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Monday Meltdown

Have I gotten too bullish?

As I’ve warned in the past, we’ve all let ourselves get a little too conditioned to buy on the dips when sometimes markets dip for very good and very long-lasting reasons.  Yesterday morning, before the C meeting even happened, I posted this article for members and said: "Maybe not the bullish news people expected at today’s meeting!"

I have long said that we won’t be able to post a real rally until the financial community steps into the confessional and clears the deck so we can see where the floor is.  As we suspected, the confessions we’ve heard to date have been sugar-coated (to use the very polite term for total BS) and we are not as near the end of this cycle as investors may think.

Perhaps now is a good time to review my 10/10 article where I called a top, detailed the housing crunch and made the statement: "$1.5 Trillion (of suspect sub-prime notes) and no reason to pay.  Yet we are celebrating when Citibank writes off $3Bn in bad loans.  What about the other $1,497,000,000,0000???  I’ve said before I’m happy to get behind this rally AFTER we hear from the regional savings banks and other lenders as they explain exactly how they think they will be collecting this money."   My CONSERVATIVE estimate for sub-prime losses at the time was $200Bn and I said: "Let’s stay aware of the undercurrents that may actually start to matter and watch out for the home related sectors, no matter how beaten down they may look – they are not $200Bn beaten down yet!"

Titantic

This is what led us to our Nasdaq bullishness for the past two weeks as I decided: "That’s why we have Nasdaq leadership, they’ve got the mix that is least likely to be affected when it all hits the fan.  Much like the Titanic, even as one end of the ship begins to fall into the water, the people on the other end start to rise – even reaching "record levels" just as money flows from one part of the market to the other – it’s a temporary effect but, wheeee, what a ride!"

That was the week we had our first great BIDU play and today may be the next one as we went into the weekend with very heavy BIDU puts ($400s) that we doggedly refused to give up on as we rolled all the way up from $360.  Speaking of rolling (and other stratgies), a very big group hug must be given to K1, who rolled out the beginnings of "The K1 Project," which is a compilation of the strategies we employ at PSW and is a must-read for new members as he’s done an amazing job of condensing months’ worth of comments into a neat and easy to follow series of articles that read like a good book.  Absolutely fantastic work K1!

Not so fantastic is the performance of the markets this morning as I was woken up right after I went to bed, for a very good reason, by one of my people in Hong Kong who rightly decided we needed to be MORE bearish in the early stages of that market’s 5% decline this morning.  It’s very rare that you see an index test our 5% rule.  Hong Kong hit it on the button, finishing at the low of the day (and we know that does not bode well for tomorrow) and the Shanghai A Shares hit our 2.5% rule, also finishing out near the day’s low.

The proximate cause of the dip had less to do with Citibank and more to do with China’s decision to delay a long anticipated scam plan to allow mainland investors to plow their life savings into the massively inflated Hang Seng bubble (PTR, for example is now "worth" $1.1 Trillion!) in order to allow corporate bagholders to escape at the expense of the Chinese people.  Premier Wen Jiabao "Questioned whether mainland investors were fully aware of the risks involved in investing in Hong Kong, noting many investors don’t have a strong grasp of the risks inherent in their own, stratospheric markets."  Wow, a political leader looking out for the interests of his people – darn those communists!

This deal was supposed to be "in the bag" at the Hang Seng and investors there were licking their lips at the prospect of $2.5Bn worth of "mattress money" coming out of the mainland and into their already red-hot market.  The fact that the Hang Seng was up 50% since mid-August only seemed to bother me but suddenly it’s going to bother everybody as the massiveness of a 5% sell-off has to be considered when Hong Kong has a "limit-down" policy of 10% on any individual stock (a level that was hit by index members Sinopec and Bank of China) – that means there could be a lot of pent-up selling pressure tomorrow as wellLimit down is different than trading curbs – when a stock goes limit down trading for the day is suspended entirely, whether it comes an hour before the close or a minute after the open

Also in Asia, Musharraf found it "necessary" to declare a state of emergency, placing the country under martial law ahead of the elections.  Fortunately for Musharraf, he is in charge of the Army, which keeps him in charge of Pakistan until the he feels it is safe to release the hundreds of members of his political opposition who were arrested this week.  Things have heated up considerable since Musharraf someone failed to assassinate former PM Bhutto in a recent bombing attack.  Pakistan has close to 1Bn people and a civil war there will probably not be a good thing!  Of course Musharraf is a Bush ally so it will be very interesting to hear how the administration spins this one as the General claims these are necessary steps to clamp down on Islamist extremists.  Think about this as each of our own candidates all try to prove they are willing to bend the constitution further than the other in order to combat terrorism.

Opposition crushing is quite the fad this weekend as Japan’s opposition leader, Ichiro Ozawa offered to resign (PM Abe resigned 2 months ago) and we need to keep an eye on this as the Yen carry trade hangs in the balance.  If anything upsets the very delicate balance between the dollar and the yen, it could be devastating for both economies.

Europe is relatively calm by comparison. with markets over there down about a point.  European lenders have been much more forthcoming than their US counterparts (HSBC and Barclays led us off in the summer) and the EU, unlike our Fed, has lots of dry powder they can fire off should the need arise.  UBS underwrote $1.2Bn of debt for Dubai International Capital, sending a very strong signal that there are still deals to be done – just not with America!  Despite UBS’s good gesture, Qatar backed off a $20Bn deal to buy England’s Sainsbury (and we know that’s a bad sign) and EADS revealed MORE losses, $2Bn worth (no surprise but holy cow, they may as well be building houses!).

Our futures are down huge early in the morning and we’re going to have to be really concerned if we break below levels so let’s take a look at the Big Chart where, sadly, we have to begin to be concerned about some real breakdowns:

    10-Day Must Comfort Break Next
Index Current Move Hold Zone Out Goal
Dow 13,595 -81 13,000 13,300 13,500 14,000
Transports 2,980 -119 2,800 2,900 3,000 3,250
S&P 1,509 -10 1,470 1,505 1,530 1,550
NYSE 10,052 12 9,400 9,800 10,000 10,250
Nasdaq 2,810 11 2,525 2,550 2,600 2,750
SOX 457 -21 480 490 500 560
Russell 797 -21 810 830 850 900
Hang Seng 28,942 -391 20,250 20,750 21,000 22,000
Nikkei 16,268 -90 17,400 17,700 18,300 18,500
BSE (India) 19,590 1078 13,500 14,100 14,725 15,000
DAX 7,820 -15 7,300 7,600 8,000 8,200
CAC 40 5,679 -32 5,750 6,000 6,100 6,300
FTSE 6,457 -73 6,400 6,550 6,600 7,000

On the whole, the changes aren’t all that bad from where they were on 10/24, when we began the pre-Fed rally.  Well, the Fed gave us a cut, so what is everyone’s problem all of a sudden?  As we’ve worried about for a long time, it’s the SOX and the Russell that are leading us down and the SOX were what kept us from committing to the Nasdaq rally as I often tell members it’s never a good sign when the Nasdaq forgets it’s SOX.  We barely hung on to our Comfort Zone levels on the Dow, S&P and NYSE and, if we lose those, shorting the QQQQs will probably give us the most bang for the buck as this very intense run in the Nasdaq has left it with little support for 60 full points!

You can tell it’s over for oil when martial law in nuclear Pakistan isn’t enough keep prices above $95.  Our SU puts should richly reward us today, as well our our XOM and COP puts, but let’s be careful in case tensions escalate and prop up the prices.  Gold is a better indicator than oil of true international tension so we’ll be watching gold carefully as an indicator of how scary things are in Asia.  The copper market is falling apart fast as it’s simply not precious enough to sustain these ridiculous prices! 

If we can’t bounce the dollar off of 76 this week and fall below it, there’s a very good chance we are looking at yet another 5% decline before we bottom.  The good news is that 5% of 76 is just 3.8 so we should hold 72.5ish (cue music: "I’m proud to be an American").  That should be good for 700 Dow points, which will hopefully keep us above the 13,000 line but a dollar bounce while the market is falling will accelerate the market decline and break technical levels we DO NOT want to visit.

So let’s be careful of and Fed speak or Paulson comments (I’m not worried about the President, he just blew the last scrap of economic credibility he had crowing about Friday’s jobs report proving that his economic policies were working).  We’ve got a nice bunch of data to look at this week with ISM today at 10 – expectations are too high at 55 so let’s watch out for a disappointment shock there.  Wednesday we have Productivity numbers, which had better be stellar or we’re back on inflation watch and we already know Wholesale Inventories are climbing and MA told us consumer credit is going through the roof so that won’t be a surprise either.  Thursday is jobless claims (yawn) and Friday we get Export Prices and the trade balance for September (oil was "only" $77) along with the fabulous Michigan Consumer Sentiment poll, which will be looked at closely as the holiday’s approach.

 It’s going to be an interesting week, hopefully we’ll hold up but we are very well prepared if we don’t!

 


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  1. windywheel

    another great post phil. as much as i read i don’t get anything close to this kind of perspective anywhere else. very much appreciated!

  2. fredrang

    Phil,

    You mentioned you were woken up at 11:00 PM and had to do some crazy hedging. What type of hedges are you putting on at that time of the night…in Asian markets? It would be great to enlighten us as I watch the overnight markets and often wonder the best way to take advantage of overnight plunges/gains. Other than moving in the premarket on stocks like Toyota/Japan I’m not well versed in the hedges one could put on before the market opens. thanks

  3. Scott

    Phil,

    I bought the Nov 380 Puts on BIDU and hedged with the 360′s just prior to the close Friday to limit the risk.

    Looks like it will drop sharply at the open, buying the putter back into the initial drop isn’t recommended, is it? Down a couple hundred. Any recommendations….(also pretty limited on margins).

    Thanks,

  4. ramana

    Pakistan population : As of July 2007 it is 164 Million – http://en.wikipedia.org/wiki/Demographics_of_Pakistan

    :-)

  5. MrN

    Is something up w/ IRBT or am I getting an incorrect quote

  6. Fabregas

    MACAU, Nov 5 (Reuters) – Macau’s biggest corruption trial opened on Monday with the court hearing charges that a former top official had taken millions of dollars in kickbacks to speed up construction of the gaming haven’s multi-billion-dollar casinos.

    Anti-graft officers and prosecutors said they had evidence he had amassed a fortune worth about US$100 million — over 57 times his income over seven years as a top policy secretary — after raids on his home and offices unearthed a web of offshore firms and bank accounts through which he funnelled funds.

    http://www.reuters.com/article/marketsNews/idUKHKG31729220071105?rpc=44

  7. fredrang

    ramana

    We Americans sometimes forget about the world population and have a hard time fathoming how much the rest of the world could consume which is scary. Also, it’s amazing that India could pass China in world population given the controls in China. I don’t know much about similar controls in India but I believe they are about 1.1 billion while China is around 1.3 billion.

