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Wednesday Rejection Weakness

So close but yet so far!

We set our bounce levels way back on Jan 25th and just yesterday I posted up the WEAK BOUNCE levels we need to see before taking our bullish betting to the next level but we have only skimmed along our lines, finishing yesterday at Dow 10,296 (down by 2), S&P 1,103 (down by 2), Nasdaq 2,190 (down by 10), NYSE 7,001 (up by 1) and RUT 614 (down by 6).  This may be seem like some pretty amazing targeting 10 days in advance but, actually, we could have predicted this move last year as it’s nothing more than the same 5% Rule levels we’ve been using since the middle of last year.

That is why, we are not in the least bit impressed by close.  Close, as they say, is no cigar!  Don’t forget those are the natrural dead-cat type bounce levels off the drop from the top that we are trained to IGNORE as they are meaningless in the grand scheme of things.  What is meaningful is when they we retake those levels and that means we found a true floor at 5% (see weekend chart)  NOT taking back AND holding our retrace levels means we are very likely to see phase 2 of our leg down and hit 10% drop levels of Dow 9,630, S&P 1,035, Nasdaq 2,088, NYSE 6,660 and Russell 585 so we will now become much more concerned by failure or those lower levels (10,058 on the Dow etc) which MUST HOLD.

We’re not there yet, we MAY be consolidating along the 5% lines and that would be good, but unnerving.  We have our disaster hedges in place and we got our commodity rally so we can on some oil puts (what a joke at $77.50 already with yet another inventory build to be announced today) and perhaps even some gold puts as we test $1,130 (GLL $9 puts have very little premium at .90).  Our favorite hedge of the moment is once again EDZ, who are back to $5.50 thanks to a nice move up in Asia today.  March $5 puts can be sold for .45 and that’s a very nice way to collect premium as EDZ has to fall 20% before you even owe the putter a nickel but the July $4/6 bull call spread at .85 pays $2 (up 135%) should emerging markets falter (and you know how we love to exploit those emerging markets!). 

Speaking of shorts to exploit, IYR looks ripe for the picking again as we had a nice, silly run in the builders based on not very impressive housing numbers (10% more than almost zero is still almost zero) and shorting IYR has been far more rewarding for us than going long on SRS, though I still can’t figure out how Commercial Real Estate is keeping up the facade of value as all we hear every day is jobs being cut (Challenger reports another 71,482 in Jan, up 59% from December)credit is tight, small businesses are suffering, local taxes are up,  consumer confidence is shot, forclosures are up and our housing vacancy rate is sitting at a record – not exactly a recipe for going long on CRE is it?

[drdoom.gif]Since SRS is so mean to us (but I do like selling the March $8 puts for .78), we’ll stick to buying the very reasonable IYR March $43 puts at $1, which should be good for a quick 25% as IYR retests $43.  Longer-term, Jan $37 puts are $2.65 and you can sell March $41 puts for .55, which is 20% back in 6 weeks so not a bad way to establish a bearish spread!  And have I mentioned I like TBT lately?  Just checking…

It’s not all gloom and doom however (even Nouriel Roubini has asked not to be called Dr. Doom anymore so I have dibs for the next downturn!).  I was just pointing out to Members yesterday that 72% of the reporting companies have beat so far this earnings season and that is huge.   Unlike last quarter, they are not really just beating ultra-low expectation but they are beating low comps so we’ll still take it with a small grain of salt but we will take it as a sign that we may be on the mend – from a corporate profit perspective, anyway. 

Economically, we’re still (dare I say) DOOMED!  Moody’s says the U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce budget deficits projected for the next decade.  Additional measures?  We haven’t taken ANY measures have we?  The budget deficit in 2009 was $1.4 trillion. The White House goal has been to reduce the deficit to about 3 percent of GDP, which most economists say is sustainable. The budget presented yesterday though predicts it’ll average 4.5 percent over 10 years.  Have I mentioned I like TBT lately?

The Bank of China has tightened lending to property developers by lifting the interest rates it charges on new loans.  The state-controlled lender told credit officials at a Beijing meeting earlier this week that the higher rates will apply from Feb 1st.  The report didn’t mention how much the lending rate would change, citing the source as saying it was an "overall hike." Some of the bank’s teams attending the meeting, which reportedly took place Monday, were criticized by senior management for profligate lending in January.  The tightened conditions appear to be a response to calls by China’s banking regulator last week for lenders to be more vigilant in scrutinizing loan applicants, especially when extending credit for real estate-related transactions.  Here is a great video of Jim Chanos lecturing on "The China Bubble." 

This did not bother the Chinese markets today as both the Shanghai and the Hang Seng flirted with the 2.5% rule BUT, keep in mind that is the expected bounce off the 10% drop they’ve had recently.   Very simply, the Hang Seng fell from 22,700 to 20,000 so a 20% bounce would be 540 points and you can see on the day chart that that’s the EXACT spot they hit coming into lunch and then they leaped an additional 200 points in the afternoon – that was some lunch!  We’ll see if they can hold it tomorrow.  The Nikkei is down from 11,000 to 10,200 so we expect to see 160 points out of them and they tested 10,360 as a floor today and held it, so we won’t be taking the Asia move lightly – it’s up to Europe to confirm a global upturn.

Europe is down a bit this morning into the US open but the EU is backing Greece’s new plan to cut the deficit 3/4 by 2012.  This means Greece, with a brand new government has accomplished in 6 weeks what the Obama administration has not been able to do in 60 simply because the EU DEMANDS balanced budgets.  It’s amazing what you can accomplish when there are rules governing good financial behavior, isn’t it?  “We are endorsing the Greek program; We are giving confidence and supporting the Greek authorities,” European Union Economic and Monetary Affairs Commissioner Joaquin Almunia told reporters in Brussels today. “Every time we observe slippages we will ask the Greek authorities to adopt additional measures,” Almunia said.  

Credit-default swaps on Greek government bonds reached a record high level of 422 basis points Jan. 28. They fell 7 basis points today to 380, according to CMA DataVision prices. That means it costs $380,000 a year to insure against losses on the debt for five years.  That perceived risk would decline further if the EU publicly offered to aid Greece and defend monetary union, said Nobel prize-winning economist Joseph Stiglitz.  “If it made that announcement, then the speculators would know there’s no more hope and they would just go away,” Stiglitz, a Columbia University professor, said in an interview yesterday in Athens. “It would cost nobody.”  Well, nobody except the speculators

We’ll have to see how this play unfolds.  The Greek workers may not accept the wage freezes that are critical to this plan and the Swap crowd will not be very happy if they don’t get their massive payday on a national default in Greece but now they have come up with a new fun acronym to scare off invetors which is STUPID – for Spain, Turkey, UK, Portugal, Italy and Dubai) to keep stirring the paranoia over pending sovereign debt implosion.  The PimpCo boys are on the warpath, dissing everything that isn’t a bond as they press their Q1 advantage for investors ears after a big victory in January. 

As my Yogi used to say "It ain’t over ’till it’s over" and we still need to see our levels break, one way or the other, before we turn our horns back in for claws.  We’re still bottom fishing but we have plenty to be nervous about along the way! 


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  1. ssdirk

    judah - RE:  your love for the stick yesterday. I use Quotetracker for charting and it displays the NYSE Tick as $TICK.  I think it was meant for you.  Cheers.

  2. judahbenhur

    SS, lol. Now that’s a sign from above to play the NYSE!

  3. jomptien

    “I was seldom able to see an opportunity until it had ceased to be one.” – Mark Twain

  4. ssdirk

    JRW – IWM resistance at the 50dma of 61.65??

  5. Phil

    WOW, you have gotta love the stick! 

    We were down 50 points at 8:55 with little progress at the open and now we’re almost even at 9:40 – that is some GOOD stickin’! 

    They still have to make our levels though or what’s the point?  Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 have GOT to be broken, 3 of 5 at least before we are even a little impressed.  

    Right now it’s none of 5 so we’ll still be looking out for a downside break of:  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620

    Above 10,300 I like playing the DIA $105 calls at .50, which can make 50% on a 100-point run and below 10,300 I like the March $99 puts at $1.37 as they provide decent protection and we can sell against them if we break up.  For now, I favor the puts because this is a very silly stick move up to our levels and it will take more than that to impress me.

    The time to take the bearish covers is when we’re going up (lower VIX, cheaper prices) so it is a good time to exercise some of the new downside hedges from the morning post.  Once you are set up, if you feel too bearish and we break 10,300 – the DIA $105 calls make nice protection.

  6. JRW III

    ss,
    Not really much untill 61.98

  7. Phil

    LOL Jomp!

