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Faltering Thursday – S&P 500 Fails to Clear Lowered Earnings Expectations

Low expectations.  

It's what we have for both the President and the Stock Market so anything they do that isn't a complete screw-up gets celebrated but that's no way to run an country – or an economy.  Powell spoke yesterday but provided no catalyst, choosing to speak about the LIMITS of Fed policy in boosting growth – a speech aimed squarely at the President in which the Fed Chair also stressed the importance of a fully independent Federal Reserve.

With about half the S&P reporting, over 30 companies, including Netflix (NFLX), Delta (DAL) and Estee' Lauder (EL) have lowered their guidance for Q1 and, as I noted in yesterday's Live Trading Webinar, a lot of the "best" companies have already reported and the 2nd half of the S&P 500 may already be showing sighns of strain in their Q4 reports.  Even now, estimates are that Q1 earnings will DECLINE 1.4% from last year  – quite a comeback from projections of 7% growth from September's guidance.

Many investors say multinationals will find it increasingly difficult to generate the type of results they did in prior years, with the outlook dimming for the global economy. If earnings estimates keep coming down, many say they doubt the 2019 market rally can continue for long.  The sheer scale of the drop-off in earnings estimates has some analysts nervous that there could be further damage ahead. That could potentially put pressure on a bull market that many believe is in its late stages.

Morgan Stanley analysts, who have been among the more bearish of Wall Street firms in the past year, said this week that they “wouldn’t be surprised” if S&P 500 companies wound up delivering lower earnings every quarter of 2019.  Goldman Sachs analysts said, in a recent note, that lower oil prices and pockets of economic weakness in the U.S. support a more conservative earnings outlook for the year. “More estimate reductions are likely rather than boosts to forecasts,” the analysts wrote.

IT companeies are particularly hard-hit, followed by Materieals, Energy, Consumer Discretionary and Communications while Health Care, Utilities and Industrials are still growing at a good pace – though Trump said in his SOTU that he wants to reign in drug pricing, which can reverse things for Health Care but, so far, investors think the President is full of crap, apparently:

Mediocrity is still being celebrated with Chipotle (CMG) jumping over 10% on revenues that are up 6.1% vs very low comps (food scare last year) and rising prices.  CMG shares are, in fact, up 50% from last year and earnings were $1.72/share, up 28% from $1.34 last year but Revenues were up just 8% from $1.194Bn to $1.23Bn and, EVEN IF CMG made $2 every quarter, that would be $8 for the year on a $526, now $580 restaurant stock for a p/e of 72.5 – fairly ridiculous by any measure.  CMG is also buying back $100M (0.7%) worth of their own stock – another trick they've been using to keep "improving" earnings per share (by decreasing the shares you divide earnings by!).  

We have a CMG position in our Long-Term Portfolio and, fortunately, we bit the bullet and rolled our 20 losing Jan $485 calls at $32 ($64,000) which we had sold for $20 ($40,000) to just 12 short March $550 calls at $15 ($18,000) in what we call "rolling the loss" as we were worried CMG would blast higher on easy comps.  That left us with the following:

Short Call 2020 17-JAN 580.00 CALL [CMG @ $526.06 $0.00] -10 8/27/2018 (344) $-48,800 $48.80 $1.20 $-247.57     $50.00 $3.60 $-1,200 -2.5% $-50,000
Long Call 2021 15-JAN 480.00 CALL [CMG @ $526.06 $0.00] 20 11/20/2018 (708) $180,000 $90.00 $40.50     $130.50 - $81,000 45.0% $261,000
Short Call 2021 15-JAN 540.00 CALL [CMG @ $526.06 $0.00] -20 11/20/2018 (708) $-133,000 $66.50 $34.70     $101.20 - $-69,400 -52.2% $-202,400
Short Call 2019 15-MAR 550.00 CALL [CMG @ $526.06 $0.00] -12 1/18/2019 (36) $-19,440 $16.20 $0.75     $16.95 $0.14 $-900 -4.6% $-20,340

Our target was $540 but we didn't expect it until next year but, if we stay over that level, the spread will pay us $120,000 and the short puts will expire worthless so it's just the short calls we'll have to adjust and we're going to take advantage of the ridiculous morning spike and sell 8 of the 2020 $600 calls for, I think, $75 ($60,000) as a "pre-roll" for the short March $550s, which we'll give a chance to calm down before closing.  If CMG keeps going higher, we'll buy another bull call spread becuase this one was a $21,240 CREDIT so we'll get paid $141,240 if it all works out – who wouldn't want another one of those?

Actually, it's a lot better than that because we already cashed our our longs from a winning trade ages ago and this is just the trade we left on to cover the short calls that remained – and now we're turning that into a long-term winning trade as well!

