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Thrilling Thursday – Yesterday’s Russell Futures Up $2,500 Per Contract!

You're welcome!  

In yesterday's Morning Report, we decided the sell-off was overdone and went for the Russell (/TF) Futures longs at 1,480 and yesterday afternoon they blasted back to 1,520 for a $2,000 per contract gain on the day and this morning at 1,530 for another $500 per contract and NOW we are flipping short – but more on that later.  Remember, we are still playing the bounce lines from the charts we made for your last week – so none of this is a surprise and none of this, so far, including this morning's pop in the Futures, is indicating a true recovery yet.  

The S&P Futures (/ES) this morning are topping out at 2,720 and our 5% Rule™ Bounce Chart from last week (2/9) has, so far, predicted the moves perfectly:

All we are doing, so far, is topping out at the same place we bounced on 2/7 and that's being mirrored on the other indexes so the lines we need to be over now – in order to call today "bullish" are Dow 25,200, S&P 2,715, Nasdaq 6,700 and Russell 1,520 and, so far, the Russell and Nasdaq are a bit over but the Dow and S&P are below.  Don't forget, we topped out at 2,872 on Jan 26th so there's really nothing impressive about 2,720 - other than the fact that we came back from 2,600 but it's only a halfway recovery (not even) at this point and, if we fail to get over these lines, it's as likely we're consolidating for a move down after 2 weeks as it is we're moving back up.

Fundamentally, nothing has changed and you saw how quickly the market can still move down (and recover) yesterday.  Our 5% Rule™ takes into account that it's easy to manipulate a rally that recovers 20% and 40% of a drop if it's done quickly enough and we take into account the idiocy of dip buyers as well.  Not that all dip buyers are idiots – we had a field day adding stocks to our portfolios over the past two weeks – it's just that we added well-hedged positions and now it is time to improve our hedges, many of which we flipped bullish since the big drop.  

To that end, since there's no news and since I have 5 Portfolios to Reveiw for our Members today, let's start with a review of our public portfolio, which we only add to and change live on BNN's Money Talk and it's called, aptly, the Money Talk Portfolio, which was initiated with $50,000 on Jan 18th of 2017 and is already up to $88,922 (up 77.8%) after just over a year and, more importantly, up $2,000 since our last Review on Jan 31st, so our hedges have been well-tested and passed with flying colors! 

It's never enough to just pick a bunch of positions and toss them in a portfolio, you have a plan for each position and then you need to regularly review that plan to make sure each position is on track and then, to make sure that the portfolio of positions are working together – well-balanced enough to steer you safely through shifting market conditions and most importantly, you have got to have good hedges!  

  • Alaskan Airlines (ALK) – These short puts were a way to raise cash to offset the cost of our SQQQ hedge.  We love ALK and would be happy to buy them for $60/share but, if they go higher, we just keep the $4,100.  So far, the position is up $650 (16%) and we fully anticipate collecting the other $3,400.  Still good as a new trade.


  • Nasdaq Ultra Short (SQQQ) – This is our hedge and we paid net $3,080 for $28,000 of potential protection but we offset that cost with a $4,100 credit selling ALK but, for review purposes, we fully expect to lose the $3,080 if the market behaves and, of course, we expect the longs to make much more than that, so no worries.  Meanwhile, the hedge is doing its job and we're up $4,650 (150%)

  • Apple (AAPL) – This is a $30,000 spread that cost us $6,100 in cash to initiate and the margin required on the short puts is $8,541 but worth it as we had very little fear Apple would fail $140 so the risk was deemed low.  Currently, the spread is net $13,100, which is up $7,000 (114%) but we still have another $16,900 left to gain so, even as a new trade, this makes a very nice 12-month return from here. 

  • Barrick Gold (ABX) – We couldn't resist them this month as they got so cheap – even cheaper now but one of my favorite bottom picks and good for a new trade.  We netted into this one for $1,450 cash and a margin requirement of $1,757 on the $17,500 spread.  So far, no good and we have a loss of $1,413 (97%) but that means you can now enter this trade for just $37 cash!  You live by the leverage and you die by the leverage but keep in mind it's a $17,500 spread and we have 2 years for it to play out so, essentially, we're down 10% on our target.  In this case, we fully expect to make our $17,500 for a net gain, from here (net $37) of $17,463.

  • General Electric (GE) – Another bargain find from my recent TV spot and this one also got cheaper and also we expect it to recover.  We entered this $14,000 spread for $2,950 in cash and $1,425 in margin and, so far, we're down $1,555 (53%) with the spread an even better deal today at net $1,395 and we have no reason t think we can't hit our goal and make $12,605 by Jan 2020 as GE is ridiculously undervalued at $15.  

  • IMAX (IMAX) – This one is over our goal but still cheap at $21.80.  The March puts should expire worthless and I would sell the Sept $21 puts for $2 ($2,000) to pick up some more cash but I don't think I'll be on the show by then so it's not an official move for the portfolio.  Meanwhile, we paid net $2,390 and used $1,600 in margin on the short puts for the $10,000 spread which is now up $4,210 (176%) at $6,600 but still has $3,400 left to gain by September so, if you want a nice way to make 50% in 7 months (even more if you sell the Sept puts), you might want to consider this.

  • Limited Brands (LB) – This was our 2018 Trade of the Year in Sept but, by the time Thanksgiving came around, it has already taken off and we officially went with HanesBrands (HBI).  Still, LB is my favorite and this spread is deeply in the money well ahead of schedule.  Our outlay was $3,400 cash with $3,728 in margin but it's a $30,000 spread and already at net $19,900 which is up $16,500 (485%) since Sept 6th but still has another 50% ($10,100) left to gain by Jan, so still good for a new, conservative trade – though I'd sell higher puts.  

