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.
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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.

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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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CarMax Inc. (KMX)

Update 10/1/2018: I 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.

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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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NIKE Inc. (NKE)

Update Oct. 1, 2018: I 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.

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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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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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