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Meaningless Monday – Rethinking that Round Earth Idea

What if the World is flat?

It sure looks flat.  You have to go to space to see that it’s round, even in an airplane it looks pretty flat, doesn’t it?  Well, fiat currencies are like that too.   We talk about Quantitative Easing as if the World is flat because Americans (who are trained to be self-centered to the point of Xenophobia from birth) don’t think of their connections to other counties on this planet.  To understand the American investor is to look at this map and understand that it is not a joke

So investors in the US discuss Quantitative Easing as if we can simply devalue the dollar and every other country on Earth has no choice but to bend over and accept our worthless currency because they are lucky we even bother to trade with them.  To most American’s, it’s still 1950 and we just won the war and Europe better kiss our ass and the rest of the World better fear us or they’re NEXT.  That pretty much sums up our next 50 years of diplomacy, doesn’t it?  

That is the mindset that now permeates investors attitudes towards our currency which is, in fact, the World’s Reserve Currency.  What does it mean to be the World’s Reserve Currency?  Well, nothing more than the fact that it is held in significant quantities by governments and institutions as part of their exchange reserves.  That is what our government and the Fed are now taking advantage of by printing Trillions of additional dollars and devaluing our currency, which is currently 62% of the World’s reserve holdings, although that is down from 71% in 1999 and 64% in 2008.  

That’s the problem the rest of the World faces as we race to devalue our own currency – they simply can’t replace it fast enough to stop us.  The only real alternative to the dollar is the Euro, which makes up 27.3% of the World’s reserves, next is the Pound at 4.3%, followed by the Yen at 3%.  Let’s say, for argument’s sake, there is an even $100Tn in the World.  That means $62.2Tn of it is the US Dollar and $3Tn is the Japanese Yen.  No matter how irresponsible you think the US is being with it’s currency – you simply can’t buy enough Yen to replace them.  There are only $27.3Tn in Euros (and they don’t look like a good bet, do they?) and $4.3Tn in Pounds.  What has been happening?  Well between 2008 and 2009 $1.9Tn was moved out of the Dollar (3%) and $900Bn went into the Euro (3.4%), $300Bn into the Pound (7.5%), the Yen LOST $100Bn (3.2%) and "Other" currencies picked up $800Bn (36%)!

A 36% increase in "Other" currencies, which flew from 2.2% of global reserves to 3.1%.  Others are Rupees and Yuan/Renminbi and even Rubles as well as Aussie Dollars and Canadian Loonies but the sum total of ALL those currencies is just 3% of Global Reserves.  It is tremendously destabilizing to those countries to have their currencies go up in value as it makes them all less competitive as exporters.  That is the goal of the US at the moment – to create a monetary sink-hole of such mass and gravity that it begins to actually suck global trade dollars in – instead of spitting endless amounts of them out, as has been the norm for the past few decades.

Can creating a black currency hole really save our country, or do we risk being sucked in as well?  Clearly the "Greenspan Model" we’ve been running has been nothing but destructive for America as we have exported 10% of our labor demand to China, who have accumulated $2.5 TRILLION dollars of our currency reserves while we have run up $9Tn of debt since Al Gore lost his election bid in 2000, despite getting the majority of the popular vote.

Why bring up Gore?  Well it was Gore who wanted to protect both jobs and our "lock box" but that lock box was raided and our Social Security SURPLUS was used to fund a decade of runaway Government spending that has gotten so extreme that we now need to borrow over $100Bn a month just to keep the lights on in this country.  $100Bn is more than the ENTIRE GDP of all but 67 countries on this planet and that’s what we need EVERY MONTH to keep up the pace of our spending.  Annually, our $1.2Tn deficit is the ENTIRE GDP of all but 14 countries on Earth (about Canada or Spain’s entire GDP).  

Our monetary black hole has already sucked up all the money on Earth and that’s why 72.1% of our Treasuries are now sold to ourselves – we’ve pushed the rest of the World past their limits and $4Tn of our debt has been dumped on the Social Security Trust since the "lock box" was raided and now we are devaluing our currency at a rate of 1.5% PER MONTH in order to keep up the illusion of solvency but we’re really not fooling anyone BUT OURSELVES! 

It’s US we owe the money to.  Sure China has $2.5Tn of our debt and other countries have perhaps $8Tn more but the other $30Tn in the world are held by Americans and the Government’s insane scheme to devalue our currency by 10% in order to borrow 10% more money is costing us $3Tn for every $1.5Tn we borrow.  That’s CRAZY!  

Of course crazy isn’t just our current policy – it seems to be what the voters aspire to as well.  Unlike Europe, we do not have serious policy discussions about taxation and Government spending – instead we have two parties that totally disagree with each other on every issue other than maintaining the status quo which is destroying our nation day by day.  

The MSM is no better, with nothing but polarizing opinions as if the whole World is right or left with no room in the middle for rational thought.  On Friday, I called Newt Gingrich an idiot and my patriotism was subsequently questioned – that’s the way politics are played in America these days – the way they were played under Joe McCarthy in the 50s… 

Unfortunately, the lunatics have clearly taken over this asylum and we continue to create dollars at the pace of about a dozen Bahamas per month.  That’s right, the entire annual GDP of the Bahamas is $9.3Bn and we drop 12 times that in debt load on a monthly basis, going 144 Bahamas deeper into debt every year!  Our debt and deficit is now so massive, that we need to measure it in terms of the GDP of other nations because 1,500,000,000,000 is fairly inadequate to grasp the scope of our deficit spending.  Suffice to say that it’s more money than exists unattached on the planet Earth so, in order to go further into debt – we have to create more money.  

As I mentioned, because other countries aren’t as stupid as we imagine, we need to create 3 dollars in order to borrow 1.  That gives us $1 more debt (out of 10) and $2 less value to our remaining pile.  How long can that go on?  One reason our currency creation is so inefficient is because the people we are giving the money to, the Banks, aren’t willing to invest it in America either.  They have their own debt holes to fill and most of the money we give them goes into a derivatives ($200Tn and rising) juggling scheme that makes them look solvent and masks their very, very questionable asset bases.  

The banks take the money the Fed is dumping on them and speculate in commodities and foreign currencies and THEN they buy some TBills in order to keep the treadmill running.  This forces asset bubbles in things like gold and oil but they too are a complete illusion because it’s only the idiots with dollars that are buying them – the rest of the World stopped chasing shiny metals in June but the flat-Earthers in the US just didn’t seem to get the message.  Here’s gold priced in Euros, which is DOWN 8% in 3 months!

Our stock markets, of course, look just even worse – down 10% to the Euro in the last 3 months, but that won’t stop the MSM from engaging in the Grand Dellusion that they are feeding to the voters this month – that everything is somehow going according to plan (what plan?) and happy days are just around the corner – as long as Americans can keep pretending the World is not round at all but a neat little square with our great nation on top and in the center.  

Well, there’s a lot to be said for getting out while you’re on top – or at least while there are still enough people fooled into believing you are on top.  As the Joker says in the "what plan?" link above – Nobody panics when things go according to plan, EVEN WHEN THE PLAN IS HORRIFYING!

That’s what we have now, a horrifying plan to prop up the US Economy based on the belief that the US is the center of the universe and that the rest of the World will be fooled by our fiscal nonsense.  As you can see from the gold chart and the S&P chart – we stopped fooling them a long time ago.  What will happen when we can no longer fool ourselves?  

For my take on the markets today, see the weekend’s Member Chat but, as indicated above – it’s a meaningless semi-holiday in America – a day the bulls can only pray will be quiet, because all my charting indicates that real activity is very likely to come to the downside this week.  

 


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  1. Savi

    Phil--on the PRE PSW positions —CME and TMV
    700 sh of TMV at 83
    100 sh of CME at 440
    they were all purchased by broker before I took over the portfolio--please do not tell anyone what an idiot I was--I have many more I am slowly trying to clear up:(

  2. Cap

    This mortgage / foreclosure fraud story looks like it could explode … http://www.zerohedge.com/article/4closurefraud-exclusive-%E2%80%93-president-obama-falls-victim-chase-robo-signer

  3. flipspiceland

    Why do you think only Americans are  "xenophobes"? 
     We don’t exactly see the French, Italians, Russians, Spanish, Peruvians, Vanuatuans, Firth of Forthians, Irish, Brazilians, Californicans, Canadians, Africans, Brits, Asians, Indonesians, Aussies, Kiwis, Danish, Swedes, Norwegians, Saudis, Yemenese, Japanese, Chinese, New Yorkers, New Jerseyites, Alaskans, Greenlandians, Penguins, Libyans, Moroccans, etc. thinking their countries aren’t extra special.
    Why do you?

