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Which Way Wednesday?

ImageEarnings are now a mixed bag.  

75 S&P companies have reported so far and 43% (32) have beaten expectations and the ones that have missed have been hit with average 3.9% drops vs the historic 2.4% so not much tolerance for failing to hit those expectations while the ones that beat have only gone up 1.6% – indicating that good news is mainly priced into the current prices.  The Banksters have led us so far – now we have to see if Tech, Industrials, Consumer Goods, Energy and Services can hold up.  

Caterpillar (CAT) is often regarded as a good proxy for the Global Economy and they just reported earnings that are down 8% from last year on 6% lower revenues AND they lowered their guidance to the $10.90-11.40 range, which is not bad for their $133 shares, which are already 20% down from last year's highs.

Image

We like CAT but we'd like them a lot more around $110.  Yesterday, we initiated a new, $100,000 Earnings Portfolio to give us something to do while we wait for a proper correction.  As noted in yesterday's Morning Report, we went with Boing (BA) as our first official play and we added IRobot (IRBT) and Cliffs (CLF) as the day progressed:

Though BA didn't have much encouraging to say this morning, the lack of additional negatives has pushed the stock back to $350 so we're on our way to goal on that one already, which could net us a nice $13,250 (122%) profit at that level.  CLF beat by a mile at 0.33 vs 0.24 expected and, keep in mind, that's just one quarter on a $7 stock – so silly!  Our main premise there is a China deal will really get them going.  

Unfortunately, we didn't win them all and IRBT was a big disappointment as tariffs are hurting them badly.  We did think that was a possibility, which is why we did not sell puts initially but now we will sell 5 of the 2022 $35 puts for $10 ($5,000) and then spend $5 ($5,000) or less to roll the 2022 $45 calls down to the 2022 $35 calls which will widen our spread to a potential $25,000 on the same $5,750 net cash investment.  

IRBT lowered their guidance to a $2.60-2.80 range from $2.40-$3.15, so about 5% lower so a 20% drop is a bit of an over-reaction – especially since there is no indication of product issues – simply Trump's tariffs taking a bite out of profits – certainly not a reason to dump the stock for the long haul.  IRBT was our Stock of the Century at $10 back in 2009 but we took $100 and ran earlier this year as we were not happy that they sold off their military division.  Now that it's back below $50, we're happy to get back on board!  

Our Stock of this Decade, by the way, was Taser (TASR), now (AAXN) and they went from $5 to $50, which was our 10-bagger goal, so we moved on from them as well and we haven't officially announced it yet but Lockheed Martin (LMT) is our Stock of the 2020s, though we are hoping for a pullback to give us a chance to get on closer to $300.  

Not in our Earnings Portfolio is a Top Trade we made on September 26th on Texas Instruments (TXN), who just announced disappointing earnings – just as we expected.  Our trade idea was:

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.

As you can see on the chart, we got a bigger dip than we expected and TXN is already below $120 and that means our bearish spread should come in in the money for the full $7,500 while the short $130 calls will expire worthless.  That's a fantastic 215% profit in just 90 days!

Earnings plays are a fun thing to do when we have a lot of cash on the sidelines.  Usually we don't like to be short-term gamblers – but it's very boring waiting for a nice correction so we can re-deploy our CASH!!!  May as well make a little more while we wait…

 


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  1. Good morning!


  2. All these deep state people waited all these years (some close to 40 years) to finally come out and take down a man of the people like Trump who is fighting tooth and nail for the middle class against the wealthy elites.


  3. I heard it's more accurate than many mutual funds managers:

    https://www.theverge.com/2019/10/22/20927640/mschf-stocks-astrology-zardulu-prank-jesus-shoes-netflix

    Astrology is real, and it’s strong and it’s our friend. As in Morrowind, the stars you were born under govern every aspect of your life. And now you can apply those celestial insights to that most dignified form of Russian roulette: stock picking!

    Bull and Moon is an app from the professional pranksters behind MSCHF — yes, it’s stylized like a mid-aughts synth band, and yes, it does say “mischief,” and yes, it really is a creative agency — and it’s their latest effort to Zardulu the good, unsuspecting people of the world.

