Nothing to Bloody Lose! (FB, HYG, GLD, CTB, AAPL, GDXJ, DIA)

Let’s get straight to business with some updates on a whole lot of trades.

But before we do, a quick shout-out to good reader Jesper Markenstam, who queried us regarding last week’s Facebook/DJIA initiative.

For some reason the strike of the FB CALL was not included in the recommendation at press time, and our efforts to make that known in the talkback section of the website were also unsuccessful. We pray it doesn’t happen again and thank Jesper for his insistence in the matter. As he was keen to discern, it was indeed the FB 70 CALL that we were recommending.

BY THE WAY, is it true that Jesper was once a stand-in for Kiss’s Ace Frehley when the latter fell ill with a bout of mono in 1978?

ace[click to listen]

Don’t be shy, Jes…

 

That said, we move now to our October 27th recommendation on the iShares IBoxx Hi Yield Corproate Bond ETF (NYSE:HYG). The letter was called Launch the Dirigibles, and in it we suggested there was money to be had from buying a long-dated HYG CALL and selling a shorter dated PUT for the same price.

And we have good news. The PUT expired worthless last Friday, as we expected, so today we’re holding the HYG March 94 CALLs, last trading at $0.30 each.

Now, we’ve a long time to go until March. Lots could happen. But we’ve a hunch that high yield will be back in the saddle very shortly, particularly considering the latest action on HYG (see below), which is heavily influenced by the price of oil (close to 20% of the junk market is oil company issuance – when oil declines, those bonds decline and drag high yield down with them).

Oil looks to have hit an intermediate bottom for now and is in the process of bouncing.
HYG has surged higher as a result.

Look here –

hyg

The jury’s out short term, of course, but the action’s all good for now, and we’re sitting on a small profit. Thanks to the PUTs’ expiry on Friday, we can’t lose with this one.

More updates on high yield as they’re warranted.

Look Now at this Woman’s Foot Gold

 

Back on the 10th of November we wrote a letter called Gold Slowing, in which we declared that gold’s bounce off her bear market bottom was about to come to an end. The moves in the PMs were completely hyperactive at that time, and we suggested a calm was about to fall over the gold pits.

We took advantage of it by selling five GLD December 122 CALLs for $0.48 each, for a total credit of $2.40, and bought one GLD January 106 PUT for $1.43 with the funds. Total credit on the trade was $0.97.

As of Friday, the 122s are history, expired worthless, giving us the full $2.40 premium. The 106 PUT is going for $0.28. Should we sell it, we’ll come away with $1.25 on nothing risked and a song in our hearts.

But we’re not going to.

Here also, we have nothing to lose. And gold could well tumble if we get any kind of Santa Claus rally into the New Year.

Hang on.

dutchman

We made some funny money (17%) on a Cooper Tire and Rubber (NYSE:CTB) covered CALL venture that we opened in the summertime. But never happy with a handful when we can squeeze a gallon, we opted a month ago to sell a further round of CTB CALLs for some additional premium.

The letter was called Insurance Trade, and the bet consisted of three December 34 CALLs, then selling for $0.30 per, which netted us a nice credit of $0.90.

As of Friday’s expiration, they expired worthless.

Call it 100% profit.

Down to the Wire

 

Our penultimate trade under the microscope today is our November 24th initiative from Bite the Junior Golden Apple, a letter in which we paired two unlikely stocks, Apple Inc. (NASDAQ:AAPL) and the Market Vectors Junior Gold Miners ETF (NYSE:GDXJ).

Our thinking on the matter was straightforward. As we wrote then –

“[It’s] a pairs trade that matches one very strong company (with a market cap larger than the economy of half the world’s sovereign nations!) against a sector that looks very beaten up and potentially prepared for a turn.”

And the details went like this –

Buy the AAPL January 100 PUT for $0.38 and sell the GDXJ December 24 PUT for $0.40. Credit on the trade was $0.02 per pair written.

Today, the GDXJ’s are worthless, expiring last Friday just a hair out-of-the-money at $24.15. The AAPL’s are now worth the same $0.38 that we originally spent on them, and because we see the potential for another wee bout of weakness in the weeks ahead, we’re going to hold on to these jobs, too.

After all, we’ve got nothing to lose…

Take a look at the chart for AAPL below –

aapl
Here, we see a clear picture of an overbought Apple falling from its perch and – sorry Eve – with still a little further left to roll.

The stock was overbought back in late November (black square), has a gap that needs filling (in blue), an RSI read that’s just gone negative, and a MACD indication that’s just a day or two away from doing the same (in green).

Any weakness in the broader market would likely give traders reason to take an Apple profit romp, sending her lower straight into the arms of our mid-January expiry.

We’ll keep an eye on her.

marilyn

Never a moment’s rest with this one.

The Final Bell

 

We’re closing today with a trade we launched on the first of December in a letter called Don’t Shoot the Salinger. There, we recommended you sell the DIA January 181 CALL for $1.17 and buy the January 185 CALL for $0.42, for a net credit of $0.75. Then, we suggested using those funds to purchase the DIA March 160 PUT for $1.45. Total debit on the trade was $0.70.

But last week, in Bailing Early – And Taking our Money with us!, we closed the long PUT for $2.80 and let the CALL spread ride.

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Today we see it differently, and in order to avoid a Blundstone roundhouse to the teeth, we’re shutting her down.

The 181 CALL goes for $0.96. Buy it back.

The 185 sells for $0.15. Dump it.

Your net profit on the deal is $1.29 (280 – 96 + 15 – 70) per trio traded.

Marilyn sure liked it.

Wall Street Elite recommends you consider closing your DIA CALL spread as detailed above.

 

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Today we see it differently, and in order to avoid a Blundstone roundhouse to the teeth, we’re shutting her down.

The 181 CALL goes for $0.96. Buy it back.

The 185 sells for $0.15. Dump it.

Your net profit on the deal is $1.29 (280 – 96 + 15 – 70) per trio traded.

Marilyn sure liked it.

Wall Street Elite recommends you consider closing your DIA CALL spread as detailed above.

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With lots of warmth and good cheer for the holiday season from all of us here at Normandy!

And with kind regards, too.

Hugh L. O’Haynew, Senior Analyst, Normandy Research

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