Option Investor
Newsletter

Daily Newsletter, Wednesday, 1/10/2018

Table of Contents

  1. Market Wrap
  2. New Option Plays
  3. In Play Updates and Reviews

Market Wrap

Uncharacteristic Weakness

by Keene Little

Click here to email Keene Little
We've all become accustomed to a stock market that only knows how to rally and therefore it was unusual to see the indexes gap down this morning. It was only a minor move and the bounce back up could easily lead to additional new highs, but it also might have been a shot across the bow of the USS Bullship as a warning not to proceed any further.

Today's Market Stats

I had to rub my eyes this morning when I first looked at the open and saw the gap down. Surely it must be a mistake -- this market only knows how to gap up. And the gap down was followed by a little more selling (stop run) and by the time the selling finished (all of 20 minutes) SPX had dropped 15 points from Tuesday's close. But the dipsters saw their opportunity, stepped back in and drove the indexes back up for most of the day.

So far the dipsters have only been able to achieve a lower high since the indexes finished in the red, but I'm sure they'll try again. It's been a winning strategy for a long time so why not? But the bears just might get a shot at this market since the bearish pattern and an important timing cycle have been suggesting a possible high of importance could be this week. It's possible Tuesday's high was the final one for this rally but we'll need the next day or two to help answer that question.

This morning's gap down resulted from a selloff in the futures last night, which began after the Asian markets started trading and continued after the European markets opened. There was a rally attempt from the early-morning low but that pre-market low was quickly retested after the regular trading session opened.

The morning retest of the pre-market low then led to a stronger bounce into the afternoon and the Dow and RUT (strange bedfellows since the Dow has been relatively strong while the RUT has been relatively weak) were able to close this morning's gaps before succumbing to a little more selling in the afternoon. A bounce into the close managed to get the RUT back near the flat line while the other indexes closed marginally in the red.

The techs were the weak indexes today but not as a result of any heavy selling in the FAANG stocks. The semiconductor stocks got hit a little harder (SOX finished -1.2%) and that hurt the tech indexes. But the bulls could easily recover today's weakness and a rally Thursday morning could lead to another push higher. Only time will tell how much higher this market can go before taking at least a larger breather.

Today's trading volume was a little heavier than we've seen recently and the market breadth was mixed, which sends a mixed message. There was a lot of churning with both selling and buying and no clear winner. If today's little pullback is followed by more buying Thursday morning we could see another push higher. But if the bounce off this morning's lows is followed by a drop lower then we'd have more convincing evidence that at least a larger pullback is in progress.

Prompting some of the today's weakness resulted from news out of China. The Treasury market sold off this morning (prices gapped down), spiking yields, after China announced that is considering halting its purchases of U.S. Treasuries. Many have been worried about this for some time as China has run up a huge debt (financing projects, paying for programs to keep people busy, etc.) and the fear is that China could halt their Treasury purchases and then start selling in order to free up capital and pay down some of their debt. The US$ also took a hit today for the same reason.

The gap down in Treasury prices was followed by a rally and the 10-year closed the gap by the end of the day. The recovery in Treasury prices probably helped the stock market recover as well so both the bond and stock markets traded in synch today. That could continue and it will be worth watching carefully in the coming weeks.

The worry over China's announcement comes from the worry about what a lack of demand for our Treasuries could mean. And if China starts selling it could cause prices to drop further, which would of course spike yields. Higher interest rates could stall our economy and even drive us into recession (there's worry that the Fed will make that mistake) since, like the Chinese, we are so highly indebted and even more so than at the October 2007 market high. The Fed would like to slowly raise rates but the market could have a different idea than the Fed (it usually does).

If rates do start to accelerate higher, which is not yet clear on the charts, it would make it very difficult for the economy since there's such a huge debt burden by so many businesses and individuals (and of course the state and federal governments). Even dividend-paying stocks would have to compete with higher yields from the safer Treasury bonds. Investors would once again have a choice for yield and could take some money out of the riskier stock market and put it into bonds. That's part of the worry that came from China's announcement so the market will be watching carefully for further developments in this area.

Countering the theory that higher bond yields would hurt the stock market is the idea that selling in the bond market could free up even more money that will rotate into the stock market. While that's certainly a possibility, one which supports the idea that the stock market's melt-up will continue for much longer, I believe higher yields will have more of a negative impact on the stock market. This morning's selling and then bounce by both bonds and stocks suggests we could see them trade in synch again. It will be an interesting development to watch over the next weeks/months.

Other than the China news it was a quiet day, including a lack of important economic reports. This morning we got some export/import price data, wholesale inventories and crude inventories but again, nothing market moving. Most market participants are simply focused on prices and enjoying the bullish run. Very few are looking ahead to see if there's any danger in the road but perhaps they should be.

Bullish sentiment has reached a dangerous level (from a contrarian perspective) and Mom and Pop have finally, literally, bought into the rally. We know the retail traders typically buy the top and sell the bottom so the very large and fast swing into the bullish camp by the public and investment newsletter writers should be a warning sign.

Trump's "the stock market is a bubble" has turned into "I'm great and the stock market is reflecting that." That's not a political statement but more of a statement about how everyone believes in the current uptrend and how it can only go higher. Right now we only have warning signs but of course price is king and the king has been happy with higher prices. Whether or not the trend is in trouble will be known from the charts so they're what we'll look to for our clues.

The bullish sprint continues and the streak of days without at least a 3% pullback continues, now at 432 days (the Trump rally that started November 4, 2016). Trump is now the market forecaster-in-chief and is calling for Dow 30,000 next. It's no wonder the moms and pops are getting themselves fully invested.

I'm going to start tonight's chart review with a top-down look at the RUT since I like it as our canary index. I've been watching and reporting on the RUT almost exclusively for the past week because it will be the index that tells us whether or not the uptrend will remain intact or instead provides an early warning when the trend breaks. The canary fell off its perch this morning but it then worked hard to climb back up on it. It's looking a little woozy from hypoxia but could take at least a few more big breaths before succumbing to the lack of oxygen from the high altitude.


Russell-2000, RUT, Weekly chart

A trend line along the highs from December 2016 - October 2017, currently near 1560, has been acting as resistance since the end of November and it's essentially where the RUT closed today. So far we have a little star doji for the week and it could be just an indecision candlestick or it will turn into the middle candle of a 3-candle reversal pattern (with a red candle next week). It's too early to tell but with the bearish divergence over the past year it would be a tough call to say it's bullish here. I think the higher-odds play here is to short it and keep your stop tight -- just above Tuesday's high at 1565.58.


