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Terminal Tuesday – Markets End October at Halloween Highs

Happy Halloween!

Clearly no one is spooked about the markets as we're drifting along at the highs into the monht's end – as well as into tomorrow's Fed meeting and maybe the traders are right and there are no economic monsters under the bed or even in the closet and maybe the President isn't an uncontrollable monster but a nice orange man who is here to grant all of our wishes – like a giant Oompa Loompa...

As I mentioned last week, Keebler Elf-man Warren Buffett gave us a great reason the markets will hold up through the holidays – the promise of lower taxes but that will require the GOP to hold things together while the indictments are flying around Washington.  If the investing public gets w a whiff of fear – it could start a stampede out of equities.  Money is already flying out of oil longs as the Oil ETF (USO) recorded it's 3rd consecutive week of outflows – even as the price of oil has risen 5%, from $49 to $54.  Gasoline (UGA) has risen 10%, from $1.55 to $1.70 – oupacing oil by 100%, even as we enter the slowest time of year for demand.  

Not only does that not make sense (OPEC has been talking up oil so speculation is driving the price, not Fundamentals) but the quantity of fake, Fake, FAKE!!! open orders at the NYMEX has never been higer, with 1.3 BILLION FAKE!!! orders in the front 4 months alone.  Consider how ridiculous this is when the US only imports 7Mb/d of oil so these orders, over 120 days, would deliver 10.8Mb/d to Cushing, OK alone – a terminal that can handle, at most, 50M barrels in a month.

Click for
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Dec'17 54.16 54.18 53.75 54.06 09:09
Oct 30


0.16 152063 53.90 597839 Call Put
Jan'18 54.35 54.37 53.96 54.28 09:09
Oct 30


0.19 28075 54.09 320656 Call Put
Feb'18 54.45 54.45 54.07 54.39 09:09
Oct 30


0.21 9066 54.18 130886 Call Put
Mar'18 54.45 54.45 54.18 54.43 09:09
Oct 30


0.22 8537 54.21 254030 Call Put
Apr'18 54.30 54.46 54.17 54.43 09:09
Oct 30


0.23 7353 54.20 84852 Call Put
May'18 54.30 54.40 54.10 54.38 09:09
Oct 30


0.25 3634 54.13 61062 Call Put
Jun'18 54.25 54.28 53.96 54.24 09:09
Oct 30


0.23 7931 54.01 204539 Call Put

But Cushing is full and less than 20M barrels are actually delivered to them in the average month so the other 577,839,000 barrels worth of orders (1,000 barrels per contract) are FAKE!!!  It's a total scam – all the trading, all the hand-wringing – is nothing more than a scam used to drive up the prices you pay at the pump (see "Goldman's Global Oil Scam Passes the 50 Madoff Mark").  Notice how flat the curve is on the chart above – all the way into June it's still $54/barrel.  

In fact, oil is only $50.32 per barrel in June of 2021 (/CLM1) and all of 2020 and 2021 are under $51, in fact.  That means we can buy 597,839 June 2021 contracts now for $30,083,258,480 and sell (short) 597,839 Dec 2017 contracts (/CLX7) for $53.90 ($32,223,522,100) for a $2,140,263,620 credit and, if oil goes lower (which we expect), we will make instant money on our short contracts or, if oil goes higher, we can just roll our shorts forward to longer months, knowing that we have delivery covered at a much lower price in 4 years.  That's going to be my Trade of the Week – we'll see how it plays out.  

We also added an Ultra-Short Oil (SCO) Spread to our Options Opportunity Portfolio yesterday – that's another great way to play oil short up here and you can follow our trades right HERE on Seeking Alpha.   

Who says you can't make money in this market?  3 Tuesdays ago (10/10), we expected a 4% correction on the Russell (IWM), taking us back to 1,490 on /TF.  We tried to play it with the TZA Nov $12 calls but TZA didn't make the move we expected (too much decay) and they ended flat but the Futures shorts, from 1,515, made a nice $1,250 per contract.  

Keep in mind though, if 1,490 holds, then that's simple a strong retrace that was predicted by our 5% Rule™ and it means we're likely to see another attempt at 1,515, which is more likely to be successful this time so possibly more record highs in store – if 1,490 holds.  If not, then it's a bearish signal with a possible drop all the way to 1,440 with some support at 1,470 and 1,455 (which would be the bounce lines off 1,440) – so that's what we'll watch for.  

Also in that Tuesday's Report, I laid out our case for shorting Tesla (TSLA), which was $360 at the time and now $320 with earnings tomorrow.  This morning, in our Live Member Chat Room, we discussed the following DANGEROUS earnings play:

  • Sell 6 TSLA April $350 calls for $23 ($13,800)
  • Buy 6 TSLA April $370 puts for $65 ($39,000)
  • Sell 6 TSLA April $320 puts for $34 ($20,400) 

That nets you into the $30,000 short position for $4,800 with a $25,200 (525%) upside potential if TSLA is below the current price of $320 in April.  It's a lot of margin ($15,465 ordinary margin) and a lot of risk – if TSLA gets back to $380, you will have to pay the short caller $18,000 but we'd roll them along to higher, longer months.  Of course, if TSLA does well then maybe our oil play does well (more electric cars) and that one we can make $2Bn on!  

The markets will open up again today as HSBC upgrades Apple (AAPL) to a buy with a $193 price target.  Analyst Erwan Rambourg calls Apple a “luxury stock” on par with Louis Vuitton or Prada and notes that “Consumers are buying the spirit of the brand and the way it makes them feel about themselves and in society.”  After a month of bashing the IPhone 8 and pushing Apple's stock down into earnings, reviewers are falling over themselves to praise the IPhone X and sales will only be limited by how many AAPL can make.  

