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Flip Flopin’ Friday – Markets All Over the Place

Coronavirus (COVID-19) Testing - Statistics and Research - Our World in Data153,000 new cases yesterday

The virus is spreading at an alarming rate and the futures are up half a point this morning – go figure.  Do you want to know why you can't see the US on this chart?  Because 153,000 new cases for 330M people is 463 cases per Million people – the chart doesn't go that far!

Across the United States, daily caseloads surged. Illinois reported a record number of infections for the second day in a row. Ohio and Minnesota each topped 7,000 daily cases for the first time since the pandemic began, while Pennsylvania and Indiana reported more than 6,000 cases in a day, according to Johns Hopkins. Other states recording all-time highs included Colorado, Utah, New Mexico, South Dakota, North Dakota, Oregon, New Hampshire and Vermont.  

The rising numbers of cases pushed hospitalizations higher. The number of people hospitalized due to Covid-19 rose to a record 67,096 for Thursday, according to the Covid Tracking Project. Intensive-care units continued to face pressure. As of Wednesday, there were 12,796 Covid-19 patients in ICUs, the highest number since May 2.  The U.S. death toll, meanwhile, surpassed 242,000 as more than 900 new fatalities were reported, according to Johns Hopkins.

School districts nationwide are split on their closing plans as community infection rates vary and transmission in many locations has been relatively contained.  Cities such as Detroit, Boston and Baltimore have shut down or scaled back in-person learning because of increases in coronavirus cases. Other large school systems including Chicago and Philadelphia that didn’t reopen schools during the fall term are deciding to keep students at home longer.  Meanwhile, schools in Oregon, Texas and elsewhere are keeping schools open despite increases in infections.

Grocery stores are reinstating purchase limits on items like paper towels or soap for the first time since the spring, as consumers stock up on staples amid rising Covid-19 cases.  With people staying at home more, retailers say there is renewed demand for paper products and frozen foods. Stores also are reporting new shortages in staple cooking ingredients like butter and spices.

The markets had a bad, but not terrible week as we're still hanging out just under the 25% line and, while an optimist may say that looks bullish, a realist might say that looks exhausted and it won't take much to push us right back down to the 15% line at 3,277.50 again.  

Last week we made some changes in the Short-Term Portfolio, to increase our coverage into the weekend as we had "No Stimulus, No President".  This week we have a President but we also have an ex-President that won't leave – so I don't consider it much of an improvement yet and, of course, no stimulus either.  The Long-Term Portfolio had a good week, going from $1,055,660 to $1,145,403 (up 129% for the year), so up about $90,000 for the week means we should take about $30,000 and spend it on more hedges to lock in our gains.  

With the little dip in the S&P, the STP had a nice week, going from $174,483 to $203,763 so it's one of those nice weeks where we're up a bit in both portfolios.  That happens because, whether bullish or bearish, we try to sell as much premium as possible and, in a week where we're pretty flat – we can make money on both sides! 

  • CMG – We bought back the short-term short puts last week so we're more aggressively bearish now.  If CMG stays below $1,300 into January we make $26,975 on the short calls and the spread is good for $120,000 or more below $1,100 and it's currently at net $93,270 but we're not in that for the win – we're using it to cover the short puts (we are covering our short calls with CONVICTION!) we sell and we made $10,365 on the last set.  We'll sell more on the next dip.   

  • SQQQ – We rolled to 2x the 2022 $15 calls and SQQQ is at $19.90 so we're well in the money on what I'll call a $300,000 spread because the short Jan $25s will be easy to roll and the other short calls are at $30 but, really, we can do better over the next year.  Currently the spread is net $67,312 so we conservatively have $232,688 of downside protection if SQQQ goes up $5, which is  25% and it's a 3x Ultra so an 8% drop in the Nasdaq would do it.

