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Moronic Monday – Still No Deal?

This is amazing, isn’t it?  

Our "leaders" still can’t work out a debt deal with just 7 days left until the Government shuts down (and we’re already at the end of our bonus time as Treasury has been juggling the books for three months just to allow us this much).  I wrote extensively about this over the weekend so we can move on – just as we moved on in Chat yesterday evening when my 6:09 pm Alert to Members was to go long on the Dow Futures (/YM) over the 12,500 line (now 12,543, up $215 per contract), Russell (/TF) at 830 (now 831.80, up $180 per contract) and, of course, shorting oil (/CL) below 99.50 (now $98.97, up $530 per contact) so the winner of the morning is oil!  Congrats to all the players with a lovely start to our week! 

On the whole, we were just protecting our bearish bets as I remained very grumpy into the weekend on Friday.  Those of you who followed our suggestions from Friday’s post were no doubt pleased because, at the time, we were short the Dow Futures at 12,720 and the Russell Futures at 842.60 with $1,100 and 1,260 moves from there to Sunday night’s flip-flop respectively.  

We also picked the S&P (/ES) short at 1,346 (now 1,331) and the only one that isn’t working is the Nasdaq (/NQ) – back at the same 2,415 we had in Friday Morning’s Futures.  Well, it’s not the only one – gold went over our $1,605 shorting target this morning, after giving us a quick gain on Friday.  This is not good for our GLL August $22 calls (.40 on Friday) or our ZSL Sept $11/15 bull call spread at $2, offset with the sale of SLW Sept $44 puts for $1.20 for net .80 on the $4 spread but a nice re-entry opportunity today – if you are still a believer.  

We’re more agnostic now.  We were bearish into the weekend expecting pretty much what happened – NOTHING, and now we’re waiting to see what actually happens and how the markets react.  The Shanghai Composite freaked out this morning and dropped 3% – only saved by the closing bell as the Government moved to shut down counterfeit Apple Stores and bullet trains went off the rails.  The Hang Seng wasn’t as worried – down only 0.7% while the Nikkei was off 0.8% and India couldn’t have cared less and gained 0.8%

Europe opened down about 1% but is recovering and almost flat at 8 am despite Moody’s cutting Greece to "Yucky, smelly junk" – the worst rating they have ever given to a nation with running water.  Moody’s Alastair Wilson warns, "Our experience is that relatively small restructurings have been often followed by deeper defaults."  That’s not helping Italian Banks, who closed limit down one day last week and are still falling this morning, with some down about 5% already.   We got good news out of Europe with Ryanair’s profits jumping 49% for the Q.  RYAAY was one of our featured trade ideas last Tuesday, when my comment in Member Chat was:

Airlines/Asaenz – I like RYAAY as they got killed recently on no particular news (but Q2 is tricky for them).  I would go light, in case they miss with the March $25/30 bull call spread at $1.90, selling he $22.50 puts for $1.60 for net .30 on the $5 spread that’s currently $1.15 in the money.  UAL may be a falling knife here but, then again, so could Ryanair but I like RYAAY’s business model better (more flexible).

That one is nicely on track for the maximum 1,566% gain and I’m very pleased with that call as UAL went the other way last week so a nice bonus warning people off that one!  We had taken a bearish stance on the debt fiasco last week with Friday’s trade ideas including an SQQQ Aug spread, a bearish move on FAS, the GLL & ZSL trade ideas mentioned above, shorting oil futures (/CL) at the $100 line, a GMCR Jan bear spead and a bullish January play on AAPL and a March trade idea for SONC that was featured in this weekend’s Stock World Weekly.  

Intra-day we picked off a nice downward move on the Nasdaq with the weekly QQQ $60 puts, which went from .35 in Member Chat at 2:30 to .50 when I reminded Members "Don’t be greedy" at 3:43 so a nice, 42% gain in an hour to finish off an excellent week.  

Now we’re back to watching our lines this week to see what holds but, of course, we like to short at the top of our range and go long at the bottom (Duh!) – so we’re just following through with the same old plan until we get a proper break-out – or break-down, whatever the case may be.  It’s a very generous 10% range we’re bopping around in and that gives both bulls and bears plenty of room to run IF THEY ARE PATIENT and don’t try to force their entries.  As we are a bit pessimistic overall, we generally are quicker to take our bullish profits while we tend to press our bearish bets – waiting for the big one.  

consumer_metrics_chart_3_contraction_watchThere may be a rally if we "fix" the debt ceiling but that’s not going to do Jack Shiite for the economy is it?  Again, we covered this extensively over the weekend but this whole charade is a farce to distract Americans from the reality of the chart on the right, which clearly shows we are still contracting, so CUTTING Government spending while neither Consumers or Corporations are spending is probably the most sure-fire recipe for disaster since Lucy and Ethyl took over the assembly line.  

Speaking of things that are contracting: we got the Chicago Fed Report this morning and that came in at -0.46, which is slightly less bad than -0.55 in May.  The Texas Manufacturing Outlook Survey comes in at 10:30  and tonight we get earnings from notables such as BIDU, FNF, NFLX and TXN.  Tomorrow things get serious on the Data front with the Case-Shiller Index for May (too old to matter), Consumer Confidence for July (how far down will it be?) and New Home Sales (pathetic) at 10.  

Wednesday is the unreliable Mortgage Purchase Index along with Durable Goods (probably awful ex-aircraft), Oil Inventories (SPR?) and the July Beige Book, which is very likely to sum up a worsening economy.  On Thursday we get the usual 400,000 lost jobs no one seems to care about and Pending Home Sales, if any.  Friday is the 2nd look at Q2 GDP and the Chicago PMI and Michigan Sentiment so there is NO DATA that I think will look good in the week ahead – sorry….

With all this going on, the Treasury is going to try to auction off 3 and 6-month Bills at 11:30 this morning, followed by one and two-year notes tomorrow, the 5-years on Wednesday and 7-years on Thursday so it will be interesting to see how well Eric Cantor’s TBT stock does this week (we’re long too!) as he refuses to deliver a debt deal while we ask people on Thursday to buy 7-year notes that we might default on next Tuesday – yep, this is going to be fun!  

We don’t care – we had our pre-market futures victory and now we’ll see how well our bearish option plays perform at the open.  It looks like our SQQQ play will still be makeable in early trading as the Nasdaq is so easy to pump up but poor NFLX earnings may give the bulls pause this evening and GMCR (we’re short) is looking very much like a Chinese "growth" stock – unfortunately, from an accounting perspective, using methods best explained by the accounting firm of Benes, Costanza and Seinfeld.  As noted by the Grumpy Old Accountant (thanks Sam for heads up):

GMCR’s balance sheet clearly indicates why the Company isn’t performing.  Over 44% of the Company’s assets are imaginary ($606.4 million in intangibles and goodwill), and almost equal total stockholders’ equity.  Most of the non-goodwill intangibles originated in 2010 and relate to customer relationships and product names. 

Not surprisingly, the Company is aggressively spreading out the expensing of these assets over periods of 10 to 15 years, when a much shorter period is likely warranted.  This just might be another Golf Galaxy in the making with a major impairment charge lurking in the near term.

So, what’s the verdict likely to be in the forthcoming litigation?  No question about it: GUILTY!  Investors are guilty for overlooking the clear danger signs lurking in both the past and current financial statements. 

GMCR’s managers are guilty of financial reporting fraud for issuing clearly misleading financial statements to cover poor operating performance.  And the auditors are guilty for issuing an unqualified, “clean opinion,” on a restated set of financial statements for a Company with acknowledged material weaknesses associated with an ongoing SEC investigation.

Just a little side-show for what’s bound to be an interesting week!

 


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  1. lflantheman

    If I were a congressman, and also traded options, here’s what I would do.   I would set up a large trade to buy TNA calls, but would not trigger it yet.  I would keep in close touch with my colleagues in the congress to try and determine when they would cease this nonsense on the debt debate and reach an ageement, and I would trigger the call  purchase the moment they reached an agreement.   If they went to within 24 hours of the deadline I would trigger the buy at EOD that day.  Because I would know they are going to reach an ageement.  I just don’t know when.  And I know the market  will respond positively with this news.   Now this doesn’t sound like honest, above-the-board activity.  But hey, I said in the beginning …’if I were a congressman’ , didn’t  I ?  

  2. russellb73

    Phil/anyone
    What about quick bullish play on BIDU, buy calls today after market open (drop at the open) and then hopefully U.S. debt gets resolved and bounce higher….also wouldn’t mind owning some BIDU?  Still thinking short term, since after bounce due to U.S. debt resolution, longer term seems markets going down (indicators looking poor to aweful recently).  BIDU reports today.

  3. exec

    Iflan,
     
    You know they will reach an agreement.  This is their typical political charade.  Question is, is an agreement good for stocks or bad.  Gotta believe good because everything is good for stocks…..even if it’s bad.

  4. rpme

    Everyone who has a problem with our Political Process and the respective parties should check out Americans Elect.org. Something new that could be compelling.

  5. stjeanluc

    Oil Lines
    R3 – 100.74
    R2 – 100.30
    R1 – 99.61
    PP – 99.17
    S1 – 98.48
    S2 – 98.04
    S3 – 97.35
     
    Previous session high and low – 99.87 / 98.74
    Fib lines to watch for breakout – 101.70 and 95.78. 

  6. stjeanluc

    FAS Money (Weekly) – We are short the 26 Puts (entry around $1.01) and the 25 Calls (entry around $1.21). Looks like the puts are going to be hurting, but the calls will be doing well!
     
    FAS Money (Monthly) –  We are short the August 25 Calls (1.15 now 1.82) and the August 26 Puts (1.75 – now 1.81). As with the weekly trade, the calls should be OK today, but the puts might be hurting!
     
    It would seem that we should be able to cash in our calls today and wait for an agreement on the debt ceiling to cash in our puts on a rally! That would be the plan at least!

  7. stjeanluc

    FAS Money Recap (Week 5)
    Last week did not go perfectly – we collected $0.50 on the Put side, but we had to roll our calls higher and that cost us $1.00. Overall, last week cost us $0.50.
    Week 1 – $0.82 of premium collected ($0.45 call side and $0.37 on the put side)
    Week 2 – $1.18 of premium collected ($-0.02 call side and $1.20 on the put side)
    Week 3 – $0.40 of premium ($-0.40 on the call side and $0.80 on the put side)

    Week 4 – $1.47 of premium ($1.17 on the call side and $0.30 on the put side) 
    Week 5 – Loss of $0.50 (loss of $1.00 rolling the calls and gain of $0.50 on the put side)
    But we sold over $2.00 of premium on Thursday and Friday….. Still on track!

  8. stjeanluc

    For a communist country, they are learning the capitalist games quickly!
    http://ftalphaville.ft.com/blog/2011/07/25/633216/etf-arbitrage-chinese-trust-edition/ 

  9. lflantheman

    russellb73…..They usuall y beat, and usually the stock rises after earnings about 60% of the time.  It’s sitting right on its performance curve.  It’s overvalued.  And you wouldn’t mind owning it.   And people are buying more puts than calls right now.  So with earnings it will probably stay level, perhaps go up a bit.   So what I like is sell September 140 puts for about $5.   

  10. tuscadog

    Phil / Oil  Went into the weekind short oil.  Conintue to hold through Wednesday hoping SPR release hurts some more?  Hard to see any of your data points above being positive for oil consumption?

  11. snow

    Cantor/anyone – I do not understand this story at all – aren’t there rules, laws even, that officials, especially elected national officials, must place their assets in a blind trust? Or is that all gone with so many other regulations and ethical standards?

  12. Pharmboy

     

    If you are really down today, you can fly to Medocino, CA and help the gov’t take out the pot plants there.  It happened this weekend, but I am sure there are a few stragglers!

  13. Maya1

    Congressman
    And why is everyone against our dear elected officials?
    They are trying to do the best they can under very difficult times
    (TIC)

  14. Pharmboy

    With UAL and AML missing, I again ask – PCLN Short?

     

    Couple of UP phantom bars on SPY in the a.m.  Careful on more shorts.  Both are 134.62.

  15. Troy

    Debagedon not so bad so far…emphasis on so far.  And hey Pharm, govt needs to take down all those natural pot growers so the pharmaceutical synthetic producers can corner the markets instead. 

  16. lflantheman

    russell……….BIDU Sept 140 puts sold for 5.10.  

  17. stjeanluc

    FAS Money / Phil – Looks like the 25 Calls are around $0.50 now. That puts about $0.70 in our pocket. Sell half, all of them? 

  18. stjeanluc

    I am assuming that XLF will hold $15! 

  19. rustle123

    This market has the feel that it wants to snap back at any minute.  Phil, at what level would you buy DIA calls?

  20. jabobeast

    PHARM— I hope you are right about PCLN being a short
     
    All these momos do is go higher every week!
     
    FU MOMOS!!!!

  21. jabobeast

    WTF is PCLN up 7 points???

  22. nicha

    Iflan/BIDU – what is the reason you chose Sept $140 puts?

  23. rustle123

    Last two qtrs OPEN was a disappointment and their traffic to the site has died down.  Can’t see them having a good qtr.

  24. David Ristau

    As promised, I just published up the momentum stocks/high growth stocks story for you on the website here.

    We did ten companies.

    Surprised to find only three companies that were well under current prices including CRM, LNKD (two obvious ones) and AMZN. The latter we looked at for awhile after our results.

    The three with the most upside were CMG, NFLX, and GMCR…not three popular stocks on here.

    Check out the story here: http://www.philstockworld.com/?p=442041

     

    Good Investing!

  25. Phil

    Good morning!

    We should have a chance to re-load on this morning’s futures longs if we head back up but the Dollar is over 74.25 (74.35 at the open) and probably heading higher – which was our bearish premise so let’s keep a sharp eye on that this morning.  The Euro is at $1.435, Pound $1.627 and Yen very strong at 78.21 so the BOJ wants the Dollar stronger and why would the Euro and Pound be strong when the US, who owes them over $1,000,000,000,000, is on the verge of defaulting?  

    Ridiculous as it seems, this causes Europeans to panic into the Dollar (and the Yen) and, of course, into gold ($1,620) and silver ($40.81) and we can’t short metals again until we get a debt deal.  Oil, on the other hand, is facing up to the reality of a renewed recession/depression so I’m happy with our short oil positions.  Gasoline bottomed at $3.05 at the open and that’s the only bullish energy play I would make (/RB) above that line.   Nat gas is $4.40 and so is copper (of course).  

    Our main bullish futures trades (in anticipation of the worst-case being priced in) is to play the Russell over 830 (/TF) and the Dow over 12,500 (/YM) using Nas (/NQ) 2,400 and S&P (/ES) 1,330 to confirm a bullish move.  That’s still valid as people are already bored with worrying about a US default.  As long as the Dollar stays under 74.40, they might be able to push the indexes higher but, in EITHER direction – this is a quick in and out market where cash is king.  

    On the Big Chart – it’s all about holding those 2.5% lines at Dow 12,505, S&P 1,333, Nas 2,809, NYSE 8,487 and Russell 835.  Once again, it’s 1,333 or bust with the S&P right on the line this morning and acting as our 3 of 5 tie-breaker.  Volume is lame so no one is panicking but also, it should be noted, no one is buying this F’ing Dip either…

    I do not have any upside option plays as I only like the futures because it is cheap to play them with tight stops over strong lines – generally, I still think down is the way to go for the week unless there is a deal – then we should rally before we begin to go down again!  

