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Thrilling Thursday Wrap-Up

Whoo-hoo!  What a day!

First of all – welcome to my new site!  I’m really happy to be here and I hope you will be too.  I’m going to lay out some ground rules, which I will make up as I go along and change as I see fit but at least we can get started.

  1. Never talk about stock club!  This is for us, these trades are for us, some of these trades will not work with too many people in them so sharing is not caring (for the other members).
  2. You will always hear it here first!  From this moment forward – all posts start here.  I am going to experiment with posting unfinished posts here and you guys need to let me know if you like it or hate it but I am done with a lot of stuff hours before you see it on the main site so I thought it might help.
  3. Participate!  This is a dictatorial democracy – that means I always want to hear what you have to say before I do whatever I want.  There are no dumb questions, only dumb people (wait, scratch that – reverse it, thanks).
  4. Have Fun!  I’m going to have fun so you may as well to.  If there is anything I can do to make this site better let me know – you are a guest in my house and I want all of you to feel like family.  If you are reading this you are one of my original readers and that means a lot to me – we’re going to do something that’s never been done before and it’s going to take time and effort but why can’t we have a good time AND make money AND help people? 

From now on we will only publicize certain picks (I promised Seeking Alpha 2-4 picks a day) but will keep the comments (for 3-5 days, not sure yet) and spreadsheets (always) to ourselves.  There will be lots of private columns that track sectors but, most importantly, we will try to help you identify what kind of investor you are and what strategy will work best for you.

I’ve never done this before so don’t just humor me, ask questions, request topics, give us your opinion so we can build this thing together.  I’m very proud to have gotten this far after just one year of newsletters and I thank you for being one of the first to join our community – it means a lot to me!

I’d better tell you now that, for some reason, I have no spelling checker and I make a ton of typos so please excuse those while we get that rectified…

 

Today was a fantastic market day, everything worked:

  • The S&P blasted through its record high to 1,425
  • The NYSE closed at 9,147 – another record!
  • The Nasdaq barely broke 2,450, finishing at 2,453 (better than falling)
  • The Russell was rejected off 800, our only sign of trouble, finishing at 794
  • Oil went flying up and I’m just about ready to raise the white flag there as there seems to be nothing that will convince oil traders to stop paying more and more for their oil.  The NYMEX crowd pulled the amazing trick of dumping 34M barrels in January contracts while bringing the price of those contracts up $1.14.

    February contracts swelled to a stunning 278M barrels at $63.33, which will be the price you will see (+/- whatever change) at tomrrow’s close.  OPEC did not cut output, despite the fact that they said 100M barrels of excess supply need to be taken out of the market, despite the fact that this weeks total draw of product was 2M barrels less than last.

    But those are fundamental arguements and we have to admit that fundamentals are out the window at the moment.  I took my last stab at oil puts today and am now at equal weight with puts and calls (in number of contracts) but I would still prefer down to up!

    Over the weekend we will initiate some spreads for next month for this sector but I’m not advocating the XOM bandwagon as it approaches a $500Bn market cap, even though I already have the April $80s!

    Direct oil Contributions by Party

    The biggest fundamental that drove oil today was the illness of Senator Johnson - Democratic control of both houses was sending a shock wave through the oil patch as they had really been backing the wrong horse.

    On the bright side, if we are going to accept the premise that XOM really is worth $500Bn, then the S&P, which it used to stick to like glue, must be tremendously undervalued still.

    That’s the logic behind taking oil puts against our postive Dow plays, they are a nice, volatile hedge – as evidenced by last week where we pulled several huge profits off the table.

    The dollar moved higher today (.42%) and may be gathering steam for a decent move back to 85 (1.2%), perhaps next week.  Gold remained flat at $632 and oil’s move was less than impressive as you roll the statistics into the continuous contract (but shhh, dont tell the roaches).

