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Monday Market Movement – China’s New Stimulus Falls Flat, Trade War Continues

When at first you don't succeed…

China has been attempting to boost their own small companies with promises of financial support for local businesses and Chinese investors are hoping and praying that their Government will perform another market bail-out, like the one they did in 2015 when it put $483Bn into a bullish, state-run margin trading firm to stop the bleeding.  $483Bn is 5% of China's real economy – that would be like the US putting $1 Trillion into the markets – of course it's going to have an effect but of course the effect is simply an unsustainable illusion that will fade over time and, eventually, you either do it again or end up having the same correction you put off the last time by spending hundreds of Billions of Dollars.  

Unlike the US, China doesn't bail out Capitalists at any cost.  The last time China was crashing, too many farmers had put their life savings into the market and the repercussions of a major crash would have been too painful.  Now they have all been warned and all had their chance to pull back their cash and a lot more foreign money (thanks to "reform") is now at risk in Chinese markets so the state would rather spend 10% of the GDP AFTER the crash – to buy up those companies when they are cheap.  In China, the Government plays the markets as well!  

As you can see from the chart above, a massive effort was made just a month ago to rescue the market and, since then, we've drifted along but still haven't filled the gap that occured in October that took the market down 15% and even that is just 1/2 of the overall 30% decline since January.  

We tend to think of China as "them" but THEY have people, just like us and THEY have a Government, just like us and that Government is full of good and bad, competent and incompetent people – just like ours and THEY do what they can to fix the markets and please their constituencies but, just like us, THEY have a country to run and budgets to manage and, ultimately, THEY live in a World with the rest of us and can't act solely in their own self-interest – no matter what nationalistic fantasy of inherent superiority their leaders may choose to infect their people with, right?

People’s Bank of China Governor Yi Gang said in a statement on the Central Bank’s website that it is studying measures to ease companies’ financing difficulties and will use policy tools to support banks’ credit expansion and Liu Shiyu, head of the China Securities Regulatory Commission, said his agency encouraged local government-backed funds to help ease pressures created by share-pledge risks while Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said in an interview posted on the regulator’s website that recent “abnormal fluctuations” in markets don’t reflect the country’s economic fundamentals and “stable financial system.”  Liu He, China’s vice premier, hammered home the message in an interview with the Xinhua News Agency. He urged officials to step up efforts to promote “healthy” stock-market development while noting that equity valuations had dropped to historically cheap levels.

Image result for kudlow chineseWow, put a Mao jacket on Larry Kudlow and you'd feel right at home, wouldn't you?  See, China is just like US and they do the same sort of things to prop up their markets that we do and so do the Europeans and Indians and even the Russians and, when we all try to stimulate the economy at the same time – it sort of works – it's what happens when we stop stimulating that


worries me.

And by "we" I mean all of the G8 (Russia too!) because, as soon as one lets their economy fall on it's own, they are likely to all start falling in our inter-connected Global Economy and any additional efforts made by the remaining participants to bail things out at that point would be an effective bail-out of the first country to quit the effort – making there something of an incentive to be the first country to stop stimulating.  So far, that's US!  

Of course this is kind of a dick move (couldn't think of a better word) but we do have a dick President and not just because he's going down like Nixon…  Unilaterally withdrawing stimulus measures and enacting trade restrictions benefits the US to the detriment of the G7 (without the US these days) and we can play that game for a short while but, very soon, the other countries are going to be sick of footing the bill for the US.  Currently, the rest of the World is looking to China to see if they will stand up to Donald Trump and tell him to shove his trade policies up his ass. 

Image result for pence evilIndeed, over the weekend, at the APAC (Asia-Pacific Economic) Conference, Mike Pence squared off against his China's XI and the US came off looking worse for the wear as China's exports continue to climb as they make more and more trade alliances outside the US and there was no, if not backwards, progress on Trade Talks, which will cause the markets to rethink what little rally we had last week.  Pence ineptly adopted his master's style in his speech, really pissing off XI, who sees Pence as an underling to Trump, who couldn't be bothered to show up at Asia's most important business conference.

“The United States, though, will not change course until China changes its ways,” Pence said in his speech, implicitly taking shots at China while offering an alternative to the other member countries in the region. “Know that the United States offers a better option," he said.

"We don’t drown our partners in a sea of debt. We don’t coerce or compromise your independence. The United States deals openly, fairly. We do not offer a constricting belt or a one-way road.”

