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Which Way Wednesday – Topping or Popping?

SPY WEEKLY CHARTGoaaaaaaaaaaaaaaaaal!  

When we first began following the Alpha 2 TradeBot pattern on Jan 3rd (see Stock World Weekly for current chart) back on Jan 3rd, I said: "Let’s assume we get that extra 2.5% between Friday’s close and expiration day – that’s going to take us to Dow 11,850 and S&P 1,285."  Yesterday the Dow hit our 11,850 mark, 2 days ahead of schedule!  If we break higher here (and the S&P is already at 1,295 – see David Fry’s chart) then we are "off the charts" and possibly running a whole new series – which is very possible as last year the IBanks didn’t have $25Bn worth of POMO a week to feed into their machines – that has to be worth something right?  At least 10 S&P points

If, on the other hand, S&P 1,300 becomes a hard stop and the Dow can’t hold 11,850, let alone break up over 12,000 – then the second part of my prediction was that we would pull back to Dow 10,900 and S&P 1,188 – a test of the 200 day moving averages.  If we get that pullback and those levels hold, THEN we will be happy to get on the bullish bandwagon – we just want a test!  

Not, of course, that we are waiting around doing nothing.  We already had our "Secret Santa Inflation Hedges" and, at this point, you either have them or you shouldn’t even look as they are up well over 200% already and the market is "only" up 2.5% since then.  We were waiting patiently for Russell 800 to confirm our Breakout 2 levels and we not only got that but we got several nice tests since then so we’ll have to put that one in the "win" column as well for the bulls.  

While I don’t like chasing the MoMo stocks higher, AAPL and IBM show us that there are some solid fundamentals underlying the big boys and I mentioned in the Morning Post of the 6th that I did like CSCO ($20.77 at the time) and GLW ($18.98 that day) as solid, go-forward positions.  Even without our option plays, they are both up nicely in less than two weeks – certainly a higher percentage (5% for GLW, 2.5% for CSCO) than AMZN, which is up $3.50 (1.8%) or NFLX, which is up $6 (3.2%), who I cautioned to avoid in the same post.  Why would we want to commit $195 to NFLX when we can buy 10 diversified blue chips for around $20 like GLW and CSCO and it’s very doubtful that they will fall victim to a dip the way fellow MoMo play CREE did last night on a relatively small miss?  

This is about RISK MANAGEMENT folks – a concept that investors seem to have thrown out the window lately.  Why should we play the high-flyers when we can make relatively small capital commitments to leveraged trades that will leave the MoMo stocks in the dust?  For instance, in that same post of the 6th, we discussed the progress of our Breakout Defense Plays and one was the FAS Apr $20/25 bull call spread at $2.70, selling the Apr $21 puts for $2.55 for net .15 on the $5 spread.  At the time the spread was netting $3.05 (up 2,033%) and today it’s at net $3.50 – that’s up another 15% in two weeks, even if you were that late to the party.  $3.50 is up 2,233% and the trade still looks in no particular danger of failing its $4.85 profit goal.  

So screw those MoMo stocks – if they keep going up, we have 100 other ways to make many multiples of their gains without making all or nothing bets on their earnings.  Of course, even 15% is nothing compared to the naked FAS April $27 calls that we picked up for $1 a while ago and were "only" up 55% on the 6th.  It’s been a good few weeks for FAS, who are up to $31 now and those April $27 calls are now $5.85, up a nice 485% from our entry but even up 277% in two weeks for the late-comers (and we got a really nice-reentry on the 7th).  NFLX who?  AMZN what?  

This is why I never understand the excitement about following these silly Cramer-type stocks.  If things are so gung-ho fantastic that people are willing to pay p/e’s of 75-100 for high-risk stocks, then surely we can make small bets that the financial sector will rise or the price of crops will continue to creep up.  In fact, DBC was another play we discussed that day (these were free trade ideas, right in the morning post for millions of people to see) and our play there was the Jan 2012 $26/30 bull call spread at $1.40, selling the 2012 Jan $22 puts for $1.10 for net .30 on the $4 spread.  At the time the spread was up to .85 and up 183% but that was out of a potential 1,233% max gain so the train had hardly left the station on that one.  Today DBC is at $28 and the $26/30 spread is up to $1.80 while the puts have fallen to .65 for $1.15, now up another 100% at 283% just two weeks later.  Or you can buy NFLX and make 3.2%, biting your nails every day and tossing and turning every night.  Do I really need to give you any more examples?  

Of course we don’t clear 283% because we hedge.  Our short-term hedges are getting killed but that’s fine as it means our long-term spreads, which are the majority of our cash in play – are doing very well.  When that changes and the market drops – we will get a sharp pop from our short-term hedges (see this weekend’s review of our $10,000 Virtual Portfolio for a good idea of how that works) which balances out the loss of our longer-term positions, which allows us to calmly decide if it’s time to take them off the table or ride out the pullback.  Whenever we do get a pullback, like we did on the 7th, the cash profits from our short-term hedges can be used to initiate another play.  On the 7th we discussed the long-term pair trade of selling the AAPL 2013 $175 puts for $8 and buying 2 SPY 2012 $125/135 bull call spreads for net $1.60 on the potential $20 play (if the S&P finishes above 1,350 in Jan 2012.  

The AAPL 2013 $175 puts were already down to $5.90 yesterday and the SPY spreads were each $5.35 for net $4.80 already – up 200%!  What was our bet there?  That AAPL would not fall all the way to $175 and that the S&P would go higher.  This is not rocket science folks – this is what we are trying to teach over at PSW!  The margin on the short AAPL puts was net $1,600 for a contract and the spread was another $960 so, rather than buy $2,560 worth of NFLX (13 shares), you could buy a single spread like this and that spread is now up $360 while the 13 shares of NFLX are up $78.  

Now, which is more likely to happen?  Will AAPL drop below $175, forcing you to buy the stock, or will NFLX drop 10% and cost you $250?  Our spread outgains the MoMo stock almost 5 to 1 on the same cash + margin commitment – we do NOT need these stocks to make money.  Please don’t let yourself get sucked into them – especially here at a critical inflection point for the market!  

We don’t have to BELIEVE in the rally to make money on it.  If we’re watching a 3-Card Monty scam and you can see that the the suckers NEVER find the queen (not when there’s real money on the table) – then why should we not bet against the suckers?  Look – we don’t MAKE them play.  In fact, I spend a great deal of time and effort trying to explain to people how the game is rigged but, if they are going to keep playing, we may as well make a few side bets, right?  The trick (as demonstrated in the video) is to know when to fold up the game and walks away.  Holding our Breakout 2 levels through next week will indicate the game isn’t over yet but we do know enough to keep our eyes out for any sign of trouble – even while we’re enjoying the game.  

The 7th marked the end of our Q1 promotional week, where we give away free trade ideas in the morning posts (don’t worry, we’ll do it again in April!) but that’s nothing compared to what we do in Member Chat every day with our trade ideas.  Monday, the 10th, for example, in Member Chat it was the DIA Jan $116 calls for $1 (now $2.35, up 135%) at 9:48, SKX short Apr $20 puts at $1.90 (now $1.25, up 35%) at 9:58, short DIA Jan $115.75 puts at $1.15 (now .10, up 91%) at 10:15, the DIA Jan $116 calls again at 10:16 (I REALLY liked them), NFLX Jan $190 short calls at $4 (after a roll, now $5, down 25%) at 10:44), BIDU Weekly $100 puts at .40 (total loss, 100% if not stopped out) at 10:53 and QID Jan $10 calls at .94, at 3:47, which we rolled along to Feb $10s for .15 more (see $10K Virtual Portfolio review) and doubled down, now .70 so down 35% so far.

That’s how we’re playing the markets at the moment – a little bit bullish and a little bit bearish – we’re not too proud to be wishy washy since taking our short-term profits on both sides when the market gyrates can lead to some very nice average gains while we wait for our longer-term, hedged ideas to play out.  As I lectured in this weekend’s educational post – why would you want to be 100% bullish or 100% bearish in this crazy market when you can make money on both sides of the aisle.  Again, compare these nice little trades that make a quick 20-100% here and there to sitting on NFLX at $195 a share and hoping it goes to $250 some day.  Frankly, I don’t even know why anyone would

AAPL had blow-out numbers last night so good call by Cramer not to lose faith but I still think $350 is plenty to get out of the stock.  This week, I’ve been giving Members some ideas on how to get out of AAPL stock and swap into option strategies that let them participate in a move from $350 to $450 without the downside risk if AAPL falls back to $300.  That’s hedging – it’s what you should do when you have a huge winner like AAPL (or NFLX or AMZN or PCLN for that matter).  The higher the market goes without a correction, the more nervous we get that the correction will come.  As noted in David’s S&P chart – up 20% on less than 1/2 of normal volume means you are going to have a very hard time finding buyers on the way down. 

But, will there ever be a down?  That is the question, of course.  We did the big macro overview thing this weekend and we’re in a watch and wait mode this week as we watch our Alpha 2 pattern play out.  It didn’t matter that Steve Jobs got sick yesterday so why should it matter that AAPL did great today?  On that logic we took a spread on AAPL, expecting them to stay in range and that trade is looking very solid at the moment.  Today, GS is a little disappointing but so what?  Pimco’s Kashkari says the US faces a debt crisis without drastic spending cuts – yawn!  Housing starts fell 4.3% in December to fresh 20-year lows but nobody cares.  ICSC Retail Sales were off 0.1% last week but that’s an improvement from last week’s 3.2% drop although the year/year number is now just 1.4%, when it was celebrated at 3.5% last week.  This is the worst rate since last May but it doesn’t fit the MSM narrative so I doubt anyone else will bother you with it today. 

Other than that, it’s a slow news day.  Assuming, of course, you don’t give a damn about violent global food riots that are threatening to topple governments around the World.  I guess we also shouldn’t care that budget cuts are forcing Camden, NJ to cut 1/2 of it’s police force and 1/3 of its firefighters – a heck of a plan for the city that already has America’s highest crime rate!  Well, that is, as we like to say "Somebody Else’s Problem" and is not reason not to BUYBUYBUY is it?

Still, if you do have the time,  The Economic Collapse Blog has a great article on "Austerity in America" – just something you may want to consider before you let it all ride on what are becoming some very crowded trades!  

 


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  1. 1020

    Good Morning!

  2. Cap

     Good Morning.
    Oh yes, those Socialist Paradises (er, capitalism w/ a conscience).
    Which ones are those Phil ?  LOL …. Venezuela ?  Former USSR ?

  3. mike5885

    Futures overnight:  H =1296.25, L =1290.50
    they have defended that 1291-1290.50 area hard
     
    NET $ = +1.47%,  dx/y = (.68)% huge disparities and divergence, just like yesterday

  4. mike5885

    Cargill selling its Mosaic stake
     
    Cargill has been very shrewd over the decades, maybe close to a top in commodities, not sure just thinking out loud
     
    Funny Money probably still trumps all

  5. mike5885

    F = 1289.75
    Net spiking here to the bell
    NET $ = +1.82%,  dx/y = (.77)%

  6. flipspiceland

    Fidel Castro:   "Communism (Socialism, with an attitude) does not work.  I was wrong.  All you government non-workers are fired. Go get a real job".