Russell-2000, RUT, Daily chart

The trend line resistance mentioned above is shown in purple on the daily chart and you can see how the RUT has been unable to break through it. The daily candlesticks show a fight to keep from selling off but I think the churning near resistance, along with the bearish divergence, is a bearish signal that it's getting ready to break down. But because it's looking bearish, a sustained rally above 1565 would likely trigger a lot of stops and the short covering could help propel the RUT up to the trend line along the highs from October-December, which will be nearing 1600 by the end of opex week (January 19th).

Key Levels for RUT:
- bullish above 1565
- bearish below 1535


Russell-2000, RUT, 60-min chart

A short-term uptrend line for the RUT, from December 14-29, is currently near 1558 and it held on a closing basis today. A drop below 1558 would be a bearish heads up and it would look more bearish below this morning's low at 1551 since that would be a confirmed break of price-level support near 1552 and its uptrend line from November-December, currently near 1550. A drop below Monday's low at 1548 would confirm a top is in place. In the meantime I see the potential for at least one more pop up to a minor new high to complete a rising wedge pattern for the leg up from December 29th.


S&P 500, SPX, Daily chart

On January 5th SPX made a bullish break above its trend line along the highs from April 2016 - March 2017 and it also broke above a shorter-term trend line along the highs from September-October. This morning's low was a back-test of the line of the longer-term trend line and has so far produced a bullish kiss goodbye off that line. It then closed back above the short-term trend line after this morning's break. This looks bullish and if nothing else it should keep the bears away until it's at least proven to be a head-fake bounce back up today, starting with a drop below this morning's low at 2733.

Key Levels for SPX:
- bullish above 2733
- bearish below 2695

In last week's wrap I had shown a (squished) copy of my Gann Square of 9 chart and showed why 2721-2123 were important levels to watch. The next day (Thursday) SPX blew through those levels, which told me the market didn't think much about them. So that opened the door to the next important level on the SOf9 chart, which is 2760-2763. Tuesday's high was 2759 so was that close enough for government work?

I don't have a squished chart to show you tonight but I had mentioned a red vector that goes through 768 and 1576, which was the October 2002 low and October 2007 high, respectively. Opposite those numbers on the chart is 2763 and the high so far (yesterday's) is 2759. Tomorrow, January 11th, is where 2760 points to and when there's a price/time alignment Gann would often say it's far more important than just price. Maybe a test of Tuesday's high on Thursday?

The Gann Sof9 levels could also be coinciding with a time cycle that the market has responded to since the 2009 low. Again, Gann was more in favor of time than price and this week is the completion of the next 23-week period in a 23-week cycle that has typically resulted in a market turn (usually a pullback). There's also an Earth-Sun-Venus alignment this week but I won't go all astrological woohoo on you.

SPX weekly chart with 23-week cycle since 2009

And here's one more numbers thing to throw at you, this from Jeff Cooper, who often quotes Gann's work. This Friday is the 45th anniversary of the 1973 high. So what you say. That high led to the greatest downturn since the Great Depression and the 1973 high was 45 years from the 1929 high. Something to think about.

Quoting Gann, "Thus, I affirm, every class of phenomena, whether in nature or in the stock market, must be subject to the universal law of causation and harmony. Every effect must have an adequate cause. If we wish to avert failure in speculation we must deal with causes. Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because mathematical principles of the highest order lie at the foundation of all things."

Will this week be a high of significance? We of course can't know that at this time but if nothing else, Gann's work should have you pausing to think about what it could mean here. I often say price is king but Gann would argue with me and say time is king. And now back to our regularly scheduled charts


Dow Industrials, INDU, Daily chart

The Dow has rallied up to the top of a possible rising wedge for it rally from November and if it's to complete a 5-wave move it can't go much higher. Since the 3rd wave in the rally from November, as I have it counted, is shorter than the 1st wave the 5th wave must be shorter than the 3rd wave, which means it can't rally above 25483. Ideally, from an EW perspective, Tuesday's high was it and now down we go. Otherwise the wave count will have to be redone and that could open it up to much higher prices (which would say the melt-up could accelerate higher). So Mr. Bear, are you feeling lucky here?

Key Levels for DOW:
- bullish above 25,440
- bearish below 24,876


Nasdaq-100, COMPQ, Daily chart

Like SPX, the Nasdaq made a bullish break last week above its trend line along the highs from April 2016 - March 2017 and above its shorter-term trend line along the highs from September-October. This morning's low was a back-test of its longer-term trend line and the bounce back up looks bullish. It only managed to close on the shorter-term trend line so it remains to be seen whether or not the bulls can recapture that line on Thursday, which will be only marginally above today's close. A better test for the bulls will be better than closing this morning's gap, near 7164.

Key Levels for COMPQ:
- bullish above 7182
- bearish below 7000


10-year Yield, TNX, Weekly chart

The 10-year yield has made it back up near its December 2016 and March 2017 highs near 2.62%, with a high so far (this morning's) at 2.595. TNX would turn more bullish (bearish for bond prices) with a rally above 2.62 but I'm not convinced yet that we'll see that, or that it will be bullish if it happens.

There's a corrective bounce pattern for the rally from September that drive TNX up to 2.75-2.78 and still be part of what will be a larger pattern to the downside. But a little more short-term oriented says a rally above 2.62 would be potentially bullish. However, at the moment we're seeing a possible double top with bearish divergence so we'll have to see whether or not TNX can maintain its upward momentum.


KBW Bank index, BKX, Daily chart

Banks outperformed today on the theory that higher yields would help the banks' bottom line. When yields fell back down from this morning's high it wasn't matched by a pullback in the banks but there was an afternoon pullback. We'll have to see if the banks can hold up if yields do reverse back down.

BKX ran up to the top of its parallel up-channel from September, did a little throw-over and then dropped back inside the channel. That can be interpreted as a sell signal but it would become a stronger signal if it continues to drop back down on Thursday. There's bearish divergence on both the daily and weekly charts, which at the very least suggests caution by the bulls. BKX would be more bullish with a sustained rally above 113.