  8. fredrang

    Quote of the day from Barrons:

    Re: Risk companies like Ambac and MBIA assume

    These companies “pick up nickels in front of steamrollers”, nice visual if you ever watched those old Laurel & Hardy movies.

  9. Fabregas

    Ao stands accused of hastening the approval process for local developers and contractors on numerous projects, including one involving the $2.4 billion Venetian Macau, and helped developers snag contracts in open tenders in return for kickbacks.

    The Venetian Macau said on Monday it had no comment for now.

  10. fredrang

    IRBT – Quote is correct good news for them

    Boston, Nov 05, 2007 (MidnightTrader via COMTEX) — iRobot (IRBT) says the U.S. District Court for the District of Massachusetts has granted in part the company’s request for preliminary injunction in a lawsuit against former employee Jameel Ahed and his company, Robotic FX, Inc., prohibiting use of critical features incorporated in the design of the Negotiator, a knock-off version of the combat-proven iRobot PackBot robot.

  11. ramana

    fredrang : naah Phil is very knowledgable…just being myself :-)

  12. MrN

    Fredrang – thanks

  13. Optrader

    Wow. Looks like my FXI puts are going to rock this morning. I was a little bit anxious with all my puts on Friday as the bounce really caught me by surprise but decided to keep everything as charts were looking bearish according to my rules. Looks like being disciplined is going to pay off big time this morning.
    I hope most of you are really well hedged. If not, try to cut losses on a bounce and be very careful with your longs.

  14. Cap

    Good stuff on China Phil … what do you expect to happen w/ FXI beyond today ?

    Will this be a 1-day wonder, or more ?

    What about other China bubble stocks like BIDU ? Man, that one needs to be CROXed IMO !!

    Also, the Pakistan thingy cannot be good for neighbors China and India.

  15. Demetrius Michael

    There goes planet Earth…. It was kinda funny that Citi did it’s reporting when it did… I was kinda hoping they’ll release the real bad news near December 11th… Only real way to keep stocks alive, and cut rates… We will see how the market does today.

  16. Shahir

    Anybody know what happened with Ali Baba in china??

  17. Cap

    BTW, on CROX, I think what has happened there is ridiculous.

    Their numbers looked pretty good to me; better than a POS like BIDU for sure.

  18. Cap

    9 am – Fed’s Mishkin: This rate cut wasn’t really necessary. Just insurance. Fed can easily take it back.

    Sounds like no mas on rate cuts to me.

  19. Phil

    Asian Hedging – that’s for a private client I have, I don’t play those markets for my own accounts. I actually fear the globalization of exchanges because if I could trade 24 hours a day I would and that certainly wouldn’t be healthy.

    It’s very tricky to hedge our foreign markets, both the Hang Seng and the FXI are very small samples of the total base of tradable securities (like the Dow) and there are A LOT of moving parts. You guys get the condensed version of all the research I do, there would not be enough days in the week for me to start following those markets to that level. That particular client has money in a US account I oversee but he has far more tied up in Asian markets so he called me when it statted falling and we “fixed” his positions but it’s very hard to do when I don’t have the same kind of data set-up on tap that I have for the US.

    BIDU won’t drop that sharply and it’s highly manipulated so be careful. I wouldn’t rush out of all the $360 puts but I would take 1/4 to 1/3 off the table and set stops to take out the rest. Every time you uncover your longs you should really consider putting a stop on them too – just in case. Remember, the PTR play got a stunning response and we still have Alibaba and a few others tomorrow so if the US holds on today, we could get a bounce in Asia tomorrow and BIDU may reflect that optimism today. $360 puts are a long way away!

    Pakistan 164M? Oops, why did I think they were as big as India? That begs the question what the hell are they thinking antagonizing India then?

    IRBT – oh please no! I covered them! Waaaaaaaaaaaaah… They were granted an injunction in a lawsuit against an employee that left them and tried to compete with military bots – that’s a big deal!

    Macau – that will be interesting as China will want some briber’s heads LITERALLY on the chopping block in addition to the bribee.

  20. likewoods

    IRBT I thought this trade was dead, looks like i might get out with out a loss, keeping my fingers crossed. lol

  21. fredrang

    DM

    It would have been better to release C on 12/7; Pearl Harbor Day. Can’t remember the big US company that did a major layoff on 12/7 a few years back…how insensitive…or ironic.

  22. Brian

    Phil,

    Congratulations on the gains in the $10/25K portfolios. I wish I could have participated. But, as usual, your trades are beyond the ability of mere mortals to follow. Take, for example, the LVS trade. According to your spreadsheet, you have about $18K in gains. The last three trades made over a five day period netted about $18K. It looks like these were calls sold against your long call postion, the Jan 135′s. You sold 10 Nov 135′s contracts on 10/29, closed them on 10/31 for $9480. You sold the same contracts on 10/31 and then closed them on 11/1 for $2240. You sold the 130′s on 11/1 and closed on 11/2 for 6,580. Total, over $18K. I can find no documentation for any of these trades at all over the period. Nothing in the daily blog, nothing in the intraday summaries, nothing in your wrap ups. There should be a rule that you cannot get credit for trades that are not documented somewhere. These trades suddenly appear in your spreadsheets when they are updated them over the weekend.

    Also, I noted that you closed out your Yahoo position on 10/29. I thought you were going to hold the Jan 32.50′s ? Once again, I can find no documentation anywere that this trade was ever made.

    It is not too much to ask that you announce your trades in the 10K/25K portfolios when they are executed or within a reasonable time frame. I understand that you are busy during the day but it is essential you you do this on a timely basis. Many of us (well, I am, anyway) are participating in these trades and are trying to follow along.

    Thanks

  23. Phil

    FXI – PTR and tomorrow’s IPOs should give the market some hope but I’d start going after any China plays that DON’T go down if our markets finish down today because our markets are not going to recover based on a China bounce tomorrow.

    BIDU should be able to hold up if GOOG holds up and GOOG has their phone announcement today, which should help them out a bit but, once this is over, what next?

    Foget BIDU, what about PTR. How much do you have to earn in a year to be worth $1.1Tn. XOM makes $40Bn with a $500Bn cap, PTR earned $10Bn last Q. I wish I had shorted them on last week’s ridiculous run-up but today they will be caught up in a “sell on the news” dip most likely.

  24. fredrang

    China

    Well the last guy committed the Chinese equivalent of Hari Kari around the pet food scandal.

  25. jon

    GOOG up!

  26. Demetrius Michael

    IBM going to 111?

    lol pearl harbor day would be interesting timing to say the least.

  27. Phil

    Brian – I do try to list all the trades but sometimes I don’t remember which portfolio a trade is in. Also, when I say set stops, or cover all calls, it certainly includes those portfolios. Also, also, I don’t think there was anything in that LVS trade that deviated from the normal strategy of buying out a caller when you get a certain profit and recovering on the next pullback but I’d be happy to go over it after hours if you’d like.

    Meanwhile, in today’s market – we lost 2,775 on the Nas already and the S&P blew right past 1,500 and is holding 1,495, that’s the key index on the day.

    GOOG is positive but not much else but this is certainly not looking like a panic sell-off so let’s keep tight stops on the puts and start building up the call side of the mattress while they’re cheap. DIA $135s are $2 and we can roll them down for .40 or less. The Dec calls are still too expensive at $4.

  28. bmb

    13500 holding again? Wouldnt have guessed that..

  29. Demetrius Michael

    FCX doing well at the 110 mark.
    ESLR Upgraded, doing pretty well.

  30. Demetrius Michael

    ESLR – well it’s whipy, but 12 looks like support.

  31. Phil

    BSC $98! GS $220! Such great deals but still hard to buy!

  32. Demetrius Michael

    LULU – Crap I missed it at 44 for the 2nd day in the row.

  33. hawk

    The bulls are scared but it’s been so long they can’t remember how to sell. I can’t really read a direction here at all.

  34. Demetrius Michael

    I agree with phil, it’s really hard to buy for LT in this market. Friday was a really good entry because we had pins everywhere… Unless everything ends positively today, I would be worried.

  35. Phil

    This is very interesting, lots of real buying interest at these levels. AIG, YRCW, CROX – things that are oversold but, on the other hand, IBM still going down, MCO making new loses, MDT getting killed again.

    I think money is going to start coming out of oil if this keeps up as it’s the best source of cash for people who want to bottom fish.

  36. MrN

    OIH – I’m still in Fri. puts @ decent profit. What’s the direction.
    Rimm – worth shorting again or going countertrend?

  37. Highlander

    Phil,
    where is the key support level for the djia at? $13,400??

  38. Phil

    BIDU doing well!

    13,400 is very key but 13,500 is psychological and looks to be holding which means it’s time to disconnect the old brains and enjoy the “rally” while we can.

  39. Demetrius Michael

    ESLR wholy crap

  40. Demetrius Michael

    buying that thing at 12 turned out to be a really good idea.

  41. Highlander

    Phil,
    crammer has called crox dead and a sell. i kind of have to agree. thier product is now being copied even at walgreen at really cheap prices while at jcp the ‘mudd’ brand which has not only cloaned crox products but has done them one up on quality and selection.

  42. Courtney

    SHLD SHLD SHLD

    Phil, is this looking weak enough to roll Nov 135′s to the 130′s. There’s mo’ money in those 130′s!

    Thanks

  43. Phil

    ISM number is UP 55.8 showing growth, that should give us a good kick up, so much for puts! Use stops on callers but be ready to recover if we can’t break up. XXX

  44. bmb

    Well, stopped out of my puts

  45. fredrang

    FSLR

    A short into earnings? Recovering nicely today…but that short is calling me…how would you play? I believe you could see the action like a SPWR, down sharply and then a recovery.

  46. Phil

    SHLD – November? It’s a gamble but a good one at the moment.

  47. irished

    Phil
    Which one do you like the best? FSLR/SPWR/ESLR
    Thanks.

  48. Demetrius Michael

    IBM wants to go up, but it’s the train that can’t.

  49. Scott

    Phil,

    I have several deep in the money callers for November. Do you a bounce from here to take some of these off and maybe move to Dec.

    Thoughts are appreciated.

  50. fredrang

    C

    Haven’t seen anything from Eddie Lampert on Citigroup. He wss down $290 million on his initial investment although he could have been hedged. I’d be more interested in his take than Mr. Purple Rain.

  51. fredrang

    irished

    I know you want Phil’s opinion but based on all my research SPWR is the best of the three. Superior technology, Cypress backing, most reasonable forward P/E.

    ESLR is interesting but they haven’t been profitable and the more I read about FSLR, the more those fixed price contracts concern me. Their costs are highly variable but their contracts are not. Of course that’s a long term issue.

  52. Demetrius Michael

    lol purple rain haha, you hilarious, I thought the same thing.

  53. fredrang

    Those C Nov 35 Puts are scary but juicy @ $1.05. How much more bad news could there be before next expiration. Wish they had 32.50 strike to hedge. Not pulling the trigger yet.

