Editors Note:

The market declined from new highs into a 10% correction in only 11 days and it was painful. We lost ten positions although most of them were still profitable. Now we are faced with rebuilding the portfolio in the weeks ahead in a high volatility environment.

In theory, investing in LEAPS is a long-term proposition where we hold over earnings in anticipation of a long-term gain. LEAPS should be exited in the normal November rally.



Original Play Recommendations (Alpha by Symbol)


AABA - Altaba Company Profile

Comments:

Alibaba shares declined from $205 to $175 in the market crash to stop us out of the Altaba position. Alibaba went on a spending spree over the last couple weeks with $2.5 billion in acquisitions. Apparently, investors are afraid they are going to grow too fast with many interests away from their core retail business.

Original Trade Description: September 17th.

Altaba Inc. operates as a non-diversified, closed-end management investment company in the United States. Its assets consist primarily of equity investments, short-term debt investments, and cash. The company was formerly known as Yahoo! Inc. and changed its name to Altaba Inc. in June 2017. Altaba Inc. was founded in 1994 and is based in New York, New York. Company description from FinViz.com.

Altaba owns a 15% stake in Alibaba, currently worth about $70 billion. They hold a stake in Yahoo Japan currently worth $7.7 billion. They have $130 million in investments including Snap Inc. (SNAP). They have a $740 million stake in Excalibur, a unit of the new company that holds all the Yahoo patents that were not sold to Verizon. The company has $12 billion in cash. They recently announced a $5 billion stock buyback and the company has committed to returning nearly all the cash in the bank plus any thrown off by the investments, to the shareholders.

Owning Altaba is just like owning Alibaba only without the expensive options and a lot less volatility. We get the other parts for free.

We have tried to play Alibaba several times but the volatility kept knocking us out. Unless you want to buy a $30 Jan $180 call and just sit on it with no stop loss, AABA is the only way to play Alibaba.

Update 10/15/17: Alibaba said it was going to spend an additional $15 billion over the next three years on research. They already spend $3 billion and have more than 25,000 engineers on the payroll.

The new effort will create the Alibaba DAMO Academy, short for Discovery, Adventure, Momentum and Outlook. The academy will set up labs in China, USA, Russia, Israel and Singapore and fund collaborations with universities. They plan to explore AI, IoT, quantum computing, visual computing, machine learning and network security.

Update 11/3/17: Alibaba reported an outstanding quarter with a 61% rise in revenue. They raised guidance for 2018 for a 49-53% rise in revenue, up from prior guidance of 45-49%. Their cloud computing business revenue rose 99%. Earnings of $1.29 bear estimates for $1.04. Revenue of $8.29 billion beat estimates for $7.86 billion. Monthly active users rose 3.8% to 549 million. The current quarter is going to show explosive growth given the expanded Single Day promotion. Shares faded from the post earnings bounce but should pickup this week when the Singles Day headlines appear.

Update 12/10/17: Susquehanna said there were 6 reasons Alibaba shares should hit $220. They are the category killer in China with Taobao and Tmall claiming a 75% online market share. Alibaba has not monetized their advertising with 45% upside in ad revenue for 2018 and 30% in 2019. The company just bought the leading Southeast Asia e-commerce platform Lazada with expected growth of 78% in 2018. Alicloud already has a 40% market share in Asia and they are just getting started. Overall the analyst expects Alibaba to grow revenue by 40% with 40% margins.

Update 2/4/18: Alibaba reported earnings of $1.63 that missed estimates for $1.65. Revenue of $12.76 billion rose 56% and beat estimates for $12.13 billion. They also announced a deal to acquire 33% of Ant Financial. Currently Alibaba received 37.5% of Ant's pretax profit. In order to set the stage for an Ant IPO, Alibaba is transferring some intellectual property rights to Ant in exchange for 33% of the stock and halting the royalty payments. Ant will likely IPO later this year and it will be a big offering. Ant Financial operates Alipay. BABA shares declined $17 on the earnings miss and the weak market. This is temporary with support at $180. Altaba shares declined $6 on the news but the trend is still positive.

Position 9/18/17:

Closed 2/5: Long Jan 2019 $70 call @ $8.20, exit $10.65, +2.45 gain.


ABBV - AbbVie - Company Profile

Comments:

After blowout earnings the two weeks ago the weak market knocked shares back to the 50-day average on Tuesday to stop us out of a very profitable position.

Original Trade Description: June 4th.

AbbVie Inc. discovers, develops, manufactures, and sells pharmaceutical products worldwide. The company offers HUMIRA, a biologic therapy administered as a subcutaneous injection to treat autoimmune diseases; IMBRUVICA, an oral therapy for the treatment of patients with chronic lymphocytic leukemia; and VIEKIRA PAK, an interferon-free therapy, with or without ribavirin, for the treatment of adults with genotype 1 chronic hepatitis C. It also provides Kaletra, an anti- human immunodeficiency virus(HIV)-1 medicine used with other anti-HIV-1 medications as a treatment that maintains viral suppression in HIV-1 patients; Norvir, a protease inhibitor indicated in combination with other antiretroviral agents to treat HIV-1; and Synagis to prevent RSV infection at-risk infants. In addition, the company offers AndroGel, a testosterone replacement therapy for males diagnosed with symptomatic low testosterone; Creon, a pancreatic enzyme therapy for exocrine pancreatic insufficiency; Synthroid to treat hypothyroidism; and Lupron, a product for the palliative treatment of prostate cancer, endometriosis, and central precocious puberty, as well as for the treatment of patients with anemia. Further, it provides Duopa and Duodopa, a levodopa-carbidopa intestinal gel to treat Parkinson's disease; Sevoflurane, an anesthesia product for human use; and ZINBRYTA, a subcutaneous treatment for relapsing forms of multiple sclerosis. The company sells its products to wholesalers, distributors, government agencies, health care facilities, specialty pharmacies, and independent retailers from its distribution centers and public warehouses. AbbVie Inc. has collaboration agreements with C2N Diagnostics; Calico Life Sciences LLC; Infinity Pharmaceuticals, Inc.; M2Gen; and Principia Biopharma Inc. Company description from FinViz.com.

A lot of companies have 1-2 real drugs in the pipeline that may be approved. Several companies have one drug that could be a blockbuster and reach $1 billion in sales annually. AbbVie has multiple blockbusters in the pipeline and dozens of other drugs already in the market.

AbbVie was a spinoff from Abbott Laboratories in 2012 and they are doing great. In the first quarter they reported earnings of $1.28, that rose 11.3% and beat estimates by 2 cents. Revenue of $6.5 billion rose 10.1% and that was higher than three of its biggest competitors Amgen, $2.8 billion, Biogen $5.5 billion and Celgene $3.0 billion.

Earnings are expected to continue growing with analyst estimates for 14% annual growth over the next five years. AbbVie guided for 13% to 15% in 2017. Despite the earnings growth the stock only trades at a PE of 11.

Shares dipped back in May when Coherus won a court battle invalidating one of AbbVie's patents on Humira, their biggest drug. However, AbbVie said it was not a problem because there were 61 other patents on the drug and they would fight it in the courts until 2020. The first trial is not even scheduled until 2019. Amgen won FDA approval for a biosimilar but AbbVie said it would not happen until 2020 at the earliest.

The company's confidence that there would not be a biosimilar drug until 2021-2022 matched analyst estimates. This is a steep uphill battle for anyone trying to copy this drug.

The company's other drugs are going to be cash cows. Imbruvica generated $1.8 billion in sales in 2016 and could reach $7 billion annually over the next couple of years. Venclexta was approved in 2016 for leukemia and sales could peak at $3.5 billion a year. An experimental cancer drug called Rova-T could hit $5 billion a year when approved. A psoriasis drug called risankizumab could produce $4 billion a year and arthritis drug upadacitinib could peak at $3.5 billion. Given all these cash flow giants in the pipeline, I am amazed the company only trades at a PE of 11.

I would not normally pick a stock that has had a $5 run over the last three weeks but ABBV is about to break out to a new high and that could kick it into high gear. People love to buy stocks when they first make a new high.

Update 6/23/17: The company received a favorable opinion on MAVIRET, a once daily He-C drug, from the European Medical Agency and the CHMP. This is an 8 week cure for Hep-C that will compete with Gilead's products.

Update 7/28/17: AbbVie reported earnings of $1.42 compared to estimates for $1.40. Revenue of $6.94 billion narrowly beat estimates for $6.93 billion. They guided for the full year for $5.44-$5.54. Shares declined because the sales of its Hep-C drug, Viekira Pak were $225 million and well below estimates for $257 million. This is a temporary setback because they have multiple drugs in the pipeline that are expected to generate more than $1 billion in sales annually. Shares declined $3 on the earnings.

