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Untroubled Tuesday – Google and AAPL at Record Highs Despite War Footing

What war?  

Since when does killing another country's General constitute an act of war?  While no one is shedding any tears for General Suleimani, he was a General in a foriegn nation and we did assassinate him and Iran has said they WILL retaliate – which could mean anything but you wouldn't know it from yesterday's markets – which made a quick recovery.

The S&P 500 is back at 3,245 and only about 15 points off the all-time high while Apple (AAPL) is testing the $300 line and Google (GOOG) is testing the $1,400 line – both at all-time highs as well.  Google is being investigated for Anti-Trust Violations but so what, Trump is being investigated for Treason and that doesn't seem to stop him.  Another unstoppable stock under investigation (Privacy Violations) is Facebook (FB) who are also just under their all-time high so of course the Nasdaq is doing well – closing in on the 9,600 mark that we said would be the top of the rally back in April, when we reviewed the top components, but 9,000 is going to be a real test for the Nadaq 100 as even the Nasdaq Composite has paused under 9,100 with the 200-day moving average now 10% below that mark.  

Notice the cute indicator that the Nasdaq divided by the S&P is now 2.79 and it never quite hits 2.80 and lat time we were this high was back on 2018, before an almost 2,000-point (20%) correction.  So we still like the Nasdaq Ultra-Short ETF (SQQQ) as a hege and SQQQ is way down at $21.45 – down from $80 a year ago.  It's a good way to hedge the war and to hedge earnings season.  

When we set up an index hedge, we like to offset the cost by selling puts against a stock we'd REALLY like to own if it's assigned to us and, back on Novemeber 15th, we put out a Top Trade Alert on China Telcom (CHL) at $39, thinking it would do better when the Trade War ended and it did but it's still only at $41.37 and you can still sell the June $42.50 puts for $2.70, which nets you in back at $39.80 and that's an entry we're comfortable with (see our Top Trade Alert).  

So, as a new hedge, I like:

  • Sell 10 CHL June $42.50 puts for $2.70 ($2,700)
  • Buy 30 SQQQ March $20 calls for $2.55 ($7,650)
  • Sell 30 SQQQ March $24 calls for $1.30 ($3,900) 

That's net $1,050 on the $12,000 spread so, if SQQQ is over $24 into March expiration, you collect $12,000 from the spread and wait to see what, if anything, you owe back on the short puts into June.  The overall upside potential is $10,950 (1,042%) and that should protect a $100,000 portfolio from a 10% drop very nicely but our true goal is to MITIGATE the damage, not completely cover it – as that's simply too expensive as a habit.  

Why does that work?  Well if you have $100,000 and can buy $100,000 worth of stock now, that's fine but if your money is in the stocks and the market falls 20% (uniformly), then you have $80,000 if you cash out, right?  Now you need a 25% gain just to get even.  On the other hand, if you have a hedge that pays you $10,000 when the market drops 20%, you then have your $80,000 in stock and $10,000 in cash and the stocks you can buy with your $10,000 are 20% cheaper so you can buy what was (before the correction) about $12,000 worth of stock for $10,000. 

Either way, now you have at least $90,000 in stocks and a 10% rebound will put you right back to $100,000 while the unhedged portfolios will only be at $88,000.  That's going to give you a MASSIVE difference in portfolio performance in a down market while a hedge like the one above only costs us $1,050 if all goes well with the short puts so maybe 10% of a 10% move up is lost (and it's cheaper to roll than initiate a spread as they mature).  

The S&P 500 gained 30% last year and, while we certainly got sick of losing money on our hedges – they were the reason we were brave enough to stay invested most of the year and we had some very nice upside returns.  Sure we could have done better if we didn't hedge – but that's an historically silly attitude to have – it's always better to hedge your bets – at least a little.  

 


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  1. Any one having Trouble placing comments?


  2. Duplicate comment detected; it looks as though you’ve already said that!

    yes but not placed


  3. Its blank except for yours.


  4. JUst can not place my comments


  5. OK to Yodi


  6. Well I give up Possible some one gives me an email and that person can place comments on my HRB idea.


  7. Yodi- try rebooting and logging back in. 


  8. Good Morning!


  9. Looks like Yodi might have set to Ignore himself!

     

  10. Good morning!

    A little early selling pressure but nothing too serious so far.  

    Yodi, try changing the comment slightly (assuming you are not ignoring yourself).


  11. Yodi Shut down your computer and reboot. Comments are getting kicked out. This is my second try. Maybe Phil's site got hacked. In this political climate I'd believe anything. Now it says I'm posting too fast..slow down. 3rd try coming up.


  12. No short comments like this work but nothing else


  13. I did change comments possible the clown has something to do with it?


  14. PMTrade  on HRB Buy  2 x  Jan 22, 18 call @ 6.40 ( for comparison only Jan 20 18 call you can sell for 5.50 so you paying .90 cent premium.)

    Sell 1 x Jan 22, 20 put @ 2.50, so you net capital outlay is 6.40 – 1.25 = 5.15 x 2 = 10.30.

    Now sell 2 x July 22, 22/25 strangle @ 2.45. so your first income is 490.00

    49000/1030 =  47.6/196 (days) = .242 x 30 (days) = 7.3 % per month

    Armchair buy the stock HBR @ 23.50 and sell the Jul 20, 22/25 strangle @ 2.45.

    Combined monthly income ( incl. div.) 1.93 per month. (The sleepy joe for Alter)

    Here you can only get your cash back for the stock or get put to you the stock at 22.00. your entry would be 22.00 – 2.45 = 19.55.

    BCS

    Buy  2 x the Jan 22 vertical HBR@ 2.40 and sell 1 x Jan 22, 20 put @ 2.50, net cost 2.30.

    Sell 1 x Jul 20, 22/25 strangle @ 2.45. net cost 0.15 cents credit. Return 16.3% per month!

    Phil’s Play  with ifs 200 %

    Obviously you can adjust the above plays in higher multiples.


  15. Finally rebooted Comp


  16. Yodi, you should be back to normal.

    The spam filter thought your post was spam. (It doesn't like strings of numbers and symbols… it suspects malicious code, then quarantines the post.) So I approved the post, got rid of the duplicates, and tried to tell the spam filter that you're not spam. Let's see if it holds.



  17. ABMD    ABMD200221C180    21-Feb-20    180    -2    CALL    10.33    16.3    -57.79%
    ABMD    ABMD200221P155    21-Feb-20    155    -2    PUT    8.07    5.6    30.61%
    ABMD    ABMD220121C150    21-Jan-22    150    2    CALL    54.7    63.95    16.91%
    ABMD    ABMD220121P145    21-Jan-22    145    -3    PUT    27.2    24.35    10.48%

    This PMTrade is running wild 1835 in 7 days.


  18. Albo – congrats on your QUIK position – great job on persistence and determination. I watch from afar on CTL as well, but see the same character traits are required.

    I would be very interested in your learnings on those trades. For QUIK anything you would have done differently? Did you respect your standard 20% stop loss levels? And anything else worth sharing?


  19. Thanks Admin, Just try to explain some thing clearly, obviously with plus and minus etc.


  20. Comment content omitted because it is too long.


  21. I see no sign of an HRB comment unfortunately, even in the junk folder.  

    Pretty neat rejection of NYSE at 14,000, which is about the 10% line (14,080) so worth paying attention to.  If we strictly watch 14,080, it's a 1,280-point move from the Must Hold in October so 256-point retraces take us to 13,824 (weak) and 13,568 (strong) and 13,568 was resistance on the way up so hopefully we'll get to see how it holds up as support.  

    There Yodi, all fixed!  I don't know why I couldn't see it but Greg could.

    TSLA $460!

    Lots of upgrades keeping the rally going:

    How do they act like this is bullish?  Factory orders above expectations

    ISM service edges higher in December

    Chain store sales strong in latest read

    • Chain store sales increased 7.2% for the week ending January 4, according to the latest report from Johnson Redbook.
    • Johnson Redbook reports that chain store sales for December rose an estimated 6.9% on strength in the shoes and cosmetics categories.