That's going to give all the indexes a pop and we'll see how the trading goes today but most likely still kind of flat into the Fed tomorrow. 


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  1. Watching Sarah Huckabee Sanders at the WH press conferences is bringing back memories of Baghdad Bob now! There is such a disconnect with the reality that it loses any educational value. Better spend your time watching Fox News!

  2. Bubble or another name:

    "Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value.

    "What if equity value has nothing to do with current or future profits and instead is derived from a company's ability to be disruptive, to provide social change, or to advance new beneficial technologies, even when doing so results in current and future economic loss?"

    That brings back memories of 1999… All these Internet stocks needed to be valued differently then as well.

  3. PetroChina has been taking hits after hits and not looking cheap still:

    Ten years after PetroChina peaked on its first day of trading in Shanghai, the state-owned energy producer has lost about $800 billion of market value — a sum large enough to buy every listed company in Italy, or circle the Earth 31 times with $100 bills.

    In current dollar terms, it’s the world’s biggest-ever wipeout of shareholder wealth. And it may only get worse. If the average analyst estimate compiled by Bloomberg proves right, PetroChina’s Shanghai shares will sink 16 percent to an all-time low in the next 12 months.

  4. TSLA / Phil – I also expect $280 to be a realistic downside in this environment so will be transitioning to your recommended play.  Thanks!

  5. Phil

    What do you think of this company?

    AU Optronics Corp. AUO


  6. Good Morning.

  7. Happy Halloween 

  8. Good morning!  

    Big Chart – Remember, 3 weeks ago today we predicted the 5% Rule would cause the Rut to pull back to 1,490 which, from 1,512 (the 5% Line) was the 20% pullback of the run from 1,440 (with roundings).  So another 25 points down is 1,465 and that would be a strong retrace but you won't see that if the other indexes don't even make a weak retrace.   The NYSE is mirroring the RUT but the Nas just popped off into space again and the Dow and S&P are breaking up so this dip may be all we have.

    Sanders/StJ – She's like an SNL sketch of herself.  

    PTR/StJ – A real Chinese bubble stock.  

    You're welcome Stu.

    Image may contain: 1 person, text

    AUO/QC – Too many vowels for my taste…  A lot of debt, too, about $7Bn for a $4Bn company.  They borrowed $500M last year to keep cash flow even and I hate it when companies do that to pay a $100M dividend, which, of course, mainly benefits the large inside shareholders.  Half their revenues come from TV sales and only around 25% from mobile devices.

    They are not terrible but not that exciting either and, since the options aren't exciting to play – this is not one I bother with.  They do have an interesting solar side business though, that's a saving grace.  

    Despite Apple's efforts, the indexes are not looking strong.  

  9. Phil/ CNBC

    Good morning!

    If anyone on the board is watching CNBC, they may have heard Cramer pounding the table on MA…

    WHY, you ask? Because it’s down pre market…by all of $1, on a $149 stock!!!!

    He says ‘it’s a GIFT’!!

    So, I just put all my life savings into it for $148!!  NOT!

    How do they allow that guy to say this kind of BS?

  10. Maya – MA – its up almost 30% in last year as well.

  11. Opps – a meant 50% – up in the last year

  12. Well FTR has earnings today

  13. Phil// Any suggestions on ABX trade?  Thanks.

  14. batman… FTR today and TEVA Thursday.. i hope we can go 2 for 2 with these dogs.

  15. Maya/MA

    I think we can take it as a signal to liquidate our positions in MA and wait for a pullback :-) . What he is saying is for the sheeple so that the big boys can sell to them and get out and wait for a correction…


  16. TSLA/phil,…aargh…can't wrap my head around this one.  i have both april 400/330 (~$45 now) and 380/320 (~$37 now) bear put spreads.  both are showing a profit from where i bought them but lots more to go.  should i be favoring one over the other?  I won't be selling calls--too rich for me.

  17. Apparently CME is launching a bitcoin futures contract??? that one sounds like it could be a wild ride!

  18. Teva Pharma announces that the United States District Court for the District of Delaware has ruled in the Company’s favor in patent litigation involving the ANDA directed to a generic version of Valeant’s (VRX) Uceris tablets  (13.80 +0.25)

    10/31/2017, 9:53:28 AM ET

    At trial in May, the Court found that Plaintiffs did not meet the threshold to establish infringement, and the Court has now issued its written decision confirming that Teva's ANDA product does not infringe the asserted patent. Based on available information, Teva believes it is a "first applicant" to file an ANDA for the generic version of Uceris. Should its ANDA be approved, Teva may be entitled to 180 days of generic market exclusivity.

  19. Phil – 2nd Holiday Song - Kyle may not have Santa, but he does have Mr. Hankey

  20. QCOM getting spanked as AAPL breaks up with them.

    Cramer/Maya – What a stooge that guy is. Yep, it's a gift alright:

    Maybe we should teach him the 5% Rule.  $120 – $150 is $30 so $6 pullback (weak) to $144 is expected and strong pullback ($12) to $138 – THAT would be a "gift" if it's on a bull run.  Notice how $144 was resistance on the way up and then tested on the first pullback so, if it holds this time, THEN you can assume we're consolidating for a move higher but, at 36x earnings – I doubt that.

    Wow, V is at 40x earnings.  People have just gone completely nuts in this market.  

    FTR/Batman – What could they possibly say to match low expectations?  Although, actually, they missed the last 2 Qs, so who knows?

    ABX/Rookie – There's always an ABX trade!  They missed by a penny and got smacked for it.  

    Gold falling at the same time didn't help:

    And, of course, there was the tax thing with Tanzania (which caused the miss).  Also, ABX disappointed with production numbers but they tend to produce less when gold is cheap because they'd rather leave it in the ground, which is wise – as they almost always manage to lower their net cost of production each year.  And plenty of dry powder to buy other companies with.

    Strengthening balance sheet

    ABX maintained the strengthening of its balance sheet as its top priority in its 3Q17 results. The company paid off $3.1 billion in total debt in 2015 and another $2.0 billion in 2016. It had aimed for total debt reduction of $1.45 billion for 2017. As of 3Q17, it has already paid off $1.5 billion—exceeding its target.

    ABX is aiming for a total debt reduction of $5 billion by 2018 from $7.9 billion at the start of 2017. ABX aims to achieve this reduction through:

    • cash flow from operations
    • portfolio optimization
    • new joint ventures and partnerships

    Maturity profile remains comfortable

    Barrick’s maturity profile remains comfortable. Only $66 million of debt is due before 2020, excluding capital leases. The majority of the debt is due post-2032. The company has refinanced portions of the debt, pushing the maturity wall further into the future. This approach gives the company more time to manage debt in the long term and focus on other growth and productivity initiatives in the short-to-medium term. ABX had a $2.0 billion cash balance at the end of 3Q17 and a fully undrawn $4.0 billion credit facility.

    So, as a new trade on ABX, I like:

    • Sell 10 ABX 2020 $15 puts for $2.60 ($2,600) 
    • Buy 20 ABX 2020 $13 calls for $3.50 ($7,000) 
    • Sell 20 ABX 2020 $20 calls for $1.30 ($2,600) 

    That's net $1,800 on the $14,000 spread so the upside potential is $12,200 (677%) at $20 and you're starting out $3,000 in the money which means you can sell 5 (1/4) Jan $15 calls for 0.50 ($250), which doesn't seem like much but you have 8 quarters to sell so you collect $2,000 and the trade is net free!  

    AAPL $169.

    TSLA/Lunar – If they are both April, they are essentially the same play so it doesn't matter much.  Either one makes about $23 more at best if TSLA is below $320 but you can sell April $360 calls for $20 so I'd cash the $380/320s, which can only make $23 with a lower strike, and sell the short $360s against the remaining spread instead.  There's a bit more risk but, since you are taking the $37 off the table, you have $57 in pocket at $360 so no worse off than if TSLA hits $417 and, if you think that can happen – you should be taking both of the table, right? 

    CME/Crs – That's going to jack Bitcoin higher.  

    Hankey/Naybob – I like that whole album.  

  21. Phil,  Do you have any thoughts on SBUX before earnings?

  22. Phil

    What do you think of this company?

    Maybe a future

    Mazor Robotics Ltd. MZOR


  23. What is keeping \RB up?………..seasonally shouldn't it being going the other way.  Dang it!!!!

  24. AAPL

    Picked up some short term AAPL last Friday, ahead of the iPhone X madness and perhaps earnings.

    Looks like it wants to go higher before Thursday.

    May sell it or cover or sell it altogether and not risk earnings..Looking at the options, selling some $160 calls nets in a little premium too

  25. Phil / Pharmboy – what do you think of GWPH (GW Pharmaceuticalss)?  It's a biopharm developing marijuana-derived treatments.  It's up recently on submission of new epilepsy drug application to FDA.


  26. MA/Phil

    Yup, $135-138 is also a potential gap fill from early Sept, although its been in a rising channel from $100.

    They expect it to grow into earnings, I guess…I wonder how much PYPL and Square will eat into market share

  27. what's the best outcome for FTR today at ER.  the put prices sure are priced as if it was going bankrupt.

  28. CMG…does anyone know when the 2020 options start trading?

  29. AT&T/QC

    Thanks for that..

  30. Phil/RB – are you holding your shorts into inventory? Sorry if someone already asked you today, didn't see anything. Thx

  31. SBUX/Baron – Nothing in particular.  I think they are a good value at $55 but not outstanding as it's still 28x earnings and they just aren't growing like they used to.  

    Year End 02nd Oct 2011 2012 2013 2014 2015 2016 TTM 2017E 2018E CAGR / Avg
    Revenue $m 11,700 13,277 14,867 16,448 19,163 21,316 22,400 22,495 24,753 +12.7%
    Operating Profit $m 1,729 1,997 -201.8 3,081 3,931 4,172 4,340     +19.3%
    Net Profit $m 1,246 1,384 8.30 2,068 2,757 2,818 2,897 3,011 3,385 +17.7%
    EPS Reported $ 0.81 0.90 0.005 1.36 1.82 1.90 1.97     +18.6%
    EPS Normalised $ 0.80 0.91 1.21 1.36 1.69 1.92 2.03 2.06 2.35 +19.2%
    EPS Growth % +24.0 +14.2 +32.6 +12.9 +23.9 +13.7 +5.7 +7.53 +13.8  
    PE Ratio x           28.8 27.2 26.8 23.5  
    PEG x           3.82 3.61 1.94 1.56

    15% revenue growth from 2016 to 2018 is not what you want to see from a company you are paying 28x for.  The profit growth is even slower (10%), so that's not encouraging.  

    So, on the whole, I hope they miss and come down to $45 (p/e 22), where I don't mind taking a toss again (we used to have them and got out when they crossed $55 years ago.  In fact, we have short puts that give us a net $45 entry in the LTP and an even cheaper put in the STP, but that's the last time we touched them.

    MZOR/QC – Flying today but $1.6Bn for $36M in sales is a price/sales of 44 and the profits don't even exist.  It does sound cool but who knows if it's good or not.  The reason we used to play ISRG way back was because one of our guys was a doctor who used the machines and told us how amazing they were.  I don't know anything about Mazor so it's way to speculative for me.  

    Oil going up – $54.50 getting tested.  /RB $1.73.  

    /NG going the other way as people chase the hot hands.

    2.5% Rule at $2.893, which is $2.925 on /NGV8.