China is a relative newcomer to providing aid, and its loan-heavy, no-strings-attached approach has unsettled Western nations that have been the mainstay donors to developing nations and often use aid to nudge nations toward reforms.  Pence also called on China to pull back from its military expansion in the South China Sea, deal with its human rights violations and halt the theft of American intellectual property in its pursuit of its “Made in China 2025” plan.

Image result for china belt and roadBut China has ramped up its investments in the Indo-Pacific region, putting billions of dollars into infrastructure projects as part of its “Belt and Road Initiative.”  In countries like Papua New Guinea, the development is apparent, from buildings to new roads and bridges. A sign lining a road outside of APEC read: “The Great ‘One Belt and One Road’ Is Not Only a Road of Cooperation and Win-Win Situation, But Also a Road of Hope and Peace!”  Unlike in the US, simply repeating propaganda against something you don't like doesn't change other people's minds.  

Pence knows this, his audience is still the fanatics that put him in power, not the Asian Countries who are loving China's new open trade policies.  Those are the same fanatics who Pence will need to support him in 2020, as he runs for re-election after taking over for Donald Trump when he resigns.  

It's a very low-data week as we digest the last 20% of the S&P's earnings reports.  The Fed's John Williams speaks twice today and we have Durable Goods and Consumer Sentiment on Wednesday but markets are closed Thursday for Thanksgiving and no one will show up for Friday's half-day – I don't even know why they bother…

Be careful out there and watch those bounce lines!  


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  1. Still not convinced by these bounces!

  2. Someone got wrecked on the NatGas move last week. posted some messages:

    Options on futures sounds to me like leverage on top of leverage. They had 290 customers and the reporter from WSJ ( estimates losses over $70M! My guess is that these guys probably precipated the move by covering short calls by buying futures and moving the price up, forcing them to buy more! 

  3. Putin sure is getting sick of winning:

    China has purchased record amounts of soybeans from Russia in recent months amid trade tensions with the U.S., Bloomberg reported. 

    The world's biggest soybean importer, China has nearly tripled its imports from Russia, according to Bloomberg. Russian trade data show the country sold 850,000 metric tons of soybeans to China between July 2017 and mid-May this year. [...]

    While Russia's soybean production makes up less than 1 percent of the amount China imports, the size of soybean plantings in eastern Russia could reportedly expand up to 20 percent in the next two to three years.

    It's a market our farmers will never win back!

  4. Is anyone else having problems with TOS today.  I cannot open my account on new macbook air.  I called and told very long wait times.  


  5. Nom, I can log in fine on the mobile platform. 

  6. That's a crazy story, Stj. They must've been net short bunches of /NG calls, or else they had strangles which became inverted during that move. Burned on the calls, burned on the puts. I was watching the /NG futures options pricing during that move and the prices got very wide at times.

  7. Good Morning.

  8. It's amazing how it's never enough for some people:

    The Japanese broadcaster NHK said Ghosn was arrested Monday after he voluntarily submitted to questioning by Tokyo prosecutors. The prosecutors’ office did not confirm that.[...]

    According to NHK and the Kyodo News Service, Ghosn made nearly 10 billion yen ($89 million) over five years through March 2015, including salary and other income from the company, but reported as if he only made 5 billion yen ($44 million), or half of what he had received.

    Pay the freaking taxes – there will be plenty left anyway. How is that money going to help in jail?

  9. Phil, thanks for your advise on CELG last week. I think you said you'd want to look at fundamentals and whether you still like them when back. Would be good to get your view. Thanks.

  10. Anyone  What is Phil's rule about rolling spreads that are losing. I think it is roll when the long has lost 1/2 value or something like that.  I can't find it in the prior days.


  11. I hope you will take me off ignore.

    I was joking.

    LB earnings after the close.

  12. Thank you

  13. TSLA 360--wow

  14. Phil,

    Hope you had a good weekend, what are your thoughts on STT and what would be a good set up for STT? 

    Thanks as always 


  15. nomigp – TOS   Took my system a long time to load updates, but working fine now.  I use a Macbook too.

  16. Anyone playing /RB? Can’t find a reason for drop. Think we can still get to 1.60

  17. Phil, curious if you have any opinions on EQT.  With the breakout in natural gas prices, and them being one of the largest producers in the US, it appears they have more upside potential than down.  They've been severely punished this year, and their current price seems out of balance with their peers.  They haven't been this low since 2010.  Maybe justifiably, I don't know.

  18. Bought a little /CL around 55.5 japarikh, made 55 cents. Still long a little from earlier, sold $60 calls against it on Friday to help in case of a grind lower or sideways. Hoping for a pop and to close it all out this week but am not feeling terribly optimistic!

