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Just Another Manic Monday – Hurricane Relief

Image result for dodge a bullet animated gifWell, it looks like we dodged a bullet.  

More like $50Bn worth of Hurricane Irma damage vs up to $200Bn expected, so a nice break for insurance stocks (KIE) – as long as there are no other storms barreling down on us.  The markets have gapped up half a point and we're back to our usual Mon/Tues shorting levels at Dow (/YM) 21,900, S&P (/ES) 2,475, Nasdaq (/NQ) 5,970 and Russell (/TF) 1,410.  We had many, many thousands of Dollars of winning plays from those levels on the short side over the past few weeks (see recent posts), so no reason to change our minds now

Speaking of recent posts, 2 Mondays ago (8/28) our PSW Report was titled "Monday Market Musings – Making Money on Misery" we taled about several hurricane plays and it's important, as an investor, that you learn to turn macro events to your advantage – or you will always be at their mercy.

  • VLO 2019 $60 calls at $10.35 are now $13 – up $265 per contract (25%)
  • Oil (/CL) Futures long at $47.35 topped out at $49.45 – up $2,100 per contract
  • Lowes (LOW) Oct $75 calls at $1.70 are now $4.80 (our target was $4.50) – up $310 per contract (182%)

I know it comes across as bragging when we review our trades but it's important to LEARN what worked and what didn't so that, next time a similar situation presents itself, we can make those good trades as a reflex.  The premise was simple, the Hurricane would disrupt oil and gasoline production and repairs (and preparations) from the hurricane would benefit Lowes and Home Depot – not complicated, right?  The only trick is using that knowledge to make the right bet – and that's exactly what we are trying to teach you to do!

July 31st was a Monday and our Report was titled: "Monday Market Maintenance – Dressing the Windows for One More Day" in which I said: "It's going to be a meaningless Monday, we're just going to sit back and see how the month ends up but we'll certainly short the S&P again if we're back to 2,480 – along with the other shorting lines we were using last week."  The next day (8/1) was: "Toppy Tuesday – Back to our Shorting Line on the S&P 500" and, in our Live Member Chat Room that morning, I had put out the following note to our Members:

Markets blasting up yet again for no particular reason.  Now I like /YM short at 21,950 with tight stops but then again at 22,000, /NQ 5,900 is good as well and you know 2,480 was my target short on /ES and that's lined up with 1,430 on /TF – definitely a short the laggard day.  

As you can see, the S&P took a nice dip to 2,420, which was ultimately good for gains of $3,000 per contract on those Futures shorts for our Members and, per our fabulous 5% Rule™, we know that a weak bounce off 2,420 was 12 points to 2,432 and a strong bounce of 24 points took us back to 2,444, so we knew to wait before getting aggressively short again as we were over our strong bounce line.  We were right to short Oil (/CL) at $50 (now $47.50, up $2,500 per contractand going long Natural Gas (/NGZ7) at $3.07 (now $3.14, up $700 per contract) but wrong about the Dollar long (/DX) at 92.75 (now 91.60, down $1,150 per contract), which is a play we're still in.  

As an option earnings play, I suggested shorting Amazon (AMZN) as follows:

  • Buy AMZN Jan $1,100 puts for $101.50 ($10,150)
  • Sell AMZN Jan $1,050 puts for $72.50 ($7,250) 
  • Sell AMZN Jan $1,200 calls for $21.50 ($2,150) 

The net of the spread was $750 and AMZN is well on track to pay us in full and the short $1,200 calls are now $5.35 ($535) and the spread is $40 ($4,000) so net $3,465 so far is up $2,715 (362%) so far but still another $2,285 (304%) left to gain and, even if you start from scratch here, you still make 84% in 4 months picking up our Members' trading scraps – not bad for the free readers, right?

So that was a good day's report, well worth the $3…  The next day (8/2) was "Whipsaw Wednesday – The View from Dow 22,000" and I was getting more concerned about a major correction so we added a Dow hedge using the Ultra-Short ETF (DXD) as follows:

  • Buy 100 DXD Oct $11 calls for 0.45 ($4,500)
  • Sell 100 DXD Oct $13 calls for 0.12 ($1,200) 
  • Sell 5 AAPL 2019 $120 puts for $4 ($2,000) 

DXD is at $11.24 so in the money and $13 is $1.66 away or 15% so a 7.5% drop in the Dow will pay you back $2 x 10,000 options (100 per contract) or $20,000 and the net cost of the spread is $1,300.  That's a profit of $18,700 (1,438%) if the Dow drops 7.5%, and stays down, into the October expirations.  You are obligating yourself to buy 500 shares of AAPL at $120 ($60,000) so make sure you REALLY want to own AAPL if it drops 20% but, chances are your will be safe with that bet if the Dow stays up and, if the Dow falls and puts AAPL in the money, then you have an extra $20,000 to buy the shares with!  

As it turns out, DXD has gone net nowhere but, because we followed our core philosophy of Being the House – NOT the Gambler, all that premium we sold has decayed and the Oct $11 calls are still 0.45 ($4,500) while the $13s we sold are down to 0.08 ($800) and the short Apple (AAPL) puts are $4.50 ($2,250) for net $1,450, which is up $150 (11.5%) despite no major, lasting sell-off.   Now, to lengthen the term of our insurance, all we have to do is spend 0.35 to roll the DXD Oct $11 calls to the Jan $11 calls (0.80) and then sell the Jan $13 calls for 0.35 for net $0 and now we have the same protection through January (we leave the short October calls to expire on Friday).  

Thursday (8/3) was the key day I wanted to get back to.  That post was "Thursday Market Folly – You Need an AAPL a Day to Maintain Dow 22,000" and my premise was (and is) that, without constant stimulus of some sort, 22,000 on the Dow is not sustainable and we expected a correction of at least 2.5% (550 points to 21,450) or possibly 5% (1,100 points to 20,900).  We did fall just below 21,600 but no lower (so far) but I do still think that correction is coming.  