  7. stjeanluc

    The spiral of death is starting in Spain:
    http://ftalphaville.ft.com/blog/2011/01/19/463226/even-more-spanish-banking-negativity/ 

  8. stjeanluc

    Investing games in China:
    http://ftalphaville.ft.com/blog/2011/01/19/463001/chinas-bond-purchasing-games/ 

  9. mike5885

     C = 1293.73, F =1290.75
    10yr = +.24%,  30yr = +.09%
    VIX +.32%
    NET $ = +1.48%,  dx/y = (.64)%

    oil +.29, Gold +7.90

  10. terrapin22

    Pharm / NUVA – good news and nice move.  thanks.

  11. mike5885

    C = 1291.72, F =1288.50
    10yr = (.21)%
     VIX +.88%

    NET $ = +1.42%,  dx/y = (.64)%

  12. exec

    Good Morning All,
     
    Does anyone using Streetsmart Pro at Schwab have trouble drawing trend lines?  I occasionally (like right now) have anomalies where I try to draw a line and it either snaps to some off the page location or simply snaps back to the start point and doesn’t leave a line.
     
    Talk about frustrating.  I can’t figure out why it does it, but sometimes if I go through all my charts and erase all the trend lines it will stop doing it.
     
    Any suggestions?

  13. samz3700

    Should we buy the f* dip at 11am on iwm?

    If I am considering it that must be a warning sign that we finally go lower.

  14. Phil

     Good morning!  

    Very boring watching and waiting again today.  You have to be concerned that great earnings and guidance by AAPL and IBM are not running us higher.  What is the story today – Yesterday, Steve Jobs being sick didn’t matter but today, AFTER we see mind-blowing earnings, it does?  

    Nope, sorry, as I said above, it’s fixed so bad news may not matter but good news doesn’t either – the Bots will simply drive the indexes towards their goals because you can’t program fundamentals into a robot – they are just point and shoot instruments and the Gang of 12 can unleash their fury on the markets and draw all the technical traders in time and time again (and the technical traders look like geniuses, don’t they) until that fateful day when the fundamentals once again rear their ugly head in a manner that is too big to ignore.  

    Who knows, perhaps I’m old-fashioned and clinging to a defunct way of looking at the markets, where the actual earnings potential of a stock determines the amount of perfectly good capital you should tie up in it but I would like to at least be POSITIVE that the technicals are real before playing them like they are.  

    Anyway, the only technicals we care about this week are Dow 11,850 and S&P 1,185 – those need to hold to keep up the bullish premise.  I put up a new Bear play on BHP in last night’s comments as well as a way to play MOS for a buyout but keep in mind I am no fan of that sector as I tend to believe that you’re probably at a top when food prices are causing governments to be overthrown (again, perhaps I am just old-fashioned).  

    So that’s it for this morning.  I don’t have anything particularly clever to say.  We went aggressively bearish on yesterday’s open and so far, so bad on those plays as they ran the Dollar down to 78.50 this morning (and oil up to $93 with our short futures play still the $92.50 line).  If they can keep pounding the dollar down, then there is no limit to how high they can push the market but 78.50 has been solid support since December so we’ll call it a "bullish" signal if we break below that.  

    Don’t forget it’s January expiration day on Friday so anything can happen and probably will over the next 19 hours of trading. 

    Let’s have some fun!  

  15. mike5885

     C = 1290.49, F =1286.75

    NET $ = +1.61%,  dx/y = (.67)%

  16. nicha

     Phil/IBM – from your weekly income plays, I played the below. The $150 calls are now $5 (no premium) and the $155′s are $4.3. Should we roll it to the Feb $150′s.
    5 IBM Jan $150 calls at $1.65 ($825) can be sold against 4 April $155 calls at $2.49 ($996).  

  17. mike5885

    10yr = (.56)%,  30yr = (.46)%
     
    only slight selling
    if the Chinese wanted to send a message, they could sell the bonds hard to make sure we know who is in charge (just me talking out loud), would have to be bigger then what we are seeing though, much bigger

  18. chuckerd

    I have back-tested a new strategy, and it shows wildly successful results over the past 3 months.  The only variable is "Market is open".  If Open = Yes, then everything goes up.  Thank The Bernank!

  19. yodi

    Nicha IBM 150 I rolled them to Apr 155 they can not go up for ever!!!

  20. hoss18

    Phil, after this recent run up, I’ve found several positions have a nice profit I would like to protect.  I have cashed the one’s I have no interest in holding, but have some that I prefer to hold onto on a longer horizon.  So I’m thinking about putting together a medium term hedge to protect the portfolio for the next couple of weeks.
    Am thinking about TZA April 14/17 spread for $0.90 and selling the Apr 12 Puts for $0.80, so $0.10 on a $3.00 spread, with potentially bailing the put to the July 10s or Jan 2012 $9.
    Thoughts?

  21. Phil

     By the way, I should have emphasized above, the top I see in the fact that people are rioting over food is because they are rioting over PRICES.  There is no shortage of food, there is speculation in food driving up prices.  We have so perverted the concept of Capitalism in the past 50 years that we pretty much all buy into the premise that it’s GOOD to charge people as much as possible for your products and if speculators can help the market "find it’s best price" – then so much the better.  

    Once upon a time, prices when up and down because the Capitalist would aim to produce and sell a product at a reasonable rate of return and that profit goal would be generally fixed and prices would go up and down with fluctuations in input costs, capital expenses and labor.  That is not what happens anymore – now everyone tries to charge people as much as they possibly can at all times.  If you put up a business plan and told people you intend to sell a quality product at reasonable prices, the investors would laugh you out of the room!  "How much CAN we charge" is business school 101 as is the Laffer Curve, which was only invented in the 1970s but has schooled the past few generations as if supply-side economics was as certain as the sunrise.  

    Well, I could go on all day about this but my point is that these are problems with speculative prices and those CAN be dealt with by government like China if they want to and that’s probably what this meeting is going to be about between Hu and Obama.  We’re near the boiling point and somebody needs to turn down the heat.  

    Of course if China’s solution is to decouple the Yuan then bye-bye dollar and don’t think Obama won’t trade another 10% of our nation’s wealth (through dollar devaluation) in exchange for a promise from our banker to keep funding our debt (China stopped buying our Treasuries last month to give that threat teeth).  

    Meanwhile, RUT futures are back below 800 and that was a great spot to go long yesterday so I like the upside futures with tight stops over the 800 line and we can also use the IWM $79s ($1.21) over the $80 line but ONLY over that line.  They opened at $1.72 so looking for .25 seems reasonable as a goal (and, of course, that’s 20%).  

  22. nicha

     Yodi/IBM – it was a pair trade with buying 4 Apr $155 call against selling 5 Jan $150 calls. Are you now naked the 5 Apr $155 calls?

  23. flipspiceland

    @Phil 

          When has this ever failed:(Regression to the Mean, approximately)?
    DF = (s12/n1 + s22/n2)2 / { [ (s12 / n1)2 / (n1 - 1) ] + [ (s22 / n2)2 / (n2 - 1) ] }

  24. amatta

    WYNN going up in a down market all because Citi raised its estimate to $110 from $90, while they are $120…irrational exhuberance at its greatest! 

  25. shadowfax

    The Bots are selling after 2 days off with the exception of oil. Is that what is holding up the DOW?

  26. yodi

    nicha IBM I am trading them against a Jan 13 150 long so a synthatic CC and keep on rolling them just make sure you do not get asigned!!!

  27. Savi

    Phil--Tx for the  Jan TZA short 14 puts trade--had to close out today as will not be here the next few days--did not want to see profit go down the drain

  28. stjeanluc

    Barry had a good post about China and the US debt:
    http://www.ritholtz.com/blog/2011/01/is-china-really-funding-the-us-debt/
    To summarize, they own 7.5% of our debt so they are not the landlord just yet! Actually we owe more to oil exporting countries. But they have their own interest at propping the dollar… 

  29. mike5885

     C = 1288.28, F =1284.75
    10yr = (.27)%
    VIX +2.77%

    NET $ = +1.03%,  dx/y = (.52)%

  30. Phil

     Cap you are like an attack dog trained with a few kill words that send you into a frenzy and one of them is Socialism!  

    Cargill/Mike – I agree, we talked about that last night.  

    Spain/StJ – The disaster that is not going away.  Spain is not offering realistic rates and are being shunned at the moment. The China thing is scary – they can buy and sell at will and yank the global markets around any time they want to.  Hu doesn’t need tanks to take over other countries, all he has to do is threaten to dump bonds…  

    IWM/Samz – Good call, GMTA!  You do want to pick a line and stick with it though, not just buy because you think something is turning as that can get you in trouble.  IF the RUT is going back up THEN $80 should not be a big deal on IWM, right?  

    Copper took a dive – back to $4.37 from $4.44, which is a pretty big move fro an hour.  Don’t blame the dollar, it’s still lame at 78.37.  Silver touched 29.50 and fell back to $29 too.  Oil is down to $91.60 already so the stop line is $91.75 (.25 trailing) on the futures shorts there.  

    IBM/Nicha – It’s not usually a good idea to react to the initial move up (don’t buy into the initial excitement) so just keep your eye on the roll, which could be the $150s or you could DD on the Apr $155s (8 at avg $3.47) and roll the 5 Jan $150s ($2,600)  to 10 Feb $155s (now $2.65, $2,650) and that sets you up for a roll to the March $160s (not printed yet) or at least the Apr $160s (now $2.30) and that would put you in a $5 bullish spread if IBM keeps going up and forces you to roll.  So just keep your eye on those relationships and you only have to worry if the net cost starts to become unfavorable.  

    LOL Chuck!  Sounds foolproof…

    TZA/Hoss – Very good spread idea.  We did them last week when the RUT punched up to 805 and I still like that one as good bang for the buck. 

  31. tuscadog

    Phil / Comments don’t seem to be accessible today?  Server down?

  32. tchayipov

     Pharmaboy / PDLI
    is it time to DD??

  33. rustle123

     Phil, dangerous move or not?  This morning I sold the Feb 360 calls on AAPL for 4.50 and bought the 330 puts for 4.10.  Figured if the stock didn’t go up that much after earnings, I don’t see what will make it leap to over 360 in a month.  Also thought if the market does start to fall, AAPL can be in the low 330′s this week and I can unwind the positiion or possibly just the puts and hold the calls I sold.

  34. shadowfax

    Is this a dip or the start of the sell off?
    Since there was no gap down at open beware the correction. Mistery buy program in USO on the dips.

  35. nicha

     Anybody have a recommendation or alternative to tradelog? Thanks.

  36. Phil

     Regression/Flips – I think it’s N2 in the middle there.  Not sure what would happen with just the 2!  As to when it fails, when your variables aren’t measured in constant dollars!  Try doing that over time and inflating your figures by 1.5% per quarter…

    WYNN/Amatta – Actually there were some nice Macau numbers to support them.  

    Dow/Shadow – $1 on a Dow component is about 8 points, maybe 8.5 so IBM up $4 is 35 Dow points by itself.  

    TZA/Savi – Smart move.  Take money and run and we’ll find something else to trade tomorrow (or whenever you are back).  

    China/StJ – Well it’s only 7.5% because we’re friggin’ $15Tn in debt!  Otherwise, $1Tn would seem like a lot of money to owe someone.  Also, that’s kind of misleading as half the debt is owed to the American people and I’m pretty sure the Government has no plans to pay that back already so keep your eye on the side of the pie they haven’t already defaulted on.  

    AAPL/Rustle – Well they are getting a lot of upgrades as they blew past the highest expectations and raised guidance above that so it’s now reasonable to say that, if they can maintain this rate of growth, $450 is not out of the question for 2011.  On the other hand, everyone is long already so it’s kind of hard to fuel a big rally but Feb is a long time so make sure you stop out if AAPL breaks $345 or the Nas pops 2,750 unless you really don’t mind rolling.  

