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Wednesday – Weakness or Consolidation?

People have gotten so used to immediate rescues off any drop that holding a floor for two days brings out the doomsayers.

I remember a time, many years ago, where we could go a whole week without the Dow moving 100 points – TOTAL!  I know that sounds like it must have been back before the Internet or even electricity but really, even between 2005 and 2007, the VIX averaged 12 - less than half of where it is today and, pre-1997, that was about the norm for the market.  Back in those days, we used to buy stocks because we thought the company would grow and we wouldn’t hide in ETF "baskets" where we buy every single stock in a sector, as if quality was meaningless and the entire market would trade as a block.

Sadly, ETF funds (according to Blackrock) have now hit $1.032 TRILLION at the end of 2009 and that figure is up 45% for the year!  That’s right, since their inception, we put about $700Bn into ETFs but, last year, another $300Bn was plowed in – mostly into new commodity ETFs (which creates a very false demand but is self-fulfilling at first).  US ETFs account for $706Bn while Europe has $224Bn so imagine how far we can pump up Asia and other emerging markets if we can convince the sheeple to "diversify" over there!  And ETFs have plenty of room to grow as BlackRock has done an excellent job of promoting them as a way to "take control of your Investments" as they look to capture more of the $19Tn mutual fund market. 

Hedge funds make up just $1.5Tn of the investment money and, as a Hedge Fund manager, I can tell you we could not be more thrilled to see more and more money going into index and commodity funds that BUYBUYBUY and SELLSELLSELL based on rules I can read about in the prospectus.  You, the ETF investor are playing a game where your money will be put to work at a certain time and under certain conditions every day and I, the Hedge fund manager, can read your entire playbook and can make my bets ahead of you any time I choose and, even if you see me betting, you still can’t change because you (your ETF) still have to follow your rules.

Now we have launches of CRBA, CRBQ and CRBI ETFs, even MORE ways to pile money into commodities – this following closely on the heels of PLAT (platinum) and WCAT (wildcatters) – it’s MADNESS I tell you!   Apparently, whenever the big boys have positions to dump now, they just start an ETF.  You can throw any crap stock in an ETF and people will buy it.  This is much the same way that investors would buy toxic loans because the IBanks (the same guys who now put together the ETFs) would bundle them up with a couple of good loans to make the bundle look much better than it really was. 

Here’s a fun exercise for you ETF holders.  Outside of the "top 10 holdings," I challenge you to find out what stocks your ETF actually holds.  When you buy XLF are you buying AIG?  When you buy IYT, how much YRCW are you buying and are you still buying BNI at $99 even though there’s no possible way it can appreciate?  What if I have those answers and you don’t – do you think that would be unfair?  That’s what ETF investing is, we (the top 10%) herd the suckers into a rigged game – it’s like playing "go fish" where we can see your cards but you can’t see our cards OR your cards! 

Don’t get me wrong, we play ETF’s all the time, even leveraged ETFs, which are an exercise in stupidity to invest in – but we play them for what they are and they are NOT generally a good investment.  We like XLF but only because we can get suckers to buy overpriced options from us and we loved IHI at $40 earlier this year but we took 25% and ran.  ETFs make good momentum plays, especially the ultras with the leverage they provide over the short-term, but don’t build your virtual portfolio with them and we love to use a sell-off like this to identify the stocks that get taken down with their ETFs for no good reason other than being stuck in the herd.  Unfortunately, the same way ETFs exaggerate the moves up in the market – they exaggerate the moves down and, as we fail to hold our 5% levels, we can trigger selling in the ETF market that can take this market down to the 10% levels we identified on Monday.  

Anyway, on to the markets!  Asia was down AGAIN today with the Shanghai off 1% and the Hang Seng off just 0.4% but they fell 400 points off a morning run and hit my 20,000 target, up with a very small save into the close.  India dropped 3% so still a huge drag on that side of the globe overall.  We did take our EDZ/FXP money and ran yesterday as we expected to see a bit more of a bounce but things are still weak over there and we sure aren’t providing much leasership as our US indexes lounge around the 5% lines. 

In a story we’ve been following of grave concern, Credit Default Swaps are still rising in value and now also increasing in volume as well.  The net amount of credit-default swaps outstanding on 54 governments from Japan to Italy jumped 14.2 percent since Oct. 9, compared with 2.6 percent for all other contracts, according to Depository Trust & Clearing Corp. data. European countries led the jump, with the amount of protection on Portugal climbing 23 percent, Spain 16 percent and Greece 5 percent.  So the record levels of debt being purchased at Treasury auctions are being hedged with record levels of bets that those debts will default by big money investors.  Hmm, can we think of another time that big money investors bought something with one hand while betting against it with the other?  I wonder how well that turned out?

The same mistakes that were made lending money to less than qualified mortgage borrowers are now being made lending money to less than qualified nation borrowers and both Nouriel Roubini and I are very concerned this will all end badly.  If you thought you were angry about GS getting rich on swaps as MER and LEH wen under, imagine how we’ll be feeling when GS makes Billions as the United States goes under!  Actually, thanks to the Supreme Court and Madison Avenue PR firrms, we’re going to feel however Goldman tells us to feel, right?

I was somewhat encouraged that Obama was talking about freezing some spending and we were going to form a debt commission to get on top of this problem but the MSM has gone on the attack already on Obama’s plan within 24 hours of the announcement and the Senate just struck down the idea of having a commission that would look to balance the budget by a 53 (in favor) to 46 vote as we now seem to need 60% of the Senate in order to get anything done these days.  Looking at our national debt clock, you can see why it’s more fun to stick our heads in the sand than contemplate these numbers.  The part I find disturbing is the state and local debt of almost $3Tn – there’s a number no one talks about and our government is taking in $2.1Tn in tax revenues on $3.5Tn in spending this year – that does NOT sound like an improvement. 

Like Lot in Sodom and Gomorrah, we can’t find 60 righteous senators who want to get an honest assessment of this situation – perhaps because we all know what the answer is (cut spending, raise taxes) and now one has the guts to actually say it out loud.  We’ll see what, if anything, Obama has to say on this subject in tonight’s State of the Union Address but Fox has already declared his spending freeze a disaster and a Public Policy Polling nationwide survey of 1,151 registered voters Jan. 18-19 found that 49 percent of Americans trusted Fox News, 10 percentage points more than any other network.  Wow – that is sad!  

Europe is down over 1% ahead of the US open as rumors fly that other governments aren’t as willing as we are to plow headlong into the debt wall and may be withdrawing stimulus measures this year.  Greece is denying reports that, in addition to the $11Bn worth of bonds they sold on Monday, that they are trying to sell $35Bn worth of bonds to China and that news send Greek bond yeilds flying this morning. 

We went a little short into yesterday’s close and we are now looking at the strong possibility of another 5% drop.  We’ll still be doing some bottom fishing but we’re just slowly scaling into good companies with strong hedges – fully prepared to buy a second round at a significantly lower price – just in case!

Don’t forget we have the Fed at 2:15 – that can move the markets either way but any indication of tightening will send us lower


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  1. sns1

     Phil- perhaps for a weekend discussion, it would be great if you could expand on the ETF rules so that we can understand better when the buy/sell orders for the ETFs get done and how to make day trades around them

  2. judahbenhur

    Peter,  Great set of posts last night in the "Q&A with Peter D" format.  Thank you.  I also set some strangle orders yesterday morning that filled in the afternoon.  I’ve been scaling in slowly, so still lots of margin to spare, and keeping $20K set aside for each SPX strangle (though $10K for each RUT strangle).  This month’s movement has been very useful for me, as I see how profitable it can be to wait for surges in the VIX. 

  3. pstas

    Reposting from early morning:
    Peter/Stranglers: RE: 6%
    Your thoughts on this – I am looking at SPX April 1200/925 (which is +10%/ -15%) and Vertical April 1050/1040 . Per TOS Analyze tab- the strangle sells for $14.95 and the vertical costs $2.90. Plugging these two in as simulated trades and setting the slices @ -/+ 5; 10; 15% and picking the OPEX date of 4/17/10- shows profit of $1205 which is 6% of $20,000.
    Seems easy but that is what troubles me. April is long way off.
    Comments from all appreciated.

  4. judahbenhur

    JRW, Is your next line down still 60.35?

  5. pstas

    judabenhur-please explain – margin reserve 20/10 for SPX/RUT? Why only 10 for the RUT. I may have missed something in some of ongoing discussions. I was assuming $20M for either?

  6. lflantheman

    jud…where do you go to get quick data on the VIX?

  7. judahbenhur

    Pstas, I don’t think you missed anything in the discussions.  I think Peter advises us to keep $20K for both. I have a Fidelity account in addition to a TOS account, and if I look up the margin requirements for my Fidelity account (not PM) on each index at these ranges, I see about $20K for SPX and about $10K for the RUT.  Fidelity tends to be fairly conservative, and I personally always keep a lot of cash, so these are just guideposts for me. That is part of my rationale. I’m not sure how Peter derived the numbers for his advice, but I’d be interested in his view.

  8. judahbenhur

    Lfan,  I still use Fidelity charts, since I’m still new to TOS, though TOS is undoubtedly better.  If you don’t have tools with your broker, Yahoo isn’t bad. Here’s a 5-day chart from Yahoo that shows what Peter was talking about earlier.  http://finance.yahoo.com/echarts?s=^VIX#chart1:symbol=^vix;range=5d;indicator=volume;charttype=candlestick;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

  9. 1020

    Good Morning! Phil, the only way to get anything accomplished is serve one term (4 years) and you’re done…..

  10. EricL

    Banks, especially regionals, taking off this morning. I suspect it’s a back test of the recent drop and will reverse, but we’ll see.

  11. judahbenhur

    JRW, SS, That wasn’t a train this morning, it was a rocket.  Anybody else on TNA?

  12. Phil

    ETFs/SNS – Oh I’m no expert on that.  That’s more for funds that have teams of guys to pick apart the rules and play against the ETFs.  Of course, when GS or BLK design the ETF, it’s pretty easy for them to design programs to snipe against the funds at well, a nice bonus for them!

