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Thursday – The Pain in Spain will Hardly be Contained

The S&P downgraded Spain yesterday.

That sent our markets tumbling to the day’s lows and rightly so.  After all, how much better does our economy look than Spain’s (8th largest in the world)?  It’s certainly worse on a debt to GDP basis by a wide margin and so is Austria, Belgium, France, Germany, Greece, Hungary, Italy, Ireland, Japan, Netherlands, Portugal and, of course, the UK – who are particularly worrying because they also have one of the largest bank assets to GDP ratios (570%), which means the country would be hard-pressed to stop a major slide in the financials, which is what, ultimately, undid Iceland.

Wouldn’t it be lovely if we didn’t have to worry about these things?  We’ve grown accustomed to facing Greek debt and no one is even asking why can’t the English pick a government but just you wait, because it will take more than a little bit of luck before this market is off to the races and we can once again dance all night instead of worrying about what’s going to happen in the morning.  Until, then, we’re going to be staying mainly in cash, although some would say that ain’t nothin’ but trash - so we hedge it with TBT, of course!

Yesterday morning’s news prompted me call for an EDZ hedge in Member chat, which is an ultra-short on the emerging markets and Spain’s very close ties to South America make it a very prominent domino if things begin to fall apart.  Things are already falling apart in China, where the Hang Seng dropped another 170 points this morning and 200 of them came after lunch, right into the close.  That drops the Hang Seng all the way to 20,778, down 1,000 points (just under 5%) since Monday and now 7.5% below the April 12th high at 22,400.  India also got whacked for 1.7% and the Shanghai continued to tumble while Japan was mercifully closed today:

If this set of charts made you spit coffee on your keyboard, you are not alone – that’s what happened to me when I pulled up the 2-month set this morning!  Yes, this is the planet Earth – although obviously not a part of the planet covered by the US media, nor part of the planet where the FOMC (not you Hoenig – you are my hero!) says:

  • Economic activity has continued to strengthen
  • Business spending on equipment and software has risen significantly
  • Financial market conditions remain supportive of economic growth
  • Inflation is likely to be subdued for some time
  • The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability

Here’s what a joke the Fed has become.  There is no mention of the Fed’s 2:15 statement yesterday on the front page of the WSJ (other than one of their bullet items) or in their on-line version or the NY Times or even Bloomberg as the Fed has pretty much lost all credibility to the point where they barely even move the markets any more.  Already the Federal Reserve Bank of the United States of America has sunk to the same level as the Bank of Japan – who have been little more than the excuse to run a printing press for the past 20 years as Japan has racked up a World-record debt to GDP ratio of 200% - making Greece’s 105% ratio look responsible by comparison.

picOf course Japan isn’t the only problem this year.  National governments, according to Forbes, have issued over $1Tn worth of debt in Q1 of 2010 and are on track to issue $4.5Tn in new debt this year – so 10% of the global economy is now deficit spending, this is triple the rate of the past 5 years and it’s accelerating rapidly as major debtor nations like Germany and the US bail out the little ones like Greece and Ireland as they start to fail so we are "solving" the debt of small countries by increasing the debt of big countries – what can possibly go wrong with this plan?  Oh, by the way, Europe is flying higher this morning along with the US futures because Greece is "fixed" again!

We’ll be watching the CAC to see if they can get back over that 50 dma at 3,900 and the FTSE needs to retake 5,600 and hold that while the Dax is bouncing nicely off of their 50 dma at 6,000.  As I mentioned yesterday, when we looked at the US index charts, I’m comfortable within that range between the blue and red lines but the US indexes are WAY over lines and need to consolidate at least through earnings but not today, as the fabulous Fed came out and saw the shadow of a pullback and declared 6 more weeks (until the next meeting, at least) of MORE FREE MONEY. 

Could you imagine how totally screwed our economy would have to be in order for our Central Bank to tell us that we can look forward to "exceptionally low levels of the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability" and we still couldn’t make new market highs?  Listen to the MSM – companies are beating earnings at record levels AND the Fed is going to keep lending out as many Trillions as will be necessary at 0.25% OR LESS!  How would you like that deal for your business?  Take a few Billion, buy something.  If it doesn’t go up, pay the 0.25% with the next few Billion you borrow and try something else.  If that fails, Borrow a few more Billion,  pay the 0.25% interest and try something else.  Eventually, you may find something that works, all you need is a small positive winning percentage… 

Goldman's Win PercentageGoldman Sachs finds things that work for them 93% of the time.  Boy those guys must be smart!  In fact, for all of 2009, there were only 19 trading days in which GS lost money with 244 days tucked into the win column.  On 130 of those days, GS generated more than $100M in profits at their trading desk.  Do Goldman’s clients win 93% of the time?  Of course not!  Goldman’s clients, as Lloyd Blankfein explained to Congress, are big boys and take risks on both sides of the transaction so they pretty much come out even in the "zero sum game."  Why is it then, that GS comes out at 43% better than even and who are the zeros they are taking their $100M per day from?

The biggest zero is, of course, our beloved Uncle Ben, who hands GS as many Billions as they may need through the "discount window" at zero percent, so they can use it to game fix manipulate play the markets.  Ben doesn’t mind because this is a good game for him – Goldman pays him back and makes him look good as the Fed gets to say they made a "profit" of $45Bn last year.  That’s very nice but when you lend out $2,500,000,000,000, even at 0.25%, you are going to accidentally make a few Billion in "profits."

So, who is the biggest loser in this game?  Why it’s you of course!  You, through the auspices of the US Treasury, borrow money every day.  In fact, just yesterday you borrowed $42Bn for 5 years and paid 2.54%.  That money makes it possible for Uncle Ben to hand over our borrowed cash to Goldman Sachs and other Banksters through the aptly named discount window, where they pay 80% LESS than we do to use the money.  Some banksters turn around and lend our money back to us for quite a bit more than 2.5% and some banksters run a street con, like Goldman, and spin the little market wheel round and round every day where, coincidentally, their number always seems to come up. 

It was a funny coincidence that the markets tanked when GS was called to Congress to answer for their actions and the market rallied back as soon as Congress let Goldman go and the Fed gave them a parting gift of MORE FREE MONEY.  At PSW we found it EXTREMELY funny because we are cynical bastards and , as I said to Members in Tuesday’s with the Dow down 150 points:

For those of you with margin, you have to love the DIA $110/112 bull call spread for $1.03, selling the $107 puts (another 350 points down) for .84 is net .19 on the $2 spread that was in the money yesterday.  Not a bad bet on a recovery but it chews up $1K of margin so if  a quick profit presents itself, that’s worth taking.  This is a play now on Blankfein’s powers of persuasion later.

That play was already up to .33 yesterday, up 73% in 24 hours and should be even better this morning.  As I often say to Members – We don’t care IF the game is fixed, as long as we understand HOW it’s fixed so we can play along.  In fact, I closed Tuesday morning’s post saying: "Boy, I just can’t wait for the Fed to tell us just how super everything is tomorrow, can you? So lots of drama but Greece can be fixed in an instant and the post-Senate analysis could be a crushing victory for Goldman Sachs and the Fed can say nice things and we still have 900 earnings reports to chew the green shoots of this week so I guess it’s time for another 566% play this morning."  I mean, come on people, with GS winning 244 out of 253 trading sessions, it’s not a big stretch to figure out the playbook, is it?

As I said though, today the play is back to cash.  We took our unhedged plays on both sides off the table yesterday as the Spain downgrade got me nervous and this morning it looks like we’re going to have such a nice pop that we’ll be back to asking ourselves, as we did (thank goodness!) on the weekned: "Should We Take Profits At 300%?" on our more complex spreads like the one above (and I’ll save you some trouble – the answer is "YES").  Cash doesn’t mean sitting on our hands, cash means flexible.  Cash means being able to grab opportunities like the chance to sell BIDU calls to suckers this morning and the chance to short oil at $85 again

Whatever you do, just be careful out there!

 


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  1. japarikh

    Phil,
      I’m short May APPL 250 calls at $12.50. I’m down about $4 with plenty of time to expiration. I was thinking about a roll up to the May 260s of 270s b/c I feel that they have a better chance of being out of the money at expiration. What are your thoughts? Thanks.

  2. balancenv

     Phil,
    Trapped in BIDU Sep strangle (630c/550p). luckily I have may 600/620 call spread to somewhat relieve the pain. 
    I am thinking of just roll the call to Jan11 740 or even Jan 12 7xx and leave the Sep 550 put along. Who know what will happen down the road toward year end. 
    Then sell front month put to buy bull call spread, like sell May 650 put to buy may 700/720 call spread. 
    I think there will be waves (already) of upgrades and target raises plus the 10:1 split dated 5/10 will provide the stock more upside momentum.
    Please advise on this plan. Also I am concerned the Jan11/12 LEAP will not be too liquid after the split. but then there’s no other choice, do I? 
     
    Thanks

  3. lflantheman

    Geez!!!   Hope not too many out there shorted BIDU.  That sucker up 14% after hours!  Glad I let that sleeping dog lie through earnings. 

  4. lflantheman

    Phil….Good query from balancenv……What’s the logical play on BIDU now?  I certainly don’t think it’s to short it.

  5. phlit

    Mornin Phil, What is todays entry into EDZ? Thanks.
    Phil

  6. lflantheman

    Momentum trades:    The BIDU blowout may make tech giddy today and I’m expecting a rise in APPL, AMZN and (maybe) GOOG.  Either of these could provide a momentum trade for the day.  I’ll be watching them carefully this morning and will let you know my entry if it happens. 

  7. daveo

    spwra up almost 4% this morning

  8. Phil

    BIDU/Balance – $630 calls are $77 and can be rolled to 2x the June $720s at $35, which I’m for.  I also like selling those calls naked as a new entry.

  9. gucci

    BIDU-  do you recommend to roll all my caller may, june , sept and jan11 700 caller to day into the excitement and keep the same month shot put 500 alone, no margin left to roll 2x now.  thx

  10. lflantheman

    Momentum plays ARE:   AAPL   55 calls   June 250 in at 19.45, watching.   GOOG  20 calls June 530 in at 24.10, watching.  

  11. Phil

    Good morning!

    Still watching our levels at:  Dow 11,000, S&P 1,200, Nas, 2,500, NYSE 7,600, Russell 725.  3 of 5 over is the minimum to be "bullish" even though theres a lot of BS in that bullishness…  SOX 400 is also key to get really bullish.

    S&P is on the cusp of 1,200 and Nas wil probably go green first if we’re heading straight up.  I am still for cashing out upside bullish spreads that are up 100% of more because I REALLY don’t trust this rally to last through the weekend.  They need Spain to give Greece $5Bn and Portugal has to give Greece $1Bn so it’s just an insane arrangement and it all falls back on Merkel, who is now in political hot water because the Germans are disgusted by this whole thing so they could flip or flop this weekend. 

    Let’s call copper the real economy and they can’t get back over $3.40 after topping out over $3.60 last week.  Oil hit our shorting target of $85 on the futures (/CL contract) and we take out nickel losses over that line and re-enter at $85 until it works but that’s a bad plan if you don’t have the discipline to take your dimes on the other side of the trade.   Oil can also be shorted by selling USO $41 calls for .95 as that’s the $85 line on oil that we don’t think will hold.

    On the DIA mattress plays, if you sold May puts to cover, it may be a good idea to set .10 trailing stops as we’ve done well with them and this time make sure you roll the July position up to the $114 puts, which are $5.10 at the moment, down from $6 yesterday.

  12. snow

    Phil, what are you using for oil plays? Only one I’ve used so far is USO.

  13. RMM

    Phil: my BIDU jun580 put naked made a quantum jump, closed now,
    what about DVN with expected earnings to be reported on May5, triple from a year ago, ?????buy calls or sell puts ?

