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Monday Market Movement – Trump Tweets War Threats Against Iran

Oh Trump, you crazy bastard!  

"Trump Threatens Iran in Tweet, Warning of Dire ‘Consequences’" is the headline in the Wall Street Journal this morning.  Apparently (and we don't know for sure what's in this guy's head, which is attached to the arm that's got a finger on the button), Trump was "responding" to a speech by Rouhani over the weekend that was the usual rhetoric in which Iran's President said:

"Peace with Iran would be the mother of all peace and war with Iran would be the mother of all wars" 

I guess we now know which path our President is going to choose!  Of course oil prices flew back up to $69 a barrel from lows of $65 last week after Trump announced he may open up the Strategic Petroluem Reserve to keep prices low.  People who have foreknowledge of Trump's announcements could make Billions of Dollars betting on the price swings very much the way Vladimir Putin and his Russian cronies did when they manipulated oil prices.  I wonder where Trump would have gotten that idea?

Mr. Trump’s warning to Iran came hours after a speech by Secretary of State Mike Pompeo that was harshly critical of Iran’s leadership. Mr. Pompeo accused Iran’s leadership of widespread corruption at the expense of its citizens’ welfare.  “Governments around the world worry that confronting the Islamic Republic harms the cause of moderates, but these so-called moderates within the regime are still violent Islamic revolutionaries with an anti-America, anti-West agenda.”

Well, if they didn't have one before, they sure have one now, especially after Trump unilaterally withdrew from the Iran Nuclear Treaty of 2015 that was negotiated over many years by Obama and Trump is not only imposing sacntions against Iran for no apparent reason but is also trying to force our allies to go along with the sancitions.  These are all moves that have driven the price of oil from $45 to 75 (66.6%) since Trump has been in office – maybe that's a sign?  

It's certainly a sign for the average American who has to fill up his gas tank as every $10 rise in oil (22%) is a $200M/day tax on the American people so we're now talking $500M/day, $3.5Bn/week, $15Bn/month, $180Bn/year – more than the entirety of the Tax Break that trickled its way down to the lower class (cut-off is $126,000 year in family income just to make Middle Class – IF you live in a cheap part of the country – on the coasts it's more like $188,000).  

Of course, you can always "fake it 'till you make it" and that's what most of the consumers are doing as politicians tell them how GREAT things are and how they're going to get GREATER is we stay the course.  It's the Bottom 60% consumers that have fueled this growth cycle while the Top 40% has been cutting their bills down.  Filtering data on household finances and wages by income brackets, the Reuters analysis reveals growing financial stress among lower-income households even as their contribution to consumption and the broad economy grows.  

Image result for bottom 60% savingsThe data shows the rise in median expenditures has outpaced before-tax income for the lower 40 percent of earners in the five years to mid-2017 while the upper half has increased its financial cushion, deepening income disparities.  Over the past year signs of financial fragility for the bottom 60% have been multiplying, with credit card and auto loan delinquencies on the rise and savings plumbing their lowest since 2005.

Stephen Gallagher, economist at Societe Generale, says stretched finances of those in the middle dimmed the economy’s otherwise positive outlook.  “They are taking on debt that they can’t repay. A drop in savings and rise in delinquencies means you can’t support the (overall) spending,” he said. An oil or trade shock could lead to “a rather dramatic scaling back of consumption,” he added.

Economists say one symptom of financial strain was last year’s spike in serious delinquencies on U.S. credit card debt, which many poorer households use as a stop-gap measure. The $815-billion market is not big enough to rattle Wall Street, but could be an early sign of stress that might spread to other debt as the Fed continues its gradual policy tightening.  More borrowers have also been falling behind on auto loans, which helped bring leverage on non-mortgage household debt to a record high in the first quarter of this year.

As I noted when we reviewed the Beige Book in last Wednesday's Live Trading Webinar, these are not the kind of reports you expect to be reading while being asked to pay record-high multiples for stocks.  Everything should be AWESOME and, even then, you should be a little cautious – just in case things stop being awesome down the road but, other than for the Top 10%, things are not that awesome in America and, for the bottom 60% – they are downright terrible.  

