Guest View
User: Pass: | become a member


Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Testy Tuesday – 1,072 or Bounce!

SPY DAILYHas it been a week already? 

That’s right – last Tuesday our title, after 3 bullish days, was "S&P 1,200 or Bust (again)" and bust we did!  At the time I said "It’s not that I’m flip-flopping – we’re simply playing the range and if the trip from the bottom to the top of the range is just 2 days – then flip-flop we must!"  Our bearish hedge in that morning’s Alert to Members was 30 DXD Oct $18/20 bull call spread at .70 ($2,100) offset by the sale of 10 GE Jan $15 puts at $1.05 ($1,050).  DXD is already at $21.34 and the bull call spread is $1.30 (30 = $3,900) while the 10 GE short puts are $1.75 ($1,750) for a net $2,150, up 105% in the first week – even if the short puts were not stopped out with a smaller loss.  

We also ran our Long Put List that morning (see Weekend Reading for recap of that strategy and list of short trade ideas) and those, of course, are up huge across the board as things got so bad yesterday we even had to short IBM – our list’s last brave holdout.  Another fun short we played that day was a ratio backspread on CMG.  

Taking advantage of selling into the pre-earnings excitement, we were able to add the following trade to our virtual $25,000 Portfolio:  

Earnings are on the 20th, the day before expirations so I like the volatility crush of selling 5 $340 calls for $9 ($4,500) and buying 3 Dec $350s for $15 ($4,500) for a free spread.  No matter what CMG does, $4,500 of premium will be gone from the callers on Oct 21st, then the Nov whatevers can be sold, hopefully for another $4,500 in premium or perhaps we can just pull the trade so let’s do one set in the $25KP and see how it goes. 

EEM WEEKLYCMG took a nice dip since then (now $292) and the 5 Oct $340 calls fell to $2.20 ($1,100) but the 3 Dec $350s have held $8.60 ($2,580) for a net profit of $1,480 off a trade that cost no cash just 7 days ago.  These are the kinds of trades we love around earnings season.  We didn’t need to hold it for a month and now we can free up the margin (about $6,000) and move on to another trade (in fact we did one on GS yesterday).  When you are working in a small portfolio, picking up $1,480 in a week on a single trade is a big deal!  

Another hedge we added that afternoon to the $25KP (as the S&P was clearly failing) was 10 EDZ (our favorite overall hedge) Oct $28/34 bull call spreads at $1.10, selling FCX Oct $31 puts for .91 for net .19 ($190).  FCX, unfortunately, has dropped like a rock and the Oct $31 puts are $1.85 ($1,850) but, fortunately, EDZ has gone up like a rocket to $35 (opposite of EEM on David Fry’s chart) and the spread is 100% in the money and currently priced at $3 ($3,000) for net $1,150 so up 505% despite our offsetting hedge behaving badly (and again assuming our naughty traders don’t stop out at the recommended 30% loss on the short put).  

See – hedging is FUN!  We can (and will) make trades like this every week on the way down and, of course, the real VALUE of that EDZ spread is $6 if the premiums all wash out in the money so another $3,000 to come if EDZ simply fails to bounce back.  I’ve been emphasizing hedging and balancing these last couple of weeks as we move into a potential down cycle and there is no more important skill to master than learning how to make these relatively minor adjustments to be able to shift your portfolio from bullish to neutral to bearish at will.  

VIXEven as I write this, the EU is down ANOTHER 3.5%.  Today’s worry du jour is the EU signaling to bondholders that they need to expect to take bigger losses on Greek debt in the second aid package.  People who lent money to Greece this year at 20% and higher interest rates are SHOCKED that there’s a chance the debt may not be repaid in full.  After all, aren’t the wealthy ENTITLED to get money from Governments?  What next – will they be expected to pay the same tax rates as everyone else as well?  MADNESS!

The EU Finance Ministers also pushed back a decision on the release of Greece’s next 8 billion-euro loan installment until after Oct. 13. It was the second postponement of a vote originally slated for yesterday as part of the 110 billion-euro lifeline granted to Greece last year. “The endgame for Greece has now begun,” Sony Kapoor, managing director of policy group Re-Define Europe, said in an e-mailed note. “It seems that the ground is being laid to revisit the private sector involvement agreement reached in July.” 

Also spooking the Financials this morning is news that Dexia SA, BNP Paribas SA and Societe Generale SA are resisting pressure from regulators to accept more losses on their holdings of Greek government debt amid criticism they haven’t written down the bonds sufficiently. While most banks have marked their Hellenic debt to market prices, a decline of as much as 51 percent, France’s two biggest lenders and Belgium’s largest cut the value of some holdings by 21 percent. The practice, which doesn’t violate accounting rules, may leave them vulnerable to bigger impairments in the event of a default. The three firms would have about 3 billion euros ($4 billion) of additional losses if they took writedowns of 50 percent, according to data compiled by Bloomberg.

That’s helping to push MS and GS credit default swaps to their highest level since 2008  as concerns intensified that Europe’s debt crisis will infect the global banking system.  Contracts on Morgan Stanley, the New York-based owner of the world’s largest retail brokerage, soared 92 basis points to a mid-price of 583 basis points as of 4:30 p.m. in New York, the highest since October 2008

Goldman was no help for their own cause as they just issued a statement raising the odds of a US Recession to 40% and declaring it more or less a done deal for France and Germany.  Oddly enough, GS still maintains a 1,200 price target on the S&P for 2011 and a 1,300 target for the end of 2013, with steady progress throughout they year.  Trying to reconcile that with the text of their report reminds me of the great Yogi, who said: "You can’t get there from here."  

Of course, talking out both sides of their mouth is a GS specialty and we are loving all this bad news as it (hopefully) shows us where the real support is.  As in this title, we’re expecting to see it at 1,072 as that’s our 2.5% overshoot of the 10% drop on the S&P and then we bounce back to test 1,011 and we’ll see what happens there but it’s going to be fun, Fun, FUN this week as we continue Thursday’s search for bottom.  

IWM WEEKLYOur favorite long play is a speculative bet on the Russell with the TNA Oct $28/33 bull call spread at $2.25, selling the Oct $23 puts for $2.10 for net .15 on the $5 spread.  TNA is currently $28 so a $5 drop is about 20% and that would be a 7% drop on the Russell to 558 before this trade is in serious trouble while our goal would be an 18% gain, which would require a 6% move up on the Russell, back to about 640 on October 21st.  

We already played the Russell Futures (/YM) bullish off the 600 line this morning in Member Chat but, keep in mind – we are playing both sides of the fence so we are grabbing bullish plays to protect our winning bearish plays and then grabbing bearish plays to protect our bullish winners as we move the other way.  For the most part – CASH remains king but we will be looking for the Dollar to be rejected at our 80 target today and retrace back to 78.50 for it’s first major test – despite all the nonsense in the EU.  

We also did our usual TLT short play as it hit $123 yesterday (so far, so wrong at $124) and this morning we will likely play our VXX short spread – probably selling the weekly $55 calls for $3.50 and buying the weekly $56 puts for $2.50 for a net $1 credit on the puts.  