    I do still like the SQQQ Aug $21/24 bull call spread at .95, selling the GS Sept $120 puts for $1.20 for a net .25 credit on the $3 spread.  JPM Sept $39 puts at .85 are also a nice offset – netting .10 on $3 with 2,900% of potential upside.  I prefer the GS because our expectation is the debt will be fixed and the short GS puts should still net us .25 for our troubles if we rocket up while the JPM spread means we’re still out a dime.  

    Monday’s economic calendar:
    8:30 Chicago Fed National Activity Index
    10:30 Texas Manufacturing Outlook Survey 

    Notable earnings after Monday’s close: APCBIDU,BRCMBXSCNIDRHFNFFTIHLXJECLPSMASNFLX,NUVAQGENRRCSTMTXNVECO

    At the open: Dow -0.79% to 12581. S&P -0.73% to 1335. Nasdaq -0.94% to 2832.
    Treasurys: 30-year -0.6%. 10-yr -0.2%. 5-yr -0.1%.
    Commodities: Crude -1.23% to $98.64. Gold +1.01% to $1617.60.
    Currencies: Euro -0.03% vs. dollar. Yen +0.29%. Pound -0.1%.

    Market preview: S&P futures -0.9% and following European shares lower after weekend debt talks again failed to bring a resolution, with the uncertainty sending gold and Treasury yields higher. HCA -14.3% after Q2 EPS misses expectations; Bank of Ireland +13.8% following news it plans to sell a €1.1B stake to private investors. Later: Texas Manufacturing. 

    The debt ceiling stalemate must really be getting serious now: Pres. Obama has canceled two fundraising appearances scheduled for today, according to a campaign official.

    The Fed – which owns $1.6T of Treasuries - could theoretically sell those holdings, remit the proceeds to Treasury, and fund the government’s borrowing needs for 1 year. Maybe unlikely, but the past few years have shown the Fed and Treasury capable of extraordinary measures when necessary.

    June Chicago Fed Activity Index-0.46 vs. -0.4 expected. May revised to -0.55 from -0.37. April revised to -0.78 from -0.56.

    Treasury prices fall, sending yields higher, on growing anxiety over the continued lack of agreement on a raise of the U.S. debt ceiling. Yields on 10-year Treasurys rose past 3%; yields on 30-year bonds added six bps to 4.32%.

    Investors Raise Bullish Commodity Bets by Most in Year. Funds boosted bets on rising commodity prices by the most in almost a year on speculation that the global economic recovery will prove resilient. Speculators raised their net-long positions in 18 commodities by 16 percent to 1.26 million futures and options contracts in the week ended July 19, government data compiled by Bloomberg show. That’s the biggest gain since early August. Bullish silver holdings climbed to the highest since May 3. Hedge funds and other money managers lifted their net-long silver position by 19 percent to 24,740 futures and options contracts, the third straight gain, data from the U.S. Commodity Futures Trading Commissioned showed.

    Gold Surges to Record as U.S. Debt Impasse Threatens Default, AAA Rating. Gold surged to a record as U.S. lawmakers failed at the weekend to reach an agreement on raising the federal debt limit, boosting haven demand on concern that the government of world’s largest economy may default. Immediate-delivery gold gained for a second straight day, climbing as much as 1.4 percent to $1,624.07 an ounce. Spot gold, which has rallied 13 percent this year, was at $1,611.45 at 9:59 a.m. in Singapore. Gold for August delivery in New York climbed to $1,624.30, the highest ever.

    Bank lending to businesses in the U.K. contracts by £2.5B in June, a faster rate than the average £1.4B drop over the previous 6 months. Separately, home prices slipped 0.1% in June and 3.9% Y/Y.

    Ahead of what is expected to be a weak GDP report tomorrow, U.K. Business Secretary Vince Cable ventures into monetary policy, calling for the BoE to consider additional QE. No reaction yet from the supposedly independent central bank.

    "We’re on the edge, we’re the worst among the AAA countries," says a French money manager. "If you look at the fundamentals … it should be downgraded," contends another strategist. Like the U.S. and the reserve currency, France’s role at the core of the EU is allowing the country leeway with the ratings agencies. 

    Merkel Facing German Revolt Over Greek Bailout.

    The team at RBS has 3 issues with the latest Greek bailout. First, Greek’s debt – only marginally reduced – remains unsustainable. Second, the new bailout tools sound nice, but their practical implementation is a different story. Finally, the size of the EFSF was not increased – there isn’t enough firepower to do the job.

    John Mauldin: Kicking The Can One Last Time. A 21% haircut is a bad joke. If you assume that Greece can afford to spend 10% of their revenues just to pay the interest, which is what they will need to be able to do to get out of their crisis, then the haircuts look more like 75-80%.

    Threat to Japanese Food Chain Multiplies as Cesium Contamination SpreadsRadiation threats to Japan’s food chain are multiplying as cesium emissions from the crippled Fukushima Dai-Ichi nuclear power plant spread more widely, moving from hay to cattle to beef.

    Vietnam’s Inflation Accelerates to 22%, Highest Among Economies in AsiaVietnamese inflation accelerated for an 11th month in July after the central bank cut a key interest rate even as the nation faces the fastest price gains in Asia.Consumer prices rose 22.16 percent from a year earlier, compared with June’s 20.82 percent pace, data released by the General Statistics Office in Hanoi showed today

    How Wall Street Helps China in Back Door to U.S. Markets.

    While tablets and macro issues are hurting PC demand in Western economies, Asia remains a bastion of growth: IDC estimates the Asia-Pacific region (exc. Japan) saw 13% Y/Y PC shipment growth in Q2, well above the 2.6% growth estimated for the entire world. Microsoft (MSFT) and Intel (INTCspoke last week of emerging markets PC demand remaining healthy.

    Quick take on Asian PC demand: The PC industry’s greater reliance on Asia-Pac is a positive for Lenovo (LNVGY.PK), whose market share in this region is much higher than its global share, and a negative for HP (HPQ), for whom the opposite is true. It may also be a negative for Microsoft (MSFT), given the higher rates of Windows piracy in the region.

    As global mining companies report record earnings, mine workers across three continents are striking over payBHP workers vote to extend their strike at Chile’s Escondida copper mine, stoppages at BHP’s Australian steelmaking coal operations may resume this week, and Anglo American (AAUKY.PK) and Xstrata (XSRAY.PK) coal miners in South Africa walk off the job.

    IMAX is down 4.3% as Stifel Nicholas lowers its PT to $27 from $32. Stifel, which is maintaining its Hold rating, doesn’t expect three 3D children’s movies arriving in Q4 to perform well, and believes consensus estimates for the second half are too optimistic.

    Netflix (NFLX +1.85%) is scheduled to report earnings after the close, with analysts likely to focus not just on the headline numbers but also on subscriber growth, costs and margins amid concerns that content distribution deals, including rumored talks with DreamWorks, will grow increasingly costly for the company.

    Texas Instruments (

  26. Phil

    Texas Instruments (TXN) is due to report its Q2 earnings later, with EPS forecast to fall to $0.54 from $0.62 and revenue to $3.44B from $3.5B, mainly due to declining orders from Nokia (NOK). Investors will look for signs TI is executing on its plans for analog chip dominance.

    Horrible Footage Of China’s Deadly Bullet Train Disaster.

    Chart of the Day: WAIT, Is August 10 The Real Debt Ceiling Deadline?

     

  27. Pharmboy

    CTL – pays a nice dividend (7.6%), and the Jan13 $35/40 C/P can be sold for $11.30.   What say you oh wise Phil or anyone who knows about the telecon industry?

  28. lflantheman

    nicha….BIDU has only dropped 3 of the last 8 earnings reports, and only one of these was the fall > 10% (ll.4%) at one month .  So the odds are > 87.5% that BID will nt be down more than 10% with earnings, one month out.  154 – 15.4 = 139.      I could have sold August as well, but for less premium. 

  29. jcaesar

    Poor David Ristau – with those CMG and GMCR numbers, he’s bound to suffer the Wrath of Phil.  Let’s all keep him in our thoughts and prayers.  ;-)

  30. David Ristau

    Haha thanks.

  31. dflam

    Phil : About a week ago, you recommended IMAX Aug. $27/$28 BCS at $.50 paired with the sale of Jan. $25 P ? IMAX now down to $27.07. Any changes tot he position?

  32. Pharmboy

    ONTY – if you bought back the short puts, I am selling the AUG $9s for 80c or better.  I still have the stock and the Aug 9 Cs.

  33. jabobeast

    DAvid-- you kind of remind me of Henry Blodgett in 1999 ;-)

  34. Maya1

    Phil,
    Good morning
    Here is a hypothetical scenario, that I would love your feedback on:
    $5m in a portfolio, with 2 year horizon.
    BCS’s on which of following:
    INTC, MSFT, WFR, GE OR AAPL? And what spreads?
    Or something else all together, and if so, what?
    Only one stock allowed under the rules.

  35. asaenz

    wow…..they just wont let these markets stay down, congrats to those that went long on the opening.

  36. Phil

    We’re shrugging things off better than I thought already.

    Good plan Iflan – No if only you had $20M to get yourself elected.  

    BIDU/Russell – I am not a big fan of those guys at this price.  They are up 130% from last July – don’t you think that’s a bit much?  Remember they spit 10:1 so this is about $1,550 a share now – something no one in their right mind would have paid pre-split but just seems less ridiculous because it’s "only" $155 now.  The p/e, IF all goes well this year, is 85 with a market cap of $55Bn or about 1/4 of GOOG with GOOG earning $8.5Bn on $29Bn in sales last year while BIDU made $535M on $1.2Bn in sales.   This is simply not a stock I would have any interest in betting higher.  

    5 short BIDU Aug $170 calls at $4.15 ($2,075) can be covered by 3 Sept $175 calls at $5.10 ($1,530) for a net credit of $545 on the spread.  It’s risky, of course but a good way to make a bearish bet that BIDU doesn’t jump another $5.5Bn in valuation (10%) on earnings.  

    Everything is good for stocks/Exec – Good point.  

    Amercians Elect/Rpme – That’s interesting but I worry about who’s gathering and controlling the data?  

    FAS Money/StJ – Good call on cashing out the weekly $25 calls but you have to pull that trigger!  They were .50 at open, now .60 so, hopefully, a 20% move up triggered people’s stops even without a specific instruction.  THAT’s the way you play folks – if you get a 50% gain early in the week, you damned well set stops and take it off the table!  The other leg (which is, of course, going against you) can always be rolled WHEN you have the flexibility of being able to sell another short call to cover it.  

    Arbitrage/StJ – Always a winner in an inefficient market.  I was considering moving to China a decade ago for exactly that reason.

    Oil/Tusca – I’m liking Aug and Sept short plays but you have to move in and out of futures on resistance.  Back to $99.50 for a reload on the short side (/CL) with tight stop over that line. 

  37. David Ristau

    Jabo -

    Just reporting my findings, I have no positions in any of the companies. Per the article, I commented that any slowdowns in growth would be detrimental as well. Until those are apparent and forthcoming, these will continue to have great success.

  38. dflam

    Pharm/CTL:

    CenturyLink’s shares have struggled in 2011. The stock peaked at $46.87 in late December and traded near that level at the start of the year, but the stock slid into the early spring, recovered a bit in May, but it has since sunk to end last week at $38.42 and was lower again today along with the broader market.

    Like most telecoms, CenturyLink generates strong cash flows that help to cover the interest on its nearly $7.2 billion in long-term debt. The company currently pays an annual dividend of $2.90 per share, which at current levels equates to an annual yield of 7.5%. Management said the company expects its payout ratio to be slightly less than 50%, which is among the lower rates of its peers.

    It should also be noted that CenturyLink’s free cash flow benefits from net operating losses that will shield roughly $1 billion of cash tax payments this year and next. Those NOLs are expected to run out in 2013, which would result in significantly lower free cash flow and a lower yield.

    Wall Street generally remains bullish on CenturyLink, with 14 of 22 analysts who follow the company recommending it to clients. One analyst is bearish, while the others are neutral on the name.

     CenturyLink is clearly counting on the synergies it expects to realize from its acquisition binge to boost margins. If it is being conservative in the amount of savings it can realize, as bullish analysts believe, it could outperform current guidance and expectations. It has tended to be conservative in those estimates in the past.

  39. matt1966

    Well hello!  Isn’t it nice of them to give us a ride up this morning?  When they are in crisis mode, the plays become more obvious.  But now it’s time to take it off the table.  We will NOT be closing anywhere near here, imho.

  40. Troy

    Today could actually hurt future debt deals…as politicians realize that default doesn’t scare the markets like uncle Timmy warned.  One would have thought Wall Street would have sent a message today…save our markets or else.  Perhaps they will by EOD… 

  41. deano

     Pharm
    I think both VZ and T are more diversified plays in Telco, and CTL will need to integrate Savvis into their company over the coming quarters. That said I like, in order, VZ, T, and FTR all better thank CTL at this time. All pay nice dividends as well.

  42. strether

     Phil
    Is there a SPY alternative to the SQQQ  bull call spread?

  43. Pharmboy

    Muchas gracias on CTL all!

  44. jabobeast

    David-- ia prreciate your findings even if I disagree with them. Then again, I would be much better off if I agreed with them because I am getting my ass kicked being short these MoFos!

  45. stjeanluc

    FAS Money – Out of the 25 calls at $0.60 now. A $0.61 profit in this trade! Should have pulled the trigger earlier, but lesson learned on this one! The 26 Puts are of course higher now so hopefully we get a rally later this week when they fix the US!

  46. Pharmboy

    RPTP – lookie there!  Met its primary endpoint, and being hammered.  Wait ’til things calm down, then we will make a nice spread on them.

  47. rustle123

    If we are barely down now and have been up quite a bit already, do we really get a rally if all is fixed if we never had a sell off?  Looks like many are buying in already just waiting for the announcement which makes me now think it could be sell on the news.  Hell there’s a good chance we might turn positive today without any deal so far.

  48. Phil

    Rules/Snow – Get rich and get out before you are caught.  Those are generally the "rules" these days.  

    Cali/Pharm – Sure, now they are competing with the tax-paying growers so the Government is getting serious about enforcement.  

    And what Troy said!  

    PCLN/Pharm – Hard to call with their massive Asian presence but, at $533 (earnings 8/4) they better not miss.  Too scary to sell calls though so I’d go for 5 Oct $465 puts at $14 ($7,000) and sell 4 Aug $500 puts for $12.50 ($5,000) for net $2,000 which is $4 per Oct $465 put.  The assumption is PCLN falls but not too far or goes up but not too far and the short puts expire worthless but your long puts retain more than $4 of $14 (delta .21 so a $50 move up is your leeway).  On the too far downside, you have one more long and time to roll the $35 spread so tricky but playable.  

    Totally correct 9:43 assumptions StJ.  

    DIA/Rustle – Well you could have played them off that 12,500 line but I would not chase.  Dollar is testing 74.40 line and stopping the rally now.  