  4. bps2002

    Phil,
    I think the dollar may rebound sooner than we think. Also agree that the hope of QE2 is already well embedded into current asset prices. There is no compelling reason to destroy the world reserve currency, at least not yet. One major international upset will prove that point.
     
    If commodities and fuel continue their rise and there is no jobs and wage inflation to go along, we will enter anoter recessison.
     
    IMO

  5. David Ristau

    Hey all,

    I have two new positions this morning that we are looking at in Trina Solar (TSL) for a Buy and Fortune Brands (FO) for a Short Sale.
     
     
    Good Investing!
  6. jasu1

     Phil,
    Thanks for the reply on the banks….
    Are there a new batch of 500%er, positions that you have in mind?

  7. gucci

    Good morning Phil — need your help agjust Goog position that I short 5 of Oct 550 call for $4 and 3 October 560 short cal for $2.60.  Forgot that this thursday is earning for goog, possiblity up side after earning, should I buy ITM nov call like 540 and after earning roll the call up and turn to a spread … not sure what to do thx

  8. fortep

     Phil—are you still bearish on WYNN? It’s up 2.5% today. Time to DD on the puts?

  9. JRW III

    Good morning,

     

    IWM  66.56, 67.09, 67.34, 67.93, 68.14, 68.33, 68.61, 69.01, 70.18, 70.55 and 71.62

  10. fortep

     Phil/lWYNN—-per my above comment, I meant DD on short calls.

  11. Phil

    Good morning!

    Well, I feel better getting that off my chest.  Sometimes I get into focus and realize what is really bothering me and it turns out that it’s this whole illusory market we’re building up based on debasing our currency in order to inflate asset prices.  

    Now, the question is, if you possess piles of these devalued Dollars, what is the best thing to do with them.  Gold, copper and oil are losing traction to the Euro so that means commodities aren’t the best way to go right now (Platinum was my metal of choice a couple of months ago and they are up 13% but also stretched now at $1,700 an ounce).  It really does look like the best payoff we can hope for is shorting the market and hoping the dollar pops as that will increase our supply of dollars at the same time as they increase in value but there’s no indication that the US will do anything to willingly increase our dollar’s value just as China has no interest in inflating the value of their own currency (which is pegged to the dollar and has been devaluing just as quickly).   The devaluation of the Yuan means the Chinese get the same return on their reserves as they did when the dollar was higher – only the de-pegging of the Yuan from the dollar gives us a debt reduction with China ($2.5Tn in debt). 

    So we screw ourselves by devaluing the dollar but not our largest foreign creditor – SMART!  

    Levels are the same and I’m still looking to see if we hold those 5% lines into expirations.  The critical test levels above 7.5% are Dow 10,950, S&P 1,160, Nasdaq 2,400, NYSE 7,450 and Russell 690- all green for day 2 and that does put us technically bullish if we hold it, even though it’s a BS, low-volume day.  Our other levels are:   

    • Up 7.5%: Dow 10,965, S&P 1,146, Nas 2,365, NYSE 7,280 and Russell 672
    • Up 5% (must hold)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%: Dow 10,455, S&P 1,100, Nas 2,255, NYSE 7,000 and Russell 650

    Friday’s put plays were DIA Oct $108 puts at .40, now .24 and I still like those.  The weekly Qs popped then dropped and the QQQQ Oct $49 puts not only hit our .25 target but dropped to .20, where I really like those too.  They are speculative but what a ride if we get a sell-off today or tomorrow.  By Wednesday, we’ll capitulate and find things to buy if need be! 

    A totally meaningless day in either direction so be very careful.  

  12. willsons

    PHIL    DXD and SDS putters to roll by friday.  Would you roll to January?  

  13. kinkistyle

    VIX back down to Apr. levels.  Looks like everything is hunky dory.

  14. respeja

    VIX below 19.50

  15. swellesley5

    hmm,if i criticize anything about the Obama administration I am told I am too stupid to understand and an I am a rascist!!  Not that the stimulus was wasted on a bunch of social mumbo-jumbo,Larry Summers was a bad choice,the war goes on in Afghanistan,an promoting class warfare sure is not "Washington as usual"…PS…George Bush is long gone!!  Can you say"Jimmie Carter?"

  16. gucci

    Hi Phil-- what is your recommend AAPL trade before earning or recommend to wait after earning.  thx

  17. Savi

    Phil-do you still like theTLT Dec 102 puts ?
    Tx

  18. 1020

    swellesley5 – No, plenty of criticism here, you must be thinking of another board…….

  19. samz3700

    Phil
    With vol low what do you think of picking up leap puts on spy and iwm.

    Thinking about writing weeklies against the puts or just covered calls with locked in protection.

  20. JRW III

    As I have often said, we either go Up or DOWN from here !!

  21. jromeha

    Swelley, GWB is not long gone. When we are no longer spending 100s of billions on Iraq or Afghanistan, or dealing with bullsh!t rulings by a conservative Supreme Court then he will be long gone….

  22. JRW III

    A BIG IF, but……………..

  23. terrapin22

    Phil – VECO – do u like the below VECO play?
    Phil’s Buy/Write strategy can be initiated by buying half of your desired VECO position and then for each 100 shares of VECO, SELL one Jan $36 2011 put and SELL one Jan $36 2011 call on Monday:
    Buy 1/2 position in VECO Long at open Monday (approximately $36.50)
    Sell 1 Jan. $36 Call per 100 shares of VECO (approximately $4.40)
    Sell 1 Jan.$ 36 Put per 100 shares of VECO (approximately $5.20)
    http://ilene.typepad.com/dark_horse_hedge/2010/10/dark-horse-hedge-what-i-like-about-you-veco.html

  24. Phil

    TMV/Savi – you bought 700 shares at $83 and they are now $34?  Ouch!   Well you still have $23,800 and you want to make $34,000 back and the best way to do that is to perhaps sell 1/2 the Nov $35s at $2 and buy 1x the Feb $45s for $1 so you spend nothing and you add 1x to a potential move up.  If you get called away, you have the same cash you have now but you still have all but $10 of your upside.  If you don’t get called away, you sell another $2 and buy another $1 and maybe, if you are lucky, you have 3x or 4x of the long calls by the time TMV takes off again.  You may have to do this for a year or two but you get the idea, you accumulate a large, free, long position making use of your holdings to leverage an upside move.  

    CME/Savi – As I said, much easier to fix since owning the stock is silly anyway.  You own 100 shares at $260 for $26,000 and all you have to do to make $20K there is agree to DD at net $196 and sell 2 2012 $195 puts for $16 and buy 2 $220/270 bull call spreads at $17, which returns $18,000 profit at $270.  I would caution you on CME that their weak performance in the face of a big commodity boom may indicate they are generally a poor bet though and you may be better off moving on from this one rather than trying to "fix" it.  I won’t say you were an idiot but realizing you are in idiot is the first step to becoming a better investor.  If you go into every trade supposing you could be totally wrong and taking steps to hedge your decisions, would you be better off or worse off than you are now?  If you set stops that takes your money off the table when you are wrong – better or worse?  If you scale into a position because there is at least a 50/50 chance that you did not pick the perfect entry point – would you be better off or worse?  Only by accepting FOR A FACT that you are not a perfect trader will you be able to make rational decisions based on imperfect trading outcomes.  

    Morgages/Cap – Absolutely, it’s a total sham.  MERS was a disaster that robotized the whole mortgage system without following established rules and the fact that they neglected to change those rules has led to the whole thing now imploding as all illegal schemes do once the damage becomes obvious.  I never thought it was a big deal (being in the industry) because I always thought they were working on changing the law or something but it turns out they forgot that little part when things were good and now they are in the very uncomfortable position of having to ask 30M upside down homeowners, 10M of whom they are in the process of foreclosing on, to abrogate their rights in order to make sure the banks can proceed with repossessing their homes.  Oops….

    Xenophopes/Flip – Wow, I hope you are joking but, if not, we can discuss after hours…   Here’s one recent video on the subject as well as the classic history lesson from your friend Michael Moore.  

    Recession/BPS – Without job growth we are in big trouble.  We may not see it but Europe and Asia do.

    500%/Jasu – Same ones as last week still work.  So far, nothing has changed.  

    GOOG/Gucci – Well, I’ll point out that GOOG is not at $550 so it’s hard to be worried at $541 with a week to go.  No way should you buy Nov to cover because that premium will get wiped out too on a move.  If you want to keep and cover, I would roll the $550s ($8) and $560s ($5) to the Nov $580s ($7) and you can cover their $24 delta with March $680s at $4.75, which have a .12 delta so they will mitigate 1/2 the damage on the way up (and you can always DD and roll them while you roll the callers up to match).  Since the thetas aren’t even close, you are playing the time-decay game on the trade but, of course, this is still a bearish play on GOOG with a hedge, you will still take a hit if GOOG goes up.  

