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2,700 Tuesday – S&P Back at a Milestone We’ve Shorted Before

Here we are again! 

Back in January, the S&P 500 staged an epic rally that took us over the 2,700 line to 2,850 before falling back to 2,700 in early February, when I wrote "10% Tuesday – Market Correction Hits Our Primary Goal"   and "Flailing Thursday – Trouble at 2,700" saying:  

Well, it's been a day and people are already freaking out because we haven't flown back to 2,850 and it's going to be a while before they realize 2,850 shouldn't have happened in the first place and it's more likely that this (2,700) is the top of the range, not the bottom – at least through Q2.  On our Big Chart, 2,640 is the 20% line on the S&P and, even being generous, THAT should be the middle of a range we move 5% up (2,772) and 5% down (2,508) in, so call it 2,500 to 2,800 with 2,650 the middle line.  That's where I think we'll settle once all the dust clears.

As you can see, from the S&P chart using our predicted lines and the Fibonacci series above and below them – everything is proceeding as I have forseen for the past 3 months and now we get to see if earnings season can keep us in the green end of our trading range or not.  Remember, I can only tell you what is going to happen and how to make money playing it (3 months in advance!) – the rest is up to you…

In fact, on Thursday, 2/8, I said in our Morning Report:

I also like /TF over 1,500 and /NQ over 6,600 and /NQ is lagging and likely to pop big if we get moving.  /YM 24,800 and /ES 2,675 will confirm and tight stops if 2 of the 3 fail to hold those lines!

As you can see, we're following the 5% Rule™ pretty much to the penny so it's not a good time to "think" when we can just watch and see what happens.  If the market is recovering, we should get back over that strong bounce line (2,728) and hold it into the weekend and, if the weak bounce line (2,684) fails to hold this morning – it's more likely we head back down than up.

We hit 2,728 on the nose and that long play of 53 points was good for gains of $2,650 per contract and flipping short at our mark and riding it down to 2,550 the next week was good for gains of $8,900 per contract so – you're welcome!  We never made our downside goal of 2,500 (2,535 was the low) but the year is young and we're expecting some earnings disappointments begininng next week – oh, and Trump is still President!  

Well, for now – the wagons are circled but they are getting picked off one by one.  Anyway, Trump turmoil aside, we're still in our predicted trading range and the closer we get to the top, the more we want to short and the closer we get to the bottom – the more we want to go long.  See – not complicated at all…

At the moment, we are shorting the S&P Futures (/ES) at the 2,700 line but we can't be sure we hit it so we short 1x at 2,697.50 and another 1x at 2,698.50 to average 2,698 on 2x short and then, at 2,699.5, we short 2x more and then we're averaging 2,698.75 on 4x short and we stop out at 2,700.25 with a 1.5 loss, which would be $75 per contract (4x!) and then we simply wait for a cross below 2,700 to short again with tight stops.  We'll see how that works out tomorrow.

What we have, so far, is a very low-volume rally that makes the majority of its gains in the even lower-volume Futures so our theory is that a big line like 2,700 on the S&P is likely to be rejected and, since we've run up for no reason from 2,660, that's 40 points and our 5% Rule™ says we can expect at least a 20% (of the run) retrace back to 2,692 and that's good for $400 per contract, so why not play it since we're only risking a $75 loss?   

A strong retrace would be another 8 points to 2,684 and, below that, it's a fail and we begin to look back down to 2,650 for support.  

We have 3 Fed speakers today (Quarles at 10, Harker at 11 and Super-Dove Evans at 1:40, so likely they'll try to keep us afloat as we digest the first week of solid earnings.  Industrial Production and Chain Store Sales were both good this morning so no major reason we should do more than retrace a bit off this run.  Other than that, it's a watch and wait kind of day.  

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  1. NFLX / Phil – You can use NordVPN to watch that Star Trek show. Installing it is really easy and it's cheap. And having a VPN installed on your PC is a good idea when you travel anyway, if you are going to connect using public WiFi. And you can also install that VPN on your phone or tablet and using it is really simple. Some VPN are blocked by Netflix but so far, so good with NordVPN.

  2. These guys are by no means perfect, but what I like about Google is that they actually spend money on stuff that might help the human race:

    In a talk given today at the American Association for Cancer Research's annual meeting, Google researchers described a prototype of an augmented reality microscope that could be used to help physicians diagnose patients. When pathologists are analyzing biological tissue to see if there are signs of cancer — and if so, how much and what kind — the process can be quite time-consuming. And it's a practice that Google thinks could benefit from deep learning tools. But in many places, adopting AI technology isn't feasible. The company, however, believes this microscope could allow groups with limited funds, such as small labs and clinics, or developing countries to benefit from these tools in a simple, easy-to-use manner. Google says the scope could "possibly help accelerate and democratize the adoption of deep learning tools for pathologists around the world."

  3. Option strategies vs. hedge funds:

    The results show that the combined option strategies of buying puts and selling calls against the index generated higher returns and have better return to risk characteristics. The numbers are economically significant and should be persuasive even to motivate any investor to take a closer look at the value of these strategies as a hedge fund alternative. 

    These are really simple strategies but still pay off better than traditional hedge funds.

  4. CHK

    ~~CHK -1.6% (downgraded to Sell from Neutral at Citigroup).

  5. Shorts are leaning on HMNY in pre-market.

  6. Good morning..

    Feds just arrest d the owners of the Northwest Territorial Mint on ponzi charges..