  14. ban2

     Phil
     
    which BIDU calls do you like selling naked? both?
    BIDU/Balance – $630 calls are $77 and can be rolled to 2x the June $720s at $35, which I’m for.  I also like selling those calls naked as a new entry.
     
    thanks

  15. tradansh

    Phil – BP getting smacked down, probably on the Gulf of Mexico oil spill news. Crossed it’s 200dma now. Would you recommend any trades now or wait for the dust to settle in?

  16. tradansh

    SPWRA having a nice gap-up today, probably because of FSLR.

  17. Phil

    AAPL/Japar – I think you mean May and June?  I don’t like the idea of running out of the $250s at the top of the range.  If you are so bulish on AAPL then you can sell the June $250 puts for $6, which have a .42 delta to your callers’ .78 so they won’t hurt you on the way down and the .36 differential still gets you your $4 back on a $10 drop.  Of course I do like rolling the May $250s ($16.70) up to 2x the $260s ($9.90) but only, of course, if you are comfortable with that margin and have enough left for another roll, just in case. 

    BIDU/Iflan – Actually it is very logical to "ALWAYS sell into the initial excitement."   The June $720s are $10 out of the money and are going for another $35 so that’s $755 to break even.  Those in turn can be rolled to the Sept $800s without even accounting for premium decay.  The VIX is still at 19.5 and if the markets keep going up, that will come back down and deflate the calls and, of course, like above – if you are that bullish, you can sell Sept $600 puts for $26 to balance things out. 

    EDZ/Phlit – You don’t need to take a big risk on the hedge, the Oct $38/44 spread is $1.90 and you can sell May $38 puts for $1.15, which is net .75 on the $6 spread and you have many months to roll or, if successful, re-sell and collect more put profits.

    AAPL flying now, being used to bull the Nasdaq back to 2,500 but it’s not enough. 

    SPWRA/Daveo – I still love those guys!

    BIDU/Gucci – I’d buy back the $500 puts.  At .30 it’s not worth the margin.  You can roll the caller up to 2x the $720s, as above, or you can sell the December $600 puts for $42 (better than Sept now that I see them) which should have no more margin than the $500 puts did yesterday and you can use that $42 to roll your $700 callers a little higher but ONLY IF REALLY NECESSARY – ie. they have lost 2/3 of their premium. 

  18. chyer

     Hi Phil
    I totally agree with you on this BS rally, China tanking like a brick, actually tanking off a wedge today if I am not wrong, this actually gets no news. I am starting to wonder who is the real communist country here. The fact that the FED has not come out to give excuses for a poor GDP makes me worry on taking any shorts today. what do you think?

  19. jason_l

    Hi Phil
    Re BIDU: surely selling the 720 calls naked is very dangerous: one could wake up one morning and find that BIDU is subject of a bid by (for example) Microsoft, or Google, or somebody else – is that not at least a possibility? At $720 * 100 for even one contract that’s $72000 of stock, if there is a 30% premium in the offer that’s a lot of cash to be on the hook for.

  20. phlit

    Phil, whats your current take on VLO?
    Phil

  21. cwan120

    How do you watch copper’s price?  Thanks.

  22. Pharmboy

    Interesting chart showing the unemployment rate and rating of bonds…..Hope the link works.

  23. gucci

    hi Phil what you mean is wait for a few day BIDU may get profit taking and possible go below 700 before may expiration??  is that what you mean by only if nes and also I still have decent premium left in the short call at the same time  thx, what about other months like june and september 700 short call, just wait too early to adjust today ???

  24. Phil

    Oil/Snow – I like the futures as you don’t have to mess around with spreads but they can be nerve-wracking and you need a very tight stopping discipline or you can get killed.  USO can be rolled, the futures cannot. 

    BIDU/RMM – Very nice! 

    DVN/RMM – We did them last week didn’t we?  I think it was the Jan $60/75 bull call spread, now $7 and selling the $60 puts, now $4.50, which is net $2.50 for a $15 spread and a nice way to play $68 DVN bullish as long as you REALLY want to own them for net $62.50 in Jan

    BIDU/Ban – We already sold the $630s yesterday for $40, now $77 so down $35, rolling them to 2x the June $720s at $35 each keept $28 in our pocket and pushes the callers back out of the money.  The new entry I like is the short sale of the June $720s and you can hedge that with a 1/2 sale of those Dec $600 puts at $42.

    BP/Trad – They could get a multi-Billion clean-up bill and fines and may be appearing before Congress where drilling can still be a major political football (I sure want my Senator protecting my beaches!).  So not bullish on any of those guys right now but also too scary to short. 

    SPWRA/Trad – That’s what we figured yesterday, a combination of Spain and fear of FSLR was bringing them down.  Last time we played them was a June $17.50/20 bull call spread at .85, now .65 and selling the June $16 puts for .75, now .95 so I still like that play very much.

  25. Pharmboy

    /HG on TOS – cwan

  26. cwan120

    BIDU / Jason: Do you think somebody might want to pay $700/s for a company that makes $2/s earning?  Nah…
    But on a second thought, Ballmer might do it.  Why not!  That’s the only way to beat GOOG!
    8)
     
    Seriously, I think Jason has a point.  BIDU is dangerous, either up or down.

  27. daveo

    I HATE this market.  0.10 trailing stop on my DIA covers.  Wouldn’t you know it.  As soon as I buy them back the market reverses 0.13.

  28. daveo

    Well the calls reversed 0.13

  29. EricL

    I mentioned this yesterday, but there are elections in North-Rhine Westphalia Germany on May 9. This state is a major source of support for Merkel’s CDU party and she doesn’t want to anger voters there by talking about a Greece bailout.
     
    But after those elections something might be cobbled together, so we need to be careful about getting too bearish over the next week, IMO.

  30. Phil

    Like a BRIC/Chyer – LOL, even if it wasn’t intentional!  Cash is king with the GDP tomorrow and the Fed in full BS mode.  And don’t forget the Gang of 12, who have been very quiet this week and may be standing ready with 1,000 upgrades tomorrow morning, as soon as they have an excuse to raise their already 1,300 average S&P projections.

    BIDU/Jason – Anyone can get bought (in theory).  On that bais you should never sell naked calls at all.  Nor should you sell naked puts because companies can also go BK overnight or have PFE-like meltdowns.  Obvioulsy, if you don’t have $72,000 to play with, then it’s ridiculous to be in this stock at all.  This is why margin is a bad thing – nobody should play with stocks that can blow out their portfolio on a black swan event. 

    VLO/Phlit – I always like VLO but much more so at $18 than $20.  They don’t have a big dividend (1%) though so you can virtually buy them with a Jan $17.50/22.50 bull call spread at $2.60 and sell the $17.50 puts for $1.30 for net $1.30 on the $5 spread and worst case is you own them for net $18.80.

    Copper/Cwan – In TOS it’s /HG in the futures.  I think you can get a free TOS account and still use their Futures screens, which are very nice.

    BIDU/Gucci – I mean you only HAVE to roll a caller when it’s not worth keeping.  As a rule of thumb, that’s when the premium is less than 1/3 of the price.   Way too early to worry I think.

    Whee, Nat gas with a big build so shorting oil at $85.15 (very risky).

  31. Phil

    Selling OIH May $130.85 calls for $4.

  32. lflantheman

    The a.m. momentum plays are over:  
    AAPL   55 June 250 calls in at 19.45  out at 22.50        profit       $16,500
    GOOG 20 June 530 calls in at 24.10   out at 23.50       loss       $1,200
    These are my only 2 plays of the day so far.  I will not trade these stocks again today.   

  33. phlit

    Phil, I sld the May VLO 20 Puts and the 19 Calls and I think its time to roll the callers.  Looking at Sept 20 or 21. Your thoughts?
    Phil

  34. Pharmboy

    GS May $160 C for $5.5 for a swing trade.  25c trailing or out by EOD.

  35. Pharmboy

    Never mind.  Moved down right as I was posting….

  36. gucci

    premium phil — do you look at the  TOS option platform — like sept 700 short call side intrinsic 9$ and extrinsic $65.26  bid/ask 73.1/74.7 — the premium is the intrinsic value which is $9 now which is less than 1/3 of 65 — is this right or the otherway around — i still have $65 in premium left not $9 in this septtember 700 short call .  thx

  37. judahbenhur

    Phil/XOM. Just wondering what you thought of XOM’s earnings. 

  38. ssdirk

    judah – absolute perfect setup for my play today. 

  39. RMM

    Phil: the TNA stock against which I sold jun65 calls: TNA is over 67..5, when will the stock be called at 65 ?

  40. Phil

    Stops/Daveo – If you are setting hard stops, try setting .10 on 25% and .20 on 25% and .25 on 50% (or whatever proportions based on your max loss) as that averges out to .20 and you can do that at .05, .10 and .20 if you want to be tighter but I’m no fan of hard stops as the market will always spike ahead of a move.  "When in doubt, sell half" also means when in doubt – don’t sell half.  Generally (and that means not at all always) if I don’t see 2 10 minute candles forming against me, I don’t pay attention to the movement.  Of course that means that I have no reason to think the move is legit – based on news or something.  The very act of you setting a hard stop is like waving a white flag at the Market Maker saying you are willing to surrender your shares if he hits your price and that will greatly motivate him to hit your price so he can buy your contracts before he begins selling contracts to the orders he holds up.  How do you think these guys make a living?

    Bearish/Eric – Not me, I’m cashis and hedged for disaster (just in case).

    VLO/Phlit – I can’t imagine why you’d ven consider rolling May $20 puts you sold while they are still .40 and my attitude about rolling $19 calls when I have $1 strikes ahead of me it to pay .45 to roll them up to the June $20s so you are buying $1 of upside for .45.  Do that every month and you will be very rich – as long as your stock keeps going up, of course.  If you are not confident enought to take .45 out of your pocket to buy $1, then maybe you should just let the protection ride until you are. 

    See, now the market is going up and the OIH short calls have been disappointing but they can be bought back for $3.70, which is a quick .30 profit and it sure beats taking a loss for sticking with a trade that isn’t working.

  41. judahbenhur

    SS, Yup, I was going to mention it, but got distracted.  Nice down move to one of the TOS pivot point lines and then back up again.  I was keying on 72.50 so bought a small number of 73 calls for 1.24.  If it doesn’t hold 73, I’m out, though I should probably set up a trailing stop and go hit golf balls.

  42. judahbenhur

    SS, I’m out. I’ll reload later.

  43. ssdirk

    judah – I bought the 72′s for 1.86 now over 2.  I think we go over 73.

  44. phlit

    Phil Im not rolling the puts just the callers.  So what you are saying is rolling up $1 for .45 and one month is the best way to play it.  The .45 cost me (x50) $2250 but I stand to make $3900 on the putters so makes sense and cents. Thanks.
    Phil

  45. judahbenhur

    SS, I think we go over 73, but after a pullback, and I was in the mood for a quick profit.  What did you key off of this morning — the 5 min or 15 min candles?  Pivot points? JRW’s lines from yesterday?

  46. biodieselchris

    I know the world’s falling apart and all of this debt will never be contained … but with XLF at 16.50 and Jan11-20 calls at 0.29, this just seems cheap to me. Even as inflation hedge alone, holding a couple of these and betting against Phil’s Doom and Gloom doesn’t seem like a bad gamble….

  47. Phil

    Premium/Gucci – I don’t need a program to tell me the Sept $700 calls are $12 in the money!  That’s the right idea though, they have $12 of intrinsic value and the rest of the $75 is extrinsic or, premium.  So I wouldn’t even consider rolling those calls until they were at least $40 in the money so $740.  Of course, that figure changes as time goes on or the VIX goes down etc. etc.  Also, what do we really think BIDU is worth with their fancy projections of earning $10 per $700 share this year.  They now have a 95% market share – where exactly is the growth coming from?  This is classic extrapolation nonsense and if GOOG announces they have come to an agreeement with the Chinese government (or MSFT), then this could be one mother of a short play but not until Cramer and Co. are done herding all the beautiful sheeple into it. 

    XOM/Judah – Pretty much what we expected.  Totally great for the $67.50/70 spread! 

