Global Market Comments
February 4, 2020
Fiat Lux
Featured Trade:
(MEET THE ITALIAN LEONARDO FIBONACCI)
I suggested a short term debit spread on NET and with the way the market has been trading, I want to close this position quickly.
Because I did not suggest a lot of time when I suggested the position, I feel it is better to close the trade out and take a small loss.
Here is how to close the trade.
Sell to Close the February $17.50 call for $1.20
Buy to Close the February $20.00 call for $0.55
The net loss will be a nominal $30 overall, if you traded the suggested 6 lot.
Today, I would like to make a suggestion on a stock that, like a lot of stocks recently, is oversold. That stock is NetApp Inc (NTAP).
NTAP is trading right at the extreme lower band on its 60 minute chart which is $54.32.
As I write this, it is trading around $54.47 or just above this level.
NTAP does report the 12th, after the close.
The suggestion will be an unequal straddle with a bullish bias.
The idea will be buying 2 calls for every 1 put.
This trade benefits if the stock bounces ahead of earnings. And an additional benefit could be IV expansion as it trades closer to the earnings date.
We will give the trade a few days to see if it does move and if it doesn't, I will close this quickly.
Buy to Open (2) February 14th - $54.50 calls @ $2.07. The 2 calls will cost $4.14
Buy to Open (1) February 14th - $54.50 put @ $2.06
Based on the nominal portfolio, limit the trade to a 2 lot or a total of $1,240. This is a 1.2% risk based on the nominal portfolio.
The end result if you trade the suggested position size, is that you will own (4) February 14th - $54.40 calls and (2) February 14th - $54.50 puts.
Mad Hedge Technology Letter
February 3, 2020
Fiat Lux
Featured Trade:
(CAN’T HOLD DOWN AMAZON)
(AMZN)
The recent Chinese pandemic over the coronavirus is overshadowing a sensational start to tech earnings.
The big have only gotten bigger!
Apple, Microsoft, and now Amazon and Founder Jeff Bezos have clearly tweaked the business into a well-oiled machine.
I won’t lie – expectations were a little shaky going into the earnings’ report because of expense worries on turning the 2-day free shipping for Amazon Prime members into a 1-day affair.
The narrative was whether Amazon could deliver enhancements that could overcome the high cost of making Amazon Prime better.
It’s not cheap to make the logistical improvements in the warehouses and transportation functions.
A lot of money has been poured into air cargo transport efficiency and last-mile developments as well.
Profitability was supposed to bear the brunt of the expense surge, but just take a peek at EPS performance of $6.47 per share vs. expectations of $4.03 per share, and rejoice in relief that expense worries were overblown.
The only conclusion that I can make is that the spoils from investments into logistics have outweighed the costs of the investments.
In total, revenue expanded 21% to $87.44 billion for the quarter which is a robust growth trajectory for a company as gargantuan as Amazon.
Amazon unleashed the head turner metric this time around too sharing that Amazon already has over 150 million Amazon Prime members.
That is almost the equivalent of half of the U.S. population paying Amazon $119 per year.
The higher logistic costs were deemed necessary to stay in front of the rest and expectedly ballooning costs showed up in the earnings report with shipping expenses up 43% year over year to $12.9 billion.
Other segments of the business have been just as prolific as Kansas City Chief’s quarterback Patrick Mahomes.
Streaming and subscriptions pulled in a massive $5.24 billion for the quarter, up 32% from the year-ago period.
Amazon’s cloud business AWS was up 19% to almost $10 billion last quarter.
The 19% represents a significant slowdown from the 35% they grew during the 3rd quarter of last year but still brings in the lion's share of the profits.
Are there any other dark horse growth drivers in Amazon’s arsenal?
Certainly, Amazon’s advertising segment can be pigeonholed as the rising star and generated $4.8 billion in revenue during the quarter, a 41% increase from the year-ago period.
Amazon is also bullish on the Amazon’s “stores,” allowing the company to customize and curate a multipage digital storefront.
Stores are getting a refresh and the company has added features like shoppable images and the ability to schedule updates like new releases or seasonal changes.
Other advertising tools like the ability for brands to create posts, which consumers can view to discover products and brands through a curated feed, will help the company become an advertising juggernaut.
The company launched “Posts” in beta last year which shows that Amazon plans to double down in marketing.
The marketing space serves as a critical area for incremental growth potential and profitability flow-through.
This is because the marketing space is the largest and least penetrated total addressable market, ahead of retail, cloud, and business-to-business segments.
Amazon is a sure-fire buy and hold tech company because it simply is the second-best tech company behind Microsoft.
There will also be opportunities to trade this short-term from the long side, but the volatility might turn off some investors.
“Our philosophy is that we care about people first.” – Said Seller of User Data Mark Zuckerberg
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
February 3, 2020
Fiat Lux
Featured Trade:
(MEET THE GREEKS)
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points. Read more
Global Market Comments
January 31, 2020
Fiat Lux
Featured Trade:
(LEARNING THE ART OF RISK CONTROL)
