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Impeachment Thursday – Putin Backs Trump Says He has the Votes in Senate

How crazy is this?

At his annual end-of-year news conference in Moscow on Thursday, Putin denounced the impeachment proceedings as "spurious" and said the US Senate is unlikely to remove Trump. He said Trump's presidency is far from over as Republican lawmakers "are unlikely to want to drive out of power a representative of their own party."

To show off his puppeteering skills, Putin made words come out of Trump's mouth all the way in Michigan while having Trump flash the "White Power" sign to the crowd, who burst into applause.  Now, I don't know when we decided the "OK" sign was now the White Power sign and I'd love to give Trump the benefit of the doubt but it's not like he can't know that the OK sign is not OK – it's been a controversial topic involving his supporters all year long and just this weekend, West Point and  Annapolis launched investigations into students who flashed it during the Army-Navy game.  

This is not the first time Trump has been accused of flashing the White Power symbol during a speech and it's a very interestering time to be stirring it up again, what with him being impeached on the same day and all but Vladimir Putin says Trump should not worry as he can't see his GOP Senators reversing the votes he worked so hard to obtain.  

In the end, no Republican House Members voted to impeach the President and only 2 Democrats voted not to but, on Article 2 of the Impeachment (Obstruction), 35 Republican's did not vote rather than pretend the President did not obstruct Congress any of the 10 times he was cited for doing so in the Mueller Report.   Unfortunately for Trump, the leaves the House Vote 221 to 165 against him and that's 57% – more than enough to convict in the Senate.  

Image result for ok white powerI say we give Trump a pass on using the OK sign because maybe the President is just oblivious to current events or, if not, lacks the self-control to avoid making controversial gestures that are likely to be misinterpreted as support for the worst possible people or, even better – perhaps he was just "owning the Libs" by making racist gestures at his rally – like the true chessmaster he is.  You know, the usual GOP talking points that makes everything the President does seem – OK!  

The markets are still OK even though there is no actual China Deal signed and, of course, the President is being Impeached but "Moscow" Mitch McConnell has already made it clear that his Constitutional role as an impartial juror in Trump's Senate Trial takes a back of the bus seat to his role as Trump's Advocate.  "I'm not an impartial juror. This is a political process. There's not anything judicial about it," McConnell told reporters on Tuesday.  McConnell's comments to reporters came after the majority leader rejected Democrats' request to call witnesses for Trump's Senate trial.

Trump should be more worried about weak job growth in swing states like Michigan, Ohio and Wisconsin so, while Trump is holding a rally in Michigan talking about his National Job Creation in a state that simply isn't seeing the effect at all.  

Bloomberg has a disturbing article this morning about "Financial Fakery" – something we tried to eliminate after the last financial crisis but seems to be making a comeback as Trump defunds and defangs Elizabeth Warren's CFTC.  Of course, with insiders making $1.8Bn off a single Trump tweet – they don't want the CFTC looking into anything and the lack of bank oversight is just collateral damage in dismantling the agency and setting us up for the next crisis.  As noted by Bloomberg:

Everybody risk-adjusts. JPMorgan Chase & Co., the biggest U.S. bank, says its capital backs up 12% of its assets when they’re risk-adjusted. The ratio drops to 6% without the adjustments. That’s because the adjustments shrink the bank’s $2.8 trillion balance sheet to $1.5 trillion. The shrinking balance sheet is more striking at European banks, which have broader leeway to use internal formulas for credit risk. Deutsche Bank AG’s €1.5 trillion ($1.67 trillion) balance sheet becomes €344 billion after risk-weighting. That helps its capital ratio jump from 4% to a risk-adjusted 13%.

Yikes!  That's a $700Bn difference for JP Morgan (JPM) alone.  Lehman collapsed in 2008 over a $50Bn difference in collateral. 

Be careful out there! 

 


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  1. Good morning, All! 

