Editors Note:

The Fed raised rates but market reacted to a hike in expectations. The Fed changed their economic outlook significantly and the odds of a fourth rate hike in 2018 also increased significantly. The market was expecting some hawkish comments but the statement was worse than expected.

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

No Changes

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

Full updates on all plays on Wednesday and Saturday. Only closed plays are updated on other days.

BULLISH Play Updates

ABBV - AbbVie - Company Profile


No specific news and shares declined with the market. I raised the stop loss.

Original Trade Description: June 9th

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.

ABBV reported Q1 earnings of $1.87 compared to estimates for $1.79. Revenue was $7.93 billion, beating estimates for $7.60 billion. Humira, Imbruvica, Lupron, Creon, Synagis, AndroGeol, Duodopa and Sevoflurane sales all came in above expectations. The company raised guidance from $7.33-$7.43 to $7.66-$7.76.

Next earnings are July 26th.

The company's many new 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.

AbbVie's drug Humira is expected to sell more than $20 billion in 2018 after a $18 billion revenue in 2017. The FDA has 10 FDA approved indications giving it a massive patient base. This is just one of AbbVie's billion dollar blockbuster drugs. 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.

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.

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.

AbbVie recently announced a deal with Biogen/Samsung to prevent the company from competing with a biosimilar drug to Humira until 2023. Biogen will be able to begin marketinf their similar Bioepis drug in Europe at the end of 2018 but is restricted from marketing in the U.S. until 2023. This is similar to a prior agreement with Amgen. Humira had $18.43 billion in sales in 2017 and accounted for two-thirds of Abbvie revenue. Abbvie has plenty of blockbuster drugs in the pipeline to replace the Humira revenue by 2023.

Last week AbbVie conducted a Dutch auction to buyback $7.5 billion in shares. The company handling the auction misquoted the buy price at $105 before the open but that was later changed to $103 and traders were very upset. Shares declined as those not accepted to be sold in the auction were dumped on the market. This had nothing to do with stock fundamentals and the headlines have faded.

Shares closed at a post auction high on Friday and should continue moving higher because of their outstanding guidance and strong drug pipeline.

Position 6/11/18:
Long Aug $105 Call @ $2.21, see portfolio graphic for stop loss.

COST - Costco - Company Profile


No specific news.

Original Trade Description: June 2nd

Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses. It offers branded and private-label products in a range of merchandise categories. The company provides dry and packaged foods, and groceries; snack foods, candies, alcoholic and nonalcoholic beverages, and cleaning supplies; appliances, electronics, health and beauty aids, hardware, and garden and patio products; meat, bakery, deli, and produces; and apparel and small appliances. It also operates gas stations, pharmacies, optical dispensing centers, food courts, and hearing-aid centers; and engages in the travel business. In addition, the company provides gold star individual and business membership services. As of September 3, 2017, it operated 741 membership warehouses, including 514 warehouses in the United States, Washington, District of Columbia, and Puerto Rico, 97 in Canada, 37 in Mexico, 28 in the United Kingdom, 26 in Japan, 13 in Korea, 13 in Taiwan, 9 in Australia, 2 in Spain, 1 in Iceland, and 1 in France. Further, the company sells its products through online. Company description from FinViz.com.

Costco reported earnings of $1.70 and beat estimates for $1.59. Revenue of $31.62 billion rose 12% but missed estimates for $31.90 billion. Same store sales rose 10% overall and 9.7% in the USA. Analysts were expecting 7.9%. E-commerce sales rose 37%. Shares fell -$4 at the open before rebounding to close with the loss of $1. How can anyone not like this report? Shares should have spiked over $200 to a new high. Revenue rose 12%, same store sales up 10%, e-commerce up 37%. What is wrong with this picture? Analysts were simply being overly optimistic and the shares suffered. Buy the dip.

Next earnings August 30th.

Option premiums are expensive and this should be a combination position. There is strong support at $190 and $185. If the stock suddenly fell to below $180 that would be a great entry point on a stock purchase but I doubt it will happen. I am using the September options to benefit from premium support ahead of the August earnings.

