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Thank GDP It’s Friday!

Wow, a 6% GDP!

I’m guessing as it’s only 7:30 but WOW!  What an amazing economy this must be in the fantasy-land where they concoct these numbers.  Let’s see, we have 138M working people so we must have added 8.6M jobs, right?  NO???  Well, then the people who are working must be putting in a lot of overtime, right?  No?  I know, everybody must be making 6% more money than last year!  No?  Well, then it must be coming through in benefits, right?  No?  Hmm, this is a hard game isn’t it?  I KNOW!!!  Housing prices – with China-like GDP growth our housing market must be red hot and surely our homes are up 6% in value!  No?  Damn, I feel like I’m playing deal or no deal and I picked the case with the penny

Just like our discussion about what total BS the CPI was – GDP is no different.  GDP is the sum of Consumption, Investment, Government Spending and Net Exports which means a combination of inflation and government spending can boost our GDP even as real consumption falls and the rising dollar papers over export losses.  In other words – I buy $100Bn worth of Toyotas (5M at $20,000 each) from Japan with the dollar at 85 Yen.  Now the dollar rises to 93 Yen and I’m "only" buying $90Bn worth of Toyotas (5M at $18,000 each) and our GDP for that segment is up 10%.  Wow – FANTASTIC! 

Are we happy?  Are more Americans working?  Is there more shipping?  Are there more sales at the Toyota dealership?  No.  Is Japan happy?  Not at all, they are getting less money for the same cars.  Another group that hasn’t been happy are the oil exporters, who shipped us an average of 10.5 Million barrels a day at an average price of $60 last year ($630M) and are now shipping us just 8.5Mbd at $80 last week ($680M).  Sure they are still getting their $680M a day by choking off production and creating false supply shortages, but they miss the days when they were able to charge us $100 for 11Mbd. 

Don’t worry my OPEC pals, JPM and the other oil manipulators are working very hard to make sure you once again have Billions of more American dollars that you can funnel to terrorists and this Democratic Congress turns the same blind eye to the shenanigans as the previous administration did so happy days will soon be here again as our leaders have the unmitigated gall to get up and tell us that paying more money for the same stuff is a sign of economic growth rather than the destruction of middle class wealth it really is

So Japan gets less money for the same cars and that offsets OPEC getting more money for less oil as our idiotic GDP system tells us that a mother who buys a gallon of milk for $5 is richer than a mother who buys a gallon of milk for $3.  Isn’t economics great?  I’m not going to get into a huge thing on this but here’s an interesting article on "What’s Wrong with the GDP" that makes for interesting reading.  There’s a great paper on this in the Journal of Economic Psychology called "The GDP Paradox" and, of course, our man Joe Stiglitz argues for scrapping the whole system of measurement and starting from scratchsomething that does not sit well with our friendbuddypal Jim Cramer, who’s head is currently so far up GS’s collective ass that I’m surprised he is still able to breathe. 

Of course Stiglitz is one of the most noted critics of Goldman Sachs and the great global scam they are running and he has the ear of the EU – even as lap dogs like Cramer try to discredit his work in the US

8:30 Update:  OK, the official GDP number is 5.9%, I am the king of mising by 1 this week but as long at that 1 is 0.1% – it’s not too bad!  Inventory builds added 3.88% of the 5.9% so good job not selling stuff America!  There was an encouraging build in software and equipment investment but let’s keep in mind this was Q4 GDP and THANKS TO THIS 5.9% GAIN – our 2009 GDP was only -2.4% overall.  Consumer spending rose 1.7%, which is nice but it was forecast to rise 2% and in Q3 it was up 2.8% so we’re heading the wrong way just a bit.  Consumer spending accounted for 1.23% of our growth so that’s 1.23% for buying and 3.88% for stuff that was built but wasn’t bought on the assumption that someone will buy it eventually.  It will be sad if that assumption proves incorrect…

Asia had a nice bounce this morning with the Hang Seng gaining 209 points (1%) back to 20,608 while the Nikkei inched back to the 10,200 mark with a 24-point gain to end the week at 10,126.  The Shanghai and BSE were flat.   A huge rebound in commodity prices sent Asian and Emerging Market commodity pushers higher and fortunately we took our money and ran on yesterday’s move down as we have learned a greedy bear is quickly turned into a bear-skinned rug in this market.  Fundamentally, metal traders are ignoring the massive red flag of 90 Million Metric Tons of Steel that are stockpiled in Chinese Warehouses,   “There is so much steel lying around that the warehouses are full,” Huang said in an interview today. “Ships coming in have no more places to unload and are piling up at the ports.”

Don’t worry commodity speculators, just because there is a 2-month oversupply of steel in China I’m sure that doesn’t mean you are being idiots paying $3.25 for copper (even more oversupplied) or $1,110 for gold.  Don’t mind us while we short your positions – as Cramer says, we’re just prudently hedging and we simply forgot to make the upside bet!

Europe is nice and bouncy, up about 1% ahead of the US open.  The FTSE held our 5,250 target yesterday so we expect a bounce back to at least a retest at 5,400 but it don’t mean a thing if the DAX can’t get back to the 5,750 mark (now 5,576).  Europe is also rallying on miners and oil producers so we’ll be looking to go a little short into the weekend but we do expect a rally today to take us back to par for the year, which will be 10,428 on the Dow and 1,115 on the S&P – anything less than that will be a very poor showing after all this effort to push the markets higher. 

Chicago PMI is going to be our big obstacle at 9:45 and then we have a dangerous Michigan Consumer Sentiment Poll at 9:55 and Existing home sales at 10.  If we can get through those potential land-mines, we may be able to whip out the stick and rally back to green levels for 2010 and that will give the funds some good spin as we head into the last month of the quarter – which is what it’s really all about, right?

 


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  1. Cap

    Fed’s Hoenig says Super Low Interest Rates Sometimes Invite Speculative Activity.
     
    You don’t say !

  2. Phil

    That’s why he gets the big bucks!

  3. jburgess

    Phil, you need to learn to express yourself better and not hold those nasty feeling inside.  " who’s head is currently so far up GS’s collective ass that I’m surprised he is still able to breathe." You made me laugh so hard I almost choked on my coffee.

  4. Phil

    LOL Jbur!  Did you see that clip from yesterday.  Literally they should put that clip in Webster’s for an example of "shill."

  5. bord

    Phil, I posted this near the end of the day yesterday so you might have missed it. Thx.
    "Wow BAC up from 14.50 to 16.55 in one week. Made my sucky Jan 15/20 bull spread look good, but it seems very far very fast. It seems like I should sell into this, but I am selling front month calls to help finance the spread, and the march calls sold are way in the red because they were written near options expiry time when BAC was around 14.50. WWPD? — What would Phil do in this situation? Thanks"

  6. RMM

    Phil: what do you expect for todaY IN THE MARKET ? bULLISH OR bEARISH, what protection and hedges ?

  7. Phil

    Good morning!

    Same old range as yesterday:  Bounce levels (Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625) and our 5% lines (Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620) so it’s not worth playing much in the middle.

    Obviously notihing to get excited about if we can’t retake ALL of our bounce levels.  The RUT continues to be a great canary for us as is copper (now $3.22) at that $3.20 line. 

    Chicago PMI was 62.6, which was better than expected so a huge relief there and the market had been selling off in anticipation of a bad number but we are not out of the woods yet with Michigan Sentiment in 10 more minutes.  Once we get past that, we should be all clear for the Mr. Stick show as "THEY" try to push the markets to close February on a positive note for the year but we are already way up from Jan’s finsish (S&P 1,073) so it is not desperately important to jack us up. 

    That’s why I’m not enthusiastic about betting up here as we are sort of in-between.  Had we had a big sell-off this morning, I would have been excited to take upside plays but I very much doubt we can gain more than the required 128 to get the Dow green for the year and it’s also possible a fund that had a good January will be calling it quits at some point in the day and take us down so it’s going to be watching and waiting for the most part. 

    Our Aggressive $100KP went from + 8% to +19% for the week yesterday and we’re back to almost all cash with the short sale of TBT and SPWRA puts our only positions (both losers too!).  No sense in messing that up trying to bet the middle but I do like shorting oil again at $80 (now $79) both in the futures and with USO so, if we get another shot at the $38 puts for .50 or less (now .85) - that’s my play of the day.

  8. Pharmboy

    They’ve gotta paint it green today. As I said a few weeks ago and Phil notes, if it is not green for this month (and year for that matter), then they have some serious problems with 2/3 of the quarter being over and things one hand looking good, but on the other, no one believes them.  As this upper 10% knows, we just have to stay solvent long enough to make $$$.

  9. Phil

    Michigan came in at 73.6, barely down from Jan 74.4 and nothing like Consumer Confidence so a greenish shoot there!

  10. Phil

    BAC/Bord – Knowing what March calls you sold at what strike would help but the real answer is to just do what you are supposed to do which is make sure you have eaten away at least 75% of the premium from your caller and then look to roll them to the next month up $1 as long as you don’t feel the need for the downside protection anymore.   Since we are suspicious that this week’s rally was fake though – I’d be inclined to keep the callers as weekend protection in case we reverse. 

    Today/RMM – I’m wishy washy.  We’re going to be green for February and it may not be worth the effort to fight selling pressure.  We’ll just have to see how things play out but I’m bearish at 10,400 or 10,300 into the weekend. 