Update 8/5/17: AbbVie has declared war on the Gilead Sciences Hep-C franchise. The AbbVie drug Mavyret has a 97.5% cure rate and only costs $13,200 for four weeks of treatment compared to Gilead's newest drugs at $25,000 for four-weeks. Most patients are cured in 8 weeks but some have to continue for 12 weeks. Gilead's Harvoni was initially $96,000 for a 12-week treatment.

Update 9/10/17: The company declared a quarterly dividend of 64 cents payable Nov 15th to holders on Oct 13th. They have increased their dividend for 25 consecutive years.

The company also submitted two NDAs to the FDA for approval. AbbVie also released positive results on a new drug for eczema. The drug called upadacitinib, produced stronger results than the competitor drug from Regeneron (REGN).

Update 9/17/17: AbbVie's drug Humira is expected to sell more than $18 billion in 2017 after a $16.1 billion revenue in 2016. The FDA has 10 FDA approved indications giving it a massive patient base. This is just one of AbbVie's billion dollar blockbuster drugs.

Update 10/1/17: AbbVie and Amgen reached an agreement on a biosimilar for Humira. Amgen can sell its copy in the US starting Jan 23rd, 2023 and several European countries on Oct 16th, 2018. Amgen will pay royalties to AbbVie for the marketing rights. Both parties canceled legal proceedings regarding existing patents. The marketing agreement grants "non-exclusive" right, which suggests AbbVie will repeat the same agreement with other companies and thereby guaranteeing future royalty streams. Shares spiked $5 on the news.

Update 10/21/17: AbbVie entered into a new immuno-oncology research collaboration with biotech firm Harpoon Therapeutics. The partnership hopes to develop a T-cell treatment for cancer using Harpoon's tri-specific T-cell activating molecules. The prior week AbbVie partnered with Turnstone Biologics to gain access to their next-generation oncolytis viral immunotherapies. AbbVie is on the move and not afraid to go where no company has gone before.

Update 10/29/17: AbbVie (ABBV) reported earnings of $1.41 that beat estimates for $1.39. Revenue of $7.0 billion missed estimates for $7.04 billion. They guided for the full year for earnings of $5.53-$5.55, up from $5.44-$5.54, and increased their quarterly dividend by 11% from 64 cents to 71 cents. The company said sales of Humira, the world's largest selling drug, would bring in $21 billion in annual sales by 2020. That is up $3 billion from prior forecasts. Sales in 2016 were $16.08 billion. Sales of the arthritis drug in Q3 were $4.7 billion.

Here is the key point for AbbVie. The company said non-Humira sales are expected to rise from $9.6 billion in 2017 to $35 billion by 2025. The company is launching 20 additional products by 2020 with at least 8 of them expected to generate more than $1 billion in annual sales. These drugs will focus on Alzheimers, womens health and Hepatitis C.

Update 12/10/17: The company issued a press release on Saturday saying they had significant success with the drug Imbruvica in treating Mantel Cell Lymphoma. Half the patients in a trial survived more than 3 years and more than 25% did not have any disease progression.

Update 12/15/17: AbbVie and Roche Holdings released the results of the phase-3 MURANO trial on Venclexta plus Rituxan for the treatment of lukemia. The drug combination reduces the progression of the disease or death by 83% compared to Bendamustine plus Rutuxan. Venclexta has been granted 4 breakthrough therapy designations by the FDA.

Update 1/26/18: The company reported adjusted earnings of $1.48 compared to estimates for $1.44. Revenue of $7.74 billion beat estimates for $7.57 billion. They guided for full year earnings in the range of $7.33-$7.43 per share, up from $6.37-$6.57. The FactSet consensus estimate was $6.66. The company said it planned to invest $2.5 billion in US capital projects and a possible expansion to its US facilities. Sales of Humira, Imbruvica, Lupron, Creon, Synagis, Kaletra, Sevoflurane and Duodopa all came in above expectations. Shares spiked $15 on the news.

Position 6/19/17:

Closed 2/6: Long Jan 2019 $75 call @ $4.70, exit $36.60, +$31.90 gain.

Previously closed 7/28/17: Short term: Long Jan 2018 $72.50 call @ $2.81, exit $2.63, -.18 loss.


ATVI - Activision Blizzard - Company Profile

Comments:

Activision posted earnings of 49 cents that beat estimates for 17 cents. Revenue of $2.04 billion beat estimates for $1.88 billion. However, 2018 guidance was weak due to tough comps from new games in 2017. Shares declined in the weak market to stop us out.

Original Trade Description: July 16th.

Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games. The company operates through two segments, Activision Publishing, Inc. and Blizzard Entertainment, Inc. The company develops, publishes, and sells interactive software products and content through retail channels or digital downloads; and downloadable content to a range of gamers. It also publishes subscription-based massively multiplayer online role-playing games; and strategy and role-playing games. In addition, the company maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games. Further, it engages in creating original film and television content; and provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. The company serves retailers and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and consumers through third-party distribution, licensing arrangements, and direct digital purchases in the United States, Canada, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea, China, and internationally. Company description from FinViz.com

Activision reported Q1 earnings of 56 cents, up 17%. Sales rose 19% to $1.73 billion. Activision had originally guided for 25 cents and $1.55 billion. Analysts were expecting 22 cents and $1.1 billion so it was a major blowout. For the full year they raised guidance to 88 cents and $6.1 billion, up from 72 cents and $6.0 billion.

Blizzards's monthly active users rose to 431 million. King Digital has 342 million active users. The new Overwatch game was the fastest Blizzard title to hit 25 million registered players and now has more than 30 million. Revenues from in game purchases rose 25% driven by World of Warcraft and Overwatch customization features.

Activision has been beating on earnings and given the success of their last two releases the Q2 earnings should also be a beat. The stock is poised to break out to a new high over $61. I am recommending the 2019 LEAPS ahead of earnings. For those that do not want to hold that long I am also going to list the January 2018 strikes as well.

Update 7/30/17: Blizzard announced that player signing for the professional Overwatch Gaming League will begin on August 1st. All players for the league will become members of the seven teams that have joined the league so far including, Boston, Los Angeles, Miami-Orlando, New York City, San Francisco, Seoul and Shanghai, or for teams that sign on before the player signing period closes Oct. 30. Each player is guaranteed a $50,000 salary or more, lodging and practive facilities, health insurance, a retirement savings plan and 50% of the team's winnings. Each team will have 6-12 players. The total bonuses in Season 1 will add up to $3.5 million with a minimum of $1 million to the winning team. The e-Sports craze is exploding and this will be a money maker for ATVI.

Update 8/5/17: ATVI reported earnings of 55 cents compared to estimates for 30 cents. Revenue of $1.42 billion beat estimates for $1.21 billion. They guided for earnings of 34 cents in the current quarter with full year earnings of $1.94 per share. Shares spiked to a new high close at $64 on Thursday but gave back $2 on Friday.

Update 9/24/17: Call of Duty: WWII is due out in November and retailers have already reported a huge wave of preorders after the beta testing was completed. Those that were allowed to download the beta version were very excited and the news is spreading. This takes Call of Duty back to its roots and should be a very successful game.

Update 10/15/17: NPD reported that sales of Destiny 2 were down 50% from sales of the original at this point in the release. That caused the stock to decline sharply on Monday to stop us out of the January position. However, this is not what is appears on the surface. Destiny 1 was sold mostly at retail in a CD package. Destiny 2 is being sold mostly online with a digital download so the comparison of boxed retail sales is apples to oranges. Secondly, Destiny 2 has not even launched on the PC yet. That will happen on Oct 24th. That is another entire wave of sales.

Activision issued a press release calling Destiny 2 the biggest console video game launch of the year with the PC launch still to come. They cited "franchise pre-orders records broken and record day-one performance on the Playstation Store and engagement at the highest ever in week one of a launch" it would appear Activision is not admitting to any sales decline.

Update 11/5/17: The company reported earnings of 47 cents that missed estimates for 50 cents. Record revenue of $1.62 billion missed estimates for $1.74 billion. They guided for the full year for $2.08 on revenue of $6.68 billion. Analysts were expecting $2.14 and $6.79 billion.

However, Activision had guided in August for earnings of 34 cents and revenue of $1.385 billion. Based on their guidance they had a blowout quarter. Activision Blizzard had 384 monthly active users (MAU) with a record 49 million online players. Subsidiary King Digital had 293 million MAU. Numerous engagement metrics were at record highs. For Q4 they guided for 36 cents and $1.7 billion in revenues.

Update 11/19/17: The new release of Call of Duty appears to be a blowout. Concurrent players on the PC platform after the first week of release was up +395% compared to the prior release of CoD Infinite Warfare and the highest levels since 2012. Retail sales in the UK showed a 57% increase compared to last year's game installment. The CEO said the opening weekend took in more than $500 million. The last WWII CoD Black Ops 3 game in 2015 took in $550 million.

Update 12/3/17: Electronic Arts (EA) caused an uproar on how they were charging for in game purchases and the entire sector crashed. EA immediately changed the process but it is hard to recover that negative sentiment over just a few days. Shares of ATVI fell $4 in the reaction as investors worried the problem would carry over in to ATVI games. There is very little danger of that because the processes are a lot different.

Update 12/15/17: Goldman upgraded ATVI from hold to buy saying the stock would get multiple earnings boosts from the game sequels currently in production. Call of Duty: WWII has already become the bestselling video game in 2017 after only being out for a few weeks.

Update 1/16/18: The Overwatch Esports league play began on Wednesday. The 12 team league will compete while fan watch online. Each team represents a particular city and the franchise holder for each city paid $20 million to join. The season will last six months until June 16th. There will be post season matches and all star matches. The initial match on Wednesday has been viewed 4.4 million times on Twitch. The professional teams are competing for millions of dollars in price money and significant bragging rights.

Update 1/21/18: The Overwatch league drew more than 10 million viewers last week. The opening of the league competition in Los Angeles over four days of competition saw more than 10 million viewers participate. The opening saw more than 408,000 viewers per minute on average and the rest of the week drew an average of 208,000 per minute. That is impressive since it was four days of gaming. On Twitch and MLG alone they saw 437,000 viewers at the peak to watch competition between Dallas Fuel and Seoul Dynasty. Actual tickets to the Blizzard Arena in Los Angeles were completely sold out for the entire week. The Overwatch game has more than 35 million players so the potential audience is huge.

Update 1/26/18: Shares closed at a new high after Credit Suisse predicted the return of mobile gaming based on the Activision franchises. Saying gamers do not have to have an expensive gaming PC to use the mobile apps. The analyst raised the price target to $81 and shares close at $72.50.

Position 7/17/17:

Closed 2/9: Long Jan 2019 $65 call @ $8.20, exit $9.73, +1.53 gain.
Closed 2/9: Short Jan 2019 $85 call @ $2.61, exit $3.85, -1.24 loss.
Net gain $.29.

Alternate position:
Closed 10/9/17: Long Jan 2018 $65 call @ $4.05, exit $2.80, -1.25 loss.


CAT - Caterpillar Inc Company Profile

Comments:

No specific news. Shares continued to decline with the Dow after a 7-month rally and $75 gain. Shares have dipped to the 100-day at $144 twice and I believe that will hold unless the market is going to make another leg down. I am going to recommend we reenter this position.

Original Trade Description: October 8th.

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives for heavy and general construction, rental, quarry, aggregate, mining, waste, material handling, oil and gas, power generation, marine, rail, and industrial markets. Its Construction Industries segment offers backhoe, compact, track-type, small and medium wheel, knuckleboom, and skid steer loaders; small and medium track-type, and site prep tractors; mini, wheel, forestry, small, medium, and large track excavators; and motorgraders, pipelayers, telehandlers, cold planers, asphalt pavers, compactors, road reclaimers, and wheel and track skidders and feller bunchers. The company's Resource Industries segment provides electric rope and hydraulic shovel, landfill and soil compactor, dragline, large wheel loader, machinery component, track and rotary drill, electronics and control system, work tool, hard rock vehicle and continuous mining system, scoop and hauler, wheel tractor scraper, large track-type tractor, and wheel dozer products; longwall, highwall, and continuous miners; and mining, off-highway, and articulated trucks. Its Energy & Transportation segment offers reciprocating engine powered generator set and engine, integrated system, turbine, centrifugal gas compressor, diesel-electric locomotive and component, and other rail-related products and services. The company's Financial Products segment offers finance for Caterpillar equipment, machinery, and engines, as well as dealers; property, casualty, life, accident, and health insurance; and insurance brokerage services, as well as purchases short-term trade receivables. Its All Other operating segments provides parts distribution and digital investments services. The company was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Company description from FinViz.com.

CAT has been alternately ignored or talked down for the last couple years but the shares keep rising. Part of the recent gains came from the guidance. The company has been bitten by the global slowdown in construction since the financial crisis. Then it was hit by the slowdown in the energy sector. Every expected rebound falied to appear and CAT continued to give cautious guidance. That changed over the last several months.

The global economy is rebounding. There are massive construction projects now underway in China and Asia. The Eurozone is also seeing a resurgence in consrtuction. Commodity metals are booming and mines are reopening shuttered capacity and opening new mines. Everything is suddenly positive for CAT.

In December they guided for full year 2017 revenues of $38 billion "as a reasonable midpoint expectation." Analyst estimates for earnings of $3.25 were "too optimistic" according to CAT.

In January they guided for $36-$39 billion in revenue and $2.90 in earnings.

In April they guided for $38-$41 billion in revenue and $3.75 in earnings.

In July they guided for $42-$44 billion in revenue and $5 in earnings.

In April they guided for revenue from construction at flat to 5%.
In July they guided for 10% to 15% growth.

In April they guided for revenue from mining at 10% to 15%.
In July they guided for 20% to 25% growth.

In April they guided for energy revenue at flat to 5%.
In July they raised it to 5% to 10%.

At the September 12th investor day meeting the new CEO said they were targeting $55 billion in revenue in 2018 with margins of 14%-17% compared to 12% in 2017. That would take them back to 2014 levels before the bear market in commodity/energy began. That is 28% above 2017 levels. He was careful not to call it a target but said that level was achievable if the current rebound in mining, energy and construction continued.

In late September CAT reported a global increase in machine sales of 11% for August. Total sales in Asia and the Pacific surged 44%.

After the devastation in Houston, there were new estimates from analysts for 17% or higher revenue growth in construction equipment.

I believe revenue estimates will continue to rise because they are running out of year and their conservative guidance will have to become more accurate.

Update 10/29/17: Caterpillar (CAT) reported earnings of $1.95 that nearly quadrupled and blew past estimates for $1.22. That is the kind of earnings beat that should have spiked the stock $13 like MMM but given CAT's recent string of new highs over the last three months, a lot of excitement was already priced into the stock. Revenue rose 25% to $11.41 billion compared to estimates for $10.61 billion. Construction equipment revenue rose 37% with energy and transportation equipment revenue rising 12%. CAT raised guidance for the full year from $5.00 to $6.25 on revenue of $44 billion. Analysts were expecting $5.29 and $42.94 billion. This was a killer quarter for CAT and this confirms more than anything else that the global economy is beginning to surge.

Update 11/19/17: Caterpillar makes an Android phone that is indestructible. It has 44 days of standby time, 38 hours of talk time with a 5,000mAH battery. You can even charge other phones with the CAT phone and it comes with a cable to do exactly that. The price is $509. Article

Update 12/15/17: Caterpillar announced a 78-cent dividend payable Feb 20th to holders on Jan 22nd. The company said sales rose 26% for the 3-months ending in November. The last time they saw sales this high was in 2012. The 3-month gains were driven by a 43% rise in Asia Pacific, Europe, Asia and Middle East were up 32%, North America 12%. Latin America sales rose 48% in October but no number was given for November. Sales were strong across all divisions, resource, energy, construction, etc.

Update 1/26/18: CAT said sales for Q4 rose 35% on strong global demand for construction equipment. They reported earnings of $2.16 compared to estimates for $1.79. Revenue of $12.9 billion beat estimates for $11.9 billion. The company guided for 2018 earnings of $8.25-$9.16 and analysts were expecting $8.19. The CEO said demand remains strong thanks to rising oil prices, booming construction and a rapidly rising global economy. CAT reported before the open on Thursday and shares were volatile over the last two days. However, despite the volatility shares are only down about $2 from the pre-earnings close. Given CAT's big rally over the last six months, there is still risk of profit taking even though they beat earnings and guided significantly higher.

Position 10/9/17:

Closed 2/5: Long Jan 2019 $135 call @ $8.63, exit $28.38, +$19.75 gain.
Closed 2/6: Short Jan 2019 $155 call @ $3.13, exit $16.50, -$13.37 loss.
Net gain $6.38.


DIA - Dow ETF - ETF Description

Comments:

The intraday rebound on the 5th stopped us out of the put before the big decline appeared. We posted a minor gain.

Original Trade Description: December 10th

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.

We have a lot of uncaptured gains in our portfolio. The tax reform bill should be approved next week and the market "should" continue to be positive throughout the week. There is always the potential for a sell the news event but I am betting the market will remain positive for the rest of the year.

We also have the government funding problem on January 19th that could cause a government shutdown but that dip would probably be bought.

I am recommending we enter a long put position if the Dow trades at 24,800. Since many traders try to anticipate sell the news events at big round numbers, I want to enter the position a little early. This will help get us into the position even if the Dow does not reach 25,000.

02/5/18: The market finally returned to reality with an 1,100 point decline on the Dow. S&P futures were down -19 early Sunday evening but have improved to -12. We still have the funding deadline on Feb 8th but they are talking about kicking the can out to March 22nd. The 50-day average at $250 would probably be a support point. I would recommend closing the put at $250.25. We should be profitable at that level.

