What a big day for tech as Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Intel (INTC) all beat earnings estimates and all raised guidance – pretty much justifying the crazy Nasdaq run – 6,666 it is (see yesterday's Report)! I hate to say it but it's not a bubble when earnings are blasting higher and all 4 of the big tech names are benefitting from the explosive growth of Cloud Computing and the Internet of Things.
I will be on Benzinga's Pre-Market Prep this morning – just in time to look over the GDP report and I'm sure we'll be discussing the Nasdaq and where we could go from here. Last time I was on the show was September 29th and we discussed our Limited Brands (LP) spread, which has already moved up from $1,600 to $4,200, so up $2,600 (162%) in short order but only "on track" for our 800% projected gain.
We also talked about using the Russell Ultra-Short ETF (TZA) as a hedge with 50 Nov $12 calls at $1.95 ($9,750), selling 50 $14 calls for 0.70 ($3,500) for a $1.25 ($6,250) net cost, which we offset by selling 5 Apple (AAPL) 2020 $130 puts for $11.20 ($5,600) to drop the net of the spread to $650. Despite the rally, TZA is at $13.45 so the spread is $1.45 ($7,250) while the AAPL puts have fallen to $10 ($5,000) so net $2,250 is up $1,600 (246%), despite not even needing our hedge during this rally.
Why does that work? Because we are Being the House – NOT the Gambler and selling premium when we establish our spreads. The only sure thing in the markets is that premiumd DOES expire – and that gives us an edge in every trade we make.
This morning we discussed a variation of yesterday's long trade idea on Celgene (CELG):
- Sell 5 CELG 2020 $80 puts for $9 ($4,500)
- Buy 10 CELG 2020 $80 calls for $30 ($30,000)
- Sell 10 CELG 2020 $110 calls for $16 ($16,000)