    AAPL doing well, don’t be greedy on the calls if we get rejected at $200 or if the market starts to lose it but remember we thought the plan was to use AAPL to punch the Nas back over 2,200 so let’s see what they can get out if it…

    Dollar still strong as Euro and Pound both fail their levels ($1.40 and $1.60) and we’re back near 91 Yen, which should make Japan happy (and they were lagging today). 

    Copper $3.05 so a big grain of salt to the whole rally, silver $16.59 and gold $1,117 all hurting with the buck.  Oil inventories at 10:30 and oil is still pushing $77.50 and I like the short ERY March $10 puts at .50 as well as the March $11 calls if they can be had for $1.10 (now $1/1.30), which is very possible if we get a run-up into inventories.  Nat gas is $5.54, under $5.50 is very weak for them.

    OIH is up over 5% in 2 days as is XLE.   Both can pull back hard if inventories disappoint.

  8. EricL

    Nervous selling ahead of ESS earnings, which exposes what a joke all the trading around that stock has been. You’d have to be a serious gambler, or have special information, to want to own that stock into the close today.
     
    I bet we see SPG continue to sell into tomorrow’s earnings too.

  9. EricL

    Be interesting to see where they place MA today too (earnings tomorrow AM). The chart set-up is good, but obvious skittishness. If it sells off after a good report, it will be a nice short.

  10. yodi

    Good Morning Phil
    Yesterday you blaimed me for not setting stops on my short DIA Feb 106p I did as you told and set a trailing stop on the short Mar 103p sold it at 2.82 and set my trstp at 3.10 meaning if the option runs against me it will trigger at 3.10 to reduce my loss. this morning the stop triggered at 2.96 as the trailing stop had reduced my trigger point. To my horror I saw afterwards the option I bought back at 2.96 I could have bought back at 2.65. Question is, at what point shall one set a stop loss 20% as per norm ? Again hard stop or trailing? your thoughts pls

  11. oncmed

    Phil,
    You like TM here?  TIA

  12. yodi

    Phil now I am nacket on my 104Jun Mat shall I wait for todays happenings?

  13. allen060

    Phil, I just read about the VXX in an article on Seeking Alpha. Any thoughts on using that as a hedge?
    Options are not available.

  14. judahbenhur

    JRW, SS. This is a heckuva battle at 61.50.  She sure doesn’t seem to be able to make up her mind.

  15. ssdirk

    Bord – you have to love this move in AAPL.  Glad it is working out for you.

  16. ssdirk

    JRW,judah – hard to tell thus far, but my gut tells me TZA.

  17. ssdirk

    Phil – IYR :) .  Quick 10% ain’t bad.  Thanx.

  18. EricL

    Poor TM. It makes copper companies’ charts look bullish.

  19. EricL

    KRE in a fifth consecutive day of selling. It may be heading to 22.5, where it would meet the 50 SMA and find chart support. I’m long some June puts.

  20. ssdirk

    JRW, judah – don’t know if you follow OpTrader on his thread, but he has been killing it this year.  Outstanding.

  21. judahbenhur

    SS, I subscribed to PSW at first to follow OpTrader (no offense Phil), but I haven’t checked in for a while.  Thanks, I’ll start taking a look again.

  22. EricL

    TM just broke through another support level.

  23. JRW III

    ss
    Can you link that thread ? BTW SUPPORT at IWM 60.82

  24. Phil

    MA/Eric – I don’t see any reason they won’t do well.  I’m long-term negative on the cards because the banks will eventually have to start playing hard-ball to stop paying fees on defaults etc (and they are going to want a share if MA does too well).  I like that idea of shorting if they get all giddy on a good report. 

    Stops/Yodi – I wrote a whole article once on why I hate hard stops.  Anything can trigger you in a move up or down.  Generally, I like to see 2 10-minute candles form against me before I get out (unless it’s moving really fast) and trigger my mental stops.  When in doubt, sell half is an excellent concept there because you can set hard stops on 1/2 or 1/3 ($2.96) in your example and then, at $2.65, you could have sold the rest and averaged out at about $2.80.  Had it gone .30 the other way, you would have averaged out at $3.10 but your long calls would be very happy on the continued downturn.  Options jump up an down constantly and the real point is we hit a level that made the DIA look weak so it was time to go back to a 1/2 cover.  Sometimes you win a quarter and sometimes you lose one but don’t forget the big picture is to have good overall portfolio protection. 

    TM/Oncmed – No, I don’t like TM.  Look how dumb investors are.  Yesterday there’s a fix and it flies up, today there’s another rumor and it flies down (cue clip of Bugs Bunny at the theater switch) - it’s not a stock anymore it’s a toy for the mo-mo players, which is fine if you are one but sucks if you think you are "investing".   The next "shocking" news on TM will come when people realize it costs money to make these repairs and that TM doesn’t really make all that much bottom line profit so this will hurt them A LOT.  Once that sinks in and TM gets back to the low $60s, then I might be interested but we have years of lawsuits to come as well.

    Nacket/Yodi – I don’t want to know what that is but yes, I think we’re going to retest 10,200 but keep your eye on a 1/2 sell of the $102 puts, now $1.33 and at $1.50, they make a good sell and if we head back up, get $1.50 for the $103 puts (now $1.80).  Keep in mind that we are NOT taking back our bounce levels so this is, overall, a very weak showing. 

    VXX/Allen – That’s a total nonsense ETF.  If they had options they’d be good to sell puts against but you are way better off (if you want to bet the VIX up) buying VIX June $25s for $3.20 and selling the March $25s for $1.90 as it’s not very likely the Junes drop below $1.30 and the March $25s can ultimately be rolled up to a positive vertical, even if the VIX flies up. 

    IYR/SS – Cool!

    Opt/Judah – That’s why he’s here, he does excellent work!

    TM/Eric – is it really a support level when it breaks that fast?

  25. ssdirk

    JRW – I guess it is part of the premium membership.  He has a green tab at the top of the site next to Phil’s Favorites.

  26. ssdirk

    Eric/TM – did you see just now where U.S. Transportation Secretary Ray LaHood said if you own any model affected by the problem, Stop driving it NOW.

  27. JRW III

    ss
    Sorry, I thought you meant Option Trader, not OUR Op Trader, thanks.

  28. kustomz

    Copper getting creamed
    TM building a position ….excuses excuses

    Using GOOG RIMM AAPL to keep the markets steady…they sell off and its bye bye baby

  29. EricL

    ss, seriously? No I didn’t, but now it looks like they have Prius problems too.

  30. Phil

    CSCO is nice at $23, 2011 $20 calls are $4.40 and you can sell March $23 puts and calls for $1.80, which is $2.60 on the $3 spread and loads of time to roll.  The 200 dma is rising at $22 so I’m pretty confident in not getting killed on the put side but you do have to WANT to own CSCO for about $20 (assuming a roll or two to the downside). 

    TM - Selling the Feb $70 puts for $1.80 is a good deal.  Just looking for the excitement to wear off and they drop to $1.50 or less.

  31. EricL

    Phil, if MA sells off hard after a good earnings I agree it’s a good long once it stabilizes. But there have been impressive sell offs in expensive stocks with good earnings recently.
     
    Someone was pointing out recently (maybe it was you? Denninger?) that major sell-offs from overbought conditions have often started when earnings are good but disappoint investor expectations. Apparently this was the beginning of the end for the Nas bubble.
     
    Something I’m keeping in mind.

  32. bord

    ssdirk, yes got lucky this morning on AAPL, decent bump up to roll and cover into.

  33. ssdirk

    Eric – Toyota link: http://www.cnbc.com/id/35213034

  34. yodi

    Hi Phil,
    Still looking at a good trade on GS they still owe me some money A short while back I set up (did not sell it) a short strangle Jan 11 250c/140p for a credit of 14.34 Today it is only 13.04 as GS is recouperating it looks Do you have any better plays on that stock?

  35. EricL

    I should go to my Toyota dealer today and offer $12K for a brand new Camry. Except that I’m scared he might actually take it, lol.

  36. b1ll

    SU down 2 1/2 bucks in 3 days is this really justified Phil?

  37. Phil

    GOOG not too affected by "70% chance" they are pulling out of China.  I think it’s more like 100% because you don’t cross the Chinese and get to keep hanging out in their country…

    MA/Eric – To be clear, I’m for going short if they have good earnings and go up and am long-term bearish on the CC companies because the banks will be pushing back on their profits once they have time to focus on it. 

    GS/Yodi – What happened to all those puts we sold naked last week?  I don’t like them now because they are back to being in between but if they head back to the low $150s, then game on again for selling puts. 

