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Thrill Ride Thursday

Wheee – this is fun!

Everything went according to plan yesterday as the very fake pre-market pump I warned you about in the morning post very quickly turned into a day of carnage for the markets.  Sure we only ended up down 10 points, but it was down 100 from the open

Fortunately, we have learned how to ride this bull and we grabbed the DIA $105 puts at a .55 average per my 9:47 Alert to Members and we cashed those out at .90 (up 63%) in the afternoon.  We also had a quick 20% winner on Dec QID calls and we kept the Jan QIDs as our continuing bearish bet as we didn’t want to risk a possible overnight pump job taking the markets back up with open Dec calls.  Still, we weren’t worried enough to cover our longer DIA puts so we were very bearish but, as I said yesterday: "We have neglected to do is play the futures pump for the past week as we keep expecting something very bad to happen and boy would we feel silly if we were just 55% bearish when this house of cards comes tumbling down."

It has been volume, volume, volume that kep me questioning the rallies this year - the fact that all the up moves come on very thin volume (ie. manipulated) while all day long the insiders sell to the suckers who are draw in by the futures action and stick saves (it’s a team effort).  This chart from Ron Greiss illustrates what’s wrong with our rally on a more macro level:

While we are certainly not ready to do a bearish victory dance on this tiny little correction, we certainly feel a heck of a lot better about our decision to stay bearish.  In addition to adding bearish DIA and QID plays yesterday, we (of course) added more SRS at our target bottom, took the money and ran on EWJ, shorted XTO (rumors XOM may walk), got more UUP and shorted V.  Our long covers were TOL and the VIX but it was a very bearish day of picks, especially considering our already bearish stance (see Weekend Wrap-Up – Too Bearish or Just too Early?). 

Also a little too early was our positioning for an up move in the Dollar, which began in early November when I wrote a lengthy article on the Dollar, Gold, Oil, The CRB and the Fed and why I felt we were reaching the end of that run.  The dollar is now well over where it was when I wrote that article but gold is still up $100 while oil is down slightly and the CRB has been holding flat overall (so far).  Yesterday we entered the zone where we are expecting a 5% short squeeze that should take the dollar index back to 80 so we’ll be keeping close tabs on the Forex market for the balance of the month, watching the lines at 90 Yen, $1.60 to the Pound and $1.40 to the Euro to see if they offer any resistance to the rising dollar.

Last Wednesday I posted my article "Hedging for Disaster" and if you think you may be too bullish going into the holidays, those are still valid plays – although we got fabulous entries Friday and Monday that may not be seen again.  Too bullish has not been our problem in December – the worry this weekend was that we were too bearish and the $100K Virtual Portfolio was so bearish that we got killed (-5%) on a relatively small 200-point bounce last week but we decided to stick to our fundamental convictions after we could find almost no appealing upside plays to make last Thursday and Friday, despite the run-up.

Speaking of the run-up.  We expected a sell-off after Thanksgiving but we didn’t get a good one, mainly because FDX pre-announced better than expected FYQ2 guidance on December 7th, which turned the markets back up on a dime.  The Transports had been holding back the Industrials and the bulls could not have gotten a better early Christmas present thant FDX’s statement.  Funny thing about that though – now that  they hype machine has run it’s course it turns out the FDX Q2 earnings FELL 30% from last year and are just 4 cents above $1.06 expectations on 10% lower revenues and, outlook for next quarter (FYQ3) is a SHOCKING .50 to .70 a share vs. estimates of .84, a 20% or more MISS

As I often point out when I parse out Fed statements for members – there is a huge gap between happy talk expectations and actual economic facts but the CEOs, the MSM and even our Government will spin that happy talk for all it’s worth as a well-informed public seems to be the enemy of everything these people stand for.  Perhaps we can’t handle the truth but I thought we elected Obama because he was at least going to give it a try – how about we start with a realistic assessment of the economy for once so people can plan their finances according to what is rational to expect, rather then plowing money into this fantasy-land stock market?

The higher the market has gone over what we considered fairly bullish targets for the year (Dow 9,850, S&P 950) the harder it has been for us to run with the bulls and the last couple of weeks have been very frustrating as more and more it seems like investors simply have their heads in the sand and don’t want to hear anything negative about the markets.  I hate to be Chicken Little but sometimes the sky IS falling (gosh, I made this same speech on Nov 7th 2007 and that is scaring me!) and someone needs to point it out.  So please – take a moment to read that old post and consider that nothing is really new – the same games get played over and over again…

The Shanghai Composite fell 2.3% this morning while the Hang Seng dropped 1.2%, mainly on liquidity concerns as regulators approved a big supply of IPOs this week.   China Shipbuilding Fell 6.6% in their initial trading day and China Citic Bank fell 5.2% indicating investors may no longer be willing to buy any company that slaps the name China in it somewhere (although I will be going ahead with plans to launch PhilsChinaWorld next year to cash in on the trend).  The Hang Seng would have been much worse but for a 150-point stick save into the close pulling the index off a possible breakdown at 21,150, which has been pretty good support since early October.  The Nikkei’s market looked much like ours did yesterday – nothing but selling after an early morning pump.

The dollar rising is bad for China as it makes their pegged exports more expensive but the really bad news came out of Hong Kong this morning, where their Central Bank said the city may face “sharp corrections” in asset prices should fund flows reverse, adding to concerns voiced by Japan, China and South Korea on the dangers of speculative capital.  A rally in the stock market was fueled by an influx of capital as investors’ risk appetite gained and they bet on an improving outlook for China’s economy, the Hong Kong Monetary Authority said in a quarterly report yesterday. Outflows may bring “volatilities in the real economy,” the HKMA said.

Donald Tsang, Hong Kong’s chief executive, said Nov. 13 that he was “scared” that money flowing into Asia could lead to another crisis. “We have a U.S. dollar carry trade at the moment,” Tsang said. “Where is the money going — it’s where the problem’s going to be: Asia. You can see asset prices going up, not only in Korea, in Taiwan, in Singapore and in Hong Kong, going up to levels that are incompatible or inconsistent with the economic fundamentals.”  The carry trade is where investors borrow cheaply in one currency and use the funds to invest in other currencies.   The danger is when the borrowed currency rises faster than the invested assets, causing investors to scramble to pay loans back before they can no longer afford to on the conversion costs.  A rapidly rising dollar can cause a major invesion very quickly – something I’ve been warning about since we began to bottom out the dollar in September. 

Europe is down about 1% ahead of the US open, led down by (unsurprisingly) the National Bank of Greece, LYG and BCS as well as Australias Westpac Banking Corp – pretty much anyone who lent any money to Greece or Dubai is being called into question.  “The market is using this as a pretext to lock in profits,” said Kilian de Kertanguy, a fund manager at Cholet- Dupont Gestion SA in Paris, which oversees about $2.3 billion. “Some investors might have anticipated more of a transparent discourse from the Fed, saying that rates would remain low all year.”  

Jobs were the usual 480,000 losses this week but analysts had gotten all excited by the NFP report and were aiming for 450,000 so it’s a disappointment to people who take analysts seriously.  Leading Economic Indicators are expected to come in at 0.7% today and that will be well up from October’s 0.3% and we may get some disappointment there as well.  At 10 am we also get the Philly Fed and if that is a disappointing as the NY Fed was this week, we could get some additional selling there into lunch where, who knows – we may be able to do a little bottom fishing finally. 

We’re really going to have to play this one by ear – it’s going to be a tricky day!

 


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  1. balancenv

     Phil,
    DD on C again? 

  2. doro165

    Thanks Phil for the "sell into the excitement" post-it note on my monitor. Sold HOV yesterday near the high for a very nice 50% ROI.

  3. judahbenhur

    Balance, Let me add my voice of thanks for running the short strangle simulations and sharing the results.

  4. pstas

    Another tale from the trenches:
    I had a conversation with a jewelry store sales rep the other night. The store was rather busy and while waiting I inquired about business conditions. The rep was quite happy and excited- said volume was up about 25% and they were expecting good things even after the holidays. I found this contrary to my instincts as I would have expected jewelry sales to be slow given the economy. With some further probing, he revealed that while sales are up now, the base is low. The store was at about $4MM rate before the "big crash" and is now at about $2MM.  So, I guess its all about relative perspective. If you have been on bread and water for a year, then a plate of White Castle sliders is a gourmet feast.
    Curious side note to this story- the rep said sales began a steep slide well before the "big market crash" as he called it.

