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Tuesday Market Workshop – Portfolio Repair Part 2 – Resetting Your Positions

10 skills to be a successful stock traderWhat is your plan?  

Come on, I'm not messing around here – WHAT is your trading plan?  Surely you have one if you are in charge of trading your portfolio, right?  If you were a General in the Army and you didn't have a plan – your troops would very likely be screwed.   If you were head coach of a football team and you didn't have a plan – your team would likely lose.  If you were the CEO of a company and you didn't have a plan – your company would likely do poorly.

These things are obvious and while you know it's a bad idea to perform surgery without a plan or mount a legal defense without a plan – somehow some of you business owners, doctors, lawyers and other professionals who trade the markets think it's OK to trade without a plan.  It's not – it's a very bad idea!  

On the right are some good trading guidelines but #1, as it should be, is HAVE A TRADING PLAN.  And it doesn't mean "Until it Fails" – it's even more important to have a plan to FIX your positions AFTER the first plan fails.  Very sadly, a lot of people take 3, 4 and 5 too seriously and hold tight and cross their fingers when faced with a major market sell-off but your plan CANNOT BE waiting until the market recovers.  That is not a plan – that is FEAR!

What we need to do, when the market drops, is have a very rational look at our positions – under the new circumstances – and decide if they are still worth keeping in our portfolio and, most importantly, whether or not we have realistic targets for them to recover.  

Let's take Boeing (BA) for example.  If you owned BA at $350 and watched it fall to $300 but then back to $350 so the next time it hit $300 you weren't worried but  then $275 and back to $300 and suddenly $250 but you thought surely it would bounce back from that and then below $200 the same week and now it's too late to do anything about it but cross your fingers and then down to $100, where you know you should Double Down but now you hate them and now back to $150 – what do you do?  

First of all – do you still hate them?  Clearly continuing to stand like a deer in the headlights is not an ideal strategy.  Is Boeing worth $300/share ($170Bn)?  That is the first question you need to ask yourself.  BA lost $636M last year and this year, so far, they haven't sold very many planes because they CAN'T sell the 737 Max's until they fix them and the airlines are all shut down with many close to bankruptcy so not only is BA not getting new orders but they may start losing old ones as their customers close up shop.

On the other hand, it seems like the Airline Industry is being bailed out so maybe BA will do well if they can start pushing 737s out the door in Q3.  I know I have put off business trips and family visits this year and I'll probably fly again as soon as they give the all clear – just like we all flew again after 9/11 so I don't think air travel is dead – I just think it will have some pains.  Still, is BA going to make $6Bn to justify a $90Bn valuation?  Certainly not this year and maybe not next year either so $300 is right out the window but I do like owning them at $150.

But we don't own them at $150 do we?  We own them at $350 and the stock is now at $150 so – HOW DO WE FIX IT?

If I have 200 shares ($70,000) they are now worth $30,000 and we could buy $60,000 more to have 600 shares at $130,000 or $216.66/share.  So we'd be spending $60,000 and STILL not very comfortable with the target.  BA is not going to be paying a dividend so we don't actually NEED to own the stock, however.  That means I can show you a nice options trick to fix the trade:

  • Cash out 200 shares of BA at $150 ($30,000)
  • Sell 10 BA June 2022 $100 puts at $28 ($28,000) 
  • Buy 20 BA June 2022 $100 calls for $82.50 ($165,000) 
  • Sell 20 BA June 2022 $150 calls for $59 ($118,000) 
  • Sell 5 BA July $200 calls for $15 ($7,500) 

That transaction nets you an $18,500 credit on the $100,000 spread.  You started with $70,000 so your new net is $51,500 so you can still almost double up (+$48,500) your net if BA manages to be over $150 into Jan 2022.  The net margin on the short puts, since they are 33% out of the money, is just $3,686.70 but you are OBLIGATED to buy 1,000 shares of BA for $100 per share ($100,000) – that is what you were paid $28,000 to promise when you sold 10 short puts.

That would put us in 1,000 shares of BA for net $151,500 or $151.50/share so, if you don't REALLY want to own 1,000 shares of BA for $151,500 – don't obligate yourself with the short puts but, since we already have 200 shares we paid $70,000 for – it seems like a worthwhile trade-off to me!  

This is what we call an Artificial Buy/Write where, rather than continuing to own the stock, we set up an in-the-money bull call spread to simuluate ownership.  We limit both our downside ($51,500) and our upside ($48,500) though we can sell more short calls along the way (1/4 cover 33% out of the money is not very risky).   Amazingly, we are able to make a profit even if BA never goes back above $150 and our break-even is about $126 – not bad for a stock you entered at $350 and dropped over 60% on you, right?

Another way to reset your position is to simply sell those short puts.  Let's take Macy's (M), for example.  That retailer fell from $16 to $5, down almost 70% but we still like them (they are laying off all their workers today) so if, for example, we had 1,000 shares at $16 ($16,000) and they are down to $5.37 ($5,370).  Rather than doubling down, which would give us 2,000 shares at $10.685 ($21,370), we could replace them by selling 40 of the 2022 $8 puts for $4.25 and that puts $17,000 in our pocket plus the $5,370 we cash out is $22,370 so now we're into M for a net $6,370 credit and, if assigned 4,000 shares at $8 ($32,000) our net entry would be $25,630 or $6.40 per share.

So, for about $4,300 more than it would cost us to double down now to 2,000 shares and pray for M to get back to $10.68 (+100%) so we could be even, we now risk owning 4,000 shares but we only have to get to $8 (+50%) to make $6,370 and our break-even is $6.40 despite starting the trade out at $16.  Aren't options FANTASTIC?!?

And don't let people tell you this is complicated – it isn't.  We teach our Members how to trade options every day and they are valuable tools in any trader's tool belt – especially in troubled, volatile times like these.

 


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  1. Good Morning.