Obviously, I still like that Jan DXD hedge and the AAPL puts going higher makes the net even cheaper as a new play but, be aware – as I told our Money Talk viewers last Wednesday – I see AAPL correcting 10% to $150, which means those puts will be painful to hold as they rack up some paper losses but, long-term, I have faith AAPL will hold $120 without too much trouble and, if not, I certainly would love to own them at that price for the long haul.

Other than Friday's Quad Witching expirations, it's going to be a quiet data week with very few earnings reports so it's a good time to assess where the market is trending a week ahead of the Fed's pending non-decision (they will delay due to the hurricanes).  Today is certainly a watch and wait sort of day – our long positions are doing fantastically and we've added to our hedges – just in case. 

Now there's not much to do other than wait and see. 


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  1. Teva upgraded on CEO announcement at BTIG As noted earlier, BTIG upgraded Teva to Buy from Neutral . Analyst Timothy Chiang says that the company's appointment of Kare Schultz as its new CEO is "a positive catalyst that should help create a floor for the shares and provide a boost to near-term investor sentiment." He is upbeat on the company's decision to hire "an experienced pharmaceutical executive" as its CEO, and he remains bullish on its migraine treatment, fremanezumab. Target $24. 

    Read more at: 

  2. Good Morning.

  3. Good morning from Georgia.  Storm starting to move in, but just rain as of now.

  4. Phil/TEVA

    any trade setup now that it could have a good floor. apology If I have missed the trade.


  5. QUIK

    ~~QuickLogic upgraded to Buy at Roth Capital.

  6. Irma and Harvey – at the moment from varied sources, est. insured loss ; est. economic damage ; in an institution for 75 years and Out.

  7. Good morning!  

    TEVA got a new CEO and that seems to be good for $1.8Bn (14%) in market cap.  Guess you can't overpay that guy!  

    Schultz, until now, served as president and CEO of Denmark’s H. Lundbeck A/S. He joined H. Lundbeck in 2015 when the company was struggling due to loss of patents for key drugs and helped the company to turn around. He has also worked as chief operating officer of another Denmark based drug giant, Novo Nordisk A/S NVO.

    Management expects lower revenues and profits in the U.S. Generics unit in 2018 and potentially 2019 due to generic industry pressure.

    This is why you accumulate on the way down – if you wait for them to pop – they can easily get away from you.

    TEVA/Pat – LOL, as I was saying.  Well, if you missed the last month of me banging the table on TEVA, at least you can still sell the 2019 $15 puts for $2.10 to net in for $12.90 and you can leave it at that or add the 2019 $15 ($4.75)/$20 ($2.60) bull call spread at $2.15 and then you have a net 0.05 entry on the $5 spread with $4.95 (9,900%) upside potential at $20 and we're halfway there already.  

    • Hurricane Harvey is expected to be one of the costliest disasters in postwar U.S. history, and a likely drag on third-quarter economic growth by a full percentage point, Goldman Sachs said in a weekend research note.
    • While the U.S. contends with the destruction caused by two ferocious hurricanes in three weeks, Americans are also marking the anniversary of one of the nation's most scarring days – Sept. 11, 2001.

    China to close bitcoin exchanges

    • Chinese authorities plan to shut down domestic bitcoin exchanges, delivering a final blow to a once-thriving industry of commercial trading for virtual currencies, WSJ reports.
    • The move comes after months of scrutiny by Beijing, including a ban last week in China on initial coin offerings, a kind of fundraising via virtual currencies.

    Big day for insurers on tap as Irma less than feared

    • At least one disaster modeling firm is lowering its damage estimate to just $49B from $200B previously, as Irma over the weekend shifted its wrath away from Florida's east coast, and mostly spared Tampa on the west coast.
    • The insured loss is likely to be far less than even that $49B says that same disaster modeler.
    • The Florida-exposed insurers figure to have the biggest rallies today. Premarket action: Universal Insurance (NYSEMKT:UVE+15%, HCI Group (NYSE:HCI+6%, United Insurance (NASDAQ:UIHC) no trades.
    • Other P&C players: Travelers (NYSE:TRV), Allstate (NYSE:ALL), Progressive (NYSE:PGR), Chubb (NYSE:CB), Alleghany (NYSE:Y), 1347 Property (NASDAQ:PIH), Kinsale Capital (Pending:KNSL), Selective (NASDAQ:SIGI).
    • Reinsurers: Everest Re (NYSE:RE), RenaissanceRe (NYSE:RNR), Aspen (NYSE:AHL), Endurance (NYSE:ENH), Axis Capital (NYSE:AXS), Arch Capital (NASDAQ:ACGL), Reinsurance Group (NYSE:RGA), Unum Group (NYSE:UNM), Maiden Holdings (NASDAQ:MHLD), Greenlight (NASDAQ:GLRE)
    • A growing movement to eventually ban traditional fuel cars has received a boost from China.
    • The country is developing a timetable to end gas and diesel auto sales, but it hasn't delineated a timeframe like the U.K. and France, which will ban the vehicles by 2040.
    • Seeing the future? Chinese-owned carmaker Volvo (OTCPK:GELYYconfirmed in July that all its new car models would have an electric motor from 2019.
    • Mercedes-Benz will offer electric versions of all its models by 2022, according to parent company Daimler (OTCPK:DDAIF), which said it would similarly convert its Smart city car brand to become fully electric.
    • Daimler's R&D chief also announced that spending on R&D needs to increase going forward, while the automaker disclosed a new cost saving plan with a target of €4B.

