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Thursday: How to Make 500% On the Next Crash

Have a thrilling thursdayDid you have fun when Japan crashed the markets?

How about when the S&P knocked us down last week?  If not, then you probably weren’t hedged and you weren’t hedged because you don’t buy your protection when it’s low, which is when the market is high.  I’ve said enough about us being in a channel and I’ve made enough titles of posts "1,333 or Bust," referring to the line the S&P has to hold (for more than a day!) in order to give us a properly bullish sign and I’ve said that there isn’t enough money in the World to support what is now $112 per barrel oil so I’m not going to bother – that’s why we have archives

I laid out a case for Members last night as to why earnings are deceiving as we are hearing a lot from multi-nationals early in earnings season and they get some pretty big benefits from the exchange rate, which is running 14% better than last year.  I strongly advise all Members to read my example on YUM brands as well as look over the charts and other stuff I’m not going to bother repeating here.

What I will repeat here is what I said in conclusion, which is

I look at stuff like this (the Dollar’s effect on earnings) and think "surely I can’t be the only person who sees this" but I can’t find anyone else discussing it.  I just don’t see how there can’t be quite a few fund people who know full well that this is all BS but, if so – what is the logic that keeps them playing the game?  I guess, like us – they are worried about losing out to inflation so they can’t really stay away but we are currently ignoring a staggering amount of bad news at a complacency level we haven’t seen since 2007 (VIX under 15).  

Is it really possible that anyone can look at the market and say that they feel there is less risk in the market now than there was in 2005-7.  Of course NOW we know that they were idiots but THEN people felt very safe buying anything that wasn’t nailed down.  I guess that’s the answer – only in hindsight does the behavior we are observing right now seem idiotic.  While it’s happening it’s called "trading the trend." 
Flashback from November 2007 (I was way too early):  
Although we did break 13,900 on a desperate pump into the close I warned members (and I hate to be a Chicken Little but sometimes the sky actually IS falling!): " This is not a rally, this is limping halfway back to our 14,200 high from a sharp and relentless drop to 13,600. The big drop came 10/19 at 13,900 (to 13,550) after a protracted sell-off from 14,200 on the 10th. So here we are on the 31st at 13,930 (and boy was that finish forced!) acting like everything is great. After the last Fed blast (9/18) we drifted flat along 13,800 for a week so it’s all going to be about next week’s action. Today is meaningless."

Last night I gave my overview of the economy, which was kind of scary, but not as scary as the 100.1% rise in foreclosures since last year.  446,726 homes are currently in some form of foreclosure and that’s up 33% from Q2.  Since we know, thanks to Mr. Sparkle, that  ARMs will be resetting at an alARMing rate for the next few years, it is easy to imagine that 33% gain driving foreclosures up from the current level of 1/196 homes (was 1/400 last year) to 1 in 150, 1 in 100, maybe even 1 in 50 homes.  Will that matter?  At 33% a quarter we could get there in just 18 months.  Party on mainstream media!  

The above-mentioned overview was what I called my "Spooky Federal Wrap-Up," in which I warned that, if you deconstructed what was, at the time, a 3.9% GDP number, that was boosted by Federal tampering, a weak dollar and that "3% of our 3.9% GDP growth coming from sources of dubious benefit."  That line is what prodded me to check the archives – because I knew I had a similar feeling in 2007 to the one I have now for similar reasons.  It’s deja-vu all over again and look what happened to the markets pretty much the day after my October 31st warning in 2007!  

At the time, the MSM was non-stop positive as the markets rallied but the Dollar was testing the 75 mark, 5 points away from completing the 50-point collapse (40%) from the highs at 120 in 2000-2002.  The strong Dollar was, of course, terrible for OPEC as they got far less of them (20 at the time) for a barrel of oil but, by happy coincidence, King Fahd’s kissing buddy George got elected President of the United States and that led to a bunch of very lucky breaks for OPEC including 3 planes full of Saudis crashing into US buildings which caused George to declare war on Iraq and destroy their production capacity which fueled commodity speculation just months after the rules on speculation had been revised to allow massive speculation by people who had no actual interest in the commodities.

Those happy coincidences were followed by a massive increase in Government spending (2 wars, homeland security, pork) that was coupled with a massive decrease in Government collections due to tax cuts and, at the EXACT same time, the Fed began relentlessly driving rates down from 6.5% when Bush took office all the way down to 1% by the middle of 2003.   That coupled with more relaxed regulations on lending and lower reserve requirements from banks sent the money supply flying and led to the massive inflationary bubble market that I finally became sick of on October 31st, 2007.  

Now we have a background as to what happened last time.  The question now is – is this time different?  So far, I don’t think so.  Other than not jamming his tongue down the throats of Saudi princes, Obama has been no better than Bush at handling the oil situation and Congress has done nothing to reign in the rampant speculation in the commodities markets and things are now MORE out of control than they were in 2007.  While we don’t yet know WHAT will be the straw that breaks the market camel’s back, I can simply repeat my Halloween warning of 2007:

US Dollar chart Long Term 29 Nov 09.JPG

Who knows what other horrors will reveal themselves as the year winds down but the real Halloween slasher event is what’s been done to the dollar, which hit new record lows as the Fed worked hard to appease everyone and ended up pleasing no one.

Add to that the monstrous yen carry trade, that’s been flooding the global economy with speculative money all decade and we have one of those scenes by the lake where all the kids are having a wild make-out party while a killer (that could be almost anything in our fragile economy) observes from the woods, circling closer and waiting to strike.  Just like any classic horror flick, several people (MER, CFC, C… ) have to actually fall victim before any of the other kids even notice there’s a problem.  Then they call the cops (Paulson and Bernanke) who look at all the blood and the severed body parts and then say: "Oh, it’s probably just some kids on dope."  Usually, it’s a long time before anyone takes the psycho killerseriously, and by then it’s way too late!

That’s right, I named MER, CFC and C as potential catastrophes a year before the collapse.  Oil was "only" $95 a barrel at the time and housing had barely turned down but I’m not the guy in the horror film who keeps telling the people it’s still safe to go in the water (or whatever) – no, I’m the loud guy in the movie theater who says "Oh no girl, do NOT go in that house!"  You may hate that guy but you KNOW he’s right….

So, what are we gonna do about it?  As promised, we can protect ourselves with some nice, leveraged plays to take advantage of a POSSIBLE collapse in the markets:  

SDS is still my favorite index hedge and the June $20/22 bull call spread is just .69 and is currently .72 in the money at $20.72 so all it takes is for the S&P to finish below 1,333 and you should be able to get out even.  We can improve the odds on that by selling SPY May $126 puts for .46 to turn this into a .23 spread so a risk of $230 in cash pays $2,000 (+769%) if the S&P falls.  On the put side, SPY $126 is S&P 1,260, which is 5.4% lower than it is now – this can happen, of course but the nice thing about offsetting with SPY is you can’t lose both bets.  

For those of you with PM accounts, you can get .65 for the short SPX May 1,095s, which is a whopping 17.8% below the current price and, if you think the S&P will go lower than that by May expirations then you should be at the ammo store and not worrying about the markets!   

We actually don’t expect the S&P to fail 1,200 on a pullback and you can sell SPX May 1,200 puts for $2 and that pays for 3 SDS spreads at .69 ($2.07) for net 0.07 on $6 worth of spreads which pay almost 100 to one if the S&P falls between 2.5% and 10%.  

Another fun way to offset a hedge is to think about what stocks you would REALLY love to buy if they get cheaper and then sell puts at around the price you are willing to pay.   This works very well if you are brave around earnings season and look for oversold stocks like TEVA this morning, which took a hit on BIIB’s MS drug getting good results.  TEVA May $42.50 puts should be .60+ this morning.  

A few other suggestions to raise cash:

  • XLF June $16 puts can be sold for .50.
  • TBT  June $34 puts can be sold for .55 
  • TM June $72.50 puts can be sold for $1.25
  • RIMM Jan $45 puts can be sold for $3
  • AAPL Jan $250 puts can be sold for $6
  • GOOG Jan $450 puts can be sold for $18.50 

As I said, anything you REALLY want to own at the net strike is a fine way to raise capital to offset your bearish hedges.  So, now that we have some cash to play with, what else makes a good hedge?  

EDZ makes a nice cover on a longer-term collapse in the BRICs.  This would likely be caused by a rising dollar and/or a commodity collapse or simply their own economies imploding due to inflation.  The Oct $14/18 bull call spread is $1.80, so offsetting that with TM June $72.50 puts at $1.25 is net .55 on the $4 spread with 627% of upside if EDZ moves up 9%.  TM makes a good offset because if the BRICs stay solid, they should have good sales so your real insurance risk is just the .55 cash you commit to the trade.  

TZA is interesting as we think small caps may be the first to feel the bite of inflation and you can get a big money spread fairly cheaply.   This is far more speculative than SDS but the Jan $30/50 bull call spread is $4.75 and I love selling the AAPL calls against those for a net $1.25 CREDIT on the $20 spread that’s starting out $4.60 in the money.  The short story on this spread is, if AAPL holds $250, you make $1.25 no matter what the Russell does.  If the Russell falls 15%, you should collect $2,000 for every AAPL put you sell (and collect net $125 on).   Isn’t hedging fun?!?

So that’s my post for the pre-holiday weekend.  I thought it was important enough to ignore the market BS this morning.  As the great Han Solo once said:  "I have a bad feeling about this" and, sometimes, you just have to go with the force you feel

Have a good weekend, 

- Phil

 


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  1. Pharmboy

    Today’s wonderful, wonderful Pivots.

  2. goober

    Nice ! Once we all realize our overall system/paradyme is based on consumption and the fractional reserve banking system propogated by the federal reserve which is no more federal than Mcdonalds, two premises that are totally flawed and unsustainable for a multitude of reasons, only then will be able to "THINK" properly about a solution by abandoning the two party ruse ! Certain philosophical thought processes are valid as disagreement and quite healthy, but our current system is purely a divide and conquer illusion promoted by those with teh greatest at stake, that would be teh elites who we all see everyday burning down not only the US, but the entire planet to maintain thier status quo. We are better than this, at least we used to be ? Something to ponder.
    Looking for a great day and good luck to all ! Thank you Phil, only a few caveats, excellent read.

