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Toppy Tuesday – S&P Back to 3,000 – Again

Can things get worse for Boeing (BA)?

Since Thursday's close, BA has dropped $40, from $370 to $330 and that's 10.8% in two sessions so we'll watch the $333 line (10%) to see if they can getg back over that and then we'd look for a weak bounce at $340 and a strong at $348 but the news on BA has been very, very bad with two downgrades yesterday as rumors came out that BA had lied to regulators – leading to hundreds of deaths.

BA booked a $5.6Bn charge in Q2 and estimated the 737 Max grounding would cost them $8Bn overall but that was before the new revelations.  BA makes $10Bn a year, usually, but lost $3Bn last quarter and they will report again tomorrow – so get ready for some fireworks.  It's very unlikely we'll hear that "all is well" tomorrow and it's too risky to play short puts in this environment but, we can still play for an eventual recovery with a Bull Call Options Spread as the first trade in our new Earnings Portfolio:

  • Buy 5 BA 2022 $300 calls for $72.50 ($36,250)
  • Sell 5 BA 2022 $350 calls for $50 ($25,000) 

That's net $11,250 on the $25,000 spread that is currently over $15,000 in the money so, if BA gets back over $350 by Jan, 2022, you will make $13,750 (122%), which is not bad money for 2 years.  If BA is flat or goes lower, we can begin to recoup our money by selling short calls, like the Jan $330 calls, which are $20.  Just selling 1 contract for those puts $2,000 in our pocket and we have 8 quarters to sell so it's very possible we can generate $16,000 worth of income while waiting for our $13,750 pay-off!

We decided to make a new $100,000 Earnings Portfolio, mostly for quick trades duing the season as we are mainly in cash and have plenty to play with.  Yesterday, in our Live Member Chat Room, I suggested the following trade on TD Ameritrade (AMTD):

Let's make an Earnings Portfolio with $100,000 to do some earnings plays while we wait for a good time to start rebuilding the main portfolios.  For AMTD, we can:

  • Sell 5 AMTD 2022 $30 puts for $4.20 ($2,100) 
  • Buy 10 AMTD Jan $38 calls for $2.30 ($2,300)
  • Sell 5 AMTD 2021 $45 calls for $2.60 ($2,600) 

That's a net credit of $1,800 on a $7,000 spread where we are disadvantaged by time but not really as an up move or flat would let us cash out Jan and then pick up a 2022 bullish spread to cover the short 2021 $45 calls and a down move would give us a better entry on a 2022 spread and we could roll and DD on the short puts and sell more calls.  

Earnings went well last night and the stock should be up a bit this morning and we'll see how it goes but the suggestion came in too close to the closing bell for us to be able to include it in the portfolio, unfortunately so BA will be our first official trade idea to be included.  Still, it will be interesting to see how this one pans out.

 


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  1. Good Morning!



  2. From bad to worse at WeWork:

    https://gizmodo.com/report-wework-delaying-mass-layoffs-because-it-cant-af-1839243971

    In other words, WeWork is so broke that it needs to raise additional funds to fire people. As the Journal’s Liz Hoffman noted on Twitter, if the bailout package goes through, that will put SoftBank in the… unique position of having invested $10 billion and lent another $5 billion to a company it now values at $8 billion. If a report on Axios is to be believed, around $200 million of that will be an exit package designed to wrest control of voting shares held by former CEO Adam Neumann, who stepped down amid claims of bizarre behavior and a cloud of suspicion over questionable financial arrangements.

    One of the biggest cons in a while! I am guessing thatb lawsuits will be filed eventually. But Adam will be out of the country by then.


  3. I wonder what the average Fox News viewer is thinking:

    https://www.motherjones.com/kevin-drum/2019/10/50-million-is-chump-change/

    These guys go out of their way to say that Warren's wealth tax (I am not a big fan of that) is bad because $50M is really not that much money! It's a 1000x what the average family makes yearly in this country!


  4. This looks like an interesting book:

    https://www.vox.com/identities/2019/10/21/20897021/meritocracy-economic-mobility-daniel-markovits

    Here’s a clarifying stat: At two Ivy League schools that Markovits surveyed, “the share of students from households in the top quintile of the income distribution exceeds the share from the bottom two quintiles combined by a ratio of about three and a half to one.” The point: Meritocracy is a mechanism for transferring wealth from one generation to the next. Call that what you want, but you can’t call it fair or impartial.

    What makes Markovits’s book so interesting is that he doesn’t just condemn meritocracy as unfair for non-elites; he argues that it’s actually bad for the people benefiting from it. The “trap” of meritocracy ensnares all of us, he says, in ways that make life less satisfying for everyone.