So we don't expect $69 oil to last and shorting /CL with tights stops above is a good play, as is shorting Gasoline (/RB) at the $2.10 line – also with tight stops above.  

This week's Economic Calendar will give us a first look at Q2 GDP, which seems to me like it will miss 4% but we'll get a clue on that from the Chicago Fed this morning and Durable Goods on Wednesday, which better be up 3% or there's no way we make a 4% gain in GDP! 

TIME (ET) REPORT PERIOD ACTUAL MEDIAN
FORECAST
PREVIOUS
MONDAY, JULY 23
8:30 am Chicago Fed national activity index June 0.43 -- -0.45
10 am Existing home sales June   5.45 mln 5.43 mln
TUESDAY, JULY 24
9:45 am Markit manufacturing PMI flash July   -- 55.4
9:45 am Markit services PMI flash July   -- 56.5
WEDNESDAY, JULY 25
10 am New home sales June   670,000 689,000
THURSDAY, JULY 26
8:30 am Weekly jobless claims 7/21   215,000 207,000
8:30 am Durable goods orders June   2.9% -0.4%
8:30 am Core capital equipment orders June   -- 0.3%
8:30 am Advance trade in goods June   -$69.1 bln -$64.8bln
10 am Housing vacancies Q2      
FRIDAY, JULY 27
8:30 am Gross domestic product Q2   4.0% 2.0%
10 am Consumer sentiment July   97.0 97.1

Other than that, it's all about earnings as we move into the meat of the season with about 1/3 of the S&P 500 reporting this week, notably:

Stocks are heading into this earnings period with their highest price to sales ratios EVER so forgive us for sitting this one out with PLENTY of CASH!!! (over 80%) on the sidelines in our Member Portfolios:

And, while Corporate Earnings may be improving, the earnings for employees has actually turned negative again – that hardly seems awesome, does it?

We're 50/50 on our earnings plays so far so it's prudent to wait a bit and gather more data before getting back into the prediction game.

Be careful out there, 

- Phil

 


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  1. High oil prices are also a tax on the middle class… That $150 (average for a family) tax cut is melting away with tariffs and visit to the gas station!


  2. People don't even pay attention to Trump anymore:

    https://www.motherjones.com/kevin-drum/2018/07/donald-trump-threatens-to-annihilate-iran-but-no-one-really-cares/

    By Monday morning Sarah Sanders will have invented some absurd interpretation of what Trump meant and everyone will shrug and pretend to accept it. Trump himself, of course, will refuse to explain anything, claiming that he doesn’t want to give away his game plan. The State Department will issue some kind of tough-but-not-really statement that will explain nothing. And the rest of the Republican Party—aside from the usual lunatic fringe cheering this on—will slink away to their offices, desperately hoping that no one will ask them for comment.

    And then we’ll move on. This is how seriously people take the United States of America these days. This is what our country has come to.

    Sad!


  3. And while we pick fights with the rest of the world, China is planning world domination (economically):

    https://www.bbc.co.uk/news/world-asia-china-41206772

    Map showing extent of belt and road initiative

    Thank you Trump!


  4. ~~ABX
    Barrick Gold president Dushnisky jumps to AngloGold Ashanti as new CEO.

    •Barrick Gold (NYSE:ABX) says President Kelvin Dushnisky will leave the company at the end of August to become the new CEO of AngloGold Ashanti (NYSE:AU).


  5. FU Dushnisky!!!!!!!!!!


  6. Phil// what are your thoughts on SWKS?  It went up the evening of the after the earnings.  The very next day it started to fall like a rock.  So your thoughts are appreciated.  Thanks..


  7. Good morning!  

    I'll be in and out today – lots on the agenda.

