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Inflationary Thursday – Real Inflation at 10% – Equities Losing Ground!

10% – That’s how much we’ve gained in the markets over the past 12 months.

9.6% – That’s the annual rate of inflation using the original CPI methodology – before it was altered to hide the true impact of inflation.  Why would our government do this?  Well A) They don’t want to look incompetent (more so), B) They don’t want workers asking for raises, C) They don’t want Bond buyers to ask for higher rates to compensate for declining Dollar buying power and, most importantly D) They don’t wan to give cost of living increases to millions of Government workers and, much more importantly, tens of millions of seniors who are collecting Social Security.  

Since 2008, Social Security benefits have been frozen, with no cost of living allowance.  Next to Defense (28.5%), Social Security payments (20%) are the Government’s biggest outlay (it is also their 2nd biggest inflow (32% of revenues) but don’t let that logic stop the people who want to break the system).  Our Social Security outflows are currently $600Bn and inflows are $900Bn – that’s not the problem – it’s Medicare & Medicaid at $550Bn that is getting out of control quickly (which is why Health Care Reform was a logical top priority to tackle the long-term deficit projections, just like it was supposed to be in 1992, when we spent just $200Bn on Medicaid).  

actuarial_impact_of_social_security_cap_proposals.pngOf course the entire thing can be fixed in 5 minutes by simply eliminating the income cap on contributions above the $106,800 line.  This would, of course, have no affect at all on people earning less than $106,800 and a person earning $213,600 would pay 3% more total taxes and that amount would top out at 6% for people making upwards of $1M per year – a small price to pay to keep Grandma from eating cat food or, even worse, moving back in!  

It seems to me that people who "only" earn $213,600 a year will end up paying a lot more than 3% of their income ($6,408) to support Mom, Dad and the various In-Laws if they do let SS fail or cut back benefits but, for some reason – Obama and company do not seem to be able to articulate this fairly obvious point to baby boomers.  

The kids don’t want their parents to count on them and the parents don’t want to have to count on their kids for support and it is not yet legal to either hunt old people for sport or to eat the poor ones (the so-called "Cheney Plan") so SOMEONE is going to have to support old people.  Will it be you or will it be your Government?  3% is suddenly sounding quite reasonable, isn’t it? 

Meanwhile, as we approach year 20 of kicking the can down the road – the Government has taken to falsifying data in order to avoid their obligations of increasing SS benefits to keep up with inflation.  For most of the 20th century, Social Security payments afforded the average American enough money to retire in dignity and well it should as a person earning (using today’s averages) $40,000 a year and contributing $2,400 a year matched by $2,400 from their employer for 40 years should, at 6% compounded interest, have $787,428.88 in their retirement account.  

$787,000 at 6% a year is $47,220 a year – that’s about equal to the contributer’s average salary over 40 years, which is what the system was designed to do.  The system works perfectly – it’s the raiding of the lock box over the past 20 years that has destroyed it.  This began under Bush the First, when the first of the CPI shenanigans was initiated and suddenly annual adjustments to payments dropped by 50% over the next decade.  This is how we strip our retirees of their dignity and rob them of their savings, year by year – so the Government can pretend it has more money than it does:

Obama made a good speech yesterday but, as I said, why can’t they make the point that these "savings" are really trade-offs.  Our lack of support for balancing SS with higher taxes 20 years ago and our lack of getting Health Care under control is now costing our nation over $2Tn a year in higher payments and the problem is still snowballing and will cost $4Tn a year in 10 years and $8Tn a year (half our current GDP) in 20 years.  This is not really YOUR problem if you are wealthy and can simply relocate to a more stable nation but it will really, really suck for the people we will leave behind (yes, I will be out the door too if this country can’t get serious and deal with it’s collection problems).  

Moving on now.  It’s 8:30 and guess what, even MORE people are losing their jobs.  Quelle suprise, right?  A whopping 412,000 pink slips were handed out in March, up 5% from February and 27,000 more than expected by those fabulous expert prognosticators.  Despite ultra-low labor costs, the PPI jumped 0.7% in March and even the core PPI was up 50%, from 2% to 3% – almost crossing over to a level that even crazy Benny can’t deny.  

As China raises interest rates for the third time in four months to fight inflation, here are the numbers that keep China's economy turning.Chinese inflation is clearly on the rise with food inflation clocking in at 7.2% in 2010 and getting WORSE in 2011.  The supply of cheap labor is drying up and Multi-National companies – the SAME ONES that tell you that it’s been a tough year and they have no raises or bonuses this year – gave their Chinese workers an AVERAGE increase of 8.4% to keep up with inflation in 2010.

Overall inflation in China is at a 5.5% pace in March, up from 4.6% in December and it would be much, much higher except the Chinese took a page out of our Government’s playbook and reduced the weighting of food in their official CPI by 24%.  THAT’s how official inflation in China was reduced from 10.3% in January to 5.5% in February and March – who says Government can’t solve problems? 

Brian Coulton, an emerging markets strategist at LGIM, believes that Beijing is not on top of inflation – expected to come in at 5.5pc for March – which threatens a more painful tightening process to rein in prices than many expect.  "This means rising risk to the country’s macroeconomic stability and of growth falling from the current 10pc a year to 4pc or 5pc." Mr Coulton said.  Are we prepared for the consequences of a 50% pullback in China’s growth?   

On Goldman watch this morning, it’s a slow day.  Apparently they mislead their clients and Congress on Collateralized Debt Obligligations, misleading their own client/investors – creating (allegedly Lloyd!) conflicts of interest as the company built short positions before the U.S. housing market collapsed.  I guess it is subject to interpretation as their Hudson Mezzanine Funding 2006-1 stated (allegedly!) that Goldman Sachs told investors its interests were aligned with theirs while the firm held 100 percent of the short side.  So it’s the EXACT opposite – just like GS alumni, Cramer, if you do the EXACT opposite of what they say you can do very, very well so it’s only the suckers who listen to them who get screwed (allegedly).  Senator Carl Levin is, not surprisingly, a little pissed:  

In my judgment, Goldman clearly misled their clients and they misled the Congress.  Our investigation found a financial snake pit rife with greed, conflicts of interest, and wrongdoing,”

Come on Carl – that’s not news – it’s their mission statement!  

The Senate Report also outlines how GS Traders (allegedly) tried to manipulate the derivatives market in 2007, "manipulating prices of derivatives linked to subprime home loans in May 2007 for their own benefit," according to a U.S. Senate report.  Company documents show traders led by Michael J. Swenson sought to encourage a “short squeeze” by putting artificially low prices on derivatives that would gain in value as mortgage securities fell, according to the report yesterday by the Permanent Subcommittee on Investigations. The idea, abandoned after market conditions worsened, was to drive holders of such credit-default swaps to sell and help Goldman Sachs traders buy at reduced prices, according to the report. “We began to encourage this squeeze, with plans of getting very short again,” Deeb Salem, a trader in the structured product group, said in a 2007 self-evaluation excerpted in the report.  Swenson, Salem’s supervisor, sent e-mails in May 2007 urging traders to offer prices that will “cause maximum pain” and “have people totally demoralized.”

This is the same logic that is used in the TradeBot programs we play against every day.  We love the fake moves that squeeze out the retail crowd and we are happy to jump on board the train as it reverses – right at the point where most traders are capitulating their positions so I thank the Senate for providing us a nice addendum to our usual trading materials – it’s not a conspiracy theory when they prosecute the conspirators, right?  

In other Gang of 12 action, DB is also under investigation for also dumping bad CDOs on their clients with the head of the marketing team EMailing in regards to the $1.1Bn package they were pushing on the same clients who PAY THEM for advice: "Keep your fingers crossed but I think we will price this just before the market falls off a cliff."  Er, allegedly!  

This is no different than the tactics that are used every day by Cramer, Goldman (allegedly) and the rest of the Gang of 12 and their MSM lackeys.  OPEN is a buy at 175 times earnings?  PCLN is a bargain at 50 times earnings, NFLX at 80 times earnings?  Come on people, that is just nonsense!  

Still it’s nonsense we need to learn to live with.  Remember the robo-signers?  We said "Oh that is such blatantly obvious fraud they are certainly going to get it now."  Well that jokes on us…  The Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision announced a settlement yesterday with the 14 largest U.S. mortgage servicers including Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo.  The settlement doesn’t fine the banks for any of the wrongdoing but instead lists ways they need to improve their mortgage and foreclosure proceedings.

I am not kidding!  It’s a Bankster World – we’re just living in it.

 


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  1. rossmanmd

    25k / FAS – I’m covered with 1/2 Apr 30 and 1/2 Apr 31.  Do we roll the 31 down to 30 and let expire tomorrow? Or do we buy back this morning into the dip, expecting a bounce later today? Thanks.

  2. stjeanluc

     Oil Lines:
    R3 – 110.32
    R2 – 108.94
    R1 – 108.07
    PP – 106.70
    S1 – 105.82
    S2 – 104.44
    S3 – 103.57
    Volatility way down…

  3. Maya1

    Phil
    Good morning!
    Thank you for your input over the months.
    Just to run some thoughts by you re market direction, notwithstanding today’s numbers.
    We seem to be in a range, but are we in the middle bottom or top of the range?
    And should we breakdown, because of the next “2008 banking or some other “crisis”, how will we foresee it on this site and would you be able to point it out on the site?
    Besides your 25k portfolio, which I cannot partake in cos of time constraints, how would we fare even in the dividend portfolio?
    also, please explain ( and maybe I am getting it wrong), why you book profits on the sold puts as these are only a profit at expiration or on buy back, and thus should not be neutral or pro-rated as profit over the life of e puts or calls if they are being sold?

  4. Manimal

    OMG Phil – "it is not yet legal to either hunt old people for sport or to eat the poor ones." Hahaha. 

  5. Pharmboy

    Woo hoo!  PP are up!

  6. Pharmboy

    Not sure if anyone saw this from John Stewart, but this was classic on the Medicare/Medicaid issue:

  7. exec

    Phil,
     
    Isn’t it pathetic that that our government can simply lie about the true inflation figures (for all the reasons that you pointed out), and that the average Joe get the hell out of my way because you’re blocking my view of American Idol citizen is either 1. completely oblivious of it. 2. Could care less. 3. or just accepts the fact that is it standard operating proceeds for governments to lie to their people.
     
    It never ceases to amaze me how the government comes up with all these voodoo formulas for calculating things that they know full well are totally fictitious.  Just last night I heard respectable commentator explaining that all the figures that the President spewed in his speech yesterday were totally bogus.  No basis…..no foundation…..based on unrealistic projections……in other words……a fairy tale…….yet he stood up there with conviction and said it anyway.
     
    Ok…..I’m done.

  8. stjeanluc

    I guess my business doesn’t make enough money to get tax exempt status…
    http://www.ritholtz.com/blog/2011/04/corporate-tax-rates-then-and-now/ 

  9. JRW III

    Good morning,

     

    IWM    84.84,  84.44,  84.04,  83.62,  83.21,  82.84,  82.42,  81.80,  81.40,  80.30  (and $7 Bil of POMO)

  10. roma_

    Pharmboy
     
    What do you think about  ALTH?

  11. rustle123

     Steve Liesman was talking about the CPI numbers and trying to convince people that inflation wasn’t too bad.  Yes energy is up but food has been coming down a lot.  He reminds me so much of the kid who ate paste when you were little.  He looks like he just has nothing going on up there.

  12. augrusot

     Phil, SVU doing well. I sold it this morning for a 30% profit. If it pulls back, should I get back in?

  13. exec

    Good Morning JR,
     
    You jump in yet?

  14. Pharmboy

    If TLT can move through here, we have problems, or I don’t but the market does.

  15. Pharmboy

    Silver is going up quickly.

  16. stjeanluc

     Pharm – Dollar is going down quickly….

  17. rehat

    JRW,
    The lines are mostly the same as yesterday?

  18. Pharmboy

    stj – but TLT is holding, market is moving down, and FXE is moving down as well.  Setting this up, but which way?

  19. Pharmboy

    PLX – if you hold the stock, I will cover at the EOD w/ the Nov 7.5s if the stock closes below 7.  I will let them go if it rockets back up and just buy more stock FWIW.

  20. Pharmboy

    ALTH/roma – they are ok.  Search PSW for them, as I said something about them a few months ago.  Start small.

  21. rj_jarboe

    woo hoo!! SVU

  22. rustle123

     Just went short oil again.  Trading oil has been like taking from an open cash register this week.

