11:50 a.m. New York time

The bond markets and banks are closed today for the government’s Columbus Day holiday. While the stock market are open, they are deprived of their most important leading indicator: Market prices of the 10-year Treasury bonds at the Federal Funds rate. Absent that important data, I would anticipate a fairly slow day.

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Today’s Book

The Total Money Makeover

by Dave Ramsey

Let’s face it. The way we manage our household money? Pure habit. The money comes in, as a paycheck or a pension, and if you were ask a month latter  where the money had gone, we wouldn’t a a clue. Did we at least make a profit for the month in running our personal finances? Beats me. Dave Ramsey shows how to take control of that great financial enterprise that each of us in engaged in, keeping ourselves and our loved ones fed and sheltered, with money for emergencies and to educate the youngsters, and to provide for that interesting time called old age. Ramsey provides a straightforward plan, based o results, not dreams.

More about the book

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Certainly I have no trades in sight. None of my positions are at the point where I must exit, and my next potential earnings plays come on Thursday, when I’ll be considering two of the financials, WFC and JPM. Until then, or until the situation changes, i plan to happily drift along in the land of easy living, occasionally rousing myself from sloth to improve the way I manage my finances.

The status of my options positions:

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
EWZ	1.20	38.80	(39.5)	(0.34)	39
JBL	2.03	25.27	(48.2)	(0.66)	11
LEN	3.10	45.23	4.0	0.13	39
SPY	2.27	287.20	26.1	0.80	39
STZ	10.58	225.79	(26.0)	(2.18)	39

And of my shares positions.

sym	share price	net result %	net profit $	days held
AAPL	223.11	-0.4%	(0.85)	24
CHK	4.65	16.3%	0.65	24
FXI	40.38	-2.0%	(0.83)	24
SPXU	33.44	-17.6%	(7.12)	146
TSLA	254.75	-16.5%	(50.24)	7
VNQI	53.74	-5.4%	(3.07)	25

By Tim Bovee, Portland, Oregon, Oct. 8, 2018

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The U.S. Treasury and the American bond markets will be closed on Monday for the government’s Columbus Day holiday. The stock markets will be open as usual, although without bond trading, they will be lacking access to the most important of the leading indicators.

The prospects of inflation are the theme of the week’s economic reporting. The consumer price index, the most watched inflation measure, will be published on Thursday, and the producer price index (final demand) will be published on Wednesday, each at 8:30 a.m. New York time.

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Today’s Book

The Return of High Inflation: Risks, Myths and Opportunities,

by Wolfgang H. Hammes

Preternaturally low inflation has been with us for a decade, and memories are fading of the long years of rapidly rising, sometimes runaway, prices.. As the Federal Reserve raises interest rates in defense against inflation, many voices can be heard muttering, “Inflation? What’s to worry? Don’t bring back the recessoin.”. Hammes argues that the risk of inflation is real, and in this well researched book provides a map of the world we’ll be trading in when (not if) inflation once again returns.

More about the book

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4:30 p.m. New York time

And that’s a wrap for the week. On Saturday I shall post The Week Ahead, my discussion of the economic reports and other externals that sometimes impact the markets.

A reminder that Monday is a U.S. government holiday to mark the landing in North America of the Spanish expedition led by Christopher Columbus. The Treasury Dept. and bond markets will be closed; the stock and options markets will be open for business.

10 a.m. New York time

I have no potential earnings plays in sight for today. The S&P 500 is trading narrowly within yesterday’s range, and none of my holdings are close to the point where I would head for the exit.

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Today’s Book

Science, Strategy and War: The Strategic Theory of John Boyd,

by Frans P.B. Osinga

This book is a potential change agent within any trader’s life. The primary job of a trader is no different from that of a military leader, what the level: To make tactical decisions within a strategic framework that provide a winning edge. John Boyd revolutionized strategy within the American military, and has slowly worked its way into business strategy, particularly in the form of Boyd’s OODA Loop decision cycle: Observe, Orient, Decide, Act. Boyd lectured extensively within the military, but left only notes and lecture slides. Working from that material, Osinga has written the most complete accounting of Boyd’s approach.

More about the book

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Here is where my options positions stand. JBL is the next to reach expiration, two weeks from now. The others are all more than 40 days away from expiration.

