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Terrific Tuesday – Inflation Boosts Earnings

J&J (JNJ) to Start Q3 Earnings Season for Pharma SectorInlfation is great!

Johnson & Johnson's (JNJ) Q3 sales were up 11% at $23.34Bn but earnings were only up 3% so IT'S TIME TO RAISE PRICES!   That's right, why should JNJ suffer through inflation when they can make their custormers suffer instead?  And, speaking of suffering, although they have been sued because their talc-based products seem to have been (allegedly) causing cancer all these years – it won't affect the company because they formed a new company that has no assets and assigned them all talc-related liabilities.   Yes, you can do that when you are a corporation (and when the courts are packed with Conservative judges who are sympathic only to the Top 1%).

.Clever moves like that have taken JNJ to new all-time highs recently, topping out at almost $500Bn (now $421Bn at $160) last month on the heels of revenues that have been driven by their lesser-desired Covid shot (8% market share), which will still drive profits this year and next but then they will go back to being a consumer products company who also make medical devices that are featured in many lawsuits – so I'm not sure I think I'd want them for the long-term at these prices.  

That's from 1973!  

Fortunately, JNJ has discontinued their baby powder (rather than just take out the asbestos?) as of last year but Reuters claimed they knew way aback in 1972 that there were high levels of asbestos in lab tests.  They were sued in 1999 but the plaintiffs couldn't seem to get access to the records they needed, so they were forced to drop the case but, 20 years later – the evidence turned up and the suit was back on.  During those 20 years, the documents also depict successful efforts to influence U.S. regulators’ plans to limit asbestos in cosmetic talc products and scientific research on the health effects of talc.

The earliest mentions of tainted J&J talc that Reuters found come from 1957 and 1958 reports by a consulting lab. They describe contaminants in talc from J&J’s Italian supplier as fibrous and “acicular,” or needle-like, tremolite. That’s one of the six minerals that in their naturally occurring fibrous form are classified as asbestos.  At various times from then into the early 2000s, reports by scientists at J&J, outside labs and J&J’s supplier yielded similar findings.

1934 UK Magazine Johnson's Baby Powder Advert Stock Photo - Alamy

Still, this is all LTL Management's problem now as, during the current lawsuit, the company was formed and purchases all of JNJ's talc-related assets and liabilities and then, mysteriously, decided to stop making talc (despite insisting how safe and effective it is), so now they just have the liabilities and, finally realizing that's not likely to be a good business model – have decided to declare bankruptcy – a move that could stall any talcum powder settlements for the thousands of families that have sued the company for Billions of dollars in damages in recent years.

Linda Lipsen, one of the lawyers representing women with cancer claims, called Johnson & Johnson's move "an unconscionable abuse of the legal system."

"There are countless Americans suffering from cancer, or mourning the death of a loved one, because of the toxic baby powder that Johnson & Johnson put on the market that has made it one of the most profitable pharmaceutical corporations in the world," Lipsen said in a statement. "Their conduct and now bankruptcy gimmick is as despicable as it is brazen."

Like JNJ, Proctor & Gamble (PG) also had increased earnings due largely to increased prices, with revenue up 5% to $20.3Bn.  The company expects to spend $2.1Bn on higher commodity costs and $200M on higher freight costs for the year but that's nicely offset by the $4Bn prices increase they "passed along" to consumers.  

Evergrande is still a thing in China but it's a slow drip as they only default as the next note comes due so it will take a long time for a good chunk of their $300Bn in debt to default overall.  It's too early to call anything in the US a crisis but September Housing Starts were down 1.6% and Building Permits were even worse – down 7.7% and even housing completions were down 4.6% but nothing to worry about yet – as there's no sign of a trend.

Tomorrw we get the Beige Book and we'll see what the friends of the Fed think about the state of the economy.

 


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  1. Phil/Online Sports Gambling--

     

    I think the space is and will be very crowded as more and more states approve it – all doing promos and competing for market share.  What are your thoughts about a company like SRAD that provides the data and infrastructure to the sites?  I see also that GENI is an up and comer in that space but not yet profitable from what I can tell.

     

    Thanks


  2. America’s Cash Glut



  3. Supply-Crunch Inflation Gives Central Banks an Unfixable Problem




  4. This is how your brain sabotages your happiness


  5. SRAD/Jeff – It's too new for me to have much of an opinion on.  They seem well-funded but $26Bn at $23.50 with only $500M in sales and $16M in profit is nothing but speculation.  

