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Wednesday Wind Down for 2017

Not much is happening.

That doesn't stop us from making money in the markets, of course, but we have to be a bit selective in picking and choosing our spots.  Yesterday morning, for example, a pipeline explosion in Libya sent oil rocketing up to test $60 and, as it was climbing, I put out the following note to our Members at 11:09 am:

Oil exploding higher, $59.55 and /RB $1.796 - even though there's no logic to that following oil higher because a pipeline explode in Libya so I like /RB short under the $1.80 line with tight stops above.

That's all good Fundamental Trading is:  Read the news, think about what it means and play for or against the market reaction.  In this case, it was an over-reaction so we went against the market.  When oil hit $60 (/CL) we shorted that too as $60 is a tough line to cross and we expected at least some rejection there and, this morning, we just cashed in at $59.50 for a $500 per contract gainj already.

As to Gasoline (/RB), that was good for a quick $1,411.20 on two contracts into the close – not bad for a day trade, right?  Even if you have a $500,000 portfolio that you parked in CASH!!! and it's sitting on the sidelines, making $1,000 per trading day is $200,000 a year – that's a 40% annual return with some simple Futures trades while you wait for some good opportunities to re-deploy your cash!

Futures trading is a very valuable tool to have in your trading toolbox but, like anything worthwhile, it takes a lot of practice and that's why we do a lot of Futures work in our weekly webinars.  There will not be a Live Trading Webinar this week, however, as I'm on semi-vacation in Las Vegas, where I'm applying our "Be the House – NOT the Gambler" method to the poker tables.

Image result for winning pokerAside from the bluffing and luck aspects of the game, winning consistently at poker is just like good portfolio-building, we try to take a consistent series of positive risk/reward positions and manage our capital to take advantage of winners while limiting our losses on losers.  Once you have that discipline established – all you have to do is PATIENTLY wait for a run of good luck and then have the discipline to realize that's a good time to cash in and walk away.

We had the good sense to realize, early in December, that it was a good time to cash in and walk away from a market that had given us better than 50% gains in our Member Portfolios as it was no longer prudent to risk 150% into a market we did not believe was likely to give us another 10% – the risk simply didn't balance with the reward anymore.

So, like a good poker player, we took our pile of cash off the table and, when we sit back down to play in 2018, we will have put the original 100% away and we'll come back to the table with 50%, or about 1/3 of what we cashed out.  If the market is going to continue to rally, we can be aggressive and make 100% next year but, if it crashes and we lose half or more of our money – it won't kill us.

Image result for poker all inWe also have to play the hands we're dealt and we have to understand the market conditions.  Last night, for example, I was playing with one of those obnoxious chip bullies who keep going all in on hands to get people to fold.  This happens a lot at cheap tables ($1/2 game) because the buy-in limit is $300 and a guy who can afford to throw $300 away can bully all the people who can't.  Though I can afford it – I hate those guys and make it my mission to take them down.

So I PATIENTLY waited until I had a really good hand (2 kings) and waited for him to do what he usually does and then I called his bluff.  He had a 10 and a 6 – I won and doubled my money while halving his.  Given the conditions of the table, there was no point in playing unless I had cards that were worth going all in on so, rather than play 20 or 30 hands (an hour) in rough conditions (he was likely to go all in and I'd have to decide on weak cards whether to play) - I waited for the one hand that was worth playing.

I still might have lost – he could have had aces or he could have simply lucked out but, STATISTICALLY, it was the right play and statistics won out.  My risk/reward was 50/50 but the conditions were that there was a person who seemed willing to risk his 50 on pretty much any hand he had so I waited until my cards had a statistical advantage. 

We do this with our Options Opportunity plays as well.  For instance, back in January, we decided to take a poke at Energous (WATT) as I liked their wireless charging system and here's how we followed it at key moments over the (rough) year:

Submitted on 2017/01/30 at 3:04 pm

This is another one I would like to keep our eye on in the LTP and, since they are only a $14.59 stock and we can sell the WATT 2019 $12.50 puts for $5.50, let's sell 10 of those ($5,500) and see what happens.

Submitted on 2017/04/27 at 12:14 pm

WATT/Learner – I think the rumors that the new iPhone will use wireless charging have been debunked (not that WATT was going to be the provider anyway).  Speculators are bailing.

Submitted on 2017/09/15 at 12:34 pm

  • WATT – Their system did NOT get used in the new IPhones so down they went.  Still like them at net $7.40. 

