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Which Way Wednesday – So Long Summers!

Larry Summers is out!

Hopefully this portends a shake-up of the Administration’s economic policy but that will very much depend on who is appointed to replace him.  It is, once again, the economy stupid and Larry’s stint as Director of the National Economics Council has given us far too much of the same at a time where we really needed — change.  As Barry Rhitholtz points out:

He was one of the chief architects of the crisis. In addition to believing all of the usual foolishness about efficient markets, he bought into the radical deregulation arguments pushed by the free market absolutists.

Summers was Treasury Secretary when Glass Steagall was repealed. Instead of speaking out against the irresponsible Gramm–Leach–Bliley Act (Financial Services Modernization Act of 1999), he actively supported it. Instead of explaining to the public how Glass Steagall prevented Wall Street crises from spilling over into Main Street for 65 years, he rolled over for Citibank.  The repeal of Glass Steagall was not a cause of the crisis, but it allowed the net damage to be far, far worse than it would have otherwise been. And it was emblematic of the corporate takeover of the legislative process. For a fee (campaign donation) you could write your own regulations. How could that ever go wrong?

Even more ruinously, Summers oversaw the passage of Commodities Futures Modernization Act of 2000 that exempted financial derivatives from all regulatory oversight. The CFMA made the AIG collapse not only possible, but likely. It helped to set up both Lehman and Bear Stearns. CFMA allowed AIG FP to write over $3 trillion in derivatives, reserving precisely zero dollars in case an underwritten derivative needed to be paid.

Conservatives should not be celebrating the departure of Larry Summers, he was a guy who "played ball" with Big Business and it is very likely that his replacement will have a less friendly stance towards our Corporate Citizens, who made 60% of the income in this country in 2009 but paid just 6% of the taxes ($138Bn). 

Larry has to get out of town before the Administration goes after his meal-ticket and begins asking Big Business to pay their fair share, an issue that is very likely to shape the next election cycle.  The chart on the left is a measure of taxes paid in relation to GDP and you’ll notice that corporations now pay 75% less than they did in the 50s.  Income taxes are now 6 times the level of corporate taxes and, much worse for the middle class, Social Insurance has gone from 2% to 6%, tripling the tax for those making less than $106,000 in order to allow Corporations who make Billions to pay 75% LESS!  Clearly something has to be done and clearly Summers is NOT the guy to do it…

So yesterday’s Autumnal Equinox marked the end of Summers and now we have to look ahead to the fall and the possible end of the summer rally – such as it is.  We flipped a bit more bearish on what was a fairly bullish Fed statement (if you like easy money policies), picking up directional shorts on DIA and IWM in my 2:50 Alert to Members as the post-Fed run-up seemed downright silly and we wanted to lock in those unexpected bullish profits.  

I had earlier in the day put up a chart series, warning Members that the last two Fed meetings had also formed violent spikes on the news that were both followed by 5% drops in the following 10 days so we choose to error on the side of caution on this one, especially coming off our 10% gains in September

We topped out at 10,833 and fell all the way back to 10,739 at 3:38 and pulled a very lame bounce into the close that wasn’t enough to impress us.  We had already gone naked on our Mattress Plays, simply following our usual pattern on the 5% Rule, and we already made one nice run with the DIA $105 puts in the morning so reloading them at .89 was a no-brainer.  The IWM 9/30 $67 puts were a little more aggressive at $1.10 but they were up over 30% already at the close and provide excellent overnight protection into today’s uncertainty.   

Despite the BOJ’s best efforts to the contrary, the Fed’s threat of additional Dollar drops put our 3am trade back in business for the second day in a row as the Yen rose from 85 to 84.5 against the dollar this morning and down from 85.8 on Monday.  As I said to Members in yesterday’s chat: "The Fed knows the BOJ will support 85 Yen to the Dollar no matter what, so they may take advantage and do some QE that, ultimately, Japan will pay for as they will probably buy whatever the Fed/Treasury jams down their throats between now and XMas."  There was talk of additional BOJ intervention that got the Nikkei off the floor this morning but talk is no longer enough to actually boost the Yen so we’ll see what line gets defended in today’s trading.

The weak dollar will mask a weak market this morning and that will support commodities and the commodity pushers in early trading but watch that dollar, which will likely get bought up by the BOJ at some point and that will send oil and copper down and those strong sectors will pull back and likely lead us back down to test our 4% levels at Dow 10,608, S&P 1,112, Nas 2,288, NYSE 7,072 and Russell 660.  Failing 3 of 5 of those will turn us bearish for the moment.  The 10:30 oil inventory report will be a dangerous spot this morning.  

Of course Japan has bigger fish to fry as tensions with China are heating up over Japan’s continued detention (ie capture) of a Chinese "fishing boat" Captain.

China’s Premier Wen Jiabao threatened more retaliatory action unless Japan “immediately and unconditionally” releases the fishing captain detained two weeks ago in disputed waters, Xinhua News Agency said.  Japan is China’s second-biggest trading partner after the U.S., with two-way commerce in the first seven months of the year rising 25 percent from the same period in 2009 to $65.2 billion, Chinese customs data show. China is Japan’s largest trading partner, buying 10.2 trillion yen ($121 billion) of the nation’s goods and services last year. A sanctions war could knock both economies down and threaten a global sell-off led by Asia – something else to worry about. 

The Hang Seng plunged 200 points in the last hour, giving up all of the day’s gains and the Shanghai was also flat while the Nikkei lost 0.4% for the day.  Even India finally had an off day, dropping 60 points (0.3%) to 19,941.  Europe is down about half a point ahead of the US open but off its lows as Spanish Prime Minister, Zapatero declares that the European debt crisis is OVER!  This is, of course great news and, had we known that one of the countries that were deeply in debt could end the crisis by just saying it was over, I’m sure someone would have done it sooner – next time we’ll know better!  

The BOE didn’t quite agree with Mr Zapatero as they voted 8 to 1 to keep rates on hold and also saw a high probability that they would have to add further stimulus to keep the UK economy growing.  Iceland’s Central Bank went as far as to cut rates as Euro-Zone Industrial Orders posted their sharpest monthly drop in 19 months, led by a slump in orders for capital goods.

Many good reasons to be wary on Wednesday and we expect a 2% pullback off the 10% September run anyway so bear is the word until we see how our levels hold up – hopefully we see some volume so we get a real test but let’s remember to be careful out there – it’s going to be a wild ride!  


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  1. hanna5

    ADBE is down $7 to 25.95 now in the premarket. Did I miss something? Were earnings/guidance really this terrible? Seems like a scary over-reaction. Anyone here why the news is being taken so hard? They werent super expensive anyways…

  2. craigzooka

    Brooklyn,
    1.  Yes, I bought the 70p back for .71 
    2. Last night before I went to sleep I noticed the bid ask on the 70 PUT was $.70 x $1.05.  So before I went to sleep I put in a buy order for $.71.  It got filled this morning at 6:30 ish.
    3.  The 70 PUT is out of the money, so it would expire worthless.  I am not entirely certain what happens if you let a futures option expire in the money.  I think it like you bought a futures contract at the $70.00 mark.  NOTE, I will never let this happen.  That would be way to much of a headache.  I will either roll my options or close them out. 
     
    craigzooka /cl
    a few questions:
    1. assume you bought the 70p back for .71?
    2. Did you offer to buy by just leaving the buy as GTC when placed?
    3. What happens if you are holding at expiration?

  3. brooklyn

    craigzooka /cl -
    based on where the 70p is right now, would you buy or are you selling premium only?

  4. craigzooka

    I am selling premium only.  This give me a way out should the trade go against me.  I can roll and double down etc.  If I bought the PUT I would just have to take my loss :( .   If you plan on doing this, I suggest you wait till close to the end of the day,  then look at the open interest for the options.  Choose a strike that has a large open interest.  Then sell one before the close.  After the close put in your buy order and make sure you have the highest bid. 

  5. reza99

    Phil-
    Bought DBA Jan 25 C awhile ago, down 41% now. DBA is looking toppy! How can I minimize losses with minimum cost till expiration? It’s TD IRA account which only allows put spreads and naked puts.

  6. JRW III

    Good morning,

     

    IWM 64.42, 65.20, 65.65, 66.01, 66.36, 66.62, 67.09, 67.87,and 70.55

  7. augrusot

    Buy calls in ADBE? sell puts?

  8. brooklyn

    craigzooka
    So is where the option is trading within its daily trading range largely irrelevent – and you are mostly relying on the pool of aftermarket buyers being so thin that you can get a great buy?

  9. willsons

    JRW     Thanks for posting lines each day.  I use pivotpoint.com but  your lines work better. 

  10. exec

    JR,
     
    What R U thinking???  Long or Short

  11. Maya1

    Craigzooka
    I am with fidelity and they don’t allowmoptions trading after regular market hours.
    What broker do you use?

  12. bobhu

    Bought some ADBE at 25.91 premarket, I think it’s oversold.

  13. doubled

    Phil,
    Can you explain  the "20 long and short calls’ part of your post to Gel1 yesterday?  What exactly are these?

    GDXU/Get – You are very bullish setting the $34 puts. I prefer to have a discount on the put-to price,
    your play is net about $34, which is higher than it is now. If you are that buLlish, there’s no need to
    spend money to be in the money on the bull call spread and you could go for the Feb $33/38 bull call
    spread at $1.75 and completely offset that with the sale of the Feb $31 puts. That drops your put-to
    price 10% and Lowers your timeframe and the margin without the upside overhang, which could really
    screw you if gold goes to $1,500, like you hope it wiLl. If you wnat to make the $9 spread from the first
    play, you can always do 20 long and short calls and sell 10 May $32 puts for $3.20 which is net .15 on
    the 2x $5 spreads and your put-to is just net $32.30 on 1,000 shares.

  14. Maya1

    Phil,
    Tsk tsk tsk, but I sold AAPL Jan 300 covered calls for $9 a couple of weeks ago…you know the rest… Now $20.
    What do you think of my “options” now?

  15. JRW III

    wilsons

    You are welcome !!

     

    exec

    David Fry always says the first direction is usually wrong; he waits out the first 15 minutes. I have a trend line now at 66.90 so I may play off that.  but for the day I would think lower, FWIW  8-)

  16. Maya1

    Phil,/ aapl
    Sorry, aapl Jan $300c’s…. Sold for $6, now $14

  17. nicha

    Pharm- I followed you on the JNJ October 60 calls. Continue to hold? Thank you.

  18. craigzooka

    Brooklyn,  Absolutely.  Here is the logic.  The open interest in the 70 PUT is 16,000.  At night there is often no bid.  So if I owned a 70 PUT I couldnt get rid of it even if I wanted to.  Probability says that of the 16,000 contracts out there, some one has got to want to get rid of it over night.  Its simply supply and demand,  At night, the supply , 16,000, is way higher than the demand which was 0.  So if I come in on the demand side and I am the only one there, they must be willing to pay me and extra $50 or $100 to dump their contract.

  19. Phil

    Good morning!

    AAPL getting rammed up and pushing the Nas green so forget the bear side this morning as it’s pretty obvious "THEY" do not want to market going lower.  Volume is low so they can push it where they want to and I’m sure funds are thrilled to sit on the sidelines and let Lloyd’s bots take us for a ride.  

    We do have a little room before we are EXTREMELY overbought – but just a little:

    Levels are same old, same old but if we hold our 5% lines today, it will be time to look at 7.5% and maybe even 10% tomorrow – crazy as it seems.  This morning’s action makes it seem very likely that we are being jammed as high as possible through the end of September – it’s what happens after that that gets interesting:

    • Up 5%: Dow 10,710, S&P 1,123, Nas 2,310, NYSE 7,140 and Russell 666 
    • Up 4%: Dow 10,608, S&P 1,112, Nas 2,288, NYSE 7,072 and Russell 660
    • Up 2.5% (MUST hold): Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650

    The play of the day is definitely ADBE, whose sell-off to $26 is just ridiculous.  The Jan $26 puts can be sold for $2.20 so I like that as a net $24 entry.  That can be paired with the April $24/28 bull call spread at $2.05, which is pretty nice all by itself as it has almost 100% upside as is

    We have oil inventory at 10:30 but no other data to move us today, if oil can hold $75 it will be a bit bullish and copper is $3.55, also bullish but up with gold ($1,296) on the weak dollar as expected.  As I said this morning, a weak dollar early in the day will mask a weak market and that’s just what’s happening along with Nasdaq manipulation, using the usual suspects to boost that index. 

