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Tag Archive for: (MSFT)

Mad Hedge Fund Trader

June 21 Biweekly Strategy Webinar Q&A

Diary, Free Research, Newsletter
bringing back the gold standard

Below please find subscribers’ Q&A for the June 21 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, NV.

Q: When do we buy Nvidia (NVDA) and Tesla (TSLA)?

A: On at least a 20% dip. We have had ballistic moves—some of the sharpest up moves in the history of the stock market for large stocks—and certainly the greatest creation of market caps since the market was invented under the Buttonwood Tree in 1792 at 68 Wall Street. Tesla’s almost at a triple now. Tripling one of the world's largest companies in 6 months? You have to live as long as me to see that.

Q: Is it a good time to invest in Bitcoin?

A: No, absolutely not. You only want to invest in Bitcoin when we have an excess of cash and a shortage of assets. Right now, we have the opposite, a shortage of cash and an excess of assets, and that will probably continue for several years.

Q: Should I short Apple (APPL)?

A: Only if you’re a day trader. It’s hugely overbought for the short term, but still in a multiyear long-term uptrend. I think we could see Apple at $300 in the next one or two years.

Q: Is it better to focus on single stocks or ETFs?

A: Single stocks always, because a single stock will outperform a basket that's in an ETF by 2 to 1 or even 3 to 1. That's always the case; whenever you add stocks to a basket, it diversifies risk and dilutes the performance. Better to just own Tesla, and if you want to diversify, diversify to Nvidia, but then I live next door to these two companies. That's what I tell my friends. You only diversify if you don’t know what is going to happen, which is most investors and financial advisors.

Q: Is the bottom of the housing market in, and are we due for a spike in home prices when interest rates can only go lower?

A: Yes, absolutely. In fact, we will enter a new 10-year bull leg for housing because we have a structural shortage of 10 million homes and 82 million millennials desperately trying to buy them at any price. I just got a call from my broker and she is panicking because she is running out of inventory. Even the lemons are starting to move.

Q: When do you think energy will rise?

A: Falling interest rates could be a good key because it sets the whole global economy on fire and increases energy demand.

Q: Outlook for the S&P 500 (SPY) second half of the year?

A: We hit 4,800 at least, maybe even higher. That's about a little more than 10% from here, so it’s not that much of a stretch, not like it was at the beginning of the year when it needed to rise 25% to reach my yearend target.

Q: Best time to invest from here on?

A: Either a 10% pullback in the market, or a sideways move of 3 months—that's called a time correction. It usually counts as a price correction because of course, over 3 months, earnings go up a lot, especially in tech.

Q: I’m seeing grains (WEAT) in rally mode.

A: Yes, that's true. They are commodities, and just like copper’s been rallying, and it’s yet another signal that we may get a much broader global commodity rally in everything: iron ore, coal, energy, gold, silver, you name it.

Q: Will inflation drop to 2%, causing stocks to go on another epic run?

A: The answer is yes, I do see inflation dropping to 2% —maybe not this year, but next year; not because of any action the Fed is doing, but because technology is hyper-accelerating, and technology is highly deflationary. The tech product you bought two years ago is now half the price, and they offer you twice as much functionality with an auto-renew for life. So, that is happening across the entire technology front and feeds into the inflation numbers big time, including labor. There's going to be a lot of labor replacement by machines and AI in the coming years.

Q: Is Airbnb (ABNB) a good stock to buy?

A: Well, if we’re going into the most perfect travel storm of all time, which is this summer, and which is why I’m going to remote places only like Cortina, Italy. Airbnb is the perfect stock to own. It’s a well-run company even in normal times.

Q: Should I buy gold here on the pullback?

A: Yes, you should. Gold is also highly sensitive to any decline in interest rates, and by the way: buy silver, it always moves 2.5x as much as the barbarous relic. 

Q: How can inflation not go up if commodities and wage demands are going up due to state and federal unions? What about farm equipment and truck supplies? Costs keep rising, should we buy John Deere (DE)?

