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Why Worry Wednesday?

Move along folks, nothing to see here.

The new, more contageous strain of corona is in the US and McConnel killed the additional stimulus but why should that bother the markets?  The good news is, with most of the country back on lockdown, we "only" had 201,106 new cases yesterday and "only" 3,628 Americans died yesterday – which was 9% better than Monday so YAY!!!, I guess….

Here's a fun fact, there are only 924,107 "staffed" hospital beds in the US – ones where the patient can be monitored.  Only 20% of them have the potential to have ventilators – even after US having 9 months to get ready.  124,686 Americans were hospitalized YESTERDAY – most of them cycle out within a day or two but every time one lingers on, it diminishes our total capacity to care for the rest.  

The US ranks 32nd in hospital beds per capita, right behind Turkey but better than Columbia so YAY!!! again, I guess.  Remember what China did when Covid started – they built two giant hospitals just for Covid cases on just a few weeks and that country only had 90,000 cases – TOTAL.  The US will ring in the New Year with 20M cases and not one wing has been added to any hospital – no Government effort at all has been made to make sure we are prepared, leaving us no choice but to go back on lockdown.

It's one thing for the Government to say they don't want to have lockdowns because they hurt the economy but when the same Government does nothing to make it possible to NOT have lockdowns – what do they think is going to happen?  You can't govern this ineptly by accident – it has to be the plan….

California, Ohio, North Carolina and Puerto Rico now have "stay at home" orders in place – no going out unless it's absolutely necessary as their hosptial systems can't take any more patients.  PA, MA, DE, WS, KY and NM have all issued stay at home advisorys – trying to not make it an order if they don't have to.

What could possibly be better for the stock market, right?  Maybe we'll get lucky in 2021 and get hit by an asteroid or something – then we'd see Dow 40,000 for sure – because that's the way the markets work now, apparently….

The Russell 2000 Small Cap Index (/RTY) has been rejected at the 20,000 mark so perhaps the fact that 25% of small businesses have closed down and another 1/3 of the ones that are left don't know if they will make it through the first quarter MIGHT be leading investors to hesitate slightly before paying record-high prices for the small caps but doesn't look like it's any reason not to give Tesla (TSLA) $666/share at a $631Bn valuation as a reward for making $2Bn this year – only 315 times earnings.

Chipotle (CMG) is still going strong at $1,400 and we're aiming for $1,100 at the end of next year as well as $1,300 or lower by Jan 15th – only two weeks away.  The net cost of our CMG spread in the Short-Term Portfolio (STP) is $42,722 and, if CMG is below $1,100 by next January, the spread will pay $180,000 for a potential profit of $137,278 (321%) - that's a nice hedge as it's doubtful CMG will not sell off with the market and it's also doubful CMG will get through 4  earnings reports justifying it's current $39Bn valuation when this year they will be lucky to make $300M so that's 130 times earnings for a fast-food franchise?

CMG Short Put 2022 21-JAN 1,100.00 PUT [CMG @ $1,393.97 $1.76] -3 10/28/2020 (387) $-39,525 $131.75 $-48.60 $-7.75     $83.15 - $14,580 36.9% $-24,945
CMG Short Call 2021 15-JAN 1,300.00 CALL [CMG @ $1,393.97 $1.76] -5 10/28/2020 (16) $-41,550 $83.10 $18.00     $101.10 $-2.00 $-9,000 -21.7% $-50,550
CMG Long Put 2022 21-JAN 1,400.00 PUT [CMG @ $1,393.97 $1.76] 6 12/17/2020 (387) $124,542 $207.57 $-7.77     $199.80 - $-4,662 -3.7% $119,880
CMG Short Put 2021 15-JAN 1,250.00 PUT [CMG @ $1,393.97 $1.76] -5 12/21/2020 (16) $-4,750 $9.50 $-6.18     $3.33 $-1.48 $3,088 65.0% $-1,663

You CAN be sensible and still make money in this market – it just takes longer…

 


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  1. Good morning


  2. Good Morning.


  3. GILD

    hi Phil & members 

    What do you think about this article (speculation ?) the guy did some more write ups on it the following days

    https://www.griproom.com/fun/it-looks-like-gilead-is-about-to-merge-with-roche

     

     

     


  4. Well with all Phil's anger, where people not only in the US but also in Europe not understand the sincerity of the matter, I wish to draw your attention to some trade comments, which I made in the past, but I guess no one follow any way. 

    ABBV I mention various plays when the stock was trading at 86$ 10/6/20

    AMGN when it was trading at 220$ 12/23/20

    AAPL when it was trading at 114$ 11/23/20

    From some other source I received DFS 11/4/20 trading at 68 sell the Jan21 77.5 call for 2.00 and sell the jan21 60 put for 2.65, this one I did not even enter because for me the div. was to low on the stock, but well again. just have a look where this stocks are today. 


  5. Yodi – No offense, but you could have thrown a dart from October to now and made 30% +.

     

    Even the Russell is up 30%+ since November…..


