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SOTU Tuesday – Trumped-Up Rally Continues

Everything is Awesome!

Well, that's what they want us to believe this evening as Trump gives his State of the Union message.  One year ago, Trump taled about the $8Tn the stock market gained during his first year in office and the S&P had run all the way up to 2,872 into his Jan 30th speech but then we collapsed back to 2,532 just a week later (2/9) and it took us until September to get back to where the BS pre-SOTU rally had taken us.  

Now we're at 2,724 so the market is down a couple of Trillion Dollars but has also ralled back 16% off the 2,346 low just 6 weeks ago in December and thank Trump it did or he'd have to be explaing how the State of the Stock Market was WORSE than when he took office.  But thanks to the Fed reversing course and the Administration telling us how AWESOME their trade talks with China are going and thanks to the economic data the Administration has released showing the Government Shutdown was GOOD for the economy – EVERYTHING IS AWSOME!

Of course, having actually seen the Lego Movie, I know that things were not, in fact Awesome but a brain-washed society that had fallen under an oppressive regime run by a TV-obsessed, orange-haired psychopath (relax, it was 2014 – no one was picking on Trump – it's just a very strange coincidence) and had to be saved by a girl who looked a lot like Alexandria Ocasio-Cortez who did all the work while some nobody got all the credit.  Again, coincidences…

Image result for hedgingStill, I would not go into today's end without hedges – just in case we have a repeat of last year and the great efforts to prop up the market end as soon as the President is done telling you how great things are.  Trump also bitched about Government Regulations and said it was ridiculous that we were once able to build the Empire State Building in one year and now it takes 10 years to get a road built but 5 people died building the Empire State Building and 60 people died building the First World Trade Center while NONE died building the second one – BECAUSE we have learned to make construction safer.  President Trump wants his construction permits now and he'll bury the bodies later – so great!

Last year, Trump praised "Mad Dog" Mattis but the Secretary of Defense resigned over Trump's policies.  Trump also vowed to lower prescription drug costs (still waiting), to do massive infrastructure projects (still waiting) and to rebuild our nuclear arsenal (which has led to breaking our anti-proliferation treaty with Russia, who are now also developing new missiles so congrats on re-initiating the Nuclear Arms Race after we spent 40 years disarming each other!).  

Trump called for bi-partisanship ahead of the longest shutdown in history and now, with a Democratic House, he plans to call for it again but, after sticking it to the Democrats for 2 years – I don't think he'll have many takers.  Our dysfunctional Congress is back in session in February and we'll see if anything can get done and, don't forget, Trump is still threatening to shut down the Government again if he doesn't have his wall funding in 30 days.

Whether or not it's true that the Shutdown caused the recent 20% crash in the markets or if it was just a huge coincidence, as Team Trump claims, what's not a coincidence is that we're heading right into the 200-day moving average on the S&P at 2,741.55 and I'd call 2,400 and let's say 15% over that is 2,760 so that's the line we'll watch closely (dmas change daily) for a rejection and a 360-point rally gets 72-point rejections to 2,688 (weak) and 2,616 (strong) but that's OK as the 50 dma is down at 2,609.75 so a bit of consolidation between the 50 & 200 dmas will be nice and healthy.

We've gone back to anemic volume during this rally.  In the 10 trading days from Dec 17th to Dec 31st, 1.87M shares were transacted on SPY while, in the last 10 sessions of January, also from the 17th, just 900M shares were traded in the "rally" so it's a 50% decline in volume while the S&P moved up 10%.  That means the last 10% is build on a very weak foundation indeed!  

Other than saying BE CAREFUL, I'm not making any predictions but PLEASE, do be careful as it would suck if we give up all these lovely gains.  We'll be checking our hedges today in the Live Member Chat Room but I think we're well-covered and we'll also see if the S&P can indeed take out the 200 dma so the President can say "at least we're only down 5% from last year."  


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  1. Things won't be awesome long when the bill comes! And Rattner is wrong, it's not bipartisan spending, the GOP has been in charge the last years of this running disaster! Without the tax cuts, we would probably still be on track.

  2. Good Morning!

  3. Good morning, 1020 and all. I'm returning to Korea in a couple of weeks, so won't be able to do these morning greetings for a while.

  4. Think the current period and dialog here has helped understand how to adjust positions and be proactive but still need help with the specifics… Also see that adjustments are sometimes restricted by mgn requirements!