    Indexes looking weak out of the gate but it's all about earnings this week.  GOOGL dominates but BA has to justify their cap on the Dow as it's up 20% on the year and V is up 23% – another one to watch with MA (up 36%) but V is in the Dow with a lot of weight at $139 as is MMM at almost $200 but that one is down 14% on the year already.  MCD also Dow weighty at $157 so lots of things that can send the Dow flying up or down this week.

    Big Chart – Technically, we look strong but still the NYSE can't simply take back 12,800.  Would make you think — IF we didn't have to have smashed our brains in with a brick already to trade this nonsense…  

    Good summary, StJ.  At least I'm encouraged by more GOP defections, weak though they may be.  

    ABX/Albo – Should get a pop when we get a new CEO.  Clearly Dushnisky was not inspiring any confidence.  

    SWKS/Rookie – They've had very little sales or profit growth for the last few years so either they are selling the wrong stuff or still retooling – I don't follow them closely enough to know which it is.

    Year End 29th Sep 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 1,569 1,792 2,292 3,258 3,289 3,651 3,844 3,857 4,134 +18.4%
    Operating Profit $m 255.6 345.1 565.2 1,023 1,119 1,254 1,325     +37.4%
    Net Profit $m 202 278.1 457.7 798.3 995.2 1,010 914.2 1,314 1,434 +38.0%
    EPS Reported $ 1.05 1.45 2.38 4.10 5.18 5.41 6.34     +38.7%
    EPS Normalised $ 1.18 1.47 2.41 4.11 5.20 5.41 6.34 7.14 7.83 +35.7%
    EPS Growth % -5.4 +25.2 +63.4 +70.6 +26.6 +4.1 +21.8 +31.8 +9.76  
    PE Ratio x           17.9 15.3 13.6 12.4  
    PEG x           0.56 0.48 1.39 1.21
    Profitability

    Projections are up for this year but last Q was just $1.64, so where is $7+ going to come from (that was their Q3/18 = $5.28 so far)?  I think the company has been positioning for 5G and IoT so maybe not their fault those rollouts are slow (they only make components, not the whole system).  In short, not terrible but not a screaming buy at $95 but $85 I might take a poke selling $75 puts for $10 (now $6).


  8. Phil/HMNY,

    Below 10!!

    regards


  9. Wow, HMNY testing 0.08.  Nothing to do now but grit our teeth and DD in the OOP and LTP.


  10. Winston – I joined in in HMNY puts.  Sold some 2020 .50 puts for .46.

    Most likely they go all the way to .50.  But averaging down at .04 isn't risking a lot.


  11. Phil// What is your recommendation for LB trade – don't have any position as of now and would like to initiate one.  Thanks.


  12. Easy fills on HMNY at 0.86.

    LB/Rookie – Another one that's way down at $31.60.   As a new position I'd sell the 2020 $30 puts for $5.45 and buy 2x the 2020 $25 ($8)/35 ($3.40) bull call spreads for $4.60 for net $2.65 per long so say 10 short and 20 long for $5,300 and then you could sell 5 (1/4) Sept $32.50s for $1.25 ($625) which is 60 days to expiration vs 543 for 2020 so maybe 9 sales like that for $4,500 down the road makes this a nice spread for income while you wait.


  13.  AVG0 -Possibly bottoming here. 

    Now trading up in that big gap from 10 days ago.


  14. Albo AVGO bottoning? I recommended 7/12 to sell the Jan 200 200 put and I sold the same for 26.80.


  15. Sorry obviously Jan 20 we not that old yet!!!


  16. Nice move, Yodi !

    I'm also short some puts and have a BCS position on.

    Hopefully, it is bottoming, but too soon to tell for sure.


  17. Albo – I'm in HMNY and FTR as Hubris management trades – I can't wait to see how this board will light up when both of those turn into winners. We will never hear the last of it!!!!!


  18. albo good for you, agree one never knows from which side the wind blows tomorrow.


  19. Winston – Those two will obviously humble you. 8-)


  20. hmny and FTR Winston turning into winners???

