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Toppy Tuesday – Waiting for the Shoes to Drop

We're still at 11,000 on the Nasdaq.

We punched over it a bit yesterday and we're into our second round of shorts on the Nasdaq (/NQ) Futures now and you can still catch them crossing the 11,000 line with tight stops above, which is a more conservative way to play.  We scaled back in overnight, taking advantage of the spike up to end up with 3 short at 11,048 average so 11,000 is now our stop line to lock in the net $1,000 per contract gains (there were some losses that are offset).  

The Russell (/RTY) is below 1,500 so, as long as that stays below, it's still good to short /NQ and the Dow (/YM) failed 26,600 and the S&P (/ES) failed 3,300 again and we're probably on the way back to 3,150, which is the Must Hold Line on our Big Chart and also now the 50 dma(ish).  Our tracking chart for the S&P is more conservative as we don't think this bull run will last so the Must Hold line on the SPX is still 2,850 and thats' a solid 15% drop from where we are now:

Our hedges in the Short-Term Portfolio are holding up well and the portfolio itself is up 373% for the year as the STP loves volatility – and we've had plenty of that.  Although it's early in the month, not much is happening today so it's a good time to go over our hedges and see if there's anything we should adjust (there wasn't last time).  We haven't touched the positions since July 14th (3 weeks) other than adding the short INTC puts but, since then, the Long-Term Portfolio (LTP) has gained $75,000 AND the Short-Term Portfolio (STP) is up $70,000 too – not bad for leaving things alone!

  • CANE – I thought sugar consumption may go up during a pandemic and so far, so good and we're well over our very conservative target.  Keep in mind that we sold the Oct $5 puts for 0.75 so our net entry is $4.25 and we make 0.75 (17.6% against risk) if CANE is simply above $5 after 8 months – that's a nice rate of return!  And, of course, Sugar isn't going to be free so the risk isn't actually $4.25, is it? 
  • That's something a lot of trade technicians fail to consider as they tend to ignore the Fundamentals of a position.  When you buy a house for $500,000, you don't consider your risk to be that it will go to zero, right?  If that were the case, you would never buy a house, nor would the bank lend you money for it.  You need to understand the real value of an investment in order to understand the real risks of owning it.  That way, when you see these great options deals – it becomes very obvious that you should jump on them.

  • AAPL – Speadking of obvious.  Here we collected $7,000 in exchange for promising to buy 700 shares of AAPL for net $150 ($105,000).  Again, notice when sold the puts – March 11th.  Apple wasn't done going down but we didn't know that but we did KNOW that we would certainly love to buy 700 shares for $150 and keep it forever and ever – even if the virus did destroy the World.  

  • INTC – We just took advantage of these and they are still down, so good for a new trade with a net $41.50 entry.  

  • JPM – These are up so much we should probably kill them rather than wait 18 months to make the last 20%.  Yes, let's take that money and run.  Our entry was perfect on this one and we've been rewarded for it.

  • SDS – The ETF is at $17 so the spread is $60,000 in the money and we paid net $96,000 for it.  More importantly we paid net $2.37 for it and the long calls are still $3.05, so there's no pressure to roll it yet to salvage the net cost of the spread (by investing more and moving it to a longer-term asset).  Having decided that, the next thing we need to consider is are we being adequaterly protected?
  • SDS is a 2x ETF so if the S&P drops 15% then SDS will go up 30% to $22.10 and we have the short $30 calls so lots of room there and our calls will be about $5 or $150,000 vs the current net $75,000 on the spread so we have $75,000 worth of protection here.

  • TQQQ – The is a 3x inverse ETF at $123 so if the Nasadq falls 15%, TQQQ will fall 45% to $67.50, just over our target range.  We paid net $8.62 for the spread and the long puts are still $12.80 so, like SDS, no immediate need to roll and $67.50 would be $22.50+ on the puts for $112,500 and thespread is currently net $43,125 so about $80,000 of protection here.  
  • In this case, the $110 puts are $20 so $7.20 to roll up $20 in strike is worth it for more protection.  The 2022 $110 puts are $34, not worth it so we'll go for the higher strike and see how that goes.  