  19. Txchili – roll down generally when the value of the long call is about the net of your spread. That way you recoup your initial investment and adjust to a better position. 

  20. Phil, would you say it's a good day to close SQQQ Dec '18 13/19 BCS (now at 15.15). That's bearing in mind I would not be able to put any further ETF-based in place going forward… ). Or are risks still too high?

  21. /NQ, I’m taking a poke long here as they hit -2.5% down. Just looking for quick scalp money. 

  22. Already out of /NQ with a 20 pt bounce

  23. Thanks for the reminder on LB earnings!  $2 expected move, sold calls against some stock in IRA.

  24. Long some AMZN & NVDA.  Playing for a bounce. Risking about 4 points on each.

  25. Raised stop on AMZN to entry on this 7 point move.

  26. Stopped out of AMZN at entry.

  27. Good morning!  

    Europe's been falling since the pumped-up open and we're following suit, back to Thursday's lows, most likely.  

    • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
    • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
    • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230
    • Russell 1,485 with a weak bounce at 1,530 and a strong bounce at 1,575

    Those are the exact same levels and colors we had Thursday morning – that was a crazy day! 

    Anyway, you don't need me to tell you that all the indexes are below the 200 dma – so there's NOTHING to be bullish about, is there?  Wel, Dow is above it but the Dow is a stupid indxex – don't forget that…


    Debits/StJ – Holy crap!  

    '' Goes Dark After "Catastrophic Loss Event" 

    Typical options hocus pocus fun – selling both puts and calls just outside the "risk zone" to scalp pennies each month and it's a great strategy until the one time you lose 48 months worth of profits in one session and then, suddenly, you're underwater and it will take you 4 more years to get even – as long as nothing bad ever, ever happens again….

    There is nothing worse than your broker/fund manager losing so much money that you now owe money just to get even!  

    Farmers/StJ – Trump has completely screwed them.  Even if they get back the trade, now Russia is a major competitor with a huge shipping advantage:

    According to Russian Prime Minister Dmitry Medvedev, the country may partially replace US as the leading exporter of soybeans to China. The nations are also planning to work more closely on deliveries of other agricultural goods, including pork, rice, poultry, fish, as well as developing joint logistics projects.

    Over the past 10 years, Russia’s soybean production has been growing, with farmers expected to harvest a record 3.9 million tons in the current season that ends in 2019, Bloomberg reports citing projections by the US Department of Agriculture.

    TOS/Nom – Working on my PC.

    Ghosn/StJ – It's not just him either.  Apparently, a lot of directors were in on some scheme to hide income – more will come out soon.

    CELG/Alter – I'll take a look this morning

    Rolling/TX – Try to do something when the price of your long call drops to the net of the spread.  Why?  Because, if I bought the AAPL 2020 $190 ($25)/240 ($12) bull call spread for $13 when AAPL was $25 higher and now it's $16.50/$3.70 – it's still that same(ish) net $13 but it's all premium now but you can recover $16.50 from your $13 investment and put it into something that won't burn premium off at the rate of $2/month by re-investing in the 2021 $170 ($44)/210 ($26) bull call spreads at $18 so you'd spend $1.50 to roll but now you have a $40 spread that's half in the money for net net $14.50 and, of course, you still have the naked June $240s which you'd have to watch but, if you have to buy those back – you are well on the way to collecting the full $40 on the longs.

    Cashing in the calls from a bad spread allows you to put that money to work in a better-positioned, longer-term investment.  That's why you don't want to let that money slip away and deny you future opportunities.

    Welcome back Jabob:

    Looks like Musk may get his $420 wish after all.   Still silly but we can't bet against them while they are making money.

    STT/Pat – Classic financial firm and seems to be in good shape – just out of favor with the sector.   

    I see the 2021 $60 puts going for $5.70 and I'd consider that free money and you can pick up the 2021 $70 ($12)/90 ($5) bull call spreads for $7 so net $1.30 means you can buy 2x the longs for net $4.15 on the $20 spreads that are at the money and then, if we get a bounce, you can sell 1x the Jan $80s for $1.50-$2.

    So let's say it was 5 short 2021 $60 puts for $2,850 and 10 of the $70/90 spreads for $7,000 and 5 short Jan $80 calls for $750, that would be net $3,400 on the $20,000 spread with many more short call sales ahead.  Meanwhile, STT is at $72 and the Jan $72.50 calls are $3 so, if they fall to $2, you should sell 5 of them instead with tight stops on 2 as you don't want to miss your quarterly collections.  

    /RB/Japar – Same $1.55 as last week for the longs.  As you noted, nothing changed.  

