The Week Ahead: Jobs, global trade, manufacturing

workers
Computer operators in the 1940s

The jobs numbers always get the headlines. Which is odd. It’s a trailing indicator, a recitation of history rather than an anticipation of the things to come. And yet, it’s up close and personal. Most of us have jobs, and all of us understand the impact of being without work.

Hence, the headlines that we’ll see on Friday when the employment situation report is published at 8:30 a.m. New York time. The sneak preview, the ADP employment report compiled by a leading American payroll company, will be released on Wednesday at 8:15 a.m.

On Friday, simultaneously with the jobs report, we’ll get international trade stats, also at 8:30 a.m.

A major forward-looking report, the Institute of Supply Management  manufacturing survey, will by published on Monday at 10 a.m.


Today’s Book:

The Trader’s Guide to Key Economic IndicatorsBy Richard Yamarone

How to understand and act on the data that traces the course of our economy.


And the Fedsters are coming out in droves during the week.

Fed Chairman Jerome Powell has two appearances.

First, he talks about the economic with the National Association of Business Economics annual meeting in Boston, on Tuesday at 12:45 a.m., and then sits for a discussion with PBS NewsHour anchor Judy Woodruff  at The Atlantic Festival in Washington, D.C., on Wednesday at 4 p.m. The discussion with Woodruff will be streamed here.

Fed Vice Chairman for Supervision Randal Quarles has two appearances as well.

He testifies on Tuesday at 10 a.m. before the Senate Banking, Housing and Urban Development Committee, about implementation of the Economic Growth, Regulatory Relief and Consumer Protection Act, signed into law by President Trump at June. It reforms the post-recession Dodd-Frank regulations, among other things.

Quarles also speaks about trends in community banking to the St. Fed’s community banking conference, in St. Louis, Mo., on Thursday at 9:15 a.m. It will be screened here.

And Fed Gov. Lael Brainard will address the FedPayments Improvement Community Forum in Chicago, on Wednesday at 2 p.m. It will streamed here.
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Live: Friday, Sept. 28, 2018

8 p.m. New York time

I shall post my weekly discussion of economic reporting, The Week Ahead, on Saturday.

16:05 p.m. New York time

My attempts to exit GNRC and KMX  failed, as the asking price never came sufficiently close to those levels to attract a trade. The market price for the GNRC options was $0.70, and for KMX, $2.70, each 10 cents above target exit price. I shall re-establish the orders on Monday if the market prices are within the ballpark.

12:50 p.m. New York time

One of the perils of trading East Coast markets from the West Coast is the occasional need to catch up on sleep. The leisurely 9:30 a.m. opening bell in New York or the Chicago Board of Options Exchange kick-off kickoff at 8:30 a.m. is transformed into a hellish 6:30 a.m. at Private Trader’s home base, Portland, Oregon. Normally I’m a morning person, but a string of early mornings caught up with me this morning, and after 10 hours sleep, i came awake at 9:10 a.m. local time, noonish in New York.

So it goes.

Despite my slothful sleeping, I was greeted with two potential good surprises. My iron condor on GNRC reached an asking price of $0.60 per contract, or 50% of maximum potential profit, the point at which I manage such positions, and my iron fly on KMX reached an ask of $2.60, or 25% of maximum potential profit, the management point for the iron flies.

I have entered exit orders on both symbols at the prices given above. I’ve had no takers on those long orders, which are attempting to buy back the options positions for a debit less than the credits I received when entering the positions. Both positions expire Oct 19, so there’s still some time to play with as time decay, which works in my favor on short positions such as these, picks up the pace.

Status of options positions:

sym option debit share price curr % max profit net prft/shr $ option days left
AMD 0.55 30.38 43.9 0.43 7
EWZ 0.72 33.95 16.3 0.14 49
GNRC 0.60 57.14 50.4 0.61 21
JBL 1.83 27.39 (33.6) (0.46) 21
KMX 2.60 75.67 25.1 0.87 21
MU 0.66 45.47 34.7 0.35 21
NKE 2.50 85.12 19.1 0.59 21
SPY 3.17 290.84 (3.3) (0.10) 49

Status of share positions:

sym share price net result % net profit $ days held
AAPL 225.05 0.5% 1.09 14
CHK 4.53 13.3% 0.53 14
FXI 42.94 4.2% 1.73 14
SPXU 32.13 -20.8% (8.43) 136
VNQI 56.19 -1.1% (0.62) 15

By Tim Bovee, Portland, Oregon, Sept. 28, 2018

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Live: Thursday, Sept. 27, 2018

10:40 a.m. New York time

I have no new analyses in sight for for today.