U.S. Dollar contract, DX, Weekly chart

Taking a step back from my usual daily chart of the US$, it's good to see where it is in the larger pattern. The reason I keep thinking we might see a drop down to the $90 area is because of the large megaphone pattern that it might be in since 2015, the bottom of which is currently near 89.80. If the dollar continues to slide down the top of its broken down-channel we could see it reach the bottom of its megaphone by mid-February.

The bullish interpretation of its pattern calls for the resumption of the rally off its September low. The pullback from November is only a 3-wave move so far and could be an a-b-c pullback correction, which achieved two equal legs down at 91.57 last week, and now we'll see it rally from here. Whether from here or after it drops a little lower, I think we're looking for a rally in the dollar this year.


Gold continuous contract, GC, Weekly chart

Gold sits in the middle of its price range since last September and in fact, as can be seen on its weekly chart below, in the middle of its range since the July 2016 high. The big choppy sideways consolidation could go either way and there's not a lot to help us figure out the odds of one way vs. the other. It remains bullish with the strong rally off the December 12th low since that was a successful back-test of its broken downtrend line from 2011-2016. But that was the 2nd back-test and without bullish divergence so I'm not sure it's that trustworthy.

The daily oscillators are overbought and turning down while the weekly oscillators have room to "grow." That's a recipe for more chop and consolidation so at this point I'm not expecting much in the next few weeks. That could change quickly and I'll keep updating the charts.


Oil continuous contract, CL, Weekly chart

Oil is about to make a bullish breakout from a bearish rising wedge or lese this week's rally is completing a little throw-over above the top of the wedge and will soon collapse back inside. A drop back below the January 4th high at 62.21 would create a sell signal. But if oil's rally continues from here we could see a continuation of the rally to the $85 area. That would put the economy into a tight squeeze and bears a close watch here.


Economic reports

Thursday morning's economic reports, like this morning's, will likely not be market moving. We'll get some inflation data with the PPI numbers, followed by CPI numbers on Friday, but no big swings are expected.


Conclusion

The bears put a tiny little dent in the bull's armor today and we'll soon find out if he only angered the bull or if instead the dent is pushing against a major artery and causes the bull some more pain. The indexes have once again run up to potentially important price levels and as discussed above, there are some important timing reasons why this week could be an important turn week. We've rallied into the turn window and therefore the expectation is that the market will turn down.

But it's important to know that sometimes a turn window results in an acceleration of the current move and not a reversal. That would mean the current melt-up could actually pick up speed to the upside and go truly parabolic on us. Higher prices beget higher prices until the music stops and then look out below. I can't know what will happen from here but the setup is for a reversal back down and if the indexes drop below this morning's lows I think that would be a strong clue that an important high could already be in place.

Considering the melt-up potential it's not a good time to be thinking aggressively about the short side. The upside risk is too great. But I do like the potential for a profitable trade on the short side as long as Tuesday's highs are not exceeded (they therefore make a good stop level if you try a short play).

While there remains significant upside potential I think that's a risky bet. Just as it's risky to trade an expected market crash, it's just as risky betting on a continuation of a melt-up. Stay long for as long as the market confirms new highs but hedge your positions just in case we wake up to a surprise gap down and a no-bid market. Trying to sell/hedge at a time like that will cost you big time. Bottom line for both sides is to trade cautiously, if at all, while we wait for some sanity to return.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying


New Option Plays

Night Vision

by Jim Brown

Click here to email Jim Brown

Editors Note:

Self-driving cars require night vision equipment because they cannot rely on ambient light to make the thousands of decisions per second that drive the vehicle. They need FLIR capability.



NEW DIRECTIONAL CALL PLAYS

FLIR - FLIR Systems - Company Profile

FLIR Systems, Inc. develops, designs, manufactures, and markets thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and threat-detection solutions worldwide. The company operates in six segments: Surveillance, Instruments, Security, OEM and Emerging Markets, Maritime, and Detection. The Surveillance segment provides enhanced imaging and recognition solutions for various military, law enforcement, public safety, and other government customers for the protection of borders, troops, and public welfare. This segment also develops hand-held and weapon-mounted thermal imaging systems for use by consumers. The Instruments segment offer devices that image, measure, and assess thermal energy, gases, electricity, and other environmental elements for industrial, commercial, and scientific applications. The Security segment develops and manufactures cameras and video recording systems for use in commercial, critical infrastructure, and home monitoring applications. The OEM and Emerging Markets segment provides thermal and visible-spectrum imaging camera cores and components that are utilized by third parties to create thermal, industrial, and other types of imaging systems. The segment also develops and manufactures intelligent traffic systems; imaging solutions for the smartphone and mobile devices market; and thermal imaging solutions for commercial-use unmanned aerial systems. The Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market under the FLIR and Raymarine brands. The Detection segment offers sensors, instruments, and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives threats for military force protection, homeland security, first responders, and commercial applications. The company was founded in 1978 and is headquartered in Wilsonville, Oregon. Company description from FinViz.com.

The short description is that FLIR makes night vision equipment for the military. They are the primary provider of these high tech night vision systems and they are very expensive. With the military budget being greatly expanded in 2018 and probably 2019, FLIR is going to be getting a lot more contracts for new equipment and for replacement equipment and parts.

For Q3, FLIR reported earnings of 52 cents that beat estimates for 48 cents. Revenue of $464.7 million rose 14.7% and easily beat estimates for $446 million. The surveillance segment revenues rose 7.6%, instruments rose 10.5% and OEM and emerging markets revenues rose 39.1%. Detection systems revenues rose 18.9%. The security segment sa revenues rise 16.5%. The marine segment was the slacker with only a 4.2% increase. Order backlogs rose 10.1% to $709 million.

The company guided for full year earnings of $1.83-$1.88 up from $1.81-$1.91 with revenue of $1.78-$1.83 billion.

Earnings February 13th.

Shares rallied last week to close at a new high at $48.25 and just over two-month resistance at $47.90. They spiked again on Monday when they announced a high-resolution camera kit for self-driving cars. If this breakout continues, it should produce some short covering given the long period of consolidation after the spike from Q3 earnings in October.

I am recommending an inexpensive February ATM option with earnings on the 13th. I intend to hold this position over earnings unless we have profits to protect by that date.

This is also a longer-term position in the LEAPS newsletter.

Buy Feb $50 call, currently $1.55, no initial stop loss.