     Currently holding AAPL bc spreads including:


    - Long 20 Jan’21 140c (rolled ’19 150s vs 20 Jan’19 175’s expired) 


    If I can only sell one set of short calls at a time (vs the long Jan’21 140s) is it better to sell premium on the Jan’21 (say) 190s now or to sell several sets of short calls each quarter on the way?

    Or maybe half and half?


    I also have:

    Short 5 Jan’21 170p  @$22.2   (mgn ~ $36k)

    Short 7 Jan’21 195p   @ $31.7  (mgn ~$ 61k)


    Should I roll the 7- 195p to more 170s, 160s?



  5. Good morning!  

    The Dow is already over the 200 dma so we're just waiting for confirmations but, if we get them, you can't fight the technicals.  

    $2Tn/StJ – Clearly that will be the fault of whatever Democrat is in power at the time.  The deficit gives the GOP an opportunity to say we can't afford Health Care or Infrastucture or Welfare, etc (but we can always afford more Military!).  

    AAPL/Wing – Half and half is a good solution.  It's certainly more profitable to sell short-term calls but sometimes you get burned to the upside.  Maybe don't sell so many puts to conserve margin or stick with the significantly lower-requirement $170 puts.  Short put selling is for people who have margin just sitting around doing nothing – that doesn't sound like you.

    As to the bull spread, keep in mind that selling 10 of the 2021 $185s for $20 puts $20,000 cash back in your pocket and does not require margin so, if you have a 2x account, it should add back $40,000 in buying power (also, if you have such big positions, you should look into getting a Portfolio Margin account but, for God's sake, don't go using it all!).  

    You didn't say what you paid for the 2021 $140 calls but they are now $45 so selling $185s for $20 puts 44% back in your pocket and you still have $20 (80%) upside potential, which is pretty good. 

    You have to weigh that against, for example, selling 10 April $180 calls for $5 and that takes up 72 of the 710 days you have to sell so call it 1/10th and 10 sales would be $50, which is much more than $20 but, of course, not every sale will be a winner so you are working and risking for $30 extra Dollars – something I'm usually not willing to do as you have to divide that up along the whole spread so really $15 per long extra (rather than just taking the $20 now) while that $20 could be going to work for you now and making 80% ($16) anyway. 

  6. Deficits / Phil – And of course, you can't raise taxes when deficits are high because…. reasons!

  7. MJ/Phil – With the recent rally, I'm trying to figure out the best way to adjust my jenga'd position.

    Back in October I picked up 6 2020 $35/$50 BCS for $4.80 and sold 3 2020 $30 Puts for $4.55

    Between Christmas and New Year I:

    Rolled the puts and doubled down to 6 2021 $20 Puts

    Covered the $50 short calls

    Full disclosure, I ran out of margin at that time rolling and adjusting all of my other positions as the market was bottoming and felt most confident MJ could come back, otherwise I would have taken advantage then.

    So, with my remaining long call, I feel like I should be covering it with this rally.  Would you recommend:

    Sell near term calls x4 (Mar, Jun, Oct, Jan) as we work toward 2020 (I believe the potential for this to pop makes it too risky), or

    Sell the $35 calls $6.35 today and buy the 2020 $30/$45 BCS for $6.45, or

    Sell the $35 calls $6.35 today and take it out to the 2021 $30/$50 BCS for $6.55

    I have a few other positions like this as well (thankfully I was able to roll down the long call on those), so I'm very interested in the best way to lock in these gains and how I should be thinking to get to that conclusion.


  8. Information:  I'm long both AAL and UAL.  They are moving strongly upwards today.   Earnings were favorable but ????

  9. Sold some Sept $3 OPK puts for .70/

  10. Hi Phil,   I missed MJ, now it appears to have gotten away…. too late for a trade?

  11. Trump’s economy is a train wreck waiting to happen

  12. Luxury retailers, technology companies push stocks higher

  13. Sold another 1/3 of /NG.  Keeping 1/3.  Moved up stop.

  14. /NG finally coming back a bit.  

    MJ/Buckeye – So you have 6 2021 $20 calls and 3 2020 $30 puts and MJ is $37.  The bid/ask spreads are all over the place but the 2020 $40 calls are about $5 and the 2021 $50 calls are $4 so not too much protection for your $20s, which are $17 in the money so $18 is very reasonable.  

