Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

TGIF – Closing out a Weak Week in the Markets

Well, we made some progress.

That's right, we opened on Monday at 2,763 and closed at 2,750 on the S&P (/ES) and this morning we're at 2,782 and climbing on a supportive note out of China, whose entral bank governor and banking and securities regulators said recent volatility in Chinese stocks didn’t reflect the nation’s economic fundamentals and “stable financial system.”

That flipped the Shanghai up 2.5% into the close, reversing a sharp downturn as China released weaker (6.5%) GDP data than expected (6.7%).  Chinese exports, by the way, held steady from last quarter as they are not, so far, being affected much by Trump's tarrifs, which is actually bad because that means that there's more potential trouble for their economy ahead.  In fact, exports got a boost in Q3 as shippers raced to push goods out under the tariffs, Q4 may paint a very different picture and these are only 10% tariffs – Trump wants to go to 25% and he will if he comes back in November with continued control of Congress – a good reason for China to meddle in our election!  

Yesterday morning I warned you not to be fooled by a "dead cat bounce" and we promptly fell off a cliff and lost a lot of our gains.  Fortunately, at 3:01 pm in Wednesday's Live Member Chat Room, I repeated our Webinar call to short the S&P (/ES) Futures at 2,815, which led to a very nice $2,500 per contract gain at 2,765 yesterday afternoon.  This is why we say "Wheeeee!" when the market sells off – it's fun when you know how to hedge!

You can follow our logic and learn our trading signals by watching a replay of Wednesday's Live Trading Webinar here.  

Speaking of singals, I also called the bottom and flipped our Nasdaq Ultra-Short (SQQQ) hedges bullish by cashing in our long calls (leaving us with naked short calls) at 2:10 pm, saying:

SQQQ – I think today's sell-off was a gift horse so let's cash these out and wait and see where we top out on this bounce (goes for STP SQQQ longs too!)

That's another nice thing about hedges, they allow you to leave your longs in place and ride out the dips and then, when you are done with them, you can flip them bullish by simply selling all or part of the long end of the spread (if you are using ultra-shorts).  The Futures are very useful for making fine adjustments – if you feel you are too long or too short – especially after hours but, to really steer the ship, you need solid index hedges to protect a bullish portfolio.

Image result for portfolio balanceWe managed to get through the reviews of 4 of our 5 Member Portfolios yesterday and today is the Big Kahuna – the Long-Term Portfolio but, if our other portfolios are any indication – we're generally happy with our long positions and have little desire to change them as this has, so far, been a very mild correction and our hedges have been battle-tested and held up very well – so we're even more confident holding the longs.  We are still cautious and still well-hedged, but yesterday's drop seemed a bit severe so we flipped a bit bullish – for as long as it lasts.

One reason stocks are heading higher this morning is the resumption of Corporate Buybacks, which take a pause into the beginning of earnings periods.  As you can see from this JP Morgan chart, 71% of the companies were not buying back their own stock on October 15th but that was the peak and, over the next two weeks, we will resume the normal madness where about 25% of all market transacitons are the result of companies buying back their own stock – often at record-high prices using money they borrowed.  Morons!  

$4.5 TRILLION of buybacks have pushed the market $15.8Tn higher since the crash – imagine what the market would look like without that support and imagine what earnings would look like if there were 25% more shares to divide those profits by…

So yes, it's all a massive scam but so was Madoff and early investors there made a fortune (though they were sued to give it back as they benefitted from a massive Ponze scheme).  Hopefully, we won't have to give back our ill-gotten gains from this Ponzi scheme – certainly not while Trump is in charge as he seems to measure his success by how well the market does – even though the market tripled under Obama (800 to 2,300) and, under Trump, 2,300 to 2,750 is up 450 and that's 19.5% – one tenth of Obama's gains after 18 months.  

Certainly Stormy Daniels would have warned the President not to get into a measuring contest with Obama, right?  

Anyway, we're not expecting much action today though it is an options expiration day so we could have some wild swings.  We're still looking for the same bounce lines we laid out on Monday, which we haven't gotten all week and we need to see Europe's DAX get back over 11,800 and Euro Stoxx back over 3,250 or it doesn't matter what our markets think is happening – this is the same stuff I said we shouldn't ignore before we collapsed, so why ignore it now?  

Have a great weekend,

- Phil


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!

Comments (reverse order)

    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1. CLF

    Cleveland-Cliffs beats by $0.75, reports revs in-line; Initiates $0.20 quarterly dividend. 

  2. Good Morning!

  3. Good morning!  

    Sadly, we don't have CLF anymore – we just bought back the short puts in the last LTP review (with good timing).  I always have trouble buying stocks for $11 that we used to buy for $5….  We sold the 2020 $10 puts for $3.80 on 1/10 – one of our first new LTP plays but, sadly, they never sold off to give us a good entry on a bull call spread so we "only" made $4,500 when we cashed them out last month.

    It would have been far better for us if they fell to $5 and became a FU trade we could have added to…

    Oh well, can't lose them all!  cool

  4. /CL testing $69.50 but /RB not getting over $1.92 so I wouldn't be greedy.  We can always reload if they break over (with tight stops below) but why squander quick gains?

  5. F

    Ford Motor downgraded to Equal-Weight from Overweight at Morgan Stanley.


  6. X-37B Military Space Plane Wings Past 400 Days on Latest Mystery Mission

  7. Phil / AAPL – Nov 4 Put / Call $200 calls still doing this or not, given timing of earngings?

  8. If the S&P doesn't close green, this will be the 4th consecutive weekly loss!  

    No pressure though…

    AAPL $218 – still giving us bad signals.

    AAPL/Batman – Well we have 2 weeks to milk premium so yes, I still like them but may pull them into earnings or roll them to Jans.