    Existing Home Sales down 7.2% in Jan (was down 16.2% in Dec) with 38% of the sales distressed sales.  That’s VERY disappointing and it will be tough to hold things together off that number.  If we do – then we can expect a strong move up later.

    I grabbed some DIA $102 puts as a tight mo play for now but I’ll be looking to flip if we retest our 5% lines (yesterday’s lows).

  11. Phil

    Big support at Tuesday’s lows, which is where I thought we’d be staging yesterday (but we added 60 more points into the close).  I guess we’ll have to call holding that bullish but I’d rather see it properly tested before I flip over to a bullish bet (probably DIA $104 calls, now $1) and it would be strange for them to waste the stick early as all they would do is give some funds a good exit point that they’d have to buy into. 

    Nas is green, S&P just pennies away so I may have to give up the DIA puts at 10,320 but hopefully I can give them some time to work.  

  12. judahbenhur

    Peter D, If you are checking in, how have you been positioning your strangles lately?  Thanks in advance.

  13. jomama

     PHARM, sorry that i didn’t  get a chance to answer your question yesterday.  I  have not tried the new anesthesia drug or have seen it.  It is a reversal agent (if i remember correctly)  I don’t really think this will move the needle per say.  I tend to use old-school tried and true drugs such as succinylcholine.  I want a track record of 10-20 years.  If it aint broke….If you recall, organenon released "Rapalon" as a replacement for succinylcholine.  It was great until kids started dying of bronchospasm.
    I am very suspicious of this new study on carotid stents.  The lead researcher is a invasive cardiologist funded by the stent companies.  But i’ll have to read the study.

  14. bord

    Phil, They were the BAC March 15 calls, sold when BAC was about $14.50.

  15. Pharmboy

    Thanks Jo….good to have eyes and ears in the field.  Yes, I knew of the AEs, but not wanting to tarnish it too much.  If the FDA rejects it (again), their maybe trouble brewing in NJ….and the earth may rumble (earthquake insurance, Phil!).
     
    Have a great weekend all.  Off to KC….

  16. jcmcn5

    Phil regarding SRS (the position which dares not speak its name), I had sole the March 8′s against my stock.  Dod well and bought them back.  I can’t see anything worth writing in April.  Would you go out to the July 8′s for $0.74?

  17. lflantheman

     AAPL cranking up.  

  18. Phil

    The U.K.’s GDP expanded by 0.3% in Q4, an upward revision from an initial estimate of 0.1% growth mainly due to improvements in services and production. Overall, the U.K. economy shrank by 5% in 2009. (ETF: EWU)

    Lloyds (LYG): Full-year loss of £6.3B ($9.6B) vs. consensus of a £6.1B loss. Total impairments were "significantly higher" at £24B, though they were down 21% in H2 as compared to H1. Impairments should fall further in 2010 and beyond, “assuming current economic expectations.” Shares -7.6% premarket.

    I never said the pound is on the brink of collapse, Jim Rogers says, responding to a press release (preserved here) yesterday. "I did not issue this nor did I say any of it. I am trying to get it corrected. It is outrageous." (ETF: FXB)

    EU officials reportedly want Greece to adopt an extra €4B ($5.4B) of austerity measures; Greece is considering a package closer to €2B-2.5B. Privately, EU officials worry Greece is intentionally dragging its feet, and that the Greek Parliament may choose to block proposed austerity measures.

    S&P says Spain’s weak growth prospects may undermine its fiscal consolidation program. Firm predicts a deficit-to-GDP ratio of 5% through 2013, vs. Spain’s more optimistic 3% outlook. "We also expect much weaker economic performance than current budgetary assumptions." (ETF: EWP)

    Feb. ISM New York Business Index: 77 vs. 72.6 in January. "New York City business activity is strengthening and broadening."

    Chicago PMI: 62.6 vs. 60 expected, and previous 61.5. New orders fell after four straight months of gain, to 62.2 from 66.4. Production similar at 65.2. Rise in backlog orders, to 58.5 from 54.3.

    Jan. Existing Home Sales: -7.2% to 5.05M, a seven-month low, vs. expectations of 5.5M. Supply rises again, to 7.8 months. NAR’s Yun: "The latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery.”

    Jan. Reuters/UofM Consumer Sentiment: 73.6 vs. 73.7 expected, 73.7 prior. Failed to extend mild momentum from January’s 74.4. Expectations index 66.9 vs. 68.9 prior.

    Still no green shoots in closely-watched rail freight data.

    The market recovery of the past year prompts AIG (AIG +2.3%) to change its repayment plan for an $8.5B loan from the NY Fed. Instead of using proceeds from life insurance policies, AIG will rely on assets sales and cash generated from its insurance businesses.  AIG (AIG): Q4 EPS of -$53.23 may not be comparable to first call consensus of -$3.94. Shares -12% premarket. (PR)  AIG (AIG) CEO Robert Benmosche on the press release: "We are increasingly confident in how we see the mix of AIG’s businesses over the long term. We are taking the right steps to regain our stature as one of the most respected and diverse property-casualty operations in the world." 

    Madness: The Fed is coming back into favor in Congress as lawmakers negotiate the details of a financial reform bill. Sources say the Fed could end up as the primary regulator of the country’s largest financial reforms.

    Here’s the payoff for the last bunch of regulators that turned a blind eye:  A group of ex-regulators and bankers are said to be raising $1B to buy failed lenders. The investment group will be led by William Isaac, former FDIC chairman; David Moffett, former Freddie Mac (FRE) CEO; and, John Ryan, former OTS regional director.  Yeah, regulators usually have the spare change needed to buy a bank and be set for life once they have completed their government service – what could be wrong with that?

    More of the same: Federal officials are said to be investigating whether hedge fund NIR Group paid kickbacks to outsiders as part of a plot to inflate the value of its holdings; Starting in 2001, NIR Group reported eight years of positive returns in its largest fund, without a single negative month.  What are the odds they will find no wrongdoing and then, 5 years from now – end up working in the hedge fund industry? 

    Yet another official getting his paybackMajor restructure of Citigroup’s (C +0.6%) board: Former Mexican president Ernesto Zedillo will be nominated as a new non-management director candidate, Michael Armstrong and Anne Mulcahy will not stand for election, John Deutsch previously announced same.

    The Financial Crisis Inquiry Commission plans to put bank execs back on the stand, saying last month’s questioning of Lloyd Blankfein (GS), John Mack (MS), Jamie Dimon (JPM) and Brian Moynihan (BAC) wasn’t the end of the process for them.

    Nicely timed Nasdaq booster:   Apple (AAPL) shares are likely to rise over the next 60 days relative to its peers, Morgan Stanley says. Firm believes the iPad launch in late March will exceed low expectations, and cites growing anticipation of the next-generation iPhone launch (expected in June). AAPL +0.5% premarket.

    James River Coal (JRCC): Q4 EPS of -$0.12 misses by $0.56. Revenue of $149M (+6.2%) vs. $175M. (PR)

    The move to smaller cars pounds Volkswagen (VLKAY.PK), which said profit fell 80% last year, to €2.44/share from €11.98/share. Europe’s largest automaker has a goal of passing Toyota (TM) in deliveries and profitability by 2018.

    I’m still liking the DIA $102 puts at $1.08, definitely if they get back to $1.02 using S&P 1,105 and RUT 630 as a stop out *(around 10,350).  I am waiting for somebody to do some profit-taking but, so far, no takers

    Dow volume at 10:55 is 50M about normal for a program trading day.  The snow is keeping trading light this morning but if I were intending to dump my fund, I’d be patiently waiting to see how high they can take it first but, if I am the boss – I also want to be done by 1:30 so I can get out ahead of the traffic. 

  19. roberthjrfl

    Judah, is there a point where you close your SS.  I remember you saying something like "when the price gets to .80, it is very hard to get that last .80."   .80 might not be the number you said, that is what i am asking.  Maybe instead of closing the leg you would roll that side one month out ( to have time start working again on that leg)?  Thanks

  20. gel1

    Phil
    Re: TM… I am very bearish on this stock, given the massive amount of law suit activity on their radar screen. I see the stock heading to the low 60′s. I did a very safe bear calendar spread yesterday selling the Apr 70 puts and buying the July 70 puts for a cost of 2.20 which is my total negative exposure with lots of positive exposure if the scenario plays out. Do you have a better way of playing the scenario? Thanks!

  21. gel1

    Samz
    I have been doing well shorting the GBP against the CAD and AUD. The best play I think for the coming week is the short play GBP/AUD as I think the AUD can rocket next week if they raise their rates, and GBP is a basket case and is now only second to Greece in their debt problems.

  22. jburgess

    All this corruption, all this greed for power and wealth, at every level, every day… I watched the movie "V for Vendetta" last night, and I saw it with new eyes.

  23. cwan120

    Hi, Peter, Judah, SS, & Fellow Stranglers,
    I am sorry that I haven’t been able to participate in the discussions, as I got really busy on a project at work in the last few weeks.
     
    I have a RUT March put verticals 550/540.  Do you think it’s safe to sell the long leg (550) for about $0.85 now and leave the short leg (540) to expiration?  We still have 3 weeks to go.  I kinda worry.