Why so bullish?  Because we are already up 505% on hedges like our EDZ spread and all it has to do is not go down (Global markets up) and we make another 1,600% as the premium wears off the bull call spread so anything down is a huge win on our leveraged protection and we need to begin protecting those gains with some leveraged bullishness.  BALANCE – it’s all about balance….

Ben speaks to Congress today and there’s a Beatles song to cover that.  

Let’s hope we get that bounce because it’s not a pretty picture at all if we break down here!  

 


Tags: , , , , , , , , , , , , , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1. stjeanluc

    Oil Lines

    R3 – 82.45
    R2 – 81.04
    R1 – 78.73
    PP – 77.32
    S1 – 75.01
    S2 – 73.60
    S3 – 71.29

    Yesterday’s high and low – 79.64 / 75.92

    Breakout lines – 85.65 / 66.18 

  2. lapper

    At the risk of speaking too early (again) EURUSD is getting accumulated, under normal market conditions a jam is to follow dragging equities to the plus side.

  3. Pharmboy

    PP

  4. stjeanluc

    The pre-market quotes are pretty bad:

    TLT – Up to 124.50
    FAS – 8.85
    XLF – 11.12

    Looks like the financials are going to get hit again today

    Barry has a great post about the situation at the banks:

    http://www.ritholtz.com/blog/2011/10/bankings-self-inflicted-wounds/

    The bottom line is this: Investors do not really have a clear idea of how healthy any of these banks truly are. We do not know the state of their balance sheets. We do not know what their exposures are to mortgages, to Europe, to Greece, etc. They could all be technically insolvent, as far as any investor can tell.

    Bankers, enjoy your beds. You made them, now lay in them . . . 

  5. Burrben

    This chart is making the rounds on Wall Street today, due to the exact close of yesterday
     
    For Those Who Don’t Believe That History Repeats Itself…
    http://www.businessinsider.com/chart-of-the-day-october-3-2011-vs-october-3-2008-2011-10

  6. jomptien

    Phil, Thanks for the FTR roll on the Jan 6 short puts but just leave the May 7 short puts in place? Thanks

  7. stjeanluc

    And also from Barry’s site, a Paul McCulley interview from John Mauldin:

    http://www.ritholtz.com/blog/2011/10/greatest-moral-hazard-says-paul-mcculley-is-austerity-here-and-now/ 

    Phil, this guys support our view that austerity in this time is never going to work:

    You mean that cutting federal spending in a liquidity trap, like we’re in, is absolutely counterproductive?

    Yes, it’s ludicrous and I don’t use that word too often. There’s a large range of opinions about most issues, and rightfully so. But if you are in a liquidity trap and you are advocating frontloaded austerity—

    The Tea Party is really talking about killing the economy —

    Again, it’s absolutely ludicrous. And if we need an example, we can just look across the pond and see what’s going on in Euroland. Putting somebody who is suffering from anorexia on a diet doesn’t make a lot of sense to me. But essentially that’s what the austerity folks are preaching and that’s what we’ve been grappling with here in the United States.

     

    Are you implying that the Tea Party has been sold a bill of goods?

    Yes, they have. I mean, the historical parallel that a lot of us point to would be 1931, when Andrew Mellon said, essentially, liquidate, liquidate, liquidate and assets will be transferred to moral hands, and we’ll live a more moral life.

    Until we starve to death.

    Right — but we will live a moral life.

  8. rossmanmd

    Good news: Ford makes commitment for 12,000 new jobs in the US in tentative agreement with UAW.

  9. Pharmboy

    Poker is still under consideration for the place, but looks like a friendly game is going to happen (sub – $200)…..yeah, and you can give me your money now! :)

  10. champ87

    Phil
    USO weekly 30 calls at .90 yesterday afternoon. Any recommendations based on what you see so far today? Thanks!

  11. stjeanluc

    FAS Money Recap

    Long Strangle –Jan 12 Calls (2.71 now 1.60) and April 11 Puts (3.30 now 4.72).

    Weekly – Full Cover October 13 Puts (1.98 average now 4.35)
    Monthly –  Full Cover October 13 Puts (1.98 average now 4.35)

     

  12. snow

    Here’s a thought on reform from an interesting article that even speaks to me as a loony flaming radical – after hours, of course, Phil, what do you think?
    "if we had a conception of government that was not only tax agent, service  deliverer, but also an investor  in the economy like a bank, and it was entitled to a return just the way a bank gets return, we’d have plenty money.  But we don’t treat ourselves as the investor. But every major technological growth has been publicly invested in. If we were a shareholder in Microsoft because we invented the computer, it would be a very different terrain. So the reinvention of capitalism is the issue, and the reinvention of government is what is happening. So capitalism is directly claiming public investment now. "
    from
    http://www.alternet.org/story/152605/the_big_picture%3A_a_40-year_scan_of_the_right-wing_corporate_takeover_of_america__/?page=entire

  13. jabobeast

    man I hope we get a bounce… this is too painful.
     
    FU financials!!!
     
    FU RUT!!!

  14. Phil

    Good morning!  

    AAPL got a $20Bn commitment for IPhones at $500 per phone from Sprint and let’s keep in perspective that AAPL only sold $65Bn of total product last year.  Today is the big AAPL event and it turns out that Siri (Apple’s personal assistant software) will be the likely star of the show.  Siri is "artificial intelligence for the IPhone" and is a first attack by AAPL on GOOG (and OPEN and Groupon…)!  

    Virtual Personal Assistants (VPAs) represent the next generation interaction paradigm for the Internet. In today’s paradigm, we follow links on search results. With a VPA, we interact by having a conversation. We tell the assistant what we want to do, and it applies multiple services and information sources to help accomplish our task. Like a real assistant, a VPA is personal; it uses information about an individual’s preferences and interaction history to help solve specific tasks, and it gets better with experience.

    Creepy or cool?  You decide…

    How far is the leap from here to the point where I don’t feel like going to a meeting so I just send my phone to ask a few questions and report back to me?  The World (assuming it survives) is on the verge of another major technological revolution as 4Bn people are now able to walk around with powerful personal computers at all times.  Imagine how different college would have been for you if you could have just said to your phone "Find that lecture where Professor X talked about the Heisenberg Uncertainty Principal and see if you can find a video that illustrates it.  Then take the text of that speech, wrap it around the video and save it for review 3 days before the test."  You can do that WHILE you are walking between classes – just you and your phone – Best friends….

    Anyway, so AAPL is a BUY and that means watch out for those QQQ short plays too.  Earnings are probably expiration week and you can sell the AAPL $335 puts for $5.30 if you don’t think they drop another 10% on earnings and that pays for the WEEKLY $380/395 bull call spread at $5 for a fun way to make $15.  

    Other than that, it’s 1,172 on the S&P and 600 on the RUT and 2,300 on the Nas (2,050 in the futures) that need to hold for us and I posted the updated TNA spread at the end of the morning post and, of course we like the RUT (/TF) bullish off that 600 line and we like oil (/CL) above 78.50 and I’m going to send out this Alert asap as it looks like they are gettable.  

