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Friday Market Folly – Up and Up Regardless of Events

Higher and higher we go.

994 Americans died from Covid-19 yesterday, 1 per minute during the debate where Trump denied it was a problem, leading Joe Biden to give him a WTF?!? look.  As Trump falsely stated that we are "rounding the corner" on the virus (we are not) and that a vaccine was ready (it is not), Biden pointed out that projections indicate that over 300,000 people (50% more) will be dead by Christmas – though he didn't say it that harshly.

In reality (a place we're no longer familiar with) Pfizer and Moderna have both said they could apply for Emergency Use Authorization from the US Food and Drug Administration in the coming weeks, but only if they have positive results from their Phase 3 clinical trials. Neither company says they know whether the results will be positive. Pfizer has said they could apply for emergency use authorization after the third week in November. Moderna has said they could apply in early December.

"99.9% of young people recover," Trump said. "99% of people recover. We have to recover. We can't close up our nation," Trump said.

So far, about 2.6% of people in the US who tested positive for Covid-19 died from it, according to Johns Hopkins University. Recovering from Covid-19 depends on someone's underlying health conditions, and many survivors experience lingering symptoms. Health experts are unclear as to why some people experience lingering symptoms and other internal damage.

"If you look at the people who were sick, but didn't require hospitalization," Dr. Fauci said, "when you look at the percentage of them — that actually recover, and recover within two to three weeks — a substantial proportion of them don't feel right."  According to a CDC survey, symptoms subsided in some people in as little as five days, while others, studies show, have experienced symptoms several months later. Only 65% of 292 people surveyed in the CDC study from April 15th to June 25th said they returned to their normal health as soon as five to 12 days after they tested positive for Covid-19 – as Trump claims to have done.

Trump fails to mention that the reason for his amazing recovery from Covid-19 is he was given over $100,000 worth of experimental treatments not available to the average American and he began his treatment the moment he tested positive and was take to the hospital immediately.  Like everything else in his charmed life – Trump gets preferential treatment that's not available to the average person and then he says you just need to be like him to succeed.

Coronavirus: How Trump killed tens of thousands of Americans.In the debate, Trump claimed that "2.2M people were expected to die" and therefore he's doing a good job but, in FACT, that was the number expected to die if no actions were taken (and they didn't say "by election day 2020 in 9 months").   With only 2.4% of the population infected (8M/330M), 230,000 Americans are, in fact, dead and 2.4% is 1/40th of 100 so 40x 230,000 is 9.2M potential deaths if we "stay the course" with President Trump.

Oh, and a note to the people who feel I'm being "too political" – if Obama or Biden or Clinton were President and recklessley causing the deaths of hundreds of thousands of American citizens and endangering the lives of my children, my family, friends and neighbors – I'd be criticising the terrible job they were doing and calling for their removal from office as well.  I'd even consider giving Donald Trump a try, rather than re-elect an incompetent, ecotistical, tyranical monstrosity that has brought our country to the brink of ruin.  It just happens that, in this particular case, Donald Trump IS the incompetent, ecotistical, tyranical monstrosity that has brought our country to the brink of ruin…

Meanwhile, the market keeps bouncing around but it's been a big downtrend for the last two weeks and, so far, it's a weak bounce off the 20% line that's keeping us from real trouble.  The 25% line on the S&P 500 is 3,565 so 3,420 isdown 145 points which means a weak bounce is 29 points (20% of the drop) to 3,449 and a strong bounce is up another 29 points to 3,478 but I'd call it 3,450 and 3,480 to round things off.  Finishing the week without a strong bounce makes us very vulnerable into the weekend and 3,467 is the 2-week moving average – which will be a tough nut to crack.  

So that's an excellent shorting spot on the S&P 500 (/ES) Futures this morning if we get there and, of course, tight stops above that line.  We're also liking the sell-off in Intel (INTC) this morning as a chance to jump in and here's how we're playing it in our Long-Term Portfolio (LTP) from our Live Member Chat Room:

INTC – I think the worst hit for INTC was the Hynix deal is going to cost them 14% of revenue (for sure) and they weren't clear about the impact on the bottom line.  I like buying INTC low as it's a true cyclical and this is a down cycle.   Our entre play in INTC so far has been selling short 2022 $30 puts back in March and then, on 7/24, we bought a spread that now turns out to be too aggressive but, at a net entry of $35,000 so far, we're very early in the scale so now we have to decide if we want to own a stock at $56 (net cost) that only makes $1.10 per quarter.

