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Flailing Thursday – Markets Look Toppy and a Money Talk Portfolio Review

This is sad:

We've been going nowhere for a month and there's nothing wrong with healthy consolidation but, if you listen to the Financial Media, you would think you are missing out on some huge rally.  FOMO, or "Fear of Missing Out" is the new driver for market behavior though I can't imagine what it is people fear, when you consider the S&P 500 is up 1,000 points 55% in the last 3 years though we're actually lower now than we were a year ago.

That's why we've been "Cashy and Cautious" since we cashed our our 5 Member Portfolios in December of 2017, when I decided the risk of holding through the holidays wasn't worth it after a year of such spectacular gains.  I was a little early with that call but we got a great sell-off last January and we jumped in with our new Virtual Portfolios and now they have made ridiculous gains – especially our skeptical Short-Term Portfolio, which we use to hedge our Long-Term Portfolio.

I went over the STP and gave my thoughts on it in yesterday's Live Trading Webinar (replay available here) and we feel our current hedges adequately protect us from what we think will be a minor (2.5-5%) correction that shouldn't take us lower than 2,640 on the S&P (/ES), which is the 20% line on our Big Chart, which is still using the 5% Rule™ calculations we applied way back in 2015 so we're right on track but we also need to adjust those brackets 10% higher (Dow, Nas and S&P only) to account for the new, lower, Corporate Taxes and their effect on large-cap earnings.  

Despite expecting a sell-off, we're still very bullish in our Long-Term Portfolio as well as our other Member Portfolios.  Our public portfolio, the Money Talk Portfolio, which we only trade live on that BNN Show once per quarter, is self-contained, unlike our paired STP/LTP combination, so the hedges are baked in.  Our last adjustment came on Jan 30th and we added an IBM trade that's already up $1,185 (182%) against our $650 cash outlay and the whole portfolio, at the time, was up 111.7% at $105,845 (we started with $50,000 on 9/6/17) and now, less than two months later, it's at $125,790, which is now up 151.6%.

Every single trade we add, subtract or change is done on the show and published on our site in public and the portfolio hasn't changed much since October, frankly, though we did send out a special alert and tweet to dump GE on Feb 25th (if you follow us on Twitter, you'll catch all these trades) – as we didn't like the spin-off they were doing.  Other than that, all you had to do was leave this portfolio alone since Jan 30th for a $19,945 gain (18.8%), just a bit less than our actively-managed Hedge Fund.

And that's the point of Philstockworld – we teach ordinary investors how to trade like Hedge Fund Managers and we teach Hedge Fund Managers how to do their jobs properly!  To me, Hedge Funds are for busy people who are out making money (or having fun) and don't want to sit around worrying about the stock market.  That's something that's worth paying someone else to do and we're happy to do that if people want us to.  BUT, for people who don't qualify for a Hedge Fund or simply like trading (I do!), then the key is to learn to treat trading more like a profession and less like gambling – which is where our famous "Be the House – NOT the Gambler" tag-line comes from.

That's what I like about the Money Talk Portfolio – it emphasizes our dual strategies of Balance as well as learning to LEAVE YOUR POSITIONS ALONE!  Over-trading is a huge problem and too many people feel the need to constantly adjust and change things but we recognize that markets go up and down and a well-hedged portfolio has little to fear from normal market gyrations – it's the Fundamentals we keep our eye on – and that's why GE got the axe when they spun off one division too many for our liking.  

Here is the MTP as it currently stands – last time we calculated that, if all went to plan, the positions we had would make $152,476 (150%) less a $13,760 loss on our hedges over the next two years so gaining $20,000 in two months is really just "on track" for our plan:

  • ALK – Often, when we want to buy a stock, we first sell a put in order to be able to buy the stock for a net discount.  The guy we sell the put to owns ALK and pays us $8.20 in exchange for our promise to buy the stock from him any time he wants, between now and Jan 17th, 2020, for $60 (the put strike).  This would net us into the stock for $60-8.20 = $51.80 so we either get the stock for a nice discount or the stock goes higher and the contract expires without being used.  Either way, we keep the $8.20 and, since we promised to buy 500 shares, that's $4,100!  Despite ALK's recent sell-off, we expect it will go back up so we expect to collect the full $4,125 that is currently a debit ($25 loss) on the account.  Not only is this good for a new trade but, if ALK is still low in April (our next show), I will add to it!  

