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Just Another Manic Monday – The Deja Viewpoint

We not only told you so but we showed you!

That’s right - Last week (and what a great week it was!) we closed out a week of pattern watching with Friday’s "Pattern Recognition 101" class, where we put up the graph of THE FUTURE, which is actually a graph of the past but, since it accurately predicted our sharp recovery off Friday’s gap down open AND predicted the strong gap up this morning – perhaps we should take it seriously:

This is the HFT recovery program we call "Omega 3" at PSW that seems to be running as the markets move off the bottom (which we also predicted) of our long-standing trend lines.  Today we are hopefully going to stick to the Feb 16th plan and finish just short of our breakup points so we can have a successful "Testy Tuesday" tomorrow.  If you look over our SUPER BULLISH positions in the Weekly Wrap-Up, you can see how happy that will make us so keep in mind that we are unusually biased this week as our usually market neutral stance has tipped as bullish as it gets the past two weeks. 

We’re just following through on my Friday morning game plan, where I said: "It will be kind of funny if we get that big gap down at the open and then recover to even to end the week right back in the middle of the low end of our range.  I think I would have to go a bit bullish into the weekend if that’s the case!"  Head bone-caster, David Fry, had this to say about the action that day:

There wasn’t really a story in markets Friday. The news items, mostly bad, didn’t register as such. The machines have things under control and spent the day cherry picking news they liked (slightly better Consumer Confidence) and ignoring news they didn’t (horrible Retail Sales data). Some, like permabulls at CNBC had to dream-up ways to rationalize poor Retail Sales against Consumer Confidence. Frankly, it’s a laughable exercise; but, they have soap to sell.

So when folks ask, "what moved markets today?" The only intelligent answer is "nothing" except perhaps some program trades, high frequency algos, trading desks and hedge funds. The rest of us are left to scratch our heads watching another end of day light volume jam job.

In fact, volume is roughly 30-40% below normal and this allows a few players with their HAL 9000s to manipulate prices all they want. The market now has become a private casino for a few with machines, formulas and cash to push things around.

Our test lines are going to be critical for our short-term bets.  For our long-term plays, we actually would prefer if the market went down or stayed range-bound, so we can accumulate more stock at great prices, but it was the concern about things getting away from us that led us to take UPSIDE "Disaster" Hedges last week, with the goal of "Turning $10,000 into $50,000 by Jan 21st." (Members Only)  We haven’t run a series of aggressive upside plays like that since last February and those plays were cashed out at "just" 300% on 4/24, when we decided the market was toppy and the risks of leaving 300% gains on the table outweighed the additional 200% reward we hoped to get ("Should We Take Profits at 300%?"). 

That’s a big mistake traders often make.  Sure we WANT to make 500% on a leveraged trade but that’s a decision we made based on incomplete data (see "The Microwave Oven Theory of Investing Behavior").  Just because you set out to make 500% or 1,000% on a trade, doesn’t mean you should sit on your hands a couple of months later when the trade is halfway to goal.  You need to ALWAYS re-evaluate your positions   Profits you make along the way add to the risk you are taking and need to be taken into account and PROTECTED.

Protecting profits is why we are going to be looking for new disaster hedges but I will urge Members to keep in mind that our goal line for re-establishing the TZA dn SDS hedges tomorrow’s test levels at:  Dow 10,250, S&P 1,100, Nas 2,260, NYSE 6,820 and Russell 666.  Looking back at my Feb 16th morning Alert to Members, I see that our lines to get bullish at that time were:  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 – other than the NYSE, we hit all those levels last week and it’s the NYSE that needs to confirm a move up here.

As we had hoped, nothing blew up over the weekend but oil pushers from Iran have jammed up the price of crude by "vowing to challange Israel’s blocade" of the Gaza and that has sent oil back to $75.70 in the futures, up from $73.50 on Friday.  Wow, that’s strong stuff, but why do I have a feeling I’ve heard this all before?  Let’s see, when is the last time oil was dropping and Iran was worried about maintaining prices?  Oh yes, it was January!  And what did Iran say on Sunday (it’s always Sunday if you want to manipulate oil prices), January 4th?  "Gaza will be a graveyard for Israeli troops, warns Iran."

A week later, Israel blocked an Iranian ship 20 miles off the coast of Gaza (it takes 2 weeks for the trip).  Mission was accomplised though and the price of oil was bouncing off the $70 mark so  Iran’s supreme religious leader, Ayatollah Ali Khamenei, called for Muslims to boycott products linked to Israel.  Ooh snap, as they say – that will show them not to mess with Iran!  Don’t you think that Israel would love an excuse to turn Iran into a golf course?  Am I the only person who remembers the Six Day War, where Israel defeated Egypt, Jordan and Syria, who were being supported with troops from Iraq, Saudi Arabia, Sudan, Tunisia, Morocco and Algeria – IN 6 DAYS?!?  

That wasn’t a fluke, 6 years later pretty much the same group thought they could catch Israel by surprise by attacking them on Yom Kippur, which is their holy fasting day.  It did sort of work as it took Israel 20 days to kick their asses that time but, to be fair to Israel, Russia was helping Egypt et al that time.  That was a FANTASTIC war for the price of oil – changing it from a relatively cheap and reliable commodity to a speculators dream as Egypt proved they could disrupt the supply of oil by blocking the Suez canal for more than a week.  That was the old Egypt of course.  Anwar Sadat made peace with his neighbors and was, of course, killed for it but too late to stop oil from slipping back to normal commodity ranges until… 

Iran is nothing more than Rent-A-Rebel on a national scale.  Amadinejab NEEDS oil to be above $75 a barrel to keep the peace in his own country and the great Western PR machine that is funded by oil interests is very happy to blow this threat completely out of proportion in order to drive profits into our own local oil cartel.  You may not be able to get consumers to buy new bathing suits or gas grills if they are not in a spending mood but you can sure as hell shake them down for money at the pump – especially as we come into summer driving system.  This activity is so disgustingly predictable that we are doing very well on the oil and gas plays we picked up over the past two weeks so we are financially satisfied but still morally outraged as this global con game is allowed to continue.  If you need any proof of what BS the Iran threat is – just look at the price of gold today!

Speaking of special interests who hijack our country and manipulate the people, sacrificing the health and safety of our union in order to pad their profits with money they pick from the pockets of working Americans – Mark Ames has a great follow-up piece on the Tea Party and how their oil-backed PR firm has gone into quiet mode as "Drill Baby Drill" just isn’t ringing with quite the same tone as it did during the 2008 campaign.  

Asia had a fine morning with markets up across the board but the Shanghai is still not looking too perky, up just 0.29% on the day (2,569) and still looks bearish as the rapidly descending "death crossed" 50 dma flies down to intercept the fractured index.  The Hang Seng gained 0.9% (179 points) and broke over the 20,000 mark but lost ground during the day after a gap open to 2,100.  The Nikkei also gained 174 points but that was up 1.8% on the smaller index, to 9,879 and we don’t like to see too much divergence between the Dow and the Nikkei as the stronger index tends to snap down and, right now, they are 6% apart so we need the Nikkei to get it in gear if we’re going to have a global recovery.

Japan sentimentWhile all Asian exporters are still very concerned about the crisis in Europe, at least Japan’s quarterly business sentiment index is picking up and mainly due to strong overseas demand from the rest of Asia!  The quarterly business outlook survey’s large company business sentiment index was 4.0 in the April-June period, compared with minus 2.4 in the January-March quarter. It was the first positive reading in three quarters.  Firms said they will increase capital spending by 9.2% in fiscal 2010 ending in March next year. Manufacturers said they will increase such investment by 12.5%. Non-manufactures expect their spending to increase 7.5%, the data showed

Europe is off to a fine start this morning as well with reports that Euro-Zone Industrial Output is way up and Ireland claims to have a handle on their banking losses.  The markets there are up about 1% just ahead of the US open and, as I said last week – all they had to do was not mess up over the weekend to give the global markets a boost and the World Cup made that unlikely as pretty much everyone in Europe is watching soccer this weekend and didn’t have time to screw up the economy.  The danger comes as teams start getting eliminated and depressed economists turn their attention back to the bigger picture.

So it’s going to be a race to amass enough good news before the first round of FIFA eliminations puts the EU back to work, which will coincide with the G20 meeting at the end of the month.  It was very easy for us to be very bullish last week, now we have good enough news where not breaking our levels (which are, I will remind you, the LOWER levels of our ranges) will be a very serious sign of trouble so the theme for this options expiration week for our bullish plays is likely to be: "Take the Money and Run" unless we can decicively punch through our levels.

Enjoy your week,

- Phil

 


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  1. jomptien

    PCL – Plum Creek timber. Owns 7M acres of timberland of different varities and maturities in 19 states. Pays a 4.6% dividend, coming off lows (double bottom) nicely. Can be a good inflation hedge. Maybe a Buy/Write at 36.23, selling 2012 p+c for 11.75.

  2. lflantheman

     Phil et al…….If you haven’t seen this yet I think you’ll find it very interesting.
    http://www.thestreet.com/p/rmoney/marketcommentary/10782008.html

  3. amatta

    Good morning phil,

    It seems although retail sales were dismal markets are continuing to go up. I was hoping for a pullback to collect on my hedges and buy at lower levels. I am still holding the June tza 8/9 and July 6 puts and June sds 32/35 (no puts) Do you recommend I sell at a loss now?or roll to continue protection of longs ( I trimmed down my longs to 2/3 to be a 25% as per recommended, should I be adding now?).
    Thanks.

  4. exec

    Phil,
    Since I’ve been a member here I’ve noticed one theme that repeatedly comes up.  Market manipulation.  The Fry link that you posted theorizes that our friend "Mr. Stick" is somehow the result of "program trades, high frequency algos, trading desks and hedge funds"  Do you understand how this works?  How is it possible that computers or trading desks can influence the market so drastically?
    How can they force the price up without buying higher?  Why would they want to buy higher than necessary since it only cost them more?  I don’t get it.

  5. Pharmboy

    exec – think of it as they have lots of money (hedge funds, etc) and buy a ton of calls OTM for pennies on the dollar.  They run it up, collect their dimes and quarters, and then pull the rug out.  HFT is just that, algorithms that run with the tide.  When you have manipulators manipulating themselves, then things get out of whack (flash crash).  I still think we blow through 1040 on the S&P, but until then, we need to take a contrarian view and run with them….although that is hard to do when you know the game is rigged, but cannot play catch up b’c they are psychotic themselves….JRWs method works very well in this environment b’c I am sure they have lines in their algorithms that take into account exactly what he is looking at.

