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$3,000 Friday - Profits From The Future(S)

|Includes: EWJ, IWM, SDS, SPDR S&P 500 Trust ETF (SPY), WYNN

Another HUGE winner!

That's $5,500 in two days using the Futures Trade Ideas we published right here in our morning post on Wednesday and Thursday but, sadly, not for my readers at Seeking Alpha, where the editors felt yesterday's post was "more of a marketing pitch than investment commentary" and rejected it. You see, on Wednesday, we had 3 Futures Trade Ideas which made our readers $2,500 and on Thursday I talked about how well they went - so that was considered to be a promotion of our services - where we have trade ideas like these for our Members every day.

Of course, if we don't let you know how our prior trades went, then the new trades will seem like random picks and, without context, they would be difficult to understand. The same goes for our slow-moving portfolio strategies, where we do not promise quick returns like other service but focus on a BALANCED Portfolio Model using our "How to Get Rich Slowly" techniques over longer periods of time.

It's not like we don't know how to make short-term money - that's what I got in trouble for at SA because on Wednesday I said:

The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I'll tell you how much money we made shorting and you'll say "why do I never catch these great trade ideas" and I'll say it's because you're not patient enough to wait for the pattern to reset itself and just make the obvious play.

This is the 11th time the S&P has been over 2,100 since May and, so far, it's been like a little money machine for us all year long on the short side. I know this time may be different and the last 10 times may have been different too, which is why we stop out if we don't get confirmation from the other indexes that things are toppy but, when it works - it's good for $250, $500, $1,000+ PER CONTRACT in the Futures at $50 per point to the downside.

  • The S&P (/ES) Futures bottomed yesterday at 2,040 - up $3,000 per contract
  • The Russell (/TF) Futures bottomed yesterday at 1,165 - up $3,500 per contract
  • The Nikkei (/NKD) Futures bottomed yesterday at 19,435 - up $2,825 per contract

If the editors at Seeking Alpha don't feel that trade ideas like these are appropriate for their readers - that's fine by me. It's just funny that they consider it "too promotional" when I actually have a paid service with SA called the Options Opportunity Portfolio and I almost hesitate to post a link to it for fear of having this article rejected (just kidding, no way will they run an article that criticizes them in the first place). There we have trade ideas like the one I shared Wednesday to hedge the S&P downturn with the following:

  • Sell 20 SDS March $19 puts for $1.25 ($2,500 credit)
  • Buy 20 SDS Jan $18 calls for $1.20 ($2,400 debit)
  • Sell 20 SDS Jan $20 calls for $0.48 ($960 credit)

That spread gave us a net $1,060 credit and already the $18/20 spread is $1 and the short puts are 0.85 for net $15, which is $300 on 20 contracts plus the original $1,060 credit means this spread is now up 128% in just two days and right on track for the full $5,060 potential gain (477%) if the S&P stays below 2,050. Now tell me, are we promoting our service or simply reviewing our trade ideas?

Philstockworld is not a trading site. We are an educational service that teaches people HOW to trade like hedge funds - although I hesitate to say that because most hedge funds have had a miserable year. That's why we have many new hedge fund managers as Premium Members now and we're rolling out an Institutional Investing Service in partnership with Sarhan Capital to help small funds beat the big boys (again, not even hard this year!).

I'll even give you a trade idea we're putting out for the institutions this weekend:

Wynn Resorts (NASDAQ:WYNN) have seen their stock plunge 62% since March as Macau essentially imploded at the same time as WYNN is in the middle of building a brand new $3Bn complex (Wynn Palace) that is scheduled to open in June in a market that is off 50% from its highs.

While that's pretty much a disaster, even with all this spending going on, WYNN was able to drop $125M to the bottom in the last two quarters and the company is on track to make $3 per $65 share in 2015 (only 80M shares floated) and $3.45 next year - despite the disappointing performance of their Chinese properties.

That by itself does not get me excited about buying a $65 stock but what does get me excited is PROMISING to buy the stock for $45 by SELLING the 2018 $45 puts for $9.30. That drops our net cost per share (if assigned) to $35.70, which is another 45% off the current price and, even if earnings fall to $2 per share (not likely), the p/e would still be in an acceptable range.

If things get worse in China, we can expect WYNN to sell one of more of their properties to a Chinese firm for a substantial loss but, once they take that hit and stop draining cash - things will turn around quickly. That's our worst-case scenario - if things improve in China, we can expect the stock to head back towards $100 and we'll keep our $9.30 per share as a profit without ever having to bother owning the stock.

These trades are very margin-efficient as the ordinary margin for selling 1,000 of the put contracts is just $278,000 but you collect $930,000 (remember, these are trades for institutions and HNW individuals!) and all WYNN has to do is be above $45 (30% below where it is now) in Jan of 2018 and you get to keep the $930,000 free and clear.

That's how you can take $250,000(ish) in margin and turn it into $1M(ish) in profit in 25 months using our "How to Buy a Stock for a 15-20% Discount" strategy - though this discount works out to 45% if assigned...

If you are a retail investor and you need to be aware of the risk of being assigned the stock at $45 and let's say you can afford to own $45,000 worth of WYNN in your portfolio. You would then be able to sell 10 contracts for $9,300 against $2,780 in margin but it's the obligation you have taken that you need to keep in mind. Still, even making $9,300 against a 50% margin requirement of $22,500 would be a 41.3% return in 25 months - still very nice (but much nicer when you are rich and can take full advantage of margin accounts!).

Meanwhile, we remain overall "Cashy and Cautious" into the holidays and the events of the past couple of days have made it obvious why I've been holding this stance since before the August preview flash crash.

Have a great weekend,

- Phil

oh, and PS - SUBSCRIBE TO PHILSTOCKWORLD and get our 2016 Trade of the Year as well as our Buy List for 2016.

(OK, that was a bit promotional. blush)

Disclosure: I am/we are long WYNN, SDS, TZA.

Additional disclosure: Positions as indicated but subject to RAPIDLY change (currently mainly cash and an otherwise slightly bearish mix of long and short positions - see previous posts for other trade ideas). Positions mentioned here have been previously discussed at - a Membership site teaching winning stock, options & futures trading, portfolio management skills and income-producing strategies to investors like you.