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Fat Finger Friday – Business as Usual, Really

Wow, we are sinking to new levels of idiocy now.

The MSM would have you believe that the tremendous sell-off in the markets was just a trading error.  If it was a trading error, then these markets SUCK!  Are you telling me we put TRILLIONS of dollars, including our retirement savings into a system that can be completely thrown into chaos because a single guy hits the wrong button on a single transaction?  It’s a good thing Faisal Shahzad isn’t still working on Wall Street anymore, or he could have just pushed a button and caused a lot more damage that way than he did with a faulty car bomb

This is financial terrorism folks, retail traders were stopped out and margined out while the pros made Billions picking up the pieces.  Don’t worry though, if you are rich enough and connected enough, the Nasdaq will reverse your losses but if they really wanted to make ammend, they would cancel the day’s trading for ALL traders.  My Members don’t care, we were, of course, in cash and generally short on our fun plays so we made out like bandits or, should I say, like banksters!  Heck we even used our cash to do some bottom fishing in that ridiculous sell-off.   

This market didn’t just sell off because of a trading mistake.  Whatever really happened, it happened because there were no real buyers when the selling came – something I have been warning would happen during the last 3 months of low-volume run-ups.  I keep using the house of cards/Jenga metaphore and that’s exactly what we have so be very careful when the same idiots who have been telling you BUYBUYBUY are now telling you to "come back in – the water’s fine."   We all know how that advice worked out in Jaws

I’m certainly NOT saying not to buy now.  We dumped our short yesterday as I told member Members during Chat to take the ridiculous money we were getting for the day and run:

  • 2:17: Well you can assume today is a very nice move down and get out now.  Tomorrow, even if jobs are bad and we head lower, then you can still flip to a June spread.  Don’t foget that VIX keeps climbing as we head lower.   Also, don’t forget how nice it is to be in cash and not care what happens tomorrow! 
  • 2:43: If you need them (our very successful DIA puts) for protection then just lighten up.  You can sell some or you can cover by selling SOME May $104 puts for $2.90
  • 2:50:  I’d say wheeee but this is just scary now!  We broke below 10,000?  Wow, things are just going insane now and we still have an hour to go. 
  • 2:54: You’re playing for a meltdown and this is a meltdown so not much to do about it. This is such total BS it’s incredible!  Good time to do some bottom fishing at these crazy lows.  Volume is pretty good now, 273M on Dow at 2:50 but 5% lines held and now we’re bouncing to -4% so watch those lines.  What a crazy day!
  • 3:11 (to a Member who still had some long positions):  Don’t start capitulating unless you have to, this was a forced move that can’t be real but, of course.  Money coming out of bonds now, rates ticking up a bit.  People back to bargain-hunting stocks. 
  • Same comment, answering whether bears should take profits: YES.  YES TO ALL BEARS, TAKE PROFITS ON A 5% ONE DAY MOVE!!!! 

I know – wow, what a flip flopper, right?  Actually 10,200 was our established buy line, the level at which we intended to flip bullish if it held on a sell-off but we sure didn’t expect to see it break and be retaken yesterday!  Of course we have our stopping disciplines for taking profits in our Members’ Strategy Section but the action was so fast and furious that it was really just about controlling greed and taking profits as they were offered on the way down.  The bid/ask spreads on options went so crazy that we were sometimes getting ridiculous prices for our puts and sometimes trapped in bearish spreads by the ridiculous prices of the puts we sold (which is still the case and gives us opportunities in today’s trading). 

Today and next week our Members will be concentrating on selling options to the panicked retail investors, just like the big boys.  We can pick beaten-down companies like RIG or MEE, who had the mining disaster and put on what we call a buy/write play like this: 

  • Buy MEE at $33.50
  • Sell 2012 $30 calls for $11.20 (net $22.30)
  • Sell 2012 $30 puts for $8.30 (net $14)

So our entry on MEE is net $14 and we are obligated to buy another round at $30 for an average entry of $22 if MEE finishes below $30 at Jan 2012 expiration.  If MEE finishes over $30, we collect $30 from the person we sold the call to and we have a 114% profit in 20 months.  This is what we do in hedge funds – we hedge!  We’re not buying options, we’re selling them to people who think they can beat the markets and are willing to bet that MEE sill go below $22.30 or above $38.30.  In this particular case, we also think it will go above $38.30 but, rather than pay $8.30 for the call contract, we are HEDGING our belief in a way that protects us all the way to $22 (a 33% drop from today’s price) but pays us a better percent return than if the actual stock hit $65.  Is that so complicated? 

That’s what we do at PSW and today is a good time to review my "How to Buy Stocks For a 15-20% Discount" where we reveal my secret hedge fund techniques.  Why do I do this?  Because the people who put money into a hedge fund don’t do it because they don’t know how to trade – they do it because they are busy making other money or enjoying their lives instead of putting up with this market nonsense every day.  Due to ridiculous regulations, it’s not realistic to set up a hedge fund for small investors so, for what it’s worth, I do my best to teach people how to use these strategies in their own trading.  The BEST time to do this is when the VIX is high and I WILL be putting together a Buy List this weekend to select a couple of dozen sticks (we already grabbed 5 on yesterday’s dip) that are good candidates for the hedge. 

I strongly recommend that anyone who has ever considered options at least try this strategy with one stock in your virtual portfolio.  If it works out, you’ll have at least one tool that you have learned how to use that will serve you for the rest of your life! 

Meanwhile, nothing is better and nothing is fixed and don’t believe a word they say about "fat fingers" causing the crash.  This crash was caused because a little boy finally pointed out that this Emperor of a rally actually has not clothes and all the MSM analysts who have been fawning over the magnificence of the rally are once again revealed to be nothing but fools, yet no greater fools than those who follow them

So Asia blah, blah and Europe blah blah – I’ll go back to talking about fundamentals over the weekend but watch the lack of reaction to 290,000 April Job gains this morning and then you decide if yesterday’s drop was a "mistake" or not.  Greece may be solved, Greece may not be solved – if you have unhedged cash at work in the market over the weekend you will either be lucky or you won’t but we will have cash and we will take advantage of whatever situation presents itself next week. 

Have a great weekend,

- Phil

 


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  1. 1020

    Good Morning!

  2. balancenv

    Phil, Good morning.
    Need advise on BIDU (yes, I am still trapped in it…) 
    What;s your advise for some downside protection to my short position of Sep 650 Put. I want to go to cash but the premium right now is just too ridiculous. I was thinking buying some 600/580 put spread, or just simply roll the Sep put to Jan11 600 put? 
    Thanks!

  3. lflantheman

     Phil ….Coming into the am with no DSP, having cashed it all out yesterday during the plummet.  What would you suggest?  I’m looking for two types of protection….short term/long term.  Thanks.

  4. judahbenhur

    PeterD,  Remember last week when I asked about disaster hedges for the short strangles?  :)   
     
    When you next check in, I’d be interested in your advice.  I have some short SPX puts (not worried about the callers anymore) at 1080 and 1050, with enough put verticals to make my break even point on everything at 1040. Below 1040, not so good, assuming I am brain dead and don’t roll out the putters.   So, yesterday was interesting as at one point TOS locked me out of trading, but for less than a minute.  I had been planning to keep everything in place until at least next week to see how things shake out.  If the market keeps moving down, I roll my short puts to June and make enough on my crazy plays to buy one of JRW’s cars.  Or, I would roll some shorts and let the verticals offset the loss on some others. 
     
    So my "what would PeterD do" question is: Better to roll the 1080s to June now and only roll the 1050s if I have to in the coming two weeks and thereby make money on the verticals while rolling and buying new verticals in June. Or, wait because the put verticals protect me at these levels and I can always roll later and even use some of the cash from the verticals to roll down below June 900.

  5. exec

    Well put.  I was thinking exactly the same thing. 
    Do these idiots really expect us to believe that one moron pushed the "B" button for Billions, rather than the "M" button for Millions and that’s what caused this meltdown.  Give me a feakin break.  First off, if you were responsible for making a million dollar trade, wouldn’t you think you’d be a bit more cautious about the digits you entered into your super computer?  Secondly, are we really expected to believe that some phantom trader could cause this?  Does this mean that had he erroneously hit the "T" button or "G" button,rather than the "M" button, then he would have instantly executed Trillions or Gazillions of trades rather than the Millions he intended and thus the market would have evaporated even quicker and deeper???   This is a joke.  This just demonstrates how dumb they think the general public really is.  You’d have to really believe you were talking to complete fools before you’d have the balls to reach this deep into your bag of BS to try and explain off this event.

  6. morxlntway

    Mattress – i have the june $110 long puts. Up almost 50% (thank you very much) Where should i role to?

  7. terrapin22

    Phil/EXC/stops – I had stop on EXC, a stable utility stock which i bought recently, and of course stock went down to below $1, i got stopped out at $36 and now its back up to $42ish this morning.  Ridiculous!!  What should our stop strategy be going forward in this new normal where stocks can potentially go to zero and back in a few minutes?  I did not have stop on Verizon or XLU thank goodness as I want to hold these positions for 12 months or more for tax reasons and collect the dividends and felt comfortable being long with no downside protection. 

  8. RMM

    exec: no error but only sellers and no buyers, that was the fact, in addition, these programmed systems following their algorithms made things accelerate.

  9. raulsm

    So all the programmed systems follow the same program?

  10. RMM

    Phil: 2 questions;
    lots of bad news about C: should I close the combination you recommended weeks ago: jan2012 call 5, caller 7.5, putter 4 ?
    and
    Bondfunds: these are well in green, as money seeks refuge in US treasuries, I probably should keeep these.
     
    Please advise.

  11. roberthjrfl

    Phil, with the VIX being so high, is there a good Vega play?  Maybe selling 2012 OTM options on a "relatively" stable stock?  How do we profit from a drop in the VIX?

  12. Peter D

    Judah, you are in luck as I have a couple of hours to watch the market this morning!  I’m looking at the VIX to make my decision.  It’s at 32.8 and I don’t think it can go much higher.  Remember the Dubai saga last October?  VIX jumped to 32 and SPX was at 1030.  So barring any sudden dip (and manipulation), VIX would be lower or stay the same for the next few days.  This means holding on to the shorts is the best deal right now.  Do you have the margin for rolling 2X?  If so, then roll the 1080 to 1030 to give a bit more breathing room.  Don’t forget to cash out the vertical when it gets to $8 as a reversal upward could evaporate that gain.

  13. judahbenhur

    PeterD,  Yes, plenty of margin, so I’ll look for the 2x roll and breathing room.  With all the bouncing around, sometimes if you put in a lowball bid, it will fill, as I did yesterday filling more verticals for .10 and .20. 

  14. samz3700

     We had massive dislocation in the currency markets prior to the "accident" – a lot of people got burned on the carry trade and had to dump stocks
    see the wsj – lots of quant trading firms stopped trading as we tanked so lack of liquidity

  15. tradansh

    Phil – OMG. the monkeys are hilarious.