  6. lflantheman

     exec           This is intriguing  to me as well.   I’ve thought of a way I could manipulate the markets for profit if I had unlimited cash.    Step 1.      Buy slightly OTM calls near term on XYZ.     Step 2     A few days later buy huge amounts of the stock, driving the price up.     Step 3    Sell the calls and buy puts     Step 4     Sell large amounts of the stock       Step 5    Repeat.
    Is this how they do it Phil?  

  7. exec

    Thanks for the explanation Pharmboy.  I’ve been trying to follow JRW’s trades but that’s difficult for someone still learning the terminology and methodology of is madness.  It’s becoming clearer though.

  8. David Ristau

    Hey all,

    Play of the Day is in Aviat Networks (AVNW). We are looking at a communications company to get a nice rise on the day out of the gate of 2-3%. I will be publishing, as well, later today a Play of the Week and my Longterm story on China Automotive Systems (CAAS). 

    Check out this morning’s story here.

    Good Investing!

  9. JRW III

    Good morning,
     
    IWM 64.67, 65.30, 65.90, 66.35, 67.09, and 67.81

  10. Phil

    Good morning! 

    Dow is over 10,250 already so very important that they hold it or done with June and July long positions (we can reload once we have 3 of 5 levels broken).  This is a huge run off last week’s picks so greed kills at this point.

    The 3 of 5 levels we want to see taken to the upside are: :  Dow 10,250, S&P 1,100, Nas 2,260, NYSE 6,820 and Russell 666.  As usual, the S&P is super-critical so we’ll be watching them carefully. 

    For now, until I recast 5% lines, let’s call our old lines (from February) the new "MUST HOLD" levels, below which we actually get bearish.  They are:  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620.  Notice the NYSE is ALREADY below the line so they have lost ground in the past 4 months against the other indexes and, since they are the broadest index – I’d say we will have to remain cautious UNTIL we get back over 7,000 line on the NYSE.

    Hopefully, it won’t come to that but it’s options expiration week and anything can happen and I always get nervous when we’re up 150 points in less than two market hours (we were at 10,120 at 3pm on Friday!).

    So be careful out there and remember, it’s time to think about putting back our main downside hedge:

    TZA Jan $6/11 bull call spread for $1, selling 1/2x $5 puts for $1 is net .50 on the $5 spread so 950% upside on this very simple hedge and we can roll the putters out to 2x the 2012 $3 puts, at least (now .65).

    Also, nice upside play on BAC that I ran for an article Ilene is doing this morning – still close enough for the entry:

    Let’s say we want to buy BAC at $15.60.  If our goal is to buy 200 shares we buy instead 100 shares and also sell one Jan $15 put for $1.80.  Additionally, we sell one Jan $15 call for $2.49.  The two sold contracts reduce our net basis to just $11.31 and we have taken on two obligations.  The call we sold, obligates us to sell our stock for $15 on Jan 21st (option expiration day) IF the price of BAC closes above $15 on Jan 21st.  We have sold someone an OPTION TO BUY our stock for $15 on that date, which they will exercise if the price of BAC is above $15.  Whether they exercise the options we sold or not, we keep the $2.49 they paid us and they would have to give us another $15 in cash to complete the contract.  Our second obligation is on the put we sold.  By accepting money for the put, we have agreed that, in exchange for $1.80, the put holder can "put" the stock to us (force us to buy it from them) for $15.  They can do this at ANY time prior to Jan 21st, no matter what the price of the stock but, of course, if the stock stays over $15, there would be no point for them to put it to us at a discount.

    So, if BAC finishes the expiration period above $15, we will have our 100 shares called away at $15 and our put holder will expire worthless.  The profit on that trade would be $3.69 per share against our net outlay of $11.31, a 32% profit in 7 months.  Should the stock be put to us below $15, then our caller would be expiring worthless but we will be forced to pay $15 for 100 additional shares of BAC, regardless of what price it’s currently trading at.  With our original 100 shares at net $11.31 and 100 more at $15, our new net basis would be $13.16 – which is 15.6% lower than the current price.

    This is a simple example over a short period.  The key is to pick stocks that are:

    1. Trading near lows and are undervalued
    2. Fairly volatile
    3. NOT likely to go bankrupt
    4. Either pay dividends or have good growth
    5. Have a clear path of continuing contracts to write
    6. You don’t mind owning long-term

     

    In short, if you think BAC is a relatively good deal at $16.30 – why not commit to buying it for $13.16 instead?  Also, to take a more advanced view, the trade doesn’t end on Jan 15th.  You have a $13.16 basis in Bank of America. If BAC begins paying regular dividends again, that’s another 3% return on your money.  Additionally, you can continue to sell calls against the stock.  Let’s say BAC falls all the way to $12 (down 30%) and you are stuck in it at $13.16.  You can still sell $15 calls for about .25 a month, that’s $3 per year against your $13.16 (22.8% annual).  Learning to use options effectively can change your investing life!

    Don’t forget – it’s not a profit until it’s cashed and back in your pocket – don’t leave gains on the table if you have ANY doubts we’re going to hold out levels.

  11. RMM

    Phil: for my TNA jan35/55 spread, 10 days ago I closed 0.3x of the jan callers55 at 7 (previously sold at 14.8$), now I could sell them again with a slight gain at around 8. If market goes up more I should wait or is it smarter to get to full cover NOW ??

  12. judahbenhur

    JRW, 65.90.  Nice call.  I was going to wait for a pullback at 66 until I saw your post.

  13. jomama

    Phil, bought my BP putter back this morning.   Essentially rolled the play to 2X OIH 75 2012 puts like you advised.  Seems like lower risk especially of bk with a smiliar amount of implied volatility.  Thanks again.

  14. boobearsdad

    Phil,
    How do you feel about BRCD?  They turned out to be a pretty decent play after their Q1 earnings troubles.  The broader market and a less-than-impressive Q2 has brought them back to the 5.30s, where they were after Q1, but they haven’t adjusted their guidance for the rest of the year downward and there are plenty of reports of IT spending increasing.  I’m wondering whether you think this might be a good buy/write again, especially if the market convincingly breaks the "cautiously bullish" lines convincingly today: buy BRCD @ 5.35, sell Jan 2011 6 call @ .51, sell Jan 2011 5 put @ .60.

  15. JRW III

    IWM between R1 and my ascending resistance at 65.91; a break either way should be bought !!

  16. jomama

    I sold 10 OIH puts this morning, waiting to sell the other half after Obama’s speech tomorrow.  He should put a good scare into people about the future of US drilling and exploration.

  17. EricL

    Gold can make up its mind this morning. Gets bought at 1220 but can’t push its way higher. I’m short June 120 calls against deeper ITM calls, so a stall-out is o.k. with me.  However, if the market turns down and gold follows it, I will cut back.

  18. EricL

    Gold can’t make up its mind, I mean.

  19. Phil

    PCL/Jomp – I don’t find them especially cheap but they do make a good long-term inflation hedge.  Good plan if you REALLY want to be in them long-term.

    Street/Iflan – Actually I can only see the Cramer ad as I seem to have let my subsctription lapse.  8-)

    Hedges/Amatta – No, I’d keep those and cash out the bull plays (short-term) they were protecting.  With TZA you can take out the $9 caller for .05 (the puts can be rolled) and with SDS you can take out the $35 caller for .40 and then you hope that sthe S&P is rejected and we get a 20% retrace off last week’s run from 1,044 to 1,100 (56 points) back to around 1,088 and then be thrilled to get out.  If the S&P breaks over, then you know you are dead and you cash what you can and wait for the next signal to reload insurance. 

    Stick/Exec - Good general explanations by Pharm and Iflan.  Happy to talk about it at nights or on weekend if you remind me. 

    How/Iflan – Well that would be blatantly illegal but, yeah, that’s pretty much it.   That’s why I’m always suspicious about both upside and downside media frenzies – usually they are trying to drive option prices one way or the other ahead of a turn.  The media hype gives them SEC cover to explain why they flip-flopped and covered their own positions – it’s very clever actually. 

    Wheee!  They have our first cyclone warning already!  Nat gas up 2% and oil testing $76

    TNA/RMM – At this very big inflection point, I would not be greedy and take the cover.  You can totally afford to take a $1 hit on the other side and buy them back as you’re up $7 from the first well-timed move. 

    BP/Jo - Good!  I don’t know about you but it sure makes me feel better…  8-)

    BRCD/Boobear – I like them as they are a good general growth play (IT infrastructure) that’s out of favor but I see a juggernaught as we are pumping more and more bandwidth out there every day. Keeping in mind that they did fall to $2 last year though, I’d rather go in at $5.35 and sell the 2012 $5 puts and call for $2.90 for a net $2.45/3.73 entry as it’s not so terrible to wait 18 months for a double if the stock just stays flat

  20. JRW III

    In TNA at $46.26

  21. jomama

    Phil, yeah i wasn’t really comfortable with the downside.  I’m sure Whitney Tilson has some better hedges but i’m out.

  22. gucci

    Hi Phil Jun DIA 100/102 Buul spread with sell 100 put net 48c, how come the June 100 call was bot at 4.09 and now is trade at 3.35 value is not up more since we up today, should I go ahead and closed this out now then wait till friday- thx

  23. Phil

    SOX hitting 2.5% rule at 360 so that’s going to be a critical indicator for whether we can move much higher today,  Otherwise, watch for the 1.25% lines to be a stopper on the majors.  Anything over 1.25% today is very strong and even settling 1% up or higher is probably going to keep us in rally mode.

    Witney/Jo – Whitney is managing OPM so he can afford to take a chance.  Also, from a risk/reward for a "value" fund manager like Tilson – if he busts on the BP trade, it will be because of unusual (and therefore "unpredictable") government intervention that leaves them unable to defend themselves under the laws and regularions that were in effect when the accident happened so no one is going to blame him.  On the other hand, if BP does make a big turnaround – he will be considered a total genius and be interviewed for many years as " the man who called the bottom on BP."  So, if I were a career advisor for Whitney – I’d tell him to go for it as you don’t get many opportunities like this to make a name for yourself and the potential rewards (for his career) far outweigh the downside risks.  Keep that in mind when you listen to pundits – there are many layers to their motivations

    DIA/Gucci – It’s not about the price of the call (down because VIX is down and premium is dropping) it’s about the net price of the spread, which has gone from .48 to $1.35, so up 200%.  Now you are risking that 200% gain (.87) PLUS the .48 you put up at the beginning, to make another .65, which is another 135% but just 50% over your current capital at risk.  I’d take $1.70 for the spread and, if you get that, then maybe let the naked putter ride with a stop at .50 so, worst case, you get $1.20 back on your .48.

  24. Phil

    Rejection on S&P at 1,100 is NOT GOOD! 

