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GDPhursday – Fed Boost Doesn’t Last 24 Hours

Wheeee, that was easy money!  

In yesterday's Live Trading Webinar, we were watching the Fed report live and we didn't see what people were being so bullish about so I made a call to short the Russell (/RTY) and the S&P 500 (/ES) Futures, which I reiterated in our Live Member Chat Room:

"In the Webinar we decided to short /ES at 3,250 and /RTY at 1,500.  GDP tomorrow is likely to be ugly."

As you can see, we've already gained over $1,000 per contract and we haven't even had the GDP Report yet (8:30) and that is expected to show a horrific 30+% drop in US economic activity for the 2nd Quarter.  It's POSSIBLE we have an upside surprise – thanks to $5Tn of stimulus spending during Q2 but, either way, we're in the middle of an economic disaster with not end in near sight.  

Image

Germany's GDP was down 10.1% this morning and that is twice as bad as it was in 2009, the second-worst on record (only records since 1970) but Germany, unlike the US, had a plan to fight the virus and has things more or less under control with 208,892 – about as many cases total as the US has deaths (150,716 so far).  Germany has just 9,137 deaths to date, both about 5% of the US's totals although they have 25% as many people (84M).  

Trump's bashing of Angela Merkel might help her keep a grip on ...Merkel's Germany did everything the Trump Administration did not and the differences are astounding.  Rather than spend Trillions of Dollars propping up the economy, they actually protected their people from getting the virus in the first place and are already on the road to recovery while the US virus count and death count are spinning out of control.

8:30 Update:  Officially we're down 33% DESPITE the $5,000,000,000,000 boost by the Fed and Congress (see yesterday's Report for breakdowns) so I'm very glad we put on those extra hedges as things could get pretty ugly although it's really right in-line with the drop that has been projected since early June.  Still, just think about how COMPLETELY misused that $5Tn must have been to have not been able to boost a $4.5Tn Quarterly Economy to more than 66% of it's usual level.  That's like a doctor saying he put 10 pints of blood into a patient but he only has 6 pints in him (10 is normal) – either somebody is incompetent or there's a MASSIVE leak somewhere.

We know where our leak is – it's in the President's pocket as he's redirecting as much Covide Relief Money as possible into his own projects and projects by his friends and family 

RIGHT NOW

President Trump suggested for the first time on Thursday that the November election be delayed.

We'll see how the markets digest this GDP Report – it's only AS BAD as expected, not worse but it's certainly nothing to celebrate and the Fed has already fired their guns so now it's up to Congress to save us as those unemployment bonuses run out TOMORROW.

Good luck!

 


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  1. Good Morning.


  2. Yup .. he actually did it. USA … delay the election. 


  3. Here's my weekend:


  4. Phil – You've been a good person all your life.

     

    Why did you move to Florida?  ;)


  5. I'm looking for Pharm – my LQDA is starting to look like Florida!  ;)


  6. Well, it was a brave start but down we go.

    Honey badger don't care:


  7. 1020- Phil's Mom is there. Best reason in the world.


  8. Floridat/1020 – Partly tax exile and partly because my Mom will be 80 in November and I wanted to see her more often.  With the girls in college, rather than coming home to NJ, they come home to see their Grandmother.

    And what Pirate said.


  9. Of course, I wasn't planning on being trapped here but I wouldn't be hitting the town and going to shows and concerts anyway if I were still up North either.  At least here I'm trapped with a year-round pool.


  10. 3,200 should be bouncy on /ES so time to close the /ES shorts.  1,475 is the stop on /RTY as well.  Can always re-enter if these lines break down.

    See what I meant about mostly not playing.  We waited a long time for the Futures to get nice and toppy and THEN we finally make one play that makes good money.


  11. 3,200 was 1.5%, by the way, so a very likely bounce line.  That's 1.25% with an 0.25% overshoot so back up about 10 to 3,210 is a weak bounce – no sense in riding that out for $500 per contract, right?  