    Webinar replay is up! Here:

    https://youtu.be/DnWWhyLSfew


  2. Good Morning!



  3. Good morning!

    Less money, mo' problems for BA:

    Moody's lowers Boeing a notch

    • Moody's drops its unsecured debt rating on Boeing (NYSE:BA) to A3 from A2 and shifts to a Stable outlook from Negative. Key snippets from the Moody's report are posted below.
    • "The A3 senior unsecured rating broadly reflects Boeing's position as one of two manufacturers of large commercial airplanes and a prime US defense contractor. The diversification of the defense and services businesses helps mitigate increasing financial and operational risk within the company's commercial aircraft operations."
    • "The stable outlook reflects the company's strong liquidity and financial flexibility which, together with stability in the defense business and ongoing growth in services, mitigates the impact while the MAX remains grounded. The stable outlook also reflects that Boeing's historically aggressive financial policy will remain tempered, with no share repurchases until after a sustained recovery following the ungrounding of the MAX."
    • "There will be no upwards pressure on the ratings until after the MAX program returns to normal, the inventory of aircraft is depleted, and the effects of the grounding on the financial profile have been reversed, including the repayment of commercial paper and other debt used to fund the MAX disruption. Improvements in key credit metrics that could lead to a ratings upgrade include debt-to-EBITDA moving below 2.5x and retained cash flow-to-net debt above 40% while EBIT-to-interest approaches 10x."

    As we expected:

    Philly Fed survey unexpectedly goes soft

    • December Philly Fed Business Outlook+0.3 vs. +8.5 consensus, +10.4 prior.
    • The big decline came mostly as a result of the survey of current conditions. Forward-looking indicators like new orders, employment, and shipping remain positive, suggesting a healthy outlook for the next six months.

    Remember, this is before they knew BA was cutting production.

    This is surprising:

    Rite Aid up 22% premarket on Q3 beat; non-GAAP EPS guidance raised

    • Rite Aid (RADQ3 results: Revenues: $5,462.3M (+0.2%); Retail Pharmacy Segment: $3,909.9M (-1.7%); Pharmacy Services Segment: $1,613.1M (+5.7%).
    • Net Income: $52.3M; EPS: $0.98; non-GAAP Net Income: $29.1M (+98.0%); non-GAAP EPS: $0.54 (+92.9%); CF Ops: $423.7M (+20.7%).
    • FY 2020 guidance: Revenues: $21.5B-$21.9B (unch); net loss: ($174M)-(204M) from ($235M)-(275M); non-GAAP EPS: $0.13-$0.55 from $0.00-$0.56; non-GAAP EBITDA: $515M-$545M from $510M-$550M; Capex: ~$230M from ~$250M.
    • Shares are up 22% premarket.

    Micron calls the bottom – WSJ's 'Heard'

    • The current quarter is "the cyclical bottom for our financial performance," said the company last night, as noted by the WSJ's Dan Gallagher.
    • Last night's conference call transcript
    • To review, Micron (NASDAQ:MU) in its FQ1 posted its fifth-straight quarter of double-digit revenue declines, and the outlook for the February Q is for six straight.
    • Markets do anticipate though, and they've clearly been pricing in a rebound in the company's results for some time – shares are up about 75% this year. With the stock changing hands at about 19x forward earnings – or double the average valuation over the last three years – the turnaround needs to come soon, says Gallagher.
    • Checking the Sell-Side, RBC lifts its price target to $65 from $55, and Rosenblatt to $100 from $80.
    • Shares are up 3.65% premarket to $54.98.

    A Tesla Shareholder's Biggest Fear: Robotaxis 

    Alibaba Set To Soar: Hong Kong And Chinese Demand Big Driver 

    Darden Restaurants -4% after Olive Garden drags

    • Darden Restaurants (NYSE:DRI) reports comparable sales across chains increased 2.0% in FQ2 vs. +2.1% consensus.
    • Comparable sales were up 1.5% at the Olive Garden Chain vs. +3.1% consensus off a 1.2% drop in customer traffic and 2.0% jump in prices.
    • Comparable sales rose 6.7% at the LongHorn chain vs. +2.9% consensus off a 3.2% gain in traffic and 1.9% increase in pricing.
    • Darden's overall restaurant margin was 19.7% of sales vs. 19.3% consensus.
    • Looking ahead, Darden anticipates full-year revenue growth of +5.3% to +6.3% and EPS of $6.30 to $6.45 vs. $6.40 consensus. Total capital spending of $450M to $500M is anticipated.
    • Shares of Darden Restaurants are down 4.39% premarket to $111.20.
    • Previously: Darden Restaurants EPS beats by $0.05, revenue in-line (Dec. 19)

    China announces fresh tariff exemptions

    • The new list of import tariff exemptions includes six chemical and refined oil products from the United States, days after the world's two largest economies announced a phase one trade deal.
    • While the exemptions will be for one year from Dec. 26, duties already imposed on U.S. products would not be refunded.
    • Kelly Cui, principal analyst with consultancy Wood Mackenzie, said the exemptions on the chemical products would benefit companies such as Dow Chemical (NYSE:DOW), Exxon Mobil (NYSE:XOM) and Chevron Phillips Chemical (NYSE:CVX), which have since 2017 been adding shale-based ethylene production facilities and targeting China as the prime export market.