  16. EricL

    I’ve closed out some of my GLD positions — clearly overbought here.

  17. jromeha

    Phil, I know you’re all for cash now but could you give me a bullish play for fsys? Thx

  18. Phil

    Good morning!

    Well open is looking lame already but there is some buying at least.  If we get another blast of selling we will fall very hard so be very careful with your trading. 

    We’ll be looking at Dow 10,500, S&P 1,125, Nas 2,320, NYSE 7,000 and RUT 670 to hold (all below now) in order to call it "stabilizing" and above that we need 2.5% gains on the day to be impressed.  Unfortunately, the move yesterday makes it very hard to say what constitutes a bounce and what is still an erasure of yesterday’s spike down that we may ultimatley ignor so let’s just keep our eye on Jesse’s very good S&P chart that gave us such a good indication of where we were heading when I posted it yesterday at 1:37:

    In our 5% Rule post, I said that a break below 1,155 would take us down to 1,100 but I didn’t mean in one day!  1,155 is still the key line to watch on that index and it’s right about the 2.5% rule for the day and 1,145 was our last breakout so a bearish sign if the S&P gets rejected there. 

    We could go either way so be very careful and, obviously, a 0.6% bounce is expected after a 3% drop so the key is how we behave around those levels and then 1.25% and 2.5% – IF we are heading higher but I’m still not convinced.  Cash remains king over the weekend (as long as it’s US dollars!). 

  19. magret

    Re Liquidation IB … Has any one had the same experience … Yesterday during the spike IB liquidated three positions buyinhg puts at 40%  to 400% abovey esterday’s eventual closing prices without giving me any notice?// Anyone knows whether this is legal?

  20. samz3700

    Magret -
    IB offers pm on the condition that they can liquidate your portfolio at any time -
    However – given the BS yesterday I would contest the trades

  21. drumkeerin

    still these tremendous bid-ask differentals for the options. hard to trade

  22. yodi

    Good Morning Phil,
    on your recomendation below question why or when can we not better buy a Jan12 25 or 20 call I know the spread is big at the moment but still 1/2 the price thanks

     
    Buy MEE at $33.50
    Sell 2012 $30 calls for $11.20 (net $22.30)
    Sell 2012 $30 puts for $8.30 (net $14)

  23. samz3700

    So yes it is legal -
    someone with experience in arbitration should tell you what to do – depending on how much money your are talking about I would threaten to take them to arbitration or whatever -

  24. chyer

    Hi Phil/ Bought MEE at the open but dumped on the first spike. options market liquidity have dried up no vol what so ever, bid ask spread is ridiculous, what is you advice here?

  25. roberthjrfl

    Peter D, yesterday i tried to flip short putters to short callers 1X3 but couldn’t get filled in the chaos.  Doesn’t that make good sense as if the market starts going up the VIX goes down deflating the value of the short calls you "flipped" into. 

  26. roberthjrfl

    Phil, could you outline some bearish plays for us ATM.  Not disaster hedges, but things to work the market going lower.  TIA.

  27. samz3700

    SS / Judah -
    any sense of direction here on iwm

  28. ravalos

    Phil, a technicality in your subscription site.. if I have a certain membership that expires at the end of the month but let’s say I want to upgrade to a higher level today for another 3 months, will the old membership reset even when there’s still 1/3 of the time left for the money paid and then the new status begins today and expires 3 months from today’s? How do the upgrades work when it comes to fees and time? Thx

  29. ssdirk

    judah, samz – going with the program.  Bought IWM puts on the strong buy signal.

  30. rexx

    New guy Rexx here.  Are you seeing  much liquidity in MEE 2012 trade?

  31. magret

    Samz, the amounts are not really worth bothering…However, the issue is not the money but the factis that if the Authorities can allow something like yesterday’s BS to happen anytime wiping out God only knows how many an ordinary man’s hard earned savings, , then no matter what we do investing in the US stock market is like playing Russian Roulette. I am seriously thinking of calling it quits, as one gets the impression that this is one big sham…. 

  32. humvee4me

    Would love to get out of some disaster hedges but the spread is crazy; example   DXD stock 28, bought 23/27 call spread and sold 23 puts  many weeks ago.  Should be making good money.  All three legs show losses, can’t get out without taking a beating.  Seems like only way out is to wait for volatility to drop or wait to expiration (Oct), either way my  "profit" will likely be gone.

  33. lionel

    Hi Phil,
    Yesterday we hit during the panic 1065 on S&P
    What disaster hedge (SDS or SSO) would you recommend for the weekend at this level? Or would you wait to see if we crawl back today to our 1155 watch level.
    Thanks
    PS: I would like to take the opportunity to congratulate you for your accurate prediction of the amplitude and also of the timing of this correction. Exceptional guidance that has benefited hopefully to all your members.
    Bravo!

  34. ssdirk

    IWM spreads are still only a few pennies.  Nice liquidity.

  35. cwan120

    Hi, Peter D,
    Just saw your reply to Judah.
    I have SPX May 1050 putters.  Do you think it’s okay to hold onto them?  No margins to 2X.
    Thanks!
     
    Did I mention that my Net Liq Value went negative for minutes yesterday?  I was thinking if it were IB, they might have liquidated my account automatically.  What do you think?

  36. magret

    and to add insult to injury, they said that this was due to a mistake???????

  37. samz3700

    ss – did you use the 15 min bar

  38. lionel

    Magret/IB
    Yes it did happen to me last year.
    There is on IB a way to indicate which positions to liquidate last (you can check that on your account window)
    Try always to leave the most liquid positions unchecked, so if that happens again IB will liquidate your stocks and indices options first. That is what I have been doing since.

  39. ssdirk

    samz – I have been using a combination of 1,3,5,10 and 15min charts with differing ema periods.  Currently I am triggering off of a 3min 8period ema chart.  However, all gave a good signal.  I got filled on May 68′s at 2.35 and 67′s at 2.12.

  40. samz3700

    so annoying spread on old edz options

  41. samz3700

    ss – thanks

  42. magret

    Thanks Lionel.

  43. ssdirk

    IWM 100dma is 65.72.

  44. stockbern

    Going to put in a buy order for APPL @  .01 , just in case.   :)

  45. ssdirk

    IWM Jan high is 65.00.

  46. RMM

    Phil: are there buyers today or only sellers again ?

  47. lionel

    Magret/IB
    Magret just for your to know and other IB users, I had to call IB today because they "added" some ghosts transactions to my account during the market glitch yesterday.
    I could see the trades in my trade windows (and the associated commissions) but nothing in my portfolio.
    Too bad since I was supposed to have been shorting 51 Gold June futures at 1211….!
    I just got the commissions charged but not the corresponding profits :)
    Just to say have a good look at your yesterday trades.

  48. EricL

    F looks like it’s on its way to yesterday’s lows.

  49. concreata

    Phil – AAPL – Short May 260 Call (3.60, now 2.40) with equal number of short  May 250 puts (2.40, now 15.20). Suggestions?

  50. humvee4me

    Phil, a few months ago I got into GOOG spread that you suggested:  Jan 2011 420/480 bull call and selling 1/3 of monthly calls against it for income.  Part of trade included selling 420 puts if Goog dropped under 500.  Well here we are:  you still suggest selling the puts and at the same quantity as the calls?  Thanks in advance

  51. yodi

    Phil Question on rolling puts example DD sold the May 38p for 1.36 now trading at 2.44 rolling the same now to jun 38p  would give me a credit of .58  This is the case with many puts in an strangle some are more than double I would say to roll when the market is down and the VIX is high. Am I right in saying this? thks

  52. ssdirk

    IWM trend line going back to Jul low and touched again on the Feb low is around 63.20.  This trend line is the exact stopping point at the low yesterday.  Below that………..Lord Blanfein help us.

  53. EricL

    Now I’m having trouble getting trades through ToS.

  54. Phil

    BIDU/Balance – Why protect it?  They are holding up well and you just need to be patient.  If you are worried, pick a spot like $650 or even $660 and momentum trade below the line.  If you pick up a dollar here and a dollar there, you can pay off those putters anyway.  If it makes you feel better, roll away but those puts are 100% premium and you don’t really owe any of that money – that’s just what they are asking due to the inflated VIX.  This is kind of like buying concert tickets on the street before a show – an hour before the show, they can ask for $200 and get it but (and this is my favorite event trick) after the show starts, you can buy those tickets for $20.  Sure, sometimes you don’t get tickets but I see 10 times more shows from the same seats for the same $200…

    Protection/Iflan – Best protection right now is the old buy/write on short plays since we want to sell premium, not buy it.  SKF is $20.17 and you can sell the Jan $19 puts for $6 and the $18 puts for $3.70 which is net $10.47/14.24 and keep in mind it’s a 2x ETF so XLF has to gain 15% to knock them down 30%.  You can also be more aggressive with the July $19/21 bull call spread at $1, selling the $16 puts for .75 so .25 on the $2 play that’s currently $1.17 in the money.

    QID is also a good downside hedge with the July $17/20 bull call spread at $1.20, selling the $16 puts for .80 so net .40 on the $3 spread that’s $1.24 in the money.

    Please read my last comment on yesterday’s post regarding the use of downside hedges!!!

    Gazillions/Exec – LOL! 

    Mattress/Morx – CASH!!!!  You are up 50% because of the VIX – if we head up you will lose value at an alarming rate and the rolls are too expensive.   If you CAN’T get out then sell the $105 puts for $2.70 and use that money to roll the $7 puts to Sept $107s, which are $8.70 so you put a buck in your pocket and buy 3 more months of protection.  If we start going lower, you can use the extra dollar to roll the putters lower and if we start going up you have $1 (+ $2.70) which pays for 7 rolls up, all the way to the Sept $114 puts.

    Stops/Terra – For that reason (this isn’t the first time this has happened) I never set hard stops.  Yes a company could go BK but try not to invest in companies that might go BK and you can generally avoid that problem.  Also, make sure no position is more than 5% of your portfolio and, ON EVERY BULLISH POSITION YOU OWN, make sure you are ready, willing and able to DD if, for some reason, your stock drops 50% for no good reason.  That means ALWAYS having 25% cash on hand and being willing to ride out, for the very long-term, a 9/11-type market event but that’s how to invest.  Otherwise, you are a trader and don’t pretend to be an investor because you are likley to get in trouble.

    Same Programs/Raul – That’s the logic behind my 5% Rule (see that post for explanation).  It’s not that they are the SAME programs but the idiot firms hire the same consultants and the same software designers and they all worked at the other firms at some point in their careers and there are only so many different ways you can program "try to buy low and sell high" so they end up with programs that are close enough to become predictable.  I strongly recommend reading the entry on Psychohistory I linked to – it’s something most people are not familiar with but a great concept. 

    C/RMM – There’s always bad news when they try to take it down.  I wouldn’t make it a core holding but I do still like them.  As to bond funds – if they are doing well you need to take profits (next week) just like any other investment that does unnaturally well over a short period.

    VIX/Robert – Just wire me $10,000 and I’ll go play poker at the Borgata for you this weekend  – it’s a LOT safer!  Don’t forget the VIX hit 89 at some point and held 60s for quite a while so, unless you have a TON of margin to spare, I wouldn’t want to get caught up selling puts (and they only go out to Oct anyway).  I think, if anything, I prefer buying Sept $27.50 puts for $3.50 and betting things calm down eventually.  If you are scaling in and roll and DD the position up to, perhaps the $40 puts, that could be a fun bet.

    Uh oh – down we go again and TOS just crapped out!

  55. salvum1

    PHI:/ FAZ -I have "made up" 2/3 of my loss on the sporead – should i close?> thanks 

  56. aclend

    Here is something valuable I have learned in the recent sell-off. Even though my portfolio is down significantly on this correction due to many sold options positions, it is all on paper because the bulk of the loss is due to short puts on stocks I would like to own. The kicker is that due to the increase in volatility and premium, even those deep ITM are not being assigned because they still contain significant premium. So as long as I have sufficient margin to prevent any liquidation, I do not have to take any losses and can just ride it out.

  57. cwan120

    Hi, Lionel and all IB users,
    Do you think IB will automatically liquidate the entire portfolio if net liquidation value goes to negative?  It happened for a few minutes in my thinkorswim account yesterday while I was watching.  For those few minutes, I owed maybe -200K!

  58. magret

    Cwan/ IB ,yes I am conviced. They did send me a warning yesterday but only seconds before they effectively liquidated.

  59. ssdirk

    Closed the IWM 68 puts for 70% profit in 36 minutes.  Still holding the 67′s.

  60. RMM

    Phil: the TNA position which on 4/29 I covered with the goal to get to neutral by selling jun65 calls is of course in big trouble , when those callers expire in June, their covervalue will not be enough to reach the goal as TNA now lost more and more,
    the false fat finger drop made things really bad, I had off and on some TZA but cashed them in whenever there was a gain, obviously too soon,
    what could I do better here with this ?

  61. Phil

    FSYZ/Jrom – It looks like you can sell Jan $25 calls for $5.50 and Jan $22.50 puts for $4.30 for net $16.40/19.45 so that’s the way I’d go with the $8.60 upside.

    DIA $107 calls for $1.25 for risk takers!

  62. RMM

    Phil: why getting out of bond funds (which contain mostly US treasuries ) if investors are fleeing into US treasuries ?

  63. sns1

    Phil- did we find a floor at 1100 on S&P? tempted to play a trading range to 1125, but cautious until Europe closes due to potential selling presure as they cash out for weekend…thoughts?

  64. stockbern

    Phil,   thoughts on oil?

  65. ssdirk

    Closed 1/2 of the 67 puts for 60% profit.

  66. lionel

    Cwan/IB,
    I agree with Magret, you will get few minutes to execute the trades yourself.
    Your account window will be flashing yellow and they will try to contact you by email or by phone.
    Pretty scary experience!

  67. EricL

    I’m liking this fear. Buying SPY verticals selling ATM buying deep ITM. Still holding naked XLF, KRE, F puts for safety.

  68. stockbern

    GXDX/ Pharm     I know you liked them?  Wait for police and weekend then maybe entry next week?

  69. EricL

    Getting fabulous roll prices out to June on diagonals too because of the crazy IV.

  70. judahbenhur

    SS,   Very nice.  Sorry I didn’t join you.  I did see the signal, but I was busy rolling some short puts to safer ground.  I am finding I can’t manage the strangles and day trade IWM at the same time.  I’m going to have to pick one or the other.

  71. jcedens

    WMT is down almost a dollar. Is it a gift with a buy/write or hold out for the gift to get bigger?

  72. chyer

     Europe taking the express elevator down. Selling into the close, may happen

  73. kururi67

    Phil, Thanks for the very detailed response on my disaster hedge question from yesterday. I think maybe I was just shocked by the "paper losses" in my account from the spreads and VIX. CAT is probably not for me as I am already a bit overweight in industrials, but any recommendations over the coming days on good stocks you think are overly beaten up will be nice.

  74. ssdirk

    All out of the 67′s.  Looking to reload later.

  75. lionel

    Sns1/
    It seems to me that US investors are trying to cash out of their Euro positions ahead of the weekend. There has been a pressure down on the euro that coincides with Europe sell off.
    US markets may be next soon…
    By the way, Europe is trading pretty cheap – using last Phil’s analysis, Eurostox50 bottomed out at 1820 but one can argue that the "non panic floor" was actually at around 2100-2150.
    That makes the Eurostoxx at 2485 trading just above 15% from the "lows" or 35% above their absolute bottom.
    That is due to the fact that European banks are being hammered down.

  76. aclend

    Does anyone know how much option prices increase for a given increase in volatility? …or know of a user-friendly option calculator?

  77. RMM

    Phil: stock positions: callers and putters, if expectations of further drop, keep callers, close putters, YES ???? how does time/month influence this ?

  78. sns1

    txs lionel…so how are you expressing this view from an investment standpoint?

  79. salvum1

     PHIL / FAZ
    How is it that the Oct 12 puts are actually UP today?  That makes no sense?  The spread is 2.72 * 2.87 but still, with FAZ up, shouldnt the puts be down?  Wgat am I missing here?

  80. bassdad

    Phil,
    I have an old BAC position which I’ve grown tired of working at.  Jan.2011 $10Calls & $20Puts. Selling straddles against this has been painful for months as this seems to be the bots preferred stock for jerking the Dow around.
    Right now the spreads are murder on closing the $20 puts, however, I can roll the Jan2011 $20Puts to the May2010 $17Puts right now for 3.92.  As I originally paid 5.95 for the existing position, I believe this gets me about even or slightly ahead on that leg.  My thought is I’ll then be out of the put leg in a couple of weeks while still having some protection for the next 2 weeks, & then I can go naked on the $10 calls or turn them into a vert. if necessary or call calendars to continue working off the calls.
    Does this seem reasonable.

  81. lionel

    Sns1/
    I am buying French banks (buy writes because they all have a nice dividend)
    ACA buy write at 9.2 selling June 9.6 put and calls for 2.80
    ACA bottomed out at 6 euro last year and was 13-15 euros until recently. The dividend yield is 4.9% and they are profitable.
    Credit Agricole is the major retail bank in France but it is heavily exposed to Greece…so there is a risk!

  82. lionel

    Sns1/
    I buy MONEP options. They are more liquid than DTB’s.
    Be careful they come in two flavors, by 1 or by 100 multiplier :)

  83. jomptien

    salvum,
    I have same problem – I have short puts and they are down. No sense, only think is to wait it out I guess

  84. sns1

    txs lionel!

  85. Phil

    IB/Magret – Whatevers in the broker agreement you signed is legal.  Now I remember why I don’t use IB – I’ve heard that before about them. 

    Hard to trade/Drum – That’s why cash.  I HATE not trading but what can you do – it’s just stupid to try to beat a market that moves 100 points in 5 mins up or down randomly…

    Volume on Dow is a healthy 114M at 10:40, which is why I liked the bull bet on the move down.   That was a lot of volume and we didn’t fall 500 points and we found support above yesterday’s lows so I liked it.  Looking to retest 10,600 on a run up if we’re lucky but failing 10,500 or 10,400 for that matter is a quick out on the DIA calls

    MEE/Yodi – You can do that.  I was writing a nice, simple trade for the general public.   We do know that there’s no point buying a stock that doesn’t pay dividend unless you intend to hold it longer than the leap expirations.  It’s actually often an advantage to own the leap as they gain a little premium on the way down and help buffer your losses…

    MEE/Chyer – It’s a 2-year play, you don’t dump it after 15 minutes!  You put in an offer at the net price you want and you either get filled or you don’t and you move on to something else.  Once you are in it, you don’t do anything unless they are down 20%, at which point we look to adjust.  Always scaling in, of course. 

    Bearish/Robert – The above 10:29 plays are best for relatively short-term bearishness but I’m not very bearish at 10,344.

    Ugrades/Ravalos – I think it’s best to check with Greg on that, he can make sure it goes right.  Use the admin@… address. 

    Welcome/Rexx – MEE is not too liquid that far out, you just need to put in an offer and wait patiently to get filled.  This is tru with many long-term contracts. 

    Wow, VIX up another 22% today. 

    Sham/Magret – If you think this is a sham, wait until you see what happens when there’s a run on the banks!  I’d rather own my bits of companies than bits of currency on the whole.  Even in a depression people need toothpaste and toilet paper..

    Hedges/Humvee – Thanks!  You’re not going to realize your gains until about August, since the play hinges on SELLING premium and since the VIX has sent that premium through the roof so the contracts we sold are grossly inflated.  Again, read my last comment from yesterday’s post where we discuss those in depth.  These are insurance plays and, if you are in them, you are now very well insured because, if the market doesn’t recover, you will collect your insurance.   Therefore, it’s time to start looking for bullish plays to offset them. 

    Yeah Obama – Gimme my 50 points! 

    Oil at $75 – that’s nice.

    Buyers/RMM – I’m a little encouraged but we’re still down 1.25% ish so more day’s of pain likely if we can’t get green.

    AAPL/Concreata -  I’d wait for next week, plenty of time to roll and for AAPL to recover.  I would say take out the calls but the premium is ridiculous for 10% out of the money. 

  86. Pharmboy

    All – just waiting.  Not worth the pains today, as one can drive a truck through the B/A spread.  If there is a company’s stock I like, then I will post something, but just waiting. 
     
    QCOR getting beaten down from AH high of 10.40.  This is the problem with a company that has a drug on the market and has a line extension.  The question is – is the price built in?  I took my profits a week ago and used those to bet on a move up.  Now I will go long, but I will wait for the dust to settle.  Watch them closely, as they have a ton of support in here, and as with DCTH, investors will buy on these dips. 

  87. EricL

    Pharm,

    The SPY spreads are only about .10 — totally worth it given the size moves here, IMO.

  88. judahbenhur

    Cwan, Saw your question to Peter and I’m interested in his reply.  I’m sitting tight on the 1050s at the moment, as my verticals keep me even down to 1030.  But if we don’t hold 1100 today, I might roll them out to June, which keeps me even in May down to 1010.  I had a moment yesterday when my net liq value went negative, even though SPX didn’t drop below my BE point and I have a ton of cash in my account and I can always roll to the next month on these SPX putters and callers (can’t I?).  Must have been a computer glitch.

  89. EricL

    Holy crap-o-rama that was awesome. Not JRW III – level awesome, but I’ll take it.

  90. RMM

    Phil: when day after day the market goes down, it usually ends Friday way down, is this typical ?

  91. aclend

    Pharm,
    Which of the biotechs could be a ten-bagger in 3 years?