    4 years/1020 – Would that help?  Then you have the constant scramble of people trying to get elected and a constant learning curve for the people on committees and the corporations can dance around them all day long.

    TNA – That’s a strange over-reaction to a very small move in the RUT (1% off the pre-market low).  Be careful around 615.

  13. EricL

    Well, that was just what I needed to get the heck out of my big PNC position with a tiny gain. Very lucky since I was way too early buying. Now I’m short them.
     
    I still like this bank and will look to buy them later — perhaps the 45 area.

  14. Phil

    We failed at our bounce levels yesterday:  Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 - so it’s going to be doubtful we get back there today.

    Our 5% lines were Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 and we are holding those, which means we can still stretch and call this a nice consolidation but let’s be VERY concerned if we start giving them up.

    I’m still inclined to bottom fish and GS is good and cheap at $151.50 and you can enter by selling the March $145 puts naked for $5.85, a $139.15 net entry.

    New Home Sales are down 7.6% in December and revised down 9.3% in November.  MBA Mortgage Applications were already down 10.9% earlier so this is not surprising and will make a good level test as numbers like this shock the sheeple. 

    Sector ETF strength: Biotech– BBH +1.6%. Semis– SMH +1.4%. Commercial Banks– KBE +1.1%. Regional Banks– RKH +1%.
    Sector ETF weakness: Livestock– COW -1.7%. Gasoline– UGA -1.5%. Base Metals– DBB -1.4%. Coal– KOL -1%.

    Dow laggards: CAT -4.8%. UTX -2.1%. VZ -1.2%.
    Dow leaders: BA +3.2%. TRV +1%. KFT +0.9%.

  15. ssdirk

    judah – just getting back from an early appt.  No trades yet for me.
    pstas – I do have some comments that I will try to get to you today, just trying to settle in from starting late.

  16. jburgess

    Normal
    0
    0
    1
    77
    442
    3
    1
    542
    11.1282

    0

    0
    0


    Phil,  got a tremendous amount of info out or your post yesterday “XLF/Jcm – As Sartre would say, there’s no exit… “  on income generation shorting straddles. I read it, printed it, and reread it again. I have a question regarding having the stock/ETF put to you several times in a row. What actions do you take with the position if you DON’T WANT 2x or 4x (etc.) the position? Do you then sell proportionately more calls the following expiration? Sell in the open market, or what? Basic question, but any help is appreciated. Thanks.

  17. judahbenhur

    SS, I’m out already.  Now just watching to see if it fails here.

  18. oncmed

    Phil,
    Thoughts or trade recs on VLO, CAT or UTX?  Thanks…

  19. ssdirk

    judah – I show the RUT sitting on the lower channel that was started way back to the beginning of July. 

  20. Phil

    Speaking of dumb ETF’s – RSX is holding up well.  Too well.  I like the March $33/31 bear put spread at $1 with a 100% upside if RSX drops .24 from here.  I also like the March $29 puts at $1.10 as a trade looking to make .30+ on.

  21. ssdirk

    judah – man, what a critical area.  Like JRW said yesterday, if we fail here you can short anything and win.

  22. JRW III

    judah.
    60.35 is still the next support level on IWM

  23. EricL

    Yeah, /ES sitting on next level of support. I’m guessing it will hold here ahead of the Fed, but if not, very bad.

  24. JRW III

    judah,
    Sorry, now 60.16

  25. judahbenhur

    JRW/SS. Thanks, gentlemen. You playing TZA down, or a bounce off of 60.35?

  26. JRW III

    judah.
    I’m in TNA from 10 minites ago with my finger on the sell trgger.

  27. ssdirk

    judah – nothing at the moment, but I do have my finger on the TZA trigger should we fail.

  28. judahbenhur

    JRW,  Nicely done. My hat’s off to you.

  29. lflantheman

    Got $6 for the  GS Mar 145s.   I think that’s a good trade.

  30. 1020

    Phil, So with the Supreme Courts decision last week, term limits of any sort have little appeal?  (last political comment)

  31. JohnC1

    Phil:  Any thoughts on CAT right now as a possible buy?  Thanks.

  32. ssdirk

    Timmy has quite the tone this morning.

  33. judahbenhur

    Phil, A question occurred to me at 3 am this morning when my 3-year old woke me and I checked the futures markets.  Do you find the overnight highs/lows in the futures markets, either in the Dow or S&P, useful indicators?

  34. dmankoff

    Phil, any idea on how we can play the Google move down here? and take advantage of what I think is a ver cheap stock at 538?

  35. lflantheman

    jud….you are really starting them young.  My 3 yr. old would never waken me to check the futures.  :)

  36. 1020

    Iflan – :)

  37. lflantheman

    Some say AAPL stock has a history of dropping with new product announcements.  Wouldn’t that be great if we could establish a buy at about 190?  Perhaps I’ll sell some 190 puts.   

  38. Phil

    Puts/Jbur – It’s easier if you have a specific because it always depends on what your options are but, as I very often say, don’t even sell a naked put in a stock you don’t actually want to own long-term and don’t ever sell a naked call in a stock you don’t want to short long-term (look what happened with AMZN a while back as people who bailed got killed and people who stuck it out made money).   You can always roll rather than take the assignment.  One thing people tend to forget when they sell a put is that they did collect some money so if I sold the GS March $150 puts for $5 and they are now $8, I’m only $3 behind on paper – that’s no reason to get assigned a $150 stock I don’t want is it?  You can roll the puts down to April $135 puts, now $4.60 and that STILL makes $1.40 for you if GS holds $135.  What you have to be realistic about is – do you WANT, REALLY WANT to own GS at $135 or are you just trying to avoid taking a loss on a bad bet?

    VLO/Onc – You know I love them always but not at $19 when we just got a $17.50 entry a couple of weeks ago.  The range has been $17.50 (where we buy by selling $1 puts) to $19 this year and I if $18.50 starts holding then we can finally look up to $20.  CAT said China and didn’t create a buying frenzy – very bad if China is losing their mojo to drive the sheeple.  I’d let CAT find a level, probably at the 200 dma at $48.  UTX was one of my favorites at $40 but has been no way since $60 – hopefully we’ll see that again.  None of these are companies I like to short but, short term – I’m bearish on all 3.

    "The inventory burn-off is over," says Caterpillar (CAT) CEO Jim Owens. The company plans to more than double its steel purchases this year, even if sales don’t rise at all. Other firms are making similar decisions as the ‘bullwhip effect‘ works its magic.

    FBR Capital’s five reasons for downgrading Verizon (VZ -1%) this morning.

    Dec. New Home Sales: -7.6% to 342K vs. 365K expected, 355K prior. Months’ supply 8.1 vs. 7.9 prior. Median price of $221,300.

    BofA (BAC +1%) plans to hold on to, and raise new money for, Merrill Lynch’s Asia property fund business. BofA had previously planned to sell the unit but reconsidered after a rapid recovery in Asia’s property prices, especially in China.   WTF?!?  Have these guys not heard of selling into the excitement?  This is making me concerned about BAC long-term.

    More doom and gloom from Nouriel Roubini, who warns we’re seeing the start of a global asset bubble, says Greece is already bankrupt and thinks the eurozone is at risk of breaking up sometime down the line.

    On the other hand: Good news euro-bulls, bad news Greece: ECB’s Axel Weber says the euro will be here forever, that the ECB will start phasing out emergency measures and that there’s no room to cater to the needs of individual countries with problems. (ETF: FXE)

    Trying to assuage the fears of U.S. firms operating in China, Chinese officials play up comments by Bill Gates that the country’s internet censorship is ‘very limited‘ and promise not to curb Google’s (GOOG) Android platform

    With the FOMC announcement due this afternoon, investors will be watching to see if the Fed sticks to its plan of ending its $1.25T mortgage-debt purchase program in March.

    This just gets worse and worse:  In an unprecedented move, Toyota (TM) halts U.S. production and sales of eight key models on quality concerns, causing untold damage to the firm’s bottom line and reputation for safety. The eight models represented 57% of Toyota’s 2009 sales.

    Berkshire calming down fast – maybe I’ll get my $65 entry after all…

    I didn’t see inventories yet but oil is down to $74 so I guess they weren’t good.  Nat gas is $5.25!   That’s going to push the markets lower.  Gold is at $1,091 ($1,088 needs to hold), silver $16.59 (already bad) and copper PLUNGED to $3.26, with $3.20 being a big problem for the commodity pushers. 

    CAT/John – See above. 

    Futures/Judah – No, it’s all low volume BS, not much to base things on.

  39. Peter D

    judah, pstas, balance, ss, cwan and others – Good morning!
     
    Sorry, been busy trying to decide whether to add or to shred strangles.  The $20k reserved for each strangle was derived from how portfolio margin is calculated.  It tests the movement in the range of -8% and +6%.  I took the liberty to interpret it as 8% margin at the money.  It’s close enough, but it’s also dependent on the VIX.  8% means when a short strike is reached, the margin would be 8% of SPX, which can be around $8.8k with SPX at 1100.  Having $20k per contract means we can double down, by moving the spread out of danger and increase the position by 2X, or double down at different strikes.   See this post for doubling down:
    http://www.philstockworld.com/2010/01/07/thrill-ride-thursday-retail-sales-and-maybe-some-jobs/#comment-278802
     
    pstas, yes April is a bit far away, 2-3 weeks away that we would have liked.  For the 6%, it needs patience as we are unlikely to get a spread that would return 6% a month off the bat.  We need to wait for it to fall into the maximum profit range for the crazy play, and/or we need to take advantage of the VIX surge to sell more into it.  Take a look at this post for further explanation:
    http://www.philstockworld.com/2009/12/03/thrilling-thursday-japan-jump-juices-futures/#comment-272396
     
    An example of SPX Mar spread: 925/1190 is $8.8 credit according to TOS at 10:25AM.  The Mar 1020/1010 put vertical is $1.9.  So profit of $7.1 between 1020 and 1190, which is 3.55% of the $20k per contract reserve for 2 months.  Between 925 and 1010, the max profit is $17.1, which is 8.5% of $20k for two months.   So we need to be lucky a few times a year to hit the max range, then we also need to deploy cash into VIX surges to make our 6%.  
     