    I’m for taking the downside hedges here, naked on DIA mattress play (Sept $105 puts, now $6 and good for a new entry) and I also like the TZA $6 calls at .70.

  25. JRW III

    Phil,
    Are you expecting a pull back to fill the gap today ?

  26. jomama

    Phil, i kind of made my own misinformed decision.

  27. lapper

    JRW, lack of progress does not worry you?  Stop loss at 64.90 and holding otherwise?

  28. lapper

    65.90 that is

  29. Maya1

    Phil,
    On DIA mattress play of few minutes ago, do you mean BUY the DIA Sept 105 puts here?
    Thanks.

  30. morxlntway

    Phil -  true confession; i sold a june $109 put a while back and didnt’ take the $ & run thinking we would be back there before too long. I have an order in to roll to Sept 106 for +$.40. What is your opinion? Is there a better way for me make it through? Maybe roll to 2x at a lower strike?

  31. drumkeerin

    Phil
    I sold the CCJ 26 Jun put at 1.25. What roll do you think is best

  32. JRW III

    1/2 out of TNA at $46.91

  33. Pharmboy

    MJR OH resistance at 200d MA on the SPY.  My trend shows 111.  We have bounced right off of it 3X. 

  34. EricL

    In one week we’ve gone from very oversold to very overbought.

  35. Phil

    Well, the S&P popped back up so we’ll just have to wait for RUT 666 to test next and that will be it for those short plays if we can take that out but SOX were rejected at 260 so I’m not seeing it unless they come back.

    Gap/JRW – Yes, a 20% of the run pullback would be good and healthy. 

    DIA/Maya – As protection, we pretty much always have a mattress play.  We have had the Sept $105 puts for ages and this is finally a good time for someone to make a new entry (at $6) and then we can 1/2 cover with the July $102 puts, now $2.22 at no less than $2

    $109 put/Morx – DIA I assume.  Those are $6 but you can roll them to 2x the $103 puts now at $1 each and, AFTER they expire, you can then roll to 2x the July $102 puts.  No need to run right to Sept unless it’s a margin issue because every month that premium will expire so you have a $2 per month buffer between here and Sept ($6) if you keep rolling. 

    CCJ/Drum – I’d offer .30 to roll to the July $24 puts.  If it never comes in then you can just roll right across to the July $25 puts, better than even (now $2).

    Overbought/Eric – I don’t know if it’s overbought but, as usual, we didn’t take any time to build a base to make a proper, sustainable move up.

  36. Fabregas

    ICE short – Phil, any thoughts?

  37. EricL

    You’re right Phil we’re not that overbought: RSI still only around 50 on the daily SPX.

  38. Phil

    Big punch up now testing Wednesday (3rd’s) highs, above that and we may get moving again because the volume is only 55M at 11:20 and the EU looks like they are closing well and there are still plenty of short to be squeezed.  TZA calls are going to be a DD at .55 (down 20%) but then we’ll have to give up at .45, which should be just about 667 on the RUT.  What we’re hoping for is a pullback here into the gap zone between Friday’s close and today’s open.

    ICE/Fab – Temping but a very dangerous play. 

  39. drumkeerin

    confused by your suggestion on my sold Jun CCJ 26 put-numbers seem off

  40. gmarts

    Pharm, interested in your take on DCTH at this point. I’m long the stock at 13.00 or so, take another round or wait?
     
    Gordo

  41. cslanson2

     Phil,
    I believe I read something about a YRCW play the other day but for the life of me cannot find it on your site.  Can you point me in the right direction.
    Also using your guide that the longer term accumulation with options is best on stocks that are unlikely to decline by more than 40%, what is your view of MS?
    Thanks

  42. JRW III

    Sold the other 1/2 TNA at $47.28

  43. robo74

    Pharm,
    How do read the action in QCOR today? It seems to me that the delay on the decision is leaning closer to approval rather than rejection, but I am also wondering if MMs are trying to pin this around $10 for OPEX.
    Also curious to know if you ever play FDA decisions with a straddle or strangle.
    Many thx,
    Robo74

  44. boobearsdad

    YRCW/cslanson2: That play is at this link: http://www.philstockworld.com/2010/06/11/turning-10000-into-50000-by-january-21st-members-only/

  45. japarikh

    Phil,
      I’ve got SDS Jun 29 calls at $4.03 (part of a bull call, offset by put selling) which are now $4. Should I get out now or see what tomorrow brings?
      Also, if you can give some advice on how to unwind spreads (I think I screwed up this SDS one). Thanks.

  46. judahbenhur

    JRW, When you have a minute, take a look at 4/5, assuming that the gap up and the run-up during the first 15 minutes on 4/5 were the same type of move.  A very close match so far through the first 2 hours, including this little drop down at the European close.

  47. Pharmboy

    DCTH/Gord – wait, sell some premium if you can to reduce UR basis.  July $11 C ($1) and Dec10 $10s ($3) are a good way to go, if they jack up, you can  roll the caller and leave the P in place.  Plenty of downside with the Dec P which is why I like them.  I don’t think they rocket up anytime soon, but play a zone – unless someone buys them (BSX maybe?).

  48. fizz

    JRW--been watching you guys for a few days actually since yip first started--wanting to get the chance to really follow you--wonder where yip is?.  Thanks for the posts.

  49. EricL

    I’m back down to a small GDX position, since it has been acting poorly since Thursday. I’m thinking gold may push back to the bottom of its uptrend line, which is also close to the 1200 area of support. Just a lot of consolidation right now.

  50. JRW III

    I’ll be buying TZA on a solid breakdown at R2 ( IWM 66.24 )

  51. Phil

    CCJ/Drum – I still like them long-term.

    YRCW/Cslan – That was on our list of $10,000 to $50,000 plays on the 11th I think.  It was a straight purchase at .21, I never did get a fill because I was sick in the morning and missed the run-up.  As to MS – I don’t like them as much as JPM but they seem to be OK.

    SDS/Japar – They are June so playing a dangerous game staying in them but, as with the TZA’s, it’s a fun day trade looking for a pullback during lunch.  If we break 666 on RUT though, any bear play is a bad idea.

    Watch VNO – they are climbing and, along with BXP, are usually good early indicators of a bullish breakout

  52. brooklyn

    Phil - Thoughts on KO ($51.52) for a Jan 12 45/52.5 bull call spread selling a $40 put. In at $1.60 on the $7.50 spread?

  53. JRW III

    judah,
     4/14 ?

  54. boobearsdad

    Phil,
    You say that "If we break 666 on RUT though, any bear play is a bad idea."  On a breakout above RUT 666, would it be wise to lighten up on longer-term downside hedges, with the goal of putting them back in place on either a breakdown later or at the next major resistence?  Or are those best left in place over the long haul, then adjusted as they get closer to expiration?

  55. jomama

    fabregas, if finreg looks good for ICE then they will go ape.

  56. David Ristau

    Hello all,

    New play is up for my Oxen Report’s Play of the Week. We have gone 4/4 on these over the past month, and I think I have another strong play for you this week. I just sent out an alert about Winnebago Industries (WGO). We are looking to get in at 11.20 – 11.30 for a 4-6% gain. You can read my analysis here on my page if you are a premium member or Oxen Alert Member. If you are not, ask Phil or me how you can read about this play and other premium positions from me.

    Check out WGO!

    Thanks and Good Investing!

  57. judahbenhur

    JRW, I like 4/14.  4/5 has a much flatter shape, more range bound, and so far seems more consistent with today’s narrow range.  The next hour may tell.  Either one, if we revisit a support line at around 2, that could be a good place to enter and sell at 4.

  58. Jbur

    Hi Phil and everyone! Just back from one week cruise. Good to be gone and good to be back. Gonna take days to catch up. Good read your posts. Why is the screen rolling and I feel slightly sick?

  59. Phil

    Today’s happy talk:  St. Louis Fed President James Bullard says a strong global economic recovery is under way and is unlikely to be thrown off course by European debt woes or the improbable event of the bursting of China’s asset bubble. Still, he also believes the recovery is not strong enough to merit a hike in U.S. interest rates.

    The cost of fixing Fannie Mae (FNM) and Freddie Mac (FRE) will climb to at least $160B and could grow to as much as $1T, according to a Bloomberg report. Barry Ritholtz believes Fannie and Freddie "have become a dumping ground for all manner of bad bank loans," and the odds of a $1T loss are "100%" if the practice is allowed to continue.

    Several municipalities are struggling financially, but municipal bond prices don’t seem to reflect much concern. Yields on muni bonds maturing in 2020 stood at 3.15% Friday, up slightly for the week but down from 3.3% in April. "The day of reckoning is here," Jeffrey Schoenfeld of Brown Brothers says. "But municipal investors continue to act as if there’s no default risk in municipal bonds."

    French and German banks continued to hold the greatest exposure to the weakest eurozone countries at the end of last year, collectively holding nearly $958B of debt from Spain, Portugal, Greece and Ireland, according to the latest figures from the Bank for International Settlements.

    A strong euro in recent years is to blame for blinding the region to its underlying fiscal problems, says EU President Herman Van Rompuy. "What went wrong wasn’t what happened this year. What went wrong was what happened in the first 11 years of the euro’s history. In some ways we were victims of our success."  Now THAT is some mighty fine spin!

    Before swearing off euro exposure, remember that the currency has been weakening for a relatively short seven months, and it wasn’t so long ago that economists were concerned about the dollar’s weakness and the euro’s strength.

    Industrial production in the 16 eurozone countries rose 0.8% in April from March and 9.5% from a year earlier, exceeding expectations. European markets up strongly today.

    The EU has roughed out rules that would let national regulators temporarily ban naked shorting and some CDS trading when markets are volatile – a move that would mostly affect hedge funds and the few big banks that dominate European CDS, mainly in London.

    Reason for invading # 11Afghanistan is said to contain a treasure trove of nearly $1T in untapped mineral deposits, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy. The country could become the “Saudi Arabia of lithium,” and it includes huge deposits of iron, copper, cobalt and gold.

    Starbucks (SBUX +2.1%) has weathered the recession in fine fashion, and the stars could be aligned for a growth renaissance. Citing accelerating sales growth and an awakening overseas business, Heard on the Street looks for a return to the Starbucks growth story even without meaningful store additions.

    Videogame maker THQ (THQI) down 7.9% as weak sales of a top title pinch results for the first quarter and the rest of the year. The company lowered its fiscal Q1 forecast to a loss of $0.20 to $0.30 per share, from breakeven.