  92. RMM

    Phil: I know you are busy, maybe you can comment on my 10:36, 10:40 and 10:56. TXS

  93. Phil

    GOOG/Humvee – If you REALLY don’t mind owning GOOG for net $394.50, then why not sell the Jan $420 puts for $25.50?  That play has a net margin requirement of about $4K to collect $2,500 (62%) by Jan or you own GOOG at the lowest price it’s been since early 2009.   And, of course, you can always roll the putter lower – the 2012 $340 puts are $25 so you are really committing to buy GOOG at net $315.  

    FAZ/Salvum – Given that incredibly limited amound of information, I’d say maybe. 

    Short puts/Ac – Yep, that’s the ticket!  If you sell things you REALLY want to own AND can afford to own, it’s a great way to play….

    Unfortunatlely, we fell from 11,160 to 10,260 (900 points) and that means a 20% bounce is 180, back to 10,440 so if we have trouble here, it’s very bearish!  We want to see that line on the Dow firm up as support.  The S&P fell from 1,200 to 1,100 so (tough math) 1,120 is our key mark for a weak bounce. 

    BRK/B is $75.22 and you can sell the 2012 $75 puts and calls for $26.50 for a net $48.25/61.63.  It gets you a ticket to what may be the last few Buffett conventions as well as the great story of how you got into Berkshire at less than $50! 

    IWM/SS – Very nice!

    TNA/RMM – Really?  I have to figure out what do do with it from those clues???  I know you are new here but strkes and basis are hugely helpful…  8-)

  94. balancenv

    SPX put spread protection. 
     For spx put spread crazy play, try TOS simulation, just say 1130/1140 spread, and move the date forward.
    You’ll see, spread value will only explode within 3 days of OpEx. yes 3 days! 
    I have 20 1130/1140 spx spread right now (finally it works!) and they’re in the money but only worth 5.4 on a 10 buck spread.
    So spread for protection, from my experiences, can be useful in two ways:
    1. wait for close to OpEx and max the value, this will require you’re right on the mark on selecting the spread.
    2. if it’s close enough but still not in the money completely, try experimenting near OpEx to sell the + leg and just leave the short naked. <-- very dangerous and needs PM and lots of margin!
    I also have 20 1080/1090 spread and I am holding it! 
    I think they’ll be completely in the money by may OpEx.
    What a day!

  95. Pharmboy

    TOS is painfully slow….
     
    Biotechs/ac – if I knew that….I would not B here!  How about VIAP for 15c.  That makes it 1.50 in 3 yrs.
     
    DCTH, ARIA, CRIS are my favorites for now.  ARNA is also a good bet @ $3.  Remember, more biotechs go in the crapper than succeed.

  96. Phil

    EU closing down about 3% – looks like they must have had some fat fingers over there too…

    If we’re lucky and if there are any buyers out there, they are likely waiting to see if the EU close pushes us down.  If we can hold it together here above our weak bounce zones, then maybe we can get serious about getting green.  Those DIA $107s are $1.07 now, even better deal but the problem is, as we go up, the VIX goes down so we need a good move up to make money

  97. pyern

    Phil,
    Have LMT Jun 75/85 bull call spread. Thankfully, it was a bit ITM and decently covered.
    Is it prudent to roll it to a Sept 75c/Jun 80c, for a net credit of $0.40? I’m presuming that the higher VIX gives me the net credit due to the calendar spread.

  98. EricL

    I think if we can find support again around 1100 that will give us a nice potential double-bottom at major support. It will look good, even if we don’t get a second liftoff today.

  99. ssdirk

    judah – back on the 66′s this time for 2.11.

  100. cwan120

    Thanks Margret & Lloniel, regarding IB.
    I might still open an account there.  But I’ll be careful.  I might as well transfer my Schwab account to IB.  Schwab does not have PM anyway.  Their commissions are high.  And their web site was down for quite a while yesterday.  What the hell!

  101. judahbenhur

    Balance/SPX.  Thanks. Are your put verticals protecting SPX short puts — if so, what levels are you hanging onto? 

  102. RMM

    Phil: sorry about not giving you the basis for the terrible TNA position:
    TNA stock basis 71.56 , then we discussed and decided on getting out even by selling jun65 calls, basis 6.72,  now 2.75$,

  103. judahbenhur

    SS, I was going to buy some IWM puts a short while ago and the IWM price dropped by about 20 point in a couple of seconds.  Too bouncy for me.  I’m staying on the sidelines.

  104. yodi

    Hi Phil my question from this morning thks copy below
    yodi
    May 7th, 2010 at 10:25 am | Permalink  
    Phil Question on rolling puts example DD sold the May 38p for 1.36 now trading at 2.44 rolling the same now to jun 38p  would give me a credit of .58  This is the case with many puts in an strangle some are more than double I would say to roll when the market is down and the VIX is high. Am I right in saying this? thks

  105. Peter D

    robert, yes, flipping to callers saves a lot of margin and you are correct about the VIX effect, benefiting you.  See how the call values increase even if SPX were down 22.
     
    cwan, you can stay tight with the 1050 putters.  As for IB, I don’t know yet as I have been slow to move money there.  Those cash are sitting in my bank account, which is a great thing at the moment.
     
    Gotta go to meetings!  Good luck to bring that VIX down – stop buying puts!

  106. ssdirk

    judah – out for .06.  I think I will head to the range and come back for the last 2 hours.

  107. gel1

    UGH!!!!

  108. kururi67

    Phil, I forgot to ask you about margin and my short TBT puts. Like everyone’s short TBT puts they are down and my broker’s margin requirement on them is large, very large. I am still on board TBT long term for sure and want to roll them down and out, but I have a feeling TBT could go down (or at least flatline) for the next several days at least. Can I cover them now and wait a few days (letting my margin recover) to roll them down out again, or do you think I would possibly might miss out on a rise in price and drop in VIX? I know it sounds silly to wait but the margin requirement really handcuffs me at the moment.

  109. cwan120

    Hi, Judah,
    Just saw your 11:17 comment.
    I rolled May 1050 to June 975 1X about even.  I have to leave in 1 hour or so for an appointment, and have no access to any computer for the rest of the day.  So, I’d rather be safe than sorry.
     
    You had that negative net liq value experience as well?  I think the estimated values on the putters went crazy yesterday.  TOS usually takes the Mid between bid/ask.  If we took the Mid’s as face values, our net liq. values were probably negative.  I was glad TOS sat tight and did nothing to our accounts.

  110. salvum1

     PHIL/ FAZ
    Ok, smart aleck – haha – more info?  I thought my 2 days of bogarting your blog with my time machine trades were enough?  lol
    Ok, all OCT with open prices in paranthese – I have FAZ 9 long calls (debit 3.52), FAZ short 11 calls ( credit 2.56), FAZ short 12 puts (credit 2.82) – recall that i already have a realized loss of 2.22 per also but with the 1.86 net credit from above, i am net .36 cash loss.
    And my other question was, how can the 12 puts be up and the underlying be up also.

  111. biodieselchris

     Pharmboy, I was going to drop into 4-6 biotech positions today. From recent comments I think you’re hit list looks something like this.
     
    AMLN ARIA ARNA DCTH EVVV KERZ ONTY QCOR SGMO SVNT
     
    Also any thoughts on BIIB DNDN ELN PLX JAZZ OXBT ?
    Just wondering which ones you like best. Or maybe I’d be better off in IBB ……  — BDC

  112. JRW III

    Good morning,
    IWM 64.73, 65.31, 66.10, 66.78, 67.86

  113. sns1

    TO ALL-  THERE IS A RUMOR THAT EUROPE AGREED TO CREATE A 600BN CREDIT FACILITY. NOT SURE WHO WOULD BE ABLE TO BORROW, BUT THIS WOULD BE HELPFUL TO EUROPE AND EURO

  114. Pharmboy

    Rumors swirling that PDL is a takeout candidate for their mAb technology (Genentech/Roche would be the most logical.  I am going to pick up some more shares here from our original entry, being prepared to DD.

  115. samz3700

    Great time to sell long dated options – high vix really pushes them up
    Appl jan 185 puts have shot back up to 13 – they were down around 8 a week ago

  116. Pharmboy

    BDC – ARNA buy 1/2 here (sell 3 Jul P for 50c), ARIA (sell 3.5 May P now), CRIS, DCTH (sell 12.5 Sept P now with higher VIX), EVVV, KERX ONTY (short term spike); 
     
    BIIB for buyout, fine, and my favorite GILD 35 Jan12 C for < $9.  I am warming up to AIS that gel noted a few days ago for 1.55 or better.

  117. EricL

    sns,
     
    Thanks for that; I’m pretty sure we’re going to hear something like that soon.

  118. Jordan

    humvee4me/DXD spread   – I am in the exact same situation, and the way I have addressed it is I have a standing limit order to sell at half my theoretical profit on this thing, and if it fills on a spike down (or up)- great!

  119. Phil

    Bonds/RMM – If you had outsided gains in the funds, then it was due to the panic.  When/if the panic subsides, so will your gains. 

    S&P/SNS – Better to wait.  Those DIA calls are already annoying me as the Dow is up over 50 points since I bought them but they are down .18.  Just not worth the hassle on a Friday..

    Oil/Stock – Tempting to play them long at $75 but also better to give it the weekend.

    WMT/Jced – We like them down in this channel but I’d start with a sale of 2012 $55 puts at $8.30 and see what happens next.  If WMT crashed to $45, those puts go to $15 (price of $65 puts now) and you can then buy the stock at $45 and sell $45 calls for $5 and your net is $31.70/43.35 so consider that your "worst case" on the naked put sale – getting 2x the stock at about 17% less than today’s price. 

    Prices/Ac – Lots of factors, that’s why it’s good to get familiar with a few regular stocks and learn their habits.  After a while you’ll see a new stock and thing  "that one move like Google" or "that thing is like WMT the way those options lay there."  That’s how you build a good reference frame – learn a few stocks intimately so you can internalize the action under various circumstances. 

    Influences/RMM – Every stock is different and the answer depends on the position, the hedge, the cost of the roll, the outlook for the next month or two, the overall market…

    Faz/Salvum – They’re up because the VIX is up more than FAZ is up and, of course, FAZ has it’s own volatility that factors in and it’s been very bouncy.  As I often say, you have to have conviction to play these positions.  If you have no faith in your targets and you are going to let yourself get pushed around by the numbers on your screen, then you are doomed to lose a lot of battles…

    BAC/Bass – It sounds good but I’m confused.  Do you own the $20 puts or did you sell them?  If you sold them, then sure, roll them to something that expires but if you own them, not clear how this makes you money. 

    French Banks/Lionel – That makes me very nervous.  France may be next to fall if Greece and Spain go. 

    LOL Eric!

    Friday/RMM – I wouldn’t count on any "typical" behavior here.  My impression is that they were waiting for the EU to close and while they were waiting they flushed all the people who thought they were getting in cheap yesterday and now that everyone is confused, they’ll run us back to 10,700 and it will be almost like nothing bad happened this week except a little sell-off…  If we don’t get a very nice run-up like that, then cash is the only way to go into the weekend as we could make a spectacular drop if anything goes wrong in Euroland.