    There's no point in holding a position you can't protect well so I'd cash the 6 2021 $20 calls for $10,800 and buy 10 2021 $30 ($10)/$50 ($4) bull call spreads for $6 ($6,000) so you have $4,800 in your pocket AND $20,000 worth of spreads that are $7,000 in the money to start.  

    If you want to be more aggressive, you can sell just $6 of the $50 calls, which will cost you $2,400 and instead sell 4 of the April $40 calls for $1.80 ($720) and, hopefully, you can keep selling short calls 9 more times and collect $7,000+ rather than the $2,400 for the 2021 $50s.   I approve of this one as you only need 3 good sales (220 days) to be about even to just selling the one long.  

    Airlines/Iflan – Be careful if fuel costs keep rising.

    OPK/Albo – They did a $200M note offering, people are upset. 

    MJ/Sun – Well, if you wish you had gotten in at $30, you can still sell the 2021 $30 puts for $5.30 and that's net $24.70 and $5.30 is 21.5% so you'd be beating most hedge funds with just that trade!  If you REALLY wan to own them for $30, then you can consider the $5.30 free money and still the above $30/50 bull call spread at net $6 is a good deal – especially if it's net $3.35 for 2x against the short puts as the upside is $16.50 (492%) at $50+ and you are starting out $7 in the money, which is 100%.  

    KEEP IN MIND PLEASE, since we have had 3 people bring up margins today, that – if you are getting into a play that returns 492% on CASH!!! – that you don't need a lot of CASH!!! to make a nice, 40% return.

    If, for example, you intended to sell 5 MJ 2021 $30 puts for $5.30 and make $2,650 at $30 or above, you should keep in mind that just 2 of the $30/50 bull call spreads will pay you $4,000 and you only have to sell one short put for $530 to lower the net cost from $1,200 to $670 and your upside potential is still $3,330 – quite a bit more than $2,650 and, even at $40, you would collect net $1,330.  

    That would require very little margin to make the same return but the strike would be quite a bit higher – so you'd have to be more bullish, of course. 

    If you don't want to be that bullish, the MJ 2021 $25 ($15)/35 ($9) bull call spreads are also $6 and 100% in the money now so 4 of those at $2,400 less 2 short $30 put at $5.30 nets you in for $1,340 on the $4,000 spread with a very conservative target. 

    Just because you have a lot of leverage doesn't mean you should make a much bigger play.  Unless you have tons of margin, just look to make a REASONABLE return in a manner which keeps you flexible and protected because, according to our compound rate calculator, making "just" 20% a year on $50,000 for 20 years nets you $1.9M and 30% is $9.5M and 40% is $41.8M so why on Earth would you blow making conservative plays that are very likely to return 20-40% in favor of risky plays that MIGHT make you a quick 100%?  

    THE RISK IS NOT WORTH IT!!!  Our conservative plays don't even work out often enough – even our top trades fail 20% of the time in a great year but, all 5 top trade go for 40% and 4 make 160% and one loses 40% – you still make 120%!  If, on the other hand, you go for doubles and win 3 out of 5, you make 300% and lose 200% and end up with 100% – that's 20% worse than top trades but you could just as easily lose 3 out of 5 as win them with volatile trading so it's NOT WORTH IT!!!

  15. Wow, look at the volume for the VXXB calls expiring in June:

    15,000 contracts of the June 75 and 80 calls. Could be a spread I guess but looking at only $0.10-0.20. Although 15,000 of them is still a lot. That would be $150K using something like $8M in margin (much less for an institution I am sure). But that's an insanely sized bet. But a pretty safe one – well over 90% chance of working out! 

  16. OPK – Phil, I saw that filing.  People are definitely upset.  I think the company might be sold.  After all Dr. Frost is 82 years old and owns almost 40% of the outstanding shares.  At any rate, I like the risk/reward of buying the stock at $2.30.

  17. VXXB/StJ – Could be a bear put spread?

    OPK/Albo – I agree, fun to take a shot.

    RUT falling hard and fast.  Others not affected yet but /NQ 7,000 is a good shorting line if it breaks (tight stops above) and 25,300 on /YM.  

  18. Thanks Phil, definitely agree on the logic re:margin…. was only a few short months ago that margin was a huge factor with the almost 20% drop in the markets…..

