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Tag Archive for: (AMZN)

Mad Hedge Fund Trader

Amazon Means Business

Tech Letter

The blockbuster announcement from Amazon (AMZN) regarding their 20:1 stock split is a big deal, and don’t listen to the charlatans who say otherwise.

Sure, on paper, the business model will be thriving just like it has been since its inception, but this piece of financial manipulation is genius.

Just think about it.

The reason for Amazon to need a stock split in the first place is because the stock has gone from the bottom left to the top right over time.

The best and most successful companies frequently execute stock splits and so even if one wants to spin it as a problem, it’s a problem that I wouldn’t mind having myself.

Splits are often a bullish sign since valuations get so high that the stock may be out of reach for smaller investors trying to stay diversified. Investors who own a stock that splits may not make a lot of money immediately, but they shouldn't sell the stock since the split is likely a positive sign.

Nominally cheap stocks have a massive psychological effect on the average investor.

I also don’t buy the BS about fractional shares, it’s like owning half a car.

Nobody wants that.

Investors also clamor for round numbers.

Would you rather own 5 shares of AMZN or 100 after the stock split?

Human psychology can’t be discounted here and, true to form, stock splits have been the precursor to even higher share prices.

Many companies decide to rinse and repeat and AMZN also unearthed a tidy $10 billion stock buyback plan.

So it’s no shock that this will be Amazon's 4th stock split in its history. The last split came in September 1999.

If shareholders approve of the split, it will begin trading on the new basis on June 6.

Big tech behemoths made hay when the sun was shining during the pandemic, and now they want to make it easy for the simple investors to get back into shares.

Bravo to them.

Other companies of its ilk have also partaken in stock splits like Tesla and Alphabet.

So this isn’t out of left field.

It just so happens that at the time of the stock split announcement, big tech has been the most oversold in the past 5 years.

Apple (AAPL) split its stock 4-for-1 in 2020s. Tesla's (TSLA) 5-for-1 stock split also occurred in 2020. Alphabet's (GOOGL) 20-for-1 stock split was announced in February.

Granted, at a fundamental level, things won’t be different at Amazon.

This doesn’t change the innards of the machine that was built for financial engineering from share buybacks to stock splits and the timing of it is also an important lever as every company tries to max out its genetic makeup.

Amazon shares are down about 9% in the past year, but I would attribute that more to too fast too soon.

Then we were hit by the onslaught of higher interest rate expectations and then the Ukrainian war.

Let’s be honest, the first 3 months of this year have been an absolute blood bath for equities, and AMZN doesn’t trade in a vacuum.

The extra kick in the teeth was the supply chain problem for the ecommerce juggernaut.

AMZN will come back as market sentiment starts to heal itself.

War won’t be a ubiquitous event around the Western world and I view the military escalation as an anomaly.

It’s not like AMZN is operating in Russia as well, or China for that matter.

It’s true that the events of the last few weeks have shined a spotlight on non-Democratic countries as a poor environment for business and in absolute disregard of the rule of law.

AMZN needs to operate in places where the law has teeth, otherwise, delivery packages would get stolen half the time with no recourse.

I feel the timing of the stock split is also indicative of a near short-term bottom in tech stocks.

 

amazon stock split

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-03-11 16:02:352022-03-25 19:25:29Amazon Means Business
Mad Hedge Fund Trader

March 3, 2022

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
March 3, 2022
Fiat Lux

Featured Trade:

CHEATING DEATH: ARE WE GETTING CLOSER TO IMMORTALITY?)
(AMZN), (FB), (GSK), (RHHBY), (GOOGL)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-03-03 16:02:192022-03-03 17:14:26March 3, 2022
Mad Hedge Fund Trader

Cheating Death: Are We Getting Closer to Immortality?

Biotech Letter

“Staving off death is a thing that you have to work at…If living things don’t actively work to prevent it, they would eventually merge with their surroundings and cease to exist as autonomous beings. That is what happens when they die.”

This is a quote from Richard Dawkins, which Jeff Bezos wrote to Amazon (AMZN) shareholders in his farewell letter. Needless to say, death and decay seem to be at the forefront of his mind these days.