  7. The Netflix juggernaut:

    Hard to justify but then again, many things in the market don't make sense!

  8. Good Morning.

  9. nflx up over 20 bucks and the only $ they have is through financing. I'm going to have to sit on my hands not to short that sucker. As dangerous as tsla though= another one to skirt.

  10. I'm easing into the weed stocks and just a heads up on MPXEF. It has started a move up with heavy volume. Canada had a glitch with their roll out scheduled for July because of politics (what else) but it looks like the bottom had been reached. Imho.

  11. A few snippets on NOK :

    ‎April‎ ‎10‎, ‎2018‎ ‎3‎:‎43‎ ‎PM Updated on  ‎April‎ ‎11‎, ‎2018‎ ‎3‎:‎38‎ ‎AM 

    Google is in talks to acquire Nokia Oyj’s airplane broadband business as the Alphabet Inc. unit seeks to tap into new services and reach more users by offering in-flight high-speed internet, people familiar with the matter said.

    ~~Nokia (NOK) initiated with a Buy at Berenberg.:

    From Briefing~~ NOK Follow Up- Just wanted to highlight that NOK would be a beneficiary of the ZTE news.

    Not very exciting, but I've held it for some time and now have a near zero cost basis in the stock following Phil's formula.

  12. Pírate/NFLX

    Keep sit in your hands, market is buying the idea that content offer  is so powerful that suscription rates can be increased with no problems, and from my personal experience I agree, most  of the subscribers are fellows that has been paying 30- 70usd /month for mediocre content, so if they say me to pay 10 instead of 9 …I will do it.

  13. NFLX/StJ – I am surprised netflix does not automatically see that someone is logging in from Canada one day and the US the next.

  14. Good morning!

    Got one dip already on /ES to just over goal (2,692) and a quick stop out but now reloading as we test 2,700 again.

    Big Chart – They are trying desperately to force us back over the 50 dmas but it hasn't been sticking.  Still, it's all about 12,800 on the NYSE now so about 0.5% more than we have now.

    Nord/StJ – Thanks.  I won't pay CBS out of principle.  We can't have every single network asking for $10/month – that's ridiculous.  

    GOOGL/StJ – I agree, some monopolists do good things and thank God for them as they get things done!  

    Options/StJ – That's why we set up our hedge fund WITH the option strategies.  It amazes me that they don't all do this stuff.

    CHK/Albo – How can you downgrade them to sell when everyone's already sold?  devil

    Image result for double secret probation animated gif

    HMNY/Albo – If we hold $4, that's great.   Yes, bet against the $200M company that VZ just invested $20M in…. sure…  How could VZ possibly help them?  

    Related image

    Ponzi/Scott – A lot of those in those small commodity companies.

    NFLX/StJ – A bit irrational at $330 but lots of people raising targets today. 

    • Analysts are raving about the Q1 report turned in by Netflix (NASDAQ:NFLX) as they boost estimates for 2018.
    • "We believe Netflix has built the ideal model for global distribution of premium video in the internet era, and it is working to improve the efficiency of that model at a rapid pace that others cannot currently match," writes KeyBanc's Andy Hargreaves. The firm lifts its price target on Overweight-rated Netflix to $385.
    • Morgan Stanley points to the "rare combination" of an subscriber beat and margin guidance boost out of the streamer. MS also has an Overweight rating on NFLX to go along with a price targe of $370.
    • Pivotal Research hikes its price target on NFLX to a Street-high $420 on a glowing assessment of Netflix's momentum within the media/cable industry.
    • GBH Insights calls the subscriber tally out of Netflix "eye popping" as it maintains an Attractive rating and price target of $375. "We believe Netflix has built the ideal model for global distribution of premium video in the internet era, and it is working to improve the efficiency of that model at a rapid pace that others cannot currently match," writes analyst Daniel Ives.
    • Sources: Marketwatch, Bloomberg
    • Previously: Netflix smashes subscriber estimates (April 16)
    • Shares of Netflix are up 7.34% in premarket trading to $330.36. The 52-week high is $333.98.

    Weed/Pirate – I like MO as my weed stock.  

    NOK/Albo – Not good news for GOGO if true.  

    NFLX/Advill – True, I wouldn't flinch at $19.95/month.

