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2.5% Friday – Payroll Gains Inspire Market to Close on a High Note

We're up 2.5% for the week.

That's thanks to 943,000 jobs being added in July and unemployment droppoing to 5.4% so, in the very least, we WERE going very nicely before the Delta virus began to spread.  Wages were up 0.4% in an attempt to keep up with non-existent inflation.  As you can see from the Payroll Chart, we're still down about 6M jobs from where we were before the pandemic and, in 18 normal months, we should have added 4M additional jobs to keep up with population growth but, luckily, population isn't growing much so we're down perhaps 7.5M jobs below where we should be and that is about 5.4% of the labor force

The surveys for the NFP Report are conducted in the middle of the month (so they are always lying to you when they call it July jobs) and we'll see if new lockdown restrictions are having an effect – a month from now.  Meanwhile, this report is positive so the markets will jump on it and the Dollar will pop and oil will go higher and gold will go lower – all the stuff that usually happens when the economy looks stronger.  

Some local governments and businesses have reimposed mask mandates, but have avoided a repeat of last spring’s broad closures. However, New York City this week said it would require people to show proof of vaccination for indoor activities, such as dining, gyms and events, and the New York Auto Show, set for later this month, was canceled because of the variant. Similar policies and cancellations, if adopted more widely, could have a chilling effect on consumer behavior.

Recent Indeed data showed job postings, which had been increasing at a slower rate this summer than the spring, declined in late July. The drop primarily reflected fewer available jobs in Manufacturing, Construction, Warehousing and Transportation sectors hit by supply shortages - rather than the Delta variant.  Meanwhile, About half of states have ended participation in federal programs that allowed workers to collect an extra $300 in benefits a week and stay on unemployment rolls longer than the six months allowed in most states. Those benefits are set to expire in the remaining states in early September.

With 7.5M people unemployed x $300 x 4 weeks, that's $9Bn/month or over $100Bn per year that is being removed from the economy and hopefully some of those people will find jobs but others will have their benefits expire entirely, not just the bonus so there will certainly be a dip in consumer buying power in September, no matter what

And then we have the evictions coming.  Yes, the moratorium has been lifted but the legal process to evict is long and tedious so getting 4.5M families out of their homes by Christmas is going to be a hard job (go long on Law Firms) but the landlords can't wait to get started.  And bleeding heart liberal that I am, I do however see the landlords' point, as the process needs to be fixed.  In theory, the landlords are supposed to get compensated for unpaid rents but, in practice, it's a paperwork nightmare and many are falling through the cracks.  

That's another hit on the economy as 4.5M families not paying rent also puts $9Bn/month into the economy so another $100Bn a year of stimulus will be removed in Q4 – no wonder the Fed doesn't want to add to the chaos….

Here's a wonderful photo essay from the NY Times of THE City as it re-opened this summer.  Let's hope we're all back to normal soon.

Have a great weekend, 

- Phil


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  1. Good morning all

  2. Good Morning.

  3. Phil/FRO In June was top trade at 8.65 with 2023 7/10 strangle. now its 7.51 and 7 straddle is about 2.8. nett less than 5. is it good for a new trade? Tia

  4. Phil / Fubo – Relatively new Entry into the sports streaming – but really sports betting. growing paid user base by over 100% as well as revenue.

    Betting will start late this year with deals already signed with MLB, NBA ( and workmen on Deal with EU Soccer ) I think this has huge potential.  They are in investment mode at the moment, so no profit short term, but I think it may be able to earn about 1 to 1.2 sh in the '23 timeframe…..  this should trade easily get a 40 to 60 price range….  I think in the fall we'll more of the betting lines on TV and Apps.  with live steam on screens….

    ….  LT puts are enticing….  

  5. Flying cars coming soon, yeah, right – I want a jetpack like that guy – person? – who keeps zooming around LAX.

  6. Lithium Stocks Sizzle as Electric Vehicle Sales Leap 200% in 2021

  7. FUBO & Online gaming.   

    Today someone bought 1000 PENN 2023 $100 calls for 11.75 after their deal to buy Score yesterday 

  8. Stockbern / FUBO / PENN – this industry / area is in the early stages…. there are lots of players….. lots of growth….  now that Football, Futbol, NBA, NFL, MLB and others are blessing it…. it's got lots of wind at it's back…

  9. Good morning!

    FRO/Stuart – They actually beat in Q1 by a lot but they projected lower rates in Q2 while, at the same time, extending their debt with more tanker purchases.  