    AAPL/Maya – Usually conservative guidance but another massive quarter, most likely.  I'm sure they will justify $180+ next year regardless.  

    GWPH/Bai – Not my thing.  I'm very surprised they are a $2.7Bn company, actually.  Seems kind of insane with $13M in sales (price/sales = 200) and an $82M loss – I thought they were a penny stock and I was going to say I'd stay away but, at $107.59 – I'd stay very far away!  

    MA/Maya – Don't forget Apple Pay.  People I talk to who use it all say they wish the merchants would get it together so they don't need to carry money or cards anymore.  It is linked to your CC so MA or V or AXP still get a cut but AAPL could buy AXP with petty cash ($85Bn) or DFS for $25Bn – it would take them almost 6 months to make that much money!  

    CMG/Lunar – There is a schedule but I never know it.

    /RB/Ravi – Yep, may as well wait until there are more facts before capitulating.  

  32. phil/AAPL, if we think they will justify 180 next year, shouldn't the short calls be rolled out now?

  33. Many Americans Believe Fake News Is Sowing Confusion

  34. Macy's Is Maintained at Sell by Citigroup

  35. Chicago Bridge & Iron Is Maintained at Neutral by Baird



    10:26 AM ET 10/31/17

  36. SSD – outstanding move for Simpson. Construction industry must be good, so much rebuilding to do..

  37. Phil,

    What's you /RB position? Still short 3 at 1.703?

  38. Phil – DOPE – wanna know about GWPH or MJ stocks, read this guy, on the frequency.

    FYI, you asked for the raw commercial clip for our new venture, here it is, let me know. As for tonight, Happy Halloween all, don't get spooked like the herd and Out. 

  39. Doctors: Global warming is taking a toll on people’s health

  40. Airbnb hosts charged with murder in the death of a guest in Australia

  41. Thanks to Wall St., There May Be Too Many Restaurants

  42. AAPL/Lunar – What if we're wrong?  It's only a part cover and we're happy to buy more longs if they do too well.  We have a lot of profits in the position – I'd rather be protected.

    M/Jabob – Well, here's our current LTP position on M:

    Short Call 2019 18-JAN 28.00 CALL [M @ $18.87 $-0.82] -20 6/1/2017 (445) $-4,500 $2.25 $-1.36 n/a     $0.89 - $2,720 60.4% $-1,780
    Short Put 2019 18-JAN 25.00 PUT [M @ $18.87 $-0.82] -8 7/18/2017 (445) $-4,920 $6.15 $2.10     $8.25 - $-1,680 -34.1% $-6,600
    Long Call 2019 18-JAN 18.00 CALL [M @ $18.87 $-0.82] 30 8/18/2017 (445) $11,250 $3.75 $-0.48     $3.28 $-0.52 $-1,425 -12.7% $9,825

    The 2020s are out so 8 short 2019 $25 puts ($8.50) can be rolled to 15 short 2020 $18 puts ($4.60) for about even.  The 2019 $18 calls are now $3.15 and we can roll them to the 2020 $15 calls at $5.05 for net $1.90 and pay for that by selling the $25 calls for $2.10 so that all costs us net nothing but I'd rather wait and see where they do bottom.  If they bounce back quick – we don't need to adjust or if they go lower – we can do a cheaper roll. 

    Meanwhile, at this price ($18.60) if we owned the stock, we could sell the 2020 $18 calls for $4.20 and the $15 puts for $3.00 which would drop our net to $11.40 with the call-away at $15 but the main point is we collect $7.20 against an $18.60 stock and that's 40% over 2 years.   That's why I love these stocks when they get cheap – if I can get assigned a large quantity of M at an even lower price and then, forever more, make 20% a year selling puts and calls – that's the best thing I can possibly have in my portfolio.  

    CBI/Jabob – It's an infrastructure play and still no infrastructure bill.  Blame Trump.  

    Of course, on CBI, we have the 2019 $7.50/$15 spread so certainly not worried on that. 

    SSD/Scott – Nice move on them:

    /RB/Japar – 4 short at $1.706.  Down $4k at $1.73 frown  I missed two different chances to lighten up even – very poorly played.  

    Pot stocks/Naybob – If not for Sessions, I'd be a lot more interested.  If he gets indicted, then we can jump in on legalization speculation.  

    Gogo reports successful test of new air-to-ground network

    • Gogo (GOGO +0.1%) reports it's conducted its first successful test flight on its new, next-generation air-to-ground network.
    • The "ATG-NG" network, combined with in-flight hardware, will bring up to 30 times more bandwidth than the company's previous solution, it says, and it's pursuing an ATG network with performance comparable to its 2Ku satellite solution.
    • Peak capacity on the new network, which uses unlicensed 2.4-GHz spectrum along with Gogo's already licensed spectrum, is more than 100 Gbps.