    • Stocks get off to another strong start, supported by strong earnings reports from Netflix, Goldman Sachs and Johnson & Johnson; S&P +0.7%, Dow +0.8%, Nasdaq +1%.
    • European bourses are broadly higher, with U.K.'s FTSE +0.2%, France's CAC +0.6% and Germany's DAX +1%; in Asia, Japan's Nikkei finished +0.1% but China's Shanghai Composite closed -1.4%.
    • Netflix +6.1% after easily beating estimates for quarterly earnings and subscriber growth and issuing upbeat guidance, and Goldman Sachs +0.4% after reporting better than expected earnings and revenue, but J&J -1.6% despite beating earnings estimates.
    • Most sectors are higher, with consumer discretionary (+1.1%) and information technology (+0.9%) leading the charge.
    • "The Q1 earnings season has started solidly," says FBN Securities chief market strategist Jeremy Klein. "Corporate executives have not only easily beaten extremely aggressive top and bottom line estimates in aggregate but have also spoken effusively about their business prospects. Nothing matters more for the health of the rally than the ability of companies to churn out profits."
    • U.S. Treasury prices are slightly lower, pushing the benchmark 10-year yield up a basis point to 2.84%.
    • U.S. WTI crude futures -0.5% at $65.86/bbl.
    • ABB +1% premarket facing renewed shareholder demands to break up its sprawling business empire, beginning with ditching its struggling power grids division.
    • The company reports Q1 earnings on Thursday, with investors braced for another weak performance from power grids – its largest but least profitable division, which it decided to keep in 2016.
    • General Electric (NYSE:GE) says its Power Services unit has secured a contract worth more than $300M to service power generation equipment in 11 power plants in Brazil owned by Petrobras (NYSE:PBR).
    • GE will be responsible for carrying out inspections, repairs and other tasks relating to 20 heavy-duty gas turbines, 23 LM6000 aeroderivative gas turbines, three steam turbines and 13 generators.
    • GE says the contract covers ~80% of PBR's total installed fleet; the 11 power plants produce a combined 4.3 GW of electricity to meet the residential power consumption needs of 57M Brazilians.
    • GE Healthcare (NYSE:GE) is upping its bet on biotechnology with the launch of prefabricated manufacturing units for producing virus-based gene and cell therapies, novel anti-cancer treatments and vaccines.
    • Interest in such medicines, which use engineered viruses to carry healthy genetic material into the cells of sick people, has soared as the first wave of gene-fixing drugs reach the market.
    • GE expects to have a $1B-a-year gene and cell therapy business by 2025.
    • Previously: Crispr sees gene therapy milestone in Europe (Apr. 16 2018)

    • Steel stocks seem oversold and their valuations compelling but they lack positive near-term catalysts to drive share prices higher, Morgan Stanley analyst Piyush Sood says.
    • Sood raises his near-term steel price forecasts to reflect current market strength but expects prices to turn lower over the summer as import volumes start to increase due to Section 232 exemptions and exclusions.
    • Nucor (NYSE:NUE), U.S. Steel (NYSE:X) and Steel Dynamics (NASDAQ:STLD) seem to price in hot rolled coil prices at $625-$675/ton vs. spot prices of ~$880/ton, Sood says, adding that prices will struggle to fall through the $700/ton level given the strength of global commodity prices.
    • Meanwhile, Cowen's Novid Rassouli sees fundamental support for steel prices and expects steel shares to rise as prices remain elevated; Q1 steel sector earnings likely will come in broadly in line, with benefits from rising steel prices starting in Q2.
    • ETF: SLX
    • Source: Bloomberg First Word
    • March Industrial Production: +0.5% to 107.2 vs. +0.4% consensus, +1.0% prior (revised).
    • Capacity utilization: 78.0% vs. 78.0% consensus, 78.1% prior.
    • Redbook Chain Store Sales+3.0% Y/Y vs. +2.9% last week.
    • Month-to-date sales are up 3.0% Y/Y and 0.5% M/M through April 14. April sales are expected to be up 3.6% for the full month.
    • Analysts are quick to point out that China's relaxation of foreign ownership rules for automobile companies isn't so much of a concession linked to tough trade talk from the U.S. as it is an opportunity for China to significantly increase its status as an automobile manufacturing hub.
    • Over the long-term, the rule change is expected to boost some Chinese automakers and set up the nation to be the "world's factory" for electric vehicles and the EV supply chain. In an important reminder, Macquarie Capital Research points out that foreign auto makers may also find it difficult and costly to extricate themselves from their current joint ventures in China.
    • Also keep an eye on auto parts stocks today as the China reset mixes up the long-term picture.
    • U.K. unemployment benefit claims fell to 11,600 from 15,100 in the three months to February.
    • The unemployment rate fell steady to 4.2%, below the consensus forecast of 4.3%.
    • The number of people in employment in the UK rose 55,000 in the three months to March, in line with expectations.
    • Average earnings, excluding bonuses, rose by an annual 2.8% in the three months to February, compared with 2.6% in the prthree months to January and including bonuses, pay growth rose by an annual 2.8%
    • Germany's economic sentiment index fell to -8.2 compared to the consensus of -0.8%.
    • Current conditions fell to 87.9 from 90.7 in March, compared to consensus of 88.0.
    • China's economy grew at a 6.8%, beating estimates of 6.7% buoyed by strong consumer demand and robust property investment.
    • The economists still expect China to ease as Beijing forces local governments to scale back infrastructure projects to contain their debt, and as property sales cool further due to strict government controls on purchases to fight speculation.
    • Tomorrow is a significant day for the movie industry, with Black Panther due to open at an AMC Entertainment (NYSE:AMC) theater in Riyadh.
    • Black Panther will be the first Hollywood movie to screen in Saudi Arabia in 35 years.
    • AMC plans to open 40 theaters in the region over tha next five years.
    • Saudi Arabia hopes the opening of the movie industry to the U.S. will be a two-way street. The kingdom is sponsoring a pavilion at the Cannes Film Festival to showcase Saudi short films.
    • Q1 net earnings of $2.83B or $6.95 per share vs. $5.15 a year ago. Annualized Q1 ROE of 15.4%, the highest rate in more than five  years, notes the bank.
    • Investment Banking net revenue up 5% Y/Y to $1.79B. Financial advisory revenue down 22%, underwriting revenue up 27%.
    • Institutional Client Services net revenue up 31% Y/Y to $4.39B. FICC revenue up 23% to $2.07B, with bank noting improved market-making conditions and higher client activity. Equity revenue up 38% Y/Y to $2.31B.
    • Investing & Lending net revenue up 43% Y/Y to $2.09B.
    • Investment Management net revenue up 18% Y/Y to $1.77B.
    • Operating expenses up 21% Y/Y to $6.62B. Comp and benefits up 25% to $4.12B; ratio of comp and benefits to net revenue flat at 41%.
    • Dividend raised to $0.80 from $0.75. 3M shares bought back during quarter for $800M, or $264.32 each. Tangible book value per share on March 31 of $176.28.
    • Conference call at 9:30 ET
    • Previously: Goldman Sachs beats by $1.28, beats on revenue (April 17)
    • GS -0.55% premarket

    NFLX/Tangled – Hey, I was in Vancouver Sat and home on Sunday – it could happen!

