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Wednesday – End of Quarter, End of Pump?

David Fry S&P Chart - ETF Digest Yesterday could not have gone better!

I titled the morning post "Confidence is Key" and decided that, since my targets were dead on Monday, that we should stick to our bear plan into the Consumer Confidence report which was, as we expected, a huge disappointment.  My 9:50 Alert to members suggested the DIA 9/30 $99 puts for $1 into the report and then we got a nice 100-point drop for the rest of the day that ran those puts up to $1.60 (up 60%).  Also, in that same alert, we went back into SRS (now dubbed "The Widow-Maker") at $9 and those finished the day at $9.50 (up 5.5%) and the Nov $8 puts we sold for .75 dropped to .60 (up 20%).  These are not bad trades to make while we wait around for the market to pick a real direction.

In addition to a poor Consumer Confidence report (53.1 vs 57 expected), we also got a very poor Investor Confidence reading at 118.1, down from 122.8 in August, which was a 5-year high.  "There is a recognition that a portion of the recent rise in global equity prices can be attributed to liquidity expansion rather than fundamental opportunities. Institutional investors are pausing to assess this balance," study says. 

Speaking of investors who are not confident, GE’s own Jeff Immelt, unlike his army of pump-jocks on CNBC, isn’t willing to sully his own reputation by mindlessly cheerleading the economy.  He was in Singapore yesterday and said that: "high unemployment and slower lending will drag on U.S. economic growth, likely resulting in the weakest recovery in decades… Easing up money has always been the elixir to keep the economy in recovery mode," Immelt said. "But once you get interest rates to zero percent, you can’t go much below that, which is kind of where we are right now.  A lot of the jobs lost in financial services and construction are never coming back."

If you don’t think Immelt is in touch with the economy despite GE’s Global footprint and $180Bn in sales, perhaps we can listen to WMT CEO Robson Walton (yes, nepotism), who oversees $400Bn in annual sales and he said at yesterday’s CEO conference: "The World recovery is going to be led by Asia although it’s going to be very challenging.  I think this recovery is going to be a slow one – sales have been tough."

As noted in David Fry’s Daily S&P chart, volume the last two days fell off a cliff and, if you look at the lines along the bottom, you’ll notice that the last time we had tow low volume days like this was in early August, just ahead of a nasty gap down and then in later August, just ahead of a nasty gap down.  Far be it from me to draw any conclusions but I would like to see us hold up under "normal" volume before declaring we are out of the woods. 

Our watch levels are hanging tough as the indexes hang around our toppy target levels of:  Dow 9,800, S&P 1,060, Nas 2,130, NYSE 6,970 and RUT 615 and we did fail all but the S&P yesterday, which kept us bearish into the close so watch out today if the S&P gives it up but I think we’re likely to flatline here into the end of quarter as so much effort has been put into getting us to these levels, I can’t imagine they’re going to let it all fall apart on the last day, not matter what the data may say

We have the ADP report at 8:15 (Update: In-line at -257,000 jobs) and the Final Q2 GDP at 8:30 but no surprises there.  We have the NY (9:00) and Chicago (9:45) Purchase Managers Reports but the big deal for today is going to be oil inventories, where expert analysts expect a net build of 2.8Mb but I’m shotting for 4Mb and I’ve already sent out an Alert to Members this morning on a short play on USO ahead of the inventories, taking advantage of the overnight run back to $68 oil as the dollar got hammered in overnight trading. 

Mortgage Applications fell a seasonally adjusted 2.8% last week compared with the week before, despite more favorable mortgage rates, the Mortgage Bankers Association reported Wednesday.  Applications were down an unadjusted 44.3% for the week ended Sept. 25 from the same week in 2008.  Refinancings eased 0.8% on a week-to-week basis as filings for mortgages to purchase homes dropped 6.2%.  This is, as my Economics Professor used to say, not good…

Speaking of mortgages (and bad ones at that), CIT is on the brink of collapse this morning as the company looks for someone to take over their stock and the $30Bn in outstanding debt that’s attached to it.  CIT got $2.3Bn in bailouts last fall and a $3Bn "emergency loan" in July but that didn’t stop the stock from jumping 37% yesterday on rumors that John Paulson was dumb enought to save them.  That boosted the whole housing sector so we’ll see what happens today if it ends in bankruptcy after all.

Oops it’s 8:30 and the GDP final report came in at "just" -0.7% adn that’s boosting the futures as it’s always good to know that our government can be 40% off in it’s growth estimates for the entire economy.  Also revising their estimates this morning is the IMF, who are raising their 2010 Global Growth Forecast from 2.5% to 3.1% and revising 2009 from -1.4% to -1.1%.  The IMF is also reducing their estimate of global loan losses by 15% to "just" $3.4Tn, which is the market cap of the entire S&P 500.  According to the report: "Systemic risks have been substantially reduced following unprecedented policy actions and nascent signs of improvement.  Even so, credit channels are still impaired and the economic recovery is likely to be slow."

That’s right IMF, what do the CEOs of WMT and GE know?  You guys have desk jobs in Washington, where you get a much clearer picture of the economy than some guys who are busy dealing with hundreds of billions of dollars of global sales.  Also in global news, Asian markets were mixed ahead of China’s 60th Anniversary of Communism celebration, which was kicked off with a government edict to curb excess industrial capacity and a ban on aluminum smelters for the next 3 years, that should be good for AA (now $13.30).

A failure to rein in excess capacity "will make it hard to prevent vicious competition in the market and raise profits, and will lead to shuttering of companies, or insufficient use of capacity, layoffs, big increases in bad assets held by banks," the government said in its sternest warning on the subject yet.  "The worry in the industry isn’t so much about new capacity, it’s about the existing overcapacity," said Wang Zhouyi, senior base metals analyst for Shanghai Cifco Futures.

Europe is flat ahead of the US open (9am) and is being held up by comments from French President Nick Sarkozy, who says that even with a record budget deficit, France needs to spend more borrowed money to kick start economic growth.  As the government prepares to unveil its latest tax and spending plans today, Sarkozy is promising a “grand loan” to finance spending on everything from Paris’s rail system to new supercomputers. That will swell a budget shortfall that already is the highest since 1959, the year after France’s post-war government collapsed and Charles de Gaulle took power. 

As an example of how totally clueless economists are: Standard & Poor’s Rating Services on July 30 affirmed its AAA long-term and A-1+ short-term sovereign credit ratings for France, saying the outlook was stable. “The stable outlook reflects our expectations that the French economy will return to positive growth once the global economy recovers and that this will be accompanied by a clearly discernable trend in budgetary consolidation and debt reduction,” S&P said.

This plan “will add to debt and the state is already borrowing 700 million euros a day, so whatever we do it has to be in the national interest,” said Senator Jean Arthuis, a former finance minister.  Adding 50 billion euros to its current borrowings would bring gross French debt to about 89 percent of GDP, surpassing Hungary. France would become the European Union’s fourth-largest debtor behind Italy, Greece and Belgium.  Germany, Britain and Spain would all have smaller borrowings relative to the size of their economies, with gross debt burdens of 73 percent, 68 percent and 51 percent, according to European Commission estimates published in May.

Oh yeah, everything’s just fine…

 


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  1. where

    GDP revised…to a better than previous.  Now it’s officially -.7%
     
    And up go the markets!

  2. Pharmboy

    Interesting commentary on Marketplace last night in regards to China.  In essence the Chinese numbers are: decoupling (you will understand if you read it), are not calculated correctly, or completely and utterly manufactured…..U choose.

  3. oldgoat

     What’s a good spy or dia pick for this morning?

  4. morxlntway

    Question for whoever – are there any rules re how early a call can be exercised? Re T going X on Oct 7 and an OCT covered call i sold, is it best to not sell in X months?
    thanks

  5. aclend

    I’m not sure if anyone on here messes with penny stocks but I’m holding two that look promising, especially longer term. BEHL has a proprietary, patented technology to turn algae into biofuel, which has already shown excellent results. MDOR has a patented technology to reformulate used rubber for renewed uses and just purchased one of the biggest tire landfills in the world. Do your own research. I’d love to hear opinions on these technologies if anyone is interested.

