Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy luncheon, which I will be conducting in Florence Italy on Tuesday, August 1, 2023. An excellent meal will be followed by a wide-ranging discussion and an extended question-and-answer period.
I’ll be giving you my up-to-date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there too. Tickets are available for $287.
I’ll be arriving on time and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at an exclusive hotel in the heart of Old Florence near the Medici Palace and the Uffizi Gallery. The precise location will be emailed with your purchase confirmation.
I look forward to meeting you and thank you for supporting my research.
To purchase tickets for the luncheons, please click the BUY NOW! button above or click here.
https://www.madhedgefundtrader.com/wp-content/uploads/2023/06/florence.jpg775974Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-07-13 09:04:162023-07-31 14:55:47SOLD OUT - Tuesday, August 1, 2023 Florence, Italy Global Strategy Luncheon
In the run-up to every options expiration, which is the third Friday of every month, there is a possibility that any short options positions you have may get assigned or called away.
If that happens, there is only one thing to do: fall down on your knees and thank your lucky stars. You have just made the maximum possible profit for your position instantly.
Most of you have short option positions, although you may not realize it. For when you buy an in-the-money vertical option spread, it contains two elements: a long option and a short option.
The short options can get “assigned,” or “called away” at any time, as it is owned by a third party, the one you initially sold the put option to when you initiated the position.
You have to be careful here because the inexperienced can blow their newfound windfall if they take the wrong action, so here’s how to handle it correctly.
Let’s say you get an email from your broker telling you that your call options have been assigned away. I’ll use the example of the Microsoft (MSFT) December 2019 $134-$137 in-the-money vertical BULL CALL spread.
For what the broker had done in effect is allow you to get out of your call spread position at the maximum profit point 8 days before the December 20 expiration date. In other words, what you bought for $4.50 last week is now $5.00!
All have to do is call your broker and instruct them to exercise your long position in your (MSFT) December 134 calls to close out your short position in the (MSFT) December $137 calls.
This is a perfectly hedged position, with both options having the same expiration date, the same amount of contracts in the same stock, so there is no risk. The name, number of shares, and number of contracts are all identical, so you have no exposure at all.
Calls are a right to buy shares at a fixed price before a fixed date, and one option contract is exercisable into 100 shares.
To say it another way, you bought the (MSFT) at $134 and sold it at $137, paid $2.60 for the right to do so, so your profit is 40 cents, or ($0.40 X 100 shares X 38 contracts) = $1,520. Not bad for an 18-day limited risk play.
Sounds like a good trade to me.
Weird stuff like this happens in the run-up to options expirations like we have coming.
A call owner may need to buy a long (MSFT) position after the close, and exercising his long December $134 call is the only way to execute it.
Adequate shares may not be available in the market, or maybe a limit order didn’t get done by the market close.
There are thousands of algorithms out there which may arrive at some twisted logic that the puts need to be exercised.
Many require a rebalancing of hedges at the close every day which can be achieved through option exercises.
And yes, options even get exercised by accident. There are still a few humans left in this market to blow it by writing shoddy algorithms.
And here’s another possible outcome in this process.
Your broker will call you to notify you of an option called away, and then give you the wrong advice on what to do about it. They’ll tell you to take delivery of your long stock and then most additional margin to cover the risk.
Either that, or you can just sell your shares on the following Monday and take on a ton of risk over the weekend. This generates a ton of commission for the brokers but impoverishes you.
There may not even be an evil motive behind the bad advice. Brokers are not investing a lot in training staff these days. It doesn’t pay. In fact, I think I’m the last one they really did train.
Avarice could have been an explanation here but I think stupidity and poor training and low wages are much more likely.
Brokers have so many legal ways to steal money that they don’t need to resort to the illegal kind.
This exercise process is now fully automated at most brokers but it never hurts to follow up with a phone call if you get an exercise notice. Mistakes do happen.
Some may also send you a link to a video of what to do about all this.