TZA – Here's a great place to spend money.  We moved our Jan $25 calls to the April $15 calls for $2 and now they are $1.58 but the April $10s are only $2.70 so let's spend $1.12 ($11,200) to roll the April $15s down to the April $10s and double down on the April $10s (100 more) for another $27,000.   So we've spent $38,200 but now our 200 TZA April $11 calls are $1 in the money ($20,000) and a 10% drop in the Russell, to 1,550, would be a 30% bump in TZA, to $14.30 and the spread would be $86,000 so we'd get about +$50,000 back on our investment.

So that's about $300,000 worth of protection against a 10% market drop and I don't think the LTP will lose more than that so we don't NEED to add more protection than that at the moment as it's a regular weekend but then it's Thanksgiving and we're going to want serious proetcion into the holidays.  

For now, let's just enjoy Friday the 13th!  

Have a great weekend, 

- Phil

 


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  1. KMB, my todays play would be a limited risk play to sell the Jan 21 130/135 put for  1.90. the max loss is 310$. This play is only if you really want KMB, a stock with a PE of 20 and a yield 3.10 % and trading at present at 138.14.


  2. Good Morning.


  3. Good morning!

    Japan Has Worst Day of Covid Cases Yet Amid Fears of Winter Wave.

    Powell Warns of U.S. Economy Risk With Pandemic at Deadliest Yet.

    Chicago Stay-at-Home Advisory to Begin Nov. 16 Amid Covid Surge.

    NYC Schools Headed Toward Shutdown, Teachers Union Head Says.

    Hedge Funds Loading Up on Darling Stocks Got a Rude Awakening.

    States Order New Restrictions as Covid-19 Cases Soar.

    China’s President Personally Scuttled Jack Ma’s Ant IPO.

    Five test positive for Covid on first cruise ship to resume sailing in the Caribbean. 

    This is so stupid!  People just can't do math.  1/40 of the people in this country have been infected.  About 4M (1.3%) people in the US are actively infected so, on a cruise ship with 200 people on it – 3 are going to be infected!  It's not "news" it's MATH!!!  

    Then you take into account that this has to be 200 careless people to be so stupid as to get on a cruise ship in the first place….  Speaking of stupid:  

    Jim Cramer on Thursday’s decline: ‘We have too many bulls’. 

    TikTok can continue to operate in the U.S., Commerce Department says.

    Disney suffers first annual loss in more than 40 years, but stock jumps as losses are not as bad as feared.

    Cisco stock rallies 8% as results, outlook top Street view

    Trump Bans Americans From Investing In Chinese PLA-Linked Firms With Executive Order.

    Feud Breaks Out On Wall Street Over Lockdowns: JPM Says "No Benefit' While BofA Sees Urgent Need.

    Bonds Bid, Stocks Skid As Lockdowns Loom, Stimulus Doomed.


  4. Phil T / PM – I'm looking at my Support and Resistance lines on these stocks – long term – I use these to sell short term callers and puts in the 1+ quarters.   I have PM at 70 and 80, and T at 29 to 36.  can you take a look and see if his makes sense?  Thanks





  5. Lockdowns possible as Illinois, Maryland and Washington governors weigh more restrictions


  6. Phil, Would like your thoughts on what to do with my SDS Jun 21 15/30 Call Spread ?

    Hicket


  7. Renewable Energy / Solar – I have been reviewing the Solar industry for a while,  and am looking for some feedback.  would like to get some discussion no this.

    My current view is that Power Management has the highest profits – companies like ENPH, SEDG …. ( although they also install) are in this space, there are others that are smaller.  .  Solar Panel development is next, with the next highest profit margins – SPWR, FSLR, MAXN, Panasonic, Samsung.   Finally the installers is next with the lowest profit margins, some of these do some development of Panels or Controllers some don’t – SPWR ( moving more into this space), RUN, NOVA, FSLR, SEDG ( moving into this) – this space may have the highest growth, but there is little differentiation in this business model, but this space has the highest revenue growth potential.  