  15. NFLX/Phil – Going to binge it all in one day?   I watched all of Star Trek during the free week CBS gives you to try it out.   I am a big fan of Star Trek, but this show is not worth the hassle to me.  

  16. Advill-Interesting your take. I've never paid a dime for Nflx and probably never will. My son has subscription and it is used heavily in TCI where he lives. I've enjoyed some of the content, but certainly very little .I agree the canned quality of cable is awful and what they charge for nonstop ads atrocious, but we watch so little we basically are PBS fans. Doing a lot more streaming of content.  After a check GS  also has no cash and is running on borrowed $.. I contend of Phil's valuation method and bubbles eventually pop. Digging into the financials of these high flyers is certainly enlightening. Also SMG is supposedly linked to cannabis growth.

  17. NFLX/Tangled – I can't do that.  I have Tivo and I'd say 4 is my absolute limit for watching the same show and that's rare but maybe Gotham or Game of Thrones if I want to catch up and make an evening of it.  Usually I watch 2 and switch to something else.  

    Well 2nd time not a charm on /ES so up $300 and down $75 so far.  With /YM over 24,800 – there's no bearish play but we'll look for failures there and 1,580 and 6,790 though, of course, /NQ 6,800 is the next level where we're likely to get at least a weak retrace (from 6,650 so 30 points back would be a nice $600).  Notice we did consolidate though at 6,760 so that may negate the need for a pullback.

    Meanwhile, what volatility?

    • Variety takes an in-depth look at MoviePass (NASDAQ:HMNY) in a new article that delves into the company's explosive growth, business model and chances for long-term success.
    • "It’s become the fastest-growing paid-entertainment subscription service in history, signing people at a greater clip than Netflix or Spotify. All that disruption in the movie theater business has created enemies and fueled skeptics, but whether MoviePass survives or dies, it has undeniably shaken up an industry that hasn’t changed much since the silent era," writes Brent Lang.
    • Lang points out that MoviePass losses could pile up this summer as the biggest blockbusters hit theaters and the service's high mix of subscribers located in high-ticket priced cities factors in.
    • Looking ahead, he notes that MoviePass ''like Amazon or Netflix, it wants to build market share, believing that establishing a passionate user base is more important than short-term profits. It’s willing to lose money, lots of it, to get that kind of leverage."

    Like AMZN, all they have to do is not lose so much money and it will be considered a huge victory.

    And so much for the pullback:

    I think, over $5, there will be a nice squeeze as the shorts panic out (54% short!).

    Hey Jabob:

    Image result for kiss my ass in times square


  18. One more thing – If I didn't have TiVo, I wouldn't watch TV.  There's about 20 mins of commercials in an hour show – what an insane waste of time!  Also, I never just watch TV, I'm always reading or playing games with the kids or chatting with friends so it's generally a background thing.  If it were just me and Jackie, we'd always have music on too but Tina and Maddie can't deal with music and TV at the same time – even though Jackie and I consider them totally different things that don't interfere with each other.  

    This would be my ideal set-up for consuming TV content:

    Related image

  19. NFLX / Phil – The current valuation is non-sensical, but as opposed to AMZN, it's possible to make a case for a payday soon. If they keep adding subscribers at the same rate they are now, revenues should more than double 5 years down the road. Not sure that subs growth is sustainable but it has not slowed much at all, quite the contrary and the original content does help. Mix in a rate increase and it's possible to imagine revenues of $20B or so in that 5 years period. They drop $8B on original content now and even if you have add 50% to that number, that would be $12B then. That leaves a lot of potential profits! And a lot for more original content to drive growth.

    Not saying that it will happen, but that's not an outlandish scenario at all!

  20. And I agree with TIVO/DVR – if I am watching a show with commercials, it's just background and I am doing something else. That's why I pay for Netflix and Hulu. Just 20 minutes of my time watching commercials is worth more than the $25 I pay….

  21. NFLX/StJ – I just wish they would spend as much money on scripts as they do on sets and actors.  They rely too much on their "formulas" for shows and don't spend money making sure the content is good.  It's like ads on the internet, they know they'll grab a good audience with a good headline, so why make the effort to work harder just to make them happy once they click?  We are used to consider a show a success if it gets good ratings and lasts a long time but all they care about is that the shows SOUND like something people want to watch so they subscribe and once they subscribe, X% tend to stick around as they wade through the archives looking for gold nuggets.  

    HBO, on the other hand, goes for quality.  