That’s why it comes as no surprise that the founder of Blue Origin and, of course, Amazon (as well as Elon Musk’s favorite punching bag) has launched a company comprising renowned scientists and globally respected executives to realize his dream of developing immortality technology.

The company, called Altos Labs, is basically an anti-aging venture. While many people would probably mock the idea, this seemingly impossible wild concept has notable names backing it.

Bezos is not the only investor putting his money on this project.

Russian billionaire Yuri Milner, whose wealth expanded thanks to his strategic funding of Facebook (FB), along with Russian email service Mail.ru (MLRYY) and Russian social networking site VK, is also part of the mission.

In fact, the company was officially conceived in Yuri’s house in Palo Alto in the Los Altos hills, leading to the name Altos Labs. (Given that “Los Altos” means “the heights” in Spanish, they probably used it as a double entendre for Altos Labs’ goals.)

In addition to Yuri and Bezos, there are several other backers of Altos Labs.

While they aren’t specifically named, the mere fact that the startup has generated the most funding of virtually any biotechnology business at $3 billion is quite telling of how much faith investors have on this project.

And they wouldn’t be wrong.

Its remarkable roster of executives includes experts from GlaxoSmithKline (GSK), Roche’s (RHHBY) Genentech, and the National Cancer Institute.

Altos Labs not only has wealthy backers and esteemed executives on its board, it also has Nobel Prize-winning scientists working on its goals.

The highest-profile scientist they have is Shinya Yamanaka, who received the Nobel Prize in 2012 for his stem cell research.

His work, which focuses on cell “reprogramming,” can reverse the development of cells towards that of stem cells. In a nutshell, Yamanaka is working on a “backward aging” technology.

Part of the board is Juan Carlos Izpisúa Belmonte, who specializes in developing techniques to switch cells from one type to another.

He gained notoriety when he experimented on creating hybridized human and monkey embryos using Yamanaka’s technology.

Another member of Altos’ board is Jennifer Doudna, who shared the 2015 Breakthrough Prize with Yamanaka and later won the 2020 Nobel Prize for her co-discovery of CRISPR genome editing.

Although it’s a startup, the company will have offices in the San Francisco Bay Area, San Diego, Cambridge in the UK, and even Japan.

However, Altos Labs insists that it’s not chasing some impossible vision worthy of sci-fi movies.

Admittedly, most of the details about the project are still under wraps. But insiders say that Bezos and his crew seek to become the “Bell Labs” of biology.

The oversimplified explanation of its goal is that Altos Labs plans to reverse diseases, effectively regenerating new cells to help the body perform optimally.

Basically, they seek to come up with a biological reprogramming technology that can rejuvenate the cells and eventually revitalize human beings.

They target cells under pressure, including those with genetic abnormalities, suffering from injuries, or aging.

Using their reprogramming technology, they aim to create medications that can deliver one-time treatments for these conditions. Ultimately, these efforts will lead to a prolonged human life.

Further clarifying their mission, Altos explained that their goal is to extend “health span” and that boosting any longevity initiative would simply be considered an “accidental consequence.”

Inasmuch as Alto Labs is an exciting venture, it isn’t the first in the field. This startup joins the ranks of Calico Labs, which was launched in 2013 and funded by one of Google’s (GOOGL) co-founders, Larry Page.

Other startups working on reprogramming technology are Life Biosciences, Turn Biotechnologies, AgeX Therapeutics, and Shift Bioscience.

The quest to defeat death is a mission as old as time.

In response to this challenge, Alto Labs has put together an impressively pedigreed bunch.

Moreover, a solid and established connection is seen between aging clocks and reprogramming technology—all of which Alto Labs already have access to due to its roster of executives and scientists.

While the technology feels so farfetched, industry experts believe it holds indisputable and repeatable results.

These were already seen in laboratory experiments. However, these have only succeeded so far when applied to individual cells.

The technology can gather a cell from an 80-year-old and, via in vitro, reverse this age by as much as 40 years.