  5. aclend

    Phil,
    HOG added to GS conviction sell list with 15% downside "based on channel checks which indicate sales declines of 35%-40% yoy for October and November which we believe is below Street expectations. We attribute the decline to tightened lending standards at HDFS, and a recall of 110K touring and custom bikes due to fuel tank issues which we think is leading to deferred purchases. While we think sales will hit their lows within the next year, 4Q09 comps are likely to suggest a still worsening demand environment adding uncertainty to the timing of a recovery in our view."

  6. EricL

    EUR/USD blew right through the support level at 145 overnight; hardly even paused. So major selling pressure there for the time being which makes a market reversal pretty unlikely this week, IMO.
     
    Thanks for those FDX updates Phil. The CFO now basically says "We’re in good shape and will make more money in a few Qs". That’s it — the spin that was put on this two weeks ago was crazy.

  7. EricL

    Actually EUR/USD 145 was defended — I was looking the wrong timeframe. But once it broke the selling was fast and furious, predicably.

  8. yodi

    DIA  March 108 is in the black again 

  9. yodi

    HOV back to 3.88 lost nearly all of yesterday

  10. craigzooka

    Phil, I went naked on the DIA mattress into today.  With the nice drop this moring, I am thinking of following your advice (always sell into the initial exitement) and going at least half cover with the JAN 104′s.  Whats your opinion?

  11. Phil

    Now we get to see if the downside holds up:   Dow 10,250, S&P 1,100, Nasdaq 2,187, NYSE 7,200 and Russell 600

    If you remember, last week I mentioned that we should change the Dow to 10,350 and the NYSE to 7,100 because those lined up better with the others and that’s where we are now but KEEPING the NYSE at 7,200 (the purist way to play the 5% rule) kept us from going bullish as they were the only index not to break over.   Had we moved the bar, we may have been more tempted to turn bullish at exactly the wrong time. 

    There is no volume to this sell-off so we could reverse quickly, especially if the 10 am data is better than expected.  Oil is holding the $73.50 line and is up at $74 despite the strong dollar and gold bounced off $1,115 so the bears still have a lot of work to do to prove they can take this market lower.  

    If we go over 10,400 on the Dow we can buy the DIA $103 calls, now $1.15 with .12 in premium (DIA is higher than the actual Dow), using 10,400 as a stop line as that should be a good upside momentum play for the day

    The Jan QID calls from yesterday are already $1.85 so those can come off the table too, especially if you are very bearish on the DIA puts.

  12. yodi

    POT down to 114.25 down – 4.60 from yesterday

  13. EricL

    Amazing the bid they can keep under the REITs. VNO is green. This is why the liquid ones (which is really just SPG, unfortunately) seem such a good option sale. SPG strangle sales now basically hedge a lot of REIT short positions for me. When they crack, it will probably happen very fast, though.

  14. Phil

    C/Balance – I’d roll down to the 2011 $4s at .50, should be about .22 to gain $1 in position.  I am adding 40 in the $100KP.

    Selling into excitement/Doro – One of the best skills an option investor can learn! 

    Slide/Pstas – That’s what I was pointing out in the article I referenced above from back in November, 2007 but it took a whole year for me to be obviously right.  Also, White Castles are always a gourmet feast! 

    HOG/Ac – long way to go down if that’s true, probably back to $21 for them.   We loved them at $8.50 but lost interest once they broke $20 as they are just too iffy up here.

    FDX/Eric – It’s hard to keep up with all the BS so it’s good to have something so obvious to point out to remind people to keep a skeptical ear open when listening to these people.  Euro at $1.437 right now so not good for them.  Pound at $1.613 and we’re at 89.98 Yen – someone is trying to keep a lid on the dollar. 

    Russell holding up well so TWM $26 calls at $1.05 is a nice momentem play if they break.

  15. llorens

    Phil – still like V as a short play? Staying in the $87.20-ish range this morning. Up from yesterday of course.

  16. 1020

    Good Morning!  Watch EWZ - It is sitting on its 50 dma. Has not broken below since July…..

  17. Phil

    Woops, breaking now just ahead of the data!

  18. 1020

    WoopS! there she goes…..

  19. EricL

    Looks like a trip back to SPX 1087 is in the cards. We’re probably one of the few groups of retail traders that are loving this range-bound action.

  20. Phil

    DIA/Craig – It’s fine to lighten up on a good move down, especially if you don’t need the cover but we have a long, long way to fall if things turn south from here but, "When in doubt, sell half" is rule #2 for a reason so I’d say yes to the 1/2 cover of the Jan $104 puts while it’s a good price (above $2) but maybe using $2 as a stop to sell (now $2.25).

    Leading indicators were up 0.9 and the Philly Fed was 22 – both better than expected but not much positive reaction so far other than we stopped plunging.  Seems like the selling was going to happen regardless and now we need to see how it plays out.

  21. Cap

    Anybody think the market rally’s when Ben is confirmed by committee ?
    Its all BS of course; and doubtful they vote him down.
    Nice timing on the Time mag cover; day b4 vote …
     
    What a great headline it would be if Ben was voted down !

  22. Cap

    The bid under the REITs is ridiculous and frustrating.
     
    Still managed to get some good swing trade shorts this week.  Hit SLG again yesterday and covered today (my swing position only).

  23. kustomz

    MA and V are very stubborn

     

  24. ephmen85

    a tray of While Castle sliders is a gourmet feast no matter what…..mmmmm, sliders

  25. Phil

    Bernanke’s nomination not secure yet, that may be hurting the markets.  Imagine having no Fed Chair!

    V/Llorens – Yes, strange that they are holding up so well.

    Now we can move a DIA upside momentum play to the 10,350 line with the $103 calls at .85 – keep in mind, we don’t WANT these but it’s better to buy these on a move up to cover than to panic out of short positions on a bounce.   When we get below 10,300, we’ll still be using these calls at that line but below that we need to switch to the 102 calls most likely.

    I am furious that my IYT buy didn’t fill on WSS yesterday.  That would have been great for the $100KP.  They changed their system this week and it’s been a disaster – not the least of which is they no longer describe the positions so it’s a nightmare to look at.  

    EDZ finally had a nice move.  First of many I hope.

    The few, the proud, the strong Eric!  8-)

    Vote/Cap – I think that may be the signal for the day but if he’s voted down it will be chaos.

    Very low volume – nothing at all for bears to hang their hats on so far!

  26. stevenparker

    V has been in a channel since July, and imo hasn’t yet  decided if it is going to break up out if its channel or reject at the top line again.

  27. ephmen85

    ERTS  I’m short a Dec 17 put and might take the shares if it paid a dividend, but I’ll probably end up rolling it….what you guys think, is this getting to a reasonable level for new put selling or setting up a long-term spread?

  28. EricL

    ANR had a breakout yesterday, and has now pulled back to the breakout line, which may be acting as support. So far it looks good from a chart perspective. I bought a small number of March calls.

  29. Phil

    Dec. Philly Fed Business Outlook: 20.4 vs. +16.4 expected, +16.7 prior – the fifth straight positive month. Prices paid 33.8 vs. 14.9 prior. Employment 6.3 vs. -0.5. "Firms still expect continued improvement over the next six months, although some future indicators suggest that, overall, optimism is on the wane."

    Nov. Leading Indicators: Leading Index +0.9% vs. +0.7% expected, +0.3% prior. Coincident Index +0.2% vs. 0% prior. Lagging Index -0.4% vs. -0.2% prior.

    Live webcast: Bernanke reappointment hearing. According to CNBC, 10 members of the Senate Banking Committee have decided to vote in favor of reappointment, 6 against, 7 undecided.

    Among Saxo Bank’s Outrageous Predictions for 2010: The yuan will be devalued by 5%; the Social Security Trust Fund will go bust; U.S. trade balance will turn positive for first time in 34 years; and angry Americans will form a third party.

    This is holding up V and MA: Discover Financial Services (DFS): FQ4 EPS of $0.63 in-line by $0.15. Chargeoff rate rose to 8.43% from 8.39%; delinquencies rose to 5.31% from 5.1%. Shares +1.3% premarket.

    The Basel Committee on Banking Supervision unveils proposals for tighter bank capital requirements, introducing stricter limits on what counts as top-level assets and on risk exposure from trading in derivatives and securities. But the announcement contained little detail on the size of a planned global leverage ratio. (graphic: world banks’ capital strength)

    Holding AMZN up:  Citi lifts its price target on Amazon.com (AMZN) to $170 from $140, noting the online retailer’s ongoing obsession with innovation & customer experience; competitive moats; and Citi’s double-double thesis (online sales and AMZN’s share thereof could both double over the next decade). Shorts could get punished this morning. AMZN +0.5% premarket.