  3. Kwan

    NYT’s Q1 Earnings: Digital Advertising Grows 4.5%, 100,000+ Paid Digital Subscribers
    Make it 100,000 + 1. I think I like their iPad app better than their Kindle content.

  4. peedlew99

    But phil,

    Are we getting bullish if we take back all our breakouts today?

  5. williex

    Shadow
     
    What is your connection to Carroll College?
     
    I use to live down the street from them. 

  6. exec

    JR,
     
    That SPY gap chart you posted yesterday provided some excellent information.  Where did you find that chart?

  7. amatta

    Phil, 
    Regarding your comments of last night about possible continued weakness in the dollar and rise in commodities. Do you still feel confident we can actually get a drop on oil in the short term? Yesterday’s inventory-- which was the catalyst we were waiting for any move down didn’t go for us… 
    Which brings me to my position I am long 60 May 43 puts (Net 3.07) and was never filled for the cover (May 42′s for 1.15 to fund the roll to June)  as you recommended (as we got a sharp rise just after the post and those fell immediately to 1.00 and continued down…I guess the roll is still available for a little less now (selling the May 43′s for .55 and paying .57 for the roll). Would you do this one now? I see you are waiting with the naked 41′s on the 25K, so at this point not sure if it makes more sense for me to wait for a hopefully pullback and then sell some covers?
    Thanks 

  8. Pharmboy

    Poor, poor GILD.

  9. dclark41

    Phil:
    Next weeks FAS $29 can be sold for .65 for long weekend?

  10. Savi

    Phil--what a great call on FFIV

  11. Savi

    Tx Phil

  12. Phil

    Good morning!  

    Let’s add the DUG June $25/28 bull call spread at $1.30 to that list as that’s one you can roll and DD to a higher October set if it fails to pay off.  DUG is at $26.68 now so we’re talking $120 oil before you are in big trouble on this one.  

    We’re watching that 1,333 line on the S&P and they gapped us over it at the open but it’s never good to show a card if you are bluffing the hand and that’s what will happen now if they can’t hold that line (now 1,335) as it will only serve to demonstrate how weak the support is at the breakout level.  

    AAPL is up 3% so that’s 0.6% of the Nasdaq’s 0.37% gain this morning – in other words, the Nasdaq is negative DESPITE the Dollar dropping half a point AGAIN.  This is kind of like Barry’s explanation of how to read the NAR releases (see last night’s comments) as you have to simply ignore half of what you are seeing to cut to the truth of the matter.  

    Unfortunately, I was finishing my post and we missed the big pop but the DIA May $122 puts at .96 are a fun way to play us failing 12,450 and out without too much damage if we don’t fail it by 10:30.  

    They Yen is all the way up to 81.75, which is very bad for Japan but it’s the Euro that kills us (see Jessie’s chart) and that hit $1.465 this morning with the Pound at $1.66 but both are pulling back as they couldn’t keep the Dollar below 74 (so far).  

    If they do manage to stick us today (and even if they don’t) I will have some upside inflation hedges for next week but I just didn’t feel good about missing this opportunity to short this ridiculous run-up – just in case the rest of the World sells off while we take tomorrow off.  

    In last night’s chat I decided AAPL is good for at least $400 in 2013 and the 2013 $370/470 bull call spread is $30 and the idea is that AAPL will head higher and eventually you can sell calls to work off some of the cost so a bit of a gamble now (and you can sell the $240 puts against it for $15 for a net $15 entry and worst-case is owning AAPL for net $255) but you can already sell the June $375s for $4.60 so imagine picking up $5 every other month for calls that are $25 out of the money with 18 months to sell!  

    "We still believe Wall Street consensus has not grasped the enormity of what Apple is delivering on a global basis," Wedgewood’s David Rolfe gushes over AAPL‘s quarter. "This isn’t Cisco (CSCO) circa 2000, with a P/E of 100. This is John D. Rockfeller, Standard Oil kind of stuff." Rolfe sees upside for the shares even with the multiple staying the same. AAPL +4.4% premarket. 

    Thursday’s economic calendar:
    8:30 Initial Jobless Claims
    10:00 Leading Indicators
    10:00 Philly Fed Business Outlook
    10:00 FHFA Housing Price Index
    10:30 EIA Natural Gas Inventory
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet 

    At the open: Dow +0.09% to 12465. S&P +0.32% to 1335. Nasdaq +0.64% to 2821.
    Treasurys: 30-year +0.08%. 10-yr +0.04%. 5-yr -0.01%.
    Commodities: Crude -0.15% to $111.28. Gold +0.34% to $1504.00.
    Currencies: Euro +0.32% vs. dollar. Yen +0.65%. Pound +1.06%.

    Notable earnings after Thursday’s close: AMDASBCATHRCB,IGTINFAMXIMPLCMRHISNDK

    Initial Jobless Claims: -13K to 403K vs. 395K consensus. Continuing claims -7K to 3,695,000

    PHILLY FED way down at 18.5 FROM 43.4 – THIS IS A CATASTROPE.  Consensus was 30 and I KNEW it was BS at the time but how can you prove it?

    The pummeling of the U.S. currency continues, the greenbackagain solidly lower against everything. Of particular note is the aussie, which hit another new record as Foreign Minister Rudd rules out intervention to check his currency’s breathtaking rise.

    Doug Kass on today’s market action: "Not a dissenting comment on the markets today anywhere – that means, to me, investors will be disappointed over the near term."

    Greek bond yields continue to scream upwards, the 2 year popping 91 basis points to 22.93%. Portuguese and Irish bonds also seeing sharply higher yields, but not in Greece’s league. Spanish debt is flat, but CDS pricing on its paper is widening.

    BIS data show French and Swiss banks each have about $79B in exposure to Greece, roughly double that of German lenders. The relatively light exposure of Germany may explain why officials there are reluctant to add to the bailout and more likely to publicly discussrestructuring

    The OECD sharply cuts Japan’s growth outlook, to +0.8% this year from +1.7% prior estimate, and recommends the country raise its sales tax rate to 20% from 5% to help offset some of the reconstruction costs from last month’s earthquake. GDP should grow 2.3% in 2012 as reconstruction spending picks up speed.

    Brazil’s central bank hikes its benchmark interest rate 25 basis points to 12%. It’s the 3rd increase this year, though the other bumps were 50 basis points. The real ETF BZF has moved sharply higher recently as the government keenly focuses on curbing inflation.

    Hong Kong real estate developers are hoping/praying for a big Easter weekend as rising mortgage rates and what appears to be the long anticipated break in prices has slowed demand. Property shares have significantly underperformed the HSI over the past 6 months.

    U.K. retail sales rise marginally in March, up 0.2% vs. expectations for a 0.5% fall. Sterling moves higher vs. the greenback, likely following a worldwide trend as opposed to the retail sales figures. Sterling +1.0% at $1.6566.

    Teva (TEVA) slides 8% premarket after Biogen’s (BIIB) surprisingly strong data on its oral MS drug. BIIB’s drug cut relapses 53% per year, while disablity progression fell 38%. Last week, Teva said its oral MS drug reduced annual relapse by 23% and progression fell 36%.

    One year after the Deepwater Horizon disaster, BP (BP +2%)files suit against Transocean (RIG -4%), seeking at least $40B in damages from the rig owner for negligence. BP also sues Cameron (CAM) for negligence, claiming a blowout preventer made by the firm failed to stave off the disaster. 

  13. Phil

    FAS $25KP – 1/2 cover with NEXT WEEKLY $29 calls at .50 (good call by DC at .65!). 

  14. matt1966

    Is today the day?

  15. Lincoln

     Phil: Surfing
    Some of the most valuable things you say are the most general and philosophical.  If Plato was learning about options trading from Socrates it would have looked much like what many of us are learning from you. :)

  16. goober

    Oil overnite touched 112.45 on futures and pulled back a bit this AM premarket to 111.200 in both front month  +1. been watching it go crazy and agree there is no reason for price to maintain, but I would not short it right here over long weekend who knows what can happen in ME and or Japan to drive it even higher ? Perhaps Monday for me.
    Japan., Japan, Japan…….did I remind you of Japan? It is definitely not over or fixed by any means.

  17. goober

    Options Buddha

  18. exec

    Matt
     
    LOL…….Are you inferring that today might be the day that it all comes tumbling down?????
     
    Mathew…….you need to run over to the fridge and take a big swig of the cool-aid…….right now!!!

  19. etradingsignals

    Phil: Any cover USO or DIA?

  20. Pharmboy

    Holy ____, Batman, BIIB……They are gone.  Question is when.

  21. shadowfax

    williex
    I lived around Helena for 20 years and went to college there when I no longer wanted to work on computers,  accounting, economics and business administration.

  22. shadowfax

    exec
    JRW said unavailable today, on holiday.

  23. goober

    Phil – Philly fed, can’t prove it, look at how many times numerous report #s of various types have been revised after the fact down once the pumpers got the benefit of the lie? But we can pay attention. UE#s are some of the worse for such as you likely are fully aware per TDs diligence.

  24. shadowfax

    83.93 needs to be added to JRW’s lines from yesterday.

  25. Phil

     On the hour: Dow +0.15%. 10-yr +0.09%. Euro +0.22% vs. dollar. Crude -0.15% to $111.28. Gold +0.39% to $1504.70.

    Apr. Philly Fed Business Outlook: 18.5 vs. 33 expected and 43.4 prior

    Mar. Leading Indicators: Leading Index +0.4% vs. +0.2% expected, +0.8% prior. Coincident Index +0.2% vs. +0.1% prior. Lagging Index +0.4% vs. +0.3% prior. 

    Used to be/Goober – Right, we sure were.  We do need a brand new party but it’s the system that is broken, someone has to toss the money-changers out of the Temple or the empire will crumble…

    NYT/Kwan – I LOVE the IPad app.  I hardly read the regular paper anymore.  By the way – good hint on that.  I just subscribe to the weekend delivery, which is really nice anyway as you get all the Sunday supplements on Saturday morning, and that gives you the on-line access for free.  