  23. Phil

    Good morning!

    It’s a US Dollar smackdown this morning but it’s not helping stocks much.  We’re back to 75.09 again from 75.35 at 7am and the commodities are flying with oil blowing over the $107 line again, back to $107.75 so we’ll watch for another short entry but really violent moves now.  

    In the $25KP, we want to take out the April (tomorrow) $30 callers at .09 as that’s up nicely already and they printed the next weeklies and we’ll certainly be selling those later.  

    Yesterday, it was all about the 1,313.25 line on the S&P so it still is to the upside but now 1,300 is in jeopardy and 2,750 is already blown on the Nasdaq so that’s danger at the major breakout levels and the order of failure would be S&P, NYSE, RUT, Dow if things turn ugly so plenty of warning if they begin to cascade down which means (and raise your hand if you know where this is going) – it’s time to get BULLISH off the 1,300 line!  

    We don’t expect 1,300 to break unless/until the Dollar popped – and it hasn’t so far, so we need to look up now and the DIA $121 calls at .97 are a nice entry with a stop if the Dow can’t get back over 12,200 by 10:30 (and that becomes the stop) or out if we fail .75 or the S&P fails 1,300, of course.  This is not a reversal – this is a bounce cover for longer-term bearish positions!  

    In the $25KP, we can hang tight on the short $123 puts, now $1.35 as we’ll have to roll them to the May $118 puts if we don’t get a bounce but I think we will.   

    Keep in mind we are just in a zone and we aren’t very bullish under 1,333 and even there we’re very skeptical.  

    Oil is calming down already so let’s call $107.50 our cross on the futures to get short again but now the Dollar is 75.05 so we may get $108.50 before they are done.  There are still plenty of barrels to roll but they knocked a lot off the NYMEX and it turns out the rolling situation is better than it looked (bad data) so we’re just looking for one big volume spike down to flush out the rest of the May contracts between now and Tuesday. 

    Month 
    Click for chart
    Session   Pr.Day   Options
    Open High Low Last Time Sett Chg Vol   Sett OpInt  
    May 11 107.32 107.86 105.77 107.80 Apr 14, 09:53
    -
    0.69 105976   107.11 151735   Call Put 
    Jun 11 107.94 108.46 106.43 108.43 Apr 14, 09:53
    -
    0.72 58462   107.71 295955   Call Put 
    Jul 11 108.49 108.95 107.00 108.92 Apr 14, 09:53
    -
    0.68 16105   108.24 184146   Call Put 
    Aug 11 108.97 109.19 107.43 109.18 Apr 14, 09:53
    -
    0.54 7248   108.64 62870   Call Put

    Still a VERY hefty 693,000 contracts in what will soon be the front 3 months.  Perhaps with summer driving coming the traders are feeling brave but 550,000 is the normal carry for barrels and 600,000 in the front three months is historically a lot so this will be interesting to see how it plays out. 

    As noted in the morning post, jobs were a big disappointment and inflation is out of control and one of those puts the Fed on the table and one takes them off so nothing to really get excited about but that won’t stop the commodity crowd from going wild (Dollar at 75.01 now).  

    Since the dollar is popping I’m going to send this before doing the news or the trade ideas might go stale!  

  24. acobra65

    Goldman/Phil
    New book on Goldman.. "money and Power" by William D Cohen – a long term view of Goldman sounds very interesting…..  Saw him on DR show…..

  25. hanna5

     Phil / TBT – I dont understand how we can have such inflation, and dollar depreciation, and yet none of this is reflected in the prices of the long bonds!!?? Why? How? Who? Is this just enormous distortion of the market courtesy of the Fed Intervention? In June, will be see a steep run-up in TBT?

  26. hanna5

     Pharm / TLT – meanwhile, you still bullish on TLT? For a medium term horizon – Like 6 to 12 months? How do you see the end of Fed intervention and increased inflation expectations reflecting in the TBT / TLT trades? Thanks!

  27. Phil

    FAS/Ross – I’d take out the $30s (not worth the risk) and leave the $31s as they are very likely to expire and you can stop them at .05 if we kick higher (now .03).  You really want to be in a position to sell next week calls either way and we WILL do a 1/2 sale of SOMETHING before the close.  It is our JOB to sell as much premium as we can without endangering our long position.  

    Direction/Maya – Short-term, there should be a correction.  No US stimulus, QE3 in doubt, very bad underlying economic data and margin compression likely to be displayed in Q1 earnings.  We need a catalyst to get over 12,500 and 1,333 and CMG $300 is not it, nor is oil at $110.  On the bright side, look how bouncy our levels are.  They have thoroughly conditioned retail investors to buy on the dips so if CMG drops 10% to $250, people will BUYBUYBUY the bargain, even though it’s still up  150% from last year, when they had $1.19 per share of Q1 earnings vs the $1.43 projected for the 20th (up 20%).  INFLATION is the only buying premise but it’s a very good one.  Unfortunately, real inflation can’t take hold until we see wage inflation and that’s much to far away to pay $283 for CMG or $511 for PCLN etc.  

    As to the Dividend Portfolio – You can check the performance – those picks are kicking the crap out of the S&P, which pretty much keeps up with inflation so I still prefer a majority of the money in buy/writes that make 20% along with some more aggressive upside inflation hedges and plenty of cash on the side in case those levels do break down and we need to flip bearish.  As to booking profits – If we sell something for $1 and buy it back for .10 – there’s a .90 cash profit – what should we do with it?  If the put is sold but still open – we do not book a profit.  You may be confused because we sell and buy back and resell and buy back the same put over and over again but we only book profits from the ones we close (ie. "realize").

    Government lies/Exec – All part of the overall campaign to convince you Government = Bad, Big Business = Good (or at least not worse). 

    Great post by Barry, thanks StJ: 

    GE paid no taxes; Goldman Sachs paid $14 moillion last year. The GAO reported in 2008 that “two out of every three United States corporations paid no federal income taxes from 1998 through 2005.”

    Companies have become all too astute at paying for loopholes which allow them to shift profits abroad, or move their gains (on paper) to foreign low-tax/no-tax nations. Since tomorrow is April 15th, it is a good time to look at our corporate tax rates. As the graphic below shows, the change in corporate tax rates over the past half century is astounding.

    Corporate Taxes as a Percentage of Federal Revenue
    1955 . . . 27.3%
    2010 . . . 8.9%

    Corporate Taxes as a Percentage of GDP
    1955 . . . 4.3%
    2010 . . . 1.3%

    Individual Income/Payrolls as a Percentage of Federal Revenue
    1955 . . . 58.0%
    2010 . . . 81.5%

    Anyone who is serious about closing the US deficit should consider the changes in what corporations pay in taxes and the rise of the deficit.

    click for larger graphic

    Another good chart:  

    And another:

  28. Phil

    Dollar 74.91 – WOW!  

    Gotta go long on the Dollar off the 74.9 line, could be a 0.5 move up off that which is huge.  I’d say stop if we can’t hold 74.85 but this is ridonkulous!  

  29. cnarbais

    Phil , Good morning
    My portfolio really needs some downside protection, It’s been loosing money very fast on the waay down and I cant really afford the risk of loosing more.  I was thinking on the TZA Jan12  30/40 Call spread. for 4.15  And 34.15 break even.  Do you have any other one, and what should I sell against it. Thank you

  30. yodi

    Phil I am not playing the USO in the 25k only sold puts and calls against the up and down of oil. Still holding the Apr 45c short which I think will be worthless tomorrow. Thinking of setting up a strangle May 42p/45c short  or would it be better to play the weeklies. Apr 4 44c at .40 and 42p at .32 your thoughts tx

  31. rustle123

     what’s the best stock to play the US Dollar?

  32. stjeanluc

    Setup / Pharm – I think that the problem is that we try to look for accurate correlation between all these investment vehicles – gold, oil, dollar, equities and bond on a daily basis and to a certain extent, they do usually hold true. But I am not certain that the correlation is always that strong. I had posted a comment one day about the anchors at CNBC having to shuffle their analysis cards on a daily basis because of that. How often do your hear a guy like Pisani mentions that stocks are going down because oil is up, say the complete opposite the day after. Then the dollar is up and gold and oil are down. Which was the opposite of an earlier day… These guys are never wrong, it just a matter of picking the correct card for the day. Although it’s getting harder and harder now! Correlation probably hold better looking at long term charts, but hourly or even daily charts will show deviations! I guess we just have to adapt to it.

  33. dclark41

    Pharmboy
    Any idea whats up with DNDN today? Up 6%.

  34. stjeanluc

    Dollar Line if you really want to know:
    R3 – 75.68
    R2 – 75.51
    R1 – 75.29
    PP – 75.12
    S1 – 74.90
    S2 – 74.73
    S3 – 74.51
    S1 holding for now! 

  35. Phil

    Only 11K in buying power to get 10 Dollar longs on TOS, not too bad.  

    LOL Rustle!  

    SVU/Aug – Well this is the earnings we expected out of them.  Watch th e$9.75 line (200 dma) but they should hold it and then we can set up another long around there next week.   

    DIA $121 calls – Don’t even talk to me if you blow a 30% profit (stop at $1.25!).  

  36. drcraig

     Phil, what dollar index are you using? I’m getting 74.72 for DXY.

  37. Phil

    Gold $1,470 and we’ll take that for a shorting line!  

    Silver back to $41.50, also a good line with TIGHT stops but our Dollar play is working already (74.95).  

  38. Peter D

    Good morning, folks!
    Before I can sell more May short strangles on SPX and RUT, VIX died (dropping from 18 to 16.8).  Oh well, the big boys just want to get off their April short options by keeping VIX down I guess.  April expiration has been a hugely profitable month for short strangles as the price movement wasn’t big enough to hurt the shorts, and VIX dropped from $22+ to $17 now.  We are approaching the phrase "sell in May and go away" (or something like that) so I’m cautious in not selling too many short puts.

  39. lori13

    Phil we oun5 UUP May 21 calls in the 25K portfolio.
    Since the $ is down should we move out to June , buy another 2 or 3 contracts?

  40. rehat

    Dr. craig, it is /DX in TOS futures.

  41. pstas

     Peter- strangles- yes, April was nice. Have only sold 1/4 of my usual allocation of strangels for May. Will wait for a bit to see if the VIX improves. 

  42. pstas

     CMG- could not resist any longer- sold  June 300 call for $12.30. 

  43. drcraig

     Thanks rehat… dxm11 on OXP. Yeah, still with ‘em. Will switch to TOS eventually. 
    How’s their software for tax calculations? Can you do a schedule D and 1256 pretty easily?

  44. rehat

    Peter D,
    I have not followed you strangle strategy before. Can you do a short introduction to it – i.e. What you play how you set up your trade and then manage it as it moves (both VIX and alpha through the month). Or point me to an earlier post you have made on the subject.
    Thanks

  45. Manimal

    Phil – Great call on the DIA’s, once again! My sole issue with these is the bid/ask always seems blown out. Currently, its 1.24-1.31. I could drive a car though that……literally a cheap $1200 car (on my 200 calls). Is there any way to mitigate the spread? I’ve tried selling at the mid-point but the bid/ask usually just shifts as I put my order in and it doesn’t fill. Thanks.

  46. Phil

    Nat gas rocketing to $4.23 on a smaller than expected build (silly): 

     EIA Natural Gas Inventory: +28 bcf vs. consensus of +33 bcf. Futures turn positive, +0.5% to $4.163. 

    Cohen/Acorbra – Thanks, I’ll check it out. 

    TBT/Hanna – If the Fed buys every note Timmy sells at 3.5% then 3.5% is the rate, right?  If you are auctioning off cans of coke you’ll get $1 or less but if you have 24 cans and I bid  $5 for each can then what is the going rate?  The scheme only falls apart when I run out of money and the Fed never does.  

    At $10 per 0.01 it’s good to set the stops on the Dollar very tight – they are over 74.60 so 74.50 is a fine stop (mental not hard) and if they break below and don’t bounce back up it’s trade over.  The thing about futures and FOREX is you can always re-load at the next cross so you should NEVER get attached to your positions!  Plan on a hit and run and, when you get a hit – don’t forget to RUN!  

    On TLT – to be clear.  TLT goes DOWN if inflation goes up.  The interest rate goes up but it devalues the bonds, lowering demand.  I get the impression some of you guys are thinking the opposite.  