    Black & Decker (BDK): Q4 EPS of $1.24 beats by $0.47. Revenue of $1.3B (-5.6%) vs. $1.2B. (PRMy play on this is to go long on LOW (who sells them) and the Jan $17.50/22.50 bull call spread is $3.10 and $4.50 in the money (gotta love that) and you can knock $1 off that by selling the $17.50 puts and LOW is a pretty slow mover so selling March $23 calls for .45 is also nice as you get a $5 gain over $22.50 and plenty of time to roll.

    PFE going on sale, we should watch that.

    Beware BAC (as an investor considering giving them money)!  BofA (BAC) is bringing back the thundering herd, with plans to add up to 2,000 people to its global wealth management unit in the next year. But the bank is hiring newer, cheaper recruits to keep costs down and that could make it harder to attract and retain wealthy investors.

    Investors have wrongly priced in an “orderly” withdrawal of stimulus measures and a rebound in bank lending, says Pimco’s El-Erian. "Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes."

    In a move that should please China, the Treasury plans to issue more inflation-protected notes, and more frequently – including a second reopening to a 10-year TIPS auction. A record-matching $81B debt refunding has the department planning to cut auction sizes overall.

    Rivals prepare to testify against Comcast’s (CMCSA) proposed tie-up with NBC (GE). The deal "would substantially increase the market power of Comcast, threatening consumer and competition," and "Comcast has proven itself particularly adept at weakening or even rendering meaningless any such relief."

    Jan. ISM Non-Manufacturing Index: 50.5 vs. 51 expected and 49.8 prior (>50 denotes expansion). Prices index rose to 61.2 from 58.7. Employment rose to 44.6 from 44. New orders rose to 54.7 from 52.1.

    EIA Petroleum Inventories: Crude +2.32M vs. consensus of +0M. Gasoline -1.31M vs. consensus of +1M. Distillate -0.95M vs. consensus of -800K. Crude oil has only a muted reaction: up 3 cents to $77.26.   Better than I thought they’d do and they are holding $77.50.   We don’t find out import numbers until later.

    There haven’t been this many newsletter writers who expect a 10% correction since April 1984, according to Investors Intelligence. The group’s survey says 38.9% anticipate such a correction, but that overall both bearish sentiment (22.2%) and bullish sentiment (38.9%) have slipped – giving no clear signal to contrarians.

  38. ssdirk

    Peter and stranglers – you have to be careful about bidding on the "mark" with SPX calls and puts.  Pay attention to the spread.  For example I have March 1240”s that I was thinking about rolling.  The bid/ask is .10/1.25 and the mark is .675 which is way too much.  Meanwhile the bid ask on the Mar 1225 is .10/.60 with a mark of .35.  I have found that the RUT provides much better spreads.

  39. balancenv

     Phil,
    AKAM earning today after close, what’s your suggestion of earning play? 
    Thanks. 

  40. Phil

    TM/Eric – Probably is a great time to go play hard-ball with them and of course the new ones will be made safe so a very good time for those of you interested in buying.  My brother is selling Lexus down in WPalm Beach and says no effect on them at all.

    SU/B1 – Something about cancer risk from shale and you DON’T want to pose a health hazard to Canadians!  Also, they really don’t make much money if oil is below $70 and that’s a very real possiblity this spring.  We bought them when they crashed last year but they were a Moby Dick short for me in early 2008 as they went up and up and I got more and more pissed (but then very happy).  

    Today AAPL and AMZN saving the Nasdaq…

    Yet another fun bit of news for REITs:  Movie Gallery (MVGR) sticks to the script and files for bankruptcy, for the second time since 2007, and will close "a significant number" of stores in the face of competition from Redbox (CSTR +1.6%) and Netflix (NFLX +0.5%).  Remember, BK means "tear up the leases."

  41. lionel

    Crude Oil/
    Phil, I was wondering what were the reasons for not using CL future options instead of USO options?
    Is it because of the physical delivery of the underlying contract?

  42. judahbenhur

    SS, Where are you rolling the 1240s--1200, 1180?

  43. hunter5533

    Phil – any thoughts on WAG?

  44. ssdirk

    judah – open interest and spread is much better on 1200.  Those spreads on surrounding strikes are all over the map.

  45. chakra108

    Phil
    IYR – The long term Jan/March Spread is $2.15. Your selling of the March 41 PUTS is on the assumption that it will hold these levels until March, if I am not mistaken. What do you see as a catalyst in the longer term. Do we continue writing against the Jan 37 puts through June? Thanks.
    TM- Do you have any other play as I dont have the margin to do a decent FEB 70 PUT sale?

  46. EricL

    GS, JPM, BAC all giving up their impressive early gains. I can’t see any good reason to go long here.

  47. leonf675

    Phil, any thoughts/recommendations for a buy/write on LLY?

  48. Phil

    AKAM/Balance – I like them long-term and if they fall I’d like them more so selling Aug $23 puts for $1.80 is a nice idea and that can offset the 2012 $30s at $4.70, selling the March $27s at $1.35 so if they go down, you can roll to the $25s cheap with $1.35 to offset the roll (it currently costs $2.15 to roll to the $25s) and if they head up, you can DD on the Leaps and the $1.80 sold for the Aug $23s pay for part of that and then you can roll the callers to 2x a higher strike (lots of time so no worries).   Anything in between $25 and $27 is a huge winner of course.

    CL/Lionel – Not at all.  I love the futures but they are super dangerous and not for everyboday.  Also, futures don’t pay you a premium so USO has it’s uses too.  For CL, you can do the standard short and use $77.50 as the stop line as it’s more likely we break down sharply than up.

    WAG/Hunter – I liked them and CVS about 100% ago but not up here.   CVS is better, I think but they had huge boosts off flu and health care rumors so best to let them fade out before jumping in. 

    10,250 holding up so far but AAPL got tired and doesn’t look like they’ll pop $200 so tight stops on that one.

  49. samz3700

    BNI puts - fyi – bni stock is now receiving a daily dividend – it is not clear to me what this means for puts and how the options clearing house is going to modify options – although they state they are going to

    Burlington Northern Santa Fe Corporation (BNI) has declared a Conditional Cash Dividend
    equal to the number of calendar days between and including December 15, 2009 and the
    closing date of the merger with Berkshire Hathaway Inc., multiplied by $0.0044 per BNI
    Common Share, and rounded to the nearest penny. The dividend is contingent upon and
    subject to the satisfaction or waiver of all closing conditions set forth in the merger agreement
    becoming or being declared wholly unconditional. The record date is February 4, 2010; payable
    date to be announced. The ex-distribution date for this distribution has not been determined.

    Pursuant to OCC By-Laws, the BNI Adjustment Panel has determined that BNI options
    will be adjusted in response to this Conditional Cash Dividend when and if all conditions
    are satisfied.

    Burlington Northern Santa Fe Corporation Common Shares will begin trading with Due-Bills
    attached representing the Conditional Dividend on February 4, 2010.
    NOTE: Contract adjustments anticipated in response to the pending merger of BNI and
    Berkshire Hathaway Inc. are described in OCC Information Memo 26903. The contract
    adjustment in response to the BNI Conditional Cash Dividend is being addressed as a separate
    event, although it is possible the two adjustments may occur simultaneously. If occurring at the
    same time, the deliverable noted below would be additionally modified by the conversion of 100
    BNI Common Shares into the resulting merger consideration.

    CONTRACT ADJUSTMENT
    EFFECTIVE DATE:

     

    To Be Determined
    OPTION SYMBOLS:
    To Be Determined

    NEW MULTIPLIER:
    $150; a strike of 50 yields $5,000.00).
    100 (e.g., for premium extensions a premium of 1.50 equals
     

  50. ssdirk

    Phil/VZ – what are thoughts on VZ?  It has been beaten down pretty good.  I sold the Apr 31 puts for 1.10 now 2.56.  It’s a bit early, but I could roll to the Jul 30’s for a small net credit.

  51. Phil

    IYR/Chakra – The idea is just to earn the premium each month.  I don’t think IYR will fall that fast but, if it does, then we roll down to a vertical eventually.  Keep in mind the deltas are about the same so you’ll get a nice roll to much lower srikes if IYR goes catastrophically low but, more likely they drift and our primary goeal is to end up with a free put after 5 sales.   As to TM, no, the whole point of the play is to sell the outrageous premium justy to profit from the run-up in volatility on this drop. 

    LLY/Leon – Well you have to like that 5.6% dividend AND the p/e around 7.5 so yes to that one even if they do test the 200 DMA at $34.  You can buy the stock at $35 and sell the 2012 $30 puts and calls for $9.50, which puts you in for net $20.50 and still collecting that $2 dividend so almost 10% a year + 50% if called away at $30 makes for a nice long-term hold

    BNI/Samz – You have to call your broker on tinks like that, they can make a mess!