A: There are three questions here. Inflation will not go up because, though commodities will rise, they are only 0.6% of the $100 trillion global economy, or $660 billion in 2022. That will be more than offset by technology cutting prices, which is 30% of the stock market. You have to realize how important each individual element is in the global picture. And regarding wage demands going up caused by state and federal unions, less than 11.3% of the workforce is now unionized and that figure has been declining for 40 years. Most growth in the economy has been in non-unionized technology firms which largely depend on temporary workers, by design. What IS unionized is mostly teachers, the lowest paid workers in the economy, so incremental pay rises will be small. Unions were absolutely slaughtered when 25 million jobs were offshored to China during the Bush administration. Buy farm equipment and trucks? Absolutely, buy John Deere (DE) and buy Caterpillar (CAT) on the next dip. I was actually looking at Caterpillar for the next LEAPS the other day, but it’s already had a big run; I'm going to wait for a pullback before I get CAT and John Deere. So, again, people see headlines, see union wage headlines—I say focus on the 89% and not on the 11% if you want to make good decisions.

Q: Is Boeing (BA) a buy on the dip?

A: Yes, they got 1,000 new aircraft orders and the stock hasn't moved. So yes, if you get any kind of selloff down to $200, I'd be hoovering this thing up.

Q: Can you please explain how the profit predictor works?

A: It’s a long story; just go to our website, log in and do a search for “profit predictor,” and you’ll get a full explanation of how it works. It’s actually where Mad Hedge has been using artificial intelligence for 11 years, which is why our performance has doubled. Just for fun, I'll run the piece next week.

Q: Gold (GLD) is having a hard time going up because Russia is being squeezed by other governments. Since they need cash, they may be either selling their gold or stop buying new gold.

A: That is a good point, but at the end of the day, interest rates are the number one driver of all precious metals—period, end of story. We’re long gold too, I’ve got lots of gold coins stashed around the world in various safe deposit boxes, and I'm keeping them. I’ve got even more silver coins, which take up a lot of space.

Q: Do you like India (INDA) long term?

A: Yes, it’s the next China. But as Apple is finding out it is very difficult to get anything done there. A radical reforming Prime Minster Modi may be changing things there with his recent Biden visit and (GE) contract to build jet engines.

Q: What do you think of General Dynamics Corp (GD)?

A: I like General Dynamics because I think defense spending is in a permanent long term upcycle as a result of the Ukraine war. And it won’t end with the Ukraine war—the threat will always be out there, and the buying is done by not only us but all the other countries that think Russia is a threat.

Q: Do you like MP Materials Corp (MP)?

A: Yes, I do. The whole commodities space is ready to take off and go on fire.

Q: What about Square (SQ)?

A: The only reason I’m not recommending Square right now is huge competition in the entire sector, where all the stocks including PayPal (PYPL) are getting crushed. I will pass on Square for now, especially when I can buy US Steel (X) at close to its low for the year.

Q: If you had to pick one: Nvidia (NVDA), Tesla (TSLA), Microsoft (MSFT), Meta (META), and Google (GOOGL), which is the best to buy for next year?

A: All of them. Diversify. If I have to pick the top performer, it’s going to be either Tesla or Nvidia, probably Nvidia. But you need at least a 10% correction before you do anything. Actually, the split-adjusted price for our first (NVDA) recommendation eight years ago was $2 a share.

Q: Do you like Crown Castle International (CCI)?

A: Yes, I like it very much—it has very high dividend yield at 5.5%. The reason it hasn’t moved yet is that as long as interest rates are high, any REIT structure will suffer, and (CCI) has a REIT structure. Sure, it’s in a great sector—5G cell towers—but it is still a REIT nonetheless, and those will start to recover when interest rates go down; that’s why we did a 2.5-year LEAPS on CCI. For sure interest rates are going to go down in the next 2.5 years, and you will double your money on (CCI). That’s why we put it out.

Q: Which mid cap will do best over the long term: Airbnb (ABNB), Snowflake (SNOW), or Palantir (PLTR)?

A: That’s easy: Snowflake. They have such an overwhelming technology on the database and security front; I would be buying Snowflake all day long. Even Warren Buffet owns Snowflake, so that’s good enough for me.

Q: Could you comment on the pace of EV adoption/potential for (TSLA) robot fleet acceleration and implications for oil investments in holding pattern till the eventual collapse to near 0?

