Bought to close VIAC 07/24/2020 24.0 Diagonal Calls / Sold 07/31/2020 24.0 Calls @ 0.38 Credit

Navigating The Tech Bubble & Living To Tell About It

If you have been around the markets for any length of time, you can quickly spot the “pigeons at the poker table.” They are the ones that rationalize why prices can only rise, why “this time is different,” and focus only on the bullish supports.

#MacroView: Navigating The Tech Bubble & Living To Tell About It.

Bought to close VIAC 07/24/2020 26.0 Diagonal Calls @ 0.01.
Sold these Monday @ 0.44 against long Calls expiring in September

Sold SQQQ 07/21/2020 8.50 Covered Calls @ 0.10

Bought to close VXX 07/24/2020 28.50 Puts @ 0.01. Sold these on 7/20 @ 0.36 and again @ 0.63.

Started a new position selling some VXX 07/31/2020 28.0 Puts @ 0.41

The big boys finally get hit – Tech Giants Apple, Amazon, Microsoft, Tesla, Google Tumble

https://www.finviz.com/map.ashx?t=sec

Bought to Open 1 VXX Oct 16 2020 70 Call at $1.24
Sold to Open 1 VXX Jul 31 2020 32 Call at $1.36
for a Net Credit at $0.12
Pushing my (hopefully free) long position out closer to the election

https://www.zerohedge.com/markets/volatility-more-number-its-everything

Textbook Volatility Defined
Volatility is a measure of the historical dispersion of returns around a mean. The greater the dispersion, the higher the volatility, and ultimately the range of potential outcomes.

Volatility is typically quoted as +/- 1 standard deviation. For instance, 14% annualized volatility means, with 68% certainty, we should expect annualized returns to be +/- 14%. The volatility formula describes a normal bell-shaped curve in which price changes should be contained.

Normal implies there are equal odds the market falls 1% or rises 1% versus the average change. The graph below depicts a bell-shaped curve. The diagram also highlights standard deviations and the percentage of data that falls within each deviation.

Normal Is Not Reality

The assumption of a normally distributed bell curve is at the heart of finance. Embedded in that assumption is the idea that market participants are rational and markets efficient. It drives risk management, option pricing, and many economic and market theories. The problem with such analysis is that the assumption is flat out wrong.

In a normal shaped curve, the S&P 500 should never move by more than five standard deviations up or down. By “never,” we mean once every 3.5 million trading days (approximately 14,000 years). Since 1970 there have been 34 such days. In March of 2020 alone, there were 7!

Summary
When investor confidence is high, liquidity is high, and volatility is typically low. Plenty of buyers and sellers willing to trade help assure orderly markets. However, when potential buyers become concerned about the risk of loss, liquidity fades. Buyers step away, sellers will take almost any price to protect against even steeper declines, and prices become more volatile. The suddenness of increased volatility and the false assumption of normally distributed prices leads to statistically impossible drawdowns.

Currently, volatility is two times pre-COVID levels. While sharply lower from March and April, liquidity remains problematic.

Volatility reminds us that the market structure is not stable. As a result, markets are more susceptible to sharp price changes. While most markets have been rising in recent months, the liquidity situation argues that bad news or a change in sentiment could result in substantial and nearly instantaneous losses.

Liquidity is poor, complacency is high, trade with caution.

Source: Bloomberg

Finally, just saying…

If you are not in Tech this market sucks
Change in market cap year-to-date

Amazon +$561 billion
Apple +$365 billion
Microsoft +$335 billion
Tesla +$203 billion
Google +$112 billion

JPMorgan -$138 billion
Wells Fargo -$125 billion
Bank of America -$115 billion
Exxon Mobil -$111 billion
Berkshire Hathaway -$90 billion

This has sent Bloomberg’s Fear-Greed indicator to its highest ever – above March 2000’s previous peak – and as @C_Barraud notes that these highs contrasted with a plunge in March that produced record weekly lows, surpassing those in December 2018 and May 2000.

Bought to Close VXX Jul 17 2020 31.5 Puts / Sold to Open VXX Jul 24 2020 30 Puts @ Net Credit of $0.08 plus a 1.50 drop on the short strike.

Bought to Close VXX Jul 17 2020 31.0 Puts / Sold to Open VXX Jul 24 2020 29 Puts @ Net Credit of $0.07 plus a 2.00 drop on the short strike.