    The app takes design cues from Co—Star and The Pattern; it’s blue and gold, with the cool minimalist lines that denote au courant taste. It’s very simple to use: after you download Bull and Moon, all you do is input your first name, your date of birth, and your investing experience, and the app will give you personalized stocks.



  4. Good morning, All!

    Join Phil LIVE today at 1pm, here:

    https://attendee.gotowebinar.com/register/5484045543364008971







  5. Good Morning!




  6. big net draw on eia weekly report


  7. Good morning! 

    Watching Zuckerberg testify – crazy stuff.

    BitCoin down 9% as it seems Congress won't be able to stop Libra.

    The Dollar won't do much better if this thing catches on.

    Big Chart – M patterns not broken yet – if we start curling over, it's a long way back to those middle legs.

    Astrology and Deep State, StJ – what are you drinking this morning?

    Oil/Tommy – Huge pop off that report:

    • EIA Petroleum Inventories: Crude -1.7M barrels vs. +2.2M consensus, +9.3M last week.
    • Gasoline -3.1M barrels vs. -2.3M consensus, -2.6M last week.
    • Distillates -2.7M barrels vs. -2.8M consensus, -3.8M last week.
    • Futures +0.07% to $54.52.

    $1.60 held again(ish) on /RB

    And $2.25 on /NG

    Now someone is asking Zuckerberg about vaccines?  


  8. Copper blasting higher – must be some trade progress.

    API was off by a mile, by the way – which is why we don't pay much attention to it:

    Investing.com – Oil prices traded lower on Wednesday in Asia after data from the American Petroleum Institute (API) showed that U.S. crude stockpiles rose last week.

    U.S. Crude Oil WTI Futures lost 0.8% to $54.07 by 12:38 AM ET (04:38 GMT). International Brent Oil Futures were down 0.5% to $59.43.

    Crude inventories rose by 4.5 million for the week ended Oct. 18, the API said.

    The Energy Information Administration (EIA)’s weekly report is due tomorrow. Analysts expect the EIA to report a build of 2.23 million barrels.


  9. IRBT bounced fast so, officially, in the Earnings Portfolio, we're selling 5 of the 2022 $40 puts for $9 ($4,500).


  10. Phil, now that IBM has settled down, what do ya think?


  11. Phil can explain what you plan to do with the earnings trades?  I think of earnings trades as binary events that you close following the announcement after the vol crush.  Are you planning to maintain this portfolio into 2020?  Thanks


  12. Drinking / Phil – We all need some strong stuff to get us through these days! And forgot to use the sarcam fonts :-)


  13. VLO 2022 70/100 bull call spread $24 dollars in the money for $15.55


  14. IBM/JMD – $135 is $119Bn and, so far this year, IBM has made $1.6Bn + $2.5Bn + $1.7Bn = $5.8Bn and last Q4 they made $2Bn so on track for $8Bn(ish) vs $8.7Bn last year.  They are probably a year behind schedule on their turnaround – buying RHT did not help in that respect but it's a good move for the long-term.  I like them as a long-term play but $110 would not surprise me if the markets get softer and $150 would not surprise me either.

    Still, there are good ways to play a +/-10% channel.  Last year IBM was $150, bottoming out at $102 in Dec but that was clearly silly with $13.80 in earnings/share.  This year, they topped out at $151 and did not go below $125 once they recovered from Dec with $12.80 in probable earnings.  Given that earnings are far more likely to go up in the next 2 years than down – I'd say $150 is very realistic so you can:

    • Sell 5 IBM 2022 $120 puts for $15 ($7,500)
    • Buy 10 IBM 2022 $125 calls for $17 ($17,000)
    • Sell 10 IBM 2022 $150 calls for $8 ($8,000) 

    That's net $1,500 on the $25,000 spread that's $8,000 in the money to start.  When IBM is back at $145, you can sell something like 3 Jan 150s, now 0.30 for $3.60 (the price of the $135s) which is $1,080 so 8 sales like that adds $9,000 on top of the potential $23,500 (1,566%) to gain at $150 – that's a very nice way to play.  

    Earnings Portfolio/Options – Ah, I wish I had my life that well-planned!   I think if a trade does very well and I don't see the point in keeping it longer – I'll cash it in but, if we are "forced" to adjust something like IRBT, which can still make $19,000 (316%) on $6,000 tied up – what better am I going to do with $6,000?

