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Fearless Friday – Markets Head into the Holidays at All-Time Highs

Image result for winter vacation cartoonNext week is nonsense

In the US, Thanksgiving is Thursday and the markets are closed and many people take the whole week off and almost everyone is in vacation mode by Wednesday and Friday (a half-day on Wall Street) is a total joke for those who show up – often the lowest volume day of the year.  So we don't expect much action next week and certainly not a move higher and then, after Thanksgiving it's Christmas time and then New Years so let's just meet back here on Jan 2nd and see where things are, OK? 

We've been reviewing our porfolios in our Live Member Chat Room and we're well-locked in neutral already with very little gained in the past month but that's OK, as the market has made very little gains in the past months.  In fact, our last Portfolio Review was October 28th and the S&P closed that Friday at 2,581 and, this morning, we're at 2,585 so – happy holidays – see you in Januray!  

If you do insist on hanging around, you can expect more of the same in December – unless the Trump Tax Plan fails to pass the Senate, then we are likely to break below the range.  At the moment, as we've discussed before, most people are holding their equities (including us) into next year, so we can take our profits when the taxes are lower.  If no one is willing to sell (and take high-tax profits), then the new buyers are forced to offer higher prices and the market does drift higher but the low volumes indicate it may be very hard to find buyers once people do want to cash in their gains. 

There are good strategies for locking in gains and I'll tell you a few.  Apple, for example, is at $171 and let's say you bought 1,000 shares for $120 ($120,000) and you have a $51,000 gain.  If you take that gain now, you will be taxed, for example, 38.5% ($19,635) but if you wait and next year you pay just 25% ($12,750) you are saving almost $7,000.  So your 1,000 shares of AAPL would have to fall more than $7 (4%) for it to be worth taking it off the table now at $171 and, if you don't think that will happen – you hold on.  

Image result for call selling tax strategyBUT, since you are going to sell AAPL anyway, you can pre-sell it now for, let's say January (to take it into the next tax year) by selling the Jan $150 calls for $22.50.  By doing this you are accomplishing 2 things, you are protecting yourself to the downside by $22.50 and you are going to get called away (almost certainly) at net $172.50, $1.50 higher than AAPL is now.  Mechanically what happens is the call you sell is you promising to sell the buyer AAPL at $150 on Jan 19th (expiration day) and, while it is the OPTION of the buyer to take them or not, if AAPL is at $150.01 – they will be taken.  Only if it's lower would they option not be exercised.  

Meanwhile, the buyer has paid you $22.50 for the right to buy your AAPL stock for $150.  You get that in your pocket now and you get the other $150 when it's exercised and you, in turn, surrender your stock – very simple.  The downside to the play is you will not make any gains above $172.50 but the point is to lock in your current selling price at next year's tax rate.

You can do something like that with most stocks if you want to extend their timeframe while lowering the risk.  Another way to drop your risk is buying a put against your stock.  In this case, let's say you have the AAPL at $171 and you want to hold it into next year but you are worried about the holidays.  What you can do then is buy the April $200 puts for $30.50 and there someone else is promising to buy your AAPL stock for $200 at April expirations (20th) which is up $29 from here so your cost of insurance is $1.50/share.  Now you've locked in $169.50 into April.  

You can even get fancy and sell April $200 calls for $2.50 to pay for it and now you'r back to having at least $172 but, between $172 and $200, you will simply keep your stock, in addition to the Feb dividends (0.63/share).  

So take these lessons and put them to good use and take a nice vacation – especially if you've had a nice year trading.  If you're not going to enjoy your good fortune – what's the point?  

Have a great weekend, 

- Phil


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  1. Good Morning.

  2. 50 DMA bouncy so far!

  3. Could you sell a put that will get exercised and sell a stock that has been hit to actualize the loss for this year?

    For example, could I sell a Jan 20 TEVA put and sell the stock today to actualize the loss (assuming TEVA will get put to me in January)? Or is that considered wash sale?

  4. BDC – "aligning the stars for a female President in 2020. Very likely Kamala Harris or Gillibrand as the front runners."

    If she could be talked into it, here is who would win hands down and her theme.

  5. TSLA up on truck hype !

  6. Phil and members interested in the volatility trade – Wanted to check with you on an idea I started testing. Up to now I have been playing the VIX by selling calls against UVXY but I stopped because a) they reset too much and b) I don't like being short calls to begin with. But I am now looking at the opposite trade which is to sell puts against SVXY. First, I believe that over the next 20 years or more, it's going to infinity (or close):