    TNA/RMM – It’s pretty rare to get a call exercised on you if you still have even a dime of premium and, if you do get assigned – then you keep the caller’s money and you get paid $65 more in cash.  Most likely, nothing at all happens until expiration day (21st). 

    I think we’re running out of gas here.  Make sure your hands and feet remain inside the car at all times!

  48. jcedens

     Anyone know why PG is down on good earnings on a day when the market is roaring?

  49. lflantheman

    Trading BIDU…..Selling June 720 calls.  I think you are right Phil.   Just too much up on earnings, and too overvalued.  Have to sell into the excitement, as you say.   Thanks.  

  50. oncmed

     Phil:
    Need your assistance repositioning BIDU:
     
    I am short-
    25 June 600 Calls@65    currently 118
    5 June 590@20                currently 5.50
    5 June 550@20                Currently 2.50
    5 June 510@20                 currently 1.30
    I am long-
    Jan’11 650/700 Bull Call spread @18            currently 24
    Q1: The June 600 calls have no premium left. Can you suggest a roll considering I have the Jan Bull call spread.
    Q2: Should I take profit on the putters or let them burn the residual premium
    Q3: Is there any need for an adjustment to the Jan ’11 bull call spread. I had bought it upon your advice as a hedge against just such a run up. Thanks a bunch for that.
     
    I don’t want to double up if I can help it since Im already in as deep as I am comfortable being.

  51. oncmed

     Phil:
    Need your assistance repositioning BIDU:
     
    I am short-
    25 June 600 Calls@65    currently 118
    5 June 590@20                currently 5.50
    5 June 550@20                Currently 2.50
    5 June 510@20                 currently 1.30

    I am long-
    20 Jan’11 650/700 Bull Call spread @18            currently 24

    Q1: The June 600 calls have no premium left. Can you suggest a roll considering I have the Jan Bull call spread.
    Q2: Should I take profit on the putters or let them burn the residual premium
    Q3: Is there any need for an adjustment to the Jan ‘11 bull call spread. I had bought it upon your advice as a hedge against just such a run up. Thanks a bunch for that.
     
    I don’t want to double up if I can help it since Im already in as deep as I am comfortable being.

  52. ravalos

    Phil, any suggestions with STD now that Spain is under the umbrella of problems?

  53. chyer

     Hi Phil
    Steels and Coals are tanking as the market is going up, China related?
    I read some where China leads the commods by 4 mths, should we take bearish plays on UYM?

  54. ravalos

    Phil, I have a May 370 / 400 Bull Call Spread on ISRG, and sold a May 340 Put. My net cost is 8.8 but I’m starting to doubt I’ll make this profitable, especially if the markets fall. I was thinking of selling my 370 long call for $10 and that would give me a profit of $1.2 and just leave the $340 put and $400 call naked until expiration. What do you think?

  55. tradansh

    Pharm – on the DCTH trade that you mentioned sometime back (sell May 12.5 puts for 85c), very little value left. So, sell the same puts for Jun (sell Jun 12.5 puts for $1)?

  56. yodi

    Hi Phil  FSLR got a shot in the arm of 19.00 today I am short Jun 130 sold the same for 4.31 now trading for 19.10
    Thinking to roll to jun 145 for a cost of 9.78 and sell the same amount of jun 10 for 8.70 net cost 1.08 your thoughts pls thks

  57. tradansh

    SPWRA/Phil – Already in that trade from your past recommendation. Waiting for the earnings now.
    BP – They have an 84c dividend next week. So, might make sense to wait and sell puts after that.

  58. Jordan

    All cash now, XOM spread worked well.  Thanks Phil.  Seeing XOM come back up a bit, but trying not to be too greedy.  Working on that LOL.

  59. Phil

    LOL, now Kudlow is saying FREE MONEY FOREVER.  What a totally scrweed up world we live in!

    Rolling/Phlit – Rule of thumb is spend .50 to make $1 whenever possible (but make sure you are more than 75% certain you’ll make that $1 or, even better, 93% certain like GS!) and, if you don’t have .45 to spend, then maybe you SHOULD let yourself be called away to generate a little cash.  By the way, things are never all or nothing, you can cash some and roll some so nothing is out of pocket.  Let’s say .45 is (with VLO at $20) 2.5% of your position.  That means every month you can reduce your holding by 2.5% and roll the rest up 5% so you would have (assuming it keeps going up) 102.5%, 105%, 107.5%, 110% and the good news is that when there’s a pullback, you drop 2.5% and stop out so you only lose the last month’s gains.  Of course that only goes for positive months too, on flat months it doesn’t cost you anything and you sell again. 

    XLF/BDC – I agree, that’s pretty cheap but it is still a 20% gain in Finacials just to get to $20 so I’d take early profits on a spike if it comes. 

    Speaking of Doom and Gloom – I have a plan to "fix" everything.  The US, Germany and Japan bail everyone else out in full and then default on their own debts (including all the new debt they accumulate bailing everyone else out).  What’s going to happen to them if they default?  Will people stop doing business with them?  Will people no longer lend them money?  Nope, after a brief period of adjustment we will be right back to normal but the entrie world will be out of debt and that should give us a good 20 years worth of "prosperity" before they screw it all up again

    PG/Jced – Maybe just safety stocks being cashed out in favor of risk? 

    BIDU/Iflan – It’s hard but you have to have a real target price in your head and stick to it (assuming facts don’t change) despite what the sheeple stampede into.  Take a look at how many pro-BIDU articles are originating from TheStreet.com.  That’s a big red flag for me! 

    BIDU/Oncmed – I’ll help you with  the first one but I have no idea what to do about the 2nd.  8-)   The bull call spread is worth $50, no matter what it says now.  The idea is that if you keep rolling your callers along and they stay in the money then you WILL get your $50.  You have WAY too many positions and they have WAY too little premium so I’d roll them all up to the June $680s at $54 and sell the Dec $600 puts for $43 (as few as you can feel comfortable with).  You have $20 cash and I think you have an average of roughly $100 per call so that’s net $80 and will be taken care of with some combination of $54+43.  Keep in mind the putters will be an anchor on your neck until they expire but better to have an anchor of $50 x 3,000 ($150K) of pure premium than an anchor of $100 x 4,000 – $400K of intrinsic you currently owe.  I like the Junes because it’s reasonable to expect a pullback that wipes them out and, if not, they can be rolled to the Aug whatevers and the Dec whatevers (currently the Dec $800s are $55) and, if you are rolling up the callers then your putters are expiring worthless and that, in itself, is good progress. 

    STD/Ravalos – Why does everyone want to give those to me?  We looked at them yesterday and they are already beaten down so its a flyer at best.  I would MUCH rather tie money up in EDZ with copper prices falling AND Spain issues.  Greek bonds can no longer be used as collateral by banks and that means they are scrambling to build assets (the ones that have actual accounting rules, that is, not our beloved US banksters), some of those banks are Spanish and they may begin having trouble and then Spanish bonds will be scrapped and that may put the UK under and then their notes won’t stand up etc. etc… 

    China/Chyer – Better to go long on SMN.  These were a rough ride last time we playted them and we were lucky to get a spike in mid march after rolling them down twice.  Now they are lower than that and I like taking a stab a the June $30/34 bull call spread for $2 and the stock is at $33 so we have no reason to sell puts unless they go down so we can target selling the July $29 puts, now $1.25, for $2 on a dip.  That would give us a free ride on the bull spread and a rollable short put to get rid of.

    ISRG/Rav – I agree.  If you have the margin and don’t mind rolling out the winner (or loser depending on your viewpoint) then you have about a $20 per month cushion.

    FSLR/Yodi – That’s why I don’t play them into earnings.  I’m not understanding your "sold the same" comments.  You sold $130 puts for $4.31, now $19, right?  Oddly enough, their strong guidance cites strong EU demand.  Before you roll, you should let the upgrade patrol have their fun although it’s probably safe to sell the Sept $125 puts ($8.15) to ease the pain.  Then you can roll to the appropriate June calls ($140s are $11.25) once you decide that they are not going to pull back.  Of course I prefer the 2x roll to the June $150s that’s risky with these guys if you don’t have a ton of rolling power to play with. 

    SPWRA/Trad – Good plan on the waiting!

    Cash Jordan – Absolutely the way to go.  This bullish move was a total gift to get out of anything you couldn’t get out of ahead of the big drop (maybe because you were busy testifying in Washington). 

  60. Phil

    By the way – Disaster Hedges nice and cheap now – good time to scale in! 

    Oil finally hit $85, nice break after going the wrong way at first.  Out even ($85.15) if it doesn’t break lower.

  61. ssdirk

    Phil – This oil spill will negatively impact me living on the gulf coast, as well as my family living in south Louisiana in a tremendous way.  However, it does supply a good analogy for the overall bailout that most people don’t understand once you mention CDO’s or CDS’ (you know the look when their eyes glaze over), but if you put it in this context they might.
     
    BP and other large oil companies decide to try risky drilling because the easy money has already been made.  Even though they know that drilling at such depths can cause severe damage to coastlines and wildlife they get congress to allow them anyway through the work of their high paid lobbyists.  Just as expected everything goes wrong.  The damage to the unsuspecting coastline, wildlife etc is incalculable not to mention the way of life and source of income for untold numbers.  The situation soon becomes to big for the oil company to manage and has to ask the govt for help.  The govt recognizing the severity of the situation quickly rounds up $1T dollars in order to stem the pain.  Now the govt can either give the money to the people directly affected by this major eff up or it can give it to the oil company to help with the stoppage and clean up.  But the oil company has another card up its sleeve.  It says, "Govt. if you don’t give us the money we will soon be broke and not be able to stop the spewing of this toxic chemical into the gulf.  Besides, we are the only ones who know how to stop it."  So the govt bends over and gives the money to the oil company.  However, instead of using the money to stop and clean up the mess they instead pay themselves big bonuses.  They also use it to drill more of the same risky wells in order to recoup some of their losses.  They then charge the same people whose lives they have destroyed more money for the oil that they are now producing using the bailout money from these same people.  Oh and by the way, the placed side bets that this exact thing would happen.
    How you like them apples?

  62. Pharmboy

    DCTH/Trad – I don’t know how much you have, but at this juncture you pull the plug and wait.  Otherwise, the May $15 P are $1.05 now and if they hold it, great, if not they can be rolled to your suggestion.  My premise with DCTH is not the application with the ONE drug, but with ALL chemo drugs for solid tumors!  I do believe any device or generic pharma company will take a serious look at them and say the risk is worth the reward. JNJ is a prime co.  Market cap is only $460M or so.
     
    Tons of support at 13.  Profit taking is going on here, and a small pullback is most likely in the cards.  Phil may have a better play, but I am inclined to take the money and run.

  63. humvee4me

    Phil, tried a quick /CL trade   sold short and put a $.05 stop; it got to within $.01 of stopping, turned down and I changed to a $.05 trailing stop and I rode it down $.25, then it bumped up and I stopped out at gain of $.20/contract   Is that how you’re suggesting or did I put the trailing stop too tight?  Thanks as always

  64. Phil

    More of "God’s work" coming to light: 

    As Bruce Krasting disclosed yesterday, Goldman’s Josh Birnbaum "slipped" when disclosing the firm’s prop equity positions, in listing the companies his firm was actively shorting. We hope none of these were naked shorts as that would not reinforce the case of prudent risk management by Goldman’s discount window-accessible hedge fund (in other words, the entire firm).

    Today, via the full exhibit list, we learn that in addition to Bear Stearns, in July 2007 the firm, via Josh, was also actively shorting a variety of other mortgage-related firms at the Structured Products Group via puts, which in addition to Bear, included Moody’s, National City, PMI, WaMu, and Capital One. The firm only had a micro S&P long offset.