  9. AAPL earnings now showing 10/31

  10. AAPL breakdown at $216 – if it happens.  Of course, we're betting that, into earnings, they move closer to $220.  

  11. AAPL Still 11/4 or 10/26. yesterday I think you thought earning were 11/8

  12. oops yesterday you had selling the nov 16. 220  puts / calls 

  13. According to Briefiing, AAPL reports Nov 1 with conference call at 5 PM.  Confirmed.

  14. AAPL – Etrade has them on 10/31, Yahoo Fin 11/1. I tend to believe Yahoo Fin

  15. AAPL – Etrade is at 11/1 now.   I think this is correct 

  16. AAPL – Has an event planned for 10/30 – iPad / Mac probably….. there will probably be a run up into this, and they may pre announce numbers here as well.

  17. CLF pricing – you should console yourself with the fact that a few years back (Jan 2014) we were buying CLF @ $20 plus!!!!

  18. Winston, is the stock action in CLF an example of "sell the news" or something else ?

  19. AAPL/Batman – Well, in the very least we have a week and, hopefully, we'll have a firm date by then.

    LOL, so many opinions on an earnings date – shouldn't that be a FACT?  

    And yes, there is some kind of announcement event – I had thought it was pre-earnings but that made me think earning may be a disappointment and they want a distraction?

    CLF/Winston – Yes but huge winner as that one did go down on us and we turned it into a major holding before they came back.

    20 CLF 2019 18-JAN 10.00 CALL SC $ 2,100.00 11/23/2016 $ 5,220.00 9/20/2017 301
    $ 3,120.00 59.8 %
    10 CLF 2017 20-JAN 8.00 CALL SC $ 0.00 11/22/2016 $ 1,150.00 1/20/2017 59
    $ 1,150.00 100 %
    20 CLF 2019 18-JAN 7.00 PUT SP $ 260.00 11/23/2016 $ 4,120.00   695
    $ 3,860.00 93.7 %
    20 CLF 2019 18-JAN 10.00 CALL SC $ 2,920.00 11/23/2016 $ 5,220.00   695
    $ 2,300.00 44.1 %
    40 CLF 2019 18-JAN 5.00 CALL LC $ 19,200.00 11/22/2016 $ 22,000.00   696
    $ 2,800.00 14.6 %
    30 CLF 2019 18-JAN 4.00 CALL LC $ 7,500.00 10/27/2016 $ 15,900.00 11/22/2016 26
    $ 8,400.00 112.0 %
    30 CLF 2019 18-JAN 5.00 PUT SP $ 3,300.00 9/8/2016 $ 4,500.00 11/25/2016 78
    $ 1,200.00 26.7 %
    35 CLF 2018 19-JAN 4.00 PUT SP $ 6,580.00 9/28/2015 $ 9,800.00 6/7/2016 253
    $ 3,220.00 32.9 %
    35 CLF 2018 19-JAN 4.00 PUT SP $ 1,645.00 9/28/2015 $ 9,800.00 11/22/2016 421
    $ 8,155.00 83.2 %
    60 CLF 2017 20-JAN 3.00 CALL LC $ 6,600.00 7/28/2015 $ 9,540.00 9/6/2015 40
    $ 2,940.00 44.5 %
    30 CLF 2017 20-JAN 8.00 PUT SP $ 18,930.00 2/5/2015 $ 11,400.00 9/29/2015 236
    $ -7,530.00 -66.1 %
    20 CLF 2017 20-JAN 5.00 CALL LC $ 5,900.00 2/6/2015 $ 1,500.00 7/28/2015 172
    $ -4,400.00 -74.6 %
    20 CLF 2017 20-JAN 8.00 CALL LC $ 5,800.00 11/19/2014 $ 4,100.00 2/5/2015 78
    $ -1,700.00 -29.3 %
    20 CLF 2017 20-JAN 12.00 PUT SP $ 13,800.00 10/1/2014 $ 11,300.00 2/5/2015 127
    $ -2,500.00 -22.1 %
    10 CLF 2016 15-JAN 15.00 PUT SP $ 7,200.00 6/16/2014 $ 4,500.00 10/1/2014 107
    $ -2,700.00 -60.0 %
    10 CLF 2016 15-JAN 18.00 CALL SC $ 700.00 6/16/2014 $ 1,750.00 11/19/2014 156
    $ 1,050.00 60.0 %
    10 CLF 2016 15-JAN 10.00 CALL LC $ 4,850.00 6/16/2014 $ 2,000.00 11/19/2014 156
    $ -2,850.00 -58.8 %
    10 CLF 2016 15-JAN 20.00 CALL SC $ 1,800.00 1/14/2014 $ 6,750.00 5/29/2014 135
    $ 4,950.00 73.3 %
    10 CLF 2016 15-JAN 13.00 CALL LC $ 9,500.00 1/14/2014 $ 4,500.00 5/29/2014 135
    $ -5,000.00 -52.6 %
    10 CLF 2016 15-JAN 18.00 PUT SP $ 4,900.00 12/17/2013 $ 4,300.00 5/29/2014 163
    $ -600.00 -14.0 %
    Total Gain/Loss for CLF
    $ 15,865.00 12.8 %

    We originally sold 10 Jan 2016 $18 puts for $4.30 and then we added 10 Jan 2016 $13/20 bull call spreads  and those didn't work out so we doubled down to 20 and ended up with 60 Jan 2017 $3 calls as they fell and, after that, it was all profits.  Again – FUNDAMENTALLY, they were a good company – it's just that people didn't like them so the PRICE went down but, if you understand the VALUE – you keep buying on the way down.  Buffett has written a dozen books on the subject but no one seems to listen to him so I don't even bother most of the time – you either believe in value or you don't.