Here’s the status of my current options positions:

sym option debit share price curr % max profit net prft/shr $ option days left
AMD 0.68 31.94 30.6 0.30 8
EWZ 0.76 34.60 11.6 0.10 50
GNRC 0.75 56.73 38.0 0.46 22
JBL 1.73 27.39 (26.3) (0.36) 22
KMX 2.83 73.79 18.4 0.64 22
MU 0.78 45.18 22.8 0.23 22
NKE 2.59 84.35 16.2 0.50 22
SPY 4.48 291.26 (45.9) (1.41) 50

And my share positions:

sym share price net result % net profit $ days held
AAPL 225.12 0.5% 1.16 13
CHK 4.48 12.0% 0.48 13
FXI 43.10 4.6% 1.89 13
SPXU 32.02 -21.1% (8.54) 135
VNQI 56.88 0.1% 0.07 14

By Tim Bovee, Portland, Oregon, Sept. 26, 2018

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EWW Analysis

 iShares MACI Mexico ETF (EWW)

I have declined to take a a short iron condor spread on EWW, using options that trade for the last time 51 days hence, on Nov. 16. The hypothetical premium is a $1.01 credit and the stock at the time of entry was priced at $51.12. Since I passed on the trade, of course, neither money nor contracts changed hands.

The trade was proposed by a member of the TastyWorks team, Fauzia, who skewed her position sharply to the downside. That skew provided more protection against a decline and increased the premium, but at a high cost in risk.

It’s that high risk relative reward that persuaded me not to take the trade. I’m not at all criticizing the trade — it’s an excellent way to handle uncertainty — but it moves beyond my own willingness to accept risk. In my book a key element of trading success is knowing your risk limits and knowing when you’re willing to move beyond them.

The profit zone for this position is between $54.01 on the upside and $40.01 on the downside.

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Live: Wednesday, Sept. 26, 2018

11:55 a.m. New York time

I’ve passed on a potential trade on EWW after a full analysis.

10:35 a.m. New York time

I have no more earnings plays in sight this week, so I’ll turn my attention to longer-term positions. Today I’ll take a look at EWW, a high IV rank exchange traded fund that tracks the Mexican stock market. It’s not my trading idea but was posted by Fauzia, a member of the TastyTrade team.

Of my present options positions, one — GNRC — is nearing the point where I manage it — either exit or roll it forward. For iron condors like GNRC and directional spreads, the management point is 50% of maximum potential profit. For iron flies, which I use for earnings plays, I manage 25% of maximum potential profit.

Here’s the status of my options positions:

sym option debit share price curr % max profit net prft/shr $ option days left
AMD 0.72 31.99 26.5 0.26 9
EWZ 0.75 33.55 12.8 0.11 51
GNRC 0.70 57.56 42.1 0.51 23
KMX 2.88 27.51 17.0 0.59 23
JBL 1.63 73.65 (19.0) (0.26) 23
MU 1.02 44.34 (1.0) (0.01) 23
NKE 2.55 83.48 17.5 0.54 23
SPY 3.45 291.25 (12.4) (0.38) 51

And of my share positions:

sym share price net result % net profit $ days held
AAPL 222.99 -0.4% (0.97) 12
CHK 4.59 14.8% 0.59 12
FXI 43.35 5.2% 2.14 12
SPXU 31.96 -21.2% (8.60) 134
VNQI 57.00 0.3% 0.19 13

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KMX Analysis

CarMax Inc. (KMX)

Update 10/1/2018I have exited short iron fly position on KMX for a $2.60 debit, $0.87 below the $3.47 credit at entry. That’s 25% of maximum potential profit, my goal for iron fly positions. Shares stood at $74.85 at the time I exited.

KMX was dropping rapidly the day I entered, and stayed near the closing low of that day thereafter. The share price at exit was 38 cents above the low end of the profit range.

Shares declined by 1.2% over six days, or a -71% annual rate. The options position produced a 33.5% return for a +2,036% annual rate.


I have entered a short iron fly spread on KMX, using options that trade for the last time 24 days hence, on Oct. 19. The premium is a $3.47 credit and the stock at the time of entry was priced at $75.74.