Position 12/18/17 with a DIA trade at 248:

Closed 2/5: Long March $240 put @ 2.76, exit $2.80, +.04 gain
Closed 1/29: Short March $230 put @ $1.30, exit .27, +$1.03 gain
Net gain $1.07.



ECA - Encana Corp - Company Profile

Comments:

No specific news. Shares rolled over with the energy sector despite high oil prices. Earnings on February 15th. We have a long time until January 2019.

Original Trade Description: May 21st.

Encana Corporation, together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States. The company owns interests in various assets, such as the Montney in northern British Columbia and northwest Alberta; Duvernay in west central Alberta; and other upstream operations, including Wheatland in southern Alberta, Horn River in northeast British Columbia, and Deep Panuke located offshore Nova Scotia. It also holds interests in assets that comprise the Eagle Ford in south Texas; Permian in west Texas; San Juan in northwest New Mexico; Piceance in northwest Colorado; and Tuscaloosa Marine Shale in east Louisiana and west Mississippi. Company description from FinViz.com.

Encana reported earnings of 11 cents that beat estimates for 4 cents. Revenue of $1.297 billion also beat estimates for $789 million. Production declined 18% due to low prices and depletion. This was an excellent report from a beaten down energy stock.

Production averaged 237,100 Boepd. Drilling and completion costs declined by 30%. They reduced long-term debt by $1.1 billion and net debt by 50%. They replaced 326% of production.

They currently have more than 10,000 premium drilling locations and expect to grow that number in 2017. Since December 31st, they have added more than 50 premium locations in the Eagle Ford alone. They ended 2016 with a whopping $5.3 billion in liquidity and cash of nearly $1 billion. They expect to spend $1.6 to $1.8 billion on capex in 2017 and grow liquids production by 35%. Capex willbe funded by cash on hand. Proved reserves were 920 million barrels and 3P reserves were 2.372 billion barrels.

With the cash, production rates, reserves and drilling inventory listed above they are definitely an acquisition candidate with only a $10 billion market cap. Half their market cap is cash on hand.

JP Morgan initiated coverage with an overweight rating and $16 price target.

I am recommending two positions for Encana. I am recommending a January $12 call for $1.40 and a January 2019 $15 call, also $1.40. The short-term position is to capture the expected summer rebound in oil prices. The long-term position is acquisition insurance. It will capture any normal rise in price but also any acquisition announcement.

Oil prices typically peak in August and then decline into fall. If OPEC announces this week an extended production cut scenario through March 2018 as expected, prices could continue to rise into winter as global inventories decline.

Update 6/12/17:

Encana sold its Permian Basin produced water infrastructure to H2O Midstream. No price was given. This included over 100 miles of interconnected pipeline and 80,000 bpd capacity. H2O plans to double the pipeline to 200 miles and capacity to 140,000 bpd plus adding storage for 2 million barrels of produced water. The produced water can be reused in new fracing projects and reduces the cost of new wells.

Update 7/21/17: Encana reported earnings of 18 cents that beat estimates for 4 cents. Revenue of $1.083 billion beat estimates for $773 million. Production averaged 246,500 Boepd, a 9,200 boepd rise. Condensate rose 14% to 124,900 bpd. The margin per barrel rose 25% to $12.10. Recent wells with the newest fracking technology have been coming with production 20% higher than expected. The company has more than 11,000 "premium" drilling locations and thousands of non-core locations.

Update 10/21/17: At the investor day last week, Encana said they were targeting 25% compound annual growth in non-GAAP cash flow over the next five years and $1.5 billion in non-GAAP free cash flow. They are going to do this without any rise in commodity prices. They stressed their 23,000 potential drilling sites with 11,000 offering premiums returns of more than 35%. That included 3,450 in the Permian, 220 in the Eagle Ford, 500 in the Duvernay and 6,900 in the Montney. Most people have not heard of the Montney but that play has over 1,000 feet of pay with six zones of stacked production. Link to presentation slides

Update 11/12/17: Encana reported earnings of 2 cents that missed estimates for 5 cents. Revenue of $861 million beat estimates for $826.8 million. Production of 284,000 Boepd declined from 338,000 in the year ago quarter. The majority of the decline was a 29% drop in natural gas production. The decline came from hurricane impacts and third party curtailments of gas in western Canada. The company said it was firmly on track to hit its full year targets. Shares are holding at 8-month highs after earnings.

Update 1/15/18: The company reported that production rose 31% in Q4 and exceeded their 20% growth targets. They did this within their $1.8 billion capex budget. For 2018 the budget remains roughly the same with 70% targeted for the Permian and Montney. Encana produced 80,000 Boepd from the Permian in Q4. They are targeting 25-35% companywide production growth in 2018. They are expecting significant liquids growth from the Montney as they complete the two remaining processing hubs for natural gas. The company will issue 2018 guidance when they report earnings on Feb 15th.

Position 5/22/17:

Long Jan 2019 $15 call @ $1.40, see portfolio graphic for stop loss.

Position 8/28/17:
Long (2) Jan 2019 $15 calls @ .50.
Adjusted 2019 position (3 contracts) @ 80 cents each.

Position 10/30/17:
Long (3) Jan 2019 $15 calls @ $1.10.
Adjusted 2019 position (6 contracts) @ .95 each.

Previously Closed 1/16: Long Jan 2018 $12 call @ $1.50, exit $2.05, +.55 gain.


FLIR - FLIR Systems - Company Description

Comments:

No specific news. Shares declined with the market. Earnings on Feb 14th. We were stopped out on the big market drop on Tuesday. Support has held but the 50-day average at $48.60 looks like resistance. I am going to recommend we reenter the July $50 call ahead of earnings on Wednesday. The passage of the defense funding bill should be beneficial for all the stocks in the sector.

Original Trade Description: January 7th

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.

Shares rallied last week to close at a new high at $48.25 and just over two-month resistance at $47.90. If this breakout continues, it should produce some short covering given the long period of consolidation after the spike from Q3 earnings in October.

They do not have LEAPS but we can buy the July calls very reasonably.

Position 1/8/18:
Closed 2/6: Long July $50 call @ $3.40, exit $2.48. -.92 loss.



GE - General Electric - Company Description

Comments:

GE shares collapsed to $14.25 on Friday. We have a long March $16 put as insurance. They announced a 12 cent dividend payable April 25th to holders on Feb 26th. We could close the put for a gain on the assumption the market decline is nearly over but there is no guarantee. I did put a stop loss on the put to prevent it from turning into a loss.

Original Trade Description: January 21st

General Electric Company operates as an infrastructure and technology company worldwide. Its Power segment offers gas and steam power systems; maintenance, service, and upgrade solutions; distributed power gas engines; water treatment, wastewater treatment, and process system solutions; and nuclear reactors, fuels, and support services. The company's Renewable Energy segment provides wind turbine platforms, and hardware and software; onshore and offshore wind turbines; and solutions, products, and services to hydropower industry. Its Oil & Gas segment offers surface and subsea drilling and production systems, and equipment for floating production platforms; and compressors, turbines, turboexpanders, reactors, industrial power generation, and auxiliary equipment. The company's Aviation segment designs and produces commercial and military aircraft engines, integrated digital components, and electric power and mechanical aircraft systems; and provides aftermarket services. Its Healthcare segment offers diagnostic imaging and clinical systems; products for drug discovery, biopharmaceutical manufacturing, and cellular technologies; and medical technologies, software, analytics, cloud solutions, and implementation services. The company's Transportation segment provides freight and passenger locomotives, and rail and support advisory services; and parts, integrated software solutions and data analytics, software-enabled solutions, mining equipment and services, and marine diesel and stationary power diesel engines and motors, as well as overhaul, repair and upgrade, and wreck repair services. Its Energy Connections & Lighting segment offers industrial, grid, power conversion, automation and control, lighting, and current solutions. The company's Capital segment provides industrial and energy financial services; and commercial aircraft leasing, financing, and consulting services. General Electric Company was founded in 1892 and is based in Boston, Massachusetts. Company description from FinViz.com.

Expected earnings January 24th.

GE has been having a hard time. The financial crisis killed GE Capital and forced them out of that business to drop their SIFI designation and government oversight. They bought Baker Hughes at almost the top of the oil market. Competition is flourishing in every sector. The prior CEO, Jeffrey Immelt left the company under a cloud. They are selling off unprofitable or low profit divisions but the stock just keeps falling. Shares are currently at a 7 year low.

However, while things have been rocky, the new CEO is determined to right the ship. Nobody reading this play description thinks GE is going under. They are a huge manufacturing company with assets in transportation, railroads, aerospace, power, energy, etc.

This is what it driving this recommendation. There are strong rumors and forecasts that GE could be split up into 3-4 companies in a massive restructuring program. Other divisions could be sold to reduce the overall management complexity. There is tremendous value in GE and the new CEO has pledged to unlock it.

