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Manic Monday – Dubai, CitiGroup and GS Move Markets

What a morning it’s been already! 

Last night, at about 11:30 EST, Abu Dhabi gave a $10Bn bailout to Dubai (until the end of April, anyway) with the following statement from Sheik Ahmed bin Saaed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee: "We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices."  That was enough to send the Hang Seng from down 300 points to up 300 points in less than 30 minutes of trading (on both sides of their lunch break) while the Shanghai went from -2.2% to +1.7% and the Nikkei also reversed a 100-point drop, but only managed to get back to even at the close

US futures trading also went wild, up over 100 points at the time but we’ve given up about half of those gains as of 7:30.  Does it make sense that the Dubai crisis, which dropped us from 10,450 back to 10,250 when it came up, should be the catalyst to get us over 10,500 just because they were bailed out?  Of course it doesn’t – that’s why we went to cash.  This is one of the most ridiculously irrational markets I’ve ever seen.  The other "good" news this morning is also the same old songs:  Citigroup will repay their $20Bn TARP loan by diluting their stock by about 20% and GS says oil will go to $85 early next year.   

I don’t know why they even bother to pretend anymore – they should just put 10 market-boosting statements on a chip that randomly plays one of them whenever the MSM needs a quote for the morning.  People don’t seem to notice it’s the same thing over and over and over again so why even bother with the pretense?  Speaking of pretense – I mentioned in the Weekend Wrap-Up that we expected this nonsense this morning but, had I realized that Greenspan AND Cramer were going to be on Meet the Press yesterday, I would have gone more bullish as those are the two biggest market hypers GE could have used for this week’s quotes.

Europe seems happy enough with Asia’s recovery and all the bull*** commentary (that’s bullISH – what were you thinking?) and they are up about a point ahead of our open DESPITE the FACT that Q3 euro area employment is down 0.5%, the fifth straight quarter of contraction.  All sectors reported declines, except public services, health and education.  October euro area industrial output was also down 0.6%, the first contraction since March.  Production was down 11.1% vs. a year ago.  Yes – 11.1% WORSE than last year.  Economists, however, expected a steeper 0.8% decline so yay – I guess…

As we usually do on a Monday, we have to plan to switch off our brains and simply watch our levels.  Other than the silly Dow, we are no closer to making new highs than we were last Monday.  There is little change to our level watch in general as we still need to see those 27.5% levels broken to call this anything but a range top and the NYSE is STILL not even over the 25% line, nor are the Transports, who are still below their retrace level.

        Dow S&P Nasdaq NYSE Russell Trans HSI Nikkei  FTSE  DAX 
Current  10,471  1,106  2,190  7,125  600  1,920  22,085  10,105 5,314  5,807
27.5% Up 10,500 1,127 2,242 7,380 615 2,113 22,421 11,787 5,381 5,894
Recnt High 10,549 1,120 2,190 7,241 625 2,045 23,100 10,397 5,396 5,888
2.5% Down  10,128 1,077 2,139 7,002 587 1,878 21,766 9,913 5,157 5,640
July Base 8,200   880  1,750  5,600  480  1,650  17,500  9,200  4,200  4,600 
25% Up  10,250  1,100 2,187 7,200 600 2,062 21,875 11,500 5,250 5,750
Retrace 9,840 1,056 2,100 6,720 576 1,980 21,000 11,040  5,040 5,520

No wonder our plays from 2 weeks ago performed so well last week – NOTHING HAPPENED!  Since most of our trades are the selling of premium, we love it when an entire week goes by the market doesn’t move.  Sure it can go up 500 and down 500 – we don’t care – as long as it ends up in the same spot and last Monday morning we were at Dow 10,388, S&P 1,105, Nas 2,194, NYSE 7,182 and Russell 602.  So it was a big, fat nothing for the week last week but today they’ve got the hype machine cranked up all over again because 67,200 brand new suckers were born over the past 7 days and Cramer, Greenspan, Goldman and all the other carnival barkers are going to do whatever it takes to bring ‘em into the tent.

XOM pitched in this morning with a $31Bn deal to by natural gas giant XTO and that’s boosting the entire energy sector but it’s an all stock deal, which is kind of like you buying 20% of your neighbor’s house at an inflated value by pledging to give him 20% of your house at the same inflated value and then holding a press conference to tell investors: "Look how valuable our houses are!"  Once again, at a birth rate of 6 suckers a minute, you can do stupid crap like this and make it work…

As a bullish hedge, I was struck by the still very high premiums in the Russell Index Futures that we can take advantage of as they sit right on the 600 line.  You can buy the Dec $590 calls for $14 and sell the $600 calls for $7.50 and sell the Jan $560 puts for $7.50 which is a net $1 credit and you collect $10 more if the Russell holds 600 through expiration, at which point you can set a stop on buying back the puts or just ride them out for an additional gain if we stay bullish.  I’ll be making a similar play on IWM and other ETFs for members in chat this morning as we need some upside covers but it’s likely to be more of a watch and wait day as we see how high they can push it.

Be careful out there.

 


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  1. pstas

    "Eurosclerosis"- the "new normal"?

    http://www.bloomberg.com/apps/news?pid=20601109&sid=axaPYnuYlqbs&pos=10

    Slow growth; Persistent unemployment; Low interest rates;

    Persistent European-style unemployment means that the Federal Reserve, which holds its last policy meeting of the year Tuesday and Wednesday, won’t raise its benchmark interest rate from near zero through 2010, according to Curtis Arledge, co- head of U.S. fixed income in New York at BlackRock Inc., the world’s largest asset manager.

    ‘Wouldn’t Surprise Me’

    “I don’t think they’re even going to be thinking about it until the third or fourth quarter of 2010,” says Arledge, who helps oversee more than $500 billion. “It wouldn’t surprise me if it was into 2011.”

    Buy?
    Stock prices will continue to rise as companies boost profits by concentrating on cutting costs and getting more out of their workers, Sinai says. Employee output per hour rose at an 8.1 percent annual rate in the third quarter, according to the Labor Department, the fastest pace in six years.

    Rising Corporate Profits

    Sinai sees profits for the companies making up the Standard & Poor’s 500 Index climbing by more than 20 percent next year.

    Or, Sell?

    “I’m more bearish than the consensus,” says El-Erian, who sees the dollar experiencing “periods of downward pressure” during the year. “We start the year at 3 percent and then end up at 2.”

    Mimic Euorpe?

    The U.S. is also starting to mimic Europe by increasing the role of the central government in the economy, says Nobel Prize- winning economist Edward Prescott.

    “There’s been a regime change,” he says. Taxes are likely to rise and that will weigh on the U.S. economy by reducing incentives to work, just as is the case in Europe, adds Prescott, who is a senior monetary adviser to the Federal Reserve Bank of Minneapolis and a professor at Arizona State University in Tempe.

    Hope and change you can believe in or a slow motion train wreck? Break out the Kool Aid.

  2. Pharmboy

    Phil – you’ve gotta use this one sometime in a post….OH MY!  Good Morning Vietnam!…I mean all!

  3. jomptien

    Sthompson, Maybe it all depends on your entries and allocations on Phils 4 disaster plays. I played all 4 and am up nice on 
    SDS and FAZ, down small on DXD, and flat on SMN. Yes, SMN is .90 now. I was too bullish generally so nice plays for me.

  4. pstas

    TOS- I am setting up a new account w/TOS. They offered commission rate choice of:
    1. $1.50 / contract
    2. $9.99 ticket + $.75 / contract.
    3. $5.00 stock ticket.
    Anyone doing better than this?

  5. Phil

    Lots of selling into this morning spike but that’s typical.  Volume is low and we’ll have to see where we stand.

    Our major highs were:  Dow 10,549, S&P 1,127, Nas 2,242, NYSE 7,380 and Russell 615 and we have quite a long way to go to get there. 

    I’m still more inclined to look downward at: Dow 10,250, S&P 1,100, Nasdaq 2,187, NYSE 7,200 and Russell 600 and we already have it on the NYSE so let’s say 2 of them would be very bad and 3 would be very, very bad.  This is the same comment I made last Monday so not exactly brain surgery to watch these levels very closely. 

    Obviously, the significant psychological barriers are worth looking at and those are Dow 10,500, S&P 1,100, Nas 2,200, NYSE 7,200 and RUT 600.  That’s were we can expect to play games.  The S&P has been holding over but the Dow, Nas and NYSE have all had a tough time making their mark while the RUT has been schitzo, using it first for support and then as upside resistance so we continue to watch the Russell very, very closely as in indicator.

    I’m still bearish because oil is weak, gold is weak, the financials (XLF at 14.30) are weak and most of the good news we are hearing is nothing but fluff – kind of like I have to blow off my 9-year old’s questions about the logic of Santa so she doesn’t blow it for my 7-year old this year.  Just like the MSM with their BS – I know it’s only a matter of time before the kids get too smart for this…

  6. pstas

    TOS- applying for Portfolio Margining on the new account. I have filled out the open book test and would like to check my work.(honestly). I recall someone posting about this several weeks back but could not find it. Anyone have this handy?

  7. ssdirk

    Pstas – I have TDA which owns TOS.  I am paying $6 + $0.75/contract, $6 stocks.  Let me know if you need my reps info.

  8. Phil

    Image/Pharm – I have used that thanks, but will again.

    TOS/Pstas – Conatct scott at thinkorswim dot com and tell him you are a Member.  I head they can’t do as much as they used to but if you do volume or have a currently better deal, they should do better than that. 

    FDX moving up nicely for us but, overall, things look internally weak.

  9. Pharmboy

    pstas – you should be able to get better.  $1-1.25/contract unless you do larger orders 10 or more contracts where the $9 is a better deal.  Stock is $5 for the first 333 shares, then increments after that….

  10. Phil

    Benchmarks:  Dollar at $1.465 to the Euro, $1.625 to the Pound and 88.5 Yen.  Copper at $3.1585, silver at $17.30, gold at $1,125, oil at $70 and nat gas at $5.36. 

    Of course oil below $70 is just sad but OPEC said they are not cutting output so I wouldn’t call oil a good indicator today.  Copper is key and we already know that below $3.20 is not bullish and below $3 is very bearish. 

    AAPL is cliff diving all of a sudden – that can’t be good for the market

  11. jromeha

    Has anyone tried Scottrade’s optionsfirst? Regular Scottrade options doesn’t allow many of the option trades that Phil does.

  12. pstas

    Phil,
    I have long stock positions in ERTS & MCO Badly underwater on both and I don’t see anything positive on the horizon. My inclination is to redeploy the capital and/or go to cash unless you have a suggestion or two?

  13. pstas

    AMZN- Barrons did a hit on AMZN- anyone have a link to the story?

  14. Cap

    Short COF … its gonna crack ….

  15. cswiger

    What a morning indeed. Terra Industries TRA scared the bejebus out of me holding a DEC09 36/38 bull put credit spread – turned out they’d just had a special 7.5 dividend and the stock price was adjusted down to 35.3.  Whew!

  16. pstas

    Options First- I have them and regular Scottrade. You are right- not much you can do on options with Scottrade. However, I like the direct link to S&P reports which I find useful for historical financial info. Options First is OK but from what I can see in my early exploration of TOS- it has many more bells and whistles.