    SVXY ProShares Short VIX Short-Term Futures monthly Stock Chart

    It's 2000% in 5 years or so and the underlying instrument is very bullish. Spikes in the VIX are damaging, but the VIX always, always reverts to the mean. A big VIX spike would be a buying opportunity and I would back up the truck then. We have not seen a prolonged bear market but even then, the VIX reverts to normal quickly. In the meantime, it might still make sense to sell some premium as income. Using the old condor book as guideline, I sold 2 months ahead with a delta of 10. In this case a couple of weeks back, I sold a Dec 70 puts for $2.50 against $1200 of margin (not a bad return for 2 months). The idea would be to roll once the delta go over 20 in order not to get overrun and maybe close after one month (it's already showing a 44% gain). First DD at a lower strike and then roll away. In this case, the Dec 70 can be DD to the Dec 55 or so and then to the Jan 18 35. Roughly of course as the other greeks mean bigger changes. Worse case, the 2020 are out and you can roll to the 2020 20 P very easily if needed. And then I would just sit and get assigned if we got there and take the shares. But chances are we will never get there. I don't see the VIX staying at 50 for 2 years. If that's the case, we'll be having other problems like buying iodine tablets. Am I missing something? This looks like a decent income trade to me if you have loads of margin and are not afraid of rolling.

  7. You would think something should work with VIX given its predictability.   I have taken to simply buying and selling on spikes rather than holding the entire spread.

  8. L Brands Raised to Outperform From Sector Perform by RBC Capital

  9. If TSLA doesn't hold 320 today, this can be at 300 very quickly again.  The roadster is great and so is the semi with the specs provided but let's be serious, in 2 years and probably a year longer than that, this can all change.  Musk was very vague on truck weight and other factors and the Model 3 was originally a 30k car (reality it is 48K) and people who have had delivery so far have had problems.  If all 1000 Founders Series roadsters sell out with 250k upfront deposit and they receive more deposits for other roadsters and Semi and let's say they raise 500B.  Reality is that less than 3 months burn rate right now.  Not as big as it seems.  Lesson here is if you think you might have trouble raising money in another secondary, create new vehicles that will hopefully come out one day and take deposits on them now.  Deposits would be lost if the company filed for bankruptcy.

  10. Several retailers are catching nice gains this morning.

  11. TSLA / Rust

    Agree. If that show couldn't get the Cult members buying more stock today then we have seen the highs. Nothing except actually delivering cars en mass is going to move the stock up. The potentcy of showmanship is waning.

  12. WSM dropping this morning, wait on trading?  trade suggestion?

  13. Wouldn't be surprised if TSLA is down today now

  14. Good morning!  

    Things are trading all over the place.  Indexes took a bit of a tumble but nothing too damaging so far.  Oil is jumping up and down around the $56 line.  I took a quick $200 and ran on 2 contracts – too crazy to play.  /RB hit $1.72 and it is the weekend and it's lagging oil so I like poking long there too – but tight stops below the line for sure!  

    Saudis jawboning extending output cuts, helping to bail the NYMEX traders out of their contracts.

    Big Chart – Oh, what's the point?  If the line goes down, something will fix it – the end!  

    Chchchchanges/StJ – I want my flying car!  

    Image result for i want my flying car chitty bang

    Interesting that they had the right idea with the drone blades.   That had to be 50 years ago.

    Put/Jabob – Sure, but you have to time it so it's not a wash.  Not sure what the timing is but I think 30 days is good.  

    2020/Naybob – Good version.  I think Chelsea is going for it.  She's been very vocal lately.  

    TSLA/Albo – Can't wait to short them again!  

    I must say though, in THEORY, it's a huge market and we can assume the entire truck fleet will roll over to electric at some point if they can really get 500-mile autonomous without too much charging time at stops – but think of the massive infrastructure that requires.  He makes it worse by talking about linked trucks following the lead truck because now one guy has to charge 3-4 trucks at a time so what will they have 20 massive truck chargers?  And will they be free?  His math on savings indicates electricity is free.  You can BS consumers but not companies that haul freight.  Also, his 1M mile warranty is insane – but what does that matter when the company won't last more than 250,000 miles?

    SVXY/StJ – We are playing that one.  We finally figured out the best way to play is with a bear put spread, selling front-month puts (which always expire worthless so far).  From the OOP:

    Short Put 2017 15-DEC 80.00 PUT [SVXY @ $103.74 $0.15] -15 8/22/2017 (28) $-19,350 $12.90 $-11.11 n/a     $1.79 $-0.11 $16,665 86.1% $-2,685
    Long Put 2018 16-MAR 105.00 PUT [SVXY @ $103.74 $0.15] 20 10/12/2017 (119) $40,000 $20.00 $-3.18     $16.83 - $-6,350 -15.9% $33,650
    Short Put 2018 16-MAR 80.00 PUT [SVXY @ $103.74 $0.15] -20 10/6/2017 (119) $-20,000 $10.00 $-2.20     $7.80 - $4,400 22.0% $-15,600

    November 16th, 2017 at 1:42 pm | (Unlocked) | Permalink

    • SVXY – At leas the short put sales are working.  Let's buy back the short Dec $80 puts ($1.85) and wait for a dip to sell some more.  

    LB/Jabob – Nice.  Over $50 now.

    Deposits/Rustle – I really want to know who these people are slapping a $250,000 deposit on a vaporware car.

    Retail/Albo – Even M is coming back. 