    Downside/Cnar – Where were you on those when we were testing the tops?  I would be careful here as the market has been very bouncy and, if they do manage to break the buck (finish below 75 2 days in a row) then we are good for another 5% move up easily.  I put up a nice EDZ play yesterday and my preferred overall hedge at the moment is the SDS June $20/22 bull call spread at .98.  SDS is at $21.40 now so ANY downside movement is going to make you 50%+ and you can offset with something you do want to buy if we sell off like SVU Jan $10 puts at $1.60 so you can offer to sell 50 and pick up $8,000 for about $16,000 in margin and then buy 80 of the spreads and you get $16,000 cash back if the S&P heads lower which would net you into SVU at $6.80.  Obviously, you can use anything for your offset – it depends what you REALLY want and how much spare margin you have.  

    USO/Yodi – Playing the weeklies on a short strangle? It’s kind of a crap shoot and I would expect a pretty violent move in oil as you are $6 between $113 (top) and $102 (target) and that’s about $2.50 on USO in either direction IF THE TREND HOLDS.  So, too risky for me with not enough reward.  

    Dollar/Rustle – UUP.  Despite the Dollar getting killed since we bought it, our UUP May $21 calls ($1.06 at the time) is still .55.

    Actually it’s now time to double down on UUP with 5 more May $21 calls at .55 in the $25KP.  

  47. flipspiceland

    Corporations don’t pay any taxes.
    The consumer of their products pays ALL the taxes.
    But I don’t want to start anything.
    EBITDA.

  48. rehat

    Dr. Craig,
    I have just started with TOS this year. I used Ameritrade last year and gainskeeper which comes free with it worked well.

  49. tuscadog

    Phil / QE3   Don’t you think today’s lousy unemployment #’s confirm our thesis that there’s no real recovery,hence QE3 inevitable?  Mkt up?

  50. scottmi

    Oil/Phil – when you say "Oil is calming down already so let’s call $107.50 our cross on the futures to get short again.." do you mean when price crosses OVER 107.5 you initiate the short position, or do you mean when price goes below that, then you start to short?

  51. Phil

    75 on the Dollar BABY!  

    Now time for oil to pull back.  

    Index/DrC – That’s just /DX in TOS, now 75.01.  

    Good job Lori – right on target.  

    CNG/Pstas – I feel compelled to say good luck, even though it seems like the most obvious trade in the World…  8)

    Bid/Ask/Manimal – Ignore that and look at last trades.  Those are real.  Always try to pay the bid and get the ask and, if you can’t get fills on DIA – consider a different broker.  200 contracts at a clip is a lot and if you put them all out in a block, it’s VERY worth a bots time to try to beat you down as well as any unscrupulous market maker who catches your play.  Also, if you wait for a turn to cash out, you will always get burned for a nickel so learn to set realistic goals like 25% and get half out at least on the way up – then you can afford to give up a nickel on the turn down.  

    "ALWAYS sell into the initial excitement" is because you always get your best prices selling INTO the crowd.  The rule does not say "ALWAYS sell AFTER the initial excitement for a good reason."  The key to momentum trading is trading the momentum, not the resistance lines.  If you gain .10 in 5 mins and then .05 in the next 5 and .02 in the next 5 – then your momentum is slipping away so don’t wait for there to be NO buyers at all – sell when the buyers slow down.  

    Good job not starting Flips.  

    QE3/Tusca – I think there will be a stealth QE3 but not an overt one and that will not give the markets more confidence (but it will cause inflation so a dip and then a recovery is still the theory).  

  52. hanna5

     TBT / Phil – Hey! I totally agree!! But, by the same token, if the fed stops bidding (in June), then there will be a very rapid and very severe dislocation and the market will reset, which means that TBT would skyrocket. Since this is public information, i HAVE to believe that there will be some front-running as we get closer to that with people dumping bond, buying TBT, selling TLT. Meanwhile, i have been adding to a long term LEAP TBT position. 

  53. rehat

    Phil,
    What stops do you use for /DX
    I used a .05 stop and got triggered (for a small gain)

  54. stepup

    I’m confused – saw Phil’s post "DIA $121 calls at .97 are a nice entry", is it April call? did the price go down to .97 this morning? thanks!

  55. kinkistyle

    interest rates/hanna: I think Phil posted this chart up a few days ago showing the effect of QE on bond yields:
    http://static2.businessinsider.com/image/4da4e496ccd1d5f1620f0000/qe-yields.png
    Bonds go down during QE and once the spigot turns off, all hell breaks loose and people pile back into bonds again.  I don’t know how long they can keep playing this game, but thats the game they seem to be playing.

  56. stepup

    ok, i guess it’s just my quote monitor

  57. b1ll

    hey Phil, I’ve been working on an oil / USO correlation, could you explain "move in oil as you are $6 between $113 (top) and $102 (target) and that’s about $2.50 on USO" ( ? $ 6 between meaning trading around $ 108 ? )

  58. oburlacu

      If anyone here follows IncomeTrader he posted an alert in his current thread

  59. Pharmboy

    The Feds stopped buying last year, and look what happened (this was from Tueday and Cullen’s post on SA).  Bid to call on LONG dated treasuries are going UP not down.  I still believe the bond market knows a bit more about what is going on than the equity market….suckers they may be, but their market and the currency market is bigger than any equity….so I follow what they do.  Retail is all in (margin included…what does that mean for equities?).  I stand by my premise that bonds will rally in the short term (6 mo or so), along with my little biotechs of course. 

  60. ultyguy

    Getting "Potential Pattern Day Trade" message on Interactive Brokers and it’s not letting me place trades.  Anyone know what that means and how to get around it?  Never had it happen before. 

  61. Phil

    Oil/Scott – BELOW!!!  In futures, we ONLY play a cross going our way off significant support/resistance lines (psychological ones) with very tight stops (.05) which we loosen up as we go more in the money.  TOS has the best system for this as they have lines you can move like football down markers so every time the futures contract moves past a line, you can move your stop up to follow it without messing around with re-entering the order over and over again.  Try it in the free version – it’s great.

    For example, Dollar crossed 75, up from 74.9 and we are playing for hundreths so a 20% trailing stop is 74.98 to lock in the 0.08 gain.  Once we cross over by .10 – we tighten the stop to the 74.95 line (allowing it to test 75) but more or less we can then leave the stop there (at 75) until we cross the next nickel and then follow it up each .05 to lock in the gains.  

    TBT/Hanna – But do you really think the Fed is going to suddenly go "you are on your own" in June?  They may be stupid but they are not idiots – they know that would collapse the economy so there will be some deal, somehow to keep as much of a lid on things as possible.  As you say, it’s public information – therefore the public (the beautiful sheeple) will have already been herded into this "can’t miss" opportunity.  There’s a good chance to make money on the rumor but I’d be very cautious about waiting for the actual news to get out.  Long-term, I think the rise of TBT is inevitable because the Fed may be able to keep printing money but, eventually, people will lose faith (unless the whole World collapses and we look relatively good again).  

    Stops/Rehat – Funny you should ask…  ^

    DIA/Step – They actually fell to .84 early on.  If I don’t say – it’s usually the front month and, if you are not sure, you can always ask but not 2 hours later – that trade is over already.  

    Oil/B1 – Yes, $107.50 actually is $6 down from $113.50 and $6 up from $101.50 and $6 is 5.5% of $107.50 and 5.5% of $43 (the current price of USO) is $2.40 so I was off by a dime but I used my calculator this time to make sure I have the number just right for you.  

    Thanks Obur!  

    Patten Day Trade/Ult – Check with them but it means you don’t have enough funds to make more then 3 day trades in a week and that flags you.  Usually they will give you a reset one time but it’s a serious thing so make sure you go over it thoroughly with the broker and understand all their rules and repercussions.  

  62. Peter D

    rehat,
    I’ll send the previous link in a few hours as I have to run now …

  63. Manimal

    ultyguy – To follow up on Phil’s post. I used to be there.  You need a minimum of $25k in your brokerage account to make unlimited day trades. With less than the margin requirement you are limited to 3 full day trades in a rolling 5 business day window. A ‘day trade’ is classified as an entire buy/sell of a position in one trading day (if you hold overnight you are ok).  Here is a link for more information:  http://www.finra.org/investors/smartinvesting/advancedinvesting/daytrading/p005906
    If your account gets flagged they could lock up the funds for 60 days so be careful!!

  64. cnarbais

    PHIL.
    What do you think about GMCR 25kp. short 65 Puts. GMRC its right at 65 now

  65. jomama

    Phil, what do you think about a GOOG Jan 2012 530/580 Call spread for about 25$.    This means a break even of about 555 by Jan with a chance for close to a 45% return?

  66. hanna5

     RIMM – at some level would anyone be interested in buying into RIMM? I know we all like talking about companied trading at 80x EPS, but RIMM could earn $6-$7 / share next year. Trading at $53 today, down again. Now ~8x earnings. Sell Jan 2012 55 puts for $8 and buy the 2012 $50 calls for the same amount. Net even. Worst case, you get put RIMM shares at 55 in January? Dont know that i like that….Any ideas for a longer term trade here? It seems to me this is a binary story. Either they sink into irrelevance ala Palm, or else they stay around, in which case they are WAY undervalued. 

  67. Savi

    anyone following the Income Trader --he posted an alert at 10.30 am

  68. keelm2

    Phil – Thanks for the DIA trade this morning (and the beautiful USO trade earlier in the week).  Wondering if you have any plays on silver opps (I’m long $US).  Sentiment is excessively bullish and the trend is getting old in the tooth (dollar – vs euro and yen – can’t be seen as worse than those two for much longer, can it?)
    Thanks – Keelm

  69. Pharmboy

    DEPO is settling right in the area where they popped up to after FDA approval.  That is a good place to either buy again, sell a few Ps or start a small position FWIW. 

    DNDN – I have no idea why they shot up.  Zack’s gave them a thumbs up, but many of these biotech/pharmas in the 5-15B range on market cap are being bought into, most likely due to M&A speculation.

  70. rainman

    WFR just close their gap.

  71. barfinger

     Phil, you are long the UUP may 21 calls? I passed on that original trade. Why do that and not sell the May 22 Puts for a little more?

  72. rustle123

    I see this on top paid CEO’s and it drives me nuts.  Johnson & Johnson have been shutting plants down here and laying off thousands of employees to get cheaper facilities in Mexico, which because of the change in the dollar are not close to as cheap as when they started doing this 3-4 years ago and I’m thinking, if William Weldon earned 5 million left and only received a paltry 23 million for the year, does it really change his lifestyle?  and you can say the 5 million difference would account for only 100 jobs saved at $50,000 but it’s actually many more jobs because it’s only the difference of what their spending at the new plant with new construction, training and labor they had to pay for and keeping the old plants open in NJ that they would have to cover.  If’s laughable when the defense is that they can’t find the talent for less.  Johnson & Johnson didn’t have a great year and I’m thinking for 23 million they can still find alot of talent.
     
     11. William Weldon, Johnson & Johnson

    Total calculated compensation (TCC): $28.72 million 
    CEO since: April 2002 

  73. Phil

    Thursday’s economic calendar:
    7:45 Annual Bertelsmann Foundation Conference
    8:30 Initial Jobless Claims
    8:30 Producer Price Index
    9:00 Fed’s Duke: Credit Conditions for Small Businesses
    10:00 Hearing: ‘Oversight of the Financial Stability Oversight Council’
    10:30 EIA Natural Gas Inventory
    1:00 PM Results of $13B, 30-Year Note Auction
    1:30 PM Fed’s Plosser: ‘Strengthening Our Monetary Policy Framework’
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet 

    09:30 AM At the open: Dow -0.35% to 12228. S&P -0.39% to 1309. Nasdaq -0.66% to 2743.
    Treasurys: 30-year +0.16%. 10-yr +0.17%. 5-yr +0.1%.
    Commodities: Crude -0.15% to $106.95. Gold +0.39% to $1461.30.
    Currencies: Euro -0.16% vs. dollar. Yen +0.77%. Pound +0.45%.

    10:00 AM On the hour: Dow -0.64%. 10-yr +0.16%. Euro -0.03% vs. dollar. Crude +0.64% to $107.80. Gold +0.74% to $1466.40.

    11:00 AM On the hour: Dow -0.34%. 10-yr +0.08%. Euro +0.11% vs. dollar. Crude +0.68% to $107.84. Gold +1% to $1470.10.

    11:19 AM Treasurys are mostly flat after a Fed POMO purchase of $7.68B in bonds maturing 2018-2021, of $23.412B offered by dealers. The 30-year yield 4.55%; 10-year 3.46%; five-year -0.01 to 2.17%; two-year +0.01 to 0.74%. Later: what could be an interesting 30-year bond sale.

