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Will We Hold It Wednesday?

When your first trade of the day is a cover, you know you are too bearish!

That’s what happened to us yesterday when I sent out a 9:47 Trade Alert to Members for the QQQQ $41/42 bull call spread at .57 to cover the too bearish stance I was worried about in the morning post.  We exited that trade at .70 (up 22%) and that served it’s purpose of giving us some cash to put into rolling up our puts, following through on the strategy laid out in the morning post.  As I said at the time, these are the moves we’re making BEFORE we capitulate and our short plays will form a base from which we can aggressively go long once we clear our targets

I called off that QQQQ trade at 11:32, about 9 cents off the high of the day as they looked about to fail our 42 target which, as you can see from David Fry’s chart, is right about the middle of the weekly range so it’s a level we have to respect on multiple fronts.  We’re still waiting for a proper test of that 40 line, a 5% drop from here and PSQ (short QQQQ) calls are the main protection in our $100K Virtual Portfolio at the moment.  Any move below 40 on the Qs can re-shape the chart to a much more bearish formation long-term. 

We also covered up our long DIA puts, which flipped us more bullish overall and ended the day half-covered – neutral and confused but with more aggressive puts than we had on Monday so some small progress was made.  In addition to rolling up our bear plays like GLD puts, we added hedged January bullish plays on EDZ and TZA, went bullish on RIMM as they sold off to $65, bearish on MOS as they ran up to $49, bullish on WFR at $16, bearish on FCX at $70, April bullish and hedged on SKF, bearish on OIH at $118.50, Jan bearish and hedged on TIF at $40.75, bullish and hedged on April SCO and bullish on FXP at $9.45.  Overall a pretty busy and bearish day of trading.

As I said to members in my closing comments, the XLF couldn’t hold $15 and the Qs couldn’t hold 42, which were both watch levels for us during the day.  The index levels we were targeting were a mixed bag as we were looking for upside resistance at Dow 9,700, S&P 1,060, Nas 2,120, NYSE 6,950 and Russell 610 and we got Dow 9,731, S&P 1,055, Nas 2,103, NYSE 6,899 and Russell 601.  The most concerning is the NYSE, which is the only major US index still trading more than 33% off it’s highs.  Our goal line there is 6,959 so that’s going to be our mark for a bullish flip going forward.  We can always go back and add another bull call spread if the markets head higher to day but, if the dollar is putting in a floor here.

What is keeping us most bearish is that I think the dollar is way oversold and this "rally" has been nothing more than a commodity run spurred on by severe dollar weakness that, as I pointed out yesterday, is being driven by rumors – not fundamentals.  David Merkel has an excellent article on the dollar this morning in which he points out:

It is not that easy to abandon the US Dollar. Where do you go? The yen will suffer for years as Japan heads into demographic decline and large structural budget deficits. The Euro is still an experiment; there are many pressures on it; its survival is not assured. Nothing else is large enough, stable enough, or mature enough to run the deficits necessary to have the debt markets, to be the global reserve currency. As an example, China does not want to run deficits, nor is its financial system strong enough to bear the wear and tear of global use of its currency.

Why is oil up 75% from last November?  Consumption is down, there were no hurricanes, spare capacity is up, inventories are up at record levels and even the forecast of 1.7% growth for 2010 may be based on overly-optimistic expectations for our economy.  If oil were a company, would you be paying 75% over the price it held 11 months ago, when consumption was 3.7% higher?  How about if it was based on a forecast that consumption would rise 1.7% next year – from 90% to 91.53% of our consumption in 2007, when oil averaged $70 for the year?   We’re not even going to get into the fact that oil bottomed out at $35.13 in December, when our consumption was still running 4% better than it is now. 

The only thing that changed oil’s fortunes in 2009 is the fact that the dollar has fallen from 88 last winter all the way down to 76 today.  That’s a 13.6% decline in the dollar and is the ONLY justification for a 75% increase in oil.  That’s why you are seeing the dollar coming under constant attack lately as oil speculators are sitting on 294M barrels worth of contracts for November delivery and another 213M barrels worth of contracts for December delivery and 87M barrels worth of contracts for January delivery.  As my readers may remember, 450M contracts is "normal" for the three front months so almost 600M barrels is what they call in the NYMEX pits – BIG TROUBLE.  

So we have overextended oil, gold, silver and copper prices yet the DBC is still at 22.13.  That’s interesting.  Perhaps we’ve found a bull cover we can take or perhaps it underscores how ridiculous these runs in individual commodities have become.  DBC is still 50% off it’s highs and not looking particularly like it’s breaking out any time soon.  There are a couple of ways to use DBC as a hedge: 

The 2011 $20 calls are very reasonable at $3.90, with just $1.77 in premium over 15 months (.12 per month) and you can half cover with Nov $23 calls at .40 to knock out the premium and give you a 2.5% return on your investment in the first 45 days. 

We also like our bull call spreads in these situations and the April $19 calls are $3.55 and you can sell the Apr $22 calls for $1.70, which puts you in the $3 spread for net $1.85, which pays you back 176% if DBC holds $22 through April. 

Those are nice ways to hedge against a continued run in the commodity sector if you have been taking some of our shorter-term commodity shorts.  Our time-frames are mainly Jan and April so we can offset 4 bearish plays that lose 20% with the one bullish spread on DBC that will pay us 76% if DBC simply doesn’t go any lower.  I dont’ think we’ll need them because the fundamentals don’t support these prices in the least, but it’s good to have a plan to cover – just in case I’m wrong

Another part of the economy I’m concerned about it the REIT sector but members got an earful of my concerns there last night so I won’t rehash it all here but I do urge them all to read that post as there’s some very scary data to mull over.  As I said to members early this morning:   The Hang Seng are just below their 33% mark (21,440) this morning so that will be interesting but the Nikkei is miles away at 9,799, needing 12,261 to get within 1/3 of their crazy highs.  The FTSE is within striking distance of 20% off and the DAX is just over 33% but the CAC is nowhere close, currently 8.5% below 33% off at 4,200 so Europe is, in short, all over the place and not a great indicator.

Geman inflation - pre WWIIWe’ll see what happens at 10:30, when we get the oil inventory report but there’s no major news today other than the Fed Budget at 2pm but I think we have lost our capacity to be shocked by how deeply in debt our government is.  Not the European Commission though, they, in fact have officially warned Austria, Belgium, the Czech Republic, GERMANY, ITALY, Slovakia, Slovenia, the Netherlands and Portugal that their budget deficits are too large and must come down to the agreed upon 3% of GDP levels.  The commission has determined that these deficits are neither close to the reference value nor temporary and they will now be subject to the "Excessive Deficit Procedure."   This is going to be interesting!

Meanwhile, back in the good old USA (ie. Deficits R Us), EVERYBODY beat earnings today:  ANGO, YUM, AYI, COST, FDO, HELE, MON and WWW all turnned in beats but MON lowered guidance and ruined an otherwise nice party. 

So strong earnings and guidance might change my mind about the economy.  We did see a rise in Mortgage Applications but that was primarily driven by refinancing.  Purchases were off 2.2% from last year so still not very good.  Of course mortgage demand is based on rates and rates are not likely to stay low if the Dollar stays weak and a weak Dollar also drags money out of consumers pockets, diverting discretionary income in to commodity purchases which do no good at all for the US economy other than the commodity pushers themselves.  Only 19% of respondents in Discover’s U.S. Spending Monitor said they expect to spend more in the next month, even though 33% now feel an improvement in economic conditions. "There appears to be no indication consumers are willing to increase their spending," Discover’s Julie Loeger says.

So yep, I’m still cautious! 

 


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  1. chakra108

    Phil
    Good Morning!
    Last night you suggested that I roll the DXD 37 NOV Calls to a spread of 32/35 NOV. I was studying the trade and found that the net delta for the spread is $0.24 while the delta for the 37 calls is $0.39 a difference of 60%. In this scenario if I am hoping to get even on the trade would it not be better to hold onto to the 37 calls as they have a greater move? I understand that the spread is in the money but wanted your thoughts on the above.

  2. Pharmboy

    Yet another opinion debunking the Oil/Dollar separation. 
    http://www.zerohedge.com/article/must-read-when-reality-meets-fiction

  3. matt1966

    What if sacrificing the dollar is the one thing the Fed/Administration must give in order to have everything else they want?  Larry Fink said he’s not worried about CRE.  He’s worried about the dollar.

  4. ephmen85

    GLD  I was away from the market yesterday and missed the big spike.  Since will be away most of today and think I need to adjust my GLD spread.  My current position is + 3 Jun 90 / – 3 Oct 97.   I’m thinking of the following adjustment:  1 Jun 90 --> 2 Jan 98, -3 Oct 97 --> -4 Nov 101.   The combined trade would be a small credit and I’d be fully covered with 4 contract rather than 3.   I’m not thrilled about rolling part of my long backwards in time, but it’s easier than committing more money to the trade.  Reasonable, or should I just sit tight and see if gold settles down and then just adjust at opex?

  5. balancenv

     Good morning Phil. It’s evening time here in Asia. On the oil price, so we’re being held hostage by those oil speculators?When will we see some real actions on oil speculation reform, as those being done to UNG/natural gas!
    From the Asia side, China’s wrapping up the ‘golden week’ holidays and retail sales is claimed to be up 21% over the same period in 08, to 420B RMB/61.7USD (english.peopledaily.com.cn/90001/90776/90882/6510209.html).

  6. samz3700

    anyone know the symbol for dollar index?

  7. Pharmboy

    sam – futures $DXY
    Gold article – contango formation?  http://www.zerohedge.com/article/gold-move-not-confirmed-backwardation

  8. Cap

    While Larry Fink claims not to be worried about CRE, keep in mind that Larry Fink’s Blackrock manages AHR, a commercial mortgage REIT that has completely imploded, along with several private funds that invest in RE that BLK also manages.
    Some of Fink’s most senior bond nerds manage AHR and they have done a for crap job.

  9. Rich_

    Phil – I don’t usually send you anything to read, but this article from London is frightening.  Last year, we know things might have been worse, but this is worse than I imagined.  It still can happen!
    http://www.bloomberg.com/apps/news?pid=20601102&sid=aMfETcYI2t7Y
    I’ll bet we don’t see this in the US.

  10. morxlntway

    my eTrade pro screen says LZB dropped 97% & MCO went up 495% over night. Do other trading houses have similar glitches now & then? Maybe i should put in an order to sell my MCO at 122 & see if i get it.

  11. Cap

    got out of BIDU pre market for small gain from yesterday (3-3); will look to possibly re-enter

  12. Cap

    AMZN pumping again pre-

  13. Cap

    High Beta going crazy; BIDU AMZN AIG
    Real Estate going down

  14. Phil

    Good morning! 