With the stock at a 7-year low at $16, this is the target low for a large number of analysts. It could go lower but GE is now a strong value proposition. It is not likely to happen this quarter or even this year, but it will recover. The options are cheap and with earnings on Wednesday, there could be some positive surprises.

With GE in crash mode, I am also recommending a March $16 put. If the stock drops another couple of bucks post earnings, we could sell the put and further reduce our cost in the LEAP.

The LEAP options are cheap. Buy a couple contracts and put them in your "do not disturb" folder. Other traders think this is a good idea as well. More than 4,500 contracts were bought on Friday with another 4,700 contracts of the $20 LEAPs.

Update 1/26/18: The company disclosed a SEC investigation into a $6.2 billion charge for insurance reserves. The company also reserved for future charges of as much as $15 billion. The company posted a $10 billion loss including charges and said it was looking to sell $20 billion in assets. The company reaffirmed their 2018 guidance for earnings of $1.00-$1.07. That was significantly lower than the $2 Immelt had promised before he left in August. That $1 number contains a lot of charges and is not an adjusted number. We knew there would be volatility when we entered the position but we are looking well into the future. GE posted $122.1 billion in revenue in 2017. They are not going away and the new CEO is committed to making them more profitable and easier to manage.

Position 1/22/18:
Long Jan 2020 $18 LEAP Call @ $2.42, see portfolio graphic for stop loss.
Optional: Long March $16 put @ 75 cents, see portfolio graphic for stop loss.



HPQ - HP Inc - Company Description

Comments:

No specific news. HPQ did enable voice control for printers over Alexa, Cortana and Google Home. You can say "Alexa, print my shopping list on the office printer" or similar commands. Earnings are Feb 22nd. Shares fell 20% and I am recommending we double up on the position size. At 79 cents, that is a bargain.

Original Trade Description: January 28th

HP Inc. provides products, technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health, and education sectors worldwide. It operates through Personal Systems and Printing segments. The Personal Systems segment offers commercial personal computers (PCs), consumer PCs, workstations, thin clients, commercial tablets and mobility devices, retail point-of-sale systems, displays and other related accessories, software, support, and services for the commercial and consumer markets. The Printing segment provides consumer and commercial printer hardware, supplies, media, solutions, and services, as well as scanning devices; and laserJet and enterprise, inkjet and printing, graphics, and 3D printing solutions. The company was formerly known as Hewlett-Packard Company and changed its name to HP Inc. in October 2015. HP Inc. was founded in 1939 and is headquartered in Palo Alto, California. Company description from FinViz.com.

Expected earnings February 22nd.

Hewlett Packard, now HP Inc, saw its shares crash back to $9 in 2016 as Lenovo cornered the cheap laptop market and consumers were moving away from desktop PCs. That was a lifetime ago in the tech world. Since that cycle low, HP has reinvigorated itself and changed its business model. The company no longer competes in the cheap computer market. HP now sells top end PCs to compete with the Apple Macs and fully features Dell workstations.

The reinventing of HP has worked. According to IDC, HP's market share rose from 21,8% to 23.5% in the last quarter. Only three companies, HP, Dell and Apple, saw shipments rise in Q4. HP shipments rose 8.3% to 16.6 million, Apple shipped 7.3% more to 5.8 million and Dell barely made the list with a 0.7% rise to 11.1 million. Total PC shipments rose only 0.7% in the quarter, showing how dominant HP was in stealing market share. That was the first quarter where overall PC sales have risen in the last six years. The PC is coming back to life.

Analysts credit high speed gaming computers, crypto currency mining computers and stylish new models for the surge in market share. For instance the graphic below is the HP Envy All-in-One PC. This comes with Windows 10, 16GB, Core I7 Processor, 2TB hard disk and 256GB SSD, Nvidia GeForce GTX 950 video, QHD 4K video, dual band Wi-Fi, camera, microphone, HDMI input and output. The optional quad speakers makes this not only a PC but an entertainment center as well. This is not your father's PC. Base price $1,899.

HP's PC revenue rose 13% in 2017 to $9.1 billion with total shipments rising 6%. That was after a 12% rise in revenue in the prior quarter. Notebook revenues rose 16% on a 8% increase in shipments.

The printer business is also coming back from the dead. Printers generated 65% of the revenue and 30% of earnings. HP is buying Samsung's printer unit, which will expand the product line in multiple directions including mobile printers and 3D printers. The company is poised to announce a new 3D printer that prints metal components in 2018.

The company is expected to grow earnings 10% in 2018 with a 4% increase in revenue. Compared to other tech companies their PE of 13 is positively ridiculous when most companies are in the 203. 30s or even 100s.

HP shares are about to break out to an 8 year high over $25. This should trigger additional buying because everyone wants to own a winner.

Position 1/29/18:
Long Jan 2019 $25 call @ $2.13, see portfolio graphic for stop loss.



IBM - IBM - Company Description

Comments:

No specific news. IBM fell with the Dow to stop us out of the position with a minor gain.

Original Trade Description: October 27th

International Business Machines Corporation provides information technology (IT) products and services worldwide. Its Cognitive Solutions segment includes Watson, a cognitive computing platform that interacts in natural language, processes big data, and learns from interactions with people and computers. The company's Cognitive Solutions segment also offers data and analytics solutions, including analytics and data management platforms, cloud data services, enterprise social software, talent management solutions, and solutions tailored by industry; and transaction processing software that runs mission-critical systems in banking, airlines, and retail industries. The company's Global Business Services segment offers business consulting services; delivers system integration, application management, maintenance, and support services for packaged software applications; and business process outsourcing services. Its Technology Services & Cloud Platforms segment provides cloud, project-based, outsourcing, and other managed services for enterprise IT infrastructure environments. This segment also offers technical support, and software and solution support; and integration software solutions. The company's Systems segment offers servers for businesses, cloud service providers, and scientific computing organizations; data storage products and solutions; and z/OS, an enterprise operating system for z systems. Its Global Financing segment provides lease, installment payment plans, and loan financing services; short-term inventory and accounts receivable financing to suppliers, distributors, and remarketers; and remanufacturing and remarketing services. It has a strategic collaboration with ABB Ltd to develop industrial artificial intelligence solutions. The company was formerly known as Computing-Tabulating-Recording Co. and changed its name to International Business Machines Corporation in 1924. The company was founded in 1910 and is headquartered in Armonk, New York. Company description from FinViz.com.

IBM surprised investors with positive revenue growth when they reported earnings. Revenues had declined for 20 quarters. They had been beating on earnings for the last 12 quarters but revenue continued to slide. Earnings of $3.30 beat estimates for $2.84. Revenue of $19.15 billion beat estimates for $18.61 billion. They reiterated their full year guidance of $11.95 per share.

Morgan Stanley said the earnings were a clear inflection point for IBM and the multiyear restructuring was finally beginning to produce results. IBM said they had a new mainframe server and orders were strong.

Shares hit $162.50 for the biggest one-day gain since 2008. They have faded back to $153 and I am recommending we enter a position with a trade at $150.

Update 11/12/17: IBM announced the availability of a 20-qubit quantum computing machine available as a cloud service. Previously they had offered a 5-qubit machine for free in an effort to stimulate companies to develop programs to run on a quantum computer. A regular computer operates with a 2 state processor that utilizes bits set to 1 or zero to indicate certain conditions, letters numbers, etc. A quantum computer has an unlimited number of states. That is like saying the 1 bit of information in a normal computer can now represent any number from 0 to 1000 or even 10,000. The possibilities are endless but no commercial programming currently exists for quantum computers. IBM expects to produce a 100-qubit machine in the not to distant future. HAL are you listening? Skynet are you paying attention?

Update 11/19/17: Warren Buffett sold most of his position in IBM in Q3. Berkshire sold 17 million shares to lower his stake by roughly one third to 37 million shares. At one point Berkshire held 81 million shares of IBM. Berkshire used the proceeds to buy more Apple shares and more shares in Bank of America. Several analysts said this was a turning point for IBM because of Buffett's capitulation. Shares declined to $146.21 in the market drop on Wednesday has rebounded back to $150 intraday on Friday.

Update 12/17/17: IBM added JP Morgan Chase, Barclays and Samsung to its quantum computing project. These companies join a dozen others in developing applications for the new quantum computing technology that is expected to far surpass conventional computers in speed and power. IBM said quantum computing today is equivalent to the state of conventional computing back in the 1950s.

Update 1/7/18: IBM shares spiked on news they had partnered with Stellar to develop a rapid, international payments system for cryptocurrencies. The system will have low transaction fees and short transaction times.

Update 1/15/18: IBM received a record 9,043 patents in 2017 and leading the industry for the 25th consecutive year. They now have more than 100,000 active patents. More than 8,500 IBM researchers, engineers, scientists and designers in 47 US states and 47 countries contributed to the 2017 surge. These included more than 1,900 cloud patents, 1,400 AI patents and 1,200 cybersecurity patents. There were even patents on blockchain technology.