    More regulatory scrutiny for Apple (AAPL), as the U.S. International Trade Commission has agreed to investigate HTC’s complaint against Apple over alleged patent infringement. (see also)

    Consensus Advisors’ survey of the top five healthiest retailers: Amazon.com (AMZN), Aeropostale (ARO), Urban Outfitters (URBN), CVS Caremark (CVS) and Wal-Mart (WMT). The firm looked at criteria such as growth, debt levels and ability to control pricing.

  60. JRW III

    IWM 66.35-7 is currently the strongest S/R line on the chart at 16 points !!

  61. Phil

    KO/Brooklyn – Nice way to play them, KO ntot too likley to break below $40 and owning them for $41.60.

    Hedges/Boo – Not the long-terrm ones.  It doesn’t pay to take a hit on the spread on every gyration.  Keep in mind that they are insurance and we expect to lose them completely, any outcome better than that is a bonus….   The disaster hedges guard you against waking up to a 9/11-type event where the market is down 10% while you sleep.  Only if you a fully confident that can never happen should you be messing around taking them off.

    Welcome back Jbur!  Don’t worry, you’ll get your land-legs soon and hopefully it won’t be the markets that are rolling back over on your screen…

    Transports not holding 2%, SOX at 2.2%

  62. exec

    Bullard:   You gotta love it….. a strong enough recovery to withstand all the global upheaval, yet not strong enough to warrant an interest rate hike. 

  63. aclend

    GXDX seems to be finding a floor

  64. Phil

    APOL getting a massive smack-down.  Fraud allegations, rumors of loan defaults, imploding margins along with possible government restrictions on student loans pushing them over the edge but it’s the same basic attack that was made on them in March, which also took them down to $45.  The fact is, I heard rumors that the Administration is going to hit us with another big jobs package that may have an education component and I’m wondering if today’s move is just an attempt to shake out the weak hands before things really take off in that sector.  

    It’s very speculative but I do like the July $45 puts at $1.10, selling the June $45 puts for .64.  Also, the July $55 calls at $1.15 are interesting and total speculation

  65. exec

    Another big jobs package?  Makes sense.  Mid Terms are fast approaching and you have to believe they want to look like they’re doing something about the unemployment.  What better way to spend more money than a jobs package.  There isn’t a member of congress from either party that would vote against it regardless of how much pork is in it.

  66. RMM

    Phil: hope you watched the dazzling game played by Germany.

  67. exec

    Ok Phil…..you called it Friday.  What is your crystal ball showing today?  Bounce off the 250 level or close the gap?

  68. yipcarl

    Having connection problems today..
     
    JRW,,,You have a system the rates the strength of support and resistance levels?  That’s what 16 is on your software?  I feel like your a potluck everyday, I"m always learning something new about you…
    Would you care to share what you use to help you establish S/R lines? 
    Thanks.

  69. exec

    Yep…..JRW is like an onion…..whenever you peel off a layer there’s more to know.

  70. jomama

    Don’t even get me started on APOL – they only exist because students are able to borrow money from the government – i think the default rate on the loans is almost 50%, considerably higher.  The really provide a disservice to students who are really better off going to a community college.  They have a strong presence here in phoenix along with some "for profit" vocational schools that actually make a little more sense to me.

  71. JRW III

    yip,
     
    Confluence Confluence occurs when you take fibonacci projections off of multiple trends and get the same number and strengthens when it corresponds with other technical advents such as gaps, swing high/lows, chart indicators crossovers (MACD, RSI, Stochastics, etc.), trading congestion, etc. The more confluence, the more significant the level. I really take notice when I get two or more fib #s (say a 38.2% and 61.8%) to correspond with a gap in the chart or a swing high. Confluence is very powerful as it combines multiple technical analysis techniques to arrive at the same conclusion, and should be relied on accordingly

  72. lflantheman

     Phil….APOL    How can you simultaneously like the Juy $45 puts (long) and June $45 puts (short)   play as well as the July $55 calls?   One is a bearish play, the other bullish, and in the same month……???

  73. jomama

    iflan – i think that means it will move violently either way (APOL that is)

  74. Maya1

    Phil,
    I am reading and reading for a couple of months, now, but I sure wish the commentary would clarify whether he is buying or selling calls, when he talks about ” the June $45 calls are interesting”…..so I think, BUY them or SELL THEM?
    I will try to keep learning but it sure would go faster if I knew right from the git go, if we are buying or selling puts or calls.

  75. RMM

    Phil: any move UP at 2PM ?

  76. David Ristau

     In WGO at 11.25

  77. leonf675

    Phil, I have a short put position in SPX at the 1030 strike that was rolled from a losing 1070 position last month.   On the whole, I am still a little down on that particular position.  Of course, I have TZA as hedge.   What’s your recommendation?  Let the putter settle to cash on Thursday, roll or take money and run now?

  78. EricL

    jomama,
     
    Agree completely on APOL.

  79. jomptien

    APOL, Jomama is right. I taught at one in Ann Arbor (Taylor Business College) in the early 70′s, just about everyone was in because of govt. money and the owners didn’t care about their education.

  80. kustomz

    If the dollar breaks 86.60 im buying VXX

  81. jdub929

     Hey Phil,
     
    Newbie here.  Any thoughts on QCOM on these levels?
     
    Thanks in advance!

  82. Phil

    That was some wimpy gap fill so far – barely touched the tip of it!

    Germany/RMM – Actually I missed that one but it seems they kicked Australia’s butt.  That makes them as good as Ghana in their group so congrats, I guess…  8-)

    Balls/Exec – If we are true to form with the Omege 3 pattern (the Feb run), we”ll finish the ady up aboput 1% on the major indexes and tomorrow we pop all of our levels and consolidate over the line.  Not seeing anything to stop that from happening so far. 

    APOL/Jo – I’m not judging, just making a trade….  It just made me wonder WHY they were selling off like that and when I saw the news I was tinking it sounded stale, which let me to like the play but not nec. the stock…

    Comfuence/JRW – Good point!

    Fickleness/Iflan – I like the spread because the June puts will expire in 4 more days and I don’t think APOL breaks below $45 but I also don’t think it takes off by them.  We’re in the long puts for net. 46 and anything over that amount is profit.  Then the calls should be pretty obvious – they bounce, we make money, take profits, move on…

    Interest/Maya – I’m pretty sure it’s the July $55 calls I found interesting (now $1.30).  To some extent, the language reflects the nature of the play – I was looking at it as high-risk speculation so I don’t say BUYBUYBUY – sorry to not be so constantly absolute about everything I do…

    SPX/Leon – If you SOLD the put then at 1,030 short put should probably expire worthless so I’m not clear on the question.  

    More nice noisesProfit growth will drive the S&P 500 to 1,200 in the second quarter and as high as 1,350 in the next 12 months – a 23% gain, according to Merrill Lynch (BAC) equity strategy chief David Bianco: "What we see is corporate profit growth in a very low-inflation, low-interest-rate environment."

    European shares close at a one-month high, with banks and miners among the biggest gainers. Analysts pointed to improving consumer sentiment, strong indications ahead of Q2 earnings season – and a lot of short covering.

    Moody’s downgrades Greece four notches to junk status. The eurozone rescue package eliminates risk of near-term liquidity-driven default, analyst Sarah Carlson writes, but "macroeconomic and implementation risks associated with the program are substantial." Euro now +1.4% against the dollar, to $1.2254.

    Time for a last behind-the-scenes push from Wall Street lobbyists seeking to blunt provisions of financial reform, in closed-door sessions going on alongside the televised conference negotiations that one analyst calls "more like reality TV." (previously)

    Jobs pressure could help prompt an early end to the government’s deepwater drilling ban, FBR Capital Markets says in a note to clients. In 2009, the government got $11B in royalties from offshore leases, analyst Benjamin Salisbury writes.

    Three lunchtime reads:
    1) The eurozone’s tragic small-country mindset
    2) Stocks that climb when market tanks
    3) Easy to see why Asia’s worried about Europe

  83. shadowfax

    Maya1, Phil
    Most times I get the idea of which but the language changes too often to be sure. Sell = Putter Notheing = Buy Another problem that I am not sure anyone else incounters is take a day trade, DIA TNA TZA sell into stick or hold is posted at 4:02 amd I was wrong @3:59 some make money @ open some loose then or at close the day before. The condition to decide would be nice or do this if that happens otherwise this @ 3:30-3:45. JRW gives levels maybe the same? I like David’s enter at sell up % or at $ stop loss at.

  84. RMM

    Phil: what is meaning of short and long candles ? There are really long ones, red an green right now.

  85. JRW III

    RMM
    It means GAME ON !!

  86. Pharmboy

    Oh, and we thought last week was FUN!  T(HE)Y STOLE MY BALLOONS!

  87. Maya1

    Phil,
    Thnks for your reply.
    I understand that there are nuances to be understood with he market movements.
    But boy, sure would help newbies like me if you could perhaps keep that in mind, that some of us will need time to figure out wether you mean sell a put or buy one.
    In the meantime, would help me make some money if I spent less time trying to fugue out the basic premise and if it was clearly stated as a BUY OR A SELL OF A PUT OR CALL.
    Meantime, very much appreciate your market savvy!!!

  88. RMM

    JRW III: game on ? UP or Down or just what ?

  89. JRW III

    RMM
    Got in TZA at $6.56, out at $ 6.73; now set up to go long !! ( UP )

  90. yipcarl

    JRW thank you for that clarification.  I’ve learned from a guy that sounds exactly like you.  Ever hear of Chris Lori?  You are him and he is you in terms of your chart analysis.  Convergence I called it in older posts, you call it a confluence..same idea… which is what I believe Chris Lori calls it.

  91. Pharmboy

    Maya don’t be afraid to ask away as many of us are hear to help JIC Phil is on a roll and can’t stop….   ;)

  92. fizz

    Pharmboy--thanks as I am in the same boat as Maya--trying to figure out stuff without bothering everyone with such simple questions that are difficult to me in catching on.

  93. Maya1

    Pharmboy,
    Thanks.
    Your comment helps and I may just do that .
    Hopefully, I may be able to return favor someday as I get better at this game

  94. tuscadog

    Phil / Spain  Cliff Wachtel indicates Spain just sold 3yr bonds at 2x April int. rate and need to sell $25B in July – see as Danger, risk off.  He seems to be knowledgeable on currency calls, will this bond mkt signal hurt mkts this week?

  95. robo74

    Pharmboy,
    Going to post this again in the event that you missed it before, and apologies if it is a lame question! Just trying to hone my skills. Thx:
     
    Pharm,
    How do read the action in QCOR today? It seems to me that the delay on the decision is leaning closer to approval rather than rejection, but I am also wondering if MMs are trying to pin this around $10 for OPEX.
    Also curious to know if you ever play FDA decisions with a straddle or strangle.
    Many thx,
    Robo74

  96. Pharmboy

    Don’t feel like you need to jump right in and catch the train. Watch and paper trade, put UR toes in very carefully.  Rome was not built in a day, but it fell a heck of a lot faster!  The volatility now is worse than it was in ’07/08 when I joined, and the lumps will be hard to swallow.  Pick good companies to start and get the feel for, then one can move to more risk as understanding sets in. 