    This just in: 10-year yield nears 2%

    • There's been loads of whipsaw action in the bond market of late, so it's hard to make too much of the move. But for now – with a number of geopolitical risks having passed, and with the U.S. economy continuing to move forward – yields have resolved to the upside.
    • Just in the past week, the China trade war has cooled, the U.K. elections have apparently resolved Brexit, and the Fed officially went into a long pause mode.
    • The 10-year Treasury yield is up another 2.3 basis points this morning to 1.94% – that's the highest level since August. TLT -0.25%TBT +0.5%AGG -0.1%


  4. Pound rises as BOE holds policy steady

    • The British pound gains 0.4% after the Bank of England's Monetary Policy Committee votes 7-2 to keep its benchmark interest rate unchanged at 0.75%, following the European Central Bank and the U.S. Fed in holding policy steady.
    • But with Brexit on the horizon, the next move could "respond in either direction to changes in economic outlook in order to ensure a sustainable return of inflation to the 2% target," the committee's statement said.
    • "If global growth fails to stabilize or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation," it said.
    • But if those risks don't materialize and the economy recovers in line with the MPC's latest projections, "some modest tightening of policy at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably at the target."

    Xperi and Tivo to merge

    • Xperi Corporation (NASDAQ:XPER) and TiVo (NASDAQ:TIVO) plan to merge in a $3B all-stock transaction.
    • The companies say the transaction creates a leading consumer and entertainment technology business and one of the industry’s largest intellectual property licensing platforms with a diverse portfolio of entertainment and semiconductor intellectual property.
    • The merger pact calls for a 0.455 fixed exchange ratio, meaning Xperi shareholders will own approximately 46.5% of the combined business and TiVo shareholders will own approximately 53.5%.
    • The deal is expected to close in Q2 of 2020.
    • TIVO +8.23% premarket to $8.54.
    • Source: Press Release

    Darden Restaurants EPS beats by $0.05, revenue in-line

    • Darden Restaurants (NYSE:DRI): Q2 Non-GAAP EPS of $1.12 beats by $0.05; GAAP EPS of $0.21.
    • Revenue of $2.06B (+4.6% Y/Y) in-line.
    • Shares -2.9% PM.
    • Press Release

    Appeals court strikes down ACA individual mandate

    • The U.S. 5th Circuit Court of Appeals in New Orleans has ruled that the individual mandate of the Affordable Care Act (ACA), also known as Obamacare, is unconstitutional.
    • The court sent the lawsuit back to a district court in Texas to reassess how much of the ACA can remain if the individual mandate (requires a uninsured adult to purchase health insurance or pay a fine) is removed.

    Nike earnings: What to expect

    • With shares of Nike (NYSE:NKEup 35% YTD, investors are expecting more good news when the sneaker giant reports FQ2 results after the bell.
    • The company is likely to show growth in profits and revenue amid success in selling merchandise directly to consumers in-store and online, though focus will be on North America, where Nike has struggled to meet market expectations in recent quarters.
    • Also watch out for comments about new CEO John Donahoe, who takes over for Mark Parker when he steps down in January.

    Cali green lights driverless trucks, vans

    • The next step in the self-driving revolution is taking shape as California approves a broader variety of autonomous vehicles to be tested on the state's public roads, including small to mid-sized trucks and vans.
    • Companies testing vehicles without a human test driver behind the wheel will have to build in a link to a remote operator and must agree to share data with the state.
    • While 65 firms currently hold permits to test autonomous vehicles in California, only one company, Alphabet's Waymo (GOOGGOOGL), has attained a license to test fully driverless vehicles.

  5. Good morning!
    Looking for advise on the following position: 

    I am sitting on long 30 AAPL Jan 15 2021 230 calls (bought at $37, now $62) and short 30 AAPL Jan 15 2021 265 calls (sold at $17, now $38). Obviously, AAPL outperformed (as in ran over) my initial price target. I do not believe that AAPL will run past $300 anytime soon (famous last words). What is the best strategy to capture the winnings on the long call while letting time do its work on the short call? Just hold? Roll positions? Appreciate the feedback. ty 


  6. Chicken, chicken out and do nothing!!!! AAPL However you can still sell some shorter calls like Jan 20  290 or so for extra cash.