    Trying to stay ahead of the regulators:

    • Microsoft (MSFT +2.4%) and Facebook (FB +1.8%) are among 30 tech companies signing a pledge not to assist any government in offensive cyber attacks.
    • The Cybersecurity Tech Accord vows to protect customers from attacks regardless of the geopolitical or criminal motives of said attack.
    • The Accord also promises to establish new partnerships, both formal and informal, within the industry and among security researchers.
    • Other companies signing the pledge: Cisco (CSCO +2.6%), Juniper Networks (JNPR +1.1%), Oracle (ORCL +1.5%), Nokia (NOK +4.2%), SAP (SAP +1.5%), Dell (DVMT +0.9%), Symantec (SYMC +1.3%), and FireEye (FEYE -0.4%).
    • Microsoft President Brad Smith says, ““The devastating attacks from the past year demonstrate that cyber security is not just about what any single company can do but also about what we can all do together. This tech sector accord will help us take a principled path toward more effective steps to work together and defend customers around the world.”



  22. Phil what do you think about selling some $350 June calls in $20 plus range.

  23. For CMG

  24. The current market:

    There are 3 certainties in life: 1. Death 2. Taxes 3. China GDP growth at 6.8%

    We're at 2.38% – what does that say about people's confidence in our paper?

    • Sean Hannity this afternoon: Cohen has never been my lawyer.
    • Sean Hannity this evening: Everything I told Michael Cohen was subject to attorney-client privilege.

    Here's the guy who's meeting with Trump to commiserate this week:

  25. Abe / Phil – Looks like they hover in the same neighborhood! In Abe's defense, he was once popular! 

  26. Holy crap, the LTP gained 4% today!  I say cash it out and let's take the rest of the year off.  We'll do a series of seminars in various tax havens around the World and invite accountants and lawyers who specialize in helping people expatriate – just in case…

    CMG/Den – In the LTP, we did sell 3 April $300 calls for $14 and they are now $37.90 so we will be rolling them to June somethings but keep in mind that, when we sold the $300s, they seemed just as safe as the ones you are thinking of selling for the same price.  It's a stock that can burn you.  Fortunately, we are up a mile on the rest of the spread to make up for it.  

    From the LTP:

    Short Put 2020 17-JAN 270.00 PUT [CMG @ $337.84 $11.24] -5 1/2/2018 (640) $-17,600 $35.20 $-13.65 n/a     $21.55 - $6,825 38.8% $-10,775
    Long Call 2020 17-JAN 300.00 CALL [CMG @ $337.84 $11.24] 10 2/14/2018 (640) $57,500 $57.50 $26.65     $84.15 - $26,650 46.3% $84,150
    Short Call 2020 17-JAN 350.00 CALL [CMG @ $337.84 $11.24] -10 2/14/2018 (640) $-41,000 $41.00 $17.20     $58.20 - $-17,200 -42.0% $-58,200
    Short Call 2018 20-APR 300.00 CALL [CMG @ $337.84 $11.24] -3 2/16/2018 (3) $-4,200 $14.00 $23.90     $37.90 $7.95 $-7,170 -170.7% $-11,370

    We're well on track for our $50,000 return on the net $5,300 credit spread so the only question is how much we'll have to give back on the short calls.  At the moment, we're down $24 on the short calls and we only need to roll the loss ($7,200) along and, as our ace in the hole, we don't mind doubling up on the longs either.  

    This is one of those times a spread went our way right away and we would have rather if it traded lower first so we could have rolled the calls down and doubled down on the position (to the tune of FU CMG, of course) while we wait for the price to begin reflecting the value again.  Unfortunately, that didn't happen and CMG went straight up so we're only up about $9,000 so far.  

    I don't think they deserve $360 and $400 would be a stretch for the year and the Jan $360 calls are $30 so that's an even(ish) roll we could make but, as I said, I'd rather just roll the $7,200 loss to the June $340s at $18 so $4 of those is $7,400 and we're still pretty well-protected.

    Looking ahead, if we get burned again, that means our longs are way in the money and we could initiate 10 more spreads like the 2020 $370 ($54)/$420 ($33) bull call spreads at $21 and, since we have just 4 short June $340s – lets say they hit $30 because we're at $370 in June.  The delta on the 10 short $350s is 0.58 so figure $18 more for them is $75 ($75,000) and we could then roll them to 20 short Sept $370 calls for $30 (the price of the $340s now) and cash the 10 long $300s for $102 (price of the $270s) so $102,000 pays for 20 $370s but we'd just buy 10 more and pocket $50,000 leaving us with 20 2020 $370 calls, 10 short 2020 $420 calls and 5 short 2020 $270 puts covered with 20 short Sept $370s and call it 25 by the time we deal with the short June $340s.  

    So then we have a $100,000 spread that's at the money and about $50K in pocket – how's that for advanced planning?  

    Generally I rough that out in my head and also run the numbers for down 10% and, obviously, flat is a big winner and down a little is a winner and up a little is a big winner so, if none of those outcomes bother me – I simply say the position is "On Track" and ask you what you are worried about!  

    IRS website is down, agency says keep filing…  Likely to waive penalty for late filing for a day or two.

  27. Phil;  you mentioned earlier some buy list stocks you like today.  Wanted to get your current thought on a few old favorites that I still have in my portfolio.  Namely PG, GIS, TXN and VLO.  Thanks

  28. Short 10 day play on CAH sell the April 27th strangle 64/62.5 C/P for 1.82 and buy the stock at present 63.18. combined return 8.8 %. Even that this could lead to an assignment, the stock could be used for a longer armchair trade even that the div. is just under 3%. However the stock runs at the lower side of the scale.

  29. CMG/Phil    Hi Phil.  I have 5 Jan19  380/440 BCS at $30.  Have had them awhile, cashed out puts when the stock price was high.  Still believe in them. Where from here?  Thanks.

