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Thrilling Thursday – Obama plus Jobs (Steve, not employment) Boost the Market

You would think I would have a lot to say about the IPAD but I don’t.

After all, I named the IPad back in December 2008 when I told Members: "AAPL just announced a deal to do Ebooks on IPhones and ITouch and that is the intermediate step towards the IPad, which should be a 2-3x size version of the IPhone that takes the place of a Kindle or a laptop or a notepad or…"  I also ran a very close to accurate picture of the IPad back on Sept 11th (and the live images are here), which documents our bullish take on AAPL all the way from $85 and reiterated in Sept at $170 (but we were out at $213 Tuesday, back in at $202 yesterday for the ride back up as we got our expected sell-off during the Apple event) – so this is all old news for us at PSW.

Back in September I said: "So we are happy, happy AAPL owners and Piper Jaffray’s Gene Munster thinks AAPL can sell 2M units of the IPad at $600 each to generate an additional $1.2Bn in revenues in 2010 and I think he’s low.  Also, it should be noted that we went with GLW back in December on the premise that millions of touch-screen IPads would use a lot of high-end glass."  I am very pleased that the basic model came in $100 lower than my target but, as with IPods – who buys the basic model?  Delivery in 60 days means I should hit my sales targets no problem and I it doesn’t look like GLW will be the supplier of IPad glass (LPL seems more likely) but the demand for glass will still be stunning and GLW is up 26% since September so we’re not going to whine about it (I still like them). 

OK, enough about toys, on to the President, who gave his State of the Union Address last night, making the following notable points (my notes in brackets):

I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. I’m also proposing a new small-business tax credit, one that will go to over 1 million small businesses who hire new workers or raise wages. While we’re at it, let’s also eliminate all capital gains taxes on small-business investment and provide a tax incentive for all large businesses and all small businesses to invest in new plants and equipment. (Good for the Russell)

This problem is not going away. By the time I’m finished speaking tonight, more Americans will have lost their health insurance. Millions will lose it this year. Our deficit will grow. Premiums will go up. Patients will be denied the care they need. Small-business owners will continue to drop coverage altogether. I will not walk away from these Americans, and neither should the people in this chamber. (nothing concrete there)

It’s time to require lobbyists to disclose each contact they make on behalf of a client with my administration or with Congress. It’s time to put strict limits on the contributions that lobbyists give to candidates for federal office.  With all due deference to separation of powers, last week, the Supreme Court reversed a century of law that I believe will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections. I don’t think American elections should be bankrolled by America’s most powerful interests or, worse, by foreign entities.

If the Republican leadership is going to insist that 60 votes in the Senate are required to do any business at all in this town, a supermajority, then the responsibility to govern is now yours, as well. Just saying no to everything may be good short-term politics, but it’s not leadership.

Each time a CEO rewards himself for failure or a banker puts the rest of us at risk for his own selfish gain, people’s doubts grow. Each time lobbyists game the system or politicians tear each other down instead of lifting this country up, we lose faith. The more that TV pundits reduce serious debates to silly arguments, big issues into sound bites, our citizens turn away. No wonder there’s so much cynicism out there. No wonder there’s so much disappointment.

Our administration has had some political setbacks this year, and some of them were deserved. But I wake up every day knowing that they are nothing compared to the setbacks that families all across this country have faced this year.

The spirit that has sustained this nation for more than two centuries lives on in you, its people. We have finished a difficult year. We have come through a difficult decade. But a new year has come. A new decade stretches before us. We don’t quit. I don’t quit. Let’s seize this moment, to start anew, to carry the dream forward, and to strengthen our union once more.

I am often accused of being too liberal so I’m going to throw my Fox fans a bone by pointing out that I’m a little disillusioned by how little we’ve accomplished in the 24 months since candidate Obama gave the response to George Bush the 2nd’s final State of the Union Address.  I think the problem Obama is having with his supporters (and yes, I am one of them) is that we voted for change.  We voted to throw the bums out yet the bums seem to be very much still in charge and business is being conducted as usual.  I’ll say one thing for GB2, he busted heads – he didn’t let a Democratic Congress, the Bill of Rights or even the Constitution stand in the way of getting what he wanted so what the hell is wrong with Obama?  Why are we still having these discussions without the action to back them up?

Well, I’d love to dwell on politics but it’s a busy morning.  We had our Fed indecision yesterday and you needed a magnifying glass to read the faint tea leaves in their statement.  The Fed dropped its December concerns about the housing markets and was more positive on business spending (although that was not what we saw in the Beige Book) and they upgraded the revovery from "weak" to "moderate" and that’s about it.  What they did not do, was extend the time to wind down some QE programs and, in fact, put hard dates on the end of them and that gave a brief boost to the dollar, tanked commodities and gave me a chance, at 2:39 to put out a note to members to flip bullish with the DIA $103 calls at $1.23. 

Usually, I make a call like that right with my normal parsing of the Fed statement but we were distracted by the end of the AAPL conference and my 2:24 Alert to Members on the Fed concluded with: "FORGET THE FED – $499 for the IPad!!!!  BUY AAPL, Sell AMZN, Sell HPQ, Sell Dell - game over!!!  Buy T (March $26s are .75)."  Walt Mossberg quickly agreed with my take on Apple’s rivals and the T March $26 calls shot up to .95 so we took that money and ran (good thing too!) but I still like T long-term as it seems their partnership with AAPL is still going.  VZ got hammered on a short-sighted downgrade from FBR and we thank that analyst for giving us an in at $29.75 as well as it’s bandwidth, Bandwidth, BANDWIDTH in the future that will matter if everyone is going to be walking around with portable MP3 television screen/web browsers instead of books.  

You also have to love Google on this news as more and more eyeballs will spend more and more time on-line and that’s good for ad revenues AND, as I have often noted in the past, GOOG has been cornering the market on dark fiber since 2005 and estimates are they have enough to form their own telco at this point or, possibly, something more specialized to a new generation of web devices that will dominate the market the way IPods took over the portable music market.  It will be interesting and we should think of GOOG as a nice commodity play on bandwidth, as well as a company that happens to make a few bucks selling ads or whatever it is they officially do

We were discussing last week what island nations we can relocate to when it all hits the fan in the US and the peasants start revolting but what we didn’t discuss is what nations to avoid NOW.  Fortunately, Barry Ritholtz has provided us with a chart from Bill Gross’s Annual Address highlighting nations that are in what he calls "the Ring of Fire" which, ironically, does not include the Scandanavian countries from Wagners "The Ring" but does, of course, include the US, where Johnny Cash had a hit single with the same title:

As Johnny Cash said about the US economy: "I Fell Into A Burning Ring Of Fire, I Went Down, Down, Down and The Flames Went Higher. And It Burns, Burns, Burns – The Ring Of Fire."  Gross warns of the deleveraging yet to come and reminds us that good fund managers need to take the long view – echoing what I told members 2 weeks ago when we went back to mainly cash at 10,700 because, as another country singer said: "You have to know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to RUN." 

Bill sees 5-6 years of deleveraging ahead of us, as do many market bears but I question their underlying premise.  Who says we have to deleverage at all?  It seems to me that the G20 leaders have decided to go "ball to the wall" with debts they can NEVER hope to repay and perhaps it’s Bill Gross that’s deluding himself thinking his Trillions of dollars worth of bonds will actually be redeemed as governments choose de-leveraging over de-faulting.  As I have often said, everyone is partying like it’s 1999, and that may include the debt buyers, who are gorging themselves on record credit spreads as if Japan and the USA are "too big to fail."  Perhaps they need to consider the possibility that "too big to fail" can also be "too big to bail!
 

 

Anyway, as Monty Python points out, you’ve gotta love Norway.  They have their own oil, run a surplus, have the highest per capital income in the EU ($72,000 vs $42,000 US), cover 100% of the population with health care and will surely benefit from global warming.  NOK is from Norway (actually Finland but same thing to Americans so I’m going with it as a transition) and they just reported great earnings with a 65% rise in Q4 net profit.  Overall Euro-Zone Economic Confidence came in a little better than expected this morning but SI announced they are cutting 2,000 more jobs in Germany and ECB President, Jean-Claude Trichet, supported Obama’s plan to rein in large banks and Trichet has a LOT more power than Obama to make it happen so the European markets backed off, dropping about half their gains from a +1% open. 

Barry had another nice chart yesterday that gives us a nice, graphical representation of why the removal of stimulus is so terrifying to Wall Street.  Very close to 50% of China’s economy was based on stimulus spending last year and that was nothing compared to Saudi Arabia’s 85% (no kidding!) and, of course, in sheer dollar volume, the US dwarfs them all with over 1/3 of our massive $14Tn economy aimed at stimulating ourselves:

Over in Asia, both the Hang Seng and the Nikkei had 1.5% bounces which are, of course, 20% retraces of their 7.5% drops.  Better late than never as we now feel smart for getting out of our FXP and EDZ plays as we expected a bounce in the very least.  Banks and commodities led the decline in Asia as George Soros finally joins me in predicting that gold will be the next bubble to burst while also warning that by proposing imminent "exit strategies" from the unprecedented support handed out to troubled banks and consumers, governments around the world could be in danger of triggering a double-dip in the global economy, saying:

I think that since the adjustment process to the recession is incomplete, there is a need for additional stimulus. Some countries, like the US and European countries, have plenty of room to increase their deficits. The political resistance to doing so increases the chances of a double dip in the economy in 2011 and after that.

There’s a ton of interesting things going on over in Davos and I’ll be catching up on that over the weekend as it’s not often the Gang of 12 holds open meetings so we like to keep our eye on them.  We are still trying to be bullish on the markets and this morning we are likley to retest the bounce levels I predicted on Monday, which are: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 with the Russell being the only index not to pull it together so far so we’ll be watching them closely as our key indicator.  Oil bounced right off our $72.50 target yesterday and now we’ll see if they make their bounce back over $75 (20% retrace of drop from $84+) with gasoline right on the critical $2 line and nat gas (inventories at 10:30) looking weak at $5.24. 

Copper briefly failed our critical $3.20 line yesterday but seem to be holding it (remember when we were worried about our FCX shorts?) and silver is hovering around $16.50 while gold is holding our line at $1,088, which we noted is interestingly the same as our breakdown target on the S&P and both Carl Jung and Sting tells us not to ignore sychronous events so we’ll be watching both closely for warning signs.  Our 5% "must hold levles" remain:  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 with 3 of 5 below = BAD!

Be careful out there, it’s still very tricky trading! 

 


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  1. samz3700

    phil -
    what happened to the european markets – opened up big following asian and then slid ? was it the uk bank announcement?

  2. samz3700

    Phil -
    What do you think of qcom down 9%? Seems like a good play on smart phone expansion but then again I did not listen to the call – obviously disapointing a lot of folks.
    I wish there was an edit function so i could remove stupid posts i make

  3. phlit

    Phil it looks like I might get a break with my "nasty" Feb Rut put spread 620/650.  Im even with the Rut at 637 and I expect to see it the 625 range today (hopefully) .  Im inclined to give it another week or two. Any suggestions when to get out?  I dont want the $2 roll to April, to long for too little. But if I close this one out I will put that one on if the nos work. Your thoughts? Thanks for your help

  4. neverworkagain

    Peter D / Strangles (re-pasting this question from last night’s comments).
    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.

  5. judahbenhur

    Pharm/SVNT.  Thanks for the note about SVNT.  I attended the FDA expert panel hearing on SVNT last year and the comments by the panel and the participants in the trial was very compelling.  When approval for its orphan drug was postponed, I started buying calls every time the stock drops near $12.50 and selling the calls over $14. Those Mar 17.50 calls could be dynamite.  Even if they don’t get approval, there should be a run-up in the price as the expected FDA decision date nears.