    Telegraph: Google will file fine appeal today

    • The Telegraph reports that Google (GOOGGOOGL) will submit an appeal today in response to June’s €2.4B fine from the European Commission.
    • Google’s antitrust fine related to the company prioritizing its own shopping search results over those of unaffiliated companies. 
    • Last week, Intel won its appeal against its own €1.1B fine from the commission.
    • The appeal process can last for several years.     
    • Previously: EU’s top court backs Intel’s appeal of 2009 antitrust fine (Sept. 6)

    Apple hit by iPhone X leak

    • Details of Apple's (NASDAQ:AAPL) 10th anniversary iPhone have been leaked ahead of tomorrow's highly anticipated launch.
    • The iPhone X is expected to be priced at as high as $1,000, with facial recognition software, an edge-to-edge OLED screen and wireless charging capabilities.
    • An iPhone 8 and iPhone 8 Plus will also be unveiled, but they'll only contain basic upgrades from previous models.

    Reuters: Apple faces hard sell with premium iPhone in China

    • Reuters reports that Apple (NASDAQ:AAPL) might face a hard sell in China when launching the premium iPhone model expected to cost $1K.
    • The phone costs about double the average monthly salary in China and Apple faces steep competition from more budget-friendly competitors including Xiaomi, Oppo, and Vivo. 
    • Greater China was Apple’s third largest market for iPhone sales last quarter. The region represented 18% of overall iPhone sales in the quarter. Sales were down 10% on the year. 
    • According to Counterpoint Research, Apple’s share of the China smartphone market dropped to 9% in the first six months of this year, down from 14% in the same period last year. 
    • Apple will announce the new phones at a launch event tomorrow.
    • Apple shares are up 1.24% premarket.   

  8. Phil you are good! BZ has dropped 0.50 since you advised me that was a possible trade if we had to pick. I wish I had the conviction to have shorted gasoline overnight as I wanted since that would have paid $2k but I try not to trade futures while sleeping since that can go horribly wrong. Oh well. 

  9. Gasoline/Jabob – Better safe than sorry.  This article was from this morning at 3:52:

    • Amid worries that energy demand would be hit hard by Hurricane Irma and its aftermath, crude prices are trading higher on Saudi oil talk.
    • The world's largest producer said it discussed the possibility of extending the supply cut between OPEC and non-OPEC members with Venezuela and Kazakhstan. The current pact is due to expire in March 2018.
    • Crude futures +0.8% to $47.87/bbl.

    It's so ridiculous how many ways they try to manipulate the prices.  I don't play overnight unless I have major conviction I'm willing to stick with if the thing goes 5% ($2,500 per contract) against me. 

    Meanwhile, honey badger is the easy money:

  10. I took the money and ran on /DX ($1,336 on 4 longs) and just added 2 short on /TF at 1,413.  Still in my /NGZ7 longs but tight stops as they are up $500 each and I like to lock that in to start the week.    No other longs, missed the re-entry on /KC.  

    Sugar crops got hit:

  11. ?I wonder how long the media will continue to show treacherous streams and fallen trees…..

  12. Phil – love the Neo, bullet gif.. very appropriate not only for Irma, but today, I managed to make it passed the latest round of layoffs…whewww..

  13. 1020 until the TRUMP tweets.

  14. :)

  15. Watching Irma coverage it was almost as if they were rooting for the hurricane so they wouldn't be so wrong about their forecasts. 

  16. Media/1020 – Well, it's a slow data week, they have nothing else to talk about.  This is a Monday we certainly could have skipped!  

    Layoffs/Latch – What?  You have a job???  Ewwwwwwwwwwwwwwwwwww!!!!  I'm so sorry to hear that.  Couldn't even imagine working for someone else.  Quit my last job working for someone else 30 years ago – doubt I could even do it now.  

    • All of Public Storage's (PSA -2.5%) Florida properties (284), and nine in So. Carolina and Georgia are temporarily closed while Irma blows through. The impact to them from the storm is not yet known.
    • Turning to Houston, all 116 of PSA's properties have been reopened, but seven more severely properties will have to be demolished and rebuilt.
    • The entire sector is in the red this session, perhaps as Irma's less-than-feared impact means less incremental demand for self-storage services.
    • Life Storage (LSI -2.1%), CubeSmart (CUBE -2.7%), Extra Space Storage (EXR -2.9%)
    • The sector players had seen some selling amid the Harvey wreckage and ahead of Irma, but Irma wasn't as bad as feared and investors are buying back in today.
    • Invitation Homes (INVH +3%), American Homes 4 Rent (AMH +2.7%), Starwood Waypoint (SFR+3.1%), Altisource Residential (RESI +1.3%)
    • There's a solid bounce in the airline sector after the worst case scenarios on the impact of Hurricane Irma didn't occur over the weekend. Despite the sense of relief in the air, most analysts are still projecting an impact into Q4 on travel demand to the Caribbean.
    • Notable gainers include major carriers Delta Air Lines (NYSE:DAL) and American Airlines (NASDAQ:AAL), both up 1.7%. JetBlue (NASDAQ:JBLU) and SkyWest SKYW (NASDAQ:SKYW) are 2.0% higher in early trading.

    • Health Insurance Innovations (HIIQ -14.4%) slumps on light volume in apparent response to a bearish outlook from SA Contributor Richard Pearson that predicts that shares will plunge to $6 or below. Key points:
    • The company is facing fraud investigations or cease-and-desist orders in 42 states. Legal liability could exceed $100M.
    • Rejected for a key insurance license in home state of Florida.
    • Insiders have sold $50M in shares.
    • The sale of the company to China Oceanwide for $5.43 per share is likely to go through, says Off Wall Street, making Genworth (NYSE:GNW) a New Buy with a $5.43 price target. That's more than 50% above Friday's close of $3.45.
    • Shares today are up 2.9% to $3.55

  17. /CL spiked off $47.00 line all the way to $47.83.  

  18. Phil – Dollar/Naybob – So are you bullish or bearish?  I read a lot of words, one could interpret either from them… so I think my position [long - short term] is pretty clear – just curious what yours is? 

    Given the near to mid term trends, your bullish play would seem to be in order. To answer your question, at the moment, short to mid term, we are uncertain.  We live in interesting times.

