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Friday Market Follies – China Trade Deal or BUST!!!

Donald Trump will save us.

That's what we're hoping as the market optimistically heads into this weekend's G20 Meeting, expecting some sort of Major breakthrough as Trump and Xi sit down for dinner on Friday.  In fact, the first image out of Buenos Aires is that of Trump, Trudeau and Nieto signing the USMCA (ie. NAFTA) after 18 months of negotiations in which our Negotiator-in-Chief got NOTHING better – to the point where Congress may not even ratify the thing as there are so many angy constituents.  

Keep in mind that we already had NAFTA – all Trump did was change the name and claim he invented it (after saying how horrible it was for years) and even THAT took 18 months.  We do not have a current trade deal with China and the chance of going from something to nothing over this weekend is about the same as the chance of Trump letting Xi pick the menu for Saturday's dinner.  

It's not actually clear that Mexico will ratify the deal either as this is effectively Nieto's last act as President of Mexico as he turns over the office to Nationalist successor Andres Obrador on Saturday and you might think "Oh good, another Nationalist, he and Trump should get along great" but that's not how Nationalism works.  We used to have lots of Nationalists and they all said "XXX First!" and they all ended up going to war and killing each other, which led us to an elightened age when GLOBALISTS took control and cut down on conflicts by realizing that nations had to compromise to achieve lasting peace.  That's all out the window now…

One of the key "accomplishments" of the USMCA is already a disaster that threatens to skyrocket health care costs as it protects drug makers from generic competition for 10 years (up from 5 in Mexico and 8 in Canada) which means companies can charge outrageous prices for medicine for much longer periods of time.

Image result for prescription drug prices chartOpponents—including generic drugmakers, insurers and the influential AARP advocacy group for older Americans—say the deal would make it harder to ease those rules in the U.S. and restrict competition regionally. The Association for Affordable Medicines coalition wrote to U.S. Trade Representative Robert Lighthizer this month, saying the trade pact, as written, “will exacerbate the problem of high prescription drug prices in the United States.”  Just another case of Trump saying how he will fix something but then actually making it much, much worse.  

Too bad Florida – you voted for this idiot and now he's stabbing you in your bad backs!  As you can see from the chart, the price of generic drugs has dropped 75% in the past 10 years while the price of prescription drugs had gone up over 200% in the same period – that's a 1,100% difference in price that you are being asked to pay.  Mexico wasn't asking for this, Canada wasn't asking for this – this was Team Trump pushing through what will amount to a massive tax on all Americans in order to keep that Big Pharma money flowing to the GOP.  They sold you out America!  

Image result for trump xi negotiating cartoonSo that's the guy we HOPE (not a valid investing stragegy) will pull a rabbit out of his ass and make nice with China and hammer out a trade agreement over the weekend.  Good luck with that!  Not only do I debate Trump's negotiating skills (6 business bankruptcies indicate he doesn't always win but he certainly likes to roll the dice) but I debate his motive in talking to China as those Tariffs are now responsible for adding $50Bn a year in revenues (paid for by the American suckers who buy the same overseas goods for higher prices, NOT paid by China at all) and, if Trump expands the Tariffs, the revenues are projected to be $125Bn a year.

That $125Bn a year is 10% of Trump's budget deficit so, if he eliminates that and tries to keep his tax cuts, he will go down in history as having the largest budget deficit of any President ever.  It will also give the Democrats even more reson to scale back Trump's tax cuts and the House GOP already didn't have the votes last night to pass the tax bill with very few legislative days remaining until a Democratic House is sworn in in January and last year's tax bill got ZERO Democratic votes (0).

Today is a window-dressing day and there was NO CHANGE AT ALL yesterday to our bounce line chart so we're watching the same levels today but I wouldn't trust anything that happens today so we'll maintain our heavily-hedged stance into the weekend and, in fact, we'll be taking advantage of the bounce to add a little more so we kind of hope we get more of a pop today than what we've had so far.  

Watch the NYSE and Dow very closely at their inflection points – if they can't turn green, there's little hope for the rest!  

Have a great weekend, 

- Phil


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  1. Learning from mistakes:

    The same arguments used to sell the Brownback experiment were used to sell the $1.5 trillion tax cut signed into law by President Trump last year. Most of the benefits of the cuts went to those at the top of the income spectrum.

    Leading members of Congress of his party have already begun talking publicly about significant cuts to programs like Social Security, Medicare and Medicaid to pay for them.

    This is reminiscent of Kansas, where the extensive cuts in everything from education, health care and transportation to agriculture and higher education dragged down the state’s economy while the money that was accruing to the rich wasn’t being used to ramp up investment. 

    The reason for the failure of the Brownback experiment, and the likely failure of the Trump tax cuts, is that they didn’t account for the ways that economic inequality today obstructs, distorts and subverts the pathways to economic growth that is strong, stable and broadly shared.

    They ignore extensive evidence of what — in fact — drives economic growth and stability and can deliver improvements in living standards.[...]

    There is an alternative explanation for how the economy grows. A strong economy comes from a society where good ideas and talented people are not obstructed from economic opportunity.

    It’s when investors don’t have distorted incentives but rather see that a strong middle class is ready and able to purchase the goods and services their firms produce.

    It comes from ensuring that economic inequality doesn’t subvert our institutions — undermining our democracy, our government and the way the market works to the benefit of the few at the top of the income and wealth ladders, rather than the majority.

  2. Good Morning.

  3. /CL below $50.

  4. imax???

  5. Coal ain't coming back and it's actually getting killed faster under Trump:

    In 2018, 14.3 gigawatts (GW) of coal-fired capacity was retired, up from 7GW retired in 2017. That constitutes the second-biggest year for coal-fired capacity retirement since 2015, according to new research from S&P Global Market Intelligence. In 2015, 14.7GW of coal-fired capacity was retired.[...]

    S&P Global says that an additional 23.1GW of coal plant capacity has been announced to be retired between 2019 and 2024, for a total of 71.9GW of retirements or planned retirements between 2014 and 2024. "The analysis shows about 245.6GW of current operating coal plant capacity in the US," S&P Global wrote.

  6. Took a poke at /CL long, Albo. Maybe $50 will be important (easy stop too) & worth a buck or so.

  7. (/CL was right at 50 on the Jan contract)

  8. FU GE!!!!!

  9. Spending today cleaning up portfolios.

    Taking tax losses on some positions that I no longer want to keep.