    Any break below those lines and we’re bearish again.  There’s no way to play HOPE – HOPE is not a strategy.  The technicals are TERRIBLE and I’m just looking at the newsflow that has no NEW in it – just the same old BS rehashed for the may dozenth time and that just doesn’t seem like enough to break us lower – the same way I thought the news wasn’t GOOD enough to break us over at 1,200 – it’s a range – no magic involved…

    Cashy, Cautious and BALANCED!

  15. bobhu

     jabobeast, i am with you…:-(

  16. stjeanluc

    FAS Money / Phil – Should we consider rolling down the long puts and take the money to roll the short ones. We could probably buy 2 or 3 strikes down.  

  17. amatta

    Phil, 
    Re my question on SQQQ from yesterday. Luckily I didn’t sell the long 25′s before the plunge or I’d be in very deep trouble now. But still have a potential big problem if we continue down and the OCT 34′s go in the money as I would have 40 34′s uncovered. 
    Again the position is 60 long Oct 25′s (net 2.35) against 20 short Oct 31′s and 80 short Oct 34′s. 
    Thanks

  18. button

    RIMM putting itself up for sale?? Hired GS to explore "strategic alternatives". Nice move up this AM

  19. ban2

    October 4th, 2011 at 7:48 am | PermalinkIgnore this user
    good morning Phil
    I have 500 JNPR @ $24.90 (now $17.08) and sold 20 JNPR Jan12 $19.00 P @ $2.00 (now 3.55)
    Although I think $17.00 is a good entry for the stock in Jan. the  puts are down 75%.
    How can I best reposition these potential loses?
    tia

  20. craigzooka

     Bring it on Pharm!  How bout a little heads up saturday afternoon and the looser buys dinner for the winner at Nobu?

  21. Pharmboy

    GS – $80 anyone?  CAT at $69 and falling.  DD – OH MY!

  22. Phil

    Goldman getting crushed!  

    MET at year-lows along with LM, HES, SWN, STX, IBN, BP, MRO, SLB, PRU, VLO, X, MGM, UPL, CCL, ATI, POT, SU, DIS, MOS…  Babies being tossed out with the bathwater – even IBM is down 1% this morning.  

    Dollar at 80.15 and that’s no good so not too enthusiastic about the bullish plays with the Dollar over 80 but look at RIMM – SOMEONE (besides me) is putting their foot down and my magic mirror also sees people buying JOYG, DE, CAKE, TGT, MAT, JPM, MSFT, SKX, WMT, WYNN, LVS…. 

    Silver is bouncing off $30 and we’ve had mixed results with AGQ here but it’s very exciting and the Oct $115/125 bull call spread is $3 and you can sell $75 puts for $3.10 for a .10 credit on the $10 spread.  Can AGQ go lower – yes, very easily but a stop on the short puts at $4.50 (down 50%) and the bull call spread at $1.50 (down 50%) limits the loss to $3 against a possible gain of $10.10 – that’s not a bad risk/reward ratio.  

    Europe still down about 3% across the board.  We’re testing our lines now and it’s VERY IMPORTANT to cut those short-term bullish losses and wait for a better time to enter.  

  23. Pharmboy

    craig – I would love to, but I will be driving from San Diego….  Talk off line later.

  24. button

    Just filled HOV Jan 13, $1.00 P for $.55.  Seems like a reasonable play just hope they don’t go broke!

  25. stjeanluc

    BAC – $5.19….  

  26. jcaesar

    Euro spiking down.

  27. exec

    JR,
     
    What’s the lower level lines you’re working with today?

  28. jabobeast

    looks like Bernank was a dud?

  29. stjeanluc

    Good cartoon from Barry:

    http://www.ritholtz.com/blog/wp-content/uploads/2011/10/Dino.jpg

    Traders on the Long Side forget to hedge their positions . . . 

  30. hanna5

     Not following actively here anymore! Still, hello all! Been a wild ride in market recently. I am aggressively adding to long term positions here that are looking like great values. I know we could go down more, but i think in 12 months, many of these prices will look like great buys. Buying some financials (BAC, MS, GS), MT, MGM, IBM, GLW. Casting net pretty wide, with stocks that look like good values. 

  31. Phil

    Don’t forget, if we’re going DOWN – like 2008 – , there is mindless protection you can add like SDS Nov $31/36 bull call spread for .95.  That one pays $5 if SDS goes up 28% so a 14% drop in the S&P to 925 and you make 400% without an offset but let’s say I am willing to buy $22,500 worth of JPM in Jan for $22.50 (1,000 shares).  I collect $2,100 for those short puts and then buy 25 of the SDS spreads for .95 ($2,375) and those spreads pay $12,500 at SDS $36.  

    Forgetting the rest of your portfolio but where do you stand with JPM?  If it’s put to you at that price (down 25%) it’s very likely the whole S&P is down 14% and you collect $12,500 towards your $22,500 purchase and you end up with 1,000 shares of JPM at net $10.  If you don’t like JPM at $10, then there is no reason on Earth to sell puts on them when they are at $28, right?  And, you don’t have to.  You can just take the spread and that same $12,500 contains $10,125 in profit (426%) all by itself with no offset and you can stop out the $2,375 hedge at $1,500 (.60) or the normal 30% off and you are then risking $875 to make up to $10,125 – again, a good risk/reward ratio to protect a $100,000 portfolio from a 15% drop.   

    The advantage of offsets is that, USUALLY, when the markets are this low – if you have cash on the sidelines (as you should) then there MUST be things you REALLY want to buy – especially if they get cheaper.  So we can use those POTENTIAL stock entries to fund the protection on our existing stocks.  Of course if JPM did fall to $20 in Jan (down 28.5%) the $22.50 puts would be $2.50 in the money but you STILL gain $5 on the spread for a net 30 x $2.50 gain ($7,500) so still not too bad as the other stocks you want to buy with that $7,500 got really cheap AND the JPM Oct $31 puts, which are about $2.50 in the money are currently $3.65 and they can be rolled $6 lower to the March $25 puts (now $3.40) so figure we should be able to at least roll the Jan $22.50 puts down to the June $17.50 puts and then those should roll to the 2013 $14 puts at least and THEN we would be forced to buy JPM.  These are not bad outcomes!  

    The key is to remain in control and know when to apply the gas and when to apply the brakes to steer your portfolio through the market bounces.  I take a lot of fundamental stands and sometimes, like BNO last month – my timing is annoyingly off but that’s why we scale in and leave ourselves plenty of time to roll because, when we are right, we can be 100%, 200%, 500% right and when we are wrong – we keep it under 30% wrong and then we don’t even have to be right hat often to do well…

  32. stjeanluc

    Apparently we are now officially in a bear market:

    http://ftalphaville.ft.com/blog/2011/10/04/692571/welcome-to-the-bear-market-america/

    Oh wait, not yet… 

    Update – We are again in a bear market!

    Latest update – Not anymore!

    These definition are just so absurd!

  33. kustomz

    Heavy USD/CHFselling being blamed for $ weakness..

  34. jcaesar

    Kustomz – Thanks, I was wondering what that dollar dive was about.

  35. rustle123

    Another hedge that has been decent for me has been SDOW (proshares ultrashort dow30).

  36. Phil

    Ben sounds upset….