    Thinking long term, the adage "we live on borrowed time and borrowed money" is apropos.  Our dual deficits must be addressed, our trade deficit must be filled by foreign investment, and the budget deficit must be balanced by rising revenues from economic activity.  

    Lacking higher quality, lower unit cost of production goods relative to our trading partners, and bereft of a stable, credible, political regime, viz. formerly the most favorable to invest and conduct business under the rule of law;  a lower dollar will not correct either of those issues. 

    Our incumbent political, corporate and economic brain trust are derelict in thinking that a lower dollar or lower taxation solves those issues.  The brain drain and capital flight may continue, and quite possibly, depending on our trading partners circumstances, a slow dollar descent.  TBD and Out.

  19. FTR

    "It's becoming clearer that spending $10.54 billion to acquire customers who are, over time, likely to drop its services, was a mistake. Frontier may become an acquisition target at some point, but it's hard to imagine any rival paying much of a premium for a declining asset. This is a company that bet big and lost, and there's little hope for it to change its current trajectory."

  20. FTR… hate is such a strong word… he must be down a lot… or short a lot

  21. TEVA     I had DD and bought back short Cs.  My 5000 share position is uncovered and am wondering if I should cover on this pop?   I'm thinking of selling the J 18   $17.50 Cs or the $20 Cs and the $20 Ps. I would still have a small loss, but I could always Cs roll if it pops up more. I'm thinking selling premium here is a good thing with the IV% going up on the spike. 

  22. txchili--Cramer this morning said the move to 17.5 isn't justified..


    wasn't he saying to sell last week too?

    he is a male organ

  23. Dollar/Naybob – near to mid-term bullish, short to mid-term uncertain – got it!  Meanwhile, I was happy with the small pop I got, want to see 92 break over before going long again (or a re-test of 91).  Trade deficit is an old-fashioned notion from a time when money was backed by metal.  Who cares how many finished goods our consumers get in exchange for scraps of paper.  In God we trust but the Arabs still take in in exchange for a barrel of oil which powers our economy and the Chinese don't believe either but they take the money in exchange for IPhones.  

    In the modern global economy, the shift of manufacturing to China should concern the US about as much as it concerned NYC when Ford decided to make cars in Detroit instead of Manhattan.  Detroit may as well have been a foreign country in 1908, Michigan had not only been a state for four score hence and not one of those jobs did anyone in NYC any good at all but they bought the cars with their New York money and they used them to build a modern economy.

    If Martians invent Fusion and sell every home in America (110M) a home fusion device for $10,000 – then we will have a $1.1Tn trade deficit with Mars.  Will we be worse off?  Should we build a space-wall to keep martians out or add a 30% tax to imported fusion drives?  Mars benefits from getting $1.1Tn (which we made by selling other goods and labor) and we benefit for 1,000 years by having a perpetual source of energy – saving our economy probably $1Tn each year and that money would then go to purchase other things in our ever-fluid economy.  

    All this nonsense about trade is just a fun way for the Global Top 1% to distract the masses from who is really robbing them.  That's the key to any kind of scam – misdirection!  

    Trump's whole Presidency is misdirection – getting you to blame anyone but the Billionaire class for your troubles.  

    Speaking of misdirection – more BS we had to ride out:

    It lives: U.S. box office returns to life

    • Exhibitor names are showing some strong gains after a blistering $117M opening weekend for Warner Bros. feature It. The solid numbers for It coincided with large parts of the Southeast U.S. preoccupied with the threat of Hurricane Irma.
    • AMC Networks (AMC +5.4%), Regal Entertainment (RGC +6.4%), Cinemark (CNK +5%) and IMAX (IMAX +5.2%) are all notably higher.

    FTR/BDC – More misdirection.  You can buy a declining asset for $10.5Bn that pays $20Bn over 10 years and that's still a nice return on your money.  FTR, in fact, added $3.5Bn in revenues for $10.5Bn and their operating profits run about 20% so $700M/yr back so, even without any scaling efficiency, it pays back the loan but they also bought backbone and infrastructure (last mile fiber in NY, CA and TX) to 3M subscribers and no one is going to rebuild that to get around them so they can count on 50% of that revenue – even after every single customer "cuts the cord".   

    Of course an integration this massive is going to generate costs the first year or two so people looking for instant synergy will be disappointed but it's likely they are often disappointed because they are idiots with unrealistic expectations.  The company is focusing on stabilizing the base of clients they have but, once they do that, then they can put their efforts towards marketing to new customers and, since FTR's operating rates are significantly lower than VZ or T or S or TMUS in those large states – it's the other companies who will have to worry about customer attrition once they get their act together because this isn't some crappy rural service they'll be selling for a 20% discount but VZ and FIOS and, since FTR doesn't have any corporate business to speak of, they aren't worried about angering existing customers by advertising better rates to attract new ones.  It will be interesting.

    TEVA/TX – When in doubt, cover 1/2!  

    TEVA/Jabob – Up 22% now at $19!  


    please no tease!

  25. jabob… don't jinx it :) .   

  26. By the way, Jabob, since Kathy Griffin is off the show, Anderson Cooper says you can kiss my ass right on the main stage on New Year's Eve – looking forward to seeing you!  cheeky



    albo--FTR is trading like a BK. So is TEVA. So is IMAX.

    These are the names that I am supposed to kiss Phil's tuchus in time square at the end of the year when they recover.

    August 18th, 2017 at 12:44 pm  | Permalink 

    • FTR – They are still paying a $2.40 dividend, so it's hard to walk away from at $13.54.  Let's add 2,000 more at $13.54 ($27,080) to bring our average on 4,000 down to $19.89 and we'll see how things go.  At least the dividend is more than 10% while we wait.  