    According to a Chinese central bank official, it’s becoming increasingly difficult for foreign governments to buy U.S. Treasurys, because the shrinking current-account gap is reducing supply of dollars overseas.

    Nov. U.K. Retail Sales: ?0.3% M/M vs. ?0.4% expected, ?0.6% last month. Sales dropped at the fastest pace since May, sending the pound to a two-month low. "It doesn’t really derail hopes of GDP growth resuming in Q4, but it does suggest that growth is going to be pretty sluggish. We are not going to see a strong rebound in the final quarter," RBS economist Ross Walker said. Pound -1.45% vs. dollar.

     

     

     

     

  30. EricL

    Small number = 2, btw.  :)

  31. JRW III

    ss / TZA
    How did you like my target from yesterday ( 60.37) ?

  32. ssdirk

    JRW – IWM bounced off of the support going back to 11/16 – 11/18.  What are you seeing today?

  33. ssdirk

    ZION flying up.

  34. ssdirk

    JRW – That worked great.  Thanks.

  35. Phil

     Freddie Mac weekly mortgage survey: 30-year fixed mortgage rates rose to 4.94% from 4.81%, the second straight week of expansion, and bringing rates close to the 5% psychological level.

    Goldman Sachs’ (GS) newest critic: Jimmy Hoffa. The Teamsters chief says Goldman is actively soliciting trades for clients to help them benefit from a collapse of YRC Worldwide (YRCW), America’s biggest trucker.

    Very easy to scalp dimes on those DIA calls and, don’t forget, you can always set a new entry at 10,375, 10,400 etc and even if you just get .10 per 25 dow points, it’s still good money. 

    ERTS/Eph – I think they are cheap enough down here but there is no dividend and you can get $1.25 for the Jan $17.50 puts so why not roll for +.80 first and your net entry is down around $16.50?

    ANR/Eric – Strange time to play them bullish..  They do look good long-term though.  Ah, 2 – that makes sense!

    TZA/JRW – You are money on those!

    ZION/SS – I think they must be the first buy on GS’s bot program or something.  $13 was big resistance – that can’t be good.

  36. JRW III

    ss / Today
    Got out of TZA right on Target, now 70% cash. I’m planning to ride the wave when it shows up (TNA / TZA)

  37. Phil

    Nat gas must have been a big draw as gas is up 7% now ($5.87).  Oil still laying at $73.50 though.

    U.S. commercial paper outstanding contracts for the fourth straight week, shrinking by $59.6B to $1.15T, and underscoring that the credit market’s recent expansion appears to have stalled.

    Bernanke vote at about 11:30.

  38. mrmocha

    HK - wow, somebody’s working hard to get that one to 25 as tomorrow’s pin point!

  39. Pharmboy

    GILD looks like they have found support (barring a major move down).  THe 1 yr chart shows it across the board, with a small break in March (who didn’t break down) and a small move in May (41.5).  Gonna add to my longs here 1/4 position.

  40. stevenparker

    Market Internals update at 10:30amET – NYSE volume 488M shares, about 80% above its three-month average; decliners lead advancers by 4.6:1. – NASDAQ volume 481M shares, about 10% below its three-month average; decliners lead advancers by 2.7:1. – VIX index +5.8% at 21.75.

  41. Pharmboy

    Also, GILD 45/50 bull call spread is ~2, and selling the 40 Jan10 P for 55c knocks it down to 1.45.

  42. eben22

    Phil/Condor – thanks!  What I was most interested in your response was your thoughts on the 2:1 downside:upside ratio.  That didn’t look like a good deal to me.
    QID JAN 19 calls, I still have them as my downside protection.  Keep them or do you have suggestions for better downside protection plays?

  43. jcmcn5

    So how are we playing the 103 calls?  Are we buying them now at 10,345 for a run up, or are we waiting to buy them IF we break abover 10,350? 

  44. ssdirk

    Phil – I know you are expecting/hoping for a bigger correction.  I have been holding off on writing puts that will eventually become buy/writes until that happens.  Some stocks like VLO and WFR are nearing their 2009 ow levels.  Is it still too early to initiate writing puts on these?  BTW, I do want to own them longer term, but at the best price I can get.

  45. JRW III

    Phil,
    You might consider UWM calls here

  46. craigzooka

    Wouldn’t it be hilarious if the programmer for the super secret GS HAL-9000 market manipulator just went in reverse alphabetical order to prop up the market?  
     
    Lets compare ZION and AFL to see if ZION is the leading indicator and AFL is lagging indicator.

  47. Phil

    EIA Natural Gas Inventory: -207 bcf vs. consensus of -176 bcf, and well above the five-year average drawdown of 127 bcf. Natural gas futures +2.5% to $5.597.

    While Bernanke’s fate hangs in the balance on Capitol Hill, former Fed chief Alan Greenspan backs calls for creation of a bipartisan commission on deficit reduction: "For more than two centuries, we have been able to hold the level of U.S. federal debt to well below our long-term capacity to borrow. But for the next decade or two, on some reasonable sets of assumptions, our borrowing cushion shrinks significantly, threatening to test our capacity to raise funds to finance unprecedented deficits."

    Volume/Steve – Very interesting that the NYSE is heavy and the Dow and Nas remain thin.  I guess they are trying to sneak into this sell-off, supporting what they can while selling the broader range of stocks before retail investors figure out the party is over.

    Deal/Eben – I’m not a big fan of negative risk/reward ratios but that’s because I get bored playing percentages like that.  Realistically, if you play them regularly, then like any insurance company or casino owner, you have an excellent chance of making money but, keep in mind that casinos and insurance companies do take the occasional hit and sometimes multiple hits – they KNOW they will ride it out long enough for statistics to kick in but that is generally where people who make those kind of plays end up failing – they don’t stick it out past a couple of bitter defeats long enough to get back on track.  As to downside protection – see last week’s disaster hedges. 

  48. Pharmboy

    ss – I have been playing WFR and VLO for a few years now.  WFR is in a nice position to buy the calls and sell some puts.  The 10 Jan11s are a good entry and selling front month C/P (strangle) at 1/2 positions have done very well for me.  IF someone wants to eventually acquire WFR (they have no DEBT), then it would be wise to lighten upon the C covers….IMO.

  49. EricL

    Phil, I bought ANR today just from the chart and the pullback to support. Wish I’d done about 50 of them now, lol.

  50. samz3700

    Phil -
    I  scooped up some EFA March 57 Puts – for 3.86 – avg.
    As I mentioned I was going to do a mattress play – you suggested selling june puts and calls if I owned – EFA -
    Don’t own EFA
    Would you stay naked as per current DOW mattress – thinking of covering with:
    1/2 Jan. 55 puts for 1.80 and 1/2 March 57 calls for $1.50 might legg into the calls. -
    Would burn off over $3.30 in premium and don’t mind the upside risk on the Calls – figure I can roll roll roll and play on dollar. – Gives me a good shot on the downside move.

  51. kustomz

    Phil GE, what do you think

    Diversified conglomerate General Electric Company (GE) saw its price target boosted on Thursday by analysts at Barclays Capital. (lump these guys with GS)
    The analyst raised its price target on GE to $22 from $20, citing a better 2011 earnings outlook. Barclays Capital also boosted its 2009 and 2010 earnings estimates to $1.03 and $0.97, respectively, while maintaining its “Overweight” rating.
    GE shares rose 15 cents, or +1%, in morning trading Thursday.
    The Bottom Line
    We have been recommending shares of GE since Sept.16, when the stock was trading at $16. The company has a dividend yield of 2.55%, based on last night’s closing stock price of $15.69.

    ==================================
    NOK they do have a 4% yeild

  52. EricL

    All major REITs are green now, lol.

  53. Phil

    $103s/Jcmn – With penny movers like this you can start to ignore the level and start looking at the price channel of the call.  Pretty much .90 is a good entry and $1 is a good exit so far.  It’s much easier after you make the first dime as you are less worried about losing on the second one.  It’s a momentum play, which means we look at the 1-3 min chart for direction and confirm our buy with a cross of our support line and quickly use that line as a stop.   Good topic for a weekend discussion actully

    Puts/SS – VLO and WFR I do like down here for put writing.  They haven’t really joined the rally so they make good starters.  Keep in mind you can usually roll them a bit lower if they fail the first month so your entry is not set in stone. 