    Chairman Ben S. Bernanke

    Economic Outlook and Recent Monetary Policy Actions

    Before the Joint Economic Committee, U.S. Congress, Washington, D.C.

    October 4, 2011

     

    Chairman Casey, Vice Chairman Brady, and other members of the Committee, I appreciate this opportunity to discuss the economic outlook and recent monetary policy actions.

    It has been three years since the beginning of the most intense phase of the financial crisis in the late summer and fall of 2008, and more than two years since the economic recovery began in June 2009. There have been some positive developments: The functioning of financial markets and the banking system in the United States has improved significantly. Manufacturing production in the United States has risen nearly 15 percent since its trough, driven substantially by growth in exports; indeed, the U.S. trade deficit has been notably lower recently than it was before the crisis, reflecting in part the improved competitiveness of U.S. goods and services. Business investment in equipment and software has continued to expand, and productivity gains in some industries have been impressive. Nevertheless, it is clear that, overall, the recovery from the crisis has been much less robust than we had hoped. Recent revisions of government economic data show the recession as having been even deeper, and the recovery weaker, than previously estimated; indeed, by the second quarter of this year--the latest quarter for which official estimates are available--aggregate output in the United States still had not returned to the level that it had attained before the crisis. Slow economic growth has in turn led to slow rates of increase in jobs and household incomes.

    The pattern of sluggish growth was particularly evident in the first half of this year, with real gross domestic product (GDP) estimated to have increased at an average annual rate of less than 1 percent. Some of this weakness can be attributed to temporary factors. Notably, earlier this year, political unrest in the Middle East and North Africa, strong growth in emerging market economies, and other developments contributed to significant increases in the prices of oil and other commodities, which damped consumer purchasing power and spending; and the disaster in Japan disrupted global supply chains and production, particularly in the automobile industry. With commodity prices having come off their highs and manufacturers’ problems with supply chains well along toward resolution, growth in the second half of the year seems likely to be more rapid than in the first half.

    However, the incoming data suggest that other, more persistent factors also continue to restrain the pace of recovery. Consequently, the Federal Open Market Committee (FOMC) now expects a somewhat slower pace of economic growth over coming quarters than it did at the time of the June meeting, when Committee participants most recently submitted economic forecasts.

    Consumer behavior has both reflected and contributed to the slow pace of recovery. Households have been very cautious in their spending decisions, as declines in house prices and in the values of financial assets have reduced household wealth, and many families continue to struggle with high debt burdens or reduced access to credit. Probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market. Over the summer, private payrolls rose by only about 100,000 jobs per month on average--half of the rate posted earlier in the year.1 Meanwhile, state and local governments have continued to shed jobs, as they have been doing for more than two years. With these weak gains in employment, the unemployment rate has held close to 9 percent since early this year. Moreover, recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead.

    Other sectors of the economy are also contributing to the slower-than-expected rate of expansion. The housing sector has been a significant driver of recovery from most recessions in the United States since World War II. This time, however, a number of factors--including the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of "underwater" mortgages (on which homeowners owe more than their homes are worth)--have left the rate of new home construction at only about one-third of its average level in recent decades.

    In the financial sphere, as I noted, banking and financial conditions in the United States have improved significantly since the depths of the crisis. Nonetheless, financial stresses persist. Credit remains tight for many households, small businesses, and residential and commercial builders, in part because weaker balance sheets and income prospects have increased the perceived credit risk of many potential borrowers. We have also recently seen bouts of elevated volatility and risk aversion in financial markets, partly in reaction to fiscal concerns both here and abroad. Domestically, the controversy during the summer regarding the raising of the federal debt ceiling and the downgrade of the U.S. long-term credit rating by one of the major rating agencies contributed to the financial turbulence that occurred around that time. Outside the United States, concerns about sovereign debt in Greece and other euro-zone countries, as well as about the sovereign debt exposures of the European banking system, have been a significant source of stress in global financial markets. European leaders are strongly committed to addressing these issues, but the need to obtain agreement among a large number of countries to put in place necessary backstops and to address the sources of the fiscal problems has slowed the process of finding solutions. It is difficult to judge how much these financial strains have affected U.S. economic activity thus far, but there seems little doubt that they have hurt household and business confidence, and that they pose ongoing risks to growth.

    Another factor likely to weigh on the U.S. recovery is the increasing drag being exerted by the government sector. Notably, state and local governments continue to tighten their belts by cutting spending and employment in the face of ongoing budgetary pressures, while the future course of federal fiscal policies remains quite uncertain.

    To be sure, fiscal policymakers face a complex situation. I would submit that, in setting tax and spending policies for now and the future, policymakers should consider at least four key objectives. One crucial objective is to achieve long-run fiscal sustainability. The federal budget is clearly not on a sustainable path at present. The Joint Select Committee on Deficit Reduction, formed as part of the Budget Control Act, is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. Accomplishing that goal would be a substantial step; however, more will be needed to achieve fiscal sustainability.

    A second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. These first two objectives are certainly not incompatible, as putting in place a credible plan for reducing future deficits over the longer term does not preclude attending to the implications of fiscal choices for the recovery in the near term. Third, fiscal policy should aim to promote long-term growth and economic opportunity. As a nation, we need to think carefully about how federal spending priorities and the design of the tax code affect the productivity and vitality of our economy in the longer term. Fourth, there is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy. In sum, the nation faces difficult and fundamental fiscal choices, which cannot be safely or responsibly postponed.

    Returning to the discussion of the economic outlook, let me turn now to the prospects for inflation. Prices of many commodities, notably oil, increased sharply earlier this year, as I noted, leading to higher retail gasoline and food prices. In addition, producers of other goods and services were able to pass through some of their higher input costs to their customers. Separately, the global supply disruptions associated with the disaster in Japan put upward pressure on prices of motor vehicles. As a result of these influences, inflation picked up during the first half of this year; over that period, the price index for personal consumption expenditures rose at an annual rate of about 3-1/2 percent, compared with an average of less than 1-1/2 percent over the preceding two years.

    As the FOMC anticipated, however, inflation has begun to moderate as these transitory influences wane. In particular, the prices of oil and many other commodities have either leveled off or have come down from their highs, and the step-up in automobile production has started to reduce pressures on the prices of cars and light trucks. Importantly, the higher rate of inflation experienced so far this year does not appear to have become ingrained in the economy. Longer-term inflation expectations have remained stable according to surveys of households and economic forecasters, and the five-year-forward measure of inflation compensation derived from yields on nominal and inflation-protected Treasury securities suggests that inflation expectations among investors may have moved lower recently. In addition to the stability of longer-term inflation expectations, the substantial amount of resource slack in U.S. labor and product markets should continue to restrain inflationary pressures.

    In view of the deterioration in the economic outlook over the summer and the subdued inflation picture over the medium run, the FOMC has taken several steps recently to provide additional policy accommodation. At the August meeting, the Committee provided greater clarity about its outlook for the level of short-term interest rates by noting that economic conditions were likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. And at our meeting in September, the Committee announced that it intends to increase the average maturity of the securities in the Federal Reserve’s portfolio. Specifically, it intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less, leaving the size of our balance sheet approximately unchanged. This maturity extension program should put downward pressure on longer-term interest rates and help make broader financial conditions more supportive of economic growth than they would otherwise have been.