  5. https://seekingalpha.com/news/3507027-annaly-bounces-bill-gross-mention 

     

    Bill Gross is bullish on NLY and mortgage Reits  If he's right, MRRL should do well. 

    (ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B)

    Currently yielding 20 %.  NLY is the heaviest weighted component at 12.97%.

     

     

     

     

     

     


  6. Good morning!


  7. Phil / AAPL – I'm looking at cashing in about 1500 Shares ( book the LT Gain) and set up a BCS to stay in it at a lower risk.  I'm looking at the following 2022

    Buy 20X Jan '22 $225 ( 45) 

    Sell 20X of the '22 $280 (22)

    Sell 5X of the '22 $190 Puts (15). then maybe 5 later…

    I'm thinking that 280 to 300 is a reasonable target given the new lower priced iPhone ( maybe $499 at 40 Million per year adder in '22.  along with services picking up as well.   However I'd like your thoughts. on the BCS and if it's too aggressive, or if you think I should hold off on a new position.   Either way I'm selling the shares.  Appreciate your feedback. 


  8. Phil,

    I realize I may be too early to sell a 2022 $230P( 3 contracts) on BA for $21. Your thoughts on this trade would be appreciated. Thank you


  9. Phil, My apologies; your trades came in 15 seconds after my question. Would still like to hear your thoughts. Thank you.


  10. Good morning!

    WeWork/StJ – This is the problem with the Unicorn market – growth at all costs to get to the IPO ends up creating a lot of companies that don't make money, which puts a lot of perfectly good companies that could make money out of business.  AirBnB, for instance, is having the unintended cons

    $50M/StJ – Shows how tone-deaf these guys are.  Even their viewers should snap out of their trances when they are told $50M is not much money.  All over the World, people are rising up against the inequality – Fox needs to start paying attention but it's hard to do that when their job is to pretend things like inequality don't even exist.  Good point on "meritocracy" too, which has been perverted to maintain the status quo now.  

    Jackie and I just went to USC, where she's considering and they have the nerve to charge $75,000/yr in tuition and, at orientation, the guy says "don't worry, our average student gets $25,000 in aid" – as if $50,000 a year is easy to afford!  So you won't see many films made by poor people as USC has such a massive pipeline to Hollywood it's almost impossible to break in from outside it (Jackie is going for coding, not film).

    The USC School of Cinematic Arts (commonly referred to as SCA)—formerly the USC School of Cinema-Television, otherwise known as CNTV—is a private media school within the University of Southern California in Los AngelesCalifornia. The school offers multiple undergraduate and graduate programs covering film productionscreenwritingcinema and media studiesanimation and digital artsmedia arts + practice, and interactive media & games. Additional programs include the Peter Stark Producing Program and the Business of Entertainment (offered in conjunction with the USC Marshall School of Business MBA Program).

    It is the oldest, largest, and arguably most reputable such school in the United States, established in 1929 as a joint venture with the Academy of Motion Picture Arts and Sciences.[1][4][5] Having been ranked as one of the best film schools in the world on several occasions, SCA has most notably topped THR's ranking for seven consecutive years. As such, admissions into the school are extremely competitive, with an estimated 2–3% acceptance rate.[4][6][7]

     

    Really, really impressive place – they are as well-equipped as a Hollywood studio and the kids get mentored through into all the top jobs – what chance do the poor kids have of breaking in?  Even if the college costs were paid for, you still have to consider the cost of simply going back and forth to LA for people from other parts of the World.  I got into USC and Berkeley but, ultimately, I ended up staying on the East Coast because the sheer cost of commuting meant I'd pretty much have to give up my family and friends if I moved to the West Coast. Jackie's leaning the same way – especially after we all did the redeye home!

    NLY/Albo – I think most of the REITs are undervalued. 

    Dow back in the red. 

    BRB on the trading questions.


  11. Phil,

    Wth LMT's earnings due tomorrow and F-35 contract with Turkey possibly at risk any thoughts on keeping a few short Dec 355 puts ?

    Thanks , as always


  12. 8800/LMT – The earnings were out this morning


  13. vkat_mn

    Thanks for the info – LMT beat top and bottom #s


  14. AAPL/Batman – Thanks for reposting.  So, 1,500 shares at $241 is $361,500 and let's say we were hoping for $300 so that's $90,000 you'd hate to miss out on, right?  I like your spread for net $23 ($46,000) which pays $55 ($110,000) if all goes well plus the $4,500 you collect on the short puts gives you a nice $68,500 at $280 – seems like you have learned your lessons very well! 