  97. Jtiff

    Phil- Is there any significance in the Greece downgrade?  It almost seems like it’s already priced in.  Does this mean anything in terms of the bail out?

  98. gucci

    Hi Phil — What do you think about FCX and CLF — for short put sell in July option -  thx

  99. Pharmboy

    Robo – apologies, yes I did miss it.  QCOR action, agreed, I think they pin it this month.    There is no question in my mind that they get approval, and the FDA is notorious for doing these types of things (delyas).  They are very busy and most reviewers have more work than many of us combined.  The product is already approved, this is a line extension.  My question is how much is baked into the revenue line b’c the drug is already used off label for infants….My 12.5s from last Friday are dead, but they were a risk with a few dollars of my profits.  The 7.5 P I sold, those more than made up for it.  Now we have to wait until Sept and since they have no debt, and are profitable, I expect them to hold in this area.
     
    I rarely sit around for FDA decisions.  I usually play into the rally and get out.  I (we) have played with some due to the fact that the science pointed to a yes, but look at ITMN…..we rode them up…and they were shot down.  So no, I do not usually play straddles into the decision, but will play them up to it.
     
    JAZZ is one play we are on right now selling the 7.5 Sept calls and puts.  We bought the stock at 7.5 and I did at 7.95.

  100. fizz

    JRW--in at TNA 45.28--what IWM level will you watch to sell?

  101. JRW III

    fizz
     
    I’m not in yet, but the levels I posted this morning. Bail if it breaks below 65.31 !!

  102. JRW III

    TNA $45.42

  103. gucci

    GOOG — Hi Phil still hold June 500 short put-- was up this morning but roll over this afternoon, should I wait and see tomorrow before roll to July lower stirke (either july 460or 470 short put) .. need your guidance thx

  104. fizz

    Thanks!!  JRW--it’s going up!  out with .40 gain.

  105. willsons

    Phil
        What is your take on Halliburton and would you do a buy/write at this point?  Thanks

  106. fizz

    Whee that was fun, but got out too soon--darn it.  That .40 gain looks pretty measly now.  Human nature--always looking at what you could have had.  Time fore Boobear’s song.

  107. robo74

    Pharm,
    Thanks for that breakdown on QCOR/run up strategy. Very helpful!
    wrt JAZZ, you are playing a short straddle and own 2x the underlying, is that correct? My brain is not firing on all cylinders today and I am trying to figure out how exactly that trade becomes profitable. Again, hope I’m not wasting your time!
    Thx,
    Robo

  108. Pharmboy

    Robo – not at all on wasting time.  So, I have sold the straddle FWIW.  So if JAZZ stays at 7.5, we pocket all proceeds and either get out or take some profit and gamble with a vertical or OTM C.    If  the stock gets called away, again we used rule #1, takem money, run ..  for a $2.9 profit on the 7.50 stock.  Caps our up side, but a ~30% gain is nothing to sneeze at in a few months.  it takes some margin, but I think the reward is worth the risk. 

  109. Pharmboy

    Phil – these premarket gaps are getting to be annoying….on the DIAs or QQQQs or something, there has to be a way to take advantage of these bastards from running the markets one way or another….hell, I’ll take probabilities if someone can write and algo for us to predict the future movement or use deltas and leveraged ETFs to stick it to the ‘house’ so to speak.
     
    Oh, and another 100pt swing for the day…makes it 25 fer 25…..but who’s counting?  Man I like him these days.

  110. tuscadog

    Phil / Stick, You said earlier maybe finish up 1%, and up again tomorrow.  Still play for that?

  111. lapper

    doubling JRW?

  112. lapper

    oops guess not

  113. Phil

    Welcome Jdub!  I know that, as a new member, you read the New Members Guide and that told you to read the last month’s worth of posts and comments so I will assume this is a follow-up to my comments on QCOM on Thursday, where I said: "I think I would go artificial with the Jan $32/36 bull call spread at $2.20, selling $27.50 puts for $1.40 so that’s net .80 on the $4 spread that’s 2/3 in the money and your worst case is you own round one of QCOM at net $28.30 (an 18% discount)" - so, no, no change from that stance yet.   8-)

    Levels/Shadow – ????????????????  It sound like a thought in there somewhere but I just wasn’t getting the point… 

    Long candles/RMM – On what chart?

    Buy/Sell/Maya – If you’re not sure, just ask and I can clarify it on a specific play.  I pretty much type whatever I’m thinking as soon as I’m thinking it and, if it’s a trade, I hit submit very quickly to get it out there.  I don’t know whether anyone will be interested or not and, if you are, just ask and I am happy to clarify after but, after a while, you will understand the shorthand and benefit from the speed more so than you would waiting for me to hold and edit every comment I make until the trade is stale. 

    Spain/Tusca – I don’t know the details (a link would be helpful) but Spain is pretty much old news now – they’ll need to do better than that to bring the markets down. 

    Done with those annoying TZA’s by the way at .77!

    Greece/Jtif – Already priced in I think.  Until they use up at least 1/2 of that Trillion, I don’t think they are going to phase people too much.

    FCX/Gucci – We are long on them on a spread from a while ago.  I wouldn’t bet against CLF either but I think you are talking about selling July puts short?  On CLF I think selling the $49 puts for $1.40 is very reasonable as the 200 dma should give them good support at $48.50 and on FCX, as long as copper holds $2.85 then the July $60 puts can be sold for $1.95.

    Nice catching the turn JRW – looking like we’re going to get the exact finish foretold by the charts (creepy) unless Mr. Stick decides to jam us into the close but I’m not feeling it today.

    GOOG/Gucci – As long as you REALLY want to own GOOG, then no hurry to pay 10% premium on a bad day.  You are going to roll down to July $480 puts, now $16.50 so only if that relationship stops being a credit for you should you be worried. 

    HAL/Wilsons – I’m not a HAL fan so we played RIG, OIH and BP but not HAL but I think the stock at $24.27, selling the 2012 $22.50 puts and calls for $11 at net $13.27/17.89 is cheap enough for a comfortable initial entry.

    Minding the Gaps/Pharm – Well that’s why we went with those DIA July $105 calls last week but, in general, it’s too dangerous as we risked 30% we already made on Friday for what - another 20% this morning?  It worked so it was fun but I would have been really pissed if we had lost that .20 instead of making another .20.  To me, it’s not about specifically playing the overnights but about taking that hoped-for action into account when we took the cheap calls at $1.  This market is insane – how ridiculous is it that we can make 50% trading a major index in one trading day?

    Up 1%/Tusca – We are looking a little lower now and that means a 1/2-point stick could happen but we filled our gap and held above it – painting more on top of that would really be overkill.

  114. robo74

    Pharm,
    Great, I got it now. Thanks!

  115. EricL

    There’s the gap fill on SPX.

  116. Phil

    As the stimulus starts to wind down, cutbacks in state and local governments may trim growth by about 0.25 percentage point in 2010 and 2011, Mark Zandi says. He also sees the governments cutting payrolls by 200,000 during the next year. "The budget cutting that is dead ahead will be a significant impediment to economic growth later this year into 2011," he says.

    David Rosenberg says the latest ECRI reading signals an 80% likelihood of a double-dip. "There is probably a greater chance that profits go down than meet the consensus estimate," he adds, "[leaving] quite a bit of downside potential in a market that is still priced for too much growth."

    Sen. Blanche Lincoln offers to modify her plan to limit swap trading by banks in return for assurances that at least some parts of her proposal will be included in the final financial reform bill, Reuters reports. The original Lincoln plan "was much too sweeping," Paul Volcker tells CNBC.

    Ranks are breaking:  Arguing that not all oil companies should be tarred with BP’s (BP -8.3%) brush, Chevron (CVX +1.1%) CEO John Watson says the BP disaster was "preventable" and that his firm has always maintained procedures that might have avoided the well blowout that caused the spill. The defiant tone adds to growing skepticism that any punishment the U.S. government may impose on BP will stick to the energy industry as a whole.

    Woops – sold my TZA too soon!   Looks like S&P is going for my 1,088 pullback target.  We’re still fine with that but no need to cover DIA puts – just in case we get lucky and have a big fall

  117. JRW III

    Out of TNA essentially even, +4 cents.

  118. exec

    Well….there’s the gap closing…..now what

  119. shadowfax

    Phil
    The question is can you give a clear what your doing before 4PM or how to decide. Example I got out of DIA 105s last week and missed the gain.  You win I loose. Missed sell DIA this AM or hold till monday AM. Targets?

  120. kustomz

    Scaling out of VXX, they love to kill it premarket and BBY could be a catalyst for a pump up

  121. gucci

    Hi Phil — is there any news that casue the afternoon sell off — do not understand this market  thx

  122. cwan120

    Hi, EricL,
    I got busy today, just checked in, and haven’t read today’s post yet.  So, I apologize if this question already came up:
    What SPY condor did you play last week?  I’d appreciated if you share with us the specifics.  Thanks!

  123. kinkistyle

    gucci:  Probably just the predetermined algo and stick course for the day…

  124. Phil

    APOL back for a reload now and that is BUYING the July $55 calls at $1.15.  ANOTHER play is BUYING the July $45 puts for $1.10 and  selling the June $45 puts for .64.

    I don’t see how we’re going to get China going with this crappy action…

    SSO $36/37 bull call spread at .52, selling $35 puts for .45 is net .07 on the $1 spread that’s hit or miss Friday (and keep in mind you would be stuck ultra long on S&P for next month).

  125. EricL

    cwan,
     
    I sold the June 109 calls and puts and bought June options 5-6 strikes away. So far so good. On the gap fill a few minutes ago, I rolled the short calls up to 110 and bought a small number back to get lightly bullish.

  126. jdub929

     Thanks Phil! And yes, QCOM question was a clarification.  APOL--July $45 P or $40?  Seems like $1.10 is for the July $40 P

  127. EricL

    Nice recovery for gold but not for GDX which now looks headed for the 50 SMA at about 49, where it will test the uptrend line as well.

  128. shadowfax

    Try every day to follow trades but timing is everything, didn’t take DIA or TZA ideas but on paper would have missed the marks. I have learned some valuble stuff but don’t see your gains or how you get those exicutions without a plan like Davids in @ $ out @ $ or ?%. My trades usually have a plan or fail!