    TOTAL US Sports Betting by 2025 is expected to be $37Bn from the current $9.5Bn so $27.5Bn in growth in REVENUES means, even if they capture half the market and drop 10% to the bottom line – it would still be hard to justify $26Bn in a maturing market.  And these guys aren't taking the bets, they are selling data – data that can be compiled and sold by others very easily or compiled by their biggest target customers themselves.  GENI is one of those competitors but only priced at $3.6Bn ($18.21) with $300M in sales and running at a loss. Seems to me, GENI is a better bet as they have the same "wide open" potential as SRAD but without already having it priced in and GENI has the exclusive rights to NFL data without which, any respectable betting parlor cannot deal with SRAD exclusively anyway.  So I'd go for GENI over SRAD but I'd go for neither as BYD has a proper business that will increase with sports and trades at 15x with year's of profit history backing it up and IGT is also embedded in the industry with a p/e of 22 and all that GENI and SRAD data will be fed into IGT machines so people can make the bets – no matter where the data comes from.

     

     

    • Procter & Gamble (PG -2.0%)is being given credit for navigating the supply chain and inflationary backdrop as well as could be expected.
    • Bank of America keeps a Buy rating on Procter & Gamble (NYSE:PG) even though operating profit was lower than its estimate. The firm notes that P&G reiterated plans for dividend payouts of more than $8B in FY22 and buybacks totaling $7B to $9B.
    • JPMorgan (Overweight rating) is also bullish on PG even though it expects near-term selling pressure. Analyst Andrea Teixeira says PG deserves credit for maintaining its FY22 EPS outlook despite its expectation for greater cost pressures than what was initially anticipated back when guidance was first provided in July. "We think management is just being conservative on the top line given that the company still has three quarters ahead," notes Teixeria.
    • Wells Fargo (Overweight rating) notes PG's results were ahead of consensus and in line with the buyside bar as expectations have been coming up on strong data. "So, basically: strong quarter, maintained outlook despite incremental costs, flex remains especially on sales line to beat said maintained outlook….but probably not enough upside surprises on the whole to move shares higher today," updates the firm.
    • Shares of Procter & Gamble (PG) are up 2.30% YTD, but drifted below the 100-day moving average with today's action.
    • Manpower (MAN -6.4%) drops after the workforce solutions company reported a miss on its top and bottom lines in its Q3 earnings report.
    • Revenue of $5.14B (+11.7% Y/Y) misses by $160M.
    • Gross profit margin of 16.6%.
    • GAAP EPS of $1.77 misses by $0.12.
    • The results saw a impact of restructuring costs for the company's Mexico business and ettain group's acquisition closed on Oct.1, excluding which the Non-GAAP EPS of $1.93 beat by $0.04.
    • Q4 Guidance: Including a full quarter impact of the ettain group acquisition, the company expects its EPS to be between $1.99 and $2.07, compared to consensus of $2.04. The estimate has also taken into account the expected unfavourable currency impact of $0.04.
    • Net earnings for the nine months ended September 30, 2021 were $271.3M or EPS of $4.90 including the positive impact of $0.21 due to changes in foreign currency. 
    • Wall Street is Bullish on the stock and so do Quant, and SA Authors.
    • JetBlue (JBLU +0.1%) becomes the first domestic U.S. airline carrier to offer customers the ability to book flight, cruise, and hotel packages all in one place.
    • Cruise packages through Royal Caribbean International (RCL -0.5%) and Carnival Cruise Line (CCL -1.4%) will be available  on jetbluevacations.com starting Nov. 1, allowing customers to save money by bundling their travel purchases.
    • The move comes as JetBlue intends to evolve into a broader travel company, that offers other trip features besides just flights. “We want customers to book their entire trip, from flights and cruises to hotels and more, all with us,” said Andres Barry, president, JetBlue Travel Products. “Handling the customer service ourselves, rather than sending them to multiple entities, allows us to go above and beyond."
    • As part of the offering, JetBlue guarantees that its flights will reach cruise ports in time for departure or else the company will let customers choose to be flown to their next port, free of charge, or receive 150% of the original package price for a new JetBlue vacation.
    • Cruise line spending is gradually improving according to data from Bank of America. However, it was still down ~50% September compared to pre-pandemic levels.
    • Coinbase Global (NASDAQ:COIN) stock jumps 4.1% in premarket trading after Facebook (NASDAQ:FB) chooses the cryptocurrency exchange as its custody partner for a pilot of Novi, Facebook's new digital wallet.
    • Novi users who can participate in the pilot can acquire Pax Dollar  (USDP) through their Novi account; Novi will hold the asset on deposit with Coinbase Custody. Novi users will then be able to transfer USDP between each other instantaneously, Coinbase (COIN) said.
    • Coinbase (COIN) Custody, which manages $180B (as of June 30) of crypto assets, is regulated by the New York Department of Financial Services and is a fiduciary under New York state banking law. Novi users will also benefit from Coinbase Custody's insurance program, which includes a $320M commercial crime policy, the company said.
    • Previously (Oct. 14), Coinbase suggests new crypto regulatory framework to replace SEC