    I like the same IWM and DIA puts as yesterday as we test 10,800 on the Dow – I don’t think it’s going to last.   Tomorrow we lose the usual 450,000 jobs for the week and we have Existing Home Sales at 10, which can now disappoinit as Building Permits were a big upside surprise yesterday.  We also get Leading Economic Indicators at 10 but they are expected up just 0.1% and I doubt they go negative.  Friday we have Durable Goods, which should be down 2% and New Home Sales at 10, also now set up to disappoint even the very low 291,000 expected. 

    So caution, caution, caution PLEASE!

  20. acobra65

    Phil/Spain
    "European debt crisis is OVER"… What is Sppain going to do with their 1.5 million units of housing that is unfinished, unsold and unwanted which is equivilent to almost the population of Barcelona… it is roughly equivilent to 13% of Spain’s population if you populated each unit with a family of four….. ??

  21. tuscadog

    Phil / Gold    Unfortunately I didn’t buy gold.  Even though the momentum seems strong, I can’t find value in miners which are trading at 20 to 40 times analysts estimates of 2011 earnings.  Adobe is now at 12x 2011 and SKX 6x    What am I missing here?

  22. nicha

    craigzooka- ur logic makes sense :) . Next time will you please post your trade. I wud like to try it out. Thanks.

  23. Pharmboy

    ABX Tusc is the miner of choice.  They have the best balance sheet of all the miners.

     

    JNJ/nich – ummm, take the profits and RUN!

  24. Pharmboy

    TBT, using OPTs method, is a nice trend UP.  Volume was strong yesterday, and being bought today as well. 

  25. rainman

    acrobra65 / spain — maybe we can get a group rate on a PSW community of homes over there 

  26. datuu

    Phil
    your thoughts on IBM and WY
    thanks

  27. JRW III

    Phil,

    Where did you get thet chart for your 9:56 post ?

  28. 1020

    JRW – I too would like to thank you for your daily numbers – We be playing for a "Chalet in Calais"  :)

  29. Pharmboy

    Wow, ARNA still being made for pulp, and VVUS is being bought into for what?  November 7/8 P spread can be bought for 60c, selling Oct 7 Ps for 45c makes it a 15c spread. 

  30. acobra65

    rainman/Spain
    It may be possible in the near future to purchase a property in Europe at considerable discout, especially if the Euro and the Dollar go to parity……… patience is a virtue…..  living on the coast in southern Italy (Calabria) known as the Italian Riviera would be a nice peaceful existence…..

  31. rainman

    Why is AA up over 3%? Just a weak dollar? I’m not much of a currency trader but that seems extreme to me.

  32. JRW III

    Courtacy of Trader Mike, the question of the day:

    And for matt:

  33. tuscadog

    Pharm Phil / Gold    GRS seems to have the lowest fwd p/e at 13x   ABX is next lowest at 15x  Some of the others seem ridiculously expensive and are probably a gamble on $2000 gold?

  34. kustomz

    Fed.POMO 11am
    http://www.newyorkfed.org/markets/pomo/display/index.cfm

  35. yaali110

     Phil,
    Are you still in your OIH 109 put play from yesterday. I assume you are looking at a pullback 10:30 am when the Oil inventiry numbers come out. 

  36. diamond

    JRW III - Phil’s 9:56 chart: Bespoke Investment Group

     

  37. brooklyn

    craigzooka
    thanks

  38. JRW III

    And for Phil:

  39. JRW III

    diamond

    Thanks !!

  40. Pharmboy

    Let’s put INO on a watch list for future buy in (thx gel for the heads up).  They popped a bit too much for me, and are in the DNA vaccine space.  They are located right next to MRK in PA.

  41. Phil

    Another nice ADBE play is the Nov $22.50/25 bull call spread at $1.85 with 35% upside in 8 weeks if ADBE can hold $25 and a b/e at $24.35, which is another 6% down from here

    DBA/Reza – I don’t understand how you lost money with DBA unless you bought it last year.  Lesson number one is NEVER buy premium!  Sure we do once in a while but we KNOW it’s a bad thing to do and we take those profits quickly because, over time, buying premium is silly.  Your Jan $25s are $3 and I’d roll out to the 2012 $27s ($3.50) and sell the Nov $27s for $1.20, which puts .70 in your pocket and you then have a whole year to sell calls (or roll this one into an eventual vertical).  Your goal is to sell at least .30 a month in premium to pay for your long calls and whatever value remains is your profit (from this point).  

    20 Long and Short/DD – That was the amount of the long and short calls in his bull call spread.  The other leg was a put sale so I was using "long and short calls" to differentiate which postion I was talking about. 

    AAPL/Maya – They’re not at $300 are they?  Your best option is to learn that just because some idiot is willing to bid $14 for a call that’s $14 out of the money doesn’t mean you have to take a loss.  That would be like someone offering your neighbor $100,000 for their house and you suddenly feeling compelled to take it.  The Jan $300 call is only worth $14 when AAPL finished Jan expirations at $314 and is only worth $9 at $309.  So let’s take a look at the current calls that are $9 in the money – the Oct $280s, which are $6.50 in the money at $11.75 so let’s add $2.50 and call it $14.25.  So if this were Dec 22nd instead of Oct 22nd and AAPL was at $309, your caller would be at $14.25, no worse than you are now after a $23 gain (almost 10%).  What can you roll a $14.25 caller to?  How about the Apr $320s – that’s $40 higher (another 15%) on a 6-month roll.  So the real question is, do you think AAPL will be higher than $349 next June?  If so, THEN you need to do something about the trade but, if not, then just let it ride.  You can always take a momentum play like the Oct $300s (now $2.73) if AAPL pops $290 as a momentum play to stop the upside bleeding but make sure you are comfortable day-trading with tight stops or you will be just another sucker overpaying for premium on a move up. 

    Gold hit $1,297!  Gel must be having ore-gasms this morning - congrats Gel!

    Spain/Acobra – You do realize I was being sarcastic re. Spain’s statement, right?  I think it’s far from "over" – stable at best and the BOE is right to buck the EU and call for stimulus.  Too bad our leaders don’t have the same ability to lead…

    Group rate/Rain – Great idea!

    IBM/Datuu – Should be a long-term hold in any portfolio but not at $132.  They are a total buy on the dip play.  With luck, you may see $120 again.   WY  is also a good one at $12 but a bit much at $15.50 and only this high on low dollar and commodity push, which is unlikely to last with no job growth. 

    Chart/JRW – Bespoke.  They are on SAlpha and I highly recommend following them as they put up lots of useful things like that. 

    VVUS/Pharm – Didn’t they get some really good study results? 

    AA/Rain – They are doing some JV with Saudi Arabia that should give them some long-term growth.  Also, they were way too low, we played them from $10 and I’m expecting $12 at least. 

    Trader Mike/JRW – He’s back?  He was gone for a long time.  I like that guy.

    Woops, here we go – Oil inventories a net build of 2.8Mb, not going to hold $75 so game on for the bears (and our OIH play!).

    EIA Petroleum Inventories: Crude +0.9M vs. consensus of -1.7M. Gasoline +1.6M vs. consensus of -0.4M. Distillates +0.3M vs. consensus of -0.2M. Futures +0.2% to $75.11

  42. chyer

     Buying USO here trying

  43. chyer

     ADBE I know I am late but WHOA!!! Market is really brutal on misses.

  44. bobhu

    Phil,
     
    "Another nice ADBE play is the Nov $22.50/25 bull call spread at $1.85 with 35% upside in 8 weeks if ADBE can hold $25 and a b/e at $24.35, which is another 6% down from here."
     
    Why not just sell Nov. 25 Put for 0.92 if we think ADBE will hold 25 at Nov?  We got better entry at 24.08 even it’s not.

  45. acobra65

    Phil/Spain
    Right…………. I am commenting on the prime minister’s statement not yours….

  46. craigzooka

    I will post the trades I am looking at tonight.

  47. Phil

    Gold/Tusca – All overpriced now.  ABX is best operator by a mile, I’d rather pay for that than just p/e.  HMY is my 2nd favorite but they are way up now.  NAK is just breaking out and still pretty cheap for $1,250 gold at $8.25 but a very long-term play.  I certainly like NAK as a buy/write, selling May $7.50 puts and calls for $2.50 for net $5.75/6.63 as a first entry.  Upside is a nice 30% in 8 months if called away but likely you can roll and add and establish a long-term position in a huge gold reserve.

    OIH/Yaali – Sure, that was a bet on a build in oil today, which we got.  If the market holds 5% levels today it’s not worth keeping though. 

    Dollar/JRW – Very sad, isn’t it.  Make me wonder who in their right mind buys bonds?

    At the open: Dow -0.03% to 10757. S&P -0.11% to 1139. Nasdaq -0.34% to 2341.
    Treasurys: 30-year +0.62%. 10-yr +0.21%. 5-yr +0.02%.
    Commodities: Crude +0.87% to $75.62. Gold +1.72% to $1296.20.
    Currencies: Euro +1.15% vs. dollar. Yen +0.71%. Pound +0.27%.

    On the hour: Dow +0.2%. 10-yr +0.19%. Euro +1.19% vs. dollar. Crude +0.83% to $75.59. Gold +1.61% to $1294.80.

    Notable earnings after Wednesday’s close: BBBY, RHT

    MBA Mortgage Applications: -1.4% vs. -8.9% last week. Thirty-year fixed mortgage rate decreased to 4.44% from 4.47%.

    Jul. FHFA Housing Price Index: -0.5% month-on-month, vs. -1.2% (revised from -0.3%) in June. Year-on-year, prices are -3.3%.

    Euro area industrial orders fell by 2.4% M/M in July, reversing June’s gain, vs. expectations of -1.4%. Year-on-year, new orders were +11.2%, missing expectations of +16.2%. (Eurostat)

    At least Lloyd agrees with me:  Goldman says it’s still buying shares of Adobe (ADBE) despite yesterday’s earnings catastrophe, but it doesn’t seem like anyone else is – shares are now down more than 20% premarket. On last night’s earnings call, CEO Shantanu Narayen said weak Japan and educational sales contributed to Adobe’s soft guidance.

    Apple (AAPL) sits atop Goldman’s VIP list of hedge fund holdings. Rounding out the top 10: JPM, PFE, BAC, MSFT, C, ACL, GOOG, XOM, MA.

    According to Michael Arrington, Silicon Valley’s most powerful angel investors are colluding to keep valuations low and lock traditional venture capitalists out of deals. Update: VC Fred Wilson says collusion is dead.

    The number of U.S. companies at significant risk of default (rated B3 or below) drops to a two-year low, according to Moody’s. "What’s interesting is the snap back," Moody’s David Keisman said. Government liquidity initiatives are helping to improve credit quality and lessen default risk.

    Even though Wall Street rallied on the NBER’s declaration that the recession ended more than a year ago, 88% of Americans say it’s a bad time to find a quality job. Just before the recession, in Sept. 2007, 55% held this view of the job market. (Gallup)

    China Premier Wen Jiabao threatens more retaliatory action unless Japan "immediately and unconditionally" releases the trawler captain accused of deliberately colliding with a Japanese coastguard ship near disputed islands in the East China Sea. The dispute is being closely watched by other Asian countries and the U.S., who have growing concerns about China’s expanding naval power.

    Japan fires back at Beijing, saying it will "respond appropriately" after verifying China’s activities with regard to a disputed gas field in the East China Sea. (earlier)

    BOJ policy board member Ryuzo Miyao suggests the bank will continue to loosen its purse strings, saying it will take "timely and appropriate" action if downside risks to the Japanese economy materialize. Miyao also expressed deep concerns over the future of the U.S. economy.

    While the world waxes enthusiastic about China’s growing economic strength, Premier Wen Jiabao remains a skeptic, recently decrying his country’s "lack of balance, co-ordination and sustainability in economic development." Martin Wolf thinks he may be right to worry.