  2. would you do a BCS with Macy in this example. I have 700 shares at cost basis of $10


  3. Good morning! 

    Oil (/CL) almost hit $22 so I'm back to 2 long now at about $21 but I'll be back to 4 around $20 as that's been nice and bouncy so far.  

    Indexes are all over the place but flat consolidation is a good thing.  Yesterday's SPY volume was low (171M), lowest since 2/24.  Today is EOQ so anything can happen and it won't mean a thing.

    Trump Says Coronavirus Travel Ban May Extend to More Countries.

    As Rest of World Locks Down, China Struggles to Get Shoppers Out.

    Retailers Furlough 500,000 Despite Stimulus Law, More Expected.

    Kohl’s will furlough about 85,000 employees, Macy’s furloughs majority as retailers cope with significant sales losses.

    Visa Says Consumer Spending Has ‘Sharply Declined,’ Even Online.

    The Fed Transformed: Powell Leads Central Bank Into Uncharted Waters.

    DOJ Investigating Lawmakers for Possible Insider Trading.

    Moody’s cuts outlook on $6.6 trillion US corporate debt pile to ‘negative’.

    Microsoft jumps 7% as cloud services see pickup.

    Rising virus numbers in these states are cause for concern, Harvard official says.

    Fed's Kashkari Goes Full-On God-Complex, Lectures "This Is Not The Time To Worry About Moral Hazard".

    "This Will Be A Tsunami" – America Has A New Problem: How To Give Away $2 Trillion In 2 Weeks.

    Retailers Prepare For Civil Unrest; Boarded-Up Stores Seen From SoHo To Beverly Hills. 

    Mortgage Lenders Demand Fed Bailout… After Blaming Fed For Forcing "Staggering, Unprecedented" Margin Calls.

    Leaked memo from Delta reveals plans to cut worker hours and pay, despite protections in the coronavirus stimulus package. United and other airlines are doing the same.



  4. Need repair suggestions for my PAA also


  5. M/Millard – So you spent $7,000 and now you have $5,300.   There probably won't be a dividend so I guess I'd ditch the stock ($5,300) and sell 10 of the 2022 $8 puts for $4.25 so your worst case there is netting in 1,000 for $3,750.  Now you have $9,550 in your pocket so $2,550 more than you started with which means you either own 1,000 M for $5.45/share or you make $2,550 over $8 – that's a really good fix by itself!

    That means a bull call spread is now just an optional transaction.  The 2022 $3s are $3.30 and the $5s are $2.55 so net less than $1 on the $2 spread is fun and you could, rather than the put play, cash your $5,300 and buy 30 of those spreads for $2,400 and sell 10 2022 $5 puts for $2 ($2,000) and that's net $400 on the $6,000 spread and you have another $2,000 in so net $2,400 that way and, if assigned 1,000 at 5, you are back to $7.40 net so you end up with 300 more shares for +$400 – not terrible either.

    PAA/Millard – Well I have no idea what that is but I'd say do the same kind of thing.

    Big Chart – Just waiting and seeing.  End of month/Q is not very informative.  


  6. So can those money talk, and dividend portfolio positions be improved without additional cash outlay?


  7. Yes, they can but it also makes sense to increase the cash commitment while things are cheap.  Goes back to the "investing" vs "trading" concept.  


  8. Phil (or anyone),
    I know it's been discussed many times over the years but I need a refresher.
    How do you place your trades to get your prices ? Long, short or put first ?
    How long do you wait for the trades to fill before resetting to a new strike or price ?
    If a strike price is getting away from you, how do you redo the trade ? Stick to the
    strike price or change strike to get the price you expected ?

    Thanks


  9. People are dying – WTF


  10. Phil/AAPL

    TD blocked me when I tried to roll my 30 ’22 AAPL 270 calls to $240s at $7, then were unavailable by phone to fix it ..  Is it still worth trying to do this at around $14/15? Is there a better move?

     

    10 AAPL June’21 $200 calls  @ $29

    15 AAPL Jan ’22  $240calls   @ $53.5

    30 AAPL  Jan’22  $270 calls  @ $60.6

    - 35 Jun’21 $320 calls  @ $44

    - 20 Jan’22 $350 calls  @ $36.2

    THX


  11. I am not confident all of them are still good investments but otherwise I agree


  12. I have 100 of the SQQQ 6/2020 22/29 BCS at $1.25.  Would you roll that down now?  Can roll to the 18/25 for about $ .5.


  13. Phil// Couple of questions on my trade

    M sold 10 naked 2022 $15 puts at 4.3 and now it is at $10.xx.  What is your suggested trade?  I believe this was part of the MTP

    IMAX Sep 202 $15.00 calls bought it at 2.73 and now it is at .50 cents or so.  What is the suggested trade?

    Thanks.


    • The major averages edge lower at the open on the last day of the worst quarter since 2008; S&P 500 -1%, Dow and Nasdaq both -0.6%.
    • Stocks are swimming uphill against continuing headlines on the economic pain from the coronavirus with a flurry of corporate furlough announcements and Goldman looking for a 30%-plus decline in Q2 GDP.
    • "I think the market has established some type of bottom," Tom Lee, head of research at Fundstrat Global Advisors, told CNBC. "If we are rallying on bad news, I think that's a sign that we are probably at a bottom."
    • European markets are mixed, with U.K.'s FTSE +0.7%, Germany's DAX +0.1% and France's CAC -0.1%; in Asia, Japan's Nikkei -0.8% and China's Shanghai Composite +0.1%.
    • U.S. 10-year Treasury yield up 2 bps to 0.69%.
    • U.S. crude oil bounces off yesterday's 18-year lows, +4.3% to $20.96/bbl.