    EQT/Idi – No EQT but we do have CHK – also been disappointing.  I don't disagree because we're the first but we won't be the only exporters of Nat Gas and there will be a huge glut of the stuff in a couple of years.  I just thought, for a while, we'd get a nice move higher.

    EQT is $4Bn and CHK is $3Bn but EQT's profits are a bit of a tax illusion while CHK's are a bit of a write-off illusion so I prefer the stock that is showing less than the one that's showing more.  CHK sells $9.5Bn and EQT sells $3Bn so, if there is money to be made – I'm betting CHK can make more of it. 

    SQQQ/Alter – Unless you don't need the insurance, I wouldn't give up the hedge.  They are $2.50/0.50 so net $2 out of $6 while being $2.20 in the money.  That means you have $4 upside and $2 downside so it's still a good hedge.  

  28. Closed out NVDA for small 1 1/2 poiint profit.  Have a 12:15 tee time and won't be around this afternoon.

  29. Oil/Jabob – Yep, that did it – good catch.

    TSLA/Jabob – Oh that is just silly.  This moves the market?

    Replying to 

    Maybe interesting to work with Daimler/Mercedes on an electric Sprinter. That’s a great van. We will inquire.

    Meanwhile, an electric sprinter would be great for people moving, like a 1/2 bus.  Jackie wants a sprinter but one more like this:

    Related image

    Very cool for road trips, that's for sure…

  30. someone needs to start buying some underwear!!!

  31. CELG/Alter – Like STT, they are down with their sector more so than having their own troubles.  

    Trump threatens to reign in drug pricing (which is really a threat to step up GOP contributions) and Revlimid sales are still a big part of their Revenues that is going away over time as they lose exclusivity – but it's a long way off, so shouldn't be considered by shorter-term investors:

    Currently, Revlimid is about 1/2 of CELG's sales and essentially all of it's profits so they've acquired Juno to pump up their pipeline but, at the moment – there is no immediate replacement for Rev:

    They can also reformulate and re-package Rev to improve its lifetime – any announcement to that effect would be a market-booster.  Even in their pipeline presentation – 3 of their 5 main rollouts depend on Revlimid variations:

    CELG may be a one-trick pony, but it's a great trick:

    He's a one-trick pony

    One trick is all that horse can do

    He does, one trick only

    It's the principal source of his revenue

    But when he steps into the spotlight

    You can feel the heat of his heart

    Come rising through

    He's just a one-trick pony, that's all he is,

    But he turn that trick with pride

    He's a one-trick pony

    He either fails or he succeeds

    So we're paying $48Bn at $70 with $4Bn in earnings and we should hit $5Bn, maybe $6Bn at the peak of the Rev cycle so anything else they figure out between now and 2022 is bonus money.  I don't know that I'd want to play them aggressively but we can add the following to the LTP:

    • Sell 5 CELG 2021 $65 puts for $9 ($4,500) 
    • Buy 15 CELG 2021 $70 calls for $14.20 ($21,300) 
    • Sell 15 CELG 2021 $85 calls for $8.60 ($12,900) 

    That puts us into the $22,500 spread that's 1/3 in the money for $3,900 so our upside potential is $18,600 (476%) at $85 but, as you know, the reason I generally go with 15 longs is because I like to sell 5 short calls that I could easily split if they go against me and still not be in trouble.  At the moment, of course, they are too low but I have my eye on selling 5 of the Jan $80 calls, now 0.80 for $1.70 (the price of the $75s) if CELG gets back over $75 soon. 

    If not, we can always sell 5 of the April $75s ($3.75) for $1,875 and use that money to roll the 2021 $70 calls ($14.20) to the $65 calls ($16.80) for $2.60 ($2,900) so two short call sales and I pay for my roll to a $5 (7,250) wider spread.  That's the kind of trade we like to get involved in!  

  32. We lost 25,000 yet again.  Lined up with 2,690, 6,700 and 1,500 – all failing. 

    I'd say short or long the laggard here but, if we have to short – it's very ugly (already is at down 500). 

    /RB stopped out below $1.575, would do $1.56 now if we hit it but tight stops and then again $1.55 and $1.54.  If they can't do something into Thanksgiving, I'd almost like to be short!  

    Finally getting some movement out of the STP – up 242% so we made about $40,000 while the LTP lost $100,000 on this dip (since last month).  That's about where we want to be because we only want to mitigate half the damage on the way down unless we're going to go full bearish – which is very tempting now.  

    Also, keep in mind the LTP move is paper losses mostly caused by the VIX, more so than our positions declining – as we sell a lot of premium in that portfolio (Butterfly too).

