Here is the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at https://tradingwithcody.com/chat or send me an email with your question at support@tradingwithcody.com.
The doctor is in. What’s up?
Q. Cody, I’m new to trading options. I’m holding FB Jan 15 22 calls. I would love to hold the calls or the common long term. It appears that the calls are not increasing in value as much anymore. If FB continues to rise, is there a point that it won’t continue to increase and I would be better off exercising the option and buying the common at 22.
A. Congrats on the huge win in the $FB call options. Call options that are that far into the money, meaning that the options’ strike price is way lower than the current stock price, will almost always reflect the moves in the actual stock price unless the stock were to fall way down closer to your strike price, at which time, you’d probably see the option price decline slower than the actual stock price, because someone is willing to pay a premium for the upside exposure that the call option would still give them for a smaller overall price than it is right now. With your options that far into the money, there’s not much difference between holding them and holding the common stock itself.
Q. When you buy a put like PCLN do you use a mental stop to sell if it keeps going up?
A. Not sure there’s been many times I’ve had the chance to “buy a put like PCLN” other than back in 2001 when the dot-com market was crashing. I might just ride the PCLN put into the ground if the stock rallies away from our strike price because I am using the PCLN put as a hedge against our GOOG, AAPL, FB and other such longs, which I expect would make me more money than I’d lose on the put if PCLN does indeed run away from our strike.
Q. Howdy Cody from a fellow Ruidoso neighbor whose been a TWC subscriber for several months. I’ve been trading the stock market for over forty years with twenty of that as a stock broker in Lubbock. I notice that you never trade any oil & gas exploration companies. Being from west Texas I’ve traded many of these with much success. Since you live right next to one of the world’s greatest oil producing regions, why don’t you trade any of them?
A. I have traded some oil and gas stocks in the past, but I find trying to game the OPEC/RepublicanDemocratRegime policies difficult for near-term trading these things. And in the long-term I think most of these oil and gas companies have spent way too long on the taxpayer’s teet and eventually they are going to lose the trillions of annual welfare handouts and other benefits they get from your taxdollars. Energy policy is as corrupt as banking policy in this and every other country in this day and age. Makes me sick frankly to even think about it. If oil ever crashes again, I might take a look at a long-term contrarian buy into some oil and gas stocks, but I’ve had huge success with my Revolution Investing approach over the last couple decades and I think I’ve got an edge in the way I do things, so until that changes, it is what it is. Thanks for subscribing!
Q. Cody, I’m starting to see gold possibly beginning to move up. What’s your take and how soon might you make a move?
A. I’ve made most of the “move” I plan on making in gold and silver for the time being. I might buy a couple more gold coins or something, but that’s about it for now. Would rather own gold than silver for the very long-term, the more I analyze the difference in the two markets — mainly that Russia, China and others are likely hoarding gold right now to back a large part of whatever the “new reserve currency” they are looking to start trading with. I have no idea how long it will take for the price of physical gold coins to go up 10x the current price as measured in US Dollars, but I will definitely be a big buyer of physical gold if there’s another chance to buy it lower near, say, $1200/oz for a real coin.
Q. Afternoon, Cody. The subject, once again, is: gold. Specifically GDX. You’ve just said ‘I’ve made most of the “move” I plan on making in gold and silver for the time being.’ Here’s MY situation: sitting on way-down GDX January ’14 calls: $29 strike price is down 73%, $32 strike price is down 80%. Here’s YOUR situation: Your “Latest Holdings” (as of 9/6? Time for an update?) has you holding GDX as an 8 (i.e., with confidence). Can you (a) define that? At what average price is your GDX? ( I assume it’s the ETF itself, not an option. True?) and (b) advise someone like me (and others) — in the hole with options with about three months to go — as to what to do? How confident are you? Should I bail? I do NOT want to zero out these options. Thanks!
A. Tough call on the GDX into year-end at this point, as we’re down to 90 days left to expiry or so. Here’s what I own mostly right now “I also like GDX’s big decline here. As gold has fallen, the miners have continued to be a higher beta version of the metal and we sold some GDX calls for big gains near the highs. I’m adding those back today, using January $32-$35s.” Trade Alert – Portfolio Bullets — and yes, I’m down on this last tranche painfully too right now. I am worried that we won’t get the mid $30s or even $40s target that I think GDX could run back up to, but that it might now take another 18 months instead of 6 months. I plan on holding my GDX calls for now, but if the GDX ETF does run back up closer to my strikes, I might take some off the table and alleviate the pain there. I’ll keep you posted.
Q. Thanks for the GDX answer. Final subject is Pandora (P). When you identified a few stocks as great candidates for shorts or puts a couple of weeks ago — including PCLN and P among others, I looked at PCLN and gasped at the price, so I went into November and December ’13 puts at $25 as an alternative. Had some good movement shortly thereafter, trimmed a tiny bit, and then –continuing to mirror you — added some more P when you added some more to one of those months. And now I’m sitting there with puts getting deeper in the hole (lately) by the day. Again, with my timeline, what would you advise? Still think P will show its weakness before my strike dates of November or December? Thanks.
A. I think P is headed lower short-term and will be back closer to $10 at some point in the next year, but it’s a wild bubble blowing bull market out there, so it might very well spike once again before that day of lower prices follows.
Thanks. Not sure that tells me much (!) but I appreciate your honesty/unsureness.