    Let’s keep an eye on the Qs in case we need to cover, the Oct $41s are $1.20 and the $42s are .60, which is .03 worse than yesterday but it’s the kind of thing where you get a better price on a move up sometimes as the out of the money put catches bids from the gambling crowd.  If anything, we’re going to want to take it as a mo play, buying the $41s first and then covering but only if we see the horsement start to move up and get worried.  Otherwise, if things go down, we’re sitting pretty on yesterday’s mix.  Pretty much 42 is out in/out line on the $41s

    We are especially keen on seeing NYSE break 6,959 in order to get more bullish.  Our other upside watch levels are Dow 9,700, S&P 1,060, Nas 2,120 and Russell 610 so we need everyone but the Dow at the moment.   If we can’t get through those levels and start heading lower, let’s take that seriously.

    Oil inventories at 10:30 should be a non-event.  They expect a big build and won’t get it but they also won’t get a big draw-down, certainly not enough to justify $72 and certainly not enough to comfort the front-month traders who are sitting on 600Mb of contracts coming into our slow season. 

    As usual, OIH is our best shorting opportunity and I like the Nov $125 puts at $7.50, selling the Oct $120 puts, now $4.30 for no less than $3.50, which is a crappy bear vertical but if they drop that low we want the protection and we’ll buy back the $120s cheaper (or it goes down and we make 25%). 

  15. matt1966

    Oh boy are they trying to prop this market up today!

  16. dmankoff

    The OIH NOv. 25 puts are not 7.50 they are more like $10.65, so what is this play now?  buy Nov, sell  Oct?

  17. balancenv

     i think both are Oct, OIH. 

  18. RMM

    Cap: your hunch to short BIDU is of the same quality as your political comments. Agree ?

  19. where

    Market internals look weaker today comapred to yesterday and the TRIN is a bit elevated.  I’d say depending on the oil report (I think it’ll be bearish) we could be going down today.

  20. chaps

    Phil:
    On  QQQQs:

    Pretty much 42 is out in/out line on the $41s
    .
    Could you clarify?

  21. Highlander

    where,
    where are you going with that comment? cap is only politically challenged not investment challenged!

  22. Highlander

    where,
    sorry that question was directed to rmm not you!

  23. Highlander

    aapl appears to have completed its teacup & handle and might be posing to jump upwards.

  24. RMM

    Highlander:
    I , on my own, was stupid enough to conclude the same as CAP and shorted BIDU: 

  25. Phil

    DXD/Chakra – Yes, screw delta, the idea is to protect yourself from further losses and increase your chance of winning (or getting even as the case may be).  If you get behind 20% on a trade you need to either scale in (assuming that was your plan) so you are no longer down 20% or get out or get safe.  The only thing worse than being down 20%, when you need a 25% move just to get even, is being down 40%, where you need a 66% move back just to get even.  Of course, once you are down 50%, you need a 100% move to get even and you’ve already been totally wrong about the trade so then you’re just wishing…

    Dollar/Pharm – Yeah, I’m getting very comfortable with my premise there.  I’m almost ready to open a Forex account and start buying dollars at this point…

    Dollar/Matt – It doesn’t matter if the Fed wants to sacrifice the dollar, Japan, China and the rest of our manufacturers can’t afford to let it happen.  We’ll get into a good old-fashioned Central Bank war which may lead to global hyperinflation as everybody races to keep their money worthless but it won’t lead to a weaker dollar.   By weaker I do mean significantly weaker.  We could dip down to 65 in panic selling but that, then would be a major buying opportunity. 

    GLD/Eph – We went short on it actually with the Nov $101 puts.  I’m not sure about the next 2 weeks but you can roll that caller up to the Nov $99s for .50 and that’s like buying $2 of spread for .50 while still being well protected from a drop.  Do that every month through May and it will cost you $3 to have May $109 callers and THEN you can give them their $5 or whatever…

    Reform/Balance – It’s in the works now.  That’s why the dollar is under attack.  There was no hurricane activity and demand is still down so the only thing they have left to bring in the suckers to become bagholders is to spin the story of using commodities to hedge against a weak dollar.  It’s nice to see that the Chinese are learning to be good little consumers – maybe we can start opening some factories over here and send you guys some stuff for a change. 

    Fink/Cap – Good point!

    Banks/Rich – We had the same situation here.  I mention sometimes that there simply isn’t enough money by a factor of 10 to cover ANY of the top 10 banks going under.   If any one bank goes under and the FDIC fails to cover, we’ll have a run on the banks (who don’t actually have our money) and the whole thing will explode very quickly.  That’s what I DO like about gold as a hedge, although not likely to happen, it’s still a better than 3% possiblility on any given weekend. 

    ETrade/Morx – If you don’t log out shut it down before the bell in the morning, they seem to get clogged up (my technical term) with bad data.

    AMZN global Kindle announcement is killing us in the $100KP, where we shorted them.   AMZN, BIDU, RIMM and SHLD are leading the Nas to green at the moment. 

    OIH/Dman – Damn, you are right, those were strange October puts that I didn’t realize were open on my screen.  That being the case I prefer the Nov $120 puts, now $7.25 with the same cover concept.  The Nov $115 puts are $5 at the moment so as long as we cover for $4.25, it’s a spread we can live with.

  26. Pharmboy

    ITMN – back to 14.5.  I am going to watch this one closely, if it breaks down, back to 12.  Pirfenidone filing should be in January, with review for 6mo to 1yr.  If the FDA approves it, they will set the market for interstitial pulmonary fibrosis (IPF).  You can read about IPF here.

  27. matt1966

    Bravo bulls!  Your willingness to spend our money never ceases to amaze me.

  28. matt1966

    Phil, that cartoon is hilarious!

  29. Cap

    RMM — why would you make such a stupid comment ?
     
    I made money on all of the BIDU shorts and have no positions right now fwiw; as for your political comment; see above.

  30. Cap

    Thank you Highlander (lol); RMM don’t take out on me if you made a bad trade.

  31. lflantheman

    Highlander/AAPL.    See my post from last night.

  32. Cap

    BIDU; while I don’t have a position right now (tried to get short again at 408/409) but missed; who cares to bet this will be back in 390′s at least sometime this week ?
     
    Clearly its a volatile trading toy, not really a company w/ a sensible value, and if you play it, you have to be prepared for extreme volatility; including the kind that goes against you.
     
    Which is why I covered in pre-market rather than hold.
     
    Now let’s play nice RMM…

  33. Phil

    Inventories coming, consensus is net 2.6Mb build. 

    Qs/Chaps – $42 on the Qs is the point at which we want to buy the $41 calls (now $1.30), getting out if we fall below and riding up otherwise.  Of course, I don’t mean to jump in when we’re testing it, as we are now – just this is about the place where you do want to have your finger on the trigger.  Now the $42 calls are .65 so that’s a .65 spread and VERY unattractive as we dumped the spread at .70 yesterday so I’m more inclined to just take a straigtht momentum play at the moment.

    Volume just 35M at 10:30.

    BIDU/High – It should only be shorted if you are either out very quickly with small losses or willing to roll and ride it for quite a while as it’s a very insane stock. 

    OIH Nov $120 puts seem to be bottoming out at $7, which is a fine entry.

  34. Cap

    Oil:  APi numbers last night were way more bullish than expectations; hopefully EIA will be weaker.

  35. Cap

    Gas and distillates much weaker than last nighs API; so I would like to see some weakness in oil and OIH….but might not get it.

  36. Phil

    Oil down 1Mb, Gas up 2.9Mb, distillates up 700K so a big disappointment for oil bulls and yet another indicator of poor demand.  No need for QQQQ calls at the moment.

  37. Highlander

    phil,
    europe starting to turn green!

  38. matt1966

    There is definately a new ‘program’ in town.  This is not the usual cram and slam stuff.  It’s like the market it actually trying to figure out which way to go and there isn’t a giant with a sledgehammer pushing us there.  I think we could break down right here.. we’ll see shortly.

  39. Phil

    API/Cap – Those numbers are total BS.  API is a pro-industry group and their survey is based on calling Vito over at the Sunoco refinery and asking him to eyeball the barrel count.  Here’s what API has to say about gasoline on their web site:  "Gasoline helps power the American dream, giving us the freedom to travel where we want and when we want — for work, for school or for recreation. A steady supply of clean-burning gasoline is central to our nation’s economy."  They also funnel oil money to lobby against climate controls…

    Europe/High – Thanks for the heads up.  Any reason? 

    XLF is over $15 (exactly) and now Qs over 42 become significant if they are both over.  Oil is down to $70.72 and gold is holding $1,042 with copper hanging out at $2.78 so nothing of note yet to show real weakness but let’s watch that Dow 9,700 line as they are the only index that is holding the 33% line at the moment

    SRS doing well today, up to $10.30 so things are still favoring the bears for now. 

  40. Highlander

    cap,
    From last night, regarding Lisbon Treaty compared to our own constitution formation, only alexander hamilton (the architect of a strong central government) really understood the ‘interstate commerce’ clause which was the sleeper regarding evolving to a powerful central government! Taxing, single president, common currency and diplomacy powers were nothing burgers compared to the commerce clause in the hand of a sympathetic supreme court.

  41. Highlander

    Phil,
    re europe up, no related news and now that damed yahoo wont let me see the daily charts!!! i’l check later.

  42. mrmocha

    SYNA – rolled down my longs and bought some OCT calls this morning for a daytrade, looks like a strong day for it.

  43. Highlander

    green, green, green!

  44. Phil

    Europe/High – Someone is bidding up the markets, they seem very determined to break the new H&S pattern that was forming.  Nothing to do but go with the flow and watch our levels. 

    Helping AMZN:  Electronic reading devices are having a breakout year, with Forrester today upping its 2009 e-reader sales forecast to 3M from a previous 2M, including 900K of sales for the upcoming holiday season. Firm sees sales doubling in 2010 – and says things could skyrocket "if the category expands beyond E Ink-based displays in a substantial way."

    $100KP, at this point we need to sell 10 AMZN Nov $85 puts at $2.70 to offset the roll we’ll almost certainly have to make from the Oct $90 caller, now $5.30, to the Nov $95 caller, now $6.  That roll has to be made before it goes below even. 

    QQQQ $41 calls are now $1.35 and we’re willing to lose a nickel gain but not a dime so a .05 trailing stop once we gain .10 or better ($1.45).

  45. javaben

    Phil, some positions that I had picked up via some recommendations here – any suggestions?
    EDZ  $6.78 +500
    EDZ $6.78, Nov 09 6 put -5
    EDZ $6.78, Nov 09 7 call -5
    ERY $13.71, Oct 09 14 put -5
    FAZ $20.33, Oct 09 19 put +4
    TASR $4.51 +500
    TASR $4.51, Oct 5 put -5
    WHR $67.85, Nov 09 75 call -5
    WHR $67.85, Nov 09 80 call +5

  46. eben22

    Calendar Spread question for anyone who can educate me.  Let me know if this type of question is better handled after market hours.
    I was playing around with TOS within Ameritrade and was using their "spread hacker" to pull up spreads.  Here is a sample: CME – buy NOV 180 put (.45) and sell JAN 180 put (1.80) for net credit of 1.35.   99% probability of profit.
    This seems backwards to me.  when the NOV put expires worthless you’re left with a naked short put for JAN.  Can someone explain the strategy or point me to an explanation?  Thanks in advance!

