Comment by phil

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phil
December 13th, 2017 at 10:15 am

Good morning!



Futures popping right up at the open – just madness.  Check out the Nas since 8am:



They are leading the pack at the moment and the Dow is lagging and needs to pop 24,600.  Can we finish the year at 25,000?  Maybe even the week?  

UNG/Calch – Seems very messy and I hope you sold some short calls at some point.  UNG is at $5.35 and the 2019 $4s are $1.65 and the $5s are $1 and the short Jan puts are way in the money.  Keep in mind that buying naked calls (or puts) is a suckers game – it's exactly what we try to teach people NOT to do at PSW.  Bottom line is you lost about $4,000 on the calls so there's no "fix" to this thing – it's just a matter of whether or not you want to continue being long Nat Gas to try to make $4,000 back.  



As a new trade for UNG, looking to make $5,000, I'd go with the following:

• Sell 40 2020 $5 puts for 0.80 ($3,200)
• Buy 60 2020 $5 calls for $1.45 ($8,700) 
• Sell 60 2020 $7 calls for 0.70 ($4,200) 

That's net $1,300 on the $12,000 spread and, while you are waiting, you can sell 20 (1/3) April $6 calls for 0.25 ($500) as picking up $500 per quarter will drop your net to $0 in less than a year.  

In your case, you are already down $4,000 on the puts so down $8,000(ish) total (assuming no calls were sold) and this spread does give you back that and 50% more if all goes well.  Downside is still owing 4,000 UNG at $5 ($20,000) but you're on the hook for 1,000 shares for $10,000 now – so not much worse off, I think.

FTR/Baron – $10.36 today!  Unless you want to add more to the position, there's not much to do.  It depends what calls you sold and for how much, of course, but let's say you have our LTP position, which was:



And our call in the last Review was:

• 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).

I included FNSR since it was next to it, in case people were wondering where we left them.  

Anyway, so with FTR, we had 10,000 shares and we sold 50 (1/2) 2020 $8 calls for $1.10 because we really believed in FTR and the short calls helped pay for the DD without assuming too much more risk (since the non-believers were freaking out at the time).  So now the short 2020 $8s are $2.80 and FTR is at $10.37 so we don't really care if half our position is called away as we still get dividends on 1/2 and we're effectively cashing out for $10.80, which is like cashing now and getting an 0.43 dividend too!  

If we just had 5,000 FTR and fully covered them (possibly because the non-stop stream of FU's made us feel like it was a mistake to hold on, rather than sticking to our trading plan) then we could add 20 of the 2020 $5 calls for $5.30 ($10,600) and roll the 50 2020 $8 calls at $2.80 ($1,400) to 70 $12 calls at $1.90 ($13,300) and that would ensure nothing gets called away on dividends for net $11,300 but the dividend is only $3,000 so you are risking $8,300 on a stock that's almost certain to pull back at least 0.60, which is another $3,000 so it's back to a matter of faith as FTR will still have a rocky ride going forward.

Delay/StJ – Good luck with that. That only counts for Democratic Presidents in their last 18 months of office picking Supreme Court judges, apparently.  

All news/Baron – Now you are catching on!  

OpenBazaar/Grass – Oh there's lots of ways, including sending them traffic or good old cash payments.  We're evaluating what will give us the best bang for the buck with GRE.

SVXY/StJ – The VIX hasn't moved much all year (just stays low) but SVXY goes up and up and up.