Global Market Comments
February 19, 2025
Fiat Lux
Featured Trade:
(HOW TO HANDLE THE FRIDAY, FEBRUARY 21 OPTIONS EXPIRATION),
(AND MY PREDICTION IS….),
(TESTIMONIAL)
Followers of the Mad Hedge Fund Trader alert service have the good fortune to own three in-the-money options positions that expires on Friday, February 21, and I just want to explain to the newbies how to best maximize their profits.
This involves the:
Current Capital at Risk
Risk On
(NVDA) 2/$90-$95 call spread 10.00%
(VST) 2/$100-$110 call spread 10.00%
Risk Off
(TSLA) 2/$540-$550 put spread -10.00%
Total Net Position 10.00%
Total Aggregate Position 30.00%
Provided that we don’t have a monster move down in the market in two trading days, these positions should expire at their maximum profit points.
So far, so good.
I’ll take the example of the (TSLA) 2/$540-$550 put spread.
Your profit can be calculated as follows:
Profit: $10.00 expiration value - $8.80 cost = $1.20 net profit
(12 contracts X 100 contracts per option X $1.20 profit per option)
= $1,440 or 13.64% in 22 trading days.
Many of you have already emailed me asking what to do with these winning positions.
The answer is very simple. You take your left hand, grab your right wrist, pull it behind your neck, and pat yourself on the back for a job well done.
You don’t have to do anything.
Your broker (are they still called that?) will automatically use your long position to cover your short position, canceling out the total holdings.
The entire profit will be credited to your account on Monday morning, February 24, and the margin freed up.
Some firms charge you a modest $10 or $15 fee for performing this service.
If you don’t see the cash show up in your account on Monday, get on the blower immediately and find it.
Although the expiration process is now supposed to be fully automated, occasionally, machines do make mistakes. Better to sort out any confusion before losses ensue.
If you want to wimp out and close the position before the expiration, it may be expensive to do so. You can probably unload them pennies below their maximum expiration value.
Keep in mind that the liquidity in the options market understandably disappears, and the spreads substantially widen, when a security has only hours or minutes until expiration on Friday. So, if you plan to exit, do so well before the final expiration at the Friday market close.
This is known in the trade as the “expiration risk.”
One way or the other, I’m sure you’ll do OK, as long as I am looking over your shoulder, as I will be, always. Think of me as your trading guardian angel.
I am going to hang back and wait for good entry points before jumping back in. It’s all about keeping that “Buy low, sell high” thing going.
I’m looking to cherry-pick my new positions going into the next quarter end.
Take your winnings and go out and buy yourself a well-earned dinner.
Well done, and on to the next trade.
You Can’t Do Enough Research
Take those predictions, forecasts, and prognostications with so many grains of salt. They have a notorious track record for being completely wrong, even when made by the leading experts in their fields. In preparing for my autumn lecture series, I came across the following nuggets and thought I’d share them with you. There are some real howlers.
1876 “This 'telephone' has too many shortcomings to
be seriously considered as a means of communication.”
--Western Union internal memo.
1895 “Heavier than air flying machines are impossible.”
--Lord Kelvin, president of the Royal Society.
1927 "Who the hell wants to hear actors talk?"
--H.M. Warner, founder of Warner Brothers.
1943 “I think there is a world market for maybe five computers.”
--Thomas Watson, Chairman of IBM.
1962 “We don't like their sound, and guitar music
is on the way out.”
--Decca Recording Co. rejecting the Beatles, 1962.
1981 “640 kilobytes of memory ought to be enough for anybody.”
--Bill Gates, founder of Microsoft.
Thomas Watson of IBM
The Beatles
A Younger Bill Gates
I don't know what I would do without John Thomas's information. It is informative and entertaining. In the past 2 years, I have almost doubled my portfolio, something I couldn't have done on my own.
As a military member, he has enabled me to ensure that I will not only be able to retire on time but also help my children through college. If things keep going this well, I will be able to pay for their college.
Many blessings to you, John, and your staff.
Warm regards,
Charlie Moniz
US Military, deployed
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Biotech and Healthcare Letter
February 18, 2025
Fiat Lux
Featured Trade:
(A TALE OF TWO SHOTS)
(GILD), (MSFT)
The smell of antiseptic and sounds of beeping monitors filled the air as I walked through a Tokyo hospital ward back in 1975.
As a fresh UCLA biochemistry graduate working in Japan, I was visiting a friend who had contracted hepatitis B - a common affliction in Asia at the time.
Little did I know that decades later, I'd be analyzing a company that would revolutionize not just hepatitis treatment, but potentially end the AIDS epidemic as we know it.
That company is Gilead Sciences (GILD), and they just delivered a knockout Q4 that has Wall Street's attention.
But the real story here isn't in the numbers - though believe me, we'll get to those. It's about what's coming next.
Last week, Gilead reported Q4 revenue of $7.57 billion, beating estimates by $420 million. Not too shabby for a company some analysts had written off as past its prime.
