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Thursday Thoughts – Powell to Head Fed, Tesla Crashes and Burns $1.4Bn


That's a lot of money to burn through in a single quarter – especially in a quarter where not only were just 260 Model 3s actually delivered by Tesal (TSLA) but they have now pushed back full-scale production targets through March, so 2 more lost quarters ahead, with Q4 losses now estimated at an even $1Bn. 

This can only mean one thing – Morgan Stanley will be ugrading TSLA any moment!  That's what usually happens when one of their leading underwriters has to defend the company's poor ACTUAL earnings.  Just a month ago, Nomura gave them a $500 price target – these analysts truly have no shame (or common sense!).  Our take on Tesla has been somewhat more negative (see February's "Tesla’s Emperor Musk Has No Clothes!" or May's "Tesla’s Earnings Miss – Emperor Musk has no Clothes!" or "Tuesday Turmoil – Tesla Valuation Reaches Peak Insanity") and, though we were often early, our Tesla shorts have all wound up being successful, so far.

On Tuesday, right here in the Morning Report (which you'd be foolish not to subscribe to HERE), our Trade Idea for this earnings period was:

  • 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!  

With TSLA tumbling to test the $300 line this morning, we'll probably be good for 200% gains ($10,000) in just 48 hours – not bad for a free pick, right?  In yesterday's morning Report, we called for shorting Oil (/CL) Futures at $55 and those picked up a nice $1,000 per contract gain at $54 yesterday – just a fun thing to do while we waited for Tesla's earnings to be released.  The Russell (/TF) short at 1,515 paid a whopping $1,500 per contract at 1,485 and the Dow (/YM) Futures short we called at 23,450 caught a 100-point drop that was good for gains of $500 per contractyou're welcome!  

Of course, we're going to need those quick wins because Tuesday's 597,839 contract spread on June 2021/Dec 2017 oil contracts has jumped almost $1, to $4.55, so we'd be about $600M out of pocket if we closed it today but we started with a $2.14Bn credit, so we can afford to ride it out a bit longer (see Tuesday's Report for details) and, of course, it was meant to be a long-term trade – not like our quickie Futures plays

Image result for oil contango chartIn a NYMEX spread like that one, we're really only concerned with the rolling cost since, ultimately, we bought cheap June 2021 barrels for $50.32 and sold Dec 2017 barrels for $53.90.  There are two ways to win and the one we are counting on is that the front-month barrels will fall faster than our long barrels and we cash out with a profit (started with a credit) but the other way to win, if oil goes higher, is to buy back the Dec calls (now $54.30) and roll them (resell another month) to a longer month for low cost.  At the moment, the March 2018 calls are $54.66 so we get an additional 0.36 credit for rolling 597,839 contracts ($215,222,040), bringing our credit total up to $2,355,485,660 – you're welcome!  

As time goes on, if the contracts go higher and we can keep on rolling for credits, our spread will simply widen and widen until we cash it in for the net of the spread.  We would probably make more money being "wrong" if oil goes higher in the long run than if our shorting premise pays off in early rounds.  Either way, it's nice to start out with a $2.1Bn credit – just ask The Donald…  

Speaking of our Beleaguered Leader, it looks like Trump will appoint Investment Bankster Jerome Powell to head the Federal Reserve because who better to guard the hen-house but the foxes?  A long-time Republican (he was assistant to Reagan's original VP pick, Richard Schweiker), Powell is actually a very good guy who's last private gig was managing a sustainable energy fund (Global Environment Fund).  Powell was a compromise pick by Obama so, for a Trump apointee – we could do much worse – this one actually knows something about the department he will be heading! 

Powell is expected to maintain the Fed policies (easy money, very slow increases) but the Dollar is rising this morning (94.66) as former Goldman Bankster, Marc Carney announced a "one and almost done" rate increase (now 0.5%) that leaves the UK with a much looser forward policy than the US has.  That's sent the Pound back to $1.31 – already 2% off yesterday's highs.  It was also noted that the UK economy was growing at just 1.7% – the reason they are continuing to print money are this insane pace.  

Carney is having the same problem our Fed is having:  Though they have drastically increased the Monetary Base by growing their balance sheet (about 200% for each) and growing the reserve balances of their primary dealers (Big Banks, who are the true owners/controllers of the Federal Reserve, not our Government) but the Banks have not turned around and put that money to work in the economy and thus we have very little economic growth and very low inflation – despite a massive uptick in the money supply.  

Image result for supply velocity of money

Related imageBecause the Central Banksters of the World have MASSIVELY inflated the Money Supply while the Velocity of the Money has approached record lows, they are sitting on a ticking inflationary time bomb because it's very hard to withdraw that money, once it's out in the wild, while the smallest increase in velocity can have a huge impact on prices – ESPECIALLY if Output remains the same and our recent Productivity Reports have not been very encouraging.  

So it's all about the velocity now and we'll look for upticks in lending activity as a warning that inflation is soon to follow.  Of course many would argue that inflation is already here – we have a stock market that's inflated 300% since the crash and things the Fed doesn't measure like medical costs and college tuitions are completely out of control and oil, which they never count – was $42 last November and is now $54, which is up 28.5% – what inflation?   

It's almost time for our 2018 set of "Secret Santa's Inflation Hedges" and we'll certainly be going back to bat on the Agricultural ETF (DBA), which has been on a run lately but should really hit its stride next year – if the Global Economy doesn't derail.  We have the slightly profitable spread from last year's Secret Santa List in our Long-Term Portfolio (LTP) as well as our Options Opportunity Portfolio (OOP):  

We're just about at our $20 target and we should collect the full $8,000 from our $3,700 net entry so up $4,300 would be a 116% gain since August – not bad for 3 months, right?  We'll look for something similar to help pay for our groceries next year as well so then, like the Fed, we can pretend inflation doesn't affect us!  


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  1. TEVA WTF? What a POS. From 45 to under 12. 

    Worst than FTR

  2. Phil – Great call on TSLA !

    ~~ BABA – Alibaba beats by $0.26, beats on revs.  

  3. I don't think I'd ever hear myself actually say this, but bitcoin might go to $25,000.

  4. TEVA is even more absurd than FTR.  TEVA is further from bankruptcy than FTR and in an industry that has a demographic tailwind.  The 'focus' in healthcare seems to cycle through the different sub-segments so that every one of them feels the pain at some point as they seek to cut costs.  However, generics are an important part of cutting costs.  TEVA is hardly going bankrupt despite industry pressures and the company's travails, but it's trading like it.  The market is efficient eventually, but the path to get there is often very inefficient.

  5. Good morning, All!

    The webinar replay is now available!

  6. the way the market is rewarding value of very skewed overall. It's important to be very vigilant which is why we all work so hard to try to stay on top of it.

  7. Good Morning.

  8. seer— TEVA is a disaster. They continue to miss and guide lower. The POS is under 12. 

    I knew the quarter would suck but this is ridiculous.

    Is there any chance TEVA could recover and close above 13?

    So sick of hitting new 52 week lows on these FU stocks.

  9. TSLA – Another joke of an earnings call.  Worth listening to hear how bad it is.  They get the positive analysts to ask questions first and Elon goes on a ramble to presumably chew up time.  No straight answers.  Unlike any other earnings calls.  No mention of Model 3 reservations, probably smart because I am sure they are only going down further.  How Cowan can put a $405 price target on this after those earnings and conference call is unbelievable. It will be an interesting couple of days to see if there is follow through.  