    The Committee also announced in September that it will begin reinvesting principal payments on its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities rather than in longer-term Treasury securities. By helping to support mortgage markets, this action too should contribute to a stronger economic recovery. The Committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability.

    Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy. Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector. Fiscal policy is of critical importance, as I have noted today, but a wide range of other policies--pertaining to labor markets, housing, trade, taxation, and regulation, for example--also have important roles to play. For our part, we at the Federal Reserve will continue to work to help create an environment that provides the greatest possible economic opportunity for all Americans.

    Nothing very market bullish here – it’s the same old cop-out.  Ben is right to tell Congress they must act but unrealistic in that these guys will not act so it is all up to him and he’s dropping the ball.
     
     
     

  37. barfinger

    Short TNA 30 calls, took the $ and bought TNA 24 puts.

  38. scottmi

    " producers of other goods and services were able to pass through some of their higher input costs to their customers." – that would be the goverment service sector of vendors and suppliers.  i’m sure no trouble passing on their inflated prices.

  39. stjeanluc

    VXX running out of strikes in the weeklies…. It stands at 58.85 and the highest strike is 60 now! With 3 days to go, might need to create new ones!

  40. scottmi

    EMN/Phil – down significantly, putting dividend at over 6% and just announced a 2-1 split. if one wants to start a new entry to EMN..and rules of thumb re better to wait for after the split or take it before..?

  41. ban2

    RUT and SOX turning up.
    Think rotation into Semi’s?? — I hope!

  42. scottmi

    EMN/Phil – that would be "…any rules of thumb…"

  43. jcaesar

    I wonder if we will follow Europe’s close today?  Hmm…

  44. kustomz

    Heavy sellers 1.3280 in EUR/USD…not confident in the Euro sustaining this move and the markets decoupling from Euro moves seems possible.

  45. ban2

    Phil
    Is there any scenario where you can see the dollar strengthening and the market going up?
    If our economy shows signs of improvement before other areas of the world wouldn’t undervalued equities move up regardless of the value of the $?
    Reluctant to go long based on your comment re the $ over $80.
    tia

  46. rainman

    Phil / tech — I watched Frontlines "Digital Nation" last night. They talked about an IBM campus that is a ghost town because the people that work there have virtual meetings (in a 3d virtual world simulator) from whereever they might be. Add a digital assistant and you could then be in two places (or more) at one time! There are some strange psychological studies being done based on personalities and virtual environments, spooky, but interesting nonetheless.
     
    We are all screwed if an EMP forces a reboot of the system.

  47. lapper

    not that heavy after all kustomz

  48. jmm1951

    ANR
     
    Interesting that the stock started deeper in the hole today, but right now up 6% for the day. Maybe the company is buying back stock or someone thinks enough is enough.

  49. rainman

    Phil / lows — 2200 new 52 wk lows

  50. Pharmboy

    Ahh, short squeezes……gotta love them.  The show must go on, and it appears China is buying large blocks of treasuries…..that is a good thing if you are long treasuries, not so good for the market….

  51. kustomz

    Lapper…incredible, Europe better be all fixed. Otherwise..moves like we just witnessed are unsustainable.
    Thursday we get a rate decision from the ECB.

  52. Phil

    Banks/StJ – The problem is the Government refuses to put a gold stamp on the banks that says "Cannot fail – we GUARANTEE it" – if they did that, all this BS would go away.  They can audit them and make them jump through hoops to get that gold star but a system like that would draw Trillions of Dollars INTO the US banks from overseas and, instead of panicking over the downfall of EU banks – we’d be profiting from it. 

    Chart/Burr – Same Bots, same charts.  

    FTR/Jomp – They are a good company.  I’d give them a chance and by May, there will be longer puts to roll to anyway.  

    Ludicrous/StJ – Absolutely!  It goes back to the old Jefferson (or whoever) quote – first they inflate bubble and get people to pour their life savings into debt-assets and then they pull the rug out and, through austerity, jam the price of assets down so the moneyed class can either confiscate the property or buy it up for 10 cents on the Dollar.  This scam has been going on since the Magna Carte was signed and peasants were first sold land by the nobles – who always seemed to end up getting it back somehow…

    "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." 

    F/Ross – About a 5% bump, not bad.  

    Poker/Pharm – That’s great!  

    USO/$25KP, Champ – The $30s are down to .51 and I wish we had caught the DD at .41 but c’est la vie.  10 more at .51 averages just over .70 and we look to take 1/2 off the table at .70 or better to leave us with 10 at a lower basis.  

    Government-Investor/Snow – Makes perfect sense to me. 

    FAS Money/StJ – I still think $13 is a perfectly reasonable target 17 days from now.  If we go lower, we need the delta to protect ourselves from more damage on the April puts but they are VERY well protected by the Oct puts at the moment and we would be more than thrilled to see a move up (where the naked calls finally catch up a bit) so I don’t think it’s worth playing with at the moment.  

    SQQQ/Amatta – I understand that it would be a problem if SQQQ jumps over 20% and puts those callers in the money and I also understand you freak out about these things and DESPITE that, I gave you my best idea yesterday, which was just cash out the $25 calls (now $5) and leave the short calls naked as you can re-cover them if we fail to hold 2,300 but there’s no sense in hedging if you refuse to take profits off the table.  You can set a stop on the short $34s (now $2.10) at $3 and worst case is you end up taking net $2 off the table but you can also roll them to 1/2 as many Nov $34s (now $4.40) or even less Dec $40 calls (now $5.10) and if you think SQQQ is going up 100% then logically you should have liquidated all your long positions and just keep the spread, which would be $16 in the money but, if you want to adjust because you don’t want to lose the gains – then that’s the way to go and, if it makes you less nervous – you can buy the Dec $30/40 bull call spread for $1.30 to cover as those shouldn’t lose too much while you wait for the Oct $31 and $34s to expire.  

    RIMM/Button – The problem with that is – if they don’t find a buyer – then they drop like a rock tied to another rock.  

    TLT pulling back nicely.  Gold down too – is Bernanke calming the markets?  Money coming out of bonds again but that wasn’t a helpful indicator last week!  

    JNPR/Ban – You didn’t sell calls?  Bad bull!  You don’t have a loss on the puts other than a paper loss that is 100% premium and the only reason you have to take that loss is fear of a greater loss as you’d rather take that than own 2,500 shares of JNPR at net $18.58 per share.  The 20 Jan $19 puts can be rolled even to the 2013 $15 puts if you want to avoid possible ownership but, as long as that relationship stays even or better – why do it now?  You can also sell 2013 $20 calls for $3.60 – something you should have done from the outset to pick up $1,800 more and that knocks almost another $1 per share off the net price in the worst case and, if you are called away at $20, then the 20 puts expire worthless for $4,000 and you lose $450 on the call-away and you’re up $3,550 on the net $6,650 entry – that’s not so terrible, is it?  