    WYNN/Fortep – Yes, I’m still bearish on all the stuff that went up as they all went up for the same silly reasons.  I wouldn’t DD on things while we are sitting up here in technically bullish territory.  More like roll along and wait for sanity to resume at the moment.  

    DXD, SDS/Willsons – Which positions? 

    VIX – I told you guys they could go much lower.  Now it’s getting interesting as we finally broke 20! 

    Later for political nonsense please Swellesley.  We try to keep that discussion in non-market hours so we can make money and fix the world later.  Thanks! 

    AAPL/Gucci – They are too overpriced to play up and too good to play down, that is my opinion on them but someone is willing to pay you $7.65 for the Nov $310 calls so you may as well take it by selling 5 of them for $3,825 and buying 4 Apr $360s for $8.60 ($3,440) which is a $385 net credit on the spread so you make that plus whatever value the Apr $360s maintain if AAPL fails to get over $310 by Nov expiration.  If they take off, you have to buy more longs and roll the callers along for 5 months.  

    TLT/Savi – Yes, I do still like them.  I think the wheels will come off the QE2 bus soon.  

    Puts/Samz – I would hesitate to do anything long-term where you are paying the premium but as long as you feel you can control the short-term trading, it can be interesting.  I am worried about another flash crash or a relentlessly bad week messing up those covered put strategies.  

    Up or Down/JRW – BRILLIANT!  

  25. gel1

    My morning FX play is:
     
    Buy ( long) AUD/CHF at market
    Stop (sell) at .9350
    Stop (limit) at .9850

  26. Cap

    Methinks this mortgage fraud issue is going to be a catalyst for some downside …

  27. Cap

    Still short FCX

  28. willsons

     PHIL    DXD Bull call January 27-32  October 27 putter.  Roll putter to January by friday????

  29. gel1

    JRW… I like your optomism !

  30. kinkistyle

    Dollar showing some life.  Go Greenbacks.

  31. mSquare

    SLT – A long I bought some of and plan to add to with today’s double-bottom breakout
     http://finviz.com/publish/101110/SLTc1dl1108.png
    Target is just shy of $18 in 4-8 weeks. Good commodity diversification long-term trade…

  32. gel1

    Will bee adding to my NEM ( Newmont Mining ) positions today. This is a play on gold primarily, but also copper.
     
    Lots of talk about the anticipated quantitative easing…. why not just get to it and go one step further and talk about the inflation that will result from it. Since 1971, the American dollar has lost 90% of its purchasing power relative to the hard currencies.Greenspan liked to be referred to as a Fed chairman that fought inflation… ya sure… In his 19 year tenure the dollar dove over 50%…. And Ben… he will will set a record, and might even be presented with a Nobel prize after all the dust settles.

  33. JRW III

    gel,

    Good article on the dollar !!

    http://jessescrossroadscafe.blogspot.com/2010/10/us-dollar-long-term-trend-and-triffins.html

  34. JRW III

     

  35. Phil

    Obama pushing the much needed infrastructure – yet another bill to be filibustered…  (am I getting cynical?)

    VECO/Terra – Yes, I did like that one.  Usually if Ilene puts them up, I’ve already worked on the trade idea but always worth asking.  Sabrient was justifiably bullish on VECO and, based on their short-term target, I liked this play to take advantage.  

    FCX/Cap – One day…  

    UUP had a strange spike in the pre-markets, up 10% then back down.  

    DXD/Willsons – Oh the putter.  Yes, that has to be done, can spend .40 to roll them down to the Jan $25 puts.

    Nobel/Gel – Maybe one for physics in finding a value for the dollar that is so small he ends up proving quantum theory…. 8-)

  36. JohnC1

    Phil:  I’ve been traveling and I’ve lost track of the hedges you are recommending. i have a long-term stock portfolio to protect.  I’ve sold premium against many of my long stock positions and am heavily short FCX calls but I need additional downside protection.  I am long QID Nov 13 calls, short QID Nov 15 calls, and short QID Jan 13 Puts (total cost .29).  I some have DIA Oct 109 puts (cost .88) and a small position in SPY Oct 116 puts (cost 1.48), these have lost 50% of their value and need to be rolled as they are getting too close to expiration.  I am considering moving a percentage of the stocks to cash  (say 25%) but need to hedge the rest.  I am not adept at hedging and could use guidance.  Thanks.

  37. Savi

    Tx-Phil
    will keep a look out for something else and get out of CME

  38. Pharmboy

    Good morning!  I hope all got out of ALXA last week…..they took a 60% haircut on the FDA denial. 

  39. Phil

    Hedging/John (Everyone) – It’s best to focus on just one leveraged hedge along with the normal DIA or SPY mattress play.  Right now, due to earnings, my two favorites are QID and FAZ as I think we could get a scare in tech or financials.  I think CRE is scary too but they go up and up and up no matter what so tech seems more likely to shockingly disappoint and the financials may not guide as well as people think.  

    • A short-term hedge on QID would be the Nov $13/16 bull call spread for $1.08, selling he Jan $13 puts for .75 for net .33 on the $3 spread that’s $1.12 in the money.  
    • Longer-term on QID, I like the Apr $13/17 bull call spread for $1.13, selling the $12 puts for .84, which is net .29 on the $4 spread, also $1.12 in the money.

    These are simply plays on the Nas NOT gaining another 5% from here since about 10% on QID gets you into trouble.  5% is 2,520 on the Nas.  The logic of this play, long-term is the bulk of your risk is having the ETF put to you but the Aprr $12 puts are .85 and they can be rolled to 1/5 the 2013 $14 puts at $4.30 so let’s say QID falls to $10 and you had 20 contracts (looking to make $6,000 on the Jan longs), you roll them along to 4 2013 puts and the nas goes up and up and up and the QID falls to $2.  What happens?  You are assigned 400 shares at $15 ($5,600) and you spend $1,600 more to buy 800 more and now you have 1,200 shares of QID at net $6 and that just becomes a long-term bearish position in your portfolio to balance out future trades.

    That’s not likely to happen, of course and there are adjustments to make along the way but having a good idea of your worst, worst case can help you focus on what needs to be done along the way.  

    • FAZ is also getting fun again at $12.60.  I like selling the Jan $11 puts for $1.20, to help pay for the Nov $10/14 bull call spread at $2.10, which is $2.59 in the money to start.  So a net .10 credit and the worst case is you own FAZ for net $10.90 (now $12.60) into next year’s nonsense.  
    • FAZ is also interesting in April and that gets you through the end of year reports from the financials as well.  Since they will pay you $1.55 for the $10 puts, you can use that to finance the $8/15 bull call spread at $2.85 for net $1.30 on a spread that’s $4.60 (250%) in the money to start you off.  If you are long on financials, then you can’t lose here unless you win there – that’s what hedging is all about!

      

  40. 1020

    Alxa – got out at 3.49. I love it you get a win "by the skin of your teeth"  :)

  41. gel1

    JRW / Currency devaluation
    Your link is very descriptive of the transitional demise of the dollar. The United States is not alone in this overindulgence and the resulting problems. Many other global currencies have suffered similar debilitating devaluations, beside the dollar. In the post WW 11 period, Latin America literally saw its currencies crumble in the inflationary 1970′s and 1980′s. In the late 1990′s currency values were desecrated in Asia. Russia devalued and crashed in 1998. Other currencies that have tanked over the last 35 years are: South Africa, Turkey, Iceland, India, Pakistan, British pound, and the Italian lira – just to name a few…. oops I almost forgot Mexico. The US has joined the party and we are the RESERVE currency. Have I mentioned lately I like Gold? — reading this stuff does tweak your interest, as with so much in the way of currency problems, folks are looking for stability when it comes to a store of value that is reliably immune from these massive devaluations.

  42. gel1

    I added a 2012 bull call ratio spread to my NEM plays, and also sold some December 60 puts, to help pay for the spread.

  43. mrmocha

    ALXA – got out just in time, thanks Pharmboy!  Now the question is: do you think this one was unfairly pounded and we start while it’s down, like with CRIS?

  44. biodieselchris

    "[The US political system] has two parties that totally disagree with each other on every issue other than maintaining the status quo, which is destroying our nation day by day."
     
    That quote’s a keeper!

