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Testy Tuesday Morning – Coincidence or Confidence Game?

What will hold up?

As you can see from our chart set, our major indices are trading very much in synch, more likely than not propelled by trade-bots that already have the next 25 trading days already mapped out to take us through the end of the quarter.  Of course you can argue that it’s perfectly natural for 8 of 9 different indexes to follow virtually identical patterns as a result of the random trading of millions of individuals trading Trillions of Dollars worldwide and that’s your perogative.  I prefer to think of it as one giant scam and then figure out ways to make a little money off it for ourselves

Several times last week I said to members I thought "THEY" were running the market higher so they could sell calls to suckers at high prices but, in general, the move was "fake, Fake, FAKE."  What do we do in the face of flagrant market manipulation?  What do you think we do – we play along!  We don’t complain about good manipulation when we see it – we join in!  Don’t be confused by the fact that I complain about it in my morning post – once the bell rings we move right to the other side of the table and happily run with the wolf pack.  We’ve tried to fight the power – it’s not fun, nor is it profitable…

We remained fairly conservative last week and, as I discussed in our "Weekend Trend Spotting" post, we are more inclined to believe we are in a range that centers around 10,400 than about to break back over 10,700.  The bounce zones we predicted when we first began to sell off in January are finally being tested (red lines on above charts) but the 5% line (blue lines) are still exerting a pull and we NEED some healthy consolidation in between those blue and red lines if we are ever going to get serious about making a real move higher.

Speaking of healthy consolidation – Congrats to our own David Ristau of the Oxen Group and all the members who played along with yesterday’s specially featured selection of SAH.  David nailed it in his 1pm post (also sending out a 1:06 Alert to our Members) and put us into the stock right in his target range at $9.45 and it looks like we’re getting a nice 3-cent beat this morning (20%) and this should be a very nice 5% day-trade gain.  We also played the longer-term March $10 puts, sold at .95 and those are looking like strong candidates for 100% gains.  If you want to get these trade ideas when they are published along with Alerts that come right to your inbox while the trade is hot – SUBSCRIBE HERE

Another theme that will be no shock to our subscribers is the oversupply of copper and Bloomberg reports this morning that copper production outpaced demand by 75,000 tons in November, according to the International Copper Study Group.  “High surpluses have resulted in rising inventories,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said in a report today.  Stockpiles of copper in warehouses monitored by the LME have climbed 10 percent this year after jumping 48 percent in 2009 and rose on Feb. 18 to the highest in more than six years and that does NOT include China, who engaged in massive copper speculation last year as the prices dipped.  We are already short FCX at our target $77.50 from Friday’s Member Chat, also in the May $75 puts so we’re just going to be enjoying the ride at this point.  We’re also short on gold at $1,120 – waiting for that shoe to drop.  If you want a good commodity – try WOOD.   

Asia was mixed overall this morning with the Hang Seng up 1.2% and the BSE up 0.3% but the Nikkei dropped half a point and the Shanghai fell another 0.7% and back below the critical 3,000 level.  This should be good for our EDZ longs, which we took as protection last week.  "China Wouldn’t Survive a US Double-Dip Recession," says Isaac Souede, chairman of $20 billion fund of hedge funds Permal.  Souede says China does not respect the euro and that an American double-dip recession would spark protectionism in the US. 

What Asia did not know last night was that German Corporate Confidence would turn down sharply this morning.  Ifo President Hans-Werner Sinn said that the situation in retailing was responsible for the decline. "The economic recovery is expected to continue when winter is over," Mr. Sinn added.  The roughly 7,000 companies participating in the Ifo survey were less optimistic about their current business situation. The respective indicator declined to 89.8 in February from 91.2 in January.  

Italian Consumer Confidence fell 4% and French consumer spending fell 2.7% in January as their version of cash for clunkers ended.  "It has been a disappointing day for euro-zone survey data which, at the least, offers further evidence that the euro zone’s recovery is proving a subdued affair," said Eoin O’Callaghan, an economist at BNP Paribas.  Overall, Europe is off about half a point ahead of the US open but the key for us is the DAX was rejected at the critical 5,750 mark we’ve been watching and the FTSE is heading back to a possible retest of 5,250 and a failure there would be, as they say at the London School of Economics - NOT GOOD. 

Also not good is the very alarming pullback in Commercial and Industrial Loans, which has fallen from $300Bn in new loans annually in 2008 to $300Bn in rescinded credit in 2010.  Thus the banks, after getting Trillions in aid from taxpayers (which include US Corporations) have pulled $1Tn in loans out of circulation, thus crippling those same taxpayers

chart of the day, Commercial And Industrial Loans At All Commercial Banks

Banks continue to restructure their own troubled assets but, in another trend we’ve been following here at PSW, the next worry is Commercial Real Estate, or CRE, which has been hit hard by vacancies fueled by rising unemployment. Banks could lose $200 billion to $300 billion on CRE loans, according to a February report by the Congressional Oversight Panel — a watchdog for the government’s $700 billion Troubled Asset Relief Program. Read about COP’s warning and contemplate our long position on SRS (yes, again!). 

Case-Shiller Home prices show an additional 2.5% decrease from last year’s horrifying numbers but, through the magic of "seasonal adjustments" the MSM is working to spin this into a positive story this morning (keep in mind there is a great big section full of advertising called "Real Estate" in every newspaper).  The index for 20 major metropolitan areas dropped 3.1% and recovery in the U.S. housing market has been fragile. Demand for new and used homes, after strengthening in earlier months, dropped in December because of cold weather and continuing joblessness. Though housing starts sprang up again in January, an indicator of future groundbreaking fell. In addition, buyers sought to wrap up home purchases before a federal tax credit was set to expire in November, pulling some sales in earlier.

A record 3 million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California-based company began compiling data in 2005.  The end of Fed purchases of mortgage-backed securities, aimed at keeping borrowing costs low, represents another challenge for the industry. The program is scheduled to expire by March 31.  

We’re positioned a little bearish here at the top of our range so we’ll just be sitting back and watching our levels today.  Shenanigans are likely to continue through Friday’s end of the month but down seems to still be the path of least resistance at the moment.

 


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  1. samz3700

    Phil -
    Hope you are feeling better -
    Any short opportunities on oil – oih etc?

  2. terrapin22

    Phil – Hope you and your family have recovered.  also on the short oil theme, i’m thinking about buying SCO.   
    Pharm boy – Barrons had positive thoughts on Stryker, Zimmer and Mylan in this past wkend’s issue.  what do you think?  your favorite?

  3. Pharmboy

    terr – of all of them, I like Mylan the best (generics).  The device makers (ZMH & SYK) have all fallen from their highs, and to me look a bit overdone still.  Of the two, I like SYK better as they are into more hip/joint replacement.  I am planning on a Med Device writeup, and I will hit upon these two to see who has better prospects.

  4. Pharmboy

    Funny, CBSmarketwatch:  U.S. home prices down 0.2% in December: Case-Shiller
     
    Yahoo Finance: 




    Home prices rise 0.3 percent in December

  5. morxlntway

    morning,
    Phil, in your response to hanna yesterday re GLW you proposed only selling puts. I know when teaching it is the variation from the rule that is hard to get folks to understand. Normally i hear from you, only sell puts if you want to own the stock and you usually also combine the put sale with a call sale, etc. Would you mind elaborating, please?

  6. craigzooka

     Can someone explain to me how it is that AMED beat and the stock has dropped $1?

  7. jcmcn5

    Phil — EDZ — I never sold the Mar 6 puts as part of Friday’s spread, but I still own the March 5-6 bull call spreadt at $0.40.  Any thoughts on adjusting?  I know someone was talking about a reverse split.  Do we know that for sure?  Why would an ETF do a reverse?  Makes no sense (it rarely does).

  8. ssdirk

    It is hard to tell that the market is open…..the volume is nill.

  9. Pharmboy

    Personally, now watching AMED over the past month, I think things were baked into the stock price.  Being at ATHs and now looking like a double top, I am inclined to thing that the MM will beat this thing down.  JMHO.

  10. bord

    AMED,
    Since it’s good news going forward, it should be a nice set up for that short March 60, long June 65 spread that Phil suggested.  Phil, any changes on that AMED spread now or just let March 60s whither some more?

  11. tradansh

    Pharm – Good call on HK yesterday. Down to 21 today.

  12. dmankoff

    Phil, feeling better?   any idea on TBT for a new trade?  it’s pulling back a little today…. David

  13. ssdirk

    Eric – remember our old straddle friend GNW at 11 bucks, it is now 16+.

  14. Phil

    Good morning!

    Oil/Samz – David is advocating ERY at $11.35 – $11.45 with a 3% stop loss.  That means selling the $11 puts for .55 is not a bad deal with a $10.45 net entry and I really don’t see how oil can sustain $80 for any length of time AND, there’s always rolling so that’s my play on it.