    Bullish/Peedle – There is nothing that would make me "bullish" today but if we hold it next week I shall be a very reluctant bull, which is something many of us were in 1998-1999 – you can make money on a silly rally and still be a skeptic but, on the whole, it’s more satisfying to be right.  8)

    Oil/Amatta – I feel very confident that the people who consume 90M barrels of oil a day (3.7Bn gallons that would take 2Bn cars about 40 miles each) can’t afford to pay $16Bn a day, which is $5Bn a day more than last year, which is $1.8 TRILLION DOLLARS MORE than they paid for oil last year.  Where the f*ck do people think this money comes from – it is ridiculous to hear these idiots on TV saying we can go to $5 a gallon (another $2Tn) or higher without destroying the global economy.  The problem is that $1.8Tn comes out at "just" $5Bn a day and the food inflation is another $5Bn a day and – just like the US Government’s spending – $5Bn here and $5Bn there and after a while you’re talking some real money.  

    In the meantime, as I’ve said before, people don’t buy that new sofa for $1,000 and that pays for 20 tanks of gas, they don’t buy a washing machine for $600 and that pays for 4 trips to the grocery store…  That’s how they can jack up commodity prices for short periods of time but those couches and washing machines are not being bought right now – the future is being borrowed from to pay for commodity expenses that add nothing to the family’s ability to function as it’s the same food and the same fuel they used last year for 30% less money.  

    How long can it stay up?  That’s a tricky question but not as long as last time, which was 6 months, because people don’t have credit (or jobs for that matter) and, in the end, oil must be purchased by people.  But you don’t get reports daily and the reports we do get are wildly inaccurate so anything can go on for 3 months no matter how crazy it is as speculators will buy oil long after the consumers stop.  Oil has only been over $100 since mid-February and only over $105, which is what I consider the breaking point, since mid-March so there is no compelling reason for it to crash in mid-April but May is getting to be a stretch…

    I would do the roll WITHOUT selling the puts at the moment.  .57 is cheap enough to buy the time to wait a week to see if things improve before capitulating and selling covers.

    So that’s the official move in USO, rolling the May $41 puts, now .31 to the June $42 puts at .71 for .40.  The next move would be to sell either April or May puts for enough money to pay for the next roll up to the $43 puts (now $1.37) but, for now, we can just go for the naked roll that buys us time

    FFIV/Savi – Thanks.  

    By the way folks, notice how mellow our AAPL trade was where we bought 4 June $300 puts for $8.50 ($3,400) to cover the sale of 5 May $310 puts at $8.50 ($4,250) for a $850 credit.  The May $310 puts are already down to .85 ($425) and the June $300s are $1.60 ($640) so that’s a bonus $215 already but no reason not to let May expire unless they break $1.50 at which case we’re happy to quit the trade.  This is a very good way to play earnings bullish – especially if the only consequence is you buy a stock you like for a discount.  

  26. matt1966

    exec, thanks for the clip.  Love me some JCougar.  I’ll say this-  if we close up today, particularly FAS, I’m done with day trading.  I don’t have JRWs set up.  Nor the time even if I did.  I wouldn’t even fantasize about having Phil’s tricks up my sleaves.  Without that, it simply isn’t healthy to try and figure out which days the market goes against logic (most) and which days logic applies (least).  The market is a lagging indicator to the bigger picture anyway.  The bigger picture is that the fiat currency system is in grave danger.  Both the dollars’ days as the world’s reserve currency and the Euros’ days of its very existence are numbered.  There truly is a new world order in the works.  Precious metals are the only refuge. 

  27. cnarbais

    PHIL, Good morning
    USO. IM already long  20 Jul 43 for 2.69 (now 1.83) and half covered wit 10 May 42 at $0.82 (now 0.49). Should I make any adjustment. Thank you

  28. rpme

    Phil,
    Selling 10 SPX May 1095 Puts @ .65 gave me a margin requirement of $100,000. Is that the same at TOS?

  29. brooklyn

    Phil/Kwan/others – is anyone trading from the ipad using either ATT or Verizon (not wifi)? Seems no more secure than a cell phone.

  30. malsg

     Matt … is that capitulation?  If so I’m shorting this market ready for Flash Crash II

  31. bobhu

    Wow, look at TZOO.

  32. dclark41

    Phil:
    What is your opinion on using XLK to get exposure to tech.? I am not good at picking winners and losers in tech, but this ETF gives good exposure to AAPL, IBM, INTC, GOOG.

  33. samz3700

     Phil -
    I sold AAPL – Jan 12 – 280 puts for 15.74 before earnings – now 10.95 -
    Take money and run would seem to dictate taking my 30% gain – three days and running -
    Not buying back very far out of money premium would seem to argue for leaving it alone and being happy -
    What’s your take? Thanks.

  34. samz3700

     Appl –  I bought the short puts back on the assumption that the VIX cannot go much lower and I will probably have the chance to sell those again for at least the same price if the vix goes up at some point – probably when hell freezes over.

  35. jabobeast

    Looks like NFLX,PCLN,LULU,OPEN,BIDU must all be eating the magical matzah????
     
    Do these MoFos ever stop going higher?

  36. rustle123

     @jabobeast
     
    I was just thinking the same exact thing.  Open only moved 41% since last earnings period so they are probably still undervalued.

  37. exec

    Matt,
     
    I hear you.  It’s all nuts.  It’s all manipulated.
     
    Like you, I have difficultly going against my gut feeling that this is all going to end bad and when it does all the poor bastards that are slowing working their way back into this F’d up market are going to get their asses handed to them again.
     
    With that said, if you can only get your brain around the fact that this market is in fact manipulated…..and that the main point of the manipulation is to "make the market go up" then it’s almost impossible not to make money swing or day trading.  Think about it.  If you had the guts to wait for a dip at any point in the last 2 1/2 years, went all in TNA……let it run up for a month……then put a trailing stop on it….you couldn’t loose. 
     
    Even now….had you bought the dip from last week…..you’d be laughing at this stupidity, rather than getting frustrated and sick of this insanity.
     
    When I looked back at may trades……almost without exception….I got my ass handed to me on TZA and I made money on TNA.
     
    Do yourself a favor……scale into TNA on the dips…..set trailing stops…..and enjoy the ride.

  38. rustle123

     Thought this was hilarious.
     

    BP Ready To Resume Oil Spilling
    APRIL 20, 2011 | ISSUE 47•16

    LONDON—A year after the tragic explosion and oil spill that caused petroleum giant BP to cease operations in the Gulf of Mexico, the company announced Wednesday that it was once again ready to begin oil spilling. "People said this company might never rebound from last year, but we’re here and ready to do what we do best," said BP chief executive Robert Dudley, who confirmed that the company had already successfully conducted small test spills and that full-scale spilling operations could resume as early as July. "We’ve reorganized and regrouped, and now we’re ready to put the faulty blowout preventers on the wellheads and watch them pump raw crude petroleum right into the environment." BP stock jumped $14 a share following the announcement.

  39. jabobeast

    If the markets only get "manipulated" higher then what happened from late 2007 until March 2009? I believe the theory just wandering why it didn’;t help back then?

  40. samz3700

     Dollar Goes down -
    Treasuries rally – ok – anyone who bought treasuries just lost money in dollar terms – guess they don’t care -
    Market goes up – seems like I remember a time a couple of years ago when the market would rally and bonds would go down - 
    This is beyond absurd – like someone said above – just accept it and play along – or step aside.

  41. goober

    Phil – The money changers are the entire issue, all else is a giant illusion. We aren’t far apart, things are changing in perception for good reason, reality is setting in.

  42. pstas

     DEPO- Pharm- thinking of adding to position here but note that earnings report next week. Wait til then? What’s your take?
    Thx.

  43. goober

    Jabo – Because the elites greed ran it in to the ground and it failed. Problem is you were forced to pay for their malfeasance, surely you have figured that out by now I hope? 

  44. Phil

    Today/Matt – Probably not but we have a long weekend so who knows what Monday will look like.  I think just the absence of Fed officials saying something stupid for 3 days should be good for the Dollar.  

    Socrates/Lincoln – Unfortunately for Socrates, Plato’s the one who got all the fame while Socrates got the hemlock…  Actually, now you’ve made me depressed as Scocrates was executed for speaking out against the oligarchy that had taken control of Athens…  8) 

    Japan/Goober – That’s interesting.  I was reading the NYTimes this morning and noticed that there were two celebrity stories in the front pages on my IPad and that’s one of the reasons I decided we are now complacent to the extreme.  I don’t know the radiation levels at Fukushima but I do know the ratings levels for American Idol have held up surprisingly well in it’s ninth season, posting their best ratings since 2007!    We are doomed…

    Covers/Etrad – Not ahead of the weekend.  Next week we’ll have to get bullish if we hold up.

    BIIB/Pharm – Does ELN still have ties to them or is that all over?  

    Proof/Goober – Lies, damned lies and statistics, right?  

    Oh no Matt, don’t turn into a gold bug!  I think the smartest people are the ones buying farms.  Food seems to be going up and up and has the support of an ever-increasing population and ever-worsening weather conditions coupled with a growing speculative trade.  Add to that the fact that we are now wasting millions of acres of food and turning it into fuel and you have a recipe for, yes disaster, but also some real value gains on productive farmland.  And, of course, if you own a farm and it all hits the fan – you will be able to get all the gold you want in trade (but I bet you’d rather have a gallon of gas or a blade for your tractor than a shiny lump of metal!).  

    $25KP – XRT May $41 puts, now .49 can be rolled up to the May $52 puts at .75 and doubled down for 20 at net $1.28.

    $25KP – UUP May $21 calls, now .35 can be doubled down to 10 at net .85

    USP/$25KP, Cnar – Did I already make an adjustment and forget?  That spread is fine for now. Actually, no – I would buy back the May $42 puts at .49 over the weekend to lock in that gain. 

    SPX/Rpme – LOL, that’s only for people with PM (portfolio margin) accounts!  What TOS is doing in an ordinary account is charging you 10% of the risk of the S&P going to zero.  If you think this is a trade you might want to do monthly (as clearly you have a lot of spare margin), you can buy the Sept $750 puts for $1, which should lose about .20 a month and that would cut your potential loss down to $345,000 and should drop the margin requirement by 2/3 but, on the whole, you are better off with one of the stock hedges.   Another option on SPX is to take the May 1,145/1,195 bull put spread for a .70 credit – the risk there is "just" $50,000 to collect $700.  