    Another way is to look for additonal spread further OTM, say SPX Mar 825/1210 is $3.45 credit, and Mar 960/950 put vertical is $0.9.  So another $2.55 credit to add to our $7.1.  Where we are today, the 825 short put strike looks very safe, so we can take a chance to add without reserving the $20k margin.  Being that far OTM means the 825 short PUT would lose most of its value way before expiration if the market doesn’t drop 15-20% on us.  A little trick, but a good one, what do you think?   Then we can sell off the 960 long put if the market turns back up.

  40. judahbenhur

    Lfan. Lol. My wife is horrified that our 8-year old is fascinated by the stock market.  The 3-year old--right now, I’m just teaching him to play golf.  Then the 3 of us will all be able to go golfing and talk about stocks.  I love being a dad.

  41. tchayipov

    what is wrong with VZ? it is droping and dropping and dropping again

  42. neverworkagain

     Copper / $3.25?  I see copper’s 50DMA around $3.25 (March futures) as a really key point for commodities. All the BS I have heard about "Dr. Copper" knowing best about the global economy over the last few months will be severely tested at the $3.25 level. Inventories are at extreme levels and demand is weakening (look at that housing data!), but copper traders have kept bullish given (some) supply problems as well as the weak USD trade. I’m already short copper and have put spreads on UYM, but a breach of $3.25 per pound to the downside will entice me to add to my shorts.

  43. Phil

    3am/Judah – My 7-year old woke me up to tell me that the avatars were annoying her in her dreams.  I told her that the people in Avatar were nice and she said "no, not THEM Dad (implying "you a-hole"), I mean the avatars from IMVU," which is some new thing her friends play on-line.  I’m telling you, it’s tough to be a kid these days – I only had to worry about monsters under the bed, these guys have entire virtual worlds full of things to worry about…

    GOOG/Dman – I like the 2011 $500/580 bull call spread at $40, selling the 2011 $500 puts at $41.50, which puts you in the $80 spread for free (roughly $10K per contract margin).  You can then sell the Feb $560 calls for $7.50 and if you get away with selling $7.50 a month for 11 months that’s $82.50 collected ($82,500) PLUS whatever value is in the spread next Jan.  Also, since you are + $1.50 on the spread and collecting $7.50 selling calls, your downside is having GOOG put to you at net $491, and 8.5% discount.

    Kids/Iflan – Mine don’t wake me to check the futures unless they see them breaking key support levels.  8-)

    AAPL is a nice mo play from now to 12:30 with the sale of naked $210 puts at $11.60 (I like them since they have a nice buffer in case AAPL drops).

  44. 1020

    Kids/Phil  Nice :)

  45. dmankoff

    Phil, why is margin here only $10,000  ?  seems like selling naked puts at 500  and selling naked calls at 560 would be a lot of margin,  no?  on Google….
    how about selling the 550 p uts for February and buying the March 540 puts for debit of $1.70 or so, which pays the most if on Feb expiration Google ends up at 550
    David

  46. ssdirk

    GILD with a nice move up.

  47. ilene

    Here’s a new, educational and interesting post with a couple option strategies by Pharmboy on a couple new biotech/biotech tools stocks:  http://www.philstockworld.com/2010/01/27/orphan-drugs-are-good-biomarin-pharmaceuticals/

  48. ssdirk

    JRW, judah – IWM 50dma is 61.50, do you see this a resistance?

  49. morxlntway

    beware when the avatars start telling them the trades you should be making

  50. samz3700

    PHIL -
    bni PUTS – IF YOU LIKE BERKSHIR b – OK TO HOLD ONTO THE JAN 95 BNI PUTS

  51. llorens

    My 5 year old told me she doesn’t like jellyfish. Why? "Because they can sting you and they can see your bones." Didn’t know they could do that.   STOCKS:  Was going to DD on C yesterday but decided to spend the same amount of money on GS at $150.97 as a pair trade with C. Like a hedge on a hedge. And GS can’t see my bones, so I have that going for me. Will add more to AAPL position if they drop after their event. I just don’t know why anyone would sell this stock with such a bright future and new accounting that drops their P/E from 33 to ~13.

  52. gel1

    Phil
    I would like to make a play on BRKB. I have not been following the situation, but do you have a target and strategy. Maybe put in a GTC order? Thanks!

  53. judahbenhur

    SS/50 dma.  Sure was resistance this morning, but then I played it as resistance yesterday and then had to wait hours and hours before the trade bore fruit, so I’m more interested in JRW’s lines than my own, since yesterday JRW called both 61.15 on the bottom and 62.03 at the top.  Man, he’s good.

  54. JRW III

    ss / 61.50
    Yes it is resistance; a more interesting point, however, is that today is the day that the current downward trend line intersects the PRIMARY UPWARD trend line from last March, so we either move up today, or we set off all the technical alarm bells on the Street. I doubt "they" will let that happen, but if it does, I’m going 85% of my portfolio in TZA.

  55. desmoines

    phil,
    thoughts on symc, selling calanders on puts & calls to get a cheap straddle after exp. thanks

  56. RMM

    Phil: what do you think about a trade in AMZN or SNDK, earnings for thesae expected to be good.

  57. gel1

    Pharm
    I still have some long GILD positions up about 50% today. Going forward, given the movement today, are you selling today?

  58. Pharmboy

    GILD/gel – covering.  They are an income generator for me.  But by all means take the money and run….!!!!

  59. ssdirk

    gel – I know your decision to move mainly to cash last weekend was not taken without a lot of thought and frustration.  Are you still happy with that decision?  Are you starting to rebuild or are you waiting for direction?

  60. hanna5

    Phil, any action today on PCS? I’m long the stock at 6.1. Perhaps sell some calls?

  61. gel1

    ssdirk
    I am still unwinding everything possible, as I believe we will see a more definitive correction before summer. When we reach the bottom, I plan to get back in quickly for the ride back up. I will be watching closely Phil’s sentiments for this timing. In the meantime, I am slowly scaling back into a few positions that I believe will not be too impacted by the correction that is on its way. Believe me, I think I have the right timing on this, and I also recognize there will be some terrific trading opportunities on the way down, One that I’m watching is FAS. As soon as it gets over 76-77, I’ll be shorting the hell out of it, as I believe it will replicate an elevator that has lost it’s cables.

  62. pyern

     Pharm – My GILD cover got blown. Would DD on the covers be prudent at this level?

  63. jlui_tx

    Phil, I sold GS Feb $150 puts @4.50 Do you think it’s a good idea to roll it to Mar $145 puts for a crdeit of  $0.65?

  64. wiiboxer

    Phil or Anyone,
    I have a few people who would like to offer me money 100K+ to invest for them. I have 8 years experience just doing my personal portfolio but I am not registered or licensed to be a professional. What do I need to do to set this up the proper way? Who knows I might be the next Goldman :-) …. Thanks for any feedback.

  65. ssdirk

    JRW, judah – 61.50 approaching.  Finger on the TZA trigger if we fail.

  66. ssdirk

    in TZA at 10.15.

  67. tradansh

    Phil – Asked about American Royalty Trusts like BPT or PBT. What do you think about these? BPT has a yield of 17%, along with some options. Very enticing.

  68. Phil

    VZ/Tch – See above, they were downgraded by FBR with conviction.  Only back to just below $30, where we were buying yesterday.

    Copper/Never – I think it’s been way over-speculated ahead of the expected recovery.  The problem with all these commodity traders is they think we’re going to go right back to ’08 levels but those levels were ridiculous and based on building buidlings that no one actually wanted to occupy and building homes that are now sitting empty and, of course, based on levles of economic activity based on bank profits that never actually existed.  This is the flaw in in the assumptions – how can copper be worth $350 when it topped out at $400 on insane speculation.  It’s not like it was ever in short supply and you would think people would learn but clearly not…

    Margin/Dman – I was just looking at the naked put margin, the call margin will be there but much of it cancelled by your upside gains on the bull spread in a PM account.  The diagonal play works but I’m not looking to make short-term guesses on GOOG, just a nice long-term play that can make $16,000 per contract in a year is fine with me.

    Avatars/Morx - Actually I like the idea of setting up a virtual world where we could all gather and chat in places where we could use common charts and stuff.  It would be a huge project but it’s doable, using all the various sources of information as "houses" we could enter and brows around in and people could gather on AAPL Island (where there would be TONS of info all about AAPL) to talk about that stock or whatever other virtual place (maybe grouped by sector) so all the people thinking of making an AAPL trade could stand around and look at the live chart and put trade ideas up on a white board and draw inlfection points on the common chart – that would be cool I think…

    BNI/Samz – Sure and I do like Berkshire.  There is very little chance of those getting put to you.

    LOL Llorens – I think in cartoons when a jellyfish stings you they do that shock thing where you can see the character’s bones – maybe that’s it…  There’s a sush restaurant in the Bellagio (kick ass) that has a jellyfish tank as a decoration – very nice.  Good logic on GS but I’m sure they’ll be getting a feed from Homeland Security as the new scanners go in and then they’ll have your bones on file too (so they know just where to hurt you)! 

    BRK.B/Gel – I’m hoping they pull back to $65 as the buy and hold crowd gets annoyed at the volatility and/or the market in general tanks.  If neither of those things happens by mid March – then we can design some long-term plays on them once the leaps are established.  Of course you could sell March $66 puts for $1.50 as that’s about $10 a year against (according to TOS) $8 in margin so not a bad thing to do with your unused cash while we wait.

    So far we are holding up pretty well what with Timmy’s weasely testimony and the poor oil report and all the other scary stuff this morning.  

    EIA Petroleum Inventories: Crude -3.9M barrels vs. consensus of +900K. Gasoline stocks +2M vs. expected +600K. Distillates +400K vs. consensus -1.6M  Holy demand destruction Batman – no wonder CNBC hasn’t said a word about this one!

    Dec. Mass Layoffs: 1,726 mass layoff events (at least 50 workers), resulting in 153K job losses. That’s down 87 layoff events from revised November total of 1,813. The total mass layoff events since the December 2007 beginning of the recession: 51,978, resulting in 5.3M job losses.

