Top Trades for Thu, 07 Jan 2021 11:04 – GOLD

Good morning!

Now I have to find another stock nobody believes in….

By the way, in yesterday's Webinar we talked about a new trade on GOLD before it pops back up.  

  • Sell 10 GOLD 2023 $20 puts for $3 ($3,000)
  • Buy 30 GOLD 2023 $23 calls for $5.75 ($17,250) 
  • Sell 30 GOLD 2023 $27 calls for $4.50 ($13,500) 

That's net $750 on the $12,000 spread so the upside potential at $27 is $11,250 (1,500%) and all you are doing is obligating yourself to buy 1,000 shares of GOLD at $20.75 (assuming you lose the $750), which is $3.75 (15%) below the current price.  TOS says ordinary margin on the short puts is $1,617 so it's a very margin-efficient way to make $11,250 and a great inflation hedge as well. 

We don't have GOLD in the LTP anymore so let's do a double order of this (20 puts, 60 spreads) and see how it goes as our first official trade of 2021.

WBA/Batman – They are avoiding saying "We are going to make a fortune on this virus!"  

Bigger Chart – It looks like we'll need that 20% line on the S&P as we're clearing 10% in the NYSE.   All boxes are green now and that's a signal that we need to reset our targets (if it holds into next week).





Top Trades for Wed, 30 Dec 2020 12:23 – GILD

GILD/Pharm – Still a great value.

GILD is back where we like them and we cashed them out of the LTP so, for the LTP, let's get back in with:

  • Sell 5 GILD 2023 $50 puts for $8 ($4,000)
  • Buy 10 GILD 2023 $50 calls for $12.80 ($12,800)
  • Sell 10 GILD 2023 $65 calls for $6.75 ($6,750) 

That's net $2,050 on the $15,000 spread that's $7,000 in the money to start with an upside potential of $12,950 (631%) if GILD can power up to $65 over the next two years.  Worst-case is you own 500 shares at net $60.10 – because we sold aggressive short puts but, hopefully, GILD will go even lower and we can double down on this one.

By the way, no Webinar today.  My daughter is here and I'm leaving early for a family dinner.





Top Trades for Wed, 16 Dec 2020 12:45 – MO

Maybe a glitch?  I'm sure they are paying it.

MO dividend is a very fat 8.16% now at $3.44 per $42.87 share.  As a new trade, you can:

  • Buy 1,000 shares of MO for $42.87 ($42,870)
  • Sell 10 MO 2023 $35 puts for $4.50 ($4,500) 
  • Sell 10 MO 2023 $40 calls for $6.25 ($6,250)

That's net $32,120 and the spread pays back $40,000 if called away in two years with a $7,880 (24.5%) profit plus the $3,440 dividend x 2 is another $6,880 (21.4%) so a very nice way to tie up $32,120 to make $14,760 while we wait for MO to get into the hemp/cannabis space.  

Altria Has Had a Tough Year. Why 2021 May Be Better.

Webinar time.





Top Trades for Wed, 02 Dec 2020 10:50 – T

Trade of the Year/Batman – We've been discussing it for months, I'd call that a benefit.  You already know the top candidates and they are all good trades.

Speaking of candidates, VZ caught an upgrade today but no one has noticed T yet.  VZ is trading at 14x earnings and pays a 4.14% dividend, T is trading at 19 times earnings and pays a 7.2% dividend.  

15x on T would be $23 and you can sell the T 2027 $27 for $4 and then you would be paying net 15x earnings for T while putting 2 year's dividends in your pocket up front.

We could then buy the stock for $28.90 and sell the 2023 $25 calls for $4.90 to net in for $24 and, with the puts, our net is $20/23.50 (if assigned) with the call-away at $25 (up 25%) and the 7% dividends on top – so a nice use of sideline cash.  

So we could do 500 shares for $14,450 and sell the 5 2023 $27 puts for $2,000 and sell 5 2023 $25 calls for $2,450 and that nets us in to 500 shares for net $10,000 – just $20 per share so getting called away at $25 is a $5 ($2,500) profit PLUS anticipated $2,080 in dividend over 2 years is $14,580 back on $10,000 is 45.8% on this very conservative trade.  

Of course 45.8% wouldn't make it the Trade of the Year so we'd use a spread instead, probably 50 of the 2023 $27 ($3.75)/32 ($1.85) bull call spreads at net $1.90 ($9,500) against 20 of the short puts ($4,000) for net $5,500 on the $25,000 spread that's 40% in the money to start.  No dividend but the upside at $32 is $19,500 (354%) and that's right in our Trade of the Year territory but I'm not sure VZ getting an upgrade is enough of a catalyst to make T a clear winner… yet. 

SDS/Hwt – Didn't we do that yesterday?