    UWM/JRW – Nice timing but I like the DIAs as they should move faster to the upside and we have those fat support zones to watch and, of course, super liquid for scalping dimes. 

    ZION-AFL/Craig – Hey, you may be onto something!

  54. stevenparker

    Volume – Citibank traded 7 times daily average already could be a feature too

  55. samz3700

    What is up with the EDZ  3 April calls – things are not really moving - 
    still seem like a good deal – any opinions

  56. EricL

    samz,
    It’s just the spread on options on the ultras. If there is no extrinsic showing (as on the EDZ April 3s right now), then just consider yourself as owning 100 shares of stock for each one (at a discount).
     
    I once had an FXP spread in which the 5 strike calls were ‘cheaper’ than the 8s. Needless to say, the MM wouldn’t let me buy more of those spreads for a credit.

  57. eben22

    NatGas – http://www.eia.doe.gov/oil_gas/natural_gas/ngs/ngs.html

  58. stevenparker

    samz – as it is an inverse, IV will come out of EDZ options when the market falls.

  59. EricL

    This REIT thing is getting comical. SLG May 55 puts, which I unfortunately own, have lost .50 today and 1.25 over the last three days as the stock moved down!  Apparently no one except us actually believes that commercial RE may not be one of the strongest sectors in the economy. Just you way REITs, I’ll get rich of you yet you b#@$%ds.

  60. Peter D

    judah, cwan, chaps, balance and the short stranglers -
    As you know, we are looking to start the February contracts on SPX, but yesterday and today’s move doesn’t make it any easier for us.  This is exactly the indecisive period between 9 and 6 weeks to the Feb expiration, where the short stranglers need to make some judgement calls whether we should start the Feb or not.  The SPX January 1180 CALL is $1.3, 1190 CALL is even more pathetic at $0.8. They are a great hold if the market continues to go up, but don’t provide any downside protection.  Meanwhile, the February 1210 and 1225 CALL are losing value at a quick clip if the market continues to drop.  VIX is also not helpful with a relatively small jump.
     
    If we can mustered a rally to SPX 1150 at year end, the Jan 1180/1190 short CALLs are perfectly positioned, but if we dropped to 1050 in two weeks, the Feb short CALLs will give more profit.  The US dollar continue to rise that can put a damper in the rally.  So I’m more influenced by the dollar move today than before, and thus moving 1/4 of the short CALLs to Feb 1210 strike.  As someone said, Feb has a longer time to expiration (5 weeks instead of 4), it will be a long wait to get the Theta decay. 
     
    On the PUT side, I still have the Jan 925, 950 and 980.  The 980 is at $2.9, which is good to keep.  The 925 is at $1.3, so putting in a roll to Feb 900, which is at $3.9.  I’m not in a hurry to roll, so it’s a GTC order.  The 950 is at $1.8, so keep it and will roll if the market drops lower as the Feb PUT value would go up while the Jan’s are battling with Theta decay.  Will roll to Feb later.
     
    Very indecisive move, but it’s a move to hopefully provide some downside hedge.  RUT seems to be easier as there are still some excitement to sell into with the move up in the past few days, starting a small position with RUT Feb 480 and 680, with the intention of rolling the 480 short PUT to 500 if and when there is a short term bottom in the next few weeks.

  61. samz3700

    Steven and Eric – thanks – had forgotten about the IV -
        My brother who used to work for Hedge Fund selling mostly puts – had said he did not like the inverse etfs for this reason – did not want to be short Vol.

  62. cwan120

    Hi, Peter, balance, and All Stranglers:
    I don’t know if someone already posted this info: Here is the CBOE official web site that publishes the SPX settlement values (i.e., the opening price of SPX to settle the options expired on OpEx Fridays.)
    http://www.cboe.com/data/Settlement.aspx
    The page looks blank initially.  Don’t click the "Weeklys" link.  Instead, keep scrolling down the page until you see the numbers.
     
    BTW, today (Thursday) is the last day you can trade December SPX options.  Be careful!  You don’t know if your options are OTM and worthless until CBOE announces the settlement value tomorrow morning.

  63. cwan120

    PS: RE the web site on SPX settlement values.  I think you can get historical data back in years.  But I haven’t really looked beyond that page yet.

  64. Phil

    EFA/Samz – As you know I prefer EDZ, which are far easier to hedge.  Of course a 1/2 cover is sensible, especially when you are capturing a nice drop like this one.  You can do a full cover with the Dec $55 puts at .42 today and tomorrow roll them to a 1/2 cover of whatever fits, collecting a quick .40 of premium.

    GE/Kustomz – I love them long-term.  I like the fact that they are getting out of GE at what is probably the beginning of a global infrastructure boom – even if we do have a prolonged recession.   Their CRE exposure is worrying and probably why they are looking for cash from GE but, long-term, they’ll make money, even if they have to foreclose on $1Tn in property.  I play GE like they may go back to $7.50 where I’ll DD. 

    C/Steve – It worries me that the government is holding onto their shares for now.

    EDZ/Samz – The bid ask is ridiculous $2.35/2.75 and probably your trade system values it at $2.35 with the stock at $5.55 so it’s not worth worrying about.  The delta on those calls is .98 now and if I could buy them for $2.35 I sure would!

    RIET/Eric – LOL, it is the most amazingly frustrating trade of the year.  Kind of like shorting oil was last year for the first half. 

    Bernanke bounce didn’t last long. 

    I’m still overall very bearish, not finding upside plays I like and not wanting to cover in the way too bearish $100KP.  I’m already thinking that anything that happens tomorrow to the upside will be meaningless and there’s no way I want to be bullish into the weekend so what’s the point of switching now?

  65. jromeha

    Phil, recently you stated that you liked LYG at 3.64, are you now lovin’ them at 3.33 or do you prefer to wait until the smoke clears a bit before dipping into European banks exposed to Greece/Eastern Europe?

  66. cwan120

    Hi, Peter, Just saw your analysis.  Great thoughts!  Will look into some of your recos.  Thanks!

  67. aclend

    Any action to take on TIE naked straddle?

  68. Phil

    Finally V is coming down – how silly..

    LYG/Jrom – I still like them but, like C, at a certain point you just have to give up and wait and see.  We’re falling hard and deep now and we may get a big correction that takes everyone down.

    TIE/Ac – What do you have?  They are finally popping, which is nice but they picked a strange day to do it.

    Dollar making new high to the Euro as soon as EU trading stopped and Euro support slacked off.  FTSE failed 5,250 with a bad finish but DAX is at 5,854, 100 points over the line.  Still, a poor show for the EU markets and the dollar looks strong so we could get another leg down here.

  69. ephmen85

    PGH  I’m short the Dec 10s which will be my second entry.  Take assignment and look to sell calls on a bounce…meanwhile, sit back and take the dividend?

  70. Phil

    Ags hitting 5% rule and still going down. 

    OIH group still holding up thanks to nat gas but probably won’t last. 

    Gold down to $1,105 and if they fail $1,100 then the miners will drop fast.   Copper back to $3.12 too. 

    Oil heading back to test $52.50 – nasty if they fail that.

    Wheeee!

  71. judahbenhur

    Peter, Thanks for all the guidance.  I’m looking forward to getting my feet wet. (Wading in, rather than diving in.)

  72. balancenv

     Phil,
    Recommendation for some RIMM earning play? 
    Thanks.

  73. tchayipov

    Phil/ mattress
    I’m now holding Mar106 with 1/2 coverage Jan 105
    when you recommend to buy next mattress?

  74. wiiboxer

    Phil, what do you of ldk march calls?

  75. aclend

    Sold the Jan 10′s for $2 per previous recommendation. Up $1.17 on the p, down .94 on the call

  76. EricL

    It is tempting to sell RIMM double diagonals, but then you look at the chart for the last three earnings. It can’t happen again, can it?

  77. ssdirk

    Eric – you up for another round of GNW 11′s?

  78. samz3700

    anyone just get an email from wall st. survivor saying their recurring order was cancelled?

  79. EricL

    ss, it’s tempting, but 1.45 right now seems a little low for Jan. I’m going to put a bid in for 1.55 and see if it fills in the days ahead.

  80. ephmen85

    When are RIMM earnings?

  81. jromeha

    Pharm, since CLDX has no options right now and are near their 52 week low would you play them long?

  82. stevenparker

    eph – rimm tonight after the bell

  83. jromeha

    Samz – I just got that message as well…

  84. eben22

    WSS – yes Samz I did too.