    Buffett rumor boosts Boeing

    • Chatter hits the wires about Berkshire Hathaway (BRK.ABRK.B) building a stake in Boeing (BA +1.5%).

    JPMorgan lifts estimates on Netflix

    • JPMorgan does a reset on Netflix (NFLX -0.9%) to adjust for the company's new reporting structure.
    • On sales growth: "Our 4Q revenue estimate increases 1% to $5,493M (vs. $5,442M guide)."
    • On subscriber growth: "Our net adds estimate is unchanged at 7.70M global paid streaming subs (vs. 7.60M guide), driven by UCAN net adds of 786k (612k US, 175k Canada), EMEA net adds of 3.47M (with potential upside), LatAm net adds of 1.75M, and APAC net adds of 1.70M."
    • On profit: "Our 4Q operating profit estimate increases 2% to $495M (vs. $475M guide)—both largely due to FX. Our 4Q EPS decreases to $0.31 as NFLX raised ~$2.2B of debt intra-quarter, and we expect the company’s euro-denominated debt to result in a ~($127M) headwind to net income."
    • Perhaps most importantly, JP expects Q1 global subscriber growth of 9.25M (net).
    • The firm keeps an Overweight rating on NFLX and price target of $425 vs. the average sell-side PT of $359.89.

    Exxon's Fos refinery blocked by striking workers

    • Exxon Mobil (XOM -1.2%) says its Fos oil refinery in France is blocked by striking union workers but its Port Jerome refinery is operating normally.
    • XOM's 140K bbl/day Fos-sur-Mer and 240K bbl/day Port Jerome refineries – which account for 10% and 20% of French refinery production, respectively – had seen little effect from the strike movement in France.
    • France's government and unions appear to remain far apart after talks resumed today over proposed pension reforms.
    • The government is playing down the impact of refinery disruptions, saying France has fuel stocks to last more than three months and that more than 98% of the country's 11K gas stations are completely unaffected.

    Micron, Western Digital gain as Cowen turns bullish

    • Cowen analyst Karl Ackerman upgrades Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) from Market Perform to Outperform. MU and WDC have Bullish average Sell Side ratings.
    • The analyst thinks DRAM fundamentals may improve sooner than expected, supporting Micron's improved cost position relative to its peers.
    • For WDC, Ackerman sees an opportunity for a beat-and-raise, citing improved NAND pricing, Enterprise SSD market gains, and improving HDD margins.
    • Cowen raises its Micron target from $50 to $70 and WDC from $45 to $88.
    • Micron shares are up 5.7% to $56.59. WDC is up 4.3% to $66.08.

    Raymond James sees 'challenging' landscape for Marriott

    • Marriott International (MAR -0.6%) dips after Raymond James moves to a Market Perform rating after having the hotel stock set at Outperform.
    • "Following a strong performance in 2019, MAR shares are trading at the upper bounds of the 5 and 10-year historical ranges despite what appears to be a more challenging fundamental landscape. With 4Q19 earnings season looming, we remind investors that MAR shares have not reacted particularly well to quarterly earnings reports in the past couple of years," writes analyst William Crow.
    • The average sell-side rating on Marriott is Neutral.

    Macy's gains on Q4 sales beat hopes

    • Macy's (NYSE:M) opens 1.66% higher with a positive report out from Cleveland Research a potential catalyst.
    • The research firm is tipping that Macy's Q4 comparable sales growth could arrive ahead of beaten-down Street estimates.
    • JPMorgan also pushed its same-store sales forecast on Macy's up by a percentage point yesterday, although the firm kept a Sell rating locked in place.
    • Shares of Macy's are still down more than 40% over the last 52 weeks.

    T-Mobile adds 1.9M net customers for Q4

    • T-Mobile (NASDAQ:TMUS) has reported a preliminary 1.9M total net subscriber additions for Q4, putting it at 7M net adds for the year.
    • That marks six straight years of 5M net adds or more overall, to land at 86M customers at year-end.
    • Of the Q4 adds, 1.3M were branded postpaid, and 1M were branded postpaid phone net adds. Branded postpaid phone churn was 1.01% (up 2 basis points Y/Y).
    • Prepaid net adds were 77,000, and churn was 3.97% (down 2 basis points Y/Y).
    • For the 2019 numbers, 4.5M of the 7M were branded postpaid net adds, and 3.1M were branded postpaid phone net adds. There were 339,000 branded prepaid adds.
    • Full financial results for Q4 and 2019 are due in February.
    • Shares are up 0.7% premarket.

    Retail chains scrap for foot traffic

    • Placer.ai lists the retail chains it sees winning the war for foot traffic in 2020.
    • Target (NYSE:TGT): "Target is crushing it as it moves to include higher-priced offerings. 25% of Target’s audience has a household income of over $100,000, significantly more than Walmart. Target is focusing on higher-income areas by launching multi-format stores in major cities like a new NYC flagship."
    • Chipotle (NYSE:CMG): "November 2017 to November 2019 showed Chipotle’s highest peak the last week of April was 17% above baseline, compared to just 2% above baseline that week the previous year. With continuous menu innovation and improved restaurant design Chipotle is certainly on the right track to continue its rebound into 2020."
    • Chick-Fil-A: "November 2017 to November 2019, Chick-fil-A’s peak week actually came before the onset of the great chicken wars. The second week of July shows visits of 26.8% above baseline, compared to a 5.7% the previous year. Chick-fil-A’s ability to sustain growth outside of the social-media-induced peaks surely sets the restaurant up for success in the upcoming year."
    • Bed Bath & Beyond (NASDAQ:BBBY): "Despite a disappointing 2019, the strategic direction seems to be completely dead on. The company recently hired ex-Target executive Mark Tritton as CEO and is rumored to be aiming to bring on former Target CFO Cathy Smith as well. Target is a perfect North Star for Bed Bath & Beyond for several reasons."
    • CVS (NYSE:CVS): "CVS began testing its new HealthHUBs at three different locations and with such positive market response, decided to increase the total amount of HealthHUBs across the country to 1,500 by the end of 2021. Since the launch in February 2019, the pilot locations continue to perform well. Overall visits are trending upward as average duration of customer visits are at an impressive 40-minutes. CVS has positioned itself well amongst its competitors as the leading one-stop-shop pharmacy."
    • Ulta Beauty (NASDAQ:ULTA): "Ulta Beauty saw a 300% spike in traffic above the baseline average for Black Friday in 2019. Each month from November 1st, 2018 to November 30th 2019, saw an overall increase in visits."
    • Place.ai says Wegmans, Publix, TJ Maxx (NYSE:TJX), Popeyes (NYSE:QSR) and Nike (NYSE:NKE) all earned honorable mention in the research firm's look at foot traffic analytics.

  22. Sirius XM provides 2020 outlook

    • Sirius XM (NASDAQ:SIRIforecasts 2020 revenue of $8.1B with adjusted EBITDA of about $2.5B and FCF approaching $1.7B.
    • The company expects net self-pay subscriber adds to exceed 900,000.
    • Sirius XM added 1.1M self-pay subscribers to finish 2019 for a total of 30M, above the 2019 guidance.
    • Sirius XM will report Q4 results on February 4.
    • SIRI shares are down 0.7% pre-market to $7.07.