  19. This idea from Briefing Trader :

    They are thinking that LABD could be interesting going into the SOTU tonight.

    Cost of drugs is one of few issues that the Pres and the Dems agree on.

  20. Good morning!

    Anyone have definite information on black out periods for companies to buy their own stock? 

  21. You're welcome Sun.  Nothing teaches us like experience…

    LABD/Albo – Well that's interesting since LABD is super-low at the moment and has been much higher.  

    They do have margins and they are pretty expensive but I'd just go for the LABD March $25 ($2.80)/29 ($1.65) at $1.15 on the $4 spread that's at the money and, if you want to pump up the risk, you can go 5/4 or 5/3 as you could get lucky on a nice pop.  5/4 would be $800 and, at $35, you get $1,600 + $1,000 = $2,600 and 5/3 would be $905 and, at $35, you get $1,200 + $2,000 = $3,200.  So very nice risk/reward ratios.

    Blackouts/Maya – There's no set period, just a standard courtesy most follow:

    The unofficial blackout period for corporate and insider stock purchases generally goes from the last two weeks of a quarter until after earnings are announced. The rule isn't hard and fast. Corporations can execute a buyback within a blackout period if they have a preset rule for doing so.

  22. Thanks, Phil.   I put on a small 125/129 spread for $1.20.

  23. Blackouts/Phil


  24. One could do something similar in LABU too..

  25. Going the other way? Sure.  

  26. VXXB / Phil – All on the call side…

  27. It would be interesting if Trump announced some trade deal tonight.  If so, it would probably be very vague, something like China has agreed to open their markets and to buy billions in US ag products.  Anything stronger would be very surprising.

