Mr. Musk May Need A New Gig
For years Elon Musk has been making a fortune burning up investors money. His companies, Solar City and Tesla Motors have used the new formula to perfection. Get involved in clean energy and renewable power and the road has been paved to riches. Although he has been able to convince elected officials to pour billions into his ideas he has never made dollar one. He pulled one of the greatest deals ever by buying his losing business Solar City from himself with investor money!
He has constantly overpromised and underdelivered on his car company, but the street always forgives him and continues to drive up the price of the stock. His tweets are always taken with a grain of salt. He is the Mr. Trump of the business community. You never know what is going to come out of his mouth. On August 7, 2018 he released a tweet about the idea of taking his company private at a price of $420 a share and he added a sentence at the end which said the “funding was secured” for the $70 billion he would need to do the buy back. The stock immediately rallied $30 a share or almost 11%.
Elon has been a critic of short sellers of his company’s stock since day one and has done everything possible to antagonize them. It appears that this time he may have gone too far. The big banks on Wall Street don’t like to have someone push them around and it appears that someone complained to the Securities and Exchange Commission about the tweet. They claimed that the tweet was market manipulation and they wanted Mr. Musk to show them the $70 billion he had in hand. Unfortunately for Mr. Musk, he later admitted that he didn’t have all of the money he claimed.
The S.E.C. has had an on-going investigation into the way Tesla has been running its business as there have been other issues that they want to know about, so the latest problem may be rolled into an old investigation. The bottom line will probably depend on the interpretation of S.E.C. Rule 10b-5 which deals with market manipulation and insider trading. If the Feds can prove that Mr. Musk deliberately released fraudulent news to hurt short sellers he could be suspended or prosecuted under the antifraud statutes which could lead to more severe penalties.
If that happens he may want to take one of his rockets and go to Mars or face the possibility of spending some time incarcerated. Everyone agrees that Mr. Musk is a genius, but other geniuses have ended up broke or imprisoned for their behavior. Sir Isaac Newton is regarded as one of the greatest minds to ever live, and he busted out in the South Sea Bubble in the 1720’s, never recovered, and died penniless in his nieces house on March 31,1727. Doubt that it will happen to Mr. Musk, but he better get his company in order or investors might start to doubt if Tesla will ever make money!
Ask Mr. Seifert
I am constantly asked questions about trading and how important execution is to insure success. Each week, we will answer those questions with a short paragraph on a variety of trading subjects.
Is it possible to sell a credit spread that can have less risk than reward?
Answer: Yes, it is possible to sell a credit spread that has less risk than reward. The trade is called a 60/40 and it is an aggressive directional spread. Here is how it works. Normally when we sell a credit spread, we sell the ATM strike and buy a strike that is further out of the money. If you use a 60/40, we sell a spread that is slightly in the money. We are not taking a neutral position. We are trying to predict the direction that the underlying stock’s price will move. So instead of selling a $500 wide spread for $220 and assuming a $280 risk we sell the spread for $280 and assume a $220 risk. We never risk more than the difference between the strikes minus the premium we collect on the spread. The difference in the 60/40 spread is if the stock’s price doesn’t move in our favor we will not collect the entire $280. We will collect only a portion of the spread as a profit. The 60/40 is a spread that many professional traders use when they are confident that the stocks’s price will move in their favor.
The Wise Guy Report
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. Let’s look at how the equities performed last week.
US EQUITIES (Possible Breakout To New Highs)
The last ‘equity holdout guy’ threw in the towel last week as the DJIA made new all-time highs topping the 01/26/18 previous close. The blue chips surged over 250 points in the last part of the week to get to the new highs. This rally came despite a pause in the dollar and a recent spike in the 10-year bond. It seems that that feeling in the market is that when the Fed raises interest rates next week that the economy will be able to sustain the rally even as interest rates rise. As with all rallies, the good news pushes it higher and bad news stops it for a moment and then the rally begins again. This bull has been going on for almost ten years, the longest in history and it appears that the Trump’s administration handling of taxes and trade disputes issues have succeeded. With unemployment now at ten-year lows and consumer confidence at ten-year highs it seems as if sunshine will be here forever. After more than 40 years in the business, I know the market can turn on a dime, and on something that is least expected. But while the sun is shining, enjoy the beautiful weather.
Get Your FREE Two-Week Trial Subscription
The option trades and strategies offered by The Optionomics Group are very unique in that they all have limited risk while creating great leverage. Our basic BL – BR Credit Spread Strategy (and all of the others) let you control 100 shares of a $200 stock ($200*100 = $20,000) for only $500 (the spread differential) or 40:1 leverage with your risk limited to only $500. Plus our strategies produce winning transactions in four out of five possible outcomes.
The Optionomics strategies let you become the casino whereby you have a mathematical edge that lets you grind out consistent returns in any kind of market environment. These strategies are designed to produce good returns over a short to intermediate term time frame. It is an approach to the stock market which will be hot, cold or average over time, but the end result should be very good in any type of market environment.
I offer a FREE Two-Week trial to the various subscription services with no cost or strings attached. Each strategy is explained in a 5-7 page booklet which includes sample recommendations and model portfolios. I doubt that you have ever seen anything like this. During your FREE trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. Simply click on the appropriate tab on the Optionomics’ Home page to access the informative booklets and then sign up for one or all of the weekly subscriptions.
- The Bullish – Bearish Credit Spread Strategy: The basic strategy of trading weekly credit spreads.
- The 21st Century Covered Calls Strategy: A modern day alternative to the old fashioned covered call strategy.
- The Low Cost Put – Call Hedge Strategy: Sleep at night knowing your portfolio is protected for little or no cost.
- The Earnings Trade: Get in on potential big movers with little or no downside risk.
- The One Day Wonder Trade: Get ready for some real action. A one day trade with great potential.
- The Blow Off Top – Bottom Trade: A lot of action and big moves too.
Each Monday morning by 11:00 EST, the plays for the upcoming week plus updated model portfolios for each strategy are posted on the site. The prices in the reports are Monday morning’s opening prices. In addition, I have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the floor and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to one or more of the subscriptions for only $19.95 each per month on a month to month basis with no contract or strings attached. If you subscribe to three, it is only $49.95 per month while you can subscribe to all six for only $79.95 per month, a 33% discount. I think you will agree that this is a super offer so give it a try. Click on www.optionomicsgroup.com to access the Optionomics Group web site and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert