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Friday Follies – Market Drifts Into the Weekend Slightly Weaker

Watch the Russell.

Both the Russell 2,000 and the NYSE (about 1,900) are broad-market indicators and both of those indexes have been weak, not just this week but for the month of November.  The Dow has just 30 stocks and any one (AAPL) can lift it higher and the S&P 500 has 500 stocks and heavyweight stocks (AAPL) can lift it higher without broad participation and the Nasdaq (100) is dominated by one stock (AAPL) and even the broader Nasdaq Composite (3,300) is very heavily weighted to it's top stocks (AAPL).

Apple is up over 30% since early August and up 50% since the June swoon and 70 AAPL points time 8.5 Dow points per Dollar (yes, the index is that stupid) means AAPL alone added about 600 points (33%) of the Dow's 1,800 point run since early August.  That's a lot of eggs in one basket!

I would argue that AAPL may deserve its valuation but United Health (UNH) is up 55 points since October (467 for the Dow) so there's two stocks responsible for more than half the gains right there.  How much did the rest of the index go up just because the leaders went up and NOT based on their own merits?  

As I mentioned on Wednesday, we are approaching the point of peak valuation on the broad indexes.  My prediction when we cashed out our last batch of portfolios on September 18th was that EVEN IF there were a trade deal with China, the S&P 500 would top out at 3,300 (10% gain) but, if there were no deal – we were just as likely to see 2,400 (20% drop) and, since we were sitting on some very large birds in the hand – it simply wasn't worth chasing others in the bush until we saw how 2019 played out.

That didn't last too long, by October 1st we were already bored and we started making short-term picks and then we decided they were good enough to build a new portfolio around, so we started a new Short-Term Portfolio and then, for balance, we started two more in October.  My intent was to wait out the year but it's kind of boring just watching the markets and our Members do love portfolios – so here we are again but using just $300,000 (10%) virtual Dollars out of the over $3M we cashed out in September.

Already, our Short-Term Portfolio is up 52.1% and we have bets in both directions there so I'm not all that worried but I am concerned about the Dividend Portfolio and the Earnings Portfolio – so we'll be reviewing them today to make sure we feel good about leaving them exposed to the market insanity over the holdiay weekend (Thanksgiving is Thursday in the US but by Wednesday the market will be dead and subject to rough swings through Tuesday, Dec 3rd.  Our STP postitions are as follows:

These are mostly the same positions we had when we updated the STP on November 4th, when the portfolio was "just" up 21.7% at $121,735 so it's not even Thanksgiving and we're up another $30,318 for the month – who needs large portfolios when we can generate these kinds of returns from the small ones?  We bought back the short BKNG calls and sold the CBS puts and sold more TSLA long (hell, you can see by the dates what we changed) and the MO play is new but the rest of the gains camr from simply doing well on those same positions.  

In trading, as in many things, it's quality, not quantity that matters.  On August 29th, as we were preparing to go to CASH!!! for Q4, I selected just "5 Trade Ideas for the Next 5 Months" as a nice substitute for the $100,000 Portfolios we were cashing out:

  • Sell 5 VAC April $85 puts for $5.70 ($2,850)
  • Buy 7 VAC Jan $80 calls for $20 ($14,000)
  • Sell 7 VAC Jan $90 calls for $12.80 ($8,960)

The net cost of the spread is $2,190 and, if successful, it pays $7,000 at $90 or higher for a gain of $4,810 (219%) in 5 months, though the short puts won't expire until April – it should get us very close to our goal by January. The ordinary margin requirement of the short puts is $5,280 so a pretty efficient way to make $4,810 in 5 months!

We're looking good for our $90 goal and the full $4,810 gain.  

  • Sell 10 WBA Jan $50 puts for $3.70 ($3,700)
  • Buy 30 WBA Jan $47.50 calls for $5 ($15,000)
  • Sell 30 WBA Jan $50 calls for $3.60 ($10,800)

The net cost of the spread is $500 in cash and the ordinary margin requirement for the short puts is $8,918 and, if WBA is over $50 on Jan 17th, the short puts expire worthless and the spread would be $7,500 in the money for a $7,000 (1,400%) gain in 5 months.

Well over our target so we expect the full $7,000 gain here.  

  • Sell 10 LB Jan $17.50 puts for $2.80 ($2,800)
  • Buy 25 LB Jan $15 calls for $3 ($7,500)
  • Sell 25 LB Jan $17.50 calls for $1.85 ($4,625)

That's net $75 on the $6,250 spread so there's $6,175 (8,233%) upside potential if LB can get back over $20 by Jan 17th (option expiration day) and it's an efficient trade as the ordinary margin requirement is just $3,834 so a very good way to make $5,150 into the holidays!

