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Thursday Flatline – Markets Drift Weakly into the Weekend

chart

"Well we know where we're going

But we don't know where we've been

We're on a road to nowhere

Come on inside

Taking that ride to nowhere

We'll take that ride" – T Heads

As you can see frojm they  S&P ETF (SPY) chart, we haven't done much of anything since Monday's open but it has been an exciting week as the S&P has had a 100-point trading range (4%) but each of these exaggerated moves in the Futures, whether up or down, seems to get dragged back to the middle once the real trading sessions (with volume) begins.

Date Open High Low Close* Adj Close** Volume
Dec 12, 2018 267.47 269.00 265.37 265.46 265.46 97,760,100
Dec 11, 2018 267.66 267.87 262.48 264.13 264.13 121,504,400
Dec 10, 2018 263.37 265.16 258.62 264.07 264.07 151,445,900
Dec 07, 2018 269.46 271.22 262.63 263.57 263.57 161,018,900
Dec 06, 2018 265.92 269.97 262.44 269.84 269.84 204,185,400
Dec 04, 2018 278.37 278.85 269.90 270.25 270.25 177,986,000
Dec 03, 2018 280.28 280.40 277.51 279.30 279.30 103,176,300

Other than yesterday, volume this week has been much stronger than the sub-100M on SPY we routinely posted in November and this could be a good sign that we're consolidating along the -10% line, which is really nothing more than a healthy correction of a rally that's been going on since early 2016, when the S&P double-bottomed at 1,800.

In the bigger picture of the weekly chart, we're simply double-bottoming at 2,600, where we bottomed out last year before making the 10% climb that we've now reversed and this all makes perfect sense since 1,800 x 150% is 2,700 and it's very, very hard for an index to move up 50% without some sort of correction – the move to 2,950 was simply an overshoot that never should have happened.  

Image result for corporate tax collectionsAs I noted in yesterday's Live Trading Webinar, most of the gains we've had over 2,400 have been due to Trunp's disastrous tax cuts, which allowed many corporations to take massive write-offs last year that have distorted their earnings – not to mention artificially low taxes are themselves an earnings distortion.  What do I mean by that?  I mean that the tax cuts are unrealistic as we're running a deficit of 5% of our GDP (over $1Tn /yr), which would cause us to be automatically sanctioned if we were in the EU as we're over their deficit limit by 150%.  

So, if our negligent collection of Corporate Taxes is causing/contributing to a massive budget deficit, then the low taxes are, logically, unsustatianable – the only question is how close to bankruptcy does the country have to get before we get realistic about our spending and saving habits?  Fortunately, our current President is just the right guy to find that out with as he's driven 5 companies into Bankruptcy and dozens more to the brink – hopefully we'll be one of his lucky gambles…

Image result for corporate tax collections

It's pretty clear from the chart above that Corporate Taxes are directly related to deficits and the impact is far, far worse than it seems because, yes, we collected 50% less ($150Bn) corporate taxes this year than in 2016 but that's only half the picture as PROFITS were much higher so we should have been collecting more like $600Bn, not $150Bn and that $450Bn would have halved the 2018 deficit.  

And keep in mind that's not even including the hundreds of Billions of taxes that were not paid by Trump and his top 0.1% buddies, who also make record amounts of money while paying record low taxes.  It doesn't matter if Trump gets impeached – he's done his job and allowed the Top 0.1% to cash out of the market at the top while paying as little money as possible and now they will wait patiently for the market to fall and wipe out the bagholders so they can step in again and buy when it's cheap.

Speaking of cheap stocks being accumulated by rich people, I've been banging the table on GE (GE) and we just made aggressively bullish adjustments in our Long-Term Portfolio as well as our Options Opportunity Portfolio and FINALLY, just this morning, JP Morgan became the first analysts in ages to say perhaps the selling is a bit overdone at this point.

Let's not pop the champagne just yet as Steve Tusa only raised his rating to neutral from "underweight" but Tusa has led the bear charge on GE and we finally won him back at $6.66.  Tusa says the industrial giant now has a more "balanced risk reward at current levels," saying: "Key to the story, in our view, is the outcome of 'known unknowns' in near term, which are better understood and around which debate is more balanced, as opposed to being overlooked by most bulls in the past."