  30. HMNY – nice volume on the last couple days. If they squeeze up to 25 again, i'd bail. ;-)

  31. Wow, look at the engine that exploded on that Southwest flight:

    They landed in Phila after one of the windows broke and they lost cabin pressure! I would need a drink or two before I get into another flight. Although statistically speaking, one airplane mishap in your life is probably the max you can expect. 

  32. List/Options – Well I like all of them but not sure at what price.  PG is having margin issues and is not cheap at $78.25 since it's about 20 times their $4 earnings with little growth.  I know that seems "cheap" compared to other idiotic prices but I prefer to play assuming reality sets in before Global Warming kills us all.  TXN requires a lot of study as chip cos go in and out of fashion and VLO is not even a tiny bit cheap and I'd short them if I didn't like them so much – play OIH to catch up.

    GIS also nice and boring and well-priced at $45, those should go in the LTP in the very least selling puts.  Let's make this play official for the LTP:

    • Sell 10 GIS 2020 $45 puts for $5.15 ($5,150)
    • Buy 20 GIS 2020 $40 calls for $7.50 ($15,000)
    • Sell 20 GIS 2020 $52.50 calls for $2.20 ($4,400) 

    That's net $5,850 on the $25,000 spread that's $10,000 in the money to start.  Profit potential is $19,150 (327%) and, of course, once we're at $50 we can sell some calls like 5 short July $50s for $1+ and, if we collect just $500 every quarter, that's another $3,500 we can bank on the trade.  

    CAH/Yodi – Nice demogaphics for them. 

    Mascot/Jabob – I find that insulting and demand to be named Chairman because there's no one better than I am!  

    CMG/Taihu – Shame you didn't press them when they were down.  It's a bit of a high target and you missed the cheap rolls and double downs.  The Jan $380s are $23 so not too much loss if you do something about it.  The $440s are $9, total rip-off.  I'd cash the $380s for $11,500 and roll to 5 of the 2020 $320 ($71)/400 ($39) bull call spreads at $32 ($16,000) and that's a much more realistic target on a $40,000 spread and just let the short calls die on the vine and then, next year, sell quarterlies for more cash.

    HMNY/Scott – Yeah, I'm not that bullish.

    Sothwest/StJ – Oops, that's how we're going to Albuquerque next month (wedding).   I guess you could say it's encouraging they can take that kind of beating and still land safely…

  33. Sorry Phil but Trump is the chairman! ;-)

  34. did you mean 45 puts?

  35. Financials selling off.  On lows of the day.

    Usually not a good sign for the market.

  36. Especially after reporting good earnings.

  37. Jabo I think it is the 45 put still a good deal as the 40 p ist only 2.82

  38. Apparently netflix has some sort of method of dealing with VPNs, havent tried myself but a friend was telling me he was using a VPN to try to access netlflix American content and they were still able to somehow determine he was using a VPN and block it, not sure if anyone else has had the same experience?

  39. Netflix / crs – They do block most VPN already but so far NordVPN is still working. I guess until they figure it out.

  40. How Bad Is the Government’s Science?

  41. VLO – I am still in a VLO play, to get some of my losses back from our old butterfly position, and I'd like to see if you think I should adjust it.  I really didn't expect VLO to show so much strength (up almost 80% in the past 12 months)  My position is as follows:

    20 2020 80/90 Spreads – Currently about 7.00

    -10 2020 $75 puts – Currently $3.40

    -17 2020 $85 Calls, currently at $23.  

    I'm showing a $12k loss for the year, and I was down last year as well.  Interested in your thoughts on potential adjustments.  Thanks.

  42. Palo, don't know how you could have made a loss on VLO made a packet on these trades with stock  BCS and cherry calls, closed because stock was going too high for my likings.

  43. GIS / Phil 

    GIS also nice and boring and well-priced at $45, those should go in the LTP in the very least selling puts.  Let's make this play official for the LTP:

    Sell 10 GIS 2020 $40 puts for $5.15 ($5,150)

    Buy 20 GIS 2020 $40 calls for $7.50 ($15,000)

    Sell 20 GIS 2020 $52.50 calls for $2.20 ($4,400) 

    That's net $5,850 on the $25,000 spread that's $10,000 in the money to start.  Profit potential is $19,150 (327%) and, of course, once we're at $50 we can sell some calls like 5 short July $50s for $1+ and, if we collect just $500 every quarter, that's another $3,500 we can bank on the trade.  

    Ths GIS 2020 $40 puts is trading around $3, Perhaps you meant GIS 2020 $45 puts?


  44. bshing8

    Did you not see my comments on GIS above!!!!???

  45. Yodi – I was short, unfortunately.

  46. Yodi – thanks.  Just catching up on the chats. Did a quick search on GIS and missed your comments.  

  47. TWTR – gotta say, one thing I loathe about twtr is when someone posts something like the LUV engine picture, 'reporters' descend like locusts.

  48. but today, "Yay, TWTR!"

  49. Palo VLO it is hard to make comments on your positions as one does not know what were your entries.

    BCS is more or less OK, short puts as well but how you land up with 17 2020 85 callers against a set of 20 BCS is hard to understand. You underselling you 80/90 BCS by 7. Further you should not have more than 1/2 of any short calls against a BCS. If the calls were at least like my cherry calls in 2018 I would say you do have at least 7 to many. Looks to me that you might indeed have a nice loss on this situation. Possible VLO goes down to your BCS range again, but oil has recovered very nicely, so I do not see VLO going down to much from the present position. Possible Phil as usual can wave his magic wont.