    Dollar with a nice dip to boost the markets (and commodities!).  

    There'll be no more ahhhhhhhhhhhhhh, but you may feel a little sick:

    Perfect video to cap off this week:

  20. Morning Phil. A quick question on "option theory". Say you sell a 2021 put option on company X.

    Then, in 2019, one of the five things happen:

    1) Company X splits in two, Company X and Company Y.  Company X shares are now only have of what they used to be. If you had shares, you might have been "compensated" through either Company Y shares or special dividend. I guess no luck at all if you hold an option?

    2) Company X merges with another company. They are now called Company Z. Company X share no longer trade on the market. What happens to your option liability?

    3) Company X goes bankrupt and the shares no longer trade so, having sold the put option" you can't really buy them at a strike price? 

    4) Company X re-organises itself (no merger involved) and they are now called Company Y. Would the options be automatically "re-named"?

    5) Company X does reverse spit. Would the options be adjusted accordingly?

    Just keen to understand what would you see happening in those scenarios. Thanks.

  21. The Trump Tax Scam, Phase II

  22. Does anyone on the board pay for a subscription to use this tool:

  23. Phil – when you say cover 1/2, do you mean sell 1/2 of oure 2020 long calls, take some profits, and buy 20 of the 2021's?

    "ABX – Finally back from the dead and we're pretty aggressive.  Let's cover 1/2 with 20 2021 (yes, 2021) $15 calls at $2.30 ($4,600) as it drops a lot of money in our pockets and it's only a 1/2 cover so we can do a 2x roll much higher when 2022s come out (and we'll need to buy longs then too with the money from our 2020 calls – how's that for long-term planning? "

  24. Long-Term Portfolio Review (LTP) – Part 1:  $933,565 is up 86.7% and up $25,174 (5%) since our Sept 21st review, when the S&P was at 2,916 and we made a lot of bearish adjustments.  Those helped and so did the 9 trades we added on Sept 26th, which were aimed at generating another $101,875 in short-term income if the stocks we picked were flat or down which, so far, they are.  

    As noted yesterday, the STP is up $50,000 so we were very well hedged and over-hedged really so we flipped more bullish by cashing in our SQQQ longs but I'm not expecting to retake 2,916 (not even 2,800 at the moment), so I think we're in good shape at the moment – just a bit more neutral into the weekend.

    Unfortunately, adding 9 new spreads puts us up to 49 spreads, which is 9 over my max so I'll be very anxious to cash things out whenever there's an opportunity.  It's not a cash or margin issue as we're only using $636,000 in margin and we have $657,798 in cash, so using about 1/2 our margin at the moment.  It's just a matter of having to deal with so many open positions – I'm not Yodi!  cheeky

    • FRE – There's one we can cut.  
    • HMNY – There's one we can ignore!  
    • Short Puts – We only have 13 of those because we bought back all the ones that were more than 60% up last month (to avoid losing money on the dip and to lower our need to hedge).  We have since added CAH, CPB, DLTR, and PSA, collecting over $25,000 just for promising to buy those stocks if they get cheaper – God I love options!   
    • WHR – is disappointing but time to make it a full position.  Let's Roll 5 short WHR 2020 $130 puts at $30 ($15,000) to 10 2021 $100 puts at $16 ($16,000) and let's add 15 of the 2021 $100 ($20)/$130 ($9) bull call spreads at $11 ($16,500) so we're spending net $15,500 and we originally collected $5,600 so net net $9,900 on the $45,000 spread that's $10,500 in the money – not bad for a put that was 167% against us before adjusting!   5 Jan $115 calls can be sold for $3.70 ($1,850) using 91 of 819 days so 9 of those would give us a nice credit to work with but let's wait for 10/24 earnings – hopefully they aren't the catastrophe traders are expecting.  Last year was $3.83 and WHR went from $155 to $170 on that news so $107.50 seems like quite the bargain for the same 120 year-old company. 

    ETM – In range (we're in it for the dividends)

    FTR – Back down on hurricane damage and why do we only have 2,500?  Let's buy 7,500 more shares at $5.65!  

    NRZ – Well over our target.  

    SKT – On track though we were aggressive with our put sale but I love these guys.  Still good for a new trade.

  25. LOL, loyal to the end:

    Since President Trump met with Secretary of State Mike Pompeo on the heels of his return from a meeting with Saudi officials, Trump has begun privately distancing himself from Crown Prince Mohammed bin Salman, The New York Times reported. 

    Trump has told allies that he “barely knows” bin Salman, in the Times’ words, while simultaneously attempting to whitewash his son-in-law and senior adviser Jared Kushner’s relationship with the crown prince, despite reports that the two are so close that they text through private channels like WhatsApp.

    That's what happens when you ally yourself with thugs! You either have to cover up for them and when it doesn't work, you have to throw them under the bus hoping that they have nothing bad on you.

  26. Albo: CLF – either…… or? The honest answer is I haven't a clue.

    But, look at a 5 year chart of CLF – the price action is enough to try the patience of Job. By Jan 16 the price had declined to $1.40 from $24 in October 2013. End March 2011 the stock had reached a post financial crash high of $100. That is a lot of time and pain for investors who held the stock and every false up move was an opportunity to cut losses.

    In terms of a stock holding, it has been a terrible ride for investors. For option traders another matter perhaps. It is one of those stocks that is a serial disappointer – just when you think it might break out with some positive momentum it falls back. Yes, as a stock picker as long as you make a new trade recommendation every three months and have investors with short memories then one might be able to build a case that things are going well. Again, option traders may have more success by doubling down, doubling down, selling calls and puts and other necessary adjustments (see Phil's table above on profitable CLF option trades).

    Value plays are condemned to have a high left low right chart configuration – that's the attraction of them. But as Phil says time and time again, you need patience to manage these plays effectively. It's good to know that Job lived 140 years after his trials and suffering began.