This one might come down to the wire but I think we'll make the full $6,175 on this one. 

  • Sell 10 THC Jan $20 puts for $2.50 ($2,500)
  • Buy 20 THC Jan $15 calls for $6.50 ($13,000)
  • Sell 20 THC Jan $20 calls for $3.10 ($7,500)

That's net $3,000 on the $10,000 spread so $7,000 (233%) upside potential is not as exciting as our other trade ideas but THC is a lot more of a blue chip so possibly the least risky of the set. Margin is also light, just $2,886 according to TOS in an ordinary margin account.

No worries here, we blew through our target so looking forward to $7,000 on this one.

  • Buy 50 SKT Jan $12.50 calls for $1.85 ($9,250)
  • Sell 50 SKT Jan $14 calls for 0.95 ($4,750)
  • Sell 20 SKT Jan $15 puts for $1.85 ($3,700)

That's net $800 on the $7,500 spread so $6,700 (837%) of upside potential if SKT is over $15 on Jan 17th. Since we're selling puts over the current price, the ordinary margin is $5,741, so more than we'd like but, as noted on Aug 1st, I think SKT is ridiculously under-priced.

My new table-banging stock – so ridiculously undervalued.  Also a little iffy but $15 should hold and a lovely $6,700 to collect here.

So that's a fairly quick $33,603 to be made on our original $6,565 in cash and $26,659 in margin required for these 5 trades works out to a 511% return on cash in 5 months.  More importantly, we took our huge gains off the table but still made a very respectable 33.6% return on the re-commited $100,000 while the S&P gained just 3% so we're outperforming the index by 10x – without all that silly risk.

THAT is how you play an uncertain market – even if you are bored! 

Have a great weekend, 

- Phil

 


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  1. Good Morning!


  2. Fiona Hill (who is smarter than all these guys combined) – denying that Russia attacked our election process in 2016 and saying that Ukraine in fact did it is only parroting talking points created by Russia's intelligence services.

    GOP Congressman – In 2016, Ukraine attacked our election process! 

    Image result for putin laughing


  3. Some Friday humor:

    https://theirrelevantinvestor.com/2019/11/21/20-signs-that-the-stock-market-is-about-to-top/

    • Elon Musk moves to Mars
    • The Fed buys the ECB
    • Vanguard requires customers to use infinite leverage
    • Kylie Jenner sells the other half of her company for $10 billion
    • WeWork goes public
    • Henry Blodget resumes reinvesting dividends
    • Peter Luger introduces plant-based rib eye
    • RobinHood buys Schwab
    • David Stockman turns bullish
    • Facebook hires Scott Galloway as Chief Marketing Officer
    • James Altucher says you should max out your 401(k)
    • The VIX goes negative
    • Ramp Capital replaces Jerome Powell
    • Apple buys back all outstanding shares, accidentally goes private
    • Robert Shiller declares the CAPE ratio to be dead
    • Jeff Bezos becomes the world’s first trillionaire
    • Berkshire Hathaway starts charging performance fees
    • Wall Street 4
    • Billy McFarland launches a hedge fund
    • Your parents start a podcast


  4. Good morning!  

    TSLA down 5% on that silly truck with the broken windows.  

    Image result for tesla truck broken window"

    Doesn't it look like they slapped it together last night because they forgot it was due?

    Image result for tesla truck broken window"

    He announced the Trucks two years ago – no sales there either.

    Image result for tesla truck broken window"

    That was a very easy call the other day (selling the $365 calls).  

    Big Chart – Watch the 20 dams – would be bad if they fail easily. 

    Hill/StJ – That's a confusing sentence.  More like:

    At around this point Nunes sighed, and Republicans seemed to realize that this was not going to be a helpful witness for his side to question. From there on out, Republicans on the committee did what they could to avoid directly asking her anything of substance.

     

    Rep. Mike Turner, during his turn, complained at length about Hill’s opening statement, in which she had coldly dismantled Republican claims that it was actually the Ukrainians who meddled in the 2016 election. If Hill had just read the committee’s report that acknowledged Russian interference in the 2016 election, Turner said, “you would have known that what you just said was not true.” He went on to say that Hill had relied on hearsay evidence and spread other mistruths, then pivoted to questioning Holmes without giving Hill a chance to respond. A Democratic committee member wondered aloud, “Was there a question for Dr. Hill?” There was not.