  10. TEVA / FTR – It seems reasonable to expect these stocks to be dumped till year-end since no fund wants to be holding them at year-end for disclosure purposes, and tax loss selling has to be kicking in as well.  I have been selling December calls against 2019 positions.  Will sell more December calls rolling lower.  I think we could see a nice bounce in 1Q 2018.  

  11. TEVA – Bot some. 11.97  :)

  12. FTR – You can sell December calls and collect the dividend as well. Stock will likely drop ex dividend post December 14th. 

  13. Nothing to worry about the markets, we'll have our tax cut soon:

    House leaders initially tasked Trump with naming the bill, but both House Speaker Paul Ryan (R-WI) and House Ways and Means chairman Kevin Brady (R-TX) have both pushed back against the bill name favored by Trump, according to ABC News. Despite this pushback, Trump still wants to name the legislation “The Cut Cut Cut Act,” per ABC News.

    What, WTF…. We have a man-child in the oval office!

  14. ~~ CHK -Chesapeake Energy beats by $0.01, misses on revs.  

  15. Cut x 3 – TRump just hopes to trip up a few when saying it…. ;)

  16. Jabo-TEVA is troublesome, but far from bankruptcy.  Pharmas can get hit with changes in the environment and a lack of pipeline, but TEVA has a pipeline that will kick in eventually.  They can also adapt the cost structure and organization for the changing environment.  They are not adapting as fast as we like, but EPS was still $1.  Likely to be more pressure given the negative sentiment, tax timing and selling pressure from AGN.  What happens when they continue to earn $4 EPS, or even $3, over the long term? 

  17. TSLA – JP Morgan neutral with a target of $185.  What does it take to get a sell rating?  That is pathetic. Jonas at Morgan Stanley all kinds of qualifiers (basically I believe what Elon will finally meet his commitments) on TSLA now being a buying opportunity and a $379 target.  Hucksters.  

  18. i was thinking same as stuman, tax selling 

  19. RBC out defending TSLA.

    ~~•RBC notes, Model 3 ramp challenged and NT targets pushed a quarter. While after-market sell-off isn't a surprise, they agree with Elon that in the scheme of things a quarter or so delay is a blip. TSLA benefits from being valued off outer-year earnings and/or DCFs, so this unlikely to change many views and may be a buying opportunity for LT holders. Price target to $340 on tweaked forecast.

  20. Stuman – I like your idea of buying FTR and selling calls.  I also sold some puts.

    Opened a small position :

    Bought 600 shares @ $8.96

    Sold 6 Jan 9 calls for $1

    Sold 6 Jan 7 puts for $,50

  21. Stock goes ex-divd on 12/14 by .60.

    * Leverage: Ended the quarter at 4.7x net debt/EBITDA (4.57x at Q2'17).
    * 2017 guidance lowered: sales $22.2-$22.3 bn (prior $22.8-$23.2 bn), adj EPS
      $3.77-$3.87 (prior $4.30-$4.50), CFO $3.15-$3.33 bn (prior $4.4-$4.6 bn).
    * Debt paydown: Now expects to pay down $3.5-$4 bn of debt (instead of the
      stated $5 bn on Q2'17 call). Currently does not have a plan to raise equity.
      Will evaluate all options going forward.
    * Potential downgrade: $6 bn of Term Loans are subject to 25 bps increase on a
      1 notch downgrade. There will be 100-150 bps increase on interest rates if
      Teva were to refinance debt.
    * Divestitures: Expects to receive $2.3 bn in net proceeds from divestitures
      with the majority coming in 2017. Will continue to  look at non-core assets
      that the company can monetize.
    * Generic pricing: Generic price erosion was 10% in the quarter (6% in Q2'17). 
      Expects price erosion to remain at elevated levels for remainder of the year.
    * Copaxone: Expects a 30 cent impact from generic Copaxone in 2017. Mylan price
      discounts were greater than originally expected. 
    * New products: Revenues from new product launches are expected to be $400 mn
      in 2017. Has 300 ANDAs filed with another 300 ANDAs yet to be filed.
    * Cost savings: On track to achieve $1.6 bn of cost savings.
    * IG Commitment?: Excerpt from call transcript: "Since the beginning of the
      year, we really been focused our efforts on extracting our deal synergies,
      reducing our cost base and divesting our noncore assets. This is really been
      with the goal of reducing our leverage. We continue these efforts,
      especially, facing all of the headwinds that we have. And we also enjoy an
      active and open dialogue with our credit agencies. And we'll continue to work
      with them as we consider and prepare for all foreseeable scenarios. We have
      some important decisions to make in order to stay Investment grade. But we
      feel we'll be in a better position to really address that in our future
      calls. We'll be working on our 2018 plan together with our new CEO, and
      evaluating all options to make sure we do what's in the best interest of all
      stakeholders. Currently, we do not have a plan to raise equity. But these are
      some of the things that will be considering together with new management and
      the Board as we move in into the future"

  23. Phil / FTR preferred  -

    FTR - Frontier Communications Corp., 11.125% Mandatory Convertible Preferred Stock, Series A, liquidation preference $100 per share. The preferred shares are mandatorily convertible on 6/29/2018 into a variable number of Frontier Communications Corp. (NYSE: FTR) common shares based on the then current price of the common shares for 20 consecutive trading days immediately prior to the conversion date. The conversion settlement rate will be 17.0213 shares per unit if the then current market price is equal to or greater than $5.875 and 20.0000 shares per unit if the market price is equal to or less than $5.00. For market prices between those values the settlement rate will be $100 divided by the market value. The last reported sale price of the common stock on 6/4/2015 was $5.00 per share. The preferred shares are convertible any time at the holder’s option into 17.0213 shares of common stock.


    So they are under 5 / sh so that means the preferreds convert at 1.33 ( accounting for the 1 to 15 split) per unit.  So 19.3M Preferred stock turn into 25.7M shares of common.  so prior to conversion they pay $11.125 / preferred share as a dividend.  So $217M / year on preferred.  After June the preferred will convert to common at 1.33X per unit which is 25.7M shares now paying 2.4/ sh of dividend.  So now they will be paying $62M on the just converted shares. This is a huge dilution on the current outstanding shares = 78.5M but a plus from a FCF standpoint.

    So payout prior to conversion is 217(preferred) + 188 ( reg dividend) = $405 M after conversion dividend will be roughly 250M.  

    Is this assumption correct?

    Phil, my question now is are my assumptions above correct, and if they are, does the

    FCF allow them to pay for this and support their capital expenses?    

  24. On the positive side:  LB up 7%, and SPWR up 16%.  I believe some of our long calls are uncovered in one of the portfolios.  I have 10 2019 $35 long calls ($6.98) covered by 4 $57.50 2019 calls ($4.44). Where would you look to fully cover LB? THX

  25. Anybody buying TSLA now, unless their covering a short, is insane.  They will absolutely have to raise cash soon.  I think they have at least 4 class action lawsuits against them.  The 3's which the stock was being pumped on and were supposed to show 5,000 a week by December they now have moved to March and there is no way they will be doing it by then either.  Absolutely won't hit 10,000 a week by end of 2018 which originally was supposed to be summer and competition is getting closer and closer.  Less than 2 years ago, every analyst had them earning around .80 this qtr, they lost $2.92 and the stock has gone up a ton on that.  It's the most insane stock.  Last qtr I said they bought themselves another qtr to stay in mid to high 300's.  Think this qtr is inflection point.  Only short term catalyst is the hype of the Semi Truck reveal on 11/16.  Their loyal analysts already shot their load on raising price targets a few weeks ago.  Would expect some downgrades.