    WSM/Mike – They just bought an AR imaging start-up for $112M – being punished for spending 2.5% of their market cap on something stupid.  I'd wait.  Now people worry about the dividend, etc.

    Well, /RB at $1.72 worked, now rejected at $1.73 so wait for $1.72 again or over $1.73. 

  15. TSLA

    Wouldn't be surprised if Musk was selling up and leaving. It's really mission accomplished for him. Musk 2013: "Our goal when we created Tesla a decade ago was the same as it is today: to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible."

    Don't need profit and other auto makers can deliver the cars as well as Tesla. Strange I know but there is some logic to it.

    He's suffering depression at the moment. His mental health is not so good. The recent Rolling Stones article is quite telling.

    Electric Long haul trucks: Don't make sense with current battery technology as they are too heavy. To get the 500 mile range it will need something like 16 tons of battery, which is 16 tonnes of lost payload capacity.

  16. Sports retail stocks jump after upbeat reports

  17. GE shares rise after CEO Flannery buys stock

  18. Comcast Has Approached 21st Century Fox About an Acquisition

  19. Blowing up the debt is a threat to America: Leon Panetta

  20. Swiss regulator finds JPMorgan broke money-laundering rules

  21. WIN – One of my dumpster dives with a nice move in the past week.  Sold some at $2.26.

  22. World’s first human head transplant is successfully carried out

  23. Senate Plan Would Raise Taxes on the Poor, a Report Says

  24. TSLA moving back up on news that Walmart plans on testing their trucks.

  25. Musk/Enfil – He's acting like a scam artist who is about to be caught – a flurry of desperate moves coupled with private hand-wringing while putting on a brave face – hoping for a miracle before the house of cards collapses.  

    There's $56.50 on /CLF8 – In in for 2 short. 

    /RB $1.74 – don't be greedy!  

    WMT/Rustle – Well the Waltons could go long on TLSA, order 10,000 trucks and pay for them with what they make on the stock.  

  26. TSLA/Phil

    Would be bad investment as that pop was very short lived.

  27. Long-Term Portfolio Review (LTP) Part 1:  $1,698,372 is up $20,577 from last month's review and that makes sense because, unlike the OOP, the LTP is not self-hedging.  All the positions in the LTP are bullish (we would take bearish positions but long-term bearish hasn't been a good idea in the last 3 years, so we have none).  All the hedging is in the STP – always keep that in mind when looking at this portfolio.  

    Our STP lost $7,700 so we're net $13,000(ish) and last month we were net $14,000 so very nicely locked down in our two largest portfolios.  Keep in mind, we did this in lieu of going to CASH!!! in October.  We wanted to see earnings and then get through the Holidays with our winnings intact – so this is all according to plan.  

    The biggest concern we had was margin on our short puts and we cut our naked short put positions down to 12 (from a high of 36) and now we'll make sure we're comfortable with the coverage on the rest of our spreads.

    • ABX – I have to remember to move that call down to the rest of the group.
    • BRK.B – Berkshire is the S&P, actually it's the best of the S&P as Buffett has hand-picked the winners, either for his portfolio or as companies they buy in whole.  I wish they had gone down and we could have bought them but they didn't.  There's pretty much no way in hell these go in the money so silly to buy them back and, in fact, they are an easy way to raise cash even now.  
    • CAKE – Well these puts are all stocks I wish I could buy, I suppose.  We added CAKE on the dip and they blasted higher on earnings now.
    • DNKN – Comfort food theme here (Berkshire owns plenty as well).  Good for a new trade.
    • ESRX – I failed to update this entry because I forgot to bold and blue this entry.  As of last time (and no big changes so same move if you missed it) it was:  2020 is out so let's roll our 5 short 2019 $65 puts ($9.20) to 10 short 2020 $52.50 puts ($5.30) for a $750 credit.  We'll put the cash to good use and buy 20 2020 $57.50 calls for $10.50 ($21,000) and sell 20 of the $62.50 calls for $8 ($16,000) for net $5,000 – $1,400 – the $3,750 we collected originally puts us in this $10,000 spread for net $600.  Keep that in mind when I am THRILLED to spend $10,000 ($5/contract) to roll us down to the $47.50 calls (now $17) if ESRX goes lower because then we'd be in a $20,000 spread for $4,850 with a break-even 20% below the current price.

    If you enter your positions correctly, you should WANT the stock to go lower so you can buy more at a lower price.  Make sure you read our article on scaling in in the strategy section – we are always going in with about 1/4 of what we intend to spend if the stock gets cheaper.  More often than not, the stock doesn't get cheaper and we just run out our small positions.  Once in a while, they go 20-40% lower and, assuming we still like them, we load up!  

    In the above case, we took a very small 5 short put entry on ESRX to remind us to keep an eye on them and now they are cheaper so we are upping our buy commitment to 10 contracts (at a 20%lower strike than we started with) and we're adding a bull call spread at a price we couldn't get when we started (but HOPED we would). 