  • CMG – Still crazy high at $1,150 and we sold the Aug $1,050s for $65 but at least the short puts will expire worthless.  Earnings took them down 5% but they are recovering but not so fast that I'm worried.   Next earnings are 10/20 so we can roll the 3 Aug $1,050 calls at $109 ($32,700) to 4 short Sept $1,100s at $85 ($34,000) and we can sell 2 of the Jan $900 puts for $30 ($6,000) and that gives us plenty of cushion to work with.  Not yet, but that's the plan.

  • SQQQ – Our primary hedge is a 3x ETF that's at $5.66 so a 15% drop in the Nasdaq will take it up 45% to $8.20 and our $5 calls will be worth $3.20+ which is only $64,000.  Currently the spread is net $700, so we're getting $63,300 worth of protection but that's not as much as we thought we'd have.  


TSLA – Another dagerous MoMo play.  

  • TSLA – What a crazy stock!  Not in a million years is this worth $1,500 but, currently, that's what it's priced at.  They went bast earnings so not much chance they are derailed but I can't see the Jan $1,900 short calls not paying us the full $106,575 and the short puts should pay us $32,835 but the puts we own could lose $36,488 and the 5 short Sept $1,250 calls at $291 ($145,500) can be rolled to the Jan $1,600 calls at $265 and then we could sell more puts so I'm not too worried.  It would be lovely if we also end up collecting the other $145,588.
  • Keep in mind, this is also a hedge – one that pays about $300,000 if the market crashes and TSLA turns out not to be immune (they weren't in March).

  • UNG – Going like gangbusterds now.  We have 100 long 

So we're still in good shape with good protection.  


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  1. Good Morning.

  2. Good morning!  

    Sorry, site was down a bit.  

  3. Could not login at all for a while…

  4. Ban an app from the USA, find a buyer to resolve the problem and ask for a cut on the transaction.

    See, no quid-pro-quo!

  5. GOLD- Have owned shares for a while back to 12/2014 and after trading around the positions and selling callers my cost basis is around $12. Sold some to get my initial money back so now a "free" ride.

    So, do you think this one has more room to run? Cover remaining shares with callers? Convert remaining shares to BCS? Suggestions? 

  6. NLY- also, current take on this one? 

  7. NLY / pstas – They have been upgraded recently FWIW. The chart looks better but I don't know how bad they could be hurt in a downturn (and there will be one again soon). I own them and keeping them for now.

  8. STJ don't be so negative

  9. Big Chart – NYSE and Russell not giving us good signals.  Neither is the Dow really.

    Gold/Pstas – We have trashed our currency so it's gold or Bitcoin and you know how I feel about Bitcoin….

    I remember a bit after 9/11, gold was $250ish and I told my wife we should just put it all in gold and wait….

    NLY/Pstas – It's too complex to see what will happen with the MREITs..  They just announced, they made money in Q2 – more than last year so I still like them long-term but it's going to be a bumpy ride.  

    And what StJ said!

    Oil blasted higher.

  10. Before we take a big victory lap on the markets, let's keep in mind that the dollar has lost 10% since March:

    About 7% lower than in January 2017! So losing purchasing power in addition to getting the virus from the current POTUS.

  11. Big explosion in Beirut turns out to be a fireworks factory (so they say).

    • The broader market is flat at midday, unable to gain much traction without participation of the techs and cautious after a large explosion in Beirut.
    • The Nasdaq -0.2% is slumping as Microsoft gives back some of Monday's big gains. The Dow +0.3% is outperforming with help from UnitedHealth and McDonald's.
    • Energy leads, up 1.8%, as crude futures rise 1.3% with Mideast tensions rising following a blast near the port in Beirut.
    • Just three sectors are down, but one is Tech, off 0.4%. Financials are the weakest, down 0.6%.
    • Gold is popping as interest rates keep tumbling. Spot gold (XAUUSD:CUR) set a new record, silver futures also jumped, while the 10-year yield sank further into all-time lows at 0.52%.