My 30.50 and 30.0 Puts for today should expire shortly

Bought to lose VIAC 07/17/2020 20.0 Covered Calls / Sold VIAC 08/07/2020 20.0 Covered Calls @ 0.25 Credit.
This will keep me in this low p/e highish dividend stock through earnings on the 6th of August.

Also Bought to close VIAC 07/17/2020 25.0 Diagonal calls / Sold VIAC 07/24/2020 26.0 Calls @ 0.24 Credit plus an extra point on the strike price.

Bought to Open VXX Jan 15 2021 15 Puts / Sold to Open VXX Jul 24 2020 30 Puts @ Net Credit of $0.12

Bought to close VXX 07/17/2020 35.0 Calls @ 0.01.
Sold this on 7/13 @ 1.02 AND AGAIN @ 2.08 as part of two diagonal call spreads.

This leaves me with 2 more zero-cost long VXX Calls.

Letting my 36,37,38,41 and 42 Calls expire

With the stock at 24.89 I bought VIAC 07/17/2020 24.0 Calls / Sold VIAC 07/24/2020 24.0 Calls @ 0.45 Credit

Bought to close 1 VXX 07/17/2020 35.5 Call @ 0.01.
Sold this on 7/13 @ 1.05 as part of a diagonal spread.
I have another zero cost long for any Black swan events in the next month

Bought to Open VXX Jan 15 2021 12.0 Puts / Sold to Open VXX Jul 24 2020 29.0 Puts @ Net Credit of $0.12

Bought to Close WBA 07/17/2020 40.50 Call / Sold WBA 07/24/2020 41.00 Call @ 0.05 Credit plus 0.50 higher strike.
Bought to Close WBA 07/17/2020 41.00 Call / Sold WBA 07/24/2020 41.50 Call @ 0.27 Credit plus 0.50 higher strike.
My average stock cost is 39.73 with a nice dividend

I’m not ready to give up this dividend stock just yet.
Bought to close CINF 07/17/2020 60.0 Covered Calls / Sold 1 CINF 08/21/2020 60.0 Covered Calls @ 0.79 Credit.
A whole bunch of downside protection while I wait for another dividend.

Also rolled the short side of a CINF 70.0 Calendar spread.
Bought to close CINF 07/17/2020 70.0 Call / Sold CINF 08/21/2020 70.0 Call @ 2.21 Credit.
Since I only paid 2.17 for the long September 70 position, this spread is already zero cost.

I am also short an August 50.0 Put that is rapidly approaching minimum value.

SPY opened above yesterday’s entire trading range, so I decided to roll early instead of waiting for a typical late Friday move (probably higher)
Bought to close 1 SPY 07/17/2020 310.0 Call / Sold 07/24/2020 311.0 Call @ 0.11 Credit plus a point higher on the strike.
Bought to close 1 SPY 07/17/2020 313.0 Call / Sold 07/27/2020 315.0 Call @ 0.12 Credit plus two points higher on the strike.

SPY was at 321.56 and 321.59 for the two rolls

Bought to close WFC Jul 17 2020 28.5 Call at $0.01. Then sold WFC Jul 24 2020 28.5 Call at $0.14.

Also sold :
WFC Jul 24 2020 27.5 Calls at $0.23 against long August Calls.
WFC Jul 24 2020 28.0 Calls at $0.18 against long August Calls.

The stock has made back all it lost after it’s earnings report.
WFC is 25.97

Bought to close AAL 07/17/2020 13.50 Covered Calls / Sold AAL 07/24/2020 13.50 Covered Call @ 0.57 Credit.
Quite a nice premiums for just 1 week.

Sold VXX o7/17/2020 31.0 Put / Bought 01/15/2021 11.0 Put @ 0.14 Credit.

VXX hit a low of 31.03 for the month July on 7/02. I’m guessing the short expires.

Bought to close 1 SPY 07/15/2020 308.0 Call / Sold 07/24/2020 309.0 Call @ 0.38 Credit plus a point higher on the strike.
Bought to close 1 SPY 07/15/2020 309.0 Call / Sold 07/22/2020 310.0 Call @ 0.02 Credit plus a point higher on the strike.

Someday …. someday the market will actually drop for more than a day.

SPY was at 322.04 and 321.73 for the two rolls (pretty close to the highs for July so far.)