    Wow, so much for IWM $80, now we’re below 79.50 with S&P testing 1,285 – if that breaks, the Dow should fail next.  

  37. Phil

     Access/Tusca – Your CC did not go through yesterday.  Greg put you back in but go update your account info (top right of screen is link) or it will happen again tonight.  

  38. z401

    Phil
    i’m going with your premis that JPM is superior to GS.  What price wouldyou be a buyer?
    Thank you.

  39. Pharmboy

    Good morning!  One thing I can say is that Pharma is on the prowl, everywhere.  Deals are going to be made this year, as patents on blockbusters are starting to roll off the protection line. 

    NUVA – finally. 

    MKND – getting thrashed and the data is not even out yet.

    PDLI – let’s see where it settles as the lawsuit is a fear…but not a killer.  I now like them even more.  They are a cash machine.

  40. mike5885

    C = 1286.52, F =1283.00

    10yr = (.27)%
    VIX +4.10%

  41. jvest

    Phil, I noticed thinkorswim has options on /CL oil futures. Have you ever considered any option spreads on oil?
     

    Also, any play on CREE now that it’s down 15%, or is it too hot to touch?
     

  42. Pharmboy

    TSRX – 1/2 out.  Nice run for them.  Time to take some off the table.

  43. Pharmboy

    Too funny, but a little scary as well…..still  one of my favorites (CRIS).

    Michael Shulman from Marketwatch says, "I believe the technology will be a success, which means this $2 stock could be worth $40-plus. If I’m wrong, you will probably be looking at a 50-cent stock. I’d say it’s worth the risk."

  44. shadowfax

    CNBC
    Always bipolar now is considering a correction!

  45. nicha

     shadowfax/CNBC – maybe they are watching Phil.

  46. japarikh

    Phil

    Interested in initiating a new long position in AAPL given earning results. What would you suggest?

  47. Pharmboy

    MOS – how about that….someone bought at 93.89 AH yesterday.  Now 79. 

  48. mike5885

     C = 1286.09, F =1282.50

    10yr = (.61)%,  30yr = (.42)%
    VIX +4.79%
    oil  (.02), gold  +4.0

    NET $ = +1.23%,  dx/y = (.60)%

  49. Phil

     JPM/Z4 – Well, they are a bit extended now but $40 was our last buy-in and you can sell the 2012 $40 puts for $3.55 and buy the $40/47.50 bull call spread for $3.95 for net .40 on the $7.50 spread and that’s not a bad way to take a first run at them as your worst case is you get assigned at net $40.40 and then you could sell (for example assuming 2013 prices then match 2012 now) the 2013 $40 puts and calls for $11 to drop the net to around $30/35 into 2013.  

    Oil options/Jvest – Not really, it’s hard enough just trying to catch the quick moves on /CL!  Also, keep in mind the contracts roll over so once a month CL jumps up $1 so that’s a handicap you’ll always have playing them long-term on the short side.  Surprisingly, the contracts are nice and liquid-looking and I do like the fact that there’s a strike every .50 so maybe we should give it a toss on the next run-up.    On CREE – see last night’s comments.  I don’t like them but I do think they are playable to hold $50.  

    Europe closing down 1% – that might be it for our selling.  IWM $78 calls are the way to go at $1.75, stop if IWM can’t hold $79.50. – these are to protect short-side gains, of course! 

  50. exec

    Phil,
     
    Just curious.  Why do you think our selling might be over based on Europe closing down 1%?

  51. shadowfax

    nicha
    CNBC is just one that watches Phil, what is fun is they mostly laugh at him on air but never reviel their positions. Do they practice what they preach?

  52. samz3700

    Phil
    If we do start heading down are there any sectors etfs you prefer on the short side -
    xme, xlb, xli, or xrt

    Thanks

  53. mike5885

    C = 1287.03, F =1283.50
    10yr = (.56)%
    VIX +3.72%

  54. Phil

     AAPL/Japar – I see no benefit to owning the stock.   You can sell the 2013 $280 puts for $30 and buy the $350/450 bull call spread for $33 so net $3 on the $100 spread and maybe $63 cash + margin on the spread.  Even if put to you at net $283, you skip a $60 drop in AAPL 20% and your upside is still 30% of the current price so much better risk/reward than buying the stock and, of course, you can layer it if AAPL pops $400 so it’s not like the $100 is a hard stop.  If AAPL sells off and you think it’s an opportunity – you can just roll down the $350 calls.  Right now the spread between the $350 and $400 calls is $19 so figure a $50 drop in AAPL would let you add $20 and roll to the 2013 $300 calls with a $150 spread on the caller at net $23 – what’s not to like???

    Oops, forgot to say 20 in the 1050P on the IWM Jan $78 calls, now $1.78 and the stop is $1.65.  

     

  55. drmtv10

     Hi Phil,
     
    FXP (buy price @40) and also sold calls (Jan 12, strike $50) around $14.50, net ~$25.5.  Current ask for FXP Jan 12 50C is about $2.75, which makes the trade a net neutral to close out at $25.5+2.75=28.25, assuming I can sell FXP at 28.25.  Do you have recommendation on how to make a better exit? (I am willing to wait a year to collect remaining $2 in premium but worried about decay in FXP during this time period.. Lowering the strike (adjusting the short call) does not seem to provide premium due to current market condition either).
     
    Thanks,

  56. Pharmboy

    FYI – IPXL is not making generic Lipitor (as I noted here).  I picked this up on several news sources a week ago, and this was a basis for my entry.  I still like them for other generics, but without Lipitor, they are not as interesting.  WPI is the generic maker that has filed with the FDA.  I have updated the article to reflect that.

  57. williex

    well that was a short trade IWM  stop just got taken out. 

  58. Phil

     Selling/Exec – I think that’s where the selling pressure is coming from.  Futures were jacked up until Europe opened and Asia had a decent day (all but India up and they have an excuse – riots) but we turned sour at about 3am, which is when the EU opens because they haven’t stupefied their population like we have and they still read the papers and worry about silly things like 100% debt to GDP ratios and people who are starving to death because of high food prices and 20% unemployment and all that other nasty stuff Cramer says we should ignore.  

    Cramer may not be wrong – as we talked about on the weekend, if you have a pool that has a terrible 50 gallon a day leak you can ‘ignore it" as long as you have a 60 gallon per day hose filling it up.  You might even raise the water level and you can fool yourself into thinking it’s BETTER THAN FIXED!  In fact, you can ignore it right up until you get the bill for 4,800 gallons of water that you pumped in that month but, if you are the Fed – you get to declare that bill an asset and use it to roll over and "pay" the next month’s bill.  Only when the Fed finally runs out of money or the hole becomes bigger than their ability to pump does the water level actually begin to fall.  The question is – are we there yet?  Cramer thinks no way but, again, I see riots breaking out in "civilized" countries and I think we may be a little closer to the breaking point. than the spoiled and isolated top 10% investor class may realize.  

    Short side ETFs/Samz:

    • EDZ is always fun.  You can sell Feb $19 puts for $1 and buy the Apr $19/22 bull call spread for $1 so a free look at $3 of protection if they hold that $19 line for 5 weeks.  XME is kind of redundant to this as lower metal prices will hurt emerging markets who sell them.    
    • XRT may still be in for some bad news and you can play them into earnings with the Feb $47 puts at $1.24.
    • SRS has been a nightmare but I see VNO having a lot more trouble than usual so I like the April $19 calls for $1.10 into earnings in the hopes that a red flag comes up in the sector.  

    FXP/DrMTV – I would just get out unless you want to risk it, in which case you can hedge a bit with the above EDZ spread and sell the June $25 calls for $2.10 and buy back the calls and then wait for a nice move up to sell some more calls.  You are committing to DD at $25ish in June and then you can cycle through selling longer-term puts and calls again.  If you do not have that much faith in a long-term china play – then why on earth wouldn’t you cash out now and walk away?  

    IWM//Willie – Good job getting out.  We don’t mess around with momentum trades, especially when they are protective.  We sacrifice a little in case the indexes turn up to prevent us from getting bounced out of gains on the short side but once we get that next leg down – there’s no reason to hold the long plays.  

  59. Phil

     IWM – We DO, however, want to get back in over $79.50 so we’ll spend the nickel and go back in if we have to – that goes for the 1050P as well.  20 contracts losing .13 costs us $260 and another nickel and another is $200 more but it’s worth it as we either hold onto our QID and DIA gains or we have a lot of confidence we’ll bounce more than .25 ($500) to offset the early loss.  

  60. craigzooka

    Phil, Jvest.  I have been playing the oil shorts using options for several months now with great success.  One thing you have to be carefull of is that each options contract is attached to a specific months future.  The nice thing is that the contango actually helps us shorting when using the options.  For example, /cl is currenlty the FEB future which is at 92.28.  But the MAR future is at 93.32.  I think this greatly helps out our rolls in the event we are wrong.  If you short a FEB 96 CALL for $1, you can currently roll out to march 101,101.5.  This would not be possible if the MAR future was also trading for 92.28.  After trading them for a while I have noticed some trends.  The first is, if you short the option that is about a $1 you can almost always roll for $5 in position about even.  Also, the premium collected to marging put up is nuts.  Right now you can short the FEB 96 CALL, collect $1000 and they only hold $2200 in margin.  The margin rules for futures options is different than the rules for regular options.  Now, as Phil will no doubt tell you, margin is a double edged sword.  Its great if you scale into positions and gives you lots of wiggle room, but it will also allow you to play way to large for your account and blow it up in short order. 
     
    To illustrate the managing a position when /cl explodes against you,  Back around OCT first I went short when  /cl at $75 by selling whatever front month option was at $1.  If you look at the chart you will notice /cl went from $75 to $83 in about about 3 weeks.  So I rolled to november, doubled down on the calls and shorted whatever NOV PUT was at $1.  At this point my position was short 2 CALL and short 1 PUT.  On november 18th with /cl at $85, I managed to close my trade for $1000 profit.  
     
    So, you can see that you have much wiggle room when shorting the options, since they give you so much margin. 

  61. Phil

    At the open: Dow +0.03% to 11841. S&P -0.11% to 1294. Nasdaq -0.14% to 2762.
    Treasurys: 30-year flat. 10-yr -0.05%. 5-yr +0.01%.
    Commodities: Crude +0.34% to $92.62. Gold +0.56% to $1375.90.

    Currencies: Euro +0.95% vs. dollar. Yen +0.53%. Pound +0.18%. 

    10:00 AM On the hour: Dow +0.04%. 10-yr +0.13%. Euro +0.81% vs. dollar. Crude -0.41% to $91.93. Gold +0.3% to $1372.30. 

    11:00 AM On the hour: Dow -0.01%. 10-yr +0.03%. Euro +0.8% vs. dollar. Crude -0.35% to $91.99. Gold +0.37% to $1373.20. 

    11:27 AM The Fed buys $7.716B in Treasurys, of $39.06B offered by dealers, in a POMO that sees the central bank skipping most CUSIPs in favor of freshly issued three-years. Treasurys turn up: the 10-year yield -0.02 to 3.345%, 5-year -0.02 to 1.94%. 

    12:00 PM On the hour: Dow -0.01%. 10-yr +0.12%. Euro +0.84% vs. dollar. Crude -0.16% to $92.16. Gold +0.14% to $1370.10.