    SYMC/Desmoines – I like them down here, they haven’t broken 50 dma support ($18) since last earnings and only breifly before then.  At $18.37 you can sell the March $18 puts and calls for $2 which nets $16.37/17.18.

    AMZN/RMM – I wouldn’t touch those guys.  I’m out of the short calls and still in short Apr $115 naked puts so I guess that’s about how bullish I am but 1/2 of their prorfits were Kindle and they will have a great Q of course but then what?  AAPL may put a knife in them in 45 minutes.  SNDK is great but way too high, if they dip I’ll like them or if they hold $30 after earnings but I don’t buy stocks at 52-week highs in declining markets – it’s just not smart.  Since you can get $1.50 for selling the $30 calls, you can take a chance on them and buy Apr $31s for $2.12 to cover and hopefully they hold around $30 and you do very well.  If they head lower, it’s much less bad than if you took a riskier play ahead of earnings and, if they take off, you get your wish and can add long positions so you can roll your way out of trouble on the callers.

    PCS/Hanna – I thought we were waiting to see what holds up?

    Good plan Gel but don’t overdo it at a "bottom" – it always pays to have firepower on the sides. 

  69. gel1

    Pharm/GLD
    Many thanks!… I had four long positions anfd they are gone. I am still running and it is a great feeling.

  70. Pharmboy

    pyern – what do you have?

  71. ssdirk

    Peter – yesterday you mentioned having to adjust your delta to a more negative position.  Do you do this by selling more OTM calls which would put you in a more ratioed position with more sold calls than puts, or is there another way?

  72. pyern

     Pharm – I have the Feb 43 covers (now $5). Wondering if going to a DD on the Mar 47 covers (now $2.20) would be a good choice.

  73. gel1

    AAPL presentation today will present a product that does not require a mouse or keyboard – new technology that has not been used in the past.

  74. Peter D

    ss, I’m rolling down the short callsmostly, as the premise of the market going up forever has not hold up well.  I’d look for any Feb callers that are less than $1 and roll them down.  Same for March’s.

  75. Phil

    GS/Jlui – I think it’s a good idea to keep an eye on that roll and make sure you do it before it costs you money but better to collect $5 in Feb than $5 in March so don’t be so quick to give up the month.  If we break 3 of 5 of our 5% levels and GS breaks $150, then I think it’s better safe than sorry but, otherwise we can hope for a recovery. 

    Investing/Wii – If you want to do it formally, it’s kind of a nightmare and you need lawyers and such (not to mention very expensive year-end accounting and reporting).  You may want to consider looking for an existing hedge fund and bring your "clients" to them as they will have everything you need and can set you up as a trader under the fund umbrella. 

    Trusts/Trad - I do like them and will like them much better if they pull back more.  They are tough to hedge as they tend to have very low call premiums compared to the wild swings they can take but PBT isn’t bad at $14.35, selling Sept $12.50 calls for $2.10 (no less or you’ll get called away at dividends) and selling Sept $15 puts for $2 for net $10.25/12.63 entry and, of course the dividends!

    Dr. Copper back at $3.25, sliver holding $16.61, gold $1,092, oil $74.55 and Nat gas $5.21 – these guys are ready to drop if the Fed says one word about tightening (not even 2 hours to go).

    Speaking of RSX puts:  "The whole atmosphere isn’t the same as two weeks ago" – Oleg Deripaska, CEO of Russian aluminum giant Rusal, as the company’s shares sunk 10.6% on their first day of trading in Hong Kong. Late last year, the teetering firm restructured to delay $7.4B in loans with Western banks.

    Dueling book talkers: Marc Faber reiterates his negative outlook, saying the S&P may drop 20% from here. "The economy has stabilized but isn’t really expanding… Profits have been boosted by aggressive cost-cutting. The revenue side of corporations is weak." But Legg Mason’s Bill Miller refutes Faber’s doomsday view, saying that "10 years ago, stocks were expensive. Today they are not."

    New York Attorney General Andrew Cuomo subpoenas major online retailers including Barnes & Nobles (BKS), Avon (AVP) and Staples (SPLS) for their deals sending visitors to fee-based membership programs. Cuomo says the arrangements often transfer credit or debit card information without customers’ knowledge.

    Boeing (BA) says delivery deferral requests for its commercial aircraft have fallen, reflecting a moderation in declining air-traffic demand as the global economy stabilizes. They are adding 16 points to the Dow today.

    Fun ahead of AAPL conference:  Though the scientific debate is heated and far from resolved, there are multiple reports, mostly out of Europe’s premier research institutions, of cell-phone and PDA use being linked to "brain aging," brain damage, early-onset Alz­heimer’s, senility, DNA damage, and even sperm die-offs (many men, after all, keep their cell phones in their pants pockets or attached at the hip). In September 2007, the European Union’s environmental watchdog, the European Environment Agency, warned that cell-phone technology "could lead to a health crisis similar to those caused by asbestos, smoking, and lead in petrol."  

  76. neverworkagain

    Copper blew right through its 50DMA of $3.25. Let’s see if it can bounce. If not, the whole commodity complex has to be seen as having 5-10% downside from here, with the obvious implications on the mining and commodity stocks in the broader indices.

  77. judahbenhur

    Phil, When do you think you get the answer posed by your headline this morning, or rather, what are you looking for specifically to gauge either weakness or consolidation?   Failure or support at the levels we’ve been mincing around today?

  78. jamie

    Are there any live video feeds of the Ipad show?

  79. Phil

    Paulson reminds me never to trust a guy who talks with that kind of voice

    Forget Dr. Copper – Check out X – they are flying down.

    Gold testing $1,088 as is the S&P – getting a bit ugly.  DIA $98 puts at $1.03 are a mo play below S&P 1,088 (Dow 10,150)

  80. terrapin22

    RSX – I liked your RSX bear put spread idea but was too late.  RSX is almost at $31.   no volume on the march $29 puts and they are asking $1.30 now so think i will pass for now. 

  81. pstas

    SRS- after much consternation, rolling and DD’s; finally out of Feb SRS puts. Held out for a nickel on psychic principal. Please be advised for all who would care to join, there will a ceremony at dawn to drive a spike through it’s heart.   :)

  82. ssdirk

    Unbelievable!!!  No one was involved with the AIG negotiations….it just happened I suppose.

  83. Pharmboy

    pyrn – what strike are you covering?  I assume you had a 1/2 cover position with the 43s…..in other words, can you take some money off the table with URs.  I would sell the 48 May for a credit of 20c (full cover I assume) and also sell 1/2 position of the 46 Feb or 45 Mar P for a conservative $$.  Phil might be able to chime in as well for better money.

  84. Phil

    Barny strikes again:  Barney Frank says Obama’s bank plan could be law "within months." In a Financial Times interview, the House Financial Services Committee chairman admits he was surprised by Obama’s move but that the policy details were in line with the committee’s thinking. One caveat: Banks must be given "at least three years" to divest hedge fund and private equity assets.

    Answers/Judah – As I said earlier, it would be a miracle to see our 4% bounce zone today so anything not holding our 5% levels (and Europe closed down about 1% for a 7.5% total loss so far) is going to indicate a lot of downward pressure and any red close here is going to really test Asia’s downside levels – if those fail, we could fall fast.  So it’s all up to AAPL to rally the Nas (barely holding 2,200) and then up to the Fed to get the Financials and commodities back on track by indicating they are going to keep giving away money without actually SAYING they will keep giving away money – a say no more kind of thing..

    AAPL/Jamie – I don’t know if there is a video feed.  And the sights I’ve tried are slow or not working so let me know if you find one.

  85. ssdirk

    Best apple feed that I have found after viewing several: http://live.gdgt.com/2010/01/27/live-apple-come-see-our-latest-creation-tablet-event-coverage/

  86. Pharmboy

    Gold will be 800 by year end…..barring a major nuclear event or war in the middle east.

  87. bord

    I guess this link explains why we’re not hearing from Cap today… I always pictured him as being much older than in his picture. Just joking Cap….:)
    http://www.nytimes.com/2010/01/27/us/politics/27landrieu.html?em

  88. terrapin22

    SLX  – Phil – do u like any bear put spread ideas on SLX in case it keeps falling to 200ma? 

  89. Phil

    RSX/Terra – The trick is to buy the top put as a mo play and cover on the dip but not recommended if you aren’t a good day trader. 

    OK, I have a semi-reliable feed from Adrian Kingsley at ZDNet.  He’s a good guy so I’m going with his coments.

    ROFL Pstas!  It is cathartic to get out of those isn’t it?

    AIG/SS – Hey, these things just happen spontaneously you know..

    Oh , SS’s feed is way better, sorry Adrian!

  90. ssdirk

    And there it is….the IPad.  Looks awesome.

  91. gel1

    Phil
    I have quite a few long AAPL positions. I expect a run-up later today and would like to protect them against a drift down tomorrow. Do you have a good play for this?

  92. Kwan

    Phil, looks like your name was right. I’m using live.gizmodo.com

  93. EricL

    Looks like the iPad is twice as tall as Steve. No wonder the stock is falling.

  94. ajaytoo

    Why is AMZN up?? Listening to live audio stream w/ frequent photos of Apple event. Kindle is dead!

  95. judahbenhur

    JRW, Did you switch over to TZA after the run-up this morning?

  96. tradansh

    Phil – Why did you pick PBT over BPT? Yield for PBT is around 8% compared to 17% for BPT.

  97. Phil

    Apple Conference:

    Steve looks like he could play the scarecrow in the next Batman movie but a healthy skinny, like an 80-year old guy who’s in good shape.

    250M IPods sold so far. 

    284 Retail Stores with 250M visitors to date. 

    140,000 Apps, 3Bn downloads.

    Proud of AAPL projecting over $50Bn in revenues this year. 

    "Apple is the largest mobile devices business in the world today.” Bigger than Sony, Samsung — bigger than Nokia (by revenue). “Apple is the number one mobile devices company in the world!”

    Yay IPAD – they are using my name after all!

    I want one now!!!

    AAPL of course selling off on the news but this is just what I wanted so I’m still in.

