CHK Positive Surprises

Chesapeake Energy is still losing money but at a much slower rate, which sent the stock climbing …

During the third quarter, Chesapeake’s loss narrowed to $1.16 billion, or $1.54 per share, compared with a loss of $4.7 billion, or $7.08 per share, a year earlier. Excluding certain items, earnings actually came in at 9 cents per share, which beat Wall Street analyst estimates of a three cent loss.

Revenue fell by 33% to $2.28 billion, above analyst estimates of $2.18 billion.

One of the Most Significant Straddles of the 21st Century

Reiterate, LMT Out of the Money Straddle

For Speculative Accounts Only,

1/20/17 LMT $270 Calls for $0.65.

Considering the ambivalence of a Republican majority leadership of fulfilling the rest of the F-35A contract (only 57 planes excluding the entire 140 were fulfilled late Wednesday), an astonishing delivery of 2400 fighters, this analyst is extending any further straddle purchases to LMT 3/17/17 for the $270 calls selling for $.80.  As the 2nd part of the straddle, the LMT 3/17/17 $180 puts at $1.40.  This will allow enough time to see if whether Trump or Clinton gooses or axes, respectively, the contract.  This straddle strategy is quite speculative, depending on Wall Street and LMT executives to extending their intentions into the price of the stock.  The downward action Friday of 1.01% augurs for a reduction in future purchases of the fighters, although the exact amount is unknown.

1/20/17 LMT $215 Puts for $1.60.

Please see this due diligence.

LMT Beurre Redux.

Pentagon’s Chief Weapons Tester calling F-35 a failure.

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Pentagon’s Chief Weapons Tester calls F-35 failing to Deliver

Just four months ago, the Pentagon’s chief weapons tester wrote in a memo the F-35 program was “not on a path toward success but instead on a path toward failing to deliver.

Defense officials at the Pentagon say they need up to $500 million more to finish the development phase for the F-35, the troubled fifth-generation fighter that’s already gone 50% over its original budget.

Sen. John McCain (R-Ariz.), the chairman of the Senate Armed Services Committee, has in the past called those cost overruns a “disgrace.”

“It has been both a scandal and a tragedy with respect to cost, schedule and performance,” he said in April.

“Strong national security is an expensive endeavor but the existing concerns with the F-35 make calls for even more money harder to green light,” said Joe Kaspar, chief of staff for Rep. Duncan Hunter (R-Calif.), a member of the House Armed Services Committee.

“And the Pentagon never seems to be able to help its case on the F-35. Technical superiority is not cheap, but whether or not costs can be driven down is something Congress must look at it before throwing more money in the Pentagon’s direction.”

EA Guides Low

Electronic Arts

Estimates: EPS should fall 34% to 43 cents, with revenue down 5% to $1.085 billion.

Results: Loss of 13 cents as the company stopped reporting non-GAAP earnings that adjust for deferred revenue. Revenue of $898 million and adjusted revenue of $1.1 billion.

Outlook: Q3 revenue of $1.125 billion and adjusted revenue of $2.04 billion, vs. consensus for $2.08 billion. Q3 loss of 17 cents.

Stock: Shares (88 CR) rose 0.85% late after closing down 0.9% to 77.84. The stock dived below a buy point last week amid concerns that new game “Titanfall 2” won’t sell as well as hoped.

Electronic Arts’ earnings and outlook will give investors a heads-up on video game demand for the key holiday season, ahead of quarterly reports this week from rivals Activision Blizzard(ATVI) and Take-Two Entertainment (TTWO).

EA stock initially fell in after-hours trading as investors worried about light holiday sales guidance. But shares then rallied, rising more 5.86% in extended trading. During the regular session Tuesday, EA stock dropped 0.9% to 77.84.  Could be a trading opportunity to add to put and short positions tomorrow morning.

A short or put idea is in the console vs. smartphone gaming business.  The largest player is Electronic Arts (NASDAQ: EA).

Even with an installed base of 101 million Wii units, 80 million PlayStation 3 systems, 80 million Xbox 360 consoles, 13 million PlayStation 4 machines, 7 million Xbox One units, and 7 million Wii U systems, the console business can’t compete with the sheer billions of smartphone and tablet users around the world.

“Practically everyone in mature markets now has a smartphone and the majority has access to a tablet,” van Deelen says. “In emerging markets, the smartphone is often their first device that is connected to the Internet. With an installed base of billions, the audience is enormous on a global scale. A console is not a must-have device like smartphones, and in a growing number of cases, tablets are. Mobile devices, which aren’t purchased to play games on, introduce new consumers to games.”

The overall question now seems to be not if Microsoft will exit the game business, but when and how.

Price Explosion of Nat Gas in New England

The heating fuel may surge to $20 to $25 per million British thermal units in New England this winter, the highest in the world, as pipeline bottlenecks limit supplies during frigid weather, traders including Consolidated Edison Inc.’s ConEdison Energy said.

Low cost natural gas is in demand and has been replacing coal and nuclear power in electricity markets in New England, which is now over 50 percent dependent on natural gas.

LMT Beurre Redux

It is forecasted, “that if the funding lands (for the F-35) before year-end, it will generate $5.7 billion in operating cash flow for 2016. If not, that number would fall to $5 billion.”  Chief Financial Officer Bruce Tanner said on a third-quarter earnings call with analysts, “We remain hopeful that this situation will be resolved soon, but have concerns with receiving collections before year-end.”

Reiterate LMT bearish, now $220 puts 1/20/17 at $1.80.

“As we are in the second-longest bull market of all time, and as we approach the eighth year of this economic expansion,” he wrote, “odds are high that whoever the next president is, they will preside over a recession, a bear market and rising debts and deficits.”

For more risk seeking accounts, $215 LMT 1/20/17 puts at $1.50.

Please remember the Straddle.

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