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TGIF – Trade Progress Trumps Government Shutdown – Again

500 points!  

That's how far the Dow (/YM) Futures have climbed since yesterday morning on rumors that trade negotiations with China are progressing but China but we've seen this fade before so we reserve judgment for the moment and we're not going to get all bullish into a Holiday Weekend (Martin Luthor King Day on Monday), not with all this uncertainty still in the air. 

We have been, however, very bullish since the bottom on 12/26, only the second time all year we've been very bullish and it's paid off nicely in our Member Portfolios so now is the time to protect our gains – not to add to the risks.  We added hedges to our Short-Term Portfolio and our Options Opportunity Portfolio this week to lock in the month's gains and now we can happily enjoy the long weekend ahead.  

While the headlines on China SOUND good, let's consider it from China's perspective.  Apparently Treasury Secretary, Steve Mnuchin, has floated the idea of pulling back some tariffs in exchange for China doing the same as long as China makes some long-term concessions on policy.  US Trade Rep, Robert Lighthizer is against this but, then again, he has spent his whole career telling people how evil China is (and he's the guy Trump put in charge of the negotiations), so what else would you expect from him?

So ignoring Lighthizer and focusing on what Mnuchin proposes, he's essentially saying to China that we began tariffs to make them change their policy and then China said "no, we're not changing our policy" and placed retaliatory tariffs on US and now Mnuchin says, "how about we drop the tariffs and you change your policy?"  My kids were better negotiators when they were toddlers!  Certainly they were not so transparent about their motives.   

Image result for lighthizer trump china cartoonIf we were serious about Trade, we'd also be making concessions, not simply saying we'd stop doing something we only started doing so we could use it as a negotiating tool down the road – which is now.  Even if China were that stupid (and they are not), Lighthizer didn't come all this way just to make a deal.  His goal is the economic destruction of China and he doesn't care if he accidentally destroys the US as well in order to achieve his personal goals.  Imagine spending your whole life as an anti-China activist (he was Deputy Trade Secretary under Reagan after which he practiced law for 20 years) and then to get another chance to take China down by a President who doesn't consider the consequences of his actions.  Lighthizer isn't in this to settle…

Meanwhile, the markets are settling ABOVE their 50-day moving averages just in time for Tuesday's World Economic Forum in Davos or, I should say, The Rest of the World Economic Forum because Trump has just pulled the US delagation "due to the Government shutdown" insuring the US will be an even greater laughing stock when the rest of the World's Government and private leaders gather next week.  If we were actually trying to make progress on Trade, wouldn't meeting with Chinese leaders in Davos be a good idea?

Trump also told Nancy Pelosi she couldn't travel to Afghanistan via Military Plane, suggesting she fly commercial instead – even though the plane itself is still going to Afghanistan – Trump just wanted to make a petty dig at the Speaker of the House because she still won't give him $5.7Bn to start building a $30Bn wall. 

 

Image result for pelosi trump cartoonSeriously, this is what we have now come to.  Pelosi spokesman Drew Hammill pointed out that Trump had visited troops in Iraq since the shutdown began, as did a congressional delegation led by Republican Representative Lee Zeldin of New York.  “We believe this is completely inappropriate by the President,” said House Intelligence Chairman Adam Schiff of California, who had intended to accompany Pelosi. “As far as we can tell this hasn’t happened in the annals of Congressional history.”

I don't know about you but I'm happy we have more hedges – this will prolong the shutdown at least a week and then we have President's Day Weekend on Feb 18th, which is another big Congressional break so there's maybe one week in the next month in which a deal can be made to re-open the Government and another month of damage is going to be another 0.4% shaved off our GDP.  MADNESS!!!

Have a great weekend, 

- Phil

 


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  1. Impeachment seems more likely today than it was yesterday and I am curious to hear people like Lindsay Graham in the Senate explain why this doesn't rise to the same level as Clinton impeachment! But I know that he will… 


  2. The sad story of Sears:


  3. Grantham putting his (vast amount of) money where his mouth is:

    https://www.bloomberg.com/news/articles/2019-01-17/jeremy-grantham-s-1-billion-plan-to-fight-climate-change

    Despite these gains, people are losing the race: Climate change is also accelerating, with consequences so dire that they’re almost impossible to imagine.

    Grantham says he’ll devote 98 percent of his net worth, or about $1 billion, to help humans win the race.

    Grantham delights in being provocative, making statements that seem especially outrageous considering the source, a longtime denizen of Wall Street. The investment business is a “vastly overpaid industry,” he tells a roomful of financial advisers. He lambastes economists, the Federal Reserve, and the flaws of capitalism. “On income inequality, I am left of Karl Marx,” he declares. A father of three and grandfather of six, he applauds the falling fertility rate in most of the developed world. “We have discovered at long last that children are both expensive and incredibly inconvenient,” he says. And as for his perceived adversaries—climate skeptics, oil and chemical company executives, and politicians who fail to take climate change seriously—“perhaps they hate their grandchildren.”