A: Yes, oil may collapse to near zero, but it may take twenty years to do it—that’s how long it takes to transition an energy source. That’s how long it took the move from horses and hay to gasoline-powered cars at the beginning of the 20th century. A national robot fleet of taxis with no drivers at all is a couple of years off. There are about 1,000 of them working in San Francisco right now, but they still have more work to do on the software. When it gets foggy, they often congregate at intersections causing traffic jams. Suffice it to say that eventually Tesla shares go to $1,000 and after that, $10,000—that’s my bet. By the way, my Tesla January 2025 $595-$600 LEAPS are starting to look pretty good.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.

Good Luck and Stay Healthy,

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

 

bringing back the gold standard

2018 in Australia

https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/john-thomas-03.jpg 400 400 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-06-23 09:02:392023-06-23 15:53:43June 21 Biweekly Strategy Webinar Q&A
Mad Hedge Fund Trader

June 22, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 22, 2023
Fiat Lux

Featured Trade:

(A ROLLERCOASTER RIDE ON THE BIOTECH HIGHWAY)
(AMGN), (HZNP), (AMZN), (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 Trader2023-06-22 20:02:142023-06-22 20:12:54June 22, 2023
Mad Hedge Fund Trader

A Rollercoaster Ride on the Biotech Highway

Biotech Letter

What gets my heart racing about Wall Street's wild rodeo is its capricious personality. This unpredictable creature weaves a tapestry of inflated possibilities, stretching across a vibrant spectrum of asset classes. It's like being at an all-you-can-eat financial buffet; every day, there's a fresh plate of opportunities to dig into.

Just last year, for instance, we saw a grand opportunity to pack our portfolios with tech titans like Amazon (AMZN) and Microsoft (MSFT) when the market was frolicking after cash-flush pharmaceutical stocks, allured by their pricing power and inflation defense.

But oh, how the pendulum swings. Today, we find the market donning its risk-taking garb again, pursuing high-growth stocks and leaving value stocks eating its dust.

This brings us to Amgen (AMGN).

Amgen, a trailblazer in the biotech industry since its inception in 1980, has earned its stripes, boasting membership in the esteemed Dow Jones Industrial Index and Nasdaq 100. Over the past year, AMGN churned out an impressive $26 billion in total revenue.

The company proudly displays a well-rounded product portfolio experiencing a strong global thirst. This is echoed by the hearty 14% YoY volume growth in the first quarter.

Notably, much of this surge was fueled outside U.S. borders, with the Asia Pacific region flexing a muscular 47% volume growth. Credit this partly to the rapidly aging populations in Japan and China, where medicines like Amgen’s Repatha and Prolia are enjoying a burgeoning demand.

However, we're not getting the complete picture from these favorable metrics.

Amgen is embarking on a journey into a period filled with question marks, marked by stiff competition from biosimilars for its aging blockbusters, pushback from the Federal Trade Commission over its proposed acquisition of Horizon Therapeutics (HZNP), and valid doubts surrounding the rationale behind this hefty $28 billion buyout.

The firm has had a tough time finding a true growth engine in recent years, despite launching several new drugs for high-value indications such as lung cancer, cardiovascular disease, and migraine headaches. Can Amgen sail past these patent headwinds?

While most in the industry are betting on Amgen to win its legal battle to acquire Horizon, this move carries its own set of hitches.

The spotlight is on Horizon's primary growth engine, Tepezza, which is dealing with recent commercial setbacks.

In Q1 2023, Tepezza sales took an 18% sequential dip from Q4 2022 and were down 19% YoY.

Horizon blamed seasonality for this significant sales dip, which is disheartening for a drug slated to hit $4 billion in annual sales.

If Tepezza is the mainstay behind the proposed merger with Amgen, the biotech could set itself up for a rocky journey.

And remember, Amgen's previous attempts at value creation via business development haven't always been home runs.

Take the 2013 acquisition of Onyx's cancer drug Kyprolis. Despite initial excitement, Kyprolis has underperformed expectations, illustrating that Amgen's $28 billion bid for Horizon may not be a guaranteed solution to its patent woes.

Furthermore, Amgen's clinical pipeline isn't bursting with potential stars.