They played out a bit like a biotech company as they waited for FCC approval on their system and people got bored and lost faith but, this morning, the FCC certified their WattUp Mid Field Transmitter and the stock is doubling.  By selling the $12.50 puts for $5.10 (we couldn't get $5.50 in the end), we had a conservative net entry of just $7.40 so we were able to ride out the dip and now, with the stock back around $17, the short puts should expire worthless and we'll make 100% on the puts ($5,500).

Our RISK was owning 1,000 shares of WATT at net $7.40 ($7,400) and our REWARD is $5,500 but, since we felt that, even if they were rejected, they would still be good for $5 or so as they try again, not only did we not feel we were risking more than $2,000 but even yesterday, the 2020 $7.50 calls could be sold for $4.50 so, even if we were assigned at $7.40 – we could have turned around and sold the calls and dropped our net to $2.90 ($2,900).  

We had all year to make that play and, though we are now in CASH!!! (too much risk into the holidays), we have 40 stocks on our Watch List already that we'll be looking to play as we build all new portfolios starting on January 2nd.  Until then – we can relax and enjoy the holidays. 

That's what it's all about – keep your risk lower than your reward and try to make intelligent investing choices and you have a great chance of staying ahead of the markets in 2018.


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  1. Good Morning.

  2. good morning

  3. good morning

  4. And gm to you all.  Have to go drop my son off at the new house.  We took turns using a demo hammer on the fireplace yesterday.  I am stiff as can be.  I'll let him finish.  We have already filled up a 10 yard dumpster with tile and the fireplace.

  5. I loved to demo homes…. :)

  6. Good morning!

    /NGV8 stopped out at $2.74 after failing $2.75.  Will get back in again on the next dip, of course.  Good stop out on /CL too – back to $59.75.

    /KC with a nice run  back over $124, which is now the stop.

    New house/Baron – Congrats, what fun!  I love starting with fresh homes.

    Speaking of fun:

    Teva launches generic version of Bristol-Myers HIV drug

    • Teva (NYSE:TEVA) announces the exclusive U.S. launch of a generic version of Bristol-Myers Squibb’s (NYSE:BMY) Reyataz (atazanavir) capsules.  
    • The protease inhibitor is used in combination with other antiretrovirals to treat HIV-1 infection in patients over 6 years in age and 15 kg in weight.
    • Reyataz had $402M in annual sales as of October.  
    • Teva shares are up 0.7%

    Redbook Chain Store Sales Post Strongest Y/Y Gain Since July 2014

  7. WATT was a nice call….

  8. Sold 1/2 of my CEIX position.  This is one I mentioned last week.  Has doubled since Dec 4th.

    Phil, I agree with you that coal is dead in the long run, but many of these coal names such as CEIX, BTU & CCR are at or near yearly highs.  Have provided good trading profits.

  9. VLO… what a move.. due for a reversal. 

  10. Dollar dive is boosting the indexes:

    WATT/1020 – Actually, I forgot about them as we were supposed to add a bull call spread when they got cheap.   I'm into wireless charging as I tried to develop wireless speakers about 10 years ago and did a lot of research (wasn't viable at the time and still isn't yet) so WATT caught my attention with a promising approach but it was like a biotech as they had to clear the approval process.

    CEIX/Albo – Very nice but coal is still dead.

    I called this one the day they announced they were building it:

    Moment of truth for the A380

    • Airbus (OTCPK:EADSY +0.6%) is drawing up contingency plans to phase out production of the A380 superjumbo if it fails to win a key order from Dubai's Emirates, sources toldReuters.
    • The world's largest jetliner was developed at a cost of €11B to carry some 500 people and challenge the reign of the Boeing 747 (BA +0.1%).

    Submitted on 2007/02/08 at 6:30 am

    A380 – I’ll see your monkey and raise you a mule! Even if they get it flying where are they going to land it? Other than the few European airports that have made a commitment and some in Asia/PG, who is going to be redesigning gates to handle a super-plane that only uses it a few times a week.

    It’s a huge chicken and egg problem for Airbus and wait until you see the bad press when they try to put 600 people in a plane at one time (and with 100 first class seats I bet you I STILL can’t get an upgrade!). How does this mesh with any airline gate you’ve ever seen. Will the airlines triple the staff at the gate or willl you wait on a 200 person line to ask a question? Have you ever been on a plane that was waiting for the catering car? Times 3! What happens when they scap a flight? Do all 800 of you race to the customer service counter to try to get on the next plane? What redesigns of the luggage system are being put in place to handle 5-800 people’s bags on the same belt? How many additional customs agents will they put on staff every time an A380 lands in a foreign country – or will we just wait 2 hours?