Sure if this were a teacher saying "nice" things about my kid, I'd be very concerned but as long as GE doesn't go BK, I'm very happy to accumulate them down around $7 which is a $60Bn valuation for a company with $120Bn in sales which led to $9Bn in profits in 2016 and 2014 but write-downs made them negative this year, last year and in 2015.  I've been willing to forgive GE for restructuring but, until now, my analyst peers have not.

As a new trade on GE, I would go with:

  • Sell 20 GE 2021 $8 puts for $2.30 ($6,300) 
  • Buy 50 GE 2021 $5 calls for $3.70 ($18,500) 
  • Sell 50 GE 2021 $8 calls for $2.25 ($11,250)

So our target is, of course, $8 and anything below $8 means we end up having to buy 2,000 shares of GE at $8 ($16,000) plust the $950 cash we lay out for the spread so $8.19 would be our net if below $8 but, since we own the $5 calls, our breakeven is the average of ($8.18 + $5) / 2 or $6.59 per share but our worst case is GE being below $5 and then our shares flat out cost $16,950.  The reward is that, at $8, you will get $15,000 back for a gain of $14,050 and it doesn't seem like much of a stretch to imagine GE can make $8 in two years (it's $7.40 this morning), so I love this trade for a potential 1,478% return on cash.  

Market-wise, we're still watching our bounce lines to see what sticks but Draghi was very doveish at the ECB meeting and the indexes are moving up about 5% early this morning though these things tend not to stick so let's just hope we don't end up lower into tomorrow's close or we'll have to get more bearish into the weekend.  There's really been no improvement since Monday's close so what we said about the levels on Tuesday morning still stands.

  • 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
  • NYSE 11,880 with a weak bounce at 12,150 and a strong bounce at 12,400

 


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  1. Good Morning.



  2. It has always been about personal enrichment:

    https://talkingpointsmemo.com/edblog/let-the-looting-begin

    I’m glad this is finally getting some attention and sorry I hadn’t gotten on it earlier. The AP ran a piece yesterday about how Jared and Ivanka stand to profit from a wildly sleazy developer tax credit they pushed in the big tax cut bill last year. They’re called Qualified Opportunity Zones. And they create huge – and I mean huge – potential tax shelters for extremely wealthy people, especially those who play in the real estate game.[...]

    There are already lots of outrageous examples. Jared and Ivanka are cashing in. Trump’s pal Richard LeFrak is already doing a $4 billion development in North Miami and now that’s in a zone too.

    It’s the most comical invitation to the ultra-rich to pay minimal or close to no taxes unless for some reason they just like paying taxes.


  3. And at the same time:

    https://talkingpointsmemo.com/news/irs-scrutiny-earned-income-tax-credit-claim

    Put another way, as the IRS has dwindled in size and capability, audits of the poor have accounted for more of what it does. Last year, the IRS audited 381,000 recipients of the EITC. That was 36 percent of all audits the IRS conducted, up from 33 percent in 2011, when the budget cuts began.

    “Those struggling to make ends meet are being unfairly audited while the fortunate few dodge taxes without consequence,” Sen. Ron Wyden, D-Ore., the ranking member on the Senate Finance Committee, told ProPublica. “The IRS needs more manpower to go after tax cheats of all sizes, and working Americans need a simpler way of obtaining a tax credit they’ve earned.”

    Shameful…


  4. Phil,

    As requested, a reminder on PLAY.


  5. Good morning, All!

    The webinar replay is now available!

    https://youtu.be/e8ePIGCpprU


  6. Phil  / AAPL – I'm thinking AAPL has hit a good support line at 162 / 168 range. It has not dropped below the former, interlay,  and not closed below the latter.  There is probably very strong support at 150.  I'm struggling to find the bounce lines above this to set some short term callers.   In addition I think Buffet may be buying more of this and he usually announces / makes public holdings around 2/14 is of the year so if he is buying more there will be a strong up off of this.  so I'm trying to position the callers around this.   do you have any thoughts on this?


  7. HBI WTF???


  8. Good morning! 

    Rally fading already so not looking good at the moment.

    Nasdaq is just silly and RUT is pathetic:

    Dollar not helping:

    IRS/StJ – Also, when they audit a poor person, the guy usually just pays whatever they say but, when they audit a rich person, they get tied up with lawyers and accountants for ages.

    PLAY/Lotter – Next.

    AAPL/Batman – I have lots of thoughts on AAPL and I've said them over and over again:

    Happy Pearl Harbor Day!