  7. Yodi/apple calls 

    I don’t know…with the way  ? (aapl) is going up, we could be at $300 by mid Jan. (Justified or not)

    I feel that we in a no man’s land over the short term with  ? .(aapl)

    With the run up from 150, we are due for at least SOME KIND OF pullback? . It may be a fantastic company and the street may have just doubled their multiple (almost) from 12 last year to the current 20.


  8. Maya I am having the AAPL Jan 20 170/210 to close for 39.98 for quite a while with no takers, so I will let it take it's course. Even sold some Jan 20 290 at 2.60 now 2.30, so I think they will take a porse.


  9. Butterfly Portfolio Update:  $237,869 is up $137,869 (137.8%) in our oldest portfolio (initiated 1/2/18) as we close out our 2nd year.  There's no point to closing butterfly plays as the whole point is to generate a quarterly income selling puts and calls.  It is, by far, our steadiest portfolio year over year - as it's generally market agnostic but, month to month – it can have pretty wild swings on changes in the VIX or even a big move up or down in single stocks.  

    It's generally a low-touch portfolio, we try to only make adjustments when we have to:

    • AAPL – We just rolled 20 short March $210 calls to 30 short June $260 calls and now those are burning us for a $22,875 loss already.  Fortunately we also added longs but they are not keeping up so far.  AAPL is at $280 at the moment and we sold the calls for $24 so $284 is where it starts getting really annoying but they are due for a pullback into earnings next month.  Our key safety feature here is we sold 2021 $270 calls against our 2022 $240 longs and the $270s ($35.50) can be rolled to the 2022 $300s ($33.50) to add another $180,000 of upside if AAPL does keep climbing – so we've got that going for us, which puts our current, unrealized short call loss into perspective.

    DIS – Also recently expanded and adjusted and now right on track with a big profit.  

    MDLZ – This has been a good income producer and it was a proper Butterfly Play, where we bought the long puts and long calls to protect our short puts and calls – but we hardly actually do them that way in this never-ending bull market and you can see why as the puts are nearly worthless already and too far out of the money to be effective.  The calls are up nicely, however so we're going to lock them in and extend our time as follows:

    • Buy to close 20 2021 $55 calls at $4.25 ($8,500)
    • Buy to close 20 2021 $38 puts at 0.60 ($1,200) 
    • Buy 20 2022 $55 ($6)/$62.50 ($2.80) bull call spreads for $3.20 ($6,200) 
    • Sell 10 2022 $50 puts for $4.20 ($4,200) 

    So we're taking net $7,700 off the table and we're still covering the upside with a $20,000 spread and we're generating about $5,000 a quarter in premium sales.  Very nice!  

    That's the beauty of the Buttefly Plays – sometimes we are so on track that we have tons of cash we can wring out of the position.  This will put the portfolio at over $130,000 in cash, giving us about $250,000 in remaining buying power to add more positions with.

    • MJ – We're testing my theory that if we'd just stick to the plan and sell lots of calls – this can be a very profitable ETF to hold onto.  Since we can buy back the 50 short 2022 $35 calls at $1 ($5,100) last sale was $1 yesterday, don't pay more), let's do that and sell 30 of the 2021 $21 calls for $2.05 ($6,150).  We can always roll the short 2021 calls back to 2022 but, meanwhile, they burn premium twice as fast so we make $6,150/393 ($15.65/day) vs $5,100/764 ($6.67/day).  These moves don't seem like a big deal but they add up fast!

    • WHR – We didn't panic and now the short calls are coming back for us – all seems well but let's put a stop on them at $4 now.  

    • X – Our newest play and right on track.  


  10. GOLD got at upgrade today at BAML   


  11. Phil / you reminded us of your deep love for M yesterday. As part of the 3 for $150k picks that you kindly created back in April (together with RH – which did not hit my buy price so I did not take advantage of it, and ALK), but I did go go for the M trade – which will obviously need  some shepherding – I agreed with you back in April that love for M was due back then as well when it could be bought for just under $25 (cathartic sarcasm for soul cleansing intended): Your post on April 1st – and I really hope you were not having me on!!!! How would you adjust?

    phil

    April 1st, 2019 at 11:47 am | Permalink | Tweet this

    Speaking of retail, I owe Winston one more big winner and that's going to be M at $24.40.  That's $7.5Bn and if you like CPRI for that price, M makes $1Bn a year (50% more) and is sitting on about $16Bn in real estate or $21Bn according to Starboard, who are an activist investor in M.  

