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2,400 Tuesday – S&P Tests the Bottom of our Target Range

How low can we go?  

If 2,850 is our Must Hold Level (below which we are bearish – and for good reason apparently!), then 20% below that is the bottom of our range and that's 2,280 and the S&P 500 bottomed out at 2,350 yesterday so we're not quite there though we certainly attacked it with a running start as the index fell 325 points (12%) on heavy volume.  

As I noted yesterday, while this is now close to 40% from the top, we had no business being at 3,400 in the first place so stop thinking we're going to bounce back to there – that would be silly.  It's a lot more likely that 2,850 becomes the top of the new trading range and 2,280 should be the bottom but we're in panic mode now and the selling volume is still overwhelming the buying interest so we could go quite a bit lower – but it's going to be a great buying opportunity…  at some point.

It's an incredible buying opportunity for people who still have cash to spend but a 40% drop in the market tends to make people very cautious.  As I noted last Thursday, as we dipped to 2,480, our prefered way of bottom-fishing is to sell puts, because it puts CASH!!! in our pockets by simply promising to buy stocks for an additional discount – far below where they are trading today.  

Since we're back near the bottom of our range (and, keep in mind, things can get worse), why don't we look at some more stocks we'd like to own if the World doesn't end?

?We are staying away from banks, insurance and travel stocks as we don't know how bad things will ultimately get and we will keep our entries small on the expectation we very likely may have to roll them or double down on them (or both) if the market drops another 20% but here's the kind of bargains we can engineer for ourselves in this kind of market. Do be aware that margin requirements can jump up as the stock goes lower so you should have the cash available to actually buy these stocks. ThinkOrSwim ordinary margin is noted for each item:

  • Intel (INTC) – $44.60 is $190Bn in market cap for a company that has made over $20Bn for the past two years.  Yes there will be a slowdown this year but this is not a Zombie Apokalypse, this is a virus and, even if it kills millions, that still leaves Billions of people who will still want computers, phones and tablets.  Again, we're not looking to buy them for $44.60 but we can sell the 2022 $30 put for $4, which is promising to buy them for net $26 and requires just $463 in margin selling 10 of them for $4,000 in our Long-Term Portfolio (LTP).

See how easy that is – that's a trade.  We COLLECT $4,000 for promising to buy INTC for $30 between now and 2022.  If it goes below $30, we are obligated to buy but, no matter what, we keep the $4,000 so our net cost on 1,000 shares would be now worse than $26,000, which is 40% below the current price!

  • Apple (AAPL) – Is nowhere near cheap enough at $240 as I hear FoxConn, who make IStuff, are testing all 200,000 workers every day but, when one of them tests positive, they have to shut the line down and clean everything and they are doing it over and over and over again because it's way too soon to push all those people back to work.  Still, any chance to buy AAPL on sale is something we don't like to pass up and we can sell 5 of the June 2022 $150 puts in the LTP for $14.50 ($7,250) and that net's us in for $135.50, a nice 44% discount off the current price.  Margin $1,667.

  • Automatic Data Processing (ADP) – You would think people are never going back to work the way ADP is selling off.  I doubt revenues will take the hit that is being baked in at the moment but what I find really attractive is that you can sell the 2022 $80 puts for $12 and that nets you infor $68, 43% below the current price so let's sell 10 of those in the LTP for $12,000.  Margin $3,163.

  • Amazon (AMZN) – Is HIRING 100,000 people because they are being overwhelmed by demand.  Very obviously, if people are not leaving their home, they will buy more things on-line and that should be great for Amazon.  I would never pay $1,700 for the stock as that's still over 50 times what they earn but I don't mind promising to buy them for $900 by selling the 2022 $900 puts for $47.50.  That nets us in for $852.50, 50% off the current price and we can sell 5 of those in the LTP for $23,750.   Margin $13,078.

  • Caterpillar (CAT) – Is one of our all-time favorites that we always buy when it's on sale and, while $95 is nice, wouldn't $45 be nicer?  We can sell 10 of the 2022 $50 puts for $5 ($5,000) in the LTP and those are so far out of the money that the margin is just $1,863.  

  • Clorox (CLX) – Bleach is one simple way to kill the coronavirus (but don't drink it!) and CLX has gone up, not down during this crisis so not on sale and not cheap but it's a stock we know will be doing well and, because we know how to use options to our advantage, we don't have to pay $175 or even $125.  We can promise to buy CLX for $110 and get paid $7.50 for selling 10 of the 2022 $110 puts for $7,500 against $4,944 in margin in our LTP.  

  • Lockheed Martin (LMT) – Is our Stock of the Century and miles above where we picked it when it was well below $100 but we're happy with any chance to own the company most likely to develop a working fusion reactor and, of course, virus or no, the Military still wants their planes.  We can sell the 2022 $160 puts for $16 to net in for $144, 50% off the current price so 5 of those in the LTP nets us $8,000 but, frankly, I'd be happier if this one were assigned to me than expire worthless.  Margin $2,483.

  • Medtronic (MDT) – Is an old favorite that hasn't been cheap in a long time.  They will have a bad quarter or two as all non-emergency surgery is being pushed back to keep beds open for virus victims.  Still, it's a fantastic long-term play and we can sell 5 2022 $60 puts for $9 ($4,500) in the LTP to remind us to keep an eye on them as I'd love to add a bull call spread when we find a bottom.  Margin $2,028.  

 

  • Square (SQ) – Is those little white payment terminals you see in so many retailers these days.  It's been a very hot stock and we felt like we missed the rally but now is a great time to jump in as it's more than 50% off it's highs – as if no one will ever shop again.  These are the kind of stocks we like – there's no competitor taking them down – just the irrational fear that life will never go back to normal and SQ has over $2Bn in cash and made $375M last year – they can weather a bad quarter or two.  We can sell the 2022 $30 puts for $6 and that nets us in for $24, which would be 40% below the current price.  Let's sell 5 for $3,000 in our Future is Now Portfolio as this is truly a Stock of the Future. Margin $471.

  • Exxon (XOM) – Is a diversified company that refines and sells oil as well as drills it so they still make good money selling gasoline when oil is cheap (it's an ingrediant in gasoline) and $34.50 is about the same as the low they hit after 9/11 and far lower than the $60 they held in 2008 and, both of those times, oil was below $20 a barrel for a while.  We can promise to buy 1,000 shares of XOM at net $21.50 by selling 10 2022 $27.50 puts for $6 ($6,000) in the LTP.   Margin $753.

That's $81,000 we will be collecting against our promises to buy 10 blue chip stocks for about 40% off their current prices.  We have plenty of cash in our Long-Term Portfolio but we're also well-hedged with $200,000 worth of shorts in the Short-Term Portfolio to help cover potential assignments or rising margin requirements (which will happen if the market sinks further).  You should never sell puts against stocks that you don't REALLY want to own if they fall to your strike price – a 20% drop in the market can easily cause 100% or more losses in the contracts!

I said last week, if the S&P 500 can't hold 2,500 we are in DEEP TROUBLE yet here we are this morning – not holding 2,400 so far.  If we're below 2,400 tomorrow, we're going to have a lesson on hedging!

Be careful out there.

 


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  1. Can add lines fast enough! Might need to go back to the old lines. These lines are infected with the virus and need to go in confinement.


  2. It's all about priorities for these sociopaths:

    https://www.nytimes.com/2020/03/16/us/politics/mcconnell-judges-republicans.html

    Running out of federal court vacancies to fill, Senate Republicans have been quietly making overtures to sitting Republican-nominated judges who are eligible to retire to urge them to step aside so they can be replaced while the party still holds the Senate and the White House.

    People are getting sick and some are dying but they are worried about adding a few more judges! They can't get kicked out of power soon enough.


  3. Sounds like a sound investment we could make now:

    https://www.forbes.com/sites/baldwin/2020/03/14/ventilator-maker-we-can-ramp-up-production-five-fold/#38b1da9b5e9a

    The German government just placed an order for 10,000 mechanical ventilators. What’s the U.S. government doing about a potential shortage here? Not much, it seems. President Trump alluded to the matter in a press conference but did not spell out any plans.[...]

    “We could increase production five-fold in a 90- to 120-day period,” says Chris Kiple, chief executive of Ventec Life Systems, a Bothell, Wash. firm that makes ventilators used in hospitals, homes and ambulances. He’d have to tool up production lines, train assemblers and testers and get parts. Accelerating the parts delivery might be the toughest task, he says.

    The ventilator industry is getting a burst of desperate orders from China and Italy. The U.S. hasn’t seen that yet, although manufacturers are bracing for it. “The time for action by the government is now,” says Kiple. “[Covid] is most likely to get worse next fall.”

    These are good jobs and would help us in the next crisis to come!


  4. A little light at the end of the tunnel my friends:

    Trial of Coronavirus Vaccine Made by Moderna Begins in Seattle


  5. Good Morning.


  6. Phil Allow me to make a comment on your trade on INTC.
    Yes I do have the jan 21 40 put x2 already for starters. Now there is no problem to roll this to Jan 22 30 put cost 2.75. Just no problem to sell another, 2x Jan 22 for now 3.25 and not 4$.
    But what have we learned from other situations? M I doubled it so often that I am now sitting with a mountain of ITM puts. And this does not only apply to stocks like M. Nothing having seen a stock go down 50% I hold CCL at 57 no problem it does not heard I close the put long before only worthless calls. Now I own a couple of crus-ships!!!!
    Therefore selling puts could and I say could be great at this time. But as you started your comment.
    HOW LOW CAN YOU GO, without losing your pence?


  7. No bounce yet today after such a down day yesterday! Not going long yet.. Not sure what to believe at this point – estimates can vary so much as far as the human cost, let alone the economic costs.


  8. Good news pstas – only a couple of weeks too late! Hopefully this ramps up  everywhere! And people stay home.


  9. TSLA 400


  10. THC / Phil – how will hospital systems like Tenet fare?  Lots of competing concerns like providing medical services yet will most likely be affected by the virus while providing services. Thx!


  11. Completely out of TSLA… amazing. $450 is where I started adding call spreads. I missed one on Friday and was assigned short shares which ended up being quite a gift.

    It's feeling different today. Time for a bounce please! 