    BTIG sees Yum staying aggressive

    • BTIG thinks Yum Brands (NYSE:YUM) could fire off some other M&A moves even after picking up Habit Restaurants (NASDAQ:HABT) yesterday.
    • "In our view, the acquisition gives us a glimpse into Mr. Gibbs’ strategy, which is not business as usual and could suggest a more aggressive tone on acquisitions or possibly divestitures going forward. While the acquisition is small relative to Yum’s global scale with nominal impact on financial results at this time, we expect the company to leverage its scale, systems and partnerships (like Grubhub) to support expanded unit growth and provide its franchisees another opportunity in a category (burgers) they don’t compete in," writes analyst Peter Saleh.
    • Saleh estimates addition of Habit will increase Yum's 2020 revenue by 4.3% and EBITDA by 1.0%, while Yum indicated it expects minimal impact in 2020 and accretion in 2021.
    • BTIG keeps a price target of $123 on Yum, which works to 29X the 2020 EPS estimate of $4.23.
    • Shares of Yum are up 0.62% premarket to $102.42.
    • Previously: Yum shakes up burger sector with Habit deal (Jan. 6)

    Bitcoin sets sights on $8K

    • The crypto continues its new year run, rising to as high as $7,920 a few minutes ago, and now standing at $7,879. That's roughly up $1K from a few sessions ago.
    • In between, of course, was the U.S. taking out one of Iran's top military commanders. In addition to the policy debate, the action has re-opened chatter about whether Bitcoin (BTC-USD) can be thought of as a safe-haven asset.
    • Bloomberg's Joe Weisenthal doesn't think so, and notes any number of "silly coins" doing even better than Bitcoin during this early-2020 run.
    • GBTC +2.45% premarket

    PayPal +1.7% after Bernstein turns bullish

    • PayPal Holdings (NASDAQ:PYPL) gains 1.7% in premarket trading after Bernstein analyst Harshita Rawal upgrades the stock to Outperform from Market Perform, seeing positive revisions for 2020 likely.
    • Boosts price target to $130 from $115; average PT is $126.76.
    • Sees a more manageable eBay roll-off.
    • Also sees potential for sustained margin expansion.
    • Rawal's rating contrasts with Neutral Quant ratingSell-Side average rating is Bullish (22 Very Bullish, 10 Bullish, 7 Neutral, 1 Bearish).
    • In the past six months, PayPal has declined 6.0% vs. information technology median performance of +5.4%.

    Square +3.0% after BofA turns bullish on valuation

    • Square (NYSE:SQjumps 3.0% in premarket trading after Bank of America analyst Jason Kupferberg upgrades the stock to Buy from Neutral, noting the stock's underperformance in 2019 provides an attractive entry point.
    • Sees "ample upside to near-term P&L estimates now that initial 2020 guidance has been provided."
    • Quarterly earnings and March 18 analyst day provide potential catalysts.
    • Kupferberg is bullish on expected benefits from investments being made in seller ecosystem this year, "which could enable re-acceleration in top-line metrics in late 2020/early 2021."
    • Contrasts with Quant rating of Neutral; Sell-Side average rating also Neutral (12 Very Bullish, 4 Bullish, 17 Neutral, 3 Bearish, 3 Very Bearish).
    • In the past six months, Square has declined 16% vs. information technology median performance of +5.4%.

    Kellogg +1% after Credit Suisse nod

    • Credit Suisse upgrades Kellogg (NYSE:K) to an Outperform rating from Neutral on its view that the food company's portfolio changes and reinvestment spending over the past two years have set the stage for sustainable revenue growth, margin expansion and high-single-digit EPS growth.
    • "With its organic revenue growth rate now at an above peer rate of 2%+, we think Kellogg’s stock deserves to be placed in a higher valuation echelon among its consumer staples peers," advises the CS analyst team.
    • The firm sees 20202 EPS of $3.97 for Kellogg vs. $4.02 consensus and 2021 EPS of $4.21 vs. $4.19 consensus.
    • Credit Suisse assigns a price target of $78 vs. the average sell-side PT of $66.76.
    • Shares of Kellogg are up 1.09% premarket to $68.68.

    Credit Suisse stays in bear camp on Tesla

    • Credit Suisse keeps an Underperform rating on Tesla (NASDAQ:TSLA), but lifts its price target to $340 from $200.
    • The firm says to justify the current Tesla share price one arguably must assume that by 2025 Tesla will grow annual volume to 1.2M units, which may not take into account the greater auto cycle risk being factored into other auto stocks.
    • Analyst Dan Levy: "Our target price is largely based off our Model case, in which we assume: 1. Volume of 1mn units by 2025 (vs. ‘19 of 368k), with revenue CAGR of nearly 20%; 2. Additional operating leverage (with opex as % of sales better than other OEMs); 3. We apply a 17x multiple to our 2025 EPS estimate (justified given future growth streams, but still well ahead of avg OEM multiple of ~7x). On top of our estimates, we embed upside optionality in our target price to more bullish scenarios. Even with all that, Tesla stock appears rich."
    • Shares of Tesla are up 2.10% premarket to $460.89 to extend the three-month rally to right around 90%.

    Daimler sued by institutional investors

    • Daimler (OTCPK:DDAIF) faces an €896M lawsuit in Stuttgart, Germany over its emissions cheating software.
    • The legal action against the German automaker was filed on behalf of institutional investors who are accusing Daimler of failing to inform investors about the risks. Daimler's share price fell from above €90 to below €60 due in part to the cheating scandal fallout.
    • Shares of Daimler are up 1.27% in Frankfurt trading.

    Starbucks experiments with oat milk

    • Jumping aboard the latest dairy-free milk trend, Starbucks (NASDAQ:SBUX) will introduce oat milk to 1,300 cafes in the Midwest.
    • With a sweet flavor and texture that froths like cow's milk, oat milk has won over consumers and baristas alike. In fact, oat milk sales have skyrocketed 636% in the 52 weeks ended Oct. 26, according to Nielsen.
    • Starbucks is also adding two new dairy-free drinks to its U.S. and Canadian menus: the Almondmilk Honey Flat White and the Coconutmilk Latte.

    Australia bushfires to hit the economy

    • Killing 25 people and leaving thousands homeless, Australia's huge bushfires have already burned through more than 25.5M acres of land and the economic costs are adding up.
    • Shane Oliver, AMP's Sydney-based head of investment strategy, estimates a minimum 0.4% hit on GDP in the March quarter, which could mean growth stalled completely in the period and prompt another interest rate cut as early as February.
    • Prime Minister Scott Morrison has also pledged at least $2B in investment over the next two years for a "bushfire recovery fund" to help rebuild devastated regions.

    GM China sales will remain weak in 2020

    • General Motors (NYSE:GM) warned it will suffer a prolonged sales slowdown this year in the world's biggest auto market amid heightened competition in its key mid-priced SUV segment and trade war fallout.
    • Vehicle sales in China fell 15% to 3.09M in 2019 for a second straight annual decline, marking a setback for a company that was once the top foreign automaker in the country.
    • GM -0.2% premarket

    SpaceX becomes biggest commercial satellite operator

    • SpaceX (SPACElaunched another 60 satellites in its Starlink network last night, aboard a Falcon 9 rocket, which left from Cape Canaveral in Florida.
    • It brings to 182 the number of spacecraft the firm has now put in the sky as part of its plan to provide a global broadband internet service.
    • SpaceX has regulatory approval to launch up to 12K platforms but has talked of an eventual 40K, depending on how the project develops.

    Model Y program launches in Shanghai

    • Elon Musk was on site as Tesla (NASDAQ:TSLA) delivered its first China-made Model 3 sedans to the public at an event in Shanghai, where the automaker began building its foreign car plant just over a year ago.
    • The EV maker also announced the kick-off of its Model Y program in the country (the all-electric crossover offers optional third-row seats and has a 300 mile range).
    • "Ultimately Model Y will have more demand than probably all of the other Tesla cars combined… and will have advanced manufacturing technologies that we will reveal in the future," Musk told the crowd.
    • Update: Musk says Tesla will open an engineering center in China and will design a future car there for the global market.