    OPEN/Rustle – I agree, another one I don’t like at all but we won that battle last Q and it feels like chasing now ($75 from $115).  

    Good luck with those picks David – We’ll be your counterparty on those!  

    IMAX/Dflam – Got a big downgrade today and people are bailing hard so good time to roll the Aug $27 calls ($1.30) to the Dec $28s ($2.80) for $1.50 to set up for a longer-term trade.  Also on IMAX – some damned fool is buying the 2013 $22.50 puts for $4.90 so let’s sell 10 of those to them in the Income Portfolio for $4,900.  

  49. Jbur

    Makes me wonder how many people on the floor of the Capitol have their finger on the speed dial to their brokerage.

  50. Pharmboy

    I still think those phantom bars on SPY are in play.  I went long when we moved over the lower support (S2) and sold when we bounced off of S1 (SPY 134).  If we can trade above S1 and using JRW’s rules, I will go long again.  Whoops, now time to go short.

  51. Troy

    JRW – you in TZA?  Got flushed at 10:42 for only $0.12 and I was FULL in!  As Jabobeast would say…"Fkers"…grrr…=)

  52. joemayo

    IWM traders/  I’ve been trying to learn over the last few weeks -thanks for all of the posts.  Is there any "rule" about early market noise?  How long before a trend may start?  I tend to be a little more conservative but went  long today at 9:44 and out at 10:34  however I didn’t go short.  Thanks for any tips

  53. dflam

    Phil /IMAX Are the sale of 2013 $22.50 P in addition to existing Jan. $25 P ?

  54. Jbur

    Phil/IMAX
     I see the 2013 25 puts at about $5.00, not the 22.50′s

  55. lflantheman

    BIDU…I’ve converted the short put sale to a short strangle.  I’ve now sold a 175/140 strangle, September.   Break even are 130 and 185, with the stock now at 155.    That means the stock would have to be down 16% or up 19% by mid Sept for me to LOSE money.   This is a bet that BIDU lanquishes during the next 7 weeks rather than pops or drops.  I believe it’s a reasonable trade.   

  56. stjeanluc

    The Norwegian justice system seems a bit lenient in view of last week’s drama. Apparently that guy only risks a maximum of 21 years in jail for killing over 90 people! It’s the maximum sentence for murder and they cannot be consecutive like in the US! Apparently, 93 murders is 3 times the annual number of murders in all of Norway (31 per year)! Of course, 30 is an average year in Camden I guess! Maybe lessons to be learned on both sides!

  57. David Ristau

    Phil -

    Earnings play off of NFLX with options?

  58. angelcur

    my guess is there will be 94 murders total just after hes released

  59. angelcur

    fingers crossed

  60. asaenz

    NLY very atractive at $17.60

  61. scottmi

    Workstation/Kurtww – last week i ordered a new machine to use as my trading workstation from Puget Systems (click on the "customize" link to see options). Here is a writeup from silent pc review: Serenity i7 Sandy Bridge
    I went with the Core i7 2600K processor, and two video cards which support two monitors each (chosen to support my legacy VGA monitors, and support new DVI monitors) and maxed out the ram at 16GB.  Also chose an SSD drive. i love quiet machines!

  62. rustle123

    @Stjean
    21 years is the max but they said in this case he might get life.

  63. jcaesar

    stj /Norway – My girlfriend is Danish (justice systems are very similar) and she tells me that if they find someone to have mental health issues, they can keep them in much longer than 21 years. 

  64. rustle123

    This might be an unpopular view with you Phil, but with RIMM cutting 11% of workforce, no new products hitting anytime soon, no revolutionary products even whispered about, losing corporate accounts to AAPL, it looks more and more like a slow bleed.  Similar to Palm.  Blockbuster and Borders recently went through similar moves in their fields though RIMM is profitable for now.  Still think their best option is to sell the company.

  65. Phil

    Hypothetical/Maya – Are you saying $5M on one stock?  You can only go out to 2013 on the spreads so it’s really 18 months and, of that group, I’d have to go with GE as they are safest overall (and also liquid in long options – VERY IMPORTANT) if you are going to put your whole portfolio on a single stock.  At $19, you can buy 334,000 shares of the stock and sell 33,340 2013 $17.50 calls for $2.90 and 33,340 $15 puts for $1.17 for net $14.93/14.97.  The 334,000 shares will collect .75 in interest over 18 months for another $250,000 added to a potential gain of $858,380 if called away at $17.50 (down 7.8% from here) so $1.1M in potential profits is 22% in 18 months – not too bad when dealing with large numbers.

    SPY/Streth – This week’s $134/133 bear put spread is .40 and you can sell any kind of bullish offset like the JPMs I mentioned above or RIMM Aug $24 puts for .42 or how about IMAX Aug $23 puts for .65 to pay for 2 of the bear calls for net .15 on the 2x $1 spread and it would take another 10% drop in IMAX to worry you on the short put (rollable, of course) while a small move down in the S&P below 1,330 can give you a nice 1,233% gain. 

    Chances/Rustle – Cash is your friend right now.  Guessing is the enemy – don’t mix them up!  

  66. matt1966

    scottmi, sounds nice.  But often the noise comes from video cards.  Hopefully yours will be quiet.  I’m using the lure of new puter to get my a$$ in gear on my automated trading program.  It’s now under way.. again.  An i7 with 16G of ram will be what I go with as well.

  67. rainman

    CCJ been getting some love over the past few sessions.

  68. topher7

    BAC…    Jan 12.5 calls..      70k traded today… (60 k  within 10 minutes) hmmmm…  
    any thoughts?

  69. Troy

    HP Laptops/Retailmenot – being a very frugal buyer, I ran across this 30% HP laptop coupon code last night before I ordered a nice laptop (2nd gen I5, 6gb ram, 1gb gpu).  See below. HP also is selling Office/Acrobat combo for $129.  Felt like I stole the purchase it was so sweet…=)
    coupon code:
    NBP61449
    30% off & Free Shipping on $999+ customized HP laptop. Expires on: Unknown Coupon Code: NBP61449 Offer excludes all Envy, HP ProBook 4520s, and HP EliteBook 8440p. Offer limited to the first 1,200 coupons redeemed. 1 redemption per person or address. Not valid with other promotions, HP Academy, or HP Friends & Family. Restrictions apply. Not combinable with instant rebates.

  70. Maya1

    Phil/Hypothetical
    Thanks a lot!
    Not TOO far from my thoughts.
    However, you have the ability to ‘come up’ with answers so quickly!
    I may JUST go and do that! And buy GE stock for $5M. Then I can take a vacation for 18 months unless, the world collapses for whatever reason before then!

  71. CanuckBob

     Phil, re:  GE leap trade — why sell the 2013 $17.50 ITM call ($1.40 net premium) vs the 2013 $20.00 OTM call at $1.65 which is all premium?    

  72. kurtww

     scottmi – thanks for the link. I have a similar machine I built last year that I’m quite happy with. I see their list of video cards, but they don’t offer the one I was thinking of. I did see them selling an ATI FirePro 2460 card that runs four monitors. It only has a heatsink (no fan) so it should be quiet, unless it heats up so much the main fan spins too much.
    Does anybody have any decent 22-24" monitor recommendations? There must be quite a few people here with multi-monitor setups… or am I deluding myself that I need it? All I know is I can’t wait to get back home to more screen than my 17" Macbook Pro…

  73. lflantheman

    DIS chart and action contiues to look good. 

  74. strether

     Phil
    Thanks
    Let’s hope is works like last week’s SPY 128/131  bull call spread, which was amazing.
    Strether

  75. shadowfax

    matt new puter
    It is important to pay attention to RAM speed. 16 G at 1033 is not as good as 12 G at 1600. Do the simple math, also systems run best with 6 12 or 24 Gig, not sure why. 12 at 1600 ran good on mine but to run CNBC live it sometimes stopped, maybe you can get a faster line, bumped mine to 24G, now only operater error. Just trying to help.

  76. nicha

    Troy/HP – the coupon you provided is expired. I am in need of a laptop.

  77. scottmi

    Video noise/Matt – this is the card – ASUS GeForce 210 Silent

  78. kustomz

    Speaking of GE
     
    BEIJING – GE Healthcare, a maker of diagnostic imaging equipment, said Monday it is moving its X-ray global headquarters from the United States to Beijing as it seeks to tap China and other emerging markets.
    The General Electric Co. unit is the first business of the industrial and financial giant to relocate to China.
    http://old.news.yahoo.com/s/ap/20110725/ap_on_bi_ge/as_china_general_electric

  79. drumkeerin

    phil-down over 50 percent on SQQQ Aug 24-26 call spread at .60. Sold performing offsets on BTU puts,  But not sure where to roll the long call for now if at all.  I,’m  in the call at 1.79 and the caller at 1.19. Thanks.

  80. yodi

    CanuckBob
    My two cents on GE leap selling the 17.5 c gives you cash on hand 2.94 as the Jan 13 20 c gives you only 1.70 in cash which makes a lot of difference in buying the stock for a bigger discount on the 5million investment

  81. shadowfax

    nicha
    Laptop, did you try Tiger Direst? Clearer catalog and phone help. Then you can price check Newegg but they sometimes don’t have the same one. Never Best Buy!

  82. zeroxzero

     Rain:  I’ve always liked CCJ, but the spread of Fukushima cesium, which is very bad as reported — and you know that 3/4 of the truth is being hidden "behind the curtain" in typical Japanese fashion — is putting me off for now.  A dog that will have it’s day, however.

  83. Phil

    Long/short/Pharm – Just watch that Dollar on the 74.40 line.  

    IMAX/Dflam – Yes, they are just too good to pass up.  On a bounce, we’ll get off the Jans but that is an amazing deal!  

    IMAX/Jbur – If it doesn’t fill at our price, then don’t bother as we already have one set sold.  All we can do is ask when there’s an opportunity but, if we don’t get our price, we need to learn to walk away and look for the next really good sale.  

    BIDU/Iflan – It’s a good spread and, of course, you can always roll the losing side.  

    Justice/StJ – Hmm, I can think of 90 people I’d like to invite to Norway that being the case…  8-)  Actually, isn’t it interesting in Norway that no one seems to care that this is yet another horror that would not have been possible without assault weapons.  

    NFLX/David – That one is way too scary for me David and no way on earth would I want to play them bullish.  My favorite play on them, longer term, is the Jan $270/210 bear put spread at $20, selling the $325 calls for $21 for a net $1 credit on the $60 spread.  The 2013 $400 calls are $22.50 so the bet is really a short $1 call that NFLX doesn’t make $400 in 18 months (up 41%) with the bonus kicker of a 6,100% gain if it turns out they aren’t as good as people think and they drop 30% instead.  

    That trade can be played from the other side by selling Aug $250 puts against the long spread for $4.80 on the premise that you can make $20 or more of monthly sales by Jan.  If the spread goes in the money, your long play (net $15.20) is $20 in the money already so you don’t get in trouble until NFLX is below $225 but it’s more work, of course.  

    NLY/Asaenz – I’d wait for them to get back over the 50 dma at $17.80 although selling the 2013 $17.50 puts for $3.25 is certainly attractive.  

    RIMM/Rustle – Clearly going through a rough patch but not as dead as they are being priced with a p/e of 4.25 (and they have beat 4 consecutive earnings) and $2Bn in cash out of a $14Bn valuation.  

    Noise/Scott, Matt – My 27" IMac is dead silent.  Wish I could say the same about my Dell…

    CCJ/Rain – Long-term they are great deal.

    BAC/Topher – Still scary but worth a toss at $10.  You can sell 2013 $10 puts and calls for $3.70 for net $6.30/8.15 with a very nice 58% upside if they turn out to be too big to fail and hold $10.  You can always hedge with FAZ if you get worried because, if BAC goes down, they won’t be the only ones… 

    Good coupon Troy.  

    GE/Maya – Not a bad plan, just set your alarm for a 10% drop in the averages, otherwise, not much to worry about (as long as that’s not your only $5M, of course).  

    GE/Canuck – Because you get $1.30 more PROTECTION and we don’t KNOW for sure that GE will go up.  When you can make 22% playing conservatively, there is no need to go for another 10% by taking a risk.  

    Europe kind of strange into the close with FTSE down 0.2%, DAX up 0.3% at day’s high and CAC down 0.7% at day’s low.  

  84. CanuckBob

    Ok – reduce initial outlay and that in turn yields higher % return — makes sense.  Thanks.

  85. Troy

    nicha/coupon - it worked last night at 2am EST when I ordered a hp pavilion g6t series, upgrading everything to the fastest hardware options, and adding enough software, etc to get the price above $1000 before using the 30% discount.

  86. rustle123

    RIMM/Phil
     
    But what’s the proper P/E on a negative growth rate and if they do start losing money, that cash will be disappearing quickly.  That’s why now is the time they should start looking for buyers.  Medco Health just did the same as they were going to lose more contracts this year.

  87. shadowfax

    Phil
    Dell noise, quiet fans are dirt cheap and super simple to change, 4 screws and a plug.

  88. dclark41

    iflantheman
    Are you looking to sell your DIS calls before earnings or once they have been reported? Thanks

  89. Troy

    nicha/laptop – shadow is right, newegg has some of the best deals, such as this HP mid grade laptop for $485 …although no upgraded software is included.  The acrobat x was going to cost me $300 alone, so it made more "cents" to config at HP as they basically give away the software when ordering direct.

  90. Phil

    DIS/Iflan – Very good but not cheap.  

    GE/Kustomz – I noticed this weekend that GE Healthcare sponsors "House" on TV.  Thought that was interesting.  I guess all these medical shows lead to hypochondria which drums up a little extra business…  

    SQQQ/Drum – The key to taking action when you are down 50% is to be able to roll back a month.  That’s not really there now as you are down a lot more but the Aug $24 puts are still .60 so you can take advantage of the roll down to the $22 calls (now $1.05) for .45 and turn it into a $4 spread.   It’s a more aggressively bearish move so make sure you have something worth protecting and, of course, if that starts falling, you have an out to the Sept $21 calls (now $2.20) for another $1.20, which can be offset by the sale of the Sept somethings for $1 (currently the $25s).  

    Dollar bounced off 74.30 and markets did not like that one bit.  Especially oil, back to $99!  

    RIMM/Rustle – You are acting like they have no sales.  Cash flow was POSITIVE $250M last year AFTER buying back $2Bn worth of stock.  They put another $1Bn into CapEx with $1.3Bn allocated to R&D – I guess if you think RIMM is totally incompetent and incapable of building a phone or tablet people will want then you should stay away from them but, as they’ve been in the top 3 for the past 20 years – I’m willing to give them a quarter or two’s benefit of the doubt.  

    DELL/Shadow – No worries, I got a whole new computer instead.  Just waiting for Tina to get it all set up…

  91. tuscadog

    Phil , Kustomz  GE Imaging HQ to China.   This makes me sick.  Immelt is advisor to Obama and he’s moving high tech and proprietary know how to China, probably to take advantage of future ‘tax amnesties which he’ll ‘suggest’ as job creators to Obama.  Obama should dismiss him now and use the propaganda value.  But then he’s surrounded by GOP advisors so that ain’t gonna happen.  America is so fu’d.