     

    https://www.memecenter.com/fun/170719/u-say-what


  21. Phil// I am not sure if I understand the math behind the LB trade.

    Sell 2020 1 time $30.00 puts for $5.45

    Sell 2020 2 times 25/35 bcs for  $4.60

    So the net for the trade is $7150 and not $5300.00 (20 longs at 8 is $16000 – ($3400 (for 10 shorts) + $5450 (for 10 puts))

    Let me know where I am going wrong in my calculation?  Thanks.


  22. Winston I think the heat up north is getting to you????


  23. 20 X 4.60 not 20 X 8


  24. SKX moving back nicely, don't forget we want to sell those original Jan $28s at some point.

    Speaking of stocks people thought were going BK that we doubled down on:

    • Cleveland-Cliffs (CLF +9.4%) surges to a fresh 52-week high, extending Friday's 13% post-earnings gains, as J.P. Morgan upgrades shares to Overweight from Neutral with a Street-high $15 price target.
    • JPM analyst Michael Gambardella cites CLF's strong U.S. iron ore earnings momentum and the removal of an overhang with the expected sale of Asia Pacific Iron Ore assets.
    • U.S. manufacturing and domestic steel market are experiencing robust activity, which is creating more demand for iron ore pellets and allowing CLF to increase its sales volume guidance and realized pricing expectation, Gambardella writes.
    • Also, Citi analyst Daniel Knauff sees room for CLF to move higher as the company delivers on deleveraging, begins capital returns and de-risks the HBI project the stock; Citi keeps a Buy rating and lifts its stock price target to $12 from $11.

    • Parsing comments from Jay Powell's congressional testimony last week, Cowen's Jaret Seiberg expects the newish Fed boss to "be an obstacle to the use and expansion of digital currencies."
    • Powell placed himself firmly in the conventional wisdom camp, noting cryptos lack investor protections and are ideal for nefarious uses like money laundering.
    • Source: Bloomberg
    • The Bitcoin (BTC-USD) bounce continues, up 4% today to $7.71K.
    • World financial leaders called for stepped-up dialogue at a G20 meeting on Saturday, but endedthe gathering with little consensus on how to resolve multiple disputes over U.S. tariff actions.
    • The communique noted while growth is strong, it's becoming less synchronized amid downside risks, including financial vulnerabilities, heightened trade and geopolitical tensions, as well as global imbalances.
    • Previously: Mnuchin: Don't 'minimize' chance of tariffs (Jul. 21 2018)

    • Boeing (BA -0.4%) projects demand for pilots will rise to 790K over the next 20 years.
    • The company says its increased outlook represents the most significant demand in its nine-year history of forecasting pilot demand. The projection is also double the current workforce.
    • "Despite strong global air traffic growth, the aviation industry continues to face a pilot labor supply challenge, raising concern about the existence of a global pilot shortage in the near-term," notes Boeing exec Keith Cooper.
    • Boeing says it's partnering with customers, governments and educational institutions to help ensure that the market is ready to meet this significant pilot demand.
    • Related stocks: AALLUVDALUALHAALKSAVEJBLUFDXUPS.
    • Source: Press Release
    • Tesla (NASDAQ:TSLA) CEO Elon Musk says only costs that apply to Q3 and beyond "will be counted" as part of its request to suppliers that they drop prices.
    • Separately, the company says the request to suppliers is part of its normal procurement negotiations. Automakers such as Toyota have also used similar tactics.
    • Shares of Tesla are down 4.33% premarket to $300.00.
    • Previously: Tesla requests supplier refunds to assist with profitability – WSJ (July 22)

