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Wednesday Wipeout – Let the Slaughter of 50M Turkeys Begin!

Thanksgiving Turkey DinnerGetting ready for Thanksgiving?

If you are an American, of course you are – it's what we do here.  And, of course, after the orgy of food to be consumed tomorrow – we begin the orgy of shopping known as Black Friday – because that is, traditionally, the day that the ledgers for retailers finally gets into the black for the year.  

The Retail Sector has already made a bit of a comeback, with the Retail ETF (XRT) gaining 7 points (18%) from the August lows, outpacing the 10.5% gain on the S&P by a wide margin.  Still, overall, XRT is still about 15% below last year's highs so there's still a lot of bargains out there – including our beloved Macy's (M), who host the Thanksgiving Day Parade from their flagship store in Herald Square – which is the World's Largest Department Store at 2.5 MILLION square feet and, in downtown New York City, with rents at $776 per square foot – that's $2Bn a year if they decide to rent it out – yet you can buy the whole company for just $4.75Bn at $15.37/share.  

Image result for miracle on 34th street macy's"Macy's has been entertaining the idea of SPENDING about $1.5Bn to build 1.2M feet on top of the existing structure and use that space to generate about $1Bn a year in rental income.  They already have to maintain the building so, aside from the building costs – they wouldn't be taking on a lot of running expenses – so it's a very good idea and, when you consider that Macy's "only" drops about $1Bn a year to the bottom line (on $25Bn in sales) – it's a GREAT idea.

Unfortunately, for about 3 years, it's all costs and no income so nothing to get excited about for the short-term investor but, for a long-term accumulator, Macy's just narrowly missed being our 2020 Stock of the Year and I predict it will be our 2023 Stock of the Year as construction nears completion and income is poised to double.  I don't think Retail is dead in the same way that Radio isn't dead just because we have TV now. 

imageAmazon (AMZN) and other on-line retailers will get their shares but, on the whole, people still like to shop – 90% of $6Tn in Retail Sales in the US are still done in person and Amazon, for all the noise and now in their 25th year of operation, are "only" doing $250Bn in sales – about 4% of US Retail Sales.  Yes, they have captured a lot of the growth but, so far, there is no Retail Apocalypse – just a culling of the weak – which was probably long overdue

In fact, Toys R Us is making a comeback, opening a new store in Paramus, NJ this very day.  That's another great thing about retail – the resurrections!  This new version of Toys R Us has been started by a group of former executives from the old company and is looking to "re-invent" the shopping experience – we'll see what that means over time but their experimental stores do look pretty cool.  They are more like a place to take the kids, which is very smart and, at the end, there are things to buy – like a Disney (DIS) ride.  Speaking of Disney:

DIS is up about 40% this year as they opened Star Wars Theme Parks in Florida and California and, through September, they had sold $8.1Bn in movie tickets around the World, accounting for 33.4% of the US box office at $2.7Bn and now Frozen II is a monster hit and should add another $1Bn World-wide and then we will have another Star Wars movie in December.  Oh yeah – and they just launched a new on-line video service and have been signed up about 18M people already – and it's only month 2!  

DIS is getting a little ahead of itself at $151.64 as that's $273Bn in market cap and they "only" make about $11Bn a year on $85Bn in sales so we're paying 25x earnings which anticipates more growth than is likely but, what I like about Disney stock is there's a very nice floor to it – that's why we bought it back at $95 but we're out now – and waiting patiently for a correction to $130 to buy again.

 

By the way, we did pick M as a Top Trade Alert on the 19th for our Hemp Boca Portfolio and it came at net $725 and now it's net $1,147 for a quick $422 (58%) profit in the first week but it's a $10,500 spread so, if it pays off for us, there's still another $8,853 (771%) left to be gained if M is over our $20 target in Jan, 2022.