  23. Food delivery software startup Olo plans to IPO in 2020 – sources

    • Food ordering software company Olo (ORDR) is planning to IPO this year, sources say.
    • Olo, whose name comes from “online ordering,” could fetch north of $1B. It has already begun interviewing advisors.
    • It could seek to raise $300M in an IPO.
    • Olo, founded in 2005, started off as a text-message food-ordering service. Investors include Raine Group and Tiger Global Management. Tiger's $18M investment one year ago came through employee equity; Olo did not sell any shares. And it said a year ago that it had no need to raise money. Which makes it unclear what it would be looking to raise the $300M for.
    • In October 2019, Olo said it was partnering with Google to enable customers to order directly from restaurants across Google Search, Maps and the Google Assistant.
    • 2020 looks to be a hot year for food delivery IPOs: Postmates (POSTMsaid in February 2019 it had filed to go public. DoorDash (DOORD) is said to be considering a direct listing. And of course there's Uber Eats (NYSE:UBER). All of whom compete against GrubHub (NYSE:GRUB).
    • This (lengthy but good) interview with Olo CEO Noah Glass gives you an idea of how Olo differentiates itself from food-delivery "marketplace" competitors such as GRUB and DoorDash. He views delivery marketplaces as the Amazon of food delivery, who will eventually "cut the restaurants out of the equation" entirely, whereas Olo is the anti-Amazon of food delivery, partnering with restaurants and ensuring their margins aren't squeezed.
    • Olo gets a 3.8/5 rating on Glassdoor.

    Finland targets four-day workweek

    • Calling it the "next step for us in working life," Finland's newly installed prime minister, Sanna Marin, has proposed putting the entire country on a four-day workweek that consists of six-hour workdays.
    • Neighboring Sweden tested out six-hour work days a couple of years ago, and in France, the standard work week was reduced to 35 hours (from 39 hours) in 2000.
    • The corporate world is also experimenting with the idea. In November 2019, Microsoft Japan revealed that a trial four-day workweek had boosted productivity by 40%.

    Meatless pork and sausage from Impossible Foods

    • The meatless wars are heating up as plant-based food makers target new product lines after biting into the U.S. burger business.
    • Impossible Foods (IMPSBL) will introduce imitation ground pork and sausage later this month, including a patty for a new sandwich at dozens of Burger King (NYSE:QSR) restaurants, as the company turns its focus to international expansion in 2020.
    • Rival Beyond Meat (NASDAQ:BYND) already began supplying plant-based sausage to Dunkin' Brands (NASDAQ:DNKN) and Tim Hortons restaurants last year, mainly for breakfast sandwiches.
    • Cases of plant-based proteins shipped to commercial restaurants from broadline food distributors increased by 23% in the year ending in November, according to market-research firm NPD Group.

    Hyundai to make vehicles for Uber's planned air taxi service

    • Uber Technologies (NYSE:UBER) and Hyundai Motor (OTCPK:HYMLF) say they are partnering to develop electric air vehicles, joining the global race to make small self-flying cars to ease urban congestion.
    • Hyundai becomes the first automaker to join Uber's air taxi project, which also counts Boeing subsidiary Aurora Flight Sciences, Textron's Bell unit and Embraer among its partner firms.
    • Hyundai, which unveiled its prototype full-scale personal air vehicle, the S-A1, at the Consumer Electronics Show in Las Vegas, says it will produce and deploy the vehicles for Uber while Uber will provide airspace ride-share services and interface with customers.

    Gap -1.5% as Jefferies downgrades on mixed results

    • Gap (NYSE:GPS) is down 1.5% postmarket after Jefferies cut the stock to Hold from Buy.
    • The firm points to mixed results from each division of the company as well as an Old Navy spinoff that might not still make strategic sense.
    • The company also still needs a permanent CEO, Jefferies says, prompting a cautious approach.
    • It's cut its price target to $17 from $24, implying 7% downside from today's close.
    • Sell-side analysts are Neutral on average, and Seeking Alpha authors are Neutral as well. The stock has a Quant Rating of Neutral.

    Defense stocks earn double S&P's return after Middle East event – CNBC

    • Shares of aerospace and defense companies (BATS:ITAtypically outperform the broader market in the six months after a crisis event in the Middle East, according to a CNBC analysis.
    • CNBC says it used hedge fund analytics tool Kensho to analyze market returns after Middle East events dating back to the start of the 1990 Gulf War, finding that defense stocks earned an average 6.7% return in the six months following a crisis event vs. 3.3% for the S&P 500.
    • The top-performing defense stock in the study was shipbuilding company Huntington Ingalls (NYSE:HII), with an average gain of more than 15%, with General Dynamics (NYSE:GD), TransDigm (NYSE:TDG), Raytheon (NYSE:RTN) and Northrop Grumman (NYSE:NOC) making the top five.
    • Other relevant tickers include LMTLHXHEIKTOSTXTUTX AVAV
    • ETFs: ITAXARPPAROKT

    Final Wingstop bear throws in the towel

    • Despite not having the scale of peers like McDonald's or Starbucks, Wingstop (NASDAQ:WING) is well-positioned for the long term, says Jefferies' Andy Barish, upgrading to Hold from Underperform.
    • Barish had been the lone sell-sider bearish on Wingstop, and he's been a skeptic since late in 2017 (despite a recent pullback, stock's more than doubled since).
    • Seeking Alpha contributors lean strongly bearish on the stock (3 have covered in the last 90 days).

    Toyota to build hydrogen test city

    • Toyota (NYSE:TM) revealed plans today at CES to build a prototype city of the future at the base of Mt. Fuji in Japan.
    • The Japanese automaker says Woven City will be a fully connected ecosystem powered by hydrogen fuel cells.
    • Woven City will serve as a home to full- time residents and researchers who will be able to test and develop technologies such as autonomy, robotics, personal mobility, smart homes and artificial intelligence in a real-world environment.
    • Toyota plans to extend an open invitation for other commercial and academic partners to collaborate on the project.
    • #CES20
    • Source: Press Release

  24. The power of the short ATM straddle: maximizes the sale of extrinsic premium, the core of our business. DIS is a great example.

    I'm long the Jun 18, 2021 $115 / $145 BCS (bought for $17, now trading at $18) – but the value of the BCS is not the point of the trade. I've been selling front month straddles for a while now – that's a premium selling machine that cranks out the following:

    Sell DIS Feb 21, 2020 $145 straddle for $9.70

    The advantage of maximizing the premium selling is that it gives you a lot of firepower to handle adjustments – which of course is the default position for selling strangles (best to work on the basis that they ain't never gonna pin at the strike price).

    And I am going to aggressively manage these straddles ahead of time:

     I'll set a fixed premium that I am willing to let go against me and then I will move in and buy the ATM call or put as necessary to neutralize any further bleeding.

    Or close out the entire position, take the lumps, and move on to the next opportunity.

    One thing I've learnt from 2019 (and all the years before that :) ) is let winners run but CLOSE OUT the losers quickly.


  25. Phil /TSLA

     

    Well, people finally realize that they are buying 6 plants for the price of one, the original auto unit, the batteries US unit, auto, and batts in China and also auto and batts in Germany, and they are profiting of Space X technology which is second to none in mechanic thermodynamics, and other relevant fields and the promise to buy it back private.


  26. Thanks for the AAPL ideas Phil. I should have said that the 30 $200/240 bcs is for JUNE /21, not Jan so it's worth $31 or $93k instead of $33 and $99k so I'd wait 17months to gain $27k instead of 12 mths to gain $20k. Would you still cash out or wait out?

    THX


  27. Disinformation For Hire: How A New Breed Of PR Firms Is Selling Lies Online





  28. "One thing I've learnt from 2019 (and all the years before that  ) is let winners run but CLOSE OUT the losers quickly."

    Winston, Amen to that !


  29. $50Bn/Albo – That's nuts.  Either these telcos will go bust or the consumers will if they have to pay for that. 

    Good strategy, Winston.

    TSLA/Advill – I'm pretty sure Space X is a separate, private company.  

    AAPL/Wing – It's a long time to wait for 30% though pretty much a sure thing so, if you don't have anything better to do with that money, no sense in cashing it in ahead of time.  

    O-I Glass wins bullish call from Baird on asbestos liability news

    • O-I Glass (OI +0.5%) extends yesterday's gains after Baird upgrades shares to Outperform from Neutral with a $17 price target, raised from $10, saying finality in the company's asbestos liability may end the stock's "massive underperformance over the past 20 years."
    • OI's wholly-owned subsidiary Paddock Enterprises yesterday filed for Chapter 11 bankruptcy under the weight of thousands of asbestos injury claims.
    • Notable Calls says the upgrade is a "big call" following yesterday's news, as Baird has been bearish on OI for six years.
    • OI's average Sell Side Rating is Neutral, while both its Seeking Alpha Authors' Rating and Quant Rating are Bearish.