  33. What is the thing that they don't want to disclose:

    Saudi Aramco no longer plans to launch what would have been one of the world’s largest-ever corporate-bond sales to fund a roughly $70 billion stake in the kingdom’s national petrochemical firm….People familiar with Aramco’s financing discussions say the oil firm is now worried about the level of disclosure required for a bond issue and whether the uncertain outlook for the oil market might damp demand for debt or increase the cost of borrowing.

  34. StJ – they do not want to reveal how much they rely on decomposing bodies for creating future oil reserves

  35. Phil/optionsellers…  the "mea culpa" video by the president is both sad and funny.  He actually said "I truly invested your funds like you were a family…I'm sorry this rogue wave capsized your boat… I wish you great luck and good health."

  36. Hello Phil and the Gang.

    Phil you wanted me to remind you about the butterfly portfolio information today.

    Thanks in advance!

    Hello Phil and the Gang,

    As a new member I have been studying old posts and the new members section.  There is a lot of great stuff in there – especially on position sizing.  

    One thing I haven't been able to find is an explanation on the Butterfly Portfolio.  I am looking for information on the creation of positions – ie why did Phil pick "this" strike verses a different strike.  Or, I am looking for information on typical setups – ie "we pick  .3 / -.3 delta options as our wings of the butterfly" – the premise for selecting strikes.

    Thanks in advance.

    Butterfly/Robert – I'm in Vegas and tight for time but ask again on Monday and I'll be happy to catch up.

  37. Long-Term Portfolio Review (LTP) – Part 1:  Actually it's better than I thought as we were only at $933,656 back at our 10/19 review and now we're at $935,614 so we're up about $2,000 after a rough month – I can live with that – especially as "that" is still up 87.1% from our $500,000 start on Jan 2nd.  

    Also, the STP is doing its job and making money while we lie still and, while it's tempting to get bearish, this market is actually just making the bullish 10% correction we expected, only it's starting from 10% higher than we thought it would be so MAYBE down another 10% if panic ensues but we'll be buying then, not selling.  

    Meanwhile, our primary goal is to preserve cash and buying power so we're only going to change the really compelling positions and generally try to stick with what we have which is $555,528 in CASH!!! with $1M of our $1.8M buying power in use at the moment – that's something else I'd like to reduce so we'll take a hard look at our bigger margin-eaters and see if they are necessary. 

    • HMNY – Still hanging onto 0.02 and the year is winding down and they aren't BK – interesting.  They had lost about $240M by 9/30 but really – that was their plan all along, wasn't it.  Their big mistake was doing this in a public shell instead of losing Billions in private like Uber…
    • WBA – Loose call from a position we'll discuss later.
    • Short puts – We trimmed a lot so these are just the losers:
    • KHC – Nothing wrong with our net $52 entry – that's where we are now and, since that was our downside target (see how these placeholders work?) let's buy 15 2021 $45 ($10)/60 ($3.50) bull call spreads for $6.50 ($9,750) and, you guessed it – I want to sell short calls down the road for income.
    • SBUX – Since the market is uncertain and we'd like to free up margin, let's take the money and run as we're up 60% already.  
    • SEE – We were asleep at the wheel as they dipped to $30 early this month, now I'm not willing to chase a BCS but next time we should.

    LTP Review – Part 2:

    • ETM – Still good for a new trade.
    • NRZ – On track.
    • SKT – I love this company, best REIT of them all at the moment with a 6% dividend.  On track.  
    • AAPL – More cowbell!  ("Guess what? I got a fever! And the only prescription.. is more cowbell!") How could you not want more AAPL stock when it goes on sale?  We have a big spread already but why sell 10 June 2020 $160 puts for $12.88 ($12,880) when we can sell 15 2021 $170 puts for $18.80 ($28,200) and I know I said I wanted less margin but hey, $10,000 more (so we roll).  Now we can use that $10,000 to roll the 40 2021 $190 calls ($33) down to the $180 calls ($37.50) for net $4.50 ($18,000) so we've added $40,000 of potential upside for net $10,000 AND improved our position for when we do want to sell more short calls (and we're likely to collect the full $31,000 from the June $200s at this rate).  More cowbell baby!  
    • ABX – We shouldn't be greedy as we're back in our range so let's sell 20 April $13 calls for $1.25 ($2,500).