  4. Winston 
    January 18th, 2019 at 3:28 am | Permalink | Tweet thisIgnore this user

    LTP adustment required on CMG: just a heads up that there are 20 short Jan contracts of the $485strike which need adjusting by the end of today – the contract closed @ $33.20. The roll for a scratch is to the 15 Feb $505s, or 15 Mar $510s. CMG closed @ $517.66.




  5. Polls agree: Americans don’t like shutdown and they blame Trump




  6. Good Morning!


  7. TSLA / Ouch!


  8. https://www.cnbc.com/2019/01/18/tesla-to-cut-its-workforce-by-around-7-percent.html

    We are finally getting to the final stage here. There is very little demand. Coming competition. And they can’t raise more money. I’m loaded up on short calls and long puts. 


  9. Wow NFLX down on positive earnings-Ha. Expected was .30, last qtr it was .69. I wondered when they raised the prices by $2.00 and that was a good indicator. Their cash flow is horrendous. Now down by over 12.00.


  10. Good morning! 

    Going to try to plow through the LTP review before 2pm – that's my goal for the day.  Markets not giving us much to worry about despite Trump caught obstructing justice red-handed.  

    Butterfly Portfolio Review:  $109,404 is a bit of an improvement from our last review (12/13),  when we were down $5,564 but AAPL is still killing us, sucking up all of last year's gains though we do now have a Hell of a nice position – if they ever do improve.

    More importantly, having 15 AAPL 2021 $120/210 bull call spreads means we can sell 5 short calls any time we want, as aggressively as we want and really, with the 11 short puts that are killing us too – we can sell 10 short calls with very little fear of damage.  

    Going out 90 days, the AAPL April $160 calls are $6.35 so selling just 5 of those generates $3,175 so selling those 8 times would be $25,400 – so we have that to look forward to, at least.  Of course, if the spread goes back in the money, it can be good for $135,000 vs the current value of -1,097, which means we have a Hell of a lot riding on this Apple position.  This is not meant to be the strategy of the Butterfly Portfolio but it was dictated by circumstances as AAPL went on sale – we don't pass up on opportunities to buy good stocks when they are cheap. 

    • AAPL – The short $200 calls will expire worthless but the 6 short $210 puts are $53 in the money ($31,800) so we'll have to roll them and we already have 5 short 2021 $195 puts, now $45 ($22,500) and we collected $13,000 selling them and $11,700 on the $210s so that's $54,300-$24,700 = $29,600 so we're just going to roll the losses to 10 of the 2021 $175 puts at $32 ($32,000) which will lower the margin requirement in exchange for $22,300 of our cash.  As noted above, we'll be able to recover that by selling short-term calls – but not now as I want to give earnings a chance.  

    • DIS – We threaded the needle on our Jan target and both the short puts and short calls will expire worthless for a $2,425 gain for the quarter.  The remaining position is net $10,900 so our ROI is 22.25% per Q – that's a keeper!  Now we have to re-target and, as I noted from my trip – DIS is packed and they have a lot of big movies coming this year and ESPN is less of a drain but the Fox deal was expensive and building the Star Wars Park and Hotel will be expensive too.  I feel good about selling 5 April $110 puts for $3.40 ($1,700) but I'm worried about selling the $115 calls for $3.20 so here's my "compromise" – let's sell 5 April $115 puts for $5.80 ($2,900) and 5 April $115 calls for $3.20 ($1,600) so we have $4,500 which gives us $9 wriggle room in either direction.  Of course we'll lose on one side but we'll just roll the loser and, hopefully, that will eventually expire worthless as well.

    • MDLZ – The short Jan $42 puts will exprie worthless and the short $44 calls will expire worthless (am I good or what?) and that's $1,260 for 2 months against a net $3,500 position so 36% ROI in 60 days is another keeper!  It was a wild ride though and, on the whole, I'm bullish.  Unfortunately, the payout for March puts are terrible, just $1.10 for the $43 puts and the $43 calls are only $1.45, so neither are worth selling at the moment and I think we should wait for earnings on 1/30 to see where they are.  

    • OIH – We got aggressively bullish on these far too early.  Waiting and seeing.


  11. Phil,

    Wheeee on TSLA. I have 420 short calls for June @18, would you recommend any adjustments ?

    thanks as always

    Pat


  12. NFLX down today but it's on the list of never short! Not because the fundamentals are good but líke AMZN because the analysts are irrational.