    “I thought that was some epic mansplaining that you were forced to endure by Mr. Turner,” Rep. Sean Maloney later told Hill. “Some of us think that was unfortunate.”

    I believe she was clear that Russia DID interfere in the 2016 elections, NOT Ukraine.  The GOP is trying to confuse people on this issue – don't help them!  cheeky

    I have never seen so much crap thrown against a wall – not even criminals go this far trying to defend themselves once they are caught red-handed.  

    That is a cool chart.  This one is too:

    complexity connectiveness by sector

    This is why Venezuela is in trouble:

    venezuela economic complexity breakdown

    Saudis probably look worse.  


  5. I find it interesting that Harvard feels that Home Office Products are close to Beer and Spirits Textiles and Cereals.  I was thinking it's funny to think of the Egyptians heading over to staples but then I remembered they kind of did invent writing and, therefore – office supplies!  

    Image result for egyptian writing tools"

    Image result for egyptian writing tools"

    China too!  

    Image result for ancient chinese writing tools"

    Funny how a chart like that can give you new insights – connecting the dots on things you didn't think of before…


  6. Phil / CLF – way up today – I don't see any news. do you?


  7. CLF    lots of Dec call buying yesterday and today.  Sometimes that accounts for the price movement


  8. Took a one day 8% profit on uncovered 1/2 of AR.

    Batman – Don't see any news on CLF, but huge option activity yesterday..

    CLF Dec 7.5 calls (volume: 12.7K, open int: 280).


  9. CLF/Batman, Stock, Albo – Raised guidance came across the newswire earlier:

    05:56 AM EST, 11/22/2019 (MT Newswires) — Cleveland-Cliffs Inc's (NYSE:CLF, Recent Price: 7.51) earnings targets for Q4 ending December 31, 2019, and the full year forecasts for 2019 and 2020 have been scaled up. The Q4 earnings estimate has been raised to $0.37 per share, up from the previous consensus of $0.29 per share, as have the full year estimates for 2019 and 2020. The 2019 estimate has been raised to $1.33 per share from the previous consensus of $1.10 per share and the full year 2020 estimate has been increased from $0.83 per share to $1.14 per share. This consensus estimate is based on 9 estimates used to derive the Q4 forecast and 7 and 12 available estimates contained in the full year forecasts for 2019 and 2020, respectively.

    There's a reason it's one of our Earnings Portfolio plays!  

    CLF Long Call 2022 21-JAN 5.00 CALL [CLF @ $7.89 $0.38] 20 10/22/2019 (791) $5,900 $2.95 $0.53 $2.95     $3.48 - $1,050 17.8% $6,950
    CLF Short Call 2022 21-JAN 10.00 CALL [CLF @ $7.89 $0.38] -20 10/22/2019 (791) $-2,600 $1.30 $-0.03     $1.27 - $60 2.3% $-2,540
    CLF Short Put 2022 21-JAN 7.00 PUT [CLF @ $7.89 $0.38] -10 10/22/2019 (791) $-2,350 $2.35 $-0.36     $1.99 - $360 15.3% $-1,990

  10. I do feel happy when I see the company's prospects turning up a month before their own management does!   cool 


  11. Thanks, Phil !


  12. Here was the play at the time (I was annoyed as I wasn't enthusiastic about taking new positions):

    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).  


  13. Any one followed my armchair trade on R when I recomended it at 49.90? 11/1???


  14. Complexity / Phil – When I talk to some Russian colleagues, they are starting to understand that Russia made the same mistake of putting all their eggs in the oil and gas basket and didn't make the necessary investments in other industries that is needed to go to the next level. Putin took the path of least resistance to corruption and personal wealth. Country be damned… Starting to catch on here.


  15. Phil gave yesterday a great write up on GPS. I set up a comfortable armchair trade on it stock plus sell the Jan 13/17 Strangle at 5.90. I bought 600 stock @ 16.28 it give you a relaxed 186.00 per month while watching the sun going up for the next two years. But if you really crazy you still can sell some have short term calls against you position in my case 3x Jan 20 18 calls for .52 an other 156$ for the next 2 month, but  this may make you sweet.
     


  16. Yodi/GPS – Can you explain the trade and how you came up with $186 per month. Jan 13/17 strange? Does that mean you sold Jan (2021 or 2022?) $17 Call and Jan $13 Put?

    Thanks.