    Also doubling down on some positions I wish to keep, with the intent of selling the original  position in 31 days to avoid a wash sale.

    This is the last day you can do that and establish the loss prior to year end.

  10. Albo – I would be curious to know what you are selling…

  11. thanks for the heads up ALBO.

  12. StJ – I'm getting out of MU for now, 1/2 of my HL position which is at a loss, and 1/2 of BBBY which is at a loss.

    Bought some Jan $8 calls  on GE with intent of selling some Dec 31.

    Also buying some more QUIK in order to sell some higher priced stock Dec 31.

    Still looking for other actions to take.

  13. Phil – Did I screw up on GE ?  The thought just occurred to me that I need to go out to Feb to avoid a wash sale ?

  14. Phil/aapl

    My question on Wed: please scr3am our loud when you buy.

    Your answer: we already did!

    I was traveling and missed the $171.88 low on Monday and have some funds or allocate specifically to Aapl…like a lot..of funds

    So, what is the best strategy to invest here? Was $171 the bottom? If we allocate now, is there a way to prevent losses in event of a drop to $164 or $150 (2 or 3 standard deviations)?

    Appreciate your input very much as I can’t seem to move and feel a bit conflicted since I missed Monday in a plane

  15. KC/ 1.13 for July contract interesting for a long poke

  16. Thanks Albo! Don't have many positions that I would close now. Maybe GE and restructure a new position.

  17. hi phil

    when playing futures do you interpret the situation as we have currently  where indexes move up with a corresponding move up in dx to mean to  the upward move is less desirable to short than where the move up has corresponded with a drop in dx.

    and for a relative one to one move in vix and dx which one do you think has more effect on indexes.


  18. StJ – I'm pretty sure that i would be creating a wash sale if I executed or sold the Jan calls.

    Sold them up .02 from where I bought them.  Lucky !

    Am looking to replace them with some Marches since GE doesn't have FEBs.

  19. Yodi, thanks for the yesterday's tip regarding CM. They fell down somewhat more today so I sold Jan '19 80 put for 1.30 allowing net entry at 78.70. If assigned, what do your so called "armchair" trades involve? Is the this a combination of dividend-paying stock plus writing calls?

  20. Albo – Sounds right. I guess better to stick on the side of safety.

  21. Alter, good move, it is always difficult to find the bottom of a stock. But I think we very close.
    I don’t think the stock will be assigned at Jan 19 with the  80 put. So you will just land up with the credit you received. I have sold the Dec. 85 put which was already ITM, a very much more aggressive approach.
    Once I receive the stock, if still below 85, the armchair is a more relaxed type of play, where I sell for the same amount of stock, puts and options. So you say have 200 shares you sell 2x puts and calls.
    These straddles or Strangles run from 1 to three month forward. Say the stock would be at 83 I can sell a 80/85 strangle. Jan 19 for 2.55 or March 19 for 4.65 at present. It depends how much or how long you like to sit in the armchair, watching div. roll in. In general the further out option plays will give a bit smaller monthly return.
    The following can happen, if the stock runs over 85 you might get assigned before expiration of the option, you get your money back plus capital gain 83 to 85 or below 80 you will receive more stock if you do not roll, before the option is 100% ITM.

  22. jabo


    there been a negative media ( cnbc,bnn and sa) blitz on oil and energy stocks ever since trump tricked the saudi prince into flooding the world with oil by effectively reversing the promised sanctions 

    its been a painful experience for anyone long oil but i personally think it will end when whoever is paying for the media blitz is finished buying all the cheap energy stocks. 


  23. Good morning!

    The G20 sits at a big, round table and Trump was upset his seat wasn't at the head of it.

    Still not getting our Ws on the big chart and broken Ws are the worst…  It's all about 1,530 on /RTY and 25,300 on /YM but Dow is popping back to 25,380 at the moment – so looking good(ish).

    Good reference chart, StJ.  

    Failure/StJ – Well you may call it a failure but if your goal is to keep the Rich rich and prevent the poor from climbing up the ladder and attempting to take what the Top 1% already has – it was a rousing success.  That's the problem with these analysts – they assume that there are good intentions in these actions and they are simply misinformed but entitled assholes in the Top 1% aren't misinformed – they maybe be deluded, like Trump, who knows damned well he got everything from his father and would have been much, much richer if he had stuck it in the bank or the market rather than playing monopoly with real buildings but his story is that he's some self-made guy who beat all the odds to become a success and that story let's him look down on anyone poorer than him (because that's all he measures) as a "loser."  

    But, deep inside, Trump knows he's no big success and so do probably 70% of the people in the Top 1% and they all know that it's a coin flip whether their kids will be a success so they fight to tip the scales towards keeping their money, not sharing and NEVER providing equal opportunities for others because – from that mindset – everyone else is a potential competitor that they might not be able to beat.  

    When you point to successful immigrants in this country (43% of the Fortune 500 were founded by immigrants) they don't see that as a pro-immigration argument but a threat.  They can destroy education and health care in this country and make college and medical costs so expensive that only the already rich can pay without impacting their credit (making them less of a competitive threat), which gives them and their family a huge advantage over other Americans but they can't control the flow of well-educated foreigners so that becomes the next bogey-man they "need" to stamp out.  It's not MS-13 Trump fears but Jorge Perez, who kicked Trump's ass in the Florida market.  

    T/Albo – Always a good buy in the low $30s.

    Oil a fun long play off $50 with /RB also at $1.40 again (tight stops below)

    Coal/StJ – /NG killed it, how can it come back?  No one in their right mind would build a new plant as certainly within 20 years they will be outlawed globally.  Not enough time to recoup the costs.   That's why net retirement keeps climbing.

    GE hits keep in coming:

    For one thing, this is a forensic investigation on costs long-since absorbed by the company:

    The investigation by the Securities and Exchange Commission started, the company said, after GE earlier this year disclosed that a shortfall in those reserves for long-term-care policies would require more than $15 billion in funding. That surprise was part of a series of problems that have pushed GE shares to their lowest levels in years and prompted GE to decide to break itself apart and oust its chief executive.

    For another thing, these are statements released by the lawyers who are suing GE for poorly managing the stock and for another thing, they KNOW GE can't comment on it so whatever the WSJ decides to print goes uncontested in the minds of investors.

