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Thursday Failure – UK hits new Record Number of Covid Cases – US Right Behind

This is not good.  

If this were Cryptocurrency or a stock you owned, it would be good but it's not – it's an incredible surge in Covid in the past 30 days as the US and the UK refuse to shut down for the holidays and we're paying the price, with infections surging back to levels we had when our former President was denying the problem even existed.  Now, supposedly, we know better – but obviously not. 

Keeping the malls open through Christmas is very likely to cost us Q1 (again) as we have to shut down eventually to get this thing under control.  It is critical to have hedges in place and, now that we're back to 4,700 on the S&P 500 – I'm tempted to take this opportunity to cash out our portfolios completely and not risk another market melt-down when traders are "surprised" that we are once again overwhelmed by Covid.  

Omicron does seem to be milder than the Delta strain that has been dominant this year but it's also far more contageous and it's breaking through vaccines.  There were actually 242,794 cases yesterday and 69,413 people were hospitalized.  There are only 919,559 hospital beds in the US, at this pace, we will fill them all some time in January.  

I know you are reading in the Corporate Media that Omicron is milder but it's infecting more people and still, in America, a supposedly advanced country, only 62% of the population is fully vaccinated with 27% still having not had a single shot and, as it turns out, unvaccinated people are 13 TIMES more likely to die of Covid than vaccinated people and 5 times more likely to become infected with Omicron and, the way it is spreading, that means it's pretty much a certainty that 100M people will be catching Omicron and over 500,000 of them will die – happy holidays – I hope that time at the mall was well-spent!

To be fair to the Corporate Media, Corporate Advertisers don't like you scaring the customers away from shopping – so they don't.  Disney owns ABC, ESPN so they clearly have an interest in keeping the show running with their theme parks, hotels, movies and cruise lines.  DIS lost $2.8Bn in 2020 and, in the legal game, that's called Motive, Means and Opportunity…

Of course we're not picking on Disney as Comcast (CMCSA) owns NBC, MSNBC, CNBC, Unviersal Studios – so they are just as motivated at DIS to play down Covid and keep the citizens shopping.  VIAC and T (Time/Warner) are more of a pure-play on media (and phone companies too) and then there's Fox, who clearly don't want us to even get vaccinated and encourages protests of lockdowns (including court battles against them).  And that's it – that's everyone who controls see and hear all day long in the media (From Visually):  

Remote Control: Who Owns What you Watch on T.V?

 
The CEO with the biggest audience is Hans Vestberg, CEO of American multinational telecommunications conglomerate Verizon Communications Inc. Vestberg’s outlets boast a combined monthly readership of over 3.8 billion and include media powerhouses of the likes of Yahoo, AOL, Huff Post, TechCrunch, Engadget and Autoblog. This means that publications under the direction of Verizon Communications reach an incredible 52% of the world’s population.  Also based in the US are the Newhouse family, who have built a media empire that includes 47 titles, with a combined monthly readership of 1.5 billion. Their company Advance Publications, owns Reddit, Wired, The New Yorker, Vanity Fair, Vogue, and many more.  These are the people who wake up in the morning and decide what you are going to think….

What "THEY" have all decided to tell us, so far, is that Omicon is no big deal and, amazingly – despite clear scientific and stastistical evidence to the contrary – people are believing it – even though this same group of people just lied to us the exact same way about Covid 2 years ago (it's Covid (20)19, remember?).  

So PLEASE, make sure you are well-hedged – just in case it turns out they are lying to us again.

And have yourselves a merry little Christmas!

- Phil

 


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  1. Good morning!  

    I don't know why but I love these kids who can sing – so fascinating…

    In November 2015, Jordan published the book Mellom to hjerter (Between Two Hearts), which was illustrated by her grandmother, Iranian artist Mery Zamani.[15] The book tells the story of her meeting a poor motherless girl in the Middle East who has no shoes. After a long conversation in which they discuss their dreams in life, she gives the girl her shoes and the girl promises to pray for Jordan to fulfill her dream to become a successful singer, which she cites as the reason for always performing barefoot.[16]

    Same girl as above but younger.  

    This should be a completely pointless day, as was yesterday and the day before:

    Date Open High Low Close* Adj Close** Volume
    Dec 22, 2021 462.79 467.81 462.58 467.69 467.69 58,816,600
    Dec 21, 2021 458.61 463.21 456.31 463.06 463.06 69,806,300
    Dec 20, 2021 454.48 455.40 451.14 454.98 454.98 107,134,800
    Dec 17, 2021 461.55 464.74 458.06 459.87 459.87 135,511,600

    So all 3 people who were trading took the S&P up 2.5%.