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
EWZ	0.99	36.87	(15.1)	(0.13)	42
JBL	1.98	289.94	(44.5)	(0.61)	14
LEN	3.19	26.25	1.2	0.04	42
SPY	3.01	44.51	2.0	0.06	42
STZ	10.33	224.05	(23.0)	(1.93)	42

And here is the stats of my shares positions.

sym	share price	net result %	net profit $	days held
AAPL	226.43	1.1%	2.47	21
CHK	4.51	12.8%	0.51	21
FXI	40.94	-0.7%	(0.27)	21
SPXU	32.54	-19.8%	(8.02)	143
TSLA	269.54	-11.6%	(35.45)	4
VNQI	54.17	-4.6%	(2.64)	22

By Tim Bovee, Portland, Oregon, Oct. 5, 2018

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2:35 p.m. New York time

Today’s decline in the markets — the Dow had dropped more than 300 points within the final two hours of grading — is a confirmation that the whimsical wandering market top has indeed dropped anchor, and we are now, at long last, in what Elliott wave analysis calls the 3rd wave down in the Intermediate degree.

And if the WWMT (whimsical wandering market top) again picks up anchor and drifts to a later date, i may blush slightly but will still feel satisfied with my analysis. A rapid decline of this magnitude almost always means that a change has occurred at one of the higher Elliott wave degrees.

The SPY chart covers one year with daily bars.

The peak was reached on Sept. 20. SPY traced a 1st wave to the downside at one of the much lower degrees. Today’s decline appears to me to be a 3rd wave within an impulse movement.

Implied volatility rose from 13% to 16%. Volume, though higher, had not spiked up by an amount comparable to the Sept. 20 peak, although today’s market day is not yet over, so any conclusion from volume — and IV — must be tentative.

From an options trading strategy standpoint, I shall follow my position management rules — at 50% of maximum potential profit for short iron condors and vertical spreads, and at 25% of max for iron flies. Otherwise, everything has pre-defined risk, so there’s no temptation for me to go blundering out at what proves to a turning point.

2:20 p.m. New York time

Here is how my options positions stand this afternoon. As is apparent, SPY was the only position impacted in a major way by today’s decline of the broad indexes.

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
EWZ	0.86	35.85	0.0	0.00	43
JBL	1.98	26.22	(44.5)	(0.61)	15
LEN	3.28	44.62	(1.5)	(0.05)	43
SPY	2.55	288.22	16.9	0.52	43
STZ	8.45	219.40	(0.6)	(0.05)	43

And this is how my shares positions stand.

sym	share price	net result %	net profit $	days held
AAPL	227.99	1.8%	4.03	20
CHK	4.58	14.5%	0.58	20
FXI	40.56	-1.6%	(0.65)	20
SPXU	33.03	-18.6%	(7.53)	142
TSLA	278.86	-8.6%	(26.13)	3
VNQI	53.99	-5.0%	(2.82)	21

2:15 p.m. New York time

The major market indexes kept a steady decline beginning with the opening bell. My exposure to the S&P 500 is an options position in SPY and a shares position in SPXU.

The SPY position is presently at about 17% of maximum potential profit. My goal for the position, a short bear call vertical spread, is to manage it at 50% of max. The SPXU was fairly deep in loss and remains in loss, although shallower.

Bottom line: No action needed at this point. I shall be posting a SPY chart shortly with an Elliott wave analysis and discussion of today’s move.

10:25 a.m. New York time

I plan no exits from current positions today. Also, there are no potential earnings plays on the calendar. Bottom line: I anticipate no trades.

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Today’s Book

Mastering the Market Cycle, by Howard Marks

We are more than nine years into the economic recovery, making this one of the longest recoveries ever. Today, every thoughtful trade must ask: Is it time for the next recession? Marks parses the cycle that is writing the markets’ future and our future net worth to gain a sense of what lies ahead and to help us get the odds on our side.

Order here

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Here’s the status of my options positions:

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
EWZ	0.96	36.28	(11.6)	(0.10)	43
JBL	1.98	26.43	(44.5)	(0.61)	15
LEN	3.10	45.22	4.0	0.13	43
SPY	3.11	290.39	(1.3)	(0.04)	43
STZ	8.93	220.74	(6.3)	(0.53)	43

And my shares holdings:

sym	share price	net result %	net profit $	days held
AAPL	229.81	2.6%	5.85	20
CHK	4.70	17.5%	0.70	20
FXI	41.03	-0.4%	(0.18)	20
SPXU	32.35	-20.2%	(8.21)	142
TSLA	288.48	-5.4%	(16.51)	3
VNQI	54.34	-4.3%	(2.47)	21

Read More »

Constellation Brands Inc. (STZ)

Update 11/2/2018: I have exited STZ for a loss, leaving the position to avoid a higher chance of assignment when the stock goes ex-dividend on Monday, Nov. 5. The cost of exiting was a $8.93 debit — a loss of $53 per contract — with shares going for $200.97 each at exit, down $11.42 from the price at entry.