    "We are exploring every option to manage and mitigate risk from the company's legacy insurance liabilities. We have a strong commitment to integrity in our controllership and financial reporting. We are not going to comment about the specifics of ongoing legal matters."

    “I wouldn’t say what I saw was smoke,” said a former employee at the company’s finance arm, GE Capital, who left in 2016. “But there was enough concern that I decided to leave because I didn’t want to be there when there was smoke.” This person spoke to SEC investigators this summer, the person said.

    Hmm, not exactly a smoking gun, is it?  

    David Chase, a former SEC enforcement attorney now in private practice in Miami, said the entrance of the Justice Department into an accounting probe is unusual because of the dependence on subjective assessments and opinion in accounting decisions.

    “Accounting cases are very difficult to prove,” he said, adding that the claims can turn into a battle of expert witnesses. No charges have been filed by the SEC or the Justice Department, and Mr. Chase cautions that the focus of an investigation isn’t always known.

    Representatives of the SEC and Justice Department declined to comment.

    The shareholder lawsuit was brought by pension funds and other investors in federal court in the Southern District of New York in November 2017. The suit, several legal complaints consolidated into one, cites testimony from unnamed GE employees who allege that cash-flow models used to determine required reserves were altered for unknown reasons. One person claims to have informed GE’s external auditor, according to the complaint.

    I said we were going to roll in the last LTP review and now we're back at $7.50 so let's do it.  Our current position is:

    Short Put 2021 15-JAN 15.00 PUT [GE @ $7.50 $-0.44] -30 9/24/2018 (777) $-12,000 $4.00 $3.63 $1.83     $7.63 $0.48 $-10,875 -90.6% $-22,875
    Long Call 2021 15-JAN 10.00 CALL [GE @ $7.50 $-0.44] 80 9/21/2018 (777) $25,600 $3.20 $-1.52     $1.69 $-0.22 $-12,120 -47.3% $13,480
    Short Call 2021 15-JAN 15.00 CALL [GE @ $7.50 $-0.44] -80 10/1/2018 (777) $-12,000 $1.50 $-0.79     $0.71 $-0.07 $6,320 52.7% $-5,680

    As noted this morning, we're down $39,000 on the overall trade with much of the loss $16,000 reflected in the current position.  

    • For the LTP, let's roll the 80 GE 2021 $10 calls at $1.70 ($13,600) down to 100 of the $8 calls at $2.35 ($23,500) and buy back 40 of the 2021 $15 calls for 0.72 ($2,880) and hopefully we get a bounce to sell short calls into.
    • On the put side, we have 30 short 2021 $15 puts at $7.70 ($23,100) that we sold for $4 ($12,000) so down $3.70 but if we roll them down to 40 of the 2021 $10 puts at $3.60 ($4,400) we will have collected $26,400 on our two sales less the $23,100 we used to buy back the position so still a net $3,300 credit on 40 short $10 puts is 0.825 so net $9.075 is our entry if assigned 4,000 shares ($36,300).  Of course we're still down $39,000 so we'll need about $11.90 to break even on GE now.  

    In the OOP:

    • We only have 20 short GE 2021 $15 puts ($15,400) so let's roll those to 30 of the 2021 $10 puts ($10,600), giving up $4,800 of the $7,000 we initially collected.  
    • We have 50 2020 $10 calls, now $1 ($5,000) and we can roll those to 75 of the 2021 $8 ($17,625) and sell 75 of the 2021 $12 calls for $1.18 ($8,850) so we're spending $3,775 to roll to a $30,000 spread that's at the money and we're $32,000 away from breakeven overall so our goal is the same $12 as the LTP.

    Good point on tax moves, Albo.

    GE/Albo – It's 49 days out but I'm really not sure how the rule works as I trade under net rules (business entity), not personally, so I'm not used to worrying about those things.  

    AAPL/Maya – Without betting against yourself, it's hard to hedge AAPL here.  Of course, with the goal of owning $1M of AAPL, let's say we begin with a commitment to own $300,000 and we sell 20 2021 $170 puts for $21 ($42,000) and consider that free money.  From that, our SQQQ hedge had the following ratios:

    • Sell 5 AAPL 2021 $170 puts for $22 ($11,000) 
    • Buy 80 SQQQ March $15 calls at $3.40 ($27,200) 
    • Sell 80 SQQQ March $22 calls for $1.60 ($12,800)

    You intend to own AAPL longer so maybe a longer hedge would suit you better and the SQQQ 2020 $13s are $4 and the $20s are $2.65 so $1.35 is not too much to ask for a $7 spread that's at the money, right?  

    You'll have to own $340,000 worth of AAPL if things go rotten but you don't have to insure $340,000 – just what you think you'd lose on it so let's say we could imagine AAPL trading back to $100 and you'd be down $140,000 so we're going to want to mitigate about 1/2 of that damage ($7,000) and the above spread pays $70,000 for 100 contracts ($13,500).  

    That $13,500 is insurance money you HOPE you will lose because it's not likely you lose all of it unless AAPL is doing OK.

    Now, you collected $42,000 less the $13,500 insurance means you still have $28,500 towards a bullish spread but keep in mind what you are looking for here is what happens if AAPL does drop to $85 and you are assigned 2,000 shares at $170 ($340,000) so down $170,000 less the hedge is down $100,000 or 10% of your allocation.  

    Well, that's not so bad since, in theory, we'd be THRILLED to buy 2,000 more shares for $170,000 to average $127.50 and presumably we'd sell more puts and calls since doubling down again at $85 still wouldn't kill you as it would be 8,000 at $85 (or less) is $680,000 – so still room to double down again at $40!  

    Once you decide the worst case isn't so bad you can go ahead and decide what you are now willing to risk on a spread and the 2021 $150s are $46 and the $200s are $23 so net $23 on the $50 spread is very nice and 40 of those is "just" $92,000 so, even if you get wiped out, you still have plenty of firepower to establish our main Apple position.

    Meanwhile, spending $92,000 on the spread and getting a net $28,500 credit on the hedge means you are in the 40 2021 $150/200 bull call spreads for net $63,500 and your hedge pays back $70,000 if AAPL is below $150 (very, very likely as it's hard to imagine AAPL dropping 20% without taking the Nasdaq down) so you're pretty well covered and the upside would be $200,000 back at $200+, not including some extra cash from short call sales along the way (the Jan $180s are $7 so you could get $7,000 for 49 days out of 777 on just 10 contracts (1/4) but I think it's too low – it's just an indicator that you can scalp another $70,000 along the way. 