  26. Rustle – I heard that Goldman lowered their TSLA target to $205, but unconfirmed at this point.

  27. albo/UNIT

    This trade is working out nicely!

  28. @albo

    I think it was only 215 before after it was raised.  Nomura urged people to buy this into earnings when the stock was at 330 and then gave softball questions to Musk on the conference.  Nomura, MS and Baird are part of TSLA's HR dept as far as I'm concerned.  Hopefully one day they will be investigated and emails will be sought ala Meeker and Blodgett in 2001.  The stuff they do isn't even well hidden.

  29. FU TEVA!!!!!v WTF!

  30. looked at old Musk tweets, originally supposed to have 20,000 M3 cars by next December a week but that's cut in half for now, will probably be cut in half again and people on the waiting list have received emails that their cars will be delayed.  Try and get a refund on that deposit.  So far waiting time is over 3 months.

  31. FTR / TEVA and other dogs….  I met with my accountants a few weeks they indicated that if there is a tax Bill next year ( in almost any form they were considering at the time) I would be better off taking Losses this year ( both long and short term) to cover any gains and only gains for this year ( not necessarily more to carry over).   So my losses this year from a LT standpoint are FTR and CBI etc.  My winners no the other hand – BRK A/B, AAPL,  KO, T, VZ  etc   I"m wondering how many other folks are looking at the same thing…  Selling losers even though they want to own them LT and would normally be adding to them and holding winners LT even though they would normally be taking some gains off the table….  and if they are how they are affecting the trading patterns.   I'm in a unique situation in that I run my options trading through a business which allows me to deduct all business expenses including insurance and retirement contributions and i pay higher taxes on gains… and in all scenarios these pass through earnings would be taxed at a lower level.

  32. Dclark – So far so good on UNIT.

    Another example of buying a distressed name hoping to lock in a long term very high yield.  Stock was yielding 17% when we bought it.

  33. Phil,

    Any new setups for TEVA, M and CBI

    Teva – Jan 2019 – Sell 10 Put + 10/15 BCS ?

    thanks as always


  34. TEVA, Phil has pointed out a few times that with the new CEO will come a very, very ugly earnings report, which makes sense, make the bar so low it won't take much to show improvement

  35. batman/taxes

    If you want to take gains against losses but don't want to give up the stock at all.  Double down on the position 30 days before 2019 and after 30 days, sell original position.

  36. meant losses vs gains, opposite way around

  37. For those EWers out here, SPY below $256 is a signal FWIW.

  38. Wow, what news is bringing those indexes down? 

  39. StJL – We have a man-child in the oval office!

    and the spirochetes ate into his brain….

  40. 1020 – "Cut x 3 – TRump just hopes to trip up a few when saying it…. ;) "

    Mike Hunt might have something to say about that.

  41. Indexes down… deductions are going to be lowered/phased out…..

  42. I'm sure the mortgage deduction and getting rid of the estate tax are going to go over well for most of the middle class and lower class.  This bill will never pass.

  43. Not too mention, it will destroy real estate if it does which will lead to a market collapse again.

  44. and there goes 300 on TSLA.  Nothing like writing calls a day away on a stock as it gathers steam you know will evaporate quickly.

  45. nattering good call on man child – inspecting the talmud for ancient symbols seems like a good use of one's time given the incomprehensible clusterF the current regime has become; we're almost in "why bother" territory. If you dare try to keep up with the crime and corruption of it all one guy worth checking in with is here. Check IN.

  46. TOL down 7%….

  47. frick! I forgot I had TSLA 280 puts from a while back. Thank somebody for small favors once in a while. something out there must be broken if bio-d-c is making money ;)

  48. Anyone see if the tax plan gets rid or reduces EV credits?  TSLA will be down another 50 if it does.

  49. Pat and company

    I think you guys are set up, call for panishment

  50. bat / take losses always always always pay as little tax as possible and push any defer any gains a far as possible. Always.

  51. yodi,

    did not get what you are saying?


  52. Good morning!  

    TEVA down 20%, there's another one we need to think about.  Fortunately, we expected that one to be risky and, in the LTP, we only have a small entry.  

    Long Call 2019 18-JAN 32.50 CALL [TEVA @ $14.02 $0.00] 5 8/1/2017 (442) $2,100 $4.20 $-3.91 n/a     $0.29 - $-1,955 -93.1% $145
    Short Put 2019 18-JAN 22.50 PUT [TEVA @ $14.02 $0.00] -10 8/21/2017 (442) $-7,000 $7.00 $2.20     $9.20 $-0.45 $-2,200 -31.4% $-9,200
    Long Call 2019 18-JAN 15.00 CALL [TEVA @ $14.02 $0.00] 10 8/21/2017 (442) $4,500 $4.50 $-1.83     $2.68 $0.06 $-1,825 -40.6% $2,675
    Short Call 2019 18-JAN 25.00 CALL [TEVA @ $14.02 $0.00] -10 8/21/2017 (442) $-1,400 $1.40 $-0.73     $0.68 $0.08 $725 51.8% $-675

    This isn't about defending the position, we knew this might happen to TEVA but we thought it was worth the risk.  It's the PROCESS that needs to be learned.  Including our previous loss, we're down about $9,000 on this position, which was initiated 8/1 with the above long calls and 5 short 2019 $40 calls and 5 short 2019 $30 puts, both of which we rolled on 8/21, absorbing a $3,200 cash loss to get to the current position.  

    As you can see, TEVA went right off a cliff and we waited a fee weeks but then, at about $15, we did the above roll and now, at $11.25, we're still going to wait a bit before acting but the key is that, using our system of SCALING IN – even a 70% drop doesn't kill us because it's a $1.6M Portfolio using $50,000 allocation blocks and this particular block is down 20% – that's not going to kill us and, because we used so little cash or margin to build the position – we can easily double down if we decide to stick with them or simply take the $9,000 loss and move on.

    Thanks Albo.  Sometimes (not often lately), the market makes sense.  

    $25,000/BDC – Things are going to get crazy if they go on the Futures market.  Currencies trade $4Tn/day – Bitcoin almost has to explode higher just to fill the demand for single lot transactions.

    TEVA/Seer – I still can't get away from the fact that they cut guidance to "$3.77-3.87" in earnings and the shares drop to $11.20.  

    The drug giant posted disappointing third-quarter results on Thursday. Adjusted net profit for the quarter ending Sept. 30 was $1 billion, compared with $1.4 billion in the same period the year before, while revenue rose slightly over the same period to $5.6 billion.

    Teva said it now expects adjusted earnings per share of $3.77 to $3.87 for 2017, down by roughly 30 cents from earlier guidance

    Saddled with billions in debt after a series of ill-timed acquisitions, Teva is hastily trying to sell assets to make financing repayments. Net debt fell to slightly $34.7 billion after Teva said it paid down roughly $600 million of loans.

    It had also been without a permanent chief executive for nine months. In September it appointed industry veteran Kare Schultz to lead a turnaround at the firm but the new chief only began work on Wednesday and hasn’t communicated a new strategy yet.

    Teva in August said it had taken a $6.1 billion write-down on its U.S. generics unit to reflect dimming prospects, dragging the company’s quarterly net loss down to $6.04 billion.