If any of you are the slightest bit worried or confused by all of this, come out of your position RIGHT NOW at a small profit! You should never be worried or confused about any position tying up YOUR money.
Professionals do these things all day long and exercises become second nature, just another cost of doing business.
If you do this long enough, eventually you get hit. I bet you don’t.
Calling All Options!
https://www.madhedgefundtrader.com/wp-content/uploads/2018/11/Call-Options.png345522Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-07-13 09:02:172023-07-13 13:44:00A Note on Assigned Options, or Options Called Away
Investors are always looking for practical economic indicators they can use to help them make informed investing decisions. The best way to do this is to look at practical indicators in the world around you – like looking at products your friends are buying or what stores always seem to be crowded. The Baltic Dry Index (BDI) is a practical economic indicator on a global scale.
The Baltic Dry Index is a measure of what it costs to ship raw materials – like iron ore, steel, cement, coal, and so on – around the world. The Baltic Dry Index is compiled daily by The Baltic Exchange. To compile the index, members of the Baltic Exchange call dry bulk shippers around the world to see what their prices are for 22 different shipping routes around the globe. Once they have obtained these numbers, they compile them and find an average. To ensure they are getting a comprehensive view of the entire shipping industry when looking at various shipping costs, the Baltic Exchange looks at costs for each of the following four sizes of ships:
Capemax – (10% of the global fleet)
Panamax (19 % of the global fleet)
Handymax, or Supramax (37% of the global fleet)
Handysize (34% of the global fleet)
Why Investors Watch the Baltic Dry Index
The BDI is a leading indicator that provides a clear view of the global demand for commodities and raw materials. The fact that the Baltic Dry Index focuses on raw materials provides a glimpse into the future. Producers buy raw materials when they want to start building more finished goods and infrastructure – like automobiles, heavy machinery, roads, buildings, and so on. Producers stop buying raw materials when they have excess inventory and when they stop infrastructure projects.
Typically, demand for commodities and raw goods increases when global economies are growing. For investors, knowing when the global economy is growing is helpful because that means stock prices, commodity prices and the value of commodity-based currencies should be increasing. Conversely, demand for commodities and raw goods decreases when global economies are stalling or contracting. For investors, knowing when the global economy is contracting is helpful because that means stock prices, commodity prices and the value of commodity-based currencies should be decreasing.
The Baltic Dry Index is also a powerful indicator because it is a simple, real-time indicator that is difficult to manipulate. Some economic indicators – like unemployment rates, inflation indexes, and oil prices – can be difficult to interpret because they can be manipulated or influenced by governments, speculators, and other key players. The Baltic Dry Index, on the other hand, is difficult to manipulate because it is driven by clear forces of supply and demand. The demand that affects the Baltic Dry Index is the demand of commodity buyers who need the raw goods for production. It is difficult to manipulate or distort demand because it is calculated solely by those who have placed orders to have raw goods shipped. Nobody is going to pay to book a Capemax cargo ship that isn’t actually going to use it.
Interpreting the Baltic Dry Index
The Baltic Dry Index typically increases in value as demand for commodities and raw goods increases and decreases in value as demand for commodities and raw goods decreases.
When the BDI starts moving up:
-Global economies are starting to, or continuing to, grow
-Companies are starting to, or continuing to, grow
-Stock prices should start to, or continue to, increase in value
-Commodity prices should start to, or continue to, increase in value
-The value of commodity currencies – like the Canadian dollar (CAD), the Australian dollar (AUD), and the New Zealand dollar (NZD) – should start to, or continue to, increase in value.
If the Baltic Dry Index is turning down, the opposite happens. Global economies and companies start to contract. Stock and commodity prices start to decrease, and the value of commodity currencies starts to decrease.
So, catching up with The Baltic Dry Index occasionally seems like a good idea to me.
Have a great week.