Top Trades for Tue, 10 Nov 2020 11:50 – IBM

IBM/Ravi – From scratch I would go with:

  • Sell 5 IBM 2023 $100 puts for $20 ($10,000)
  • Buy 15 IBM 2023 $110 calls for $20 ($30,000)
  • Sell 15 IBM 2023 $135 calls for $10 ($15,000) 
  • Sell 5 IBM Jan $120 calls for $4 ($2,000) 

That's net $3,000 on the $37,500 spread so that's $34,500 (1,150%) upside potential at $135, which is not very far away.  The short calls can be rolled and I don't think IBM will explode and, of course, any time IBM doesn't gain a few % in a quarter, you lower your basis. 

Also nice that we're starting out $10,500 in the money so it's another Trade of the Year contender with that kind of leverage!

 





Top Trades for Thu, 22 Oct 2020 09:44 – CHL

Good morning!

Please not the following CHL adjustment for the Dividend Portfolio and new trade for the LTP:

Yesterday, in our Live Trading Webinar, we talked about some other stocks that were still cheap at the moment.   T was a Top Trade Alert the same day as PFE and it's a lot cheaper now than it was then (a nice way to say we called it wrong) at $26.72 on the day of their earnings.  This is idiotically low and earnings were just OK but the stock is popping to $28 because, as I said in the Webinar, just because a stock is being sold off by idiots doesn't mean it's not a bargain.  Things like earnings tend to balance that out but here's another Top Trade you can still pick up at a good price.

If T is making money, I bet China Mobile (CHL) is making money as they have 950M subscribers and AT&T has around 100M yet T is valued 50% more than CHL, which is trading at 7.6x earnings.  We already have CHL stock in our Dividend Portfolio, because it pays $1.97 (6%) per $32.65 share and we have 1,000 shares so we're going to promise to double down at $30 by selling 10 2023 $30 puts for $5.50.  That would net us into 1,000 more shares at $24.50.

You can just sell the puts for $5,500 to initiate a long position but, in our Long-Term Portfolio, we're going to also buy 30 of the 2023 $27.50 ($6)/35 ($3) bull call spreads for net $3 ($9,000) and that will put us in the $22,500 spread for net $3,500 and we're sure to be able to make that up selling a few calls along the way.  The ordinary margin on the short puts is $1,444 so it's a super-efficient play as well.  If all goes well and CHL is over $35 in Jan, 2023, then the profit on the spread will be $19,000 (542%).

See, there are still things to buy, even in a pandemic economy…





Top Trades for Wed, 14 Oct 2020 10:06 – GS

Good morning!

Oil up to $41 on this API data:

Crude -831k Cushing + 1,6M Gasoline +1,6Mi Distillates – 3,6M

It's pretty much net 0 so I'm for shorting /CL here with tight stops above.  /RB too at $1.20.

Just a good risk/reward play – not a lot of conviction.

Don't forget our GS play from the main post for the LTP:

There's been some spillover from Main Street to Wall Street as Bank of America's (BAC) profits are down 16% in today's report and Wells Fargo's (WFC) are down 56% but Goldman Sachs' profits almost doubled expectation at $9.68 per $215 share in a single quarter – very impressive.  We don't have much banking in the LTP and GS is a good one (well, evil, but good earnings) so let's add them with the following trade:

  • Sell 5 GS 2023 $165 puts for $20 ($10,000) 
  • Buy 10 GS 2023 $170 calls for $60 ($60,000)
  • Sell 10 GS 2023 $210 calls for $40 ($40,000) 

That's net $10,000 on the $40,000 spread that's 100% in the money to start and all GS has to do is not be lower than it is today in 2.25 years and we make $30,000 (300%) – aren't options fun?  Our worst-case scenario is owning 500 shares at net $185, 15% lower than the current price and the ordinary margin requirement is just $5,718 – so it's a very margin-efficient way to make $30,000 too!





Top Trades for Mon, 12 Oct 2020 06:53 – IBM

Good morning!

Hope everyone had a good weekend.

Should be kind of a slow semi-holiday today.

IBM/Batman – Krishna says the hybrid cloud opportunity is a $1Tn market:

"Client buying needs for application and infrastructure services are diverging, while adoption of our hybrid cloud platform is accelerating … Now is the right time to create two market-leading companies focused on what they do best."

 

The company will spin off the Managed Infrastructure Services unit of its Global Technology Services operation into a new public company. The tax-free deal is expected to be completed by the end of next year.

The company sees Q3 adjusted EPS of $2.58 vs. consensus of $2.58, and revenue of $17.6B vs. $17.56 consensus.