    Interestingly, M pays a $1.51 dividend, which is 6.5% at the moment so it's actually good for a dividend play so, since I'd LOVE to own the stock at $24.40, I can sell very aggressive puts where my only downside is owning the stock and collecting dividends. 

    So, for the OOP, let's add:

    Sell 10 M 2021 $28 puts for $7.50 ($7,500) 

    Buy 25  M 2021 $23 calls for $4.75 ($11,875)

    Sell 25 M 2021 $30 calls for $2.40 ($6,000)   

    That's still a net $1,625 credit on the $17,500 spread so the upside potential is $19,125 (1,176% on negative cash) at just $30 so, even if assigned, the net is still $1.625 less than $28 or $26.37 and then we can sell $23 calls for $4.75 and drop our net to $21.62, about 10% below the current price.  Also, if M takes off, we can sell 5 or 10 short calls for extra cash along the way.


  12. Winston ooooutch that hursts but you are not alone I sit with the stock at 20$ still hoping for a miracle.


  13. Winston if it makes you feel better one port. down 14.2 K the other 12.8K remember you can not be right ALL the time!!!!


  14. But I am not counting the div.!!!


  15. Me too – I was late to the M trade (hooray!) and sold the M $23 puts for $4ish and was assigned some stock on Monday. I did not partake in the call spreads so my adjustments will be dead simple. 


  16. M well as long once not sell the stock it is only a paper loss.


  17. Would you suggest any adjustments for a closer MJ setup:

    Long 10 Jan'21 $20calls at $6.53 (now $2.15)

    Short 5 Jan'21 $30 puts at $5.87 (now $14.40)

    THX!


  18. Enjoyed the M narrative from all of the above. However knowing Phil is usually early I waited and am in on the 22X 15Calls. At the time regular retail was under the gun as AMZN is wiping them all out?? Anyways, the headwinds seemed good for M with all that real estate (much like SHLD) so ….I did get wiped out on MJ, but there is another etf that seems to be doing somewhat better as I believe it is US versus the Canada mj stocks. Canada is not rolling out the dispensary's so that is causing problems. Even in COLO the illegal MJ is 70% of the market! Our government is so dang dumb!!


  19. M – it's actually a good example of Phil's approach – as he said it is a feature of the system – but more of that in a minute. Love for a stock is an interesting concept, and is worth exploring in a bit more detail. If you start with an analysis of the fundamentals of a company and feel that a stock can more than justify its current price (especially if it has been punished for some reason by the market), then I perfectly understand that one's assessment is that this a stock that I really want to own. 

    Now, if you adopt an approach that the current price is where you would be happy to own this particular stock (whatever it may be called), then it is perfectly reasonable to follow through on that logic and assess that if the stock declines in price then, yes – this stock is now being offered at a 'bargain' price – in other words – if I loved the stock at $25 and it is now at $23 then of course I would be happy to buy more. One caveat – if the fundamental analysis has changed for valid reasons (fraud, increased competition) then of course that logic has to be revised. But let's say nothing has changed. Using M as an example on M – you will love it all the way down to $15, every single tick on the way down you see only what love can profess, a deeper love is the only logical position to have. 

    Now we come to the feature of the system. If you decide in advance that you will reserve 25% blocks of allocation to buying the stock, and one is absolutely committed to following through and buy additional blocks when a stock declines in price until 4 x 25% allocation blocks have been bought – then I think that is an absolutely valid strategy to adopt. 

    From the very beginning of subscribing, the Phil strategy has always been that a key decision has to be taken when a stock drops 20%. Do you double or stick? Because the correct response if you want to stay with the stock is that you have to double down. And then you have to double down again. So in that sense Phil is right to be in love with a stock he wants to own when it effectively gets cut in half. What I see as a wounded animal that has to be approached with care, Phil sees as a reason to rejoice. I respect that. 

    But I am still working on the mental fortitude needed to follow that approach.

    I of course would love to hear member's experiences (with examples) of doubling down and doubling down again on favorite stocks.


  20. GOLD/Stock – Need to see Gold hold up before they can get going again, I think:

    M/Winston – Ah, sorry about being an early adopter on that one!  The good news is the 2021 $23 calls are still 0.80, so $2,000 is $3,625 more than you paid for the spread – so at least there's something to build off.   The 10 short 2021 $28 puts are now $12.90 ($12,900) and they can be rolled to 15 short 2022 $20 puts at $7.10 ($10,650) and you can pick up 40 of the 2022 $13 ($4.60)/20 ($2.10) bull call spreads for $2.50 ($10,000) and that's net $8,625 you would be spending to end up with the $28,000 spread that's $12,000 in the money with the 25 short 2021 $30 calls – but they are only 0.25 so not worth the margin if you need it.  