    As the list demonstrates, the firm had a big delta short in fins offset with no financial longs, thus refuting Josh’s testimony that this was a "hedge" when in reality this was nothing than a directional short bet on fins. What is more troubling is that Josh was planning on expanding the list to a whole slew of other firms, and specifically competitors, most of which eventually going under: including Lehman, Merrill, and Morgan Stanley

  65. cwan120

    Hi, Pharm,
    Just read your TA on Gaps!  Very nice!
    I am collecting all the chapters.  Is "Gaps" Chapter 8?  My collection says Chap 7 is "Basic Patterns".  Did I miss anything?
    Thanks!

  66. SeanC

    Phil: thanks for the XOM trade - now the puts and calls act exactly the way they should!  Now do we just hold till expiration?

  67. yodi

    Phil I am talking about calls not puts  my puts are fine slod the 95 putter for 3.59 now .38 which I am going to cash out possible
    he
    yodi
    April 29th, 2010 at 11:42 am | Permalink  
    Hi Phil  FSLR got a shot in the arm of 19.00 today I am short Jun 130 call sold the same call for 4.31 now trading for 19.10
    Thinking to roll to jun 145 call for a cost of 9.78 and sell the same amount of jun 10 calls for 8.70 net cost 1.08 your thoughts pls thks

    re again

  68. lflantheman

    Phil/  BIDU….Thanks for keeping me FOCUSED.  This market is all about TIMING>   One of the things you teach is to learn to change your tactics as the market changes.  I believe the tactics right now for this market involve short-term focused trades.  The news just whipsaws the market around so much that nothing else seems to work well.  Anyway, thanks for keeping me ‘on track’ with my thought processes.  

  69. salvum1

     PHIL / EDZ
    WOuld you adjust the strikes on the EDZ disaster play since it is down almost 3 from orignial entry.
    Also, are you still trying to hold your nose for long plays? haha

  70. Pharmboy

    TA handbook/cwan – PDF will be out when all chapters are done for members.  I think I have 3 more to finish up, so no need to collect them.

  71. cwan120

    Phil: I like your idea of US, Germany, etc, bailing out everyone else and then default all of their debts.  Let’s short DOW for a 10,000-point drop and make money the hell out of it!
    8)

  72. bgbigelow

     VNO – Clearly I should have closed out the short 80 calls yesterday.  Any further thoughts on VNO phil?

  73. salvum1

     Phil / TBT
    Also, on the TBT disaster play, been trying to fill at 1.00 but no luck – entering it as a multi legged spread on TOS.  I know yesterday you said that you would set at the offer but that was then.  Also, in order to do that. would have to enter each leg separately.  Soooo – what to do? thanks

  74. judahbenhur

    SS, IWM looking like one of those Screen Play days.

  75. tradansh

    Pharm – Already took the profit off on the May 12.5 puts. Was trying to make some more money. ;)

  76. ravalos

    Phil, I sold May $80 calls in VNO for $2.1. The stock just reached 85. Should I consider some adjustment? Thx

  77. Phil

    Have you guys seen this?

    This is why these earnings are a joke.  None of the underlying data supports the earnings increases we’re seeing for companies doing business in the US other than massive cutbacks in labor costs, price inflation and industry consolidation – bigger pieces of a shrinking pie is not a BUYBUYBUY premise

    Lots of noise on a GS settlement now.  Sounds like $1-2Bn fine and then back to business as usual.

    A guy just made a good point to me.  Goldman was shorting housing and had huge bets on housing going down WHILE they were leading the street upgrading the price of oil and ACTIVELY purchasing oil futures and even physical oil to push the prices higher.   Man they need to be stopped! 

    DNDN just popped! 

  78. tradansh

    DNDN halted now, after a 7$ pop. This is fun.

  79. willsons

    Phil  I am in USO long puts and oil is dropping. (profitable)
    should a guy be out by the nymex close or hold.

  80. Pharmboy

    I have been digging into a few of my recommendations over the past few months, trying to see where things are progressing in the pipelines etc.  The companies have issued stock in the past months, and have been holding theirA few observations:
     
    SPPI – as I am writing, they are jumping (on volume) -sumpin’ is up.  Tried to get back in for more Jan12 $2.5 C for 2.8.  These guys make money and have extensions on their cancer drugs. 
     
    ARIA - Ridaforolimus (formerly known as deforolimus) is their flagship and partnered with MRK.  I did not realize this, but NVS has approval for an mTOR inhibitor (2009).  Anyway, I still like these guys, and they have several other early lead drugs.  If their PIII data is positive, goodbye.  I am going to accumulate a bit more here.  Data due out in the summer and fall.
     
    CRIS - in bed with Roche, just did a round of stock at 2.56, and holding at 3.30.  Their big boy is a hedgehog inhibitor that many cancer docs are wild about. In their pipeline is a few others little gems that other big pharma’s have as well, but I think accumulating a bit more here is warranted.  Data for the hedgehog is due out later in the summer, so a run up will be likely.  Buying more here.

  81. hanna5

     Phil, can you propose a short term, high risk/reward strategy to enter MON if it reverses? thanx

  82. Pharmboy

    Ahh, DNDN is pushing the little boys.

  83. Pharmboy

    Looks like they have approval according to FLY.

  84. Pharmboy

    DCTH/Trad – may $15s for $1 then.

  85. Pharmboy

    SPPI is moving.  In at $5.16….

  86. matt1966

    This is just another deer in the headlights push back up.  The only people who believe it are the talking heads and their sheeple.  Meanwhile, the increases ARE real.  Same old MO but they are getting even more blatent about it.  Huge moves pre-market, defend during the day, get the media to whip up interest and stick it at end of day.  Yesterday’s 10 minute stick was feable but effective.  They are pushing us back up on as little money as possible.  Once they get to whereever they’re going.. something will come up (let’s see… Greece?) to give them cover while they dump like crazy for 20 minutes.  Then the whole process completes.  We are in the clack, clack, clack phase climbing back up.  So don’t just sit there… buy something already.  I did.  Just got some FAZ with a stop at 108.62 looking for 1.5%.

  87. tradansh

    Looks like SPPI was covered on CNBC, that’s why its popping. Cant seem to find any other news.

  88. biodieselchris

     GOOG looks like a buy down here. 550 calls?

  89. tuscadog

    Phil / RWM  Your State economic activity chart reflects everyday local tv news reporting of nothing but budget defecits and teacher etc layoffs.  There is no recovery if the budget must be balanced (Feds excluded of course). Greece will have a national strike next Wed, and the masses will reject the IMF austerity and taxes.  The conditions of the IMF/EURO loan are unenforceable in an environment of near anarchy.  Will the IMF (and the Germans) just turn a blind eye to non implemenation?  ($40B from the US Treasury).  Greece’s main FX resource is tourism and that will only improve if they return to a cheaper Drachma (their main tourism competitor is Turkey), so the loans are actually a diservice to Greece.
    Placed a big RWM bet yesterday, sold my longs today (except C) and  85% balance in cash.  Should I stick with the cash and bearish theme? Still thinking about EDZ and EPV, but fighting the Fed and ECB’s’ free money’ hasn’t worked so far so deferring to your guidance on entry timing.

  90. jomama

    phil, what is going on with CCJ?  They have been taking it on the chin – going down everyday?  getting ready to sell some puts to offset leaps but want to see the bleeding abate before i sell some puts.

  91. Pharmboy

    QCOR is also panning out nicely. 

  92. Phil

    CL/Humvee – You can’t really be too nervous with /CL!  I’ve found it’s best to play the lines with very tight stops because you may lose 5 nickels but then you get one of those .25 moves that makes up for it and, sometimes, it’s $1+.  Keep in mind though, that when I set a stop, I may plan to buy 4 contracts at $85 with a .05 stop but then I am willing to short one at $85 and one at $85.10 (avg $85.05) and then 2 more at $85.15 (avg $85.10) and then I’ll take my loss if it looks hopeless and we’re still going up past 85.15.  That in itself is a simplification, of course, as you don’t buy right at $85.10, if it’s heading up AND you are SURE you want to DD, then you wait until it stops, DD and then set your new stop or DD spot.  This is true when your major trend is Down, like it is now (since 11).  Generally, we’re looking for 5% rule bounces so .10 here violates the weak bounce rule (20% of the drop) and we should play this a lot tighter than if we had dropped from a higher spot. 

    XOM/Sean – Sure, unless XOM does something strange. 

    FSLR/Yodi – Sorry, I meant calls anyway.

    You are very welcome Iflan.  The problem with big move like this is you get few chances to "practice" what to do.  Don’t worry, over time you will be as cool about adjusting this kind of play as you are about rolling your regular monthly posiitons. 

    EDZ/Salvum – If you are scaling in, for sure take advantage and roll the calls (not the caller) lower.  That’s it for now.  If the drop another $3, then the adjustment needs to be a little more drastic.  If you can roll the Oct $38s down to the Oct $35s for $1.20, why the heck not?  EDZ is at $40, you are buying $3 for $1.20…

    Big short/Cwan – Yeah but the problem is they’d pay us off in dollars.  8-)

    VNO/BGB – I am consoling myself that there are 3 weeks left.  Next week I will become unconsolable…

    TBT/Salvum – At the current prices I’d go for the Sept $43/48 bull call spread at $2.60, that should be an easy fill.  We’re at $46.50 so you don’t need anything else to make 100% if they head up.  IF we head down, THEN you can sell the $43 puts (now $1.50) for $2.50 and that puts you in TBT at net $43.10 in Sept with a .10 bull call spread

    VNO/Rav – Not today.  Today is happy day.  Tomorrow may be as well.   Next week is time to get bullish if we survive the weekend (or tomorrow). 

    Oil/Wilsons – If we look to be finishing over 11,150 then I think throw in the towel for the day. 

    Nat gas down to $3.98 again, that is an insane move for a day (-.37).   Good time to play UNG.  You can do a simple June $6/7 bull call spread for .62 with a .38 upside in 7 weeks that’s .98 in the money right now.  I’m expecting a good hurricane season so I like the Oct $7s at .92, selling the $7 puts for .93 and not covering until the next spike (the $9 calls were .52 yesterday, now .35).  

    MON/Hanna – I like the 2012 $50/65 bull call spread at $8 if you are patient.  Selling the $50 puts for $4.30 for net $3.70 on the $15 spread. 

    MON -  Short-term, the simple July $60/65 bull call spread is $2.45 so that’s a double if they get back to our target at $65 and you can sell $60 puts to wipe out the basis at $2.25 if you are greedy but rather than buy 100 shares of the stock for $62 ($6,200) you can buy 10 of the spreads for $2.45 ($2,450) and that pays $2,550 if MON hits $65 and you can stop out with a $1,250 loss (50%), which is 20% of 6,200 anway so no more risky than the stock.  For 100 shares of MON to pay you $2,450, MON would have to gain $24.50, to $87 by July.  Options do not have to be about taking on more risk, you can greatly expand your chance of success while reducing your risk as well (as well as no margin in this example)!

    Clacking/Matt – Yes but once again the volume is gone while we go up.  Dow is at 94M at 1:10, way behind the last two days.  These guys unload at the top and buy back at the bottom, they can keep that up forever. 

    GOOG/BDC – I don’t know, if BIDU gained $8Bn in market cap, shouldn’t GOOG lose it? 

    Sticking/Tusca – Unless we break up to new highs, especially NYSE 7,700 this is just more churning.  I’m too scared to be bearish but no way will I go bullish because I would feel like a total moron if I was stuck in a bunch of longs and some catastrophe (pick one) took all my money.  Cash, cash is good, cash is nice, cash is, indeed, king!

    CCJ/Jo – No money in the EU puts all those nuke projects on hold. 

  93. lflantheman

    GOOG …..I’m thinking sell May 520 puts for 9.50 or so.  These could be rollled to June 500′s for even if necessary, but I doubt GOOG will get that low.  It’s only down today on the BIDU effect.

  94. tradansh

    BP being taken to the cleaners today. Now down 9% to 52.

  95. lflantheman

    Is BP still a trade?   More down to go?