  6. Pharmboy

    USO $36 Oct09 Ps I assume are the ones at the end of yesterday’s post.  Currently 2.1…FWIW.

  7. Phil

    China/Pharm – We had a few main page articles on that over a couple of weekends last month.  The China numbers are total BS and that means global growth (as China is 15% of it at 8% growth) is total BS.

    Plays/OldG – Sorry I don’t do requests.  I call them when I see something obvious, that way I’m only wrong 40% of the time…  8-) 

    Rules/Morx – A call can be exercised any time.  It’s just very unlikely when there is still more than a dime of premium unless there is a significant dividend payout the caller wants to capture.  It does not happen very often and if you make sure premiums are more than dividends then no big deal if you are called away. 

  8. Cap

    AMZN getting the early mega pump … meanwhile they are discounting like crazy to boost end of Q sales; same with Dell.  I bought a Wii yesterday for $175.
     
    AMZN at 199 plus $25 gift card + free shipping if you buy it now.

  9. Cap

    I think an AMZN short here should be a decent risk reward trade (93)

  10. ssdirk

    After Cramer’s call yesterday on CIT I would classify him as worse than the weatherman.  At least the weatherman doesn’t cost people their hard earned cash.  This guy’s act is very stale.

  11. Phil

    Yay New York!

    Sept. NAPM NY Report on Business: New York City business activity surged in September to the highest level since November 2006, with NAPM’s Current Business Conditions index soaring to 72.9 from 55.5 in August - the first back-to-back positive months since the recession began. Future optimism continued to build on recent gains, with index hitting 69.5 from 65.1 a month ago.

    Let’s keep an eye on our levels today but the volume is looking low again and my thoughts are we flatline today unless oil is really dreadful and crashed that sector. 

    Our watch levels remain:  Dow 9,800, S&P 1,060, Nas 2,130, NYSE 6,970 and RUT 615 and only the S&P and RUT are holding so far.  Generally it’s going to be 3 of 5 to set direction but, on the whole, I’d rather just sit today out as we’re already bearish and there’s not much they are going to be able to do to the upside to convince me to change my stance today.

    Oops, oil is diving already, now below $67 so look for gold to follow and the GLD Oct $99 puts are $2, looking for $3+, stop at $1.50. 

  12. Cap

    Now how is it that market started selling off a full 5 minutes before Chicago ISM ??

  13. morxlntway

    Jomamma – u in the XOM calls today? I guess they don’t always play fair.

  14. kustomz

    HELP SAVE THE BULLS!!! BUY STOCK this message brought to you by the good people of Goldman Sachs

  15. yodi

    Hi Phil
    How do I read the GLD oct 99 put buy the put at 2.00 difficult to read??

  16. ssdirk

    Looks like some fund managers are desperately fighting to lock in that last percent for the end of the quarter. 

  17. Phil

    Wow, no volume to this sell-off but really sharp drop!

    Oh Chicago PMI was as bad as NY was good.  Down to 46.1 in Sept vs 50 in Aug.  Once again – Yay New York but I think this may be a contributing factor in why the media is so clueless about the economy, not only are they centered around NY (especially the financial media) but they also have their companies cutting back drastically on travel so they’re not even going out and seeing the real world anymore. 

    USO/Pharm – Yes, I was hoping the $37 puts would come down more but whatever is around $2, looking for a quick 25%.

    AMZN and RIMM bravely holding on but Nas still down a point, watch out if they break…

    Wii/Cap – Is that off $200?  That’s scary with 85 shopping days left to Xmas. 

    Cramer/SS – Did he call CIT positive?  What a jackass!  Damn, I missed that or I would have been all over him – that is way beyond irresponsible…

    Precognition/Cap – Do you really have to ask?

    LOL Kustomz – maybe a nice T-shirt business for us…

    GLD/Yodi – That was a buy on the put.  It scares me that you can’t pick that up from context…

  18. ssdirk

    CIT/Cramer – Yes he did.  Here is the ZH link.
    http://www.zerohedge.com/article/jim-cramers-recommendation-cit-yesterday-primed-upside-i-would-buy

  19. EricL

    Someone’s obviously dumping. Possible downtrend day shaping up here.

  20. yodi

    Phil I have a hard time reading between the lines better safe then sorry

  21. RMM

    Phil: sell DIA oct puts ???? yes ???

  22. Phil

    Willing to give Mr. Stick a chance with the 9/30 DIA $96 CALLS at .50, stop out at .40, looking for .70+.

  23. Highlander

    phil,
    looks like europe had inside info on pmi #’s. they preceeded us down!!!

  24. ssdirk

    Maybe a little premature, but while it last I have John Mayer’s "Gravity" playing, and I am enjoying every single note.  Sweet.

  25. Phil

    Cramer/SS – I think he used that same logic on GM with Kerkorian to herd the sheeple into that one at the top:  "Hey, a rich guy is buying so you should buy too."  There are lots of ex-rich guys around these days…

    I hate to say it but I think that now WE are pumping up the price of the DIA $96 calls because they are still trading at .50 and they should have broken down by now so be very careful if we can’t hold 9,620! 

  26. Phil

    ICE has got to be kidding!  Selling $100 calls for $3.50 naked.

  27. morxlntway

    DIA – not my fault. ETrade don let us trade SEPT’s by ourselves. Guess we’re not responsible enough.

  28. Phil

    Lines/Yodi – That’s OK, you should always know WHY you are making a trade, not just what the trade is as understanding the premise, (like our DIA calls that are hanging by a thead) is the key to knowing when a trade has gone bad and getting out before too much damage is done. 

    Sell DIA puts/RMM – Not yet, maybe if we take back Friday’s lows.  Let’s say we want to sell 1/2 the Oct $97 puts at no less than $1.50 (now $2..10)

    Europe/Highlander – That makes sense, all the really good psychics are in Europe.  8-)

    Gravity/SS – Yes, quite a bitch isn’t it?

    15 Mins to oil inventory – that can push us right over the edge so best to kill the DIA calls even – too risky.

  29. morxlntway

    kustomz – when i check for Phil updates on the iphone i just refresh the page each time. Seems a little slow and keeps me from doing the things i got the phone so i could do.  Is there a better way to get his alerts? thanks for your assistance.

  30. Phil

    Speaking of IPhone stuff – I need some programmers.  If anyone has people (or is people) who can do this sort of work, please let me know.  Thanks

    Volume still very light at 45M at 10:30 but better than yesterday’s sub 50M at 11.

    Obama is announcing $5Bn for health-care jobs.

    Oil numbers are in:  Oil up 2.8M, Gasoline down 1.6Mb, Distillates up 300K so much LESS build than expected so KILL THE USO PUTS!

  31. balancenv

    (hi guys, just signed up with the premium level..) I am actually in HK so I will share my views of previous comments of China # being doctored..
    The more pressing Q now for Phil is : Kill the GLD 99 put too? 

  32. yodi

    Phil Very clear instruction on USO what about GLD kill as well?

  33. Phil

    Overall, that is a neutral number on oil but a net build of about net 1Mb is way better than last week’s 11.2Mb so should let us drift along around $67.  That should help the market find a little support but it still doesn’t make me want to go long on DIA short term. 

    However, our DIA Jan $100 puts (preferred spot) can now be covered with 1/2 the Oct $97 puts at $2.10, just in case they do put together a rally this afternoon.

    As of yesterday, American Express (AXP) leads Dow components YTD with an 83% gain, followed by Cisco Systems (CSCO) (+43%) and JPMorgan (JPM) (+42%). ExxonMobil (XOM) gets the dubious title of worst of the Dow with a 14% loss YTD, followed by Wal-Mart (WMT) (-12%).

    Foreclosures jumped 16% in Q2 to 2.9% of all serviced mortgages, delinquencies hit 8.5% of all mortgages, while home retention actions such as loan mods were up by 21.7%, according to a report today from the OTS. Report says data continues to reflect "negative trends influenced by weakness in economic conditions including high unemployment and declining home prices in weak housing markets."