NEW DIRECTIONAL PUT PLAYS

No New Bearish Plays



In Play Updates and Reviews

Nice Recovery

by Jim Brown

Click here to email Jim Brown

Editors Note:

The major indexes fell hard at the open but recovered to only minor losses. The Dow fell -128 at the open and the Nasdaq dropped -52 on worries that China would quit buying US treasuries. That would be a disaster since they are the biggest buyer and own $1.2 trillion in US debt. The comments about not buying in the future were seen as a political threat to make the US administration rethink their trade policies with respect to China.

You never know what unexpected event will appear to roil the market. We can focus intently on the ones we know and then get blindsided by something out of the blue.



Current Portfolio


Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.


Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.





Current Position Changes


BITA - BitAuto Holdings
The long call position was stopped at $35.85.

PYPL - PayPal
The long call position was stopped at $77.85.



If you are looking for a different type of option strategy, try these newsletters:

Credit spreads and naked puts = OptionWriter

Long term option investments = LEAPS Investor

3-6 month Option Trades = Ultimate Investor

Iron Condors = Couch Potato Trader

Long and short equity trades = Premier Investor



BULLISH Play Updates

AKAM - Akamai Technologies - Company Profile

Comments:

No specific news. Shares gave back some of Tuesday's gains.

Original Trade Description: January 3rd.

Akamai Technologies, Inc. provides cloud services for delivering, optimizing, and securing content and business applications over the Internet in the United States and internationally. The company offers Web and mobile performance solutions, such as Ion, a situational performance solution that consists of an integrated suite of Web delivery, acceleration, and optimization technologies; Dynamic Site Accelerator that helps in consistent Website performance; IP Application Accelerator to enable enterprises to deliver Internet Protocol-based applications; Global Traffic Management, a fault-tolerant solution; Image Manager that automatically optimizes online images; and Cloudlets, which provides self-serviceable controls and capabilities. It also provides cloud security solutions, including Kona Site Defender, Bot Manager, Fast Domain Name System, Prolexic Routed, and Client Reputation; enterprise solutions comprising Enterprise Application Access and Akamai Cloud Connect. In addition, the company offers media delivery solutions, such as adaptive delivery solutions, download delivery solutions, media delivery acceleration solutions, media services, media analytics, and NetStorage, a cloud storage solution. Further, it provides network operator solutions, including Aura Licensed CDN suite of solutions, Aura Managed CDN solutions, and Intelligent DNS Solutions; and professional services and solutions. Company description from FinViz.com

Expected earnings Feb 6th.

Akamai reported Q3 earnings of 62 cents that beat estimates for 59 cents. Revenue of $621.4 million beat estimates for $610 million. Web division revenue rose 14% to $328 million. Media division revenue fell -1% to $273 million. Enterprise and carrier division revenue rose 2% to $20 million. Performance and security solutions revenue rose 11% to $381 million. Cloud security solutions revenue rose 27% to $121 million. Services and support revenue rose 12% to $57 million. International revenue rose 18% to $213 million. Cash on hand was $1.4 billion. They repurchased $129 million shares of stock in the quarter.

Shares spiked $4 on the report but faded over the next week. Deutsche Bank reiterated a buy rating and raised their price target to $75. The analyst pointed to what would be monster traffic volumes from the Winter Olympics in Q1 and the World Cup Soccer in Q2.

In October, Akamai announced the acquisition of Nominum, a market leader in DNS and enterprise security solutions for carriers. Akamai also announced the launch of Bot Manager Premier, designed to help organizations manage the impact of bots across their entire digital environment, including websites, mobile applications and wed APIs.

The company guided for Q4 revenue of $638-$656 million with gross margins of 65% to 77%. Earnings are expected to be in the 60-65 cent range after a 4-cent impact from the acquisition of Nominum. They are forecasting 5% to 8% growth for the year with a 64% gross margin. There is nothing wrong with their business.

Akamai said the rapid advancement of video on demand was a strong factor in future earnings since they are the largest provider of content. Also seeing a rapid ramp was the cloud storage business. Akamai has a security hook in that growth and the redundancy of that storage.

Akamai collaborated with Google, Cloudfire, Flashpoint, RiskIQ and the RBI to squash a botnet named WireX that had infected 120,000 Android phones in early August. The bot was generating 20,000 page requests a second against a set of targeted servers in a DoS attack.

Akamai announced it had set a new record for throughput delivered on September 12th with more than 60 terabytes per second (Tbps). That beat the old record of 47 Tbps set on August 29th. Akamai delivers more content on a daily basis than any other content provider. In January 2017, they set a single event record of 8.7 Tbps streaming the Presidential Inauguration. The company has more than 200,000 servers spread across 130 countries to accomplish this record content delivery.

Akamai announced the Content Delivery Network (CDN) capabilities for enterprises are now available on the IBM cloud. The new offering is part of the IBM Cloud Content Delivery Network. Akamai currently provides CDN services on 1,700 networks in 131 countries. That now included IBM's footprint of 60 cloud centers across 19 countries. Akamai has more than 200,000 servers across 130 countries.

In mid December Elliott Management disclosed at 6.5% stake in Akamai saying the shares were significantly undervalued. Elliott said it would attempt to talk with the board, other shareholders and potential acquirers about strategic alternatives. Shares spiked to $67 on the news and have faded only slightly with support appearing at $65.

I have to use the May calls because the February calls have a $1.25 bid/ask spread on a $3 option. Just because we buy May does not mean this is a long term position. We will exit before the Feb 6th earnings. I am just using May because the bid/ask spread of only 35 cents. They should also hold their premium better than the February strikes.

Update 1/9: Bloomberg reported Akamai was working with Morgan Stanley to explore strategic alternatives including a sale. Shares posted a nice gain on the news.

Position 1/4/18P:
Long May $70 call @ $3.20, see portfolio graphic for stop loss.


ARNC - Arconic Inc - Company Profile

Comments:

No specific news.

Original Trade Description: December 27th.

Arconic creates breakthrough products that shape industries. Working in close partnership with our customers, we solve complex engineering challenges to transform the way we fly, drive, build and power. Through the ingenuity of our people and cutting-edge advanced manufacturing techniques, we deliver these products at a quality and efficiency that ensure customer success and shareholder value. Company information from Arconic.

Earnings January 22nd.