    BA is up net $1,000 so far just $5 from goal at net $12,000 but it's a $25,000 spread so should I be happy with the $1,000 gain on $11,000 or wait for the additional 108% gain on $12,000?  We still have $86,900 in cash and only used $13,100 of our $200,000 in buying power so it's not like holding these will cripple us, right?

    So, so far, I like BA enough to hold and I like IRBT enough to hold and we'll see what happens to CLF.

    VLO/JMD – Damn, they really took off.  Another one off the Watch List:

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

    VLO is one we like to play when they are cheap and either oil prices are going lower (good for them) or gasoline prices are going higher (good for them) so $84.24 is $35Bn and they make $2Bn in a bad year and $3.5Bn in a good year so p/e between 10 and 17 – depending which way the wind blows. 

    Good for OIH too:


  15. bitcoin is down because of this quantum computing article.

    Bitcoin not down on "Libra." Libra is not a cryptocurrency. It's simply a fiat currency aggregator. It relies on  a "basket of currencies" for its value and stability. There is no point to developing a new system of trust (hashchain, peer-based system) and attaching it to a deprecated system of trust (centralized law-based fiat currency). That would be like building a car and having it pulled by horses.

    Quantum computing actually threatens bitcoin (and the entirety of our password based authentication systems, for that matter), whereas Libra does not.


  16. Quantum / BDC – Maybe Google will start mining coins with their quantum computer and add that to their bottom line! At which point of course, bitcoin might be trading below $1…


  17. Passwords/BDC – True but that's old news.  We all knew about Google a month ago – they are just recycling the story with more details now.  Also, we all new about quantum computing years ago – which is why cryptocurrencies were doomed from day one.  

    Webinar time!


  18. These ping-pong volleys between Phil and BDC on crypto are entertaining, not to mention educational. Thanks, guys.


  19. Is Phil on in the seminar?


  20. Phil got forced into a Windows update because he went to restart his computer.

    Webinar should be starting soon. Sorry for the delay.


  21. Sorry guys, Windows is forcing a restart of the Webinar computer.  Hopefully back up in 10 mins.

    Ping pong/Snow – We have pretty different outlooks on crypto, that's for sure!


  22. CMG beat estimates by the way – still not good enough to justify $850!

    Chipotle Mexican Grill, Inc. CMG reported third-quarter 2019 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate. While the bottom line beat the consensus estimates for the eighth straight quarter, the top line came ahead of the same for the fourth consecutive quarter.

    Despite reporting better-than-expected results, the company’s shares declined 2.1% in after-hour trading session on Oct 22 owing to concerns regarding rise in delivery costs.

    The company’s adjusted earnings of $3.82 per share surpassed the Zacks Consensus Estimate of $3.20. The bottom line also improved 76.9% from the year-ago quarter, driven by increased revenues and strong operating margins.

    Chipotle’s increased focus on augmenting customer experience by introducing food-safety programs, various sales-building initiatives and greater digital innovation resulted in revenue growth in the third quarter.

    Revenues & Comparable Restaurant Sales

    Quarterly revenues of $1.4 billion surpassed the consensus estimates by 1.8% and improved 14.6% year over year. This upside is primarily attributable to improvement in comps and restaurant openings. In the quarter under review, Chipotle opened 25 restaurants and closed one, taking the total restaurant count to 2,546.

    Comps in the third quarter rose 11%, driven by a rise of 7.5% in comparable restaurant transactions and an increase of 3.5% in average check.

    Costs, Operating Highlights & Net Income

    Food, beverage and packaging costs, as a percentage of revenues, decreased 20 basis points (bps) to 33.2% due to benefit of menu price increases, marginally negated by higher costs of ingredients.

    Restaurant-level operating margin was 20.8%, up 210 bps from 18.7% in the year-ago quarter. This upside was primarily driven by comps growth, partially offset by wage inflation, increased food costs, and marketing and delivery expenses.

    Net income in the reported quarter amounted to $98.6 million, up from $38.2 million in the prior-year quarter.

    Balance Sheet

    Cash and cash equivalents as of Sep 30, 2019, were $386.6 million compared with $250 million as of Dec 31, 2018.