Its metabolic disorder candidate AMG 133 has been flagged as a potential blockbuster by some analysts, but the obesity treatment market is heating up. The same applies to Amgen's various candidates in hematology and immunology. Therefore, its current pipeline might not be the panacea to its legacy medicine challenges.

So, what's the play for investors?

The silver lining here is that Amgen isn't predicted to suffer a sharp drop in annual sales anytime soon, irrespective of the Horizon deal or its internal pipeline.

The main concern lies with the drugmaker's potential to resurrect robust top-line growth in the latter part of the decade. Given its low trailing-12-month payout ratio of 54%, the dividend appears to be on solid ground, which is a tick-in-the-box for its prospects as an income stock.

Overall, this stock could be a top pick for income investors considering its ample yield coverage, substantial margins, and double-digit average dividend growth.

Although the top line may seem a little shaky, buybacks should help keep EPS growth on track. Given its resilience, the stock presents an attractive opportunity for income investors. Just don't hold your breath waiting for a sudden surge.

In fact, if you're on a DRIP (Dividend Reinvestment Plan), you'd rather want the shares to slump for a bit.
After all, Amgen has the makings of a SWAN (Sleep Well At Night) stock. So, keep those midnight snacks handy.

 

biotech

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 Trader2023-06-22 20:00:102023-06-27 00:38:34A Rollercoaster Ride on the Biotech Highway
Mad Hedge Fund Trader

June 20, 2023

Biotech Letter

Mad Hedge Biotech and Healthcare Letter
June 20, 2023
Fiat Lux

Featured Trade:

(THE RISE OF THE TRILLION-DOLLAR PHARMA)
(LLY), (NVO), (AAPL), (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 Trader2023-06-20 18:02:382023-06-20 19:19:50June 20, 2023
Mad Hedge Fund Trader

The Rise of the Trillion Dollar Pharma

Biotech Letter

It's hardly a surprise when we think of titans like Apple (AAPL) and Microsoft (MSFT) topping the trillion-dollar club. After all, these tech leviathans have their tendrils in the lives of billions worldwide.

But guess what? This playground isn't just for tech heavyweights.

There's another contender in the ring, flexing its muscles from the biotechnology and healthcare sector: Eli Lilly (LLY).

Even as I write, I can almost hear the gears of potential turning. Eli Lilly could soon be donning the badge of the biopharma representative in the trillion-dollar league. What's more, this could happen sooner than you might think—say, before we're toasting to 2030.

Today, Eli Lilly stands proud with a market cap hovering over $410 billion, rubbing shoulders with the crème de la crème of the pharmaceutical world.

To reach the coveted trillion by 2030, it needs to rev up its growth engine by almost 166% in the next six or so years.

Given that its market cap ballooned by 178% since May 2020, we're not betting against the odds here.

Let's dissect this potential behemoth and scrutinize its growth prospects, valuation, and their likely dance over time.

With a trailing 12-month net income of $6.2 billion and a price-to-earnings ratio lingering around 69, Eli Lilly isn't exactly shy.

This valuation is higher than the industry standard but not bloated like some tech stocks.

Credit its remarkable net income growth of around 14% per annum over the last decade to persistent R&D investment, the frequent launch of new sought-after medicines, and strategic label expansions for its already-approved drugs.

Now, the market is giddy with anticipation, pricing in growth that surpasses its own impressive average. This is likely due to Eli Lilly's ambitious ventures into thriving markets with treatments for conditions like diabetes, obesity, and chronic kidney disease.

If Eli Lilly maintains its current PE ratio and boosts its earnings by a mere 13.5% each year between now and 2030, it will rake in a net income of about $15.1 billion, nudging its market cap just above $1 trillion.

A lofty goal? Perhaps, but Eli Lilly isn't one to back away from a challenge.

The question hanging in the air like an eager balloon is whether the company can maintain this steady pace.

Analysts are optimistic, predicting an EPS of $8.76 in 2023 and around $16 in 2025. This promising growth is tied to the launch of new medicines from its four programs awaiting approval decisions and a Phase 3 roster filled with 21 promising programs.

Meanwhile, Eli Lilly is acing its game in another affluent market: obesity treatments.