    ===================================

    We didn’t make many moves today other than a double down on open oil puts at what wasn’t even the top at about 11 but I had to leave and I really thought the rally wouldn’t last…

    AXP suddenly flew out of the box and the Jan $60s are well in the money at $2.75 (up 150%) and I’ll be looking to roll into the Jan $65s, currently .45.

    Both BBY and CC gained 1.6% but it’s nothing to get excited about just yet.

    We took the DIA Jan $123 puts for $1.10 as a cover and they finished the day down a dime.  This allowed us to ride out the rally without worrying about lightening up but we still have to think about a weekend strategy for tomorrow morning.

    We stopped out of DALRQ Jan ’08 $2.50s at .75 (up 1,400%) and the stock finished down 13% on the day as reality sets in.

    HD initiated a $3B stock buyback and our May $40s should be in great shape tomorrow, currently $2.70 (up 38%).

    INFY perked back up today with India’s recovery but I forgot to make the play I picked on Monday (kick, kick!). 

    That first sign of trouble we were looking for on LVS came early and the Jan $95 puts at $5.50 (up 15%) were rolled into the March $85 puts for $4.10 rather than the $80 puts for $2.90, seemed like a good trade up for $5 closer to the money…

    MSFT actually moved!  The Apr $30s finished at $1.70 (up 36%).

    I added OIH $150 puts, which were meant to be a day trade but I cashed half and reduced the basis to $1 and held it into the close (mainly because I couldn’t get out for .90).  I picked the wrong week to decide GSF was a good leading indicator!

    TXN had another up day on the roller coaster and the Jan $30s came back to .90 (up 50%) where I’m very tempted to sell these annoying calls in favor of my more relaxing Apr $27.50s at $3.70 (up 12%).

     


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    Comments (reverse order)


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      Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

      Click here to see some testimonials from our members!

    1. digger

      Hello Phil, I am happy to be a part of your endeavors, and look forward to your success as well as my own!

      Would it be possiable, at some point, to state the expected time frame of a position and a projected exit point? I know that changes as the market dose, but I would like to know before I enter a trade if I need to be in front of the puter for the next ten minutes or is this a 3 month proposition. I tend to do better with the later.

      Google tool bar has a spell check. I wouldn’t leave home with out it!

      By the way, I am D from the old forum.

    2. size123

      Phil, emboldened by #3 (the dumb person/dumb question category), I have one. What does it mean when there are two different options listed for the same month and strike price but with different premiums, what is the difference in them?
      Thanks.

    3. digger

      Size123, I don’t get that either.

    4. digger

      Size, who do you trade with?

    5. digger

      Another question Phil. Do I need a margin account to sell a call against a call?

    6. size123

      Fidelity, they say that these duplicate ones are not available to the retail market or something like that.

    7. size123

      Phil, just to let you know, the time stamp on the comment posts is off, they are saying two hours earlier than they are.

    8. Phil

      Dig – I have a hard enough time thinking about when to enter, forget the exit but, in general (and please read Trading Policies) I am looking to get out as soon as I make 20%, the faster I make 20%, the more I want to leave as it is too much too soon.

      In a strong market (like the past 3 moths) I’m more lenient but our 9 day average hold is 50% longer than it was in the choppy spring.

      I am planning to make categories of plays with Quick Trades, Medium and Long-Term Plays. The little know reality of my picls is that the ones we talk about are just the play money portion of the portfolio.

      For the bulk of the trades, I advocate a diversified mix of leap and income producing plays – some of which we detailed under a post called “Forgotten Trades.”

      This is the time of year we review and roll those trades over, there will be a lot of this done between Christmas and New Year’s.

      =================================

      Great Question Size! Be very careful about those, usually one is from a pre-split or a pre-special dividend or something and may carry special obligation booby traps you really don’t want to deal with.

      For example, when MOT spun off FSL + a cash dividend, the MOT $22.50 call obligated you to buy the MOT share for $22.50 PLUS 1/11th of one share of FSL PLUS .15 in cash! There are ways to use them to your advantage but the problem is even a very sophisticated broker generally has to call a specialist who has to consult with his boss to figure out what exactly it is you are buying and selling in those situations.

