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Working it Out Wednesday – Is the Trade Deal the Beginning or End of the Rally?

Image result for trump trade deal cartoonToday is the day!  

Trump will sign a deal today (11:30) with China that puts off the new tariffs he threatened them with until "after the election" and China agrees to buy $200Bn in US Goods and Services over 2 years, which is double their normal pace so, in theory, it could add 0.5% ($100Bn) to our GDP, assuming we actually produce more Goods and Services and don't just end up selling China things we would have sold to someone else.  Boeing (BA) has several hundred grounded 737s China can have – that's a good start!

It's onlly a start though as the deal does not address Cybersecurity or China’s tight controls over how companies handle data and Cloud Computing.  China rejected American demands to include promises to refrain from hacking American firms in the text, insisting it was not a trade issue.  The Chinese have also rebuffed requests for broader changes to the structure of their economy. That includes a pattern of subsidizing and supporting key industries, like solar and steel, that American firms say have allowed China to dump cheap products it makes into the United States.

In the interim, the remaining tariffs will continue to inflict financial pain on American businesses that rely on Chinese imports and the consumers who buy their products.  Is that going to be good enough to continue to boost the market or will the reality of the trade deal's mediocrity begin to weigh on forward-looking sentiment.  Pay close attention to Corporate Guidance, now that they are taking the signed deal into account.  

Earnings have been going well so far but Goldman Sachs (GS) missed this morning by almost 20% – that was a surprise.  BAC, BLK, PNC, USB and UNH all beat along with WAFD last night and only WFC screwed up yesterday so it's so good, so far in the Financial Sector but, of course, shouldn't it be with the market up about 30% in 2019 and up another 2% in the first two weeks of 2020?

The Producer Price Index came in weak this morning at 0.1%, half of what was expected and that indicates that, despite "strong" retail sales, the Consumers are unwilling to swallow price increases and that does not bode well for margin improvement down the road.  For 2019, total PPI expansion was 1.3% so 0.1% is actually right in-line with all the other months of 2019 – I don't know why they were expecting 0.2% in the first place…

We still have our S&P (/ES) Futures shorts at 3,277 (4) and our Dow (/YM) Futures shorts at 28,915 (2) after cashing our our Nasdaq (/NQ) Futures shorts on yesterday's dip with a lovely profit.  This morning I want to add 2 Natural Gas (/NG) Futures longs at $2.13 as that's a nice, low price for /NG in the winter.  We're having a Live Trading Webinar this afternoon at 1pm, EST – we'll follow up on Futures trades than and also review our 6 Member Portfolios.  

One portfolio we can review right here and now is our Money Talk Portfolio, since it's a public portfolio we keep for Bloomberg's Money Talk show and we only make changes on the show and never touch them otherwise.  We began the new portfolio back on November 13th and not much excitement so far as it's only up 2.7% but they are all solid picks with plenty of room to grow so let's look at the trades and their potential for future gains:

  • SPWR – Finally coming off the bottom and I do love these guys.  We were being cautious but I'll probably be adding this trade to one of our other Member Portfolios, with an additional bull call spread as $8 is way too cheap for SPWR.  We certainly expect to collect the remaining $2,810 on these short puts so good for a new trade.

  • GOLD – Our 2020 Trade of the Year is off to a great start as our net $675 entry is now net $2,662 for a quick $1,987 (294%) gain in just two months.  While it sounds like it may have gotten away, it's actually a $12,000 potential trade if all goes well and GOLD holds $17 into 2022 so that's another $9,338 (350%) left to be gained – still not bad for a new entry!  

  • IBM – Our Trade of the Year for 2019 is still going strong at $135 – up from our $110 entry in Nov, 2018 (we make our Trade of the Year decisions around Thanksgiving) so we didn't see any reason not to renew it as it's simply on the way to our $150 target for 2021.  This spread has barely budged and still a net $80 credit on the $16,000 spread which is 200 times $80 so you can make 20,100% on the $80 credit if IBM is over $140 in Jan, 2022.  The ordinary margin requirement on the 4 short puts is just $3,571 – so it's a very efficient trade as well – just the kind we like over at!