    Consumer confidence takes a big slide

    • March Consumer Confidence120.0 vs. 110.0 consensus; 132.6 prior (revised).
    • Present situation index: 167.7 vs. 169.3 prior.
    • Expectations index: 88.2 vs. 108.1 prior.
    • Consumer confidence declined sharply in March due to a deterioration in the short-term outlook,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
    • March Chicago PMI47.8 vs. 40.0 consensus, 49.0 prior. The survey dates were March 2-March 16.
    • Production and New Orders both declined, though some respondents noted a rise in orders due to stockpiling.
    • Supplier Deliveries rose to the highest since Nov. 2018, with respondents noting continued delays from China.

    • The Federal Reserve establishes a temporary repurchase agreement facility for foreign and international monetary authorities (such as other central banks).
    • The move is intended to support the functioning of financial markets, including the U.S. Treasury market, and as a result keep credit available to U.S. households and businesses.
    • The FIMA Repo Facility will allow FIMA account holders, which consist of central banks and other international monetary authorities with accounts at the Federal Reserve Bank of New York, to enter into repurchase agreements with the U.S. central bank.
    • In these transactions, FIMA account holders temporarily exchange their U.S. Treasury securities held with the Fed for U.S. dollars, which can then be made available to institutions in their jurisdictions.
    • The FIMA Repo Facility, along with the U.S. dollar liquidity swap lines the Fed established with other central banks, should also ease strains in global U.S. dollar funding markets.
    • U.S. lawmakers should "wait and see" whether a fourth legislative package is needed in response to the coronavirus pandemic and its economic fallout, U.S. Senate Majority Leader Mitch McConnell said.
    • They need to see how the Covid-19 crisis unfolds before taking further action, he said.
    • Speaking on the syndicated Hugh Hewitt radio program, McConnell also said the concept of pandemic-related U.S. Treasury bonds was interesting.
    • New York attorney general Letitia James is looking into the privacy practices of Zoom Video (NASDAQ:ZM), according to The New York Times.
    • James' office sent Zoom a letter asking about any new security measures implemented to handle the increased traffic and to detect hackers.
    • The note lists several concerns, including Zoom's slow response to security vulnerabilities "that could enable malicious third parties to, among other things, gain surreptitious access to consumer webcams."
    • Zoom says it takes user privacy seriously and that it appreciates "the New York attorney general’s engagement on these issues and are happy to provide her with the requested information."
    • Zoom shares are down 2.4% pre-market to $147.20.
    • January S&P Corelogic Case-Shiller HPI:
    • HPI Composite – 20 (S.A.): +0.3% M/M vs. +0.4% consensus, +0.4% prior (unrevised).
    • HPI Composite – 20 (N.S.A.): +0.0% M/M vs. +0.0% prior.
    • HPI Composite – 20 (N.S.A.): +3.1% Y/Y (N.S.A) vs. +3.2% consensus, +2.8% prior (revised).
    • Speaker of the House Nancy Pelosi says she sees the U.S. moving toward voting by mail in the November election due to the pandemic.
    • Pelosi would like to see additional funding for the Postal Service to accommodate the plan.
    • The stance could be supported by public health officials with widespread dissemination of a vaccine not expected by fall, while President Trump earlier this week expressed opposition to states making changes to the early voting period.
    • Congress has already approved an additional $400M to states for help managing the election during a pandemic.