  47. EricL

    That absurd oil pump after inventories looks like its failing.

  48. jromeha

    Phil, how are we looking on volume today? Do you think we’ll get a mini selloff at the end of the day?

  49. EricL

    eben, I also have no idea why anyone would enter that spread. Maybe if they were bearish for Nov. but bullish for Jan? Makes little sense, and would use a lot of margin.

  50. pstas

    RE: Electronic Reading Devices- per the above post – anyone here have actual experience owning/using one of these? Never too early to start my Christmas Wish List :)

  51. allen060

    $100KP, at this point we need to sell 10 AMZN Nov $85 puts at $2.70 to offset the roll we’ll almost certainly have to make from the Oct $90 caller, now $5.30, to the Nov $95 caller, now $6.  That roll has to be made before it goes below even. 
    Phil, what do you mean "before it goes below even."?

  52. Phil

    List/Java – EDZ is on track, ERY is on track, FAZ I can’t imagine who suggested you short those and you should get out while you can.  TASR is on track if you want 500 more shares at the same price but I’d roll to the Nov $5 puts for +.20  and NOT sell calls until there’s a move to $5 and you can get .50 for those.  WHR looks good but aren’t you way ahead and shouldn’t you consider taking the profits?  The most you can make is $1 more on the spread but you can (doubtful) lose $5.

    I’m looking for bullish plays, really I am, but I’m not seeing anything I like at the moment.  Happy to take suggestions!

    Backward spreads/Eben – Well, in theory, you have a better upside delta than your caller for most of the spread and you will lose .45 in 45 days in theta and they will lose $1.80 in about 100 days so you have a 1.8:1 theta advantage and their delta is 0.04.  While yours is .01, your climbs to .02 on a $1 drop and .05 on a $30 drop while the Jan $210s have a .10 delta so ROUGHLY it would take a greater than 10% drop in CME before you are in a losing position.  While I dispute the 99% probability, it is not a bad trade if you have the margin and patience to deal with it but you are playing for pennies and you can get burned if there’s a big move near your expiration.

    Volume/Jrom – Lame, just 56M at 11:30 so easy to push around but generally waves of sellers at our upside resistance points is the trend so far.

  53. yodi

    Good morning Phil,
    Re AMZN how about a fresh stangle Nov sell 105 call and 80 put at credit 4.02 your thoughts pls

  54. eben22

    Phil on the backwards spread since you own the nov put and sell the jan would your margin requirement be very small through the nov expiration?

  55. Phil

    EReaders/Pstas – I’m waiting for the IPad.  The Kindle is too clunky for me and I have no desire to carry it on a trip.  I’m a vacation reading by the pool kind of person so any EReader is a hassle for me as it’s one more thing to get lost or stolen or broken on a trip while a good old paperback I can use to prop up a wobbly table leg or keep the door open while I go down the hall to get ice etc….  So the only interest I have in an Ebook reader is a nice multi-purpose device that I WANT to have with me all the time and that’s why I don’t fear the Kindle in shorting AMZN, they’ll never beat the IPad and they certainly won’t add 10% to AMZN’s value so this move up is silly. 

    AMZN/Allen – I mean you want to make that roll before the roll costs you money but, until then, you don’t need to do anything.  I usually sell the next leg first, while there is still premium, leaving me with both short plays and then I stop out the front-month (in this case) caller IF it crosses the price I sold the new calls for.  If not, I still have the possiblility of profiting from a pullback but good luck expaining that every time I make a play….

    AMZN/Yodi – Excellent play I think.

    Oil just power dove to $70.25 but is bouncing there.   Gold could care less and is holding $1,043.  The dollar is doing noting exciting so these guys are just on their own. 

    BIDU $450s for $1.80, selling $420s for $8.30 is $6.50 on a $30 spread so you are very screwed if they head up but it’s a nice play to pick up $6.50 on net $23.50 in margin.  If you have big margin (and cajones) you can do it naked

  56. Cap

    Highlander … EU vs revolutionary America.  Different times; different issues.
    EU aspires to rule over vastly disparate sovereign countries with vastly disparate cultures.  And they are amassing power largely without the consent of the people involved as European governments with different power and economic and political agendas have made what objective observors would have to regard as undemocratic decisions oblivious to the will of the people.  As a consequence, peoples lives are materially affected by unelected, undemocratic bureacratic "elites" (elites in their own minds anyway) in Brussels who have no real accountability.
    If this were happening in the US for example; you would be hearing real legitimate howls about trampling on the Constitution, not the politically expedient drivel we’ve heard from the left in recent years.

  57. Cap

    Speaking of hype, er, AMZN, I actually saw a Segway on the street the other day …

  58. Phil

    Google (GOOG) CEO Eric Schmidt says he told staff this morning "the worst is behind us," and that "we’re clearly seeing aspects of recovery, not just in the U.S. – but in Europe as well." He adds: "We’re increasing our hiring rate and investment rate in an anticipation of a recovery." Search Engine Land and MediaMemo are liveblogging the press conference.

    Bing (MSFT) seach share growth takes its dip according to Hitware’s Sept. numbers, falling to 8.96% from 9.48%. Google (GOOG) rose impressively to 71.08%, while Yahoo (YHOO) fell to 16.38% from 16.96%. What’s interesting is the possibility Verizon’s (VZ, VOD) new Android (GOOG) phones may come with Bing as the default search engine.

    The only solution to iPhone congestion, and ultimately the only way to solve AT&T’s (T) bandwidth woes, Farhad Manjoo says at Slate, is to kill the all-you-can-eat internet model and charge people for what they use. Superusers will cry foul play, but AT&T’s public image – ironically – is bound to improve if most users start getting less dropped calls.

    Europe contracts more than expected. Euro area GDP fell by 0.2% in Q2, according to Eurostat’s second estimate (.pdf), far less than Q1′s 2.5% contraction and the 4.8% decline of a year ago. In comparison, U.S. GDP also declined 0.2% in Q2, while Japan’s GDP increased by 0.6%. The decline was sharper than the 0.1% dip estimated last month. While the report is "slightly negative," economist Nick Kounis said, it "adds nothing to the big picture: The economy very likely returned to growth in Q3, and a rather moderate recovery is likely to follow in the coming quarters."

    $20Bn in 10-year notes get sold at 1pm – that’s a market mover too.

  59. Highlander

    europe closes down on oil and banks. recovered most of interday loses to just marginally in the red and almost green

  60. Cap

    speaking of BIDU; sold a $430 Oct call nekked for $5.   Has to be above 435 by next Friday for that not to be profitable.
     
    I think they are going to try to jam REITs up next to hold the market up.  Will it succeed ?
     
    As I speak; down goes SRS.

  61. yodi

    Hi Phil, being in Cancun I like your spanish on BIDU

  62. Highlander

    cap,
    your best point is that central government decisions are being made by each country’s government while we went directly to the people in electing constitutional convention members and only then did the ‘country/state’ governments get to vote it up or down!

  63. Phil

    Spread/Eben – I just plugged it into TOS’s non-PM account and doing that play with the CME Nov/Jan $180 puts is $1,895 per contract in margin to make maybe $40, probably $10-20.  That’s why I have no interest, you’re better off manning up and selling the Nov $200 puts for .85 as that whacks you for about $1K and you have an excellent chance of making all $85 you collect in 45 days. 

    Consent/Cap – How is is without consent when they require a unanimous yes vote from a majority of each potential client state?  What do you think the 13 colonies did in order to form this country?  They didn’t hold public referendums, the colonial congress delagates decided on the details and advised the people after the fact for the most part (We’re a state now!  Oh and by the way, the British are coming and they’re a little peeved…).  I don’t even understand your objection to this – Europe needs to do this in order to be competitive on the world stage.   Other than Germany and the UK, none of those countries have a shot in hell of mattering in the global economy without forming economic alliances.  Had it not been for the strong ECB, this last crisis would have been far, far worse in Europe.

    Segway/Cap – Oh yeah.  How exactly was that supposed to change the world? 

    Oil failed $70!!!  XLF still holding $15, Qs below $42 and gold still $1,040.

    Cancun/Yodi – Oh that’s very nice!  Hope you’re having fun…

  64. mrmocha

    Behold the power of the reverse split!  Last summer someone here was touting THPW so I bought some for my IRA and forgot about it; the stock didn’t budge for a year.  Then they did a reverse split as LTBG and shot up from 7 to 12 in 5 days, so it took a year but I’m up 90%.  Patience truly is a virtue!

  65. Phil

    Gang of 12 jockeying: "A major transformational buy" could be in the cards for Barclays (BCS +1.3%) as it considers acquiring a Julius Baer-sized wealth management business to jump into private banking’s top five. The No. 5 wealth manager, J.P. Morgan, manages $600B in assets; Barclays Wealth manages about $230B.

    THPW/Mr M – Congrats.  Keep this up and you’ll lose your status as a contrary indicator…  8-)

    WFMI interesting short at $30.60   Grocery store with a 40 p/e?  I loved them at the bottom but I think it’s safe enough to sell the Nov $30 calls naked for $2.40 with a stop at $3 (maybe a roll to Jan $32s).  With any short call play, you should be thrilled to make 20% by the way….

  66. yodi

    Phil your opinion on AA sell Nov or Jan 14 put for 1.10 or 1.60 relv. giving you an entry to AA at 12.89 or 12.40 now trading for 13.96 possible wait till tomorrow ?
    same with WRE  sell Jan 25put for 1.20 giving you an entry point of 23.80 now trading at28.16
    Both are cheap stocks

  67. ken88

     AMZN, why are the Nov 95 calls down .85?

  68. stevenparker

    AT&T struggling with bandwidth as well, boy we better find ourselves some way to capitalise on that trend!
    Simirlarly I notice that Time Warner has just launched a 50mbps cable internet service in new york city, the same speed as Fios. No doubt they are buying a lot of equipment as well.

  69. b1ll

    Speaking of shorts Phil, how would you compare playing PSQ / QID , DOG / DXD , SH /SDS versus stocks like WFMI , AMZN etc and why ?

  70. eben22

    Phil thanks!  Not interested in that CME example either, just trying to get my arms around the strategy.