    Again, only GREED prevented you from being fully covered with just 500 at $24.50 ($12,250), selling 5 Jan $19 puts for $2 ($1,000) and 5 Jan $22.50 calls for $4 ($2,000) for net $18.50/18.75 and you probably wouldn’t be the least bit worried by this sell-off as you could roll the $19 puts ($3.50) to 2x the April $17 puts at $3.85 to put another $2,075 in your pocket and drop your basis to net $14.35/16.12 with 1,000 shares assigned to you at $16 – worst case.  At that point, it’s almost disappointing NOT to be assigned.  Which conversation would your rather have in the future?  

    HOV/Button – Good entry!  

    LOL StJ!   

    Ola Hanna!  Good strategy, we have to put our feet down at some point. 

    Can I get an upside Wheeeeeeeeeeeeeee?!?

    79.85.  Oil $77.80 – will be a very good sign when the Dollar and oil cross, maybe at $79.25. 

    Looks like a little Yentervention as the Yen shot up from 76.70 to 76.90 in minutes.  Euro also took off like a rocket from $1.317 to $1.33, which is a ridiculously large move in a short time for the World’s second largest currency.  EUR/CHF is at 1.225 and the Pound is trying to get over $1.54.  Gold down hard at $1,626 – silver still $29.95 at the moment, copper $3.13.  

    VXX/StJ – That’s the best time to play them.  If they don’t even have strikes for where they are – you KNOW they are overbought!  Those $55 short calls opened at $5 and the $56 puts opened at $1.20 for a net $3.80 credit – how can we turn that down?  Already it’s down to $3 on the callers and up to $1.85 on the puts for a ridiculous 2-hour gain.  

  53. rustle123

    We did track Europe yesterday but not until the end of the day.  I’m staying cautious and bearish still.  Do love the Apple spread by Phil earlier.  That’s looking good.

  54. Pharmboy

    Can I get an upside Wheeeeeeeeeeeeeee?!?

    Give me a downside Ooooooo…….

  55. champ87

    Phil
    on USO I did a couple of double downs ( and caught the .41). Have been scaling out since then. I did go long USO Nov 31` Calls at 1.45 and those are up nicely so far. Thanks

  56. lapper

    Kustomz, they accumulated all early morning NY time, now jammed.  Don’t think it’s over, unless equities fall apart should see 1.3330-40 range.  First objective is met (around 3285) I am half out, looking to buy back and watching equities.   Hairy freaking market.
    As I long suspected ‘they’ have 2 teams: one makes money, the second is responsible for keeping things from falling apart.  If this is the bottom the second just told the first to stop killing the market (which is all done by big scary Greece rumor, which could be solved in about 5 mins).  Liquidity withdrawn= we barf, liquidity magically appears and rally ho.  Days ahead will tell us.  Hope that chart JRW posted is right.

  57. jcaesar

    Wow, I was looking at the Greek stock market and it’s only worth 15% of its value compared to 5 years ago.  Lost over half it’s value in the past year.

  58. ban2

    shame on me!!  always swinging for the fences.
    Used to play college BB in a little town near you – Newark
    My coach once said to me -"instead of trying to hit the ball over the Hudson how about just putting over the pitchers head?
    hit 322 that season — good lesson for investing too. Be happy with smaller gains. Bad habits die hard.
    Oh that coach was "Jersey Joe Black" if you remember that far back.  Loved that guy
    thanx coach!

  59. edro00

     YRCW Assignment
    Hmmmmmm…..
    Just got assigned 50 2013 $1 puts sold for 0.88 – what can I do with the stock??

  60. rustle123

    From Doug Kass:

    Three Years After
    10:23 a.m. EDT

    The U.S. stock market might be cheaper today than three years ago.

    On October 3, 2008, the S&P 500 closed at 1099.23, the exact same level that it closed at last night.
    Let’s compare the data points from three years ago with today.

    In observing this data, one can make the case that the U.S. stock market might be cheaper today than three years ago.

  61. rustle123

    chart didn’t post, Phil, can I send a comparison chart of many different sectors of 3 years ago to now to someone to post?

  62. jabobeast

    phil-- is ther hope that we close green (even FAS)???
    overdue for a stick right?

  63. Phil

    EMN/Scott – It’s always messy to play splits and the dividend looks like 3% to me – you are looking at pre-split dividends of $2 but that’s PER SHARE and now there are twice as many shares so $1 next time.  That being said, the stock is attractive down here and the dividend seems solid so how about just fishing for an entry with the short 2013 $35 puts at $8, which is a silly amount to pay so you forego about $2.50 in dividends over 15 months but you get paid $8 on net $27 of total commitment (even in an IRA), which is 29% and TOS says the net margin on the short puts is $7 so a 114% return on margin beats a 3% dividend. 

    Dollar back over 80 as the EU buys them into the close.  Europe finishing down about 2.5%.  

    Dollar/Ban – Sure, the strong Dollar would be good for us after we stop dropping as a price adjustment.  Once it firms up at some level – then the market is free to move on its own but there would be a long adjustment as exporters get hammered (see Japan) while domestic companies and importers improve.  The problem is, we haven’t had a steady Dollar since 2006 so that scenario is not likely to play out.  

    EMP/Rain – My kids and I were watching the original Dr. Dolittle movie this weekend and it’s set in England around 1880 – just before cars but with electricity (for lights only, no machines yet) and they were mortified!  I was trying to get them to watch the movie for it’s own sake but they saw it as more like a filming of Dickens’ "Hard Times" where children suffered without the use of electronic devices (not even phones!) rather than a happy musical from a simpler era.  

    ANR/JMM – Some big boys finally going bottom fishing.  Berkshire also dropped then popped – happening to a lot of stocks as we had a mini-capitulation this morning. 

    Too much info Rain!  

    USO/Champ – Good job.  I hope you got back out now and are back to 10.  That way, we can DD again at .45 or .50 and drop basis below .60 on 20 and that’s a very nice reduction for a day’s work.  

    Greek market/JC – That sounds about right.  Too scary to touch.  

    Joe Black/Ban – From the Dodgers?  That’s cool.  My Stepfather grew up in NY back then and was a huge Bball fan – what I didn’t see myself I heard the stories of.  

    YRCW/Edro – Not much to do.  You can buy 10,000 more for $400 and bring the average down to .075 and then just wait and see how it all works out.  

    With the threat of bankruptcy out of the way, at least for now, and the impact of the impending re-structuring finally factored into the stock price, we believe that shares have now entered value territory, and it may be safer to start building a small speculative position in the stock.

    While YRCW after flirting with bankruptcy for at least two and a half years has finally avoided it, at least for now, it has done that by throwing existing shareholders under the bus. That sign has been there on the wall for some time for all who have wanted to see it. At yesterday’s closing price of under 5cents, the market has finally factored into YRCW’s stock price the impact of the dilution of existing shareholders from the inevitable re-structuring. But as happens often times, we believe that this time the market may have over-reached in correcting YRCW to the downside.

    Also:  Despite an onslaught of negative economic data the last month, the turnover rate for over-the-road truck drivers is at its highest point since the second quarter of 2008, according to a report by The American Trucking Association (ATA). Meanwhile the not seasonally adjusted truck tonnage index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, equaled 123.8 in August, which was 10.9% above the previous month. Compared to August 2010, SA tonnage is 5.2% higher, ATA said, and the tonnage index is 4.5% above a year ago.