    Recovery/Terra – As long as I don’t move too fast things don’t spin too much and that’s a major improvement.  The girls are in school and Tina has the most lingering effects but hopefully we’re done with it today, thanks!  SCO is good too, it’s a 2x so not as crazy as ERY and you can sell $13 puts for .55 – same deal essentially

    Prices/Pharm – It’s a direct correlation to who get the most ad money from Realtors. 

    GLW/Morx – A naked put sale is always a good way to initiate an entry into a stock, especially one you are not expecting any huge moves up from.  It’s always about trade-offs and you can sell the GLW Apr $17 puts for .75, which pays you .75 on a max of $8.50 in margin (9%) in 60 days vs buying the stock for $17.34 and selling the $17 puts and calls for $1.80 for a net $15.54/16.27 with a $1.46 gain on perhaps twice as much margin so more like 8%.  So there is no particular merit to committing to buying the stock here and we get the same $16.25 net entry either way but much less capital committed.  The more sure you are that your stock is going up, the more sense it makes to do a buy/write as an initial entry but if you are testing the waters, the naked put sales are much more flexible and leave a lot more cash on the side to adjust.  

    Same old watch levels today:  Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625. 

    We’re still waiting for the NYSE to confirm and hold and I do expect "THEM" to keep us generally up here through Friday, which is the end of the quarter but, the more fake these little recoveries look, the more concerned I am about next week so remind me later this week and we’ll take another look at some disaster hedges – just in case. 

  15. Pharmboy

    TS (steel/industrials) has formed a double top.  Good to watch now for a short.

  16. Phil

    I’m going to poke at those DIA $102 puts for $1 again (now $1.03), still just day-trading for dimes

    AMED/Craig – Whispers were getting ahead of reality.  Good chance to take out callers or make new entry.  The $55 puts can be sold for $1.40, which is downright silly after looking at the earnings

  17. doro165

    EDZ reverse splits on 3/3.
    http://www.direxionshares.com/pdfs/EDZ_Reverse_Split_QA.pdf

  18. Phil

    EDZ/JCM – I’m not seeing any news of the split but I don’t think it’s a big deal if you go from the $5/6 spread to the $50/60 spread as long as EDZ goes from $5.53 to $55.30.  The timing seems strange to me as the new margin rules make this less attractive on a reverse split. 

    Holy crap – consumer confidence fell from 56.5 in Jan (which we thought was BS at the time) to 46 for Feb.  That should do a lot better than a dime on those DIA puts!

  19. Phil

    AMED/Bord – Just keep a sensible stop on the March $60s – When in doubt, buy back half and all that…

    TBT/Dman – Gotta wait it out now.  Bad news in Europe and US and Asia hasn’t seen it yet so we could get a nice pullback.  Good time to buy back some calls you sold or to roll down long leg of a spread but not going to jump in at the moment off this initial downtick other than to sell puts like the Apr $47 puts, now .70, maybe getting $1 if we head a little lower. 

    EDZ/Doro – Thanks. 

  20. Phil

    Feb. Consumer Confidence Index: 46 vs. 54.8 expected and 55.9 prior. Present situation 19.4, its lowest level in 27 years, vs. 25 prior. Expectations 63.8 vs. 76.5 prior. "Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending."

    Oh, obviously (I hope) uncover DIA mattress plays!

  21. tchayipov

    Phil/ SPWRA
    what do you think about this guy?? this loss is bugging me, close with loss or wait for bounce??

  22. judahbenhur

    Pstas, Now maybe we’ll start getting decent prices for our April strangles. 

  23. yodi

    Phil You remark uncover DIA mattress play hold Jun 105 @ 5.07 now 5.50 march 103 short 1.92 now 1.82 your guidance pls

  24. Phil

    Tuesday’s economic calendar:
    10:00 Consumer Confidence
    10:00 FDIC: ‘Quarterly briefing on State of Banking Industry’
    10:00 State Street Investor Confidence Index
    10:00 Richmond Fed Mfg.
    11:00 Hearing: Toyota and NHTSA on Sudden Vehicle Acceleration
    5:00 PM Fed’s Bullard: Regulatory Reform
    5:00 PM ABC Consumer Confidence Index

    Watch that RUT – failure at 625 is BAD!

    Feb. Richmond Fed Mfg. Survey: 2 vs. -2 last month (above 0 = growth). Shipments improved to 0 from -2, while orders gained 8 points to 9. The job index slipped 2 points to -7.

    ICSC Retail Store Sales: +2.3% W/W, vs. -1.6% last week. +0.9% Y/Y, vs. -0.7% last week, thanks to an improvement in the weather. February as a whole is up 2% Y/Y.

    Redbook Chain Store Sales: +1.9% Y/Y vs. +1.8% last week. Unlike ICSC, there were no weather-related swings in sales.

    Dec. S&P Case-Shiller Home Price Index: -0.2% M/M vs. -0.2% prior. -3.1% Y/Y vs. -3.2% expected, -5.3% prior.

    The Treasury is considering new guidelines for mortgage lenders that would give borrowers more time to qualify for a federal foreclosure-prevention program. A spokeswoman confirms the changes are being discussed, but says nothing is definite.

    The eurozone recovery seems to have stalled, warns BoE’s King, and the unexpected weakness in its main trading partner could threaten the U.K.’s economic prospects.

    Harvard’s Ken Rogoff expects growing public debt to cause several countries to default in the next few years, while Germany, the U.S. and maybe Japan will have to "tighten their belts when the problem hits with interest rates."

    Amedisys (AMED): Q4 EPS of $1.35 beats by $0.04. Revenue of $405M (+19.1%) vs. $396M. (PR)

    Barnes & Noble (BKS): FQ3 EPS of $1.38 beats by $0.04. Revenue of $2.1B (+33.3%) in-line. Shares -4.9% premarket. (PR)

    Home Depot (HD): Q4 EPS of $0.24 beats by $0.07. Revenue of $14.5B (-0.3%) vs. $14B. Shares +0.6% premarket. (PR)

    Petrohawk Energy (HK): Q4 EPS of $0.12 misses by $0.03. Revenue of $355M (+31.1%) vs. $350M. (PR)

    Macy’s (M): Q4 EPS of $1.40 beats by $0.08. Revenue of $7.8B (-1.1%) in-line. Shares -1.4% premarket. (PR)

    Medtronic (MDT): FQ3 EPS of $0.77 beats by $0.01. Revenue of $3.7B (+6.1%) vs. $3.8B. (PR)

    Sears (SHLD): Q4 EPS of $3.69 beats by $0.15. Revenue of $13.2B (-0.2%) vs. $12.9B. (PR)

    Target (TGT): Q4 EPS of $1.24 beats by $0.08. Revenue of $19.7B (+3.7%) vs. $20.1B. Shares -1.1% premarket. (PR)

    Tenet Healthcare (THC): Q4 EPS of $0.04 beats by $0.03. Revenue of $2.2B (+3.9%) in-line. (PR)

    Vornado (VNO): Q4 EPS of $1.04 beats by $0.20. Revenue of $719M (+3.5%) vs. $675M. (PR)

    Few specifics are available, but Microsoft (MSFT) and Amazon (AMZN) reach a patent cross-licensing agreement in which Amazon will be able to use Linux-based software in its Kindle and servers, and Microsoft will gain access to some Amazon patents. (PR)

    Amazon’s (AMZN -0.3%) cross-licensing deal with Microsoft (MSFT -1.1%) was short on specifics, but not short on speculation. One analyst thinks Amazon is going to build a ‘KindlePad’ that approaches tablet PC functionality and can compete with the iPad (AAPL -0.7%).  This is DOOMED!

    Ratcheting up the war of words, China says Google’s (GOOG) claim that its computers were attacked by hackers in the country is "groundless," in the government’s first outright rejection of the allegations.

    Very nice!  Intel (INTC) is said to be working with VC firms to create a $2B fund that will invest only in U.S. companies. CEO Paul Otellini may provide details later today in a speech that will cover "the need to create a culture of investment in the United States."

    Judge Jed Rakoff may have approved BofA’s (BAC) settlement with the SEC, but his fiery court opinion (which called the deal "half-baked justice at best") leaves the bank vulnerable to similar charges by NY AG Cuomo.

    New York’s comptroller said Wall Street bonuses were up 17% to more than $20B in 2009, the year taxpayers bailed out the financial sector after its meltdown.

    Obama is said to back off the "Volcker rule," favoring a watered-down version. Instead of issuing an outright ban on prop trading, the White House will propose that federally insured banks keep higher cash reserves if they want to run such trading desks. "The White House is looking to save face" by backing a proposal with fewer restrictions.

  25. RMM

    Phil: selling some DIA puts?? which ones? 103????

  26. Phil

    SPWRA/Tcha – That one is a long-term own at $20. 