  6. silentstorm44

      Phil, Re : TM       The accelerator repair could be more complicated than first thought. There might have to be a large provision for warranty/ repair expense  next quarter. TM shares might fall further.

  7. Cap

    Bord:
     
    Short candidates:
    S&P at around 1110
    AMZN (but earnings tonite, so risky)
    SPG here, but definitely around 75
    SLG here, but defintely around 50
    VNO here, but definitely around 70
    SNDK (but also earnings tonite I think)  — a good play could be to sell the 33 or 34 calls today
    Also looking at MNKD, ZION, KRE

  8. Cap

    Phil, you are such a riot, GW busted heads ?  Ha,funny.
     
    What a yawner of a filibuster, er, speech, last night.   What a waste of time and teleprompter.
     
    Oh well, back to Timmy Bernanke Barney and market manipulation !

  9. judahbenhur

    Never/strangles. Very interesting post and I’m looking forward to Peter’s reply.  Over the past couple of months as I started playing with the strangles/crazy plays myself, I had the same thought re a fund.  My circle of friends and acquaintances are mostly lawyers, many who make 7 figures each year.  They are smart people, yet when it comes to managing their money, they are generally clueless.  Options trading, hedging and the like are sort of mysterious to most of them.  While they understand the concepts, they don’t have the time or inclination to avail themselves of the sorts of things folks here do as a matter of course.  Because of the large and varied client representation by their firms, they are often conflicted from investing in individual stocks, so they often just stick to mutual funds.  An approach limited to trading the indexes could gain a great deal of interest.

  10. 1020

    Good Morning! Phil, MOT is sliding on a poor outlook. They will be making a Google only phone. What are your thoughts? Thanks

  11. Cap

    Mocha — HK w/ an upgrade this morning

  12. Cap

    oops; that was last week; not today HK

  13. roaster

    Phil – Thoughts on POT selloff? You don’t like them until 85 or so, right?

  14. yodi

    MOT down 10%

  15. Phil

    Good morning!

    Stopped out of DIA $103 calls already at $1.49 (10,200 was the stop line), maybe reload later but expect a sell-off from EU investors as well as quick bull profit taking (which we should be doing too!). 

    We are getting rejected again near bounce zones at:   Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 and we can’t even get the RUT over 620, let alone 625 so this is still weak, Weak, WEAK but hopefully we hold our floor at:

    Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 (2 of 3 of course) and we can keep calling it consolidation. 

  16. 1020

    MOT selloff a little extreme….

  17. morxlntway

    is this a good op to buy the T calls again? Pretty good drop this morning.

  18. yodi

    POT down to 102.30 -6%

  19. llorens

    QCOM sure looks like a bargain for a long-term position at $40.86. Down 13%+ has to be an overreaction. Dell not looking too shabby down here either (sub $13.50) – we report Q4 early Feb. 

  20. Phil

    Wow, this sell-off seems a little panicked for not much bad news.  Jobs were good(ish) and Durable Goods were a bit light but Karl Denninger wrote about that yesterday (see Phil’s Favorites) so no surprise there and the ex-Transport number was actually encouraging.

    Don’t forget we have a strong GDP report tomorrow so we’re going to go bullish into the close, at least speculating up a bit as we don’t want to underestimate how surprised the average retail investor will be by a good number.  We also have Bernanke confirmation at 1:30 so that’s another silly thing that shouldn’t move the markets up but might, especially after a 7-year note auction at 1pm that will probably get an "A" to usher in the new Fed boss, same as the old boss.

    Market timer Charles Nenner says retail investors fleeing to the saftey of Treasurys (ETFs: TLT, TBT) are setting themselves up for big trouble, and predicts the recent bond rally will soon reverse drastically. Nenner believes rates will only rise "for the next 30 years," and suggests investors put their cash into Gold (GLD), U.S. dollars (UUP) and Goldman Sachs (GS).  Don’t forget TBT!

    The Fed’s exit strategy to prevent future inflation won’t work because it can’t, writes Allan Meltzer in a WSJ op-ed. Instead, the Fed should reduce excess reserves by selling securities and the Treasury should come out with a credible plan to lower the deficit.

    Cramer’s F pick from yesterday missed and they were jacked way up to $12 by his sheeple overnight.  Still TM’s troubles are everyone else’s gains going forward.

    Toyota (TM) expanded its recall late yesterday, announcing it needs to fix another 1.1M vehicles because of safety concerns. In total, Toyota has now recalled nearly 6M vehicles for problems related to the accelerator pedal. (PR)

    While Toyota (TM) deals with the fallout of its expanded recall, Toyota dealerships are unsure what to do with the glut of unsellable cars on their lots, major car rental agencies (including CAR, HTZ) say they’re pulling Toyota cars from their fleets, and competitors like GM are using this opportunity to try to steal marketshare.

    POT sold 41% less than last year but sold it for a higher price so earnings were only a small miss.  If they hold $100 tomorrow they may be worth a toss to the upside. 

    MOT got their butts kicked by NOK and missed revs by 19% but beat earnings so I like them as a stock buy at $6.55, selling the July $7 puts for $1.10 and waiting to sell July $7 calls for the same (now .65).   The 2012 $5 calls at $2.25 are nice too, waiting patiently for them to come back

    The foreclosure problem is spreading, says a RealtyTrac report, and "there is evidence that we’re entering a new wave of foreclosures, driven more by unemployment and economic hardship than what we’ve seen over the past few years."

    Lots of talk about economic recovery, but households and small businesses are still fighting to get access to credit, and loan quality is deteriorating across several asset classes.

    Dec. Chicago Fed National Activity Index: -0.61 vs. -0.39% in Nov. Three-month moving average -0.61 vs. -0.68 last month. Most of the weakness continues to stem from consumption and housing. The level of activity remain in a range historically consistent with the early stages of a recovery following a recession.

    China shouldn’t buy Greek government debt, warns Yu Yongding, a former adviser to the Chinese central bank. Calling Greek debt even riskier than U.S. Treasurys, Yu says it’s unreasonable to diversify "away from an unsafe asset class to a much more unsafe asset class."  Hey, I resent that, NOTHING is riskier than US treasuries!

    Greece isn’t the only country eurozone members are worried about; earlier this week Portugal reported an unexpectedly large 2009 budget deficit, while Spain, Italy and Ireland, facing anemic growth and less-than-expected tax revenue, are fighting budget problems too. (ETFs: EWP, EWI)

    For all the tablet nay-sayers, Piper Jaffray’s Gene Munster thinks the iPad (AAPL) has the potential to be a "breakout" product if given a year to enter the broader consumer market and with a price cut to the $300-400 range.

    If something good is going to happen, it needs to happen in the Qs so the speculative upside play is QQQQ $44s at $1.02, with a stop if the Nas fails 2,200, just looking for a dime if possible (nickel trailing stops)

  21. ssdirk

    Vix is down…strange.

  22. 1020

    Phil/MOT  MOT deferred 200m in revenue from the smart phone sales due to some new accounting….

  23. ssdirk

    It’s getting ugly out there.

  24. Phil

    EU/Samz – Soros and Trichet both made them unhappy with statements. 

    Damn, bad timing on those Qs, Nas blew it already!  It’s commodities dragging us down, including semis, which is silly as another few million 64-Gig devices is a lot of semi activity somewhere…  I still like those QQQQs if we turn back over Nas 2,200.  The S&P and Dow are still holding the line but the NYSE looks shaky so that’s our 3 of 5 rule to be bearish!

    QCOM/Samz – I like them when the market turns up but below our bounce zones it doesn’t make sense to buy anything other than things you LOVE and want to DD and TD on as they go lower.

    Santelli says S&P may be downgrading UK and that’s what’s panicking markets.  That makes me feel better about looking for a bounce once things calm down but first let’s see how low we can go.

  25. yodi

    DOW surely going down -70  10161

  26. Pharmboy

    Didn’t get the fill yesterday on BMRN.  The chart looks toppy today, and almost like a head an shoulders.  I am gonna try and sell the call and back fill with buying the lower call at a better price.
     
    SVNT home run noted yesterday, 17.5 Mar C for 8-9c.  If they get approval in the next 50d or so.  Someone bought 1K last night b’f the close, so either they are gonna sell for 10c or they are thinking the same thing. 

  27. ssdirk

    JRW, judah – are you on the train?  She looks like a runaway.

  28. Pharmboy

    pyrn – did you do anything with GILD?  Pulling back a bit today, but should be safe to 46 if you sold the puts. 

  29. judahbenhur

    SS, Got on TNA at 61.08, with an itchy sell finger.

  30. ephmen85

    Wassup with IBM?

  31. llorens

    this is what I get for spouting off on the guy that sold AAPL at $199…..I still like them of course and have absolutely no intention of selling my $202 position. Will DD if I can get my basis below $200. I’ll tell my grandkids about the time PawPaw got into AAPL for under $200 cost basis. "What’s a basis?"  Nevermind, just go play and enjoy the Jungle Jim that AAPL bought.

  32. pyern

     Pharm – No I didn’t make the adjustments yesterday, hoping for the excitement to die down a bit. Looks like a good time to sell the puts, which I’m about to do.

  33. Phil

    RUT/Phil – Well we took a bad turn but Feb is still 3 weeks to expiration so unless we fail our 5% lines for the day, I wouln’t take a loss.  This is all just consolidation as we get hit with waves of bad news – did we not know that UK debt was questionable?   Keep in mind that whatever doesn’t kill our support levels only makes them stronger

    TM/Silent – Oh no doubt!  I did the math a while ago and came up with about $5Bn and that may be light.  TM will be a buy when they get back to below $65 though.

    RUT futures have held 610 very nicely and make a fun upside play there with 609.50 as a stop

    MOT/1020 – See above.

    POT/Roast – We need to see what sticks in the end.  They have held $100 well and I sure don’t love them there but plenty of other people do and their "story" is compelling (China switching to beef and needing way more raw Ag product) even if the reality doesn’t back it up (they produce a BS commodity that could be replicated almost anywhere but it’s mostly not worth the bother so they sometimes have pricing power). 

    T/1020 – I like T long-term here, not sure about getting another good run like we had yesterday so I wouldn’t want to pay up for premium again.  I’d go 2x the 2012 $30s at $1.02 and sell 1x the March $26s for .68 as a very long-term ratio backspread, willing to add another 1x to the leaps if it starts to get away but, otherwise, looking to sell .15-.20 a month against the longs.

    MOT/1020 – I thought their earnings report was fine.  Sales were disappointing but looking backwards at phone sales is never a smart way to play that sector. 

    Ouch, IBM costing 24 Dow points by itself!  Yet another reason I think we’ll hold our lines.  Seems like a lot of panicky profit taking based on some truth-telling in Davos.

    Euro down to $1.395, Pound at $1.613 and falling fast.  The Yen is gaining on us though as people still fly to Japan for safety for some reason, now below 90 to the dollar. 

    Copper $3.175 is in the danger zone, sliver hanging on to $16.50 and now gold having trouble getting back over $1,088 while the S&P tests 1,088 from the other side.   Oil holding $73.50 and nat gas at $5.15 with 60 seconds to that report.

  34. Pharmboy

    pyern – good, should be fine.  when it settles back in its range (gotta watch the chart at the end of the day), you can probably add to your long position a bit and then roll up and out.
     
