Comment by phil

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phil
December 6th, 2017 at 11:40 am

Portfolio/Pat – LOL, would you like to send me more information.  I guess I can get into the business of doing individual reviews for people who don't even bother subscribing.  Actually I can't – I'm not a financial adviser and that's simply not a good thing to do!   In GENERAL, you have to use your head and look at each position and think about how you feel about it – especially how you WILL feel if the broad market goes down 20% and your positions are down 10%-40%.  Which ones do you want then?  

If you have "good" gains that can be offset with "good" losses, why not start there and begin to lighten up so at least you are more flexible (and have a lower cost of hedging) and then pick out some sensible hedges to go through the holidays. 

Speaking of hedges.  TNA is the ultra-long Russell ETF at $67.87, well off the highs at $73.50.  If you think you will regret going to CASH!!! then you can take an upside hedge using something like this, which will give you great gains if the rally continues (or Santa Clause comes to town).



Just like any play, a bull call spread will keep you from losing too much and the longer spreads have a lower net delta and that means you won't get too burned on the downside.  So, for example, we are cashing in the OOP (the SA people voted yes too) at $300,000ish and usually we make about $10,000/month so, if we think we'll miss out $20,000 in gains during December and Jan, we can:

• Buy 20 TNA April $60 calls for $12 ($24,000) 
• Sell 20 TNA April $70 calls for $6.50 ($13,000) 
• Sell 3 TSLA April $330 calls for $19 ($5,700) 

The net cost of the trade is $5,300 and it returns $20,000 if TNA is simply over $70 in April so you'll capture $14,700 (277%) in profits if all goes well.  If not, unless TSLA has a major rally, you will only lose $5,300 at most but, more likely, you'll be able to salvage half of that by closing out the bull spread if the market is heading lower – as we expect it will.  

You can, of course, use anything to offset the bull spread but I feel pretty good about shorting TSLA, rally or no rally!  

Oops, forgot about oil (I got out yesterday) – down big on net build in stocks:

 

EIA Petroleum Inventories

• EIA Petroleum Inventories: Crude -5.6M barrels vs. -3.4M consensus, -3.4M last week.
• Gasoline +6.8M barrels vs. +1.7M consensus, +3.6M last week.
• Distillates +1.7M barrels vs. +1.0M consensus, +2.7M last week.
• Futures -1.23% to $56.91.

The headline draw in Crude is wiped out by the bigger builds in Distillates and Gasoline and they signal weak demand so $55, here we come!  

/SI/Japar – 2 long at $16.04, looking to add 2 more at $15.96 as we discussed yesterday (well off by a penny as I didn't get my $16.03 on 2).