  92. bobhu

    scottmi/Workstation,  I envy you, I can’t spend over $2000 for a computer.  I got a used Dell XPS 630i with Dual Dell 2500FPW monitors over weekend.  Intel core 2 Quad CPU with 4GB, great video card, it’s great PC for trading/gaming.  Just paid $325 for it.  Got to LOVE it.   Good luck with your new baby(workstation).

  93. David Ristau

    Phil -

    Any options ideas for shorting oil?

  94. Phil

    10:00 AM On the hour: Dow -0.74%. 10-yr -0.29%. Euro -0.07% vs. dollar. Crude -0.82% to $99.05. Gold +0.91% to $1616.10.

    11:00 AM On the hour: Dow -0.55%. 10-yr +0.03%. Euro -0.14% vs. dollar. Crude -0.63% to $99.24. Gold +0.82% to $1614.60

    12:00 PM On the hour: Dow -0.42%. 10-yr -0.04%. Euro flat vs. dollar. Crude -0.87% to $99.00. Gold +0.85% to $1615.10.

    July Texas Manufacturing Outlook: Business Activity Index -2.0 vs. previous -17.5. Mfg. Production Index 10.8 vs. previous 5.6. New Orders 16.0 vs. previous 6.4. Shipments 7.8 vs. previous 0.4. - Better, I guess (vs. last very bad report)

    Macroeconomic Advisers says a delay in raising the debt ceiling would result in recession: "This fiscally induced ‘shock’… could be partially offset by an expected monetary easing, but it would almost certainly be too late now for the Fed to prevent an initial slowing of growth and rise in the unemployment rate… Sometimes in a game of chicken, people get injured – seriously.”

    House Speaker John Boehner blogs that Pres. Obama "is trying to set up a no-win situation for taxpayers: either he gets his $2.4T blank check, or America defaults." Sen. Harry Reid says hedoesn’t want a short-term deal that could cause a rating downgrade. The Washington circus is becoming "a global embarrassment," Art Cashin says.

    "Why can’t we do what {Turkey in 2001 and 2008} has done," asked Greek PM Papandreou of his parliament. Actually, Greece is – accepting large bailout loans, cutting spending, and seeking union concessions. The one difference – Turkey lowered interest rates and devalued its currency – options unavailable to Greece.

    Moody’s places 8 Greek banks on review for possible downgrade in the wake of its conviction of the near certainty the country’s paper will soon be placed in default. National Bank of Greece NBG -4.1%

    Following a sharp rally last week, Italian bonds are tumbling again today, the 10 year yield rising 20 bps to 5.6%. The Spanish 10 year is 19 bps higher at 5.96%. The Milan and Madrid bourses are underperforming the rest of Europe. EWI -1.7%EWP -2.1%. Stoxx 50 -0.7%.

    Maybe having squeezed as much as possible out of Madrid’s budget, Spanish finmin Salgado turns her sights on the regional governments that control about 1/3 of Spain’s public spending. Her main tool – withholding financing from regions that fail to hit budget targets – has had limited effect. 

    "Sell your Mortgage REITS immediately," writes Todd Johnson, who likes the sector, but is worried they could get hit hard if the debt ceiling issue is not resolved. A downgrade of government paper could force collateral calls, reduced leverage, and funding issuesAGNC -2.7%NLY -2.2%HCS -0.3%.

    Hospital shares are weak in early trading, after HCA’s (HCA -14%) disappointing Q2 results serve as a "harbinger of bad things to come" for the sector this quarter, a Jefferies note says. Hospitals continue to struggle, as Americans who lost their jobs and health insurance avoid all but the most urgent medical care. Also:CYH -4.3%THC -4%HMA -3.4%. - No, this won’t bit us in the ass down the road…

    The NAND flash memory market has grown in recent years on the back of smartphone, tablet, and solid-state drive demand. iSuppli sees gaming consoles as another growth driver: the average NAND density for home consoles is expected to grow 42% this year, and another 279% by 2015. NAND giant Sandisk (SNDKshot higher on Friday following its Q2 earnings report

    Nvidia (NVDA) is down 2.6% after UBS’ Uche Orji cut his PT to $16.50 from $20, while reiterating a Hold. Orji believes AMD‘sQ2 graphics weakness doesn’t bode well for Nvidia’s results (due next month), and also sees strong competition for the company’s Tegrasmartphone and tablet processors from Texas Instruments (TXN) and Qualcomm (QCOM).

    Hollysys Automation Technologies (HOLI -21%) tanks following Saturday’s fatal collision between two high-speed trains in China. The company – a leading provider of high-speed rail signaling controls in China - has since confirmed its systems were functioning properly at the time of the crash. Roth downgrades the shares to neutral on concerns over the industry’s future. – Short Jan $7.50 puts at $2.40 are worth a toss for a net $5.10 entry.

  95. jerconn

    Anybody watching AAPL?  Almost back to $400 between yesterday and today.  Nice to have a few AAPL calls on hand…

  96. Savi

    Good Afternoon
    Phil--I have the following bcs that need adjustment
    EDZ  long aug 18 call @ 2.00 now .85      short aug 22 call @ .80 now .20     short aug 17 put @1.10 now 1.05
    SCO long aug 45 c @ 5.25 now 2.4   short aug 50 c @ 3.00 now 1.00   and   short aug 45 put @ 2.05 now 2.80
    Thx

  97. Savi

    Phil--also I missed buying back the Fas money call @ .61 now .72—--wait or buy it back?
    Thx

  98. pahurik

    Pharm, what you think: Buy ANX 3,2 sell sept2,5C 1,2 +19% if stock fall 2,5

  99. enni_82

    Phil,
    With CIM falling from 4+ is it starting to look attractive for a buy write? Thanks!

  100. matt1966

    Everyone enjoying our market today.  Once again, they found an even bigger pair of training wheels to slap on it-
     
    Phil, I don’t get involved in oil trades.  However, given the huge slug building up in December contracts that you often mention.. and the impending position limits from the CFTC this fall (not a done deal and maybe a later phase in.. however) is there a simple, low cost, high reward play we could make over that period of time or slightly longer if need be?

  101. shadowfax

    Phil
    Have you noticed the hoopla about starting over in medical care, the sqeeze won’t bite them in the ass down the road!

  102. kustomz

    Tusca all you can do is cheer for GE as an investor, surely by now you’ve accepted the fact this country has been sold to the corporations and defense contractors. Asia will be a magnet for business and money for the foreseeable future.
    Free trade killed my business, I got over being angry/disgusted. OK…Back to raping and pillaging whats left.

  103. Troy

    Phil/Doug Kass on CNBC -  said rally into debt ceiling "fix", sell on news as austerity will hurt the markets.  Timing would line up with our $600 August auctions…perhaps we can get to 1386 before 1310 again?

  104. JRW III

    Good afternoon,

     

    IWM    82.51,  82.75,  83.04,  83.39,  83.71,  84.21,  84.48,  84.86  and  85.60

    Sorry I’m late, a little under the weather today !! And I just got a sell signal, if they can’t breakout IWM 83.71, maybe……….

  105. shadowfax

    IWM needs to get past 83.74 fib line from Friday then next fib, resistance, and confuence line at 83.94 to actually get to green today. 83.40 ish brings many lines together on the downside to 82.96 and 82.29. This is my best JRW stand in at 1:00.

  106. jomptien

    Phil,Pharm/SNY,
    What is your take on SNY? I bought them at 31 and sold the Sept 30 puts and Sept 35 calls, since rolling both to Dec 30 puts and 35 calls. They have the March options out now and thinking of rolling to the March 35 calls. Looks like it may be coming into resistance though. Thanks

  107. shadowfax

    I tried to make my multi program bridged work this weekend, FAILED!! again

  108. Phil

    Oil/David – I like the SCO Set $43/47 bull call spread at $2.05, selling the XOM Jan $75 puts for $2 for a free crack at a $4 spread with 7,900% upside if SCO is back at $47 which is around oil $92.50 and, of course, if oil doesn’t get below $92.50, those XOM short puts will be looking good.  

    EDZ/Savi – The $18s are .85 and can be rolled to the Sept $17 calls for $1  and then the key is to try to sell something else for $1 (currently Sept $20s) to keep your net $1.20 on that leg.  The Aug $17 puts are all premium so not worth worrying about but keep your eye on the roll to the Sept $16 puts for about even and don’t let it get away.  SCO is similar as the Aug $45s can be rolled out to the Sept $43s for $2 so not bad if you still believe and then you sell something else for $2 (currently the $49 calls are $2.25) to keep the cost down and it’s the same deal on the puts, which are 75% premium so you can wait those out with an eye on the roll to the Sept $42 puts (now $2.40) for about even as the premium washes down (but only if you think your Augs are in trouble, of course). 

    FAS/Savi – Gotta have better discipline than that if you are going to play the weeklies.  Now they are .83 so getting worse and worse but at least the puts are dropping to match.  If .50 was a good idea and .60 was a stop – why do you think .70 was going to be "hold on" or something other than sell before we get to .83?  Interestingly, now that you’ve blown 60% it is no longer a good idea to take it off but now you are just back to the original spread, more or less, with net $2 between the put and the call and you hope we finish somewhere in between so you can make $1.  That’s why taking a .50 or better gain off the table was such a no-brainer earlier – your best case was to make .50 on one side from the start so, when it’s offered to you on Monday instead of Friday, only a fool wouldn’t take that deal, right?  

    CIM/Enni – The definition of chimera is "foolish fantasy", this is not something that gives me faith in the management because they either don’t know (stupid, poor research) or don’t care – neither of which are qualities I look for in my managers.   Also, I’m short on BXP and they are about 1,000,000,000,000,000 times better capitalized and better experienced than CIM, who have a grand total of $16M in cash and $4Bn in debt vs. BXP’s $1Bn cash and $8Bn debt.  This does not make CIM seem like a relative bargain to me.  

    Oil/Matt – The above SCO play or you can widen it to (and I think we already did this one) the Kam $43/48 bull call spread at $3, selling the XOM 2013 $65 puts for $3.25 for a .25 credit on the $5 spread and your worst case is you own XOM at net $59.75 (29% off), which is about as low as they’ve been in 3 years (and not for long last summer).  

    Ass biting/Shadow – When people do start getting either jobs or health care, there will be a huge bubble in procedures that have been put off for 2 years.  They will then be able to use that statistic to panic people into thinking that the cost of Obama Care is skyrocketing out of control – fun game…

     Return of Mass Layoffs a Grim Sign for U.S. Workers (Yahoo Finance)

    Austerity/Troy – I agree with that.  You can’t cut $400Bn of spending without 8M people losing $50,000 jobs.  How people can think otherwise is beyond me.  

    01:00 PM On the hour: Dow -0.29%. 10-yr +0.04%. Euro +0.11%vs. dollar. Crude -0.61% to $99.26. Gold +0.66% to $1612.10.

    Prepare for a rough ride, US warns world stock markets (The Telegraph)

    Wall Street Set to Act on Default, But How? (WSJ)

    Remember Gramm-Rudman? Jim Rogers does, and he says that was supposed to end deficit spending a generation ago … how did that work out? Calling current goings-on a political "charade," Rogers expects no more success this time around. Listen on why he’s short Treasuries, but long the dollar.

    BGR reports AT&T (T) is informing employees it expects a surge in store traffic in September, suggesting this is when Apple’s (AAPL) next iPhone will be introduced. During its FQ3 CC, Apple talked of a "future product transition" possibly affecting FQ4 sales, which was taken by many to mean a new iPhone will soon arrive.

    China Property loans halted in 2nd and 3rd-tier cities (China Daily)

    Three lunchtime reads:
    1) Why tech stocks deserve to be cheaper than industrials
    2) Meredith Whitney wins if default meaning is lost
    3) The activist ratings agencies and their poor public sector predictions 

    Click to enlarge
    Renewable Energy - Infographic

    Source:
    Carrington College’s Renewable Energy Degree

  109. shadowfax

    JRW
    I would not have posted if I knew you were coming to the party. We sure agree at the 83.70ish level, noticed you added 82.59, I figured if we drop that far we keep going, I also got a sell!

  110. tuscadog

    Phil / 8mm jobs   Any immediate austerity will ensure a Ddip.  Surely Obama’s advisors know this. Surely he can’t accept any deal that cuts pre Nov 2012?

  111. scottmi

    CSCO/Phil – i’ve been riding and rolling and saving some plays here for a while (arg). most of it is pretty tidy now, but  i have a few Oct $19 calls at cost $1.06, now .15.  yes late on these, but i just haven’t seen doubling on these as the way to go and had been hopefull CSCO would come back more. but might as well roll to something to save the 15 cents that is left…   or do you think give it more time? i have no near term faith in this dog, and this weekend heard Ralph Acampora say he likes blue chip tech, but NOT Cisco…

  112. Savi

    Phil--Thx—and yes only a fool!!!

  113. Troy

    Phil - tick tock tick tock tick tock
    JRW – wish you could have held my hand (in a non-gay way, of course!) on TZA this morning…got punked at 10:42 on zero volume.  Embarrassing!  Agreed on 83.71…we just fell out of the acending channel…yet not going to trade on 12k/min volume…

  114. lol730

    matt/oil -  don’t forget, that when such huge money is involved you can rule nothing.
    I’m not going to be surprised if some med-size war starts in Middle East in October-November.

  115. tuscadog

    JRW /  TZA  Are you 1/3 in now?

  116. nicha

     Troy/Shadowfax – thanks for the computer advice. I usually buy mine direct or thru amazon. Will check out tigerdirect and newegg.

  117. nicha

    Iflan – thanks for the BIDU spread. I followed you in on the strangle.

  118. shadowfax

    nicha
    Hope we help!

  119. Maya1

    AAPL/$400
    Just sold Aug$420 covered calls for $3.00

  120. angelcur

    cim/annaly manages cim i think..if thats the case there is no better team out there than mike farrell and wellington st clair…maybe i got the wrong manager here..farrell is a legend

  121. nicha

    Iflan – oh, and thanks for the Oct 390/400 AAPL spread.

  122. JRW III

    tuscadog / TZA

    1/3 in  at $32.73 !!

  123. chuckerd

    Phil,
    Just saw your comment:  Austerity/Troy – I agree with that. You can’t cut $400Bn of spending without 8M people losing $50,000 jobs. How people can think otherwise is beyond me.
     
    While the math certainly would support your comment, couldn’t we flip that around and say that the $770B stimulus package (government spending) should have created 15.85M jobs at $50k - even if for just one year?  We know that the stimulus did no such thing, so isn’t it fair to say it’s definitely not as linear as government spending cuts = lost job wages?

  124. JRW III

    Fully in TZA, looking for IWM 83.39 or 83.05ish !!

  125. Troy

    Breaking NEws – NFL players agree to deal…my winter bunk has been saved!

  126. tuscadog

    JRW / TZA  Good, I’m learning, in at $32.74!

  127. kustomz

    chuckerd, the stimulus money could have gone into creating jobs but, it didnt. Spending cuts will focus on job cuts.

  128. lflantheman

    nicha….that AAPL spread is some sweet, eh?  You can pretty much forget about it and watch your money double by mid October.  I think that BIDU strangle will work out well.   I love short strangles.  Essentially two plays for single margin, rapid contraction of premium, and good when the market is not moving too much in either direction. 