    August 18th, 2017 at 12:44 pm  | Permalink

    • TEVA – Priced like they are going BK.  Our 15 2019 $37.50 short puts are $20 ($30,000) and we can roll them down to 30 of the 2019 $25 puts at $9 ($27,000) so -$3,000 and we collected $14,000 originally so net $11,000/30 is $3.666 so our break-even is $21.333 – seems reasonable.  The 10 $25 calls are $1.45 ($1,450) and we can roll those down to 30 of the $17.50 calls at $3.60 ($10,800) and I'd rather not sell calls for now.  We have a $9,000 loss from before so we're in for $20,000 on 30 $17.50s less net $11,000 collected on the short puts is $9,000 or $3/contract and that means over $20 we start making money (over $22.50 because of the puts) and at $25 we'd suddenly have $22,500 for a $13,500 profit despite the hard fall.  Meanwhile, we have plenty of room to add more cash if we have to.

    August 17th, 2017 at 2:42 pm | Permalink

    • TEVA – Another awful sell-off.  Fortunately we started small but still down big as it dropped like a rock with a rock around its neck.  The 5 short 2019 $30 puts are $13 and we can roll those to 10 of the 2019 $22.50 puts at $7 and pocket $500.  We'll leave our long $32.50 calls (you never know) and buy back the short $40 calls (0.33) and set up 10 of the 2019 $15 ($4.80)/25 ($1.40) bull call spreads at $3.40 ($3,400) and they return $10,000 if things turn around, which would still be a nice profit despite the 50% drop as we started with a net credit. 


    This is why we like to start with small positions.   You always have to expect a stock to go 40% against you and have a plan for what you will do if it does.  Markets don't need good reasons to discount your stocks but smart shoppers keep their heads – and plenty of CASH!!! (have I mentioned how much I like CASH!!! lately?) on hand so that, when the sale comes (and they always do), they will be BUYERS and not panic sellers.

    We don't knee-jerk buy everything that goes down but, when we think the move is overdone, having a small start makes it not at all painful to take advantage and pick up a bigger position at better prices.  TEVA started with a $950 credit and we hoped to make $3,750 more at $40.  They went the WRONG way by a mile but now we're spending just $3,065 to put ourselves in a $10,000 spread that pays off at $25 – that's 23% lower than where we came in!  

    If you begin with sensible portions in positions that you would HAPPILY double down – even twice – then you will be able to ride out even the harshest of corrections.  

    August 18th, 2017 at 12:44 pm  | Permalink

    IMAX – Going to call a bottom here.  March is out so we can roll our 25 Dec $29 puts ($10.20) that we sold for $3 (ish) to the March $26 puts at $7.50 so we'll spend the $3 but pick up $4 of position on the roll.  The Dec $28 calls can die on the vine and we'll roll our 20 Dec $23 long calls (0.50 = $1,000) to 30 Mar $17 ($3.30)/$22 ($1.20) bull call spreads at $2.10 ($6,300).  The spread pays $15,000 if all goes well and we'll be pretty much even at $22. 

    August 18th, 2017 at 12:44 pm  | Permalink

    LB – I think, perhaps, this will be my 2018 Trade of the Year if they stay this low.  Meanwhile, we sold 10 2019 $55 puts for $11.75 and they are now $21.30 ($21,300) so we'll roll them to 20 of the $40 puts ($9.65 = $19,300) for $2K out of the $11,750 we collected so now we have $9,750/20 contracts is roughly $35 for break-even and the stocks at $36 so what's the problem? cool  Now we look to the OPPORTUNITY on the call side and we have 20 2019 $45 calls, now $3.30 ($6,600) and we can roll them down to 40 of the $32.50 ($7.60)/$45 ($3.30) bull call spreads at $4.30 ($17,200) so we're spending $10,600 (less the net $9,750 collected on short puts) for the $40,000 spread that's $4 ($16,000) in the money DESPITE LB's horrific sell off since our 2/1 entry.  

    August 17th, 2017 at 2:42 pm | Permalink

    LB – The thing to understand is LB discontinued swimwear and apparel this year so every quarter they are going to be missing 10% of last year's sales.  They cut the catagories because they weren't as profitable as the rest and the profits are on track so it's all working – yet people are freaking out because their sales are down from last year (not even 10%) and they think AMZN is taking over the panty and bra biz.  Investors are generally idiots, you know…   Anyway, their idiocy is our opportunity and we can roll the 5 short 2019 $40 puts ($9.60 = $4,800) to 10 short 2019 $32.50 puts ($5.40 = $5,400) and that adds $600 to our pocket.  Let's buy back short 2019 $50 calls ($1.90) and roll the $40 calls ($4.10) down to the $32.50 calls ($6.85) for net $2,750 and add 10 more ($6,850).  We'll stay uncovered until hopefully $45 and then turn it back into a very cheap spread.