  96. bgbigelow

     FSLR – Phil I have a FSLR put spread that I’d love some feedback on.  I bought Jun 130 P and sold May 125 for net $5.  I rolled up the Jun 130 to 135 for 115, but am curious what you would do to adjust this, or should I just shut the whole thing down?
    Thanks.

  97. Pharmboy

    MRK is naming Frazier the heir apparent.  He is the lawyer that fought tooth and nail on the VIOXX cases.  Very interesting.

  98. salvum1

     PHIL / FAZ
    I am underwater in this (or am I):
    Jul 13 long calls for 3.15
    July 13 short puts for 1.59 credit
    July 16 short calls for .72 credit
    With the credit from the initial Bull Call spread that was adjusted (per your rec fyi), I am in this for 1.64 net BUT I am currently down 3.03 per leg.
    Any recs?

  99. RMM

    Phil: is a sell of BIDU jun750 naked too risky ????

  100. Pharmboy

    BP rockin’ now.  Thx Trad

  101. Phil

    "Strategic" defaults have risen to 12% of all mortgage defaults, Morgan Stanley says, with borrowers more likely to stop paying their mortgages (and divert spending elsewhere) the higher their credit scores and the larger their loans are.

    Mortgage rates held steady, with the 30-year fixed-rate average ticking down to 5.06% from 5.07%, Freddie Mac (FRE) says – close to 2009′s annual average but slightly higher than a year-ago 4.84%. Low rates have been helping to moderate housing price declines, the agency says.

    The Treasury sells $32B in seven-year notes at 3.210% (.pdf), in an auction boosted by end-of-month buying. Bid-to-cover ratio of 2.82 vs. a recent 2.79; indirect bidders take 59.5% vs. a recent 44.5%; direct bidders take 12.2% vs. a recent 10.9%. Futures tick up slightly; the 30-year Tsy +0.34%; 10-year +0.19%.

    A Fed move toward prepping investors for higher rates would not have been such a bad idea, David Callaway writes. "The downside of delaying the inevitable another month… is that the Fed puts itself behind the farther eight ball when economic growth really starts to pick up. The risk is that when it does need to start raising rates, it will have to do so faster than most investors expect."

    April KC Fed Manufacturing: 24, vs. previous 18. Production was up in both durable and nondurable goods. Employment index at highest level in over two years.

    March Chicago Fed National Activity Index: -0.07 vs. -0.44 prior. Three-month moving avg. -0.18 vs. -0.31 prior. Three of the four broad categories made positive contributions, while the consumption and housing category made the lone negative contribution.

    Moody’s: still reviewing whether it will join S&P in downgrading Greece’s sovereign ratings, even as it cuts ratings on covered bonds issued by Greek banks.

    Pimco won’t be buying into Greek debt until there’s a sustainable solution to the country’s crisis, CEO Mohamed El-Erian says. Europeans need to understand "when you allow a crisis to fester it morphs and it morphs into something much more difficult to control."

    Debt crisis? What debt crisis? Confidence among Europeans in their economic outlook improves to the highest in more than two years, according to an EC survey. The increase in sentiment contrasts sharply with blundering euro governments, but Greece eventually will prove "a multi-year headache for the region."

    Barry Ritholtz believes the recession is over but recovery is "lumpy." Stock market internals are "constructive" but a correction will come eventually. "The uptrend remains in place, and until it is broken we maintain an upside bias.. We are not at the sorts of extremes yet that make the contrarian in us scream ‘sell.’"  Wow, for Barry, this is a big flip!

    "Greece is going to default despite all the talk, despite the liquidity package," and Portugal may be next, Martin Feldstein says. The problem is that Greece needs to cut its budget deficit from 13.6% of GDP, forcing its economy deeper into recession and sapping tax revenues. “Those are enormous cuts, impossible to live with.”

    The administration reiterates that BP (BP -6.6%) by law has to pay the costs associated with its Gulf spill – which the company says will rise beyond $6M a day. BP is about to begin drilling a relief well to try to reduce the leak’s flow.

    Shares of oilfield equipment maker Cameron International (CAM -13.7%) slide on liability concerns after providing the blowout preventers for the Transocean (RIG -5.7%) rig in the Gulf of Mexico that caught fire and sank last week. Meanwhile, the spill could prompt the administration to rethink its offshore drilling plans.   That last bit is helping oil prices.

    Banking billionaire Gerald Ford will inject $500M into Pacific Capital (PCBC), the bank holding company that lost $1.71/share in the first quarter and hasn’t profited since Q1 2008. Shares have plunged 47% today, in the wake of record trading of put options last Friday.

    Procter & Gamble (PG -2.3%) posted a 7% gain in revenue (its best showing in 18 quarters) fueled by the most aggressive price war in years. The consumer-products giant and its competitors are also speeding up launches and increasing ad spending in a "war inside stores" to get a foothold with reawakening consumers.

    Good sign:  Oshkosh Truck (OSK): Q2 EPS of $3.22 beats by $0.61. Revenue of $2.9B (+131.5%) vs. $2.8B. Shares +4.7% premarket. (PR)

    Three lunchtime reads:
    1) Saving the eurozone: $1T, ECB reform, new IMF head
    2) On the possibility of a rebound and retreat for jobs
    3) European debt crisis: how the dominoes fall

  102. yodi

    Phil shall we stock up on our hedge of TZA OCT by the end of the day if DOW is going up the play will be just about the same as on 4/26 thks

  103. humvee4me

    Back goes up /CL after Obama talked and CNBC opined that new drilling off shore may be curtailed until better safeguards are in place.

  104. JRW III

    Phil Stuck in longs
    Cash is great, especially over night, but you miss the gain of the "clack clack clack" ,  that’s why I’m in TNA today; and if the UK defaults during market hours, I’ll just switch to TZA !!

  105. ssdirk

    judah – screen play all the way.

  106. ssdirk

    JRW – what is the next line up on IWM?

  107. judahbenhur

    SS, Nice to see a familiar pattern after yesterday.  From yesterday, JRW had 73.72 then 74.14.

  108. Phil

    GOOG/Iflan - I think if we turn down then they have another 5-10% in them.  I think if you wait for them to cross back over the 200 dma at $540 then you can sell the $530 puts with more confidence than the $520 puts now.

    BP/Iflan – Gotta let the dust settle for a few days.  Like MEE, who are still down at $41.

    FSLR/BGB – They are not likely to come back for you. You can leave the putter naked for what help that is or you could get risky and sell the May $145 puts for $4.40 since they are out of the money and FSLR would have to be down to about $140 before you owe them their money back and that’s $9 and since the current June $130 puts are $3, you can almost certainly roll into that vertical at worst. 

    MRK/Pharm – Have a lawyer running the company.  That’s just great!

    FAZ/Salvum – You are what we call "off target" and, since you are nearly 20% off target, you should be concerned.  Is it realistic for you to get to your b/e point at $14.64 by July and, if not, what would a realistic adjustment be?  You can roll the putter to the Oct $12 puts at $2.90 (+.15) and the $13 calls can roll to the $9 calls at $3.40 (-1.35) and the $16 caller can go to the Oct $11 caller for + $1.80 which lowers your cash basis from .84 to .24 and your spread drops to $2 wide but down $4 in strike is a very fair trade-off for that.  Of course you still need $12 to wipe out the caller but it’s a lot more obtainable to make $12 in Oct than $14.64 in July and it gives your upside plays a lot longer to pay off if your hedge keeps going against you.

    BIDU/RMM – I don’t think it is.  We just shorted the June $720s (going badly so far)  If somebody wants to pay you $13.50 for the May $750s, I say let them! 

    TZA/Yodi – I don’t think so .  Cash, cash, CASH!!!  We could have another Friday like last week and they need that to make our levels and THEN we may want to buy some cheap puts.  If the market doesn’t go higher then we correct again and we’re back on track as if today never happened so, either way, no action is required today. 

    Safeguars/Humvee – US has very lax regulations on platforms.  Hasn’t been a huge issue due to relatively small amount of platforms but new drilling permits and still no regulations is not a good mix. 

    T’s/JRW – I’m a little burned out on day trading after last week.  Need to step back for a couple of days.  

  109. JRW III

    ss
    73.77 then 74.14; 73.77 is yesterdays 73.72. That 2/25 trend line worked pretty well this morning. Your candle system gave a nice buy signal too !!

  110. judahbenhur

    JRW, That 2/25 trend line has been great.  Even during yesterday’s noise, IWM pretty much ran up that line. 

  111. gucci

    HI Phil I have a question on rolling the caller up and out to far mos like dec or jan for a even price — in the front front month while waiting for the caller side to expired, I can try to earn some premium by sellin put the front mos right, and roll the put to the following mos till it expired wortless, and same as goes for selling put in the leap and selling call in the front mos to collect the premium.  I hope I explained it right. Almost the same as if you are buying a leap call and sell the front mos caller for premium and possible roll it if goes agaisnt you while you have the leap call in place.  So for example as I adjust BIDU this morning persuggested sell dec 600 put, I was able to raised my May 700 caller to 780 may short call, if this MAy 780 short call does not get expired wortless by may expiration then I roll out to June and and wait again….hopefully your caller get wipe out — is this how the process work – thx

  112. JRW III

    ss
    Also watch 73.89; if we start to look weak,I may just close out with a nice gain for the day

  113. JRW III

    judah / Line
    Yesterday established that as a floor and set up today’s move; I still think this all comes apart, but in the meantime, I’d rather make a daily profit than hold to my Bearish bias !! I’m up 5% on the day so far. (TNA at $65.75)

  114. hanna5

     Phil / Anyone / WYNN : Any slightly bearish earning plays on WYNN. A little risky, and i know its best in breed, but has run up a ton. Doubt the earnings can support this price. Perhaps a bear put spread?

  115. humvee4me

    Interesting that 30 year bonds  have a good bid and are up today (despite an up day); likely money coming from europe into the US; the euro although still up is barely holding on to small gain (? Central Bankers intervening), increased my EUO (thanks Gel for pointing out this ETF)  calls hoping for a big break down in the euro

  116. ssdirk

    JRW, judah – You may find this useful.  I have been watching a 1, 5, 10 and 15min chart on the RUT while playing the IWM calls/puts also using JRW’s lines and trendlines.  I also plotted different moving avg’s on these charts.  The chart that has given the best entry and exits has been the 5min chart with a 10min moving avg.  I still like my green candle after a solid red candle to wring out the daily selling.

  117. RMM

    ssdirk: what charts are you using, I need something ?

  118. JRW III

    Out of TNA at $68.81; leaving for an early lunch. Good luck all !!

  119. ssdirk

    RMM – do you mean what software?

  120. cwan120

    BMY & MRK, after a few days of going down slowly but steadily, are moving +2% today.  Good sign for a bull in that space?

  121. RMM

    ss: yes

  122. JRW III

    ss
    Your system is much lie Dave Fry’s discipline of waiting out the first 15 minutes of trading, as he says, "the first direction is usually the wrong direction".

  123. ssdirk

    I use http://www.quotetracker.com .  I have been for years and really like it.  It is free.  On their website it has a list of brokers that it interacts with.

  124. RMM

    ss: does it have live charts with candles ?

  125. ssdirk

    RMM – absolutely!!  with every upper and lower indicator known to man and completely customizable.

  126. judahbenhur

    SS, Very interesting. I’ve been back and forth as to whether the RUT or IWM charts give a better entry/exit indicator.

  127. Phil

    Rolling/Gucci – If you have a caller that is hurting you, then selling a front-month put (or longer month) is an excellent idea since the caller is already a hedge against a move down.  I don’t like to overdo it but I like to sell enough that I can spend to money to roll the caller to a reasonably higher strike without risking getting killed when the stock goes down (which is what I thought it would do in the first place).  The only thing about what you did is I would not have pushed BIDU up so far as you left potential money on the table from $700 to $780.  That $40 is enough to pay for the May $700 ($32) to roll to the June $950s ($2.50, which are an interesting nake sell, by the way) so what is the hurry?  Maybe BIDU finishes below $700 and you owe the caller nothing.  Also, if BIDU falls back to $650, then the Dec putter becomes a minor headache.  It’s always important to try to strike a balance and - when in doubt – just SELL AS MUCH PREMIUM AS POSSIBLE!

