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Thank Tech it’s Friday – Apple and Company Boost the Markets

$60 Billion!  

Apple (AAPL) had $59.69Bn in revenues last quarter and that's up 10.9% while the rest of the economy was down 33% and the market logic is that one company making money trumps an entire economy losing money.  Of course it's ridiculous but what can you do?  

The chart on the right illustrates just how bad our Q2 GDP was compared to… well, history!  This one-quarter drop in GDP was worse than ENTIRE RECESSIONS COMBINED yet the market is trading like we are going to just dust ourselves off and get right back into the race.  Of course Apple did well – they sell exactly the kind of crap that people forced to sit on their couch for 3 months are going to buy.  Amazon and other tech companies did well too because they cater to the shut-in crowds – you can't judge the economy or the market by what was bound to be the strongest sector.

Apple was our Stock of the Year 3 times this decade and, just two weeks ago, on July 17th, we did our Portfolio Reviews and we made aggressive adjustments to our AAPL position in the Butterfly Portfolio:

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 spred with $36,000 potential to one with $192,000 potential – easily covering the short calls but also well-covered by them. 

AAPL Short Call 2020 18-SEP 350.00 CALL [AAPL @ $384.76 $4.60] -10 6/19/2020 (49) $-25,500 $25.50 $14.65 $-190.29     $40.15 $3.65 $-14,650 -57.5% $-40,150
AAPL Short Call 2020 16-OCT 350.00 CALL [AAPL @ $384.76 $4.60] -10 7/20/2020 (77) $-50,500 $50.50 $-6.68     $43.83 $2.98 $6,675 13.2% $-43,825
AAPL Long Call 2022 17-JUN 300.00 CALL [AAPL @ $384.76 $4.60] 40 7/17/2020 (686) $470,000 $117.50 $-3.95     $113.55 $3.55 $-15,800 -3.4% $454,200
AAPL Short Call 2022 17-JUN 400.00 CALL [AAPL @ $384.76 $4.60] -40 7/20/2020 (686) $-261,200 $65.30 $-5.75     $59.55 $2.73 $23,000 8.8% $-238,200

That was from yesterday's close so not much excitment so far but it's a net $400,000 potential on the bull call spread and, as of yesterday, the position was net $132,025 so this single position has $267,975 (202%) upside potential if AAPL remains over $400 for 2 years (and we manage our short calls).  So, two years from now, if you wonder how our boring little Butterfly Portfolio can be making 100%/year – this will be the main reason!  

That's what we do with the options positions in our Member Portfolios, we take SENSIBLE RISKS and then we make our adjustments based on FACTS that we gather over time.  Facts about the Macro and Micro picture as well as facts about the companies themselves and the competitive environment they find themselves in.  You can see our price-targeting and options-selling skills at work in the Butterfly Portfolio Review and they've done well into earnings season so far and AAPL was our biggest "risk" – and now it's paying off.

I put quotes around "risk" because I didn't consider betting that our 3-time Stock of the Year would be up 2.5% over the next two years to be a risky proposition.  I did think Apple was a bit over-priced but we intended to improve our position on a downturn – or I would have sold the $500 calls, not the ones that were practically at the money.  Still, this position is poised to make spectacualar gains – you don't need to make crazy long bets to make crazy proifts!

Into the weekend, I'm very concerned about the Nikkei, which seems to be breaking down as the virus makes a comeback in Japan as well.  Our market may be happy to pretend that things like this don't matter but we can't stop the rest of the World from being rational and Europe is also engaging in a similar pullback that, so far, has not affected the US markets.  

We will continue to take these gains with a huge grain of salt. 3,250 was a great spot to short the S&P 500 early Thursday and it remains a great short this morning (/ES) with tight stops over that line as well as 1,485 on the Russell (/RTY).  These are very stretched areas and it won't take much for us to have a serious pullback.

Have a great weekend, 

- Phil


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  1. Phil/aapl

    Good morning!

    so, I now need a sensible and 'non risky' adjusting please.

    I have 10 Aapl Nov 380 short  calls covered by stock (long term hold) that I will need to roll. What do you suggest.

    in another account, I sold 10 Aug 7  $400 calls, for $3 thinking no way aapl gets to $400. How wrong!

    what's a good roll or if I want to abandon the calls, how do I recoup the 'loss' from buying them back? How about your June 2022 $300/400 spread, maybe now for $55?

    thanks for your help.

  2. I wonder what the GDP number would be if Dems had not pushed for that extra $600 in unemployment? But that extra $600 expires today and Congress is taking some time off. Sure Amazon and Apple did well – people had time and some extra money. Next month, they might have to sell their new iPhone on eBay to pay the rent. Maybe we should go long eBay! And homeless shelters…

  3. STJ/EBay

    I like!

  4. These guys are sociopaths:

    Most troubling of all, perhaps, was a sentiment the expert said a member of Kushner’s team expressed: that because the virus had hit blue states hardest, a national plan was unnecessary and would not make sense politically. “The political folks believed that because it was going to be relegated to Democratic states, that they could blame those governors, and that would be an effective political strategy,” said the expert.