    Chevron ships first Wheatstone LNG cargo to Japan

    • Chevron (CVX +1.3%) says its first shipment of liquefied natural gas has departed from the Wheatstone project located in Western Australia, after starting production earlier this month.
    • CVX says the cargo will be delivered to Japan's JERA, the world's biggest buyer of LNG and one of Wheatstone’s foundation buyers.
    • At full capacity, Wheatstone’s two train LNG facility is expected to contribute ~6% of the Asia Pacific region’s total future LNG production, delivering 8.9M metric tons/year of LNG for export to customers in Asia, and its domestic gas plant has the capacity to produce 200 terajoules/day of domestic gas for the Western Australian market.
    • The U.S. International Trade Commission recommends tariffs on imported solar panels of as much as 35%, lower than requested by the trade case bought by bankrupt Suniva and relieving worries from other U.S. solar companies that the recommended tariffs would be higher.
    • “That’s below the price that people have been hoarding panels for,” says Cowen analyst Jeffrey Osborne. “On the demand side, job cuts won’t be as bad as feared, but on the manufacturing side, job creation won’t be as big. This would have a limited effect."
    • Imported solar panels for large solar farms are forecast to remain ~$0.32/watt in the U.S. next year, excluding the impact of tariffs, and a 30%-35% tariff would tack on $0.10-$0.11, putting modules at the same cost developers were paying in September 2016 and significantly less than developers had feared, says Bloomberg analyst Nathan Serota.
    • The ITC will send its proposals to Pres. Trump, who faces a January deadline to make a final decision.
    • Among relevant tickers: FSLR -10.8%SPWR -1.1%CSIQ -0.1%JKS -1%CAFD -1%SOL-2%RUN -0.5%VSLR +1.3%TERP +2.3%SEDG +0.7%ENPH +2.2%.
    • Casinos in Nevada reported that gaming win revenue increased 3.25% Y/Y in September to $979.9M. The Las Vegas mass shooting incident occurred on October 1 so the impact wasn't included in the total.
    • Revenue on the Las Vegas Strip was up 4.67% to $568M during the month, while downtown LV casino revenue was flat at $49.25M.
    • Total slots revenue increased 1.6% to $595.5M during the month off a win percentage of 6.39% (down from 7.00% in August).
    • Games and tables revenue increased 5.9% to $384.4M off a win percentage of 14%. The win at sports books was up 8% to $44.4M off a win percentage of 8%.
    • Nevada Gaming Control Board full report (.pdf)
    • Nevada-related stocks: Caesars Entertainment (CZR +2.6%), Boyd Gaming (BYD +1.2%), Wynn Resorts (WYNN +5.2%), MGM Resorts (MGM +2.3%), Las Vegas Sands (LVS +2.9%), Full House Resorts (FLL -0.4%) and Red Rocks Resorts (RRR +0.5%).
    • Related ETF: BJK.
    • AK Steel (AKS -20.7%) plunges as much as 21%, the most intraday since November 2012, to a 52-week low following disappointing Q3 earnings and its conference call where a gloomy Q4 outlook outlined weaker shipments and higher maintenance.
    • AKS forecasts marginally lower flat-rolled prices in Q4, sees auto shipments slightly lower Q/Q and expects lower shipments in infrastructure and manufacturing in the quarter.
    • AKS also sees planned Q4 outages totaling ~$50M vs. just $8M in Q3 but expects to recover higher costs with higher pricing in Q4.
    • On a potential equity raise, AKS says it will wait for the opportune time and continue to monitor the market.
    • Other steel names also are lower: X -5.2%STLD -1.1%CMC -1.1%NUE -0.9%.
    • Source: Bloomberg First Word
    • Under Armour (UAAUA) is down 16% after once again lowering revenue expectations due chiefly to challenges in North America. Though Under Armour says the upgrading of its IT system impacted Q3 sales, analysts are warning that the company is facing some larger issues. In a nutshell, consumer trends have turned against Under Armour to a degree and rivals such as Adidas have encroached into its territory.
    • UA aftershocks: Foot Locker (NYSE:FL-1.7%, Wolverine Worldwide (NYSE:WWW-1.7%, Caleres (NYSE:CAL-3.3%, Columbia Sportswear (NASDAQ:COLM-1.3%, Finish Line (NASDAQ:FINL-2.2%, DSW (NYSE:DSW-1.9%, Shoe Carnival (NASDAQ:SCVL-3.2%, Boot Barn (NASDAQ:BOOT-2.1%, Dick's Sporting Goods (NYSE:DKS) -1%, Hibbett Sports (NASDAQ:HIBB-1%, Big 5 Sporting Goods (NASDAQ:BGFV-2.5%.
    • Larger peers are faring just fine after the UA print. Nike (NYSE:NKE) is down only 0.4%, while in Frankfurt, Adidas (OTCQX:ADDYYOTCQX:ADDDF) is off just 0.1%.

  43. Phil / CBI – Wanted to bounce off my thoughts on this company.  Earnings yesterday were OK.   I was not impressed with management on the conference call.  They lacked a clear message, and still had write offs from existing LNG operations.  Having said that these projects are now 99% and 85% done.  In addition the sale of Engr Tech is progressing.  They indicated that all bids were above 2B but did not comment on their earlier outlook of 2.2 to 2.8B ( this is OK since they are in negotiations).  They will use this to pay off some or all of their 1.7B debt, and be well within lender covenants.  They also indicated CF from Ops  should get back to normal / positive run rate( I'm assuming 200M). They company should choose a buyer by late Nov and sell late 2017 or early 2018.  They are also looking for a tie up with new buyer which will lesson the loss of revenue and most likely keep some high margin consulting type work.  Given what there outlooked this Qtr and commented on about run rate ( .45 to .6 / QTR EPS is reasonable).  I believe it is reasonable to have an annual EPS run rate of 2 to 2.5 / sh next year and nominal growth.  This will be impacted some by sales price and tie up clause with buyer.  Given this they should warrant a multiple of 8 to 12 and look like a 20 to 25 dollar stock.

    Questions. – Do you agree with the 2 to 2.5 EPS run rate? if not what do you think is?

    I the multiple reasonable?

  44. Phil aren't you short the M $28 puts?

  45. Phil, would that be a rec on a new M position, buy stock and sell P and C? 

  46. Phil/ CBI -  Somehow I missed the change in position on CBI.  Still hold 10 Jan19 17.50/22.50 BCS (basis  3.65) and short 10 Jan19 15 puts (basis 3.10).   Advice please.

  47. CBI/Batman – I agree with $2/share next year and, going forward, a nice $750M tax credit to work off as a bonus. Given their shaky history, I think a p/e of 10 is fair and we're only looking for $15 on our spread – I definitely feel good about that.  

