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Toppy Tuesday – $2Tn Stimulus Talks Buys Us a Trip back to the Highs

Here we are again!

After incredible gains yesterday, we're back to the highs on the Dow, Nasdaq and S&P 500 and we're waiting for the Russell to come back to 1,700 (now 1,636) but even the NYSE has joined the party at 13,324 and things could not be greater in America, could they?  

Well, the economy may be on life support but what a lot of life support we're getting with Trump now bidding $2Tn and Biden saying that's nowhere near enough so, whoever gets elected – there's going to be lots of money flowing into the economy – just don't ask where it came from…

Apple (AAPL) led the markets higher yesterday, jumping 6.35% in a single day ahead of today's iPhone 12 event.  While Apple may be introducing a 5G phone, the US is certainly not ready (the rest of the World is) as Trump's ban of Huawei set us back quite a bit and he either saved us from Chinese spying or put America about a year behind the rest of the World in technology - which one do you think Putin was hoping for?  

Despite the run-up in the Nasdaq, our Short-Term Portfolio is holding up well at $484,069 – up a very healthy 384% for the year and that's strange for a hedging portfolio in an up year but that's because we caught a couple of nice down moves perfectly AND we made some very profitable short-term plays.  We're down about $30,000 since last Wednesday but our Long-Term Portfolio has jumped from $1,005,650 to $1,065,450 (up 113%) so we're going to take the +$30,000 we made in the LTP and spend it on more hedges in the STP to lock in those gains – just in case.

Short-Term Portfolio (STP) Review:

  • CANE – We figured sugar would do well with people being shut inside and nothing to do but bake.  We can exit at $1.20.

  • INTC – Just a short put to raise cash.  Very confident.
  • WBA – My favorite bargain stock.  In contention for Stock of the Year 2021.

  • SDS – We spent net $5.09 on the spread and the 2022 $10 calls are down to $4.93 so we salvage our investment (see "Stupid Option Tricks – The Salvage Play") in a position that's iffy and move to a position that has a higher chance of paying off.  That's going to be the UPRO though, so in this spread, we're just cashing out the 2022 $10 calls for $98,500 and leaving the naked, short Jan $22 calls with a stop at 0.50.

  • UPRO – This is a new hedge using the S&P 500 3x Ultra-Long and we're going to short it as it should drop spectactularly if the S&P drops and will decay nicely even if it doesn't.  UPRO is at $65 so we'll take 100 of the 2022 $70 puts for $20 ($200,000) and sell 100 of the 2022 $50 puts for $12 ($120,000) and we'll also sell 50 of the Jan $50 puts for $3.75 ($18,750) so our net cost on this $200,000 spread that's $50,000 in the money is $61,250 and we intend to make more short call sales to pay for the rest.  

  • TQQQ – Another ultra-long we are shorting and we can roll our 40 March $130 puts at $23.70 ($94,800) to 40 June $200 ($71)/160 ($45) bear put spreads at net $26 ($104,000).  So we're spending $10,000 more but we're moving to a $160,000 spread that's 100% in the money – it pays off UNLESS the Nasdaq is higher in June and, of course, if that happens, our longs should be doing well.

  • CMG – The short Jan calls are 50% premium and earnings are on the 21st and I can't see how this fast food restaruant is going to justify trading at 145x earnings so let's be happy and buy back the 2 short puts and see what the number actually are.   The remaining spread is a net $37,750 credit and could easily make $50,000 if CMG disappoints.  

  • SQQQ – Interesting that our June $15s have held there value better than the June $39s.  That's the advantage of selling more premium than you buy!  The short Jan $35s are so dead there's no reason to buy them back but, with the Nasdaq back at a record high, let's buy back half (100) of the short June $30 calls for $4.45 ($44,500) to increase the power of our hedge substantially.  We're also going to take advantage of the now very cheap 2022 $15 calls at $9 to roll our June $15s to so we add 7 more months of protection (and 7 more months to sell premium!) for $24,000.

  • TSLA – The madness continues!  Back near the top but, fortunately, we cut back our short calls so we'll be happy to roll (again) if we get in trouble (again) but, for now, they are still 1/3 premium and the short puts are 100% premium.