Arconic was the original Alcoa. They spun off the aluminum business then changed their name to Arconic. This company makes precision aluminum parts for aircraft and transportation equipment. Eliott management has been agitating for change and managed to get the long term CEO Klaus Kleinfeld kicked out and oversaw the five-month process to get 24-year GE veteran Charles Blankenship installed as the new CEO.

Elliott has seen their investment lag for the last year as the spinoff and CEO hunt took the wind out of Arconic's sales. Now they could be reaching the end of their struggle with a potential buyout on the horizon.

One analyst got the fire started a couple weeks ago when he suggested Honeywell was on the prowl and would eventually buy Arconic. Honeywell lost out on Rockwell Collins (COL) when United Technologies bought them for $30 billion or 14 times EBITDA.

Honeywell was under pressure by Dan Loeb to spin off its aerospace unit. Instead, they agreed to spin off the homes and global distributions unit and the transportation business leaving (by the end of 2018) the aerospace unit intact and the surviving business. Now Honeywell needs to bulk up its aerospace business of they will be the nex company acquired.

With Dan Loeb on one side urging Honeywell to build aerospace and Elliott Management on the other side urging Arconic to sell itself, this is a match made in heaven and could happen in early 2018 according to the analyst.

Shares have sprinted higher since the news story broke a couple weeks ago. They are very close to a 52-week high over $28 and a move over that level could trigger additional buying and short covering.

I am using a July option to get well past the January and April earnings. We will not hold it that long but the uncertainty surrounding those events should keep the premium up if we have a market drop in January.

Update 1/8/17: Arconic said it was freezing the pension plans at current levels for 7,900 employees and would make contributions to 401K plans instead. This will save them $140 million.

Position 12/28/17:

Long July $30 call @ $1.50, see portfolio graphic for stop loss.


BITA - BitAuto Holdings - Company Profile

Comments:

No specific news. Shares fell -7% to stop us out at $35.85. I always have stop loss remorse when we are stopped at the low of the day, wishing I had set it higher. When I set them higher and we are stopped on a hiccup and the stock rebounds and goes higher, I have remorse. There is no happy medium.

Original Trade Description: December 30th.

Bitauto Holdings Limited provides Internet content and marketing, and transaction services for the automotive industry in the People's Republic of China. The company operates in three segments: Advertising and Subscription Business, Transaction Services Business, and Digital Marketing Solutions Business. The Advertising and Subscription Business segment provides advertising services, including new automobile pricing and promotional information, specifications, reviews, and consumer feedback to automakers through its bitauto.com and taoche.com Websites, as well as mobile applications. It also provides Web-based and mobile-based integrated digital marketing solutions to automobile dealers. The Transaction Services Business segment operates automotive transaction services platform that provides e-commerce transaction services to automobile dealers; and offers online automotive financial platform services to consumers and financial institutions, including banks, auto finance companies, and insurance companies. The Digital Marketing Solutions Business segment provides one-stop digital marketing solutions, such as Website creation and maintenance, online public relations, online marketing campaigns, and advertising to automakers. The company also distributes its dealer customers' automobile pricing and promotional information through its Internet service provider partners. Bitauto Holdings Limited was founded in 2000 and is headquartered in Beijing, the People's Republic of China. Company description from FinViz.com.

For Q3 BITA reported earnings of 23 cents that missed estimates for 33 cents. Revenue of $352.4 million rose 54% and beat estimates for $334 million. They guided for Q4 revenue of $360.7 to $368.3 million, a 51% increase, and that was well above estimates at $331 million.

Shares were crushed on the earnings miss despite the 54% increase in revenue and strong guidance. Their Yixin website generated approximately 140,000 automobile transactions in Q3. Active monthly users rose to 51 million and they have more than 15,000 dealerships in the network. Transaction services rose 145.7% in Q3. Advertising and subscription service businesses saw revenue rise 19.3%. The company ended the quarter with $487 million in cash.

Their Yixin subsidiary IPOed on the Hong Kong exchange on Nov 15th and that raised a significant amount of money that will allow them to rapidly expand that portion of the business. The perceived dilution was also a factor in the stock decline.

The company is growing rapidly and guidance was very strong. There is no reason why the shares should not continue rebounding. There is strong support at $28.50.

I am recommending a February option because it is cheap. Normally I would reach out to the next month to capture the expectation premium of their Feb 19th earnings but the options are twice as expensive and with potential market volatility in January, i would rather risk less with cheaper options.

Position 1/2/18:
Closed: Long Feb $35 call @ $1.55, exit $2.94, +$1.39 gain.


CGNX - Cognex - Company Profile

Comments:

No specific news.

Original Trade Description: December 9th.

Cognex Corporation provides machine vision products that capture and analyze visual information in order to automate tasks primarily in manufacturing processes worldwide. The company offers machine vision products, which are used to automate the manufacturing and tracking of discrete items, such as mobile phones, aspirin bottles, and automobile tires by locating, identifying, inspecting, and measuring them during the manufacturing or distribution process. Its products include VisionPro, a software suite that provides various vision tools for programming; displacement sensors with vision software for use in 3D application; In-Sight vision systems that perform various vision tasks, including part location, identification, measurement, assembly verification, and robotic guidance; In-Sight vision sensors; ID products, which are used for reading codes that are applied on discrete items during the manufacturing process, as well as have applications in logistics automation for package sorting and distribution; DataMan barcode readers; barcode verifiers; vision-enabled mobile terminals for industrial barcode reading applications; and barcode scanning software development kits. The company sells its products through direct sales force, as well as through a network of distributors and integrators. Cognex Corporation was founded in 1981 and is headquartered in Natick, Massachusetts. Company description from FinViz.com.

Cognex is a tech stock where growth is booming. Every manufacturer is looking to automate as many tasks as possible and Cognex provides them the opportunity with robotic vision equipment that can inspect and track items much faster than humans.

For Q3 they reported earnings of $1.14 that beat earnings for $1.05. Revenue of $259.7 million beat estimates for $256.8 million. They guided for the current quarter for revenue of $170-$180 million and analysts were expecting $155 million. That was a major guidance beat.

Expected earnings Jan 29th.

They announced a 2:1 split that was effective on December 4th. Shares immediately sank $7 on post split depression and Nasdaq rotation but have rebounded the past two days. The 50% decrease in the stock price also reduced the option premiums by 50% and made them cheap enough to buy.

