MCD Analysis

McDonald’s Corp. (MCD)

I have entered a short iron fly spread on MCD, using options that trade for the last time 25 days hence, on Nov. 16. The premium is a $6.20 credit per contract share and the stock at the time of entry was priced at $167.15

My decision to enter the trade was based on proximity to an earnings announcement, on Tuesday, Oct. 23, before the opening bell.

The profit zone for this position is between $173.50 on the upside and $163.50 on the downside.

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Live: Monday, Oct. 22, 2018

11:25 a.m. New York time

I have entered a short iron fly position on MCD.

10:25 a.m. New York time

My top choice for a potential earnings play today is MCD. It has a second-quintile implied volatility rank, but it makes up for that with a high market cap and by adding a consumer discretionary company to my holdings.

If MCD fails to qualify for trading, my next choice is MMM.

The other prospects, arranged by IV rank quintile:

1st quintile: (81-100): AMD, CAT, UTX

2nd quintile (61-80): FITB, HBAN, HOG, ZION

3rd quintile (41-60): RF, VZ

5th quintile (1-20): XL


Today’s Book

The Fifth Risk

by Michael Lewis

Now #5 on the Amazon Charts in its 2nd week on the list. A new book by the financial writer who always finds new, and often surprising, insights into the world of money and systems.

In The Fifth Risk, Lewis dives into the most contentious issue of our times, the functioning of government in a time of attack and change.

He asks, What are the consequences of handing government over to people who have no idea how it works.

The New York Times calls it his “most ambitious and important book”. Quartz says that it is a “spellbinding, alarming analysis of the most serious threats to Americans’ safety happening now from inside the U.S. government.

More about the book


Status of my present holdings based on options:

sym option debit share price curr % max profit net prft/shr $ option days left
C 3.02 67.65 12.5 0.43 25
EWZ 1.13 5,975.00 (31.4) (0.27) 25
HON 5.71 151.42 9.9 0.63 25
IBM 9.57 128.84 (40.9) (2.78) 25
JNJ 5.70 138.51 (1.8) (0.10) 25
PM 3.55 8,788.00 (3.5) (0.12) 25
SPY 2.74 274.79 37.2 1.62 25
STZ 9.33 223.17 (11.1) (0.93) 25
WBA 4.06 77.62 (14.0) (0.50) 25

And of my holdings based on shares:

sym share price net result % net profit $ days held
AAPL 226.55 1.2% 2.59 38
CHK 4.57 14.3% 0.57 38
FXI 40.40 -2.0% (0.81) 38
SPXU 37.75 -6.9% (2.81) 160
TSLA 254.48 -16.6% (50.51) 21
VNQI 53.77 -5.4% (3.04) 39

By Tim Bovee, Portland, Oregon, Oct. 22, 2018

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The Week Ahead: GDP, durables, global trade, new homes

The week brings a first look at 3rd quarter gross domestic product. The report will be published Friday at 8:30 a.m.

The release has a greater than normal potential for market impact.. The 1st quarter’s growth was 2.2% and 2nd quarter’s, 4.2%.

That’s a rapid growth rate, and as the markets begin to falter in the face of the Federal Reserve’s raising of interest rates, both the Fed and traders will give these numbers an eagle-eyed scrutiny for signs of a looming recession.

Of greatest importance for interest rates: The implicit price deflator metric within the GDP report. The FOMC gives greater credence to this measure of inflation rather than the headline-generating consumer price index, and it will be a factor the committee considers in setting the target federal funds interest rate.


Today’s Book

The Infinite Game, by Simon Sinek

For the trader, life is a game. The questions we spend on our days, and sometimes nights, worrying about are these: What sort of game is it? What are the rules? What is my goal, besides “Make money”?

Sinek divides games into two varieties, the finite — with fixed rules and goals, like football — and the infinite — where the rules change and the goalposts move, like — well, like trading.

The book carries its discussion of games off the playing field and into the enterprise, and since trading itself is an enterprise, it’s insights apply to the games of the markets as well.

Coming soon.

More about the book


Otherwise, it’s a savory stew of indicators: Durable goods orders, a measure of buyer confidence to commit funds for a long-term asset, and international trade in goods, important as a diagnostic of the impact of the Trump administration’s aggressive tariff policies. Each will be published on Thursday at 8:30 a.m.

There will be one housing report: New home sales, the smaller part of the market, will be released on Wednesday at 10 a.m.

The Fed’s Beige Book will be published on Wednesday at 2 p.m. It provides a narrative of economic conditions in each federal reserve bank region.