    12:00 PM On the hour: Dow -0.23%. 10-yr -0.08%. Euro +0.14% vs. dollar. Crude +0.66% to $107.82. Gold +0.95% to $1469.40.

    March Producer Price Index: +0.7% vs. +0.8% expected and +1.6% prior. Core PPI +0.3% vs. +0.2% expected and +0.2% prior.

    Initial Jobless Claims: +27K to 412K vs. 385K consensus. Continuing claims -58K to 3,680,000.

    Canadian manufacturing sales fall more than expected in February, dropping 1.5% vs. expectations of 0.2-0.5%, with the strong currency being targeted as the culprit. Future months could see additional declines due to supply disruptions from Japan. The loonie is flat vs. the greenback.

    Danger Will Robinson!  Danger!  Danger!  Yesterday’s comments from German Finance Minister Schaeuble regarding Greek debt restructuring sink in, pushing its 10 year yield well above 13%, and the 2 year skipping 90 basis points higher to 18.38%. The euro plummets from a 15 month high, now at $1.4377.

    The head of S&P’s European debt team suggests bondholders would see a 50-70% haircut in a Greek debt restructuring, as Greek officials hit the wires denying the possibility of default. The numbers say otherwise: Argentina’s debt/gdp was 63% at its 2001 default, Greece’s is expected to hit 158% next year.

    Political parties opposing European bailouts continue to gain ground in Finland, now with a 50% chance of winning a majority, and thus able to block a rescue of Portugal. Such action would likely fuel opposition parties in Germany, calling the whole EFSF into question. Pesky voters. 

    Mark it at T+34 days … the head of Japan’s opposition LDP party calls on PM Kan to quit due to his handling of the earthquake and subsequent events. Though needing opposition help to pass bills, Kan is likely to ignore the request, instead calling out the LDP as using the tragedy to score political points.

    John Paulson makes three key points: 1. Financial reform could hinder the recovery; 2. Inflation is a risk; 3. U.S. debt levels will sooner or later reach a "very serious" problematic threshold. Additionally, the biggest risk for the U.S. recovery is the "stagnating" housing market, and he’s betting on gold strength. 

    Repossessions fell 17% year on year to 215,046 homes in Q1 2011, data from RealtyTrac shows. However, March figures suggest foreclosure activity may be starting to creep up as lenders make progress tackling a backlog of cases. 

    Mortgage rates rise for the fourth straight week in Freddie Mac’s survey, though the agency is emphasizing sub-5% affordability. Fixed-rate 30-year loans averaged 4.91% (up from 4.87%), while 15-year fixed-rates were up to 4.13%. 

    Who’s (still) buying our debt?  The PBOC reports China’s foreign currency reserves jumping$197B in the 1st quarter to more than $3T. The growth in reserves suggests, despite a 1st quarter trade deficit, China continues to print gobs of yuan to buy up greenbacks. The G-20 gathers tonight in D.C.

    Spain backtracks from yesterday’s leak that China’s SWF was to invest €9B in the the country’s struggling savings banks (cajas). By Spain’s calculations the lenders need to raise €15B in capital to meet acceptable balance sheet ratios.

    Knocking down the Dollar:  The Xinhua news agency reports Chinese Premier Wen vowingto "increase the flexibility" of the yuan to combat inflation. It’s the first time a senior Chinese official has acknowledged using the currency as a tool against price rises. A Hong Kong source reports March inflation risingto the 5.3-5.4% range.

    Shaking off weakness in the euro, the British pound is higher following a report that March U.K. consumer confidence bounced off February’s record low, the NBS index rising to 44 from 39. Cable +0.4%vs. the greenback, and +0.6% vs. the euro. 

    The ECB’s monthly bulletin (pdf) suggests further interest rate hikes, again mentioning "upside risks" to price stability. The report notes past accommodation continuing to slosh around, "facilitating … price pressures in the euro area." FXE -0.2%.

    An adviser to the Bank of Korea calls for rates to be raised to at least 4% to combat inflation (currently running near 4%) and put a check on rising household debt. What is the state of the world when even a hawkish voice isn’t calling for positive real rates? Gold hovers near record levels at $1,460/oz. 

    Following news its 

  74. Phil

     

    Following news its GDP tripped along at a 23.5% Y/Y rate last quarter (double expectations), Singapore (EWS) joins a growing list of countries allowing faster appreciation of domestic currencies to combat inflation. Without central banks’ active support, the dollar could be headed lower still. UUP -0.2%

    Like "choosing between AIDS and cancer" is how a Peruvian Nobel Laureate describes the presidential runoff between Chavez ally Ollanta Humala and Keiko Fujimori, the daughter of a jailed ex-president. Shares agree, off more than 12% since the news hit on Sunday. EPU -2.9%BAP -0.4%

    Having made Libya its problem, NATO is warned by opposition groups that a massacre will occur in Misrata if air attacks against Gaddafi forces are not stepped up. Other than France and the U.K., NATO appears to have lost interest.

    U.S. officials believe Iran is providing Syria with assistance – including crowd control gear and helping to block cell phones and internet service  – in its battle against protesters. This shouldn’t be a surprise, and the leak is likely just to let Iran know the U.S. is aware of its activities. 

    Does Goldman Sachs’s serial downgrading of the commodity sector this week reflect a bit of jealousness? Occasionally called theGoldman of the commodity world (but not yet a vampire squid), Glencore officially announces its planned IPO, hoping to have the company valued at $60B.

    A commodity strategist at BofA views things a bit differently than Goldman, calling for crude oil to rise as much as 30% from current levels. Sabine Schels sees nothing to change the current paradigm of strong economic growth against continued restricted MENA supplies. BNO-0.2%USO +0.5%.

    The statement coming out of the BRICS summit calling for increased regulation of commodities is at odds with current Brazilian policy to refrain from such action. It suggests that the commodity importers (C,I) successfully put the lean on the exporters (B,R,S).

    MGM Resorts (MGM +1.2%) founder Kirk Kerkorian is leaving the board to become director emeritus, saying his 27% stake is well represented by the current board: "I just didn’t care to keep going back" to "lengthy" meetings, the 93-year-old says. 

    Not out of the woods yet, Bank of Ireland (IRE -1.4%) may shape up as the strongest Irish lender should the country get to the other side of its current morass. The bank reports a net loss of €609M for 2010, about half of expectations. 

    Allied Irish Bank (AIB -3.3%) will offer to repurchase subordinated notes (of which it holds $3.8B), Finance Minister Noonan says, as the Irish government gets a court OK to amend the debt’s terms. Bondholders that don’t comply could be forced to accept losses, though the government doesn’t plan to impose them on senior bondholders of the viable lenders, including IRE

    Told you so: Fund managers are on the lookout for tech bargains (includingINTCCSCO and HPQ) as an earnings season heading into full swing will show income crimped by Japan supply-chain issues and worries about the tablet-vs.-PC market shakeout. Intel, H-P, DELL and MSFT are trading at less than 10 times forward earnings. 

    Ford (F -2.2%) shares sink following reports of an expanded recall of 1.2M Ford F-150 pickup trucks due to a wiring problem causing inadvertent airbag deployment. The recall covers trucks from the 2004 through 2006 model years. Ford’s F-Series pickup is the top-selling vehicle in the U.S. 

    First Solar (FSLR-2.3% premarket after announcing that its president of operations will be leaving the company, and Jim Chanos tells CNBC that he finds the company "problematic," citing “enormous insider selling.” Regarding the solar sector: "It still costs almost three times a kilowatt hour for solar power than regular natural gas or coal-fired power."

    Hasbro (HAS): Q1 EPS of $0.12 misses by $0.05. Revenue of $672M (-0.1% Y/Y) beats by $11.62M. (PR

    Progressive (PGR): Q1 EPS of $0.55 beats by $0.11. Revenue of $3.9B (+3.2% Y/Y) beats by $0.12B. (PR)

  75. chaps

    UUP $21 calls @ $.42 have no premium if you want to take a shot on the $ rising before the end of the week.

  76. jomama

    hanna, that was my premise on RIMM last year.  I got tired of holding my breath and watching some sold puts bounce around in price and i took a small loss.  I think that it depends on the playbook but i do believe that ultimately they will be a palm.  I am concerned by the amount of cash they are burning.  In addition, their ceo/leader (the dudes name starts with a B) is so arrogant, that i would be concerned that he would turn down a nice buyout ala Jerry Yang.  jmho

  77. rehat

     What just happened to the dollar…

  78. 1020

    JRW – Why Dad tells the kids to take Moms car…..
     
    http://uk.cars.yahoo.com/14042011/36/t/20-year-old-writes-dad-s-pound-275-000-superc-0.html
     
     
    :)

  79. lori13

    Phil  I’d like to get back on the 25k portfolio.  I have the UUP trade and the xrt trade.  By the way should we be DD on
    XRT May 51 puts?  Anyway don’t have many longs anywhere.  Mostly cash.  Should I but some FAS May 31 calls?

  80. exec

    Damn……there crushing the dollar.
     
    What’s the best play for a bounce Phil?

  81. dclark41

    Pharmboy
    DNDN now up over close to 9%. Can M&A speculation really drive a stock this high? Seems very strange especially with the strong volume.

  82. augrusot

     JRW, are you in TNA today?

  83. Pharmboy

    IRWD – look at them go……

  84. kurtww

     Phil, I’m looking for a decent long play to offset my short positions. I have 25 of the Jun 20/22 BCS offset with 15 Jan SVU 10 Puts (both at $2250, net $0). My only other long positions now are $7k in futures options in the metals (which I’m comfortable with), and 5 of the Jan CSCO play from a while ago (long 15 call, short $17.50 call and $17.50 put). 
    I’ve been watching PFE and I like your play that you mentioned about 10 days ago, still at the same terms. For example, long 500 shares, sell 5 Jan 15 puts and $17.50 calls.
    I’m trying to keep the positions on the smaller side for now in my trading account to get a good feel for things before jumping in bigger. Do you think I would be reasonably balanced by adding PFE as aboveor should I add a larger position? Or should I add a different buy/write as well? I’m still reasonably bearish (at least for a short term correction), but I do think QE3 is coming in some form and I don’t want to be unreasonably bearish. On the other hand, I still think gold and silver are good plays in the inflation scenario, and I have fairly big long exposure in physical metals now. 

  85. exec

    JR went MIA after his initial post……..I wonder if he went BD in TNA and committed Harry Carey

  86. Phil

    S&P 1,313.25 would be a stronger breakout today than it was yesterday due to downtrending channel top.  On the other hand, probably a really tough time getting there that will get harder as the day goes on.  No confirmation from Financials so far that they are ready to rally.  Dollar back to our bargain – basement buy level at 74.9 again.  

  87. zeroxzero

     Harry Carey — now that’s funny.

  88. Phil

    Finally $108.50 on oil (our next shorting opportunity).  

    USO Next week $43 puts down to .57 are good because we still think a big sell-off is coming into the rollover.

    And, of course, we still like our futures shorts below this line.   

  89. zeroxzero

     Phil: Food / DBA:  I’ve been holding a position for weeks, it pretty much does zip.  Any opinion?  Haven’t seen you mention the grains for awhile, or perhaps I missed it.

  90. willsons

     Phil     I shorted oil at 108.51 and went long the dollar at the same time.  Is it OK to play it that way in your mind?

  91. willsons

     Phil    Never mind.  It worked

  92. lunar

    does anyone know how to look up oil on fidelity.  thanks.

  93. dclark41

    Phil
    Are we looking to half cover FAS longs at minimum $.50 next week $30′s or minimum $1.00 $29′s? Financials still look very weak.

  94. jomptien

    Phil/BRK.B,
    Good time to sell Jan 70 or 75 puts? Thanks

  95. JRW III

    kurtww / Chart

    The setup that will probably be the most help to you is my 3 minute conformation chart, as my 1 minute has proprietary software. Basic settings are 2 day, 3 min, candlestick chart of IWM (I never watch TZA or TNA). Overlay TBT on the chart and add pivots, 40 and 200 SMA’s, Bollinger Bands, an 8 or 9 EMA and my daily confluence lines. In sub-screen 1: MACD,Stoch/RSI14momentum and Signal line. In sub-screen 2: Volume.

    This will give you good results by simply changing position based on a breaking engulfing candle followed by another engulfing candle on the new side of the EMA. You will be late on entry and exits as compared to the one minute chart, but you will have fewer false entries !!