  24. tradansh

    PCS / Phil – What do you think of their results? Worth getting in long term?

  25. Phil

    Freddie Mac (FRE) will stop buying interest-only mortgages due to poor performance. This week the No. 2 mortgage purchaser said unpaid principal on IO loans amounted to 7% of its portfolio at the end of December, with 18% of those loans over 90 days late.

    BAC/Bord – Well the premium is gone so they are not doing you any good from that perspective but, as I said, I’d hold them over the weekend as protection and, if things go well, you can look to roll them along to May $16s, now $1.44 and you can offer to roll them for even now – just in case you get it. 

    Have a good weekend Pharm (or as good as can be had in KC). 

    SRS/JCM – Why not just give them a chance to move up a bit?  If you just made good money on March because SRS turned down – there’s nothing wrong with waiting a bit to see if you get a bounce.  I’d look at selling the Apr $7s for no less than .55 if we turn lower but hopefully selling the Apr $8s for .50 or better (now .32) as they were .45 yesterday.  Think of it as Shrodinger’s Cat – you have exactly the same chance of the ETF moving up or down and you are now at $7.32 so selling the $7s for .55 is no loss from here but selling the $8s for .50 gives you over $1 of upside – neither outcome is terrible and either is possible until you pull the trigger so isn’t it best to wait for more evidence?

    TM/Gel – I’m sticking with my $65 target to start accumulating.   That spread is fine as the Aprils are rollable but if they do drop fast you are not in a very good position.  How about betting the people who are speculating on the April $75s are fools and selling 5 of those for $3 ($1,500) against 3 Oct $85s at $3 ($900) for a $600 credit and you just DD the Jan $85s if TM breaks over $75, using that as a stop line.  The July $80s are $3 so you have an easy roll there to the upside.  It’s still a bearish play and can sting you if TM flies but it pays very well if they don’t.

    USO $38 puts did not come down below .70 so let’s go for the $37 puts at .45.

  26. jomptien

    Gel1,
    Looks like TM put in a double bottom this month – W pattern usually bullish if you like TA?

  27. gucci

    hi Phil regarding 100KP porfolio post on 2-24-10 — price action change each day — is the goal trying to get as close to your post price or try to  open position base on today market price . thanks 

  28. gel1

    jomptien
    I am sticking to the fundamentals on this one… There will be a lot of media hype as the law suits get rolling and I think this will drop the stock. Their legal problems are worldwide. Re Phil’s comment – once the stock bottoms, then it will be a nice buy, and I will wait until it is 60 before I get back in.

  29. jcmcn5

    Schrodinger’s Cat.  Gee Phil, you really need to stop using the every day references. 

  30. qcmike

    Phil
    Is this a good trade for today  ?
     
    1.      AAPL Jan $180/2000 bull call spread at $11, selling $180 puts for $16.50 is $5.50 credit so you make $25 or you have AAPL put to you at net $174.50.

  31. Phil

    Vendetta/Jbur – Yeah, I liked that one. 

    Speaking of manipulation – Suddenly the Euro costs $1.367, up 0.22 from yesterday!  The Pound shot up a penny too and the dollar dropped to 88.87 Yen now that Japan is closed and we don’t need to pretend.  That’s got Copper right back to $3.26 with gold at $1,115 but silver isn’t playing along at $16.37.  Nat gas also isn’t playing at $4.80 but oil is testing $80 and no problem filling the USO put play. 

    TBT grinding down as all the Fed talk of tightening is now gone with the wind despite the runaway GDP numbers.  

    RUT/Cwan – I don’t see any reason not to buy back the putter at .65 and just hope for a nice sell-off next week but don’t be silly about it – if we don’t sell off just get what you can back and be done with it. 

    PCS/Trad – I like them, they are on the buy list and earnings were BTE but they are in a tough drawn-out battle with S so don’t expect them to do much in the short run.  They are just a great long-term hold that you can use to sell premiums. 

    $100KP/Gucci – See the comment section there, I updated the status this morning.  The goal is to get a better price.  As I said in the post – I have zero time to mess around with it so I just put in price targets and fill whatever hits my numbers.  Next week I’ll look to make some adjustments but this is day two out of 60 days (as they are all April trades) so RE-LAX!

    Schrodinger/Jcm – You are right.  As Yoda says: "Impossible to see the future is"  – how’s that?  8-)

    AAPL/QC – If you can get the same net yes, but you can’t and I liked the trade BECAUSE it had such a nice credit (now about $2.50 credit, which means it’s up $3 from yesterday).

  32. samz3700

    Phil -
    trading from 30,000 feet – kind of strange -
    I am short bac – march 16 calls – basis 24  cents -
    and long the jan 2012 10s and 15s -
    Should I roll now to April – or just wait for that last bit of call premium to burn
     
    What’s your gut on t he dia covers over the weekend? Going half at 103?
    thansk

  33. judahbenhur

    Peter D, Also, take a look at Robert’s question when you have a minute. I’ll give him my response, so correct me where I’ve gone astray:
    "Judah, is there a point where you close your SS.  I remember you saying something like "when the price gets to .80, it is very hard to get that last .80."   .80 might not be the number you said, that is what i am asking.  Maybe instead of closing the leg you would roll that side one month out ( to have time start working again on that leg)?  Thanks"
     
    Robert, I don’t know that there is a particular price point for closing down a strangle.  In my case, I look at whether or not I want or need to free up some margin so that I can be opportunistic when the VIX surges.  For example, when the VIX surged in the 3rd week of Jan, it was a good opportunity to DD, that is, use more of the margin allocated for these plays. Then, you might close down the new strangles when the VIX settles down again, as it did the first few days of Feb.  That allows you to be opportunistic again if the VIX surges again.   Right now, I only have about 1/4 of the cash/margin I currently allocate for these plays in my Mar and Apr strangles, and for now I’m inclined just to let my Mar strangles run their course.  If I had more March positions open right now, I might be inclined to close them out while the VIX is so low.  But currently I’ve got plenty of margin to spare for new plays.

  34. dmankoff

    hi,k Phil, i got long a little TBT yesterday, long June 40 calls and short March 49 calls for net of 7.67  and now with TBT at 46.85, down a bit, would you adjust down, and i could sell the 47 calls and cover the 49, or wait for it to bounce?
    thanks for your advice to wait a bit
    David

  35. Phil

    Ooops – Evans just said 6 months is his definition of an extended period for low rates – the market doesn’t like any kind of stop line placed on the punch bowl!

  36. samz3700

    gel – thanks – for the forex trade -
    don’t want to put that on from the plane but think we will land in neward so might give it  a go

  37. pstas

    TBT beatdown today. Sold Mar and April 47 puts for .85 and 1.25 respectively. This seems over done to me.

  38. pstas

    Cwan- I have been watching for a good time to make a similar move. I am in the Mar RUT 680 and 690/ 540 strangles w/ 570/560 vertical. I am going to wait a week or so to pull the long 570 but if I were in yours, I would be inclined to move now. Just my opinion.
    Judah- strangles- Also in the same boat. I have some orders in above the market for April strangles just in case we get move and I ma not around. However, I am in no hurry at this time to do anything new.

  39. judahbenhur

    Pstas.  I’m being very patient with April strangles.  In Jan, I got so tired of waiting while the VIX was below 20 that I entered some strangles early, and though I was able to DD when the VIX surged past 25, I sure wished I had even more powder.  If we don’t get a sell-off soon, so what, it’ll come eventually.   As for TBT, I’m with you.  Just sold some April puts.

  40. TmDecay

    I think that it is wise to be cautious about selling too many TBT puts until the market makes a move either up or down.   No question that longer term TBT is a good bet but short term the USA may become the safe haven if world markets continue a correction.  I have sold a few TBT 47 MAR puts and 46 APR puts myself but scaling-in seems prudent to me.

  41. RMM

    Phil: is it too early to roll SPWRA mar20 putters , base 1.03 to april or june 19 ?? Have stock, no callers(no need ?)

  42. judahbenhur

    Phil/CROX. What do you think--the sell-off over the change in CEO overdone?  I got out of my positions earlier in the week.  Do you think this is a good new entry by selling puts, or give it some time to shake out?

  43. Phil

    BAC/Samz – As I said above, that call is good weekend protection AND it still has 1/3 premium so too early to roll. 

    DIA covers/Samz – I’m still wishy-washy with 1/2 $103 puts as cover but I’m aggressively playing DIA puts at the moment, looking for a retest of 10,300 or, hopefully, the lows of the day at 10,280 by my 1:30 target.

    TBT/DMan – What was the point of selling March $49 calls?  They offer virtually no protection at all and if you sell .50 a month of premium between now and June you only offset $1.50 of your longs.  Your problem is you take these incredibly aggressive positions right off the bat and then, when you have a loss – you seek to cover in such a way that you make it impossible to make a gain.  Had you done a vertical in June (although I already told you September would have been much safer) then you’d be thrilled to see your March caller take a hit while you remain relatively unscathed but now you have a deep call with tons of risk and no cover.   I’d scrap the position and move to a more conservative spread, either the Sept bull call we looked at yesterday or the following:

    TBT – I like getting in low here with 10 Sept $47/53 bull call spreads at $1.90, selling 5 March $48s for .40.  Collecting .20 per long per month between now and September knocks off $1.20 of the basis for net .70 with a $6 upside – worth the risk!