  50. It appears that the shorts are still in control of HMNY.

  51. FU ALBO!!!!!

  52. ;-)

  53. It's not me Jabob, it's the bad guys !

  54. Thanks Phil.

  55. Phil would disagree!

  56. Wow, running up again into the close.  

    Looks like I won't have the LTP update done but will finish tonight.  The rest are easier.

    GIS/Jabob, Bshing - Yes, sorry, was the $45 puts for $5 in the LTP! 

    VLO/Palotay – How are the $75 puts still $3.40?  Anyway, can't fix it with 17 short 2020 calls, really need to rework more than that.  The 2020 $80s are $30 and the 2020 $90s are $22.50 and it look like the 2020 $85 calls are $25.50 – maybe you meant Jan?  

    Anyway, I'll assume Jan $85s and realistically, you are simply cashing out and taking the loss ($12K) and it's up to you whether you want to use VLO to get it back.  The problem is, your bet would really be a fairly bearish on on VLO and is that what you really want?  I don't see playing them more bullish but bearish is scary the way they've been going (and the way the market is going).  Do you REALLY want to own VLO if they do take a dip?  

    I would find two other trades that make $6,000, like GIS above but, if you REALLY want to be in VLO, I'd go like this:

    • Sell 10 VLO 2020 $90 puts for $7.50 ($7,500) 
    • Buy 15 VLO 2020 $90 calls for $22.50 ($33,750) 
    • Sell 10 VLO 2020 $105 calls for $14.25 ($14,250) 

    That's net $12,000 so you've effectively doubled down and your in a $22,500 spread so even if it works out but the point of the 10/15 spread is now you can risklessly sell 5 May $105 calls for $4.15 ($2,075) and, if you do that 6 times over 2 years, there's your $12,000 back and you still have the $22,500 spread.  If VLO goes higher, you can stop a couple up or even roll to 2x and, if it goes lower, you can sell more calls, put a stop on 1/2 the short calls and roll your 2020 longs to a lower strike.

    You have to make the adjustments though, you can't watch it like a deer in the headlights if it moves against you.

    HMNY/Albo – Wow, hard pushed back to $4.   Motley Fool did a hit job on them this afternoon.

    Is MoviePass Stock Rallying for All of the Wrong Reasons?

  57. I didn't see that, Phil.

  58. HMNY – sold the 2018 2.5 Puts for .75  – There should be some safety in that play.  $1.75 worst case.

  59. OLED – to open a position, might be able to get 1.25 for Apr $97 puts..

  60. Motley Fool, like Seeking Alpha, lets pretty much anyone contribute content and that means half the people contributing content (maybe 70%) are trolls working to push stocks up or down.  You have to take their stuff with a massive grain of salt! 

    Always check out the author and what they've written before:

    Rick Munarriz
    Fool Since:
    May 11 1997
    TMFEdible (9/22/2004)
    Where I Live:
    Coral Gables, FL

    This guy, at least, has a bit of a track record but notice how bot-like his click-bait titles are – very suspicious.  Even more bot-like is that he "wrote" 8 articles on Jan 10th between 3:53 and 3:58 then nothing for a month, then two months later.  

    I give this guy 4.5 grains of salt!  

    Image result for lot's wife salt cartoon

  61. OLED – June $95 puts @ 7.20 for just $2373 regular margin…

  62. VLO – Your premise was that the market was extrapolating a good quarter, and assuming they had dramatically increased their profitability, and therefore the run was unsustainable.  It was hovering in the mid 90’s which would have given me a 20k gain between March and the end of the year if it stayed there. So I held on. This push above $100 happened very quickly, and I didn’t want to react too fast, just in case it didn’t hold. Now it is getting ugly. Do you think this run is supported by the fundamentals?

  63. Palotay- don't know about VLO but seems to me not much of this market is fundamentally supported. 

  64. VLO earnings are on April 26. Might want to wait until then to start a new position. Based on forward earnings they are not wildly expensive, but it's all predictions!

  65. And then a sharp down-turn to end the day – so silly.  

    VLO/Palotay – Yes but the premise played out in Jan/Feb and we quit them, having been burned once.  Had we not, I would have doubled up and widened the longs to accommodate the forced 2x roll on the short calls.  Once the short calls overwhelm the backstop, you are then bearish on a trade you wanted to play bullish so how can you have conviction about anything at that point?

    Submitted on 2017/11/28 at 11:55 am

    VLO/Jet – We're tilted bearish in the Butterfly Portfolio with 15 short March $72.50 calls we sold for $7.  I'm expecting things to calm down after OPEC – even if they do extend cuts.  It's going to be tricky to play with next earnings at the end of Jan.  Gasoline is up almost 20% since Oct but so is oil so not likely to be a better crack spread and demand isn't exciting so I'm willing to stay short but, if that's not how you intended to play (aggressively short) then take the money and run – there will always be something more sensible we can trade.  

    Submitted on 2017/12/08 at 12:28 pm

    VLO/Learner – It's way ahead of itself but you'll have to wait for earnings for it to correct, most likely.  Last Q they made a fat $1.91 due to an unusually favorable crack spread and people are extrapolating like that's what they'll earn from now on.  Usually, more like $1-$1.25.  Up 2.25% today on no news at all – it's just a market frenzy but you can always add a few more calls to cover and put stops on your lower ones.