    IPad/Brook – No way in hell would I log into my trading account from a mobile device!  

    TZOO/Bob – Holy cow!   Revenues up 30% to $37M, income up 140% to $6M and that’s an EPS of .37 so of course they are worth $95 a share….  Wow people, I need a vacation – this is just too stupid for words.  Even in 1999 I would have jumped on the short side of this one.  Sadly, they have no options.

    XLK/DC – It’s great to get exposure but it’s also on a huge roll and up 150% from the ’09 lows so I’d go very cautious with something like the 2013 $20/25 bull call spread at $3.70 and sell the $23 puts for $2 for net $1.70 on the $5 spread that’s currently 125% in the money.  You can be more aggressive with the Jan $23/27 bull call spread at $2.65 but I wouldn’t sell against it until/unless we get a sell-off and you get better pricing.  If we don’t sell off and they make $27, you make 50%, which is nice enough for 8 months.  

    AAPL/Samz – If you REALLY want to own AAPL after Steve Jobs dies (I don’t want to start rumors, it’s a scenario!) for net $264.26, then it’s a no-brainer to keep it.  In fact, the Jan $280s can roll to the 2013 $210s so my decision would be based on owning AAPL at net $200 a year later.  This is the power you have if you only sell puts in stocks you REALLY want to own at the net strike – you have to power to be patient.  If not, then a sensible stop at $13 but, of course, the risk of a crash is always there – as it is with any put sale but, other than Jobs getting very ill, it’s hard to imagine those puts triggering.  

    Also, the same goes for scaling in – if you sell those puts and you’re looking at owning AAPL for net $200 in 2013 – what’s your real worry?  That they go back to $85?  At $85 I am pretty sure I’d have no reason not to want to DD and then DD again for an average of $142.50 or $113.75 and then I’d be happy to put a bow on the position and give it to my daughter as a wedding present in 15 years or so.  Again, that is the power of scaling in and picking positions you REALLY want to own long-term.  Think of the puts as paying you NOT to have your dream position – ideally, you should be disappointed every time you DO collect the premium and miss out on a cheap entry.  

    MoMos/Jabob – Not if we’re playing for hyperinflation.  They all have no employees to pay and the theoretical infinite growth of the World Wide Web.  Kwan and I are currently working on a company just like them as our own hedge against hyperinflation because – if we’re going back to a 1999 environment, we may as well do our own $200M IPO that gives us a $2Bn market cap on $2M in sales – it’s the American dream, right?  

    TNA/Exec – Very true.  You play the upside until it stops working and then play the downside until that stops working although, of course, my variation is I consider 1,333 the top and I’ll play that down until it proves me wrong (so far, so good in 3 attempts).  

    LOL Rustle – Didn’t you hear, it’s all RIG’s fault anyway according to BP.  They just own the wells.  Amazingly, RIG already recovered from the $40Bn lawsuit because we wouldn’t want OIH to slip on such a fine market day would we? 

    Manipulation/Jabo – It’s the hose in the pool thing again.  If the economy has a 5 gallon per minute leak and the Fed (or any and all manipulators) has a 6 gallon per minute hose, then they can make the economy go up or down at will.  If the weight of the additional water above the level of the leak (and the constant bleeding of 5 gallons a minute that remains unrepaired while the Fed pretends there is no leak by continually filling the pool) expands to 6 gallons a minute, then it will be all the Fed can do to keep things level – which is where we are now.  If the continues rush of 6 gallons of water a minute through the hole plus the tremendous weight of a full pool further stresses the leak and it grows to 7 gallons – then there is no longer anything the Fed can do to stop the bleeding until the level of the economy gets back to a level below the leak again.  Right now, they are so desperate, they are using the declining Dollar as spackle… 

  45. goober

    Jabo – that is what we are dealing with now, the aftermath of their greed and malfeasance. hope that makes sense because it is 100% true. if not start reading or take your lumps, it’s your choice. we are all in the boat or on the same space ship (planet earth) however you percieve it

  46. make33

    Phil,
    With AAPL on the verge of starting a subscription service like NFLX, this has got to be a good time to short NLFX at its 52 week high..
    Thoughts?

  47. Jbur

    All: So I am sitting here wondering how the hell I can make $ when the VIX is so frustratingly low. Most of the premium selling techniques I know won’t work well in this environment. So, perhaps buying BUYING would be a good idea with this low VIX. Then I realized, oh ya, that is what Phil is talking about when he says "buy your protection when it’s cheap".

  48. goober

    Phil, not a rumor, simply a fact that all are aware of.

  49. barfinger

     What’s the latest take on our position in UUP?

  50. Pharmboy

    DEPO/pstas – I don’t think earnings is a problem, as they have none.  ABT just paid them to go away, and they are most likely looking for a partner for selling their drug.  I think it is all upside from here.  XNPTs approval can only help, as off label use for a 1X/d compound is much better. 

     

    BIIB/ELN/Phil – that is a good question.  I am not sure how much is left from that agreement.  JNJ owns a big chunk of ELN.

  51. matt1966

    exec, my bigger point was that even if I was profitable on the day trades.. they would keep up with the profits made simply by buying gold or silver.  Furthermore, when the day of reckoning comes, when not if, the gold and silver positions will spike up while the equity market will plunge.

  52. matt1966

    correction:  they wouldn’t keep up with the profits…

  53. BruceE

    Phil, I sold the TEVA $42.50 puts this morning for .50, now .30 (thanks), do I keep of take it and run?  

  54. matt1966

    Phil, I’d love to buy farmland.  I think it makes ALOT of sense for a number of reasons.  But, it’s a little out of my price range.

  55. strether

    Phil
    Is there a July SPY put that could be bought as downside protection--without the complexity of the various spreads you mention?
    Thanks
    Strether

  56. goober

    Phil  there is proof everywhere we look and satistics can well be manipulated to fit the illusions as you well know. I could spend a lot of time and space defending my positions but I won’t, time tells all and we are all on our own merits and demerits/knowledge/experience are we not.
    Farm land and PMs are my favorite things to own and that is the end game for me now and none in US, interesting you mentioned that .
    Matt – futures are a bit different methodology and I am convinced  options and futures can and do compliment each other at this juncture. You can play overall direction with no premium and trying to guess individual behavoir is proving to be  absurd given all the manipulation/intervention for political and other reasons. I am here to fine tune  my options knowledge although I have been using options as well considerably, mostly naked and very straight forward as the need presents itself. The ability to save or correct trades is a must as well as hedge. 

  57. rainman

    Phil /  food — I’m on board with that thought pattern. I’m working positions in AGCO, DF, SFD, WFMI and considering WMT since they are moving away from "green" foods. TSCO is a possibility as well for the community farming movement I think we are on the start of.

  58. Phil

    11:00 AM On the hour: Dow +0.11%. 10-yr +0.12%. Euro +0.22% vs. dollar. Crude -0.26% to $111.16. Gold +0.35% to $1504.10. 

    12:00 PM On the hour: Dow +0.26%. 10-yr +0.16%. Euro +0.44% vs. dollar. Crude +0.22% to $111.70. Gold +0.4% to $1504.90.

    Feb. FHFA Housing Price Index: -1.6% month-on-month vs. -0.2% expected, -1% (revised from -0.3%) in Jan. Year-on-year, prices -5.7%.  Aaugh!!! 

    10:31 AM EIA Natural Gas Inventory: +47 bcf vs. consensus of +51 bcf. Futures hold narrow gains, +0.25% to $4.321.

    Treasurys are holding gains after the biggest-ever TIPS auction, and the first to come in at a negative yield but (due to a new rule) at a positive coupon. The auction’s end came early ahead of an early afternoon close of bond trading before the Good Friday holiday. The 30-year yield -0.02 to 4.445%; 10-year -0.03 to 3.385%; five-year -0.01 to 2.11%; two-year -0.01 to 0.66%. 4.445% for 30 years and they claim inflation is currently under control at 2.5%???  

    An unusual auction as the Treasury sells $14B in five-year TIPS at -0.18% - a negative yield, though it had to set a minimum positive coupon of 0.125%. Bid-to-cover ratio of 2.57, vs. a recent 2.48; indirect bidders take 39.5%, vs. a recent 36.3%. Direct bidders take 2.7%, vs. a recent 2.2%.

    McDonald’s (MCD -1.8%) remains lower after the company warns rising inflation is crimping margins. Shareholder Peter Jankovskis is looking towards summer results, when he expects the company to shine in the face of $4/gallon gasoline. 

    The Fed’s Real Broad Trade-Weighted Dollar Index drops to 40 year lows. Chart readers have a look – either a trend line has been broken with the next stop zero, or the greenback has hit resistance and is due for a serious bounce

    Perhaps accounting for the tepid start in stocks as well an all of a sudden bid for the dollar is word from favored Fed leak outlet Jon Hilsenrath that debate at the bank has shifted from QE to when and how to hike rates.

    Sterling gives up some gains after BoE member Martin Weale says the U.K. recovery has been disappointing in Q1. Weale’s dovish comments have particular significance as he’s been voting for higher policy rates since January. Cable buys $1.6545.

     "If it was a horse, I’d shoot it," once said a wise auto mechanic to a customer who brought his jalopy in for repair. A corporate turnaround manager might say the same about Greece, where the sheer level of debt is likely to overwhelm any effort to better balance fiscal matters. 

    new Gallup poll finds that Americans holding individual stocks, stock mutual funds, or stocks in their 401(k) or IRA falls to 54%, the lowest level since Gallup began regularly monitoring stock ownership in 1999. Real estate is viewed as the best long-term investment by 33% of respondents, vs. 24% for stocks, 24% for savings accounts/CDs, 12% for bonds.

    Tech stocks and bank stocks are on a "collision course," and the winner will dictate the market’s direction this year, David Callaway writes. "The question now is whether the tech rally can finally help lift the moribund financial services sector out of the doldrums or whether persistent weakness in banks and on Wall Street will hobble a U.S. economy that appears ready to run." 