  12. With volatility so high, it might be a time to start buying some stocks and selling near term April or May options at the money.  Gives you good protection, and you can roll them up if we are close to the bottom.

    Agree with StJ, probably not yet.


  13. You know Albo, as long as Kuldow will tell us to buy the dips, I'll be on the sideline! The guy is the perfect contrary indicator.


  14. It's the death of the deficit hawks:

    https://www.reuters.com/article/us-health-coronavirus-usa-congress/senate-weighs-emergency-coronavirus-pandemic-funds-trump-seeks-850-billion-more-idUSKBN21420L

    The U.S. Senate on Tuesday prepared to weigh a multibillion-dollar emergency spending bill passed by the House of Representatives offering economic relief from the coronavirus pandemic as the Trump administration pressed for $850 billion more.

    These are the same people who said we could not spend another dime in 2009 because the deficit was too high. But no issue now even though their idiotic tax cut has pushed us over $1T already. They'll be hawks again if Biden wins I am sure! And they also now love bailouts for some reason – not so much for the banks and auto industry in 2008/09.


  15. stj: I usually wait for Phil to pound the table and explain to people the world is not going to end, but don't know if we'll get that chance since most of us seem to be dealing with things quite well.


  16. And a payroll tax holiday will not help… The millions who need the money won't have jobs and another $50/month won't make a difference for those who do.


  17. Phil// Few days you had mentioned about SKT.  Is this a good time to initiate a position with SKT?

    Thanks.


  18. Atitlan – I covered 2 short Apr 17 400 TSLA puts avg $60 because it would have to get down to $340 in a month to make money – hoping for a bounce now also so I can buy one back


  19. now maybe with TVIX at 600 it's time to start shorting volatility.

    I think the markets will go dow 40 to 60% from here, but it'll be over the next year as we suffer through this Long Emergency. That's still only 0.3% per trading day on average.


  20. Volatility / BDC – We might have peaked for a while, but as I said, I am still worried about the reaction we will get once we get widespread testing and the real numbers start to show up. So we could still spike a bit. I am not as pessimistic as you are as far as the downside but I doubt that we are done. More shocks to come methink!


  21. I did not mention my M shares pay now a div of 25% great


  22. These dividend rates are up for so many companies now Yodi! Looks good on paper until you look at your cost basis! NLY 15%, STWD 13%, F 12%. Current examples from my holdings!


  23. Phil//  What is your recommendation on M 2022 $15.00 naked puts we sold?  Should we roll that down now?  Thanks.


  24. Choosing ET over USO was not my best decision ever.


  25. TSLA not participating in the mini bounce


  26. Rookie – The obvious problem with  selling the 2022 puts instead of shorter ones is that one has you can't roll them down and out in time.  


  27. The ride on the VIX futures is insane – up 10 points, down 8 points in a couple of hours! that's 80% of the actual VIX price in normal times. Margin requirements are up to $20k! 


  28. StJ – we are so far from a new normal. We might be at some partial % of employment until November. We've got along way to go to figure out what this new economy looks like.


  29. GBTC at 6 is stealing


  30. Good morning!  

    Well, we're down less than 1,000 so a good day so far…

    Big Chart – Holy crap!   Look at the gapping down action….

    McConnell/StJ – The good news is they are acting like they know they are going to be thrown out in 6 months.

    Ventilators/StJ – I don't know who makes those.

    Big for MRNA if the vaccine works:

    INTC/Yodi – We've had these same kind of conversations in 2008 and, as I say all the time, SCALING IN is critical.  You should plan on doubling down or at least rolling 2 times after your initial investment and, as you note – even that isn't going to help when the market is collapsing.  I'm willing to bet INTC will be around 20 years from now but certainly not CCL or even M.  I think M is a great buy down here ($6 now) but a disruption like this could finally break them.  Value has nothing to do with this – you can't stop people from panic-selling.

    THC/Jeddah – The hospitals will be filled to capacity but not clear how they'll get paid.  Health Insurance companies may start going BK on this thing – that's something people aren't even thinking about yet. 

    TSLA/Ati – I'm so pissed, we capitulated on our main play that would have made a fortune.

    Fallback Thursday – Tesla (TSLA) Down 10% Already – Where Will Reality Strike Next?

    Also, from that post:

    January 16th, 2020 at 9:48 pm | (Unlocked) | Permalink 

    As to "what if" – Yes, money has nowhere else to go but equities but what a catastrophe for equities when that changes.  Timing your exit to the exact top of the market is very tricky (see March 2000) and obviously we are playing along but I keep reminding people to keep one hand firmly on the exit – just in case…

    Not yet/Albo – I feel more comfortable with the puts.  This is not like 2008 – the underlying institutions are fine and we just need one tremendous business interruption insurance policy.  Consumers WANT to shop – they just can't and there will be a lot of pent-up demand once this thing is over.   Unless the virus mutates and we are all consumed by hoards of zombies, of course – but that's why we have hedges!  cool

    Image result for stock market zombies animated gif

    Pounding/Kinki – This is my early stage pokes (above).  Table pounding comes 20% below this.

    SKT/Rookie – I've been saying it's a good time since $16 so $6 seems pretty good to me!

    Image result for pretty pretty good animated gif

    Tanger Outlets touts 'strong demand' for planned Antioch mall

    First look: Next project at billion-dollar Century Farms development has begun

    Edited Transcript of SKT earnings conference call or presentation 27-Jan-20 1:30pm GMT

    I can't find a reason not to own them.  0% rates are great when you are a borrower.   Worst-case is a lot of their retailers fold but the way they distribute the loads, they should be able to re-fill the slots without too much damage.  

    M/Rookie – Well you can't roll them yet to 2023 so all you can do with the $10.70 puts is roll them to 2x the $8 puts at $4.50, which is the same margin with a more reasonable strike.

    ET/Tangled – Amazing how they are getting crushed. 


  31. Albo//  Thanks.


  32. Phil//  THanks for the reply.  I'd like to know if we made any adjustments in our portfolio trade for M.  I want to make sure I didn't miss any suggestion you might have made.  Let me know if this is official trade so I can roll it down.

    Thanks.


  33. DIS is stabilizing now that all their parks are shut down.  Still scary though.  Summer box office might be toast.

    That's 10,000 more since I last looked and those are generally outside China though China still going up a little.  Very slow movement on the recoveries with deaths closing in on 10% of those recovered – not good.  

    Still, look at Japan, who have fallen way back and Australia also under control, Israel not bad, Thailand doing an excellent job of containment…  These guys have gone through the whole process in 2 months – we just need to get our shit together and do the same.

    Unfortunately, given the total lack of preparedness in the US, the only viable option is going to be a 2-week lockdown starting next week (today would be better but they have to vote on it) and then Chinese-style checking and tracking of everyone who has the nerve to step out of their homes.  

    M/Rookie – We haven't done LTP adjustments yet but we will be doing that one.  We have 40 of the 2022 $10 calls at $2.55 and the VIX has them up at $1.70 still and we can roll those to the $5s at $2.60 for 0.90 – that's a no-brainer!  


  34. At the end of 2019 both my restaurant chain startup (which had continuously funded only by revenue) and my movie theater chain hit the revenue targets for a sale.  The restaurant chain will now almost certainly fail.  The theaters may survive if they can open in 3-4 months but they will never have the value they had.  The universe loves to play head games.


  35. continuously grown, funded that should have said


  36. QQQ buy 2022 180/140 BCS, sell 1/2 march 185 calls


  37. Ventilators / Phil – Thinking about a good investment for the country in general. But the mentality is too much "just in time" now! No one stockpiles stuff anymore. That might need to change again! I am hoping that maybe the next president will see less opposition to programs that help our general infrastructure including health. But hard to be optimistic when 1/2 of congress seems to be made up of sociopaths!


  38. Wow you can get $17 now for VXX 2022 $100 calls.  What would it take to have that be a losing trade?


  39. VXX / Tangle – The chance of winning are probably around 99.9% but the main issue has been margin expansion. Once things calm down, I will be adding some more VXX short calls but being super cautious now. You need to plan about 10x the margin needed today to be safe. 


  40. You can sell the 115 calls for $16 and that would be the VIX at around 120 or 130. I used to think that it was crazy. Not so much anymore… There will be time to make these trades again.


  41. MDT makes some respiratory/ ventilation products too.


  42. Yeah, what was the price when vix hit 84 this morning.  I snoozed and lost :)


  43. StJ in my account at least margin cost is 1.3X the price of the sale.  I actually expected higher but that is for a tiny non concentrated position.


  44. Tangle – Yeah, the initial margin requirements are small. But when the VIX goes up, they go up exponentially. Mine when up close to 10x the initial ones. Trust me (and Palotay) on this. So plan accordingly or you will need to take action.


  45. Bought 1 of my TSLA Apr 400 back at 49 – maybe to early, we will see

    SQQQ June 17/26 spreads just filled for 2.50


  46. Yay, we're all getting checks!  

    And tax extensions….

    Market seems happy.  Got /ES on a cross back over 2,400, back over 2,500 is good too but tight stops below.  Funny how if you miss the first 100 points you can still play!  

    Chains/Tangled – There should be some bailout relief, hopefully it will be enough.  

    What would it take/Tangled – Another day like yesterday should do the trick.

    MDT/Randers – Good, I thought so but wasn't sure.  


  47. Not to worry StJ.  I have lots of vxx shorting experience from back when you could still short it.


  48. And I am not actually making this trade.  Just musing.


  49. Phil/LABU

    good time to make a year end BCS trade?

    regards


  50. OK, so DIS is down to ESPN and ABC – everything else they do is closed (including production of future movies and TV):

    • Walt Disney (DIS +1.7%) is closing all North American stores temporarily "in an abundance of caution," falling in line with a spate of retail closures amid the COVID-19 outbreak.
    • The stores are closed today. The closures will include closing hotels in Walt Disney World and the company's Vero Beach resort, by March 20.
    • The company had already closed its North American parks and Paris park until at least month's end.
    • It will continue to run its online shop in the meantime.
    • Shares have turned higher along with the broader market, after a down morning amid analyst target cuts.

    233,000 employees.  

    2 months!  Still, a lot of people can't handle 2 months being shut down.  