Position 12/11/17:

Long Feb $67.50 call @ $3.20, see portfolio graphic for stop loss.


JUNO - Juno Therapeutics - Company Profile

Comments:

No specific news.

Original Trade Description: January 4th.

Juno Therapeutics, Inc., a biopharmaceutical company, engages in developing cell-based cancer immunotherapies. The company develops cell-based cancer immunotherapies based on its chimeric antigen receptor and T cell receptor technologies to genetically engineer T cells to recognize and kill cancer cells. Its CD19 product candidates include JCAR017 that is in Phase I/II trials for adults with relapsed or refractory (r/r) B cell aggressive non-Hodgkin lymphoma (NHL) and pediatric patients with r/r B cell acute lymphoblastic leukemia (ALL); JCAR014, which is in Phase I/II trials to treat various B cell malignancies in patients relapsed or refractory to standard therapies; and JCAR015 that is in Phase II trials for adult patients with r/r ALL. The company's CD22 product candidate comprise JCAR018, which is in Phase I trial for pediatric and young adult patients with CD22-positive r/r ALL or r/r NHL. Its additional product candidates include CD171, a cell-surface adhesion molecule to treat neuroblastoma; Lewis Y for the treatment of lung cancer; JCAR023, which is in Phase I trial for patients with refractory or recurrent pediatric neuroblastoma; MUC-16, a protein for treating ovarian cancers; IL-12, a cytokine to overcome the inhibitory effects; ROR-1, a protein for the treatment of non-small cell lung, triple negative breast, pancreatic, and prostate cancers; WT-1, an intracellular protein that is in Phase I/II clinical trials to treat adult myeloid leukemia and non-small cell lung, breast, pancreatic, ovarian, and colorectal cancers; and IL13ra2 for treating glioblastoma. Juno Therapeutics, Inc. has collaboration agreements with Celgene Corporation, Fate Therapeutics, Inc., Editas Medicine, Inc., MedImmune Limited, and Memorial Sloan Kettering Cancer Center. The company was formerly known as FC Therapeutics, Inc. and changed its name to Juno Therapeutics, Inc. in October 2013.Company description from FinViz.com

Expected earnings January 31st.

This is a simple story. Juno is developing CAR-T drugs. Their JCAR017 drug treats non-Hodgkin lymphoma. The drug is currently in trials. Two other drugs, Yescarta and Kymriah, developed by other companies are already approved and being marketed.

In the latest JCAR017 trial 80% of patients were in complete response at the end of 3 months. At the end of six months they were still in complete response and after the six month date until the end of the trial, 92% stayed in complete response. That is an amazingly successful trial. In early December Juno reported only a 50% response rate using different term length and dosages and investors were expecting something over 70% based on the early results. Shares were crushed.

In reality, the results are still there. Yescarta and Kymriah only showed a 30% to 40% response rate so even with the downplayed results from JCAR017 it is significantly better. Once the drug is approved it is going to be a major winner in the category.

Investors have begun buying the stock again and shares are up from the $42.50 low to close just under $48 today. This is long term support and the 100-day average.

Position 1/5/18:
Long Feb $50 call @ $3.50, see portfolio graphic for stop loss.


PYPL - PayPal - Company Profile

Comments:

No specific news. Shares gapped down with the market at the open to stop us out before rebounding to close at a new high.

Original Trade Description: November 29th

PayPal Holdings, Inc. operates as a technology platform company that enables digital and mobile payments on behalf of consumers and merchants worldwide. It enables businesses of various sizes to accept payments from merchant Websites, mobile devices, and applications, as well as at offline retail locations through a range of payment solutions, including PayPal, PayPal Credit, Braintree, Venmo, Xoom, and Paydiant products. The company's platform allows consumers to shop by sending payments, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies. Company description from FinViz.com.

They reported Q3 earnings of 46 cents, up 32%, that beat estimates for 44 cents. Revenue of $3.24 billion, up 21% and beat estimates for $3.17 billion. They guided for the current quarter for earnings of 50-52 cents and full year earnings of $1.86-$1.88. Mobile payment volume rose 54% to about $40 billion. Total payments rose 31% to $114 billion. Free cash flow rose 36% to $841 million and they have $7.1 billion in cash. They added 8.2 million active accounts with net new actives up 88%. They now have 218 million active customer accounts with 17 million merchants. They processed 1.9 billion payments, up 26%.

Q4 revenue is expected to rise 20-22% to $3.570-$3.630 billion. Paypal said payment platform Venmo was on track with expectations. The platform processed $9.1 billion in payment volume, a 93% YoY increase.

Expected earnings January 18th.

The company recently announced partnership deals with Baidu, Bank of America, Visa, JP Morgan, Facebook and Apple. They have changed their focus from disruptor to partner where they can process more transactions through the partners. The Baidu partnership will connect them to 700 million Chinese shoppers and 17 million Paypal merchants. The deal with Apple to allow Paypal in the iTunes store, AppStore and Apple Music will connect them to more than 1 billion IOS devices worldwide. The Facebook partnership gives them access to 2.01 billion users.

Thanks to recent agreements with MC/V, users will be able to transfer money directly from their accounts to credit/debit cards, which will become a big selling point. The new "Pay with Venmo" platform that will allow users to make purchases at retail locations is in test mode with Lululemon, Athletica and Forever 21 already accepting those payments. This is turning into another big revenue stream for Paypal.

PayPal just launched domestic payment services in India with 1.324 billion people.

Paypal signed a deal to sell $5.8 billion in its credit card portfolio to Synchrony Financial. The company said that would free up cash for acquisitions and expansion. The company raised its revenue forecast to $3.64-$3.70 billion for the current quarter. They raised earnings guidance from 37-39 cents to 52-59 cents.

Paypal closed exactly on horizontal support and the 30-day average, which has been support since February. The company is more of a bank than a tech stocks and should benefit from any further rotation into banks.

The original PYPL position was stopped out in the Nasdaq crash on Nov 29th and we reentered this new position on Nov 30th.

Update 12/2: Keybanc believes the Venmo payment app is going to be a breakout hit in 2018 and raised his price target for Paypal from $85 to $90. In a recent survey of 500 consumers, Venmo was the preferred payment option for 76% of respondents. Paypal is forecasting $75 billion in Venmo payments in 2018 and they get an estimated 4 cent EPS boost for every $10 billion.

