What's new
Fantasy Football - Footballguys Forums

This is a sample guest message. Register a free account today to become a member! Once signed in, you'll be able to participate on this site by adding your own topics and posts, as well as connect with other members through your own private inbox!

Stock Thread (28 Viewers)

Anyone have extra insights into the risk for AMZN being broken up? I guess I assumed that's why it dropped 30% from highs when SP500 dropped 12%.... that and everyone and fund owns it so the exit was pretty crowded.
I don’t have a subscription so I couldn’t read that. I think I’ve heard/read that Bezos wouldn’t consider a break up.

I think the drop (about 20% now) was tied to the tech stocks getting hit harder because they had run up the most and you said the top ones are the largest companies market cap wise so when people run there’s more in them to run. 

 
I promised myself I wasn't going to post in here anymore.  But, imo, unless you have a tremendous number of shares at a significantly lower cost basis than current share price - Writing Covered Calls is a bad idea.  It wasn't always this way, but that's the way it is today.
Writing covered calls works very well unless you are in a market with exceptional returns.  I like writing calls on positions 10% out of the money with a call date approximately 6 months away.

Curious as to why you don't like covered calls right now.

 
Amazon Web Services is a massive company by itself - the largest Cloud company by far that just grew by 45% - and this is not some measly 45% of a small number like Microsoft with Azure or Google Cloud - but a 45% growth rate on a larger starting point than the other competitors. They are killing it.

It may be better to remove that yoke of the other parts of AMZN from this growth engine - the shopping, music, devices etc. to fully get it's proper price. The margins there are much higher. I'd imagine a lot of Wall Street is telling him that an AWS stock would blow up.

On Wednesday, Brent Thill, an analyst at Jefferies wrote in a note to clients that, "AWS Cloud momentum was evident with 3+ days still left in the conference."

Thill, who recommends buying Amazon shares, estimates that based on potential 2022 revenue of $71 billion, AWS could be worth $350 billion on its own, a market value that today is higher than all but eight U.S. companies, including Amazon. Salesforce currently has a market capitalization of $107 billion after a 40 percent rally this year.

 
Writing covered calls works very well unless you are in a market with exceptional returns.  I like writing calls on positions 10% out of the money with a call date approximately 6 months away.

Curious as to why you don't like covered calls right now.
The answer is basically the risk is just not at all worth the reward anymore. But let’s take a look at a real world example.

You guys are talking about AT&T. So that will be the example used.

At the time of writing, $T is currently trading at $30.00. The June $33 Calls are trading for $.70.

500 Shares of $T would cost $15000. (500 shares is the amount I would recommend for a $1m portfolio – 1-2% of the value per a single stock position). The income you would receive on your calls would be $.70 x 500= $350.00. You will also receive 2 dividends over the next 6 months (likely to be $1.00 per share so that’s another $500 of “income”. The cost of those shares is essentially $14150.

Since it’s impossible for me to know the future share price of $T 6 minutes from now much less 6 months from now I’ll put it at a range- $20-$40. And that’s where we need to see if taking this position is worth it.

(1) $T= $40. At $40, the shares have been called away at $33. The position did make $1.70 from the calling writing + dividends + $3.00 of share value increase. Total profit is $4.70 x 500=$2350. ROI= 15.6%. Without the CC the profit would have been $11 per share ($10 stock rise + $1.00 dividend)- $11 x 500= $5500. ROI= 36.6%. Verdict. CC worse than Long Stock.

(2) $T= $35. At $35, the shares have been called away at $33. The position did make $1.70 from the call writing + dividends + $3.00 of share value increase. Total profit is $4.70 x 500=$2350. ROI= 15.6%. Without the CC the profit would have been $6 per share- $6 x 500= $3000. ROI= 20%. Verdict. CC worse than Long Stock.

(3) At $30, the shares are still held. The position did make $1.70 from the call writing + dividends. Total profit is $1.70 x 500=$850. ROI= 5.6%. Without the CC the profit would have been $1 per share- $1 x 500= $500. ROI= 3.3%. Verdict. CC better than Long Stock but not by any significant margin.