    • Treasury Secretary Steven Mnuchin is working with the Senate and House on a "big, bold" fiscal stimulus package that includes relief to the American worker as well as the most hard-hit industries.
    • They're talking about loan guarantees to such industries as airlines and hotels, Mnuchin said.
    • They're also considering a stimulus package for American worker, which Mnuchin likened to "business interruption insurance" for the American worker, which means sending checks to Americans immediately — within the next two weeks, he said.
    • The Treasury Department is also increasing the deferral of payments to the IRS to $300B from $200B previously, said at the White House's coronavirus media briefing.
    • The S&P 500 is now up 6%.
    • Update at 12:08 PM ET: "We absolutely believe in keeping the markets open," Mnuchin said when asked if markets would be closed, although "we may get to a point where we shorten the hours."
    • The commercial paper funding facility the Fed announced earlier today will add $1T of potential liquidity, Mnuchin said.

    Wow, as soon as I suggest something it becomes policy now!  

    • "Given the size of our economy relative to where it was 10–15 years ago, it would probably be appropriate for Congress to pass a TARP-style program of $2T," says Guggenheim Partners CIO Scott Minerd.
    • Alongside, Minerd suggests the Fed  re-introduce a TALF-like program (Term Asset-Backed Securities Loan Facility).
    • The biggest risk is that politicians don't want to be accused of 2008-2010-style bailouts, and thus won't act with necessary speed. "This is the scenario that leads to global depression," says Minerd. He's putting those odds at 10%-20%.
    • Morgan Stanley says big auto has exceptionally strong liquidity levels on a historic basis, with Ford (NYSE:F) and General Motors (NYSE:GM) having $35B of gross liquidity at the end of 2019, while Fiat Chrysler Automobiles (NYSE:FCAU) had $23B.
    • The problem is that the pace of cash burn during a shut-down scenario is formidable.
    • MS on Ford and GM: "Taking revenues down 90% globally could result in FCF burn on the order of $4bn for both Ford and GM per month on our calculations. We calculate Ford and GM have gross cash balances equal to 6 and 5 months of cash burn in a down 90% (aka draconian) scenario. Using gross liquidity (cash + untapped lines of credit, etc.) we calculate Ford and GM have balances equal to 10 and 9 months of draconian cash burn respectively. Run for a full quarter, a 90% revenue drop ‘stress test’ could consume as much as $11bn to $12bn for Ford and GM respectively on our calculations among a range of potential outcomes. Ford and GM have gross liquidity levels equal to 9 or 10 months of our draconian stress testing. While clearly auto companies cannot run their business down to the last pennies of liquidity and stay in business, one could argue that even an environment of revenue down 90% or so for as many as 3 to 6 months for an auto OEM may imply challenges that extend well beyond the auto industry. If investors wish to run different levels of potential scenarios of severity and duration in our model, please reach out to the team. The US OEMs have stated they each can remain profitable in a 10mm or 11mm unit US SAAR environment. Now may be the time where they prove it. However, if US SAAR were to fall to say 5 to 7 million units… that would likely lead to significant testing of fortress liquidity."
    • MS on Tesla (NASDAQ:TSLA): "In our down 90% revenue draconian scenario, we calculate Tesla could burn just shy of $800mm per month. Tesla’s gross liquidity is equal to roughly 14 months of our FCF burn scenario… ostensibly better liquidity levels (relative to propensity to burn) than the D3 OEMs. We note that there are any number of assumptions around working capital and other factors that we have had to estimate for these scenarios."
    • The firm says Ferrari (NYSE:RACE) and Harley-Davidson (NYSE:HOG) have some of the highest gross liquidity relative to their revenues at 33% and 37% respectively, while Avis Budget (NASDAQ:CAR) and Hertz Global (NYSE:HTZ) scored the weakest on the stress test.
    • "We believe the OEM balance sheets are categorically in a strong position to absorb several months of a near shut-down… giving the market enough time to address other actions to either stimulate demand or to ensure openness of key capital markets, including securitization markets to roll regularly maturing debt," summarizes Adam Jonas and team on the sweeping stress tests.

    SNE back at a good price:

    • Costco (COST +6.7%) inks a deal to acquire logistics firm Innovel Solutions for $1B from Transformco.
    • The acquisition includes a long-term commercial arrangement whereby Costco provides TFCO warehousing, delivery and installation services to Sears and Kmart members and Costco will retain over 1,500 Innovel employees on a go-forward basis.
    • The addition of Innovel is expected to boost Costco's last mile delivery capabilities for bulky items.
    • Source: Press Release
    • Boston Beer (SAM +9%) is higher after landing an upgrade from MKM Partners to a Buy rating from Neutral.
    • The firm says the beer industry does well during economic downturns and isn't overly concerned about the two-week closure of restaurants in many states.
    • "As bars/restaurants close, beer consumption shifts to at-home," Kirk wrote in a note to clients. "As long as grocery stores and liquor stores remain open, we don't expect aggregate beer volumes to be meaningfully impacted," reasons analyst Bill Kirk.
    • Facebook (FB +1.5%) is giving $1,000 in cash to all 45,000 employees, in a move to blunt the effects of the virus outbreak, The Information reports.
    • CEO Mark Zuckerberg disclosed the payments in an internal company notice, part of a move to support remote workers, according to the report.
    • Employees will also earn at least their full bonuses for their six-month review.

    That's a week's rent in San Fran!  

    • S&P Global Ratings cuts SoftBank (OTCPK:SFTBF,OTCPK:SFTBY) from stable to negative, citing the recent pullback and announced $4.7B buyback.
    • The ratings agency affirms SoftBank's long-term credit rating at BB+, which is non-investment grade.
    • Key quote from S&P report: "SoftBank Group's announcement of a plan to buy back a considerable amount in shares amid plummeting stock markets has raised questions over its intention to adhere to financial management that prioritizes its financial soundness and the credit ratings on it."
    • Grubhub (NYSE:GRUBjumps 6.11% and Waitr Holdings (NASDAQ:WTRHskyrockets 49% as restaurants close off the dining in option across large parts of the country.
    • Food delivery is expected to take off over next two months in a trend that will also help Postmates (POSTM) and DoorDash (DOORD).
    • Meal-kit provider Blue Apron (NYSE:APRN) has surged in Tuesday's trading
    • Previously: Everyone-must-eat rally takes hold (March 17)
    • Vail Resorts (MTN -0.3%) to close all North American resorts and retail stores will remain closed for the 2019-20 winter ski season due to coronavirus.
    • The Company will consider reopening Breckenridge, Heavenly and Whistler Blackcomb dependent on the situation with COVID-19 and weather conditions.
    • Additionally, the Company's owned and operated lodging properties will close on Friday, March 20.
    • Epic Mountain Express, the Company's Colorado transportation service, will run through March 18.
    • Previously: Colorado governor orders closing of all ski resorts (March 15)

    Oh, we are totally buying them!  


  51. Damn, I forgot the reason we don't play MTN is because they don't have long-term options but they do have December and we can sell 10 MTN Dec $100 puts for $11 ($11,000) in the LTP because people don't understand that the 2019-2020 ski season ends in April anyway – not as bad as it sounds.  

    I'd love to also buy the $140 ($48.50)/$180 ($28.50) bull call spread for $20 but we are collecting money ($150,000 in two weeks) for the LTP, not spending it unless necessary (roll downs).


  52. LABU/Pat – We did that last week (cheaper now):

    3x Biotech ETF (LABU) – This index is completely falling apart, just caught up in the general selling that's going on in the market.  It fell 20% yesterday and another 20% this morning so VERY RISKY to catch this knife at $25 but we can sell 10 2022 $15 puts for $7.50 ($7,500) in the LTP to net us in for $7,500 on 1,000 shares so the risk/reward is pretty good.  Margin on that is $607 but we're also going to buy 20 of the 2022 $20 ($15)/$35 ($10) bull call spreads at $5 ($10,000) as that will be net $2,500 on the $30,000 spread with $27,500 (1,100%) upside potential if LABU can get back over $35.

    I would just drop everything $5 in strike.


    • Shares of Planet Fitness (NYSE:PLNT) are down 22.28% as investors gauge the impact of the coronavirus on the fitness chain's membership growth and potential cancellations.
    • The company is streaming online classes for free in response to President Trump's directive to limit gatherings to ten people or less.
    • Planet Fitness is down 65% over the last month.
    • With the commercial paper market all but closed up, the Fed establishes a Commercial Paper Funding Facility.
    • "The CPFF will provide a liquidity backstop to U.S. issuers of commercial paper through a special purpose vehicle that will purchase unsecured and asset-backed commercial paper rated A1/P1 (as of March 17, 2020) directly from eligible companies."
    • The move was made with the approval of the Treasury Secretary.
    • Markets are adding a bit to gains – the S&P 500 now higher by 2.6%. The Dow is lagging, up just 0.7% as a 15% decline in Boeing weighs.
    • Bernstein has cut its price target on Disney (DIS -1.9%) to a Street low of $100, pointing to the unpredictability of its businesses in sporting events, theme parks and movie theaters in virus times.
    • Ouch: "For investors searching for ‘high quality’ stocks at a reduced price, Disney is always on the list,” but if "high quality" means "'best business model for the next 10-plus years,' Disney probably doesn’t have that (yet), nor the predictability/stability that comes with it," analyst Todd Juenger says.
    • Bernstein's $100 target implies just 7% upside.
    • MoffettNathanson has slashed its fiscal 2020 EPS estimate for the company by 40%, and cut its fiscal 2021 estimate by 29%.
    • It's sticking with a Buy rating, but at a lower price target ($120) as it sees the combo of the outbreak and an ensuing recession causing "unprecedented pain."
    • Overall, sell-side analysts are Bullish on Disney, as are Seeking Alpha authors. It has a Quant Rating of Neutral.

    As I have said before, the reason DIS can charge $200/day for tickets to the parks is because there are more people on this planet who want to go than they have room for.  Obviously, at $200/day, those people are not poor and will not be canceling DIS trips due to a Recession.  Also, what do people do in a recession?  Go to movies and watch TV!  These are very overly-pessimistic outlooks.  My biggest worry is DIS buys someone else who is cheap and then investors get nervous about leverage.  They could buy VIAC for cash at this point or SIX or SPCE or an airline….  

