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Trade Off Thursday – Words Speak Louder than Actions

Image result for trump trade football charlie brown"And now there's no trade deal – again.

Keep in mind that, a month ago, we were told the deal was ready to sign and it amazes me that, almost every day, the Financial Media carries articles that say "President Trump Says Great Progress Being Made" as that's like running headlines saying "Boy Who Cried "Wolf" Says There's a Wolf".  Are we seriously that dumb?  Apparently, you can fool some of the people ALL of the time because someone is that dumb and the market rallies EVERY SINGLE TIME on the same news it rallied about last time

Remember, all Trump even promised was a LIMITED deal, a part one of 5 or whatever because there was no way they could even pretend to be close on an overall deal.  In fact, 100 Economists polled by Reuters don't expect a real trade truce until 2021 - let alone next week.  While the median probability of a Recession for the coming year fell to 25% from 35% last month, the Economic Growth outlook remained modest. 

Image result for economic forecast cartoon"Over 80% of 52 respondents to an additional question said the Fed had done enough to delay the next recession but that already-modest growth forecasts were largely left unchanged.  "I think in terms of the risks, they are probably still tilted towards the Fed maybe cutting rates once more at some point in the coming months if growth slows further, certainly if there is some renewed breakdown in trade talks," said Andrew Hunter, senior U.S. economist at Capital Economics.  "But barring that, it does look like they have done enough to avert a recession. In our baseline forecast, there is growth slowing a little bit further over the next couple of quarters but starting to recover next year."

I gave my own Economic Forecast last night on Money Talk, embracing the uncertainty:

As you can see, the NYSE has indeed been drifting along under the 13,500 line for two years after breaching it early in 2018.  The NYSE is the broader-market index and is less influenced by a few high-flying stocks and gives us a much more realistic view of real market performance than the more selected (and curated) indexes.  After all, don't forget that, in the last 5 years, the Dow kicked out AA, BAC, HP, T and GE and replaced them with GS, NKE, V, AAPL and WBA.   Apple alone, since joining the Dow in 2015, has gained $145 and at 8.5 Dow points per Dollar – that's 1,232.5 added to the Dow by AAPL alone (vs T, who are up $6 over the same period).

The same thing happens in the S&P, the Nasdaq and the Russell all the time as they frequently re-balance by tossing out underperformers for whatever is new and hot.  Of course, that's what you should do with your portfolio and it makes a good case for using index funds but the main point is – it DOES NOT tell you the "health" of the economy – the indexes are a measure of how top-performing stocks are doing – nothing more.

In my next segment on Money Talk, I discussed the value plays we did like for our new Money Talk Portfolio:

Officially (as previewed in yesterday's Morning Report), our first 3 trade ideas for the new Money Talk Portfolio are:

  • Sell 4 IBM 2022 $135 puts for $20 ($8,000) 
  • Buy 8 IBM 2022 $120 calls for $23 ($18,400) 
  • Sell 8 IBM 2022 $140 calls for $12 ($9,600) 

IBM is down a bit this morning so it shold be easy to fill.  

  • Sell 10 SPWR 2022 $8 puts for $3 ($3,000) 

SPWR is also lower, so should be easy to fill.

  • Sell 15 GOLD 2022 $17 puts for $3.50 ($5,250) 
  • Buy 30 GOLD 2022 $13 calls for $5 ($15,000) 
  • Sell 30 GOLD 2022 $17 calls for $3 ($9,000) 

GOLD is up a bit but the spread should be the same net $2 ($5.35/$3.33 was the last on each) and you can wait for a dip on the put sale or just sell 5 at $3+ and see what happens.  If you never get the fill, then the spread is in the money and your net would be $4,500 on the $12,000 spread and that's still $7,500 (166%) upside for a spread that was never in danger.  Any time it goes lower over the next 2 years you can sell the puts – so no reason to take less than our target.

See, trading isn't hard, is it?  That's why we gained 148% in two years in the prior Money Talk Portfolio – we take lots of small plays that have big pay-offs.  The Dividend Portfolio, on the other hand, is like pulling teeth.  It's only designed to make about 15-20% a year and it's right on track up 3.2% in the first month but YAWN!!! 

Of course, INVESTING is not supposed to be Gambling, is it?  This is the sort of thing you should be doing with the bulk of your money – INVESTING in nice, safe, steady, dividend-paying stocks that will SLOWLY but surely, build your wealth over time.  We're only using $17,500 in margin at the moment so, over time, we'll likely double the number of positions and goose our returns but, for now, this will do just fine – though I very much doubt we'll average 3% a month – we just happened to make good picks to start.  