    LMT/Pyern – I would take advantage of the premium in the June calls and spend $7 more to drop to the Jan $70s, now $14.  So you gain $5 intrinsic + 7 months for $7.  Then you let the caller expire and roll him along, hopefully higher each month.  If you don’t want to spend money, the roll makes sense too. 

  120. aclend

    Phil, I never uncovered my DIA 112 puts (full cover) so I have ridden them down and figured I would just roll them out even to June 111s and close out the long puts when we find a floor to ride the 111s back up. I know its risky but I should be fine on margin. What else would you recommend?

  121. salvum1

     PHIL / FAZ
    Oh, I have plenty of conviction to stay with this trade -just wondering if I should be adjusting with such a wold price swing.  I look forward to your response. thanks!  :)

  122. minijoe

     Phil,
    I bought TBT Dec. 45 Call @ $3 yesterday looking to sell May calls. Need advice on what strike to sell. Thanks

  123. bassdad

    Phil
    I own the puts, but I’m not really any longer in a position to make money unless there is an extreme move. Just trying to limit loss while working out of the bad position. The thought was to give up $3 by rolling from the $20′s to the $17′s and collect $3.90 ish for the roll.  Am I mis-reading that I’m picking up .90c to my favor doing this while allowing me to start re-positioning into a likely more bullish position, sooner, around the $10Calls that I will still own.

  124. RMM

    Phil: should I not be closing all putters ?

  125. jcedens

    TBT is up but the puts are still up significantly. What’s up with this?? Sell more puts now?

  126. jimmyv

    Rick Santelli hit it on the nose. The largest order you can put on eminis is 2,000 contracts. It would have been impossible to place this billion trade order. Phil you are right this is total bs

  127. b1ll

    Phil where is the entry on Psychohistory ?

  128. JRW III

    Go TNA !!

  129. leonf675

    Cramer recommends raising cash.   I think he is a secret PSW subscriber. 
    http://www.cnbc.com/id/37007089

  130. EricL

    AAPL is finding a steady bid even though someone keeps unloading into it. Seeing that in quite a few places, so it’s going to come down to who finishes first.

  131. lionel

    France next to fall/
    Phil, I am not as pessimistic as you are about French Banks.
    http://econ365.files.wordpress.com/2008/10/gross-savings-rate.pdf
    France is a saving nation, like Belgium, Germany and funny enough Spain.
    The governments of these countries can and may tap into this money pool by using local fiscal incentives.
    Secondly, credit is expanding in France, and more importantly to businesses and small businesses.
    That means that banks are making money the old fashioned way – lending and not "trading".
    I wish it could be the same for the major American banks.

  132. sns1

    Eric- I blinked and missed the chance to play from 1100-1125…thoughts at this point on spy, or individual names? Txs

  133. RMM

    Phil: what do you say about my 11:41

  134. EricL

    sns,
     
    I’m still liking call verticals selling ATM and buying several strikes ITM. I just added some on AAPL a few minutes ago. Although the VIX just pulled back significantly, IV is still pretty high. So in my opinion, it’s worth it. I’m watching GOOG for a retest of 495 to try the same thing.
     
    If I’m wrong and we crash, it will suck. However, I will have something to do, namely buy-out the front-month options and wait for some kind of recovery, rolling my longs out in time if necessary. If we go nowhere I win as the front-months dribble to 0. If we go up I win.
     
    My current hunch is that we’re going to get some kind of bullshit aid package out of Europe this weekend and the markets will fly up. But of course the risk is high.

  135. JRW III

    Out of TNA at $51.27 for $ 2.42

  136. lionel

    PCS/
    The stock just had a 15% drop in two days!
    Steep fall.

  137. sns1

    Phil/Eric – We just tried going positive three times and it didnt hold…is that bearish or not meaningful?

  138. tuscadog

    Phil, Gold & Euro quantitative easing.  The new rumours of ‘helicopter Trichet’ if true would further boost Euro money printing along with US and Japan.  I opened a big TBT position this morning.  Should I add gold miners now in anticipation of global fiat currency destruction as the alternative to a ‘ fiscally prudent’ global depression?

  139. Pharmboy

    Eric – I agree with you, and am doing the same myself on SPX and a few others.

  140. ssdirk

    judah – couldn’t stay away.  Made another 13% on IWM puts.  Why can’t everyday be like today.  This is fun!!!

  141. EricL

    sns,
    I don’t know, but it may just be distribution. Still lots of sellers, but also buyers stepping in. As long as SPX 1100 holds I’m going to stick it out with these new positions.

  142. ssdirk

    JRW – 66.10 is a good line today.  Thanks :)

  143. RMM

    tuscadog: what a name??
    TBT: did you buy the stock or options ?

  144. JRW III

    Back in TNA at $49.90

  145. judahbenhur

    SS, Great. Are you using JRW’s lines, or the 3 min candles?  I hurt my shoulder recently and can’t swing a club, which means I don’t go to the range, which isn’t good for my health, since hitting golf balls has been my form of meditation for over 30 years.

  146. tradansh

    ToS is really screwed up today. Hung tick data, hung ADV, DCN , Volume data. WTH is going on ToS?

  147. ssdirk

    judah – Bummer!!  Get that fixed.  Using the 3m8p to enter and used JRW’s 66.10 to exit.

  148. ssdirk

    JRW – are you triggering on the 66.10.  What will make you go with TZA?

  149. gel1

    Out of EUO with a nice profit….. will enter later when markets settle.

  150. gel1

    Sold TBT puts today – Jan 43 for 6.70

  151. gel1

    Entered Buy/Write on BAC for 29% discount – selling short straddle with Nov 18′s

  152. JRW III

    Out of TNA at $ 49.98

  153. Phil

    TNA/RMM – Much better (but worse considering the entry).  So you are down about $18 and you can close out here and plan to re-buy at net $26 by selling the Jan $35 puts for $9 and pick up another $10 on the Jan $35/55 spread at $10.  Worst case is you are back in TNA in Jan at net $35 + the $18 you lost = $53, still a big improvement over current position. 

    Oh good, Rick Santelli explaining what total BS this "fat finger" thing is. 

    DD/Yodi – I like roling down and out for credits!  Good catch – taking advantage of high VIX.

    TBT/Kururi – If they "fix" Europe over the weekend then those TBTs will fly back up.  If you want to cover, 2012 $40 puts are $7.70 and you can use them to lower margin on many many put sales ahead but I’d paid that with an upside bull call spread like the $45/60s for $3 so you don’t get totally burned on an upside move. 

    Nice hedge:  FAZ at $14.07, selling 2012 $12s for $7.25 and $7 puts for $2.25 is net $4.57/5.78, a 60% discount and a 160% profit if called away at $12 so a nice hedge on financials, like our 2012 C spreads

    FAZ/Salv – That play is $2.30 in the money, what is the worry?  I know I just went into why this happens on an earlier comment so CTRL-F for the words VIX and Premium.  The premise of this play, which was meant to recover a loss, was that FAZ should finish above $12 in October.  This is May.  May is not October.  This play is ABOVE our goal of $12.  That is not below our goal.  There is nothing to fix but your expectations although I will say that 2x the FAZ Oct $9/11 bull call spread at $1.10, selling the $9 puts for $1.20 is a great way to hedge financials for 5 months.

    Rumor/SNS – That makes me nervous that that was the only reason we came off the floor before. 

    DIA/AC – I’d roll them to 2x the June $105 puts.  You can cover margin with the 1x the June $92 puts at $1 or you can pany up for mor long puts but the idea is to sell premium as much as possible. 

    TBT/MiniJ – At this price, I would not sell May calls.  Next week maybe but if EU collapses, rates could fly up despite dollar desireablility and if EU is fixed with $600Bn bailout – I will eat my keyboard if rates stay this low!  Look to sell 1/2 covers around $45 hopefully. 

    BAC/Bass – You own Jan $20 puts at $5 and you want to roll them to the May $17 puts, which are $1.05 and yes, you will collect $2.95 but why not just cash them in for $5?  Clearly this is a good low for BAC and you should be ahead on that leg so just cash it in and wait for the calls to come back (although I’d roll those to 2x the 2012 $10/17.50s at $4 so you are in for a $7 total upside, which you’d need BAC $23 to accomplish now and that means you can also sell 1x the June $18s for .50 and if you do that 14 time in 2 years, you’ll have a free spread!  

    Putters/RMM – The ones you sold?  No way, this is, HOPEFULLY, the low we were looking for.  Now I’m happy because bad news is priced in and fear is back in the markets so it’s time for us to pick up bargains and sell options to other suckers! 

    TBT/Jced – This is a great time to sell puts with the high VIX but keep in mind if we crash next week the VIX could hit 60 and the premium portion of what you sell could jump 50% and that may annoy you…

    Psychohistory/B1 – It was a hot link on the word I’m pretty sure but you can start with Wikipedia.  The original concept came from Sci-Fi writer Issaic Asimov but it’s gotten serious consideration over the years. 

    Cramer Cash/Leon – Well then it must be time to buy. 

    We’re holding 10,440 but 1,120 ain’t happening! 

  154. JRW III

    ss
    Failing 66.10 as more than a flush would put me in TZA. However, I think we get some buying today; the close may be a different story though.

  155. aclend

    …just listened to GS call for Investment Strategy Group call for private clients. They basically said that we are not entering another crisis, the market could go down 5-10% but this recent area is a good buying opportunity and the long-term outlook is still intact. Also, they have NO IDEA why the market plunged yesterday, yada, yada, yada

  156. JRW III

    In TZA at $ 7.39 ( 1/2 position )

  157. ssdirk

    judah – I think I will print today’s 3m8p chart and frame it.  It is working like a champ.  It has met the line and stopped when the trend was intact, and clearly crossed it when the trend was broken.

  158. lionel

    CAC40/
    Just had a look at the daily volume on the French index – Euro 10.5bn exchanged today, which is three times above average. That is some conviction selling!
    Eurostoxx50 closed today at approx its Jan 2009 level. Which translates into S&P500 at 900 or Dow at 9000 (if it was the same Dow)

  159. jomama

     Wow, what a mess – missed most of yesterday with a busy pediatric day.  Some of my puts are hogging up a lot of margin – monsanto in particular.  Been loading up on C & XOM.  C will be a easy way for investors to jump back in when tide turns.   Only bad thing about selling puts – when tide turns, you better be prepared to own the stocks/and or have margin gobbled up.  The FAZ puts etc, that i sold have been pretty useless – with the increased vix they have not provided much value. 

  160. judahbenhur

    SS, I’ll be all over it on Monday.  I see you switched from 10 periods to 8.  I’ve made that change now as well.

  161. RMM

    Phil: amn this is tough for me to understand:
    I have TNA stock which went from 71.56$ to now 49.1$,
    the cover was the sale of calls Jun65 which went from 6.7$ to now 1.9$,
    so the net loss is about the 18 you mention.
    Now: you say I can close: now, the calls to collect the gain ? YES, not selling the stock ?
    To remedy further: sell jan35 puts and ?? what spread ?
    This is the part I do not understand.