Fed Vice Chairman Richard Clarida will address London’s Peterson Institute for International Economics on Thursday at 12:15 p.m. New York timeIt is his first public event as vice chairman, and it will be streamed here.

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HAL Analysis – passed

Halliburton Co. (HAL)

I have declined to take a short iron fly options spread on HAL, using options that trade for the last time 28 days hence, on Nov. 16.

The strike prices on the options are $2.50 apart and are situated so that they are some distance from the at-the-money price. That sort of distortion makes an iron fly difficult to construct without biasing the profit zone in one direction or the other.

I  considered the trade in conjunction with an earnings announcement on Monday, Oct. 22, before the opening bell.

The profit zone for this position is between $41.79 on the upside and $39.29 on the downside.

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Live: Friday, Oct. 19, 2018

3:20 p.m. New York time

I’m wrapping up trading for the week. On Saturday, look for The Week Ahead, a discussion of next week’s economics reporting.

11:20 a.m. New York time

I’ve passed on HAL after preparing an analysis.

10:10 a.m. New York time

As the week winds down, so does the pace of earnings announcements. I have one potential earnings play on my desk, HAL, and shall analyze it this morning.


Today’s Book

The Laws of Human Nature

by Robert Greene

Robert Greene’s new book delves deeply into the subject of our emotions as an essential tool for our social species, where relating to others — empathy — can mean the difference between life and death. Knowing why we have emotions, knowing how and when to control them and understanding the motivations and emotions of others, these are the goals discussed by Greene, along with tactics for mastering this complex core of the human experience.

As one of my early trading mentors one told me, emotion is the enemy of success. “Whether you make money or lose isn’t how you judge a trade”, he continued. “If you followed your rules, then the trade was a success.” Greene’s book provides a map toward the destination of mastering that enemy.

More about the book


My present options holdings:

sym option debit share price curr % max profit net prft/shr $ option days left
C 2.83 69.24 18.0 0.62 28
EWZ 1.01 39.25 (17.4) (0.15) 28
HON 5.99 155.65 5.5 0.35 28
IBM 9.10 131.55 (34.0) (2.31) 28
JNJ 5.93 139.20 (5.9) (0.33) 28
PM 3.73 88.69 (8.7) (0.30) 28
SPY 4.22 279.15 3.2 0.14 28
STZ 9.80 224.56 (16.7) (1.40) 28
WBA 3.99 77.48 (12.1) (0.43) 28

And shares holdings:

sym share price net result % net profit $ days held
AAPL 220.65 -1.5% (3.31) 35
CHK 4.85 21.3% 0.85 35
FXI 39.78 -3.5% (1.43) 35
SPXU 36.01 -11.2% (4.55) 157
TSLA 266.01 -12.8% (38.98) 18
VNQI 54.07 -4.8% (2.74) 36

By Tim Bovee, Portland, Oregon, Oct. 19, 2018

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HON Analysis

Honeywell International Inc. (HON)

I have entered a short iron fly options spread on HON, using options that trade for the last time 29 days hence, on Nov. 16. The premium is a $6.34 credit and the stock at the time of entry was priced at $155.80.

I made the decision to enter the trade because of its proximity to an earnings announcement, on Friday, Oct. 19, before the opening bell.

The profit zone for this position is between $161.34 on the upside and $151.34 on the downside.

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Live: Thursday, Oct. 18, 2018

11:30 a.m. New York time

PG’s strike prices wouldn’t allow me to construct a workable iron fly position, so I set it aside and instead entered an iron fly on HON, which was much better positioned relative to the at-the-money point.

10:25 a.m. New York time

My primary candidate for an earnings play today is PG, which combines an implied volatility rank high than the other prospects with a larger market capitalization.

The also-rans are AXP, CLF, HON and STI.


Today’s Book

Trumponomics:

Inside the America First Plan to Revive Our Economy

by Stephen Moore and Arthur B. Laffer

Sit down to any American political discussion these days and it will take one of two forms. The first, “He’s crazy! He’s destroying America!” The second: “MAGA! He’s making America great again, and it’s about time.”

Heritage Foundation chief economist Stephen Moore and Arthur B. Laffer, the economist who discovered the a Laffer Curve, cut through the rhetoric to uncover the heart of President Trump’s attempt to transform the American economy. He’s neither on the left nor the right, the two conservatives conclude, but rather has adopted an economic populism that combines elements of both. The result? The authors think he can pull it off, bringing a new age of prosperity for all Americans.

And as the mid-term elections loom and the 2020 presidential election campaigns prepare for their kick-offs, what subject could be more important than an assessment of where the Trump administration is taking us?