    Dollar/StJ – Very good point.  Down again today after a very weak bounce.  

    No surprise looking at the Debt Clock with the Debt past $26Tn ($3.8Tn this year so far) but at least collections are heading back up (slowly) now – there were running backwards last month.

    • The SEC is investigating the disclosure of the government's $765M loan to Kodak (KODK-3.6%) that caused shares to soar, The Wall Street Journal reports.
    • The investigation is in preliminary stages and will look at how the company handled disclosure of the loan to make COVID drugs as reports began to emerge a day before the official announcement, the Journal said, citing sources.
    • Shares soared to as much at $60 with multiple volatility halts on the day the deal was officially announced. They are around $15 now after dilution in shares.
    • Kodak had shared information about the deal with media outlets a day before the announcement, according to the Journal.
    • Virgin Galactic (SPCE -12.4%) falls sharply after reporting Q2 earnings with no revenue, floating a new share offering and setting a timeline for space travel that may have disappointed investors.
    • CEO Michael Colglazier: "We expect to advance to the next phase of our test flight program by conducting the first rocket-powered spaceflight from Spaceport America this fall. After that flight, we will conduct a second powered flight from Spaceport America, which is expected to include 4 mission specialists in the cabin. In addition to conducting a variety of functional tests within the cabin, these specialists will help us block and choreograph the ways we will capture and cover Richard Branson's history-making flight. If all goes as expected on this fully accrued flight, we would then plan to fly Sir Richard Branson on the third powered flight from Spaceport America, which we anticipate will occur in the first quarter of 2021."
    • Read the full earnings call transcript
    • ViacomCBS (VIAC +3%VIACA +2.5%) is launching a new connected video ad platform this fall in an attempt to streamline its video ad offerings.
    • Its EyeQ platform will serve as a "single transactional point of entry for digital video content" from across its portfolio of broadcast, entertainment, news and sports networks.
    • That includes BET, CBS Television Network, CBS All Access, CBSN, CBS Sports HQ, Comedy Central, MTV, Nickelodeon, Paramount Network, Pluto TV and VH1 – all in all a viewing audience of 50M full-episode monthly unique viewers, and 150M across all content and all devices.
    • It features multiple lanes of activation, including content segments, broad demos, strategic segments, and creative.
    • “When you are in the market with six or seven different products, it becomes incumbent on you as a seller to make it easier for your clients to understand what they are spending and how it is working,” the company's John Halley explains.
    • Spot gold (XAUUSD:CUR) rises to a new record amid rising speculation that U.S. lawmakers will move forward on a new virus relief bill, as Senate Democratic leader Schumer says progress is being made in talks with the White House.
    • Details are scant, but video from a mammoth blast near the waterfront in Beirut is making the rounds, and might help to account for gold's sudden surge about 45 minutes ago.
    • Spot gold rose as much as 0.8% to $1,994.47/oz., an intraday record, after bullion for immediate delivery surged 11% in July, the biggest monthly gain since 2012; December Comex gold +1.3% to $2,012.50/oz.
    • "What Schumer was saying suggests we will get a package and reverse the sudden stoppage of benefits. This helps stocks and gold," says Tai Wong, head of metals derivatives trading at BMO Capital. "It means the Treasury will borrow trillions more which someday we will have to repay."
    • Goldman Sachs says gold may climb to $2,300/oz. as investors are "in search of a new reserve currency," while RBC Capital puts the odds of a rally to $3,000/oz. at 40%.
    • Bloomberg reports worldwide holdings in gold-backed ETFs rose to 3,365 tons on Monday, up 30.5% YTD; U.S. reserves exceed 8K tons.
    • Rates are seeing pressure along the Treasury yield curve as equities overcome an early stumble and move into the green.
    • The 10-year Treasury yield is knocking on the door of 0.5%, now at 0.52%, off about 4 basis points (NASDAQ:TLT) +0.7%(NYSEARCA:TBT) -1.5%.
    • The 2-year yield is down to 0.11%, the 5-year is falling to 0.2% and the 30-year is slumping to 1.19%.
    • Real 10-year rates stand at -1.06%.
    • Late last month, JPMorgan strategists led by Jay Barry trimmed their year-end outlook for 10-year yield to 0.80% from 1% and 30-year to 1.65% from 1.85%, noting that the "earlier-than-expected recovery" in economic data in May and June has "started to falter".
    • "I believe it is likely that the TLT ETF will march towards approximately $180 between now and the end of the year," Zvi Bar wrote on Seeking Alpha last week. "Moreover, I believe TLT is likely to continue to grind higher, as it is probable that the Federal Reserve will attempt to take bonds closer and closer to negative rates."
    • Generac Power Systems (GNRC -0.3%) has unveiled a new, more powerful addition to the Guardian series of home standby generators.
    • The new generator provides 24 kilowatts of peak power from a 70% smaller footprint than traditional generators of this power level, yielding cost savings of up to $8,000 on purchase and install.
    • The innovative generator is also equipped with home energy monitoring technology that could also save owners enough to nearly pay for the entire generator.
    • "The reality of today is that the home must be an oasis. People are working from home, entertaining at home, and going to school at home. Protecting families from unexpected power outages is a requirement," said Russ Minick, Generac's Chief Marketing Officer.
    • "Generac is diversifying its business and making large efforts to penetrate the solar and storage markets," wrote Simple Investment Ideas back in March. Shares have risen 86% since the SA article was published. See Generac: Preparing For The Solar Tidal Wave.
    • Dan Primack's Axios look at the TikTok (BDNCE) talks delves into potential players other than Microsoft (MSFT -2.1%) – and says multiple sources say Apple (AAPL +1.3%has expressed interest.
    • It's an unlikely suitor for TikTok, which is a cross-platform app, and the sources are external to Apple. Still, Primack notes Apple is flush with enough cash for the deal and any Treasury "payments" that might be required.
    • "Private equity is also circling," he says, including firms that don't currently have ByteDance stakes.
    • Updated: Primack notes an Apple spokesperson says there are no discussions about such a purchase and "the company isn't interested."