    Even so, we're only 50% committed on this one so far.  Our worst-case is owning 1,000 shares at $52.50 which would take up $26,000 of our $3.4M in ordinary margin (0.76%).  If ESRX drops $20 (35%) and the short puts go to $25, our loss would be $25K – the same 0.76% of our portfolio so that, realistically, is the risk on the position.  As I said – a small commitment.  

    • FCEL – We REALLY do want to own them for net 0.97, so we can leave it.
    • GPRO – We got past earnings and they moved up so all good.   
    • SBUX – Very small and we'd LOVE to own SBUX for net $44.95 so we can stay with these.  
    • SEE – Even higher after earnings so all good.
    • THC – Back at the lows but I like them.  Good for a new trade.  
    • TLRD – In good shape, not worried. 
    • WATT – It's too good of a deal to sell (net $7.40).
    • WHR – That's a new one, no worries. 

    • CG – Sold off but recovering.  
    • F – Love them, not worried.  
    • GCI – Can you believe papers still exist?  Well, that was our logic, bet on the survivors in a declining field.   This one blasted up on earnings so I only wish we had more 

    • GE – NOW we think it's the bottom (waited last month).  Let's buy another 2,000 shares at $18.30 and buy back the 20 short 2019 $25 calls at 0.37 and sell 20 2020 $18 calls for $3.25 so the net cost of our new 2,000 is $15.42.  We have 20 short 2019 $28 puts at $9.80 ($19,600) and let's roll those to 25 short 2020 $25 puts at $7.35 ($18,375).  
    • GNC – Keep in mind here we are in for net $2.70 unless the stock is under $7.50 in which case we own 12,000 at a $5.10 avg but, either way, we're in the money at $6.45 and it's great for a new trade as the paper loss is gigantic – despite the fact that it's "on track".  
    • HOV – Another one where we aimed low and we will be called away at $1 with a ridiculous profit.  They are doing some strange financial stuff so I'm not keen to get back in.

    That part was easy, not too much work to do.  Let's hope the next two parts keep it up! 

  28. TSLA/Rustle – Well not if they actually do it and announce a huge order.  They could always cancel later but a $5Bn truck order would keep them up for a few days.  In fact, I expect Musk will push orders through SpaceX and SCTY as well – as both of them use a lot of trucks.  

    /RB finally stopped at $1.75, that should be it.  Now we'll see if they can hold into the close (2:35).  /CL still at $56.55.

    /KCH8 is playable long at $127.45.  Might go lower but I was a lot more worried it would get away as it popped $130.  Expect it to fill the gap to $125 – Monday's are usually bad but I'm going to start accumulating here. 

  29. robots are getting interesting.

  30. StJ – agree on SVXY, however, I'm going to wait until the next really big sell off, whenever that is. It could still lose 50% of it's value in stark 6-month market downturn. Then I'm in (long stock though, not selling puts). 

  31. FTR/Phil I have 100 of the pre-split short $1.50 Jan puts. They don't seem very liquid, so I'm thinking I will let them assign me 600 shares and then sell calls against them. Would you suggest anything different? These are in an IRA, so not looking to short puts again. Thanks.

  32. Phil,

    Too scary to short /RB at 1.75?

  33. Long-Term Portfolio Review (LTP) Part 2:  We have 42 spreads in this section.  I'd love to cut back but they are all so good!  

    • We made big adjustments in the OOP but here we're more balanced but I do want to get our 2019 $150 calls off the table, in case of a pullback so let's cash those for $31.20 ($156,000) and we will add 80 2020 $160 ($32)/$200 ($16) bull call spreads at $16 ($128,000).  We can then roll our 50 short 2019 $180 calls at $15.20 ($76,000) to 50 of the short April $170 calls at $11.50 ($57.500) and the 15 short 2019 $120 puts can be bought back for $2.55 ($3,825) and we can sell 10 of the 2020 $150 puts for $13.50 ($13,500).  I'd sell more but I'm expecting a pullback – but I'm not going to sell none!  So, now we've taken net $19,175 off the table, widened our spread and added 30 more (+60%) long units (though we are nearly fully covered) at a $10 wider spread – that's $80,000 more upside potential yet the same $160,000 potential at $180 that we just cashed out.   
    • AAXN – SEC investigation is making them cheap again ($23 now) but let's let them settle down before adjusting.  
    • ABX – Let's buy back the short 2019 $20 calls at 0.55 and see how it goes for a while.   
    • ALK – Had a silly sell-off so let's take advantage and add 10 more of the 2020 $65 calls at $12.90.  That puts us more bullish.
    • AMGN – On track.  
    • BBBY – Essentially a new trade with our recent adjustments, I like this set-up still.