    Looks very scary on paper and I apologize to all that I love these kinds of plays as they can be long and frustrating rides but, holy cow – if they drop earnings 50% and their p/e goes to 10, they are still an $18 stock!  

    TEVA/Jabob – We knew they were going to kitchen sink this qtr to welcome the new CEO.   A $6Bn write-off is a great start.  As with FTR, no quick turnaround is in the cards. 

    TSLA/Stu – More and more the evidence mounts that it's a con more than a company.  

    Tax losses/Stu – And, keep in mind, if taxes are dropping to 20% next year, we'd better take our deductions now as they'll be worth half as much next year.  

    FTR/Batman – If the preferred were that amazing, then everyone would be buying them, right?   The real "advantage" to preferred stock is that you are senior to ordinary shareholders but still subordinate to the debt, which swamps it all so essentially no advantage.  The conversion is mandatory in June of next year and you get 20 shares per old share, which is now 20/15 =  1.33 shares so there would barely be a budge in the dividend payments.  If prior they were paying $11.125 in dividends to preferred shareholders, the conversion would save them a fortune, not cost them and the dilution would be well worth it to go from paying $11.25 to 1.33 x $2.40 – more for everyone else!  

    Also, I imagine your 19.3M preferred share count is pre-split and more like 1.3M but it's all very confusing due to the split so maybe check with your broker and see if they can get a proper statement on the subject.  

    LB/DC – In the OOP, we were super-aggressive with 20 naked calls (2019 $40s @ $7.35) and 10 short puts (2019 $32.50s @ 5.40) so we're in for about net $5 on the $40s and I'll certainly want to cover and lock in these gains.  

    In the LTP, we were less aggressive on the spread (40 $32.50/45 @ $4.55) but more aggressive on the puts (20 short 2019 $40 puts).  Both should do very well though.

    Same with SPWR, we had a large but fully-covered position in the LTP and OOP – both on track (again).  

    TSLA/Rustle – There goes $300!  I think they have cried wolf a few too many times now and no one is going to believe they are going to deliver a semi truck, which CAN'T be produced on the same platform, in any realistic time-frame.  In fact, it might finally occur to people that it's just another distraction Musk can no longer afford as the clock is ticking down on investor patience while his cash pile is dwindling away.  

    Goldman/Albo – I heard that too.  

    Indexes bouncing back already.  

  53. Pat

    This is what I mean

    Any new setups for TEVA, M and CBI

    Teva – Jan 2019 – Sell 10 Put + 10/15 BCS ?

    thanks as always


    Still don't think it will pass but that would be the death of tsla

  55. These Robin Hood guys are really getting it done:

  56. Phil, 

    I’m looking for a new hedge. What do you suggest? I was thinking of TZA Jan 13-18 call spread and offsetting with a put sale of something else. I’m sure you’ll find something better. Thanks! 

  57. rustle/TSLA why??? nobody buys teslas cars in the first place, because, relatively speaking, they don't make any. 

  58. TSLA/bio

    If this goes through they have an enviable decision, raise prices on their cars or take even a bigger loss on them and this is still without competition.  I bought long puts about 20 min ago to go with the short calls I wrote when it was at 306.

  59. jeff, how about the TZA Jan 21 calls for 0.12 outright?

  60. And TSLA getting some decent competition:

    Chevy sold 2,871 of them in October, making it the best-selling EV of the month by quite some margin. The next closest was the Toyota Prius Prime, which notched up 1,626 sales. That means that the Bolt EV is now the second-best selling EV for the year thus far at just over 17,000 sold—not bad for a car that only went on sale in all 50 states in the second half of the year.

  61. TSLA/bio

    Just to put things in perspective, I posted on here a couple months ago that electric car sales in GA crashed from 1400 to 100 after their 5k tax credit ended in 6/15

  62. thanks for the perspective. Both those numbers to me mean zero. They go from 0 to 0. OK. great. This obviates that TSLA's entire valuation is based on forward-looking "vision," which we've been saying in here for quite some time. 

  63. Phil, Is /RB unplayable?   It has edged up from this morning's 1.74ish to 1.7650ish  TIA

  64. FNSR – Down 9% in sympathy with OCLR's weak quarter and forecast. 

    They are also an AAPL supplier.

  65. FTR -  Bad news? The company lost 63,000 net broadband subscribers for the quarter, 36,000 video subscribers, including 10,000 Dish subs. Overall the company had a net loss of 99,000 consumer customers, compared to a loss of 151,000 in the second quarter of 2017.

    Good news? Q2: 151K Q3: 99K, losses elsewhere 385K for AT&T and DirecTV, 125K for Comcast, 104K for Charter, 18K for Verizon FiOS TV dSLreports

  66. As for the question yesterday about Futures.  Yes, I play them frequently and I can report while taking a few ass whoopins…   that brokerage account is doing better than my Options account at the moment.  Futures is a different beast and you have to be willing to ride out the storm.  While, Futures trading has slowed my learning and primary purpose for signing up for this service.  It has also kept me interested in learning more about being the house.  Cos, watching the screen everyday, versus having an Options Portfolio that only needs to be touched a couple times a month is more desirable to me longer term.  But for now, Futures are easier for me and I will need the full 10,000 hours to understand Options, which will take quite a bit of time, so might as well enjoy the journey, right?

  67. gambling: TEVA 12 calls expiring tomorrow @ $0.17

  68. Phil/GOGO

    Anything to adjust with the OOP position? 

  69. New/Pat – Remind me after I'm done with this comment please, though it's a little early to jump in.  

    Good point on doubling down and selling, Rustle!  

    News/Grasshopper – Rumor driven with Fed changes, Tax Cuts, Investigations, etc.  Hard to keep track, which is why I cashed in my kids' college funds!  

    Mortgages/Farm – It seems like only for mortgages over $500,000, which is fair but horrible for luxury sellers.  

    Like TOL….

    Hedge/Jeff – I still like TZA best of all.  Those small caps are very sensitive to downturns but the Dow is so crazy that it's getting attractive too.  DXD is now $9.78 and you know I love to do spreads on low-priced ETFs but they are way less liquid than TZA, so either DIA puts, which do have their merits, or TZA.  

    One nice way to hedge the Dow is the DIA 2019 $245 ($19.20)/$215 ($8) bear puts spread at net $11.20.  It pays $30 if the Dow fails and, while you wait, you can sell 1/2 Dec $225 puts for $1 so let's say you did 30 of the spreads for $33,600.  That would buy you $56,400 in downside protection and it's $11 in the money so you only lose if the Dow is up 5% so, of course, if you aren't going to make $100K if they Dow is up 5% next year – then you're doing it wrong!  

    Meanwhile, selling just 15 of the $225 puts raises $1,500 and you have 12 months to sell for $18,000, which pays for a good part of your spread.  Any time DIA is up or flat, the short puts expire worthless.  The Dow has to drop 5% for them to go in the money and the Jan $215 puts are $1 and the March $200 puts are $1 so you have pretty easy rolls in a super-liquid stock to the downside.

    That's what we call a Mattress Play and the disadvantage is that you have to take actions each month but, other than that – it's a great way to cover.  

