Editors Note:

Apple added 23 points to the Nasdaq and 34 points to the Dow. The surge in Apple along with positive comments about a Chinese trade meeting combined to power the Dow and Nasdaq higher. The sharp gains in Apple causes the QQQ and DIA to bounce and that triggers short covering and price chasing and that means all the stocks in those ETFs are bought.

We lost the UPS position after they announced a $20 billion capex program. Investors were not impressed.

Current Portfolio

Stop Loss Updates

Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline.

Profit Targets

Check the graphic below for any profit stops in green. We need to always be prepared for a profit exit at resistance.

Current Position Changes

DLTR - Dollar Tree
The long call position was entered at the open.

UPS - United Parcel Service
The long call position was stopped at $121.75.

If you are looking for a different type of option strategy, try these newsletters:

Credit spreads and naked puts = OptionWriter

Long term option investments = LEAPS Investor

3-6 month Option Trades = Ultimate Investor

Long and short equity trades = Premier Investor

Full updates on all plays on Wednesday and Saturday. Only closed plays are updated on other days.

BULLISH Play Updates

UPS - United Parcel Service - Company Profile


Shares imploded after UPS announced a $20 billion overhaul aimed at automating its facilities to offset the low margin squeeze from shippers like Amazon. The company said it would add $1.00-$1.22 to earnings by 2022 with $1 billion in savings from more efficient sorting facilities. Investors were not pleased and shares fell $3.60 to stop us out for a breakeven.

Original Trade Description: Aug 11th

United Parcel Service, Inc. provides letter and package delivery, specialized transportation, logistics, and financial services. It operates through three segments: U.S. Domestic Package, International Package, and Supply Chain & Freight. The U.S. Domestic Package segment offers time-definite delivery of letters, documents, small packages, and palletized freight through air and ground services in the United States. The International Package segment provides guaranteed day and time-definite international shipping services in Europe, the Asia Pacific, Canada and Latin America, the Indian sub-continent, the Middle East, and Africa. This segment offers guaranteed time-definite express options, including Express Plus, Express, and Express Saver. The Supply Chain & Freight segment provides international air and ocean freight forwarding, customs and truckload freight brokerage, distribution and post-sales, and mail and consulting services in approximately 220 countries and territories; and less-than-truckload and truckload services to customers in North America. The company also offers shipping, visibility, and billing technologies; and insurance, financing, and payment services. It operates a fleet of approximately 119,000 package cars, vans, tractors, and motorcycles; and owns 45,000 containers that are used to transport cargo in its aircraft. United Parcel Service, Inc. was founded in 1907 and is headquartered in Atlanta, Georgia. Company description from FinViz.com.

UPS reported earnings of $1.94 that beat estimates for $1.93 but there was still a 23 cent charge in that number meaning the real earnings were $2.17. Revenue rose nearly $2 billion to $17.46 billion and beat estimates for $17.33 billion. For the full year, the company guided for earnings of $7.03-$7.37 and analysts were expecting $7.25. UPS is planning on reducing costs by $200 million by offering some employees a buyout offer.

The company said online shopping demand was steadily increasing outside of normal holiday shopping patterns. Package volumes rose 3% in the quarter and revenue per package rose 4.6%. The CEO also said "free trade" was good for shipping.

On Thursday, UPS announced a quarterly dividend of 91 cents payable September 5th to holders on August 20th. Shares ticked up to a six month high on the news then fell back on Friday in the weak market.

UPS is poised to rally on rising volume, new technology that reduces cost and the reliance by Amazon on UPS and USPS on delivering that last mile to the customer door. Amazon is going to try and replace a lot of those trips with their new localized partner program but it will not be fully implemented until 2019. Until then UPS and USPS will remain the shippers of choice for Amazon. The best news is that online retailers other than Amazon are taking market share from brick and mortar and UPS is seeing increased volume from these non-Amazon shippers, which do not get the ultra cheap rates paid by Amazon.

Earnings October 24th.

In order to buy an option that expires after earnings we have to reach out to January. There are no November options at this time. Options expiring before earnings will evaporate rapidly. Options expiring after earnings will retain that expectation premium until earnings. I do not plan on holding this position until October. We are buying time as insurance but we do not have to use it.

Update 8/29: UPS announced Ware2Go, an online shipping platform matched with warehouses sourced by UPS. Internet retailers can store their products in a UPS warehouse and sell online. UPS guarantees 2 day delivery from their warehouse. This should be a great program for startup retailers and those growing rapidly and running out of warehouse capacity. Retailers do not have to worry about the warehouse component of their business if they use UPS Ware2Go. They simply sell their inventory and UPS handles the stocking and shipping for them. Ware house owners who want to be part of the program upload their space availability and pick, pack, delivery capabilities and UPS matches warehouses with retailers based on capabilities offered and needed.

Update 9/5: On Tuesday, Raymond James upgraded UPS from neutral to strong buy on the strong ecommerce initiatives underway, declining capex expenses and rising free cash flow. Shares rallied on the news. Just before the close today, the Wall Street Journal claimed Amazon had ordered 20,000 Mercedes Vans for a new delivery service that it previewed a couple months ago. UPS shares spiked higher at the close and did not trade down in afterhours on the news.

Position 8/13:
Closed 9/13: Long Jan $125 call @ $3.10, exit $3.20, +.10 gain.

BEARISH Play Updates

No Updates on Current Positions