  45. cmsosa

    Phil, I have a long call F Jan 2010 12.5 which I rolled down from 17.5 due to margin req, against them I have been selling covered calls with not a great succes because F has been in uptrend lately, anyway now I have shorted March 2011 12 at 1.20 and today is at 2.46 but still 0.65 premium in them, what shall I do? wait until the premium is consumed and THEN roll or is there any other adjustment I can make to improve rhe trade? Thanx

  46. cmsosa

    sorry the long call is Jan 2012 12.5

  47. biodieselchris

     THE THING ABOUT CHAOS: IT’S FAIR
     
    hahaha that’s a great line too….

  48. ravalos

    Phil, CMG continues higher.. I have short 2x Nov $180s (from a previous roll) @ $6.7 in premium and 1x Oct $170s @ $5.70.. I want to roll the remaining Oct to 2x $180 Nov to end up with 4x Nov $180s. This is now getting a bit oversize, HOWEVER margin is not (and will not) yet an issue even if CMG shots up to $200. 
    I was thinking of buying 3x Mar 2011 $200s @ $9.50 and convert the whole play into a ratio backspread, but I SERIOUSLY have trouble buying calls for such an expensive price, even if the intention is to have the shorter calls expire worthless and sell whatever value remains in the long-term ones.. or buy an additional caller if CMG announces spectacular earnings and raises guidance and then roll the short ones to higher prices and convert it to a vertical call spread. However I feel that if CMG misses by one bit, the plunge will be significant and I will end up LOSING money from the ratio backspread. 
    What would u suggest?

  49. Phil

    At the open: Dow +0.12% to 11020. S&P +0.1% to 1166. Nasdaq +0.05% to 2403.
    Treasurys: 30-year -0.07%. 10-yr +0.06%. 5-yr +0.03%.
    Commodities: Crude -0.54% to $82.21. Gold -0.04% to $1344.80.
    Currencies: Euro -0.04% vs. dollar. Yen +0.19%. Pound -0.14%.

    10:00 AM On the hour: Dow +0.1%. 10-yr +0.05%. Euro +0.04% vs. dollar. Crude -0.07% to $82.60. Gold +0.26% to $1348.80.

    11:00 AM On the hour: Dow -0.02%. 10-yr +0.06%. Euro -0.28% vs. dollar. Crude -0.44% to $82.30. Gold +0.09% to $1346.50.

    12:00 PM On the hour: Dow +0.08%. 10-yr +0.09%. Euro -0.45% vs. dollar. Crude -0.34% to $82.38. Gold +0.27% to $1348.90.

    Don’t blame the foreign reserves build-up by emerging nations for exchange rate imbalances, says Brazil’s Central Bank President Henrique Meirelles at the annual IMF meeting. In reality, "the most important imbalance today is the American monetary expansion… this is the biggest injection of liquidity in the international economy."

    Despite warnings of a looming currency war, global leaders failed to find common ground on exchange rates at the IMF’s annual meeting. Instead, they’ve asked the IMF to serve as "currency cop," monitoring how one country’s policies affect the economies of others, with a focus on the U.S., U.K., China and the eurozone.

    The global economy appears to be slowing, and most developed and large developing countries are already in a downturn, according to the OECD’s latest composite leading indicators. It’s the second month of decline for the forward-looking CLIs, which are designed to provide early signals of turning points between economic expansion and slowdown.

    Foreclosures are a full-fledged scandal, Ryan Chittum says, so why is The Wall Street Journal getting its clock cleaned on the story by smaller business staffs, and bloggers like Yves Smith?

    A detailed look at why robo-signing means systemic risk, in Foreclosure Fraud 101, first in a Rortybomb series stepping through the (still-developing) mortgage crisis.

    The Daily Bail spells out the foreclosure fraud nightmare scenario: more homeowners start to challenge the ownership of their mortgage, and choose to stop paying in the interim, destroying bank profits and balance sheets while they wait for resolution from Congress or the courts. Could get ugly quickly.

    Good a day as any for an XLF-led crashThe attorneys general of up to 40 states plan to announce as soon as Tuesday a joint investigation into banks’ use of flawed foreclosure paperwork. Banks have been reeling from the robo-signing scandals, and BofA (BAC) just became the first bank to halt foreclosures in all 50 states.

    As politicians step up interventions to slow the pace of foreclosures amid concerns about document fraud, economists say such delays could deal another blow to the housing market. "Stopping that process could have significant impacts on prolonging the housing recovery," FHA commissioner David Stevens says.

    "If job-creating government spending has failed to bring down unemployment in the Obama era, it’s not because it doesn’t work; it’s because it wasn’t tried," Paul Krugman asserts. Of the cost of the stimulus, he says more than 40% came from tax cuts, while another large chunk consisted of aid to state and local governments; only the remainder involved direct federal spending.

    Tim Geithner bids TARP farewell by debunking five TARP ‘myths’: (1) That TARP cost hundreds of billions (ok). (2) That TARP was a gift for Wall St., not Main St. (hmm…). (3) That TARP was a quick fix (wasn’t it?). (4) That the banking sector is even more vulnerable now to systemic risk (?). (5) That TARP was a Republican ploy to take over the economy.

    All those newly minted Dollars have to go somewhere:  Private equity is piling on the BRICs – investing $3.7B so far this year in assets of Brazil, Russia, India and China, a fivefold increase over the same period last year, and 4.1% of total investment. (graph).  Think of how little $3.7Bn is in the grand sceme of things yet stories like these drive investor sentiment.

    The bond market is at an "extreme danger level" since too many investors have piled into a market vulnerable to even a small rise in inflation, Calamander Capital’s Roman Scott says. "Investors continue to buy these and it only makes sense if you are holding these to maturity," which he believes few actually do.

    The commodity boom is starting to look a lot like 2008 (though then, it was more about oil and less about food) – will the outcome be different? Depends on your inflation expectations, but more than one scenario leads to a collapse in commodity pricing.

    Stocks are sleepy, the VIX is the lowest since April, and the bond market is closed, but some commodities are hopping – like sugar, up 1.6% and near an eight-month high on Brazilian weather concerns. Gains in other softs: corn +6.9%, soybeans +3.5%, cotton +3.9%.

    How to trade a weak job market? Step one is to fully realize the stock market doesn’t care about jobs. As long as the dollar’s weak, fund managers will be forced to allocate to equities.

    Considering many Chinese manufacturers have profit margins of just 2-3%, economists say Premier Wen’s warning last week that a sharp yuan revaluation could trigger widespread unemployment and destabilize global economies is no empty threat.

    Attn Gel and the Gold Bugs:  ETFS Physical Swiss Gold Shares (SGOL) reports it’s crested $1B in assets under management. SGOL’s keeping its bullion in Switzerland – compared with IAU (London, New York, Toronto) and GLD (London) – but the 12-month returns are pretty much the same for all: SGOL +27.3%; GLD +27.4%; IAU +27.4%.

    There’s plenty of reasons to love Southwest (LUV), including its AirTran (AAI) deal and rebounding earnings, but YCharts points out that "Southwest is a great company in a crummy industry… and while being smarter than the rest of the class ought to mean that one sets the curve, in airlines and some other industries, it’s hard to rise above the dullards."

    Peter Diamond, Dale Mortensen and Christopher Pissarides win the 2010 Nobel Prize for economics. Their models on search theory and labor markets "help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and economic policy."

    The Onion sums up your usual Market Currents day in one story: "Some sort of tax cut or earnings or money or something was reported" in economic news, and experts are concerned. "Greece was also involved."

    Three lunchtime reads:
    1) The $6T opportunity: emerging-markets infrastructure
    2) Currency tensions rising
    3) The Fed’s mystery is gone

  50. gel1

    Bought the EUR/NOK… looking to take profit at 8.39…. could be a very long play… betting on continued Euro strength.

  51. tchayipov

     Phil/MEE
    what do you think about it at this level? I have buy/write which I opened at 35 with short Jan12 30s Calls & Puts and finely got positive, don’t know what to do now: happily close, hold it or somehow protect if it will go down again. Any advice?

  52. hoss18

    Phil, took the SSO Oct 39-43 long play last week….it’s nice & green, but I would be shocked if it ended the week anywhere.  Should i take it down with small profit, or let it ride?  Or how would you suggest I manage it now?

  53. gel1

    Phil
     
    Sometime ago you expressed concern about GLD… and the security of knowing if the physical gold will be there when everything hits the fan…. Here is an alternative play that operates the same way, but the physical gold is in a government controlled depository ( Swiss Government ). The ETF is SGOL. Might be a good alternative.

  54. David Ristau

    Pharm -

    What you think of Ista Pharm? 

    Looks like a pretty solid for sure thing in the pharmaceutical sector, but I am not sure can it get much rise since it won’t add too much with XiDay.