    Trump saying on TV "You know, a lot of people are going to die – a LOT of people".  OMG!!!

    • Grocery store stocks are racing higher as traffic accelerates with the number of coronavirus cases growing and dining out no longer an option in some parts of the country.
    • Gainers include Sprouts Farmers Market (SFM +19.3%), Village Super Market (VLGEA +10.1%), Natural Grocer (NGVC +9.7%), Casey's General Stores (CASY +8.2%), Weis Markets (WMK +7.1%), Ingles Markets (IMKTA +7.1%), Kroger (KR +8.9%) and Grocery Outlet Holdings (GO +6%).
    • Target (TGT +7.2%), Walmart (WMT +8.6%) and Costco (COST +5.4%) are also notably higher off the same anxiety-driven burst of sales.
    • Amazon (AMZN +4.6%) is also rallying through its exposure to the grocery sales via Whole Foods and Amazon Fresh.
    • Food manufacturers on the move include Cal-Maine (CALM +10%), Post Holdings (POST +6.4%), Sanderson Farms (SAFM +4.2%), Lancaster Colony (LANC +8.7%), Pilgrim's Pride (PPC +3.5%), TreeHouse Foods (THS +6.5%), Flowers Foods (FLO +7.7%), Campbell Soup (CPB +7.2%), J.M. Smucker (SJM +5.2%), Kellogg (K +4.8%), General Mills (GIS +4.9%) and ConAgra Brands (CAG +9.6%).

    • Economists at Morgan Stanley and Goldman Sachs join the chorus of other Wall Street prognosticators to declare that Covid-19 has pushed the global economy into recession.
    • A global recession is now the base case, say Morgan Stanley economists led by Chetan Ahya; they see growth falling to 0.9% this year. The Goldman Sachs team, led by Jan Hatzius, sees growth weakening to 1.25%.
    • Both groups expect the global economy to rebound in H2.
    • The recession wouldn't be as steep as the 0.8% contraction of 2009, according to the International Monetary Fund's measure, but would be worse than the 2001 and early 1990s recessions.
    • The projections put more pressure on policy makers to take measures to limit the health emergency and then inject enough stimulus so demand increases once the virus is under control.
    • “While the policy response will provide downside protection, the underlying damage from both Covid-19’s impact and tighter financial conditions will deliver a material shock to the global economy,” Morgan Stanley’s economists said.
    • But there's still a lot of uncertainty as to how long the spread of the virus will take and its economic consequences as factories, stores, restaurants and schools close. Other risks include slow government response and a freezing up of markets and credit
    • Airline stocks are underperforming the broad stock market despite the reassurances from the Trump Administration on a relief package of some sorts.
    • While President Trump pointed out that it's not the fault of airlines that travel industry has cratered, it's also a sentiment applicable broadly across the lodging, hospitality, online booking agency, car rental and many other travel sub-sectors as well. The debate over the relief package will also factor in how mom-and-pop shops can be supported at the same time taxpayer money is funneled into an industry heavy with investments by Warren Buffett. Then there is also the unanswerable question of how long the coronavirus outbreak will last?
    • Price check: American Airlines (AAL -4.8%), Southwest Airlines (LUV -2.4%), Delta Air Lines (DAL -6.1%), JetBlue (JBLU -7%), United Airline (UAL -9.7%) and Hawaiian Holdings (HA -12.2%) are some of the notable movers.

    What the F'ing F?

    • Amazon.com (AMZN +3.7%) is suspending non-essential shipments to its warehouses, Business Insider reports.
    • It points to a memo sent to sellers saying that shipments other than medical supplies and household staples are being put off to April 5, in order to manage workload.
    • "As COVID-19 has spread, we've recently seen an increase in people shopping online," according to the memo Seeking Alpha has seen. "So in the short term, we are temporarily prioritizing household staples, medical supplies, and other important products coming into Amazon fulfillment centers so we can more quickly receive, restock, and deliver these products to customers."

    Truly the World is ending – we've broken Amazon! 


    • March NAHB Housing Market Index72 vs. 74 consensus and 74 prior.
    • NAHB Chief Economist Robert Dietz notes half of the survey responses were done prior to much of the current panic. The full impact should be seen in April's report.
    • January Business Inventories-0.1% to $2,035.3B vs. -0.1% consensus and +0.0% prior (revised from +0.1% ).
    • Sales +0.6% to $1,471.2B (M/M)
    • Inventory/Sales Ratio 1.38 vs. 1.40 (Y/Y)
    • February Industrial Production: +0.6% M/M to 109.6 vs. +0.4% consensus, -0.5% prior (revised).
    • Capacity Utilization 77.0% in-line with consensus, 77.0% prior (revised).
    • February Retail Sales-0.5% M/M vs. +0.2% consensus and +0.6% prior (revised from +0.3%).
    • Retail Sales (less auto) -0.4% M/M vs. +0.2% consensus and +0.6% prior (revised from +0.3%)
    • Ex-gas and autos: -0.2% M/M vs. +0.4% expected and +0.7% prior (revised from +0.4%).
    • Retail sales control group +0.0% M/M vs. +0.4% consensus vs. +0.4% prior (unrevised)

    • Credit Suisse sees a potentially good harbinger for Netflix (NFLX -2.7%) international demand, as the company's downloads are spiking in regions hit hard by the coronavirus.
    • Netflix has seen sharp growth in Hong Kong and South Korea, indicating "first-time app downloads inflected positively starting in January and continued into March." That's not likely driven by content releases, analyst Douglas Mitchelson writes.
    • Lack of fresh content will become an issue over time, of course, as companies suspend production; but that may be a bigger issue for Netflix's competition, he says.
    • And SensorTower data that Bloomberg points to show 57% jumps in first-time downloads in Italy this week, and a 34% jump in Spain.
    • Assisted living facility and nursing home operators and related REITs have been hit particularly hard during the broad market's COVID-19-related swoon. Investors, rightfully so, perceive substantial risk to companies' operations if COVID-19 strikes any of their locations, considering the heightened susceptibility of its elderly residents. An outbreak could be fatal to many and would virtually shut down new resident sign-ups.
    • Selected tickers: Brookdale Senior Living (BKD -4.2%) (down 75% since mid-February), Ventas (VTR -7.2%) (down 63% in about the same timeframe), Sienna Senior Living (OTCPK:LWSCF -1.7%) (down 42%), Capital Senior Living (CSU +4.3%) (down 76%), Sabra Health Care REIT (SBRA +1.1%) (down 67%), Welltower (WELL -3.7%) (down 59%).
    • Cisco (CSCO +3.1%) CEO Chuck Robbins says its Webex videoconferencing platform has surged this month due to the pandemic.
    • “In the first 11 business days of March, we’ve had 5.5 billion meeting minutes,” Robbins tells CNBC.
    • “Yesterday we held 3.2 million meetings globally on Webex, and that doesn’t include one on ones. Those are multi-individual meetings," Robbins says.
    • William Hill (OTCPK:WIMHY) and GVC Holdings (OTCPK:GMVHF) take another blow after the U.K. suspends all horse racing.
    • The bookmakers are already suffering from a drought of sports action during a typically busy period of Premier League football.
    • William Hill is down 16% in London trading and GVC is off 15%. Those drops just add to a six-week slide in share prices to historic lows for the bookmakers.
    • Churchills Down (NASDAQ:CHDN) announces that the Kentucky Derby has been rescheduled for September 5.
    • The Kentucky Horse Racing Commission still has to approve the change.
    • The new weekend will place the horse race in direct competition with college football.

    • World Wrestling Entertainment (WWE -0.3%) has canceled the public events around its flagship WrestleMania in the area of Tampa Bay. Fla., in response to the COVID-19 outbreak.
    • The company will live-stream the event on April 5 on its WWE Network and pay-per-view. But it will take place from a closed set at the company's Orlando training facility, with only essential personnel and no fans.
    • That move has led Guggenheim to cut its price target, to $60 from $65 (still 98% upside from current). It cut its OIBDA forecast for Q1 and the full year, assuming that live audiences won't return until June, crimping ticket revenue and merchandise sales.
    • Analyst Curry Baker expects TV partners will still get their regular content and could draw high ratings, but WWE's other catalysts have probably been pushed back further.
    • American Express (NYSE:AXP) observes that spending slowed in the last few days of February and accelerated into March, it said in its investor update call.
    • AmEx now sees Q1 adjusted EPS of $1.90-$2.10, excluding reserve builds; compares with consensus of $2.14; for Q1 2019, the company had reported adjusted EPS of $2.01.
    • Due to the continuing uncertainty surrounding the duration, magnitude, and geographic reach of Covid-19, AmEx isn't able to forecast financial results beyond Q1.
    • “American Express has a long runway to deliver strong, long-term performance, driven by our differentiated business model and our focus on our strategic imperatives,”  said Chairman and CEO Stephen J. Squeri. “We will continue our strategy of investing in share, scale and relevance, and we are focused on running the company for the long term.”
    • The New York Times (NYSE:NYT) submitted an SEC filing on March 2nd reporting weakness in its advertising revenue due to the coronavirus, and said that its subscription growth was in line with prior guidance.
    • The filing stated: "Like many companies, in recent weeks we have begun to see some economic impact from the coronavirus. Unlike many news publishers, our business is heavily skewed towards subscriptions rather than advertising. We’ve seen no adverse impact on subscription growth, or on the expected rise in subscription revenue, which remains strong and consistent with the guidance we gave in our most recent earnings call. However, we are seeing a slowdown in international and domestic advertising bookings, which we associate with uncertainty and anxiety about the virus. We therefore now expect total advertising revenues to decline in the mid-teens in the current quarter, with digital advertising revenues expected to decline 10%. We remain broadly in line with all the other guidance numbers we gave in the call in early February."
    • However, while the company stated that subscription revenue "remains strong and consistent with the guidance we gave in our most recent earnings call", NYT might be understating the strength of its subscription business.
    • The Atlantic reports that "Even after un-paywalling coverage, publications are seeing a marked boost in readership and subscriptions. Poynter reported that subscriptions at The Seattle Times have set new records, even though coverage is free, and that readership is "way up." Coronavirus coverage at Tampa Bay Times made up about half of the stories leading people to subscribe. Publishers are also counting on the longer-term impact, particularly with regards to building brand affinity. As Poynter’s Rick Edmonds put it, "If potential subscribers like what they see, they may be more inclined to sign up when the wall returns.""
    • This suggests that NYT's stock might reflect the current and expected weakness in its advertising revenue, but not the coronavirus-driven increase in subscriptions.
    • The revenue impact of growth in the number of subscribers would be amplified by the NYT's recent price increase. See: The NY Times raises prices, and what to do about it
    • Oppenheimer is out with an upgrade on Walmart (NYSE:WMT) as it points to the retail giant's outperformance during U.S. recessions (2001 WMT +1% vs. -38% S&P 500, 2008-2009 +10% vs. -8% S&P 500)
    • "We view a slightly more accommodative valuation coupled with the potential for still attractive relative financial delivery to drive outperformance from here. As we look forward, we believe the company is well positioned to still deliver on financial targets, and shares could benefit from money flows shorter-term as investors likely continue to seek safety in a more uncertain global economic backdrop."
    • Obviously, Walmart's comparable sales will look pretty good for March amid the stockpiling trend. Oppenheimer thinks U.S. stimulus and a consumers trading down also sets up well for Walmart comps in the near future.
    • Walmart falls just behind Costco and Dollar General as Oppenheimer's top picks in the retail sector.
    • Walmart is raised to an Outperform rating and tagged with a price target of $125.
    • Shares of Walmart are up 3.40% premarket to $110.39.