    Investors send Tesla below $300 and back

    • There's continued buzz over the WSJ report on Tesla's (TSLA -3.8%) efforts to press suppliers for money.
    • "We find it a little disturbing that Tesla feels it needs to claw back funds from suppliers to meet its third quarter financial objectives," says CFRA analyst Efraim Levy.
    • A tweet from Elon Musk seemed to indicate that Tesla was negotiating mainly for future work, although the WSJ quoted the company as confirming price reduction requests were being made for projects dating back to 2016, some of which haven't been finished yet.
    • "Automakers often have brutal pricing demands on suppliers for future work, but retroactive rebates is not something we hear much about, and this is troubling for us to hear, chips in Morningstar's David Whiston on the development.
    • Tesla traded as low as $292.86 earlier in the session.
    • Freddie Mac sees market conditions improving slightly later this summer as more new home construction helps to alleviate some of the current supply shortage, according to its July forecast report.
    • Low housing supply combined with higher mortgage rates and home prices restrained housing market growth in H1
    • Total home sales--new and existing--are expected to rise 2.5% this year with home prices expected to increase 6.7%.
    • “Mortgage rates have stabilized in recent months, and in some high-cost markets, price appreciation is showing some signs of easing, says Freddie Chief Economist Sam Khater. "If new and existing housing supply can increase meaningfully, sales will follow.”
    • Total single-family first-lien mortgage originations are expected to slide about 7% percent this year to $1.69T, driven by decreased refinance activity due to higher borrowing costs.
    • Source: Press Release
    • Previously: Existing Home Sales misses estimates (July 23)
    • NXP Semiconductors (NASDAQ:NXPIdrops 2.1% as the Wednesday deal deadline looms for its acquisition by Qualcomm (NASDAQ:QCOM).
    • China is the last of nine markets that need to approve the deal, and the US-China trade tensions have put that approval in jeopardy. 
    • Antitrust regulators could still sign off, but that’s not likely after President Trump’s threat Friday to put tariffs on $500B in imports. 
    • If Qualcomm walks, NXP gets a $2B breakup fee. 
    • Qualcomm shares are down 0.2%.      
    • Previously: Qualcomm extends its NXP cash tender offer for final time (July 20)
    • Harmony Gold (HMY +0.9%) says it beat its FY 2018 production guidance by 4%, due largely to the recent addition of the Moab Khotsong operation.
    • HMY says it produced 1.23M oz. for the full year, beating company guidance of 1.18M oz., including a 14% increase in gold production of which Moab Khotsong produced 105.9K oz., contributing 10% of the increase in South African gold production for the four months that the operation was included in HMY’s asset portfolio.
    • HMY says it also enjoyed an 8% increase in underground recovered grade to 5.48 g/t, rising for the sixth consecutive year.
    • RV stocks are trading lower after CL King warns that an industry-wide projection for 7% RV shipments growth this year will be hard to achieve.
    • Analyst Scott Stember thinks the influential RV Industry Association could reset its 2018 shipment projection to 515K-520K from 540K at the important Open House event in September.
    • LCI Industries (NYSE:LCII) is down 3.23%, while Thor Industries (NYSE:THO) is off 2.49% and Winnebago (NYSE:WGOpeels off 1.68%.
    • The expectation for lower shipments is also impacting Camping World Holdings (CWH -2.6%).
    • Sources: CNBC, Bloomberg
    • Oil service stocks are dropping amid Halliburton’s (HAL -8.3%) Q2 earnings conference call, as the company comments on Permian bottlenecks, pricing and temporary softness in the Marcellus Shale.
    • HAL, which fell slightly in premarket trading after reporting in-line Q2 results, has plunged as much as 8% after the opening bell, the most intraday since August 2015; other sector losers include RES -6.9%PTEN -4.6%SPN -3.4%PKD -3.1%WFT -3%NBR -2%HP -1.5%NOV-1.3%.
    • Societe General's Edward Muztafago says HAL's Q2 is less about the earnings number and more about worries over transportation constraints in the Permian Basin.
    • Wells Fargo’s Jud Bailey says investor expected a strong Q2 beat, adding that HAL’s outlook for North American activity and margins in H2 2018 is critical; the firm sees the outlook "likely to soften given the recent weakness in pressure pumping supply/demand fundamentals." (Briefing.com)
    • The New York Daily News said it would cut half of its newsroom and point remaining employees toward breaking stories focused on crime, civil justice and public responsibility.
    • As rumored, Editor-in-Chief Jim Rich is out, as well as Managing Editor Kristen Lee. Robert York (most recently publisher and editor-in-chief of The Morning Call) will take over.
    • Tronc (TRNC -0.4%) had purchased the paper in September.