    Getting some support here and I like taking advantage and selling 1/2 the DIA $104 puts for $2.35 against the June $105 puts as it’s $1.40 in premium and you can only sell the $103 puts for $1.85 anyway so I like it on the chance we get another bounce back to 10,400 and have a chance to make a very quick .50.  If we do head lower, then we can roll them to 2x the $101 puts (now $1.15) as we add more longs so not too worried on the downside.

    DIA/Yodi – I’d hang on at this point or you can sell the 1/2 $104 puts and put a very tight stop on the $103 puts, maybe at $2.  This is the hardest move you have to make when trading – taking a chance on holding resistance by exposing yourself to a loss if you are wrong….

    DIA/RMM – Not selling DIA puts (never selling DIA puts).  Bought the $102 puts, done already at $1.40. 

  27. Phil

    DIA/RMM – Oh well, maybe as a cover but not naked selling.  As a cover, see note to Yodi and bold comment above.

  28. Phil

    Here’s our other bit of 10:30 bad news:   In its quarterly report on the banking industry, the FDIC says problem banks jumped 27% in Q4 to 702, the highest level in over 15 years. Though the industry managed to eke out a $914M profit, improvements were concentrated in the largest banks.   We knew this, not worth selling off over

    Feb. State Street Investor Confidence Index: 103.9, down 0.7 from previous 104.6. North America confidence up again, to 111.3, with Europe up 2.1 to 101.1, and Asia-Pacific down 1.1 to 97.0. "By month’s end, institutional investors were approaching the European solvency issues in a more nuanced way."

    OWW’s earnings were so bad they hit PCLN!

    I can’t believe I’m saying this but I like selling the FSLR $105 puts for $5.45 as a momentume play.  If they flatline around here, they should drop down to $4.50 pretty fast.  Stop if they fail $105.

  29. RMM

    Phil: the DIA put selling was meant for cover.

  30. yodi

    Phil you playing with the idea of selling the FSLR put for 5.45 I am still holding the short leg of the Mar 120p sold for 5.93 now 14.72 playing with the idea to roll to Jun 110p for a debit of .85 or shall I wait still a while? thks

  31. tradansh

    BRCD / Phil – Taking a nice 22% drop today. What do you think of their earnings? Worthwhile to start a small position?

  32. yodi

    Phil P.S.  FSLR closed the call leg 155 sold at 6.26 for 0.10 so nice gain there

  33. Phil

    Top U.S. mortgage insurer MGIC (MTG +4.5%) is cutting premiums – on what is expected to be a substantial majority of new business – to avoid losing market share to the FHA, which (unlike MGIC) doesn’t take credit scores into account when pricing insurance.

    Chinese regulators – trying for a new emphasis on environmental responsibility – have reportedly denied GM approval to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co. If that deal falls apart, GM’s likely just 1 for 4 in ditching underperforming brands.

    Dollar at $1.355 to the Euro and $1.545 to the Pound but only 90.24 Yen so this is Europe weakness, not dolar streangth today.  Copper back to $3.22 after hitting $3.35 yesterday (what a joke) and gold just bounced off $1,101 back to $1,105 but $1,110 is the critical line there.  Silver is very weak at $15.86 and XME is down 2.5% overall.  Oil is holding $78.50 but having a little trouble getting back over $79 and Nat gas is still hanging at $4.87 but gasoline is $2.18 and that’s good for our pals at VLO, holding their own line at $17.50. 

    Volume at 11:10 not very heavy on Dow at 61M but here comes another round of selling. 

    TNA $39 puts can be sold for $1.50, not a bad way to play them.

    FSLR/Yodi – Just a momentum play to take advantage of the move down (ALWAYS sell into the initial excitement).  I’d be very happy with close to a 200% gain and get the hell out of that play.  $2 of your $14.72 is premium and won’t you feel really silly if you blow your gains?  If you feel like you’re going to miss a downside party, why not take your $14.72 off the table ($8.60 in profits) and just go for the $110/100 bear put spread for net $4.40, which has another $5.60 of upside and is $3 in the money.  You can stop that at $2.20, risking just 25% of your profits and none of your initial investment.  If FSLR goes below $100, you can add another, lower bear put spread. 

  34. jburgess

    Thought everyone might find this "parable" by Charlie Munger interesting. "Basically, it’s over."
    http://www.slate.com/id/2245328/

  35. yodi

    Phil I am short the Mar 120p sold for 5.93  I ow on the short 9.00 that is why I want to roll to Jun 10 for a cost of only .85 which I can take of the profit when I closed the 155c for a profit of 6.18 net! thaks

  36. kustomz

    tradansh i would like to know what Phil thinks as well…..

    I read the transcript on BRCD i would listen to the CC when you have the time..it may hold 5 but i would be very interested at 4.60 area

    http://www.brcd.com/phoenix.zhtml?c=90440&p=irol-EventDetails&EventId=2718467

  37. stockbern

    AMLN/ Pharm      I ‘m thinking about Amlyn  again.  FDA decision is in 2 weeks.   They have all ready built the manufacturing facility.  Do you think approval is built in the stock or could the FDA delay Byetta decision based on other diabetes drug problems?

  38. Phil

    BRCD/Trad – It was about a 5% guide-down so I’d say an overreaction.  The company will make .55 per share so from a straight valuation perspective they are certainly cheap enough at $5.32.  Not too much debt and it’s well serviced by cash flow and this has been a rough year and they’ve come through it.  Buying the stock here and selling the July $6 calls for .48 and the July $5 puts for .52 is net $4.32/4.66 with a very nice 38% upside if called away at $6 and a nice initial entry if not.

    FSLR/Yodi – Congrats, nice trade!  That’s why I love those short sales…  On the put SALE – Ouch!  That’s totally different and then rolling is a good idea. 

    Munger/Jbur – That’s pretty good!

  39. Phil

    January saw 1,761 mass layoff events – those where at least 50 workers were let go – resulting in 182,261 job losses. The total is up 35 events from the prior month.

    They are working hard to spin this one:  Breaking down Case-Shiller home prices by metros show only five cities posted (seasonally adjusted) sequential declines, with Los Angeles showing the biggest jump and Chicago the biggest drop.

    GS had quite a pop this morning! 

    PALM is another stock I don’t like but, come on!  The $8 puts can be sold for .58 for a net $7.42 entry.

  40. DKGuy

    Phil, I’ve only been a member for a couple of weeks and have already more than covered the dues on a few trades you have put out in chat so THANK YOU very much for the education.
    Not sure if you have covered these issues in the past but the SII puts look like they are still carrying a decent premium going into the sale of the company to SLB and I would be interested in your thoughts on an arbitrage play. 
    Also, any thoughts on MDVN since the premiums there are huge.
    Thanks again

  41. Jordan

    Phil, as an alternative to WOOD, there is CUT.
    http://www.google.com/finance?q=NYSE:CUT
    What do you think?
    And for timber companies, there’s PCL and PBL, both have options.

  42. mrmocha

    Stupid Stock Trick of the Day – I really want BIDU puts, so I’m buying a call here for a daytrade bounce, and any profits will be used to buy puts, this is called a left pocket – right pocket transaction 8) !

  43. mrmocha

    Smiles not working today? 8) is a smiley?

  44. mrmocha

    Hmmm, sporadic.

  45. mrmocha

    HK – time to get back in, bot APR 20s, will ride a few days and cover before the weekend with MAR calls.

  46. Phil

    You are very welcome DK!  The SII deal is $11Bn all stock and, of course, SLB’s stock took a hit so I like selling the SII 2011 $42.50 puts for $6.30 as that’s $5 in premium and it gets totally wiped out if the deal closes over $42.50, which is less than the apx. $46 SLB offer.  Since SLB has already dropped back to a price where it’s attractive, it’s almost like selling SLB short at $60 with an added kicker

    MDVN/DK – I don’t know enough about them to have an opinion.  I prefer to play low-priced Biotechs becasue they attract an endless amount of speculators and you can ride out the dips and, of course, get the cheap DDs, like PARD at $1.50.  The premiums simply reflect the risk on MDVN and I suppose if I were to play them I’d go for the Jan $10/30 spread for $10 and sell 1/4 March $45s for $5 which knocks your basis down to $8.75 and if you can get away with that 6 more times, you have a free trade. 

    CUT/Jordan – I looked at them a while ago and decided I liked WOOD better but I don’t remember why.  I prefer the ETF spread to picking one company, mainly because I don’t follow the industry closely enough (nor do I want to) to have to worry about the merits of a single stock (but I did like IP last spring, when they were good and cheap).   I just think it’s a nice side bet to a housing bottom that’s a viable long-term commodity play.   Too bad they don’t have options!

    BIDU bank shot/Mr. M – Very nice!  I do think $500 is fair for them so expect it to be bouncy within 5%.