    Copper $2.98 – what does that tell us?  FCX March $65 puts are $2.30 and if they break back up you can sell the Feb $70 puts ($2.35) as a mo play or the Feb $65 puts (.93) as a regular cover.

  52. ocelli7

    Phil, am late to the game today, but following up on your comments to me about the cause of oil rising so much yesterday, I did plot the Fib retracement and as you pointed out, it was close to a 38% bounce. I noticed the next Fib line at 50% was 78, so now I see it actually hit that mark, and then began its decent. Since then it bounced back near $78 and fell again at 11am. I think you’re onto something.
     
    I like your comments above about shorting /CL and using 77.50 as a stop.

  53. chakra108

    Phil
    QQQQ- I still own the $45 FEB Calls for $0.21. Whats your take on that? Thanks.

  54. JRW III

    Phil,
    Still think we’re going to make it back to 10,200 or 10,165 ?

  55. bord

    AMED, Yesterday’s hero is today’s goat…..down 5% but that set up Phil’s spread suggestion (sell Feb 60, buy June 65) nicely. Stay put for now or adjust given the big move?

  56. lvmoda

     Phil,   studying the LLY trade and wanted to make I understand….did you mean net entry $25.50, not 20.50…
    You can buy the stock at $35 and sell the 2012 $30 puts and calls for $9.50, which puts you in for net $20.50 and still collecting that $2 dividend so almost 10% a year + 50% if called away at $30 makes for a nice long-term hold

  57. Pharmboy

    LLY spread is also here for a bit more work.  I am not a fan after this year, as revenues and clinical trial data comes out next year and the are a big gamble. 

  58. Pharmboy

    Revs will be hit from big patent expirations.

  59. EricL

    Copper sell off looks like it’s turning into a waterfall. It should get defended here where there is significant support from October-November.  If it breaks through here would be bearish for commodities generally, obviously.

  60. EricL

    By ‘here’ I mean the 2.95 area.

  61. judahbenhur

    JRW, SS,  Thinking of an afternoon ride on TNA, (missed TZA by being indecisive). I was hoping to get on closer to 60.15.  I don’t really like this level as an entry, but if the Dow isn’t falling back to 10,200 and the RUT isn’t falling back to 605, these levels may be holding.  Where are you gentlemen today?

  62. ssdirk

    judah – missed it as well.  I am inclined to think a $tick may be in order with the light volume.

  63. kustomz

    They can make today look bullish with defense of the 10250 line and rally on back up over 10300 and if the dollar weakens we can see a bounce in commodities…it would be just perfect.

    TM made great trade

  64. JRW III

    judah,
    Made $o.35 on TNA on the first bounce off 60.82; missed the TZA play completely !!

  65. Pharmboy

    OGXI – a favorite from a few months back is finding support finally and rising slowly.  Put on the radar, but a partial fill up to  20 would not be out of the question (they have to break through 15.75).  They are still in clinical trials, but could be worth a flier.  Stock is better as it is more liquid, options are too light and spreads are large.

  66. Phil

    VZ/SS – I think it’s too early to worry about it.  If you roll, you wait 3 months to get paid.  They are just 7% out of the money 10 weeks to go and this is just that whole panic thing I was talking about when people look at the trade loss on a naked put.  If you REALLY intended to own VZ, who would pay you a .50 dividend for owning them between April and July, then you would be saying "Yay" I’m going to get my VZ for net $29.90!!!"  You can spend .60 of the $1.10 you collected to roll the caller down to the Apr $30 puts, putting them just 3% away from the current strike and you still make .50 at $30 without the wait. 

    Another interesting thing you can do with a play like this is buy the Apr $29 puts for $1.25 and sell the Apr $27 puts for .50 so you’ve collected $1.10 + .50 = $1.60 less the $1.25 for your puts = .35 and the most you can possibly owe the putter is $1.65 (which is what you owe now) and, if it’s put to you  at $27, you are in for net $28.65 so you’ve dropped your put-to price another $1.25 on the downside and still have the ability to roll out the putter later or they still may be wiped out and spare you the bother.  Just another way to look at these plays.  

    CL/Ocelli – I like to find those inflection points and play them like a slot machine, where I’m willing to risk a nikel or a dime (stops) on a cross over the line as long as I think I can get .25 or .50 profit when it goes my way.  That way, you can miss 5 times and still break even or better on a good run.   The trick is not to force it – wait for REAL inflection points to form (like 605 on the RUT right now) and use that spot with good discipline.

    QQQQ/Chakra – I gave up as we need 2,200 THIS WEEK for them to start paying off and we just don’t seem to have the strength for it. 

    10,200/JRW – Well Dow volume is lameish 91M at 12:30 so w are stickable so maybe not today.  It’s all about that Friday jobs report and 10,250 is hanging very tough so we have to respect that. 

    AMED/Bod -  No need to adjust one like that as we have loads of time.  Certainly you don’t want to spend .80 to buy out the caller but it is worth considering spending $1.50 to roll down to the June $60s if you are inclined to put money in (that’s why we sold the calls in the first place!). 

    LaHood recinded his TM comment – Yay short puts!

    Also yay!  Tough economy means cheap booze

    Economist David Rosenberg speculates that real Q4 GDP (.pdf) would have declined more than 7%, rather than rising the announced 5.7%, if stimulus benefits are stripped away. Some other analysts expect sharp downward revisions.

    With Kraft’s (KFT +0.7%) effective control of Cadbury (CBY +0.4%), the chocolate maker’s CEO Todd Stitzer and CFO Andrew Bonfield resign their posts, and Chairman Roger Carr says he plans to step down from the board.  I hate it when the CEO leaves pre-transition, that’s never a good thing.

    Troubles at Abercrombie & Fitch (ANF -2.7%) go beyond pricing to its "stale" style, as teens turn to rivals Aeropostale (ARO) and American Eagle Outfitters (AEO) for their fashion fix. January retail numbers roll out tomorrow, and solid same-store sales gains are expected – except at Abercrombie.

    Strained finances have forced a growing number of consumers to give greater importance to paying credit card bills than their mortgages, says a TransUnion study. People seem more willing to lose their homes than access to credit – another blow to the notion that home prices and foreclosure rates will improve.

    Obama says the U.S. will put "constant pressure" on China to open its markets and address currency rates to ensure U.S. goods are not facing a disadvantage.  Will he also address the fact that we pay people $20 an hour and they pay $2 per day?  I don’t think a little currency adjustment will "fix" that.
     

    This is truly amazing.  Forbes rejected my "Tale of Two Economies" article last month and here’s today’s "America’s Two Economies" – Man they really are capitalist tools! 

  67. cwan120

    Hi, Phil & All, regarding BNI, do you think we should get out of that BNI 2011 puts?  We sold them around $4 a few months ago.  Maybe we should get out now, instead of worrying about OCC’s adjustments?

  68. Pharmboy

    Forbes – We should all join and post links to the PSW website…!!!

  69. Phil

    LLY/LV – Yes, bad math!!!  So $25.50 and + 20% if called away plus the dividends.  That does make more sense

    ACOR off to the races again after pullback. 

    Dollar grinding higher.  I don’t think people are too confident Greece is solved. 

    Nas making another run for the gold.  1,780 is a tough spot for them in the futures.  

    BNI/Cwan – Yes, I don’t think it’s worth the hassle and they’ve done well anyway at under $2.  It’s not at all likely that the adjustments will hurt us, it’s more a matter of "why bother" if there’s going to be any kind of annoyance. 

    Forbes/Pharm – Good plan!  8-)

  70. yodi

    Phil,
    PCU not looking to good for me at this stage holding stk at 28.08 now 27.61 Jan11 c 11.50 now 5.35 these are the longs which I am not to worried about holding against it shorts 5 Feb at 2.10 now .02 , 3 Mar 40c’s  at .73 now .02 these are the good once against this holding 3 Mar 40p short sold for 5.34 now 12.65 quite a combo but never thought copper cable would go that low not at Homedepot!!! your thoughts on the matter Pls  Thinking of rolling the 40 put to June 30P at at net cost to me for 7.90 selling the 30 Jun call 5X for 1.80 leaving with a cost of aprox 1493.00 or closing the lot now at a loss of 960.00

  71. gel1

    Sold June 50 puts on AMED @5.10

  72. yodi

    Phil to add to the above PCU I could aswell close for a cost of 960 and sell 5 Jun calls at 1.80 950 just about breaking even. ??

  73. Pharmboy

    Forbes…done.

  74. kustomz

    Coast Guard OKs Yemen gas deliveries to Boston….we are just asking for it.