Update 12/13: BMO Capital raised their price target from $80 to $85 saying the sale of the credit business will reduce expenses and increase earnings per share. The sale will free up $1.0 billion in cash for 2018 and $2.5 billion in 2019.

Position 11/30/17:

Closed 1/10: Long Feb $75 call @ $3.75, exit $5.10, +$1.35 gain.


SYNA - Synaptics - Company Profile

Comments:

No specific news. I still believe the company is on the verge of a breakout because of all their new products coming to market soon.

Original Trade Description: January 8th.

Synaptics Incorporated develops, markets, and sells intuitive human interface solutions for electronic devices and products worldwide. The company offers its human interface products solutions for mobile product applications, including smartphones, tablets, and touchscreen applications, as well as mobile, handheld, wireless, and entertainment devices; notebook applications; and other personal computer (PC) product applications, such as keyboards, mice, and desktop product applications. Its products include ClearPad, which enables users to interact directly with the display on smartphones and tablets; ClearView products that provide advanced image processing and low power technology for entry-level smartphones; TouchView products, which integrate touch and display technologies to deliver performance and simplified design; and Natural ID, a fingerprint ID product that is used in smartphones, tablets, notebook PCs, PC peripherals, and other applications. The company??s products also comprise TouchPad, a touch-sensitive pad that senses the position and movement of one or more fingers on its surface; SecurePad that integrates fingerprint sensor directly into the TouchPad area; ClickPad that offers a clickable mechanical design to the TouchPad solution; and ForcePad, a thinner version of its ClickPad. In addition, its other product solutions include dual pointing solutions, which offer TouchPad with a pointing stick in a single notebook computer enabling users to select their interface of choice; TouchStyk, a self-contained pointing stick module; and TouchButtons, which provides capacitive buttons and scrolling controls, as well as display interface products. The company sells its products through direct sales, outside sales representatives, distributors, and resellers. It serves smartphone, tablet, and PC original equipment manufacturers, as well as various consumer electronics manufacturers. Company description from FinViz.com

Expected earnings February 6th.

In August, Synaptics reported earnings of $1.18 that beat by a penny and revenue of $426.5 million that exactly matched estimates. However, they guided for the next quarter for revenue of $380-$425 million. That was a sequential decline and they blamed it on the mobile business. However, based on orders in the pipeline they expected future quarters to show significant gains. Investors were not impressed and shares fell from $56 to $33.

In early November the company reported earnings of $1.03 that beat estimates for 97 cents. Revenue of $417.4 million beat estimates for $397.6 million. For the current quarter they guided for revenue of $410-$450 million. Shares spiked to $44 on the news then fell back to $35 again. The company said it lost market share with Apple's fingerprint sensor business because its product was not completely ready for Apple's manufacturing cycle.

The current quarter is normally seasonally strong for Synaptics. They are now shipping fingerprint sensors in volume to Huawei and Samsung. Huawei sold more than 100 million phones in the first three quarters of 2017 and has outsold Apple since the new iPhones were introduced. Samsung has adopted the Synaptics technology for their Galaxy S8 and Note 8. For the next evolution of the Note 8 the sensor will be built tight into the screen.

Synaptics is also big in touch screen technology and device driver integration or TDDI. This is their specialty. Demand is expected to grow from 100 million units in 2017 to $654 million by 2022.

In the last quarter, the company received 14% of its revenue from IoT devices. That is expected to rise to 24% in the current quarter. They recently bought Conexant and that will expand their addressable market. Conexant makes voice and audio solutions for Amazon's Alexa voice assistant.

The company just announced a partnership with Microsoft to develop voice enabled solutions for Cortana using Synaptics far-field DSP voice technology.

Synaptics has a lot on their plate and much of these efforts are just now reaching broad commercialization with the major device manufacturers. Shares are rebounding and broke over resistance at $42.50 on Monday.

Position 1/9/17:
Long Mar $45 Call, currently $3.10, see portfolio graphic for stop loss.


TGT - Target Corp - Company Profile

Comments:

Telsey Advisory reiterated a market perform rating but Susquehanna raiesed their rating from neutral to positive. Shares gained $1.59 in a weak market.

Original Trade Description: December 13th.

Target Corporation operates as a general merchandise retailer. It offers household essentials, including pharmacy, beauty, personal care, baby care, cleaning, and paper products; dry grocery, dairy, frozen food, beverages, candy, snacks, deli, bakery, meat, produce, and pet supplies; and apparel for women, men, boys, girls, toddlers, infants, and newborns, as well as intimate apparel, jewelry, accessories, and shoes. The company also provides home furnishings and decor, such as furniture, lighting, kitchenware, small appliances, home decor, bed and bath, home improvement, and automotive products, as well as seasonal merchandise, such as patio furniture and holiday decor; music, movies, books, computer software, sporting goods, and toys, as well as electronics, such as video game hardware and software. In addition, it offers in-store amenities, including Target Cafe, Target Photo, Target Optical, Starbucks, and other food service offerings. Target Corporation sells products through its stores; and digital channels, including Target.com. As of September 13, 2017, the company operated 1,816 stores in the United States. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota. Company description from FinViz.com.

I would not normally recommend a retailer only two weeks before Christmas but I expect Target to overcome the normal post holiday depression.

Earnings Feb 14th.

Target announced on Wednesday they were buying grocery delivery platform Shipt Inc for $550 million in cash. The company said they would be offering same day delivery across all major product categories by the end of 2019. They will be offering same day delivery for groceries, essentials, home products, electronics and other items by mid 2018.

Shipt's services cost $99 a year for unlimited deliveries. Shipt already has a network of more than 20,000 personal shoppers to fulfill orders from various retailers and deliver within hours in more than 72 markets. Shipt partners include stores like Costco, Whole Foods, Meijer, etc.

Target is going to continue letting Shipt deliver for their other customers. The more widely recognized the brand is the larger it will grow and Target will be able to benefit from their ability to scale deliveries all over the country. Plus, they will profit from the fees received for those other deliveries.

This is a great deal for Target as it ramps up competition against Amazon.

I wrote last week that shippers were noting the increase in packages from Target. They were the second largest volume in UPS trucks after Amazon. They should have a great Q4.