  • Wheaton Precious Metals (WPM) – This was our 2017 Trade of the Year and the first trade in the Money Talk Portfolio.  Again, our Trade of the Years' are big trades and this one is a $25,000 spread we paid net $2,000 cash for along with $1,312 in margin on the short puts.  At the moment, we're at net $9,150, which is up $7,150 (357%), so this spread has $15,850 (173%) more to gain if we hit our mark in January. 

We have 8 positions in our Money Talk Portfolio with 6 winners and 2 losers so 75% success is a little worse than our Top Trade Alerts (82%) but we are very happy with our losers as new positions.  Our gains after year one are $34,490 and, if all goes well, our current postions should gain another $76,638 over the next 2 years so we're on track to add another $35,000 (70%) of our original $50,000 this year and next.  

For today, however, we're calling a short-term top and we'll be making adjustments in all our portfolios to turn a bit more bearish (we can't change this one as we're not on TV but it's already well-hedged).  In the Futures, I see 25,100 on the Dow (/YM), 2,720 on the S&P (/ES), 6,725 on the Nasdaq (/NQ) and 1,530 on the Russell (/TF) as good shorting lines and our rule of thumb is to wait for 2 to cross under than then short one of the other two as they cross and then either the 4th confirms the drop and, either way, you stop out if any of them pop back over for a small loss.  Keeping the losses small is the key to playing intra-day moves.  

I will be giving a 4-hour "Master Class" on Hedging, Options Trading Strategies, Portfolio Management and Fundamental Analysis at the opening of the New York Traders Expo on Sunday, Feb 25th at 9am at the Marriott Marquis – so register now if you'd like to hear a lot more about these strategies.


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  1. ~~ CSCO -Cisco Systems beats by $0.04, reports revs in-line; guides Q3 EPS and rev above consensus; raises quarterly dividend 14%; increases buyback to $31 bln.  

  2. Good Morning.

  3. UBS raises CAT 

    How about a 2020 150/180 BCS for 12.2, sell 2020 120 put (6.8) and 1/2 June 160 call (6.45)?

    SUMMARY:  We partnered with UBS Evidence Lab to analyze construction

    equipment dealer locations in the US and Canada (link to full report). Using an

    industry set of over 2,500 Case, New Holland, Caterpillar, Deere, Komatsu,

    Hitachi, and Volvo dealerships, we analyzed capacity share, market quality,

    dealer footprints by region, competitive intensity, and cannibalization rates.

    We found that CAT is by far the market leader, with the highest capacity

    share, best market quality, and low competitive overlap. We think CAT is best

    positioned to take advantage of sustained NA construction demand, and

    maintain its industry-leading construction margins. In 2018, we also see

    potential for upside from buybacks, improving oil/gas activity, and sustained

    investment in China.

    Rating: Buy

    Price Target: $190

    Price: $158.06

    Market Cap: $94.9bn


  4. Crossing lines again! 

  5. I guess fundamentals don't matter much – we lose money on every ride but we make it up on volume:

    For the entire year of 2017, Uber sustained a loss of $4.46 billion on sales of $7.36 billion.

    In a call with investors on Tuesday, CEO Dara Khosrowshahi said that the company’s food delivery service, known as UberEats, had hit $4 billion in gross revenue—or about 10 percent of Uber’s business, according to Bloomberg. Khosrowshahi is expected to take the company public next year.

    And they want to go public with these numbers? I guess they can raise the money they need to cover losses for another 10 years.

  6. I don't get how Uber loses so much money. They own no assets and are basically a phone app. They should be printing money!

  7. Going backward on possible innovation:

    Six months after taking office, the Trump administration began to contemplate easing future Corporate Average Fuel Economy targets. Over the past week, Bloomberg has run a few pieces on what the new CAFE mandates might look like, and how the administration could try to justify them. According to a draft proposal put together by the National Highway Traffic Safety Administration, the most serious climbdown would lower average fleetwide fuel economy to 35.7 miles per gallon for passenger cars (but not light trucks) by 2021, instead of the current target of 46.6 mpg in 2021 set by the previous administration.

    Or paying back big oil companies for their donations!

  8. SpaceX is really putting the screws on the competition:

    The Falcon Heavy rocket, with reusable side boosters, costs $90 million. For a fully expendable variant of the rocket, which can lift a theoretical maximum of 64 tons to low-Earth orbit, the price is $150 million. While it is not certified yet, SpaceX says its rocket can hit all Department of Defense reference orbits; however big and gnarly the military wants to build its satellites, and whatever crazy orbit it wants to put them into, the Falcon Heavy can do it.

    Only the Delta IV Heavy rocket, manufactured by the United Launch Alliance, also has this capability today. It is more expensive, but how much more is a matter of some debate. On Twitter this week, the chief executive of the Colorado-based rocket company, Tory Bruno, said the Delta IV Heavy costs about $350 million per flight. This figure, however, is strikingly lower than what Bruno cited during a congressional hearing in 2015, when he asserted that, "A Delta IV, depending on the configuration, costs between $400 and $600 million dollars."

    Moreover, the costs referenced above by Bruno exclude a "launch capability contract" worth about $1 billion annually, which the US government pays exclusively to United Launch Alliance. Based upon current law, this contract payment will phase out in 2019 (for Atlas rockets) and 2020 (for Delta rockets), which should increase the costs allocated to each mission. Finally, in 2019, United Launch Alliance will make the last flight of a Delta IV Medium rocket. Once this variant is retired, all of the Delta's fixed costs will fall on the Heavy variant. This will push the per-flight cost above $600 million, and perhaps considerably higher, in the early 2020s.