    U.S. Coast Guard officials say they’ve developed a security plan to allow the safe passage of tankers carrying liquefied natural gas from Yemen through the Port of Boston.

  75. Pharmboy

    New IPO – Ironwood.  Opened at 12.4, now 11.66.  Gonna try to pick up a few hundred on the excitement….then dump by EOD.

  76. Pharmboy

    IRWD is the ticker.

  77. Phil

    PCU/Yodi – I have no faith in copper holding anything.  Ordinary demand is down and China stockpiled about a year’s worth of consumption last year so that’s another shoe to drop.  You are looking at PCU just off the all-time highs they hit in 2008 when people thought we would just expand forever to justify miners with whopping p/es.  I would not relentlessly keep putting money into this one.  China is cutting back on construction as they are worried about their own RE bubble and it would take 2 years of 10% monthly gains for us to get back to our old levels.  Meanwhile, what if inflation finally kills the penny?  How many tons is that?  If you want to play them up, why not just shift to a sensible hedge like the 2012 $25.35 bull calls for $3.30 with a 200% upside and you can sell 1/2 the $25 puts at $6 to pay for it and the worst thing that happens is you own PCU again at $25 or you make $10 to the upside if things go well. 

    9% demand drops in gasoline and distillates and last year sucked.  Oh yeah, things are getting better…

    At least this item makes sense:   Turn on, tune in, drop out: CNBC’s ratings in January were down substantially from a year ago.

    The tough economy accelerates restructuring of U.S. manufacturing: car and chemical production capacity cut sharply, capacity to produce chips way up. It’s capitalism at work, but some worry that the scope of cutbacks could doom companies that ought to survive.

  78. bgbigelow

     PARD – Pharm or Phil any thoughts on Pard after they announced their shakeup today.  Close the whole thing or still waiting for another spike?

  79. yodi

    gel1
    Question AMED went up from Dec to FEB 20$ do you not expect a downturn at a given point? OK it dropped today 2.70 not much for a 20$ increase. Looking forward to your comment

    February 3rd, 2010 at 1:10 pm | Permalink  
    Sold June 50 puts on AMED @5.10

  80. bord

    Phil, Per your copper comments, a stock like FCX seems like one hell of a ride, especially the last few weeks. As a long time watcher of FCX, I almost get the feeling one could open at the same time a LEAPS bull spread and LEAPS separate bear spread, and just work them both-- buying some on the dips and selling some on the peaks. Seems like you could cash one side out for a nice profit within a short time frame, and still have plenty of time to let the other one turn into a winner (or at least neutral)--with sensible stops in place.  Is that tactically a plausible, wise  thing to do, or is there a better way to take advantage of the swings?

  81. sns1

    phil- Ticker NLY…pays 18% div…any thoughts on how to structure a one year investment that protects downside while providing max dividend yield?

  82. Pharmboy

    PARD/bg – OUCH.  Small co. reducing work force is not a good thing.  Not sure how much you are out, but if you still have a bunch, probably worth salvaging what you have an put it some where else to work.  They still have a chance, but that chance is better spent in my eyes on something else like ARIA, CRIS, or SPPI.

  83. chakra108

    Phil
    TM – Are you buying back the TM puts or should we wait? Thanks.

  84. Phil

    LNG/Kustomz – That is NUTS!   A LNG tanker holds 120,000 Cu or about 50,000 tons of methane, which is about as volatile as TNT.  The bomb dropped on Hiroshima was equal to 20,000 tons of TNT.  Nat gas wouldn’t level the city but an explosion on one of those ships would be like a daisy cutter going off in Boston Harbor

    PARD/Bgb – They have a study due in June and that’s do or die for them I think.  They did a presentation and got a great spike at the end of Jan but that was the get out signal for people who were sick of them.  Last report I saw looked encouraging enough to stick it out (but taking profits on spikes of course!).   This is what biotech does, even the good ones.  I just did ACOR and they had a GREAT result but still they sold down before heading back up – it’s a very tough sector to trade if you don’t have a really strong stomach.  

    Uh-oh, if Pharm doesn’t like PARD then better off looking for exits.  I’m a sucker for biotech stories sometimes – he’s got a clearer perspective on if things will work.

    FCX/Bord – That’s a double diagonal and a very valid strategy which we like to use in duller markets or with crazy premium stocks like GOOG where you don’t want to get too burned but you want to sell premium.  With stocks I don’t like like FCX or FSLR or IYR, I much prefer to paitently wait for them to go up to the top of a range and just short them, it’s more relaxing as playing the double diagonal, especially if you think you will be calling tops and bottoms on their almost daily 2.5% swings, is a lot of work and can distract you from the rest of your portflio.

    NLY/SNS - Keep in mind that your "protection" is an illusion with these as the main reason they tank is that something bad happens to the dividned and then you end up with a ton of non-dividend paying stock put to you at a big loss.  That being said, You can buy the stock for $18.07 and sell the 2011 $17.50 puts and calls for $3.90 for a very nice $14.17/15.84 net entry.  Those puts can be rolled down to the 2012 $12.50 puts, that are now $1.70 and even if you lose $1 on that, if you stop out at $17 on the stock and have it put back to you at $12.50 in 2012, your net reentry is still just about $10.50 (you lose $1 on the stock and $1 on the put roll but you collected $3.90 so net $1.90 credit on $12.50 put to price) so that’s a hell of a lot of downside cushion if you manage it right.

    TM/Chakra – Was meant to be a day trade and up 30% is a nice day’s work.  As I said earlier, I think $65 is fair for them but, TODAY, I felt the sell-off was a bit abrupt and took advantage to ALWAYS sell into the initial excitement.

    Nice article:  10 States About to Get Murdered by the Coming Chinese Import Slowdown

    Markets are looking fairly insane today aren’t they?

    As expected, the Treasury kept its quarterly refunding the same as last time, planning $81B in auctions: $40B in three-year notes Tuesday, $25B in 10-year notes next Wednesday, $16B in 30-year bonds next Thursday. Treasurys still under pressure today, with the 30-year yield +0.05 to 4.62%; 10-year +0.05 to 3.69%; 5-year +0.04 to 2.4%.

  85. jcmcn5

    Phil — I;m guessing we haven’t made a commitment to a short term move either up or down from here, because A) we bounced off 10250 and b) we haven’t gone above 10300?  So we’re just kinda watching, right?

  86. gel1

    Hi Yodi
    I entered the play selling puts (basically a premium income play). I personally like the fundamentals of the company and do not see a lot of risk of a massive downdraft. I subscribe to some very good analytical research sources and they are very positive about the long term prospects. I also get a "heads up" allert if the fundamentals start to show weakness – I’ll post if this should happen.I do not plan to cover the position. I have been in AMED previously, and closed it out strictly for the purpose of portfolio downsizing.

  87. b1ll

    Phil, what do you think short term for semis, I play MU (I know . . but they "like me" , usually)

  88. Pharmboy

    PARD (for those still in them) – Phil has it right, but once something goes off, it is a long road to recovery.  There are a bunch of platinum based therapies out there, but PARD was supposed to have less side effects……I am with Phil, as I love the plays, but now the reward is getting tough to swallow.  If you want a home run, why not go for the Sep 2.5 for 23c IV is only 30%………if they spike, you can sell the $5 fronts for an even trade (fingers crossed).

  89. jomptien

    Phil, I have 200 shares of AGNC at 26.25. Is there a good strike to sell puts and calls against it now? Thanks

  90. gel1

    Pharm
    I have been in MDVN for so long I forgot why i have the stock. I know they have an altzeimers drug in development. Maybe the drug would help me remember why I have the stock!  Any sentiments?

  91. Phil

    Here’s a great example of what I was talking about with that oil futures trade earlier:

    That dark line is the $72.50 line and the idea is using that to enter the trade (on the way down) and stopping out if it goes up to $72.55 or $72.60 (depending on your tolerance) before it heads down to get you an anticipated .25 or .50.  As you can see, there was only one spike that even touched 72.55 and that was very briefly, touching it exactly for about 2 ticks (which is why hard stops will kill you, as you would be one of the two ticks on the flush!).  The key is having realistic expectations and learning to be TRILLED with .50 wins.

    Generally, you want to set a .10 trailing stop on 1/2 once you make .10, which lowers the basis on your remaining 1/2, even if you just make a dime.  Then you can be a little more liberal on the next and then on the next.  If you get lucky, like this one, and get a fast win – you can give it a little more slack but there’s no reason to let losses slip away as you can bob in and out of futures 100 times a day so you won’t be missing any "opportunities of a lifetime" by taking your profits.

    Rangebound it is JCM – That’s why I’m trying to evenly mix short and long plays.