  54. dday97

    Mornin all…late again.

    Mostly cash right now but YHOO nov calls are up 30% already. Could be a nice light day for me riding that wave until tomorrow.

  55. Fabregas

    CROX – shorting some $45 puts for $2.9 (happy to pick up some common at $42.1 next Fri).

  56. dday97

    PCLN getting it’s pre earnings run up I see. Apparently I forget to do a play on them.

  57. Quentusrex

    phil, with my yhoo calls up almost 25% when would the take profits at 20% rule apply? do you think we should stick with this position until tomorrow?

  58. irished

    Thanks Fredrang! Heard Dr J talking about all three with upgrades. Thought it was time to buy some solar stuff.

  59. dday97

    Accumulating more GS Dec.230′s here, not quite a DD.

  60. Demetrius Michael

    What’s Dr. J’s degree in?

  61. Anonymous

    Phil, Any of those 10K or 25K port positions worth getting into still? Or are we waiting for market direction?

    -Corey

  62. Phil

    Financials still really weak, can’t buy the markets if they are failing.

    SPWR out of that group but I’d like any of them on a 10% pullback.

    Deep in the money calls – try to improve yourself by taking some off on a bounce, then you can resell those at a higher strike and work on the remaing callers, it’s a cheap way to practice market timing!

    BIDU smashing highs. I rolled to Dec $420 puts at $44, covered with Dec $410 puts at $39 which I will roll to Nov puts if the damn thing ever goes down but, otherwise, they protect me for now and buy me time.

  63. MrN

    NCTY – chinese games is a shoulda for this a.m. bounce back

  64. Phil

    Frankengoogle play goinng well according to plan. Hard to call a top but we need to take $720 very seriously. Just in with 2 Dec $730 calls on the $25KP which opened at $27, now selling 2 Dec $720s for $36 and buying 2 Dec $700 puts (this is a change but they’re cheap) for $22. XXX and we wait for a pullback, still planning to sell the $710 puts with a better than $8 credit(currently $4 credit).

  65. Phil

    If you did not start the Frankengoogle play yet, then start to the downside by taking the Dec $700 puts and work into it the oppositite way.

  66. irished

    DM
    Football

  67. Phil

    YHOO is flying!

    CROX now going down more!

    YHOO – kind of scary with PTR’s huge sell-off after a record IPO, I suppose taking 1/2 off is prudent but selling 1/2 the $3.250s at $1.35 is a good alternative that I’ll probably take later.

    Qs are coming on strong. Don’t fight the tape!!!

  68. Demetrius Michael

    RIMM is flying

  69. hawk

    YHOO’s pop is crazy, I’m too scared. Bailing out. I like keeping my profits (probably going to regret this)

  70. Demetrius Michael

    X holding up well from 98 support.

  71. Demetrius Michael

    hawk – always good to take profit :)

  72. Mark

    For what it’s worth (to any out there who care about my “two cents”), here are some companies a friend of mine ran a screen, over the weekend, and found technically interesting (using weekly charts found some inverted head and showlders, pendant, cup and handles, etc). Possible good LT plays IMHO:

    ACL, ADSK, AEP, AET, AVP, BP, BTU, CA, CHK, DELL, ECA, EOG, NEM, NGG, STX, SYY, YHOO, BKC, BMC, CLX, CTXS, FDRY, HAE, HITT, INFA, NDAQ, MIND, NGS, PPDI, SCI, WMGI.

  73. dday97

    lol, I’m actually adding to YHOO on the dips.

  74. Anonymous

    I haven’t had time to read everything lately, so I skimmed through the past few weeks’ posts looking for Frankengoogle information and couldn’t find any. Where can I read about this play?

  75. jomama

    Frankengoogle. Trade can be found at the comment sxn of week review post.

  76. MrN

    YHOO – thanks again Phil & team!!!! Took 3/4 off let the rest ride more than free w/ a TX

  77. jon

    Phil – What do you think about initiating a new spread on Crox on the 50s. Thinking June 50s for $8.60 pay off a dollar up front with the novembers (or $3 in dec).. likely a free trade by March?

  78. k1

    Phil – “work into it the oppositite way.”

    Are oppositites a more fundamentalist sect of contrarians?

  79. Phil

    GOOG turning down, this could be a top signal if they start to fall, watch that $720 line closely. XXX

  80. mrl14

    IAC to split up and trade as 5 companies

    http://feeds.feedburner.com/~r/Techcrunch/~3/180084259/

  81. Phil

    SOX are awful.

    Good list Mark, remind me later and we can go through them.

    Frankengoogle was in the weekly wrap-up, new play, can still be entered starting with the put side.

    CROX – in a good spread you really don’t want a stock to jump 20% while you have it and CROX could do that at any moment. While I agree they are being knocked off like crazy – that certainly hasn’t bothered Nike for 20 years.

    Opposites are not contrarians because they don’t care what people think, they just play the channel…

  82. Phil

    Out of DIA calls, back to $135 puts at $1.95 XXX

  83. Daniel

    Anyone out there ever look up ARAY? It pulled back a bit for a few days last week (as I posted earlier). Today it’s up over 3% on a pretty drab day (actually more than that from its opening). Large volume. Anyone know anything? Disclosure: I have a personal monetary interest in this stock.

  84. Phil

    PTR is a great example of what BS China values are. The company has a $1.1Bn cap in China and is trading at $415Bn in the ADR. Technically it’s the exact same stock – perhaps all of China needs a “mark to market” event so we can discover the true value of these things.

    That being said, I see little downside to taking a crack at the Jan $240s for $22.40 and selling the 1/2 the Nov $240s for $8.10 and selling the other half at no less than $7 if it goes further down. The Dec $240s are $17.60 so if they retain $15 of that value at expiration we have a free ride so XXX for 5 in the $25KP.

  85. mrsmdrt

    ARAY got a positive call by jefferies reiterates buy and target $29. I made a quick buck on it a bit ago.

  86. Demetrius Michael

    Thanks Mark,

    This is your list in no particular order what so ever.

    YHOO – I would take profit at 32, 34, and 36… Depending on how aggressive of a player you are, those are my targets.

    SYY – If it doesn’t break 34, I would be selling it.

    AVP – if it doesn’t break yesterday’s high, I would be selling it.

    FDRY – Looks overbought, some support at 20.

    BP – boring.

    AEP – Ceiling at 48.5

    HAE – looks good, would buy technically on a 53.5 retrace.

    PPDI – looks expensive, if it doesn’t break higher, it’s going lower. Don’t like the volume on it, not as liquid as I want the company to be.

    CTXS – Neat company, Very nice over 43. Lower Q profit, but whatever. Competes with VMW.

    NDAQ – Well market bet, I like it. Phil might not lol.

    AET – Humana Jumps 5.5% on Strong Guidance, Membership Growth. AET is it’s competitor, I would like the company at 52, good floor there.

    ACL – Not liquid enough for me.

    BMC – Pendant break on the daily from the floor it just broke, might break. Reasons why lower: ” DiFucci downgraded shares of both BMC Software (BMC) and Tibco (TIBX) to Underperform from Peer Perform.weak mainframe sales IBM reported Tuesday could weigh on BMC, in addition to the softness in enterprise software sales. DiFucci says he calculates fair value for the stock at about $25.” Reasons why higher: Ichan.

    BTU – Energy play, If bullish, I would wait for a 48 floor. But 50 is good one too..

    INFA – Not my kind of volume, but rounded top.

    NEM – Adami on fast money says beware and take profits after the Q. Looks interesting though.

    CA – I like it, but might flag down after a run from today. I would wait and see on this one.

    CLX – 62.5 (.8) looks good like a nice entry. I like it.

    WMGI – low vol.

    STX – Uptrend, I like it. Might do well with Xmas computer sales. Hopefully the slowing consumer doesn’t affect them.

    EOG – I would watch it.

    Dell – Never liked it, but CEO is back… Losing market share with Apple growth, and their ‘diversified’ products are just rebranded stuff… Which is just icing w/o a cake. I need more convincing.

    NGG – 30,000 vol on the daily? lol most of the guys here can buy the company.

    ADSK – I looked at it before on it’s climb to 51… Will it do it again?.. Well if it holds over 48, you might have a chance. Last Q did it beat earnings and estimates, but stock sold off. Note the next Q coming up on the 15th.

    CHK – Energy play, rather this over BTU… Easier to trade atleast. You can draw the channels pretty easily on this one. stops on a close below today’s low.

    NGS – No vol.

    SCI – Funeral homes and cemeteries eh?… Death care :/… Mmmm Costco is a better play on this, given they’re cheap for slowing consumer.

    BKC – Food play, I like it. Q1 Profit Rises 23%; Revenues Up 10%; Announces Secondary Offering. Growth on target with analysts.

    There I think I covered them all.

  87. ozzi997

    What does everybody think about CSCO long term. Buying the Jan 09 35c for 4.50 on a down day, selling the Dec 07 35 for 1.20.

  88. Phil

    ARAY – wasn’t that the one I was supposed to look at this weekend?

    The tech sounds great and sales are popping but R&D spending is still very high. I don’t have a firm handle on their business plan but it bothers me that their costs are rising rapidly but they have tons of cash, little debt (thanks to a massive stock sale in Q1) and cash flow is in the black.

    People are a little too excited about the company and you can sell the Nov $20s for $1.30 against the March $20s for $3.45, which seems way too cheap but that’s a great deal if you can get it (thinly traded). I’d go as high as $2.60 on the spread as it’s plenty of time to deal with the stock going in the money and the downside is nicely limited with a roll to the $17.50s costing just $1.20. XXX

  89. 6fingerman

    Phil — re: PTR, for the 25kp, the trade is to buy the Dec 240s instead of the Jans? but I assume the Nov covers are the same?

  90. jomama

    Ozzie, I have the Jan 09 35′s and I’m going raw dog into earnings (uncovered). I have a feeling that they are going to have msft like numbers and response. They have not really reacted in the down days. I think that the big boys know something. Plus, chambers really knows how the game is played. He seems to play wall st. like a violin.

  91. ozzi997

    I am thinking long term for them with the impending WiMax technology that is going to revolutionize the last mile scenario over the next 5-10 years.

  92. Demetrius Michael

    NILE – Maybe interesting for an xmas play. It’s in a downward channel, so I’m not touching it yet, but a break should be interesting.

  93. jomama

    Phil, no love from IMCL today?

  94. Phil

    GOOG, huge reverse! The CC is at noon but what I’ve heard about the GPhone does not make me think it justified a 5% run in the stock last week (especially after the 5% run after earnings). We are now in the 10% rule territory which means we can expect a $14 pullback to $709 with little provocation but let’s watch it closely in case it does break up from here. Since I now have 2 open Dec puts and nothing to lose, I can make a mo play on the $760 calls for Nov $6.60 XXX hoping to make a quick buck or 2.