  27. Phil lives with 3 females….. No Butt Kissing going on there…. ;)

  28. London stays world’s top finance center despite Brexit

  29. how does that guy switch that card at the end? pretty fascinating

  30. High street shoppers down by 22pc since 2007

  31. Cards/BDC – Those things drive me crazy.  

    • Home Depot (HD -1.3%) and Lowe's (LOW -1.3%) fall as the Hurricane Irma trade from last week reverses itself with Florida damages estimates starting to come in.
    • Both home improvement stocks still sit solidly above where they were before Hurricane Harvey hit Texas in August,
    • After meeting with management, the team at Oppenheimer says it didn't hear anything new, but likes the "grounded" and "realistic" targets set by executives. The sell-siders say they're "impressed" with the restructuring effort.
    • Oppenheimer sees Hero6 likely tracking ahead of Hero5.
    • GPRO up 7.7% today and about 25% in September.
    • Source: Bloomberg's Brad Olesen
    • As reported by Bloomberg, data from Foursquare Labs showed a 25% increase in traffic at Whole Foods in the first two days after the Amazon (NASDAQ:AMZN) purchase closed (your humble editor set foot in WFM for the first time in years last week).
    • The rough run continues for competitor Sprouts (SFM -5.3%), now off 20% in the last two weeks.
    • A Phase 3 clinical trial, HALO, assessing Teva Pharmaceutical Industries' (TEVA +22.1%) fremanezumab for the prevention of migraine demonstrated its efficacy for all 25 primary and secondary analyses in both monthly and quarterly dosing regimens. The results were presented at the 18th Congress of the International Headache Society in Vancouver, Canada.
    • Patients with chronic migraine treated with fremanezumab experienced a statistically significant reduction in the number of migraine days of at least moderate severity compared to placebo [-4.6 days (monthly); -4.3 days (quarterly); -2.5 days placebo; p<0.0001].
    • Other endpoints included improvements in quality-of-life and health measures, less work productivity loss and significant reductions in impairment activity outside of work.
    • Previously: Teva's fremanezumab successful in late-stage migraine study; U.S. marketing application expected this year; shares up 1% (May 31)
    • Previously: Teva finally gets a new CEO (Sept. 11)

  32. Phil

    Do you think it’s too early for the deep water drilling to come back  ?


     Deep Water Oil Slowly Staging A Comeback


  33. Drilling/QC – I think you need a sustained move over $50, which will probably start in the spring as we're underinvested for 2 years now in E&P and it's likely to impact production once we get through the winter.  I made a call for OIH as an early stab last week.

    Submitted on 2017/08/31 at 3:53 pm

    As we may have oil shorts, OIH will make a nice hedge against oil popping too so, in the LTP:

    • Sell 20 OIH 2019 $20 puts for $2 ($4,000) 
    • Buy 20 OIH 2019 $20 calls for $3.65 ($7,300) 
    • Sell 20 OIH 2019 $27 calls for $1.00 ($2,000)

    That's net $1,300 on the $14,000 spread with $12,700 (967%) upside potential at $27.  Worst case is being long 2,000 shares at $20.65, about 10% off the current price but look how encouraging the 20-year chart is:

    Safer than trying to pick a winner in the sector. 

    Speaking of FU stocks I'm glad we stuck with:

    Up 40%!  

    August 18th, 2017 at 12:44 pm  | Permalink

    • CBI – Hopefully this is the bottom.  Our 15 short 2019 $25 puts are $15.50 ($23,250) and we can roll them down to 30 of the $15 puts at $7 ($21,000), which uses $2,250 of the $7,800 we sold the $25s for.  That nets us into 3,000 shares of CBI for $39,450 ($13.15).  Given that's getting close to a full allocation block (though the portfolio has tripled, so we can afford much more), we don't want to spend too much on the calls so we'll roll the 20 2019 $15 calls ($1.85) to the $7.50 calls ($4.30) and sell the $15s to some other sucker for net 0.60 out of pocket ($1,200) to put is in the $15,000 spread that's back in the money.  We lost $5,500 so $6,700 net cost means our upside at $15 is still $8,300 (123%) despite all the FUs – plus the $5,550 we still hope to make on the short puts!   

    This is the key to understand these patience plays.  We started out selling $25 puts in Sept, when CBI was around $30 and now it's $9 and we can still make $13,850 if they just make it back to 50% of where we originally planned to enter and, if not, then we'll own 3,000 shares at $13.15 – MUCH lower than the $25 we planned to buy 1,500 for!  

    It's taken just under a year to get to this point and it will probably take more than a year to get back but so what?  As long as our companies don't go bankrupt, there's almost no trade that can't be turned around if you are willing to stick with it and no, we don't really have a better use of $4,000 in net margin than making $13,850 in 16 months so we're not "wasting time" with bad positions and CBI is a company I'd love to own a lot of long-term (assuming their debts don't swamp them). 

    I'm not tooting my own horn – I just want you guys to make the connection between all these value discussions we have and how things play out over time.  The "noise" along the way can get very intense and you have to train yourself to deal with it and see it for what it is.  It's hard to stand your ground while others around you are panicking too….

    Meanwhile, all these FU stocks turning around is why the LTP has blasted up about $100,000 in less than a month.  

  34. Phil,

    I am once again in need of your strategy advice:

    I long IMAX stock (24.38) and short equal number of Dec 20 calls (.90, now 1.80) sold to cover when things looked especially bleak. No conviction that this weekend's box office numbers for 'IT' , itself will be a game changer or indicate better days ahead. So looking to roll the Dec 20s to Mar 24s (now .90) which would make me about even. Plus short some Sep 26 puts  (2.5, now 5.80) which I am okay holding pending assignment. Given your newly adjusted Mar 17/22 bcs above wanted to hear your thoughts.


  35. IMAX/8800 – Well, we knew that SOMETHING would get a huge audience because, as I noted before the holidays – there were no good movies to see for the past 3 weeks.  That's a lot of pent-up demand for pretty much anything that doesn't suck and It got 86% on Rotten Tomatoes with 89% of the audience liking it – that's the best score of any movie since Dunkirk a month ago.  Now though, we're into a strong cycle with Kingsman and Lego this weekend, Flatliners next week, then Blade Runner which has such high expectations there's no major release even the week after, then Geostorm and Leatherface, then Thor and then forget it because you have Justice League for Thanksgiving and Star Wars for Christmas plus Ferdinand – so, in short, I would not bet against the movie sector in the Fall!  

    I would trade the stock ($19.92) for 3x March $17 ($4)/$21 ($1.80) bull call spreads at $2.20 because, for $6.60, you have a $5.40 upside at $21 vs tying up $19.92 to have a $1 upside at $21.  That makes your 1x short Dec $20s ($1.70) and easy roll to 1.5x the March $22s ($1.40) and then you'd be 1/2 covered and you could put a stop on 0.5x at $1.80 and 0.5x at $2.20 and, if that happens, you won't care because you will have your $5.40 from the 3x long spread.  You can be fine with the puts but I'd still roll them to the March $22 puts at $3.20 as that's about how much you're down and why risk impairing your long gains – you can always sell more puts later but, when you miss an opportunity to sell premium now, that expired premium disappears on you while you wait.

