Howdy folks. Let’s ride. Ask me anything.
Q. Hi Cody, What are your thoughts concerning FIO call options vs. common? If you prefer common over calls on this, please explain why especially when you can gain so much more with options…Thanks!
A. The main problem with the options is that you’re betting that the underlying stock will be high at the time the options expire, not just that the common stock is a great investment. If the markets crash as those options expirations near, you could be facing devastating losses if you’re over exposed to the options. I prefer to use both options but mostly common in any investment like FIO. In a shorter-term trade where I think a stock is about to pop or crash in the near-term with a direct catalyst, I might stick with only options. But I never put more than 10-30% into options exposure at any given time and even that is VERY aggressive and a result of the fact that I’ve still got many years of (I hope) growing income relative to my overall portfolio and current assets. If I were older, less experienced or had less gumption about growing my income, I’d probably not use any options ever.
Q. Cody: yellow flag – can we assume you don’t see the 15-30% declines in FIO,AAPL,GOOG AMZN specifically as buying opportunities? See something more ominous?
A. Buying more on every down turn, as we have been doing, even after the huge run we’ve had over the last few years, well, it’s starting to feel like those rare times you’re at the black jack table and can’t hardly remember the last time you lost a big hand. At some point you want to start playing with smaller-sized chips and keep some of the casino’s money on the side. I’m not turning bearish, but I want to sit tight and see if we can’t get some lower prices before getting aggressive again, if at all.
Q. Cody, what is your take on the election outcome short term impact on the market for each of Romney or Obama winning?
A. I just think the market knows that Obama and Romney are equally corporate/bankster friendly but that the banks will sell off if Obama wins. We’ve got some bank shorts and puts and I might add to them a little bit before the election on that logic, though I have no idea which puppet will win the “election”. And after having been subjected to the horrible pretend partisanship that counts for political debate on mainstream TV for so many years, I have to throw out my political two cents on the election too, since you asked. If you’re conservative, vote for the Libertarian Candidate Gary Johnson or the Justice Party’s Rocky Anderson and if you’re liberal vote for Green Party Candidate Jill Stein. Don’t waste your vote on the fake Republican/Democrat Regime candidates. Here’s a good article from a liberal about why he won’t be voting for Obama – “The most common way people give up their power is by thinking they don’t have any,” Alice Walker writes.
Q. So what’s your take into elections and year end? Sideways drift or rise into year end as you had said before so many fund managers are WAY behind performance wise and need to catch up or lose lots of business or their jobs? Still feel that way?
A. Man, nothing like holding my feet to the fire, eh? Wasn’t my NFL Weekend game picks enough for you? Sigh. Okay, feet to fire, the markets will trade mostly sideways with an upside bias into the election and then we’ll be off to the races into year end as earnings season ends and the managers scramble to catch it with the S&P 500 ending the year near 1500. Or I could be dead wrong like I sometimes am.
Q. Weekend? I should tell you about my weekend and past 72 hours. No power, No heat, baby in house, NO TV, internet, potential property damage, Family unscathed thank g-d, Fathers / Family business Devastated in NJ. 2 refrigerators all food thrown out, Freezers took to family members after day 2 no power seemed to be coming back, HUGE massive Trees down in roads, No traffic lights at ALL major intersections SUPER dangerous, Now NO gas at gas stations as power was returned to us last night.
A. I apologize! I was insensitive. Did not mean to be. I forgot you were in NJ and I hope you are well. If there’s anything we can do to help you from TradingWithCody let us know. God bless.
Q. Cody, I hear you about wasting your vote. I feel the only real hope for our country is to start electing Non-Professional Politicians. The Tea Party is a small step in that direction but we really need a NAPP party based on electing only those who are “Not A Professional Politician,” who won’t worry about re-election but about doing what is right for the country.
A. The Tea Party was sold out to the Republican Dick Armey and corporate-welfare loving Koch brothers soon after it started. Occupy Wall Street needs to join hands with the people who initially started the Tea Party movement and get us a new party. Or something.
Q. Up big now on the LPS puts after the earnings miss. but seems like that is due to something separate from what your original thesis was… feet to fire, do you see these guys ever being held accountable for their role in that robo-signing mess? and does one particular presidential candidate over another increase the odds of that happening?
A. Feet to fire, I thought that the LPS would have been held accountable and the stock halted at below a $1 a long time ago and that a few lower-level managers would have gone to jail and the executives gotten off scott free but banned from business a la Countrywide. I just don’t know any more. And no, there is no meaningful difference in any financial/corporate/banking/economic policy between the two puppet Republican/Democrat Regime candidates. None at all.
Thanks. and that’s what I thought you would say about the last part.
Q. With the sentiment so bad after earnings and now the management changes, is it time to buy some AAPL calls?
A. I bought back some of those AAPL calls we sold much higher a bit ago and AAPL is still my biggest position despite having trimmed it down repeatedly near the highs. I’ve got plenty of upside exposure already if the stock can get a sustained rally from here to $750 into year end, which is still a possibility, but I’m also just not going to add to it until/unless there’s some more panic.