Turn off the Pandora, man. Don’t open that box! “I ain’t much on Fannie’s conversation or care to much about her operation but every time Pandora come my way…” – Aerosmith – Pandora’s Box
Totally dig Steven Tyler, but half the time I don’t understand what comes out of that huge mouth. Including right now. Maybe my investing mantra should be “What would Steven do?” but that would displace you.
I’ll just throw 2 cents out there on P as I’ve lately put a lot of time into exploring the different music services and honestly, I like Pandora better than all of the others for creating stations and letting their algorithms play DJ. My opinion may not matter but I do find it hard to short companies whose service I like and think is superior to the competition.
Thanks!
Excellent input and feedback and value add comment about $P. Thanks.
No problem. I think it’s a steal for $3.99/month for the value that I get from it too. 🙂
Q. CREE earnings are almost here. Feet to fire what is the earnings call option? Speaking of call options, you bought the Apple $500’s…is there another Apple call option play here before we find out how many tens of millions of phones were sold?
A. Let’s not call these pre-earnings report option gambles, “plays”, let’s stick with the word, “gamble” because it underscores the magnified risks when we try to game the near-term with options like that. CREE’s already run up so much since we bought it, that I’d probably only hesitatingly look at the December $80s or something for the call options. I wouldn’t want to buy AAPL call options before this report either, as I bought some as you said awhile ago when it was lower. That said, probably the January $550s are one of the best call option bets you could make on AAPL here right now. Just remember, BE CAREFUL WITH OPTIONS!!
Q. I think we’re in a product upgrade cycle for AAPL since the new iOS came out. Many of the older model phones and iPads are seeing some serious battery drain, and I can’t remember a change this significant for several years. In fact, I’m hearing folks ask about which iPad to get their loved ones for Xmas, etc. That said, when will the holiday numbers affect the stock price? First quarter earnings?
A. If the iPad and iPhone are as hot as you’re hinting they might be for the Xmas selling season, we’ll hear buzz in early December and the stock will likely start to reflect that immediately.
Q. What are you expecting on GOOG earnings? I’m trying to decide whether to trim.
A. I’d rather be long than short $GOOG into tonight’s earnings call, even as I think the real reason to continue holding Google’s stock, as I have since the IPO, is all the innovation and Google Glass and Android upside over the next decade. I’d buy more if the stock gets hit tonight, but I haven’t bought any new GOOG shares in a while now.
Got it and thanks, Cody.
Q. Any new thoughts on the IEF puts with this debt “solution”? Should we live to fight another day and save some capital? Getting killed on those unfortunately.
A. I’ve still got my IEF puts from when the IEF was much higher and we first started tranching into them. No change there for me. Sorry that you’re getting killed on them for now, but I do remain of the mind that the path of least resistance for rates is higher both short-term and long-term.
Q. No worries, I have a challenge with options as they fluctuate so greatly. Both pulling the trigger to capture gains as well as biting the bullet when they are down and not selling. Know what I mean?
A. We all know what you mean, anybody who’s ever traded an option. Good luck.
Q. Hi Cody. I’m in with TQNT common per your trade alerts. How soon do you think TQNT can make a splash? No love in this recent pop. You mention the tens of millions of iphones now being sold which will double + TQNT revenue at Apple. There has been some discussion about the January 15 $10 call options. I’m looking at the January 14 $8’s. Would those be a reasonable risk/reward in your opinion?
A. If TQNT’s average selling price into the iPhone 5S is as high as I expect it will be, the stock could very well take off after its next report. I think it could take a year or two for it to fully play out though. That would make the Jan 15 $10s calls the better bet. Or just stick with the common.
Q. Hello Cody, I’ve made some money this past 12 months off of LNN and I sold all my last shares around $80. Now that it’s near a 12 month low do you think it is a good time to traunch back in or do you think fresh money is better placed elsewhere at this time and if the latter, where? Thanks for your reply!
A. I like $LNN here a lot for the long-term. It’s a truly Revolutionary Investment kind of theme on the idea that potable water and irrigation systems and effective water usage is in a forever secular growing cycle.
Q. With companies reducing or keeping staff below the magical Obamacare 50 employee threshold, is there a commercial real estate/office space short play on the horizon or has that train already left the station?
A. Good thought process, let us know what you come up with! I don’t have one off the top of my head but I do remember chastising Mort Zuckerman for buying the Chrysler building in 2008 right as the entirety of Wall Street was imploding…and it worked out for him anyway, courtesy of all the trillions of dollars of welfare he and his bankers begged for and got on my show and others. Puke.
Q. Hi, how soon will we be able to see larger print for SCUTIFY? Great site!
A. Thanks, Cupcake! Man, we are absolutely keeping it pedal-to-the-metal on adding new features, All-Stars and other upgrades to Scutify.com. We’ll also have a new iOS7-based iPhone app that will be much easier to use and read coming out in the next couple weeks. And our first Scutify Android app will be out in the next couple weeks too, if all goes according to plan (cue God’s laughter).
Q. What is something you believe is the new dot-com or Blackberry? I’m assuming it’s companies like PCLN or P, and I guess what I’m asking is what companies that investors are so thrilled about will be nothings in 5 years, and why? Might be a longer answer than I realized.
A. Good question and I’m working on it every day. Let’s revisit next week?
You need a countdown clock! Deal.
I had one on my show…and I always got in trouble with my producers cuz I could hardly contain myself within their parameters. Like you and TWC Chat!
All right, that’s a warp and a wrap. See on the other side of the wormhole.
Dang, buzzer got me. 🙂