  13. Big Chart – We're back in rally mode but it's got to hold up into next week.

    Grantham/StJ – Nothing there I don't agree with.  

    TSLA/Soma – Hard to reconcile the story of amazing growth with laying off ANOTHER 7% of your workforce.  Too bad, they were almost back in our shorting zone.

    NFLX/Pirate – Another one where the reality can't possibly live up to the hype. 

    As StJ notes, however, we don't like shorting them because they make insane moves higher (they just made one) that can rip your face off. 

    TSLA/Pat – The June $420s are still $10.50 and I sure wouldn't pay $10.50 to buy them back.  It's a nice, quick gain for you but I think TSLA goes back under $300 and, once it calms down, the premium will come off the short calls and THEN you might want to close them more like $6 – just to clear the decks.

    Oil popping over $53, /RB $1.455 for the holiday weekend.  

    Cold snap coming and /NGV19 is a good buy at $2.887 again with the cold weather coming.

    I'd wait for $2.89 to cross and then tight stops below.  


  14. Polar vortex has hit No climes and everyone has fallen on the ice with bad injury's, or have had the flu for weeks! Snow is safer; ice is treacherous.


  15. Phil / NatGas- 

    What was your thinking behind going with the Oct contracts vs something closer?  TIA for the info!


  16. /NG/EMike – Less likely to burn you badly if it goes the other way is the main reason.  We've gotten hit hard on /NG being irrational before so now we favor the less volatile long-term contracts.  


  17. Phil,

    /RB has had massive build last 2 weeks. Worth a short here? Up with /CL and market









  18. Long-Term Portfolio Review (LTP) – Part 1:  $952,639 is up an amazing 12.2% ($61,200) since Monday's snap-shot as all those Jan short puts and calls we sold expire worthless (or at least with no premium) and the aggressive adjustments we made in the last review kick in on this rally.  More importantly, we're up over $100,000 since our 12/14 review where I said:

    $847,390 is DOWN $86,175 since our last review but the STP is at $378,093 and that's UP $68,253 so the paired portfolios are working PERFECTLY as the hedges are not meant to eliminate all your losses – just mitigate them.

    How does loss mitigation work?  Well, we're essentially flat since 11/16 and the S&P is down about 5% and AAPL is down 10%, etc so the same cash we had on 11/16 buys 10% more stock – that's what the hedging is for – it puts CASH!!! in our hands when things go on sale.  They also keep us from having to panic out of positions as they go lower and, in fact, we often get to add to them – as often the best use of cash is improving strikes on the spreads we already have – especially when we're early in our scales, as we are with almost all of our first-year positions.

    "They (hedges) also keep us from having to panic out of positions as they go lower" may be the most important thing I've ever said.  Hedges are the difference between just recovering and coming out ahead when there's a correction and a rebound.  BECAUSE we had our hedges and BECAUSE we had a ton of money (and margin) sitting in the STP, we were able to ride out the correction, which knocked the LTP down 20%, without breaking a sweat.  

    We made 2 (two) adjustments in the December review – though we did make more aggressive adjustments later in the month, when the market hit the -20% line.  It didn't make sense for us to adjust on Dec 14th because we were not confident the market would bounce back but, on Dec 26th, we were confident calling a bottom – mainly because the STP made another $100,000 on our hedges so, even if we were wrong – we had plenty of room to adjust.

    As I said on 12/14:

    All in all the portfolio is in good shape with lots of positions I'd like to buy more of if the market doesn't collapse.  The high VIX is also hurting us as we sell a lot more premium than we buy but one thing we know is all premiums go to zero on expiration day so simply waiting will make us about $200,000 in this portfolio.  We have a ton of short calls to deal with next month, so don't make any plans for expiration week (14-18).

    And here we are, on Jan 18th with everything going exactly as planned.  That's LUCK, not SKILL – the skill was in being prepared to take advantage of the downturn so that – IF we got lucky – we would do a lot more than just recover.  

    Another way we prepared was by adding 9 short-term bearish positions in September that were designed to make us another $100,000 in a market downturn.  That was a success and also helped us ride things out but notice we took our precautions AT THE TOP – we didn't need to wait for a correction to begin to tell us the positions we held – even the ones we loved – were overbought. 

    Now we have way too many positions so I'm looking for any excuse to cash some out…

    • HMNY – There's no reason not to spend $2,160 to triple down on these.  That will make our cost basis 0.466 on 240,000 shares and it's probably going to end up at zero but we might get lucky so it's like a lottery ticket now. 
    • WBA – Short puts will go worthless and I'm including them here because, by the time we get to Part 4 of the review – I may forget I skipped them.