More about the book


I have no exits in sight at this point.

Here’s where my options positions stand:

sym option debit share price curr % max profit net prft/shr $ option days left
C 2.90 70.08 15.9 0.55 29
EWZ 1.05 39.33 (22.1) (0.19) 29
IBM 8.76 132.15 (29.0) (1.97) 29
JNJ 5.67 138.42 (1.3) (0.07) 29
PM 3.69 88.40 (7.6) (0.26) 29
SPY 4.04 279.21 7.3 0.32 29
STZ 10.08 225.84 (20.0) (1.68) 29
WBA 3.91 77.07 (9.8) (0.35) 29

And my shares positions:

sym share price net result % net profit $ days held
AAPL 218.53 -2.4% (5.43) 34
CHK 4.61 15.3% 0.61 34
FXI 39.09 -5.1% (2.12) 34
SPXU 36.05 -11.1% (4.51) 156
TSLA 266.80 -12.5% (38.19) 17
VNQI 53.81 -5.3% (3.00) 35

By Tim Bovee, Portland, Oregon, Oct. 18, 2018

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PM Analysis

Philip Morris International Inc. (PM)

I have entered a short iron fly options spread on PM, using options that trade for the last time 30 days hence, on Nov. 16. The premium is a $3.43 credit and the stock at the time of entry was priced at $84.45

I made the decision to enter the trade because it coincides with an earnings announcement, on Thursday, Oct. 18.

The profit zone for this position is between $88.43 on the upside and $83.43 on the downside.

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Live: Wednesday, Oct. 17, 2018

11 a.m. New York time

I’ve entered an iron fly options spread on PM.

10:25 a.m. New York time

I’ve decided to pass on TRV as an earnings trade today. I shall instead go with PM, which has a higher implied volatility rank and greater market capitalization.

10:15 a.m. New York time

I have updated the LEN analysis with results.


Today’s Book

Capitalism in America: A History

by Alan Greenspan and Adrian Wooldridge

Whatever our personal politics, as traders, capitalism is the sea in which we swim. In Capitalism in America, economist and former Federal Reserve chairman Alan Greenspan joins with The Economist’s Adrian Wooldridge, who writes the Begehot column,to explore the forces that have driven the American economy to where it stands today, from slavery in the pre-Civil War South to the redefinition of government’s role under President Franklin Roosevelt and onward to our post-Great Recession present.. It will be published Oct. 16, and it looks like a book that will earn a place on my shelf

More about the book


9:45 a.m. New York time

I have exited LEN for a loss. The stock goes ex-dividend on Thursday, Oct. 18, which increases the chance of an assignment, which I would prefer to avoid. I shall update the analysis with results later today.

I have five potential earnings plays on the table this morning. TRV, an insurance company, is the most interesting at this point, although its IV rank, in the 60s, is the lowest of the prospects.

BBT and KEY are banks, and I already have exposure in that reason and so I am striking them from the list without further analysis.

The global tobacco company PM will be my next choice if TRV doesn’t work out, and the metals refining company AA is the third prospect.

Here’s is the status of my options holdings, including the just-exited LEN.

sym option debit share price curr % max profit net prft/shr $ option days left
C 2.88 69.41 16.5 0.57 30
EWZ 1.01 39.11 (17.4) (0.15) 30
IBM 8.09 135.28 (19.1) (1.30) 30
JNJ 5.19 137.75 7.3 0.41 30
LEN 3.59 43.32 (11.1) (0.36) 30
SPY 4.79 279.58 (9.9) (0.43) 30
STZ 10.90 226.95 (29.8) (2.50) 30
WBA 3.73 76.58 (4.8) (0.17) 30

And of my share holdings.

sym share price net result % net profit $ days held
AAPL 221.20 -1.2% (2.76) 33
CHK 4.75 18.8% 0.75 33
FXI 39.87 -3.3% (1.34) 33
SPXU 35.81 -11.7% (4.75) 155
TSLA 277.23 -9.1% (27.76) 16
VNQI 53.85 -5.2% (2.96) 34

By Tim Bovee, Portland, Oregon, Oct. 17, 2018

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IBM Analysis

International Business Machines Corp. (IBM)

I have entered a short vertical spread on !S, using options that trade for the last time 31 days hence, on Nov. 16. The premium is a $6.79 credit per contract/share and the stock at the time of entry was priced at $143.80.

I decided to enter the trade based on the proximity of an earnings announce, on Wednesday, Oct. 17, before the opening bell.

The profit zone for this position is between $151.79 on the upside and $141.79 on the downside.

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