    Still, I'm all about getting an income so I'd rather go with:

    • Buy 15 AAPL 2022 $200 calls for $61 ($91,500) 
    • Sell 15 AAPL 2022 $260 calls for $30 ($45,000) 
    • Sell 5 AAPL 2022 $220 puts for $26 ($13,000) 
    • Sell 5 AAPL Jan $240 calls for $11.70 ($5,850) 

    That's net $27,650 on the $90,000 spread so $62,350 of upside but $299,150 in pocket from the shares so no worries about being assigned 500 at $220 ($110,000) as you can roll the short puts to 10 of the 2022 $190 puts ($13) even ($190,000 if assigned).  Meanwhile, 7 more quarterly sales of $5,870 is $41,090 of additional potential premium sales while you wait.  If AAPL goes lower, the short calls offset the increase in the short puts and pay to roll the long calls lower.  If AAPL is flat, you make great money selling calls and if AAPL goes higher, you roll the short calls while your longs go in the money and, if AAPL goes over $260, you simply buy 15 $240/300 spreads (putting a stop on the $200/260 spreads) with all your spare cash to keep covering the short calls.  So many ways to win!  

    BA/Jasu – There COULD be a disaster – that's why I'm unwilling to take the risk on the short puts.  If you have a $500,000 portfolio and you don't mind being stuck with 300 shares of BA at $230 ($69,000) if the stock drops 40% to $200 if they have another crash at any point over the next year – then no worries as they should EVENTUALLY get their act together but it's just too much risk for a $100,000 portfolio.

    LMT/8800 – My Stock of the Next Decade!  I don't short things I like long-term and LMT is too strong otherwise and US defense spending is at record highs and Trump is pressuring NATO to increase spending (ie. give our Military/Industrial complex more money) and LMT has lots of other things in the works – including Fusion – so I wouldn't bet against them. 

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 45,358 39,946 40,536 47,290 49,960 53,762 57,492 59,188 62,822 +3.5%
    Operating Profit $m 4,505 5,012 4,712 5,888 6,744 7,334 8,105     +10.2%
    Net Profit $m 2,981 3,614 3,605 5,173 1,963 5,046 5,850 6,011 7,043 +11.1%
    EPS Reported $ 9.04 10.1 9.93 12.1 13.0 17.4 20.4     +14.1%
    EPS Normalised $ 9.90 10.1 10.1 12.3 13.0 17.7 20.2 21.2 25.4 +12.4%
    EPS Growth % +17.0 +2.0 +0.3 +21.3 +5.8 +36.5 +31.2 +19.6 +19.5  
    PE Ratio x           21.1 18.5 17.6 14.7  
    PEG x           1.07 0.94 0.90 1.58
    Profitability

    $375/share is still "only" $105Bn market cap.  Divide that by $6Bn CURRENT earnings ($3.1Bn in first half) and the p/e is 17.5 – not over-priced at all with $1Bn (15%) earnings growth projected next year.  

    Lockheed Martin's Skunk Works is building a new, more capable test reactor as it continues to move ahead with its ambitious Compact Fusion Reactor program, or CFR. Despite slower than expected progress, the company remains confident the project can produce practical results, which would completely transform how power gets generated for both military and civilian purposes.

    Aviation Week was first to report the updates on the CFR program, including that Lockheed Martin is in the process of constructing its newest experimental reactor, known as the T5, on July 19, 2019. The company's legendary California-based Skunk Works advanced projects office is in charge of the effort and had already built four different test reactor designs, as well as a number of subvariants, since the program first became public knowledge in 2014. The War Zone has been following news of this potentially revolutionary program very closely in recent years.

    "The work we have done today verifies our models and shows that the physics we are talking about – the basis of what we are trying to do – is sound," Jeff Babione, Skunk Works Vice President and General Manager, told Aviation Week. "This year we are constructing another reactor – T5 – which will be a significantly larger and more powerful reactor than our T4."

    These aren't blueprints – this is their 5th test reactor!  Fusion is a multi-TRILLION Dollar business and LMT is probably in the lead but they don't have to win the race to get rich – just be one of the early suppliers.  

    Teams in various countries have built functional fusion reactors, but they remain large, inefficient, and expensive. Last year, China touted progress on its Experimental Advanced Superconducting Tokamak (EAST), but without highlighting that this reactor is situated inside a two-story building within the Dongpu Science Island, a large research campus on a lakeshore peninsula in China’s Anhui Province. An international consortium also hopes to have construction of the International Thermonuclear Experimental Reactor (ITER) completed in France in 2025, but this reactor will weigh approximately 23,000 tons.

    Lockheed Martin says that the CFR design could eventually be small enough to fit inside a shipping container, but still be able to power a Nimitz class aircraft carrier or up to 80,000 homes. The patent documents suggest it might eventually be compact enough to even power a large aircraft.