There, only 5 more reviews to go and we're ready for Friday's options expirations.  

Meanwhile, we'll see how things go after the trade signing.  We have 2 Fed Speakers (Harker and Kaplan) sandwiching the signing ceremony so I imagine the fix is in and no one wants the markets to look disappointed on signing day.  We also have a Beige Book to look at at 2pm and Oil Inventories at 10:30 should give us a boost – as it's very unlikely they'll be as bad as last week was.  That makes Oil (/CL) a fun long at $58 but tight stops below that line.


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  1. Good morning, All!

    It's webinar day! Join Phil at 1pm here:

  2. Target Corporation (NYSE:TGT) shares were trading lower Wednesday after the retailer reported holiday sales that failed to meet expectations.

    Down almost 10% premarket.

  3. Good Morning!

  4. Trade war not helping the trade deficit with China:

    Better than last year but the trend is still up!

  5. You have to love that fight about the cost of Medicare for all. For some reason, the GOP only provided cursory explanation on how tax cuts were going to pay for themselves (which proved wrong anyway) but Dems have to provide a detailed explanation down to the penny for Medical for all!

  6. Good morning!  

    Gotta love the angle of ascent on the Nasdaq over 20% since October is 3 months, pacing for an 80% year?  That's very 1999…

    TGT/Ati – That is a surprise.  There was no indication they were having issues.  They are up 60% since Aug so they'll be lucky if they only give 10% back on a disappointment. 

    Top solar name slapped with double downgrade by Barclays

    First Republic Bank -2.2% after stock offering prices

    • First Republic Bank (NYSE:FRC) slides 2.2% in premarket trading after the bank's public offering of 2.5M shares of common stock prices for expected gross proceeds of $295.0M.
    • That implies a per-share price of $118; First Republic shares closed at $120.75 on Tuesday, Jan. 14, 2019.
    • Grants greenshoe option for up to an additional 375K shares.
    • Intends to use net proceeds from the offering for general corporate purposes, which may include, among other things, funding loans or purchasing investment securities for its portfolio. 

    Empire state manufacturing exceeds expectations

    • Jan. Empire State Manufacturing Survey+4.8 vs. +3.55 consensus, +3.3 prior (revised).
    • New Orders index: +6.6 vs. +1.7 prior (revised).
    • Shipments index: +8.6 vs. +9.5 prior (revised).
    • Number of employees index: +9 vs. +10.4 prior.

    Amazon bull sees continuing ad momentum

    • Mizuho says Amazon's (NASDAQ:AMZN) ad business showed "continued momentum" in Q4, particularly in sponsored product ads.
    • Sponsored product ad pricing grew 9% in the period due to conversion rate and targeting improvements.
    • Mizuho says the tech giant is "focused on expanding into brand advertising in 2020" and is expected to ad videos for the sponsored ads.
    • The firm cites a conversation with Amazon ad agency Tinuiti.
    • Mizuho maintains a Buy rating and $2,150 price target on Amazon. The company has a Very Bullish average Sell Side rating.
    • AMZN shares are up 0.1% pre-market to $1,870.85.

    PG&E +5.7% pre-market after Citigroup calls agreement 'big step forward'

    • PG&E (NYSE:PCG) is indicated to open at its highest levels in five months as Citi analyst Praful Mehta upgrades shares to Buy from Neutral with a $15 price target, up from $11, saying the company's potential agreement with bondholders is a "big step forward."
    • Bloomberg reported yesterday that PG&E is near a deal with creditors including Pimco and Elliott on a restructuring plan which would offer a mix of equity and new debt if they abandon their rival restructuring plan.
    • Mehta believes the "constructive negotiations" referenced in bankruptcy court yesterday suggest a deal with bondholders is imminent, one that would limit California Gov. Newsom's ability to push back on leverage levels.
    • PG&E likely will offer "constructive solutions like building sales, NOL monetization and regulatory asset recovery as ways to improve the credit profile," Mehta writes.
    • PCG's average Sell Side RatingSeeking Alpha Authors' Rating and Quant Rating all are Neutral.