I made the decision to enter the trade in my account because of proximity to an earnings announcement, on Sept. 26 before the opening bell..

The profit zone for this position is between $79.47 on the upside and $74.47 on the downside.

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NKE Analysis

NIKE Inc. (NKE)

Update Oct. 1, 2018I exited NKE for a $2.45 debit, a $0.64 profit on the options, with shares trading at $83.43, which $1.08 below the entry price. The share close $1.05 below the short calls strike price.

Implied volatility was 22% when i exited, eight points below its entry level.

I exited at 20.7% of maximum profit. That was below my target, 25% of max, due to difficulties on my part in correctly using the TastyWorks brokerage interface.

Shares declined by 1.3% over seven days, or a -67% annual rate. The options position produced a 26.1% return for a +1,362% annual rate.


I have entered a short iron fly spread on NKE, using options that trade for the last time 24 days hence, on Oct. 19. The premium is a $3.09 credit and the stock at the time of entry was priced at $84.51.

I made the decision to enter the trade in my account based on proximity to an earnings announcement, on Sept. 25 after the closing bell..

The profit zone for this position is between $87.59 on the upside and $83.59 on the downside.

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Live: Tuesday, Sept. 25, 2018

12:10 p.m. New York time

I have entered an earnings play on KMX.

11:25 a.m. New York time

I’ve entered an earnings play on NKE.

10:20 a.m. New York time

I have two earnings plays in mind today, NKE and KMX.

The state of my options positions:

sym option debit share price curr % max profit net prft/shr $ option days left
AMD 0.92 32.77 6.1 0.06 10
EWZ 0.73 32.60 15.1 0.13 52
GNRC 0.80 58.09 33.9 0.41 24
JBL 1.65 27.34 (20.4) (0.28) 24
MU 1.09 44.18 (7.9) (0.08) 24
SPY 3.51 291.30 (14.3) (0.44) 52

And of my shares positions:

sym share price net result % net profit $ days held
AAPL 220.86 -1.4% (3.10) 11
CHK 4.71 17.8% 0.71 11
FXI 42.81 3.9% 1.60 11
SPXU 32.16 -20.7% (8.40) 133
VNQI 57.21 0.7% 0.40 12

By Tim Bovee, Portland, Oregon, Sept. 25, 2018

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JBL Analysis

Jabil Inc. (JBL)

Update 10/12/2018I have exited my short iron fly position on JBL for a loss, a week before the options expired.

The stock gapped down at the opening after earnings were published by nearly $3, immediately pushing the price below the profitable zone, and the decline continued unabated though the nearly three weeks I held the position.

The debit on the options was $2.05, for a loss of $0.68 per contract/share, with shares trading at $23.63. 

Shares declined by 20.6% over the 18 day holding period, or a -417% annual rate. The options position produced a -33.2% loss for a -673% annual rate.


I have entered a short iron fly spread on JBL, using options that trade for the last time 25 days hence, on Oct. 19. The premium is a $1.37 credit and the stock at the time of entry was priced at $29.75.

I made the decision to enter the trade in my account based on an earnings announcement.  JBL publishes earnings on Sept. 25 before the opening bell.

The profit zone for this position is between $31.34 on the upside and $29.34 on the downside.

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Live: Monday, Sept. 24, 2018

11:05 a.m. New York time

I have entered a position on JBL.

10:25 a.m. New York time

JBL publishes earnings before the opening bell on Tuesday, and I’m looking to enter an earnings play today, either an iron fly or an iron condor.

Here is how my present options positions stand…

sym option debit share price curr % max profit net profit/share $ option days left
AMD 0.85 32.12 13.3 0.13 11
EWZ 0.78 33.73 9.3 0.08 53
GNRC 0.85 57.78 29.8 0.36 25
MU 0.84 45.53 16.8 0.17 25
SPY 3.50 291.25 (14.0) (0.43) 53

And my shares positions:

sym share price net result % net profit $ days held
AAPL 217.75 -2.8% (6.21) 10
CHK 4.69 17.3% 0.69 10
FXI 42.50 3.1% 1.29 10
SPXU 32.17 -20.7% (8.39) 132
VNQI 57.24 0.8% 0.43 11

By Tim Bovee, Portland, Oregon, Sept. 24, 2018

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