  17. jomama

    Xto/xom some fun risk arb. sold xto 2011 puts for 9 at the open. this gonna be fun. can play xto calls for a run up of xom.

  18. llorens

    I’m in with you Cap – short COF.

  19. jromeha

    Thanks Pstas….

  20. 1020

    Phil/Santa  Maybe a small cash payoff for your 9 year old will help. Our 10 year old son looked the wife and I in the eye and asked "Well, IS there a Santa?"  He was crushed. Our sharp 10 year old daughter has always had her doubts and she would never say a word as long as the gifts keep coming…… ;)

  21. Phil

    ERTS, MCO/Pstas – ERTS I think you are giving up at the bottom but MCO we’re done with after that nice run from our $20 entry in Sept.  Let’s say you are willing to own them again in 2012 at $15.  You can sell the 2012 $15 puts for $3 and buy the 2011 $10/17.50 bull call spreead for $4.50 for net $1.50 plus about $5 in margin.  With a $6 upside over 2 years, it’s not a bad way to stick with it long-term and still free up half your cash for other things. 

    AMZN/Pstas – Article here.  Nothing we haven’t already said about them but somehow it sounds more official when Barron’s says it…  8-)

    COF/Cap – Always a temping short.  .61 for the $40 puts is a fun way to play them to the downside this week but, so far, the sell-off hasn’t done much damage.

    Naked sponsored access now accounts for 38% of all U.S. stock trading, according to a report this morning by Aite Group. Naked access allows traders to shave microseconds off their fill times by piggybacking on their brokers’ licenses to give them unfettered access to stock markets.  So 38% of the volume we see is flash trading, which is over before it starts so we are much slower than volume would indicate and that means the markets are even easier to jerk around

    We MUST get these!  Japan’s top toymaker Bandai has released paper-thin, rose-scented bath soap that looks like the American $100 bill and dissolves to create a bubble bath.

    Santa/1020 – I think my oldest is at the point where she doesn’t believe but wants to.  I’m pretty sure by next winter I’ll have to tell here not to ruin it for her sister. 

    Selling pressure picking up again.  Seems like down is easier than up.

  22. chaps

    Anyone understand what’s happening with LYG’s share price? I think there was a right’s offering approved, but I don’t know anything about it, or how it would affect current price

  23. bvar

    Phil:
    With the natural gas industry having an orgasm over Exxon news, would you consider shorting
    any of them?  looking at buying RRC Jan 45 puts. 
    thanks.

  24. doro165

    Are LYG options suspended? Can’t pull up a chain in OX and in TOS the stock is down 30% but the options have barely moved (if at all).

  25. qcmike

    Phil
    Time to sell the FDX Jan 90. ?

  26. yodi

    LYG just closed a short dec 5 option pd .10 even that the stk is shown at 3.62 should have pd some how 1.40 so .10 is not a bad deal furthe more the beloved Cramer show LYG was listed a a looser!

  27. yodi

    Phil any comments on BAC and C only JPM shows some plus ?

  28. pstas

    LYG- rights offering should adjust everything by approx 34%. Should have 134 shares now for every 100. The Jan 5 calls are now showing an * of 100 shares plus 146.80 cash. The additional shares have not appeared on my screen as yet but I am assuming they will.

  29. chaps

    thanks pstas…

  30. gel1

    Executed a short position on GRMN today… Why would anybody buy their product when you get it free on your smart phone?

  31. Phil

    LYG/Chaps – Yes, the shareholders voted to get 1.34 rights (warrants) for each share for about 1/3 of the stock price.  I haven’t got a clue in the world how that’s all going to work out, this is why I went away from them but now I like them again at $3.64.  Notice the $2.50 calls are STILL worth $2.50 but you have to wait for new options to come out to do something useful with new shares of stock.

    Nat gas/Bvar – It’s a terrible time of year to short them as you just keep getting bigger and bigger draw-downs of inventory between now and Feb.  Especially this year when many producers are cutting back production by sending people home early for Christmas breaks so we could be looking at massive draws in early Jan.  I just don’t see someone like RRC low enough to want to short here.  If they get back to $55, absolutely. 

    FDX/QC – I’m thinking we get another $1 out of them, around $90 would be good I think but maybe if I can get $6.50 I just take $1 profit and run.  Don’t forget it’s acting as an upside hedge so I’m not going to be too quick to cover it.

    BAC & C/Yodi – Not surprisded by C who has chosen to dillute the hell out of themselves to make sure they can keep paying obscene bonuses to ineffective management – Oh yeah baby, I gotta get me some of that company!  I think all shareholder meetings should be held in Texas so we can make sure the board is facing people who carry guns when they have to explain this BS…  Anyway, that shouldn’t affect BAC other than conceptually now they have to bid bonus packages against C so bad for the bottom line.

    Merry Christmas Holiday Travelers:  British Airways (BAIRY.PK) cabin crew votes to go on strike for 12 days over Christmas and New Year holidays, after cuts last month to crew levels. It would mark the first strike faced by the airline since 1997. (previously)

    Sector ETF strength after one hour: Healthcare Providers– IHF +1.4%. Energy– XLE +1.2%. Solar– KWT +1.1%. Oil Services– OIH +1.1%. Biotech– BBH +1.1%.
    Weakness: Internet– HHH -1.6%. Broker/Dealers– IAI -0.7%.

    Dow leaders after one hour: AA +1.3%. MRK +1.2%. HPQ +1.1%. CSCO +0.9%. DIS +0.9%. KFT +0.9%.
    Laggards: XOM -3.9%. WMT -1.3%. BAC -0.8%.

  32. tchayipov

    Phil
    do you think that AIR and LOW is toppy? may be sell additional calls?

  33. Highlander

    phil,
    where do you think aapl will be pinned this week and  could you give me the basis of your analysis?

  34. gel1

    NTRI is getting fat, while popularizing thin. Stock is up 116% since I did the buy/write, I keep doubling down on my covered calls and waiting for a down day to dump them, but it never comes.

  35. chaps

    Phil:
    I think all shareholder meetings should be held in Texas so we can make sure the board is facing people who carry guns when they have to explain this BS…
    Hey, there’s something George W did that you liked. I think when he was Gov of Texas he strengthened laws allowing citizens to carry concealed weapons….lol

  36. harip

    Phil,
     
    I have April 40 puts on slg and it seems to be going up steadily. I have been selling shorter month puts steadily. But, at this point,  how can I salvage the position ??
     
    thanks

  37. stevenparker

    Looks like they heard your comments on AAPL phil

  38. cwan120

    TOS / Pstas & All,
    I applied for Portfolio Margin a while ago.  I asked on the board to see if someone was willing to check my answers.  I passed the exam.  So, you can email me at cwancalo at gmail dot com.  Swear that you’d be honest 8)
     
    As far as commissions, I contacted Scott as well.  I already have $1.25/contract.  I was trying to negotiate something better.  I posted his reply on this board once before (with his permission).  I am posting it again below:
     
    Hi,
    The simple answer is that Ameritrade has begun to limit my ability to
    change rates.  The $1.25 per contract rate that you already have is really for
    somebody trading 1,500 contracts per month (the stated PSW rate is
    actually $1.50 per contract).  To go to $1.00 per contract we look for
    2,500 contracts per month.  I can not change your rates at this time but
    will be happy to revisit the issue should your volume approach the next
    level.

    Enjoy the day,

    Scott

  39. Cap

    $SLG … holy cow …. 50.75. 
     
    That is insane crazy.  Tough to short; but if you can …

  40. morxlntway

    cwan 120 – is there a per trade fee on top of the 1.25?

  41. cwan120

    Morx, No per ticket fee.  Just 1.25/contract straight.

  42. cwan120

    Hi, Peter D & SPX strangle fellows,
    Any new ideas?  With VIX going lower, is it better to sit on our hands and wait?

  43. lynn2long

    cwan120, what is scott’s email at TOS again? I copied it somewhere and couldn’t find it anymore when I finally am setting up TOS account

  44. ssdirk

    Cwan – I am in the Jan RUT strangle and sitting tight.  If you are interested in the wild plays it might be a good idea to purchase some put verticals with the lower vix.

  45. ajaytoo

    scott at thinkorswim dot com

  46. JRW III

    Phil,
    So at 10:40 you were thinking things were going lower, so with DOW at 10,501 are you shorting ?

  47. Phil

    Wall Street’s most accurate forecasters – this year, anyway – are calling for an 11% rally in the S&P 500 next year. JPMorgan Chase’s Thomas Lee expects the index to go to 1300, and Goldman Sachs’ (GS) David Kostin expects 1,250, on low rates and profit growth of more than 26%.  Think about this one, if they were accurate, then they were very bullish so we’ve filtered out all the bearish forecasters and now we are saying that the more bullish analysts, expect another 11% move next year but it’s worded very carefully to give you the impression that it’s MORE accurate because they are filtering out the silly old bears, who were wrong about this year

    Dow volume 60M at 11:30, not very exciting. 

    GRMN/Gel – That’s probably right but maybe they have major auto deals so hard to say for sure.  

    AIR/Tcha – I think AIR has a long way to go as long as BA doesn’t have any glitches.  LOW, on the other hand, I’d be very careful with if they can’t get to $25 and hold it. 

    AAPL/High – $195.  This is based on taking AAPL’s high of $208 and subtracting their low of $78 ($130 and adding back 5 for the number of months between the events plus the total number of Saturn’s moons (60).  See, simple enough!  You could try to be more scientific and say it’s because there are 18,000 $195 callers that would be wiped out and 10,000 $195 putters that would be wiped out without putting too many lower callers (5,000) or higher putters (2,400) into the money.  That’s essentially the Max Pain theory for options and I’m not a big proponent though.  More realistically we have a channel since October between $190 and $205 and, because of the options, I favor the lower end of dead center at $197.50. 

    NTRI/Gel – So you have more covered calls than stock? 

    Weapons/Chaps – It always freaks me out in Texas when I’m in an office building and they ask people to check their guns in the lobby.  Mostly because people do it!  Coming from NY/NJ, where they have metal detectors, the idea that they DON’T in Texas and expect people to follow the signs is a little disconcerting because I meed just as many strange people there as I do here but up here, they are usually not armed. 

    SLG/Harip – They don’t have April.  What month and what is your basis?

    TOS – That’s right, I’m pretty sure they are supposed to waive the transaction fees for us, even on smaller accounts unless that has also changed

    Dollar got knocked down against the Pound (but not so much against Euro or Yen) and that give us the little rally.  And we have magical Mr President about to show up and he’s usually good for 20-50 points anyway. 

    Pumpin’ it up:  Citigroup says the REIT sector could enjoy elevated valuations in the coming year, with total returns flat to 10% higher – with nearly half of that from dividends. Analyst Michael Bilerman shuffled his ratings on trusts, and expects shopping center REITs to outperform in 2010 like mall REITs did this year.

  48. jimmyv

    On Friday you were anticipating a sell off either that day or today (Monday). Are you still planning on a selloff this week or before year end or do you see market staying flat with low volume until after New Years? Thanks for your thoughts.