    • ALB – Patience is paying off with them. 
    • ALK – On track but I don't expect them to go over $70 so let's sell 10 Jan $70 calls (full cover) for $2.25 ($2,250) and see how that goes.  If they go higher than $72.50, we're in the money for $25,000 and I'm happy to DD on the longs if they break up but, come on, it's only an airline…

    • AMGN – We're right on track as we sold the Jan $200 calls so we don't want them to be higher at the moment.  We already took profits on the first leg of this trade and the 2021 spread is there to cover the short calls we left out.  On the other hand, the premium on the 2020 $200 calls is ridiculous now but we're generally in good shape.
    • ARR – Those short puts expired at about $2 so evenish in the end.  We're back to $22.50 and I don't like the option pricing but I do love the 0.19 MONTHLY dividends so let's sell 10 of the July $22.50 puts for $2 and 20 of the July $20 calls for $2.50 and see how that goes.
    • BBBY – Not much to do but wait on these.
    • BHC – $10.60 for the 20 2020 $15 calls ($21,200) is much more than we'd get for the spread so let's cash those and buy back the short 2020 $15 puts for $1.40 ($1,400) and cover the short 2020 $22 calls with 20 2021 $22 ($8)/35 ($4) bull call spreads for net $4 ($8,000) and sell 10 2021 $20 puts for $3.25 ($3,250) so that's net $15,050 and we've cut half our short put margin and we still have a $30,000 spread left over.  Not bad off our original $4,200 credit spread (we were very aggressive with the put sale because — VALUE!!!).  

    • C – Wow, doing very poorly at the moment.  We'll take advantage of the cheap 2021s and roll the 25 2020 $62.50 calls at $9.20 ($23,000) to the 30 of the 2021 $60 ($12)/75 ($5.50) bull call spreads at $6.50 ($19,500) and we'll roll the 10 short 2020 $70 puts at $11 ($11,000) to 15 short 2021 $65 puts at $9 ($13,500) so we're pocketing $6,000 to make up for a bit more margin and now we have $45,000 worth of longs.
    • CAKE – Nothing to do here but wait.
    • CDE – Unlike ABX, they haven't recovered yet but I still  like them long-term.  No good moves to make, so we wait.
    • CHK – Strangely dead with /NG prices through the roof but, as noted recently, the long-term contracts haven't begun moving yet.  On the whole though, we're on track, about halfway to goal.
    • CHL – A Chinese stock that made money.  I should get an award!  cool

    • CMG – How do I love thee?  Let me count the ways.  $26,000 on those Jan short calls!  Now guess what?  I have no faith of $460 holding so we'll take $72 ($108,000) and run on the 20 short 2020 $460 calls and buy 20 of the 2021 $480 ($100)/540 ($65) bull call spreads at $35 ($70,000) and we'll roll 10 (1/2) of the 2020 short $580 calls at $26 ($26,000) to 10 more of the short Jan $485 calls at $13.50 ($13,500).  We're doing that just to accelerate the Theta decay as we intend to pull a lot of money from short sales over time.  We're taking net $25,500 off the table for now.  
    • CZR – Still good for a new entry.  Vegas was packed when I was there.  

  38. Aramco/StJ – LOL, why don't they just lie like everyone else?  That tells you all you need to know, they know that Aramco is never going to be worth $1Tn, let alone $2Tn.  Half of those "assets" will end up stranded and the price is not likely to sustain $70 for long periods of time going forward.

    Queen/Batman – I saw the movie yesterday, it was very good.  I was in Philly for that show (was also on in UK, where Queen was) – one of those great lifetime experiences, which is why I always say yes to my kids when they want concert tickets…

    Options/Tom – That's why I refused to have a certain strategy for our Hedge Fund.  If you take money in following a certain strategy and the market changes – you can get killed very quickly.  Unfortunately, investors are generally more comfortable with a well-defined strategy – not that it ever bothered Berkshire investors not to have one other than "try to make money by investing in stuff."

    Butterfly/Robert – First of all, we call them butterflies but that's not the option strategy you are thinking of.  Once upon a time we used traditional butterflies but I decided they sucked so we began experimenting with extending the bull legs so we lost less Theta than our shorts and, over time, it evolved into mostly bargain-hunting positions that are low in a dependable channel we could sell puts and calls on over time.  The selection criteria is to find stocks with a lot of motion within the channel (driving up short-term option prices) but long-term stability that makes the leaps reasonably priced.  Then we just pay attention and try to buy low and sell high and, when we do decide it's time to sell short-term puts and calls, our selection is based on where we actually think the stock will end up during that time-frame.  It's surprising how many times we nail it.

    Just go to the portfolio tab at the top of this page and check out the reviews from Jan forward and you'll see every new Butterfly position as we added it and my comments on each.  