Update 1/21/18: IBM reported earnings of $5.18 that beat estimates by a penny. Revenue rose 3.6% to $22.54 billion and beat estimates for $22.06 billion. That was the first revenue rise in 23 quarters. Cloud revenue rose 30% and revenue from "strategic imperatives" rose 17%. Shares fell -4% after the report.

Update 2/5/18: The company declared a $1.50 dividend payable March 10th to holders on February 9th. IBM has paid consecutive quarterly dividends every year since 1916.

Position 11/9 with an IBM trade at $150:

Closed 2/5: Long Jan 2019 $160 LEAP calls @ 8.06. Exit $10.65, +$2.59 gain.



MNST - Monster Beverage - Company Profile

Comments:

No specific news. Record high close the prior Friday. Down with the market to stop us out.

Original Trade Description: June 4th.

Monster Beverage Corporation, through its subsidiaries, develops, markets, sells, and distributes energy drink beverages, soda, and its concentrates in the United States and internationally. It operates through three segments: Monster Energy Drinks, Strategic Brands, and Other. Its Monster Energy Drinks segment sells ready-to-drink packaged drinks and non-carbonated dairy based coffee energy drinks primarily to bottlers and full service beverage distributors, as well as sells directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, food service customers, and the military. The Strategic Brands segment sells concentrates and/or beverage bases to authorized bottling and canning operations; and ready-to-drink packaged energy drinks to bottlers and full service beverage distributors. It sells its products under the Monster Energy, Nalu, Monster Rehab, NOS, Monster Energy Extra Strength Nitrous Technology, Full Throttle, Java Monster, Burn, Muscle Monster, Mother, Mega Monster Energy, Ultra, Punch Monster, Play and Power Play, Juice Monster, Gladiator, Ubermonster, Relentless, Samurai, BU, and Mutant Super Soda brands. The company was formerly known as Hansen Natural Corporation and changed its name to Monster Beverage Corporation in January 2012. Company description from FinViz.com.

Monster reported earnings of 33 cents that rose 26.9% and beat estimates by a penny. Revenue of $742.1 million rose 9.1% and beat estimates for $741.4 million. These numbers beat estimates despite a -$3.7 million hit from foreign currency translation. Net sales outside the U.S. rose 28% to $190.9 million. Sales of new products were so strong there was actually a shortage of product.

Monster is doing great in a weak retail sector. This proves if you sell something habit forming you will always have a market.

They have multiple initiatives underway to increase global sales and they appear to be overcoming all the daily headaches that impact a retail distribution company. Gross profits rose from 62.2% to 64.8%.

For the last couple of years Monster has been transitioning their distribution into the Coca-Cola network. Coke took a major equity stake in Monster and part of the deal was that Coke would distribute the product globally. That is working out well and giving Monster a wider presence than they could have ever done on their own. Coke has an option to buy more Monster stock, or even the entire company. Given the slowdown in carbonated sugar drinks, Coke could be looking to exercise their option soon.

I am recommending two positions. The first is a Jan-2018 call that will get us through the rest of the year and capture any short-term gains. The second is a Jan-2019 LEAP call that could capture a run to a new high and/or acquisition by Coke. You can do one position or both.

Update 8/13/17: Monster reported earnings of 39 cents that missed estimates for 40 cents. Revenue of $907.1 million beat estimates for $906.6 million.

Update 9/10/17: There was more analyst speculation last week that Coke might be getting close to acquiring the rest of Monster shares it does not own. Coke has a 16.7% stake in Monster and that is the only portion of the drink business that is growing. Coke's Q2 revenues declined 16% for the 9th consecutive quarterly decline.

Update 11/12/17: Monster reported earnings of 40 cents that matched analyst estimates. Revenue of $909.5 million beat estimates for $901.1 million. Shares dipped to $56 after earnings and then exploded higher over the next two days to close at $61 on no specific news.

Update 12/30/17: The president and CEO combined to sell nearly 400,000 shares over the last week. They pair had exercised options for 433,000 shares each on Dec 12th. Shares of MNST declined from the new highs on Thursday.

Position 8/14/17:

Closed 2/6: Position 8/14/17: Long Jan 2019 $55 call @ $6.76, exit $12.20, +$5.44 gain

Previously closed 8/9/17: Long Jan 2018 $55 call @ $2.65, exit $1.95, -.70 loss
Alternate position:
Closed 8/9/17: Long Jan 2019 $55 call @ $5.60, exit $5.70, +.10 gain.


MRK - Merck & Co - Company Description

Comments:

Shares crashed back to support from December. The 2020 LEAP has been cut in half. I am recommending we double up on that position size.

Original Trade Description: November 12th

Merck & Co., Inc. provides healthcare solutions worldwide. It operates in four segments: Pharmaceutical, Animal Health, Healthcare Services, and Alliances segments. The company offers therapeutic agents to treat cardiovascular, type 2 diabetes, asthma, nasal allergy symptoms, allergic rhinitis, chronic hepatitis C virus, HIV-1 infection, fungal and intra-abdominal infections, hypertension, arthritis and pain, inflammatory, osteoporosis, and fertility diseases. It also offers neuromuscular blocking agents; anti-bacterial products; cholesterol modifying medicines; and vaginal contraceptive products. In addition, the company offers products to prevent chemotherapy-induced and post-operative nausea and vomiting; treat brain tumors, and melanoma and metastatic non-small-cell lung cancer; prevent diseases caused by human papillomavirus; and vaccines for measles, mumps, rubella, varicella, chickenpox, shingles, rotavirus gastroenteritis, and pneumococcal diseases. Further, it offers antibiotic and anti-inflammatory drugs to treat infectious and respiratory diseases, fertility disorders, and pneumonia in cattle, horses, and swine; vaccines for poultry; parasiticide for sea lice in salmon; and antibiotics and vaccines for fishes. Additionally, the company offers companion animal products, such as ointments; diabetes mellitus treatment for dogs and cats; anthelmintic products; fluralaner products to treat fleas and ticks in dogs; and products for protection against bites from fleas, ticks, mosquitoes, and sandflies. It has collaborations with Aduro Biotech, Inc.; Premier Inc.; Cancer Research Technology; Corning; Pfizer Inc.; AstraZeneca PLC.; and SELLAS Life Sciences Group Ltd. The company serves drug wholesalers and retailers, hospitals, government agencies and entities, physicians, physician distributors, veterinarians, distributors, animal producers, and managed health care providers. Merck & Co., Inc. was founded in 1891 and is headquartered in Kenilworth, New Jersey. Company description from FinViz.com

Merck reported earnings of $1.11 compares to the $1.03 that analysts expected. Revenue of $10.33 billion beat estimates. The company guided for full year earnings of $1,.78-$1.84 up from $1.60-$1.72. Revenue guidance rose from $39.4-$40.4 billion to $40.0-$40.5 billion.

Shares were crushed after the company said it had pulled its European application for the cancer drug Keytruda. Sales of the drug nearly tripled to $1.05 billion where it has already been approved and are expected to continue to grow to $5 billion over the next two years.

The reason they pulled the European application was to modify a phase III trial to focus on "overall survival" or OS rather than short-term "progression free survival" or PFS. This pushed the trial end date out to early 2019. Overall survival is the holy grail of any cancer drug. It is one thing for cancer to grow slower and let the patient live a longer life but gaining another 6-12 months of life is a fleeting goal. Living out your normal life span is the target all drugs shoot for. By modifying the trial to focus on longer term benefits, the eventual drug approval will be worth more. If the short term drug is worth $10,000 per treatment, a drug that give you upir life back is worth 10 times or even a 100 times that amount.

Merck will refile the application when they have the new data but this is one drug with $3 billion a year in sales compared to their current $40 billion in overall volume. If they get the OS data they want, Keytruda could grow to $10 billion a year by 2022.

I believe this drop is a buying opportunity because the LEAP premiums are miniscule for a company with a $150 billion market cap and $40 billion in annual sales.

I am going to recommend two LEAPS because they are so cheap. Choose either one or buy both.

Update 12/3/17: Merck announced another $10 billion share buyback program and they increased their dividend to 48 cents.

Update 12/17/17: Merck said a late stage trial for its blockbuster drug Keytruda failed to meet the main goal of extending lives of patients with gastric cancer. The drug is effective in other forms of cancer. Shares declined slightly on the news.

Update 12/30/17: Merck said the drug Steglatro and the combination drug Steglujan, both for diabetes, had been approved by the FDA. These drugs are in partnership with Pfizer. Both will be available in January.

Update 2/5/18: Merck reported earnings of 98 cents that beat earnings for 94 cents. Revenue of $10.43 billion missed estimates for $10.49 billion. The company recorded a loss of $125 million as the result of the June cyber attack. Sales of Januvia, Keytruda and Gardasil beat expectations. The company guided for full year revenue of $41.2-$42.7 billion compared to estimates for $41 billion. They guided for earnings of $4.08-$4.34 and analysts were expecting $4.10. They announced plans to invest $8 billion in US capital projects over the next five years with $12 billion planned in total. They also announced bonuses for employees as a result of tax reform. Shares had been declining since the "lower drug prices" pledge by President Trump on Tuesday.