  • SQQQ – This is a hedge that protects us against a market downturn.  The net is currently $2,550 and it pays $10,000 if SQQQ goes up $3.60 (31.5%) and, since SQQQ is a 3x Ultra-Short on the Nasdaq, that means about a 10% drop on the Nasdaq will lead to a $7,450 (292%) gain on the spread.  Overall though, we HOPE to lose the $2,550 as the market goes higher.  
  • TZA – Another hedge and this one is net $6,580 on a $28,000 spread so the upside at $15 is $21,420 (325%) but TZA has to gain 50% to hit $15 so about a 17% drop in the Russell to make all that.  On the whole, we hope to lose the $6,580 as it's just insurance to protect our long gains.  

Keep in mind that, in our last review, we expected to lose $13,760 on our hedges and now they are down to $9,130 – also right on track as they lose value while our longs move up – all accounted for in our net $19,945 gain.  And, by the way, if you don't know EXACTLY how much money you plan to lose or make on EVERY single one of your positions – YOU ARE DOING IT WRONG!!!

By KNOWING, for a FACT, how much money a position should be making and when, we are easily able to tell if our positions are on track and, if we know whether or not our positions are on track – we can easily identify and fix problems and then it's very simple to keep our entire portfolio on track and – TA DA! – MAKE MONEY CONSISTENTLY!  

  • CAT – We have a very conservative spread that is, at the moment, in the money but we have 2 years to go.  So far, the net of the spread is $6,299 and it's a $15,000 spread, so we have $8,701 left to gain and that's still another 138% from where we are now so no reason to take the money so early and, besides, we began with just net $800 in cash deployed so we're already up 687%!  CAT is a notoriously rough ride but I'm confident we'll get there.  

  • GIS – Almost at our goal already.  The net of this spread is $4,403 and it's a $11,250 spread so $6,847 (155%) left to gain and I'm very confident in this one as well.  

  • GOLD – Was ABX, who bought GOLD and kept their symbol.  Now they want to buy NEM, which is kind of scary as they might over-leverage but the management thinks it's a good time to buy up the competition.  We have a net loss so far on this one at net $912 nd the upside potential is $12,500 but I'm not confident enough, at the moment, to log that as an expected win so we'll see how they look in April and maybe we'll adjust or maybe we'll get out – depends on the NEM deal details. 

  • IBM – Our 2019 Trade of the Year and we haven't missed one yet!  We're already at net $1,360 off a net $175 entry so up $1,185 (677%) on cash since 2/1 is pretty good for the first month.  The potential at $135 is $7,500 so another $6,140 (451%) still to gain off our now $1,360 is not just a keeper – but still good enough to be our Trade of the Year – even if you did miss our original entry!  

  • LB – This was the runner-up for last year's Trade of the Year only due to timing.  We already cashed in our first set and this is round 2 with LB and now we're at net $7,900 on the $40,000 spread that's $8,000 in the money but I have a lot of confidence that they will pull off their turnaround and $32.50 is a modest target so let's say we do expect to gain another $32,100 (406%) from here, which makes it still good for a new trade.  

  • MJ – The Marijuana Biz is very hot right now and this is the ETF that's buying them.  My logic on them is that if any two their 10 biggest holdings become 10-baggers, then the whole ETF doubles – even if the rest go to zero and, since we also invest in MJ companies through PSW Investments – we know first-hand what a gold-mine this industry is.  Net $12,050 is already up $10,800 (864%) from our $1,250 initial cash outlay but it's a far cry from the $40,000 potential that I feel strongly is going to give us another $29,200 (270%) in gains.  

  • MU – They were doing great but the global slowdown is spooking the chip sector.  Still the Internet of Things (IoT) is coming and our two-year time-frame and modest target ($50) make me think we can still expect to make the full $15,000 on this trade and currently we're at net $2,125 so another $12,875 (605%) of uspide potential makes this great for a new trade – even if you missed our original net $550 cash entry.  

  • WPM – Our 2017 Stock of the Year and we are now in this one for the 3rd time and, once again, LOVING IT!  We had a very conservative line and I think it will head up to the $30s but that's fine with us as our spread has $18,750 pay-off potential and is currently at net $9,600 so still another $9,150 (95.3%) left to gain, which is great – though it may not seem that way compared to our other trades.  