    Good for our LTP and Future is Now Portfolios:

     Top Trades for Thu, 14 Oct 2021 14:01 – COIN

    COIN is kind of interesting as they are well below their IPO price but NFT is a whole other (and more realistic) revenue stream for them, in addition to being a crypto exchange.  They are making about $1Bn per Q and $260 is $67Bn in market cap – so not too bad, actually.  Good one for the Future is Now Portfolio so let's add:

    • Sell 2 COIN 2024 $200 puts for $44 ($8,800) 
    • Buy 5 COIN 2024 $200 calls for $105 ($52,500) 
    • Sell 5 COIN 2024 $300 calls for $70 ($35,000) 

    That's net $8,700 on the $50,000 spread that's over $25,000 in the money with upside potential of $41,300 (474%) - the future is fun!  

    In the LTP, let's just sell 5 of the 2024 $200 puts for $44 ($22,000) just to keep an eye on them.  We either own them for net $156 ($78,000 – 40% below the current price) or we just keep the $22,000 – I'm good either way…

    And, of course, we wouldn't go in at $156 as we'd roll and sell calls, etc so it's doubtful we're even committing more than 1/2 of a $100,000 allocation block to this one.  

    That's why we jumped in with a full play ahead of earnings.   See how easy it is to make $41,300?  

    I know it all sounds like "Blah, blah, blah" but I look at 100 things and reject them before coming up with one thing I think is worth trading – you guys only get the highlights….


  6. Good Morning.


  7. The J$J story makes me sick – Profits over morals.

     

    Anyone remember the pinto? 

    https://hiddenbrain.org/

    The Halo Effect.


  8. Shorting /ES at 4,500 – seems like a good place for a pullback.

       

    I'll play /NG long over the $5 line with tight stops below:

        


  9. Phil your Macys call was epic.

    SPWR is going to be your next epic call. What are your targets?









  10. SPWR/Pman – I'm not a target person.  If something is undervalued, I buy it.  The assumption is it will get more valuable but I don't have any particular expectations usually.  Mostly we just make long-term covered bets so I guess my goal is "higher than" whatever we sell the calls for.  In the case of SPWR, we're generally shooting for $45, which would be about $7Bn in market cap in, let's say 2024 and I expect they should be making at least $200M by then so 35x for a company growing around 30% a year in a hot sector.  I think that's conservative and, of course, easily worth 20x or $4Bn, which is 10% higher than now so no worries selling $30 puts but, in reality, all we shoot for is the conservative targets:

    SPWR Long Call 2023 20-JAN 20.00 CALL [SPWR @ $27.90 $0.46] 50 5/21/2021 (458) $43,500 $8.70 $2.20 $8.70     $10.90 $-0.22 $11,000 25.3% $54,500
    SPWR Short Call 2023 20-JAN 35.00 CALL [SPWR @ $27.90 $0.46] -50 5/21/2021 (458) $-20,600 $4.12 $0.73     $4.85 $0.40 $-3,650 -17.7% $-24,250
    SPWR Short Put 2023 20-JAN 20.00 PUT [SPWR @ $27.90 $0.46] -20 5/21/2021 (458) $-10,200 $5.10 $-2.00     $3.10 - $4,000 39.2% $-6,200

    That was a net $12,700 entry in our Future is Now Portfolio and it's a $75,000 spread that pays us at $35, not $45.  With a potential to make 62,300 (490%) in less than two years – who's fussing about targets?   My goal in these spreads is to be WAY inside where I think the price should be.  Better to be right 6 out of 10 times making 500% than 3 out of 10 times making 700%.