    As a new TZA hedge:

    • Buy 50 TZA April $13 calls for $1.80 ($8,000)
    • Sell 50 TZA April $18 calls for 0.85 ($4,250) 
    • Sell 10 TEVA 2019 $12.50 puts for $3.20 ($3,200) 

    That's net $550 on the $25,000 spread so $24,450 upside potential if TZA pops 40%, which would be a 13% downturn in the RUT (1,300).  Still a nice $12,500 on a 6.5% drop so a nice hedge and, of course, you can use any stock that you REALLY want to own for the short puts.  

    /RB/Grass – Well it's certainly scary but $1.77 was a good top yesterday so I'll take a poke with tight stops.  Very tough play into the weekend.

    /KCH8 popping to over $128.50 – that's the stop now and last time we cashed in at $130 with no regrets (as we're now back in at $125).  Subtract 3 for the current contract (ish):

    FTR/Naybob – 3% higher today.  It's fun when you start from the bottom.

    Futures/Grass – Good attitude.  Futures is practice, practice, practice as you have to learn to get the feel for getting in and out under duress.  There's no handy answer-key for that and the people who look for short-cuts to putting in the training tend to burn out early.  For me, it's generally what I plan to do for my retirement income – sit down in the morning over breakfast, make a couple of trades and get on with my day.  

    GOGO/Jeff – Well, we blew that one by being aggressive.  No sense in instantly reacting.  We'll see how it goes into next week.  

  70. FTR – Possible red flag is their maintenance capital investment.  If it is in the range of $200M as they imply, that seems incredibly light on almost $15B in property plant and equipment.  I come from a telco background and I've seen this before where acquirers think you can reduce maintenance investment in your existing capital stock.  That is very hard to do without breaking things.  You can do it for a year or maybe 2 but longer term, stuff breaks.  Alternatively, they may be playing with the categorization of new vs maintenance capital to make it look like they are investing in the future.  Still playing it but more or less focused on a 1 year time horizon.  

  71. Phil

    reminding again as you advised


    Any new setups for TEVA, M and CBI

    Teva – Jan 2019 – Sell 10 Put + 10/15 BCS ?

    thanks as always


  72. BDC – "nattering good call on man child – inspecting the talmud for ancient symbols seems like a good use of one's time given the incomprehensible clusterF the current regime has become; we're almost in "why bother" territory. "

    Funny you mention that as today I was examining crude approximations of Egyptian hieroglyphs made by Hebrew/Canaanite slaves who worked in Egypt around 1900 BC. The genius of that script was a modular system comprised of 22 characters representing the Canannites most used consonant sounds. That system became so successful, that it replaced the cuneiform script of Mesopotamia, and inspired the Greek and later Roman alphabet, which you and I are communicating in now.  Strange days indeed. Out.

  73. Stuman – "If it is in the range of $200M as they imply, that seems incredibly light on almost $15B in property plant and equipment."

    They cut operational costs by 14%, wages, experience, undermanned, maintenance gets spread thin, after a couple of years, shit starts breaking and service levels become a major issue.  Been there done that too.

  74. Stu – Jomp – "It seems reasonable to expect these stocks to be dumped till year-end since no fund wants to be holding them at year-end for disclosure purposes, and tax loss selling has to be kicking in as well."

    Perhaps, and barring a concomitant market downswing, meaning a Frontier Xmas could be here early?

    Phil – FTR – up 3%.  Watch for if and when the PRICE, 20sma and 35ema ALL cross above the 50sma. Potential sign of a bottoming breakout.

  75. This is not logical at all in the new tax proposal:

    The plan also limits the deductibility of local property taxes to $10,000 while eliminating the deduction for state income taxes, which generated significant opposition from Republicans in high-tax states such as New York and New Jersey.

    The estate tax would be eliminated because it's supposedly double taxation (it's not, the person getting the money has not paid any taxes on that income) but state and local taxes are now taxable income even though I don't even see that money ever! I guess we are used to hypocritical arguments from that crew, but this one takes the cake.

  76. FTR / Naybob – I was just thinking that yesterday. No matter what someone thinks of TA, it never hurts to be on the right side of these lines!

  77. Wow, these Republicans have totally lost touch with Americans.  They have come up with a figure of $1,182/yr that will be saved in taxes by the "average" American making the average $52,000 salary and the Dems are going to rip them to shreds by pulling examples of Trump officials who save $11,820,000 on their taxes and GOP Congressmen who save $1,182,000.  "Is Paul Ryan 1,000 times better than you?   Then ask the Republicans why he should get a 1,000 times bigger tax cut than you do?"  This stuff writes itself!  

    Wow, boom goes /KC – blasting up to $130 (which is now the stop).

    Maintenance/StU – Well most of that equipment is wires and telephone poles I imagine.  They don't require too much to maintain.  About 9M last-mile customers at just $150 per customer for the connections as an asset pretty much accounts for all of their equipment.  

    Ha, I wanted to check my logic and I found the 8K, $11.5Bn is Cables, poles and conduits.  

    New trades/Pat – OK, now things are calming down so, as new trades (though I would not be quick to jump the gun):

    • Sell 5 TEVA 2019 $12.50 puts for $3 ($1,500) 
    • Buy 1,000 shares TEVA for $11.91 ($11,910) 
    • Sell $10 TEVA 2019 $10 calls for $3.75 ($3,750)

    That's net $6,660 for 1,000 shares of TEVA and the dividend is $1.09 (16%) while you wait to see if you get called away with a 50% gain.  

    • Sell 10 M 2020 $15 puts for $3 ($3,000)
    • Buy 20 M 2020 $18 calls for $4.20 ($8,400) 
    • Sell 20 M 2020 $22 calls for $3.10 ($6,200) 

    That's a net credit of $800 with $8,000 more upside at $22 and the worst case is being assigned 1,000 shares at net $14.20, which is 25% below the current price.  Upside potential is $8,800 (1,100%).

    • Sell 10 CBI 2020 $12.50 puts for $4.10 ($4,100) 
    • Buy 20 CBI 2020 $12.50 calls for $5.60 ($11,200) 
    • Sell 20 CBI 2020 $20 calls for $3.40 ($6,800)

    This one nets $300 on the $15,000 spread that's $4,000 in the money to start.  Upside potential is $14,700 (4,900%) and worst case is owning 1,000 shares of CBI for $12.80, 15% below the current price. 

    Hieroglyphs/Naybob – And you looked so young back then!  cheeky

    Image result for hieroglyphics tablet

    Taxes/StJ – I am seriously moving to FL over that BS if it passes.  

  78. And WTF is that in the tax proposal:

    For example, the proposal repeals an itemized deduction for medical expenses, a crucial provision to households with extraordinary health-care costs. It also repeals the tax credit for adoption and the deduction for student-loan interest.

    They want to get rid of the health insurance system we have and now eliminate itemized deductions for medical expenses once people don't have insurance anymore. And screw over college students when we have a student loan crisis. Do these people have a soul?

  79. StJL – "FTR / Naybob – I was just thinking that yesterday. No matter what someone thinks of TA, it never hurts to be on the right side of these lines!"

    The lines are our friends?…. Out.

  80. DF – still liking a combo play on these.. now looking at June2018 short 9 put / long 10 call for net .07 credit.  Or just sell Jun $10 puts for 1.50..

  81. Chesapeake sees flat-to-modest production growth in 2018

  82. Rather stupidly

  83. I am far too happy (for an adult) that Sony are bringing back Aibo.  I have wanted one of those since I first saw Battlestar Galatica in 88. 