INTC Short Put 2022 21-JAN 30.00 PUT [INTC @ $53.90 $0.40] -10 3/12/2020 (455) $-3,000 $3.00 $-2.07 $-3.00     $0.94 $-0.05 $2,065 68.8% $-935
INTC Short Put 2022 21-JAN 50.00 PUT [INTC @ $53.90 $0.40] -20 7/24/2020 (455) $-17,000 $8.50 $-2.25     $6.25 $-0.30 $4,500 26.5% $-12,500
INTC Long Call 2022 21-JAN 45.00 CALL [INTC @ $53.90 $0.40] 50 7/24/2020 (455) $55,000 $11.00 $1.18     $12.18 $-0.17 $5,875 10.7% $60,875

Of course, gains are not the only reason to own a stock (as we recently discussed) so we take advantage of the $5 dip to roll the 2022 $45 calls at $9.50 (guessing $47,500) to the 2023 $40 calls at $14 ($56,000) and we sell 30 of the 2023 $55 calls for $8 ($24,000) and that drops the net of the trade from $35,000 to $19,500 for 50 2022 $40s covered by 30 2023 $60s and we'll have to deal with the short puts one day, maybe.

So now we have a potential $100,000 spread that's $40,000 in the money we paid net $19,500 for and if INTC is over $50 in Jan 2022, the short puts go worthless and we get $50,000+ back on this "failed" entry.  Meanwhile, I see that the Jan $55 calls should still be $1.20 so selling 20 of those puts another $2,400 in our pockets while we wait, using 84 of our 819 remaining days on this trade.  10 short sales like that is another $24,000, which would pay for the entire spread using a blue-chip stock whose revenues are down 5% in one of the worst economic crises in human history.

I think I'll stick with it….

If there were an upside catalyst for Intel, it would be in contention for our 2021 Stock of the Year but I don't know how long it will take them to turn around so it's just a simple value play on a stock we don't mind being "stuck with" for the next decade or so.

Intel should be back around $48.50 this morning, the bottom of it's uptrending range for the past 10 years.  If you're not going to buy a stock when it's cheap – when will you buy it?  

Have a great weekend, 

- Phil

 


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  1. Good Morning.


  2. Hi Phil I regret that some of the people still not see the sincerity of the corona virus. In all point I see it your way, but only the clown was never sick, he just used it to trick the rest of the world. Even with 100k of treatment I think no one get over the sickness in three day. Please!!!


  3. I posted this European time this morning, but for reference here it is again. I see KMB is up already.

    KMB Dropped 7% yesterday!
    My following plays ideas all based on 100 stocks and one option.
    That poor man’s trade!
    Buy Jan 23 125 call for 22.90 Sell Jan 23 125 put for 15.80. Cash out lay 710.00. Hold back and watch the development of stock for the next few days at present the Nov 20 141 call sells for 2.50.
    Here you can use the long leap call as stock replacement for selling short monthly calls.
    KMB has a yield of 3.1% 
    So spend 138.09 on the stock sell the Jan 125 put for 15.80 And sell the Nov 140 call for 3.10. Net cash outlay 11,920.30. Should you get assigned Nov. 20 you make 5.01 on the deal in 28 days or 7.9%. Not including the discount of the put sale in respect of the stock price!!!
    On none assignment you can ride the stock and you can continue your short monthly call selling one or even three month out for a combined return (interest and opt. premium) of about 2.7% per month.
    Please not prices might be different after Market opens!!!


  4. INTC for what it is worth. I bought the Jan22 45 call for 9.95, today still worth 8.00


  5. Phil,

    I have the following INTC positions:

    Sold  6 contracts Jan 2021  $40 PUT received $ 4.50 and also

    Sold 6 contracts Jan 2022 $ 45 Put Received $6.25

    Please advise on how to improve my position, perhaps a BCS or adding a Jan 2023 Put. 

    Thanks as always for your help.


  6. jasu1 Selling more put will alway increase your margin, obviously you will get more cash. At this point I would buy only Jan23 40 calls at 12.30 and wait for the stock to recover.


  7. yodi / INTC

    Are you rolling Jan22 $45 calls to Jan 23 40 calls? The net debit now is $4.40.

    I see Phil selling Jan21 $55 puts. Did he mean to sell Jan21 $45 puts? 


  8. Good morning!

    3,460 on the dot – very nice for our /ES short. 

    Gotta love the 5% Rule!  

    Regrets/Yodi – France is having scary spikes in cases too.  This is a very bad global situation.

    Daily Covid-19 cases rise above 40,000

    Not sure what France is doing wrong – do you know Yodi?

