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Testy Tuesday – S&P 3,135 Yet Again

"Baby here we stand again

Where we've been so many times before

Even though you looked so sure

As I was watching you walking out my door

But you always walk back in like you did today

Acting like you never even went away

Well I don't know if I can

Open up and let you in baby

Here come those tears

Here come those tears again"Jackson Browne 

That's right it's Tuesday so the S&P must be testing the 10% line and last Tuesday we failed but the Tuesday before that we popped over so it's a real coin flip this morning.

Things are looking good so far because those 30M unemployed people are still getting their $600 WEEKLY bonus checks ($18Bn/week, $72Bn/month) and those will last until July 31st and that has kept the economy from totally collapsing and has kept Consumer Spending at reasonable levels at the Bottom 25% of wage earners are now outspending the Top 25% relative to where they were before the crisis.  

Pumping an annualized $864Bn into bonus checks for the Unemployed is 5% of the GDP we're adding and that's making all those economic numbers look much better than they are, not to mention the base $15Bn a week of regular unemployment benerfits that are being handed out – that's another annualized $780Bn (4% of GDP).

Then we add in the $1,200 stimulus checks for 170M tax filers ($204Bn) and $500 for 50M dependents ($25Bn) and that's another $229Bn in Q2 is an annualized $916Bn (5% of GDP) so this economic bounce is here because we spent an annualized $2.56Tn to get here – that's money that Donald Trump borrowed on your behalf so he can get re-elected in November.  Great!

But the money is about to run out and apparently investors believe that Congress will quickly apporove another round of stimulus right away – before they go on their "break" on July 3rd.  Of course, since Congress takes a break to go home and they are all home anyway – why can't they just get some work done?

Any additional spending Congress approves gets added to this year's $3Tn deficit and this is not even taking into account the very sharp decrease in collections that will come from all those small businesses and their employees that will not have income to pay taxes on in the second quarter.  The Government has already decided that 1-2% of the population will die in order to start those tax revenues flowing again, so let's get out their and risk our lives to prop up the system – who's with me?  

As many as 31 states have R0 figures above 1, according to the website, meaning that each person with the virus infects at least one other. Morgan Stanley estimates R0 for the entire U.S. stands at 1.1 — a rate at which the epidemic would double every 52 days.  Sending people back to work in those states, with inadequate PPE equipment, testing or tracking is political negligence at best, murder at worst.

Here is how that chart looked in April and May, during the lockddown:

You don't need to be an epidemiologist (and it's bad that we even know that word now!) to see that this is BAD!   We have gone from slowing the spread of the disease to expanding it at new levels – and that spread is coming from an even larger base of citizens than we had in March, when Trump could still count them on one hand.

I know I sound silly saying this when the markets are bouncing back but it's not like we didn't make money during the crash and correction (BECAUSE we were careful!) and all I am saying now is that we are heading for another crash and it's going to be a lot more expensive to correct than the first one, which has required $2.7Tn in hard Federal Spending and another $4Tn allocated to the Fed, who have already spent $2.5Tn of it propping up rich people and the corporations they own.

Let's be careful out there!  


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  1. Good morning! 

    Another day for you and me in paradise!

    Shorting /ES as it dips below 3,135, of course – with tight stops above.

  2. Big Chart – Dow 26,300 is the 200 DMA so watch that one and 3,019 is the 200 dma on /ES and the Nas is way over and the NYSE/RUT are way below so we need leadership from /YM and /ES.

    Dollar down more than 1% from yesterday or we'd never be this high.

    You know your currency sucks when the Yen is kicking your ass!

    Good for our HMY play:

    HMY Long Call 2022 21-JAN 1.00 CALL [HMY @ $3.46 $0.00] 100 5/29/2020 (577) $24,000 $2.40 $0.13 $2.40     $2.53 $0.00 $1,250 5.2% $25,250
    HMY Short Call 2021 15-JAN 3.00 CALL [HMY @ $3.46 $0.00] -100 6/4/2020 (206) $-9,000 $0.90 $0.05     $0.95 $0.00 $-500 -5.6% $-9,500
    HMY Short Put 2022 21-JAN 3.00 PUT [HMY @ $3.46 $0.00] -50 5/29/2020 (577) $-5,000 $1.00 $-0.02     $0.98 $0.00 $125 2.5% $-4,875

    See, we took a nice, conservative $10,000 entry on a $20,000 spread simply betting HMY will hold $3 (and the short calls are rollable).  You don't have to take crazy risks to make money!

  3. Good Morning.

  4. GM!!

    MYOV – buying stock, selling front month calls.  3 for 3 in trials.  More to come.  Small lots FWIW.