So that's $109,138 of expected gains on our 9 long positions and we expect to lose $9,130 on our hedges if all goes well.  Taking GOLD off our expected profit list cost us $11,588 compared to last time so, as I noted above, we can quickly zero in on the problem and we will either adjust or kill GOLD to get it back on track and we will look for a resource play to replace it (keeping diversified and balanced is the key to success).   

We won't be making adjustments this month but next month I should be scheduled for the show and then we'll see how things look for Q2.  Don't forget, we're expecting more of a pullback than this between now and then!  


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  1. Good Morning

  2. The year started well all around:

  3. Some surprises in this list:

    And some not surprising rankings – The Trump org at #98!

  4. STJ – MO worse than Trump Org? That is a little surprising….

  5. eric_s – MO has killed a few more people but Trump Org is trying really hard to catch up.

  6. Good Morning!

  7. Morning All!

    The replay is up!

  8. Good morning!  

    Wow, nice head-fake in the Futures but now we're down 0.666% – an ominous beginning to the day but pretty much what we expected.  2nd time's a charm on the /RB shorts.  

    Dollar blasting higher on ECB doveishness (and economic downgrade) surpassing our Fed's doveishness and bearishness.  

    • The euro slides 0.5% against the dollar to $1.126 after the European Central Bank slashes its 2019 growth forecast for the euro zone to 1.1% from its previous  view of 1.7%.
    • "The risks surrounding the euro area growth outlook are still tilted to the downside, on account of the persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets," ECB President Mario Draghi said in his statement.
    • The ECB earlier announced moves to remain accommodative, introducing a new round of long-term cheap loans, known as TLTROs, to stimulate growth.
    • Draghi also said other policy areas must contribute to boost longer-term growth and reduce weak spots. Structural reform in the euro area needs "to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential," he said.
    • Update at 9:20 AM: While the Governing Council chose to further delay any future rate moves to at least the end of 2019, several members of the council proposed to extend the range of forward guidance to March next year, Draghi said.
    • The European Central Bank will launch a new series of long-term lending operations to increase liquidity and pushes back guidance for future rate moves.
    • The euro falls 0.2% against the U.S. dollar.
    • Now expects key ECB interest rates to remain at their present levels through at least the end of this year vs. prior statements that said it would hold rates through the summer of 2019.
    • Will start a series of quarterly targeted longer-term refinancing operations (TLTRO-III) in September 2019 and ending in March 2021, each with a maturity of two years.
    • "These new operations will help to preserve favourable bank lending conditions and the smooth transmission of monetary policy," the ECB comments on the TLTRO-III operations.
    • Key interest rates remain unchanged. Interest rate on main refinancing operations stays at 0.00% and interest rate on marginal lending facility stays at 0.25%; deposit facility rate at -0.40%.

    • Challenger Job-Cut Report76,835 from 52,988 in February.
    • Bloomberg reports that it's the highest monthly total since 105,696 cuts were recorded in July of 2015.
    • Initial Jobless Claims -3K to 223K vs. +220K consensus, 226K prior (revised).
    • Continuous Claims: -50K to 1.755M vs. 1.775M consensus, 1.805M prior (unrevised)

    Not to mention with Italy joining China and UK out of the ECB – there may not be a Euro next year. 

  9. Crossing below our 200 DMA already on most indices but the Dow!

  10. Remember, my "bullish" premise is that the 200 dmas will hold.  /RTY already failed to get over theirs so anyone under is a very bad sign.  Dow 24,675, S&P 2,659, Nas 7,060 (failing!) and NYSE 12,500 (failing!) – if those two don't turn red or we lose another – we may have to bump up the hedges.  

    Well/StJ – Too well, not enough justification for the move other than fixing things we broke.  

    Poll/StJ – Seems to have a recency bias with FB near the bottom.  Fun list to contemplate tough….  Ranking high doesn't seem to help KHC.  

    Speaking of food disasters:

    This is why AMZN is such a good short – who in their right mind would want to get into this business?

    Mo/Felt – Well, the Trumps are working on killing the entire planet – you have to give them time to execute their plan…

  11. Phil, do you plan on resetting the portfolios again at the end of this year (2 year cycle), or will the next reset be completely based on when you want to call the next short-term top?

    I'm curious, because I would like to more closely follow the STP/LTP (who wouldn't with these gains?!) in ny account.  I've been doing ok the last 18 months, but am significantly lagging the member portfolios, mainly because of improper position sizing, and having margin pressures hurt my ability to take profits on our hedges when they actually go up in value.  It would be instructive for me (and probably a lot of other members), if we started over every couple years.