    At least someone is spending on infrastructure:  Siemens (SI +1.0%receives an order for as many as 300 long-distance trains from government owned Deutsche Bahn. Described as the "largest individual order yet in Siemens’ history," the first 195 trains alonewill cost around €6B.

    More naked Emperors:  Shares of Chinese portal Sina (SINA -5.8%) swoon after Goldman Sachs downgrades to Sell. “We believe the stock is now mainly driven by expectations that Weibo," its Twitter-like micro-blogging platform, "will evolve from a social media into a fully fledged social network, which we view as challenging." Goldman says Weibo’s implied valuation is a "rich" $6B; $3.5B is more reasonable. 

    And now, the countersuit: Facing a $40B lawsuit filed by BP (BP+0.2%), Transocean (RIG -0.8%fires back in court with its own action against BP as well as other entities involved in the Macondo well blowout. 

  59. doro165

    Phil, small math error on the UUP double down (1.06+.35)/2= .705
    $25KP – UUP May $21 calls, now .35 can be doubled down to 10 at net .85

  60. zeroxzero

     TZOO – no options, no shortable shares.  That’s pretty convenient.

  61. pstas

     MDVN- Pharm – are looking to get back to shorting this one if it turns down? 

  62. rainman

    0×0 / TZOO — Someone else would like to see TZOO pushed down with you. "They" failed to deliver 26k shares 3/31

  63. cnarbais

     PHIL
    UUP 25kp. we have doubled down already on April 14th.  your post then:
    1.      Actually it’s now time to double down on UUP with 5 more May $21 calls at .55 in the $25KP.  

  64. ban2

     pencils? i don’t need no stinkin pencils.
    I guess time to invest in APPL.
    My wife runs a new Primary School program for one of the N/E Independent Boarding Schools and she told me last night they purchased 18 IPad2′s for the pre- kindergarden thru 2nd grds (4-7 yrs old) with 18 more coming in Sept.
    I started my life at PS33 in Jersey City, NJ where a crayon,  a #2 pencil and yellow pad was to get you thru the month.
    Can you imagine the skills these kids will develop and the information they will learn to gather by the time they just enter high school?

  65. goober

    Matt – caveat, I do not own one stock and will not until I see this admin and or future change policies. I used to but do not trust any of it at all given gov actions or inaction is perhaps a better view. I am 100% convinced Obama is completely clueless and a simple political fool and BB is an egomaniac that thinks he is very smart and is not. Many PHDS/MBAs have proven they are all part of the illusions and served well destroying all we see to protect their staus quo.  

  66. amatta

    Phil, 
    I might not  be at my computer after 3 today, wanted to know if we are staying long the FAS 30′s naked over the weekend?
    Thanks

  67. goober

    Phil are you anticipating a sell off for long weekend or a stick save ? I cannot get a feel for direction mif any from here, butlean to a slight selloff towards end ? I have positions to close and or place for weekend. Thanx  

  68. goober

    ban2 – that could backfire

  69. amatta

     Phil, 
    FAS, Sorry never mind I saw the post now…

  70. Phil

    More workers of the World uniting:  Trucker protests in Shanghai bring home the possibility of social unrest in China due to rising prices. Even with the government sitting on the true cost of fuel, prices for diesel and gasoline have risen about 10% this year. Expect quick government action to ease the price burden on truck operators. 

    Dollar hanging onto that 74 line for now (how pathetic that is, though).  

    NFLX/Make – Logically, I agree 100% but that thing has pretty much gone up on all bad news.  $250 is a good spot to short though and you can sell 5 May $250 calls for $15 ($7,500) and buy 3 Sept $270s for $21.30 ($6,390) for a $1,110 credit on the spread.   If NFLX does well, you have to spend whatever to DD on the calls and roll the longs but you’re in for net $1,110 so even if you spend $9K to DD ($30 per call, up 50%), you’re still in the spread for $10K on 6 longs (net $16 each) and you you’d be well in the money with 4 months to roll the callers.  Obviously, any down move is a winner.  

    Buying/Jbur – Yep, this is the only time we buy premium – when it’s on sale.  Also, plays like the one above on NFLX (ratio spreads) are a good way to go.  

    UUP/Barf – I just called for a DD on the same position.  Either the Dollar bounces or dies at this point.  

    ELN/Pharm – They used to be so tied in with BIIB that you could trade them in tandem but most of those agreements died down.  However, at $7.92 with BIIB doing so well, I do like ELN assuming they still get some benefits from the relationship.  Maybe a buy/write with the short 2013 $7.50 puts and calls at $4.30 for net $3.62/5.56.

    TEVA/Bruce – See above conversation about REALLY wanting something.  If you do really want to own them, it’s a great net entry so you can ride it out.  If you don’t REALLY want to own TEVA – then you got a very successful day trade and you made 40% in 3 hours and you are a stupid, greedy bastard if you don’t take it off the table and be happy.  Got it?  8)

    Farmland/Matt – My cousin is looking at a vineyard in France with sheep.  I could see myself as a shepherd, sitting up on the hill with a good book while keeping an eye on the flock…  There’s also some very cheap farmland up in Vermont, and probably other states but I ski in Vermont so that’s where I read the real estate guides.   A working farm has some cash flow and there are also farms where you lease your land to a neighboring farm who works it and you essentially carry the mortgage on the house and on the land, which can be a very good arrangement (but the guy has you by the balls if you are not a farmer and he decides to pay you less for the land.  They don’t do that generally but if times get tough – who knows).  

    SPY/Streth – If you are going to buy premium then you run serious risks, of course.  I’d go for the July $131 puts at $3.15 and sell 1/2 the next week $132 puts at .32.  Figure if you pick up .10-.15 per long per week with 12 weeks to sell that’s about half the longs paid for and that, then, is the cost of your insurance.  

    Good plan Goober. 

    Food/Rain – TSCO is kind of high for me but so is WFMI and I wish I’d never sold those!  WMT is always a good hedge against a bad economy and DF is the bargain of that group.  They are trying to sell out and you can bet it’s going to happen with the 2013 $5/10 bull call spread at $2.80, selling the $10 puts for $2.30 for net .50 on the $5 spread that’s 100% in the money and, if they do get bought out above $10 – you collect early and, if not, the break-even is $7.50 on a 1x entry. 

    UUP/Doro – Thanks, even better then!  

    TZOO/ZZ – Yes but it helps "justify" the pricing of the other MoMos – isn’t it funny how that works out?

    TZOO/Rain – More evidence of the scam.  

    UUP/$25KP, Cnar – I’m for doing it again then – I promise to do a thorough update this weekend.  That would be 20 total UUP then with 10 more at .35 for net .58 on 20.  

    IPads/Ban – That’s great but what do they do at home?  Kids already have awful penmanship and they can’t spell due to spell checkers and they can’t add due to calculators – it’s a double-edged sword to some extent but, then again – we can’t make fire or fletch arrows or track game so I guess some things are not necessary to learn as we evolve and I’m just old-fashioned worrying about reading, writing and arithmetic…

  71. vic55

    Americans holding individual stocks, stock mutual funds, or stocks in their 401(k) or IRA falls to 54%
    So it falls from 65% in 2011 to 54%! I tried to google an actual amount in $ but couldn’t. Anybody has this data?
    Two conclusions: 1) next time market crahes average american will suffer less, 2) market will never crash cause there is little left to skim and quite a lot to lose.
    Phil,
    USP/$25KP, Cnar – Did I already make an adjustment and forget?  That spread is fine for now. Actually, no – I would buy back the May $42 puts at .49 over the weekend to lock in that gain.
    What’s USP?

  72. vic55

    Sorry 65% in 2007

  73. BruceE

    Lol Phil – I think I’ve got it now.  I was just making a trade and thanks for the lightning fast 40% gain, you are indeed the man! 

  74. cnarbais

    VIC55
    He was refering to USO. I have a slight different position in My 25kp. due to some moves I made and was consulting on my position

  75. Dennis

    I cashed the AAPL trade Phil, thanks for "refunding" my whole year’s membership already.  Have a good holiday, I’m back in cash with your SDS spread just in case.  

  76. rainman

    Phil / $ — what TOS symbol do you watch for the dollar?

  77. Phil

    Dow up 300 points since Monday morning – business as usual, I guess.  

    FAS/Amatta – See above.  Oh you did!  

    Stick/Goober – I don’t think they need a stick so why waster the firepower?  The trick will be holding us up into the close but the volume is very low (80M on the Dow at 1pm vs. 110M "normal") so anything can happen.   The Bot Masters have to be worried about someone cashing out into the weekend so I’m sure they are saving energy to make sure 12,450 and 1,333 hold up so we have a pretty picture going into the holiday.  I think the best plays are our June hedges into the weekend, they are good downside protection and, if you offset them with a bullish short put – they are minimally damaging if the market breaks up next week (you can always kill the hedge with a 50% loss, keep the short put and still make a profit).

    USP/Vic – That’s USO with a typo.  Good point on this crash hurting people less than the last ones but that’s like saying the patient already lost a lung and two kidneys and this time it will just be a lung.  As to the cap, US stocks and commodities are about $34Tn now, down from $40Tn then but the mix has shifted to more commodities lately, maybe now 20% vs. 15% last time.  Including housing, which was $25Tn and is now about $17Tn (and falling), the loss of wealth is staggering and is in no way reflected in the "forward-looking’ markets. 

    Good job Bruce!  I’m sure we’ll find something to play with next week…

    AAPL/Dennis – Very nice!  Good job staying flexible into the uncertainty.  

    Dollar/Rain – In TOS it’s /DX.  I don’t think they do DXY.  

    TIF still going up!  BC too – What a non-stop party this country is for the top 1%…

  78. jbaker2447

     Vic/USP-- I think it’s USO.

  79. Phil

    TIVO got more realistic today.  Will be a long drawn-out battle but the stock is a great deal at $10.30 and the 2013 $12.50 calls can be sold for $2.20 and the 2013 $7.50 puts can be sold for $1.40 and that’s net $6.70/7.10 with almost a double if called away and a very nice entry long-term.  