    • Raymond James notes that a bundle created for college students by Spotify (Private:MUSIC) and Hulu (CMCSA -1.6%DISFOX +0.8%FOXA +0.8%TWX +0.4%) will likely be at the forefront of a trend, with subscription services sprouting like weeds.
    • The two companies will offer services that would cost $13/month on a stand-alone basis for just $4.99/month together, in a bundling move that's "frankly overdue" for media companies, says analyst Justin Patterson.
    • Fragmentation among subscription media services is growing, and marketing them isn't cheap, he notes. And Spotify and Hulu can add customers through the deal since there's modest overlap for the two among millennials.
    • Looking at other stocks, he notes Netflix (NFLX +3%) already struck a deal with T-Mobile (TMUS+0.2%) and so technically it's part of a bundle of sorts (not quite a content bundle like Spotify/Hulu), but that Netflix's competitive position is secure. And a relationship with Sirius XM (SIRI +0.8%) is a potential catalyst for Pandora (P -2.4%) as customers await possible bundles there.
    • A leak from AFTVNews claims that Amazon (NASDAQ:AMZN) has two new Fire TV products in the works, per Engadget.  
    • The first combines the traditional Fire TV with Echo Dot functionality to bring more Alexa control features including far-field microphones and speaker that will let users control the TV from across the room without it being turned on first. The Fire TV can handle 4K HDR video at 60 frames per second.
    • The other “mid-tier” Fire TV lacks the full Alexa experience but could pack the same video potential and would give Amazon an entrant on the level of Google’s Chromecast Ultra. Amazon’s winning device strategy has remained developing products across a wider price range than the competition. 
    • Apple is expected to announce its own 4K-capable Apple TV at tomorrow’s launch event in an attempt to close the huge market share gap with Amazon. According to a Parks Associates report, Apple’s Q1 streaming market share dropped to 15%, down 4% on the year, while the Amazon Fire TV grew from 16% to 24%.  
    • Previously: New iPhones might release September 22; Apple TV lost Q1 market share (Aug. 23)

    Speaking of entertainment – I'm talking to a guy via PSW Investments that has a patent to add smell to your virtual reality experience.  The World is getting weirder every day!  

  36. Very low volume (40M), as usual in a rally.  Maybe we'll hit 60M, which would be a normal(ish) day but nothing to indicate this rally has legs.  

    4 short /TF now and /NQ hit 6,000 so 2 of those short, of course.  

  37. Phil,

    My thanks for the detailed strategy explanation. My remaining concern/question is the validity of the fundamantal cost argument that a working middle income couple with kids might be increasingly prone  to viewing films at home (esp with the pending first day release prospects being circulated – DIS etc) rather than incurring the cost of a babysitter + tickets + popcorn/candy (the main revenue source for theaters). The mechanics of your suggestion are so appealing that I will adopt that strategy for at least part of my position. As to the recent absence of popular movies, there are arguably cycles of hit/flop movies (as in everything else) – some cycles are better than others. Thanks again

  38. Phil – "Dollar/Naybob – near to mid-term bullish, short to mid-term uncertain – got it! "

    You asked: "So are you bullish or bearish? [US Dollar]"

    I answered: "To answer your question, at the moment, short to mid term, we are uncertain."

    Anything being conflated otherwise is ether. Your diatribe seems to conflate budget or fiscal deficit austerity measures, and debt ceilings contrived to squeeze the 98% for the benefit of the 2%; with a balance of payments or flows deficit which we suffer.  So let me bust out ol Pennywise… and some smell-o-vision.

    The trade balance is the largest component of the current account, which is itself the largest component of the balance of payments.  The current account measures trade balance plus the effect of net income and direct payments.

    In English, when your country's people provide enough income and savings to fund all their purchases, business activity and government infrastructure spending, then the current account is in balance. When they don't, then a current account deficit is created, and your country relies on foreigners for the capital to invest and spend. No misdirection there.

    Our deficit is the largest in the world, negative -510B annual , #2 the UK at -114B. Surpluses are run by some of our largest trading partners: Japan +191B; China +196B; Germany +294B and the EU +387B.

    Back to the trade deficit and the real misdirection of all those jobs we got FU'ed out of for cheap ass shit IPhones we really don't need to survive, so the turncoat Tim Cook's and rich MF's can live it up.  The trade deficit means you are a net consumer, not a producer, of the world's economic output.

    Those thinking that things like cars or anything being made in Detroit or anywhere in the USA by Americans, don't mean anything or matter anymore, might be in for a surprise. When you consume more than you produce, you have to go into debt to pay for current consumption rather than investing in long term domestic economic growth or your children's and nations future. 

    As long as your trading partners pick up your slack and continue to buy UST's (lend to us) and you continue to honor your debts, its Saul Goodman. TBTF?? Perhaps, we are the masters of making something out of nothing and our partners might have to bail us out, but at a cost. 

    If your deficit runs long and large enough, future dividends flow abroad to pay your past debt, lacking that reinvestment capital in the future, your economy eventually slows and stagnates, while your infrastructure rots. We are witnessing secular strangulation in the erosion of our real wages and SOL for decades.

    A loss of investor confidence or demand for your bonds could lower your currency, drive up interest rates and create inflation from higher priced imports. Not having invested in future growth, outsourcing everything with a zombie service economy to fall back on, even a gradual decline in dollar value would lead to a drastically lower standard of living. In severe cases, you may have to sell off assets to pay creditors or default on the loans. 

    At the end of the day, whether the balance on current account deficit is unwound in a crash or slowly over time, the results are the same, a lowered standard of living for the debtor nation. Thus, borrowed money and borrowed time are conjoined with a mortgaged future, specifically your children's future. So if ones children matter to them, then they care about that deficit, no sleight of hand required there.