    AAPL/Batman – Those lines are good.  I was going from $230 down so 95% = 218.50, 90% = 207, 85% = 195.50, 80% = 184, 75% = 172.50, etc 

    Of course, once you drop that much you need to zoom out and think about where the upside support was so that's about $175 but then we go back further and say AAPL consolidated around $100 and then broke up which means $150, $200, $250 and $300 should be the big numbers but those don't fit so we should check our premise (keeping in mind the reverse split probably screwed up the lines anyway).   

    So now let's assume AAPL never should have been to $230 and that was an overshoot.  We did get consolidation at $150 so that's a clean line and $180 is 20% up from that then $210 is 40% and $225 is 50% so it looks more like we got a pullback off the 50% run from $150, which was 75 so our retrace lines would be 15 points back to $210 and $195, where it certainly had trouble on the way up – so it's likely to be a good line.  Also, we always expected to see a pullback at $1Tn ($204) – that's the level I based my original assumptions on which led us to shorting the Nasdaq at the top and they served us well. 

    We did get a little consolidation at $210 and very little at $195 but those failed so we're back to looking at the 5% lines off $150 so $7.50s are $157.50, $165, $172.50, $180, $187.50 is the 25% line off $150 so likely an overshoot from $180 there so that now (assuming we consolidate around here) makes $180 the new center of our expected trading range for AAPL and we still use the 5% lines from the bigger consolidation at $150 but now we calculate the series from $180 which is +/- 9 so $162, $171, $180, $189 and $198 so now we will look to see which series AAPL seems to obey and if it's the $150 series, then, sadly, that is likely to be where we're going but if it's the $180 series, then we can expect it to stabilize around here.  

    That means, if you are bullish, you'd rather see AAPL finding support at $171 than $172.50 as $172.50 is coming from the $150 set and $171 is from the $180 set.  So, when I begin to see AAPL obeying the $180 set in the short term, I become more bullish at $171 than I would be at $172.50 if I saw it obeying the $150 set. 

    This is how much work I do every time you guys say "So what do you think AAPL is going to do today."!!!

    You can't just apply the 5% Rule right away unless you have very clear lines, you have to first observe and make sure you are working with the right series first.  

    Meanwhile, if we're AAPL bullish, then we'd love to see a "W" form at $171 and $180 is the middle of the W and then the next leg would be $189 and then on to $198. 

    So, if $171 holds today, the AAPL Jan $190 calls at $1.85 are fun since we expect at least a $9 move up in 2 days (the time in which it fell $9) which should put them into about the price of the $180s, which is $5.   Since the downside delta is 0.20, you risk just 0.80 pulling the plug below $170 vs the potential $3.15 reward.  

    And, of course, if AAPL is going to pop $9 then the Dow and Nas Futures will get some good support too – so we'll look at those lines for a possible bullish play.

    Submitted on 2018/12/10 at 1:52 pm

    AAPL/Japar – We sold the 2021 $170 puts for $22, now $22.50 so you're all caught up.  We already have long spreads but of course I like the 2021 $150 ($39)/$200 ($18) bull call spread for $21 on the $50 spread that's $19 in the money to start. If you sell 5 of the puts for $10,100 and buy 10 of the spreads for $21,000, you net in for $10,900 on the $50,000 spread.

    Submitted on 2018/12/11 at 3:40 pm

    So we like our positions and the reason I'm cashing in $30,000 worth of TZA hedges is because I like to get $30,000 of CASH!!! off the table and also because I think AAPL is stupidly cheap and it has a dramatic effect on the market so, barring something new hitting the news cycle – I think we may stabilize around these levels (might go lower, might go higher).

    AAPL – Short puts seemed like a great idea but AAPL now $172 so ouch!  Eventually we hope to reverse it and it should pay us $19,925.

    Now next time, I will expect you to actually remember all the work I already did for you before you ask again – thanks!  


  9. Hi Phil.  Did very well with the MET Jan19 trade, when the price was $46.  Looking to re-load here at 39.50.  Thoughts?