    Chart/Rustle – Sure, you can send it to Greg or just post a link if there is one. 

    Green/Jabob – That seems to be the plan all around.  If not, what a waste of a morning pop.  

    Dollar back under 79.80, TLT $122.60, VIX 43.67 – would be nice if VIX were calmer.  Oil having trouble getting over 78 but yet another nice win on the Futures.  

  64. randers1

    Phil,
    Looking for advice on how to adjust a 5 X  NOV TZA Bull call spread the 45 & 52′s. I still probably need more hedges and do not want to increase margin.-  Although the Jan 12 25 -40 EDZ BCS has been good so far..( I am still short calls in VIX ( with a much higher long call to reduce overall risk-loss & puts CSTR).

  65. rustle123

    chart/greg/phil
     
    What’s Greg’s email?

  66. amatta

     Phil, 
    SQQQ, yes I understood your recomendation  the problem with this hedge (additionally to the fact that you have to be on your toes and make adjustments--on these crazy 5% swings and I am traveling) is that the spreads are insane as SQQQ options are very illiquid. That is what happened when I made the initial entry and had to roll and ended up giving up over $1.00…

  67. tuscadog

    Phil / PRC  Top lady banker I met today from PRC told me PRC Gov’t is lying, that growth is only now 6% not the reported 8%, inflation is slowing rapidly and SME’s are collapsing under the credit squeeze having to borrow at 20% plus (if available) , meanwhile large enterprises are being begged to borrow by the big banks.  Next move she claims is  a 180 with relaxation of liquidity to get the economy moving again.  Kind of sounds like what is about to happen in Europe as they give up on austerity.  I guess we have to wait in the US until the Tea Party drinks coffee again.  But, I see this coming shift in PRC  strategy as positive for more rapid growth resuming.  Banker claims the speculators in China have been liquidating stocks of things like copper for 4 months now, so rejects my concern that copper can go back to $1, claims biggest PRC copper producer has cost at $1.

  68. stjeanluc

    China / Tusca – What a surprise, we can’t trust the numbers coming from the government. 6% growth for China is like stalling. This could cause problems! 

  69. jcaesar

    stjean / China problems – Oh come one now.  Don’t you join the Chicken Little Caucus!

  70. zeroxzero

     Stj:  What problems?  They would be problems related to certain assets or asset classes relying on China’s posted growth numbers.  Since dictatorships have only a passing relationship with telling the truth, one would think that 6% rather than 8% growth wouldn’t come as a great surprise to the markets.

  71. rainman

    DOW starting to look tasty with a 4.65% yield and PE of 10. Buy write @ 22 and sell the 2013 $17.50 puts and calls for $10.25 puts you in @ 14.62 and makes the div about 6.8%, getting called returns 47% without the dividend.

  72. jabobeast

    they are talking about the rally today on CNBC?
    Do they not realize that the dow is DOWN 90 and S&P is DOWN 1!!!
    FU CNBC!!!

  73. David Ristau

    Phil -

    Have any trading ideas for a conservative GOOG play on earnings?

  74. stjeanluc

    Problems / ZZ – It should not come as a surprise (at least for me) but look at all these guys piling into China! And by problems I mean that China needs high growth just to sustain the current model – slower growth means fewer jobs and fewer jobs mean unhappier people – dictatorship or not! The advantage of the dictatorship is that they have fewer qualms to suppress discontent! 

  75. rainman

    IP starting to look good as well

  76. Burrben

     Phil / ED (no not that e.d.)
    What do you think about selling some puts on ED?  Read a article today on SA and I like the premise..  Good / Bad / Wait?
     

     Con Edison (ED). If you’ve ever lived in New York, then you’re familiar with ConEd. ConEd won’t be going out of business anytime soon, and it has a large economic moat and a well-heeled clientele and pays a steady stream of dividends.
    With a $15 Billion market cap, you’re getting above average Return on Assets of over 6%, and you’re getting a solid dividend yield of 4.2% -- that’s a greater yield than the 30-Year Bond! In addition, in times of crisis you can rely on this utility for capital preservation. Check out how ConEd has performed relative to the S&P500 over the last 5 years.


    Even during the 2008 financial crisis While the S&P500 was down 30% from the day Lehman went under until the end of the year, ConEd was down slightly under 4% -- and was still paying out a large dividend.

  77. Pharmboy

    FWIW – pullback then rebound?

  78. gucci

    Hi Pharm — how to open your graph — showed nothing right now

  79. Pharmboy

    better one now….ignore the above.

  80. Pharmboy

    AAPL not following though…..

  81. terrapin22

    tusca – thanks for the China insight.  I was in Hong Kong and Singapore last week.  what’s your email?  I will get in touch before my next trip later this year. 

  82. Phil

    TZA/Randers – Here’s my logic:  The $45 calls are $17.50 and the $52 calls are $14.50 so that’s $3 out of a possible $7.  If you buy the $52/47 bear put spread for $3, you will collect no less than $7 total, no matter where TZA finishes so you can lock in another $1 gain by doing that.  My preference, in this situation is to roll the $45 calls to the Jan $64s at $15, taking $2.50 off the table plus whatever long value you retain above that of the caller at expiration.  And, of course, my favorite way to cover is to cash the $17.50 on the $7 spread and spend $5 on the Jan $50/70 bull call spread so you pocket $12.50 and you have a $20 spread that’s protecting against a move in TZA all the way up to $70 (and if TZA moves up $5 or more, you spend another $5 of the $12.50 to buy another $20 worth or protection and if it moves up another $5, your first $20 spread would be about $15 in the money and you can pull the profits off that one and buy another $20 worth of protection.  

    Greg/Rustle – admin at philstockworld dot com

    SQQQ/Amatta – If you are traveling and feel forced to make adjustments on the road, then don’t use the ultras for a hedge.  The Qs are much more liquid and you can pretty much accomplish the same thing.  

    PRC/Tusca – If the G7 is smart, they will spin the whole thing as a massive Global stimulus package with China participating as well. 

    DOW/Rain – A very good stock but also very tied to China so probably a bumpy ride ahead.  

    CHK getting some bids.  

    Rally/Jabob – They also don’t realize that Cramer was on all morning saying the World was ending and people would be fools to buy in this market (but MS is a safe place to keep money).  

    GOOG/David – I don’t think there is any such thing as a Conservative play on GOOG.  They went up 20% from June to July and down 20% from July to Aug and then "only" up and down 10% from Aug to Sept.  They have earnings on expiration day and, judging from media company reports – ad revenue sucks so either GOOG is stealing it or it’s down across the board.  If I had to pick a GOOG play it would be a backspread, buying 3 March $370 puts for $15.50 ($4,650) and selling 4 Nov $440 puts for $14.50 ($5,800) for a net $1,150 credit.  If GOOG goes up (or doesn’t drop $50), the short puts expire worthless and whatever value is left on the long puts is additional profit.  If GOOG goes down, the Nov $440 puts can be rolled lower and eventually (hopefully) into a bear put spread.  You can also add a long put if you think it’s in trouble but the main premise here is you don’t think GOOG falls $50 on earnings or, if it does, that it won’t be too sharp a drop.  