Position 11/13/17:

Long Jan 2019 $60 LEAP Call @ $2.38, see portfolio graphic for stop loss.
Long Jan 2020 $60 LEAP Call @ $3.90, see portfolio graphic for stop loss.


MU - Micron Technology Company Profile

Comments:

Micron raised earnings guidance from $2.51-$2.65 to $2.70-$2.75. They raised revenue estimates from $6.8-$7.2 billion to $7.3-$7.35 billion. Analysts were expecting earnings of $2.58 on revenue of $7.02 billion. Shares spiked on the news on Tuesday but then fell back below support in Friday's market decline to stop us out.

Original Trade Description: October 22nd.

Micron Technology, Inc. provides semiconductor systems worldwide. The company operates through four segments: Compute and Networking Business Unit, Storage Business Unit, Mobile Business Unit, and Embedded Business Unit. It offers DDR3 and DDR4 DRAM products for computers, servers, networking devices, communications equipment, consumer electronics, automotive, and industrial applications; mobile low-power DRAM products for smartphones, tablets, automotive, laptop computers, and other mobile consumer device applications; DDR2 and DDR DRAM, GDDR5 and GDDR5X DRAM, SDRAM, and RLDRAM products for networking devices, servers, consumer electronics, communications equipment, computer peripherals, automotive and industrial applications, and computer memory upgrades; and hybrid memory cube semiconductor memory devices for use in networking and computing applications. The company also provides NAND Flash products, which are electrically re-writeable, non-volatile semiconductor memory devices; client solid-state drives (SSDs) for notebooks, desktops, workstations, and other consumer applications; enterprise SSDs for server and storage applications; managed multi-chip package products; digital media products, including flash memory cards and JumpDrive products under the Lexar brand name. In addition, it manufactures products that are sold under other brand names; and resells flash memory products that are purchased from other NAND Flash suppliers. Further, the company provides 3D XPoint memory products; and NOR Flash, which are electrically re-writeable and semiconductor memory devices for automotive, industrial, connected home, and consumer applications. Company description from FinViz.com.

For Q2, they reported earnings of $2.02 compared to estimates for $1.84. Revenue rose 90% to $6.14 billion and analysts were expecting $5.97 billion.

For the current quarter, analysts are expecting $2.14 in earnings on a 60% increase in revenue. They are likely to beat those estimates.

Despite the strong earnings and forecasts, the company trades at a PE of 8.7 when the S&P is trading at 18.0. This is a monumental mismatch and suggests investors will be racing to buy this undervalued stock.

Shares spiked on earnings and ran up to $40.50. They have been consolidating in the $40-$42 range for the last two weeks.

On October 10th, they announced a $1 billion secondary offering and shares dipped for several days while the offering was priced and completed. This added 25 million shares to the float with 1.14 billion shares outstanding.

This was a great deal. They are using the proceeds to help fund the retirement of $2.25 billion in debt priced at 7.5% and 5.5% interest. This will reduce their costs and eliminate those debt service payments. They raised about $1.2 billion after the offering was upsized and the rest of the funds for debt retirement will come out of cash on hand.

Summit Redstone said buy because the secondary offering to pay off debt was an exercise in value creation. The analyst has a $51 price target. Credit Suisse reiterated an outperform rating and $50 target. Susquehanna has a $50 target and Evercore ISI has a $50 target. Barclay's boosted their target price from $40 to $60 saying DRAM demand looks good through 2018. Demand should remain high and supply should remain tight. Stifel has a $60 target. Needham's, Rajvinda Gill has a price target of $76.

UBS analyst Stephen Chin says he expects Micron's profits to rise 50% in 2018 to $7.50 per share. If you put any kind of market multiple on those earnings, the stock should double.

Update 12/17/17: Morgan Stanley said buy Micron despite rising production on NAND memory and the expected softening of prices. Analysts expect Micron's NAND cost to decline 30% over the next 12 months. They said demand remains very healthy and new sources of demand keep popping up everywhere. They referenced the IoT, AI and self driving cars.

Update 12/30/17: Micron reported earnings of $2.45 that beat estimates for $2.20. Revenue of $6.8 billion rose 71.4% and beat estimates for $6.39 billion. They guided for current quarter earnings of $2.51-$2.65 and revenue of $6.8-$7.2 billion. Analysts were expecting $1.95 and $6.08 billion. Shares spiked on the news then declined for the last week as the semiconductor sector rolled over in a generally weak market.

Update 1/15/18: Intel and Micron said they were going to terminate their partnership on developing new NAND memory technology after their third generation effort is complete in 2019. Micron is totally focused on memory and Intel is going back to focus on processors. This makes sense because the memory technology changes so quickly and it is priced as a commodity with very little margin it does not make sense for Intel to waste time and resources on a commodity product.

2/5/18: Micron shares followed the movement in the chip sector. The $SOX was down -37 points (-2.73%) on Friday. Wells Fargo said the strong results from Samsung suggested Micron and Applied Materials would do well in 2018 despite lower semiconductor spending from elevated levels in 2017. The sector crashed on Friday after Apple reported earnings and lowered guidance. This hammered all the chip companies that supply to Apple.

Position 10/23/17:
Closed 2/9: Long Jan 2019 $45 call @ $7.00, exit $5.20, -1.80 loss.
Closed 2/9: Short Jan $60 call @ $3.10, exit $2.65, +.45 gain.
Net loss $1.35.


PGR - Progressive Corp Company Profile

Comments:

PGR shares broke to a new low on market weakness but managed to cling to $52 for the week. The company is planning on hiring 7,500 people. Even though the stock made a new low I am encouraged that it was minor and it did not progress to even lower lows.

Original Trade Description: February 4th

The Progressive Corporation, through its subsidiaries, provides personal and commercial property-casualty insurance, and other specialty property-casualty insurance and related services primarily in the United States. Its Personal Lines segment writes insurance for personal autos, and recreational and other vehicles. This segment's products include personal auto insurance; and special lines products, including insurance for motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles. The company's Commercial Lines segment provides primary liability, physical damage, and other auto-related insurance for autos, vans, and pick-up trucks, and dump trucks used by small businesses; tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses, and non-fleet long-haul operators; dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses; tow trucks and wreckers used in towing services and gas/service station businesses; and non-fleet taxis, black-car services, and airport taxis. Its Property segment provides residential property insurance for homeowners, other property owners, and renters, as well as offers personal umbrella insurance, and primary and excess flood insurance. The company also offers policy issuance and claims adjusting services; home, condominium, renters, and other insurance; and general liability and business owners policies, and workers' compensation insurance, as well as sells personal auto physical damage and auto property damage liability insurance in Australia. In addition, it offers reinsurance services. Company description from FinViz.com

The company reported Q4 earnings of 99 cents that rose 55% compared to estimates at 77 cents. Premiums written rose 22% to $6.8 billion. Expenses rose 19.6% to nearly $2 billion. That includes a 19.8% loss and adjustments expense, 16.5% increase in policy acquisition costs and 22% higher underwriting costs. The stock cratered after earnings from the new high at $58.25 to a 2-month low at $54. We were stopped out for a minor gain at $54.65.

Shares have held at that $54 level for the last week despite the market meltdown. As the high flying tech stocks and Dow industrials crash and burn we may be better off going back into a stock that posts steady gains without a lot of volatility. According to Zacks earnings estimates are rising.

Premiums are cheap relative to the high beta stocks. I am going with the ATM strike because the premium is only $1 more than the next higher strike. On a slow mover we do not want to start well out of the money.

Position 2/5/18:
Long Jan $55.00 call @ $4.50, see portfolio graphic for stop loss.



PYPL - PayPal - Company Description

Comments:

On Monday Wells Fargo upgraded Paypal from market perform to outperform. Shares are holding at the $73 level.

Original Trade Description: February 4th

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

Expected earnings May 2nd.

PayPal reported Q4 earnings that rose 59% to 55 cents that beat estimates for 52 cents. Net revenue rose from $2.98 billion to $3.74 billion. Total payment volumes rose 32% to $131.45 billion. They guided for Q1 for earnings of 52-54 cents, compared to estimates for 54 cents. These were dynamite earnings but shares faltered after the weak guidance.

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.

Paypal said payment platform Venmo was on track with expectations. The platform processed $9 billion in payment volume, a 93% YoY increase. 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.

In Q3 Paypal said it was acquiring Swift Financial, a small business lender and the transaction would close by the end of 2017. No terms were given. This will extend Paypal's reach for financing services. Paypal already has a working capital unit since 2013 and they have loaned more than $3 billion to small businesses.