    Also, understand that I have 6 screens and am  always watching dollar futures, Weiss Order Flow, and a myriad of other contributing factors as mentioned here.

    I hope you find this useful, and I apologize for missing your first post; good hunting !!

  96. Phil

    Hit $74.85 on the dollar – Nice!  

    GMCR/$25KP, Cnar – That’s really annoying but I think they pin it and, if not, we roll.  

    GOOG/Jo – I like that.   It think GOOG is still way underpriced but it’s a tricky time for them and they may disappoint slightly tonight so make sure you will be happy to roll or scale.  

    RIMM/Hanna – I like them all beat up down here.  I would not be that aggressive, maybe sell the 2013 $45 puts for $6 and buy the $42.50/55 bull call spread for $6.40 for net .40 on the $12.50 spread and the worst they can do is have you own it at net $45.40.  With $12 coming to you above the current price, you can also pick up income selling 1/2 the May $55s for $1.55.  

    Silver/Keelm – I would take advantage of SLW’s run and sell the 5 May $44 calls for $2.45 ($1,225) and buy 3 Sept $46 calls for $4.60 ($1,380) and just hope silver doesn’t crash too hard.  Shouldn’t be tough to recover more than the net $155 for the 3 longs (.50 each) and, if SLW breaks over $43, you can add a long and if they break over $44, you can add another.  

    UUP/Barf – It’s a $25KP trade so we don’t have the margin to sell the puts but of course that’s a good way to play.  

    JNJ/Rustle – Yes, very sad – they have really fallen apart as a company.  Weldon doesn’t deserve a dime for what he’s done with them.  

    Nice reliable bottom on the Buck!  Back to 74.91 already.  

    Good idea Chaps.  

    Car/1020 – Cool!  That’s why my kids will drive Hummers or Range Rovers.  

    $25KP/Lori – We just added the XRT May $51s as a DD so I still like them, UUP I mentioned above and FAS is very cheap down here but, as a fresh entry, I’d go for the July $30s at $2.75 as we’ll end up rolling there anyway, eventually.  If the S&P breaks 1,313.25 today, we’ll stay naked but if not, we will sell something that gives us at least .50 and right now that is 1/2 the next week $29 calls, now .80.  INTC June $20s are really cheap at .46 too.  

    Bounce/Exec – That dollar play is working like a charm.  You can go with the no-premium tomorrow UUP calls too and, of course, shorting oil works for a dollar move higher.   

    Long/Kurt – I think a small shot of PFE is fine but there’s also INTC at crazy lows, RIMM we mentioned above, F had a nice sale today (recalls not too painful over time) and TM is risky put pays very well and long-term, make a good hold.  

    Harry Carey/Exec, ZZ.  He will be missed.  

    DBA/ZZ – Better used as a position to generate income.  You can have long-term faith in inflation to ride out the dips and make your own dividends.  At this point, of course, I think they topped out but you never know.  You can sell the July $34 calls for $1.40 so that’s a start and you can be long with the 2013 $30/37 bull call spread at $3 and that’s net $1.60 on the $7 spread and just make sure you cover if they pop $35 or you can spend .50 for the July 37s to cap possible losses and margin.  Even if you take the conservative .90 – do that just 3 times and you have a free spread.  

    Combos/Wilsons – It’s really the same bet so I’d rather put 2x on one and concentrate.  Good plan though, timing-wise.  

    FAS/DC – See above – of course as IT’S OUR JOB TO SELL PREMIUM!  

    BRK.B/Jomp – I think you should make sure we pop our trend on the S&P because, if we sell off – Berkshire will not be immune.   If it’s a scale in and you don’t mind rolling and doubling down – sure I like them enough to go for it.  

    TBT just got beaten with a stick.  

    S&P testing our line now – big deal!  

  97. dclark41

    Phil:
    FAS/ Or is it time to roll down the May 31 to May 30 for .40 and sell 1/2 cover April 21 $29 for .84? .04 credit on the move.

  98. JRW III

    1020,

    Ouch !!

    augrusot / TNA

    Yes, since 11:59 !! I will sell if we lose IWM 82.21.

  99. stjeanluc

    USO / Phil – Would it be OK to go into XLE Puts rather than USO for next week – for example the 76 weekly puts. XLE tracks oil as well as USO I think and actually long run, much better. Thanks. 

  100. keelm2

    Phil – Thanks for the SLW tip.

  101. Peter D

    rehat,
    Here was the April 1st post that was linked to other posts (thanks to the Wiki):
    =====================
    … Wow, has it been over a year when we had all the fun discussion on short strangles.  Sun & Scott, here is the link for "newbie" that we did: 
    http://www.philstockworld.com/2010/01/13/which-way-wednesday-beige-book-boogie-2/#comment-280315
    We have short strangles open all the time.  It supposes to be boring plays, but we made them interesting a year ago.  Statistics shows that we would win most of the time, but there are occasions that make us sweat and work for our money with short strangles.  Cwan had a famous quote saying that we will only be counted as experienced with short strangles AFTER enduring at least a big crash AND a relentless run up.   Yes, we prefer short strangles on indices too.  I personally want to dabble with long strangles on individual stocks because of the blowout events that scottmi mentioned, using a percent of profit from the index shorts, but I never got around to open the long strangles.  May be I should start to ask Pharmboy which ones in his list is good for a long strangle, or at least a long call….

  102. Phil

    Since the S&P is just under our breakout – it’s a good spot to short the Dow for a possible rejection.  The April $123 puts at .85 are nice for a quick ride and we can watch 2,750 on the Nas (now 2,749) and 1,313 on the S&P and 12,260 on the Dow as stop lines for maybe a dime loss.  

  103. drcraig

     JRW- Do you use Weiss order flow on the RUT through a charting service? If so, who offers this indicator? Or do you use the free SP version on their web site?

  104. stjeanluc

    Someone is overly optimistic:
    http://ftalphaville.ft.com/blog/2011/04/14/546626/bob-the-bear-sees-a-hard-landing-ahead/ 

  105. Pharmboy

    What scares me is that every one I read is saying this! 

    While the bears picked up the pace of selling on Tuesday, the market (SPY) has been basically asleep since April 1 with tight trading ranges and low volatility. Periods of low volatility are often followed by periods of higher volatility.
     
    Welles Wilder developed the Average Directional Index (ADX) to measure the strength of a trend, without regard to the trend’s direction. In the chart below, Wilder’s ADX is at the top and the S&P 500 Index is at the bottom. The thick black ADX line rises as a trend strengthens and ADX falls as a trend weakens. When the red ADX line is above the green line, as was the case at the close on April 12, the bears have the upper hand. When the green ADX line is above the red line, the bulls have the upper hand.
     
    Our description of the chart will move from left to right. Notice how when the ADX black line moves up from low levels (see orange arrow left), the stock market often makes a sharp move (see orange line bottom left). Similarly, when the black ADX line moved up from low levels in the middle of the chart (see green arrow), a strong uptrend followed. The takeaway for us today is near the blue arrow; ADX is at low levels, which is often followed by a “pop” in the market. The fact that the red line is above the green line does not necessarily mean the “pop” will be down – it is too early to tell.

     

  106. 1020

    Phil/drive   I have one of these for my kids to drive – otherwise known as the mother-in-law guest house  ;)
     
     

  107. oakd

     Hi Phil
    I have SVU stock and sold 2013 7.5 calls and puts. Given the pop, what would be the best way to adjust? Thanks.

  108. 1020

    I guess I need one of these…
     

  109. JRW III

    drcraig / Weiss S&P Daytrader

  110. shadowfax

    kurtww
    I wanted to give you other tips along with JRW. I didn’t know until today that he uses 6 screens, I tried this with 4 and it wasn’t enough and 6 works for me also. I also built my own computer and although I use JRW’s 3 min as he states my software is overdriven and nobody can copy my screens either with standard software or processing. I monitor XFF, DOW, and S&P almost the same and $ futures. It took almost 3 months to set up and I change things all the time. I also find to do this it must be the only thing you do, try to only catch the big moves not every day.

  111. Manimal

    Phil – This could be a topic for later discussion but on a given day (this afternoon for example) how do you differentiate in your calls for a sell-off vs. stick. I assume the notion of POMO comes into play? Levels? Volume?
     
    Some insight would be very helpful to myself, and I’m sure a majortiy of us on here. Thanks!   btw. I’m loving the DIA puts already….:-)

  112. stjeanluc

    Add one to the unemployed list:
    You won’t be able to hear him for much longer, folks. Paul Marcarelli, aka "Verizon Guy," is being let go. As it turns out that wasn’t even his character’s name, VZW settling on "Test Man" when scripting the early shots. Now that company is "taking its ads in a different direction," a direction that apparently does not include Mr. Marcarelli. But, based on the tales he recounted to The Atlantic, that may be a good thing. Paul once heard someone say "Can you hear me now?" at his grandmother’s funeral — as her body was being lowered into the grave. Yup, it’s time for a role change. 

  113. shadowfax

    XFF is really XLF financials and I have lost some days!

  114. chaps

    re/FAS:
    will sell something that gives us at least .50 and right now that is 1/2 the next week $29 calls, now .80.
    you mean $.50 per caller with a half cover, not $.50 cover per long, right?

  115. vic55

    Phil,
    This is from Bloomberg:
    U.S. Companies Pay World’s Sixth-Highest Tax Rate, Study Finds

  116. drcraig

     Anyone want to speculate on GOOG and the market reaction? I figure with a green CEO in place, they’ll be under a lot of pressure to present results that the market will like. Last year this time we traded up aggressively into earnings, and despite the beat, they were punished a new downtrend began. This April we’ve traded down into the earnings report, but the market is swirling with mixed signals. Usually that’s bad.. but it’s hard to know what bad really means anymore. Statistically GOOG is up 65% of the time with a beat, and down 100% of the time with a miss. They probably won’t miss, so the question is.. will the market be happy with their beat?

  117. asaenz

    Hey Pharmboy, what do you think about this article? 
    http://seekingalpha.com/article/263537-why-phase-ii-trials-are-the-best-time-for-biotech-investing
    Any biotech companies that will report phase two trials in the near future that might be worth investing in them? Thanks.

  118. Pharmboy

    Someone loaded up on AGN May Ps at 72.5.  OI is 34, vol is 1750. 

  119. Pharmboy

    asaenz – those are one set of companies I try to target IF I understand the science and the risk.  CRIS, ARIA, AEZS, ARRY, etc. are perfect examples.

  120. Phil

    FAS/$25KP, DC – I don’t want to be too aggressive with the roll, even though it’s very doubtful XLF fails $16.  It’s more a matter of not wanting to tie up more cash unless we need to but we will 1/2 cover with the next week $29s if we can’t get .50 for the the $30s by the close.  That will increase the probability that we will need to roll down but hopefully it doesn’t come to that.  Don’t forget we’re really saving up for the roll to the July calls at some point. 

    XLE/StJ – Not really the same thing but a high correlation so sure.

    You’re welcome Keelm.  

    Thanks Peter – very nice.  

    Good note StJ.  

    Notice how we are hugging the top of that descending channel on the S&P. 

    Guest house/1020 – Hmm, another fine use for them…  

    SVU/Oak – Not a lot you can do.  That was a conservative play and you won.  There’s still a lot of premium so not worth cashing in but you could, if you want money, ditch the stock and buy the Jan $10 calls at $1.85, which have very little premium and free up $8.80 while you wait for the premium to wear down on the 2013 shorts.  

    Differentiate/Manimal – Unfortunately, there’s no secret recipe.  It depends on the time of the month (how close to expirations, end of Q, etc) upcoming data, upcoming earnings, statements, political events, news flow, volume, performance, long-term trends (5% rule mainly), money flow, price of oil and other demand commodities (who cares how much gold is?), performance of stocks like YRCW, AAPL, IBM, MCD, KO, FDX, V, MA, VNO, BXP…, the SOX, the Transports and, after all that, I put on my fund manager hat and think about having a meeting with my VPs and what posture I think we should be going with for the next few days so day of the week and time of day becomes important too.  After taking all that into account – I run it through my program and go with the decision.  

    Funeral/StJ – Oh come on, it HAD to be said!  8)

    Welcome back Shadow – enigmatic as always, I see… 

    FAS/$25KP, Chaps – Yes, something we sell for .50 (.25 per long).  Ultimately, we want to sell .50 in premium per long but not when we’re this low if we can avoid it.  In a week FAS can be back at $32 and we’ll be screaming if we full cover.  