  28. I'm not going to add to our hedges because, to some extent, the continued rally is a hedge.  We were very happy with where we were two weeks ago so no sense in worrying about spending money just to prevent ourselves from going back there.  
    • Tesla (TSLA +2.9%) launched a store on Amazon to sell merchandise and gear, according to Electrek.
    • A quick scan of the new Amazon store shows that Tesla-branded iPhone cases, toys and apparel are included on the site.
    • The company's Amazon play is a break from selling merchandise off its own website.
    • A promise from T-Mobile (TMUS -2.7%) to keep prices where they're at or better for three years after a Sprint (S -4.1%) merger points to a potential problem in the deal, New Street Research says.
    • Simply put, such a promise from T-Mobile chief John Legere shows the government has specific concerns about price impact from the merger. If the deal doesn't harm competition as T-Mobile and Sprint are arguing, why make the pledge? (h/t Bloomberg)
    • The firm says based on current antitrust policy that the DOJ can't rely on post-approval conditions, it's unlikely that the antitrust division will sign off.
    • Amazon (AMZN +1.5%announces it will launch a new Baby Skill Activity API that makes it easier for developers to integrate Alexa into baby apps and baby care devices.
    • The API will launch first in the U.S. and include tracking features for weight, feeding, diaper changes, and more.
    • In a related move, Amazon's Alexa Fund invests an undisclosed sum into smart nursery company Hatch Baby, which has devices ranging from a smart changing pad that weighs the baby to a nightlight with a sound machine and alarm.
    • Hatch Baby appeared on Shark Tank in 2016. The company has now sold over 200K products on Amazon, where it lists in the top 100 baby products.
    • Hatch says it will use the investment to expand its integration with Alexa and other Amazon services.
    • Just a thought: Last year, The Information reported on the Alexa Fund's tendency to invest in companies and markets that Amazon later decides to enter.
    • American Outdoor Brands (AOBC +4.5%), Vista Outdoor (VSTO +2.6%) and Sturm, Ruger (RGR +2.4%) rally after firearm checks data for January is released by NCIS.
    • 2,165,094 checks (unadjusted) were recorded during the month vs. 2,030,530 a year ago.
    • NCIS data
    • TechCrunch sources say Tencent (OTCPK:TCEHYOTCPK:TCTZF) is leading a $150M to $300M round in Reddit, "the front page of the internet."
    • The Series D round comes with a pre-money valuation of $2.7B, and the post-money could grow to $3B.
    • Total funding will increase to $400M to $550M, depending on the size of the round.
    • Reddit has 330M MAUs across 150K Subreddits. Monthly video views topped $1.4B in December (+40% in two months). Engagement increased 22% in 2018, and total views rose 30%. The company recently launched cost-per-click ads.
    • Why Tencent? The Chinese conglomerate owns the popular WeChat messaging app and is one of the largest game companies in the world between owning League of Legends and stakes in titles like Fortnite. But a Chinese regulatory crackdown and associated gaming license freeze hit revenues hard last year.
    • McDermott (MDR +1.6%) and joint venture partners Chiyoda International and Zachry Group are awarded a "mega" contract to build the Golden Pass LNG export project in Sabine Pass, Tex.; MDR defines a "mega" contract in excess of $1B.
    • MDR and partners will perform engineering, procurement, construction and commissioning of three 5.2M tons/year liquefied natural gas trains with an expected production capacity of 16M tons/year of LNG.
    • Exxon Mobil (XOM +0.4%) and Qatar Petroleum announce a final investment decision to build the $10B-plus Golden Pass LNG project to export liquefied natural gas from the Texas Gulf Coast, confirming a report last Friday.
    • Construction on the project, which have the capacity to produce ~16M tons/year of liquefied natural gas, will begin in Q1 2019 and is expected to start up in 2024.
    • XOM says Golden Pass is part of its plan to invest more than $50B over the next five years to build and expand manufacturing facilities in the U.S.
    • Oppenheimer expects Chipotle (CMG -0.7%) management to have an optimistic tone on the company's Q4 earnings call without issuing any formal full-year guidance.
    • The firm rides into the Chipotle earnings report with an Underperform rating due to concerns over the restaurant operator matching consensus comparable sales and EPS estimates, as well as the +40X price-to-earnings trading multiple.
    • Shares of Chipotle are up 21% YTD.
    • Boeing (BA +2.3%) says it made a "significant" but undisclosed investment in supersonic aircraft developer Aerion in an attempt to accelerate technology development and aircraft design.
    • Boeing says it will provide engineering, manufacturing and flight test services for Aerion’s $120M AS2 supersonic business jet, whose first flight is scheduled for 2023.
    • The AS2 is designed to fly at speeds up to Mach 1.4, or ~1K miles/hour, with the ability to fly as much as 70% faster than today's business jets.
    • BA shares power past $400 for the first time and are poised for a second-straight record closing high.
    • Earlier: Boeing shares bull to another record, bucking China slowdown concerns (Feb. 4)
    • Senators Chuck Schumer and Bernie Sanders yesterday took to the New York Times to castigate corporate boards for returning profits back to company owners. D.C. bureaucrats, they insist, know better than boards on what to do with that cash.
    • The duo plan to introduce a bill prohibiting corporations from buying back shares "unless [they invest] in workers and communities first." Oh, and should the companies try to get around this by boosting dividends, the Senators say they'll prevent this, perhaps by altering the tax code.
    • Former Goldman Sachs CEO Lloyd Blankfein says a kind word for buybacks/dividends, reminding that it used to be considered a good thing when companies – unable to reinvest profits for a good return – instead returned money to shareholders. "The money doesn't vanish, it gets reinvested in higher growth businesses that boost the economy and jobs.  Is that bad?"
    • Next-day natural gas prices at the Waha hub in the Permian Basin sink nearly 90% to a record low $0.21/MMBtu, as demand fell due to moderating weather and pipeline constraints limited the amount of fuel that can leave the region.
    • The contract fell below its previous all-time low of $0.25 in November and compares with an average of $2.13/MMBtu so far this year, $2.10 in 2018 and a five-year average of $2.80, according to data going back to 1991.
    • Elsewhere in the region, next-day gas at the Henry Hub in Louisiana fell to $2.57/MMBtu, its lowest in nearly as consumers turn off their heaters as temperatures warm.
    • The $2.36/MMBtu spread is at its widest since December and compares with an average discount of $0.93 YTD, $1.06 in 2018 and a five-year average of $0.34.
    • The National Retail Federation forecasts retail sales will increase between 3.8% and 4.4% in 2019 to above $3.8T.
    • The new forecast factors in the recent government shutdown and the ongoing impact of the trade battles.
    • "The biggest priority is to ensure that our economy continues to grow and to avoid self-inflicted wounds. It's time for artificial problems like trade wars and shutdowns to end, and to focus on prosperity not politics," says NRF President Matthew Shay.
    • Online sales are anticipated to rise 10% to 12% to a range of $752B to $765B this year.
    • Papa John's International (PZZA +3.6%) CEO Steve Ritchie tells CNBC that the company hopes founder John Schnatter will come along after a deal was struck with activist hedge fund Starboard Value.
    • Sources indicate that the Starboard deal takes Schnatter's position in the pizza chain operator down to 26% from 31%.
    • The addition of Starboard to the Papa Jophn's boardroom is widely seen as a positive development after the firm helped turn around Darden Restaurants and the Olive Garden chain. A similar turnaround at Papa John's is given the best chance of success if Schnatter isn't the public face of the company.
    • Albemarle (ALB -0.9%) is lower after Citigroup downgrades shares to Neutral from Buy with an $81 price target, cut from $90, saying Livent (LTHM +1.1%) likely will outperform ALB after FMC Corp. spins off its stake to shareholders.
    • Slower industrial activity and weak refining margins increases downside risks to ALB's bromine and catalysts divisions, whose EBITDA likely will decline through 2019, Citi analyst P.J. Juvekar says.
    • Juvekar notes that hydroxide – which LTHM has more exposure to – is growing faster than carbonate, and he sees less downside risk to hydroxide prices than carbonate over the next couple of years "as the former has more tenable barriers to entry and higher concentration of competitors."
    • Also, ALB has limited balance sheet flexibility following the Mineral Resources deal, which exposes it to upstream commodity risk for a few years before conversion capacity starts up, according to Juvekar.