    That was an outage at our hosting company this morning.  Something to do with the storm.

  12. SPWR/Phil  Would it make sense to roll my short $8calls to $12s for about $1.8?

    100 SPR '22 $5c @$4.4

    -100 SPR '22 $8c @$2.6

    -20 SPR '22 $8p  @ $2.73


  13. Kodak / Phil – This reeks of corruption and insider trading so bad. These guys are so incompetent, they can't even do crime right. I mean, the CEO gets all these shares the day before the deals gets announced. Then all kinds of strange trading activity before as well. Who knows who benefited from that. It's like all the trading volume around Trump tweet! Nothing will ever see the light though.

  14. SPWR/Wing – They are breaking up nicely now.  I know people were getting so bored with me banging the table on them all the time, right?  So you have 100 2022 $5/8 bull call spreads at $1.80 and you sold $20 $8 puts for $2.73 (wow!).  I wouldn't roll up, just be happy the net $12,540 spread is going to pay you back $30,000 and be happy.  Why turn it into something risky?  At the moment it's $7.30/5.65 and the $10s are $4.60 so maybe spend $1.05 or less to roll up $2 and you're still 20% in the money but I wouldn't push it further.

    Kodak/StJ – Yep, so much corruption we can't even keep track anymore.  Remember when we used to spend 4 years looking into Whitewater or Bengazi because they were the ONLY things the Presidents or their circle did that even seemed remotely questionable?  Trump is like a corruption tsunami – there's not enough investigators in the World to cover all the crimes he and his people commit….

  15. Crazy video clips from Beirut….

  16. Wow, what the heck happened?

    No one is wearing masks!  

    The government had stored “highly explosive materials” at the blast scene on the Lebanese capital’s waterfront. Thousands of people were hurt, overwhelming the city’s hospitals.


    Lebanon’s health ministry, said that at least 63 people had died and 3,000 suffered injuries in the explosions and fire that shook Beirut on Tuesday.

    With the wounded still streaming into hospitals and the search for missing people underway, the figures were likely to go higher.