Happy New Year everybody. Let’s rock n roll.
Q. Cody, Happy New Year. New subscriber. What is a good ratio say with a 100k portfolio (nice round number) – What percentage would you use for common stock vs. option plays? Investor is mid twenties, portfolio is not needed to live on.
A. Because you provided this additional info, I can actually sorta give you an answer to that question, because this answer depends so much on these types of factors: “Investor is mid twenties, portfolio is not needed to live on.” That’s still not nearly enough info for me to really advise you well on specifics, but I’d say such an investor could certainly be aggressive on the options if they feel they truly have a good grasp of how options work. Maybe 15-20% of the portfolio in options and the rest in common.
Cool, thank you!
Q. Cody, One more question. Do you see any opportunity for short term trades going into earnings in any of your stocks, either long or short or with options? I know your horizon is much longer than that, but was just curious…
A. I’m totally kicking myself for having missed the opportunity to add to our short Apollo position by buying some puts before yesterday’s disastrous earnings report from those guys. Yes, I’ll likely have some near-term earnings trade gambles so stay tuned.
Q. Does the LOW VIX (or hi) reading ever come into your trading strategy? Aside from that what’s your take on the ascent MOST stocks are having into earnings? Sell as bars are set higher and pullbacks are likely unless earnings are stellar?
A. With the VIX (and Treasuries and currencies for that matter), it’s the rate of the change that matters more than the number itself. That is, when you saw the VIX drop from 25 to 13 last week in just a few days’ time, it was probably a meaningful indicator. But if it were to stick around 15-20 and then drop to 13 over a few days’ time, it wouldn’t then be on my radar as meaningful. As for earnings season, it looks so far that it’ll reward decent quarters (see Alcoa’s action today) and that it’ll punish bad quarters (see our largest short position, Apollo Group, which is down from the $50s to now at $18 after a 10% hit today).
Q. Hi Cody, I am new subscriber…does this Q&A have sound or strictly typed on screen? I already love this subscription. Thank you!
A. Look right above the box you type your question into — see the Sound and the Scroll html links there? Click on the Sound if it’s x’d out and it’ll turn on a beep when there’s an entry into the Q&A. And thanks for joining!
Q. Cody: what is the sound of the bird that keeps chirping? I want to get one for my home.
A. I don’t know! It’s a feature of the chat plugin that we use to power this page. It is a pretty bird sound though, huh? Probably some dude in a basement in Uzbekistan who programmed the code for this plugin whistling into a cheap microphone on his Windows 98 machine. Ha!
Q. So now 3 -D systems is at 60 and I read the article that seemed SO convincing that their accounting was not OK. So I sold out my position as well. What is your take on how the market keeps rewarding this company DDD and SSYS.
A. WCOM’s numbers were inflated and questioned by shortsellers for years before they ever went bankrupt and ended up convicting Bernie Ebbers (you know he’d be a “too big to prosecute” and that they would have bailed out WCOM were it to implode these days, don’t you think?) At any rate, as I said at the time, it’s possible that DDD’s numbers are all good and that there’s no there there in that there report that says otherwise, but I just don’t like to play with companies that might have accounting issues. Period. I used to struggle owning AAPL during their backdating option issues, for example. And DDD might be a great company some day, but it ain’t no Apple.
Q. Do you think AAPL will have success with this new cheaper phone to compete with Samsung in other world markets? What are your thoughts in general regarding AAPL?
A. I’ve long expected Apple to start selling older model and smaller iPhones for cheap to build their user base and have been disappointed for years about that. For example, Apple should still be selling the iPad 1 for $99 today or something. Anyway, I’ve been long AAPL for many, many years now and I’m sticking with it and it’s still my largest position.
Q. Hi Cody, there has been a huge move in LNN this week and there was some chatter on the site that it might be a short squeeze resulting from good earnings. Do you think that this might be a good time to take some profits and look to buy again at lower prices?
A. Good call, yes it’s a good idea to trim some LNN after this huge run we’ve had and the nice rally of late. I’ll probably go ahead and do that later today, trimming a tranche, as it were.
Q. Hi Cody, In your post today, you wrote that you were going to buy a tranche of FIO calls for June of next year at $22-$25. Do you mean June 2013 or Jan 2014?
A. Good catch, yes I meant the 2013. I forgot we crossed into the new year already, I guess.
Q. So to confirm, we are talking 6/13 dated calls, correct? That’s what I purchased based on the trade alert.
A. Yes, I bought the June 2013 or later dated calls in FIO this morning. Gulp.
Q. Cody, Happy New Year! I asked the board earlier and I tend to agree reluctantly, but what are your thoughts on any sort of entry into FB right now. I prefer options going into earnings and their new announcement, but fear it is too late. You always say, don’t chase the trades, is this that scenario, which I fear it is, or is there still room to get in now? Thanks for everything!
A. If you don’t have any FB, I’d look at buying a small tranche to get started. It’s been a heckuva run and surely that alone could make the stock drop after earnings, no matter how good the report. But then again, if you’re looking out to 2015 or 2020 in your time horizon, it won’t matter much whether your cost basis is $28 or $30 if the stock gets to $200 some day. I trimmed some FB calls of my own today, so you know where my money and mouth are.
Q. With apple being down for the year and it being your largest holding and FIO being down nearly 20% YTD your portfolio must almost surely be in the RED this year as other stocks 3-5% YTD performance is not enough to offset the largest holding being down for the year and a 20% decline in another large holding. How does one deal with such action in your own words?