  129. matt1966

    Phil / Oil:  Very cool play.  That’s what I’m talking about folks..  one of Phil’s strengths is coming up with plays like the SCO one above.  For a mere nickel plus margin, you have a 7900% upside on oil falling below $92.50 by January and a worst case of owning XOM at its 3 yr low.  The SCO calls are for January right?  Also, any idea what the margin requirement is for someone without PM?  Thanks.  This could be my first option play..

  130. cslanson2

     Phil,
    Perhaps you didn’t make the connection on CIM but it is managed by the same group that runs NLY.  CIM was started several years ago by Michael A.J. Farrell who I believe is the smartest guy in town on the subject of Mortgage REITS. Prior to the 2008 Great Recession CIM was intended to trade & hold non-Agency paper which as you can imagine didn’t work out too well.
    During the past year they have been steadily rolling their portfolio into Agency paper and I think they are now at approximately 60%. The remaining 40% as I understand it is mortgage paper that is cherry picked from residential mortgages on high end homes in the North East and not the infamous crap touted on Wall Street during the bubble.
    Disclosure, I’m long CIM

  131. matt1966

    Troy / Hold Hand:  lol.  Next time, invite Nicha along cuz as Justin Timberlake tries to assert, it ain’t gay if it’s a 3 way!

  132. kustomz

    Look at the $!!…dont know whether to laugh or cry

    CC has declined in both May and June..will July make 3 in a row
    http://blogs.forbes.com/sageworks/2011/07/25/slightly-decreasing-confidence-all-around/

  133. angelcur

    right cslanson thats what i posted half and hour ago

  134. Troy

    Matt/Hand Holding – Can I invite Justin Beiber instead?

  135. russellb73

    Phil
    How about buying puts for IWM, dollar is just over $74.0, no debt deal news, probably still stand off tomorrow?  So guessing bearish.  Goes along with JRW idea for TZA? (afraid to use leveraged etf’s like TZA).  Tight stop limits…hope it works this time.
     
    IWM JUL 29 2011 83.00 PUT at 0.69
     
    Has anyone else had a problem with Fidelity allowing stop loss to not work?  Lost a lot of money today when I was away from stock screen……lost  extra 10% with calls for GLD until I noticed and manually sold.

  136. lolobear

    Lflan – what’s the apple oct 390/400 call spread? Thanks. 

  137. Savi

    Does anyone have the original AGNC buy/write trade   that was put on in the income portfolio?
    Thx

  138. joemayo

    IWM traders/  I’ve been trying to learn over the last few weeks -thanks for all of the posts.  Is there any "rule" about early market noise?  How long before a trend may start?  I tend to be a little more conservative but went  long today at 9:44 and out at 10:34  however I didn’t go short.  Thanks for any tips

  139. kustomz

    Phil any thoughts on going short XRT?

  140. lflantheman

    lolobear…..buy  October AAPL 390 call/sell AAPL October 400 call, presently 5.60 for a payout of 10.00 at October expiration if AAPL above 400.  ( got it last week for 4.95, but it’s still a good trade.)

  141. matt1966

    Troy/Bieber:  she definately qualifies.
     
    russellb, was it a stop or stop limit?  If a stop limit and it was set to close to the stop they will often blow past the limit to get you to chase.. or simply compound your loss.  Fun, huh?  Tight stops can only be used mentally.  If you set a hard one, they will take it out.  Next to screwing people on market orders, taking out stops are the bots bread and butter.

  142. Phil

    SNY/Jomp – I like them with solid earnings and a 3.3% dividend.  I’d wait until the debt deal is "fixed" before adding risk though.  

    Deals/Tusca – At this point, who knows.  They are all clearly insane up there, playing chicken with the Global economy…

    CSCO/Scott – Doubling out of the money puts with no time left is not usually the way to go.   If you have no faith then it’s hard to construct a trade that works because it would depend on your willingness to hold on but you can sell the Oct $16s for $1.05 to get your money back and buy the 2013 $15 calls for $2.90 and sell the 2013 $15 puts for $1.80 for net $1.10 on the $1 spread to the Oct $16s with plenty of time to roll and, if CSCO does take off, you have the Oct $19s as a backstop.  So, cash out of pocket is .05 on this trade and, if CSCO does not do well short term, you will end up with a very cheap 2013 put and call combo and, of course, you can always roll those Oct $16s to the 2013 $20s (now $1.03) if you watch the roll and do it for no more than .50 (in case CSCO breaks sharply higher).  The next deltas are off by just .26 so it would take a pretty major move in CSCO (about $2 to $18.25) before that roll gets uncomfortable. 

    Fool you once Savi and you get a pass but not twice…  ;-)

    Securities/Troy – That’s a lot.  

    $99.50 AGAIN on oil – they are loving that number.  One more short at the NYMEX close (2:35) on /CL should be fun.  

    Stimulus/Chuck – It probably would have if they would have put the money into things other than bank vaults.  Obviously it matters a great deal WHAT you do with the money but when you cut spending programs at the ground level – you are taking that money out of circulation where it is most likely to be spent.  Surely that’s not an economic lesson you need, right?  If I give $1Bn to a bank and they lever that into $8Bn and bid up the price of 90Mb of oil a day from $40 (before QE1) to $100 per barrel (up $5.4Bn per day) who is it employing?  The same oil is being produced, just for more money.  No jobs are created and, in fact, over the course of a year, $60 per barrel per day takes $2Tn out of the pockets of consumers and out of the non-energy part of the GDP again, creating no new energy jobs but forcing $2Tn worth of cutbacks from the rest of the companies (not to mention their own increased fuel costs).   THAT is why misdirecting stimulus does far more harm than good.  

    On the other hand, give $1Bn to a solar company so they can install $40,000 solar systems on the roofs of 25,000 homes to eliminate their $500 monthly utility bills does what?  If a 5-man team can install one roof a week that’s 5,000 jobs created in a year and let’s say they get paid $50,000 for $162M that will be spent locally (after $87M is returned to the government in year one, an 8.7% ROI) and go through the economy to create another $80M worth of jobs at least (1,600) not to mention the jobs created by buying $750M worth of supplies (especially if we buy American) so let’s say 1/3 of that is labor and that’s another 5,000 jobs and another $87M back to the government and now the ROI is 17.4% and we’re not even counting the taxes the panel makers will pay.  Once all this is done, we’ve put $1Bn into the local community, created about 13,000 jobs AND 25,000 families will save $6,000 a year on their electric bills for another $160M PER YEAR in annual savings and THAT money will flow into the local community and create another 3,200 – 5,000 jobs so the initial $1Bn invested in creating 13,000 local jobs will allow those families to put another $3.2Bn into the local community over the next 20 years, allowing a large amount of those jobs to be sustained and, at 17% a year, the government recoups their investment in 6 years or less.  See the difference?  

    Get those NFL negotiators over to DC pronto!  

    Oh no – more political nonsense on the way.  Time to get out of futures longs and get ready to go short.  QQQ Aug $58 puts at .63 are a fun way to play – 20 in the $25KP with a stop at .50

  143. escohen5

    Phil/WFR — On the Income Portfolio, I see that those 50 short WFR Aug 8s are now well in the money (stock at $8.34).  I’m a little fuzzy on when to roll, in this sort of situation.

  144. etradingsignals

    JRW or Shadawfax: Can some explain to me JRW’s strategy (or point to a appropriate blog)? What are the stop levels for these trades?
    Thanks

  145. Troy

    In TZA at 32.87!

  146. Troy

    Out for 0.15…no greed here!

  147. Troy

    Scary the markets are NOT falling faster!

  148. gmarts

    Reid and Shumer whining, posturing, and threatening the markets …..  more of the same BS.  Politics uber alles! Gawd I’m sick of this shiite.

  149. Troy

    Phil/$1T war savings - that doesn’t account for the fact that our war machine creates positive GDP…shut it down, and not only have we lost our consumerism economy, but our war economy also.  Don’t see it happening…we are war…

  150. angelcur

      schumer…just said if they refuse our plan they want a default….hahahaha..wow..thres osmething about him bad hair and bad teeth…and his voice..oy gevalt

  151. JRW III

    etradingsignals,

    Never use stops on DT’s !! (the bots will take you out)

    This may also be helpful; it’s not in the main post !!

    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

     

  152. angelcur

    i think we WANT a default..then tarp replay..you see benzingas pis of the crew around a conferenace table with barack/

  153. shadowfax

    etradingsignals
    Yesterday JRW gave the link to his PP system with a nice addition to setting up the 3 minute chart, check yesterday’s blog in yellow.

  154. gmarts

    The media needs to refuse to give the politicos a camera until they do their jobs and carve out a deal.

  155. russellb73

    Mat1966
    Yes stop limit……is this a regular thing really??  Damn that is iritating…have to watch like a hawk I guess. 
    Phil
    Why going short via QQQ puts vs IWM??  Guess because QQQ has been leading up so much vs. other index and so expect it to mean revert down? 

  156. Phil

    SCO/Matt – Yes Jan and thanks!  Margin in short XOM 2013 $60s should be about $10 as it’s a big cap and they are well out of the money.  

    CIM/CSL – I did not know that.  Still don’t like the name and I’m surprised at them for choosing it.  NLY has $82Bn in cash and just $65Bn in debt, so we’re not comparing apples to apples here.  Let me know when they get over $5 and I might get interested but, right now, WAY too scary, no matter who is running them.  

    Dollar mashed down to 74.20 didn’t help – seems to have masked some selling this afternoon but that’s about it.  

    Thanks Kustomz:  

    Gallup's Economic Confidence and Sageworks' Retail Data

    Good 2:16 call on IWM puts Russell!  

    AGNC/Savi – I think it’s in the original Income Portfolio post under the Portfolio Tab above.  

    Noise/Joe – I wouldn’t take anything that happens before 10am very seriously.  The last half hour, the futures and the first half hour of the next day are generally the most ridiculously manipulated – fine if you like to play that but it has little do do with any sort of market fundamentals.  If you are trying to be conservative – better off playing the middle of the day or longer-term.  

    XRT/Kustomz – You would think that would be a no-brainer, right?  I like that you can sell the Sept $55 calls for $1.70 and you can match that with the $57/53 bear put spread at $2 for net .30 on the $4 spread that’s $2.50 in the money to start (up 700%). 

    Notice CNBC cut away from the Q&A session – God forbid we should hear what the Dems have to say…

  157. etradingsignals

    Thanks JRW & Shadowfax!

  158. jcaesar

    I love it.  The debt limit was raised seven times consecutively during the Bush administration and no complaints from the Repubs.
    Now the Democrats present a deal with NO tax increases (unbelievable to me), and the GOP just won’t take it.  And how is it that the Democrats are viewed as intransigent (at least by some)?  No this isn’t Even Steven.  The GOP (and its supporters) have absolutely lost it.  We’ve got to call a spade a spade. 

  159. petronick

    Phil/stjeanluc
    Where can I find out essence of FAS Money weekly and montly strategy and how to track the trades?

  160. Phil

    WFR/Esco – I’ll look at that portfolio later and update.  

    War/Troy – The problem is it’s not an efficient creation of jobs.  A $3,000 hammer does not create more jobs than a $3 hammer – just more profits for some rich people who pull the appropriations strings.  Do you believe a $200M fighter plane generates more jobs than a $200M 787?  Which one provides a long-term service for the economy?  Which one, in turn, generates more jobs and more revenues?  Come on, don’t be silly, just like any business, Government money must be used efficiently.  Hiring a teacher educates 20 future workers per year, hiring a military contractor costs an army job (at about 200% more pay) and leads to the need for more $3,000 hammers.  

    QQQ/Russell – That’s right, short the leader.  Plus, if we don’t get a drop into the close like we did on Friday, we still have those HIlarious NFLX earnings tonight…  

    Spades/JC – I have choicer words for the Reps at this point…  

    FAS/Petro – That is StJ’s baby.  I said from the outset I was not going to track it as the last FAS trade drove me nuts.  

  161. Troy

    It would seem it takes a few minutes to re-program all those bots!  3pm usual buy program was a rare sell program instead!  Debtagedon…weeeeeeee

  162. yodi

    petronick
    FAS some good advice don’t tackle it

  163. rehat

    Unbelievable. This guy actually has people who follow him. If I was Norwegian I would skin Beck. Heck I would do it since I am human. What an insult to murdered children.

    http://www.telegraph.co.uk/news/worldnews/europe/norway/8660986/Glenn-Beck-compares-Norways-dead-teenagers-to-Hitler-youth.html

  164. jcaesar

    Phil  – Oh I had choicer words, believe me.  Just trying to keep things civil!  :-)

  165. JRW III

    IWM 83.05 !!!  Smiley

  166. kurtww

     JRW – that was an awesome call at 1:39. I got faked out too quick with only .20, left .50 on the table so far. Stuck right at 83.05 at the moment. Beautiful call!

  167. matt1966

    HAHA!  Totally selling into the stick-   Luv it!

  168. Troy

    JRW – at your 83 limit…selling half?

  169. Phil

    02:00 PM On the hour: Dow -0.43%. 10-yr -0.04%. Euro +0.15% vs. dollar. Crude -0.58% to $99.29. Gold +0.71% to $1612.90.

    03:00 PM On the hour: Dow -0.51%. 10-yr -0.18%. Euro +0.2% vs. dollar. Crude -0.74% to $99.13. Gold +0.72% to $1613.10.

    It just doesn’t matter:  Ed Yardeni’s downgrade of U.S. debt hardly matters, he admits, but if the “plague on both our Houses of Congress” isn’t cured, he expects the ratings agencies that really matter – Moody’s, S&P and Fitch – will follow suit. So he’s placing his trust in gold, which "may be rapidly converging to $2,516, the inflation-adjusted equivalent of the June 1980 record high." 

    It just doesn’t matter:  The Aug. 2 deadline for a deal to raise the debt ceiling may be more flexible than previously believed, a Barclays report suggests, as tax receipt inflows since July 14 have been stronger than expected, meaning that the date on which the Treasury will run out of cash to pay its obligations might be around Aug. 10 instead.

    It just doesn’t matter:  One of the more prescient bond bulls of recent years, Lacy Hunt is unconcerned about a U.S. ratings downgrade, saying the economy is too weak to withstand any prolonged increase in interest rates. Long-term, the biggest risk to Treasuries is sharply higher rates causing a "death spiral" in government borrowing costs, but that’s not today’s worry.

    "The main effect (of Greece’s new bailout plan) was to extend the expected date of certain default from about 18 months away … to closer to 2 years," writes John Hussman. Math doesn’t lie and the numbers facing Greece are overwhelming. Greece may be small potatoes, but Italy – with GDP 2/3 that of Germany – will be a different story.

    Italy follows Austria in canceling its August auction for medium and long-term bonds, suddenly deciding they just don’t need all that money. "The real reason is that the spreads are prohibitively high," Zero Hedge writes. "We fail to see how this can possibly result in anything than another loss of credibility in the eurozone rescue package."

    Pushin’ from the Gang of 12:  Small-cap stocks have been punished too harshly in the first half of the year, and strong fundamentals and increased M&A activity in the space are ready to reverse the trend, JPMorgan says. Small-cap fund outflows have totaled $5.5B YTD, vs. inflows in mid-caps ($6.2B) and large-caps ($9.6B). Last week, Credit Suisse forecast a similar uptick in small-caps.