  34. Phil

    Welcome Balancenv!  Always glad to hear what’s going on on that side of the World, especially if you catch news that’s not being reported here.  Yes to GLD play being killed.  You can hold it and see if we really take out $1,000 again but, generally, it was a momentum play and momentum has been lost

  35. kustomz

    morx, my iPhone chimes when i get new emails…i also refresh. Not sure which model you have but i upgraded to the new version and its much faster

  36. where

    $ rally is fading and oil looks set to defend $67.  Volume pretty weak on followthrough for that breakdown.  I don’t see any more impetus for continuation today.  Maybe a little rally followed by a light sell off into the close?

  37. craigzooka

     anyone heard anything going on with SUN.  It just jumped 3% for no reason that I can tell.

  38. kustomz

    3rd day in the past 5 S&P went has gone under 1050 makes me say hmmm

  39. craigzooka

     Phil, I is someone who can do this sort of programming work.  I would love to talk to you about an application.  I am also a huge iPhone fan!!

  40. pstas

    HEY PHIL- if considering programming, don’t forget about us Blackberry addicts!

  41. wiiboxer

    Phil,
    I built a couple iPhone apps for personal use and have local friends that do it for income on the app store. Please let me know what you want.

  42. Phil

    Oh no, it must be Ping Pong Market day – now this:

    Fed’s Lockhart sounds a cautious note, warning it’s still to early to talk about exits, or to declare victory. "We all ardently want to believe the nation is on the economic comeback trail. I don’t think we are served by declaring prematurely that we’re in the clear."

    ICE calls almost $2.50 already and that’s plenty ($1 profit) as we don’t like to have that kind of exposure once we make a nice profit

    I’m reading GDP details and not getting a good feeling:

    • Q4 was down 5.4% from Q3, Q1 was down 6.4% from Q4 (that’s down 11.8% from Q3) and Q2 is down 0.7% from Q1 so we’re now down 12.5% from last Q3 – what exactly are we getting excited about?
    • Consumer spending (70% of GDP) is down 0.9%
    • Government spending rose 11.4%
    • The big "positive" change was Business Spending ONLY fell 9.6% vs. prior forecast of a 10.9% decline. 
    • Corporate investment in structures dropped 17.3%
    • Corporate profits were revised DOWN to a 5.6% increase from a 7.5% increase – that’s a 25% adjustment! 
    • PCE was up 1.4% and up 2% in core, very bad with wages declining. 

    This is not a "healthy" picture by any stretch.  This is like the doctor saying "Good news, her condition is stable – she’s in a coma…"

    Another monthly increase in home prices is encouraging, but James Hamilton worries the fat lady hasn’t sung just yet: "The decline in existing home sales for August, future rise in foreclosures already baked in the cake, inventory of unsold homes, and expected continuing increases in unemployment all raise the possibility that house prices could resume their descent."

    SUN/Where – Refiners in general getting a pop off better than last week numbers.

    Only the Dow is below Friday’s low of 9,650 so now I’m pissed we didn’t hold those calls but at least we sold the puts.  Other Friday lows were: S&P 1,040, Nas 2,086, NYSE 6,800 and RUT 597 – not a serious breakdown until we fail those but let’s watch the Dow as it will be telling if they can’t get back over.

    Oil up to $68 again and gold over $1,000 so all must be well.

    Great Craig, I’ll drop you a line! 

  43. Pharmboy

    Should have bought the OIH calls.  That 1d – 5 min chart is amazing.

  44. wiiboxer

    I also belong to the Dallas iPhone developers group and attended apple’s developer connection conference.

  45. Phil

    OK, this is not just IPhone of course, so I would love to know about anyone with programming experience who has time for projects.    Thanks.

  46. balancenv

     can anyone explain why USO and DUG are UP at the SAME time? thanks!

  47. blair

    I can also do some programming (non-iphone).

  48. blair

    I missed $2.10 on the DIA Oct 97s, what’s the minimum I should accept on the sale? Is there a way to figure that out or is it gut feel?

  49. Highlander

    Phil,
    I own an asic development and imbedded software development company. You can have your tech guy send me a preliminary requirements document to my email address of record and we could take alook at it as well as provide a company background.

  50. Cap

    They keep throwing out the stick.

  51. Cap

    earlier comment apparently did not post:
     
    Phil:  Wii … yes, that’s right

  52. Cap

    we should be having a negative FMD today; but you can’t trust anything w/ the stick out there; especially given end of Q and mid-day slow hours.
     
    Come back at 3:30 and sell some more !

  53. Phil

    Wii, Blair, Highlander - I’ll be in touch, thanks. 

    USO/DUG/Balance – Although they track the same thing in opposite directions, they are only officially adjusted once a day (end of day, I think).  The rest is based on sentiment trading and arbitrage by fund managers.  When you see a discrepancy like this, it means sentiment is running high (in this case on DUG) for one or the other. 

    DIA/Blair – It’s no big deal on a half cover but $1.95 is a bit light ($2 would not be bad).  Once something gets away, I’d rather sell the next strike up (the $98 puts, now $2.47) and use the extra money to roll my longs up $1. 

    3:30/Cap – Oh for sure we shoud be shorting if they pump us back to neutral.

  54. kustomz

    They either shook out the weak hands to build a stronger base at 1050 for the next leg or this is a signal to get out, but i don’t see conviction in the selling so i must assume we go higher from here, unless we get a strong sell off this afternoon.

  55. mampcs

    Phil, i can help with the programming too.

  56. eben22

    Phil, not everyone sold those DIA calls…..;-)

  57. bgbigelow

    Phil,
       I’m a programmer also, with a background in alot of environments.  Let me know what your needs are and I may have the time to help out.

  58. Phil

    Apple (AAPL) is reportedly in talks with "several media companies rooted in print," discussing content for a new device, likely the much-rumored tablet. Apple’s "aiming to redefine print" by allowing publishers to "create hybridized content that draws from audio, video, interactive graphics in books, magazines and newspapers," which Gizmodo says could make it king of "next-gen print content."

    iSuppli lifts its 2009 forecast for chip and electronic-equipment sales, with chip sales now seen down 16.5% to $216B and equipment sales off 9% to $1.39T from an earlier estimate of -23% and -9.8% respectively. The global economy has been boosted by worldwide stimulus spending, but a lack of visibility continues to make tracking sales trends tricky, firm says.

    Thanks Mampcs! 

    Nice job Eben!   Don’t be greedy. 

    Cool BG – what a talented group we have here…

  59. matt1966

    Damn there are alot of developers on this site!  So Phil, you finally ready?  I got my iPhone back in June and have been sitting by it.. sometimes on it.. waiting for your call!  Just kidding, I’ve sorta had my hands full playing around with an add on program to IB’s API.  But I can put that aside for some juicy iPhone stuff.  Or other stuff for that matter (Java J2EE).  But  I think you use php on your site..  anyway, I’d love to start.

  60. pstas

    ?File this under “Everything is Fine” or “ Just Another Thing to Worry About” or “Geez,
    Christmas is Just Around the Corner”:

    The WSJ reported a story
    (http://online.wsj.com/article/SB125424963214850111.html?mod=rss_whats_news_us) this
    morning about declining state tax revenues. No big surprise there. It caught my attention because
    of a topic which came up in a discussion yesterday with one of my customers.
    During my usual inquiries on current business conditions, the manager ( a restaurant chain store)
    lamented the negative customer feedback on the sales tax line on customer receipts- 12 %. That
    is not a typo – it is 12%.
    This store is located in Schaumburg, IL, a Chicago suburb which is home to Woodfield Mall.
    Woodfield is or was one of the first mega-malls and was or still is a regional destination for out
    of town shoppers. Around the holidays, you can see the dozens of busses grouped on the parking
    lots as you drive by on the expressway.
    Having done business here over the years, I am familiar with the city bureaucracy . They actually
    have inspectors (affectionately dubbed the “appearance police” by local merchants) who are
    tasked with citing/ticketing with fines for infractions such as rust on parking lot light poles or
    substandard landscaping (defined as a drooping Hosta or scrawny bush- I am not kidding).
    They also have very strict code enforcement. You can hardly pick up a hammer without a
    contractor license ($100); basic construction permit (minimum $100); plus electrical, fire
    marshall; plumbing fees as applicable. As an example, a recent small job which would have cost
    less than $2000, billed out at nearly $6000 due to the work having to be done in stages to allow
    for multiple inspections by 3 different people at 5 different times.
    So, here we have our tax dollars hard at work keeping us safe and secure and looking good.
    Come January, when the city fathers tote up the shortfall in sales tax receipts following the
    holiday onslaught and they wonder “Wha happen?”, they undoubtedly will blame the bankers for
    predatory lending and subprime mortgages; cold and snow; George Bush for unemployment and
    deficits; Haliburton and Cheney for whatever; and then jack up the sales tax levy one more time
    for good measure.
    They will undoubtedly sleep well at night knowing they will have the safest and best looking
    EMPTY storefronts in the area.