    ARNA has a 21% short interest in the stock, and normally trades 1.9M shares a day.  Someone is loading up on them.  OREX and VVUS are flat or up.  Very interesting.

  35. Peter D

    tcha/margin on the short calls,

    Answering your question yesterday on whether the long holdings in the portfolio would compensate for the short call margin.  This is a gray area for me as I don’t have the longs to find out, so can only talk about the theory.  With Reg-T accounts, there would be no compensation as each individual position would be on its own.  For Portfolio Margin, I think there is definitely some compensation, but I don’t know how much.  That’s probably the reason why you asked as the required margin for the calls may be very low (since it’s like a covered call) and you don’t need the 20k per contract reserve for the short call.  However, you’d need at least 8k margin for the short put as both your long and the SPX short put would be hurting on the downside.

  36. Phil

    RUT futures up to 612 already, I added QQQQ $45 calls but very speculative at .45.

  37. Phil

    Added DIA $104 calls at .75 – these are all just speculating that sell-off is overdone, not too much conviction

  38. chuaeu

    llorens,
    Today’s selloff in AAPL seems to be a delayed "sell the news" reaction because of the big surprises that AAPL threw out there the past few days: first, the change in accounting that resulted in the blow-out quarter but makes forward comparisons difficult; second, the very aggressive $499 pricing on the iPad. I’m confident you’ll have the last laugh.

  39. Peter D

    never/short strangles,
    Welcome to the vocal short strangler’s club.  We now have 9 speaking members (ssdirk, judah, cwan, pstas, balance, never, barf, tcha and myself)! Did we miss anybody?

    Good to hear that you are using various instruments to balance the portfolio Delta.  Very cool!  Good questions on whether the hedge funds are using this strategy in much larger size to get the 2% per month return.  I think some are.  Looking at the March 900 PUT, it has a high Open Interest of 146,000 contracts with a value of $3.45 each.  That’s $50M worth of credit.  Take a 4% return per 2 months (2% a month), the amount of money under management would be $1.25Bn, for this one strike.  Adding all the put and call strikes and other months, we are looking at north of $250Bn under management for SPX easily.
    There are risks to this strategy though, as balancenv pointed out that on big spikes down, the loss can be large and needs to be managed.  So to make a consistent return on a monthly basis will be hard, even if long term expectancy is positive.  Investors would freak out if their balance goes down for more than 20% in a particular month.  Making consistent return on a yearly or multi year basis is much easier with short strangles.  You are correct that one of the vehicles would be the hedge fund where the investor can’t see the daily balance.  A strange parallel is that Madoff were saying that he employed a similar scheme.  Remember that he said the sold puts and calls?  He probably didn’t manage the big spikes and started loosing money, then turned it to a ponzi scheme.
     
    You are also correct on the seemingly low volume and liquidity that makes it hard to get out quick.  So yes, the hedge fund idea is good, and I’m suspecting other folks are doing it to the tune of $250+Bn, but there are wild swings that make the scheme not suitable for everyone.  I’m just happy to implement it for myself.
     
    Yesterday, wii asked a similar question to judah’s 9:13AM question, and Phil, cap and I responded.  Please see the notes there as it’s a sensitive topic.

  40. Phil

    Nat gas disappoints (as usual)EIA Natural Gas Inventory: -86 bcf vs. consensus of -108 bcf. Nat-gas futures -1.4% to $5.15.

    Bye bye, banner ad. Google (GOOG), Apple (AAPL) and a handful of start-ups are racing to remake mobile advertising, and this week Google is expected to launch a new type of mobile-search ad for high-end phones.

    Proposals to severely limit proprietary trading could cut earnings at global investment banks by 3-5%. JPMorgan (JPM), BofA (BAC) and Deutsche Bank (DB) would be particularly vulnerable.  Good for GS, though!

    Ford (F +1%) stops production on a commercial vehicle it makes in China with a JV partner, as its gas pedal comes from the supplier involved in Toyota’s (TM) continuing safety issues. There haven’t been reports of uncontrolled-acceleration problems with the Ford vehicles yet.

    Sector ETF strength: Homebuilders– XHB +1.5%. Commercial Banks– KBE +1.3%. Regional Banks– RKH +1%. Solar– TAN +1%.
    Sector ETF weakness: Heating Oil– UHN -1.7%. Semis– IGW -1.5%. Tech– XLK -1.2%. Agribusiness– MOO -1%.

    Dow leaders: PG +2%. BAC +1.6%. JPM +1.1%.
    Dow laggards: T -0.9%. VZ -0.8%.

    CME coming back to $300.  AMGN higher and higher.  COH could care less what’s happening to the little people, nor could JWN – keeping that premise going strong…

  41. llorens

    Thanks Chuaeu. It’s down to a squeak right now but it’s getting stronger & louder as I learn to use my diaphragm more.

  42. lflantheman

    AAPL down to 201.   Bought more long-term calls.

  43. bord

    EK up 17% today…. a shorting opportunity?

  44. Phil

    Man we have got to get rid of these whiny Europeans before we get some real market damage!   They are selling off hard into the close and taking us with them.

    Meanwhile, RUT is a reload at 610 after stopping out after topping at 613.50.

  45. EricL

    "Keep in mind that whatever doesn’t kill our support levels only makes them stronger…" I think the general view among chartists (the ones I’ve read anyway) is that repeated tests of support make it more likely to fail (and likewise, repeated probes of resistance make it more likely to break). Brian Shannon makes a big point of this in his recent book, e.g.
     
    Anyway, some similarities right now to the July 7-13 period which did ultimately lead to a large rally (except now we’ve gone one day longer on support).
    I have moved to a much bigger cash position; might as well flip a coin right here, IMO.

  46. jcedens

     What’s a good short for copper right now?  Anyone doing this?

  47. EricL

    jcedens, I’m short PCU, but it has fallen pretty hard so very risky shorting here (I’m looking to get out).

  48. neverworkagain

    PeterD / strangles:  Thanks for your insights as always. Yes, i just went to look at the open interest and if you add up all the strikes out past +/- 5%, there is a LOT of notional. And for every fund buying calls or puts for hedging purposes, there obviously is someone writing those options on the other side, some being stranglers. Although I think an ‘income fund’ could basically just run this strategy, I think it works even better in a balanced, Portfolio Margin portfolio where movements in the market and VIX can be utilized for doubling down, and rolling up or down to increase income and/or mitigate risk. In the vast majority of months where the strategy is working, it looks too good to be true, but the risk is there for the greedy and reckless (ie. Madoff).

  49. lflantheman

    Brief political commentary……Last night’s lecture had me riveted, but not to what Obama was saying.  I was taken aback by the responses of the democrats (standing ovation every 30 seconds) and the republicans (mute, sitting).   It is clear to me from these polarized responses that these people hate each other, and that the likelihood they can ever work together on ANYTHING is almost nil.  Very depressing indeed.  Who suffers from their immature attitudes (both sides, indeed).  It aint them.  Its us.   Very sad.  Sorry for the daytime commentary.  Had to get if off my chest.

  50. lflantheman

    Brief political commentary……Last night’s lecture had me riveted, but not to what Obama was saying.  I was taken aback by the responses of the democrats (standing ovation every 30 seconds) and the republicans (mute, sitting).   It is clear to me from these polarized responses that these people hate each other, and that the likelihood they can ever work together on ANYTHING is almost nil.  Very depressing indeed.  Who suffers from their immature attitudes (both sides, indeed).  It aint them.  Its us.   Very sad.  Sorry for the daytime commentary.  Had to get if off my chest.

  51. tchayipov

    never
    I think It is good idea to hedge big portfolio with ES futures, because it is marked to market daily and you don’t need to close position to use winning cash to DD your long positions

  52. ssdirk

    never, Peter – I think your summation is a good one.

  53. ssdirk

    Oh shat.

  54. EricL

    AMZN IV starting to run so high that you can buy Feb/March 145 call calendars for .15.
     
    I’m buying a few as an upside hedge against a larger bear position  in AMZN.

  55. EricL

    Oops! Sorry, those are .93 not .15. Still not bad as a hedge though.

  56. Cap

    Liking BEXP right here; has traded strong all day even when market sells off; good entry now.

  57. bord

    jceden, maybe use FCX but it’s been beaten down a lot already lately. Broke 90 a few weeks back and now is low 70s

  58. Peter D

    ss & judah, are we debating whether to be in the RUT 640 short call now?  I’m still in the 660.   This has been incredibly weak given the excitement in the futures last night and this morning.

  59. ssdirk

    JRW – great levels posted late yesterday for today.  How you playing it?

  60. neverworkagain

     tchayipov / ES: Yes, I agree. I think there is some advantage from a margin point of view of having some SPX ‘crazy’ put spreads as they drop the risk of the SPX short put. But I use /ES to control the risk in my overall portfolio, but I don’t think (and I still haven’t figured out all the nuances of the PM calculations) that it reduces my SPX strangle margin requirement.

  61. ssdirk

    Dow is trading in a perfect channel on the 15 min chart.

  62. tchayipov

    phil
    do you think it is time to add one more lair of Mattress???

  63. ban2

     Phil
    sold some QCOM Jan11 35 puts @ 2.9
    Will own @ 32.1  —-  last March blow off low was 32.64 — how much worse can things get??
    (of course I’ve said that several times over the past year)

  64. ssdirk

    peter – from yesterday’s post I think I am going to make the 680 to 650 roll for 1.10 credit.  Seems a bit safer today than yesterday.  Do you concur?  Going to the 640 is 2.37 credit and 5.4% cushion for another 3+ weeks.  The 650 is 7% cushion.

  65. jburgess

    Pulled up  option chain on RUT at OptionsHouse, all I’ve got is a bunch of zeros for IV, volume, and greeks. Not the first time this has happened

  66. JRW III

    ss,
    Bought TZA at the open ( 9:32 ), sold it at 10:15, bought it back at 11:00, may sell it here or double if we get more volume

  67. ssdirk

    jburgess – happens on TOS from time to time as well.

  68. Phil

    AAPL – You can sell the March $185 puts for $4.75 – that’s a very nice entry still!  2011 $180 puts can be sold for $19, which is a nice 95% return on what TOS says is $2K in net margin for the naked shorts in an ordinary account.  Do keep in mind though that Jobs could get sick and this will get put to you so you need to be serious about wanting to own AAPL at $161 and not just trying to get a big ROI on leverage!

    EK/Bord – I like those guys and they just turned profitable and they’ve consolidated along the 50 dma for 6 months without failing it (except fro last earnings, where we bought them) so I don’t see them as an attractive short.

    Probes/Eric – Yes, that’s the conventional wisdom for free and rational markets but we have neither so my rule is, whatever doesn’t kill us is probably the stop line written into a trade-bot and if we see it defended often enough (defended meaning jerked back over the line in EOD shenanigans regardless of what happens during regular trading) then that is probably good support.  Now we do have some evidence the trade-bots have abandoned us but right now we are selling off hard on nothing but rumors and anti-market speeches (including what’s going on on the Senate floor with Bernanke) so this may be making a nice, panic, blow-off bottom.  If not – we have miles more to fall so I’m not missing anything by sticking to the bull side ahead of the GDP report.

    Copper $3.139!!!

    RUT fell really hard off 610 that time, now 607 and that’s 606.50 on the Russell so we are really getting shoved out of longs the hard way! 