    WYNN/Hannah – Well that is a lot of money but wouldn’t you rather wait for $100?  I guess if you are impatient you can sell the $95 calls for $3.65 and those can roll to the June $100s ($3.35) and those to Sept $110s ($4.15).  If you want to do a bear spread, you can sell the June $105 calls for $2.05 and take the $100/95 bear put spread for $3.20 so net $1.15 on the $5 spread but, opposite of our usual plays, you have to REALLY want to be short on WYNN at net $103.85 at June expiration. 

    They are about to release DNDN!

    30s/Humvee – You are right, money still pouring into the dollar and mostly from Euro.  Pound is gaining today. 

    BMY, MRK/Cwan – I don’t think you can read much into an up 2% move in an up 1% market. 

    "Ban the bailout!" David Rosenberg insists. "We have governments bailing out banks (and auto companies and mortgage providers), homeowner debtors, and now we have governments bailing out governments. When does someone finally say – enough is enough!"

    The major – perhaps the only – buyers of the current rally are the investment banks themselves, Lombard Street Research says. Two reasons: "They think the authorities will prevail in their (so far unsuccessful) efforts to inflate their way out of debt liquidation; or… they are too big to fail and so can afford to take a huge gamble."

    Ken Feinberg says Goldman’s (GS) traders and salespeople had payouts on their minds when they shorted the housing market. "Human nature tells you that when your salary is going to be somehow related to your overall success in the marketplace, there’s an influence there."

    Markets anticipate a Fed rate hike by the end of the year, but a Milken panel has doubts. Vincent Reinhardt: "They won’t tighten until they change their forecast, unless there is an outside force that puts pressure on them to do so." A surge in inflation isn’t a likely cause, Jason Cummins says: "The U.S. economy is in outright deflation in the core CPI basket… The breadth of the declines is profound."  This is funny, someone pays them to say what I said yesterday

    Janet Yellen, Obama’s new Fed vice chair: a "dove slanted toward job creation and growth" or "as strongly anti-inflationary as anybody on the [FOMC] committee?" But in any case, a historical perspective suggests her words and actions may not go together.  Wow, that makes her the perfect Fed Chairman!

    Trading halted after Dendreon (DNDN +14.8%) shares surge on news that the FDA approves its drug to treat advanced prostate cancer. The biotech firm says it will make Provenge available through about 50 clinical centers and plans to increase manufacturing capacity over the next year. (PR)

  128. RMM

    ss: I downloaded but how do you set it up for some stocksymbols /
     
    TXS.

  129. Phil

    Oh what a rip off!  DNDN Options went off-line when they opened up.  Poor putters are all wiped out!  but it does look like you can still sell Jan $40 puts for $5.50.

  130. ssdirk

    RMM – you first have to setup your data feed and account info.  Go to the Options tab at the tab and click Data Source/Proxy.  On the new window under the Quotes tab you have to choose the Site you will use and also fill in your User ID and password used at your broker.  Do the same for the other tabs on this window.

  131. RMM

    ss: so this ties in with a broker / Mine is Fidelity,

  132. dflam

    Hi Phil : I appreciate your input on BP.  I did roll today from the Oct. $49 c to the Jan. $50 c and rolled from the Oct. $52.50 p to the Jan. $ 50 p .I bought back  the Oct. $ 62.50 c for $.60 ( I sold them for $1.02) and will wait for a bounce to sell the Jan. $ $55 calls.A nice safe trade turns into a disaster.
    On TBT, I have the Sept. $43/50 bull calls for $4.59 ,now $3.21 paired with the Sept.$45 puts sold for $1.58,now $2.22. Any changes suggessted?  

  133. oncmed

     Phil,
    Building on guccis question above:
     
    I have the Jan 650/700 bull call spread on BIDU.
    Jan 650 Call bought @ $72 currently $133
    Jan 700 Call sold     @ $53  currently $110
     
    While its possible that BIDU will stay over $700 by Jan next year, I am of the view that BIDU will not sustain this current $90 runup in the short term and we may have a short term pullback. Could you suggest a strategy that might better  facilitate an early exit given such a view. TIA

  134. ssdirk

    RMM – yes it pulls all of your account info into the software.  I use it to make my trades.  BTW, Fidelity is supported with the software.  Give it a try.

  135. pstas

    ssdirk-software/charts- Is TOS supported?

  136. ssdirk

    pstas – unfortunetly it is not :(

  137. RMM

    SS: txs a lot, I will try it, should be better than Fidelity charts.

  138. salvum1

    PHIL / FAZ
    First of all, thank you!
    2 followup questions though:
    1. "Of course you still need $12 to wipe out the caller" – if FAZ goes to 12, the short 11 calls will become more expensive to buy back, not cheaper?  How would getting to $12 help the caller?
    2.  A Little more detailed:
    Closing the original short calls was a .84 loss
    the original long 13 calls cost 3.15 and I just closed it for a 1.14 credit so a loss of 2.01
    the original short 13 puts credited 1.59 and i bought them back for 2.71 so a loss of 1.12
    the short 16 calls credited .72 and i bought them back for 2.71 so a loss of 1.99
    Total loss of .84 + 2.01 + 1.12+ 1.99 = 5.96
    NOw the rolls:
    Bought OCT 9 calls for 3.52
    Sold the OCT 12 puts for 2.82
    Sold the OCT 11 calls for 2.56
    Net credit on the rolls of 1.86
    SO, adding the realized loss of -5.96 to the net credit of 1.86 i am in the hole, so to speak, -4.10.
    So, effectively, FAZ needs to go  up by 4.10 in order for me to break even, correct?
    FYI, the original entry was from the March 15th post on the July 13/18 bull call spread, and the puts were sold on about the 3/17 when the tgt fill price was hit of 1.60.  Then the the short call was covered on 4/16 and the resold on 4/22.  And now here we are.  My point is, what did i do wrong?  I think I followed your guidance to a T but still am looking at $400 loss per contract?  Thankyou.

  139. hoss18

    SS/Judah – played the IWM 74 C off the 5 min Engulfing candle @ 15:35, in 1.16 out 1.27 for 9.4%.  Chickened out at the end, just felt it was enough.  Thanks for posting your trades and strategy though, I have learned a TON.  Thanks!

  140. ssdirk

    judah – the 5min chart with the 10period mov avg. picked up this last move like a champ.

  141. ssdirk

    hoss18 – nice.

  142. judahbenhur

    SS/5 min chart.   You’re using a 10-period, or 10-min MA?  And you look to see if it starts to turn up?

  143. judahbenhur

    Hoss.  Well done.  That line also corresponded well with S/R over the past few days.  I wish I had joined you, but I was futzing around with something else at the time.

  144. ssdirk

    judah – it is actually a 10 period.  Looking for the candle to close above or below.  BUT, I still think JRW’s pivot lines need to be used in connection.  He obviously uses them quite well.

  145. Pharmboy

    DNDN – Wow.  I thought ITMN was impressive.  DCTH should go to the moon on that move.  Talk about appetite for risk.  -25 P/E.  6.7B market cap.  THAT IS CRAZY.  Now Medicare has to give it a CPT code, and it better pay well.

  146. Phil

    Looks like both of Monday’s DNDN plays are right on target!   I can’t believe last year we were GAMBLING with the 2011 $5/10 veriticals at $1.50 with the offsetting put sales! 

    BP/Dflam – January is a long time, I wouldn’t do anything for a while.  With TBT, Sept is a long time too.  The only change is to roll down to a lower call if you are motivated, you have to be in real trouble before adjusting the puts and the caller. 

    BIDU/Oncmed – LOL, what a rip-off right?  That’s why I pair them with put sales, at least you get that on a spike.  How about rolling to the June $580s ($135) and the June $610s ($108.30)?  You can pair that with the sale of the $600 puts at $7 and you’re in for a potential $37 or even just $30 from the vertical is better if it’s quick, right? 

    LOL – Dylan is marching on Wall Street (MSNBC).

    FAZ/Salvum – You have the $9s, you sold the $11s, if FAZ finishes at $11.00 or $11,000,000 you will still end up with $2.   Oh, I missed the .84 loss but, tough.  It is not the job of your new position to make up for the losses of your prior position, that leads to putting too much pressure on the new position and taking too much risk and not being satisfied with reasonable gains – all bad things..   You are killing me with these numbers:

    • You lost .84
    • You sold the $13 calls for $1.14 after buying them for $3.15 (total debit $2.85)
    • You bought back the $13 puts you bought for $1.59 for $2.71 (total debit $3.97)
    • You bought back the $16 calls for .72 that you SOLD for $2.71 (total debit $1.98)
    • You bought Oct $9 calls for $3.52 (total debit $5.50)
    • You sold the Oct $11 calls for $2.56 (total debit $2.94)
    • You sold the Oct $12 puts for $2.82 (total debit .12). 

    That’s what I see, you can double check….

    Russell really popped into the close

    Good golly what a day.  Last Friday was up and up so maybe they do it again?  

  147. judahbenhur

    SS, I see that now.  So, this morning, without fresh JRW lines, I waited for the first green candle (using IWM) following the solid red candles that coincided with one of the TOS pivot point lines.  I haven’t used the TOS lines prior to last week, but they have been pretty good substitutes for JRW. 

  148. Pharmboy

    If you like the moves in DNDN and ITMN, I cannot say enough…IF ARNA gets approval it should be a 10 – 20 bagger.  If DNDN market is 2B/yr, obesity is 10X that.  Risk is there with ARNA, but on the run up to FDA as we have seen with all biotechs a few weeks to months out, it is time to accumulate for the free ride as one can lighten up  or cover when volitality is higher in the coming months.
     
    Look at the ITMN, DNDN, DCTH, QCOR etc on the runs up in their stocks b’f data release and then again on FDA approval.  ITMN and DNDN are FDA approved now.  DCTH is positive and will file for FDA.  QCOR will get approval (the drug is already approved and it works AND who wants to let BABIES die?).  We should get a pop.

  149. snow

    @pharmboy
    Yeah, I can see lorcaserin being huge (heheheh, sorry) – but, man, we know so little about neurotransmitters, and about gut seratonin in particular. The Phase 4 studies should be _very_ interesting.

  150. Pharmboy

    Another I am looking at very closely is GILD.  I know many are already playing them, but looking at the charts for the daily, weekly and monthly, there is accumulation going on here.  Volume is larger than normal on the daily, and they continue to hover in the 40-41 range.  $40 is a good line in the sand, and should that fail, as I have said, then the world is ending.  The company has a $40B cap and a 12.8 P/E.  BMY has a 43B cap and a PE is 15.5.  The kicker comes in the revenue growth, where GILD is growing at 31% and BMY is losing ~ 8%.  When Plavixx goes off patent, BMY will be crushed (next year) -that is 9.3B split with SNY.  I continue to accumulate GILD into the dips FWIW. 

  151. judahbenhur

    SS/TOS lines.  For a nice picture, superimpose on the chart you are using the TOS pivot point lines from today — 72.40, 72.88, 73.26.  The first one was the morning support that started the run, the second was the midday resistance between 10:50 and 12:25.  At the third, there was some resistance/support for about an hour, then acted as that great support line at 3:25.  As I said, I haven’t used these much before, but they had a pretty fair day today.

  152. salvum1

     PHIL / FAZ,
    First of all, "tough" on the .84 loss – love it – I am from the east coast but now live in Colorado and lets just say that your "tough" comment would make most cry out here. boo hoo.
    I totally agree with the comments of one position being independant of another BUT it is relevant in my mind if the subsequent position is a management of a previous position.  Otherwise, you could just post here the results of the successful adjustments while ignoring the original positions that lost money.