Cheers,
Jacque
"Never let the fear of striking out keep you from playing the game." - Babe Ruth
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-07-12 16:10:402023-07-14 17:31:21July 12, 2023
Archaeology, the study of human history through the excavation of artifacts and structures, is an intricate and time-consuming process. However, the emergence of artificial intelligence (AI) has opened up new avenues for archaeologists to enhance their search for undiscovered archaeological sites. By leveraging AI technologies, such as machine learning and data analysis, archaeologists can streamline their efforts, uncover hidden patterns, and make more informed decisions regarding potential excavation sites. This article explores the exciting possibilities of AI in archaeology and highlights its potential to revolutionize the field.
One of the primary ways AI can aid archaeologists is through remote sensing techniques. Advanced satellite imagery, LiDAR (Light Detection and Ranging) technology, and drones equipped with high-resolution cameras can capture vast amounts of data from large areas. AI algorithms can then be employed to analyze this data, identifying subtle features or anomalies that may indicate the presence of archaeological sites beneath the surface. By using machine learning algorithms trained on known archaeological sites, AI can recognize patterns and potential indicators of hidden archaeological features, helping archaeologists narrow down their search areas.
AI can also assist archaeologists in predicting the likelihood of undiscovered archaeological sites in certain regions. By combining various datasets, including historical records, geological information, and environmental factors, AI algorithms can create predictive models. These models analyze the correlation between known archaeological sites and specific characteristics of the landscape to identify areas with a higher probability of harboring hidden sites. This enables archaeologists to prioritize their efforts and concentrate on areas that are more likely to yield significant discoveries.
Archaeological research often involves extensive literature reviews and analysis of historical documents. AI-powered text mining and document analysis can greatly speed up this process by automatically scanning and analyzing vast quantities of written materials. Natural language processing techniques allow AI to identify relevant keywords, extract meaningful information, and detect potential references to unexplored archaeological sites. This can provide archaeologists with valuable insights and direct them to previously overlooked locations or ancient civilizations.
AI can facilitate public engagement in archaeological research by harnessing the power of citizen science. Online platforms can encourage people from all over the world to contribute to archaeological discoveries by analyzing images, maps, or other data. AI algorithms can be employed to process and filter the inputs received from the public, helping to identify promising areas for further investigation. This collaborative approach not only accelerates the search for new dig sites but also raises public awareness and involvement in preserving our shared cultural heritage.
Midjourney Prompt: “AI archaeologist discovers ancient burial site”
Artificial intelligence has immense potential to revolutionize the field of archaeology, offering new tools and techniques for the discovery of unexplored dig sites. By leveraging AI's capabilities in remote sensing, predictive modeling, data analysis, and public engagement, archaeologists can optimize their efforts and make more targeted decisions regarding excavation sites. However, it is important to note that AI is a complementary tool to human expertise, and its successful implementation requires collaboration between archaeologists, data scientists, and domain experts. With continued advancements in AI technology, the future holds great promise for uncovering hidden chapters of our ancient past and deepening our understanding of human history.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Douglas Davenporthttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDouglas Davenport2023-07-12 16:07:522023-07-12 16:08:15Unleashing the Potential of AI in Discovering New Archeological Dig Sites
Everyone has been on pins and needles waiting for the U.S. CPI inflation report every month because of the volatile reaction to tech stocks.
Lately, it’s panned out well for tech.
It’s been almost like an ancient Incan ritual ever since Congress and the Fed pushed quantitative easing and stimuli to the moon resulting in spiking inflation over the past few years.
It appears as if we have finally turned the corner with the inflation rate dropping down to 3.0% YoY which was in line with expectations.
Coming down from 4%, the rolodex of normal asset reactions occurred such as higher tech stocks, higher spot gold price, lower US dollar, and spiking oil prices.
Ironically enough, the coming down from 4% could set the seeds for the next inflation reversal as Americans still have jobs and are likely to spend, spend, and spend more at these lower price points excluding oil.
In sum, the numbers could give the Federal Reserve some breathing room as it looks to bring down inflation that was running around a 9% annual rate at this time in 2022, the highest since November 1981.