  53. STJ is right about margin, but you also need to worry about the backwardation in the VX futures.  If volatility remains elevated for months (which would be unprecedented, but so was this, so..) , each new /VX contract slowly moves up towards the spot vix, which is a tail wind for VXX.  For example, if we stay in backwardation, and the VIX stays above 50, each futures contract out in time that is under 50, will eventually have to move up to hit the spot vix.  VXX splits their assets between the two or three front month /VX contracts.  If /VX is at 50, and the vix is at 70, and the VIX stays at 70, VXX will go up roughly 40% as /VX gets closer to expiration.  This will keep happening with each roll, if volatility stays elevated.  We can easily get into the hundreds on VXX if vol stays elevated for multiple months.


  54. Looking more and more like the E in P/E is going to be the problem! We won't be able to spend these checks from the government any time soon!

    On the other hand, it looks like people are making some small progress with that incompetent administration. No small task! But they need to keep Trump away from the mic and from Twitter!


  55. VXX / Palotay – Very true! That is why I am not adding anything now! Way too scary. There will be a time when this will be a very profitable trade though – we just need to wait for the inflection point.


    • Foot Locker (NYSE:FL) says it will temporarily close its stores across all of its brands in North America, EMEA and Malaysia from today until March 31.
    • The closures include the Foot Locker, Lady Foot Locker, Kids Foot Locker, Footaction, Champs Sports, Runners Point, and Sidestep chains.
    • The company's locations in the Asia Pacific region outside of Malaysia will remain open, including Hong Kong, Singapore, Australia and New Zealand.
    • Foot Locker says it's withdrawing its full-year guidance and will provide an updated outlook on its Q1 earnings call.
    • FL +2.55% premarket to $24.26.
    • Source: Press Release
    • Chico's FAS (NYSE:CHS) announces the temporary closure of all retail stores across North America for a period of two weeks due to the coronavirus outbreak.
    • The retailer's online business will still be operating.
    • Along with most of the mall store sector, Chico's is withdrawing its Q4 guidance and not providing any updated guidance at this time.
    • Source: Press Release
    • T-Mobile (NASDAQ:TMUS) will close 80% of its store locations in a further step to combat the spread of the coronavirus.
    • The company had said yesterday it would temporarily close indoor mall stores. Now it will only leave a "critical mass of 20% of stores open to provide important service to customers."
    • The closures will run until at least March 31.
    • The stores remaining open are distributed across the country and designed to be within a 30-minute drive for most customers in a market, COO Mike Sievert says. And they'll open for only eight hours a day, staffed only with voluntary workers.
    • Crocs (NASDAQ:CROX) temporarily closes all of its company-operated retail stores in North America, effective March 17 through March 27, amid coronavirus outbreak.
    • However, customers may continue to shop on Crocs.com.
    • Many retail stores in Europe are also currently closed in compliance with local regulations. In Asia Pacific, many company-operated stores have re-opened and store traffic has begun to improve.
    • All Crocs offices and owned stores within Greater China have re-opened and offices within South Korea, Japan and Singapore remain open with regular deep-cleaning and enhanced sanitary requirements.
    • Source: Press Release
    • Nordstrom (NYSE:JWN) to temporarily close its Nordstrom full-line, Nordstrom Rack, Trunk Club clubhouses and Jeffrey stores in the U.S. and Canada for two weeks, effective March 17.
    • However, the company will continue its online business,  which made up one-third of sales in 2019.
    • The company withdraws its FY20 guidance issued on March 3 amid heightened uncertainty relating to the impacts of COVID-19.
    • February sales were in-line with expectations; however, the past couple of weeks saw deceleration in customer demand due to the virus.
    • Cuts expenses, capital expenditure plans and suspends share repurchases.
    • The company remains committed to executing its savings plan of $200M-250M in FY20.
    • Source: Press Release
    • McDonald's (NYSE:MCD) is close dining rooms at company-owned restaurants in the U.S. to focus on takeout and delivery options amid the coronavirus outbreak.
    • The fast-food giant is also shutting self-service beverage bars, kiosks and its kids area at the restaurants it controls.
    • McDonald's is asking franchisees to take similar measures.
    • Shares of MCD rose 2.40% in AH trading after falling 15.88% during the regular session. For the year, McDonald's is down 24.59%.
    • Guess (NYSE:GES) says it will close retail stores in the U.S. and Canada from March 17 through March 27 in response to the COVID-19 outbreak.
    • That follows similar temporary closures of company stores in European countries, while most Guess-operated stores in Asia have reopened after temporary closures.
    • All retail associates will continue to be paid for their scheduled shifts. And the company encourages customers to continue shopping through its websites

    • Canada Goose (NYSE:GOOS) says it will close all retail stores in North America and Europe as of today.
    • The retailer's stores in Greater China and Tokyo remain open.
    • Canada Goose's CEO is foregoing his salary for at least the next three months.
    • Canada Goose is suspending its previous long-term outlook. Management notes the company has a high degree of financial flexibility through both cash on hand and undrawn capacity on its asset-based revolving credit facility, which was increased to $517.5M during peak periods on February 24.
    • GOOS +0.67% premarket to $14.96.
    • Source: Press Release
    • Williams-Sonoma (NYSE:WSM) will temporarily close all U.S. and Canada stores effective March 17, with a plan to open on April 2, 2020.
    • Laura Alber, President and CEO, commented, "Our e-commerce sites, distribution centers and customer care centers will remain open, and we will keep our online order pickup at curb side and ship from store, as local regulations allow. As the coronavirus situation evolves, we will adjust our plans as needed.”
    • Source: Press Release
    • L Brands (NYSE:LB) will temporarily close all Bath & Body Works, Victoria’s Secret and PINK stores in the United States and Canada, effective March 17 through March 29, 2020.
    • The company will continue to serve customers through its direct channels, http://www.BathandBodyWorks.com and http://www.VictoriasSecret.com.
    • As a proactive measure, the company elected to draw down $950M from its Revolving Credit Facility, which has an aggregate size of $1B and expires in May 2024.
    • The company is withdrawing 1Q20 earnings guidance issued on Feb. 26, 2020.
    • LB +2.58% premarket
    • Citing the COVID-19 outbreak, Canopy Growth (NYSE:CGC) has decided to temporarily close its Tokyo Smoke and Tweed retail locations (23) in Canada effective today at 5:00 pm ET.
    • Customers will be able to purchase medical cannabis through Spectrum Therapeutics. Adults in Manitoba and Saskatchewan will be able to buy products through Tweed and Tokyo Smoke e-commerce platforms. All other provinces and territories will be supported via government-run online retail.
    • Shares up 2% premarket on light volume.

    • AMC Theatres (NYSE:AMC) says all locations in the U.S. will close for at least six to 12 weeks amid the coronavirus outbreak to comply with local, state and federal directives.
    • As a result of the temporary theatre closures, AMC will automatically pause all A-List memberships for the time that AMC theatres are closed.
    • AMC says it will continue to monitor the situation very closely and will look for guidance from the CDC and local health authorities.
    • AMC +7.69% premarket to $2.80.
    • Source: Press Release