    It would have been great if the original spread worked out and we make $19,125 after taking a $1,625 credit but it didn't so now we have to man up and turn it into a real trade that "only" makes $19,375 (224%) if M is back over $20 almost 3 years from the start at $24.40.  Not that bad really for a stock that dropped 33% on you….

    And what you said in that last P – you do need "mental fortitude" but everyone forgets (so I'll point it out again on this cycle) that MOST of the stocks we put in the LTP are short puts only and, if they drop 10-20%, THEN we add a 1x bull call spread and THEN, IF they drop another 20%+, we consider doubling down and THEN, IF they drop yet another 20%+, we consider another DD to a full, 4x (1/20th of the portfolio) position.  

    That strategy means we end up with A LOT of short puts that we never add to and they just expire worthless (and we just keep the cash) and we also end up with a lot of small, 1x positions that recover and we "only" make 1x of whatever we set out for.  Meanwhile, that leaves a lot of big allocations available for those stocks we REALLY love that have tragic circumstances along the way and some of those recover and some don't and when they don't they are big failures (HMNY, FTR) but mostly they do and our winners offset those losers by a wide margin.  

    The mental fortitude comes from doing it over and over and over again and understanding that by "being the house" YES, there will be times we lose but, in the long-run, statistics are on our side and we tend to come out ahead.  

    And you missed RH?  That went even lower in May from our entry - why couldn't you buy it?

    ALK was the other one I was banging the table on back then:

    M/Yodi – Hope is not a valid trading strategy!  As noted above, you have do DO SOMETHING to put yourself in a position to win.  Of course we take pot-shots where our worst case would have been owning 1,000 shares of M at $21.62.  They just paid an 0.38 dividend on the 12th and that's $1.51/year so I could collect that (7%) while I wait for it to come back or I could sell 2022 $17 calls for $2.90 and 2022 $15 puts for $3.65 and than my net would be down to $15.07 and I'd collect $3,000 (20%) in dividends while I wait to see if I get called away at $17+ for another $2,000 (13%), which isn't a bad worst case.  If M goes lower, I end up owning 2,000 shares at $15 ($30,000) rather than 1,000 shares at $24,400 – where we started – also not a tragedy unless it goes much lower, right?  

    If you only sell puts on positions you REALLY want to own in amounts you REALLY want to scale into (1x, 2x, 4x) - it's very hard to have a major problem unless the stock drops more than 40% on you.

    In fact, I rarely double down on a stock unless it's dropped quite a bit more than 20% – otherwise, a small adjustment generally does the trick. 

    M/Ati – Same as above.  Nothing wrong with owning them down here.  

    MJ/Wing – As I noted in the Butterfly Review, MJ is generally a bad investment if you're not using it to make money selling short calls.  That set-up is pure long so I'd roll the 5 short 2021 $30 puts ($7,200) to 10 short 2022 $20 puts at $6.50 ($6,500) and then I'd take the 10 2021 $20 calls ($2,150) and roll to 10 of the 2022 $15 ($5)/23 ($2.50) bull call spreads ($2,500) and sell 5 of the April $18s for $1.40 ($700).  That may not seem like much but it's net $350 more, so you are in for net $3,945 on the $7,000 spread and you'll have 7 more chances to collect $700 ($4,900) selling short calls while you wait so – even if MJ stays flattish and the long spread goes worthless, you can ultimately still recoup your outlay.  

    Early/Pirate – Yes, we should have a portfolio that only enters trades AFTER we double down on them!


  21. Phil M as I said by not selling the stock I do not count it as a loss. Good point in selling ITM calls. In my case I have waited before selling as I was hoping the stock would start to recover, before selling calls as when the stock was trading at 14 selling calls would now have been a negative aproach. you can not win them all.


  22. Earnings Portfolio Review:  $102,715 is only up 2.7% in 6 weeks and, though that's considered great by most people – it's kind of boring for us.  Our SQQQ hedge has sucked up $2,430 of our gains but, otherwise, we do love the positions and they are scheduled to make another $42,293 over the next two years – so we have to take the hedge in context as future adjustments are much cheaper than the initial entry and, of course, we will be adding more as next earnings season commences.  