  27. Winston – I hear you.  Thanks.  

    Seems that sometimes, many of us ignore opportunity cost, which can be very high at times.

  28. Theory/Alter – Generally your positions are adjusted but I usually find it's wiser to just get out when something like that is announced as your adjusted options tend to be very thinly traded and then you are stuck waiting for expiration to see if you win or lose.  There are no hard and fast rules – the exchanges decide how to treat old options in each circumstance and it's like pulling teeth trying to get a straight answer so getting out fast is often the best move if there's a change you are in any way concerned about.  In bankruptcies or buyouts – you just pay the difference at the closing (or collect it).  

    ABX/Soma – We have 40 ABX 2020 $10 calls and they were uncovered.  So, when I say, "let's cover 1/2" that is my super-secret code for covering 50% of the 40 long calls which, according to my official Stephen Hawking Lucky Decoder Ring – is 20.  So we end up with the same 40 long ABX 2020 $10 calls but HALF (20/40 = 1/2 or 50%) of them are covered by 20 of the 2021 $15 calls. 

    CLF/Winston – The problem is people are all short-term traders now and don't even seem to be able to conceptualize how cyclical companies work.  They make a lot of money in good times and lose money in bad times so, logically, we try to buy them during bad times but it's tough to know when those bad times will come to an end.  We jumped in at $20, down from $100 and it dropped to $2 but, since we understood the cyclical nature of the business – we kept buying.   If you consider riding out the last 2-3 years of a 10-year cycle to be super-human patience – then cyclical stocks simply aren't for you but, as someone who traded with my Grandfather from 1970 onwards and was constantly lectured on his observations over 50 years of trading – to me it's just the way those stocks work.

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 5,873 3,891 3,373 2,013 2,109 2,330 2,194 2,416 2,238 -16.9%
    Operating Profit $m -308.8 1,380 146.3 544.2 407.1 258.2 423.2      
    Net Profit $m -899.4 413.5 -7,224 -749.3 174.1 367 444.1 546.3 484.2  
    EPS Reported $ -6.57 5.06 7.14 0.68 0.97 -0.074 0.48      
    EPS Normalised $ -1.78 5.12 9.77 -0.97 0.43 0.28 0.65 1.83 1.67  
    EPS Growth %     +90.6     -34.9 -13.1 +554.2 -8.92  
    PE Ratio x           41.1 17.6 6.28 6.89  
    PEG x           0.074 0.032 n/a n/a

    The hardest thing to teach people is patience.  I was lucky enough to be brought up that way because stocks were only printed in the Sunday paper in the 70s and you couldn't even find out what was happening during the week if you weren't at the exchange and my Grandfather would have me circle stocks that were making new highs or new lows one week and then we'd spend months finding out why (including knocking on their doors and asking) and then, perhaps months later, making an initial entry and then waiting 2 or 3 quarters to see how our premise was playing out before deciding whether to add to our position or pull the plug. 

    Even more so, because my Grandfather lived in England and I only saw him on Summer and Winter breaks (I'd stay there over the summer) – to me it seemed perfectly normal to buy something and not even think about it again until the next year.  To this day, that's how I think about long-term positions but people seem obsessed with the day to day gyrations of the market and act like those gyrations somehow determine the VALUE of a company – which is ridiculous – it simply determines the opinion of the masses at the moment and every bookie in Las Vegas makes a fortune betting against that!  

  29. Would have loved to met your Grandpa.  We’ve lost many folks with his type of insight.

  30. Just as a reference, was told by a stock advisor yesterday that 80% of stock trades now are held less than 1 minute.

  31. Opportunity cost/Albo – Since we are almost always 1/2 cash, there's not much opportunity lost in nursing a few long-term losers.  Take WHR, for example.  2 years from now, Winston will say we bought them at $180 and an ordinary human couldn't have ridden out the drop but, in Jan, when the stock was at $180, we sold the 2020 $130 puts for $11.20 so all we did was promise to buy 500 shares of WHR (in exchange for $5,600) IF they fell to net $118.80.  THAT was what I considered a good price for them.

    Now, 9 months later, they are at $107.50 and I still think $120 is a good price – so it's time to buy.  Not complicated at all and I don't consider it risky nor do I consider it some sort of "opportunity cost" – THIS is the opportunity we wanted – to be able to buy a low-priced bullish spread but, overall, it's now a 3-year trade – at least!  If it goes lower and we DD and end up with a large $80/100 spread for 2023 – is that a bad thing?  NOT if your perspective is that you simply waited, PATIENTLY, for a real value to make a large commitment.

    Max Davis/DC – He was so great – I aspire to be more like him all the time!

    80%/Nom – I believe it – especially since 80% of all trades are done by bots.

  32. Phil,  what are your thoughts on F?  Has it been sold too much on China exposure? 

  33. Sometimes it looks like 100% of trades are held less than 1 minute!

  34. seeing WHR adju made me remember from yesterday

    Short puts – IBM and WHR should be moved to the LTP – someone remind me tomorrow.  

  35. Phil, can you comment further on CLF's value?  I understand it is hard to buy it at $10.84, when we were buying at $2 (and I am one of the success stories who stuck with it, and made a killing), but I'm seeing $2.95 in earnings for the past four quarters, on a $10.84 stock.  I have a big position in 2020 $7/12 spreads, and 2020 $10/15 spreads (which I bought for under $1), and am having a hard time not buying back some of the short calls on this bizarre negative reaction to a great earnings report.  They have very little competition now, and are making a big investment in a new plant that should give them additional revenue/profit potential.  It seems to me like this stock is just getting started.  I understand that they are being helped by the steel tariffs, but I don't see those going away anytime soon.  Thoughts?

