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Philstockworld April Top Trade Review

Image result for top trade ideasYes, this is Monday morning's Report.

I don't have much to say about the markets, they are back near the highs and we'll see if they hold tomorrow, not today, as it's Monday and Monday's don't matter.  What we do need to do is bargain-hunt in case it is a real rally and the best way to do that is to look back on past trade ideas and see if we can find some that haven't gone up yet.  

We did our last Top Trade Review in Marchso it's a good time to do one of those and, as our Members well know, the vast majority of those trades turn positive so, when they're not, it's usually just a matter of time.  As of the March review, we had looked at Top Trades that were initiated through July and, out of 32 trade ideas in 30 weeks, we had 24 winners and 8 losers but 2 of the winners turned around by Sept and that left is with 26 wins and 6 losses for a very solid 81.25% winning percentatge.

Our Top Trades are what we think are our best trade ideas of the week with the highest chances of winning and we send out Alerts to our Members via Text and Email but we don't have a specific portfolio for them as they ofen ended up in one of our 5 various Member Portfolios already.  

There's a bit of randomness to the reviews in that we check in on trades after roughly 6 months so they are usually in progress and may be randomly up or down at the moment but that's why these reviews are so great for identifying bargains that simply haven't made a move yet.  These are the Top Trade Ideas for August and September:

Tuesday, Aug 1st: Teva (TEVA) – We felt TEVA has bottomed out in early Aug but we were wrong and it did go a lot lower before bouncing back.  Our trade idea was:

As a new play on TEVA, I would sell 5 2019 $30 puts for $4.20 ($2,100) and buy 10 of the 2019 $32.50 ($4.20)/$40 ($1.90) bull call spreads for $2.30 ($2,300) which would put you in the $7,500 spread for net $200 and worst case is you own 500 shares of TEVA for net $32.90 while best case is up $7,300 (3,650%) in 18 months.   Let's add that to the OOP.

As you can see, TEVA fell off a cliff and we made adjustments in the OOP but killed the trade when it bounced in Dec.  At the moment, the 2019 $30 puts are $12 ($6,000) and the $32.50/40 bull call spread is 0.10 ($100) so this trade is net -$5,900 plus the $200 it cost us to enter is a big $6,100 loss (3,050%).   If we were still in the trade, I'd roll the 5 2019 $30 puts at $12 ($6,000) to 10 of the 2020 $22.50 puts at $6.30 ($6,300) and leave it at that as that's the entire loss so then hope TEVA comes back over $22.50 in the next 18 months or so.

Thurs, Aug 24th: Retail ETF (XRT) - We had a bonus idea on the penny stock GreenCoinX (GRNBF) and you can read the logic from the original post.  It was trading at 0.0985 at the time and blasted up to $1.50 before pulling back for a 1,400% gain.

That was just a bonus play, the main trade idea was for the Retail ETF, XRT and our trade idea was:

  • Sell 10 XRT Jan $36 puts for $1 ($1,000)
  • Buy 10 XRT Jan $37 calls for $3.40 ($3,400) 
  • Sell 10 XRT Jan $42 calls for $0.850 ($850) 

?That's net $1,550 on the $5,000 spread that's $3,500 in the money to start.  Upside potential at $42 is $3,450 (222%) in 148 days – not too shabby.

As promised, XRT did finish over $42 in Jan so the short puts expired worthless, leaving us with a net $5,000 on the spread for the expected profit of $3,450 (222%) in less than 6 months

Wed, Aug 30th: Altria (MO) – Altria is the US part of Philip Morriss and the reason I liked them was, aside from the fact that nicotine is very addictive so they are legal drug dealers, that pot is becoming legal and that will open up a whole new revenue stream because, while people in California may hate smoking and even bans them outside – they mean cigarrettes, of course, not pot, which they smoke like fiends!  

All kidding aside, it's a great opportunity for MO so worth a toss when they are cheap (and they still are).  Our trade idea was:

  • Sell 10 MO 2019 $60 puts for $5.65 ($5,650) 
  • Buy 20 MO 2019 $57.50 calls for $8.70 ($17,400) 
  • Sell 20 MO 2019 $70 calls for $3.20 ($6,400) 

Here we have a net of just $5,350 on the $25,000 spread with $19,650 (367%) upside potential.  The difference is, in the LTP, we can easily deal with a move down in MO against our $60,000 commitment to buy the stock (which pays a 4% dividend) while in the OOP, we don't REALLY want to own it – so we make a smaller, more conservative commitment on the put side 

Though MO hasn't really gone anywhere yet, since we were BEING the House and selling premium, we're still doing well in our first 6 months.  The Jan $60 puts have fallen to $3.30 ($3,300) and the $57.50/$70 bull call spread is now $6.10 ($12,200) for net $8,900, which is up $3,550 (66%) but only on the way to our expected $19,650 gain so you can still get in for $8,900 on the $25,000 spread and you only missed the first $3,550 by not subscribing to Top Trade Alerts!  