And that is what it's all about – stock picking.  In any kind of market environment, there are stocks that are likely to perform well going forward but it takes a lot of hard work and even more PATIENCE to identify them AND make a good entry.  That's why we have our Watch List – which we went over in yesterday's Live Trading Webinar (replay here). 

 


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  1. Good morning, All!

    Webinar replay is up!

    https://youtu.be/0KfE7w3WoXA



  2. Trade / Phil – I think that all these market gyrations around trade talks are further proof that most moves are now bot driven. They train these bots around newsfeed, Twitter feeds and so on and to look for keywords that have an impact on the market. I can't believe that traders are so dumb not to realize by now that none of that trade talk is real… But bots can't read the psychological profile of the writer (yet).


  3. With Trump, there is always a tweet that didn't age well:


  4. The latest talking points shut down:

    Image


  5. Good article about value investing. Do we need to look at numbers differently:

    https://www.institutionalinvestor.com/article/b1j0mvcy9792vt/Why-Value-Investing-Sucks

    “A lot of people think the stock market is expensive today because of the PE multiples,” says Brad Neuman, senior vice president and director of market strategy at growth investment firm Alger. Wrong, he says. “The stock market is actually cheap on a price-to-cash-flow basis.”
    Neuman argues that the traditional ways investors classify which stocks are cheap and which are expensive have become “dramatically skewed” as business practices have outpaced U.S. accounting standards.

    “There’s been a dramatic change over the past several decades in how companies invest,” he explains. “Historically, when companies invested, most of their assets were tangible assets. Today companies invest in more intangible assets.” These intangible assets — patents or intellectual property, for example — aren’t accounted for in the same way that tangible assets are. “They’re expensed, not capitalized, which means they don’t show up in book value,” Neuman notes.

    This inherent flaw in book value — and, relatedly, earnings — has lately been attracting a lot of notice in finance and academic circles, as investors and market observers have attempted to figure out why value investing strategies haven’t been working.

    Bernstein analyst Inigo Fraser-Jenkins and his colleagues in June flagged the increasing importance of intangible assets as one of several structural challenges facing value investors, arguing that the usefulness of book value and earnings as value indicators has become “questionable.”

    On the other hand, I recall a lot of similar comment in 1999!





  6. Why we fall for cons



  7. Good Morning!


  8. Is CSCO sell off opportunity to set up BCS?


  9. Csco even buying the stock is not a bad deal but better start with selling puts on top they pay 3.12%

    Buy the stock and sell the Jan 21 43put for 4.35 and wait to sell the call.


  10. Same with DUK buy the stock and sell the Jan 22 75 put @ 5.70 wait with the call


  11. Hi Phil,

    Since LABU took off, at what price would you look at it again? $35 or lower? Thanks…


  12. Phil: IRBT

    Someone bought and sold (my assumption) 2022 $70 calls and puts (97 each).  I thought that was interesting.  



  13. 10 Thursday AM Reads



  14. Good morning!

    Still waiting for the NYSE to break over 13,500 on the Big Chart or at least 13,340 (5% line).

    Bots/StJ – Way too much faith being put in those things far too early.  Good tweet – I popped it into the post.  

    Book value/StJ – Sorry, I do care about cash-flow and income/share and p/e but I'm not going to start attributing IP etc. to valuation models – they aren't worth anything if they don't lead to earnings are they?  They factor in M&A but, if you are a market investor – you should look for companies that actually make profits for you.  NFLX is a good example, they have tons of IP they could buy $1Tn worth of old movies but what good does that do you if no one wants to watch them?  On the other hand, if they can depreciate them and pay no taxes for 20 years – that's something worth considering in your long-term value.  

    CSCO/Millard – The Watch List is not a Pounce List – I prefer to let things show us a bottom first. 

    Image result for cat pouncing animated gif"

    DUK/Yodi – They are nice and steady but not cheap at $90.  Earnings are $3.5Bn now, were $3Bn in 2017 so not much growth but not none either.  Range has been $75 to $95 so I'd want to be closer to $75 – even for the purpose of selling a put.  $88.50 is $64.5Bn so p/e 18.4 is a bit more than the normal 15 for utility companies and, of course, there's the PCG problem…

    Not that DUK is likely to face the same issues in the SouthEast but all our infrastructure is very old and things are going to break – hopefully not one of DUK's 11 nuclear plants!   They still provide about 50% of the energy for DUK customers but all their new efforts are renewables and Gas these days (which the US has plenty of) - so I do like them over the long-haul though emissions regulation could affect their expansion plans for /NG.  Also, they may not be given 14 years to still have coal plants under a Dem Administration.