    As to the rest of the short puts:  All being kept except:

    • FNSR – Up 74% with a year to go so let's take it and run.
    • ARR – On track 
    • ETM – On track
    • NRZ – On track.
    • SKT – On track

    • AAPL – We're super-aggressive on Apple now and it is a huge position but paying off quickly as we rolled the $160s at $18.50 to the $120s at $37.50 and now the $160s are only $22.50 and the $120s are $45.50 – so much more gain than we would have had simply because we logically bought $40 in position for $19.  That's why I say those are MECHANICAL rolls – if you intend to stay in the position – then why on Earth wouldn't you buy $10 in position for $5 every time it's available?  We buy options as a proxy for the stock but we're happy to improve our position because all that does is bring us closer to actual ownership and raises our delta closer to the 100% we'd have if we owned the stock.  Not having 100% delta SAVED us money while the stock was falling but it's only paper savings if we don't convert to a more relational contract position.  I'm still confident enough to leave these open for now an, anyway – we just spent a lot of money improving our SQQQ hedges in the STP.  
    • ALB – Not so bad, considering the drop.  Let's buy back the short 2021 $120 calls and roll our 5 short 2020 $100 puts at $25 ($12,500) to 10 short 2021 $75 puts at $12.50 ($12,500) so we're only taking a profitable short call off the table and spending no additional money to lower our shorts while committing to own the stock if it's still down at $75.  I costs us $14,000 to roll the 20 2021 $80 calls at $14 to 20 2021 $65 calls at $21 but that puts us $22,000 in the money – so that makes sense.    

    • ALK – I'm hearing good things about them from travelers.  The short Jan calls will expire worthless and our position is on track. 
    • AMGN – We were pretty close on our Jan target so we'll close those out and also close out the 10 short 2020 $200 calls at $19.70 since that loss is canceled by the short Jans.  Now we can just sell 10 of the June $200s for $13.35 ($13,350) as we can always roll them along but it's good protection in case we fail at the triple top.  The CELG deal make me worried AMGN could get bought and those 2020 short calls would burn us if they did.

    • BBBY – We got way more aggressive on them in Sept and we're finally back to where we were then.  At least it's good for a new trade!  
    • BHC – The old VRX and we already cashed in the profitable longs we had and this is our leftovers. Just have to watch and see how these play out for now.
    • C – Nice reaction after earnings and we're back on track.  We should have taken better advantage of the dip but it will be a nice score regardless.  
    • CAKE – The short Jan $55 calls will go worthless and the rest is on track but we'll revisit after earnings.
    • CDE – Under-performing miner but I have faith.
    • CELG – Well these worked out great!  Our Dec spread is potentially $40,000 and now net $25,555 and the offer was at $100 so no reason to cash in early there.  Our Nov spread is potentially $22,500 and now net $13,133 so again, not going to walk away from $9,000.  Just have to hope the deal doesn't blow up and we've got $24,000 coming to us…
    • CHK – I guess it's on track? 

    • CHL – I picked one of the only stocks in China that was green for the year!  Net $7,050 out of $7,500 potential though means we should close the bull call spread for $7,255 and leave the short puts to expire worthless.  
    • CMG – Yikes, they blasted higher but we already cashed out a huge winner so they deserve to get some back.  Our 2012 $480/540 spread is potentially $140,000 and now showing $58,000 and I'm not worried about the 10 short 2020 $580s but they are even so let's just close themWe'll have to roll the 20 short Jan $485 calls at $32 ($64,000).  We sold them for $19.75 though so not a huge loss ($24,500) so we're just going to roll those to 12 of the March $550 calls at $15 ($18,000) and we'll see how earnings go.  If they go lower, we have room to sell puts and if they go higher, we could still sell puts and roll the longs higher and we're double-covered with $82,000 in potential gains at "just" $540. 

    • CZR – Brand new and doing well.

  19. Phil- What was the hedge we added to the
    OOP this week?


  20. /RB/Japar – Logical (and good instincts as it dipped on your comment) but too dicey over the long weekend for me to play.  

    OOP/Dreamer - 

    • SQQQ – Let's buy back 1/2 (25) of the 2020 $25 calls for $1.80 ($4,500) as it makes us much more flexible and gives us better coverage.  Also, it would be silly not to roll the 50 2020 $15 calls at $3.20 to 50 of the 2020 $12 calls at $4 as we're picking up $3 in position for 0.80 ($4,000).
    • TZA – Amazingly, we're still up on these.  Let's buy back the 50 short April calls as they are just 0.70 ($3,500) and it makes us much more bearish and we'll roll our 2020 $15 calls at $1.70 ($8,500) to the 2020 $8 calls at $4 ($20,000) so we're spending net $15,000 but buying $25,000 in position and now I'll sleep well over the holiday weekend.  