  162. roberthjrfl

    SS, could you explain the 3m8p label?  I am assume that is 3 minute period but i am not sure what 8p is.  Thanks.

  163. ssdirk

    judah – just to clarify, 8 period ema.  Got in the 66′s at 2.07 and the chart is keeping me in it.  In the past I would have bailed for a quick profit. 

  164. JRW III

    ss
    Has your system given you a current signal ?

  165. ssdirk

    robert – 8 period ema.  Just started abbreviating to type faster.

  166. Phil

    France/Lionel – I hope you are right.  Their loans to the PIIGS just seem a little dangerous to me but I guess they can bail themselves out by lending Greece more money so Greece can pay them the installments they owe until Greece falls short again but then France can take those installments they got plus another $10Bn and that should get them another year’s worth of installments back – what can go wrong?

    This sell-off is brought to you by a suspicious package in Times Square.  Should be a nice relief rally if it turns out to be an Elmo doll

    TNA/RMM – Answered already.  I am behind and get more behind when I have to check because you couldn’t wait for the answer to one of your questions. 

    Still getting insane fluctuations in values on every tick up or down in the market (lots of short-term DIA plays).  Ridiculous market to trade with anything but gambling money.

    PCS/Lionel – I like those guys, especially at this price.

    Trying/SNS – Oh it tells us a lot, we’re not holding our weak bounce levels of 10,440 and 1,120 so that means the Dow fell 1,000 points and couldn’t even manage a weak bounce of 20% – that’s BAD!  Of course, coming into the weekend it’s a tough time to BUYBUYBUY with all the uncertainty but the volume here is 246M on the Dow at 1:20 and we’re consolidating above our 10,200/1,100 target and that makes me think it’s going to be a playable floor so certainly worth a few early scale entries even with the looming weekend uncertainty

    Gold/Tusca – Let’s wait and see what’s real next week.   ABX is not too far up considering. 

    GS/Ac – Thanks.  I agree with them other than the part where they have no idea what happened…

    TNA/RMM – I’m saying to cash out and go for the new position which has a better chance of getting your $18 back. 

  167. ssdirk

    JRW – at 12:23 an engulfing red candle crossed the 8ema line.

  168. concreata

    Phil – TBT – would you still recommend selling 100 Jan puts as buy and hold strategy for excess cash? If so, what strike price (e.g. 38?) and when to place order – today or wait until Monday.

  169. roberthjrfl

    SS, further, i am assuming that 8p is an 8 period moving average?  Thanks for the guidance.

  170. RMM

     
     
    Phil: you said:
    Putters/RMM – The ones you sold?  No way, this is, HOPEFULLY, the low we were looking for. 
    okay, putters remain, what about the callers which I sold ? close those ?

  171. yodi

    Hi Phil You are painting devels on the wall (more crashes next week)
    I have sold on the DIA mattress play, May 109p and 110p both in the 1.93 / 1.98 now the cost 5.50 / 6.40 where to shall I roll them ? thanks

  172. roberthjrfl

    SS, typing too slow… thanks for the answer.

  173. ssdirk

    Engulfing green crossing the 8ema.  I am out for 6%.  Also, I am toying with MACD to see when the trend is slowing down.  It could lead to better exits when we are in between JRW’s lines like just then.
     
    Robert – yes, 8 period exp. moving average.

  174. gel1

    Phil/GOOG
    Would like to enter a bull vertical for January expiration – could you recommend strikes? Thanks!

  175. Phil

    Equities trading is still volatile (and the FTSE finished its biggest weekly drop since Nov. 2008), but who knows how bad a freakout could be on if not for the calming rumor that the ECB may be planning a €600B one-year 1% loan facility for banks – not to mention the "nuclear option" of buying sovereign debt. There’s intent listening for the next thing out of President Trichet’s mouth. Euro -0.9% against dollar.

    Contagion risks have hit European credit markets, with company bond sales slowed to a halt and the cost of protecting against European bank failures rising. One trader said yesterday he’d heard fixed-income desks in Europe shut down early because there was no liquidity, "similar to what took place pre-Lehman Brothers."

    Germany’s Parliament approves the country’s contribution of up to €22.4B  in emergency loans to Greece, even as a group of academics sought a court injunction to block the payment.

    Greece is just the "tip of the iceberg," Nouriel Roubini tells CNBC, warning that printing money to finance debt is likely to lead to inflation that won’t be containted to just one continent. "My concern is eventually, not this year, it may spread to Japan and in the U.S."

    The Bank of Japan moves to offer ¥2T ($21.6B) in overnight liquidity today, trying to “increase markets’ sense of security” in light of the ongoing debt crisis in Greece. BOJ is the first central bank to react to fears about sovereign debt default by adding liquidity.

    The pound is -0.5% against the dollar as a hung parliament appears all but inevitable.

    The G-7 has a conference call planned for today to discuss the Greek debt crisis. Japanese FinMin Naoto Kan doesn’t expect to be "asked to take specific action, such as currency intervention.” The call suggests leaders see growing risks to the global economic recovery.

    Libor jumps the most since Jan. 2009 over concerns banks are too deeply intertwined with Europe’s most indebted nations. Three-month dollar Libor rose 5.5 bps to 0.428% – the 13th straight gain. "There is clearly a fear trade starting to stalk the market," a fixed-income strategist says. "Questions are being asked about certain counterparties."

    Philadelphia Fed President Charles Plosser: The Fed is keeping an eye on Europe and especially Greece, which is a risk to a recovery on a "sustainable path." Inflation should be subdued near-term, but "I do not see much risk of deflation" and risks are to upside in the medium to long term. Sees economy growing about 3.5% this year and next.

    Fed officials have reportedly agreed to sell some its $1.1T portfolio of mortgage-backed securities, but are unable to reach a consensus on how soon or how aggressively to do so. Most members want the Fed to wait until after it starts to raise short-term interest rates, which could be months away, but a minority is eager to move sooner.

    Commodities crumble: Copper heads for its worst week in more than three months, aluminum declines to its lowest level since February, and crude oil is on track for its biggest weekly drop since July 2009.

    Cantor Fitzgerald’s Uwe Parpart says yesterday’s losses were no glitch, but rather reflect that "sovereign debt woes due to indiscriminate Keynesian deficit spending is outrunning tepid global recovery and threatening the next financial blowout." Fat finger? Maybe, "but the scene was set for a big fall."

    April nonfarm payrolls: +290K vs. +190K expected, +230K in March (revised from +162K). Unemployment 9.9% vs. 9.7% expected, 9.7% in March. Upside surprise in payroll gains, and unemployment.

    The Canadian economy generated a record 109K new jobs in April, over 4x more than expected, pushing unemployment down to 8.1%, the lowest in a year – and raising the odds that the BOC will on June 1 become the first G7 central bank to hike interest rates. (ETF: EWC)

    It’s a buying opportunity, some strategists say. Birinyi’s Jeff Rubin: “Almost all bull markets have a correction at some point and that point could be now. That doesn’t change the outlook for the year.” Russell Investments’ Stephen Wood: "The fundamentals are intact." JPMorgan’s Thomas Lee reiterates his S&P year-end forecast of 1,300, a 15% gain.

    Citigroup’s Tobias Levkovich warns not to buy the dip: "In view of the recovery in corporate confidence and general investor sentiment from a year ago, it seems improbable that investors will feel emboldened to step up now, particularly when European economic challenges and a stronger dollar could crimp H2 earnings. Indeed, selling on rallies could be more pronounced than buying on the dips."

    The heat was supposed to be on at Goldman Sachs’ (GS +1.7%) annual meeting, but Lloyd doesn’t look like he’s going anywhere and shareholders have re-elected the entire board.

    Goldman Sachs (GS) lawyers met with SEC representatives this week to discuss a potential settlement. Sources say the two sides remain far apart and the talks are preliminary, but Goldman’s willingness to even come to the table suggests the firm is scaling back its aggressive defense.

    A bit of a turnabout: AIG (AIG +3.9%) has reportedly fired Goldman Sachs (GS +2.4%) as its main corporate adviser in what could be the beginning of a series of defections among Goldman’s clients.

    Russian billionaire Len Blavatnik’s holding company Access Industries drops out of bidding for Metro-Goldwyn-Mayer, another blow to creditors who had already waived interest payments from the studio since September and are likely to extend forbearance again. (previously)

    Relax, says Barclays’ James Ratcliffe to the cablecos, there’s no need yet to panic over the FCC’s "net neutrality" regs. The agency doesn’t really want to regulate prices, and the rules don’t stop cable providers from doing anything they could have expectd to do anyway. TWC -2.3%; CVC -3%; CMCSA -1%; T flat. (yesterday)

    Smartphone sales grew a robust 56.7% in Q1 from a year ago, IDC says, eclipsing a 21.7% gain for the overall mobile market. The growth is more impressive when contrasted with Q4′s 38% growth – typically the strongest of the year. Apple (AAPL) is nipping at RIM’s (RIMM) heels, with 16.1% market share to RIM’s 19.4%. Nokia (NOK) was steady in first place at 39.3%.

     A comprehensive list of yesterday’s busted trades.

    Three lunchtime reads:
    1) Algorithmic trading and price volatility
    2) The real drama is in fixed income and currencies
    3) Yes, Virginia – there is a difference between Greece and the U.S.

    Wow, AIG going up.  Banker preferred stocks seem to be moving up too, perhaps a return of confidence there.

    Times Square "fixed" – up we go again!

  176. lionel

    PCS/
    started a buy write on PCS
    PCS at $7.35
    Sold 7.5 JAN put and call for $2.85
    net entry $4.50 if called away, if not $6 net entry if put to me at $7.5

  177. JRW III

    Out of TZA for a $ 0.16 loss; in TNA at $ 49.31. Trend lines are now at IWM 65.57 and 67.18

  178. EricL

    Every bounce still getting sold into. However, I’m seeing some decrease in volume on the drops on the indexes. This last little dip is the lowest-volume drop of the day.

  179. EricL

    I’m starting to want to cheer the market on. Hard to believe we were here complaining about the relentless bullishness two weeks ago.

  180. rdr006

    phil,
    aapl call delta’s for may ,jun ,jul, oct,& jan are all closely grouped around 0.50. whats the deal?

  181. ssdirk

    Another cross down.  In the 66′s for 2.11.  I feel like this one is a leap of faith, but following the system.

  182. Phil

    TBT/Concreata – Selling 100 puts is a lot of margin!  If you sell 100 Jan $40 puts for $4.50 you collect $45K and net about $100K in margin requirement.  So $100K to make $50K.  I think I prefer the $33/41 bull call spread at $5 and you can sell the $35 puts for $2.50 for net $2.50 on the $8 spread and you can sell 50 of those for net $50K in margin (and much easier to roll) plus the $12,500K on the spread and that’s a $27,500 profit if TNA holds $41

    Callers/RMM – I have no idea which ones you are talking about but I’d say probably I don’t like buying back callers that are way out of the money with the VIX at 37 and the market having trouble holding the "weak bounce" levels but, on the other hand, the weekend could "solve" everything and we gap up 500 on Monday so, "when in doubt, sell (or buy back) half" seems to be appropriate. 