    Good job on KMB – that's the way to take advantage of earnings:

    INTC laying around at $54.   

    What to Watch for in China's 5-Year Plan as Economy Shifts to Self-Sufficiency.

    In Xi Jinping’s China, Nationalism Takes a Dark Turn.

    Huawei Outhustles Trump by Hoarding Chips Vital for China 5G.

    Chicago Issues Business Curfew as Cases, Hospitalizations Surge.

    WeWork Default Is a Real Possibility, Fitch Ratings Warns

    Goldman’s Image Stained Again With Damning 1MDB Settlements.

    Inside the Left’s Web of ‘Dark Money’. - From the WSJ

    The Biden ‘Family Legacy’. - From the WSJ

    Red and Blue States of Recovery. - From the WJ 

    New Hunter Biden allegations hover over final Trump-Joe Biden debate. - Fox

    Hunter's ex-partner recounts meeting Joe Biden, says sons were 'paranoid' about hiding father's involvement. - Fox 

    Man, those Murdochs are working overtime for Trump!  

    Digital payment stocks Square and PayPal surge this year, but a market analyst has a warning.

    Gilead's stock rises as FDA formally approves remdesivir.

    Good time to be more aggressive with GILD.  In the LTP:

    • Let's buy back the 30 short 2022 $65 calls, now $6.50.

    Since they pay a $2.72 dividend, in the Dividend Portfolio:

    • Let's sell 5 2023 $57.50 puts for $10 ($5,000).  

    $5,000 is as much as we'd collect in dividends for 2 years and our worst-case scenario is getting assigned 500 a net $47.50.  Ordinary margin is just $2,194 so a nice, efficient way to make $5,000 and, even in a 401K, just $23,750 so $5,000 is a nice 21% return over 2 years – even at full margin.


  9. INTC/SK – I meant calls and it's not an official sale, I'd rather wait for a bounce.  Just looking ahead to income that CAN be produced. 


  10. sk2020 I will stick to my Jan22 45 calls as they are now still ITM. Paying 4.40 to better 5$ and one year is to much for me. I am not sure what Phil means with Jan21 55 puts are 7.85


  11. INTC obviously for a new start is the same as I show with KMB.  Buy INC Jan23 40 call for say 12.40 and sell the Jan23 40 put for 5.50 gets you in for 6.90. Wait with selling calls.

    Or make a quicky. Buy the stock at 48 and sell the Dec20 50 call for 1.30. You possible get called and gain 3.30.


  12. INTC you even can sell 2x Jan23 puts for 11.00 gets you in the 1x long call for 1.40. As I daught INTC will be below 40 in Jan23.


  13. Good morning, 

    Phil / Yodi, I will wait you conclude your INTC ideas because I made many times your changes but I did not arrive to same results. You said to sell 55 calls then after you said potential 100k on 40/60 spread…..

    I think I understood your solution but not your numbers potential results. Can you clarify, please?

    Tks,


  14. Phil the daily corona cases in France 41000 in 24 hours Spain 20,000 in Germany 12,500. First you need to take the number in relation to the population. Germany has 82 Mill, Spain 41Mill people, not sure about France but I think 60 Mill.
    The problem are mainly the big cities, where people not play by the role, Masks, distance 1.5 to 2 meters and hygienic. Parties, weddings, restaurants and bars, where ever people meet in groups of more than even 5 you have a good chance of picking up the virus. Now your next human is your biggest anomy, Regret to say. There are many foreigners in France, they do not care or play by the role. Spain is a family orientated country with hugs and kisses. No good. But look even Spahn, German minister of health received the virus, obviously a serious man, and not a clown, even Spahn can not be cured in 3 days.


  15. marcel55 , INTC I can not answer for Phil's calculations. But I think my above comments are easy to understand. I gave the plays on KMB and INTC. Obviously prices on stock and options can change quickly during the day. A 40/60 BCS has a potential of 20 if the stock price at expiration is over 60. 20 x 100 = 2,000 per one option play, less the money you paid for the spread.


  16. INTC – I think Phil means the Jan21 30 puts which are about $1.20


  17. yodi, i agree with you no chance trump had the virus it was just another fake episode in his presidential reality tv and twitter show.


  18. Phil / yodi INTC

    Thanks for your comments. 

    I am choosing not to roll for now since the numbers don't make sense to me. 

    In stead of rolling, I am thinking of taking advantage of the dip with following additional trade

    10  BCS INTC Jan23 40 / 60  and sell 5 INTC Jan23 50 puts for a net debit of $1,750 for a $20,000 spread. 

    What do you think?