So they've raised guidance ahead of the spin-off and they're not doing the spin-off to head lower, right?  Last two Qs were $1.84 and $2.18 so these guys are pretty virus-proof so $2.58 and last year's Q4 was $4.71, which would put us at $11.31 though I doubt Q4 will be as strong as last year.  So $12.30 is not out of the question but the spin-off and transition could be a bit disruptive so I wouldn't go too crazy but I'm certainly comfortable with IBM at $125 for the long-haul as the same good value it was when we picked it at $110 in Nov 2018 as our Stock of the Year for 2019.  

The Stock of the Year doesn't have to go up (we hit $150 in Jan 2020) but it does have to be one we are certain will make 300% with an options trade and just knowing we got a bargain was enough to be sure with IBM.   

At the moment, I wouldn't make IBM the stock of the year because it COULD fall back to $100 if the market tanks.  THEN I would love it but $127.79 is simply a good price at the moment.

Of course you can own IBM for $100 by selling the 2023 $100 puts for $11.50 so, if we consider that free money, then our trade can be:

  • Sell 5 IBM 2023 $100 puts for $11.50 ($5,750) 
  • Buy


continue reading





Top Trades for Thu, 08 Oct 2020 08:44 – JETS and Future Is Now Portfolio Review

Good morning! 

Speaking of the Future is Now Portfolio, it's been doing very nicely (up 67.4% for the year) but it is risky times so let's cash in our short puts, which are over 80% anyway (ALB too) and make room for more Futuristic trade ideas down the road.  

Since we don't have hedges, cashing the short puts reduces our downside risk and we REALLY want to own our other positions, so we're not worried about those puts but let's see if they are worth keeping:

  • ARNC - This is an $8,000 spread and it's currently net $8,725 so we should really cash those out, right?

  • BYND – This is a $25,000 spread at net $21,985 so I guess there's no point in waiting 16 months for the last $3,015, is there?   

  • SPWR – We liked them so much we played them twice!  We have the $20,000 spread that's currently net $11,170 so that's good for a new play!   Then we have the older $28,000 spread that's currently net $13,640 and that's good for a double too if SPWR doesn't fall below $12 – so both of those are keepers.

See how I snuck that in there?  We just killed the Future is Now Portfolio, other than SPWR, which my hands got sore from banging the table on early this year but at least we added JETS and we'll look for some more bargains as earnings season comes around again.   

To reiterate, out new trade idea for this portfolio (from the Morning Report) is:

Stimulus talks are still up in the air with the Airline Industry hanging by a thread.  Yesterday, the Democrats tried to


continue reading





Top Trades for Thu, 01 Oct 2020 13:39 – EPD

Oil came down hard.  

Don't blame the Dollar:

Blame the global outlook on demand:

BBBY/Wilsons, Atty – Nice job on the patience play.  

Top Trades for Thu, 16 Apr 2020 15:15 – BBBY

 

  • Baird checks in on Bed Bath & Beyond (BBBY +17.2%) after the retailer's earnings reporte.
  • "While we believe BBBY has enough liquidity to survive this downturn, the unprecedented demand shock adds another layer of complexity to what is already a difficult turnaround process,' reads the firm's update.
  • Q2 and Q3 are seen dropping 5% to 20% from last year's levels.
  • Barid keeps a Neutral rating in place and lowers its price target to $5 from $10 to reflect reduced EPS estimates.
  • Previously: Bed Bath & Beyond +13% after slight sales beat (April 15)

Very tempting down here!  I think, for the LTP, we may as well pick up the 50 of the BBBY 2022 $3 ($3.55)/10 ($1.45) bull call spreads at $2.05 ($10,250) and sell 20 of the 2022 $5 puts for $2.62 ($5,240) for a net $5,010 entry on the $35,000 spread so $29,990 (598%) upside potential if BBBY can get back to $10 in 20 months. 

Sadly, I forgot to enter it. 

Good little company with a nice dividend.  I like it!   We already have ET in the Dividend Portfolio but I think there's room for EPD and their $1.78 dividend so let's go for the following:

  • Buy 1,000 shares EPD at $15.92 ($15,920) 
  • Sell 10 EPD 2023 $13 puts for $2.85 ($2,850)
  • Sell 10 EPD 2023 $15 calls for $3 ($3,000) 

That's net $10,070 on the $15,000 spread so about 50% upside and the $1.78 dividend is 17.67% while you wait!  Worst case is we get to own 2,000 shares at an average of $11.53, which is a 27.5% discount to the current price.  That's the worst case – and we're not even counting the $3.50(ish) you will collect in dividends over 2 years.  Aren't options fun?





 
 
 

Phil's Favorites

The Death Of Retail Is The Birth of Retail - Part 3...A Post Covid World... And More Gamestops?

 

The Death Of Retail Is The Birth of Retail – Part 3…A Post Covid World… And More Gamestops?