  12. Sorry, that wasn't a very informative chart:


  13. Mom – I knew that, hence the wink. :)

     

    From an old 60's sitcom -

    "Californy is the place you ought to be"
    So they loaded up the truck and they moved to Beverly

    Hills, that is. Swimmin pools, movie stars….or Vegas.  ;)

     


  14. CLU20 / Phil

    Oil has tanked to 38.85. What would be a good point to cover my short position that I entered at 40.86


  15. IMAX CEO on CNBC.


  16. JiJ123 OIL short  should have covered it already at 39


  17. Phil – Thoughts on HBI after earnings? earnings seemed good but now they have sold off (I shoulda quickly sold some calls in the morning like Yodi has recommended but i wasnt fast enough!)


  18. Oil/Jij – We're re-closing so I think oil might be in big trouble but other parts of the World are picking up.

    There was a 10.6Mb draw last week (ending 7/24) but imports were down another 5Mb for the week and gasoline and distillates were up slightly, so there are demand worries. Still $38.50 should be bouncy so I'd stop at $39 in the very least.  Silly to be greedy.

    And what Bert said!

    Former Republican presidential candidate Herman Cain, 74, has been hospitalized after testing positive for the coronavirus less than two weeks after attending President Trump's rally in Tulsa, Oklahoma.

    Why it matters: Public health officials warned Trump that hosting a large-scale rally last month could bolster the spread of the coronavirus. The campaign did require temperature checks upon entry but did not require attendees to wear face masks. A tweet from Cain, who is the co-chairman of Black Voices for Trump, shows him not wearing a mask during the event.

    • Six Trump staffers who were part of the advance team in Tulsa tested positive for the coronavirus just hours before the rally. Two Trump staffers who attended the rally have since tested positive.

    What they're saying: The Trump campaign said of Cain, per CNN, "Contact tracing was conducted after the Tulsa rally but we do not comment regarding the medical information of individuals. Regardless, Mr. Cain did not meet with the President."

    Image

    Here’s just a few of the #BlackVoicesForTrump at tonight’s rally! Having a fantastic time! #TulsaRally2020 #Trumptulsa #TulsaTrumprally #MAGA #Trump2020 #Trump2020Landslide


  19. I hate those twitter things, messes up all the formatting.  


  20. So lazy at the Trump campaign, they don't even have a new slogan?


  21. Cain – Sad for anyone to suffer like that….   I find it hard to believe that with his resources and probably tightly managed schedule that they don't have a good idea of where he may have been infected….   I suspect it is highly likely that he was infected around the the time he attended the Trump rally in Oklahoma   


  22. Cain seemed a little careless despite being a black man in his mid-seventies….


  23. Batman/Tracing

    I'd venture they know, or can at least drill down that it was likely at the event or surrounding that timeframe. They just don't want to say. Contact tracing can be difficult in situations like that, but outside of large events like that most people have relatively easily traceable close contacts – which would be the risk category. Another reason the guidance isn't to have large gatherings, it makes tracing and quarantine of those exposed almost impossible. 


  24. HBI – I think the Dividend is safe, given they can generate 750M on Masks, and a possitive EPS… need to set up. a position on this.


  25. Phil, what do you think about Apple earnings? 


  26. Hi Phil, are you in the mood to take a look at AEO today? :-)  


  27. crs101010, HBI They not supose to go over 15 as I hold still the Sept 15 short caller!!!!


  28. phil  would you think theres a likely hood that the dollar might bounce off 93


  29. tommyt Dollar I sincerely hope so as he is really slipping against the €. Must be Merkel got such a boost from Phil this morning!!!!


  30. Tom I dont see much support at 93, 92.25 does. If NAZ sinks, the markets sell off and $ will strengthen, short term.
     


  31. Cain/Batman, 1020 – Of course they know where he got it.  If it were anywhere else they'd definitely tell you that!  Well, maybe not a brothel…

    HBI/Batman – Yes, masks are a good sideline for them.