    • BX – Well over our target and we'll let ourselves get called away and get back in if they ever pull back. 
    • CBI – Another one with low expectations that were exceeded.  Still good for a new trade as it's a net credit on the $15,000 spread but that's with the aggressive put sale (that I'm fine with).  
    • CHK – Making slow and steady progress and I have high hopes.  If they go over $5, then we're $30,000 in the money with no cap.   Still, as the 2020 $2 calls are only $2.30 and ours are $2.20 – I say we spend a dime and buy a year!  In fact, 100 of the 2020 $2 ($2.30)/$5 ($1) bull call spreads at $1.30 ($13,000) selling 50 of the 2020 $5 puts for $2 ($10,000) for net $3,000 on the $30,000 spread might end up being our 2018 Trade of the Year of CHK is still low next week.

    • CLF – Pulled back so we'll take advantage and buy back the 20 2019 $10 calls at $0.60 ($1,200) and we'll roll our 40 2019 $5 calls at $2.17 ($8,680) to 60 of the 2020 $5 ($2.40)/$12 (0.85) bull call spreads at net $1.55 ($9,300).  Hmmm, maybe that should be my Trade of the Year?  
    • CLNS – Too low to cover but not low enough to DD.
    • CM – We'll probably be called away in March but we can sell 5 June $85 puts for $3.40 ($1,700) so we can be re-assigned at net $81.60 or, more likely, just to get another $1,700 that offsets the 2 naked short calls.  
    • CMG – It finally calmed down and, on the whole, we're not so bad off so let's take advantage and buy back the 10 short 2019 $420 calls at $11 ($11,000) and roll our 10 2019 $280 calls at $52 ($52,000) to 20 of the 2020 $250 ($84)/350 ($42) bull call spreads at $42 ($84,000).  We can also roll our 10 short 2019 $350 puts at $78.50 ($78,500) to 15 of the 2020 $300 puts at $57.50 ($86,250).  That's net $35,250 and we've moved our strikes $30 lower and doubled down into a $200,000 spread (from $140,000) that pays off at $350 instead of $420.  Now we're in a great position to sell calls and, for example, we could sell 5 Jan $300 calls for $11 ($5,500).  Do that 10x and it's money but the main point is we can easily get our $32,250 back – so it's a great investment!  Maybe this should be our trade of the year?  

    • CSCO – Blasted higher on earnings, wish we had more.  
    • DBA – We're net even after more than a year but I still like them as an inflation hedge so let's roll our 30 2018 $17 calls at $2.85 ($8,550) to 40 of the 2020 $15 ($5.20)/$20 $1.85 bull call spreads at net $3.35 ($13,400) and we won't sell calls yet (the short Jan $23s should expire worthless).  The 30 short Jan $21 puts are $1.90 ($5,700) and we can roll them to 20 of the 2019 $20 puts at $1.50 ($3,000) as that's net $2,100 (we sold the $21s for $4,800) and we're fine with that.
    • DIN – Just starting to take off and this is one of those that I wish they had gone lower first so we could have bought more.  Well, we did buy the bull call spread on the dip – that's why we're up so much – because we followed our plan to scale in!  

    • DIS – As we expected, back over $100 and we're perfect on these.
    • FCX – I love this one, so cheap!  Again, our conservative spread is miles in the money.
    • FNF – Looks like we'll be called away on these.  Too high to repurchase or sell puts so we'll let them go.  I tried to buy this whole company for $2Bn in 2009 – couldn't get enough cash (even went to Buffett, Ackman, Pritzgers).  $10.8Bn now.  8(  
    • FNSR – We got more aggressive last month and now we're being punished.  May as well take advantage and roll our 20 2019 $23 calls at $3.10 ($6,300) to 40 of the 2020 $17 ($6.50)/25 ($3.80) bull call spreads at $2.70 ($10,800) and one day we will sell short calls too.  Not that we need to but we can also roll the 10 short 2019 $25 puts at $7.50 ($7,500) to 20 short 2020 $20 puts at $5.30 ($10,600).  That's net about $1,000 for our changes and we're in a $32,000 spread for net/net about $14,000.  

    • FTR – Can't not DD here.  Let's buy 6,000 more at $6.95 ($41,700) and sell 50 of the 2020 $8 calls for $1.10 ($5,500) so we're 1/2 covered with an average cost of $9.56 (and possibly assigned 4,000 more at $10 on the puts side).  If all goes well though, we'll collect $2.16 in dividends so, by the time we get to 2020, our net will be down to $7.40 and then we'll roll the short calls and all will be well (hopefully).  
    • GILD – The short Jan calls should go worthless but I'd rather wait for a bounce to sell more.  

    Wow, this is a lot of work!  I'll  try to get part 3 done by 3. 

  34. Phil – do you feel that CME bitcoin contracts are created to allow flexibility, or a way to control and Manipulate bitcoin like they do with oil?

  35. Speaking of BK companies, CZR is buying Indiana Casinos for $1.7Bn!  What nerve.  They've gone BK 3 times in 10 years and they're out there throwing money around.  Lessons learned from the Trumpster…

    FTR/Jet – No, that seems sensible.  See above adjustment in LTP.   I'm assuming 50% dividend cut but we'll see what they actually do.  Seems like they are still paying 0.60 on 12/14 – just in time for Christmas.  

