FREE ACCESS, In The Money January 20, 2021

In The Money with Fidelity Investments: TLT, TWTR, F

by Dan

Shortly after the open today, I filmed my weekly In The Money segment with Fidelity Investments. Click below to watch and see my notes below the video:

 

Here are my notes from today’s show:

Macro: The Virus is at its worst in the U.S. in terms of cases and deaths, showing little signs of letting up. The vaccine rollout has been nothing short of a disaster, as we are well behind the 20 million vaccinations meant to be distributed since mid-December, and in that time period, 100,000 Americans have died.

The biggest priority for the Biden Administration (as stated by them) in its first 100 days is their pledge to distribute 100 million vaccines in that time period. But while it sounds insensitive to those sick or who have lost loved ones, the Biden Admin needs to also focus on American’s livelihoods at a time when the economic data in the U.S. is weakening, the December non-farm payrolls were the first monthly decline since April. Consumer confidence and retail spending are decelerating…Stimulus can’t come fast enough, but again it will take a will to work itself through the system, and the lag of unemployment benefits and help for small businesses might come a little too little a little too late.

Consensus thinking is that interest rates are rising because of optimism about our path to herd immunity… I suspect rates dip again below 1% as the treasury gets ready to heap on another $2 trillion or so to the deficit for Biden’s relief bill. More debt will weigh on rates, lower rates are best for paying back that debt.

5yr chart of Fed’s Balance Sheet

 

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Trade Idea #1: Long Treasuries… TLT iShares 20year U.S. Treasury Bond ETF

Is the chart so bad it could be good? Also if stocks were to correct we could see money move back into the treasury market.

 

Bullish Trade Idea: TLT ($152) Buy March 152 call for $3.25

Break-even on March expiration:

Profits above 155.25

Losses of up to 3.25 between 152 and 155.25 with max loss of 3.25 below 152

Rationale: this trade idea risks ~2% of the etf price, breaks even up 2%

 

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Trade Idea #2: Bullish TWTR – Two weeks ago I detailed a bearish view in TWTR when the stock was $53, I thought AFTER inauguration, THE EXECUTIVE BRANCH of govt would be using the platform very differently than the prior… since the suspension of trump and many followers the stock went down…

I highlighted the chart as I saw the potential for a move back towards the uptrend from the March lows near $45:

The last two times the stock bounced off of the uptrend in late June and in early Nov the stock rallied 40% in the following two months. Will the third time be a charm?

The next identifiable catalyst for TWTR will be their Q4 results on Feb 9th, and then their virtual investor/analyst day on Feb 25th where the company will address their de-platforming of trump, privacy, trust, and safety policies and importantly new product innovation that hopefully will drive user growth and monetization.

Bullish Trade Idea: TWTR ($46.60) Buy Feb 47 – 53 call spread for $2

-Buy to open 1 Feb 47 call for $3

-Sell to open 1 Feb 53 call at $1

Break-even on Feb expiration:

Profits of up to 4 between 49 and 53 with a max gain of 4 at 53 or higher

Losses of up to 2 between 47 and 49 with a max loss of 2 at 47 or lower

Rationale: this trade idea risks 4.5% of the stock price, breaks even up 6.5% and has a max gain of 12% if the stock is up 20% in a month.

 

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LookBack: On Jan 6th, I detailed a bullish trade idea in Ford (F):

Ford ($8.75) Buy March 9 call for 55 cents

Now the stock is $10.55 and the March 9 call is now worth $1.80 for a 77 cent gain…

It makes sense to roll this view up and out…

Sell to close 1 March 9 call at $1.75 for $1.20 profit and Buy to open 1 June 11 call for $1, the profit of the March call…now breaks even at $12

 

 

 

 

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