    Image result for duke energy composition"

    LABU/Sun – Actually I'd go in if they get over $40 and hold it for a week.  LABU is only a 3x tracking (kind of) XBI so you are better off watching XBI's resistance zones to get a handle on LABU but LABU is also 1/10th the size (asset-wise) of XBI, which is why you're not getting the advertised replication accuracy.  

    XBI is very diversified with the top 10 just 20% of the total assets:

    Name (p/e) Symbol % Assets
    Seattle Genetics Inc (-)  SGEN 2.48%
    Arrowhead Pharmaceuticals Inc (98)  ARWR 2.18%
    Biogen Inc (28) BIIB 2.05%
    AbbVie Inc (40)  ABBV 1.84%
    Ligand Pharmaceuticals Inc (28) LGND 1.82%
    United Therapeutics Corp (-)  UTHR 1.81%
    Vertex Pharmaceuticals Inc (25)  VRTX 1.80%
    Incyte Corp (46)  INCY 1.79%
    Mirati Therapeutics Inc (-) MRTX 1.79%
    The Medicines Co (-)  MDCO 1.79%

    So not one p/e under 20 which is why we played CELG in the last down cycle and not LABU.  I want to see the whole sector out of favor before I decide to pick up a basket play (like OIH) rather than go through the list and find my own individual gems.  

    Even with this pop, by the way, CELG's p/e is now $14 so you can ignore EARNINGS all you want but I'll stick with my antiquated notions that I'd rather buy companies that ACTUALLY MAKE A PROFIT and, if they have growth potential – so much the better – but I won't trade one for the other unless the potential is spectacular.

    IRBT/DC – They are on the watch list.  They would certainly make the cut for an LTP but the projections suggest a cautious, conservative position as they are not likely to be back on track for a few years (but I'm sure they are building up some lovely IP!):

    Year End 29th Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 487.4 556.8 616.8 660.6 883.9 1,093 1,172 1,202 1,322 +17.5%
    Operating Profit $m 32.6 53.1 60.6 57.6 72.7 105.8 99.9     +26.5%
    Net Profit $m 27.6 37.8 44.1 41.9 51.0 88.0 90.5 76.8 41.8 +26.1%
    EPS Reported $ 0.94 1.25 1.47 1.48 2.19 3.15 3.23     +27.3%
    EPS Normalised $ 0.94 1.25 1.47 1.48 2.19 3.15 3.23 2.68 1.33 +27.3%
    EPS Growth % +54.1 +32.9 +17.1 +1.1 +47.5 +43.9 +14.3 -14.8 -50.4  
    PE Ratio x           14.3 13.9 16.7 33.8  
    PEG x           n/a n/a n/a 0.43
    Profitability

    For an LTP, I don't care that they are investing in growth as long as I agree with what they are investing in but I would treat them as a scale-in, hoping they fall another 40%, to about $25, where I'd go to a 4x position so I'd start with a 1x position like this:

    • Sell 5 IRBT 2022 $35 puts for $7.50 ($3,750) 
    • Buy 15 IRBT 2022 $40 calls for $16.50 ($24,750) 
    • Sell 15 IRBT 2022 $50 calls for $12.50 ( $18,750) 

    So the net is just $2,250 on the $15,000 spread and if I'm wrong and IRBT takes off, I'll just take my $12,750 (566%) profit and move on but, HOPEFULLY, IRBT drops and I buy back the short calls and roll the long calls down to the $30s (now $22) for less than $5 and roll the puts to 2x the 2024 $25 puts and maybe sell some short calls, etc. until my 2024 spread (when I really think they'll be back in the $60s) is maybe a 30 $20 spreads for $60,000 at lower strikes.  But for now – the above is a good start…

    Whole slide show is here (PDF or I would have put more up)/

    I don't mind at all that they are spending profits making lawnmowers and mops.  Yes they will have competition but that was the concern 10 years ago – when I made them our Stock of the Decade at $5.  While $100 was kind of silly, $50 is right back to where we expected them to be though we dumped them when they sold off their military division, which I like more than their core products. 

    Still, the consumer stuff is great and it's not that easy to do (see self-driving cars) – no matter how much the big boys spend.  