Thurs, Aug 31st: Williams-Sanoma (WSM) – We caught the dead bottom on this one but they've since pulled back so maybe you didn't miss out too much if you didn't get in on the original play, which was:

We don't have WSM so let's get back in in the LTP:

  • Sell 10 WSM 2019 $42.50 puts for $5.30 ($5,300) 
  • Buy 15 WSM 2019 $40 calls for $9.20 ($13,800) 
  • Sell 15 WSM 2019 $52.50 calls for $4 ($6,000) 

That's net $2,500 on the $11,250 spread so we have $8,750 (350%) upside potential at $52.50 and our worst case is owning 1,000 shares at net $45, which is about where it is now and that's aggressive but I really like the value down here – especially as a lot of people in Houston need furniture and furniture inventories are usually tight, which means there should be a nice drawdown over the next 6 months. 

The Jan $42.50 puts have dropped to $3.20 ($3,200) and the $40/52.50 bull call spread is $8 in the money at net $6 ($6,000) for net $2,800 on the spread so only up $300 (12%) so far and great for a new trade.   Don't forget, even if they don't go higher, the -$3,200 for the short puts goes away and becomes profit, as does the -$2,000 from the short calls, so PATIENCE is the key to these plays.  

So here we have, in August, 3 winners and one loser which brings our total performance for 2017 up to 29 and 7 for an 80.55% win rate and it's a sad, sad day when 3 wins and one loss brings your winning percentage down, isn't it?  Financially, it was on OK month as our big loss set us back but we did have $7,300 in winners against our $6,100 loser so a net gain $1,100 for the month – even if you never did make the adjustments and get out of TEVA when we did.

The markets are up this morning for no particular reason and we have 10 Fed Speeches this week, so be ready for anything.  Not much data but a bit of earnings as we begin the first real week of earnings season:

 


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  1. Not much conviction in either direction although I keep on thinking that there is more room on the downside.


  2. That's why attacking the press is part of the toolbox:

    https://www.politico.com/story/2018/04/08/news-subscriptions-decline-donald-trump-voters-505605

    That gives new force to the widely voiced concerns of news-industry professionals and academicians about Trump’s ability to make bold assertions about crime rates, unemployment and other verifiable facts without any independent checks. Those concerns, which initially were raised during the campaign, were largely based on anecdotes and observations. POLITICO’s analysis suggests that Trump did, indeed, do worse overall in places where independent media could check his claims.


  3. Are markets cheap or expensive?

    https://www.marketwatch.com/story/stock-valuations-are-at-multiyear-highs-and-multiyear-lows-2018-04-13

    “If you just look at P/E, then you might be able to say that the market looks expensive. But if you look at PEG, the U.S. doesn’t look as extended as people perceive it to be,” said Philip Lawlor, managing director of global markets research at FTSE Russell, who emphasized that he was simply analyzing the data, and not making a market prediction.

    One thing boosting earnings growth, and the PEG along with it, is the recently passed tax-reform bill, which cut corporate tax rates, delivering an immediate boost to profitability. Compared with the growth rate of 17.3% that is currently expected, analysts were looking for growth of 11.4% at the end of December, back when the bill was passed, according to FactSet.

    Analyzing the market through a P/E or a PEG lens makes U.S. stocks look markedly differently, including in comparison with other countries. While the U.S. forward P/E is the highest of any region, it doesn’t rank that lofty on a PEG basis. By that metric, an index for Europe that excludes the UK is the most expensive major market, even though that region’s P/E is lower than the U.S. This occurs because the Europe ex-UK region has lower earnings growth than the U.S.

    My problem with the PEG (and it's not a bad indicator overall) is that it's based on growth predictions, not actual numbers. And predictions can sometimes (often?) be wrong. But you have to start somewhere I guess.


  4. Looks like sanctions have take a bite on the Russian economy:

    https://www.motherjones.com/kevin-drum/2018/04/raw-data-russian-gdp-1989-2016/

    No growth in more than 5 years on the GDP per capita. And that concern is confirmed by my discussion with colleagues there.


  5. Good Morning


  6. Hi Advill, yes I do have a lot, but they are not at the right price to enter. I did have an eye on D but not sure if they still will go lower. I did set up a put play on them for starters. Did you see it?

     I see you do like some relaxing good returns? Somehow the future trades on this board are too time consuming. Love to have your email address again, to get some more info to what is actually in the mind of the Catalans. Mine is yodiet@live .com.


  7. Just for all I will look at the D trade after opening again and see what gives. But as usual the market opens at /ES 20+ and where do we go from here 40+ or 20- no one knows. Crazy market.


  8. As you all know my trades in general are armchair and Tree plays. PG is still a good play. I did show you some iron condors TWTR and FB. They are trades for my I would call them if you bored sitting in your chair. They are more expensive as far as commission is but still giving you some pocket money.

    Phil has just another way to cover his boredom.


  9. Grasshopper- thank you for the mention of LINE


  10. Phil, good morning.  What do you think of a NFLX earnings play: shorting by selling an april 330 call and hedging with a 350/400 june or september spread.  TIA.


  11. Advill I advised on plays with MO and PM but at 59 and 98. Not sure even if some one followed. Now the horses are out of the stable, at 64 and 102!