    GrubHub target lifted on M&A potential

    • Goldman Sachs maintains a Neutral rating on GrubHub (NYSE:GRUB) and raises the target from $42 to $54. The company has a Neutral average Sell Side rating.
    • Goldman cites the expected ongoing consolidation in the food delivery market and notes that GRUB has moved from third to first place on the firm's M&A ranking.
    • GRUB shares are up 0.4% pre-market to $54.90.

    Curaleaf closes upsized $300M term loan

    • Curaleaf Holdings (OTCPK:CURLF) has closed an upsized (from $275M) Senior Secured Term Loan Facility from a syndicate of lenders totaling $300M.
    • The notes bear interest at a rate of 13.0% per annum, with a maturity 48 months from closing.
    • The proceeds will be used to refinance existing debt, satisfy transaction fees and expenses, fund capital expenditures and for general corporate purposes.

    Goldman Q4 EPS falls short as expenses increase

    • Goldman Sachs Group (NYSE:GSfalls 1.3% in premarket trading after Q4 EPS of $4.69 falls short of the $5.56 consensus.
    • Compares with $4.79 in Q3 and $6.04 in the year-ago quarter.
    • Q4 net revenue of $9.96B beats the average analyst estimate of $8.56B and rises 23% Y/Y reflecting higher net revenue in Asset Management and Global Markets; increase was 20% on Q/Q basis.
    • Q4 net interest income of $1.07B, up 6% Q/Q and 7% Y/Y.
    • Q4 total non-interest revenue of $8.89B increases 22% Q/Q and 25% Y/Y.
    • Q4 compensation and benefits expense of $3.05B, up 12% Q/Q and 64% Y/Y; total operating expenses of $7.30B increases 30% Q/Q and 42% Y/Y.
    • Q4 Investment Banking net revenue of $2.06B, down 6% Y/Y as lower revenue in Financial Advisory and Corporate Lending were partly offset by significantly higher revenue in Underwriting.
    • Q4 Global Market net revenue of $3.48B rose 33% vs. Q4 2018 with FICC net revenue rising 63% to $1.77B and Equities net revenue up 12% to $1.71B.
    • Q4 Asset Management net revenue of $3.00B jumps 52% Y/Y, reflecting higher net revenue in Equity investments and Lending, as well as higher Management and other fees, partly offset by lower incentive fees.
    • Q4 Consumer & Wealth Management net revenue of $1.41B rose 8% Y/Y.
    • Book value per common share of $218.52 at Dec. 31, 2019 vs. $218.82 at Sept. 30, 2019.
    • Conference call at 9:30 Am ET.
    • Previously: Goldman Sachs EPS misses by $0.42, beats on revenue (Jan. 15)

    BlackRock Q4 beats, helped by inflows, technology

    • BlackRock (NYSE:BLK) Q4 adjusted EPS of $8.34 beats the average analyst estimate of $7.65 and compares with $6.08 in the year-ago quarter.
    • Q4 total revenue of $3.98B, exceeding consensus of $3.84B, rises 16% from $3.43B a year earlier.
    • "Continued investment in Aladdin, including the acquisition of eFront, drove record growth in technology services revenue to almost $1B for the year," said Chairman and CEO Laurence D. Fink.
    • Q4 adjusted operating margin of 43.5%, unchanged from a year ago.
    • "Full year flows were positive across product type and investment style, including records in cash, factors and illiquid alternatives," Fink said.
    • Assets under management of $7.43T at Dec. 31. 2019 increased 6.7% during the quarter.
    • Q4 total net flows of $128.8B vs. $49.8B in the year-ago quarter; market change accounted for $258.6B of the AUM increase.
    • Conference call at 8:30 AM ET.
    • Previously: BlackRock EPS beats by $0.69, beats on revenue (Jan. 15)

    Repo And The Man: A Half-Trillion Later 

    Beyond Meat: Too Much Negativity Often Breeds Short Squeezes 

    Beyond Meat -3% after Bernstein cut

    • Beyond Meat (NASDAQ:BYND) falls after Bernstein downgrades the plant-based meat producer to an Outperform rating from Market Perform.
    • Analyst Alexia Howard doesn't see short-term share price catalysts. "In particular, we believe that Beyond Meat’s near-term sales growth potential in the U.S. is largely priced in at this point," she warns.
    • However, Howard thinks there could be upside if Beyond Meat expands internationally down the road. "We believe that BYND has significant growth potential in Europe, which could more than double its total addressable market," she observes.
    • Bernstein's price target of $106 is still above the average sell-side PT of $101.86.
    • Shares of Beyond Meat are down 2.61% in premarket trading to $114.00.