  29. Phil/AAPL,

    got 5 AAPL Feb 18 $160 calls – cost of $5.50. How can I book profit but still be part of the upward movement of APPL. I feel and as you have advised that surely it is going to go up more. Maybe April BCS or something? You have explained these strategies before but somehow not able to wrap my head around the strikes to be selected to catch reasonable upward movement.

    thanks as always.


    • General Electric (GE +1%) is fined €50M ($57M) by the French government for creating fewer than 3% of the jobs it had promised as a condition for gaining approval to take over Alstom's energy business in 2015.
    • GE added a net of just 25 jobs over the past three years compared with the 1,000 it had pledged, according to French Finance Minister Le Maire.
    • The GE-Alstom deal was touted by then-CEO Jeffrey Immelt as a win-win for the two companies and for France, but demand for gas turbines collapsed not long after GE completed the takeover.
    • Chain store sales rose +5.7% for the week ending on February 2, according to Johnson Redbook. The weekly gain is just 10 bps short of the 5.8% pace from the prior week.
    • Retailers report that the Polar Vortex held back some store traffic.
    • Apple's (AAPL +1.5%) HomePod accounts for 6% of the U.S. installed base of smart speaker devices, according to new Consumer Intelligence Research Partners data.
    • The total U.S. installed base grew to 66M in the December quarter, up from 53M in September and 36M in the December 2017 quarter.
    • Google (GOOG -0.9%)(GOOGL -1%) Home holds 24% of the base and Amazon's (AMZN+1.5%) Echo leads with 70%.
    • CIRP attributes the stark difference in share to Amazon and Google offering lower-cost products, which encourages homeowners to have multiple devices.
    • As of the December quarter, 35% of smart speaker owners had more than one device, up from 18% in the prior year's quarter.
    • The Florida Public Service Commission says Tesla's (TSLA +0.9%) residential solar equipment lease program isn't considered a sale of electricity or make the firm a public utility under state law.
    • The residential solar equipment lease will not subject Tesla or its customer lessees to commission regulation.
    • FPSC press release
    • Kelley Blue Book estimates that the average automobile transaction price in the U.S. rose 4.2% in January to $37,149 as the shift away from passenger cars continued.
    • KBB analyst Tim Fleming says other factors include Tesla (NASDAQ:TSLA) approaching the U.S. sales numbers of BMW (OTCPK:BMWYY) and Mercedes-Benz (OTCPK:DDAIF) in recent months with even stronger transaction prices and continued strong demand for full-size trucks like the Chevrolet Silverado, GMC Sierra and Ram 1500 pickup.