    Ags getting hit hard today.  Some news of abundant crops somewhere….

    Possible reload possible on FSLR if the Dow holds 10,300 again

    U.S. health officials warn Eli Lilly (LLY -1.3%) about problems with the manufacturing of an insulin ingredient at a plant in Puerto Rico. (FDA warning letter)

    AAPL havig a bad day and dollar hitting highs against Euro ($1.352) but also lows against Yen so Japan will be in a bad mood in the morning and will likely test 10,200 (now 10,352) since we’re testing our levels and DAX finished at day’s low 5,604 and FTSE also at lows at 5,315 so 5,250 is in reach tomorrow. 

    We’ll need one mother of a stick save this afternoon so let’s keep an eye on volume but I’m liking the DIA $104 calls at $1.22 with a stop if the Dow fails 10,300, using that as an on/off line for the trade – very risky.

  47. jim123

    On BUCY – holding sold Mar  55 puts at 1.71
    Down significantly today- can you advise the proper play in this situation

  48. DKGuy

    Thanks Phil

  49. mrmocha

    Somone just bot 2M shares of AAPL, QQQQ trade bots waking up?

  50. matt1966

    Further proof that Obama needs to shake up the West Wing and pull in new people.  Summers and Geitner need to go.  Or there will be no second term to finally get it right.
     
    Obama is said to back off the "Volcker rule," favoring a watered-down version. Instead of issuing an outright ban on prop trading, the White House will propose that federally insured banks keep higher cash reserves if they want to run such trading desks. "The White House is looking to save face" by backing a proposal with fewer restrictions.
     
    What happens when their losses exceed their cash reserves?  What about CDSs?  Will they still get to hold those?  We have learned absolutely nothing.  It’s just sickening.  The next presidential election could very well be the year of the independent candidate… or, at least Ron Paul.  They just don’t get it.

  51. mrmocha

    Perhaps QID is the play of the day, looking at tech shares right now…

  52. matt1966

    Phil, btw, love your allegation that ‘they’ have the next 25 days already programmed into the bots.  I agree.  Only a crisis would cause them to make a change in the algos.  Loving my FAZ today!

  53. cclark3

     are we still considering the DIA’s if the dow moves back above 10300? 

  54. jburgess

    Just another reason why I am accumulating VZ for long term:
    http://www.marketwatch.com/story/verizon-skype-deal-underscores-wireless-evolution-2010-02-23

  55. kustomz

    mrm i think yest. was the day to take those bearish positions i have been lightning up on the way down…

  56. mrmocha

     kustomz, no worries I shorted a few things yesterday so not hurting, just surprised by the downtrend in AAPL, GOOG, and BIDU despite the bots at work - check out the buy on GOOG of almost a million shares a few minutes ago.  Phil, who’s buying tech?

  57. ssdirk

    Gold testing 1100.

  58. mrmocha

    gel – what’s smacking the AUD today?

  59. judahbenhur

    Phil, Apropos of nothing, you ever read the guys at monkeybusinessblog.com?  They’re good for a laugh every now and then.

  60. mrmocha

    Nice timing ssdirk, you reminded me to check GLD, it’s gold that’s smacking the Aussie.

  61. ssdirk

    judah – finally my strangles are cooperating today even with the vix move.  It was getting a little too close for comfort on the Mar RUT 650 puts making my delta decidedly too negative.

  62. Phil

    AAPL/Mr M – Oh yeah, that’s someone taking a stand!   We can play along by shorting the $195 puts at $5.10, looking for $1 and stopping at $196 as that means our buyer has given up. 

    Overall, we don’t want to get too bullish as this is not a real bottom – just the top of our bounce levels and, if they fail (and they all are) then it’s a quick trip down to the 5% lines at Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620.  

    I would be playing this bearish EXCEPT I’m giving Mr. Stick until 2:30 today as I really think "THEY" want to keep us over the bounc lines through Friday and CERTAINLY over the 5% lines or we’re going to be very week coming into March. 

    Volker Rule/Matt – I think Obama got a lesson in who’s really in charge this weekend as the Volker Rule got drowned like an unwanted cat.  I’m going to push for Ron Paul at this point, just to shake things up but it will be a pointless victory if we can’t put in at least 20% independent Senators and Congressmen and that means he’d have to get things moving sooner, rather than later. 

    DIA/CClark – Yes but using that line as an on/off switch for the play.  Commodities are leading us lower right now and I could care less if they all fall to zero but they are a drag on the overall market.  Gold is now at $1,100, which should hold and oil is holding $78.50 and I already sold TZA puts expecting the RUT to hold 625 (it isn’t) as the small caps are the hardest index to push around. 

    The February jobs number, to be reported March 5, is likely to be very bad, due to snow. If it is, says Floyd Norris, that will prove exactly nothing about how the economy is actually doing.

    The Fed won’t raise its target lending rate as long as unemployment remains high – until at least 2011 – says Pimco’s Richard Clarida. "They’re trying to do something that’s never been done before, which is to normalize policy without reducing the monetary base."

    Former Fed chairman and current Pimco hired gun Greenspan says the recovery is "extremely unbalanced," driven by people with high incomes as stock prices recovered. Small businesses and low-wage earners are still suffering from "by far the greatest financial crisis globally, ever."

    VZ/Jbur – Excellent stock! 

    Monkey/Judah – That looks like fun but the formatting gives me a headache..

  63. Phil

    Matt – I believe it is time to bend over and assume the position – here comes Mr. Stick!

  64. RMM

    Phil: rolling SPWRA putters march20 out to april 20 or june 19 ??  Base 1.03$, now 1.9$)?????
    You feel better today ?

  65. kustomz

    " I’m going to push for Ron Paul at this point", now your talking sense my man

    I dont usually try and catch the falling knife but im going to take a small position in T if it gets down to 24.80, just to keep me focused.

  66. mrmocha

    Phil just said "I already sold TZA puts", I’m pretty sure he meant "TNA puts".

  67. jburgess

    MRM- yeah, that really caught my attention!!

  68. Phil

    2-year note auction went well I think.  These are silly auctions that go off at 0.895% with a 3.33 bid-to-cover becasue they are essentially a cash substitute. 

    TM getting clobbered on testimony.  May get to my $65 buy-in yet! 

    Useful Bespoke list of country ETFs:

    I love these type charts:

    Here’s where we are as of last week’s reports – not bad:

  69. yodi

    Hi Phil Talking about BIDU any realistic play looking at the JAN 11 sell 600/400 strangle

  70. 1020

    Phil – Greenspan and Cheney. Two fossils I wish would just fade away…… Glad you’re feeling better :)

  71. Phil

    SPWRA/RMM – What’s the hurry?  They still have $1 in premium.  I’d rather roll to 2x or 1.5x the March $19 puts and then those can roll to Apr $18 puts if things get worse (and the June $17.50 puts are $1.75).  This is just a result of oil dipping and the same old BS about Spain and Germany not subsidizing at the same levels as they were.  And I am better thanks.

    T/Kustomz – I still like VZ better.  T has AAPL to lose, VZ has them to gain plus FIOS.  I don’t know about you but when they have FIOS in my area, I’m already on the list.

    TZA/Mr M – Right you are – I sold TNA puts, not TZA!

    BIDU/Yodi – No way would I want to guess on them long-term.  I would SELL the Apr $500 puts and calls for $55 and, if you must cover, I’d go with the Jan $450 calls at $105 and the Jan $550 puts at $106 so you’re in for $211 on the $100 spread and sold $55 for net $156 with 8 more months to sell so maybe $200 more in sales if you are lucky and there’s no way you end up with less than $100 on the longs. 

    Yay – It’s time for the Mr. Stick show!!!! 

    Bank of America (BAC -2.0%) shareholders approve an increase in authorized common shares to 11.3B from 10B. About 80% of the company’s shares voted on the proposal, with more than 76% voting in favor.

  72. judahbenhur

    SS, I know what you mean.  I had rolled a small amount March SPX callers down to 1160, and while I think they are pretty safe and easy to roll out to April if necessary, the recent move up in the market was irritating.  On the whole, my March positions look great.  I could close them all out today with about a 75% gain.  I can’t get myself to commit to much in April yet.  I keep waiting for the VIX to get back to about 25.  And I’m starting really wide.  You doing much with April strangles?

  73. dmankoff

    Phil, now that TBT has dropped more than $1.25 can yu recommend a good play on it now?
    thanks
    David
     
    i really like this on th elong side and today is a gift to buy it cheaper

  74. ssdirk

    judah – nothing in April yet, still waiting for the vix to give better pricing as well.  Still have March though, and hoping for a nice put vert pop.

  75. gel1

    DK/MDVN
    I have been in this stock for a very long time. I believe they will be announcing some big news in early March, that could be very big. I’ll check further and post.