The company has long been a trailblazer in diabetes and obesity drugs, and its recent approval of Mounjaro, a revolutionary treatment for Type 2 diabetes, adds another feather to its cap.

Mounjaro has made waves, garnering $568.5 million in sales in the first quarter, and is predicted to hit peak annual revenue of $25 billion.

Obesity, a global health concern responsible for at least 2.8 million deaths yearly, opens up another massive market for Eli Lilly.

Branded anti-obesity drugs could hit $44 billion in risk-adjusted sales by 2030, up from a modest $2.5 billion in 2022.

As it stands, Eli Lilly's primary contender in this arena is Novo Nordisk (NVO).

So, can Eli Lilly flex its muscles and reach a market cap of $1 trillion by 2030? Signs point to a resounding yes.

With a steady stream of treatments on the horizon and a projected growth trajectory through the end of the decade, it seems to be business as usual for Eli Lilly.

However, like a precarious game of Jenga, the entire venture hinges on its valuation. As long as investors see sunny days ahead, all's well. But maintaining a P/E ratio of around 70 isn't a walk in the park. A dip in performance or a market crash could bring the whole structure down.

That being said, don't let these concerns hold you back from joining Eli Lilly's growth ride. Come 2030, you'll probably be smiling at your investment, whether or not Eli Lilly cracks that 13-digit milestone.

 

eli lilly growth

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 Trader2023-06-20 18:00:342023-06-27 14:22:46The Rise of the Trillion Dollar Pharma
Mad Hedge Fund Trader

June 16, 2023

Tech Letter

Mad Hedge Technology Letter
June 16, 2023
Fiat Lux

Featured Trade:

(THE SKINNY ON AI)
(CRM), (NVDA), (MSFT), ($COMPQ)

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 Trader2023-06-16 14:04:352023-06-16 19:03:48June 16, 2023
Mad Hedge Fund Trader

The Skinny on AI

Tech Letter

(CRM), (NVDA), (MSFT), ($COMPQ)

One misunderstanding about generative artificial intelligence is that it is advertised as the panacea that will cure the economy and global business in one second.

It’s not.

These types of technologies take time to absorb and integrate.

The type of hype surrounding AI feels like every tech company should 100X revenue next year.

That’s not going to happen right away.

It’s obviously going to be an incremental phenomenon instead of a parabolic rise.

People also seem to miss there will be a swath of AI failures that will disappear into the dustbin of history and everything in between.

Just because Nvidia (NVDA) and Microsoft (MSFT) are making hay during this hot money AI investor pandemonium, doesn’t mean all tech companies will.

In the long term, access to high-quality artificial intelligence will unlock a long-term productivity miracle.

The United States economy is suffering from a bout of unproductivity as young workers mostly spend their time perusing Instagram than tangibly delivering results.

Moving a finger is a hard slog these days for Generation Z.

The net result is poorly trending productivity gains.

Productivity growth in the US has been a paltry 1%.

This week alone brought two examples of generative AI's potential for economic output.

First, a new McKinsey study identified 63 generative AI use cases spanning 16 business functions that could unleash $2.6 trillion to $4.4 trillion in economic benefits annually.

The same study found that generative AI could perform each of more than 2,100 detailed work activities such as communicating with others about operational plans.

Generative AI has the potential to change the anatomy of work, augmenting the capabilities of individual workers by automating some of their individual activities.

Current generative AI and other technologies have the potential to automate work activities that absorb 60 to 70 percent of employees’ time today.

Meanwhile, software company Salesforce (CRM) launched its new GPT enterprise products designed to boost worker productivity.

The company introduced "AI Cloud" at a New York City investor day. Salesforce says its AI Cloud product will allow marketers to auto-generate personalized content for customers and developers to auto-generate code.

Salesforce employees also showed off coming AI functions in the workplace collaboration platform Slack.

It’s true that this AI wave is going to be the biggest that anyone has ever seen, but it will take time to get there.

I think there are meaningful lags in AI's impact. And the idea there will be a surge in economic growth in the next seven to ten years because of AI and technology.

It won’t happen in 2 or 3 years.

Goldman Sachs estimated recently that generative AI could expose the equivalent of 300 million jobs globally to automation over the next decade. That's a nice way of saying a person may lose their job to a robot.