    CSCO – me love them long time! Be careful selling the closer calls but, with an ’09 spread, not a big deal. Just set stops on a % in case it really runs.

  95. Phil

    PTR – NO! We’re buying the Jans, I’m just looking ahead to Dec for our next sale.

  96. Demetrius Michael

    BBD – Are you alive? What do you think about GRMN at these levels?

    Any comments, anyone?

  97. Jasmine

    Phil – I would appreciate your recommendation on CCJ.
    Bought Jan09 40c @ 12.78
    Sold Nov 45c @ 2.25

    Bought Jan10 40c @ 16.38
    Sold Nov 45c @ 2.25

    The stock is creeping up which is nice, but Nov 45c are ITM. Would you still wait or roll out to Dec and would you roll up to 50s or stay at 45s.

    Thank you

  98. Mark

    Thanks DM. As far as the stocks, my buddy is on the buy-side and so can go long only (can’t day trade). He narrowed down a bunch of companies that he found attractive first by their charts (mostly) then by fundies (secondly) only. So these are a spattering of random stocks that screened out, but DEF not saying they’re worth investing in. As always, everyone should do their own dd…

    Funny note, with the market looking anemic in cases that a “death care services” company would screen out, eh?

    :)

  99. Phil

    IMCL – I really like them down here. $4.80 is just .70 less than what we paid so no DD on the Jan $40s. If they had $42.50s to sell I’d be thrilled to DD and sell but they don’t and it’s not worth it with the others.

    FrankenGOOG – rolling $700 put to $710 put for $4.40 XXX

  100. Mark

    SONS reports Thurs, looks interesting…

  101. Quentusrex

    the DIA is on a rampage….

  102. Demetrius Michael

    lol yah for sure, as for investing, I think a much better screen would be think of the sectors that’ll do well, and screen for the best companies within those sectors…

    So for me,

    i like:

    Rich consumer: COH, NILE, LULU, UA, etc.
    Conglomerate: MMM, GE, PFE, (JNJ is also getting attractive)
    Big boy Industry: BA, CAT, FCX, X (maybe a bit lower on this one)
    Value: C, NYX, etc.

  103. Demetrius Michael

    I remember a couple months back, the only performing sector was deathcare on a huge down day lol.

  104. Mark

    DM, LOL. Just noticed you compared SCI to COST?!?! You jest right?! I can just see the Costco now… you’re in line with a big carton of ketchup and 8 tubes of toothpaste next to someone with their grandfather in a wheelbarrow (which is subsequently 1/2 off with a deceased family member). Wasn’t Halloween last week?

  105. rcha

    PHIL,
    Looking for GOOG play. I missed the initial one….since it has run up, what numbers to go long and short? Still stick to the ones you called above

  106. jeffro

    Costco sells caskets but they are called Costkets

  107. Demetrius Michael

    Mark – Yah haha, well they do sell coffins at discount.. People are getting cheap… 2 and 2. Imagine this: Drive through costco… Now that’ll be American to the max or what!

    “Yah can I have a 8L can of ketchup, some mayo and a coffin”
    “Next window please”

  108. Demetrius Michael

    I should’ve kept Goog in my 2k… Wow that was a dumb move getting stopped out at 560 lol

  109. Demetrius Michael

    lol Jeffro

  110. Optrader

    GOOG was saving the market. Watch-out if it starts dropping.
    Surprised that MOT did not get a nice bounce on the GOOG news, but I would not touch this chart right now anyway.

  111. fredrang

    Those Costco caskets are a great place to store the kids toys. I keep a couple spares around all the time and for some reason their friends are always respectful when they visit.

  112. fredrang

    DM

    You just go to the loading dock and they’ll load the body for you. I guess you missed this in their Logistics Services menu.

  113. jeffro

    fredrang big lol

  114. Quentusrex

    phil, What’s your current position with DIA puts? tight stops? expecting them to run? out?

  115. jeffro

    DM I heard a comedian last night on XMSR with a similar name as yours, do you have a nighttime gig?

  116. bmb

    Opt

    You still shorting the bounces? Do you see the downtrend continuing?

  117. Shangrali

    06:30 EDT ARAY; November 5, 2007

    Accuray-ARAY Aetna national coverage decision a significant positive-Buy@JEFF
    Jefferies has learned that Aetna has revised its reimbursement guidelines for sterotactic radiosurgery (SRS) treatment and now has a formal national coverage policy for both cranial and stereotatic body radiosurgery. They believe this decision will drive CyberKnife utilization and is a significant positive for ARAY. :theflyonthewall

  118. JB

    Phil,

    Ive the the CROX Jan/Nov 50 Calendar spread on. Would you roll this down or at least roll the Nov to Dec?

    thanks

  119. RankXerox

    310.659 UTHR shares bought @ 106.(10-39) .. .. not me, market I mean

  120. Demetrius Michael

    UNH looks interesting.

    fredrang – … That’s unreal… Kinda ridiculous what era we’re in. A rough quote from American Ganster “Where’s the service anymore in America”

    NILE is doing well…

  121. RankXerox

    Oops wrong forum.. well it’s a data anyway

  122. Optrader

    Phil,

    I have a quick question about rolling. When you have a calendar and are feeling a little bit bearish about the stock/market, do you sometimes consider rolling the long stock to a HIGHER strike, which has a lower delta and less intrisic value? I know it is counter-intuitive as we usually roll to lower strikes when stocks go down, not higher ones.
    I currently have an AAPL Jan/Nov 90′s, which is already ratioed with more short calls than long calls to make it appproximately delta neutral. I want to keep the Nov 90′s shorts as I like the premium, but I don’t want to sell more right compared to the number of Jan’s I have as it would affect my buying power. So I was thinking I could roll the Jan’s to $95′s to get a negative delta on the whole position. This way I might even be able to buy more of the $95′s than the Jan $90′s and sell some additional Nov $90′s

  123. Demetrius Michael

    No gig, but surprising that someone else has the same name.

  124. Demetrius Michael

    Was he good atleast lol?

  125. windywheel

    jb
    i would roll CROX down to the 45′s
    risky because it moves so much, but it just broke below support
    i’m not an expert though, just my opinion

  126. JB

    Thanks for your input Windywheel

  127. Optrader

    Some very interesting comments about Nokia below from Notable. I think I am going to look at puts on them. Seems to me that they can only lose market share from here, especially if MOT is partnering with GOOG and the Iphone is launching in Europe.

    Nokia (NYSE:NOK): Nokia hit by second-tier insurgency – Avian Securities
    Tero Kuittinen from Avian Securities has some interesting comments on Nokia (NYSE:NOK) this morning saying two new 5 megapixel camera models from smaller brands are topping sales charts in Europe – both Samsung G600 and Sony Ericsson K850i have started outselling Nokia N-95 by comfortable margins in the United Kingdom. These two new 5 mega models are considerably thinner and lighter than Nokia N-95, which is at six months after its launch is starting to show its age. Judging from the high interest in Samsung G600 and Sony Ericsson K850i it’s clear that the 5 megapixel camera module will indeed be one key driver of high-end phone demand in Europe in 4Q 2007. By end of October, the Sony Ericsson K850i was outselling all of Nokia’s high-end models in France and Germany – a notable switch from 3Q 2007, when SE was a bit weak.

    According to Kuittinen, it’s not entirely surprising that the brand new lead models from Samsung and Sony Ericsson are outselling Nokia’s 6-month old flagship phones (N95 and Nokia 6300) in the last weeks of October. What is noteworthy in their view is the series of tepid debuts of Nokia’s new 6000 series phones. The 6080, the 6070, the 6500 Classic, the 6500 Slide, the 6288 – all of these models are having some trouble finding traction.

    He thinks it’s clear that Nokia’s management is aware of the situation – this is why Nokia elected to not guide for global market share gains in 4Q 2007 and even took the unusual step of pointing out that Nokia did not gain share in Europe in 3Q 2007. It’s hard to get a full picture of 4Q market share situation, particularly because the LG990 is still in early stages of ramping up and Samsung’s biggest model and iPhone are yet to launch.

    At this point Avian projects that the Top Five charts of UK and German contract phones at the end of November won’t include a single Nokia model. The N-95 and N-81 simply aren’t getting the operator support or media buzz to help deflect the surge of several second-tier brands. Nokia’s share price continues floating serenely close to its multi-year highs. In firm’s view, investor complacency is not warranted. Multimedia device operating margins may dip by 2% in 4Q and even the main phone unit margins may come down a point as Nokia’s European market share is now in decline and the pricing pressure on the rise.

  128. Optrader

    NOK-Also, the chart is looking very toppy here and $40 gives you a very nice easy stop. This market is getting really crowded now if Samsung and SE are gaining traction and are joining RIMM, AAPPL, MOT…Not to mention any Gphones manufactured directly by the carriers.
    Phil, any long-term bearish plays that you might like?

  129. Demetrius Michael

    Here’s something neat about NYX btw for you swing traders.
    http://web.mac.com/dem_z/PSW/71105/nyx.png

    The last bar is suppose to be green.

  130. Optrader

    NOK-The strength of the Euro/Dollar might hurt them in the US as well. Not that it is a big market for them, but still.

  131. Anonymous

    Optrader – fwiw, Tero Kuittinen writes quite often for TheStreet.com and appears to know more than the average bear in telecomm and related sectors

  132. Optrader

    ILMN-Breaking up

  133. Demetrius Michael

    LOL MOT makes phones? I agree with NOK, it was a good trade from 30 to 40, time to take profit boys.

  134. Courtney

    SHLD

    I really want to pile on more SHLD! 130 looks like strong support, the premiums are fantastic, and it’s not a pure retail company so it should recover from the Citi-driven credit flinch relatively quickly. Thoughts?

    DM? Phil?

  135. Optrader

    CROX-Seeing some support here at $42. Might try to catch a bounce.

  136. Demetrius Michael

    Dollar strengthening up against the CAD (9341) and Aussie (9203^-1)…

  137. BillBigD

    DM-yes alive but still hurting from PATS an Cowpokes wins!

  138. dday97

    GS – Adding more here which puts me at just over 1/2 of my total position.
    GOOG – Just drop already and get it over with, you know you want to.

  139. Demetrius Michael

    SHLD – Funds were buying it at 135ish, I would bet their next entry would be at 125. I’m looking lower on the stock, but doesn’t hurt to scale.

  140. Phil

    CCJ – No merit to giving him .70 premium to give up your Nov insuarance. You can ask for a roll to Dec at .75, which would be a good deal if it triggers but otherwise, there’s no hurry as the Decembers will appreciate better than the the Novembers on a run up and the Novembers will lose more on the way down.

    You have so long to go it’s really not even worth spending time looking at it if you have other positions. Perhaps put a stop on 1/4 at $4, just in case you get a really good run but, if it goes down, you’ll be rolling to Dec $45s, which have a nice $2 premium and $3 of downside protection. You can also trade 1/2 your Nov $45s for 1/4 the Dec $45s for a small hit, hopefully just a buck next week.