  98. ssdirk

    Phil – I currently only have some AAPL Apr 180 sold puts.  With this move down do you like selling more?

  99. kustomz

    I was very excited about the IPhone, the IPad not so much

  100. gel1

    I am now convinced Jobs is a minimalist – only one pair of pants and shirt (or maybe this is his presentation outfit)

  101. JRW III

    judah,
    Sold TNA at 12:30, nice gain. Waiting for "them" to decide whether to force the market up or let it fall.

  102. Peter D

    wii/investing for others,
     
    It’s depending on where you live, and whether you want money for your service or not.  In most states, you’d need to be registered if you charge money for the service.  If you are in Delaware, the law is much more relax.  If you don’t take money for the service, one of the easiest way s is to set up accounts in their names, apply for portfolio margin (they themselves need 3 years of experience with options), and you are set.  It’s not Madoff type of scheme as they can see their accounts anytime they want, and the money is in their names, you can’t transfer them in or out, just trade for them.  The downside is that they have a lot of tax paperwork to do if you are trigger happy!  Check your state law as this may not be even supported in some states.  Again, I’m not a lawyer, and this is not an advice, just random information.

  103. 1020

    XLF hanging tough….

  104. microflux

    Phil are you hearing the paulson and geithner gilling thats going on in congress ? its not on TV but its live on cpan radio. wow this is for real.

  105. microflux

    *grilling

  106. 1020

    I liked " I-slate" better….;)

  107. Kwan

    gel, you’re just now convinced he’s a minimalist? There’s a reason the laptops (and the mice) no longer have buttons… same reason that macs only ever had one button while PCs eventually gained two and three.
    Enough for the history lesson today though, class :)

  108. samz3700

    Phil would you make any changes to your apple play – especially if initiating new position -
    already in jan 185 / 230 bull spread – might add to that

  109. pyern

     Pharm – I have the GILD 2011 40s. Unfortunately, they are fully covered with the Feb 43s. Rolling to 2x May 48s would give a credit of $0.30. I could also add 0.5x the Mar 45 puts for additional credit. I’m concerned about the possibility of it running away too far ($50 looks like reasonable resistance?)

  110. 1020

    Phil, since you have been on the web touting I-Pad, one would think that Mr. Jobs would be more than happy to spiff one of the first, to you. :)

  111. tchayipov

    where can I see apple presentation?

  112. gel1

    Kwan… Ya, it all fits – a true believer!

  113. BigPinot

     JRW…what are you in right now?? What are you thinking about?

  114. Pharmboy

    GILD/PYRN – OH my…. Phil may have a better play but I will summarize so he does not have to can up:
    $40 Jan11 full cover with $43 Feb10. 
    My suggestion – roll your Jans to 2X 45 Aug even and roll to the 43 Febs to 2X 48 May and sell Puts above.  Then just wait to see if they pull back a bit….There is a bit of excitement here so they may pull back a bit. I hate to jump the gun, but..
    Phil? 

  115. Phil

    LOL Bord!

    SLX/Terra – I was using SMN as a main short play but SLX works too.  I figure they get to $50 if they break $55 and the Mach $59/56 bear put spread is $1.50 with a 100% upside if they don’t gain at least .50.

    AAPL/Gel – I don’t expect a run-up today, as I said about the earlier trade, you have to get the hell out on the announcement as NOTHING can live up to the hype.  I’ll be liking AAPL again if they sell off though. 

    AMZN/Ajay – Maybe they’ll sell 10x more IPads than Kindles and make up for the lost Kindle profits. 

    "It’s 0.5-inches thin, weighs just 1.5 pounds. Thinner and lighter than any netbook. 9.7-inch IPS display.”

    “iPad is powered by our own custom silicon. Our own chip. It’s called the A4, and it screams.” 1GHz. 16, 32, or 64GB of flash storage. “It’s got the latest in wireless: 802.11n, WiFi, and Bluetooth 2.1 + EDR.”  This has got to be huge for the memory makers!   

    What’s the battery life on this remarkable device?” Pauses. “We’ve been able to achieve 10 hours of battery life.” Big applause.   These guys should get a Nobel Prize for that!

    PBT/Trad – I’m more comfortable with staying in range on the less expensive stock.   BPT is good too but if a reg changes on the dividends or they cut them, you can be at some scary low numbers fast with these things. 

    AAPL/SS – Anyone selling AAPL after seeing this thing is nuts – take their money.  If they hit $699 on this thing it will wipe out the competion.  Doesn’t seem to have a phone though. 

    Grilling/Micro – Yeah and it’s about time.  I like this committee but I don’t know what they acan really accomplish in 1 year. 

    AAPL/Samz – No changes as they should do fine.  They will still sell off if the market crashes but they’ll still be my top buy on a sell-off.

    Freebie/1020 – Make sure you mention that to him!  8-)

    AMZN $121.29, RIMM $61.69, HPQ getting hit at $48.82, MSFT $29.43 - good reference points. 

    NYTimes had the paper App’d for the IPad in 3 weeks – that’s telling – it means there can be tons of content really, really fast. 

  116. ssdirk

    JRW, judah – out of TZA at 10.29 for a .14 scalp.  Better than a stick in the eye.

  117. stockbern

    So have they said how much the I-pad will cost?  Will only the top 9% (used to be the top 10%) be able to afford one?

  118. JRW III

    Big,
    See 11:30 and 1:27 posts.

  119. cwan120

    Hi, fellow classmates in the Strangler 101 course,
     
    I have not been able to contribute much to the discussions because I’ve been really busy with a project at work.  I am way behind in reading the post.  (I only read up to Peter’s comment at about 10:30am).  So, forgive me if this has already been discussed.
    I think we are WAY TOO GREEDY!  We are only 1-3 months into the semester and we were already trading like there was no tomorrow.  May I suggest that we keep our expectation low, like 1%-2% profit target.  Observe the rules.  And check with Prof. Peter before you go beyond the rules.  We’ve learned (and are still learning!) some good lessons from this drop.  Let’s give ourselves a few months, and a few up/down cycles before we fly solo.
    For G-D’s sake (or is it GS?), are you not satisfied with 1%-2%?
     
    BTW, I was fortunate that I was tied up with the project at work last week.  I only managed to log in several times a day.  So, I didn’t have a chance to deploy all my ammo.  However, many of my put legs are in red, because I sold them early on at low premiums.

  120. judahbenhur

    SS, Funny, I may get in here.  Watching the winds.

  121. EricL

    Woohoo, now on to the Fed. Why can’t we have big pre-announced tradeable news events every hour of the trading day?
     
     
    AMZN selling off as if an ebook function is all a big surprise.

  122. Phil

    Top 9%/Stock – It doesn’t matter if it is as they certainly won’t sell more than a few million a year at first and that’s just 10% of the top 10% – I don’t think price is a major issue.

    New app called IBooks

    “Amazon’s done a great job of pioneering this functionality with the Kindle. We’re going to stand on their shoulders and go a little further.”  ROFL – AMZN dropping as he speaks, amazingly there were people who didn’t see this coming…

    “It looks like a bookshelf — and there’s a button to a store. It’s an iBook Store to allow you to discover, purchase, and download e-books right on your iPad.”

     

  123. ssdirk

    cwan – I agree.  I think I saw it as a sure way for good profits and got a little greedy.  I am glad to discover the significance of a vix spike now.  I am one to be taking it easy for a while and let the good Prof show us the way.

  124. wiiboxer

    Phil,
    I didn’t know it had that much involved on setting up. If I wanted to do it for a few close investors, could I just create a legal binding agreement saying I’m not liable and not a professional? Will that be enough protection for me? My investors are willing to agree to that but I wanted to see what u thought. Should I create an LLC or an entity create a new TOS account with it or should put all there money in my personal TOS account. Thanks again. 

  125. Phil

    GMTA Eric!

    AAPL running long so we have AAPL, the AIG hearing ending and the Fed rate decision all at the same time – the markets may explode! 

  126. BigPinot

     Phil Im mostly bearish…do you have an option play for protection?

  127. ssdirk

    Phil – boy were you right about Toyota.  Geez, shutting down production and sales.  Ouch.

  128. ajaytoo

    Phil, EDZ Apr 3 calls bought at 2.20. EDZ keeps rising…Apr 3s now at 3.05. Cash out or maybe sell Feb 6 calls for 0.5?

  129. microflux

    the ipad has a phone !!!

  130. Phil

    AAPL showing spreadsheet functions – that I do not see on a Pad computer.

    Volume at 2:10 on Dow is 132M – typical dull day on the whole.

    Legal stuff/Wii – I couldn’t (and shouldn’t) tell you.  It depends on your state and a ton of other things and, like Peter said, it’s a whole different ball game if you want to get paid. 

    $9.99 for software that is compatible with Mac versions – that seems strange.

    “I’d like to talk for a minute about iTunes. The iPad syncs over USB with iTunes exactly like an iPhone or iPod touch. So when you sync, you sync everything. Photos, music, movies, TV shows, contacts, calendars, bookmarks, apps…”

    This is a real benefit. Now, I’d like to talk about wireless networking. Every iPad has the latest and greatest WiFi. But we’re going to have models with 3G built in as well.”

    “Now, what does it cost for the data plans? In the US cellphone companies typically charge $60 per month for a data plan for a laptop.”

    “We’ve got a real breakthrough here. Two awesome plans. The first is up to 250MB per month — a fair bit of data, most people will get by on that — for just $14.99.” Big applause.

    If you feel you need more, we have an unlimited plan for just $29.99. Real breakthrough prices. We’ve got a breakthrough deal with AT&T who is providing the service.”

  131. Kwan

    Fed leaves rates unchanged. (ToS)

  132. Phil

    T is heading up, of course. 

    “We think it’s a phenomenal offering. So what about internationally? We hope to have our international deals in the June-July timeframe. We think we can do a lot in June, we’ll start on that tomorrow. However all models are unlocked and use GSM micro-SIMS.”

    No change in interest rates on the Fed, sounds like they are sticking with "extended period" language

    Not a good sounding statement, good thing we got the puts!