    Just my 0.02.  Thanks for everything.

  12. /NG with a healthy draw:

    Stopped out of /RB with $600 per contract:

    Portfolios/Palotay – I think so because once we're up 200% – it's kind of silly although, like Russian Roulette – if I keep starting from scratch I'm bound to hit a down patch one day when we don't have any excess to bail (that did happen once but we worked out of it).  Still, the education is more important than my reputation so yes, I'll reset them at the end of the year – unless the market does it for me by dropping 40%, of course!  

    • H&R Block (NYSE:HRB) jumps 4.9% after fiscal Q3 revenue of $468.4M beat the average analyst estimate of $465.5M.
    • Q3's top line fell by 4% from a year ago, primarily due to a delay in overall industry filings.
    • Q3 loss from continuing operations of 58 cents per share, missed consensus estimate by 1 cent, and improved from a loss $1.16 in the year-ago quarter.
    • Reiterates FY2019 outlook of $3.05B-$3.10B of revenue and EBITDA margin of 24%-26%.
    • For 2019 tax season, HRB sees client growth in H2 with declining net average charge in its assisted business and higher net average charge due to improved mix in DIY business.
    • Previously: H&R Block misses by $0.01, beats on revenue (March 7)

    Too bad we chickened out!  

    OK, so we did the Butterfly (yesterday) and the MTP above so I guess I need to put up the STP and OOP today…  LTP was 5 parts last time – I don't think I'll make that before heading to CA but, fortunately, there's not much to do in the LTP mid-quarter.

  13. I think your reputation is safe Phil.

  14. Signs of economic strain emerge in Trump’s home base

  15. Bespoke Morning Lineup — 3/7/18

  16. Phil – Any thoughts on WTW? Down huge from last year.

  17. T  plays were mentioned by Phil yesterday as well I advised the stock for armchair trades. Bought stock yesterday at 29.80!!!! It is a real comfortable play set up by Phil!!!!! In addition you still can sell a smaller amount of monthly cherry calls. In addition I set up an other armchair with May 29/31 strangle. Still good today.

  18. CTL-

    CenturyLink Stock Is at a 25-Year Low and Top Executives Are Buying

    CenturyLink President and CEO Jeff Storey and Chief Financial Officer Neel Dev apparently think so as well, as they bought a total of $1.6 million in the company’s stock on Wednesday.

  19. WTW/Soma – They are a good solid stock but Oprah didn't do that much for them so not too exciting.  At $15 I'd get excited, that would be just about $1Bn in cap with $225M in profits.  

    If you're worried it might not get there, you can sell 2021 $15 puts for $3.60 and that nets you in for $11.40, worst case and, even in an IRA, that's 31.5% back on your max risk.  TOS ordinary margin is $5,354 for 10 – so not as efficient as I like to add it for our portfolios.

    T/Yodi – $30 is certainly the sweet spot for T!  

    CTL/Pstas – Crazy how out of favor Telcos get:

  20. Phil what is the best way to hedge long term positions in REITs and how much should you allocate per month or quarter or whatever as a % of the holdings knowing all of it may be lost as insurance?

  21. How much more drop do we you guys think we need in WBA before they start looking good? The PE is about 11 right now. Although come to think of it, I’m feeling pretty bearish this morning – it would be ok with me if the bottom fell out so we could quit wondering when it’s going to happen  

  22. Hi Phil,

    I also would like to second tangledweb's question about hedging Reits.  I moved some cash into AGNC,NLY,NRZ and ARR about a month ago and have found it nearly impossible to sell in the money calls with any real premium at all.  Today, I discovered that I had forgotten about an old AGNC order selling the Jan 21 15 call.  A move up in price by AGNC meant that my sell offer on the call had only a .02 premium on it for a Jan 21 call, and it still didn't fill!  I quickly cancelled the order and replaced it with one aiming for .15 premium (which itself is pretty pathetic) and of course it also didn't fill.  I'm assuming that selling in the money calls with no premium just for protection leaves me wide open to being called away at dividend time.