    Anyway, that means this entire portfolio is good for a new trade and I love every one of our positions (except BA, which I'm worried about). 

    • HBI – Another hidden retail gem.

    • BA – The were up $3,000 so this cost us since the last review.  Very tempting to sell a put here but we don't know what the outcome will be so I think this spread is enough of a gamble by itself for now.  

    • CLF -   Finally woke up and on track.

    • IMAX – Star Wars is getting bad reviews but I doubt that keeps people from going.  My Mom asked us if we wanted to go on Sunday AND she's bringing her boyfriend!

    • IRBT – Very happy with that bottom call.  Sometimes they do work out…  cool

    • SQQQ – In trouble already but that's OK, the idea is the portfolio needs insurance and this was our first policy.  Unfortunately, we didn't die – so we wasted our first payment!  Still we paid net $1,630 for our insurance and we can still cash in our March $22 calls for $5,250 – that's more than we paid!  I don't care about the puts because we'll roll them forever but, while SQQQ is low, let's buy some cheap, longer-term insurance like 40 June 20 ($4.60)/27 ($2.50) bull call spreads for net $2.10 ($8,400) so we're paying $3,150 for much more insurance and we are double covered on the short March $27 calls, now $1.30 and if we put a stop on 10 (1/2) of them at $1.70 ($1,700) it's very doubtful we'll get in trouble on an upside move.  

    See how cheap it is to adjust a hedge once you establish it?   And now it's a $28,000 hedge vs $10,000 before at the same upside point ($27).


  23. Unfortunately not, Yodi!  That's why we try to have fun playing the game…


  24. Winston – I personally prefer using stop orders to protect one's capital instead of continuing to average down on losing positions. The mathematics are very simple.  If you cut your loss at 20% you only need 25% appreciation to get your money back. However, if you let the loss get to 50%, you need 100% to get your money back.  Not that many stocks do that in a short period of time, and you end up "babysitting" your position for a long time. Which brings me to the second reason to avoid all that averaging down, which is opportunity cost.  How much money could you be making by buying stocks that are going up rather than continually adjusting losing positions.  There is no doubt that Phil is a genius when it comes to using options to create profits. He succeeds because he is a master.  I simply take a different approach.  And I believe most successful investors follow this path. There is an awful of averaging down and rescuing positions on this site. Having said all of that, I don't always follow my rules, and get whipsawed at various times when I sell a stock only to watch it go back up.  But I still favor that approach.  Just my 2 cents.

    To add three more times to a losing position sounds like a big mistake to me.  Yes, you might be able to come out ahead in thee long ru 


  25. Sorry for the formatting error !



  26. Albo- My biggest losses have been readjusting the position. Still have Hmny but got out with small losses on ftr and others. No doubt long time Phil fanatics develop their own strategy's for handling things but when things are at the bottom is when Phil makes the dive and gets the calls cheap. This market has been especially difficult with my short callers so now if its a profit I buy them back. It seems expiration day is not the time to wait if things are within 10% I got assigned aapl because I expected the short to expire worthless. Lesson learned as AI or whatever drove it up. Everything seems contrived to me and the volumes are so low I can't get things sold for what they should sell for. Put the order in and the slide starts. Still learning and buying and holding with selling calls seems the way to go especially with dividend stocks. So much knowledge on this site. Very unique.


  27. Hi Phil,

    ~~let's buy some cheap, longer-term insurance like 40 June 20 ($4.60)/27 ($2.50) bull call spreads for net $2.10 ($4,200)

    I think the hedge is either 40 for $8,400 or just 20 for $4,200.


  28. Pirate – Good thoughts.

    I've been trading for along time, but have learned many things from Phil, esp. on option strategies.


  29. Thanks for the MJ thoughts, but I'm restricted by Canadian laws on options so I can't sell two short calls for one long one. Would it be better to maybe sell 5 '22 $23 calls against the 10 $15 longs and then sell 5 Apr $18s for $1.40?


  30. Stops/Albo – Perfectly valid way to play as well but, as a value investor, I don't see it as a zero-sum game when my alternative to stopping out is getting more of a stock that's 20% cheaper than when I liked it in the first place.  My example is real estate – what's the benefit of stopping out of a home every time it goes 20% below the price you bought it for.  If you like it and have use for it – why sell it?  If you are a long-term investor – price is just what OTHER people think your stock is worth at the moment – you don't have to listen to them. 

    SQQQ/Motox – You are right it should be $8,400 for 40.  As usual, I started out with 20 then decided to double it and forgot to adjust the math.