    Late Tuesday, Microsoft (MSFT) raised its quarterly dividend by $0.03 to $0.16, and said it would borrow up to $6B in short- and long-term debt, saying the move "reflects our commitment to returning capital to our shareholders and our confidence in the long-term growth of the company" – which it has done to the tune of $170B over the last 10 years.  Microsoft’s (MSFT) dividend raise, even as it faces a post Windows 7 growth conundrum, is a sad admission of defeat, Doug McIntyre says. " In a world in which there are a number of companies which would augment Microsoft’s current businesses, it has not found one among them that it will risk buying." MSFT -1.2% premarket.

    Shares of Deutsche Bank (DB) are being pummeled, dragging Europe markets and futures into the red, after Germany’s No.1 bank warned it would book a Q3 loss stemming from its purchase of Postbank, and from "the poorer market conditions during the summer months." The warning was part of a prospectus for DB’s €10.2B share sale to pay for the acquisition of up to 30.6% of Postbank’s outstanding shares (DB already owns 30% of Postbank). DB -9% premarket.

    Yesterday’s successful Irish bond auction? Not so.

    With Arena Pharmaceuticals (ARNA) now seemingly out of the picture, Data Explorers looks at which biotech stock is most likely to benefit from obesity cures. (VVUS, OREX, LLY)

    This is what I don’t like about JNJ, lots of sloppy things like thisA House committee probing recent massive recalls of Johnson & Johnson (JNJ +0.7%) consumer medicines wants to know if the FDA permitted the company to secretly recall potentially tainted stocks of its Motrin painkiller last year. The panel says an e-mail suggests the FDA approved a phantom recall.

    According to the WSJ, Research In Motion (RIMM) will unveil its BlackPad tablet computer at a developer conference next week. BlackPad will reportedly be released in Q4; will include a 7-inch touch screen and 1 or 2 built-in cameras; will have Bluetooth and WiFi connections; and will link to cellular networks only via a BlackBerry phone. BlackBerry chip-maker Marvell (MRVL) will supply the chips. RIMM +1% premarket. MRVL -0.5%.

    General Mills (GIS): FQ1 EPS of $0.64 beats by $0.01. Revenue of $3.53B (+1.5%) vs. $3.57B. (PR)

    Carmax (KMX): Q2 EPS of $0.48 beats by $0.08. Revenue of $2.34B (+12.8%) vs. $2.27B. (PR)

    Jefferies Group (JEF) blames an $0.08 FQ3 EPS miss of $0.23 on "painfully slow" trading volumes. "The normal seasonal slowdown was exacerbated by continued concerns over the state of the global economy." JEF -6% premarket. (PR)

  48. jthoma

    I believe for the first time in 3 weeks the POMO’s will have a tough time defending the market today!

  49. Phil

    Down 20% on this???  Adobe (ADBE): Q3 EPS of $0.54 beats by $0.05. Revenue of $990M (+42%) vs. $985M. Issues mixed guidance for Q4.

    Cintas (CTAS): Q1 EPS of $0.40 beats by $0.02. Revenue of $924M (+3.6%) vs. $915M. (PR)

    Darden Restaurants (DRI): Q1 EPS of $0.80 beats by $0.03. Revenue of $1.8B (+4,2%) in-line. Shares -1.9% AH. (PR)

    Shares of eBay (EBAY) rise after the company says it expects Q3 results near the high end of guidance provided in July, which called for revenue of $2.13B-$2.18B and EPS of $0.35-$0.37. The company also announces the departure of the President of its Marketplace unit. EBAY +1.2% AH. (PR)

    More economists react to today’s Fed (non-) move. An example: "Bernanke’s wearing yum yum yellow against a backdrop of bond sharks, but before he jumps in, we’ll likely need to see outright evidence of declining price levels, something that could – emphasis on ‘could’ – hit in early 2011 at the soonest."   The Fed left the door open for more economic stimulus measures without announcing immediate action.  

    The latest American Customer Satisfaction Index gives Apple (AAPL) its highest-ever score – 86 out of 100 – in its 2010 survey (pdf). That’s nine points higher than Hewlett-Packard (HPQ) and Dell (DELL), and driven by the iPad, which apparently is even more satisfying than the Mac.

    The physicist who has been investigating the origins of May’s "flash crash" is getting ready to release his report and promises new insights into what happened. But will it look at the "mini flash crash" which occurred six trading days earlier? Zero Hedge asks if someone attempted to create the crash a week early, and if it was merely a "grand rehearsal" for the real deal.

    U.S. Total Federal Government Outlays vs Median Household Income, 1967 through 2009

  50. kustomz

    POMO…2B today I dont believe thats going to do much

  51. dclark41

    Phil:
    On a buy write, such as AA, when do you consider rolling the calls/puts? I own the shares at $10.36 and sold the 2012 $10 puts and calls. I am not thinking about doing anything anytime soon, but what happens when we are closer to expiration and the stock hovers around $14? At that point, I would reposition both the puts and the calls upward unless something makes me not want to own the stock. Is there ever a time when you would act sooner to reposition the options based on an upward movement of the stock? Thank you.
    dclark41

  52. chyer

     DAX getting sucker punched USD is the whipping boy now. NAZZY falling fast

  53. chyer

     USO stopped out small loss

  54. yodi

    Hi Phil,
    Your comments on AAPL today is very much the same as on the 15th Sept see below. The dif is I am holding the 280 jan caller short chewing on my 9.00 credit by 5.00. Yes if something unforseen happened to AAPL this would be a good down turn. I now it is not a good time to sell more putters. 3 putters I rolled to 220 net credit 3.00 where 6.00 now down to 3.15. so another 3 dollar ro my credit. I am looking at the Jan  250 putter paying 7.70. If appl goes on like that they will be worthless as well after a month. You suggested to to buy caller OCT but I do not like to pay premium. Would the 250 putter be to risky?
    AAPL/Yodi – I’m sorry but I’m confused.  You SOLD 5 Jan $280 calls for $9.48 and SOLD 5 $175 puts for $14.49?  Then you rolled 3 of 5 of the $175 putters up to $220 and only collected $3 for that?  So that makes the basis $17.49 on the $220 puts and you’ve collected around $26 for the two sides and AAPL is at $270 and your break-even is $306 to the upside so what is the actual problem?  The $280 callers are now $14.60 but who cares what they think – those suckers paid you $26 because you can’t lose on both sides of the trade.  If you are worried, then you can fund a roll up by taking a bigger risk on the downside but why do that unless you are REALLY in trouble?    What you are saying is "I want to take on $30 more of downside risk in order to get $6 more so I can then take that $6 and spend it on premium by buying the $280 callers so that I can be the sucker buying premium instead of the guy I sold it to, who is already in a poor-looking position."  That’s not a good strategy.  What you did is correct, hedge the possible upside by selling a few more puts that will absolutely expire worthless if AAPL goes higher.  That’s cash you can use to roll up IF YOU HAVE TO.

  55. Phil

    ADBE/Bob – You can do that but I’d rather get $2 than .95.  I super-doubt you will get a shot at this entry again. 

    Miracle of miracles – PCLN down yet again! 

    More FREE MONEY:  The Fed buys $2.07B in Treasurys in its latest buyback, of $20.5B offered by dealers, as rollovers continue. Treasurys hold gains overall: the 30-year yield -0.04 to 3.75%; 10-year -0.04 to 2.53%; 5-year -0.01 to 1.29%.

    AA/Dclark – The upside on that was 30% or so, right?  In general, I’m very reluctant to do anything that may disrupt a 30% "sure thing."  The $10 puts and calls are $4.40, which is $3 of premium so no way do you want to give them a dime.  Look at all the 2013 combos you can roll to that are over $5 and their real value is just $1.40 so every day you are in better and better shape.  Even if AA is at $15, you can still roll the $5 $10 call to a 2013 or 2014 combo that’s $5 or greater and, presto, you have 50% more upside for the next cycle. 

    AAPL/Yodi – The $250 caller is not riskier as long as you are tight with stops on the mo play but that’s key.  Your break-even at $306 hasn’t changed, right so also a bit early to worry just because AAPL’s IV has increased due to the recent run.  It’s the same deal as last time but now the calls are protecting your put sale because you "owe" the Jan $280 callers $23 (although they are only worth $6 really) so that $23 is protecting your sale of the $250 puts at $7.65.  As long as you don’t mind rolling the $250 puts along to 2013 $135 puts (now $8.65), for example, why not make that sale? 

  56. yodi

    Phil,
    DIA mattress Do think we will belooking for down markets taday and tomorrow. Being naket I am selling some small amounts of 106putters any thoughts on that thks

  57. revtodd64

     I have posted two covered call trades this week for TRW and VMW.  You can view the trade details and rational by clicking on my user ID.  I redesigned the site over the weekend and also put up the September expiration results.  I would like to add about 2 or 3 more positions this week.  My watchlist is shot at the moment, with everything either breaking down or overbought.  I’ll come up with a short-list later today.

  58. Phil

    If the RUT fails 650 then almost a certaintly we fail to hold the 5% lines.

  59. gucci

    Hi Phil — at what range you do rec scalling in more hedge,  and is DIA mattress still nake right, I have not sold any put to cover yet…is it still ok  thx

  60. JRW III

    Traveling down a very nice channel in IWM from yesterday at 2:30; connect the tops and bottoms.

    I think we’re going to 650 on the Russell (652 anyway) but that will hold as per yesterday’s chart from Lloyd’s car !!

    1

  61. yodi

    RevTodd64
    Hi, I have posted yesterday some questions to possible you have a chance to look at them thanks
    yodi
    September 21st, 2010 at 2:24 pm | Permalink  
    I wonder if RevTodd has joined the board
    yodi
    September 21st, 2010 at 10:16 am | Permalink  
    RevTodd
    Following you conservitive buy/write plays, I would be pleased to know your view on your handling of the monthly plays.
    Most of the Oct plays are now showing ITM meaning that you looking for a call away of the stk should the market hold until exp. My question: do you hold the caller until you drain all premium out of the same, and roll to the next month, should you decide to hold the stk for an other round, or do you just get called away and you look for greener pasture.
    Obviously if the stk still pays a good div. it would be prudent to roll, if one feels the stk is not overpriced. Thks for your opinion

  62. datuu

    Phil--if you like IBM at $120 and WY at $13 what do you think of:
        selling IBM 2012 $125 puts for $12.90 or the 2013′s at $18.70
        selling WY 2012  $15 puts for $2.50 or the 2013′s for 3.50
    thanks

  63. kururi67

    Does anyone know when AAPL has next earnings report?

  64. kustomz

    Markets usually move around this time.. from 12:30 till 1..watching to see if they sell into or buy during the move

  65. jossietx

    Phil, I had bought the EDZ Jan 2012 $50/$70 bull call spread @6.83 and sold $35 puts @12.10 for a net credit of $5.27 as a disaster hedge a while back. Is it time to roll to a better hedge? thanks

  66. Phil

    NFLX maing new highs, AMZN continues to go up – 4-letter stocks getting lots of lovin’ as they attempt to prop up the markets but best to take it seriously as the noon volume is just 74M, about 20% low so easy to stick it to the poor bears again this afternoon but I would still want to be hedged into tomorrow’s data, although the big number is Home Sales and Leading Indicators at 10. 

    Herb Greenberg doing a good job on CNBC of explaing how ETFs are pretty much smoke and mirrors and could actually fail.

    Mattress/Yodi – So far, we are holding 5% well and the RUT is holding 650, which is key. Copper is $3.56 and only oil, at $74.20 is really signalling weakness so I’d say cover if oil recovers (assuming copper and the RUT hold up).  $285 is a good line to watch on APPL too – if they fail there then the Nas is not likely to hold it together.  SOX are already off 1.7% so big job stopping the Nas from breaking below 1%.

    Very nice updates RevTodd

    Mattress/Gucci – Ahead of tomorrow’s data, I’m for staying naked.  As to scaling in more hedge – that very much depends on how much you need it.  I guess if I had to have a rule of thumb, I’d say putting 20% of the profits (unrealized) on the way up into a hedge is prudent. 