  49. harip

    Phil,
    sorry May 40 slg puts at $5.
    thanks

  50. TmDecay

    Sorry .. but I have to laugh at these specific questions to Phil on his projections on a specific stock price or exactly where the market is headed in the next few days.  Phil is one of the best but if he was a seer if wouldn’t have to run this web site.  I guess we just all want confirmation before an order is placed.

  51. cwan120

    SPX / ssdirk:
    If you want to buy verticals, take a look at Feb versus Jan.  You might want to pay a little more for one more month of protection.

  52. mrmocha

    Cap, did you do well with HK today?  I went to full covers over the weekend so squeezed out the premium but otherwise mostly burned on this move.

  53. yodi

    Hi cwan120,
    Pls explain the per ticket trade say you buy or sell 10 options does this mean you pay 1.25 x 10 12.50 or you pay for the complete order (10 options) 1.25 ???
    cwan120
    December 14th, 2009 at 11:58 am | Permalink  
    Morx, No per ticket fee.  Just 1.25/contract straight

  54. b1ll

    SRS @ 7.92 where do you see a bounce phil?

  55. stevenparker

    Highlander/AAPL pinning – just curious if you use this site? http://optionpain.com/ – they say 195 for AAPL (at least in their free calculation). They proudly (and without obvious justification) only use options written since last expiration…..

  56. cwan120

    TOS / Phil: The commission price you negotiated for PSW members was $1.25/contract, no per ticket/per leg fees.  That was the deal I got at that time (a few months ago).  Now Scott is saying $1.50.  Looks like the big brother, Ameritrade, is coming down on him pretty hard.

  57. tchayipov

    Yodi
    for each option you buy or sell you will pay $1.25 commision

  58. gel1

    Phil/NTRI… Yes covered calls 3-1. My short puts have all expired at zero. Could tis compa keep going up indefinitely. January is their best month – I should sell some puts to cover, I guess

  59. cwan120

    yodi / TOS : 10 contracts commissions = 1.25 x 10.
    Many brokers charge per ticket (ie, per trade) + per contract.  Eg, for one trade of 10 contracts, $8.95 + 0.65 x 10.

  60. magret

    Does TOS charge for order change or cancellations (like IB)?

  61. dflam

    Hi Phil: I bought LYG stock at $ 6.20 and sold April $5 P&C for $1.35 The stock is at $3.78 ,up $.11 but the options are not trading. I saw your note above,but wondering if you can clarify 1.34 rights will affect my position.Thank you
    dflam

  62. gel1

    Phil/GRMN… I’m sure they have lots of auto contracts, but, sales on autos will be soft for at least 12 months, and the models that are selling are the small fart-carts that have a minimum of features.

  63. yodi

    Thanks for the TOS trade explaination

  64. Pharmboy

    MrM – HK could not break through the 50d MA.  Time will tell ’cause the day ain’t over.  I full covered on Friday as well, and sold some puts this morning, figuring if they want to move it up…be my guest.
     
    WSFS – I noted them on 11/13 when they were 28.5…said my uncle told me to short them….whalla.  MS is the next on the list.  I have sold a calendar 29s Dec/Jan for 83c.  25 is the target by Jan exp.
     
    JAVA – thank you very much GS for upgrading ORCL.  Now we know how you arb play the game.  Bastards. From 12/10 – Oracle estimates raised at Goldman through 2012. Company should benefit from higher IT spending and market share gains in middleware. Buy rating and $27 price target.

  65. Highlander

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    phil,
    licensed concealed handgun holders here in texas undergo extensive classroom and field training as well as undergoing lengthy background checks. when you are stopped by a policeman and show him your handgun license and announce that you are carrying, believe it or not he is put at ease instantly because he knows that he is dealing with a person who is not a crazy and who has a history of obeying the law not breaking it. i have actually avoided several traffic tickets since getting mine. however crazies are in every state and we should be checking not taking peoples word on not having a weapon.

  66. humvee4me

    Brokers:
    I notice most everyone is using TOS; I have accounts at TDA and Interactive Brokers.  IB has quite low transaction costs but the user interface is not as user friendly as it could be.  I am curious why TOS seems to be the broker of choice (perhaps I need to change).
     
    Thoughts Please,

  67. Pharmboy

    FWIW – JAVA can be bought by the way for 9.2…that is a 20% return if the deal closes in Jan. 

  68. ssdirk

    JRW – Are you playing TZA/TNA today?

  69. llorens

    any ideas why COF is rocketing to the stratosphere? Short squeeze or other news?

  70. yodi

    Hi Phil
    I have done very well with China life Ins. LFC actually started with them at 40.00 now trading 77.00 sold some time ago the 60 put 2011 for 16.21 now 4.85 what would you do as I am thinking of rolling the 60 put 2011 to the 70p for an other credit of 3.95 tks

  71. chaps

    magret:
     
    re:
    Does TOS charge for order change or cancellations (like IB)?
     
    No.

  72. yodi

    Phil GS now at 166.00  strangle contracts of 2011 195/140 c/p giving a credit of 28.00 per contract with a margin req. of 15.40  break even 111.95/223.05 is this to risky ?

  73. chaps

    humvee:

    Brokers:
    I notice most everyone is using TOS; I have accounts at TDA and Interactive Brokers.  IB has quite low transaction costs but the user interface is not as user friendly as it could be.  I am curious why TOS seems to be the broker of choice (perhaps I need to change).
     
    Thoughts Please,

     
    TOS’s software is basically designed with options/futures traders in mind. They present data to you in a format that gives you lots of immediate intuition as to what’s going on as an options investor. When I switched to TOS (from Fidelity), my ability to see what was going on jumped dramatically. Options create tons of data. Without organizing that data properly, it’s hard to see the big picture. IMHO.

  74. tchayipov

    Hamwee
    TOS has the best platform for trading options
    TOS commission is very reasonable (especially for PSW members)
    TOS doesn’t have any order change or cancellations charge
    support is much better than IB
    and if you have acc more than 125k you can get portfolio margining which reduce margin for some strategies 3-4 times(very good for balanced portfolio)

  75. JRW III

    ss / TNA
    Bought 5000 at about 10:15; sold it at about 12:30. Waiting for direction now.

  76. Phil

    Lower/JRW – I THOUGHT we would head lower but we didn’t (note the lack of betting today) so we just have to sit an watch and see what happens.  Clearly there are people who are taking advantage to exit the market but not enough to offset the buying.  There simply is no volume, which means it costs nothing at all for GS to punch a button and run the market up 50 points and the sellers aren’t complaining because they sell and wait and sell and wait. 

    Sell-off/Jimmy – There is a very determined and very effective attempt to boost the markets.  Right now, even the financials are being run up into Obama’s statement so there’s no sense in fighting it.  Will he be saying anything to justify this move or are they running it up ahead of the speech just so they can sell into the aftermath?  Don’t forget only 17% of the people managing funds are bearish so there’s really no one looking to sell at the moment and probably the 17% who are bearish, are out by now with 2 weeks to go so the bulls, like XOM and XTO, can just keep selling shares to each other at higher and higher prices unless something happens to make them lose faith and turn them into sellers, where they may find there are no real buyers at all. 

    SLG/Harip – It would be nice if they showed some sign of slowing.  You can sell the Feb $45 puts for $2.25 and use that money to roll up to the May $45 puts.  It would suck if they fly back down but the May $35 puts are currently $1.75 so you should be able to roll into a $10 vertical to the downside. 

    Seeing/TmDecay – I tell you what.  Write down on a piece of paper the year you were born, the year something VERY important happened to you, how many years it’s been since that happened and also, your age.  Add those numbers together.  When you have a number don’t put it in comments, but let me know and I will tell you the answer.  8-)

    SRS/B1 – It’s hard to get a bounce when C comes out and tells investors that CRE is the place to be.  Forget the fact that they have hundreds of Billions in CRE loans outstanding and are more than a little biased…  When a move goes against you based on something like that, you just need to ride it out but, at a certain point, you have to recongnize that these guys are going to relentlessly upgrade until it all explodes - just like they did with housing and just like they did with oil – that’s the way the game is played.

    Optionpain/Steve – I don’t use it because I can see the number in my head by just looking at the OI list.  Max Pain is a valid FACTOR in looking at where something is heading but it’s certainly not something to go crazy betting on.  The problem with all of these systems is they don’t take into account HOW MUCH each contract was bought for.  If there are 20,000 contracts bought for .05 on Thursday, logically I would give that much less weigth than 500 contracts bought for .75 this week as you can assume the 500 contract person is seriously trying to make money while clearly the 2,000 contact guy simply has $10,000 to play with. 

    TOS/Cwan - We should threaten to leave but, sadly, TOS is better than anyone else…

    NTRI/Gel – They are a major grower and still trading lower than expectations from 2007 so they could go a lot higher.  It’s one of those companies where the people who can afford to use their product also tend to be investors (LULU, AAPL and RIMM win this way too) who are likely to buy a stock they are loyal to and that helps a lot. 

    LYG/Dflam – Not sure but assume you still have about $5 value at $3.70 so just worry about that line now.  I think your shares are now worth 1.43 shares so $3.76 is $5.36 but check with your broker on that.

    Autos/Gel – I don’t disagree, just pointing out possible dangers that keep it from being a no-brainer.

    Guns/High – Yes, that’s the part that bothers me most.  Although it still bothers me that I have been to lunch where I was the only unarmed person – background checks or no!   In the northeast, if you are sitting at a table with 5 people who have guns, either they are cops or you are in deep trouble. 

    TOS/Humvee – It’s an interface quality and execution thing, certainly not a cost thing.  My attitude is execution is everything because If you charge me $1.25 per contract that adds 2.5 cents to my buy and sell cycle but if you save me .05 on execution 1 out of 4 transactions – I’m even. 

  77. judahbenhur

    Peter D, I’ve finally gotten around to checking into PM--not currently offered by my broker (Fidelity), nor Ameritrade, though both say that it is in the works.  Even though I always hold a lot of cash, it certainly appears from your posts that PM can really make the difference in the short strangles and SPX crazy plays.  Looks like I am moving to TOS until Ameritrade can get its act together.

  78. ssdirk

    JRW – If you don’t mind, let me know your next TNA/TZA move.  You seem to have a great handle on these.

  79. yodi

    Phil The SRS dec 9p sold for .79 now 1.11 do we roll this to Jan 9p thks

  80. lynn2long

    I just got this email from Scott of TOS

    Thanks for the e-mail.  The actual rate for PSW members is a flat $1.50 per contract or .75 per contract + $9.99 ticket charge.  I can lower you to $1.25 per contract if you are trading about 1,500 contracts per month.

    what ticket charge? so there seems 2 kind of rates. one flat 1.5/contract, or the .75/contract +9.99
    what are your experiences?

  81. JRW III

    ss, TZA /TNA etc
    If you play the stock, you have to be right on top of it !! You can play primary direction by selling options which can be a two day or a five day play with more flexibility. Anyway I’ll try to keep you posted.

  82. humvee4me

    Regarding Brokers:
    Thanks all, I think I know what to do now
    Cheers

  83. JRW III

    Looks like they’re spooling up for new highs.