  2. Good Morning.


  3. good morning.  T finally getting a little attention.  February $25 puts trade 2300x   Guessing they were sold 


  4. Phil/Imax

    Thoughts on this?

    Buy 20 $17 IMAX Jan 2023 calls $5.10

    Sell 20 $25 ImAX Jan 2023 calls $2.20

    Sell 10 $20 IMAX Jan 2023 puts $4.70

    Looks like $532 on a potential $15k return. 


  5. Univer (UNVR) is interesting. They are speciality chemical distributers (not manufacturers). Stable, growing, but 0 option volumes or OI. I am thinking that a 20-25 BCS with short $20 puts could be good, but with no OI or vols, who knows… 


  6. Phil/FL – Off hours question. Did you get a residency audit when you left NJ? Thinking about FL  (or any one of the states that don't tax income). Don't own real estate in NJ or work for a company domiciled in NJ, but have high earned and investment income for which the state bleeds me. Thanks. 


  7. seer, you should be a foreigner the US deduct 30 to 33 % from your div. even from options you hold which have a delta more than .80, even you do not get a cent of div. from any option.


  8. T/Stock – Well, if they were sold then someone bought them too, right?  That roll down was well worth it.  

    /NG fell yet again but too dangerous to go long over the holiday weekend.

      

    IMAX/Swamp – Nothing wrong with that.  You are in for net $1,100 I think on the $16,000 spread.  The only thing is, our target isn't really $25, that's a butterfly play and the long spread is mainly there to protect us in case a short call sale runs away – it's a bit aggressive for a simple spread.  In our Butterfly Portfolio, we sold 15 Jan $20 calls for $3,600 in October so about 90 of what are now 757 days remaining on the spread.  Ideally, we'll have 8 more chances to sell $3,000 worth of premium, which would bring in $24,000 additional and, frankly, we could care less what the spread actually does if we get our $24,000.  

    As to the spread, if IMAX is down, we keep the $27,000 less the $4,350 we put into it, less any cost on the 20 short puts but we don't care about that as we'd love to own 2,000 shares of IMAX for $40,000-$27,000 or $6.50 per share.   If IMAX is flat, things also work out and if IMAX is up sharply, we roll the short calls along and we have the $24,000 spread backing us up.  In the case of the Butterfly Portfolio, we are only 2/3 covered on the longs as we are pretty bullish so we can't even be hurt to the upside.  

    UNVR/Rn – Yes, so thinly traded.  Nice little company but benefitting from scarcity and profits should dip back a bit once supply bottlenecks wear off.  Just be patient and make sure you get your prices.  

    Audit/Seer – No audit but they did try to tax me for 6 months I wasn't there.  Fixed by accountant, no big deal. 

    See, they tax Yodi and he's homeless, living in a trailer…  cheeky


  9. Oil doesn't seem to care about Covid and lockdowns or potential lockdowns……..$7 swing in the last week.  


  10. yodi, i see the 30% withholding tax on div income,  it nothing on opt premium income or cap gains. 


  11. StuartJ, It is not on opt premium income but on the actual opt. If you have bought or sold an opt, which value is higher than a delta of .80, Trump says you might as well holding the stock and therefore you pay tax on the imaginary stock div. Take it from a homeless in a trailer.


  12. Oil/Ult – Oil (traders) care about sticking it to you on a high-demand travel weekend.  That's why our long bet on /CL last week was such a high-probability play. 


  13. Suppose the fire and explosion in Texas have anything to do with the oil price? Xxon. Very few people are traveling up in No Country. Some coming/going from Mpls area. Phoenix is swamped as usual.



  14. yodi, thanks, maybe i don't have any of those but i haven't seen that tax. at least ibkr doesn't seem to have deducted any. i have homes in manila and sydney and just back to manila from 5 months in hong kong and Spain and Ireland. travel to countries where covid is low and leave  when it jumps up!!




  15. Those pictures remind me of the explosion in Superior, Wisc. Huge smoke and fire.it was a miracle the whole complex didn't blow. Contamination spread for miles because of wind. EPA was testing soil in a 75 mile perimeter and of course you never heard any results. The town was evacuated fast though. Went across the bridge into Duluth.