    • Tracking the timeline of Goldman's Q2 GDP predictions through March… On March 15, Jan Hatzius and team expected a 5% (annualized) contraction, and on March 20, a 24% contraction.
    • Today, Hatzius is predicting GDP will plunge by more than one-third in Q2. The unemployment rate is seen spiking to 15% by mid-year.
    • A big bounce is seen in H2, with Q3 GDP growth of 19%, and Hatzius expecting more than half of Q2's losses to be made up by year-end.
    • Spirit Airlines (NYSE:SAVE) will cancel all flights to and from New York, Connecticut and New Jersey due to the public warnings of the COVID-19 pandemic.
    • Spirit says it will suspend service to the airports it serves in the region (New York LaGuardia, Newark, Hartford, Niagara Falls and Plattsburgh) through at least May 4.
    • The temporary suspension is expected to go into effect in the next few days.
    • Shares of SAVE are up 2.77% premarket to $12.77.
    • Ford (NYSE:F) pushes back the expected restart dates for production at its North America plants.
    • The company had been aiming to restart production April 6 at the Hermosillo Assembly Plant and April 14 at several key U.S. plants.
    • The automaker says the actual startup dates will be announced at a later date.
    • Previously: Ford and GE to partner on ventilator production (March 30)
    • Cowen expects it to be a long time before airline demand returns to normal levels.
    • "We continue to believe that pricing recovery will lag the volume recovery by at least a year. Once people feel safe to travel again, we believe they will start to book travel, and then once airlines notice the increase in bookings, we believe that they will start to discount to attract leisure travelers," advises analyst Helane Becker.
    • "We believe business traffic may start to come back sooner, but we do not believe business traffic will fully recover to 2019 levels," she adds.
    • Chimera Investment (NYSE:CIMestimates its GAAP book value per share was $12.25-$12.75 at March 27, 2020.
    • That's 78%-85% higher than its share price of $6.88 at the close of business on the same day.
    • Additionally, Chimera sponsored two residential mortgage loan securitizations during the month of March.
    • CIM 2020-R1 is a $390.7M non-rated securitization of re-performing residential mortgage loans, which closed on March 10, 2020, and CIM 2020-R2 is a $492.3M rated securitization of re-performing residential mortgage loans, which closed on March 24, 2020.
    • Carnival (NYSE:CCL) discloses a new $1.25B share offering through BofA Securities, Goldman Sachs and JPMorgan.
    • The cruise line operator also commenced private offerings to eligible purchasers of $3B of first-priority senior secured notes due in 2023 and $1.75B of senior convertible notes due in 2023.
    • Management's update: "We are taking further actions to improve our liquidity, including capital expenditure and operating expense reductions, suspending dividend payments on, and the repurchase of, Carnival stock and pursuing additional financing… Based on these actions and assumptions regarding the impact of COVID-19, we have concluded that we will be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months prior to giving effect to any additional financing, which may occur."
    • Shares of Carnival are up 3.98% premarket to $13.31.
    • BuzzFeed is calling the coronavirus pandemic a "media extinction event," while a headline entitled "The Coronavirus Is Killing Local News" was featured in the Atlantic last week.
    • Now, Gannett (NYSE:GCI), the largest U.S. newspaper publisher and owner of papers such as USA Today and the Des Moines Registersays it's making unspecified furloughs and pay cuts for its staff.
    • "Our plan is to minimize long-term damage to the business by implementing a combination of furloughs and pay reductions," declared CEO Paul Bascobert.
    • The coronavirus economic freeze could cost 47M jobs and send the unemployment rate past 32%, according to the latest projections from the St. Louis Fed.
    • They reflect the high nature of at-risk jobs that ultimately could be lost to a government-induced economic freeze aimed at halting the spread of COVID-19.
    • A record 3.3M Americans filed initial jobless claims for the week ended March 21 and economists expect another 2.65M or more to join them this week.
    • Gun sales have picked up during the coronavirus pandemic, with long lines seen at stores nationwide.
    • Though advisory in nature, the federal government has now classified the industry as an "essential business" that shouldn’t be closed during shutdowns.
    • New Jersey reversed course because of the new guidance, while Pennsylvania's governor is allowing gun stores to operate with new social-distancing rules even after the state Supreme Court backed his initial decision to close them down.
    • Moody's Investors Service has lowered its outlook on U.S. corporate debt from stable to negative, saying that a coronavirus recession will result in rising default rates.
    • "Government support will cushion the blow for some companies, but it is unlikely to prevent distress at businesses with less certain long-term viability," wrote Senior Credit Officer Edmond DeForest.
    • The situation is especially troubling as non-financial corporate debt totaled $6.6T at the end of 2019, a 78% increase since the Great Recession ended in mid-2009.
    • China's official manufacturing PMI bounced to 52.0 in March, up from a record-low 35.7 in February, signaling a revival in activity even as much of the rest of the world is shut down.
    • "This does not mean that output is now back to its pre-virus trend. Instead, it simply suggests that economic activity improved modestly relative to February's dismal showing, but remains well below pre-virus levels," said Julian Evans-Pritchard, senior China economist at Capital Economics.
    • Economists are already forecasting a steep contraction in China's Q1 GDP, with some expecting a Y/Y slump of 9% or more, marking the first such contraction in three decades.
    • Shanghai +0.1% to 2,750.
    • Domino's Pizza (NYSE:DPZ) reports 1Q20 prelim U.S. company-owned same-store sales growth of 3.9%, U.S. franchise stores growth of 1.5%, U.S. stores growth of 1.6% and International stores excl. forex growth of 1.5%.
    • Total global retail sales growth (incl. forex impact) of +4.4%, U.S. stores +4.9%, International stores +3.9%.
    • The Company borrowed the remaining availability of $158M to end 1Q20 with more than $300M in cash on hand to enhance financial flexibility.
    • Withdraws financial guidance.
    • Shares -4.8%.
    • Press Release

  14. Italy peaking nicely! Let's go Italy, we love you! 

    WA State hospital admissions DOWN 20%!

    Helicopter money winning, QQQ to 210 short-term??


  15. Phil, you read my mind, I was writing to you about my position of  5 write Jan21 $350 puts where I´m losing the shirt. and 3 write  BA Jan 21 $300 puts.


  16. Time to play first world country or not.


  17. Trades/Gard – It depends on the stock.  How about give me a couple of names you are looking at?

    Look at DPZ in the news above.   They have good news for Q1 despite the virus but they pulled guidance (because who the F knows what Q2 will be like?) and the stock fell 5% because pulling guidance is pre-programmed into machines at bad and 5% is a normal computer sell-off. 

    I would not want to buy DPZ here because it's not very cheap but, If I were looking at it, I'd feel the sell-off is silly so I want to first sell puts (as they are getting more expensive on the sharp move down) and the 2022 $220 puts are $25 so that's a nice start so I sell 5 for $12,500 and if I'm selling 5 I should be THRILLED to roll down to 10 at a lower strike for the same money or better (the $170 puts are $13 at the moment).  So, If I'm not willing to own 1,000 shares of DPZ at net $160ish, I have no business selling 5 $220 puts for $25!  

    So, DPZ is heading down so my next move would be to buy my long call while it's cheap.  I know I plan to sell the $325 calls because we're at $325 and they carry the most premium (but I'll look up and down a few strikes to see if anything is better) and the 2022 $320s are $65 and the $310s are $71 and the $330s are $61 and I'm collecting $25 for the short puts but let's say $12.50 per long if I buy 10 longs so I can afford to take a long maybe $25 more than my short calls so if I sell the $320s for $65, then I can buy whatever is $90 and that's the $280 calls at $87.50.  So now I grab 10 $280 calls for $87.50 ($87,500) and I sell my 5 $220 puts for $12,500 and now I spent net $75,000 and I ask for $65 on the $330s and hopefully they fill on the bounce but I won't let the $320s fall below $60, in which case I'd be in for net $15,000 on the $40,000 $280/320 spread with the short puts but, hopefully, I'll be in for $10,000 on the $50,000 $280/330 spread.  

    See – simple!  

    Trump/StJ – What a nutball!   101,000 comments – I wonder what percentage are negative?

    AAPL/Wing – It's always worth rolling down if you can do it for 50% or less of what you are picking up.  AAPL is at $260 and the 2022 $270s are $40 and the $240s are $54.50 it seems ($53.60/55.95, last $53).   You would go $20 in the money for $14.50 and your upside delta would go from 0.57 to $0.64 but, most importantly, the $240s have $14.50 of premium that WILL burn off in two years while the $270s have $40 of premium that WILL burn off in two years so, on a time decay basis, the $270s cost you $25.50 more to own.  Why would you want to do that?  You are literally spending $25.50 NOT to spend $14.50 to make the roll to a better position.  