  44. TmDecay

    Phil…What’s the USO put holding period plan today.   Do we close with a dime or more or hold thru the weekend?  My inclination is to close since I don’t like holding oil puts through the weekend with the propensity for both real and BS events that will push up oil.

  45. chaps

    RE: TM/Gel – I’m sticking with my $65 target to start accumulating.   That spread is fine as the Aprils are rollable but if they do drop fast you are not in a very good position.  How about betting the people who are speculating on the April $75s are fools and selling 5 of those for $3 ($1,500) against 3 Oct $85s at $3 ($900) for a $600 credit and you just DD the Jan $85s if TM breaks over $75, using that as a stop line.

     
    Phil: To clarify: did you mean DD the Oct 85s, switching on/off from 3 to 6 longs using $75 as the trigger in either direction?

  46. pstas

    TMDecay- TBT- agreed- prudence is warrented. I have plenty of dry powder since I am no doing much on the strangles. Entering the TBT put trades with an eye to rolling/DD.

  47. cwan120

    Pstas: Thanks for your encouragement.  I just made the move.
    Judah: I did the same thing in Jan.  I got impatient and sold strangles at pretty low prices just days before the big dip.  I am still managing those positions now.  On the other hand, when VIX went up, I didn’t have enough powder left to deploy.
     
    In this business, you gotta learn patience really fast!

  48. jomama

     Phil, do you have a good ACI spread for a new entry?  I know you picked it last week (i think on your sick day)

  49. CXTrading

    I’m not sayin’ but just sayin’:
    TBT – Oct 2nd low of 42.24; currently trading at 46.80 = +10.80%
    TLT – Oct 2nd open (equivalent of the above low) 100.28; currently trading at 91.86 = (8.40%)

  50. gel1

    Sold some April 47 puts on TBT. This "flight to safety" trend will not last much longer IMO. There is a lot of talk in the currency markets about the US debt levels and the coming weakness of the dollar. The "phantom" purchaser of the bonds at recent auctions is our own Fed, and many of the traditional buyers (including China) are staying away. The party is winding down, and only the drunks are left.

  51. XLF'd

    Guys,
    I’m selling the MAR10 UAUA 17.50 Callers NAKED for 0.70 credit.  Any last minute thoughts?
    - XLF’d

  52. Phil

    TBT/Pstas – It’s a long-term bet and we can roll and roll puts until interest goes up.  Hard to worry about.

    Safe haven/TM – I agree, that’s what can keep TBT down for a long time but, after a while, it will be RELATIVELY safe – as in we’ll have to pay investors 5% for a 20-year note and other countries will be paying 7-10%.  This 3% BS cannot last unless the Fed prints another $2Tn this year and, if they do that, then inflation will take care of us anyway…

    SPWRA/RMM – I’m waiting for Obama to make a speech that’s pro-solar so I’m giving him 2 more weeks. March $20s are still .65 of pure premium, why cap your gains to $19 in exchange for .75?  If you are in SPWRA as a REAL long-term investor, then you realize that collecting .65 a month for 12 months is $7.80 or a 39% return on a $20 investment and, as a savvy investor, you may have deduced that 39% is GOOD and, since you have learned not to be a greedy bastard and you have learned not to be a nervous nelly who panics out of his positions every time some idiot analyst doesn’t like your stock – then I know you will confidently wait for the $20 caller to expire and methodically sell another .65 in premium next month and brag to all your friends how you can make 39% in a flat market while holding onto a stock that is probably going to go up in value for the next 20 years

    USO/TM – I’m a little greedy to be taking a dime myself but, if it’s anything more than a fun bet then you are a fool not to take a 25% single-day profit when it’s offered.  A very wise man (not Yoda or Schrodinger) once said "When in doubt, sell half" and I would say that’s very good advice if you intend to stick with it over the weekend.  Don’t forget, I’m planning to go bullish at 1:30, which gives us just another hour to get our sell-off. 

    TM/Chaps – Yes, adding or subtracting 3 Oct $85s at the $75 line, which, of course, we’re not expecting to have to do at all. 

    Can CNBC possibly promote curling any more?

    LOL Cwan!

    ACI/Jo – I’d just sell the Apr $22s for $1.20 to get started.  If they break over $23 (50 dma) then you can enter at $23 and sell the Apr $23 calls for $1.60 (the price of the current $22s) for a net $20.20/21.10 entry with the stock already at $23

  53. judahbenhur

    Gel, "and only the drunks are left"..LOL, great image.

  54. CXTrading

    TBT performed 1.3X not 2X over that time (as expected there to be drift)
    If you apply a similar logic to the Sept Call spread AND expect to gain the full premium
    53.00/46.75-1 = 13.37%/1.3 = 10.28%
    Thus TLT would have to decrease roughly by 10.28% over the same time frame or to $82.50
    In a trade that relies on that much delta I would lean towards structuring something with TLT and leave the TBT trades to selling premium when the ratio option volatility between TBT & TLT is significantly greater than 1.3X

  55. JRW III

    Just like yesterday, today it’s 62.66 on IWM that will give you direction to the close. Look for a flush, then buy the oposite direction. R1 is 63.21, S1 is 62.42

  56. jomama

     phil, i like spwra 2011 Jan 15 puts for 2.35.  I know that you can roll down to this, but i like the margin of safety, combined with the margin requirement.  Plus at 12$, GE will buy these guys, immediately.

  57. judahbenhur

    JRW, Thanks. I watched your play yesterday with admiration. I’m playing today, not watching.

  58. Phil

    Hey – here’s my seller!  Volume 80M at 12:30, 90M at 1pm is normal for slow prog day so any accelleration over 10M per half hour would indicate some real activity. 

    TBT/CXT – Yep, it’s an ultra and it does decay, no question about that.  That’s why it’s CRITICAL to sell premium against longer positions, not just sit on it. 

    Also, note that the WSJ had an article today about "EVERYBODY" on the short side of the Euro so today you have a bunch of "savvy" investors using that ground-breaking information to take long positions and that’s messing with the currency markets

    UAUA/XLF’d – Just make sure you buy the stock if they break over $17 and use that as a stop line unless you don’t mind rolling them along.  It is a crazy premium…

    SPWRA/Jo – I have nothing bad to say about buying them that cheap.  Not sure GE would be interested though. 

  59. RMM

    PhiL: good SPWRA comment, still like to get your interpretation on option rolls, I usually roll only when premium down to 20/39 cents or high gain/75% plus)
    TXS

  60. RMM

    What is news triggering the drop in DIA ???

  61. jcmcn5

    Phil — I know we’re just looking for nickels and dimes on the DIA puts, but I have 20 of the 102 at a cost of $1.08, now at $1.15.  At the risk of receiving one of your profit taking lectures (stated affectionately of course), don’t you think it’s worth holding for perhaps a little more than a nickel (after commissions)?

  62. drumkeerin

    dear phil
    I am long the DXD the  April 31 call at 2.2 minus .50 on the Feb callers. My present caller is the March 32 at .60. Do you think I should roll down this early in the game?  (my basic problem in my DXD trades is that I took gains as they presented themselves, rather than sticking with your April -26/34 vertical call, which is now looking like a bullseye. I neglected to notice  the total hedge aspect of your trade)

  63. jomama

     I think John Harwood should be Obama’s next press secretary after Gibbs burns out.

  64. jcmcn5

    DIA March 102..  I sold them for $0.08 so spare me the lecture :

  65. jcmcn5

    supposed to be a smiley face on the end of previous post. 

  66. jburgess

    jcm- I used to have a friend from Sout Africa (JoBerg as they say) who had a saying:  "Watch after the your nickel and dimes, and the dollars wil take care of themselves." Of course, he’s the same guy who would say "Don’t sleep with monkeys or you’ll catch fleasl"  Don’t mind me, I just thought I’d share.

  67. tradinv1

    Phil, what are your thoughts on CME as it approaches 300?  How about a similar Call Spread/Put sale to the AAPL trade you recommended yesterday?

  68. oncmed

    Phil,
    ….your words of wisdom for FLR,  post earnings?  Im thinkin of selling some puts (jul or jan) for entry….TIA

  69. ocelli7

    Phil, it’s 1:30 and it’s starting to move…..do we get DIA calls yet?

  70. jcmcn5

    Burgess — yeah yeah, I know.  My in-laws are from Scotland.  Surely you’ve heard of how cheap the Scots can be?  My mother-in-law accumulated a $1 million net worth on her iron worker husbands intermittent salary.  I shit you not.  I on the other had, and a greedy risk taker.  Maybe that’s why I’m broke!.
     
    Anyway – I did take the profit, let the record show.

  71. ssdirk

    Hey Gang,
    I am in Keystone on the slopes.  I left yesterday morning early with the futures way down and arrived in Keystone with the vix down and the RUT up.  I am sure I missed a fun one.  Fellow stranglers – at least our strangles are melting away.  JRW and judah give TZA/TNA hell without me.  I will be back Tuesday.  Enjoy and have a safe weekend everyone.
    ss

  72. roberthjrfl

    Keystone is the best – I learned to ski there!