  80. lolkha

    best plays are our June hedges into the weekend, they are good downside protection and, if you offset them with a bullish short put – they are minimally damaging
     
    Are we going to cover today or Monday?

  81. vic55

    Phil,
    What I wanted to find out really, is how much money invested in 401K’s and IRA’s total, so we can calculate how much money was taken out of market since 2007.
    I just realized – that’s probably the money on the sidelines that banksters are talking about, and waiting for. Well they’d have to wait a bit longer, maybe forever.

  82. rustle123

     The Street.com was pushing OPEN today, they said they expect it to go higher.

  83. grenowoods

     It’s $DXY in TOS

  84. Pharmboy

    IRWD – Our Aug $10/15 BCS, 1/2 can be put in for a close out at $4 or better.  We are way up, and I am not liking the chart nor how some of the sector is acting.  We can always go back in, but I want to protect the $2.20 we made and the rest can be held for basically free.

  85. vic55

    Phil,
    USO $45 weeklies at .46

  86. shadowfax

    matt
    You might try doing for a while different but when the QEs end you will see things making sense again. I made only $57 today closing out at 11:30 to go to the hospital to seee my mom. I come back no change other that matt, farmland is reasonable in Nebraska, the rest of the west and midwest are out of control or no growing soil.

  87. palotay

    Short OPEN May $120 calls at $5.25?  

  88. jabobeast

    NFLX over 250—and I thought I was safe selling the $300 calls—sickening!

  89. goober

    Phil – Thanx, lots of rumors on China – asia negatives toward US over our close tomorrow or balance of weekend. I agree caution is the word. When I look at most of the charts I see double tops and or forming cup and handles ? so I imagine we are possible either way. Kinda hard to make a call with all the intervention manipulation for sure. Some cannot be anticipated because it is a political whim and many potential intl events or EQ - radiation ? . Good luck to all and enjoy a long weekend……..  I am

  90. Phil

     Cover/Lol – Oh those are hedges meant for now.  We are dangerously close to the top of our range with a 3-day weekend in which there could be violent outbursts in the Middle East, a worse situation in Japan, a fiscal collapse in Europe, bad earnings from any of hundreds of companies (and no one was happy with GE today, down 2.5%) – so it’s prudent to be careful now, not wait until Monday.  

    Sidelines/Vic – Sounds about right but figure that the bottom 90% only have 30% of the money so not much more than $500Bn of the sideline money would be from the working class. 

    OPEN/Rustle – Those guys are amazing!  They are currently priced at $120,000 per restaurant which is about 5 years worth of revenues so even if we assume they have a 30% profit margin (16% last Q) that’s still a p/e around 25.  The problem is they are not demonstrating anything like the revenues you expect from 20,000 restaurants ($1,000 a month) so we can only assume they are massively discounting the service to get penetration as they are on path for $120M, which is $6K per restaurant or $500 per month so the entire thing is built on a foundation of outrageously optimistic assumptions.  Problem number 2 is – how many restaurants do you know that actually take reservations?  I don’t mean write them down on in a notebook but really have a full list of reservations and can’t really seat you unless you called ahead?  That’s their customer base and they’ve already got huge penetration with those kinds of restaurants.  Most restaurants in this country are nothing like that and people just walk in and sit down so they’ll NEVER get past about 25% penetration and that’s only if they have EVERY restaurant that takes any kind of reservation.  There are apparently 215,000 full service restaurants in the US so we’re expecting a total population for OPEN of 50,000 (one in 4 non fast-food restaurants) so, with no competition, at full price they get $1,000 a month for $600M and if they drop 30% to the bottom line that’s $180M a year to their $2.5Bn market cap for a p/e of 14.  That’s what they are currently priced for at their CURRENT p/e of 200 – 20x growth in the next 5 years taking over the entire space and doubling their prices and doubling their margins.  So, long-term, I think they are a fantastic short but, short-term – people are idiots!  

    5 OPEN JUNE $115 calls can be sold for $9.60 ($4,800) and that can be covered by 3 Jan $130 calls at $13 ($3,900) for a net $900 credit spread.  If they go higher, the June calls are all premium and the Jan calls have a .42 delta so, by the time you owe the June calls $15 (at $130), the Jan calls should be up to $20 each and you can buy 3 more for $6,000 and then roll the callers along each month.  

    $DXY/Greno – Thanks, but it seems like /DX is a bit more reliable of an indicator (obeys the trend-lines better).  

    USO/Vic – I like that trade but it is risky so make sure you are willing to deal with $120 oil (or more) if it pops.  

  91. vic55

    USO weeklies $45 (now at .46) can be rolled into May $47 now .55 or May $48 now .39

  92. cnarbais

    PHIL
    USO.25kp  Are we leaving the position naked over the weekend or half covered?

  93. Phil

    1:00 PM On the hour: Dow +0.31%. 10-yr +0.05%. Euro +0.41% vs. dollar. Crude +0.3% to $111.78. Gold +0.59% to $1507.80. 

    2:00 PM On the hour: Dow +0.2%. 10-yr +0.09%. Euro +0.28% vs. dollar. Crude +0.61% to $112.13. Gold +0.45% to $1505.70. 

    Escalating fast:  Trucker protests and strikes in and around Shanghai grow larger and a bit violent. Several arrests are made amid reports of protesters being beaten by police. One shipping company warns of delays because of the strikes.

    "If illegal conduct is responsible for increasing gas prices, state and federal authorities should take swift action": Attorney General Eric Holder, in forming the Oil and Gas Price Fraud Working Group to monitor petroleum markets for criminal and civil violations. Several cabinet departments and federal and state agencies are cooperating in the effort.  They always do this – they go after the gas stations and then decide they are not at fault and that "proves" there’s no manipulation – total scam!  

    Is silver a bubble or is the number of people trying to call a topin silver a bubble? Corey Rosenbloom looks at the explosion in volume in the ultra-short silver ETF (ZSL). 

    Another kind of commodity dumping:  A USDA report this afternoon is expected to show increased movement of cattle to feedlots as ranchers unload inventory due to the brutal drought in the Great Plains. The higher meat supply could boost margins for processors like Tyson (TSN) and consumers such as Morton’s (MRT). 

    Brian Hunter is fined $30M for trying to manipulate the natural gas market in 2006. Hunter was the key trader for hedge fund Amaranth Advisers which lost $6.6B when gas prices plummeted. 

    Look who’s running today: student-loan giant Sallie Mae (SLM+14.1%), beaming after last night’s earnings beat combined with a $300M repurchase authorization and a $0.10 quarterly dividend – its first since 2007

    Intel (INTC) CEO Paul Otellini on what stage of the enterprise upgrade cycle we’re in: Top of the fourth, 3 on, no outs.

    Perhaps surprising after some lukewarm-at-best reviews, Research In Motion’s (RIMM -1.7%) BlackBerry PlayBook tablet likely sold 50,000 units on day one - reportedly a better debut than the Galaxy Tab from Samsung or the Xoom from Motorola (MMI +3.3%).

    federal jury rules against Mattel (MAT -1.6%) in its lawsuit with MGA Entertainment over the ownership of Bratz dolls. The jury found that Mattel does not own the idea for Bratz or any of the sketches that led to the doll, and awarded Mattel no damages. A federal jury in 2008 had ordered MGA to pay Mattel $100M in damages, but it was later overturned on appeal.

    New York Times’ (NYT -2.6%) online paywall has "meaningfully exceeded" expectations, CEO Janet Robinson says, surpassing 100,000 paying digital subscribers since it erected the paywall last month - one-third of the way toward its unofficial goal. Q1 digital ad revenue -4.5%, print ad revenue -7.5% combine for -4.4% overall in ad revenue.

    General Electric (GE -2.5%shares slump after a strong open, as analysts focus on declining industrial margins and a middling earnings beat. "GE gave us little today to get excited about," Morgan Stanley says. "Big headline beat for 1Q was at best operationally in line after adjusting for Garanti sale [one-time gain], larger than expected NBCU gain, and six extra days in the quarter."  That’s funny – I guess GE was the only company that had 6 extra days in the quarter (7%) because we haven’t heard a word about that from any other analyst!  

    Three lunchtime reads:
    1) Behind the S&P warning on the deficit
    2) Muniland’s black swans: derivatives
    3) Fleeing the dollar flood 

  94. shadowfax

    matt
    After checking I see a sticky set up, if in FAS time to get out or hold till next week, after today looks down on XLF

  95. jabobeast

    and here comes the attempted stick….

  96. Phil

    I totally agree with Barry on this one:  

    Great concept — that is exactly how I sift through the daily deluge of data: Information Triage:
    n. The process of gathering, sorting, and prioritizing information to identify what is relevant or important and to discard everything else.

    Information triage is the continuous process by which we refine the information we gather, paying most attention to the information that is most valuable and identifying additional information we want to procure.
    —”Information Triage,” Notes About Notes, January 1, 2010 (approx)

  97. leonf675

    Phil, any thoughts on STI?

  98. shadowfax

    Not FAS FAZ
    IWM needs to flush out to let me in then I expect 83.40. A turn at 83.12 would be great

  99. goober

    Jabo – nearly all of the books Phil mentioned yesterday and a few more different ones were mandatory reading when I was coming up a few decades ago (50/60/70s)and I am a little older than Phil. There is no doubt in my mind some of them greatly affected my thinking processes and reasoning ability. I remember distinctly in the 8th grade we had a constituion test and you could not go on to high school unless you passed (at least that was the implied threat). So what are kids using these devices for? that is the real issue, is it not ? By and large when I look around I don’t see the devices being used as learning tools although they could be. Same could be said of TV, no? In retrospect the duck and cover maneuvers were a waste of time and of course a bit of fear imposed on young minds, but nothing to compare with being surrounded by thousands of NVA on Hwy 13, 20 kliks from Cambodia in 1968 on more than one occassion. So I guess it is all about your reference point now isn’t it, of what a bad day is and isn’t and what might be best for our children/heirs future. Again PEACE/OUT

  100. shadowfax

    XLF
    Buy program!