STZ rose immediately after earnings were published and then began a long, sometimes sharp decline, keeping it in loss territory much of the time, despite a broad profit zone.

Shares declined by 5.4% over 30 days, or a -65% annual rate. The options position produced a -5.9% loss for a -72% annual rate.

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I have entered a short iron condor spread on STZ, using options that trade for the last time 44 days hence, on Nov. 16. The premium is an $8.40 credit and the stock at the time of entry was priced at $212.39.

I decided to enter the trade as an earnings play. STZ publishes earnings on Oct. 4 before the opening bell.

Read More »

11:10 a.m. New York time

I’ve entered a short iron condor position on STZ.

10 a.m. New York time

I shall be considering one earnings play today: STZ, with an implied volatility rank (IVR) of 62.6. STZ announces on Thursday before the opening bell.

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Today’s Book

The Fifth Risk, by Michael Lewis

Just out: 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. On the answer to that systems question hinges our prosperity.

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Two other companies are publishing earnings today and tomorrow, but I’m passing on them without analysis because of low IVR: PEP and COST.

No exits in sight today.

Here’s the state of play on my options holdings:

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
EWZ	1.08	37.62	(25.6)	(0.22)	44
JBL	1.78	27.21	(29.9)	(0.41)	16
LEN	2.93	47.24	9.3	0.30	44
SPY	3.84	292.62	(25.1)	(0.77)	44

And my shares holdings:

sym	share price	net result %	net profit $	days held
AAPL	231.75	3.5%	7.79	19
CHK	4.50	12.5%	0.50	19
FXI	42.17	2.3%	0.96	19
SPXU	31.57	-22.2%	(8.99)	141
TSLA	301.50	-1.1%	(3.49)	2
VNQI	55.45	-2.4%	(1.36)	20

By Tim Bovee, Portland, Oregon, Oct. 3, 2018

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Lennar Corp. (LEN)

Update 10/17/2018: I have exited LEN for a loss $0.36 loss per contract/share, as share prices declined by $4.11 during my 15-day holding period. The debit on the options at exit was $3.59 per contract share.

I chose to exit because the stock would go ex-dividend the next day. Since the position was in-the-money, there was a significant chance that the options would be assigned, an outcome I preferred to avoid.

LEN had been falling steadily since April when I entered the position, and after earnings were published, continued to fall. There was no drama, just a steady pace.

Shares declined by 8.7% over the 15 days, or a -211% annual rate. The options position produced a 10.0% loss for a -244% annual rate.

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I have entered a short iron fly spread on LEN, using options that trade for the last time 45 days hence, on Nov. 16. The premium is a $3.23 credit and the stock at the time of entry was priced at $47.43.

I made the decision to enter the trade in my account based because of an earnings announcement, on Oct. 3 before the opening bell. 

Read More »

8:40 p.m. New York time

I have updated the analyses for today’s three exits, AMD, MU and NKE, with the final results.

3:50 p.m. New York time

I got sidetracked and so have not yet updated AMD, MU and NKE with results. Tonight, for sure, U.S. Pacific time (GMT-7).

12:20 p.m. New York time

I have entered an earnings on play on LEN, structured as a short iron fly.

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Today’s Book

Soft Currency Economics II, by Warren Mosler

Mosler lays to rest the terrors that traditional economists experience when they think about deficit spending. “Inflation!”, they cry in horror. In this brief book Mosler digs into realities of our soft-money world and concludes that deficit spending, far from being a horror show, is the best tool around to put an end to devastating recessions, without a risk of inflation. I found it to be a fascinating read with a counterintuitive view of the nature of money..

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11 a.m. New York time

Another busy start for the day. I exited AMD, MU and NKE, each for a profit. I shall update their analyses with results later today.

I shall next turn to assessing LEN as a potential earnings play. The company announces earnings on Wednesday before the opening bell.