In our Short-Term Portfolio, we can sell 4 of the same 2020 $600 calls if we can get over $70 for them because who doesn't like making $28,000 for selling some sucker massive premium?  The margin on the trade will be hefty but we have plenty of cash and, as I said, this is a ridiculous price for CMG.

Happy hunting, 

- Phil

 


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  1. Phil – Here is another interesting piece about the China GDP we discussed in the past:

    https://carnegieendowment.org/chinafinancialmarkets/78138

    He makes different arguments and comes to the conclusion (being on the ground himself) that the numbers are inflated but that it also relates on how these numbers are achieved:

    In practical terms, this means that once Beijing sets a GDP growth target, local governments are expected to generate enough economic activity to reach that target, and they are able to borrow as much as they need to do so. If this activity were productive, there wouldn’t be a problem, although it would be an amazing coincidence (or a truly incredible feat of prognostication) for the amount of productive activity truly to equal the growth target. What would be more likely in that case is that GDP growth would consistently exceed the target, which is indeed what happened until about a decade or so ago.

    But if the economic activity isn’t productive, there are two requirements that allow China to set GDP growth as a systems input in a way other countries are unable to do. First, there must be no hard budget constraints, so as to allow economic entities to persist in value-destroying behavior year after year. Second, the resulting bad debt cannot be written down. Once these two conditions are met—and they are in China’s case—Beijing can set any growth target it likes and, as long as it has the necessary debt capacity, it can achieve that target.

    But notice that achieving the target reveals nothing about the country’s real economic growth, for which GDP is supposed to be (however imperfectly) a proxy. Once GDP growth becomes a systems input, rather than an output, it does not indicate anything about the economy’s health or performance.


  2. Tax cuts didn't trickle down:

    https://www.bloomberg.com/news/articles/2019-02-06/banks-reaping-21-billion-tax-windfall-cut-staff-ease-off-loans

    Major U.S. banks shaved about $21 billion from their tax bills last year — almost double the IRS’s annual budget — as the industry benefited more than many others from the Republican tax overhaul.

    By year-end, most of the nation’s largest lenders met or exceeded their initial predictions for tax savings. On average, the banks saw their effective tax rates fall below 19 percent from the roughly 28 percent they paid in 2016. And while the breaks set off a gusher of payouts to shareholders, firms cut thousands of jobs and saw their lending growth slow.


  3. CMG and HBI WOW!


  4. Good morning, All!

    The webinar replay is now available!

    https://youtu.be/C-HybJD6nvY


  5. Good morning!  

    Please note CMG adjustment in the above post:

    We have a CMG position in our Long-Term Portfolio and, fortunately, we bit the bullet and rolled our 20 losing Jan $485 calls at $32 ($64,000) which we had sold for $20 ($40,000) to just 12 short March $550 calls at $15 ($18,000) in what we call "rolling the loss" as we were worried CMG would blast higher on easy comps.  That left us with the following:

    Short Call 2020 17-JAN 580.00 CALL [CMG @ $526.06 $0.00] -10 8/27/2018 (344) $-48,800 $48.80 $1.20 $-247.57     $50.00 $3.60 $-1,200 -2.5% $-50,000
    Long Call 2021 15-JAN 480.00 CALL [CMG @ $526.06 $0.00] 20 11/20/2018 (708) $180,000 $90.00 $40.50     $130.50 - $81,000 45.0% $261,000
    Short Call 2021 15-JAN 540.00 CALL [CMG @ $526.06 $0.00] -20 11/20/2018 (708) $-133,000 $66.50 $34.70     $101.20 - $-69,400 -52.2% $-202,400
    Short Call 2019 15-MAR 550.00 CALL [CMG @ $526.06 $0.00] -12 1/18/2019 (36) $-19,440 $16.20 $0.75     $16.95 $0.14 $-900 -4.6% $-20,340

    Our target was $540 but we didn't expect it until next year but, if we stay over that level, the spread will pay us $120,000 and the short puts will expire worthless so it's just the short calls we'll have to adjust and we're going to take advantage of the ridiculous morning spike and sell 8 of the 2020 $600 calls for, I think, $75 ($60,000) as a "pre-roll" for the short March $550s, which we'll give a chance to calm down before closing.  If CMG keeps going higher, we'll buy another bull call spread becuase this one was a $21,240 CREDIT so we'll get paid $141,240 if it all works out – who wouldn't want another one of those?

    Actually, it's a lot better than that because we already cashed our our longs from a winning trade ages ago and this is just the trade we left on to cover the short calls that remained – and now we're turning that into a long-term winning trade as well!

    In our Short-Term Portfolio, we can sell 4 of the same 2020 $600 calls if we can get over $70 for them because who doesn't like making $28,000 for selling some sucker massive premium?  The margin on the trade will be hefty but we have plenty of cash and, as I said, this is a ridiculous price for CMG.