    With M our target at $5 was $10.

    THAT is what makes a good pick – when it's RIDICULOUSLY undervalued and you can't imagine how it's possible that two more years can go by without someone noticing.   Sometimes they do go a very long time but, if you do your homework correctly – eventually other investors catch on to what you see.



  11. Phil/sports gambling

     

    Thanks for the perspective on the sports gambling industry – I read a piece (barron's — I think but I might be wrong…) that gave the opposite perspective — that the data providers/infrastructure could be the way to go.  But I see your point — kind of like amazon deciding to do their own delivery company at a point instead of paying UPS or FedEx for the same service.  I wonder if there would be any regulation issues (?)  — Kind of like why it's hard for there to be a large scale cannabis operator because of all the state interference

    Still doing my research on this industry


  12. 17 Fall Foliage Getaways



  13. SPWR trade someone made today   Jan $38 calls and $23 puts x2000, likely a collar 


    • Small-cap stocks have trailed large caps this year, but hedge funds are betting on some near-term outperformance.
    • In Societe Generale's chart of momentum in hedge fund net positions (non-commercial positions reported to the CFTC), the z-score of small-caps, a measure of standard deviations from the mean, is on the rise.
    • The Russell 2000 (NYSEARCA:IWM) saw the biggest change in equity net positions vs. four weeks ago, with a z-score of 1.8. The S&P 500 (NYSEARCA:SPY) came in at 0.9.
    • Only the Nasdaq 100 (NASDAQ:QQQ) saw a decline, with a score of -0.3.
    • Hedge funds are also expecting a flatter Treasury yield curve. The z-score on the 5-year is -1.7, the biggest decline, indicating expecations for the yield to rise. The 10-year (NYSEARCA:TBT) (NASDAQ:TLT) momentum is flat.
    • Momentum is mostly falling for commodities, wth negative z-scores for natural gas (NYSEARCA:UNG), gold (NYSEARCA:GLD), silver (NYSEARCA:SLV) and copper (NYSEARCA:CPER) negative. Crude oil (NYSEARCA:USO) is barely up at  0.1, but platinum (NYSEARCA:PPLT) gained traction at 1.
    • SA contributor Bubba Trading is expecting a move in IWM after range trading.
    • Albert Bourla, chairman and CEO of Pfizer (NYSE:PFE), said Tuesday that COVID-19 is "here to stay" but he expects the medical community "should be able to have it well under control."
    • Speaking to Bloomberg TV, Bourla reported that he expects a U.S. regulatory decision on COVID vaccines for children "in a matter of weeks."
    • The Pfizer CEO noted that the U.S. Food and Drug Administration has an advisory committee meeting on the subject scheduled before the end of October, with a final decision likely to take place within a few days after the panel announces its recommendation.
    • Looking longer-term, Bourla expressed confidence that enough doses of vaccine can be created to provide shots to the entire world "within several months."
    • While he acknowledged challenges with delivering the vaccine to people throughout the world, he highlighted the fact that PFE alone would have produced 3B does by the end of this year.
    • Bourla also pushed for changes in the medical approval process, using the COVID example as a guide as to how to establish a closer collaboration between private drug makers and regulators.
    • He said this would require "significant structural changes" in the regulatory process and increased resources for the FDA.
    • However, Bourla argued that an investment in a faster-paced regulatory system can speed the development of treatments for major killers, like cancer.
    • "It is not good will that will bring a cure for cancer. It is billions of dollars," he said.
    • PFE advanced 2% in intraday trading on Tuesday, rising to $42.16 at about 12:30 PM ET.
    • Generally speaking, PFE rallied to a 52-week high of $51.86 in mid-August. However, shares have drifted steadily lower since then.
    • After sizable rallies early in the year, the big makers of COVID vaccines have seen a pull-back lately. Moderna (NASDAQ:MRNA) and BioNTech (NASDAQ:BNTX) have both dropped more than 20% over the past month.
    • Johnson & Johnson (NYSE:JNJ) has held up better than its peers, dipping by just 3% over the past month. PFE has slipped about 6%, compared to a gain of about 1% in the S&P 500:

    • Bernstein is out with a huge bull call on the gaming sector. The firm expects upside for the sector with a forecast for a growing market recovery in retail gaming and improving social outlook surrounding other gaming sector segments like digital and sportsbook.
    • Other positive factors include the growing addressable market in the U.S., the increased odds for legislation in new states with budgets strained and cost improvement amid more M&A and consolidation.
    • Analysts Zachary Silverberg and Brian McNamara say they prefer names with strong growth profiles and conservative balance sheets that appear to be undervalued. With that in mind, Bernstein launches coverage on Penn National Gaming (PENN +4.6%), Churchill Downs (CHDN +0.1%), International Game Technology (IGT +0.4%), Scientific Games (SGMS -0.8%) and fuboTV (FUBO +0.9%) with Buy ratings.
    • On PENN ($95 price target, 22% upside): "We expect will capture mindshare given its strong marketing and reach with Barstool Sports and the vertical integration of theScore’s technology stack."
    • On CHDN ($294 price target, 15% upside): "We believe CHDN warrants a higher multiple given its significant moat in pari-mutuel wagering."
    • On IGT ($35 price target, 20% upside): "We believe IGT will capitalize on the rebound in the gaming sector and strong performance across the globe in the lottery segment."
    • On SGMS ($98 price target, 15% upside): "We believe SGMS offers upside at its current valuation and are optimistic regarding the future of the company as it invests in cross-platform gameplay."
    • On FUBO ($50 price target, 67% upside): "Sports-focused, digitally native TV replacement product, with a strategy of accumulating subscribers from the pool of cord cutters. The company will launch a digital sportsbook product to create sports-focused, interactive environment."
    • Catch up on the latest DraftKings news.
    • Fossil Group (FOSL -0.6%) shares are down as Swiss watchmaking exports when measured by units fell 16.5% in September when compared to the pre-pandemic level. When measured by value sold, watch exports rose 3.8% driven by higher luxury watch prices and units. Watch exports are up 16.6% Y/Y.
    • Watches priced below 500 francs (~$540) saw a marked decline in both value and units exported, while more expensive watches contributed to 6.2% value export growth compared to the September 2019 baseline level.
    • The United States and China led the export growth, with exports up 28.5% and 45.3%, respectively, compared to 2019, while Hong Kong (-20.4%) and Japan (-21.0%) continued their downward trend.
    • Fossil Group was founded in Texas, but manufactures their upscale and more expensive "Fossil Switzerland" watches in Switzerland.
    • SA contributor The Value Investor still has concerns about Fossil Group despite its seemingly cheap valuation.

    Like many things, less watches for more money.  Inflation can give you a very false sense of growth.


  14.  

     

    • The long-awaited 44-page report on the meme stock surge in January stopped short of any recommendations on changes, but did highlight four areas where regulations could be fixed or tightened.
    • The SEC has issued its examination of the rally in GameStop (NYSE:GME) in January and the actions of brokers like Robinhood (NASDAQ:HOOD) during the surge, including the suspension and limiting of trading.
    • The report is big on fact, but short on concrete recommendations, although the areas it flagged for closer study mirror areas Chairman Gary Gensler has pointed to for possible increases in regulations.
    • "Those issues, the staff suggested up, we're going to take a closer look in terms of what policies can help the public," Gensler said today.
    • The SEC does attempt to answer how GME ran up so far so fast and notes the evidence doesn't point to one big short squeeze.
    • SEC staff noted "discrete periods of sharp price increases during which accounts held by firms known to the staff to be covering short interest in GME were actively buying large volumes of GME shares, in some cases accounting for very significant portions of the net buying pressure during a period."
    • But buying by those with short positions "was a small fraction of overall buy volume, and that GME share prices continued to be high after the direct effects of covering short positions would have waned." (See chart at bottom.)
    • "Whether driven by a desire to squeeze short sellers and thus to profit from the resultant rise in price, or by belief in the fundamentals of GameStop, it was the positive sentiment, not the buying-to-cover, that sustained the weeks-long price appreciation of GameStop stock."
    • The report also concluded that a gamma squeeze, where writers of options buy the underlying stock as a hedge, was a smaller factor.
    • "While staff did find GME options trading volume from individual customers increased substantially, from only $58.5 million on January 21 to $563.4 million on January 22 until peaking at $2.4 billion on January 27, this increase in options trading volume was mostly driven by an increase in the buying of put, rather than call, options," the report says. "Further, data show that market-makers were buying, rather than writing, call options. These observations by themselves are not consistent with a gamma squeeze."
    • The report also downplayed the impact of naked short selling and said there were not meaningful distortions in ETFs like SPDR S&P Retail (NYSEARCA:XRT).
    • Four areas of focus. "These events present an opportunity to reflect on the market structure and regulatory framework and identify additional areas for potential study and further consideration in the interests of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation."
    1. Brokerages restricting trading. Looking at the effect of acute margin calls on more thinly-capitalized broker-dealers, the SEC says a "method to mitigate the systemic risk posed by such entities to the clearinghouse and other participants is to shorten the settlement cycle."
    2. Game features and payment for order flow. The report simply says whether on-screen confetti and the like lead to more trading than usual should be considered. And that payment for order flow and "the incentives it creates may cause broker-dealers to find novel ways to increase customer trading, including through the use of digital engagement practices."
    3. Dark pools and wholesalers. "Such trading interest is less visible to the wider market – and payments to broker-dealers may raise questions about the execution quality investors receive," the SEC says. "Further, though wholesalers increasingly handle individual investor order flow, they face fewer requirements concerning their operational transparency and resiliency as compared to exchanges or ATSs."
    4. Short selling. "Improved reporting of short sales would allow regulators to better track" the interplay between shorting and price dynamics.