Update 1/2/18: Influential tech analyst Gene Munster said he believes Amazon will buy Target in 2018. Target has a market cap of $37 billion but it would require a huge premium to get a deal done, probably something in the $50 billion range. Amazon has a market cap of $573 billion. The deal makes sense in the long run because it would give Amazon 1,802 major store outlets with a huge warehousing system that Amazon could use to its advantage. The addition of Amazon specific products to the already broad range of products offered by Target, would be a major boost to Amazon sales. The stores would function as customer delivery points for Amazon packages and because of the large store footprint it would allow Amazon to expand its same day, next day delivery offering to most of the US.

While it might make sense on paper, I would not hold my breath expecting a deal to be done. That would be a big bite for Amazon and there may be a problem getting regulatory approval. President Trump already believes Amazon is a monopoly with too much power and that could keep a deal from completing.

Update 1/9/18: Target raised Q4 earnings guidance from $1.05-$1.25 to $1.30-$1.40. Same store sales are expected to rise 3.4% and well above analyst expectations for 1.25%. They guided for 2018 earnings of $5.15-$5.45 and well above estimates for $4.36.

Position 12/14/17:

Long March $65 call @ $2.90, see portfolio graphic for stop loss.


TXT - Textron - Company Profile

Comments:

No specific news. Only 10 cents from a new high.

Original Trade Description: January 6th.

Textron Inc. operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates through five segments: Textron Aviation, Bell, Textron Systems, Industrial, and Finance. The Textron Aviation segment manufactures and sells business jets, turboprop aircraft, piston engine aircraft, and military trainer and defense aircraft; and commercial parts, as well as provides maintenance, inspection, and repair services. The Bell segment provides military and commercial helicopters, tiltrotor aircraft, and related spare parts and services. The Textron Systems segment produces unmanned aircraft systems; smart weapons, airborne and ground-based sensors and surveillance systems, and protection systems; armored vehicles, turrets, and related subsystems, as well as marine craft; test equipment and electronic warfare test, and training solutions; piston aircraft engines; and intelligence software solutions. This segment also designs, develops, manufactures, installs, and maintains full flight simulators, as well as offers training services. The Industrial segment offers blow-molded plastic fuel systems, windshield and headlamp washer systems, catalytic reduction systems, and engine camshafts, as well as plastic bottles and containers; golf cars, off-road utility and light transportation vehicles, aviation ground support equipment, professional turf-maintenance equipment, and turf-care vehicles; and powered equipment, electrical test and measurement instruments, mechanical and hydraulic tools, cable connectors, fiber optic assemblies, underground and aerial transmission and distribution products, and power utility products used in the construction, maintenance, telecommunications, data communications, electrical, utility, and plumbing industries. The Finance segment provides financing to purchase new and pre-owned aircraft and helicopters. Textron Inc. was founded in 1923 and is headquartered in Providence, Rhode Island. Company description from FinViz.com

Expected earnings January 31st.

With Airbus acquiring a stake in Bombardier, Boeing a stake in Embraer, Honeywell, United Technologies, Rockwell Collins, etc, all circling each other like sharks around a wounded whale, Textron is a potential acquisition candidate.

There are no formal rumors but options activity is huge. On Friday there were 5,400 of the Jan $55/$60 calls traded with the $55 calls at $3.50. There were 9,500 of the Feb $60 calls traded at $1.70 against an open interest of 261 contracts.

Textron has lagged the other defense contractors because they are in a contract period where capex is high but the eventual income has not yet appeared.

Last week FedEx (FDX) announced an order to buy 50 of Textron's Cessna SkyCourier 408 aircraft with an option to increase the order to 100. FedEx worked closely with Textron to design the plane for package delivery to small and medium sized markets.

The Textron aviation chief said Amazon was another potential customer because the need to ship express packages to addresses outside major cities was rapidly growing. Textron produces Cessna, Beechcraft and Hawker business jets.

Textron/Bell/Boeing produces the V-22 Osprey aircraft. They just achieved first flight on the new V-280 Valor, which is a new generation tiltrotor aircraft like the Osprey. Bell, as in Bell Helicopter, is the division producing the V-280. The aircraft has twice the speed and range of a conventional helicopter and carries a much larger payload.

The company has so many projects in the works they are right on the edge of a new chapter in their growth. With the $700 billion defense program that passed in September, they will be getting a wide variety of new orders.

There is no way to know if somebody is about to make any offer but the dramatic surge in option volume is typically a sign or rumors making the rounds.

I am recommending the March option to retain premium longer but we will probably exit before earnings on Jan 31st.

Position 1/8/18:
Long Mar $60 Call @ $2.15, see portfolio graphic for stop loss.



BEARISH Play Updates (Alpha by Symbol)

DIA - Dow SPDR ETF - ETF Profile

Comments:

Only a minor decline after the Dow came back from a -128 loss at the open. This position is dead unless we can get a 2-3 day decline ahead of the potential government shutdown. If we can get a decent drop, even just a couple days, we can sell a short put to turn it back into a spread and reduce our loss. This is a March position so we have plenty of time for disaster to strike. I believe it is worth the 70 cents to hold it just in case.

Original Trade Description: November 16th

The SPDR Dow Jones Industrial Average ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Dow Jones Industrial Average. The DJIA is the oldest continuous barometer of the U.S. stock market, and the most widely quoted indicator of U.S. stock market activity.

I am going to make this as simple as possible. The Dow is still extremely overbought. It is due for a rest. The earnings cycle is over. Post earnings depression is here. The short squeeze is likely to fail. The tax plan faces an uphill battle and January could see a major market decline. It has been over 500 days since the market had a 5% decline and we average twice a year. We are due.

This is highly speculative. I am using March options because I want to have as much time as possible for this scenario to play out.

Update 12/18/17: The Dow is moving ever closer to 25,000, which could end up being a monster sell the news trigger. The Dow is up 6,900 points since the election. That is 38.5% in 13 months. There is a 100% chance there will be a correction in the future. The only unknown is when.

I am recommending we close the short put side of the spread. That captures that portion of the trade and once the Dow rolls over we do not have to deal with the rise in value in the short put. Secondly, that gives us other options to raise additional premium in the future, including selling a higher put if the index does not decline.

Position 11/17/17:

Long March $230 put @ $5.16, see portfolio graphic for stop loss.

Closed 12/19: Short March $210 put @ $1.71, exit .43, +1.28 gain.




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