  6. TWTR Down a healthy 10%!!!!!


  7. CMG 2020 $600s are $65 at the moment but they were $55 on Tuesday at $545 so I'm not keen on taking less than $75 but I'll be really pissed if we miss it.  angry  As long as CMG holds $570, I think the calls will creep up and there should be a nice squeeze this morning.  If 2022s were out, I'd cash our $480 longs ($133) and roll the whole thing again!  

    Big Chart – Don't fight the tape, things are still bullish, but not if we put a couple of days like this together.

    GDP/StJ – Good point and we engage in a bit of that ourselves with the Fed running up a $5Tn balance that's "off the books" as far as the US budget is concerned.  That's 2.5% of our GDP for the past decade from our Fairy Godparents counted as "economic activity" or, essentially, ALL of the growth. 

    $67 – told you so! 

    HBI/Jabob – Stick with value and patience is often rewarded.  

    LTP:

    Long Call 2021 15-JAN 10.00 CALL [HBI @ $15.57 $0.00] 50 11/20/2018 (708) $26,500 $5.30 $0.60 $6.70     $5.90 - $3,000 11.3% $29,500
    Short Put 2021 15-JAN 15.00 PUT [HBI @ $15.57 $0.00] -50 12/19/2018 (708) $-22,500 $4.50 $-1.98     $2.53 $-0.07 $9,875 43.9% $-12,625

    OOP:

    Short Put 2021 15-JAN 15.00 PUT [HBI @ $15.57 $0.00] -10 1/9/2019 (708) $-3,600 $3.60 $-1.08 $-1.11     $2.53 $-0.07 $1,075 29.9% $-2,525
    Long Call 2021 15-JAN 10.00 CALL [HBI @ $15.57 $0.00] 20 12/27/2018 (708) $6,400 $3.20 $2.70     $5.90 - $5,400 84.4% $11,800
    Short Call 2021 15-JAN 17.00 CALL [HBI @ $15.57 $0.00] -20 12/27/2018 (708) $-1,800 $0.90 $1.08     $1.98 - $-2,150 -119.4% $-3,950

    We previously had a $3,800 loss on our other HBI trades so we're just crossing into profits now after starting with 5 short 2020 $18 puts and the $18/23 bull call spread on 3/15 that we rolled to 10 short 2020 $15 calls and 20 2021 $13 calls and 10 short 2020 $15 calls on 10/18 and then we rolled to the new position when it got even worse.  

    TWTR/Yodi – I'm very surprised because Dorsey has been running around pontificating on all sorts of things and you'd think he would have wanted to keep a low profile if he was about to tank a quarter.  Must be SQ (2/27) that's got the big numbers?

    Jack Dorsey says the 'only' cryptocurrency he owns is bitcoin

    Twitter Posts Strong Q4 Results, Stock Plunges on Weak Revenue …

    How Jack Dorsey reacted when then-Square CFO Sarah Friar said …

    Jack Dorsey: Twitter Nazis Are Here to Stay

    Twitter CEO Jack Dorsey: The Rolling Stone Interview


  8. $73!  I love my job!  


  9. 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.  


  10. Phil/CMG- I don't have any CMG-, would you still recommend the short calls? Margin not an issue, wondering how I will adjust if it ran up more. 


  11. A while back we discussed with one of our members his Feb 150 short call on NVDA.He was worried than. I told him to be patient and wait. Stock trading today at 148!!!!


  12. Hi Phil, you still like TWTR after this Q earnings? 


  13. On a day like today you will enjoy your ITM cherry calls. They looking better every moment!!!!


  14. Phil,

    Had a 2019 $15 Put put to me in Jan 2019. Basis is now $13.28…..a) Does it make sense to sell the 500 shares at this point or b) sell a 2020 Jan $20 Call and if the stock drops, sell Puts in the 13-15 range to increase the position. Your thoughts appreciated. Thanks 


  15. Phil / CMG – just saw your post – regrading the roll after I posted….  I got 80 one the rolls to the 600's,  Please provide feedback on my stock price target.   I  do believe there is a lot of leverage left, but would like your feedback on earnings and price target.


  16. A while back one member highly recommended a bank in California ??? I did counter and recommended NYCB when it was around 10.50 now 12$ Any one still knows that Californian bank or how it progessed?


  17. Phil / CMG – one more item.  I do believe the stock is over valued at the moment with a 420 to 440 price target for this year, but next year / late 220 if they get the margin expansion and go to opening more restaurants I think this is a 600 to 630 stock…. is this crazy?


  18. Phil,   The above is for HBI….my apologies


  19. The CA bank is SCBH. Stock price is essentially  unchanged from last post of very good 4Qtr and F/Y numbers. Like most "value" plays, the stock flies under the radar until it doesn't. I have orders in for more if there is any weakness in the price. The value is there, IMO. 