If this succeeds, Altos is poised to lead and dominate the “immortality” industry — a sector projected to be worth $600 billion by 2025 — soon.

alto labs

 

alto labs

 

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-03-03 16:00:172022-03-07 21:39:05Cheating Death: Are We Getting Closer to Immortality?
Mad Hedge Fund Trader

February 25, 2022

Diary, Newsletter, Summary

Global Market Comments
February 25, 2022
Fiat Lux

SPECIAL AMAZON ISSUE

Featured Trade:
(WHY AMAZON IS BEATING ALL), (AMZN)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-02-25 09:04:402022-02-25 12:08:41February 25, 2022
Mad Hedge Fund Trader

Why Amazon is Beating All

Diary, Newsletter

I believe there is a good chance that this creation of Jeff Bezos will see its shares double over the next five years.

Amazon, is in effect, taking over the world.

Jeff Bezos, born Jeff Jorgensen, is the son of an itinerant alcoholic circus clown and a low-level secretary in Albuquerque, New Mexico. When he was three, his father abandoned the family. His mother remarried a Cuban refugee, Miguel Bezos, who eventually became a chemical engineer for Exxon.

I have known Jeff Bezos for so long he had hair when we first met in the 1980s. He was a quantitative researcher in the bond department at Morgan Stanley, and I was the head of international trading.

Bezos was then recruited by the cutting-edge quantitative hedge fund, D.E. Shaw, which was making fortunes at the time, but nobody knew how. When I heard in 1994 that he left his certain success there to start an online bookstore, I thought he’d suffered a nervous breakdown, common in our industry. 

Bezos incorporated his company in Washington state later that year, initially calling it “Cadabra” and then “Relentess.com.” He finally chose “Amazon” as the first interesting word that appeared in the dictionary, suggesting a river of endless supply. When I learned that Bezos would call his start-up “Amazon,” I thought he’d gone completely nuts.

Bezos funded his start-up with a $300,000 investment from his parents who he promised stood a 75% chance of losing their entire investment. But then his parents had already spent a lifetime running Bezos through a series of programs for gifted children, so they had the necessary confidence.

It was a classic garage start-up with three employees based in scenic Bellevue, Washington. The hours were long with all of the initial effort going into programming the initial site. To save money, Bezos bought second-hand pine doors which he placed on sawhorses, which stood in for proper desks.

Bezos initially considered 20 different industries to disrupt, including CDs and computer software. He quickly concluded that books were the ripest for disruption, as they were cheap, globally traded, and offered millions of titles.

When Amazon.com was finally launched in 1995, the day was spent fixing software bugs on the site, and the night wrapping and shipping the 50 or so orders a day. Growth was hyperbolic from the get-go, with sales reaching $20,000 a week by the end of the second month.

An early problem was obtaining supplies of books when wholesalers refused to offer him credit or deliver books on time. Eventually, he would ask suppliers to keep a copy of every book in existence at their own expense, which could ship within 24 hours.

Venture capital rounds followed, eventually raising $200 million. Early participants all became billionaires, gaining returns of 10,000-fold or more, including his trusting parents. There is one guy out there who missed becoming a billionaire because he didn’t check his voicemail often enough, which invited him into the initial funding round.

Bezos put the money to work, launching into a hiring binge of epic proportions. “Send us your freaks,” Bezos told the recruiting agencies, looking for the tattooed and the heavily pierced who were willing to work in shipping late at night for low wages. Keeping costs rock bottom was always an essential part of the Amazon formula.

Bezos used his new capital to raid Walmart (WMT) for its senior distribution staff, for which it was later sued.

Amazon rode on the coattails of the Dotcom Boom to go public on NASDAQ on May 15, 1997 at $18 a share. The shares quickly rocketed to an astonishing $105, and in 1999 Jeff Bezos became Time Magazine’s “Man of the Year.”

Unfortunately, the company committed many of the mistakes common to inexperienced managements with too much cash on their hands. It blew $200 million on acquisitions that, for the most part, failed. Those include such losers as Pets.com and Drugstore.com. But Bezos’s philosophy has always been to try everything and fail them quickly, thus enabling Amazon to evolve 100 times faster than any other.

Amazon went into the Dotcom crash with tons of money on its hands, thus enabling it to survive the long funding drought that followed. Thousands of other competitors failed. Amazon shares plunged to $5.

But the company kept on making money. Sales soared by 50% a month, eventually topping $1 billion by 2001. The media noticed Wall Street took note. The company moved from the garage to a warehouse to a decrepit office building in downtown Seattle.