AI could also eventually increase the annual global Gross Domestic Product (GDP) by 7%.

There is the thought that AI will make production faster and more voluminous but the quality and understanding will be poor. Just like all those online chat assistants that companies use. If you have a very specific question not covered by the FAQs they just spit back unhelpfulness.

The takeaway is that there will be winners and losers, but it will take time.

In many cases, the outsized winner is someone we have never heard of that brings something new to the table.

A critical part of this investor play is to avoid AI failures as well because there is bound to be a pile of body bags on the way to AI riches.

 

generative ai

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 Trader2023-06-16 14:02:102023-07-06 11:24:52The Skinny on AI
Mad Hedge Fund Trader

How to Handle the Friday May 16 Options Expiration

Diary, Newsletter

Followers of the Mad Hedge Fund Trader alert service have the good fortune to own a deep in-the-money options position that expires on Friday, June 16, and I just want to explain to the newbies how to best maximize their profits.

This involves the Tesla (TSLA) June 2023 $120-$130 in-the-money vertical bull call debit spread.

Provided that we don’t have another 80-point move down in Tesla in ten trading days, this position should expire at its maximum profit point.

So far, so good.

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 13.63% in 25 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, June  19 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. 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

https://www.madhedgefundtrader.com/wp-content/uploads/2019/09/john-and-girls.png 322 345 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2023-06-02 10:02:202023-06-02 17:09:18How to Handle the Friday May 16 Options Expiration
Mad Hedge Fund Trader

May 31, 2023

Tech Letter

Mad Hedge Technology Letter
May 31, 2023
Fiat Lux

Featured Trade:

(WILL CHINA WIN THE AI WARS)
(NVDA), (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 Trader2023-05-31 16:04:012023-05-31 21:43:25May 31, 2023
Mad Hedge Fund Trader

Will China Win the AI Wars

Tech Letter

The two tech heavyweights are basically what the generative AI wars are going to come down to.

Who do I mean?

The United States and China are naturally involved in a larger economic spat that has come to define the world we live in.

What’s the good news?

The Yanks are clearly ahead in the technology that could define the future of the human race.

China’s bread and butter has been to steal vital intellectual property, reverse engineer it, then roll it out for mass adoption.

The strategy has been incredibly effective in launching the Chinese to the second-biggest economy in the world.

Rinse and repeat, right?

China won’t be able to just “copy” generative AI unless they can poach the competition, but since American corporations know the Chinese playbook, I doubt they would allow IP secrets to leak out like a broken toilet.

It most likely appears as if the Chinese and their own Silicon Valley or lack of one will need to create this by themselves.

Funnily enough, American artificial intelligence developed from a non-profit OpenAI as it researched the Transformers machine learning model, which eventually powered ChatGPT.

This environment never existed in most Chinese companies. They would build deep learning systems or large language models only after they saw the popularity.

US investors have also been supportive of the country's research push. In 2019, Microsoft said it would put $1bn into OpenAI.

China, meanwhile, benefits from a larger consumer base. It is the world's second-most populous country, home to roughly 1.4 billion people.

China lives in a world where speed is essential, copying is an accepted practice, and competitors will stop at nothing to win a new market.

This rough-and-tumble environment makes a strong contrast to Silicon Valley, where copying is stigmatized and many companies are allowed to coast on the basis of one original idea or a lucky break.

Creativity and entrepreneurship aren’t valued in China.

At the fundamental level, Chinese tech companies might not be able to hang because they won’t have access to suitable materials.

High-performing computer chips, or semiconductors, are now the source of much tension between Washington and Beijing. They are used in everyday products including laptops and smartphones, and could have military applications. They are also crucial to the hardware required for AI learning.

US companies like Nvidia currently have the lead in developing AI chips and that supply is choked off by the US administration.

For now, the US seems to be ahead in the AI race, and there is already the possibility that current restrictions on semiconductor exports to China could hamper Beijing's technological progress.

However, China's ability to manufacture high-end equipment and components is an estimated 10 to 15 years behind global leaders and that could be the determinant between winning and losing.

Readers need to invest in the AI stocks like Nvidia on every dip and the best of the rest to participate in one of the greatest tech trends in the modern era.

 

china ai

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