Courtesy of Howard Lindzon

Back in 2016 I wrote my first ‘Death of Retail Is The Birth of Retail‘ post and it had some good links and thoughts. I concluded to stay long $aapl, $amzn, $shop and $pypl. That was a good idea and I still own Apple, Amazon and Shopify, but I sold Paypal too early last year.

...



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ValueWalk

A Mixed Bag Of Mega-Cap Financial Firms' Earnings

By Gorilla Trades. Originally published at ValueWalk.

Commenting on the earnings of mega-cap financial firms and today’s trading Gorilla Trades strategist Ken Berman said:

Q4 2020 hedge fund letters, conferences and more

Investors Remain Eager To Buy The Dip

Following Friday’s deterioration, today’s bounce in stocks was crucial from a short-term perspective. With the busy political and earnings calendars in mind, today’s relatively low-volume rally might prove temporary, but it once again confirmed that investors remain eager to buy the dip thanks to the bullish long-term outlook.

The main sectors continued to diverge substantially today, with especially the after...



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Zero Hedge

Options Positioning Collapse Sparks "Potential For High Volatility"

Courtesy of ZeroHedge View original post here.

As we detailed last week, Friday's very large options expiration sparked a ~50% reduction in single stock gamma, leaving markets vulnerable to short-term volatility.

As SpotGamma warned, the  markets were entering a period with the potential for high volatility:

This creates volatility because as large options positions expired, are closed and...



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Politics

What is the 'boogaloo' and who are the rioters who stormed the Capitol? 5 essential reads

 

What is the 'boogaloo' and who are the rioters who stormed the Capitol? 5 essential reads

Rioters mass on the U.S. Capitol steps on Jan. 6. Samuel Corum/Getty Images

Courtesy of Jeff Inglis, The Conversation

In the wake of the insurrection on Jan. 6, the U.S. is bracing for the possibility of additional violent demonstrations and potential riots at the U.S. Capitol and state capitol buildings around the nation. W...



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Chart School

Why did selling SP500 volatility trades blow up?

Courtesy of Read the Ticker

Many have made their fortunes selling volatility premium and then losing it, that is because they are running down the lit fuse and not understanding that eventually the strategy blows up.

In the chart below periods marked with A, B, C, D are periods of chasing yield which was so great the selling of option premium became vogue. Yes, this strategy worked for a while and 'this time was different' worked, until it didn't.

Selling volatility work great during period gray A until the cycle ended at red A.
Selling volatility work great during period gray B until the cycle ended at red B.
Selling volatility work great during period gray C until the cycle ended at blue C.
Selling volatility work great during period gray D un...

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Biotech/COVID-19

The simple reason West Virginia leads the nation in vaccinating nursing home residents

 

The simple reason West Virginia leads the nation in vaccinating nursing home residents

By mid-January, only about a quarter of the COVID-19 vaccines distributed for U.S. nursing homes through the federal program had reached people’s arms. Paul Bersebach/MediaNews Group/Orange County Register via Getty Images

Courtesy of Tinglong Dai, Johns Hopkins University School of Nursing

The urgency of vaccinating nursing home residents is evident in the numbers. The COVID-19 pandemic has claimed the lives of mo...



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Kimble Charting Solutions

Treasury Bond Yields At Make-Or-Break Decision Point Says Joe Friday

Courtesy of Chris Kimble

Treasury bond yields (and interest rates) have been falling for so long now that investors have taken it for granted.

But bond yields have been rising for the past several months and perhaps investors should pay attention, especially as we grapple with questions about inflation and the broader economy (and prospects for recovery).

Today we ask Joe Friday to deliver us the facts! Below is a long-term “monthly” chart of the 30 Year US Treasury Bond Yield.

Counter-Trend Rally In Yields Facing Strong Resistance!

As you can see, treasury bond yields have spent much of the past 25 years trading in a falling channel… but the coronavirus crash sent yields...



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Mapping The Market

The Countries With The Most COVID-19 Cases

 

The Countries With The Most COVID-19 Cases

By Martin Armstrong, Statista, Jan 12, 2021

This regularly updated infographic keeps track of the countries with the most confirmed Covid-19 cases. The United States is still at the top of the list, with a total now exceeding the 22 million mark, according to Johns Hopkins University figures. The total global figure is now over 85 million, while there have been more than 1.9 million deaths.

You will find more infographics at ...



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Digital Currencies

Bitcoin: why the price has exploded - and where it goes from here

 

Bitcoin: why the price has exploded – and where it goes from here

B is for blast-off (but also bubble). 3DJustincase

Courtesy of Andrew Urquhart, University of Reading

Bitcoin achieved a remarkable rise in 2020 in spite of many things that would normally make investors wary, including US-China tensions, Brexit and, of course, an international pandemic. From a year-low on the daily charts of US$4,748 (£3,490) in the middle of March as pandemic fears took hold, bitcoin rose to ju...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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