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Monday Market Movement – Archegos Liquidates

Well we had our first Financial Disaster this weekend.

The Financial press is painting over it as we don't want to upset people at the end of the quarter but Archegos Capital Management had to (for reasons unknown) liquidate $30Bn worth of holdings, one of which was Viacom (VIAC) which dropped 50% in last week.  While $100 was too high for a stock we loved at $40, $50 is back to being too low and we bottomed out at $40 in Friday before bargain-hunters finally moved in.

VIAC all by itself lost $30Bn in market cap last week and now it's at $30Bn at $48.50/share for a company making $2.5Bn a year – it's a great time to jump into this blue chip holding and, for our Long-Term Portfolio, we're going to play it this way:

  • Sell 10 VIAC 2023 $40 put for $12 ($12,000) 
  • Buy 15 VIAC 2023 $40 calls for $18.50 ($27,750) 
  • Sell 10 VIAC Jan ('22) $60 calls for $7.50 ($7,500) 

This is an aggressive net $8,000 into what is technically a $30,000 spread but we can easily sell 5 more short calls to recoup 1/2 of our cash but, more importantly, we can roll the 2022 $60 calls out to 2023 $80 calls (for example), which are $7.50 too and sell 5 more and we'd drop our basis to about $4,000 on a $60,000 spread that would be at least half in the money or we wouldn't have rollled it.  That's our plan if VIAC goes higer and, if it's flat, we'lll sell the 2023 $60 calls for another $7,500 and engineer a free spread and, if it's lower, we're very happy to add to the position as our worst-case scenario is being forced to own 1,000 shares of VIAC at net $48 – the current price.

That's a lovely trade to start the week off with, Archegos may not want VIAC anymore but we sure do!  Another stock that was trashed by Archegos is Discovery Financial (DISCA) – also losing about half their "value" though value is in quotes because it was never worth $80 in the first place.  DISCA too is getting interesting down here but not quite as compelling as VIAC so, in this case, we can just sell the puts in our LTP as our promise to buy the stock – if it goes lower:

  • Sell 5 DISCA 2023 $40 puts for $12 ($6,000)

We are collecting $6,000 in exchange for our promise to buy 500 shares of DISCA for $40 so our net entry would be $14,000 or $28 per share – a 33% discount to the current price is our worst case and, if DISCA stays over $40, we simply keep the $6,000.   On the whole, we'd almost rather it go lower so we can have a cheap stock for the long-haul! 

That ship is still stuck in the Suez Canal and Oil (/CL) is still $61.50 but it's going to be a great short here.  The Dollar is super-strong near 93 and that can boost the market if it comes down so we can mask a lot of selling into Quad-Witching Wednesday to close out the month.  Friday will be our Non-Farm Payroll Report and we have 8 Fed speakers along with Dallas Fed this morning, Case-Shiller and Consumer Confidence tomorrow, Chicage PMI & Investor Confidence on Wednesday and PMI & ISM Thursday, so it's a busy data week for sure.

There's always something to buy in the market if you wait patiently.  We had no idea we'd have an opportunity to get back into Viacom but having cash on the side allows us to act and pick up the bargains that are presented to us.  We still have to be patient and see how the re-opening goes but Biden's very aggressive vaccine schedule (I get my shot on Saturday!) is giving us hope that things could be sort of normal in the 2nd half of the year – just in time for people to go out and spend the next round of stimulus checks!  

 


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  1. Good Morning.


  2. that was fast, somebody bought 1000 Jan23 $45 calls in VIAC 


  3. i was reading about TM   Because of the Fukushima disaster, Toyota implemented a policy to always keep 6 months of parts in stock  They are going to fare much better than their competition, most of whom have had to cut production due to the chip shortage. 

    Phil, can u recommend an option play.  I think I want the dividends. 


  4. As a side note, I went car shopping over the weekend and visited BMW, Porsche, and Mercedes. ( no comments please ) . Good luck finding inventory or making a deal, especially if its an SUV.  Porsche delivery is 5 months out.  BMW , no deals , and Mercedes will deal on some of their lesser models. Guess I should have gone to a Lexus dealership, re my above question to see if they have better inventory. 


  5. now they are buying the DISCA May and June $45 calls

    Phil knows value when he sees it !


  6. Good morning!  

    Nice drop on oil to start the day off right.  $60.50 is the stop now.  

    And $60 will of course be bouncy from $61.50 by 0.30 (weak) at least so no sense in not cashing in at $60 and then re-playing if it crosses back under (and stop drops to $60.25 once we cross below that).

    VIAC/Stock – Wow, that's what happens when I make a play above the non-Member cut-off.  Still down at $46 though, great entries on our spread!  

    Don't forget, for the LTP we have these two from the above post:

     

    Well we had our first Financial Disaster this weekend.