  71. Ether

    FWIW, Here is my experience with the Kindle….
    I owned both the first and second generation KIndle.  I agree that the Kindle is a bit clunky, but I have found that I can get lost in a book just as if I am reading a real one.  If you turn the wireless function off, the Kindle’s battery will last for weeks if not longer.  With wireless on, the battery need recharging about once a week.
    What I don’t like about the Kindle is that Amazon is charging about $10 for most Kindle books, and recently they are starting to charge more.  I would rather spend a few dollars more for a real book because I can sell it used or loan it to a friend — something I cannot do with a Kindle book. 
    The iphone/itouch have a Kindle reader app that makes for a find reading experience.  I don’t know if you need to own a Kindle in order to have a Kindle account to read books on your iphone. I think not, as Amazon probably wants to sell books on any platform.
    I took the Kindle on vacation recently. I always bring more books than I can read because what I want to read seems to change when I get to my vacation destination.  It was nice not to have to lug extra books. 
    If I want access to a book instantly, then the Kindle version is very convenient.  However, rarely do I need this.
    The Kindle is not that great as a dedicated reader. I agree with Phil that a multipurpose "Ipad" or even itouch/iphone is just as good as a Kindle.
    Hopefully, as this market grows, the price of ebooks will decrease.  In the meantime, it is hard to beat tried-and-true Gutenberg technology.

  72. oldgoat

     Re the iPhone. Sounds as if the AT&T network is overloaded. Wold a Blackberry w/ Verizon be better? 

  73. JRW III

    Phil,
    Thin market, nothing happening with the dollar, all they have to do is hold it here and they get a close above the declining trend line. Then tomorrow’s " better than expected " initial claims # could do it. Your thoughts ?  J.R.

  74. oldgoat

     Play the stick save this afternoon?

  75. chakra108

    Phil
    I own a trade that I woould like your opinion on. I bought FACT 17.50 NOV PUTS @1.85 expecting the stock to sell off on news that the FACT board has rejected a BIIB offer for a buyout at 14.50. The stock is up purely based on the buyout prospects. Since FACT and BIIB already have a partnership, I doubted BIIB would be hard pressed to come up with another offer in the near future. However, Barrons came out with an article quoting a merriman analyst that FACT is worth $25 and no less. Consequently, I changed my view fearing a run up  and converted the trade to a Bull Put Trade by selling the OCt 20′s for $2.15.
    I was wondering if you had any suggestions to imporve the trade. The worst problem with the options in this stock is the spread and illiquidity.Thanks in advance.

  76. balancenv

    Phil, any suggestion to my previous question of FSLR 145/150 call spread? On China moving factories to US: two reference points?a 5 yrs experience auto assembly worker avg. annual salary is 65K RMB (1:6.8 is the exchange rate). A 5 yrs experience programmer from 1st tier school is 140K RMB. It will be a while we see to ‘move’…

  77. stevenparker

    EU/Lisbon – Curious why you think the EU ‘needs to do this to be competitive on a world stage’. Hasn’t the EU already become the world’s biggest economy?

  78. jomama

     i love when your caller gets scared and leaves premium on the table.  my at&t caller flaked out this am :)

  79. morxlntway

    Phil – With all due respect to our good friend Jomama, I have followed his instructions too literally. I bought the XOM $70 calls at about $1then DD to .82 but just getting worse. How do i save myself?
    Roll to the Nov 70′s for 1.20 + .55 loss = 1.75 then sell Nov $65 puts for 1.21 & Nov 70 calls for 1.16?  I made $ on this trade a couple times before it bit my hand.
    Thanks

  80. pstas

    IPHONE/Blackberry
    I moved from Sprint/Motorola up to a Blackberry Storm on Verizon about 6 mos ago. I seriously considered the Iphone but the ATT network is sad compared to Verizon. Mostly a coverage issue. Sprint is great in metro areas or if you don’t stray further than a gas station off an interstate hwy. ATT is spotty outside metro areas. Over the past 2 yrs my travel companion has had Verizon service in remote areas of Alaska, Canada, Montana, etc. and being able to access service when I want is most important to me. Don’t get me wrong, I love AAPL and think it is a great company with a very bright future. But , I just can’t shake to image of the IPhone being more toy than serious business tool. I may be in a distinct minority but I am not impressed with "cool". It’s a tool , after all.

  81. jromeha

    Does anyone know when Alcoa is reporting? All is says on yahoo finance is (after markets close)…

  82. Cap

    Segway / exactly.  AMZN probably went up $100 that day !  What a joke that was (brought to you by CNBC of course).

  83. RMM

    jromeha:
     
    AA reports today at 5pm.
     
    you can find all earings reports under earnings.com.

  84. jomama

     sorry morx i got a little behind myself, and then bought nov’s for 1.08 and then cashed out yest for a nice gain.  likorke most things you have to look at the whole market sentiment (overbought/oversold) before jumping in.  sorry it didnt work out for you.  you will have a few loosers but more winners.

  85. Phil

    In another step in its clampdown on speculation, the CFTC considers further closing the "Enron loophole" that exempted many over-the-counter energy trades from regulation. The commission will examine 17 natural gas and power contracts for "significant price discovery function," meaning they should be regulated.

    AA/Yodi – I’m not too bullish on them up here but maybe that’s because we were buying them at $5 in March so $14 seems like a lot.  10% isn’t really that much to pay for the uncertainty and $15 would be very tough for them to get through so why not wait for data and have a plan, like if they run up to $15, you sell the Jan $15 calls naked for $1.50 and buy the stock for $15.50 if they hit it and if they head down, you THEN sell naked puts once they stop.  There’s also the 2011 $15s at $2.90 that have a .56 delt so AA could go up $2 (7%) and they’d only be $4 and $1 in the money vs. $2.90 and out of the money now so you wouldn’t even miss anything to the upside by waiting…

    AMZN/Ken – Ah, a great example of why PSW Rule #1 (and we only have 2) is "ALWAYS sell into the initial excitement."   Most traders don’t have me to calm them down and they overpay for anything that has momentum.  We take advantage of that by selling into those boosts while the premium is way too high.  That way, even if the stock just flatlines like AMZN did, we still make money as the volatlilty normalizes. 

    Bandwidth/Steve – We have, it’s called FIOS!  Yes, companies can compete in cities but not in suburbs.  Either way CSCO wins too…

    Essay question/B1 – You’ll have to catch me when I’m in the mood for that.  What’s the actual question?  There are ultras and there are straight index puts, it depends how sure you are and what you are hedging for what kind of move and which one has the better option pricing for the strategy you’re looking at.  Like yesterday and today, I was very unsure of the market move and the QQQQ calls seemed the safest way to cover because I figured worst case was a nickel loss but a very nice .76 delta if they broke up.  The Qs are very liquid too, something you don’t get with the ultras.   Versus stocks I can’t even begin to explain – you short an index to cover various positions or follow trends, you short stocks to take advantage of short-term overpriced conditions…

    Oil $69.20!  I am so happy!

    Kindle/Ether – That seems about right to me.  Kindle is nice but it’s not special – it’s just books on a screen.  Unlike music, which gets shuffled and has a lot of user interaction, a book pretty much boils down to turning a page, bookmarking a page, screen quality and battery life.  That week battery thing is a big edge for Kindle, no way an IPad will go longer than a day.  Really though, that’s not the point as AMZN will sell maybe 2M Kindles for $300 which is $600M so about 3% of total sales and if they have 20% net margins (doubt it) that’s $120M and 10% of their profits (over last year when half that many were sold) so the max impact on earnings is 10% and they are projected to earn $1.69 this year and $2.10 next year so give them $2.50 just to be sporting and does that justify a $95 share price?  People are just insane…

    IPhone/OldG – With either device, make sure you find someone who has the device you want on the network you want in the place you are actually going to use it and then try it out.  There are good spots and dead spots everywhere for all devices.  My house used to suck for T but now they put a tower close enough to give me a brain tumor and my IPhone kicks ass on Tina’s BBerry on VZ, which used to be the best signal in my town. 

    Jobs/JRW – I don’t see a beat in the cards.  This is a weekly number and we have end of summer layoffs and clearly sentiment has turned lower due to loss of jobs and worries about jobs so it would be surprising to get a great report.  Those weekly numbers aren’t taken too seriously though so I don’t think it will take us down.  A miss from AA, however, can cost us 100 points or more before the open.  They are expected to lose 9 cents anyway vs. making .37 last year.  Before the bell tomorrow, we have MAR (another possible miss), PEP (who would be a shocking miss) and PGR, who should do well because driving is down and there are less accidents and there were no disasters last Q. 

    PGR Feb $17.50 calls are pretty cheap at .80 if you can get them for that (spread is .75-.90).  If they beat, their p/e is below 10 this year, which is about 50% less than the sector average. 

    Stick/OldG – I don’t think so, this is pretty weak so far with 75M at 1pm it seems like we’re consolidating for a move down, not up. 

    Fed buys $1.3B in Treasurys maturing between 2021 and 2025, just a fraction of the $7.9B offered by dealers. The spend was about half the Fed’s previous purchases in this range, consistent with its plan to spread more thinly the roughly $6B left in its buyback fund, which expires at month-end.

  86. pstas

    Ether-thanks for the insight on the Kindle. Did you look at any other options? I think Sony has a similar product? Also, isn’t the Ipad still more rumor than fact?

  87. morxlntway

    Jo – i had a few winners before this so i’m not gripeing. Thanks for the tip.

  88. RMM

    Phil: on the 14th, ABT will report earnings which are higher than previous year: what trade would you put on  ?

  89. Highlander

    phil,
    is this flat line crap just vic manipulation?i

  90. gel1

    Pharm
    Do you have any sentiment on CEPH. I have a long position in it and can’t recall why . Thanks!

  91. Cap

    Phil / WFMI …. agree … should be a screaming short; but so are many other names, lol !  should be !

  92. JRW III

    Phil,
    Look at this coiling formation on the Russell ( IWM ) maybe this afternoon won’t be so boring after all !

  93. Pharmboy

    CEPH/gel – nor do I….not a huge fan of any biotech buys now, unless one is scaling in to them or buying big Pharma for the healthcare bill.  That is one reason for my lack of activity now. If you are up, then I would move on.  If even, maybe the same.  If down, try and make it up on front months…
    KR – Phil you ranted the other day about companies near their Oct ’08 lows, well, KR gets the best there – they are below their Oct price.  I think that one has a good chance at success due to COSTs good earnings.  They need to fill the gap up to 22.3, but as a LT play, I like them. 

  94. Phil

    The Treasury sells $20B in 10-year notes at 3.21%, the lowest yield in five months. Bid-to-cover ratio of 3.01 vs. a recent 2.89; indirect bidders took 47.4% vs. a recent 44.5%. Treasurys were higher across the board: the 30-year yield -0.05 to 4.02%; 10-year -0.06 to 3.2%; 5-year -0.05 to 2.19%; 2-year -0.03 to 0.88%.