    So it's an initial allocation block that only uses 10% of your buying power (and $55,000 in ordinary margin) and, frankly, it will be disappointing if AAPL goes higher and all you make is $136,500 plus short call sales) but, if AAPL does take off, the other $900,000 in the allocation block is freed up for something else as it becomes unlikely you'll need it for AAPL.

    It would, of course, be way more fun if AAPL plunges 50% and you end up with 4,000 shares at $127.50 ($510,000) and then you sold 40 2023 $75 puts for $10 and $120 calls for $10 and dropped your basis on 4,000 to $107.50 where doubling down below $75 would put you in 8,000 at $91.25 ($730,000).

    So, if you'd love to own 8,000 shares of AAPL at $91.25, there's no reason not to pick up the above spread as a nice way to get started.  Worst case is you don't get to keep it and you have to be happy with just the $163,500 gain…

    /KC/Lionel – /KCN9 dropped to $113.05 – that's a good line to go long at but could go down to 105 so be careful.

    Wow, noon already?  Oops…

    Maya's fault!  

  24. Up a buck or so on /CL and out. Thanks for the heads up Albo :)

  25. By the way, I am taking a real day off on Monday – I don't expect to be around much at all.  I will try to get a post up or at least a short thing to move the chat to…  

    Very nice pop on /CL and /RB – good job guys!  

    Futures/Tommy – Yes, consider the Dollar to be like a current and it's more impressive if they swim against it than with it.  If the Dollar is strong AND we get an index move up, then a move down in the Dollar later will provide support or boosting fuel so it's kind of silly to short a move like that.  If, however, the Dollar is down 1% and the indexes are up 1% – you can then assume the move up is pretty weak and may be shortable.   The Dollar is much more important than the VIX, which is really measuring the effect of the market move – it doesn't cause it.

    Speaking of weak, from 274 on the 14th to 264 on the 20th, we had 625M shares traded.  Then we churned on the 21st and back to 263.25 on the 23rd but, from the 26th to the 30th (back around 275) – it's been 390M so almost twice as much down volume as up means we're weaker now than we were when we fell on the 14th.

    Date Open High Low Close* Adj Close** Volume
    Nov 30, 2018 273.81 274.98 273.45 274.59 274.59 26,159,585
    Nov 29, 2018 273.71 275.55 272.43 273.98 273.98 81,929,800
    Nov 28, 2018 269.60 274.58 268.33 274.58 274.58 127,629,600
    Nov 27, 2018 266.34 268.40 265.66 268.40 268.40 75,502,400
    Nov 26, 2018 265.78 267.75 265.34 267.50 267.50 79,843,900
    Nov 23, 2018 263.18 264.82 263.07 263.25 263.25 42,807,900
    Nov 21, 2018 265.86 267.15 265.01 265.02 265.02 75,563,700
    Nov 20, 2018 265.36 267.00 263.15 264.12 264.12 136,021,300
    Nov 19, 2018 273.05 273.38 268.07 269.10 269.10 103,061,700
    Nov 16, 2018 271.79 274.75 271.21 273.73 273.73 126,668,000
    Nov 15, 2018 268.78 273.54 267.01 273.02 273.02 135,101,400
    Nov 14, 2018 274.16 274.61 268.45 270.20 270.20 125,335,900

  26.  Some positive comments out of President Trump as he says there are good signs ahead of the meeting with President Xi tomorrow.  Sure !


    You're welcome, Atitlan.  Well done !  

  27. Made my 1k per day with Oil long and some puts on SPX. Can’t say how much I appreciate this board and everyone’s contributions…such a great forum!! 

    I have to imagine folks will be taking some risk off going into the weekend ahead of Trump’s meeting. Be careful, and have a great weekend! 



    Have a great weekend

  28. /CL /jeffdoc /Albo

    "Oil a fun long play off $50 with /RB also at $1.40 again (tight stops below)"

    Help me out here guys as I am a newbie and trying to get some futures gains/experience. Where was the call to go long on CL at $50?

    I did see Albo mention something about 50 but I didn't know it was a signal.

  29. House Democrats’ 1st bill targets big donors, voting access

  30. Bitcoin plunges back below $4,000

  31. Dreamer – I just posted that /CL was very weak.  It wasn't a trading call.

  32. Albo- OK, thanks for clearing that up and thanks for your contributions.

  33. Yodi, thanks for the comments. Yes, "armchair"-like trades is what is I am looking for. Would be very happy if I am able to generate an average of 2% per month on the capital… 

    The idea with joining this forum has also been to also learn to trade futures and then put whatever I earn (hopefully…) on future into far safer plays like the armchair trades.

    Jeffdoc, indeed, agree – very useful for me to.

    I wonder whether for most people here trading is their main activity? I am working full time as well and, while options-based strategies are very much feasible, I am finding futures plays quite difficult to catch at the right time… Also, I am playing with roughly $80k in total at the moment so some of the plays (most with stock prices >$100/share) here are somewhat out of bounds for even if do 1/10 of Phil's positions :)  

    In any case, interesting journey so far. Learning a lot about about options but would be keen for some "Futures Tradings – Do's and Don't" for beginner's. There must a good intro on this somewhere on the site so if someone knows where to find it, it would be be great.

  34. Alter-

    Yeah, I am in the same boat with working full time and trying to catch things fast enough. 

    I also have a similar amount of capital to trade with. You probably already know but the OOP starts with 100K, so I that might be the best option for us right now and then hopefully in a couple years, switch over to the LTP/STP allocation blocks.

  35. /KC @ $106 would be fun.  

    /GE = OOP, doesn't the suggested roll exceed the scaling for this portfolio size? 

    /Yodi – Well written write-up, easy to understand.  I visited your armtrade article many times since joining PSW.

  36. Alter and Dreamer, I have followed both your comments. I have been on the board for quite some time, entered many different option plays.
    Yes I looked and played future as well """ On paper trade!!!!"""
    Now if you wish to lose your 80 or 100K quickly, you are on the right way jumping on to future trading.
    It might sound great to take 1k HOME on a day, on paper I did this as well.
    My recommendation start the 10,000 hours on paper first and then possible but only possible start for real with futures.
    Even a guy like Phil can loses money on futures!!!
    That said I rather relax in my armchair. And with this all have a nice week end and watch the clown pulling rabbits out of his ass.