     

     

    • A large basket of crypto stocks including Marathon Digital (NASDAQ:MARA), Hut 8 Mining (NASDAQ:HUT), Bitfarms (NASDAQ:BITF), MicroStrategy (NASDAQ:MSTR), slide into negative territory on Monday as bitcoin (BTC-USD) attempts to break out of mid-April levels, but quickly reverses lower to a trough of $61.7K before recovering back over $63K.
    • Bitcoin (BTC-USD) is slightly up on the day, up nearly 9% in the past five sessions, and +430% Y/Y, as per the chart below. 
    • Perhaps the rapid rise and fall of bitcoin (BTC-USD) intra-day is likely attributed to the much-awaited ProShares Bitcoin Strategy ETF (BITO), which is very highly correlated with the price of BTC, starting trading on the same day.
    • This is considered a big deal in the crypto community because it's the first bitcoin (BTC-USD) ETF that has been approved by the Securities and Exchange Commission to get listed as a publicly traded security; note that the fund doesn't directly invest in BTC, but holds futures contracts of the digital token.
    • For company specific news, crypto miner Riot Blockchain (NASDAQ:RIOT) develops 200 megawatts of immersion-cooling technology at its Whinstone facility, the first industrial-scale immersion-cooled deployment of bitcoin (BTC-USD) mining hardware, the company says.
    • "We anticipate observing an increase in the Company's hash rate and productivity through 2022, without having to rely solely on purchasing additional ASICs," said Riot CEO Jason Les.
    • Some other crypto-related stocks moving as bitcoin volatility rises includes: Net Savings Link (OTCPK:NSAV -1.0%), BIGG Digital Assets (OTCQX:BBKCF -1.6%), Cordia (OTCPK:CORG), KYN Capital (OTCPK:KYNC -4.7%), Vinco Ventures (BBIG -6.4%) and BCII Enterprises (OTCPK:BCII -16.4%).
    • Earlier, Grayscale Investment files with SEC to convert popular GBTC into a Bitcoin spot ETF.

  15. VIX    15.76     what me worry? 


  16. Hi Phil,  I have a legacy position in MJ, dating back from the days when you were a fan.  It is not a primary position for me and I have pretty-much ignored it.  Your thinking at the time was that the diversity offered by the ETF was attractive since one or more of the ETF's holdings might take off.  MJ hit $34.50 for a brief period earlier this year and is now at $14.36.  What is your thinking these days?  Is there opportunity here or is this simply a dying swan?

    I've rolled my short puts down since they were originally sold.  I currently have short Jan 2023 16 &17  puts.  When the premium burns off on these, I can roll them down to 2024 puts.  For margin reasons, I do not want to do a 2x or 3x roll downward to even lower strikes.  I also have Jan 2023 7/17, 11/17, 12/17, and 13/18 call spreads.  I sold a 1/4 quantity (relative to the short puts) of Jan 22 24 calls, which should expire worthless.  Is it worth rolling the long ends of the spreads downwards, or should I admit defeat?  Any other ideas on how to manage this position would be appreciated.  

    Thank you.