M Long Call 2022 21-JAN 13.00 CALL [M @ $15.37 $0.00] 15 11/20/2019 (786) $6,225 $4.15 $0.00 $3.72     $4.15 $0.00 $0 0.0% $6,225
M Short Call 2022 21-JAN 20.00 CALL [M @ $15.37 $0.00] -15 11/21/2019 (786) $-3,075 $2.05 $-0.14     $1.91 $0.00 $210 6.8% $-2,865
M Short Put 2022 21-JAN 15.00 PUT [M @ $15.37 $0.00] -5 11/20/2019 (786) $-2,425 $4.85 $-0.42     $4.43 $0.00 $213 8.8% $-2,213

That will make for a very White Christmas, 2021 (we should be well up by then) and that makes Stephen Miller happy indeed!  As we just discussed yesterday in our Live Member Chat Room (you can join here for the Holidays), there are PLENTY of great bargains still to be had – even in this runaway market – especially as we are able to discount things even further for ourselves using options spreads.  

Thanksgiving factsThe first Thanksgiving (Plymouth, 1621) was such a success, they extended the festivities for 2 additional days but, then again, they didn't bring a lot of extended family members on the Mayflower and, of course, the young men in the colony were not happy to see the native girls go – as 3/4 of the women who came over on the Mayflower did not survive the first winter in Plymouth.

Speaking of Plymouth, if you want to do something very cool with the kids (or for yourself), Plymouth Plantation puts on an original Thanksgiving dinner with authentic courses like a corn pudding and fish fricassee, tales of colonial life, and centuries-old songs.  They also have recreated the original colony in all it's architectural… er… glory.

image

Still, I love it for the historical perspective EXCEPT the actual Mayflower – which is a huge disappointment – just a tiny little ship that makes you realize what a miserable journey 100 people must have had on it – especially arriving in DECEMBER of 1620 – the European refugees were lucky to have survived at all but, fortunately, there was no wall to stop them.

The Americans that were already for 15,000 years, living in peace and harmony and respecting this great land helped the refugees through that first winter and the Thanksgiving Celebration one year later, when the refugees had their own first harvest, was a celebration in thanks for the tolerance of the original Americans – who put up with their pasty skin color and strange clothing and bad habits, weird religious practices and crazy morals.  

Thank God for tolerance!  

Happy Thanksgiving, 

- Phil

 

 


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  1. Morning, All! 

    We won't be having our webinar this week. We'll get back on schedule next week.

    Happy Thanksgiving! 


  2. Good Morning from Denver —of all places had to pick Denver—although very glad to see my son and dil

    Happy Thanksgiving to all



  3. Happy Thanksgiving Everyone!


  4. Wherever you are I'll bet you don't have our exciting weather with a blizzard with 20-30 MPH winds. Looks like about 8-10 inches so far and this is No Wisc on the south shore of Lake Superior. Our dog went out for 5 seconds and came back looking like a polar bear! Look out east coast-might cause trouble for the Macy's parade!


  5. Good morning and Happy Thanksgiving!

    It's not just the turkeys we are slaughtering – this article is very depressing but I urge you to read and share:

    “Human actions threaten more species with global extinction now than ever before,” the report concludes, estimating that “around 1 million species already face extinction, many within decades, unless action is taken.”

    Unless nations step up their efforts to protect what natural habitats are left, they could witness the disappearance of 40 percent of amphibian species, one-third of marine mammals and one-third of reef-forming corals. More than 500,000 land species, the report said, do not have enough natural habitat left to ensure their long-term survival.

    Over the past 50 years, global biodiversity loss has primarily been driven by activities like the clearing of forests for farmland, the expansion of roads and cities, logging, hunting, overfishing, water pollution and the transport of invasive species around the globe.

    Fishing nets and ropes are a frequent hazard for olive ridley sea turtles, seen on a beach in India’s Kerala state in January. A new 1,500-page report by the United Nations is the most exhaustive look yet at the decline in biodiversity across the globe.

    That face says it all! 

    Denver/Savi – I'm jealous – I miss snow!

    Image result for snow denver"

    Big Chart – Consider how strong this looks as the double dip is still in the uptrending line from the July highs through the new highs.  Of course the 200 dma is still accurate and the volume is BS so there's one hell of a correction ahead – some day…

    Parade/Pirate – No balloons!  What's the point if we can't have balloons?  It's fun when it's windy and they lose control of a balloon – can't they understand that's a FEATURE of the parade?  


  6. I'm surprised Macy's parade still has balloons after what happened to Mr. Pitt !


  7. happy thankgiving phil,

    do you think they will try and keep gasoline up all week or have they achieved the mission

    thanks


  8. I remember that one! 


  9. I was looking for a history of Thanksgiving balloons but I don't see a good one.  Would make a good coffee table book.

