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| Global Market Comments May 7, 2020 Fiat Lux Featured Trade: (HOW TO EXECUTE A VERTICAL BULL CALL SPREAD) (AAPL) (DINING WITH THE BOTTOM 20%) (TESTIMONIAL) 
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How to Execute a Vertical Bull Call Spread For those readers looking to improve their trading results and create the unfair advantage they deserve, I have posted a training video on How to Execute a Vertical Bull Call Spread. This is a matched pair of positions in the options market that will be profitable when the underlying security goes up, sideways or down a small amount in price over a defined limited period of time. It is the perfect position to have onboard during markets that have declining or low volatility, much like we experienced in 2014, and will almost certainly see again. I have strapped on quite a few of these across many asset classes this year, and they are a major reason why I am showing positive performance numbers for 2016. To understand this trade, I will use the example of an Apple trade, which I executed on July 10, 2014. I then felt very strongly that Apple shares would rally into the release of its new iPhone 6 on September 9, 2014. The same play has just started to kick in for the iPhone 7 released September of that year. So followers of my Trade Alert service received text messages and emails to add the following position: Buy the Apple (AAPL) August 2014 $85-$90 in-the-money bull call spread at $4.00 or best To accomplish this, they had to execute the following trades: Buy 25 August 2014 (AAPL) $85 calls at.................$9.60 Sell short 25 August 2014 (AAPL) $90 calls at.......$5.60 Net Cost:.....................................................................$4.00 This gets traders into the position at $4.00, which cost them $10,000 ($4.00 per option X 100 shares per option contract X 25 contracts). The vertical part of the description of this trade refers to the fact that both options have the same underlying security (AAPL), the same expiration date (August 15, 2014) and only different strike prices ($85 and $90). The breakeven point can be calculated as follows: $85.00 - Lower strike price +$4.00 - Price paid for the vertical call spread $89.00 - Break even Apple share price Another way of explaining this is that the call spread you bought for $4.00 is worth $5.00 at expiration on August 15, giving you a total return of 25% in 26 trading days. Not bad! The great thing about these positions is that your risk is defined. You can't lose any more than the amount of capital you put up, in this case, $10,000. If Apple goes bankrupt, we get a flash crash or suffer another 9/11 type event, you will never get a margin call from your broker in the middle of the night asking for more money. This is why hedge funds like spreads so much. As long as Apple traded at or above $89 on the August 14 expiration date, you would have made a profit on this trade. As it turns out, my read on Apple shares proved dead-on, and the shares closed at $97.98 on expiration day or a healthy $8.98 above my breakeven point. The total profit on the trade came to: ($1.00 profit X 100 shares X 25 contracts) = $2,500 This means that the position earned a 25% profit on your $10,000 investment in a little more than a month. Now you know why I like Vertical Bull Call Spreads so much. So do my followers. Occasionally, these things don't work and wheels fall off. As hard as it may be to believe, I am not infallible. So, if I'm wrong and I tell you to buy a vertical bull call spread, and the shares fall not a little, but a lot, you will lose money. On those rare occasions when that happens, I'll shoot out a Trade Alert to you with stop-loss instructions before the damage gets out of control. That stop loss is usually at the lower strike price when there is still a lot of time to run to expiration, as the position still has a lot of time value remaining, and the upper strike price when there are only a few days left until expiration. To watch the video edition of How to Execute a Vertical Bull Call Spread, complete with more detailed instructions on how to execute the position with your own online platform, please click here. 
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| Dining with the Bottom 20% Occasionally, you have to tear yourself away from your screens and get involved in the real world. So, a recent Saturday found me driving a carload of Boy Scouts to the Oakland Food Bank, a local distributor of free meals for the poor and homeless. I learned a long time ago that nonprofits can be the most efficient participants in an economy. They have to or die because they can’t afford to pay anyone. Look no further than the Boy Scouts which runs a million-man national organization off of the $2 a month dues contributed by its juvenile members. The Oakland Food Bank did not disappoint. After a brief training video, I was ushered into a vast warehouse and bluntly asked “Corn or potatoes.” No management role here. I opted for potatoes, as my somewhat large hands were ideal for picking up several spuds at once. What I ended up doing was breaking open 50-pound bags of potatoes fresh from the farm in Idaho and repackaging them into ten-pound carriers ideal for a single family. Others were inspecting sweet potatoes, corn, and peas. My task was made all the easier by a sound system blasting vintage sixties rock music. It is amazing that the demand for free food is so great just across the bay, or one BART stop away from the world’s wealthiest and highest paid city. The Oakland Food Bank feeds 20% of Alameda County, or about 320,000 people a day. When the federal government shut down in January, the Oakland Food Bank was there sending truckloads of meals to the nearest base to feed military families. I learned at the recent SALT conference in Las Vegas that 50% of the country could not pay an emergency expenditure of $500. This is where the food was going. Certainly, the organization has grown a lot since the summer of love in 1967 when I stood in long lines to get doled a cup of stew of indeterminate origin by an organization then known as the “Diggers.” San Francisco was inundated by 100,000 kids that year, camping out in Golden Gate Park and totally swamping local services. The Oakland Food Bank is now a massive outfit bringing together 17,000 volunteers donating 103,000 hours last year to feed the hungry. Even at minimum age, the value of that labor was $824,000. Semis from throughout the west were unloading thousands of pallets of food from farms, stores, and manufacturers. A lot of the vegetables I saw were fine, they just did not conform to the picture-perfect version that Safeway requires for its produce aisles. A market has sprung up to meet this. The food bank buys substandard potatoes direct from farmers at ten cents a pound, versus the $1.16 a pound in supermarkets. The China trade war has also made available millions of tons of foodstuffs available at throwaway prices, from rice to almonds, or corn and soybeans. The work became more tedious when the music shifted to contemporary pop and I was sorting my 10,000 potatoes. But then the morning shift mercifully ended, and I was left to collect my far-flung scouts. On the way out, our organizers told us we 60 volunteers had created 15,000 meals. Everyone cheered and headed for the door. I reminded my kids that if they didn’t go to college, they too would be doing this all day, every day….for $8 an hour and no benefits. They gave me a sober look. We’ll be back again next month. I can’t wait to see what I get to sort next. 
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