    Copper/Jced – Copper producers are down 20%+ already, it’s a little late to the party.  I would short Copper futures if anything but it’s too dangerous for rational play on the whole as any silly word from China can send copper flying (or dying).  The time to short things is when they are making new highs or having huge gains like FCX this month as they went from $75 to $90 (up 20%) and made 52-week highs.  Once they move to more in-between zones, the shorts become very dangerous.  If copper heads down hard and FCX breaks $65, then they make a good short again as it’s noting but air supporting them below that (they were $15.67 last November and $30 last March).

    Division/Iflan – I have a theory that the internet and cable TV are polarizing the nation.  It used to be that the MSM really was pretty much "fair and balanced" and no matter what you read or watched you’d get a pretty mainstream view but now, no matter how crazy radical your views are, you can find a channel or a web site that not only supports your world view 100% but also links you to other sites that also share your view, which then reenforces the idea that you are part of the "right-thinking" crowd and that those who do not follow your views are clearly "misinformed."  To combat this, I try to spend at least 25% of my time reading things I totally disagree with (Cap’s sight is great for that) just to make sure I have a handle on what the other points of view are.   Sadly, most people do not do that and we end up splitting up into waring camps where there is no longer any middle ground that can be reached for compromise. 

    Selling QLD March $50 puts for $2.50 is a nice way to play the Nas to the upside.   They haven’t been below $47.50 other than a spike since September and the rising 200 dma is at $46.40 with the ETF at $53.67 so we’d have to take a lot of Nas damage to hit it and, even then, we can just roll them along.

    AMZN/Eric – Nice play.

    Mattress/Tcha – Only in that you are planning to use it to lighten up on the upper layers (tight stops, take profits down).  I amd still bullish here ahead of Bernanke’s confirmation (I’m sure the EU Media has people convinced he won’t get confirmed) and, of course, our "great" GDP numbers tomorrow.  It’s very painful but I’m accumulating in right now, not going short.

    QCOM/Ban – I think that’s fine.  Even if they go down that far, isn’t that a nice entry?  It’s a very sensible way to take up positions in a sloppy market like this.

  69. ernest

    This is the 2nd time in a week we were supposed to go back up after Europe closed, but instead the selling increased.
    I really believe we are going to consolidate and then go higher from here though.  One reason:  That’s what nobody expects.  Everybody is saying that the big correction is here, but I feel that it’s just going to be short-term like last summer, and then we go up even higher for a while (maybe 11,000 – 12,000?).  I say that partially because nobody is expecting it (the market always does what you least expect) and also because earnings have been so good this quarter.  Last March it looked like the end of civilization as we know it, but now companies are starting to get back on their feet.  Just my 2 cents.

  70. ssdirk

    JRW – only took a .20 scalp so far.  Things getting a bit hairy.

  71. Peter D

    ss, yes, the way we are going down, we’d either roll the callers down or buy back the callers.  Rolling down gives a bit more downside cushion, so rolling to 650 it is.

  72. judahbenhur

    JRW,  Got on TZA when 60.84 failed.  Do you have lower support levels?

  73. lvmoda

     Phil – Recommend any short-term plays on AMZN earnings?   I’m short Apr 150 Calls with a gain of about 9.   I’m thinking we’re in a ‘sell the news’ market right now and even if the earnings are a blowout shares may not spike much since 125 has alot of expectations built in already.  I kind of like Eric’s Feb/Mar 145 calendar call trade, since volatility will most likely peak sometime today/tomorrow.  Your thoughts?

  74. gel1

    I thought I was safe closing out over 90% of my positions. Tuned in today and found I was stopped out of six more that I was hoping to keep. I think it is time to look at some aggressive short positions as the "must hold" levels keep getting blown out.

  75. ssdirk

    JRW – throw up a daily dow 15min chart and plot the channel.  It is staying in it nicely.  I won’t give up TZA until its out.

  76. Phil

    Wow, this is relentless!   RSX, SDS, Mattress plays working but this is getting really ugly with Transports right ont he 2.5% line and the SOX down 4%.  RUT and Nas are our worst major indexes – down 2.25% and we need to watch them at the 2.5% lines.  The rest are down 1.5% but getting weak fast!!

  77. ssdirk

    Peter and stranglers – this is the day I was afraid of over the weekend.  I am just happy it didn’t happen on Monday.

  78. ssdirk

    Peter – I am trying for .95 on the roll.

  79. Jordan

    Phil, another thing to consider, besides the "good" GDP number tomorrow is any stock that report after hours today that have the potential to drag the market sentiment down, a damage the GDP report tomorrow may not be able to repair.  There are some important earnings tonight..

  80. chakra108

    Phil
    I sold some MSFT FEB 25 calls which are slightly profitable. Do u have a take on the CC tonight? Thanks.

  81. ssdirk

    peter – I have SPX Mar 1240 and RUT 700 and 710 calls with my deltas now slightly positive.  What do you like for rolls there to take me slightly negative.  On the SPX looks like the MM has given up all the way down to 1215 area.  The RUT I like 680.  What do ya think?  Man this gets exciting quick.

  82. chakra108

    Phil
    AAPL- Do you have any longer term disaster protection play in mind? Thanks.

  83. jburgess

    Caps site? Someone help me out here.

  84. lvmoda

     Phil –  Any reason on AAPL to go out to the 2012 180 puts and collect $10 more premium vs. the 2011′s?    I’m thinking concerns over Job’s health and the IPad would be resolved one way or the other.  

  85. mrmocha

    Cap, getting back into HK today with you, its RSI is at a level where it always seems to turn upwards.

  86. Phil

    .02/Ernest – I am going over the week’s earnings and looking for a reason to be fearful and I’m not seeing it.  We are improving – slowly, but improving and I’m happy to pick up long-term positions here as they get cheap.  We may go down another 5% to 9,650 on the Dow and about 1,000 on the S&P but that’s really not too bad overall (compared to what March looked like).

    Europe finished down over 1% at the low of the day with the DAX well below our old 5,750 watch line at 5,572 and the FTSE below our 5,250 line at 5,170 but the FTSE is only 6.7% off the top at 5,550 and the DAX is also at likely support down 8.7% from 6,050.  It does look like we’re all going to poke that 10% line if we don’t turn our day around but the Nas and RUT are holding the 2.5% line so I don’t think it’s going to be today for US markets

    AMZN/Lv – I think they have a good Q but I’d sell into that rally so a good way to play is to sell the Feb $120 puts for $5.70 against the Apr $110 puts at $5.15 for a .55 credit and then take out the Feb puts on a big move up and hold for a retrace the other way.  If they head down, of course, you can roll it into a bearish vertical (Apr $105 puts are $3.75).

    Cash/Gel – I’d take a stab at the upside for the afternoon and if that works, take the base off the table and let the profits ride into the GDP tomorrow morning.

    Earnings/Jordan – We’re running 70% beats with very few guide downs so I’m not going to bet against the trend.

    MSFT/Chakra – I think they accidentally make money no matter what happens and their road show last month was full of "good news" so I doubt they guide badly but you are severely screwed if they miss or say something stupid (very easy with their CEO) so naked $25s is not the way I would go.  For $2.60 you can own the July $25/29 bull call spread which gives you $1.40 of upside if MSFT holds this line and you’ll have $1.70 left to roll or DD if they do miss.

  87. JRW III

    judah / support
    60.16 is the next level but I got out of TZA at 60.40 on IWM, so I’m back to watching. Made $0.75 though !

  88. judahbenhur

    JRW, Wow. .75 is great on TZA.  I played TNA from 61.08 to 61.40, and didn’t get into TZA until late. Made .25 on it though.  Thanks for the 60.84 line. Thinking there might be an afternoon ride on TNA.

  89. chakra108

    Phil
    Pardon my ignorance. You write "but you are severely screwed if they miss or say something stupid (very easy with their CEO) so naked $25s is not the way I would go. " I wrote the FEB  $25 calls so if they miss or say something stupid the stock would fall apart and allow me to buy the position back. So how will your statement play out? Thanks for the spread idea.

  90. jburgess

    Phil, you stated this morning "To combat this, I try to spend at least 25% of my time reading things I totally disagree with (Cap’s sight is great for that) just to make sure I have a handle on what the other points of view are. " What site are you referring to so I can read too. Thanks.

  91. Phil

    GS holding up. 

    OIH holding up too well at $120 – that’s another shoe still to drop if oil breaks down. 

    AAPL/Chakra – You mean just on AAPL itself?  Hmm, that’s interesting…  Well, if you are INVESTING in AAPL and drawing a monthly income of at least $2, you can protect yourself by taking the 2012 $160 puts at $20.50 and selling 1/2 the March $160 puts for $1.  If you keep doing that, you collect about $10 against your protection over 24 months and you will expect to lose the other $10 but your $48 of sales will outweigh that while a 20% drop in AAPL should send the $160 puts up to $38 (the price of the $200 puts) and it would only put the putters just in the money with lots of time to roll. 

    Cap’s site/Jbur – Click on Caps name on one of his posts and you will be enlightened!  8-)  Today he’s blaming Obama for Kentucky’s BBall loss…

    AAPL/LV – BECAUSE of Jobs’ health I prefer to have a year I can see to roll to.  If AAPL drops 50% to $100, the 2011 $180 puts can be rolled to the 2012 $140 puts (now $14) whichi is within the realm or reason to ride out (kind of like when AMZN blew up on us – you split it, sell calls, widen the spread, etc..) but if the 2012 $180s jump to $90, the only thing you can do is come up with $60 to pay them off or split them to something like a 2x $120 put/call spread, whcih won’t be fun to sit on.

    Copper hovering at $3.12, gold STILL $1,087, Silver $16.30 (Fail), Oil $73.47 (better than it should be) and Nat gas at $5.18 (also better than it should be).

    Dow volume at noon is 96M with 90M normal on a slow day so we are stickable with Ben’s confirmation (maybe) at 1:30 but first we get that 7-year note auction at 1.

    Global demand for goods and services will come back "very slowly, if it all," says William Fung, managing director of Li & Fung Ltd., a major supplier for retailers including Walmart (WMT), Kohl’s (KSS) and Macy’s (M). Fung predicts it will be "very tough" for China to completely offset the decline in U.S. consumer spending.

    Jan. KC Fed Manufacturing: 13, vs. a revised 7 in December. Six-month expectations index: 35 vs. a previous 17. Growth slowed, though, at durable goods producers, especially computers and electronics. Production is nearly back to year-ago levels; price indexes moved up, but pass-through to finished goods prices is limited.

    Margin debt rose significantly in the second half of 2009, according to the New York Stock Exchange, totaling $230.9B at the end of December, up 4.5% from November and 30% year-over-year.

    NYSE (NYX) reports delays in quotes on symbols A through HZZ.  See, what did I tell you about messing around with those early letters!

    Toyota (TM -3.4%) says it’s close to a fix for its sticking accelerator pedals, and hopes for regulator approval in the next few days – which means it could resume halted production lines next week. (earlier: I, II)

    AstraZeneca (AZN -5.8%) plans to cut more than 10,000 jobs over the next four years – that on top of the 12,600 jobs it cut between 2007 and 2009. After a strong quarter, the company expects profits to drop, and hopes to save $1.9B a year, against a restructuring cost of $2B.   That’s about 20% of their work-force!

    Blackmail from Blakstone:  If politicians keep attacking, Blackstone’s (BX) Steven Schwarzman says, bankers are going to cut lending and risk the recovery. “Financial institutions will feel under siege and they will retreat … Their entire world is being shaken and they’re being attacked personally. We don’t need those financial institutions insecure.”