    MJ/Wing – Then I wouldn't trade that stock as the entire premise is that you sell short calls.  We've experimented with that ETF several times and the only things that works is to use it for a short call-selling vehicle.  If you can't do that – I wouldn't play it at all.


  31. ALL / Short

    I have a question regarding ratios.  I see a lot of plays employ selling half the number of puts/calls to reduce net entry (i.e. 5 x short puts,  10 x BCS)  Is there a logic to this in terms of risk / reward / margin used?

    interested in the inner workings. 

    thanks!


  32. Yeah, I'm happy with the assigned stock on M, as it was only a partial position to start with. Before being assigned I had also sold and bought back a round of shorter term puts, so my basis at assignment is just under $17. Once I sell one more set of calls I'll be in the black, and M just has to go sideways or higher.  X worked out this same way back in March or April, my window for profitability is pretty good in both positions. Same with SKT… in and out of puts a couple of times this year, and finally starting to build a position with short puts and bull call spreads here. 

    AGNC & NLY were both great double-downs. They looked like death several months back when PSW board members were banging the table, and I wished I could've added even more than I did.


  33. Short-Term Portfolio Review (STP):   $153,498 (53.5%) is flat to the last review as our hedges killed us and so did TSLA.  Still, I'd rather lock in a $50,000 gain over 3 months than risk giving it back so we got cautious after making ridiculous 2-month gains.  Next month, we can start an LTP by simply renaming this one and removing the short-term plays and the hedges and putting them in a new STP – see how easy that was – we already started our LTP – and it's our STP!  

    • Short puts – All on track with $8,710 of additional potential.  
    • SQQQ – The December spread was a bet, not a hedge and offset by the CSCO puts – though it's a long time before we get this loss back.  Just dead money here.  
    • BKNG – Very nice as we bought back the short calls and now we can sell them again.  Unfortunately, we shorted BKNG over China Trade issues affecting travel (it did) but that's over now and they really aren't that expensive at $2,000.  Also, I no longer feel strongly about the bear put spread so let's just cash this one in – it's been very good to us.

    CMG – Meh so far but right in our range.  

    • FCX – Big pop off trade deal but it's a $5,000 spread and only net $2,530 so 100% to gain if we just wait.  Yawn – I guess we may as well wait for the other $2,470….
    • MJ – See, we didn't sell enough calls so a fail so far.  Still, we only paid net $7,200 for the $45,000 spread and our 2-month (out of 26) short puts and calls brought in $2,700 so 12 more of those is $32,400 of premium left to sell – I like those odds! 
    • MO – Over our target already so another one of those boring ones that goes up before we get to double down or even adjust.  Net $6,355 on the $7,500 spread means we have to wait until March to collect our last $1,145, but that's still 18% more in 3 months – what better do we have to do with the cash than wait when it's almost a sure thing?  

    • SQQQ – Now this one is a hedge.  Like the Earnings Portfolio, we should make the same adjustment, which was:  "we can still cash in our March $22 calls for $5,250 – that's more than we paid!  I don't care about the puts because we'll roll them forever but, while SQQQ is low, let's buy some cheap, longer-term insurance like 40 June 20 ($4.60)/27 ($2.50) bull call spreads for net $2.10 ($8,400) so we're paying $3,150 for much more insurance and we are double covered on the short March $27 calls, now $1.30 and if we put a stop on 10 (1/2) of them at $1.70 ($1,700) it's very doubtful we'll get in trouble on an upside move." 
    • TD – On track.  
    • TLT – Should get our full $8,000 on that one!

    • TOL – Brand new and good for a new trade.
    • TSLA – Yikes – it blew over our short calls but fortunately, we made a lot on the short put side too.  The short Dec $365 calls are now $40 but, fortunately, the short March $400 calls are $40 so let's roll our 5 short Dec $365s ($20,000) to 5 short March $400 calls at $40 ($20,000) and make it a problem for another quarter.  Keep in mind, if TSLA keeps going up, we still have $17,850 more to collect on the short put side.  

    • VALE – A nice $20,000 spread that's on track at net $6,330 so 200% left to gain makes it perfectly lovely as a new trade!  


  34. Yikes, I forgot Hemp Boca is pre-taping their New Year's show today so I have to run.

    See you all tomorrow.


  35. Phil/New short play on TSLA?


  36. SPCE stock up.  Warrants up 18%.


  37. Hulu is down






  38. HUD reporting 2.7% percent uptick in homeless population