    Inventory totaled $23.9 million as of Sep 30, 2019, down from $21.6 million as of Dec 31, 2018. Goodwill, as a percentage of total assets, was 0.4% at the end of the third quarter compared with 1% at the end of 2018.

    2019 Outlook

    For 2019, management expects comps to grow in a high-single digit. The company estimates effective tax rate between 26% and 29%. It still expects to inaugurate 140-155 restaurants in 2019.


  23. Phil/BDC/crypto

    sadly the bottom 99% of us got fucked up because of the difference in the outlooks….but the risk of losing 100% in this is well known.

    regards


  24. CMG close out – finally! I used this pull-back opportunity to close out the short calls that were protecting a raft of Bull Call Spreads that were added to 20 short calls back in January 2019 (10 months ago) that were meant to 'die on the vine' but ended up biting me in the proverbial backside. So effectively 10 months digging myself out of a hole – what a learning experience after all these years!

    The genesis of the whole affair was my parsimonious self refusing to spend a couple of $k on buying back naked short calls on CMG (why be the sucker who buys premium?) 

    Lesson 1: naked short calls on momentum stocks carry high risk (in the vernacular they have the capacity to rip your face off). CMG is a momentum stock that caught many people offside. 

    Lesson 2: Rolling short calls can be a long, long journey. Even though you are gaining more room on the upside by rolling, you are increasing your tab with the devil. If you cannot defeat your caller, then they turn into the Grim Reaper – so cashing out short calls after a series of rolls is an expensive business (the unrealized contract cost increases every time). To sell short calls is to assume the responsibility of seeing it through to the end, or (see next Lesson):

    Lesson 3: Better to bail on short calls early rather than late – particularly if you are not going to last the journey. It's a lot cheaper. As the man said: "Sooner or late, everyone sits down to a banquet of consequences".

    Lesson 4: The antidote to rolling short callers is to layer on bull call spreads. Don't underestimate the number of contracts that need to be added and the capital and margin this will consume. That was one of Phil's big worries on adding more long spreads to the original CMG position in the LTP. You end up unwillingly with a large position in a stock you would rather not have.

    Lesson 5: Yodi points it out often; a deep InTheMoney BCS means that the long call and the short call have almost the same Delta. So even as the underlying motors upwards, your shorter term short calls sold against the BCS are increasing faster than the net of the BCS.

    In conclusion, although I left more money on the table than I would have liked (due to the delta compression of the LEAP Bull Call spreads) – I'm glad I got out of most of my CMG positions 14 months before expiration.

    I want to thank Phil for his indulgence on answering all my questions regarding rolls and accounting for managing the short calls. I was a pain in the ass, but I was dealing with real 'moolah' and real skin in the game. It tested my emotional fortitude and I'm gIad to say I scored an A+ in that category. I came through it nevertheless with a significant profit – and a fast track education that was priceless.

    Know your risk capacity, adjust position size accordingly, and manage appropriately.

    And of course, the winds of fortune sometimes blow hard against us.


  25. Ilene – give Winston a color; he's arrived!


  26. Snow; thanks, but Phil considers me a maverick and not for the mainstream audience just yet.


  27. That was a good Webinar – worth listening to.  

    I like selling the LB (I know!) 2022 $15 puts for $4.20, 10 in a $500,000 portfolio for a quick $4,200 while we wait to see how they did.   Worst case is netting in for $10.80 and you can sell the 2022 $17.50 calls for $4.50 so even if you only get $3 for the $10s, that drops your net to $7.80 on 1,000 shares so more than a 50% discount is your worst case!  

    F'd/Pat – Well, I think I've been very consistent telling people crypto was a joke and not a real investment.  It's called Phil's Stock World for a reason, not BDC's Stock World!  cool

    Maverick/Winston – Great notes on CMG and congrats on a hard-fought win.  While I don't mind differing opinions on strategies and such, I am very careful about giving people a color as Pat (for example) tends to give their comments a lot of weight and may follow trades or strategies I actually disagree with.  BDC is generally great regarding alt energy and such but is way too evangelical regarding crypto – IMHO.  

    CMG failed to take $800 back!