    If we get a real market drop, the REITS I mention can be hit hard and I hate to leave them without real cover.  The only exceptions this past December were NLY and AGNC which weakened, but substantially less than the other names.  NRZ was particularly hard hit, and though I can sell a near the money call for some premium, it affords little protection.  At least in terms of NLY, which seems to be more stable, I can sell a more or less at the money Jan 21 10 call with a bit of premium, .21 or so. I am thinking that the solution may be to sell out the other REITS, and then sell out of the money puts, all of which have good premium, and let that be the income I derive from these REITS.   

    By the way, I know that ARR is in one of your portfolios, but commentary is quite negative on it by many firms including S&P and Credit Suisse.  I'm down about a dollar on it at the current price and I'm more or less even on all of the other names.  Any comment about ARR, and about hedging REITS in general?  Thank you!

    As a source of income, Yodi's armchair plays are looking better to me everyday…

  23. Options Opportunity Portfolio Review (OOP):  $283,465 is actually DOWN $3,622 from our 2/14 Review but was closer to $300,000 a couple of days ago – so luck of the draw as to when I do a review.  ALK took a big hit, BHC was better, CHK went our way, GNC got hit, MJ got better, NAK worse, NLY worse, OIH worse, SPWR worse, WBA worse, WPM better…  And so it goes…

    If you remember, last time I was looking to cash stuff in ahead of the drop and we got a few but not enough off the table.  On the bright side, we have a bit more cash, though still only $76,280 and I'd like it to be over $100,000.  Still, I'm not going to pretend I'll find things to cash as these are what's left after I tried really hard last time to let things go.

    We already got more aggressive on our hedges but we'll see how the week plays out before deciding what to do with those.

    • FTR – Just the stock now.  Hopefully they are consolidating for a move above $3.
    • HMNY – We doubled down so now 160,000 shares at 0.035 avg but, sadly, the stock is at 0.012 but it would be funny if they came back.  
    • JO – This one killed us!  I don't know what happened but we forgot to pull the plug and then it was too late.  Much as I like /KC, this ETF never seems to win so I"m not going back in.

    • SQQQ – QQQ goes down 10%, SQQQ goes up 30% to $15.30 and our $12 calls are worth $3.50 or so ($17,500) but currently at $12,000 so really not enough protection, is it?  MTP seems to be smarter than the OOP so let's mimic them and roll down to the Jan $10 calls ($3) for 0.60 ($3,000) and offset that cost by selling 20 (40% cover) of the Jan $17 calls for $1.50 ($3,000).  So we spend nothing to drop our calls $10,000 in the money – MUCH BETTER!  
    • TZA – The $8s are low enough and 1.3 x $10.20 is $13+ so $25,000+ at that price is up $12,000 from where we are now and that's reasonable protection with the bonus of having unlimited upside though my Webinar theory says we're not going past $18 so we will look to sell some calls – just to take money off the table when TZA does move higher.  

    • LB – Not worried about the short puts.
    • PLAY – Happy with net $37.20 entry if it comes. 
    • SIG – On track.
    • HOV – They missed by 0.02 and lost 0.12, so not great and Revenues are down 8.8% from last year but nothing tragic – will take time.

    • AAPL – I think this picture says it all and it's not a trick, this is typical whenever I go to malls, anywhere in America.  And it's not just vs MSFT but, typically, the Apple Store is THE most crowded store in the mall.  I can walk through an otherwise empty mall and there will still be a ton of people at the Apple store – it's like Starbucks – wherever they put one – people find it and start lining up!  Bottom line is I wish it would go lower so we could buy more.  As it stands, it's a $65,000 spread priced at net $22,387 so, by itself, can make our year with a $42,613 gain.  

    Image result for apple store vs

    ALK – Higher fuel costs and competition from Southwest (LUV) is spooking people but we'll just ride it out.  Good for a new trade.  

    • AXL – This is a new trade.  
    • BBBY – We cashed out $10s and this is what's left.  Too early to worry. 
    • BHC – Took a hit with the sector but still on track for us. 

    • C – On track.
    • CDE – Maybe GOLD will buy them?
    • CHK – On track.

    • FCX – Good for a new trade.  Should do well once tariffs are lifted. 
    • FNSR – We took a profit and this is what's left – haven't even sold new puts.

    • GNC – Huge sell-off but long way to go.
    • GOLD – Are they biting off more than they can chew with NEM?  This is one I have to think about but I do love them.

    • HBI – On track, over our modest goal.
    • KHC – Waiting and seeing on this one. 
    • LB – Disappointed again but it's a true long-term trade.  
    • MJ – Pretty much saving us for now.  