  12. Anytime Scottmi.  

    Top Trade post – Phil, Nice post this morning.  From someone just learning… it is a good illustration of how "being the house" pays off, if one will be patient. 


  13. Good Morning.


  14. Here some plays FA iron condor May sell 170/175 call and 155/150 put for 2.73.

    ABBV iron condor May sell 92.5/95 call and 90/87.5 put for 1.96


  15. Armchair D sell May 65/65 C/P @ 3.15 and buy stock present at 6.19 monthly combined return 4.9%


  16. hbi under18


  17. Jabo is this a FU or a ???


  18. more of a WTF???

    LB too…

    but yes HBI and LB are definitely FU stocks.. ;-)


  19. Good morning! 

    Dollar way down is most of the rally so far:

    Nice weekend gains in /RB and /CL but bounced out now:

    Honey badger do not care:

    /KC giving us the usual Monday entry (bullish @ $116 on /KCK8 but only 3 days left!):

    Big Chart – Still waiting for those breakouts to stick.

    PEG/StJ – Also, coming out of a Recession – of course you have growth!  

    Boredom/Yodi – I prefer to call it discipline.  

    NFLX/Lunar – Though I really think they are overpriced, they do have a tendency to get people excited about earnings so I don't like betting against them. I agree with the targets and the logic – but I wouldn't do it.

    Thanks Grass.  Those reviews are very important.

    LB/Yodi – Such a deal down here:

    You can sell 5 2020 $30 puts for $5 and that is simply a free $2,500.  If you want to be more aggressive, the 2020 $30 ($9)/$40 ($5) bull call spread for $4 still leaves you with a $500 credit on 5 full spreads and pays $5,500 at $40 – not a rough target.  


  20. Jabo how about some productive play like WFC Jan 20 sell 45 put for 3.45.


  21. Phil LB I do not like the Bras they hang lower and lower as they get older!


  22. hilariuos


  23. Advill IP still a good armchair play I gave it away the other day!


  24. Other one IRM


  25. /KC taking a big dump.   Long /KCN8 avg 118.08 -- 3 contracts, already.  

    Phil – Great call on /CL and /RB

    Jabob – HBI is the trade of the year, eh?  Reading the archives, I don't think Phil has ever missed one of those trades.  It is just a mini FU, and only for this week.  


  26. grass-- it was supposed to be LB but then Phil took HBI after LB ran up (only to give away all those gains now)..


  27. yodi, could you please re-post your TWTR play/holdings.  thanks.


  28. Advill,

    Had a few questions about Barcelona when you have a moment. jag4006@gmail.com

    Thanks


  29. Lunar TWTR this was   iron condor Apr 20 sell 30/31 c and 28/27 p you might as well go for May 18 for .81 cents.


  30. LB/HBI – Jabob, I guess that I don't get it.  Is there a reason to worry much about where they are today?  I am almost hoping we get to DD on them.  Speaking of DD, I had to buy more /KC.     

    /KCN 5 @ $117.95, scaling back down to 3 @ $118.00  (63 trading days left) 

    Long /KCU 1 @ $119.65


  31. no reason to worry about where they are today…

    just hoping they do not become FTR or GNC like


  32. phil--what are your thoughts on biotech now??


  33. HBI/Grass – Became trade of the year in Nov, when LB had taken off already as we hit the announcement date.  We cashed out in Dec on LB and HBI and, when it came time to get back in, we went with LB again.  

    /KC/Grass – Could go lower but, hopefully, $116 holds.

    And yes, you are right about not worrying about daily moves – silly thing to do with long-term plays.

    Biotech/Jabob – I love LABU when it's low.  Next time we see $70, we should play it.

    The problem with Biotech is the last wave of mergers made things kind of expensive for now but there are still so many companies that can explode higher and, of course, the rising need for health care Worldwide doesn't hurt.

    The reason they don't allow people to choose to end their lives is because they would get out of running up some truly epic end-of-life health care bills!  

    Image result for end of life care costs

    That's $1.5M in the last 60 days of life for the average American – 60% of our total health care costs in 60 days…


  34. Phil/End of life-that's a for-profit system.  Capitalize on fear to make a buck despite the impossibility of delivering a solution.


  35. Won't be anything left to acquire at this point.  Valuations are already high.

     

    https://www.marketwatch.com/story/executives-expect-us-deal-making-pace-to-pick-up-steam-in-year-ahead-survey-2018-04-16


  36. Phil,

    Any /CL play into expiration?


  37. Los Angeles’s New Plan to House the Homeless


  38. BAC/C/Phil- big banks seem to report good earnings but down after report… Does that tell you anything?


  39. thanks Phil and Jabob -- just wanted to make sure I am understanding this stuff.  I know FTR has special meaning for both of you and I hope we see a date on the calendar for when Jabob meets Phil in Times Square.  =) 

    /KCN feeling some pain. 




  40. Phil

     Do you think it would be a good time to sell puts on QCOM?