  84. ban2

     any reason you play SRS 2x vs  DRV 3x?

  85. ssdirk

    JRW – I’m in front of my screens at all times.  I know you were keying off of IWM 60 level last Friday.  Do you have a key level today.

  86. gel1

    Phil
    How is this for a lottery idea.. Have all PSW premium members submit their guess as to where the Dow ends the year. Cost 25.00, winner take all. My projection is 10,875.

  87. boonie

    Phil,
    seeing?
    i did a similar algabraic card trick in the 5th grade as a demonstration speech….even though I explained it to the class…some still thought it was magic.

  88. dflam

    PhiL : Thanks on LYG  . On your SRS April trade this AM, it’s now + $.37 instead of net zero.I want to do this trade but checking to be sure I didn’t miss something.
    dflam

  89. JRW III

    ss / 60.64

  90. dflam

    Phil : On SRS,never mind , I was looking at price of $8 C instead of $9
    dflam

  91. lynn2long

    again, what is per ticket charge? I suppose it meant per order u put in no matter how many contract. It would be a lot of savings then.

  92. Pharmboy

    Lynn – unless you trade >10 contracts at a time (spreads, calendars, etc), ticket charge is not worth it IMO.  Do the math for the numbers you trade.  If you are buying small lots at several intervals to leg into positions, I would go with the 1.5/contract.  Notify OXPS as well, maybe they will beat it.  IB may as well.  Pays to shop.

  93. kustomz

    Markets look tired

    I was in Best Buy over the weekend and i always check the laptops for processor, INTC powered the majority. There were 4 laptops with AMD and the rest were all INTC 18…its been a while since I’ve seen such large disparity and desktops were 50/50

  94. cwan120

    Lynn: Yes, per ticket charge is per order (or per trade) charge regardless of # of contracts.
    If you mostly trade a small number of contracts per trade, go for $1.50/contract.   If you mostly trade 100 contracts per trade, go for the other commission structure.

  95. Pharmboy

    I find it interesting that COF, JPM and AXP all trade within the same range….they are dangerous to play b’c it depends upon which one the big boys are hedging with, as they are all used interchangably.  JPM is trying to rid themselves of the CC business FWIW.  Problem is, who wants to buy it?

  96. tchayipov

    Phil/ERY
    I shorted Dec $11 puts and they performed very well, do you recomend to roll them to Jan? or expecting some bounce of oil?

  97. JRW III

    If this push does’nt work, I’m shorting.

  98. lynn2long

    Pharmboy, about shopping. I am switching to TOS because of all the good recommendations about the interface and tools which I suppose, will help me. Other than Etrade, I have no idea how Option Express etc is like. Are you using something else than TOS? What’s your experience?

  99. roamer815

    Now the lower SRS goes… the less it can ever come back is that right? If it ends up down at like $3 or something ridiculous like this, can it ever rally to $20 or $30? Maybe someone can shed some light on this because I’ve been riding this one out, and it just seems like unrelenting pain. Thanks.

  100. JRW III

    Hell, back in 1990,
        the Government seized the Mustang Ranch brothel in
    Nevada  for
        tax evasion and, as required by law, tried to run it.. They failed and it
        closed. Now, we are trusting the economy of our country, our banking
        system, our auto industry and possibly our health plans to the same nit-wits who
    couldn’t make money
        running a whore house and selling whiskey?!" 
       
       
        "What are we thinking?" 

  101. Pharmboy

    TOS is great, but it does not hurt to ask others their charges and say that TOS is giving you X.  Can they beat it?  If so, use that email back to TOS and ask them if they can beat OXPS, IB, or whomever.  You wouldn’t buy a Chevy if we all told you it was great….you would still shop around…try it, it just might get you a better rate.  you can always fund a small TOS account and use the interface, but trade out of somewhere else.  OXPS was not too bad.

  102. Phil

    LFC/Yodi – That’s a good one!  It doesn’t sound like you are protecting yourself though as just selling puts is just adding risk in a sell-off.  They don’t pay a dividend so you can just take $46 off the table by switching to the 2012 $50s at $31.  Then you can sell Apr $80 calls for $5.30 and you don’t need to change the puts or you can get aggressive and roll to the July $67.50 puts at about even (you can always roll back) and you have loads of time to sell and roll with just $26 left in play.

    GS/Yodi – Risk to both sides as they were at $250 pre crash and $47 last November so it’s not the kind of play I would do.  Don’t forget the margin goes up as you get closer to either side.  I’d rather play the 2011 $145/185 spread at $19, which has a $20 upside and then you can sell the Apr $175s for $9.40, which puts you down to $10 on the $30 spread.  Once you establish that, you can work on a put leg and you can start that by putting on a protective momentum cover of the 2011 $185 puts (now $36.40) IF GS goes below $160.  Then you can look to cover that one up by selling the 2011 $145 puts (now $15.35) for hopefully $25 so you are in for $10 on the puts side (below $185) and $10 on the up side (above $145), which means you locked in a $20 profit AND you can still sell puts and calls in the front months. 

    SRS/Yodi – Yes, we are going to roll but there’s no major benefit to doing so now.  Probably Wednesday unless SRS goes even lower  but this is our buy point on SRS

    TOS/Lynn – If you only trade a few contracts, the $1.50 system makes more sense (you have to trade 6 to pay $9) but if you are a bigger trader, the $9.99 + .75 begins to work out in your favor at about 18 contracts, which is kind of a lot to commit to and, if you are trading 20 contracts at a clip, you are very likely to be well over 1,500 contracts a month anyway. 

    SRS/Ban – Because SRS is crazy enough!  Also, we’re used to it and it behaves well in it’s channel.  Don’t underestimate comfort in something you trade often…

    Lottery/Gel – I’m not sure that’s legal so officially I say now and I also say 10,250.

    Seeing/Boonie – I love that stuff.  Most people don’t think of numbers like math people do.  My brother can hear a symphony in his head by reading sheet music but to me it may as well be a rorschach test – people’s brains are just wired for different things.  I read an interesting study the other day regarding health care costs and they pointed out something pretty obvious that most people won’t undersand and still won’t accept – even after you tell them.  The point was that cheaper screenings can cause massive cost overruns and they used breast cancer as an example.  It sounds good to be tested often as preventive care but, even if you ignore the fact that the test itself can cause cancer, the test is only 95% accurate in catching cancer and only 0.5% of the people tested have cancer.  Obviously worth catching but also the test yields 1% false positives, which require the same follow-up lab work as actual cancer.  So if you test 1M people, 5,000 may have cancer and you’ll miss 250 of them so you’ll send 4,750 people in for testing.  That logically argues for frequent testing since your chance of catching the 250 you missed next year is nearly 90%.  BUT, the 1% false positives yeild 10,000 additional people who require lab testing who do not have cancer so the cost of attempting to improve your catch rate by 5% is 10,000 additional full work-ups.  If the test costs $300 and the lab work costs $5,000 then the first run of the test costs $300M plus $73M for lab work on 14,750 out of 1M people but to catch just 250 more cases costs the same every time you re-screen, driving the total cost per cancer from $78,500 per case to $1.5M for the next 250.  This is why Congress can argue this stuff for 20 years and make no progress. 

    ERY/Tcha – I don’t have the same conficence now that oil has come down so much.  I’d just let them expire for now and wait for a better opportunity.  Also, VIX is very low right now and that’s not the best time to sell puts. 

    SRS/Roamer – I would expect that 3x from any price is the most you can reasonably expect in a major sell-off so, right now, $27 would be about max and that means your goal should be about $15.  If $15 doesn’t do it for you, then you probably need to risk too much to make the play work. 

  103. yodi

    Before I landed up with TOS, moons ago I started to open an acc with Tradestation they did have as well a siphysticated trading platform  I see they now on their webpage charging 1.00 per option contract no ticket charge no minimum just if any one wishes to investigate possibly they even go lower for a group like us. Just a suggestion any comments?

  104. tchayipov

    Pharm
    OXPS for succers who buy options not sell them – they don’t use standard margin requirement (20%) for short options and set up margin individually for each stock ( very often 40 – 60% just for regular stocks) this margin will kill you

  105. Cap

    Mocha – HK — did ok; sadly; I had already sold a bunch; the rest was pretty much covered; so just ok …. timing ….

  106. samz3700

    Jr – what do you use to set levels

  107. lynn2long

    Well, etrade is offering .75/contract https://us.etrade.com/e/t/pricingandrates
    too bad they only let me do buy to open, sell to close.

  108. stevenparker

    Kustomz, agreed AMD’s laptop cpu offering is really quite poor and always has been.
    I think their desktop cpu’s are stunningly good value, but in that segment their brand marketing simply doesn’t stack up to Intel. People seem to like having "Intel Inside" even though it makes about as much difference as buying a blue ballpoint pen or a black one.
    The other place to watch AMD is in the corporate datacentre, where their current lineup is quite competitive imho.

  109. Cap

    SRS … sorry, this does not behave well due to built in decay.
     
    What we need on SRS — IYR, REITs to sell off.  Market to sell off.
    $9 will be a tough hill to climb at this point.
     
    This thing has just gotten killed.

  110. samz3700

    How is the charting on TOS -
    Cannot get IB to do anything more than a day bar so cannot do weekly charts – very annoying

  111. stevenparker

    Anyone have a clue why TIE is moving up so much? I am happy as I am long, but also confused. Is it just because the 787 is going to fly?

  112. kustomz

    Steve i don’t know what to make of it, I’m just worried about INTC margins in the coming Q and lots of rumors of NVDA buy out…just looking for a smart way to play it

  113. kustomz

    BA actually lifted the nose of the 787 off the ground, set to fly tomorrow at 10am i cant express how excited i am to see her finally fly!!

  114. EricL

    On my REIT positions  I’m already selling January strangles above my long puts on a 1:2 or in some cases 2:3 ratio. This worked last month and from the looks of things may wind up being the only way these position make any money in January too.
     
    Transports look very bullish. Even though we’re due for a little pullback, it’s darn tough to make a case for the bears near-term (barring an outside event, as usual).

  115. gel1

    This is a great day to add to XOM positions… doubled my position in stock for a long term play.

  116. jromeha

    BA – THat’s right people!!! Let’s give props to the great NW!!!! We have brought you Boeing, Microsoft, Starbucks, Hendrix, Grunge Rock…… AND AMANDA KNOX!!!! As a U of Washington grad, I am proud! :)

  117. Phil

    $100KP:

    • Selling 20 IYT $75 calls for .65
    • DD (10) on DIA $106 puts at $5.

    Only want them at offer. 

    TIE/Steve – Yes, people are finally believing this will actually happen now.

    Greece "has lost every trace of credibility" and "faces the risk of sinking under its debt," says Prime Minister George Papandreou in an evening speech to business and union leaders. He said the government would take actions that have been put off for decades and bring the deficit from 12.7% of output down to the EU limit of 3% by 2013.