    DIA puts – let’s see if we hold 13,500 through 2pm, then I might be willing to turn around, not jumping out of these unless we get a real rally but look at NEM and the GDX – bad signals for the dollar. 30-year jumped up too, that indicates money flowing out and it sure isn’t heading into the market…

    Europe closed looking like the Dow looks now, a poor recovery off the lows. GS and BSC getting worse, not better and there’s little volume to the buying I see.

    Speaking of which – some big model ($33M last year) is demanding to be paid in Euros, not dollars – now you know the dollar is dead!

    CROX – I wouldn’t put fresh money in but if your caller pays for the roll then yes.

    Rolling to higher strikes – Well, first of all, I consider everything as you never know what will suddenly work for some dumb reason but rolling to higher calls to insulate yourself is valid, especially if you can create a diagonal without too much upside risk.

    With the Apple play I’m not sure what the benefit is there of rolling him to another low margin position – it it really the $90s? I would roll that position to 2x the Apr/Dec $145s. This will cost you a bit but it buys you some time and pushes him way up. If you can roll him even up just $5 for the next 3 rolls, you’ll make real progress.

  141. Optrader

    AAPL-Sorry, Phil, please put a “1″ in front of all the numbers. It’s 190′s, not $90′s.

  142. Demetrius Michael

    lol model’s know where the money is at!

  143. Optrader

    EBAY-Let’s see if we can break $34.

  144. Demetrius Michael

    BBD you betted against the patriots?!?

  145. biodieselchris

    that was a pretty tragic death in the US olympic marathon trials on saturday.

    There can be too hard. Too much. In anything.

    Lesson of the day…

  146. BillBigD

    PATS-no just drank for 10 hrs.
    PTR-I like that trade

  147. MrN

    Phil – I have naked IRBT Dec. 20 @ 1.3 is this time to cover?

  148. Mark

    BBD – what were your drinking? Was it a PBR or Scotch day…?

  149. Demetrius Michael

    Bahaha that’s awesome. Only way to cope is to drink more!… Best cure for a hang over.

  150. Demetrius Michael

    tell me it was scotch.

  151. Mark

    DM – I can imagine drinking PBR et al for 10 hours, but scotch?… to quote Walter Sobchak, “you are entering a world of pain…”.

  152. Optrader

    DIA-Watching that flag very closely.

  153. CMan

    Phil,
    Is above PTR trade still good to get in to?

  154. Demetrius Michael

    If FCX retraces to greenland, I would be happy happy.

  155. FILMflam

    Hey all, interesting set-up we are at now. Feels like the down draft is about to pick up. GOOG levitating, AAPL drifting, QQQQ’s rolling over.

    Nothing on that calendar that looks like an upside catalyst. Also, this is a short expiration month and December is the longest possible, that leaves a lot of time for a big move in between. I think we need to finish selling off the laggards and push us up next week and a STRONG move back over 14000 to 14500.

    Optrader, love the (bearish) call on NOK, couldn’t believe it was up at 40, hadn’t looked in a long time, I guess.

  156. FILMflam

    Does anyone know FSLR’s earnings date?

  157. jomama

    Phil, more info on ISRG. They are going to expand into pediatric surgery and dev pediatric sized instruments. Needles for the port sites and there are about five to six, can be used 20x and cost 20k each. Maintenance is 200 to 300k for two years. This is all according to a urologist i was working with last night. Numbers may be inaccurate but i thing the thesis is on target. I’m adding this to my retirement account with a price target of 300 to 305$. This is set it and forget it along with: Taser, IBM, AT&T, and GE.

  158. BillBigD

    Martinis yesterday!

  159. Anonymous

    Qs bouncing on $54 again. Let’s watch this market very closely, could go either way from here.

  160. Phil

    FrankGOOG – waiting patiently with my open Dec $710 puts, $760 booked $1 profts so right on plan so far.

    AAPL – boy that’s much better! In that case I agree, a diagonal is a good idea as the market is very uncertain and you can always adjust later.

    IRBT – ALLWAYS sell into the initial excitement!

    Markets holding the floor, AGAIN, gold still up but Nas is in better shape than last test so let’s just watch the S&P and the Dow for signs at 13,500 and 1,500. IF we blow both then we are right on my morning prediction where the Nas will follow and the QQQQ $55 puts at $1.44 make a nice mo play with a stop at $1.30 and be very happy once you get past a dime. XXX

  161. mSquare

    IMCL – How about selling the Dec $40 Puts and buying Jan $35 Puts? Don’t mind owning IMCL stock for under $40

  162. Phil

    PTR – risky but yes. All trades should be scaled into, I’m accumulating down here.

    FCX – you should be careful as copper took a nasty downturn.

    FSLR – earneings were supposed to be 10/31 – that’s why I keep a lot of coverage on mine, who know’s what they’re up to?

    Qs are a go (gambling now as we didnt’ get a dow confirm but a whole loat of my watch list fell including Goog)! DIA mattress $134 puts at $1.72 XXX

  163. Mark

    FSLR – bloomberg says 11/07.

  164. OptionSage

    Well I couldn’t resist strike 850 short calls on Google for $0.70 with two weeks to expiration.

  165. Phil

    Don’t forget GOOG $720 is my downside target, let’s not be too greedy as this is working out perfectly! We need to BUY the Dec $690 puts for $16.25 (2 in the $25KP) and then we will sell our $710 puts AND sell 2 more $710 puts to complete this leg for, hopefully $26. XXX

  166. FILMflam

    Thanks Mark. Couldn’t find it anywhere.

  167. Phil

    GS diving again!

  168. Seattle

    I agree with the NOK toppy thesis. I was in their flagship store on Michigan avenue 2 weeks ago and it was EMPTY! I also played around with a few of their devices and it is obvious Nokia has lost all concept of the word INTUITIVE. The Apple store 1 block down the street was packed shoulder to shouler.

    Phil, Any recommendations on a downside NOK play? I was thinking of the Jan 40 Puts, but interested to hear your ideas.

  169. Quentusrex

    Almost didn’t break before 2 pm. That was close for DIA. now where?

  170. Mark

    FLIM – no worries. just to make sure I went to their site too (b/c bloomie ain’t always right)… BTW, you were on vacation (right?) but I made money on your GOOG play… bought the Dec 850′s for 2.15, sold them for like 3.40 i think the next morning (and GOOG opened lower than where I bought them the day before!). Just silly.

    PHOENIX, Oct 19, 2007 (PrimeNewswire via COMTEX News Network) — First Solar, Inc. (Nasdaq:FSLR) will report financial results for the third fiscal quarter ending September 29, 2007, on Wednesday, November 7, 2007 at 2:30 p.m. MT (4:30 p.m. ET). To participate in the conference call, please dial (888) 264-8952 if you are calling from within the United States or (913) 312-1278 if you are calling from outside the United States. Investors may also access a live web cast of this conference call on the Investors section of the Company’s website at http://www.firstsolar.com.

  171. Primus

    Thanks Phil,
    New member, 20% & out on the Diamond 135 Puts.

  172. FILMflam

    I am taking NOK Jan 35 puts at $.70. Will double down if I can at $.55. Out with a break above $40.

  173. Phil

    ISRG – I can only hope it comes down one day.

    IMCL – I agree, it’s way too cheap but it goes back to don’t think you need to buy on the dips, we don’t know what a dip is yet!

    HOLY COW on PTR!

  174. FILMflam

    Mark, glad we could help each other out.

    No real volume on DIA with this move down… Same with Q’s. Looks like a buyers strike. Watching closely for reversal.

  175. hp

    Heard rumour that GS has 20bil writedowns coming up soon. So, maybe time to buy puts

  176. sanjith

    What happened there? Anybody has any news?

  177. Phil

    Welcome Primus – Glad you’re having a good first day!

    Like I said on the puts – don’t be greedy, now we need to watch upside of 1,495 and 13,500 but if Nas fails 2,775 we are more likely going down. We already lost 30 of the 60 Nas points I predicted this morning but I expect 2,750 support.

  178. Mark

    sanjith – I don’t hear anything yet, but maybe hp has it right? Huge volume spike on GS and it drops 5 bucks… market sold off with it really fast on teh rumor?

  179. Courtney

    hp – Please post a reference for that GS rumor!

  180. parchesia

    I’m fairly certain that was a bottom for the Q’s. So if you have puts and want don’t want to hold them overnight, watch your stops.

  181. MrN

    PTR – could buy & sell the next bracket closer for the same as original spread; which is better for a new position – or it this drop an indication to stay away?

  182. Anonymous

    GS – don’t know about the rumor but here’s an article giving estimates of GS’s (and other brokers’) exposure.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=a5IcbvTr6oaM&refer=home

  183. FILMflam

    Optrader, did you see that sneaky little FNF slide past $15 while I was away. Little bastard. Looks ripe for another drop, but hoping to get in at a better price. If it can get to 14.75 I will throw some money away on Nov 15p’s.

  184. Optrader

    Sold 1/2 of DIA, FXI, AMZn and EBAY puts. I am still bearish but playing it safe in case there is a bounce again.

  185. Optrader

    Film, yes, I saw that and got out of last puts on Friday :)

  186. Demetrius Michael

    Bernanke, knock knock.

  187. hp

    This is just verbal stuff from friends working in financial industry.

    Also, another thing which is going to cause grief is if bond insurers such as ACA, ABK have their ratings downgraded. This will result in more writedowns since additional CDO hedges comes off the books and risks increase.

  188. fredrang

    FSLR – Briefing.com has it on 11/7 also after the market close.

  189. FILMflam

    Into GOOG Nov 700 puts at $8.10. DAY-TRADE. Looking for $1.

  190. FILMflam

    Congrats, Opt. That is sweet.

  191. Joseph

    FCX – added 10 DEC 110 short. Looking to turn it into an LTP-type play by adding JAN 09 115 or 120s at some point

  192. ozzi997

    Think yhoo might get some legs to close??? or not

  193. ramana

    CY – Is this still interesting, Phil?

  194. Optrader

    Film, good luck to us on NOK. I think we need to be patient on this one, it is not the most volatile stock on the world. I bought the Jan $45′s puts as I liked the fact that they have no premium and I am risking very little with a stop at $40, but I will probably add some OTM if/when it starts dropping.

  195. Phil

    Yet another day I wish I was still shorting FWLT!

    Oil not making it back to $95 despite NYMEX shenanigans.

    GOOG bouncing back but I’m satisfied with the fills we have so I don’t want to play the middle if we don’t have to.

    GS rumor is almost certainly BS but unless companies come out and actively deny in this environment, we’re going to trade on rumors. Even the Bloomberg article says $13Bn of sub-prime. They’ve already done a major write-down and, with those earnings, they had no reason to hold back as they were going to get a buy this Q anyway but next Q they would be taken out and shot if there was more to write down – that’s a risk/reward for management that makes no sense.