  85. ssdirk

    JRW – Yesterday’s straddle paper trade on TNA is flat.  Not a good trade thus far.

  86. Pharmboy

    CLDX/jr – they have not extended the options on them out to next year.  Interesting.  Cold be a nice play into the new year.  I will go in again and buy a few hundred shares at 4.25, being ready to DD a few times.  Medarex sodl some of their stock in them, but I believe they need to raise money themselves.  I like their prospects and with CuraGen, it fills the pipeline quite nicely.

  87. ephmen85

    that makes sense…I knew there was a reason the premium was holding up so well

  88. EricL

    I’m asking .40 credit for just a couple RIMM double diags long Jan 70C/55P, short Dec. 60P/65C. I’ll probably regret this but just for fun.

  89. gel1

    Phil
    I’m buying into the excitement… Do you like BTU today?

  90. bord

    Phil,
    What do you think about a FXI calendar spread, selling the Jan10, buying the May10?

  91. cwan120

    TWM now at $27.20.  Dec $27 puts still have $0.30 premiums, if you think TWM will hold…

  92. cwan120

    I mean selling TWM Dec $27 puts.

  93. Phil

    PGH/Eph -  They will probably head lower on a strong dollar and you’ll get better sales with a higher VIX so I think I’d pay the .50 if you have to tommorrow and wait until next week to see where oil and the markets are.   Generally, with a trade like that, you just want to go long when you are near a strike, like selling the July $10 puts and calls for $2.25 and then forgetting about it.

    RIMM/Balance – Oh we did that yesterday.  Now they are down a lot but I guess you can still buy the March $75s for $2.15 and sell the Jan $70s for $1.72.   It’s just a volatility crush play with a slightly bullish bias.

    Mattress/Tcha – That’s a litle close for comfort.  Generally you want to buy 1/2 x more of puts that have a .50 delta once your puts have a .70+ delta (and our March $108 puts have a .68 delta), generally when you are about $5 in the money as the primary mattress is designed for a 500-point drop, after which it loses it’s effectiveness.  Pretty much you’ll be looking at buying the March $103 puts (now $4.20) when/if we cross below 10,300 and stopping out 1/2 your higher puts (now $5.75) at about $5.50

    LDK/Wii – I like LDK but they are a very frustrating stock so I don’t bother anymore.  SPWRA is my fav and I’d rather go for a March $23/27 spread for $1.70 to make $2.30 than mess around with LDK calls but solar is tough right now, especially if everyone starts worrying about where funding will come from and if the climate talks fail.

    TIE/AC – It’s very important to use stops on those plays.  I belive the idea was to buy TIE if it crossed $10.   Still, if you sold the $10s for $2, they are now $1.60 so not a big issue and an easy roll to March $12.50s so you can wait or you can add the 2011 $10/12.50 call spread for $1 as it’s already $1 in the money and has $1.50 upside (150%) if your caller goes further in the money.

    Whee again!  Just like a roller coaster today!

    WSS/Samz – They have some serious system problems this week since they changed the symbols over.  I think they are working on it.  They never filled my IYT puts yesterday, costing me about $2K. 

    BTU/Gel – I don’t like buying anything today.  This has the makings of a real correction.  If BTU hit $40 again I might like selling $40 puts for $1.50 (now .70) but not here.

    FXI/Bord – I like a vertical or a straight call better.  They have a long way to fall.

  94. yodi

    ephmen85
    Rimm today after close

  95. jlui_tx

    Hi Phil, what do you think about GILD? Is it time to sell puts?
    thanks

  96. sthompson

    Any really good short ideas in case of a real correction? I do play the disaster play Phil suggested. But looking to be more bearish. Currently not bearish enough.

  97. ssdirk

    Notice again how VZ is strong in the face of this move down.

  98. Phil

    Homebuilder Hovnanian (HOV -6.4%) doesn’t expect to be profitable until after 2010, says CEO Ara Hovnanian in discussing a "year of transition" ahead. The company reported its 13th straight quarterly loss Wednesday.

    And some springing into action at Citigroup (C -7%) – in the PR department. The bank is suspending foreclosures and evictions for 30 days, a goodwill gesture expected to help 4,000 homeowners.

    Europe’s biggest clearinghouse, LCH.Clearnet, begins guaranteeing interest-rate swap trades between banks and clients – which could clear $146T in notional interest swaps.

    The latest AAII measures of investor sentiment are indicating the fewest bears since May 2008 – and the highest bull-to-bear ratio since summer.

    Good article on people walking away from mortgages:  Businesses walk away from contracts all the time, whenever the benefits of doing so exceed the costs under the terms by which they are bound. McArdle is certainly right to point out that companies frequently honor costly bargains they could get away with breaking, because their reputations would be harmed by walking away. But, reputational costs are economic costs. They are a part of the cost/benefit analysis that firms use in making decisions. It is not virtue that binds them to keep their word, but medium-term self-interest. Similarly, homeowners consider the hit to their credit rating and potential loss of social standing prior to walking away.

    GILD/Jlui – I think they "look" good here but I wouldn’t buy anything ahead of the weekend other than a very small entry.

    Bearish/Sthom – The Commercial Realtors like BXP and VNO and SPG are all still really high as are V and MA – all should fall pretty hard if the market turns down but, then again, so should the Dow and it’s easier to cover.. 

    WDC making new highs in this mess.  ANR too.

  99. bord

    Per FXI, how is a straight call advisable if you think they have a long way to fall? I thought that was the naked option buying was largely verboten here.

  100. EricL

    LMAO at C. They wanted to be like the other big boys and pay off the TARP and their their fat banker bonuses too. But like a handicapped child on the ball field, they instead fell flat on their faces in front of everyone.

  101. yodi

    Hi Phil ,
    You recommended the SPWRA dec21p which is closing tomorrow do you recommend to sell the jan 24 put for the next step tks

  102. kustomz

    And some springing into action at Citigroup (C -7%) – in the PR department. The bank is suspending foreclosures and evictions for 30 days, a goodwill gesture expected to help 4,000 homeowners.

    In other words its going to take 30 days to shuffle some people around as that department is clearly understaffed

     

  103. llorens

    MA is up considerably today in the face of headwinds to most other financials, including V. Do you suggest shorting here or closer to $250?

  104. dflam

    Hi Phil : I’m "learnin" every day from u.Took your advice on rolling dn on the 2011 C calls from $5 to $4 today.I am also short the  2011 $4 Puts,sold at.$.84 ,now.$1.21. I now have 80, $4 calls and 40, $4 puts.I was thinking of DD on these puts to 80 to match quantity of calls,or as an alternative,close the $4 put position and sell 80 Jan. $2.50 puts for $.37 which would be less riskier &also put cash in my pocket. What’s your input? Thank you
    dflam  

  105. bgbigelow

     Phil do you have any ideas to play RIMM earnings.  There seems to be pretty nice premium in the Dec 65 calls.  Maybe Jan/Dec calendar?

  106. kustomz

    If MOT fails with their new product they should exit the market. Palm is holding on by a very thin string. Sony/Erc DELL..nevermind. All you have left is AAPL RIMM NOK and possibly GOOG if they get into the game.

  107. kustomz

    DFS what a PS

    The latest results include an after-tax gain of $285 million related to an antitrust settlement. This is the last payment related to this settlement. The year-ago results included an after-tax gain of $535 million from the antitrust settlement.
    Discover will implement the new accounting rule, in fiscal 2010, requiring companies to bring their off-the-books securitized loans onto their balance sheet. This would result in a $1.3 billion after-tax charge to equity in the first quarter of next year. As a result of this change, Discover will bring on its books $21 billion of assets and increase reserves by $2.1 billion. This is a "very significant change that we’ve been preparing for," said David Nelms, Discover’s chief executive.

    The company got $1.2 billion in March from the U.S. Treasury’s Troubled Asset Relief Program in exchange for a stake in the company.

  108. cwan120

    Although BNI Jan 2011 $95 put has fallen from $4 (our entry) to about $3.1, it has been sitting at $3.1 for weeks.  Any news on the merger?  It’s quite tempting… $3.1 for just a few weeks.  Exactly when do they expect to finalize the merger?

  109. Phil

    FXI/Bord – Oops, sorry, that was FXP I was thinking of!    So the answer to the calendar spread is no way and I’d rather go for FXPs like the June $6/9 bull call spread for $1.40.