    TZA should have blue – of course.  



  21. pstas-the plan is to take them out of conservatorship and the government might be after getting done with GSE/ It is at a yearly high and shows no profit. We know how great the government is at handling basically nothing BUT who knows?


  22. FMCC- Pirate- I have a small speculative position betting on the release from government control. It is my understanding there have been good profits of late but all is swept to the Treasury. If FMCC reincarnates anything like the "old" Freddie & Fannie, they were like a license to print money. Of course, the mortgage shenanigans brought them down so I am sure protection from a repeat will be paramount. It is still a crap shoot as there is some incentive to keep things as is due to the cash flow back to the Feds especially given the deficits. 

    We shall see. 


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

    • DAL – Good for a new entry.
    • DIS – 25 2021 $120 calls at $8.50 can be rolled down to 25 2021 $110 calls at $13.50 for net $5 ($12,500).  
    • F – A bit behind but I have faith so good for a new trade (just one set of puts if new).
    • FCAU – Should put their troubles behind them and on track anyway. 
    • FTR – Waiting on earnings.  We're already obligated to DD essentially from our short puts. 
    • GCI – Buyout offer at $12 and we played for $12.50.  The 30 short Jan $10 calls are $1.20 so we have to close those and there's really no sense in selling more so we'll just wait and hopefully collect our entire $12,500 but only $10,000 at $12 but still much higher than our current net.
    • GE – Finally showing signs of life.  Not ready to buy back the short $15 calls but I am happy.

    • GILD – Our short Jan calls will go worthless and, otherwise, we're on track.  Again, with the CELG thing – let's wait a bit before re-covering.
    • GOLD – The old ABX. Not too much damage – good for a new trade.
    • GPRO – Wating and seeing on earnings.
    • GS – Still has that new trade smell.
    • HBI – Our aggressive adjustment is paying off (so far).

    • HRB – At our goal but net $6,500 out of $14,000 means i'ts great for a new trade, even up $3,600 from our original entry.  
    • IBM – Our 2019 Stock of the Year {insert fanfare here}!  After narrowly missing as our 2017 pick, the stars lined up in 2019 and we're on track and up about $12,000 already.
    • IMAX – Not only is DIS giving them mega-content this year but Aquaman had blowout numbers too.  We got very aggressive on the October dip and we only just passed it going the other way.   Great for a new trade.  

    • IP – I love shifting from exciting to boring.  IP is very boring but had an exciting sell-off that we couldn't resist.  Already almost at the top of our very conservative targets but way too early to cash in.

    • KHC – More boredom!  Same story as IP – can't resist a blue-chip going on sale for no good reason.  Our original short puts are still hurting so let's roll the 10 2020 $57.50 puts at $12 ($12,000) to 15 of the 2021 $50 puts at $8.40 ($12,600).

    • M – Now this would be my Stock of the Year at $25 – how silly!  We are already aggressive and not too much damage.  The short Jan $35s will expire worthless, so thanks for the $3,000 and the rest of the position is good as a new trade.
    • MJ – Well, that was easy money.  I think this ETF will be up 3x or more in 2021 as there are several companies in their basket that could become 10-baggers.  We're right on track so far. 

    • MO – Also going into the MJ biz so we like them and this spread likes us – right on track.  
    • MT – Suffering from tariffs and now a slowing economy but, as I keep saying, these are self-inflicted wounds and we should recover – I just hope 2021 is enough time.  
    • MU – Another huge bargain and we're up a bit anyway. 
    • NLY – We're in it for the dividends 
    • NYCB – Another dividend-payer and I'm not worried (good for a new trade).
    • OPK – Had some SEC issues that seem to be resolving so good for a new trade.

    • PZZA – We took the new spread to cover the short 2020 $50s so down is what we expected.  I want to see earnings before trying to improve what's really just leftovers from our original, hugely profitable trade.  See where we got out?  11/20!  You have to KNOW when your stock is unrealistically high as much as you need to know when it's low.

    • QCOM – Seem to be suing everybody but we're on track so we'll see how earnings look.
    • SKX – On track
    • SPWR – We got very aggressive and now we wait.  
    • T – We always buy T below $30 – it's in our first videos from 10 years ago…  On track.

    • TGT – Earnings not until March but last earnings went well.
    • THC – This is our third round with these guys – love 'em! 

    • UCTT – Earnings are late Feb and I don't want to do anything until we see them but we are pretty aggressive in this spread now.  We haven't rolled the short puts because 2020 is the longest month for contracts.
    • WBA – Jackpot on the short puts.  We only bought the long spread to protect the short puts, which were left over from a bullish play we cashed already.  I don't see any reason not to turn it into a proper play though so let's buy back 20 (1/2) of the short 2021 $85 calls for $5.50 ($11,000) and see how earnings go.  If they are good – we win big and, if they are not, we sell puts and roll the long calls lower and sell more calls to cover.  

