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2020 Vision – Looking at the Year Ahead in the Markets

This is the weekend post.

We have successfully concluded our trip to Bangkok with a signing ceromony this afternoon (3am, your time) that has put Hemp Boca, New Age and PSW Investments to partner with Bienestar to bring CBD products to Thailand for the first time.  It's a massive opportunity and we're all very exhausted and my plane leaves very soon so I'm going to be brief here and we'll add to this post over the weekend but, for now, it will have to serve as Thursday and Friday's Report – as I will be spending the next 29 hours flying home from the other side of the World

As you can see from the chart above, the S&P 500 (/ES) has blasted back to 3,250 since Tuesday's close and I'd sure be shorting that as there's no news supporting it and the volume is ridiculously low so it's very simple to short that line with tight stops above and see if it gets a bit of a rejection – probably back to 3,240, at least, which would be good for a quick $500 profit to start your year off right.

On Tuessay, I said I liked Oil (/CL) long at $61 with the unrest in Iraq and Iran and gosh, that was a very quick $750 (at $61.75) on two runs up and now again we have a chance to go long at that line.  We also had a USO options spread for those of you who are Futures-challenged but we didn't get the fill we wanted (as the dip didn't last long enough) – so no trade there though you could just pick up the long USO Jan $12.50 calls for 0.40 and wait to sell the Jan $13s for 0.20 and accomplish a very similar spread.  

Natural Gas (/NG) is also a fun long now at $2.16 because, though it isn't cold in the US – it's very cold in other parts of the World and traders have not yet taken into account the globalization of the Natural Gas supplies. 

Oops, that's the opening bell so I'd better head to the airport…

Have a great weekend, 

- Phil

 


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  1. Good morning! 

    Just a quick post and now I'm off for my trip so same post for today and tomorrow.

    I had no proper connection on the plane (Qatar) last time but I'll try harder this time since the markets are open but, if not – have a fantastic weekend and I'll be back tomorrow night and, hopefully, next week will be more or less normal.

    We (PSW Investments and two of our companies) have a mind-blowing, life-changing opportunity here in Thailand and we just finished the contracts after a long week of negotiations and I'll fill in more details over the weekend but, for now – up, up and away!


  2. Good Morning!


  3. Safe travel Phil! 



  4. Pstas – And a $12 target.    Surprising.


  5. Good day!!  

    I followed the dividend portfolio NLY trade and the Short $7 Calls were assigned and the stock sold. How would you suggest to manage this? "Re-establish" as Phil says it.

    Thanks in advance.


  6. NLY/youngy_paul – I also was assigned. I re-established the long stock but I'm waiting for a move up to sell more calls.


  7. all of a sudden, first day of 2020, and Wells Fargo decides to downgrade a stock that beat earnings estimates for 8 straight quarters?  maybe to create another few million fake clients accounts to short the stock?


  8. I was assigned NLY also.  No big deal I seem to alternate between assigned calls and puts so I'll take more more dividends until it all gets taken away again and then I will buy more.  In it for the dividend anyway. 


  9. Yodi / ALL / Cron 

    Hoping to recoup a little here.  Have 100 shares of Cron at roughly $18.  Any thoughts on puts/calls i could sell to smooth this loss over a little, ha!

    thanks


  10. Youngy,
    I would buy the stock again and sell the Jan 22 10 put @ 1.95 same amount as stock. You can sell the Jan 22 7 call for max 1.37 or sell the Jan 22 10 call for .30. As you notice there is a 7 cent different, however you will not be able to participate in any capital gain in reference to the stock.
    As daveo says he will wait for an increase of the stock, before selling calls. Over the two years the stock did have a range between 10.65 and 8.07, so as you can see you are about in the middle of the range. I have sold already my put at 1.98 and still holding Jan 21 10 callers, with whom I am very comfortable. I did not enter any plays at the 7 caller so I do not have the hassle with assignments. Market in general is at it’s high so waiting for a Reit to go higher is possible a bit fare ahead.


  11. Contrary to others believe, I do not have much confidence in POT stocks. Yes I purchased various of them in very small amounts and especially CRON being bought by MO I thought it would be a better play but on a six option play I am 1.3 K down holding at present the Jan 21 8 long call and the Jan 30!!!! Short call. The stock trading at 7.41 is obviously below my long call and I am eyeing to roll that sucker further down to 5. How low can you go???. So honestly I am not looking for any gains here in the near future.
    So no pot smoking for me on this one!!!!!
    CRON is part of the Drugs industry. There are 636 other stocks in this industry, of which 72% are performing better than CRON.