    That could be the real Musk legacy! And they can lift 64 tons in space? That's a lot of equipment.

  9. FU ABX!!!!

  10. I know ABX is cheap and probably an opportunity, but how the %^&#$ could they be so low with gold so much higher??? WTF!!!!

  11. 64 Tons ! That's the weight of all the GOPs in the Congress, Senate and Cabinet! (~250/2000 x (260+50+20))

  12. …and let's aim it at the Sun….. :)

  13. Good morning, All!

    The webinar replay is now available!

  14. SPWR/Phil- down almost 12% due to guidance… should exit or wait to see if administration will rollback the Tariffs? 

  15. Rexx – Can they all fit in that Tesla Roadster?

  16. Profile in courage:

    During an interview with Fox News just hours after the school shooting in Parkland, Florida that left 17 people dead, Sen. Marco Rubio (R-FL) on Wednesday warned his colleagues to not “jump to conclusions” on gun control policy before the facts of the attack are known.

    Facts are that the guys used large mags to kill many people with a semi-auto assault weapon. Could we ban both to get started? Not a hard conclusion to reach unless you get money from the gun makers and the NRA! 

  17. Good morning!  

    CSCO/Albo – Wow, that really pisses me off that they can't find anything better to do with $31Bn than buy their own stock!   They make $10Bn a year so should they blow 30% of the next decades earnings to buy 15% of their own stock or maybe try to build something to improve those earnings for the future?  It's such a BS, defeatist strategy but Wall Street rewards it and it makes the CEOs rich so screw the future, right?  

    Makes for a good investing premise:

    CAT/JMD – They are riding a very bullish cycle but $160 is $95Bn for a company that makes $2.5Bn when things are going well (lost money in 2016).  They'd have to make double that to get a 20x earnings (which is what people expect) so it's not for me at this price – much as I've loved them in the past. 

    Even if they get to $5Bn (which they were at in 2012, last time the cycle peaked) they are still going to hit a down cycle that will take them back to $100 where I'll go back to banging the table to buy them while people argue they are a dead company (which is what happened a few years ago, when they dropped all the way to $52.95 at the low).    

    At $160, MAYBE they get to $200 but it's risky and could go the other way (and we have 1,000 ways to make 25% that are less risky than that).  At $100, MAYBE they get to $200 but, if they go to $50, I could DD and have twice as many shares as the guy who paid $160 and then I can PATIENTLY sell some calls while I wait for them to turn around again.  

    Big Chart – "THEY" are working really hard this morning to keep things together, our levels are still in play (see post above).  

    Uber/StJ, Jet – WTF?  That's mind-boggling.   Still, the reason people value them at $60Bn is because of the $7Bn in sales which, in theory, can be serviced by driverless cars and let's say the average ride is $15 so $7Bn represents 400M rides and figure a driverless car can pick up 20 people a day so they need 20M cars for $40,000 each = $800Bn on lease would be $80Bn a year in lease expenses alone.  Yep, Uber investors are morons!  

    I know Amex give me a $15 or $20 credit to use Uber every month.  Not sure if it's only Centurion Cards but I would think all Platinum people get it and that's probably $1Bn in free rides on that promotion alone.  This is a company, kind of like TSLA, that doesn't have a proper business model but are able to dazzle investors with growth at any cost.  Yet another reason I'm still cautious on the markets as capital is being misallocated to crap like this, which will one day implode.  

    Wow, I'm flashing back to something similar I wrote about Yahoo in 1998 – boy was I wrong - for a year!  

    CAFE Rollback/StJ – What sick bastards.  It runs up the price of oil and increases pollution by 30% – who does it help?  Yes we have some oil but the rest of the World (Russia, Saudis, Iran) have 50x more than we do so we're enriching them and giving ISIS et al more reasons to fight over it rather than sensibly weaning off fossil fuels altogether, which would diminish the power of OPEC, increase our national security, decrease carbon emissions and increase the production efficiency of our economy.

    64 Tons/StJ – We could build a lot of space stations that way, even a moon base.  

    ROFL Rexx!  

    ABX/Jabob – Did you see my comparison with GG in yesterday's comments.  This is just an out of favor company that can't seem to please investors at the moment.  

    SPWR/Dave – I think if the tariff gets waived, they shoot back up and, if not, they simply restructure to sell into the new environment.  There's going to be a demand for the most efficient solar cells on the global market – even if Trump wants to stop it.

    Fit/StJ – With a good blender – sure!  cheeky

    Rubio/StJ – It's times like this when I pray that Rubio is right and there is a Hell and that he will forever be tortured for what he's doing on Earth.  It seems like the only justice these bastards are likely to face…

    Trump will address the Nation at 11am and tell us there was no way to prevent this tragedy other than building a wall to keep out Mexicans. 

  18. Phil;  I have been a member for many years and realized you do not pay close attention to "margin".  It's more about trade ideas and teaching how to trade.   I trade with TD and become very familiar with margin after last week's volatility explosion.  I have generally left 30-40% of my net liquidity value as available buying power.  That was not nearly enough last week and I needed to liquidate positions.  Probably a cleaning that was overdue.  My point of writing today is I just looked at the Money Talk portfolio and had to say something.  First I don't think a brokerage firm would allow you to make those trades even with Portfolio Margin as that is a tremendous amount of risk in all those short puts.  I would really appreciate any thoughts on hedging the volatility risk since my underlying stocks performed better than the overall market during the "correction".  Thanks 

  19. Margins/Options – Well rule #1 is always having about half the portfolio in cash.  These trade make a fortune so there's no need to be fully invested.  Margins vary tremendously and you always need to be aware of how much margin each position is losing.  In the event of a pullback that stretches your margin – you should know exactly which puts to buy back that will give you the most bang for your buck.