  17. M really taking off today!!!!


  18. JWN has almost 30% short interest and 12 days to cover. They are making a big deal on JWN beating earnings, but the earnings target was very low so M is going up too after loads of downgrades. M has short interest of 27% too so it could be part of it. Don't you know retail is dead?


  19. Pirate patience Christmas is comming


  20. R/Yodi – Good call on that one.

    Russia/StJ – As Yoda said: "If you choose the quick and easy path, you will become an agent of evil.”  Very true….  Speaking of sayings:

    The truth unquestionably is, that the only path to a subversion of the republican system of the Country is, by flattering the prejudices of the people, and exciting their jealousies and apprehensions, to throw affairs into confusion, and bring on civil commotion. Tired at length of anarchy, or want of government, they may take shelter in the arms of monarchy for repose and security.

    Image result for trump agent of chaos"Those then, who resist a confirmation of public order, are the true Artificers of monarchy—not that this is the intention of the generality47 of them. Yet it would not be difficult to lay the finger upon some of their party who may justly be suspected. When a man unprincipled in private life desperate in his fortune, bold in his temper, possessed of considerable talents, having the advantage of military habits—despotic in his ordinary demeanour—known to have scoffed in private at the principles of liberty—when such a man is seen to mount the hobby horse of popularity—to join in the cry of danger to liberty—to take every opportunity of embarrassing the General Government & bringing it under suspicion—to flatter and fall in with all the non sense of the zealots of the day—It may justly be suspected that his object is to throw things into confusion that he may “ride the storm and direct the whirlwind.” – Hamilton

    GPS/Yodi – Good set-up.

    OK, let's see if we can knock off the Portfolios into the weekend:

    Short-Term Portfolio Review (STP):  Doing way better than planned but mostly due to BKNG working out perfectly (even a broken clock….) but also as there is only MJ on the losing side and not too much damage there.  While the Portfolios are small, it's a good time to practice the expectations game.  

    Overall, I'm worried we turn down next week on low volume but, then again, they aren't done beating the dead horse of "China Progress" so this drift may go on for another month – into the year's end.  Keep in mind I didn't WANT to have money back in play – it was just so boring to not play….

    • CBS – Net $32 is not going to be on my list of things to worry about – even in a downturn.  Expect to make the remaining $3,625 (I'm looking at a more updated one than the one printed) 

    • BKNG – We bought back the short call leg as it was "only" $10 and that was ($2,000) off a sale of $21,390 – so massive profit there.  Essentially, that was our play but I still see BKNG as a good quarterly money-maker so I'm not inclined to close it – even though we have $10,000 more profit if we cash out.  However, the March $2,000 calls are $52 so 2 short of those is $10,400 plus whatever we sell more puts for (the short $1,700 puts are $39 so 2 would be $7,800) so $18,200 of March sales beats taking $10,000 off the table now but we don't project things we aren't sure of – though there's a lot of potential in this trade.  
    • Still, we have $10,000 and I'd be surprised if we don't at least realize that over time

    FCX – Like CLF, big beneficiary of a China Trade Deal.  They are 75% Copper and 16% Gold (the rest is Moly) and we like GOLD (trade of the year) and copper should do well as oil infrastructure must come back as well as construction (and where's our infrastructure bill?).  We're already over our conservative target at net $1,335 on the $5,000 spread so I expect the full $3,665 (274%) to be made from here but, yawn….  At least we started with a $160 credit!

    • MJ – This one is very annoying but I think the worst of the selling is over and now we can concentrate on making money selling puts and calls.  To that end, we should buy back the short Jan $20 calls and sell 10 of the Jan $18 calls for $1.20 ($1,200) and 10 of the $17.50 puts for $1.50 ($1,500) so that's $2,700 back in 56 days against our net $8,200 entry – seems like there's money to be made but nothing I would count on.  

    • MO – Already over our target so I'll count on collecting the full $7,500 against the current net $4,195 so $3,305 (78.7%) left to gain by March.  Yawn again but I guess other sites would put that up as their best trade of the year – so we should learn to enjoy the simple things as well…  

    • TLT – This has been disappointing but we are on track.  I don't see the Fed easing more so that would be the full $5,000 and currently net $3,225 so another $1,775 (55%) in 56 days doesn't suck.

    • TSLA – We just sold the $365 calls this week and already up 2/3 after yesterday's debacle.  Overall premise is we hold $250 and that's our $25,000 buffer while we keep selling $5,000 worth of short calls every money or so – could be very lucrative…  For now, let's just say we expect to make the full $1,900 in 28 days and we'll see how it goes from there.  Also, for $2 or less, I'd buy back the short calls to clear the slot.