    Deja Vu – Didn’t they run the same articles when the IPhone came out to chase people out of AAPL?:  Apple (AAPL) could be in for a fight: Fujitsu (FJTSY.PK) has been selling a computer product called iPad since 2002. A 2006 Fujitsu release described the product as "a powerful, retail-hardened mobile device that integrates multiple applications into a single, compact solution." Also, STMicro (STM) may have filed to register the iPad name with the European Union in 2000. AAPL -3.5%.

  92. jlui_tx

    Phil, do you still think EWJ is a good longer term investment?
    thanks

  93. jburgess

    AHHHHHHH! More fun and games!

  94. judahbenhur

    SS, Peter, Rolling my Feb RUT caller per your comments.  Are you rolling SPX as well, and if so, to what level?  Seems like nothing pays unless it is down to 1150 or 1160.

  95. yodi

    Hi  Phil SMN showing great return more than doubled if you think the tanking of the market would reverse in the afternoon (do not know what is spooking the market today) is it not a good idea to sell some of the same?

  96. 1020

    Cap – I thought he was an "Independant" :)

  97. lvmoda

     Phil –  I really like your AMZN earnings trade, but before I pull the trigger I want to make sure I understand the action to take if the price collapses.   In that case, say AMZN drops out the gate to say, 105 as a dramatice example,  I’d look to roll the short Feb 120 puts into Apr 100 or 105, right?  The IV move should allow for the roll without losing much on the roll wouldn’t you think?  Also, I assume the .55 credit is not important since I think I’m only going to be able to get .40 right now.

  98. yodi

    I find it interesting to see AAPL going down like that and AMZN going up  -8.17 versus +1.42

  99. judahbenhur

    JRW, SS, Either of you thinking of playing for a stick today?

  100. ssdirk

    judah – I got .95 for the RUT roll.  I also need to roll my Feb SPX 1180 and 1210 calls.  You are right that nothing really pays until 1160 or 1150.  1160 gives us 7% cushion and 1150 only 6.4% for 3+ weeks.  I am inclined to go conservative with the 1160, but let’s see what Prof says.

  101. ssdirk

    judah – I am thinking the Bernanke reconfirmation might give us a boost, but I don’t want to guess early and wrong.

  102. judahbenhur

    SS, Thinking the same thing. Guess I’ll switch on CSPAN…

  103. cwan120

    Hi, Peter and Fellow Stranglers,
    I have a question in my head that’s been nagging me.  If this has been discussed before, please point me to the post.
     
    God forbids, what if something happens to you or someone close to you, and for whatever reasons you can’t attend to your accounts for days?  Is it prudent to set some hard stops, perhaps far away enough from being hit by daily swings, but still reasonably close so as to protect your accounts, just in case?  You can always take the hard stops out when you want to trade.  But put the stops back before you log off.  Maybe we can even develop some scripts to automate this process.
    The current market downturn is a good opportunity to think about this question.  What would be a good hard stop for a position?
    Call me paranoid.  But the probability of something happening is non-zero!

  104. dflam

    Phil : I’m short ABX March $34 puts at $1.30,now $1.80.thinking of increasing position by 50% .What do you think?
    dflam

  105. mrmocha

    I’m playing for the stick today with HK and DIA, so there will not be one…

  106. Phil

    Anti-Reading list/Jbur – Well there’s Fox, of course – the holy grail of WTF? in my day, Drudge, The Washington Times, Weekly Standard, National Review, The Times (UK) and, of course, plenty of links to follow from them to other "right-thinking" sites.  I also read peak oil sites and gold bug sites to find keep up with the arguements against me there. 

    Wow, speaking of gold, gold just flopped to $1,077 to match up with the fall in the S&P (I wonder how long those two will stick together?). 

    MSFT/Chakra – Oh, I’m sorry, I thought you OWNED the calls!  Totally the opposite of what I said then but I’d still go longer in case they beat or just be happy you got this great move down ahead of the fact and take the money and run.

    EWJ/Jlui – Not really.  I liked Japan for an outperform on the dollar bounce but that’s done at the moment.  And their new government is pretty clueless so I’d stay away.

    SMN/Yodi – Big dollar move up through 200 dma and we’re soon to do a "life cross" (50 dma crosses over 200 dma) so I wouldn not be making any pro-commodity bets but I also think it’s a nice time to lighten up on SMN.

    Cap independent/1020 – ROFL!!  He’s only independent because the Republicans are too liberal for him (either that or no party will have him, pick your joke..).  Oh that reminds me, I did get the guilty pleasure from Cap’s many citations of reading LittleGreenFootballs.com – possibly the best argument ever for censorship.

    AMZN/Lv – Yes, a roll to whatever is tolerable and preferably about even money-wise.  You don’t want to be greedy, let the spread do the work for you.  When a play like that blows out your range, be thrilled to roll to a $5 spread and get out with a small win.   Yes, extra .15 credit not a big deal but I still like to fight for it. 

    Interesting/Yodi – Is that another word for ridiculous? 

  107. magret

    Cap re. short candidates. At what levels do you usually short KRE & MNKD…thanks.

  108. Phil

    I am now VERY LONG.  May be a mistake but you have to gamble once in a while.

  109. ssdirk

    cwan – actually a GREAT question, and one that I thought of as well.  I have a nephew that also trades options that I have given written authority to to play out or unwind any positions I have and vice versa.  I don’t have anyone else close to me that would be able to handle this.

  110. chenboy83

    ARNA/Pharm – Huge short interest, what do you mean by loading up?  Loading up on shorts?

  111. Phil

    ABX/Dflam – I wouldn’t DD here unless you already intended to scale in.  You should be thrilled to make the $1.30 if it’s a full position but, as a new position or a scale in, I love selling those March $34 puts at $1.80.

    Stops/Cwan – Stay balanced and that won’t be a huge issue.  Make sure you have a broker who picks up the phone and can trade your account but that also doesn’t help unless you always know what single trade you can make that will drive your portfolio to neutral. 

    Hey the Treasury auction went really well and it’s boosting the markets.  Oops, sorry, that didn’t happen yet….  

  112. yodi

    Slod 1/2 SMN for 2.45

  113. sns1

    Phil- What are you VERY long on??

  114. Phil

    OK, now I can say it:  Hey, the Treasury auction went really well and it’s boosting the markets.  Gosh I’ve got to stop jumping ahead in the script like that…

    Fast Money crew all saying sell – gotta love that! 

    Freddie Mac (FRE) reported that the rate of delinquencies at least 90 days behind for conventional single-family loans jumped to 3.9% in December, up from 3.7% in November and 1.7% year-over-year.

    The only recovery going on is in bank profits
     

    More Blackmail from the Gang of 12: Morgan Stanley says Obama’s proposed ban on bank prop trading would knock up to 5% off Bank of America’s (BAC) earnings, far worse than the 2% projected by Citigroup (C) in an earlier report. The analysis also says JPMorgan Chase (JPM) likely would suffer a similar 5% hit. BAC -0.7%, JPM -0.9%.

  115. tchayipov

    Phil/VZ
    how low do you think it can go? DD yesterday and it drop again

  116. jburgess

    Phil, I grew up with The Wall Street Journal and The National Review spread out all over the house. Back then, for a while at least, I thought William F. Buckley was a god. I’m a little older than you, I think, but not quite old enough to have demonstrated a the DNC 1968 in Chicago. Have looked at the gold bug sites, and have an 85 year old friend who has 3x’d his money long gold the past several years. But I don’t buy the story, everytime I did in the past and went long, the smart money dumped while I was buying and I got my *ss burned. Thanks for anti-reading list.

  117. Phil

    Long/SNS – Just the indexes QQQQs and DIA as directional bids (unhedged).  I’m pretty determined to see it through to the GDP in the morning but if we don’t get a move up from Bernanke’s confirmation I’m going to probably give up as that would be one leg of my premise shot right there

    VZ/Tcha – Sadly, there is no lower limit to things if panic sets in but I think at $26 it would be great to buy more, not $29 unless you are early in the scale. 

  118. yodi

    AMZN is on fire up 2.20 now incredable

  119. kustomz

    This move up has to be BS, financials are leading….weak sector in my opinion

    I see unwinding in the markets, nothing more

  120. tradansh

    VZ / Phil – In the same boat here. 28-29 has held as support for some time now. 26 is LOY. Do you really think it can go that low?

  121. Pharmboy

    ARNA/chen – they are moving the stock lower, but if/when it rises, it will be very hard and swift.  There is plenty of room in the market for obesity, and they have the only one that does not require phentermine.  When it does get added (it will), they will take VVUS and OREX to the cleaners.

  122. Jordan

    Bernanke cloture vote set for 3:20 p.m. Eastern.

  123. tradansh

    Cap, MrMocha- How are you playing HK today?

  124. llorens

    haha Mocha. Since you called the lack of stick ahead of time, and you never seem to get your way, you created a double-negative. (so we’ll get the stick)

  125. lflantheman

    I agree with you Phil.  I am also very long  right now as well.  I think this is going to turn around fast and vigorously within 2 to 3 trading days..

  126. mrmocha

    tradansh - usually w/ HK I buy ditm calls a month out and cover/uncover with current month calls, it’s a fun game; too busy for that this week so just simple naked FEB 23 calls through tomorrow.

  127. chenboy83

    ARNA/Pharm – Possibly, sounds like someone’s trying to shake folks out of the stock?  I don’t see any reason otherwise unless there’s craziness about to go down.

  128. Phil

    Buckley/Jbur – I always liked that guy!

    AMZN/Yodi – They should report a very good Q but this time I think it will be harder for them to avoid admitting how much is Kindle sales like they did last Q. 

    BS/Kustomz – It was BS all the way from 10,200 to 10,700 the first time, why should it surprise you now?

    VZ/Trad – After last March I would say anything could happen.  People were selling us CAT for $22 and GE for $6 and BAC at $3 and maybe we bought some things at $10 (like GE) but then we DD’d at $8 and thought that was crazy and then we DD’d again at $6 and we would have DD’d at $4 because it was stupid but you have to be patient and keep in mind that things can drop 20%, even 40% pretty easily in a major market sell-off so always make sure you have a plan for that.

    3:20/Jordan – Oh that sucks!  Although it could end the day with a bang but now it’s going to mess up all the bot plans that were supposed to kick in at 1:30 and pretend it was on the Bernanke news and not just blatant market manipulation after shaking out the retail holders.

  129. mrmocha

    llorens, good point, kind of like coming back from the future and killing my current self!

  130. llorens

    Staying every bit Long here as well:   AAPL / DELL / C / S / GS.
    Mocha, I didn’t not laugh.
    (get it?)

  131. BigPinot

     JRW…IWM now back at 60.84…what are you doing?

  132. Pharmboy

    HK – I am going to nibble on the 23 Sept for $3.  The chart still looks hard pressed to move up.  22 is more likely and will sell puts there.

  133. kustomz

    Uhm just saying Phil, getting too bullish on a move up lead by financials at this moment may be a mistake. Expecting to get back to 10700 from here is a stretch when all i see is unwinding in the best/biggest gainers. I know we must fear the stick and becoming too comfortable with this downward movement may be risky but believing we can head back to 10700 from here seems more risky.

     

  134. JRW III

    Big,
    I’m waiting to see comviction, I think " they " will try to force it up but I’m just waiting to get on a train, as opposed to geting in front of a train !!

  135. Phil

    LOL Iflan – I think you meant 2 or 3 trading minutes…

    10,700/Kustomz – Oh I hope we don’t do that, certainly not quickly but after watching the last run, nothing would surprise me.  What I’d like to see here is those 5% levels holding for about a month and then a grudging move up in the markets to test 10,700 into next Qs earnings where we can hopefully justify 11,000 again.  Between now and then the government will hire 2M census workers and business hopefully will add 1M and we’ll see some light at the end of the tunnel but not if commodities bounce back faster than wages so I’m a lot more worried about them going higher than financials – who WILL make money lending money at 6% that they borrow at 0.25%.