  84. $1.5T more debt – so much for fiscal responsibility! hahaha 

  85. BDC Greencoin question. I purchased some on, should I leave it there or move it to a wallet, and if so, which one? GRE seems to be pretty dead, with a .00000001 btc bid. Is there a catalyst for it to do anything?  Thanks.

  86. jel/GRE

    Can you please provide steps you performed after you setup the account to buy GRE coins?


  87. NLY – Phil, if you were going to invest some IRA money in NLY now how would you do it?

  88. Souls/StJ – Not at all, this stuff is pure evil.  The trick is that they have so many horrible things going on at once, no one can focus on this particularly horrible thing they are doing.  

    DF/Scott – They really took a dive this year.  I'd play them to hold $10 but not for big gains.  You can sell June $10 calls for $1.50 and use that money to buy the $7 ($2.70)/$10 (0.85) bull call spread for $1.95 and then you are netting 0.45 and you make $2.55 at $10 but, even at $9, you make $1.55 with a break-even at about $8.50, which is a good cushion and a great upside. 

    Aibo/Malsg – Yep, I want one too.  Will be good to see what they are capable of.

    $1.5Tn/BDC – That's a BS low-ball figure too.  And they only had to take insurance away from 688,000 children to do it too!  These Republicans are like comic book villains…

    NLY/Tangled – I love them but not that cheap at $11.35 with the danger of rates going up.  When I do play them, I usually sell puts first.  The 2019 $12 puts are $2 so that would net you in for $10 or pay much more than the $1.20 dividend.  That's how I'd get started.  

  89. Pat, BDC is really the expert on this, but in layman's terms, you have to first set up a fiat-to-crypto account ( I use Coinbase) to deposit dollars and buy Bitcoin. Then you move the bitcoin to an exchange where Greencoin is traded (I use and trade BTC to GRE. 

  90. FTR/FTRPR analysis -

    I look at this way, if I had  $10,000 to spend I could buy

    FTR $10,000 / 9.00 (stock price) = 1111 shares x 0.60 (div) = $666

    FTRPR $10,000 / 15.90 = 629 shares x 2.78 = $1748

    I would gladly trade in my FTR shares for an equal $ amount of FTRPR shares for almost 3x the dividend.

  91. I use coinbase as well, and then once you have btc the altcoin world is your oyster. I'd recommend buying lots of different alts and not GRE really as we had to close the foundation because we couldn't raise money for the non-profit to operate and the lawyers couldn't be fended off any longer for their fees. I guess they don't see eye-to-eye on the whole saving the world thing after all…. (insert well-deserved lawyer joke here). But the coin is still the coin, it could be taken up by anyone with an imperative to do anything with it; that is one of the magical things about these digital assets, there is, oddly, permanency to their existence. 

  92. BDC/GRE Well maybe we can get Phil to consider accepting GRE for subscriptions to get it some traction!

  93. BRCD massive spike up an hour ago. not seeing today news on this. what's up?

  94. THS proves once again why one should never get excited about consumer staples. It beats getting shot at walmart by a terrorist (oops, he's white — I mean Poor Troubled Snowflake), but not by much…

  95. BRCD – looks like an amended 8-k was posted today, with the financials for acquisition announced on 10/30

  96. BDC – agreed.. your ROBO and BOTZ are much more exciting.

  97. Wow Phil, so anti-capitalist of you! shouldn't you know by now that 3-month olds shouldn't get hand-outs for being nothing but useless lazy blobs? The market will allocate baby-ofd to their mouths!

  98. scott I'm-a holding BOTZ/ROBO for 15 years. 10-bagger. Robots are coming and they are coming bigly

  99. ~~Teva Pharmaceutical Industries Ltd., announced it has completed the sale of Plan B One-Step® and Teva’s value brands of emergency contraception to Foundation Consumer Healthcare in a $675 million cash transaction. Story link: {NSN OYSVX0MEQTXE <GO>}

    * “Today’s announcement, coupled with the recent completion of the sale of
      PARAGARD®, exhibits Teva’s commitment to divest non-core businesses to ensure
      that we are even more focused and efficient in this rapidly changing and
      highly-competitive environment,” stated Michael McClellan, interim CFO of
      Teva. “Teva is extremely pleased to complete the sale of Plan B One-Step® and
      value brands of emergency contraception, which brings a significant influx of
      cash into the organization to further progress our ability to repay term loan
      debt while also providing a clear path forward for these important emergency
      contraception products to continue to be available.”

    Teva continues to progress and actively pursue additional divestiture opportunities, including the previously announced agreement with CVC Capital Partners for the sale of the remaining assets of its global Women's Health business. Teva expects to generate at least $2.3 billion in total proceeds from the sale of these businesses, as well as additional asset sales to be executed by year end 2017.
    Morgan Stanley acted as financial advisor to Teva, Ernst & Young served as accounting advisor and Goodwin Procter is Teva’s legal counsel for this transaction.
    Foundation Consumer Healthcare is owned by affiliates of Juggernaut Capital Partners and Kelso & Company. Jefferies LLC, Sawaya Segalas & Co., LLC and Barclays acted as financial advisors to Foundation Consumer Healthcare and Robinson Bradshaw are Foundation Consumer Healthcare’s legal counsel for the transaction. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal adviser to Kelso & Company.

  100. seer— they need to sell the whole company.

    what morons to bury themselves in debt to buy actavis at the top and overpay as well.

    FU TEVA!!!!!

  101. GRE/Pat – You should buy the Bitcoins first and wait a day, that way you make 10% before converting!  cheeky

    FTR/Edro – But you only collect the higher dividend for 2 more distributions before you are forced back to ordinary – it's already baked into the price. 

    THS/Scott – I think those Blue Apron variations are killing those guys.  I know so many people who get pre-made or pre-ingredient meals delivered these days.  I was assuming it was a yuppie thing but lot's of regular families around me seem to find it cost-effective, probably because supermarkets have so much waste.  Blue Apron dinners work out at about $9/person and there are plenty of generics that are cheaper.  

    GRE/BDC – I would like to restart the Foundation or whatever next year and yes, Jet, we do plan to accept them for subscriptions.  I like the idea of GreenCoins, we just have to find a way to get people comfortable with the carbon credit aspect of them so we can promote them properly. 

    BRCD/Scott – I think people think they are Broadcom, who Trump just met with.  

    WMT/BDC – Will Trump immediately call to ban guns in Colorado or to do extreme vetting at WMT doors?  

    Virginia Samora, whose 15-year-old son was inside the Walmart, told KDVR her son texted her while his phone was on low battery.
    "He said, 'I'm at 1% Mom, my battery is ready to die, but there's a shooter here at Walmart. If anything happens to me, I love you guys' " Samora said.

    Notice the kid's priorities – it's the battery at 1% he's worried about!  

    TEVA/Jabob – Lots of FU's in store for you:

    Berenberg analyst Alistair Campbell said in a note he did not expect the stock to recover until Schultz outlined his strategy and gave "a steer on the 2018 outlook", which he said would be challenging due to the roll-out of cheap, copycat competitors to Copaxone.

    With Copaxone prices falling around 10 percent in the third quarter and generic competition starting sooner than expected, Teva again cut its 2017 estimates, while McClellan said only that it was "working on a 2018 plan and evaluating all options".

  102. Villains / Phil – In the comic books, the villains don't get to gerrymander their district and generally end up gone. These GOP guys are worse, they are like bed bugs you can't get rid of who suck your blood while you sleep. 