    So again Dems (line in 2008) trying to push plans that would help the country against their own political interest because Trump will take credit for whatever good comes out while Kushner and Co look for ways to hurt  blue states politically at the cost of people's lives.

  5. Good Morning.

  6. Phil / Hedges,

    My attempts at using SQQQ, TQQQ, SDS as hedges have gone haywire. Appreciate if you could help suggest what I could do to effective rebalance them? My current positions are:

    50 Jan 21 SQQQ 5.00 long calls

    50 Jan 21 SQQQ 7.00 long calls.

    10 Jan 21 TQQQ 105.00 long puts

    130 Jan 21 SDS 15.00 long calls

    65 Jan 21 SDS 30.00 short calls

  7. good morning

  8. Good morning!  

    They are using bit tech's gains to cover a lot of selling of everything else this morning – be careful! 

    AAPL/Maya – Don't be greedy, you also want to lock in your gains.  I don't think $400 will last long so don't panic and pay premium.  The Nov $380 calls are $42.50 so $17 of premium and $25 of downside protection – what's wrong with that.  I'd sell the shares for $408,000 and buy 20 June 2022 $350 ($100)/$450 ($53) bull call spreads for $94,000 and roll them along until they expire as you'd have $206,000 of upside protection on the short calls and $314,000 in your pocket with a $300,000 spread that's $116,000 in the money already.

    Big Chart looks like it's weakening to me.

    GDP/StJ – 30M x $2,400 x 3 = $216Bn x 3.5 multiplier on velocity of money at the bottom is $756Bn against a $4.5Tn quarterly GDP so 16.8% lower is what the Republicans are shooting for in Q3.

    Sociopaths/StJ – I hope they hold trials for these bastards down the road.

    Hedges/Jij – Well there's no balance there at all, where are the short calls – just 1/2 cover on SDS.  These are very bearish BETS, not hedges.  Of course, covering them now, at what is likely the top of the Nasdaq, would be silly so you need to hang on a bit, I think.

    Here's how we had the hedges on July 14th in the STP, no changes at all were made and we were happy with the protection.

    Here we are this morning:

  9. Stopped out of /RTY at 1,460 – you don't mess with the bottom of the pivot points. /ES has further to fall if things turn ugly but also bouncing off the line.

  10. Image

  11. T is cheap again today!!!

  12. A lot of things are getting cheap but LTP is still $928,790 so we're still at a combined $1.4M with the STP so balance is good at the moment.  Still I'd feel so much better if we just cashed out.  

    4.5M cases in the US now, 152,074 dead.

  13. Phil// Given the GDP, store closures, unemployment, etc. I'd like to have your thougts on SKT and a suggested trade.  Also any suggestion for INTC?


  14. Companies ready to defy Boris Johnson’s planned return to work

  15. Eurozone economy suffers record drop during lockdown months

  16. Lawsuit: Trump still blocks Twitter critics after court loss

  17. Phil / INTC

    When I didn't enter trade quickly with some of the trades like FL, MMM, etc, it was no longer attractive. 

    I did the INTC immediately. I agree with your rationale for the trade. Of course, it's down 45% in few days since I did the trade. Since we didn't sell calls, it amplifies the loss and I like your reason for not selling calls at this time. It continues to go down. I understand thinks go down short term and this is about what happens in 18 months. Taking paper loss in the short term comes with the territory and I don't have an issue with it. 

    I joined after Mar 23rd and don't have the same upside as your portfolios. You keep mentioning about closing the portfolios due the virus being not control in USA. 

    How should we handle INTC now? When would you add more to the trade? 

  18. SK2020 – I have been in your position.  Here are the few things I did to get a better handle on things

    Start with small position – 1/3 of my intended level so this gives you an opportunity to keep rolling.  Phil suggest that one should be prepared to roll 4 times or so.

    Lot of times I wait for Phil to make a suggestion to roll out/down or DD on an initial position.  Starting at that time helps me.  Also the downside is that some of his trades I missed which went on to make huge gains.

    This was/is a mental exercise for me.  I am still learning to get that discipline and not panick into or out of a position.

    When I joined this group I tried to follow all of Phils portfoliios.  I learned it is hard to manage all the positions.  So I have narrowed down to one or two portfolios

    Good luck


  19. rookie / managing trades

    Thanks for the perspective.

    Though I want to do the same 'scaling in', I don't seem to have the discipline and have FOMO. During March, I had the buy list and target price, I didn't have the guts to buy them at target price thinking it will go down more. For a period of time, that worked. By Mar 23, I had only bought small amounts and still kept decent amount of cash.

    With TSLA, I kept rolling and finally gave up and lost my shirt. 

    I have done very well with most of Phil's trades – VIAC, BRK-B, AAPL, BBBY, MU etc. Have done well with Phil inspired trades on my own – ZM, FB, PINS, ROKU, LUV, AYX, CZR.