     

  61. Phil

    Oil has gone down a lot within 10 days of July, Aug and Sept so I like the Oct $14s at $1.20 (.70 premium) but it’s a scale in and you have to WANT to DD at .80, just in case

    PHP/Matt – Like I have a clue!  8-) 

  62. Pharmboy

    Phil – NOW THAT is a cryptic message!  Let me guess…na….atone Phil – enlighten us.

  63. chakra108

    Phil
    Oil has gone down a lot within 10 days of July, Aug and Sept so I like the Oct $14s at $1.20 (.70 premium) but it’s a scale in and you have to WANT to DD at .80, just in case
    What instrument are we using for this with Oil?

  64. Cap

    What a joke; man ….

  65. morxlntway

    i think the nov 12 would be better

  66. Kwan

    Phil, I can help out with the iPhone dev (varying amounts of time) if you want to talk about projects. Drop me a line.
    I also recently got the wiki integrated with wordpress like you wanted for this site. I need to talk to your developers though about how to go about setting it up. Again, drop me a line…

  67. Phil

    EMIS/Cap – It seems that the way to make money on this stock is to buy it for .73 and sell it for .78 over and over again!

    Taxes/Kustomz – Well that’s the funny thing about taxes.  They do have to be collected somewhere.  If the Federal government cuts the money they give to local government then local government has to do nasty things to raise money, which is why Federal tax cuts are just a snow job to benefit the wealthy, who have 1,000 times more money but only 5 times more property to tax so they make out like bandits when they shift the burden down the line.  Also, 12% local tax is great for AMZN as long as that free ride keeps going. 

    Cryptic/Pharm – What?  OH – It was ERY Oct $14s at $1.20!!!  Sorry about that.  See, this is the game you guys make me play all the time when you don’t give me the ticker!  Seems like we should wait a bit, maybe get .80 on the first round at this pace (oil now $69).

    Dollar getting jammed back down.  89.5 Yen again, $1.60 for a Pound and $146.3 to the Euro.

    Thanks Kwan.

  68. mrmocha

    PharmBoy – my CHBO is up 250% on no news today, can you find anything?

  69. samz3700

    Phil – what do you think of buy write on USO – getting $2 for Nov. 36 calls

  70. yodi

    Phil please let me have you stock symble on your info:
    Oil has gone down a lot within 10 days of July, Aug and Sept so I like the Oct $14s at $1.20 (.70 premium) but it’s a scale in and you have to WANT to DD at .80, just in case
    What instrument are we using for this with Oil?

  71. diamond

     yodi - read down … Phil is using ERY.

  72. Pharmboy

    LOL MrM – that would be…no.

  73. yodi

    Thanks for the info Diamond,i t is hard to fligh a plane blindfolded

  74. partha

    Phil – DIA 97 puts sold as cover – exit point for those ?  Sold at 2.10 – now 1.58

  75. Cap

    What BullS— !!

  76. Pharmboy

    Come’on Cap, it is always the same.  U should know that being here for the past few years…..

  77. yodi

    I am still looking at this oil deal now I know ERY does one buy or sell the oct 14 call ( oil can go both ways at this stage)
    the scale in must be a code for doing what? and the double down would that be the 15s ?
    Please some one put some translation to this

  78. kustomz

    Got into RIMM  and got out of RIMM, i think we hit some resistance here and head back little lower this afternoon before the big afternoon pump they need to galvanize 1060

  79. kustomz

    Can you imagine Tiger has hit 1B in net worth, what has this world come to. You have to ask yourself how much money is out there? Really!

  80. jromeha

    Im curious to see what the commentators say is the reason we are going to end in the green today after worse than expected jobs and Chicago Manufacturing….

  81. Cap

    Really, this crapola makes one want to just stay completely out of the market.  That they can jam this up 200 points on nothing after a sharp selloff shows how completely dysfunctional and controlled this is.

  82. Phil

    Yay, green again!  I told you we’d be flat for the day….

    From a just-released poll of 180 global equity strategists: Major world stock markets will likely stutter to the end of the year. "Sentiment has become way too optimistic."

    More of the "new normal": Pimco’s Bill Gross says that higher savings rates mean that expectations for total equity returns should be around 5%. Yesterday he said Pimco has "exchanged our mortgages for the government’s check" in getting into long-term Treasurys.

    August Chicago Fed Midwest Manufacturing Index (.pdf): -0.3% to 80.1. July revised to +3.1%. Regional output declined 20.8% from a year earlier, vs. -12% nationally.

    In the second quarter of this year, the notional value of derivatives contracts at JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC) and Citigroup (C) increased by $1.92 trillion, to $191 trillion. Shockingly, Citi is responsible for most of that gain from the end of the first quarter.  Overall, the total dollar value of outstanding derivatives transactions at the top 25 U.S. commercial banks was $203 trillion, according to the Office of the Comptroller of the Currency, meaning that the nation’s four biggest banks account for 94 percent of the industry’s total exposure to derivatives.

    A new Nielsen survey predicts holiday sales that are near flat with last year’s disappointing season: a 0.03% increase to $90B. Most forecasts have settled into in a range from up 2% to down 1%.

    Fed Vice Chairman Donald Kohn on exit strategy: Unwinding unusual policies takes time, so it will be based on forecasts rather than current conditions. "Clearly, the present degree of accommodation … is extraordinary." Fed has the tools, including paying interest on reserves, which will allow short-term rate hikes even with high quantity of assets – but rates to remain low for extended period. Lending programs are winding down with improving conditions, as designed.

  83. aclend

    Obviously, you want your business to grow but what happens if your subscribership gets so large that you can’t answer our individual questions?

  84. diamond

     aclend – let me answer that …

  85. ssdirk

    Direxion Funds To Seek Monthly, Not Daily, Returns
    Last update: 9/30/2009 1:11:54 PM

    By Ian Salisbury
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)--After months of criticism, some mutual funds that magnify investors’ bets on the direction of the stock market are being scaled back.
    On Wednesday, Direxion Funds said its so-called "leveraged" mutual funds will double investors bets on the direction of the stock market on a monthly – rather than a daily – basis.
    The change will apply only to Direxion’s conventional mutual funds and not to its exchange-traded funds, which along with those from Bethesda, Md.-based ProShares ETFs, have provoked the most controversy.
    -By Ian Salisbury, Dow Jones Newswires; 212-416-2241; ian.salisbury@dowjones.com
    (END) Dow Jones Newswires

  86. mrmocha

    Cap, it’s a dopey market but that doesn’t mean it can’t be fun.  Today is one for the record books for me — this morning I sold my DIA puts up 50%, switched to calls, and just sold them up 60%.  So this roller coaster sometimes pays off…

  87. kustomz

    DIamond lol

    aclend hopefully when Phil gets to that point he’ll have a staff second to none that can take up some of the slack.

  88. javaben

    Phil, re web site.  I’m sure there’s a lot of us on here that are software engineers – I’m one myself.  While I can’t devote the time to contribute to the programming of this site, I think what would be worthwhile would be for you to set up a separate area where you can capture the wants, desires, and needs of your subscribers on this site – requirements gathering.  I know some of us in the past have brought up some issues – e.g., how to make the 100KP information easier for us to find while making it easy to use for yourself.  Then from those requirements you could present them to a team to code from.