    The Financial press is painting over it as we don't want to upset people at the end of the quarter but Archegos Capital Management had to (for reasons unknown) liquidate $30Bn worth of holdings, one of which was Viacom (VIAC) which dropped 50% in last week.  While $100 was too high for a stock we loved at $40, $50 is back to being too low and we bottomed out at $40 in Friday before bargain-hunters finally moved in.

    VIAC all by itself lost $30Bn in market cap last week and now it's at $30Bn at $48.50/share for a company making $2.5Bn a year – it's a great time to jump into this blue chip holding and, for our Long-Term Portfolio, we're going to play it this way:

    • Sell 10 VIAC 2023 $40 put for $12 ($12,000) 
    • Buy 15 VIAC 2023 $40 calls for $18.50 ($27,750) 
    • Sell 10 VIAC Jan ('22) $60 calls for $7.50 ($7,500) 

    This is an aggressive net $8,000 into what is technically a $30,000 spread but we can easily sell 5 more short calls to recoup 1/2 of our cash but, more importantly, we can roll the 2022 $60 calls out to 2023 $80 calls (for example), which are $7.50 too and sell 5 more and we'd drop our basis to about $4,000 on a $60,000 spread that would be at least half in the money or we wouldn't have rollled it.  That's our plan if VIAC goes higer and, if it's flat, we'lll sell the 2023 $60 calls for another $7,500 and engineer a free spread and, if it's lower, we're very happy to add to the position as our worst-case scenario is being forced to own 1,000 shares of VIAC at net $48 – the current price.

    That's a lovely trade to start the week off with, Archegos may not want VIAC anymore but we sure do!  Another stock that was trashed by Archegos is Discovery Financial (DISCA) – also losing about half their "value" though value is in quotes because it was never worth $80 in the first place.  DISCA too is getting interesting down here but not quite as compelling as VIAC so, in this case, we can just sell the puts in our LTP as our promise to buy the stock – if it goes lower:

    • Sell 5 DISCA 2023 $40 puts for $12 ($6,000)

    We are collecting $6,000 in exchange for our promise to buy 500 shares of DISCA for $40 so our net entry would be $14,000 or $28 per share – a 33% discount to the current price is our worst case and, if DISCA stays over $40, we simply keep the $6,000.   On the whole, we'd almost rather it go lower so we can have a cheap stock for the long-haul! 

    TM/Stock – What a great premise, I love it!   Toyota is not that cheap – historically.  $155 is $215Bn and it's no TSLA and they should make about $15Bn so not bad but usually they trade around 10x and we're kissing 13.

    On the other hand, They've been rangy for years – as have revenues and profits been so we can expect them to hold the band over $100 but the options are short-term to December, so not that much fun to play as the Dec $120 puts are only $2.  So, unfortunately, I'd have to be PATIENT and see them back at $120 before I'd want to jump in again.

    Cars/Stock – Becoming a huge problem already and not going to get better.  You should put deposits down on all 3 and sell the 2 that come later for a profit.

    DISCA/Stock – That's why I got this:

    Trader's Expo Discounts | Phil's Stock World


  7. Gold took a dive. 

    Oh noooooooooooooooooooooo! 


  8. Good morning PSW Team! Been AWOL for a while now busy working 80 hours a week.Hoping to slow down soon and have more time to worry about the markets!

    But wanted to connect today to wish Phil a Happy Birthday! Survived the pandemic so good for another 50 years I guess.

    My wife's grandmother turns 101 in 2 weeks, that's my example!


  9. Happy Birthday, Phil!

     

    stjean – Don't work too hard – Good to see you!


  10. Welcome back StJ!  Happy Birthday to Grandma – gives me hope it ain't over yet…

    I was talking to my daughters about being 3 times their age but then you consider they've only had about 12 years of solid memories – it's a big gap. 


  11. Happy Birthday Phil!  Here's to many more!


  12. Happy Birthday Phil!


  13. Happy Birthday Phil !


  14. Phil,

    Happy permanent 39th Birthday !


  15. Happy Birthday Phil!  


  16. Phil, Happy Birthday! Stay healthy and wealthy!!



  17. Happy Birthday Phil!  Is your Birthday today or yesterday .. my wife's Birthday was yesterday so either way, yours is now bookmarked in my brain.


  18. Wow, a chance to short oil at $61 again (they are unblocking the canal) – what a good birthday this is turning out to be!  


  19. Well Phil it looks today that some of the members are still alive, turning up for your birthday!!!. From an old man I am wishing you many more years.

    Stay healthy. Yodi


  20. Happy Birthday Phil! Party on!


  21. Thanks for all the Birthday wishes, folks.  Maddie will be 21 in July and wants to go with me to Vegas – that will be my party, hopefully.  

    Biden making progress on the Infrastructure Bill, another $3Tn is giving the markets a lift at lunch.