  39. LOL Tangle! If it weren't so tragic…

  40. LTP Review – Part 3: 

    • DAL – On track
    • DIS – These are leftovers from a successful spread but let's change up the timing by rolling the 15 short 2020 $115 calls at $12.75 ($19,125) to 20 short April $115 calls at $7 ($14,000) so we're putting $5,125 into it but we'll have another two or 3 chances to sell short calls this way.  
    • F – Down on trade issues but still a good company so good for a new trade and no changes to far.  
    • FCAU – On track.
    • FNSR – They came back strong on the buyout offer.  Our $10/22 spread is net $10 on 20 but the full $12.75 we expected otherwise, so let's just take it off the table and free up $60,000.  The short puts we can leave to expire. 

    • FTR – Let's take advantage of the low price and sell 50 of the 2021 $5 puts for $2.35 ($11,750) and, technically, it will be a roll for the short 2020 $8 puts but they are only $4.50 so let's say we set a stop at $4.75 and, otherwise, hope they recover before buying them back.  
    • GCI – Good for a new entry.
    • GE – It's silly not to pay 0.75 to roll the 80 2021 $10 calls ($1.90) to the 2021 $8 calls ($2.65) for $6,000 to buy $16,000 more in position.  The $5s are $4.20 – steep by comparison.  
    • GILD – Good for a new entry back at the bottom of the channel ($68.50).  
    • GIS – Good for a new entry.  
    • GPRO – Let's buy 40 more of the 2021 $5 calls for $1.90 ($7,600) 
    • HBI – Very out of favor at the moment.  We'll roll our 50 2020 $13 calls at $3.15 ($15,750) to 50 2021 $10 calls at $5.60 ($28,000) so we're paying $12,250 to buy $15,000 in premium plus another year for HBI to get their act together.  I guess we may as well buy back the 50 short 2020 $20 calls (0.65), since it's not worth waiting a year for and we'll sell 30 April $16 calls for $1 ($3,000) to pay for it.  
    • HRB – On track (again).  

    • IBM – On track.
    • IMAX – Good for a new entry.  Let's buy back the 20 short 2020 $30 calls for 0.55 (not worth keeping) and wait for the next spike to sell more
    • IP – Mis-entry as the 2021 Jans are supposed to be calls, not puts on the spreadsheet – no wonder we're losing money when we had such a well-timed entry!  

    • LB – On track.  We have a lot of short puts, let's buy back the 15 2020 $30 puts for $3.80 ($5,700) 
    • M – Still good for a new trade
    • MO – Good for a new trade.
    • MT – Nice bottom so let's buy back the 40 2021 $32 calls for $2.90 ($11,600) and wait for some improvement to sell more calls.  
    • MU – On track (barely).

    I'll finish part 4 later. 

  41. Indexes look very sickly, not a productive day.  Monday on a short holiday week, however – very meaningless…

  42. CZR- I always pay attention to your portfolio reviews looking for updates on any of these I may hold but also for any possible new entries. (Note to newer members- do your own homework. Don't make a trade that Phil suggests unless you are entirely confident in the premise). 

    In that vein, I have no CZR position but taking a quick look I see a highly leverage balance sheet (which I know does not affect your thinking usually) and slow earnings growth. 

    What is you premise beyond Vegas is Vegas? What am I missing?

  43. LB opinion?

  44. L Brands beats by $0.01, beats on revs; comps 4%; guides Q4 EPS in-line; cuts dividend to reduce debt; names John Mehas as CEO of Victoria's Secret Lingerie

    Font size: A | A | A


    4:41 PM ET 11/19/18 |



    4:03 PM ET 11/19/18



    % Chg






    Real time quote.



    Reports Q3 (Oct) earnings of $0.16 per share, excluding non-recurring items, $0.01 better than the S&P Capital IQ Consensus of $0.15; revenues rose 6.0% year/year to $2.77 bln vs the $2.70 bln S&P Capital IQ Consensus.Same store comps in Q3 were +4%.Co issues in-line guidance for Q4 (Jan), sees EPS of $1.90-2.10 vs. $2.00 S&P Capital IQ Consensus.

    Other News:

    Dividend Cut: Co plans to reduce its annual dividend to $1.20 from $2.40 currently, beginning with the quarterly dividend to be paid in March 2019. The planned reduction will result in a dividend payout ratio that is more consistent with the company's past practice, and a dividend yield in line with relevant comparisons. The $325 mln in cash made available from the dividend reduction will be used primarily to contribute to the deleveraging of the company's balance sheet over time. Victoria's Secret Lingerie Leadership Change: Co also announces that John Mehas has been named CEO of Victoria's Secret Lingerie, effective early 2019, replacing Jan Singer, who has resigned. Mehas is currently serving as President of Tory Burch, the iconic lifestyle brand. Previously he led Club Monaco, a Polo Ralph Lauren brand, for 13 years as President and CEO.

