14.3 C
New York
Wednesday, June 7, 2023



Just Another Manic Monday

Image result for earnings season animated gifWhat a boring weekend!

For a change, there wasn't any news – things just sort of drifted along but, poof!, half of January is already behind us and already we're moving into the heart of Earnings Season with 10% of the S&P 500 reporting this week followed by over 20% next week and we'll be half done by the end of the month and then it's February already – boy time flies

This week we concentrate on earnigs from the Financial Sector and I find Schwab (SCHW) very interesting at $48 as that's $61Bn after they swalled Ameritrade but they are only making $3.6Bn this year, just $300M more than last year with Q4 likely to be down from last year – not too supportive of a record-high valuation.  

It will be a good test to see how rational traders are getting (if at all) in this ultra high-value market environment.  Bank America (BAC) and Wells Fargo (WFC) are also expected to be making less money than they did last year and they too are at year highs – might be an interesting time for a little correction?

WFC, of course, is coming off fake account scandal but it hasn't really cost them a lot of cutstomers after 3 years as Revenues were $88Bn in 2016 and $85Bn in 2019 and profits are down 10% but, of course, the stock is up 10% from the 2016 highs ($50) and 20% off the lows ($45) because – well because it's part of the overall Valuation Rally – where everything is more expensive than it used to be.  

Still, a good case can be made for shorting them here and WFC reports tomorrow morning and it seems very unlikely they are going to hit $55 so the way I would play it is:

  • Buy 10 WFC March $52.50 puts for $2.10 ($2,100)
  • Sell 10 WFC March $50 puts for $1.05 ($1,050) 
  • Sell 5 WFC March $52.50 calls for $1.30 ($650) 

That's net $400 on the $2,500 so there's $2,100 (525%) of upside potential in 67 days if WFC is below $50. If earnings are good and they stay above $52.50, we will owe the short callers money but we can always roll them and put up a bullish spread to cover (since earnings are so good) so let's add this trade to our Earnings Portfolio and see how it does.

After we see how WFC, C and JPM do tomorrow morning, we'll have a better idea on how we want to play the rest of the sector.  As you can see below, 2019 was not a good year overall for earnings and no help is projected to come in Q4 but guidance is supposed to improve for 2020.  If it doesn't, watch out below!


We'll be working on all of our Member Portfolios this week as January options expire on Friday, so there will be plenty to do and it's a busy week with 9 Fed Speakers scheduled as well as CPI, PPI, NY, Philly & Atlanta Fed Reports, the Beige Book, Retail Sales, Consumer Sentiment and Industrial Production.  

We're still shorting the indexes (2 contracts each) at Dow (/YM) 28,915, S&P (/ES) 3,276 and Nasdaq (/NQ) 9,024 and we'll go for 3 contracts if we can still get those prices at the open.  These are the same shorts we began scaling into during last Wednesday's Live Trading Webinar (replay available here) and they are hedges for our $100,000 Portfolios against one of those sudden moves down the market likes to make these days

As I said, it was a dull weekend, nothing much in the news, which leaves us with Earnings and the re-start of Trump's Impeachment as well as lingering tension with Iran that can blow up at any minute – of course we want to be hedged!  Trump signs that Trade Deal on Wednesday but the actual deal isn't very exciting and then what will they use to prop up the markets?



Notify of
Inline Feedbacks
View all comments

Just like to remined you of the T trade of the other day buy stock and sell Jan 22 33 straddle.

I sold even 33/35 and 33/37, still a good time to enter the trade. T38.11!!!!

AXLN – Thanks Phil   I'll look at some Putters and maybe a BCS 


Pharmboy / AXLN – Do you follow this?

Phil T to discount the stock to 30 to 31 is not a bad deal. In May 2019 we would have never believed TSLA would make it to 250, look where we are today, seams like we still find enough fools to buy. Forward PE 88 T PE 17.

Phil how do you decide when (if) to Roll up and out TSLA 2021 480 calls to 2020 580 calls?


Some AAPL progress (slow but steady)!

It’s 2020 so I have sold my 20 AAPL ’21 $140calls and bought 30 AAPL $270calls @ $61 (now $72). 

Would like to capture some of the enthusiastic AAPL premium by rolling my short calls up.

I have 10 ‘extra’ longs so could sell 10 ’22 AAPL $310s but prefer the idea of selling more short term calls and rolling them out or letting them expire.


30 AAPL ’22 $270calls @ $61 ($72)

15 AAPL  ’22 $240calls @ $53.5 ($92.5)

-10 AAPL ’20 Mar 220c @ $16.5 ($94).

-25 AAPL ’20 June $270c @ $17.6($50) 


Still have 30 ’21 $200/240 BCS. ($29/$18)


Any words of wisdom?

Phil: Would you pick a strategy to short BKNG here? (looking like a triple top and not moving in pace with the other crazies)

Information About Liquid Metal

Liquidmetal has been used in the iPhone’s SIM removal tool since the iPhone 3G came out .  A Liquidmetal case, for instance, might be able to accommodate wireless charging, as a patent filed by Apple in the third quarter of 2016 claims. Most industry observers were speculating that the iPhone 8 would be the first model to feature both a Liquidmetal body and wireless charging. While the current iPhone 8 line already uses the Qi wireless charging standard, it uses a glass back instead of the Liquidmetal housing that was predicted in 2017. While glass might seem pretty, it is still prone to scratches and breaking. Fortunately, says John Kang, Liquidmetal has none of those issues. It’s now up to Apple’s engineers and product designers to come up with an iPhone that has a body that feels like metal, but is able to charge without cables.

Mito / Crazy Short BKNG – my unasked for 2 cents

With BKNG capable of moving 200 pts per expiration cycle (when you look at the current expiration cycles post earnings on February 26th) then the only play I would consider is a defined risk play. 

Given the high price of the stock I would go for a speculative Put Butterfly trade (of the Broken Wing variety):

April 17, 1850 / 1880 / 1900 ::::: +1 x -2 x +1 (all puts) for a credit of $0.45.

The short strike ($1880) is placed around about the strike of the expected move.

In terms of risk / reward – 1 contract has a max profit potential of $2,000 and a max loss of $1,000. Of course there is no way that the stock will pin at the $1880 strike – so rather an all or nothing play – but the nothing is pennies so that is not an issue. Obviously no risk to the upside as you as the trade involves puts.

If BKNG does start to slide then you could consider layering on a Put debit spread – but a small position.

With any trade on BKNG I would not consider any strategy which involves naked short options – been there, done that – conclusion: don't like it.

Trump support for Iran protesters could fuel anti-US forces

BKNG/Winston – Thanks that's a good idea.  I was considering a plain April 2100-2000 Bear Put Spread but yours require less upfront. You are right this name is so volatile I prefer not to have uncovered legs!

Stay Connected


Latest Articles

Would love your thoughts, please comment.x