  5. Phil / AAPL & TSLA

    Good Morning. 

    Learning when to exit on trades:

    1. AAPL in IRA account

    BCS 10 AAPL 200/320 Jun 22 Calls bought it net $66K. Didn't sell puts due to high margin in IRA.

    Of the full spread $120K, it's now at $87K.

    Does it make sense to wait for 2 years to collect another $33K or just close the trade and collect $21K now.? 

    I don't have a compelling trade to redeploy the capital. 

    2. TSLA in taxable account

    Did your TSLA trade buying 800 Jan 21 puts and selling 800 July puts and 800 calls.

    After rolling, the trade looks like this

    5 long 1100 Jan 2021 puts

    3 short 850 July puts

    2 short  800 July puts 

    2 short 950 July calls

    15 short 1100 July calls.

    Spent $132K buying Jan 21 put and collected $37K selling July puts and $49K selling July calls.

    Now, July puts show a gain of $29K and Calls show a loss of $12K at this time. Should I buy back puts now or wait until expiration to see where calls and puts land. I assume I should let the calls premium decay.

    Your thesis is TSLA is overdue for a correction and to collect premiums every month with long puts to cover. 

    When to exit the July puts and calls?

    When to enter the Aug puts and calls?

    Between selling puts and calls, I tried to balance the risk. But, selling 17 calls against 5 puts, is very skewed and excessive risk. An analyst just changed the target for TSLA to $1200. Expect to roll the calls to Aug if price goes to $1100. 

    What are some of the best practices on exiting trade, switching to next month and taking risk.?


  6. @Pharmboy — ARNA

    Pharm — I followed you in the ARNA butterfly play (never did one so I took a small chance).  Mine got filled at 0.77 and I since rolled down from the 65 calls to the 60 for $2.50 when it dipped last week.  So now my basis is $3.02 on the 60/70/75 'broken wing' butterfly  — I also read up on butterfly spreads to educate myself and figured the roll was a good idea.  Are you still confident in the $70 target?

  7. The Nas is insane. 

  8. Do we know why trading on ACB is suspended?

  9. Horace – I think most of it's in here (the just released 6-K):

    TL;DR: Restructuring progress, $200MM in asset impairment charges, and 30% reduction in workforce.

  10. Phil / AAPL – I need some help on this one….  I've been waiting for a pull back to reload on this but I'm thinking in need to do a serious roll to reposition.  I made about $120K on this spread closing out 30X '22 260 Puts and 20 X '22 210 Puts along with 30x 270 Calls.

    The position below is what's left of a balanced spread,  


    My intent was to roll this up to a 300 / 420 spread but did not pull the trigger on the small pull backs.

    Long 25X Jan'22 270 Calls (70)

    Short 25X Jan '22  340 Calls (25)

    Short 40X Jan '22 350 Calls (30)

    Short 15X Jan '22 420 Calls (24)

    I've looked at the '22 300 / 420 spread and the but break even is pretty high, Also am OK with loading up on puts at maybe scaling in on them…..  also I am concerned about a pull back at some point on the stock as I think the stock is ahead of itself…

    I know this this kind of a mess – but maybe you can see a better way…   Thanks for your help

  11. I knew someone who was talking to Steve Bing about our energy storage project. Sad

  12. Batman on your AAPL play are you saying you hold 65 naked call, as the 25 BCS does not give you any protection. Very risky or do I see this wrong?

  13. Yodi – yes – these were balanced at one tine… but not now…

  14. Batman does this mean you sold the longs and left the shorts open??? Boy you guys jumping without the parachute!!!!

  15. AMZN: $1,342,930,000,000

    All the gold in the world: $9,194,615,790,004

    AMZN as a percent of world gold: 14.6%

  16. AAPL/SK – Well, you used $66,000 to make $21,000 (32%) in maybe 6 months.  Now you have $87,000 and you hope to get $120,000 in 2 years (34%).  It seems pretty risk-free, so that has to be taken into account and 17% a year is a very nice return so, if it's not stopping your from making a better trade, why stop collecting your 1% per month on $87,000?  If, on the other hand, you find a better, safe(ish) trade, then you can cash this out whenever as AAPL is pretty liquid.

    TSLA/SK – Don't be hyperactive, you have a range of $850-950 into July but I'd keep it and mybe stop out the July short $950s if TSLA breaks over $1,020 – just to be safe. There's no certain time to do anything, you have to see how it progresses but, once you are up 50% on a contract, you should be protecting your gains.

    ACB/Horace – Layoffs and plant closures just announced.  CEO "retiring" – major restructuring, $200M impairment.  Could be good but probably not. 