    It would also only require a fraction of the nuclear fuel found in existing fission nuclear power reactors, which, in turn, would generate significantly less waste over time. The fuel also doesn't need to be anywhere near as refined, making it less dangerous to handle and far less suitable as a starting place to build nuclear weapons.

    I hope it ends up working – this is how the World will be saved!


  15. USC / Phil

    A Nephew is studying there, his father has been filming all his life in " 2nd. unit"   shooting all the action scenes (last 4 of James Bond and others I don´t remember now).

    It´s difficult to be admitted, but after that…. 

     

    Wework,  I think they will face some problems in Mexico because they bought massive buildings of a Real Estate company related to laundering money…we´ll see.


  16. Phil – Not sure if you missed this… reposting.

    Phil / AAPL – I'm looking at cashing in about 1500 Shares ( book the LT Gain) and set up a BCS to stay in it at a lower risk.  I'm looking at the following 2022

    Buy 20X Jan '22 $225 ( 45) 

    Sell 20X of the '22 $280 (22)

    Sell 5X of the '22 $190 Puts (15). then maybe 5 later…

    I'm thinking that 280 to 300 is a reasonable target given the new lower priced iPhone ( maybe $499 at 40 Million per year adder in '22.  along with services picking up as well.   However I'd like your thoughts. on the BCS and if it's too aggressive, or if you think I should hold off on a new position.   Either way I'm selling the shares.  Appreciate your feedback. 


  17. Phil,

    Thanks for the thorough LMT update which is in harmony with my short puts so I am on the side of a bullish outlook. Just wasn't sure with how significant the Turkish issue might be. Agreed that fusion will/would be a category killer but that is a few tomorrows in the future.

    Thanks again


  18. USC My wife went there so I am biased. Here is another interesting and well funded collaboration there with Professor Dr. Dre ! and Jimmy Iovine in Arts, Tech and Business of innovation.

    https://iovine-young.usc.edu/about/index.html


  19. USC/Advill – Seems like a great place to go (ignoring the cost) though I prefer location of UCLA – right in Beverly Hills.  

    AAPL/Batman – Ah sir, it is you who missed my response in the comment above.  cool

    LMT/8800 – Oh, I see, short puts.  Those I don't mind but still expecting a market correction that won't spare LMT so make sure you REALLY want to have those puts if LMT drops 20%.  As to Fusion, I think most people think it's farther out than it is and that's the danger of shorting LMT – if they announce a significant breakthrough – stock could pop 20% and never come down again.  Keep in mind they "only" make $6Bn a year, working fusion can make them $6Bn/month for decades to come.  

    Academy/Randers – That's very cool!

    Nas taking a beating, as I said, AAPL boost masking broader weakness.

    /ES makes a nice short if they fail 3,010 (tight stops over) and /YM 27,000 remains a good shorting line along with /RTY 1,560.

    • Chain store sales increased 4.3% for the week ending October 19 to fall back from the recent +5% pace, according to the latest report from Johnson Redbook.
    • Month-to-date sales through October 19 are up 4.2%.
    • The Baltic Dry Index fell 2.17% in London to 1,806 to mark an eighth day in a row of a decline.
    • Panamax rates were down 1.36% to $14,388, while Capesize rates dropped 3.31% to $24,203.
    • Geopolitical uncertainty has cut somewhat into confidence in the freight markets, according to analysts.

    • CarMax (KMX -2.2%) is reportedly on a negative watchlist at Pacific Square
    • The negative view from Pacific Square contrasts to the sell-side average rating of Outperform on CarMax and Quant Rating of Very Bullish.
    • Shares of CarMax trade on the upper end of their 52-week range of $55.24 to $96.36.

    • McDonald's (MCD -3%) says it used national and local promotions to drive traffic in Q3 and leaned on menu price increases and tech-focused upgrades to boost same-store sales growth during the quarter.
    • The restaurant chain's U.S. same-store sales mark of +4.8% was high enough to nab more restaurant market share during the quarter, but missed the consensus expectation of +5.2% and came at the expense of at least a few pennies to EPS.
    • Headline shock: While the numbers turned in by McDonald's weren't necessarily bad by sector standards, the company is not one to miss earnings estimates – topping sales and EPS estimates more than 75% of the time over the last two years.
    • Shares of McDonald's are swapping hands at the lowest level in over four months.
    • Previously: McDonald's EPS misses by $0.10, misses on revenue (Oct. 22)
    • Previously: McDonald's -3% after earnings miss (Oct. 22)

    Hopefully CMG has the same issues.