    Dividends/Tangled – Well anyone who accepts a bailout can't pay dividends.  F already cut them and we'll see about the others.  

    Dividend Portfolio up to date (including all dividend pay-outs):

    You could make the argument for fixing Ford as they won't be paying a dividend anymore but they are cheap enough that I don't see the point in using calls instead of the stock for now.  $7 is a realistic target and we're mostly covered at $5 anyway and we're in the position for net $10,170 on 3,000 shares so, if called away at $7 ($7,000) + $5 ($10,000), that's $17,000 so almost $7,000 in profit potential and it's net $8,205 now so $8,785 (107%) potential gain.  The only question there is – do we have a better idea for $8,205 than to make 107% if F can get back to $7 in two years? 

    I don't see F going Bankrupt and F bottomed out at $1.58 in 2008/9 so you'd better have the balls to buy a lot more at $1.50 or you shouldn't be playing but would you with this chart?

     It would have been a damned shame if you had doubled down at $5 and refused to buy more at $1.50 because of this terrible looking chart because here's what happened next:

    We don't know WHEN or even IF a stock is going to turn around but when we are presented with the opportunity to buy blue chip stocks like Ford that have survived 2 World Wars, the Great Depression as well as a dozen other recessions yet, somehow, people still buy cars after the crisis.  Maybe this time will be different but – if it's not – I'd like to be there please.  

    Investing is not safe and investing is not pretty but, if you aren't going to be in it to take advantage of decade(s) lows in solid Fortune 500 companies – what is the point of pretending to be an investor?  

    5 Great Buffett Blue Chips | Seeking Alpha

    Like Buffett says, YOU have to pick a price that YOU are happy to pay and then you have to IGNORE the idiotic opinions of other people.  If your premise turns out to be wrong and the numbers aren't what you thought they were – of course change your mind but don't change your mind because some guy who's no smarter than you said something and don't change your mind because you think you see a chart "pattern" – that is the dumbest reason of them all!  

    This inspirational quote was not said by Bruce Lee or Warren ...

    A chart pattern is just the average of what average idiots are trading – try to be above average…

    Warren Buffett Memes - Imgflip

    SQQQ/Nom – Is it a hedge or a bet?  SQQQ is at $18.50 so a 20% drop in the Nasdaq would pop it 60% to $29.60, which is still the top of your range, so it's still an effective hedge.  The June $22s are 3.80, way more than you paid for the spread so there's no particular danger that's forcing you to get out.  If you have the margin for it, I'd cash the June $22s ($38,000) and pick up the Jan $15 ($7)/$35 ($4.50) bull call spreads for $2.50 ($25,000) and the short June $29s are $3 ($30,000) so you could buy back 1/2 now ($15,000), spending $2,000 out of pocket and then you have the deeper, wider, longer (don't Google that!) spread 1/2 covered by the rollable short June $29s and you could put a stop on 20 more at $5 ($10,000) to keep out of big trouble if SQQQ pops again but then you'd have $200,000 of long-term protection that's $34,000 in the money for your $14,500 investment so no worries paying out $10,000 if it pops, right?

    M/Rookie – I'd say $10.25 for the 2022 $15 puts.  The $10 puts are $5.90 and the $8 puts I think are a realistic target at $4 so I'd just go for 25 of those for $10,000.  You collected $4,300 and obligated yourself to 1,000 shares at net $5.70 ($5,700) and now you would be in 2,500 shares for $8 ($20,000) less the same $4,300 is $15,700 or $5.23, which is about the current price.  You could cut it in half by just rolling the loss and then your obligation would be about the same as you had before but at a lower strike and the best you could do is break even.

    IMAX/Rookie – You bought naked calls?  I hope not!    The Dec $5s should be less than $6 and the Dec $10s are $2.50 so net $3.50 is not bad for that spread and you can sell 1/2 the $7 puts for $2.10 to knock the net down to $2.45 so 100% return on your net cash outlay at $10+ seems realistic to me.

    Winning/BDC – It would be lovely if it all goes away that easily but, if so, then we have to consider that there's a small percentage of the population that is susceptible to the virus but most people either don't get it or get such mild cases they think it's a normal flu.  Kind of like a virus allergy for some.

    BA/Advill – Just make sure you REALLY want to own BA if things get worse.  LMT at $341 or something else can be substituted.  The LMT 2022 $250 puts are $30 and they topped out at $46 on that spike down but the VIX was 70 then so it's not likely to come back and LMT doesn't have the kind of side issues BA has.  

    1st World/BDC – Why we used to dream about lovely white lines for our sleeping gravel!  


  18. Phil / BA

    They have 2 main concerns now, one is the market and the airlines situation, the other is the recertification of the Max, for government is very easy to liberate the FAA license, it has no cost and is quick, so I assume they will be delivering planes in June and that will be a big help.

    The airline's scenario is more complex because there will be the wild west in BKs, M&A and governments help for flag airlines.

    On the other hand, I don´t understand why the put was not assigned at $95, it was in the money for $250 but "they" keep it running so now I´m $70 up, still I could try not to lose more.

    My problem is guessing a price level on Jan 21, for the repair of my trade or take my losses

    I believe you are in the $175 range for the next 15 months right?


  19. It will be interesting to see what happens in a world without buybacks. I really think that has been a consistent source of inflows for equities, P/E's are bound to drop by that alone plus there will be very little earnings for a while. Maybe the Fed will replace demand. 


  20. Trades/Phil,
    what about your BA trade listed in the morning post ?
    None of the prices you listed for you trade setup is there right now. Close but not quite.
    What do you try to fill first ? Yodi once said "short call" first. Place all 3 (excluding the July short call ) and wait to see ? Would it be dependent on BA going up or down at the moment.
    I usually end up settling for lesser prices to get trades to fill since
    I can never get the prices you list in your trades. I'm still happy with the trades
    but I think they could have been better.