  12. Wells Fargo downgraded SIG and HBI this morning same 12.00 price target. SKT M and LB down this morning also everyone selling retail and buying FANG stocks


  13. MO – difficult to assess the impact of the FDA  ban on flavored pods (see this Barrons article). Altria's value destruction exercise in purchasing a stake in JUUL is almost complete – now there appears to be inventory shortage of the mint pods. It's never good sign when there is a constant drip feed of bad news around a sector.Steering well clear of MO at the moment – although I do have a smallish position – net short put to price of $40.


  14. Here is a better  picture.
    I am holding stock in SBUX . Bought the stock at 69, now trading at 88.60. So on my put / call sales I am making 2 to 2.5% per month not taking in account any div. For me the div must be over 3% before I start counting.  
    I feel like selling 100 stock for 8860.00 and buying 4x Jan22 70 calls for  22.40 (8960.00) Selling Jan 22  2x 75p @ 5.85 (1170.00) net cost 7790.00. OR 7790/400= 19.47.
    Again I receive Feb  82.5/90 strangle 2.97 x 400 1188.00. So 118800/7790= 15.25% over 50 days or 9.1% per month, instead of 2 to 2.5%.
    Just for comparisons The 70 call of Jan20 has a value of 18.40. So Paying 19.47 there is about a dollar more I am paying.
    Above this is just an example what alternatives one has in option trading, or being at two weddings with the same bride.


  15. Winston MO possible puts at 45 in closer range. I still enjoy there div. payments, even that the stock is at the low range. I think people will smoke along what ever.

    Trading MO since Dec 2016 and show 70K up not even counting the div.


  16. CVX    CVX200221P115    21-Feb-20    115    -2    PUT    1.87    1.495    20.05%
    CVX    CVX200221C125    21-Feb-20    125    -2    CALL    1.03    1.23    -19.42%
    CVX    CVX220121C100    21-Jan-22    100    2    CALL    23.32    24.075    3.24%
    CVX    CVX220121P100    21-Jan-22    100    -1    PUT    8.49    7.95    6.36%
    I try to show my CVX play                                


  17. The CVX poor man's trade (PMT) was entered 12/31 and shows today a credit of 237.00 as you can see also with small plays you can make money. Sometimes!!!


  18. Starting fresh as a dividend play, might buy nly, sell 20 2022  10 puts then sell 2022 10 calls when it gets back over 10


  19. Other trade which were discussed on this board. PMT!!

    CMI    CMI200124C182.5    24-Jan-20    182.5    -2    CALL    4.6    1.5    67.39%
    CMI    CMI200124P175    24-Jan-20    175    -2    PUT    3.05    2.125    30.33%
    CMI    CMI220121C160    21-Jan-22    160    2    CALL    35.07    32    -8.75%

    XOM    XOM200221C72.5    21-Feb-20    72.5    -2    CALL    0.97    0.725    25.26%

    XOM    XOM200221P67.5    21-Feb-20    67.5    -2    PUT    1.74    1.33    23.56%

    XOM    XOM220121C60    21-Jan-22    60    2    CALL    11.8    12    1.69%
    XOM    XOM220121P60    21-Jan-22    60    -4    PUT    5.4    5.5    -1.85%

    CBRL    CBRL200117C157    17-Jan-20    157    -2    CALL    1.95    0.8    58.97%
    CBRL    CBRL200117P150    17-Jan-20    150    -2    PUT    1.95    1.675    14.10%
    CBRL    CBRL220121C135    21-Jan-22    135    2    CALL    24.15    22.4    -7.25%
    CBRL    CBRL220121P120    21-Jan-22    120    -1    PUT    9.71    9.6    1.13%

    RDS/A    RDSA200417C60    17-Apr-20    60    -4    CALL    1.075    1.45    -34.88%
    RDS/A    RDSA200417P55    17-Apr-20    55    -4    PUT    1    0.7    30.00%
    RDS/A    RDSA220121C50    21-Jan-22    50    4    CALL    9.975    9.3    -6.77%
    RDS/A    RDSA220121P45    21-Jan-22    45    -2    PUT    2.2    1.775    19.32%

    As you can see you can't win them all!!!


  20. Yodi, can you comment on your hedging strategy?  What happens to your portfolio of option positions when the market goes down 25%?  Do you have hedges in place to protect against a large correction?