    You lost .84 – CORRECT
    You sold the $13 calls for $1.14 after buying them for $3.15 (total debit $2.85) – CORRECT
    You bought back the $13 puts you bought for $1.59 for $2.71 (total debit $3.97) CORRECT
    You bought back the $16 calls for .72 that you SOLD for $2.71 (total debit $1.98) – INCCORECT – I sold them for .72 and bought them back for 2.71 so a loss of 1.99 – (total debit of $5.96)
    You bought Oct $9 calls for $3.52 (total debit $5.50) – INCORRECT – (total debit of 9.48)
    You sold the Oct $11 calls for $2.56 (total debit $2.94) – INCORRECT – (total debit of 6.92)
    You sold the Oct $12 puts for $2.82 (total debit .12). – INCORRECT – (total debit of $4.10)

    1.  Did I do something wrong in managing this position or because I did not have enough long exposure, I did not have enough to cover the losses in FAZ?
    2.  What DID you mean about needing 12 to wipe out the caller?
    3.  I do not want you to get the wrong idea that I am crying over spilled milk here – or blaming you for anything.  Its all water under the bridge.  BUT, I am trying to see what I did wrong or if the original trade just didn’t work out.  If it was something I did wrong, I want to know so it does not get duplicated in the future.
     
    Thanks Phil, and I though you loved numbers?!

  153. edro00

    ss, judah – IWM pivot lines
     
    In TOS, use intraday 5day, 5min setting and you will see the pivot lines are right on

  154. edro00

    ss, judah – IWM pivot lines
    And also enable extended session.
    Todays pivots using that setting were 72.02, PP 72.40, 72.88 and 73.26

  155. Phil

    I like this article:

    Americans Must Understand the IMF Scam

    Americans must understand the IMF and German view of things in order to protest IMF imposing plans for the US economy. The Value Added Tax, a hidden tax, is an idea right from the International Monetary Fund. The IMF is a world bank, funded by the G20.

    Here is how the IMF and German bank scam works. It is similar, by the way, to what happened in the United States. Here are the similarities:

    1. The German (and French) banks loaned the PIIGs countries, Portugal, Ireland, Italy, Greece and Spain lots of money for cars, for solar panels, and much more. These were easy money loans, similar to the easy money loans made by the shadow banking system in the United States. German companies made money because of the loans. They borrowed from the German banks as well.
     

    2. The German banks want their loans to be paid back, even though they were making loans that were really bubble loans and could not be sustained. But just like Bank of America, Goldman Sachs, JP Morgan, Citibank and Wells Fargo were bailed out, a bailout of Greece or the other PIIGS would result in a defacto bailout of the banks themselves.

    3. Credit is withdrawn in the aftermath of the easy money pullback. That is happening in the USA, and is happening in Europe as well. Without easy money, the Germans want Greece to tighten their belts.

    4, Large Financial Institutions divide the populace, For example, they divide shop keepers from manufacturing workers. They divide public employees and private employees. They divide borrowers who pay their debts on time from borrowers who cannot afford to do so. In setting up these divisions through the media they control, the big financial institutions deflect blame off themselves and their scams
     

    So, what is the scam you ask? The problem is that Germany wanted to sell Beemers and gave crap loans to Greece, just like ponzi housing banks gave crap loans to Americans. Now the German banks are scared and want their government and the IMF to clamp down on the guys that bought all those Beemers, the Greeks. Germany is a predator. They wanted the easy loans to sell the Beemers and the solar panels to people who could not afford them. Now they want their money. This is predatory.

    The IMF fits in nicely with the predatory scam. The IMF places countries on austerity programs. Although countries can default if they see that these programs are too deflationary, there is great pressure on them not to default. Austerity hits mainstreet, and keeps mainstreet down, but the banks go on with their obscene profits and don’t miss a beat. The IMF is behind the hidden Value Added Tax that has been proposed for the United States. I would suggest that the IMF is not the friend of the United States nor is she a friend of the PIIGS! The G20 has given the IMF power to pry into the financial affairs of every nation.
     

    As Gordon Brown once said, following the refunding of the IMF in early 2009, that we now have a New World Order, or should I say, a way to continue to squeeze mainstreet after the easy money is long gone. So, in a word, go to hell, IMF!
     

    German Opposition Cares About German Mainstreet

    Just to be fair about Germany, the opposition wants German banks to share the pain of the bailout. I hope they get their way. Why should the taxpayer in Germany be scammed like Geithner scammed US taxpayers? Go German opposition!

    But of course, the finance minister is trying to frighten the German opposition. Finance Minister Wolfgang Schaeuble stepped up his opposition to bank involvement yesterday, saying that debating such a move risked creating “the misunderstanding in financial markets that we’re not talking about ensuring the solvency of Greece.”

  156. judahbenhur

    Edro/TOS lines.  I see that. You may have been the one who initially suggested we look at them a few weeks back, so thanks if you were.  I started using them last week and, when combined with 5-min candles, they have often been right on the money.  My view about using lines like these (or TA in general) is that it is better to use the same lines and analysis that lots of people use, since that has a reinforcing effect. 

  157. Phil

    FAZ/Salvum:  I think my problem is I cannot, for the life of me, figure out how you were in a bull call spread of the July $13 calls that you bought for $3.15 and the July $16 calls that you sold for .72 (per 1:42 comment) and then you sold both the calls you bought AND the bought the calls you sold EACH for huge losses.  You say that the FAZ July $16 calls cost you $2.71 to buy back?  When did this happen?  They are at .43 now and I am dumbfounded to figure out what circumstances caused a net $2.43 debit spread (which in itself seems extremely high for FAZ July $13/16) to cause you to take a $1.12 loss on the $13s AND a $1.99 loss on the $16s.  You lost more money than you paid for the spread!  You lost more money than the maximum value of the spread. 

    The only thing I can think of is that you somehow had horrendously bad timing and you bought out you caller back in March (which was the last time the July $16 calls were anywhere near $2.71) and you then waited until today’s low to sell your own calls.  Is that how it worked?

    Most of the ways I envision this happening involve faster than light travel, which is very difficult at today’s fuel prices so please clear this up for me so I can get a handle on how this actually happened. 

    Also, I’m not saying not to count your loss on a position as you roll, of course, but I am saying you can’t take a loss and then take ever more dangerous plays to "make up for" the loss you took.  When you are down .84 you need to shift your strategy to a play that has a high probability of returning .84 – that in itself would be a "win."

    So clue me in as to how this play actually evolved over time and what kind of ship you were traveling in to get there and can I borrow it some time and I’ll take a look at it tonight when I get back from my meeting.

    - Phil

  158. Pharmboy

    Snow – yeah, neuroscience is a beast.  I worked on many of them in a former life here at a big pharma in SD that closed its doors (after it bought a biotech for neuroscience).  The brain regulates appetite, as you well know…and the feedback loop b’w the gut and the brain is tightly regulated.  Look at GLP-1 (Byetta, Novo’s competitor compound and Januvia from Merck).  All inhibit the same enzyme, but the proteins actually are better at weight loss b’c they cross into the brain and act there as well. 
     
    Serotonin does not cross to any appreciable extent as it is like dopamine (has to be given as a prodrug).  in the gut, serotonin is for peristalisis.  Arena’s drug only acts in the brain, not at the gut/heart/endothelial 5-HT receptors. 

  159. edro00

    Judah – I agree. 
    Also – you might look at the TOS study WoodiesCCI, its kinda cool and may give you more sensitivity than the 10MA

  160. Pharmboy

    For those that soak up science:

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    In the brain, serotonin diffuses to serotonin-sensitive neurons, which control the ones perception of nutrient availability.  This system has been partially conserved during the 700 million years of evolution, and it separates C. elegans from humans.  When humans smell food, dopamine is released to increase the appetite.  But unlike in worms, serotonin does not increase anticipatory behavior in humans; instead the serotonin released while consuming activates 5-HT2C receptors on dopamine-producing cells.  This halts their dopamine release, and thereby serotonin decreases appetite. Drugs which block 5-HT2C receptors make the body unable to shut off appetite, and are associated with increased weight gain (Stahl 2009) especially in people who have a low number of receptors (Buckland 2005) (this is why some anti-epileptics and antipsychotic drugs are associated with weight gain).  The expression of 5-HT2C receptors in the hippocampus follows a diurnal rhythm (Holmes 1997), just as the serotonin release in the ventromedial nucleus, which is characterized by a peak at morning when the motivation to eat is strongest (Leibowitz 1990).  Lorcaserin is a 5-HT2 receptor agonist (it works like serotonin) on only THOSE RECEPTORS. 

  161. jomama

    PHARM,  I am accumulating GILD as well.  I think it will either fill the gap back to 45 for any artbritrary reason -Goldman upgrade, favorable result etc – but he fundamentals remain strong – they generate a crap load of cash and own the AIDS franchise.  I continue to add in my retirement account and brokerage with leaps and sold puts.  I am doing the same with MON.  I did this with XOM about 6 months ago when it hit 63.5.  I bought XOM stock, sold puts bought leaps etc.  

  162. jomama

    PHARM, I initiated a position in BP today by sell Jan 12 50 puts.  BP was 42 when the world was coming to an end.  They shaved off about some xbilllion off their market cap today – seriously?  remember the valdez.  These boys can drag this shit out forever.

  163. tradansh

    Pharm – Looking forward to riding ARNA, SPPI with you into the sunrise :-) (or sunset)

  164. tradansh

    jomama – planning to do the same for BP, 6% div is too sweet. Today’s drop was ridiculuous ($15B drop in market value for $1B loss), but as per Phil’s advice better to wait for the dust to settle in.

  165. palotay

    Anyone else see their margin requirements double on naked puts on EDZ and TBT? Seemed to happen at market close. 

  166. johnp592

    palo – i think there are new margin requirements going into effect for ETF’s.  Could be why.

  167. tradansh

    Margin requirements for leveraged ETFs were changed recently (increased in proportion to their leverage, so for TBT doubled etc)

  168. Pharmboy

    Yes, margin requirements go up April 30. 
    GILD – Jo – I am accumulating them over multiple accounts as well.  I am doing the same with UNG.
    ARNA and SPPI – yes, I hope it is a sunrise only to watch the sun set on the Beach.  ARIA and CRIS are along for the ride as well.  Heck, QCOR PDLI (with a nice dividend), CLDX, VIAP (although I might be eating those shares someday), & ALTH.
    AMAG is moving nicely today.  Those sold P are very nice. 
    BP – got in when you posted Trad, and rode them up, and out at 10% gain.  Will have to look at some real plays tomorrow, although I am really trying to move to more cash except my little biotechs are very hard to part with!

  169. salvum1

     PHIL / FAZ
     If I had faster than light travel, I would let you know, and then we could change the world as it were – fairly of course.  But alas, I do not so here is what I did, with dates and in parantheses, the post date.
     
    3/15 – July bull call 13/18 spread; long 13 calls for 3.15 debit/ short july 18 calls for 1.56 credit. (March 15 post 10.18am)
    3/17 – Sold July 13 puts for 1.58 credit. (March 15 post also)
    4/16 – Bought back the short 18 calls for .72 debit (April 16th, 11.33am response to my querie at 11.19a,) – (running total g/l of +.84)
    4/22 – Sold July 16 calls for .77 credit (April 20th at 3.00pm)
    4/29 – Closed July 16 short calls for .69 debit (g/l of .77-.69=+.08) (running total g/l of  +.92)
    4/29 – Closed July 13 long calls for 1.14 credit (g/l of 3.15-1.14= -2.01) (running total g/l of –1.09)
    4/29 – Closed July 13 short puts for 2.71 debit (g/l of 1.58-2.71=-1.13) (running total g/l of -2.22)
     
    SO, at this point my realized gain loss is -2.22.  I had an error in the original post today on the july 16 short calls buy back price as well as the July 18 short calls leg – I apologize profusely – sorry about that!!!! I hate wasting other people’s time.  I was going off my excel spreadsheet which, obviously, had an error.  These figures are off of TOS.
     