  89. Phil

    DIA/Partha – Well they are a 1/2 cover so no pressure but we should set .20 trailing stops any time we’re up .75 so we can capture at least .50, which pays for 1/2 of a roll up

    ERY/Yodi – It is a 3x oil bear fund and we BUY the Oct $14 calls, now $1.10 with the goal of working out entry down to $1 net by scaling in.  The "code" is if you buy 1x at $1.20, you want to buy 1x at .80 and then sell 1x for $1 or better to get to a $1 basis.  If you buy 1x at $1.10, then you buy another 1x at .90 or lower for a $1 basis on 2x, etc….  This is not just something special for ERY.  If you read the Strategy section, you’ll note that the intention of EVERY entry is to make a decision at any 20% move in price to either get out, double down or take profits, depending on what you think of the move.   Right here, It looks like too many of you are buying ERY to let it get to $1 so $1.10 seems to be as good as it’s going to get. 

    Meanwhile, It looks like even may be as good as we get today…

    Tiger/Kustomz – Not his fault he appeals to the masses.  That is THE best way to make money in the world, have a product that a billion people want, whether it’s Coke or Big Macs or Nikes or various Tiger products (and don’t even get me started on Hannah Montanna and the Jonas Brothers..).  The more the media splinters, the more valuable a brand like Tiger is – which is why I like Disney as a permanent long-term play…

    Subscribers/Aclend – Already dealt with for the most part.  As it is Premium Members have priority and we will limit membership at some point.  My main focus now is on building up the more limited access Basic Membership as well as the Newsletter as we don’t have the same level of inteaction there.  I was just saying to Craig, re the IPhone thing, I’m looking to push the report out and a passive version of comments, not to have another 500 people in chat.  Najerian has 9,000 subscribers and doesn’t say a word to them and charges 3x what I do – now THAT’s a goal! 

    Good job Mr. M!  We don’t care if it’s a scam as long as we know what the scam is…

    Suggestions/Java – That is an excellent idea and as soon as someone designs a suggestion area we can add it!  Actually, that’s going to be in the Wiki Kwan and I are already woking on (well, mostly Kwan…).  8-)

  90. morxlntway

    while you all are working on the website you can send me out for donuts & coffee.

  91. EricL

    Man, I come back after 2 hours and it’s a glorious new day. I guess the morning seller finished early, and/or the dollar was sacrificed to keep things propped up. FWIW, my view is that not so much that it’s a conspiracy to keep the markets running higher, but rather that there are just enough buyers to keep us in an uptrend as long as volume is low.  This has the consequence that with the volume so thin, just one determined fund selling can push everything down like this morning. Unfortunately, we don’t know when they will hit or when they are finished; I thought they would keep it up today, but apparently not.

  92. mrmocha

    PharmBoy - thoughts on why is BEAT getting so beaten up?

  93. EricL

    Brazil (EWZ) with a new high for the year. Now coming into a little resistance from last summer.

  94. RMM

    Phil:
    what to do/adjust this one ??????
    have stock PGH, 6.89 to 10.44, nice and still pointing up.
    callers jan 7.5 , 1.29 t0 3.1$, fully covered,
    putters jan 7.5, 1.10 to 0.15 $, 2/5 covered.

  95. Peter D

    Can Mr and Mrs Market stand still for another 5 trading days?  Or just move less than 5% each way.  We have October short strangles that we want them to expire worthless.

  96. Phil

    Volume at 1:30 is 105M, more than yesterday after that big run we just had but that seems a bit overdone. 

    FSLR nice and overdone, selling naked Oct $155 calls for $7.40.  On these trades we are always happy to make 20% (about $1.50 here).

    No conspiracy/Eric – Now that’s just crazy talk…

    Brazil/Eric – EDZ taking a nice beating today on that Brazil move (which I think is tied to Sugar making new highs). 

    EDZ at $6.87, selling Nov $7 puts and calls for $2 nets $4.87/5.93.  This is a nice 43% upside as a bearish play on emerging markets that you can roll out as a long-term cover (also should make a sort of good commodity cover and global financial melt-down cover).

  97. yodi

    Phil Now this was a clear info on ERY thanks. I sold the 14c 1.20 having a premium mor than 1.00 be covered up to 15.20 is this not a better deal?

  98. chaps

    Phil:

    re: DIA/Blair – It’s no big deal on a half cover but $1.95 is a bit light ($2 would not be bad).  Once something gets away, I’d rather sell the next strike up (the $98 puts, now $2.47) and use the extra money to roll my longs up $1.
    So in this case, is it true that you wouldn’t necessarily wait to pay max $.50 to roll up your longs? It seems like that would be the case, since otherwise you’re exposed to a too-small net delta in your overall position, and exposed on a pullback.

  99. ajaytoo

    Phil, I sold FSLR Oct 155s a while back for 10.00, with an escape plan of rolling up to Dec 175s I believe. Since you’re still recommending naked short Oct 155, I suppose I can just stay put? Thanks.

  100. Pharmboy

    MrM – no news on BEAT.  The run up was take over speculation, and just when you think it is all over and done, BAM!  I am in the 5 Feb10 C and 7.5 P, just about even from my original trade (small loss).  They make money (yeah) and I am just stilling and waiting.  Plenty of support here, and if it goes lower, then I will just buy more.  M&A in device/pharma is just getting started.

  101. EricL

    LOL Phil. If and when we get serious volume to the upside, who will be buying? It will, finally, be retail investors; people who become persuaded that the stock market is ‘safe’ because it just keeps going up no matter how bad things seem. We know that Joe 6 pack has not been participating in the market, for the most part (another B-Berg article supporting that claim today). They will at long last move their remaining 401(k) money out of bond funds and into the market. They will then be the bagholders who will buy at the top from GS, et. al., and provide the selling pressure and volume needed for a sustained decline. The markets have to look safe to get them to participate, and as long as volume is light, big traders can make it look that way.
     
    So there’s my conspiracy theory.

  102. matt1966

    Eric L, I’ll take your conspiracy theory and raise it.  Looking at the volume during this am’s selloff and it’s way too ‘neat’.  I think it was just an intentional headfake.  Just to get some more money out of the shorts.  They also got $ out of the people jumping on the end of quarter bandwagon.  If someone wanted to sell, they would do it in a more controlled way so as not to clobber the market.  I think that spike was designed to instill fear in the bulls and greed in the bears.  Outside of some unexpected event, Poland collapses not GDP -1.5% instead of -1%, I don’t think we’ll go anywhere unless THEY want us to go there.  They’ve got tons of free cash from the Fed and can outspend all of us.  Not to mention the sick programs they have to completely confound the market regardless of the direction it’s going in.  It really is a fool’s errand to try and out wit them.
     
    That being said, excellent job Mr. M.  That’s the way to do it.  Until it isn’t.  8-)

  103. Cap

    Mocha…. nice !
    Peter — you need 12 days to expiration …

  104. EricL

    That may be matt, although it may just be that someone wanted out for whatever reason and that’s all it took. My current attitude is to treat increased volume in either direction as a warning sign for the rally, although if it’s volume on the buy-side, we’ll have some more upside first.

  105. Phil

    Treasury Secretary Henry Paulson urged Goldman Sachs (GS) and Wachovia to merge last year – and Paulson and Ben Bernanke told John Mack he should sell Morgan Stanley (MS) to JPMorgan Chase (JPM) for $1/share – according to Andrew Ross Sorkin’s Vanity Fair excerpt of his coming book. "Hank, if you do this, you’ll get killed," Sorkin reports Paulson’s chief of staff said about concerns that Paulson would be lining Goldman’s pockets, and that "Government Sachs" theories would flourish.

    PGH/RMM – All you can really do is roll them to the Apr $10 puts and calls at the moment so you may as well ride it out as you have goood coverage and you can see how you feel in Jan or maybe just let yourself get called away with a profit – not the worst outcome. 

    5 days/Peter – That’s a long time.  I think this morning may have been a shade of things to come if we get poor earnings. 