  55. gel1

    ravalos…. be very careful shorting CMG… this one is a momentum stock with some very strong fundamentals. I would not try to channel trade this one…. just my opinion. ( I am long the stock )

  56. jomama

    Phil,  what do you think about sbux puts here – i know they recently raised some prices but i think the commodity increase will not be reflected in these prices.  Their margins should really take a hit going forward?  more competition from mcd and unemployment?

  57. Pharmboy

    ALXA/mrm – I need to investigate WHY they were rejected.  At this point, I am staying away.  I am writing up something on CRIS.

  58. ravalos

     gel, I agree they are in a strong momentum, however since 10/1 I’ve noticed a significant put buying for the Nov expiration in the $165 Puts.. the Put-Call ratio is disturbingly sided towards the puts so I think people expect a pullback on this. Now, I’m not playing fundamentals, but merely an extended valuation at this point in time. If they keep managing the business the way they do it, I have no doubt the stock price should be worth today’s price, but at a much later time.

  59. datuu

    1020
    sent you an email regarding an attorney for your italian passport paperwork--been traveling and just found out it bounced--the address you gave me is rldabbert@gmail.com

  60. JRW III

    Seems that Lloyd is using Friday’s algo on this Melt-up Monday !!

  61. gel1

    Phil / SGOL
    Coincidentially, we posted on this one at the very same time… I’ve got to quit channelling your brain. I have some November naked short puts, hoping for a pump after the FOMC revellations.

  62. gel1

    ravlos / CMG
    This might turn into a short squeeze, with all of the long puts.

  63. nicha

     gel – what NEM play do you recommend? Thank you.

  64. Pharmboy

    $1 left to fill our gap on IMGN.  If you are up since the 5.50 ways I would start selling here and maybe put on a bull call spread.  Looking at the Apr $6/8 for 1.10 and selling the $6 P for 60c.  If they fall back  bit, may be able to sell the 6s for a better price, so may want to wait on that part….

  65. Pharmboy

    1020 – I just signed U up for an offer a minute to UR email!!! 

  66. gel1

    nicha / NEM
    My play today was a bull call spread, buying the 2012 40 calls, and selling twice as many 2012 70 calls. I also sold an even amount of December 60 puts. I am sure Phil would have a better spread, as he is the "master" at this strategy.

  67. willsons

     JRW     WHERE DO YOU THINK WE FINISH TODAY?

  68. jomama

    willsons – up of course.  This market is a joke.  One day within the next two weeks the gang of 12 will announce a major downgrade, and that QE2 is more than reflected in the market and poof – down 350 day and start of a downtrend.  Just selling winners & unsuccessfully adding puts.

  69. Savi

    Pharm--took your advice in IMGN awhile back and sold out this morning for a nice gain
    Tx

  70. respeja

    Phil,
    Any speculative calls on VIX?
    It’s already below 19.50!

  71. datuu

    gel1
    here is another swiss gold option
    So what about the ZKB Exchange Traded Funds?
    The ZKB precious metals ETFs are generally solid…
    We consider the ETFs issued by ZKB as generally solid:
    • The fund is (largely) backed by physical metals, “good delivery bars”, as
    defined by the LBMA
    • All four precious metals are offered: gold, silver, platinum, palladium
    • It is covered by audits and insurance
    • It is covered by audits and insurance
    • No Leasing and pledging
    • Minimal tracking errors
    • Fees relatively transparent (at least in the unhedged USD classes)
    • ZKB, the third largest Swiss bank, is financially sound and comes with a
    cantonal guarantee.

  72. nicha

    Pharm/CELG – I have Jan 11 $60 calls from long time ago…I think I mentioned this to you and you recommended rolling to Jan 12. I do not have much money in that account so would like to work with what I have. I would like to lower my cost basis which was $6, they are now $3. 
     
    Thank you.

  73. David Ristau

    Hey all,

    I have a new Play of the Week in Ista Pharma (ISTA). We are looking for 4-6% movement into and out of approval decision on company’s XiDay. 

    Check it out here!

    Good Investing!

  74. gel1

    Jo…. Just curious…. where do you see the market towards the end of November… Im laying in some short call protection.

  75. Savi

    CEF is another CN gold fund that looks good

  76. JRW III

    willsons,

    Great question, I would say we disconnect from Friday’s algo and move higher; it’s cheep to break technicals on a VERY low volume day !!  ( We are very near the top of the channel and a breakout would start one heck of a short squeeze !!)

  77. JohnC1

     Re: "FAZ is also getting fun again at $12.60.  I like selling the Jan $11 puts for $1.20, to pay for the Nov $10/14 bull call spread at $1.10, which is $2.59 in the money to start.  So a net .10 credit and the worst case is you own FAZ for net $10.90 (now $12.60) into next year’s nonsense."  

    Phil:  I must be missing something.  The Nov 10/14 bull call spread can be established for a debit of between $2.04-$2.11.  Where do you get $1.10?

  78. Cap

    So, Phil, did Obama have his "shoe moment" today ?
    I hear someone thru a book at his head.
     
    Anyway, not cool, but surely the press won’t give it the same field day treatment that it did when an Iraqi threw his shoes at Bush.

  79. 1020

    datuu – Did not work for me either. It will work if you type it in. Thanks!

  80. 1020

    Pharm – I share that with the wife….and she’s mean…. ;)

  81. JRW III

    If Lloyd desides to save the House and Senate for the President, I wonder what he will call in for the favor ?

  82. Savi

    Phil--I cannot do a bull/call spread in my IRA--can only do a buy/write and short put--any suggestions --I have been buying calls on DIA etc and they have been killing me
    Tx

  83. gel1

    datuu / ZKB
     
    That does sound very interesting, and certainly worth a complete evaluation. The Swiss have a profound respect for gold and the stability of its value. Interestingly, private investors now own 30,000 metric tons of gold, which far outpaces the world’s central banks. This diversification of ownership is strengthening the base under the price. I expect price corrections will occur, but I will regard these events to be buying opportunities. In the past the Swiss government backed their currency with gold…. and yes, it became the most stable currency in the world. The need for stability is not new, it is just becoming more important as the nations of the world are racing to devalue their currencies first.

  84. Phil

    Man, is the Russell seriously up 2.5% today?  Wassup with that?  Testing 700 not in the least expected…

    Volume at 1 is very lame 65M on the Dow – that is just sad….

    F/CMSosa – Were you bearish to start?  I’m kind of confused by why you were in the $17.50s and selling the $12.50s…  Anyway, you are in the 2012 $12.50s now and those are $3 and you sold the March $12.50s and those are $2.50, which is .70 in premium.  There’s really not much to do with it but wait for premium to expire.  Calendar spreads are not big money makers, you can only hope to grind out profits on time decay but that takes ages to work out, especially with a relatively low-premium stock like F.  By choosing March, you don’t even have a lot of legs to sell but I guess you had to roll out.  Just keep in mind that 2012 isn’t the end of your trade so the real move here is to roll back to 2013 and then roll the March calls up to the 2012 $15s (now $1.80) and, as long as that relationship gives you a near-even roll, you don’t have much to worry about as it’s a $2.50 bull call spread, even from where you are now.  

    Chaos/BDC – Good point although some thrive on chaos and others don’t.  It’s kind of like when small but assertive guys or overweight desk jockeys extol the "fairness" of capitalism as "survival of the fittest" and I tend to think that if survival of the fittest still meant whoever could smash your skull with a jawbone of an ass wins, they’d be singing a very different tune about "fairness."  Any system has advantages and disadvantages for different players and our system was designed to reward those who accumulated and held the most wealth.  While the first generations of kings may have wielded a pretty mean sword – by the time they hold their grandchildren in their arms they begin to rethink the idea of ascension by combat…

    CMG/Rav – You are right, they are not doing you much good with no premium but perhaps consider the intermediate roll to 2x the Oct $180s ($2.50).  While you do have to kick in, that $2.50 of premium will expire on Friday vs. just $1.50 per week on the Nov $180s.  I agree the calls are overpriced.  If you want to offset with a long position, consider selling some Nov $165 puts ($4) as that should no increase your margin and, obviously, they can’t both get hit at the same time so if you do a 1/2 sell there, it contributes $2 to another call roll if you need it and, of course, easily rollable to 2x whatever going the other way.  That’s a good way to play a stock like CMG, which we think is overbought but not terrible.  

    MEE/Tcha – It’s been a long, slow climb for them from where we took advantage of the crash but I do still like them here.  They need to break over the 50 dma at $37 but, after that, they should be good to $45 at least.  I really don’t believe the $30s are in any danger as the mining collapse that hit the stock was, hopefully, a one-time event.  You still have $9 in premium to collect so certainly no hurry but you could cash your stock and roll it too the 2012 $25s at $14 and take $22 off the table if you want to free up some cash.  It will cost you $3 of the $9 you stand to collect and worst case is the stock is put to you again at $30.  Doing something like that makes sense as long as you feel you can make much more than $3 on $22 with 15 months left to go.  