    I need to write down a check list and follow them to have the discipline. Would love to hear if any one else has a check list for managing trades

    - When to roll,
    - When to exit,
    - When to DD,
    - When to buy back puts,
    - when to cover / uncover
    - When to do BCS, Calendar, Armchair, Butterfly etc 
    - How much to allocate for each trade relative the portfolio size
    - How to keep track of risk and manage risk


  20. Hi Phil, do you have any thoughts on CBOE?

  21. Done with /ES, that line seems to be holding up.

    No more shorts then – nice bonus into the weekend – maybe I'll get takeout…

    Damn, I remember when I used to play for Hamilton Tickets or First Class Upgrades.  frown

    Kind of takes the fun out of making money when there's nothing to spend it on….

    SKT/Rookie – Occupancy for 2020 has dipped from the usual 96% to 92% – the first time in 25 years they've been below 96%.  I'm betting this year shall pass and they will go back to having 4% more average occupancy and paying their usual dividends, which would make $6.41 quite a bargain.

    INTC/SK – Intel is down 45%?  Or do you mean the options trade that has 809% upside potential in 18 months is down 45% at the moment?  Do you see the support at the $45 line.  If that breaks, I will be worried.  INTC fell from $60 to $45 in March (also on earnings) and then went back to $60 so I regretted not buying it and this time, it hit $50 so I decided to buy it and it's been down for a whole week out of 78 weeks ahead in this trade so cut and run if you think you have to – it's not necessarily going to go straight up from here.   For that you should buy….    

    And what Rookie said, soon to be renamed Veteran.

    And, by the way, read the whole Strategy Section, especially the linked article on Scaling In and also read the Education Archives – lots of good stuff there.  

    CBOE/Ilene – They are reasonably priced at $9.4Bn and good for about $400M in earnings but nothing exciting there to me.  Why are you asking?

    Well, once again the markets had a fantastic close – erasing all the losses for the day.  Next week is NFP on Friday and the unemployment bonuses are over – we'll see how things go.

    Have a great weekend folks,

    - Phil

  22. SK2020 – Here is some notes I have.  Might help you.

    Rolling Down:  When the long call goes down, check to see if you can roll down to a strike where you can get that for 50 cents on a dollar

    Rolling Out:  Similar to the above.  When you see the stock needs more time to recover based on the fundamentals, you want to roll out using 50 cents to a dollar

    When you buy stocks if it is down 20% DD and if it goes down another 20% DD again and keep doing it.

    TSLA/CMG, etc.  Since it is so volatile I don't touch those stocks because I don't have the mental strength to deal with so much action up or down.  Phil used to stay – know your personality before trading

    When to Quit – I just follow Phil on this one.  I am still learning

    FOMO – We all have done that.  One thing I use are the MACD/RSI and trade suggestions before initiating the position.  On INTC, I see 45 has held strongly for the last couple of years.  So I am waiting to initiate a positiion around that price.

    BCS Rolling:  When the price of the BCS you paid is equal to the price of the long call you should initiate the roll.  Any later than that it becomes hard to salvage.

      Hope this helps.  Have a nice weekend.

  23. rookie / check list

    Thank you for the list.

    I started doing options actively since April. Doing it live helps me understand the dynamics. I am learning a lot from Phil's portfolio review, webinar and chat. 

    I thought Phil likes to roll spending 25 cents for a dollar.

  24. Hi Phil, I ask because Paul Price (remember him?) put out an article on Real Money Pro (or he is going to) that's suggesting buying or selling puts on CBOE. That's where the idea came from, but I don't follow the company. 

  25. SKT

    Another thing you can do to get a better feel for your speed is to papertrade, but do it with at shorter timeframe (not leaps 2 years out for example). Set up positions in a fashion similar to whatever portfolio you are trying to emulate and do the rolls etc. over a couple of months. I did that and found some of the errors I was making (rolling too early/too late, when to wait/dd). Another option would be to papertrade with the leaps and positions at the outset, manage them as you would normally but initiate with real funds when you are doubling or tripling down in the paper account. You'll have a handle on the way the options for that particular underlying set up and might be more confidant. And if you screw one up, no big deal. Learn from it an apply to real life. Once comfortable, stop doing that and go after it. 

    Patience is the hardest thing to master for many of us. If you deal with FOMO you need to mange that aggressively early on with options trading. The contracts move significantly and you can't be overly influenced by those movements unless something fundamental has changed with the underlying…Phil has mastered this so it is wise to follow his lead. 

    I totally agree with Rookie regarding waiting to initiate positions when Phil doubles down or really starts banging the table. I did this with futures trading and it benefited me greatly. You can't do it exactly like him, but you can use the information here to set yourself up for wins consistently. 

  26. jeffdoc / best practices

    Thanks for the insights. 

    I use tastyworks for options trading. Which broker is better for paper options trade?