    OI is interesting as that's a $2Bn valuation and they are dropping $340M to the bottom line in a nice, steady business.  My concern is that a judge will let the lawsuit transfer to the parent with the subsidiary folding.


  30. CSGP  has, in my opinion, an interesting strangle Feb 21 and is a strong buy in Tipranks

    Space X, yes they are different but engineers cross-breeding exists.  



  31. Closing out last of JILL bounce trade up 30%.


  32. Any Comments today on my HRB suggestions???


  33. Phil – Nice move stepping away from TSLA.


  34. OK, done with our December Portfolio Review.

    JILL/Albo – Interesting chart now. 

    HRB/Yodi – I didn't want to do the butterfly because it moves a lot once in a while and I'm generally bullish so I'm happier going for the straight bullish play from yesterday's Top Trade Alert.  For me, if I see the stock making $5 moves, I'm not going to be willing to risk selling $2.50 worth of short puts and calls as one big move can offset my whole year's gains.   Historically, we just take the money and run when it gets back up in the channel.

    TSLA/Albo – Still in the STP with 5 short March $400s which I thought would be safe last month but up $18 today isn't helping – even though we sold them for $40.   Still, way too much celebrating way too little reality on the bottom line so we'll just roll along until they disappoint.  


  35. Pimco sees threats to private credit, risky debt if economy slows

    • Private credit, leveraged lending, and high-yield debt will be vulnerable if the U.S. economy slows further instead of picking up during the year as Pimco expects, the investment firm said in its 2020 outlook.
    • These riskier types of debt are concentrated in businesses that are "highly cyclical and have riskier credit profiles," Pimco said.
    • "With speculative grade lending currently around 35% of GDP, stress across these sectors would be more than enough to contribute to a recession," according to the outlook.
    • Pimco sees housing as an area of strength in the U.S. economy this year and next. Its mortgage team expects U.S. home prices to increase by ~6% cumulatively over the next two years
    • As a result the firm likes U.S. agency mortgage-backed securities for their "attractive valuation, reasonable carry, and an attractive liquidity profile in comparison with other spread assets."
    • Sees non-agency mortgages offering "relatively attractive valuation along with a more defensive source of credit and carry and better market technicals than generic corporate credit exposure."
    • That's just a few excerpts from the outlook, see Pimco's full commentary here.

    IBM launches Advertising Accelerator with Watson

    • IBM (IBM +0.2%launches the predictive solution, which uses Watson to "create campaigns designed to understand and engage consumers while addressing industry pain points like targeting and personalization."
    • LendingTree and Potential Energy Coalition are among the brands participating in the beta for IBM Advertising Accelerator with Watson.

    Chevron CEO Wirth sees little more oil price gain from U.S.-Iran tensions

    • Chevron (CVX -1.8%) Chairman and CEO Michael Wirth tells CNBC he does not expect significantly higher oil prices from escalating Iran-U.S. tensions and is not surprised that oil prices did not spike higher following recent events.
    • "Fundamentally, supply and demand remain where they were before these incidents," Wirth told Squawk on the Street from the Goldman Sachs energy conference in Miami. "We've been in a well supplied market for some period of time here, and that's generally what the view continues to be at this point."
    • CVX pulled some employees out of northern Iraq yesterday as a precaution, but the company's facilities in the area are in the early phases of development and not yet producing.
    • Wirth noted that following September's drone attacks on Saudi Arabian oil facilities, which took 5.7M barrels of oil offline, oil prices initially spiked before returning to pre-attack levels within weeks.
    • The CEO also said CVX adds $450M/year in cash flow for every $1.00/bbl increase in the price of oil, but the company would "probably not" increase its capital spending plan even if prices stay higher for longer.

    Chevron cut to Sell-equivalent rating at BAML on cash flow outlook

    • Chevron (CVX -1.7%) slips below its 50-day moving average after BofA Merrill Lynch downgrades shares to Underperform from Neutral with a $125 price target, citing challenges to the company's cash flow growth.
    • "We recognize this is a counter-consensus view, but [the] debate on the share price starts with a discounted cash flow-based valuation that suggests the shares are fairly valued at current levels," writes BAML analyst Doug Leggate.
    • Unlike other energy plays, BAML expects CVX's primary growth driver, the Permian Basin, will dilute its previously sector-leading cash margins because production is skewing toward natural gas and natural gas liquids, according to Leggate.
    • "We are concerned that share buybacks are symptomatic of underinvestment that limits visibility on pipeline of new projects to sustain growth in free cash flow and support sustained dividend growth," Leggate writes.
    • CVX's average Sell Side Rating and Seeking Alpha Authors' Rating are Bullish, while its Quant Rating is Neutral.

    Airline Internet firms drop amid Delta's free Wi-Fi talk

    • In-flight Internet firms are trading lower in the wake of comments from Delta Air Lines' (DAL +0.3%) CEO about improving the flying experience through tech, including free Wi-Fi.
    • “Wi-Fi should be free on all flights,” Ed Bastian said at CES. “I’m confident we will reach that goal within the next couple of years at speeds as fast as on the ground.”
    • He also wants to apply machine learning, robotics, big-data analysis and "binge button" entertainment viewing, MarketWatch notes.
    • Gogo (NASDAQ:GOGO) is now down 4.4%, Viasat (NASDAQ:VSAT) is off 1.5%, and Global Eagle Entertainment (NASDAQ:ENT) has slipped 5.3%.

    CIOs prefer Azure over AWS in Goldman survey

    • Tech execs at large companies chose Microsoft (MSFT -0.7%) Azure over Amazon (AMZN +0.3%) Web Services in a Goldman Sachs survey conducted last month.
    • Out of the 100 IT execs at Global 2000 companies, 56 indicated using Azure for cloud infrastructure compared to 48 for AWS. The math suggests some overlap.
    • Asked to forecast their cloud infrastructure habits three years from now, 66 CIOs expected to use Azure, and 64 would use AWS.

    Wolfe Research sees bright spots in trucking

    • Wolfe Research says it's more positive on transports into 2020, noting the sector hasn't underperformed for 3 straight years since the late 1990s and volume comparables get much easier starting in the middle part of this month.
    • The firm lasers in on two trucking stocks, upgrading Knight-Swift Transportation (KNX +1.9%) and C.H. Robinson Worldwide (CHRW +2.1%) to Outperform from Peer Perform.
    • "Earnings for these 2 TLs were among the hardest hit the past year and thus have the most risk-adjusted upside potential to an inflection in the cycle," writes analyst Scott Group.
    • The firm says it's looking to get more constructive on Schneider National (SNDR +0.7%) and Werner Enterprises (WERN +1.1%) on pullbacks and U.S. Xpress Enterprises (USX +1.2%) as execution improves or spot pricing strengthens.

    BofA sees upside after Twitter earnings

    • BofA reiterated its Buy rating on Twitter (TWTR +2.8%) with a note highlighting its stance that the social-media stock is among its top SMID-cap picks for the coming year.
    • Shares will do better once the company gets past Q4 earnings early next month, analyst Justin Post says: It faces a "difficult setup" going into the report, and the consensus may not have enough expense growth built in.
    • Consensus expectations are for a report of $0.27 in EPS on revenues of $996M.
    • But the company should benefit from the new Promoted Trend Spotlight ads, and could draft in a "secular tailwind" off linear TV time shifting online, he says.
    • Sell-side analysts are Neutral overall, while Seeking Alpha authors are Bullish. The stock has a Quant Rating of Neutral.

    Boeing to recommend simulator training for 737 MAX pilots

    • Boeing (BA +1.2%) backs off highs of the day after the company says it will recommend simulator training for 737 MAX pilots before the jets can return to service.
    • The Federal Aviation Administration says it "will consider Boeing's recommendations for flight crew simulator training during the upcoming Joint Operations Evaluation Board."
    • The decision is a shift for Boeing, which previously backed computer-based training, and could lead to further delays for airline customers.