    MU/B1 – We played them last week as they got silly cheap.  I like the SOX in gerneral long-term but WFR is my favorite as they have that solar thing going for them.  You can sell March $13 puts for .72 for a net $12.28 entry, which is nice.   SNDK is another one we bottom fished as they got crazy cheap at $25 and you can still sell the March $25 puts for $1.04 for a net $23.96 entry (stock is now $26.89).   These are two of my favorite semis.

    Cheer up, hotel companies – 2011 should be a good year. But analysts expect 2010 to be flat, with revPAR to fall between 1-3% this year.

    It’s going to take more than new (but "welcome") government resolution powers to avoid crises in the future, says Fed governor Kevin Warsh. “We must resurrect market discipline as a complementary pillar of prudential supervision,” he said in a speech, or else too-big-to-fail will damage the real economy. "We need a system in which insolvent firms fail."

  92. jcmcn5

    What about IYR?  The March 43 puts you wrote about this morning kinda ran away.  Do  you still like them here or do you have something else in mind?

  93. judahbenhur

    Phil, How does the volume look to you--stickable back over 10300 into the close?

  94. yodi

    gel1
    Thanks, good explanation on AMED, putting an order out and see what goes the margin is equal to the amount you receive not bad

  95. Pharmboy

    MDVN/gel – freaky, I was just looking at the chart on them….they are in bed with PFE.  They are gonna run up so an entry here would be good.  I am off to lunch, will be back b’f close….

  96. yodi

    Phil any suggestion on covering the mattress today mar 103p or feb 103p thks

  97. Phil

    AGNC/Jomp – Sadly, there are no $27.50s and, because it’s a dividend play, the calls pay lousy premiums but there’s nothing wrong with selling the Sept $25 puts and calls for $4.80 for protection, just make sure you get $2.50 at least for the $25 calls because the less premium you get, the much more likely you will be called away into ex-dividend day. 

    IYR/Jcm – Now it would be chasing a 2.5% move already.  This morning they were clearly overbought, now it’s riskier. I think just wait for them to go up again or perhaps a ratio backspread, selling 5 March $45 calls for $1.25 ($625) against 3 June $46s at $1.80 ($540) to play for a drop and a roll if you have to.

    Volume/Judah – Dow volume is 127M at 2:45 so super stickable but we look super-lame at the moment.  Copper can’t get over $3 and both the Pound and they Euro have 8′s as their 2nd decimal and we have 91 Yen  so go dollar!  Gold is $1,109 (yay GLL) and silver blew $16.50 (now $16.35) with oil at $76.75 at NYMEX close (ha-HA) and nat gas at $5.40 so not looking god at all for the commodity pushers at the moment. 

    Mattress/Yodi – The June $104-105 puts should be 1/2 covered with (preferably) Feb $103 puts.  Over 10,300 we want to be full covered, adding 1/2 Feb $104 puts with 10,300 as a stop line.

    Echoing Rupert Murdoch’s comments (NWS +5.5%) yesterday, Time Warner (TWX -1.4%) CEO Jeff Bewkes says he sees signs the worst may be over for the media industry: "We’ve got strong operational and financial momentum, and there is increasing evidence that industry trends are going our way."

    "Those contracts were outrageous. They should never have been permitted," Treasury’s Geithner tells a House committee, appealing to Congress to help recoup AIG’s (AIG) "deeply irresponsible" bonus payments (prepared testimony). Geithner, who was grilled last week over his role in the AIG bailout, took some more heat today on Capitol Hill.

  98. EricL

    MA getting hit now. Dang near shorted it this morning. Woulda, coulda…

  99. Phil

    This is really starting to catch on!  Yves Smith wonders if the U.S. mortgage market is reaching a tipping point as solvent borrowers grow increasingly comfortable with strategic walkaways. While the government has "a vested interest" in saying that few homeowners abandon their mortgages by choice, "this sort of cold-blooded detachment is the logical result of encouraging borrowers to treat their house as an investment… rather than a home."

  100. ssdirk

    Wow, a new 2% tax on food in Phoenix, AZ.  Will War Gardens return.

  101. judahbenhur

    SS, Days like today really make me appreciate the strangles.  Slightly down day, little price action.  Tough to make much money on the day trades, and the strangles just slowly decay.  Been on TNA since 12:45, but if nothing is moving I may bail.  Oh, that might be my train now.

  102. EricL

    Looking at the MA three-month, there is a big H&S pattern starting before Xmas. It’s now below the 50 SMA and sitting on support. Could get very ugly tomorrow if investors don’t like earnings.
     
    V isn’t looking happy either.

  103. ssdirk

    judah – yeah, those strangles certainly fill in the gap on slow days.  I am just a little annoyed by the SPX spreads.  Haven’t taken any trains today, but made good money following OpTrdader with GOOG calls, ANF puts and SHLD puts.  That guy is in the zone.

  104. gel1

    Pharm/MDVN
    I must have been channeling your thoughts – I doubled down on the puts I sold a long time ago ( Jan. ’11 30′s ) Thanks!

  105. stjeanluc

     Pharm, what do you think about ABT? Not very sexy, but super safe dividend over the years and they are just chugging along. How about a long term play on them Phil? Thanks.

  106. Phil

    Oh damn!  I just realized (actually Bloomberg just realized and fortunately I can read) that this is the NFP report that will likely carry the massive (maybe a Million jobs down) birth/death adjustment that can give us a very shocking job loss.  We could get a wild knee-jerk reaction to the 8:30 report on Friday so make sure you are ready for insanity.

    War Gardens/SS – That’s Victory Gardens – learn your newspeak! 

  107. EricL

    ss, you can always trade SPY spreads instead of SPX. I know Peter prefers SPX, but he trades huge position sizes.
     
    SPY spreads typically fill within .02-.03. You pay 10x the commissions, but the spreads are often less than 10x as wide, so IMO it can be a better alternative if position sizes are not very large.

  108. kustomz

    You cant help but laugh

    Greece’s debt stands at more than 294 billion euros (412 billion dollars), its deficit is well beyond EU limits of three percent of output for eurozone members and it suffered a triple downgrade of its sovereign debt in December.

    ATHENS) – The European Union must back Greece’s efforts to shore up its debt-hit economy and defend it against attacks by speculators on the financial markets, the Greek finance minister said Wednesday.
    "We expect and ask our European peers to come out and support Greece in the coming days," Finance Minister George Papaconstantinou told Mega television.
    "They have to back Greece’s effort and to tell international markets that there is no weak link (in the eurozone), that we are all in the same boat and must work together," the socialist minister said.

  109. jburgess

    Phil, CMCSA long stock(still) at 17.42. shorted Feb17 straddle for 1.37. While the calls are worth only .06, the puts are worth 1.14. Could roll to Mar 16 straddle, but that would only gain me about .12, not much. I’m open for comments. Thanks

  110. d12ewman

     Phil, 
     you mentioned PARD above and commented that pharm doesnt like it anymore, but i missed his comment? Any input on PARD pharm?

  111. kustomz

    Theres going sideways, and then theres what we see today and i dont like it.

  112. Peter D

    Phil,
    Thanks for posting the information.  I had trouble with the post last night that had many links.  It seemed to disappear after I spent time formatting them.  Thanks for correcting them.
     
    pstas/Feb and March strangles,
     
    I am taking a break because I’m already ahead of the profit target, but it doesn’t mean that you guys can’t continue to play it.  The RUT Feb 550 put is still $1.05, which is not a bad sell for 9 trading days with a 10% cushion.  The RUT callers is harder to pick.  The Feb 640 call can be sold for $1.35, Feb 650 for $0.55, so pick the one that you are more comfortable, or split half and half to get the 645 average.
     
    For SPX, Feb 1000 put is $1.65, and Mar 925/1190 short strangle is $4.2, which is not a bad way to wait for the illusive VIX surge.

  113. ssdirk

    Eric – great point.  I will keep that in mind for next month. Thanks.

  114. Peter D

    ss/Mark price discrepancies,
     
    Yes, they can happen, especially now that many of us are playing them.  So check out the surrounding spreads to make sure that your price is correct before hitting submit.  Otherwise, we know we made a mistake (by not checking the price) if ithe order get executed in miliseconds!

  115. jcmcn5

    Do you attribute any importance to the possibility that the 20 day EMA is about to cross the 50 day EMA on the downside?  First time that’s happened in more than a year.

  116. jcmcn5

    should have written "assign", not "attribute."  The Jesuits would not be proud.