    The S&P/Case-Shiller Home Price Index got a monthly move up yesterday, but the prognosis is sideways – "for a while, meaning five years," says Robert Shiller in a Q&A. Problems: People are buying now instead of later, and eventually banks are going to dump REO supply on the market.

    ERY/Yodi – You are killing me!  Did you SELL $14 calls naked for $1.20???  I BOUGHT them for $1.05, not quite the same thing…

    DIA/Chaps – That is about the only time you ever want to pay more than .50 (but never more than .60) to roll up, if you sell a put cover that’s higher than you planned and you want to maintain your vertical spread.  It is NOT a big deal with a half cover as you still have a $1.05 delta to their .66 delta (and .33 over the whole) so it’s not like you can get in trouble really but it’s VERY important if you go to full cover as you need to make more than net .80 (15%?) on a 200 point Dow drop.  If you learn to really understand WHY you are in the position and have a clear goal of what your coverage needs to accomplish, these things start to fall into place. 

    FSLR/Ajay – Yes but I’m happy to make $1.50 and get out, you are up $2.50 (25%) already so not stopping out at $8 with a 20% profit would be pretty foolish.  Since you sold them at $10 you can imagine how disappointed I am that you let them go from $4 all day Monday (up 60%) to $5 on Tuesday morning (up 50%) to $6 this morning (up 40%) and now at up 25% you still haven’t taken your profits. 

    Bagholder Theory/Eric – Ah, that’s more like it!  8-)

    Clusterstock has picked up on an excellent research piece by Amherst Securities who have produced a scary analysis of this “shadow inventory” overhang, which Amherst estimates is a shocking 7 million houses in the US. (The consensus is only 2-3 million). 7 million represents 1.4 times the number of houses currently sold in the country each year. So this represents a massive overhang. As these houses hit the market in future years, they will keep pressure on house prices. This will likely either lead to further declines in prices or delay the recovery.

  106. stevenparker

    Oops I seem to have some FXI Oct 40 Calls net 2.05 was that a play here? Any recommendation  pls? (now $1.70)

  107. Phil

    Seller this morning – To me, it just backs up my "car lot" model that the market is fine as long as you wait paitently for the odd buyer here or there and everyone holding $30Tn worth of stocks on various exchanges is happy to look at the little lights on the screeens that tell them they have money but it all comes crashing down the second one of the sellers actually tries to get cash for a couple of stocks.

  108. ajaytoo

    FSLR – ah, damn it you’re right. I got greedy. I do remember pausing to think if I should get out, but with $5 in premium still left on the Oct 155s, I thought I would just wait a couple more weeks and profit the entire $10. Why leave $5 on the table :) But you’re right, that’s lazy thinking and I should be looking to get in and out more often.

  109. dmankoff

    Phil, can you explain this play in detail please:
    EDZ at $6.87, selling Nov $7 puts and calls for $2 nets $4.87/5.93.  This is a nice 43% upside as a bearish play on emerging markets that you can roll out as a long-term cover (also should make a sort of good commodity cover and global financial melt-down cover).

    Are you speaking of buying EDZ itself here at 6.87 and the selling those Nov. options, so your cost is $4.87.
    What is the $5.93 ?
     
    i understand if it goes up, then your cost is $4.87 and the puts expire worthless and you get taken out at $ 7 for a 43% profit in 7 weeks, which is incredible.
     
    But what if it goes down to let’s say $4.00,  then your cost is still $4.87 but you will be long more stock at $7.00 since you sold the 7 put for November, so you’ll be down $3.00 if the stock goes to $4.00 on this extra piece that you will forced to buy since you’re short the put, and long the other original stock at $4.87,
     
    please explain what I’m mjissing here.
     
    thanks
    David

  110. concreata

    Phil – DIA mattress – I hold DIA DEC 99 and  the roll to JAN 99 is .85DR right now. I know .50 is goal for roll up same month, what is goal for rolling out one month at same strike?

  111. Pharmboy

    EDZ – David – the puts will be added to your play for an average of 5.93.  So you buy  100 shares here, 6.85-2 = 4.83, then you will have to average in your puts at a buy of 7. So 4.83 + 7 = 11.83/200shares = 5.91 or so.

  112. ssdirk

    dmankoff, Phil’s notation always follows the same notation.  You have the 4.87 correct.  If you are assigned another round of the stock at your put strike price of $7 (meaning the stock is trading below $7 at option expiration), then your cost basis will be (4.87 + 7.00)/2 = 5.93.  Thus 4.87/5.93.

  113. Pharmboy

    David – in addtion, if it goes lower, then yes, your averages will change some and you can wash and repeat.  you can also roll out a few times and scale in.  I would be prepared to scale in on these.  Buy 1/4 position.

  114. stevenparker

    dmankoff if EDZ goes down another set are put to you. You bought 1 at 6.87 and 1 at 7 for average price of 6.93
    You took in $2 for sale of the options but now you have twice as much stock so you get $1 off each half position giving you a net price of 5.93

  115. Pharmboy

    Now that is what I call team work!

  116. stevenparker

    ROFL we are getting good at understanding buy/writes!!!!
    :)

  117. EricL

    EDZ has been a nice naked 7 strike straddle sale too, which is what I did after Phil pointed this out a while ago. I keep a small bull bias by selling a few more puts than calls.

  118. biodieselchris

    ELN Jan 2011 20 calls are only 0.30…

  119. EricL

    Oh, I guess the seller is back after all.

  120. Pharmboy

    ELN/BDC – I’ll sell mine to you for 25c.  If JNJ buys them, I would short JNJ to the moon.

  121. EricL

    Selling some SPY calls here. Will cover selling by puts for a straddle if we manage to go up (unlikely, IMO).

  122. blair

    Do I want to take the 1/2 cover if the DIA Oct 97 puts hit 2.10 again? Or is the expectation that it’ll continue to drop after the quarter is over?

  123. yodi

    EDZ Exellent boys you are getting better to me it looks if you sell the 7 put and call stangle for 2.00 you covered at exp. date down to 5 und up to 9 .

  124. gel1

    Mr, M has the strategy.. makes double digit profits on the DIA three times in one day on three different directional trades. He must have been or is a skilled surfer.

  125. Cap

    Now that’s a little bit better.
    And a big FU to the stick, and to AMZN as I shorted the hell out of that one today !

  126. EricL

    "… will cover by selling puts…" I meant. Sheesh.
     
    Lysdexia viles!

  127. Pharmboy

    GNW – buywrite 12 Nov for 3.05…..not a bad bet.8.78/10.42. 

  128. ssdirk

    yodi, if you sell the straddle naked you are correct.  But, if you buy the stock you have to take into account that price.

  129. JRW III

    Phil,
    Are you expecting a gap down tomorrow, or the Mother of all head fakes,( Blow Off TOP) ? Or, Should we just BUY BUY BUY ?

  130. hp

    Phil,
    Looks like USO is going crazy today. Do you recommend buying puts again now that the move is done??
    thanks

  131. gel1

    Pharm – Thanks for GNW buy/write, I caught it for 2.95. Good percentage advantage!

  132. Pharmboy

    gel – I have been watching them for a while now, but this is what caught my eye from Monday.  They should be one standing after all this….I know Phil liked them many moons ago.   
     
    Genworth Financial (GNW) is up 81 cents to $12.68 and options are active, as players jockey for position in anticipation of its next move. 27K puts and 17K calls traded. Recent trades include a sweep of 5000 Dec 15 calls at the offer for $1.10. More than 11.5K now traded. Meanwhile, 2,500 Jan10 $5 puts were bought in a sweep for 80 cent per contract. 10.7K now traded.

  133. Phil

    FXI/Steve – Those were done yesterday.  Better get out if we’re finishing red.

    Why/Ajay – That’s why the rule of thumb is take profits of 50% of more with over 2 weeks left.  Keeps you out of trouble as anything can happen in 10 days.