    • Wedbush names Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB) as "best ideas" with strong long-term positioning amid the coronavirus pandemic.
    • The firm says that Amazon (Outperform, $2,325) has experienced "an unexpected surge in demand" due to people staying home, a trend that will only accelerate as consumers become more dependent on the e-commerce platform.
    • Facebook (Outperform, $250) has likely seen "significant upticks in user engagement and hence ad impression growth" due to the virus, says Wedbush.
    • The firm sees FB's positive momentum continuing at least through the rest of Q1, which makes consensus estimates seem "overly conservative."
    • Amazon shares are up 3.8% pre-market to $1,751.50. Microsoft gains 1.9% to $137.95
    • The coronavirus crisis is spreading from airlines to the manufacturing sector as Airbus (OTCPK:EADSYannounced plans to halt operations at its plants in France and Spain for four days.
    • "This will allow sufficient time to implement stringent health and safety conditions in terms of hygiene, cleaning and self-distancing, while improving the efficiency of operations under the new working conditions," according to the planemaker.
    • Exxon Mobil (NYSE:XOM) says it is "looking to significantly reduce spending" due to the coronavirus pandemic and weaker oil prices, as shares slump to a 17-year low.
    • Spending plans will be issued "when they are finalized," but the admission is a sudden reversal for the company, which two weeks ago pledged to maintain annual capital spending of $30B-$35B through 2025 while trimming costs amid falling demand and the oil price war between Saudi Arabia and Russia.
    • "Based on this unprecedented environment, we are evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term," Chairman and CEO Darren Woods says.
    • The company's statement does not say whether cuts would affect dividends, which consumed $14.65B last year, but "protecting the balance sheet and dividend is the priority for this company," says Tudor Pickering Holt's Mike Murphy, who sees Exxon cutting 10%-12% from outlays and lowering this year's capex to $28B-$29B.
    • XOM +3.2% pre-market.
    • A brutal selloff yesterday hammered Boeing (NYSE:BA) shares, which fell nearly 24% to under $130 (lowest since Sept. 2016), though things are looking slightly better premarket as the stock climbs 3%.
    • The latest? Boeing has officially requested aid due to the coronavirus pandemic and is "leveraging all our resources to sustain our operations."
    • "Short-term access to public and private liquidity will be one of the most important ways for airlines, airports, suppliers and manufacturers to bridge to recovery," the planemaker declared. "We appreciate how the administration and Congress are engaging with all elements of the aviation industry during this difficult time."
    • Boeing also named Wendy Livingston, currently VP of Corporate Human Resources, to replace Heidi Capozzi as head of Human Resources in early April.
    • Regeneron Pharmaceuticals (NASDAQ:REGNannounces latest progress in its efforts to discover and develop a multi-antibody cocktail that can be administered as prophylaxis before exposure to the SARS-CoV-2 virus or as treatment for those already infected.
    • Regeneron has identified hundreds of virus-neutralizing antibodies from its VelocImmune mice, genetically modified to have a human immune system. Antibodies from humans who have recovered from COVID-19 have also been isolated to maximize the pool of potentially potent antibodies.
    • The company is working to produce hundreds of thousands of prophylactic doses per month by the end of summer, and hopes to have smaller quantities available for initial clinical testing at the beginning of the summer.
    • Shares are up 10% premarket.
    • Uber (NYSE:UBERhas begun suspending shared rides in the United States and Canada due to the coronavirus pandemic.
    • Users opening the app in those countries won't have the option to book a pooled ride, which offer lower prices by including up to three other passengers heading the same way.
    • Uber statement: "Our goal is to help flatten the curve on community spread in the cities we serve."
    • The company will evaluate similar actions in other countries on a case-by-case basis.
    • Uber shares are up 1.7% pre-market to $20.64 after hitting a new low yesterday.
    • U.S. airlines are seeking over $50B in financial assistance from Washington, in a potential aid package that could include government-backed loans, cash grants and other measures like tax relief.
    • Putting it in perspective: The figure would be more than three times the size of the industry's bailout after the Sept. 11 attacks.
    • "We're going to back the airlines 100%," President Trump said at a media briefing on Monday. "We have to back the airlines. It's not their fault."
    • Industry trade group Airlines for America, or A4A, also proposed $8B in grants and guarantees for cargo carriers, while U.S. airports are separately seeking $10B in assistance.
    • Looking to spur sales amid the coronavirus outbreak, automakers are offering new vehicle financing programs.
    • General Motors (NYSE:GM), through its GM Financial arm, is offering 0% financing for seven years – two years more than recent programs – and four months deferred payments for those with A+ credit.
    • Ford (NYSE:F), through its financing division, also announced a program giving customers who buy new vehicles the option to delay their first payment for 90 days.
    • Previously: RBC expects 20% decline in US vehicle sales amid coronavirus outbreak (Mar. 17 2020)
    • RBC Capital Markets expects a 16% fall in global auto production as coronavirus outbreak is expected to lead to a 20% decline in U.S. auto sales to 13.5M vehicles.
    • As of now, China's auto retail sales demand is halved partially leading to a 16% fall in global auto production this year.
    • Automaker stocks are among the worst-hit stocks, with shares down about 30-40% in March.
    • Tesla (NASDAQ:TSLA) closed 40.2% lower in March, however, YTD shares are up 6.4%.
    • Ford (NYSE:F), Fiat Chrysler (NYSE:FCAU), and General Motors (NYSE:GM) plunged to 52-week low yesterday as U.S. markets reported the biggest drop since 1987.
    • Prior: Transports reeling after U.S. shutdowns

    • GNC -25.9% after-hours upon disclosing it does not expect to have sufficient cash flow from operations to pay debt under 1.5% convertible senior notes or its tranche B-2 term loan when they come due.
    • As of year-end 2019, GNC's debt included $154.7M under the notes and $441.5M under the term loan.
    • Since GNC "has not refinanced the tranche B-2 term loan and it will mature less than 12 months after the expected issuance date of these consolidated financial statements, management has concluded there is substantial doubt regarding the company's ability to continue as a going concern within one year from the expected issuance date of the company's consolidated financial statements, according to an SEC filing.
    • GNC also says it is unable to file its annual 10-K report on time but expects to do so within 15 days after the deadline.
    • Boeing (NYSE:BA) is asking for short-term aid from the Trump administration and Congressional officials for itself, suppliers and airlines, Bloomberg reports.
    • Boeing is seeking to avoid layoffs and damage to hundreds of smaller companies that make parts and systems for its aircraft, the report says.
    • The aerospace sector faces "extreme disruptions" in the near term and possibly longer, says BofA analyst Ron Epstein.
    • "Global airline business models will be stressed, airlines will cut capex, growth plans will be slashed and there will be airline bankruptcies," Epstein writes. "The 737 MAX program could be especially hard hit due to its own idiosyncratic circumstances."
    • Also, S&P downgrades Boeing's debt rating a notch to BBB from A-, saying "cash flows for the next two years are going to be much weaker than we had expected," due to the 737 MAX grounding and sharply reduced global air travel due to the coronavirus.
    • Chesapeake Energy (NYSE:CHK) has tapped debt restructuring advisers amid the rout in energy prices, Reuters reports.
    • The company reportedly has enlisted restructuring lawyers at Kirkland & Ellis and investment bankers at Rothschild, firms which have counseled on significant restructurings of large energy companies, including Energy Future Holdings.
    • Chesapeake is studying its options at this point and no debt restructuring move is imminent, according to the report.
    • CHK -5.8% after-hours.

  56. Phil – does this mean TSLA could be bankrupt in 14 months??

     

    MS on Tesla (NASDAQ:TSLA): "In our down 90% revenue draconian scenario, we calculate Tesla could burn just shy of $800mm per month. Tesla’s gross liquidity is equal to roughly 14 months of our FCF burn scenario… ostensibly better liquidity levels (relative to propensity to burn) than the D3 OEMs. We note that there are any number of assumptions around working capital and other factors that we have had to estimate for these scenarios."


  57. Phil// I believe we sold $15.00 puts in STP or LTP (not sure).  here is the link and I am referring to the puts we sold.

    https://www.philstockworld.com/2020/01/27/philstockworld-january-portfolio-review-2/

    Thanks.


  58. There is no chance Tesla has enough liquidity to last 14 months.  Their cash level is window dressed.  True cash levels are much less. ( you can tell by looking at interest income)


  59. Back to ET again Phil – stats say they have $52B in debt.  Can they service that just off storage fees and gas pipelines?


  60. Looks like oil heading for $24


  61. Hi Phil,

    Wasn't BX part of one of the portfolios awhile back? What do you think of them down here? They could probably get cheaper into the low 30's if we keep going down…Thx


  62. BA at 102 was starting to look interesting


  63. So 90 day delay on tax season.   Just curious what that does to govt debt servicing, treasuries, etc?  Is there a play to be made there?


  64. We're turning into a communist society right in front of our eyes. Dictator trump appeases the peasants with edicts like free cash. Oh hooary!! that's so wonderful!!! Maybe we can cry and hold parades for our Beloved Dictator like Kim Jong Un? Is that it? We don't go through Congress to pass laws anymore? LOL. RIP USA. Seattle/SF can't evict people? Oh really? So answer me this, WHY PAY RENT? Should we just stop paying mortgage? Asking for a friend.





  65. Timeline: How coronavirus compares to history’s most deadly pandemics


  66. New York state coronavirus cases soar to about 1,700, hospitalizing 19%


  67. Tom Brady Says He Will Leave the Patriots


  68. BDC – Tell your 'friend' to burn a fatty and r-e-l-a-x…. :)


  69. 1020 - I'm working on it….


  70. CCJ very interesting at $6.40

    2022 $5/$10 call spread selling $7 puts


  71. Everything looks interesting if the wheels weren't coming off. The algo traders are making this market seem more buoyant than it actually is. Call me crazy but I'm not jumping in right now. I got in some of the previous "bottom trades" and they're all bleeding like they've had their throats cut. If it takes off like a rocket I'll try to grab hold but 1000 point moves these days don't mean a thing. The interesting part is when it goes down 1000 I lose my ass and when it goes up 1000 I only get half of it back. Yeah, forget it. I did a couple smart things however, I covered the long end of some bull call spreads when they were cheap, and rolled down what I could, so if it takes off again I won't miss out completely. And the smartest thing was stay 3/4 cash no matter how tempted I was.


  72. OK, VPU, that was fun. Time to go back down thanx


  73. TBH, I'm tired of winning. Let's pretend governing isn't a game. Let's pretend it's real.


  74. oil / tangledweb – what's the logic of your $24 bottom prediction? i've been nibbling at oil but looks like i was early, how did you get that target? tia


  75. TSLA/Coulter – Well any company can be BK if they have no sales and burn cash for 14 months.  That's actually considered in pretty good shape.  Keep in mind that's assuming $0 sales.  TSLA also has the advantage of having a pre-sold waiting list and, other than losing their jobs, I think a very good percentage of those customers would accept delivery – even if they are stuck at home.  

    M/Rookie – We moved them to the LTP (the STP became the LTP and then we started a new STP to cover the LTP) and added a bull call spread to it. 

    M Short Call 2022 21-JAN 20.00 CALL [M @ $6.45 $-0.26] -20 2/24/2020 (675) $-2,800 $1.40 $-1.00 $1.70     $0.40 $0.00 $2,000 71.4% $-800
    M Short Put 2022 21-JAN 15.00 PUT [M @ $6.45 $-0.26] -20 12/9/2019 (675) $-9,000 $4.50 $5.90     $10.40 $0.40 $-11,800 -131.1% $-20,800
    M Long Call 2022 21-JAN 10.00 CALL [M @ $6.45 $-0.26] 40 3/6/2020 (675) $10,200 $2.55 $-1.21     $1.35 $-0.36 $-4,820 -47.3% $5,380

    TSLA/Palotay – I wouldn't be surprised, just going by what the analyst said but, of course, analysts also said TSLA was going to $3,000.