  45. FU LB!!!!!!


  46. Apple Plunges Into A Bear Market: 4 Things Investors Need To Know

    Buy some now; buy more if it goes lower. 

  47. SPX- air out of the balloon:

    1/2/18- close 2695

    11/19/18-close 2690

  48. S&P lower EOY. Volatility higher.

  49. KC/LA game tonight will be fun.

  50. NG goes up 18% and bankrupts hedge funds? Asset prices can easily move by 20%, especially in energy and US natgas has been a fraction of international prices for years so domestic volatility was an inevitability. These guys are over-leveraged, plain and simple. A consequence of the expanding knowledge economy model. The incumbent currency model (fiat-based system of trust) is being deprecated. It's like global warming and forest fires. You can't tie any one fire or its intensity directly to global warming, but statistically there's more of them and they're worse. With futures and underlying asset values you'll see more of this. The high level cause is a paradigm shift from the manufacturing economy (well served by nation-state fiat currency system) to the knowledge economy, which is not well served by this mechanism. It allows for the contracts (knowledge) to be worth orders of magnitude more than the underlying assets. When the underlying moves slightly (like 20%) the contracts move 1000%. You see it here with natgas. We saw it with volatility and SVXY in Feb. We see it with "fake fake fake" oil contracts. You see it everywhere now.

    Take my theory and apply it to the current stock and bond markets and then it goes Kablooie real bigly. 

  51. bio--you are right about the game--wow!

  52. Fate of World’s Biggest Car Alliance Hangs on One Word: Ghosn

  53. Apple cuts production orders for all three new iPhone models: WSJ

  54. US, China may be heading toward a new cold war

  55. Coldest Thanksgiving in 117 years likely for Northeast, Boston

  56. Good morning!

    They did a very complex reorganization that leaves them with little downside and a lot of upside. I like the fact that they are down with the other casinos but have no exposure to Asia.  CZR is now really an operating company with some owned assets while VICI is essentially a wind-down REIT (owned by the former creditors) which is doing a lease-back of properties to CZR – as long as they keep making their payments.  Also, aside from owning WSOP, CZR has the best sports book in Vegas and that will franchise out to other states and generate maybe billions more in income in the coming years.  Don't forget, CZR sports betting lets them tie back rewards to the casino – huge advantage locals don't have.

    Q2 killed them (8/1 report) because they forecasted Q3 down but that was because last Q3 was the Mayweather fight – you can't possibly compare to that!  Also, Mandalay Bay is theirs and they're still recovering their business post-shooting.  

    Yes it's risky but all we did was promise to buy 2,000 shares for $12  and took a net $3,320 credit on a $20,000 spread so our net entry is about $10.50 ($21,000) – I think it's a reasonable risk-reward.

    LB/Jabob – That's why we bought back the short puts in the LTP – now we can sell more.  They cut the dividend, of course it's going to sell off.  Still paying $1.20/share, which is good against $32.50 but was $2.40 and all people hear is "cut" and they dump the stock.

    The parent company of Victoria’s Secret said that for its third quarter of fiscal 2018, it posted a loss of $43 million, or 16 cents per share, which is weaker than its earnings of $86 million, or 30 cents per share it posted during the year-ago quarter. On an adjusted basis, the company brought in earnings of 16 cents per share, which is nearly half the 30 cents per share it brought in during the year-ago quarter.

    L Brands added that its revenue for the period came in at $2.8 billion, a 6% increase compared to the $2.6 billion it brought in during the year-ago quarter. “During the quarter, we made some tough decisions that enable us to increase our focus on our core businesses and highest growth opportunities,” CEO Leslie H. Wexner said in a statement.

    The company is calling for fourth-quarter adjusted earnings of $1.90 to $2.10 per share, while its fiscal 2018 adjusted earnings is slated to be between $2.60 to $2.80 per share, an increase from its previous outlook of $2.45 to $2.70 per share. L Brands added that its board of directors will slash the company’s annual dividend to $1.20 per share from $2.40 per share.

    Oh no, run away!  I don't want to own a company making $2.50 share for $35 (p/e 14) in what is widely considered to be a rough, turn-around year…  

    Traders are idiots – that's my opinion!  

    Kablooie/BDC – Let's just hope we're well-hedged for the ride down.