  37. Risk off/Jeff – Thanks for reminding me (and good job with taking quick profits).  

    In the STP, we have:

    Long Call 2019 21-JUN 12.00 CALL [SQQQ @ $13.83 $-0.02] 80 10/25/2018 (203) $28,000 $3.50 $-0.10 $0.01     $3.40 $0.15 $-800 -2.9% $27,200
    Long Call 2019 15-MAR 15.00 CALL [SQQQ @ $13.83 $-0.02] 100 11/23/2018 (105) $31,000 $3.10 $-1.40     $1.70 $0.11 $-14,000 -45.2% $17,000
    Short Call 2019 15-MAR 22.00 CALL [SQQQ @ $13.83 $-0.02] -100 11/23/2018 (105) $-14,500 $1.45 $-0.80     $0.65 $0.01 $8,000 55.2% $-6,500
    Short Call 2019 21-JUN 17.00 CALL [SQQQ @ $13.83 $-0.02] -80 11/20/2018 (203) $-28,000 $3.50 $-1.50     $2.00 $0.15 $12,000 42.9% $-16,000
    • SQQQ is just under $14 and we can roll our 80 March $15s ($1.75) to 80 June $12s ($3.40) for $13,200 in the STP and that buys us $24,000 more protection and 3 more months. 
    • We also left naked short DXD calls in Jan and April (we cashed the longs) in the STP and they pulled back so let's just close them out with a $6,150 profit (plus what we already collected) and work on TZA.

    Our TZA position is:

    Short Put 2020 17-JAN 10.00 PUT [TZA @ $11.10 $0.07] -40 8/29/2018 (413) $-13,000 $3.25 $-1.41 $-2.46     $1.84 - $5,640 43.4% $-7,360
    Long Call 2019 18-APR 7.00 CALL [TZA @ $11.10 $0.07] 100 9/20/2018 (139) $16,000 $1.60 $2.50     $4.10 - $25,000 156.3% $41,000
    Short Call 2019 18-APR 11.00 CALL [TZA @ $11.10 $0.07] -100 10/24/2018 (139) $-6,000 $0.60 $0.91     $1.51 - $-9,050 -150.8% $-15,050

    TZA is at $11.10 so our spread is in the money and would pay $40,000 if it finishes over $11 vs current value of $18,590 but we can pull the April $7s now for $4.10 and that's $41,000 so let's take it and run but we're still bearish so let's now double-cover the short April $11s with 200 2020 $9 ($3.10)/$15 ($1.65) bull call spreads at $1.45 ($29,000) so we're still putting $12,000 in our pockets and now we have $120,000 worth of 2020 protection and we will just deal with the short calls and puts as we have to.

    Oil/Dreamer – I spent too long answering other questions and, by the time I posted my comment, it was too late to catch $50 but that was the call – me saying it was a fun long (ie, not with conviction) at $50 and, of course, in context, our Members know that $50 is a good place to play for a bounce so it's not very surprising that they were already doing it.

    Futures/Alter – The big mistake part-time traders make is they sit down at some random time (even if it's a time you schedule, it's still random to the market action) and they only have a certain window in which to trade so, if they don't trade – they feel like they failed or missed a chance.  That leads to a lot of bad trading.  9 out of 10 times I sit down to look at the Futures – I see nothing worth trading so I don't.  

    If you go duck hunting and there's no ducks – there's no point in just shooting into the air or shooting your friends a la Cheney – you just don't get any ducks.  Futures are like that – only trade when you have a good duck and you KNOW you can hit it.

    Same goes with options, you are right and you should not trade $100 stocks, you have to wait for calls on $10 stocks – like GE!  If you have $80,000 you can commit to owning $8,000 worth of GE by selling 10 2021 $7 puts for $2.35 ($2,350) and then you can use that money to buy 20 of the 2021 $8 ($2.40)/12 ($1.15) bull call spreads for $1.25 ($2,500).  That puts you in the $8,000 spread for net $150 and, if GE is at just $9 in Jan 2021, you will collect $2,000 for a $1,850 profit, which is more than 20% of your entire allocation for the trade and you can make up to $7,850 at $12 if all goes very well.  

    Even if it sells off, it's reasonable to expect you can pull the plug with a $4,000 loss so the risk/reward ratio is very good and, even if you "only" make $1,850 profit and you have 10 positions like that, your $80,000 becomes $97,000 in two years with the potential for a near double if all goes very well.  

    You don't need big trades to make big money – just the right small ones.  

    Of course, if GE goes to $6, I will advocate rolling the $8 calls ($2.40) to the $5 calls ($3.80) for maybe $1 as who doesn't want to add $3 of intrinsic value for $1?  That would be another $2,000 sunk into the trade but then you'd have a $12,000 spread.  You always have to like your worst case or you shouldn't even get started!  

    GE/Grass – Yes, it's bigger than it should be for the OOP but, fortunately, we're generally doing well so it's not killing us.

  38. Alter & Dreamer – I agree with Yodi and Phil re: trading futures.

    Seems that we've seen a lot of guys on this board lose big trading futures. It used to be quite busy with those guys posting their futures trades.  Several of them did well early on, only to get  more aggressive and lose.  

    Phil is uncanny with some of his calls.  But he is not averse to averaging down several times in a position because he has deep pockets.  For that reason, following his trading style can be difficult for us novices..

    I have been trading stocks and options for a long time, but only recently started trading futures, and have had some limited success.  Phil is different and quite good.

    Almost all the traders I have read about cut their losses short, and try to let their profits run.  These are the guys I try to follow.  They frequently get whipsawed, but will occasionally  catch a big move which makes their month or year.

    And Phil is so right about not trying to force trades just for the sake of the action.  That's the way to burn out fast.

    Take Yodi's and Phil's advice and paper trade..

  39. Futures/Albo – Yes, conviction trading is only for the cash-heavy.  The first 10,000 hours of trading (which was a good 30,000 hours ago for me) should be all about trading with good entries at strong support lines and setting very tight stops if they break.  That keeps your losses small and, of course, let's your winners run.  Not at all as complicated as it sounds but the discipline to stick to that plan – that's what takes 10,000 hours to get good at!  