    • Verizon (NYSE:VZ) is throwing its unlimited wireless subscribers a year of Disney Plus (NYSE:DIS) for free.
    • Netflix (NASDAQ:NFLX) is down 2.5% premarket alongside the move; Disney is up 2.5% and Verizon is up 1%.
    • The new Disney streaming service is set for a Nov. 12 launch; a year of service prepaid comes at a discount, for $69.99. The service will cost $6.99 billed month by month.
    • Verizon is also offering the throw-in to new FiOS Home Internet and 5G Home Internet customers.
    • The news will provide a solid initial chunk of subscribers for Disney, which is starting a long-haul run to catch up to Netflix in critical mass.

    • GNC Holdings (NYSE:GNC) is on watch after Bloomberg reports the company may be taken private by Harbin Pharmaceutical Group.
    • Harbin invested $300M in GNC last year.
    • Shares of GNC are up 13.46% premarket to $2.36 vs. the 52-week range of $1.32 to $4.47.

    • Adjusted EPS of $5.44, up 6% versus prior year.
    • Sales by segment: Aeronautics +10%; Missiles and Fire Control +14%; Rotary and Missions Systems -4%; Space +5%.
    • Quarterly cash deployment: Capex of $308M; Repurchased 600K shares; Paid cash dividends of $621M; Record backlog of $137.4B. Raised outlook for 2019: Diluted earnings per share of ~$21.55 ($20.85-$21.15), on net sales of ~$59.1B ($58.25B-$59.75B).
    • LMT +0.1% premarket
    • Q3 results
    • Travelers (NYSE:TRVdips 1.8% in premarket trading after Q3 core EPS of $1.43 misses the average analyst estimate of $2.02 and falls from $2.62 in the year-ago quarter.
    • Core income decreased primarily due to net unfavorable prior year reserve development in the current quarter, including the impact of an "increasingly challenging tort environment."
    • Q3 net written premiums of $7.57B rose 7% Y/Y, with business insurance NWP of $3.89B up 7%, bond & specialty insurance NWP of $728M up 13%, and personal insurance NWP of $2.95B up 7%.
    • Q3 total revenue of $8.01B rose 4% from $7.72B in the year-ago quarter.
    • Q3 net investment income of $1.852B pretax was comparable vs. the year-ago quarter.
    • Q3 underlying combined ratio of 94.1% compares with 93.0% in Q3 2018.
    • Q3 core return on equity of 6.5% fell from 12.0% a year ago.
    • Adjusted book value per share of $90.09 at Sept. 30, 2019 increased from $87.27 at Dec. 31, 2018.
    • Conference call at 9:00 AM ET.
    • Previously: The Travelers Companies EPS misses by $0.92, beats on earned premium (Oct. 22)

  20. Got our nickel on /NG, by the way – good job taking $2.30 and running everyone!


  21. GME continues to act well.


  22. I do think/admit that most people would be more comfortable – feel safer in Westwood /Beverly Hills than near Watts ! 


  23. GME/Albo – Might be ready to beak higher. 

    HOV popping too.  What a ridiculous sell-off that was.  

    And now LEN is taking off (from our Watch List) too:

    Submitted on 2019/09/23 at 2:56 pm

    Now that HOV made a comeback LEN is on the top of my list at $55 in the real estate space.  That's $17.3Bn and they are good for $1.2Bn at least so p/e around $14 and I like that they do mortgage and title and rentals – they squeeze money out of every part of the transactions.  

    WTF?


     

    • Fannie Mae (OTCQB:FNMA -2.1%) and Freddie Mac (OTCQB:FMCC -2.1%) sink after Federal Housing Finance Agency Director Mark Calabria told Congress that he'd be willing to take steps that could wipe out shareholders of the mortgage insurance giants if it had to be done to prevent a bailout by taxpayers.
    • "I work for the taxpayers," he told the House Financial Services Committee when asked about whether hedge funds, including Paulson & Co., stood to gain windfalls under the plan the U.S. Treasury Department released last month.
    • Calabria said it's not his aim to wipe out or enrich shareholders and that he'd do what it takes to make sure taxpayers aren't on the hook for losses at Fannie and Freddie, the two government-sponsored enterprises that have been under U.S. conservatorship since 2008.
    • For years, John Paulson's firm and other hedge funds have been seeking to end the net worth sweep that sends all of the GSEs' profits to Treasury.
    • Previously: Fannie, Freddie gets upgrade by KBW on recap optimism (Oct. 9)



  24. Phil / AAPL – That's weird…. when I posted, your response was not up, but then when your post came up, it was prior to mine…. so I'm not sure how that happened….  maybe I posted at the same time you were….     But….