The Fed will embrace this report as validation that their policies aren’t finally stinking up the joint – inflation has fallen while growth has not yet stalled.
However, central bank policymakers tend to look more at core inflation, which is still running well above the Fed’s 2% annual target. The report is unlikely to stop the central bank from raising rates again later this month.
When inflation first began to accelerate in 2021, Fed officials and most Wall Street economists thought it would be “transitory.”
They included surging demand for goods over services and supply chain clogs that created scarcity for vital items such as semiconductors.
However, when inflation proved more resilient than anticipated, the Fed began tightening.
During the inflation surge that peaked last June, worker wages had run consistently behind the cost-of-living increases.
Traders are still pricing in a strong possibility that the Fed will enact a quarter percentage point rate hike when it meets July 25-26. However, market pricing is pointing toward that being the last increase as officials pause to allow the series of hikes to work their way through the economy.
What does this mean for tech stocks?
Buy on the dip. Don’t need to make it more complicated than that.
Big tech such as Microsoft, Meta, Apple, and Google are up big this morning suggesting that consumers who have more purchasing power and higher real incomes will buy their products.
The lower inflation number also suggests that the Fed could be right about the “soft landing” which is also demonstrably positive for tech stocks.
Tech stocks don’t need any exogenous shocks to the system and in the short term, this effectively cancels out spiking inflation as a legitimate market risk to tech stocks.
It will be hard to topple tech stocks in the short-term and I’m not talking about orderly technical pullbacks.
Workers might start to be able to get ahead of the cost-of-living increases with slower price hikes.
The even larger challenge is getting from 3% to 2% because we now cross the point of when comparable prior data turns from tailwind to headwind.
If the Fed continues with these little 25 basis point hikes until the end of the year, nobody cares because most people are sitting on their sub-3% fixed 30-year mortgages and pouring their paycheck into tech stocks.
Ultimately, today’s report sets up for a positive last 5 months for tech even if we are technically stretched in the short term.
Buy tech on the dip.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-07-12 15:02:142023-07-12 22:55:17CPI Acts as Launching Pad for Tech Stocks
“By giving people the power to share, we're making the world more transparent.” – Said Co-Founder and CEO of Facebook Mark Zuckerberg
https://www.madhedgefundtrader.com/wp-content/uploads/2021/06/mark-zucherberg.png624340Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-07-12 15:00:112023-07-12 22:53:55Quote of the Day - July 12, 2023
There has been a lot of chin-wagging about whether we're on a collision course with a recession or on the upswing. I get it. It's as confusing as figuring out why Warren Buffet didn't invest in Apple (AAPL) sooner.
Still, there are stocks that, recession or not, will let you sleep like a baby. In the biotechnology and healthcare sector, Pfizer (PFE) stands out as one of those stocks. In bear markets, it fares well because, well, let's face it, health trumps wealth every time.
Now, you might look at Pfizer's recent earnings and think it's taken a bit of a tumble. No growth in revenue or EPS in the first quarter of 2023? That’s definitely worrisome. But hold your horses. Let's peel back the layers a bit to see the full picture.
Pfizer has been raking in the dough from its COVID-19 potions, especially its vaccine Comirnaty and therapy Paxlovid. With the COVID gold rush subsiding, the company reported a 29% dip in revenue in Q1, clocking in at $18.3 billion.
Remember, context is key. Strip out the COVID-19 products, and revenue has actually nudged up 5% YoY.
It’s the same story with the company's forecast.
Revenues are predicted to be between $67 billion and $71 billion, a drop of 29% to 33%. But subtract the COVID dollars and cents, and Pfizer's set to grow between 7% to 9%.
What's Pfizer doing with its COVID-19 windfall? It's not buying beachfront properties, that's for sure.
Instead, it has a staggering 101 programs in the pipeline, including 38 in phase 3 trials. This year, the company also had four new approvals, from new uses for Paxlovid and Prevnar 20 to a vaccine for older folks and a nasal spray for migraines.