  133. EricL

    Oops. First move false move?
     
    Watching GS for a possible long if we start up.

  134. ssdirk

    $499!!!!!

  135. ernest

    Wow, Apple shot up a few points when the pricing for the iPad was announced:  Starting at $499.

  136. llorens

    Did you hear that? That was the sound of the guy that sold AAPL at $199.53. Sounded like a Chupacabra….not something you want to hear again.

  137. morxlntway

    i had a syncing situation this morning: my wife wanted to download some photos from her iphone to desktop so being the great teacher that i am i was showing her how. A little message pops up telling us we didn’t have the most up to date version and do we want to fix that. So i tell her sure, click on it. CRASH! no more iphone.  The message is i need to restore it to it’s original settings and anything that is not stored on the desktop is lost.  Of course this happened before we sunced (past tense of sync)
    A word to the wise – sync before you are sunc.

  138. cwan120

    Hi, Prof. Peter D. & fellow stranglers,
    For your reference, I looked into my records and found my very first SPX strangles + crazy plays started on Oct 15 2009, following Peter’s recommendation.  On 10/15/2009, I bought 1080/1070 put verticals at $3.65.  And then I legged in by selling 980 puts at $4.80 on 10/16/2009 and selling 1125 calls at $1.20 on 11/04/2009.  (Oh boy!  Was I patient!  Waited 2 weeks to sell the 2nd leg.)  Sometime in Nov, we got a big dip and the 1080/1070 put vertical went all the way to $7-ish (about 2x).  I put in an order to sell for $8.  It was never filled and I waited too long.  The vertical went down really fast as the market recovered.  I managed to sell them at about $4.00.  I bought back the 2 short legs when they went down 75%.
    By looking at the price alone ($3.65), I must have bought a put vertical with relative high strikes.  The value went up faster as the market dipped.  But 2x was about the max.  This seems to be consistent with balance’s observation last night.  Maybe 2x is about the best we can hope for from the put verticals.

  139. hanna5

    Wow. $499? Thats incredible.

  140. Phil

    Fed Statement:

    Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

    With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

    In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit wil be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

     

    FORGET THE FED – $499 for the IPad!!!!  BUY AAPL, Sell AMZN, Sell HPQ, Sell Dell - game over!!!  Buy T (March $26s are .75).

  141. ssdirk

    JRW, judah – now that’s a bucking bronco.  Not involved at the moment.

  142. Jtiff

    What about all those rumors about VZ getting some AAPL business?  Nothing but rumors or is AAPL waiting to break out to other carriers?

  143. EricL

    Closing all those Fed lending facilities on schedule is something a lot of bulls were hoping not to see, so big banks with lots of RMBS exposure may not take well to this.

  144. CaFords

    This smells of a head fake, playing for the stick I think

  145. Phil

    AAPL will boost the Nas and there is nothing bad in Fed Statement that we didn’t know so we’ll see if they can put together a rally now.  The $99 puts are $1.30 so they’ve done their job – Don’t let that get away!

    AAPL has a keyboard doc for the IPad, another nice sales item. 

  146. BigPinot

     Anybody out there in cyberland know where Gold is now, my bloomberg is 30 minutes delayed.

  147. ssdirk

    Pinot – 1086.10

  148. BigPinot

     JRW…short or long? IWM is under your 60.15 line.

  149. BigPinot

     Thanks SS.

  150. JRW III

    So, no change; no rate bump, no program extension. A great time for Blankfein to turn on the Bots; every one will think someone knows something !

  151. Phil

    Protection/Big – Do you mean upside protection?  I’d go with the DIA Sept $97/104 bull call spread at $4 which is pretty much exactly in the money and effectively makes $1 for earch 100 points the Dow is up by then.

    EDZ/Ajay – You got more out of them than I did, I got out yesterday.   When in doubt, sell half but I’d take it and run.

    IPad/Micro – Are you sure it has a phone?  Holy crap those T calls are booming, maybe it does!!

    LOL Llorens!

    I like the DIA $103 calls at $1.23 as an upside play but Dow has to hold 10,150 and S&P 1,088 and Nas 2,200

    Gold/Big – Exactly holding $1,088.

  152. Phil

    Man, no wonder those APPL guys were looking so pleased with themselves – their product is so good they saved the stock market!

  153. judahbenhur

    JRW, SS, Been on TNA since 61.20, but I’ve got an itchy sell finger.

  154. llorens

    Gearing up for the "Mother of All Sticks"

  155. aclend

    Phil,
    I haven’t played this drop very well. I have the June 107 puts and 4/5 covered by the Feb 105p. I added the 1/5 107 put a little late but, if we are heading down more, I was thinking just uncover the 107′s…or should I just ride the whole thing down and then cash out the 107′s and ride the 105′s back up? Obviously, I don’t want to uncover and then we start to head back up. Also I bought a GOOG Jan’11 580c when GOOG was at $576 so it is down about 30%. It’s a long-term play to appreciate and sell calls against since I was thinking GOOG should head back to $650 by the end of the year but it is bothering me a bit. What do you think? Thanks.

  156. ssdirk

    judah – Nice.  Glad I avoided the stick to the eye.

  157. gel1

    Jobs is a marketing genius. He should write a book, as it would be a best seller. Ballmer neds to be an early buyer.

  158. pyern

    Phil – Any feedback on Pharm’s 1:44 regarding GILD… Thanks.

  159. Kwan

    I’m kind of surprised (and even confused about why) there is no forward facing video camera on that thing.

  160. JRW III

    judah / ss
    Got in TNA at IWM 61.10, 2:37, ( see post )

  161. chuaeu

    Phil,
    Haven’t seen anything about phone on iPad. Since no calling plans were shown, only data plans, and no contract required, assume no built-in phone capability. However, I would think there’d be an app for that . . .

  162. aclend

    …uncover by buying back the 105′s is what I meant

  163. stockbern

    Phil, OK great I-pad price and data plans , buy T, got that one, but what I’m interested in is cellular bandwith infastructure plays.  It seems we keep on inventing things that go wireless and i T is always behind in ramping up their capacity.  Anything we should be looking into?

  164. Phil

    .95 is plenty for T – .05 trailing stop at this point!

    Rates kicking up a bit (see TBT) and that should push some money out of bonds and into stocks so a little fuel for the rally. 

  165. judahbenhur

    JRW, I saw your post, but fumbled my buy order for a second and IWM had shot up to 61.20. ;)

  166. JRW III

    OUT !

  167. ssdirk

    JRW, judah – too many cross currents at the moment.

  168. JRW III

    This is turning out to be a lot of work today; now they have to break 61.55 for me to go long, or,60.97 to go short.

  169. hunter5533

    Hey Phil,
    Any thoughts on NFLX earnings today?

  170. ajaytoo

    Phil, a week or two back we sold HOG 25 puts expecting their earnings to be better than expected. This never played out and they have gone from 0.9 to 1.925. It was a tiny position…close out and take the small loss? Or is it worth rolling out and trying to get even.
    EDZ – Got out at 2.91.

  171. Phil

    DIA/AC – At this moment, I’d say hang in there, we may get a move up tomorrow.  XLF up to $14.20, oil bounced off $72,50, which is where we expected support, gold looks like they’ll hold $1,088 BUT copper blew $3.20 while we were distracted so let’s not get too bullish.  Just set stops on some along the way down and get more naked as we head lower.  Also, don’t forget you can just add long puts and roll the Feb putters down to more March puts.  On GOOG, it’s best to take advantage of the drop and roll down like down to the $560s for $8 and keep your eye on sale of March $580s, now $8 and don’t let $6 get away from you but, otherwise, better off waiting for a nice move up. 

    Forward camera/Kwan – Then how would they sell you the version 2?  I predict that 4G model will come with built in video phone. 

    GILD/Pyern – Haven’t even considered it – too much going on. 

    Phone/Chuaeu – I don’t think so either and that’s why I’ll be giving this version to my kids and getting Version 2 as soon as it comes out with the phone…

    Wireless/Stock - I like the regional carriers from the buy list like PCS.  They are able to put out high-speed networks in small areas and that wil be useful as demand ramps up.  Obviously, everyone has to have a competing product by Chrismas or they are screwed and T is probably locked in with AAPL forr the long haul.

  172. Phil

    NFLX/Hunter – I’d stay away as AAPL is out in 60 days and if they incorporate ITV functions into the IPad then the writing is on the wall for rental cos.  I think NFLX should have a good Q though, it’s the future I worry about.

    HOG/Ajay – The 200 dma is $22.40 so I’d go with the roll.  They are still a big brand name and are ok to own long-term.  Last big dump took them to $21 then they rocketed back to $28.  Nice on EDZ!

  173. japarikh

    Phil,
      Tempted to sell naked calls on AAPL not b/c I don’t like them but to take advantage of the premium and excitement. But am kinda scared. Thoughts?

  174. bgbigelow

     iPad – They obviously didn’t do much name testing among women.  I saw an article where they were playing off it and a guy tried to take the iPad from a woman and she said "Give me my bloody pad back."

  175. leonf675

    Phil,  I have the June 10 17.50/22.50 bull call spread on SPWRA that I paid $3.10 for.   Any trade ideas on the move down today?

  176. ssdirk

    bgbigelow – interesting…I have had three women tell me they dislike the name for that exact reason. 

  177. ssdirk

    Does anyone know if the new IPad is capable of running multiple apps at once?  I didn’t see reference to that.

  178. kustomz

    ss im sure as it runs on IPhone software

    Euro bye bye

  179. microflux

       Phil I am sure. he put up a price matrix and there are 2 products, one with 3g that takes micro sim and one that does not have phone. the one with phone is 130 more expensive and it will be released a few weeks after the non-phone one. he also talked about the data planes. 250MB for 14 a month and 30 for all you can eat. no contracts and cancle any time and sign up right from the ipad. can we give him a nobel prize now please ?

  180. judahbenhur

    JRW, SS, Out. Just can’t get it over 40.50. Watching though for possible last half-hour play.

  181. Phil

    Damn, Copper failed, gold failed, oil at $73.62, nat gas at $5.23, silver barely holding $16.50 – not looking pretty all of a sudden but let the commodity pushers fall – that’s fine. 