    The other thing is having hedges.  Hedges win while your margin goes up and that gives you more margin and decreases your urgency to sell – it's kind of the whole point.  With a PM account, they take into account the future protection of the hedges as well, which drastically lowers your margin requirements.  

    As margin varies from person to person and broker to broker, I can only go by what my ordinary margin account on TOS tells me at the time of the trade to see if margins are in-line or not.  You say you had to liquidate things but, without knowing what they were or what context it's in – I can't comment on what might have helped you in that situation.  

    Meanwhile, speaking of high-margin portfolios, the Short-Term Portfolio (STP) has $100,000 but it's paired with the $500,000 LTP so we have $1.2M of margin (non PM) available to play with and we tend to use more of it in the STP than the LTP:

    • TSLA – Those look fairly safe and we should collect the last $731 without worries.  

    All the puts are just offsets to raise cash against the hedges and I think they are all fine – even SKT and of course, NLY, which we'd love to own for net $10.18, which is our worst case.  

    • SQQQ – Let's buy back 1/2 (40) of the short Jan $30 calls to increase our protection and we can roll 40 of the Jan $20 calls ($3.70) to the Sept $15 calls ($4.50) for net 0.80 ($3,200).  If we get a good pop, we'll sell something to cover but, for now, this locks in the gains we've recovered. 

    Note how a small adjustment to this hedge shifts our LTP/STP significantly more bearish and, with a quick cover – we can go back to being bullish.   That's the way you want to be able to control your portfolio as conditions change.  

    • DIA – NOW that we're ahead we will buy back the short Feb $257 puts and we'll also buy back 20 of the short June $230 puts ($4.50) and roll the June $250 puts ($10.25) to the June $255 puts ($12.50) for $2.25 which puts us $5 more in the money for $2.25 and now only half-covered.  
    • SVXY – Fortunately, we cashed out the long puts and it's fun having $400,000 in the portfolio but it's time to close out the rest and never speak of this debacle again!  I don't want to try to win it back – it was a hedge, it didn't work, so let's just move on and learn not to mess around with the VIX.  

  20. Wow, no wonder the prices were changing so fast, the market was tanking while I was writing that review!  

    Nice for my /NQ puts, up a quick $1,000 each!  Tight stops of course as that was a nice short, sharp shock!  

  21. Those stop-outs applied to ALL the indexes, of course – I just happened to choose the /NQs earlier. 

  22. AAPL/Phil- I bought the Apple 2020 150 calls and Apple has shot up >10% since the market correction. I was wondering if it's time to cover the calls as I am just long calls at the moment or you recommend covering it when it's trading close to 180?

  23. StJ – the gun thing is hitting a tipping point where the data is so obvious over the emotional element that we'll probably start doing something about it.

  24. Being saying that for a while BDC – what we need is to raise millions to pay the politicians more than what they get from the NRA!

  25. AAPL/Dave – Sure I'd cover (but I'm not greedy).  When in doubt, cover half!  

    • Jan. Producer Price Index: +0.4% M/M in-line with consensus, -0.1% previous. +2.7% Y/Y.
    • Core PPI +0.4% M/M vs. +0.2% consensus, -0.1% prior.
    • Jan. Industrial Production: -0.1% vs. +0.2% consensus, +0.4% prior (revised).
    • Capacity utilization: 77.5% vs. 78.0% consensus, 77.9% prior.
    • Feb. Empire State Survey-4.60 to 13.1 vs. +17.5 consensus, 17.7 prior.
    • New Orders 13.5 vs. 11.9.
    • Shipments 12.5 vs. 14.4.
    • Number of Employees 10.9 vs. 3.8.

    Mortgage rates climb to near four-year highs

    • The 30-year fixed-rate mortgage jumps to its highest level since April 2014, according to Freddie Mac's latest weekly survey.
    • Freddie reports the 30-year rate averaged 4.38% for the week ending Feb. 15, rising from 4.32% last week, and the 15-year rate averaged 3.84%, up from 3.77% a week ago; last year at this time, the 30-year and 15-year fixed rates averaged a respective 4.15% and 3.35%.

    Natural gas inventory draw was higher than expected

    • Chicago Bridge (NYSE:CBI) has been awarded a contract valued in excess of $95M by Samsung Engineering for a brownfield ethylene plant at PTT Global Chemical's petrochemicals complex in Map Ta Phut, Rayong, Thailand.
    • The scope of work includes the license and basic engineering of the ethylene plant and pyrolysis gasoline hydrogenation unit.

    Sears spills preliminary Q4 numbers

    • Sears Holdings (SHLD) releases preliminary numbers for Q4.
    • The company expects revenue of $4.4B during the quarter. EBITDA of -$10M to +$10M is anticipated and net income of $140M to $240M.
    • Sears reiterates that in order to remain a "viable competitor" in the face of a very challenging retail environment, it's working to transform to a less asset-intensive business model, with a store footprint and digital capabilities meeting consumer needs and preferences.

  26. AAPL/Phil- what should I cover with, 190 calls?

  27. This is how you get from 33,599 gun violence deaths to 6.* A new, untested mechanism is not necessary, the blueprint already exists.

    That's data. The rest is emotion, politics and money.

    *to be fair, Japan has ~125M people versus our ~300M, so that would be from 33,599 to 15. 

  28. CTL  -New positions established in the 4th quarter by :

    Prem Watsa, George Soros, John Paulson, and Jeremy Grantham.

    At current prices the stock yields more than 11 1/2 % from what appear to be a very sustainable dividend.