    • MU – Another trade victim and I'm not confident enough to add more so watch and wait for now.
    • NAK – What a roller coaster!   They are floating 10M shares to raise cash  but there's a 250M float so not a big deal at all and I'm glad if they get the cash.

    • NLY – We are trying to sell 2021 $8 calls for $2.50 to cover – no takers yet. 
    • OIH – With all the drilling I can't believe they don't move.  Watching and waiting.

    • SPWR – They just came up with new cells that are even better than their already best-in-business cells so I'm not letting go of them.  It's a $20,000 spread netting $6,685 at the moment so more than 200% gain left in it.  
    • TWTR – We thought they'd have good earnings and they didn't so let's not waste the space and kill this trade.  
    • WBA – What a great opportunity to get in if you missed it last time!  Let's buy back the short $72.50 calls for $4.75 ($9,500) and roll the $60 calls ($9.40) to the $50 calls ($14.50) for about $5.10 ($10,200) and that's too much cash out of pocket so we'll sell 1/2 (10) the $62.50 calls for $8 ($8,000) to get a little back.

    • WPM – On track. 

  24. Phil for any suggestions on a new play for WBA?

  25. Hi Phil,

    I know we bought the FDX puts back but is there any price that would interest you in selling more puts? Maybe if the stock dropped another $10-15?

  26. Tesla CEO Musk's security clearance under review over pot use: Bloomberg. … Musk has security clearance because another of his companies, SpaceX, provides satellite launch services to the U.S. government. The electric carmaker's shares pared gains following the report.

  27. Phil/Hedges

    Any hedge setup that we can enter now? TZA? or maybe NASDAQ 3x ultra?


  28. Hi Phil,  I don't know if you noticed my post at 1:10 and tangledweb's post at 12:12, but I'd appreciate it if you could respond when you get a chance.  Thanks.

  29. REITs./Tangled, John – REITs are tricky because they pay out all their profits (90%), which means they are always very sensitive to rate changes and such.  You could play TLT as a hedge, as it goes down when rates go up but it's not super-reliable as a hedge.  

    See, the rates recovered but the REITs did not because people have a general fear that rates will climb again, regardless of what the Fed is actually doing – so the REITs are out of favor.  My preferred way to hedge a REIT is to sell calls that are 10% in the money though you may get called away ahead of dividends sometimes – I generally prefer to have solid protection as they can go down sharply at times.  

    John says "If we get a real market drop" and that's what general hedges are for, I'm more concerned about when a REIT goes out of favor – like they are now, regardless of the overall market.

    As to ARR, they are offering shares to raise cash, which will dilute us in the short run but, if you are a long-term investor who wants them to keep doing what they do – so what?  In the LTP, we've had them since last Feb and they are down a bit but we sold the $20 calls – so we don't really care.  

    ARR ARMOUR Residential REIT Inc. 1000 2/22/2018 378 $22,500 $22.50 $-3.12 $20.58     $19.39 $-0.20 $-3,115 -13.8% $19,385
    Short Call 2019 19-JUL 20.00 CALL [ARR @ $19.39 $-0.20] -10 11/29/2018 (134) $-2,100 $2.10 $-1.75     $0.35 $0.01 $1,750 83.3% $-350
    Short Put 2019 19-JUL 22.50 PUT [ARR @ $19.39 $-0.20] -10 11/26/2018 (134) $-2,100 $2.10 $1.70     $3.80 - $-1,700 -81.0% $-3,800

    The July $20s are 0.35 now and way out of the money but, if I were buying them now, I'd sell the $17.50s for $2.05, which is only 0.15 in premium but they only pay 0.19/month – so if I get called away I get 0.15 instead of 0.19 and I sell another call for another 0.15 – that's still $1.80/yr – even if it's 0.15 every time.  I would so much rather have the $2 of downside protection than the extra 0.04!  

    WBA/Dawg – They look good now but let them find a bottom – you don't have to be the one that saves them! 

    WBA/Robert – As above, I suggest waiting.  You can sell the 2021 $50 puts for $5, that's a good start if you are impatient and the spread to watch would be the $55 ($11.50)/65 ($7) bull call spread at $4.50 so if you sold 5 of the $50 puts and buy 10 of the spreads, your net would be $2.25 for each $10 spread with a break-even at $57.50 and $7.75 (344%) upside potential.  That doesn't suck.