Thanks for your response and for re-scheduling this Q&A.
Q. Ah, good. Trying to read a purchase and sale agreement with one eye and watch AAPL try to push through the $600 mark with the other eye. Cody, the departure of Forstall has to have some sort of impact on AAPL going forward. I’m just curious what your take is.
A. I think it’s a good thing to hold your people accountable and to be decisive and I think that’s what Tim Cook is doing here. As always, the reason we’ve owned AAPL since $7 is because they have successfully been building a Platform that is both amazingly easy to use and locking in consumers almost forever into their technology. That’s not changed.
Q. Every apple product got upgraded to the point where they are almost “perfect”. Merrill Lynch has earnings of $54.30 and $64 for fiscal 2013 and 2014 which ends in. September month. PE is 9 on 2014 . If I was a buyer at 650 and more at 620 I sure am not afraid to buy here at 595. What do you think?
A. I wouldn’t have AAPL as my largest position still if I didn’t think it was headed higher still. Not sure about whether a complete refresh cycle being already out in the market is bullish per se or not though.
Q I believe I ask this question before. When did you issue a trade alert to SELL Apple 700 calls?
A. A few examples with a quick search of the site – “I’m looking to sell down some more of my Apple calls from purchases that I’ve outlined for my TradingWithCody.com subscribers when Apple was $150 lower. I’ve sold most of the lower strike priced calls so far which lowers my risk on the downside somewhat, but I’d like to roll some of these calls out into longer dates and higher strike prices so I can have a little bit less capital exposed to Apple.” AND “So I’m looking to sell down some more of my Apple calls which expire out in January and have strikes around $700. I’ve sold most of the lower strike priced calls so far which lowers my risk on the downside somewhat, but I’d like to roll some of these calls out into longer dates and higher strike prices so I can have a little bit less capital exposed to Apple.” AND “Apple is up huge in the last two days since the iPhone release. I’m going to trim down some Apple calls a little bit today. Just a trim and it’ll still be my biggest position, but we’ve got some huge profits in some of these calls and it’s time to lock some of that in.”
Q. If you like OCZ down here, would you use call options or just buy the common stock?
A. I, like everybody else, am shocked at the disclosure and earnings report issues at OCZ. I don’t necessarily like the stock long-term anyway, as I’ve written about many times here on TradingWithCody.com when the stock was 5-8x higher than the current quote, but it wouldn’t have collapsed like this without the disclosure problems. If you are willing to gamble on potential bankruptcy and/or delisting if the company’s truly not being above board about their financials, it’s definitely worth a long shot here. I’d probably stick to common stock since it’s already below $2 and it’s essentially a call option on the company being solvent two years from now or before if this stuff can get resolved. Not really my style, but as I’ve written before, it’s important to be like a great rock band and to utilize different instruments well to make a complete song and eventual full album. Here’s a great example of a live song that builds up with different instruments into something that truly moves you.
Q. I know this question has been asked many times before by others, but I’m not sure if I ever really found an updated answer on MRVL. It seems that with everyone pushing the cloud, big data, and other aspects of data storage that MRVL’s controller business for data storage actually has some upside potential. I understand the critiques about wireless but the rest of the world (besides the west) is really only now upgrading to 3G so I think they will have upside potential here and they are also expanding networking which I think their foray into the automotive world to network more in car systems will start to yield some surprises also. Since they are trading so close to cash is this a bargain or is there something lurking here where they deserve the over 40% haircut they have taken this year?
A. MRVL’s been killed because their biggest revenue source remains the disk drive manufacturers and that’s a forever declining industry as Flash NAND drives replace them. MRVL’s a buy because they’re so darn cheap with so darn much cash, but I am not in a rush because it could take a few quarters before their other product lines catch growth.
Q Hi Cody hope all is well. What are your thoughts on YELP? Seems expensive but perhaps a likely takeover candidate. Or maybe there’s too much competition. Thoughts? If it were to drop with the market heading into fiscal cliff etc etc, at what price does YELP become a no-brainer?
A. I like YELP’s management and I think they will someday be bought by Google or Apple or most likely, Microsoft, at some point in the new few years. But I don’t know that price will be higher than the $1.5 billion the company’s currently valued at. I’d probably look to short it for the near-term and probably try to get long it somewhere in the low teens.
Q. Cody, for those with little or no current positions, what would be your top 5 trades right now, or potential “wait and see” trades in the near future?
A. I’d look at the highest-rated stocks in the latest positions and start slowly but surely scaling in over the next couple months.
Q. What happened to FB’s MoMo?
A. No idea. Hasn’t had a bid since it opened the day after earnings. Glad we trimmed some of those calls and locked in some profits. Sigh.
Q. I thought you were going to do some homework on JNPR – when can we expect an update on JNPR?
A. We are hard at work on JNPR and FFIV. Expect the analysis on Tuesday next week.
Okay folks, that’s a wrap.