    DIA/Yodi – If you are full covered, I’d roll them down to 1.5x the July $105 puts and add .5x ther Sept $100 puts at $5.30. 

    GOOG/Gel – Good time for it.  I’d go with the $380/450 bull call spread at $50 and sell the $420 puts for $25 for net $25 on the $75 spread, margin about $50K for 10 so 100% gain on cash and margin, 200% gain on cash and worst case is you own GOOG for net $445 but, of course, the 2012 $340 puts are $25 so more like owning GOOG at net $365, worst case..

    Cheering/Eric – I feel so much better now that we’ve sold off.   Consolidating down here (10,200-10,700) will make me much more bullish going forward (assuming the global economy doesn’t collapse). 

  183. rdr006

    phil,
    that was aapl $240 calls!!!

  184. craigzooka

     Starting to take a poke at AFL here.  executed a buy/write at $44.67 selling the NOV 45 puts/calls for $13.40.  

  185. JRW III

    Out of TNA even

  186. stjeanluc

     Talk about medicine killing the patient…
    Daniel Gros, an eminent economist on euro zone issues who is based in Brussels, has argued that for each 1 percent of G.D.P. decline in Greek government spending, total demand in the country falls by 2.5 percent of G.D.P.  If the government reduces spending by 15 percent of G.D.P. — the initial shock to demand could be well over 30 percent of G.D.P.

  187. ssdirk

    1/2 out with 10% gain.

  188. gel1

    Phil/Goog
    Damn… that is beautiful…. Thanks!

  189. ssdirk

    Took the second half with 10% also, although the trend wasn’t broken.  Have to pick up my son. 

  190. ravalos

    Phil, what’s your take on ERY? With this pullback ERY flew all the way past $10 from the los $8s, I have a May $9 / $10 bull call spread and sold May $9 puts for a net cost of $0.15.. at this time, the whole spread is worth 0.55 out of max gain of $1.. We are two weeks away from expiration but if Europe gets fixed over the weekend, would you think ERY could fall hard back to below $9 before expiration?

  191. gucci

    Hi Phil I need help in adjusting GOOG and Bidu short put position to decrease my margin, in negative and TOS ask for margin now. — please advise how to change these position
    GOOG -  MAY 490 short put 5 contract, 6 June 500 put , 9 sept 510 put
    BIDU-- 11 june 500 short put,  3 jan 11 500 short put, 3 jan 11 700 short call.. my BP power is negative at this point .. thx for your advise

  192. judahbenhur

    SS, If you are checking back in, I’ve just looked over the day’s charts and I see what a beautiful day you’ve had using your entry/exit method.  I’m looking forward to Monday and joining you.

  193. JRW III

    Back in TNA at $ 48.30

  194. RMM

    Phil: a nervous day and a nervous ending of the week,
    have closed the TNA jun65 calls and sold jan 35 puts now, so I collected the $s, the jan 35 strike should be low enough to be safe. have sales orders in for the TNA stock.
    Have trouble understanding what this spread is (puts I suppose) and when to get this implemented ?
    Below is your comment:
    TNA/RMM – Much better (but worse considering the entry).  So you are down about $18 and you can close out here and plan to re-buy at net $26 by selling the Jan $35 puts for $9 and pick up another $10 on the Jan $35/55 spread at $10.  Worst case is you are back in TNA in Jan at net $35 + the $18 you lost = $53, still a big improvement over current position.
     

  195. gel1

    Just entered an nice Buy/Write on a stock I love with a 28% discount – IBN (Icici Bank) buying stock and selling a short straddle of Sept 39′s

  196. Phil

    AAPL/RDR – Just all sorts of crazy stuff happening with these violent moves.  Have I mentioned how relaxing cash is lately?

    Greece/Stj – That’s one of my problems with all this.  I am not a supply sider but austerity is not going to be the answer at this point.  The real problem is that Greece was loaned money and Greece can’t pay it.  The solution is for them to default, go bankrupt and reboot, not pretend they can keep going until the next tragedy puts them further into despair. 

    OK, that was a good one.  As the market went down and the VIX went up, my DIA calls gained value but then the market turned up and the VIX went down and they lost value.  If nothing else, it’s entertaining…

    Now we seem to be getting past the sell-off point from yesterday without another crash so maybe Mr. Stick will come back to us?

    ERY/Rav – I took ERX yesterday.  The most likely outcome of all this nonsense is more stimulus.  In your situation, you are $2.20 in the money and showing .55, you have to play the statistics there, not your feelings.  Of course, sell 1/2 and you lock in a profit and worst case is you own ERY at less than $9, not bad consequences… 

  197. JRW III

    Out of TNA at $ 49.24

  198. rdr006

    phil,
    why is aapl tracking the euro (i.e. $xde) almost tick direction by tick direction. what would be the trading mechanism or scheme at play? selling aapl generates dollars which if converted to euros should drive them up not down?

  199. EricL

    Pretty good battle going  on in the futures. /ES 1107 keeps getting tested; it’s more likely to break if it keeps getting hit.

  200. jimmyv

    Are you going into the weekend long on those DIA 107 calls?

  201. kustomz

    Thank the Lord for all the bargain hunters (Ben Bernanke) otherwise look out below, Where are they going to find another 20T if this whole thing goes bust?

  202. hanna5

    Phil, question (potentially stupid)
    DXD 25-29 call spread. Overall profitable, but the 29 caller is ridiculously expensive. Should i contninue holding, disolve the whole thing? I tried to roll up the 25 caller to take some money out, but the rolls are ridiculous….right now 25s are at 4, the 29s are at 2.50!

  203. ephmen85

    NLY   What do you think about them as a buy-write at these levels?  Selling Oct 15 P&Cs?

  204. hanna5

    whoops, sorry thats for july, and the basis for the 25s was 3 and sold the 29s for 0.9

  205. rdr006

    phil,
    so according to that geek cnbc had on, stochastic high freq trading operates on the basis that all stocks are inter-related and when one stock jumps they immediately jump on the other pups in the litter. of course the litter being now the eft’s which have increased the effect many times over the previous old litters of major market catagories which were more conceptial as opposed to real aggragrated stock funds.

  206. thatway

    Can we go long oil here?

  207. exec

    "20T if this whole thing goes bust?"
    Where else……on their printing presses!!!

  208. exec

    Hang on……Here we go!!!

  209. tuscadog

    Phil, German (on CNBC - name missed) says ECB will hang tough otherwise they will lose all leverage over PIGS re tightening fiscal discipline, which has been their main battle for months.  Big risk mkt may be disappointed on Monday? 

  210. gel1

    Taking advantage of the crazy VIX- executed Buy/Writes on XOM and EGO for great discounts by selling ATM short straddles. Gotta make up for my short term losses on TBT

  211. RMM

    Phil: what is better: to roll BIDU jun650 down to 640 or further out in time ?

  212. sns1

    Eric- looks like a decent retest of 1100, no? Any suggestions?

  213. JRW III

    Back in TNA at $ 47.55

  214. JRW III

    Doubling TNA at $ 48.17

  215. gel1

    Mexican Peso has suffered a major correction – if markets rebound next week go LONG the Mexican Peso for some big wins!

  216. JRW III

    If we can break over IWM 66.14, THE STICK RULES !!

  217. EricL

    sns,
     
    I don’t think it looks good. I’m holding my longs but bought some cheap OTM put verticals just in case.

  218. grant

    Phil – I have been wondering all day, what is the likely effect of all of the stops being taken out yesterday.  Usually there are all these accumulations of stops at various levels.  Without any of these "targets" there is a clear table.  A truly unique situation.  What effect might this situation have if any? 
     
    Also a lot of people now have cash on their hands who have been stopped out.  Is that something to ponder about?  Or are they likely to hang onto their money and lick their wounds for awhile?

  219. sns1

    Eric- would you mind telling me what OTM put verticals you bought? txs

  220. lflantheman

     Monday up.  I’m an optimist.  

  221. Pharmboy

    Gimme an even for the day….
     
    Phil – I have the Jun 114 P fully covered by the May 109s way up on these (I sold most yesterday for a nice gain.  Now I think it is time to roll and but with the high VIX, is it just better to wait, or roll these out?  I have been looking for positions, and am considering a 2X roll to the July 104s and can move the covers 2X to the Jun 100s.  Thx.

  222. EricL

    I bought AAPL May 220-210s, GOOG 470/450s, SPY 107/102s, and some other small positions. I legged-into all of them and got them for very little. So that part worked out, at least.
     
    If we get down there, they will pay enough to cover my losses on the long positions.

  223. diamond

    Phil – Your Jan11 GOOG call spread is BRILLIANT! Thanks!!! :-)

  224. tradansh

    eph – NLY just cut their dividend and seem to be selling off. You might want to stay away from them. Phil can advise better.

  225. EricL

    VIX set to close over 40.

  226. Jordan

    Phil, FXP is down today?  Weird.

  227. Phil

    Beyond the positive headline number of 290K payroll jobs, a record 6.7M workers have now been unemployed for more than 26 weeks, 4.34% of the civilian workforce. A near-record number of part-time workers pushed underemployment to 17.1%.

    Did the yen do it? A break in the dollar/yen trade may have set off an algo machine to sell, Bruce Krasting says. If so, yesterday’s market mayhem was not a mistake at all.

    Paul Kedrosky: "The providers of shadow liquidity – algorithms and high-frequency sorts – that individually account for large percentages of daily trading activity… can be turned off with a switch, or at an algorithmic whim. As a result, in market crises, when liquidity was always hardest to find, it now doesn’t just become hard to find, it disappears altogether, like water rushing out of sight via a trapdoor to hell."

    A WSJ examination of oversight by the Minerals and Management Service, now caught up in the oil spill crisis, shows the agency gave the oil industry an increasing voice in its own regulation.

    Nokia (NOK +1.2%) sues Apple (AAPL -4.2%) for patent infringement involving the iPhone and iPad 3G products. (PR)   Boy are they messing with the wrong guy!  I predict Jobs comes out with a $50 IPhone and bankrupts NOK.

    Apple (AAPL -3.7%) says its retail stores in 13 cities are sold out of all three versions of the iPad. No news on when they’ll get more; the device is scheduled to go on sale in nine other countries May 28.

    GOOG/Gucci – I think if you roll all to 1/2 (10) Sept $560 puts at $82, that will about cut your margin in half.  Make sure you check with a TOS margin specialist to see if he agrees.  Of course this is a more aggressively bearish stance but, despite the .71 delta, you have 1/2 as many positions so do not suffer much worse than if 20 contracts with a .35 delta fell.   The downside is the only real escape from those is a roll to 1.5x the 2012 $450 puts (now $60), which would be less margin overall but a long time to wait to get even.   On BIDU, I think if you just kill the June puts and add one Jan put and call you should be good.  Again, make sure you talk to someone at your broker before making any changes.