     

    I’d welcome feedback with thoughts on an areas I am missing that may have higher profits, and any companies I am missing that you feel are well run.   If there are, what are they and what do they do, At this time, my view is ENPH and SEDG are the companies to focus on, and if certain price point I’m buying….  BTW I did two years ago in the 5G space and identified AVGO, SWKS, MU, QRVO, AAPL. these I was able to buy get into these at low 200sh, 75 and low 40s

    I think the solar industry is in early stages with growth rates projected at 25% for the next 3 to 5 years …. Some of these companies are expensive now – that’s fine… If  we can ID the best companies and put a value on them, we can get into them on a dip…..   SWKS was at 90+ when I analyzed it,  I started buying in the low 80 and 70s and held into the 130s…. stock and options,   

    Would love some feedback – thanks.


  8. OOPS reposting last item – the formatting god screwed up …..

    Renewable Energy / Solar – I have been reviewing the Solar industry for a while,  and am looking for some feedback.  would like to get some discussion no this.

    I’m looking to identify the business segment that generate outsize profits, or should get outsize growth.   The space consists of Solar Panel development, Power management ( micro controllers) system installers and In some cases leasing. There may be other spaces ( chip designers?)

    My current view is that Power Management has the highest profits – companies like ENPH, SEDG …. ( although they also install) are in this space, there are others that are smaller.  .  Solar Panel development is next, with the next highest profit margins – SPWR, FSLR, MAXN, Panasonic, Samsung.   Finally the installers is next with the lowest profit margins, some of these do some development of Panels or Controllers some don’t – SPWR ( moving more into this space), RUN, NOVA, FSLR, SEDG ( moving into this) – this space may have the highest growth, but there is little differentiation in this business model, but this space has the highest revenue growth potential.  

     

    I’d welcome feedback with thoughts on an areas I am missing that may have higher profits, and any companies I am missing that you feel are well run.   If there are, what are they and what do they do, At this time, my view is ENPH and SEDG are the companies to focus on, and if certain price point I’m buying….  BTW I did two years ago in the 5G space and identified AVGO, SWKS, MU, QRVO, AAPL. these I was able to buy get into these at low 200sh, 75 and low 40s

    I think the solar industry is in early stages with growth rates projected at 25% for the next 3 to 5 years …. Some of these companies are expensive now – that’s fine… If  we can ID the best companies and put a value on them, we can get into them on a dip…..   SWKS was at 90+ when I analyzed it,  I started buying in the low 80 and 70s and held into the 130s…. stock and options,   

    Would love some feedback – thanks.


  9. Phil / Hedge

    I don't have any hedge now. From Oct 30th to now, portfolio is up 32%. Few days ago, it was 35%.

    What can be an effective fresh hedge to protect the gains?


  10. In canada where management of virus has been generally good the experiment to reopen is looking to have failed. High population high density areas are all in serious trouble and politicians are hesitant take the necessary actions. I think the sad truth is there is no viable solution.


  11. So now the eurozone ays they're going to have a "digital currency." What a total waste of time. I can't believe we're 10 years into this great global cryptocurrency experiment and people so fundamentally misunderstand it, especially people who you would think most definitely SHOULD understand it. The point of cryptocurrency is to operate a system of trust without a government component. In the same way that emerging fiat currencies looked backward at gold and asked "what happens if you take away the gold?" and the answer was nothing. One can operate a system of trust without a physical metal component. So crypto comes along and asks "what if you take away the government?" and the answer unsurprisingly is…. nothing. You don't need a government component (laws) to enforce the system of trust if it can be enforced with a distributed algorithm (bitcoin "mining").

    There's ZERO purpose to develop a more modern system of trust on top of a deprecated system of trust. It's like building the first car ever and then pulling it with horses. Fiat currencies are already "digital," in the sense they mostly move around electronically. Does anyone buy stocks with physical cash currency?? LOL!! Only drug dealers use large amounts of cash (and not crypto, by the way).