  129. Phil

    Close/Shadow – You need to decide your own risk tolerance.  If you got out of the DIA $105s with a 30% gain in a day, that’s not a bad thing – it’s actually very smart.  As it was an inconsequential play for me (craps roll), I kept it but I’m not going to sit here on every single trade and go over entries and exits.  These are trades that aim to make 20% gains (see strategy section).  If it makes 20% and you don’t get out – you are on your own.  If it loses 20% (again see strategy section) you should be either getting out or scaling in. 

    I prefer to spend my time here helping people who are trying to turn losing trades back to winners and looking over new ideas that other people suggest than worrying about squeezing an extra .20 out of a trade that made .30 the day before.  My job is to stay on top of the markets and keep looking forward and find new trade and the next good idea so the CASH you should have made by not being greedy and taking 20% short-term gains of the table can be re-deployed into something else that has a good chance of making 20%.  If you want every step of your entries and exits handled for you – I have a hedge fund for that – THIS IS NOT IT!  I am not going to have my day dragged down on the minutia of each trade idea I post

    News/Gucci – Nothing I see, this is a very nasty but pointless-looking sell-off.  This may be a full rejection of our levels or just the expected 20% retrace at our levels – nothing to do but wait and see what happens on (surprise!) Testy Tuesday. 

  130. EricL

    There was an intra-day H&S pattern that completed just before 2:00, so perhaps the selloff was trade-bots responding to that. Overall I thought there was fairly steady buying.

  131. Phil

    APOL/Jdub – You are right, they are the July $40 puts, now $1.15, not the $40 puts, now $2.50.

    Planning/Shadow – If you want a good plan.  Don’t enter ANY trade until we are looking to DD on a mistake.  That way, you missed a 20% move in the wrong direction and you are getting a superior entry so you have a lot more leeway on the trade.  Today, that would have been the TZA play when I made the call to DD on the $6 calls at .55 (11:26).  At that point, even if you would have paid .60, you would have beat our initial entry at .70 and, even if you took my wimpy exit at .77, you would have made your 20% on the trade.

    On the whole, I think that was a gap-fill and a healthy pullback but they sure did make it ugly-looking!

  132. kinkistyle

    The person taking the other side of the APOL trade, is probably Steve Eisman, the hero of Michael Lewis’ "The Big Short".  He gave a presentation that ripped into for-profit schools and called it "Subprime Goes to College":
     
    http://www.scribd.com/doc/32066986/Steve-Eisman-Ira-Sohn-Conference-May-2010
     
    based on what was written about him in The Big Short, he seems like a very smart bad-ass, so "Know Thy Enemy" and all that…

  133. yipcarl

    The big short was a great book…

  134. JRW III

    Net 3 1/2% on the day
     
    Have a good afternoon all !!

  135. cslanson2

     Would anyone here know if a stock or ETF exists to short the Japanese Yen?
    Thanks

  136. shadowfax

    Phil,
    SORRY! Don’t take this the wrong way I got out of DIA at even No gain at all!  I am net loss on all these and want to turn them into winners but don’t see how. The spreads work, covers work, the dicount buying works. I’m truly sorry if I don’t speak your language but I am truly trying to figure what I am missing. It is not your problem, it’s mine and all I’m asking for is help Thanks.

  137. goldman

    Phil - Sent an email in the"contact"  section about midnight last night trying to resolve my membership renewal, does Greg check email daily?
    Second question…curious, what are your entry $$$ limits for your hedge fund…$100k, $1M, $10M, etc?  I have a good friend who sold his software company recently, and is looking for options as he has it all in treasuries and physical gold.  He is also looking for VC opportunities…any suggestions to point him in the right direction?  Thanks!

  138. fizz

    Now that market is closed, has anyone noticed the lighter volumes on the Hang Seng, since 6/1/10--the last time volumes were consistently that light on that index looks like Dec 09, and only for a few days then.  All you guys that know more than me, does that mean anything to you?? ( I’m always looking for inconsistencies, differences, to spot a change, that may be coming) .  and Phil--(kiss up coming)  I’m so glad I have found you guys--I live in MIssouri with absolutely no one that knows anything about the market, or charts, etc. to talk to!!!!  so I get a kick out of just listening to you all, let alone actually getting to have any one of you answer me.

  139. samz3700

    japanes yen -
    if you can sell short in your account - fxy

  140. cslanson2

     samz3700
    Thanks for response, I trade with TDAmeritrade – no inventory for short sale!

  141. jbaker2447

     ProShares UltraShort Yen ETF (YCS)

  142. gucci

    SPX  Hi Phil — I am not good at technical but it seem s like we a re trading ina channel from low 1040 and hi at 1107 ish, until this channel is breakout, just ake one day at a time i guess.  Like we reject 1100 today — wonder if we are testing 1040 low again before break out above 1100 S& P — thx

  143. bobhu

    Phil,
     
    Thanks for all your help.  What is the name of your Hedge Fund?

  144. cwan120

    Hi, Eric,
    Thanks for the info on the SPY condor play.  I remember you did similar plays on individual stocks before.  Do you mind if you explain how this play works?  It’s not the traditional condor, is it?

  145. joe2010

    hedge fund – that one caught my attention too ;-)
    Phil, can you post any info on that hedge fund? is it being constructed right now or already in operation? (etc etc)
    Thing is, beside my money-earning day job, i wanted to do end-of-day trading, swing trading, but i have not the mental strength for it, so sure enough my only chance of making money in stock market is to delegate it.
    I am currently selecting a set of (mainly) hedge funds using various hf-databases to spread out the risk, and if there would be "Phil fund" i would very seriously consider an investment.
    any info would be appreciated, also if you know any funds / advisors you’d recommend! 

  146. jdbs13

    I think the selloff was purely technical as the 200 day on the S&P is around 1107/1108 and although we only got to 1105/1106, it looks like the bulls just couldn’t hold it especially after the sizable move we’ve had since last Tuesday

  147. shadowfax

    Anyone know a good place to learn the condor and butterfly? I may not use then but because they are mentioned here I want to learn. Thanks
    JRW I have a good handel on your system and if followed for the past few weeks would have made money. If I can figure out etrade pro by next week I may actually trade, if not I plan to try another broker. Who do you use? Thanks

  148. EricL

    cwan,
     
    I calculate the net cost/risk of the short condors I sell by subtracting the credit received from the total margin. So if I receive 4.00 credit and need 5.00 in margin, it’s 1.00 cost/risk. Then I aim for some reasonable percentage of that 1.00 and exit when I reach that goal. So if I can buy the condor back one day for 3.50, say, then I’ve made .50 against 1.00 in risk/cost, or 50%, before commissions. That’s how I look at them.
     
    There are a lot of variables about which strikes to sell, what time frames to use, and so on, but a simple way is to sell a near-money 1-2 month duration straddle on a stock you follow (assuming options are liquid) and then buying a few strikes away (thus giving you a short condor, technically) and then wait, perhaps with a good-till-cancelled order to buy it back if your profit goal is reached.

  149. EricL

    shadow,
     
    The Stock and Options trading ebook at the top of this page is a good place to start to learn the various spreads. You can download it for free as a member.

  150. EricL

    cwan,
     
    Another thing: short condors get more dangerous as volatility rises. I didn’t trade many over the last month — just a few on things like V. If we get back to higher volatility, I cut back on them.

  151. David Ristau

    New Position – CAAS

    I have a new post in China Automotive Systems Inc. (CAAS) as a long term position. 

    You can read my analysis, entry, exit, and valuations here.

    Good Investing!

  152. campbell

    Phil,
    Ditto on joe2010. 
    Lori

  153. kustomz

    jdbs13
    agreed and Phil mentioned the last push higher Friday was BS and unnecessary….today’s late action proves his statement was on the money.

    "Well that was a totally unnecessary stick at the end but still more or less flat for the day and we erased ALL of the damage since last friday – yet another Fugheddaboudit week!"

  154. kinkistyle

    kustomz: gotta pull more momentum traders in so they can sell into strength on Monday! ;)

  155. kustomz

    kinki, true and the thin trading makes it possible to push and pull this market any way they like, im sticking to 10400 by opex….unless i see a serious breakdown in the trend in the next 2 days.

  156. shadowfax

    EricL,
    Thanks for the advice, found butterfly and now remember that I’m not interested, spreads make more sense at less cost. I didn’ read the book again but I failed to find condor again in it, maybe by another name, no mention of mattress either although I understand that. Eventually etrade will explain but they continue with Coming Soon. Thanks

  157. Phil

    APOL/Kinki – Good to know.  The spread trade is just an options trick to win premium and tight stops should be kept on the call for sure!

    Yen/Cslan – YCS is an ultra-short on the Yen.  They actually have some reasonably active options but it’s very hard to short the Yen as it’s massively manipulated.  YCS ranges from about $19 (about 89 Yen to the dollar) to the low $20s (95 Yen to the dollarish) but generally jerks up and down in a channel so you are probably better off just buying the stock at $19.50 and selling at $21 over and over. 

    DIA/Shadow – Short-term trading and day trading takes a lot of time and practice.  The most important thing you need to do is develop entry and exit disciplines and learn to use stops.  You also need to learn what kind of trades you are good at sticking with and which ones make you bail out.  Thing #1 is NEVER pay more than you intended to enter a position.  If your average entry on ETF momentum plays is $1 and you give up .05 10 times – you wipe out 5 .20 gains!  Since we generally are THRILLED to have 7 20% winners against 3 20% losers for a net gain of 80% – paying an extra nickely turns even that great percentatge into a losing series so THE WORST thing you can do is enter a trade by paying too much. 

    When you see a trade you agree with and want to try, you should be aiming for a small initial entry.  Let’s say that I picked the DIA July $105s last Friday at $1 and you have a $50K portfolio and have $5K put aside for day-trading/momentum trading.  That means the MOST you would want to risk on a position is $1K, and even that’s a lot but it means your initial entry on a trade is going to be $250 so, at most, you’d be looking for 3 contracts for $1 ($300). 

    BEFORE you make the trade, you need to think through in your mind what you intend to do in the next two steps.  We took the DIA  trade when the Dow was at about 10,020 so the logic is that if we fail 10,000 we’re just done.  That means, in that case, we would just take the $50 loss and get out if we pulled back to .80 UNLESS we were holding 10,000 but the calls dropped, and then we’d have to make a judgment call on whether to DD or hold or bail. 

    As this trade went up with no trouble and made 30% by the end of the day, you just need to decide whether to take $90 profit off the table or not.  $90 is 0.0018% of $50,000 so even this "small" gain, when taken in a day can add up to a major impact in your portfolio if you end up doing even just 50 more times a year ($4,500) than you lose.  As I said, we were bullish into the close (per the plan from the morning post, no change at all) and, since we were early in the scale, there was no need to close it (and that’s very rare for over the weekend as usually we are much more nervous). 