    SSO/Hoss – Well it was meant to offset out bearish bets so if you are still on with the bearish bets, then you can leave it but if you rolled out to Nov+ on the bear side and have nothing to protect, then $2.20 is nice to take off already.  Max is $4, of course and you are now risking more than you can make – which was not the original idea….

    SGOL/Gel – Yeah I just noted that to you in the news!  

    SBUX/Jo – Too crazy to have an opinion on.  I have yet to see a short-term thesis pan out on those guys.  I agree that rising commodity prices should have hurt them but we’ve thought that many times and they’ve been very good at hedging and locking up prices.  If you want to go short, I’d keep it simple like the Apr $24 puts at $1.57 with a .32 delta so you make 20% on a $1 drop or get hit the same on a move up and then, after earnings, you can see if you want to ride it out.  

    NEM/Gel – That’s very aggressive.  I prefer to keep it simple with something like the 2012 $52.50/62.50 bull call spread at $5.25, selling the Jan $60 puts for $3.10.  If the Jan put sale is a winner, you can spend $3 to roll the calls down to the $45s and then sell another $3 of puts for the next 3 months, wash rinse and repeat to work your way into a better spread.  

    VIX/Resp – I still don’t like them.  If we keep grinding up here, the VIX grinds down and if we head down from here, you can make 5 and 10x on thousands of stocks so why mess around with the silly VIX?

    FAZ/John – Wow, bad math!  I meant $2.10 for net $1 on the $4 spread.  Lunches are not that free!  

    Book/Cap – If that was a thown book it missed by a mile but I guess if you think that’s the same as this classic (thrown by a journalist, no less), then I guess that’s just your usual unbiased interpretation of events…  The best thing is Bush is so used to being flipped off and cursed out wherever he goes that he doesn’t think this is a big deal…

  85. Pharmboy

    David, nice play ISTA.  Ocular is becoming a big market, and that is a great drug…too bad it was causing liver problems as an oral agent.

  86. Pharmboy

    Wow JRW color is now enveloping us all!!!  Or is it Lloyd?  Or is JRW Lloyd?

  87. pstas

    JRW- just curious- on the puts (IWM & SPY) from Friday, i.e., held over the weekend looking for a gap down open on Monday- did you dump at the open or what?
    Thx.

  88. JRW III

    pstas

    Still have them, gambling on reality. If we go higher tomorrow, I’ll dump them !!

  89. doubled

    Phil,
    I’d like to sell the Calls on LDK.  Huge run up today!  What is your thought on this?

  90. Phil

    IRA/Savi – Sorry but what are you trying to do?  I might have lost track as you mention DIA calls that have been killing you in the best rally we’ve had in ages….

    WYNN making new highs, over $100.  Our plan was to have a net $5 sale of the Nov $95s (now $9) and then roll up to 2x the Jan $110s even (now $5) so totally on track but scary!  Obviously I like the Jan $100 calls at $5 as a clean, new sale but it’s a patient money thing.  The Jan $100 puts at $8.75 on the other hand, are not a bad buy and the idea there would be to sell the $95 puts for $8.75+ (now $6.75) to get a free $5 spread.  

    LDK/DD – Chinese solar play that’s breaking out and getting a lot of attention and you want to short them?  Good luck is my thoght.  When they were lower, they were my favorite foreign solar play.  

    Reality/JRW – I am learning not to count on it! 

  91. Savi

    sorry --DIA puts

  92. shadowfax

    Phil
    The RUT is not up 2.5%, it is up .5% or 3.5 pts. The problem I as I found out was the the services Reuters etc are feeding inaccurate data The # 697.37 is correct.

  93. Cap

    There you go again PD ….

  94. shadowfax

    What’s up, I proffed that post the first I was not there the first the was that!

  95. gel1

    The ubiquitous "never ending" news that is coming from everywhere about the upcoming QE is definitely having an effect on the markets. Even Steve Leisman at CNBC  is suggesting "shock and awe" levels of $1.5 tril. Could the event be imminent, or just hopeful thinking?

  96. Cap

    Look at WYNN … holy moley

  97. jvest

    Savi – if you can do buy/writes and short puts then that’s what you should be doing. Phil recommends plenty of those most months (just not as many in the past 2-3 weeks). An IRA is not for gambling on short-term puts. The R stands for Retirement.   :)

  98. Phil

    Defending Defense by – well, who else?:

    Establishment conservatives love to talk about the need to cut government spending, but they always seem to find an excuse whenever there is a serious effort to actually do it. Last year, for example, they opposed cutting Medicare as part of health care reform. Now they are banding together to stop cuts in defense spending, which is a fifth of the federal budget, even as they also insist that the deficit is our most critical problem.

    This hypocrisy was on full display on Oct. 4, as American Enterprise Institute president Arthur Brooks, Heritage Foundation president Ed Feulner, and Weekly Standard editor Bill Kristol penned a joint op-ed  for the right-wing Wall Street Journal editorial page on why the defense budget should be totally off limits to budget cutters.

    Barry picks up on my theme very nicely: "The Left/Right Paradigm is Over.  It’s You vs. Corporations."

    For a long time, American politics has been defined by a Left/Right dynamic. It was Liberals versus Conservatives on a variety of issues. Pro-Life versus Pro-Choice, Tax Cuts vs. More Spending, Pro-War vs Peaceniks, Environmental Protections vs. Economic Growth, Pro-Union vs. Union-Free, Gay Marriage vs. Family Values, School Choice vs. Public Schools, Regulation vs. Free Markets.

    The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two “interest groups” – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power.  The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.

     

     

  99. aryeh

    VECO/Phil, Terrapin,
    I’m confused: in Ilene’s DarkHorse the Jan $32 straddle is recommended; yet you guys are talking about the Jan $36 straddle?

  100. shadowfax

    gel1
    The QE2 hype is pumping the markets but now the hype is to good to be true. QE will not solve any real problems and I think Ben knows that because QE1 didn’t do anything other than put off the bank problem and send stocks up. The market may react tomorrow and if we go down it will be fast and ugly. The shorts are still not taking the sqeeze.

  101. terrapin22

    aryeh – / VECO $36 is for new entry.  $32 is for existing to roll into. 

  102. gel1

    The market is definitely a challenge… think I will take the afternoon off – on my way to San Jose !

  103. doubled

    OK, so I will not sell into Chinese based stock run-up .  Does this hold for other Chinese sectors as well? Or is just the solar energy group?

  104. novice

     Phil,
    I am quite bearish in my portfolio waiting for that market correction (I am short AAPL 280, AMZN 155, NFLX 150, GOOG130, QQQQ 50, SPX 1160 and GLD 128 some in Oct some in Nov). My AAPL and GOOG shorts were from pre PSW. Just in case the correction does not pan out in the next few weeks what do you recommend. Should I roll out the positions to January or do some bullish hedging. Thanks..

  105. terrapin22

    Phil - somebody buying SVU (which I brought up last week) and now RICK and FEED.   How would you play RICK here?

  106. Savi

    jvest/Phil--how does one hedge in an IRA using DIA, QID,SDS,FAZ without having to do a buy/write or just buying the DIA puts or the SDS calls  etc? sorry if it is a basic question that I should already know, also maybe I am using the wrong lingo in trying to explain the positions--would love to go into more detail after hours

  107. pstas

    JRW- puts- Thanks- I am also still holding and actually rolled them up into the stick on Friday so I could enjoy a bit more pain.
    Again, curious- given your charts,etc.- what was it that triggered the put purchase on Friday? A particular indicator or level broken or just pulling a Phil and "putting your foot down"?  

  108. datuu

    gel1
    i noticed that SLB hasn’t done much despite the contract in Eurasia announcement last week--what are your thoughts on that? also i have some info on buying/selling/storing allocated positions in metals in switzerland if you are interested--

  109. Pharmboy

    Well, that’s interesting.  Now JRW’s color gone (before all the comment boxes were inside JRWs gold).   Must be my browser having trouble with Gold!

     

    The FDA is now the new ‘No’.  JAZZ rejected as well.  Shares are UP 5%.  Really does not affect them much, b’c it is already prescribed off label.

  110. hanna5

     QE2 – i think the fed realizes from the action in the past several weeks that they will (unintentionally?) push up commodity prices such that consumer goods price increases will outweigh the positive effects that monetary easing would otherwise have on the economy. I think we will see some rhetoric in the coming days/weeks designed to try and remove this premium from the commodity markets. They are walking a very fine line, and i think they know it. 

  111. Jbur

    datuu:
    I posted this to you last week, but it sounds like you were traveling.