    AAPL/Jeff – I think they are trading ahead of themselves at about 30x earnings.  Can be quite a market catastrophe if they disappoint.  

    AEO/Ilene – Damn, now I have to look.  $1.75Bn at $10.35 and they usually make about $200M so call it 9x earnings and this year is a loss and next year will be short so the price is fair.  They withdrew guidance and they are going to have a rough Q and probably next Q too so no reason to jump in at this level.  Since they have gone to $7 and now up 50% from that, I'd certainly wait until earnings (9/2) to see what they say or if they go back to $8 I'd be willing to take a chance.

    Dollar/Tommy – Why did the Fed stop printing?  Horrifying.  

    Didn't bounce off 94.  92.50 is safer but wow!  

    Trump: What Led Angela Merkel to Give Up on Relationship | Time

    That says it all!

    Now we can short the Nas at 10,700 (/NQ) if you're feeling brave.  Very tight stops above.  If AAPL misses, could drop 200 and pay $4,000 per contract.  


  32. Thanks, Phil! 


  33. If anyone is concerned about an AAPL miss, the tomorrow SQQQ 6 calls are .32, and have only .07 premium, and a .75 delta.


  34. August has not been kind to markets on average over the last decade.


  35. deano / SQQQ

    Does it move much? Does the value reflect QQQ in real time.?

    Thanks for the suggestion.


  36. SK2020 – Its a three times the inverse (-3x) ETF of the NASDAQ-100 Index. Given that its a tomorrow expiration, its basically a bet that AAPL misses. I'll let Phil chime in should he choose to.


  37. TQQQ 100 P might be a better choice. I have been seeing TQQQ move more than SQQQ though both are 3X ETF's


  38. HMY / Phil,

    Is it time to roll the Jan $3 calls to the 2022 $7 calls


  39. test


  40. AAPL - Having problems posting.

     

    Reviewing my outlook for them.   REV – 52.5B. EPS 2.09….. strong growth in Mac and Wearables.  Next Quarter is key if they give an outlook it should take the stock higher – as it will indicate products are coming up well, and they have visibility on cursory demand.  This should goose the stock more.  If not not a big deal ….


  41. SQQQ/Deano – That's a fun play.  /NQ shot up hard after hours already.  My chime is it's very risky but fun.  

    HMY/Jij – It depends what the whole position is.

    Dollar 92.97. 


  42. AAPL 4 for 1 SS! By by $, risk on.


  43. Apple EPS beats by $0.51, beats on revenue

    Apple (NASDAQ:AAPL): Q3 GAAP EPS of $2.58 beats by $0.51.

    Revenue of $59.69B (+10.9% Y/Y) beats by $7.13B.

    iPhone Revenue of $26.42B (consensus $22B), Services Revenue of $13.16B (consensus $13.13B).

    Shares +3.9%.

    Press Release

     

    460 here we come…..


  44. AAPL 4 for 1 stock split on  8/24


  45. AAPL is amazing!


  46. HMY / Phil,

    I was referring to the HMY positions in LTP. You had mentioned the below when you added HMY to LTP.

     

    Sell 50 HMY 2022 $3 puts at $1 ($5,000) 

    Buy 100 HMY 2022 $1 calls for $2.45 ($24,500) 

    Sell 100 HMY Jan ('21) $3 calls for $1 ($10,000) 

    That's net $9,500 on the $20,000 spread but the short Jan $3 calls can be rolled to the 2022 $7 calls, now 0.85, if all goes well and then it's a $60,000 spread for $9,500.  Meanwhile, if the stock fails to move, we just sell 2022 $3 calls, now $1.40 for $1 and then we have a net $0 trade and only the obligation to own 5,000 shares at $3 ($15,000) so very little risk with a potential $50,000 gain.