    Unless of course the kids can sell fusion to the Martians, or drugs, or their ass on the internet with their IPhones, because at the pace we are going, those are the only jobs that are going to be left for them. Oh wait, the latter two have been happening.  Some might side with Mr. Conductor (George Carlin),  so fuck the children cause it stinks and "they all float down here" and Out.

  39. just perusing companies…
    SMP looks interesting, new to watch list. Would like to know how their Ft. Lauderdale distribution center fared.  
    BLL already bounced off 200MA and is challenging its 50dma today.

  40. DE – tiptoeing back into the gap above?

  41. Movies/8800 – I agree they are somewhat pricing themselves out of the market but people still go – just less often.  Also, with instant global digital releases these days, movies have much wider audiences, which is great for IMAX, who are pushing past 50% foreign revenues.  As to US movies though, it's a bad year for films, nothing more – look at AMC's revenue numbers:

    Year End 31st Dec 2011 2012 2013 2014 2015 2016 TTM 2017E 2018E CAGR / Avg
    Revenue $m 2,522 2,018 2,749 2,695 2,947 3,236 4,192 5,152 5,381 +5.1%
    Operating Profit $m 96.7 132.4 189.1 183.5 226.4 212.9 133.8     +17.1%
    Net Profit $m -94.1 47.5 364.4 64.1 103.9 111.7 -108.7 -134.1 64.5  
    EPS Reported $ -1.19 0.17 4.74 0.65 1.06 1.13 -0.68      
    EPS Normalised $ -1.15 0.24 4.77 0.63 1.16 1.53 -0.13 -1.01 0.50

    So they may be missing on 25% growth but still up from last year and IMAX doesn't care if AMC makes money – as long as people see the movies.  

    Also, in no way is AMC isolated, check out Cinemark:

    Year End 31st Dec 2011 2012 2013 2014 2015 2016 TTM 2017E 2018E CAGR / Avg
    Revenue $m 2,280 2,474 2,683 2,627 2,853 2,919 3,000 3,044 3,213 +5.1%
    Operating Profit $m 303.6 378.1 343.2 363.1 422.2 409.5 431.6     +6.2%
    Net Profit $m 130.6 168.9 148.5 192.6 216.9 255.1 273.6 246.5 269.4 +14.3%
    EPS Reported $ 1.14 1.47 1.28 1.66 1.87 2.19 2.35     +14.0%
    EPS Normalised $ 1.26 1.57 1.65 1.79 1.97 2.42 2.48 2.12 2.31 +14.0%
    EPS Growth % -8.0 +24.9 +5.1 +8.6 +9.6 +23.1 +13.3 -12.4 +9.29  
    PE Ratio x           13.4 13.1 15.3 14.0  
    PEG x           n/a n/a 1.65 1.47

    These people who write articles about the rise of Netflix and the death of movies etc. are simply writers who get paid to grab your attention looking to make something out of a nothing trend.  Once one writer does it, other jump on the bandwagon – encouraged by funds who pay people to scare traders out of stocks they want to accumulate,  Then it gets picked up by mindless analysts and soon it becomes a meme in the MSM and, suddenly, no one wants a perfectly good stock…

    Current accounts/Naybob – We produce Dollars and ship them overseas.  God knows no one is putting them to use in this country!  $180Bn worth of our deficit is oil imports and $200Bn is IPhones – the rest is just noise in a $19Tn economy.  

    DE/Scott – Almost came down enough to be interesting but I've always liked CAT way better.

  42. Wow, CNBC's Delivering Alpha seminar is tomorrow – $5,000 for the day!  We are way undercharging for Vegas!  

  43. Phil/movies – yep, 'the evil that men do' those dastardly stock manipulators are everywhere vs a possible fundamental change in viewing habits. Time will tell. Thanks again for the in depth stats.

  44. Phil – NGZ7 – stopped out at 3.169 for a nice profit.  Are you still in and will you reload as per the 'high reward, low risk' comment last week?

  45. Delivering Alpha – wonder what the top trades will be

  46. Well made it through wisdom teeth surgery. Was apprehensive about the anesthesia since my last one was 40 years ago but was kind of cool – the feeling that 20-30 minutes of your life just got erased. One second the dentist is asking me how I am doing and the next one I am waking up. 

    I also wonder if anesthesia is restful as I didn't feel sleepy all day even though I didn't sleep well last night. Maybe a super power nap! Any specialist out there? I also stayed away from the heavy painkillers.

  47. An IMAX Movie I will go see….

  48. New York In The ’70s: The Photos

  49. Phil – CL – take a poke short at 48.25?

  50. Good morning!

    Futures up about 0.25% but mostly because Europe is excited that we were excited yesterday.  S&P 2,500 is in sight, would be a shame if we didn't make it but, of course, we didn't make 2,000 back in 2007 and then catastrophe.  I'm not being bearish, just saying don't get complacent.

    Dollar 92 but oil up, /RB up and /NG up so just some general enthusiasm, I think.

    /NG/Latch – Took money and ran as I had meetings, missed my chance to reload so far.  

    Top Trades/Batman – Well Leon Cooperman has 15 minutes to tell you that and then they get back to their pontificating until they give Jeff Smith (Starboard) 15 mins and then you have to wait for the afternoon to  get 15 mins from Jim Chanos.  Mostly it's a commercial for CNBC and various hedge funds – went to one once and wanted to shoot myself.

    Models/Scott – I think having 3 hurricanes at once threw everything off.

    Glad things went well, StJ.  

    Darkstore – That's exactly what I was talking about in last week's Webinar.  Didn't know someone was already doing it.  This is AMZN's problem, they were first but nothing very special about what they do. 

    Oil/Latch – I don't know why it's popping so I don't know why I would be shorting it.  Do you?

  51. BDC/Phil/Card Trick  The answer starts around 2:55 … … just remember, once you know the magic will be gone