    I know it’s a nightmare when 2 planes with 200 people land at the same time and hit customs, imagine 2 A380s dropping 1,600 people off at once!

    All the traffic flow studies they do rest on the fatally flawed assumption that these planes take off on time, land on time, have available gates and never break down. I’d say I would avoid them until they get the bugs out but I may be too old to fly by then…

  11. A380… I've been on a few times…loading time did not seem unduly difficult. We have a couple that come to Houston.  Here's detailed opinion on why its not working..

    even the 747 is dying off

  12. A380s/Phil – those are what I fly with Korean Air Lines between LAX and Incheon, every time. Long lines when deplaning, especially at LAX, but at least they usually don't have two of the things landing at once. They seem to have mostly figured out how to handle it efficiently on the ground, though. Takeoff and landings seem protracted, and landings have a weighty feel to them.

  13. VLO/Learner – Yes, very Icarus-like at $90+, gasoline is near $3 and that should get some blowback soon.  

      I would sell the Feb $92.50 calls for $2.80 maybe 3 ($840) and buy 5 of the $95 ($4.75)/$90 ($2.30) bear put spreads for $2.45 ($1,225) for net $385 on the $2,500 spread.  

    A380/Latch – Well those are mega-airports it services now, the point is that it can only work in hubs and so has a limited value to the airlines, who prize flexibility.  As to the 747, that was part of the discussion at the time, BA went with the smaller, more efficient design for next gen planes and Airbus went A380 and I predicted BA would kick their asses as the A380 was a huge mistake.  Good business lesson there as BA listened to their customers and solved their problems while Airbus tried to create a new category – whether people wanted it or not.  

    The real failure of the A380 is that the economy didn't keep booming and the ultra-luxury air market didn't grow the way Airbus imagined it would.  

    Landings/Snow – I haven't been on one but I imagine you can feel the weight of the thing.  Like landing a dodo vs an eagle.  

  14. Speaking of Icarus – /NKD at 22,990 and I have to take a poke at those short below 23,000 as it's a great shorting line ($5/point per contract).

  15. 6 things investors need to know about the new tax plan

  16. Phil,

    IEP what are your thoughts on IEP, I was looking at them and their PE is around 5 which seems to be very cheap for an EPS of 11.5

    Thanks as always 


  17. US consumer confidence dips this month but remains high

  18. 14 of the best places to travel on a budget in 2018

  19. IEP/Pat – Not sure how the p/e is 11.5 when they haven't had a profit in years.  Negative cash-flow too.  I've never like IEP, certainly not compared to BRK.B or BLK or BX but they do pay a fat dividend and they tend to stay in their range BUT, they only have short-term options (June) and, like any big dividend-payer, they have crappy premiums so we never play them.  As they stand now, at $52.60, if you sold the June $50 calls for $4  and the $45 puts for $1.05 that's net $47.55 and called away with a $2.45 profit while you collect 2 $1.50 dividends is not terrible.

  20. Couldn’t resist picking up FTR @ $6.78

  21. ah the WATT scam continues. They can have their press release-fueled run ups until the anti-"smart" meter crowd has their way with them. The company should change their name to Running The Microwave With the Door open, but that's not as catchy as an acronym, RTMWTDO, I suppose.

  22. FTR should announce they are Net-Neutral For Life by choice, and watch business flock to them. 

  23. CEIX did the standard scam, go bankrupt, screw the pension holders, environment and unhealthy worker obligations, recipe the stock and start paying dividends until the whole thing busts.

    Oh, and ship out big executive bonuses for all that hard financialization work of course! (that won't get paid until 1/1, because the tax rate is now lower). See, America is great again.

  24. Wow, nice little dip on /TF and /NKD!   Not turning down a quick $2,000 – now I can afford to see Britney Spears!

    Microwave/BDC – That is my concern but a 3-foot electric field is not so terrible (unless your balls are in that zone – then I'd be concerned!).  Nice summary on CEIX!

  25. /YM is the fresh horse now, still 24,790 so good short with a stop over 24,800 (-$50) so you won't regret cashing other index shorts but I do think they might be done falling here.

    See, that's just what I was talking about this morning – be patient, go for the easy money play and, when you win, take the money off the table!  