      To identify the proper symbol – look out more months until only one kind shows up – that should have the correct first three letters – also, if one is heavily traded and one is dead – avoid the dead one like the plague!

      That was not a bad Question – that will go on our FAQ board!

    9. john_the_other_one

      Phil, how would you play ADBE? The market was just THRILLED that they met expectations after hours. Looks like a high P/E to me. I don’t get it.

      Also, the Firefox browser has a spell checker built in. It’ll highlight a misspelled word and you can right click to choose a correction or add it to the dictionary.

    10. soccer_f1

      I was out all day today, just trying to catch up with the news.

      ===========

      Maybe This Is Why Stocks are Rallying…
      http://blogs.wsj.com/marketbeat/2006/12/14/or-maybe-this-is-why-stocks-are-rallying/

      Hmm?

      ============

      Dec. 14 (Bloomberg) — Morgan Stanley gave John Mack $40 million in stock and options for 2006, the largest bonus ever awarded to a Wall Street chief executive officer.

      ============

      Dec. 14 (Bloomberg) — The Defense Department has requested $99.7 billion more in emergency funding for Iraq, Afghanistan and the war on terrorism that, if approved, would bring war spending in fiscal 2007 to a record $170 billion.

      ============

      Americans will spend nearly 10 hours a day watching television, surfing the Internet, reading books, newspapers and magazines and listening to music this year, the U.S. Census Bureau will report on Friday. In its “Statistical Abstract of the United States: 2007″, the agency will note that Americans drink about a gallon of soda a week, along with a half gallon each of milk, bottled water, coffee and beer

      The Census Bureau projects U.S. population will grow to 420 million by mid-century, versus nearly 300 million today.

    11. Gary Kuebler

      A gallon of soda! Yikes! To keep the temple running long, strong, flexible, flowing and clear think about drinking only steam distilled water (8 glasses a day). Google “Paul Bragg” + “steam distilled water” for more info on this concept.

    12. digger

      Milk, coffee and beer; the major componet is water. That’s all you need.

    13. Phil

      Population – that’s great, we’ll catch those Chinese yet!

    14. batesum

      I want to wish you the best of luck in the new site and I hope we can all take advantage of it to make some $$$. I hope we dont have to regress too far and too often to answer some of the recent questions I have seen, but I believe people that ask first time option trading questions wont be subscribing anytime soon…….thank you Phil for making this a pay site

    15. reinharden

      One quick suggestion. Several comment packages (although I can’t speak explicitly to WordPress) allow you to lock the comments. Perhaps you could do that whenever you open a new post so as to keep the comments flowing in the right place.

      Granted, it’ll be a bit of a pain to carry the comment forward…but if it’s interesting enough, I think we’ll jump through the hoop. And it’ll be way easier to stay current that way.

      #####

      Sorry about not following up on ADBE, I got busy. I did pick up some of the $42.50′s at the close (I’m talking 3:59 PM). Hopefully ADBE will hold the after hours number in the morning…although at the moment it looks like the $40′s might yield a better percentage return.

      If ADBE breaks $43.66 in the morning, it’ll be an all-time high. Coming on the heels of the best revenue in ADBE’s history for both the quarter and the year. With CS3 announced to be on track for a late Q2 release with an associated revenue surge. Combined with a hardware refresh cycle on the Mac (people moving to Intel) and on the PC (people moving to Quad Core processors and/or Vista capable machines).

      ADBE isn’t being priced for past performance, it’s being priced for what they expect to be a fairly blowout 2007. While the TTM PE is near 50, the forward PE is “only” 28.

      If I held the stock instead of options, I’d be tempted to see where it goes from here. ’cause barring macroeconomic events, there’s no ceiling on it at the moment.

      That having been said, the results won’t show up until the October earnings report…but the expectations start now. ;-)

      reinharden

    16. cran

      Phil – I’m excited to be part of your Pro site…I have been a silent lurker the last several months and really value your insight and analysis of the markets/ecomony. Looking forward to all the new and upcoming features here!