Amazon moved beyond books to compact disc sales in 1999. Electronics and toys followed. At its New York toy announcement, Bezos realized that the company actually had no toys on hand. So, he ordered an employee to max out his credit card cleaning out the local Hammacher Schlemmer just to obtain some convincing props.

A pattern emerged. As Bezos entered a new industry, he originally offered to run the online commerce for the leading firm. This happened with Circuit City, Borders, and Toys “R” Us. The firms then offered to take over Amazon, but Bezos wasn’t selling.

In the end, Amazon came to dominate every field it entered. Please note that all three of the abovementioned firms no longer exist, thanks to extreme price competition from Amazon.

Amazon had a great subsidy in the early years as it did not charge state sales tax. As of 2011, it only charged sales tax in five states. That game is now over, with Amazon now collecting sales taxes in all 45 states that have them.

Amazon Web Services originally started out to manage the firm’s own website. It has since grown into a major profit center. Full disclosure: Mad Hedge Fund Trader is a customer.

Amazon entered the hardware business with the launch of its e-reader Kindle in 2007. The Amazon Echo smart speaker followed in. This is despite news stories that it records family conversations and randomly laughs.

Amazon Studios started in 2010, run by a former Disney executive, pumping out a series of high-grade film productions. In 2017, it became the first streaming studio to win an Oscar with Manchester by the Sea with Jeff Bezos visibly in the audience at the Hollywood awards ceremony.

Its acquisitions policy also became much more astute, picking up audio book company Audible.com, shoe seller Zappos, Whole Foods, and most recently PillPack. Since its inception, Amazon has purchased more than 86 outside companies. Make that 89 with MGM Entertainment.

Sometimes, Amazon’s acquisition tactics are so predatory they would make John D. Rockefeller blush. It decided to get into the discount diaper business in 2010, and offered to buy Diapers.com, which was doing business under the name of “Quidsi.” The company refused, so Amazon began offering its own diapers for sale 30% cheaper for a loss. Diapers.com was driven to the wall and caved, selling out for $545 million. Diaper prices then popped back up to their original level.

Welcome to online commerce.

At the end of 2021, Amazon boasted some one million employees worldwide. In fact, it has been the largest single job creator in the United States for the past decade. Also, this year, it disclosed the number of Amazon Prime members at 100 million, then raised the price from $120 to $139 a year, thus creating an instant $2 billion in profit.

The company’s ability to instantly create profit like this is breathtaking. And this will make you cry.

So, what’s on the menu for Amazon? There is a lot of new ground to pioneer.

1) Health Care is the big one, accounting for $3 trillion, or 17% of U.S. GDP, but where Amazon has just scratched the surface. Its recent $1 billion purchase of PillPack signals a new focus on the area. Who knows? The hyper-competition Bezos always brings to a new market would solve the American health care crisis, which is largely cost-driven. Bezos can oust middlemen like no one else.

2) Food is the great untouched market for online commerce, which accounts for 20% of total U.S. retail spending, but sees only 2% take place online. Essentially, this is a distribution problem, and you have to accomplish this within the prevailing subterranean 1% profit margins in the industry. Books don’t need to be frozen or shipped fresh. Walmart (WMT) will be target No. 1, which currently gets 56% of its sales from groceries. Amazon took a leap up the learnings curve with its $13.7 billion purchase of Whole Foods (WFC) in 2017. What will follow will be interesting.

3) Banking is another ripe area for “Amazonification,” where excessive fees are rampant. It would be easy for the company to accelerate the process through buying a major bank that already had licenses in all 50 states. Amazon is already working the credit card angle.

4) Overnight Delivery is a natural, as Amazon is already the largest shipper in the U.S., sending out more than 1 million packages a day. The company has a nascent effort here, already acquiring several aircraft to cover its most heavily trafficked routes. Expect FedEx (FDX), UPS (UPS), DHL, and the United States Post Office to get severely disrupted.

5) Clothing-Amazon has already surpassed Walmart this year as the largest clothing retailer. The company has already launched 76 private labels, with half of them in the fashion area, such as Clifton Heritage (color and printed shirts), Buttoned Down (100% cotton shirts), and Goodthreads (casual shirts) as well as subscription services for all of the above.

6) Furniture is currently the fastest growing category at Amazon. Customers can use an Amazon tool to design virtual rooms to see where new items and colors will fit best.