  76. mrmocha

    FYI, I’m invested in a stick today, so that should be good for another 100 points down…

  77. samz3700

    where is the stick !

  78. RMM

    Phil: your 1:1`4 lists: what are your conclusions ?

  79. kustomz

    Phil thanks on VZ  and I’m with you but i dont mind trading either one….. and I don’t believe VZ gets the IPhone this year

  80. matt1966

    If Ron Paul were elected but not a significant amount of independents in Congress.. then the first two years could be spent exposing the vested interests (Dems and Reps) for what they are…  Scumbags more interested in their own preservation then the country’s.  Then, the mid year election would be a rout of the incumbents and we’d have a slew of new idealistic congressmen and women to push the fiscally prudent agenda.  It’s doable.  But it will take time.  Don’t give up hope.’
     
    Mr. Stick hasn’t gotten to the financials yet from what I can see… but there’s plenty of time.  Should I cover?  After such a nice gain it might be prudent…. but could be costly.  Go FAZ!

  81. yodi

    Ericl Hi
    Are you still waching the iron condors of V and SPG not much movement right?

  82. dmankoff

    phil, also selling the FAS  67 puts for March for 3.45 breakeven down to 63.55, seems good to me, can always roll them down to April and go to 58 or below even, if continues lower….
    what do you think?

  83. yodi

    Phil still looking for a stick I think today we looking for the antistick

  84. gel1

    Mr.M
    Sorry for late reply … have been dealing with my demons today. I checked with the big boys at GFT and they know of nothing that would tank AUD. Go to http://www.fx360.com and check the calendar – I see nothing – just demons I guess!

  85. gel1

    DK/MDVN
    Yes the volatility is way up as the announcement on the Alzheimers drug is coming soon – the Correction study. Nice day to sell some puts, I guess.

  86. judahbenhur

    Matt/Paul.  I like Ron Paul a lot--contributed, voted for him in the primary, wrote in his name in the general--but the most you can hope for with a 3rd party candidate is someone who runs on an agenda that influences the other two parties, the way that whack job Ross Perot did.  I hope he runs, or someone like him does. 

  87. Phil

    Here’s why SOX down 3% today:  Korea Times reports Samsung Electronics (SSNLF.PK) is worried over a possible bubble in the global market for computer memory chips. The top executive of Samsung’s semiconductor business expresses hesitation over additional investment due to growing sings of a demand and supply mismatch.

    Treasurys held gains they made in the wake of poor consumer confidence data after some typically strong demand at its auction of $44B in 2-year notes at 0.895% (bid-to-cover ratio of 3.33 vs. a recent 3.21; indirect bidders took 53.6%). But direct bidders took just 8.2% vs. a recent 15.3%. The 30-year yield -0.09 to 4.64%; 10-year -0.10 to 3.7%; 2-year -0.05 to 0.84%

    TBT/Dman – I still like the Sept $44/50 bull call spread at $3.25 and you can sell $46 puts, now $2.35, for $3.25 on a dip and that makes your worst case owning TBT at net $46 in September.

    Damn Mr. M – Not today!  I’m actually betting on it today.  Come on, please go short, please!   8-)

    Meanwhile, stick is getting sold into but volume still a very lame 105M on Dow at 1:50 so we remain very stickable.  I already had said 2:30 but I let myself get excited at 1:30 attempt but no reason to bail yet. 

    Dollar just hit 90 Yen, going to be ugly in Japan tomorrow.

    RUT holding up is the main reason I’m still bullish for 2:30 but I hope this is just a shake out.

    RMM – What the heck are you asking at 1:56?

    VZ/Kustomz – Whether they get it or not is not the point.  Just that they have a possible positive and T has a possible negative.

    Cover/Matt – Actually you are looking good so far, just watch out at 2:30 but we could retest 5% lines now with all of our indexes blowing the bounce lines.  It all depends on the close and I do think "THEY" are highly motivated not to let us fall becasue there will be major profit taking if we hit 1,088 on the S&P, which is about 10,220 on the Dow.  That will bring about more volume than they can control and then we’re NOT going to close Feb at 10,428 or better, which was where we were on Jan 1.  I think without a + 2% Q1 to point to, stock funds are going to have a very hard time getting money away from PIMCO, who are obviously on a PR blitz trying to keep people out of the markets and "safely" in their bonds.  All this is today is a commodity sell-off with OIH down 2% and XLE down 2% and XME down 2.5%, all about twice as much as the indexes.  XLF is weak too, also down 2% and, overall, that’s just the kind of sell-off we like to see. 

    FAS/DMan – That’s 5% on FAS which is 1.5% on XLF so no, I don’t like that play at all from a safety point of view.

    Stick/Yodi – I said 2:30.  I shouldn’t have gotten excited by 1:30 attempt – was wasted effort. 

    Speaking of stick hitting songs – I forgot about this classic

  88. matt1966

    I’m shocked.  Does this make sense to anyone or have they run up against this?
    Let’s say I’ve got $100k in my account.  Yesterday, I had a daytrade buying power of $300k.  In the morning I bought $50k worth of FAZ.  Later in the day I wanted to cover that FAZ with $50K of FAS.  So at the end of the day I had $0 in cash on hand.  Today, my daytrading buying power is also $0.  So, all I can do is sell my positions.  I can’t buy anything.  The reason?  My broker said my daytrading buying power is calculated based on the cash on hand at the end of the previous day.  Scottrade had been recalculating daytrading buying power throughout the day to reflect the realtime account situation.  Because of that and the fact I rarely use all my cash let alone my margin I hadn’t run into this before.    But within the last few months, they were told by FINRA they shouldn’t do that and can only calculate it once based on the previous day.  So, even though I’ve got my own $ in the account…. FINRA won’t let me trade it.  It’s the craziest thing I’ve heard of!

  89. dflam

    hi PhiL glad your feeling better.What do u think of BX at $13.90 with sale of Jan. 412.50 P& C  for $4.40 for 31% return plus 9 % divend?

  90. chaps

    RE: Speaking of stick hitting songs – I forgot about this classic!

    ROFL !

  91. DKGuy

    gel1 – Thanks for the info. I appreciate all the help I can get.

  92. jburgess

    Time to see some green on the screen.

  93. Phil

    Margin/Matt – The rules are absolutely insand AND subject to interpretation by each broker, who then change their mind every once in a while on what the rules are. 

    Damn, 2:30 and no stick yet?  Dow volume just 118M so it’s not like they are facing a lot of selling pressure. 

    Here’s Ron Paul on a roll two weeks ago.  CNBC had to cut him off…

    WFMI doing well despite the poor market. 

    Sill pulling us down are KO, TM, IRR, Ags, energy but hopefully that will stop with the NYMEX shutting down at 2:35 and oil holding $78.85 and gold at $1,103.  Copper is right on the $3.20 line again.  Silver is $15.85 and nat gas at $4.81.

    BX/Dfalm – I don’t know what those guys do, kind of like GS et al, there’s no way to know if they are doing well or not until after they tell you (and then why should you believe them?).  Still, that being said, they seem cheap enough and I do like them with the Jan $12.50 hedge as a resonable risk.

  94. ssdirk

    This Toyota questioning/answering is not leaving a high degree of confidence for the end users.

  95. terrapin22

    Phil – what’s your favorite play on VZ right now?  Thx. 

  96. samz3700

    Matt – do you have portfolio margin and are still running into the problem?

  97. Phil

    VZ/Terra – They have crap premiums so the best play is just to go long and enjoy the 6.5% dividends.  The stock is $28.77 and you can sell the Jan $25 puts for $4.20 and the Jan $30 puts for $4, which is net $20.59/25.30.  This is, of course, aggressive but fine if you REALLY want to own 2x at $25.30.  Meanwhile, of course you will be able to roll out to 2012 $25 puts (now $3.20) so the put to price is a real worst-case

    3pm Dow volume still lame at 128M.  I’ll be very disappointed if we can’t retake 10,350 today.

  98. Kwan

    AAPL – FYI, over 5000 apps were pulled from the Apple App store late Sunday night because the content was deemed too sexual. Translation: anything with anyone in a bikini was yanked UNLESS it was owned by sports illustrated, fhm or playboy. Phil Schiller released a statement earlier saying:
    "It came to the point where we were getting customer complaints from women who found the content getting too degrading and objectionable, as well as parents who were upset with what their kids were able to see."
    Of course, a guy washing a car with no shirt on is perfectly okay because no one complained about that having objectionable content, but the Suicide Girls app was pulled even though the company was started by a woman.
    Absolute hogwash. Apple is beginning to tighten the noose around their content a bit too much for my liking I’m afraid. 

  99. EricL

    Hi yodi,
     
    Yes, I’m just watching those condors. I think they are ‘on track’ here.