    Italy preps to put $2B of property on the market: Bloomberg

    • Italy is getting ready to sell as much as EUR 1.8B ($2.1B) of state-owned real estate as it seeks to tame rising debt, Bloomberg reports, citing people with knowledge of the plan.
    • The finance ministry is identifying properties owned by state and by regional and local administrations that could be sold--mostly army barracks, hospitals, and office buildings that are no longer being used.
    • The three-year budget plan approved in December targeted EUR 950M in revenue from real estate sales in 2019 and EUR 150M  in each of the next two years.
    • The first properties could be put up for sale by the end of the year. Talks are taking place on how to package the properties, but a final plan hasn't been decided yet.
    • Seagate Technology (NASDAQ:STX) guides downside Q3 with revenue within 5% of $2.3B (consensus: $2.47B) and EPS within 5% of $0.70 compared to the $1.04 consensus.
    • The company expects gross margin of at least 26% (consensus: 29.7%) and forecasts total exabyte shipments down 10% to 15% sequentially.
    • Source: Earnings call with a transcript available here.
    • STX is down 4.7% premarket to $43.40.
    • Previously: Seagate +2.8% on Q2 EPS beat (Feb. 4)
    • OPKO Health (NYSEMKT:OPKprices its $200M aggregate principal amount of 4.50% Convertible Senior Notes due 2025.
    • The initial conversion rate will be 236.7424 shares of common stock per $1,000 (~$4.22/share).
    • Underwriters over-allotment is an additional $30M Notes.
    • Net proceeds will be used for commercialization of pharmaceutical and diagnostic products and for working capital and other general corporate purposes, including repayment or repurchase of indebtedness or debt securities.
    • Closing date is February 7.
    • Shares are down 18% premarket.
    • Previously: OPKO down 5% after hours on convertible debt offering (Feb. 4)
    • Some investors are ready to begin pricing in a rate cut as the Fed's next move, but they're getting way ahead of themselves, says BlackRock fixed-income chief Rick Rieder.
    • "The Fed," he says, "would still like to get a hike or two done."
    • Short-term rate futures are pricing in about a 13% chance of one more rate cuts by this time next year.
    • Federal Reserve Chairman Jerome Powell and Vice Chair Richard Clarida met with President Trump for an informal dinner Monday to discuss recent economic developments and the outlook for growth, employment, and inflation, the Fed says.
    • Powell's comments were consistent with remarks he made at last week's press conference, the central bank said in a statement.
    • He didn't discuss his expectations for monetary policy other than to stress that the Fed's policy path will depend entirely on incoming economic data and how that affects the outlook.
    • Statement adds that Powell and the Federal Open Markets Committee set monetary policy to support maximum employment and stable prices and make decisions based "solely on careful, objective, and non-political analysis."
    • Previously: Powell: Evaluating appropriate size of balance sheet (Jan. 30)
    • Saudi Arabia and its Persian Gulf allies are proposing a formal partnership with a Russian-led group of countries in hopes of better managing the global oil market, in an alliance that would transform the cartel, WSJ reports, citing OPEC officials.
    • Russia and OPEC have increasingly worked together in recent years, including in December when they agreed on a deal to curb production, and the proposal would formalize their loose union.
    • Ministers hope to work out a final deal when representatives of both groups meet in April, according to the report.
    • Separately, March WTI crude oil settles at its lowest in a week, -1.7% to $53.66/bbl.

  30. Phil//  I bought 20 WPM Jan 2020 $15.00 at 6:40 per unit.  I am looking to sell some short calls against my long and thus make my naked calls into a BCS.  Any recommendations? or just leave it naked?

  31. AAPL/Pat – The Feb $160 calls are now $24.10 so, YAY! on those.  That's $12,050 from $2,750 and you want to be part of more upside then I would add 5 2021 $160 ($32)/190 ($18.25) bull call spreads at $13.75 ($6,875) and that would take $5,175 off the table so almost a double off the table and you still have a spread that can pay up to $15,000 if AAPL is over $190 in two years.  As I noted above, if you simply keep making $8,125 (118%) on each $6,875 every two years on these "boring" plays – you'll be plenty rich enough in 20 years.  

    A good portfolio should have some short-term gambles in them but, when you make a nice score, it's smart to put the big money into long-term conservative positions with an excellent chance of making you 20-40%.  In this case, it's 60% a year for two years – there's certainly nothing wrong with that and you have twice as much short-term money to gamble with as you had when you started anyway!  

  32. Phil/AAPL

    The Feb 160 calls are $14.25 currently instead of $24. does that change anything?


  33. AAPL/Pat – Sorry, that was the Jan $160s but no, doesn't change anything, you had a nice score so now you can put the money in something that has a higher percentage chance of making money.  If you still want to gamble, just subtract what you want to make for a short-term bet out of what you can afford on the more conservative play.