    MBA Mortgage Applications: +5% vs. +2.2% last week. Thirty-year fixed mortgage rate decreased to 4.77% from 4.78%. 

    ICSC Retail Store Sales: -0.1% W/W, vs. -3.2% last week. +1.4% Y/Y, vs. +3.5% last week. "Ice and snow hit store sales hard", leading to the slowest Y/Y rate since May.

    Redbook Chain Store Sales: +2.5% Y/Y vs. +2.8% last week. Winter storms and a satiated consumer result in soft sales so far this month.

    Dec. Housing Starts: -4.3% to 529K vs. 554K expected and 555K last month. Permits +16.7% to 635K vs. 560K expected and 544K last month. 

    30 Pieces of silver for selling out US Aviation Industry:  General Electric (GE) plans to announce $4B in deals with China in energy, rail and aviation during President Hu’s visit to the U.S. this week, FT reports. The deals are expected to create 4,700 jobs in the U.S. 

    And Obama and BA get paid to look away too:  President Obama and Chinese President Hu Jintao open their Washington summit announcing $45B in export deals, including China’s purchase of 200 aircraft from Boeing (BA). It’s part of a visit with a lot on the agenda and a number of agendas – including clean energy cooperation and the steel industry asking for pressure on Hu over steel dumping. (earlier

    Told you the numbers were BS:  Rare earth exports from China dropped only 9.3% less year, far less than the 40% cuts bandied about. Did China mess up its quotas, or was all that talk for the benefit state-owned miners who saw the value of their holdings skyrocket. (MCP) -4.37%. (REE) -5.67%. (SHZ) -19.36%. (AVL) -5.6%.  

    Well, here’s one way to take the teeth out of regulations!  SEC officials say they have been forced to postpone investigative trips and abandon examinations of money managers who are more than a day’s travel away to cope with a restricted budget. Without investment in technology, the agency says it can’t deal better with issues such as the flash crash or improve the enforcement division that missed the Madoff fraud. 

    The stock market has been flashing yellow for a little while now, Joshua Brown says, "but this weekend [it] began flashing much more brightly and with an increasing urgency." Investor sentiment has run above 50% since October, the VIX hit its lowest level since July 2007… and Cheezburger Network just closed a $30M round of funding. 

    U.S. stocks have reached “a significant market top” that is likely to precede a drop of at least 11% in the S&P, market timer Tom DeMark says. “I’m pretty confident that in one to two weeks, the market will be in a descent,” citing indicators based on comparisons of the current closing level of the index with closing and intraday levels over previous periods. 

    Now this is a trend I like!  A record fourth quarter brings hedge-fund assets to a near-record $1.917T, according to Hedge Fund Research – sealing an almost complete recovery from the time of the Lehman Brothers collapse. Investors had a clear preference for macro strategies and allocated assets to smaller hedge funds. 

     

    Northern Trust (NTRS): Q4 EPS of $0.59 misses by $0.12. Revenue of $906.4M (-4.6% Y/Y) misses by $15M. Shares -3.8% premarket. 

    Bank of New York Mellon (BK): Q4 EPS of $0.55 misses by $0.02. Revenue of $3.74B (+13.2% Y/Y) beats by $0.17B. (PR

    Goldman Sachs (GS): Q4 EPS of $3.79 beats by $0.03. Revenue of $8.64B (-10% Y/Y) misses by $0.36B. Shares -2.4% premarket. (PR)

    Hudson City Bancorp (HCBK): Q4 EPS of $0.25 beats by $0.02. Shares +0.2% premarket. (PR

    As it consolidates facilities, American Express (AXP -2.5%) will lose 550 jobs and take fourth-quarter charges of $113M, and expects additional charges this year of $60M-80M. The bank expects Q4 earnings of $0.94 excluding the charge, vs. consensus of $0.95.

    U.S. Bancorp (USB): Q4 EPS of $0.49 beats by $0.03. Revenue of $4.72B (+7.9% Y/Y) beats by $0.19B. (PR

    Wells Fargo (WFC): Q4 EPS of $0.61 in-line. Revenue of $21.5B (-6.4% Y/Y) beats by $0.5B. Shares -2.3% premarket. (PR

    State Street (STT): Q4 EPS of $0.87 beats by $0.01. Revenue of $2.28B (+9.6% Y/Y) beats by $0.14B. (PR

    Regulators expect to start choosing as soon as this summer the financial firms that are ‘systemically important,’ and non-bank financial firms receiving that label will be subject to extra Fed supervision.

  62. edro00

    Jvest -
    I successfully played a 92.5/91.5 bear put spread on the /CL options this month.  The only thing of note is the premium stays very high until about 4 days before expiration so that may be the best time to enter.  I entered about 2 weeks before expiration and watching the spread was painful.  The options expire on the same day as the futures so no problem there.

  63. Phil

     Futures options/Craig – Nice overview, thanks!  You make an excellent point about rolling – it’s a fun way we can make money off the NYMEX boys rolling contracts every month.  Please chime in on these whenever you feel motivated as it will take me a while to get used to looking at them but you got my wheels turning now…

    Thanks Edro! 

    Wow – and THAT is why we have tight stops on momentum trades!  

  64. stjeanluc

    Le Monde in France is saying that a contract for 200 Boeing planes ($19 billions) is on the table today during the meeting between Obama and Hu.

  65. williex

    Phil,
    Looking for a roll or other idea.
    I sold a DAL Jan 12.50 put a while ago for .26.  Now it is a 1.08.  any ideas?  or take the loss

  66. biodieselchris

     Phil " I can haz cheezburger" just raised $30M so if your company can’t raise money I would be worried

  67. stjeanluc

    And desperate situations call for desperate (or strange) move. You can tell that some are getting pretty worried over in Europe:
    http://ftalphaville.ft.com/blog/2011/01/19/463561/reflections-on-the-weirdo-greek-debt-plan/
    Here in the US, no such problems. All we need is to buy more printing presses! 

  68. shadowfax

    Next IWM support about 78.90!
    Where is JRW when we need him?

  69. craigzooka

    edro00, that is incorrect,  For the FEB cycle the options expire in 28 days while the futures expire in 33 days.   Options settlement always comes several days before the futures contract settlement.  That way if you have to take delivery of a futures contract, you still have a couple days to close it before you have to deal with having a futures contract open at expiration.

  70. rustle123

     Doug Kass tweeted about 11:30am that posted on thestreet.com that "gun to my head Mr. Market would be down by 1% today, for the first time my bar mitzvah"

  71. craigzooka

    Edr00, I got tired of playing the spreads and just go short the naked options for exactly the reason you mention.  The spreads held their value till almost expiration day.  Where the naked options start decreasing in value much faster.  Also, their is something wonky in the way the CME calculates the margin,  For example I was short 7x 1point wide verticals but they were holding 8000 in marging, which was more than the max loss on the position.

  72. amatta

    Craig, 
    I have no way of trading the Oil futures, as Schwab doesn’t offer them. What is the underlying you are trading?
    Thanks 

  73. craigzooka

    One last comment, The liquidity on individual /cl options is great.  But I found getting fills on spreads to be quite difficult. 

  74. shadowfax

    Next FAS support 28.81!
    If that and IWM78.90 fail LOL BULLS!

  75. amatta

    Phil, 
    You recommended a few weeks ago the following with an SDS hedge I have been holding on for quite a while:

    SDS/Amatta – If you can drop the $27 ($3.50) puts to 2x the $24 puts ($1.30), I would do that.  You still have $1.55 left in the $24s so you can spend another $1.40 to pull back to the June $23s and that’s not a bad adjustment as you pick up $1 in strike and 3 more months for $1.40.  No need to roll the caller as you have a $6 spread unless they break around $22.50, at which point you’ll want to sell something for $1.50 and rol yourself down (currently you can get to the $20s for that price).  
    Would you kill it at this point and go with the TZA you recommended a few days ago and that Hoss mentioned today?
    Thanks

  76. exec

    IWM,
     
    All the volume seems to be on the down moves. 

  77. biodieselchris

     DOW failing 11850, SP failing 1285, RUT at 793, 
     
    They might hold onto it through expiration but Feb is going to ugly

  78. stjeanluc

    Interesting analysis site – they have a scanner for stock in various stages of accumulation, distribution. Check the blog link for a free trial. This was listed in Barry’s blog.
    http://alphascanner.com/ 
    And Phil, nice chart - http://alphascanner.com/Home/About

  79. amatta

     Phil, sorry forgot to mention I DID DO THOSE ADJUSTMENTS so I am currently in the 23 (Junes)/29 (march) spread with the 24 (march) puts…

  80. biodieselchris

    I’m taking my $20k in losses and learning a serious lesson: Stay away from TBT.
     
    To whomever sold me those calls: congratulations. And F you.
     
    If things look ripe I may buy put spreads on TLT, but never again am I doing anything but puts on leveraged funds forever more.

  81. stjeanluc

    BDC / TBT – I am curious, when did you sell calls and at what strike then? TBT has been in a up trend since mid-October. 

  82. exec



    Bio/Calls,
     
    That’s it….curse the bastard that sold you the calls……now that’s funny. 
     
    I don’t know if you’re Italian like me…..but this might cheer you up.

  83. shadowfax

    USO BOT buys stopped @ 12:59!

  84. yodi

    Phil  craig, Trading futures I have been doing this for a while now with good results. Trading oil corn and wheat. I set up my plays normally three month out but specially taking in to concern the growing cycles of corn and wheat. In addition one has to take in to concern unforseen items like floods explotions and draughts. Selling puts or calls you need to close your contract below a delta of .20. This leave you a good amount of room to play, in case things go against you.

  85. edro00

    craigzooka
    Thanks for the correction on the /CL options expirations.
     
    I don’t have PM so the margin to sell a $1 naked put is $4000 while the margin on a $1 bull put spread is only  $833

  86. morxlntway

    Pharm – might be a nice day to add some CLDX? No?

  87. yodi

    Phil on MOS Just sold my Jun 11 85 caller yesterday for 8.75 now 5.50 thinking of selling possible at this drop a 70 putter. your thoughts please thks

  88. biodieselchris

    Today’s no-brainer observation.
     
     Bad news is being ignored.

  89. Highlander

    Phil,
    What is your take on AAPL concerning expiry? Is expiry holding AAPL up or is it holding it down?

  90. exec

    Bio/Bad News
     
    It’s not just today…..the bad news has been ignored for a long time.  We shouldn’t they ignore it….if you don’t and have shorted over the last 2 years……you’ve been beat to a pulp.

  91. rainman

    Phil / UNG — I have an open bull UNG spread expiring on Fri, any thoughts on nat gas inventories tomorrow?

  92. JRW III

    Something wrong with this site today ? I’m having trouble posting.

    I think it’s turning on IWM 79.12; final support would be 78.82. Resistance on the way back up at IWM 79.25, 79.44, 79.69 and 80.06.

    I’m now 1/2 in TNA at $74.78 with orders keyed for more

    Good morning, BTW !!

  93. Phil

     DAL/Willie – Oh you missed it last week when we talked about people finally realizing that Airlines use a lot of oil…  Well, DAL is a nice enough stock long-term so if you REALLY want to own them (and you should never sell a naked put unless you do) then you can roll out to the June $11 puts, now $1.03 for better than even.  As long as that roll is even, there’s no hurry or you can just spend .18 to roll down to the Feb $12 puts, now .82 and the June roll remains your back-up for next month.  

    Cheezburger/BDC – Actually, they are pretty well-known and successful.  Of course $30M does seem insane but 350M hits a month is pretty damned impressive (and makes me very sad for our culture).  