(4) At $25 ,the shares are still held. The position did make $1.70 from the call writing + dividends. Total loss is $-3.30 x 500= $-1650. ROI= -11%. Without the CC the loss would have been $-4.00 per share- $-4 x 500= $-2000. ROI= -13%. Verdict. CC better than Long Stock.

(5) At $20 ,the shares are still held. The position did make $1.70 from the calling writing + dividends. Total loss is $-8.30 x 500= $-4150. ROI= -27.6%. Without the CC the loss would have been $-9.00 per share- $-9 x 500= $2500. ROI= -30%. Verdict. CC better than Long Stock.

So CC Writing is only better when the stock is at break even or underwater. And the question I’m going to ask my self is: why do I want to take a “complicated” position in $T when the best outcomes for that position vs just long is for it to be a loser?

In addition taking the position means that one is now committed to not adhering to any type of trend identifying discipline/stops?

If you’re looking at the position from the view of ((3) from above- $T is flat for 6 months which provides an Annual Return of 11%)? Then, imo, you are looking at the position incorrectly as a low odds chance of occurring, and far more likely that (4) or (5) would be the end result vs. flat. Of course $T could range between $27.50-$32.50 which is the sweet spot of this trade. But again, I’m going to ask myself, “in THIS market is that a high odds play and the best use of funds?” And if I truly believe this is the range, then is the CC the best options strategy to employ? (hint: Answer = No)

Easy to remember Risk v. Reward is Risk $1.00 to make $2.00. In the (3) v (5) scenario you are risking $8.30 to make $1.70. That’s the coach who will go for it on 4th and 15 from their own 20 yard line up by 2pts with 1 minute to play.

People are looking for ways to mitigate losses in a volatile market, and see CCs as a potential answer.  CCs are great if you own lots of shares (LOTS) at a very low cost basis and can write deep OOM Calls.  Have 1M shares at a cost basis in the single digits, and we can write April 37's for a $nickle so you can have some spending money for a couple of months and manage the position without fear...go for it.  But in general CCs are easy to apply and what happens often is you will wind up worse off than not owning the position at all or owning the position naked.

 
Last edited by a moderator:
The answer is basically the risk is just not at all worth the reward anymore. But let’s take a look at a real world example.

You guys are talking about AT&T. So that will be the example used.

At the time of writing, $T is currently trading at $30.00. The June $33 Calls are trading for $.70.

500 Shares of $T would cost $15000. (500 shares is the amount I would recommend for a $1m portfolio – 1-2% of the value per a single stock position). The income you would receive on your calls would be $.70 x 500= $350.00. You will also receive 2 dividends over the next 6 months (likely to be $1.00 per share so that’s another $500 of “income”. The cost of those shares is essentially $14150.

Since it’s impossible for me to know the future share price of $T 6 minutes from now much less 6 months from now I’ll put it at a range- $20-$40. And that’s where we need to see if taking this position is worth it.

(1) $T= $40. At $40, the shares have been called away at $33. The position did make $1.70 from the calling writing + dividends + $3.00 of share value increase. Total profit is $4.70 x 500=$2350. ROI= 15.6%. Without the CC the profit would have been $11 per share ($10 stock rise + $1.00 dividend)- $11 x 500= $5500. ROI= 36.6%. Verdict. CC worse than Long Stock.

(2) $T= $35. At $35, the shares have been called away at $33. The position did make $1.70 from the call writing + dividends + $3.00 of share value increase. Total profit is $4.70 x 500=$2350. ROI= 15.6%. Without the CC the profit would have been $6 per share- $6 x 500= $3000. ROI= 20%. Verdict. CC worse than Long Stock.

(3) At $30, the shares are still held. The position did make $1.70 from the call writing + dividends. Total profit is $1.70 x 500=$850. ROI= 5.6%. Without the CC the profit would have been $1 per share- $1 x 500= $500. ROI= 3.3%. Verdict. CC better than Long Stock but not by any significant margin.

(4) At $25 ,the shares are still held. The position did make $1.70 from the call writing + dividends. Total loss is $-3.30 x 500= $-1650. ROI= -11%. Without the CC the loss would have been $-4.00 per share- $-4 x 500= $-2000. ROI= -13%. Verdict. CC better than Long Stock.