  • UNG Back on track but hurricane season is over so let's just take the win and be done with it.

So we've got a solid $500,000 of downside protection – enough to cover our $1M LTP and now we'll see how earnings season goes.  I always feel better after improving our hedges – don't you?


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  1. Good morning – slow morning……

  2. Good Morning.

  3. Good morning

  4. Trump making the point again that markets are at OTH or close but does not realize that most likely they are pricing in a Joe Biden win and a return to normalcy where Dems will need to spend 8 years cleaning up the mess left by the GOP – an economy in shamble, high deficits and high unemployment. And the GOP will again discover their inner deficit hawks leading to some compromises. 

    And people will again not learn their lessons!

  5. All time highs baby!

    The IMF estimated Tuesday that the global economy will shrink 4.4% for 2020. That would be the worst annual plunge since the Great Depression of the 1930s. By comparison, the international economy contracted by a far smaller 0.1% after the devastating 2008 financial crisis. [...]

    While forecasting a global contraction this year after 2.8% growth last year, the IMF predicts a rebound to global growth of 5.2% next year, 0.2 percentage point lower than in its June forecast.

    For the United States, the IMF forecasts an economic contraction of 4.3% this year, 3.7 percentage points better than in its June forecast. The less-pessimistic outlook reflects a stronger-than-expected bounce from the $3 trillion in relief aid that Congress enacted earlier this year.

    For next year, the IMF envisions 3.1% growth in the United States, 1.4 percentage points less than in its June outlook and in line with the view of private forecasters. Last year, the U.S. economy grew 2.2%.

    China, the world’s second-largest economy, is expected to grow 1.9% this year, a sharp slowdown from the 6.1% gain in 2019, and then expand 8.2% in 2021.

    I predict that official numbers in China will still show 6% for this year since the numbers have been already printed in official documents!

  6. STJ - printed in official documents!   LOL

  7. World GDP To Drop 4.4% In 2020, Rise 5.2% 2021: IMF

  8. Trump attacks Fauci as Joint Chiefs Chair also objects to use in ad

  9. i have a group question (Phil, would love your thoughts too!) 

    how does everyone deal with exiting trades – got tired of crappy fills from stops? got burned from stop-limits that didn't fill?  use a trail stop on winners? 

    the timing of bailing on the losers and getting the most out of the winners is such a tricky science. Curious to hear what peoples' general strategies are - 

    thanks y'all! 

  10. MonkMan
    Seams like the Members. You ask for some comments on trades you wish to discuss, the only one who reacts is Phil. You did not mention which platform you using TOS is working OK for me. Obviously with a clown now wanting to kiss the crowd, trading is different. Corona effects us all no one is actually immune.
    The most important present defense, take distance from other people. Some unfortunately do not understand this.

  11. Hmm. Interesting "breaking news" about the king of Thailand. Wonder how he compares to the sultan of Brunei.

  12. Snaw King of Thailand is this not the guy who rents in South Germany half of a five star hotel ?

    Poor  guy.

  13. FSLR up 5.5%

  14. Good morning!

    Russell backed off 1.25% but other indexes not too bad at the moment.

    VIX is still elevated – no one is really believing this pre-election BS.

    Keep in mind that, if Trump loses, his ego will drive him to crash the market to prove he was right.

    Meanwhile, over in the not-as-stimulated reality of Europe:

    3,750 to 2,250  is down 1,500 points (40%) on the nose and that makes for 200-point bounce lines to 2,450, 2,850 (strong) and 3,250 is the 60% line, which is very significant for Fibonacci so over that is good and under it is not and I'll take Europe's word for it over our manipulated markets.

    I was in the pool! ~George Costanza [Video] | Seinfeld, George costanza,  Never not funnyShrinkage/StJ – Worst plunge since the Great Depression = BUYBUYBUY, apparently.  1.9% for China is really awful.

    Fills/Monk – Platform is so important.  I went from Fidelity (who were robbing me blind) to Options Express (who just sucked) to Think or Swim and I've never wanted to leave them because their execution is miles better than the others.  I've played with the other but TOS suits me..  Most important thing about getting fills is patience – don't buy things if you're not getting your prices.  Also you have to scale in (see Strategy Section) so you don't get buried by a single mistake.