    The reality is that business INSIDE the USA sucks:  A third of the way through Q2 reporting season, earnings for S&P 500 companies are their highest in four years, and they could be stronger in the second half. But the gains often have come from operations outside the U.S., with there is little indication that the strong results will jump-start the U.S. economy and get Americans back to work.

    Leaving the sinking ship of state:  Applied Materials (AMAT) reportedly will begin construction later this year on its first manufacturing plant in China, to focus on producing equipment for the manufacture of solar photovoltaic cells. "With more than 80% of solar sales in China, we’re looking to produce some solar equipment in that market to be closer to customers," AMAT says. 

    With RIM (RIMMdown 4% following its layoff announcementthe market doesn’t appear satisfied with the scope of the company’s restructuring. Many still think RIM badly needs to rid itself of its dual-CEO structure. Gartner’s Ken Dulaney also thinks the company is starting to take its relatively strong international business for granted.

    When Netflix (NFLXreports today, Citi’s Mark Mahaney is hoping the company discusses the impact its controversial price hikewill have on profit margins; Mahaney, who has a Buy rating and $300 target on the company, thinks a greater proportion of streaming-only subscribers could give margins a lift

  170. loopster

     JRW.  Great call again, in 83.61 out 83.07.  Thanks

  171. dclark41

    Phil:
    I know this may be like playing with fire, but don’t you think this rather subdued market reaction has provided the politicians the room to take us even closer to the cliff without settling this BS?

  172. kustomz

    Still in TZA if we blow 83.25 im out

  173. Phil

    Glenn Beck/Rehat – Wow, I thought they got him off the air?  What does it take to stop these people?  If I were the parent of one of those kids I would feel obligated to kick his ass.  

    That was a fantastic call on the turn at 1:39, 1:43 JRW – Congrats to all the players on that one!  

    Dollar testing 74.30 now – bad finish if it breaks higher on "no deal" panic.  

  174. Troy

    Hell Yeah-  great call JRW…missed .30 on the way down, but made .35 in TNA on your 83 line!  Got lucky though, it bounced .50 in about 10 seconds…

  175. shadowfax

    I only sold 1/4! prepareing for 1/2.

  176. mrmocha

    JRW is so right on this: "Never use stops on DT’s !! (the bots will take you out)"  I bought IWM puts at mid-day for the downdraft and went to a meeting; before going down, they turned it up right to my stop and took me out then dropped.  This is not an uncommon occurence.  As a smaller trader, I used to be off the radar but it does seem life enough bots running on enough CPUs can track and attack even the small traders now…

  177. ethan2010

    Phil, can you explain why SCO is better than USO (or SQQQ better than Q or AGQ vs SLV)? see very wide bid offer and less liquidity from these ultra names. isn’t it harder to liquidate those without getting a bid offer charge? thanks,

  178. Pharmboy

    ANX/ pah – not a real exciting company to me, as there are may other things in the clinic for NHLCC (lung cancer).  But the spread is fine.

    SNY – not my a favorite, so I would hold the line with what Phil said.

  179. JRW III

    kustomz

    Careful, you can take profit and get back in if IWM 83.05 fails !!  I’m fully in cash from my target.

  180. shadowfax

    1/2 out

  181. stjeanluc

    FAS Money / Petronick – Here is the link to last week recap that included some information on the setup - http://www.philstockworld.com/2011/07/18/monday-market-madness-gold-1600-edition/#comment-1162711
    Regarding Yodi’s comment, I agree that this is not a setup for the faint of heart. Unless you can stay on top on a regular basis during the day, I would advise to stay away. It has been pretty volatile and if it was not for Phil’s advice, I would be in trouble now. But it’s fun though! 

  182. JRW III

    2/3 TNA for the last 1/2 hour !!

  183. kustomz

    FU dollar!!! Thanks JR..Im a greedy SOB

  184. Troy

    JRW – you should trade more often when you are sick! =)  We are in a new ascending channel…they might walk this back up…in 1/4 TNA at 82.73

  185. Pharmboy

    Hello ARNA……up 6% today. 

  186. ricktao

    Pharm:
    Could I get your opinion on the stock TRMS? The stock is trading between $2 – $3.
    Is it worth to hold long term? Thanks!

  187. shadowfax

    JRW
    My plan is sell my puts if we make new LOD!
    Looking more like a hold.

  188. pat_swap

    Hi Phil,
    What is your premise for setting the stop at 0.50 for your QQQ Put trade
    QQQ Aug $58 puts at .63 are a fun way to play – 20 in the $25KP with a stop at .50.
    Thanks.

  189. JRW III

    All in !!  Smiley
     

  190. Pharmboy

    MRX – you know the one where the CEO’s son died, and the girlfriend was in the entryway….well, 2K 39/43 bull call spread just went through for $1.02.  Going to pick some up as well for a gamble.

  191. dclark41

    THE STICK

  192. Pharmboy

    rick – let me look into the targets.  There are a couple of companies doing this.  CCR5 was a hot one many years ago for the exact same reason, as HIV uses the receptor for entry into the cell.  Don’t know enough about gp41.

  193. JRW III

    Scaling out of TNA !!  1/3 out now for 80 cents !!

  194. Phil

    Bots/Mr. M – They can drill down to every single individual trade these days.  It really is terrible that some traders have such a huge trading advantage over others.  

    SCO/Ethan – No I can’t explain it.   I just look them over and one trade looks better to me than another.  I wouldn’t play SCO straight up but, if you take a spread, you are negating the premium as long as you hold on for your price and the big premium from the outside call or put is generally better than you’ll get from a 1x ETF.  Streth asked for an SPY alternative to a trade earlier, if you want an alternative, you can just ask.  Those of us who scale in and out of spreads like that on momentum aren’t very bothered by the bid ask as it works to our advantage as often as not…  Limit orders and limit sells are very important things to use no matter what underlying you are trading.  

    QQQ/Pat – My premise is that, if they fall to .50 then I was wrong about direction and we should take a small(ish) loss, get back to cash and try again next time something looks obvious.  

    The White House has reportedly been telling executives at major U.S. banks a default won’t happen, even as Democrats and Republicans continue to wrangle over the terms of a debt ceiling increase. However, the White House is also said to be warning a debt downgrade is "a real possibility," if only due to S&P and Moody’sprior rhetoric

    It just doesn’t matter:  Even if a U.S. debt downgrade might not be the end of the world, if Japan’s track record is any guide, certain sectors could suffer. Big banks (XLF -0.6%), whose credit ratings get a boost from the implied support of the U.S. government, could feel pain with a downgrade their sugar daddy. Big banks are also massive holders of Treasury debt. BAC -1.2%JPM -1%C -0.7%WFC -0.5%.

    Indispensable public servants, researchers at the SF Fed believe home-building activity will return to its "long-run average" in 2014. Of particular interest, the report contends appreciating home prices alone aren’t enough, and that a thinning of inventory from foreclosed properties is also necessary.

    Big oil firms are expected to report their best Q2 earnings on average since 2008, Oppenheimer says, as rising crude prices are "a rising tide that raises all boats." Fearful of the reaction of cash-strapped consumers paying an average $3.69/gallon at the gas pump, the oil industry touts its contributions to the economy: "When our industry does well, America does well too."

  195. JRW III

    All out ; too late in the day for me !!

  196. shadowfax

    What a fake and down again.

  197. cwan120

    JRW,
    What’s your take on tomorrow’s markets?  Up or down?

  198. JRW III

    3% on the day; BTW here’s a good short :

  199. morxlntway

    Pharm – when were the sales numbers for AMAG going to be available? We are getting past Phils adjust at 50% down mark. What wisdom do you have? Did we just jump when we should have ducked?

  200. JRW III

    cwan120 / Tomorrow

    No idea, that’s why I’m in cash every night !! (No worries)

  201. etradingsignals

    Phil: Carry the QQQ puts trade into tomorrow?

  202. ricktao

    Pharm:
    Thanks for your response.

  203. Phil

    QQQ/Etrad – That’s why I went with the Augs and not the weeklies.  I doubt things get "better" tomorrow.  

  204. Jbur

    JRW: I rarely play TNA/TZA b/c I haven’t spent the time to develop the skill…. but I had a great time making 0.52 today! Thanks.

  205. Pharmboy

    AMAG – well, we got in when they were on an upswing.  I had no clue that they were going to buy ALTH.  Some say it is a good thing, some say not.  I say, no se!  At this point, we are in Jan12 spreads, and whilst down, they are ok.  Sales are tomorrow.  By the call/p action, there is nothing that looks horrible.

  206. russellb73

    Phil/anyone…
    CVX or XOM calls as hedge to IWM and QQQ puts?  Just thinking I need a little upside hedge, hope to get before close or before 4:15 through options.

  207. matt1966

    Ding, ding, ding!  A truly beautiful day.  Hope yours was, too!

  208. Phil

     Well, that was an interesting day. Always scary when Matt is cheerful though.  

    Now comes the Republicans to "help" us…

    Hedge/Russell – I don’t see an industrial/commodity short call as hedging a small cap/Tech short?  How about selling EBAY Oct $35 calls for $1.65 or AMZN Sept $240 calls for $3.40?

    Ooh – bye bye NFLX.  Thank you so much for playing our home game…    Profits good but revenues missed.  

  209. Troy

    NFLX - revenue down…$788M versus $791

  210. Phil

     I love how the Reps are always in a pack to show how unified they are.

  211. JRW III

    Jbur, kurtww, loopster,

    You are most welcome, and thank you !!  Smiley

  212. Phil

     How come, when the Reps speak, CNBC runs all their talking points in a box below them but not for the Dems?

  213. Pharmboy

    TRMS – well, the ‘peptide’ is on the market and Roche is in charge of it.  I don’t see anything that gets me really excited about them, and they have nothing in the pipeline except a follow on.  In essence, I would pass.

  214. JRW III

    Phil,

    You should use my 1:43 call in your public post, as I am rarely that accurate !!  Smiley

  215. matt1966

    Phil / Scary:  Don’t be!
     
    Phil / Talking Points:  Because the Reps give them to CNBC!  I’m sure they would do the same for the Dems…  8-)

  216. morxlntway

    thank you Pharm. I thought maybe you’d gone to figi to celebrate.

  217. jjennings

    BTFD on NFLX tomorrow?  As much as I despise the stock…….it’s 95% owned by Hedge Funds and other Investment Managers that probably aren’t the ones heading for the doors.  This hot potato has been a cash cow for these guys.  My guess is they just continue to bid it up between each other.

  218. russellb73

    Phil
    Thanks for hedge advice.  Makes sense, ran out of time, needed to have more of a plan in place ahead of time…hope tomorrow QQQ drops further.  Netflix will help!
    JRW  
    Thank  You!!  Was thinking about IWM puts, read your TZA posts and went for it.
    Matt1966
    Phil should add me to the "Always scary when Matt (or Russell) is cheerful though".  I am pretty bearish right now.

  219. rj_jarboe

    Savi,
    Is Vegas a definite go? I have been trying to keep up, but I have been unclear on if Monday is in the plans.  

  220. ilene

    Today’s levels.

  221. petronick

    stjeanluc/Phil, 
    Thanks for the advice guys!
     

  222. stjeanluc

    Yodi, how are the 2 iron condors (RUT and SPX) behaving so far? 

  223. pat_swap

    Phil,
    QQQ Put Trade:
    http://www.philstockworld.com/2011/07/25/moronic-monday-still-no-deal/#comment-1185231
    I understand about getting direction wrong but is there a specific range of drop that you look for to confirm that the direction was wrong and it is better to convert to cash. Setting correct stops has always being difficult for me….
    Bots:
    Are our trades exposed to markets is we use stop limit orders instead of just limit orders?
    Thanks.

  224. craigzooka

     Hip HIp Hoorayyy, its about god damn time.  NFLX down $20 after earnings!

  225. pstas

    POTUS to address nation, 9 pm tonight, re stalemate over avoiding default and the best approach to cutting deficits. Watch @ wh.gov/live.

  226. strether

     JRW III
    I have followed APKT for a year. The recent down/up has grabbed attention, but why is it now a good short?
    Thanks
    Sttether

  227. flipspiceland

    @Felipe
    re: Why CNBC runs talking points in the below box only for the R party:
    Because they assume—- quite rightly—-  that all liberals have pushed the "Mute" button on the remote, when Reps are yapping their fool heads off.  
    I’m certain that if you check Fox you will find the reverse is true.

  228. russellb73

    Darn should have bought BIDU calls this morning…up over 5% afterhours.  Oh well.

  229. Burrben

    Phil / HCBK
    Looking for a little advice.  I let a small trade go without any adjustments for a while, or really alot of thought.  I know…my bad.  This was before I started only paper trading until I get a stable environment and stop travelling.
     
    Anyway, I tried to follow a trade you did on HCBK
    - I sold 4 x Jan12 12.50 put for 2.05
    - I bought 400 shares of HCBK at $11.20
    - My sold calls never got filled ( tried to sell 4 x Jan12 10 call for 2.00)
     
    HCBK is now at $8.12.  I know this is a "it’s your own fault" type of situation, but just looking for a little guidance to learn from this mistake and possibly fix it for the future.
     
    THANKS! Burr

  230. lvmoda

    Savi – I’ve been missing some days on the board lately.   Here is my email address:  wjcarney@gmail.com if you need to be in touch for Las Vegas logistics.   I assume everything is still on as discussed a couple of weeks ago and that we’ll have a good turnout.

  231. JRW III

    strether / apkt

    I would short below $60ish on technicals !!  (Head & Shoulders Patern)

  232. Peter D

    Congrats JRW and other players!  I was watching that trade and you guys collectively forced TZA to go up with your trades.  Then TZA went against you guys for a few minutes.  A weak player would have been shaken out of the TZA position.  Sometimes, JRW takes a 5 cents loss, but didn’t today and got paid the full amount in the end.  It looks easy, but it does take some nerves.  I didn’t play TZA/TNA as I have my RUT and SPX short strangles to watch.  The good news is that there is one less day to August expiration.

  233. lflantheman

    BIDU….Toward EOD I added some July 29 weekly  155/160 bull call spreads to the mix.  Those should come in nicely for more than a double.   
    Hope someone here played NFLX to the downside.    :)    

  234. rustle123

    Love watching NFLX get killed.  Even though I’m not long or short them currently, it just feels very gratifying watching them tumble.

  235. roberthjrfl

    Hey Peter!  Good to hear from you.   Are you going to Vegas?

  236. roberthjrfl

    What are the official dates for Vegas?

  237. stjeanluc

    President Lincoln’s on the current crisis – well, from his Cooper Union address. But still relevant! Just replace Republican by Democrat!

    Under all these circumstances, do you really feel yourselves justified to break up this Government unless such a court decision as yours is, shall be at once submitted to as a conclusive and final rule of political action? But you will not abide the election of a Republican president! In that supposed event, you say, you will destroy the Union; and then, you say, the great crime of having destroyed it will be upon us! That is cool. A highwayman holds a pistol to my ear, and mutters through his teeth, “Stand and deliver, or I shall kill you, and then you will be a murderer!”

    From Krugman, trying to debunk the claim that both sides are at fault.