    M/Jabob – We closed 10 short 2019 $28 puts in July (21st) at $8.55 and rolled them to 15 of the $23 puts at $5.25 for net $675 so net $4.80 per short put is our current position.  

    M/Taihu – I like it down here but it might go a bit lower first – don't over-commit.  

    CBI/Taihu – The 2019 $15 puts are $4.70 and a perfectly valid target, so you don't need to do anything but the 2020 $12.50 puts are $4.20 so for 0.50 you can make yourself $2.50 safer if it makes you happy.  The 2019 $17.50s are $2.50 and the 2020 $10 ($6.40)/$17.50 ($3.80) bull call spread is $2.60 so that's a nice roll and then I'd keep a stop on 1/2 the short 2019 $22.50 calls ($1.50) at $2 – just to stay out of trouble.  

  48. FTR up today…

    will it be up tomorrow?

  49. Thanks Phil.

  50. Truck drove down bike lane in NYC – multiple deaths!  

  51. Shooting downtown NYC just blocks from my office.  Good thing I telecommuted today.

  52. Shorting /TF at 1,505.

  53. disgusting!

  54. 1 school on lockdown and multiple deaths so far.  5 critically injured.

  55. Apparently on a bike path by Chambers St downtown.  

    Bloodbath in downtown NYC after driver shoots pedestrians from his truck via

  56. Doesn't seem like terrorism, just some gun nut so taking quick profit on /TF and done with it.  No one cares of one of our citizens exercises their 2nd Amendment rights…

  57. In other news we strangely don't care about;

    KABUL, Afghanistan — A suicide bomber struck near the US Embassy in Afghanistan’s capital Tuesday, killing five people in an attack claimed by the Islamic State group.

    Health Ministry spokesman Wahid Mujro said another 20 people were wounded in the blast, which took place in a heavily guarded area housing several diplomatic missions and the offices of international organizations.

  58. GPN – another money-handler marching ever onwards and upwards

  59. Frontier Comm 3Q Loss/Shr $1.19 FTR

    4:05 PM ET 10/31/17 | Dow Jone


  60. seems good

  61. well, FTR didn't sink yet!  not down is good!

  62. We purchased $45 million principal amount of our senior unsecured notes 

    on the open market during the third quarter of 2017. 

  63. dividend still 60 cents.  that's good!

  64. Frontier Communications Corporation (NASDAQ: FTR) announced today that its Board of Directors has declared a regular quarterly dividend on Frontier's 11.125% Mandatory Convertible Preferred Stock, Series A, of $2.78125 per share, payable in cash on December 29, 2017 to holders of record at the close of business on December 15, 2017. 

    The Board of Directors also has declared a regular quarterly cash dividend of $0.60 per share of common stock, payable on December 29, 2017 to holders of record at the close of business on December 15, 2017. 

  65. NFLX suspending House of Cards because Spacey was accused of harassment.  That's going to hit them financially.  Someone is bound to do some math that harshly downgrades NFLX on this.  

    FTR/Jabob, Lunar – That's nuts, a $2.40 dividend on a $12 stock! 

  66. and they are buying back their debt. makes no sense. 

    but i am not counting on 2.40 even if they will pay the 60c this quarter.

  67. i can't believe they kept their dividend. 

    you would think that it would at least scare the shorts a little.

    and buying 45MM of their debt back is not a sign of a cash strapped company.

    ftr is a steal down here imo.

  68. Phil,

    Spike and CL and RB futures not sure what happened

  69. Seems too soon for API report.   

  70. No, I guess it was API:

    API Weekly: Crude -5.087, Cushing -0.263, Gasoline -7.697, Distillate -3.106

  71. S&P SPDRs: CNBC tweets 'NYPD treating lower Manhattan truck crash that has killed 6 & injured 15 as suspected act of terror – WNBC'

    10/31/2017, 4:38:00 PM ET

    CNBC Article


  72. give me a manhattan hotel stock to short

  73. Phil

    Would you recommend any adjustments to RB shorts ?

  74. /RB/Pat – I just added a few more to bring my avg to $1.72 with tight stops over $1.75.

  75. phil--any opinion on ftr earnings?

  76. Phil,

    What are your thoughts on where /CL will settle?

    Also, are you available to talk about PSW Hedge Fund tomorrow or on weekend?

  77. CTF Summary from SA

    Frontier Communications (FTR +1.9%) has turned 1.7% higher in choppy postmarket trading following Q3 earnings where it posted a smaller-than-expected loss and improved churn measures.

    Net loss was $38M, and net loss attributable to common shares was $92M, vs. an expected loss of $105M.

    Revenue breakout: Consumer, $1.1B (down $22M sequentially); Commercial, $958M; Regulatory, $191M.

    Customer churn improved to 2.08%: 1.92% for Frontier Legacy, and 2.33% for the California-Texas-Florida operations it acquired, with the overall gain being driven by FiOS in CTF.

    Average Revenue per Customer in the Consumer business was $80.91: $63.99 for Legacy, and $107.33 for CTF.

    Total commercial customers shrank to 463,000, vs. Q2's 473,000.

    Net cash from operations was $356M; adjusted free cash flow was $182M.

  78. OOPS above should be FTR summary

  79. FTR – My thoughts on the Quarter.  Mgmt seems to have good focus on the key drivers of the business.  Would appreciate feedback from the forum.  It feels to me like they are making progress but the big overhang remains cash flow … the areas they are focusing on are the right ones and they are making progress on them… the net output – cash flow growth and revenue ( flat) have not been affected.

    Areas of focus – In not particular order of importance:

    Customer Service – Positive - this is improving and CTF had best customer sat rating since acquisition.  2 quarters of improved numbers.  Legacy is flat.