    A Mighty Mouse balloon in the Macy's Thanksgiving Day in 1951

    Giant balloons joined the parade in 1927, starting with Felix the Cat. But Felix had no way to be deflated. When the parade ended, he was simply released into the sky, where he burst. The next year, designers added a release valve to the balloons that, they hoped, would slowly leak helium while the animals drifted harmlessly out to pasture. According to TIME, “Macy’s claimed that they would float hundreds of miles away from New York before landing softly in fields or people’s yards.” The balloons came with a return address and an incentive: whoever found one could return it to Macy’s for a $100 reward.

     

    The plan was not seamlessly executed, however. Of five balloons released after the 1928 parade, three (a tiger, a bird and an elephant) landed in Long Island, where one prompted a jealous squabble for the reward. According to the New York Times, neighbors and passing motorists who had seen the tiger balloon land rushed to grab it: “[A] tug of war ensued… The rubberized silk skin burst into dozens of fragments.”

    A fourth balloon, shaped like a hummingbird, landed in the East River and split into two pieces. The fifth, a ghost, was still afloat when the Times story was published on Dec. 1; it had last been seen “moving out to sea over the Rockaways with a flock of gulls in pursuit.”

    Despite the snags, Macy’s continued to send the balloons skyward after the parades until one wrapped itself around an airplane’s wing in 1932, sending the plane into a tailspin.

    Balloon mishaps, including some that caused serious injuries, have remained a problem for the parade, especially in windy years, such as:

    After the 1997 balloon crash, which fractured a woman’s skull and put her in a coma for nearly a month, Macy’s agreed to abide by new rules on the size of balloons and the wind speeds in which they could operate. For the 3.5 million people who line up along the parade route every Thanksgiving, it’s relatively low-risk entertainment — although still not quite as safe as it is for the 50 million people who watch from their living rooms, out of balloon’s reach.

    Gasoline/Tommy – Not worth the risk at all!  Could go higher but EASILY could crash after the holiday in fear of demand not being up to expectations (as it wasn't for several recent holidays).  

    Submitted on 2019/11/18 at 11:41 am

    Last time we played /RB long we were a bit early at $1.60 and we hit $1.585 before coming back up so be careful with the entry here.  On the other hand, I'd hate to miss a Thanksgiving bounce.  

    Markets turned down a bit.


  10. To all of you on the otherside of the pond all have a happy Thanks Giving.

    Macys How about the yellow clown balloon


  11. Ah, here's the Woody Woodpecker episode:


  12. Happy Thanksgiving…..  


  13. KL/Phil
    Hi Phil,
    Happy Thanksgiving, and thanks very much for your detailed explanation of KL and GOLD. I'm
    learning a ton! Just not making a ton :-)


  14. Happy Thanksgiving to all

    I am in Vancouver Washington its  30 that’s the hi for today its only 830 am in them morning.

    Happy we moved from Minnesota


  15. Happy Thanksgiving to the entire PSW family! 

    For most of us, we have much to be thankful for.


  16. Happy Thanksgiving to all.  Rolling on my 10th year at PSW.  Still the best site out there!  Thank you Phil.


  17. You're welcome Saguaro – we will work on the latter.  cheeky

    Happy Thanksgiving to all and I'm very thankful for all our wonderful Members.  I was just saying to someone that, if I didn't run PSW, I'd be a Member here anyway as it's such a good place to go during the trading days and that's thanks to all of you! 

    Image result for big bird thanksgiving"

    I'm finally going to get that poke bowl I've been in the mood for all week – back to do the Butterfly Portfolio in about an hour….


  18. Happy Thanksgiving to all. This year I am making one smoked and one fried turkey. 

    Stjeanluc- well said


  19. Happy Thanksgiving to all. Breaking free from a despotic ruler far away did the USA no harm. Let's hope the same will be said after Brexit.