    QUIK – Stock down sharply.   No joy in Mudville.  Revenue ramp pushed out once again.  Still think it's coming, but wearing out my patience. 

  29. CTL / Albo – Tempting with the dividend but growth is projected to be negative and the payout is well over 100% so I am not so sure they can avoid cutting the dividend. Historically their div rate was around 7% or so I think. And the debt level is high – debt to equity is close to 2. I might be wrong though, just a quick look at the numbers.

  30. STJ – Thanks, but I disagree.

    From their press release yesterday :

    ~~- Anticipate 2018 Free Cash Flow after Dividends of $850 million to $1.05 billion.

    Management has stated on several occasions that they are committed to maintaining their current dividend.

    I really believe the street is underestimating the strength of LVLT and it's management team.

    We'll see.  I'm over weighted and comfortable.

  31. Options Opportunity Portfolio Review (OOP):  $97,587 is down $2,413 (2.4%) and down $6,825 from our Jan 16th review.   Don't blame the market, the S&P was only 2,800 on the 16th and now, despite the wild ride, it's at 2,700 so down 3.5% for the broad market.  What hit us was the increase in volatility, which has doubled and, since we tend to sell more premium than we buy in the OOP, the people we sold premium to are getting a bonus valuation – at the moment.  

    Fortunately, these are not day trades, or even month trades – so we can ride out small storms like this and we already added 21 long positions, 2 short puts and 2 hedges to start the year in our new portfolio.  

    • AAPL – I wish we could buy them for net $134.80! 
    • GPRO – Hopefully they've bottomed out here.
    • FAZ – This sucks as we were way in the money and now barely in.  If we can get out for 0.50 that's $2,000 and we gain $1,000 and we're done with it and last sales were $1.25/0.75 so let's kill this and concentrate our hedging on SQQQ and TZA.

    • ABX – Back to $13 on earnings and guidance that disappointed but I do like them going forward as a value play and we have the $20,000 spread for net $4,150 so it's still good for a new trade and we're down $1,275, not even 10% of what we're trying to gain so a little off track, but very recoverable.  
    • ALK – We just sold more puts and, if they go lower, I'd buy more calls too.
    • BBBY – In yesterday's Webinar I said we should add them to the OOP but they are already there.  Love this trade, still good as new since it's going to make $7,500 at $25 and now net $2,285 so it's a triple from here without the risk of Jan earnings.  
    • CBI – Real hidden gem.  Great for a new trade and I really can't understand why people don't like this stock more.  Look how many contracts they are winning!  So good for a new trade. 

    • CDE – Another gold miner getting more respect than ABX.  
    • CG – Just added them. 
    • CHK – This one is causing us pain and earnings are next week (22nd) so I'm not inclined to adjust until we have more facts.  I'm very long-term bullish on Natural Gas though, so I'm willing to stick with CHK through troubled times.  
    • F – This is mostly a dividend play, paying 0.60 per $10 share is 6% and we paid net $6.86 so more like 8.5% dividend while we wait to get called away at $11.87 with a $3 profit (another 50%ish).  So good for a new trade that I'm tempted to double down!  

    FNSR – We're almost all in the money yet the net of the trade is still the same as where we started.  Fantastic for a new trade.  

    • GE – This one is killing us with a $4,600 loss but I love them at $15.  I'm still good with the $20 target on our short puts but we can roll our 20 2020 $15 calls at $2.75 ($5,500) down to 30 of the 2020 $13 calls at $3.75 ($11,250) so we're buying $6,000 of intrinsic value for less than $6,000 – that's a good deal and, hopefully, when we get back to $17.50, we can get our $6,000 back by selling a cover (the $20 calls should be over $2 by then, now $1.20).  
    • HMNY – Brand new and going the wrong way so far.  Good for a new trade.  
    • HRB – They go down every fall (no revenues) and then, in the spring, people remember they exist again as they rush to do their taxes and the stock goes back up.  Works every year!  Already at our target but the spread has barely moved so, good for a new trade. 

    • IMAX – We just added to this one when they hit $20, thank goodness!  This is another one that goes up and down but with film cycles you can see coming from a mile away.  Black Panther this weekend will boost IMAX back to $24.

    • JO – I love coffee as a long-term trade as Global Warming screws up the crops (and coffee is very sensitive).  Already on a good track. 
    • NAK – Another gold miner.  I guess we're expecting inflation.  This one is also killing us but it's a speculative play that will take ages to resolve so – patience.  
    • SPWR – Unfortunately, they just gave some really crappy guidance due to Trump's tariffs on solar panels.  On the bright side, we're in with a net credit of $700 on the $21,000 spread and, even at $7, we would clear a $6,700 profit (957%) while, at our goal of $12, the profits would be ridiculous – so no need to change it.  

    • THC – This one flew up to our goal already but, despite being up $2,125 (405%) on the net $525 entry, it's a $12,000 spread so we have $9,350 more to gain so, oddly enough, good for a new trade – even if you did miss the first 405% of the profits!  
    • TZA – We took the money and ran on our long July calls but now we have to pay the piper and buy back the short April $15 calls (0.45) and 1/2 (25) of the short July $12 calls ($1.80) which then flips us more bearish as we're double-covered with the Jan 15/20 bull call spread.  Those Jan $15s ($2) can be rolled down to the Jan $10s ($3.45) for $1.45 so let's do that as well.  
    • WPM – Our Stock of the Year for 2017 and we were lucky to be able to get back in at a reasonable price.  Still good for a new trade.  