    This morning, it went to $1.50 and that’s now a $150 gain and, per the strategy section and all common sense, we take those gains off the table on short-term trades unless we have an amazingly great reason not to.  This morning at 9:51, in bold letter and in an Email Alert I said "This is a huge run off last week’s picks so greed kills at this point."  I also said: "I always get nervous when we’re up 150 points in less than two market hours (we were at 10,120 at 3pm on Friday!)" and, at 10:33 I said: "SOX hitting 2.5% rule at 360 so that’s going to be a critical indicator for whether we can move much higher today,  Otherwise, watch for the 1.25% lines to be a stopper on the majors" as well as telling Gucci (also in bold to bring it to the attention of all Members) that it wasn’t worth pushing risk after great DIA gains and then, at 10:36 I said: "Rejection on S&P at 1,100 is NOT GOOD!" and then, in bold again, I said: "I’m for taking the downside hedges here, naked on DIA mattress play (Sept $105 puts, now $6 and good for a new entry) and I also like the TZA $6 calls at .70." 

    You need to learn to pick up on subtle signals like that, as well as my bold comments at 11:16 and 11:26 and 11:45 because those DIA July $105s topped out at $1.60 at about 11:20 and held $1.55 all the way through 12:40 so there was all the time in the workd to take those non-greedy exits at 50% or higher.  It is a TERRIBLE thing to have a gain that is 50% or 150% over our target 20% gain and to let it slip away – you make it virtually impossible for you to succeed day trading and, if you can’t get the discipline to take the profits off the table – you need to consider that day trading is NOT for you. 

    It all comes down to practice, practice, practice and you need to either paper trade or trade very small amounts until you are VERY confident that you can commit real capital and keep your focus – which is a whole new ballgame…

  158. pahurik

    I think daytrading is a lost game for 95% peoples, forex and futures with high leverages and small accounts 99%. I am on markets only 1,5 half years, and I find Phil site and very good traiding ideas and I like Phil ideas. I think people want understand this way they can buy stocks and spreads on longer timeframe and it is only way for ordinary peoples to make money.  Of course I know guys who make money on daytrading, but the work mostly on premarket  calls then US peoples sleep. In future I like more ideas from members, not simle questions to Phil. Sry my english not good, but if somebody have questions to understand Europe and Easrt Europe, ask.

  159. Phil

    Greg/Gold – He’s part-time and usually catches up at nights on mails.  As to the hedge fund, send Greg contact info and, if person qualifies, we can talk to them about specifics.  The rules are pretty silly but it’s best to follow them!

    HSI/Fizz – Interesting on volume but it’s consistent with the general loss of interest in Chinese market.  US equities are simply looking safer with not too much less growth potential (now that they are cut in half) so why risk cash in China?  I bet if you look at Shanghai, volumes are comparatively higher because that’s a captured market but HSI needs to attract capital from EU and US.  I’m glad you’re having fun and I’m glad to have a new member who contributes things like paying attention to Chinese market volume!

    Range/Gucci – I see the low end of our trading range to be about 1,100 to 1,150 with 1,200 being near the top or my expected range.  Without positive data and earnings, I see no fundamental reason for the S&P to move higher and without negative data and earnings, I see no reason for it to go much lower either.  So if we call 1,150 the middle of our channel, then it stands to reason that we can expect 5% swings on a regular basis and, when the newsflow is negative, it’s not at all unusual for us to drop another 2.5% (1,075) while consolidating for a move up.  To me, seeing panics down to 1,050 that quickly recover back to 1,075ish is a good sign that 1,050 is probably the very low end of our 10% trading range.  

    If you haven’t read it:  Read my detailed look at the S&P range in my "5% Rules!" article..

    Hedge Fund/Bob, Joe, Campbell - It’s called Capital Ideas.  As to other info – you need to qualify so send Greg and Email and he’ll hook you up with my partner to get you the forms you need (admin at philstockworkd dot com).

    Condors/Shadow – Go to the education tab.  There are tons of links there about any kind of trading you are interested in and they are all ones that Sage and I found useful.  If you want proper lessone, use the link at the top and try Sage’s Market Tamer lessons. 

    BP/Doro – ROFL!  Unfortunately, also sad because so true…

    Daytrading/Pahurik – Well said!  DAY TRADING IS NOT FOR EVERYONE!  Just like in baseball, you probably know what position(s) you are best at – you are going to be better at some aspects of trading than others.  It does not make sense to try to do everything - TRY things, YES, but try things with the goal of finding the things that suit you best – the things that work with your risk tolerance, your temperament and, most importantly, within your available time commitment.  If you are day trading and you like to have lunches away from your desk – you are not likely to do well!  If you are day trading and like to get your mail in the afternoon while the market is open – you are not likely to do well.   If you are day trading and you answer the phone while you have open trades – you are not likely to do well….  Most people SHOULD NOT be day traders…  

  160. qcmike

    Pahurik
    I have a question that is not about trading, its about travel
    Is that OK ?

  161. pahurik

    Yes! I am from Estonia, and Estonia become euro  zone next year. All questions East and all Europe  travel or any theme is welcome.

  162. pahurik

    Estonia is a small country in Nort Europe and only 1.4 million people. We speak our own langueage, this is similar finnish language and we are independent 1918-1940 and after collaps soviet Imperie. If you dont now, skype is developed in Estonia and we made 99% bank transfers in internet.

  163. shadowfax

    Thanks Phil.
    I am starting to get your message and how you say it. I sold the 105s on Thursday at close, don’t remember exactly. In other DIA  plays I made 10% at close only to hear about 100% the next morning because I didn’t get the hold message until after close even though it was stamped before. I was of the assumption to get out not hold over. I have closed many times at 3:59 PM. I do have my own plays that I do by your example and make my own decisions like the 4-6 stocks you don’t follow and I understand JRW’s levels. I am not fast enough or program savy enough to do my own levels on more than the S&P in a timely mannor. Etrade still baffels me, they think it is simple I don’t. I designed computers and programed in Cobal and Fortran. I know how these PCs work and how to fix them, todays techs have no clue, what is called programing now has no use for binary, octal, hexidecimal, 32, or 64 base that I learned. People are no longer allowed to know how things work, just buy a new one stupid. It was actually fun finding the axact bit that failed, I actually found bad transistors that were part  of a nan-gate. As you know I don’t trust Apple anymore, on a macro level my reasons are not understood. Other people only see profit and me as a bad attitude towards a great company. After the fact my reasons will be clear and they are a prediction, not a history and I may be wrong. I am very aware of my age and that of the new traders. I may say things differently but we all have the same goal. This is a new way of talking, please understand I am trying to understand the new english even though I got an A back then I feel I would get a F today.

  164. qcmike

     Pahurik
    I booked by train ticket on the German site.
    I am traveling from Paris to Munich
    I have tried e mail, phone calls and could find out if there is a first class lounge in the Paris EST train station.
    My question is
    Is there a first class lounge in the Paris EST train station?
    Do you know any one I could contact? Or if you have a number
    I have 4 hours between trains and trying to find a good place to spend the time.
    Or if you have a number
    Thank you
    mike

  165. pahurik

    http://www.raileurope.com/europe-travel-guide/france/paris/train-station/est-train-station.html
    I think 4 hours is not big problem to spend. Munich is a nice city and all Germany to. You must find time to visit Neuwanstein  Castle (http://www.tripadvisor.com/ShowTopic-g187309-i118-k497715-Neuwanstein_Castle-Munich_Bavaria.html

  166. shadowfax

    Pahurik
    I have no idea about a first class or last class lounge at the Paris EST train station but based on asking the question accross the pond on this site indicates you really do need a drink! Best Wishes and Luck!

  167. pahurik

    shadowfax, I drink a white wine,thank you, but  I not asking this question :P

  168. qcmike

    pahurik
    Thanks you for the information.
    I may have time to see the Castle, I will let you know when i return.
    mike

  169. qcmike

    Paris EST train station
    I asked the question
    I am going for a walk them a wine with dinner

  170. shadowfax

    Hey everyone as this after hours post will show my age, to me it is funny. I enterd an eye care center and shocked the 20 something at the counter. I asked what she was doing, her answer was texting. I mentioned, isn’t it faster to just call. She answered you can’t talk to your friends at work. I mentioned that she was not working and she did not understand.

  171. yipcarl

    I’m preparing to leave Wednesday for a wedding in Prague this weekend and a few days in Budapest back home next Wed.  Estonia is a beautiful place with beautiful people.  I’ve never been but met a handful of Estonians.
     
    The three times I left this year was the 3 craziest times the market had. If I can go 3/4 this wed to next wed should be interesting for everyone….

  172. pahurik

    Yipcarl, I was Prague in may, and I wish a nice trip to you. Markets go down and up, but ours emotions is for ever.  I visited US  two months a go, and this was very nice trip with visit LA, Las Vegas, Bruce and Grand Canjon, Phoenix and Palm Spirns.

  173. shadowfax

    yipcarl
    Have fun, enjoy yourself, the world doesn’t care what anyone is doing, snd if you stop in Paris to catch a train please buy phurik a glass of white wine on me.

  174. cwan120

    Hi, Eric,
    Thank you for your explanation of your condor play.  In this case, is "margin requirement" the same as "spread"?  For example, if I sell a SPY 110/115 call & a SPY 110/105 put, the spread is $5 on each side.  I lose at most $5 minus credits from the sale at OpEx.  My guess is that if I trade in a cash account (eg, IRA), then it is true that $5 is the margin requirement.  But if I trade in a margin (or even PM) account, then margin requirement is much less (something like 20%).  Am I correct?  So, are this type of plays good for stocks/ETFs that don’t move too much, and you are trying to catch the time decay?
     
    I’ll try to paper trade your SPY condor and see how it works.  I’d appreciate it if you report the progress on this play.  Thanks!

  175. shadowfax

    cawan120
    I am trying to understand a condor, you make it sound like a butterfly, please explane a condor or give reference. I am trying to understand new english and the unknown.

  176. shadowfax

    Tracy Trunks, a teacher in Teton county Idaho or the huge city of Driggs, to others cofee grounds thinks the pledge  doesn’t need, "under god", although the law differs, standardization works, if your trying to be vague so be it but be honest. I will admit the only thing I have reveiled is my view of Apple.  Share or this site is?

  177. yipcarl

    Thanks guys…

  178. shadowfax

    To ALL’
    I am sorry if I offended anyone, I was taught that the only dumb question was not asked. I have monitored this site for 4 and 1/2 hours and it seems noone knowns or cares to explain what a condor is. SORRY if anyone feels put in question. Good Night.