(5) At $20 ,the shares are still held. The position did make $1.70 from the calling writing + dividends. Total loss is $-8.30 x 500= $-4150. ROI= -27.6%. Without the CC the loss would have been $-9.00 per share- $-9 x 500= $2500. ROI= -30%. Verdict. CC better than Long Stock.

So CC Writing is only better when the stock is at break even or underwater. And the question I’m going to ask my self is: why do I want to take a “complicated” position in $T when the best outcomes for that position vs just long is for it to be a loser?

In addition taking the position means that one is now committed to not adhering to any type of trend identifying discipline/stops?

If you’re looking at the position from the view of ((3) from above- $T is flat for 6 months which provides an Annual Return of 11%)? Then, imo, you are looking at the position incorrectly as a low odds chance of occurring, and far more likely that (4) or (5) would be the end result vs. flat. Of course $T could range between $27.50-$32.50 which is the sweet spot of this trade. But again, I’m going to ask myself, “in THIS market is that a high odds play and the best use of funds?” And if I truly believe this is the range, then is the CC the best options strategy to employ? (hint: Answer = No)

Easy to remember Risk v. Reward is Risk $1.00 to make $2.00. In the (3) v (5) scenario you are risking $8.30 to make $1.70. That’s the coach who will go for it on 4th and 15 from their own 20 yard line up by 2pts with 1 minute to play.

People are looking for ways to mitigate losses in a volatile market, and see CCs as a potential answer.  CCs are great if you own lots of shares (LOTS) at a very low cost basis and can write deep OOM Calls.  Have 1M shares at a cost basis in the single digits, and we can write April 37's for a $nickle so you can have some spending money for a couple of months and manage the position without fear...go for it.  But in general CCs are easy to apply and what happens often is you will wind up worse off than not owning the position at all or owning the position naked.
I would argue that T is a terrible example for covered calls since the premiums offered is minimal.  I agree it does not make sense to write covered calls on T.  Covered call writing going out 6 months for a strike price 10% above current market price is still enticing if given a decent premium.

Let's look at AAPL.

Current Price = $174.73

June $215 option gives you premium of $2.91.  If called away in 6 months your selling price is effectively $217.91 and you make 26% in 6 months along with dividends.  If not called away you continue to collect diviedend and keep the $2.91 premium (2.5% by itself).

The only way you lose is if AAPL closes above $218 in 6 months.  If that happens I will take my 26% return in 6 months and be happy.

 
I would argue that T is a terrible example for covered calls since the premiums offered is minimal.  I agree it does not make sense to write covered calls on T.  Covered call writing going out 6 months for a strike price 10% above current market price is still enticing if given a decent premium.

Let's look at AAPL.

Current Price = $174.73

June $215 option gives you premium of $2.91.  If called away in 6 months your selling price is effectively $217.91 and you make 26% in 6 months along with dividends.  If not called away you continue to collect diviedend and keep the $2.91 premium (2.5% by itself).

The only way you lose is if AAPL closes above $218 in 6 months.  If that happens I will take my 26% return in 6 months and be happy.
Or if AAPL is lower than $171.82 at expiration. I can't argue sneaking an extra 2.5% APY out of a LT hold though.

 
I would argue that T is a terrible example for covered calls since the premiums offered is minimal.  I agree it does not make sense to write covered calls on T.  Covered call writing going out 6 months for a strike price 10% above current market price is still enticing if given a decent premium.

Let's look at AAPL.

Current Price = $174.73

June $215 option gives you premium of $2.91.  If called away in 6 months your selling price is effectively $217.91 and you make 26% in 6 months along with dividends.  If not called away you continue to collect diviedend and keep the $2.91 premium (2.5% by itself).

The only way you lose is if AAPL closes above $218 in 6 months.  If that happens I will take my 26% return in 6 months and be happy.
$AAPL @ $175 and the June $215 Call isn't 10% distance.  But it doesn't matter.   I was responding to this post...no one mentioned $AAPL and CCs.

If T keeps ratcheting lower you can easily generate 6% a year by selling calls against your position. That with the dividend is 12%/year. The risk is, T temporarily pops and your shares are called away below your break even. So, always sell calls about 8-10% higher than the current stock price. I know not everyone wants to learn about options but covered calls are the most simple strategy in my mind.  This guy does an awesome job explaining covered calls and lays his poop out there for free,
Regardless.  If you are going to do CC on the June $215's for $2.91.  It's still a stupid trade imo.  Why?  