    XOM is down .70, CVX is down .90 that’s 15 Dow points between them.

    The trick is will another sector pick up the ball?  I’m still leaning towards yes as the Fed decision was bad for bonds and we get that reaction fast but it was good for stocks (more free money). 

    AAPL/Japar – There are many, many things to buy that you are not scared of (but may become scared of later) so starting off scared is a recipe for disaster.  Don’t forget Europe and Asia wake up to the AAPL news and that could be good for another pop.

    Groan BG! 

    SPWRA/Leon – June is when we use oil, not Jan/Feb.   I’d take out the $22.50s at $2.35 and sell em again at $3.

    Multiple apps/SS – Well the IPhone does so it would be pretty lame if the IPad doesn’t.

    Euro barely holding $1.40 – tomorrow may be the day.  Greece seems like they are getting desperate with this China BS – kind of like a guy who keep calling on more and more distant relatives for a loan after the ones he usually talks to turn him down….

  182. judahbenhur

    That was 61.50.  Don’t even know how I made that typo.

  183. microflux

    By phone im talking about the data coverage not phone calls, you can do that with skype people :)

  184. d12ewman

     Phil what do you think about holding T calls through earnings and longer term? better to wait for them lower? 

  185. Phil

    When T is done going down I will like them again!

    Treasury sells $42.7B in five-year notes at 2.37% (.pdf). Bid-to-cover ratio of 2.8 vs. a recent 2.35; indirect bidders take 53%, close to a recent average of 51.5%; direct bidders take 7.5%. Treasurys mostly held a bit above flat: 30-year yield -0.01 to 4.54%; 10-year -0.02 to 3.61%; 5-year -0.02 to 2.33%; 2-year -0.03 to 0.84%.

    Fitch cuts U.S. Steel (X -7.9%) to junk status, as observers like Goldman Sachs say profits are still a "distant dream" after the company’s earnings miss. The company’s free cash flow is likely to be negative in 2010, Fitch says.

    Paul Kedrosky’s tag cloud summarizes the theme of all 227 sessions at Davos so you can get the gist without having to spend all that time hobnobbing with George Soros.

    The Fed – along with the European Central Bank, Bank of England and the Swiss National Bank – announces that swap lines established in the crisis to ensure dollar liquidity will be allowed to expire on Feb. 1 as they’re "no longer needed."   LOL – THAT remains to be seen!!!

    Money market fund assets slip by $13.75B to $3.19T, according to the Money Fund Report. Taxable assets fell $11.11B to $2.8T, while tax-free assets declined $2.65B to $390.97B. Taxable yields were likely to hang at record lows of 0.03% following another FOMC meeting with no rate hike.

    Dow leaders: BA +5.7%. KFT +2.1%. T +2.1%. BAC +1.8%.
    Dow laggards: CAT -6.8%. AA -3.4%. DIS -1.9%. UTX -1.9%.

  186. judahbenhur

    JRW, Very nice call on 61.55. I am in your debt again.

  187. JRW III

    62.03 is 1st R.

  188. ssdirk

    judah – how much scotch do we owe JRW now?  It’s gotta be a lot.

  189. judahbenhur

    JRW, Yes, I remember from the pass couple of days. Fail that and I’m out again.  Maybe sooner, it’s been a nice run.

  190. kustomz

    Some of these fees are on the rise. The domestic credit-card interchange rate — a transfer fee set by issuers such as Visa and MasterCard, but paid to the cardholder’s financial institution every time a Visa or MasterCard payment product is used — rose from between 1.25% and 1.91% in 1991 to between 0.95% and 2.95% in 2009. MasterCard’s rate also jumped from between 1.30% and 2.08% to between 0.90% and 3.25% last year, according to a recent Government Accountability Office report about credit cards. Processing fees have also been added to debit-card purchases, which in the past, were free for merchants to process.

    http://online.wsj.com/article/SB10001424052748704094304575029091882451812.html?mod=WSJ_Technology_RIGHTBottomSBHeadLines

  191. JRW III

    Out at IWM 61.83

  192. judahbenhur

    JRW, SS, That felt like a lot of resistance to me. Never know what the last 5 minutes will bring. I’m out at 61.80. It has been a real pleasure riding with you two.

  193. ssdirk

    judah – likewise my friend.

  194. ssdirk

    Phil – There is a great IPad demo on the Apple website, but they must be getting a butt load of traffic because it is slow to load.

  195. BigPinot

     JRW… I missed the 61.5 buy point for IWM and didnt chase it What levels are you looing at for tomorrow? Thanks.

  196. EricL

    Fun day. A bit more upside tomorrow morning, then the selling can resume. :)
     
    OMG!! AAPL just released another new keyboard-less device!
     
    http://www.theonion.com/content/video/apple_introduces_revolutionary

  197. judahbenhur

    Phil, Do you think today was the beginning of consolidation, or just Mr. Stick gracing us with his presence?

  198. JRW III

    Big,
    Support at 60.84, resistance at 62.03, MAJOR resistance at 62.33; so, where we start ( futures manipulation ) and initial direction success are key. Over 62.33 I’ll BUY below 60.84 I’ll sell BIG.

  199. judahbenhur

    SS, To your earlier question, I’d say we owe JRW at least a case of scotch by now, but we don’t want to turn him into an alcoholic because then his lines will become fuzzy.

  200. pstas

    Eric- "it’s new and shiny and from AAPL"- put me down for two!

  201. Phil

    T/D1 – I like them long-term now at $25.50 again, this is another revenue stream for them that will be nice and AAPL has given no major indication of leaving them soon.

    CC/Kustomz – It’s crazy, anyone who can jam up mandatory expenses to consumers is doing so and the discretionary spending (US manufacturing) is dying.

    Thanks SS!

    LOL Eric! 

    Consolidation/Judah – This is just what we wanted for consolidation., pretty nice volume (262M on Dow) and a stong up move – much better than usual stick with REAL bottom testing for 2 days.  My objections to other pullbacks is "THEY" were scared to let us test these levels, which are the same levels I’ve been looking for since November.  That’s the thing about real level tests – they scare the crap out of people!

    Well that was a totally fun day, hope tomorrow is just as interesting…

  202. gilmdjd

     Anyone know what happened to IOC. Fell out of bed bigtime and looks to me headed back to its breakout at 50 which is 18 points down from here.

  203. BigPinot

     Thanks JRW. 

  204. kustomz

    Everything is just a few hundred clicks away lmao….those guys seem to have a big budget to work with, very professional
     

  205. BigPinot

     Well Phil, gold is hovering at 1088. I sure hope it breaks down.

  206. Peter D

    cwan, thanks for the kind words.  You are absolutely right that 1%-2% profit target to learn the trades is very reasonable, as long as we don’t make a loss, right?
     
    My post at 10:43AM seemed to be the best time to sell more strangles (and why I was undecided to open more or to close existing ones).  After that, their value keeps dropping, so closing out short strangles was the direction for the rest of the day.  So 1/3 of my portfolios had been closed in the last 2 hours.  Shredding a few more spreads and I’m back to the numbers where we started last week.  It was an unbelievable ride.

  207. japarikh

    Phil,
      Now that we’ve tested 10,200 (successfully I think), is it okay to scale into some long positions by selling puts a la "Buying Stocks at a 20% Discount"? I was thinking of long biotech for my IRA accounts per Pharm’s excellent review and looking to pick at the Q1 Buy List. What say you? Also any recs for downside protection or just the usual with EDZ, DIA puts, and GLL (when gold >$1100)?
      Thanks for the comment on selling apple calls. Tempting but stupid. Should have known better.

  208. judahbenhur

    iPad.  Wow. I’ve just been watching the iPad video clips from the WSJ site, http://online.wsj.com/video-center/apple-tablet.html, and considering my own experience using a Kindle for over 2 years now.  It is a bit like the difference between cell phones and smart phones.  I probably spend $1,000 a year with the Kindle on books, magazines and newspapers, in addition to the two devices I bought (first one broke).  Starting in March, that amount will go to zero.  While I never consider myself a typical anything, I am probably indicative of the heavy Kindle user who is very profitable for Amazon.  Not only have I bought more books from Amazon over the past 2 years, but I have increased other purchases from Amazon as well.  Clearly, Apple can take Amazon’s ebook business, which has become core to Amazon’s success recently.  So, I can’t for the life of me figure out why Amazon’s stock finished up 3% today.

  209. tchayipov

    Peter,
    I don’t understand why you closing your positions when market is going down, if I understand correctly, because of put spread, when market down we can make more than ussual

  210. Jordan

    QCOM down, missed expectations.

  211. tchayipov

    Juda
    I think that apple will take not only e-book business but also regular book business, same way as they changed music business

  212. bord

    judahbenhur, I have a position in AMZN, so I watched it closely. It’s been down roughly 7-8 of the last trading days. It dropped from about 140 to near 120 real quick , so a weak bounce was due, and they earnings tomorrow at the close. AAPL should eat Kindle’s lunch, I think the people here are smart enough to know that right away after today’s show, but frankly I don’t think some analysts are quick enough to really think through and figure out the ramifications in time for tomorrow’s earnings.
    In general, it seems like the last few weeks are heavily influence by the perception of liquidity.  Really good earnings plus speculation over sugar daddy Ben getting axed = maybe the free money ride will be over sooner than we think = stocks tank. Same applies to China, they tighten credit (a very prudent thing to do) and investors are rewarded with a big drop in stocks. But today the Fed orders another round on the house because we’re all Keynesians now (for those who watched the youtube video), so US stocks recover. It will be interesting to see if China remains week in the coming weeks as maybe money gravitates to the US market since we’re still playing loose and easy, while China is tightening up. This is all gonna end so badly, but for now the party goes on.

  213. bord

    whoops, that is AMZN was down maybe 7-8 of the last 10 trading days.

  214. ssdirk

    Too funny.  Check out this old clip on the IPad name from MadTV.
    http://www.youtube.com/watch?v=FTzhXMbOWHE&feature=related

  215. gel1

    Judah
    I concur with your opinion – The ipad is a kindle-killer. and I can see the AAPL product really have an aggressive growth pattern over the next six months, as it fills the pipeline for all the Apple cult members, as well as those who are looking for a device just like this.