    And what Greg said.

  17. AAPL/Batman – Well AAPL is $369 so what do you have?  Basically 2022 $270s at $117 ($292,500) fully covered by 2022 $340 calls at $71 ($177,500).  That's a $175,000 spread at net $115,000.

    Then, for whatever reason, you have 40 short Jan $350s, now $66 and that's a $144,000 loss and you have 15 short $420s at $35 and that's an almost inconsequential $16,500 loss.  

    Fortunately you have lots of money so I'd just take the loss on the $420s, buy 80 of the June 2022 $300 ($100)/400 ($50) bull call spreads for $50 ($400,000) and roll 20 (1/2) of the Jan 2022 350s at $66 ($132,000) to 30 of the Aug $365s at $21.50 ($64,500).  Since you sold the 40 2022 calls for $120,000, I believe that makes this now something like:  $400,000 (new spread) – $120,000 (short $350 calls) + $132,000 (the roll) – $64,500 (the new short calls) + $16,500 (loss on the short $420s == net $365,000 for the $800,000 $300/400 spread less $120,000 you made on previous sales is $245,000 on the spread and you still have the $270/340 spread clean at $120,000 that pays up to $170,000.

  18. ARNA/jeff – am I confident? Absolutely.  Am I positive?  No.  But that is the beauty of a butterfly, on those dips you can do things to reduce basis and see how it flies. I am in the original still….so … fingers crossed.

  19. A tidal wave of bankruptcies is coming

  20. TikTok Teens Tank Trump Rally in Tulsa, They Say

  21. We Need Better Masks

  22. See, we fixed the news!  It does seem to be back-filling all the stuff that's been stuck – so there might be a lot today.

  23. 3135 resistance again

  24. Resistance is not futile!

    China E-Commerce: Resistance is Futile | China Law Blog

  25. Some public health officials are resigning amid threats during the Covid-19 pandemic

  26. Phil / AAPL – thank you for your feedback… 300/400 is more realistic and the short august callers as a swap for. the 340 callers ( not 350 callers) will help me widdle down some of the losses on the 340 callers. So I'll be left with 25X of the Jan '22 270/ 350 spread and 80 0g the 300 400 spread and 30 of the Aug 65 short callers hopefully I won't have to roll the August callers…     Thanks again.

  27. Phi; / AAPL –  More work for you :) .

    .  I' ve been looking at the Jan '21 $290 ( at 32 ish) or the Jan '22 $300 puts for $65 the prices would imply at 10 to 15 point pull back….  Would this be a good point to sell puts ( Apple at 345 to 350) ?\

    or do you see a bigger pull back to maybe 315 or 325?  

    Thank You

  28. That how great things are going now:

    If the plan is implemented, Americans along with Russian and Brazilian travelers, would be prohibited from visiting countries in the EU — a clear rebuke of President Trump’s handling of the virus in the United States, which has had more than 2.3 million cases and has exceeded all countries with a staggering death toll of more than 120,000.

    The Times reported that European nations are currently considering two potential lists of welcome visitors — and both exclude Americans. The lists have been drafted to only include countries that have fared well in their managing of the coronavirus pandemic. China, as well as developing nations like Uganda, Cuba and Vietnam, appear on both lists, according to The Times.

    Good thing I still have my EU passport! But hey, new highs baby!

  29. WOW 


    ‘I don’t kid’: Trump says he wasn’t joking about slowing coronavirus testing

    Administration officials have scrambled in recent days to clean up the president’s remarks from his weekend rally in Oklahoma.

    President Donald Trump on Tuesday insisted he was serious when he revealed that he had directed his administration to slow coronavirus testing in the United States, shattering the defenses of senior White House aides who argued Trump’s remarks were made in jest.

    “I don’t kid. Let me just tell you. Let me make it clear,” Trump told reporters, when pressed on whether his comments at a campaign event Saturday in Tulsa, Okla., were intended as a joke.

    “We have got the greatest testing program anywhere in the world. We test better than anybody in the world. Our tests are the best in the world, and we have the most of them. By having more tests, we find more cases,” he continued.

    Administration officials as high ranking as Vice President Mike Pence have scrambled in recent days to clean up Trump’s statements from his weekend

  30. How Amazon was founded

  31. Fauci warns of disturbing trend as Trump ignores viral surge

  32. The Black Lives Matter Protests Have Taught Us More About The Coronavirus

  33. Millions of Americans Can’t Afford Water, as Bills Rise 80% in a Decade

  34. Biden Takes Dominant Lead as Voters Reject Trump on Virus and Race