    So nothing we're really worried about and now we are super-hedged after those adjustments.   The longs will make a fortune if the market keeps going up – so we're not worried about losing on the hedges.  In fact, as I wrote this, the portfolio gained back $1,200 as the markets perked back up just a tiny bit!

  32. CTL / Albo – I stand corrected then! You have more recent numbers! Thanks.

  33. Was catching up from yesterday and found this…

    Phil – You are sighting very backward-looking statistics and extrapolating them going forward as if this economy is the same as the after-shock economy we had 10 years ago.

    That is incorrect and unlike our short fingered Vulgarian in Chief, I just don't make this shit up out of thin air as I go along. I made a legit claim about declining real wages based upon CURRENT statistics (Q42017 and Jan 2018), backed it up from multiple perspectives, and linked to the source data.  Just like this…

    Phil – UK Wages going up 3% in a year

    Something our knuckle brained fart lozenge or Theresa who May not care put out? Forget nominal, how about REAL "inflation" adjusted wages?

    The Office of Budgetary Responsibility (OBR), the government's economic watchdog, projects that when the full figures for 2017 are confirmed they will show that wages have fallen by 0.4% in real terms as inflation has soared to more than 3%. – BBC

    So much for those projections, in FACT its WORSE.. Growth rates for REAL average weekly earnings, both regular and total pay have been NEGATIVE for all of 2017, leading to a  -0.5 Yoy declineOffice For National Statistics

    So imagine how negative that number really is when real inflation, not the BS low ball advertised number is subtracted out? Sorry, but we just can't help being anything but this and Out.

  34. for all you volatility traders:

    VXX   10,000 Jan'19 $59 calls sold to open for $9

  35. That's over $22M in margin for these calls! For a chance to make $9M… If you have a ton of margin, it's not a bad play as they can roll easily higher and to the Jan 20 if needed. My guess is that these guys are betting that the VIX returns to around 10 and close the position then when these calls will be worth half of that. The calls I sold for $12 are now $4. If I had $10M in margin I would have sold 100 of them!

  36. Anyone know if anything is going on with FTR?  Up from $6.75 to $9 in the last 5 days.  not that I'm complaining, just wondering if this is good time to sell covered calls…..or is there possible news coming out that it would be better to wait for….

  37. AAPL/Dave – You have the $150s, right?  So those are $38 and you can sell the 2020 $200s for $15 and then you are in for net $23 and let's say you have 10 for $23,000.  Then you can sell 3 2020 $145 puts for $11 ($3,300) and 3 April $185 calls for $3.50 ($1,050) and, if you sell 3 calls like that every 2 months for 22 months, you'll knock another $11,000 off the spread.  That's how I'd play it.   If you can't sell short calls, then I'd just sell the $190s for, hopefully $20.

    Guns/BDC – There are lots of very obvious, proven ways we can save the lives of thousands of kids (and tens of thousands of adults) each year but Congress would rather let them die and cash their checks.  These are very sick people – I can't even imagine how they can live with themselves.

    Wages/Naybob – I'm just saying you are looking backwards and it's not relevant as we're moving forward now.  If your answer to that is "I was only looking at the last two quarters" – then we have to get into a whole lecture on statistical sampling as well.  

    Image result for extrapolation cartoon

    Also, inflation adjusted wages don't need to go up.  As long as the consumer is generally keeping up with inflation, even if it's 3% then MCD raises prices 3% and earnings go from $100 to $103 to $106 to $109, etc and you pay more for the stock to keep up with inflation against your declining dollars.  

    Image result for it's all connected

    FTR/Ult – Hah, I missed them in the review.  About time they woke up.  Earnings are on the 27th and, oddly enough, they just went ex-dividend but maybe people realized it's not a mistake (0.60/qtr) and they're not cutting it so, even at $9, this is a company paying a 26% dividend.  

  38. That's TEVA and FTR Jabob – getting very close to some major ass-kissing!  cheeky

  39. FTR – Phil, it looks to me that the latest FTR dividend was back in December and went ex 10/31.  Am I missing something  ?


  40. OOPs, I'm wrong.  Went ex in December ?

  41. The traders are looking bullish again:

    Keep in mind we have to hold our lines for a full day, through closing.  We did not do that today so now they have to do it tomorrow through closing.  

    Recent poll bound to piss Trump off:

    Johnson should be pissed too – below Trump?  

    What inflation?

    One idiot shoe bomber tries once to blow up a plane and now we are forced to take off our shoes in airports. 1606 mass shootings since Sandy Hook Elementary, 10's of thousands dead, and Republicans in Congress worked to make guns easier to get.

  42. Phil/Greg-


    Could you send out the OOP review in an email?  It's much easier to print/enlarge and read.  Thanks

  43. jeffl/OOP Image

    one trick I normally do. right click on the image in Phil's post and select copy image. Then open a new tab in your internet explorer and paste it in the url box and hit enter. It will load the image and that is a much clearer image. you can zoom it too. hope this helps.


  44. OOP/Jeff – You can just click on the image and have it open in a new tab like these:

    And what Pat said.  

    FTR/Albo – You're right, I read it wrong, the last Dividend was 12/14 and they have not announced a new one yet.  So I guess the move up now has more to do with FTR's chances of benefiting from the infrastructure bill.  

  45. AAPL/Phil- I have sold 2 130put, 2 140 put. I own 12 150 calls, I was thinking to sell half 2019 190 calls and the remaining 2020 200 calls. What you think?