  36. Phil – I'm just a believer in using stop orders to avoid following a stock down as much as you did on WHR.  Yes, you might make a good return yet, but how much better would the return be if you stopped out and invested those funds in a stock that's not such a falling knife as WHR has been, or many of the others that you've ridden down.  I am quite active in buying falling knives, but hopefully, after most of the fall is behind them.  Even then, I use stop orders.  And yes you can get whipsawed, but it's a small price to pay to avoid big losses.

    You use stops very effectively in your futures trading.  I think they could be an effective tool in stock investing as well.  JMHO.

    Although I must you are a wizard at escaping most big losses through your expertise in the options market. The best I've ever seen !

  37. Long-Term Portfolio Review (LTP) – Part 2: 

    • AAPL – We got way more bearish last month and sold those very aggressive June calls, which have already dropped $33,000 so let's buy back 15 of the June $200 calls ($31.70) and turn this into a more normal spread, locking in 60% of our quick gains.  Of course, if AAPL does pop on us, we're happy to roll and DD the longs and, if they go lower, we're still happy to roll and DD the longs so it's hard to lose…  
    • ABX – As with the OOP, let's 1/2 (50%) cover the 80 2020 $10 calls with 40 short 2021 $15 calls at $2.30 ($9,200).  
    • ALB – Back low in the channel so good for a new trade.  Let's roll the 2021 $90 calls at $22.50 to the $80 calls at $17.50 for net $5 ($10,000) and let's buy back the 5 short Jan $110 calls for $1.20 ($600) as those don't have much left to give and we'll sell more calls on the next pop.

    • ALK – On track.
    • AMGN – Wow, when you can pull $38 out of a $25 spread, it's good to figure out a way to do that.  Let's cash in our 15 2020 $175 calls at $38 ($57,000) and buy 25 of the 2021 $200 ($28.50)/$230 ($15) bull call spreads at $13.50 ($33,750) and roll 5 (1/3) of the short 2020 $200 calls at $22 ($11,000) to 8 more (15 total) of the short Jan $200 calls at $10.50 ($8,400).  So we're spending a little but shortening the time-frame so we have many rolls ahead to work it out.  Meanwhile, net $20,650 drops in our pocket on a spread we spent net $3,650 on since May!  
    • ARR – They've been in free fall since "talk like a pirate day" (9/19) on rate fears and we pulled the short calls and the puts aren't worth adding to so we'll just have to wait and see.  Arrrrgh!  

    • BBBY – Another "catastrophe" we've upped our bet on (good for a new trade).  Down and down they go, however  and $13 is less than $2Bn for a company with $12Bn in sales and $400M in profits but let's say $200M and then their p/e is all the way up to 10.  Let's buy back both sets of short calls and give them a few months to guide next year (they had earnings 3 weeks ago – no one liked them).  
    • BHC (was VRX) – Well in the money but only net about $7,000 on the $14,000 spread so "on track" with 100% more to gain.    
    • C – Took a hit but on track.  Good for a new trade.
    • CAKE – New one and down a bit so good for a new trade.  Still one of the only restaurants I have to consistently wait for a table at.
    • CDE – Good for a new trade.
    • CHK – On track.
    • CHL – On track. 
    • CMG – Earnings next week and we're up $85,000 on the short calls so screw that – I'm not taking a risk.  Let's buy back the short Jan $460 calls for $38,000 (crying) and we'll leave the spread and, if it goes well, we can sell calls again and, if it goes badly, we sell puts, drop the calls to a lower strike and sell calls again.  Once again, I'd prefer if the stock goes against us as I think we'll make more money over the long run if we have to add to the position but, if it goes higher, we "only" have a $240,000 spread we paid net $19,800 for!  

    • DAL – New and good for a new trade.
    • DIS – Over our target and we can cash out our 2020 $90 calls at $32.50 ($48,750) which is $11,000 more than what we hoped to collect on the spread at $115.  That leaves us with 15 short 2020 $115 calls so let's buy 25 2021 $120 ($17)/$140 ($9.50) bull call spreads at $7.50 ($18,750) so we still have $30,000 in our pocket to make adjustments with after earnings.

    • F – Ridiculously low at $8.50.  If we buy 3,000 more we average $9.50 but let's just sell 30 of the 2021 $10 puts for $2.60 ($7,800) so the worst thing that happens is we're assigned 3,000 more at net $7.50 and our average would be $8.925 on 6,000 shares.  Meanwhile, it lowers our cost basis on 3,000 to $18,050 or $6/share so hitting our original goal at $11.87 would be a double if they recover.  
    • FCAU – Another beaten-down auto company.  Fortunately, this is where we came in and they are still good for a new trade. 
    • FNSR – Still good for a new trade.  We're so confident in this one we only 40% covered the calls.  

    • GCI – Good for a new trade.
    • GE – Finally making money!  
    • GILD – Good for a new trade.
    • GIS – Good for a new trade.  
    • GPRO – On track.

  38. Phil, it looks like there was an error in the recording of the Apple short calls.  We sold them for $31 last month, not $45.

    AAPL - The 5 short Sept $190 calls are $29 ($14,500) but 2021 is out so let's get more drastic and buy back those and cash in our 20 2020 $165 calls at $63 ($126,000) and roll them to 40 2021 $190 ($52)/240 ($30) bull call spreads at $22 ($88,000) and we'll roll 20 short 2020 $195 calls at $41 ($82,000) to 25 short June $200 calls at $31 ($77,500).  All in all, we're spending $19,000 of our cash and we end up with 40 $50 2021 spreads ($200,000) covered by the same short puts (we'll sell 2021s if they dip) and a 2/3 sale of June calls which are 273 days out of 847 so 3 rolls ahead of us.  Moves like THAT, by the way, are how this portfolio makes the big bucks.  This trade started out with 20 $30 spreads ($60,000) that we spent net $20,500 on and now, at around $40,000 in (using the current profits from the same trade), it's a $200,000 spread – that's 40% of our original portfolio money ($500K)!  We started this on May 8th so this is just month 4!  