    Lockheed to replace F-35 logistics system

    • Plagued by delays, the Autonomic Logistics Information System (ALIS) designed to underpin the F-35 fleet's daily operations will be replaced by another network made by Lockheed Martin (NYSE:LMT).
    • Ellen Lord, the Pentagon's chief weapon's buyer, said it would be swapped with the company's Operational Data Integrated Network (ODIN) without additional cost to the taxpayer.
    • The Government Accountability Office had estimated that ALIS would have cost more than $16.7B over its multi-decade "life cycle."
    • LMT -0.2% premarket

    Credit Suisse sees GameStop struggles extending

    • Credit Suisse keeps an Underperform rating on GameStop (NYSE:GME) after catching up with top management at the ICR Conference this week.
    • "While we appreciate the fresh look from new management, we continue to see both cyclical and structural challenges that the company will need to work through. In our view, the shape and extent of the potential improvement on the back of new console introductions remains unclear at this stage," writes analyst Seth Sigman.
    • Sigman lowers his 2019 EPS estimate on GameStop to -$0.22 from -$0.10 and drops his 2020 EPS estimate to $0.12 from $0.40.
    • Shares of GameStop are up 0.85% premarket to $4.75.

  7. Wow, big push up at the open.

  8. Just a small armchair ABR reit 8.7% div PE 10.5 positive cash flow. Bought stk @ 14.50 and sold the July 15 straddle for 1.70. Combined return 2.6% per month.

  9. Yeah… But!

  10. Back to 3,300.

    Mnuchin said something about tariffs being rolled back in next deal but next deal is a year away so how does that justify this sudden rally.  I think they are manipulating the market and just making these statements to cover their tracks…

    Atlanta fed business inflation expectations unchanged in January

    Goldman Sachs exits Uber – CNBC

    • Goldman Sachs (GS -0.4%) sold its entire stake in ride-hailing giant Uber (UBER +0.4%) in Q4, CNBC reports, citing a person with direct knowledge of the matter.
    • The move may have helped Goldman's Q4 revenue beat expectations.
    • Goldman's investments in private and public companies are reported under its Asset Management division.
    • Goldman's Asset Management revenue of $3.00B in Q4 rose 52% Y/Y and 85% vs. Q3 2019.
    • The company didn't mention the Uber stake sale in its Q4 earnings report, but said its "increase in equity investments net revenue reflected significant net gains in public equities compared with net losses in the prior year period and significantly higher net gains  in private equities."
    • Previously: Goldman Q4 EPS falls short as expenses increase (Jan. 15)

    Apple bull lifts target on 5G, low-cost iPhone

    • Canaccord Genuity raises its Apple (AAPL +0.8%) target from $275 to $355, a 12% upside from yesterday's close.
    • Analyst T. Michael Walkley: "We believe the potential launch of a low-cost iPhone combined with a 5G upgrade cycle will drive further demand through 2021."
    • Apple is expected to launch a budget-friendly iPhone SE successor early this year.
    • The analyst expects the higher-margin services revenue to continue to outpace the company's overall growth and notes the strong sales and growth momentum in wearables.
    • Canaccord reiterates its Buy rating on Apple. The company has a Bullish average Sell Side rating.

    Virgin Galactic appoints Enrico Palermo as COO

    • Virgin Galactic (SPCE +1.1%appoints Enrico Palermo as Chief Operating Officer, effective immdeiately. The position of COO is a newly created role.
    • Enrico currently serves as President of The Spaceship Company, the wholly-owned aerospace manufacturing and development subsidiary of VG.
    • Previously: Virgin Galactic beefs up hiring (Jan. 14)

    2.5Mb draw in oil but Gasoline up 6.7Mb and Distillates up by 8.2Mb is a disaster!  /CL still at $58 but I'd get out and wait as it's too dangerous.  Still like /NG though.  