    My current positions are:
    Long FAZ OCT 9 calls for debit of 3.52
    Short FAZ OCT 12 puts for credit of 2.82
    Short FAZ OCT 11 calls for credit of 2.56
     
    I ended up with 1.86 in credit and a carryforward loss of -2.22.
     
    What are realistic expectations?  If FAZ closes as 13, then my 9 long calls and my 11 short calls end up netting 2.00 and my short 12 puts cost me 1.00 so I net 1.00 which I add to my 1.86 credit received for a net gain of +2.86, correct?
     
    And if it goes the other way, if FAZ closes at say 9, then my 9 long calls are worthless, my 11 short calls cost me -2.00 and my short 12 puts cost me -3.00 so I lose -5.00 plus the 1.86 credit so I net loss of -3.14?
     
    Once again, I apologize for the extra work due to my mistake – won’t happen again – and thanks for working through this with me.

  170. Pharmboy

    Shire crushes earnings.  Gonna have to look at them as well.  Man, they say healthcare is dead.

  171. tradansh

    Pharm – what about adding NNVC to this list? Allan (@http://allallan.blogspot.com) seems pretty committed to it.

  172. Pharmboy

    Trad – thanks to gel on that one, as he sent them my way to look into. I like them, but they have a ways to go for me.  Looks like Allan is trading them based upon TA, not science (which is my premise for most of my picks).  NNVC has nothing as of yet, but they are a good story and need to be watched closely.  They have held, thus someone is accumulating in here.

  173. edro00

    Judah -
    Now what we really need it to be able to tell when NOT to trade.  I have been using the "tick_molester".
    http://www.thinkscripter.com/forum/viewtopic.php
     
    Add it to your TOS chart and it will show you graphically when the $TICK index is high or low.  A trending day will show mostly highs or lows, a choppy day will show mixed highs and lows – just look at today vs yesterday!
     
    So, I don’t trade on choppy days!

  174. Peter D

    BIDU, for all of us who has options on this stock, I did a quick look at historical data using Thinkback in TOS to see what was the options value in the past earning period.  The last earning announcement was Feb 9th, which does not correlate with this earning on 4/28 well as it was much later in the month.  The 10/26/2009 earning announcement was a better fit.  So let’s look back 3 weeks and 1 day prior to the November 2009 expiration, which was 10/29/2009:
    - BIDU was 393!
    - Nov 430 Call was $4 (10% OTM), and Nov 350 put was $3.5 (10% OTM).  The option value was around 1% of the underlying stock when they are 10% OTM.
     
    BIDU closed at 710 today roughly, and the May 780 call was $6.8 (10% OTM), and May 640 put was $5.15 (10% OTM).  So the options value was also 1% of the underlying when they are 10% OTM.
     
    Fast forwarding 10/29/2009 by a week to 11/5/2009, BIDU was 396 (it didn’t move much, huh), and those same calls and puts were $1.95 and $1.475, which decayed about half in a week. 
     
    Another week later, 11/12/2009.  BIDU jumped to 427, and the Nov 430 calls and 350 puts were $8.5 and $0.25.
     
    So, an observation is that the options can decay by half a week from now if BIDU stands still, which would be an excellent point to get off the train.  On the flip side, it does move a lot though, so be ready to roll the losing leg that you are shorting.

  175. jromeha

    Pharm, when is the next big date for Arna? You are recommending we start accumulating now right?

  176. Phil

    LOL Salvum – I feel much better knowing that my fundamental view of the universe is not flawed and you do not have FTL travel nor did you lose $3.11 on a $3 spread!  So let’s be clear about where you are.  You had, when you closed out your original spread today, a cash loss of $2.22.  That’s fine and makes sense as you paid premium in additiion to taking a loss on your calls.  Now you initiated a new position that is giving you a cash credit of $1.86 so your cash loss is now down to a very manageable .36.  That’s how much you are "in" the spread for. 

    However, you do have a once again unrealized cash loss of $1.86 that is built into the spread.  There are two things here – you have the bull call spread of the Oct $9/11.  If all goes well and FAZ finishes above $11, you will collect $2 and you will owe nothing.  Any finish above $11 gives you this result, anything between $9 and $11 pays you .01 to $1.99 and there is no way you can end up negative. 

    Your final piece, the only one that can take money out of your pocket is the naked Oct $12 puts.  Any penny they finish under $12 comes out of your pocket.  Of course you can roll them, just as you did the July puts.  FAZ 2012 $9 puts are $2.80 so you can figure you can improve those puts by at least another 25% if you have to without spending anything.  So obviously out goal here is for FAZ to finish over $12, where you collect $2 from the bull call spread and owe the putter zero. Because you make $1.50 on the bull call spread at $10.50 and the $12 puts will cost you $1.50 at $10.50 – that is your break even point on this trade – not counting the .36 cash loss in your pocket so really you are shooting for $10.68 where you collect $1.68 from the spread and owe your $12 putter $1.32, leaving you with .36, which you put back in your pocket even Steven.   

    From there, all the way up to another $1.32 at $12, is your profit.  Keep that in mind, the VIX changing, the market gyrating the values of the puts an calls changing – none of that matters as long as you are on track to close above $12.  Unless we go below $10.50, this spread is not really in trouble under any known laws of this universe. 

  177. snow

    Good stuff on the seratonin, Pharmboy, although I’m skeptical that you’ve covered all (or that we know all) that’s going on with visceral seratonin. Anyway, for the audience, Pharmboy mentions 5-HT2C receptors – previous attempts at these weight loss meds relied more on 5-HT2a receptors, with some problematic side effects as a result.
    The other bit you all should know that Pharmboy didn’t enlarge upon, is Phase 4 studies. After  drug, device, whatever, is approved by the FDA for general distribution, it is followed by very large surveillance studies, and this is where the rare effects are most often picked up, as well as the picture of how effective the med is in actual clinical practice. These don’t get the ink of the early trials with the hot results, but believe me, Phase 4 studies can kill a drug, even a company. The whole vioxx story came out only in Phase 4 studies, for example.

  178. Cap

    As crazy as it seems, the pain in Spain was contained for today, as far as the markets are considered.
     
    I continue to be fed up with the ridiculous moves we see again and again.
     
    Interesting article about new home sales and the economy.
    All that "good news" about new home sales ?  Well, you know …. maybe not.
     
    http://www.nypost.com/p/news/business/that_housing_sales_boom_is_without_T7quSTtCkOBjCvblrpL8nM
     
    Here’s the best part:
     
    New Home sales in March.
    2010:    39,000 homes   (27% increase WOW !!)
    2009:  31,000
    2008:  49,000
    2007:  80,000
    2006:  108,000
    2005:  127,000
    2004:  123,000
     
    Go economy; go stock market; go housing market.  38,000 new home sales in March in this improving economy WIT an $8,000 housing tax credit !
     
    Hoo boy.

  179. tradansh

    DNDN - There was a news story on DNDN/Provenge on CBS 11pm news today. DNDN getting nice coverage.

  180. Pharmboy

    Snow – first, I am not worried at this time about Ph4 studies.  Let’s get FDA approval first.  By then, ARNA will be bought or have a partner and we can worry about tox events in the general public for a later date.
     
    Lorcaserin is ~15X and 100X specific for 5-HT2C than 5-HT2a or 5-HT2b.  Data are from their paper:  Lorcaserin bound to human and rat 5-HT(2C) receptors with high affinity (K(i) = 15 +/- 1 nM, 29 +/- 7 nM, respectively), and it was a full agonist for the human 5-HT(2C) receptor in a functional inositol phosphate accumulation assay, with 18- and 104-fold selectivity over 5-HT(2A) and 5-HT(2B) receptors, respectively. Lorcaserin was also highly selective for human 5-HT(2C) over other human 5-HT receptors (5-HT(1A), 5-HT(3), 5-HT(4C), 5-HT5(5A), 5-HT(6), and 5-HT(7)), in addition to a panel of 67 other G protein-coupled receptors and ion channels. Lorcaserin did not compete for binding of ligands to serotonin, dopamine, and norepinephrine transporters, and it did not alter their function in vitro. Behavioral observations indicated that unlike the 5-HT(2A) agonist (+/-)-1-(2,5-dimethoxy-4-phenyl)-2-aminopropane, lorcaserin did not induce behavioral changes indicative of functional 5-HT(2A) agonist activity.  IT ALSO DID NOT IN THE CLINIC.  Link to paper is below.
     
    As for 5-HT2a receptors visceral effects and lorcaserin, this paper says there are none with regards to the studies (one example and the compound has been in over 7K subjects).  5-HT2A is mainly in the visual cortex and is associated with LSD (thank you very much).  5-HT2A inhibitors are also for glaucoma and do not cross into the brain.

  181. Pharmboy

    OH, and as for VIOXX, that is a bunch of crap.  VIOXX should never, ever been pulled from the market.  COX-2 has NO beneficial effects for heart or blood thinning, so the data against it is a load of crap.  Naproxen has the same problem as VIOXX.  Celebrex is not as specific as VIOXX and thus does not have the same profile.  Please don’t get me started on that one. 

  182. kururi67

    For all you Cramer fans out there
    http://www.youtube.com/watch?v=2LmAMa-SE8o

  183. dmankoff

    Hi, Phil
    well, I’m long TBT:  130 Sept. 48 calls, long 70 Sept. 49 calls, and short 60 May 49 calls;  short 120 May 120 calls and short 20 May 47 calls;  any suggestions how to unwind this as we go along?  my guess is, if TBT continues lower, I can just wait and then let May expire, and sell June for whatever I can get (50 cents up to $1.00 or more hopefully at  same short strikes i have now), and then sell July, and August, and probably be able by then to recoup the current $2.10 average price of the September calls.     of course, I could also sell some puts, if we go down and then end up with more of the position, but have some credits helping me, such as selling the June 43 puts for $ 1.00 or more, if we head down to 44 or lower…..
    your thoughts and comments?  i know you’ve helped me simplify to here, wondering how to proceed, thanks

  184. Phil

    BIDU/Peter – Good advice on taking that early exit!

    Ticks/Edro – That sounds interesting but I don’t understand how to put it in TOS.  Is that something easy to do?  Learning how to use TOS features is still on my ToDo list….

    Housing Cap – That’s a great point, I’m going to use that this morning.  Thanks!

    DNDN – I don’t know where I originally said it but I remember Pharmboy quoting me when we were recommending DNDN as an accumulation at $5.  This is a very important thing to keep in mind as it applies to many biotechs – Be careful who you trust with analysis.  What I said then is obvious now but, at the time, the attacks on DNDN were relentless: 

    Phil’s take:  I agree with Benjamin and Adam Feuertein of the Street.com is nothing more than a Cramer thug who’s prior assignment was keeping people out of DNDN while Cramer’s hedge fund buddies accumulated it on the cheap.  Cramer’s crew is loathesome inside TheStreet and you need to take anything they say with a huge grain of salt.

    Ilene had a great story by Michael Milken about all the nasty manipulation around DNDN.  Very satisfying to read now that we’re up 1,000%!

    Cramer/Kururi – I love that one but the audio on that is painful to listen to…

    TBT/DMan – As I said at the time, the reason I liked the $49s over the $48s was that you lose more on the $48s on a spike down and and that’s when you do want to roll as you can buy intrinsic cheap.  We’re not too worried about Sept, time will take care of itself but this is the kind of play you want to take some off the table when we get a good run up.  If you are in Sept for $2.10 average, that’s great and you can spend $1 to get down to the $46s, which are in the money.  Then you won’t care if DNDN moves up although I’d still put a stop on the $47 callers if TBT breaks $47.  What you then want to do, is just make sure That the $48s dont go below $2 (now $2.28).  IF they do, you MIGHT want to sell them and use that $2 to roll down to the $42s, which is crazy low for TBT and then you’d be in a $6 vertical and you could consider selling some puts too to collect some cash (and, of course, you wouldn’t be executing this move without the callers expiring worthless).  But that’s a nice fallback strategy, right?   It almost makes you WANT TBT to go lower…

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