    EDZ/David -  Yes, if a stock drops 40% after you buy it you will be down.  I am sorry I don’t have a magical spread to make that not happen…  The gist is, if it falls to for you are in 2x at $5.93, then you DD at $5 and your average on 4x is $4.97 and then you sell some $5 puts and calls for $1.50 and it brings your net down to $3.47 with a call away at $5 (or you will end up with 8x  at $5).  If you do not wish to own 8x at $5, you souldn’t play $1x at $6.87 – I would think that’s a good rule of thumb with any stock you buy…

    Roll/Concreata – There’s no real goal there, it costs what it costs.  Ideally you can pay for the roll by selling some front month calls like 1/2 the Oct $98s at $2.40 which pays for you to roll to the Jan $100s on all the leaps – that’s not a bad deal and now you can just ride it out as it’s a healthy spread and you can roll the $98 puts down to 2x the $95 puts (now $1.05) and those can roll to the Nov $89s, which are $11 below your Jan $100s which you’re sitting in for net $5.25 so all is well. 

    FSLR hit goal already – I love those trades!  At this point you just set the stop at $6.25 with a .50 trail. 

    Hey – Bob Pissani just figured out "Dollar up, stocks down and vs. vs." - that is just FANTASTIC!  I’m so proud….

    Good job on the buy/writes guys – That’s good because these is still not a better way to buy things the way this market has been trading this year. 

    ELN/BDC – I think that’s because the stock is at $7!

    DIA/Blair – As above with Concreata, it doesn’t matter as you have a clean path to a double so better off covered than not until we have a very good reason to go naked again.

    ROFL Eric – That is a good one!

    GNW/Pharm – Excellent play.

    Tomorrow/JRW – I don’t know, that’s why we picked up the 1/2 cover… 

    USO/HP – No we switched to the ERY play.

  134. Phil

    GNW – Filled naked short $12 straddle in TOS at $3.05 and only $543 in margin per contract – not bad on $305 collected, net cost of $238 per contract to make $300.  Will buy stock if they convince me they can hold $12.50 but maybe they get caught in a big sell-off and I get a $11 entry

    CIT Group (CIT -39.6%) will offer holders of its $32B in unsecured debt a choice: swapping it or agreeing to a prepackaged bankruptcy, sources report. The firm thinks customers will continue to borrow from it even while reorganizing.

    One possible reason that insider selling has become so lopsided: a Business Roundtable survey (.pdf) that finds over the next six months 79% of CEOs expect capital spending to be flat or worse – and 87% expect to do no hiring.

    GM’s fling with eBay (EBAY) looks to be over, at least for now, as evidence suggests it drew a lot of lookers but not a lot of buyers. And some typical online-auction behavior: One bidder submitted a $2,500 bid on a $40,000 vehicle.

  135. dmankoff

    EDZ – thanks for the explanation guys, now I finally got it, and with Phil’s final touches on explaining why if a stock goes down 40% , yes, you’ll lose money, I can understand that….LOL

  136. magret

    Phil, any particular reason why you prefer selling naked calls (eg FSLR / ICE) rather than buying puts….I know that you prefer selling premium rather than buying…..but since these are daytrades does it matter…I mean no time decay is incurred by buyinng rather than selling if you close the trade during the day… At least buying requires less margin than naked selling ……

  137. partha

    Phil – Thx for the FSLR gift. In at 7.40 – out at 5.80 – had set a limit – since I dont have trail stop.  Am keeping an eye on it for bear vertical if it breaks below 200d

  138. stevenparker

    magret – day trades sometimes turn into overnight trades….

  139. gel1

    Phil
    I did my GNW trade in Fidelity – should have put it through TOS,. Pays to shop the market, as my wife keeps telling me.

  140. Phil

    Bespoke oil inventories:

     

    Notice the classic "stalking kitty" pattern in the barrel count – this is a clear indication that there’s a mouse somewhere around January…  8-)

    FSLR/Magret – There is a HUGE difference between selling a call and buying a put.  If I sell the FSLR $155 call for $6 with FSLR at $154, my caller needs a $7 gain before I owe him his money back.  If I BUY the FSLR $150 put for $5.10, I need a $9 drop before I get my money back.  We had discussions early this month about what constitutes a "good" or "bad" price on a contract and I considered $7.50 premium on the FSLR $155s at 1:42 to be a rip off and, since there were idiots lining up to be ripped off, I sold it to them.  That’s what drove that decision, the fact that FSLR was on a run that I considered overdone and the fact that the option prices were too high for my comfort to buy them so I chose to sell them instead.  We do have 2 actual trading rules and Rule #1 is "ALWAYS sell into the initial excitement."  That’s what I was doing, selling overpriced calls into the rally just as it looked to be topping out. 

    FSLR/Partha – That’s perfect, now walk away.  There are plenty of silly stocks to trade and FSLR will have an obvious spot again one day. 

    And up we go again!

    Shopping/Gel – Yes, I think TOS is very reasonable generally.  Lots of factors in choosing a broker and margins are something you don’t really get to see until you start trading as they vary from stock to stock and you can’t really get more than a guideling from the broker (ie. some would consider GNW a financial and hit you for 100% each side). 

  141. Cap

    Joe Saluzzi on Bloomberg TV right now talking about the HFT Hal9000 computers dominating and churning the market.
     
    Price does not equal value.
     
    Turn it on …

  142. Cap

    "You cant fight them; they are way too big; they will run you over"
    "In the end the house of cards will fall"

  143. Phil

    In the "Duh, we figured out math" department: A depressing report suggests that even if adding two million jobs a year, it will take seven years to restore employment to pre-recession levels.

    This is not news really but it’s important for us to remember that a large portion of the investing public is so dumb that they have to hire people just to figure this out – very sad!  Seriously, I will give this problem to my 1st grader for a homework question (if the economy lost 14M jobs and we add back 2M jobs a year, how many years will it take us to get even) and see if she qualifies to teach at Rutgers.    

    Well they did it, they got "The best quarter in 11 years" onto the books – now what?

  144. eben22

    Phil, on those DIA calls, I kept moving my stop loss up and up.  Stopped out at 1.20.
    Thanks for the idea!

  145. matt1966

    Cap, as more and more traders figure that out.. one of two things will happen.  The smart ones will get out of the market.  And the not as smart ones will try to jump on momentum plays and figure out a way to game their program.  I’m in the second camp.  But every day I get closer and closer to graduating to the first camp.  You cannot fight the ability to borrow money for nothing, a wicked program and a HAL9000 to run it.

  146. Cap

    Matt, see my 1:09 pm comment

  147. matt1966

    Yep.  And with Blackrock’s Fink saying that with the Fed fund rate at 0, ‘it’s only responsible to put some of that into the equity market’ we can expect more death defying acts until they reach their levered limit or rates start to go up.

  148. Peter D

    Cap, you are correct about having 12 days to expiration, but I just need 5 FLAT trading days as the premium would be almost gone for options that are 5-10% OTM by the middle of next week.  Plus SPX, RUT and NDX expired a day earlier (sort of).
     
    Next week, I’m also looking for the downside hedge, which will also get cheaper (but more likely to expire worthless too).  UPRO 120/115 PUT vertical is currently $1.15, paying $3.85 (3.3x) for a 4% drop in S&P500. 

  149. aclend

    Phil,
    Maybe you missed my question earlier. Do you think you could get too big to operate in the same format (take all our individual questions)? What would you do?
    Following on the above conspiracy thread, any chance that if "we" got that big, we would be played against by the big boys?

  150. craigzooka

     Phil, in regards to the "Duh, we figured out the math" report.  I asked a student of mine today "if I have five dollars and you have twice as much as I do, how much do you have"  and he replied confidently "Oh, I get it, I have fifteen dollars".  The part that is incredibly sad is I teach math at Kent State university.  So I will no longer underestimate how rediculously stupid the general public is.  These people are in f*cking college and have a 4th grade education.  Imagine what the people who don’t go to college are like!!! 

  151. Peter D

    craigzooka, many street vendors can do the maths very quickly even if they don’t go to college!  Some folks are just not built to do maths, I don’t know what percentage of the people are in this category.  May be some of us can do the research.  I’m sure the many car salesmen can’t because it takes them 5 hours to sell a car, and they have to check with the manager each time (end sarcasm font).