#1 - you are giving up unlimited potential upside on a $17,500 position for a measly $291.  Two Hundred and #### ing Ninety One Bucks.

#2 - If we assume $AAPL rises to over $215 by June and you are called out of your position for some % gain...you will need to pay taxes on that gain which will be more than the measly $291 bucks you got writing the CC.  Of course you could come back and say: "but this is in my $1M+ retirement account."  Sure.  Fine.  Ok.  See #1.

#3- Odds would favor that you could just put in an order at the same distance you would make from writing a $40 OOM Call and that it would get filled sometime in the next 6 months.  ie: $AAPL would trade $2.91 lower than it's current price sometime in the next 6 months.  Especially with the current trend of $AAPL.  Thus you would have the exact same cost basis AND unlimited upside potential AND without the risk of ST Capital Gains.  Trading Options should be all about giving you MORE OPTIONS not LESS!  CC should be done when you have LOTs of shares at a much lower cost basis and preferably with a stock that is rangebound where you can write just outside that range 

As I've come to understand- it's not my money you're going to lose and I'm always happy to be proven wrong.  If you believe in it go for it.  Because even if the coach who goes for it on 4th and 15 from his own 20 up by 2 with a minute to play and makes the first down and can kneel for the win...I still stay situationally it was a stupid decision.  I view this kind of nonsense trading in the same light.

 
$AAPL @ $175 and the June $215 Call isn't 10% distance.  But it doesn't matter.   I was responding to this post...no one mentioned $AAPL and CCs.

Regardless.  If you are going to do CC on the June $215's for $2.91.  It's still a stupid trade imo.  Why?  

#1 - you are giving up unlimited potential upside on a $17,500 position for a measly $291.  Two Hundred and #### ing Ninety One Bucks.

#2 - If we assume $AAPL rises to over $215 by June and you are called out of your position for some % gain...you will need to pay taxes on that gain which will be more than the measly $291 bucks you got writing the CC.  Of course you could come back and say: "but this is in my $1M+ retirement account."  Sure.  Fine.  Ok.  See #1.

#3- Odds would favor that you could just put in an order at the same distance you would make from writing a $40 OOM Call and that it would get filled sometime in the next 6 months.  ie: $AAPL would trade $2.91 lower than it's current price sometime in the next 6 months.  Especially with the current trend of $AAPL.  Thus you would have the exact same cost basis AND unlimited upside potential AND without the risk of ST Capital Gains.  Trading Options should be all about giving you MORE OPTIONS not LESS!  CC should be done when you have LOTs of shares at a much lower cost basis and preferably with a stock that is rangebound where you can write just outside that range 

As I've come to understand- it's not my money you're going to lose and I'm always happy to be proven wrong.  If you believe in it go for it.  Because even if the coach who goes for it on 4th and 15 from his own 20 up by 2 with a minute to play and makes the first down and can kneel for the win...I still stay situationally it was a stupid decision.  I view this kind of nonsense trading in the same light.
First off, I agree using covered calls when you have a large concentration with a low cost basis makes sense.  I have done this and even when I had to buy back the call to avoid it getting called I was okay.

Back to my example, I was talking about doing inside an IRA, so avoiding short term capital gains.  Also, typically when I do this I don't write the call on my entire position so I give myself some additional upside.  Perhaps buy 200 shares of AAPL and write a call on 100 shares.  

$291 is all relative, it is still 1.66% pop.  More importantly, if I am buying AAPL I am ok having to sell for a 52% annualized gain.  If it goes up more so be it I am happy with the trade. More likely is it expires unexercised and I write another call in June.

Appreciate your response and you bring up some good points.

 
Shucks, I don't know nothing about this investing and trading stuff. IMHO, covered calls (and all options) are not static plays like some propose; Just because you buy or sell an option you do not need to sit in it until expiration. Also, one can close or roll their options to maximize returns and minimize odds of losing the core shares. Last, one can buy calls higher then sold (a spread) if losing the "unlimited profit potential" is really a concern... this would lower your return from the pure short options, of course.