    PTR – I’d go bracket down on the same spread. If this is the legitimate value differential between China and US on the same equities then we are going to make millions shorting China. YHOO is getting hammered back down on that premise (that the IPO won’t be worth what we think).

  196. Optrader

    CROX-Almost $40. I might try a bounce play here as well. With a tight stop of course.

  197. Phil

    S&P not holding 1,495 = BAD!

  198. Optrader

    Markets-we are getting close to Friday’s lows. If that fails it could get real ugly. Or we could bounce hard again. be careful out there.

  199. FILMflam

    1/2 out of Nov 700 puts. Taking singles for a while. Hit and run, baby. Hit and run.

  200. Demetrius Michael

    Yah that’s a really high number for the sachs rumor. But hey, costs nothing to lie your way to another rate cut.

  201. BillBigD

    Rimm-took profits on calls and now on Phil’s puts

  202. Optrader

    LVS puts-3/4 out.

  203. CMan

    Phil,
    GOOG: 25KP
    I am confused – do you recommend all of following positions:
    Buy dec 710 puts
    Buy Dec 690 now for a converting to Nov710 Put spread later. Also you mention: “Don’t forget GOOG $720 is my downside target, let’s not be too greedy as this is working out perfectly! We need to BUY the Dec $690 puts for $16.25 (2 in the $25KP) and then we will sell our $710 puts AND sell 2 more $710 puts to complete this leg for, hopefully $26. XXX”
    Are you selling 710 puts and hoping to buy back and sell again or do you have a total of 4 690 puts?
    I think all recommended positions on GOOG in 25KP would clarify it for me.
    THANKS!

  204. Demetrius Michael

    Spy will hold 149… I feel it.. I’m using the force on this one boys.

  205. Optrader

    FXI-breaking 188. WOW !!

  206. FILMflam

    all out of GOOG puts

  207. parchesia

    60,000 Q 54 calls just went through. Was that you Phil?

  208. Dan ellis

    25 k needs -10 / 10 contract clarification?
    with 3 legs it’s too hard to decipher

    also ntes sell 22.5
    buy jan 25 no cost???

  209. Optrader

    I hope everyone took some profits on their puts at Friday’s lows. That was an amazing bounce. We have all the time to reload later.

  210. Demetrius Michael

    The force, the force is strong… Do not resist, it is futile.

  211. Demetrius Michael

    I’m getting weaker… can’t…hold…it…much…long…gerrr…..gahhhhhh

  212. Lukas

    Yes, I am also abit lost with Frankengoogle in the 25KP,

    Frankengoogle play goinng well according to plan. Hard to call a top but we need to take $720 very seriously. Just in with 2 Dec $730 calls on the $25KP which opened at $27, now selling 2 Dec $720s for $36 and buying 2 Dec $700 puts (this is a change but they’re cheap) for $22. XXX and we wait for a pullback, still planning to sell the $710 puts with a better than $8 credit(currently $4 credit).

    Do we still have the 730$ calls ?

    Lukas

    with fries!

  213. FILMflam

    Feels real on this drop. Let’s get that other 30 points on the nasdaq. LET’S DO IT FOR PHIL!!!!

  214. Optrader

    I am completely flat now, that was fun. Watching Friday’s levels (53.60 on Qs and 134.40 on DIA). If we break down I will probably re-enter with puts.

  215. Phil

    GOOG – the original play was:

    Buy GOOG Dec $730 calls for $24.70
    Sell GOOG Dec $710 calls for $33.60 (credit $8.90)
    Buy GOOG Dec $690 puts for $19.80
    Sell GOOG Dec $710 puts for $28 (credit $8.20)

    As GOOG was going up we took the calls first, then covered, then bought the $700 puts, then rolled those up as it went the wrong way. Now, with a proper turn, we made money on our puts and go back to our original plan and buy the $690 puts (the position we really want). Once the downward mo on GOOG dies we sell the $710 puts we picked up earlier PLUS 2 more puts to completed the put side of the spread. Oh year, we also made a buck on the $760 calls earlier but they’re gone already.

    So we now have 2 of each call and the $690 puts we wanted and $710 puts we don’t really want but boy, what a ride and we should have a $2 trailing stop on those to sell the $710s we have for a proft and then sell 2 more to cover the full spread. This is working out insanely well so far!

  216. FILMflam

    Thanks Opt. I was trying to make up for lost time, but that last 15 min bar (and you) chased me out of my puts.

  217. Demetrius Michael

    How do you like the force there! BAM

  218. Phil

    QQQQ – not guilty, I’m pretty well balanced so I’m just messing around with quick hits. Qs are done though!

    GOOG – $730 calls were covered with $710 calls.

    Wow, nice bounce! You’ve got to be really quick in this market! I don’t see much strength to it though but we took back the levels so that’s that…

  219. Optrader

    Film, glad you got out. These levels have been incredible strong support, this is why I insisted about them, and it did not fail. I sold everything at 134.40. Watching now. I might re-enter with puts if we get an intermediate top, using it as a stop. But there is no rush.

  220. rmyadsk

    WOW on GOOG. On Halloween I got in on the iron condor Phil mentioned last week:

    +10 Nov 720 Call
    -10 Nov 700 Call
    +10 Nov 690 Put
    -10 Nov 710 Put

    …for an $18.00 credit. When it was up to $729 this morning I took half off (x5) the put side for $5.25 debit. At the big drop 20 minutes ago I took all off the call side (x10) at $10.75 debit and then seconds later sold five back at an $11.00 credit.

    Now I let the five condors run into expiration and I’ve guaranteed myself break-even at the worst case with a free shot at up to $4k, perfectly if it expires between 700 and 710. That extra quarter handily takes care of all my commissions :)

    Thanks Phil, nice play!

  221. FILMflam

    back in GOOG 700 puts at 8.60

  222. MrN

    PTR – I’m going in on 220 spread. Leg in or is it too dangerous to wait for an afternoon run to sell the nov’s?

  223. Scott

    Phil,

    I have the APR/DEC 30 CY Spread. Its about even still. Any value in rolling the Dec 30′s to 35′s for the extra 1.3 in premium. or hold out for downside protection.

  224. Phil

    GS denies rumor and stock doesn’t bounce?

  225. Demetrius Michael

    FCX – Okay time to push this higher to reasonable, savable levels.

  226. Optrader

    Here we go again. Might have to switch to 5 min chart for these intraday trades LOL. Incredible volatility. 60 points bounce in 15 min.

  227. Optrader

    They should an option on the trading platform that would switch from puts to calls automatically, a little bit like rolling. I know that would help me a lot on the indexes. Sometimes I am just too lazy to sell puts and then buy calls :)

  228. Phil

    Cool Rmyadsk! That’s why I’m trying to teach these things, they’re the single best ways for smaller players to try to double up without risking too much.

    GS Jan $220s for $19.40, you’ll get a nice premium on Nov bounce or no bounce and Dec has huge premiums too. XXX

  229. Demetrius Michael

    Op just sell calls and buy calls.. That’s what I do.

  230. FILMflam

    stopped out of GOOG puts, no more of that today.

  231. dday97

    Bracketed down my GS Dec 230′s to 220′s

  232. parchesia

    Someone is defending 54 on Q’s with a ton of money!

  233. Demetrius Michael

    FILM – I think you’re a bit early on the google stopppppppppp. I like entering the google puts @ 725

  234. Optrader

    Back in DIA puts at 135.60. stop at 135.7.

  235. dday97

    Patience Phil, some absorb the news slower than others ref. GS.

  236. Optrader

    Pull-out a 15 min chart on DIA and it is just amazing how we have been trading in that range (134.4-135.6). Been real easy to play these levels. Breaking out of this flag would be pretty significant.

  237. Optrader

    DM, I agree but I don’t like being naked short…So do you just buy/sell twice your holdings to reverse position?

  238. Demetrius Michael

    BA is such a sweet stock… I’m feeling a bit diabetic just holding it. Keeping go higher!

  239. Demetrius Michael

    keep going*

    Yah I do, really easy to switch direction that way.. it allows me to pay more attention to the feed and how people are buying / selling the option…. I’m thinking of switching to futures because of it… But options are pretty fun for now.

  240. Phil

    PTR – still liking those Jans! Leg in for sure, that’s the whole fun part…

  241. Optrader

    DIA puts-1/2 out at 135.40, so I can play with the rest for free. Crazy market.

  242. dday97

    Op

    I’m using the 10 minutes for DIA but your point is well taken on the range using either one.

  243. parchesia

    DM-I forgot to give you some props for you upward bias call on Friday. Good Job! I was shorting tops, while I could have just as well been buying bottoms for the nice upswing at the end of the day.

  244. Optrader

    I am thinking of switching to Eminis as well instead of DIA, Qs, etc for daytrading..Just have not found the motivation yet.

  245. MrN

    PTR – I must have made the right decision to leg in; but when to sell? In Jan 220 28.5 already up 20% – take it & run or sell nov 230?

  246. FILMflam

    DM, yeah, I might do it one more time, but I wasn’t going to post it anymore. If you got them at 725, well done.

    Those Q’s are making a very shallow triangle. Looks like 53.60 to 54.25 is the range to break.

  247. Optrader

    Qs-back to 54 magnet. But the slope on the 5MA is now down on the daily.

  248. parchesia

    OPT-I agree with you on the Q’s but there’s been a lot of call activity today. I don’t bet against the big money. I would at least expect a break in the mid 54′s in the next few days.

  249. Phil

    CY – that’s a little too much protection! If you can afford it, sure roll him up, you can always roll him back if it heads down. Personally I’d take that much money to DD my Mar (not Apr, right?) $30s at $7.80 into 2x the $35s at $4.70 and roll my caller to 2x the NOV $35s at $1.65 and THEN roll him to Dec to pick up another $2 next week.

    Put/Call switching – I like it! We’ll call it the Weathervane Trading System!

    What a comeback! Great entry on GS.

  250. k1

    Optrader- What’s your motivation to switch to trading Eminis? I’ve been watching the Eminis lately, after reading McMillan on spreading the indexes and futures, but am mainly interested in finding a calculator to show the index arbitrage margin.

  251. sanjith

    Phil,
    Any play on WIND? GOOG is using its software for the new OS it is putting on its mobile initiative

  252. Optrader

    DIA puts-Stopped out. Well, when I said earlier that we could bounce hard on Friday’s lows, I did not think I would be THAT right. This market is just unbelievable. How many times has it been now that we are down 150 points and bounce back to neutral? I wished I had bought calls at support, now that would have been a great day.

  253. dday97

    Never traded the eminis, maybe I’ll do some homework tonight. Back to DIA puts

  254. Optrader

    Eminis-Liquidity, Commissions/Spillage, trading hours, leverage.

  255. fredrang

    DIA

    Nice my 135 calls were taken out @ 2.50.