  100. samz3700

    i hate the banks – just went to chase – took my $55 out of the account and then went to close it.
    After having to listen to them try and sell me on keeping the account open for fifteen minutes – they finally told me they could not close the account because I had withdrawn money – like it was my fault.
    Sorry – if you had left the money in the account we could close it -
    what if I put the 55 bucks back in – nope -
    How idiotic is that ! I took cash out of the account at the teller.
    Chase … by the way we would be happy to do an analysis of your brokerage account bc we are also JPMorgan and see if we could give you a better deal than your current bank – would you like to deposit 20K?
    Me – How much money did you write off in credit card debt last year ? I think I will do my own analysis of the books – thanks

  101. roberthjrfl

    EricL,
    What are the criteria you look for for your condor trade?  I would assume you want a high theta as you are working the time decay.

  102. Pharmboy

    Been in meetings most of the a.m. here on the left coast…..AMLN should get approval, and I think it is baked into the price.  I think MRK though, is gonna catch up with them and Januvia will take the market in that one (barring a tox event in humans).  Question is, will LLY buy them?
     
    We had several conversations about MDVN last week, so DK you may want to search those.  MDVN in my mind is a big risk.  I am inclined to short them, as Alzheimer’s is a very difficult area to treat.

  103. gel1

    Mr. M
    Re AUD – In checking further, I have the scoop from the top analyst at GFT (Kathy Lien), This evening , Deputy Gov. Battalino of the RBA will be speaking and the tone and content of the speach will have an impact on the Aussie. This currency is interest rate sensitive and the statements made, whether he infers a gradualness or immediate need for a rate hike will determine the outcome.

  104. gel1

    Watching the TM hearings…. Whisky, Tango, Foxtrot is this guy Rep Rush trying to say?

  105. EricL

    I’m noticing some recent sector run-ups have a similar pattern: heavy buying on weakness, but no follow through after the first day or so. Examples: PMs and PM miners were bought up on the weakness after the Fed announcement, but then failed to follow through. Credit-card companies were run-up yesterday on the rule-changes, but no follow-through for them today (in fact they are now lower).
     
    So some of these bullish-looking set-ups of buying on weakness are turning out to be just quick scalps from traders, it seems.

  106. ssdirk

    gel – LOL!

  107. EricL

    robert,
     
    I look for range-bound stocks with decent premiums. So the idea is that the credit I’m receiving is something like 2/3rds of the total margin cost, and the stock is range-bound enough that I have a fair chance of getting the stock to run-through the ‘sweet spot’ of the spread within a week or so of expiration (when I get out).
     
    So if you look, say, at WMT it’s not that exciting to me for a short condor, even though it is very range-bound. Selling the 52.5 straddle and buying the 47.5 p and 57.5 c nets only 1.92 right now. Although there is a decent chance it will work, you only collect 1.92/5.00 = 38% of the margin in credit. So you’re risking 3.08, and there is no way for this trade to be a double.
     
    SPG on the other hand currently pays 3.75 for selling the March 75 straddle and buying the 70 p and 80 c, so you collect 3.75/5.00 = 75% of the margin in credit. The idea is that if SPG continues to drift around 75, I eventually collect more than the 1.25 I would have at risk selling this condor.
     
    That said, it could turn out that the long-term success would be better selling the WMT-type condor. I don’t know. But, they are boring and one loser can wipe out three winners. With "SPG" – type condors, one loser wipes out at most one winner.

  108. yodi

    AMED a very interesting swing they made today now they in the plus again try to roll from 50p JUN to 55p Sep at a dif of 4.80 but no takers

  109. Pharmboy

    GSK seems to be holding here.  I am going to buy into a few 32.5 Aug10 for 5.4 (C if it fills).  I have full covers on my 35 Aug10 with 37.5 Mar JIC it pulls back a bit.

  110. Phil

    Damn!  I just lost my whole comment!  Friggin Wall Street Survivor crashes my computer if I leave it on the open positions screen….

    Fogive short answers and imagine I had great reasons for these things:

    VZ/Terra – Stock at $28.77, selling Jan $25 calls for $4.10 and Jan $30 puts for $4 for net $20.67/25.34.  Nice with 6.5% dividend and you can roll putter to 2012 $25 (now $3.10) so put-to price is better than it seems long-term.

    AAPL/Kwan – As a shareholder, I’m happy with the decision.  Due to AAPL’s power in the market, it’s a fine line between marketing and censorship and I would have rather have seen them come out with a V-chip, type solution but, if that’s difficult, then I’d rather run a clean company that has Disney-like appeal worldwide.  My kids and most of their friends use it and Tina will be very happy to not have to police their downloads as rigorously.  If you really want your porn, you can still get it on the web browser anyway…  8-)

    Banks/Samz – LOL, they are insane aren’t they?

    Hearings/Gel – What is wrong with us not shorting TM ahead of this?  Very obvious in retrospect…

    Scalping/Eric – I agree.  Looks more like pump and dumps overall, just running up various sectors in order to generate enough interest to unload into the next round of bagholders.  I’m thinking that will be the pattern through the end of the week and then a blow-off once the month ends. 

    GM needs 5,500 people for 18 retooled U.S. factories and may fill most spots with laid-off workers. New net hires on top of those depend on a recovery in auto sales, and as one economist puts it: “The market still sucks.”

  111. TmDecay

    Phil … I sold my spy 111 calls and bought spy 107 puts and may hold over night.  DAX was down 1.48% and Asia will catch up over night.  I don’t think there is any more stick today but maybe I’ll be wrong.

  112. EricL

    I should have said that one loser wipes out two winners with WMT. But still boring.
     
    It’s crucial to measure success against your total cost and risk in the trade, since that helps to keep you from getting greedy. So margin required – credit received is total cost/risk. If that number is 1.25, then buying back the condor for 1.25 less than you sold it means you made 100% (before commissions).

  113. deano

     Phil
     
    Do you still like DRYS? Also, any thoughts on AA down here?
    Thx,

  114. oncmed

    Phil,
    Any ideas on a OIH trade. Theyve been heading down forthe pasttwo days after toppping off around 125.

  115. kustomz

    Whats holding this market up, Volcker rule not going to be watered down, dollar at session highs, sovereign debt at levels never seen before and Toyota building asphalt cruise missiles..how is this stock above 70?

  116. roberthjrfl

    EricL,
    Thanks for the explanation – i will let you know if i find any good candidates based on those criteria.  Do you find the credit you receive is 75% of margin required? 

  117. mrmocha

    Sorry, Phil, I really wanted a rally but instead lookie what I did to Mr. Stick today.

  118. Pharmboy

    Buying a few P on X now.  Chart is dangerous here, but IF they follow through, look out.

  119. Phil

    SPY/TM – I tend to agree, this is super-lame overall.  I don’t want to get too bearish because I can’t see what the point of last week’s pump job could have been if they don’t intend to keep it up this week but, other than that, I’m happy to be short starting Friday so no harm jumping the gun. 

    WMT/Eric – I love them BECAUSE they are so dull.  Just sell premium – wash, rinse, repeat and they’ll still be at about $55 in 2012 most likely…

    DRYS/Deano – There are other shippers I like better on the Buy List as DRYS doesn’t pay a premium so why bother?   They do get a little interesting down at $5 but they serve the bottom 90% so not a sector high on my radar.  Nothing wrong with an atificial buy/write with the Jan $5/7.50 spread at .80, selling the Jan $5 puts for .93 for a net $4.97 entry (and you can roll down to the 2012 $4 puts so risk is really assignment at about $3.90 long-term

    OIH/Oncmed – My idea was shorting at $125, too wishy washy at $121.  Next time they hit $125 we can attack.

    LOL Kustomz – pure manipulation but it works…

    A little warning ahead of time next time Mr. M!  8-)

  120. EricL

    robert,
     
    yes, with SPG right now it’s 75%. Remember though that you have to factor-in how close the stock is to the short legs you are selling (a straddle in this case). With SPG it’s $3 from my 75 short straddle, so there is a little bearish directionality in that trade. If the stock were sitting on 75 right now, you’d probably be lucky to get 65% of the net margin in credit for a front-month straddle with 24 days to go, unless the stock is very volatile.
     
    Volatile stock example: BIDU short condor selling the 500 line and buying 490 p and 510 c currently showing credit of 9.40 (against 10.00 margin)!  I actually just put an offer in at that price but doubt it will fill.

  121. mrmocha

    deano, DRYS earnings after after the close on Thursday, you might want to wait to take a position.  Also check out EXM, they have dollar strikes as well and a little fatter premiums.  Cheap shippers like these work pretty well with Phil’s buy-writes where you sell both puts and calls.

  122. mrmocha

    gel, thanks for the intel.

  123. ssdirk

    judah – what is your Mar SPX short call again?  I have 1180 and I am thinking of rolling a bit lower.