    Thanks


  41. Did we pop for any particular reason? Other than its Monday? 


  42. EOL/Seer – Well the problem is we need to re-educate the public about death to get people to accept it as part of life, rather than fight it tooth and nail at the end.  The extreme measures we use to prolong life for a week or two – especially when the patient is in pain and wants to let go – are ridiculous.  My mom's friend has had cancer for years and it's spread to the point where she's out of treatment options and she's in tons of pain and has stopped eating for the last few weeks because it's the only way she can get off the wheel of health care they have her on – ridiculous!  

    Acquisitions/Seer – There won't be any companies left to trade if this keeps up.

    /CL/Japar – If they were still high but too tricky at $66.50 – have to wait and see which way they break into inventories.  I did like that SCO trade into next month.

    BAC/Dave – I expected all earnings to fail to live up to the hype except the banks but, if they can't even live up to the hype – then I'm very concerned about the rest.  Not today though, Dow up 300 (again).

    QCOM/QC – Well, I like them at $45 for sure and you can be aggressive (ish) and sell the 2020 $50 puts for $6.75, which nets you in for $38.25 and that's a very good entry point.  In fact, let's do 10 of those in the LTP!  

    Yet another downward revision to GDP Now so, of course, the markets rally:

    Dudley also said we could go slower on raising rates.


  43. Speaking of the LTP, back to being up 10% today.  That's + $50K and the STP is still holding onto 64% ($64K) so +$114K combined means this is pretty much our sweet spot into expirations.

    We will, of course, be reviewing portfolios over the next few days. 


  44. CVS- wow up almost 5% because Amazon said taking a break on the venture into distributing pharma products…


  45. Prison riot – I thought that only happened in sh*thole countries…. oh wait… :(


  46. "Lee Correctional Institution is one of South Carolina’s highest-security prisons, which means the inmates are generally tightly monitored and their movements inside the facility are limited."


  47. CVS/Dave – A break?  These markets are crazy!  NOTHING actually happened, AMZN threatened/planned to do something and now they are not so there's a rally?  Same thing with days Trump doesn't do anything extremely stupid – the market rallies.  

    • Amazon.com (AMZN +1%) has killed a plan to sell and distribute pharmaceuticals through its Amazon Business marketplace, according to CNBC.
    • That's in part because Amazon's had trouble convincing hospitals to change their traditional purchasing process, according to the report.
    • The retailing/tech giant will instead focus on selling less sensitive medical supplies to hospitals and smaller clinics, a business even Amazon has found more challenging than expected.
    • Handling pharmaceutical products would have mean heavy changes to its logistics network as well considering temperature sensitivity, sources told CNBC.
    • Pharma products needing a "cold chain" for transport were worth around $283 billion as of 2017, with heavy growth predicted ahead.
    • Updated 1:18 p.m.: On a spike up: Walgreens Boots Alliance (WBA +4.4%); CVS (CVS +4.8%); AmeriSourceBergen (ABC +1.3%); Cardinal Health (CAH +4.3%); McKesson (MCK +3.9%).
    • The market's up day notwithstanding, health insurance and managed care stocks are up as a group. UnitedHealth Group (UNH +2.7%) kicks off the healthcare earnings season tomorrow premarket. Consensus view is EPS of $2.91 (+191%) on revenues of $54.8B (+13%).
    • Johnson & Johnson (JNJ +1.2%) is first up in the biopharma space, also due to report tomorrow premarket. Consensus view is EPS of $2.00 (+9%) on revenues of $19.4B (+9%).
    • Q1 is the first reporting period based on the lower corporate tax rate.
    • Selected tickers: (HIIQ +2.8%)(WCG +2.1%)(GTS +1.9%)(MOH +2%)(HUM +1.2%)(CIVI+1.7%)(CI +1.8%)(ANTM +1.6%)(AET +1.3%)

    Riot/1020 – That was a bad one.

    Pimco's Clarida headed to Fed – WSJ

    • Richard Clarida has been with Pimco for 30 years, and a an economic professor at Columbia for the last four years. He's set to be nominated by the president for the vice chairman's post at the Fed, according to the WSJ.
    • Described more as pragmatist, rather than ideologue, Clarida also previously served as the Treasury Department's top economist during George Bush's (the younger) term.
    • Jay Powell is the first Fed chairman without an economics PhD to hold that post in several decades, so the White House was focused on bringing in more of a traditional monetary policy expert as the number two at the central bank.

    Big step for online poker

    • Caesars Entertainment (CZR +3.2%) and 888 Holdings (OTCPK:EIHDF) announce that they are moving forward with an online poker pact.
    • The initiative will see an online poker platform launched in New Jersey, Delaware and Nevada for Caesars' WSOP.com players and 888Poker players. Current online poker customers on both sites will just need a software update to play in the new platform.
    • The companies aim to launch the pooled player platform before May 1. States that could join the platform in the near future include Pennsylvania, New York, Michigan and Connecticut.