  101. Phil

    Japan Imposes Ban on Nuclear Zone. Japan’s government announced Thursday it is creating a formal ban on entry into the 20-kilometer evacuation zone around the quake-hit Fukushima Daiichi nuclear-power plant after some residents ignored pleas to stay away from the potentially hazardous areas. The announcement came as workers at the plant are pumping water that is flooding the basement of the turbine building for reactor No. 2, which contains more than 30 million times Japan’s allowable level of Cesium-137, a long-lived radioactive isotope. At the current rate of pumping, it would take more than 100 days to remove the water. That doesn’t take into account additional water that could enter—either through continuing operations to cool the reactor with water, or from other sources—or government plans to eventually pick up the pace of pumping.

    Tepco Must End ‘Whack-a-Mole,’ Cover Fukushima Reactors as Typhoons LoomTokyo Electric Power Co. must speed up plans to cover reactors at its crippled nuclear plant and drain tainted water to prevent more radiation leaks as Japan’s typhoon season approaches, engineering professors said.

    China March coal imports fell 40.7% to 9.05 million tons compared with a year earlier.

    OPEN/Palotay – I agree with that one but look at NFLX popping $250!  

    And what Jabob said… 

    Weekend/Goober – Best to just get fairly neutral and see what happens. This market is now bat-shit crazy but it was that way for much of the late ’90s and you just have to play the hand you’re dealt and not be too surprised when the reality police kick in the doors.  

    USO/Cnar – Well do you want to bet they go higher?  No, we have 4 weeks left with the dollar at 5-year lows – so I think we can stand pat for 3 days. 

    LULU making new highs at $102.30! 

    STI/Leon – I’m sure they will find some form of intelligent life eventually.  I like STI and they took a hit on TARP repayment fees but let’s emphasize the "repayment" part of that statement.    Revenues were up nicely but the question is, what is their earning power without the extra $5Bn they had sloshing around in TARP funds?  Still, they are on a good path and they seem like a solid bank with just 3.75 leverage on capital so lots of room to grow.  I’d wait until next week in case we head lower but certainly the 2013 $17.50/25 bull call spread at $4.80, selling the $20 puts for $2 is net $2.80 on the $7.50 spread that’s 100% in the money for a nice triple in 18 months if they simply hold onto $25 and worst case is you own 1x at net $22 with a break-even at $19.75.

    Screw NFLX – I like selling the next week $260s for $8.30!  

  102. goober

    Gotcha ! again thanx……………………………………….

  103. deano

     SLV continues to go up $1/day – 8% in a day and I’m shaking my head – hang on or out?

  104. Pharmboy

    Silver is our Po man’s gold, deano…..and it is now, with gold, a fiat currency.  Problem is noted above and many times over, the higher they go, the faster they fall.  Still begs the question: When will it?

  105. Phil

    Click to View

    S&P futures failed to hold 1,333 – now we’ll see what the index does

    3:00 PM On the hour: Dow +0.21%. 10-yr +0.09%. Euro +0.26% vs. dollar. Crude +0.66% to $112.19. Gold +0.43% to $1505.30.

    Yay!!!  President Obama orders Attorney General Holder to create a team to root out fraud and manipulation in oil markets, with a focus on market traders and speculators. 

    And immediately they begin to circle the wagons:  Maybe a better reason than speculators for the high oil price, Stuart Staniford argues "evidence points in the direction of Saudi Arabiabeing unable to raise production much if at all in the near term." With cutbacks from Libya and demand still strong, oil could have a lot farther to go. 

    Keeping their eyes on sovereign bond markets, traders unload euros before the weekend. GreekIrish, and Portuguese 2 year note yields all soar by about 100 basis points, Greek paper now at 23%, Ireland and Portugal about half that.  

    The zloty surges after Poland says it will use FX reserves topurchase its own currency. This is the 180 degree opposite of nearly all other emerging countries which have been selling domestic currency in a bid to cap gains. Polish shares buck the worldwide trend, -0.5%PLND+12.4% YTD.

    Barely a discouraging word about Apple’s (AAPL +2.7%quarterand outlook, with multiple analysts raising price targets. Average targetis now $444; the highest, $612. And don’t pay much attention to the company’s modest outlook: “Given [its] usual conservatism, we would not be surprised if it ended up delivering closer to $25B in revenues and $7.00 in EPS,” ISI Group says of FQ3. 

     

  106. escohen5

    Deano --
    I’ve been riding SLV all the way up.  It is relentless…taking profits along the way, rolling up, trying not to leave anything on the table.  You know how silver corrections can be!  This is trading like there’s going to be a COMEX default.

  107. Pharmboy

    SGEN – selling May11 $15 P.  I am determined to own them at less than 15 now.  1/4 entry.

  108. jbaker2447

     Phil/NFLX — bold move, I like it  -- earnings on Monday.  What if they beat?

  109. kurtww

     Phil, just managing to tear myself away from watching the PMs (hi ho silver, wow). Thanks for that great selection of hedges this morning, 
    I got the whole smorgasbord. I hope it works out. Well, I actually hope the world gets back on track and all of these expire worthless, but I’m a pessimist at heart. I was a little nervous about getting Toyota put to me, so I only sold a bit of that, but those were some great suggestions.  

  110. Pharmboy

    Another good one for SGEN is the Dec11 $12.5/17.5 BCS, paired with selling the $15 Ps for a net CREDIT of 40c (100% ITM).  Means you own them at 14.60, but break even is roughly 13.90. 

  111. diamond

    Pharmboy – What are your thoughts on SPPI?

  112. shadowfax

    Unplayable close now it sticks?

  113. rainman

    Wow! Didn’t expect Mr Sticky!

  114. sjtheshadow

    Phil-
    I am unable to follow you to the degree I would like. As a result I sometimes lose track of your current outlook.  What are your thoughts on a brief  ‘This is my outlook of the variuos markets’ (ie bullish, bearish, range-ish) box, maybe included with the support resistance box, each day?

  115. Jbur

    Phil/NFLX: I looked at shorting the weekly 260′s… do you have any concerns about earnings coming up next week? Or do I have the date wrong. Or do you just have heep powerful conviction?

  116. Pharmboy

    HYV (a high yield fund) just jumped 18c in one move.  That is a big move for a slow fund.  Someone is betting that ‘inflation’ is subdued.  Current yield is 8.1%.  Its sister one CYE is unchanged.

  117. kurtww

     deano – I’m with you, I’m watching silver like a hawk, and can hardly sleep at night. But my next car will be silver as a thank you. My trading account is up 120% in three months, most of it from silver. I think we’ve got further to go, though I keep taking profits off the table. OpEx is a fun time, I have a May 45 call that expires on Tuesday and it’s up 217% today alone, 700% since I bought it a few days ago. I already rolled my bigger positions to June and July, but I’m letting this one go over the weekend… what the hell, right? My only regret is that I was being stupid and daytrading the stuff even though I "knew" it was going way up, I lost a lot of ground along the way. I remember Phil telling me to stop being a greedy bastard and take the money, but I kept going back for more. This one keeps on giving…  

  118. Pharmboy

    SPPI just won FDA approval.  That has been a long and winding road.  Diamond, if you are in the stock, cover with the $9s or $10s 3/4.  I think they hold in this area, but they need to show revenues, and more of them.

  119. Jbur

    Rainman: No stick for the banks!

  120. escohen5

    Kurtww --
    Sounds like I’m trading just like you.  Taking profits too early!  But what can you do?  Take the money and run!
    May calls are expiring on Tuesday?
    Anyway…at some point, I’ll have to switch to futures….it takes a lot of SLV contracts to get enough leverage.

  121. mampcsA

     Wow, going for 12500 on the Dow.

  122. rainman

    Wholly cow, I think "they" stoled a base!

  123. Phil

    SLV/Deano, Esco – Really playing with fire but silver simply should not be this high – it’s crazy but so is gold and the Dollar is too low so the normal laws of market physics don’t really apply.  Again, without wage inflation, these prices cannot be maintained so it’s all up to the Workers to squeeze more money from the Capitalists so they can go out and buy something shiny otherwise this whole thing collapses in an ugly way.  

    NFLX/Jbak – Well I was kind of hoping for a return to normalcy before Monday night but, if not, the $230s are $21 in the money and are trading at $28 and that’s a $20 loss and the Jan $305s are now $20 so figure a roll to the Jan $325s on a big pop or maybe 2x something closer at $10.  If I didn’t think it was totally ridiculous for NFLX to hit $325 in Jan, I wouldn’t like the $260 short play today but come on, REALLY???  

    Thanks Kurt – Hopefully we don’t need them and we are clearly over in early may so we kill them or roll them to protect our new bullish positions (which we can take now as we have laid down protection first).  I know I’ll sleep a lot better this weekend and that’s worth something right there!  

    Outlook/StShadow – My outlook very rarely changes.  I’m still long-term bullish based mainly on inflation pushing everything higher but believe we have a short-term correction coming, especially when they artificially jam the markets up on low volume like they have this week.  The bouncing dollar (no sign yet) is the most likely catalyst for a market pullback and our general portfolios are 65% invested with a 20/15 bullish ratio and we are HOPING for a sharp sell-off so we can buy more bullish positions.  In no way, shape or form should you consider that a substitute for doing your homework – as suggested in the New Member’s guide – if you read a month of posts and comments, all this is covered at least twice in much greater detail and it is not my goal to have a floating cheat sheet for people who don’t want to put in the time to learn WHY we do what we do here. 

    NFLX/JBur – A fundamentalist does not fear earnings – he looks forward to them.  It is certainly not a trade for the feint of heart though.  Yesterday I did a similar play on CMG ahead of the earnings, that one worked out just fine.  Hopefully I’ll have a good percentage of winners. 

    Good strategy on Silver Kurt!  It’s not greedy to take it off the table and re-establish sensible longs with lower deltas – that’s smart.  

    Wow – 12,500 at the close – what a market!  1,337 on the S&P even though the futures are at 1,332.75.  Even the Transports went up today because those trucks produce something like a gallon of gas every 5 miles (or do I have that backwards?).  

    Anyway – have a great weekend everyone!  