    FACT/Chakra – That thin trading thing is something you need to take into account before you step in.  The fact that one analyst says $25 shouldn’t make you do a 180 on your position like that.  Your $17.50s are down to $1.45 but rather than take the .40 loss, you sold to a putter who’s $2.50 in the money for $2.15 so unless FACT finishes above $19.30 (UP 10%), you would have been better off cashing out for $1.45 and now, anything down (the direction you thought it would go) is a nightmare for you.  So you bought premium instead of selling it, you didn’t scale in and reversed you position rather than getting out with a 20% loss and you want to know how to "improve" the trade?  Hmmmmm….    You can’t even roll out to the March $17.50 puts because, if they do get bought out, you are wiped out.  You do realize that at $17.50, you have to give the caller back $2.50 AND you get nothing, right?  So you are not just bullish, you are bull or die on this one.  So I think, on the whole, I’d just look to get out for decent prices.

    FSLR/Balance – too wacky for spreads.  I don’t see your previous question but if you are talking October, you are better off making a straight bet than trapping yourself in a vertical.  I’m not actually expecting any jobs to come to this country from overseas – on the whole, we are pretty screwed if the global economy stays slow.  All we’ve been doing for the past 10 years is selling stuff and pushing papers around. 

    EU/Steve – Yes they have become the largest economy but they are doing so without a proper constitution and that keeps them fragile and they can’t be taken seriously if all major decisions require a unanimous vote from 27 countries.

    ConocoPhillips (COP +1.9%) cuts its capital budget for the coming year by more than 12%, and plans to sell about $10B of assets in order to reduce debt. The company also raised its quarterly dividend 6%.

    Just a week after a floor-mat flaw caused Toyota’s (TM) biggest U.S. recall, the company’s Tundra truck is drawing an investigation by U.S. regulators over "severe" frame corrosion that might cause brake failure – more bad news for a company that’s at least a little off track.

  95. Pharmboy

    CEPH/Gel – there is one blurb on CEPH – On 9/24/09, Cephalon announced that the FDA granted a priority (six-month) review for its supplemental New Drug Application (sNDA) for NUVIGIL (armodafinil) Tablets [C-IV], which was filed in June of this year. The FDA decision on approval of NUVIGIL as a treatment for improving wakefulness in patients with excessive sleepiness associated with jet lag disorder due to eastbound travel is expected by 12/29/09 and there is currently no FDA-approved treatment for this indication.  Not sure what the market is on this indication, since travel is down.  Also, CNBC likes them big time….U decide….

  96. Phil

    XOM/Morx – LOL, this is why I don’t buy things I don’t want.  As you know I have no respect for XOM and I’m bearish on oil so there’s not much I can say about sticking with them long-term.  However, you have your $70s at .90ish and you are down a horrific 60% because you didn’t stop out when things got worse so what can be done?  Well, you can sell 2/3 the Nov $70 calls for $1.27 to collect .83 and you’d have to buy Apr $75s (now $1.95) to cover if they break back up but then you can sell your Oct calls and roll away on the callers for 6 months.  That’s the best "fix" for this one.   You can go the straddle route but earnings are coming and you might get burned (even worse that is)… 

    IPhone/Pstas – It very much depends on what you do with it.  I use my IPhone like a hard drive and I can read all my office docs when I need to and send them to people who’s office I’m in so they can put them up on their computer.  I like the way it works off WiFi wherever I go and I mainly browse the web and read mails, not write them so I have no use at all for the keyboard.  Phones/PDA’s will always come down to personal preferences and don’t forget, I was stomping my foot for everyone to buy RIMM at $65 last week and this week so I’m not anti-Blackberry – it’s a Coke and Pepsi thing…

    ABT/RMM – Where are you getting the inside info?  Since they are up 10% in 10 days, you may not be the only person privvy to this "news" but, if you want to be bullish, I’d sell the 4 Oct $49s for $1.35 as they expire 2 days after earnings and buy 5 May $52.50s at $2.30 so if they go down you don’t get hurt too bad and if they go up you just buy 3 more Mays and roll the $49s to 2x whatever works. 

    Flat-line/High – I’m wondering how long they can keep this up.  It’s like they are terrified of letting us drop but don’t have the juice to get us over the resistance lines.

    Shorts/Cap – At the moment I’m picking things  and selling calls where I simply can’t see more upside, even if the rest of the market gains 10% like AMZN, FCX, FSLR, WFMI….  Hopefully I won’t be more than 20% wrong, which is covered by a few monts of rolling.

    IWM/JRW – All consolidating for a fall I think..

  97. matt1966

    EEEEEeeeeeeeeeewwwwwwwwwww!   Bring back the GS trading program!!

  98. gel1

    Pharm…. Thanks much. They are trading at the bottom at the moment. I’ll wait for a bounce and then say ‘good bye" Must have been one of those tips that came in over the transom!

  99. ssdirk

    Pharm, any word on BEAT?  They have been drifting lower for a few weeks.

  100. gel1

    yodi
    Mucho Gracias! I caught your AMZN short straddle – great risk/reward situation I believe.

  101. chakra108

    Phil
    Thanks for the inout. That was a crazy move. An afterthought is to neutralize the Oct 20′s if the stock does nothing by buying OCt 17.50′s close to expiry. I may payout $0.40 based on the $0.03 theta per day for 6 days .This would atleast allow me to salvage the Nov 17.50′s for one more month and then think of a scale in. What do you think? I must say that I learnt a hell a lot by reading your archives of daily trades. 

  102. Pharmboy

    BEAT bounced off their support at ~6.2.  I bought more there (a DD) on the 5 Feb10s.  I sold 1/2 Oct 7.5s a while ago, bought back, and now sold another 1/2 Nov 7.5.  I also sold Feb7.5 P.  I am expecting them to turn up.has been holding 6.2-6.5.  They are a LT hold for me.

  103. pstas

    IPHONE/Blackberry- Hey Phil, glad to hear you are not anti-blackberry. So, that means you will do a mobile reader thing for us Blackberry Addicts? Wouldn’t want to be discriminating against a minority, would you?:)
    BTW, I am addicted the the damn thing. I used to chuckle and marvel at the teenagers simultaneously texting while walking; talking;standing in line; etc. Now, althought not texting (my fingers are too fat) I grab the damn thing for WSJ; Bloomberg; etc updates at traffic lights; pumping gas; in the grocery line. My how times have changed.

  104. samz3700

    Phil -
    OIH naked calls @ 120 did you do anything with those?
    Why is OIH up with oil down??

  105. qcmike

    Pharmboy
     Any thoughts on Affymetrix  AFFX
    Thanks

  106. Phil

    I must say that I learnt a hell a lot by reading your archives of daily trades."

    Thanks Chakra – Although that is an assignment in the New Member Guide, sadly, many members do not realize it’s not a punishment – it’s actually the single best way to get a handle on how we trade here and, more importantly, why…  Hopefully, this will be a good note for all new members. 

    As to FACT, just keep in mind that you lose all Premiums if you do get called away.  With speculative buy-out plays like this, you generally want to look at bull call verticals like the March $15/17.50 spread for $1.40, which makes 78% if called away and breaks even at $16.40.  If you don’t believe in them, the March $20/17.50 puts spread is $1 and pays $2.50 if they go down from here.  You can also buy the March $15 calls for $4.20 and the $20 puts for $3.50 and you are in for $7.50 and then you can sell the Nov $17.50 puts and calls for $2.80 but the problem with that one is you are screwed if there is actually a buy-out. 

    Oh yeah, things must be really picking up, this is not even enough time to amortize the investment:

    Dell (DELL -2%) will close a North Carolina desktop PC plant at the end of the year, affecting more than 900 employees. The plant opened in 2005.

    BBerry/Pstas – Yes, that is the plan once we have our IPhone app running we’ll see about converting it over to BBerry too.  They are addictive, and productive for many so why shouldn’t they catch on?

    OIH/Samz – LOL, those are Nov puts.  It’s a little early to be concerned about them.  As I said this morning – IF the $115 puts fall to $4.25 (now $5) then we cover with them.  I have no idea what OIH is doing today other than giving us all the time in the world to establish our shorts…  They may be planning a run at $120 tomorrow if there is even the slightest improvement in nat gas inventories. 

  107. Pharmboy

    Well, I lied.  I am liking MNTA for a bounce up to 11.5 range.  Buying 7.5/10 Jan10 C Spread for $1.  FDA decision may be out by years end.  Here is a blurb on SeekingAlpha.  Phil may have a better option risk/reward.

  108. JRW III

    Hmmmmm,  the 3:05 is a little early !!

  109. chakra108

    Phil
    You wrote "As to FACT, just keep in mind that you lose all Premiums if you do get called away.  "
    Just wanted to clarify. I own the NOV 17.50 PUTS and SOLD the OCT 20′s.
    On option expiry, if I chose the option of buying OCT 17.50′s to offset the risk of losing my NOv 17.50′s, then that would leave me with the same position (Lng NOV 17.50′s) as before albeit $0.40 dearer assuming the Oct 17.50′s are $0.40 by next wednesday. I just wanted to be sure I expressed myself clearly.

  110. Pharmboy

    MrM – not sure if you are still playing VNDA, but the P/C ratio is 4.  Either that baby is gonna tank, or someone has to cover their butts.  One way or another, it is gonna be violent.

  111. samz3700

    Phil -
    I was talking about your call yesterday -
    "Selling OIH $120 calls naked for $2.30.  Scale in and not for the feint of heart!"
    Thanks – forgot about NatGas in OIH – Looks like can roll calls out to Nov. 25 for a 1.30 credit

  112. EricL

    This action looks bullish to me; sideways consolidation before the next leg up. Momentum stocks pushing up to yearly highs. As always, a big seller could step in and push us down quickly given the light volume, but it would probably just be yet another brief buying opportunity.

  113. pstas

    DIA- now in Jan 98′s long puts-naked. What is the suggested covers?

  114. EricL

    GOOG exploding to the upside all day.

  115. ssdirk

    Last Thursday I started my long term buy/writes on stocks that I wanted to own by selling Nov OTM puts.  I initiated 10 and was filled on 6.  I was up 50% on the naked puts on 3 of them so I took it and ran (SUN, VLO, PM).  I may resell on a pullback.

  116. XLF'd

     Phil, with BIDU over 400 again… what’s your take on a PUT or Short position?

  117. XLF'd

     REVERSE Stick Save Day… Or shall I say BEATEN with a STICK Day, coming soon to a market near you!

  118. ephmen85

    IBM   No more than 1/2 covers going into earnings, right?    My position is + 1 Jan 100, + 3 Jan 110 / -2 Oct 120

  119. jomama

     xlf’d – you have the best nickname so far thats been on this site.  always makes me laugh

  120. Phil

    Consumer credit: down for the seventh month in a row, $11.98B in August to $2.46T – a 5.8% annual rate. Economists expected a $12.5B decline. Credit-card debt fell for a record 12th straight month, $9.91B (an annualized 13.1%) to $899.41B.