  10. this shit makes me so mad. It's hard to get 60 seconds into the video. THEY ARE NOT PROVIDING FOR ANY INNOVATION. The coin does nothing the current fiat currency system cannot already do. 90% of coin projects fit this mold, and maybe 99% of all "ICO's" which are a proxy securities for SEC-less money raising activities. Identify a huge problem, take up no less 50% of your video time describing said problem, and then try to sell you solution simply because the Big Problem exists. This is why I spend a considerable amount of time differentiating the concept of what blockchain software protocols actually are (borderless, decentralized, digital system of trust) and why that would be useful (more efficient system of allocating scarce information resources), and perhaps most importantly, a mechanism for valuing social group activities as opposed to valuing real estate and manufacturing activities. This is force fitting a new paradigm into an old model. It's like making a car for the first time and having horses pull it.

    This is key. The ICO guys here say we're all F'd on wars and droughts, but then so what? Buy GNC at some arbitrary price prior to the project having any value?? The best way to use blockchain technology is to develop a system of carbon productive work that has no value, that's where the token comes in. If it already had value you can just use regular money. Then by increased participation in this group it becomes self-valuing because it's useful. That means the coins, tokens, or what have you are free. No ICO's. No for-profit corporations. If you are doing these things you are doing it wrong, which ultimately means you will fail because the projects doing it right will always beat you. But hey, maybe you can get some people to buy into an ICO then run away, so I guess that's good for them?


  11. AAPL will go to 90 before it goes to 200.


  12. Bought some FDX at 184.92 for a trade.  Risking 2 points.


  13. Phil – are we ready for an additional TSLA short yet? If so, what would you suggest?


  14. BBBY – New low.  Boy have I been wrong on this one.  Didn't have a stop in place cause I thought it was too cheap.  My bad !

    Selling a few May 10 puts for about $1.02 might not be a bad play.  If exercised, the stock would be yielding 7%, if the dividend holds.


  15. Closed out FDX for -.62.  Don't like the continued weakness.






  16. The Trump Team’s Fawning Over Saudi Arabia Is Getting Ridiculous




  17. The Making of a Computer-Generated Influencer





  18. PLAY/Lotter – They are on track to make $120M this year and about the same going forward but, thanks to the dip, they are selling for $1.8Bn at $46 so about 15x earnings – not bad but not great for a slow-growing business, which is what they project going forward.  

    Year End 04th Feb 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 608.1 635.6 746.8 867 1,005 1,140 1,238 1,246 1,391 +13.4%
    Operating Profit $m 43.7 51.0 46.3 103.7 150.5 165.1 162.5     +30.4%
    Net Profit $m 8.78 2.17 7.64 59.6 90.8 120.9 123.4 112.3 124.1 +69.0%
    EPS Reported $ 0.22 0.055 0.21 1.39 2.10 2.65 2.84     +63.8%
    EPS Normalised $ 0.22 0.055 0.70 1.72 2.34 3.09 3.37 2.79 3.16 +68.9%
    EPS Growth %   -75.3 +1,160 +145.6 +36.5 +31.9 +13.7 -9.78 +13.3  
    PE Ratio x           15.2 13.9 16.9 14.9  
    PEG x           n/a n/a 1.27 0.60
    Profitability

    I think it's just a stock that will go in and out of fashion but VR should be good for them as it gives them something at a higher price-point to sell that can't be re-created at home.  

    I'm in favor of selling 10 of the 2021 $45 puts for $7.80 ($7,800) in the LTP and 5 of the 2021 $45 puts for $7.80 ($3,900) in the OOP – just to remind us to keep an eye on them.

    If you want to be more aggressive, I'd go for 20 of the 2020 $45 calls at $11.50 ($23,000) and sell 20 of the $65 calls for $4.50 ($9,000) against 10 of the short puts ($7,800) for net $6,200 on the $40,000 spread so the upside potential is $33,800 (545%) at $65 but my goal would be to sell short-term calls down the road and use that money to roll the $45s to the $40s (now $14) to widen the spread.

    The April $55s are $1.60 and the $50s are $3 so when the $55s are $3, I'd sell 8 for $2,400 as that's easy to roll along and 8x $3,200 is another $25,600 in pocket over 2 years.

    Notice selling 1/3 short calls DOUBLES the return on the above spread – that's why it's a very important strategy to follow!  

    MET/Taihu – Absolutely, that's one we could certainly use for the LTP, selling 10 of the 2021 $37.50 puts for $5 ($5,000) for a net $32.50 entry.  