    ET/Tangled – It's essentially the same debt they had 3 years ago and until last month – it wasn't bothering anyone.  Certain kinds of companies operate with lots of debt, mostly utilities.  They need to build expensive infrastructure but they have fairly predictable cash-flow models to service the debt over long periods of time.  When the cash-flow is interrupted or reduced – it's very easy to paint a dire picture (FTR) and if investors start to bail – the stock can get killed.   

    People run out of any debt company in a recession – even SKT, who couldn't be better on their actual cash-flow and returns but they do have a lot of debt and if you extrapolate bad news against companies that are leveraged – every one of them looks like a bankruptcy risk – even GE or CAT.  

    Oil/Tangled – Can't put a rally together when the energy sector is assuming $10 oil.  That then triggers a sell-off for the bankers who lend them money, etc.  

    BX/Sun – That was the last cycle.  You don't know what kind of hit their portfolio is having.  They made $4Bn last year but they had $32Bn in assets so take 40% off those and we're down to $20Bn with a $12Bn write-down?  Gotta be very careful with guys like this – I liked them when we were in a non-stop bull market as being better than an ETF with a nice dividend ($2.44) but now – I'd have to see their earnings before jumping in.

    BA/BDC – We sold 5 of the 2022 $110 puts last week for $30 and they are already $45 – markets are too scary to sell 5 more but I love them at $45.

    Image result for duck season animated gif tax seasonTax season/Tangled – They'll just borrow more money to keep the plates spinning.  Only a problem if the auction goes bad but it can't because the Fed is happy to step in and buy notes at 0.25-0.5%.

    Trump/BDC – Maybe he will drive down Main Street in his limo and toss cash to the masses (no more than 10, of course).  

    So far, they haven't actually announced anything that's very useful and, as I said, it's not about giving people $1,000 – it's about giving people a plan that makes them feel that this is something we are going to get under control in a defined amount of time.  "Lots of people will die" is not really the leadership quote we need at the moment.  

    Although – it all makes sense when you put it together:


  76. So de Blasio is touting a lockdown for NYC. Would this close the stock/bond markets? 


  77. PFE to start vaccine trials in April.  That makes me think the people who say they have something now are full of crap.  GILD I might believe as they had the vaccine for another coronavirus but hard to believe random firms who say they have a sudden treatment or vaccine this quickly.  

    Though GILD is most likely to find a vaccine, every time some other joker announces a breakthrough, people sell them off like they've been beaten.  Big firms like GILD and PFE don't announce something unless it's very solid.

    Fed saying something to the effect that they will make INFINITY liquidity available in the overnights.  Well, I think that's it – unless they go to Infinity + 1,000?

    “There’s more the Fed will do. We are in a ‘QE to infinity’ moment” —former Deputy

    Secretary Sarah Bloom Raskin

    Lockdown/Pstas – The whole country is going to lockdown most likely.  The market has been saying they can operate electronically but that's what Robin Hood said too.  If they go to limited hours it's going to be a bottleneck nightmare and prices will swing insanely – they are better off closing it for a while.   A week off wouldn't kill us, China does it every year.  


  78. CLF pays a 5.83% dividend currently at $4.12 .  If one buys the stock, sells the $5 straddle in 1-22, and gets called away at $5, the return is 110% for 21 months.  What do you think Phil?


  79. The CLF $5 straddle sells for $4.07 


  80. CLF/Rvn – Another debt-servicing company that people have lost faith in.  You can lower the risk and just sell the $4 puts for $1.85 as the dividend is just 0.24 so why go through the hassle when you can put $1.85 in your pocket now and worst case is you get assigned at net $2.15 and then you sell $3 calls (now $2.08) for $1+ and your net on the stock is like $1.  So consider the risk $1 to make $1.85.

    X is also interesting down here as they are very likely to be bailed out, even if things get worse.  The 2022 $5 puts are $2.25 for a net $2.75 entry.  


  81. I would be OK if markets shut for a month.


  82. covid19 vaccine/Phil – yup – lotta shysters out there. I'm with Osterholm on this: https://www.youtube.com/watch?v=X8J0f18LLhE


  83. How is X that low?  Has steel stopped being used?


  84. Dollar almost 100 but Gold back at $1,533. 

    Almost 2% in a day – that is some Grade A global panic, my friends!  

    Canada 0.70!  Too bad we can't go there on Vaca and get 30% off….

    40% off in Australia:

    And Airfares on sale too – best time to travel and we can't.

    This is too funny:

    See there's no real value to things – just whatever people are willing to pay for them at any given moment.  Good spot to go long at $1,400.

    No options! 

    Good point, snow.

    Steel/Tangled – Can't eat it so it's worthless at the end of the world. 


  85. AMZN up 8% today – good job guys!  

    Overall, it's a little progress today volume was solid (250M+) and we're over the weak bounce (from yesterday) but the key is to get over the strong tomorrow and hold it through the weekend or it's meaningless.  


  86. EWT says one more low before the bottom


  87. So what happens if the say (if even legal) that for one month nobody has to make a payment on anything (mortgage, loans, credit cards, rent, …)?  You only have to pay for basic supplies and can still use CC for that.


  88. Payments / Tangle – I think that they did that in Spain already – at least for rent and mortgages. Don't have the details. Maybe Advill can fill us in. In any case, if people don't have jobs or don't get paid, they won't pay them anyway.


  89. Serious question for anybody

    if they ban short selling what does that mean for any shorts you have and what does it mean for a put spread that expires during the ban





  90. Phil / M – Macy's – I have a sick feeling these guys will be cutting dividends soon during the '09 recession they cut the dividend.   The outlook on their credit rating was lower from stable to negative last week.  I know they have lots of buildings from a Cap perspective but I'm not sure this will save it.   Do you think the dividend is at risk?  If they were to cut it do you think it's priced in?  I'm struggling with putting more money into this one thinking that it may be a huge loss.   I have not been able to find when the loans come due.

    My position is as follows:

    50X '22 5($2.5) / 10 ($1) BCS with a running loss of 22K on this position after rolling down the first time. as wells as rolling down some puts.

    I also have 3K shares at 12.5 that are uncovered ( just sold my April short calls ) 

    15X Jan 22 $15 put (in at 4.45) now 10 

    15X Jan 22 $15 put (in at 2.3)   (partial role from above) just sold yesterday.

     

    A few questions – is dividend cut in the offing in your view?  is this priced in ?  do uoui know the timing of loans?   Is there anything else to do hear but cover the 3K shares at maybe 10? or something else, and should by a few more 5 putters ? or just close out the 15 putters and leave it?


  91. Phil / Macys – on the 3K shares ABOVE  I just Closed out my short callers so they are need now







  92. Nevada governor shutters gambling, dining to halt virus


  93. California governor: Most schools won’t reopen this spring


  94. GBTC, Bdc nice one – forgot about this one, good time to buy a few shares as spec



  95. A cruel paradox: Beating virus means causing US recession


  96. Just catching up on yesterday’s post



  97. Why the coronavirus could be the tipping point in reshaping the global economy


  98. Can California Keep 7 Million People at Home?


  99. Good morning?

    Futures went limit down again, QE Infinity and $1.2Tn of stimulus wasn't enough, it seems….

    Here's the problem – even if you give every man, woman and child in this country $2,000 a month ($600Bn) – where are they going to spend it?  

    And, even if the US is that generous (we're not), what about the rest of the World?  If every country doesn't do something similar, we're still looking at a global Recession.  Recessions end when people goo back to work and things start getting back to normal.  The problem is, there's no "normal" in sight at the moment.  As I keep saying – you have to fix the crisis first – NOT the economy!

    This is like firemen showing up at a house fire and painting the house – who cares about that?  

    Bloomberg reporters are reporting from their homes – how's that for inspiring confidence!?  

    Sadly, we'll have to add more hedges today, in case 2,400 breaks down and we head for 1,800.  Fortunately, that's down 25% so up 50% on SDS, which is already at $34 so $51 would be the target and the SDS May $35 ($7.50)/50 ($4.50) bull call spread is just $3 and pays $15 so 400% upside potential means we can get $100,000 back for each $25,000 and we just sold $81,000 worth of short puts in the LTP which pays for $300,000 worth of protection.

    Of course we don't need to take it all at once but 80 of those for $24,000 pays $120,000 back at $50 and we certainly hope we lose the $24,000 but I'd rather have the insurance.  If 2,250 fails, we add another layer (maybe June) and another at 2,000 and, by the time you are adding at 2,000, the S&P is down 17% and that's 34% up on SDS to $45.56 and the May $24s ($10 in the money) are $12 so we'd already be able to cash in the original calls for $12 and leverage that to buy more long spreads, etc.  

    And, of course we already have $200,000 worth of SQQQ and QQQ hedges that will kick in but we need to make sure we have at least $500K in the STP as another 20% down could wipe out the LTP – in the very least, we'd have to buy back all our short puts (can't risk assignment) and then wait a very long time hoping our bull call spreads go back in the money.  

    Is it survivable?  Of course it is – but that doesn't mean it will be pleasant.  

    “I think the Fed is doing the right thing. But people are having margin calls,” said Alex Au, managing director at Alphalex Capital Management, a hedge fund based in Hong Kong. “There might be many forced sellings on the market as people unwind earlier positions.”

    Investors who have used borrowed money to make bigger bets can face margin calls when holdings fall in value, forcing them either to stump up more cash or to sell their positions.

    This is probably a fantastic opportunity to deploy cash but, as noted above, cash is in short supply and we can't be sure it's the bottom so we need to "waste" (hopefully) money on hedging if we intend to stick with long positions.  

    One reason we can't wait is that there's a possibility (30%) they will close the markets – another reason people are cashing out in a panic.

    So it will be a busy day, expect to be adding hedges to all our portfolios this morning and we'll have a lot to talk about in today's Webinar. 

     Meanwhile, I do expect progress on stimulus today so I still like (again) playing the S&P Futures (/ES) long over the 2,400 line – with tight stops below. I also like /NG long here ($1.65) also with tight stops and Copper (/HG) at $2.20 is also a good long – but tight stops below.  Better to take small losses and try again at the next support than ride the futures down! 