    John Tamny seeks a ban on "bubbles" – not the phenomenon, but the word, which has now been overused into meaninglessness. There are two sides to every trade, and there’s no law that says markets must collapse if they rise too much.   Yes John, THIS time it’s different

    After just short of 1.5M personal bankruptcy filings in 2009, a best guess for 2010 sees 1.5M-2M filings, with the amount of consumer credit continuing to decline – keeping consumers from being able to borrow to put off the day of reckoning.

  118. gel1

    Jromeha… good list of winners – but you overlooked one of my best winners FFIV ( F-5 Networks ) GREAT prospects!

  119. JRW III

    Phil,
    I was expecting a pump today, as it is MONDAY, but tomorrow we get news. Thoughts on the close and overnight possition ?

  120. gel1

    Jromeha… I have a home in W Vancouver… my friends say I have a tan in the winter. No so… that is RUST from all the rain. With all the rain in the NW, everybody is at work, I guess.

  121. Phil

    FSLR reminding us why it’s the most dangerous stock on Earth, jacked up another $7 today.  It’s always hard to wait patiently to short them. 

    Volume is so low this month that I’m always surprised when it’s 3pm as nothing has happened all day.   Just 100M on the Dow at a quarter to 3 and we did about 100M in the first hour on the day we gapped down. 

    IWM $60s at $1.25, selling $61s for .62 and the $60 puts for .36 is net .27 with $1 upside if RUT stays up.  This is not a bad offset if you are too bearish as it pays about 4:1 by Friday if the week closes higher but, sadly, you would be stuck with IWM stock you almost certainly don’t want if they head down (roll to the Jan $55 puts is about even so 10% leeway).

  122. Cap

    REITs vs. Homebuilders.
    Homebuilders have given back 30-65% of their recent gains  (KBH for example was up to $22, now 13;  LEN was 17; now 12).
     
    REITs are plowing higher. 
     
    Makes no fundamental sense of course; just gotta wait I guess.

  123. kustomz

    Fisher has aggressively expanded Caterpillar’s presence in engine rebuilding in recent years. Remanufacturing had largely been left to independent rebuilders and service shops. By leveraging its manufacturing technology for new diesel engines, Caterpillar has been able to capture additional revenue from doing high-quality restorations of older, worn-out engines

    CAT helping rebuild worn out engines, part of the going green initiative or a sign of continued drop in spending from customers

    Forced dieting
    India..
    Food inflation, according to the weekly data announced earlier, had shot up by 19.04 per cent during November recording the sharpest increase in the decade.
     

  124. yodi

    Hi Phil Sorry I am not clear on the LFC trade The 46$ I think are actually  meaning 16.00 . buy rolling to the 2012 jan 50p I get a credit of .10 possible. the 50p 2012  trades for 4.70 to 5.20 do not understand the $31 the rest is OK thnks  
    Phil
    December 14th, 2009 at 2:10 pm | Permalink  
    LFC/Yodi – That’s a good one!  It doesn’t sound like you are protecting yourself though as just selling puts is just adding risk in a sell-off.  They don’t pay a dividend so you can just take $46 off the table by switching to the 2012 $50s at $31.  Then you can sell Apr $80 calls for $5.30 and you don’t need to change the puts or you can get aggressive and roll to the July $67.50 puts at about even (you can always roll back) and you have loads of time to sell and roll with just $26 left in play.
    yodi
    December 14th, 2009 at 1:04 pm | Permalink  
    Hi Phil
    I have done very well with China life Ins. LFC actually started with them at 40.00 now trading 77.00 sold some time ago the 60 put 2011 for 16.21 now 4.85 what would you do as I am thinking of rolling the 60 put 2011 to the 70p for an other credit of 3.95 tks

  125. cwan120

    Negotiating with Brokers / Pharm:
    Hey!  That’s not a bad idea negotiating like that!  Can Lynn or someone give that a try, and report back?  We’ll then all go to TOS and do the same.

  126. cwan120

    ETrade commissions / Lynn: That’s NOT 0.75/contract.  Instead, that’s $6.99 + $0.75/contract.  You have to click on "Detail" to see… well, the details.  So for each trade with 5 contracts, it’s 6.99 + 0.75 x 5.

  127. stevenparker

    Cwan/others fyi I use a broker that people don’t seem to like (excessive margin reqs for one thing), traded 1500 contracts last month and pay $1/contract with $10 minimum. Hope this helps :)
     
    Oh, and if anyone can tell me I should be paying less pls bring it on heehee

  128. cwan120

    Hi, kustomz,
    Can you elaborate on "NVDA buy out" rumor?  What is it?

  129. gel1

    Sold my NKE position today. With CEO Knight saying he is in full support of Tiger – WOW. Might work in a counter-culture society, and it does exist in areas of the US, but overall who would buy a Nike product for a child with this character flaw advertised on all products. Sheesh not woosh imo!

  130. kustomz

    Watch AMTD looks like a decent bounce play

  131. dflam

    Phil:  sell Jan. 11 $4 P on C for $.94 naked? stock is at $3.69,dn $.25
    dflam

  132. jromeha

    Gel – keep on perpetuating that  constant rain stereotype about WA/British Columbia – keeps people from moving there… Since I am going to school in Dayton, Ohio now I would KILL for that rain!

  133. Phil

    Pump/JRW – My thoughts are CASH.  Any money you have in needs to be pretty much play money as there is no volume so nothing you see happening is meaningful and the market can snap up or down 200 points any time for any or no reason.  I’m sticking with the very bearish side because, as we discussed the last 2 weeks, I feel much better being 80% in cash and 100% bearish than playing along with the game that’s being run on the markets.   Sure, if there’s an obvious long play, I’m happy to take it but I have been looking at longs for 3 days and finding very few I like. 

    Speaking of long plays, taking 25% and running on the FDX $85 calls in the $100KP, nice profit for 1 day

    VNO $70 puts are fun if they can be had for .75, offering for 10 in $100KP.

  134. gel1

    jromeha… so right – it is really a relative issue. You are fortunate to call Seattle home!

  135. kustomz

    As we predicted, Apple’s Mac business had a monster November, according to NPD Group data analyzed by Piper Jaffray analyst Gene Munster.
    In a note today, Munster reports:

    Mac sales for Oct. and Nov. are now tracking up 21% year-over-year, over the Street’s 14% consensus, and up from 7% year-over-year growth in October alone.
    It’s still early: Half of the quarter’s Mac sales typically occur in December. But the November data "increases our confidence in slight Mac unit upside in the quarter," Munster writes.
    The new iMac and Mac mini were huge: Desktop sales are up 74% year-over-year this quarter so far.

  136. Phil

    REITs/Cap – Citi says they are great investments and they should know, they are almost bankrupt from lending to them! 

    Food inflation/Kustomz – Oh yeah, I don’t know if I mentioned it here but if you removed the increase in food prices from the retail sales numbers, then retail sales were off 0.4% last week. 

    C/Dflam – I’m a little worried about C here but fine if you are set to roll and DD to 2012 $2.50 puts (now .41).

    DIA – Still naked bearish of course into the close.  Have $108 and $106 puts but I am looking to sell the $106 puts when they get even (hopefully better).

  137. stevenparker

    AAPL desktop sales are up 74% year over year? Can you say that again please? And put it in bold? That is AMAZING.

  138. cwan120

    kustomz, thanks for that link to the article on Intel buying NVDA rumor.

  139. gel1

    AAPL iphone euphoria dragging desktop popularity upward. This company is an expert at cross-marketing!

  140. josec

    PHIL,
    What’s your view on POT what do you think is a fair price for them and what’s your outlook for the stock?
    Thanks

  141. lynn2long

    Phil, when u say DD on DIA 106 put at $5, u mean the Mar 106 put, right and now u said you have 108 and 106 put, are they dec?

  142. kustomz

    Anytime C

    Speaking of C, whens the reverse split going to be announced

     

  143. Phil

    AAPL/Kustomz – Well if their desktop sales are up 74% this year and you subtract that from other Retail sales then we have a VERY serious problem in the rest of retail. 

    POT/Josec – I would consider buying in at $95 but we shorted them at $125 so that’s the range to me.  It would not surprise me at all to see them head lower.  It’s the kind of stock that has a great story (easy to make, everyone needs food so lots of demand) but no real defensible market position, which becomes a problem in a downtrending economy.  They made $3Bn last year but will be lucky to make $1Bn this year yet they are valued like $3Bn is coming again soon.  It’s the same silliness that is driving up oil companies and other commodity players and that’s the danger with the way we’re recovering – the speculators are driving prices back up miles ahead of the people’s ability to pay and all they are doing is making the situation worse and worse.

    DIA/Lynn – No I mean I have the March $108 and $106 puts that we’ve been talking about for 3 months.  I did not suddenly buy Dec $108 and $106 puts but next time I’ll remember to specify.

    And the dominos keep falling: Following a similar move by Fitch, S&P cuts Mexico’s foreign-currency sovereign credit rating by a notch, to BBB/A-3, on worries about the fiscal 2010 budget.

  144. ajaytoo

    Phil, 20 IYT calls at 0.65? Isn’t that a whole lot of margin being used up?

  145. EricL

    Whichever move we make out of this compressing range is likely to be big. Selling Dec. calls or puts naked is very dangerous here, IMO.

  146. mrmocha

    Nice monster move by MGM today.  Why?  BECAUSE I’M SHORT!!!!

  147. llorens

    Funny mocha – I know for a fact that some traders wait and wait until I open a position to drive the stock in the opposite direction. Take COF today for example..

  148. mrmocha

    llorens - I share your pain. Last year for fun I would post my trades here labeled as ‘anti-trades’, and I counseled people to do just the opposite of me.  It might still be a good strategy given my performace over the last two weeks, Phil’s gotten me all bearish but that’s been a painful strategy so far….

  149. kustomz

    Screw Mexico look at NY and  Kaulifournya
    New York
    Governor David Paterson said he is ordering $750 million withheld from aid payments this month to schools, local governments and health insurers to avert a cash squeeze after the Legislature in the third-most populous U.S. state didn’t cut spending as much as he wanted.
    Lawmakers’ $2.77 billion plan for reduced outlays and generating additional revenue approved earlier this month isn’t enough to ease the state’s December fiscal bind or close an estimated $3.2 billion deficit for the year ending March 31, Paterson said at a news conference yesterday in New York City.

    New York has the second-highest amount of state-backed debt at $56.9 billion, trailing California with $66.4 billion, Moody’s said in July. As a percentage of residents’ personal income, the New York total ranks fifth, the credit rating company said.

  150. lynn2long

    I am curious if any of you follow those emals sent to us from swing trading portfolio. I’ve been ignoring them. Cannot handle so much. Are they more directional plays (just buy and sell options)? And not dealing with these buy/write or mattress etc?

  151. JohnC1

     Phil:  When you talk about going to 80% cash are you talking about liquidating long option positions, or do you really mean liquidating 80% of long-term stock holdings, as well.  Are you really this bearish?  If so, what kind of correction are you looking for after this long bull run?

  152. gel1

    kustommz… California has been setting records for a long time in its efforts to create governmental budget deficits. As a resident, along with so many others, the remedial  tax proposals addressing the overspending habits are killing me. The responsible are leaving the state in hords. The irresponsible are increasing at the same rate. The only solution is to create a world class institute that specializes in the treatment for "spendaholics" and recruite the graduates to serve in government, otherwise this disease will end in the death of the patient.