    Very tough time with QQQQ 42 and XLF 15.  Dow 9,700, RUT 600, S&P 1,055, NYSE 6,900, Nas 2,100 so good spots to watch as they all line up

    FACT/Chakra – What I was saying is that IF they get bought, you have zero as your position is all premium and has no value if they are bought for $17.50 or more.  My point being, you are investing in something on the premise that they may get bought out but if they do get bought you are totally screwed.

    OIH/Samz – Oh those.  Those fell to $1.60 yesterday and stopped out on the first set (trailing stop once you pass 20%).  They are good for a resale here though but, as I said, it’s a roller coaster. 

    Action/Eric – With a volume of 110M at 3:30 it doesn’t look like anything at all.  This last "rally" has been led by a sudden surge in solar stocks for some reason.

    DIA/Pstas – Same as yesterday, a 1/2 cover of the $98s, now $1.78, just in case we fly up as those can be rolled to 1/2 the Nov $94 puts and the $1.78 pays for you to roll up to the $100s which would put your net $5.40 puts $6 in the money and 1/2 covered with 2 months to roll.

    On the whole, I think that there is more of a chance we gap back down to 9,600 tomorrow than anything else.  Perhaps after that we will move back up, assuming we hold it.

    2 Step Program/SS – Very good! 

    BIDU/XLF’d – Same trade as before, the $420s are still $8.50 and you can cover with the $450s at $1.80 but it’s a rough trade with a whole week to go.  No way would I pay the premium to own puts on them unless they go to $450 or something silly like that. 

    IBM/Eph – Probably the one we can be the least worried about.  Tragic if they miss though..

  121. EricL

    Another nasty, bigger than expected contraction in consumer credit. Consumer stocks rally on the news, lol.

  122. EricL

    Bloomberg median estimate for the credit contraction was $10 bn, not 12.

  123. oldgoat

     pstas, Is the Blackberry hard to set up? 
    I just found that AT&T reception here in Santa Fe NM is very poor. So I’ll have to go w/ the BB.

  124. chakra108

    Phil
    Thanks. I own the USO JAN 35/36 PUT spread @0.50. Should I just keep this to next wed or so till Oil shakes down more?

  125. JRW III

    Phil,
    I have to agree with Eric, this looks like a Bull consolidation, not a Bear.
     
     
    p

  126. yodi

    Hi Phil, one day I sincerely hope I can join this privat club of trading with DIA.
    your response to Pistas can only be understud by an insider. Could you pls explain this to a normal person?
    DIA/Pstas – Same as yesterday, a 1/2 cover of the $98s, now $1.78, just in case we fly up as those can be rolled to 1/2 the Nov $94 puts and the $1.78 pays for you to roll up to the $100s which would put your net $5.40 puts $6 in the money and 1/2 covered with 2 months to roll.

  127. mrmocha

    Pharmboy - still in VNDA, thanks for the info.  I played it like a fiddle from 13 to 15 several times but it’s broken down lately so I presume people with a position at 15 are buying protection.  Or you could be right, something bad is coming.  I’ll be careful.

  128. Phil

    Let’s see, we had TBoone on CNBC yesterday pushing oil and nat gas and today Jim Rogers runs back from China to be a guest and tell you to buy every single commodity you can – thank goodness for these good samaritans taking their valuable time to help the viewers put their money into these sound investments….  8-)

    USO/Chakra – Jan is a long way off, I’m not even sure what Wednesday has to do with anything.

    CCredit/Eric – Whatever they thought it was, it’s still money off the table that won’t get spent and can’t become corporate earnings but whatever… There’s no way to ascribe logic to the reactions to these things. 

  129. mrmocha

    "contrary indicator" – Don’t worry, Phil, in between my wins I’m still doing a fine job of making bad calls. Witness my BIDU short from yesterday, not looking so good today!

  130. pstas

    Oldgoat- The Verizon store set everything up. They transferred all of my existing phone numbers; set up the email, etc. It was painless. Verizon runs promotions all the time here in the Chicago market with some very good deals. It pays to shop and a little bit of haggling can go a long way.

  131. EricL

    Totally agree Phil. It has been worse than expected every month and is an ongoing disaster.

  132. dflam

    PHIL : ON DBC, APPROX. 60 % IS RELATED TO CRUDE, CRUDE FUTURES, AND HEATING OIL. WEREN’T U BEARISH ON THESE 7 IF YES, DO U STILL RECOMMEND THE APRIL DBC SPREAD?
    DFLAM 

  133. Pharmboy

    Well, wasn’t that interesting….

  134. javaben

    VZ – today was ex-date.  The stock dropped about what you would expect today, so no surprise there.  But I am surprised that the Oct 30 puts didn’t appear to anticipate this drop yesterday vs. today.  On TOS, looking at .vzvf chart, it looks like this could be playable going forward.

  135. aclend

    Pharm,
    I just said that to myself out loud 2 seconds ago (even though I’m by myself). Hahaha

  136. Phil

    FSLR – Just my personal favorite but very dangerous, selling $155 callls naked for $5.10.

    Bullish/JRW – It will be interesting to see what tomorrow brings.

    DIA/Yodi – Pstas is far more advanced than you are so I gave him the longer logic of the potential moves down the line.  I really can’t take every conversation I have with every member down to the most basic level or I will lose interest in communicating…  You need to accept the fact that not everyone here needs everything explained that simply and it’s unfair to expect me to not have higher-level conversations with people who can.  It’s not about being an "insider" it’s about being here long enough (Pstas has been here since March, you since August) to learn what these things mean and understand the process.  I really don’t mind explaining things to you but I find it downright insulting that you insinuate that I’m somehow purposely making things difficult.  If you walked into a calculus class with an algebra education who are you helping by stopping the class every 5 minutes so "normal" people can understand.  You need to recognize you have some learning to do and you either want to practice or you don’t but do not blame me becasue you don’t understand: 1/2 cover, roll and in the money.

    DBC/Dflam – Yes I’m bearish on all of DBC but it’s a cover on individual bearish positions just in case Jim Rogers is right.

    That was a whole lot of work to get nowhere.  XLF finished at $15.07, QQQQ $42.04, OIH made a high at the close as did FSLR for nice fills.  

    SRS was up on an up day – that is VERY different from what happened last month.

  137. Cap

    AA … down 32% rev from last year; tiny profit; small rev beat of expectations … "its a blowout" says CNBC

  138. morxlntway

    yodi – i have been copying & pasting DIA conversations for the last month or so into a word doc. It’s very interesting reading (incase you cant get to sleep some night) If you want to post your email address i will send it to you. By reading all the Qs & A’s i think you will be able to get on the inside.

  139. chakra108

    Hi Morx
    Thats a great help!. May I request you to send me the word doc. My email id is subahu108@gmail.com. Thanks.

  140. Pharmboy

    Java – not from the put side of things, but the calls were outpacing the puts, so I was expecting covers to be taken on the stock at 30 (which were .40c on Friday.  With the stock petering out Oct 1, I bought back the Oct 30 P for a nice 60% profit and covered my calls harder preparing for that move down (see the bearish engulfing on Oct 1?).  I have the 27 April10s fully covered with the Oct 30s and 31s.  I am looking to sell the 29 Nov for $1 or better.

  141. javaben

    Pharmboy – cool play!

  142. javaben

    pharmboy – can you drop me an email – I would like to ask you some questions regarding overall experience.  boathouseblues at gmail dot com.  Thanks!

  143. Pharmboy

    Here are more DIA links.  PLEASE PLEASE PLEASE paper trade these for a while to get the hang of it. 
    http://www.philstockworld.com/2009/02/22/weekly-wrap-up-89/
     
    http://www.philstockworld.com/2009/03/05/thrill-ride-thursday/#comment-216966

  144. yodi

    Hi Phil Hi morxIntway,
    I thank you for your comments Phil and in no way was it my intention to insult you in any way. It was just said in a bit commical maner. I just like to learn and understand as possible all of us here.I am following the comments on DIA and just feel I do not understand most of it. It is well understood that Ione does not wish to buy when to sell and in revers and loose your shirt!
    So pls forgive me when I hurt your feelings in any way. I respect you very much for what you doing for us do not missunderstand this.
    Morxintway thank you for your offer my email is yodiet@yahoo.com
    Thanks to both of you

  145. JRW III

    Subject:  Boeing  News

    CHICAGO, IL. BOEING (NYSE:  BA) today announced that the Office
    of President, CEO and Chairman will be  outsourced as of October 31, the
    end of the fiscal year. The move is being made  to save $45 million in
    annual salary and benefits. Further savings in air travel  are expected to
    add To Boeing’s bottom line.

    "At the end of the day, the cost savings will be quite significant"  says
    Boeing board member, Executive VicePresident, and CFO Rob Highwayman, who,
    with the aid of Boeing’s outsourcing arm, Boeing Services, has studied
    outsourcing extensively. "We simply can no longer afford this inefficiency
    and  remain competitive in the world stage," Highwayman said.
    Sanji Nahasapeemapartilan, 23, of Indus Teleservices, Mumbai, India, will
    be assuming the Office of President, Chairman and CEO as of October 31. He
    will  receive a salary of $320 USD a month with proportionate benefits. Mr.
    Nahasapeemapartilan will maintain his office in India and will be working
    primarily at night, due to the time difference between the US and India.
    "I  am excited to serve in this position," Mr. Nahasapeemapartilan stated
    in an  exclusive interview. "I always knew that my career at the Boeing
    call center  would lead to great things."
    A Boeing spokesperson noted that Mr. Nahasapeemapartilan has extensive
    experience in public speaking and has been given Mr. McNerney’s Script Tree
    to enable him to  answer any question without having to understand the
    issue.

    The Boeing board continues to explore other outsourcing possibilities
    including Boeing’s more than 1,200 vice presidents.

    In an unrelated news item it was learned that Boeing was selling five
    corporate jets complete with passengers thought to be board members and
    Boeing  executives. While the value of the content was not thought to be
    significant it  is believed that their accumulated air-miles could be used
    to facilitate  additional outsourcing initiatives.

    Boeing employees were in a somber mood after the announcement. Company
    announced that counselors will be available all week to help employees get
    through the difficult time.

  146. Phil

    Wow, Qs went flying after the close, up to 42.12 now.  Don’t know why yet but someone decided they have to have them at any price…

    AA profit?  That’s a big deal for them actually.  Revs are in-line and they are halted at the moment.  But it is s nice upside suprise.  We’ll see if it’s enough to break us over tomorrow. 

    Of course we have jobs at 8:30 and Wholesale Inventories at 10.  I guess we can snooze through another 550,000 unemployed but Inventories are for August and if they don’t come down a lot due to Cash for Clunkers then there is something seriously wrong. 