  12. FSLR, someone sold 1000 Jan22 $50 puts today though odd because the mid price shows $6.60

    ( previous open interest was 9 )


  13. I told you CSCO was too cheap:

    Oil did really well from yesterday, nice $1,500 per contract dip (done now).

    Fatal Thursday – Virus Deaths in the US Hit a New One-Day Record!

    This morning we're recovering back to the bounce line at $42 and our prediction is that fails and we fall below $41 this time we can short that $42 line today with tight stops above – keeping in mind there's a very volatile inventory report at 11am.  If we break over $42, then back to repeat yesterday's plan.

    November 12th, 2020 at 11:26 am | (Unlocked) 

    /RB is coming down nicely, /CL should follow down to $41 – as predicted by the 5% Rule…

    SDS/Hicket – Well it's a $15 spread so let's say you spent $4 on it and now the June $15s are $1.60 but keep in mind that's insurance and the longs didn't lose money so you can re-up your protection by spending 0.80 to roll to the 2022 $15s at $2.40 and you can pay for that roll by selling the $30s for $1.20 – so it pays you an 0.40 credit to buy 6 more months of insurance.  If you can't leave the short Jan calls hanging, then you can offer 0.40 to buy them back and it's just an even roll to the longer-term protection.

    Solar/Batman – Let's call that a weekend project.  As I said, it's easy to get margin when there's no competition in an expanding space but there's no moat to the businesses, they are going to get squashed when the big boys decide to get into that space.  Biden should, generally, be good for solar. 

    Hedges/SK – Any of the ones above are good, SQQQ has the most bang for the buck though.   Cashing in some winners is also a very effective way to reduce downside risk.

    Trust/BDC – Yes but the Bitcoin Government doesn't arrest you for counterfeiting.  Currencies are much more effective when backed by armies.   As to the drug dealers, that's because Crypto can be traced, Dollar bills are more liquid.

    FSLR/Stock – Somebody bought the puts too.

    That would be an epic fail.


  14. How do we contact the hedge fund guy?


  15. Solar/Batman/Phil – There really is no moat on this because the electronics are really simple.  All of the brains are derived out of companies like Analog, TI, and the like which create the IC MPPT regulators that maximize the efficiency of the solar panels.  Honestly, I could probably recreate their electronics in a month if I felt like it.

    I do actually have Enphase microinverters on my solar and their app/web interface are pretty good and they also happen to be the biggest name in town but, regardless, they really don't have anything particularly special about their product.


  16. Hedge fund/Tangled – I'll let Doug know.  Done.

    And what JPH said! 

    Have a great weekend,

     - Phil


  17. Phil / Solar -n Would be great to have you analyze this and get your view..

    Thank You.


  18. Trade Thought over the week end on OPT trading today at 22.20 PE 14.61 Yield 9.91 quarterly div .55. Market value of stock Mar 16 2020 17.81.
    My todays trade idea: Sell Jun21 20 put for 2.70 PM margin 190. Duration of option play 216 days.
    Downside protection 17.30.
    Compare with purchasing the stock cash outlay 2220.00 div over 216 days 1.32.
    Obviously the cash secured put is 2000$!


  19. Solar/Batman – As you know, SPWR is my favorite for the same reason I liked INTC for the past 20 years and NVDA – specialty chip makers with the best designs tend to keep their lead for the long-term.

    SPWR is not as cheap as when I was banging the table for them early in the year but, at 48x earnings, they are still better than half the space.  Of course I have no interest in a new position until they get back to $12 and about 30x – the most I would tolerate.

    As I have to say every time we have these discussion – 3D Printers, Fuel Cells, Cloud Companies – these are all technologies that are obviously "THE FUTURE" but that doesn't mean they are going to make any money.  The small cloud companies got crushed by the big boys and, 15 years later – we're still waiting for 3D printing to catch on (it will) or for Fuel Cells to make a profit (and then the big boys will jump in).