    Customer Adds – Neutral to Positive – CTF gross trending up and almost back to levels when they first were acquired. Net Adds still negative but have 3 qtrs of improved numbers.  Legacy is flat to down.  looks like they could hit a positive no. in the next qtr or two.

    Churn CTF – Positive –  improving for 2 quarters and Legacy flat.

    ARPC – Positive. Legacy at 107.3 is trending up and is almost at the 108 they were at acquisition. CTF flat.

    Adjusted Cash Flow – Negative.  Revenue still shrinking and impacting this.  They outlooked a down quarter at 720M to 750 M. down sequentially and YOY.  This needs to be improved.  

    Debt – Paid off 42M of debt this Quarter and should be in good shape to pay off the 578 in Q4 next year as well as 528 in '19.  The trend needs to reverse.  This is directly related to the spiffs they are running.  

    There was a lot of concern on the call from analysts regarding the Div.  Really around how they can refinance debt and still pay dividend.   The response from mgmt was – essentially – we'll review it quarter to quarter, but they feel good about at this time.  They are on track to achieve the 300M of cost savings by mid next year. They really need to get a path to get to a 3 to 3.4B run rate on the adjusted cash flow.  They also have the conversion of their Preferred due next year – This should help from a cash flow, but from a dilution standpoint not helpful.  

  80. FTR/Jabob – Well $2.25Bn in revenues and a $38M loss means if they can get 10% more efficient, they'll make $200M/Qtr and you're buying the whole company for under $1Bn at $12.  

    The Company achieved more than $19 million of synergies in Q3 and remains on track to achieve its target of $350 million in annual savings by mid-2018.

    Net cash provided from operating activities was $356 million for the third quarter of 2017. Adjusted free cash flow4 was $182 million for the third quarter.


    • Revenue was $1.1 billion, a sequential decline of $22 million versus the $40 million sequential decline in the second quarter. The improved trend was entirely driven by a stronger performance in CTF.
    • Customer churn improved to 2.08% (1.92% for Frontier Legacy and 2.33% for CTF operations) compared to 2.24% for the second quarter of 2017 (1.95% for Frontier Legacy and 2.69% for CTF operations), with CTF FiOS being the primary driver of the overall improvement.
    • Combined Average Revenue Per Customer (ARPC) of $80.91 ($63.99 for Frontier Legacy and $107.33 for CTF operations). Excluding the positive one-time impact of the Mayweather vs. McGregor fight in the quarter, each of these measures of ARPC was stable sequentially.

    Commercial Business Highlights

    • Revenue of $958 million, was roughly stable with the second quarter, adjusted for the divestiture of the Frontier Secure Strategic Partnerships business.
    • Total commercial customers of 463,000 compared to 473,000 during the second quarter of 2017.
    • For the full year 2017, Frontier’s guidance is the following:

    • Adjusted free cash flow5 - $730 million to $750 million
    • Capital expenditures – $1.15 billion to $1.2 billion
    • Integration – operating expense $20 million; capital expenditures $50 million
    • Storm impact – operating expense $28 million; capital expenditures $12 million
    • Net cash tax refund – $50 million
    • For the fourth quarter 2017, Frontier’s guidance is the following:

    • Adjusted EBITDA6 - $910 million to $930 million
    • Cash pension/OPEB – $34 million

    T and VZ both went through money-losing periods when they built out their systems.  Any utility does but people these days, for some reason, don't understand the model.  There's no way around it – you go into debt and build stuff that pays off enough to service the debt and make a profit for about 20 years and then it's old stuff and you have to run the cycle again.   FTR is coming out of a borrowing and building cycle and it's perfectly normal.  The thing that isn't normal is the way traders freak out about it.

    In the old days, because of their nature, cyclical companies used to have a p/e of 7-12 – all the time.  That reflected the CYCLICAL nature of their business.  People would hold them when they were in debt and the same people would hold them while the cash flowed in and they considered their risk to be an average of those times.  

    These days, people play cyclicals like they are momentum stocks and way overpay when the money is coming in and then completely panic out during the borrowing cycles.  It's probably the stupidest thing going on in the market these days – probably due to the fact that "investors" and even the analysts are not experts on the stocks they are looking at – they treat every investment like it's some kind of casino bet instead of…. an investment!  

    From our LTP review:

    FTR – If they don't go BK, this will be amazing.  There's no sense in leaving the short 2019 $15 calls open when we can buy them back for a 75% profit so let's buy those back for $1 (no more) and there's 10% of our loss erased with those profits.  Now, we KNOW we will end up doubling down at $10 to drop our basis to $15 but we can already sell 40 2020 $10 puts for $5.30 ($20,600), so there's really no reason not to do that, is there – as it's a net $4.70 entry AND it immediately drops our long basis to $14.59.  That then means that we can sell the 20 (1/2) of the 2020 $12 calls for $2 but, as I write it, I feel we're giving it away so let's hold off on that leg.  

    So, with FTR, we just took back $23,000 of our $33,000 loss on the long stock.  If we can do that with a disastrously wrong-way entry like we had on FTR – don't you think you should be entering all your trades with these kinds of spreads?  When we enter positions where the worst case is we double down to a 50% allocation at a 20% discount and then we can go in for the rest at a 40-50% total discount on a full allocation block – isn't it obvious we're rarely going to have any serious losers?  

    FTR Frontier Comms. Corp. 4000 8/24/2016 433 $79,560 $19.89 $-7.99 $21.00     $11.90 $0.02 $-31,960 -40.2% $47,600
    Short Put 2020 17-JAN 10.00 PUT [FTR @ $11.90 $0.02] -40 10/24/2017 (808) $-21,200 $5.30 $-0.25     $5.05 $-0.20 $1,000 4.7% $-20,200

    /CL/Japar – I think the good news is baked in so any disappointment from EIA tomorrow should get us back to $53 and my break-even is $53.64 at the moment.  As to the fund, tomorrow is a rough day because of the Webinar but any other day is good after 10 or early as you want on weekend.  