    • WHR – Another tariff victim but doing well for us regardless.
    • WPM – This is like our 3rd time playing them so all gravy now.  Once again on track and the short Jan $17 calls are in the money so we'll buy them back and wait for earnings (around 2/15) before selling more.  The big spike came when they settled a tax issue in Canada.

    Wow, done exactly on schedule!   Nothing to cut though – our positions are too good!  


  24. ALK/Phil

    I am not as qualified to,comment on their financials. However, having flown on both their mainline Alaska flights as well as on their regional carrier flights, both as a passenger and as a cremember, I can say that they are no better or worse than Delta or United.

    Logistically, they are trying to absorb the Virgin acquisition. Time will tell how well they do that.


  25. Scratch that, we just popped $1M in the LTP!  

    That's without any of the above changes, of course.  

    ALK/Maya – Well no better or worse is a lot better than ALK's pre-Virgin reputation so, hopefully, they are purposely upgrading their experience.  


  26. TSLA BOOM!!!


  27. Shutdown hits home for Trump; he lives in government housing


  28. So apparently China has offered to spend $1Tn on US goods over 6 years, which should balance trade by 2024 – but even that is being rejected by Team Trump – who don't actually want a deal because then won't have an excuse to tax Americans 25% on Chinese goods.  


  29. Pstas – I'm also holding some FMCC and also some FNMAH.  Same thought process as you.


  30. I think a trader on Briefing Trader was probably right.  He said this market is not up because of hopes on the tariff front, but rather because too many people were betting against this rally, and now the shorts are running for cover.


  31. Thought we might sell off some going into the long weekend, but maybe not.


  32. volume light on a lot of stocks


  33. PG&E: The First Climate-Change Bankruptcy, Probably Not the Last

     

     

    Now that's a shark! 

    Diver Ocean Ramsey swims next to a female great white shark off the coast of Oahu, Hawaii, on Tuesday. The shark is believed to be Deep Blue, one of the largest recorded sharks.

    Covering/Albo – I don't know, I've been saying they were self-inflicted wounds that would easily be corrected.  I don't think we go back to the highs, now that some of the risks are recognized but sideways trading into Q2 would be super-healthy for the market.

    Have a great weekend everyone, 

    - Phil


  34. Popped a bit into the close.  

    Well, this one worked out:







  35. Nordstrom Has Rich-People Problems










  36. Justice Department’s Reversal on Online Gambling Tracked Memo From Adelson Lobbyists


  37. Leave it to California to make what should have been simple, very difficult…..

    https://merryjane.com/culture/the-sales-conundrum-how-cannabis-farmers-are-being-screwed-by-retail-regulations


  38. Regulations/1020 – Been great for us as we were prepared and passed the new regs.  


  39. Winning or losing on armchair cc writing.
    I have been asked before are you winning with covered call or csp selling.
    I like to give you a real type example with my AMGN play, a somewhat lively stock, however still paying a div. of 2.85%. Not my most likable div. which is normally above 3.5%.
    However due to the liveliness of the stock in respect to capital gains, I do hold this stock in my various armchair trades.
    Dec 18 was a trying period for most stocks and without fail also for AMGN.
    On the 21st Dec AMGN was closing at 178.40, a really rock bottom price for that stock. Here I must be honest with you I do hold the stock at the original purchase at 170.00.
    However at that date I sold the Mar 19 180 put for 8.25. (Blood on the street and all that jazz and a bit of guts) That for starters, basically to cover my next foolish move, by selling the 26th of Dec. the Jan 19 192.5 caller for 3.35. At that day the stock was trading I recorded at 187.86. Why foolish? My general role is not to sell calls, at the time the bottom is falling out of the market, or at a time where the stock shows a loss during relevant trading day. But again the stock went in 5 days from 178, Dec 21st closing, to 187!!!
    So here comes Jan 18 and I had to pay the piper 9.51. While the stock closed at 203.70. As you can see a good distance from my 192.50, a punishment going against my role.
    However let’s look at the bright side of this trade and do the math. The stock went from 187.86 to 203.70. Great I hold the stock!!! A capital gain of 15.84. But not so fast, I had to pay the piper 9.51 to get out of this. So we down to 6.33 plus what I did get for selling the 192.5 caller 3.35 makes it a 9.68 win. That makes it 5.2% on the caller only in 25 days.
    Still having trust in the stock I did roll the Jan 19 call position to Feb 19 205 strike for a credit of 4.10. Obviously if the stock goes down the caller will run worthless however you will have a paper loss on the stock.


