Where’s the Outrage, Business Pundits? $AMZN $BABA $MELI


I’ve said many times its best not to take political sides when you are investing or trading. 

That is not to say that you cannot or should not have political views, but that you should be agnostic so that your trades can be with less emotion than would otherwise be present. 

I still believe this, but this latest attack on Amazon by President Trump has me incredulous. What I don’t understand is why the rest of the financial news feed is not incredulous as well. I’ve only heard one on CNBC so far that seems to realize how nuts this is, Steve Leisman. 

You all know the story. Because Jeff Bezos, the founder and major shareholder in Amazon bought the Washington Post sometime back, President Trump is out to get Bezos (or as the reporting goes, “to f**k with him”) because he doesn’t like the coverage the Washington Post gives him as President.  

President Trump says that the USPS is losing money because of Amazon and that they are not paying their fair share of state and local taxes. 

This is Putin-esque. He is trying to do damage to a company he believes is controlled by Bezos as revenge or pay-back. This means that companies are no longer going to be rewarded for innovation, good deal making, or excellent execution, but instead whether or not Trump likes the founder.  

This is NOT a level playing field, this is picking winners and losers. This is trying to hurt one of the USA’s largest companies, largest employers and largest tax payers. Yet Trump institutes tarriffs to help much smaller steel and aluminum companies because he is tryiing to shore up the Rust Belt vote.  

If Obama had done this, there would have been howling from the financial news industry. Rick Santelli would have popped a vein on his head and Larry Kudlow would have banged the table. “Free market capitalism is the fastest path to prosperity”, right Larry? 

This sure doesn’t look that Free Market Capitalism to me and these fools need to be called out for it.  

Ultimately how does anyone choose which stocks to buy? Do we have to get a list from Trump? 

Bears Buckle Down. $AMZN $NFLX

So, the market finds itself in correction territory once again. That’s when the averages are down about 10% but not yet 20% which would be a Bear Market.  

The most recent selloff is being ascribed to the ‘Facebook Data Breach’. But in late January when the market started to roll over it was fear of inflation, manifested in good job numbers. We were just getting that behind us when President Trump tweeted that ‘trade wars are good and easy to win’.  

The real question is whether or not these events are really the cause of the sell off, or when the market sells off do we just look around and pick what we think is the cause. 

Take this morning, AMZN was down, below 1400 at 11:30. Why? Well CNBC’s answer was that Trump was going after Jeff Bezos because of his ownership of the Washington Post. Clips were played of him saying exactly that. 

Problem is, those clips were old, like 2 years old. He didn’t say them yesterday. In fact they could have played those clips on March 18 when AMZN was ringing the bell over 1600. 

I believe sometimes the market sells off, takes a breather, gets a bit nervous for absolutely no reason. Then the sentiment changes. It can happen both ways, up and down. 

However, the Bears always know the reason because they have been crowing about them all along. I’m sure you could find lots of Bears on March 18th saying AMZN was overvalued. 

Being Bearish always sounds smart. Bears are all about you not losing money, about preserving your portfolio and about getting a better price. Bears like technical analysis or fundamental analysis because you can find a Bear case in either one. 

But making money trading requires that you take some risk, that you put some money in a few areas that don’t fully make sense and is not obvious. 

Josh Brown retweeted a David Wilson (@TheOneDave) chart a couple of days ago. In 2003 when NFLX was mailing DVDs out one at a time, it would have been hard to imagine that today NFLX would have a market cap bigger than GE. 

I didn’t see that coming, did you? 

You know who else didn’t see it, for sure? NFLX Bears. 

$AMZN goes Brick and Mortar in my Home Town. I’m celebrating with an Iron Condor.

In the Austin American Statesman, our local paper, it was noted that Amazon opened a bookstore in a mixed use area of north Austin called the Domain.  

The Domain is a happening place. Apple has a new store there specifically built for them and all the hip retailers are there, too. Even Tesla has a showroom there.  

This is the first store for Amazon in the state and follows other stores in Seattle, Portland, Los Angeles and New York. Notably, none of the other 20 finalists for HQ2 have a bookstore but I believe that one is coming to Washington, DC.

In celebration of this event, I’ve decided to open a new Iron Condor in $AMZN. I already have a number of other spreads open in the name, but with today’s little Gary Cohn blip I think the downside is set for a bit, at least until a week from Friday when this expires. 

An Iron Condor is the marriage of two credit spreads, one put credit spread and one call credit spread. All the options expire on the same date, and this date is Friday March 16. Typically, one will use this strategy when one feels the stock will close in a range on the expiration date in between the two credit spreads.  

For the credit call spread: I’ve sold the 1575 call for $880 and I have bought the 1585 call for $655. Spread credit = $215 

For the credit put spread: I’ve sold the 1500 put for $1225 and bought the 1490 put for $1000. Spread credit = $225 

The Total Credit is the sum of these two spread credits or $440. The Total Risk is $1000, which is the margin requirement of holding this strategy open. The margin requirement is half of what it would normally be because with these options expiring on the same day it is impossible for the price at the close of that day to be both above 1575 and below 1500. 

It may seem imprudent to risk $1000 to make $440 but remember there is no requirement to hold this strategy to that day. Frequently I will open new spreads around this trade. 

Another name looking to trade today is $NFLX, which someone downgraded. Seems like a buying opportunity of sorts.  

Good Luck today!  

Time to Panic? Time to Buy? Volatility and my morning trade in $AMZN, $VXX and $UVXY Jan 30 2018

If you just started trading just after the 2016 election you woke up this morning to something you have never seen. The market is down, and volatility is up.

Those ‘old timers’ that started trading, oh let’s say the summer of 2016, have some experience with this but its quite a shock to you, right? The market was set to drop about ½ to 1% (I always will use the S&P500 here for ‘the market’) and in fact did so. As I write this, the market is down about 0.86% 

As an option trader, when the market opens you can see the market value of your portfolio plummet out of proportion to the move. 

This is because volatility explodes on a day like today. One of the hedges in my portfolio are holdings in $VXX and $UVXY. Between the two they comprise about 12% of the market value of the portfolio. This morning $UVXY is up 11% and $VXX is up 5.5%. 

But my portfolio looked like it was blowing up, being down about 15% at the open when the market is down only 1%. 

This all has to do with how Fidelity prices my portfolio. It ALWAYS prices the options at the worst possible executions for every position. It always assumes that I will sell only at the low, bid price and buy only at the high, ask price. Volatility is a measure of that bid-ask spread so as it widens, the portfolio suffers. 

That also explains why every day at the close the market value of my option rich portfolio will drop 2 – 6% just seconds before the close. That’s because the bid-ask spreads widen right at the close. This is way more pronounced with puts than with calls.  

We have been in a historically low volatility environment and if you are new to trading you haven’t yet seen a rise in volatility quite like this. Trust me, it used to be normal. 

So today, I’ll be writing covered calls in the $UVXY and $VXX and maybe even some credit call spreads. 

I’m also going to buy a VERY small amount of $XIV and, in fact, I already have at 121. That’s the inverse of the $VXX. 


This mega-cap stock reports on Thursday and I am getting a little longer today. When $AMZN was under 1400 I bought the April 20 call butterfly spread, 1420/1440/1460 for about $90. I may also buy a calendar call spread buying another April 1460 call and selling a Mar 1460 call for $1,600 debit. I’ll fish for that one a little bit and see if I can get it cheaper . . . . I’ll let you know. 

Good Luck today!