And here’s another thing that got my attention: their new HIV prevention treatment, lenacapavir, achieved something I've rarely seen in four decades of following biotech - a standing ovation at the AIDS 2024 conference.
Why? Because it worked. Not just worked - it was 100% effective in one trial and 99.9% in another.
For perspective, that's like pitching a perfect game in the World Series, twice. And instead of daily pills, we're talking about two shots per year.
The FDA is expected to weigh in by summer 2025, and after seeing results like these, I'd bet my vintage Japanese sake collection on approval.
The numbers tell quite a story. Gilead's HIV franchise grew 16% year-over-year, with their flagship drug Biktarvy now commanding over 50% market share.
Even with Medicare Part D changes taking a $1 billion bite out of 2025 revenues (thanks, IRA), management still guided for $28.2-28.6 billion in revenue.
That's not just maintaining course - that's sailing straight through a hurricane without spilling your coffee.
Their oncology business isn't sleeping either. Trodelvy hit $1.3 billion in 2024 sales, up 19% from last year.
Their cell therapies Yescarta and Tecartus are performing like seasoned kabuki actors, bringing in $390 million and $98 million respectively in Q4.
On top of these, Gilead has over 50 clinical programs running simultaneously.
For those keeping score at home, that's more shots on goal than a World Cup final. And they don't face any major patent cliffs until late 2033 - practically an eternity in biotech years.
Speaking of shots on goal, let's talk about that stock price.
Shares have climbed from $71 to around $100 since my last recommendation. Not bad, but given what's in the pipeline, I think we're still in the early innings here.
The company's latest breakthrough, Livdelzi for liver disease, already pulled in $30 million in its first quarter.
Some analysts are talking about $2 billion in peak sales - and having seen my share of liver disease cases during my time in Asia, I wouldn't be surprised if they're being conservative.
Looking ahead to 2025, Gilead has several potential catalysts.
Two major Trodelvy trial readouts, potential lenacapavir approvals worldwide, and expansion into new markets.
They've come a long way since their Harvoni glory days of 2015, transforming from a one-hit wonder into a diversified powerhouse.
Is the stock cheap? Not as cheap as when I first recommended it. But with lenacapavir looking like it could change the game in HIV prevention, this feels like watching Microsoft (MSFT) in the early days of Windows - you know something big is coming, even if you can't quite see the whole picture yet.
The last time I saw scientific results this promising was during China's opening up in the late 1970s, when decades of isolated research suddenly became available to the world.
As for my friend from that Tokyo hospital? He recovered fully, thanks to medical advances that seemed impossible at the time.
Today's impossibilities have a funny way of becoming tomorrow's breakthroughs - and that's exactly why I'm rating Gilead a strong buy on any dips.
(WILL THE RESERVE BANK OF AUSTRALIA CUT RATES OR HOLD THIS WEEK?
February 18, 2025
Hello everyone
WEEK AHEAD CALENDAR
MONDAY FEB. 17
9:30 a.m. Philadelphia Reserve Bank President Harker speaks in “Global Interdependence Centre Central Banking Series Conference” with the University of the Bahamas.
10:30 p.m. Australia Rate Decision
Previous: 4.35%
Forecast: 4.10%
Markets closed for President’s Day Holiday.
TUESDAY FEB. 18
8:30 a.m. Empire State Index (February)
8:30 a.m. Canada Inflation Rate
Previous: 1.8%
Forecast: 1.8%
10 a.m. NAHB Housing Market Index (February)
Earnings: Arista Networks, Occidental Petroleum, Cadence Design Systems, International Flavors & Fragrances, Devon Energy, CoStar Group, Vulcan Materials
WEDNESDAY FEB. 19
2:00 a.m. UK Inflation Rate
Previous: 2.5%
Forecast: 2.4%
8:30 a.m. Building Permits preliminary (January)
8:30 a.m. Housing Starts (January)
2:00 p.m. FOMC Minutes
Earnings: CF Industries, Analog Devices, Trimble
THURSDAY FEB. 20
8:30 a.m. Continuing Jobless Claims (02/08)
8:30 a.m. Initial Claims (02/15)
8:30 a.m. Philadelphia Fed Index (February)
10:00 a.m. Leading Indicators (January)
6:30 p.m. Japan Inflation Rate
Previous: 3.6%
Forecast: 3.7%
Earnings: Live Nation Entertainment, Insulet, Booking Holdings, Akamai Technologies, Walmart, Hasbro, EPAM Systems, Quanta Services
FRIDAY FEB. 21
9:45 a.m. PMI Composite preliminary (February)
9:45 a.m. S&P PMI Manufacturing preliminary (February)
9:45 a.m. S&P PMI Services preliminary (February)
10:00 a.m. Existing Home Sales (January)
10:00 a.m. Michigan Sentiment final (February)
The market will tell us when the chaos turns “real”.
This year the market seems to be propped up every time it drops sharply.
Is that designed to suck everyone into the market before it well and truly peaks out?
Probably.