  20. Happy Thanksgiving to one and all from sunny and warm – for the moment - Atlanta


  21. Told you so on /RB!  

    Will be interesting to see if /NG holds $2.50


  22. 10:30 Oil Report was a pre-holiday disaster:

    Crude inventory build of 1.6M barrels

    • EIA Petroleum Inventories: Crude +1.6M barrels vs. -0.42M consensus, +1.4M last week.
    • Gasoline +5.1M barrels vs. +1.22M consensus, +1.8M last week.
    • Distillates +0.7M barrels vs. -0.75M consensus, -1.0M last week.
    • Futures -0.43% to $58.16.

  23. Phil/thanksgiving

    Phil, Great commentary on Plymouth and the first thanksgiving.

    So true and that’s what makes this country great and what it’s been….don’t where we are going though..

    Appreciate the site, morning posts and commentary.


  24. Butterfly Portfolio Review:  $193,996 is up 93.9% in less than two years but well off our highs so nothing to be excited about.  DIS is killing us at the moment – so it's time to make a serious fix there and MJ is the real culprit – back to $17.  Ironically, we'll have more adjustments to make to the Butterfly Portfolio than all of the others combined – the opposite of our usual low-touch updates.  

    AAPL – $266 is way over our mark and we sold 20 short March $210 calls for $23.30 so a $71,350 loss there only 1/3 offset by the gains on the short puts.  On the bright side, our $240,000 spread is 100% in the money and still net $140,000 – so $100,000 more to gain there.  Many steps to this fix:

    • Buy back the 10 short June 2021 $175 puts for $5.50 ($5,500) 
    • Roll the 20 short March $210 calls at $58.85 ($117,700) to 30 short June $260 calls at $23.65 ($70,950) 
    • Sell 15 short June $240 puts for $9.20 ($13,800) with a stop on 5 at $11, 5 at $13 and 5 at $15
    • Roll 40 short 2022 $260 calls at $44 ($176,000) to 60 short 2021 $270 calls at $28.50 ($171,000)
    • Roll 40 2022 $200 calls at $80 ($320,000) to 60 long 2022 $240 calls at $54.50 ($327,000) 

    So, all told, we're spending just $36,450 and what are we accomplishing?  We now have 60 2022 $240/2021 $270 spreads at $180,000 so worse than the one we had but the short 2021 $270s can be rolled to the 2022 $290s ($30) not even accounting for the 1-year decay advantage so I'm confident we'll get our $120,000 back there eventually.

    Meanwhile, the big accomplishment is to push all the short calls into 100% shorter-termed premium while keeping them well-covered and we've lowered our downside delta considerably – other than the short puts, which are rollable. 

    This is why we have such major fluctuations in the Butterfly Portfolio so it's not the journey – it's the destination.  If AAPL stops going higher every day long enough for some of the short premium to expire, we could pick up $70,950 plus another $13,800 by June if we thread the needle on the puts and that's $84,740 in pure premium we've sold for the next 6 months and 3 more chances means we'll sell $340,000 in premium between now and 2022 PLUS we think we can work into a $320,000 spread so POTENTIAL to make $640,000 but even a small portion of that will do wonders for our portfolio.

    DIS – Similar problem to AAPL as we sold 25 of the Jan $130 calls and DIS is at $152 and those calls are down $7,625.  Well, not that similar as it's way smaller – but the same concept!  We have an advantage here as we aren't at 2022 yet and you always do better rolling for time and not just strike.  Essentially, we're going to scrap the short puts and calls as we missed the target and lost net $4,300 – in this case it's not tragic and our bull call spread is deep in the money for a huge gain.

    • Sell 25 June 2021 $110 calls at $46 ($115,000) 
    • Buy 50 2022 $130 ($33.50)/$160 ($18.25) bull call spreads at $15.25 ($76,250) 
    • Roll 25 short June $135 calls at $28 ($70,000) to 35 short April $145 calls at $12.50 ($43,750) 
    • Buy (to close) 25 short Jan $130 calls at $22 ($55,000) 

    Here we're spending net $42,500, putting us in this spread for net $9,775 (we had a large net credit to start) and we have a $150,000 long spread that's mostly in the money 2/3 covered by the short April $145s, which we should be able to roll out over time.  On the whole, we do think DIS will correct a bit but, long-term, the streaming service will push a lot of money to the bottom line and the Star Wars Hotel will be booked for 5 years….