  73. Phil

    Rolls/RMM – I’m saying if you buy back your caller for .30 12 times a year you are spending $3.60 on your $20 stock.  Does that seem like a good strategy to you?  The only reason you should be buying back a caller early is if you feel that the caller you roll him to will pay you more money per day than if you leave the current caller or if you feel that the long-term value of your stock has dropped and you are no longer adeqately covered but, if that’s the case, why are you in the stock? 

    News/RMM – The news is it is lunch-time and my fund manager want’s to get back to cash before he goes home for the weekend. 

    DIA/JCM - Well I just took a .03 profit on my $101 puts so I may not be the best guy to ask that question.  I still have my $104 puts but I’m probably out of them at 1:30 unless they are looking VERY promising.  It all depends on how you look at the trades.  I look at the day trades like something I will do 30 or 40 times a month and if I make a nickel each time that’s $2, which is a 200% gain on a single $1 trade.  I have a high likelyhood of making a nickel 30 or 40 times and a low likelihood of making 200% but the nice thing about trading 30 or 40 times is I MIGHT still get lucky and make 200% anyway on a really obvious and easy drop but, meanwhile, my itchy trigger finger keeps me out of trouble while I wait to get lucky.

    Also, If your current broker can’t cut you a deal on index ETF trading (and they can differentiate), then check out Option House, which gives you 100 free trades (promo code "FREE100") to try them and still offers a flat $10 for 10 contracts or $8.50 + .15 per contract so about a penny per contract net (and if you are doing big volume you can still negotiate flat rates).   Their platform isn’t great but for getting in and out of an index spread you don’t exactly need a mission control center…

    DXD/Drum – We do have rules about taking callers out when you are up more than 50% with more than 2 weeks to expiration so yes, you should have a stop on him BUT what is your plan on this trade?  The Apr $31s are down to $1 and you collected .50 + .30 if you buy back the caller at 50% which means you are in a losing trade by .40 out of net $1.40.  If you are going to adjust, I’d sell the Apr $30s for $1.30 and spend $2.30 to roll down to the July $28s which puts you in the $2 spread for net $2.40 with 3 more months to roll (and $1.50 in the money as opposed to $1.50 out of the money). 

    Press Secy/Jo – Now there’s a fun job!

    Lecture/JCM – Good job!

    CME/Trad - CME or ICE may get the nod to exchange derivatives and fly up in value but they also may not and I’m not very pro-commodity trading so not too excited about CME at $300 but, if you are, you can go for the Jan $260/300 bull call spread for $23 and sell the $260 puts for $23 so you are effectively committing to buy the stock for a 20% discount at $260 OR you make $40 at $300, which is not a bad risk/reward, especially considering you can roll the Jan $260 puts down to the 2012 $230s (the lowest they have) at $26.50. 

    FLR/Oncmed – I do not like that sector with oil at $80 and they have been super-weak considering.  I’d stick with SLB, who just had a nice sell-off and should outperform long-term.   You can sell the March $60 puts for $1.20 and then roll ‘em along if you have to. 

    1:30/Ocelli – I’m disappointed with the lame sell-off but I guess that was it.  Volume at 1:30 is 96M on the Dow so very low so I suppose fishing for some DIA $104 calls at $1.05 with a DD at .95 and giving up if we fail 10,380 is a good plan but absolutely out by the close no matter what.

  74. doubled

    Hi Phil,
     
    I have EDZ July 4/6 2010 in at .99 now around 1.06.  So you think it is worth holding this position?
     
    Donna

  75. Phil

    Lawmakers are debating today whether to use $30B in bank-bailout funds to try to help small banks lend to small business, as Treasury’s Herbert Allison testifies, or to allocate it straight to the SBA to loan out to companies. "Why give money to banks when they’ve proven they aren’t going to lend?" says one businessman supporting the SBA plan.

    Some German lawmakers say any German aid for Greece would be via state-owned lender KfW Group buying Greek bonds. Those bond purchases, which would be guaranteed by the government, would be part of emergency European measures that could provide up to €25B ($34B) to Greece.

    JP Morgan’s (JPM) Jamie Dimon says it’s California you should worry about, not Greece. “Greece itself would not be an issue for this company, nor would any other country… [but] there could be contagion” if California were to have problems servicing its debts. IF??????

    Did Goldman’s Friedman game the system?
     

    WSJ says major hedge funds have launched large bearish bets against the euro, mimicking some trades made at the height of the U.S. financial crisis. But Felix Salmon labels the story "sensationalist." In the event of a euro demise, the near-collapse of the dollar in the 1930s could offer a blueprint for recovery.

    Fed’s Hoenig wants rates at more normal levels and worries that its near-zero interest rate policy has dangers of its own. “I don’t consider it necessarily in our interest to assure the markets that rates will be zero and they can play the yield curve… because that invites speculative activity." (video)

    "It appears as if the market declines of 2008 and early 2009 are being treated as nothing more than a bad dream," GMO’s James Montier writes. Here are the 10 lessons the markets should have learned from the collapse.

    While the vast majority of ETFs track widely-followed equity and fixed-income benchmarks, there are a number of funds that track non-traditional "intelligent" indexes. Performance results overall have been mixed, but ETF Database has found seven alpha-seeking ETFs that have crushed their benchmarks.

    "Wireless simply cannot be described as a growth industry any more," says Bernstein Research, citing measly 2.6% growth in 4Q09. The report says 2010 expectations "look too optimistic," suggesting lower-than-forecast revenue growth at Verizon (VZ), AT&T (T), Sprint (S), T-Mobile (DT) and others.

    The Justice Department’s chief antitrust enforcer says health insurance companies may lack competition, endorsing a House-approved measure to revoke insurers’ federal antitrust exemption.

    Scots/JCM – Those guys are amazingly good savers.  I always like doing business with Scottsmen.

    Keystone/SS – If you have time, try getting a dinner at the Fondue place on top of the mountain.  You take the gondola up at night (and you can night ski too) and it’s a really fun place with good food.  Also, if you haven’t been to Vail, it’s totally worth the drive.    Enjoy your trip! 

  76. Phil

    EDZ/DD – Well you expect to make $1 over 5 months so .20 per month and you are on track and $1.60 in the money.  Unless you have a strong feeling they can’t hold $5.06 then you have little to lose by giving the position some time. 

  77. JRW III

    SS
    If you get to Vail, go to Snowmass and ski Bull Run; my favorite of any in the world, VERY FAST !!   Have fun.

  78. RMM

    Phil:
    have CVX stock, base 74.7$, nothing more,
    am thinking about opening either covered call or sell put: what do you think ?

  79. judahbenhur

    JRW, Got in TNA (62.66) and out when IWM couldn’t hold 63.  Maybe premature, but I’m out of practice and I’ll take the quick money.  Thanks for the line.

  80. where

     SS
     
    Another reco for runs in Vail is out the gate skiers right off Pete’s chair in Blue Sky Basin.  Catches lots of the windblown pow and has some nice mellow cliff drops and trees.

  81. JRW III

    Judah,
    I got in at the same point, and I’m still in; you should have made $ 1.25, 3% or so on that trade, well done !

  82. Cap

    Time to look at shorting REITs here.  SPG, SLG, VNO, etc.   Buying SRS.     SPG has been up almost the past 2 weeks.   Very silly.  I am sure their malls are packed today.
    CNBC — shameless Olympics promos.
    They only have 3 advertisers — Your Marketing Sucks (about 20 times / day);  Chase, and Ally/GMAC.

  83. JRW III

    Cap / Buying SRS
    I have some old SRS 9 / 14 bull call spreads if you’re interested !!

  84. Peter D

    Hi short strangler folks,
    Sorry that I’ve been busy with work, and it’s a good day to check-in.  Today is a great day for short strangles as the premium drops on both the putters and callers.  So I have a bunch of GTC order to reduce my short strangle holding, freeing up the dry powder.  As the VIX getting lower, we have learned to reduce our positions, so that we have the buying power for a higher VIX.
     
    Talking about that I did ask TOS to restore my PM margin to the old level.  It seems to improve, but I don’t know what they did exactly.  We just need to be careful as Penson can impose some other margin overnight.  We still get a good deal from TOS compare to OptionXpress on portfolio margin though.  Can’t complain there.
     
    judah/10:23 comment,
    The market looks like it’s easier to go down than going up, so I have a negative Delta positioning as usual.  Reducing the portfolios is what I’m doing today and early next week.  Hey, I have a tracking trick that works well.  I would note down my short strangle positions in a spreadsheet, then put in the "reserve margin" as a parameter (20k, 15k, etc. for SPX), and I can see how much my accounts are loaded.  Over 100% loaded would be red, 50-100% loaded is Yellow, etc.  At a glance, I can tell what I need to do for days like today.  Of course, we can do this with the TOS Analyze Tab, but it’s quicker for me to see which accounts are more loaded than others. 

  85. bgbigelow

     BIDU Back Ratio – Phil what do you think of the idea of doing something like selling 1x april 530 put and buying 2x april 490 put at about a $3 credit.  The premiums seem pretty low for something so volatile and it will pay off in a pull back and just close it next week if we don’t get a pullback?
    Thanks.

  86. Phil

    Go TASR! 