    Tesla defends itself on factory safety

    • Tesla (TSLA -2.5%) issues a new blog post to defend itself against what it calls a "disinformation campaign" against the safety of its automobile factory in Fremont.
    • Tesla on safety: "Our goal is to be the safest factory on Earth. Last year, despite going through extreme challenges building an entirely new Model 3 production system, we nonetheless reduced our injury rate by 25%. Through a lot of hard work, our injury rate – which we diligently track, record, and update – is half what it was in the final years GM and Toyota owned and ran the same Fremont factory before it closed and Tesla took it over."
    • The blog post also includes a point-by-point rebuttal of an article published by Reveal on Tesla's safety record.

    Cameco +6% on report that Russia considers banning uranium exports

    • Cameco (CCJ +5.9%) spikes higher after Russia is said to be preparing a ban of uranium exports, a move that would help the company as Russia represents 40% of U.S. imports.
    • A draft bill was submitted to Russia's Duma, the lower house of the country's parliament, that would ban all trade between state-owned nuclear power company Rosatom and U.S. nuclear power companies, according to TD Securities.
    • The bill could be considered and possibly adopted during the next Duma session next week, TD says.
    • Coffee companies are fighting back in California after a judge's ruling on requiring cancer warnings on labels in the state.
    • The companies maintain that trace amounts of the chemical acrylamide in their coffee products aren't dangerous or even enough to warrant a health warning. The legal wrangling over the issue is just heating up.
    • Most analysts don't think consumer behavoir with coffee will be changed even if the warnings are added.

  48. 6,700 on /NQ again is a good short (tight stops above!).   Lined up with 24,650 (which comes up a lot), 2,680 and 1,570.


  49. The QCOM trade above nets you in to QCOM at $43.25 not:

    QCOM/QC – Well, I like them at $45 for sure and you can be aggressive (ish) and sell the 2020 $50 puts for $6.75, which nets you in for $38.25 and that's a very good entry point.  In fact, let's do 10 of those in the LTP!  

    …and QCOM 2020 puts for $6.75 will require some patience – which is normal for freshly minted trade ideas from Phil (must be someone at GS who is charged with ensuring less value is on offer).


  50. Patience indeed… I am waiting for QCOM to break $50 which might happen in some volatile market day for additional put sales.


  51. QCOM/Winston – Monday's are not good for math, thanks.  Still a good trade as my intention was to be below $45 but I did the math off the $45 puts and we used the $50s.  

    Small dip but nothing exciting so far.  


  52. QCOM/Winston 

     

    i just filled on the 50 puts at 6.70


  53. Pleased to see IMA, AMC, HMNY all up. Are people finally realizing a lot of big movies have been rolling out, and doing well?


  54. IMA -> IMAX 


  55. How about that HMNY !


  56. qc – that's good and bad news – good you were able to get the fill at the recommended Phil price, bad that you were able to get the fill – that means the stock is weaker than expected!!! 


  57. IMAX/Scott – That Avengers movie will set records for them.  People are catching on to HMNY too.

    MoviePass owner Helios & Matheson's stock jumps again, after Verizon discloses large stake

    I only hope people weren't put off buying on the dips like we were supposed to by all the negative "FU"s that were being thrown around.  

    Submitted on 2018/02/16 at 11:06 am

    • HMNY – They just diluted the crap out of shareholders so, if we want to stay in, we should buy more.  Let's just shut this position down and change it to the following:  Buy 50 2020 $2.50 calls at $2.40 ($12,000), Sell 20 2020 $7.50 puts for $4.10 ($8,200).  That will be net $3,800 plus the $2,200 we lost on the first spread puts us in for $6,000 on 5,000 $2.50 calls so our break-even is $3.70 – as long as we're over $7.50, of course.  Counting the short puts, our break-even is below $5, where we'd be down $5,000 on the puts but up $6,500 on the calls – maybe.  

    Submitted on 2018/03/13 at 10:35 am

    HMNY/Jabob, Albo – It's basically a penny-stock start-up.  Up or down 10% is nothing.  The whole market cap is $128M but they have 3M subscribers at $10/month = $30M x 12 = $360M and certainly losing money but if they can show they are going to hit 6M subscribers then they are NFLX or AMZN and can really pop if people get enthusiastic about them.  

    Submitted on 2018/03/14 at 11:51 am

    HMNY - We got aggressive on these but it's likely to be a slow recovery.  This one is very speculative but look at that spike to $35 – that would be $162,500 on the $2.50 calls so, on the whole, I don't mind being down $3K while we wait. 

    Submitted on 2018/03/16 at 3:00 pm

    Speaking of interesting business models, HMNY getting crushed again! 

    HMNY – Could get a bit of a short squeeze here.

    Submitted on 2018/03/27 at 11:23 am

    HMNY/Albo – I think they've got the goods, this thing is going to be hard to stop.   Also, unlike FB, they are not collecting intrusive data and, for their market, they are collecting exactly the data that the movie companies want for that specific purpose – so less likely they get in trouble for it.