I’m not ready to give up this dividend stock just yet
Bought to close 1 CINF 07/17/2020 55.0 Covered Call / Sold 1 CINF 08/21/2020 55.0 Covered Call @ 0.65 Credit.
A whole bunch of downside protection while I wait for another dividend.

VXX is down almost 3 points from the peak of 36.01
Selling calls in the morning, and Puts in the afternoon
Sold VXX 07/17/2020 31.50 Puts @ 0.39 adding to my position.
The puts don’t scare me as much as the calls.

I still have Long Puts with nothing written against them for this week, but fully paid for with previous writes.

Long Put +3 Jun 18 2021 9.00

Long Put +2 Jan 21 2022 8.00
Long Put +2 Jan 21 2022 7.00
Long Put +2 Jan 21 2022 6.00
Long Put +2 Jan 21 2022 5.00

Long Put +2 Jun 17 2022 8.00

Sometime after the close I got off a risky diagonal on an open order (pressing my luck on this one).
Bought 1 VXX Sep 18 2020 65.0 Call / Sold 1 VXX 07/17/2020 35.0 Call @ 0.25 Credit.
I have no idea how this turns out but the market goes up 4 days out of 5 recently so the short should expire Friday.
If not, it’s an easy rollup.

This also counterbalances my SPY bearish positions

Sold 1 VXX 07/17/2020 38.0 Call / Bought 1 VXX 09/18/2020 80.0 Call @ 0.12 Credit.
If the market doesn’t implode this week I should have another free September long call.

It’s up over 8%

How much would it be UP if the market was actually down instead of notching all time highs on the QQQ and big rallies in the other indexes (DJIA up 300+).

TSLA is up over 13% this morning… up almost 80% since the start of July!
Almost made it to 1800 today.
$2000 here we come

Will Meade @realwillmeade Jul 11
Yesterday at 10:15AM
A trader-hedge fund purchased 13,600 $VIX 8/19 $90 calls for 35 cents
The VIX is currently 27
wow

Sold VIAC 07/17/2020 25.0 Calls @ 0.20 with the stock at 23.30

Sold SLB 07/17/2020 19.50 Covered Calls @ 0.09 with the stock at 17.70

Second-quarter earnings season starts this week with the quarterly kick-off ritual of reports from the major investment and money center banks.

With the arrival of each bank earnings season comes opportunity with either the Direxion Daily Financial Bull 3X Shares (NYSE:FAS) and/or the Direxion Daily Financial Bear 3X Shares (NYSE:FAZ).
The bullish FAS tries to deliver triple the daily returns of the Russell 1000® Financial Services Index while the bearish FAZ, which is higher by 9.16% over the past month, attempts to deliver triple the daily inverse performance of that benchmark.

Banks faced an array of headwinds in the first half of 2020, including declining interest rates, rising loan loss reserves and the mandate from the Federal Reserve that buybacks be scuttled and dividend hikes be put on hold.
“Goldman analyst Richard Ramsden is more bearish, projecting earnings off 69% compared with last year. On the plus side, with the exception of Wells Fargo (NYSE:WFC), which he believes will report a quarterly loss, banks are apt to avoid dividend cuts,” reports Barron’s. “Still, banks will be hurt by higher reserves, which he expects to hit $32 billion, 27% over last quarter.”
Reading through the tea leaves of that assessment, it would appear that the bearish FAZ has a chance to shine this earnings season. Potentially bolstering the case for FAZ is that bank stocks, though still inexpensive relative to the broader market, aren’t quite the value plays they were 12 months ago. “Even with the recent increase in stock prices, the median North American financial sector stock still trades at an 11% discount to its fair value estimate but below a 30% discount a quarter ago,” according to Morningstar. “With our assessment that many financial sector stocks are less undervalued than they were a quarter ago, investors should be much more discerning of which stocks they choose and cognizant of the risks they’re taking.”

Something else to consider when it comes to the FAS/FAZ decision is that the Russell 1000 Financial Services Index isn’t a bank-specific benchmark. It includes insurance providers and asset managers, among others and some of those companies aren’t all that inexpensive, either.
“Outside of banks, we see fewer bargains in the financial sector. The investment-management firms we considered undervalued at the end of the first quarter are mostly fairly valued after the run in the stock market,” notes Morningstar. “The median North American insurer we cover also trades at around an only 8% discount to its fair value estimate, which is a relatively small margin of safety, given the insurance industry’s exposure to interest rates, asset prices, and tail risk of large insurance claims from the pandemic.”