7) Event Ticketing firms like StubHub and Ticketmaster are among the most despised companies in the U.S., so they are great disruption candidates. Amazon has already started in the U.K., and a takeover of one of the above would ease its entry into the U.S.

If only SOME of these new business ventures succeed, they have the potential to DOUBLE Amazon’s shares from current levels, taking its market capitalization up to $3.2 trillion. Perhaps this explains why institutional investors continue to pour into the shares.

Whatever happened to Bezos’s real father, Ted Jorgensen?

He was discovered by an enterprising journalist in 2012 running a bicycle shop in Glendale, Arizona. He had long ago sobered up and remarried. He had no idea who Jeff Bezos was. Ted Jorgensen died in 2015.

Bezos never took the time to meet him. Too busy running Amazon, I guess. Worth over $300 billion, Bezos is now the second richest man in the world after Elon Musk.

 

Second Richest Man in the World

https://www.madhedgefundtrader.com/wp-content/uploads/2022/02/2nd-richest.png 316 560 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-02-25 09:02:362022-02-25 12:07:39Why Amazon is Beating All
Mad Hedge Fund Trader

February 17, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
February 17, 2022
Fiat Lux

Featured Trade:

(ANOTHER 130 MILLION PEOPLE JUMP ON THE CRYPTO WAGON)
(BTC), (AMZN), (GOOGL), (MSFT)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-02-17 16:04:062022-02-17 18:06:39February 17, 2022
Mad Hedge Fund Trader

Another 130 Million People Jump on the Crypto Wagon

Bitcoin Letter

First Turkey and now Ukraine.

Yes, these are two sovereign currencies, the lira and the hryvnia, that have absolutely lost any credibility whatsoever.

We forget that there are many of these banana republics out there that might as well adopt some sort of alternative currency.

El Salvador anointed Bitcoin their national currency and now that isn’t as bizarre as it first seemed.

Americans sometimes forget that the pandemic ripped through emerging nations like a hot knife through butter and there were no stimuli or handouts, let alone handouts for corporations, and there has never been a longer queue for U.S. green cards.

Well, Russia is on Ukraine’s doorstep and the threat of it crowding the Ukraine border means that no foreign capital or investment will penetrate Ukraine for the foreseeable future.

Every Ukrainian under 40 years old is now making a mad dash for higher ground to the European Union or if they can, the United States, United Kingdom, or Canada.

The Ukrainian hryvnia has lost 10% of its value in a few days and this could be a beginning of a much bigger collapse in purchasing power for Ukrainians who don’t leave.

It could trigger a vicious cycle all the way to zero where like a hot potato, Ukrainian citizens try to rid themselves of local currency as fast as possible.

Like I said, there are others out there, pretty much every ex-Soviet republic not in the European Union of the likes of Georgia, Kazakhstan, Moldova, Azerbaijan, and Armenia of the South Caucasus.

When you add up the population of the likes of Uzbekistan and such, then that totals roughly 130 million people.

These 130 million people, like El Salvadoreans, would be foolish not to adopt Bitcoin if they can’t secure US dollars.

For people who haven’t traveled to these esoteric places, US dollars are in high demand and hard to find and families hold on to them for dear life.

So if the choices are Bitcoin or worthless paper, then between those two, the decision is rather straightforward.

Ukrainians are slowly coming to the realization that these are their options.

Don’t think that any one of these similar countries is immune to political strife or war either.

Georgia has already given up a sliver of their country to Russia already.

And in an incredible set of events, the Government of Ukraine has passed a law that legalizes Bitcoin and other cryptocurrencies.

The law grants legal status to virtual assets. The law not only grants users the right to operate cryptocurrencies but also defines the clear rights and duties of all market participants.

The Ukraine’s government also approved the law on cloud services as a whole. The bill’s goal is to create conditions for the processing and protection of data when using cloud computing technology, as well as providing cloud services and determining the specifics of public authorities’ use of cloud services, as well as more efficient use of public resources through the introduction of new technologies.

The new law will expedite the entry in Ukraine of the world’s top cloud service providers – Microsoft (MSFT), Amazon Web Services (AMZN), and Google (GOOGL) Cloud – and encourage the construction of data centers.