    Thank your for the feedback… I was actually looking for something with some ability to generate some income but was struggling with the short term short caller…   this one makes more sense I'll study this one….  ….  I do think by FY 2021 ( Cal year 2022) they will be at about  14.5 to 15 EPS so a 18 to 20 Multiple gets them to the 290 ISH range.



  25. OPEC, allies to mull deeper oil cut amid worries over demand growth




  26. AAPL/Batman – No worries.  Keep in mind I'm still gun-shy and expecting a market correction, so I lean towards more protective plays. 

    Speaking of corrections – so we now have one trade in our brand new Earnings Portfolio (see Morning Report above) and CMG is tonight but too dangerous for a small portfolio.  BA is tomorrow morning – that's scary enough!  

    IRBT took a pounding this year, back to $56.  That's just $1.5Bn and they are good for $85M/yr in earnings – so 20x.  We used to like them but bailed at $90 – and then they went up to $130 before finally falling apart.  As with most stocks – if you wait long enough – they go on sale again.

    IRBT spun out their military stuff so it's all consumer robots and they have a lot of competition now but business is still growing about 10% a year and would be doing better if not for trade war (most of their stuff is made in China and tariffed at 25%).  

    They are still in the tariff storm so I don't expect great things here but long-term they should recover so I do like the 2022s and we can play the following:

    • Buy 10 IRBT 2022 $50 calls for $19 ($19,000)
    • Sell 10 IRBT 2022 $65 calls for $13 ($13,000)

    That's a simply net $6,000 on the $15,000 spread so $9,000 (150%) of upside at $65 and we're $6,000 in the money to start.  If IRBT does well and pops, we're well on the way to a 150% gain in two years and, if it is flat or down, I have my eye on selling 5 of the 2022 $45 puts, now $10 ($5,000) to drop our net to $1,000 but 150% is very good money and $6,000 is not much to tie up and the margin on 5 short puts is $2,253 so we don't NEED to save the money so there's no sense taking a risk before we have more facts, is there?


  27. Damn, here's another one we have to play!  

    CLF is a long-time favorite to buy when they are cheap and they are cheap today.  You would think they are losing money as $7/share is less than $2Bn in market cap and they MADE $1.2Bn last year – but that was abnormal and this year they should make about $360M and next year $320M.  In Q1 they lost $22M and in Q2 they made $160M so not sure what Q3 will bring but I do know they are a good hold for the long-term so our goal on a trade is to actually own them long-term.

    For our Earnings Portfolio, let's:

    • Sell 10 CLF 2022 $7 puts for $2.40 ($2,400) 
    • Buy 20 CLF 2022 $5 calls for $3 ($6,000) 
    • Sell 20 CLF 2022 $10 calls for $1.40 ($2,800) 

    That's net $1,800 on the $10,000 spread so $8,200 (455%) upside potential is more like our normal LTP plays and we don't mind owning 1,000 shares of CLF at $7 ($7,000) plus whatever we lose on the spread if it heads lower but we'd like to keep that loss below $2 so we're in for net $9 at the worst (where we'd sell more $10 calls for $1.40 to drop back to net $7.60).  


  28. Here's that sell-off we were expecting.  Nas gave us a great early indication of weakness before!

    We'll see if 3,000 holds  and 7,900 on /NQ and 26,800 on /YM and 1,550 on /RTY – nothing wrong with a quick cash-out if they do and we can always go back in the laggard as they break below.



  29. Well that was a crappy finish.  As usual, Tuesday reverses Monday and we're back to where we left off on Friday for a "Which Way Wednesday?"  – why not just come in on Wednesdays and have a 3-day week (maybe just 2 as Friday not very important either).  The perils of a low-volume market…

    How an ‘astonishing’ decline in S&P 500 trading volume could pose risks for investors

    “The numbers are astonishing,” Tim Quast, president of market analytics firm ModernIR told MarketWatch. “One potential risk is that there will be a lack of buyers during times of stress and that the absence of liquidity will lead to fire sales.”

    These data dovetail with a recent report from Bank of America’s chief equity and quant strategist Savita Subramanian, who wrote that she worried that trading volume for large cap U.S. stocks is increasingly reliant on “non-fundamental investors,” including algorithmic investment funds, passive investment funds and high-frequency traders.

    “Banks no longer provide the same liquidity as [before the Great Financial Crisis]. The result is a bid-ask spread for the average S&P 500 stock that is close to a multi-year high,” she wrote. The bid-ask spread is the difference between the prices quoted for an immediate purchase (the bid) and the immediate sale (the ask) of an asset.

    One guy says it's a function of passive ETFs taking over but I'm dubious – we had a big sell-off last Q4 as there were simply no buyers to be found – that's very dangerous.