    This is how I plan to spend my retirement.  If I have a good day, I have a nice dinner and see a show and, if I have a bad day – fish and chips (I still plan on living in Jersey though every time I go to Vegas I keep thinking maybe I just live in a nice hotel).  Frankly, the only downsides to Vegas is they are still in the US and there's a long-term water issue that won't go away.

    I forgot to mention that, flew over Lake Mead and it's so tragic!  

    Image result for lake mead water level

    That white line is where the water used to be!  

    Image result for lake mead water level


    BDC – Where are you getting your information on CEIX ?  As far as I know, none of that is true.  Are you confusing them with BTU ?

  27. FTR/Den – I hope they stay this low so we can start a new FU portfolio next week! 

  28. We stopped boating at Lake Mead when there were dozens of new spots to avoid on the lake every new season…that was about 2001…. not to mention an odd rash everyone could get when going in the water… :(

  29. Phil/FTR,

    Do we have a BCS with FTR? I think we have stock and then short calls and puts.


  30. Phil, what do you think of this TEVA 2019 call spread?

    Buy 12.50s  sell 20s for $4.50

  31. JO and UNG on a nice bounce from their recent lows. Temperatures in NYC below 30 for the next week. Phil, you picked a great week to be in Vegas.

  32. Phil/BTU – really it was my rant for Arch coal from last year.

    East Coast is Cold Cold Cold – just went long Jan 5.50's on UNG but this is a terrible decaying PoS as we all know so only here and there and front month's only. The short term calls worked last year though!

  33. I'm 100% out of HFC today. That was awesome. Will probably shed CNX/CEIX too and just be done with coal and lighten up a little more on energy. SQM +200% and I'm still holding. Or as the crypto guys say: HODL!

  34. Rash/1020 – That's a shame.  It used to be such a scenic spot.  Now it looks post-Apocalyptic (or maybe pre?).  

    FTR/Pat – We have CASH!!! In case you missed it, we cashed everything out officially in our portfolios and we start fresh next Tuesday but yes, I will be buying FTR stock and covering with short calls.

    TEVA/Jabob – Oh F them!  Don't tell me you were cursing them out and complaining about how bad there were at $11 and now, at $19, you want to buy them???  If you want to be bullish with $4.50, I'd buy the 2020 $15 ($7.25)/$25 ($3.20) bull call spread for net $4.05 and, if they fall back to FU territory, then, rather than cursing at them, I'd sell the $12.50 puts, now $1.70, for $2.50 or better and use that money to roll the $15 calls down to the $10 calls (now $10.50) and THEN you could do 1/2 sales to pay for the whole thing – like March $20 calls for $1.40.  The March calls are 79 days out of 751 so 10% means you can collect $7 per long on 1/2 sales, which means the net $0 spreads would be a $7 credit at $12.50.  So, in that scenario, would you rather TEVA go up and you make $10 or go lower first and maybe you make $22.50?

    Vegas/Den – It was a perfect week to go as I knew we'd be slow and we're in cash.  All working out quite well.

    Not working out well is the indexes – barely bouncing off those lows.  /YM is heading down a bit. 

    Coal/BDC – Please keep your generic rants straight!  cheeky  I don't know why you don't just play /NG – quick in and outs for $500-1,000 several times a week.  Don't forget, we looked at the forecast maps and cold goes away within 10 days.

  35. I don't have an account with ToS and I don't buy and sell futures.

  36. You should try one, it's fun! 

  37. I might have said FU to them but that doesn't mean I didn't do anything with them ;-)

    Thanks for the advice.

  38. FTR – fyi – to buy, say, 100 shares FTRPR today at 10.20 will result, after dividends received and shares issued following June 29, 2018, an average cost of approx. $3.48 per share

    buy 100 FTRPR for $1020, receive 3/30 and 6/29 dividends of 278.13 each for net cost of 463.74. After conversion, 133.33 shares will be issued to you. $463.74/133.33 = 3.48/share

  39. Phil – why is GNC being priced for bankruptcy? the shares are dropping like a rock

  40. futures :) --   "fun" ? , addictive and destructive most times….at least in my limited experience

  41. Scottmi – Interesting on FTRPR.  If I understand your post correctly, couldn't you short 133 common at 6.83 and buy 100 FTRPR and lock in almost a double ?  Assuming FTRPR continues to pay that dividend, which I think is probable given that they'd eliminate the common dividend first before doing that.