    Europe/StJ – They seem to have a "scheme du jour" over there.  

    Cycles/Craig – That can be a real issue as the play we count on is the sell-off that comes only several days before the contract close as the last of those barrels gets cleared.  

    Speaking of oil contracts, they are now down to 52Mb in Feb NYMEX contracts and 2 full days left to dump them.  Smooth!  March is up to 399M but they don’t have to worry about those for a few weeks.  

    Kass/Rustle – Whuck?  Did he have a stroke while typing?  

    SDS/Amatta – There’s nothing wrong with SDS.  I take it you are in 2x the $24 puts, now $1.30 so it’s a little progress anyway.  We still think the S&P is toppy here so why not just roll the the Feb $24 puts, now $1.70 and pocket another .40? 

    How much money would you guys pay to see Hu actually bend over and tell Obama "Why don’t you just do sex to me?"  In the very least the guy could work in a "Hu’s on first" joke….

     

  94. mike5885

    C = 1286.06, F =1282.75

    10yr = (.21)%,  30yr = (.13)%
    VIX +5.48%
    oil (.10), gold +2.20
     
    NET $ = +.94%,  dx/y = (.57)%

    something stinks
    the $/Yuan has risen so the $ has gone up against the chinese currency

    but the the $/Franc is almost doubles its loss, now (.84)%
     

  95. drmtv10

     Hi Phil
    FXP/DrMTV – I would just get out unless you want to risk it, in which case you can hedge a bit with the above EDZ spread and sell the June $25 calls for $2.10 and buy back the calls and then wait for a nice move up to sell some more calls.  You are committing to DD at $25ish in June and then you can cycle through selling longer-term puts and calls again.  If you do not have that much faith in a long-term china play – then why on earth wouldn’t you cash out now and walk away?  
    FXP is 2x inverse FXI.  I do not follow comment about June 25 calls and EDZ and FXP would both move the same way, though EDZ is 3x (EEM?).  Could you clarify, please?  Thanks.

  96. biodieselchris

     the red envelopes are going bye-bye!

  97. mike5885

    1188.66 would be a 50% retrace on the say, see if we bounce there and find resistance, if we cannot get there or through it may have lower to go
     
    currencies may determine everything though
     
    the BS on the news and CNBC will be in full effect during the whole China visit

  98. reza99

    Hi Phil:
    How ’bout weekly Wednesday plays?
    BTW, I am thinking of selling Jan TNA 77/75 BPs if IWM ever turns around; would like to know your thought on that?
    Thanks!

  99. exec

    JR/IWM
     
    IWM is really weak today.  Lot of volume on the downside.  You still hanging?

  100. Phil

     Alpha/StJ – That does look pretty good, wish I had time for another site but let me know if you have good images. 

    Euphoria

    Wow, hitting them with the Human Rights question right off the bat – way to screw up a press conference!  

    LOL – Jintao looks very upset with the question.  I think the translator is explaining to him that they can’t have that reporter killed — today.  

    Words to live by BDC. 

    Futures/Yodi – If you have been shorting calls in this market and doing well, I imagine you have a very bright future ahead of you!  

    MOS/Yodi – I’d go a bit lower unless you REALLY love them long-term.  It’s only day one of a pullback, a little early to commit to a floor.

  101. reza99

    Bidu 107Ps @1.13!

  102. japarikh

    Phil,
    HCBK down 7% despite an earning beat. It’s one of your dividend plays that I’ve been waiting to get into. Is this an opportunity or something to be worried about?

  103. mike5885

    using the FRanc to offset the $/Yuan
     
    Franc hammering or keeping dx/y in check, $$$/Franc = (1.16)% now

  104. shadowfax

    The press is set on a OBOMB even if it causes big trouble!

  105. JRW III

    exec / TNA

    Got out with 6 cents on the failure of the 8ema; now waiting for a turn or IWM 78.82ish !!

  106. Phil

     AAPL/High – Well it seems everyone was long so it’s very possible that the stock is being held down into expiration and will fly after that.  On the whole, it’s way too difficult to call. 

    IBM now good for about 50 Dow points!  

    UNG/Rain – I very much doubt there will be a big move off inventories.   They are having a nice run today – I’d take that and run or roll.  

    Posting/JRW – Let Greg know if that happens.  I don’t see anything caught in spam.  

    FXP/DrMTV – My bad, I was thinking FXI.  Same logic with the FXP moves but no hedge with EDZ, of course although I do like using EDZ better than FXP.  

    NFLX/BDC – Hah!  I told you guys.  They are trading $15 subscribers for $8 subscribers – that’s not a good idea short-term…

    Wednesday/Reza – OK, I’ll take a look.  Kind of hard with a big drop.  I think if you are going to play TNA, play the naked calls as a mo play.  Selling the put spread only pays you on Friday, in between you’ll gain very little from the move as the deltas are close.  

    HCBK/Japar – Remind me after hours.  You want to give the downgrade police a day or two anyway but it does seem to me they are down more so on cautious outlook than actual performance and that caution is why I like those guys.  They are like a bank!  

    Hu doing a good job actually. 

  107. yodi

    Phil In deed BIDU is looking a bit more brighter for you today !!! We will see on Friday. I obviously did not play but!!
    My questions is to look in you cristal ball and Give me an Idea where AMZN will be exp. April down to 175 or up over 200
    Thanks

  108. biodieselchris

    JR is checking out his new toys
     
     
    no time for us peons….

  109. samz3700

    Jrw
    Does this seem like a major break down to you? If not, do you have another level that would indicate trend reversal

  110. mike5885

    good analysis of CAT valuation for those interested in research

  111. shadowfax

    JRW
    I found that resistance at 78.81 to.83. Which do you expect up or down or wait to see which way it goes? Thanks

  112. samz3700

    Meet the new stick! Release the hounds!

  113. JRW III

    samz / break down

    Not yet, but I think you’ll know it when you see it !!

    IWM is Exactly at Trendline Support

    0119-iwm

     As you can see, the rising wedge target on the SPX chart has not quite been hit yet, though it’s very close:

    My first target for the correction is the 1255 – 1260 area, for the lower trendline of the ES rising wedge. If broken, then my next target is in the 1200 area, depending on when it is reached.

  114. shadowfax

    JRW
    Since we are loosing 78.82 is your next support at 77.57?

  115. mike5885

     C = 1282.33, F =1278.50

    0yr = (.46)%
    VIX +7.12%

    NET $ = +.76%, dx/y = (.61)%
    near lows I have seen on the Net $ today

  116. JRW III

    Now that USD appears to have topped I’m more doubtful about seeing a sharp correction on equities in the near future. I think we are in the process of making some kind of interim top though.

  117. tuscadog

    Phil / XLF   Banking reports have not been very positive, nor is housing outlook improving.  Time to dump my long position in XLF?

  118. JRW III

    shadow / IWM 77.57

    I certainly hope not as I now own 16K shares of TNA at $73.76!!

  119. mike5885

    thanks for the dollar chart and thoughts
    that 78.50 is a key area

  120. mike5885

    having broke to 78.30 intraday gave a fresh sell signal on its Point 7 Figure chart

  121. mike5885

    first since mid NOV
     
    could get real interesting if the dollar and markets fell

  122. Phil

     AMZN/Yodi – I don’t think any of these valuations will hold up long-term.  I did the math a while ago and AMZN needs to triple their sales to even come close to justifying an $85Bn market cap at their margins.  That would make them as big at TGT but still only about 15% of WMT.  If there was another $40Bn worth of annual sales to be had – don’t you think WMT would be in there fighting a lot harder?  I like AMZN, I think they are great and they make a lot of smart moves but when you start valuing a business that’s already been around for 20 years as if it’s going to triple in 5 – you have to be concerned…  But again, why the fascination with MoMo stocks that are capable of ridiculous run-ups or sudden sell-offs?  If you are a thrill-seeker – then fine but there are 9,000 other stocks to play and 8,900 of them are much easier to predict than AMZN.  

    Wow, I do want that boat BDC!  Usually I’m not interested but this is something that suits me…

    Streets of Monaco

    Of course I’ll wait and pick it up used for $500M! 8-)

    CAT/Mike – I was very surprised with yesterday’s move.  I though CAT was done at $92.50 – probably is but now they have to go the other way.  

    Cutting things close on the IWM, JRW!  

    XLF/Tusca – Depends how long.  I think it can’t live up to the hype but we had longs looking to hold $15 – that I don’t think is in danger.  

    Still light (and stickable) volume at 95M on the Dow at 2:40 but all of the volume has been down today so we could pop lower very easily.  

  123. shadowfax

    JRW
    Best to you I don’t have a position, you have a large one. I only see IWM above EMA and some buying the rest down!

  124. mike5885

    75.63-75.85 is the next area on default P&F chart, watch the 81 (actually 81.11 and 81.14 as resistance)

  125. shadowfax

    BOTS are buying the DOW, for a good news bite?

  126. Savi

    Phil--I have a few short Jan 430  PCLN calls @ $4.10  (now $5.10)—since I won’t be here for expiration should I roll or just bail? would appreciate your thoughts
    Tx

  127. mike5885

    very weird, lowest net $ yet today

    NET $ = +.60%, dx/y = (.55)%

    things should be rallying in theory, not falling with the dollar dropping

    the NET $ has been up for many days straight now

    of course nothing has made sense for a long time, especially the last 3-4 days
     

  128. Phil

     LOL, listen to the GE employees (Cramer and Maria) telling us how great China is and how they’re not being unfair in their trade practices and how they’re not stealing our jobs.  I know I feel much better now, don’t you?

  129. JRW III

    Out of TNA with 5 cents; buying 1/2 TZA here; dollar rising 2 other sell signals and the 8ema never crossed !! Next support IWM 78.22

  130. dflam

    Hi Phil : Bought JPM at $39.21 (now $44.18)  and for 1/2 of position ,sold 2012 $40 C  for $6.00,now $7.35. For the other 1/2 of postion, I  sold June $40 C for $3.65 now, $5.80. Should I roll June C to 2012 $40 C? Thnak you.

  131. flipspiceland

    @Phil
    Stealing?? I don’t think millions of americans going to some big box store to buy whatever, knowing it is made in China and also knowing that a laborer earning the equivalent of Big Mac everyday, is stealing anything.
    The american people are GIVING china, and india, and malaysia and indonesia and africa  their jobs all to get stuff at very low prices everyday.
    If the american worker (and non-worker) who spends money would ever go on strike and stop purchasing anything not made in the U.S. the turnaround in this country would be miraculous.
    I think I smell protectionism right around the next election corner. Or at least the rhetorical equivalent of it.

  132. Phil

     Uh oh – Current market status not good!  

    Dollar poking back up towards 79 (78.8).  

    PCLN/Savi – Well you sure don’t want to be assigned them, do you?   That sucks because I think they are still winners.  Why not just roll over to Feb $450s at $13.50 – it’s another $9 in your pocket and $20 further out of the money?  

    JPM/Dflam – I’d keep the protection until the market settles down, you’ll get a better roll if we head lower.  

  133. jromeha

    Awesome, those peckers ran TF down to my exact stop and then it shot back up 1.2 pts within 12 seconds…. Such BS.

  134. mike5885

    C = 1281.30, F =1278.00
    10yr = (.77)%
    VIX + 8.28%
     
    NET $ = +.75%,  dx/y = (.56)%

  135. shadowfax

    If the DOW can’t break11,820 the market is in deep shit, can we say anti-stick?