    CVX/RMM – As I have said before, I think they are too gassy and I don’t see nat gas rebounding very much.  At least they have a nice dividend but I’d lock it in by selling the Jan $70 calls and $65 puts for $11, which drops you to $61.50, making $8.50 if called away, and CVX would have to go over $80 for you to make $8.50 otherwise so not bad.  If you get it put to you at $65, then your average is $63.25, which is closer to a fair price for CVX if oil were back at $65. 

    CNBC/Cap – Someone should put them out of their misery already – maybe Comcast will tear it down and start from scratch. 

  87. Peter D

    robert/judah,
    Thanks, judah.  That’s the exact answer that I would give.  I think the 0.8c rule is from either pstas or ssdirk (I usually got them mixed up with the many s’s in their login names).  It’s in fact a good rule, especially when you have to wait the whole months to get 0.8, meaning you’d be better off selling the next month for more than 1.6 (2 x 0.8).
     
    cwan,
    Leaving the RUT Mar 540 or not is depending on your margin level.  Phil said close them out, but leaving them open is also an option, especially when we are in a waiting mode for VIX to go up.  If VIX does go up, the March 540 doesn’t gain much as the Theta would kill it, while the April 540 put would go up a lot.  Bingo, you can roll from Mar to Apr for a lot more credit than you would today.
     
    Oh, my buy back short strangles orders starting to execute, i.e. at this time of the day, the premium erodes quickly.  Back to meetings for the next 2 hours.

  88. DKGuy

    Phil, FCX seems to have had a couple of up days. Any reason to change the short bias ?

  89. TmDecay

    What do you think about selling FCX naked 80 calls at 0.95?  Cu’s at 3.27.

  90. judahbenhur

    Peter D, Thank you.  That’s the point I was trying to explain in my response to Robert.  I think I’m doing roughly the same thing as you describe with your tracking trick.  I’m green to go right now if the VIX will cooperate.   

  91. Phil

    BIDU/BG - It’s a sensible way to play it but it’s also a very volatile stock that could jump $50 on you one way or the other overnight so just make sure you are willing to deal with the potential mess. 

    Volume on Dow is just 113M at 2:38 so we’re chugging along at pathetic.  Still very stickable but no stick in sight so far.

    New York snow is making for the lowest NYSE volume of an already low-volume year. Stocks are just above flat now, but if traders bail out to start their weekend, it could mean more of what we’ve seen: a no-volume float up into the close. 

    TOS/Peter – Yes it sucks that we now have to toss and turn every night wondering how much margin will be left in the morning!

    FCX/DK – We hit goal at $71 yesterday.  Now waiting to go short again at $77.50.  Might not get back there but copper is back to $3.28 and if they hit $3.30 again next week, FCX should make it back up. 

  92. judahbenhur

    JRW,  Good luck and thanks again.  I probably should have had Faith in the Stick today.

  93. TmDecay

    DAX, CAC abd FTSE all had late sticks today.  Granted they were catching up to our late afternoon recovery yesterday but I still think we get at least a small stick.  I hope so for my 112 SPY calls.

  94. matt1966

    Phil, congrats on the call for today  Looks like they didn’t want to risk dropping it too far in the am but oh well.  It’s definately been up from there.  FAZ is now at 17.58.  Crazy.  With Monday being the first of the month isn’t there a fair amount of inflow from funds on the first day?  Just wondering if I should stay covered over the weekend or risk a bearish posture which I definately want to be in come Tuesday..

  95. kustomz

    This market is lame, i feel like a homeless guy standing on the corner with a coffee cup 
     

  96. DKGuy

    Thanks Phil

  97. Cap

    JRW …. depending on how much time you have, those could come back.  Doesn’t look good right now.
     
    SLG right here is the short entry !!!

  98. RMM

    Phil: cover for DIA protective puts for weekend???? I have 2/3 cover with mar 104 puts. what is your take ?

  99. Cap

    GS HAL9000 relentlessly grinding and holding this market up.
     
    Will anyone press the sell button today ?

  100. morxlntway

    FYI Phil – just got out of that FSLR trade i messed up earlier this week. Even made some change!

  101. Phil

    Weekend/Matt – I’m all for being wishy-washy as Monday’s are crazy and we didn’t get enough of a pop today (still 30 mins left) to have a good short for the weekend.  At 10,420 on a nice, fake stick, I’d feel good about holding $102 puts over the weekend but 10,350 is a little iffy.

    I am holding onto my USO puts, more chance of bad news in Europ boosting the dollar and crushing commodities than not.  In addition, the run-up is silly anyway. 

    You need a squeegie Kustomz – much more entrepreneurial…

    At this point I’m done looking for gains on the Dow and just looking to close out my puts

  102. deano

     Phil
    I have UNH 20 Jan ’11 leaps, fully cover with mar 33 callers and mar 32 putters. Basis on the leaps ~12. Its very tempting to take out the putters here – what do you think?

  103. JRW III

    Out of TNA, nice $26K for the day; have a great weekend all !

  104. Phil

    DIA/RMM – I’d roll 1/2 the $104 puts to 2x the $102 puts which should be better than even for you.  That gives you lots of room for a drop and you make the same on a move up.  Or you can just lighten up to a 1/2 cover. 

    FSLR/Morx – Nice job sticking with it!

    UNH/Deano – I wouldn’t.  It’s $1.20 in premium between the puts and the calls.  Why turn it into a directional gamble when you can just collect $1 a month in premium on your -.12 investment?  Unless you really don’t want the chance of UNH being put to you but, realistically, you can roll to ANY Apr combo for $3 and your combo is $2.20 so as long as there’s a .80 spread between your March and April combos – what do you care what strike you roll to?  All that matters is you make your .07 per trading day gain on the premium until it really is time to roll. 

    Nice job JRW -  Have a great weekend!

    Whew: Jamie Dimon (JPM) is apparently no longer subject to arrest in Atlanta in connection with illegal tire dumping.

    Obama taps four more for the White House’s part of the deficit-cutting panel: Honeywell (HON) CEO David Cote, former Fed Vice Chairman Alice Rivlin, union chief Andy Stern and former Young & Rubicam Brands CEO Ann Fudge. Congress will add 12 members to the administration’s six; Sens. Dick Durbin, Kent Conrad and Max Baucus are already in.

  105. cwan120

    Hi, Peter,
    Thank your for your replies.
     
    One question: How do you maintain a negative delta?  Do you keep more short calls open than short puts?
     
    As far as the 0.80 figure, I might be the one who first mentioned this several months ago.  There is no magic about the number.  It’s just a rule-of-thumb number that I can take a quick glance and decide what positions to close or roll.  Another rule of thumb is the famous 50% PSW rule: If a position is 50% in profit, close at least 1/2 of the position.

  106. Phil

    A fading dollar has helped push copper yet again – with futures up 2.2% – and the metal wraps up its best month since August (up 7.1% for February).

    Fighting to hold green into the close but a last ditch push is coming in to try to keep us over some key technicals -  not a bullish signal despite holding our bounce levels (mostly).  It would take very little for us to get pushed off the ledge here by some bad news

  107. gel1

    Andy Stern as one of the distinguished members of the deficit reduction panel ? I now completely give up any hope I previously had for this administration. Why not put the town arsonist in charge of the fire department.

  108. Phil

    I’m leaving my DIA $102 puts over the weekend but, obviously, a gamble…

  109. TmDecay

    gel1…. I couldn’t believe it either that Andy Stern is on this so called deficit reduction panel.   Just goes to show what a joke it is!

  110. Phil

    Whee, what fun!  

    That was a very lame finish with 130M shares (1/2 the day’s volume) trading in the last 10 mins on the Dow and it looks like it was all Mr. Stick could do to keep us from falling hard. 

    RUT was down a bit, Dow flat, Transports were best performers on railroad fever but that’s just silly given the stats I posted earlier.  We’ll see how things shake out next week but nothing to be bullish about based on this week’s action. 

    Time for me to go sledding with the kids!

    Have a great weekend,

    - Phil

  111. judahbenhur

    Gel, Agree completely.  The country needs a 3rd party that can gain traction at the national level.  It won’t happen, of course, which is why I am moving to the PSW island, whenever that gets set up. 

  112. where

    Cap
    Nice call on that SPG!

  113. DKGuy

    Everyone needs an AYN Rand strategy. I implemented mine 4 years ago when I retired.

  114. TmDecay

    Nice intraday trading calls this week Phil.   You have me hooked on trading SPY options analogously to your DIA moves.  I paid some tuition the last few weeks but I think I have the hang of it.  Don’t be greedy and be happy with 0.05 to 0.10 and sometimes you’re lucky with much bigger moves.   Thanks for the training.

  115. Peter D

    cwan,
    That’s right, it was you on the 0.8 rule of thumb.  Sorry about that.
     
    For this month, the negative delta was achieved due to the big cushion on the put side and a much smaller cushion on the call side.  That’s SPX 970 putters (12%) and 1160 callers (5%).  It’s a little close on the callers side, but they looked great when SPX was down at 1060.  I have been refraining from rolling the putters higher up, and that refraining works well.  The number of callers are not more than putters currently.  For a side trade, I’m watching the SPX Mar 970 put closely next week and will sell more if VIX jumps (just the short puts).  Those are lucrative plays with 2 to 2.5 weeks left to expiration, with the assumption that the market doesn’t drop 12% on us within 2 weeks.  If the market does drop, we can always roll to April.  If VIX doesn’t jump, then I just close out the March short strangles.
     