  15. Csco for those who played Entered the stk at 44.65 and 44.70 and the put Jan43 for 4.35


  16. Phil/Yahoo Premium

    Are you subscribed to yahoo premium? it looks good. which site do you use to read new about a company. I do not find any that provide you targeted news for the shares in your portfolio. Seeking alpha is there but not great. TD news is not updated….

    regards


  17. Thanks Phil…What portfolio was the LABU trade in?






  18. Phil

    What up with NRZ today ?

    Thanks


  19. LABU/Sun – I don't know, that was ages ago, maybe 2016 when Biotech was hot.  Here's our recent Top Trade on them:

    Submitted on 2019/10/03 at 11:39 am

    LABU/DC – I'd make it an income play:

    • Sell 5 LABU 2022 $25 puts for $11 ($5,500)
    • Buy 15 LABU 2022 $30 calls for $13 ($19,500)
    • Sell 15 LABU 2022 $45 calls for $9 ($13,500) 
    • Sell 3 LABU Jan $34.87 calls for $3.80 ($1,140) 

    That's a net $640 credit on the $22,500 spread and you should be able to pick up at least $1,000 a quarter for 8 quarters so $8,000 even if you don't end up making money on the long spread.  

    That's good enough for a Top Trade!  

    Yahoo/Pat – I haven't tried it.  It's ridiculous how many things you need to subscribe to these days.  For deep dives into news, I've been using NewsWatch, which they demo'd for our Members a year or so ago (might be a discount if you mention us) in a Webinar.  SA does let you put in your portfolio choices and then track the news – it's superficial but generally, if it's already in my portfolio – I'm happy just to check up on them. 

    NRZ/QC – I don't see anything.  Kind of strange.  The 200 dma was $15.85 so I think it may be an overshoot followed by a technical retrace after that $2 run.  Call it $14 to $16 with the overshoot ignored so 0.40 retraces are $15.60 and $15.20 (strong) so that's the line that's got to hold.  

    Speaking of what's up (or down), ACB reports tonight and is down 10% because CGC just had very disappointing results but sales were up 200% and CGC took a $32.7M restructuring charge and an inventory charge of $15.9M that ACB is not likely to repeat.  CGC is sitting on $2.7Bn in cash meanwhile – very silly to count these guys out!  

    Canopy Growth (CGC -17.7%), considered by many as the leader in the overhyped cannabis sector, slumps on almost double normal volume after its fiscal Q2 report released this morning that represented yet another example of investors' unrealistic near-term valuation views.

    Net revenue was C$76.6M, up 229% from a year ago but down 15% from the previous quarter, a clear sign of headwinds principally due to too many producers who have ramped up capacity chasing too few customers.

    Operating expenses continued to climb, up 48% from a year ago and up 15% sequentially. Non-GAAP EBITDA was solidly negative (C$155.7M) as was cash flow ops.

    Inventory was C$461.8M, up 17% from Q1, another signal, albeit preliminary, of a backup in demand.

    Cannabis oil and softgel sales were down 80% from Q1.

    Related tickers: Aurora Cannabis (ACB -12.1%), Cronos Group (CRON -6.6%), Tilray (TLRY -4.4%), Aphria (APHA -8.1%), Horizons Marijuana Life Sciences Index ETF (HMLSF -5.4%)

    Previously: Canopy Growth EPS misses by C$0.73, misses on revenue (Nov. 14)

    ACB lost $193,000 last Q, down from $158M in Q1 so very much on the right track finally and it's possible they put up a profit this Q and $3.20/share is only $3.2Bn for the company (so 1Bn shares) and it won't be much of a magic trick for them to drop $100M to the bottom line at some point as the profits scale up  very quickly once you stop spending to grow (we're dealing with the former at New Age now)

    Year End 30th Jun 2014 2015 2016 2017 2018 2019 2020E 2021E CAGR / Avg
    Revenue C$m 0.000 0.000 1.44 18.1 55.2 247.9 512.8 854.4  
    Operating Profit C$m -0.76 -4.37 -4.59 -11.2 -95.8 -394.2      
    Net Profit C$m -1.82 -9.52 -5.72 -13.0 71.9 -290.8 -154.3 -49.4  
    EPS Reported C$ -0.11 -0.12 -0.044 -0.046 0.15 -0.29      
    EPS Normalised C$ -0.11 -0.12 -0.060 -0.060 0.13 -0.29 -0.15 -0.047  
    EPS Growth %                  
    PE Ratio x           n/a n/a n/a  
    PEG x           n/a n/a n/a
    Profitability