    Of more concern:

    The Swedish krona and a range of eastern European currencies tumbled as Latvia appeared to edge closer to devaluing its currency.  Latvia failed to attract any bids for one of its treasury-bill auctions Wednesday, the latest sign of economic stress in the Baltic nation, where the government is struggling to meet budget cuts required by the International Monetary Fund, the European Union and other bilateral lenders in return for aid.

    In a statement after the auction, the Bank of Latvia said a fix is urgently needed for the country’s deteriorating budget, and proposed amendments to legislation on mortgages were an ill-timed threat to the country’s economic recovery. "Another wave of distrust is beginning to roll over Latvia, potentially bringing higher interest rates, worsened conditions for entrepreneurs," the bank said.

    Investors fear that a devaluation of the let could mean more bad loans for Swedish banks, which have plowed more than 138 billion kronor ($19.62 billion) into Latvia and 460 billion kronor into the Baltic region as a whole.  A stress test by the Swedish Financial Supervisory Authority, which is assumed to contain a devaluation scenario, indicated that Swedish banks could face more than $45 billion in loan losses over the next three years.

    Nordic governments are threatening to withhold the latest tranche of a €7.5 billion ($11.03 billion) bailout package unless Latvia cuts spending by 500 million lats ($1.04 billion) in 2010. So far, Latvian Prime Minister Valdis Dombrovskis has only offered to cut LVL325 million.  Most Latvian mortgages are denominated in foreign currency and house prices have fallen 70% from their peak, according to Danske Bank. Devaluation would saddle homeowners with soaring debts.

    DIA/Yodi – As I said, I do not mind explaining things when I have time but when I answer a members question in a non-bold comment, it is unreasonable for you to expect me to stop and go back and unwind every conversation.  I’m sorry I was in a bad mood when I answered that and I understand you didn’t intend it to be critical but it would be nicer if you saved a question like that for after hours or weekends when I could sit down when I am in the mood and detail out the trade. 

    BA/JRW – I would laugh but it’s only a matter of time… 

    Ruby Tuesday (RT): FQ1 EPS of $0.11 beats by $0.02. Revenue of $301M (-7%) vs. $297M. Shares -1.4% AH.

    California Pizza Kitchen (CPKI) raises Q3 EPS guidance to $0.22-0.24 from $0.19-0.21, vs. consensus of $0.21. The company says same-store sales in the quarter are down 5.3% compared to an expected decline of 6.5-7.5%. Shares up 2% AH.

  147. EricL

    A similar situation to Latvia is brewing throughout E. Europe, with Austrian, German, and Swiss banks carrying huge exposure to Euro and Swiss Franc-denominated mortgage debt. I thought this would blow up last year but they’ve managed to muddle through. A blowup seems inevitable, though.
     
    AH response to the glorious Alcoa news actually seems muted so far.

  148. Phil

    Eastern Europe/Eric – That is the strongest of my remaining market plunge scenarios.  I have long said that the markets can be taken down 20% by a major bank failure (not to likely now), GM bankruptcy (been there done that) or the collapse of a real country (not Iceland and not Latvia either).  If Eastern Europe starts to collapse, the domino theory will take on a whole new meaning! 

    AAs revs are down 33%, just like everybody last Q and 33% off means we are LUCKY to be trading at 33% off the market highs as those levels were based on assumtions that the following year would be at 115% whereas even 20% growth off 67% sales will only take us up to 80%.  I don’t know if analysts don’t understand the math or if they are just refusing to say anything but when you fall 33% in revenues, you need 2 full years of better than 20% growth just to get back to where you were.  The markets are acting like nothing happened and that nothing can possibly go wrong either.  Up over 50% off the bottom in 6 months and the VIX is 25% – madness! 

  149. Phil

    Speaking of GM:

    General Motors CEO Fritz Henderson says the company’s cost-cutting measures are on track and that it has closed four plants, dropped 12,800 hourly workers and cut 5,400 salaried employees this year. GM veteran Mark LaNeve, the top U.S. sales executive, is leaving the company, though Henderson didn’t address rumors that CFO Ray Young would leave.

    The SEC is asking Congress to grant it direct access to real-time data on credit-default swaps and other derivatives. You mean they didn’t have it already? Regulation might be good, DealBook says, since CDS trading brought the banking system to its knees.

    Hot Topic (HOTT) says its September same-store sales are down just 4% vs. estimates of a 6.6% decline; shares up 9.1% AH.  Teen and children’s apparel retailers overall are expected to post a 6.2% decline in same-store sales in September, the steepest decline for all segments tracked, according to Thomson Reuters. Overall, its same-store sales index is expected to fall 1.1%.  The projected September decline is worrisome because a late Labor Day and later school-start dates helped boost the month’s sales, and the decline last September makes comparisons easier.

  150. Highlander

    phil,
    what is the deal with aapl a/h?

  151. Phil

    AAPL/High – I have no idea but why not – everything is going up and up, why not AAPL?

    From Barry’s Blog:

    David Leonhardt has a terrific piece in the Times today on Bruce Bartlett — “the most persistent — and thought-provoking — conservative critic” of the GOP.  The discussion of tax cuts is far too common sense to be seen in print very often:

    His conservatism starts with the idea that high taxes are no longer the problem, even if complaining about them still makes for good politics. This year, federal taxes are on pace to equal just 15 percent of gross domestic product. It is the lowest share since 1950.

    As the economy recovers, taxes will naturally return to about 18 percent of G.D.P., and Mr. Obama’s proposed rate increase on the affluent would take the level closer to 20 percent. But some basic arithmetic — the Medicare budget, projected to soar in coming decades — suggests taxes need to rise further, and history suggests that’s O.K.

    For one thing, past tax increases have not choked off economic growth. The 1980s boom didn’t immediately follow the 1981 Reagan tax cut; it followed his 1982 tax increase to reduce the deficit. The 1990s boom followed the 1993 Clinton tax increase. Tax rates matter, but they’re nowhere near the main force affecting growth.

    And taxes are supposed to rise as a country grows richer. This is Wagner’s Law, named for the 19th-century economist Adolf Wagner, who coined it. As societies become more affluent, people demand more services that governments tend to provide, like health care, education and a strong military. A century ago, federal taxes equaled just a few percent of G.D.P. The country wasn’t better off than it is today.

    Modern conservatism, Mr. Bartlett says, should therefore have two main economic principles. One, it should prevent government from getting too big. There is no better opportunity than health reform, given that the current bills don’t do nearly enough to slow spending growth. Instead of pushing the White House to do better, however, Congressional Republicans are criticizing any effort to slow spending as an attack on Grandma. They’re evidently in favor of big Medicare, just not the taxes to pay for it.

    policing bankers

  152. stockoptions88

    Phil, I sold the $70 Oct FCX call for $2.54 and its now trading at $4.00. Should we be rolling it to Nov?

  153. matt1966

    Does this AH pop have to do with AA, A or the fact it was announced on CNBC that one of China’s SWFs have given 30 different hedge funds cash to invest for them in the US equity market and they plan on giving another 30 money soon?
     
    i know we’ve had huge trade surpluses with China for a while and so have other countries.  I know that China takes 50% of profits right off the top before giving the rest to the companies who actually made the money.. but it seems to me they are spending an awful lot of money all over the world on just about everything.  Haven’t they burned through their savings yet?  I’ve got to think they’re starting, too.  They didn’t make that much money off their slave’s backs.  Wouldn’t it be sweet if they got stuck holding a much bigger bag then they thought they would like the Japanese did back in the 80′s. 

  154. lflantheman

     High/ and Phil…….You guys are kidding.  Maybe I missed the gist of your post but…..You really don’t know what’s up with AAPL?  It’s only selling phones like hotcakes, and opening new sales opportunities around the  world almost weekly.  It’s only increasing market share in computer sales.  It’s only one of the best companies around.  Don’t tell me you guys don’t know what’s up with AAPL!  Go buy some, and make some money!

  155. deano

     Phil
    A question on rolling something that’s deeply buried – for me, AAPL this month among others. I have Leaps with 170′s sold in a full cover. My putter is long bought back. If I roll up to the Nov 175′s, and sell a call & put per long – I’m selling $8 in premium and keeping another $5 in profit on my long, and still really well covered. Seems relatively easy – if AAPL flatlines, I burn off $8, and have another $5 in unrealized gain, AAPL goes up, I do it again, AAPL tanks, I use the gain on the call to roll down the put.
    Nevertheless I often notice that you recommend rolling or splitting the long – can you explain your logic on why you go with the latter?
     
    Thx

  156. Highlander

    iflan,
    I hold and trade over 5,000 shares of aapl on any given day. the question was why did aapl jump in after hours after remaining almost completey flat all day on much higher volumes. normally this can be attributed to either news (none), manipulation(?)  or day traders holding on past closing in the hope of an after hours (a/h) drop due to their thinking that aapl was being supported as opposed to what now seems being repressed during the day.
    i also like aapl tremendously but at this level it can either quickly break out or retrace 10%. It is not only approaching its pre-crash value but is also approaching its all time high in an economy that is still very soft by many standards.

  157. kustomz

    This is from

    Alcoa earnings drop 52% on weaker demand, higher costs

    Updated
    document.write(niceDate(’10/8/2008 11:11 AM’));
    10/8/2008 11:11 AM

    "I think this is probably going to be the first of many companies that come out and say something along the lines of what Alcoa did, which is they’re taking steps to preserve their cash and just trying to keep their balance sheet strong," said Jonathan Pavlik, portfolio manager at Stewart Capital.
    Alcoa’s third-quarter net income fell to $268 million, or 33 cents a share, from $555 million, or 63 cents, in the same quarter of 2007, the Pittsburgh-based company said.
     
    Last year’s third-quarter earnings included a gain of $218 million on the sale of Alcoa’s stake in China’s Chalco.
    The latest quarterly results, which ended Sept. 30, included costs of 10 cents a share for the curtailment of a smelter in Texas and the negative impact of currency translations.
    Revenue fell to $7.2 billion from $7.4 billion a year earlier, as the price of aluminum dropped 28% during the quarter, from $3,375 per tonne July 1 to $2,415 Sept 30.

    Your going to tell me after slashing 12000 jobs and taking extreme cost cutting measures and trillions in global stimulus this is all they could muster, makes me question the sanity of people and the CEO is counting on China to lead the way? Stabilizing is another word for still sucks,

    "China is clearly back and back very strong," Alcoa chief executive Klaus Kleinfeld said on CNBC moments ago. He added he is seeing signs of "stabilization" in the U.S.

     
    Kleinfeld said Alcoa’s reduction of its global workforce to 63,000 from 97,000 a year ago helped reduce costs as the company encountered "a challenging environment" that included unfavorable currency rates and energy prices.
     
