Friday Failure – No Stimulus, No President, Have a Nice Weekend!

Not much to say about this mess other than – add some more hedges!
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Not much to say about this mess other than – add some more hedges!

Ex-ish President Trump declared the elctions invalid last night in a rambling lie-fest. I don't think it would suprise anyone if he sends in the troops this weekend to "oversee" the recounts in the states he lost in. As noted by Stephen Colbert – this isn't very funny anymore – our Democracy is at stake. You know, the thing our Founding Fathers fought and died to protect and, when faced with a similar challenge our "Not-So-Great" Generation changes the channel or, at most, fires of an angry tweet or likes an anti-whatever post on Facebook. Way to revolt, my friends!

There is still no official President and there won't be one until Trump has exhausted the courts, apparently.


Officially it's Biden 264, Trump 214 but Biden is up 12,000 in Nevada with 150,000 mostly blue votes left to be counted. Biden is 1,0000 ahead in Georgia with 50,000 Atlanta votes left to count – where Biden has been leading 4:1. Biden is behind by just 20,000 in PA – from 600,000 last night with about 200,000 mostly Dem votes left to count and Trump is up 80,000 in North Carolina with 250,000 votes to count – not likely for Biden and, for some reason, Alaska hasn't been called yet – that's Trumps.

There's no way Trump wins at this point other than reversing the results and now we'll see how far the limits of Presidential power can be pushed to overturn our Democracy. Trump believes (for good reason) that he owns the Supreme Court. So much so that his legal team doesn't believe they need evidence to throw out voting results as they are making half-assed challenges all over the country and taking quick losses solely so they can appeal the matter to Trump's Supreme Court, where they expect to get favorable rulings that will invalidate our election.

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The market doesn't seem that upset about it, with the Dow down just 250 points in the Futures but 400 points off yesteray's high. That's because the Dollar has been in free-fall since election eve as 4 more years of spending like Trump and we'll all be wishing we had more Bitcoins (or Rubles).

The Dollar was over 100 in Q2 so it's down close to 10% while the S&P 500 has gone from 2,850 to 3,470 – up 620 points or 21.7%. That's about the usual correlation between the Dollar and the markets – a 2:1 ratio. Gold is back on the march, gaining $100 this week back to $1,950 and Silver is at $25.80. That, of course, is good for our Trade of the Year on GOLD, which is moving back towards $30 as the Dollar becomes worth less (worthless?).

Our Long-Term Portfolio is very happy about the rally – up $555,660 (111%) for the year and we cashed out the old Short-Term Portfolio (STP) on the last dip (10/28) so we'd better take a look at the new Short-Term Portfolio and make sure we have enough hedges in place to protect our $555,660 gains in the LTP.

STP Nov 6 2020

So much for the markets being down, we're bursting higher now with Biden taking the lead in Pennsylvania, hopefully gaining a lead that's too strong for Trump to overcome in the courts. That makes it a perfect time to take advantage and improve our hedges, which we will do. This is why we pulled our hedges on that great dip – we expected a bounce back and a great chance to re-short. First we improve the positions we have:

  • TZA – This is a cheap $4,000 hedge that pays big if TZA jumps up. The Jan $25 calls are now 0.40 and we paid net 0.40 so the best thing to do is roll those along to 100 April $15 ($2)/25 ($1.10) bull call spreads at net 0.90 so we're spending 0.50 more ($5,000) and now we have a $100,000 spread much closer to the money that covers us through the holidays and hopefully the short Jan $40 calls will expire worthless. If that $5,000 is our quarterly cost for a $100,000 insurance policy – it's money well spent!
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  • CMG – We thought this would be easy money but they rallied. I still have faith in the position and let's buy back the short puts and sell more on the next dip as we've already made 76% on them.
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  • SQQQ – Down 40% is an opportunity to roll down! We paid net $6.35 for the 2022 $20 calls and we can recover $6.80 by rolling them lower and investing an additional $1.30 ($13,000) in the 2022 $15s at $8.10 and that puts us in the money by $40,000 and widens our spread from $50,000 to $100,000 – well worth the investment and we're only partially covered by rollable short calls – so I think we're good here. Now I'll show you a really neat option trick. We are going to buy 100 more 2022 $15 calls for $8.10 and we're going to sell 100 2023 (twenty three!) $30 calls for $7.80 so here we're spending just net $3,000 more for another $150,000 in protection.
  • The key is that the 2022 $15 calls at $8.10 with SQQQ at $18.90 have just $4.20 in premium over 441 days while the 2023 $30 calls are 100% premium over 805 days – so they will decay at about the same rate and our long $15s are deep in the money with an 0.72 Delta compared to the short $30s with an 0.62 Delta so we should stay well ahead with our longs and have lots of fun selling premium along the way.
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While I'd love to sell TSLA Jan $500 calls for $25 I can't because, unlike last time, we don't have gains to play with so we'll stick with these hedges for now and see how the weekend plays out.

Have a great weekend,

- Phil