  136. JRW III

    shadow

    The new programs that have been running the last two weeks seem to use the same lines but +2/10ths % in the direction of the move; so 78.82 becomes 78.67; I thought you might like to follow and see if this pans out !!

  137. ravalos

    NFLX, I had followed Phil’s recommendation last week to sell NFLX weekly $185 call short, but then it shot up and I had to roll to Jan’s expiration $175 short put / $190 short call, and just now I was able to close the call side and most likely the $175 short put will expire worthless so my return would be around 65%.. I couldn’t risk two more days with NFLX edging on the $190 line.. I would wait for a big spike up next week prior to earnings if I really want to short calls in February above the $205 line..

  138. mike5885

    could be expiration BS
    when I did my quick max pains last Thursday, eyeballing it, top was 1297.50 (blow out the puts)  and the 1272.50 blow out the calls) looked like the bottom
    Free Money wants to get paid both ways before expiration

  139. mike5885

    Perception vs. Reality: Four Reasons to Remain Cautious on U.S. Equities
     
    we have talked about this stuff a lot, just a matter of timing

  140. humvee4me

    JRomeha:  I don’t know TF, but I see that total volume today is only 22,000 shares; i have learned the hard way to stay away from thinly traded stocks, way to easy to get pushed around. my two cents

  141. yodi

    Phil Thanks for the view on AMZN I am not looking to get in to this play I am holding this play now for quite a while apr 155p sold 7.21 and I have rolled already the caller up to 180 short 15.48. At this stage I am still 2.5 gran ahead but I wonder if the stk still will outrun the 180 by apr. I thought to adjust to 175p to 190 c but you talked me out of it. Even at 205 I would still be ahead. thanks

  142. shadowfax

    JRW
    Thanks! I am trying to get a new grasp as I see the change, 2/10% in the direction sounds about right, I thought higher 1/2 % and no clue on direction! Is the 78.22 progected  from 2 weeks ago? Thanks again!

  143. shadowfax

    (sp) projected WOW!

  144. JRW III

    Out of TZA with 11 cents; buying 1/2 TNA into the close at $72.74

  145. JRW III

    shadow / 78.22

    Goes back 5 weeks on the 30 min chart

  146. mike5885

    VIX + 10.33%

  147. mike5885

    have to run, take care all

  148. zeroxzero

     Sweet day.  Out of QID, TZA, BIDU and RTH profitably, my purchase of HYD is rising steadily, put on the BHP spread. Took losses on some straight up PBR and BTU, hedges against my sickly Euro short [but I’ve got the Jan 2013s, no worries.
    PSW the best reality check out there, thanks Phil and the rest of the Live Crew.

  149. reza99

    Phil, any one:
    Care to opine on where the IWM index opens tomorrow (Thu) and its initial direction?
    TIA

  150. Phil

     Good list Mike.

    AMZN/Yodi – It’s going to be almost impossible for them to prove out this valuation on earnings.  Having a 75 p/e means you need to beat high expectations without a hitch and have no downside to guidance.  As you can see from AAPL (whose p/e is just 22) even firing on all cylinders isn’t enough sometimes. 

    TNA/JRW – Have to disagree today.  This looks like we’re finally getting a proper sell-off.  AAPL may have been the "news" they were waiting to sell on.  Lack of follow-through from GS has some heading for the exits.  

  151. amatta

    Phil,
    Re SDS…
    As per my comment I am in the MARCH 24 Puts not the JAN, I did roll as per your suggestion a few weks ago the calls to the JUNE 23 Calls, the 29′s are also MARCH and have almost nothing left. Should I just roll all to JUNE?  
    Thanks

  152. exec

    JR,
    What’s your read on this sell off?

  153. Phil

     Thanks ZZ – good to have you aboard too!

    IWM/Reza – Well they have a 2.5% move down today and that usually indicates bearish follow-through of 0.625% at least over the next two days (and if they break that, then another 1.25% to about the 5% rule).  We’re weaker than Europe if we close here and we caught Asia with their pants down so very likely the momentum will be to the downside tomorrow and we open lower and then it’s a question of what we hold.  IBM isn’t budging and that’s saving the Dow at the moment but if they snap it could be like a downside waterfall.  

    SDS/Amatta – Well $24 is only $1 out of the money on the puts so why do anything with over 60 days to go?  You can buy back the June $29 callers and roll the $23s down tot he $20s for $1.50 and then look to sell something for $1 on a nice bounce ($1 more than you buy back the $29s for) but, other than that, not much to do.  

  154. kallenjr

    Phil,
    Looking for a couple ideas of how to tradeWeekly  Google options with earnings on Thu night and Fri opt ex.
    -ken

  155. kustomz

    Agree Phil, the market loves to make fools of even the best traders….. GS earnings were a clear sign.. things arent what they seem..

  156. JRW III

    Phil / Disagree

    Abslutely should have just kept my morning TZA; I sold early at 11:16 !! I have been getting mixed buy and sell signals for two weeks. Out of TNA at $73.08 average for 34 cents, and only 5% on the day; if I had just held it would have been 8% !!

  157. shadowfax

    JRW
    I can’t get 5 weeks back on the 30 min. but did find that point on the 60 min. Thanks again I am learning!

  158. JRW III

    exec / read

    Well, we’ll see tomorrow but I’m going with my 3 min confirm ema and my lines tomorrow and worrying less about tic, flow and momentary $ direction !!

  159. yshenhar

     Phil
    Do you like any play on DXD for the Dow to join the down trend (if its a trend…)

  160. exec

    What a pisser of a day.  I’m up 31% on my TZA options and gave it back on day trading with TNA.  Dumb.

  161. samz3700

    We took out the ten and 22 ma on iwm

  162. jomama

    yshenar – dont get too exhuberant about the dip – doesnt take much to push this crap up! They could/can spin GE or BAC this fri. I got a bunch of TZA puts that i have sold, so hoping for a little sustained dip myself.

  163. Phil

     Kissinger/Reza – Wow, he’s still alive?  He’s gotta be 90 – good for him!  

    Sorry Reza, by the way, not seeing good weekly pairs as it’s too dangerous with this move today.  

    GOOG/Kallen – That’s even crazier than the weeklies!  I guess I like selling the $640 calls for $11.50 and buying the March $645s for $22.50 and you can do a 3:2 spread (2 longs) if you want to be a little more brave.  

    GS/Kustomz – Yeah, good point.  They cheat and they didn’t do that well!

    DXD/Yshen – I’d jump on that bandwagon if we head down tomorrow but this isn’t much of a sell-off so far.  What I’d really love to have is a chart of the Dow components and when they earn because that way we could plot out a likely course.   At the moment the DXD Feb $20s are .55 so no need to do anything fancy with that protection.  

  164. nicha

     Phil/GS – we know they cheat and the main street knows they cheat. Maybe GS didn’t want to show good earnings because it would piss the people off. Remember the big cry when GS had a profitable day everyday of the quarter. I am just saying the people who devises ways to cheat can’t be failing at their own game.

  165. jromeha

    Humvee – /TF is the symbol for Russell futures, of the same thread as IWM and TNA just in the futures market. Gives a person more leverage if they dont have the funds to trade 1000K+ shares at a time with TNA….

  166. kustomz

    jo, actually it does since all this crap is tied together, currencies, commodities, bonds (sovereigns, muni), stocks, stimulus, pensions. It takes trillions at risk, and just a few billion worth of selling…something to think about

  167. Jordan

    Phil, DOW component earnings: http://wallstcheatsheet.com/trading/dow-30-quarterly-earnings-preview.html

  168. flipspiceland

    @Nicha
    Y’Think Lord Blankfein might lie about the numbers?  I’d have to think about that.

  169. matt1966

    Can I get a WooHoo?  Oh hell, there’s no time:  WOOOOHOOO!  What a beautiful day.  8 trades (5 FAZ (4 winners, 1 loser), (3 FAS(2 losers, 1 winner into the stick!).  Looking for more down from here either tomorrow or Friday.  I just knew they were going to hang those call buyers out to dry-

  170. reza99

    Weekly plays / Phil – That’s OK; NBD.
    BTW, on the SQQQ 27 long straddle play from yesterday, I ended up selling SQQQ 28s for $0.35-$.4, so am up about .30 per bcs plus the put pair. I should seriously consider SHORTING strangles instead!
    Some [relentless] selling on the IWM (2.57%) w/65M shrs. traded ( > avg.)

  171. Jordan

    DOW component earnings link above: carefuil, there are some typos there.  BAC earnings this Friday, Jan 21, not Jan 11.

  172. Phil

    Wow, a down day!  Not sure what to do with one of those…

  173. rainman

    Whoo eeee!  MoMo miss of the day is FFIV! Down about 17% AH

  174. Peter D

    Rising VIX wakes up the short stranglers a little bit today.  They wait until the last minute prior to SPX/RUT expiration to do the drop.  They saved the folks who sold 77,000 SPX Jan 1,300 call contracts.  The call was $5.5 yesterday and is now $0.5.  Wow, they saved the RUT sellers too.  Jan RUT 800 calls were $12.2 yesterday.  It’s now $0.95!

  175. shadowfax

    matt1966
    Congrats I was hopeing you "backed up the truck again". My FAS shorts did well today and I’m holding them overnight, hope we are both right on this move. If not I’m out tomorrow early.

  176. exec

    Matt,
     
    Way to go…..glad to hear you hit it right.

  177. Jordan

    eBay up over 4% AH.

  178. Jordan

    STX down 3% AH.

  179. matt1966

    thanks Gents!

  180. Phil

     Good job Matt – patience pays off!  

    Hey, who fat-fingered IWM after the bell?  

    FFIV catastrophe – another MoMo bites the dust.  

    Hey, I want credit for saying this first!  

    GE‘s latest deal with China "sounds as if one of America’s leading technology companies has decided to sell some of this country’s crown jewels to ensure access to China’s rigged market, potentially jeopardizing the competitive advantage enjoyed by this country’s leading export industry [avionics]," Steven Pearlstein writes. "What’s good for GE [is] certainly not good for America." 

    At the close: Dow -0.11% to 11825. S&P -1.01% to 1282. Nasdaq -1.46% to 2725.
    Treasurys: 30-year +0.44%. 10-yr +0.13%. 5-yr +0.1%.
    Commodities: Crude -0.62% to $91.74. Gold -0.08% to $1369.10.
    Currencies: Euro +0.67% vs. dollar. Yen +0.65%. Pound +0.16%

    Market recap: No one bought the dip today, as stocks pulled back with notable profit-taking among some of the big names. Goldman’s disappointing report weighed on financials, and weakness in steel and ag stocks dragged down the materials sector. Decliners crushed advancers five to one on the NYSE. The dollar fell to an eight-week low vs. the euro.

    Only a big boost from IBM (IBM +3.5%) is keeping the Dow near breakeven, while ~85% of S&P issues are in the red and Nasdaq posts substantial losses with two hours to go. General gloominess surrounds big bank shares following disappointments from Goldman (GS -3.1%) and Northern Trust (NTRS -4.6%). The market’s reaction suggests that expectations for corporate profits may have climbed too high. 

    How was it that Goldman Sachs’ (GS -3.1%) earnings fell 38% last year, as peers like JPMorgan Chase (JPM) and Wells Fargo (WFC) posted increases? It has a lot to do with 2010 wrapping up with declines in trading revenues, while banks with big consumer lending presence saw gains from lower loss provisions. 