The company recently sold its credit card assets to Synchrony Financial (SYF) for $5.8 billion. The bank will become the exclusive issuer of Paypal branded credit cards. The company also raised its guidance for Q4 to 52-59 cents on revenue of $3.64-$3.7 billion. Prior guidance was 37-39 cents on $3.57-$3.63 billion. Paypal said they had been using 40% to 50% of their free cash flow to fund the credit card business. With the asset sale, they will continue to promote the cards and grow the business but it will be up to Synchrony to fund the credit expansion. This was a win-win for both companies.

In December Keybanc raised their price target to $90 saying the Venmo app was the preferred payment app for 76% of responders in a recent survey. They expect $75 billion in Venmo payments in 2018 and Paypal will see earnings rise 4 cents for every $10 billion.

We were stopped out of a prior position when Paypal collapsed after the Ebay earnings. The company announced plans to phase Paypal out of the EBAY network as a preferred payment processor by 2023. Investors did not listen to the entire story. The PayPal CEO said the Ebay transaction revenue was 13% of their total and was growing at only 4% per year. The other 87% of transaction volume was growing at 23% per year. PayPal guided for 2018 for 16% revenue growth and 25% earnings growth.

Shares declined to $76.50 to rest on the support of the 50/60 day averages. Horizontal support is $73.50. I am recommending we reenter a new position on Paypal because there is nothing wrong with the company. This selling has been increased because of the market drop. If we reenter a new position at the open on Monday we could be buying right at support.

Unfortunately, with Paypal at new highs last Wednesday, the LEAP options are expensive. I am going to recommend a combination position. We can sell an OTM put spread for about a $4 credit to reduce our cost in the call. Without a total market meltdown, PayPal should not decline below $70. I would be thrilled to be put the stock at that level if it did happen.

Position 2/5/18:
Long Jan $80 call @ $8.95, see portfolio graphic for stop loss.
Short Jan $70 put @ $6.15, see portfolio graphic for stop loss.
Long Jan $55 put @ $2.04, see portfolio graphic for stop loss.
Net Debit $4.84.



ROCK - Gibraltar Industries - Company Description

Comments:

No specific news. Shares declined with the market to stop us out.

Original Trade Description: January 15th

Gibraltar Industries, Inc. manufactures and distributes building products in North America, Europe, and Asia. It operates through three segments: Residential Products, Industrial and Infrastructure Products, and Renewable Energy and Conservation. The Residential Products segment offers roof and foundation ventilation products and accessories, such as solar powered units; postal and parcel storage products, including single mailboxes, cluster boxes for multi-unit housing, and package locker systems; roof edgings and flashings; soffits and trims; drywall corner beads; metal roofing products and accessories; rain dispersion products comprising gutters and accessories; and exterior retractable awnings. This segment also provides electronic parcel lockers, roof top safety kits, chimney caps, heat trace coils and exterior products, remote-controlled deck awnings for sun protection, and solar-powered ventilation products, as well as adhesive roofing application products. The Industrial and Infrastructure Products segment offers expanded and perforated metals used in walkways, catwalks, architectural facades, perimeter security barriers, shelving, and other applications; fiberglass grating used in high strength, light weight, low maintenance, corrosion resistance, and non-conductivity areas; and expansion joint systems, bearing assemblies, and pavement sealing systems used in bridges, elevated highways, airport runways, and rail crossings. This segment also provides architectural facades for buildings; and perimeter security barriers for protecting critical infrastructure. The Renewable Energy and Conservation segment designs and provides engineered solutions for solar racking systems and greenhouse structures. The company markets its products through sales personnel and outside sales representatives. Gibraltar Industries, Inc. was founded in 1993 and is headquartered in Buffalo, New York. Company description from FinViz.com.

Expected earnings February 16th.

ROCK reported Q3 earnings of 67 cents that rose 22% and beat estimates for 54 cents. This was even over their guidance of 58-65 cents. Revenue of $275 million was in line with estimates. They ended the quarter with $208 million in cash, up from $170 million. They guided for the full year for revenue of $960-$965 million and earnings of $1.60-$1.67.

Shares have been steadily rising since mid December and closed at an 8-month high on Friday. With the economy booming, construction of all kinds breaking out all over, this building products manufacture/supplier should continue to do very well.

I chose ROCK because of the positive chart, positive sector and inexpensive option premiums that do not require a mortgage loan to buy. They do not have LEAPS but the August call will work for our time frame. With the potential for a market decline over the summer we will probably be out of the position well before expiration.

Position 1/16/18:
Closed 2/8: Long Aug $40 call @ $3.10, exit $.96, -$2.14 loss.



TEVA - Teva Pharmaceuticals - Company Description

Comments:

Teva shares declined below initial support on Thursday after the company posted soft guidance for 2018. A factory that makes one of their hotly anticipated drugs received a warnings letter from the FDA and Teva said that could lengthen the time to get 3 drugs to market.

Original Trade Description: December 10th

Teva Pharmaceutical Industries Limited develops, manufactures, markets, and distributes generic medicines and a portfolio of specialty medicines worldwide. It operates through two segments, Generic Medicines and Specialty Medicines. The Generic Medicines segment offers sterile products, hormones, narcotics, high-potency drugs, and cytotoxic substances in various dosage forms, including tablets, capsules, injectables, inhalants, liquids, ointments, and creams. This segment also develops, manufactures, and sells active pharmaceutical ingredients. The Specialty Medicines segment provides branded specialty medicines for use in central nervous system and respiratory indications, as well as the women's health, oncology, and other specialty businesses. Its products in the central nervous system area comprise Copaxone for multiple sclerosis; Azilect for the treatment of Parkinson's disease; and Nuvigil for the treatment of excessive sleepiness associated with narcolepsy and certain other disorders. This segment's products in the respiratory market include ProAir, ProAir Respiclick, QVAR, Duoresp Spiromax, Qnasl, Braltus, Cinqair/Cinqaero, and Aerivio Spiromax for the treatment of asthma and chronic obstructive pulmonary disease, as well as Treanda/Bendeka, Granix, Trisenox, Lonquex, and Tevagrastim/Ratiograstim products in the oncology market. This segment also offers a portfolio of products in the women's health category, which includes ParaGard, Plan B One-Step, and OTC/Rx, as well as other products. The company has collaboration arrangements with Attenukine, Procter & Gamble Company, and Regeneron Pharmaceuticals, Inc. Teva Pharmaceutical Industries Limited was founded in 1901 and is headquartered in Petach Tikva, Israel. Company description from FinViz.com

Teva is the largest generic drug manufacturer in the world. Unfortunately, that market place is becoming very competitive and the company has to reinvent itself to return to a profitable growth profile.

Fortunately, the company is taking action. They have been selling off noncore assets to pay down debt. They just installed a new CEO,Kare Schultz, and he took immediate action. On his second day on the job, he restructured the management team and said he would present a major restructuring plan in mid December. Last week, the stock jumped to a two-month high after news broke they were considering cutting 10,000 of their 57,000 workers in an effort to save $1.5-$2.0 billion a year.

Shares fell in early November after the company cut full year guidance for the third time and said they may sell shares to reduce their debt. In early December, they pulled back on the share sale idea saying they have no plans for a secondary offering in the near future.

I believe the worst is over. The reaction to the news over the last four months has been horrendous. Shares had fallen from $32 to $10. Since the new CEO took control, they have rebounded back to $16.

Because of the giant drop, the LEAP premiums are very reasonable. I am suggesting we take advantage of the los premiums and the potential for a share price recovery. I am recommending both the 2019 and 2020 strikes. This way we can take some gains in late 2018 and let the longer term bet ride.

Update 12/17: Teva announced on Thursday they were cutting 14,000 workers from their 56,000-person workforce. They expect to reduce costs by $3 billion by the end of 2019, with $1.5 billion in cost reductions in 2018. The company also suspended its dividend for ordinary shares and will eliminate bonuses for 2017. They are planning on closing a "significant number" of R&D facilities, offices and other locations around the world. They are going to consolidate offices in the US from 7 locations to only one campus. Teva incurred a lot of debt when they purchased the Allergan generic pharmaceuticals business for $40 billion last year. That was poorly timed just as generic prices were crashing. The company is also reviewing its asset base in order to sell noncore assets. Apparently, the new CEO, Kare Schultz, is determined to turn the company around sooner rather than later. Shares are bouncing back from a 17-year low in November. Shares were upgraded by Morgan Stanley, Goldman Sachs and Credit Suisse on Friday.

Update 12/30/17: Teva said its BLA application for Fremanexumab as a preventive for migraine headaches had been granted a priority review designation by the FDA. There were two successful Phase III studies under the HALO program with patients with episodic migraine and chronic migraines.

Position 12/11/17:

Long Jan 2019 $20 LEAP Call @ $2.10, see portfolio graphic for stop loss.
Optional: Long Jan 2020 $20 LEAP Call @ $3.70, see portfolio graphic for stop loss.



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