      Reinharden – I agree with you on ADBE. Congrats on picking up the calls at 3:59pm…Hope it stays high at the AH’s level tomorrow!

      I, like many of my photography buddies, have been waiting and holding out for the Universal Binary version (runs native on Intel and Power PC Macs) of Photoshop to come out (CS3 out in late Q2! Woohoo!). Acrobat 8 was announced a few weeks ago in Universal Binary format as well. It should be an exciting 2007!

    17. Cris

      Phil, it feels great to be here. I am looking forward to some serious action on this site.
      rein, thanks for the ADBE update. I think this Vista event is going to be fairly huge, although maybe not as huge as Win 95. I certainly don’t expect MSFT to quadruple in the next 2 years! :)
      The biggest thing I’ve noticed about Vista is that it can run detached monitors on wi-fi. For example, a notebook can have an outside smaller screen that can show email and the currently playing mp3, or you can run stock quotes on a wi-fi picture frame lcd screen. This kind of thing will open up a whole range of possibilities, on the software and hardware side.

    18. Edward Berlovan

      Hi to all, its great to be here! I would like to share some news with you. I personally own property in Monticello NY. I have been waiting for news on the approval of the environmental review from the Interior Department in Albany NY and its finally been approved.

      Now the next step is for Pataki to give his JH. Both he and Spitzer agree casino’s in NY are a good thing and most expect an easy passage. The company that would benefit the most is Empire Resorts symbol NYNY. I do not own any shares in NYNY as i do own property and that alone was enough of a risk for me to assume, and i do not advise anyone to buy them. If the casino goes through then the stock is undervalued greatly. I would just recommend watching it and deciding on your own if you should take action.

      I feel awkward making this my fist post on the pay site and do not want to come off as a stock pumper, but i thought it prudent to share this with you as i do believe money can be made here that is my sole reason for posting this news. Good luck to you all. http://www.nytimes.com/2006/12/15/nyregion/15casino.html

    19. Martin Snider

      Phil, I was going to suggest that you change the background color on your posts for those of us who try to catch up with the comments in 5 minutes throughout the day. It makes it much easier to read your posts as you tend to summarize topics nicely.

      But, you rascal, you stole my good idea. =)

      So, I will give you another one. Couldn’t you make the Valero indicator reflect your wider system. I can’t remember it exactly, but there were several components that had to be trending in the same direction. Couldn’t you use real-time moving average quote of all the stocks to represent a positive-negative indicator showing the current Valero Rule status.

    20. calch

      Phil,

      The XOM Jan 72.5′s puts are getting smoked. Should I DD on these again or play another strategy to try and recover some of the losses? Your thoughts would be appreciated.

      thanks

    21. James (Jim) Robinson

      Hey,

      It’s 1:58 am — don’t you guys ver sleep ?

      PS:

    22. James (Jim) Robinson

      PS: I’m really looking forward to the next while, to see how this site develops — it looks to be original and interesting G/L to all.

    23. James (Jim) Robinson

      PPS: Me neither I guess !

    24. prof

      PAID SITE

      IMHO this will be a better resource now that the participants are more selective. I went away for a while when the daily comments were approaching 300; hopefully I am here to stay now.

      ///////////////////////////////////////////////////////////////////////////////////

      FUNDAMENTALS JUST DON’T MATTER!

      Phil has been exasperated by oil not dropping in price even with the enormous supply. Similarly, I have been equally as frustrated by the run-up in homebuilder share prices, as homes for sale continue to languish on the market.

      Why does the stock market continue racing to new highs?

      I have been thinking about this topic. What determines the price of a stock? Is it fundamentals like P/E ratios and book values? Is it technicals like stochastics and MACD?

      NOOOO! Go back to Econ 101 – SUPPLY AND DEMAND determine a stock’s price, just like any good or service.