    So we're up $51,000 and the positions we currently have should make another $25,160 on the positions we already have.  That certainly takes the pressure off as we hit our 2-year goal in 2 months!  Now the trick is not to lose it but I don't want to waste money on a hedge when we already have positions in each direction and we can adjust on the fly.


  21. yodi-I know. Just using some sarcasm. We are telling everyone not to order anything for us from Amzn. Last year I got a box of tea from them that was like drinking grass. We love tea and this box was supposedly made in Kentucky, the bourbon state. So I through it out. It burned beautifully. It was pure awful. I got a nice leather wallet from them and the same thing. The coin purse never closed. So the word is out. Everyone says "But it is so easy and they deliver. You don't have to do a thing." Give me a M any day. I really do detest AMZN. They are right up there with Walfart as garbage stores.


  22. Pirate no problem well taken


  23. M/Yodi – For $15 I would love to buy the whole company.

    Retail/Pirate, Yodi – $5Tn in 10 months is not that dead, is it?  $610Bn is "NonStore Retailers" and that's up 12% from last year but still only 12% of total sales.  Overall, we're still growing sales at a pretty good clip, up 150% since 1992 and up 25% since the crisis.

    That's just not the chart of something that's dead and ECommerce may grow another 20% a year from 12% to 14.4% to 17.3% and to 20% of retail sales in 2022 but Retail Sales – even if they grow just 3.4%, would go from $6Tn to $6.2 to $6.5 and $6.8Tn in 2022 so ECommerce would gain $600Bn out of $800Bn but still not all of the gains.  People just need to stop feaking out…


  24. Phil M that looks good at 15 but when you hold the stock at 21 it takes a lot of call and put selling to get even.


  25. M/Yodi – If you have 1,000 shares at net $21 ($21,000) and you ditch those and sell 10 of the 2022 $15 puts for $4.50 ($4,500), you've already lowered your net (if assigned) to $16,500 and you can sell 20 of the 2022 $17 calls for $2.50 ($5,000) and buy 20 of the 2022 $13 calls for $4 ($8,000) and now you have a worst-case net of $19.50 on 1,000 – still less than $21,000 but, over $20, you collect $14,000 more.  

    Call the loss $6,000 on the stock and then net $1,500 CREDIT to establish the spread is $4,500 on the $14,000 spread – not what you wished for but doesn't suck – even without upping the risk factor.  


  26. Thanks Phil, but not always that easy, one has to take the short puts and calls also in to consideration, as they go with the stock. Many time I feel at this stage it is only a paper loss, and one has to work especially the ITM short puts in to consideration. It takes time to resolve, but mean time one collects the div. I will look it it more closely. You can not win them all, a while back we looked at M at 20 to be the bottom but as we see today there was still a bigger hole in that bottom.


  27. Money Talk Portfolio Review (MTP):   The restriction on this portfolio is we only trade (unless there is an emergency) when I'm on the show, once per quarter so it's the ultimate hands off portfolio.  

    • SPWR – They are spinning off a division or I would have gone for the bull call spread too.  I love these guys long-term and we can just sit on the short puts without worrying about the mess from the splits.  I expect to collect the full $3,310 on this one.

    • GOLD – Our Trade of the Year so it better pay off!   We're having a bit of a pullback but still ahead on the spread but only net $1,665 out of a possible $12,000 and I fully expect to collect the remaining $10,335 (620%) – so I'd call this good for a new trade too! 

    • IBM – Last year's Trade of the Year is a resurrection play – as we've already cashed in the originals at $150.  $135 got attractive again so we're back in with a $16,000 spread that's currently a net $680 credit and that's better than our entry so great for a new trade with a $16,680 (2,452%) upside potential over just $140!  I 

    Only a week old and up $560 is OK and the potential for our new trades is $30,325 PLUS that $560 so that's enough money to beat the S&P over the next two years so I guess I'm done with this portfolio, right?  Well, in the very least, I don't think we need to worry about it.



  28. Phil / CLF – thanks….  I did not find the upgrades this am at 6 30 PST —- where did you get the announce from?


  29. Phil,

    I would like a little guidance/hand-holding re IIVI when time permits.