    Have a good weekend!

  116. cwan120

    Options House: I just re-read today’s post, and saw Phil mentioning Options House.  They are not bad, EXCEPT they don’t accept GTC spread orders.  That’s a big killer for me.

  117. Phil

    Bespoke commodity round-up:

     

  118. Cap

    Gel / TmDecay.  That would be Andy Stern, head of SEIU as a key member of a deficit reduction panel.  How obscene that is.  Of course, the panel itself is a joke; just an excuse for O to claim he is doing something, while doing nothing other than taxing, spending and bankrupting us.
     
    Gel, unlike you, I simply never had any hope in this administration.
     
    check out http://hopeychange.blogspot.com for some relevant political commentary on issues of the day.
     
    I find that I can’t even keep up with all of the objectionable material that mr. happy and his minions provide.
     
    Photo of the day found here:    Courtesy of something called "Very Demotivational", which seems very apropos.
     
    http://verydemotivational.com/2010/02/26/demotivational-posterssocialism/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+VeryDemotivational+%28Very+deMotivational%29

  119. Cap

    where:  SPG.   Thanks.   The REIT pumping is again out of control.  Plus, that was a good pattern to trade.  If the market cracks, those are gonna be some kick butt shorts.

  120. Cap

    Must read this on Steve Friedman (NY Fed / GS).
     
    Martha Stewart actually went to jail, for far, far, less than this.
     
    http://www.thenation.com/doc/20100315/kaufmann
     
     
    Phil – take note – The Nation !   :wink:

  121. Phil

    This is interesting, 10% jump in Tokyo open gold contracts in last 2 days of the week, which gave us such a spectacular move off the 1,088 mark (again). 

    Gold

    Here’s a nice view of the "efficient" market in Palladium:

    Palladium

    Don’t worry about oil – Our boys in NJ are working on turning water into fuel!  The science is highly debated but they wrangled $60M in financing to pay for lots of cool-looking equipment…  I’ve been getting a lot of these things sent to me now that Bloom is getting attention.  Bloom is deployed in tests at many companies so it’s either real or a fantastic con – something I do worry about when companies deliver black boxes the size of mobile homes.  Bloom runs on nat gas by the way so if it does work out – nat gas prices will have a much higher floor.   By the way, Bloom is, of course, yet another product of NASA development – it was originally designed for the Mars program.  No wonder the oil-backed government has been hacking away at America’s last great government R&D facility – the nature of space exploration leads them to look into energy efficiency and alternative fuels and we can’t have that can we? 

  122. Phil

    This is just in from the FT:

     

    Germany recorded a budget deficit of 3.3 per cent of gross domestic product last year, one point more than the most recent forecasts, but still well below the level for most of Europe’s larger economies.

    According to the figures released by the Federal Statistical Office on Wednesday, it is the first year since 2005 that Germany has breached the Maastricht stability and growth targets, intended to keep deficit spending by European Union members to less than 3 per cent.

    However, the outcome is more likely to be criticised by other EU members for demonstrating how tight a rein Germany has kept on public spending in the midst of the current economic crisis.

  123. Phil

    Banks in Carson City, Nev., and Tacoma, Wash., become the 21st and 22nd FDIC-insured failures of the year, at a combined estimated cost to the Deposit Insurance Fund of $103.1M.

    Fannie Mae (FNM): Q4 EPS of -$2.87 beats by $0.77. Revenue of $5.8B (-3%) vs. $4.3B. (PR)

    "Unlike residential housing, there is no political will in Washington to subsidize a mall developer or office landlord. That is a good thing" – David Kotok, expecting large and continuing losses on CRE, but with adjustment less costly to taxpayers than "the protracted demise" of Fannie (FNM) and Freddie (FRE).

    This is going to be EXPENSIVE:  The automaker says it will pick up and return affected vehicles nationwide and provide alternate transportation during the time owners are without their car. Consumer Reports says owner loyalty is losing ground to Honda (HMC). TM closed +1.3%; was down 0.4% AH shortly after the close.

    Apple’s (AAPL) iTunes – introduced in 2003 – celebrates its 10 billionth song download (Johnny Cash’s "Guess Things Happen That Way"), all at roughly $1 a pop. Meanwhile, back in the rest of the music industry

    Is it possible for investor sentiment to get even more neutral this week? Yes – indicators of a flat market ahead.

    Antitrust? Don’t look at us, look at those guys over there! Microsoft (MSFT) goes public with direct requests for increased scrutiny of Google (GOOG) – a contrast to a more stealthy approach when its European property Ciao complained to EC regulators.

    Gatorade (PEP) joins Accenture (ACN) and AT&T (T) in cutting ties to Tiger Woods.

    This is interesting, rising rates send p/es lower pretty fast – another reason TBT is a good portfolio hedge:

    Of course, market p/e’s are tricky as a few big losses (or gains) can skew the whole thing. 

    I love it when my articles get the ball rolling!   Washington Post article from today (FDIC to test principal reduction for underwater borrowers):

    “The Federal Deposit Insurance Corp. is developing a program to test whether cutting the mortgage balances of distressed borrowers who owe significantly more than their homes are worth is an effective method for saving homeowners from foreclosure.

    The program would be aimed at a growing population of homeowners who are underwater on their loans, estimated at more than 20 percent of borrowers, or 11 million homeowners. Economists consider these borrowers among the most vulnerable to foreclosure, and some industry officials worry that more of them will simply walk away from their mortgages, or “strategically default,” rather than spend a decade or more trying to regain positive equity.

    Under the FDIC program, borrowers would be eligible for a reduction in their mortgage balances if they kept up their payments on the mortgage over a long period. The performance of those borrowers would be compared with borrowers given more traditional mortgage relief packages, such as those that cut the interest rate on loans.”

    Totally great article detailing the Treasury Auctions – this will help you understand what goes on!  Observations of the week’s action (from this perspective) indicate a flight to safety usually seen ahead of and during a market crash.   

  124. Phil

    Turkey has been turned upside down by the arrest of military officials in a planned coup plot. The country’s military was formerly responsible for preventing the growth of Islamist politics in the country, which is what the coup was supposedly aimed at.  The result is that Turkey has been destabilized and its E.U. ascension has been put in further doubt. With a further 11 arrests today, the amount of military officials wrapped up in the plot could continue to increase next week.

    Argentina and the UK have been clashing this week over the moves of a British oil company around the Falkland Islands.  The disputed territories could become wrapped up in the UK elections, which are due by May at the latest, and could continue to exacerbate emerging problems between the US and Britain. U.S. Secretary of State Hilary Clinton will be meeting with Argentinian leaders next week to try to mediate the situation.

    Right now everyone in Europe is focused on the so-called PIIGS. But here’s something else you should pay attention to: Austria. Here’s a country that’s decidedly in "rich" Europe, but it’s got a shakey banking system with exposure to Eastern Europe.  If you’re thinking about contagian, don’t think about who has a cold now, think about who might get a cold in six months to a year.

    This week China announced plans to tighten personal credit for consumers and the currency is pointing higher, suggesting the country might announce further tightening measures.  There is also the potential for currency peg modifications, which could emerge next week, and greatly impact the purchasing power of Chinese consumers.

    The pound continues to slide downward as belief in Britain’s ability to maintain and better its fiscal position wanes.  UBS is saying that dramatic cuts could kill the pound and it seems quantitative easing might be back on the menu for the UK, potentially leading to further declines next week.

    Protests struck the Greek capital of Athens this week with further signs that the country’s people are unwilling to accept the difficult economic terms their government is proposing.

     

    Europe continues to slide into further confusion over the subject, as key players like Germany have failed to come to a decision on how to act.  Europe and Greece will be forced to take action on the issue sooner rather than later as speculators continue to circle the troubled country.

    The joys of ChinaUnprecedented protest by mostly middle-class demonstrators comes at an incredibly sensitive time for Shanghai. The city is hoping that the World Expo, which has cost a staggering £35 billion, will catapult it on to the world stage.  The collaboration between property developers and local governments to forcibly evict people from their homes is one of China’s most sensitive issues. In the past few months at least three people have set themselves on fire to protest at the unfair seizure of their property.  "My house was on the main site of the Expo. They waited until we left home one day and then knocked it down," said Mr Han, 54. "I have not had any payment for my property and, because I complained, my son was refused entrance to university and then to the army. I am unemployed, and so is my wife and my son. We live on the bare minimum, around 500 yuan (£47) a month."  Often, the water and electricity are cut off to homes and then the owners are beaten up by thugs.  

  125. Phil

    Turkey has been turned upside down by the arrest of military officials in a planned coup plot. The country’s military was formerly responsible for preventing the growth of Islamist politics in the country, which is what the coup was supposedly aimed at.  The result is that Turkey has been destabilized and its E.U. ascension has been put in further doubt. With a further 11 arrests today, the amount of military officials wrapped up in the plot could continue to increase next week.

    Argentina and the UK have been clashing this week over the moves of a British oil company around the Falkland Islands.  The disputed territories could become wrapped up in the UK elections, which are due by May at the latest, and could continue to exacerbate emerging problems between the US and Britain. U.S. Secretary of State Hilary Clinton will be meeting with Argentinian leaders next week to try to mediate the situation.