    C/Eric – Not so bad, they sold out but at $3.15.  Does show people are willing to go very long on banks I think.   BAC skimming along $15, will be bad if they fail. 

    SPWRA/Yodi – It’s too uncertain to sell puts this week.  If we get a big sell-off next week the VIX will be higher (so we get paid more for the puts we sell) and the prices will be lower (so we can sell lower strikes for good money).  Right now Europe finished at the lows and we are at the lows and Asia didn’t look too hot – that’s not a good reason to go bullish on a 200-point drop from the top, not even 2.5% yet. 

    MA/Llorens – I made V money and don’t want to risk it on a double dip but I do think MA is pinning up for expirations, which does make the Jan $230 puts interesting at $2.05.  Why the $230s?  Because a $10 move down doubles them and another $10 move down doubles them again (the $250 puts are $8) while a $10 move against them drops them 50% so a favorable risk/reward and you can always roll ‘em up if they go against you without over-committing

    C/Dflam – You are learning!  Yes, I like the DD idea better but keep in mind what you are commiting too.  It sounds good to get C for net $2.20 now but the reality is, when C is at $2.20, you won’t feel that way. 

    RIMM/BG – just the spread above (one I liked much better yesterday). 

    Phones/Kustomz – I think there is only room for so many players due to the fairly low price points, market, distribution, support, production and R&D costs involved in getting $200 phones into a 100M people’s hands.   They just can’t all survive.  NOK is probably not going anywhere as they have the $49 global market locked down, AAPL is AAPL, RIMM has a lot of momentum but may be screwed if AAPL starts making corporate inroads but it will take years for them to die,  MOT already died and this is just the zombie corpse of MOT reanimated until their head gets cut off and GOOG is most likely to do it.  SNY/Eric also have a nice international niche and, oddly, pioneered Android but I don’t think they are a threat to anyone.  So there you have it - MOT loses.

    National Beef (NBP) becomes the latest of seven companies postponing an IPO this quarter, putting off a $293M offering that failed to draw enough interest at $15-17/share. Three other private equity-led offerings have cut prices this week in what “might be an indication of the exhaustion of the market,” according to one manager.

    Sector ETF weakness: Gold Miners– GDX -5.3%. Gold– GLD -2.9%. Agribusiness– MOO -2.8%. Silver– SLV -2.6%. Coal– KOL -2.5%. Steel– SLX -2.4%. Solar– KWT -2.3%. Basic Materials– IYM -2.3%. Gasoline– UGA -2%.

    Dow leaders: GE +1.3%. VZ +0.4%. XOM +0.4%.
    Dow laggards: JPM -2.6%. AXP -2.1%. DIS -2.1%. KO -2%.

    Nothing but a 5% rule bounce here, off the 1.5% line, up 0.3%.  Generally -1% is the tough line to get back over and we can take a bounce seriously if they get there (good old Dow 10,350, where we still like the $103 calls, now .75).

  110. kustomz

    NBP, a brazilian company was going to buy them for $560 million plus the assumption of National Beef’s debt.

    A bunch of IPO’s failed in the past 2 months, a strong signal the markets have topped

  111. Phil

    BNI/Cwan – It should March-April than that but Buffett can be very fast and banks never hold him up so no way to tell but I still like the play (selling the puts, not buying).  We got the good premium due to initial uncertainty, after that they tend to settle in to a pretty low price for the duration. 

    Of course, we just took advantage of the opposite situation yesterday, buying the XTO Jan $47 puts yesterday for $1 (now $1.35!) as they were too complacent and we caught that bad news rumor that XOM may step out if they don’t like the drilling regulations. 

    IPOs/Kustomz – Well you have C and BAC sucking up $50Bn in what’s practically an IPO and I’m sure a lot of would-be IPO money went their way.  That goes to my overall theory that there is NOT an infinite amount of money and it can EITHER go to stocks, or bonds, or TBills or commodities and we have pretty muched reached the limit of expansion until we start putting money back into investors pockets (mainly through wage growth).  That’s a long way off so now I think it’s just a tug of war for the existing capital pool.

    All is well: Dallas Fed President Richard Fisher told reporters on the sidelines of a Chamber of Commerce conference in Little Rock, Ark., that inflation still looks mild: "I don’t see anything yet that ruffles my hawkish feathers." He expected the economy to grow between 3-4% in the fourth quarter, after the 2.8% growth in Q3

    All is not well: Air carriers make a sudden turnaround, dropping advance-purchase rules, which slashes holiday fares – some by as much as 79%. The ATA says fewer passengers are getting on board: 41M compared with 42M last year.

    Dollar getting sold off hard in last 2 hours.  They are trying to keep it under 77.5 so as not to freat Asia out tomorrow.  $1.436 to the Euro, $1.6175 to the Pound and 89.75 Yen – about where we started this morning.

    S&P 1,100 should confirm a move up with Dow 10,350 if it happens

  112. kustomz

    Dollar had a strong move off 77.60…i think they need to test for support

  113. cwan120

    BNI / Phil: Thanks!  For some reasons, I got the wrong impression that it would be done in Jan / Feb.  I should’ve checked…

  114. jcmcn5

    Phil,
    I still own some UYG shares and have written the Jan 5 calls against them at %72.  The calls are now $0.53, which only gives them about $0.15 of premium.  Anything else you’d do to enhance the return, or just sit tight and let the premium come in a bit more?

  115. Phil

    Cramer is here to tell us how great things actually are.  I guess the people he’s talking to somehow don’t get counted in the economic data. 

    We should have more faith in Time’s Man of the Year, Bernanke, he says.  Didn’t he once say "they know nothing?"

    UYG/Jcm - Enjoy the fine protection over the weekend I think.  There’s not much flexibility in these small-money contract sales but they are great money, even if you do get called away so not much to do but wait for your .15 (which is yet another 3% of your $5 investment). 

    That was fun, we went right to the line that time.  You’ve gotta love the 5% rule, keeps us from making so many bad decisions…

  116. 1020

    BAC breaking $15…..

  117. kustomz

    HAL is on the verge of short circuiting :-)

  118. Phil

    Great for our SO play:  Southern Co. (SO -1.1%), America’s top power producer, is reportedly set to win approval for a loan guarantee to build a nuclear plant. The company – one of four on a short list for jump-start financing from the government – wants to build two 1,150-megawatt reactors near Augusta, Ga., though no new plants have been licensed in the U.S. since the 1979 Three Mile Island accident.

    The global economy is still fragile, says Bank of Canada Governor Mark Carney, but the bank isn’t forecasting a double-dip recession, if stimulus starts getting handed off to the private sector. "And at this stage we see that (handoff) more likely." He warned sovereign debt would be a problem in the medium term.

    3pm volume is just 116M so not a lot of meaning in todays action.  Yesterday finished about 210M with a 25-point pop into the close – about where we are now at 10,350

    Boy, everybody is so calm today.   A couple of years ago, if we had a 200-point drop in 2 days during expiraiton week, this chat room looked like a trauma center.  I guess all these conversations do sink in over time…

  119. kustomz

    I have never seen GOOG trade with such low volatility 

  120. judahbenhur

    Phil/calm.  Must be your calm demeanor, Master Phil.

  121. EricL

    RIMM IV starting to lift off. Just got filled on those spreads.

  122. yodi

    Phil any action suggested on BAC 14.90

  123. EricL

    PRU now smack in the middle of those condors from yesterday. Perfect — now just hold right there for 28 days.

  124. Phil

    BIDU and GS hitting 2.5% rules to the downside.  Will be interesting to see if they bounce or break. 

    Still can’t bring myself to cover DIA puts based on gut feeling but the proper move is to sell 1/2 the 12/31 $103 puts for $1.30 as that’s .75 per long for 10 days and it pays for 1.5 rolls up so silly not to do

    PRU/Eric – Hold, hold…..

  125. craigzooka

     I thought I would post my current portfolio up here and see if you guys think I am balanced enough.  I am not going to do another trade today so I figured this would give us something to talk about.
     
    AFL
    +100 shares at $45
     -1 JAN 45 PUT  / CALL for net $41 If called away and $43 if put to me
     
    AMAT 
    +100 shares at $13.36
    -1 JAN 12.5 PUT / CALL for net $11.94 if called away and $12.64 if put to me
     
    ARNA
    +200 shares at $4
    -1 JAN $4 PUT / CALL for net $3.20 if called away and $3.60 if put to me
     
    NUE
    +100 shares at $42
    -1 JAN $42 PUT / CALL for net $38 if called away and $40 if put to me
     
    This is currently covered with the following mattress and half cover.
    2 DIA MAR $106 PUT at $5.95 
    -1 DIA JAN $104 PUT at $2.25 
     
    Alrighty, any comments, questions, or suggestions welcome.  I figure we could use this as a discussion point for a while.