    Taxes/Vic – That’s nonsense, they don’t pay it.  You can have a tax rate of 750% but if all you collect is, in fact 12%, then THAT’S the tax rate.  Just like the income tax rate – there’s a rate for middle class suckers and then there’s a rate the top 1% pay, which is roughly 25% or less.  As Buffett has pointed out, the top 0.01% pay about 17% (not counting the $100K+ they pay to accountants to get them there).  Again – a VAT is the only way we’ll fix this system before it’s too late – no matter what they do with the Tax code, wealthy individuals and corporations will avoid them.  

    Oh there – CNBC just said corporations pay an average tax rate of 8.9% – it’s getting worse!  

  121. 1020

    vic55/tax  That 27.7% tax rate is for companies that pay taxes…..

  122. 1020

    vic55 – Like Phil said…. :)

  123. stjeanluc

    Still don’t know why the bottom 80% doesn’t revolt!
    http://www.epi.org/economic_snapshots/entry/taxes_on_the_wealthy_have_gone_down_dramatically/ 

  124. oakd

     thanks Phil--I’ll let the SVU run

  125. Phil

    1:00 PM On the hour: Dow -0.06%. 10-yr flat. Euro +0.34% vs. dollar. Crude +0.88% to $108.05. Gold +1.17% to $1472.60. 

    1:03 PM The Treasury sells $13B in reopened 30-year bonds at 4.531%(.pdf). Bid-to-cover ratio of 2.83, vs. a recent 2.73; indirect bidders take 47.2%, vs. a recent 40.1%. Direct bidders take 10.8%, vs. a recent 9%.

    Treasurys (all over the map today) were down; now yields swing back to negative again after signs of strength in a 30-year reopening. The 30-year yield -0.02 to 4.53%; 10-year -0.01 to 3.46%; five-year fractionally down to 2.17%. 

    2:00 PM On the hour: Dow -0.18%. 10-yr -0.05%. Euro +0.31% vs. dollar. Crude +0.78% to $107.95. Gold +1.24% to $1473.60.

    Global food prices 36% above year-ago levels have pushed an additional 44M people into poverty calculates the World Bank. For reference, the World Bank considers earnings of $1.25/day to be the poverty line. The figures would be far worse if not for rice, whose price has remained stable Y/Y

    BOJ Governor Masaaki Shirakawa reiterates his stand against monetizing government debt issuance to finance Japan’s reconstruction, saying it will "erode a very stable bond market … erode confidence in the currency." A favorite trade of the hedge funds, buying/shorting JGBs is now available to the average punter: JGBTJGBL

    Financial markets are gaining “a lot of confidence" that the U.S. political system "will be able to get our fiscal path in a sustainable position," Geithner says. After Obama’s proposed deficit cuts, "the world basically believes that our problems are more manageable, our system will solve it."

    Jamie Dimon said during JPMorgan Chase’s (JPM) earnings call yesterday that a U.S. government default on its debt "would be catastrophic." What is the bank doing to prepare for such an extreme outcome? "We are praying," Dimon said, then, after a pause, "And we are planning."

    Philadelphia Fed President Plosser again makes his case for reversing highly accommodative central bank policy, but recent comments from the powerful triumvirate of Bernanke, Yellen, and Dudley indicate no change is coming in the near future. 

    Poland braces for more rate increases after its central bank chief calls the 4.3% Y/Y inflation rate "beyond our range of tolerance. It would be naive to think that even if we consider the spike in inflation as transitory, that we will just let it pass." Transitory … there’s that wordagainPLND +11.9% YTD.

    A pretty fair Bond King of his own, Jeff Gundlach simply explainswhy Bill Gross is wrong about bonds selling off at the end of QEII: QE is inflationary, which is bad for bonds, therefore the end of QE has to be deflationary, which is good for bonds. The charts make it difficult to argue otherwise. Did anybody actually sell Treasurys based on Gross?

    More evidence that the world’s safest bonds aren’t U.S. Treasurys: Instead, look to Norway. (previously

    Dell (DELL -3.4%) shares stumble after JPMorgan says that "PC-centric" companies are having a tougher time than investors realize, citing Gartner data showing greater consumer attention on tablets helped drag down Q1 global PC shipments. JPMorgan also warns on Seagate Technology (STX +3.2%) and Western Digital (WDC +2.4%), but they’re higher. 

    With same-store sales and market share slipping, Best Buy (BBY-2.1%) is cutting its big-box space by 10% in the next 3-5 years and allocating the savings (estimated at $70M-80M annually) into smaller stand-alone formats, like Best Buy Mobile. Online sales are another key target.

    Three lunchtime reads:
    1) Japan GDP: New normal means Tokyo living with Chernobyl
    2) Is Goldman Sachs too big to fail?
    3) Inside George Soros’ "monstrous monkey house"

  126. stjeanluc

    As the chart in the article that I linked to point out, we have a revenue problem, not just spending. When corporation pay only 10% and the top 400 families pay 16%, that’s a lot of cash compared to 20 years ago! This seems to simple to me! 

  127. sbrownA

    Hi Phil, et al.
    Option Expiration week is one of my personal favorites.  Just completed a 3rd buy/write roll on WFR cost basis now $4.85, GCI cost basis now $6.43 and SNP just a covered call but basis down to $84.14.
    I wanted to ask you about my blunder however in playing GME when you have time.  I liked the stock at $19.92 in July 2010 and didn’t use buy/write (perhaps mistake #1).   I used the covered call Sept $20 which ended up bringing in #1 after rolling for $.31 to Jan $20 which ended up netting only $.20 on the roll to Apr $20.  So in the end we got GME for $19.92 and will be called away for $20 while earning $3.16 in call premium.  Not an awful trade but feel like with the stock at $25ish I messed up a good play.  Any advice on how I should correct for this mistake in the future would be appreciated.
    Thanks,
    Scott

  128. Phil

    JetBlue (JBLU -2.5%) reports March passenger traffic rose 7.1%. With capacity increasing 4.2% (to 3.14B seat miles), the airline’s load factor – percentage of seats filled – rose 2.3 points to 83.6%.

    JBLU 2013 $4/7.50 bull call spread at $1.60, selling $5 puts for .85 is net .75 on the $3.50 spread   Net margin should be .50 plus the $1.60 cash to make $3.50 if all goes well.  

  129. rustle123

     Phil, why the hell would anyone buy Zipcar which came public yesterday.  In 11 years, they never turned a profit, lost 52.1 million in 2010 and will lose money in 2011 yet it’s up $10 from it’s IPO price and has a market cap of roughly 230 million already.  When options are available, would you go bearish on ZIP?

  130. asaenz

    Hey Phil, the DIA $123 Puts are once again .79, would you reload on those ones?

  131. craigzooka

     @kurtww, I wanted to answer you comment from yesterday, in case you forgot 
    "Craigzooka – I followed your instructions and wanted to point out a couple of small things. 1) when you install MetaTrader, I think you have to set up a demo account rather than cancel out of that step. If you just cancel, it doesn’t set up the currency pairs and you can’t import the data (at least it didn’t work for me until I set up the demo account). 2) Could you post your latest bot code? I saw several versions in the links that you posted, and also some posts that just had the variable definitions, but the latest variables included some that were not in the code that I found. Also, when I ran the versions I did find, I consistently got major drawdowns, I couldn’t reproduce a profit of any kind. I’m not sure what I’m doing wrong. You mentioned running tests for 200 hours, but all the simulations I ran finished in about 3 seconds. It seems like I’m missing something. 

    This seems like a really interesting approach. I’m looking forward to playing around with it more. "
     
    1)  I cant remember but I think you might be right.  I know that there is a way around it, because I figured out how to do it one time, but since a demo account is free its probably not worth the headache.
    2)Here is a link to the latest code.  As far as the siumulations are concerned that is a much longer answer than I can post here.  But if you want to chat some time just skype me, my username is craigzooka.

  132. craigzooka

     thats weird, Phil, any reason my comment is awaiting moderation?  Is it just the antispam filter acting up?

  133. cnarbais

    PHIL
    FAS/  Why its not possible to cover for a day with the May 30 or 31 instead of the neat week 29′s (if we cant get the 30′ for $0.50). Let say that fas Goes up tomorrow over 30, wouldn’t it be possible then to switch back to the next week 30′s for about even or we will lose money that way.  Thank you

  134. Phil

    Oil jacked up to highs at $108.50 and the Dollar back to 74.89 into the NYMEX close (good for another round on the FOREX). Gold $1,475, silver $41.80, copper $4.29.  

    Thanks StJ

    SVU/Oak – That’s good as they are running.  

    400 Families/StJ – What it doesn’t take into account is that for the 400 families and the top 1%, their share of the total income has more than doubled too so their cut has a 2x detrimental effect on collections.  

    WFR/Scott – That’s what I was just talking about with my guys – working that basis down to zero over time – very nice!  On GME (or any like it) you can first of all roll out longer if you decide to keep it and also roll to combos.  So let’s say you are in GME at $19.92 and sold the April $20s for $3.16 for simplicity’s sake.  That $20 caller is $5.50 and you can roll him to the Jan $25 calls at $3.40 and the $22.50 puts at $1.90 for net $5.30 for net $19.92 less $2.96 in premium (as you spend .20 on the roll) and now you have $5 upside (25%) between now and January.  So, if you are confident in GME holding $25 and also willing to double down at $22.50 – it’s a nice way to pick up an extra $5.  

    Alternatively, if you are less bullish, you can buy Jan $30s to cover for $1.55 and roll the caller up to 2x the July $24 calls at $2.60.  That’s (2x $2.60 = $5.20) .30 less than you owe the caller now and you are spending $1.85 to raise your call away by $4 but then you are stuck with a calendar spread to work out once you are called away.  Keep in mind this is really what you want to do when you expect a pullback, not when you think the stock will keep rising. 

    Zipcar/Rustle – They are totally cool but yeah, not a good stock and certainly not at that price.  These things are very simple – long-term, why would they have a better multiple than Hertz or Avis or whoever.  Zipcar has not invented anything except for overcharging for smaller slices of time – BRILLIANT! but, ultimately, zero barrier to entry with many established players.  Hard to say what I would do with options though – look at OPEN – just as stupid and now $2.5Bn with just as little revenue as ZIP.  

    DIA Asaenz – As long as all 3 don’t break it’s a valid premise but a lot of effort made today to kill the dollar so I wouldn’t be surprised to see a big stick either.  

    Moderation/Craig – None at all – Just some combination of words the spam filter took exception to,  I already saw it and released it.  

    FAS/Cnar – The weeklies decay very fast and the May’s do not.  You CAN sell whatever you wish but, on average, sell the most premium with the fastest expiration over and over again because up, down or sideways – you WILL collect that premium.   

  135. rustle123

    Zipcar/Rustle – They are totally cool but yeah, not a good stock and certainly not at that price.  These things are very simple – long-term, why would they have a better multiple than Hertz or Avis or whoever.  Zipcar has not invented anything except for overcharging for smaller slices of time – BRILLIANT! but, ultimately, zero barrier to entry with many established players.  Hard to say what I would do with options though – look at OPEN – just as stupid and now $2.5Bn with just as little revenue as ZIP.  
     
    But even as ridiculous as OPEN is (and I love the fact that it has been going down since I wrote 110 calls against it when it was 110), they make money.  Zipcar will have to perform miracles to break even.  Reminds me of Vonage when that came public.

  136. morxlntway

    Hi Phil – FAS (of course) I am in the May 31′s for 2.80. Cant sell weeklies. So what should i be looking for to 1/2 cover? moderate delta? it isn’t something i will stay in, either take a gain or roll or go naked again. It’s just coverage for the nitght, right?
    thanks

  137. morxlntway

    i think you just answered to Cnar.

  138. cnarbais

    PHIL
    FAS , to be clear we are selling the NEXT week 30 or 29′s, Not the one expiring tomorrow right? thank you 

  139. craigzooka

    @kurtww, sorry forgot to actually put the link in the message.  Here ya go.
    CraigBot_1.0

  140. lolkha

    Pharm
    What is our target for DCTH?
    I have Sep 5C

  141. asaenz

    Hey Phil, what are your expectations on BAC´s earnings tomorrow?