  19. sk2020 I would hold back a bit with the 60 call. Only buy the 40 at present


  20. yodi / INTC

    I understand holding back 60 call for now. 

    What about selling 50 puts while buying 40 cals.?

    Thanks.


  21. 50 put is a bit high but I am sure the stock will be over 50 by jan23. My feeling only!!!!!!


  22. Phil All European governments do not like to hear the world full lock down, as it will harm the industry, however for me closing a bar at 10 or a restaurant at 9, is to me the same as putting a plaster on a broken foot. So specially for the winter coming, I daught this will work. 




  23. Phil / INTC – can you recommend short term caller for a qtr tor so out on this – I'm covers some long term short puts.  





  24. WHR/Phil – WHR is relentless!  I need help with this position

    200 shrs WHR (from put assignment 2019) @ 123

    covered with -2 Jan 21 $125 Call @ 12.50 now 71.85

    cherry call -1 Jan 21 $145 Call @ 17.00 now 52.80

    How to cover cherry call?

    Thanks!


  25. bai2r,

    WHR 125 plus 71.85 = 196.85. 145 plus 52.80 = 197.80. Stock is trading today at 197.00, so I would close the stock 39,400.00 and buy back the three options. 5280.00 and 14,370.00 total 19,650.00 and you left with the rest. Reget so sold more calls than stock. 200 stock against 3 calls. So you just left with under 20K to do a better trade.


  26. bai2r If you however like to hold on to the stock you could roll the 2 125 callers to Jan 23 220 caller and sell 3x Jan23 170 puts, which should brings you about even on the roll. But you still will have to pay 5280.00 for the 145 caller.


  27. Yodi – thank you for the 2 suggestions! I will evaluate your suggestions taking into account the 1.25/qtr dividend.


  28. /ES was very well-behaved, right off the pink line at 3,434:

    Thanks for the local color, Yodi.  Yes, the 3-day cure was indeed "miraculous".  And notice how Trump is now selling himself as "virus-proof".  

    Oil got splattered today.

    INTC/Dave – You have to refresh your pages, it's been corrected.  I meant selling the short calls for income against the long spread.

    INTC/SK – $60 may be a big of an aggressive target.

    INTC/Batman – Jan $55 calls opened at just 0.80 and are now 0.70 but those are the ones I want to sell for $1.20 but, if you can't wait, the $52.50 calls are $1.15.

    WHR/Bai – I imagine $200 will be some resistance.  They are doing very well as I guess people have nothing else to spend money on at the moment (the ones who do have money).  Funny how you got assigned 200 at $123 from someone who didn't see the value….  

    Looks like you are screwed though as that's way in the money so you have to cash out your $200 shares at $125 ($25,000) – or just let yourself get called away.  Then you can offer to buy 200 more shares for $150 by selling 2 2023 $150 puts for $26 ($5,200) so now you have $30,200 and the short Jan $145 call at $5,250.  The Jan $145 call can be rolled up to 2 of the 2022 $210 calls at $270 and you can cover that with stock ($40,000), which would put you net $10,000(ish) out of pocket but with $42,000 upside potential or you can cover with 4 of the 2023 $200 ($40)/260 ($20) bull call spread at net $20 ($8,000) and you'd have $22,000(ish) in pocket and a very nice spread.  

    And Yodi's works too!


  29. Phil /INTC – I was looking at those 55s as well. It looks like a good resistance. I'll see if I can get 1 for them.   


  30. Phil, you skipped over my request on INTC. Would appreciate your expert guidance. Thanks


  31. Yodi, thanks on  the buy of the 2023 $40 call.


  32. Yodi, thanks but I am not talking about prices or quotes. This trade that you suggested its very simple. I did not understand Phil rolling. I will wait for Phil answer. Thanks for your help.


  33. INTC/Jasu – Wow, what a widely held stock!    Well they are at $48 so I wouldn't worry about the short puts, there's not much to improve.  The short Jans are dead and the 2022 $45 puts are $5.90 so not even a loss and the 2023 $40 puts are $5.70 if you want to roll but why bother – there's nothing wrong with the $45 target for 2022.  If anything, I'd add the bull call spread while it's cheap.

    INTC/Marcel – Again, I was saying we COULD (in the future) sell short calls against the above spread to generate an income.


  34. Sputtered into the weekend.

    Have a great weekend, folks, 

    - Phil



  35. Amy Coney Barrett faces recusal questions over links to Shell


  36. Eyes turn to Texas as early voting surge surpasses 2016











  37. Phil, thanks on INTC. Specifically, what BCS would you recommend!