  103. Phil/battery/1% – I noticed that too — pretty funny comment

  104. we use Blue Apron and love it. It's right about $10/meal per person, so not cheap but the convenience is there

  105. No change to Moody's rating or negative outlook:

    ~~Double digit price erosion in Teva's US generics business hampers its ability to meaningfully delever in 2018, a credit negative. Without taking material actions to reduce its debt load, we see gross debt to EBITDA increasing towards 5 times in 2018 and remaining above 4 times in 2019. The high generic drug price erosion is credit negative because Teva faces significant multi-year debt maturities and already declining earnings from its main drug, Copaxone, due to generic competition. Copaxone accounts for nearly half of its operating profit. There is no change to the Baa3 rating or negative outlook at this time.

    * Teva has struggled to meet its earnings forecasts, lacking visibility in both
      the US generics business and into Copaxone. While Copaxone is a large
      contributor, price erosion and competition in the US generics business has
      been a factor. Our view is that pricing pressure on Teva's existing base of
      business will remain high through 2018 at around 10%, higher than the
      mid-to-high single digit levels seen early this year. At the same time, new
      product launches have not offset price pressures, largely due to legal and
      regulatory delays. Teva has underperformed our expectations and leverage
      remains nearly unchanged since its acquisition of Actavis in August 2016,
      which increased its debt nearly four-fold, Moody's stated.
    * $1.8 billion of cash proceeds from its sale of Paragard and Plan B, both
      women's health assets, will be used to repay term loan debt. We believe the
      company will achieve at least $2 billion of net cash proceeds (inclusive of
      Paragard and Plan B) from announced asset sales to reduce upcoming debt
      maturities. While the company amended covenants in its bank credit facilities
      back in September, we believe additional relief will be needed early in 2018.
      We are monitoring the erosion in Copaxone 40 milligram (mg) for market share
      lost, and estimate more than 30% will be lost by the end of next year. Our
      view is that erosion will be steeper at first, with additional pressure once
      Momenta Pharmaceuticals (unrated), clears approval hurdles on its generic
      version of Copaxone 40mg early in 2018, Moody's said.
    * Notwithstanding the challenges Teva is facing, we believe it has levers at
      its disposal to address its high leverage, albeit, it would be likely require
      a combination of actions.These include additional asset sales, equity or
      hybrid equity issuances, and further cost cutting. In order for Teva to
      maintain its Baa3 ratings, any additional initiatives will need
      to meaningfully and sustainably reduce leverage and improve credit metrics.
      The company has communicated its intent of developing a comprehensive plan to
      address its capital structure, that we anticipate will be announced early in
      2018. In addition to any positive impact of any actions taken, we would
      consider any offsets such as lost scale, a reduced footprint, and future
      business outlook. Failure to develop an effective strategy to address high
      leverage andoperating challenges could result in a downgrade, Moody's stated.

  106. TEVA, like VRX will survive…It will be a long time coming though.

  107. VRX/Pharm – Good point.  In the long run, those drugs are super-profitable.  

  108. someone is shorting TEVA big time imo.

    there is always a huge offer at the ask.

  109. What happened to FNSR?

  110. Malsg – Aibo -  I have wanted one of those since I first saw Battlestar Galatica in 88. 

    And ever since I first saw BSG in 1978 on TV, I have wanted one of these.

  111. Phil – Malsg – Aibo – yeah I know, I know and this.

  112. NTES is making quite the triangle squeezy thingy pattern and earnings are on the 15th:

    It's seriously lagging the Nas and I don't like $276 stocks but they are making $13/share so p/e around 20 is not terrible.  Given how well BABA is doing, I would think NTES is also having good growth (unless BABA is just kicking everyone else's ass, but I doubt it).  

    The Jan $275s are $16.60 and you can sell the Jan $300s for $7.20 to net $9.40 on the $25 spread so let's do 10 of those in the STP ($9,400) and sell 5 of the 2019 $200 puts for $12.60 ($6,300) so we net into the $25,000 spread for $3,100 and, of course, if they go down, we roll out the short puts to the LTP and work on a position there (as long as it's not a total disaster).  

  113. I don't understand what is going on with the market and my portfolio. I have given up hedging the indexes, have gone neutral on many trades, and yet I am losing   money every day.  Even my IRA account, which is very  interest rate sensitive is down, yet TLT is up, Powell will be the FED chair.  MLP's are down yet oil is up.  I have seen a number of stocks that have decent earnings that start off up and finish in the red.   This is starting to get ugly.  Oh, and happy 57 birthday to  me.  Thank you in advance for your permission to rant.

  114. Phil – NTES is definitely in a "squeezy" pattern.  Difficult to tell which way it's going to break. :-)

  115. Baron, I'm in the same boat, it's kind of a twilight zone market. My IRA has biotechs that are hitting new lows and lots of Nokia which just took a huge dump.  Owning individual stocks feels like a fools game sometimes where the indexes go up but your individual stocks continue to ebb…

  116. "FTR/Edro – But you only collect the higher dividend for 2 more distributions before you are forced back to ordinary – it's already baked into the price. "

    Nextstep in anaysis – see post above.

    We bought 629 shares of FTRPR for $10,000 and we will get 3 round of dividends @ $2.78 = $8.34 so $10,000 – (629 x $8.34) = $4574 or $7.27 a share for FTRPR.

    Then we get the mandatory conversion  of 1 share of FTRPR to 1.33 shares of FTR so I wind up with 629 x 1.33 = 836 shares for $4574 or $5.47 per share.

    If I hold on to my 1111 shares of FTR I would get $1.80 in dividends in the same period = $2000 so my total cost for 1111 shares would be $8000 / 1111 = $7.20 per share.

    When we sell the shares, say at $10, our 836 FTRPR/FTR shares would show a profit of $3787 while our 1111 shares of pure FTR would show a profit of $3110.

    Is it worth it?  FTRPR is a preferred stock – so dividends get paid before common stock, I like that and the extra $677.

  117. LOL!  Happy Birthday Baron!  This is why I liquidated my kids' college funds last week, the market is getting very dangerous and Maddie starts college next year (I'll be 55, so way younger than you!) with Jackie right behind – no sense in risking that money which I'd have to make up right away.  

    We added $200,000 to our cash pile in the LTP as well (15%) – just another sign of how I feel about the market right now.  What you are experiencing confirms my suspicion that money is actually moving out of the market while key stocks are propped up to artificially support the indexes.  This can go on for quite a while until they finally pull the rug out, but probably not until next year's tax season.

    FNSR/Jeff – Down with the sector.  

    NTES/Albo – I like them enough to take a poke that it will be up for a very quick $22K.  Helps pay for those hedges!  

    FTR/Edro – Well that makes sense assuming the numbers are right, and they seem to be.  

  118. Trump making Powell official. 

  119. My wife made more on AMZN last month than I made last year, and the best I can manage to come up with is adding to FNSR.  Its a very bi-polar market; tax loss selling could be brutal, which may well be what is happening.

  120. TSLA up $7 in 2 hours, Musk must have tweeted!

  121. FNKO – talk about a terrible IPO.  Came public at 12 already lowered from expected range.  Now trading ~7.50.  And it's a Goldman deal !

  122. baron—if you own ftr teva m ge then I know how you feel. 

  123. What are you looking for to fill out the PG butterfly trade?

  124. Phil,

    What are your thoughts on /RB and /CL? What's driving the run up? The front months are stuffed so are you expecting they come down closer to expiration?

