Comment by phil

View Single Comment

phil
May 31st, 2016 at 11:18 am

LNKD/Rustle – I don't see anything. 

DIS/Tom – I still like them.  Zootopia is getting little press but passed $1Bn this weekend – that more than makes up for Alice missing by expectations by $20M.  XMen didn't do well either so I think the weather was just too nice for people to go to movies.  DIS owns the box office this year with Captain America, Jungle Book and Zootopia all hitting $1Bn world-wide.  Apparently Alice was not good – my kids told me that so they don't want to see it now.  

Also, selling DIS off based on a single movie is idiotic because the movie division is only 15.8% of the company's value:



As a new entry for DIS, I like selling the 2018 $85 puts for $6.10 and buying the 2018 $90 ($15.65)/$110 ($6) bull call spread for $9.65 for net $3.55 on the $20 spread that's $9 in the money to start.  In our LTP, we have 2x the $90/105 bull call spreads and 1x short Jan $90 puts – so more aggressive on the put side.

RIG/Japar – I'm torn because I think oil will slump again in the fall so will possibly be another year before RIG and others come back.  If oil doesn't slump, however, they'll come back strong.  I would spend money to improve the position but as little as possible and only if buying more time/position for a good deal, not just doubling down.  



BHI/Tom – Sure, they are still out of favor and still banking $3.5Bn from HAL.  



As a new trade on BHI, I'd sell the 2018 $40 puts for $5.50 and buy the 2018 $40 ($11)/$55 ($4.50) bull call spread for $6.50 so net $1 on the $15 spread is a very nice return if all goes well and worst case is you own them for the current price. 

Gold/JMD – Gold won't do anything.  The Dollar will get stronger and drive the exchange price of gold lower but it has nothing to do with the VALUE of gold.  If you have a lot of Dollars, having some gold is a hedge to a negative event that impacts your Dollar holding – that's all.  Since a gold ETF is nothing but smoke and mirrors and would be worthless in a real collapse, I prefer to own a miner, like ABX, who have 100M ounces of gold ($120Bn) yet you can buy the whole company for $20Bn at $17/share.  



Of course, since most of their gold is in the ground, you have to deduct the $800/ounce extraction costs and that drops the value of their gold to $40Bn at $1,200 but, at $1,400, the value jumps to $60Bn and $80Bn at $1,600, etc, so ABX stock should gain value exponentially faster than gold and, unlike gold, you have the backstop of a working company if things go the other way.

ABX is not longer cheap but you can sell the 2018 $15 puts for $3.25, which nets you in at $11.75, which is a very nice discount.  I would rather own 100 shares of ABX for $1,175 than an ounce of gold – that's for sure and an ounce of gold doesn't PAY YOU $325 to promise to buy it!  

So, if you sell a put, you get $325, which is as much as you make at $1,525 on gold yet the worst thing that can happen to you is you get to buy a gold miner for 30% off or about $3Bn or $30/ounce.  

If you want to get fancy, you can add a bull call spread like the 2018 $15 ($5.30)/22 ($3) at net $2.30 and then you have another $4.70 of upside at $22 but, as the main point – I'd certainly rather sell ABX puts than buy gold!  





/TF/Tommy – I need a batter reason to short something than "it went up".  Since the others are falling apart and /TF is at 1,150, you can play it short if it crosses below as long as /YM stays below 17,800 and /ES stays below 2,095 and /NQ stays below 4,515.  /NKD is 17,150 so already down 100 from this morning's watch line despite the Dollar moving up so not looking good for equities but keep in mind Europe closes in 15 mins – maybe it's just them selling and not a trend..

Happy endings/StJ – It amazes me how long people are willing to play this game but, on the other hand, it's the only game in town, right?  

Gold/Latch – And I second ABX.  Gold is not playable until the Dollar tests 100, probably $1,100 on gold.