Partially restoring my diagonal puts that expired on Friday on the open
Sold 1 VXX 07/17/2020 30.50 Put @ 0.49
Sold VXX 07/17/2020 30.0 Puts @ 0.32
VXX opened at 31.81

Sold WFC 07/17/2020 29.0 Diagonal Calls @ 0.24.
I also have a covered call position at the same strike.
Also
Sold WFC 07/17/2020 24.0 Puts / Bought 08/21/2020 20.0 Puts @ 0.20 Net Credit
Stock at 25.32 w/ Ann. Div. Yield $2.0400 / 8.01% and the 52-week low at 22.00

Sold ADS 07/17/2020 47.0 Covered Calls @ 0.40
Also
Sold 1 ADS 07/17/2020 45.0 Call / Bought 1 ADS 09/21/2020 70.0 Call @ 0.25 Net Credit.
Stock at 41.39

Company Period Amount Yield Ex-Dividend Date Record Date Payable Date
PKI PerkinElmer quarterly $0.07 0.31% 7/16/2020 7/17/2020 8/7/2020
ZTS Zoetis quarterly $0.20 0.61% 7/16/2020 7/17/2020 9/1/2020
IEX IDEX quarterly $0.50 1.29% 7/15/2020 7/16/2020 7/31/2020
ACN Accenture quarterly $0.80 1.59% 7/15/2020 7/16/2020 8/14/2020
ABT Abbott Laboratories quarterly $0.36 1.61% 7/14/2020 7/15/2020 8/17/2020
ORCL Oracle quarterly $0.24 1.90% 7/14/2020 7/15/2020 7/28/2020
CL Colgate-Palmolive quarterly $0.44 2.41% 7/17/2020 7/20/2020 8/14/2020
CPB Campbell Soup quarterly $0.35 2.87% 7/14/2020 7/15/2020 8/3/2020
CAT Caterpillar quarterly $1.03 3.08% 7/17/2020 7/20/2020 8/20/2020
EOG EOG Resources quarterly $0.38 3.10% 7/16/2020 7/17/2020 7/31/2020
COP ConocoPhillips quarterly $0.42 4.11% 7/17/2020 7/20/2020 9/1/2020
PNC PNC Financial Services Group quarterly $1.15 4.37% 7/16/2020 7/17/2020 8/5/2020
ABBV AbbVie quarterly $1.18 4.90% 7/14/2020 7/15/2020 8/14/2020
BEN Franklin Resources quarterly $0.27 5.15% 7/14/2020 7/15/2020 7/27/2020
SJR.B Shaw Communications monthly $0.10 5.26% 7/14/2020 7/30/2020 7/30/2020

This Week’s Earnings Announcements
Monday, July 13:
PepsiCo, Inc. (PEP),

Tuesday, July 14:
Citigroup Inc (C), Delta Air Lines, Inc. (DAL), Fastenal (FAST), First Republic Bank (FRC), JPMorgan Chase & Co. (JPM), Wells Fargo & Co (WFC),

Wednesday, July 15:
ASML Holding NV (ASML), Bank of New York Mellon Corp (BK), Goldman Sachs Group Inc (GS), IBM (IBM), Infosys Ltd (INFY), Omnicom Group Inc. (OMC), PNC Financial Services Group Inc (PNC), Progressive Corp (PGR), U.S. Bancorp (USB), UnitedHealth Group Inc (UNH), Wipro Limited (WIT),

Thursday, July 16:
Abbott Laboratories (ABT), Bank of America Corp (BAC), Danaher Co. (DHR), Domino’s Pizza, Inc. (DPZ), Dover Corp (DOV), Honeywell International Inc. (HON), J B Hunt Transport Services Inc (JBHT), Johnson & Johnson (JNJ), Morgan Stanley (MS), Netflix, Inc. (NFLX), PPG Industries, Inc. (PPG), SunTrust Banks, Inc. (STI), Taiwan Semiconductor Mfg. Co. Ltd. (TSM), Truist Financial Corporation (TFC),

Friday, July 17:
BlackRock, Inc. (BLK), Citizens Financial Group Inc (CFG), HDFC Bank Limited (HDB), Kansas City Southern (KSU), NVR, Inc. (NVR), State Street Corp (STT), Telefonaktiebolaget LM Ericsson (ERIC),

Bought to close KSS 07/10/2020 21.0 Diagonal Calls / Sold KSS 07/17/2020 22.50 Diagonal Calls @ 0.32 Credit plus an extra 1.50 on the strike price.