  34. You mean ‘use it or lose' it isn’t about my margin?  :(


    I do actually have a portfolio mgn account  .. and have sold many puts to good effect even (following psw of course) .. just never had ‘the call’ before  .. 


    So I will AT LEAST sell 10 AAPL ’21 185c around $20 and maybe sell all 20. Will think more about doing 10 and watching every quarter for the short calls on the other 10.


    Since you ask about my 140 AAPL calls, let me claim that this is one of my first rolls (without an airplane). 

    I sold the ’19 Jan 150s for 2.62 and bought the ’21 140s for 28.70 (or about $26 with the trade in)  .. trade  cost about 52k. 

    But the shiny new 140s have already gone up 26k, about 50% in a month .. easy to see the benefit of proactive adjustment in that one.


    I’ll watch the swings and roundabouts and buy back the 7- 195puts on strength and maybe sell a couple of 170p on a down day (if we have one).


    Still upside down about what to do about my SQQQ position though. Does this call for another roll – so soon after my first one?


    Long 80 Mar ’19 SQQQ $15c 

    Short 80 Mar’19 SQQQ $22c 


    Paid about $1.60 or $12.8k for the insurance.



  35. Your Virtual Body is now Ready

  36. Trump to tap David Malpass, critic of World Bank, to lead it

  37. Morning Phil, I have this position in SDS:

    Bought 20 Jan20 $43 calls at $10.98, now $2.80

    Sold     10 Jan20 $50 calls at $8.33,   now $1.94

    What do you think a good adjustment would be?

    A little background, I have rolled this a couple times, bought back 1/2 of my shorts and tried to roll the longs twice, but never got filled.  So, not as bad as it looks… While I want to know what a good adjustment would be… I am equally interested in knowing your thoughts on my proposed adjustment.  I took profits off the table back in early Jan and rolled this out to Jan20. While I consider the short $50's free money, I didn't want to fully cover this new position, yet.  

    Roll 20 Jan20 $43 long calls to 20 Jun19 $36 and sell 10 Jun19 $46 for a net credit of $1.35.  

    As always, thank you!        

  38. Taliban ‘not seeking to seize whole Afghanistan’

  39. Phil / CMG – Would love to get your take on the below, and how we can adjust the BCC going forward.

    Current position:   25X '21 $480 ( 90) / $540 (65)

     4X short April '19 $550 calls (21)

    I’ve always read the transcripts for earnings on them and until recently they did not provide much of an outlook.  I listened to the concall last night.  I'm impressed with the CEO in particular and his team in general.  The quarter was very good for Q4 Rev +10% to 1.2B, EPS+ 11% to 1.55 

    GM at about 17%.  For the year 

    Revenue up 8.7% to 4.9B 

    EPS +33% to 9.06.   

    This was partly driven by price increase and some by operational improvement but accounted for 4.5% increase in labor costs.  Also, they had accelerated SS comps Oct / Nov were about 4ish% but quarter was a 6%.  They have capacity at stores for 2.5M, but are running at 1.9M ish,  getting to 2.5 would be doable and probably highly incremental to margins.   Digital grew at 65% for Q4 and 42% for Q4, this carries a higher margin and is at 10.9% of revs.   The CEO oozes operational expertise with focus on Supply chain, store efficiency and tools to track progress – this team is now just getting started in leveraging supply chain.   Marketing ( just hired new staff) -  they have lots of ideas on driving revenue higher and I believe digital / pickup / delivery are a huge focus.  

    2019 outlook: 

    SS comps at 4 to 6 % and I think this will be closer to 6% than for ’19,   they will open 140 to 155 new stores, and have only a few left to close ( probably less than 20 in ’19 compares with 54 closings in ’18).  Ended year with 2408 stores.    

    Rev 4 to 6% SSS,  

    Longer term in 2020 I see them improving GM from getting store sales to 2.5M ( highly accretive) and getting GM to closer 25% from current 18% this will drive I higher multiple. 


    My view going forward.

    EPS: ’19 – $12, ’20 – $15.5, ’21 – $18

    Next year is on efficiency and small growth in sales, years after are in filling up capacity at 2.5M per store and adding more stores at a faster pace, in addition to improving supply chain to improve GMs above 25%.

    Slap a 35X multiple on is and price target is closer about 600 long term.