  30. SKX took a hit on earnings, down $4.

    Skechers (NYSE:SKX): Q3 Non-GAAP EPS of $0.71 beats by $0.02; GAAP EPS of $0.67 misses by $0.02.

    Revenue of $1.35B (+14.4% Y/Y) beats by $10M.

    Shares -12.4%.

    Press Release

    This is what I like about cashing out.  We make "too much" money and that means the valuations are probably stretched so we cash out all the stocks we love and then, after earnings, we buy back the ones that have gone on sale (if the fundies haven't changed) - that's a lot more sensible than just HOPING everything that has already gone up a lot goes up a lot more, right?

    In SKX's case, it's just a normal fluctuation, nothing wrong with the business.  


  31. TXN/Phil – Took a hit on earnings, down $12.  Top Trade from the end of September.


  32. TXN & CMG are looking really good.  IRBT not so much.


  33. Jeff Bezos’s Master Plan


  34. Blood guacamole: In Mexico, avocados bring income, cartels









  35. Comment content omitted because it is too long.


  36. Good morning!

    A bit of a sell-off as CAT had a miss and TXN disappointed and Brexit is up in the air again.  FB anti-trust probe is also spooking people.

    • A New York-led probe into allegations that Facebook (NASDAQ:FB) put consumer data at risk and pushed up advertising rates has expanded to include attorneys general from 47 U.S. states and territories, according to New York Attorney General Letitia James.
    • The news sent FB shares down almost 4% on Tuesday as U.S. antitrust chief Makan Delrahim announced Big Tech breakups are still on the table.
    • Facebook also faces probes by the DOJ and FTC, as well as the House of Representatives Judiciary Committee.
    • Brexit is set to be delayed for a third time after U.K. lawmakers accepted the principles of Boris Johnson's deal but rejected his timetable for implementing it by Oct. 31.
    • Reports in Britain now suggest that Downing Street will push for an election if Brexit is delayed until January – as indicated by European Council President Donald Tusk.
    • Sterling slid below $1.2850 on the news, but with the final outcome still up in the air, the decline was contained overnight.
    • The Federal Reserve could soon own 12% of the market for U.S. Treasury bills, according to Oxford Economics, as it attempts to prevent another cash crunch that sent short-term lending rates spiraling in September.
    • Today it owns less than 1%. Earlier this month the Fed announced it would buy $60B of Treasury bills each month until the end of the second quarter of next year.
    • Flaws in the design of Boeing's (NYSE:BA) 737 MAX and lack of information on how to deal with MCAS malfunctions contributed to last year's crash of Lion Air Flight 610, which killed 189 people, according to Indonesian investigators.
    • The findings could influence regulators worldwide as they assess the fate of the plane, which has been grounded globally since March 13, costing the company over $8B.
    • Boeing shuffled the ranks of top management on Tuesday, replacing the head of its jetliner business as it struggles to shore up confidence in its handling of the 737 MAX crisis.
    • Lockheed Martin (NYSE:LMT) will continue to generate more cash for dividends and stock buybacks even as sales growth likely will slow next year following surging sales of missiles, space systems and F-35 combat jets in 2019, CFO Ken Possenriede tells Dow Jones.
    • LMT expects to add $17B in orders this year to reach a record $140B backlog that stretches out further than in recent years, in part reflecting the big ramp-up in F-35 production, with deliveries set to climb to 140 in 2020 from 131 this year, the CFO says.
    • The company expects a final deal for the sale of more than 400 jets – which at $35B would comprise the largest-ever military contract – in the next couple of weeks, Possenriede says.
    • The CFO also says the outlook for the Sikorsky helicopter is improving, after weighing on the company in recent quarters because of a downturn in demand for commercial choppers.
    • The comments come after LMT closed flat in today's trade after reported better than expected Q3 earnings and raised its full-year guidance.
    • Semiconductor stocks are sliding in the postmarket session following a dim forecast from Texas Instruments (NASDAQ:TXN), which saw weakness in most markets in its Q3 report.
    • TXN is now down 9.5%.
    • Joining it in the doldrums are Maxim Integrated Products (NASDAQ:MXIM), -4.5%; Microchip Technology (NASDAQ:MCHP), -4%; ON Semiconductor (NASDAQ:ON), -4%; NXP Semiconductors (NASDAQ:NXPI), -3.5%; Nvidia (NASDAQ:NVDA), -2.3%; Applied Materials (NASDAQ:AMAT), -2.3%; and Cirrus Logic (NASDAQ:CRUS), -1%.
    • Broadcom (NASDAQ:AVGO) and Skyworks Solutions (NASDAQ:SWKS) have returned to the flat line in after-hours trading after earlier declines.