    Submitted on 2018/04/03 at 10:20 am

    HMNY/State – Down and down they go!   No news and a 10% drop today.  As they look pretty shakey, I'd consider diversifying by taking the now $3.70 $5 puts ($1,850) and rolling them to IMAX or CNK puts of equal value so your fate isn't entirely tied to HMNY on the trade.  Since the net of the trade was about $1,000 – that just leaves you with that to concentrate on and the 2020 $2.50s are now $1.15 and you paid net $1.85 so if you DD here, that's a $1.50 avg – not really worth it, is it?   If anything, I'd buy back the $7.50 calls for 0.50 (not more) to lock in the 0.65 there and THEN, if the $2.50s go below $1, I'd dd on those and sell 1/2 the $5s (now 0.75) to cover at least 1/2 the cost of the new set.  That would put you in 30 of the 2020 $2.50 puts, 1/2 covered with the $5 puts for about $1,500 more so $2,500 means your break-even would be $3.50ish.  

     

    HMNY/Rookie – You are in for $7.98/share?  

    First of all, if a stock drops 20% on you you either stop out or plan to DD on another 20% drop so you average 20% lower on 2x.  The next 20% down you either stop out or plan to DD 20% lower for 4x at an average of 30% off, etc.  Any time you are not willing to DD if the stock drops another 20%, you should be stopping out.

    If a stock is at $10 and you buy 1x more at $6 that's $8 avg when the stock is at $6 and then, if you DD at $4, you have 4x at $6 avg and again at $2 is 8x at $4 avg for $32 spent to own 8x when your original play was 1x at $10.  If 1x at $10 was a 1/4 allocation block, that means you have still only used 3.2/4 of an allocation block and you are down $12 of a $40 allocation (30%) even though the stock is now down 80% from where you started.  

    If your allocation blocks are no more than 10% of your portfolio, then you take a 3% loss at that point if you decide they can't come back from $2.

    So, with HMNY, you bought 1,000 shares for $7.98 and sold 2 puts and 10 calls for $2,390 so net $5,590 and you are obligated to buy 200 more shares at $7.50 ($1,500).  Oops, you didn't sell calls, you sold more puts, which is WRONG because you weren't being the house and selling premium.  And what is this complete BS selling Aug puts – who taught you to do that and NOT collect another 18 months of premium by selling the 2020s?

    So, with HMNY you paid net $5,590 but you promised to buy 200 more at $7.50 and 1,000 more at $5 and you didn't sell any calls so this trade is ugly instead of easy to fix.  Still, at this point you are in for $5,590 + 200 @ $7.50 ($1,500) and 1,000 at $5 ($5,000) so 2,200 at $12,090 or $5.49/share.

    Rather than convert though, I'd roll the 12 Aug puts ($3,800) to 10 of the 2020 $5 puts at $3.50 ($3,500) so now you are in 1,000 shares for $5,890 and now you can sell the stock ($2.80 = $2,800) and buy 50 of the 2020 $2.50 ($1.35)/$5 ($1) for 0.35 ($1,750) which leaves you in $12,500 worth of spreads for net $4,840 with the 10 short $5 puts so at $5 you still more than double your money and worst case is you are assigned 1,000 at net $9.84.  

    The difference between playing a dip correctly and re-committing vs sitting on the sidelines and shouting "FU" at it with no better plan is night and day.  Not every trade that goes down turns into a winner but, if you evaluate your trade and you can't find any reason to change your mind – THEN COMMIT! 

    Many of our biggest losers in the short run turn out to be our biggest winners in the long run because we are able to fully scale into the position at much lower prices than we first entered.  In the case of something like HMNY, we also got more aggressive and uncovered our longs – because we thought (well most of us) that the sell-off was ridiculous and overdone and we thought (most of us) that just because the PRICE of a stock went down – didn't mean the VALUE of the stock did.  

    And THAT is how you make money in the markets – by NOT being one of the mindless masses who think "THEY" must be right if a stock goes down.  

    Weaker/Winston – If I wait for a stock to turn up before picking it, then no one gets a fill and people complain about that.  My decision has been that it's better to be early than late as it benefits more people by allowing them to participate (even though they have to endure the FU's).


  58. SQQQ/Phil- I just bought some June Hedge…. I still holding my may short -50 20calls. I can buy them back for $0.6 or will you ride them down to 0?


  59. you are the expert on getting in very early…


  60. Yodi, thanks!


  61. No need to change Phil – just got filled at $6.70 (the first small nibble). BTW, we highlighted selling the Jan 19 $50 puts for $7 at last years PSW conference in Las Vegas. Those can still be had for $4.


  62. SQQQ/Dave – We're half-covered as it doesn't seem too likely they'll break $20 soon but you never know.  The real factor is how much of a hedge do you really need if the Nasdaq drops more than 7% (sending SQQQ up 21% past $20).

    Early/Jabob – Yes. Perhaps if you read the Strategy Section, which has 2 articles and one of them discusses extensively how we scale into trades, you'd understand why we don't mind getting in early.  Most likely though, you'll continue to not get it for what, another 5 years?  

    QCOM/Winston – Well I guess I think they are still worth the same as I did last year…


  63. SQQQ/Phil- I have the Sept half covered 80/40 call spread, I have just bought a 20 16/21 June call spread. So now I left with -50 May 20 calls which were sold for $2.14, I was thinking to put a queue to close it for $0.20.


