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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Live: Tuesday, Oct. 16, 2018

11:50 a.m. New York time

I have entered a short iron fly options spread on IBM.

10:45 a.m. New York time

In the earnings season, the techs are starting to publish. I’m most interested in analyzing IBM for trading today.

Another tech, NFLX, is also on the calendar, but at $335 or so per share, it lacks granularity in sizing the trade, so I’m passing on it. The other prospective earnings plays on the calendar are ABT, CREE, CSX, UAL and MTG.


Today’s Book

Volatility: Practical Options Theory by Adam S. Iqbal

If there is a theme that dominates my trading, surely it is volatility. Indeed,, blindfold me so I can’t look at a single chart or read a single quarterly report. Plug up my ears so that I can’t hear a single market commentary. Only let me know the volatility implied by the options on a stock, and how that volatility relates to its history over the past year, and I can tell you in an instant whether I want to look at it more closely at a possible trade.

The author of Volatility, Adam S. Iqbal, is a managing director and global head of FX exotics and correlation at Goldman Sachs. His book takes a deep dive into options theory, the assumptions that underly it, and ways to apply theory in the real world. I place great value on intuition in trading, and one of Iqbal’s goals for this book is to discuss ways of developing a more accurate intuition in making decisions when the clock is ticking.

In my world of options trading, volatility is pretty much the game. Volatility the book provides the strategic foundation for winning at that game.

More about the book


The status of my options positions.

sym option debit share price curr % max profit net prft/shr $ option days left
C 2.98 69.54 13.6 0.47 31
EWZ 1.01 39.15 (17.4) (0.15) 31
JNJ 5.40 136.89 3.6 0.20 31
LEN 3.43 44.15 (6.2) (0.20) 31
SPY 3.72 277.32 14.7 0.64 31
STZ 10.63 226.04 (26.5) (2.23) 31
WBA 3.48 74.95 2.2 0.08 31
sym share price net result % net profit $ days held
AAPL 217.62 -2.8% (6.34) 32
CHK 4.80 20.0% 0.80 32
FXI 39.92 -3.1% (1.29) 32
SPXU 36.77 -9.3% (3.79) 154
TSLA 268.98 -11.8% (36.01) 15
VNQI 53.55 -5.7% (3.26) 33

By Tim Bovee, Portland, Oregon, Oct. 16, 2018

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JNJ Analysis

Johnson & Johnson (JNJ)

I have entered a short iron fly spread on JNJ, using options that trade for the last time 32 days hence, on Nov 16. The premium is a $5.60 credit and the stock at the time of entry was priced at $134.86.

I made the decision to enter the trade in my account to coincides with an earnings announcement on Tuesday, Oct. 16, before the opening bell.

The profit zone for this position is between $140.50 on the upside and $130.80 on the downside.

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Live: Monday, Oct. 15, 2018

11:10 a.m. New York time

I have entered a short iron fly position on JNJ.

I’ve decided to pass on UNH, reserving funds for later in the earnings season.


Today’s Book

Big Debt Crisis by Ray Dalio

I first encountered hedge fund manager Ray Dalio at the outset of the Great Recession a decade ago, in the form of his 30-minute YouTube video How the Economic Machine WorksIn it, Dalio presents an Economics 101 course in how economic downturns happen, the small ones of the business cycle and the big ones of an excess of debt.

It’s a marvelous piece of work, and upon watching it, as our world crumbled about us, I christened him to myself as “The Great Simplifier”, a tribute to his easy to understand style of presentation.

Dalio has returned to his economics tutoring, this time in book form. Big Debt Crisis elaborates on the theories he illustrated so long ago in the video. I’m reading the book now, and find it to be a masterwork of great clarity. From Dalio, of course, I would expect no less. I recommend the book to all traders. Like smart fish, we need to understand the water in which we swim. Dalio provides us with a map.

More about the book


10 a.m. New York time

I have  selection of five potential earnings plays on my desk as I greet the dawn, and have selected two as my best prospects: JNJ for pharmaceuticals and UNH for health insurance and other services.

I’m going with JNJ, since it has the higher implied volatility rank, 67. UNH is also acceptable, and I’ll consider adding it but have not yet made a decision.

The remaining three possibilities are all financials, BLK, GS and MS, which I am passing on without further analysis, having already added financials to my risks this earnings season.

Here’s how my options positions are doing this morning:

sym option debit share price curr % max profit net prft/shr $ option days left
C 3.26 70.35 5.5 0.19 32
EWZ 0.85 38.31 1.2 0.01 32
LEN 3.58 41.22 (10.8) (0.35) 32
SPY 3.67 275.74 15.8 0.69 32
STZ 9.93 223.54 (18.2) (1.53) 32
WBA 3.45 74.20 3.1 0.11 32

And of my shares positions:

sym share price net result % net profit $ days held
AAPL 220.12 -1.7% (3.84) 31
CHK 4.48 12.0% 0.48 31
FXI 35.54 -13.8% (5.67) 31
SPXU 37.37 -7.9% (3.19) 153
TSLA 261.12 -14.4% (43.87) 14
VNQI 52.84 -7.0% (3.97) 32

By Tim Bovee, Portland, Oregon, Oct. 15, 2018

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The Week Ahead: Industry, retail and housing

This week gets back to the basics, what we make, what we buy and where we’re living as we engage in those fundamental activities of life.