  256. biodieselchris

    inverted bid/ask on the DIA 137 call?

    it’s not correcting itself either …

  257. parchesia

    I can sympathize with you on that OPT! Talk about volatility…

  258. Optrader

    136, next level to watch on DIA 15 min. Not much resistance above that all the way to 136.80.

  259. Fan

    Phil – in terms of rolling short calls up, when does it make sense to give up on the rolls? Eg. I was reading the great links K1 posted over the weekend and you talked about giving up on the ANF rolls (as the stock shot up higher).

    Do you give up on the rolls when the cost of the cummulative rolls become greater than the value of the longer call (the LEAPs) or some variation of that? Thanks.

  260. Demetrius Michael

    FILM – no I wasn’t trading it, but you just draw the channel on it, and you see the feed slowing from it.. Figured it was a good sell… Sounds kinda after the fact when I posted it though…. Right now I’m too busy /w SPY and FCX

  261. parchesia

    biodiesel-i’m getting the inverted bid/ask on a lot of stocks. Maybe the system in New York is messed up or everyone at the trading stations is sleeping.

  262. fredrang

    eminis

    You can make some serious dough with these but I got bored out of my skull. I guess there is more in life than just making money. Every once in a while I do play them but it’s all about money management and there are so many of these chop shops playing them it’s gotten ugly as they scalp relentlessly.

  263. biodieselchris

    bought DIA puts at 135 then the calls at 136 and now I might get stopped out of those as well.

    blah.

  264. Demetrius Michael

    My bid / ask is fine… It must be your platform?

  265. Phil

    PTR again. Nice safe(ish) play taking Jan $195s for $45.30 and selling Nov $230s for $13 covers all but $3 of your premium with good downside protection you can roll down for $5 3x before you are on par with caller and Dec $230s are $22.25 making a VERY nice, very dull play to get into. XXX

  266. dday97

    Thanks for the heads up on eminis guys, now you have my interest. Definately worth looking into, I’ll see what I can scrape up on the net.

  267. Demetrius Michael

    BA – don’t do this to me.. BLOCK BUY BLOCK BUY…. No resistance, we’re better than that…

  268. DanW

    GS-Big resistance at 220.

  269. Demetrius Michael

    biodieselchris – Why do you fight the force? look at the minute tick chart, and my 2:34 post.

  270. dday97

    Stopped out of my DIA puts as well…oh well, can’t win them all. At least I had a tight stop.

  271. Phil

    WIND – remind me later, sounds like a good idea.

    Giving up on rolls – just like a bad trade, you just have to realize at some point you’d be better off spending time and tying up money on something else.

    Dow positive – totally amazing, based on GS saying there’s no additional debt (we already know they are smarter than the other guys).

  272. Demetrius Michael

    SPY 150.50 is where we have to hold, might want to pin.

  273. Ray

    Phil – you still naked on the YHOO Apr 30s esp with negative winds blowing in Asia?

  274. Demetrius Michael

    Not good, not good…

  275. dday97

    Cashed out on GOOG calls, 17% is good for today!

  276. Demetrius Michael

    Goog puts dday!

  277. Demetrius Michael

    nah it’s too late in the day for it actually…

  278. Optrader

    Biodiesel,

    Just one quick comment: don’t let them fool you when they just take the stops. I have written many times about this here, but there was no breakout at all at 136. You need to be patient and wait for confirmation/last kiss goodbye or at least let it trade some time above the resistance. You have all the time in the world to enter. We are getting 150 points moves in both directions every day, so what’s the rush?

  279. MrN

    PTR – cashed Jan 230′s in 28.5 out 32. Decided too much risk for my gut.

  280. Demetrius Michael

    I feel
    BA will hold 97.92 and SPY will hold 150… I’ll be content with these numbers.

  281. fredrang

    eminis -

    When I do eminis (SP 500) I use a 216 tick chart that you set to watch x # of contracts traded. I find it’s not the type of trade one can walk away from and go to lunch even with stops in place. I commit a couple hours to it in the morning take my gain for the day and move on. I never held a position overnight. If you can spot one of those big move days like we’ve been having you can make a killing. I paper traded on a system and entered the wrong number of contracts and it showed I had made $4 million on paper in a little over an hour…a total fluke but it was intoxicating. Of course you’d never take the risks I did on paper. If you are doing research you should look at esignal…you have to pay a subscription fee to get the real time feed but I wouldn’t do it any other way. Of course if someone discovers a free real time feed that would be great.

  282. dday97

    Don’t have any puts on GOOG. Good day trading them though, sold calls when they were 725, bought them back at 716 n change. Then bought calls and sold them at 724. Lucky timing on my part today.

  283. Demetrius Michael

    Absolutely! congrats dday, that’s very slick.

  284. Demetrius Michael

    fredrang – what’s the levereage on eminis?

  285. dday97

    Thanks for the info Fredrang…much appreciated.

  286. Optrader

    CROX calls-All out. Almost $2 bounce is good enough for me. More than makes up for the first try where I took a small loss.

  287. Optrader

    Dday, well done !

  288. FILMflam

    Ok, not crazy enough to hold overnight, but GOOG 700 puts at open tomorrow with a flat/higher open. Also, GOOG IV should drop for the next week as well. If it is to continue its pattern of troughing 2-3 weeks after earnings. Also, with the phone news out, no immediate catalysts on the horizon.

    The lower IV doesn’t help the puts, but it is something to look out for. Nov 700 puts at low of day, goog 5 points off high.

  289. Yev

    Phil, this should move the dollar down more.

    Flash news:
    http://news.bbc.co.uk/1/hi/business/7078612.stm

    The world’s richest model has reportedly reacted in her own way to the sliding value of the US dollar – by refusing to be paid in the currency.

    Gisele Bündchen is said to be keen to avoid the US currency because of uncertainty over its strength.

  290. MrN

    Put play for overnight?

  291. Phil

    YHOO – covered with 1/2 Dec $32.50s at $2.20 xxx

  292. Demetrius Michael

    Gisele is rich (…hot) enough to have advisor’s (…men) that tell her what to do about her financial situation. There is no way she has enough time to think about the currency markets by herself. It would be kinda funny if the dollar valuation started becoming based on celebs. Anything that’ll push the USD lower would probably be another rate cut, because right now, I’ve seen the worse in the market.

    Christmas is soon, and time to bribe the airliners and hotels to give the europeans some vacations over here in America… Saks looks like walmart to them, they’ll have a very happy happy xmas and save america at the same time :D .

  293. Mark

    eminis – leverage is 50/1. Here’s a breakdown of the contract and options:

    http://www.cme.com/trading/prd/equity/emini-sp500_FCS.html

  294. parchesia

    She’s so hot she can whatever she wants and i’ll just smile and nod like a jackass

  295. Phil

    I’m back to neutral for the close with DIA $136 puts balancing out my open calls but as close to neutral as I can be – China could go either way tomorrow.

  296. mrl14

    C – Longterm with this massive drop, does Citibank become a good buy?

  297. FILMflam

    Okay, calling a bottom on C. Bought Jan-09 40′s at $4.50, will look to sell Nov/Dec’s on any pop back to $38+.

  298. Optrader

    Not a nice close.

  299. Demetrius Michael

    FLIM I like your thinking! high vol pin!.. Has anyone seen that kind of volume before?… It’s like “NYX IS GOING TO BE FREAKING RICH OFF OF THIS STOCK” volume.

  300. parchesia

    MRL14-that’s a good question! I’d like to get Phil’s take on it but if they keep their dividend which seems very likely give their cash flow situation, at some point they do become a buy but I still think there are too many skeletons in the closet to buy them just yet, at least as an “investment” and not a trade.

  301. FILMflam

    Just keep your eyes open for another SNL skit about the worthless dollar. That marked the bottom in 2005(?) I think.

  302. Demetrius Michael

    parchesia – lol I know. Hotness is a woman’s equivalent to a man’s bank account. Just unfair when you’re that hot, or rich… Just unfair… Makes life wicked interesting though.

  303. FILMflam

    Phil liked C at $45, gotta LOVE IT at $35.

    Okay, that was a good half-day. Back full-time tomorrow. Ciao.

  304. MrN

    Great day but too much risk and too much luck!

  305. Demetrius Michael

    MrN – That quote should be the daily wrap up… Nothing else!

  306. Phil

    I’m thinking a 20% drop in dollar buying power to the Euro in just a year is noticable to a model who travels a lot. You don’t have to be too good at math to realize that by the time someone sends you a $500K check for something you did in the summer and that used to be 400K Euros and now it’s 320K Euros that you’re getting screwed by accepting dollars.

    Now imagine how banks and businesses that deal in Billions must feel…

    C – are they keeping the 4% dividend or the .54 dividend (which is now 6%), that’s a huge difference!

    Own Citibank for free:

    Jan ’09 $55 puts are $19.40, Stock is $35.90, that’s $55.30 for a guaranteed $55 in Jan ’09. ZERO risk (well, OK, .30 risk). You don’t even have to sell puts, you’ll collect $2.16 (5%) from the stock and you can sell Dec $40s for .90 and that right there X 6 would be $5.40, another 10% and C would have to jump 10% in 45 days for you to even have to roll the caller. So that’s 15% with virtually no risk. If you want to get fancy you can certainly get another $5 selling puts (current $32.50 puts are .33, Decembers are $1.09) for another 5%. It’s dull but maybe you get a free toaster…

  307. Legh

    Phil, any play with AIG there are huge premiums left in Nov 60s?

  308. Phil

    AIG – we grabbed the ’09 $60s on Friday at $7.95, now $10, I wouldn’t say you totally missed it but it does suck to come in 25% late. It would be crazy not to take $2.67 for the Nov $60s and I do endorse that as a new play as well. XXX

  309. Murray

    Phil,

    AIG – What do you think of the `10 $60s @ $14 instead? an extra year for $4?

    Thanks

  310. Ali

    Phil, in the C trade don’t we have to factor in carry? I mean if we are paying 5% carry on stock doesn’t that just cancel out our dividend and make any gains we receive solely from selling front month calls and puts?

  311. sanjith

    Phil,

    Just a reminder on WIND & GOOG, Thanks.

  312. lolobear

    Hey phil, for the AIG play…Are you saying, buy AIG Nov’07 $60C for $2.67..?? Isn’t that risky considering we only have a few playing days??

  313. FILMflam

    lolobear, he means sell the Nov’s against the ’09s.

  314. Legh

    No lolobear,

    He is saying buy the Jan 09 60 calls and sell the Nov 60′s.

  315. biodieselchris

    I wonder how high Dems will raise capital gains tax in 2009.

    35-38% is likely

  316. k1

    BDC- what makes you think there will be a change to capital gains tax?

  317. Phil

    AIG – sure it’s nice to buy the extra year BUT there’s not hurry. If you compare the May ’08 $60s at $7.60 you’ll see you’re only giving up perhaps $1 to NOT leave $4 on the table for 12 months and to have a better upside delta with your caller, which you will appreciate if things go well. ’10s are for stocks we REALLY think will be stuck in the mud for 6 months (or stocks that are SO volatile we want to time buffer), that’s not the case for AIG.