  216. ssdirk

    Peter -What do you think of a Feb RUT call rolldown from 680 to 650 for 1.90 credit.  I can do the 660 for 0.70 credit, but not as sexy.  What say you?  I have plenty of margin left.

  217. gel1

    ssdirk… LOL

  218. judahbenhur

    Bord, Thanks. I get that, and I’m not suggesting shorting AMZN. Even when I think I know a lot about a company, there’s always something I don’t know.  That’s one reason I don’t trade individual stocks very often. I prefer channels and momentum plays. My comment about AMZN’s rise today was meant to be rhetorical, though I guess that didn’t come across.  Hope AMZN works out for you.

  219. judahbenhur

    SS/650. Funny how just a couple of weeks ago I was worrying that 680 was too low a ceiling.  I know the RUT had a heckuva time with 650 and probably won’t get over it by Feb expiration, but that gives us just 5% headroom. I’ll be interested in what Peter says.

  220. Cap

    Timmy on TV was a pathetic, sneering, arrogant, slippery jerk-off.  Kept dodging questions.  Paulson too.  Weasels.
     
    And hey taxpayers, if you want to get paid back for AIG and FNM and FRE and GM, then you better support Timmy and Obama’s bank tax (er, financial responsibility "fee").  And if you don’t support it, then all that money Timmy gave away that the gov’t will lose and you will pay for, well its all your fault anyway.
     
    Won’t be sad to see Timmy go, but then of course he’ll get set up w/ a no-show job at GS or some hedge fund for big $$ and laugh in everyone’s face.
     
    Tough day to trade today. 

  221. Cap

     AAPL – made some $$ trading AAPL today, but after reading this review of the I-Pad, i think I want to rename it as the I-Bad.
     
    http://i.gizmodo.com/5458382/8-things-that-suck-about-the-ipad

  222. Cap

     Pharm — any thoughts on MNKD ?  and any knowledge of key dates in Feb or March.
     
    Some folks and I are thinking it is kinda pricey up here and thinking about some short strategies; but could use some expert info…

  223. Pharmboy

    CAP – They say March 5 if my memory serves me correctly but no formal date has been noted b’c it deals with manufacturing in MRK’s Organon unit.  Approval – who knows but LLY and NOVO discontinued their inhaled, and PFE took a 1.5B writeoff on their purchase of Exubera.  Cards stacked against them, but MNKD is testing in pediatric patients, so…safety must be there otherwise they would not be able to do this.  I am not playing.  My one in this area that will beat them is GNBT for buccal. 

  224. Pharmboy

    Looking in clinical trials, they have a ton of trials in COPD, asthmatics, etc.  I am not sure they would do all that if they were not confident of approval…..dilemma…..

  225. Cap

     Pharm – thanks.  I am well aware of the Exubera disaster and I think putting stuff like insulin in the lungs is no good.  The lungs are not made for this stuff.   Big market cap even if they have favorable outcome.

  226. Pharmboy

    SVNT has been pushed back down to support at 12.9.  Might be worth a flier for a bull call spread 10/14 Jun for $2.  Swing for the fences….17.5 Mar for 8c.  I am inclined to pick up a few of those JIC the FDA says everything is OK.  These guys will move to 20 in a hurry.

  227. Pharmboy

    Does increase the risk for cancer and side effects – insulin in the lung.  That was a knock on PFE.  Dosage was bigger for PFE than MKND.  The backer of MIKND is the billionaire who made solar panels for satellites.

  228. Cap

     Avatars / Phil …. that was a cool idea.   Did you watch Caprica ?  If not, you should check it out to advance how that might work.

  229. Cap

     Yeah, I know Al Mann has sunk hundreds of millions of his own $$ into MNKD.  That does not mean he will succeed, but it does account for why the stock isnt at $2.

  230. Cap

    Bord … that was funny …

  231. Peter D

    tcha/closing shorts,
     
    The VIX really dropped in the past 1.5 trading hours as the market went stabilized then went up.  When my first GTC to buy back strangles got executed (and the account balance goes up), I immediately added a bunch more, offering to buy back for less.   So no, I did not close when the market is going down, but when VIX is going down.  Take a look at the price movement from the 5 minutes VIX chart and 5 minutes chart of RUT Feb 550 put (.RUWNJ).  The key decision was to look at the account Cash Balance and see how much profit had been made and decide whether I need to protect that profit, or taking on risk by holding the shorts for longer.  Secondly, because I sold a bunch of short strangles into the VIX excitement in the past few days, I need to reduce the risk exposure to the market. 

  232. Cap

    wiiboxer … I have done this in the past.
     
    you could create an LLP or LLC with lots of disclosure and caveats and very broad investment parameters and have people invest in that.   You probably would also need a PPM, and a good subscription form.
     
    Depending on who you use for a lawyer and how extensive; you could probably get this done for under $25 k.
     
    You also need to make sure all your investors are qualified investors.
     
    This would be set up just like any private investment partnership; such as for real estate or venture capital, except in your case it would be for trading in securities (stocks, bonds, options, futures, long, short, hedged, unhedged, naked, not naked, diversified, undiversified, etc.), with securities broadly defined.
     
    You would be the general partner and/or the manager and you can set up a fee structure and profit sharing structure.
     
    If you have people from multiple states, it gets more complicated.  Foreginers, even more complicated.
     
    Then you can set up an account for your company at most any brokerage firm, and off you go.
     
    This is just my comment from my own experience; it is not advice.

  233. Peter D

    ss/judah/RUT Feb 650 callers,
     
    That’s a tough call to sell the 650 calls as we might bounce.  Worse, the 660 call is only $1.05 at close.  This is why I wish RUT as $5 instead of $10 strikes.  If you don’t need protection for the downside, then 660 is more desirable.   Like judah said, last week we though 680 was in danger, and now we are debating about the 650.   I would usually consider the what-ifs, what-if RUT drops to 600, then going to 650 is a great move; what-if RUT gains to 630, then the 650 doesn’t look so safe.  As usual, you can do half 650 and half 660 if we have a gap up tomorrow, or just 660.

  234. tchayipov

    thanx Peter,
    another q about money per strangle and margin:
    how I understood, margin is increasing if price approaching our Call, if price is going down we are OK. So if my strangles are only 20% of portfolio and I have lots of long plays, will it compensate margin increase for strangles if market will go up? If so, do I really need 20K per strangle??

  235. bord

    Cap, I hate your politics, but I appreciate your COF short last week. I laid down a little on a COF put and did quite well…but closed out most of it before earnings so could have done a lot better. Thanks for the trade! You have any interesting shorts going now? It seems like V is coming back up again, so maybe a play there?

  236. samz3700

    Buckle up – Asia up 1.5%

  237. neverworkagain

     Peter D / Strangles:
    Although I don’t get a chance to post much, I have been successfully running your great strangle strategy (with crazy plays) for the last 2 quarters and love it. I see Tchayipov’s question above, and in some ways have a similar comment. I am using PM with a pretty big portfolio and so although having ‘crazy plays’, I am using other instruments to balance my portfolio delta, such as /ES futures and other longs and shorts. Rather than manage the SPX and RUT strangles individually, I am maintaining margin levels of the overall portfolio. But obviously your rule of thumb $20k per SPX strangle is a good double check when writing new ones.
    My question though was why you think hedge funds aren’t running this strategy in much larger size? I was looking at the volume yesterday on SPX 1180 calls and 950 puts for March (my current strangles) and only see around 2,600 options traded. Maybe the reason is the lower liquidity, the high spreads, and the "boring" (not that I’m complaining) nature of the strategy. It would just seem that a strategy that, even being conservative, can return 2% a month in both up and down markets, would be MUCH more popular.  Any ideas?
    And another question…. have you looked into starting / running a fund with this strategy? Any concerns or comments from investors either pro or con? I remember a while back Phil did a big write-up on the demographics (in America) and how there would be a huge need for income funds from the baby boomers… not bond-based ones that do 6% a year, but maybe an option-based one with higher returns and even monthly or quarterly disbursements, something that option writing could deliver. Seems the strangle strategy would fit that.

  238. kustomz

    Mexican central bank Governor Agustin Carstens said officials may buy dollars from the market as part of a plan to boost currency reserves and gradually exit a $47 billion credit line with the International Monetary Fund.
    http://www.bloomberg.com/apps/news?pid=20601086&sid=aHnFkxYkVROM

  239. kustomz

    TAIPEI/HONG KONG, Jan 26 (Reuters) – Shares of cellphone maker Foxconn (2038.HK) recorded their biggest percentage fall in over 9 months on Tuesday after a profit warning, but many analysts remained upbeat about the firm’s prospects.
     
    A key supplier to mobile phone brands such as Motorola (MOT.N) and Apple (AAPL.O), Foxconn shares ended the day down 8.7 percent at HK$8.08 ($1.04), its weakest close since Dec. 22 and its biggest one-day percentage fall since March 30 last year.
     
    Hong Kong’s benchmark Hang Seng stock index .HSI ended the session down 2.38 percent.
     
    Foxconn, a unit of Taiwanese electronics giant Hon Hai (2317.TW), said on Monday it expects a "significant decline" in group net profit for 2009, mainly due to a fall in demand and weak pricing
    http://www.reuters.com/article/idUSTOE60P0A920100126?type=marketsNews

  240. pstas

    Never- just curious- on your SPX strangles- what is your reasoning on picking the 1180/950 spread? If I understand Peter’s strategy, he generally sets these spreads up using a +10/-15% range? Your 1180 is more aggressive. Thanks

  241. neverworkagain

     Ptas: I rolled the Mar 1200 call down to the 1180 for a credit earlier this week to get some more downside protection. To balance out my SPX delta (not overall portfolio delta which I use /ES for) I have sold a couple more SPX calls than puts to ensure ‘a slight negative delta’ as Peter D likes to say about the sweet spot. But I am using similar strikes to Peter on the initiation of the strangles.

  242. pstas

    Never- got it. Thx

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