    Wow, CNBC is just relentless with the AAPL bashing today (insane chick says "too many products with ‘i" in the name")…

    Oh, this is why the Senate was too busy to vote Bernanke at 1:30:  The Senate votes to raise the debt limit by $1.9T, to $14.3T, and sets a cloture vote on Bernanke’s nomination for 3:20 p.m., to be immediately followed by a confirmation vote.  Woo-hoo – it’s like getting an additional $1.9Tn line of credit from the bank – this should tide us over through Christmas!

     A liquidity-driven market may not be tapped out yet, Barry Ritholtz points out, as equity allocations have only recently moved back above a mean allocation of 60% (chart).

    The Treasury moves to speed up mortgage mods, by changing documentation procedures to move income proof closer to the beginning of the process. The agency says its focus has shifted from trying to get participants into the program to getting borrowers converted to permanent loans.

    Oh man, I can’t believe I forgot this:  QCOM is 5% of the Nasdaq!   AAPL is 15% so just those two selling off (AAPL is down 4%, QCOM is down 15%) accounts for ALL of the downturn.  This is manipulation 101!

    Sector ETF strength: Commercial Banks– KBE +0.6%. Agriculture– DBA +0.4%. Regional Banks– RKH +0.4%. Livestock– COW +0.3%.
    Sector ETF weakness: Semis– IGW -3.3%. Tech– XLK -2.7%. Nasdaq– QQQQ -2.6%. Steel– SLX -2.5%. Clean Energy– PBW -2.4%. Oil Services– OIH -2.4%.

    Dow leaders: PG +2.4%. BAC +1.8%. JPM +1.3%. BA +0.5%. JNJ +0.5%.
    Dow laggards: HPQ -2.9%. AA -2.9%. CAT -2.8%. AXP -2.6%. CSCO -2.3%.

  136. mrmocha

    Shippers - DRYS, EGLE, and EXM are almost even with their price of 3 months ago, it appears that you could make a pretty good living just owning those stocks and selling puts and calls.  TBSI not faring as well, however.

  137. BigPinot

     Pharm….do you like ARNA 2012 5 calls? Whats your price target?

  138. lvmoda

     YRCW has been averaging around .90 for the last two weeks.   Feb 1 Puts can be sold for .50, which makes for a nice entry…not many plays where the ratio of premium to underlying is greater than 50%!  I dug around the proxy for the shareholder meeting to be held on 2/17.  Board is seeking approval for a reverse split of somewhere between 1-5 and 1-25 tbd at a later time.   I didn’t see any hidden bombs in the def14A (although I hate reading these things), other than a requirement to retire $30mm of remaining debt with new unsecured financing by 3/1/09, otherwise creditors in the debt-for-equity may foreclose.  I’m assuming $30mm unsecured is available in the market for a $8B company, and the company will not be going out of business now or quite a ways into the future.  Earnings is a different story, but picking these shares up for .40 seems like a great deal.

  139. Phil

    GMCR is one insane stock!

    Gold back over $1,088, will the S&P follow?

    Shippers/Mr. M – It’s good to spread your bets on those guys.  They are mostly Greek and they run their companies the way they run their government…

    C-SPAN is streaming Bernanke debate ahead of the 3:20 p.m. cloture vote that’s projected to be close for those who enjoy having your teeth drilled.

    BIDU heading lower now, IBM still falling, SHLD joining the Nasdaq pity party.  I think the buy bots they couldn’t stop in time executed at 1:30 but now what?  If they don’t confirm until right before the close then the programs they wanted to run at 1:30 won’t work at 3:30 so probably a lot of meetings going on right now.  RUT got re-rejected at 609 and back to 605 already – that’s very bad with that stimulus spending announced.

    DIA $98 puts at $1.05 are good downside protection with tight stops, looking for a dime or so to take off the long basis and hopefully that’s all we’d need them for (about Dow 10,070-10,050 range for another bottom test

  140. BigPinot

     Phil…how about LVS Feb 15 calls ahead of earnings??

  141. lionel

    Phil, you meant FEB DIA $99 put, right?

  142. Pharmboy

    ARNA/Big – these guys have been my crutch, but maybe sell the 3 Mar P for 25-30C.  I would expect them to get to at least OREX price o 6.3.

  143. kustomz

    Im watching c span and it seems the senate is yet again being held hostage by the Fed, they speak of all his mistakes and yet they will still vote yay

    We are being lead by buffoons in Washington and computers on Wall St.
     

  144. gel1

    My portfolio now looks like the aftermath of a weekend free buffet – just a few scraps left. – Nice reminder of what the government can do to a long term investment plan. You can’t keep peeing in the soup and expect investors to keep buying it. I see this market going much lower, in spite of the better than expected earnings, as the rhetoric coming out of DC has not changed.

  145. Pharmboy

    Everything is good in Hawaii.  MLP has risen from the dead.

  146. Cap

    1020, that would be "independent".   :wink:
     
    as independents in MA just told the country, even independents are not enamored with Obama, so I am not alone.

  147. kustomz

    Jim Demint just said theres no way we can pay back the debt. Thats Senator Demint!

    Great morning write up by the way Phil

  148. judahbenhur

    Phil/Bernanke.  Well, there isn’t any doubt any longer that Bernanke will be confirmed. Even the Democrats who oppose his nomination (like Boxer) are going to vote for cloture.  So, they’ll get cloture and that’ll be that.  What else is Mr. Stick waiting for?

  149. Cap

    magret; I actually have not shorted either KRE or MNKD yet, but have been looking at them.  KRE, here is probably good; although I would probably do it by selling 25 calls naked.  And MKND is hard to borrow, but I was looking at the Feb 12.50 calls and Mar 15 calls to sell short.

  150. BigPinot

     Gel…but what about the chart scool charts…really looks oversold here.

  151. Cap

    magret; I actually have not shorted either KRE or MNKD yet, but have been looking at them.  KRE, here is probably good; although I would probably do it by selling 25 calls naked.  And MKND is hard to borrow, but I was looking at the Feb 12.50 calls and Mar 15 calls to sell short.

  152. Cap

    Phil; funny you should mention Little Green Footballs.  Charles Johnson, the guy who runs it, is a total nut job and has completely flipped into a stark raving mad liberal like you … into MSNBC, Obama, everything, hook line and sinker.
     
    You should join …

  153. aclend

    Q and AAPL:  Are you saying they are bringing the Naz down to get better pricing after the retail holders get spooked out?

  154. Cap

    tradansh … bot a little more HK stock around 23.
    another way to play is to sell the 21 or 22 puts.
    or do what Mocha sez.

  155. Cap

    AMZN; can’t wait for that one to completely blow up …. sell the news is probably the right play; but its so manipulated who knows (was at 118 yesterday,now 127)

  156. Phil

    YRCW/LV – Well they may go BK of course but it sure is one compelling trade (selling YRCW $1 puts for .50).  Also, put in an order for July $1/March $1 spread for zero – fun if it fills!

    3 AMZN Apr $140 calls at $5.20 ($1,560), selling 5 Feb $135 calls at $3.85 ($1,925) puts you in for credit of $365 on the spread and plan is to DD on the longs if AMZN breaks up tomorrow (earnings tonight) and deal with the roll to March at some point

    LVS/Big – I made long trades on them I think Tuesday.  I don’t like buying that kind of premium, you can sell June $13 puts for $1.25, which is a nice return or you can just buy 2011 $17.50s for $3.35 and sell March $17.50s for .85 for a nice intial entry.

    DIA/Lionel – It was the $98 puts, now $1.  This is only a stop to shift exitsting calls to neutral on a downturn, I am not bearish here as I think Bernanke confirmation boosts us today and GDP boosts us tomorrow. 

    Good summary Kustomz! 

    MLP/Pharm – Very nice move.

    Stick/Judah – I’m pretty convinced that the change in timing screwed up the bots and, as I said above, that means they have to call meetings and grab programmers to reload..

    The Bank of Japan’s statement on monetary policy amounts to a retreat in the war on deflation, says Angry Bear. The country’s not insolvent, but the only policy flexibility lies with the central bank – and they don’t seem to be willing to provide liquidity. (ETF: EWJ)

    Parking Company of America Airports (MIC +1.4%), the nation’s top operator of off-site airport parking, files for bankruptcy on travel-related declines in business. Owner Macquarie Infrastructure plans to sell to private equity for $111.5M and eliminate $201M in debt.

    Among those hoping for a boost from iPad hype are Apple’s (AAPL) European suppliers. It’s not clear what’s in the machine, but many expect chips by ARM Holdings (ARMH) to be at the center – and a rub-off effect could boost Infineon (IFNNY.PK), STMicroelectronics (STM) and Dialog Semiconductor.

  157. BigPinot

     Phil…is it the Qs to play for the stick?

  158. Cap

    Ipad got a good review as a gaming device on bloomberg tv today

  159. lionel

    I totally agree with Sen Bernie Sanders analysis of Bernanke’s presidency.
    He almost makes me consider moving to Vermont :)

  160. BigPinot

     lionel…I didnt  know he was president…man Im really out of it. LOL

  161. bord

    OK here we go this may be the stick.

  162. BigPinot

     bot qqqq.

  163. Phil

    Footballs/Cap – If that guy went liberal I will have to seriously rethink my own stance!  I haven’t checked in a while (I lost interest after the election) but you used to quote them as a reliable source – maybe you should reconsider…  8-)

    Nas/Ac – Sure, due to the totally insane weighting of the Nasdaq (15.7% AAPL, 5.7% MSFT, 5.5% QCOM, 5.25% GOOG, 3% CSCO, 3% ORCL is 38.5% of the Nasdaq in 6 stocks), you can manipulate just those 3 and crash or boost the index which (as I was saying in yesterday’s post) triggers the ETFs into a selling frenzy and then spooks all the sheeple and then you can buy whichever of the other 94 stocks you really wanted and then buy your AAPL, MSFT and QCOM shares back to reverse the rally and force a stampede back into the Nas, giving you an instant win on your new positions as the ETFs buy back what they just sold.  Isn’t unbridled Capitalism wonderful?

    Qs/Big – Yes, I like the Qs ($45s at .38 are good at the moment), this is the same "coiled spring" action we had last time they forced down the big Nas names and of course, MSFT and AMZN earnings tonight.  It is still very risky – I’m playing a scenario that has nothing to do with fundies and everything to do with manipulation and sentiment so there’s nothing to fall back on if it fails – keep that in mind!

  164. ssdirk

    NFLX up 24% today!  Buying Feb 60 puts out of principle.  Small position.

  165. jamie

    Phil, A Buckley story for you… Sometime back I was in the Cayman’s island airport waiting on a plane and Buckley came in, opened up his briefcase, pulled out a bottle of white wine and wine cork and proceeded to polish off the bottle before boarding the plane! I’ve liked the guys style ever since!

  166. gel1

    Big
    The correction that took hold last Jan-Mar had similar chart activity, and the signals were, at that time, of an oversold market most of the way down. I believe this market is placing more emphasis on the belief the market is in need of a further correction, and looking for reasons to justify. We are in the midst of an earnings season that is positive, but caution is still the gameplan as the market goes down. The chatter coming out of DC is really putting a very negative cloud over any optimism that is trying to surface. In my opinion, the inmates are running the asylum, and the risk is very high, as uncertainty is prevalent. The rising USD says it all, as people are willing to risk capital on a piece of shit that has the worst fundamentals of any thing that one can imagine (excluding the PIGS – Portugal, Italy, Greece & Spain). If this is the sentiment, then why should one believe the market is headed up for the near term, unless you are a contrarian without analytical skills.