    - Phil

  124. oknoman

    I am just amazed watching the bots trying to chase ‘me’ out of the weekly AAPL puts (350′s) into the close sold in the initial rush this morning @ .94. With 2 minutes left in the session they had driven the price down to @ 350 and the weeklies are quoted @ .20 +. Absolutely incredible.
    Thanks, Phil. I’m definitely learning.

  125. sjtheshadow

    Phil-
    Thank you for the summary.  Point taken about the ‘floating cheat-sheet’  I did not think about it from that (your) point of view.  I have been a happy subscriber for over three years for good reason. 

  126. Damion

    Thanks for another excellent week Phil.  I took the money and ran on the bullish positions and I look forward to your weekend post but I’m going with your gut and playing the weekend bearish – all with profits so no worries at all.  

  127. pstas

     MDVN- you/we were short this a while back- did not cooperate. Are you still negative on the fundamentals is the chart turns?  

  128. pstas

     Pharm- MDVN- that was for you.

  129. yodi

    Hi Folks all have a very nice Easter week end

  130. Pharmboy

    MDVN – Hedgies are in control.  I went short for a reason, did not work out and now am out.  No, not shorting yet.  I read a blog that noted MDVN has not gone down in April for 3 yrs, regardless of fundies.  I will re look at a hedged one b’c their drug is worse than ARNA……and ARNA’s works, it just has other issues.

  131. jbaker2447

     Phil/NFLX — Thanks for the explanation.  I trusted your call and I liked idea — I entered the trade.  I’m trying to ‘plan the trade’ better and your plan helped me understand the rolling possibilities.  Thanks — Have  a great weekend!

  132. ilene

    Today’s levels. The S&P broke above the 100% line.

  133. flipspiceland

    @Felipe
    errr….uuhh…
    "Kids already have awful penmanship and they can’t spell due to spell checkers and they can’t add due to calculators – it’s a double-edged sword to some extent but, then again – we can’t make fire or fletch arrows or track game so I guess some things are not necessary to learn as we evolve and I’m just old-fashioned worrying about reading, writing and arithmetic."
    Separating out each of the ‘Rs:
    Reading is essential in a society (bottom)  literally drowning in Information ( of the ocean). No mattter what.
    ‘rithmetic is essential because of (see above). Optional.
    ‘riting is essential.   Penmanship is not.
    As long as there are other rigorous mental gymnastics that provide for the survival, and prospering  techniques the kids WILL need—-- the manipulation of a number of variables that is the essence of a Quant education—-there may be little to worry about.  But should the curricula fail in this regard and teach instead WHAT to think, they are in deep dooody.
    Education was originally about teaching (the teacher)  the student (the learner)  HOW to think.  How to use the brain to achieve its ultimate potential. It included memorizing, number manipulation, and probably a bit further back, the use of the english language to clearly express thoughts orally. I don’t think that’s the goal today in most public educational institutions.
    The damage done to our financial system is a good illustration of the Quantitative education (run amok). It is a perfect one regarding the (way past the survival) Prospering techniques that have captured over 40% of the profits in our Multitrillion dollar economy—EACH  YEAR for the last 20 years and promises to continue to do so.  Those brainy guys and gals that developed the derivatives, the MBSs, and other Robo-programs and systems are doing very well don’t you think? And that one IB is suing its former employee over his divulging the program, a case in point as to how valuable the Quant Skill and what it  produces  is.
    Perhaps it is a goal of government to continue to dumb down the education system most of the people utilize so that the students, at least the vast majority of them, do not develop their Critical Thinking abilitits to the utmost, the very utmost that their capacity will permit, Yes, Virginia, there is an I Q .and you can bet those in the Elite and their progeny are at the the very, very tippy  top 1% also in that department. Or it may not be the intended goal. Only a cynic such as the Flipster sees a conspiracy here. It’s irrelevant.
    Classic Education which is impossible for so many due to a variety of factors to include, IQ, economics, a profound lack of curiosity (Absolutely Essential for anyone to begin accumulating the knowledge in), general disinterest and boredom, and an inability to manage complexity without severe stress, will see those students move into the Eye-Hand coordination fields ((Fletching and hunting skills and the knowledge they require to do well may not be so antediluvian if the SHTFF)) . And those skills become more redundant with each passing year.
    The fact is that we and the children if we and they are to do well in life, more than ever, require a mental conditioning that stresses clear thinking, constantly tested, challenged, and (for motivation forward) provide rewards that parallel achievements.
    Short Version: The brain is a muscle; use it or lose it. 

  134. chaps

     Phil:
     
    A question on how you manage back spreads when you’re taking a bearish position, but want to be mellower than shorting calls. For instance, you suggested a back spread on PCLN on 3/30 when it cracked $500. It involved buying 3 July $520 calls and selling 5 April $500 calls. You said if PCLN broke $510, you’d have to add 2 more long calls and plan to roll the short calls into May for a regular spread. 
     
    If PCLN keeps going up, I think you’d end up with a good BCS in July. So you end up "going with the flow" and end up in a bullish spread that makes money. No problem there.
     
    But if PCLN goes up, say, to the point where you add the 2 additional longs and roll the callers to May for even money (say, because there’s no premium left in the April callers), and then PCLN starts heading down, I’m getting confused. If your overall delta at that point is still negative, like it was when you started the trade, no problem. It’s like the trade you started with, you just adjusted your position. You ride the trade down. But not clear that you would have negative delta at that point.
     
    If you don’t have negative delta, then it’s like you’re long PCLN. Normally when you’re in a spread because you’re bullish (positive delta) and it goes against you, no problem. You cash out the callers to roll down your longs. But here you’re bearish on PCLN.
     
    I suppose you could add longs and adjust your callers in such a way that you avoid going delta positive. You start out the trade negative delta and your problem if the trade is going against you is that you’re getting too negative. So I guess you could adjust just to the point where you’re still bearish, but not in trouble.
     
    Anyhow, curious about how you think about this sort of "worst case scenario." 

  135. Cap

    Happy End of Week.
     
    Phil this is for you ….. and for me, and everyone else here:
     
    http://www.creatingnewworlds.org/wordpress/2011/02/25/charlie-reeses-last-column-555-people/

  136. matt1966

    Phil, if you ever get that hilltop in France  to sit on watching those sheep I’ll bring you any of your American favorites left behind to join you for a bit.  8-)
     
    It ‘sounds’ as if the government might be interested in doing more about gas prices then sniffing around the stations.  This articles says they want to look at.. gasp!  Speculators-  Could this be your big chance to make that world wide impact?  At the very least, there must be a public comment period for the study where they typically address all relevant comments.  I think this might be the best stage yet for you to present your most concise, compelling case for what is actually ocurring.  As you know, for me, as a matter of national interest, oil should be outside the realm of commodities that can be purely speculated upon.  If you do, I’ll be the first in a long line to thank and congratulate you.
     
    http://www.bloomberg.com/news/2011-04-21/obama-says-u-s-team-to-study-whether-speculators-driving-up-pump-prices.html
     
    Happy Easter to everyone who cares!

  137. zeroxzero

     Happy Easter, all.

  138. 1020

    Cap/555  Something we can agree on. Thanks!
     
    Happy Easter Everyone!

  139. kurtww

     escohen5 – If you are trading options on SLV, futures options are similar, just bigger (a LOT bigger). I haven’t done the math if they are more advantageous, but the commissions are certainly right. I pay $2.32 with IB on each leg. I got spooked after I made a few bad decisions, in particular I got out right after the Japan earthquake. I actually bought a whole futures contract at $33.48 hoping to take delivery because I was so bullish, thinking it was going way higher. But that was too much juice for me to handle (it felt like it could go to zero and I would be out $175k), so right after the earthquake I got out at $34.28. You can’t believe how much I kicked myself after that, and it took buying some smaller SLV options to get back in the saddle. I’m finally getting over it after having a tremendous week, but still, that was an expensive learning experience. 
    With silver going up so much so fast, I had some really good luck in the past week with lottery ticket options. It helped that options expiration is so close, so there was very little time value in the options, and once they got in the money they just rocketed. There’s nothing like going from $1200 to $8000 in a few days. So little capital at risk with such a big payout, I almost feel guilty (well, not really). I’m willing to try for a few more of those in case this parabola is not done yet. I thought for sure gold would be leading this charge because of the rampant money printing, but I think people see silver as a cheap alternative and are piling in. It’s starting to feel like a manic blow-off is in the making, but I have a feeling we’re not done yet. I know the Hunt brothers pushed it to just over 50 in 1980, but I just saw a chart of that in inflation-adjusted terms, we’re only at around 20 now. The curve is starting to get steep though!

  140. kustomz

    Hope everyone has a great Holiday weekend!!

    Whens the last time someone mentioned banks and failure
    Though the FDIC has managed to shore up its DIF over the past few quarters, the outbreak of bank failures has tested its limits. As of December 31, 2010, the fund remained in the red with a deficit of $7.4 billion, slightly better than the deficit of $8.0 billion in the prior quarter. The agency expects the fund to be in the black later this year.
    http://www.zacks.com/stock/news/51463/Bank+Failures+Zoom+to+34
    http://www.fdic.gov/bank/historical/bank/index.html

     

  141. chaps

    Phil/ bearish back spreads:
     
    Thinking about it more, I think it’s clear that to the extent you want to remain bearish, you simply roll the callers out to lower strikes. That lowers your overall delta. No reason to have to roll for even money. You can roll to a lower strike for a credit while lowering your delta.
     
    That should’ve been more obvious to me. But I’m just getting used to these types of trades.

  142. flipspiceland

    @Cap
    Thanks for the Reese column.  It grabbed me at the very first sentence. 

  143. japarikh

    Phil,
      I have the BIIB Jan 60/70 BCS and was wondering how I should adjust give the recent pop. I can roll the short call out to the 90 strike for $15 which would put me in a $30 spread for $20 (I’m in a $10 spread for $5 now). Thanks.

  144. ssdirk

    Phil and all,
    Check out this image of IWM.  I cut this past Monday and Tuesday, then pasted it in place with the ongoing channel that was established last week.  Seems the bots just picked up the action where they left off.  Nothing can bring this market down.
    http://www.scribd.com/full/53619209?access_key=key-uvizwt2gr7tnjmje0gw

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