Update 6/9: Costco reported May sales and they were outstanding. The news lifted shares to a new high. May sales were $11.02 billion, up 14.1%. E-Commerce sales rose 34.4%. YTD sales for 2018 were $103.26 billion, up 12.1% from the year ago period. U.S. same store sales were up 8.7% for May with total company same store sales up 8.0%.

Position 6/4/18:
Long Sep $200 call @ $6.55, see portfolio graphic for stop loss.
Optional: Short Sep $180 put @ $1.93, see portfolio graphic for stop loss.
Net debit $4.60.

FFIV - F4 Networks - Company Profile


No specific news. Shares closed at a new high.

Original Trade Description: May 26th

F5 Networks, Inc. develops, markets, and sells application delivery networking products that optimize the security, performance, and availability of network applications, servers, and storage systems. The company's primary application delivery technology is Traffic Management Operating System (TMOS) that enable company's products to intercept, inspect, and act on the contents of traffic from virtually each type of Internet Protocol-enabled application. It offers Local Traffic Manager, which provides intelligent load-balancing, traffic management, and application health checking; BIG-IP DNS that automatically directs users to the closest or best-performing physical, virtual, or cloud environment; Advanced Firewall Manager, a network firewall; and Application Security Manager, an Web application firewall that provides comprehensive, proactive, and application-layer protection against generalized and targeted attacks. The company also provides Access Policy Manager, which provides secure, granular, and context-aware access to networks and applications; Carrier-Grade Network Address Translation, which offers a set of tools that enables service providers to migrate to IPv6 while continuing to support and interoperate with existing IPv4 devices and content; and Policy Enforcement Manager that offers traffic classification capabilities to identify the specific applications and services to service providers, as well as Link Controller. In addition, it offers cloud-based and other subscription services; BIG-IP appliances; VIPRION chassis-based systems; BIG-IP Virtual Edition software platform; and management and orchestration software platform. Company description from FinViz.com.

F5 reported earnings of $2.31 that rose 18% compared to estimates for $2.26 and prior guidance of $2.24-$2.27. Revenue rose 2.9% to $533.3 million and beat estimates for $530 million. They have more than $1 billion in cash and only $328.4 million in debt.

For Q2 they guided for revenue of $535-$545 million and analysts were expecting $536 million. They guided for earnings of $2.36-$2.39 and analysts were expecting $2.26.

Earnings July 25th.

There are no August options. We either have to go with July or October and the long ones are too expensive. The Nasdaq is either going to breakout next week or roll over. If it breaks out we could see a decent run into Q2 earnings. That would lift FFIV and give us a gain before the June options expire and premiums begin to fade on July.

Position 5/29:
Long July $180 call @ $3.95, see portfolio graphic for stop loss.

MTCH - Match Group - Company Profile


No specific news. Shares holding at the post crash high despite the Nasdaq decline. Tuesday's rebound did not sell off.

Original Trade Description: May 9th

Match Group, Inc. provides dating products. It operates a portfolio of brands, including Tinder, Match, PlentyOfFish, Meetic, OkCupid, OurTime, and Pairs. Match Group, Inc. offers its dating products through its Websites and applications in 42 languages approximately in 190 countries. The company was incorporated in 2009 and is headquartered in Dallas, Texas. Match Group, Inc. is a subsidiary of IAC/InterActiveCorp. Company description from FinViz.com.

Match reported earnings on Tuesday of 33 cents that easily beat estimates for 19 cents. Revenue rose 36% to $407.4 million and beat estimates of $386 million. Tinder, their leading revenue generator, added 368,000 paying members beating estimates for 355,000. The CEO said the new Facebook dating service should have no impact on Match because Tinder was the driving force behind their earnings and Facebook has no equivalent application. Match is entrenched and has a loyal following.

The CEO reiterated those comments on Wednesday. Bank of America reiterated a buy rating with a $46 price target.

Match crashed $13 when Facebook made their announcement a week ago. I believe the worst is over since the stock has not decline any further in a week. The close today was a post crash high.

Earnings August 7th.

Position 5/10/18:
Long September $40 call @ $3.70, see portfolio graphic for stop loss.

BEARISH Play Updates (Alpha by Symbol)

No Current Puts

If you like the trade setups you have been receiving and you are on a free trial then now is the time to subscribe. Don't wait until you miss a newsletter to decide you want to take the plunge.

subscribe now