    /RB/Japar – Into the weekend, yeah – that's just being silly.  On the other hand, I have 5 /CLF8 shorts at $56.60 – just hoping for a nice dip into the 2:35 close.  I figure it's already up 2.5% ($1.35) for the day so not likely to go higher and maybe 0.65 pullback to 1.25% line – but it's a gamble.  

    BitCoin/Bulls – I shudder to think what will happen when BitCoin has futures.  It just fell 30% last week and people are going to leverage them 100x on a contract?  That's just beyond insane.  Of course it will be manipulated, you can bankrupt people overnight by jumping stops (or intraday for that matter).  

    Image result for it will all end in tears animated gif

  36. In my opinion, bitcoin futures is a way to drop it down and scare people off of it so they can stay away.

  37. KO – looks like market not so impressed with new slushee machine.

  38. Phil/CHK

    Are you rolling the 2019 $5 puts or just adding 2020 puts?

  39. CHK/Baron – Sorry, that was unclear.  We're selling our 2019 calls and buying the 2020 spread in the LTP

  40. Phil – Flying Car – Caractacus Potts OMG!!!!  Too bad TSLA is just CHITTY, CHITTY but when will they run out of suckers so will it go BANG, BANG?  Oh wait, one born every minute and Out.

  41. Bob Lutz ripping TSLA a new one on CNBC but he stole my "Emperor Musk has no clothes" line.  

  42. Phil – The line should have been "The name is Potts, Caractacus Potts".  Ian Fleming is smiling.

  43. TLRD – testing (again) the gap above..

  44. Phil- What are your thoughts on a play on GT? 

  45. LTP/ESRX "5 short 2019 $65 puts ($9.20) to 10 short 2020 $52.50 puts ($5.30) for a $1,400 credit."

    ?That is a $700 credit [(500 x -9.2) + (1000 x 5.3)]

  46. Phil-

    I still have trouble figuring the best "roll" for positions well ITM.

    With LB I have

    2019 37.50 call @ 5.50 (+980) and I am short Dec 17 45 call @ 1.20 (-480)

    The short calls expire in 28 days – what is best course of action? 


  47. Also have the same issue with IMAX

    I have March 15/20 BCS – well in the money – somehow I missed the buying back of the $20 call 

    What adjustment to make if any?

  48. Long-Term Portfolio Review (LTP) Part 3:  Into the home stretch now:

    • GM – Wow, I forgot we cashed out the stock looking for a pullback.  Didn't get much of one and it's reversing already.  I suppose we'll let it play out, we did take a bonus $28,050 off the table plus the $35,000 we intended to make means we've got $63,050 in our pocket against this spread.  At the moment, we can cash out for $27,125 – let's say we'll stop out at $33,000 to lock a $30K profit if it goes bad on us.  
    • GME – Still too cheap to sell puts.
    • HBI – Last time I was upset it took off before we could sell more and now they collapsed so – YAY!  Let's cash in our 10 2019 $18 calls at $3.20 ($3,200) and buy 40 of the 2020 $18 ($3.85)/$25 ($1.35) bull call spreads for $2.50 ($10,000) and let's roll our 10 short 2019 $20 puts at $2.90 ($2,900) to 15 short 2020 $23 puts at $5.55 ($8,325).  So that's net $1,375 out of pocket for 4x a wider spread!  Maybe this should be my Trade of the Year?  There's no need to roll the short 2019 $23 calls for now as they are very well-covered.  At some point, we'll 2x roll them to a shorter-term contract.
    • IBM – Pulled back but right at our target.  May as well take advantage of the dip to roll our 20 2019 $130 calls at $23.40 ($46,800) to 40 of the 2020 $140 ($19.70)/170 ($9.10) bull call spreads at $10.60 ($42,400) and we can sell 10 of the 2020 $140 puts for $15.50 ($15,500) so we're doubling our upside (but giving up $10 in strike, but we'll make it up with more short sales we can now do) and dropping to half-cover AND taking $19,900 off the table – BRILLIANT! 

    • IMAX – Junes are finally out but Justice League is getting bad reviews.  Still, no reason not to roll the 30 March $17 calls at $7.70 ($23,100) to 50 of the June $20 ($5.80)/26 ($2.30) bull call spreads at $2.50 ($12,500).  Once the short Dec calls expire, we can sell some more for income but this is $10,600 off the table and still a very nice upside on a huge credit spread.    . 
    • LB – Was going to be my Stock of the Year for 2018 but going up too fast now.   We have a good amount of these because they did take a dip that let us double down.  

    • M – $20 is a great floor and we're well-positioned. 
    • OIH – Doing well despite the low oil prices but off the highs.  I still like the trade and thank goodness we double-sold the short calls!  
    • PSO – Nice comeback on these guys despite (or because of) dropping their dividend from 0.42 to 0.065.  Unfortunately, the dividend is now too low for us to bother with so we can let this go when we're called away.
    • QCOM – Last month, I said "What a bargain down here.  I'm happy with our spread and it's not cheaper so we shouldn't buy more but I like it as a new trade as it pays $15,000 at $55 and just net $7,000 – even though the stock is already at $52."  Then this happened.  Fortunately, we were 1/2 covered so huge gains.  The $40/55 spread is net $14.80 so let's just cash those and be done with them, the short puts will go worthless – no sense in buying them back early (and if the sale goes through they terminate anyway).  