  21. Phil / CLF – i think the spread with a '22 5 call is naked at the moment.  When are you looking to cover?

     I have some naked '22 $5 calls (@ 2.4) as well and was looking to cover at 4 put the '22 $10 Calls but not real worth it at the moment.







  22. The Bug/all – "A Pandemic Expert Tells Us Why She Was So Wrong About Coronavirus". Yeah, I'm right there with her. I underestimated the degree of incompetence and the degree to which essential public health services had been stripped. Like her, I thought the US response would not be up to a competent Korea-level response, but this mess? Just, wow!


  23. COVID 19

    For want of a few tests, an economy was lost

    for want of a few masks, an economy was lost

    For want of a few tests and masks, a few lives were lost (who cares? In a 'flat earth' government)

    For want of a few masks and tests, millions of jobs were lost (who cares? in a 'denial' government)

    For loss of 'a few' jobs and an few' lives, no heads will roll. A 'beautiful' government will go on!

    Now folks, sing along with me again…..For want of….

    Sorry Phil for the above, but being a Physician, it just bugs me at a deep level


  24. BA/Advill – But delivering planes to who?  Will the airlines survive and, if some don't, then there will be a fire sale on their planes and that could depress the market for new ones too.  The puts don't get assigned if the person who bought it from you doesn't REALLY want to let go of their stock that cheaply – it cuts both ways….

    $175 is about right, I'm very concerned about bankruptcies flooding the market with used planes.

    Buybacks/Randers – Been about 25% of net inflows.  Another reason I don't see the market recovering to the old highs.  

    BA/Gard – That was an example based on yesterday's closing prices.  BA is flat but the VIX is down 5% so it's to your advantage to buy premium if you think the VIX will come back – but I'm not sure it will.  You have to put in limit orders and see what fills so, in the BA example:

    • Cash out 200 shares of BA at $150 ($30,000)

    The stock is at $152.50 so mission accomplished.

    • Sell 10 BA June 2022 $100 puts at $28 ($28,000) 

    The last sale on the puts was $26.70, the bid is $25 and the ask is $27.50.  I'd ask for $27.50 and wouldn't even do anything else until/unless I get a fill on those.  As a trade by itself, I am willing to buy 1,000 shares of BA for net $72 – so just executing this leg would not be an issue.  

    • Buy 20 BA June 2022 $100 calls for $82.50 ($165,000) 

    The $100 calls are now $78.50/82.90 and the last was $85.24 at 10am so you need to fire your broker if you couldn't fill $82.50.

    • Sell 20 BA June 2022 $150 calls for $59 ($118,000) 

    $54.10/58.40 and the last was $62. also at 10am for net $20 on the spread – miles better than we hoped.  It doesn't matter what you get for each leg as long as the net of the spread is where you wanted it.

    • Sell 5 BA July $200 calls for $15 ($7,500) 

    Those are now $11.30/11.80 but sold for over $15 this morning.

    So it's the dropping VIX that's killing the spread, not BA, which is flat and opened higher.  Had you bid out each individual leg at the open, there should not have been any problem filling the spreads but you have to learn to be patient if you don't get a fill and stick to your guns.  Priced jerk up and down constantly – just try not to end up bearish on a stock you are bullish for. 

    TSLA having a fun day:

    CLF/Batman – Well I hate to guess but are you saying you HAVE 2022 $5 calls you bought for $2.40?  I'm confused by the "I think the spread" comment above it? So, when to sell the $10s?  Certainly not for 0.50, what good does that do?  The $5s are now $1.40 so down $1 and you can sell the $3 puts for $1.20 and spend 0.60 to roll to the $3s at $2 and then sell the $5s to some other sucker for $1.40 and let's say you sell 1/2 the puts and you have 100 at $24,000 and you collect $6,000 on the short puts, spend that to roll to the $3s and collect $14,000 for the short $5s, that leaves you in the $20,000 $3/5 spread with 50 short $3 puts ($15,000 if assigned) for net $10,000 – not a bad fix if you are losing faith in CLF coming back in 21 months.  

    Actually though, for $3.97, you can just buy the stock and sell the $3 calls for $2 and that's net $2 with a 50% upside at $3 – that's not bad either and no short puts or anything required.  

    As I was saying above, there are so many opportunities to get into positions at RIDICULOUSLY low prices and it will all seem very obvious in 6 months or a year – just like everyone now says "I wish I had the chance to buy AAPL for $75" ($7.10 post--split) yet I banged the table on that one for 3-4 months in the last downturn and most people wouldn't budge.  

    AAPL/Tlsvet – I mean hyena attack here making the India situation seem like  a much bigger deal than it is.  All the good take-downs are based on taking something with a grain of truth (Seve Jobs health, GOOG click-throughs) and blowing it out of proportion to tank a stock.  It’s not about being emotionally attached, when you see a stock being driven back to it’s lows and a slew of negative articles start popping up, it’s a simple diagnosis of what’s happening and recognizing it is an opportunity to make a bottom call.  Like I said, I’m not going to sit here and argue with people like I did last time Apple got sold off – same with gold – to me the merits are self-evident so you can disagree if you want but they are on the top of my list. 

    Submitted on 2008/11/21 at 1:07 pm

    AAPL/RMM – I just heard a thing about record mac sales and AAPL does not discount yet their supply costs (semis, GLW) have been coming down all year and they are now trading below where they were when they introduced the IPhone so you are buying AAPL at 2006 prices and they are throwing in the IPhone revenues for free when the company has never once missed a quarter since Jobs came back.  They could still go lower, of course so it depends on your goal but, in this case, $6.85 is not enough payment for me to risk selling them Dec $85 calls.  Maybe a 1/2 sale of the $85s as you can roll them up to 2x the $95s even or add $80s if things go south…  Of course you could take $9 for the $80s and spend $11 to roll to the Apr $80s if you intend to stick with them and those can be rolled to Jan $90s for another $1 if AAPL takes off but you’ll be in strictly to sell premiums with little upside from a rally.