    They pay a nice $1.68 dividend so you could buy the stock for $39.25 and sell the 2021 $37.50 calls for $6 and the puts for $5 to net in for $28.25 which makes the dividend 5.9% while you wait to get called away with a $9.25 (24.6%) profit so that's a nice, conservative way to play it (and of course you can roll the 2021 puts and calls when the time comes to keep it going.

    Alternatively, you can counterfeit the ownership with the 2021 $30 ($10.80)/40 ($5) bull call spreads at $5.80 so if we did 20 of those for $11,600 and sold the above puts for $5,000 that nets $6.600 on the $20,000 spread that's almost 100% in the money to start for a $13.400 (203%) upside potential in two years.

    When you consider that buying 1,000 shares on the spread is $28,250 to make (($37,500 + $1,680 + $1,680) – $28,250) = $12,610 – there's really no point in owning the stock – even with the nice dividend.  

    GreenCoin Token/BDC – Isn't that essentially what you were trying to do?  Can't you sue them for stealing the name and idea?  As to AAPL, I'd bet you money it won't but, if it does, I'd need that money to buy AAPL stock! 

    TSLA/Deano – Not shorting them anymore.  Way too risky.  Someone just gave them a $460 price target today and you can't tell me people aren't that dumb because we know they are.  

    The FUNDAMENTALS changed because now they are making money (so they claim) so, until the profits are disproven, I don't have the same short premise I had last time they hit $380 and there's not enough evidence either way to properly value the company off just the last earnings report so – I don't play…

    BBBY/Albo – Just another stupidly cheap stock making $1.90 per $11.74 share.  Last Q4 they made $1.48 and this Q1 they made 0.32 and Q2 they made 0.36 so they would have to get CRUShed below $1.32 TOTAL for the next 2 Qs not to make $2.  As I often have to say – I don't care what other idiots are doing – this is a good company at a great price.   


  19. Thank you, Phil.


  20. Butterfly Portfolio Review:  $94,426 is DOWN $34,054 from our last review and now we're red for the year thanks to our bullish position on AAPL getting KILLED in the past month.  Fortunately, we're only using less than 1/2 our buying power so we're free to adjust but there's not too much to do at the moment other than wait.

    • AAPL – We did sell some short calls but not enough to offset the damage and we had very aggressive put sales, which are getting crushed.  In a smaller portfolio, we just want to roll the losses so, when we look for new puts next month, we'll look to sell about $35,000 worth of puts, not $70,000 and that will use up some of our cash in exchange for less margin.   Our 15 2021 $180 calls are now $25.50 and the $160 calls are $35.50 so $10 to pick up $20 in position but that's $15,000 so what we'll do is buy back the 10 short 2020 $220 calls at $5.75 ($5.750) and we'll sell 15 of the 2021 $210 calls for $17 ($25,500) so we're actually putting net $4,750 in our pocket and drastically improving our spread.  The only difference is we've moved to a full cover, so we'll have to be careful selling short calls but still a $75,000 upside potential at $210 on a spread that's currently showing net -$9,561 so a turnaround in AAPL can make our entire 2 year target (40% a year) if it all works out.

    • DIS – This one is behaving and we're right on target.  

    • MDLZ – Also right on track.

    • OIH – Another one we got too bullish too soon on but we'll just have to wait and see if oil gets back on track into next year.  Too early to panic.


  21. Ya what is up with HBI today? I didn't see anything particularly negative come out on them?


  22. crs--looks like the underwear plays can't stop sinking.. dangit!


  23. HBI/Crs, Jabob – I don't see anything particular but retail getting hammered.  That's why we took the XRT shorts…

    LB very impressive considering the sector sell-off.

    Well, I'm getting ready to go, getting picked up for a meeting in about 30 mins.

    Hopefully nothing catastrophic happens while I'm gone.


  24. Phil/Greencoin – I was trying to keep up with this project to learn about these cryptocurrencies. Are they the same greencoins that you were accepting as an alternative payment method for subscriptions? See note here. That looks very much a hijack of the project by another group of people (unless they are all known to BDC?)

    I guess you offloaded the 150 million Greencoins that PSW Investments had.


  25. Phil, a question on MET.  I like your play above but am very interested in your thoughts on this BCS spread.  You start with selling the same $40 Jan 20 put for $5.25 and then buying 3X Jan 20 $32.5 ($8.43) / $35 ($6.75) for $1.68 or $5.04 for the 3x or a small net credit of $0.21 be a better play.  I am not tying up $6,600 in cash this way and TOS says margin is only $573.31.  Also, can you share your thoughts on selling Jan 2020 ($5.20) verses Jan 2021($6.50) – it doesn't seem like there is a enough premium to wait the second year.  I would just do the trade again for the second year.  Very interested in your thoughts! TIA.