  81. An economist explains how to get the most candy on Halloween

  82. Sears could run out of money before the holidays

  83. Good morning!

    West Side Highway is closed in NYC (crime scene) - total nightmare this morning. 

    • President Trump has ordered the Department of Homeland Security "to step up our already Extreme Vetting Program" following the truck rampage along an NYC bike path that killed at least eight people and left a dozen injured.
    • Suspect Sayfullo Habibullaevic Saipov, an Uzbek national who entered the U.S. in 2010, shouted "Allahu akbar," as he was confronted and shot by police.
    • He was also an UBER driver that passed the app's background check.

    Good pop on /SI, $17.03 – taking profits there as it partly makes up for /RB losses.

    Markets are moving relentlessly higher, up about half a point with /NKD jumping 1.6% today and DAX not far behind:

    How was this not baked-in?  Japanese stocks fly as Abe re-elected
    • Japanese stocks surged overnight after Shinzo Abe was re-elected prime minister.
    • It follows his ruling bloc's big election win last month, which reinforced support for his economic reforms, popularly known as "Abenomics."
    • The decision also comes just days before President Trump's visit to Japan, which is expected to be dominated by concerns over a volatile North Korea.
    • Nikkei +2% to 22,447.

    Total-led group signs lease for oil and gas exploration off Greece

    • A consortium led by Total (NYSE:TOT) moves a step closer to exploring for oil and gas off Greece after signing a lease today with the government for a block in the Ionian Sea.
    • TOT has shown interest in the eastern Mediterranean following major gas discoveries off Israel and Egypt, and it is currently drilling for oil off Cyprus, but western Greece is a frontier, underexplored area with little data on its hydrocarbon potential.
    • TOT will operate the Ionian block with a 50% stake, while Italy's Edison and Greek refiner Hellenic Petroleum will each hold 25%; the agreement must be ratified by Greece’s parliament before exploration work can begin.
    • Natural gas producers in Alberta are frustrated with TransCanada (NYSE:TRP) for changing the way it operates its gas pipeline network with little notice, which has led to massive commodity price swings, Financial Post reports.
    • Under its new set of priorities, TRP gave producers who have firm-service contracts on its natural gas pipelines priority over shippers that use the service intermittently; previously, the company would slightly scale back service for firm-service shippers during maintenance to make allowances for spot shippers, but the new policy means that at times of maintenance or outages, TRP entirely cuts service to shippers with interruptible contracts on its gas gathering and transmission network, leaving those shippers unable to access the pipeline network to get to storage sites.
    • As a result, natural gas prices at Alberta’s AECO pricing hub have been extremely volatile in September and October, and many gas producers have been forced to shut in production at some of their wells in response to swings in gas prices to avoid selling for virtually nothing in the spot market, FP reports.
    • U.S. Steel (NYSE:X+7.8% after-hours following a strong beats for Q3 earnings and revenues as well as reaffirming above consensus full-year earnings.
    • X calls Q3 results "modestly better" than it had expected, with stable operating performance at each segment and the tubular segment producing positive EBITDA.
    • Net debt fell by $200M in the quarter to $1.2B and total liquidity increased, which the company says "leaves us well positioned to continue the implementation of our asset revitalization program."
    • If market conditions remain at their current levels, the company says it expects FY 2017 adjusted net earnings of ~$300M, or $1.70/share vs. $1.63 analyst consensus estimate, and consolidated adjusted EBITDA of ~$1.075B.
    • We are seeing operating improvements in the assets in which we are investing. This increases our confidence that we will achieve the 2020 improvement targets we have disclosed," the company says.
    • Frontier Communications (FTR +1.9%) has turned 1.7% higher in choppy postmarket trading following Q3 earnings where it posted a smaller-than-expected loss and improved churn measures.
    • Net loss was $38M, and net loss attributable to common shares was $92M, vs. an expected loss of $105M.
    • Revenue breakout: Consumer, $1.1B (down $22M sequentially); Commercial, $958M; Regulatory, $191M.
    • Customer churn improved to 2.08%: 1.92% for Frontier Legacy, and 2.33% for the California-Texas-Florida operations it acquired, with the overall gain being driven by FiOS in CTF.
    • Average Revenue per Customer in the Consumer business was $80.91: $63.99 for Legacy, and $107.33 for CTF.
    • Total commercial customers shrank to 463,000, vs. Q2's 473,000.
    • Net cash from operations was $356M; adjusted free cash flow was $182M.
    • Conference call to come at 4:30 p.m. ET.
    • Press Release

    3D Systems misses Q3 estimates, withdraws guidance; shares down 19%

    • 3D Systems (NYSE:DDD) shares are down 18.98% aftermarket following a Q3 report that missed EPS and revenue estimates. The company also withdrew its guidance.
    • Guidance explanation, per the press release: “Management is focused on building the company for long term growth, profitability and success. This includes significant transformational work in solving for legacy issues while at the same time addressing current and go forward execution. Predictability has been difficult in this environment, and therefore, management believes it is prudent to withdraw guidance at this time.”
    • Key metrics: gross profit margin, 38.3%; operating expenses, $90.9M; SG&A expenses, $66.5M (+3%); R&D expenses, $24.4M (-7%); cash used in operations, $0.7M; cash on hand, $138.3M.
    • Press release 
    • Previously: 3D Systems misses by $0.32, misses on revenue (Oct. 31)


    "a cash-incinerating vanity project for Elon Musk"  – quote of the day.  Hope all the NYC folk are okay.