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Wednesday Writedown – Virus Resurgence Spooks Markets

Wheeeeee! 

Down we go again as US cases hang around their record highs and Europe is starting to catch up as another wave of the virus goes global.   No country, of course, can match the US in number of cases or number of deaths because we are truly the most incompetent Government on the planet.  Of 50 US states, only 2 (Mississippi and Mossouri) do not have rising numbers of viral cases – only 2.

The does not, of course, stop Donald Trump's White House from announcing that it has "successfully ended the COVID-19 pandemic" on the same day that 73,240 Americans came down with the disease.  

“We have exploding case counts. Death rates will undoubtedly rise. They are living in a parallel universe that bears no relation to the reality that Americans are living,” said Dr. Tom Frieden, former director of the Centers for Disease Control in the Obama administration. “And this idea that we should let it spread and protect the vulnerable is a really dangerous mistake. The idea that it [containing the virus] can’t be done ignores reality.”

Do you see where it says "National Emergency Declared"?  That was 7 months ago when the US had less than 2,000 cases and now, on October 27th, with 8,779,839 American infected (73,240 in a single day), the White House has declared the National Emergency is over, not because it's actually over, but because it's a week before the election and Donald Trump likes to claim he defeated the Coronavirus at his rallies and now he can say "it's official".  

1,000 Americans per day are dying.  3,393 Americans have died from Terrorist attacks yet 1,000 people, EVERY DAY, are being killed by Trump's virus and he's declaring "Mission Accomplished".  20 years later, we still have to scan our bags and take off our shoes at the airport and even the incompetent George Bush II formed the entire Department of Homeland Security in response to 9/11 and the TSA was formed on November 19th, 2001, 5 weeks after the attack on the World Trade Center.

CartoonsWhy?  To prevent more American deaths.  To help Americans return to their normal lives despite the threat of additional attacks.  That is a NORMAL response to a threat – to prevent it from happening.  Donald Trump's response is more like that of an ostritch, putting his head firmly in the sand while the rest of the GOP puts their heads up his ass!  

226,728 of us are DEAD!  That's 70 9/11s and another 2 9/11s are happening EVERY WEEK under this lunatic yet the polls show he might still be re-elected?  Seriously???  

The death count is rising and is a lagging indicator behind the people who are getting sick every day.  Almost 500,000 of us caught the virus in the past 7 days – that's the most in any week for any country since the virus began.  90,220 Americans died in the entire 21-year Vietnam War – but at least they knew they were being drafted.  116,516 Americans died in World War I and 405,399 died in World War II – we're certain to beat that number before this thing is over and possibly much, much worse if we continue on the insane path this country is currently taking.

So vote like your life depends on it in the coming week – it just might…

Sales pitch, meet reality | The Seattle Times

Meanwhile, as we expected (I did say DOOM!!!) once we failed our key support line of 3,420 on the S&P, there was nothing holding the index up and it's been a pretty solid drop for the last couple of days and today is not looking any better as we're already down 2% in the Futures.  Oil is down 5% this morning as yesterday's API Report showed a 4.5M barrel build in inventories.  $37.50 should be bouncy on Oil Futures (/CL) with our EIA Report coming out at 10:30 so that's a fun way to play if you need a bullish bet (with tight stops under $37.50, of course).  

Meanwhile, with the 15% line of 3,277.50 now in sight on the S&P 500 (/ES) it's a good time to take profit on our hedges as that line should be bouncy.  How bouncy?  Well if we count this as a 10% drop from the 25% line then the weak bounce should be 2% or, more exactly, 3,562.50 is the 25% line so we had a 285-point drop which means we will have a 57-point weak bounce to 3,335 and a strong bounce would take us to 3,392 and that is the now-declining 50-day moving average. 

Now, keep in mind we haven't actually hit 3,277.50 but, if we see the strong and weak bounce lines from that PRESUMED drop acting like they matter – then that's a pretty accurate predictor that we WILL be testing our 15% line again.  Still, even if we do, the bounce back to 3,335 is almost inevitable – even if we're going to drop another 5% or more, so NOW, at 3,319, is a good time to cash out our hedges and get ready to take advantage of the bounce.  

We did our last Short-Term Portfolio Review back on Tuesday, the 13th, when the S&P was at 3,500 and the STP was at $484,069 and now it's up to $620,909 so up $136,840 in two weeks is a very nice hedge for our Long-Term Portfolio (LTP), which has fallen from $1,070,623 to $974,283 – down $96,340 so we're making more money on the way down than up and today being a big down day – it's a good day to take profits on our shorts.  