  20. TWTR/Phil

    So for those that took the flyer on TWTR with the Feb 32/35 BCS from earlier this week, the 35 will expire worthless.  Do we just roll the 32s to something that we can just salvage as much as we can?  For $.50 there are $1 spreads that we can try to get some of it back?  How would you handle that?  Thanks!


  21. Pstas Thanks that proofs my point meanwhile I am collecting the 5.6% div and the capital gain!


  22. Jasu1 HBI I would sell the Jan20 18 call for 2.30 and still collect div while things last. My two cents.


  23. Thanks Yodi, always appreciate your trades and inputs.


  24. Yodi, good for you. I didn't know it was a contest but You win .  I am still very , very comfortable in my position. 


  25. Pstas No it was not a contest, but I do like my archair trades. Especially if I have capital gain receive the div. and do not lose to much on the cherry call, at the same time the putter will compensate for the caller!


  26.  

    Larry Kudlow Fox Business says there is a pretty sizable distance to go in U.S. China trade talks.


  27. $79.99!  I'm tempted to sell more at that price.  

    CMG/Batman – Great ratio, no trouble.  That's why I don't want to be too short on them, they were once a $750 stock but there's always the risk of another Ecoli outbreak because they do use fresh food though, hopefully, they've lowered the chances considerably.  I don't see them getting to $12 this year, that's a hell of a stretch off $8 – everything would have to be perfect and, even then, still 50x earnings and that would be with the stores at their $2.5m capacity – so where's the upside (adding about 140 stores this year to 2,400 is 5% growth and a 6-month lag at least)?  If the "long-term" target is $600 then why are they at $600 now?  

    $83 for the short $600 calls as the stock tests $600! 

    Anyway, you have the short March? $550s and they are now $60 so I'd roll to the Jan $600s at $84 now and put a few bucks in your pocket.  The 2021 $480 ($190)/$540 ($155) bull call spread is $65 out of $80 potential but you can cash the $480s for $190 ($475,000) and roll the 25 $540s ($387,000) to 36 short Jan $600s at $82.50 ($297,000) and buy 40 of the 2021 $550 ($150)/660 ($98) bull call spreads for $52 ($208,000) which would put $177,000 in your pocket and leave you with 40 short 2020 $600s covered by 40 of the 2021 $550/660 bull call spreads.  Since $200,000 was the most you could collect on the original spread, that puts you in pretty good shape and the net of the new spread is an $18 credit, you can cut it to 20 for $36,000 and you'd still have $141,000 in pocket and 20 of the spreads, with room to DD and roll later if CMG keeps going up ($605 now!).  If, on the other hand, they fail to hold $600, the short calls go worthless and whatever is left on the spread is a bonus.

    That's pretty much how we're playing it in the hedge fund but we had deeper long calls.

    CMG/Ravi – The above spread is a net credit so below $600 is good and then you can make up to $110 + $18 credit if you get very lucky or something in between if not.  Still, it takes a ton of margin if you don't have PM and half a ton even if you do as this is an expensive and volatile stock.  

    NVDA/Yodi – Great call!  

    I like to put up a small BCS on NVDA for discussion.

    As known the stock has dropped considerately and has now a P/E of 20.

    I am looking to initiate a Jan 21 145/175 BCS for about 11.93 to be financed by selling half the amount of puts of Jan 21 125 put for 21.35.

    Further still selling half Dec 18 165 caller for 3.85.

    As long as you are happy to receive the stock at 125 another 18 % drop you have nothing to lose. Only the advantage of selling 2 years of cherry calls.

    Nom NVDA  I trust you did sell your straddle against a Leap BCS. In general I do not like to sell puts in an only option play. NVDA does pay a .16 cents div. so who wants the stock?

    Unfortunately the declaration is one day before expiration. I hold the Feb 155 and 165 caller, but only half of my BCS!!!! As Phil says he is more worried about the 150 put than the caller. I will do nothing with my two different callers. Especially with the options still holding a great amount of premium with next to no div., no one will call for the stock.

    Rightfully said you wait till the last day, there are still 11 days to go so many things can happen.. Rolling the put out of danger is the first thing to watch, the caller I think you still can roll on the 15th if necessary.

    TWTR/Sun – I would wait for the downgrade police to have a go over the weekend and see how they hold up.  I haven't looked closely enough yet to say one way or the other.

    Mystery stock/Jasu – You should write that person a Thank You note!   HBI does pay an 0.60 dividend, which is almost 5% of your basis and you can sell the 2021 $17 calls for $3.50 and then you're in for less than $10 with a 70% profit if called away at $17 and, while you are waiting for that (708 days), you can "cherry call" the thing by selling 1/2 the April (70 days) $19s for 0.55 as 10 sales like that drops another $5.50 (50%) in your pocket per year.  So owning the stock can be fun or you can cash out for $18.11 and sell the 2021 $15 puts for $1.90, so the worst they can do is put you back in at $13.10 and pick up 2x the 2021 $13 ($6)/$20 ($2.40) bull call spreads for $3.60 so your net on 2x $7 spreads is $2.65 with $4.35 (164%) upside and you'd still have $12.81 in your pocket!  