  125. Phil- Any apple Earnings trade ideas for those of us mostly cashed out and on the sidelines?  Thanks!

  126. SPY is green.  Amazing…baffling…why even play this game?

  127. FNSR – Yowza ! 

    Down 14%.

  128. When things slow down for me here at my day job…and it should soon as we are in the final stages of an acquisition (hopefully), I will start a small biotech portfolio for us to play with.  We will start in the new year most likely, but I will start the list in my area on the site.

  129. StJL – "In the comic books, the villains don't get to gerrymander their district and generally end up gone. These GOP guys are worse, they are like bed bugs you can't get rid of who suck your blood while you sleep."

    Shit, I laughed so hard it almost made those adult nappies worth every penny. Time for a fresh one and my IV, Out.

  130. FTR / Preferred Stock….  I wasn't suggesting buying the preferred…  I was wanting to understand the impact of the convergence on the common, and operationally / from a FCF standpoint.  Really was wondering if I had missed something that would explain the 30% drop…  My earlier analysis indicates that it is a net positive from a FCF and really a wash from a dilution standpoint.  So I'm still scratching my head on why the drop.   In any case I sold the '20 8 puts for 4.9 yesterday.  This is a bet on solvency…  and takes a bit of the sting out.

  131. PG/Tangled – Some kind of proxy battle with Peltz so I'm inclined to wait for the dust to settle.

    /RB/Japar – Hopefully just weekend nonsense, I don't see anything in particular.  Don't forget, we usually go long /RB on Wed/Thur – it's Mon/Tues that they usually drop back.  

    AAPL/RVN – I'd go with the 2020 $160 ($30)/$200 ($15.50) bull call spread at $14.50 and leave it at that as it has $25.50 to grow if all goes well and, if it doesn't, THEN you can sell puts and work it into a wider, deeper spread.  

    Meanwhile, this trade makes 175% in two years using no margin if AAPL hits $200 – not bad..

    Nice ramp-up into the close:

    Portfolio/Pharm – Cool, that will be fun.  

    FTR/Batman – It's complicated but maybe people are starting to understand and that's why we're up 3.6% today.  Think of how many analysts are running the wrong numbers from the pre-split shares. 

  132. Phil / FTR – I have the following position ( I sold the nov '17 12 calls for 1.1 which will expire worthless) and now and left with the following, and would like to know if I should sell some short term callers or just go with longer term ones.  An if so which would you suggest.   I believe that they are at the trough but have not turned the corner and I don't see them doing this in any real way till next summer.  

    long 6500 Shares ( 21.6)

    short 10X '20 $8 puts ( 4.9) 

    Thanks for your help.

  133. SBUX down 5% on in-line earnings.  

    FTR/Batman – Well, you are already on the hook to own 1,000 more shares but $21.60 is tough.  Let's call it $20.50 from the short puts and the stock is at $9.18 and it depends on your total firepower and what you want it for.  

    With millions in the bank, I'd DD at $9.18 ($59,670) to average $14.84 ($192,920) on 13,000 and then I'd sell 3,000 2020 $5 calls ($5 = $15,000) and 3,000 $8 puts for $4.50 ($13,500) and that drops your net to $12.65 which should, in theory, be made up by dividends over 2 years.  If all goes well, you're basis will be $7.50ish after collecting $5.40 in dividends over 2 years and then you'll lose 3,000 with a $7,500 loss and the other 10,000 shares are free and clear.  

    Going forward, if FTR dips below $9, you can always sell more $5 calls to cover and then get back out if it pops if you want to limit your losses.  Since you would have 40 short puts, the risk is owning 4,000 more at $8 so I'd use 4,000 short calls as a flexible cover if you get nervous.

    AAPL beats, $2.07 vs $1.87 estimate so 10% beat and RAISES GUIDANCE – which they never do.  Revenues $52.5Bn vs $50.7 expected so 4% more sales = 10% more earnings – BUYBUYBUY!!!  

  134. $175 would be $1,200 pre-split!  

  135. Here's my call of the day.  With AAPL out of the way, and not going too much  further on declining margins, and a rate hike coming, the market consolidates for the rest of the year.

  136. AAPL made 3.36 in Jan, 2.1 in May and 1.67 in June….Sorry, restickulous on the 2.06 hit and now the stock is at ATH.  They purposely lower the guidance only to beat it later. They are up >30% YTD.  Sorry, just the market is way ahead of itself.

  137. I bought some next week 170-175 call spreads on appl. Those will be a winner! Happy for that since I’ve been swing a lot of red on my screen lately. 

  138. AAPL/Pharm – $268Bn in cash too – I wouldn't call them overpriced but the rest of the market is ridiculous. 

  139. AAPL with a 19 P/E and 30% of their market cap in cash seems like a steal to me. That said, while there will be AAPL products under our tree at Christmas, AMZN has been the better innovator the last couple years with Echo, AI, streaming and cloud services. I think AAPL is behind in all three (but still ahead with the phone/watch). I have a relative who is blind and Echo has been a game changer. Siri pales by comparison.

  140. Lower taxes unless you are in a blue state (or are really sick or a student) where we already provide the majority of the income taxes in the country:

  141. I think that GOP congresspeople from blue state are going to hear from their constituents!

  142. It's so frustrating to see how short-sighted these idiots are:

    The House GOP plan, according to a summary made public on Thursday, also calls for repealing and phasing out other energy tax credits, including production and investment tax credit for solar, geothermal, fuel cell, wind energy and other clean energy projects. It would also phase out the credit for residential energy-efficient projects and a credit for producing oil and gas from marginal wells.

    But nothing is being said about tax subsidies for major oil and gas exploration. These guys live in the 20th century and seem hell bent on keeping us there while China passes us over. 

  143. don't fret too hard StJ, in 2018 these idiots and morons are TOAST

  144. NBIX…wow.

  145. Don't bet on that BDC – these guys has build gerrymandered fortresses and being helped by SCOTUS now! Soon you'll only have the illusion of choice (well already true in most places).

  146. FNSR – Deja vu all over again with these guys. I re-entered smaller this time because of what happened last year when we had many opportunities to add to exiting positions. Gotta be patient this time.

  147. GOGO

    Did you all notice that GOGO issued positive guidance last August? 

  148. STJ/FNSR-think there is more downside here?  Would expect so, but would like to get some other opinions on how far down this could go.

  149. If my math is right, AAPL bought back about 1% of their outstanding shares this past Qtr.

  150. FNSR / Seer – Not sure, but I'll wait to add myself to see some stabilization. The company is solid but they are just getting snared with other guy's soft results.

  151. StJL – "Soon you'll only have the illusion of choice (well already true in most places)."

    Our agency was lost decades ago, same as it ever was, the grand illusion.

  152. Good morning!  

    Flatlining into the weekend but AAPL should goose things a bit at the open, of course.  Meanwhile, check out yesterday's declining volume:

    Much as I'd love to go with the flow and drop hedges, things like that make me go hmmmm

    /ES 2,580 and /YM 23,500 are both good shorting lines, lined up with /NQ 6,260 and /TF 1,495 – short the laggard with tight stops if any of them go over!  

    Don't forget NFP is 8:30 and that will send us up or down pretty violently.

    /NKD is closed today for a holiday, 22,600 is crazy and the Dollar is strong because the Pound is weak, so a tempting short but so dangerous lately.