  47. I should have kept the faith in AAPL!


  48. AAPL

    "Apple’s business is highly seasonal, and its revenue was the highest the company has ever reported in its third quarter, typically the slowest of the year for Apple. Revenue was up nearly 11% year over year, and every major product line saw year-over-year growth. Services were up 14.85% year over year, and Apple remains on pace to hit its target of $50 billion in services sales this year. "

    Unbelievable. Ipad sales are up 31%. Looks like most of the stimulus check and unemployment benefits went into buying AAPL products.


  49. JIJ123 – WFH and learn from home drove the IPAD growth – will probably still grow this Qtr 


  50. AAPL  some key points of CC 

    AAPL – During CC – they indicated that New phones will be available ' later'  than last years….  so last year they shipped 9/20 – so maybe ship last weekend of Qtr this year….  So th is will push major rev into next FY Q1 …. looks like they have held schedules pretty well.  Q1 '21 should be a monster QTR – Also, If pandemic shuts apple stores down this will have a negative impact on Phone sell through…. it did this Qtr and will next qtr and launch Qtr Apple Stores shut down.

    Mac and IPAD – were constrained all the way to end of QTR – still not caught up…. So this Qtr will be higher than last year again – they indicated both were trending strong now and should continue to do so throughout this qtr. so upside on these next QTR….  


  51. Record-breaking Tropical Storm Isaias is heading toward the US


  52. This may be the euphoria to sell into.


  53. Holy cow, AAPL $410.

    HMY/Jij – Sure, with HMY at $6.38, the short Jan $3s are $3.50 so no premium left and the 2022 $7s are $2.20 so it will cost us $1.30 to roll them $4 higher.  We hadn't planned on spending $13,000 to do the roll so we have to decide if it's worth the risk of our $11,500 profit plus an additional $13,000 to maybe make $40,000 more.  I don't have that kind of confidence that gold will stay at $2,000 (ish) for 18 more months and we've got a sure thing in the LTP at net $20,000 (ish) so I feel better taking that off the table for net $20,000 and cashing in early on the bull call spread (leave the short puts) and then we'll wait PATIENTLY for a good price in the gold space.  

    HMY Long Call 2022 21-JAN 1.00 CALL [HMY @ $6.38 $-0.46] 100 5/29/2020 (539) $24,000 $2.40 $3.15 $2.40     $5.55 $-0.18 $31,500 131.3% $55,500
    HMY Short Call 2021 15-JAN 3.00 CALL [HMY @ $6.38 $-0.46] -100 6/4/2020 (168) $-9,000 $0.90 $2.60     $3.50 - $-26,000 -288.9% $-35,000
    HMY Short Put 2022 21-JAN 3.00 PUT [HMY @ $6.38 $-0.46] -50 5/29/2020 (539) $-5,000 $1.00 $-0.48     $0.53 $0.10 $2,375 47.5% $-2,625

    AAPL/Deano – It was a silly price, valuation is still too high, at about $1.75Tn.  Earnings are up 18% from last year, when the stock was $250 so $300 – sure, but $400?  Come on…  I get it that AAPL is "virus-proof" so money is running into them and other tech stocks but, once the rest of the market comes back, money will pull out of these guys looking for some value again.

    AAPL/Jij – What else can you do for 3 months at home?

    And keep in mind AAPL did all this with their stores shut down, no major advertising and no new products…

    Fortunately, we were aggressively bullish on AAPL in our Butterfly Portfolio two weeks ago, when we made this call:

    AAPL – We got more conservative but AAPL did not.  The Aug $330s are $60 and they can be rolled to the Oct $350s at $50 so we're paying $10,000 for $20,000 more strike.  Since our $200/260 spread is now net $144,000 out of a potential $180,000, it has $36,000 more to gain to cover the short calls.  Still, we can do much better than that in two years so we'll cash that spread ($144,000) and move to 40 of the June 2022 $300 ($117)/400 ($65) bull call spreads at $52 ($208,000) so we're spending $64,000 to move from a spread with $36,000 potential to one with $192,000 potential – easily covering the short calls but also well-covered by them. 

    That extra $128,000 potential gain is looking good right now!