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  42. SCBH- for anyone interested in this bank stock- just released 4thQ and 2018 results- all very good. 

    Seacoast Commerce Banc Holdings Announces Fourth Quarter and Full Year 2018 Results


  43. pstas,

    Surely not sure to whom you wish to sell this stock, without options and a .09 cent quater div. and on the bottom of the scale, possible a good sign????

    alysis    Overall    Short    Intermediate    Long
    Very Bearish (-0.54)    Very Bearish (-0.52)    Very Bearish (-0.61)    Bearish (-0.49)

    Read more at http://www.stockta.com/cgi-bin/analysis.pl?symb=SCBH&cobrand=&mode=stock#lRtGlK3V62xxeut2.99


  44. Have a look at NYCB!

    nalysis    Overall    Short    Intermediate    Long
    Bullish (0.26)    Bullish (0.33)    Neutral (0.15)    Bullish (0.31)

    Read more at http://www.stockta.com/cgi-bin/analysis.pl?symb=NYCB&cobrand=&mode=stock#HXsw44DHYmtFBqV2.99





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  48. Phil/Board; A quiet day so a general question on hedging.  Does anyone look at their overall SPY weighted delta to determine their amount of hedging?  On TOS you can see what your overall SPY weighted delta is.  Does it make sense to use SQQQ or TZA or an S&P bear fund to create a specific level of negative delta (e.g. 25%).  Phil seems to take a more general approach, using the size of the portfolio and potential loss following a 10-20% drop in the market.  Thanks  


  49. Yodi- SCBH- I guess we will have to agree to disagree. I don't see any data to support those "analysts" bearish ratings. Looking at the actual financial data I see a very, very well capitalized bank; net interest margin of almost 6% (vs. avg 3-4%); return on assets of 1.2% (vs avg. 1-2%) ; price to book 1.5X (vs. 2-2.5X for banks with assets over $1B); P/E ratio of 14 (vs. approximate 4 year growth avg of 20%+). 

    Again, a very unique story / bank business model of specializing in SBA loans (keeping the guaranteed portions (usually 70%) and selling the balance of the loans. Bottom line, a very nicely profitable small bank that has a lot of room to expand its model and this would be best accomplished as part of a larger regional banking firm, thus a buyout. Management is planning on this. 

    As always, we shall see. 


  50. Phil in the December review you said regarding CZR, "We have 40 2021 $10 calls, now $1.75 and we can roll them to the $5 calls at $3.40 so well worth the $1.65 to widen the spread by $5 and go in the money on our calls.  Did you intend to double the position as well?  The current update shows the position with 80 5 Calls.


  51. Hola people!  

    Nice holiday today (in case you were wondering) and I just got back from a family weekend.

    Looks like the Futures are down a bit, but nothing drastic.

    CZR/Options – In the LTP, we had put on a 40 unit 2021 $10 ($2.40)/15 ($1) bull call spread with 20 short $12 puts on 10/23 and those calls dropped to $1.75 and then we did the roll you note so yes, it should be just 40 long call but that is what I see in the LTP, not 80.  There are 40 SHORT Jan $15 calls we sold for $1 but just 40 long of what are now the 2021 $5 calls.

    FMCC – I can't believe I gave up on them, was such an obvious play.  We got out on that first pop near $2 but never pulled the trigger to get back in on the pullback – my bad.  Congrats to those who stuck with it!  

    Let's pull the trigger on 10,000 shares of FMCC for the LTP.  At $1.36, they just made 0.80 for the quarter but, of course, the Government stole it as they are still under "Conservership".  Mnuchin says they will review their status and this thing can explode if the Government steps back, even halfway.  

    Submitted on 2018/05/17 at 3:08 pm

    • FMCC – Brand new and they don't have options so strange for us but up 2.2% so why not?  I went in now because I think the Government may finally unwind them and, if so, it should be an easy triple.  

    Submitted on 2018/06/15 at 11:21 am

    • FMCC – Already up 20% and I like them long-term.  Sadly, no options.

    Submitted on 2018/07/20 at 12:23 pm

    • FMCC – I'm sorry but stock with no options bore the crap out of me!  It's up 16% but so what?  It's going to hit $2 and then we're out with a 50% profit - yawn!  

    Submitted on 2018/09/21 at 10:17 am

    FMCC – Has fallen back from $1.58 last month but we're in this one anticipating a rule change where the Government stops taking all their profits (still from the bailout) and then a big move higher.  

    I think in Sept I thought we still had it but we didn't anymore and that's why I forgot to get more.

