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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 extend the previous aid to the airlines through March but Republicans blocked it – because then it wouldn't have been seen as coming from the President himself, so 38,000 more workers are furloughed through inaction.  

As we can see, the XAL Airline Index is about to run into serious resistance at it's own strong bounce line, which is also the rapidly declining 200-day moving average.  XAL feel from about $115 to $35 and that's 80 points so a weak bounce is 16 points (20% of the drop) and a strong bounce is 32 points so 51 and 67 would be the key lines to watch and you can see the consolidation happened at 51 (very violent) so now it's likely we'll test 67 and we're only at $58.22.

So, if you believe in Donald Trump, who said he wanted to help the airlines, this would be a no-brainer of a bet as the Strong Bounce line is over the 200 dma and the 5% Rule™ beats TA so the move over the 200-day moving average will be interpreted as bullish on the chart and we should get a nice kick higher once they work out some kind of stimulus for the airlines

 

JETS is the US Global Jets ETF and it's got LUV, DAL, UAL, AAL, ALGT, CJT, AC, ALK, JBLU and ATSG as it's top holdings.  As we discussed in the Webinar yesterday, we're about a year away from herd immunity, vaccine or no vaccine and the airline industry is vital to our national security and JETS includes cargo carriers, who are actually doing OK at the moment, with all the shipping we're doing.  

So that makes a 2023 spread on JETS kind of interesting with Trump promising to save the airlines and the Democrats trying to save the airlines.  Eventually, hopefully, SOMEONE will actually save the airlines.  For a trade in our Future is Now Portfolo, I'd go for:

  • Sell 10 JETS 2023 $15 puts for $4.40 ($4,400) 
  • Buy 15 JETS 2023 $15 calls for $6.50 ($9,750) 
  • Sell 15 JETS 2023 $25 calls for $3.65 ($5,475) 

That's a net $125 credit on the $15,000 spread so, if all goes well, it will make $15,125 (12,100%) if JETS is back over $25 in 2023.  Worst case is owning 1,000 shares at $15 (less the $125 credit) and we can always sell calls to lower that risk if we lose confidence but it's a nice, optimistic bet on things getting back to normal – one day.  Ordinary margin requirements on ETFs are pretty low, just $841 for this one so it's a very margin-efficient trade as well!  

 


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