    FDX/Sun – I was not thrilled with their last report so it would take a better one for me to buy more – not just a price drop.  We sold 5 of the 2021 $180 puts for $22.22 so our net is way down at $157.78, so nothing to panic over but they have gone lower and we're already down $2,115.  I'm not going to cut and run as we called the bottom and it pretty much held so if it holds again – THEN I might consider some longs – but not sure I want to risk owning 1,000 shares at $180 – regardless of the discount!  

    Musk/Albo – I doubt he's the only military contractor who smokes but he's the only idiot doing it on TV so, for that reason, he's a dumbass and a security threat vs guys who keep their vices private. 

    Hedges/Pat – Well the time to enter a hedge is when we're up, not down.  Still, we just set up the SQQQ Jan $10/17 bull call spread in the OOP (net $1.50) - so of course I think that's good for a new hedge.

  30. Sorry, didn't realize how late it was already – got caught up looking up some stuff.  

    This is why I don't have a Bloomberg Terminal anymore – I'm a data junkie – I could go off on a tangent and start looking up things and not even notice it's night out…  

    I WILL have the STP review done tomorrow early but the LTP is a lost cause before my trip but at least that's the only thing we have to do next week.

  31. So what is your proposal for new entry on WBA?

  32. Indexes holding 1% drops except the Nas (-1.35%). 

    Volume is once again stronger on a sell-off (we'll finish near 100M) but, on the whole, we're just treading water at this level, which is not terrible consolidation:

    Date Open High Low Close* Adj Close** Volume
    Mar 07, 2019 276.83 276.98 274.07 274.63 274.63 81,277,909
    Mar 06, 2019 279.15 279.16 276.97 277.33 277.33 74,868,600
    Mar 05, 2019 279.54 279.76 278.41 279.02 279.02 59,114,600
    Mar 04, 2019 281.60 281.87 276.84 279.40 279.40 106,494,600
    Mar 01, 2019 280.44 280.88 278.82 280.42 280.42 78,880,500
    Feb 28, 2019 278.96 279.45 278.32 278.68 278.68 69,268,300
    Feb 27, 2019 278.52 279.59 277.48 279.20 279.20 56,921,600

    We're talking 50 S&P points from 2,800, which is only 1.7% so REALLY people – get a grip!  It's only because expectations are so high (certainly not mine!) that people think this is so terrible – as if any down move in the market is bad.

    LOL Millard!  You ARE joking, right?

  33. ARR as well as other reads.
    Phil your comment to a new start with ARR I agree, but as shown in the LTP we do hold the stock purchased for 22.50. I even hold the stock at 23$.
    First the stock pays monthly div. so the chance to be called is more on a monthly bases.
    With the stocks mentioned one has to be a bit more careful by selling a call ITM, and if called you have a stock loss and not a paper loss.
    I take the view one has to be a bit more conservative by selling calls, even if you do not get a great amount of premium. In the past I have learned that most stock will recover again.
    Especially with NLY I have built up a relative nice credit over the years, by selling puts and calls close or even ATM. So I feel in case of ARR I would not sell a July 17.5 call, if I do have the stock on my books for 23 $.

  34. ARR/Yodi – Well, I probably wouldn't sell when it's low in the channel but I do like to lock in gains when it's high. That goes for any REIT and, as a a rule of thumb, as long as the premium of the short call is at least 2/3 of the dividend – it's not very likely you get called and, even if you do – not very much damage.  There's no "loss" if I sell a $17.50 call for $2.05 when the stock is at $19.40.  If I am called away, I get $17.50 cash for my shares and I keep the $2.05 for the short call so that's $19.55 back in my pocket and I buy more ARR for $17.50 and sell another call for another $2.05 – just as good as getting the dividend and, if I'm lucky, this happens ex-dividend day and the stock is cheaper.