      Although we are awash in oil, homes, autos, and most every consumer product out there, what else out there dwarfs the supply of these items? The supply of dollars! Think about it. Have we ever before in history been so inundated with access to money – 10-year interest-only mortgages, 0% for 1.5 year credit card offers, crazy-high HELOC funds, etc?

      All these dollars have to buy something, and many of them are going to buy stocks!

      Think about who is involved in this current market rally. Most working people I come across are in utter disbelief that the market continues to rise. Just like in 1999. The financial types, however, seem to be riding this trend full-force.

      Shades of 1999-2000 to me, and I fear that Phil’s blast-off scenario – a blow-off top like early 2000 – may yet come to pass. Retail investors may get sucked in at this top, like they almost always do ….

      As for me, my two remaining homebuilder shorts are covered by protective Jan. calls. I’m fixin’ to close out positions the week before Christmas, then just go away and play one week with the kids and their Christmas presents, then the following week skiing in Tahoe.

      ////////////////////////////////////////////////////////////////////////////////

      PERSONAL INFORMATION

      Now that this is a closed community, it would be great if everyone could share their basic backgrounds.

      If Phil is agreeable to this, maybe he can get the ball rolling by specifying what information he would like us to share. (e.g. geographical location, age, education, trading experience, etc.)

      Dictatorial democracy, right?

      - Prof

    25. Edward Berlovan

      The early early bird catches the worm James.

    26. kustomz

      I dont know why but i posted and my name came up i was horrified, i felt so neket! This is much better.

    27. kustomz

      Its late guess its OK to have a little fun.
      This person obviously isn’t a subscriber to this site. http://fedexfurniture.com/bed/bed_800.jpg

    28. cran

      Kustomz, same here…i quickly changed the display name to my alias/nick.

    29. Mike_C

      Hey Rein,
      Congrats on your ADBE play. I was debating about that one for a while, but I chickened out. AH holding pretty well.

    30. Mike_C

      Cris, that’s a great insight on Vista. Pretty soon all I have to do is buy a bunch of LCD wifi monitors and have my laptop display the charts for each of my options pick. ;o)

    31. kustomz

      I thought i had posted this earlier but its not here, so here it goes again.
      I am in no way a stock pumper. I urge you NOT to jump into this stock, what i want you to do is watch it as it may be undervalued if the casino goes through.
      I personally own property in Monticello NY and just yesterday the environmental was approved. Casino Plan for Catskills Moves Closer to Reality With Interior Department’s Approval. This was a key hurdle.

      Again i can not stress enough the fact that this stock goes up and down in large swings. Gov. Pataki needs to sign off, it is common knowledge here in NY that he and Spitzer love the idea and Pataki has stated he will sign off on it. BUT YOU NEVER EVER KNOW! Until it is finally signed and approved i am not going near the stock. The company is Empire Resorts symbol NYNY

      http://www.nytimes.com/2006/12/15/nyregion/15casino.html?_r=1&adxnnl=1&adxnnlx=1166159366-4Ri/rEwZnHiubhQoo6Q1wg&oref=slogin

      Looks like there’s friction in China and its not being caused by the rubbing of thighs. Seems the Chinese are annoyed with Bernanke. O no hope its not like pissing off the waiter and he does something unsanitary to your food. Can we expect sweaters that bleed dye in the laundry and turn the rest of your clothes pink? Bernanke what have you done?!!

      http://www.bloomberg.com/apps/news?pid=20601103&sid=aEXOuMuLBBuU&refer=news

    32. kustomz

      test

    33. Phil

      ADBE – the overriding rule is “Always sell into the initial excitement”

      It wasn’t that great frankly. It’s a great company but there’s no way they were that undervalued. For me it’s a train has left the station sort of thing. On Tuesday comments I advocated:

      “If you can identify a channel, you can do something tricky like buy Jan $42.50s under .75 and buy the $37.50 puts for under .75 and sell half whenever it turns after you make .25 (so you are selling at .95 or better.”

      I didn’t take it but someone asked me how to play it at the time. If you remind me in the morning we could take another look at it though, there might be a spread to be had but my goal would now to be to sell the overactive Jan $42.50 to someone else.