It's been brought to my attention, however, that the TSLA stock split in the STP was not accounted for correctly and roughly 1/3 of the gains ($141,420) since before the split (9/1) are overstated.  That has no bearing on the gains from other positions, of course, but TSLA is a big position and, as that's very difficult to unwind in the context of this STP so I think the prudent and educational course is to start a new Short-Term Portfolio that is capable of protecting a $1M LTP in this market environment.  

This is a great opportunity to cash in and re-position and we'll carry forward just $200,000 to protect our just-under $1M LTP with the following new hedges.  

  • Sell 5 CMG Jan $1,300 calls for $82 ($41,000) 
  • Buy 6 CMG 2022 $1,300 puts for $220 ($132,000) 
  • Sell 3 CMG 2022 $1,100 puts for $130 ($39,000) 
  • Sell 3 CMG Jan $1,150 puts for $25 ($7,500) 

That's net $44,500 on the $120,000 spread but it's really more than that as we can roll the short puts along to lower strikes and widen half the spread.  Also, it's really less than that (net) as we have several mre short put sales ahead of us and we should be able to knock down at least 1/2 of that net cost which makes this a very efficient hedge offering $80,000(ish) of downside protection. 

SQQQ – Up to $23.75 at the moment!  

  • Buy 100 SQQQ 2022 $20 calls for $11 ($110,000) 
  • Sell 75 SQQQ Jan $25 calls for $4.70 ($35,250) 
  • Sell 25 SQQQ Jan $21 puts for $3.10 ($7,750) 

That's net $67,000 on a rollable $50,000 spread but the 2022 $35s are $8.40 so we can pick up $30,000 more (net $37,000) and widen the spread to $150,000 but I sure hope the Nasdaq doesn't crash that hard.  This keeps us flexible without taking too much risk on the bounce.

TSLA – Still too high!   The problem is we don't have huge profits to play with so it's not a great fit.

So that's it for now, we'll see what kind of bounce we have and add more protection as needed.  

 


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  1. Good morning everyone. Here is the link for today's webinar.

    https://attendee.gotowebinar.com/register/2391351339590228492


  2. i can picture what Trump will say – "well look at socialist Europe, they shut down hard, shut down everything and they still had a second wave.. we have the greatest economy is the history of the world (i love it when he says that btw) we can't just shut down, Joe will make us shut down and he'll punch god in the face and raise your taxes by 900% and take away your boats"


  3. Good Morning.



  4. Well, we now have an M formed Phil!


  5. Phil / SPY – Are you still looking for this to drop into he 3100 mark before it finds support?


  6. FSLR a bright star on today's drop 15.3% UPPPP


  7. PETS Phil's deal of yesterday still a good deal today stock still up especially the short call same up as the long call, just do not sell the put!


  8. GE +7.5% today. Another bright star..finally!


  9. jeddah62, Lost a farm with GE same as GM would not buy them if they would go for free.


  10. Ouch Yodi, me too but hoping to get even


  11. CIEN / Phil. Any thoughts on another one that got whacked on earnings?  Good 5G play?


  12. looking at trumps tweets for today the rallys remind me of the smokers on their ship with dennis hopper in the movie Waterworld


  13. Phil/IBM

    Good morning!

    At some time, I believe we either had in one of the portfolios or unofficially bought the 

    2022 IBM 120/140 spread for $10 with selling of 5 of the 2022 $100 puts for $13, NOW $27.7.

    On March 23, at least I rolled the $120 long calls down to the $100 calls for $10. I left the 140's unchanged.

    The $100/140 spread is now $14.5/4.5, or net 10 approximately.

    Q- what if anything would you do here? Don't know about you but, I don't see IBM at 140 in 2022. Perhaps 120.


  14. Good morning! 

    Notice we're cashing in these STP positions and starting a new STP with $200,000 aimed at protecting the LTP in a, hopefully, more nimble fashion.  

    /ES at 3,275 should be a good, bouncy spot with 26,500 on /YM, 11,200 on /NQ and 1,550 on /RTY.

    Dollar should be rejected at 93.50 – it's like a check-sum for the indexes:

    Now the question is, how bouncy?  

    LOL Monk! 

    M/StJ – below 3,300 is not good!  

    SPY/Batman – No, I was looking for the re-test of the 15% line and that's what we just got.  Now I just watch and let the bounces tell us what to expect next.