    I don't know about you but ARR never seems to get called away due to the very small monthly dividend – the problem is usually with the large, quarterly payouts, which is why I usually stick to the cheaper stocks where we can get a reasonable premium on the short calls.  That's part of my selection process:

    ARR ARMOUR Residential REIT Inc. 1000 2/22/2018 378 $22,500 $22.50 $-3.12 $20.58     $19.39 $-0.20 $-3,115 -13.8% $19,385
    Short Call 2019 19-JUL 20.00 CALL [ARR @ $19.39 $-0.20] -10 11/29/2018 (134) $-2,100 $2.10 $-1.75     $0.35 $0.01 $1,750 83.3% $-350
    Short Put 2019 19-JUL 22.50 PUT [ARR @ $19.39 $-0.20] -10 11/26/2018 (134) $-2,100 $2.10 $1.70     $3.80 - $-1,700 -81.0% $-3,800
    ETM Entercom Communications Corp. 2000 5/23/2018 288 $15,300 $7.65 $-1.67 $7.65     $5.99 $-0.12 $-3,330 -21.8% $11,970
    Short Call 2020 17-JAN 8.00 CALL [ETM @ $5.99 $-0.12] -20 5/22/2018 (316) $-3,000 $1.50 $-1.08     $0.43 - $2,150 71.7% $-850
    Short Put 2020 17-JAN 8.00 PUT [ETM @ $5.99 $-0.12] -20 5/22/2018 (316) $-3,800 $1.90 $0.68     $2.58 - $-1,350 -35.5% $-5,150
    NRZ New Residential Investment Corp. 1000 2/22/2018 378 $16,600 $16.60 $-0.19 $16.60     $16.42 $-0.08 $-185 -1.1% $16,415
    Short Call 2020 17-JAN 15.00 CALL [NRZ @ $16.42 $-0.08] -10 2/26/2018 (316) $-1,950 $1.95 $-0.43     $1.53 $-0.03 $425 21.8% $-1,525
    Short Put 2020 17-JAN 15.00 PUT [NRZ @ $16.42 $-0.08] -10 2/22/2018 (316) $-2,100 $2.10 $-1.15     $0.95 - $1,150 54.8% $-950
    SKT Tanger Factory Outlet Centers Inc. 2000 3/16/2018 356 $44,500 $22.25 $-1.38 $22.25     $20.88 $0.05 $-2,750 -6.2% $41,750
    Short Call 2020 17-JAN 20.00 CALL [SKT @ $20.88 $0.05] -20 2/26/2018 (316) $-8,100 $4.05 $-2.00     $2.05 - $4,000 49.4% $-4,100
    Short Put 2020 17-JAN 22.50 PUT [SKT @ $20.88 $0.05] -20 2/1/2018 (316) $-5,400 $2.70 $0.40     $3.10 - $-800 -14.8% $-6,200

    • ARR pays 0.19/month
    • ETM pays 0.09/qtr 
    • NRZ pays 0.50/qtr
    • SKT pays 0.38/qtr 

    Only NRZ is in danger of being called away as it would be a waste for the call-holder to do so on the others but, even if NRZ is called, we collected 0.50 in March, June, Sept  and Dec and we paid $16.60 for the stock and sold the calls for $1.95 so net $12.65 called away at $15 is up $2.35 (18.5%) for the year (not counting the short puts) so 50% better than the dividend alone and we tied up less cash and took less risk. 

    Initially we had the stock for $16.60 and sold the $15 calls for $1.95 so net $16.95 meant we'd get at least 0.35 of the 0.50 dividend.  They went ex-dividend on March 29th and, had we been called away, we could have taken our $16.95 and bought the stock on March 30th for $16.24 and the stock went up to $18 in May – so we certainly could have gotten $2+ for the $15 calls again easily.  On the June distribution, the stock fell from $18 on the 28th to $17.50 on the 29th – again, we easily could have jumped right back in with our cash to buy it again at a the ex-dividend discount.  

    That's all there is to it, if you get called away, take the cash and buy the stock right back.  A lot of the time you come out even better than if you just took the dividend and rode out the dip.

  35. And, by the way, this is a very conservative strategy meant as a CASH!!! substitute.  We have money sitting around so we may as well make 18% on it by putting it in some conservative, well-covered REITS.  If we end up getting called away and only making 12% – I'd much rather have that than take a loss on my CASH!!!

  36. Thank you Phil and yodi for your opinions on how to play the reits – I really need to find a good “conservative” strategy for one of my portfolios

  37. Retirement Income. A 3 part series was written by author 'The Owl' back in June 2018. I share FWIW, certainly not endorsing. It's lengthy, but I liked the approach and structure – not necessarily the conclusions. Perhaps something for the weekend.

    Retirement Income Part One

    Retirement Income Part Two

    Retirement Income Part Three

  38. A Humiliating End to the Superjumbo Era

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