    As President Hu visits Washington, it’s worth asking what Plan B is if U.S.-China relations take a turn for the worse and China dumps its trillion-dollar holdings of U.S. Treasurys. China could justify pulling back if the dollar were to plunge due to a U.S. failure to curb its budget deficit and debt; "we could be at a tipping point," one economist says.

    Rising inflation pressures in emerging market nations will make the U.S. and Europe better investments in 2011, Marc Faber says, since monetary authorities in China, India, et. al., will need to tighten or let inflation accelerate, weakening their equities. Investors looking for an inflation hedge should buy oil, which Faber says will rise regardless of what happens in the global economy. 

    While global credit stock doubled in the past 10 years, it will need to double again to $210T by 2020 in order to provide the necessary credit-driven growth for world GDP to retain its current growth rate, according to a World Economic Forum report. (scroll down for charts and report). 

    Use any pullback in stocks as a buying opportunity for the second leg of what Morgan Stanley’s David Darst sees as a multi-year bull market, and “don’t be underweight in global gorillas" with high dividends and attractive P/E ratios that are "under-loved.” One undervalued gorilla: Microsoft (MSFT), with “a bullet-proof balance sheet, and it’s buying back stock.” 

    More pushback on Meredith Whitney’s alarming view on municipal debt, from top-ranked muni bond fund manager Lyle Fitterer: “The baby has been thrown out with the bathwater. For every bad story there are hundreds of good ones.” Fitterer has used the selloff to buy what he sees as bargains, including debt from Illinois and California. 

    Fear of falling home prices and credit availability is only part of what’s holding down the housing market; distrust of the mortgage industry is right up there, FHA’s Dave Stevens says. "Servicers did not build their operational capabilities; they’re not treating consumers fairly with the right trained staff with the right processes."

    Auto sales in 2011 are off to a strong start in the U.S., says Edmunds chief Jeremy Anwyl, with SAAR up sequentially to 12.8M vehicles – unusual, as December numbers usually benefit from year-end sales. Korean makers (HYMLF.PK) are seeing the biggest gains, and rising fuel costs could end up displacing the country’s current most popular vehicle, Ford’s (F) F-150 truck.

    New Gallup data shows a country’s relative richness – or poorness – tracks better with its underemployment rate than unemployment. While headline unemployment in the U.S. dropped to 9.4% last month, the broader U-6 measure fell more slowly, to 16.7%. 

    Seagate Technology (STX): FQ2 EPS of $0.70 beats by $0.37. Revenue of $2.7B (-10.2% Y/Y) in-line. Shares -1.6% AH. (PR)

    F5 Networks (FFIV): FQ1 EPS of $0.88 beats by $0.05. Revenue of $269M (+40.6% Y/Y) misses by $2M. Shares -17% AH. (PR

    (EBAY): Q4 EPS of $0.52 beats by $0.05. Revenue of $2.5B (+5% Y/Y) in-line. Shares +5.6% AH. (PR)

  181. yshenhar

     Phil / down day
    Even VXX is up today!

  182. Burrben

     Phil / GE
    I was looking for the trade entry you posted a few days ago on GE, but I can’t find it.  I tried searching "GE" or ge, and general electric, but to no avail?  Do you happen to have the link to the post, or can you tell me how to search for a word that is just "GE" and not everything that contains GE?
    Thanks,
    Burr

  183. Jordan

    Fat finger – well, it’s not just the IWM.  Look also at QQQQ – similar pattern, a fat finger trade at yesterday’s close price.  The QQQQ came at 16:28, for IWM I can see two, one at 16:22 and one at 16:30.

  184. Jordan

    Phil / searches – can you ask programmers to update the site search?  Now it only does partial match, so if you search for GE, it searches for any word with the two letters "ge" anywhere in it.  You can imagine most of the hits are just not relevant to GE – the stock.

  185. matt1966

    GE is a total sellout.  Have we learned nothing from the ass whooping we’ve been getting and how they’ve surpassed the need for military know how from Russia?  Major props to you Phil and to your colleague, with a slightly larger viewership, Steven Pearlstein.  My man.
     
    Final rant:  Can GS be any more diabolic to exclude US investors in it’s Facebook shenanigans?  Extreme media attention?  I take that as meaning they didn’t want to feel the heat from the bright light of US media (ha!) regarding how it does business.  Simply unbelievable that a US company would prevent US citizens from gettting any action.  Not that I think it would be a good investment at $50B valuation but geeze! 

  186. stjeanluc

    FFIV / Phil – Actually, they are indeed coming down to a more normal valuation. They are still expensive now, but their forward P/E at this price is now at around 28 which is a bit rich, but not extravagant given projected earning growth of 25% for the next 5 years. I am not suggesting it as an investment, but compared to AMZN with a forward P/E of 52 and projected growth of 30%, they are "reasonable". Or CMG with a forward P/E of 34 and earning growth projections of 20%. There is good support around $90 and that would make a nice entry point! The Jan 2012 90 Put traded around $6.00 today, they will be up tomorrow and after the downgrade police finishes with them, it might be worth a "measured" shot.

  187. stjeanluc

    This has to be one of sharpest critic of the way political news is now delivered. From James Wolcott in Vanity Fair - http://www.vanityfair.com/politics/features/2011/02/wolcott-201102. Key moment:
    [E]lite opinion has failed this country so miserably that it has no moral or intellectual standing left, only its club-member privileges. Think back on the Iraq war and the W.M.D.’s, the Terri Schiavo circus, the iguana contortions of John McCain under the guise of maverick integrity, the Wall Street meltdown and bailout—TV satirists and late-night hosts drove much deeper nails into the marrow of what was happening than the editorial pages of The Washington Post, that prison morgue of Beltway consensus. A new political-entertainment class has moved into the noisy void once occupied by the sage pontiffs of yore, a class just as polarized as our partisan divide: one side holding up a fun-house mirror to folly, the other side reveling in its own warped reflection. 

  188. JRW III

    Phil,

    Are you going to be in La Jolla April 28 ?

  189. stjeanluc

    If this chart is accurate, the correction should be mild –   ;-)
    http://www.ritholtz.com/blog/2011/01/market-capitalization-as-a-of-nominal-gdp/
    As a note, the long term average is probably not an accurate picture. The new normal is probably between 80 and 100%. But hey, who am I to know!

  190. samz3700

    Stjean – you are kidding right – we are at 120 so a correction to 100 would be a 20 percent drop.

    Tom DeMark called for a 11% correction in the next two weeks. I would take it.

  191. Pharmboy

    JRW – I am! ;)

  192. pstas

     4:46 PM Of the four pro football teams remaining in the playoffs, don’t root for the Jets. In 1969, the year the team won its only Super Bowl, the S&P slid 11.4%. Contrast that to the market’s performance after the combined 10 victories by the other teams still in contention. The market has never gone down after the Steelers, Packers or Bears won the Super Bowl
    OK, now we know why Phil is  a Jets fan. 

  193. biodieselchris

     F*** this MAN!
     
    AAPL rocks it and stays flat, FFIV misses (like CSTR) and the super cheap options were SITTING RIGHT THERE! I Mean the 110′s didn’t even have a bid. They were practically free  !!!
     
    God DAMN! It is so easy, why am I missing these??????
     
    Making sure I keep on top of it, which other high-flyers releases before Friday (other than GOOG?).
     
     
    GRRRR getting super pissed now, when is it my turn damn it?

  194. biodieselchris

     The Steelers will win. Again. 
     
    Awesome.

  195. stjeanluc

     Samz – Actually, it would be 16% so we are not far! In any case, I didn’t mean to say that we would get to 100. Just trying to interpret the charts! A 16% drop would take the S&P to 1080 or so. That would be bad, but it would also be healthy I think…

  196. japarikh

    Phil,
    1) Wanted to remind you to comment on a way to play HCBK after their dip today.
    2) How do you trade RUT index options? When I enter the symbol RUT or ^RUT, it says it’s not a valid symbol.
    Thanks

  197. rossmanmd

    Phil – Regarding your earlier proposal for GOOG ahead of expiration. From a risk management standpoint, what are actions on Friday if GOOG moves above $640? Roll higher or forward, because unless I missed something we do not own stock. Thanks.
     
    GOOG/Kallen – That’s even crazier than the weeklies!  I guess I like selling the $640 calls for $11.50 and buying the March $645s for $22.50 and you can do a 3:2 spread (2 longs) if you want to be a little more brave. 

  198. humvee4me

    http://www.nytimes.com/2011/01/20/world/europe/20britain.html?exprod=myyahoo
     
    Cameron trying to move health care way right in England
    Obama trying to move health care way left here
     
    Neither one wants to admit we can’t afford the care we have now  no matter how its administered

  199. humvee4me

    japarikh  on TOS symbol is /TF   it can vary by broker though

  200. japarikh

    Thanks humvee4me but that didn’t work in my ameritrade account. i though they bought TOS and were one in the same. did a symbol search and got $RSL.X but I can trade it. maybe i’ll have to call them

  201. Cap

     WOW, a selloff … what is Uncle Ben on vacation ?
     
    In case you have not seen this re:  AAPL
     
    http://blogs.wsj.com/deals/2011/01/19/in-the-long-run-apple-will-bow-to-android-reality/

  202. Cap

     The irrational leftist … part of the "objective" media
     
    http://www.slate.com/id/2281645/
     
    I won’t nitpick the whole crazy piece, but please remind me if John Kerry also held on to his Senate seat …. uh huh

  203. reza99

    Re RUT / Japarikh – Tried $RUT.x on TD?

  204. stjeanluc

    AAPL / Cap – As I was watching all these reports on Steve Jobs, I was thinking the same as the blog writer. Jobs and Cook have been bad mouthing the competition the last couple of calls – 7" tablets are stupid, we have the better system, bla, bla bla… I own an iPad, but the Android offerings are looking better and better, HP is about to release a Win 7 tablet that might make more sense for people wanting to run Windows application and I saw a demo of the new RIMM tablet and on a technical basis, it rocks. So, it’s true that on the tablet level, the competition is still behind especially considering an iPad2 around the corner. But they are catching up. Android tablets have had a camera before the iPad for example. Sure, the Apple apps are more polished, but give it some time and new Android apps will start looking pretty good as well. It’s only a matter of market share before more developers jump on board. The onus will be on Apple to come up with next "great" thing or they will be condemned to be another consumer device maker and check with Sony to see how that worked out for them! They used to be the "great" thing maker! Of course, for all we know, Apple already has the next "great" thing so I would not count them out. And they have a pile of cash. But so do Google and Microsoft. And they also employ a few good people… I hope Apple doesn’t run too much ahead of expectations!

  205. stjeanluc

    And why even bother:
    http://blogs.reuters.com/felix-salmon/2011/01/19/goldmans-monster-financial-crisis-pay-award/
    These guys have absolutely no morals, don’t care about the average persons and will steal every penny from us to enrich themselves! 

  206. humvee4me

    japarikh   I don’t believe one can trade futures on Ameritrade.  They did buy TOS but they remain separate entitiies at this time; there is talk that Ameritrade may merge some of its operation with TOS that has not occurred.  I asked a rep from Ameritrade if they plan to offer portfolio margin (like TOS does) ; he wasn’t sure, but thought that they might at some time this year. 