    Amazon -1.5% as President Trump tweets about Post Office, Washington Post

    • Amazon’s (NASDAQ:AMZN) on the move after some tweets from President Trump.
    • First tweet: “The Amazon Washington Post has gone crazy against me ever since they lost the Internet Tax Case in the U.S. Supreme Court two months ago. Next up is the U.S. Post Office which they use, at a fraction of real cost, as their “delivery boy” for a BIG percentage of their packages….” 
    • Trump slammed the Postal Service late last year for undercharging Amazon for deliveries, which he claimed cost the service money. The Postal Service’s FY17 results had revenue down $1.8B on the year due to declines in First-Class and Marketing Mail, partially offset by a growth in package volume.
    • Last month’s Supreme Court ruling pertaining to online sales taxes actually benefitted Amazon. The company already collected sales tax on the product it sells directly and the ruling didn’t specify how third-party sales should be taxed. 
    • Second tweet: “….In my opinion the Washington Post is nothing more than an expensive (the paper loses a fortune) lobbyist for Amazon. Is it used as protection against antitrust claims which many feel should be brought?” 
    • The Washington Post is owned by Jeff Bezos’ holding company Nash Holdings, not Amazon itself. 
    • Amazon shares are down 1.5% to $1,787.32.     
    • Previously: Trump slams Amazon while calling for higher Post Office pricing (Dec. 29, 2017)
    • Previously: Online retail rattled by Supreme Court ruling (June 21)
    • Argus becomes the latest to throw in the towel on General Electric (GE -0.7%), with a downgrade to Hold from Buy.
    • "We have been longtime GE supporters, but have been disappointed with the steady flow of bad news from the company, not to mention management's decision to cut the dividend late last year," the firm wrote in a research note. "We also think that the tactical steps management is taking to reignite growth are unlikely to boost earnings for at least several quarters."
    • Argus also recognized management's "bold steps" to restructure the business, including the spinoff of its Healthcare business and the planned exit of its Baker Hughes stake, but the company's near-term outlook for two of its core businesses – power and renewable energy – is "bleak."
    • Previously: GE -5% as free cash flow outlook casts doubt on full-year profit target (Jul. 20 2018)
    • Wolfe Research says it doesn't appear that individual tax savings have had a noticeable impact on consumer spending just yet.
    • "So far in 2018 core personal consumption expenditures (gross) are up 4.3% y/y, which is actually decelerated from 4.5% y/y in 2017, despite individual tax reform resulting in higher paychecks," notes analyst Jared Shojaian.
    • The slower pace of personal consumption expenditures this year coincides with higher gas prices and concerns over trade/tariffs.
    • Looking ahead, Wolfe sees "potential upside" for the travel and tourism-related sectors later this year from the tax reform savings.

  25. re MDLZ – plse clarify – is there anything to do now and for the next roughly 550 days – just sit tight and do  nothing ?


  26. Taking the money and running on /CL ($67.75) and /RB ($2.081) - good way to start the week!

    Honey badger down again:


  27. Phil / QCOM – do you think the stock will move up or down post Wednesday deadline….  It' looks like, barring last second heroics, they will walk away from it, pay 2B breakup and buy up more shares… 


  28. I think it is time for a Pizza! stock down sharp today. Possible time to sell some puts!


  29. P.S. simble PZZA!!


  30. Hubris trades – that was a massive tongue in a humongous cheek :)


  31. Winston Sorry who or what is Hubris know only Trump


  32. SKX/Phil- not sure why but I did'nt get filled either the double down BCS 23/27 nor close out the 34 call at 0.55….. also means I still have the old trade set up… should I do anything to it now or wait till mid-week as it's Monday.