  46. Butterfly Portfolio Update:  One position!  That's how I like my portfolios!  

    We're down 2.8% after a month but this is a very good example of one where we start out with a butterfly and we flip it into a bull-call spread with short puts (on the long end) because the stock turns into a bargain while we're playing it:

    • OIH – Now that we're down in the bottom of the range, we're going to sell our 15 long 2020 $23 puts for $3.25 and we'll sell another 10 to put us short 10 of the same puts.  We already have the long 2020 $36 calls but they are way too high so we're going to roll them ($1.10) down to the 2020 $20 calls at $6.50 and we'll sell the 2020 $30 calls ($2.20) but not yet – hopefully we can get $3+ for them.  Meanwhile, we will buy back the short March $30 calls (0.03) to clear the spot and wait and see on the short March $29 puts.  

    That's why, after a few years, the Butterfly Portfolio ends up being a mix of fairly bullish longs along with our normal spreads.  Since we generally like the stocks and feel good about the bottom of the channel (which is why we're playing them), when we catch the stock there it usually makes sense to take advantage.  

  47. LMT/Phil     I was trading LMT for awhile and cashed out my spread for a nice gain.  Held on to 10 short March calls (basis  $7.50) as I was selling calls on the way up.  Feeling that LMT had moved up too quickly, I did not close them.  Big mistake.  Roll them or take my punishment and close them?

  48. AAPL/Dave – So it's 4 short puts and 12 $150s and, as noted above, if you can sell short puts you can sell short longs so I would go for selling 10 2020 $200 calls ($15.50 = $15,500), leaving 2 longs open and 4 of the April $180 calls at $3.75 ($1,500) as that puts $17,000 in your pocket and you either roll the short calls up to longer months or they expire worthless and you sell another 4 for another $1,500 until you've collected $15,000 while you wait to collect $60,000 on the spread.  

    The nice thing about that structure is it's hard to get burned to the upside since you're only selling 2 uncovered calls and you've got a $60,000 gain backing you up if AAPL runs higher.  If AAPL goes down, you simply sell 4 more short calls for another $1,500 and put tight stops on the other 4 and, if AAPL stays down, you have $2.50 per contract towards rolling the $150 calls lower, which should easily get you to the $145s.

    LMT/Taihu – I like them because they might figure out fusion and take over the World and, so far, it's looking good for them.  They are growing profits at 20% a year going forward and, if they have a breakthrough, you are very screwed.  Not sure what 10 short calls you have but let's say it's the $340s, which are now $21, rather than pay them $21,000 with a $13,500 loss, I'd rather buy 10 of the 2020 $335 calls for $50 ($50,000) and roll the short calls to 10 of the 2020 $380s at $30 ($30,000) so you spend $40,000 less the $7,500 collected ($32,500) but at least you are in a $45,000 spread and have some upside.  If LMT goes 10% lower, you can then sell 2020 $320 puts, now $22 for maybe $37 (the price of the $360 puts now) and, though you've been burned, I would still sell 3 June $370s for $10.50 ($3,150) as it's a shame not to but put a stop on one at $15 and one at $20 and one at $25 and you'd lose $500 + $1,000 + $1,500 while your spread went 100% in the money.  

  49. Fortunately, there's nothing to adjust in the LTP and we're up 5% again so I'll do the review tomorrow.  

    Got nice, easy fills on our hedges with this rally so now we're back to seeing if we clear those bounce lines.  /ES was rejected at 2,728 on the button. 

  50. Aapl/Phil- I just realised I actually sold 4 145 puts so I have 6 short puts in total. I just sold 10 200 calls which leaves 2 long open, I went on to sell 4 apr calls and I realised it did not use up my margins at all but should'nt the extra 2 short calls take up some margins?

  51. And a big stick at the close too!  Well that got us over 2,728 (by 3) and /YM right at 25,200, so all very exciting with /TF just under 1,540 and /NQ 6,808.  Wow!

    Margin/Dave – The short puts offset the short calls (because you can't lose both at once).  That's why we construct plays that way!  

  52. Wow, and another 30 points right away in the Futures.  When I see action like this I get very suspicious that someone is trying to sucker people in for the kill.  

    Still, we have to respect the technical breakout until it fails.  

    Not that I won't still short /TF under the 1,540 line but, you know, with respect…  cool

    This was a huge Dow booster in the afternoon:

    • Boeing (BA +3%) moves out to a ~3% gain, contributing about a third of the Dow's 200-plus point gain so far today, and is now 20% higher YTD after recouping its dropoff from the recent broader stock market selloff.
    • CEO Dennis Muilenburg told CNBC today that by the end of the decade Boeing will be building more than 900 airplanes per year after delivering a record 763 commercial aircraft last year.
    • "We see air traffic growing and passenger traffic growing at about 6%-7% a year, and that's feeding airplane growth throughout the world," Muilenburg said, adding that the world's aircraft fleets will double in size over the next 20 years and cause a need for 41K new airplanes.
    • Separately, Reuters reports Boeing has applied to stay in the race to supply Canada with 88 new fighter jets, despite angering Canada's government by launching its trade challenge against Bombardier.

    In other Dow news, who cares if they get hit for $2.3Bn?  

    • Caterpillar (CAT +1%) says the IRS completed its examination of its U.S. income tax returns for 2010-12 and raised proposed tax penalties to $2.3B, which the company says it will "vigorously" contest.
    • The IRS last year challenged CAT’s taxes for 2007-12 and federal law enforcement officials raided three of CAT’s buildings in Illinois in connection with an investigation about the company's offshore tax practices.
    • In its annual 10-K filing, CAT reiterates its position that it complied with U.S. tax laws and has continued to file its federal income tax returns on the same basis for years after 2012.