  21. Yodi/SBUX,
    when you say "I am making 2 to 2.5% per month", what are you basing that on ?
    The cost basis of the stock or something else ?

    AND I really appreciate your comments on this board.

    Thank you


  22. AIMT

    I have a 2X position in AIMT.

    Stock up big in the last couple of months.  The options are richly valued.

    Although I expect their peanut allergy treatment, Palforzia, will receive FDA approval this month, I still decided to cover some stock with the sale of June 40 calls.


  23. CTL sliding down again! Still in an upward channel but frustrating! I have 1/2 a cover just in case.


  24. SrJ – Funny you mentioned CTL.  Today I added 12 Jan 2021 $10 calls for $3.54.( Already $2.92 in the money.) 

    As you know, the stock is sporting a 7.7% dividend yield and has, IMHO, considerable upside.


  25. Albo – I am optimistic, but still frustrated :-)


  26. Greetings from Doha!

    Nice money on those Futures plays…

    NLY/Youngy – i’ll be back tomorrow night and I can take a better look but basically, you got called away The exercised, not assigned.  So the short option gone and you’re a stock is gone but the agreed-upon seven dollars should be in your portfolio, plus the cash from the sale of the short calls.  So the short option gone and your stock is gone but the agreed-upon seven dollars should be in your portfolio, plus the cash from the sale of the short calls   Essentially, you just set it up again.  


  27. Ah, and what everyone else said – you get used to the assignments, it’s just part of the game.  


  28. Garling

    Sorry switched off early thought every one gone to sleep.

    percentage Take SBUX the stock is not a typical armchair trade for me, so in this case I did not even take the .41 cents div. in to consideration. My calculation was based on a stock price of 69.00, my purchase price. So if you sell the Feb 20, 82.5/90 p/c strangle @ 2.98. my calculation looks as follow: 2.98×100/69 = 4.3% / 50 (days)= x 30 (days) = 2.59 % per month. On the armchair trade you would still add the .41 cents, which looks as follows. Strangle 2.98/50 (days) = .0956. take .41 (div) / 90 days = .0046. So  .0956+.0046= .01x 30 days = 3 dollar. You see the div. does only increase the strangle plus div to 3 from 2.98. 

    Obviously if you take todays stock price it would be 2.98×100/89.35 = 3.34/50=-0068×30=2 %.

    As you can see the stock price always makes the difference of your income.

    Sorry about all the numbers but you ask for it!!!! All these calculations and references I have set up on an excel spread sheet.


  29. Palotay,
    My port holdings are divided in aprox. 70% stock and cash of which cash is 25 to 30%. So a drop of 25% would here only effect the stock in view of a paper loss if you do not have to sell.
    The 30% options consist mainly of Armchair, PMT and BCS. And a small amount of experiments. Only the short puts would be a devil in disguise. You gain with the short calls and you will show at that moment a paper loss on the long leap calls. In addition I hold a smaller amount of DXD and SQQQ, to possible show a credit on the normal losses in these plays.
    So in a 25% drop I would expect to look at my port holding from 100 down to 85 possible 80 %, which you have to in count on or expect..
    Hope this helps


  30. Looks like we are gearing for war with Iran! 2020 is really starting well.


  31. As I said a very dangerous Clown. I think the guy lost his mind.


  32. Another one of Trump's old comments that didn't age well:

    No one will miss Soleimani but that's not helping bring peace in the world!


  33. Looks like we are giving back some of these gains today!


  34. That tax cuts was written by lobbyists it seems! Not going to pay for itself, far from it! But the GOP will be back to deficit hawks the first day of a Democrat administration:

    https://www.nytimes.com/2019/12/30/business/trump-tax-cuts-beat-gilti.html

    Over all, the BEAT is likely to collect “a small fraction” of the $150 billion of new tax revenue that was originally projected by Congress, said Thomas Horst, who advises companies on their overseas tax arrangements. He came to that conclusion after reviewing the tax disclosures in more than 140 annual reports filed by multinationals.

    Mr. Morgenstern, the Treasury spokesman, said: “We thoroughly reviewed these issues internally and are fully comfortable that we have the legal authority for the conclusions reached in these regulations.” He said Ms. Nijenhuis was not involved in crafting the BEAT rules.

    He also said the Treasury decided that changing the rules for foreign banks was appropriate.

    “We were responsive to job creators,” he said.