  26. Greencoin/Winston – No, someone has started a new currency using the name (ish) as far as I know.   We did not offload too many, they weren't that liquid but, fortunately, we sold all our BitCoins at an average of $17,500 + $3,500 for the BitCoin Cash so we made a nice return but, on paper – we were up about $1M for a while (wasn't sellable or we would have gotten out).  

    MET/Robert – That works too but only, of course, $7,500 return on 10 short puts to that play but it's a good, conservative way to go.  As far as cash goes, my attitude is that it's only going to sit there in the allocoation block anyway so whether I spend none or $12,500 – it's still a 1x entry on a new position.  

    As to the put sale, I generally prefer to keep it simple or we're always rolling things but, if you don't mind doing the work, it's often better to sell 2 puts HOWEVER, if the stock does well and goes to $50, then your next year sale will be like selling the 2020 $30 puts, which are about $1.60 and, on the whole, if MET does drop $10, I'd rather have collected $6.75 for the 2021 $40 puts, which have an extra year to recover, than $5.20 for the 2020 $40 puts, which actually have a higher (slightly) delta – so you'll lose more on the way down too.

    Russell looking scary!

    Meanwhile, I got on because /RB was a gift so I'm not going to risk that over the weekend!

    Nice way to wrap up the week.  

    Doesn't look like much on the big chart, does it.  Hopefully those UGA's will kick in now.

    Later all.


  27. Phil/Greencoin – thanks for the explanation.


  28. Phil/BDC/Greencoin

    so how does it impact the GRE that we hold. is it just dead? all the money taken away…….

    regards


  29. Don’t you think the environment is such that one should ease off selling puts in this environment? It’s kind of OK to do nothing right now. 

    My instinct (full disclosure: it is rarely right) tells me there is going to be a s**tstorm leading into Jan 2019 expiration. 2 years ago people were piling into long dated (Jan 19) long positions and it would seem to be relatively easy pickings for ‘the forces of evil’ to exploit that. Especially as any profits taken early May have been rolled up into more aggressive positions – greed being what it is.

    Which leads into my next point – shouldn’t we spend some time discussing ‘safer’ plays – god forbid buying puts – and shorter dated combination?


  30. I am with you there Winston – not adding anything at this time. Things still look too crazy for me.


  31. Winston-good point. That is what I am doing now-nothing. Just letting the shorts expire to get cash in account. Seems everything is in a float going nowhere.


  32. Winston- could not agree more. That was my point re: the MSFT play adjustment (yesterday?)

    Not a good time to be heavily exposed with short puts. I consider the markets high risk territory at this time calling for conservative moves. I get Phil's point about taking on risk as the virtual portfolios are up so much. However, the portfolios are not real money and my money is so  I take a different tack. Long TZA and SQQQ. 


  33. Thanks Phil!



  34. Hello Phil and the gang.  Phil, I have been studying the GE trade you put up in your morning post.  You said

    As a new trade on GE, I would go with:

    Sell 20 GE 2021 $8 puts for $2.30 ($6,300) 

    Buy 50 GE 2021 $5 calls for $3.70 ($18,500) 

    Sell 50 GE 2021 $8 calls for $2.25 ($11,250)

    I do not understand where you got the $6300 for the short puts.  Is this maybe a typo?  At the close of the day, GE was at $7.20 with the Jan 2021 $8 puts at $2.45, Jan 2021 $5 calls at $3.60 and the $8 Jan 2021 calls at $2.19.   I calculate 20 GE $8 puts for$4900.  The 50 $5/$8 calls are net $1.41 for a cost of $7050.  The total cost of trade is $7050 – $4900 = $2,150 with the commitment to buy 2000 shares of GE at $8 if the stock is below $8.  

    What am I missing?  Why are my numbers so far off.   I am really interested in this trade as the premiums for the ATM put and call ($8) are such a big percentage of stock price.  The buy/write return is sky high but I know from what you teach us the sell short put / buy BCS return will be much greater.  Thanks for the guidance.  




  35. Senate rebukes Trump, Saudi Arabia over Khashoggi, Yemen war


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