    Jbur
    October 7th, 2010 at 12:53 am | Permalink  
    datuu, what was the name of the book on international asset protection, and author? I worked for several years to establish an offshore trust several years ago. Tens of thousands and a lot of time and I came up with nothing that really functioned the way I had hoped. Thanks.

  112. 1020

    gel – do you? Dionne Warwick – Do You Know the Way to San Jose ?  Wonderful voice, Ah, those days……
     

  113. shadowfax

    TBT crashing, not looking good for bond tradeing tomorrow. What if QE isn’t giant now, not good for markets, CNBC is touting great earnings to come while the rest say not so good and what happened last quarter when they were good? QE is already backed in so almost anything will cause disappointment.

  114. jvest

    Savi – earlier you said you can do buy/writes and short puts. I assume that means you can sell calls against stocks you own, and you can sell naked puts as long as you have enough cash on hand to cover any assignment. Is that correct?

  115. Savi

    jvest-yes that is correct

  116. jvest

    Savi – that’s normal for a non-margin account. You can still do all the buy/writes and hedges that Phil recommends, you just won’t have as much leverage with the naked puts as the margin accounts have. One way to combat this is to buy far-out-of-money puts to protect your naked put sales (so if you sell for example a $30 put, you buy a $20 put along with it).

  117. ben1be

     I created  a trading blog this weekend. Its a chart site with a few charts I like and plenty of links to charting and trading sites. I follow a lot of traders on Stocktwits. Check it out. 
    If you have a trade idea or a list of stocks you`re watching, go to the SUBMIT button at the bottom of the page and you can post to the site. You can post photos or video, text or links. I have to moderate it for it to be published, but I`ll check it during the day if it turns out there`s any interest. 
    I find this  PSW  community is extremely diversified with many interests: different hobbies, businesses, cooking, houses overseas, travel,  their homes, their families, cars…etc etc. Got something you love to talk about or pictures to share? … post it and we can get to know each other better..
    Only rules…..NO POLITICS!!!… a friendly site….no aggressive, insulting posts, and keep the heavy macro economic discussions or philosophical debates on PSW. If you`ve  got something you want to share, go ahead. Maybe you`re a poet or an artist, maybe a cook or a beer connoisseur.  Give it a shot. My e-mail is there if you have troubles posting.  Its a work in progress so be patient. Most of the posts will open up if you click them.
     
     
    http://ben1be.tumblr.com/
     

  118. lvmoda

     WYNN is just crazy.   August revenues up 21.1% by Strip casinos over year ago…without baccarat, they would have been up 6.2%.  Most people know where that baccarat money is coming from and, along with Macau and Singapore properties, the big money is expecting a super-blowout in earnings from WYNN and LVS.   Living in Las Vegas, I think August (which is normally a very slow month) is a blip and that strip casinos are a very long way from recovering.  Visitors increased 3.5% from last year, while hotel occupancy is 82%, up .6%, at room rates that are up 4%.  These modest numbers are relative to last summer, which was simply horrendous for LV businesses.  There has been no move to hire more people due to better business prospects, so this action seems quite overdone.   Maybe WYNN and LVS are becoming a currency play….a way to recover our money back from the Chinese at the tables, in  their currency brought back into cheaper dollars!  Way to go, Stevie and Shelly!  Lucky 8′s!
    By the way, I loaded up on short WYNN OCT 110 Calls at .46…..not quite Lucky 8′s, but we’ll see on Friday!

  119. livingfull

    Phil….I think you may have missed your true calling…writing for John Stewart and the Daily Show. 
    Question……what about Bull Put Spreads instead of Bull Call?  I know you have a good reason for always using Bull Calls.
    Thanks a million for everything!

  120. drcraig

     JRW – What do you make of this? Big headfake before the push, or are we headed back to where we started? 

  121. JRW III

    pstas,

    I’m just thinking that a lot of things could go wrong by the middle of November; and if I’m wrong, I lose 1/2 and that’s not a lot of money.

  122. dclark41

    Phil:
    Could you help me properly hedge the positions I have on DNDN?
    (10 contracts) Jan ’11 $40 calls (in at 5.87) / now $5.10
    (10 contracts) Jan ’12 $40 calls (in at 13.22)/IRA now $10.90
    (10 contracts) Jan ’12 $100 calls (in at 2.52) / now .53
    500 shares bought at $36.62/ now $39.90
    In the near term, we should have a good idea by November what the CMS’s agenda is. If they are trying to limit the coverage of Provenge, I think the stock price will be range-bound  between $40-$50 until the issues are settled. If not, the stock could go to the mid 50′s by next summer and increase further upon completion of new plants and increased production. I am happy with the 20 $40 calls and 500 shares for the long term. Need to salvage the $100 ’12 calls. Any advice would be appreciated. Thank you.
    dclark41

  123. ilene

     Hi Phil – I got this question in another comment section, which you may not see:   

    "Phil, I am quite bearish in my portfolio waiting for that market correction (I am short AAPL 280, AMZN 155, NFLX 150, GOOG130, QQQQ 50, SPX 1160 and GLD 128 some in Oct some in Nov). My AAPL and GOOG shorts were from pre PSW. Just in case the correction does not pan out in the next few weeks what do you recommend. Should I roll out the positions to January or do some bullish hedging. Thanks.."

  124. 1020

    Thanks ben1be. I will stopping by….  :)

  125. dclark41

    Phil:
    Sorry for posting twice. Traveling home from NY in car reception not great.
    dclark41

  126. hoss18

    Anyone else wondering if the bot is going to have to buy everything like last Friday to keep up over 11,000?  People hitting the exits a little early maybe….
    Thanks Phil, took the profits on the SSO as my bearish bets have all moved out to Nov & Jan.  Appreciate the input.  Also, took profits in a few other verticals that were well in the money, but who’s underlying could be vulnerable to wild market movement….ie BRCM Jan 31-34 spread, took my 30% and walked.

  127. Savi

    jvest--but on the SDS QID DIA  hedges you normally do not buy the stock right?--it is most always a bull/call spread and not a buy/write--so I cannot do the bull/call in the IRA but can the buy/write
    but  buying the far otm puts to protect the naked puts is brilliant – never thought of that
    you know what they say about little knowledge is dangerous….in my case it might be cataclysmic
    Tx so much for taking the time, you are a real sport—Tx again

  128. hanna5

     That was interesting – we lost 11k, 2400, and 1165 on no volume….

  129. biodieselchris

     PCLN max pain is 290. I hope they hit it.

  130. Phil

     RUT/Shadow – Good catch!  I thought that was strange. 

    Cheer up Gel, I head there may be more quantitative easing coming… 

    Puts/Savi – That is very strange that you can’t do a bull call spread.  If you want to use a buy/write to hedge I like TZA at $23.50, selling the Apr $24 calls for $6 and Apr $20 puts for $4 for net $13.50/11.75, which is almost 1/2 of current price if put to you and pays almost 2x if TZA simply flatlines so you own 2x at 1/2 price or get a double off the hedge.  That means if you commit 5% to the hedge, you end up making 5% as an offset or 10% of your portfolio is a TZA hedge after the Russell moves up about 15%.  

    China/DD – I’d stay away.  Goblally, they may be the biggest bubble of all.  There are great questions regarding the reliability of their data and, don’t forget, their economy benefited from a MASSIVE stimulus that put ours to shame and was all directed at infrastructure and job creations, not tax breaks and bank bailouts.  

    Bearish/Novice – I had two upside plays last week, one SSO and one FAS that returned 2,000% and 1,000% if the rally continued – those are the kind of hedges you want to cover a continuing upside.  If by some crazy chance the correction doesn’t begin tomorrow, I will be as nervous as you so remind me and we’ll do some more!  

    RICK/Terra – Yeah I like them.  $7.32 for the stock and you can sell the  May $5s for $2.50 and the $7.50 puts for $1.35 and that’s net $3.47/5.49, which is plenty of upside and discount for 8 months

    Hedging/Savi – Yes, let’s pursue after hours although I have a meeting tonight.  I will say that there are IRA’s that do let you buy veritcals and sell puts and it is very worth moving your account rather than trying to trade with both arms tied behind your back to fit the rules of an account that forces you to make nothing but foolish choices.  Failing that, I’d rather cash out and pay the friggin’ taxes than run under those kind of restrictions – what’s the point of having tax-free money when you can’t do anything rational with it?  

    XLF taking a nice dive.  

    Gold/Pharm – I saw it too but it corrected.  I assumed JRW edited his naughty post. 

    Expectations/Shadow – Everyone is high and I mean that in both senses of the word.  We have gotten a lot of upbeat forecasts from S&P players and that’s what hats are being hung on but I hate it when they pre-announce as it takes all the fun out of good numbers, as we are likely to see.  