  11. FSLR selling the Jan22 45 put for 6.20

  12. Phil, what do you think of the following off the wall trade idea ?

    Buy SPCE/W at $5.17.  Sell an equal number of the SPCE July $17 calls. at $1.80.  SPCE now at $15.54.

    If SPCE is below $17, that lowers the cost of the warrants by $1.80.  The warrants have more than 4 1/2 years before they expire,  If SPCE is above $17 in July, the warrants will also be higher than today.

    If SPCE is above $17, roll the options up and out.   You could do this numerous times before the warrants expire, each time adding premium to the theoretical value of the warrants,

    If SPCE declines, keep the $1.80 premium and sell additional calls on SPCE at a premium regardless of the price.

    Does that make sense ?  Thanks.

  13. Butterfly Portfolio Review:  $189,664 is up 89.7% but down considerably ($50K!) from our 12/19 Review as AAPL is killing us at the moment.  AAPL is up $35 and our 30 short June $260 calls are hitting us for a $107,000 loss while our 60 2022 $240/2021 270 spreads are $163,950 out of a potential $180,000 so we'll certainly have to move the short calls to something with more chance of gaining if the short Junes stay in the money.  

    Fortunately, the rest of the portfolio is doing well so we just have to fix AAPL and get our $50,000 back and we'll be fine.

    • AAPL – The short June puts are dead so we buy them back at $3,488 and then we can sell 15 of the 2022 $260 puts for $22 ($33,000) and roll the 60 short 2021 $270 calls at $60.50 ($363,000) to 60 of the 2022 $310 calls at $51 ($306,000) and we'll roll our 30 short June $260 calls at $59.50 ($178,500) to 40 short 2021 $300 calls at $42 ($168,000) and we'll sell 15 more of the 2022 $260 puts ($33,000) to bring a bit more balance to the force.  

    All that is net $4,988 out of pocket and we now have a long 2022 $420,000 spread covered by 40 short 2021 2021 $300 calls ($168,000) and 30 short 2022 $260 puts ($66,000).  We can't lose both sides and, though it's short-term ugly, we now can make $409,000 if all goes well (the current net is $10,987) vs much less in the previous set-up.  So far, we have been "unlucky" as AAPL blew out of our range but we only have to be lucky once and it will all be worthwhile! 

    Keep that in mind, this is a net $10,987 spread that we're adding $4,988 to and the potential is to return $420,000 so, from scratch, it's a great trade (and you don't have to do as much as we have, of course).  

    • DIS – See, that one came back down and we're doing very well again.  We're right on track for the April $145 calls but it's a lot of them so let's buy back 15 of 35 at $6.75 ($10,125) so we can't get too burned if they pop on earnings (2/5).  Other than that, we're right on track.  

    • MDLZ – The short $52.50 puts should expire worthless and that leaves us with 10 short Jan $52.50 calls at $2.40 ($2,400) that have to be rolled but we sold the puts and calls for $5,560 so it's a $3,160 profit against our net $1,100 long position – that's exactly what's supposed to happen!   Now we just roll the 10 short Jan $52.50s to 10 short June $55 calls at $2.40 ($2,400) and 10 short June $52.50 puts at $1.50 ($1,500) so another $1,500 in our pockets while we wait.

    • MJ – Suddenly catching fire!   This one can't hurt us and we have 2 years to roll so no worries at the moment.   2022 $29 calls are $1.80 so, if MJ keeps going up, we can end up with 60 $9 spreads without spending more money.  

    • WHR – Popping back up on trade deal but we're still making nice money on the short Jan $150 calls (+$3,700) and our long spread is 100% in the money.  Let's roll our 5 short Jan $150 calls at $4.50 ($2,250) to 5 short June $160 calls at $8.50 ($4,250) to pick up another $2,000 while pushing the short calls $10 higher.  Let's also buy back the 5 short 2021 $100 puts, not because I'm worried but because we can sell something better if they have an earnings dip.   