    IIVI recently just missed Q eps (by .03) but beat on rev. Rev and net Inc have risen last 5 yrs and stock just tanked from 36 to 27. Just acquired FNSR so some disruption in rev/inc stream expected with absorption related expenses but this drop seems way over done. Multiple downward adjustments by sell side folks (mainly lowering upside target to 40 from 48).

    My somewhat complex position (from pre-merger long position in FNSR: long 300 sh IIVI @ $35, short 6, 1/21 15 calls @ 8.25, now 6.50, 5 short 1/20 35 puts @2.45, now $8.00).

    Since I can't find any negative news I'm concerned that there is something very negative afoot and considering taking the loss despite the prospects for IIVI seeming reasonably good …from my limited perspective and knowledge base. "Market can stay irrational longer than…"

    Thanks in advance







  30. So more law firms keep announcing class actions against ET but the stock is up quite a bit in the last couple of days?


  31. CLF/Batman – I don't remember where but I also can't see it now.  Was on one of the feed services I looked at but now I don't see that post.  Interesting…

    IIVI/8800 – Holy cow did they fall apart!  If only there were some magical way to see something like this coming BEFORE it happened:

    Submitted on 2018/11/09 at 10:24 am

    IIVI/StJ – Not for me now, too much debt and draining out cash from both companies and leaving only debt with rising rates – way too 1999 for me! 

    Submitted on 2019/10/01 at 2:09 pm

    IIVI/8800 – I don't think they terribly overpaid for FNSR but the acquisition of a company as big as they are is going to be disruptive for quite a while.  I wouldn't catch the knife but, down the road – they could get interesting.

    Submitted on 2019/11/04 at 2:07 pm

    IIVI/8800 – They are going to have a rough year absorbing FNSR but it was a nice bottom action at $32.  I prefer to see a couple of quarters of combined earnings before jumping into a combo like that but they are projecting a very swift integration. If I were going to play them, I'd just sell April $35 puts for $3.80 and see how that goes a $31.20 isn't a bad entry to work off and you can always add a bull call spread if you like the combined results.

    Still, you persisted, apparently and now we have to fix it….  angry

    Something is very negative, they already had a lot of debt and absorbing FNSR didn't help that and integrations are tough on any company and they take a lot of time to reorganize and get back on track.  That's why we usually stay away!  

    So, you have:

    • 300 shares of IIVI at $35, now $27.15
    • 6 short 2021 $15 calls at $8.25, now $6.50 (illiquid) 
    • 5 short Jan $35 puts at $2.45, now $8

    I think I have that right…    I assume you have the unadjusted, liquid Jan puts and not the illiquid ones.  They just guided 2020 from a $2 profit to a $1.50 loss so, even if they are done selling off, you will have a way to go to recovery.  The short calls will somewhat bail you out (there's a cash component too, which is very messy) and they only affect 22 shares per contract so they are really only a 1/2 cover.  The short puts are effectively assigned – so there's more stock for you.

    There are no new options out yet so I'd wait as it's pointless to try to squeeze into the illiquid ones, which are likely to only get worse.  If you get assigned, you get assigned and then you'll just have 500 more shares at $32.55, which are down $5 at the moment, not that tragic and it would be foolish to pay $8 (net $5.55) just to avoid having that happen.  They are cleaning house and taking some losses and hopefully they are back on track in a year if you want to wait but it's messy and they could drop another 20% to $22ish at which point you'd need to buy 1,000 more for $22,000 to bring your average down to $28 on 2,000 ($56,000) (assuming the puts are assigned) and you'd still have to ignore the illiquid calls and right now you can sell July $30s for $3.20 so figure you could sell $25s for $3.20 and bring your average down to $25 and then hope for the best.  If you aren't willing to do that if they drop another 20% - you should seriously consider just cutting your losses here.  

    ET/Tangled – Companies like that are used to being sued.  They were suing Greenpeace for $900M for bothering them (dismissed) and Greenpeace and others started a ton of lawsuits against them including the usual shareholder lawsuits that happen any time a stock loses money (because that never happens). 

    This is where that whole, "Be greedy when others are fearful" thing comes into play. 

    Well, hopefully I can wrap up the portfolio reviews over the weekend – no urgency as we're far from expirations – I just wanted to make sure I was comfortable with where we are into the holidays.  I'm inclined to kill the Earnings Portfolio – it's not earnings season anymore and, if we REALLY like something, we can put it into something else but this market is too crazy to make earnings calls on.  

    Have a great weekend, 

    - Phil


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  34. Phil,

    IIVI – thanks for the thorough guidance; expensive lesson learned about premature entry…hopefully.


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