    CC Writing/Yodi – Good point.  People lose sight of the fact that you can't always be right when selling short calls and puts.  In the Butterfly Portfolio, I tend to talk about what we can sell this Q and then extrapolate 8 Qs of selling to figure out how much premium we can sell.  So, if it's $3 for the Q against a $30 stock then $24 potential premium sales means we have a lot of room to be wrong and, when we don't get it perfectly right (which is usually), we widen the spread and, when we do hit our target – that's a bonus, not the expectation.

    What people also lose sight of is that, even if the stock makes a big move and we have to roll – we STILL collected the premium when it expired – it's just that we had to use it to pay for the short call or put that went against us but, FOR SURE, we WILL collect that $24 – that's what makes them so powerful!  

    SCBH/Pstas – They merged with CBJC last year and I can't get a good read on their numbers though the link you posted is consistent with a penny stock that bought a shell – which is what I think this is.  As Yodi says, NYCB is much sexier, dropping about 40% to the bottom line and just $5Bn at $10.50 though revenues have been declining.

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 1,460 1,385 1,342 618.8 1,433 1,347 1,145 1,031 984.7 -1.6%
    Operating Profit $m 780.9 747.1 773.1 -132 777.1 668.2 569.6     -3.1%
    Net Profit $m 501.1 475.5 485.4 -47.2 495.4 466.2 427.2 389.7 372.7 -1.4%
    EPS Reported $ 1.13 1.08 1.09 -0.11 1.01 0.81 0.80     -6.4%
    EPS Normalised $ 1.14 1.08 1.09 0.097 1.03 0.81 0.80 0.79 0.80 -6.5%
    EPS Growth % +2.6 -5.3 +1.5 -91.1 +956.7 -20.9 -1.9 -2.25 +0.15  
    PE Ratio x           13.0 13.3 13.3 13.3  
    PEG x           n/a n/a 88.1 1.83
    Profitability

    Delta/Options – I have found that those TOS (or anyone's) delta is prone to change as soon as the market moves so it's kind of pointless since that's what you need the hedges for.  This is why so many hedge funds tread water – they go by simple formulas rather than thinking a few moves ahead.

    When we hedge (and you can see this in reviews of our hedges occasionally) what I care about is how much we will get paid if the market corrects 10% or 20%.  You don't need a hedge for a 5% correction – especially the way we buy into long positions.  Hedges are disaster protection – more like life insurance than health insurance and, if we recover before the expiration date – the policy never pays but then – again because of the way we tend to ride out the downturns with our longs – we don't need them anyway.

    Good example is what we just went through, the market fell 20% – our hedges paid off the max and we cashed in $200,000 worth of gains in the STP which mostly offset the losses in the LTP and, since we were essentially even in the paired STP/LTP, we felt comfortable pressing our LTP positions at the -20% line and then, when we came back, we got our $200,000 back and STILL had the $200,000 we cashed in the STP so we gained $200,000+ in the cycle.  

    That's because we're anticipating the moves and staying on top of the cycles – not trading with some algorithm that feeds you incomplete data.  It's a waste of money to hedge against 5% corrections – especially when a properly constructed position should be able to ride them out on it's own!  


  52. Phil I see now but just so you know that I'm not crazy.  When you posted above you included the 40 long on both Part 1 and 2 and the price changed by $.05 so they looked different to me.  Thanks for clarifying.  Are you in FL permanently?  Bitter cold in NJ today…….


  53. Yes, in Florida most of the time.  Oh, I see what happened, that is just a re-paste of the last line from the first page but, by the time I snapped the 2nd image, the current price had changed a bit but it's the same 40 2021 $5 calls that were in the first part.


  54. Phil – on the following short call CMG roll, why did you decide to reduce the number of contracts (from 20 to 12) when the position rolls all the way up to close to $760, and the game plan was to layer on another BCS spread ($500/600) when/if CMG hits $540?

    Just curious as to your thinking?


  55. CMG roll was:

    We'll have to roll the 20 short Jan $485 calls at $32 ($64,000).  We sold them for $19.75 though so not a huge loss ($24,500) so we're just going to roll those to 12 of the March $550 calls at $15 ($18,000) 


  56. CMG – just to push the envelope on the 'getting to keep the premium' philosophy, you could have sold 10 contracts of the CMG March $500 straddle for $61 – so you are covered from $440 to $560? Obviously the big caveat is now you have a short put exposure situation – but rollable was well.

    Just for discussion purposes.


  57. SCBH – I can assure all this is not a scam. Seacoast bought out Capital Bank and closed on the deal in '17 I believe. I owned some Capital before the merger and did very well in the merger. Capital Bank was/is not a shell nor is Seacoast. I know the guy who started Capital Bank and arranged the Seacoast merger. He remains a major stock holder. Given that, I want to be careful about what I say but let's just leave it at  "I am very comfortable with my position" and have added and will continue to add on any weakness.