But the market's jittery about the predicted revenue drop, causing the stock to tumble 21% this year. That just makes it a bargain.
Pfizer's trading at less than 8 times earnings makes it the frugal shopper's dream.
To sweeten the pot, Pfizer's upped its quarterly dividend by 2.5% to $0.41 a pop. That gives a yield of about 4%, twice the average of the S&P 500. More impressively, it's been doing this for 14 consecutive years.
However, Pfizer's not resting on its laurels.
Its latest move? A 7% stake in Caribou Biosciences (CRBU), a firm that's pushing the boundaries of gene-editing tech and cell therapies for cancer. It's like investing in a tech startup but with a biological twist.
Caribou's stock has taken a wild ride since it went public in 2021, peaking at over $30 and dipping to a recent low of $4. After Pfizer's buy-in, it jumped 46% to $5.94. A small stake of $25 million, but it's a clear sign that gene editing is back in the spotlight.
Moreover, Caribou's no one-trick pony.
It's testing treatments based on the Nobel Prize-winning CRISPR technology. This precision tool allows doctors to zero in on problematic DNA and tweak it. The potential for treatments for cancer and genetic disorders is mind-boggling.
Caribou currently has a pair of potential game-changers simmering in the preliminary stages.
First up is their experimental treatment, CB-010, aiming a direct hit at blood cancer lymphoma. This therapy manipulates immune cells to lock onto the cancer.
Picture them as bounty hunters of the body, genetically tweaked to bring down the cancerous bad guys.
To date, we've got a trio of these CAR-T therapies courtesy of other pharmaceutical giants in the game, but they all work on modifying the patient's immune cells. Unfortunately, not every patient’s cells are ripe for the CAR-T transformation.
This is where Caribou switches things up.
The biotech’s CAR-T therapy is akin to a supermarket for immune cells – off-the-shelf and ready for action. Through some nifty gene editing, immune cells from healthy volunteers are modified and packed for delivery.
In theory, these should pack more punch. And it seems they do, judging by Caribou's initial guinea pigs – six lymphoma patients who saw their cancer vanish without a trace after a rendezvous with Caribou's CAR-T.
Obviously, they’re not promising an everlasting disappearance, but a couple of these folks kept their cancer at bay for at least a year.
While Caribou isn't alone in the off-the-shelf CAR-T quest, they've put up a stellar performance so far against the likes of Intellia Therapeutics (NTLA) and CRISPR Therapeutics (CRSP).
Caribou’s pipeline also features another off-the-shelf CAR-T contender battling the blood disorder known as multiple myeloma. This therapy, dubbed CB-011, is what specifically caught Pfizer's eye. Basically, Pfizer’s investment has earned it the right to haggle for a license if another suitor comes courting for Caribou's star player.
But Caribou's act doesn't end here.
It has a growing ensemble featuring CB-012, a CAR-T cell therapy focused on recurrent or stubborn acute myeloid leukemia, and CB-020, another CAR-T variant for various stubborn tumors.
Pre-Pfizer deal, Caribou boasted a cash reservoir of $291 million, promising smooth sailing until around 2025.
Caribou promises an action-packed second half of 2023, with an update on CB-010's phase 1 trial safety and efficacy, a dose-escalation report for CB-011's phase 1 trial, and a new drug application for CB-012 targeting relapsed/refractory acute myeloid myeloma.
As with all biotechs in the clinical stage, though, it's a bit of a gamble. With some key milestones expected later this year, investors are watching with bated breath to see if the company can deliver.
If the dice roll the right way, Caribou could be a jackpot for Pfizer – and for savvy investors.
So if you're looking for a stock that has the potential to thrive despite market uncertainties, with a dash of excitement and a sprinkle of future possibilities, Pfizer could be your ticket.
Not only is it a reliable dividend payer, but its recent ventures show it's also not afraid to swing for the fences.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-07-11 17:00:162023-07-11 20:59:31A Calculated Gamble
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