    • Frontline (NYSE:FRO): Q1 Non-GAAP EPS of $0.04 beats by $0.10; GAAP EPS of $0.15 beats by $0.22.
    • Revenue of $193.99M (-52.9% Y/Y) beats by $96.94M.
    • Reported spot TCEs for VLCCs, Suezmax and LR2 tankers in the first quarter of 2021 were $19,000, $15,200 and $12,000 per day, respectively.
    • For Q2, the company estimates spot TCE on a load-to-discharge basis of $18,100 contracted for 70% of vessel days for VLCCs, $13,600 contracted for 63% of vessel days for Suezmax tankers and $14,200 contracted for 59% of vessel days for LR2 tankers.
    • Frontline expects the spot TCEs for the full Q2 2021 to be lower than the TCEs currently contracted, due to the impact of ballast days at the end of Q2 as well as current freight rates.

    We sold 50 FRO 2023 $5 puts in the LTP for $1.30, I'm not worried about those.  Our more recent FRO play on June 15th was:

    In the Dividend Portfolio, let's:

    • Buy 2,000 shares of FRO for $8.65 ($17,300) 
    • Sell 20 FRO 2023 $10 calls for $1.50 ($3,000) 
    • Sell 20 FRO 2023 $7 puts for $1.40 ($2,800)

    That's net $11,500 or $5.75/share and, if assigned 2,000 more at $7, our average would be $6.375, which is where we wish we'd caught them.  So that's our worst case and best case is we get called away at $10 with $20,000 plus maybe $1 in dividends is $2,000 more for a net profit of $10,500 (91%) in 18 months.  Not bad for a conservative play!  

    FRO Short Put 2023 20-JAN 5.00 PUT [FRO @ $7.53 $0.04] -50 3/2/2021 (532) $-6,500 $1.30 $-0.43 $-1.30     $0.88 - $2,125 32.7% $-4,375


    FRO Frontline Ltd. 2000 6/15/2021 52 $17,300 $8.65 $-1.15 $8.65     $7.50 $0.01 $-2,300 -13.3% $15,000
    FRO Short Call 2023 20-JAN 10.00 CALL [FRO @ $7.50 $0.01] -20 6/16/2021 (532) $-2,800 $1.40 $-0.73     $0.68 - $1,450 51.8% $-1,350
    FRO Short Put 2023 20-JAN 7.00 PUT [FRO @ $7.50 $0.01] -20 6/15/2021 (532) $-2,700 $1.35 $-0.28     $1.08 - $550 20.4% $-2,150

    So about even at the moment on the spread and I do still like it but, as a new trade, I'd rather buy the stock for $7.50 and sell the 2023 $7 calls for $1.80 and the $7 puts for $1.65 to net in for $4.05/5.525.  If they go back to paying that $2 dividend – that's 50% a year!  

    FUBO/Batman – Too far pre-profit in a crowded space for me.  $3.7Bn used to be considered a lot of money, you know….  

    Oil tumbling back down as Dollar keeps going up (more jobs, more demand for $$$)


  10. Phil/FRO i closed out the puts for a profit and will get back in with the dividend play.Thanks

  11. There's no dividend at the moment.

  12. Phil/ NRG – I have 20 of 2023 25/40 BCS for $4k.  I never got a chance to sell puts.  It's trying to breakout or getting toppy???  Would you sell naked calls like Dec 46 or too dangerous?  I'm notoriously crappy at timing and would hate to ruin a good thing. TIA

  13. RRD is a boring company that's cheap again.  We played them a long time ago and caught a good pop so, for the LTP, let's sell 25 of the March $4 puts for $1 ($2,500) to remind us to keep an eye on them.  

    BIG still gets no respect and they are back to $54, we already have them in the LTP and it's still good for a new trade at net $4,350 on the $30,000 spread that's $15,000 in the money at $55.   We sold short calls when we started, they just expired worthless. 

    BIG Long Call 2023 20-JAN 45.00 CALL [BIG @ $54.51 $-0.57] 15 4/14/2021 (532) $45,000 $30.00 $-14.80 $30.00     $15.20 $-0.02 $-22,200 -49.3% $22,800
    BIG Short Call 2023 20-JAN 65.00 CALL [BIG @ $54.51 $-0.57] -15 4/14/2021 (532) $-30,000 $20.00 $-12.65     $7.35 - $18,975 63.3% $-11,025
    BIG Short Put 2023 20-JAN 40.00 PUT [BIG @ $54.51 $-0.57] -15 4/14/2021 (532) $-8,400 $5.60 $-0.65     $4.95 - $975 11.6% $-7,425


    NRG/Jeddah – Wow, what a pop!  

    You spent net $4,000 and it's going to pay you $30,000 - why do anything?   You could sell 10 Jan $45 calls for $3.25 ($3,250) to lock in some of the gains but if that's how they do on a miss – who knows what will happen when they beat?  As long as you don't mind buying more long-term calls, it's not likely to hurt you.  