    FSLR/Yodi – Nice move.

    Oil even worse, testing $37

    /RB $1.055!  

    Things that make you go MMMMMMMMMMMMMM

    GE/Jeddah – Might have finally bottomed.  Good thing to look for on days like these.

    CIEN/Jeddah – They are generally a good company but someone is not excited about their prospects.  If you remind me this evening I'd be happy to take a closer look as it's an interesting drop.

    Donald Trump looks really like Dennis Hopper (Deacon) from the movie  Waterworld! - YouTube

    IBM/Maya – I think we took it off the table.  I like them now again.  We re-added them on 10/12 – not the best timing.

    I wouldn't change the $100s other than to go to 2023 if you feel like it but I'd buy back the $140s as we either bounce and you can sell them for more or we consolidate around $110 and you sell the 2023 $115s (now $12) and roll your 2022 $100s ($14.70) to the 2023 $85s ($26) so the net cost of that exchange would be an 0.70 credit to put you in the 2023 $85/115 bull call spread.  That's wider and deeper than the original spread you seem to have spent net $12.50 on.


  15. EIA was not that bad:

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.3 million barrels from the previous week. At 492.4 million barrels, U.S. crude oil inventories are about 9% above the five year average for this time of year. Total motor gasoline inventories decreased by 0.9 million barrels last week and are about 3% above the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 4.5 million barrels last week and are about 17% above the five year average for this time of year. Propane/propylene inventories increased by 100,000 barrels last week and are about 11% above the five year average for this time of year. Total commercial petroleum inventories decreased by 3.9 million barrels last week

    Sill like /CL over the $37.50 line for the bounce.  


  16. Unfortunately, turning down again.

    Webinar time!


  17. BTW, since 2010, banks have forgiven $287M of loans to Trump presumably because he could not pay them back or told them he would not. They could not have predicted he would be president so not looking for favor. Will the US ask for loan forgiveness from our bondholders? The guy is running the country like his own business.

    And with any other president, this would be front page news for weeks and months. With Trump, it's simply Tuesday!


  18. Man, the Motley Tools are really banging on Intel.  No wonder it can't catch a bit.

     

    NVIDIA and AMD Shouldn't Worry About Intel's Discrete GPUs

    Intel is shipping its first discrete GPU in over two decades — but the initial benchmarks are underwhelming.


  19. I would not bet on Intel right now. AMD is really much closer than they have ever been as far as competition is concerned. And NVDIA with ARM will be competition in many places as well – datacenters, laptops and so on. Windows runs on ARM now, mostly Qualcomm but NVIDIA could get there as well.


  20. stjeanluc / INTC

    I have uncovered INTC positions now? Any thoughts on what I can do with them?

    Thanks.


  21. INTC / sk2020 – Maybe Phil can weigh in but you might want to list your positions. Myself, I am not in the stock and staying away for now.


  22. Phil – Thanks for the webinar.   :)


  23. INTC is getting me nervous too.  I feel buyers should step in at the 40-45 range but if we have a bad market drop, who knows.


  24. stjeanluc / INTC

    Phil said to sit tight with INTC for now and cover them when the stock recovers. 


  25. There's no point in worrying about Trump's crimes, StJ – there's a blanket pardon in his future.

    INTC/Jeddah – Oh no, INTC must be so terrified!  

    INTC/SK – Not much to do but be patient at the moment.  Can't react to every turn.

    You're welcome 1020.

    Very ugly finish today.


  26. Phil – CIEN.  Reminder to check them out as you requested.  I took a stab at a few 2023 30 calls.  Reading it's COVID causing order delays.  May go down more, but looks like a good entry into 5G fiber rollout.


  27. For S&P, looking for 3250 as a line in the sand. 

    But we added selling on top of the selling today. If markets are truly worried about the number of virus cases, how can you expect a rally. It's going to get worse before it gets better. 

    I guess tomorrow we can expect the best GDP number ever which of course will come after the worse one ever. Trump will be celebrating the fact that we got back 90% of what we lost as a huge win! Just like selling a property that you bought for $100M for $90M and claiming it was your biggest sale ever.


  28. GDP/StJ – That's why I'm sticking with the /CL longs – just in case. 


  29. And France back in full confinement again! 


  30. Holy crap, /CL down to $36.  Too scary to play this time.  

    Good morning, by the way.


  31. Good morning! That SCO play is looking pretty nice on my screen this morning ;)