    My "uncanny" calls on the Futures are because I trade the Fundamentals first and technicals second so I have a damned good reason to be entering my positions.  That's also what allows me to have conviction in a trade, like /NG, which went $40,000 against me early on but – I was SURE that LNG exports would boost prices in the long run so I was determined to stick with it – even if it took years.  It didn't take years, we flipped to an $80,000 profit and, ever since (2 years now) every time /NG fell out of the uptrend – we went long.

    It was just the same fundamental trade on the same premise over and over and over again and I I did was wait PATIENTLY for any technical breakdown, and then found support and called a long again (the 5% Rule is very good for that).

    That trade idea kicked off on 2/25 2016 – When I did a PowerPoint on the subject at the NY Trader's Expo and here's the original comment I made to our Members on 2/16 setting up my logic for why /NG should be $4.50.  The trade of the year was (and Jan was Jan 2017 at the time):

    That makes the natural gas ETF, UNG, our Trade of the Year and the way we are playing it is:


    • Buy 100 UNG Jan $5 calls for $2.65 ($26,500)
    • Sell 100 UNG Jan $10 calls for 0.65 ($6,500) 
    • Sell 50 UNG 2018 $8 puts for $2.10 ($10,500)

    That works out to a net cost of $9,500 and pays $50,000 if UNG is above $10 in January and stays above $8 into Jan 2018.  Worst case is you end up owning 5,000 shares of UNG at net $8.95 ($44,750), which is about $2.40 on /NG contracts.  Best case is you make a $40,500 profit on a $9,500 cash bet, which is 426% back on your cash!

    Obviously, it was a home run – so much so that we took it off long before Jan…

    Now we've hit my $4.50 target and I no longer care what /NG is doing unless it goes significantly enough above or below $4.50 for me to be interested again (and I'm talking $3 or $6).  If not, I simply wait PATIENTLY for the next FUNDAMENTALLY mispriced thing I can trade.  

    That's all it is, it's the same lesson I try to teach every day – find a FUNDAMENTAL reason to invest and then use options and scaling strategies to establish a position and, as long as the Fundamentals don't change – stick to your scaling plan.  I liked trading /NG bullish on every pullback because I was very confident that, no matter how badly we got burned in the short run – we would ultimately prevail.  That's what made it my favorite trading instrument. 

    Now it's Coffee (/KC) because I am fairly certain that, no matter what, at some point there will be weather conditions that cause significant damage to the crop and send prices back to $140 or higher so any time we get near 100 – I develop conviction!  

  40. Good stuff !

  41. Hey, did anyone else get contacted by American Express today to change their card over this Marriott hack?  They didn't even ask me, they issued a new number overnight.

  42. Credit card / Phil – I don't have an AMEX card but that has happened to me with Mastercard. Got a card in the mail without explanation and then an email to explain that I has used it with someone that might have been compromised so new cards… A warning would have been nice but these guys don't take chances anymore!

  43. Phil, I've read your trade on GE ( above); What is the probability that PE takes GE into bankruptcy, gets all the common stock holders out, clears out the liabilities, and comes out with new stock, no debt, etc…..Is that not what they did to Peabody coal. Just want to be damn sure I am not a bag holder for the rich and greedy! Your thoughts, Thanks as always

  44. GE/Jasu – It could happen, it can happen to any stock but it's not that likely as there are too many powerful funds that hold the stock and would get screwed.  Lawsuits would fly…

    Cards/StJ – I saw 3 mails from AMEX and I thought they were a scam but they did have my last 4 digits so I called the main number and I do use Marriott/Starwood all the time so I guess they are taking no chances on this one.  Very annoying though as I'm going away tomorrow and I'll have to take my old card and hope that's not a problem.

  45. Phil, Yodi, Albo, thanks a lot for the advise! Like it is often the case, in trading, we seem to be our worst enemies (and our impatience, in particular). On the other, that's also something we can hopefully learn to control, hopefully a bit faster than 10,000 hours but let's see.

    Have a nice weekend everyone.

  46. Tempting to fade this latest Trump rally, but Trump is impossible to handicap.

    My guess is at the end of the G-20, nothing will get accomplished but Trump will remark what a great guy Xi is and they'll continue to work together.  We'll see.

  47. Thanks everybody for the advice. Me, being a young-ish guy(30), It is sometimes hard to listen to the veterans but that's exactly what I am going to do and just paper trade futures for some years, while hopefully making great gains on our options trades! Hopefully, I can start contributing some more to this board after a couple years.

    Once again thanks for the newbie advice and have a great weekend.

  48. Jasu1 Your comments on GE sounds like GM

  49. Short /YM at an average of 25450 Albo. Ooops! The other side of a winning trade like /CL. Might get it back for a scratch. 

    Have a good weekend all!

  50. Yodi, that is the new way to rob from the small investor!

  51. Well, a bit of a bump but low-volume BS so we'll just have to see what happens on Monday (when I won't be here!).

    Have a great weekend, 

    - Phil

  52. I still could sell my then 5$ share to a other sucker for 2.50

  53. Last night we did have a serious conversation with Alter and Dreamer in respect to future trading.
    I normally like to give some comments in respect of my way of trading and set up some examples of plays I enter in my portfolios. I do not wish to tell people here how to run their business!
    Often I compare Phil’s Ports with what I trade, some work out some do not.
    I might have a lot of different positions but mostly in small numbers. And the key is small numbers.
    What would you prefer one Ostridge egg or twenty chicken eggs? If that Ostridge would die, how many eggs will you still receive from that bird? Eat one chicken for dinner you still left with 19 chicks.
    Both new members watching the comments of the day and possible see how great some guys doing in future trading. You hope!
    In did as mention by Phil and Albo, do not start to lose your money in future trading.
    I could give you my story but only want to add that in my portfolios I can see sometimes in wild swings, I am losing or gaining over 100K in one day! So if you can sleep with that, you could do some small future trading. But I do not! Especially for guys doing a day job and looking only for short time at their positions. Day trading is a job for people having their laptop as well in the bathroom!
    I must say I am happy with 75% of my positions. You cannot win them all, and on the 25% one has to work on.
    In one of my ports I only have armchair trades. During the past few weeks I could only look at this port with smiles, as with the exceptions of one or two, they all were weathering the ups and downs without me doing little or nothing.
    In that respect I again was thinking about our two newbies, having joint this forum with a capital of 80 or 100K.
    I think, before I started with Phil I lost most of my money, and was down to about 200K. Phil corrected my plays with some well, I might call it, acrobatic moves.
    Especially with HOV possible Phil still remembers, I was down heavy, sometimes I was running with some 250 option positions. It toke me over 6 years and I could close the book on HOV with some 30K profit. I must say I would not enter HOV again.
    That said It does worry me, when newbies enter our forum and hope to make a fortune overnight.
    The secret here lays in getting rich SLOWLY. This is where Tree planting (The man who planted trees) plays and armchair trades come in.
    Below I would like to give you a list of stocks, which I hold in my ports, still reasonable in Price, and to my thinking ONLY, are playable for Armchair trades. All have a yield well over 3 %.
    Here I do not wish to recommend and say do your own research.
    Say you have 100K you spread 65 to 70 % of your capital over different stocks only 100 stock or 200 at most and set them up for armchair trades.
    I milk out of these stocks a minimum of 2% sometimes up to 3 and even 4% per month.