  179. kustomz

    Shadow just type condor in search tab you’ll find all you need to know, it’s been explained in the past.. I think your better off reading past info then inquire if you don’t understand

  180. salvum1

     Iron Condor is when you think price is going to stay range bound.  LEt’s say you think XYZ, currently at 100, will stay between 110 and 90.  Then you would sell calls at 110 and puts at 90.  But let’s say you did not want unlimited risk.  Then you would buy puts, say at 88 and calls, say at 112 to limit your max loss. So your max loss would be $2.00 less the credit you received, which should be no less than 25% of max risk, so on this example, $.50 – so you receive $.50 per condor as a credit and as long as the price closes between 109.50and 90.50, you keep the credit.
     
    Sound easy right?  WRONG.
    Best time to sell SHORT Iron Condors is when Implied Volatility is greater than Historical Volatility, so you can benefit from reversion to the mean of volatility.
    Also, I use a computation when deciding how far out to put my "wings" that takes the IV and price and days to expiration and computes a 1 standard deviation move from the current price to tell me where to set my wings.  If I cannot collect enough premium based on that calc, I don’t do it.
    IRON CONDORS are not for beginning trades.  They may seem "safe" but you can get really torn up by volatility spikes.
    ALso, I use 1 std dev because that gives me a 66% probability of price moves.
    That is a Short Iron Condor, the only type I do.,

  181. lflantheman

     The  discussions above about finding  your own trading style are very interesting and important.  I have found that I can day trade successfully, but only on days when I have no other duties and no distractions.  For me, this is infrequent.  My lifestyle is better suited to what I call short-term options trading, with most positions held for a few days or a few weeks.  And finally, as unbelievable as it may sound, I rarely play more than 5, usually 3 or 4, stocks or ETFs through options.  I disavowed "diversification" long ago.  It does not fit my style.  I was astonished a few months back when someone on this site said that he had positions in over 100 stocks.  I wouldn’t be able to track 1/5th as many.   So I trade only a few entities at a time.   I protect my longs with well-chosen shorts, TZA, DIA, whatever seems best at the time.  For me, it works.  I’m a successful trader.   And I don’t think it’s that unusual.   JRW seems to spend most of his time and effort on only two entities, TNA and TZA, and he does well.   I come to this site not for trades, but rather for ideas, knowledge, and the benefits of watching others and seeing how they trade.  In fact, something we don’t do here enough is to trade ideas about what we trade and how.  Phil is full of great ideas for trades and has great insight into the markets, but we cannot all trade like Phil, nor should we.  We have to learn ourselves, learn what works for us, then go do it.  

  182. rj_jarboe

    Phil,
    I was running my screener tonight and want to see what you think.
    AFL – they have gone from just over $56 in April to $42.49 today. They have a Market Cap of 19.95B with Revenue of 18.5B. Qtrly Earnings growth of 11.8%. Dividend of 2.6%.
    Jan 12 $40 puts and calls can be sold for $20.10, that’s Net $22.39/31.20 with a 90% gain if called plus the dividend.

  183. pstas

    AFLAC- here is a snippet from the S&P report:
    May 25, 2010
    01:03 pm ET … S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF
    AFLAC (AFL 40.98***): Shares of AFL have been under pressure, we think mainly
    on exposure to sovereign and bank debt in Portugal, Ireland, Greece and Spain,
    which totals $4.2B. But, we believe AFL’s strong capital ratios in both the U.S. and
    Japan will make future investment losses and credit downgrades manageable.
    We also think AFL has some options to reduce investment exposure to Europe.
    However, we expect European financial concerns to keep AFL’s valuation
    depressed versus historical levels over the near term.We reduce our target price
    by $7 to $45, 2.1X our ’10 book value estimate.

    I think the high put values may reflect this uncertainty. A quick read on the fundamentals looks good. I like the record of increasing the dividend for 20+ yrs. I don’t follow insurance cos. so don;t know if standard cash flow analysis applies. This one looks good – would be most interested in Phil’s./ others opinions.
    RJ- I believe it is an 81% gain with a call away @ $40.

  184. cwan120

    Hi, shadow,
    I was just following Eric’s comments.  He called his play "condor".  I just followed along.
    Salvum1 just answered your question.  I think his answer was GREAT!  He not only explained what it is, but also pointed out how to trade!

  185. cwan120

    Hi, salvum1,
    Great explanation on iron condor.  One question: How do you find standard deviation on a particular stock?  I know I can download the daily prices from web sites like yahoo into Excel and compute it.  But it would be nice if I can just get it from some web site and save the time.
    Thanks!

  186. cwan120

    Hi, shadow,
    Forget ETrade.  Go for http://www.thinkorswim.com.  That’s the favorite broker on this board.  We abbreviate it to TOS.  Email scott@thinkorswim.com and tell him you are a member of PSW.  He should be able to give you discounts on commissions.

  187. cwan120

    Damn.  The link got screwed up.  Just type www dot thinkorswim dot com into your browser.

  188. kustomz

    Nancy Cheng, Taipei; Steve Shen, DIGITIMES [Tuesday 15 June 2010]

    Demand for IC products from the PC and motherboard sectors have slowed down, according to sources at IC distributors, who expressed caution about the third quarter.
    Although current order visibility in general has reached July, the momentum is not strong enough, the sources noted.
    Shipments of IC parts to the motherboard sector will be weak in June due to a relatively high level of inventory at motherboard makers, said the sources, indicating that the trend may last into the third quarter.
    The peak-season effects will not be strong in the third quarter due to weak market conditions in Europe and the US, chairman of WT Microelectronics, has warned.

    ======================================================
    Monica Chen, Taipei; Joseph Tsai, DIGITIMES [Tuesday 15 June 2010]

    AMD is seeing the supply of its six-core processors fall short due to its caution about placing orders, according to sources from motherboard makers.
    Due to their advantage over pricing, inquiries in retail channels for AMD’s six-core processors was strong in the second quarter and boosted demand for the company’s 800-series motherboards, the sources noted.
    But, the shortage of six-core processor has affected the sales of 800-series motherboards and has also impacted the supply schedule of its quad-core CPUs including the Phenom II 960T, the sources pointed out.
    Meanwhile, AMD has also adjusted its planned southbridge chips. The company was originally planning to pair its 890FX, 880G and 870 northbridge chips with SB850/SB810 southbridges, but has postponed the launch of the SB810 and will leave the SB850 with higher price to prop up the market, the sources added.
    =========================================================================
    Nuying Huang, Taipei; Willie Teng, DIGITIMES [Tuesday 15 June 2010]

    Germany’s lower house Bundestag is expected to send the same FIT (feed-in-tariff) rate reduction proposal, which ranges from 11% for former industrial sites to 16% for rooftop installations, back to the upper house Bundesrat for a second vote at the end of July or August, according to industry sources.
    Earlier in June, the upper house rejected the same proposal planned for July 1, and sent it back to the parliament reconciliation committee. Officially, such FIT adjustments do not require the upper house’s approval.
    Though delayed, the odds of the original subsidy cut, with the support of German Chancellor Angela Merkel, passing a second vote have greatly increased, said the sources. Germany’s solar market will likely take a hit this summer as wafer, cell and module makers have yet to lower price significantly to make up the cost differences, the sources added.
    During the recent Intersolar exhibition, several Asian solar companies indicated that they have stepped up their efforts in other regions, and despite the FIT reduction in Germany, will likely hold prices steady in the third quarter due to strong orders and possible losses from the fluctuating euro.
    Without a definitive direction on subsidization and solar module prices, many installation projects in Germany are currently being held up since it is impossible to calculate investment returns at the moment. Some German banks have reportedly frozen financing for solar system projects scheduled after July.
    Most industry observers believe the demand slip in Germany will last at most for one quarter since another round of FIT cuts in early 2011 should stimulate demand again in the fourth quarter of 2010.
     

  189. Phil

    Estonia/Pahurik – Very cool!  I hear you guys had a very rough year last year, economically.  Is next year considered a big deal (20 years independent)?  By the way, this is what most Americans know about your country:

    Message/Shadow – Patience is key.  Trading is a profession and needs to be treated like one.  Too many people think you just jump on in and play which is about as silly as jumping on in and performing surgery or jumping on in and defending someone in a murder trial or even jumping on in and playing poker with all of your money when you don’t know the game or thinking you have a horse-racing system your first day at the track.  As an old Foxpro programmer, I totally agree with you re. modern systems but I had to make a choice when I ran my last company and I chose to accept that I was never going to be able to run a company and keep up with new languages so the entire HTML/.net thing totally passed me by and now I rely on PROFESSIONALS to do that job for me.  I know just enough programming to be dangerous (and annoying to them!) but I also know enough to know that is not my thing.  Be aware of what you are good at and be aware of your limitations.  Also, get off of ETrade (see Cwan’s comment) - they are the worst!  Set up at least a small account on TOS just for comparison sake and I bet you’ll realize that a large percent of your timing/execution losses are their fault…

    Texting/Shadow – LOL! 

    Crazy/Yip – Well we know who to blame if things fall apart!  8-)

    Nice job Salvum – You are better at explaining those than I am…

    Excellent point on day trading Iflan!

    AFL/RJ – It’s a good trade and don’t let S&P put you off it.  We LIKE stocks that do nothing when we’re doing buy/writes.  A stock that flatlines for 20 years is the best thing in the world for the buy/write strategy.  Growth is fine, flat is fine – as long as they don’t go down we are happy, happy campers.

    AFL/Pstas – Thanks on the report.  I like AFL at this price ($42.50) as a long-term hold.  When I was doing the top 20 they were at $45 and I didn’t think they were coming down so I passed over them but they were very close to making the cut…

    IC/Kustomz – Worth keeping an eye on. 

    Futures have been a wild ride.  We were recovering nicely until CNBC had El-Arian (Pimco) and Roubini on back to back, timed for the EU lunch hours and they both (surprise!) had gloomy things to say about stocks

  190. jomptien

    I am always amazed by the smart guys on here and Phils feel for the mkts. I have a question for anyone. thanks
    I saw a bullish hedged play on a stock in Schaeffers blog on FSYS awhile back: buying the June 25 puts for 1.10 and selling the June 26 puts for 1.55. If I was bullish with a hedge I would do a BCS and sell puts. My question is what would be the difference between them, or is just your preference? I don’t recall Phil ever going bullish by buying and selling puts.

  191. rj_jarboe

    pstas
    Thanks for your input!

  192. Pharmboy

    Jomp – on the bullish P spread, depends on where the stock is, the volatility, and risk/reward.  Similar to the condors and iron condors above.

  193. jomptien

    Pharm, Thanks, I was not familiar with that one.

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