    In the LTP, we bought back the short calls on the dip – I'm very happy about that!  

    NRG Short Put 2023 20-JAN 28.00 PUT [NRG @ $44.12 $2.15] -10 3/17/2021 (532) $-4,200 $4.20 $-2.95 $-2.55     $1.25 - $2,950 70.2% $-1,250
    NRG Long Call 2023 20-JAN 25.00 CALL [NRG @ $44.12 $2.15] 20 5/26/2021 (532) $18,500 $9.25 $10.05     $19.30 - $20,100 108.6% $38,600


    • NRG – We just rolled the longs lower and doubled down on the last dip.  I say $42 would be $17 on the calls for $34,000 and we're at net $25,425 now but we'll sell some short calls like the $40s, which are now $3.25 for maybe $5 ($10,000) and then we'll be net $15,425 on a $30,000 spread so let's call it $12,500 of upside potential.   

    Let's sell 10 NRG 2023 $28 puts for $4.50 ($4,500) in the LTP per Brendan.  

    Submitted on 2021/04/27 at 12:05 pm

    NRG we've discussed before – still stupidly cheap:

    We sold 10 2023 $28 puts for $4.20 in the LTP (now $2.90) and, now that the stock is back in the bottom of the rising channel, let's buy 10 of the 2023 $30 calls for $9 ($9,000) and wait on selling short calls.  Earnings are not until May 6th and they pay their dividend on the 30th.   If all goes well, we'll sell $45 calls, now $3 for $5+ for a very cheap spread.  

    NRG/Jeddah – They took a $750M hit on the storm in Feb and that's about a year's income so 20% off over 5 years is how that comes back.  At $33, they are $8Bn in market cap and they make $1Bn in a good year so nothing wrong with them going forward for the long-term.   In the LTP, we took a flyer back in March but it was small and now I think we're at a good bottom.  Our initial trade was (we bought back the short calls):

    I don't have a problem with the $28 target so we can leave those but let's roll our 10 2023 $30 calls at $7.30 ($7,300) to 20 of the 2023 $25 calls at $9.25 ($18,500) and I want to sell the 2023 $35 calls, now $4, for $5 when they come back a bit.  

    NRG/Jeff – I answered you in the Webinar but then I realized you might not be on it.  

    What I said was, what's our premise?  Our premise is that NRG is bottoming here and we want to DD on the longs and sell the $35 calls when they hit a target and also sell our $30 calls (as part of a roll).

    As you can see, we were able to buy the $25 calls for $9.25, mission accomplished:

    So far, we can only get $6.20 for the $30s, the bid/ask have dropped to $4.20/6.10

    Our premise is to be long and it's a small position so not too much risk just being long 20 of the $25 calls AND 10 of the $30 calls for now but, even if we do sell them for $1 less than goal, it only impacts the 2x longs by 0.50 per contract – not terrible.  I would certainly rather wait to get our price.  

    As to the short $35 calls we hope to sell for $5 – we'll have to wait for that too.

    If NRG drops to $30 (10%), the delta on the $25s is 0.76 so about $2.25 would be lost there but then the $20s with an 0.88 delta would also be cheaper so we could do that roll and sell the $30 calls instead.  Since the downside of having 40 (I'd DD again) of the $20 calls for about $12, which puts us at the money at $32, is not unappealing – I don't mind taking the risk now to hopefully catch a better price on the spread.  


    Submitted on 2021/06/09 at 11:06 am

    NRG/Jeddah – Just depends how conservative you want to play it.   I think $30 is a very good floor.  I'd sell the $25s and take the $4 off the table and then you have the $30s at $8.50 and you can ask for $4 for the $40s and worst case is you take that for the $37s if $36 fails to hold and then you are in for net $4.50 with at least $2.50 in upside, hopefully $5.50 and next time it dips you can sell puts and use that money to widen the spread again.

    They grow up right in front of our eyes, don't they?

    Great example of how we leg in.  We sold the puts, the calls got cheaper in late April and, rather than panic, we bought those and then waited for a pop to complete our spread by selling short calls.  Only a bit more then 3 months to have a complete entry.

    Even though things are going great, we're going to stick to the plan and cover on the next review.  

  14. Phil / PFE – thoughts on selling naked calls as they are at the channel top. With current COVID situation, maybe they have more room to run?

  15. PFE/Jeddah – Just as a rule of thumb, I don't sell naked calls against stocks I like because, if I'm forced short (like we are with CMG in the STP), I don't have the conviction to stay with the trade.  On the other hand, if you have 30 of the 2023 $30/45 spreads and they are now net $10 ($30,000) out of $15 ($45,000) and you want to sell 10 (1/3) short Jan $45s for $2.60 ($2,600) then I don't consider that naked shorting as you have a $15,000 buffer and a full year to roll to higher strikes.  Figure 2 more sales like that is selling $7,500 in premium against your $30,000 position so that's a bonus 25% over 18 months so it's almost foolish NOT to do that.