    IBM/Datuu – Your logic is good but when I say I like them at $120, I mean then selling $120 puts for $20 for a net $100 entry.  The markets are still shakey and dangerous and I just don’t see the point of buying a stock like IBM when you can pick up a beaten-down stock like ADBE instead.  If we don’t have a sell-off and we hold our 5% lines through next week THEN I will be feeling more aggressive but, right now, there’s a very good possibility that you will be buying at the top of the range.  Patience is the hardest thing to teach an investor because there is no immediate way to demonstrate the merits.  IBM was at $122 or less 5 times since May 1st and was at $131 or higher 5 times after each dip.  Now they are at $132 and you want to argue your way into justifying a purchase rather than waiting 10 days (the average time from peak to trough) and what do you expect me to say?  WY is similar but you have to look down to the weekly chart to see that pattern and that one will take months to resolve.

    NFLX – I can’t take it anymore, I have to call it!  Nov $165 calls can be sold for $10 and NFLX is up on Blockbuster BK, which is not news at all.  So I like those naked and I like the Jan $175/165 bear put spread at $6.40 with a 50% upside

  67. pahurik

    SKX -5.5%

  68. lflantheman

    kuri/AAPL…..I haven’t seen exact date but should be very near Oct. monthly options expiration date. 

  69. snow

    AAPl / kururi67 Oct 19 – this http://briefing.com/GeneralContent/Active/Investor/TickerSearch/TickerSearchInvestor.aspx?TickerContentSearchRadio=on&SearchText=AAPL
    is a great resource, for dividends as well.

  70. kururi67

    thx snow…. gahm sa ham ni da.

  71. rainman

    Anyone track CLF?

  72. Phil

    EDZ/Jossie – That’s funny as I’ve been contemplating them as our next disaster hedge!  In your case, if you can roll down to the $35s for $2.25, that’s a good deal.  If that gets done, there’s no sense in buying the calls back but you could consider rolling them to Jan $37 calls (now $3) and plan on selling front-month calls for the rest of the year to make your $2.25 back, at least.  On the put side, not much to do with a $10 premium on them.  You can roll them to 2x the Jan $27 puts for $4 and, once those expire, roll back to whatever pays you $8 more (currently 1x the 2012 $25s) but keep in mind this is all predicated on making that main roll down to the 2012 $35s.  As I said this morning, Asia could drop any time now as India may be getting stretched, Japan has serious issues and if they sputter and we are still lame and Europe is anemic – who is China going to be selling to? 

    SKX/Pahur – Good time to re-enter.  I still like selling Nov $22 puts for $2.25 and I also like the Apr $22.50/28 bull call spread at $1.80, selling the $17.50 puts for $1.80 for a free (we hope!) $6 spread.

  73. Phil

    11:00 AM On the hour: Dow +0.03%. 10-yr +0.27%. Euro +1.09% vs. dollar. Crude +0.29% to $75.19. Gold +1.33% to $1291.20.

    12:00 PM On the hour: Dow -0.25%. 10-yr +0.37%. Euro +0.91% vs. dollar. Crude -0.63% to $74.50. Gold +1.29% to $1290.70.

    After last week’s deal to sell its student loan portfolio (STU), Fortune wonders whether Citigroup (C) is finally off the ropes. Short answer: no.

    Another problem with IBM – they may start overpaying for companiesCall options spike on Brocade (BRCD +8%), showing investors getting ready for price upside, on another round of takeover chatter. Who’s the subject of the latest storage-buy rumors? IBM (IBM).

    Dell (DELL -2.2%) has grown about 20% over the past two quarters and is on pace to bring in more than $60B in revenue this year, CEO Michael Dell says at Oracle OpenWorld. The company’s new 5-inch Streak device is set to appear at Best Buy (BBY) next month.

    If the Times shuts down (not likely) that would be a major push for me to get out of this country!  New York Times Co. (NYT -5.4%) warns of lower revenue than analysts expect – a 2-3% decline vs. a 1.2% drop – on lower advertising (print falling 5%, and digital ads increasing 14% vs. a 21% increase in Q2). Which made a timely call for John Janedis at UBS, who went against the tide yesterday by initiating coverage at Sell, based on expectations of an ad decline.

    On the other handVulture investing pioneer Randall Smith has been quietly investing millions of dollars in small and midsize newspaper chains, as well as several radio broadcasters.

    Three lunchtime reads:
    1) The recovery that statisticians see
    2) The long view of changes in China’s currency
    3) Seven tech mergers that could be next

  74. qcmike

    Phil
    On VZ  what would be a good Jan 11 spread
    Thanks

  75. kustomz

    Rates for 260,000-tonne crude tankers from West Africa to China rebounded to W52.66 on Monday, up from a 2010 low of W49.57 reached last week.
    Weak Asian demand pressured the region’s crude tanker market this month, but traders see rates improving slightly in the short-term.
    Only 83 Middle East crude cargoes were booked for Asia this month, down from last month’s 93 vessels, according to Meiwa International, a Tokyo-based shipping company.

    Rates for Long Range (LR) tankers carrying gasoline, diesel and other fuel products from the Middle East to Japan slipped to a one-month low of W136.95 on Monday from W137 last week.

    http://www.mb.com.ph/articles/278481/asia-tanker-freight-rates-rebound

  76. Phil

    Speaking of the NY Times:

    This article, Stopping a Financial Crisis, the Swedish Way, published exactly 2 years ago today, provides an answer:

    “A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?

    It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.

    But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.

    Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.

    That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.” (emphasis added)

    The result of the Swedish method? They spent 4%  of GDP ($18.3 billion in today’s dollars), to rescue their banks. That is far less than the $trillions we have spent — somewhere between 15-20% of GDP.

    Final cost to the Swedes? Less than 2% of G.D.P. (Some officials believe it was closer to zero, depending on how certain rates of return are calculated).

    In the US, the final tally is years away from being calculated — and its likely to be many times what Sweden paid in GDP % terms.

    Of all the articles that were ignored since the crisis began, this September 2008 Times piece is probably the most important.

  77. snow

    Times / Phil "If the Times shuts down (not likely) that would be a major push for me to get out of this country!" or if Sam Zell buys them – which I guess is the same thing, eh.

  78. snow

    @ kururi – good, mate – chun man ayo (means da nada, basically)

  79. JRW III

    Due for an upturn soon, if only temporary; so I’ll be scaling out of TZA on the next breach of the 8EMA on the 3 min chart !!

  80. yodi

    Phil ,
    Last week we discussed RIMM where I had sold the 55 Jan putter for 6.54 Your comment below. Thinking of beefing the putter up with the sale of a 57.5 Jan caller at 2.15. Not so sure RIMM will bypass 57.5 your thoughts pls thks
    RIMM/Yodi – I’d wait, you were on the way to having him last week and they are still making money.  If the Nas popls up and they don’t, then maybe sell some more calls and roll him to more premium but no drastic measures needed if they hold $45.  JG had a different issue because he wanted to be long-term on them.  You have a pretty good chance of a winner in Jan at the moment but watch the Nas closely.  Keep in mind you can split that putter to 2012 $52.50 calls and $40 puts so no real worries unless that starts to look bad.

  81. jossietx

    hi Phil, thanks for your input on the EDZ trade. I just want to confirm what you are saying.. So for the $50/70 bull call spread that I have, I should roll the $70 call to $35 call first and then roll $50 call to $37 call? thanks

  82. datuu

    Phil
    Thanks for your input into IBM and WY--i can definitely wait--i didn’t understand that you meant to sell puts at those prices to drive the entry lower--by the way i had already entered your first ADBE trade--
    thanks

  83. shadowfax

    Phil
    Been trying to buy the ADBE 22.50/25.00 Bull spread. I have raised my offer to $1.92 still no fill. What should, do any update on the $1.85 offer post?

  84. gel1

    Phil / Gold
    Ha, ha… Oh you must have figured it out – even "bugs" can have ore-gasms

  85. Phil

    Great article from Barry’s site:

    The Conservator’s Report on Fannie and Freddie is out.

    Fannie Mae and Freddie Mac are members of a long list of individuals and entities including Gary Condit, Tom Delay, Michael Jackson, Rod Blagojevich and JonBenet Ramsey’s parents. These are folks who were unjustly tried and convicted in the popular press essentially on the grounds that they were creepy or otherwise unsavory characters.

    As I hope to continue to argue, being creepy, a bad person, or even a usual suspect does not make one automatically guilty of any particular crime. In this case government subsidies in the housing market are a bad idea for a host of reasons and have been for years. I will testify to this with vigor and passion.

    However, that does not mean that Fannie or Freddie caused the housing bubble. Indeed, by my count they were among the biggest victims of it.

    The proper question is not: What story is consistent with my general philosophy or worldview?

    The proper questions is: What story is consistent with the facts?

    Fact One: Fannie and Freddie’s primary business of subsidizing conventional loans was not a driver of the housing the bubble.

    Indeed, conventional loans represented less than a third of all mortgage originations during the peak price acceleration years.

    image

    Fact Two: Fannie and Freddie lost market volume during the boom.

    That is, during the boom not only did the fraction of loans securitized by Fannie and Freddie fall, but the absolute number fell. At the same time the absolute number of private-label securitizations rose.

    image

    Fact Three: The major losses to Fannie and Freddie came through their expansion into guaranteeing non-traditional loans, not through their portfolio.

    That is, yes like every other financial entity Fannie and Freddie were buying subprime packages in the secondary market. However, these losses were relatively mild.

    Fact Four:The key change in the Fannie / Freddie business model was their expansion in the types of loans they willing to guarantee. In particular moving into the Alt-A and Interest-Only categories.

    As we can see these loans began to seriously underperform as the economy deteriorated. These loans were not a part of the original “crap hidden by structure” subprime business. Fannie / Freddie borrowers on had on average credit scores above 710 and equity (or down payment) of above 25%.

    Fact Five: The higher number of Alt-A and Interest Only loans combined with ultimately higher delinquency rates have meant that a plurality of losses have come from these two categories.

    These loans were vulnerable not because the borrowers were poor low-credit individuals that the government was taking pity upon but because the loan concepts were predicated on rising or at least stable housing prices.

    Fact Six: Areas with the largest collapse in home prices have accounted for most of Fannie and Freddie losses.

    Refer to the same graph above. This is further evidence that it was the collapse of the bubble and not betting on people who were poor credit risks that induced major losses at Fannie and Freddie.

    There is no one I know that understands the mortgage market better than Barry, while this is kind of an academic arguement, it is also a central Conservative kicking point used against Democratic policies so it will be interesting to see if this report gains any traction.

  86. yodi

    PS RIMM closed and cashed in already on the JAN 11 90 caller 4.00

  87. rainman

    JRW / exit — Hey bud! Easy on that exit!

  88. Maya1

    kuru/lflan
    AAPL oct options expiration is 15th
    Earnings out following Tues on oct 19

  89. JRW III

    rain

    Still waiting  8-)

  90. Phil

    CLF/Rain – Nice pickup bouncing off the 50 dma but make sure the market is going to hold first!   Long-term, they are a very nice company to have in the portfolio but much more attractive at $45, which they could easily hit if we have a nice market pullback and, if not, you can work into that entry with an artificial buy/write like the 2013 $40/55 bull call spread at $8, selling $45 puts for $9 for a $1 credit and a net entry of 1x at $44 if put to you and $16 of upside at $55 on about $12.50 of net margin (ordinary requirements).  That sounds nice but if you are patient, you can do much, much better on a pullback.

    What people need to realize about long plays like CLF here, is that you can commit to buying 100 shares for net $4,400 and you will make $1,600 if all goes well, which is 36% in 30 months - a nice rate of return on the full commitment but you don’t NEED to tie up all the money, do you?  All that is really margined is $1,250 and the other $3,150 is margin power that you can put towards other plays, like the SKX put sale, for example.  Having a 36% gain or a great entry on CLF to look forward to allows you to risk having 100 shares of SKX put to you at net $19.80 ($1,980) by selling the Nov $22 puts for $2.20 ($220).  Using your spare margin to pick up little plays like this, which return another $100 per month, brings your 30-month return to $4,600 on $4,400 committed if all goes well. 

    If all does not go well, you are only forced to buy stocks that get REALLY cheap and that means you allocate some of your cash to the cheapest entries over the course of the year and the ones that don’t get cheap, keep adding that $100 per month to your portfolio.  It seems slow and tedious but it’s actually a tremendously powerful to build an excellent porfolio over time.