    • SKT – Let's roll our 20 March $22.50 calls at $3.20 ($6,400) to 40 of the 2020 $20 ($7)/30 ($3) bull call spreads at $4 ($16,000) and we can sell 20 of the 2020 $20 puts for $4 ($8,000) to help pay for it.  We expect the short March puts to expire worthless but we'll just take the hit if they don't so we're not too exposed.  
    • SPWR – This is a new one, already going well as earnings were good.  
    • SVU – We got aggressive last month and they are perking up a bit so wait and see now.

    • TEVA – Now the 2020s are out so we can roll our 30 2019 $17.50 calls at $1.95 ($5,850) to 40 of the 2020 $12.50 ($5)/20 ($2.50) bull call spread at $2.50 ($10,000) and we'll roll our 30 short 2019 $25 puts at $11.70 ($35,100) to 30 short 2019 $20 puts at $8 ($24,000).  As we initially collected $28,500 on the short puts, our net credit becomes $17,400 or $5.80 per contract so our break-even becomes $14.20.
    • TGT – On target.
    • TWTR – On track and another one we added to on the way down.
    • UNG – On track
    • WPM – This is the second round for our 2017 Trade of the Year and also going like gangbusters.  Right on track, plenty more to gain and the old Jan puts will expire worthless – love it!  

    All in all it looks like we're in tremendous shape with plenty of big trade lined up to keep the money rolling in in 2018.  Meanwhile – it's time for the holidays so let's enjoy what we have (and give thanks!). 

  49. Today.. put on long TEVA (stock) Long TLRD (covered stock) long NIMH (call calendar) short CF (put diagonal) and hoping to fill short EA (put diagonal and long put). Looked at several other potential short plays (POST, CHRW, CMI, CTSH) but none had an option setup I liked enough for today and/or want to see what happens Monday..

  50. Wow, made it!  

    Chitty/Naybob – My cousin wrote the book for the Broadway show.  Didn't run long but I thought it was good.  

    GT/Calch – I think they rode the wave of pent-up demand (from the recession) that has boosted the whole auto sector.  I don't think it will be as easy moving forward but tires do wear out and people buy new cars so it's a great company to buy on the dip.   We used to own them at $10, then they got expensive – it's hard to love them at $30 but it is a good price.  

    Since you can sell the 2020 $28 puts for $4, that's free money (as $28 is a great price anyway) and then you can use that to buy the 2020 $25 ($7.85)/$35 ($3.30) bull call spread at $4.55 and then you are in the $10 spread that's half in the money for net 0.55.  That's so good we should do 10 of them in the LTP!   That makes the upside $9,450 (1,718%) at $35 in 2 years and worst-case is you own the stock at $28.55.  

    ESRX/Mike – You try doing 42 of these things! devil  Thanks.  I was thinking it was $9,200 to $10,600 for some reason.

    LB/Jeff – Nothing for some things but practice.  The 2019 $37.50s are $15.30 and the Dec $45s are $5.70 so no worries,  I'd cash the 2019s and roll to 2x the 2020 $40 ($15)/52.50 ($9.20) bull call spreads at $5.80 ($11.60) so you drop $3.70 in your pocket and then you just roll the short Dec $45s to the Feb $47.50s ($5.20) and if you do $2.50 rolls for 0.50 every 3 months, LB will have to gain 20% a year for the short calls to burn you.  Meanwhile, no hurry as they are good protection.  

    IMAX/Jeff – There's no real way out, you'll just get your $5 for the spread.  As a new spread, I like the June $20/26 spread at $2.50 – you have $5 coming so you can re-invest $2.50 and have $3.50 more potential upside.  

    Sounds like you were busy Scott. 

  51. yeah, more orders than usual for sure…. handful of puts etc expiring today.  really wanted to get more short positions on, and finding it -hard-

  52. So a red finish is interesting (but the RUT is green and NYSE is green).  

    Next week is BS but I'll be here Mon and Tues.  Weds I am flying to Florida so a morning post and then I'm gone (no Webinar) and I will be on Friday from FL.  

    Have a great weekend, 

    - Phil

    Related image

  53. Phil; 2 questions if you have time this weekend.  I noticed you wanted to protect the gain on the AAPL 150 calls in the LTP and rolled out to 2020.  Why not do the same with the 140 calls in the Butterfly?  The second question has to do with your trade idea from yesterday in GOOGL.  I spent a bunch of time today trying to understand how you could lose on that trade.  I realize there is no such thing as a guarantee but can you explain the risk on that trade?   I realize that if the stock goes up significantly the short calls will be under water, but between rolling those calls and adjusting the bullish call spread it seems low risk.  I apologize if the answer is obvious.