    But let us not be greedy and play conservative. My 65K will bring me say at 2.5%. A cool 1625.00 per month. That might not be much if you wish to go on a cruise every month, but I tell you a little secret, at least 50% of all Europeans would love to have this income per month.
    Even the Chancellor of Germany Angelika Merkel, flies now the Spanish airline Iberia, tourist class, to get to Argentina.
    I will not spoon feed you with setting up plays, but below I give you a range of stocks I hold in my ports. Just to name a few. If you worked and researched your plays and wish to have any further questions I try to help, no advice only my comments!
    A final example I wish to give you with my holding of PM and the same could apply to other stocks of mine as well.
    My records of trading this stock goes back to Sep 2014. I have purchased or have been assigned this stock at various levels. From 108 to 77 dollar.
    Trading today at 86.54. Obviously again trading in relative smaller numbers, between 200 and 500 stock. My record shows that I made over this period a profit of 45K.
    What I wish to say here, you will have as well paper losses during certain times. But a tree does not grow overnight.  
    With that in mind all have a nice week end
    TD, 50.59
    MO 54.89  
    CPB 39.20
    ARR 22.14
    BX 33.73 possible 1$ too high
    ENB 32.73
    F 9.41
    NLY 10.00
    T 31.00
    VOD 21.49
    UN 55.51

  54. Thanks Yodi – very nice!  

    As Yodi mentions, there's a reason we have Education Archives, Portfolio Archives and Chat Archives – it gives new people a chance to learn from our many years of mistakes – and hopefully avoid making some of them when you trade! 

  55. Thanks for putting many things in perspective Yodi!

  56. Thanks Stj, glade to see some people I hope reading my comments. To many people are losing their shirt by impatient trading.

  57. I like to give you guys’ one exercise on AGNC a stock having a yield of 12%. Trading at 17.70, and paying a div. of .18 per month. The stock was the last time that low 12/09 2016.
    We spend 1770.00 purchasing 100 stock. We sell the March 19 17/18 strangle for .68 cents.
    What will we receive over a 4 month period? 68.00 plus 4x 18.00 div. = 72.00 a total of 140.00
    14000/1770 = 7.9% /4 = 1.97 % per month. What can happen? You need to watch the caller.
    If the caller has less than .18 premium you might be called upon. Meaning they pay you out 1800.00 for the stock, 30 dollar more than you paid for it.
    The other side of the coin, if the stock goes below 17 at or somewhere before expiration March 19, and has zero premium, someone may decide to call on your premise you gave at 17 dollar and the stock will be assigned to you. Before your putter runs out of premium, you may decide you want more stock or do you want to roll a further month or months out.
    This to me is a comfortable way to make money. At the same time it will give you time to do other things than watching your plays every minute.

  58. Phil/aapl

    Thanks very much for your analytic response… sorry, it took so much time on Fri.

    Have an awesome weekend!

  59. G-20 agrees on trade, migration, US goes own way on climate

  60. George H. W. Bush Is Dead

  61. Putin Says Russia and Saudi Arabia to Extend OPEC+ Oil Pact

  62. Putin refuses to release Ukrainian sailors and ships

  63. One stock that would probably win the people's vote on the board is AAPL. Over the longer term it has been a money spinner, give or take the odd bump along the way. Options are great, and you can make some mouthwatering profitable option combinations on paper. Phil showed a couple of days ago (here; search string AAPL/Maya) probably the ultimate example of his classic strategy in action allowing you to load up on a stock (through doubling down again and again) that gains more 'value' as the price goes lower and lower. For Phil it is the PSW strategy at its purest, for me personally my psychology can't handle adding to stocks to that degree on their journey south. Maybe a difference between getting your kicks on the way down or enjoying the ride on the way up? However, I thought I'd play around with various option combos to see different risk reward combinations and what they had to offer – in terms of profit as well as in my ability to manage the position if it started to go against me. I ended up focusing on the call ratio spread that pays off if AAPL moves up by July 2019 to the $215 level. 

    I post it, certainly not as a trade to recommend, but to offer a trade idea that hopefully other members could critique and challenge it as to why it doesn't make sense or how they might modify it to address different objectives. 


    Sell 20 AAPL 2021 $170 puts for $20.35 ($40,700) 

    Buy 40 AAPL July 2020 $175 calls at $19.50 ($78,000) 

    Sell 60 AAPL July 2020 $215 calls for $5.10 ($30,600)


    Net cost of $6,700. Max spread value if AAPL is at $215 next July and returns $160,000. 


    So an upward move needed, but not too far too fast as the additional 20 July short calls will start hurting once they are in the money. That is when the adjustments will be critical. Cashing out the 40 long call spread that is covered and rolling the extra 20 out in time and strike and layering on 2021 bull call spreads. But lots of ways to adjust. As always, interested to hear others ideas.