  126. Highlander

    phil,
    whitney pridecting gs down next qtr!

  127. Pharmboy

    MS and GLD put spreads I mentioned yesterday or Tuesday are also very sweet today…..

  128. Cap

    Back from meetings … let’s close at the lows today dammit !

  129. kustomz

    A guy on CNBC that makes sense and he gets 20 seconds of exposure

  130. tchayipov

    craig/ portfolio
    I think it will be nice to have positive Theta short plays, like buy/write of EDZ, SRS or DXD. Or you can sell puts on them
    I have them in my portfolio and even when market slow drifting up they still make money

  131. tchayipov

    SRS didn’t cooperate much today

  132. EricL

    Anyone who wants to see HFT computer trading in action just look at C.’s one-minute intraday chart. Strange.

  133. craigzooka

     tchayipov,  
     
    I have considered adding some of these, mainly picking from Phil’s hedging for disaster post.  Do you feel as though my DIA puts are not enough cover for the amount of capital I have deployed?

  134. Phil

    Balance/Craig – It seems fairly balanced but, more importantly, how is it performing on the 2-day drop?   NUE might get whacked if we have a big sell-off but, other than that, they are solid picks.

    CNBC/Kustomz – 20 seconds of sense is like a 2-day allotment for them.

    VNO Jamming up into the close, big mistake not closing the $70 puts while I was ahead.   Still playing for another 100-point drop tomorrow.  If it comes early, we may run up into close. 

    Gold is possibly going to break down overnight and if it takes copper with it (now $3.12) then huge sell-off in European miners and the banks silly enough to lend them money.  I don’t know what China will do if copper starts falling fast, they bought enough copper this year to supply the entire planet next year and that can get messy if they get worried about it.

  135. gel1

    Highlander/Whitney
    My feeling is this woman plays the markets, and just wanted to get a better entry point over the next few days

  136. sthompson

    I’m confused how we can have significantly more volume in the SPX(S&P 500) and the NYA (nasdaq) and the Dow have so little. Is there an explanation?

  137. tchayipov

    Craig,
    I’m just very greedy for premium, I use some mattresses but only for disaster protection, but at the same time prefer to make money from both side if it wont be disaster and market just corrects for 2.5-5%

  138. EricL

    FDX really took it on the chin today.

  139. Phil

    Volume/Sthom – C was a large part of the volume today so maybe misleading. 

    Gold $1,096, Silver $17.10, Copper $3.12, Oil $73.69, Nat gas $5.73 (up 5% of course).

    Now comes RIMM, ORCL and PALM.  Also ACN, APSG, COMS, DRI, HEI, NKE, ZQK, SCS and TTWO so a busy evening.  Tomorrow is KMX, CCL, NEOG and STEI.

    ORCL looks good.   RIMM is usually slow to get the numbers out. 

  140. Highlander

    nice beat by rimm

  141. dflam

    craigzooka    : On ARNA, you have 200 shares but you only sold 1 Jan. Put/Call. dont u need to sell 1 moreP/C
    dflam

  142. kustomz

    If RIMM kicked a$$ you can bet AAPL knocks it out of the park

  143. sthompson

    Is C listed on the Nasdaq and the S&P 500? Those were the two with the most significant volume. I know they were removed from the Dow.

  144. Phil

    RIMM looking good, right to the top of our range at $70!  Glad we didn’t sell the Decembers…

    Of course, with RIMM, it’s 10M units sold but how many are new accounts?  A lot of people lose their job and phone and go out and get a replacement so that can bump sales without bumping long-term revenues. 

    That’s going to erase about 1/2 the Nas drop – we’ll have to see what sticks.  DIA 12/31 $103 puts can still be sold to half cover in after hours trading – seems like a good idea as ORCL and RIMM are rally fuel.   

    PALM, of course, not so lucky… 

    C/Sthom – I’m pretty sure they are still in the S&P, not the Nas but in the NYSE too.  The Nas has plenty of silly stocks they can pump up the volume with. 

  145. samz3700

    congrats to longs on rimm – covered calls not looking so hot

  146. craigzooka

    dflam,  If they get bought out they will probably pop huge.  That is the reason I am playing them.  So I don’t want to give up all of my upside by having all 200 covered by calls.  I would rather have half of them covered.

  147. stevenparker

    Rimm – their margins have increased?
    Revenue from 2.78 to 3.92 is +41%, earnings from .69 + .03 (adjust for buyback) to 1.10 is +52%
    Well, a sigh of relief from me I hope to recover from a short strangle on their last earnings.

  148. Phil

    Ah, here we go:  Citi was 47% of all NYSE volume today.

    MS walks away from 5 San Francisco office towers, which they bought from Blackstone.  Buildings have lost 1/2 their value since 2007 and it was cheaper for MS to stick the bank with them.  Oh yeah, CRE is the place to be!

  149. concreata

    Phil – after hours trading – I was just  told by Schwab they can’t trade options after hours (after 4:15 EST) only take orders but not execute until next bus day?

  150. EricL

    concreata,
     
    That’s true of all options brokers. No trading after 4:15 (and after 4 only on index options).

  151. EricL

    If you look at the longer-term RIMM charts, an earnings reversal like today usually results in a nice trending pattern in the direction of the reversal. So I’m going to roll the call side of those diagonals into verticals tomorrow, since there will be more upside if that pattern holds.

  152. ernest

    I am a new member on here (just paid for my premium membership today).  Is this the place where all the latest comments always are (including trades)?  Or should I be looking elsewhere as well?
    Thanks!

  153. Phil

    After hours/Concreata – On the index ETFs you should be able to trade until 4:15.   I realize now that I posted my comment after 4:15 anyway so a bit late for the trade.  Of course, there’s always the futures…

    RIMM/Eric – Maybe back to the low $80s if the market hold up in Jan.

    Welcome Ernest!  Yes, this is the place (although tomorrow it will be the new post of course).   You can always find my latest post by clicking on my name above.  Optrader and Oxen Group also have chat sessions under their last post (Optrader only posts about once a week but discussion goes on under the one post).  Make sure you read the  New Members Guide and our Strategy Section in the very least.   Homework assignment #1 is to use my Phil tab and go back and read the last 30 days worth of posts and comments.  This accomplishes three things – You will be all caught up with the things we are following and the trades we are making, you will get to know the people and you will see hundreds of questions and answers so by the time you finish that – any question you still have is probably going to be a really good one!

  154. ernest

    Thanks Phil!  I will get to work :)

  155. lflantheman

    Now let me see……RIMM does waaay better than expected.  I wonder what AAPL is doing in comparison?  Perhaps I should get some (more) of them thar AAPL calls.  :)   

  156. Phil

    AAPL/Iflan – Just keep in mind that RIMM was beaten down (unjustly) while AAPL has high expectations.  

    One thing about our reporting companies (NKE, DRI, ACN) – All are reporting lower revenues than last year.  All cut expenses substantially and are down about 5-10% in reves so, Presto!, better profits – but there’s not too much to be read into that for the global economy.  RIMM was equal to last year as was TTWO.  ORCL was actually up 3% but much of that was overseas revenue with the favorable exchange rate. 

    Merry Christmas – You have 30 days and then GET OUT:  Fannie Mae (FNM) and Freddie Mac (FRE) suspend evictions through Jan. 3, joining in with Citigroup (C), who earlier suspended foreclosure and eviction activity for the holidays.

    The "shadow inventory" of homes – likely in the pipeline to sell because of foreclosures and delinquency – gained 55% from last year, to 1.7M homes, estimates First American CoreLogic.

    Free money continues to flow:  The Fed’s balance sheet grew for the first time in almost a month – to $2.239T from $2.190T – as its holdings of mortgage-backed securities jumped and borrowers hit up the discount window. MBS holdings increased to $901.23B from $854.31B. Discount window borrowing gained to $86.2B from $84.3B.

  157. stevenparker

    RIMM was equal to last year
    do you mean revenue? The way I read it RIMM’s revenue wasn’t equal, it was up 41% from the same quarter one year ago?

  158. falga

     borrowers hitting the discount window?  strange in light of excess reserves held by Banking system
    http://seekingalpha.com/article/178747-why-are-banks-holding-so-many-excess-reserves?source=article_lb_articles

  159. Cap

    Did the site go down today ?