  28. Here one example PM  at it is today

    Stock gain say .80 cents Loss on 74 Mar 1 cherry call .25 cents gain on Jun 19 72.5 putter .52 cents


  29. What is causing the RTY to behave like a yo-yo?  Ah – Ha, thanks albo….I thought it was the Bots.


  30. Thank you Phil on the HBI trade! "you mind reader you"! Thanks


  31. Phil—how long has your hedge fund been open?

    How has it performed? Returns?


  32. Bank/Yodi – Pstas was liking SCBH and they are down a bit and you and I both didn't like them for different reasons.  NYCB is doing nicely however, which we also agreed on as a good value. 

    As a rule of thumb, if I can't easily get a chart and easily get data that makes sense (as is the case with SCBH) - I have no desire to play with a stock.

    TWTR/Buckey – Feb $32s are down to 0.55 so the only real hope is that TWTR comes back a bit and, as I said, I haven't gone over the numbers yet so no changes for me.   The spread was $1.60 so down $1 ($2,000) at the moment with $1,200 to salvage and I'd be thrilled to get $2,000 back but it will be tricky with the spread and deconstructing it is risky so I'd rather wait and see if anything changes first.

    Submitted on 2019/02/04 at 9:50 am

    TWTR is at $33.30 and the Feb $32s are $3 and the Feb $35s are $1.40 so essentially no premium on the $1.60 spread with $1.40 upside potential at $35 is a fun play so let's put $3,200 into that in the OOP and hope to get $6,000 back

    Contest/Pstas – I don't NOT like them, I'm just not comfortable enough with the available data to go long while NYCB I'm super-comfortable putting money into (especially 20% ago!).  

    Kudlow/Albo – What an ass!  Can't he just not say anything?  Tanked the market – I can only HOPE that's what he wanted to do because the alternative is one of the most powerful people in Washington is a complete boob…

    - Reagan budget director turned Wall Street flack!



    - Relentless stock-market cheerleading played a central role in inflating the past two market bubbles — which, when they popped, resulted in trillions of dollars of lost wealth!



    - Worked for liberal Daniel Patrick Moynihan's 1976 U.S. Senate campaign before turning true believer in supply-side economics — a.k.a. "voodoo economics"!



    - Against the estate tax and capital gains taxes!



    - Believes unlimited executive compensation is fine and dandy — and that pension and medical benefits for rank-and-file workers are an "undue burden" on corporations!



    - Forced to resign as chief economist at Bear Stearns in 1994 — because he was a cokehead!



    - Worked for Arthur Laffer, inventor of the Laffer Curve, which "proves" that lower taxes lead to higher government revenues!



    - Currently on his third wife!



    - Favored the war in Iraq because — get this — "a lack of decisive follow-through in the global war on terrorism is the single biggest problem facing the stock market"!



    - Enjoys tennis and golf in his free time!



    - Mocked those worried about the business climate and the markets as purveyors of doom and gloom — even as the global credit crunch was gathering steam!



    - Called recessions "therapeutic" and "cleansing"!



    - Blamed the current economic crisis, the most severe since the Great Depression, on "liberal guilt"!



    - Idiot!

    RTY/Jasu – It's always a bit crazy and now it's moving very fast on the dips – bad sign.

    Fund/Jabob – Terrible last year (first year) as the year closed out with AAPL in the tank etc but back to even(ish) as of this month so a wasted first year and now we build better – hopefully.  As we made a lot of adjustments at the end of Dec, we booked a lot of losses and have tons of unrealized gains – that's why it looks like we're treading water but, if all works out – lots of potential.  Most fund managers would have held off on the adjustments to put off the losses but then we wouldn't have optimized the rolls and I'd rather make money than look pretty…


  33. American Idiot has been my wife's ringtone for several years.

     

    Now, while I'm more about the music than the lyrics, I do enjoy their commentary on life as we know it….

    They market a mean, delicious coffee as well. :)

    https://www.amazon.com/Oakland-Coffee-Works-Certified-Compostable/dp/B01KLTMGB0/ref=sr_1_3_a_it?ie=UTF8&qid=1549556860&sr=8-3&keywords=oakland%2Bcoffee%2Bworks&th=1


  34. On my screen none of Phil's comment show up??? I see Yodi, Batman, etc, just not Phil…Obviously that makes for sub optimal learning experience


  35. Phil / CMG – there closed at 9.06 eps this year….so 30% gain for 12 next year


  36. Looks like these 200 DMA are resistance now! Not helped of course by the most incompetent administration ever. They will be leaning on Powell to cut rates soon. That would be the final stab – a tax cut and a rate cut in a growing economy. Keynes would be rolling in his grave… again!