    Very nice Ben.  You can go to your member profile (top right of page) and make that your website link for your name.  

    Thanks for local perspective LV.  I started off this short after reading in-depth NYTimes look at Vegas that painted a very ugly picture.  Seems like the hype is pretty much all Macau, all the time for these guys.  

    Daily show/Living – They don’t pay enough!  I don’t like the negative risk/reward of the bull puts or bear calls – it’s very rare that I see something like that that appeals to me but feel free to suggest and I’ll be happy to analyze.  Maybe you’ll change my mind…  

  131. Phil

    DNDN/DClark – Step one, don’t make such a mess of positions.  How do you know where you stand when you are all over the place with positions?  Do you think DNDN will do this or that?  Not this, this, this, or this…  I will preface by saying I consider DNDN to be dead money and haven’t had any interest in them since they popped and we got out, albeit early.  I can’t for the life of me imagine why you spend $2.52 for $100 calls but hopefully that $2,000 gave you a good education on why that’s just silly.  You don’t have time to recover from a mistake on the Jan $40s so I’d kill those, the 2012 $100s are pointless and if you want to take a risk – cash the stock ($20,000) and the calls ($5,500) that are not in the IRA and buy 20 of the 2012 $40s for $11.20 ($22,800) and sell 2x the Jan $40s for $5 ($10,000) and that puts you 3:2 bullish with the naked gains coming in the IRA and the loss (if any) hitting you in your taxable trading.  You don’t expect a big move that soon and if it comes – you have plenty of cash and time to adjust and if they fail, you are well covered.  If we flat-line, you can sell calls again and use the fresh cash to roll the long calls lower.  

    Question/Ilene – Thanks, got it from Novice earlier.

    Nice mini-stick into close – what BS! Good call Hoss.  

  132. yodi

    I twist and turn it but do not get to 5.49. some one nows how Phil get to this number thks
    RICK/Terra – Yeah I like them.  $7.32 for the stock and you can sell the  May $5s for $2.50 and the $7.50 puts for $1.35 and that’s net $3.47/5.49, which is plenty of upside and discount for 8 months

  133. Pharmboy

    Well, in AH trading…right back to where we started from…..

  134. kinkistyle

    "Meaningless Mondays" indeed

  135. ashmoret

    Phil,
    What stock(s), coming into this earnings the next 2 weeks, do you think are overbought and the street is expecting a number they cannot obtain?  I know you feel the overall market is overbought, but do you have any specific candidates for this earnings season.
    Thanks

  136. terrapin22

    Pharm / ALXA – should i dump my remaining position or hold?  I hold stock outright.  thanks. 

  137. dflam

    Yodi/Rick Terra: getting to $5.49 :
    $7.32 for original purchase of the stock less$3.85 for selling May  $5 calls and $7.50 puts gets you to net $3.47. Since you sold $7.50 puts, if they are "put to you" at $7.50 strike price, your net result is first buy at $3.47 plus second buy at $7.50 which averages out to $5.49

  138. gucci

    HI Phil what is the SSO play last week for 1000% up side, I am net short right now, would like to add these hedge if we do not get a correction soon, thx

  139. Savi

    Phil--have to hold 401K  at Fidelity  and  can do buy/write and straddles --and also sell puts  
    I can change the IRA rollover to TOS as I assume they allow  verticals  in the IRA? Fidelity prohibits this in any retirement acct
    Most of my big losses PRE PSW are due to no hedging-- just to clarify to hedge in the 401k  I will have to buy, per your example,  TZA stock and then sell call and put--am I correct?
    Tx
     
    Tx

  140. yodi

    dflam
    Thanks

  141. dflam

    Hi Phil :  On EPD, I sold Mar. $33/ $37 bull call spread paired with Mar. $34 puts for  $1.49 net.which ius now net $3.35. Stock now at $ 41.31. Thinking of rolling to Mar. $36/ $40 bull call spread with sale of Mar. $ 38 P for net of $1.75 on $4 spread. I’m comfotable EPD will hold $40 price thru Mar. What say you? Thank you. 

  142. cwan120

    Hi, Savi,
    TOS is well received on this board.
    I’d recommend that you open an account there.  Contact scott at thinkorswim dot com, and mention your membership at PSW.  He should give you discounts on commissions.  Then, transfer your account over to TOS.

  143. Cap

    ben1be … good luck w/ the blog site !
     
    I will check it out …

  144. Savi

    cwan120-Tx--I will talk to Scott at TOS

  145. Pharmboy

    OK, CRIS writeup is up and active.

  146. Pharmboy

    ALXA/terr – I think you can safely exit stage left. 

  147. flipspiceland

    @phil
    I have 50 BMY  $25 October calls that I am considering exercising on expiry, then executing a 1/2011 Bull Put Spread, 26/30, combined with selling the 1/2011 $26..00 Calls.
    At today’s numbers, would provide a credit of $4.54 on the sale of the calls and put spread, net into the stock, $23.17.
    IF BMY trades at $27.00 at expiration in January I would net $19,000 if I close the position or depending on the January price of BMY I may repeat the trade.  This appears to be a 16+% yield (without one fourth of the 4.71% dividend) over 90 days, and if done over 4 quarters, could be nearly a  68.7% gain.
    Any thoughts would be appreciated.
    And thanks for the PCLN call sale suggestion.

  148. gel1

    ben1be
     
    nice site… who needs politics with all that interesting stuff.  Question.. Is that timber framing done with white antique oak.  I am currently building a house with an entire antique barn from Pennsylvania, that is being recycled into finish material for the interior.

  149. Pharmboy

    QE2 debate rages on…..Why QE2 will be either a small or massive failure….and this chart is the grand-daddy of them all.  I have been harping on the velocity of money and how it is not moving in the right direction.  Now I have my proof.

  150. Phil

    Earnings/Ash – Boy I WISH I were that organized!  Pretty much they are all overbought and if you go under the portfolio tab you’ll see our October’s Overbought 8 and those are/were my favorites.  I know PCLN and CMG are still playable and we just did WYNN, which wasn’t on the list….  There will be many more after we get a look at some earnings to see which sectors are weak and, just as important, what the sentiment is like.

    Nice job Dflam!

    SSO/Gucci – It was from last week, remind me in the morning and we’ll come up with something based on current numbers.

    401K/Savi – If you can sell puts, you have some flexibility but not being able to do verticals is very limiting for hedges as it means we have to force plays on ETFs just because they are cheap.  It is certainly worth checking with TOS to make sure they will allow it (rules may have changed under AMTD). 

    EPD/Dflam – I’m taking it that you BOUGHT the March $33/37 bull call spread and SOLD the $34 puts as your general tone was bullish.  I think you can cash your vertical for $3.70 so why not just take it off the table rather than mess around?   On the put side, you collect .50 easy and you want to make it hard but why not roll the March $34 puts to the Nov $40 puts for a .15 credit.  Those will expire early and you can make .75  over and over again just selling the puts without risking your vertical profits if you feel they will hold $40.

    BMY/Flips – I like the spread but why own the stock?  $125K is a lot to tie up to make $19,000.  You like BMY and you are willing to own 5,000 shares so you can just sell the 2012 $30 puts for $5.50 ($27,500 with net $27,500 margin on 50).  That makes 100% on margin in 15 months and you can stop there or pair it with March $24/27 bull call spread at $2.05 but that leg isn’t that exciting and I think you should just be happy if they hit $30 in a year and you have your $27,500 to keep.  Meanwhile, you have $97,500 to put down on other things…

    Good chart Pharm!

  151. Maya1

    After the shenannigans with Fidelity, where it takes them till WEDNESDAY to remove expired WEEKLY calls, I need to move!
    Regarding TOS, if one gives them $1m or $10m, any chance they go BK or something, and all is lost?
    BTW, Fidelity gave me 50 free trades worth $400, for my $2500 lost opportunity….wheepeeeee, in the wind!

  152. http://ben1be.tumblr.com/

     gel1
    Thanks for checking out the site.
    I`ll put up a few more photos of an addition I built with black walnut and native white oak.
    You are welcome to post the progress of your house on the site, from taking down the barn to completion. 
    That garage is an amalgam of woods, some white oak.

  153. ben1be

     Cap
    How do you get the site linked to your username?

  154. ben1be

     FSLR and solar charts for today.
    http://ben1be.tumblr.com/

  155. augrusot

     Maya1, TOS was purchased by TD Ameritrade. TD Ameritrade is owned by TD. TD is one of the largest banks in Canada. A very stable, well run organization. I don’t think you have anything to worry about them going BK.
    Tony

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