    Darn these fat fingers!  8-)

    TNA/RMM – It’s easy.  You are out $18 on your stock and covers.  You cash out.   You commit to buying the stock at net $25 by selling the $35 puts for $10.  You buy a $35/55 spread for $10 more.  If all goes well, you never buy the stock again, keep that $10 and make $10 more on the bull call spread if TNA finishes over $55.  Kapische?

    AAPL/RDR – I’m sure the whole Nasdaq or maybe all indexes are tracking Euro moves right now.  If the Euro collapses, everyone loses a big customer for months plus other nighmares as to payments etc.

    DIA/Jimmy – Not if I can get out even but they are gambling money so I won’t take a small loss (not when I can have a much bigger one!).

    $20T/Kustomz – not a problem:

    DXD/Hanna – I don’t know what month but you are on track and no pressing reason to get out.  Your $25 calls are $3.50 in the money and your caller is out of the money and is asking for fantasy value from you.  VIX is crazy high and if VIX comes down, it will hurt the caller ($2.50 premium + .50 of position) much more than it hurts you ($3.50 intrinsic, .50 premium).  If you want to get aggressive, you can roll the callers to the May $28s ($1.60) so they burn a buck in 2 weeks before you roll to the June whatevers.  It costs you .90 but you still have a $3 spread and it’s doubtful you can’t roll them up to June $29s  or even, hopefully, the $30s.

    NLY/Eph – I’ll like them better if IYR gets back over $50 next week.

    Geeks/RDR – You would be mortified by things I’ve seen at "major" firms.  They hire people like that who have never owned a stock in their life to design systems for stock trading so of course they look at the whole thing as a numerical exercise.  Actual values of individual companies make litte difference in the grand scheme of things…

    Oil/That – Can’t risk the weekend, sadly.

    Monday/Tusca – I don’t see any possible way the EU can NOT back Greece.  It would be suicide but people do commit suicide and I guess when all is despair and the road ahead is despair and every possible move leads to more pain and despair, then suicide begins to look like an option.  I think in my weekend post (maybe 2 weeks ago) I said that hopefully the movie 2012 was right because the end of the World is the only exit strategy the EU has.  Sadly, I wasn’t really joking…

    BIUD/RMM – Waiting patiently is best. 

    Stops/Grant – I imagine that the stops, for the most part, are just reset now.  Anyone who got spiked out yesterday is probably waiting to get back in where they stopped out.  Imagine if you got flushed out of PG at $45 and now it’s $60 – are you going back in?  Something like that is much worse than last March, where people had a whole day to decide to get back in near the low. 

    DIA/Pharm – Better to go to lower Sept puts.  You can go to the Sept $104 puts at $7.50 and take $3.50 off the table and the extra 3 months to roll your putter means you have little to worry about.  If we go up, you are in good shape and you spend .50 per $1 to roll up.  If we go down, you can add $97 puts, now $5 and roll May $109 puts to 1.5x the June $103 puts or something like that.

    Come on Mr. Stick – I want to go back to cash!

  228. kustomz

    Funds unloading, o boy i hate to see what happens when investors start asking for their money back from hedge funds. Phones are ringing off the hook.

  229. kustomz

    Phil!! Link me that picture of Bernanke I’m going to have shirts made!!!

  230. gilmdjd

     Had to work (day job as an ER MD) all day so couldn’t monitor this market or PSW but it looks like TBT hung in there pretty nicely and may not make it back to 35 after all…..

  231. JRW III

    Out of TNA at $ 48.09 for a quarter; $48 on TNA, -$5 on TZA, $10 on TNA, and $5 on TNA, for $58K on the day. NOT yesterday, but better than a poke in the eye
    I have to get back for lunch, have a great weekend all !!

  232. lionel

    Kustomz/
    You have one buyer here. size large any color would do :)

  233. Jordan

    Phil, if we end here this would be a major breakdown as that bounce is very weak, no?

  234. RMM

    JRW III: when you trade inTZA and TNA: do you use options ?

  235. aclend

    JRW,
    I am now determined to learn to do what you do. I hope you or the others who are successful with your methodology can answer a few questions over the weekend. Thanks.
    -Aaron

  236. grant

    Kustomz – Just right click on the Trillion Dollar note and do Save Image As… and will save as a jpg.

  237. EricL

    Stick got dumped into hard: big volume selling in the final minute.

    Anyway, still a nice gain today, although about half what it was 4 hours ago. Hope everyone’s surviving!

  238. kustomz

    Lionel come on, one size fits all!!
     

  239. Phil

    Brilliant!/Diamond – I thank you.

    NLY/Trad – Yep, that’s the danger in that whole group right now.  If they have trouble getting free money, they sure aren’t going to be distributing it to shareholders. 

    FXP/Jordan – I think the betting is on recovery on Monday (as usual) but certainly no one wants to bet heavy on it. 

    Shirts/Kustomz – http://209.197.93.201/TrillionDollarBill-Bernanke-small.jpg  I assume there must be a "big" too.

    TBT/Gilm – Not unless people are willing to lend us money for 20 years at 3%

    Ending/Jordan – We have no bounce but, given the circumstances of the weekend unceraintly, I’d be thinking it was fake if wwe did have one.  What we did have is day 2 of excellent volume (415 on Dow at close, might move higher) and we held 10,200 and that is all I wanted for the last 3 months so I can’t be too bearish about it. 

    Well that was one VERY exciting week.  I am now properly motivated to make a Buy List so probably no Wrap-Up this week and PLEASE - make suggestions in comments in the last Buy List page (under the Portfolio Tab). 

    Have a great weekend everyone!

    - Phil

  240. gilmdjd

     I’m buying TBT Monday AM….

  241. gel1

    Europe is experiencing its own Lehman. In order to get out of their problem the ECB is looking at 600 Billion to solve the problem. I do not believe France and Germany will go along with this, however if they do, then inflation is in their future – big time!

  242. samz3700

    JRW -
    Will you please teach your children.
    all your profits have me dreaming of a car

  243. kustomz

    O yea thanks Grant,
    just love Bernanke’s mug…i can picture him serving some home made apple pie with an apron that reads #1 chef and destroyer of worlds

    I got a question for you guys, anyone have a technique in finding high growth stocks at lowest current price?

  244. gucci

    Hi Phil I test out GOOG and BIDU on the analyse tab, only come down about less than 50K for Goog, and may be 5k for BIDU…. not sure if it is correct.  I will call TOS margin dept monday see if they see different number.  Could I instead readjust, are these postion and be change to to a spread and hopefully much margin can be lower…. thx … not thinking straight at this point — the drop hurt my margin very badly that’s all ..

  245. stjeanluc

     Phil, regarding Greece and Europe in general, this will give you an idea of what they are fighting against:
    But I’ve witnessed a prominent European central banker state, live and in person albeit off the record, that the purpose of central bank independence is to allow him to “fight inflation, regardless of the human cost.” You or I or someone who’s not a sociopath might say the point of central bank independence is to allow to him pursue technocratically sound monetary policy that advances the long-term interests of the people of Europe. But that’s not necessarily how they see things in Frankfurt. The madness of the European Central Bank is, in my view, the most underexplored and underappreciated aspect of the crisis thus far.
    Europe is so fearful of repeating the inflation disaster of Germany in between the 2 wars that they will ignore the actual needs of the market and the welfare of their people. Sheer madness!

  246. Phil

    Market recap: It wasn’t as stomach-churning as yesterday’s wild ride, but stocks sagged throughout the afternoon on volume of nearly 10B shares. For the week, the Dow tumbled 5.7%, the S&P slid 6.4%, and the Nasdaq plunged 8% – all worst showings since March 2009. NYSE decliners outnumbered advancers by 4 to 1.

    At the close: Dow -1.34% to 10379. S&P -1.54% to 1111. Nasdaq -2.33% to 2266.
    Treasurys: 30-year -1.04%. 10-yr -0.17%. 5-yr -0.02%.
    Commodities: Crude -2.36% to $75.29. Gold +0.94% to $1208.50.
    Currencies: Euro +0.85% vs. dollar. Yen -2.72%. Pound -0.13%.

    Credit Crunch II: European banks appear to have pulled back their interbank lending, especially to those heavily exposed to PIIGS countries. Underscoring the stress in the system, the cost of credit default swaps soars to levels not seen since the Lehman collapseThis is how it all began last time!

    A new deflationary wave of global credit strains will broadly punish riskier assets, Robert Prechter says, reiterating his expectation of long-term economic weakness. Investors should opt for the safest possible investments, very short-term Treasurys or cash.

    Mar. Consumer Credit: +$2B (+1% annual) to $2.45T, vs. consensus -3.9B. Prior revised up to -$6.2B from -$11.5B. Non-revolving credit +$5.2B (+3.9% annual), revolving credit -$3.2B (-4.5% annual).

    GOOG/Gucci – I’m not sure the analyze tab takes into account your actual margin.  Just to be clear, I’m saying kill all other trades and consolidate on those 2 positions.  I went by the relative changes in margin on my screen but margin requirements do not seem to be standard across the board.  Not to beat a dead horse but if you have even the remotest chance of EVER having margin issues, you should NEVER sell naked anythings in $500 stocks (or $100 stocks for that matter) always assume that the underlying stock can double or drop in half overnight and, if you aren’t comfortable with where you’ll be when that happens, you have no business being in it at all…

  247. Pharmboy

    Those for the TBTers:  David Rosenberg again points out in addition to wage deflation – "Credit is contracting. Money velocity and the money multiplier are anaemic. This is a highly deflationary brew."

  248. Phil

    ECB/Stjean – That’s exactly it.  People in the US don’t understand the European fear of inflation, particularly the Germans who have a connection in their mind that WWI defeat led to depression and that led to hyperinflation which led to Facism, which led to the national shame of WWII.  Our beloved Fed has a dual mandate to "price stability" and "full employment" which they seem to interpret as fighting DEflation at all costs and totally ignoring unemployment, which can only lead one to believe that by "full employment" they mean for the board members….

  249. judahbenhur

    JRW,  What is impressive about your day is that you made your money on TNA on a generally down day.
     
    SS, If you see this over the weekend, what were you using for exits today — the 3min8ema, JRW’s lines, or a combination? 

  250. gel1

    JRW… Which model Bentley are you considering? The new one is over $300,000 – also a gas-guzzler.

  251. JRW III

    gel,
    All of my cars are gas guzzlers !!

  252. JRW III

    aclend, samz
    Always glad to help out; gotta go as the wife says I’m not taking advantage of the time off !!

  253. JRW III

    judah,
    Only goes to show, you can be completely wrong about the day and still make $ !!

  254. pstas

    PeterD- if you are around and have time, could you contact me at philstas101@gmail.com.
    Thanks

  255. Peter D

    pstas, just saw your note and sent you an email.  However, it bounced with a error in the email address.  Is there a typos?

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