  37. millardd2010 – check to see if you have Phil on ignore (the bottom of this page)


  38. Phil/Markets down

    Do you see further drop or support at the resistance lines for the markets? Not sure how it keeps falling with the same news every time

    regards






  39. Part of Keystone oil pipeline remains shut after potential leak




  40. Phil, Have an AAPL JAN 20 130/155 call debit spread ($14.46)  offset w/a JAN20 140/130 put credit spread ($3.32). Put in on 1/19/2019. Way in the money now, going ex div.tomorrow. Would like to stay long but not sure best way. Roll or buy back the 155C?

    Thx.



  41. Can we trust Huawei with 5G?


  42. Most helpful info from an analyst ever:

    "The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on February 13. On the other hand, if they miss, the stock may move lower."


  43. Tangledweb – That's why they pay those guys the big bucks ! ! !


  44. Phil,

    Any thoughts no Teradata? I like them as a company and was thinking if I should take a stab at them before the earnings today ?

    Thanks

    Pat


  45. Anyone buying a little /NG here? Looks like a fairly decent spot for long-term support.


  46. Well, Europe closed and that didn't help.

    Now it is looking suspiciously like last February. 

    Comments/Millard (someone please post for him) – Below the comment box is a list of people you are ignoring.  I imagine I am one of them.  Uncheck that box and refresh your screen and, if that doesn't work, contact Greg at philstockworld dot com.

    CMG/Batman – Better than I expected but still miles off justifying $600/share and look at the 0.50 of adjustments they needed to get to $1.72 this Q.  Nonsense!   Also nonsense is 30% a year as they've been in business since 1993 (16 years) and they have 2,424 store and are adding 140 this year, which is right in-line with the average.  You are assuming if they get to 3,600 stores, they will add 210 per year but that's very flawed logic and very unlikely – especially for a company with notorious quality control issues.   Anyway, you don't have to prove it to me – we bet essentially what I said to you in the hedge fund and I'd be thrilled if you want to take a leap of faith and do something more aggressive so we can compare the strategy outcomes next year (we have 25 long spreads and 28 shorts at the moment).

    Seeing/Pat – As I have been saying all week, I think the whole month was a prop job into the SOTU and we will retrace a lot of it now that Trump has avoided the embarrassment of being down 10% or more when he gave the address.

    AAPL/Brian – The $130s are $45 and the $155s are $26.50 so net $18.50 out of possible $25 – not including the puts.  I'd cash the $130s and roll to 2x the 2021 $150 ($36)/1x the 200 ($14) bull call spread net $48 and roll the short Jan $155 calls to 2x the Jan $180s ($13.30) so now you have $100 worth of longs (with no cap on 1/2) covering 2x the short Jan $180s and $10 in your pocket but I'd keep a stop on 1/2 the short $180s at $20 – just in case.  

    LOL Tangled – that's why they get the big bucks!  

    And what Albo said (almost exactly!).

    TDC/Pat – I have long predicted that all these cloud services would become commoditized and I don't see anything in the earnings so far to make me change my mind.  TDC has had flat revenues for years and make no money yet you want to pay $5.4Bn for them at $46?  I have a house I'd like you to come look at!  cheeky

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 2,665 2,692 2,732 2,530 2,322 2,156 2,202 2,142 2,154 -4.2%
    Operating Profit $m 580 532 503 -195 232 64.0 79.0     -35.6%
    Net Profit $m 419 377 367 -214 125 -67.0 -59.0 150.6 184.2  
    EPS Reported $ 2.44 2.27 2.33 -1.53 0.95 0.47 0.50     -28.1%
    EPS Normalised $ 2.51 2.34 2.33 0.69 1.29 0.47 0.50 1.24 1.58 -28.5%
    EPS Growth % +12.5 -6.8 -0.7 -70.2 +86.9 -63.8 +5.6 +164.4 +27.7  
    PE Ratio x           99.7 94.4 37.7 29.5  
    PEG x           0.61 0.57 1.36 1.17
    Profitability

    /NG/Ati – I have the /NGV19s, which are down to $2.73 at the moment – held up relatively well against the front-month but very disappointing and the in-line inventory didn't help (but still a good draw):

    We're still trending on the very low edge of the 5-year average band but not getting the reaction I thought we would this month from the cold so better to stick with the long-tern play, I think,

    Working Gas in Underground Storage Compared with Five-Year Range


  47. Phil.  /NG.  Is there anyway to work /ng  (natural gas) that you like if you don't do commodities?  Options?


  48. haha Funny Phil,

    Completely agree with you on the flat revenue but companies do manage their cost as well. Tech companies are generally very aggressive on that front. Not sure where you got the eps numbers from but I certainly see a variance in EPS on yahoo vs cnbc (Fake news)

    I am sure you would see a same price chart for your house :)  


  49. We hit resistance and might go into a correction :-)


  50. Phil / just want to ask why you changed your thinking on the CMG adjustment (from the LTP review on Jan 18th: relevant section below:

    "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) 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".