Is the market walking through all the noise Trump is making around tariffs, etc?
Yes, because it all seems like bluff and bluster.
Will the word chaos continue?
Yes.
And then, something will break, something will become real.
What it will be, I don’t know.
But I’m sure the media will explain it and how a field day after it happens.
Grok 3 is being launched by Elon Musk’s xAI in 24 hours
What is Grok 3?
Apparently, it is the ‘smartest AI on Earth. ’
It is said to have impressive speed and accuracy, with much better instruction-following capacity.
We shall wait for the demo.
The Reserve Bank of Australia is expected to cut interest rates this week
A cut would bring relief to mortgage holders, who have been waiting for this move since 2020.
But, a series of cuts is probably off the table because of concerns about inflation and the fallout from Donald Trump’s tariffs.
The broader market is pricing in a 90% chance of a cut on Tuesday. By that count, you would think it is almost a given. But many economists think this optimism is too extreme and is not getting carried away until the number is in.
If the Reserve Bank holds on Tuesday, it would be a shock to the market.
Star Entertainment Group may be bailed out by Oaktree Capital
Oaktree Capital has offered 65c in the dollar to buy The Star Entertainment Group’s debt as its future is looking more unsteady by the day.
Oaktree would be willing to provide a total of $650m in two debt facilities with a term of five years.
Star, which owns casinos in Sydney, the Gold Coast, and Brisbane, is exploring various options, including asset sales and raising further equity, as the company has doubt whether it can continue as a going concern.
MARKET UPDATE
S&P500
Choppy movement in the market and no sign yet of a peak.
Support = ~$6015/25
Resistance = ~$6145/55
GOLD
Gold is consolidating from its recent march up to $2943.
Will be looking for any slowing momentum to indicate a shift in this rally.
Support = ~$2,880/$2850/$2525
Resistance = ~$2909/$2940/$2975
BITCOIN
More of the same. More ranging, as we have seen over the last few months.
Support = ~$91k area. Support further down = ~$86/$86.50 area.
Resistance = ~$110/$110.70k area.
QI CORNER
Callum Thomas
Chart of the Week - MEEGA
Make European Equities Great Again... a new cyclical bull market is beginning.
If you’ve been fixated on the news flow around tariffs and stuck on the old narrative that Europe is doomed and can only regulate vs innovate, then you might have missed the fact that European equities are up over +10% YTD.
Change is in the air, a key set of breakouts and improving technical serve as a timely prompt to consider whether there’s more to this —and more left in the move…
What’s driving the strength in European Equities:
1. Valuations: unlike expensive US stocks, European stocks are still cheap/reasonably priced and trade at a record low valuation discount vs US. The thing I always emphasize is that when valuations reach such extremes, they have a habit of speaking for themselves; the rubber band eventually snaps back.
2. Monetary Policy: The European Central Bank began rate cuts earlier (June 2024) than the Fed and cut by a larger amount (from 4.5% to 2.9%); a tailwind for the economy and markets.
3. Geopolitics: Odds are the Russia/Ukraine conflict is going to be put on hold soon, and hopefully, an enduring and constructive peace deal can be reached. This will remove war-related costs, decrease uncertainty, take tail-risks of wider spillover off the table, and maybe even help Europe’s economy through rebuilding.
4. Politics: Germany is looking likely to see a shift in government from left to right in its upcoming elections (echoing the global trend as the pendulum swings). This will likely see a more growth/business-friendly regime, with the prospect of infrastructure investment, lower energy costs, and tax cuts. This positive shift will boost sentiment, and if pro-growth policies eventuate, it will be good for the rest of Europe as its largest economy accelerates.
5. Reforms: There is at least the intention to improve competitiveness, e.g., the Draghi report (400-page report on how to boost innovation and competitiveness; there is a strong likelihood at least some of the ideas get implemented) and moves toward greater focus on shareholder returns.
6. China: as I have noted, China’s economy is starting to turn up from recession and prolonged property market downturn, helped by incremental steps up in stimulus — this will be a boost for Europe’s luxury goods companies, and wider export demand (particularly if US tariffs prompt more trading between non-US countries).
As you can probably gather, some of these are somewhat short-term or already in the price, e.g., monetary policy easing and (geo)politics, but most of them are more medium/longer-term (enduring). So, in other words, I would say it looks like the rally and breakout in European equities is a sign of more things to come.
Basically, it’s time to discard the old narratives and biases on European equities as a new bull market gets underway…
Key point: European equities are breaking out and have ample room to run.
HISTORY CORNER
On this day
WORD OF THE WEEK
Bumfuzzle (derived from Old English – Dumfoozle)
Refers to being confused, flustered, bewildered, disoriented, or to cause confusion.
Are you bumfuzzled about the political landscape right now?
OR
Did the IKEA instructions to put a bed together completely bumfuzzle you?
SOMETHING TO THINK ABOUT
Cheers
Jacquie
Global Market Comments
February 18, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE TALE OF TWO MARKETS)
(GS), (TSLA), (NVDA), (VST)