    TXN/Buckeye – That trade should be in good shape:

    September 26th, 2019 at 3:50 pm | (Unlocked) | Permalink 

    P/E for TXN is 23.5 at $120Bn at $128.50 – that's historically high for them.  They are pegged to make less money than they did last year but they are up 40% and earnings expectations for Q3 ($1.42) haven't come down since last Q even though chip prices have crashed.   Of course TI sold most of their DRAM biz to MU ages ago and 75% of their business is analog semiconductors now but revenues were down 9% last Q and will be down 9% (from last year) again this Q with no end in sight so $130 is silly for them.

    As a short on TXN, I'd go for:

    • Sell 3 TXN Jan $130 calls for $6.25 ($1,875) 
    • Buy 5 TXN Jan $140 puts for $14.50 ($7,250) 
    • Sell 5 TXN Jan $125 puts for $6 ($3,000) 

    That's net $2,375 on the $7,500 spread so $5,125 (215%) upside potential if TXN is below $125 into Jan.   Ordinary margin is $7,179 but hopefully short-term and a nice return either way.


  37. In that same comment I made the case for my friends at TCNNF:

    Also, we talked about Truelieve (TCNNF) who are still cheap at $8 (I liked them at $9.15 two weeks ago!).  They failed the falling 50 dma but Kim is speaking at a conference on the 2nd in NYC so this might be a good time.

    Check out the quarterly numbers:

    Revenue 6/30/2019 3/31/2019 12/31/2018 9/30/2018
    Total Revenue 57,920.112 44,475.965 35,945.457 28,325.604
    Cost of Revenue -45,868.393 4,364.181 2,199.512 -7,427.494
    Gross Profit 103,788.505 40,111.784 33,745.945 35,753.098
    Operating Expenses
    Research Development - - - -
    Selling General and Administrative 14,519.501 11,896.75 10,442.113 8,041.347
    Non Recurring - - - -
    Others - - - -
    Total Operating Expenses -29,509.002 17,721.768 13,131.875 914.115
    Operating Income or Loss 87,429.114 26,754.197 22,813.582 27,411.489
    Income from Continuing Operations
    Total Other Income/Expenses Net -2,185.865 -1,214.923 -652.441 -1,756.244
    Earnings Before Interest and Taxes 87,429.114 26,754.197 22,813.582 27,411.489
    Interest Expense -1,910.064 -1,225.961 -691.379 -372.936
    Income Before Tax 85,243.249 25,539.274 22,161.141 25,655.245
    Income Tax Expense 27,714.464 10,837 11,441.468 8,153.553
    Minority Interest - - - -
    Net Income From Continuing Ops 57,528.785 14,702.274 10,719.673 17,501.692

    $8/share is $883M – I'd buy the whole thing for that price!

    Back to $10 already for a nice 25% gain – not bad for boring stock play.  They did take off on Kim's conference comments – as expected.

    IRBT/Palotay – Ouch, down 17% to $44.34 pre-market.

    IRobot Corp. IRBT, -3.07% shares plunged more than 16% in the extended session Tuesday after it beat earnings and revenue expectations but lowered its holiday quarter guidance, citing U.S. tariffs on robotic vacuum cleaners, among other issues. The robot vacuum maker reported fourth-quarter net income of $35.5 million, or $1.24 a share, compared with $31.9 million, or $1.12 a share, in the year-ago period. Revenue rose to $289.4 million from $264.5 million in the year-ago period. Analysts surveyed by FactSet had estimated earnings of 52 cents a share on revenue of $259.4 million. For the fourth quarter, analysts model earnings of $1.03 a share on sales of $444 million. IRobot lowered its full-year guidance to earnings of $2.60 to $2.80 a share on sales of $1.2 billion to $1.21 billion. Previously iRobot had expected full-year earnings of $2.40 to $3.15 a share on sales of $1.2 billion to $1.25 billion. In a statement, iRobot Chief Executive Colin Angle said it lowered guidance because of marketing conditions and the company's plans, which include several strategies to moderate the impact of U.S. tariffs on robotic vacuum cleaners. IRobot stock has fallen 36% this year, with the S&P 500 index SPX, -0.36% rising 20%.

    Of course, that's why we didn't sell puts – we thought they might be hit by tariffs.  I think this is a bit of an over-reaction since guidance is still $2.60+ so 15x is $39 so I'd call $40 a dead floor and revenues are up so it's not like the company is in decline, any move towards $3 in earnings can put them back at $60 quickly.

    So our move now is to sell 5 puts for $10 and roll the 2022 $50 calls down to the $40 calls for less than $5 so no net additional cost and we have the 2022 $40/65 bull call spread – which is right in our new target range.


  38. bonifide ten million barrel draw on oil report unexpected