  167. mSquare

    TM – Has it bottommed? I think so. Considering a Mar $75 / Apr $70 Put spread for a net credit of about $1.
     http://finviz.com/publish/012810/TMc1dl1503.png
    Anyone suggest a better spread?

  168. stockbern

    Pharm,  dump MLP.  Steve Case can’t save it.  He just had to put $20M into Exclusive Resorts to keep it afloat.

  169. Pharmboy

    MLP/Stock – didn’t buy it, just an observation.  Thx though.  T’was considering for a swing trade.

  170. jburgess

    jamie/Buckley- good story! I heard they buried him with Phil’s case of LaFite Rothchild which he thought was downstairs. I know Phil will get this one.LOL

  171. BigPinot

     It looks like Blankfein got my memo….on a sticky note.

  172. hanna5

    Up we go! <i hope>

  173. morxlntway

    msquare – did you hear the report on NPR this morning re T. Consumer Reports says they aren’t the car they used to be. Quality has dropped generally.  Of course future sales will suffer b/c of this recall, too. 

  174. BigPinot

     I just got back from living on Maui. The transplants there saw the island will sometimes embrace you at other times repel you. Well, I can tell you from personal experience the only time Maui embraces you is when it sees it can pick your pocket.

  175. bord

    I agree with Gel on the USD… when UUP and TBT have been up AT THE SAME TIME quite often during the last couple days something is really screwy, or Louis and Billie Ray did a switcheroo on that fed report .

  176. humvee4me

    I bought a TZA February Vertical Spread 8/9 a month ago; it’s deeply in the money now, how is my best way to lock in the profit?  The bid on the spread is currently only  .75 and the ask is 1.00

  177. BigPinot

     Phil … took your advice on the 45s, also got some 44s

  178. BigPinot

     Phil…let me know when to dump the, please.

  179. JRW III

    Pharm,
    MLP has been a Dead Co Walking for 8 months; now it’s finally over !!

  180. jburgess

    morxlntway- Business Week had a piece about a year ago in which they discussed Toyotas increasing quality control problems. About the time the TM became the largest in the world GM’s poor QC came to haunt them. They didn’t know if it was simply b/c of increasing size of the company or b/c so many more cars were being produced outside of Japan eg. in US and they were losing control

  181. Phil

    Buckley/Jamie – Why are so many great thinkers heavy drinkers?

    TM/M2 – I don’t think the market has wrapped it’s head around the cost of this recall.  They made $17Bn in their best year and lost $4.5Bn last year and this recall will hurt sales and cost them no less than $5Bn and very possibly $10Bn.  I think they are fairly valued at $75, even with the disaster but I’d be much happier getting in at $65 so that’s my plan. 

    Reuters says 51:23 on Bernanke and he needs 40 – this was never close – entirely a media fabrication!

    Jbur – Not my Lafite!!!

    Maui/Big – That’s why I stick in the hotel.  At least there they rip you off from a price list!

    When to dump/Big – When it goes up, right before it goes down.  8-)

    Wow, Bernanke’s been confirmed and look at the markets go – what a surprise.  (oops, sorry, I’m posting from the future again, please don’t read this for 8 more minutes, then act shocked).

  182. BigPinot

     JRW…I was still on Maui when they ceased operations…never checked the stock price then, figured it was near zero…cant believe it held up this long.

  183. kustomz

    Yippee the dollar dies and Bernanke lives again, what a joke like the markets didnt know Bernanke would keep his throne…this is no reason to rally

  184. JRW III

    Big / MLP
    Sadly, my brother-in-law was the CFO until last week; fortunately shorted the stock when they hired him !!

  185. japarikh

    Phil,
      Now that we’ve got our correction, is it okay to scale into some long positions by selling puts or doing buy/writes 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.  Also any recs for downside protection or just the usual with EDZ, DIA puts, and GLL (when gold >$1100)?

  186. jamie

    Phil, Why are so many great thinkers heavy drinkers?That was great, certainly explains my affliction!

  187. dmankoff

    Phil, any way to play long OIH or XLE?  they should probably run up after this is all over

  188. Peter D

    ss/cwan/short stranglers,
    Back from meetings, which are part of having a job!  I’m still amazed at how I can keep tab on these shorts while being away from the market for hours each day, must be that this short strangle scheme fits my work schedule well, being on the West Coast.  
     
    ss/11:48 comment,
    You are right, SPX Mar 1210 is down to $1.2.  After a 7%-8% drop from the peak, it usually takes a while to get back to the 1150 high.  Given the recent market perspective and also Gel1 comments (he’s a long term holder, but is looking to open the shorts), we could take a chance with having the 1190 or 1180 short calls.  Same thing for RUT, March 670 or 680 callers are what we need to seriously consider.  For Feb, you are also correct that 1160 or 1150 is what we can aim for, and be ready to jump back out (move higher) if needed.
     
    cwan/12:40PM comments,
    Yes, that’s a valid concern, so I have a family member who can help me close out the shorts.  In our case of wide short strangles, having shorts is much better than having longs when something happens to you.  Because most of the time, those shorts would expire worthless, and we have time to close them out (as long as there is no Black Friday, or being too close to the money).  So, we need to give instructions and access to your mirad of accounts to whoever that needs to close out your positions (preferably that they know options).  For example, close both legs of the strangles at the same time and don’t pay the Ask price, etc.

  189. stevenparker

    Hi guys could I ask our official mattress position pls?

  190. EricL

    If we can’t close above Tuesday’s close, there is no edge to going long that I can see. You may get lucky, but the odds just don’t favor you, IMO.
     
    SPX chart looks pretty bearish.

  191. BigPinot

     JRW…you crack me up…lol

  192. BigPinot

     Hey Phil…what happened…no money in the budget to add up the votes??

  193. Jordan

    Votes: They are going through the votes now, it’s on CSPAN2.
    http://www.cspan.org/Watch/C-SPAN2.aspx

  194. JRW III

    Big,
    He’s going to Denver next week on a job offer ( IT ), I’ll let you know if he takes it, right after I short the hell out of the company !!

  195. judahbenhur

    Bernanke just went over 60 and someone turned on the bots.

  196. gel1

    Bord/USD
    My longer term sentiments regarding the dollar are reflected in the bullish TBT positions I hold (dearly to my heart btw). The short term love for the dollar is a result of relative fear – relative to other asset classes and currencies at present.. This I believe is short-lived and I look for a reversal late summer, and all hell will break loose making TBT and other related investments very profitable. I am long the USD today, but will be shorting it aggressively later on in the year as the market dynamics shift.

  197. ssdirk

    What a circus.

  198. jburgess

    I’m starting believe all this stuff about bots and sticks.

  199. gel1

    Phil
    Nice call on the movement in today’s market!

  200. BigPinot

     Phil… looks too late for a big bounce..are you still holding til tomorrow?

  201. Jordan

    Alright, he is confirmed.

  202. Phil

    LOL JRW!  Let us know where he gets his next job!

    Downside/Japar – Yes to scaling in but very careful ahead of GDP, even though it’s a fairly sure thing.  We were last using SRS and RSX (the least down of the EDZ) and, of course the normal mattress for protection but I pretty much pulled back on that today as I felt we were bottoming out. 

    Which reminds me/DIA Mattress should be June $104 puts, now $6.50 FULL covered with Feb $102 puts, now $2.10 but it is not a big deal if you have a diff june (but $108+ is overkill), it’s the full cover that’s key.

    OIH/Dman – I think XLF is safer but I don’t like any of them.  We took XOM as the upside play to the group and they are $1 lower now than Monday’s entry.

    Man they are dragging out this Bernanke thing like that last Lord of the Rings movie…

  203. ssdirk

    Nice round trip on the vix today.

  204. Jordan

    Any reason to be going down these past 3 minutes?

  205. yodi

    Market is like a dead horse you can beat with your STICK

  206. samz3700

    Phil -
    AAPL – bull call spreads
    Any thoughts on buying back the calls on aapl – jan 230′s and holding the 185′s  
    could lock in a nice profit or just leave myself exposed to more downside

  207. hanna5

    OK, planning on holding the QQQQ calls till tommorow, hope we get a gdp/earnings bump

  208. Phil

    77/23 is the final vote – If you did not believe me before I hope you now realize what a manipulative joke the MSM is – they make a story out of nothing and drag it out for a week.  Nothing the 100 analysts they have paraded in front of the TV cameras said has panned out – it wasn’t close, it doesn’t say anything at all other than "business as usual" and all this hand wringing and speculations was an amazing waste of our time and a huge distraction from real issues – sickening!

    Charts/Eric – Yep, they cut it much too close and it’s hard to count on the GDP to save us in the morning.  We are below all our 5% levels, copper is $3.11, silver is $16.26, gold is $1,087, oil is $73.86 and Nat gas is $5.17 so weak all around.  I think more neutral into the close is prudent at this point but still a little bit bullish for some fun ahead of GDP (but probably selling into that excitement, if any). 

    AAPL/Samz – I favor spending the money to improve your own position (rolling down and/or out in time) rather than paying premium to buy out the caller. 

  209. hanna5

    77 to 23 to end debate on bernake nomination. now just needs majority, so basically confirmed

  210. yodi

    Phil 77/23 these guys need to do a good to earn their money. They can not play golf all the time

  211. Phil

    Oh sorry, that was votes on closure, not the confirmation.   This is crazy, no wonder markets are still going down – no official decision…

  212. samz3700

    rimm – funny it seems to do the opposite of the other tech names these days – aapl up then rimm must be down or vs versa – don’t see how a down day for apple is really improving rimm by 1.5%

  213. ChuckW

    Phil, the vote on cloture was a significant margin in Bernanke’s favor so there is little doubt he’ll get the nod.

  214. judahbenhur

    Bernanke. Well, he has over 50 votes already for confirmation. Not like it’s in any doubt.

  215. Jordan

    Yeah, and after they vote, they can change their vote… wtf. I want to change my trade after I trade, too. LOL

  216. Pharmboy

    Well, SVNT didn’t fill at 9c, so I moved it to 11 and had a 1/2 fill. 

  217. ssdirk

    All the bid/ask on all of my watchlists went red seconds before the close.  Tricky b*st*rds.

  218. JRW III

    Phil,
    60.84 on IWM(  Russell ) ; This is where is where that trading theory of mine comes into play, from here we either go UP or DOWN, I have NO doubt !

  219. Jordan

    So Phil, looking at levels (Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 , RUT 620), we basically are below on all …

  220. BigPinot

     JRW…youre a genius!

  221. Jordan

    MSFT up
    AMXN down
    after hours.

  222. Jordan

    that was AMZN, as you might have guessed.

  223. Jordan

    Are MSFT and AMZN earnings out yet?

  224. tchayipov

    what a crezy day,

  225. humvee4me

    reposting, any suggestions?
    I bought a TZA February Vertical Spread 8/9 a month ago; it’s deeply in the money now, how is my best way to lock in the profit?  The bid on the spread is currently only  .75 and the ask is 1.00

  226. Jordan

    AMZN down at 116 now…

  227. EricL

    Now they are out. Beat on revs, but stock going down of course. Hopefully they wont’ get slaughtered though, and this will work out well for all us short gamma traders.

  228. Cap

    AMZN reports 9.5 B 85 c.
    supposedly street was at 72 c and 9.02 B.
    How can that be ?
     