  64. Winston,
    Nice to see some other suggestions. AAPL.
    I do have various different positions in AAPL, The most difficult one was Jan 20 170/210 BCS I did have 120. Against this I held 65 Jan 19 170 callers. They look easy now as the stock is trading at 178, but did not look so good at 220 and 230. Out of the 65 Jan170 callers I today left with 14 Feb 200 callers. Looks much better.
    Why I give you that story, because looking at your play, I surely do not like that there are 20 naked 215 callers. No one knows where AAPL will land up. Now only in second place in the range of mighty stocks after MSFT. We always laughed about MSFT the time great nut case Ballmer was on the wheel. After that guy left, MSFT grew from a 40$ stock to 110 today!
    Yes I know Phil defends the stock but to me the stock is greatly a one horse pony. The competition of we call them "Handies" is great, and how many new phones you can still sell every year?
    I notice that the 5 and 10 dollar daily jumps are not that often any more, but still I would not bet against AAPL to be 230 before July 2020 again. I can therefore not support selling more callers than calls in any BCS. Why not go straight for a 160/210 Jan21 BCS 2x @ 22.25 sell 1/2 Jan 21 1x 165 put @ 18.35 and sell 1 x Jun 2019 200 call @ 7.90.
     Lets have a look at cost 4,450.00 less 1,835.00 less 790.00 gives us a net cost of 1.825.00 on a 50$ spread. Should the stock only go up to 200 by 2021 your credit is 5,000.00 less your cost of 1,825.00 = 3.175.00. While you waiting you can sell 2 years of my favorite cherry calls. Even say 20 x 2.50 to 3.00 gives you 5 to 6,000.00 more than your actual spread.

    You very right in saying the 20 extra short calls will hurt!!!!

  65. Yodi, thanks very much for commenting as I realize that there is a pretty important typo in the contract dates (blame my bad copy/paste. The spread is a July 2019 and not a July 2020 position. The whole idea was not to give AAPL too much time to go against the position. Apologies for wasting your brainpower on that mixup. Maybe your thoughts are different now?

    Correct dates below:

    Sell 20 AAPL 2021 $170 puts for $20.35 ($40,700) 

    Buy 40 AAPL July 2019 $175 calls at $19.50 ($78,000) 

    Sell 60 AAPL July 2019 $215 calls for $5.10 ($30,600)

    Net cost of $6,700. Max spread value if AAPL is at $215 next July 2019 and returns $160,000. 

  66. Now that crypto is back in the toilet this is when we get to be smart about it and finally start looking around and seeing what's out there. 

    Nimiq (NIM): cute little $2M market cap. I played around with their browser wallet. Fantastic focus on ease of use, which I tried out. It's hard to buy because it's not on a major exchange yet, though, so just watching for now. Interesting to see if a transaction system can make any user attraction simply because it is easy to use. It otherwise has no unique concept attached to it. This is important. Bitcoin is bitcoin because it was first. It's the only chain that gets to have substantial value with no other ability than being a blockchain (a system of trust and store of value). If you're trying to be a new, me-too chain it means taking transaction volume away from the market leader and that is hard to do. In 2011 Litecoin comes along and is the first bitcoin clone with some tech upgrades, but otherwise it's the same as bitcoin. The net one after that feathercoin, nobody even remembers anymore (well, except me). In 2014, its Ethereum which is totally different, it is a smart contract system. Ripple is a private company, it's coinbase is non-public, so they can do international banking / regulatory transaction surrogate type of direction. Dogecoin was a cutesy joke, but was the first of those so it's still around and has user base and $250M market cap. Being first is important. But it's why that's important that is interesting. An analogy I came up with was Microsoft in the 90's. They were notorious for snapping up start-ups that had bleeding edge technology. In the crypto world the tech is open source, so it's free (well, except for Ripple which is a private company and they're a bit of a black sheep always being in the top of market cap list). If Nimiq has a great concept it can be copied. In essence they can create value and the nimiq holders can receive nothing for it, unlike their counterparts in the Microsoft days. This is the new conundrum in a knowledge economy type of economic paradigm. You don't predict cash flows anymore, you predict social flows. Anyway, NIM is one of those possible 1000x returns, if they hit the adoption curve somehow, a $2B market cap for a crypto during any type of future run up is no problem.

    Sirin Labs: SRN, $40M market cap, tradable on Bittrex. Interesting if they actually launch their blockchain phone.

    Sentinel Protocol, (UPP): $4.5M market cap. Also not on a major exchange yet. This one can't be "huge" because it's so niche: crowd sourced information threat-assessment. In a world where data has value, such a concept is mandatory. The market leader in this space will eventually be valuable, however. I do like trying to find niche chains that can serve a specific, useful purpose for this reason.

    Some of these groups have significant effort behind them. Look at the team pages for NIM, UPP and SRN. These are true millenial operations where the upcoming Generation Z (that I call the Neo Generation) are going to flow into. People dismissing these operations as kids playing with video games mixed with tulip bulbs discount their ability to change the world that I feel is largely inevitable, I mean seriously, human life is not infinite and older generations die off. Are kids going to go to college to become mid-level managers at GM? Let's be serious when predicting the future, OK? They are building a global digital financial world that will need to solve problems like climate change and mass immigration that our outdated Boomers model can't even be bothered to acknowledge, let alone adequately address. Sorry Trump, but you're the last Boomer POTUS for a reason.

  67. Yodi / your AAPL spread – the numbers look good. The reason I went for a July 2019 spread was to look at relatively low price spreads that I could keep placing every 6 months. Yes, the additional July 2019 $215 calls need to be managed – but I would apply the standard buy back of 5 contracts in slices (5, 5, and then roll and double down on the remaining 10) as the option price moves deeper into the money.

    On the upside, if the short calls go ITM, then I have 40 of the $175/$215 spreads to finance the roll, and place a new series of spreads, so it is kind of rinse and repeat.

    On the downside, with the cushion of the 20 additional short calls this should give me more time to adjust or close out the position. And, the only short puts would be the 2021 $170s.

  68. Phil: Futures already up 1.5 to 2%.  Other than not immediately imposing more tariffs nothing has been gained and Chinese draw us out another 90 days (probably expecting Trump to be politically weaker as time goes by). I know we will need this burst of optimism to run its course but we should have another good shorting opportunity in the near future.

  69. Good morning!

    I agree with Den, this is a huge reaction over nothing but it’s what the bulls wanted to hear and we’re generally bullish in our own positions, so nothing to complain about.  Certainly China is happy to wait 90 days to see who’s really in charge after the new Congress sits (and the indictments start flying). 

  70. Winston, I can see what you doing but still you do have much more callers than the BCS.

    Remember when a stock rises, the shorter month caller goes up in leaps and bonces!!!.

    I like to stick mostly to my role, 2 xBCS 1x cherry call.

  71. Winston Look at AAPL this morning 6$ in one day!

  72. Thanks again Yodi for the great advice. Just wanted to let you know it is not going on deaf ears.

  73. Dreamer I am glade for you. Just wanted to show you what I would do starting with 100K. Look at the market today only up like crazy, no good for buying stock. But by evening the show might already be over.