    • MDLZ – This one is, amazingly, dead center on track.  Hard to imagine it stays right here but a pretty good call from way back in Sept, when it was 5% higher.

    MJ – Is it a distraction we should kill or salvageable?  Since we can sell 40 April $18 calls for $1.70 ($6,800) and closing the spread would cost $18,475 – it's simply cheaper to keep it.  But, keeping it means investing on a roll of the 2022 $25 calls or we risk getting burned to the upside (I know, ha ha based on recent performance) and the puts we can fix too – so let's do it:

    • Buy to close 10 2021 $30 puts at $13.80 ($13,800) 
    • Buy to close 10 2022 $25 puts at $10.30 ($10,300) 
    • Sell 30 2022 20 puts at $6.50 ($19,500) 
    • Roll 50 2022 $25 calls at $2.30 ($11,500) to 60 2022 $20 calls at $3.60 ($21,600) 
    • Sell 40 April $18 calls for $1.70 ($6,800) 

    That's net $7,900 to "fix" our $18,955 paper loss and now we have more realistic targets and we've only sold 142 out of 786 days so 4 more $6,800 sales is a potential to collect $27,200 in premium while we wait to see if our $125,000 (also rollable) spread comes in.  Of course, we don't think over $25 is very likely now so call it $25,000 at $25 but that would be nice…

    WHR – Another one that's on target – AMAZING!  

    • X – Brand new and on track.

    It's all about AAPL as that has the potential to be a blockbuster spread – if it ever calms down but, since we are generally bullish – all that's really happened is we ended up positioning for much bigger gains and we've already banked over $100,000 in profits from AAPL in the past two years – the position just grows and grows as we take advantage of changes. 

    There are not many stocks I'd be willing to carry so much on but AAPL is NOT going BK so it's all about just managing the spurts and waiting, PATIENTLY, for things to normalize – as they often do.




  25. Phil

     Are  AAPL  and Dis  ok for new trades ?

    Or wait Jan 2020

    Thanks



  26. Donald Trump tweets image of himself as ROCKY


  27. US GDP revised up to 2.1%, beating second quarter




  28. In Florida and elsewhere, GOP pressured over climate change


  29. Phil,

    I don't understand Apple long call rolling.

    If I have 40 $200 long calls, then why we roll them to $240 calls? On every roll we loose $14.5. Why we don't just buy 20 long 2022 $240 calls and keep the original long calls ? Why better to roll the $200 calls to the $240 calls?

    Thanks 


  30. Qc-Thought you were still in Twin Cities. Is your wife still with VA in Vancouver? Still snowing like crazy here. A complete white out. Even the county plow got stuck in the ditch!!


  31. pirateinvestor

     No she is working here

    We decide there was not a good reason to put up with the weather the -46 was it

    We were on our way to Asia and stuck at the airport all day

    We moved about a year ago we are 15 minutes from Portland Oregon


  32. Qc-All this yucky weather makes me crazy but I know you are in a beautiful area. Have a good holiday.!


  33. A merry harvest festival feast to all!


  34. New trades/QC – I would, from scratch, do things differently.  Remind me on Friday and I'll take a close look.

    AAPL/KGab – We're not losing anything, just cashing in part of our winnings and lowering the downside delta (so we lose less on a pullback) on the larger position.  If we leave 40 2021 $200/260 spread alone, it's net $80/44 (ish) so $36 ($144,000) out of a potential $240,000.  By shifting to 60 2022 $240s at $54.50 ($327,000) against 60 short 2021 $270 calls at $33.50 ($201,000) we are now net $126,000 on what is now only a $180,000 spread but you're not counting the additional year we have on our longs.

    If, for example, we had done something similar and sold Jan (2020) $240 calls, which are now $30 against the long 2021 $210 calls, which are now $67, our net would be $37, not $30 so 60 x is $220,000 not $180,000 (though still not $240,000) but the key thing you are missing is we can roll the Jan $240s ($30) to the 2021 $265s (now $31) about even and now we're in 60 of the 2021 $210/265 bull call spreads which is potentially $330,000 – much MORE than $240,000 and it hasn't taken us any more time than had we stuck with the original (now you have to use your imagination) 40 2021 $170/210 bull call spreads.  