    The vast container ship that was blocking the canal for six days has been freed and is moving north to an anchor point, the Suez Canal Authority said, paving the way to open the critical waterway and end days of global supply delays.282

    Southwest to Buy 100 New Boeing 737 MAX Jets

    Airline’s order is boost for the plane maker, which had been hurt by a prolonged grounding and pandemic.25 minutes ago

     

    Abu Dhabi allowed trading of a futures contract linked to its flagship grade of crude for the first time in a debut that could test OPEC’s grip on oil prices.

    Investors Shouldn’t Rush to Book a Sunny European Vacation

    For many European airlines—and some entire economies—much is riding on the hope that vaccination campaigns save the summer season. Too much, in fact, for investors’ comfort.

    Shock-Worn World Economy Girds for Supply Jolt in Suez Mess

    More German Restrictions Loom; U.S. Deaths Fall: Virus Update

    Here’s How the World’s Chip Shortage Is Playing Out for Stocks.

    New York to Expunge Convictions With Marijuana Legalization

    House Prices Are Inflating Around the World

    Average Wall Street Bonus Rises 10% To $184,000 Thanks To 2020 Recession

    Market Rallies On Powell's "Easy Money" Promise.

    77% Of Americans Are Worried About Soaring Inflation 

    Sen. Ted Cruz Shares Video of Kids in 'Biden Cages'

    Ted Cruz: Cartel Members 'Renting' Kids To Bring Them to US Border


  22. Some food for thought.
    Came across a somewhat boring stock EBF, Business Equipment & Supplies, a company with many labels. Unfortunately the options go only until Oct21. Stock is a bit high for my liking, having a somewhat large spread in the Oct call option. 52 weeks between 15 and 22,24, so 20.80 a bit on the high side, having a yield of 4.24%. 
    So I was thinking of the following armchair trade. Buy the stock 20.80 and sell the 20/17.5 strangle for some 3.80. This will give me a combined monthly return of 3.02%


  23. Time to Face Reality: Your Kids Don’t Want Your Stuff! | Kiplinger


  24. First Step Toward Reopening Canal as Ship Refloated: Suez Update


  25. Phil – HAPPY BIRTHDAY!!!!! – Hope this year brings Health, Wealth and Happiness…


  26. Hey all! Happy bday phil, and thanks for the trades. 

    Someone mentioned U a little while ago on this board, and its a stock who's product I find very appealing. Although its not a value stock in any way, I see the business as having a bright future based on some friends in the space who love it. So modeling some possible trades. 

    Sell to Open 10 $80 2023 Puts – $20,000 credit; buy to open 10 $100 2023 Call for $25,000 debit; sell tp open 10  $140 2023 Call for $15,000 credit. 

    That's net $10,000 credit for the $40 spread. Max value at expiration of $40,000 (which would be $50,000 gain). The risk is owning U at net cost of $70 at expiration in 2023 (although that could be rolled). 

    Not executing yet. Waiting to see where the stock bottoms to get a better entry. Also, may cut the trade in half to make it smaller. 


  27. Im interested in U as well, though I know Phil would hate it. I think it has a good long road ahead of it. However, those tech stonks are out of favor at the moment.  


  28. Oil back to $61.50, Nasdaq all over the place.

    U/Rick, Stock – We did talk about them a little while ago.  

    Submitted on 2021/03/09 at 3:18 pm

    U/Harip – They have had quite the roller coaster since going public.  Still at $27Bn with less than $1Bn in sales – you are putting a lot of expectations on the line.  As you say, they provide "A" platform for game developers, not "THE" platform and I don't know of any other development software makers trading at 100x 5-year forward earnings, do you?  I'm not against them but I certainly don't have a compelling reason to be for them either.

    A lot of these development tools flame out because they start out as freeware or very cheap and, if they are useful, everyone uses it to shortcut their development so the company can say impressive things like "90% of the top 100 game-makers use our software" – but that doesn't mean they would use it if you jacked up the licensing fees, does it?  This is one of those cases where the company's specialty is outside of my area of expertise so it's simply a "no play" stock for me.

    As to the $80 puts, Rick.  As long as you like them enough to DD at $40, no harm in accumulating as they do seem good for the long-haul.  I would just sell some puts and wait for earnings to see what they can justify.


  29. Happy birthday Phil


  30. Happy Birthday Phil .. you and Eric Clapton (76)!

    On this day in 1999, the Dow Jones Industrial Average closed at 10006.78 – above the 10,000 mark for the first time ever!  Was that a special day? ;)


  31. Happy Birthday Phil! Many Happy Returns!!


  32. Happy birthday Phil!
     


  33. Happy Birthday, Phil!


  34. Happy Birthday Phil , we share the day , mine as well today , all the best and appreciate the effort you put into the site .


  35. Happy Birthday to you too 2a!