  25. Feel free to vent Maya, Snow – it's a F'ing mess!   I've been venting for 3 years and it hasn't helped much – this is the kind of thing I was worried would happen under Trump – could have been any kind of crisis and it would have been the same outcome:  Deny, cover up, shift blame, fail to address the problem, attempt to profit from the crisis…  How would anyone paying attention think it would have played out differently with this team in charge?  

    Elections matter!  


  26. As a life long Republican, I can honestly say, I hope these rumors of a brokered DNC convention are true and put Andrew Cuomo on the ticket.  I would vote for him in a heartbeat. 


  27. I doubt it Dano.  Biden is clearly the chosen candidate – it's not close enough to call for a brokered convention.  Bloomberg is pushing for it as it gives him a chance but we'll see who's still alive in a few months will be the more important issue (Cuomo's brother got the virus).  They must be keeping Biden in one of those plastic bubbles at the moment…

    I suppose the Republicans want a brokered convention too as that's how Humphrey got chosen to face Nixon in 1968 – which was a complete disaster for the Dems.   All the people in all the states who voted for Biden feel betrayed and that the Dem Party is shoving someone at them they neither know or want – that's idiotic!  

    Hubert H. Humphrey, left, and his running mate, Sen. Edmund S. Muskie, stand before Democratic National Convention delegates with hands clasped on Aug. 29, 1968.  (AP Photo)

    “Hubert Humphrey is a treacherous, gutless old ward-heeler who should be put in a goddamn bottle and sent out with the Japanese current.”  ? Hunter S. Thompson


  28. Interesting covid-19 site: https://covid19.healthdata.org/projections


  29. NYC is getting fenced off from the rest of the World:

    • JetBlue (JBLU +2.7%) is reducing flights out of its home base of the New York City metro area by 80% to only 40 a day, according to CNBC.
    • The airline is also limiting the number of passengers on flights.
    • The schedule move follows guidance from the CDC asking residents of New York, New Jersey and Connecticut to refrain from non-essential domestic travel for 14 days.
    • "I’m tired of being behind this virus," says NY Governor Andrew Cuomo at this morning's press conference (his brother has now tested positive). "It’s more powerful, it’s more dangerous than we expected."
    • His comments come as cases in his state rose 14% from a day ago to just shy of 76K. Nearly 11K have been hospitalized, including 2.7K in ICUs. Cuomo doesn't expect a peak in cases for another 2-3 weeks.
    • Meanwhile COVID-19 task force member Anthony Fauci is seeing some green shoots, noting a slowing in the rate of new hospitalizations in New York.
    • PayPal and Marvell Technology are among the latest companies to promise no layoffs, though furloughs in the retail sector are becoming the norm.

    • Analysts think expectations were running too high on Domino's Pizza (DPZ -6.8%) with the chain running into a period of sporting event cancellations, university closings and other disruptions tied to the pandemic. Even with today's share price drop, they note DPZ is the top performing restaurant sector stock of the year. The sell-side community is cautious on DPZ due to valuation, but see the chain continuing to lap its peers.
    • UBS: "We expect significant industry headwinds will persist in 2Q, but anticipate delivery should remain a favored channel & pantry loading could potentially ease in coming weeks/months. While the majority of US stores (and all SC centers) remain open, ~1,400 stores (~13% of int'l) are temporarily closed across 37 int'l markets, which should continue to pressure sss (1.5% 1Q int'l comp, -0.2% March)."
    • MKM Partners: "Given their ongoing business model represents the way all restaurants are forced to operate domestically, with delivery and pick-up only, it is possible the Street had expected more lofty results."
    • Cowen: "We are positively biased on Domino's long-term story given the company is the market leader and best in class pizza franchisor with ~3-year cash paybacks and 70% digital sales mix that leads to sophisticated data collection and proficient data analytics. However, relative outperformance post better than expected 4Q19 results and COVID-19 related headwinds lead us to believe shares require time to grow into the multiple. While bullish investors may label Domino's as attractive on a total return basis given projected ~15% EPS growth over the medium term, we point to a near peak valuation that may be difficult to sustain."
    • Amazon (AMZN +0.6%) is being pulled in multiple directions at once amid the coronavirus outbreak, according to a Wall Street Journal article that relies on interviews with employees.
    • While the company is processing up to 40% more packages than normal, drawing praise from President Trump and on a hiring spree – the strain is showing in shortages, delays and worker unrest.
    • On the labor front, Amazon has faced employee walkouts, no-shows and even a minor strike by some Whole Foods workers. Yet, despite those headaches for the retail business, Amazon Web Services and the Amazon Prime business are both benefiting from the stay-at-home orders across the U.S.
    • Shares of Amazon are up 3.50% over the last four weeks vs. the 1.00% drop for the S&P 500 Index.
    • Trading in shares of Caesars Entertainment (CZR +11.1%) was halted for volatility after CNBC reported that the merger with Eldorado Resorts (ERI +12.8%) will close in June.
    • There has been some speculation that the massive disruption in the casino sector due to the pandemic would slow down the regulatory review of the deal.
    • The energy sector (XLE +4.0%) takes an unaccustomed spot at the top of the S&P sector leaderboard, as U.S. oil futures firm with Pres. Trump and Russia's Pres. Putin agreeing to talks aimed at stabilizing energy markets.
    • May WTI crude +2% to $20.50/bbl; Brent +0.2% at $22.81/bbl.
    • Trump called Putin and the two had a lengthy and "constructive" conversation, agreeing that their energy ministers should begin consultations, according to a Kremlin spokesperson, although it is not clear when any talks might begin.
    • The top four stocks on the S&P 500 are oil producers: NBL +16.1%XEC +14.9%FANG +14.7%DVN +14.2%.
    • Big Oils names are broadly higher: XOM +3.7%CVX +3.1%RDS.A +5.4%BP +5.4%.
    • Other notable gainers include COP +7.3%MRO +7.5%HES +6.7%KMI +5.7%.
    • Wedbush analyst James Hardiman says the liquidity moves pulled off by Carnival (CCL +10.3%) will give it at least $6B of incremental liquidity.
    • "When coupled with the $500M of cash on the balance sheet coming out of 2019 and the $3B of revolver capacity which was drawn down in its entirety earlier this month, we arrive at ~$9.5B of total liquidity available to CCL," he notes.
    • On the other side of the ledger, the company has debt principal payments of $2.2B due within the next year and an estimated monthly cash burn of approximately $500M.
    • "We believe that the moves made this morning are not only a positive for CCL, but generally bode well for RCL and especially NCLH," writes Hardiman.
    • Royal Caribbean (RCL +10.1%) and Norwegian Cruise Line Holdings (NCLH +10.2%) are both following Carnival higher today.
    • Apple (AAPL +2.2%) previously announced it would continue paying hourly employees who work directly for the company during the coronavirus-related lockdowns, but was vague about whether that included hourly contractors.
    • Yesterday, the tech giant said it would pay the contractors, ending a period of uncertainty for janitors, drivers, and other independent workers.
    • In other Apple news, the company has finalized its $200M investment into Japan Display.
    • The money is going towards equipment that Japan Display will use rather than a straight infusion.
    • As of last year, Japan Display owed Apple more than $800M from the cost of building the smartphone display plant.
    • Distilled spirits sales soared 24.9% over a four-week tracking period that ended March 21, per Nielsen data. Bourbon sales were up 34.1% for the period and gin sales jumped 30.1%.
    • "The data clearly reflects March pantry loading ahead of an escalation in social distancing measures as all spirits types were up strong DD," notes Cowen analyst Vivien Azer.
    • Sales growth by manufacturer: Diageo (NYSE:DEO) +19.5%, Beam Suntory (OTCPK:STBFY) +21.7%, Pernod Ricard (OTCPK:PDRDF) +22.7%, Sazerac +22.7%, Brown-Forman (BF.ABF.B) +28.9% Constellation Brands (NYSE:STZ) +19.5%.
    • Previously: Beer sales pop on pantry-loading trend (March 31)
    • Cheniere Energy (LNG +2.2%) has tendered to buy six shipments for delivery to Europe later this year, a rare step for a company which is fundamentally a seller of the fuel, Bloomberg reports.
    • The company could be testing the size of the current glut as it considers production cuts, or even seeking cargoes for its customers that could be cheaper than producing and shipping its own from the U.S. Gulf Coast, according to the report.
    • Cheniere "may be trying to figure out how long the market really is and to make a judgment on whether they should shut down some production," Jason Feer, global head of business intelligence at Poten & Partners, tells Bloomberg. "It does does not mean that they will award the tender or buy the cargoes."
    • With the coronavirus expected to exacerbate the seasonal lull for gas around the world, it is reasonable to expect customers will not lift some cargoes while still paying tolling fees under their contracts, Anatol Feygin, Cheniere's chief commercial officer, has said.