  142. hextra8

    Phil,
    Just checking in with you on the following trades. Should I sell or adjust the following:
    2 ADBE April $28 calls sold for $2.01 (-$868), now $6.25
    2 ADBE April $28 calls assigned (-$1,260), now at $34.30
    2 AAPL April 300 calls sold for $19.45 ($-2,700), now $33
    5 GMCR April $50 puts at net .85,  (-$420), now $1.17
    5 CCL April $40 calls for $1.60 (-$775), now $2.07 
    Thanks.

  143. rainman

    Phil / enigma — my favorite clip for enigmas

  144. shadowfax

    For what it is worth to all, last week the BOTS changed from the same every day to same on and off during the day. The problem is the change, the last week for me early trading is very unrewarding while seeing very clearly what could have been done. Today the RUT broke it’s downward trend, is it a real change or a dead cat bounce? The DOW, S&P, and XLF have not confirmed anything either way.

  145. chaps

    nice little FAS stick for selling covers into the close, i hope

  146. hanna5

     GOOG – think they should go up with earnings. Goodness, with the growth they have and the way they are trading, this is getting to be a cheap stock. Also, i think the android growth will be very strong. With such a strong core business, and now android "moving the needle" i like entering longer term positions here. But, will take a little play into earnings on the upside with May calls

  147. jabobeast

    looks like they are trying to close all the MoMos higher again—wow!

  148. kurtww

     JRW and Shadowfax – Thanks for the comments. They are really helpful… I’m getting the sense that I would be in over my head with this strategy. I will keep it in mind for the future, but for now I want to get my sea legs doing less intense trading. I’ve done well trading precious metals and have left a lot of profit on the table because I lost my resolve and sold out on some major spikes down, but even despite that I’ve done well with it. At the same time I am very aware of the "don’t confuse brains with a bull market" advice. 
    I wonder if it’s possible to combine some of the indicators that JRW follows to scalp some profits using a tradebot like Craig has developed for the Euro. I could get into that. 
    Craig – your link to the latest code doesn’t appear, even after Phil said the comment was released. I will try to skype you later, I’m definitely interested. 

  149. kurtww

     Craig – got the link now, thanks. 

  150. morxlntway

    chaps – i waited on that stick yesterday and had to take a lower amt for the covers. i’m just sayin…

  151. chaps

    morx: i know. i was right with you ‘bro… :)

  152. shadowfax

    kurtww
    Maybe JRW will shed some light on the BOT change, I am getting to many false signals. I am going to help my mother pick out a mattress and sleep on the rest.

  153. dclark41

    Great day for the D’s: DNDN, DCTH, DEPO

  154. morxlntway

    shadow – watch out for the bedbugs! :)

  155. dclark41

    Real tug-of-war going on with FAS. Which way will it go?

  156. JRW III

    If you are long, watch out here !!

    I’m out !!

  157. Phil

    Zip/Rustle – Just don’t get too caught up expecting logic with an IPO.  Obviously way overpriced but those things can really frustrate you if you short too early.  

    FAS/Morx – That’s a pretty hopeless position then.  Best to sell the May $29s for $2 and roll to the July $29s at $3.30 (+$2.20) and at least that way you have 2 roll ups to look forward to and hopefully you can work it into a bullish $3 spread. 

    Wow, are we actually rallying over the passage of the spending bill?  That is one lame excuse.  

    FAS/$25KP, Cnar – WAITING as long as possible, we are selling 1/2 (40) the next weekly $30s for .50 or better as a target.  If we fail to get to .50, we’ll probably sell the $29s, which still have .50 in premium and offer a bit more protection (now .88).  

    BAC/Asaenz – Pot luck but I will be interested to read them.  Any bank that can’t make money in this free money environment has some real troubles.  

    Stuff/Hextra – Well, I can’t figure out your net on ADBE but if you want to keep them you can just roll the $28 calls to the Jan $30s ($6.40) but is that worth it to have to wait a year?  May as well get called away and take some earnings spreads.  AAPL you have to roll to whatever is the same price down the line or split it with something like the short June $335 calls ($15.90) and June $340 puts ($14.75) short strangle but you still risk a big move in AAPL hurting you.  I would still do that though and just plan on rolling the losing side to something like the Jan $400 calls ($15) and the Jan $280 puts ($15.80).  GMCR I would just take that money and run or did you sell the puts (all the negatives confuse me) and, if you do own the puts with a day to go – why you didn’t stop out already today with one day to go just baffles me.  CCL I can’t even imagine what that number is, the $40 calls are .10, not $2.07.  I guess the puts are $2.07 so I’ll assume those and you can just roll them along to the May $39 puts for about the same price and if you can pick up $1 each month for free – you can do that roll for 3 more years and get them down to $3 so one day, hopefully, you’ll get them!  

    I used to like that show Rain. 

    FAS/XLF really not confirming a move up.  

    Dollar back to 74.88 – can’t trust a move up based on squashing the Dollar.  

    I agree with JRW – Very fake and low volume to boot.  

  158. lolkha

    25K FAS are we covering today by next week weeklies? or stay naked until tomorrow morning?

  159. drcraig

     I think the point of the stick was to provide a green close, if we do fall, it won’t be much. I think they’ll defend the line at the previous day close. 

  160. Pharmboy

    DCTH – $20, maybe more.  They need time (FDA time that is)…..something I will wait for.

  161. Pharmboy

    VIX is really low again, TLT is holding, and the SPY Calendar May/Apr 132s are even from my buy/sell yesterday.  I don’t think they are going to keep this up.  Oh, and I see JRW & Phil agree…whew!

  162. stepup

    how do you like the idea shorting MCP?

  163. drcraig

     FWIW the Weiss order flow on the SP futures just turned red. Let’s see if it predicts anything. 

  164. pahurik

    stepup, if you want, you can short REE, but MCP is to dangerous today after buying SILMET

  165. yodi

    Phil GS I do smell a rat again do you think they pull them selves out of the bag again Any idea on any gamble ?

  166. Pharmboy

    ACOR must be getting bought out…..

  167. Phil

    FAS/$25KP – We have had 4 consecutive gap up Fridays so, on that basis, I think we will wait for tomorrow to sell calls.  If things go the wrong way, we’ll have to go full cover and roll down but we still have 4 more weeks to sell so nothing to panic about (yet).  

    S&P finally ran into trouble at 1,315 – replay of yesterday.  

    MCP/Stap – I like it long-term, short-term it’s a crazy rumor-driven MoMo.  Good idea on REE from Pahurik.  

    GS/Yodi – I have little doubt they get a wrist slap.  These guys do something criminal every week (allegedly) – this one has been going on for 4 years and we’re FINALLY at the point where the evidence is coming out.  

  168. Pharmboy

    ….oh, I see they have a patent extension….why would they halt trading on that?  Makes not sense.

  169. abel1236

    ACOR must be getting bought out…

    i believe it is patent extension

  170. hanna5

    That was a super strong bounce from this morning. Re-orienting to a more bullish stance. Like MRVL, NVDA, and still MGM on momentum. Also, little GOOG calendar play. Cross your fingers for earnings. 

  171. livingfull

    Air tight marco economic commentary today,,,kudos.  I would encourage you as your not alone in your views.  Surprisingly even The Economist is beginning to read like some of your posts….a number of op eds in the last few weeks sounds like they were reading your posts…keep a steady strain Phil….

  172. Phil

     

    74.85 again on the Dollar – good chance we head up into Nikkei open (9pm) for those brave enough to ride the overnight FOREX.  

    Google time!  

    Thanks Living.  

  173. Phil

    Oh no, and down she flies!  

  174. craigzooka

     @kurtww I would totally be into developing that bot with you.  I am familiar with the JRW strategy and dont see any reason we cant code up the logic.    Only problem, we might have to open a new account with Tradestation in order to get it to work.  I will look into Prodogio platform on TOS to see if it is possible to implement his strategy.  I know you cant implement my Forex strategy with Prodigio but maybe we ca get the JRW strategy to work.

  175. drcraig

     No numbers on goog yet, but it ain’t lookin pretty in ah!

  176. JRW III

    Look for a gap up open tomorrow above IWM 83.01 (just a posibility)

  177. asaenz

    PHIL, GOOG missed on earnings (better than expected on revenues), we will probably get a bad report from BAC tomorrow morning, so based on those two things and on todays market movement, i expect a down day tomorrow, what do you think?

  178. bobhu

    JRW III, with goog down $24+ now, Tomorrow should be gap down?

  179. jromeha

    Does anyone know what Silver closed at? Im short 2 mini contracts at 41.95….

  180. Pharmboy

    42.12 jro

  181. drcraig

     Now that GOOG has disappointed, it usually falls an additional 13% over 42 trading days. That gives us a bottom around $480. Don’t expect much of a bounce or drop tomorrow. I will be looking for a bounce next week to buy some puts. 
     
    btw, I made about 500% in gains last year capitalizing on this info. It was not a craps roll sum either!

  182. Phil

    Down tomorrow/Asaenz – That would be logical but then why work so hard to push the indexes higher into the close?  Seems to me that if they put in this kind of effort today – they intend to keep us up here into options expiration.  

    At the close: Dow +0.13% to 12287. S&P +0.02% to 1315. Nasdaq -0.05% to 2760.
    Treasurys: 30-year -0.18%. 10-yr -0.21%. 5-yr -0.19%.
    Commodities: Crude +1.2% to $108.40. Gold +0.21% to $1475.50.
    Currencies: Euro +0.35% vs. dollar. Yen +0.44%. Pound +0.51%.

    A bill funding the federal government for the rest of the fiscal year easily passes the House, reflecting the budget deal struck last week that purportedly saves $38.5B and averts a government shutdown. But a new CBO analysis suggests that the deal will save only about $352M.

    "Collective suicide" is what one banker calls a battle for depositsthat’s seeing Spanish banks offering rates of 3-4%, more than they can make lending it out (unless they’re lending to Greece). The Spanish government is prepping new rules to brake the practice by this summer.

    Silver gets its tail in the air on news Bolivian President Morales has ordered the May 1 expropriation of mines previously sold off by the government. The metal (SLV +3.2%) is doing a lot better than the affected miners: Pan American (PAAS -6.7%), Coeur d’Alene (CDE -5.7%).

    The global high-yield bond market is on a tear and even looks at risk of overheating, Heard On The Street says. But tighter U.S. monetary policy, whenever it starts, may upset the apple cart; high-yield bonds tend to perform poorly in the 10 months after a first U.S. rate increase, and recent deals have tended to be riskier. 

    The experience of recent attempts at London IPOs by Russian firms suggests a healthy level of discrimination by investors. The offerings that succeeded did so because of very modest valuations, suggesting buyers are paying attention to the price, not the story.

    Uranium names back in favor today after a report suggests that related companies, so depreciated they’re trading at less than their assets would be worth in a fire sale, could see a pickup in M&A activity. Japan’s nuclear crisis made uranium miners 31% cheaper relative to book value, Bloomberg says. URG +4.4%UEC +4.7%URRE +0.5%USU+1.6%DNN +2.6%URZ +7.6%.

    If you agree with Byron Wien and John Taylor in expecting a market pullback but have a hard time identifying which stocks to dump, Credit Suisse analysts have compiled a list of 10 vulnerable stocksCVA,GBCIJACKMASMSINTRSSHLDSSWUSGWY.

    How high is the proverbial "wall of worry?" Still pretty high, Cullen Roche writes – high enough that "it’s safe to say that a healthy dose of skepticism remains in the market." 

    Research In Motion’s (RIMM -2.7%) first fling into tablets isn’t off to a strong start, based on the tepid reviews for its new PlayBook. Although "gorgeous," Walt Mossberg writes that "its dependence on a nearby BlackBerry connection makes it impractical for most people," and Wired’s Mike Issac finds "serious gaps in key areas like app selection and Flash stability."

    Google (GOOG): Q1 EPS of $8.08 misses by $0.03. Revenue of $6.54M (+% Y/Y) beats by $220M. Shares -4.1% AH. 

    Google (GOOG): Traffic acquisition costs rose to $2.04B from $1.71B a year ago. Paid clicks were up 18% vs. consensus of 15%. Shares -4.8% AH. (PR

    $548 on GOOG – quote the overreaction.  In a logical market, this should cause the MoMos to gap down 25% if GOOG is being punished for these numbers.  

    GS downgraded the banking sector – retaliation to the Senate I think.  

  183. etradingsignals

    Phil: Good call on GOOG!
    I am in the GOOG 580(* -4) + 590(* -3) spread that you had recommended couple of days back. How do you suggest we deal with this favourable move in GOOG? Should I just close the spread or just close the short and wait on long to move up?