  33. Nice one Yodi!


  34. So… trying to understand some basic fundamentals here – Options 101. Appreciate anyone that can share knowledge.

    - If a short puts expires BELOW the strike you can have the underlying 'put' to you, correct?
    - If a long call expires BELOW the strike you can have the underlying 'called' away?
    - If a short call expires BELOW the strike you can have the underlying 'Assigned'?

    So if we have a bull call spread open and the underlying is moving up, we can sell more calls to generate income because we are on target for the underlying long calls to expire above the strike? TIA


  35. MDLZ/Damo – You mean in the Butterfly Portfolio?  We have this:

    Short Call 2020 17-JAN 47.00 CALL [MDLZ @ $41.63 $-0.82] -20 7/13/2018 (543) $-4,600 $2.30 $-0.35 $-2.30     $1.95 - $700 15.2% $-3,900
    Short Put 2020 17-JAN 40.00 PUT [MDLZ @ $41.63 $-0.82] -10 7/9/2018 (543) $-2,700 $2.70 $0.20     $2.90 $0.20 $-200 -7.4% $-2,900
    Long Call 2020 17-JAN 40.00 CALL [MDLZ @ $41.63 $-0.82] 20 7/9/2018 (543) $10,800 $5.40 $-0.38     $5.03 - $-750 -6.9% $10,050
    Short Call 2018 17-AUG 42.00 CALL [MDLZ @ $41.63 $-0.82] -5 7/12/2018 (25) $-700 $1.40 $-0.63 $-1.40     $0.77 $-0.50 $315 45.0% $-385
    Short Put 2018 17-AUG 42.00 PUT [MDLZ @ $41.63 $-0.82] -5 7/9/2018 (25) $-500 $1.00 $0.06     $1.06 $0.34 $-30 -6.0% $-530

    So, we have the 543-day spread for net $3,500 and, for our first 30 days we sold the Aug $42 puts and calls for $1,200, which is about 33% of what we spent collected in 5.5% of the time so we've got 18 sales ahead of us which, hopefully, will bring in over $18,000 for a profit of $14,500 and THEN we'll see if we made any money on the spread.  Each time the contracts expire we roll the loser and then sell 2 more – the more times we hit the center of the zone, the more we make and it gets easier as time goes by as we try to widen the spread each time.  

    QCOM/Batman – Depends what they do at the deadline, doesn't it?  I think we've already got a pretty positive reaction on the assumption the deal is dead but, if they up their offer – down they go again.  We had intended to sell at least 5 short calls but we didn't on the assumption the deal is actually dead and they'll move higher.

    Short Put 2020 17-JAN 50.00 PUT [QCOM @ $59.05 $0.44] -10 4/16/2018 (543) $-6,700 $6.70 $-2.35 $-6.70     $4.35 $-0.17 $2,350 35.1% $-4,350
    Long Call 2020 17-JAN 55.00 CALL [QCOM @ $59.05 $0.44] 15 6/5/2018 (543) $15,000 $10.00 $-0.45     $9.55 $0.20 $-675 -4.5% $14,325
    Short Call 2020 17-JAN 70.00 CALL [QCOM @ $59.05 $0.44] -15 6/5/2018 (543) $-6,000 $4.00 $-0.50     $3.50 $-0.25 $750 12.5% $-5,250

    PZZA/Yodi – Not very good pizza.  They have an issue with the founder, who got kicked out for using the "N" word (not nachos) is trying to hostiley take over his own ex-company.  Very messy.

    Also, very little growth at $1.7Bn in sales and only drops $110M to the bottom line for at $1.5Bn valuation – it's not like they are a huge bargain – just fairly priced.  

    SKX/Dave – Not much to do but wait to see where they settle down and then make adjustments.  

    Basics/Soma - 

    - If a short puts expires BELOW the strike you can have the underlying 'put' to you, correct?

    • Yes, but it's not likely to happen before that if there is still premium in your contract.  

    - If a long call expires BELOW the strike you can have the underlying 'called' away?