  30. Phil / CLF – I thought in the LT port you had doubled up on long $5 calls in on CLF and left them naked ( think sold some 5 Putters as well.  Or did I miss something on this?


  31. Trades/Phil,
    thank you for laying out the trade in detail.


  32. Phil / CLF – it was the butterfly port – but I t may been otters as well   — 

     

                                          CLF – Let's DD on the 2022 $5 calls at $1.65.


  33. CLF/Batman – It was the Earnings Portfolio.  On 3/5 we did this:

    CLF – Let's DD on the 2022 $5 calls at $1.65.

    That took us to 40 2022 $5 calls at 2.95+1.65/2 = $2.30 and we had sold 20 $10 calls for $1.30 and 10 $7 puts for $2.35.

    Then last week, we did this:

    CLF – These I love and I'm fine with the $7 target so let's buy back the short calls and roll our $5 calls at $1 to the $3 calls at $1.75 and add 10 more to make 50 long and see what happens

    So I'm pretty consistent in these things…

    No problem Gard.  


  34. And Batman, that move, of course, takes into account the size and buying power of the portfolio – it's the best move we could AFFORD to do at the time – given that we had other positions to take care of and did not want to over-commit.

    Fixing a portfolio requires a bit of triage.  


  35. Downward spike into the close but still over 2,500 on /ES.  


  36. Dano – Andrew Cuomo explicitly stated when asked by Chris that he is not running for president; it sounded to me like NOT EVER and I think this was yesterday


  37. Pres replacement – he's certainly looking better at his daily conferences than some other pols, but didn't he close a bunch of hospitals, made them condos or something, not that long ago?


  38. Phil -I have spent the last few weeks trying to rescue many of my overly aggressive positions.

    I offer my sincere apologies to anyone who followed me into any of those positions.  I am deeply sorry for the damage I may have caused others.  Thank you and BDC for your continuing advice.  I also lost big on M and bit the bullet. As you know they are priced for bankruptcy and are furloughing almost all of their employees and have seen a lot of insider selling.  

    Thank you.



  39. Asian shares skid on virus worries, bleak BOJ survey




  40. Phil//  I would like to know what are the plans for the below trade on IMAX (sorry I didn't give you the full picture yesterday when I asked about IMAX)

    Our 2nd new position for the MTP is one I am thrilled with and that's Imax (IMAX), who have been clobbered on the China shut-down and New Years is their big time of year but, as a long-term investment, this too shall pass and it's incredible that we get to jump into this stock this cheaply so our trade idea will be:

    Sell 10 IMAX Sept $18 puts at $2.50 ($2,500)

    Buy 20 IMAX Sept $15 calls at $3 ($6,000)

    Sell 20 IMAX Sept $20 calls at $1 ($2,000)

    I believe you had asked us to buyback the short $20 calls

    Thanks.