    At the time we would have taken the original 2021 $170/210 bull call spread for $24.50 (theoretically 9/18/18), we underestimated the strength of AAPL and only anticipated making $40 x $15.50 at $210 ($62,000) on a $160,000 return but had we flipped it to the 2021 $210s with the short Jan $240s along the way (as we are now doing with our 2022 spread), for $6,450 more we potential get $330,000 back instead – $90,000 more than our max return on the old spread.  

    It's very hard to wrap your head around things like that when we change the time-frames.  That's why very few people take advantage of Theta (time) adjustments but they can be very powerful tools as we force our short callers into a much more rapid rate of premium decay – which is where we love to make our money!  

    The other big factor is that the 2022 $200/260 spread has a net Delta of 0.80/0.60 and, of course, the same Theta decay rate on their premium while the 2022 $240s have an 0.68 Delta vs 0.54 on the 2021 $270 calls so net 0.20 vs net 0.14 we move to so we lose 30% less on the way down (if AAPL pulls back) but our short caller also loses their Theta value (time premium) twice as fast as we do so their entire $33.50 in premium disappears in one year while the 2022 $240s at $54.50 are $27.50 in the money so $27 in premium decays 1/2 as fast, giving us a bonus advantage of about $20 for the year, which translates into $120,000 that we pretty much gain no matter what by BEING THE HOUSE!  

    So we will lose less (net) on the way down, make $120,000 more if it's flat and make $90,000 more if it goes higher.  Good choice, right? 

    And there's always 2023 to roll to!  

    Weather/QC, Pirate – I know how you guys feel as it might be 77 degrees during the day (81 tomorrow) but it was 66 at night and the pool water got down to 72 and we had to turn the heater on…  I guess we all have our struggles….  cool

    Have a very Happy Thanksgiving, wherever you are, 

    - Phil


  35. Happy Thanksgiving all!


  36. Make sure you refresh the page for the above comment had a math error I corrected.  


  37.  Whoops, so much for today’s gains.  

    Trump signed the sanctions against China all of a sudden.  









  38. Iraqi Protesters Burn Down Iranian Consulate




  39. Make sure you are not typing anything and/or have saved your typed posts before clicking on links!  :)

    Mr Burns has the best Thanksgivings ever!  :)

    https://www.youtube.com/watch?v=NnfzjlWho78

    And Mr Burns does his Portfolio review!  :)

    https://www.youtube.com/watch?v=3iFxUCSTfRU


  40. Phil Interesting roll and follow up explanation on AAPL, besides that you seem to have some what mixed up the 2021 and 2022 on the BCS, but easy to figure that one out, I do have though another question.
    I see you often roll a shorter call like here the Mar 20 210 call, even there is still in this case 3.50 of premium left. I hold the Dec10 230 caller and I am still not rolling as the caller still has 1.75 of premium. Yes I am aware the 230 has a much higher delta than rolling say to Jun 260 or 270, but I still feel the delta will go up or down somewhat in proportion to the stock price.
    Any thought on this one. Sorry I do not wish to spoil your turkey today.
    Happy Thanksgiving to you and your family.


  41. Happy actual Thankgiving!  

    Thanks for the warning Vidt.  angry

    AAPL/Yodi – I'm rolling the March $210 callers with $3.50 premium over 4 months ($1/month) to the June $260 calls that have $15.80 of premium (and a much greater chance of expiring worthless) over 7 months ($2+/month) so I make twice as much money each month in addition to selling 50% more so $3+/month vs $1month.  It's still the Theta you have to keep your eye on.  


  42. Thanks Phil, from that point of view this makes in deed a lot of sence.


  43. Labour unveils plan to plant 2bn trees in next 20 years





  44. Phil – I've refreshed but I believe there is still an error in the maths on the strike prices:

    By shifting to 60 2022 $240s at $54.50 ($327,000) against 60 short 2021 $270 calls at $33.50 ($201,000) we are now net $126,000 on what is now only a $180,000 spread but you're not counting the additional year we have on our longs.

    The short 2021 $270 calls are priced at $28.60 not $33.50. giving a  cost of $171,600 – ($30,600 less credit for the sale of the short leg of the BCS) so the net should be $156,600 on the $180,000 spread.

    But there is a lot of moving parts in that adjustment so I may have goofed!