  152. Phil

    DIA/Eben – Good deal, that’s the way to play them.  If you stop your losses at 20% but leave yourself open for large gains, it tilts the odds in your favor even if you are just getting 50% right.
    Fighting/Matt – Why fight it though?  We took our profits on short plays early (because any time we don’t we get burned) and then we play for Mr. Stick for the rest of the day, then we short again for a quick out on the next dip ahead of the next stick.  Just because you don’t like something doesn’t mean you can’t let it pay you…
    Too big/Ac – I thought I did answer it.  We’re already set up to tier Premium and Basic members and we can add a third category one day to control how many people are actually actively allowed in chat.  As it is right now, Basic members only see certain comments and usually not trades that are considered thinly traded, where it can get crowded.  Also, Basic members get comments on a delayed basis to avoid crowding in trades.  What we’re pusing for in our new effort is to have more report members, who don’t see chat at all but get the posts without the 48-hour delay.  We could have 100,000 of those people without affecting the core site. 
    Duh/Craig – Give the kid some credit, maybe he was planning on cracking your skull with a brick and taking your $5 too…

  153. Phil

    Math/Peter – If people in this country understood math they’d be marching on Washington! 

    In math, U.S. students posted an average score that was lower than the average score in 23 of the other leading industrialized countries. Only four countries posted lower average scores that the United States, and two countries scored roughly even with U.S. students.

    The test also was administered to students in about two dozen countries or jurisdictions that are not part of the industrialized group. When compared with the broader group, U.S. students fell in the middle of the pack in science and did somewhat worse in math.  There was no change in U.S. math scores since 2003, the last time the test was given.

    If just half of our nation’s 6M teachers were to take the time to write to Congress, there would be dozens of letters on their desk!  

  154. wiiboxer

    Phil,
    What steps/advice do you have to starting a hedge fund? I’ve been with you for 2+ years been doing stock/option trading this for 5+ years. I teach seminars to beginners and I’m thinking about starting one day to run my own fund. Any helpful advice?
    Thanks!

  155. Cap

    Goldman sounding the REIT warning ….
    http://www.zerohedge.com/article/goldman-forecast-cre-reits-flat-down-15

  156. wiiboxer

    Test

  157. pstas

    Peter D
    Can you please explain the UPRO trade, I don’t get it. Must be my lousy math skills.
    Thanks,

  158. Peter D

    pstas, you cracked me up.  Now, I’m using Excel to give more exact numbers.  It’s buy Oct UPRO 120 PUT and sell Oct 115 PUT in one trade as a PUT vertical for $1.15 debit.  If UPRO is below $115 at expiration (11.3% drop in the stock), the spread returns $5, which is $3.85 profit (330% profit, not counting the basis).  UPRO is 3x Ultra of the S&P 500, so S&P needs to drop roughly 3.8% for the full profit.  We can also sell UPRO Oct 100 PUT for a credit to cover our cost, but adding a risk of loosing if UPRO is below 95, which is 8.9% lower for the S&P 500.
     
    The closer to expiration, the same OTM spread would be cheaper, meaning we have less chance of winning being OTM, but the return in percentage term is more.

  159. morxlntway

    Did you all hear the report tonight on NPR about Chinese teaching methods? They implied that students learn facts (math) very well, much better than Americans, but creativity is trained out of them accounting for China’s lack of innovation. Maybe one has to be sacrificed slightly (but not annihilated) to allow for both. 

  160. gel1

    Craigzooka
    For the longest time I thought the mortgage foreclosure debacle was caused by unresponsible lending policies put in place to make housing affordable. I am now re-considering my position, as I believe you have exposed the primary reason – the people taking out these mortgages do not have the skills necessary to add or subtract in order to create a budget they understand. We need to tackle the educational system problems before health care, as these same people are too dumb to know when and iff they are ill.

  161. wiiboxer

    Does anyone here already run a hedge fund? Just curious.

  162. pstas

    Craigzooka/gel1
    You both have it wrong. This is the new " new math".
    Here are the basic principals:
    1+1=3
    2+2=5
    Tax + Borrow + Spend = Prosperity
    Hope + Change = Anything you want it to be
    Here how it works: You have $5; the student has $10. The Feds are going to tax away your $5 and give it the Treasury Dept. who in turn will give it to Goldmans Sachs; who in turn will run it through their magical HAL 9000 and it comes out as $10; GS will pay back $5 to the Treasury Dept after keeping $5 commission (of coarse); The Treasury will pass the $5 along to the soon to be created Dept. of Income Redistribution; Said Dept. will in turn give the $5 to the student and wala! Your student has $15 bucks.
    See, he is actually way ahead of you. :)

  163. gel1

    Pstas… LOL – I now know what the "multiplier effect" is, and how it evolved.

  164. Phil

    Hedge Fund/Wii – I would have to say get a partner who’s done it before, that’s what I did after looking into doing it myself and deciding it would be way too much hassle.   There are so many crazy laws and regulations and paperwork and compliance that you can spend more than a year just getting up to speed and then the legal and accounting costs are also huge – it’s not something you want to do on a lark.  I’ll talk to you off-line about it if you’d like.

    REITs/Cap – Well, it looks like they are pulling the plug on the market right on schedule.  I guess that was GS dumping all those shares into Cramer’s sheeple this week…

    Creativity/Morx – It is another side of the brain.  I agree that modern teaching in general stifles creativity, note that China and Japan have many of the world’s greatest classical musicians yet very few notable composers.  Society has to value creativity and encourage it and I worry about our own country in that respect as the arts were gutted out of school budgets this past decade (Bush didn’t test or budget for them in No Child Left Behind so they were cut) and that was fine when parents had money for piano lessons or art classes after school but if we’re going to head into a decade of tight money for people, then we have a huge problem of a generation of kids that have no artistic training coupled with artistic teaching becomming a dead career path and, before you know it – art is dead… 

    Education/Gel – That is at the root of the problem.  It’s very easy to con people out of their life savings when they get ganged up on by "experts" who supposedly work for them like the realtor who convinces them that they should get the biggest house they can afford (so she gets the biggest commission) and the mortgage broker who gets them the biggest loan they can possibly qualify for (and he even gets a bonus if they don’t have ideal credit for the mortgage and have to pay a higher rate to cover the risk) and then the banks who accept the situation in order to collect their fees because, even though they know the mortgage is crap, they also know they are going to bundle it up and sell it to an IBank, who will then slice it and dice it and repackage it and sell it as some triple-A rated security that gets bought back by the retirement fund that the poor homeowners are counting on to save them in case anything goes wrong with their home. 

    It’s not just math – schools don’t teach law or basics of real estate even though the most important thing most people are ever going to do in their working/financial lives is buy a home.  People think the realtor is working for them since they go to a realtors office and "hire" them but it’s actually and adversarial relationship as the realtor works for the homeowner or is going to partner with the homeowners realtor (if they even bother to show you MLS homes), then the realtor puts the couple in front of a mortgage broker, who cares about nothing but his fee and no broker is going to halt a transaction by telling people they should scale back because that would piss off the realtor.  All this time, the home buyers think they have all these people working in their interests but NONE of them are, the home buyers are just fish that swim into the shark tank and the fee feeding frenzy begins the moment they put down a deposit.  THAT’S the system that needs to change. 

    LOL Pstas – I think you’ve got it!

  165. stevenparker

    "THAT’S the system that needs to change. " – This is american consumer capitalism. The form of capitalism here is just a victim of a deeper cultural problem. People celebrate wealth above worth here more than any place on earth. It’s exemplified in the health care debate, where it’s acceptable for some people to die so that other’s can have "their choice" or "make their profit". In most parts of the world this is just plain wrong.
     
    Capitalism isn’t always like this, it’s american culture that makes it this way right here right now. And THAT is what needs to be addressed. It’s not the system. It’s the people.

  166. morxlntway

    we have met the enemy and he is us

  167. concreata

    Phil – EDZ – I didn;’t get into buy/write yesterday, how would you play it now?

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