    Chase tempts cardmembers with DoorDash

    • JPMorgan Chase (JPM -1.6%) teams up with DoorDash (DOORD) to offer complementary DashPass subscriptions for its Sapphire, Freedom, and Slate cardmembers.
    • DoorDash’s subscription service offers unlimited $0 delivery fees and reduced service fees on orders of $12 or more from DoorDash’s participating restaurants.
    • Credit card issuers have been trying to lure prospective card members with an array of reward and benefits in an effort to gain market share in the lucrative credit-card lending business.

    BMO Capital bearish on real estate REITS

    • BMO Capital downgrades AvalonBay Communities (AVB -1.7%) to market perform with an unchanged PT of $220, as the stock generated 24% total return in 2019.
    • BMO Capital analyst John Kim downgrades CareTrust REIT (CTRE -2.2%) to market perform and set PT of $22 as CTRE earnings growth is expected to slow to 3% down from 9% previously.
    • As 25% of annualized rent expires through 2021 and with few are expected to move out, EPS growth might take a hit,  cites BMO Capital analyst John Kim downgrading Franklin Street Properties (FSP -5%) to underperform with an unchange PT of $8. Baird downgraded Franklin Street Properties to outperform from neutral yesterday.
    • BMO Capital analyst Jeremy Metz downgraded Brixmor Property Group (BRX -1.5%), CubeSmart (CUBE -1.4%), Macerich (MAC -1.4%) to underperform and set PT of $19, $30 and $24 respectively.
    • BMO Capital analyst Jeremy Metz downgraded Simon Property Group (SPG -1.4%), Duke Realty (DRE -0.4%), Federal Realty Investment Trust (FRT -1.7%) to market perform and set PT of $156, $36 and $133 respectively.

    Beyond Meat rallies after Impossible Foods highlights innovation

    • Impossible Foods (IMPSBL) says it's improving its speed to market with new meatless products.
    • "Not only is the pace of new product development getting faster, but we’re getting better at getting better. The whole innovation cycle is accelerating," CEO Pat Brown tells CNBC.
    • Brown says the company's doubling of its R&D team in the last year has helped speed up the innovation cycle. He also notes the company is working on product alternatives for terrestrial animals, fish and shrimp.
    • Yesterday at CES, Impossible Foods tipped off its plans to introduce imitation ground pork and sausage later this month. That development may be a factor in today's brisk rally for Beyond Meat (BYND +7.5%).

    Oil tanker flotilla steams toward U.S. as freight rates surge – Reuters

    • An unusually high number of oil tankers – eight – are sailing empty from Europe and the Mediterranean toward the U.S. Gulf Coast to take advantage of surging shipping rates, Reuters reports.
    • The tankers are in the Atlantic and steaming to the U.S., with a combined capacity of as much as 5.6M barrels of oil, according to the report; freight rates for Aframax vessels out of the U.S. Gulf coast hit record levels last month, drawing more vessels to the region.
    • Occidental Petroleum (NYSE:OXY) reportedly has tentatively booked the Aframax vessel Seajewel at a rate of 370 world scale points from the Gulf Coast to Canada's east coast.
    • WTI crude at Magellan East Houston traded $3.35/bbl above U.S. crude futures on Monday, up ~$0.10/bbl from Friday.

    Jefferies upgrades State Street on EM exposure

    • State Street (NYSE:STT) rises 1.1% after Jefferies analyst Ken Usdin upgrades the stock to Buy from Hold as he sees the bank's higher exposure to emerging market equities boosting servicing fees.
    • Notes EM's higher fee capture rate.
    • Estimates Q4 EPS at $1.75 vs. $1.67 consensus.
    • "Balance sheet growth, cost control, and the preferreds/buybacks mix could all improve in the out-year relative to our new estimates," Usdin writes.
    • Trust banks, overall "enter '20 with the best backdrop in some time," he said.
    • In Q4 2019, strong equity markets and a less negative net interest income outlook outweighed slower activity, he added.
    • Potential for capital reform and focus on cost controls should support EPS.
    • Usdin boosts State Street price target to $92 from $68; Northern Trust (NTRS +0.7%) to $109 from $97; and Bank of New York Mellon (BK +0.7%) to $54 from $44.
    • Maintains Hold ratings on NTRS and BK.
    • Quant rating on State Street is Very Bullish; Sell-Side average rating is Bullish (8 Very Bullish, 5 Bullish, 8 Neutral, 1 Very Bearish).

    August 16th, 2019 at 11:02 am | (Unlocked) | Permalink 

    STT – And sometimes they don't work!  WTF on this one?  This is a huge bank that's making $2Bn a year VERY CONSISTENTLY but, at $50, you can buy it for $18.6Bn.  Nothing to do but DD on this one so we'll roll our 20 2021 $50 calls at $6.40 ($12,800) to 40 of the 2021 $45 calls at $8.90 ($35,600) and now we're $20,000 in the money after spending $22,800 on the roll plus our original $27,700 puts us in 40 of the 2021 $45 calls for net $50,500 ($12.625 each) but the puts are a problem too so let's roll the 10 short 2021 $60 puts at $14.20 to 20 of the 2021 $50 puts at $7.80 - a bit better than even and we'll sell some calls when they bounce, like 20 of the Jan $57.50s, now $1 for hopefully $3.50 (the price of the Jan $50s) while we wait for STT to get back to 12x earnings (about $65/share).

    I think that's what I really like about Fundamental Investing – it's pretty simple, we just find value stocks and keep accumulating them while we wait for the market to get rational – which it actually does once in a while….

    They blew through that target but we killed that trade with the rest of the LTP, of course.  


  36. So where was Jefferies in August?  These analysts are nothing but sheep, following the herd!  


  37. Phil/Earnings Portfolio

    From Nov 19  — I don't see this position in the current updated earnings portfolio — did I miss something??

    November 19th, 2019 at 1:40 pm | Permalink | Tweet thisIgnore this user

    We can also add M to the Earnings Portfolio as follows:

    Sell 5 M 2022 $15 puts for $4.60 ($2,300) 

    Buy 15 M 2022 $13 calls for $4.20 ($6,300) 

    Sell 10 M 2021 $15 calls for $2.75 ($2,750)

    This is a little more aggressive than our $50,000 Hemp Boca Portfolio and we can always roll the short $15s higher if M really pops but, if not, they expire a lot sooner and we can sell more calls and roll down the long $13s if earnings are a disappointment.  Net here is $1,250 – not too much more and the same or very possibly better upside potential.


  38. So Phil I rolled my 3 TSLA March short 405 calls out to 2021 480 calls for about the same price.

    Do you ever hedge a short like this with a call spread or just keep rolling?

    thanks


  39. STT/Phil – I'd bet Jeffries was buying bunches of STT in August, and is now happily selling.


  40. Phil / STT – that was one I picked up for my synthetic collar combo thingy. Got the long 2021 $50 synthetic stock for a credit (buy long ATM calls / sell short ATM puts) and cautiously bought a hedge of long puts (which were obviously not needed).

    But it moved up slow enough at first to make money on selling the ATM straddles to make the total combo with hedge a zero cost trade.

    Suffice to say, it's a gold mine on the long stock and selling straddles. Long may it continue. And thanks!


  41. yodi/winston – Yodi, I notice you reference selling strangles whereas Winston you mention straddles. Curious to know what leads you to one versus the other?  Also, perhaps discussed ad nauseam, but in a covered straddle/strangle strategy how far out of an expiration do you look for?


  42. Good morning! (I fell asleep)

    Not a pretty close.

    VIX is staying oddly low

    Oil gave a lot back fast:

    Honey badger don't care:

    /KC bouncing at $120

    Poor Australia!  They export a lot of Gold, Gasoline and Wheat – if these fires keep up, there is likely to be some impact.  I think Wheat Futures are worth a toss at $550.

    There's also WEAT, which has options at $5.78 and the July 4 calls are $1.90 so very little premium as a long play that's fun (no cover).  If I could sell the April $5s for more than $1.50, I'd do that down the road (now $1).

