Testy Tuesday – Santa’s Back?

28
849

SPX Dec 27 2022Welcome back! 

It’s a nice, short week and we get another day off next Monday so all is well and the volumes are low, so it’s a good time to push the market a bit higher but we’ll have to see what sticks next week.  Today we’ll see if “THEY” can even get the S&P back over the 50-day moving average at 3,886 – it’s trending up, so it shouldn’t be too much resistance.  

Will anything be enough to get us to our predicted 4,000 line for the last day of 2022?  It really doesn’t matter – it’s not like we needed 4,000 on the button to make our bones for the year – we already cashed out and the market is right where we expected it to be – so on we go to 2023.

As we expected, Covid has become a huge issue in China but they stopped reporting numbers and rumors are anywhere from 50M to 350M people have been infected in the past month.  At the moment, US numbers are holding steady at 66,000 infections per day (24M/year) and “only” 426 deaths per day (155,490/year), which is only as many Americans as died during the entire Vietnam war every 6 months – so why worry about that?

One effect we are seeing here is Tesla’s (TSLA) stock is dropping today because their Shanghai plant is extending production cuts into next year due to the Covid emergency.  At the moment, the plant is completely shut down.  Shanghai makes about 1/3 of all Teslas (3s and Ys) in the World.  

$117 pre-market is down to $368Bn from $1,300,000,000,000 last Christmas – so it’s been a bad year for Elon and company.  The real problem is they never should have been at $1.3Tn and, even at $368Bn, the company “only” made $13Bn in 2022 so it’s STILL trading at 28x earnings but they projected $19Bn for next year, which would be a forgivable 19 times earnings but producing ZERO cars in Shanghai for a month will cost them $1Bn.  

On the other hand, TSLA has $17.5Bn net of debt in the bank – that’s a huge plus, so they are getting into the zone where they may be playable.  This morning you should be able to sell the 2025 $50 puts for $10 and that would net you into the stock for net $40 and even Elon Musk shouldn’t be able to screw things up that badly – right?

Let’s say we sold 10 short TSLA 2025 $50 puts (obligating us to own 1,000 shares at $50) for $10,000 and bought 20 of the 2025 $50 ($80)/80 ($63) bull call spreads for net $17 ($34,000).  That would be net $24,000 on the $60,000 spread that is 150% in the money to start.  If TSLA stays over $80, you make $36,000 (150%).  

Gasoline RBOB Chart DailyThat is the first bullish play I’ve picked for TSLA since they were about $50!  Although I just filled up my tank this weekend at $2.85/gallon, Gasoline (/RB) priced shot back up to $2.40 over the weekend though with all the snow and grounded flights, I think it should pull back again.  Oil (/CL) is $80 this morning and also a fun short with very tight stops above that line.  

We’re still long on Natural Gas (/NG), which is hanging around $5.15 this morning.  The cold snap has mainly gone away but the intensity of the cold is likely to lead to a major draw-down in this week’s report.  

Speaking of reports, it’s a pretty dull data week with NO Fed speeches scheduled:

Calendar Dec 27 2022

And there are no significant Earnings Reports this week either.  We really should be on vacation and I was going to be but I dithered about taking a cruise this week as I was worried about Covid and I waited too long and missed my chance.  Now I’m sorry I missed it as, historically, it is such a slow week.

Market moves this week are not to be taken seriously.  

Subscribe
Notify of
28 Comments
Inline Feedbacks
View all comments

Good morning Phil,
Here’s a question that might give you something to do for a few during this slow week.  😉  Last week, I was assigned 200 shares of WBA. The remaining position based on the butterfly portfolio is:
WBA Apr 21 2023 40.0 Call -1
WBA Jan 17 2025 30.0 Call 5
WBA Jan 17 2025 35.0 Put -1
WBA Jan 17 2025 45.0 Call -4
Should I just sell 2 more $40 or $45 calls and possibly 1 $35 put or would you have a better suggestion?
TIA

brucethenet, Question why would you sell naked calls, as over 5 they naked and well if you like that great stock, with a yield of 5% than by all means sell same puts. 😡 

Thanks yodi, the way I was thinking is the 2 more short calls are covered by the 200 shares I was assigned. The 2 puts assigned were WBA Jan 20 2023 45.0 Put, not the WBA Jan 17 2025 35.0 Puts.  😊 

That makes sence

Thanks Phil, can you do the dummies version of the second cash out option?  🤔 Not sure I understand doubling the spread and having 2 extra longs and how it’s better than the first option except that 10% for 3 months is better than 4% in 3 months. Thanks again in advance, B

Good Morning.

Dithering – One of the worst mistakes a Senior can make…

Take the next boat, Phil! 🙂

Yeah!

Phil – Just got assigned 1,000 SPWR for net $19. Planning on closing this out and replacing with the 2025 15-25 call spread for 3.xx? the mid of the spread is 3.1, but I don’t think it is that likely.

I know last week you were looking for 2.5 for the 15-25 spread or 1.8 for the 20-30 spread, but with assigned shares, should I be selling the shares and waiting for a future drop?