    Right now everyone in Europe is focused on the so-called PIIGS. But here’s something else you should pay attention to: Austria. Here’s a country that’s decidedly in "rich" Europe, but it’s got a shakey banking system with exposure to Eastern Europe.  If you’re thinking about contagian, don’t think about who has a cold now, think about who might get a cold in six months to a year.

    This week China announced plans to tighten personal credit for consumers and the currency is pointing higher, suggesting the country might announce further tightening measures.  There is also the potential for currency peg modifications, which could emerge next week, and greatly impact the purchasing power of Chinese consumers.

    The pound continues to slide downward as belief in Britain’s ability to maintain and better its fiscal position wanes.  UBS is saying that dramatic cuts could kill the pound and it seems quantitative easing might be back on the menu for the UK, potentially leading to further declines next week.

    Protests struck the Greek capital of Athens this week with further signs that the country’s people are unwilling to accept the difficult economic terms their government is proposing.

     

    Europe continues to slide into further confusion over the subject, as key players like Germany have failed to come to a decision on how to act.  Europe and Greece will be forced to take action on the issue sooner rather than later as speculators continue to circle the troubled country.

    The joys of ChinaUnprecedented protest by mostly middle-class demonstrators comes at an incredibly sensitive time for Shanghai. The city is hoping that the World Expo, which has cost a staggering £35 billion, will catapult it on to the world stage.  The collaboration between property developers and local governments to forcibly evict people from their homes is one of China’s most sensitive issues. In the past few months at least three people have set themselves on fire to protest at the unfair seizure of their property.  "My house was on the main site of the Expo. They waited until we left home one day and then knocked it down," said Mr Han, 54. "I have not had any payment for my property and, because I complained, my son was refused entrance to university and then to the army. I am unemployed, and so is my wife and my son. We live on the bare minimum, around 500 yuan (£47) a month."  Often, the water and electricity are cut off to homes and then the owners are beaten up by thugs.  

  126. Phil

    The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody’s Economy.com. And that’s after plunging more than 27% in the past three years.  The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities. But the Fed’s program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates.  Any resulting rise in rates will cause some buyers to withdraw from the market and others to look for lower priced homes. Either way, demand for homes drops and so do prices.

    Very Big Deal:  Starting Monday,the jobless will no longer be able to apply for federal unemployment benefits or the COBRA health insurance subsidy.  Because the Senate did not act, the jobless will now stop getting checks once they run out of their state benefits or current tier of federal benefits.  That could be devastating to the unemployed who were counting on that income. In total, more than one million people could stop getting checks next month, with nearly 5 million running out of benefits by June, according to the National Unemployment Law Project.  "Right now, the 1.2 million workers who will lose benefits in March are being held hostage by partisan attempts to delay and block this critical legislation," said Christine Owens, executive director of the National Employment Law Project.  About 11.5 million people currently depend on jobless benefits. Nearly one in 10 Americans are out of work and a record 41.2% have been unemployed for at least six months. The average unemployment period lasts a record 30.2 weeks.  "Those benefits will expire, but the need to heat their homes and put gas in their cars doesn’t expire," said Senate Majority Leader Harry Reid, D-Nev., on Friday. "Those benefits will expire, but the need to take their medicine, or support an aging parent, or take care of their children doesn’t expire.

    gold-chart.jpg

    Notce on this Problem Bank List that the #1 reason for being a "problem bank" is CRE Lending!

    Restaurant operators reported softer customer traffic results in January. Twenty-six percent of restaurant operators reported an increase in customer traffic between January 2009 and January 2010, down from 30 percent who reported higher customer traffic in December. Fifty-four percent of operators reported a traffic decline in January, up from 47 percent who reported lower traffic in December.
     

    [RPIJan2010.jpg]

    Nice take on market manipulation on Thursday by Zero Hedge

  127. Phil

    Great summary of this week’s health care debate in the Times:

    Republicans came out ahead … They did not look like hell-bent obstructionists. This isn’t to say that they tried to meet the president halfway. They didn’t even try to meet him a quarter of the way. Repeatedly they called on him to start over. The president tried to get the room to focus on areas of agreement, and though several Republicans—notably Sen. Tom Coburn and Rep. Dave Camp—worked in that spirit, several others (hello, Reps. John Boehner and Eric Cantor) did not.

    “In terms of who ‘won’ today’s debate, I tend to think Republicans actually accomplished much of what they needed to do today,” writes liberal commentator, Greg Sargent at the Plum Line. “It seems likely that some Congressional Dems will be just as skittish tomorrow as they were yesterday about moving forward alone via reconciliation. That means Dems still have an enormously difficult task ahead.”

    But Sargent thinks this is an illusory victory: “Obama listened politely for six hours, with occasional flashes of temper, but in the end, the message was clear: It’s over. We’re moving forward without Republicans.”

    Here’s video highlights of the Summit.  The official party line from Mitch (Dir. of Organizing America) is:

    Yesterday, the President extended a hand to the Republicans and showed he’s open to any idea that will help cover the uninsured, cut costs, and give Americans control over their own health care.  But he made clear that the millions of Americans who cannot afford insurance can’t wait on political games in Washington. After this meeting, all ideas are on the table. Now, Congress must move swiftly to complete and pass a final bill.

    It was a conversation focused on substance, not process, and it showed. Both sides found areas of agreement.  But there was a fundamental divide on establishing common sense rules to protect families from the worst insurance company practices, and making sure that every American — rich or poor, old or young — has access to care.

    The President does not believe we can address a problem this big incrementally — or after another year of rising costs and loss of coverage.

    So that’s where we stand at the end of the week – about the same place we were.  I think the Dems are angling to pass something with or without GOP cooperation and if you want to debate the issue – go watch Fox because they seem to be doing it all day and I’m in no mood – I’m just letting you know what’s up.  There will be reform so stop arguing about it and start thinking about how $2Tn is currently being spent and how it will be spent in the future and let’s figure out how to make some money on it.   More testing is the easiest thing I see – 35M new patients = more testing and no one seems to be looking at the cost of testing as a big issue the way they look at the cost of treatment so labs should do very well for a whille.  More on that when I have a chance to research it but if you have any ideas – let’s hear them!

    Buffett’s Letter is out today so I am very excited.  For me, this is like getting a letter FROM Santa! 

    John Mauldin’s article on the main page is a must read!

    Also a must read.  I read this article 3 times.  One time I read this article with my feet on the headrest and my head on the floor – just to make sure I was getting my perspective right.  I don’t want to spoil it (it’s like giving away the plot of a good film) other than to say that this is so freaky that I have to verify it, even though I completely trust the source – it’s that strange..  "Defying Global Slump, China Has a Labor Shortage."

    The Times also has a great article on new ways to use cell-phones with a possible hint of what CSCO will be talking about in March.  Smart phone component makers will be good investments – all dumb phones will be cycled out over the next couple of years (do you want a phone that DOESN’T work a vending machine?).

    I have lots more to say but not today.

    Have a nice weekend,

    - Phil

  128. gel1

    Cap
    Regarding my misplaced hope for the administration… My hope was different than most – I was hoping they would not COMPLETELY screw it up, but now, my hope has vanished.

  129. pstas

    How to make money from the health care fiasco? Let’s see,  more debt;  higher taxes; more debt; more government interference in an ever larger sphere of the economy; more debt; slower economic growth; more debt. OH, and the government will have to issue more debt to pay for "free" coverage. Current short term interest rates on Treasuries are near zero, I wonder if there is a good way to short Treasuries?

  130. Cap

    Gel — LOL.
    I think most Obama skeptics had that hope, however misplaced it was.

  131. pstas

    Assuming this ugly monstrosity does pass, remember that it is 2000 some pages so who knows what is lurking within that woodpile. It is way too early to pick winners and losers. Taking a macro view, however, adding 30 MM some to the equation will pump up demand for services without a concomitant expansion of supply so there should be price/cost pressure from product and service providers. Do I hear price controls ? Just one option which would hang over the general economic analysis. Team Obama has already floated this trial balloon in the CA / Wellpoint case. Just one guys opinion but this could be, a couple of years down the road, exactly what "they" are seeking, I.E., cost pressure/price controls/large scale distortion ( as always occurs when artificial price controls are in effect) followed by another crises to which the :"only viable solution" would be total nationalization.
    So, another macro factor to consider is that winners/losers will be determined to a greater extent on political considerations over fundamental economics.
    My view is this is a huge mistake but I am beyond debating the merits. Whatever is going to happen, lets get it done so we can move on to figure out a way around it. In fact, I may consider a trip to Greece to pick up some pointers on gaming the system.
    http://www.victorhanson.com/articles/hanson022610.html

  132. matt1966

    Phil, I agree with you about John Mauldin’s article.  Nearly $1T in bank reserves?  But you still can’t push a string.  All they want to do is buy bonds, milk the yield curve and play the stock market.  This was the same situation during the depression.. which resulted in Glass-Stiegal.  Can you believe it’s been nearly 100 years and we’re slowly coming to the same conclusion?  Boy, are we smart!
     
    I say if the gov’t takes away proprietary trading by commercial banks, they will lend more and we will have a more believable stock market.  And if they take away CDSs.. we might not even have to bail their asses out again. 

  133. 1020

    Thanks for all the weekend work Phil….

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