    We are certainly trading below fair value for most stocks but that value assumes some kind of normality where people get up and go to work, school, etc…  As it stands now, people can't leave their homes, Las Vegas is closed, California is closed, New York is closed – probably the whole country next week so we have to rethink what commerce is in a country where no one goes out.

    Let's say 80% of the people still get paid.  US payrolls are $6.5Tn or $500Bn a month and Bernie says give us $600Bn a month so – THANKS!  That's why Yang (and me!) is right that $1,000 a months for people over 18 (210M) would be a more realistic $210Bn a month or $2.5Tn a year, which is by no means a crazy number in a $20Tn GDP – a simple 10% VAT would take care of it and resdistribute the wealth from the people who spend to the people who don't have any money.  

    In any case, if we do hand out $210Bn/month for the duration (seems to be the current plan in Congress) and 80% of $500Bn a month continues to be paid out – that's $610Bn – more than people are getting paid now.  

    So there's no reason for the economy to collapse based on that though I imagine that each month 10% less people will get regular paychecks as more and more businesses begin to shut down.

    Then the real problem becomes spending.  $500Bn a month only becomes a $20Tn GDP (there's other income besides wages, of course) due to the money multiplier effect, which is roughly 3.5x.  In other words, you get paid $5 and you give it to SBUX who pays the barista who goes to the supermarket to buy a whole pound of coffee for $8 (because they are not a sucker like you!) and the Supermarket pays the cashier who combines it with food stamps (because those wages suck) and they get a turkey, etc…  

    So money moves through the economy and poor people spend whatever they get so they move money the best but, when you give money to rich people they put it in the bank (0x multiplier) or, even worse, they put it into an instrument that produces NOTHING and demands interest, which sucks even more money out of the economy (-0.1x).  Since the rich have 100x more than the poor – that's a lot of sucking!

    Image result for zombie apocalypseStill, unless we are heading into a real Zombie Apocalypse, where humanity is wiped out and replaced by a mindless hoard with no interest in food, fashion or fun – we will survive – even if surviving means locking ourselves in a bubble and shopping via Amazon drones with our Universal Basic Incomes.  

    Even THAT would still have our GDP around $12Tn, down 40% from where it was but certainly not $0 – that's why a sell-off past these levels is silly and can't last – and that's the worst possible case – the actual case is probably quite a bit better than that – we just have to get through the next few months. 

    Be careful out there!  


  100. Is there separate hedging for money talk and dividend portfolios?


  101. Update for Seeking Alpha:

    Sadly, we are still in a crisis.

    Coronavirus COVID-19 Global Cases Back on January 23rd, I wrote: "How We Are Hedging China's Coronavirus Crisis" in which I warned:

    "There is still way too much market complacency here…

    "So why are we cashing out our Futures Shorts? Well this market tends to be very bouncy so we're just playing the odds and we also have index shorts (SQQQ). We will be looking at adding more of those if the market opens weak. The Futures are just a good way of giving us overnight protection ahead of something like this weekend's announcement that there are thousands of people infected right at the beginning of Chinese New Year – that could be good for a huge overnight drop."

    SQQQ is only up 50% since January 23rd, but we played option spreads which helped us keep ahead of things.  In that article, the options hedge spread we added for China went as follows:

    {C}{C} {C}

    • Buy 20 FXP June $50 calls for $7 ($14,000)
    • Sell 20 FXP June $65 calls for $2.50 ($5,000)
    • Sell 5 FXP June $50 puts for $4.30 ($2,150)
    • Sell 5 CHL Sept $45 puts for $4 ($2,000)

    {C}That's net $4,850 on the $30,000 spread so there's $25,150 of upside protection if China's Ultra-Short (FXP) gets to $65 into June expirations. If China recovers and we get completely burned, we're promising to buy 500 shares of FXP for long-term protection at $50 (20% off) and 500 shares of China Mobile (CHL) at net $41 (10% off). I don't see why the flu would have a long-term impact on China Mobile and Chinese stocks are very stretched and people are pretending the Government will bail out the banks but it's doubtful that will go smoothly, so I like the idea of having some FXP in our Short-Term Portfolio for the long term.{C}

    {C}{C} {C}

    As you can see from the charts, FXP is deeply in the money while CHL has fallen hard and the current prices are $28/18 ($20,000) for the June $50/65 bull call spread, $2 ($1,000) for the June $50 puts and $12 ($6,000) for the CHL Sept $45 puts for a total of net $11,000 and that's up $6,150 (126%) from our net $4,850 entry.

    Obviously, there's a lot of premium left in the short FXP June $65 calls as FXP is at $77.20 yet the calls are $18 – indicating $83 is expected.  Our long $50 calls on the other hand, have already lost all their premium but $28 is $13 more than we could make on the spread, since our gains are cut off at $65. 

    Or are they?

    While it is risky, we do think China will begin recovering here and that means FXP will begin to calm down so we could take the 20 FXP long calls off the table for $56,000 and leave the naked short June $65 calls.

    We can wait for the short June puts to expire worthless and we can wait for CHL to bounce back because, as I said above, we certainly don't mind owning China Mobile, with their 925M subscribers at net $41 – even if they are $34 at the moment.  

    $56,000 is a nice amount of cash to be able to throw around in a market that's having this kind of sale but it would be nice to have some insurance against FXP going higher still.  Fortunately, we can use some of the $56,000 to buy a hedge to cover the short June $65 puts that also gives us an additional hedge on China:

    • Buy 20 FXP Sept $60 calls for $24 ($48,000) 
    • Sell 20 FXP Sept $85 calls for $16 ($32,000) 

    That's using $12,000 and requires no additional margin and gives us another $50,000 of upside protection that kicks in earlier than the short calls and we STILL get to put $48,000 in our pocket – so it's a great adjustment.

    We published our 2nd Virus Hedge for our SA readers on Feb 28th, where I said:

    {C}"We'll see if this rumor of more Fed bailouts will do the trick but I doubt anyone is going to go into the weekend long in HOPES (not a valid investing strategy) that the Fed now has the power to wipe out viruses and fix Global Supply Chain issues.{C}

    {C}"We have a new hedge that can return 445% on cash by September if China gets worse."

     Our new hedging ideas were:

    {C}

    I still love China Mobile (CHL) as a long-term hold but now there are a lot of U.S. companies on sale as well but we'll stick with CHL for now and set up a new FXP hedge as follows:

     

    • Buy 30 FXP June $55 calls for $9 ($27,000)
    • Sell 30 FXP June $65 calls for $5.25 ($15,750)
    • Sell 5 FXP June $55 puts for $3.50 ($1,750)
    • Sell 10 CHL Sept $42.50 puts for $4 ($4,000)

    We got a better price on CHL so we're selling more and our net entry on this $30,000 spread is $5,500 and the spread is $15,000 in the money to start so not too bad with a potential gain of $24,500 (445%). The risk is being assigned 1,000 shares of CHL at $42.50 ($42,500) and those are already down $2,500 but we can roll them along and CHL is probably not going to disappear with their 900M customers any time soon.

    Our other primary hedges are the long Nasdaq Ultra Shorts (SQQQ), and we also shorted Tesla (TSLA) and Chipotle (CMG) as well as our Trade of the Year, which was a long on Barrick Gold (GOLD) and that, of course, is working out fantastically for our Seeking Alpha readers.

    {C}{C} {C}

    {C}{C}

    {C}{C}

    {C}{C}

    Other than GOLD, they all worked out quite nicely, don't you think?  This is what hedging is all about, making sure you have in your portfolio at least some stocks or options that will perform well in a down market.  Since we are Fundamental Investors, we like to target companies that are particularly vulnerable rather than just picking an index – you can make fantastic multiples that way that really protect your portfolio from damage during sell-offs like this one.  

    As with our first FXP spread, the June $55/65 spread is only $25/18 or $7 ($21,000) and the June $55 puts are $3.25 ($1,625) and the CHL puts are $10 ($5,000) and that's net $14,375 and that's up $8,875 but, if it's in the same portfolio, I'd simply cash out the $55/65 spread for $21,000 and let the short puts ride as that would now be $77,000 off the table from hedges in a $100,000 portfolio – leaving us well-prepared to ride out a sell-off that would cause both sets of FXP short puts to expire worthless AND gives us more than enough money to buy CHL if assigned to us with plenty to spare to adjust our longs with.  For example, our Money Talk Portfolio is down 32.4% and we can use that cash to adjust those positions:

    Money Talk PortfolioThat's what hedging is all about – generating CASH!!! for you to put to work in a crisis.  

    Clearly from the risk we've taken on the short FXP June $65 calls, we do believe we're done using China as a hedge but, for an additional hedge, we still think the Nasdaq can fall much further and, since the virus is now in the US (19,931 cases and we're still not even testing!), we should be looking at the Nasdaq Ultra-Short (SQQQ) as another overall portfolio hedge.  

    As you can see, the S&P 500 has dipped significantly below the 2018 support line while the Nasdaq is still above it, which makes it what we call the "lagging index" and could give us a significant move to the downside if it decides to catch up to its peers. 

    SQQQ is at $29.32 and a 20% drop in the Nasdaq would push this 3x Ultra-Short ETF up 60% to $46.92 so that becomes our target and SQQQ gives us a choice of June or September contracts but the September contracts top out at $40 so we'll be tricky and take the following:

    • Buy 20 SQQQ Sept $25 calls at $12.50 ($25,000) 
    • Sell 20 SQQQ June $45 calls at $7.50 ($15,000) 
    • Sell 5 IBM 2022 $75 puts for $13.50 ($6,750)
    • Sell 10 IMAX Sept $10 puts for $4.50 ($4,500) 

    {C}{C}

    {C}{C}

    That's a net $1,250 CREDIT on the $40,000 spread that is almost $10,000 in the money to start.  We already like IBM and IMAX so happy to promise to buy them if they get cheaper and, if course, it's very unlikely they go down if the Nasdaq goes up so a good hedge and if they go down and the Nasdaq goes down, we have $41,250 to put towards the purchase of those stocks.  

    That's what we call a win-win situation but it's a WIN-WIN-WIN if we are able to do what we did with FXP and cash out the hedge and THEN the short puts expire worthless – that would be perfect!