  184. stjeanluc

    Logical market / Phil – My grandfather once mentioned that concept to me! 

  185. ilene

    Today’s levels.

  186. hanna5

     Wow. What an over-reaction in GOOG. missed by $0.03 on $8+ earnings. Revenue and growth look very good from what i can see. Still on track for ~$35 eps this year, with $100 / share in cash. Thats $450 ex cash, and ~13x forward earnings for a company growing 15%+.

    Hmmm. Well, will just add long stock at these levels. And, drcraig, if it continued to $480, that would be great. I would back up the truck at those levels with the android platform. that would be ~10x, for a strong growth best in breed company with strong cash levels and flow.

    Keep in mind, even with last years historical numbers, this is a company that has grown yoy EPS and revenue significantly, so multiples have gone way down, and we’ve seen no run-up at all into earnings, which was typical previously.

  187. drcraig

     hanna5, that’s actually aggregate data on all their misses, not just a single instance. I agree with the points you’ve made, but I’ve lost way too much money betting "this time it’s different". We’ll just have to wait it out and see!

  188. hanna5

     drcraig / GOOG – yes, i understand. And, i think that you may be right, and GOOG may trend down from here. its down 5% AH now, and could easily drop another 5-7%. That being said, look at other "historical trends" for GOOG, and you will find it is in a different place then it has been. i.e. it historically traded at much higher multiples. in fact, its multiple has compressed much more then its growth rate. i was just thinking this could affect its performance based on historical data. but, i will treat it by entering in stages here. 1/4, 1/4, 1/4 to accumulate a full position. i just think the value is too tempting. would love for you to post if you make any trades on GOOG from here, as it is one of the stocks i follow closely, and alternative opinions are always welcome!!!  :-)

  189. elliotteldrich

    I have a question for everyone regarding inflation and price targets.
    Let’s say we’ve decided, for whatever reason, that 1,500 on the S&P is a really important level and when we hit that level we’re going to make some choices regarding our investments. Now let’s say that one year later, we hit that level of 1,500 but inflation has been running at 10% during that same year. So now even though the S&P has hit our target of 1,500 inflation has pushed the real number up to 1,650. So do we go ahead and act on our original premise, or do we factor in that the target is now higher due to inflation?
    I’d be very interested to hear what our Members think about this topic. 

  190. hanna5

     OK, More on GOOG for those who are interested. This is distilled from conference call. Trying to get some concept of the reaction.

    --Rev 27-28% yoy increase. Gross Rev 8.58 billion. Strong, stronger then expected. 
    --Solid 18% increase in core clicks for search. 8% increase in pay per click. Both better then expected.
    --Cash flow 3.2 billion, with FCF of 2.2 billion. Spend huge amount of cash, seems on buildings in Paris, Dublin, and US.
    --10% across the board raise for employees, with sig upfront Q1 costs with 401k, benefits, so disproportionate impact on this Q. This probably caused the miss.
    --Adjusted EPS of 8.08, vs expected 8.13. Small miss secondary to increased expenses. 
    -- 50% + rev now from non-US.
    --Aggressive growth and investment in non search businesses – Android, Chrome, YouTube, social-media, travel…growth in these areas very very impressive. 
    --Expanding YouTube beyond user generated content focus, with integration in other GOOG platforms
    --Will not comment on acquisitions, but basically imply that they WILL NOT make a big buy, as company and culture and growth would all have to be perfect and this is a "high bar"

    So, it seems like a case of investors getting chills over the expenses, which seem like solid long term business investments. Very short sighted reaction, as far as i can tell.

    And, this company has extreme growth for its size. And, the cash hoard is massive. Given stock performance, almost seems like they should issue $50 / share special dividend or something…unless they wanna start a $10/share dividend, which they could.

    Would love some comments. Considering sig investment next week or in AM if it continues lower. Also, would expect some of the GOOG $700 club Analysts to come out in the next couple days and re-itirate buy from these levels. Conf call still going on when i got off…

     

  191. Pharmboy

    25K spreadsheet is updated.  NOTE: I have already included the Intel profits (Calls that expire tomorrow) FWIW.  Overall, the numbers are still within a few thousand depending upon the inputs/exits from Phil’s $47K in realized cash + gains….

  192. zeroxzero

     hann5  - My comments are fairly untutored.  But I think Google is well-managed by its owners, as opposed to have-resume-will-travel tech execs, Google is still dominant in a very important market [search], they have diversified, very creatively in some directions, as per their comment on large acquisitions, not at the expense of damaging their coherent corporate culture.
     
     I believe in the value of company culture — how we do things, and for whom we do them.  If management is incoherent as to the former, and employees are not high on the list in the latter category, any company will lose competitive position over time.  My sense is that Google scores higher than normal in these categories, again, largely a product of it founders and owners still running it rather than turning it over to some exec who hit a lucky streak in an unrelated tech company and has a hot rep.
     
    For my money, this is the ideal "buy it well and work down the basis" company for a long hold. And, unless you’re a real pro, a much easier way to make solid investment gains than playing Joe Day Trader.  Amusing as that can be, admittedly.

  193. Pharmboy

    My spreadsheet is up to date as well.  Been less active over the last month, but I think we have enough exposure to some nice little companies.  I also am trying to wrap my head around AUXL that I bought two days ago……may work on something about them and possibly another for the weekend.  Stay tuned.

  194. jomama

    hanna, thanks for the summary of the GOOG conference call….think of what the earnings would have been if they didn’t give the raises, etc.  I have the Jan 530/580 call spread.   I may take out my 580 caller and start selling 570 or 580 monthly calls and then will  reinitiate the call spread prior to earnings.

  195. Phil

    What an insane spike up and then back down in GOOG after hours.  Seems to be hanging down at $546 now.  

  196. pstas

     Short strangles- another good month- almost 2%. Conservative strikes with a VIX over 20 makes a big difference. 
    May not looking very good at the moment. 

  197. doro165

    Hanna5, nice recap of GOOG. What did Page have to say? I am interested in the change from Schmidt. The numbers
    are Schmidts, what is Page going to do? 
    Sell off over done?

  198. lolkha

    What I’d like to see on GOOG stats is – how much returning business they have on search.
    Chunk of their revenue obviously come from simple scheme. I create new site. Immediately I get coupon from GOOG and use it. I happily see stats with a lot of clicks and next month I pay them, and get clicks. At some point I understand that those clicks don’t necessarily bring me new business. So after a while I stop paying them. I cannot find stats what % if their revenue comes from those first time payments and how many site owners come back month over month and keep paying.
     

  199. Cap

     Quick drop in.
    Options expiration tomorrow; so busy day / week for me.
    Last month, had over 50 positions to monitor, close, expire, roll.
    This month, only about 45 !  LOL.
     
    USO call sale strategy has worked well.   Have 45 & 46 weeklies that should go out at 0 tomorrow.  And some 40 and 41 puts — same.
    Hope to get some pop in USO to sell more calls for next week.
    Gotta keep the Nobu budget afloat.
     
    These momo names are driving my crazy.
    MCP at 73 ?   Its a 20 stock.
    OPEN breaking down, still at 105.
    CMG ridiculous at 283.
    PCLN at 512.
    NFLX at 236 or so.
    BIDU at 147 and barely moved on GOOG.   Its only at like 50 X  REVENIUES
     
    How "they" manage to keep these things elevated is criminal.
     
    Good luck tomorrow; hope to pop in.

  200. yshenhar

    Pharm
    In the $25KP, I believe the INTC long calls are "40 INTC June $20 calls at net $1.685" based on Phil’s last update. Your spreadsheet shows Apr11 $20C.

  201. zeroxzero

     Phil:  Re DIA  - You mentioned you had traded it extensively, and become very familiar with its movement.  I’ve noticed that before I began to trade options this year [and later signed up with PSW] I was doing very well, knocking down 6% per month over a nice stretch.  This year I’ve done rather badly.  I attributed it to my unfamiliarity with options, and a percentage of it – 25%, I’d guess — were indeed mistakes, bad entries, illiquidity surprises, and the usual tyro stumbling.  But 3/4 of my losses were bad trade selection/bad timing rather than option-specific mistakes. What happened?
    I think I’ve figured it out.  I had been trading a very limited number of large caps, some foreign, which I knew very well. I had created an "ecosystem" in which I could hunt. I understood their ranges and reciprocal sensitivities, was hooked up with the right news sources, and in general operated within familiar territory.
    When I started mucking with options, I left my ecosystem in order to grab the hot trade, fast mover, headline new stock or whatever floated by on which I could practice my option chops.  No go.  Babe in the woods.  The sucker at the poker table.
    Easy fix.  Apply my PSW lessons to my familiar ecosystem.  It happens that they were stocks I want to own in any case — that’s why I was trading them, to effectively lower my basis or increase my holdings.
    So I thought I’d mention it.  If you have members that struggle at times, like I have, just stripping down to less than 1/2 dozen names and getting to know the territory might bump the success percentages of novices like myself.  Not that you didn’t point it out, but I didn’t get it until this evening. 

  202. Phil

    Good morning!

    Wow, the Dollar ran back to $75 from our last entry – very nice!  Thanks to Craig I decided that stops can be trusted to trigger overnight (still a theory though as there was no need to stop).  Of course now we expect the dollar to go back down to goose the markets but I won’t short them, I just think 74.85 makes a pretty reliable floor (74.825 was the low at 3:30 pm yesterday).

    Global markets are pretty flat.  BSE fell 1.5% but that just makes up for yesterday’s idiotic gain of 2.25% so they are back around 19,400 but still over their 200 dma at 19,000 but they death crossed in early March so I’d expect a test of the 50 dma at 18,500ish if there’s any further weakness.  The Hang Seng is right on 24,008 with a 100-point stick save to hold that line and the Nikkei, of course is below the 200 dma (9,800) and getting worse at 9,591 (down 0.65%) and that will cause their own death cross in about a month if they can’t get over that line.  It’s tempting to go short the EWJ as they spiked down to 8,227 and that may have been an accurate assessment of the damages….

    Europe is both wishy and washy this morning, nothing to report there.  We’ll probably do the same despite GOOG because, on the hole, nothing is more important than burning premium on option expiration day!

    As it’s OpEx day and GOOG is down a ton, there are going to be high-risk trades at the open.  I especially like selling today puts here, which is great if you have margin and are ready, willing AND ABLE to roll them along if GOOG goes down further.  Let’s say, for example, you can sell the $540 puts for $5+ at the open (into the initial excitement but expect some more selling at the bell) – well even if they ramp up to $10, they can still be rolled (probably) to the May $510 puts.  

    We should also keep an eye on the TODAY calls and the Next Weekly calls – looking for a bounce.  

    13%/DrC – That would be an epic buying opportunity.  GOOG spent a little money this Q as they transitioned the company – Boo Hoo!  I’d be loving it if they get to $500 but I can’t see it unless the whole market falls.  Don’t forget GOOG usually has a big pop into earnings and that reversal is part of the overall drop, we certainly didn’t have that here as they are down from $631 in Feb already.  

    GOOG/Etrad – Our play was buying 3 June $590s for $20 ($6,000) and selling 4 Apr $580s for $12.20 ($4,880).  The $580s are obviously toast – the chance of GOOG finishing positive today are not good at all.  If the $590s retain $10, it’s an $1,880 gain on $1,120 so it’s greed not to take that but if the Junes are badly hit – we can sell 3 Next week $580s and even if it’s just a few hundred dollars, we’re getting paid to wait.  

    Logic/StJ – Once upon a time…  

    Inflation/Elliot – I am always adjusting my levels to reflect changes, inflationary and otherwise, most TA people do not.  I also account for things like changing Dow components and, soon, Nasdaq rebalancing because what’s the point of comparing a Dow that had C, GM and HON with one that now has CVX, CSCO and TRV? 

    Thanks Pharm! 

    Very good point ZZ, thanks for sharing.   I have noticed, from listening to people, that I need to emphasize that more often.  Of course it is best to trade what you know, not just follow someone else’s pick on a stock you aren’t familiar with.  That’s why hedge funds have sector specialists and even I tend to go back to the well on the same 100 stocks and ETFs I like to trade over and over again.  

    Dollar still 75, oil $108.50 so still our favorite short but tricky into the weekend.  

  203. cnarbais

    Phil, Good Morning
    25kp.   Are these today rolls…..DIA Apr 123 Puts, GMCR Apr 65 Puts,  FAS is still naked.
    Just want to be sure that I didnt miss one of these.  Thank you

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