  117. Phil

    Wow!  They STILL aren’t importing any oil.  Just 9,476Kbd vs 11,247 last year – that’s 12.4Mbd less oil or 1.5 days worth of current imports LESS oil being consumed.  Refineries at 77.7% of capacity (almost 1/4 shut down) and we still have gasoline builds.  Distillate stocks are up almost 10% from last year and they are producing 300Kbd LESS!  How does this affect prices – oil is UP 75% from last year.  And yet – no arrests will be made!

    Choppy commodities trading hasn’t kept the dollar from trading higher against all major partners: +0.4% against euro, +0.5% against pound, +0.7% against yen, +0.3% against Swiss franc, +0.4% against Aussie dollar, +0.2% against loonie. The 30-year year Tsy yield now +0.06 to 4.63%; 10-year +0.06 to 3.7%.

    Kusomz – Greece is the weakest link – Goodbye!

    CMCSA/Jbur – It’s not about "gaining," you collected $1.37 against $17.42 for a net $16.05/16.53 and the stock is down at $16 so the roll drops your basis to $15.93/15.97 so that is gaining something as you drop the basis on a stock you wanted (not to mention the nice side-benefit of avoiding a loss even though your entry wasn’t timed well).  Everything doesn’t have to be a win, sometimes it’s nice not to lose in a downturn.

    On Comcast’s (CMCSA -2.2%) Q4 earnings call, Morgan Stanley’s Ben Swinburne wonders if "some of these emerging platforms, particularly the Apple (AAPL) Tablet," are friend or foe to Comcast’s cable plans. CEO Brian Roberts: This is "an incredible time for innovation… I don’t think people wanting more content on more devices… is anything but a good thing for our company."

    PARD/D12 – Hold the CTRL key and press the "F" key and a little box will pop up.  Type in PARD and then hit "Next" and you will see all that was said about PARD today.  Just one of the many fine services at PSW…

    Sideways/Kustomz – I haven’t changed anything, still short.

    Posting/Peter – Great post!  When you have that many links, the spam filters hold the post. Just call me or Email me if that happens and I can "rescue" it from the filters.  By the way, before I hit the submit button, I highlight what I wrote and do a CTRL-C (another fine PSW special feature!) so, if anything goes wrong, I can repaste it.  Good for you too as you write some long posts. 

    EMAs/JCM – That’s a "death cross" and is supposed to be a very bad sign. 

    Mr. Stick is sure off his game so far. 

  118. stevenparker

    Hi guys!!! am Ch1/2 out of the AAPL calls, what are others doing? :)
     
    Cheers!

  119. Pharmboy

    ABT/gel – dividend should be safe, yes.  My only concern is with Humira’s growth – one of their flagships.  They are competing with JNJ’s Remicaide. They have a diverse portfolio like JNJ though, so for now.  The dividend is not as high as MRK, GSK though, so I prefer them to ABT.

  120. Phil

    Oh Mr. Stick – how could I have doubted you?

  121. craigzooka

     hey,  are you guys driving up the price of AMED?  I entered the MAR 50-55 call vertical this morning for 3.20 now 3.50  and the MAR 60-65 call vertical for 1.28 now 1.50. 

  122. kustomz

    Chambers CSCO was on CNBC from Davos last week and he looked comfortable when talking about the economy.

  123. Phil

    AAPL/Steve – Done.  I’m very concerned about that jobs report on Friday. 

    Last year’s NFP Report on the first Friday in Feb was the beginning of a 2,000-point drop in the market (not that day, that day we went up 200 but the next wee we were down 700 and last Jan we "only" had a 356K adjustment.  As I am hearing very little about the adjustments to the model, I have to think that many people will be surprised, especially Europeans, who don’t understand fake government statistics.  So I’m planning on being bearish into the weekend at the moment. 

    I certainly can’t condone anything more than a neutral stance into this report

  124. kustomz

     NFP Report

    How well can we rely on that data if CNBC isn’t reporting on it? They’re coming to take me away, ho ho, he he , ha ha,
     

  125. jromeha

    Phil, do you like UUP going into the jobs report?

  126. EricL

    Rejected twice below 160 and GS barely finishes green. Better than what happened to the other banks today I guess.

  127. stevenparker

    Sounds like lots of selling in the SPY pit on the close by JPM and GS.

  128. judahbenhur

    JRW, SS, Out at the very end. 70 cents on TNA, even though it never really got going.  Better than a…you know the rest.  See you tomorrow.

  129. jcedens

    Did anyone see Biderman on CNBC?  He talked about the stick, just didn’t have a name for it.

  130. stjeanluc

     Phil, being French, I disagree with you that we don’t understand fake government statistics in Europe… Cynicism takes over and we just learn to ignore them! 

  131. jcmcn5

    WFR earnings?  Initial thoughts?

  132. Phil

    LOL Kustomz!  My Dad used to like singing that one…

    UUP/Jrom – Hard to call as job losses can lead to stimulus speculation.  Have I mentioned I like TBT?

    Well, that was a totally insane day.  Looks like dueling tradebots out there today but the bottom line is yet another rejection off our bounce levels (not to be confused with breakout levels – these are just lame bounces we would expect from dropping a dead market off a 5% roof).  Of course an optimist could say that we are having that great consolditation at 10,200 I always wanted, which is why:

    They’re coming to take me away, ha-haaa.
    They’re coming to take me away, ho-ho, hee-hee, ha-haaa.
    To the funny farm, where life is beautiful all the time and I’ll be happy
    to see those nice young men in their clean white coats and they’re coming
    to take me away, ha-haaa!!!

    Biderman/JC – Missed it, I have my TV programmed to flip to Dylan at 4 now.

    My apologies Stj, mistaking jaded indifference for blissful ignorance….  8-)

  133. Phil

    WFR lost .03 but all acqusition costs so I forgive them.  Now we’ll see if the market does….  No outlook until 8:30 so nothing to trade on really. 

    CSCO looks nice and that’s much more important in the grand scheme of things…

  134. Pharmboy

    jcdns – we call it a stick, some call it painting the tape…..

  135. stockbern

    Just did the "control" F.  nice little trick.  Anything else like that?

  136. dflam

    Hi Phil : bought VLO at $16.71 ,now $18.92. Time to follow 2 step exit?
    dflam

  137. gel1

    Pharm/MDVN
    New data will be released the first week of March on their phase 111 drug Dimebon for Altzeimers. This might be big. Estimates in revenue for the drug are 2 Bil by 2015.. I have a friend who practices geriatric medicine and he said that 50% of his patients over 65 have positive signs of Altzeimers. Their partner in this drug PFE should also be a big beneficiary, I would think. I am going to add some long calls in case it breaks out.

  138. Pharmboy

    gel – whoa Nelly….this compound may work, but here is another thought:
     
    Less impressed with the findings is Gary J. Kennedy, MD, director of geriatric psychiatry at New York’s Montefiore Medical Center. Kennedy warns that placebo-treated Alzheimer’s patients in Russia get far different care than U.S. patients, who must be allowed access to existing treatments. (this is from the PII data in 2008)
    That would make any effect of Dimebon seem greater compared with placebo. And Kennedy says that patients’ actual improvement on Dimebon is not very different from improvement seen with the existing Alzheimer’s drugs Aricept, Razadyne, and Exelon.
    "They say people improve over time on Dimebon, and that it has a bigger impact on Alzheimer’s disease than we’ve seen before — but the data don’t bear out much enthusiasm for that," Kennedy tells WebMD. "However, what is exciting is that this drug has a different mechanism of action than other dementia drugs. So this is a medication that could be combined with existing drugs to possibly slow down the course of the disease."
    Samuel Gandy, MD, PhD, chairman of the Alzheimer’s Association’s Medical and Scientific Advisory Council, found the Dimebon data "very encouraging," but warns patients not to get their hopes up too high — yet.
    Although the Russian study included well-respected Alzheimer’s researchers from the U.S., the study must be replicated by independent investigators in American and Western European settings. And it’s not at all clear whether Dimebon alters the course of Alzheimer’s disease or just makes symptoms better for a while.
     
    Now, why would they release early? Are they really excited, or does PFE want to get out?  PFE has another alzheimer’s drug in development that I mentioned in my LLY post. that was from the Wyeth acquisition. Alzheimer’s is hot hot hot, but like stroke treatments, I proceed with caution b’c the trials are difficult and we do not understand what causes the disease at all.  If Jomamma or another doc is out there, correct me if I am wrong, but the beta amyloid/plac’s in brains from patients problem is still a hypothesis

  139. pstas

    AKAM- I am coming to expect this upon earnings reports – selling off after hours. To me, all the numbers look good. Conference call very positive. They are sitting on $1B cash (approx $5/sh). These guys are doing what they need to do- developing and selling value added services which do not compete on price. The analysts/market all seem to focus on price which is the commodity end of this business. They are in the sweet spot for the high growth mobile/HD/video content delivery. IMO, very good prospects. I am hoping for a sell-off to add to my position.