    So far, we’re holding up very well.  RUT is teasing 650 but not failing.  Copper strong at $3.56, AAPL holding up, oil not so bad at $74.10 with an hour to the close but they may break down soon and give us the day’s lows as the indexes follow

  91. arbolito

    Phil: to understand the lingo clearly:
    "NFLX – I can’t take it anymore, I have to call it!  Nov $165 calls can be sold for $10 and NFLX is up on Blockbuster BK, which is not news at all.  So I like those naked and I like the Jan $175/165 bear put spread at $6.40 with a 50% upside."
    Does this mean 2 trades: 1 sell naked the  nov $165 calls and the bear put spread is buying jan 175 put and  selling jan 165 put?
    Is this correct? sorry to bother but i have a bit of a problem understanding pro lingo. Thanks

  92. hanna5

    Phil / others – The reaction to ADBE (Down 20% on this???  Adobe (ADBE): Q3 EPS of $0.54 beats by $0.05. Revenue of $990M (+42%) vs. $985M. Issues mixed guidance for Q4.) is what i find so scary about this market. A little bit of so-so news and the volume is so low and investors are so jittery that they will totally bail out of a position. Imagine what happens if we get some "event" or actualy bad news in a stock or world economy that is actually note worthy. It will be a sell-first check later scenerio.

  93. biodieselchris

     I graphed the fed overnight rate versus gold going back to 1970 for what it’s worth.
     
    Answer: WTF?

  94. magret

    Phil Any idea why Silver futures are up 1.5% plus while SLV has not moved???

  95. David Ristau
    Hey all,
     
    We have a new Overnight Trade in Bed, Bath, and Beyond. We are looking for strong earnings tomorrow morning from the company.
     
     
    Good Investing!
  96. JRW III

    All out of TZA $28.98 average (gain of $1.65); reversal confirmed on the 3 min.  They still have to get through 65.65 and 66.01, so orders pending for both directions !!

  97. flipspiceland

    Anyone who compares the United States, nearly a third of a continent with 51 widely diversified states, some with horses, buffalo and dinosaur bones in them, spread out  over 3 million sqaure miles, home to some 400,000,000 totally unrelated people, who don’t much care about one another, comparing it to some tiny country, a country that hasn’t got the population of one of our states, is basically one family, and which is 90% homogenous, ought to have their head examined.
    This country is incomparable to any other on the planet. 

  98. Pharmboy

    Gain traction – come’on Phil.  Democrats are slipping on an uphill slope!

     

    Well Japan and the Treasury are buying bonds, and the bond salesman is making a fortune!  R U? 

     

    NVS’s MS drug is approved, killing BIIB.  Give things a few days to work out and I will get involved in BIIB (and NVS – still waiting for a pullback on them, but may have to pull the trigger).

  99. gel1

    Opened a position in ACH.. I like the prospects for aluminum, going forward, and I believe the Chinese market will have the best performance compared to others..

  100. Phil

    VZ/QC – I like the potential upside of AAPL switching to them although not likely short-term.  As a dvidend payer you really want to own the stock but Jan does not offer you good protection and the stock is not at all cheap at $32.40 so I don’t find them interesting in that time-frame.  I guess if I had to pick something it would be just selling the $30 puts for .92, which is about $4 of net margin to make 20% but you need to compare that to a real play like buying the stock for $32.40 and selling the 2013 $30 puts and calls for $9.15 for net $23.25/26.63, which is an 18% discount if put to you in 2.5 years with a 29% profit if called away at $30 plust the 6.2% annual dividend of $1.95, which knocks another $5 off your basis over that time and gives you a full upside of about 55% with a 33% discount if put to you.   I’m sorry if that’s not exciting to you but it is to me! 

    Tankers/Kustomz – So it seems they are up on speculation, rather than demand…

    RIMM/Yodi – Nice play.

    Very brief spike in oil below $74 but they took it right back – not looking good for OIH puts if they manage to jam it back up.

    NFLX/Arbolito – Yes, naked sale of Nov $165 calls at $10 (still $10) and/or the bearish put spread. 

    Scary/Hanna – It’s only scary if you are going to bail out (a la March ’09) just because other people are.  If you stick to stocks that you REALLY WANT to own for the next decade and you manage your cash and hedge so you have plenty of remaining firepower even if we drop 40% then what’s scary for some is an opportunty for you.  How much do you wish now that you had been BUYBUYBUYing in March of ’09?  That’s easy to asnwer but what if we’re there on Nov 15th?   Will you be buying or joining Gel in the bomb shelter and playing tiddly winks with your bullion?  Big sell-offs are only an opportunity if you are prepared for them both menatally and from a portfolio set-up.  That’s why we focus on stocks that have built-in 20% discounts and then hedge those for another 20% drop – we won’t MAKE money on a big market drop, but we’ll be able to cash out with our portfolios intact and THEN go crazy buying things like IBM for $67.16, AAPL at $78.20, XOM at $53.81, AXP at $9.34 etc…  If that doesn’t happen, then we’ll reluctantly take our 20% annual profits, right? 

    Great graph of the disconnect BDC!

    Silver/Magret – Just being talked up and future move faster than the ETF.  See gold going up is "evidence" that silver should be going up – of course!  I mentioned this a few weeks ago when I said people should grab Platinum futures for catch-up.  Platinum is up 10% now which is massive on the futures while gold is up less than 4%.  The whole thing is ridiculous but there’s not much you can do about it, just like oil was completely irrational over $100 a barrel – this one will last until the funds move on to the next scam. 

    Good timing JRW! 

    Bonds/Pharm – Hey, I almost forgot about them.  I’m liking TLT Nov $103 puts for $2.13.

  101. rn273

    I want to short India – does anyone have a suggestion on the best way to do that? EDZ or something would also short the other emerging markets, and I don’t have an opinion on those.

  102. craigzooka

    For the craigzooka market maker trade today.  I am goin to be selling 1 /cl OCT 70 PUT.  Trying to buy it back overnight for a $50-100 profit.
     
    Looking at the other strikes, The 72 PUT looks has huge open interest, as well as the 80 CALL. 
     
    I got dibs on the 70 PUT :)  
     
    If you are interested try and sell the 80 CALL or the 72 PUT then put in your GTC order for overnight.

  103. nicha

    gel1- what was the book you recommended a few weeks ago? Something like ‘simple technical….’

  104. craigzooka

    I have only tried 1 contract at a time.  I have no idea how much this can scale.  I dont think it would be worth it for some of the bigger accounts here to get involved at all.  For example, I think JRW probably pays more in commisions every day that this play could possibly make.

  105. pyern

    Pharm
    NVS – GS downgraded them today to Neutral citing "exposed to a looming disaster at the hands of generic drugs."
    Not sure what to make of it. Seems like every big pharma is exposed to the same issue…

  106. bobhu

    nicha/book,
     
    Thanks to gel1, it was Technical Analysis Plain and Simple – Kahn 2010.  I am reading it.

  107. Pharmboy

    BDC – gold is being bought in the EU and ASIA as everyone is inflating.  When the EU closes, gold retreats, but tends to open up the next day.  People are afraid of it falling off a cliff, but a good head fake and I will be all in.  Who cares about the fed funds.  IF it breaks out, then it will go straight up and that chart will be exponential X2.

  108. qcmike

    Phil
    Thanks, that what i was looking for on VZ

  109. jvest

    Call me crazy: I went in on ADBE with naked Jan $24 calls financed by Jan $26 puts. Theta-neutral, unlimited upside, and it’s already up 10%. I’ll lock in the other side of the vertical later.
     
    I took the same strategy with FDX after it got crushed (per Phil’s recommendation at the time to sell the Apr $90 call "later" when it hits $7). Still waiting to make that sale, but the spread is up 15% so far.

  110. dclark41

    Phil/AA
    You mean I can stop looking at the computer, ignoring my wife, not going to work, and go and play golf!!!!!!!!! Thank you for curing me of my seemingly unstoppable desire to trade/gamble!  I now have the following buy/writes INTC, AA, CSCO, HPQ, SKX, & JBLU. (All close to the trades you recommended.) Just unsure about what is best to hedge this group? Currently unprotected to the downside. Thank you.
    dclark41

  111. jthoma

    better get that way!

  112. tchayipov

     phil/VZ
    I have a spread (options with FTR) don;’t understand why Oct 30s call have the same price as Jan30s call, don’t know how to roll

  113. qcmike

    Pharmboy
    You think the drop in BIIB is over, ?
    Think they may come back ?
     
    thanks

  114. b1ll

    LVS going crazy !!!

  115. gel1

    pstas…. from last evening…. yes, maybe a crazy plan… but I have learned to expect the unexpected.

  116. gel1

    jvest / ADBN
    Nice play… will add some free long calls.

  117. oncmed

     Phil,
    Trying to understand your logic of 11.23am. 
    You are recommending buying the Nov 22.50/25 call spread for 1.82……max profit 68c (not $2 as you stated)
    Bobhu was suggesting selling  the Nov 25 puts at 92c….max profit 92c
    I get the limited loss potential of the call strategy, but If you expect ADBE to hold $25, why not go with Bobhu’s idea.

  118. biodieselchris

    Gold – either it’s off in its own ‘irrational exuberance’ lala land or it’s coming down hard at some point in the near future, or dollar based prices are going to playing catch-up at some point in the near future. 
     
    OR, IS THIS A NEW NORMAL???? Boy I get jittery whenever I hear that ….

  119. jthoma

    NEVER DOUBT THE POWER OF BEN AND LOYD!

  120. bobhu

    oncmed/ADBE,
     
    Phil was refer to his post on 9:56am about ADBE as following:
    "The play of the day is definitely ADBE, whose sell-off to $26 is just ridiculous.  The Jan $26 puts can be sold for $2.20 so I like that as a net $24 entry.  That can be paired with the April $24/28 bull call spread at $2.05, which is pretty nice all by itself as it has almost 100% upside as is."

  121. biodieselchris

    The fed is buying treasuries, keeping the rate artificially low at the expense of expanding debt (lowering the value of the dollar). This charade lasts as long as other currencies suck worse than ours. The end game is still the same though: foreign investment. If they pull out the fed is essentially printing money to pay for expanding deficits. Is this right?

  122. Pharmboy

    BIIB/qc -  i like them for a takeover target.  mAbs are the rage for cancer and they own a ton of them.  Their cash flow is better then GENZ, all things being equal.  Looks like a writeup to me!

  123. Pharmboy

    BDC – yeah, if you know the feds are going to buy from you, billions worth of short term bonds, and you paid 95c, they buy it for $1, would you not take it?  UR not gonna lend it to some joe plumber for his business when you have a guaranteed 5%!

  124. Phil

    India/RN – IFN is the index fund for India.  I kind of like just shorting EDZ better as any problem with the BRICs can send it down as opposed to picking on India, who have been very strong since May.    In either case, I’m just not there yet as I see no particular reason to short the BRICs although the warning signs are mounting. 

    Oil/Craig – Keep in mind we get nat gas tomorrow morning and that report tends to knock oil down a bit. 

    ADBE/Jvest – Not crazy at all.  Patiently buying good stocks on sale is how Buffett got rich. 

    Hedge/DClark – Hey that’s great!  Nothing makes me happier than spreading the word and turning people back into investors who get to have enjoyable AND profitable lives!  Your mix is tech heavy so you need to guard against a Nas crash and that makes the dreaded (if you’ve been playing them lately) SQQQ hedges or QID hedges your best bet.  QID is nice an mellow at $15.03 and you can pick up the Apr $13/17 bull call spread at $1.35 and sell the $13 puts for $1.18 for net .17 on the $4 spread that’s already $2.03 in the money.  Since QID is "just" a 2x mover, the Nas would have to climb 6.6% to push QID down to $13 and that’s 2,483 so say 2,500, which does seem high.  That would be about 51 on the Qs, now 48.55 so the simple way to cover a move up is just to take a mo play on the Qs over $49 with something like the Oct $47s, which have just .50 in premium at $2.05.

    VZ/Tcha – Welcome to the world of a normal VIX.  Once you are in the money on a quiet stock, there’s barely and premium difference from month to month.  I’m not understanding what you are rolling though – I take it you sold the puts to cover the stock?  In that case, I’d roll to the Apr $32 calls ($1.85) and the Apr $30 puts ($1.60) for net .85 and that pushes your call-away up $2 and takes out the FTR obligation.  You can also just roll them up to the straight 2012 $30 calls at $3.60 for .70 with no puts and you gain $2 in position for another year of dividends.