    • No, a long call must be in the money or it expires worthless and YOU, as the owner of the long call, can't have your stock called away nor can anyone force you to do anything but, IF you let your long call expire in the money, most brokers automatically exercise it (because it generates fees) and remove the strike money from your account and give you the stock.

    - If a short call expires BELOW the strike you can have the underlying 'Assigned'?

    • They can call you any time and, if time is up, it WILL be assigned and you will be given cash at the strike in exchange for your stock but, again, it's just not worth it if there is premium in the contract.  Say they have a contract for a $10 call and they paid $1 but now the stock is $9.95, if they call you away, they are paying you $10 instead of $9.95 on the open market – why would anyone do that?  Sometimes – if the DIVIDEND is more than the premium – THEN they will call for the stock to collect it – so watch that.  

    As to part 4 of your question, yes, if we have a bull call spread that's in the money then the net of the spread is what we expect to collect and, therefore, it's cash we WILL collect if the short calls we sell are in the money so the short calls are there, in part, to protect our expected gains on the bull spread.


  36. F/Phil- I have no Ford currently, I am thinking to long as this price since it's almost the same as you enter however i do notice your short calls are already making $$. Should I long and sell the same calls but for lesser premium or at this price, it's okay to naked long and wait for earnings pop(hopefully) to sell the calls w higher premium?


  37. F/Dave – It's all about the dividend so the goal is just to pay as little as possible.  With F at $10.45 you can buy the stock and sell the 2020 $9.87 calls for $1.42, which is net $11.29 and the dividend is just 0.15, so it's not likely you get called away.  Then you can sell the $9.87 puts for $1.05 and that means you're in F for net $7.40, collecting 0.15 (2%) quarterly dividends while waiting to get called away at $9.87 with a $2.47 (25%) profit.  Nothing wrong with that!  

    Worst case is you get assigned 1x more at $9.87 and you average into 2x F for $8.635 less whatever dividends you collected, so below $8/share if you hang on for a year.


  38. Jabo:  Thanks.  I am still able to get that number Phil has arrived at.  According you the bcs is $4.60.  So for 20 contracts it comes to $9200.00 and the sale of 10 puts comes to $5450.  So the net trade for that would be 9200 – 5450 = $3750 ie $1.87 net for each bcs with half put sold.  Let me know what I am missing.  Thanks Jabo.


  39. 3750 is correct, i believe (if you buy 20 call spreads and sell 10 puts)..

    right?


  40. Thx Phil


  41. Now, I'm confused.  We're talking about LB?  So the spread is $4.60 x 2 = $9.20 less $5.45 = $3.75/2 = $1.875 per bull spread x 20 = $3,750 net on the spread.  Not sure where I got $2.65 from. 

    That's why I find I make less mistakes just doing amounts like 20 $25s @ $8 ($16,000) less 20 $35s @ $3.40 ($6,800) and 10 $30 puts for $5.45 ($5,450) is $3,750 – THAT is the important number because that's what you have to make back (assuming the puts go worthless) to break-even. 


  42. DONALD TRUMP’S ALL-CAPS IRAN TWEET IS A BIG DEAL


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  45. Japan: Deadly heat wave continues as temp hits record 41.4C near Tokyo




  46. GOOGL knocked it out of the park on earnings – up $50 so far.

    /NQ flying as well, up 50 more points to 7,425!

    We'll see what sticks in the morning.


  47. Phil & Jabo// Thanks for the clarification.  I really thought I messed up something and that is why I had to request for more clarification.


  48. Who is going to be first at a $1T market cap – GOOG, AMZ or AAPL!


  49. Phil / QCOM –  Thanks for your reply,

    This seems to be a matter that rests solely on China not associated with pricing so I doubt they will raise the price.  I agree that a 'no sale' should be a short term catalyst for QCOM, but they still need to figure out how to grow their portfolio longer term…  Although I was not crazy about the price I feel the purchase was the right direction for the company – given the NXP portfolio.   


  50. Phil, nice little dip on WHR; your thoughts on a nice 2020 $110 put, 5 contracts to start with, or wait for the down grade police. Thanks as always.