  140. Cap

    WAGS – Pali Capital analyst negative on them FWIW.  My WAGs offering H1N1 shots for $18.
     
    MVGR / MOVI – hilarious.
    Didn’t Hollywood also file again yesterday ?
     
    Kustomz … Yemen;   that’s insane.  Next thing you know they’ll give them VIP access to Logan Airport.
     
    Greece — we are all in the same leaky boat.
     
    BIDU — surprised to see not one comment on BIDU.  Rocketing on GS BS and low volume.  This is gonna explode down after earnings IMO.  2 senior execs quit and their new platform doesn’t work.
     
     
    Phil / jobs — yeah its scary. 
     
    So why is Obama so insistent about lying all the time about his 2 million jobs saved or created (which nobody with 1/2 a brain believes) and has the audacity to claim that every economist, left or right, agrees with him (can’t think of any …; not even Krugman).  The stupid assertions that come out of this guys mouth every day is simply mindboggling.   And now we’ll see that the jobs picture from 2009 was even worse !  And there is O, every day talking about how he saved the world and is creating jobs.  Insane !   And the same pattern with the budget and the deficits.   The man is an arsonist !
     
    Why is he doing it ?  Well, we really know the answer.  Because he and his agenda are toast.  Desperation.  He he; ho ho, ha ha !
     
    Biderman … god bless him !  He’s been talking and writing about this for a while now.

  141. TmDecay

    Cap’ … I don’t think we should expect too much from our Marxist-educated, community organizer, should we?   Longer term I think we must diversify out of dollar denominated assets.  We can trade our options and it may seem like we are making good returns in dollar terms but what will these dollars be worth in 5-10 years.  One of three things must happen to the USA (and out Euro friends):  default, devaluation/hyperinflation or unbelievable growth in our companies/industries.  I hope it’s option 3 but I don’t see how right now.
    I don’t think the -824K birth/death jobs adjustment will be spun as any big deal since it’s old APR08-MAR09 data.  They will say it’s not important now particularly if the Friday report looks good.   Of course we have the same birth/death issue from APR09 onward.    CSCO will be the rage tomorrow.   I expect Asia and Europe will be up so we’ll be up in the morning.

  142. gel1

    Pharm/MDVN
    You really know your stuff, not only the subject matter of the data that is available, but also, and just as important, the risk level coupled with the strategic methods of playing the information as known. Many thanks! This will be fun as we go forward.

  143. gel1

    Cap
    Your post brings to memory the relevation of how the ego of sitting Presidents always comes into play, as they try to out do those that have served in the office prior to them. Nixon was known as a man that put a lot of emphasis on his "enimies list" and to this day is part of his legacy. Obama is determined to better Nixon in this regard, as his list is huge and growing including , but not limited to: Banks, Wall Street,  Big Business, Fox News, Republicans, and now Las Vegas among others, and the list is growing! – Arsonist? – Oh ya, he is burning bridges faster than anybody that ever held the office!

  144. kustomz

    Cisco now includes R&D “upon acquisition” in its reports instead of expensing it. That shift helped Cisco record a $1.9 billion profit, up from $1.5 billion in the year-ago period. Sales jumped too, from $9.089 billion to $9.8 billion. Wall Street analysts expected an average of $9.409 billion.

    http://www.phoneplusmag.com/hotnews/cisco-soars-accounting-change-client-upgrades.html

    Cisco repurchased 63 million common shares at an average price of $23.96 per share for $1.5 billion. Now we know who helped keept CSCO above the 50 day

  145. kustomz

    Planned layoff announcements at major U.S. corporations increased 59% in January, reaching 71,482 from a nine-year low of 45,094 seen in December, according to the latest job-cut tally by Challenger Gray & Christmas.

    Many more layoffs announced today by SNY and States like California, Nevada will have no other choice but to cut state workers

    Mayor Michael R. Bloomberg has said that if the city does not wring pay concessions from the teachers’ union and all of Gov. David A. Paterson’s proposed budget cuts are approved — a worst case — the city may have to get rid of 11,000 of its 79,000 teachers. Last year, about 3,800 were lost through attrition, mostly retirement, so if similar numbers are recorded this year, several thousand could receive pink slips

  146. Cap

    CSCO; as virtually everyone has sold off after earnings, I suspect the same will be true for CSCO.  As for buybacks, that’s crazy; but keep in mind that XOM has been a big buyer of its shares in recent years and it still hasn’t helped the stock !
     
    Unions and their ever growing pension and benefit  "obligations" of public sector unionized employees will be the death of us all.
     
    In Obama World, the rest of us should all pay more in taxes and fees – income taxes, sales taxes, social security taxes, and in pelosi world, VAT taxes, more real estate taxes, capital gains taxes, etc .. (in marxist lingo, our fair share) in order to keep union retirees fat dumb and happy.
    I think not.

  147. jomptien

    Phil, I have 200 shares of VZ at 31.35 now 29.19. Bought 3 2012 calls at 5.05 now
    Bought 3 2012 30 calls at 5.05, now 2.35
    Sold 10 2012 40 puts for 1.46, now .45
    Sold 3 2012 30 puts for 5.35, now 5.75
    What would you suggest I roll the 40 puts to as they are up 70% already? Seems like my other positions are OK.
    Thanks

  148. pstas

    AKAM- Goldman upgrades AKAM from sell to neutral:
     
    February 4, 2010 7:11 AM EST
    Goldman Sachs upgrades Akamai Technologies (Nasdaq: AKAM) from Sell to Neutral, saying environment shows further stabilization. The firm raised their price target from $21.50 to $27.50.

    The firm said Akamai’s return to normal seasonality in Q4 affirmed easing competitive intensity. The firm also cited success in managing bandwidth costs and increasing its mix of higher-value offerings has stabilized cash gross margins.

  149. Phil

    CRTL-F/Stock – Well I use the "Home" and "End" buttons to zip to the top or bottom of the page but that’s about all my navigation tricks..

    VLO/Dflam – If gas blows $2 then VLO will drop again and it’s $2.02 now.  It’s good for them if oil goes down and gas stays high but that’s a tricky combo to maintain.  You can pull in $3.35 from selling the June $18 puts and calls and that drops you to $13.36/15.68 with a call away at $18 for double your current gain but, obviously, there are faster ways to earn $2 so yep, our patented 2-step plan seems wisest if you are not planning to be a very long-term holder.

    AKAM looks like they’re going to oblige you Pstas!  Great for our spread…

    2M Jobs/Cap – Obviously, less jobs were lost via stimulus than letting everything fail.  Obama’s mistake was the couchy language they went with.  I would have said "We lost 800,000 jobs this month and that can’t happen.  I pledge to fight, day and night, until we turn those job losses to job gains and I believe we can accomplish that by the first quarter of next year if the House and the Senate can work with me and I know they will because they are Americans and they want this country strong and working.  We can do that, yes we can!"    I would have said that knowing full well in Q1 we were going to hire 1M census workers anyway and that leaves the door open to blame the Republicans for anything that goes wrong in between.  Obama’s problem is he’s not a good enough politician but he’ll learn how to by cynical and paint his opponents into a corner now that he realized that your "half a brain" crowd is NEVER going to support him under any circumastances.  I’ll tell you right now the biggest mistake the Republicans have made is dragging Obama down to their level, because he fights the Chicago way - this will be lots of fun as it plays out…

    Birth/Death/TM – Well after looking at what happened last year I’m in no mood to bet on the B/D adjustments being ignored.  They were ignored for one day last year and then it was 6 weeks before we had an up market again.  Better safe than sorry.

    Enemies List/Gel – Nixon was the best!  He had Joe Namath, John Lennon, Bill Cosby, Barbra Streisand and even Tony Randall on his list.  Who even has time to make lists like that?

    CSCO/Kustomz – Still a nice long-term hold as they channel well for income production.

    VZ/Jomp – I can’t reconcile your numbers.  I assume youu mean that you sold the $40 calls for $1.46, now .45 but did you also buy the $30 calls and took that hit?  With the ratio it’s not a bad spread and yes, I’d take out the callers and sell March $30 at .45 to cover so you can start working off the rest of the basis on the 2012 $30s (as they are all premium).  Feel free to clear that up but you also should cover the stock if you intend to hold it long-term.  If you look at it as having control of 500 shares of VZ (3 Leaps and 200 shares) at net $6,785 that you’ll hold for 24 months, then collecting .40 a month returns $9,600 and any value you retain in the long positiions is a bonus. 

    Guns/Pstas – The time for butter has passed.

  150. jomptien

    Yes, I sold the VZ 40 calls not the puts.

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