  39. Oh no, Russell turned ugly and all turning down now – might end up red for the day.  

    Dollar down to 95.40 so doing what it can to help and it's not enough.  

    F/Learner – See above.  I think too cheap but I also remember them being much cheaper in 2009 for no good reason so I don't want to over-commit.  

    WHR/STP, Rex – Oh yes, given the above adjustment to WHR in the LTP, let's just close out the short WHR puts in the STP and take that loss.  With IBM, however, we will close the short puts in the STP and open 5 new short puts in the LTP – effectively transferring that money over (taking a loss in the STP, which then becomes cash paid into the LTP).  

    Image result for money laundering cartoon

    CLF/Palotay – Well mostly they are the the top (by a mile) North American producer of iron ore pellets so they have a massive shipping and tariff advantage.  They are a good deal still but I'd rather wait for the next down cycle to jump back in.  This year is very likely to be the top of the cycle and then 3-5 years down so the trick for me is how long can I stand to wait.  I'm more concerned about the end of the growth cycle than the end of tariffs at the moment and again – it's not that I don't think they are worth $11 or even $15 – it's just that I'd rather buy them when they are $5 again.  

    WHR/Albo – But seeing my short puts down 164% is my buy signal!  That's what the short puts are for – aside from dropping cash into the portfolio, they are a reminder of where we thought a fair value would be for the stock if we eve get the opportunity to take a position.  In Jan, I sold a 2020 $130 put for $11.20.  It's 9 months later out of 24 and our net $118.80 entry is down to $107.50 – I don't see why that's a "falling knife" when all it did was get to the price I HOPED I would be able to buy it for.  THIS IS THE OPPORTUNITY!  Again, if you think WHR is only worth what the price on the chart says, then this will never make sense to you but I thought they were worth $120 in Jan and I think they are worth $120 now only NOW I get to buy a bull call spread for a price I couldn't possibly have gotten in January.  

    AAPL/Palotay – I'll check that out, thanks.

  40. AAPL/LTP, Palotay – Yes, that's a wrong entry (should be $31 on June $200 short calls) but still correct that we're cutting back to 10 short June $200s to be more bullish into earnings.  

  41. I found one more issue.  The current AAPL spread from the September update was 40 2021 $190/240 spreads.  But the above is only showing 20.

  42. Oh damn, that means the 25 short made more sense.  Now we're under-covered a bit.

  43. Apparently CLF CEO went a little bit elon musk-y  during the earnings call haha


  44. FU IBM!!!!!!!

  45. Friends, a question about brokerages.  I've been building up a portfolio, based on new trade ideas from Phil, since joining PSW a couple months ago.  I've got $70K in long positions and $80K in short positions for a credit of $10K (these are all options trades).  I'm using Charles Schwab for this (level III) account, and they are saying I've used $110K of purchasing power (on a $10K credit).  Seems exorbitant to me.  Are there big differences in how the brokerages determine options maintenance requirements?  Is there a better brokerage for options specifically, as it relates to maintenance?

  46. Phil, i went back and listened to your IBM comments on the webinar and with the recent weakness I've been thinking about adjusting my position (just waiting for the dust to settle as you say). 

    I've got:

    5 IBM $120 (2020) short puts

    10 IBM $140 (2020) calls

    5 IBM $160 (2020) short calls

    and then I've been selling / rolling along the way the other half of the short calls, currently 5 IBM $150 (2019) short calls.

    I was thinking about….leaving the short puts for now. letting the 5 short 2019 calls expire. And adjusting my current spread

    something like rolling the $140s down to the $130s (at a cost of approx $3500), then not sure if its worth it to roll the 5 short $160s down, or just leave them to expire and sell 5 of the 2020 $150 calls (which will mean I'll technically have 5 more short calls than i do longs, but 5 of those are likely to expire worthless this Jan). even considering continuing to sell 5 shorter term calls at a time after those Jan 2019's expire kind of like a Yodi Cherry caller play? I can always roll them if they go in the money and at that point my spread will be in the money as well???

    Hope you can make sense of that, any input would be much appreciated! thanks

  47. Long-Term Portfolio Review (LTP) – Part 3:

    • HBI – Good for a new trade.
    • HRB – On track
    • IBM – As noted earlier, we're closing the 5 short 2020 $140 puts we sold for $11.50 for $20 ($10,000) so the money moves out of the STP (-$4,250 loss but $10,000 in cash) and we'll sell 5 more of the 2020 $145 puts at $23.20 ($11,600) which drops that much cash in the LTP.   We'll also roll the 15 long 2020 $120 calls at $16.05 ($24,075) to 30 of the 2021 $120 ($19)/150 ($8) bull call spreads at $11 ($33,000) so we are still putting net $2,675 in our pockets but now we have $90,000 worth of 1/2 covered spreads that are $30,000 in the money that we've paid net $12,300 for.  

    • IMAX – They are likely to fly into the holidays with all the big films coming out.  Unfortunately, no 2021s yet but we can buy back the 15 short Jan $24 calls for $1 ($1,500) and roll the 20 2020 $25 calls at $2.90 ($5,800) to 30 of the $15 calls at $9 ($27,000) and now we're $21,000 in the money for net $21,200 on the bull spread (not counting profits from the short calls).  Also, let's sell 10 2020 $22 puts for $2.85 ($2,850).
    • LB – Almost had a rally but it faded this week.
    • M – Good for a new trade.  Is a new trade. 