  6. Good morning!

    GILD/Youri – No idea whether it's true or not.  Roche is massive and can afford the deal and GILD is attractive so it's not like it doesn't make sense but there's no reason to believe it's true based on one guy's speculation.

    Thanks for the trade ideas Yodi, they are appreciated but, as we can see from the volumes, no one is trading at the moment.

    Come up with a good short idea like mine on CMG – THAT would be impressive!


  7. 1020

    The difference is no play at 0% and yes play at 30% I need it as for the € I have to pay now 1.21 as before 1.10.

    But you mention dart playing did not beat a German just yesterday the previous world champion, may be I will consult him for the next play.


  8. GILD…. Jan 23 50/65 BCS, selling the 50P for a net CREDIT of ~2.30.  NICE!


  9. Yodi/1.21  Yes, my bicycle parts cost me more…. :(

     

    As far as darts – I learned from the best!

    https://www.youtube.com/watch?v=8BF95hdIuOg


  10. Just for those who are happy with 30% however, I started my third round of poor man’s trade on BHP 
    Original bought in Sep. 20 the leap call 50 Jan 22 for 9.20, now selling May 21 70 call for 3.15 and 60 put for 3.00  


  11. Yodi – Thx for your trade ideas and happy with the returns. 

    Followed you into AT&T. Will look for more such dividend plays. 



  12. rs_trade Glade I could make one man happy. Just always remember this are my plays and NO recommendations, every one should do their own homework.


  13. 1020, 30%%%%%% what to WBA up .20% today but frozen otherwise.


  14. Yodi – I'm sure like myself, many of us read your comments. 

     

    Trade or not, I appreciate your efforts.  :)


  15. rs_trade look at MO at 40.87 and sell 5 Feb 21 call 43 at .70


  16. MO if called 5 Feb 21 you make 6.9% in 37 day. Sorry not 30% but better than nothing!!!!!


  17. Why we ‘send them money’






  18. No seminar today as daughter is in town? Didn't read as I've been trying to catch up after a glitch with Amerx and Amzn who hacked my account. Makes life complete.


  19. Yodi – trades  I follow some of your trades in T and looking at MO just don't comment  or trade much in this over priced market


  20. yodi/MO – that premium looks decent. Will check it out thx

    How much minimum return do you generally look for when selling premium on your BCS? 

    Historically, how many months did you need to go out to get that return? ie sold calls 1-2 months out


  21. GILD/Pharm – Still a great value.

    GILD is back where we like them and we cashed them out of the LTP so, for the LTP, let's get back in with:

    • Sell 5 GILD 2023 $50 puts for $8 ($4,000)
    • Buy 10 GILD 2023 $50 calls for $12.80 ($12,800)
    • Sell 10 GILD 2023 $65 calls for $6.75 ($6,750) 

    That's net $2,050 on the $15,000 spread that's $7,000 in the money to start with an upside potential of $12,950 (631%) if GILD can power up to $65 over the next two years.  Worst-case is you own 500 shares at net $60.10 – because we sold aggressive short puts but, hopefully, GILD will go even lower and we can double down on this one.

    By the way, no Webinar today.  My daughter is here and I'm leaving early for a family dinner.


  22. rs_trade You asking basically in respect of 3 different trades 

    1. covered call trades by selling calls against the stock you own, you can as well sell a cash secured put at the same time. Important is you are sure you want the stock at this price. Like MO at 35 I fell comfortable with. Most of this type of trade should have a return minimum 1% per month. Which month? In case of the MO trade above you will not get any div. over that period. Going over three month you should receive a div. as well if not called away. I am looking for healthy stocks with a minimum of 3% yield p.a. 

    2. Poor man's trade. Where you sell a leap call with a delta of about .70. I do not sell a leap call with these plays. The short leap call only reduces the profit of you combined play. I sell monthly's up to 3 month out playing against this leap call.

    3. The normal Phil type BCS, with a possible as well leap short put. Here you have the opportunity that the put will same what compensate the loss on the short leap call if which goes against you if the stock goes up. Again you can sell half the amount of short month calls against it. Also 1 to three months out.

    For item 2 and 3 I use mostly stocks which pay no or little div. , as the premium is mostly much higher.

    Not clear just ask. 


  23. BertII I feel MO T or GILD is not so much over priced. Obviously compared to Mar 20 2020 most are over priced.


  24. Yodi – Thx for the detailed response


  25. Wow, someone just traded 600 IBM 2023 calls @ $20.5.  $1.2M trade.


  26. Phil / TSLA – Second time bumping up agains 700….  May hit this by end of year…  Do you still have the Jan 15 700 shorts in portfolio?


  27. Batman 

    TSLA looks like that 700 short call is a bit hot at the moment, short puts are looking much better. This stock is to hot to PLAY


  28. TSLA/Batman – No we didn't go back to TSLA this round.

    As Yodi says, too hot to play.  

    A little selling into the close but no real damage.


  29. Yodi / Thank You

    Thanks for sharing your trades and explanations. I find them valuable. 
    I added more MO. Already have T.