    Gold already popped (GOLD is our Stock of the Year!)

    My apologies to those who thought they'd beat us out of a Membership – that spread already made it's first 100%!  

    GOLD Long Call 2022 21-JAN 13.00 CALL [GOLD @ $18.47 $0.08] 30 11/14/2019 (745) $15,600 $5.20 $1.15 $5.20     $6.35 $-0.05 $3,450 22.1% $19,050
    GOLD Short Call 2022 21-JAN 17.00 CALL [GOLD @ $18.47 $0.08] -30 11/14/2019 (745) $-9,900 $3.30 $0.73     $4.03 $-0.09 $-2,175 -22.0% $-12,075
    GOLD Short Put 2022 21-JAN 17.00 PUT [GOLD @ $18.47 $0.08] -15 11/15/2019 (745) $-5,025 $3.35 $-0.90     $2.46 $0.15 $1,343 26.7% $-3,683

    Was $675 now net $3,292 – good progress!  

    M/Jeff – I must have missed them, I'll add them in for tracking, thanks.

    TSLA/Coulter – Well, generally, I'd rather buy a bull spread than capitulate on the short calls.  The 2021 $480s are $80 (wow!) and so are the 2022 $580s, so that's the next roll so, if you become worried about TSLA not stopping at $580 (over $500 would do it for me) then you can pick up the 2022 $520 ($100)/660 ($60) bull call spread for net $40 and now you aren't in trouble again until TSLA is over $600 (Friday?).  

    Clearly this is ridiculous, TSLA is now at $82Bn, that's GM + F!  Those guys make $10Bn between them for a p/e of 8 while TSLA has $22Bn in SALES and lost $1Bn last year and another $1Bn so far this year.  MADNESS!

    STT/Snow – Most likely. 

    STT/Winston – Those are the kinds of value finds I truly love. 

    Straddles/Music – Just tighter strangles, I think it's more a matter of deciding what your targets are on the puts and calls.  I'll usually use a straddle (puts and calls at the same strike) if I don't know which way it's going and just want to sell a lot of premium.  More likely though, I try to guess the range and simply "strangle" it.  

    With GOLD, above, for example, I think $20 is going to be a bit of a stretch and I think $16 will hold so I'd look to sell $20 calls and $16 puts and I want a 10% cushion so I have to collect at least $2 and I'm going to error on the side of bullishness if anything as I do think gold (/YG) can break higher and take GOLD with it so 1/2 cover is best and the March $20s are 0.45 so not worth selling and the June $20s are 0.95 and the June $17 puts are 0.84 so close enough that I'd ask for $1 each and see which fills first and then work on filling the other side.  The 2021 $25s are 0.75 so I'm not too worried about my roll as that's about 40% higher than we are now (and it's only a 1/2 cover).  

    That's my thought process when selling strangles/straddles.  


  43. Phil / MU 

    I have the following position and am looking for adjusting. I think 65 to 70 is a reasonable target on this for 2022…   I’d like to adjust 

    Here’s what I currently have:

    2K Shares Bought at $45 now 58

    Short 15X Jan ’21 $50 Call (4.29) now 14.6

    Short 15X Jan ’21 $40 Put (5) now 2.4

     

    Long 81X Jan’22 $40 Call (16) now 24.4

    Short 60X Jan ’22 $60 Call (9) now 14

    Short 15X Jan ’22 $65 Call (10.6) now 12

    Short 20X Jan ’22 $40 Put (6.2) not 4.7

     

    Here’s what I’d like to Adjust to:

    Sell 2K shares and close out 15 short calls and puts.

    Close out the the 20X of the ’22 $40 put.  

     

    Sell 30X of the ’22 45 Puts for $7 ish

    I’m struggling with the rolling of the BCS the 40 / 60 ones…  Can you help with this? Should I roll up to 65 or 70? And I would like to buy more ’22 long should I go with ’22 $45 or the $40s?

    Thanks for your help as always.


  44. My large short call position in Tesla, covered by a 2022 430/530 bull call spread is definitely testing my resolve. The limited float, coupled with positive news flow, and short covering is a potent combination.  I have double covered my short calls by going long shorter term call spreads (March 390/440, and March 450/500s) to reduce my short delta, with tight stops.  


  45. Well, there goes untroubled Tuesday, Iran just attacked a US base in Iraq. 

    Futures down sharply…


  46. How is the GOLD spread interpreted as being up 100%


  47. Oops, all my news went under the portfolio review as it had the latest time-stamp (of articles written by me) so the computer assumed it was the current post.

    There's indications that Iran's bombing was a one-time retaliation (even though they didn't kill anyone) and not a war escalation, so the markets have calmed down already.

    MU/Batman – Well they really blasted higher on you, didn't they?

    Part one, you have 2,000 shares and will be called away on 1,500 at $50 in 2021 – nothing wrong with that.  The 2021 $50s are $14.60 and the 2022 $60s are $14 so you can roll and pick up $10 – worst-case.  

    The options spread is fully covered so also not a problem as you are on-track to hit your aggressive targets – good call.

    $45 (6-month consolidation) + 20% is $54 and we're past that and another $9 is $63 so let's say that should be hard to pass.  You mostly sold 2022 $60s, which have a lot of premium so I'd hate to buy them back and I guess, from the gist of the question (thanks for properly formatting) that you want to lock in the gains – which is smart. 

    Your assets are the stock and 81 (why 81?) 2022 $40 calls @ $26 on my screen.  The stock is down to $56.60 after hours so those $40 calls, with an 81 Delta, are probably down $1.50 to $24.50 so kudos if you were taking that into account when you said $24.40.  

    Anyway, the problem is, how to protect yourself if you cash in the longs?  The 2022 $50 calls are $18.60 so $6 in pocket for that roll is not very sexy.  The $75s are $8.70, so that's maybe something we can work with and the 2021 $60s are $9.50 – also a possibility.

    If we cash 2,000 shares that's $116,000 and buy back 15 2021 $40 puts for $2.40 ($3,600) and 20 2022 $40 puts for $5 ($10,000) to clear the decks.  Then you have 90 short calls at ($21,900 + $84,000 + $18,000) = $123,900 and the 81 2022 $40s at $197,640.

    So if you cash out the stock and the long calls, that's $313,640 less the short puts is $300,040 and I'd suggest simply selling 50 short 2021 $60 calls for $9.50 ($47,500) and 50 short 2021 $52.50 puts for $6 ($30,000) and that's $77,500 out of the short $123,900 you had but that's one year out of two and rollable to the 2022 $75s at $8.70 – so not very risky and you've already demonstrated a willingness to own the stock – so I'm not worried about the short puts either.

    So now we're just down to cover and I'd say you only need to cover a catastrophe so 50 of the 2022 $70 ($10)/90 ($5) bull call spreads at net $5 ($25,000) should keep you out of trouble and, of course, if MU breaks over $60, simply add 50 more spreads, etc. 

    I believe that's net $253,640 off the table and you're left with 50 of the 2022 $70/90 bull call spreads covered by 50 short 2021 $60 calls and 50 short 2021 $52.50 puts – that should be easy enough to manage.

    If you want to be more bullish without waiting for a pullback, just buy more long spreads – you can't beat net $5 on a $20 spread and, if your short calls pay off (or at least look good through June), you can always spend $5 more to roll the long calls $10 lower.  

    TSLA/Palotay – Yes, that small float let's them manipulate the Hell out of the stock, unfortunately.  They did the same thing at the start of 2017, running from $180 at Thanksgiving to $380 (+111%) in June with barely a pause.  This run started at $210 in Aug and now $470 (+123%) but $100 of it came on two days in October and the last $70 came in the past 5 sessions so it's very unlikely there's a strong base to support it.

    Your March $390 ($91)/440 ($57) bull call spread is $34 out of $50 and the $450 ($51)/500 ($29) spread is $22 out of $50 so that one is still effective although think how screwed you would be on the short calls if the $500s come into play!   The 2022 $430 ($138)/530 ($96) bull call spread is $42 out of $100 – also good bang for the buck so I'd ditch the March $390/440s in favor of more of those and probably the other March spread too as the net delta of the 2022 spread is 0.68-0.55 = 0.13 and you lose a lot more than that on a sell-off on the March spreads while you only have a bit of protection from March while 2022 has $58 of upside protection left.