  160. Phil

    RIMM/Steve – You are right. RIMM was = to expectations not to last year.  Actually their growth is very impressive, better than I thought.  How the hell were they trading below $60 when we grabbed them last month?
    Reserves/Falga – I guess they are only excess until the books need to be balanced at some points so the banks are fearfully keeping the capital around that they know will be required should they have to start marking some assets to market. 

  161. Cap

    Eric L — bid on reits is super ridiculous.   volume was incredibly low.  did some nice scalping in slg and spg the past 2 days.  screw "them".

  162. Phil

    Site/Cap – I had trouble getting in at one point around 3:30 but then it came back within minutes. 

    Hopefully everyone knows to follow me at Seeking Alpha Stock Talks, where I flip  to the minute there is trouble in our own comment section:  http://seekingalpha.com/author/philip-davis/stocktalk

  163. Cap

    Eric L – 9:59 you were right on; hope you acted on that !

  164. Cap

    Phil; yeah that’s about when I had trouble; I was out at mtgs. midday and when I got back I couldn’t post comments.

  165. cwan120

    Hi, balance, Peter & chaps, I just realized that I missed a huge amount of discussions among you folks in yesterday’s post.  But I have to log off now and have to wait until some other time to read them.
    Great work, balance!  Keep us updated!

  166. newparadigmz

     Phil…I think you will appreciate…
     
    http://www.youtube.com/watch?v=17jymDn0W6U&fmt=22

  167. Cap

    FDX:  Hey, I thought everything was great with shipping; hunky dory !  So what up FDX ?

  168. terrapin22

    any thoughts on buying puts on TLT or calls on TBT to profit from bonds imploding in 1Q10?

  169. kustomz

    Hey newp cool video but they left out the moon!!! Our most important satellite, for without the moon there is no life on earth.

  170. gel1

    terrapin22/TBT
    I like the short puts for premium income at the moment (June ’10), however when the long term bonds start to have a more significant boost in their rates, I will then buy the calls. I am guessing the later part of the 1st quarter ’10

  171. bord

    Phil,
    Ditto on Yodi’s question of BAC 14.90, any suggestions or sit tight?  Last week I rolled down and out from BAC Feb18 calls to a bull spread BAC May buy 16, sell 17, and the pain just keeps on going…

  172. balancenv

    RE: SPX Strangle simulation.
    Peter, your estimate is right on the mark! With the put spread when in danger, in the 5 cases we can always roll further down to escape the disaster. So with this ‘fix’, lots of parameters to play, like instead of .91, how about .92, or better yet .8, etc. also how many put spreads to purchase at the beginning? 2 or 3, or 4?
    I think for me right now the most important thing is to get the PM calculation going so the whole picture is clear.
    On this subject, ssdirk has kindly provided his formula as follows: 
     
    max of 

    The current marked-to-market value of the option plus 20% of the underlying stock less any amount the option is out-of-the-money; or [((C+0.20*I)-(St-I))*100]
    The current marked-to-market value of the option plus 10% of the underlying stock value; or [(C+0.10*I)*100]
    The current marked-to-market value of the option plus $50 per option contract [(C+50)*100)]

    Where C = call/put premium, I = index value, and St = strike.  On the spreadsheet, the index value, the Strike & Premium are all inputs. From what I understand from PeterD, for PM, replace the 0.20 with 0.08 for SPX & 0.10 for RUT, replace 0.10 with 0.04, and replace $50 with $37.50.
     
    However I found from here that the PM is calculated as:
    ——————-

    ** High cap, broad-based index options, ETFs/ETF options (i.e.SPX, OEX. etc.) – Margin requirements based on market movements up 6% and down 8% and 10 intervals in between. 
     
    **Non-high cap broad-based index options, ETFs/ETF options (i.e.QQQ, Russell, etc.) – Margin requirements based on market movements up and down 10% and 10 intervals in between.
     
    **Stocks, stock options, single stock futures, narrow based indices and ETFs and ETF options – Margin requirements based on market movements up and down 15% and 10 intervals in between
     
    There is a minimum of $37.50 per contract for each portfolio. 
    ——————-
     
     
    If SPX strangle fans can conclude a definite PM formula while I code the put strangle ‘remedy’ into the simulation, we’ll have a decent base system. 
     
    Thanks 
     

  173. Phil

    Good morning!

    Futures are bright.  Asia sold off but Europe seems happy, reversing yesterday’s losses.  Dollar is down a bit so no squeeze yet but there is nothing to be so happy about other than the nice earnings we had yesterday and that doesn’t fix the big picture. 

    Oil is flying, up to $75.50 and that’s going to be a tempting futures short at that price.

    We’ll have to wait and see as to the indexes but it’s the same thing over and over with these futures pumps.  Until there is real volume to the upside, it’s very hard to get enthusiastic about playing them.

    Universe/New – Kind of makes you wonder why they charge so much for land on Earth – we are like the boondocks of the Universe, not even a good spot in our own Galaxy…

    FDX/Cap – Suddenly (2 weeks later) things aren’t so good.  Amazing.

    Bonds/Terrap – TBT all the way.  They had a little pullback yesterday and will go down as the dollar gets stronger (more demand for dollars = less interest paid on dollar assets) but a long-term play on rates is the way to go.  I like the 2011 $45/50 bull call spread for $2 with a 150% upside and, if TBT goes down, you can offer .50 per $1 to roll your call lower and increase the spread.  Also, as it’s unlikely you get a big, sudden move up in TBT (usually, in a crisis, rates go down), you can pick up a little cash selling 1/2 the Jan $51s for .25.  Do that 8 times and you knock $1 off your long position. 

    BAC/Bord – I think they are going down because C is going down.  BAC is a much more sturdy bank than C (don’t forget they sucked up MER) but it’s a long-term play.  I only like the Leap bull call spreads BECAUSE of the ugly uncertainty but, if they get any cheaper, I’ll be liking the buy/writes too.

  174. samz3700

    Phil -
    Are you still in the tbt June 42/46 bull call spread or did you exit? I got in a little late so I  never hit the 20% profit mark.

  175. bord

    Question for Phil/everyone, I have been studying very hard the archives, etc. and a question comes upon methodology and doubling down (DD). Bull call spread as example, let’s say I open a bull call at a debit (eg- call cost minus call sold) of $1. That long call position then drops 20%, decision is made to double down. When DD is made and more calls bought, do you correspondingly also sell more calls as part of the double down? I am just not clear from the posts how the  methodology addresses DDing the short calls in bull spread positions, whether you DD on the short calls or if they get covered or 1/2 covered. Thanks!  

  176. ssdirk

    Can oil get more ridiculous?!?

  177. bord

    Oil is not about supply/demand right now…. it’s in a knife fight with the dollar. One thrusts up, the other bleeds.

  178. Peter D

    hey balance, we won’t have the definite formula for PM as we don’t know the exact VIX level for a -8% or -10% move, so let’s do an estimation using the option strikes in the data points.  There could be several scenarios:
     
    1- 8% drop on the next day after the short strangle was initiated:  Let’s add X% (use 4% for now) to account for the increase in PUT value due to the higher VIX, and subtract X-Y% (use 2% for Y) on the CALL value, i.e.
     
    If SPX is 1,000, the short strangle was 900 and 1100, then look up the 1,020 PUT value to estimate the value of the 900 PUT, and look up the 1160 CALL to estimate the value of the 1100 CALL.
     
    2- 8% drop N weeks after the short strangle was initiated: let’s subtract the Theta for N weeks from the same 1,020 PUT and 1160 CALL
     
    3- 8% gain immediately after the short strangle was initiated: VIX would decrease in this case.  We can do a reverse of 1, but use 2% for X and 0% for Y, i.e. Let’s subtract X% (X= 2%) to account for the decrease in PUT value due to the lower VIX, and subtract X-Y% (use 0% for Y) on the CALL value:
     
    If SPX is 1,000, the short strangle was 900 and 1100, then look up the 800 PUT value (would be 820, minus 20 points for decreasing VIX to SPX 800) to estimate the value of the 900 PUT, and look up the 1040 CALL to estimate the value of the 1100 CALL.
     
    Lastly, we can do a simulation of any drop or gain using the above.  X would increase proportionally with the drop to account for VIX.  We can use X as 50% of the drop as a conservative estimate for changes in VIX.
     
    Have fun and thank you for the simulations!

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