    You also discussed rolling to the June $600s for about even as the next adjustment. 

    I'm not trying to be cute, but I'm surprised that you are happy to be with short covers out to Jan 2020 at $600 which gives CMG more than 10 months to burn you to the upside. I respect your valuation of CMG as well as Batman, but this stock seems to trade not on a 'realistic' P/E, multiple but on some out of this world pumped up number that 'some' seem to buy into. 

    I just wonder what the back up plan is if CMG continues on the same flight path to reach $700 in the space of 3 months (for example)?


  51. Millard – see below from phil if you are still having issues

    Comments/Millard (someone please post for him) – Below the comment box is a list of people you are ignoring.  I imagine I am one of them.  Uncheck that box and refresh your screen and, if that doesn't work, contact Greg at philstockworld dot com.


  52. /NG/Robert – Well I'd go with CHK as UNG decays too much and it could be a while before they come back.  CHIK does $9Bn in business and makes $800M but you can buy the whole company for $2.3Bn, less than 3x earnings.  

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 12,316 19,080 23,125 12,764 7,872 9,496 9,681 9,532 9,353 -5.1%
    Operating Profit $m -1,894 1,866 3,275 -18,693 -4,294 1,372 975      
    Net Profit $m -769 724 1,917 -14,685 -4,401 949 693 804.1 762.7  
    EPS Reported $ -1.46 0.73 1.65 -22.4 -6.45 0.90 0.62      
    EPS Normalised $ 2.17 1.39 1.93 -4.18 -3.55 1.06 0.64 0.86 0.56 -13.4%
    EPS Growth % +1.4 -36.2 +38.9       -39.3 -19.2 -34.4  
    PE Ratio x           2.45 4.04 3.04 4.63  
    PEG x           n/a n/a n/a 0.30
    Profitability

    Unfortunately for them, they began acquiring more oil assets and that's about 40% of their revenues now – so that's been hurting them recently but they just completed a $4Bn acquisition of WRD to get even more oil at what I HOPE was a good bottom call.  

    As a new trade on CHK, I'd go for:

    • Sell 20 2021 $3 puts for $1.10 ($2,200) 
    • Buy 30 2021 $1 calls for $1.60 ($4,800)
    • Sell 30 2021 $3.50 calls for 0.55 ($1,650)

    So that's net $950 on the $7,500 spread that's $1.50 ($4,500) in the money to start and not far to go to make the full $6,550 (689%) at $3.50 and the worst case is you own 2,000 shares at about $3.50.

    Image result for trump huge animated gifEPS/Pat – That's from Stockopedia's paid side – usually accurate.  As to the house, it's never lost over $10M in a year and I'd be happy with just $1Bn while you're in the mood to overpay for things.  Hey, if we add 100 stories and rent them as apartments, we have a view of Central Park and I hear those units are going for $100M each now – could be HUGE profit potential down the road!   

    CMG/Winston – Because CMG popped $60 on earnings is why!  Now that I've seen earnings and looked at the numbers, I have less fear they can burn us from here and the rolls are outrageous as the 2021 $800 calls are over $50 so we have a 33% cushion on the roll from 2020.  Had I known then that some idiot would pay us $80 for the 2022 $600s – I would have taken it then….

    What I did was move to a more cautious position (with a lot more sold premium) into earnings and, now that I have the data, I'm able to execute a more informed decision I would not have been willing to risk at the time.  I doubt those calls will ever see $80 again so this WAS our chance to make that sale – you have to be prepared to take advantage of those opportunities when they come along.

    Thanks Crs!

    Yikes, index bounces failing already…


  53. Yodi,

    I had 5 sold 130 call again my 10 110/140 BCS IBM.

    Now Its assigned. Now I have 500 IBM short 

    It gained $955 today so only $3910  loss. What is the good play? Sell 5 125 april put against this short or ?

    thanks

    Gabor


  54. /NG – Robert, you can trade UGAZ, which is a 3X Nat Gas ETN.


  55. Phil, another nat gas stock which might be worth a look is CNX, which is hitting a new low today.

    BDC and I did well with this name awhile ago.


  56. CMG – thanks Phil – I guess if it keeps going up you will just repeat the rolling exercise you just did. I am not sure the roll from the Jan 2020 $600s to the Jan 2021 $800s is a $30 'cushion' – it will cost $30 to make the roll? – or am I missing something?


  57. …and on CMG how about selling a cautious amount of puts? – I'll answer that myself – "out of the question with the potential for a reversal at any time!!!!"


  58. K gabor. IBM Today the market is down in general so I would buy the 500 IBM back for a start. With Selling puts you need always sure you do want the stock, as well you have enough cash in respect of assignment.