    • MO – On track.
    • MT – See, we have steel plays!  This one has an error as we BOUGHT 40 of the 2021 $25 calls for $11.55 but the rest is correct.  While we are fixing it, let's take the opportunity to roll the $25 calls ($8.10) to the $20 calls at $10.85 and that sets us up to sell short calls if they ever bounce.  
    • MU – Let's roll our 20 long 2020 $40 calls at $8.40 ($16,800) to 40 of the 2021 $35 ($12.20)/55 ($5) bull call spreads at $7.20 ($28,800) and we'll sell more calls when it bounces but we started at net $8,500 with a $30,000 2020 $40/55 spread and now we've spent a total of $20,500 (without increasing our put obligation) and we're in an $80,000 2021 $35/55 spread and we can certainly afford to double that down without breaking a sweat.  As long as we are SURE we want to own MU long-term, we know we can always sell calls like 10 of the Jan $45s for $1.85 ($1,850) – though we're hoping for better prices.
    • NLY – Nice discount at $10 but it's where we entered so just watching for now.  Good for a new trade.
    • NYCB – Pays a nice 0.68 dividend and w're in for net $9.10 but will be assigned 1,000 more at $13 so let's roll our 10 short Jan $13 puts at $3.35 ($3,350) to 10 short 2020 $12 puts at $2.80 ($2,800) and let's buy back the 15 short Jan $11 calls for 0.10 ($150) and stay uncovered for now.  
    • OPK – Big mess with charges of insider trading, the company's news page is nothing but lawsuits BUT, if it's resolved, they could rocket higher.  I think we'll just leave it as is though.  

    • PBR – In the money already.   It's net $15,610 out of a possible $21,000 but it's Brazil and it's risky so let's cash this one out.
    • PYX – Silly stock, no logic to it, let's just get out with a small profit.  It's too crazy to sell calls against
    • PZZA – $10,000 more to gain is worth keeping as it seems safe enough.
    • QCOM – On track but a crazy ride.  

    • SBUX – On track.
    • SKX – On track.  Good for new as it's a $16,000 spread and still net $5,000 though we started with a net credit.
    • SPWR – Let's buy back the short 2020 $12 calls for 0.45 ($1,350) and roll our 30 2020 $5 calls at $2.40 ($7,200) to 50 2021 $5 calls at $2.70 ($13,500) and we'll sell some short calls when it bounces but well worth the $6,300 investment to add 66% more longs and get a year more to grow.   With any luck, our longs will outlast Trump!  

    • T – Good for a new trade.  
    • TGT – Brand new.
    • THC – Also new and good for a new trade.  
    • UCTT – They're making $80M and the market cap at $11 is $430M so I'm inclined to stick with them but ouch so far!  No 2021s yet so let's just roll our 20 2020 $10 calls at $3.50 ($7,000) to 40 2020 $5 calls at $6.50 ($13,000) and sell 20 of the 2020 $10 calls for $3.50 ($7,000) so the net cost of going $22,000 in the money (because only 20 are uncovered to $11) is just $13,000.  

    • WBA – Home run on that one but it's a $30,000 spread netting $17,440, so still room for an almost double and fairly safe-seeming.  I don't see them exploding higher though so we can cash our 20 2020 $60 calls for $19.60 (more than the spread's max at $39,200) and buy 40 of the 2021 $70 ($15)/85 ($7) bull call spreads at $8 ($32,000) so still putting $7,200 in pocket and now we have $60,000 long spreads half covered.  Let's also sell 10 Jan $80 calls for $2.50 ($2,500) and we'll make a habit of quarterly call sales for income.

    • WPM – Let's cash in the 40 2020 $15 calls at $3.90 ($15,600) as that was leftover from our old spread (we didn't want to sell as it was too low) and we'll sell 10 of the Jan $17 calls for $1.30 ($1,300) to generate a little income but, on the whole, I think we'll move higher so I don't want to sell too many.

    Well, there wasn't much we wanted to cut – the positions are too good!  

  48. Phil / DIS – I have a similar set up to LTP on t his see below

    Long 15X Jan '20 $90 Call ( 16.92) purchase price

    Short 15X Jan '20 105 Call ( 9.7) sell price

    Short 4X Jan '19 $115 Call ( 3) 

    Short 10X Jan '20 $90 Put 

    I see what your are doing on the new BCS ( similar to CGM play earlier ). On the short Jan '19 $115 caller Roll this or just keep till later it's at $6.5 at the moment.

    thank you

  49. idicorp –   ask for "portfolio margin".  many brokers (including schwab) have it.  then they ask for margin for a "stress" for each name.  sometimes 15% for a name; some names more; some names a lot more 

  50. CLF/Crs – Down 6% today.

    Brokers/Idi – Not only does it vary by broker but the broker has discretion on each account so you have to make your best deal.  Check out TDA's Think or Swim and you can set up a practice portfolio and see what your buying power looks like by comparison and THEN you can negotiate for better in your account.  Over $100,000 you should qualify for Portfolio Margin – ask your broker about that too.

    IBM/Crs – I think the puts will be cleared easily so no need to roll them, hopefully.  The 10 2020 $140 calls are $6.80 and they can be rolled to 2020 $130 calls at $14 so you spend $6.20 to buy a year and $10 in strike and, if you are selling 5 Jan $135s for $2.50 ($1,250) – the extra year will easily pay for itself over time.  

    Without going too crazy, I'd buy back the short $160s for $2.60 ($1,300) and roll the $6,800 worth of $140 calls down to 15 of the 2021 $120s at $18.50 ($27,750) and 10 short 2021 $145s at $8.70 ($8,700) and sell the 5 short Jan $135s for $2.50 ($1,250) so you are spending $12,300 and now you have a $37,500 spread that's only 2/3 covered so you can always sell 5-10 short calls at $1,300 – $2,500 so call it just $1,500 for 8 quarters is $12,000 so, over time, you get that whole investment back and, hopefully, another $37,500 if IBM gets to $150 and it's already $12,750 in the money.