    LVS/B1 – I don’t see a reason for it.

    ADBE/Oncmed, Bobhu – I was thinking of the naked put sale I had suggested earlier, not the spread.  I suggested the spread for those who can’t sell naked puts.  My point to Bob was that, compared to selling the Jan $26 puts for $2.20, I didn’t want to waster the opportunity selling the Nov $25 puts for .92 as the put-to is the same but it’s not likely we’ll get two swings at a net $24 entry.  Sorry about that Bob, that’s what I was thinking about at the time, I had just stuck the other one on for the poor, flexibility-challenged IRA crowd.

    Oh thanks Bob – I’m glad to see you did get what I was saying!

    Gold/BDC – It’s a bubble.  The same statement you are making now was made about housing and oil and tulips.  Just keep in mind that that doesn’t stop gold from going to $3,000, just like oil went to $147, up 47% in the last Quarter before it crashed and it ended up all the way at $35 yet "that time is was different" and 1,000 experts told me I was wrong for all of  ’07 and ’08 and, for 75% of that time – THEY WERE RIGHT! 

    Very weak stick but they’re not even really trying with this volume (112M on Dow at 2:51).

    Fakeness/BDC – All I will say about that is Zimbabwe is still functioning and actually fairly stable now so it really doesn’t matter if your money is BS, does it?  I remember when the Lira was a total joke too. 

  125. Pharmboy

    can anyone short JEF?  They missed big YoY, and they are tied to hedgefunds (who are closing shop BTW) (oh, and VVUS long/ARNA short).  Short them to hell.

  126. lionel

    Pharmboy/
    You are absolutely right about gold.
    If you plot Gold/AUD it is up 14% this year.
    Gold/USD is up 29%
    Gold peaked in AUD in June to 1500 and it is now at 1310
    My question is why dont you get Gold out of the equation and just short USD against AUD?

  127. jromeha

    Phil – I shorted copper at 3.57.50 with a stop at 3.61,on the assumption that Asia opens down and Copper falls to at least 3.55 (where I will cover). Do you agree with my premise? Are there any economic reports that could cause it to spike tonight?
    Craigzooka – Im glad you’re making money but you’re playing with fire selling puts and/or calls. Have you thought about purchasing calls or puts? That is what I did with the overnight trade you recommended.  In principle it’s the same except you dont have to worry about losing an insane amount of money if there are some shenanigans in the Mid East/Africa and the naked calls you sold hoping to make 100$ end up costing you 10K+ or  if there was something that caused oil to go way down your puts could cost you the same amount – just my 2 cents…….

  128. Phil

    01:00 PM On the hour: Dow -0.31%. 10-yr +0.37%. Euro +0.8% vs. dollar. Crude -0.89% to $74.30. Gold +1.27% to $1290.50.

    02:00 PM On the hour: Dow -0.19%. 10-yr +0.35%. Euro +0.89% vs. dollar. Crude -0.67% to $74.47. Gold +1.44% to $1292.60.

    03:00 PM On the hour: Dow -0.01%. 10-yr +0.16%. Euro +0.96% vs. dollar. Crude -0.33% to $74.72. Gold +1.4% to $1292.10.

    Bond prices are up (30-year Tsy futures +0.8%) and the dollar is sinking (-0.8% against euro, -0.8% against yen, -0.9% against Swiss franc) as conventional wisdom starts debating not whether the Fed will buy assets, but when. Debate is increasing, however, over how much bang for the megabuck the central bank can get this time around.

    If NYU professor Jeffrey Wurgler is right, investors should keep most of their money in major index components, all things equal. According to Wurgler’s research, S&P 500 membership drove a price premium in the order of 40% over less than a decade.

    The income-inequality debate in America tends to focus on CEO pay, but keep an eye on Wall Street’s slice and check out research suggesting that in 2007 the top five hedge fund managers earned more than all S&P 500 CEOs combined – and all of it taxed at the capital gains rate.

    Larry Summers and the rest of Obama’s economic team have been criticized as socialists who set out to destroy the Constitution and the free enterprise system. That’s pretty much what critics said about Franklin Roosevelt, NYT‘s Floyd Norris writes.

    President Obama receives just 30% approval in Bloomberg’s Global poll, roughly in-line with equally uninspiring French counterpart Sarkozy and Japan’s Kan. Chinese President Hu Jintao’s economic policies were viewed favorably by 58%, while Germany’s Markel garned a sky-high 70% favorability rating among investors.

    So is the so-called shadow inventory really a threat to U.S. housing markets? At 7M homes – you bet!

    Newport Beach, Calif., is the most expensive real estate market in the country – $1.83M for an average 4BR-2BA listing – and Detroit is the most affordable – $68,000 on average – according to a Coldwell Banker home listing report.

  129. Pharmboy

    never mind of JEF  Worked in TOS.

  130. b1ll

    VLO or TSO going to bounce in this area Phil?

  131. yodi

    b1ll
     
    LVS to many gamblers from PSW

  132. kinkistyle

    Rahm Emanuel might leave the White House as early as next week, sources say!
     
    http://cbs2chicago.com/local/rahm.emanuel.mayor.2.1925814.html
     
    About goddamn time.

  133. jromeha

    68K for a home in detroit!!!? You must be talking a Mansion then!

  134. rn273

    India/Phil – It is a small gamble – The Supreme Court of India is expected to make a decision on the disputed land in the town of Ayodhya (which is considered holy by Hindus and Muslims) – this was the site of riots in the early 90s. The decision is expected on Friday (Indian Time) – the decision can lead to a big fall (it can be a reason to sell). Hence the India specificity.

  135. reza99

    Phil: Yes, I bought the DBA Jan 25Cs last year before I joined. Being in the flexibility-challenged crowd, are there any put/(bull) put spread plays that ideally both makes money and hedges? or at a min. offers a cheap hedge minimizin my (potential) loss till expiration?

  136. Pharmboy

    lionel – I am no expert in that area!  I talk with a few gold/bond traders and tehy are using the market as a disposition to make a fortune in the bond market. Average people cannot play bonds, b’c it takes millions.  The yield on the 30s is going down, as will the 10s.  I am very confident of that.  Rather than play the games for LT investing, david and RevTs premise should be and are good ways to play.

    Portugal’s bond sale not so good!  What does that say?

  137. lionel

    We ahve been entrapped in the 66.65 – 66.85 range by Sir Lloyd. And They are working hard to keep us tightly packed.

  138. Pharmboy

    MS getting trounced!  Remember this graph?

  139. lionel

    Pharm/
    I am short TBt myself (OCT bear put spread 34/31 that I did put on when TBT was flying high at 34.
    My LT  target for TBT is 25.
    Ohh we may just ahve been freed…on the downside for a change! Nope and back in our paddocks.

  140. tchayipov

     Phil/vz
    I have 10x jan12 25 calls (with FTR) and short 7x Oct 30s Calls(with FTR) and short 3x Jan11 28s Calls (with FTR)
     
    please advice how to roll callers

  141. lionel

    Pharm/
    Could you update us (your followers) on CRIS and CERS?They both had a great day (up 4.5%)

  142. JRW III

    exec

    Looks like riding down that channel on TZA was the only play of the day; thanks for prodding me into it !!

  143. kinkistyle

    The Bank of Japan has given a presentation (with lots of good slides and charts) of Japan’s "Lost Decade" after their bubble with comparisons of the current state of the U.S. and the Euro-zone post Global Financial Crisis (the original PDF):
     
    http://pragcap.com/konichiwa
     
    Although the U.S. economy is very different from Japan, one can see the similarities and the possible trajectory if we do end up "rhyming" with Japan’s Lost Decade.

  144. Pharmboy

    CRIS and CERS are just holds for now.   CERS is gonna be a rock, and CRIS, well down to 18 trials from 20.  All we need is 1!

  145. 1020

    JRW – Would you mind sharing your thoughts on the process for obtaining dual citizenship, what the initial steps are and your thoughts – pro and con – on Italy and Monaco. Please, at your leisure.  Thanks

  146. flipspiceland

    Re:  Larry Summers
    "……Jon Cohn at The New Republic says liberals shouldn’t be so eager to wave goodbye. He was more liberal on the issues than his reputation: He advocated Obama to bailout both GM and Chrysler, when many were arguing to bailout just the former or neither; after initially advising Obama to focus on the economy, he ended up urging Obama to not back down on health-care reform; and he pushed for a big stimulus package. “Not only has Summers advocated more spending,” writes Cohn. “He’s become particularly enthusiastic about spending on infrastructure, because of its potential to reduce joblessness among lower-skilled, middle-aged men, who are among those hardest hit by the recession.”
    More on the Daily Beast for anyone who would agree that Summers might just be a hermaphrodite.

  147. lionel

    Pharm/
    When you say "a rock’, do you mean a solid buy?

  148. biodieselchris

     With BDI slipping again and being almost "extremely overbought" SDS calls are wise.
     
    Probably means more bond fund and TBT at 28…

  149. reza99

    phil
    On hedging by QID you stated: That would be about 51 on the Qs, now 48.55 so the simple way to cover a move up is just to take a mo play on the Qs over $49 with something like the Oct $47s, which have just .50 in premium at $2.05.
    What is a "mo play"?

  150. Phil

    Copper/Jrom – I think $3.60 is a bit toppy for copper given the uncertaintly we’re seeing but it’s a good line to draw a short play at.  The trade is a hope the dollar gets a boost from the BOJ, because there sure isn’t anything being done by this government to support the buck.  If the dollar blows 80, it could begin a swan dive and copper could get to $3.75 so do be careful. 

    VLO/B1 – I don’t like TSO at all but I always like VLO for $16.50. 

    $68K/Jrom – It was for a 4Br/2Ba, not a bad deal except for the being in Detroit part…  Seems to me that a patient person could buy up a nice strip of land out there and just hope they fix that place in the next 20 or 30 years but I guess someone could have thought that in 1980 as well…

    DBA/Reza – Yes, the spread I mentioned would be the way to go.  You are simply buying time and selling front-month calls.  You could augment it with a put sale but, with your margins, I wouldn’t do it unless they had a big drop that made put sales more attractive.  When you are behind, you need to try to make the money back, not get ahead as that requires layering risk upon risk. 

    Portugal/Pharm – And Greece was poor yesterday.  Says short TLT to me but also possibly another flight to the dollar if they start to panic in Europe.  That would drive Japan nuts as people would buy Yen as well!

    Banks/Pharm – Here’s some very bad news for the banks:

    Washington, D.C.-  As the number of homes around the country entering the foreclosure process continues to steadily rise, a recent report from the Center for Economic and Policy Research (CEPR) suggests that giving homeowners the right to rent their house at a fair market price may be one of the best ways to address the nation’s foreclosure crisis.
     
    "With roughly one-in four mortgages underwater, the loan modification plans put forth so far have done little to help homeowners facing foreclosure," said Dean Baker, Co-Director of CEPR and an author of the report.  "Right to Rent, on the other hand, would benefit millions, provide families with real housing security, and could go into effect immediately."

    The report, "The Gains from Right to Rent in 2010," analyzes the costs of renting versus owning a house in several major cities and finds that the Fair Market Rents in these metropolitan areas is often much lower than the cost of ownership.

    "Ordinarily, the gap between owning and renting is not that large," continued Baker.  "Due to the enormous run-up in house prices over the housing bubble years, however, ownership costs now vastly exceed rental costs in many of the bubble markets and homeowners in these markets have much to gain from having the opportunity to remain in a home as a renter following a foreclosure."

    The report
    documents the costs of renting and owning before and after taxes in 16 metropolitan statistical areas (MSAs) and details substantial savings gained from renting across all scenarios depicted. The various scenarios consider the costs of mortgage payments, property taxes, insurance and maintenance costs, and mortgage deductions. An appendix is included that compares ownership and rental costs across 100 MSAs as well.

