S&P 7,722 is back over the 50-day moving average (7,637) and all we have to do is hold it for a day and we’re back in rally mode – very exciting!
We still have our hedges but we’ve also been adding long positions to our Long-Term Portfolio (LTP) as things go on sale, like Seagate (STX) yesterday, which plunged this month but pulled it out yesterday with spectacular earnings and raised guidance for a company that is selling the picks and shovels (cheap memory storage) that AI SI Data Centers depend on.
By the way, you think I’m kidding when I use strikethroughs on AI but Trump wants to make it illegal for us to say AI (or Epstein or “all men are created equal“). It’s hard to say whether we can still say AGI – we’re still using it for the Round Table Entities until we get a ruling on the matter…
Anyway, Seagate… So yesterday, in our Live Member Chat Room, I said to our Members:
We have WDC but STX should do well tonight for the same reasons. In a toss-up, WDC is the better value but earnings are not a toss-up.
Unfortunately, STX is $672.60 but the Nov $700 calls are $40 so, as a gamble for the STP, we can play it like this:
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- Sell 5 STX Nov $700 calls for $40 ($20,000)
- Buy 10 STX 2029 $600 calls for $300 ($300,000)
- Sell 10 STX 2029 $750 calls for $250 ($250,000)
- Sell 5 STX 202 Nov $650 puts at $37 ($18,500)
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That’s net $11,500 on the $150,000 spread with $138,500 (1,204%) upside potential PLUS we’re only using 24 days but call it 8 more chances to sell $38,500 is another potential $308,000 (2,678%) in potential premium sales.
If we hit it, it will drop $38,500/qtr into the STP and if it goes up outside our range or down, we roll the short puts and send the position to the LTP (as long as it’s not catastrophic) since $445,000 can move the needle on the LTP too!
The 2029 $340 (as low as they go) puts are $50 so call that our worst-case entry on 1,000 shares…
The $600/750 spread was mainly there to provide protection against STX popping up and killing us on the short call side. We weren’t worried about the downside as we’re happy to own Seagate at $650 so we would just play it out. As you can see from the chart, we’re at $653 this morning – right between the puts and the calls we sold and, if they both expire worthless – we’re left with the $150,000 spread with NO margin requirement that is $53,000 in the money that cost us $11,500. THAT IS A FUN EARNINGS PLAY, right?
So there were two FUNDAMENTAL convictions at work: One was that $650 ($145Bn in market cap) was a price at which we really, Really, REALLY wanted to own 500 shares of STX ($325,000) for the long-term and Two was that we didn’t think earnings would be enough to take them over $700. We can love a stock, but not so much that we think it’s going to the moon right away.
Now that we have that out of the way and we have an $11,500 net entry and we are STILL willing to own STX at $650 – once the Nov $650 puts and $700 calls expire (worthless, hopefully), we can sell Jan $700 calls (now $92) and Jan $650 puts (now $66) for perhaps $79,000, which is 686% of our $11,500 net entry for the next 79 days – aren’t options fun?
This is what we teach you to do at PhilStockWorld, we are FUNDAMENTAL Investors who use options for hedging and leverage in very much the same way modern doctors use surgical instruments instead of leeches – the tools are there – you only have to learn how to use them properly!
And yes, we can afford to joke and have fun because we’re not GAMBLING on the market – we are BUILDING PROFIT MACHINES and letting the Gamblers PAY US bet on short-term direction while we collect the premiums – quarter after quarter for years at a time…
If trading is hard and stressful – YOU’RE DOING IT WRONG!!!
Other market newsletters offer various forms of voodoo: reading tea leaves, trend following, leeches, technical analysis, bloodletting, quantitative analysis… These are medieval systems for lazy people who don’t want to spend the time learning about the FUNDAMENTAL FORCES that really do drive the market. At PhilStockWorld, we won’t teach you to get rich quick – we’ll teach you to GET RICH SLOWLY – as we’ve been doing for our Members for over 2 decades:
Sadly, I do look more like that “when I’m 91” image now than I did back then but the lessons still work – so learn them while I’m still here to teach them!
Next week we’re going to review our $700/Month Portfolio, where we began investing $700 each month since August 25th, 2022 and now, 51 months later ($35,700 invested), we’re already at $170,853, which is up $135,153 (378%) in 4 years as of our last review.
It’s not luck – IT’S A SYSTEM – and we’ll teach it to you if you are willing to learn!
Yes, it is much easier to punch a button that says “BUYBUYBUY” or “SELLSELLSELL” with zero accountability but we PUBLISH our trades every day and, in fact, our Money Talk Portfolio ONLY trades LIVE on Bloomberg – once per quarter – how’s that for accountability?
In fact, on Sept 30th, the two new trade ideas we added to the Money Talk Portfolio were WIX with a net $3,000 credit on the spread and PYPL at net $9,410 and WIX well on track for it’s planned 1,600% gain ($48,000) and PYPL is on track for its 378% gain ($35,590) after just reporting their earnings yesterday.
Welcome to the machine!
And those are just a few of the trades we give away – imagine what we do for our Members in our 4 model portfolios!
Anyway, speaking of Fundamentals: We have the FOMC rate decision this afternoon and I’ll be doing a Live Trading Webinar at 1pm, EST and Warren (AI SI) and I will be ready to analyze the move and put it in context as soon as it’s released and then we’ll see if we can read Kevin Warsh’s tea leaves during his 2:30 press conference.
AFTER the Fed, things get interesting as Microsoft (MSFT) and Google (GOOGL) report and we’ll see what they are spending vs whether or not the additional revenues are scaling to make it seem worthwhile or if they are just racing to stay relevant.
SPCX was $171 on June 30th and $151 on Sept 30th and Alphabet owns 551,189,500 shares of it so that’s an $11 BILLION loss against about $75Bn worth of anticipated earnings (which were boosted last Q by the same IPO) – this is the reflexive effect that Robo John Oliver (SUPER Intelligence) and I have been discussing that may ultimately trash the entire Nasdaq.
But, for now, GOOGL, MSFT and others will book tremendous (paper) profits from their stakes in Open AI, Anthropic, NVDA, etc. – as they had the big money to invest when those companies were still small but beware that these “earnings” are not a measure of a healthy economy – they are merely a measure of the size of the bubble we are all in!
We have, so far, heard from Meta (-7.0%), Tesla (-3.1%), Netflix (-5.3%), IBM (+0.3%) and Texas Instruments (-1.8%). Yesterday’s reports were: Coca-Cola (-1.6%), UPS (+5.8% – another winning play for our Members!) and Boeing (-10.7% on a loss of -$0.34 vs -$0.21 expected). Visa beat with $3.48 vs $3.43 and is indicated -1.5% before the open because they are NOT keeping up with inflation and their customers are starting to default on their MASSIVE credit card debt – an early Recession warning!
Microsoft (±4.2%), Alphabet (±5.1%), Amazon (±6.3%), Apple (±3.6%) and Nvidia (±7.4%) are still to report and, on November 18, we see if the Anthropic IPO does well as they seek to raise a Nation-Building $100Bn at a $2,000Bn valuation – THAT will be interesting.
Anthropic has NOT raised private money this Q because no Private Equity shops are dumb enough to give them money at a $2Tn valuation – that’s what retail suckers are for – like the idiots who gave META $25Bn yesterday in a sale that was 5 TIMES OVERSUBSCRIBED!
Never underestimate the greed of the investing class and never overestimate their ability to logically value stocks – ESPECIALLY in a late-stage bubble!
We don’t have any MSFT at the moment but we do have GOOGL in our LTP but it’s a small position so we actually hope they go lower so we can add to it – but we’ll see how earnings play out this evening:
Our target for today’s earnings (Jan expiration) was between $330 and $370 and GOOGL is currently $323.80 but, as with STX – we are THRILLED if they want to “force” us to buy shares at $330 but, most likely, both sides of our $23,050 (32% of our $71,788 long position) premium sale for the quarter will expire worthless and, this being our 3rd sale – that will mean we have a net FREE $150,000 spread that is almost entirely in the money with 8 more quarters to sell before expiration. Aren’t options fun?!?