  153. Phil

    Well that was sure interesting.  ITY/Ajay – yes, about $30K but it makes $1,300 in a week (4% of the margin) and I wasn’t planning on using it for anything esle.  Didn’t fill though so non-issue. 

    Danger/Eric – Everything is dangeous in this market.  Totally irrational.

    MGM/Mr. M – LOL.  All the casino stocks went wild today.  No reason, just cause they can.   Sorry to get you bearish but I don’t know what else to say, this is just insane lately but who knows how long it can keep going like this?

    States/Kustomz – Way worse than Greece, Dubai or Spain but shhhhhhhhhhh….

    Swing Trading/Lynn – If you go to your member link at the top righ of the page you can switch them off.   It’s a whole other discipline and you would need to spend quite a bit of time on Optrader’s side learning the system but yes, they are more directional plays.  As I and others here have already told you, you should learn ONE thing before doing something else.  You should not do buy/writes and mattresses if you don’t have a perfect understanding of either.  The buy/writes are already self-hedged and generally have little need of a mattress cover which means you are simply gambling with the mattress play and ignoring the most fundamental aspect of the mattress play which is that it is INSURANCE and you WILL NOT make money on them UNLESS there is a catastrophic event in the market.  Expecting to make money every day because you have a mattress play is like expecting to be operated on every day because you have health insurance. 

    Correction/John – If I had a clue, I wouldn’t be in cash but we can either break over the top here and start heading relentlessly higher (a la 1998-9) or we can have a sensible pullback to about 9,850 and hopefully consolidate around there into earnings and, getting past that, get ready for a proper move higher.   That’s a recovery I can get behind. 

  154. kustomz

    gel,  The parties almost over…there is nothing they can do to stimulate the economy enough to cover the short falls in tax collection. 2010 will be a very entertaining year im sure. You know the effect you get from staring at a light and close your eyes, well i close my eyes and all i see is Obama, this guy is on TV way too much reassuring us all we are on the mend…i dont see the signs

  155. kustomz

    gel,  The parties almost over…there is nothing they can do to stimulate the economy enough to cover the short falls in tax collection. 2010 will be a very entertaining year im sure. You know the effect you get from staring at a light and close your eyes, well i close my eyes and all i see is Obama, this guy is on TV way too much reassuring us all we are on the mend…i dont see the signs

  156. gel1

    Natural Gas is WAY underpriced compared to Oil on a ratio historical basis. The over-supply issue is temporary ( new production has been in remission) and the spread between the two will close. For anybody who assumes oil will level off at the current price, I strongly have to debate a contrary position. Oil will level off in the near future at $100.00 / bl. Demand for oil is still strong, the economy is ostensibly recovering, and inflation will soon factor in along with the depreciating dollar.( All bets are off if Isreal snuffs out Iran’s nuke program ) All this favors a long term upward movement in oil pricing. The out of balance differential between the NG price and Oil will close, resulting a faster upward movement in NG prices. XOM bought a large natural gas producer today for over 5 Bil. at a 25% premium. XOM is not dumb in their projections for NG demand. That is their sector business, and they are damn good at it. Accordingly, I upped my positions in UNG and XOM today, looking at the long term appreciation.

  157. gel1

    kustomz.. The party is really over… just a matter now of counting the bodies that died from overindulgence. This state was the hope of the future, and as a result attracted the best of the best. The government, through its selfish desire to accommodate everybody and everything, in order to serve their whacked out beliefs of what utopia should be, and not to mention their desire for perpetuity in government service (???), has placed everything at risk. The question is how can you reverse this idiocy, when the beneficiarys are in the majority. I guess the only solution is to pass laws that regulate who can vote and procreate.

  158. Pharmboy

    lynn – yes, the swing trade is for directional positions.  I pay attention to them, as they make me look at things outside my scope and I do play swing trades sometimes.  Last week, in fact, Opt was buying calls, Phil was buy puts on the same company (or vice versa)……you can uncheck Opts emails if you do not want them in your account mnmgt tab.

  159. pstas

    Gel- what positions are you taking to up your stake in XOM and UNG?
    BTW- my home state, Illinois is not far behind CA. The state legislature has been increasing spending at a 6-8% clip for about the past 10+ yrs. Fattening pensions and benefits in general has led to chronic deficits and more borrowing. They just cannot say no. The current recession is NOT the problem Here in IL it has been irresponsible government has been a hallmark of both parties for an extended period.

  160. Peter D

    Folks – just catching up with the chat
     
    chaps/magret:  For CBOE contracts (SPX, RUT, NDX, etc.), TOS does pass on the Options Regulatory Fee (small amount per contract) when you put in an order, whether the order is executed, cancelled or expired: 
    http://www.cboe.org/publish/RegCir/RG09-021.pdf
     
    judah/PM – yes, move to TOS for PM.  You’d also need to show 3 years of options trading experience to qualify.  I asked TDA and they gave the same answer (working on implementing it).
     
    cwan/SPX short strangles - I took more short strangle profit off the table today.  SPX spreads did very well today, while the RUT short strangles didn’t do as well because RUT jumped $9.4.  I’ll be selling into the excitement if RUT and SPX keep going up this week (selling OTM calls).
     
    Judah/cwan – I did look into Feb contracts in the weekend to see which strikes I can play.  Looking at the Monthly SPX chart, strikes 900 and 950 has plenty of support for the short PUTs.  My worry there is the low VIX.  SPX Feb 900 PUT is $3.7 today, and 950 PUT is $6.25.  So a quick 5% drop in the index means we’d have $2.55 paper loss on the Feb 900 PUT, plus another $2 from the increased VIX.  The Feb 1000 PUT is $11, so the paper loss would be $6.75 if we have the Feb 950 short PUTs for a 5% market drop.  If we are forced to play in the next couple of weeks (because the Jan’s contracts have lost most of their values), then we’d scale in with 1/2 position or less with the 900 short PUT.  This gives us the option to roll up to Feb 950 short PUT for additional credit, if we could pick a short term bottom. 
     
    On the CALL side, SPX 1200 is as high as 2005 levels,  so I’m looking at SPX 1210 – 1225 short CALLs, and will add if the market is 2-3% higher.  I’d add both the short CALL and PUT at the same time, but knowing that I have more downside than upside cushion.  The Feb 1040/1030 long PUT vertical is relatively cheap at $1.8 for a nice hedge.  Lastly, SPX 1300 is the levels in 2006.  We’d be truely amazed if the market gets there in 2010.  Anyhow, with SPX Feb 1210 short CALLS, we can roll at least 2-3% every month, so we’d get to 1300 callers by June if needed.

  161. tchayipov

    cramer pumping C, finaly something usefull

  162. lynn2long

    tchay. I am studying the mattress strategy u taught me last friday, do u think u have time for questions if ur around….

  163. tchayipov

    Lynn,
    if you want, you can call me 403-685-1404

  164. lynn2long

    what time zone are u in?
    not sure I have enough minutes, let me try here a bit first since I wrote this up….
    ok. starting fr "when Phil call  a bottom" what do u mean "u will move ur short ATM and double it (maybe move them away 1 month)" ?  How do u move your short….and so far there is only 1 short fr the beginning at 105 (and it is like u said, no longer ATM but very deep ITM as the market dropped)? do u mean u buy back the 105 short and sell 2 short ATM a month away?
    Also, when market start going up, u sell all the long put except the last 2 that u bought (why not sell all if market bottomed)

  165. judahbenhur

    Phil/80% cash.  Helps me sleep at night.  I can live with missing a move up to, say, Dow 11,000 in the next few weeks.  I suppose if you took Gel’s idea of a year-end guessing game (for legal reasons, bragging rights are all you get for being right), you’d have a good idea of whether your members are turning more bullish than you are.  My guess is we continue sideways through the year--Dow 10,400. 

  166. craigzooka

     I have a theory as to what the end game the Obama administration is playing for.
     
    If I knew that saving this country required very very serious measures to be taken and that those measures would piss off just about everyone, I would spend my first 4 years in office making a list of every thing and everyone who has to change.  I would try not to F*ck up the country to bad for the first 4 year so that I can get re-elected.  By then I should have everyone in place to make whatever changes I need to. Once I get re-elected for the next 4 years I would unleash hell and do exactly what I thought this country needs to ensure we don’t collapse.  
     
    Basically, if he tries to do everything that is needed now, he wont get elected to a second term.  So why not spend all this term preparing for what is needed, then next term when there is nothing to loose, Just be like,
     
    1.  screw you health insurance companies, welcome to cheap nationalized healthcare.
     
    2.  Wall street, you can go pound sand and every bank which is under water, you get to fail.  Then take all that tarp money and set up 20 banks with 35 billion each that are mandated to lend to consumers not play in the markets(I stole this idea from somewhere but I cant remember :( )
     
    3.  Afghanistan, F**CK your country, our guys are coming home.
     
    4.  Iraq, see #3
     
    5.  Taxes, switch to a consumption tax, no more income tax.  Goods and services are taxed, not income.
     
    6.  Service, If you volunteer for 2 years of military service, or whatever else the government decides you need to do (americorps or something like that) you get free room and board at whatever college you can get into for as many years as you want.  The same service lets you be set free from all student loans.
     
    7.  No more buying oil from any middle eastern country.  Tell the whole region to go stuff it.  See how much terrorism you can fund when Oil crashes to $5 a barrel(slight exageration).
     
    Ok, consider my rant done.  But I think the idea might hold water,  get a lay of the land your first 4 years in, put people in position, get re-elected, rough sh*t up your second term.

  167. cwan120

    Hi, Peter,
    Thanks a lot on the SPX plays!
     
    I am also thinking about selling OTM calls if SPX keeps going up this week.  What strikes are you looking at?  I am thinking Jan 1150 calls.  What do you think?
     
    As far as regulatory fees, I haven’t seen TOS charging any fees after I modified / canceled an SPX option order.  Maybe they piled those fees into the trades that were executed?

  168. tchayipov

    Lynn,
    I’m in Calgary , now is 4:35 PM
    yes,
    when you think that market is on bottom, you just buy back your one short call (ITM) and sell two ATM calls, because VIX will be high, you will do it without any additional money
    if you sell all your long puts, what do you plan to do with your shorts?
    main idea sooner or later make your short puts loose all their value
    you can sell all your longs and keep your shorts, but what if you wrong? and market continue to go down?

  169. lynn2long

    yup yup, that’s a stupid q. basically u buy (layer) long put with every 2 point drop. but when  it start to go up
    1 u sell all older put (except the last 2 u bought, but do u still keep the trailing stop on these 2 long put?)
    2 buy back the original (or first put u sold), plus double buy 1 more put at the money (at right at this month too?)
    3.for the last 2 long put, what if it triggers the trailing stop if market go back up violently? then u do some re-adjustment?
    all these steps, which ones are what Phil always keep "cover with xxx (what action)"? is buying back the original put sold "cover"?