    Wow, Gold almost back to $1,750.  GOLD down at $20.88.  Earnings are next week so, in the Earnings Portfolio, let's sell 10 of the 2023 $20 puts for $3.10 ($3,100) and buy 10 of the 2023 $23 calls for $2.25 ($2,250) for a net credit of $850.  Why the $23s, because we're very happy to roll them down to the $18s ($4.30) for less than $2 if GOLD goes the other way and THEN we'll make a 2x bull call spread or, if GOLD pops on earnings, we'll have a super-cheap bullish spread to work on.  

    In Q2, the average selling price of gold was over $1,800 – those are the numbers that are being reported.  This Q has been at $1,800 until today and, unless gold is collapsing next week – it's not likely to change their guidance much.  Guidance for this year is $1.22/share x 15 is $18.30 – so I'm very comfortable with the short puts and the rest of the trade is free on a stock we don't mind owning LONG-term as it's also a great inflation hedge.

  16. 3 Reasons Why It Is Time To Buy Gold, Silver & Miners Hand Over Fist

    GOLD has one of the lowest all-in sustaining costs of large blue-chip miners with them coming in at just $929/oz in Q4 (lower than NEM's $950/oz AISC by way of comparison). Even better, AISC has been declining over the past several quarters and management expects these declines to continue over the next several years as they continue to improve operational efficiencies. Given the rising price of gold over the same time period, GOLD now enjoys record-high profit margins and expects them to only grow larger in the years to come.

    With significant gold and copper reserves being mined using cutting-edge methods from diversified and fairly operationally-friendly locales, GOLD presents an attractive risk profile for investing in gold and copper.

    GOLD's proven and probable reserves imply a mine life estimate of more than 10 years of very stable production, giving it plenty of time to benefit from the appreciation that we expect to play out in gold and copper prices in the coming years:


    • Large Gold and Copper Reserves: As already discussed, Barrick owns significant copper and gold reserves and is only getting started on building out its copper business.
    • Attractive Jurisdictions: While you can never fully mitigate geopolitical risks, GOLD has one of the lower geopolitical risk profiles given the jurisdictions and geographic diversification of its assets, in particular its massive Nevada assets.
    • World-Class Mines: GOLD has some of the best assets in the world – with a leading number of tier 1 mines and low and declining AISCs and uses cutting-edge techniques to maximize safety and productivity.
    • Large Margin of Safety: GOLD's profitability and profit margins are at all-time highs and their valuation indicates a meaningful margin of safety. As a result, they should still be able to generate solid returns even if gold prices underperform our expectations and/or they run into a few operational or geopolitical challenges.

    As a final note, GOLD has an extremely strong balance sheet and is free cash flowing heavily with low AISCs that are only getting lower with each passing quarter. They are also focused on being disciplined about returning large sums of free cash flow to investors instead of getting greedy and leveraging up with new acquisitions. As a result, the company is extremely well-positioned to weather significant volatility in the gold price.

    In the LTP, we already bought back the short calls from our earlier trade but the set-up was the same:

    GOLD Short Put 2023 20-JAN 20.00 PUT [GOLD @ $20.89 $-0.37] -20 1/8/2021 (532) $-7,400 $3.70 $-0.65 $-3.80     $3.05 $0.20 $1,300 17.6% $-6,100
    GOLD Long Call 2023 20-JAN 18.00 CALL [GOLD @ $20.89 $-0.37] 50 2/26/2021 (532) $21,250 $4.25 $0.10     $4.35 $-0.40 $500 2.4% $21,750

  17. Any thoughts on a new PFE trade or are they a bit too expensive?

  18. PFE/Swamp – Too expensive at $45, though it's "only" $252Bn and they are making $2Bn a month so still a good price but that's massively boosted by vaccine sales that may or may not go on long-term (but will certainly last into next year).  Interestingly, on PFE, you can still sell the June 2023 $35 puts for $1.85 and I'd LOVE to own PFE for net $33.15 so that's one way to keep an eye on them (other than patiently waiting for a pullback, of course).  The June 2023 $45 ($5)/55 ($2.50) bull call spread at $2.50 isn't too terrible as it pays 100% on a move up and, on a move down, you spend $5 to roll down $10 to the June 2023 $35s (now $11) and sell some Jan $40s (now $5.75) to help pay for it.

  19. Have a great weekend, folks!

    - Phil

  20. Pelosi and Yellen to Discuss Rental Assistance as Eviction Crisis Looms