    WIND – I’ll try to get later.

    C – factoring in carry? Well that depends on what you have better to do with the cash. I certainly wouldn’t be borrowing money to play this. Most option players (well, the good ones) wouldn’t touch this with a 10-foot pole as it ties up a lot of money for low rewards but I have a lot of clients who want a nice, steady income where they can park millions without day-to-day worries and collecting a monthly check is a very nice bonus (and tax advantages as it’s a 12-month hold). A lot of people here have asked about these “safe” trades so I’m putting them out when I see good ones.

    If I want to put $3M into C and I buy 50.000 shares of the stock and buy the 500 puts, I’ve got my dividends coming to me at 15% tax, I’ve got my monthly income of roughly 25K from selling calls, I get to write off the loss on my long puts against my gains and any appreciation I have by Jan ’09 is taxed as long-term capital gains. Also, you are making the assumption that the puts will have no value but if you look at the Jan ’08 $35 calls you’ll see that they are $2.50, that’s another 5% if we take the trade off the table next November.

    I work with a lot of HNW people who go nuts for this sort of thing, it’s very hard to make good safe money on a lot of money and very few finanicial advisors or brokers will help people with these because there’s not much in it for them but my attitude is that if you can lock in a 20% profit on 80% of the portfolio – you can afford to take some risks with the other 20%.

    Capital gains is too low. I love it but it’s too low and it has to change, hopefully not to 35% but 20-25% would still bring in another $200Bn in revenues and it wouldn’t change my investing decisions. Anyway, what’s you alternative, take short-term gains and pay more or simply stop making money because you’re mad a the government.

    The idea of capital gains was to encourage investment but it did the opposite as investors (and corporations) can now make so much money in 12 months that it’s almost silly to do anything longer term. I wouldn’t mind seeing a cap gains that goes from 25% to 15% over 3 years of an investment but that’s a little more complicated.

  318. rmyadsk

    Folks,

    One of our perennial favorites, CSCO, reports after the bell Wednesday. I’m combing over the usual suspects of November-volatility-crushing plays and cannot quite make up my mind. I’m looking at call calendars and double diagonals into January and April, but I think this comes closest to what I’m looking for, but I still am not quite happy:

    +10 Nov 37.5 call
    -10 Nov 35 call
    +10 Nov 30 put
    -10 Nov 32.5 put

    $1100 credit, $2500 margin. But I think the call side is uncomfortable with the stock between 32.5 and 35, the 32.5 strike is “too” deep in the money and the 35 has only .60 of extrinsic value. Does anyone have thoughts on a favorite specific IV-crush play here?

    I’d prefer something mostly non-directional. I work in defense and I continue to see lots of Cisco hardware come through both on the customer and corporate enterprise side, and I know they command pricing power. I think they’ll have a very good quarter but I think valuation is getting a little rich here, we’ve all enjoyed the run its had in the $10K and $25K portfolios!

  319. Brian Bigelow

    Changewave recommended cisco today. I bet it gets a pretty decent pop tomorrow.

    -Brian

  320. Hng10

    Alibaba is off and running!

    Alibaba.com shares rise 122 pct in HK debut
    Mon Nov 5, 2007 9:01pm EST

    http://www.reuters.com/article/marketsNews/idUSHKF07868620071106?rpc=44

  321. FILMflam

    TAX CHANGES:

    The only thing I expect from congress is more stupid tweaks that allow loopholes and no substantive shoring up of our country’s finances.

    What they should do is 18% flat tax on income, 12% on LT cap gains, and 1-2% on wealth because idle wealth is bad for economies. You don’t penalize earners, you penalize squatters.

  322. jomama

    Phil what are your thoughts on SNDK. I have some 50 09′s uncovered with a basis of 7.5 (recently entered) This looks very similiar to CCJ as a premium seller. Do you think this is the bottom for SNDK? Samsung may provide a boost. If Csco hits it out of the park i think they will carry the whole nasdaq similiar to msft – perhaps that would be a could time to sell against these? Always appreciate the way you can relate the macro picture for any individual stock.

  323. Ray

    Darn, Hng10 beat me to it.

    Alibaba.com at 30 HKD (3.87 USD / share) … anyone have a live Hang Seng data feed?? What’s more important to me is where it closes – to gauge momentum and sustainability.

    Anyone care to hazard a guess what YHOO’s price will be tomorrow? I really hope it’s not a muted whimper – I agree with Phil that the full impact of the whole Alibaba purchase is being underestimated right now. Then again, what we’ve seen of EMC and VMW is a caution …

  324. Ray

    Oh, I forgot to add, if things go well with YHOO I will sell off enough that I can leave a few “free” calls on the table to see if YHOO will keep running from now until January just off the legs of Alibaba.com.

  325. Demetrius Michael

    C – “Most option players (well, the good ones) wouldn’t touch this with a 10-foot pole”.

    Well if you’re not a good option player, you can always look at this one:

    Jan 2010 is 10 bucks at 30 strike, IV is 15 and delta is 95. Now assuming you get the entry at 32, and you overpaid for the option @ $10, you’re looking for an 8 dollar gain across 2 years. If you pay less, then you obviously have a better risk / reward issue.

    They’re switching CEOs and the cuts have not been priced in yet. I can think of worse investments.

  326. Demetrius Michael

    lol that sounded harsh, I mean it’s a good stock play for sure, but it’s a matter of perspective. Yes there’s a lot of write downs, and it’s like catching a knife right now, but the stock will bottom… And it will do well if there’s good leadership.

  327. Seattle

    Phil, Im trying to better understand your thought process on your main strategy of buying leaps and selling calls month after month. The question is what sort of things do you think about when deciding WHICH LEAP to buy – 09 vs 10 – and also which strike price. Take DVA as just an arbitrary example, currently $58. The choices to me seem to be either the ’09 50′s, 55′s or 60′s, and likewise the ’10 50′s or 60′s. What sort of criteria would you use to pick among these 5 choices?

  328. k1

    Hey Seattle- Normally I wouldn’t presume to answer your question, but I’m feeling a bit cocky after putting the Core Strategy stuff together for the k1 Project. I don’t know anything about DVA, but I think Phil has a couple core concepts he uses for selecting long calls.

    First, if the stock is trading at 58, then the 60s make the most sense for the long leg of your spread. The others require you to commit more capital to the play, and give you more downside exposure, without providing significant benefits. Since any of those calls will serve as the long side for a premium-selling business, why would you commit more capital than necessary?

    Second, you choose between the 09s and 10s based on how much you expect the stock to move and how long you expect it to take. If you think the business might take the extra year for the market to catch up, but you can sell good premium in the meantime, then you might choose the 10s. But again, it boils down to a risk/reward choice in committing the extra cash to the trade.

  329. k1

    Oh, one more thing I’d look at. The 09s have an extra strike between 50 and 60, which would make it easier to roll down a bracket if the stock gets hit. Assuming the premiums are good, you should be able to pay for the roll down relatively quickly. And if you reach Jan 09 and things are going good, you’ll be able to roll out to Jan 10 anyway.

  330. chubby

    Alibaba – @ 11:30 EST up 164% at 35.75HK
    go to yahoo finance -listed as 1688.hk

  331. Ali

    Hey Phil,

    I have a question I was hoping you could answer for me. I asked Sage on SAOT but it is still confusing me. Anyways the question is regarding the rolling strategy. Lets say hypothetically we bought a spread in XYZ stock where we bought the Jan09 100 call and sold the Nov 100 call. With stock currently at 98 thats just about at the money. Anyways my question is lets say we get a few days to expiration and stock is now 102. Due to the forward price of stock the delta of my long Jan 100 call is probably like .55 so I would gain 2.20 in value on that but with my short option being so close to expiration and now $2 in the money it is almost a 100 delta. So what I’m wondering is how do we protect against this. Because if stock gapped up $5 on expiration friday my short Nov calls would gain an additional $5 in value because they are 100 delta while my long Jan 09 calls would only gain 2.75. Yes I collected premium when I sold the Nov but I’m still probably left with a slight loss even though stock has gone up. I figure this is why we try not to hold front month ATM or ITM short positions into expiration week. Also, in this type of situation where I am long an ATM spread, I could possibly ratio the spread to protect myself against something like this, right? Or I’m thinking if I was bullish I could sell a further upside option than the one I was long? What is confusing me especially since Sage responded to me is that you discuss how you don’t want to buy out your callers early because you don’t want to give up that premium. In doing so aren’t you opening yourself to the risks of something like this happening and losing more on your short call than you gain on your long call. It seems to me that we want to be delta neutral or long deltas when we are slightly bullish or flat out bullish but when expiration weak comes this can be really hard to manage. Sorry if I’m not making sense with this, any insight would be appreciated as always. Thanks.

  332. Demetrius Michael

    Sounds good K1, though I wonder if it’s that straight forward. Any thing else to add Phil?

    I usually rag on phil because he’s the best trader that I know of…As always, the proof is in the pudding, and I always respect his talent and track record. I’m sure there are tricks up his sleeve when he’s picking them.

    I have yet to go through your articles k1…. Not much time on my end of the stick, do you go through detail on this subject yet?

  333. k1

    DM- Heck yah, otherwise there’s no way I would have posted an answer on such a complicated topic.

    I’m sure you’re right about there being other factors as well. But there’s a whole exchange a little while back that Optrader triggered, all about why Phil prefers slightly OTM LEAPs. It’s in the Core2 section, toward the end. I may not have internalized all the details properly yet, but it was a real lightbulb moment for me.

  334. k1

    DM – here’s the link to my summary of the conversation. Might also be worth going back to that day to read through the unedited comments and form your own thoughts.

  335. k1

    Ali- I can’t answer your question, but I can offer one thing that works for me. I’ve found that there’s a delta differential between the long side and short side that I’m comfortable with, and any less doesn’t work for me. So in your words, I try to keep the ratio in my favor.

    For me, that ratio is best somewhere around 2:1, although I’ll go as low as 4:3.

    The thing this does for my peace of mind is that when the stock gaps up, my long side always gains more than the short, so even though I’m paying for the roll up it’s not like I’m out of pocket.

  336. Seattle

    Thank you k1. And kudos on the “k1 project”.

    I’ll also go back and see if I can find Phil’s previous writeup of why he prefers slightly out of the money leaps.

  337. Stock and Option Trades

    Ali did you check out the article written in reponse to your quesiton Ali at
    “http://www.stockandoptiontrades.com/account/blog/art-92.html”

    Bottom line is you let the short options go in the money a strike or two so that when you roll you end up buying back intrinsic value but selling lots of extrinsic value….you end up taking in a credit in the process so you reduce risk. The deltas don’t help you much at all in making big picture decisions like this

  338. Jack_Of_Hearts

    Bernanke gets OWNED:

    http://www.youtube.com/watch?v=yAwvlDJgJbM

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