    That's the fills, as to bailing (also covered in the strategy section), if you lose 20% on a position and you don't FULLY, REALLY intend to double down on it when/if it's down 40% – then you should get out with your 20% loss.  Similarly though, when you are up 20% on a position, if you don't set a stop to lock that in – you are being foolish because if you allow yourself to lose more than you make on the average position – then you need to do better than 50/50 just to stay even.  

    Consistency and money management are very important aspects of trading – especially if you are a short-term trader.  As I'm sure you've noticed, I'm not a short-term trader and I tend not to bail on long-term positions unless I lose faith.  Generally, I'm scaling in but it's hard for people to see it because I take 6 months before I buy a second round because I DON'T buy more unless it's CHEAPER!  

    FSLR/Yodi — Biden is good for solar.

    Especially Chinese Solar – check out JKS as Biden's polls have come up:

  15. thanks Phil !  i appreciate the wisdom.  I was curious on the 'never never use market orders' section – stops fill at market – is that just part of the cost of doing business or do you ever use stop limit.  I've never messed with OCO but it seems like one could have a favorable setup with that.  Stop-Limit at a reasonable price and then a stop-market as a safety net. 

    Sometimes i'm trading medium term on the indices with a stop, the price will spike down (which is fine, i know having stops run is part of it) but i'll get filled a million miles from where its even trading.  It's potentially the worst fill on the book! 

    thanks for your time <<MM

  16. I wonder if the dems, i.e. Pelosi, is going to hold up the stimulus until after the election. Sounds foolish, but maybe….thoughts?

  17. iPhone 12 now charger, no headphones

  18. I meant no charger 

  19. I dont think the Dems will hold up stimulus but they have no incentive to compromise.  Either they get everything they want and claim the win going into elections or stand firm and blame Team Turnip for the fail.

  20. wow two trials stopped now….

    Eli Lilly's Covid-19 antibody trial paused over safety concerns

    The Phase 3 trial of Lilly's (NYSE:LLY) ACTIV-3 monoclonal antibody has been ordered by the FDA to pause over safety concerns. The news was first reported by the NYT, and the company has confirmed to CNBC.

    Lilly: "We are aware that, out of an abundance of caution, the ACTIV-3 independent data safety monitoring board (DSMB) has recommended a pause in enrollment."

    LLY is slumping on the news, now down 2.8%. Regeneron (NASDAQ:REGN) has a competing treatment. Its shares have moved higher by 1.6%.

  21. NYCB is at multi-year lows. I remember this one as a potential pick a while back, although for which portfolio I cannot remember. Started nibbling on a little today, 1/6 of a position or so. 

  22. Stops/Monk – If you set stop on options, especially in after-hours trading, they tend to get flushed and triggered so I try to only use mental stops and only get out when I feel the trend is really against me.  The most important thing to do is never have more positions than you can manage to stay on top of!  

    Stimulus/Snow – Given that it's only 3 weeks away I wouldn't put it past anyone to use it to their advantage but all Reps are up for re-election and I think they'd all like to show they've actually done something ahead of the election.

    AAPL/Rookie – Imagine how much money that saves AAPL.  60M IPhones x $50 for headphones and $20 for charger = $4.2Bn.  Not to mention saving on packaging and shipping, store space, etc.

    Trials/Batman – Well we knew they were rushing it and that's what happens when you rush these things.  REGN may be the right way to go.  Less prevention, more treatment!  

    NYCB/Ati – I do like them, nice regional bank that gets no respect.  I wouldn't play them now as NY has a rental crisis, housing crisis and small business crisis at the moment.

  23. Speaking of which, notice the big banks are boosting their earnings by reducing their loan loss reserves and then whining to the Fed and Government that the country needs more stimulus – so people can pay off their loans…  what a joke!  

  24. Phil / BANKS – yep = JPM took reserves way down last Qtr…. fun and games

  25. Analysis: The Senate playing field is collapsing on Republicans

  26. Analysis: How you know Lindsey Graham is starting to panic