    • X – Dropped a lot since we got in.  The March $14 calls are dead so let's buy them back to close and also buy back the short 2022 $17 calls at $1.25 ($3,750) if we can (don't overpay) as that's just 0.05/month we'd be missing out on vs leaving it and I'd rather be more flexible into earnings.  

  14. SPCE price in my example was wrong .  It was at $14.54 not $15.54.  Both have movd up since i posted.

  15. Trump is rambling on with 5 Chinese delegates waiting to sign the deal standing next to him.  He's calling out dozens of people and telling little stories and thanking them – nice to do but not at this time and place…  

    SPCE/Albo – I'm no warrant expert but sure, if you are that confident they will track for you, it sounds like it could work.  Your premise is they hold $17 and burn off premium but you could also buy the 2022 $15 calls for $4.80 and sell the July $17 calls for $2.10 for net $2.70 and your net will be about $0 by the second sale.  That seems simpler to me.

  16. Phil/NAK,

    Is this a dead stock at this point? I have around 1800 and getting 900 more assigned for an average price of 1.15. Holding it will help?


  17. Phil / /NG

    following this one from the sidelines but curious what your thinking behind going long was.

    also what was your entry and stop?


  18. NAK/Pat – Ain't over 'till it's over.    They just closed an $11.5M underwriting so they are constantly diluting us but still only 432M shares issued.  It's a lottery ticket stock, nothing more.  If they get their permits (they seem confident but have seemed confident for 10 years), the stock can jump 5-10x and, if not, worthless.

    It's very much like chasing the end of the rainbow – there may be a pot of gold but most people give up long before they get there as it's a long, tedious process.  

    /NG/Potter – My thinking is the same as it was last week.  Traders are reacting to local weather and forecasts and not taking into account that /NG is now traded globally so local conditions have a reduced impact on long-term prices.  I'm in 2 @ $2.1335 but I'm more likely to DD if we hit $2.10 again than stop out.  

  19. Oops, Webinar Time!

    Was watching signing ceremony..

  20. Phil, Wanted to ask your advice on refreshing a SQQQ hedge position. Over the last 6 months I've made adjustments for about break even which I'm happy with while still providing protection. After a lot of short calls expire Friday I'll be left with the following:

    30 June 2020 27/35 bull call spread.

    50 Jan 2021 25/45 bull call spread

    -15 March 20 27 calls




  21. Dclark,

    This morning I refered to CBRL. at predent the extrinsic value is 1.25 now ca. .05 cent BELOW the div. of 1.30. I would recomment you roll the Feb. 160 to Mar. 165. !!!!!!!

  22. Wow, this market is relentless in its climb higher.

    SQQQ/Jmd – The key is to do something constructive with the long calls before the price of those calls fall below the net you paid for the spread.  In my mind, it's leap-frogging as first we roll the long calls, wait for the short calls to expire, then sell more short calls (back to vertical) and then move the long calls again.

    You're too greedy with the $25/45 spread – not enough protection for the $25s.  SQQQ is at $20 and the June $27s are $1.30 and the 2021 $25s are $3.30.  I'd roll the June $27s to the 2021 $25s at $2 ($6,000) and close the June $35s at 0.75 ($2,250) and the 2021 $45s at $1.60 ($8,000) and sell 80 2021 $35s for $2.20 ($17,600) so you'd be putting about $1,000 in your pocket to be in 80 2021 $25/35 bull call spreads and that's $80,000 in protection and just make sure you roll the $25s before they drop below $1.60 to preserve your investment.  As to the 15 short calls, when they expire, just sell 15-20 of the June whatevers to pick up more cash against your longs.  The $30s are $1 so $2,000 for $20 is good money while you wait.