    Again, this is why the market will crash – you can't just randomly price companies up 50% and expect them all to perform for you.

    Submitted on 2017/12/27 at 11:20 am

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

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

    Submitted on 2018/01/12 at 3:25 pm

    VLO/Learner – Things just go up and up.  I would think oil has risen faster than gasoline and that's bad for VLOs margins.  Have to wait for earnings but, if earnings justify the move, the March $87.50s are $10 and the Jan $95s are $10 so not a terrible roll and you can offset with 2020 $75 puts at $5.65 to give you even more room to run before even doubling down on the longs.

  66. I couldn't resist shorting /ES at 2,707 (tight stops over).

  67. Oh no, a guy was killed on that plane as a piece of engine flew off, broke his window and killed him.  

    I was on a 777 on Sat (very nice) and what freaked me out on that one was the end of the wing is VERY flexible and flapped up and down like a bird in turbulence.  I was sitting there trying to remember everything I could about metal fatigue and was having a hard time reassuring myself that this was a good thing…

    Anyway, I never like sitting over the wing and now I have a better reason to avoid! 

  68. Dow down 100 now.  

  69. IBM ouch

  70. Phil, that GIS trade is very close to the one I suggested about a week ago. Good to know that I'm getting close to your thinking after all these years. "One trade I am looking at is GIS, who has been beat up for issuing more shares and buying a new product line, which they have done successfully before. Trade idea is buying the '20 42.5/52.5 BCS, and selling the 42.4 puts for a credit of .53. Worst case is a 6% discount on this dividend payer which has increased its dividend for the last 14 years in a row."

  71. if you this link works you can see the crew reacted well

  72. Wing / Phil – Well, if they didn't flex, they would break… And by the way, it's more than just metal now. Lost of composite in these plane. See how far they flex before they actually snap:

    Not likely to happen in a flight!

  73. And I also don't like sitting close to the engine if I don't have to! Not only the noise, but engine failure does happen as we saw today. Normally they have a ring that prevent shrapnel, but evidently that failed today.

  74. Great movie about metal fatigue in planes.  "No Highway in the Sky".  James Stewart. 1951

  75. Venezuela in Crisis

  76. America’s Most Reputable Companies 2018

  77. IBM full-year profit forecast misses estimates, shares fall

  78. Under military rule, Venezuela oil workers quit in a stampede

  79. Scott Pruitt Has Become Ridiculous

  80. Waze causing LA traffic headaches, city council member says

  81. Senators leave classified briefing on Trump’s Syria policy ‘very unnerved’

  82. Pompeo nomination hits turbulence ahead of Senate vote

  83. Good morning!

    Magic markets shake off poor earnings and blast higher.  We're back in that mode again, I guess.

    GIS/Deano – Yep, that was good and, if I wasn't in Canada, I might have grabbed it then as it was a good bottom call.

    Wings/StJ – I decided to have faith in the engineers but certainly not what I'm used to seeing.

    Wow, think Greencoin can make a penny this time?  Thanks to those who paid for April Memberships @ 0.0009 – I certainly hope you also kept some for yourselves!  

    Submitted on 2018/03/08 at 2:10 pm

    Good day for GreenCoin – 0.0026!   I was going to offer to accept them in April at 0.0005 but that ship seems to have sailed…  Maybe if we get another big pullback.

    Submitted on 2018/03/21 at 10:49 am

    BitCoin up 20% in last couple of days but GreenCoin is up 116% today!  I spoke to BDC and, due to favorable laws, we're going to look to reinitialize the foundation (that gives greencoins in exchange for carbon credits) in Wyoming and create a new, dynamic web site that tells the story, etc.  This is aimed for around July and we'll talk about it as it goes along.  

    PSW Investments has about 150M GreenCoins, currently at $0.001742 ($86,107) that we paid nothing for as we bought 4 BitCoins for $600 each, used 2 to buy the GreenCoins 2 years ago and then BitCoin split and we sold our two BitCoins for about $17,000 each and the 2 BitCoin Cash for another $4,000 each so we're well ahead of the game and we've debated sticking with GreenCoin or starting fresh but I think there's great value in working with a coin that's been around since early crypto days AND one that we are simply an investor in, not a founder – as it's less legally complicated that way.

    Anyway, in December, I was banging the table on GreenCoin at 0.00044 and we promised to accept GreenCoin as payment for annual Memberships in January at that price so people could get in with downside protection.  As it turned out, GreenCoin went up 300% so the Memberships were free and 200% profits left over – a good trade!  

    Unfortunately, at 0.00174, we have a sale in for 15M at 0.003 ($45,000) so I'm not telling people to chase it but we will put a floor in at 0.0009 and accept that exchange rate for Membership payments in April so, if BitCoin goes below that price – you have a good floor to buy in at.  

    I believe, with the proper promotion, we can possibly get GreenCoin on a major exchange and get the price up over a penny, which is more than 5x from here.  It's very, very speculative and the whole thing can collapse overnight but a penny would be $1.5M for PSW Investments on our $0 investment, so I like our odds!  

    This has been a very interesting experiment in getting people involved in crypto – we set a floor by accepting Membership payments at a certain price, which guarantees you can't lose money on the trade and then you guys can buy when it's low and save money while we wait until it's high and make more than we would have – it's an actual win/win.

    If only we could do that with stocks, we could let people pay us in HMNY or FTR….