  54. Phil,thank you for all the reviews this week.  Have a good weekend!

  55. PHil,

    Did you stop out of /CL?

  56. Bio, Nice write up on Crypto.   Do you think the gov't will give up control?   

    Executive Order Crypto - How likely is this to happen again?   

    Bitcoin - Thoughts on this guy's theory?   

  57. Our GOP congress is so shortsighted:

    The house bill would eliminate this section entirely. As a result, the cost of graduate tuition, which is often set by lucrative fields like law and medicine, will count as income if it's waived. As a result, graduate students would be taxed as if they earned their stipend plus the full cost of their tuition, even though they only saw a fraction of that money. In other words, a grad student living on a $25,000-a-year stipend could suddenly find themselves liable for taxes on a $75,000 income or more. Many grad students are foreign, which could add additional complications.

    This could be financially ruinous for current graduate students, and it would provide an immense disincentive for future students to apply for a research-focused degree program—especially since the massive tax bill would apply for all five or six years of a program.

    Killing science everywhere! I guess MAGA is only for rich people in the short term. Then we will set back this country 20 years! Sad…

  58. California’s legal pot countdown: What’s coming by Jan. 1

  59. When the Right Pushes Fake Jews

  60. Phil,  I am in ABX, Jan 2018 13/17 BCS.   The short side is down to .06.   Is there a preferred way of managing these types of BCS's?  My logic tells me to buy back the short side, wait for it to pop and sell more.  If it doesn't pop before Jan, I roll the long into another BCS.  Thoughts?   TIA

  61. these types of BCS's = less than 60 days to expiration and the short side with less than 5/10% premium left.  

  62. Grass my two cents. ABX you roll the long call to Jan 20 10 or 13 call and sell the 10 or 13 jan 20 puts to cover costs. The jan 18 17 caller will expire 99.5%. just keep an eye on them. You further can sell 1/2 Jan 20 20 caller. I personally would even wait a while and let ABX come up a bit. Once you are comfortable with establishing the new BCS you start selling monthly 1/2 cherry calls against your position.

  63. Phil

     Do you think it would be a good idea to sell some

    Time Warner Inc. TWX puts?


  64. Mauldin – Bonfire of the Absurdities. Pretty much, "Yep." Nothing we don't already know here, but when put all together.. Don't put your hands in your hair when you read this, or you won't have any left by the time you finish.

  65. ABX – Yodi, thank you!  

  66. Good morning!  

    I'm on Benzinga this morning so already way behind.  

    Futures kind of flat, oil pulling back a bit but I have tight stops on 1/2.  They cut open contracts down to 30K so not much pressure there and the Dollar eased up (93.66), so no pressure there either but Brent failed $62 (-1.25%) so, as long as it's below, I feel good about shorting oil, which is only down half that much.  Oh, and /RB is down 1% so under $1.73 for /RB is good too.  

    Stop/Japar – There was nothing to stop over.  As long as we were under $57 (/CLF8), I was just adding.  But, keep in mind, I play it very dangerously, not the best example – I'm thrilled to have a profit this morning – won't let it slip away.  

    ABX/Options – Because it's already a huge position for the much smaller Butterfly Portfolio and we are THILLED in a conservative portfolio, just to make our spread.   We're still nursing the short calls and, if we HAVE to, then we can adjust but it's already a half sale.

    TWX/QC – They just dropped 20% so who's to say they don't drop another 20%?  These merger deals can cause wild swings, it's a bit too much of a gamble for my taste.  See how they do today as Justice League was disappointing.  

    Taxing students/StJ – I've never seen a worse change in my life.  There is no reason for this other than to cripple science education and disadvantage the poor from going to school.  It's ridiculous as it's completely unaffordable – and now they are only a step away from expanding that to all students who get aid or scholarships.  This whole administration just attacks and attacks the poor, education and the environment – sickening!  

    ABX/Grass – Well ABX is at $14 so, unless you paid less than $1 for the spread, I'd be a little concerned.  Not sure why you'd buy back the shorts, they are almost certain to expire worthless.  As Yodi says, the April $13 ($1.70)/$16 (0.45) bull call spread is $1.25 so very little premium and you'd be $3 in the money before you owe anything back to the short Jan callers.  Of course, if it's a margin thing, you can buy back the Jan $17s for .05, so not a huge deal, I just object to paying $5 for no reason.  Anyway, with the new spread, if ABX goes up, you're good, if it goes down, you can sell puts and roll the long calls lower. 

    Absurd/Scott – This whole GOP tax plan is absurd.   The more I read, the more awful it is.  This thing will destroy this country over the next 10 years.  I literally only makes sense if you think Putin wants this to cripple America economically and divide it politically.  

  67. Delta/Phil

    Do you  ever use Delta neutral strategies?



  68. Delta/Phil

    It looks like some are Delta neutral and some aren't.  Please bear with me.  I left Merrill and started my own RIA firm and I didn't do any of these strategies.  Thanks again for all your help.