    Also, not sure what short calls you have but let's say they are short June $400s at $99, you could sell 1/3 the 2022 $350 puts for $60 and use that $20 (per short call) to roll them to the 2021 $500 calls at $73 and then you'd be a lot more comfortable watching this nonsense.  I think just knowing that's an option is comfort enough – for the moment, I'd rather wait for earnings to see if they can prove they even deserve $400.

    GOLD/Tangled – Well we bought it for net $675 and now it's net $3,292, which is up $2,617 which is 387% of $675, isn't it?


  48. Uh oh! 

    A Boeing plane headed to Ukraine crashed shortly after takeoff from Tehran, reports said. The fate of the 180 people on board was unknown.

    Tuesday, January 7, 2020 11:42 PM EST

    The plane, a Ukrainian Boeing 737-800, went down because of technical problems, according to local news reports.

    “We are aware of the media reports out of Iran and we are gathering more information,” Boeing said in a statement.

    On the bright side:

    Iran said it had concluded its attacks on U.S. forces in Iraq and did “not seek escalation.” President Trump plans to make a statement on Wednesday.

    Tuesday, January 7, 2020 10:36 PM EST

    The statement from Iran’s foreign minister followed two missile attacks on bases in Iraq housing American forces in response to the killing of Maj. Gen. Qassim Suleimani, a leader of the Islamic Revolutionary Guards Corps.


  49. musicman / straddles : strangles. The cute answer is 'it depends'. On timing, as you are selling premium you do not want to give your short callers and putters more time than necessary to move against you. I go for the classic 45 DTE, managing at 21 DTE (leave alone, roll, close, reposition, add BCS for protection etc).

    For strangles In terms of strikes, I do look at the expected moves as indicated by the implied volatility of the ATM options. No calculations needed as ThinkorSwim shows you the expected move by option expiration cycle. So I first look at the strikes at the expected move (up or down) and see how much premium that brings in – that is generally less than I'm willing to accept – so I may bring one of the sides closer based on my view of the underlying.

    I'm cognizant of when the earnings date is due, and prefer not to be caught up when earnings is close to the expiration date. I'll generally go out past earnings.

    I'm not afraid of trading the weeklies as there is a lot more flexibility in terms of strike prices (but of course watch out for liquidity).

    For straddles, if I can get close to 10% of the stock price in straddle premium then I will go for that. Those opportunities don't come up often, but it's something worth looking for. For example CPRI (Kors) is trading at $37.58. The Feb 21 $37.50 straddle can be sold for $5.20. That even allows me to add (buy) the 1 strike OTM call or put to completely eliminate the risk to one side (if so inclined). I did that on the sale of the Jan 21 $37.50 straddle – I bought the $35 put as I had never traded CPRI before and I wanted to see how it evolved during the course of the trade. When it showed relative stability and moved up a bit I sold out of the long put – and am confident to go forward selling the straddles. Earnings are on Feb 5, expiration is on Feb 21 – so I can live with that.


  50. Selling Premium – and of course the key question is the selection of the underlying. No amount of rolling and/or adjustments will help you extricate yourself from a poor choice of stock to sell premium against.

    And of course, Phil just gave another masterclass in rolling and adjusting (see above).


  51. ……and remember, going short naked calls is reserved for the wealthy and the crazy.

    But those premiums on TSLA are juicy.

    How about selling the Feb 21 $475 straddle for $70 and then protecting the upside by BUYING the Feb 21 $485 call for $28.50. 

    That caps your upside risk to $10 – so you get to keep $60 as you pray for a short squeeze and then you get $60 to protect yourself on the downside.

    Current option pricing on the Feb 21 options are predicting a $67 move up or down. See how those straddle prices look about right (there ain't any free money going around).

    Earnings on Jan 29.

    Too rich for my blood, and I certainly couldn't recommend it – but it shows the math at work.  


  52. Of course you get to keep @ $70 minus $28.50 = $41.50 – still not bad for 45 days work! :)   – if you can keep it.

    See, juicy premiums have that intoxicating effect on the thought processes (and that's not a joke).


  53. Musicman, I guess Phil said it all. I mostly use strangles, as they give you more leeway in both direction. It is a bit more conservative, hoping both legs will be worthless on expiration day. As Phil says the straddle is more aggressive and gives more premium as well, needs more attention.
    As you can see Winston uses the straddle play in his type of strategy. To me my armchair trade is the most relaxing play. You first need a Stock you comfortable with. In this case you can be closer to the ATM option play, in respect to your purchase price of the stock. As and if you get assigned or called for, you will get the money back of the stock in case of call and you will get more stock for a nice discount in case of put. In both cases you will remain with the money received by selling the strangle.
    Obviously with the stock purchase you in addition will receive the div. provided you have not been called for the stock before expiration day. The holder of the call, you sold to, will normally call for the 100% ITM call smartly one or two days before expiration day!!!!
    Phil mostly likes to sell the legs of strangle or straddle separate, to obtain the max value of premium, as I always find after I sold the first leg for a better price, the second leg will drop on me, and mostly never receive the price I was looking for.
    Typical example with LMT sold the Feb 405 call for 4.10 before Trumps capritschas and wanted 4.75 for the put. I got the call, but because one of his cronies new about the killing in advance, the put, which did not fill is worth now only 1.40. Had I stuck to my Spread principal I possible would have never been filled.
    Especially with armchair trades you will be more comfortable and relaxed with 3 to even 6 month out plays, just looking for a combined monthly return of 2 to 2.5 %.
    Where, with a BCS or Poor man's trade, if you called for you land up with a negative or better short stock, and you will have to buy it, mostly much higher than your strike price, as in this case the BCS or PMT will not save you from a short stock.


  54. Winston Looks good for a paper trade and your legs will be to short to kick your butt, if it works out. If it runs against you, you happy to press the reset button.


  55. Not to be greedy You could buy the stock now @ 465.40 and sell the Feb 20 390/480 strangle @ 37.92. Gives you only 5.5% per month, BUT with possible capital gain to 485 and a downside protection for the put 352.00 and loss on the stock to 427.48. Obviously you need to spend 46.5K for just 1 play.


  56. Yodi – that is a very good way to play it. The best way to protect a short call is with long stock – but as you say you have to pay up for it.

    You just need to be smart about managing that downside protection.

    My suggested hierarchy of protecting short calls:

    Buy long stock (before the short call goes ITM)

    Buy synthetic stock (ATM long call / sell ATM long put)

    Buy a risk reversal – close to ATM long call spread financed with the sale of ATM short put spread (widen the strikes as desired to get the right risk profile

    Buy 70 delta long calls

    Buy a ZEBRA (Zero Extrinsic Back Ratio) sell 1X ATM call, Buy 2X ITM call such that the sold extrinsic of the short call equals the bought extrinsic of the 2X long calls – that sounds opaque but look at the option chain and it becomes clearer

    Buy a ratio call – sell 1X call – buy 2X long calls – same expiration date

    Diagonallize the ratio call – sell 1X front month call / buy 2X front month +1 expiration. The plan is you hope the front month short call expires worthless leaving you with 2X the long calls.

    Sell ATM puts

    Model all these options using ThinkorSwim ANALYZE tab to see the risk profiles and how the much positive delta you can pick up. 

    And of course – the challenge of any adjustment strategy is recognizing that you may just be setting yourself to having to adjust the adjustments!!! That sucks.

    Please feel free to add to the list of long delta strategies to assist managing runaway short callers


  57. Winston, in reference to your last post, it reminds me of a game called Mikado, where you drop a bunch of sticks and you have to pick up each stick without moving the other.
    However one thing you will make the broker happy with all your options in play and at the same time you will have sleepless nights while watching all your option moves.
    I rather stick to armchair!!!!!!


  58. Good morning! 

    As you can see, I was up late and now I overslept but new post is started.