    Under Right to Rent legislation, such as HR 5028, sponsored by Representatives Grijalva (AZ) and Kaptur (OH), Congress would temporarily alter foreclosure laws to let foreclosed homeowners remain in their homes as renters for a substantial period of time. This would save families from being kicked out of their homes and would go far to stop the blight of foreclosures affecting many of our communities. This plan requires no taxpayer dollars and no new bureaucracy to implement.

    The full report on homeownership and rental costs can be found here. More details on the Right to Rent plan can be found here.

  151. neverworkagain

    Jromeha: If you’re expecting China to be a catalyst for copper, just remember the Mid-Autumn festival shuts down Shanghai for today (Wednesday, earlier today), Thursday, and Friday. Hang Seng is shut tomorrow but open Friday. Then there is the one week break in China from Oct 1st to 7th for National Day. There have been rumours that the PBOC could use this time, as they have in the past, to raise interest rates. I have been debating whether to make a short play on copper into next week, but have not yet done it. With options now traded on JJC (copper ETN), I now prefer those to the /HG futures which are like riding a bucking bronco….

  152. Pharmboy

    CERS – yes, sorry for my analogy…it’s not going to ‘sink". 

  153. rn273

    OK, bought OTM Oct puts on IBN (ICICI Bank) and ATM Oct puts on INFY – short term gambles, out by Monday at most; as said before, these are based on the politics of the country rather than any fundamental/technical plays (though with the Sensex at 20K and Nifty at 6K – things are very toppy and ripe for a fall).

  154. jromeha

    Thanks for the info Neverworkagain….Hopefully Japan/Europe does something. Or maybe they fall into the jobless claims tomorrow, we’ll see.

  155. lionel

    Thanks Pharm :)

  156. nicha

    rn273- you really think the SC decision is going to bring down the mkt?

  157. reza99

    Phil: However, I am in the IRA aka "flexibility-challenged" camp which disallows selling (spread) calls as its non-margin.

  158. lionel

    Jromeha/
    Europe has PMIs Sep releases for each country tomorrow. After today s worse than expected European Industrial new orders, PMIs should give a direction to Europe in their morning. Most likely down from here eventhough Europe has closed 1% lower than the US today. But Tim Geithner is putting on a show before US open. So who knows?

  159. Pharmboy

    rn – remember, this could be a prop job for end of Q reporting!  Q4 is gonna get  fuggly….

     

    OK, so now that we are AH, and I know politics is a sore subject sometimes, I cannot fathom this speech by Newt G.  Where does he think we live?  This type of thinking disappoints me…and comparing Muslims to Nazis is horrific. 

  160. Phil

    VZ/Tcha – Well you have about $5 to roll out.  You can take $1.30 off the table and roll your 2012s to 2x the 2013 $30s and roll the callers to 20x the Jan $32s at $1.30 ($2.60) and, if you want to cover the other $2.40, you can sell 10x 2013 $25 puts for $2.85 too, which should only set you back about net $2.50 in margin on that side (and you took $1.30 off the table so not much at all). 

    BOJ/Kinki – Thanks.

    Mo/Reza -  Momentum.  A trade you take based on direction over certain line with very tight stops, just looking to make a quick 10 or 20% and get out as soon as the move slows down.   If you don’t know what it is, you probably shouldn’t be playing them as it’s for pretty advanced day-traders.

    Well that was a lame close, wasn’t it?

    At the close: Dow -0.2% to 10739. S&P -0.48% to 1134. Nasdaq -0.63% to 2335.
    Treasurys: 30-year +0.43%. 10-yr +0.1%. 5-yr -0.04%.
    Commodities: Crude -0.43% to $74.65. Gold +1.44% to $1292.60.
    Currencies: Euro +0.96% vs. dollar. Yen +0.66%. Pound +0.36%.

    Market recap: Stocks fell and investors fled to safety in reaction to the Fed’s enhanced concerns about deflation. Techs especially took it on the chin after Adobe’s dim outlook and Microsoft’s disappointingly small dividend hike. Gold hit another high before paring its gains a bit, the dollar continued to fall sharply, and Treasurys rose. NYSE decliners led advancers two to one.

    Moody’s upgrades its outlook for French banks to Stable from Negative, saying, "French banks benefit from the policies of a proactive government, the country’s social safety net and consumer protection rules that have contributed to French households being among the least indebted in Europe."

    Straight talk about Basel III from top BOE official Andrew Bailey. He says the accord will only work if banks stick to the spirit of the regulations and don’t use innovation to water down the capital requirement rules. "Financial services is an industry where arbitraging rules and regulations is habitual, even addictive," he warns. (via)

    Sears (SHLD +5.5%) shares jump, as investors like plans to partner with fast-fashion hotspot Forever 21. The Costa Mesa, Calif., Sears will introduce a 40,000-square-foot Forever 21 store-in-a-store with its own entrance, in hopes of driving traffic into Sears; if it works, the partnership would extend to other stores in the U.S.

    Apple (AAPL +1.2%) has lined up production of its CDMA iPhone to begin early in Q3, a Susquehanna analyst says. Production of the new phone is estimated at 3M units for the quarter, with total production of 20M-21M units for iPhones overall, he writes – up 5% from expectations a month ago. At 287.25, shares again are headed for a new closing high

  161. nicha

    rn273- in other news, a bunglow on half acre plot on Carmichael road in Bombay sold for 300 crores.

  162. rn273

    Sorry, it is the High Court.
    nicha – I think there is a small (non-zero) possibility. There would be an appeal to the SC, but it can be a reason to sell. Very small chance, but I wouldn’t be surprised. Further, if the commonwealth gets postponed or canceled, there would be some mess, and that could have a negative impact too (infra stocks might start the fall).  I have long positions in India, so this would also serve as a good hedge against a large fall. Finally, there is one week to go to Option Expiry in India (last thursday of the month) – and I have never seen such high premiums on puts with strikes 5% OTM. Finally, sensex at exactly 20K and nifty at exactly 6K – seems primed for profit booking.
    Pharm – yes, it could be that. I am willing to hold deep into Oct if things look strained over the weekend.

  163. rn273

    My comments are awaiting moderation – why?

  164. ben1be

    internationalliving.com/2010/02/2009-retirement-index/
    cost of living is S America.
    real quality of life  is Italy.

  165. David Ristau

    Update on BBBY if any of you were playing it:

    Company’s EPS per share at 0.70 vs. estimates of 0.63. Company beat revenue slightly. The company raised its Q3 projections and range met expectations to beat them. 

    Here is a summary:



    Bed Bath & Beyond Inc. today reported net earnings of $.70 per diluted share ($181.8 million) in the fiscal second quarter ended August 28, 2010, an increase of approximately 35% versus net earnings of$.52 per diluted share ($135.5 million) in the same quarter a year ago.  Net sales for the fiscal second quarter of 2010 were approximately $2.137 billion, an increase of approximately 11.6% from net sales of approximately $1.915 billion reported in the fiscal second quarter of 2009.  Comparable store sales in the fiscal second quarter of 2010 increased by approximately 7.4%, compared with a decrease of approximately 0.6% in last year’s fiscal second quarter.

    Also during the fiscal second quarter of 2010, the Company repurchased approximately $193 million of its common stock representing approximately 4.9 million shares.

    For the fiscal first half ended August 28, 2010, the Company reported net earnings of $1.22 per diluted share ($319.3 million), an increase of approximately 42% over net earnings of $.86 per diluted share ($222.7 million) in the corresponding period a year ago.  Net sales for the fiscal first half of 2010 were approximately $4.060 billion, an increase of approximately 12.5% from net sales of approximately $3.609 billion in the corresponding period a year ago.  Comparable store sales for the fiscal first half of 2010 increased by approximately 7.9%, compared with a decrease of approximately 1.1% in last year’s fiscal first half.

    For the fiscal third quarter of 2010, the Company is modeling net earnings per diluted share to be approximately $.61 to $.65.  For fiscal 2010, the Company is now modeling net earnings per diluted share to increase by approximately 20%, up from the previous model of approximately 15%.  

    Looks pretty solid. Stock is up 4.5% in AH!

    Good Investing!

  166. rn273

    300 million ~ $55 million. That is insane

  167. rn273

    Sorry, it is the High Court.

    nicha – I think there is a small (non-zero) possibility. There would be an appeal to the SC, but it can be a reason to sell. Very small chance, but I wouldn’t be surprised. Further, if the commonwealth gets postponed or canceled, there would be some mess, and that could have a negative impact too (infra stocks might start the fall). Finally, there is one week to go to Option Expiry in India (last thursday of the month) – and I have never seen such high premiums on puts with strikes 5% OTM. Finally, sensex at exactly 20K and nifty at exactly 6K – seems primed for profit booking.
     

  168. rn273

    I tried posting through another browser, but my large comment (response to Nicha and Pharm) is still awaiting moderation. So it might suddenly appear thrice :)

  169. exec

    JR,
     
    Glad you made a few.  I was busy all day so did ok on the TZA overnight hold in the morning then closed shop.

  170. respeja

    Great options play on Adobe..!
    Up 10% on the put and 7% on the call!
    Thanks Phil!

  171. nicha

    rn273- u play the mkt in India directly? Options, stocks? I have a couple of positions that I am stuck with since 2006 and lost huge on. Any help wud be appreciated. Thanks.

  172. rn273

    stocks, not options (not liquid enough). sure – you want to discuss here or via email?

  173. JRW III

    1020

    Either are fine. Italy is cheaper; Monaco requires a bank deposit, real estate ownership, and signing a document stating that you intend to live there at least 6 months of the year (not enforced I understand). I will not be living there unless the situation here collapses, it’s a great place to vacation though. It’s part of my diversification; that passport is just like my diamond investment, it gives me flexibility. These things need to be in place before they are needed !!

  174. pahurik

    pahrm, what you think: EW is little overreaction?

  175. Cap

    Checking in; been out of commission most of the past 2 days due to an intense business situation; looks like I will get that behind me now.   Seems like we finally got a wee bit of a selloff; but not enough.  Maybe manana.
     
    I will go read some posts now.
     
    So Long Summer(s) !  Hello Fall.  Great headline Phil.
     
    Who woulda thunk that Turbo Tax Timmy would be the last man standing on O’s economic team ? 
    That is truly nutty !

  176. brooklyn

    craigzooka -
    Did you sell an OCT70 /cl? I was working on something and missed the end of the day so I bought a contract after hours in a paper trading account.

  177. nicha

    rn273/Indian mkts- email wud be better nichania@gmail.com

  178. Phil

    Challenge/Reza - I’m confused.  You can’t sell a call against a longer call but you can sell naked puts?  That doesn’t sound right.  Please tell me exactly what you can and cannot do and I’ll see if I can figure something out. 

    Newt/Pharm -  I like that phrase "Christian Taliban" but it’s only going to polarize people more.  The intolerants in this country have no sense of perspective at all and certainly don’t see the parallels, even while they are tearing down the cultural aritfacts of others…

    Moderation/Rn – I haven’t got a clue.  The new filters are flukey but they are also cutting back 95% of the spam that’s been plaguing us internally.  Every once in a while, they seem to pick up some patten that sounds like some junk mail I guess but I can’t imagine what reading what you wrote there (rescued now).

    BBBY/David – Good one! 

    Intenational/Ben – Great index.  Looks like Yodi is right – Mexico ranks #2.