  238. zeroxzero

     I almost played NFLX to the upside!  Picked BIDU instead.  Whew!!  First Chinese company I’ve ever purchased, and I’ll keep my holding period to under 18 hours.  Was Netflix’s new pricing really so steep?  I thought it was pretty righteous for what you get, but then, I’m at least 500 miles from the nearest English language movie theatre.

  239. Peter D

    Hi robert,
    Unfortunately, we are going on the Alaska cruise and there is no time for Vegas!

  240. roberthjrfl

    Maybe next time Peter!

  241. flipspiceland

    Today’s NYSE volume was the lightest Volume traded all month.  In total dollars, total number of shares and number of trades.
    I dont’ know what that means entirely,  but it should at least possibly mean that a lot of play-uhs are on vacation. 

  242. lflantheman

    rustle123…..If you can figure out exactly why you love seeing NFLX get killed it will make you a better trader.  

  243. Jbur

    Burr/HCBK
    I’m happy you asked the question so I wouldn’t have to… I did exactly the same thing. I beat myself up almost everyday for that one.

  244. kustomz

    From Masco..32,000 employees
    "The lack of job creation, high cost of energy and declining consumer confidence have made forecasting the timing and strength of the recovery extremely difficult. Most economists have reduced their forecasts for 2011, including housing start levels which are now projected to be flat with 2010. As such, we believe that growth in the second half of 2011 will be challenged.

  245. kustomz

    Take a look at households and employment and compare it to business and financials…really is criminal whats being done to this country and her people..
    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/draghi/7%20quarters%20after%20recovery.jpg

  246. Lincoln

     Phil: futures
     
     
     Rudimentary futures
    While I’m getting more comfortable with futures I’m interested in what the basic chart settings are for the contract you are looking to trade.  TIA
     I know you are watching /dx and /cl /yg and others for a general sense of what is going on.
     
    Apologies if I’ve missed your response to this question in a prior post.

  247. strether

     Thanks JRW III, Got it.
    Strether

  248. russellb73

    Phil
    Still looking for some hedge vs. QQQ and IWM puts.  Was thinking about CAVM and ATML calls as possible plays.  Both report sometime around Aug 2nd I think….Like to hear your thoughts if any when you have time.  I am considering Ebay and Amazon as you suggested. 
    Wanted to say thanks for all the great advice have made a lot of money over the past year or so directly from reading your posts.  Thanks for responding to a rookie like me : )

  249. stjeanluc

    And why did we come to this debt ceiling as it is:
    http://www.theatlantic.com/politics/archive/2011/07/the-chart-that-should-accompany-all-discussions-of-the-debt-ceiling/242484/
    Hypocrisy abounds… 

  250. Savi

    official dates for Vegas —-Oct 8th and 9th—I am working with lvmoda as to how to collect the deposit
    as of today the following are definite attendees
    savi
    chaps
    rustle123
    pharm
    escohen5
    bioieselchris
    lvmoda
    rdn4evr
    jakester
    nicha—dropped out so we need another definite
    please confirm as we would like to get this moving so that everyone can book their flight and hotels
    Thx

  251. Savi

    lvmoda—sent you an e-mail

  252. Kwan

    NFLX says 75% of all new subscribers are selecting the streaming only plan. (Link to PDF). I’m certainly considering dropping snail mail portion of my plan since I maybe watch one DVD a month at best.

  253. Burrben

    SAVI / Vegas
    Count me in for the trip.  
     
    email is : skdoyle1@gmail.com

  254. Savi

    That’s great Burrben

  255. dclark41

    Another view. From NPR
    http://www.npr.org/templates/story/story.php?storyId=123256406

  256. Troy

    A Trillion-Dollar Gimmick

    July 25, 2011

     

     

     “Why, one wonders, not ‘save’ $5 trillion by proposing to spend that amount to cover the moon with yogurt and then cancelling the proposal?”
    -George Will, Washington Post, March 12, 2009
    Claim 1: “Winding down the wars in Iraq and Afghanistan will save $1 trillion.”
    Reality: The Reid plan relies on the inaccurate assumption that surge-level spending in Iraq and Afghanistan is scheduled to continue over the next decade. A honest budget cannot claim to save taxpayers’ dollars by cutting spending that was not requested and will not be spent. Senate Democrats are employing a budget gimmick that will not fool the credit markets and does not address the urgent need for Washington to get its fiscal house in order.

  257. Troy

    CME Celebrates America’s Ever Nearer Date With Insolvency By Raising Collateral Haircut On Treasurys
     
    We just heard two very useless speeches by two very useless Wall Street muppets. Both were, naturally, completely irrelevant. Now comes the important stuff, courtesy of a press release a few hours ago from the CME. Up until today, the collateral haircut on a T-Bill was 0.0%. Beginning Thursday it will be 0.5%. All other classes of Bonds, Notes and Strips will see their haircuts raised by 1% across the board. Same with Agency debt. Only foreign debt will see an increase of 2% in the Bill space, and 0.5% in Notes and Bonds. Translation: the CME just telegraphed what the rating agencies are terrified to do – keep up the charade, and the haircut will keep rising by 1% until it hits 100%. Give or take.

  258. terrapin22

    Savi / Vegas
    i will be out there for a different event.  hopefully I will be able to attend some of the sessions.  what is the cost?
    my email: thegeneral91@gmail.com

  259. Phil

    Wow, Dollar just got knocked down to the 74 line.  Don’t know why but, obviously, futures should be heading higher along with oil and gold.  

  260. Troy

    In May 1935, Pierre Laval, then the Foreign Minister of France, and also the once and future Prime Minister of France, met with Josef Stalin, the Soviet dictator. Laval, a Catholic, urged Stalin to stop persecuting Catholics in the Soviet Union. Stalin asked Laval why it mattered. Laval replied that continued persecution could provoke a quarrel between Stalin and the Pope.
    Stalin replied, “The Pope? How many divisions does he have?”
    I don’t think that anyone could confuse John Boehner with the Pope, but nevertheless, at this point, President Obama might ask the same question about Boehner. How many divisions does John Boehner have?

    This explaies Boehner’s dilemma – DeBT CeiLiNG MaYHeM
     
    ifty-nine House Republicans abandoned Boehner on the “compromise” appropriations bill. Even though Boehner depicted it to them as a Republican victory on par with, say, the Battle of Stalingrad.
    And now, Fox News has reported that between 80 and 120 Republican members of the House will vote against any bill to increase the debt ceiling, no matter what else is in it. You can be sure that Fox News knows what Republicans in Washington are thinking – because Fox News tells them what to think.
    So somewhere between a third and a half of all of the Republicans in the House of Representatives are going to vote against increasing the debt ceiling, no matter what Boehner puts in front of them. Boehner is a general with no troops. The coach has no players. The teacher has no students. The chief has no Indians. The bride has no bridesmaids.
    That’s why Boehner is always crying.

  261. Pharmboy

    Not that I am a fan of either party, but Chris Matthews of Hardball on MSNBC (as I was working out) was talking with a Rep. Mike Lee from Utah.  He just absolutely blasted him….Mike Lee, “It was partisan supported.” Chris M. “Let’s just check the facts…..234 votes, 240 repubs, and 229 repubs voted…it was a party line vote no?” Classic!

    Visit msnbc.com for breaking news, world news, and news about the economy

  262. pstas

    Do I hear drums in the distance?
    http://dailycaller.com/2011/07/25/vermont-sen-bernie-sanders-suggests-its-time-for-obama-to-face-primary-challenge/
     
    By the way, anyone seen Hillary lately?
     

  263. asaenz

    Prediction: somehow (the dollar gets smacked) the markets hang tough till the debt deal gets done, that along with another "positive (BS)" news, the markets breakthrough this years highs, if its not this week, then next week at the most….

  264. Pharmboy

    OK, I live in CA.  I am formally running for Congress as a Tea Bagger…..who’s in support for that….I am a registered independent!  Oh, did I say that?  I meant, Coffee party independent.  Where is 1020…he is my moderator!

  265. zeroxzero

     You must be referring to "420", and, given your level of incoherence, I would guess you’ve already found your moderator. :)

  266. Phil

    EGLE/Morx – About time. 

    NFLX/JJ – I would stay away.  Doesn’t matter who owns them once their business model begins to fray at the edges.  

    Big Chart – Hard bounces off 2.5% lines for Dow and S&P trump rejection at 2.5% line for the RUT so far.  

    Range/Pat – It all very much depends.  Ideally, I don’t want to enter a momentum trade until I think we are turning off resistance so I’m looking for that resistance to break down as a stop.  On the Qs in the $25KP, it’s also about how much we’re willing to risk to test the turn at that level.  As a general rule of thumb (see strategy section and comments on article in that section) – you simply don’t want to lose more than 20% on a full commitment, or trade allocation.  Since a full allocation shouldn’t be more than 5% of your portfolio, essentially what that means is you should never lose more than 1% but, if you are scaling in properly, your initial allocation is less than 2% and you are not risking more than a 0.4% loss on round one.  Keep that one thing straight and you can completely blow 20 trades in a row and still have 80% of your portfolio intact.  Lose 2% 20 times and you’re down 40%.  Coming back from 60% means you need to make 66% just to get even while coming back from 80% means you need a 25% gain to get even – see the difference?  

    Here’s what’s busting the Dollar:  

    Mr. Obama made his comments in a prime-time national address followed immediately by a response from House Speaker John Boehner (R., Ohio). Both men spoke just hours after the top Republican and Democratic leaders in Congress unveiled competing debt plans. Both plans immediately faced opposition that could make it hard to pass their respective chambers.

    While he urged the two parties to compromise, Mr. Obama also disparaged the Republican plan and called on Americans to contact their member of Congress to support his preferred alternative, a partisan twist that could harm his chances of breaking the impasse.

    "We are left with a stalemate," he said. Without a resolution, "We would risk sparking a deep economic crisis—this one caused almost entirely by Washington."

    "For the first time in history, our country’s triple-A credit rating would be downgraded," Mr. Obama said. "Interest rates would skyrocket on credit cards, on mortgages, and on car loans, which amounts to a huge tax hike on the American people."

    Mr. Boehner responded by defending his plan and dismissing not only Mr. Obama’s approach to the debt limit, but virtually his entire record. "The president has often said we need a ‘balanced’ approach, which in Washington means, ‘We spend more, you pay more,’ " Mr. Boehner said. "The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. That is just not going to happen."

    The harsh, nationally televised back-and-forth between the country’s two top leaders barely came a week before the government was about to default on its obligations, a possibility both men decried as an economic calamity.

    DifferingVision

    HCBK/Burr – Not filling the calls wrecked that trade!  Effectively, you have 800 shares at net $10.83, would have been $9.83 if you sold calls for $2 or $10.08 if you just would have taken $1.50 at least.  But it’s not, it’s $10.83.  Is HCBK a horrible stock at $10.83?  Not really.  It pays a 3.8% dividend so nice long-term and you can sell 8 Jan $9 calls for .35 and 8 Jan $7.50 puts for .50 and that drops your net to $9.98 with the possibility of having another 800 assigned to you at $7.50 for 1,600 at net $8.74.  If you don’t REALLY want to own 1,600 shares at $8.74 ($13,984) then the $8,664 you spent for 800 shares that is now down to $6,640 (down $2,024) is not worth sticking with, is it?  So your choice is to either wait for 2013 puts and calls to show up and do a roll, cash out and move on with your $2K loss or press your bet to own 1,600 shares at $8.74 avg.  1,600 shares pay .32 in dividends for $512 a year and figure you can sell $9 calls for another $960 (.05 per month) for $1,472 back on your $13,984 investment (10.5%).  Not such a terrible outcome for a stock that fell 35% on you.  

    Wow, caught a nice pop on the futures but Dollar held 73.80 (pathetic) so take money and run time! 

  267. hoss18

    What if the world has read this wrong? What if in their haste to keep the ponzi going, the pols and fed and wall streeters actually screwed up and let a bunch of hard liners into Congress via the Republican party, and now Boehner really can’t deliver? And all of this is lip sticking a pig that’s about to get Fu***ed?

    Just saying, I wonder if the markets are still counting on a deal at the last minute, what happens if the so called tea partiers stop the music? Would the dollar crash sending SP to 2,000? or would the world just sheet it’s pants? Is there a hedge for this, or should we begin to ponder this really happening?

    How about uncovering my gold and silver miners for a start? Then maybe a hedge of some kind? Hard to think through what might happen…bond markets would go bazooey, so lots of cash would suddenly be floating around looking for yield, I would think. Then again, loss of confidence in the US could trigger massive outflows and YIKES!

    Ugh, it’s late, I’m tired and personally think we should just “kill em all and let God sort it out.”.

  268. Pharmboy

  269. kurtww

    Phil – I have been on semi-vacation and made a couple of boneheaded moves. At the end of next week for 10 days I will be really on vacation and don’t want to worry about my holdings. What do you suggest I do with an S&P spread I sold? I sold a few 1370/1380 call spreads (rolled from July when I thought we were rallying into opex, ugh). I could close them out at a loss now, but of course I’m hoping they expire worthless or at least get back to what I sold them for (which would be about $1 each, now $2.85). Should I just hang on and watch them this week and next, and then buy them back next week at a hopefully opportune time? Obviously I don’t want to deal with a huge rally and have to double down and then worry about it while I’m on vacation. I just bought a 1340 call option on /ES to protect me a little in case we run up. I could try to cover with some more 1340 calls against the 21 spreads I have, but the cost of fully covering almost 2x the cost of just buying back the spreads. On the other hand, maybe I can get some money selling them again while closing out my spreads next week.

    I’ve learned my lesson abundantly that I should have been flat even on semi-vacation, but too late for that now. Thanks.

  270. Phil

    Good morning! 

    Dollar bottomed out at 73.69 and that should be it for our 3am "rally" with the RUT (/TF) at 835.6 and S&P (/ES) at 1,340, Dow (/YM) at 12,600 and Nas (/NQ) at 2,435 – all make good shorts here as long as the Dollar goes no lower (and I’ve already started the morning post with a chart that shows how dangerous this is getting).  

    We are, in fact, right back to where we were on May 30th and that is NOT a place we want to be as the Dow opened June at 12,574 and fell to 12,300 the next day and was back at 11,862 (down 5.5%) by the 15th.    This is, of course, the drop we’ve been expecting as we moved to the top of our range based on BS.  As Flips noted in last night’s chat – yesterday was the lightest trading volume of the month and that usually is not a good sign…

    Oil is giving us another shorting opportunity as it crosses below the $99.50 line but tight stops today as we head into oil inventory tomorrow – although this one may finally record outflows from the SPR and we’ll finally get a bit of a build (hopefully).  Still, we’re right at the beginning of the NYMEX contract cycle so it’s very easy to manipulate the prices – not worth fighting the tide at this point.

    DESPITE, the Dollar falling to a record low against the Swiss Franc this morning, Gold is down to $1,609.50 (3:37) and Silver is $40.28 so, once again, the falling Dollar is masking the retreat of speculators.  Think about it, if you have 10,000,000 ounces of gold to sell and you have the ability to make the Dollar weaker while you are selling – isn’t that the "smart" move?  Don’t you, in fact, have a fiduciary duty to your shareholders to bend or break every rule and regulation in order to squeeze every last penny you can get for your gold?  Sure you do!  That’s how Wall Street justifies screwing over anyone and everyone in the name of profits – even the manipulation of US currency in conjunction with paid political attack dogs that an objective observer would call treason but, on Wall Street, it’s called "thinking outside the box" and gets you a nice, fat bonus!  