I'll make the following offer to one person here (keeping in mind I am not a T fan at all) :

Your hypothetical 100 long-only shares are purchased at an agreeable time today (12/7/18). I hypothetically buy 100 shares of T at a point I determine and may use any options to attempt to do so (like that dummy Warren Buffet does); Until 12/20/2019, Once long, I sell calls against my position as I choose; I close the calls, roll the calls; initiate new covered calls; spread the calls, receive the dividends. I'll post all my updates in this thread using actual mid-price of calls +/- $.02 against me to open/close. My commissions will be $1 per trade (more than I actually pay).

On closing of 12/20/2019, all options and shares are closed at market +/- $.02 from mid-price of close. if my hypothetical account IS NOT higher than long-only plus dividends, I will PayPal you $100. If my hypothetical account IS higher than you PayPal me $100. Anyone?

 
I would have thought the jobs report would have solidified the thought that the rate hikes would be paused, and we would stabalize a bit.

Guess not.

 
I would have thought the jobs report would have solidified the thought that the rate hikes would be paused, and we would stabalize a bit.

Guess not.
It’s just all over the place. I’ve seen 3%+ moves on one stock (in both directions) every day with no real news. It’s schizo. FOMO and crash worries at the same time.

 
It’s just all over the place. I’ve seen 3%+ moves on one stock (in both directions) every day with no real news. It’s schizo. FOMO and crash worries at the same time.
When I want to feel better I get out marshmallows for the Bitcoin dumpster fire.  It's all I have. 

 
When I want to feel better I get out marshmallows for the Bitcoin dumpster fire.  It's all I have. 
Lol. That never made sense to me. I saw the software companies and exchanges being winners. Maybe miners as well (as a percentage of transactions), but the coins made no sense to me. It’s gold or it's a store of value. Why? To me those are middle ware. They have to have some value based on miners getting paid to unearth them, but the whole calculations as if Bitcoin took over the dollar and US economy as justification for the prices was funny. 

 
So from what I can remember, Amazon went up 5%, down 6, up 1.5 or something and now down 3.5% this week alone. That’s silly. 

 
Who has ticker ideas for bear market/ crash? The only regular stock I have any confidence in is VIRT. I’ve also dabbled a bit in SQQQ with mixed results. “They” love to pump at any moment with regurgitated fake news so it’s even hard to trade bearish etfs right now. 

 
I promised myself I wasn't going to post in here anymore.  But, imo, unless you have a tremendous number of shares at a significantly lower cost basis than current share price - Writing Covered Calls is a bad idea.  It wasn't always this way, but that's the way it is today.
Stick around.  Your macro discussions, in particular, are something I'd love to see.

 
Who has ticker ideas for bear market/ crash? The only regular stock I have any confidence in is VIRT. I’ve also dabbled a bit in SQQQ with mixed results. “They” love to pump at any moment with regurgitated fake news so it’s even hard to trade bearish etfs right now. 
You'd think debt collection firms would make a killing, but they were relatively flat through the bust.  They did better right after, when I guess people had money to pay collections.

 
You'd think debt collection firms would make a killing, but they were relatively flat through the bust.  They did better right after, when I guess people had money to pay collections.
It’s hard to invest in this market right now for sure. I think the downturn is just getting started. 

 
It’s hard to invest in this market right now for sure. I think the downturn is just getting started. 
Obviously you could be right, but the data doesn't support that conclusion.  Yet.

If I were to throw my :tinfoilhat: on I'd say there is a lot of algorithmic hijinks going on.

 
Gotta be honest, confused by the action Friday/today. 

That jobs report was what the market wanted, not too weak, but missed expectations. Further hikes are now being priced out after December. I wouldn't think we'd be selling this. 

 
We need to get to S&P 2630 or this likely breaks down to 2450-2480 in the next few weeks.
I mean do resistance levels really mean as much with external factors?  I mean if the fundamentals are present at 2630, what gets removed to make 2450 the value line?  

 
I mean do resistance levels really mean as much with external factors?  I mean if the fundamentals are present at 2630, what gets removed to make 2450 the value line?  
Its Elliott wave theory. here's a taste:

We are still looking for the completion of the a-wave of wave 4, which is setting up with nice positive divergences on the daily MACD for the (c) wave down, which is exactly what we should be seeing.  As long as we remain below 2620, immediate pressure remains down.  