Hope everyone had a wonderful weekend!

Phil, any thoughts on China’s opening can dropping of Covid Zero as a economic threat to US because they can cause more global inflation with their re-opening?

LUV does anyone know what the fundamental issue is that is crippling its operations vs the other airlines? Playable?

From the 10x Travel Group

My friend’s husband is a pilot with Southwest. He just posted this an hour ago. I’m not including his name or the photos he shared of packed SWA employee rooms at the airports over the past couple of days (in case his post comes back to bite him with the company—even though he’s stating facts.) He also posted a screenshot of a fellow pilot on hold with SWA Scheduling for over 22 hours. Anyway, here’s some insight for those wondering if this massive round of SWA cancellations is really all due to weather and staffing issues.

“I don’t know what to say. Southwest Airlines has imploded. Their antiquated software system has completely fried. Planes are parked. Crews are stranded in the airports with the passengers, volunteering to take the passengers in the parked planes but the software won’t accept it. Phone lines are overwhelmed for both passenger and crews. I personally spent over two hours trying to get ahold of anyone in the company last night after midnight. A Captain and I did manage to get the one flight put together on Christmas night and got people home. Kudos to the ops agent and dispatcher for making it happen. We had to manually input a lot of the data and it took over an hour to coordinate with dispatch going back and forth running numbers.

We spent hours trying to get the company to answer and get us a hotel when we landed as they’re all sold out. We were only put in a call que for hours before hanging up. I found one hotel with 4 rooms and we bought our own rooms at 2:30am. I even paid for a Flight Attendants room. We literally have crews sleeping on the airport floors all over the country with nowhere to go. Crews have been calling to fly anyone, anywhere, but the company says the system needs a reset. They have effectively shut down the operations for the rest of year, running 1/3 of the flights so that they can let the computer find and locate the crews and aircraft. Gate agents are in tears. They’ve been yelled at, cussed at, slapped and spit on. Flight attendants have been taking a beating. The frontline employees have had little support or communication. Terminals are standing room only with people having been there for days. Pilot lounges are packed with pilots ready to fly and nowhere to go.
Embarrassing is an understatement. I’m going on my second of three days off, still stuck on the east coast and still expected to show up in the morning with no schedule. And I’m willing to fly all day if needed. Because that’s nothing compared to the passengers needing meds in bags that are lost and mothers traveling with kids, having been stuck for the same amount of days in the terminal. In 24 years, I’ve never seen anything like this. Heads need to roll! Rumors on media are floating that there is a lack of crews and pilots are staging sick calls. Absolutely not true at all. This is a computer system meltdown. Thousands of crew members are sitting in hotels and airports with nowhere to go. This airline has failed miserably.”

From the 10x Travel Group

My friend’s husband is a pilot with Southwest. He just posted this an hour ago. I’m not including his name or the photos he shared of packed SWA employee rooms at the airports over the past couple of days (in case his post comes back to bite him with the company—even though he’s stating facts.) He also posted a screenshot of a fellow pilot on hold with SWA Scheduling for over 22 hours. Anyway, here’s some insight for those wondering if this massive round of SWA cancellations is really all due to weather and staffing issues.

“I don’t know what to say. Southwest Airlines has imploded. Their antiquated software system has completely fried. Planes are parked. Crews are stranded in the airports with the passengers, volunteering to take the passengers in the parked planes but the software won’t accept it. Phone lines are overwhelmed for both passenger and crews. I personally spent over two hours trying to get ahold of anyone in the company last night after midnight. A Captain and I did manage to get the one flight put together on Christmas night and got people home. Kudos to the ops agent and dispatcher for making it happen. We had to manually input a lot of the data and it took over an hour to coordinate with dispatch going back and forth running numbers.

We spent hours trying to get the company to answer and get us a hotel when we landed as they’re all sold out. We were only put in a call que for hours before hanging up. I found one hotel with 4 rooms and we bought our own rooms at 2:30am. I even paid for a Flight Attendants room. We literally have crews sleeping on the airport floors all over the country with nowhere to go. Crews have been calling to fly anyone, anywhere, but the company says the system needs a reset. They have effectively shut down the operations for the rest of year, running 1/3 of the flights so that they can let the computer find and locate the crews and aircraft. Gate agents are in tears. They’ve been yelled at, cussed at, slapped and spit on. Flight attendants have been taking a beating. The frontline employees have had little support or communication. Terminals are standing room only with people having been there for days. Pilot lounges are packed with pilots ready to fly and nowhere to go.
Embarrassing is an understatement. I’m going on my second of three days off, still stuck on the east coast and still expected to show up in the morning with no schedule. And I’m willing to fly all day if needed. Because that’s nothing compared to the passengers needing meds in bags that are lost and mothers traveling with kids, having been stuck for the same amount of days in the terminal. In 24 years, I’ve never seen anything like this. Heads need to roll! Rumors on media are floating that there is a lack of crews and pilots are staging sick calls. Absolutely not true at all. This is a computer system meltdown. Thousands of crew members are sitting in hotels and airports with nowhere to go. This airline has failed miserably.”