    Too bad it costs the American people $2Tn so some gold hedger can get $2M this Christmas but that’s the game and, if you don’t like it – just get very, very rich and put your money in the fund and then you will be able to benefit from this BS (and a portion of your profits can directly pay our friend’s bonus, rather than 2% of your net worth being indirectly stolen as your base currency is devalued for the benefit of the fund).  

    Obviously, I think we have a very fake move here and the Yen is down on the 78 line with the Euro at $1.45 and the pound at $1.635 so we’ll look for those lines to hold and for the Dollar to get back over 73.80 and, maybe, back to 74 and we’ll once again be waiting for a fall – very likely triggered by a debt deal that rallies the Dollar.  

    Make sure you have some disaster hedges!  We’ll put some up in the morning post and even more in chat – once we see how things are going.  

    Tuesday’s economic calendar:
    7:45 ICSC Retail Store Sales
    8:55 Redbook Chain Store Sales
    9:00 S&P Case-Shiller Home Price Index
    10:00 Consumer Confidence
    10:00 New Home Sales
    10:00 Richmond Fed Mfg.
    10:00 State Street Investor Confidence Index
    2:00 PM Hearing: Fed’s role in economy (Hoenig) 

    Notable earnings before Tuesday’s openAKSAMLN,ARMHAVYBIIBBP

    CITCMICOVFHSYITWJBLUKCI,LMTLXKMMMNOVODPOXYPCARPCXRF

    RSHSIAL,SPGSVUTLABTROWUAUPSVLOWATWDRWFTWPI,WU 

    Notable earnings after Tuesday’s closeACEAGNC,AMZNCHRWDWA

    ERTSGILDHTSIGTILMNJNPRKIM,LLTCLVSMTWNBRNSCPMTC

    PPDIRFMDTPXTSS

    The U.S. government can push back a default a month or more after the Aug. 2 deadline set by the Treasury Department, Wells Fargo chief economist John Silvia says. The Fed and Treasury can work together to generate enough cash "probably for the next two or three months," adding credence to reports that the U.S. is telling big banks a default won’t happen. (earlier: III

    The U.S. government flirts with default, yet most markets continue to snore at the threat. Why? It’s too-big-to-fail turned on its head, as China is hooked on its reliance on the U.S. consumer to help drive its export industries. Like other big holders of U.S. debt, it has no incentive to do anything that would damage the value of its investment, and it has few other viable options for its cash.

    The last time the U.S. defaulted on its debt (yes, it happened in 1979), T-bill rates shot up 60 basis points, but longer term Treasuries were unfazed, notes BTIG. The dollar was pretty much unaffected. Then, as now, of most import is the outlook for growth and inflation.

    Unintended consequences: Boeing’s (BA -1.9%) new 747-8, the biggest plane the company has ever built, may be able to land at fewer airports when it enters service if a deadlock persists in the Congress over funding the FAA. Five U.S. airports may not receive certification to handle Boeing’s new jet by Sept. 1 if the funding dispute isn’t resolved, the FAA says.

    Randy Vickers, director of the U.S. Computer Emergency Readiness Team – the agency charged with responding to cyber attacks - resigned suddenly on Friday. DHS declines to comment on the reason, but there have been several recent high-profile attacks on government computer systems. 

    A Reuters analysis of the newest Greek rescue shows the country’s debt burden will actually increase under the terms of the plan. This is at odds with French President Sarkozy’s statement that Greece’s debt/GDP ratio would fall 24 points – a number only true with fancy footwork likely to also be seen soon in a coming D.C. debt deal. 

    Every parent with kids attending or preparing to attend college knows this, but here’s the graph to prove it: There’s a bubble in U.S. college tuition costs, as the rate of increases over the past 30-plus years far exceeds overall consumer prices and even the rise in house prices.

  271. matt1966

    I hadn’t planned on doing it… but I did anyway.  Sat through both of our esteemed politician’s chats.  Here are my verdicts:
     
    Clear Winner To Majority of Informed Citizens:  Obama
    Clear Winner To Majority of Citizens Who Just Crawled Out Of Their Cave:  Boehner
     
    But seriously, I found Boehner’s speech very disingenuous.  However, anyone who didn’t get that feeling while hearing it probably liked what they heard.
     
    Disclaimer:  I voted for Perot.  The first time.

  272. matt1966

    Good morning Phil-  that’s a lot of data today.  And most of it could be bad.  Maybe this will be the big down day before the deal..

  273. Phil

    Recovery/Kustomz – That’s where we’re throwing the money.  We are actively extracting money from the bottom 99% and giving it to the top 1%.  Maybe I should just accept it but it amazes me how this population just rolls over and takes it.  I suppose it’s the dumbing-down of America that the people don’t even understand what is happening to them or maybe it’s the change in the Media, that used to have people who would investigate this sort of thing and make it a national issue but now they don’t even make movies where Big Business and Wall Street don’t get positive spin.  Even in the new movie "Wall Street", which was just on cable this weekend, Gekko is the hero and Bud Fox sees him at a party and acts like a dick (easy for Sheen to do, of course).  Over and over they tell the susceptible zombies in the audience (who’s minds have been trained from birth to learn from visual media) that "it’s just a game" on Wall Street – nothing personal, it’s just business…

  274. Phil

    Futures/Lincoln – I’m a simple guy, I watch for significant lines of resistance on multiple indexes to line up and then if they either hold or break, I get interested in playing the momentum.  But that’s not enough so I look for confirmation of the Dollar being too high or too low and that, of course, is based on what I see looking at the Pound, Euro and Yen.  I also look at silver, copper, oil, gasoline and gold as well at TBT and XLF but all that is just to confirm my main trigger – which is news-driven events.  I’m a fundamentalist, I only care about the charts to give me an entry or an exit point AFTER I believe the fundamentals indicate a directional move.  I have no basic chart settings other than whatever is standard on Thinkorswim.   In absence of new news, we expect the same levels to be points of contention but I much prefer it when we do get news and move into a new range – that’s where the real money can be made.  

    Hedges/Russell – You are very welcome.  Now perhaps you can return the favor by explaining to me how two relatively small semis "hedge" an index play on the Nas and the RUT?  If the Nasdaq goes up, are you 90% certain that those two stocks will have good earnings?  If so, this is a correlation I have never heard of before.  Also, how much money will you be betting against yourself and which one of the two sides (as you are guaranteed to lose one since you are buying premium on both ends) do you want to lose the most?  What’s the range in which you lose both sides at the same time?  Those are always fun too!  

    A hedge is an offset and a well-constructed hedge allows you to WIN both sides at once and has very little chance of losing both sides.  You can sell an AAPL 2013 $250 put for $9.50 if you are REALLY willing to own AAPL for net $240.50 (40% off) and that has a net margin of $25 and that $9.50 can buy you the QLD Jan $115/95 bear put spread at $11 for net $1.50 on the $20 spread that’s $19 in the money at the moment.  So, as a hedge, you are fairly likely to NOT lose on the short AAPL puts and, even if you do, your "worst case" is a very cheap purchase of AAPL.  Should the Nasdaq do anything BUT go up, you will collect $20 in January.  Should AAPL fall, it’s 10% of the Nasdaq so it is INCREDIBLY unlikely that your short puts on AAPL would be triggered without another $20 being handed to you on the bear spread, which would drop your net entry on AAPL to $221.50.  

    Anything over $250 on AAPL but under 2,800 on the Nasdaq is going to be a 1,233% winner on cash or a 74% return on margin so, if you commit $25,000 to the sale of 10 AAPL 2013 $250 puts, you will get $9,500 and you add $1,500 cash and buy 10 QLD Jan $115/95 bear put spreads and now you will get back $20,000 UNLESS the Nasdaq is over 2,800 by January expiration.  If you have a portfolio of $200,000 worth of buy/writes that pay you $40,000 UNLESS the Nasdaq is below 2,800 in January – then you are well balanced and you have many, many ways to win, possibly collecting $60,000 if the Nas is kind enough to drift in right around the 2,800 mark.  

    So, what are your possibilities?  The Nasdaq shoots up and you lose your $1,500 cash but you make $40,000 on your buy/writes and it’s highly unlikely that your AAPL puts aren’t on good track.  The Nasdaq drops 20% but AAPL does not drop 40% so you collect your $20,000 on the spread and use that $18,500 profit to roll or add to your long positions that are in trouble.  OR, the Nasdaq stays under 3,000 and over 2,600 and you collect on both ends.  THAT’s a hedge!

    Great chart StJ, that really sums it up nicely!

    24editorial_graph2-popup.gif

  275. Phil

     Another good chart that our Conservative friends will mentally block out because it doesn’t conform to their World view:  

  276. Kwan

    I still haven’t made the connect between increased tuition (or “the bubble”) and why letters are still circulated amongst students and faculty about drastic cuts to the year’s budget. These “cuts” have been ongoing (seemingly) for several years now. Is it just a case where unis are trying to balance their budget, or is something else going on altogether?

  277. kurtww

    Phil – you can disregard my question, I think I understand your expectations! 

  278. Phil

    Wheeee!  Down we go now – this is fun…

    Dollar popped over 73.80.  

    NFLX/Kwan – Well you can see why investors are bailing.  They are priced for massive growth and their rate of subscriber addition is totally collapsing from 253% in Q3 to 133% in Q4 to 94% in Q1 and 75% last Q.  Without their rate bump, revenues would have been flat to negative and they would have had no income growth.  International is a non-contributor at the moment and it looks like they are giving it away with 1M people paying just $19M for the Quarter. In two years, they have reduced their share count by over 10% – that should be backed out of their EPS performance too.  

    LOL Troy!  That’s like when Tina goes to a 20% off sale and tells me she "saved" $500!

    Macau explosion seems to be simple natural gas leak but that’s two this week for China – one more to go:  

    Boehner/Troy – At this point, a lot of what’s going on is Boehner just trying to appear like he’s relevant.  He has clearly lost control of his party, which is kind of his job so he’s weak and ineffective and is the front man for anything bad that happens to the economy related to a loss of confidence in US markets or paper.  

    Sanders/Pstas – Of course he’s pissed off at the way Obama is bending over for the righties.  I’m disgusted too – it’s time to stand up to these morons and expose their scam – not to entertain their BS and try to negotiate with economic terrorists like Boehner and Cantor…  

    What if/Hoss – I’m pretty sure that’s what happened.  As I’ve been saying for a week – I think this ends badly either way because we either default and all Hell breaks loose or we don’t default and the Dollar bounces back (because Europe then goes back into focus as a possible default) and the markets crash anyway.  Before you go nuts on gold and silver – look at 2008 and decide which would have been a good investment for you.  

    SPX/Kurt – We’re a long way from 1,370, most of your damage is coming from the rising VIX, not so much the S&P.  I assume these are Augs so yes, waiting is good but it sounds like you are SPENDING money, BUYING premium like a sucker out of fear so how is that more damaging (or more relaxing) than just taking your loss, going to cash and just getting back on the horse all clean when you get home.  AGAIN – This is why I do not play these – they are great 7 out of 10 times, maybe even 9 out of 10 times but, that one time – you can lose more money than you made the other 9 times.  What’s the point?  It’s fine if you have a ton of spare margin and you play the outsides (both directions, NEVER one) for a nice little monthly income but to risk a 1:10 LOSS over and over again, EVEN if the odds were 20:1 in your favor (and they are not), you would STILL lose more than once every two years and, statistically, it’s very possible that you lose two times in close proximity to each other (think of numbers repeating on a roulette wheel) and take a tremendous hit that could take you a year or more just to catch up.  This is not a strategy to pursue with money you care about – especially if you are not willing to ride out the premium decay and end up throwing money down the toilet with panic covers.

    Perot/Matt – I wish that guy had won.  I wish Trump was in now.  My only hope is my beloved Mishy!  Boehner wasn’t disingenuous – he was LYING…

    Budget/Kwan – I can’t do the math on colleges.  They don’t pay land tax, their buildings are generally paid for for the past generation and a school like University of Pittsburgh takes in $1.8Bn in revenues from 29,000 students (that includes football revenues and donations) and uses that money to pay a staff of under 5,000 teachers.  So about $360,000 of revenue per teacher is generated and they have $2Bn sitting in an endowment fund (my Stepfather’s old school so I get the news) yet they just had to jack tuition 8.5% to compensate for a $40M cut in state funding.  WTF are they spending $1.9Bn on???  $14,000 tuition there isn’t even a lot compared to the Ivys but, DAMN! 

    Too late Kurt, already answered.  

  279. jasu1

     Phil,
    Good morning, your 5am post to Russell:  Is that one of the recommended hedges or was that specific to Russell only.
    My daughter just graduated from PITT. I know…I paid for her BS in Microbiology and Chemistry…..Great school, greater and grander ongoing infrastructure that I paid for.
    My rant for the day….thanks

  280. russellb73

    Phil
    ATML and CAVM, you are of course correct they don’t make a good hedge…..I am bullish on these two stocks but they don’t have anywhere near 90% correlation to QQQ and so would make a terrible hedge.  I understand how much better your play on APPL and QLD would work. Really appreciate the guidance as I have a LOT to learn. 

  281. rj_jarboe

    Savi,
    Count me in for Vegas also.

  282. Phil

    Hey, nice chance to re-load short as they rally us right back to the last fail point!  

    Hedge/Jasu – Anytime I indent a trade in the white box – it’s because I feel it’s generally applicable to Members.  So that hedge is fine, as long as you REALLY don’t mind the potential consequence of owning 1,000 shares of AAPL at net $250ish ($250K or, $25,000 per contract sold if you go with less).  Keep in mind that Steve Jobs will die one day and AAPL could well take a 40% hit and you have to be willing to be in it for the long haul but, of course, I am all for backing up the truck at that price and if they dropped to $150 (another 40%), I’d be all for doubling down there as well.  With any spread, the key is to find an offset that you REALLY want to own at the net price, this one is something you want to do in a neutral fund with lots of firepower or a large account.  Hedging depends very much on how you constructed your longs and what your overall goals are.  For smaller accounts, I prefer Disaster Hedges (see Portfolio Tab for prior articles), which I intend to pick a couple of today.  

    I appreciate the rant as my girls are still almost a decade from college and I just watch stunned every year as the tuitions go up and up and up – even past my planned $250K each already!

    No problem Russell – after hours is always a good time to ask as I’m sometimes in the mood to pontificate…

    Vegas Baby!  By the way, for those going to Vegas – it seems very likely that I will be staying Monday and possibly the whole week as Tim Sykes wants me to be at his thing the following weekend so we’re definitely going to do live futures trading on Sunday night but maybe, if LV and Savi can work it out – We’ll do a whole trading day live from Vegas on Monday too.

  283. jomptien

    Phil/ EUO,
    I bought 400 shares a week or so ago at 17.48, waiting for a higher move to sell monthly calls in IRA – looks like wrong assumption. Wait it out for a move higher or is there a better solution you have? Thanks

  284. dflam

    Savi/Vegas: Is there an agenda? thanks

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