  28. Winston – thanks for the summary, I always appreciate your comments.


  29. Winston/CMG Your comments are appreciated. More and more I find myself turning Phils longer term Leap positions into shorter term butterflies to make more short term income. Making some short term profits and if all goes well leap spread makes money longer term. When I  "cherry pick' too aggressively (sorry Yodi) I follow Phil's hedge the hedge philosophy and will sell shot term weekly or monthly vertical put spreads. In your case I would sell vertical put spreads which would be protected by the in the money short calls (which are protected by the longer term bull call spread.  Some similar concepts to "layering" spreads for income. Biggest potential problem unraveling position fast. Anyone else do this? Thanks


  30. ~~Phil/Crypto,

    This was all about that GreenCoin. It was not the color of the post but was more based on the plan you and BDC had to take it forward. I believe in your plans and outlook but this one did not work out as planned. Anyways it is crypto…need to be lucky for that.

    regards


  31. Phil ;

    The TXN short strangle was a beautiful operation in a time when markets are ….well, like you frequently says, overbought, shaky, dangerous, etc.

    Let´s do more like!


  32. Bynd is below 100. Might be time to climb on the train again!


  33. TSLA is tomorrow – the Hedge Fund is playing short Jan $300 calls ($6.90) and short Jan $220 puts ($5.75) so winning range is $207.35 to $312.65 – hopefully that's wide enough!  

    TXN/Advill – For me to call a play like that, I have to also hear news that drives a call I am already leaning towards.  I forget what it was but that day, I heard something about semis that made me look up TXN and decide it was a good time to short them.  The real key to being successful at making earnings trades is NOT making 99% of the trades you look at.

    BYND/Pirate – Only $6Bn now?  $250M in sales, $40M in losses – where do I sign up???  devil  Come on, you know better!  To justify $6Bn they have to make $300M and they are not even there on revenues.  Assuming they can drop 20% to the bottom line, they need $1.5Bn in sales – 6x where they are now and, even with the IPO money, they are only up 100% a year so, even assuming they could keep that up – it's 2023 before they hit $1.5Bn.  

    Total Beef Market is about $70Bn so $1.5Bn seems doable – just 2%.  I'm hearing about 10-15% of burger sales are Beyond/Impossible now but they are not replacing steak – just burgers (so far) so let's say burgers are 25% of beef market so $17.5Bn and now we need Beyond to be 10% of the burger market – still doable – just not EASY.

    U.S. beef market

    Keep in mind, that's just to justify the $100 price tag – from there they have to grow.  $25 was the IPO price and they went for $50 that day and THAT is a realistic range – not this.


  34. Big pump job into the close – crazy stuff.


  35. Phil-of course your right and enviably rational. However, I don't think this market is rational and I had such fun for years playing the TSLA yo-yo and making great money sitting in the Carribean looking at the waves rolling in. I played those calls and bought back the shorts when I had to and made quick easy money. I know the value is not there, but it sure hasn't been for tons of other stocks either that are nose bleed high IMHO>


  36. TSLA is reporting today It looks like – 4:50 PM EST. Options are pricing a $20 move either way or 8%. Looks like you should be OK Phil!


  37. I don't know this doesn't affect the experience and lead to a downward spiral:

    The Financial Times reported Wednesday that WeWork could lay off as many as 4,000 people, or about 30% of its global workforce, with 1,000 of the cuts being made to its janitorial staff. Representatives from WeWork weren’t immediately available for comment.


  38. Can't wait to hear what rabbit Elon is going to pull out of the hat! It's just hilarious much like the political stage where the 3, 5 Stooges? are always on stage!


  39. And MSFT beats… 

    Remember me?

    Image result for steve ballmer microsoft


  40. And F beats but lowers guidance:

    The change in guidance was attributed to higher than expected warranty costs and incentive spending as well as weakening sales in China, according to the company.

    Trade wars are easy!





  41. If this isn’t impeachable, nothing is


  42. Thanks deano & JMD. Interesting JMD, I'm spending a lot more time looking at shorter term plays and especially butterflies (standard and broken wing). Selling ATM monthly straddles with a long put (one strike lower than the strangle), as well as credit spreads and Iron Condors where there is premium to be had.

    Also 3 month to expiration BCS, with a cherry call kicker 1 or 2 strikes above the short call. Add in a short put and you can often get a zero (or close to zero cost trade). If the extra short call strike is touched, then cash out the long BCS, add another one for the next 3 month period and roll the cherry call up and out. 