    And another huge booster:

    • Morgan Stanley says Apple (NASDAQ:AAPL) iPhone shipments grew 12% in China in CY17 Q4 (Q/Q) while Android shipments declined 17%.
    • In the four-week period ending January 14, the iPhone’s market share in the region dropped to 20.6% of active phones from 21.8% in the prior four weeks. 
    • The decline hit older models like the iPhone 6 likely due to domestic phone makers slashing prices to compete. But the iPhone X continued to accelerate in the period, representing over 3% of the iPhone active installed base.
    • Global Q4: Strategy Analytics has estimates for global smartphone revenue for Q4 and Apple captured 51% of wholesale revenues with an ASP of $800, which is 3x the industry average. 
    • Samsung’s ASP grew 21% to $254 (thanks to the pricier Galaxy S8 and Galaxy Note 8). 
    • Apple shares are up 3.1%.   

    Damn, we didn't get around to pulling the trigger on NLY and CIM:

    • Is it possible the bad news has been priced into the mREITs? The sector is lit up bright green today following Q4 reports from Annaly (NLY +2.4%), Armour (ARR +1.4%), Anworth (ANH+2%), and MFA Financial (MFA +4.1%). Also reporting and also higher (after big losses early) is CYS Investments (CYS +0.8%).
    • CYS is a particularly interesting case as it appears to hedge less than most, and thus may be the purest sector play on the yield curve. It's down a whopping 17% this year and trades at more than a 20% discount to Dec. 31 book value.
    • Other players today: AGNC Investment (AGNC +2%), Two Harbors (TWO +1.6%), Chimera (CIM +1.9%), Invesco (IVR +2.2%), Western Asset (WMC +1.3%), AG Mortgage (MITT +2.2%)
    • Previously: Annaly edges higher after Q4 beat (Feb. 14)
    • Credit Suisse weighs in on the huge hiring by Chipotle (CMG -0.6%) of ex-Taco Bell CEO Brian Niccol.
    • "We believe Niccol’s primary focus will be repairing CMG’s image, particularly with younger consumers, and attempting to restore historical sales volumes (currently ~$1.9mm sales/store vs. ~$2.5mm at 2015 peaks)," writes analyst Jason West.
    • "The turnaround effort is likely to involve brand rebuilding, innovation, operational improvements, digital upgrades, and potential day part expansion (e.g., breakfast)," he adds.
    • Due to the high valuation on Chipotle and challenges seen for management, CS keeps a Neutral rating on Chipotle, although the firm's price target of $275 reps 9.5% upside potential for shares.
    • Previously: Chipotle pops after nabbing Taco Bell CEO (Feb. 13)
    • Previously: High praise for Chipotle after CEO hiring (Feb. 14)
    • Bloomberg estimates that Tesla (TSLA +2.5%) has produced a total of 7,438 Model 3 vehicles and is currently producing the mass-market EV at a pace of 1,025 per week.
    • The estimates are based off of VIN tracking and information provided directly to Bloomberg by Tesla owners. The Bloomberg Model 3 tracker will constantly update based off of new information.
    • Tesla is targeting a Model 3 production run rate of 2.5K per week by the end of Q1 and 5K per week by the end of Q2
    • Japan's core machinery orders tumbled 11.9% in December reporting largest fall since May 2014, against the consensus of -2.3%, vs. +5.7% in November.
    • Core orders are expected to rise 0.6%, manufacturers expect their orders to fall 5.7%, while non-manufacturers expect their orders to rise 7.4% percent. in January-March.

  53. Phil

    GE 2020 long 13 calls

    Sold 2020 20 puts  

    No short call? correct


  54. Nasdaq is up 5.6% this week, WOW

  55. KODK  – Up 16% today along with other crypto related stocks.

    GBTC, OSTK, GCAP, etc.

  56. LMT/Phil   My March short calls (basis 7.5) are 330s.  How would that change your advice?

  57. Scandal-Ridden Scoundrel

  58. Trump’s Budget Will Destroy National Parks

  59. Good morning!

    Here's why I'm still bearish into the weekend:

    Date Open High Low Close* Adj Close** Volume
    Feb 15, 2018 271.57 273.04 268.77 273.03 273.03 103,991,400
    Feb 14, 2018 264.31 270.00 264.30 269.59 269.59 120,735,700
    Feb 13, 2018 263.97 266.62 263.31 266.00 266.00 81,223,600
    Feb 12, 2018 263.83 267.01 261.66 265.34 265.34 143,736,000
    Feb 09, 2018 260.80 263.61 252.92 261.50 261.50 283,565,300
    Feb 08, 2018 268.01 268.17 257.59 257.63 257.63 246,449,500
    Feb 07, 2018 268.50 272.36 267.58 267.67 267.67 167,376,100
    Feb 06, 2018 259.94 269.70 258.70 269.13 269.13 355,026,800
    Feb 05, 2018 273.45 275.85 263.31 263.93 263.93 294,681,800
    Feb 02, 2018 280.08 280.23 275.41 275.45 275.45 173,174,800
    Feb 01, 2018 281.07 283.06 280.68 281.58 281.58 90,102,500
    Jan 31, 2018 282.73 283.30 280.68 281.90 281.90 108,364,800

    The red days were they sell-off.  Even though we went a bit higher on a couple, there were still lows during those days below the previous day's close.  Anyway, not an exact science, of course but 1.5Bn in down volume days vs 448 in up volume days is not what I would call a stable recovery.

    /YM is 25,300, that's my favorite short and we have /ES 2,740, /NQ 6,845 and /TF 1,545 and my stop-outs are if we get over 2,750, 6,850 or 1,550 but, otherwise, I want to accumulate /YM shorts.  

    /RB almost $1.75!  

    Dollar 88.30 – even lower.

  60. The Ticking Time Bomb Of E-commerce Returns

  61. Senate rejects immigration bills; young immigrants in limbo