    Wall Street had expected another loss for the aluminum producer but Alcoa said its third-quarter net earnings were $77 million, or 8 cents per share, compared with earnings of $268 million, or 33 cents per share in the same quarter of 2008.

    Im willing to bet more layoffs coming

    This is just plain ugly
    Revenues for the first nine months of 2009 were $13.0 billion, compared to $21.2 billion in the first nine months of 2008. Income from continuing operations for the first nine months of 2009 showed a loss of $719 million, or $0.78 per share, compared with income of $1.2 billion, or $1.40 per share, in the first nine months of 2008. The nine months of 2009 showed a net loss of $874 million, or $0.95 per share, compared to net income of $1.1 billion, or $1.35 per share, in the first nine months of 2008.

  158. kustomz

    Spending our money like drunken sailors

    Essent has secured $500 million in equity financing from investors including banks Goldman Sachs and JPMorgan, both based in New York, private equity firm Pine Brook Road Partners, and Bermuda-based reinsurers PartnerRe Ltd. and RenaissanceRe Holdings Ltd.
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aNgGFuPrY3.I

  159. kustomz

    im not anti GS, really!
    Did Goldman Get A $3 Million Gov’t Gift For "National Security"
    http://www.businessinsider.com/why-is-goldman-sachs-getting-congressional-earmarks-2009-10

  160. Pharmboy

    Dollar futures getting hammered….wow!  And I wish it was Opie and Anthony WOW (for those in the NYC/NJ area).  Unbelievable.

  161. Pharmboy

    Link is broken, don’t try it…..just Google it if you are curious, but I’ll warn you….

  162. Phil

    FCX/StockO – Yes, if these futures numbers hold up we’re going to have a lot of rolling to do! 

    Pop/Matt – Not only is AA moving the markets but the Dollar is getting raped, down 1% agianst the Pound and Euro and back to 88 Yen even with the Nikkei open.  The Asian markets aren’t actually doing all that well but that can change into the close.  Our futures are up a stunning 0.75% although oil strangely is still just $70 but gold popped to $1,055.  As to China, I can’t believe they are as dumb as Japan was.  They are funding furnds to manipulate their own markets (buying IPOs etc) and to make quiet investments over here (since Americans freak when they buy things directly).

    AAPL/Iflan – We know THAT, we just don’t know why suddenly this evening they took off….

    AAP/Deano – Once you are this deep in the money ($20) and, I assume with the 2011 $170s at $44, you end up in a position where you have the option of splitting IF you think your stock has room to run and IF you think it’s advantageous to you.  Your logic is very sound, you can roll  your $20.50 $170 caller to the Nov $180 puts and calls at $21.20 assuming you can stand an assignment (or just put $7.50 stops on the puts).  You can also sell the Jan $170 puts for $6.10 and the Nov $185s for $12.50 and those can be rolled even to the Jan $190s so not a bad path if they keep going higher as you are buying $20 more spread for about $2.  OR, if you think AAPL goes up and up, you can go from the $44.20 Jan $170s to 2x the Apr $190s at $20.10 and roll the callers up to 2x the Nov $190s at $9.80, which can be rolled to the Jan $200s (now $9.60).  That trade takes you from $40(ish) with a $20 cover that’s in the money at the same strike to 2x at $20 with a $10 cover that’s $10 out of the money and all premium.  In this particular case, I would NOT do that roll because you have a nice in-the money position and you’re rolling to all premium and giving up 8 months to it’s too much to risk when you can so easily split your caller and roll them higher.  If you had the 2011 $150s at $60 and could roll to 2x the April $180s (taking $10 off the table and lowering your downside delta), that would be a different story….

    Soft/High – None of that seems to matter this week.  We noticed this new pattern of futures pumping but now it has become relentless as this will make 200 points of futures gaps this week if it holds +70 on the Dow, which is 66% of the gains overall (counting tomorrow am as 100 more). 

    I think the real market-moving news is this:

    While the SEC tries to get a better handle on swaps, House Financial Services Chairman Barney Frank flexes a bit on reform, saying he expects Congress won’t make companies process swaps through clearinghouses. The committee plans a bill next week.

    Things are looking up for investment advisers, according to a recent survey by TD Ameritrade, with 90% reporting client rosters were steady to higher over the past six months. Anxiety about regulatory change tops money managers’ list of concerns (42%), followed by the economy (35%), profitability (31%) and risk management (26%).

    Spectrem’s Millionaire Investor Confidence Index rose for the third straight month to a mildly bearish -5. Affluent investors (with $500K-1M to invest) lagged at -13, also a 5 point improvement. Of the 250 surveyed, 24% cited the economy as their greatest financial threat, followed by the political climate (16%), unemployment (12%), market conditions (10%), and inflation (5%).

    Paul Krugman sees the difficult thaw in the credit market and wonders, if banks have such excess reserves, what’s wrong with old-fashioned lending? Why does the Fed’s policy answer seem to be to go back to shadow banking?

    So lack of regulation on our banks is once again reason to party and, if Goldman is happy, then everyone should be happy because, after all, GS is America!   8-)

    AA/Kustomz – That’s true but we can’t overthink it.  The Chinese demand story works until it doesn’t and they will be able to milk it for a while.  YUM had TERRIBLE US earnings but made it up in China and you know and I know that China has had massive stimulus to mask 100M people out of work but that won’t stop YUM from reacting well to the news (although notice their stock didn’t participate in yesterday’s move back up).  

    Like everything else, AA is simply limboing under a very easy bar of expectations.  After earnings expectations were revised down 207% over the past 7 quarters, they are now up 16% from last October’s -47% (which most companies missed).  So +16% after being down 47% last Q is 116% of 53% or 61.48% of the Oct ’07 earnings.  Woo-hoo, break out the bubbly!!!!

    Earnings Revisions

    And, don’t forget, that’s WITH $20Tn of global stimulus

    So we will enjoy the rally but we will NOT take it seriously but we’re going to be over our levels and that’s a good place to BUYBUYBUY as long as they hold.

    Essent/Kustomz – ROFL!  What a scam:  "(Essent CEO) Casale is former president of Radian Group Inc.’s main insurance subsidiary. Radian, the third-largest mortgage insurer in the U.S., lost $2.05 billion over seven quarters ended March 31."  Radian was a total scam and all this is is GS and JPM hustling up $500M to create an insurance entity that will rubber stamp $100Bn of their crap mortgages so they can flip them over to other suckers under Essent’s "guarantee" and then Essent can run up Billions in losses and get bailed out or go BK.  Either way, GS and JPM don’t care because they will have gotten rid of $100Bn in bad assets (that they may have bought with TARP guarantees) at huge profits and they’ll either write off their loan losses to Essent or get bailed out of those too.

    WOW/Pharm – yeah I miss those…

    Nikkei closing pretty flat (up 32) considering the US futures are up almost a point. 

    I think coal stocks may do well tomorrow.  X is also a logical play off AA earnings so we’ll think of things along those lines.  TIE should do well, BOOM is another one I’ve been looking at.  TNK is nice and low for a buy/write too. 

  163. Phil

    Funny review of Yankee food in luxury boxes.

    EBAY looking attractive.  Retailers on EBay.com Inc.’s site had sales gains in August and September, the first increases since at least July 2008, according to ChannelAdvisor Corp., which helps merchants sell on EBay, Amazon.com and other sites.  The CHART OF THE DAY shows that same-store sales, or revenue for merchants selling for at least one year on EBay, gained 4.6 percent in August and 5.1 percent in September. Sales had declined every month since ChannelAdvisor started tracking its merchants on EBay 14 months ago.  

    BCS just said Gold $1,500.  Don’t get too excited, Bespoke compiled a chart of gold analyst projections and it’s not as pretty as BCS suggests:

    Goldforecast

    Irish Finance Minister Brian Lenihan said the country’s biggest banks may need further money from the state even after selling real-estate loans to the government.  The proposed National Asset Management Agency will pay 54 billion euros ($79.4 billion) to buy loans with a book value of 77 billion euros from five lenders, including Bank of Ireland Plc and Allied Irish Banks Plc. Losses on those loans are likely to leave the companies needing more cash, Lenihan said.

  164. Phil

    Japan wants to set just the right mood to get its people to make more babies. But forget dinner and candlelight: The government’s plan depends heavily on large amounts of cash.  With a worried eye on declining birth rates and an aging population, Japan’s new leaders propose offering new parents monthly payments totaling about $3,300 a year for every new child until the age of 15. Other initiatives include more state-supported day care, tuition waivers and other efforts designed to make parenthood more appealing.

    That’s $26,400 a year for OctoMom!  Interesting dynamic with China penalizing people for having babies and Japan paying for it.  They are also considering a $6,000 new baby bonus plus government day care and school tuitions.  France spends 3.8% of GDP promoting family growth and got their birth rate back over 2.  Japan’s birth rate is 1.37 per woman. 

  165. Phil

    HSI flying up into Europe’s open, dollar even further down, gold at $1,059, copper at $2.84, silver $17.87 and very strange that oil isn’t moving ($70.22), we’ll see what happens once there is actual trading but everyone seems super-excited about AA earnings.  I’m going to try oil futures at $70.22 with a DD at $69.78 and a stop at $69.50 (.50 loss), looking for $71.50 but with a .25 trailing stop over $70.60.

  166. kustomz

    To the Moon Alice Thursday

  167. matt1966

    Yepper, just more of the same.  They are not only lowering expectations ahead of earnings they are shifting the focus away from earnings (yesterday’s news!) to future projections (much easier to fudge!). 
     
    At the same time, many analysts prefer to focus on corporate outlooks going forward rather than rear-view earnings. With the economy struggling to regain its footing, that’s likely to be a key again this quarter.
     
    With that kind of head in the sand mentality we will hit 10000 in no time flat.  I think there is some contagion in the dolla’s drop.  It’s not just ‘them’.  It’s average folks looking to hedge.  Shoot, I’m strongly considering it myself.  I will take my cash earning 1% in a falling currency, sell it and buy Aussie dollars.  It’s pretty much a no brainer.  Alot smarter then putting it in this crack head market!

  168. magret

    Matt …or canadian dollar….

  169. magret

    I fully agree with Phil that current stock market is highly overvalued in the present economic circumstances. I am considering cashing in on all my long term positions (mainly Phil’s buy writes which  have given very good returns even on a quarterly basis)  a……..securing any gains to date against the inevitable crash……With the indexes up approx. 25% in the last 6 months, a pullback is long overdue…….

  170. Phil

    LOL Magret!

    I agree, this is a good expiration period to let ourselves get called away to more cash on our long side.  I’m still rolling up the short plays until we CLOSE over our highs, which are Dow 9,829, S&P 1,071, Nas 2,146,  NYSE 7,047 and RUT 620. 

    Out of the oil trade by the way, they weren’t looking very strong.

  171. japarikh

    still have my FCX Oct 70 puts (bought at 3.5 now 1.2). any thoughts?

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