Here is the state of my options positions:

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
EWZ	0.72	35.15	16.3	0.14	45
JBL	1.78	27.26	(29.9)	(0.41)	17
SPY	3.32	291.20	(8.1)	(0.25)	45

And of my shares positions:

sym	share price	net result %	net profit $	days held
AAPL	228.90	2.2%	4.94	18
CHK	4.45	11.3%	0.45	18
FXI	41.94	1.8%	0.73	18
SPXU	32.05	-21.0%	(8.51)	140
TSLA	305.14	0.0%	0.15	1
VNQI	55.31	-2.6%	(1.51)	19

By Tim Bovee, Portland, Oregon, Oct. 2, 2018

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TSLA Inc. (TSLA)

I’ve entered a shares position on TSLA at $304.99 per shares. The company and it’s CEO Elon Musk have been battling the SEC over penalties resulting from a statement on Twitter by Musk that he planned to take the company private.

The statement roiled the markets as TSLA rose sharply, peaking at $387.46. The SEC’s proposed penalties led the price down to $260.56. The SEC announced a settlement on Saturday, and on Monday, when I entered the positions, the shares had risen sharply in pre-market trading, into the lower portion of the pre-brouhaha trading range.

The reason I chose long shares is that I think the settlement will give Tesla the best of all worlds.

Musk is a visionary genius, although erratic in his management style, especially in his public upset over short-sellers in the markets. The settlement requires Musk to step down as CEO for a minimum of three years. That will allow for professional oversight of his decisions. However, he will still retain his 19% or so ownership of the company, will still be the operational boss. In other words, the company keeps his genius, keeps him motivated and has a professional CEO to question his decisions.

And it’s time-limited. The Elon Musk of 2021 will have learned and grown, as we all do, and will perhaps be better able to again do the CEO job.

Bottom line: For me, TSLA is a story stock, pure and simple.

By Tim Bovee, Portland, Oregon, Oct. 1, 2018

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Today’s Book

None of My Business, by P.J. O’Rourke 

The libertarian satirist’s take on the markets and business. “Want to get rich overnight for free in 3 easy steps with no risk? Then don’t buy this book. (Actually, if you believe there’s a book that can do that, you shouldn’t buy any books because you probably can’t read.)”

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1:55 p.m. New York time

I’ve posted results for KMX.

1:25 p.m. New York time

I’ve posted the results for GNRC.

11:20 a.m. New York time

I’ve added an analysis of the TSLA trade.

9:30 a.m. New York time

A busy start to the day.

I’ve exited my options positions on GNRC, for 50.4% of maximum potential profit, and KMX, for 25.1% max. GNRC was an iron condor, which I manage at half of potential, and KMX was an iron fly, which I manage at a quarter of potential. So they were textbook trades. I shall update their analyses with results later in the day.

Also, now that Tesla and Elon Musk have settled with the SEC, I’m looking to play TSLA. I began this morning with a small long shares purchase and shall be looking at options strategies as well. Bottom line on TSLA; For me, it’s a pure story stock. I think Musk is a visionary genius, and although the company will be prone to surprises for some time to come, such is often the cases with visionaries. I think the potential reward is worth the risk, but the risk is indeed higher with TSLA than with, say F or GM.

I’ll post a brief TSLA analysis later.

Also, PAYX publishes earnings Tuesday morning. I’m passing on it without a full analysis. Implied volatility rank is 44, and I prefer to focus my earnings plays on prospects with IVRs above 50.

Here is the status of my options holdings:

sym	option debit	share price	curr % max profit	net prft/shr $	option days left
AMD	0.54	31.64	44.9	0.44	4
EWZ	0.63	33.53	26.7	0.23	46
JBL	1.85	27.11	(35.0)	(0.48)	18
MU	0.58	45.78	42.6	0.43	18
NKE	2.41	84.91	22.0	0.68	18
SPY	3.84	292.65	(25.1)	(0.77)	46

And of my share holdings:

sym	share price	net result %	net profit $	days held
AAPL	228.58	2.1%	4.62	17
CHK	4.54	13.5%	0.54	17
FXI	43.19	4.8%	1.98	17
SPXU	31.55	-22.2%	(9.01)	139
TSLA	308.25	1.1%	3.26	0
VNQI	56.21	-1.1%	(0.60)	18

By Tim Bovee, Portland, Oregon, Oct. 1, 2018

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