    It's like TSLA, any idiot can make an electric car.  I had electric cars when I was a kid – sadly before I had color TV.  The first cars made were electric – the reason Elon Musk has a "lead" in the market is because big, responsible companies didn't want to lose Billions of Dollars each year selling electric cars but, once they do – they will crush Tesla (just like Edison did to the real Tesla).  

    Power Management has big profits because no one has bothered in the space yet  and I'm a long-term investor – I don't buy things that are going to be hot for a while but that doesn't mean you can't – so there's nothing wrong with ENPH or SEDG if you are playing them for the short run but, at 90 and 66x earnings – I don't consider them a long-term investment until they correct and give us a better entry.

    I think SEDG is better as it's 1/3 cheaper and they will jockey back and forth with ENPH over market share and such but I like their GOOGL partnership, which focuses on EV charging, which makes sense to me as a major growth segment with 200M cars in the US that will go solar over the next 20 years (there's only 100M homes).

    FSLR sucks, I've been saying that for over a decade yet still people keep buying them.  Just because they found a bottom doesn't mean they are a bargain at 38x earnings.  When exactly are they going to "hit their stride"?  They've certainly been given enough chances to get it right, haven't they?

     As always, FSLR "cheats" by seeding their panels with Tellurium, which gives them a performance boost and sure, that's not cheating, that's science, but it's science based on using one of the rarest elements on Earth (10x rarer than gold), which means they can't possibly scale up to double production and profits to match their current price at $80 ($8.5Bn), so they are a dead end.

    One thing that MIGHT help FSLR is NAK – who are sitting on the World's largest deposits of Tellurium but, even if their mine is approved, Tellurium is a by-product of copper mining (3 parts per Billion) so you can't have the tail wag the dog – it's copper demand that creates Tellurium, you can't have Tellurium demand drive copper mining – what would you do with 666M times the copper?  

    So we're back to the part where I'd rather bet on NAK, which could be a 10-bagger, than FSLR, which is already 100% overpriced because NAK doesn't need FSLR but FSLR sure needs NAK.

    MAXN is just SPWR but I like the main part of the company better.  

    Sunrun (RUN) is worth a look if they come back down.  Yes it's boring installation work but 100M US homes need to be installed and RUN has an $11Bn market cap with $1Bn in sales and no profit but they merged with VSLR and that's why they flew higher in July so back to $30 and I'd get in as a very long-term play.  They have a 17% share of the home market vs 5% for TSLA/SCTY, who have a substantially higher valuation (and lose more money).  

      

    Currently, solar accounts for 11.6Tn BTUs out of 825Tn BTUs of Residential Consumption so I'd say there's room to grow in this space!  Again, this goes back to most electric car buyers will want some system installed in their home and Biden/Harris could give us 12 years of support to boost the industry even further.  RUN's clients lease the equipment so their losses are loss-leading and investors will keep feeding the beast as you are building the next great utility companies.

    JKS is another one I like if they ever pull back.  Fantastic growth and even a profit and only $2.8Bn to buy the whole thing.  It's 50x current earnings but these guys are a major World player and it's good to have non-US exposure.  

    OPT/Yodi – Why them?


  20. Trump Family Business Faces Post-Election Reckoning



  21. Thousands rally in Washington as clashes erupt.



  22. Violent clashes in DC after Trump backers’ election protest


  23. OPI why? was trading before March 20 at 35.95. dropped Mar. to 20.70 10/28 even to 18.40. yield 9.9% PE 14.60 with positive cash flow. Just to put a foot in for 2.70 +- if you can get it today, more than the div. 1.30 over 214 days. Downside protection to 17.30, below 18.40. You can even sell the put vertical Jun21 20/17.5 for 1.60 even still better than the div. with limited protection. So only 2 option play will buy you here in Spain a good cup of coffee every day !!!!