    In the Webinar, we wanted to add IMAX to the STP, which is going to be the LTP so really, this is for the LTP:

    • Buy 50 IMAX June $17 calls for $4 ($20,000) 
    • Sell 50 IMAX June $20 calls for $1.90 ($9,500) 
    • Sell 50 IMAX June $20 puts for $1.30 ($6,500) 

    That's net $4,000 on the $15,000 spread so $11,000 (275%) upside potential if IMAX is over $20 on June 19th.  The risk is being assigned 5,000 IMAX at $20 ($100,000) but, realistically, maybe they are down 20% to $16 and the loss (if not rolled or stopped) is $4 x 5,000 or $20,000 – that's the true risk.  ToS says $8,494 in ordinary margin is required – pretty efficient.  

  23. Yodi/CBRL

    I rolled the calls to the March $160’s preferring to gain $2 in premium and the protection of the lower price.  I just can’t find a reason for the current price move and don’t really expect this stock to take off through March.  I don’t consider the stock cheap, not overly-expensive, but not cheap. 
    I am curious, why would you choose the March $165’s instead?  Thanks again for your help.

  24. Why Kids Fight Getting Dressed

  25. CBRL possible obtimistic stock will still go up. We will see.My roll was only 0.50.

  26. Phil/SQQQ

    As you advised leap-frogging…I have the 10 March 20/24 SQQQ at net of 1.3 and it is at around 1.00 right now. I guess it is time to roll down and out on the long side?


  27. Phil / Everyone / AAPL

    perhaps just some rouge fills but check out the AAPL chart on TOS.  Anything below the 4 hour timeframe shows some price action at $265..  Is that the "sell button test" you were talking about @Phil?!

  28. Shoved up yet again into the close.

    SQQQ/Pat – Yes as you can salvage the net $1.30 by cashing out the March $20s at $1.75 – that's more than you started with.  Now the trick is you have to re-invest for the next 3 months and pick something sensible that still gives you a nice return, like the June $20s at $2.75 (+$1) or the $18s at $3.50 (+$1.75).  In either case, you are putting up $1-1.75 and waiting for the March $24s (0.80) to expire and, when they do, you can sell the June $24s ($1.75) for hopefully $1+ to recover all or most of your re-investment.  I'm usually willing to pay a bit more to keep in the money each quarter – the extra $1 is just my running insurance cost.

    AAPL/Potter – That's a crazy drop.  A sale actually went through at $263.45.  When it's just one stock, it's more likely just a mistake but boy, someone screwed up! 

  29. SPCE – The reason I like my play better is because I can use the warrants for 4 1/2 years with little or no time premium degradation for about 2 1/2 years.   Believe I can get the warrant cost to zero in about 1 1/2 years, and keep on selling premium.  We'll see.

    Would love to hear comments from some of you option experts.

  30. Phil/Butterfly,  Can you add a bit more color on your Apple adjustment?  30 short $260 puts is $780k if put to us, in a $180k portfolio.  I understand the short calls help to protect us, but I just want to make sure I fully understand the plan if/when Apple sharply corrects.  Thanks!

  31. World shares advance after signing of China-US trade pact

  32. Good morning!

    Things are looking not ideal for Team Trump as Parnas ties them all into the conspiracy – and he has voicemails and Emails, etc.  Of course, I haven't watched Fox yet, where I'm sure this completely exonerates Trump somehow.

    TSLA back down to $500 due to… reality…

    Tesla stock could hit $6,000 per share in the next five years, analyst says

    That's a pretty poorly timed bandwagon announcement. 

    $6,000/share would be well over $1Tn in valuation.  Sure, why not?  

    AAPL/Palotay – AAPL is $310 so let's say it drops 20% overnight to $250 and the 2022 $260 puts at $22.50 end up being the price of the $310 puts, now $42.50.  That would be a $60,000 loss on the short puts while the 40 short 2021 $300 calls at $42 would drop to the price of the $350 calls at $19 for a $92,000 gain.  So the question is – do you want AAPL NOT to drop 20% so you make net $32,000?   A PM account takes all this into consideration, which is why the net margin is so low – despite the seemingly big risk. 

    It protects us both ways, of course, as a 20% pop would hit us for $120,000 on the short calls but the short puts would gain $37,500 while the bull call spread would, theoretically, be like the 2022 $190/260 spread at net $53 ($318,000) for a $72,000 gain (but on our way to $420,000).

  33. SIG – Up huge on strong guidance and short squeeze !