  16. Yodi/foreigner – You and I corresponded in the distant past about me working in Germany. I have a birthright and family there and graduate degrees and relevant experience. I keep reading the articles about the demographic timebomb in Germany. However, the process of getting a job there is more convuluted than it is in the US (and it's bad here). Germany needs to make it easier for people like me or they really will have a problem. 

    Of course, I guess it's good that I dodged that extra 30% tax :) !


  17. yodi – 871m was modified as part of Dear Leader's 2010 HIRE Act. Trump wasn't in office then, and he's not in office now – in fact last I heard, the office of President is completely vacant.

     But anyway it was written to close a total return swap loophole, and I'm not sure they should be applying it to regular options except maybe if the dividend changes the strike price (special dividend). The legal test is intended to differentiate between forward contracts, swaps, options whatever that provide total return exposure (including dividends) from those that don't. 


  18. seer, As American you at least can stay in Germany as long as you like no time restrictions as long as you can support yourself.

    I can write a book about emigration to Germany. My wife is Mexican. The emigration department are professional ass holes, to say it mildly. Let me not start with it. 



  19. dawgydaddy,

    Thanks, we got a similar explanation from TDA

    Dear Yolanda, 

    Thank you for contacting TD Ameritrade. Income earned from U.S. sources (such as dividends from U.S. companies) that is received by a non-resident alien is subject to withholding by the U.S. government. Those specific transactions that you have pointed out were found  in your account ending in 5648 and are affected by this withholding due to them falling under Section 871(m). 

    Section 871(m) is treating a dividend received on the underlying security of an option as a "deemed dividend" to the option holder, and therefore as US source income subject to withholding if certain qualifications are met. 
      
    If there is anything else we can do to be of assistance, please respond to this email or you may contact a Client Services Representative at 1-800-669-3900. We are available 24-hours a day, seven days a week. 
      
    Thanks again and have a great day! 
      
    Tax Services, TD Ameritrade 
    Division of TD Ameritrade, Inc. 




  20. Yodi – I'm able to work remotely now so will likely spend one of these summers in Germany. Just have to find a VPN to make it look like I am logging in from the USA! I'll let you know when I get there and perhaps we can have a beer. 





  21. Will Donald Trump Get Away With Inciting an Insurrection?


  22. sounds good


  23. AAPL/Phil  On Dec 3 after you sugg I buy back 20 of my short Apr $160calls and roll to 30 Jan $160s, I ended up buying back ALL 80 of them while AAPL was lower (helps reduce my cap gains). Now I am thinking to also buy back my short '23 $160s to roll them to SOMETHING? I could buy them back BEFORE Dec 29 and sell to cover AFTER which would really help my cap gains. What would you sugg? And would you still sell some short term calls like the Jan $175s?

    155 AAPL '24 $130c ($32.9)

    -25 '24 $170c ($22.6)

    -40 '23 $160c ($20)

    -5 '23 $140p ($24.6)

    THX!


  24. XOM/Pirate – It's a 500,000 barrel/day refinery and maybe it accounts for this morning's pop but we were already on a huge run:

    If anything, they WON'T be using 500Mb/d of oil for a week – the draw will come on /RB and other refined products.  As usual, it will make a very nice post-holiday short.

    TD/Yodi – Keep in mind withholding is not the same as taxes – it's just what they hold IN CASE you owe taxes.  You need to make sure you have a clever accountant to help liberate those funds.

    AAPL/Wing – You have to imagine $3Tn is a tough nut to crack.  You got very lucky and you can cover more $170 calls at $35 now, which gives you essentially a free bull call spread that's $620,000 in the money at $170.  Why not be happy with that?  Then just sell short calls for income when you feel like it.  April $180s are $9.60 so if you go full cover on 155 long spreads (2023 $160s are less than $35, so rollable when convenient) and let's say you sell 35 for a 22% cover – that's $33,600 per Q while you wait.



  25. Dividend Portfolio Review: $391,277 is up $4,143 from our Nov 19th review and next month we get another round of dividends to give us a boost so very nice.  The dividend portfolio is mostly stock positions, so making almost 50% a year is about as good as we could expect – 35% is our goal and we took advantage of the March 2020 dip, which is why we're up 95.6% instead of around 70%.  Going forward, things should normalize, as this is not a portfolio we take risks in.  