This chart should also make you recognize the multi-month b-wave I am expecting once this a-wave completes, and the target for that b-wave is quite large for now.  We will be able to narrow it down once we are at least a month into that b-wave rally. 

 
Last edited by a moderator:
Gotta be honest, confused by the action Friday/today. 

That jobs report was what the market wanted, not too weak, but missed expectations. Further hikes are now being priced out after December. I wouldn't think we'd be selling this. 
The Fed is only one of several risks in the market right now, likely selling off for one of the others.

 
Breakout above 2630 has happened.  Must hold this week however. Very possible Christmas rally now. I'll be exiting everything if we rally.
Me too. I left my SQ shares even though I was tempted to seek last Monday. Thank goodness I sold my AMZN let Monday for a nice profit. Down $140 per share since then and I had about 4x more in that. 

 
I think this bull market has seen a top. I've been hesitant to say it, but I'm gonna put it out there. 

Ceilings are in place near ATHs. While we could rally to those previous highs, I'd think the sellers would come out in full force once/if we get there. I've referenced and posted charts about cycles and corporate debt to GDP, this credit cycle is getting ready to end, money costs are almost double where they were just 12 months ago, and a lot of maturing debt coming due. None of these very important factors have been in place during this entire bull market, they are now, and I think anyone viewing growth will take these factors into consideration as the market rises. 

We'll prob see some volatility and go up and down in the coming 12 months, but inevitably, the credit cycle concludes, defaults start happening, and we eventually crash. 

My thoughts for now, subject to change. 

@siffoin

Charts have been rangebound for the majority of this year, I know you mentioned previously that it can take a while for a trend to change, you noticing anything in your charts?

 
Already given back over 300 450 Dow points in the first 2 3 hrs. of trading today, this market is severely wounded.

 
Last edited by a moderator:
fantasycurse42 said:
I think this bull market has seen a top. I've been hesitant to say it, but I'm gonna put it out there. 

Ceilings are in place near ATHs. While we could rally to those previous highs, I'd think the sellers would come out in full force once/if we get there. I've referenced and posted charts about cycles and corporate debt to GDP, this credit cycle is getting ready to end, money costs are almost double where they were just 12 months ago, and a lot of maturing debt coming due. None of these very important factors have been in place during this entire bull market, they are now, and I think anyone viewing growth will take these factors into consideration as the market rises. 

We'll prob see some volatility and go up and down in the coming 12 months, but inevitably, the credit cycle concludes, defaults start happening, and we eventually crash. 

My thoughts for now, subject to change. 

@siffoin

Charts have been rangebound for the majority of this year, I know you mentioned previously that it can take a while for a trend to change, you noticing anything in your charts?
You might find some value in the tweets of mine from Nov 15...really any of the tweets since Oct. (@Steelhedge)

 
Last edited by a moderator:
Got an alert on SNP ticker moving upward to find it is now within 0.008% of where it was this time last year.  So we have that going for us.

 
https://www.cnbc.com/2018/12/12/the-tide-may-be-turning-for-these-two-telecom-stocks.html

Funny, I was questioning this a week ago.

Stacey Gilbert, market strategist at Susquehanna, says AT&T's long-term performance depends on the safety of its dividend yield.

"There's a lot of concern, a lot of chatter that is it safe? Is it going to maintain itself? Do they have to cut?" Gilbert said on "Trading Nation" on Tuesday. "If AT&T were to maintain its dividend, this would be viewed positively. Obviously the flipside to that is if they cut it … the market is not pricing that in and that would definitely be a negative for AT&T here."
Think this will come down to execution on TWC, and my gut says it'll be a disaster.

 
Love the rebound here but pretty sure this is a false albacore swing.

Bears gonna short the float notes and the bulls hoping their stop gap tactics will reverse the choppy trend.

gotta consider these algorithms compared to the 1993 "volatile shuffle" and the similarities are uncanny.

The end result is clear and brings me full circle to my point .... I don't know anything about this stuff.

GO AMZN! 

 
Put me in the camp that we finish 2018 much higher than we are at today.  I also see a positive 2019 as well.  We are nowhere near a recession.

 

Users who are viewing this thread

Back
Top