  17. LABU   one of our old names.  interesting trade today    currently $52.70

     they sold January 2023 $100 calls for about $8 and bought Jan2024  $40 calls for about $29.00     x 2100


  18. VIX/Stock – Back to a bull market at this point.  /ES back over 4,500, /NQ testing 15,400, /YM 35,300 – all is well.  

    MJ/John – We were only using them to sell puts and calls, as a long-term bet it's kind of useless.  For every successful company in the ETF there is one that goes BK and the churn guarantees you can't make money.  They are great for selling puts and calls but look what a mess our Butterfly play is on them:

    MJ Short Put 2022 21-JAN 20.00 PUT [MJ @ $14.39 $0.48] -30 12/10/2019 (94) $-19,050 $6.35 $-0.55 $-17.62     $5.80 $-0.30 $1,650 8.7% $-17,400
    MJ Long Call 2023 20-JAN 15.00 CALL [MJ @ $14.39 $0.48] 100 1/14/2021 (458) $80,000 $8.00 $-5.55     $2.45 $0.25 $-55,500 -69.4% $24,500
    MJ Short Call 2023 20-JAN 25.00 CALL [MJ @ $14.39 $0.48] -100 1/14/2021 (458) $-50,000 $5.00 $-4.28     $0.73 $0.02 $42,750 85.5% $-7,250
    MJ Short Call 2022 21-JAN 19.00 CALL [MJ @ $14.39 $0.48] -30 7/21/2021 (94) $-5,460 $1.82 $-1.65     $0.18 $-0.02 $4,935 90.4% $-525
    MJ Short Call 2022 21-JAN 16.00 CALL [MJ @ $14.39 $0.48] -30 8/20/2021 (94) $-5,100 $1.70 $-1.05     $0.65 $0.14 $3,150 61.8% $-1,950

    I'm not sure what we want them to do!  

    I agree with rolling the short puts but you should sell some short calls to offset.  I'd roll all the longs to one spot in 2024 to cut the Theta decay but I'd just go out to whatever is the same dollar amount – I wouldn't spend more until you're ready to sell new covers.  $7.50, $4.40, $3.80 and $2.80 are your longs so let's call it $4.50 and that's the 2024 $12s ($4.20/5.10 bid/ask) so I'd offer $4.50 and see if it fills and then sell off the others as it does.  If it never fills, then MJ is going up and you have nothing to worry about, right?  The short 2023 $17s are $1.90 and so are the 2024 $25s so lots of rolling room and yes, a 1/4 sale of shorter-term calls is the way to go but, since you effectively have 2024 $12/25 spreads, why be such a wimp selling the Jan $24s for 0.10 when you could sell the Jan $15s for 0.90?  That's 94 days out of 822 so wouldn't you be better off collecting 7 x 0.20 ($1.40) per long spread?  That's enough to pay for your 2025 roll.

    LABU/Stock – I always like them when they are cheap.  

    However, more the kind of thing I buy when there's a nice crash and it's $25, not $50.  Otherwise, I'd rather pick my own winners. 


  19. Woo-hoo on /NG!  

    So basically we want to lock in $1,000 – so that's the stop but over $5.01 and that becomes the stop but the retrace from $5 would be 0.02 and 0.04, which is where we'd end up stopping out.   What do we expect?  Well this had a very high potential for reward as we've slipped from $5.80 so it's an 0.80 drop (will consider below $5 while market was closed to be overshoot) so 0.16 bounces means $5.16 would be the weak bounce and the retrace from that would be 0.032 so $5.13 and $5.105 so, on the way up, we watch those carefully to see if they give us trouble.  More bullish if they don't.  


  20. BABA really starting to run 


  21. BABA/Pman – That was so stupidly low.

    It's like if AMZN had dropped 50% because Donald Trump didn't like Jeff Bezos.


  22. I have some BABA 11/16 200 calls thinking about holding 1/2 through earnings.


  23. Sorry it's BABA 11/19/2021 200.00 C


  24. BABA/Pman – Not sure when you bought them but they only have 31 days left and, after earnings, the premium will burn out.  You need a 10% gain just to be at the money and, of course, anything flat or down will wipe you out.  More ways to lose than win.

    The 2023 $160 ($42.50)/170 ($37.25) bull call spread, however, is net $525 and will make $475 (90%) if BABA simply stays over $170 – much more fun and much less likely to be wiped out in 30 days if it doesn't.


  25. BABA/ you are right! Will make the adjustments tomorrow. Thanks!