    Other than cashing out SIG, we made no changes last month and TWO got called away last week so we have a little cash to add more positions (cash is tighter in a stock-based portfolio).  This is a nice, boring portfolio that still makes good money:

    • GILD – Already 75% in the money but we don't need the margin so we'll leave it.
    • VIAC – Surprisingly positive after 7 months.  That's because it had a high premium in early May.  The dividend was cut and now only 0.96 (3.29%) so we don't want them badly enough to do anything but see if we get assigned at net $25.65 – that would make the dividend 3.7% and then we'd sell puts and calls to get closer to 5% and we'd be happy.  So, either that happens or we just keep the $3,175.

    • ET – We will be called away next month. 
    • DOW – Good time to buy back the short 2023 $62.50 calls at $3.43 ($1,713).  We can also sell 5 2024 $60 puts for $14.50 as it would be a shame not to take advantage of them while they are net $45.50 – the same net we sold the 2023 puts for.  We'll cover again on a bounce.  We just picked Dow as a Top Trade down here.  

    • KHC – Right on track. 
    • LYB – Exactly on track.
    • MO – On track.

    • NLY – A bit lower than we like but spitting out 0.22 ($440) quarterly dividends against a net $12,360 position is 3.5% per quarter – this could just be the whole portfolio and we'd be happy.  
    • PFE – We're at net $29,486 out of a possible $30,000 so it's time to cash this one in.  

    • TWO – On track.  Lower is better than higher as we don't get called away.  TWO pays 0.17 ($340) per quarter on net $8,510 invested so that's 4% quarterly while we wait to see if we're called away at $14,000 for another $5,490 (64.5%) profit.  If not, we'll have 5,000 shares (at $29,510) into 2024 and I'm fine with collecting $850/qtr (2.8%) on those too (and we'd sell more calls to drop the basis further as well).  

    • VTRS – On track.
    • FRO – We're expecting a nice move up at some point.  

    • PETS – Another one we're waiting for a move up on to sell more calls.  

    • T – It lives!  Finally found a bit of a bottom but we're all good with our position as it's already large and we're comfortable with our targets.  Eventually we'll sell more calls but still too soon.  The Jan $30 puts are $5.65 and only a small loss and we'll roll them next month – maybe no loss at all.  


  26. Earnings Portfolio Review:  $297,673 is down $4,093 since our last review (11/18).  This is a self-hedging portfolio so a bit steadier than the others in a volatile market but we're still up $197,673 (197.7%) since 10/21/19 – hedging allows us to take risks – that's something people don't understand about hedging.  You can't jump off a bridge WITHOUT the bungee cord.  Well, you can, but you won't enjoy it as much…   Hedges are our bungee cords – they let us take risks but keep us safe while doing so.  

    The key to the earnings plays (and we don't pick them often) is to find stocks that get a negative over-reaction to earnings news we feel will reverse over time.  We take advantage of the volatility to sell puts and buy calls while others are panicking out of the stock and then we tend to cover when things calm down.  

    • IBM – Short puts already up nicely.
    • SQQQ – Our hedge. As expected the Jan $30s will expire worthless and we sold them for as much as we paid for the longs so this is a fee hedge and we'll make money on the cover – but there's no hurry to do that.  Realistically, we assume a 20% drop in the Nas will case a 60% bump in SQQQ so $6 x 1.6 = $9.60, which would make the $5 calls worth $4.60+ x 100 is $46,000 and it's currently net $21,850 so about $25,000 of protection is inadequate.   Let's add 100 SQQQ 2023 $4 calls for $2.55 ($25,500) and sell 100 SQQQ 2023 $9 calls for $1.45 ($14,500) so that's net $11,000 for another $50,000 worth of protection inside our target zone and our new calls are $20,000 in the money – so we're not wasting a penny on premiums.

    • GILD – Very close to goal with 7 months to go
    • GOLD – Waiting for them to come back.

    • JACK – Right on track and still about net $10,000 on a $30,000 spread so still nice to play. 

    • PETS – Let's buy back the short 2023 $35 calls and wait for a bounce.  
    • SPWR – We took advantage of the dip last month and it got even cheaper.  Let's buy back the short 2024 $40 calls and roll the 2024 $30 calls at $4.75 down to the $20 calls at $7.50 and buy 15 more for a total of 40 of the 2024 $20s with no short calls for now.

    • VIAC – Another one that got cheaper after we got more aggressive.  In this case, only a little lower so nothing for us to do but be patient.


  27. Looks like a nice, strong finish.

    Everything remains awesome.

    Have a great Christmas, folks! 

    - Phil








  28. Closed out an HPQ trade 3 months early (6 month time frame) for a 95% gain! Thanks group.