  124. Kwan

    I don’t have a problem with their decision but the fact that they’ve half-assing their enforcement of it is what unnerving to me. Maybe if you’ve paid them enough $$ for exclusive rights to your content on the iPad you’re okay and in the club – that’s the only thing that remotely begins to make any sense about their selection process to me.
    Besides, any geek worth his weight in mountain dew can easily put those apps right back on their iphone anyway 8-)

  125. deano

     mrmocha
     
    Thanks, I’ll check it out

  126. morxlntway

    Phil, you think if FSLR hits 105 it will not be coming back any time soon? So just exit the put sale?

  127. EricL

    Lowered my ask to 9.20 for that BIDU condor and got two filled. Seems too good to be true, so it probably is.

  128. judahbenhur

    SS, 1/4 of my calls are 1200, 1/2 are 1180, and 1/4 are 1160.  A couple of weeks ago, I had rolled half my 1200 calls down to 1160 for $2 or $2.50, I can’t remember.  But I also started thinking that I may have to roll the 1160s out to April if the SPX moved up to 1140 in the coming week.  I think 1160 is safe for now, but I’m not sure the $1 you’d get for rolling is worth the trouble.

  129. roberthjrfl

    EricL,
    It seems like to me, this is a good way of "selling premium."  If your max risk in the BIDU condor is $100 and your theta decay is -0.72, it wouldn’t take long before the credit your received ($920) is down a $100 to $820 (where you buy back) and you made 100% on your risk.  Am i looking at this wrong?

  130. Phil

    SIRI continues to grind upward. 

    AAPL/Kwan – Maybe we should send this video to Steve Jobs.

    FSLR/Morx – I think below $105 the risk begins to outwiegh the reward but those things made a quick 10% already – you have to take those kind of profits on a momentum trade. 

    BIDU/Eric – Never hurts to ask…

    At the close: Dow -0.96% to 10283. S&P -1.2% to 1095. Nasdaq -1.26% to 2214.
    Treasurys: 30-year +1.31%. 10-yr +0.78%. 5-yr +0.44%.
    Commodities: Crude -1.94% to $78.75. Gold -0.26% to $1102.80.
    Currencies: Euro -0.68% vs. dollar. Yen +1.12%. Pound -0.46%.

    Market recap: Some crushing consumer confidence numbers knocked stocks for a loop, to a second day of losses. A stronger dollar was no help to energy and metals, down across the board. The Dow marked a 100-point loss and basic materials slipped 2% as a sector.

    The trade against the PIGS nations is "crowded," Brevan Howard says, while distancing itself from the bets which have become more controversial as observers fault short-sellers.

    According to PC World’s newest 13-city 3G network performance test, AT&T’s (T) much-maligned 3G network has indeed undergone a drastic makeover. Download speeds were 84% better than they were eight months ago – and a full 67% faster than rivals Sprint (S), T-Mobile (DT), and Verizon (VZ, VOD).

    Autodesk (ADSK): Q4 EPS of $0.30 beats by $0.07. Revenue of $456M (-7%) vs. $432M. Shares +2.3% AH. (PR)

    Disk drive maker STEC down 22.1% AH as it forecast $33M-35M in revenue for Q1 vs. estimates of $79.7M, and sees a Q1 EPS of -$0.11 to -$0.13 vs. $0.29.

    Orient-Express Hotels (OEH): Q4 EPS of -$0.12 misses by $0.01. Revenue of $114M (+61%) vs. $112M. (PR)

     

  131. EricL

    robert,
     
    That’s my idea. As you know, if you’re selling a lot of extrinsic it’s because the volatility is higher. The odds of BIDU closing near 500 at opex are very low, but WMT has a pretty good chance of finishing near 52.5. My hunch is that the WMT-type trades may exhibit better long-term returns, in the same way that a dull dividend stock can outperform a high-beta stock in the very long term.
     
    However, suppose my goal is ‘only’ to double my investment, which in the BIDU case is just .80? How often will I succeed, and what will be the percentage of winners to losers, especially after paying commissions and the B-A spread on these? That’s what I don’t know, but what I’ve been experimenting with.

  132. Phil

    A new Gallup poll finds that 61% of America’s "underemployed" aren’t hopeful they’ll find a job anytime soon – with pessimism worst among the highly educated. "The lack of hope has profound implications, not only for underemployed Americans, but also for the future of the U.S. economy," Gallup says. (earlier)

    ABC Consumer Comfort Index: -50, down a point from last week and still hanging just above record lows in the 24-year-old poll. Positive ratings for the national economy and the buying climate held steady at 8% and 24% respectively, but confidence in personal finances slipped a point to 43%. (.pdf)

  133. Phil

    I love this one:

  134. hanna5

     Phil (and others with advice), I have a portfolio question. My portfolio long stock positions are relatively well hedged (DIA puts, DXD long call spread, EDZ). But, i have a substantial long TBT and TBT call spread positions. I’m also short March TBT calls. On market down days, i find my hedges work great. But, TBT (which in total is about 21% or so of my portfolio) is not really hedged appropriately. The only balance for TBT is the short call position (which is doing great). My question is : Do i need to hedge for TBT? Somehow hedge against a flight to the dollar? Or maybe it isnt necessary to hedge this position at all apart from covered calls? Thanks for any insight…i’m trying to be better about monitoring my internal risk controls!

  135. morxlntway

    now i see where i messed up. Either dislex or fat finger or in too much of a hurry. I sold the FSLR puts for 4.85 instead of 5.85. I sold em when you were buyin em back! Maybe tomorrow will be better. Need to slow down.

  136. drumkeerin

    dear phil, I like your 2011 100-130 GLD vertical spread., plus the 95 put.. You also mentioned the GLL 9/10 spread to offset the long trade. My question is if I did five of the longs, how GLL positions would be appropiate to hedge the GLD holdings?
    Thanks

  137. drumkeerin

    dear phil, I like your 2011 100-130 GLD vertical spread., plus the 95 put.. You also mentioned the GLL 9/10 spread to offset the long trade. My question is if I did five of the longs, how GLL positions would be appropiate to hedge the GLD holdings?
    Thanks

  138. Cap

    Peter – I sell a lot of these straddles, stangles, whatever.
    In my Fidelity account, where they match up short calls and short puts, irrespective of strike price or expiration date, they list them as "straddles".  Which is why I asked last night about that.  Whatever you want to call it is ok w/ me.
     
    I wish I could attribute my question to beer (or scotch), but no ….

  139. Cap

    Peter – I sell a lot of these straddles, stangles, whatever.
    In my Fidelity account, where they match up short calls and short puts, irrespective of strike price or expiration date, they list them as "straddles".  Which is why I asked last night about that.  Whatever you want to call it is ok w/ me.
     
    I wish I could attribute my question to beer (or scotch), but no ….

  140. Cap

    "Consumers also remain extremely pessimistic about their income prospects. This combination of earnings and job anxieties is likely to continue to curb spending."
     
    You dont say !

  141. Cap

    Jburgess … thanks for the Munger piece.
     
    "Politicians usually ignored the Good Father because he made no campaign contributions."   HEH…

  142. Cap

    PALM is a stock I also don’t like.  BUT, sold the $7 puts today for 0.24 for a net $6.76 entry.

  143. Cap

    HK … also in w/ stock (21.07) and April 22′s.
    Also bot SD, SWN (earnings on Thurs, down almost 10% already this week).

  144. Cap

    MDVN .. I have been looking into it; and maybe Pharm will too.
     
    I agree, the premiums are huge.  They are betting on FDA news that some antihistimine that they found in Russia cures Alzheimers.   How many ways can you say not very likely.  The whole thing seems slippery and the market cap is huge.
    I have sold some 65-75 calls …theory is even with a huge pop on news, it will make a great short.
     
    Track down video w/ CEO from BIO on CNBC.
     
    I am calling S C A M on this one !

  145. Cap

    BIDU — 500 is "fair for them" … what are you smoking today Phil ?   :grin:
     
    Maybe 250 is fair …

  146. Cap

    Yodi …. BIDU …. I would go higher and lower ….. like 620 + and 300 or even better 250   (Bidu hit 120 last year).
     
    1020 … Cheney rocks !

  147. pstas

    Hey Cap- I havebeen looking at SD. What’s your take?

  148. Cap

    pstas …. $8 seems pretty cheap for them.  Heavy on Nat Gas; well hedged; cheap multiples on Ebitda and CF, higher leverage (debt) than most.  A good trade here IMO w/ reasonably low risk unless market and sector collapses.

  149. pstas

    Cap- I agree. Also, some good company as I understand. Buyers include Pickens & Fairfax/Watsa.