  64. I know how to scale into trades.

    I know that you are great at adjusting trades that you are way too early in calling them great values.

    And I get that sometimes you fortunately get saved from sloppy analysis.. 


  65. considerations for BTFD watch list (not yet examined beyond initial chart and prior interest):  HOG, HD, LOW, KR, WMT, WELL, NLY, SO, D, HCP, SNA, PDCO, SMG, HL, TER, WHR, GE, ETE, GILD, LB, IRBT, OMI, MATX, OLED, CGNX, SBGI, … certainly an incomplete list…


  66. HMNY- guys is anyone noticing the IV on the options?, I went to grab some 2020 7.5 put @ $5.2. that means, my entry for my new puts are $2.4. I think that's not bad, grab 10 and you will make $5100 using $2400 margin. 
    I hope I am thinking right….


  67. OLED – no debt!


  68. daveH – if you like the IV on the HMNY 2020 options then you have to love the IV on the May 18 options – sell the May 18 $7.5 puts for $3.50, and if you are still standing in June then keep on selling those $7.5 puts until the cows come home!


  69. SQQQ/Dave – You have 20 covering 50?  That's not smart as it becomes a very heavy bullish bet and not a hedge at all.  Just be careful./

    Too early/Jabob – If you feel that way then simply wait for the trade to go lower before entering.  That's another thing I've been repeating for years as a good strategy to avoid early entries if you don't have the ability to make adjustments.  

    Watch list/Scott – Well I know I like HD, LOW, WMT, NLY, WHR, OLED, GILD and LB off that list.

    HMNY/Dave – Still a lot of people betting them to go BK.

    NFLX with a 6% pop ($327):

    Netflix nears a $150B market cap as its subscribers continue to balloon

    Netflix original shows lure more new subscribers than expected

    Still losing a fortune with no prospects of making money but look at the subscribers!  Well, I shouldn't talk as I like HMNY now but, of course, I like them because they are valued at $200M, not $133Bn – yet…


  70. And I will say that NFLX is winning me over by getting Star Trek from CBS (1-year delay) and Lost in Space and Black Mirror is great and Altered Carbon looks good, so that justifies my monthly fee and we watch the occasional movie too.  I'm not sure how I'd feel if I had to pay for the kids too but, as it stands, they allow 5 people per sub (and they make it so we each get our own, customized channels) – so it's a good deal at whatever price I'm paying.


  71. By the way, I downloaded Britannia on Amazon Prime for the plane and I thought that was a great show (saw first 3 so far).  Mozart in the Jungle is good and Red Oaks and Alpha House is great.  Prime is still a big threat to NFLX if they step it up as it's a lot of the same people but essentially free as it's not like I'd give up my Prime Membership to have just NFLX.


  72. Jabo, why don't you apply what you have learned  here at PSW to some of your own ideas, instead of following every one of Phils trades.  Why not try adding a few dividend champions to your portfolio.  


  73. Sqqq/Phil- well that’s not exactly because I still hold the 80 half covered 15/20 sept call spread. I added 20 fully covered June 16/20 call spread today. So was just wondering if I should set an order of $0.20 to buy back the 50 $20 short calls in may.


  74. Banks are awash in cash and looking to reward shareholders further.  However, they list employee retention as a key risk factor.  They claim that limits on pay are a problem, but they really aren't-they just got accustomed to not paying people when the market was depressed and don't want to adjust now that it's improving.  

    Compensation expenses increased at both Citi and J.P. Morgan, but that should be assumed. After all, net income climbed 13% at Citi and 35% at J.P. Morgan. Increases in pay would never meet those levels obviously, but they weren’t all that close. The total compensation pool at Citi increased 5% year-over-year to $5.53bn. At J.P. Morgan, the pool grew by 7% to $8.86bn. Comparatively speaking, it seems J.P. Morgan bankers may have a bit of a gripe.  Two snippets below:

    Citi seems to be fighting itself a bit when it comes to compensation. The bank’s efficiency ratio for the quarter was a full percentage point off its goal, according to Bloomberg. Paying its bankers less is the easiest manner in which to reach that goal.

    Meanwhile, the bank dropped a rather interesting note in its latest annual report, listing employee retention as an official risk factor. The lengthy paragraph focused almost entirely on pay, noting that “the banking industry generally is subject to more stringent regulation of executive and employee compensation than other industries. Citi often competes in the market for talent with entities that are not subject to such significant regulatory restrictions on the structure of incentive compensation.” Banks are truly stuck between a rock and a hard place when it comes to pay.

    http://money.cnn.com/2018/04/16/investing/bank-stocks-deregulation-dividends/index.html


  75. Phil/AMZN & NFLX

    Thanks for the recommends. I go on both sites and never know what to watch, besides those that I have already seen (House of Cards, Penny Dreadful, Ozark, etc…).  Any other recommendations from either one?   ….anyone?