    On the other hand the market could go further south so your purchase would be even cheaper.

    The market is very unstable at present and I would hold back with selling puts at this point. Just one day drop does not mean we will not go further down. However normally we will have a rebound after today.

    Really difficult to say. For me I never like to have short stock, they might go either way.


  59. Phil// Any moves we need to make for TWTR?  Thanks.


  60. Phil /  What's the likelihood of being assigned short calls for APPL when dividend is being paid out tmrw? Got an email from TD warning me that if I'm assigned it will create a short position in my account.


  61. They are saying that I old be required to pay the dividend.


  62. Soma I have explained the calculation on assignment of short calls at previous times but here again

    take your strike price plus the present market value of the call less the present stock price. If the remaining premium is less than the div. you can expect to be assigned.


  63. Phil/Iflan/AAPL

    why the big drop in AAPL today? is it just with the market??

    regards


  64. thx yodi


  65. Yodi,

    I think you misunderstood. If I have the short stock, selling puts is not dangerous. 

    It's a same then I have the stock and selling calls

    Now I have short and selling puts

    Not?


  66. Phil,

    I would like your thoughts on FNSR. The proposed acquisition by II-VI is in the offing but FNSR seem to be locked between 22 -23, at least this week. Thinking of selling 1/2 covered calls (Sep 25s @.90+) . Your thoughts appreciated. 


  67. Yodi – when I do your math I end up with 10.63.


  68. Chipotle Stock Is Soaring, but Investors Should Be Wary

    Ahh, the good old operating earnings scam! 


  69. CMG calming down – $590.  Jan $600s still $78 though.

    CNX/Albo – They had some sort of accident in Utica recently, not sure how that played out.  At $2Bn at $10 they don't even have $2Bn in revenue though I think they might hit $200M in profits, so worth a toss.  I do know that Marcellus is growth-limited as they've pushed the infrastructure to the limits at this point, so I wouldn't look for anything too exciting from them. 

    CMG/Winston – Well if I sell the 2020 $600s for $80 and then roll to the 2021 $800s at $50, I still sold them for $50, right.  I just took $30 of the $80 out of my pocket to pay for the roll but now my break-even is $850 instead of $680.  And you are correct sir on the puts.  I sell puts when a stock is too cheap and I sell calls when a stock is too expensive.  Today we sold calls on CMG. 

    $587.

    TWTR/Rookie – Nope, waiting to see where they settle before making adjustments.

    AAPL/Soma – Virtually no chance.   Dividend on AAPL is very little (0.75) vs the stock price, not likely someone will cancel their option premium to get a dividend, unless it's got no premium left.  So how deep are the short calls in the money?   I think TD is just looking to generate a bit of churn, worst case is you are short AAPL with the cash placed in your account (did they tell you that?) and then you have to buy the stock to close the short and pay the 0.75 dividend – HORRORS!  

    AAPL/Pat – Just with the market I think.  

    FNSR/8800 – The offer is for $15.60 + 0.2218 shares of IIVI and IIVI has been struggling at $40 and now $36 and $36×0.2218 = $7.98 + $15.60 = $23.58 so that's your target if IIVI stays where it is (the deal is likely to go through).   That being the case, if you have the stock, I'd sell the 2021 $15 calls for $8.50 to lock in the $23.50 now and then you have nothing to worry about.  Why screw around?

    CMG/Pstas – That's what I said!  


  70. Soma same as Phil says but sorry I do not have your numbers so 10.63 does not mean very much to me


  71. Phil,

    FNSR. Thanks for the math. Option product question: What happens to the value of the Jan/21 call option contract if the deal is consummated in 2019?. Seems from a logical standpoint that the owner of the long calls would be entitled to a partial refund of premium.

    Thanks


  72. K gabor yes I understand what you saying. But still I would not be very confortable with the situation.

    What if the stock goes up considerable yes you put will be reduced, but your loss on the short stock will be much greater and can not be resovlved the same as you have a long stock and selling a call against it.

    In this case if assigned you will lose the long stock and you receive CASH and your caller will be worthless.

    So you work this one out with your short stock it will always remain short. I would not be very comfortable with it. I told you what I would do.


  73. CNX – Thanks, Phil,  I agree with  you on Marcellus.  Their growth is supposed to come from Utica.

    We'll see.  Thinking of selling some July 9 puts to start an initial position.  Good volume in those today.

    Of course volume could be on the buy side. 8-)


  74. FNSR/8800 – That's not how it works, if the deal closes, all contracts terminate at the net price and lose all their premium. 

    Nice spike into the close saved us from catastrophe but there's always tomorrow!  cheeky

    Actually, we bottomed out at the 30-year auction so Kudlow may have been just scaring people into the bond market so we'd have a good auction.


  75. Phil

    Thanks for the procedural options lesson re FNSR