    34. Phil

      ADBE – I agree with Rein, re long-term prospects, the above answer was to short-term play, too close too soon to the hgh for comfort is all. Also, the fear of MSFT looms large until everyone gets a good look at Vista and decides it’s no threat for another 4 years.

      =================================

      VLO Rule – now you’ve stolen my idea! In fact I had Jared take off that Valero thing because the worst problem is that people think the rule is just watch Valero and that’s very wrong. We are looking for a group chart but we havent found anything that can give us an up down indicator on the group.

      If anyone is techy with web stuff, my ideal goal is to have a chart of the group, like the Yahoo charts I use, that tracks the daily movement but a single directional arrow that takes the sum of the movement (preferably in percent) of the group and makes a simple up or down live(ish) indicator.

      I would like to do the same with GOAX plus several other indicators I run on the fly based on various market situations (oh I have lots of secrets to share with you guys now!).

      The Blue was Jared’s great idea although I don’t like to think my comments are any more special than anyone elses – I guess it is Phil’s World so what can you do?

      ==================================

      Oh (this is great because I don’t have to hold back on ideas anymore!), what I want to do with a message board is make each stock a topic and then time categorize comments under the main topic so we lead each stock with the primary subject being something like:

      ADBE – the curent consensus on Adobe which will be modified by admins (let’s say for example that Rein and I are authorized to modify tech stocks) and always on top as the “Subject”.

      There should be a little current quote, options we are tracking, entry and exit numbers and, of course, any position we currently have.

      Then comments can be placed below it so you can read them in date order with the most recent comment closest to the subject with some kind of way that we can highligh earnings (or we can just do a link from the top I guess.)

      Feel free to comment on this idea but that’s my goal. Whether we can use it live or just as an archive depends on 2 critical factors:

      Can we have a view for all current comments, regardless of subject that we can use during the day?

      Can we find a message system that does all that and can be emailed to people (a lot of people really want comments, or at least alerts (which we could categorize) fed to them via mail.

      If anyone is into this sort of thing, please let us know.

      ===================================

      XOM and all oil puts, we have to wait for a proper signal – the title of the weekends post is either “Yes Virginia there is still a Valero Rule” or “Is the Valero Rule Dead” I’m not sure yet, which is very bad.

      I’m going to experiment with posting works in progress and heading them as unfinished – I don’t know what that will do for feeder people so let me know if it’s good or annoying but I think it would be nice if we can all comment on major articles ahead of publication. Like someone suggested that I missed MET in the insurance article and boy did I!

      BTW – Valero Rule, or whatever the Valero Rule is renamed as – will be private – it worked a lot better before it had its own page in a google search!

      ===================================

      FDX bed – lol!

      ===================================

      Please everyone at least cut the names down, I’ll never get to know everyone by their whole name!

      =================================

    35. Jamie Head

      Hi Phil, What is your take on NTRI, we tried to food it is uuuucky, repaet customers are apparently low. Would you buy puts on this one?

    36. digger

      Phil, no need to answer this question now, but in the near future can you give me your take on the WiMax revolution and the prospects of ALVR and AIRN as players.

      I have watched and played these two for a few years and I am starting to doubt management’s ability to succeed in this growing field.

      Thoughts on a buy out by a major player?

    37. denver

      Phil, you might want to take a look at IO. Big gap up eod yesterday.

    38. Phil

      NTIR – I wouldn’t buy puts just because the food is bad or I would have gone broke shorting Taco Bell long ago!

      Remind me on the weekend and I’ll check them out, today is too crazy.

      ===============================

      I think I’d rather stick with the more obvious plays in WiMax like INTC and, possibly BRCM but I’m still waiting to see a single installation.

      ===============================

      I don’t follow IO but I’ll take a look – today is just too crazy.

    39. prof

      Test

      I attempted a lengthy post late last night, and it never showed up

      I’m beginning to agree with Phil’s rocket ship analogy, and I will explain why later …

      - Prof

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