  76. Netflix – which star trek? https://www.youtube.com/watch?v=pkJAbzZg8PY


  77. Phil – thoughts on /DX long as this level? 


  78. NFLX / Phil – I have to say that they have done a good job with the original shows and I guess that is where all the data is being used. There are some losers of course, but even Disney puts out a bad movie from time to time. I also have Prime and Hulu and they have some decent shows as well, but are they willing to put up as much money as Netflix does on original shows? They simply don't have the budget as far as I can tell. I guess Amazon could lose some more billions and no one would care but this doesn't strike me as their main focus.


  79. stockbern--that is why I am still here unlike the many others that have come and gone over the years.

    As you know, my FUs have never been to discourage anyone into taking on positions in any of the FU stocks (some on the board say that it is a buy indicator) ;-)

    I have thanked Phil numerous times for his hard work and what he tries to teach PSW members.

    I apologized when I saw that PSW members did not mind when Phil recommends trades with option prices that are not possible to fill at real time. (Phil and others said to piece into them).

    When I am seeing Phil dog me on the board I guess I need to just ignore it and not comment about the horrific timing and/or underestimation of how bad some of these FU stock picks have been for the last couple years.

     I have been adjusting a lot of these for awhile and it gets frustrating when the markets are flying and you have a bunch of names that continue to hit 52 week lows.

    Will they work out? I hope so. Or at least I hope most of them do for everyone here at PSW.


  80. Prime kicks Nflx on a number of levels but Nflx original content is still great.  Prime has some seriously up to date box sets that are fantastic … Alpha House.  Great show.






  81. Trade war or not, China risks a “Minsky moment”







  82. Good morning! 

    Another 200-point pump in the Futures so we've officially engineered a rally now.  

    SQQQ/Dave – OK, I think I get it now.  At first you said "I still holding my may short -50 20calls."  And those are 0.55 with SQQQ at $17.28 and you said: "I can buy them back for $0.6 or will you ride them down to 0?" to which I replied:

    SQQQ/Dave – We're half-covered as it doesn't seem too likely they'll break $20 soon but you never know.  The real factor is how much of a hedge do you really need if the Nasdaq drops more than 7% (sending SQQQ up 21% past $20).

    Then you added:

    SQQQ/Phil- I have the Sept half covered 80/40 call spread, I have just bought a 20 16/21 June call spread. So now I left with -50 May 20 calls which were sold for $2.14, I was thinking to put a queue to close it for $0.20.

    Then I said:

    SQQQ/Dave – You have 20 covering 50?  That's not smart as it becomes a very heavy bullish bet and not a hedge at all.  Just be careful./

    So I guess I missed the fact that you have 80 Sept $15 calls and 40 short Sept $20 calls.  The 20 June $16/20 spreads I did figure out and the 50 short May $20s I figured out too – so I should get partial credit.  Assuming there are no new revelations, doesn't it defeat the purpose of having 40 uncovered Sept $15 calls if you are going to spend 0.60 to buy back May $20 calls that are $2.72 out of the money?

    Related imageWhat other unnecessary things do you spend $3,000 on?  I know SQQQ might go over $20 and then you can only roll the short May $20 calls to the short Sept $28 calls, which are currently $120 (and as high as SQQQ goes in Sept) but, if you are willing to pay $3,000 to avoid the possibility of that happening – I will be happy to sell you $3,000 asteroid insurance between now and May or even lightning insurance and, for just $4,000 more, I'll even throw in Tsunami and tornado insurance (as long as you don't live in a trailer in the midwest, of course).  

    Banks/Seer – That's the normal ebb and flow.  The banks do well, don't pay key employees enough and they leave and take clients with them, causing the banks do do less well, causing them to be even tighter on pay, causing more to leave with more clients and then the bank is left with a less experienced staff who are pressured to take risks and they overextend and crash the market.  It's a 15-20 year cycle. 

    TV/DC – I don't watch too many shows (no time) so my list is far from extensive. 

    Star Trek/Rexx – Wow, I thought NFLX had it because they have it in Canada (where I was last week) and I didn't watch it there and was excited to watch it at home on my big screen and just last night I found out that US Netflix does not have the new Star Trek!  That is such BS.  I guess I could sign in through a VPN to watch it but — I don't know how to do that….

    /DX/Grass – Same as last week, I like it at 89 with tight stops below and I'll like it again at 88 if that fails. 

    NFLX/StJ – I think their strategy is to create shows for each type of viewer so of course there are "losers" because probably 80% of the shows are not aimed at you but I think they are correct in assuming that, as long as they have 4 or 5 shows you consider "worth it" – you'll subscribe.  Rather than try to broadly appeal to audiences like HBO does, NFLX breaks the audience up into a dozen parts and makes a few shows tailored to each segment.  For me, Lost in Space, Black Mirror and Altered Carbon are exactly what I want to watch and so would be their superhero shows if they didn't suck – but the concept is there.

    Well, I won't say they suck, Jessica Jones had one plot line I loved but then it got dull and Daredevil is up and down and Luke Cage looked cool but I haven't even had time to watch or the Defenders or Punisher.  Iron Fist did suck for sure, Sense 8 was disappointing but I do appreciate the fact that they are trying to find me a good show…