  150. gel1

    Hanna/TBT
    I have about the same amount as you in terms of portfolio percentage. Most of my positions are puts that I have sold short and one large long call position. The strikes are all very conservative, relative to today’s mark. I look at this investment as a long term ( maybe a year ) situation that is far more likely to escalate upwards as opposed to dropping. The bond prices move inversely to interest rates, and interest rates are not about to go negative. Given the details of the situation, and the inevitable raise in interest rates, as the economy continues to recover, I see a lot of risk in selling any covered calls, unless they are front month and the strikes are out a way. The chance, going forward, are far greater for TBT to jump upwards, compared to the chance of it falling. I do not like this ETF as one that is suited for income generation by selling calls.

  151. gel1

    Pstas/SD
    This one looks decent to me… I just put an order in selling June 7.5 puts for .70.

  152. jomama

     gel, regarding your TBT comment.  I think verticals make good sense based on your concerns.  Established a long position on CCJ today.   CCJ 2012 20 Leaps Calls.    I think fundies look good and everybody will jump on the bandwagon, as more nuclear plants are commissioned.

  153. gel1

    Jo/CCJ
    If  we see a big push from the administration offering to back-up the massive loans that are needed to build the plants, then there might be an immediate tick up. So far, only the Southern Co. has received this guarantee and it will take about 10 years for the plant to be completed. This is a long wait for any product purchases from CCJ, although they are the "go to" company at the moment, as they will soon open up their Cigar Lake operation for production. I guess I am too impatient for this investment, as the wait for cash flow is so far out in the future. Down the road, CCJ will have major competition from a Canadian company that just recently tied up all the mining reserves in Kazatstan, and beat CCJ to the punch. Your strategy (I like it by the way ) of selling front month calls against the long leaps will probably pay for your position before the leap calls expire. I have been in CCJ in the past, and it could eet your expectations, if the media hype can build some positive sentiment.

  154. pstas

    Gel / Cap -  I am looking at the June 5/7.50 call spread along with selling the June 7.50 Put. Note they will announce earnings on the 25th/Thursday.

  155. samz3700

    Hanna -
    20% is a substantial percentage of your portfolio -
    TBT is my favorite trade but I am going to play devil’s advocate
    1) Is this just the percentage of your trading portfolio or total portfolio including long term positions?
    In either case, it seems like too much – I might look to get out of some of the positions as the verticals near expiration.
    2) While TBT is a good trade – it is also your hege against coming inflation or should be part of it -
    *Not sure if I want to hedge my hedge – (might hedge yourself out of profits – ok selling near month premium otm is probably ok – I am doing it as well – would be interested to hear why gel does not like it) – I guess it is a good idea if it is such a large % of your portfolio. * this is kind of a weak argument on my part – but the coffee has not kicked in
    3) Here are some of your risks:
    a) We get deflation – while many of us think we will get inflation – deflation is still a possibility – we get a double dip recession – etc…
    b) you have event risk – tlt can fly up if we get a major international crisis – or another severe market correction
    c) the bond market is manipulated by central banks – maybee they have less control over the long end of the curve but its heavily influenced by their actions – I have been waiting for several years for inflation to kick up – pre-crash  but the Chinese just kept buying our bonds keeping prices down. This was a crowded trade that never really paid off.

  156. Phil

    TBT/Hanna – 21% is a lot for a single position, especially if you have calls, which expire and leave you potentially with nothing.  It is possible, if we do have another financial meltdown or a 9/11-type crisis that TBT could go right back to the $30s as the Fed does another round of emergency liquidity.  If that just happens to cross the time-frame where your calls expire – what is your plan?  I would ask you the same question if 20% of your portfolio was SPY or QQQQ or AAPL or whatever – 20% is a lot of money to put on one horse…

    As to playing TBT, I favor in-the-money verticals becasue it gives you all the joys of ownership without as much risk so I can have a $100,000 portfolio and allocate $10,000 to the Sept $44/50 bull call spread at $3.20 ($6,400), so let’s say 20 contracts and then sell 10 Apr $51 calls for .65 ($650) so I’m in for net $5,750.  If TBT goes lower, I will look to roll down for about .65 per $1 and if TBT drops $2, I would cover another 1/2 for another .65 and put a tight stop on the $51s, which should be down to about .40 by then.  To the upside, I can roll my Apr $51 callers to 2x the June $65s and TBT has not moved up more than $10 in two months even during the craziness so I can assume I will have time between $48 and $65 to add more long positions to cover. 

    That’s a trading plan for a position.  I intend to collect at least .30 per long for 6 months, knocking $1.80 off my basis so my target break-even is $45.80.  I have $4,250 on the side for adjustments and it’s a position I’d be willing to stick with and I know I can roll to the 2012 $40/50 spread, now $5 for about $2 so I’ll keep my eye on that if things head south as I do feel strongly about my premise that rates can’t stay low forever (but they have in Japan) and, in the very least – if they do I would have a clear path to selling enough premium to cover myself in 2012.

    So a adequate cash to make adjustments, a plan to reduce my baisis significantly over time and a 100% upside means I’m allocating 10% of my cash to this position, I will leave apx. $5,000 on the side and, if all goes well, I will get $10,000 back at $50, which is a 50% gain on cash over 6 months.  If all goes badly, I am willing to go a little more than 10% to push this play out a year but that is my EMERGENCY fallback position, not my starting position. 

    This goes back to the whole idea of gambling vs. investing.  If you cannot be happy with a 50% return in 6 months, then you are a chronic gambler and you are bound to eventually get yourself in trouble with the risks you take.  Making 50% on 10% of your portfolio twice a year is a 10% return on your whole portfolio and that outperforms virtually any place you could possibly put your money.  If you have a DIVERSIFIED portfolio with many high-probablitly posiitons that aim to make 20-50% over 6 months and you allocate 50% of your cash overall – then you can make $15-25,000 in 6 months if all goes well. 

    That is HUGE money!  The flip side is, if you mix those positions so you have some that profit from a major downturn and some that do well in a good economy but both do well in a flatline – then hopefully your worst case will be losing about 25% of your 50% commitment (12.5%) which is realtively easy to recover from.  That only works if you don’t have ANY positiion that can cost you 20% of your porfolio. 

    Most people who go broke in the markets go broke betting on "sure" things – don’t be one of them.

  157. Phil

    FSLR/Morx – Never chase a momentum trade.  Check the Strategy section but momentum trades are very advanced and you have to enter them only when ticking your way and have your finger on the sell button as soon as the momentum slows – not when it reverses!  By the time it officially reverses it can be too late becasue the bid/ask can rapidly flip the other way.  Always sell into the initial excitement means you still need some excitement to sell into. 

    Think of it as the difference between having tickets to sell at a concert and momentum is the waves of people heading into the stadium and you may not want to sell your tickets right away but, when the crowd starts thining, you should.  If you wait past the time the crowd into the stadium is still coming in but thinning then maybe you get unlucky and suddenly no one comes by your gate for 5 minutes (the stock flatlines), then 10 minutes – suddenly the concert started and you have a rapidly diminishing asset and if you wait all the way until people start coming out the other side (the stock pulls back) – the shows over an nobody want’s your tickets.  When we’re talking about plays where your goal is to make $1 out of $5  of .20 out of $1 you can literally blow all your profits in seconds by being too greedy to sell while the selling is good. 

    GLL/Drum – I forgot the risk of the GLD spread but I guess it’s pretty much owning GLD at $100 so you want to mitigate a 20% drop generally.  GLD is at $110 so we worry about $90, which means you want to offset about $5 of your $10 potential loss.  I think I remember telling Gel that $3.50 allocated to the GLL was good from that position as it made $3.50 on a flatline so you are spotting that $3.50 and gaining $3.50 of downside protection (100% gain on GLL if gold turns down).

    Please keep in mind that I am AGAINST bullish plays on gold and I have naked GLL myself – I was simply telling Gel that’s the only way I would risk gold bullishly but that is in no way an endorsement of GLD in any way shape or form.  If you want to play for the collapse of the dollar or western civilization – TBT is a FAR safer way to play – if the dollar is worthless, then people will want a lot of interest against dollar-based 20-year loans, won’t they?

    BIDU/Cap – They have the Asian market and people do advertise there.  It’s a rapidly growing on-line poplulation and BIDU’s cap, at $500, is 1/10th of GOOGs so let me know how many shares you want to sell me for $250 and I’ll write you a check!

    CCJ – That’s one I just like LONG-term.  Always good premium to sell and it’s something I’m sure we’ll be happy to own in 20 years so who cares what it does in between now and than as long as we can collect at least 10% a year against it, which would entail selling .25 per month in premium. 

  158. samz3700

    TBT -
    Part of the equation for inflation is the velocity of money – someone with a better grasp on econ. can post this -
    but the velocity of money sure seems to be slowing – bank lending continues to contract wsj
    online.wsj.com/article/SB10001424052748704188104575083332005461558.html

  159. Cap

    Phil:    BIDU does not equal GOOG.  Its that simple.

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