  170. tchayipov

    Lynn,
    no you don’t keep any trailing stop for last two long puts
    as soon as market start going up, you just roll them up again for 0.5$ for each $1 of strikes

  171. lynn2long

    all those delta, theta that would gives u the amount of gain or drop per each $1 drop—are these info a/v somewhere? is it why everyone is using TOS cuz they provide them?
    Also, the short put sold (105), since its same month, it would’ve increase a lot  when the market kept dropping, and would be a lot more expensive to buy, unless the double that we sold will pay for them (is it what happened in reality ?)
     
    also why do u say "when we have short puts at the bottom of the market we will be fully covered and they will pay full price of rolling longs up at the top of the market, if it continue to go higher we will be 1/2 covered and they will pay at least half of price of rolling longs up"
    when market bottomed, u sold the long puts. do u have to keep buying (rolling) the longs just like when the market was going down? I basically don’t get the 2nd part of what u said Friday.
    maybe i can re-read Phils mattress strategy to see what I am missing

  172. tchayipov

    Lynn,
    don’t forget that when Phil call 1/2 or full cover, he just daytrade mattress to scweeze extra 0.2 – 0.5$ of profit – if you are not comfortable with it just stay 1/2 covered and keep your resting order to roll your longs one strike up for 0.5$

  173. gel1

    Pstas
    Sorry to hear about the similar dillema Illinois is experiencing with regard to similar wreckless government financial policy. I believe this policy was innovated in California, and has unfortunately migrated eastward. I say this, because, all you have to do is observe the all time crazy fiscal policy prevailing in Washington, as originated and supported by the California members of Congress. Need I say more ??? Anyway, with better thoughts in mind, I have held XOM for a very long time (stock), and I enthusiastically doubled my position today, as I feel it has a strong chance of doing better in the future. I also like the dividend. The stock tracks fairly closely the value movements of oil, and I am a believer oil is in a temporary holding pattern, which will see a substantial upword movement well above $100.00/bl, as the dynamics of the world economy and oil demand evolve. The very positive strategic acquisition today of a NG producer is, in my mind, very strategically clever, as I think NG is underpriced at the present, and is a very big deal in the future. I also have a large XOM naked put position in the July 65′s. As far as NG positions, I have short put positions in the 2011 UNG  8′s, and a huge position in UNG 7′s. As you might surmise I’m looking for premium income on NG, and a long term appreciation on XOM stock. I am very bullish on oil price appreciation going forward, and energy stocks in general, holding a lot of other positions in the sector.. I have a large position in BP, as I believe in the company, and I like the dividend, as well as the opportunity to sell the front month calls for income.

  174. Peter D

    cwan, I’m more comfortable with selling the Jan 1180 CALLs as Dow 11000 is about 1150, so 1150 strike doesn’t give you much room to move.  Plus we have PM, so we can use it by selling further out of the money and sell more contracts if needed.

  175. tchayipov

    Lynn,
    delta, theta and other greeks you can get from any platform, not just from TOS
    if you buy back your one short put and sell two puts at the money,  even if you do it at the same month – price of 2 ATM puts still will be same or higher than price of your one In The Money Put
    at the bottom, you will have two remaining long puts and two short puts ( mean fully covered) and if market will go up – you will make money from your 2 shorts as much as you need to pay for rolling your longs up

  176. kustomz

     craig(bazooka) i have a better understanding of your moniker, you just reminded of this great scene from back to school :-)

    http://www.youtube.com/watch?v=Xfi4s8cjLFI

    tchayipov for a good time call 403-685-1404, on bathroom stalls across America
    LOL, that was very nice of you and i commend your dedication to help out a fellow member in a such a capacity. Bravo!

     Major contraction in global GDP in the coming year? Japan "An index of sentiment at small manufacturers will worsen to minus 42 in March from December’s minus 40, the Bank of Japan’s quarterly Tankan survey showed yesterday. Large companies plan to cut spending 13.8 percent in the year ending March 2010, the second-worst projection on record."

    China bubbles everywhere, enough said.

    India, rampant inflation

    Germany (Eurozone) Euro-zone industrial production fell in October from September, the first such drop since March, highlighting the fragility of the economic recovery and suggesting a tough final quarter for the sector, data showed Monday.
    According to Eurostat, the European Union’s statistics agency, industrial production in the 16 countries that use the euro declined 0.6% in October from September and was down 11.1% from the year-earlier month. The annual fall was the 18th straight year-to-year decline.

    Britain, what a mess
    In Britain, where the nation’s economy and finances have fallen so sharply that investors fear a possible downgrade of the country’s triple-A rating, bond traders are also taking a hard line.

    The bond vigilantes are back

    Governments cant spend forever and i think after banks pay back tarp they are going to hoard cash with ever tightening fists. Wait till the CC bills start coming in the mail in Jan and Feb, can

  177. lynn2long

    so the longs (long puts), u buy more when market go down and do nothing about them till Phil call bottom.
    but then u havr to roll longs up (selling old longs and buy new longs) if market heading up?

  178. cwan120

    Hi, Peter,
    What do you do with Jan 1040/1030 put verticals?  We bought them at > $2.00.  They are now about $1.  Keep them for a while?

  179. tchayipov

    Lynn,
    when market drop and you buy more puts every 2 point of drop, you don’t need to wait when Phill call bottom to get profit from your longs, just as soon as you buy one more put, set a trailing stop to one most profitable(deepest in the money) put

  180. lynn2long

    I think the next thing to do is a paper trading so I can actually come across problems to ask and see how Phil adjust it.
    Like I kinda got what  the buy/write trade is:
    1-buy the stock and sell equal call and put ATM same month, then if it went up, sold the stock, lock in gain. If it drops, ur assigned another set and just like double down but at a discount due to call and put sold

  181. gel1

    Craigzooka
    You have mixed too much prune juice/vodka with the Kool Aid… We do not need more government, but we are in need of the inverse IMO. Go back 90 years in history, where government was 10% of the GNP, the US was the pride of the world. Today the government is over 50% of GNP and we are in a precipitous embarassing decline. Could there be cause/effect corelation factoring the standard deviation ????

  182. Peter D

    cwan, as long as we have the short strangles, we’d keep them.  In fact, since they are $1, I kept them even if I took some short strangles off the table.  The vertical can go to $5 if the market drops 5%.  Additionally, if the market stays flat or keeps going up, I learned that I can sell off the long PUT (the 1040), and keep the putters (1030) with 1-2 weeks to expiration for another $1 profit.  Not a bad play where we spent $2 in protection and get $1 back that close to expiration.

  183. lynn2long

    this fr Phil "As far as a proper artificial buy/write, let’s say I want to do a buy/write on AAPL but it’s friggin’ $200 a share and that costs me about $15,000 just to do a single set.  Do I NEED to own AAPL?  No, they don’t pay a dividend and the July $175s are $34 so that’s an effective purchase price of $209 vs. $194 for the stock.  I can sell the Jan $195 calls for $7.45 and the Apr $175 puts for $8.75 for net $17.80 on the $20 spread so I CAN’T be hurt to the upside but keep in mind that you do end up having AAPL put to you at $192.80 so what you have effectively done is eliminate the discounting function of the buy/write.  Of course, if you make it through Jan expiration OK, you now have control of 100 shares of AAPL for $1,780 + (according to TOS) $2,743 in margin vs the same put side margin in a regular buy/write plus the $9K for owning the stock.  These are VERY aggressive plays and a big drop can absolutely kill you so they should be used sparingly"
    this is a buy/write without owning the stock but did Phil make calcuation mistake for " I can sell the Jan $195 calls for $7.45 and the Apr $175 puts for $8.75 for net $17.80". i only get $16.2 credit on that spread.

  184. samz3700

    Nat Gas – we are now the Saudi Arabia of Nat Gas – so I am not sure that historical comparisons to the ratio between nat gas and oil are valid – our reserves are so much larger than anyone realized ten or fifteen years ago.
    Not sure why more cars are not converting – Phil mentioned taxis in Vegas – some taxis in NY are now on Nat gas but not enough -
    If Bloomberg were made dictator for life, all of the taxis would be green.

  185. tchayipov

    Lynn
    if you buy July 175 call for $34
    and sell Jan$195 call for $7.45
    and sell Apr $175 put for $8.75
    34 – 7.45 – 8.75 = 17.8

  186. ssdirk

    Peter – What do you like in Feb for RUT?

  187. lynn2long

    oh, Phil means buying the $175 July call.  so what happened if its called away at 195? and u dont actually have the shares to sell?

  188. lynn2long

    curious, how long have u been trading options? Tchay?
    and why is Pharmboy and Peter on different color bg when they post? r they staff here or just member like the rest of us?

  189. ssdirk

    Peter – I don’t have Portfolio margin.  When I compare a RUT short strangle vs. a SPX short strangle the buying power is much more for the SPX and it shows much lower max profit for the same buying power.   I know it would be nice to diversify, but it seems that the RUT provides more bang for the buck.  Is that correct?

  190. Peter D

    ssdirk, I like 480 and 680, give or take 10-20 points.  RUT 500 has supports from 2000, 2001 and 2002 (if they count).  680 is the 2005 level, and I can’t imagine it can go up to 740, which is the Sep 2008 level before the crash.  We can handle the roll to 740 easily (by June) if we start with 680.

  191. Peter D

    ssdirk, I think cwan (or was it balance?) asked the same question on RUT/SPX.  RUT options premium is higher, and thus gives a higher return theoretically.  However, its option strikes are wider ($10 strikes) and RUT is more volatile, so adjustments would be more costly than SPX.  After trading these for a while, you’ll find out that the SPX return can be higher than RUT.

  192. lynn2long

    Tchay, I’d like to thank YOU for lending a helping hand. Later

  193. lynn2long

    I saw this in the emaila http://www.philstockworld.com/2009/12/14/aapl-bull-buys-call-spread/
    "GLD – SPDR Gold Trust ETF – A bullish risk reversal on the gold ETF today points to a rebound in gold bullion prices by expiration in February 2010. Shares of the GLD added nearly 1% during the trading day to stand at $110.23. One trader sold 9,650 puts at the February 110 strike for 4.70 each in order to partially finance the purchase of 9,650 calls at the same strike for 4.90 apiece. The net cost of the reversal amounts to just 20 cents per contract. Profits amass on the transaction if shares of the fund rally through the breakeven price of $110.20 by expiration day in February 2010."
    what if GLD drop below @110? what will happen to this trade if by expiration its below 110

  194. craigzooka

     gel1, the post was meant to be quite sarcastic.  From an investing standpoint lets consider the following scenario.
     
    First, the assumptions.
    1.  If the market tanks too hard, Obama will not get re-elected.
    2.  The equity market is currently over valued using just about any measure you can think of.
    3.  I dont know what the fixes to our current economic problems are, but I believe that any fix will the require  the current bubbles in equities, commodities, and commercial real-estate to be popped.
    4. Obama wants to get re-elected.
    5.  Obama actually cares about the long term future of our nation not just getting re-elected.
     
    So I am starting to believe the Obama administration has a very big interest in keeping the market afloat rather that fixing anything.  That means no kind of sweeping reform will take place until after elections in 2012.  If #5 is acually true then I expect 2012 to be a crazy volatile and wild ride.  
     