The Ministry of Digital Development has previously said that it planned to expand the market for “virtual assets.”

Virtual assets are divided into two categories in the draught law: secured and unsecured virtual assets.

A secured VA is an asset that verifies property or non-property rights, such as the right of claim on other objects like stable coins, and is secured by fiat currency, securities, or any sort of offline asset.

All other sorts of cryptocurrencies and crypto-based assets, such as non-stable coins like Bitcoin, non-fungible tokens, and so on, are classified as unsecured VAs.

Therefore, it’s not surprising to find out in the latest data that adoption into Bitcoin and other crypto in Ukraine has skyrocketed.

Non-profit donors looking for donations are also being paid via Bitcoin.

The rapid legislation of course would not have occurred if not for the Russian situation, but either way, adoption is adoption and add another 50 million or so Ukrainians to Bitcoin’s growth story.

Eventually, Africa and South America will join the adoption phase as they also preside over rapidly depreciating fiat currency.

I’m shocked that Argentina hasn’t ventured this way yet, put them down for the next country in the crypto queue.

Even if Bitcoin is suffering a bout of weakness due to exogenous shocks, the long-term price trajectory is well above $100,000.

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2022/02/bitcoin-feb1722.png 434 994 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-02-17 16:02:432022-02-17 18:06:19Another 130 Million People Jump on the Crypto Wagon
Mad Hedge Fund Trader

February 15, 2022

Diary, Newsletter, Summary

Global Market Comments
February 15, 2022
Fiat Lux

Featured Trades:

(HOW TO HANDLE THE FRIDAY, FEBRUARY 18 OPTIONS EXPIRATION),
(TLT), (SPY), (BRKB), (TSLA), (MSFT), (AMZN)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-02-15 09:04:442022-02-15 10:29:04February 15, 2022
Mad Hedge Fund Trader

How to Handle the Friday February 18 Options Expiration

Diary, Newsletter

Happy and newly enriched followers of the Mad Hedge Fund Trader Alert Service have the good fortune to own a record ten deep in-the-money options positions that expire on Friday, February 18 at the stock market close in three days.

I have to admit that I traded like a Wildman this month, pedal to the metal, and 100% invested. This will take our 2022 year-to-date performance to over 24%. I like to think that is the end result of my 53 years investment in researching trading strategies.

Sometimes overconfidence works.

It is therefore time to explain to the newbies how to best maximize their profits.

These involve the:

Risk On

World is Getting Better

(TLT) 2/$149-$152 put spread               10.00%
(TLT) 2/$147-$150 put spread               10.00%
(TLT) 3/$150-$153 put spread               10.00%
(BRKB) 2/$270-$280 call spread         10.00%
(TSLA) 2/$600-$650 call spread          10.00%

Risk Off

World is Getting Worse

(MSFT) 2/$340-$350 put spread         -10.00%
(SPY) 2/$465-$475 put spread             -10.00%
(SPY) 3/$470-$480 put spread            -10.00%
(AMZN) 2/$3400-$3500 put spread  -10.00%
(TLT) 3/$127-$130 call spread              -10.00%

Total Net Position                                        0.00%

Total Aggregate Position                        100.00%

Provided that we don’t have another 2,000-point move down in the market in the next three days, these positions should expire at their maximum profit points.

So far, so good.

I’ll do the math for you on our deepest in-the-money position, the Tesla (TSLA) February 18 $600-$650 vertical bull call spread, which 50% in the money from its lower strike price which I almost certainly will run into expiration. Your profit can be calculated as follows:

Profit: $50.00 expiration value - $43.00 cost = $7.00 net profit

(2 contacts X 100 contracts per option X $7.00 profit per option)

= $1,400 or 16.28% in 15 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 21 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 make your broker 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, February 18. 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 month-end.

Take your winnings and go out and buy yourself a well-earned dinner. Just make sure it’s take-out. I want you to stick around.

Well done, and on to the next trade.

 

You Can’t Do Enough Research

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Mad Hedge Fund Trader

February 14, 2022

Diary, Newsletter, Summary

Global Market Comments
February 14, 2022
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or WELCOME TO WORLD WAR III),
(TLT), (SPY), (MSFT), (AMZN), (BKKB), (AAPL)

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