  35. Good morning!

    For some reason my phone gets the plane WiFi but not my iPad.  

    I'm 18 hours into my trip (8 left) so I have no clue what's going on at the moment as I just got on-line.  

    Crazy action already. 
     


  36. VIX is up 12% but no real panic yet – only hitting 14 or so now.


  37. PMT play on CMI I did not sell any puts in this play so with crazy Clown on the helm, I decided to sell the Jan22, 150 put got filled at 14.70 per option. Stock trading today at 176.48 neads to drop to 135.30 before you lose money. Was at the Dec 2018 crash 125.00


  38. Stj I mostly look at the /ES was somewhat -37 to start now -21.50. Just a crazy panic so far.


  39. POTUS – It's an election year, but I don't see President DumAzz gaining any support from this move or any further conflict with Iran….

     

    Good Morning.



  40. States of Hate








  41. US kills Iran’s most powerful general in Baghdad airstrike



  42. LB up on positive view from BAML



  43. CES 2020: What to expect




  44. I must say it is very quiet on this board. Is every one holding it's breath?

    Garling did you follow my answer to your question above?


  45. Hi Yodi….definitely not a boring day.  LOL


  46. Winston it's a clown's day, Europe is very concerned about his action.


  47. I live in the UK – Europe is a totally foreign concept now. There's enough clowns to fill all the premier positions of the great and small nations, so the US does not have a monopoly there.

    Keep sharing your ideas – it stimulates my grey cells and I like to hear how you are getting on. A good place to look for dividend candidates and armchair trades is the AAII dividend investing portfolio. 


  48. scary stuff indeed.  

    Time to go long /CL again?


  49. Markets – at this rate we'll be green by the end of the day! Trump will mention dropping sanctions on Iran (in return for XYZ) and we'll be off to the races.


  50. Added some FCEL options at the open, long bias. Plenty of volatility to be sold there.


  51. I agree with Winston.  I am hedging, but I am not sure the market is showing a lot of true fear!


  52. Winston where do you find this one "AAII dividend investing portfolio".


  53. Yodi,

    I'm just very slow at catching up today. Kids are out of school so I don't have my normal calm morning.

    Never thought I would look forward to Mondays.

    Thanks for your answer. I thought that's how you were calculating return but wanted to be sure.

    I like numbers so keep them coming. I'm following your comments/trades as much as I follow Phil.

    Thanks


  54. There is no real fear in the markets now. But lots of uncertainties. We don't know the possible consequences of what happened today, and we cannot predict what Trump will do over the next 48 hours because he doesn't know himself. There is no strategy and no plan. Makes it hard to invest for the long run!


  55. Yodi and STJ,

    what are your news sources ? What/Who are you following ?


  56. Garling there are many places , CNBC , vinfiz, TOS, TDAmeritrade, Finance.yahoo, Zacks Investments, Stock charts.com, seeking Alpha, just to name a few.


  57. Finally back in the USA, though it's Miami at rush hour so still another hour and a half until I'm actually home.  


  58. Why Walking Helps Us Think



  59. US manufacturing plunges deeper into recession





  60. Welcome back, Phil! Hope the trip was productive and without major hiccups.


  61. Millions of millionaires





  62. 10 Weekend Reads


  63. @phil- Where is home these days? Did you comepletely move your base out of NJ?


  64. Phil is based in Florida now.  Sold off his NJ property.



  65. 5 facts about Iran


  66. Boeing – after reading these three articles, I wouldn't touch Boeing with a 200 ft pole. So sad to see this happening, as I lived in Seattle from 77 – 85, when Boeing was a fine company. My brother-in-law has worked there for decades as a senior engineer (he designs the cranes etc that do the assembly work); still does, but he sees the deterioration. I don't see any possibility of the 737-max ever flying again. And I sure as hell wouldn't ride one.   https://medium.com/swlh/boeings-culture-crash-c1500d2db9a
     


  67. And keep in mind Snow that this is the result of letting private companies like Boeing certify themselves and leaving the government out of the process! These mistakes might have been avoided if someone on the outside (like the FAA) might have had a closer look. But there was too much money pressure on the process. And now people are dead! 



  68. Doubts grow over US case for Suleimani assassination as Iran urges revenge


  69. Fortnite made $1.8 billion in 2019









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  71. Sublimation, not melting: Graphene surprises researchers again



  72. Iran general replacing Soleimani vows revenge for US killing