    Under the previous scenario should we be slightly more bullish?  
     
    Can someone come along and tank the market so hard Obama cant fix it?
     
    Is there some kind of conspiracy to tank the market right before we have to sell crap loads of bonds so they sell at a good interest rate?
     
    I apologize if this is a little disjointed.  I am in the middle of studying for an Algebra Final exam and I can’t figure out the following problem, so if anyone out there happens to be a mathematician I could really use your help.  
     

    #5. Show that if R is a commutative ring with 1 that is not a field, then R[x] is not a
    principal ideal ring.

     
    So if anyone knows anything about how to com

  195. craigzooka

     In the same class with that last problem we had the following (its fun cause it has pirates)
     

    A band of 13 pirates stole a sack of coins. When they tried to divide them equally among themselves, 2 coins remained. In the brawl that followed, two pirates were killed. Again, they tried to divide the coins equally, only to find 7 coins remaining. Four more pirates were killed! Now, when they tried to divide the coins, 3 were left. The pirates became very upset and frustrated and they shot each other. You came across their sack of coins. What is the smallest amount of coins you own now?
     
    I have a solution to this problem,  as a hint it is less than 600.

  196. gel1

    Craigzooka
    I can’t agree with your assumptions, other than "Obama wants to get re-elected", and I am not really sure of that premise. Assuming the man has intelligence, I do not believe, following the wreckless path he is following will ever get him re-elected, and he must be aware at this time of that fact. He has yet to complete the first year of his presidency, and has a serious negative approval rating. The populace is discovering he is a fraud, and nothing he said in his campaign is proving to be truthful.The man spoke in platitudes ( Hope and Change is whatever you want it to beand is totally subjective with no real definition Even the Nobel Peace Prize committee is expressing regret (after only one week after he is presented with the prize).  Did the American people elect him in order to convert the country into a Socialist government entity, recklessly in debt to the level bordering bankrupt status, with no possible way to pay it back without debasing the currency? Obama was completely unfit for the magnitude of the office he was seeking and totally misrepresented himself, and never really said what his agenda would be, or the type of low lifes he would bring into the government to take over the day to day responsibilities that are so critical to our needs.For his sake, I hope he is not looking forward to another term, as he will have less of a chance than Jimmy Carter ever hoped to have, and his disappointment will equal his dismal performance. 

  197. stevenparker

    "Natural Gas is WAY underpriced compared to Oil on a ratio historical basis."
    I never understood this and I still don’t. Why would we assume this ratio is meaningful rather than coincidence? Cars, power stations, boilers can be converted from gas to oil or vice versa, but isn’t this process expensive  and complex enough to take years or decades, rather than days or weeks?
    Bread and chewing gum have long held a historical price ratio (I assert that this is actually true), but a failure of the wheat crop doesn’t drive up the price of chewing gum…..

  198. tchayipov

    Craigzooka/
    looks like it is 535 coins

  199. kustomz

    hey prime numbers

    Its more of a social problem, people shouldn’t be so greedy
     

     

  200. kustomz

    Euro was under relentless assault in early morning European trade today, after reports on the website http://www.benzinga.com suggested that Austria may be the latest trouble spot for the credit crisis spreading throughout the region. The Austrian regulators have already nationalized Carinthian Hypo Alpe Adria Bank AG  and speculation is mounting that Austria’s fourth largest bank Oesterreichische Volksbanken AG (OeVAG) may be the next to be rescued.

    OeVAG  which reported an accumulated loss of 607 million euros in the first three quarters of this year  has a balance sheet of 53 Billion euros. Investors are concerned that credit writedowns could skyrocket to 20 Billion euros on the loan book of Austrian banks putting massive stress on the European financial system.

    The euro tumbled below the 1.4600 level for the first time since October 5th as the single currency suddenly became a toxic asset of its own, with traders loathe to buy it until further clarity in Austrian banking sector can be established.  The unit has now come off more than 500 points from its yearly highs as concerns over the fiscal integrity of the European financial sector along with better than expected US economic data have markedly changed the dynamic in the FX market in favor of the dollar.

    FX traders will now look to the ZEW survey due at 10:00 GMT for latest data point on the state of the Eurozone economy, but if the report disappoints, the combination of weak economic data and heightened fears over another possible  credit crisis in the European financial system could easily drive the pair below 1.4500 figure before the day’s end.

    Source: FX360.com

  201. Phil

    Good morning!

    Futures down a bit at 5am but no big deal yet.  Dollar went all the way to $1.453 to the Euro and 89.3 Yen.  Even $1.624 to the pound is not too bad but a ways to go to get to new highs there.   Copper is $3.14, silver $17.25, nat gas $5.05, oil $69.55 and gold $1,119. 

    We have a busy data day and earnings from BBY (ADBE and AIR after the close):

    7:45 ICSC Retail Store Sales
    8:30 Producer Price Index
    8:30 Empire State Mfg Survey
    8:55 Redbook Chain Store Sales
    9:00 International Capital Flow
    9:15 Industrial Production
    10:00 Results of $75B, 28-Day TAF Auction
    12:00 PM FOMC Meeting, Day 1
    1:00 PM NAHB Housing Market Index
    5:00 PM ABC Consumer Confidence Index

    Nat gas/Gel – Just leave a little room in your theory to consider that oil may be over-priced and not the other way around.  US consumers spend $460Bn a year on oil at $70, asking for $100 is expecting another $200Bn a year to magically come out of consumer’s pockets ($1Tn globally) so you are saying you can boost our $50Tn global GDP 2% at will or that $1Tn worth of damage will be done to other parts of the economy?  Of course, that’s just the raw price of crude – when you add in the mark-ups along the refining and retail channels you can pretty much double thouse numbers so figure you need to scrounge up $2Tn extra dollar to get your $100 and you’d better hope that other commodities don’t go up as well or you’re into $3-4Tn to support your price. 

    Rant/Craig – Sounds like fun but you won’t get my vote.  Unfortunately, everything is tied to everything else – you pull one string and the arm falls off the sweater.  As to service though, I think people in this country need discipline and unity and 2 years of mandatory service for ALL would be a good thing.  First of all, it would take 10M people out of the labor force and then we have an excuse to give everyone college educations after they serve.  I’m not talking Army per se but Army Corps of Engineer type of service where we send millions of people out to build housing for the poor, feed the hungry, build infra structure projects, clean up urban communities… 

    Mattress/Lynn, Tcha – Keep in mind that the problem with the Mattress strategy is it does not assume that the market moves 100 points in a day on a regular basis.  This is why it’s much more stressful than it used to be if you try to mess around and day trade it.  The idea of layers, Lynn, is that you automatically get more bearish on the way down and, on a bounce, as you stop out of your higher layers (the ones at higher strikes with higher deltas) you are automatically left in a bullish position where the long puts you have left have a lower delta than the short puts you sold. 

    The reason you don’t just uncover 100% is because you, in theory, have an in-the-money putter you need to cover and also, because the market may still go down and that would leave your bullish portfolio (and if you don’t have a bullish portfolio you shouldn’t even be using mattress covers) completely uncovered, as opposed to simply inadequately covered as it would be if you flip on a bounce. 

    Again, this strategy comes from a simpler time when the market didn’t drop 200 and then bounce 100 and then drop another 150 – all in the same day. 

    Gas cars/Samz – The main issue is refueling, until they have enough stations then the consumer won’t go for it but cities can mandate it for taxi and bus fleets and think what a nice enviromental impact that would have.

    Call away/Lynn – It’s a virtual call-away, you would have to either cash in your long call and the caller or roll the caller because you have nothing to call away but, as long as the spread beteween the strikes exceeds the net you paid – you can’t lose if the caller is in the money – that’s the key but these are BULLISH upside plays that are more about trying to establish a cheap leap by offsetting your long premium in the first month.  Once you do that, you are in great shape moving forward. 

    GLD/Lynn – If GLD falls below $110 and the person takes no action, then they have GLD put to them at $110 per share x 965.000 shares = $106,150,000.  It’s a very aggressive and, in my opinion, very foolish bet – arrogantly assuming there is no way they are wrong and, rather than hedging, doubling the delta on his 100% upside bet on GLD to about $1 so every dollar drop in GLD costs this guy about $1M.  Let’s say this guy thinks GLD goes to $130 and he makes $20M.  He could have bought $25M of the $101/110 bull call spread at $5.85 and that would make about $20M at $110 and he could offset $4.50 of that selling the $110 puts but I’d sell the 2012 $90 puts.

    Nat Gas/Steve, Gel – Also, very important to note that, in Saudi Arabia, gas costs .60 per gallon.  If we are the Saudi Arabia of natural gas then why would we be paying a premium? 

    Pirates/Craig, Tcha – Figures the Russian is the only one here who can do calculus!  I forgot my calculus so I just ran a spreadsheet to solve for 7x+3, 11x+7 and 13x+2 for 1-85 and found the first match but I’m sure there’s a smarter way to do it properly as my method would be very annoying for bigger numbers.

  202. samz3700

    Gel -
    "Low Lives" compared to whom? Politicians speaking in plattitudes – that’s a surprise.
    FYI – the guy cannot get a lot of his agenda passed because of Republicans and Conservative Democrats -
    "Did the American people elect him in order to convert the country into a Socialist government entity, recklessly in debt to the level bordering bankrupt status, with no possible way to pay it back without debasing the currency?"
    It’s not Obama’s fault that he walked into the worst economic disaster since the great depression -
    The financial crisis can be blamed on plenty of people – including those conservatives that think that markets are self-regulating – a myth proven over and over again from food safety – think China – or the U.S. in the 19th century when thousands died from food poisoning caused by unregulated milk and food production – to the latest behavior by everyone associated with the mortgage crisis – consumers – all the way up the chain – both dems and rep. – sorry hard to blame this on the poor guy holding the bag

  203. craigzooka

    booya tchayipov.  There are a bunch of different ways to solve it.  I ended up  finding 3 numbers, x,y,z such that
    x=1 mod 7, x=0 mod 11, 0 mod 13
    y=0 mod 7, y=1 mod 11, 0mod 13
    z=0 mod 7, z=0 mod 11, z=1 mod 13.
     
    then 2z+7y +13x solves the equation.  To find the smallest such solution you take 2z+7y +13x mod (7*11*13).
     
    Phil, since I also just used your approach first, plug everything into a spreadsheet till it finds a solution.  But I was informed by my proffessor (who happens to be Russian) that she would not accept a spreadsheet as justification for my answer :( .
     
    On a side note,  All of the Russian students / professors I meet are orders of magnitude better mathematicians than I am.  They must be doing something right over there :)
     
    Tchayipov, I have 3 Russian proffessors all from Moscow university.  You are going to have to give me Russian lessons so I can start listening to their what they are saying about me :)

  204. bord

    Phil,
    A Bloomberg talking head was pumping BBY big time this morning, the stock has really run up too. Is there a short opportunity here, especially if there’s a big rise on the earnings announcement?

  205. tchayipov

    craigzooka
    we have a jock in Russia: what is american University?
    answer: it is a place, where Russians Math professors teach chinise students

  206. craigzooka

     That is very close to the truth, tchayipov.

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