KSS is @ 21.12 five minutes before the close

Filled on orders to sell VXX 07/17/2020 31.5 Puts @ 0.88 and VXX 07/17/2020 31.0 Puts @ 0.66.

That was my signal to give up waiting and roll my last SPY Call for today.
Bought to close 1 SPY 07/10/2020 304.0 Call / Sold 1 SPY 07/20/2020 305.0 Call @ 0.14 Credit plus another point higher on the strike.
SPY @ 317.34 when I rolled.

Bought to close KSS 07/10/2020 20.50 Covered Calls / Sold KSS 07/17/2020 21.0 Covered Calls / 0.53 Credit plus an extra 0.50 on the strike price.

KSS is @ 20.88

http://charleshughsmith.blogspot.com/2020/07/you-are-now-leaving-fantasyland-losses.html

“As the inverted pyramid collapses, the effects will be non-linear: a 10% decline may trigger dominoes that end up generating an 90% decline in “value” and “wealth” because the collapse of collateral to a non-fantasy valuation will implode all the phantom valuations piled on steadily more fragile and fantastic layers of phantom “capital.”
The fantasy of the Neofeudal Aristocracy is that the losses can be painlessly transferred to the debt-serfs and taxpaying peasantry. Mommy and Daddy (Treasury and Fed) will load future generations of debt-serfs and taxpaying peasantry with the losses and the political-financial Nobility will have their fortunes preserved. Gee, thanks, Mommy and Daddy! You’re swell!
The Neofeudal Aristocracy overlooks one terribly inconvenient fact: the debt-serfs and peasantry own next to nothing. The non-linear collapse of phantom capital will have asymmetric consequences: all the “assets” most likely to go to zero are owned not by the peasantry but by the Neofeudal Aristocracy.”

Bought to close 07/10/2020 31.50 Puts @ 0.01.

Rolled the 07/02/2020 33.0 Puts down to these at a 0.26 Credit last Friday.
They were written against VXX 2021 and 2022 long puts.

I also have 29, 30, and 30.50 short Puts and 38 and 40 short Calls expiring today.

Bought to close 1 AAL 07/10/2020 13.50 Covered Call / Sold 1 AAL 07/17/2020 Covered Call @ 0.17 Credit with the stock at 11.35

Bought to close WBA 07/10/2020 42.50 Covered Call / Sold WBA 07/17/2020 41.0 Covered Call @ 0.32 Credit
With the stock around 39.0 after the earnings drop I’m expecting this one won’t be threatened next week.

However, my average stock cost is below 40, so whatever 🙂

Sold 1 VXX Jul 17 2020 41.00 Call @ 0.57.
Waiting for this week’s calls @ 38 and 40 to expire before writing more.

Bought 100 WBA / Sold 1 WBA 07/17/2020 40.50 Covered Call @ 38.47 Net Debit
Earning were disappointing but revenues were up Y/Y and they raised the dividend by a penny per quarter

Sold VXX 07/10/2020 40.0 Calls @ 0.21
Sold 1 VXX 07/10/2020 38.0 Call @ 0.38.

Looking to balance out my short put exposure.
VXX at 33.38

Sold KSS 07/10/2020 22.0 Covered Calls @ 0.46
Sold SLB 07/10/2020 20.0 Covered Calls @ 0.07

Sold 1 ADS 07/10/2020 50.0 Covered Call @ 0.40
Sold 1 AAL 07/10/2020 13.50 Covered Call @ 0.34

With less than an hour until expiration I decided not to chance riding this out to the bitter end –
Bought to close 07/02/2020 32.0 Puts / Sold 07/10/2020 29.0 Puts @ 0.05 Credit plus 3.00 lower strike for next week.

All my puts are rolled now and my 42,44,46 short calls will expire.

Ready for the next pullback in the market now.

Bought to close VXX 07/02/2020 32.50 Puts / Sold VXX 07/10/2020 30.50 Puts @ 0.04 Credit plus 2.00 better strike.
Stock is 31.65