A. I’m up on the year as Apple was up 35% on the year and the vast majority of my Apple common was purchased at much lower levels in years’ past. With the big gains we had on FB by slowly scaling into it on the way down and the loading up on calls and common in the teens, along with the huge gains we had from our shorts in APOL, DG, DLTR and most of our other longs like GOOG and Amazon and so on, we ended up nicely ahead of any of our “benchmarks” at year end.
Q. I was referring to the YES I KNOW but Early 2013 YTD returns. This chat room is FILLED with investors / subscribers who are in pain from FIO quick 2013 20% declines YTD and apples decline 2% YTD 2013 as so many are too long both these stocks. I know we had a good 2012 no complaints there. Just 2013 started off with 2 Overweight stocks being HURT one terribly.
A. Hmm, I don’t really know what to say. I’m not having a bad year as the FB calls have kicked in so big already this year and the Amazon’s rocking and so on. I’m not even sure if I’m up or down on the year so far, but I do think you’re probably right that I might be down a little bit overall in my stock portfolios so far this year. We’ve got 95% of the trading year still ahead, so it’s just not something to freak out about anyway even if you care about year-end results, which I personally don’t.
I know this is Cody’s time, but in fairness, isn’t it kind of hard to be sizing up our 2013 performance only 9 days into the year?
Q. Losses for me on SNDK 50$ strike prices / LVLT 25$ strike prices and now I’m sensing the same attitude for AAPL 650$ strike prices…I guess that’s it for me Cody.
A. Options trading is terribly risky, man. You and I have discussed those risks on here and why I think you’ve taken too much risk with the options before. Why don’t you email me offline and I’ll see if I can help. We strive to help everybody become a better, profitable, safer trader and investor.
I’ll email you offline Cody– I understand the risks and I was willing to take these risks . But when 3-4 trades in a row go wrong then I don’t understand the logic.
Q. Cody why do you think Tim Cook keeps going to china, is it something that apple shareholders should be concerned about? Steve Jobs wouldn’t even have stepped foot in there but Cook keeps going back. It seems weird to me that he keeps going there.
A. I think he sees that industry will sell 1 billion smartphones annually in China alone in just a few years and he wants Apple to be a big part of that.
Q. Hi, Cody. Much of the chatter on the board today is about AAPL, which just hasn’t been able to gain any momentum of late. Seems as though we are spoiled by AAPL’s past stellar performance. Is the hope of a good earnings report the one thing out there that could be a catalyst, or is there something else out there that could help to sway us back towards $600? Thanks.
A. I’m worried that there’s still too many weak-handed longs hanging onto the AAPL heading into the earnings report and that if it’s not absolutely stellar, then we could still be stuck in a range on the Apple for another three months. I’m still holding onto all my long-held common from much, much lower levels and all of my calls, though it looks like I might be taking a loss on some of those calls if this thing doesn’t get a groove back on in a hurry.
Q. Cody: in order to call it a ‘stellar’ quarter for AAPL, what is the number of EPS/revenue/iphone you expect? Is 50m iphone sold good enough?
A. I’d say they need to report $16 a share in earnings (est is $13 or so) and at least $57 billion in revenues (est is $55b). It won’t matter too much what the break down of those revenue drivers are, whether iPhone 5 sales or iPad Mini or even huge Mac sales (I got a new 15″ Retina MacBook that is AWESOME for xMas!), we just need blowout numbers on the earnings and revenues.
Q. Cody, Happy New Year. In your view are FB, DDD and LNN likely to have some pull back after big gains and what is your view on DDD re accounting issues? Thanks.
A. See my answers to those same stocks from your question above please.
Q. Whats your take on how to play the FB event on Tuesday? Sell the news or add a little more? It’s been a great play for us, much appreciated.
A. I’m trimming some FB calls today after the huge run we’ve had and taking some big profits off the table here. That’s got nothing to do with next week’s Tuesday FB event though, as I truly have no idea how I’d try to game that.
Q. In October of 2012 we did an interesting MSFT purchase of puts/calls based on your thought that MSFT was in for a 30% swing one way or the other over the next 3-6 months. Can you provide any updated thoughts on that, as we are about 1/2 through the time process and MSFT has pretty much stood still so far? Thanks!
A. I think we’ll need to add to our MSFT puts before this quarterly report coming up. Stay tuned.
Q. With the dip today, though you’re not into banks right now….would you suggest some BAC for short (or long even) term profit?
A. No, I don’t think the banks are a good long side trade or investment. I’m considering scaling into more bank short exposure.
Q. What do you think about buying some out of the money puts on JPM and GS for Jan 2014?
A. I can think of worse trades. I’m considering buying some sort of puts in both myself.
Q. Cody, any thoughts on PAY?
A. No thoughts on PAY these days. I just helped finish a new book with analysis on 100 Stocks for the Clean Tech Revolution, man. Cut me some slack, will ya?
Q. Cody you rock! Looking forward to a show in NYC?
A. Thanks, man. U rock 2. Yes, we’re going to do a NYC TradingWithCody seminar/event/something before this summer. I’m, believe it or not, getting married next weekend, and I’ll be heading out on a honeymoon for ten days. You can imagine that I’ve wanted to get through the wedding and what not before scheduling and working on that big seminar project.
Q. Cody-Congratulations on your upcoming wedding!
Okay folks, that’s a wrap. Rock on and thank you.