    I recall from last earnings that guidance was like 9-10 B and $1 eps

  229. ssdirk

    Yeah, we are officially a banana republic.  Previous – Bad News = Stocks up.  Now – Good News = Stocks down.  Sure makes it easy to invest doesn’t it.

  230. Phil

    Good theory JRW – I hope it holds up…

    Levels/Jordan – That’s right, below 5%

    Woopw, there goes AMZN flying down, so much for their run but great for our backspread! 

    MSFT not up for long…

    Now Bernanke confirmed but so much damage done and MSFT down would be, as they say in Russia, BAD.

  231. ernest

    MSFT:  Well, they were down, but now going back up some.
    You would think that after all of the "Sell the news" crap manipulation is over, that better earnings should lead the market back up.  But that’s too logical, huh?

  232. Jordan

    LOL, BAD. Phil, was that a Russian accent?  :)

  233. ernest

    Final vote 70-30 for Bernanke.

  234. Jordan

    What % is AMZN of the QQQQ?  If you’re in on the wrong side, maybe you can hedge with QQQQ options.

  235. Phil

    70-30 for Bernanke – Like I said, sickening!  What a waste of hours and hours of media coverage over nothing when they could have had intellingent (or what passes for it) discussion of MSFT or AMZN or Davos (which is huge actually) or 100 other things that were 100 times more important than following a vote that wasn’t even a little bit close.

    Meanwhile, what’s wrong with AMZN numbers, they don’t look so bad to me…  I’m still short the Apr $115 puts so I hope they hold it.

    AMZN just 2.5% of the Q.  Really it only matters what those 6 guys do…

  236. ernest

    I think people are too focused on the iPad being a Kindle killer (I do believe it is, but I don’t think the device itself is a huge part of Amazon’s bottom line).
    I think Amazon is going to do great in the future.  One thing they started doing last year which is really clever is that they started monitoring competitors’ prices and matching them intraday.  I first saw this around Black Friday, when the price on some electronics they sell changed more than once during the day!  I was about to buy a new 32" TV from Sears last week when they were having a sale, and I went over to Amazon just to read some user reviews of the TV, and I noticed that their price was the same as Sears, but with free shipping and no tax!  As soon as the sale was over at Sears, the price at Amazon went back up.  I haven’t seen any other company that has been able to adjust prices so quickly.  It really does give them a competitive advantage.  Plus, if you have a problem with something and need to return it, they pay for the return shipping.

  237. ernest

    Both Apple and Microsoft going back up now after-hours.  I hope that bodes well for tomorrow.  Amazon has now recovered the losses as well (for the moment).

  238. JRW III

    Phil,
    The only arrow left in " their " quiver is tomorrows futures, so if we open gap up with " them " hoping for a short squeeze, and you being able to get OUT at a profit, give it 15 – 30 minites and then SHORT !?!!

  239. bord

    My favorite Davos moment was in 2008 when Maria said the one big take-away she had from all her interviews was that people felt the worst of the economic downturn was behind us. That’s Davos 2008, not 2009. I think it was on one the Daily Show clips you posted. F*cking priceless.

  240. ernest

    Now Amazon is up after hours!  I bet there are just a bunch of bots that sell the moment an earnings report is announced.  Then once the price drops so much, they start buying back.
    I need to get a job with G.S. so I can be on the profitable side of all of this crap that goes on behind the scenes……………..

  241. Jordan

    Well, AMZN have a conf. call at 5 pm and MSFT at 5:30, so only after it will we see the price that is likely to open tomorrow.

  242. Cap

    AMZN rally due to $2 B buyback authorization ?  announced at 4:11 pm

  243. JRW III

    bord,
    LOL, MSM at it’s best !!

  244. stockbern

    AMAZ is great at marketing , but a giant tax loophole.  Someday some broke state will sue them for damages like they did to the tobacco cos and it will all be over.

  245. BigPinot

     Ernest…do you remember when that Russian programmer stole GSs proprietary trading formulas, AND then GS stated in the wrong hands they could be used to manipulate the markets?  AND NO QUESTION CAME UP WHETHER GOLDMANS HANDS WERE THE WRONG HANDS AS WELL!!!! INF*CKINGCREDIBLE!

  246. humvee4me

    Old school Dems killed partial budget freeze; keep buying TBT boys and girls
     

  247. BigPinot

     JRW…what is MSM??? I dont get it.

  248. JRW III

    stockbern,
    CA is already auditing people for not paying " USE TAX " on online purchases !!

  249. BigPinot

     Phil..it looks like the Qs will be a nice place to be tomorrow.

  250. ernest

    AMZN:  I agree that eventually all online companies will be forced to collect taxes.  It only makes sense, especially for states like CA that have such a large budget deficit……….with online sales increasing I’m sure they will go after that possible revenue source.
    GS:  Yes, I remember that story!  Crazy……………

  251. ernest

    Look at SIRI…………..up over 10% to $0.82 so far……….I think they announce next week.  A lot of folks have been saying that if they get over $1.00, they will really take off.  I own 2,500 shares……….now I wish I had bought more.

  252. JRW III

    Big
    Main Stream Media

  253. gel1

    Big
    MSM = MicroSoft Manure

  254. stockbern

    JRW /  could be snow or ice tomorrow here in Texas so I’ll probably be in all day .  Save me a seat on the train, just let me know which one.
    P.S.  I hear you like scotch.

  255. stockbern

    Phil, per an earlier question regarding bandwith and today’s post.  I was thinking about equipment manufacturers who would be supplying T VZ S et al .  Other than American Tower, who makes all that stuff ,and are there any long term plays on the bandwith theme?

  256. JRW III

    stockbern,
    I also like Texas !

  257. tuscadog

    Take a look at Ciena (CIEN), especially since they are going to absorb Nortel Fibre Optics this year.  Small mkt cap with great leverage to this sector.  Great long term hold.  Sht term share price unclear as Nortel integration may take time.

  258. Cap

    AMZN 115 AH initially; now 131 !
    Good results; I was off on my recollection … was for 8.1-9.1 B, so they beat that.
     
    Still, they are massively overvalued.  What did they earn $2 ?  maybe they earn 2.50-3.00 if all goes well in 2010 (big IF).
     
    AAPL at about 12 EPS w/ cash almost = to AMZN market cap.
     
    AMZN multiple must come down to earth. 
     
    WMT, AAPL, BKS,   all shooting for them.
     
    They can only float their suppliers for so long.
     
    Now dropping like a rock again ….

  259. Cap

    Sold GS 140 puts today for 1.93.  That should be good.
    Closed out my GOOG 650 call; sold for 3.70; closed for 0.20.
    Now; gotta get those 520 puts to zero out next 3 weeks.

  260. cwan120

    What’s the story on MSFT?  I saw it went from $29.16  at close to $30-ish AH, now back down to $29.33.

  261. cwan120

    I found it.  MSFT: earning 74 cents actual vs 59 cents expected; revenue 19.2 Bln actual vs 17.84 Bln expected.

  262. Cap

    Listening to a very interesting webinar right now; thesis is watch out for meaningful correction; look to Asia for the clue there ….
    thinks there may be a major sell signal in HSI …  maybe India also.
    also copper.  metals & emerging markets highly correlated.
    dollar strength also supports this thesis.
    Europe; also shows highs might be in; with sell signals.
    also watch sentiment ….. good news / bad action … smells of a high … markets tend to make highs on good news, not bad.
     
    The tricky part is will we try to recover (rally) and fall short of highs; or just keep breaking down.
    also talking about DeMark indicators (market studies . net ) – have no idea what those are (do now)
     
    Even thinks AAPL is set up for some downside; tops on good news …earnings and new product announcement.
     
     
    Bottom line:
    Emerging markets rolling over w/ exhaustion signals.
    Metals also
    Europe also
    US also
    Leadership stocks also
     
    If they are picking apart the leadership stocks you know they are at the end.
     
    Food for thought ….

  263. Cap

    almost everything looks like a short .. GS, AXP, GOOG, CME,IBM … all on sell signals ; daily, weekly, monthly.
     
    but he thinks the homebuilders (heh heh) look good on a relative basis.
     
    all based on tech analysis (mostly).
     
    "more manipulation in oil than any other commodity"

  264. kustomz

    Cap one word for ya….deeeeeeeleverage!!

    Thanks for sharing the info

  265. gel1

    Cap
    Very good information to consider going forward. You mentioned selling the GS 140 puts, but also maybe recognizing GS as a short. Do you still like the short puts, and at which month? Thanks!

  266. Cap

    Obama caves on having KSM trial in NYC …. about time !
     
    Talk about a stupid idea to begin with — it would have been a multi year PR disaster for Obama.

  267. Cap

    Gel … I shorted a small amount of the GS 140 puts.
     
    Tonite, I learned this fund manager feels they are one of a number of market leaders that have broken down and are good short candidates … no price target.
     
    This does not mean that GS might not first go up to 160 or 165, at which point it would be an enticing short.
     
    From my perspective, I am either making 1.93 in 3 weeks; or I am buying GS at 138.07 (or rolling to a lower strike).
     
    I’ll take my chances … I think the risk reward is decent.  (Feb 140 puts).
     
    What’s right for you, I don’t know, just look at it as what price might you like to take the risk of owning GS.  Keep in mind all this Obama tax and reform stuff will hit GS very hard (prop trading, fees, etc.).

  268. Cap

    IF it happens.

  269. gel1

    Cap… Thanks!
    Trading tax is a big IF, as it has to pass the Senate. GS is definitely in the cross hairs. as the target du jour.

  270. Phil

    Good morning!

    Very wishy-washy futures so far but better than Asia’s open, when we sold off 100 Dow points. 

    It’s all about the GDP and how people take the news.  If that doesn’t boost us, it’s time for some more disaster protection, which will be kind of like being able to buy fire insurance while your house is on fire…

    AMZN/Ernest – That was crazy AH action.  Kindle sales are not a big item for AMZN but Kindle profits are.  I estimated last Q that the Kindle was roughly 1/2 their total profits which means the rest of the operation was not doing all that great but this Q was much better looking with 42% revenue growth and, most importantly, it dropped into revenue growth but it’s a razor-thin margin operation and that does concern me long-term.   At least they are branching out into better margin businesses. 

    Meanwhile, a company making $700M a year has no business buying back $2Bn worth of stock (and they only have $3Bn in cash but check our their A/R to A/P ratio!  They haven’t bought more than $200M in stock in a year previously so this smacks of a desperate move to squeeze more EPS next year by decreasing the amount of shares.  It’s a red flag to me – compenies with p/es of 70 should have better things to do with money than buy their own stock…

    Loophole/Stock – Good point!

    Votes Humvee – That’s an interesting take with 73% of the Dems voting for it and 61% of the Republicans voting against it.  Yeah those "old school" Democrats are the villains as usual…

    SIRI/Ernest – About time!

    Bandwidth/Stock – It’s a good question but I don’t know.  Not my field of expetise, mostly because wire supply is pretty much a commodity play but good old GLW has a hand in it, which is just another reason I love them and, of course, there’s CSCO as bandwidth needs to be routed.  I just had a meeting with the guy who runs Howard Stern’s web site and he was telling me about the spikes they get when things happen on the radio show that cause people to run for the pictures that get posted on the web – even huge sites like that have to constansly deal with changing requirements and the more video is used the more bandwidth will get sucked up and now they are doing 3D games, which is sending 2 video streams at a time – it’s getting crazy out there real fast!

    Asia/Cap – they are certainly flashing signals today!

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