    That being said, I think ACB is fun to play in our Earnings Portfolio.  We could bet the farm on the Nov $3.50 calls at 0.14 (they expire tomorrow) or take the Nov $3 (0.37)/$3.50 (0.14) bull call spread for 0.13 as it has 0.37 upside potential (almost 300%) and that would be fun but the 2021 $3 calls are 0.95 and the Jan $3 calls are 0.52 so here's my plan for the EP:

    • Buy 30 ACB 2021 $3 calls for 0.95 ($2,850) 
    • Sell 25 ACB Jan $3 calls for 0.52 ($1,300) 

    That's net $1,550 or just 0.50(ish) per long call and if ACB goes lower, we keep the short call money, sell more short calls and roll lower and flat is no problem as we'll roll the short calls to the $4s eventually (the 2021 $4 calls are 0.65) and, if ACB pops higher, we can DD on the longs (which would be in the money) and then roll the short calls to 2x a higher strike (the 2021 $10s are 0.35).  If we, for example, by 30 more $3s for $2 ($6,000 and the Delta is 0.70 so a $1.50 move up) and sell 35 $10s for $1 ($3,500), we'd be in 60 of the 2021 $3/10 bull call spreads for net $4,050 on the $18,000 spread at $4.70.  I like this plan!


  20. Bloomberg featuring SPWR now.  See, I bring it up last night and now they do a feature on it – influence! cool

    They opened really low, puts were an easy fill in the MTP.  

    GOLD puts only filling at $3.20 so far so just 5 short as planned, for now with open offer for 5 more at $3.50.


  21. Here's one for the Dividend Portfolio:

    ET is a nice Nat Gas Pipeline business and $11.10 is only $29Bn for a company making well over $4Bn a year so a very nice deal in a solid industry with good growth potential.

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 48,335 55,691 42,126 31,792 40,523 54,087 54,066 57,564 59,736 +2.3%
    Operating Profit $m 1,389 2,445 2,356 1,934 2,632 5,236 6,971     +30.4%
    Net Profit $m 196 633 1,189 995 954 1,694 3,197 4,273 4,381 +53.9%
    EPS Reported $ 0.15 0.57 1.11 1.35 -0.59 1.34 1.23     +55.9%
    EPS Normalised $ 0.72 0.84 1.34 1.92 0.044 1.71 1.37 1.56 1.48 +19.0%
    EPS Growth %   +17.5 +59.9 +43.1 -97.7 +3,743 -25.1 -8.58 -5.18  
    PE Ratio x           6.53 8.13 7.14 7.53  
    PEG x           n/a n/a n/a 0.98
    Profitability

    Because they pay a big $1.22 dividend, they are great for the Dividend Portfolio:

    • Buy 1,000 shares ET for $11.10 ($11,100) 
    • Sell 10 2022 $10 puts for $2.65 ($2,650) 
    • Sell 10 2022 $12 calls for $1.50 ($1,500) 

    That's net $6,950 and, if ET is just over $12 in two years, you get called away at $12,000 for a $5,050 (72%) profit plus $2.44 in dividends is another $2,440 (35%) against your cash outlay.  Of course, if they do go lower than $10, you are obligated to buy 1,000 more shares for $10 ($10,000) and then you'd be in 2,000 shares for $16,950 less the $2,440 dividends (unless they withdraw or reduce it) for net $14,510 or $7.255/share, which is 35% off the current price.  

    So the worst case is owning 2,000 shares at 35% off the current price and the best case is making $7,490 (107%) off your $6,950 outlay.  I'd say that's a good use of capital, right?  


  22. Oops, forgot to mention, ET is down because there's a scandal in PA about whether they bribed the Governor on a pipeline project and the FBI is looking into it.  I don't consider it material though it could make them go lower if it turns into a thing. 


  23. I'm surprised Trump isn't accusing Biden of being involved…


  24. Thanks Phil that is the trade I was referring to…


  25. Value / Phil – Sorry got busy all day. And my point was that if we remember 1999, people were making the same argument then. We needed a new way to value companies to justify the P/E at 1000 or so. That of course didn't end well for many!


  26. the first few sentences are what Phil has been saying for a long time:

     CSCO

     CEO Chuck Robbins on the global macro outlook

     

     if you just go around the world right now and you look at what's happening in Hong Kong, you look at the China-U.S. trade situation, you look at what's going on in DC. You've got Brexit. And you've got uncertainty in Latin America. I mean, I think it's — in any of those that are big issues if they get resolved then you could see some of the uncertainty removed, and I think that's what — business confidence just suffers when there's lack of clarity. And there's been lack of clarity for so long that I think it's finally just came into play. So I think, you're probably able to guess that, as well as we are, based on some of these bigger issues sort of coming to some level of conclusion. And then obviously, we have the elections coming in next year that we have to see how they work.