    You may be interested in the Road Trip Trade – food for thought. 


  43. TSLA up $30 at $285 but very hard to believe headline earnings of $1.86.  

    Not going to sleep well tonight as it’s uncomfortably close to $300.   Of course we can roll out but I was hoping it would be one and done.      

    $290!




  44. Only 7(!) Republican senators are ruling out removing Donald Trump




  45. TSLA  touching $300 in aftermarket!


  46. So much for option pricing on TSLA! Up almost 20%.


  47. Tried to short at 305 after hours and order got cancelled 

    Maybe it does what NFLX did

    Fade it??


  48. The Vaping Overreaction


  49. AAPL/Phil
    I'm very to to all this. This question is about selling/rolling covered calls. The question I
    have now is how to decide what to do with the two short AAPL calls I have. I
    realize the stakes are tiny, but I'm very interested in learning.

    I own 200 shares AAPL. In addition, I have sold some puts and calls:

    #Contracts Ticker Expiration    Strike  Type    Price  Income   Recent price

    -1         AAPL   Yr 2019, Dec  $210   call @ $8.16    $816      $34.65
    -1         AAPL   Yr 2020, Jan  $225    call @ $10.12   $1,012   $23.00
    -1         AAPL   Yr 2020, Jan  $200    put  @ $5.84    $584      $1.48
    -1         AAPL   Yr 2021, Jun  $165    put  @ $12.30  $1,230   $7.50

    I think I can let the puts expire, but I'm not sure what to do about the
    calls. I saw the Q&A with Batman yesterday about AAPL, and it reminded me about
    my AAPL question.
    Thanks.


  50. I'm very *NEW* to all this.  :-)


  51. Winston – Deep InTheMoney BCS

    Consider rolling your deep in the money BCS to a butterfly at the same expiration.

    Keep your long call

    Determine the 2x strike that covers your short call position, add a new long call at the strike that is the difference between your long call and your new 2x strike added to your 2x strike

    Roll the short calls to the 2x position

    You will find the butterfly pays a lot more and doesn't go negative


  52. Edro, can you explain why they don't go negative?  


  53. euro00

    Can you provide an example/illustration?


  54. I will continue this discussion tomorrow, perhaps someone has a deep in the money 2021 BCS they would like to improve, I'll try to use it as an example.


  55. edro00 / thanks for a thought provoking idea. I'll go first with my understanding on a current trade I am in:

    AAPL Jun 2021 $180 long call ($72) / $220 short call ($44).

    The 2x short calls equivalent to the 1x $220 short call is the strike that is at $44/2 = $21 = Jun 2021 short $270 call (all numbers are rounded to keep the maths simpler).

    The current long is at $180, the midpoint of the new Butterfly is at $270. so the upper short strike must be at $360 so there is $90 distance between the long calls ($180 & $360) and the short strike of $270. The final position is a 1x $180 / 2x $270 / 1x $360.

    There is no $360 strike available so we have to buy the $350 strike.

    The modifications cost the following:

    $220 short call rolls to the $270 short call for a DEBIT of ($24)

    Sell an additional 1x $270 short call for a CREDIT of $22

    Buy a new 1x long $350 call for a DEBIT of $4

    Net cost $6 to end up in a 180/270/350 long call butterfly

    According to TOS prices at market close 10/23/2019 for 10 contracts of this butterfly – I'll look at if this position was placed as a NEW trade – we have:

    Cost $33k

    Max loss $33k – this is a debit spread so max loss is always what you paid for the spread

    Max profit $57k

    Break even stock prices $213 / $326

    Net Effect of the adjustment of a deep ITM BCS ($180 / $220)  to a balanced Butterfly ($180 / $270 / $350:

    1. Move from a $40 wide long spread to a $90 wide spread + an OTM  $80 wide short spread

    2. Max profit goes from $40k for the BCS versus $57k for the Butterfly.

    3. The original $180 / $220 long spread cost me $20. So a max loss of $20k for the BCS versus $33k for the Butterfly

    4. Max loss kicks in if AAPL is below $180 on June 2021.

    That makes for a nice comparison. Thanks for the idea edro00. 



  56. Tesla turns a profit



  57. Trump and his defenders are inventing the reality they want