    Just a thought off the top of my head.  Would that work ?

  42. You're welcome Jabob.  What a long, strange trip it's been!  wink

    FTRPR/Scott – That does sound good but I stay away from prefereds as it adds a layer of confusion to our discussions.  

    GNC/Torquio – Because they are restructuring debt, which is often code for going BK so people will panic out and, perhaps, they are in worse shape than we thought.  Also, they are dilluting by using stock to pay down debt and you'd think people would like keeping cash and lowering debt but traders are never happy.

    Futures/Latch – Takes a lot of time (addiction) to get good at it, that's for sure.  I'm still not ready to retire and rely on Futures for my sole income – but I am beginning to see the day ahead.  

    Weak finish into the close, only the Dow is green (barely), back at 24,799.  I'll keep my 2 shorts on for now. 

  43. Albo – interesting..  in general, I don't short shares, but I don't see why that wouldn't work. ~~going with 10.25 for FTRPR and 6.83 for FTR (and no commissions), for each 'set' you would be $116.61 out of pocket today, receive preferred dividends, and pay dividends (on short shares), then shares redeemed to net you out at $280.04 credit for a 140% return (or 275% annualized) Added benefit, if FTR reduces it's dividend on the common, you get even better return. Hey, back up the truck!

  44. FTR. Last time I got assigned, TD said it was a hard-to-borrow stock and would not let me short it. Maybe you could do the same thing with a deep ITM put?

  45. Good morning!

    We're getting a little run-up into the open but, once again, that's not what Europe is doing so fake moves, most likely and same Dow (/YM) short should work again around 24,850 (tight stops over).  If you want to play an index bullish for the fake – /TF down at 1,545 with tight stops below that line should work.

    /NQ 6,475 is a good line to watch for direction

    /ES at 2,690

     /NG still flying

    Might be a good bottom for the Dollar.

    Biggest annual dollar index slide since 2003

    • The U.S. dollar index slipped today to as low as 92.36, its weakest level in three months.
    • "I think people have been long dollars into the [Fed's December] rate hike, into the passage of the tax bill, and right now people are just pulling back," said Lee Jin Yang, macro research analyst for Aberdeen Standard Investments.
    • The index has dropped more than 9% this year, putting it on track for its biggest annual slide since 2003.

    Wednesday's economic calendar


    Bitcoin drops on Korea crypto crackdown

    • Dramatic gains, dramatic declines…
    • Bitcoin plunged as much as 11% overnight to $13,672, as South Korea – the ground zero for crypto interest – eyed new regulations that would include prohibiting anonymous trading accounts and could give authorities the ability to shut down exchanges.
    • According to Yonhap, the head of the country's financial regulation agency also told reporters that the "bubble in bitcoin will burst later."

    Saudis see oil revenues up 80% by 2023

    • Saudi Arabia's plan to erase its budget deficit by 2023 relies on a scenario that would see oil revenue surge by about 80%, sources told Bloomberg.
    • Officials predict rising crude prices and output will push income from oil sales to 801.4B riyals ($214B) from 440B riyals this year.
    • The six-year fiscal program also assumes the price of oil will reach $75 a barrel.
    • ETFs: KSA

    Northeast states sue EPA over smog

    • Eight Northeastern states are suing the EPA to force it to impose more stringent controls on a group of mostly Midwestern states whose air pollution they claim is being blown in their direction.
    • "Smog pollution continues to pour in from other states," New York AG Eric Schneiderman declared.
    • The coalition wants the territory to be added to the "Ozone Transport Region," which requires stricter pollution controls.

    China extends tax rebate for NEVs

    • Boost for hybrid and electric carmakers? China's Finance Ministry will extend a tax rebate on purchases of new-energy vehicles from the end of this year until the end of 2020 amid a shift away from the internal combustion engine.
    • The extension comes as automakers in China brace to meet strict NEV quotas starting in 2019 that are sparking a flurry of new deals and launches of electric and hybrid car models.

    More lawsuits filed for iPhone slowdown

    • Eight more lawsuits have been filed in various federal courts in the week since Apple (NASDAQ:AAPL) opened up about its year-old software change, which slows down the performance of aging iPhones.
    • The cases – filed in California, New York and Illinois – seek class-action to represent iPhone owners nationwide and demand unspecified damages along with, in some cases, reimbursement from Apple.
    • Previously: Apple sued over iPhone slowdown (Dec. 22 2017)