  27. Phil / CBS --

    Phil, what's your thinking behind having CBS short puts expiring in 2022 in the STP?  Are you thinking of buying back these short puts soon, and if so when?


  28. Very true, StJ.  "You just don't understand the new paradigm!"  

    CSCO/Stock – Seems obvious but it isn't to investors so far.  

    CBS/Vidt – They are in the STP because we don't have a new LTP yet and I often sell short, long-term puts in the STP to pay for hedges but we don't have any hedges yet because we don't have any LTP positions that need hedging but that doesn't stop us from raising $4,000 for the STP selling puts in a position I'd be happy to transfer to the LTP if our initial entry is net $32.  See how simple it all is?  cool

    Don't forget, I'm a pure Fundamentalist – I don't really care what the squiggly lines on a chart do.  I care about whether or not I should be buying CBS at $40, which is $15Bn for a company with slow but steady growth that's dropping close to $2Bn to the bottom line.  

    Year End 31st Dec 2013 2014 2015 2016 2017 2018 TTM 2019E 2020E CAGR / Avg
    Revenue $m 14,005 13,806 12,671 13,166 13,692 14,514 15,263 15,531 16,227 +0.7%
    Operating Profit $m 3,025 2,544 2,658 2,691 2,460 2,768 3,260     -1.8%
    Net Profit $m 1,879 2,959 1,413 1,261 357 1,960 3,072 1,861 1,971 +0.8%
    EPS Reported $ 2.79 2.41 3.18 3.46 3.53 5.00 8.01     +12.4%
    EPS Normalised $ 2.81 2.91 3.24 3.86 4.38 5.44 7.55 4.97 5.32 +14.2%
    EPS Growth % +19.4 +3.7 +11.4 +19.1 +13.4 +24.1 +52.2 -8.68 +7.06  
    PE Ratio x           6.77 4.88 7.42 6.93  
    PEG x           n/a n/a 1.05 0.41
    Profitability

    Now, consider that if I do get assigned 500 shares at $40 and I squandered my $4,000 – so we won't even call it a discount, even now, at $37.70, I can sell the 2022 $37.50 calls for $6.50 and the 2022 $35 puts for $5 so I could drop my net to $28.50 ($14,250) – about 25% off the current price and CBS pays an 0.72 dividend as well, so another 2.5% a year while I wait to see if I get called away at $37.50 with a $9 (31% profit). 

    That's without rolling or doubling down in a position I wouldn't mind being full on ($100,000) in the LTP so a DD at $28.50 would take me to just $28,500 and if CBS dropped another 25% to $21.50(ish) then $28,500 more will put me in 4x at maybe net $25 but then I can sell puts and calls again to drop the net below $20.

    So, if I don't REALLY want to own $100,000 worth of CBS at $20 (if assigned 8x or 4,000 shares), I shouldn't be buying 500 shares at $37.50 but, if I think $20 is a completely ridiculous number (4x earnings) that I'd love to make CBS a big part of my portfolio with – then buying 500 shares for $37.50 (or a 1/4 commitment around this level) is a no-brainer.  

    There, that's my thinking!  

    Image result for homer simpson thinking gif"


  29. Please refresh as I fixed the math on the above example.  


  30. Well they yanked the Dow and S&P back to green for the close – amazing!


  31. Phil// Question about ET trade. Selling near the money call at 12 for a $1.50 my fear is the poaching for the dividend.  how do you manage being poached?  just keep an eye out for the ex-dividend date and monitor the price and roll it accordingly?  What is the best practice for these high paying dividend stocks on selling short/covered calls?

    Thanks.


  32. ACB / Phil – down 11% after hours, better entry pricing tomorrow!


  33. Futures are taking off for some reason.

    ET/Rookie –  as long as there is a penny of premium in the cost of the option over the amount of the dividend, you are very unlikely to get called away.   If you do get called away, it’s really not a big deal: they take your stock and put money in your account which you use to buy more stock  and sell new covered calls.   In this case, we are selling $1.50 in premium and if we get called away over a $.30 dividend, I will be thrilled to buy back the stock and sell another $1.50 call.

    ACB/Mr M – So now it turns into an income play with 4 more sets of calls to sell   


  34. Kudlow said we are close to a trade deal. Amazing breaking news!!!







  35. This Is Not a Game