  207. stjeanluc

    And for once, I agree with Eric Cantor:
    But guess who hates the Senate now? Earlier this morning, Republican House Majority Leader Eric Cantor kept insisting to reporters, "The Senate ought not to be a place where legislation goes into a dead end." (He said some variation of this three times.) Cantor’s frustrated because the House is all set to repeal health care reform, and Harry Reid has said he’s not even going to bother bringing the bill up for consideration in the still-barely-Democratic Senate." The American people deserve a full hearing," Cantor said, "they deserve to see this legislation go to the Senate for a full vote." 
    Of course, we would also need a full vote on other initiative at the same time, for example, immigration, carbon taxes and while we are at it votes on Obama’s judicial and political nominees. Not too much to ask I guess!

  208. stjeanluc

     Interesting concept about Europe inflation:
    http://krugman.blogs.nytimes.com/2011/01/18/european-inflation-targets/

  209. japarikh

    Reza99,
      Thanks! That’s the symbol.

  210. Phil

    GS/Nicha – Good point, it does take the heat off them if they report a bad Q and it doesn’t affect their year-end bonuses. 

    Dow/Jordan – Thanks, that list is perfect!  So it looks like   GE (21) AXP, MCD, PG (24)  DD, JNJ, MMM, TRV, VZ (25) BA, UTX (26) CAT, MSFT, T (27) CVX (29) XOM (31) round out the month.  GE should be in-line and AXP has to be good with the top 10% going shopping this year.  PG is iffy but MCD should have big international business and a great exchange rate.  Best shot for a down day is the 25th, as all 5 reporters have issues (mostly input costs) and BA or UTX can’t be counted on to save them the next day.  MSFT is iffy on top-line sales with a big R&D and promotional budget but Kinex was a hit.  T will not be able to promise good guidance and CAT is too high so a very good week to go short after the 24th reporters,  

    SQQQ/Reza – Looking good so far.  Asia opened to the down side too.  

    Nice Job Peter!  

    GE/Burrben – I can’t find it either.  Hopefully the Wiki project will have better searching and upgrading the site search is on our list.  As to GE, you can pay $18.33 for the stock and sell the 2013 $15 calls for $4.30 and the $17.50 puts for $2.65 for net $11.38/14.44 and that makes the .56 dividend a nice 5% while you wait to collect your 32%.

    Search/Jordan – as above, they are supposed to be trying something new. 

    GS/Matt – Well there was no way what they were trying to do was legal.  It was like doing an IPO without an actual IPO – total BS so they had to know it would get kicked.  One thing it did is get their clients to cash out $5Bn worth of assets and park them in GS accounts so, in the very least, they get the fees!  

    FFIV/StJ – Well, like so many things – I just think there are better deals out there.  They were $18 in March of ’09 but that’s down from $35 in ’08 and they started last year at $56 so really, really great but now they are $145 (well now $107) and you’ll have to forgive me if that doesn’t make me rush out and buy because they are "only" up 100% in a year now.  Very bullish projections had them earning $4.40 in 2012, even at $90 that’s a p/e of 20, which is fine unless the market tanks in which case it will still be way too high.   I liked the Vanity Fair article, thanks.  

    La Jolla/JRW – What Mauldin’s thing?  No, I didn’t even go to the one in NY in October…

    Jets/Pstas – Well if the Jets win and the market corrects then all will be right with the World…

    FFIV/BDC – Ah, the one that got away!

    HCBK/Japar – This is what took them down, no big deal really:

     

    “The continued elevated levels of unemployment, the weak housing market and the unprecedented level” of competition from Fannie Mae and Freddie Mac have pressured results, Chief Executive Officer Ronald Hermance said in a statement. “Going forward we expect these conditions will significantly hinder our ability to continue earnings at recent historical levels.”
     
    For the 12 months ended Dec. 31, net income was $537.2 million, compared with $527.2 million in 2009. The company has posted 11 straight years of record earnings.
     
    “However, our fourth-quarter earnings are more reflective of the trend we expect in 2011,” Hermance said. “Conditions in the mortgage market continued to produce substantial headwinds.” 

     

    HCBK is still solid with a 4.5% dividend (.60) that’s not in danger.  At $12.04, you can just sell the 2012 $12.50 puts for $1.60 and $10 calls for $2.40 for net $8.04/9.02 and that pops the dividend up to 7.5% and you still get 25% if called away at $10, which is 20% below current.  

    GOOG/Ross – Well, like one we looked at earlier today, you can just add another long and roll the Jan callers up to 1.5x a higher strike or just roll them into a vertical.  Right now the March $680s are $11.20 and that would make a $30 vertical for net $11 and, of course, you would only be doing that BECAUSE GOOG is well over $650 already.  

    Health care/Humvee – Don’t worry, the House just voted to repeal it.  I hear they’re going to go for $3Tn in health care spending this year because Europe spent $1.5Tn to fully cover 500M people last year and America is certainly going to prove that at least we can be the biggest idiots on the planet by a clean double.  You’re right, of course, if we can’t afford $3Tn it doesn’t make sense to do anything about it.  Just because the rest of the World spends less than half of what we do per person on health care and has generally better outcomes, that doesn’t mean that we should TRY.  Trying is for wimps and thank goodness Congress is putting their foot down and saying damn it – we know health care is bankrupting this nation but we care about America enough not to try to change anything.  It took us many years to have a system this stupid and corrupt – we lead the world in medical waste and fraud – what do they want us to do, give that up to Columbia or Etheopia?  I say no!  Come on Humvee – sing with me:  

    Asking nothing, leave me be
    Taking everything in my stride
    Don’t need reason, don’t need rhyme
    Ain’t nothing I would rather do
    Going down, party time
    My friends are gonna be there too
    I’m on the highway to hell

    AAPL/Cap – Wow, how many rocks did they have to turn over to find an apple hater?  

    Lieberman/Cap – Isn’t he one of yours?  

    AAPL/StJ – Well I checked with SNE and they said the IPod killed the walkman and then I asked Sony what they’ve done about that segment in the past decade and it turns out that they and a dozen other companies have come after Apple with everything but the kitchen sink and then quietly all abandoned the market because it was pointless to try to beat Apple.  The IPhone is holding up pretty well after 3 years and the IPad is from what, June?  So far, so good there.  I won’t be counting them out until they have a flop – might be a while…

    File:Ipod sales per quarter.svg

    Not bad considering the IPhone is cannibalizing IPod sales:

    File:IPhone sales per quarter simple.svg

    GS/StJ – So what else is new?   On the inflation thing – it’s no different to what we are doing to the bottom 90% – we are choosing stock and commodity inflation to prop up our asset holdings yet every penny of those gains is sucked out of the wallets of the bottom 90%, which keeps them unemployed, uninsured and malnourished while we debate whether the IPad is better than the Driod or not….

  211. Phil

    Thursday’s economic calendar:
    8:30 Initial Jobless Claims
    10:00 Existing Home Sales
    10:00 Leading Indicators
    10:00 Philly Fed Business Outlook
    10:30 EIA Natural Gas Inventory
    11:00 EIA Petroleum Inventories
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    Notable earnings before Thursday’s open: FCSFCXFITBHBAN,JCILUVMIMSPGRPHPNCPPG,TCBTELUNHUNP 

     Notable earnings after Thursday’s close: AMDASBCCOF,FLEXGOOGIGTMXIMPBCTSWKS

    Here comes the dumb money! Mutual fund inflows hit $7.7B in the week ended Jan. 12 after shedding $731M the previous week, Investment Company Institute reports. Stock funds enjoyed net inflows of $6.5B, marking the group’s second positive week in the past five. Taxable bond funds gained, while municipal bonds continued to bleed assets. 

    You’ve been warned: Higher airline fares are coming. American (AMR) and Delta (DAL) each expect their fuel costs to rise more than $1B this year, and the airlines believe they can make fare increases stick. “Strong demand and tight capacity has given management the ability to raise fares and add fees," an analyst says.

  212. humvee4me

    Phil: you’re obviously not getting my point about health care, but that’s ok; i was simply pointing out the irony of the situation. 

  213. Phil

    Irony/Humvee – Sorry if I missed your  point.  You know how pissed I get about health care – especially this petty BS Congress is pulling at the moment.  States are spiraling into bankruptcy, in large part over health care costs and, rather than working together to make health care better – we have nothing but juvenile BS from our elected leadership.  These guys are just one step above throwing feces to mark their territory but, then again, we’re only a week into the session…

  214. Phil

     Speaking of Health Care – UNH beat by a dime, making $1Bn profit on $24Bn in charges for the Quarter.  Thank goodness we don’t let the government stand between you and your doctor for free when companies like UNH are willing to do it for $100Bn a year!  

  215. flipspiceland

    "… Europe spent $1.5Tn to fully cover 500M…"
    And how badly is the armada of ships that consitutes all those European nations  foundering on partly and mostly on the shoals of "free" health care? 
    Let us count the national debts of the Portugal, Ireland, Greece, Italy, Spain, France, Belgium, Cuba --ALL worse than bankrupt. And no country, voted on by those who live internationally yet, and who don’t much like living in the United States, talk about conundrums, is rated for Quality of Life and Health Care—--No other country rates higher than the United States.
    No question we need to tackle health care issues in the United States, though I don’t want anyone talking to me about it when and until the national obesity problem is tackled first and food stamps aren’t permitted tobe used to feed the children on the likes of MacDonalds, Taco Bell, visitng the Colonel for buckets of fried chicken, mashed potatoes, and biscuits.
    When the people of the United States finally wake up to the devastating damage that they are inflicting on themselves, by their profligate consumption of calories, while they rot away in their chairs, and permitting and encouraging their kids to do the same, then and only then will I subscribe to a National Health Care program.
    Aand that goes for every other so-called program that the federal government goes poking into and making infinitely worse by mucking around with trillions in money that  theBenbernank gives away for free, making every dollar buy less and less health care.
    When this listing ship of state finally begins to turn away from the iceberg it is speeding towards with all due haste, then I’ll listen and vote for programs which genuinely have the interests of the people at heart. What this country needs desperately, far more than a single-payer (I gag just writing it) National Health Insurance program is a prolonged dose of tough love. And that is truly free, completely effective and as such never to be proposed let alone implemented.

  216. dclark41

    Well said Flip. We sometimes forget the lessons from our childhood where just saying no with authority worked perfectly well. Instead today the vast amount of solutions proposed require another program to fix the other program that didn’t work before it. Maybe if we expected the best in people rather than the worst most of our problems would disappear. But I know…having kids is a right and expecting the best of them is considered child abuse. Or it’s the teachers fault or numerous other lame excuses frequently used. I look back at the strongest influence in my life and number one on the list (by far) is still my parents. They laid the foundation for what was right and what was wrong and how to live my life as a responsible member of society. How simple is that?!

  217. rainman

    And good morning to you too Flip! I’d chime in with some of the atrocities of our food system but it would ruin my appetite…

  218. amatta

    Phil, 
    IWM got in at 1.36, didn’t set up properly the stop at 1.05 now .90 do you think we get a bounce or should I kill it with this huge loss? 

  219. flipspiceland

    Since most of the health care dollars are spent on the average 90 yr. old in years 70 thru 90 ( this could probably be broken down further to home in on the years 87-90) that must mean that not a whole hell of a lot is spent on years prior to 70.
    Beginning to deal with the most costly problems then appear to look pretty darned easy to identify.  What can be done about the elderly’s consumption of most the expense of health care?
    If the democrats and republicans would put their wooden heads together to tackle the issue in big chunks, easily calculated, they might be considered progressive, effective, and results-orieinted.  Hell, it might even work.
    But the politicians are about blurring the issues to trump each other so the creator of the solution can be denied credit, as well as they are about delaying forever concrete solutions, while they are supremely competent at dodging questions, juggling figures and bending, distorting and finally destroying facts.

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