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. 

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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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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.

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Today’s Book:

The Trader’s Guide to Key Economic Indicators, By Richard Yamarone

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

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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.
Read More »

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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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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 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.

Read More »

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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