    DIS/Batman – Earnings are Nov 8th and DIS is $118.50 but it's only a small, rollable cover so I'd leave it alone unless you hear a lot of positives into earnings that make you too nervous but, at $6.50, they are 50% premium, which is definitely going to wear off over time.  

  51. Phil / Dis – thanks I'll hold…. reconstructing the new BCS now….. I'm planning to sell the short

     calls first then try to fill the long calls 

  52. Phil

    so the PYX Nov calls made 83% so far

    does it make sense to close them  out and sell Dec at a lower strike?

  53. Well that was a dull finish.  Not strong at all today but not too weak so we'll just have to wait and see (again).

    Have a great weekend,

    - Phil

    PYX/Coulter – It's fun to play with if you want to actively work it but that's really not what the LTP is for.  Cound just as easily have gone $20 against us for the same no reason.

  54. Phil

    MU – Let's roll our 20 long 2020 $40 calls at $8.40 ($16,800) to 40 of the 2021 $35 ($12.20)/55 ($5) bull call spreads at $7.20 ($28,800)

    so are we keeping the -20 2020$55 calls also

  55. re Portfolio Margin — Thanks guys!!

  56. Cannabis stocks go ever higher

  57. 5. Public views on trade and prices are at odds with economic theory

  58. Google to charge Android partners up to $40 per device for apps: source

  59. Some Sears Suppliers Keep Their Distance After Bankruptcy

  60. SMCI – This is getting little air time but, all the information after companies have researched their supply chain has lead to nothing.  Additionally, the authors have a history of making grand accusations based on technical information and gotten them wrong twice – once on a bombing and another time on a way to hack using only IP addresses.  Both times they were called out on it.  Additionally SMCI has reviewed their operations, and several companies ( Apple be ing one). have done deep dives into this and found nothing. I I think this is due for a. pop if one of the major networks takes interest  - Apple – Tim Cook has asked for a retraction.  I've never seen this on something like this.  

  61. Tim Cook calls on Bloomberg to retract spy chip story

    Apple (NASDAQ:AAPL) CEO Tim Cook calls for Bloomberg to retract its Businessweek article about malicious Chinese chips in Super Micro (NASDAQ:SMCI) components that went to U.S. tech and telecom giants.

    Key quote, to Buzzfeed News: “There is no truth in their story about Apple. They need to do the right thing.”

    Cook says Apple “really forensically whipped through the company to dig very deep” when it heard the claims but that “each time we came back to the same conclusion: This did not happen.”

    Bloomberg reiterates its defense of the story and says the investigation followed “more than a year of reporting” with over 100 interviews and 17 individual sources confirming the hardware manipulation.

  62. SMCI - 

    NSA senior adviser for cybersecurity Rob Joyce tells Politico that “nobody’s found anything” regarding Bloomberg Businessweek’s report of malicious Chinese chips planted in Super Micro (NASDAQ:SMCI) components to spy on U.S. companies.

    Joyce: “I’ve got all sorts of commercial industry freaking out and just losing their minds about this concern, and nobody’s found anything … There’s no there there yet.” 

    Alleged victims Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN), Super Micro, and China have all denied the reports. Telecoms rushed out to deny a follow-up report’s claim that a major U.S. telecom found chips.   

    Joyce says these companies would “suffer a world of hurt” if regulators determined they were lying, suggesting the denials are truthful. 

  63. SMCI - 

    US director of national intelligence Dan Coats says he hasn’t seen any evidence to corroborate the Bloomberg Businessweek report that Chinese spies slipped malicious chips into Super Micro (NASDAQ:SMCI) parts headed for U.S. companies.

    But Coats adds that “we’re not taking anything for granted.” 

    Super Micro and alleged victims Apple and Amazon all quickly and repeatedly denied the story. Every US telecom issued denials when a follow-up report tapped an unnamed telecom as a chip recipient. 

    Officials from the US Department of Homeland Security and the UK’s top cybersecurity agency also said they weren’t aware of the supply chain attack.  

  64. This Time It’s Different

  65. Teachable moment:  I am accidentally holding 1 WYNN short Jan 160 put contract (I thought they all were closed but one never filled.  The price was $15/share.   Thinking about rolling it down though not really sure there is much value in that.   Not much to be gained by going out further in time it appears to me but maybe I am not reading that right?  Time decay has helped here so I can currently buy them back for $35/share.  If I then sell the Jan 145 puts for $35+/share have I improved my waiting it out position by $15/share or am I looking at this incorrectly in some way?

  66. Tangleweb- WYNN- looks like you are rolling your loss of 35/sh. In other words, if the stock is above 145 in Jan you break even on the trade. Not a bad theoretical move but I don't follow the casino stocks so have no insight on the probability of a 30% rally in 3 months. 

    If margin is not an issue you could consider a 2X roll out a year to the 110's which may be more likely to pay off. 

    i have been in similar straits a few times and it reinforces the notion of being very cautious selling puts as they can get out of hand in a hurry. 

    Makes me wonder why casino stocks are selling off? Any thoughts? 

  67. Bitcoin will crack $1M, timing between 7/2020 and 03/2021

  68. Now that cancer readings are one of my main concerns I found this shocking study, cancer treatments are part of our lives ( mine for sure) in one way or other.

  69. Trump says US will withdraw from nuclear arms treaty with Russia

  70. Trump Administration Eyes Defining Transgender Out of Existence

  71. A nuclear October surprise?

  72. America Is Drowning in Milk Nobody Wants

  73. Trump’s growing deficit