    International Living’s Top 30 Countries to Retire in 2009

    Country Real Estate Special
    Benefits
    Cost
    of Living
    Culture Health Infrastructure Safety/
    Stability
    Climate Total
    Ecuador 90 84 73 67 73 59 92 95 79
    Mexico 85 76 68 72 82 64 92 91 78
    Panama 80 86 65 67 77 73 93 79 77
    Uruguay 83 61 69 72 79 73 100 89 75
    Italy 64 63 58 100 80 67 100 87 73
    France 60 45 50 98 100 95 100 87 72
    Brazil 92 45 70 68 79 65 92 83 71
    Argentina 81 40 68 71 86 63 100 88 71
    Costa Rica 66 70 62 64 78 65 93 75 70
    Australia 65 52 55 68 90 90 100 89 70
    Malta 64 65 52 70 91 34 100 96 70
    Spain 60 49 57 75 94 71 100 87 69
    Belize 67 84 65 50 69 53 93 60 69
    Chile 70 47 68 71 76 68 100 85 68
    Nicaragua 87 68 62 60 69 38 79 75 68
    Malaysia 87 65 66 70 65 47 86 40 68
    Greece 75 49 55 68 79 60 100 79 67
    New Zealand 75 36 43 83 92 65 100 84 66
    Thailand 80 50 69 69 70 49 71 43 65
    Portugal 66 33 59 76 80 66 100 86 65
    Colombia 83 34 57 63 76 59 71 91 63
    U.S. 58 27 59 79 70 100 100 86 62
    Slovenia 72 46 42 65 76 56 100 83 62
    Honduras 68 55 66 34 69 41 79 83 62
    Dominican Republic 67 55 52 50 72 34 86 57 60
    Ireland 25 65 29 85 85 57 100 59 59
    Croatia 61 20 45 70 80 56 100 85 57
    U.K. 23 55 30 87 81 71 100 60 57
    South Africa 87 23 47 60 50 47 75 88 54

    How our Global Retirement Index is scored

  179. rn273

    nicha – just sent you an email

  180. Cap

    This market, Naz in particular, is whacked out.
    AMZN sold off to 96 on its earnings and has since rallied to 153.  Put on about 30 points since beginning of September.
    PCLN ?  NFLX ?  Crazy stuff.   NFLX up another 10-11 today ?
    BIDU at 91-92.   That’s over $900 per share in numbers we used to watch.
    If all this stuff breaks down, it will get FUGLY fast.
    AAPL, nice 47 point rally last 3 weeks as well.  At least they make real money.
     
    ADBE, another real company, punished today.  Its market cap is now lower than Priceline’s (PCLN).
    You tell me if that makes any sense.

  181. Cap

    Yeah, lets retire to Ecuador, Mexico, Panama or even Nicaragua !
    How bout Venezula ?  Iran ? Saudi Arabia ?  Syria ?  Cuba ?
     
    can’t take a list like that very seriously can ya ?
     
    I am sure many many people are saying lessee …. should I retire to Nicargua ?  or the US ?  Nicaragua ?  US ?
     
    [and i will skip the gratuitous comparison of Danny Ortega vs. our O-man ....]

  182. Cap

    Phil, your chart ate my prior post !  Wassup wit dat ?

  183. Phil

    Browser/RN – That’s very interesting.  What was the first browser? 

    ADBE/Resp – Cool!  That”s just following Rule #1: "ALWAYS sell into the intial excitement" – you get the best premiums selling into a drop or a pop. 

    Good Monaco plan, JRW.  I may be just across the Ligurian from you in Lerici…

    Chart/Cap – That’s strange.  You are right about the Nas, like a whole bubble at this point and very disturbing.  BIDU value is madness but AMZN, NFLX and PCLN are not much better.  As you said, at least AAPL shows us the money.  I think all it would take is someone like Buffett to say tech values are running away from desirablity and bu-bye…

  184. biodieselchris

     BDC’s insta-inflation plan:
     
    The government prints 330 Million Grover Cleveland’s, and mails one to every man, woman and child in the United States, via the last census count (punishing all of the retarded morons who dodge the census, hahaha).
     
    And, Boom! $330B right back into the economy at minimal cost (to print the notes and mail them). And 90% of that goes right back into the economy with no lag, unlike these stupid f****** banks that borrow trillions from the Fed and then turn around and don’t lend any of it. All this talk of ‘deflation’ disappears overnight. Give the money to the little guy, forget the big corp. Their supposed to fail, that’s the point. Who elects representatives anyways, corporations or people?
     
    I’ll be waiting patiently at my mailbox for my Grover.

  185. biodieselchris

    If the USPS goes bankrupt next … now that would be interesting for NFLX.

  186. craigzooka

     Brooklyn, I wish I could say that I did.  I put in my order to sell at $.72 but it never filled :(

  187. Pharmboy

    I find this amusing…Phil, do you have a mole?  I think they are reading UR site…regularly!

  188. Pharmboy

    BDC LOL!  I like it!

  189. jthoma

    Cap- When the time comes I go to Argentina- absolutely spectacular scenery, beautiful women not that it does much good at my age, BA has anything Madison Avenue does and yet you can’t spend $20US for dinner and they almost give the wine away!

  190. yodi

    I see most of the US citizens of this board wanting to migrate to an other place. What a crazy world. Most of the Europeans are dreaming about the US as the land of milk and honey.

    My question is what are you looking for? As a US citizen your passport will always haunt you.

    The basic question is how do I support myself in an other country? Let us say you move with your fat trading portfolio to a tax haven. Nice, what advantage do I have. The country I moved to is cheaper good weather no snow, I possible do not speak the language. I possible do not pay taxes in the new country, but having my trading account in the US, I am back to square 1.

    No matter where you are hiding as a US Citizen, uncle Sam wants it-s share. You are paying the same as you would be living in the US. Yes your cost of living expenses might be cheaper, but you might have to cut on your style of living. Many recommend Belize (English speaking) as the ideal place to live. Being a bit restless living in Cancun, I decided to visit Belize. Yes they do speak English and Spanish, I filled up once my car at 4.50 US per gallon, Hotels much more costly as in Mexico. But what shocked me most, I went 20 years back in time. My comfort of living would be highly reduced. Matter of fact I would have to resort to my can opener again as 20 years before in Mexico. No Costco, no Home depot, Internet questionable, no skype permitted, due to the monopoly of the local telephone company. Traffic in Belize city good for horses the streets with all the potholes are narrow and not to good for cars. Buying a car cost you 40% import duty. But if you like nature and  the tropical jungle it is perfect.

  191. yodi

    P.S. Cap I did not see any beautiful women as in Mexico!!! As well I am a bit old for that, but for the eye of the beholder!

  192. Jordan

    Spam filters on this board – Phil, correct me if I’m wrong, but the only way to post is to be a member.  So I can’t imagine why your programmers have the spam filter turned on for comments.  Unless you have a spammer willing to pay to spam… :)

  193. Pharmboy

    OK, I am feeling a bit better after a week of sulking and fuming….next A company, ARIA.  Data for sarcomas is due in 4Q.  They are in bed with MRK on this one, and NVS has the other one).  Need to do a vertical on it, buying 1/2 of our entry of the Feb 11 3.5/5 bull call spread for 45c, and if there is a pullback (chart wise, looks plausible), we can DD and sell the Nov 3.5 Ps for an entry of a nickle or maybe even a credit.  I will enter tomorrow.

  194. Pharmboy

    Here is the NVS link…didn’t get posted in the one above.

  195. brooklyn

    Craigzooka – I tried two. I bought OCT70p for $.53 (!) and I tried NOV 70p (last trade 1.50′s) up to $135 but never filled. Not sure how accurate the paper trade is.

  196. Cap

    JRW – 11:37 am post.
    Russell low today … 652.87
     
    You are amazing. 
    Can I get a ride in Lloyd’s car too ?  lol.

  197. rn273

    Phil – first browser was firefox, second was chrome. All comments that were under moderation were large comments (by my standards) – is it a comment size issue?

  198. 1020

    Grazie Mille! JRW and to all for some great info and insight!

  199. Cap

    Scary …
     
    From Harriet Johnson Brackey at the Sun Sentinel: Man’s home sold out from under him in foreclosure mistake (ht Clint)

    When Jason Grodensky bought his modest Fort Lauderdale home last December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

    Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a [Fannie Mae]. … Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

    Talk about a foreclosure error. I’m surprised a notice wasn’t posted on the front door. At least the property wasn’t sold to another party on the court house steps – imagine if that 3rd party had shown up with an eviction notice.

  200. kustomz

    The business climate for the semiconductor industry is deteriorating, according to The Information Network. DRAM manufacturers Samsung Electronics, Hynix Semiconductor, Elpida Memory and Micron Technology will suffer from slowing sales of electronic gadgets and PCs. The slowdown in PC sales will affect Intel and AMD, while foundries such as Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) also feel the impact, the research firm indicated.
    "Our proprietary global leading indicators had turned down. The hyper-growth already exhibited through 1H 2010 cannot be sustained because the poor macroeconomic climate could not support 50%+ semiconductor growth," noted Robert Castellano, president of The Information Network.
    http://www.digitimes.com/news/a20100922PR201.html

  201. Phil

    Good morning!

    $330Bn/BDC – That’s back to the failed Bush stimulus that did nothing but allow people to pay $140 a barrel for oil until the money ran out – no real help to the economy.  Mortgage relief would accomplish much more – too bad we already spent Trillions of Dollars bailing out the banks rather than bailing out the homes the banks were whining about.  In a way, mortgage belief is what Geithner hopes will happen if rates fall to 2% as people can refinance a $200K morgage from $1,199 a month at 6% to $739 at 2% so people get a permanent $460 a month stimulus.  That’s why they don’t care how low rates drop – they don’t think that’s a bad end game but I think it’s totally unrealistic as the banks won’t do it no matter how cheap money is - their spread is now 4.5% so unless they lend at -2.5%, they banks won’t drop rates to 2% so it’s cheaper to just give 2% loans directly to the homeowners than wait for "free market forces" to do it for you. 

    Moles/Pharm – We know Cramer has one but that guy hasn’t had an original idea in many years.  Who knows how far reaching our influence is?  Keep in mind – "With great power comes great responsibility," Spider Man’s uncle told him that…

    Spam/Jordan – I don’t know why but our Spam filter catches hundreds each day – almost all promotionals for something or other and lots of pretend comments that are just excuses to link in.  They are not members, but outside comments are allowed on delayed basis (and routinely held for confirmaition) which is why I think it’s a browser/cookie issue most likely as it seems to have something to do with people not being recognized as members but I also think there’s some kind of issue with the pattern-recognition thingy being a little too aggressive. 

    Size/RN – No matter what they tell you, size is always an issue…  I don’t know of any issue regarding length of comment, there is a link limit of like 9 or something but not text.  I had a comment of mine moderated last week and I couldn’t figure out why but, as I said, the new filter is WAY better at reducing the junk we were getting so if I have to rescue one or two comments a day vs. deleting 200 (had to reveiw every one to make sure none were accidentally member comments) than it’s worth it to me. 

    Foreclosures/Cap – The system is so overwhelmed that they don’t even bother with notices half the time.  It’s crazy what’s going on at the local levels but you have municipal clerks who used to handle one foreclosure a month now getting hundreds and there is no way they are equipped to handle them or make sure they are being handled properly.  I was consulting for NJ last year and we looked into whether we could fix the situation (I used to run a property data company that streamlined things like this) and we declined to get involved as it’s a total clusterF that’s only going to get worse and then there will be the invevitable lawsuits which suck in all parties – just not worth touching…

    Semis/Kustoms – Well yes, 50% growth can’t be sustained but who in their right mind was expecting that?  Last I heard, planned corporate spending is up 8% for the next 12 months – not exactly a catastrophe. 

  202. bps2002

    yodi,
     
    Good obsevation for those bent on relocation. I would recommend careful consideration of the total cost and risk to a family.
     
    I have travelled a lot, but I always like coming home…to the USA, Mississippi in the SE. The southern US is a great place to live and work. I don’t think I would trade it for any island, resort or chalet in the Alps. When the piper of US debt has to finally be "reconciled" no place will be out of reach of "good governance".
     
    I work with many engineering professionals from Europe and Asia. They all enjoy it here and complain about their taxes, especially in Europe.

  203. rainman

    Foreclosures and Strategic Default — My home is paid off and I’m starting to think about the possibility of selling it. No real timeframe yet but I starting thinking that since our place isn’t the typical suburbian home and may take awhile to find a buyer if priced reasonably (years) that it might make more sense to get a mortgage and default on it. Effectively selling it to the banks for a quick turn around. Thoughts?

  204. snow

    Denominators / bps2002 – "I work with many engineering professionals from Europe and Asia. They all enjoy it here and complain about their taxes, especially in Europe."
    Guys, it’s important to remember the company we keep. My daughter, a med student & emergency med tech talks about all the fat & unhealthy people out there, and how weirdly healthy I am at my age – it’s because of whom she sees, working an ambulance. My nephew, a cop, thinks most people are liars and crooks, because that’s whom he sees
    We hang out with a select group of people, folks, so don’t think they represent the thinking and opinions of a broader group.

  205. Jordan

    Phil – ah that makes sense then. Thanks!

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