The industrial production  report will be published Tuesday at 10 a.m. New York time, preceded by retail sales on Monday at 8:30 a.m.


Today’s Book

The Psychology of Investing

by John R. Nofsinger

What is the secret of successful trading? Lots of money? The best business data? The right technical trading indicators and techniques? As someone who has spent 36 years actively trading the stock and options markets, my answer would be, “None of the above”. 

All of those external tools, in my opinion, are irrelevant to successful trading. Rather, the secret of successful trading lies within. It is the mindset, the psychology, that makes the difference between success and failure in the markets. (Plus, I’d be remiss not to add, on occasion pure dumb luck.)

For insight, Nofsinger turns to the tools of experimental finance. His study of what happens in the brain as we trade can’t do much for the luck part of the equation, but he has much to say about the credits and debits that our built-in human ways of thinking bring to our trading results.

More about the book


Housing rounds out the triplicity with three reports of its own, housing starts, a leading indicator, on Wednesday at 8:30 a.m. New York time, existing home sales — the larger part of the market — on Friday at 10 a.m., and the less-watched National Association of Homebuilders housing market index on Tuesday at 1 a.m.

The Federal Open Market Committee minutes for the Sept. 26 meeting will be published on Wednesday at 2 p.m. The committee at that meeting raised the federal funds rate by 25 basis points to a target range of 2% to 2-1/4%, and also released members’ economic forecasts.

Read More »

Live: Friday, Oct. 12, 2018

3:45 p.m. New York time

That’s a wrap for the week. On Saturday look for my discussion of economic reports and the Fed, The Week Ahead,

1:20 p.m. New York time

I have updated my JBL analysis with full results.

stock immediately, instead reserve my funds for sector diversification.


Today’s Book

The Power and Independence of the Federal Reserve

by Peter Conti-Brown

A book ripped from today’s headlines!

Since taking office President Trump has regularly praised the rising stock market as a winning outcome of his policies. History, of course, shows that a rising market can rapidly turn into a falling disaster — remember Black Monday in 1987? — and as a smart politician, the president has moved quickly to distance himself from the decline that began on Sept. 20, saying that  the Federal Reserve’s interest rate increases, designed to control inflation, show the central bank has “gone crazy” and is “going loco”.

The Federal Reserve is considered by most to be independent of political branches, such as the White House. But what does that really mean?  Peter Conti-Brown, a professor of legal studies at the University of Pennsylvania, studied that independence, its origins and its workings, in this 2016 book.

More about the book


12:30 p.m. New York time

Here’s my latest near-term Elliott wave count on SPY, which tracks the S&P 500.

We’re early in the 3rd wave down of the Intermediate degree {+3}. The chart shows 30 days with 10-minute bars, and at that close-up level, I’m uncertain of the degree of the waves I’m tracking, and so have marked them with a {?}. At that degree, whatever it may be, we are in a upward 4th wave correction that will, if it is typical,

sp20181012A

I’m not finding any other broad-market Elliott wave trades that I’m comfortable taking, outside of the various equities markets.

1:40 a.m. New York time

I have exited JBL for a loss.

11:20 a.m.. New York time

Today’s Job #1 will be to make an exit decision on my JBL position, whose options expire at the end of next week. My normal practice is to exit the Friday or Money prior to expiration.

The one earnings play on my list today is BAC, and I’m passing on it without further analysis. I entered a position on C yesterday, and don’t want to add another financial I also plan to use the day to explore other broad-markets trades based on Elliott wave analysis, looking at areas such as gold, silver, oil, interest rates and the U.S. dollar.

Here is the status of my options positions.

sym option debit share price curr % max profit net prft/shr $ option days left
C 3.24 60.65 6.1 0.21 35
EWZ 0.88 38.36 (2.3) (0.02) 35
JBL 2.00 23.65 (46.0) (0.63) 7
LEN 3.55 41.36 (9.9) (0.32) 35
SPY 3.81 276.04 12.6 0.55 35
STZ 10.53 25.74 (25.4) (2.13) 35
WBA 3.32 72.44 6.7 0.24 35

And of my shares positions.

sym share price net result % net profit $ days held
AAPL 220.54 -1.5% (3.42) 28
CHK 4.44 11.0% 0.44 28
FXI 39.92 -3.1% (1.29) 28
SPXU 37.25 -8.2% (3.31) 150
TSLA 256.61 -15.9% (48.38) 11
VNQI 52.90 -6.9% (3.91) 29

By Tim Bovee, Portland, Oregon, Oct. 12, 2018

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C Analysis

Citigroup Inc. (C)

I have entered a short iron fly position on C, using options that trade for the last time 37 days hence, on Nov. 16. The premium is a $3.45 credit per contract/share and the stock at the time of entry was priced at $69.10.

I made the decision to enter the trade in my account to coincide with a publication of earnings on Friday, Nov. 12, before the opening bell.

The profit zone for this position is between $73.45 on the upside and $68.45 on the downside. Read More »

SPY Analysis

SPDR S&P 500 ETF (SPY)

I have entered a short vertical spread on SPY, using options that trade for the last time 36 days hence, on Nov. 16. The premium is a $4.36 credit per contract/share and the stock at the time of entry was priced at $277.28.

I made the decision to enter the trade in my account based on Elliott wave analysis showing a major downtrend began on Sept. 20. 

The profit zone for this position is $274.84 and lower.

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