    ED/Burr – I’d like it better if they weren’t at the top of a nice run (all utilities are).  They are a good, solid company but just not a compelling buy at $56.  $50 is interesting and you can sell the 2013 $50 puts for $4.30 and just leave it as that for an initial net entry of $45.70.  

    Dollar making another run at 80 – what a pain in the ass! 

  83. rainman

    Pharm / chart — Neither displays on IE9

  84. Maya1

    Jabobeast
    FU- Everything!!!

  85. jabobeast

    that is exactly how I feel today Maya ;-)
    Unless there is a stick save, of course!

  86. Pharmboy

    gucci & rain – jist is, 109.50 needs to hold, or back to 108.8…….link

  87. rainman

    Did /NG change to another symbol on TOS? My chart just says "Waiting for data".

  88. iTrade

    Tesla Motors – Model S
     
     Phil,
     
    I’m a fan of the Model S, was down in california this weekend at the beta test ride event. It was a blast and the car looks great! Very excited about the car and the prospects of the company. It definitely will not be the next apple, but has some good potential as long as the whole market doesn’t crash.
     
     What’s your take on this trade idea?
    Sell (1) Jan 13 $17.50 Put  -mark 4.55
    Buy (1) Jan 13 $20 Call – mark 7.55
    Sell (1) Jan 13 $30 Call – mark 4.40
    -- Likely credit of $1.40, for a stock currently trading at $23.75 ($3.75 in the money)
    I liked the stock at it’s $16 IPO price, despite no earnings… with the credit on the trade that puts my entry at $16.10. What do you think?
     
    Any better positions you’d recommend?
     

  89. iTrade

     TESLA MOTORS – Model S @ the Test Ride Event
    vimeo.com/29935508

  90. jcaesar

    This is one meshuggeneh market (look it up!).

  91. jabobeast

    Every rally seems to get sold into jcaesar—oy vey!
    please let Mr. Stick appear today!!!

  92. jcaesar

    jabo – Yes, it really is a shanda.

    But let’s see if this rally can do it…

  93. Pharmboy

    RIMM falling off a cliff.

  94. kustomz

    RIMM classic Phil

    "dropping like a rock tied to another rock" ;-)

  95. Pharmboy

    Buying GE $11 Jan Puts for 66c.  Just because….and I have been told this is the area they go to…..like GS to 80.  Those Nov puts are working out very well.

  96. Phil

    AAPL not giving us much to get excited about – markets losing steam.  

    TSLA/ITrade – I think they may be very underpriced as an auto company, that’s a very good entry down around $16 – nothing to change there.  

    AAPL notes:  

    10:10 a.m. Macbook Air and iMac are #1 notebook and desktop in the U.S.

    10:10 a.m. The Mac has outgrown the PC market by almost 6 times in the past year. Every single quarter for 5 years the Mac has outgrown the PC market. They are now approaching 60 million users (58 million right now).

    10:11 a.m. Apple’s Mac market share is now 23%, so nearly 1 out of every 4 computers sold in the US is a Mac.

    10:17 a.m. The iPhone has 5 percent share of the worldwide mobile phone market. That’s one in 20 people, worldwide. The market is 1.5 billion units annually.

    10:18 a.m. Next up, the iPad. People have been thrilled with both the original iPad, and the iPad 2, he says. 95% satisfaction score in their most recent survey. And iPads are showing up everywhere: in schools (cute picture of a girl in a science lab holding an iPad). Almost a thousand K-12 schools have a 1:1 program so a child can enjoy an iPad for an entire day. Almost all school districts have an iPad program. iPads are in universities, flight cockpits. It makes the pilot and plane more efficient (fuel efficiency).

    10:20 a.m. Over 80 percent of top hospitals in U.S. are now testing or piloting iPad.

    10:20 a.m. 92% of Fortune 500 companies are testing or deploying iPad. This is in less than 18 months, which is unheard of. “iPad is the undisputed top selling tablet in the world,” Tim says. “Despite everybody and their brother trying to compete with iPad, 3 out 4 tablets in the US are iPads.”

    10:21 a.m. Consumers don’t want tablets, they want iPads, Tim quotes from AllThingsD

    10:22 a.m. So Apple has sold 250 million iOS devices. iOS has 43% of the mobile market. Android has 33%, according to their pie chart. iOS makes up over 60% of the mobile browsing market. There are over 500,000 apps in the app store, including over 140,000 iPad-specific apps.

    10:23 a.m. The app store is the number one store for mobile apps. In a little over three years, customers have downloaded over 18 billion apps. And that rate is accelerating: 1 billion apps are being downloaded each month.

    10:28 a.m. Now another new app in iOS 5, Reminders. You can have location based reminders, if you need to remember something on your way home from work, or simple reminders like a grocery list.

    10:35 a.m. Now, Eddie Cue will talk to us about iCloud. “iClodu stores your content and wirelessly pushes it to all your devices.” iCloud is free. Now, music, photos and documents. Over a third of the music purchased from the iTunes store is purchased on iOS devices.

    10:36 a.m. Now, if you download something from iTunes, say on your iPad, it’ll also simultaneously download on your iPHone and iPod Touch. With a tap of a button, you can download a song you’ve previously downloaded from the iTunes store onto another device.

    10:37 a.m. Now, Photos. With Photostream, you can take a photo on your iPhone, it’s saved to iCloud, and it’s pushed to your other devices. It even downloads right to iPhoto on your Mac, and you can see it on your Apple TV.

    10:38 a.m. Documents in the Cloud. Now, when you create a new document, like in Pages, it’s automatically saved and stored in iCloud. You can open a document and start editing on any device and pick up right where you left off. Documents are available as Pages, Numbers and Keynote, and will be available on Ocotber 12.

    10:41 a.m. New app: find my friends. It lets you find the location of family and friends. It’s like Find My iPhone for people. But sometimes you just want to share your location for a few hours or a day. You can create a temporary event and share your location for a certain amount of time, like a day at the beach. You can easily locate friends and family, there’s a temporary sharing option, simple privacy controls, and parental restrictions (parents can restrict kids from turning it off!). All of this is part of iCloud, which is free for iOS 5 users and OS X Lion users.

    10:47 a.m. He’s talking about iPod. We’re getting iPod updates. First, iPod Nano, which features a compact design, multi-touch display and more, but now has updates. Now you can display big icons for the features on it and swipe between them with your finger. Fitness is one of the Nano’s most popular uses, so there’s an improved fitness experience. Right out of the box, it can track walks and runs. Plug your Nano into your PC to upload your data to Nike+’s website and compete with friends, gain achievements.

    10:50 a.m. The iPod Nano is available in 7 colors, 8 GB for $129 and 16 GB for $149. Nice price drop. It’s available today.

    10:50 a.m. Next, iPod touch, their most popular iPod. It’s the most popular music player in the world and the most popular game player in the world. It will now run iOS 5. With iMessage, you can communicate with other iOS users even though you don’t have a data plan, since it’s free and unlimited over Wi-Fi.

    10:52 a.m. iOS 5 is a tremendous update for the iPod Touch, Phil says. It’ll be available in both black and white. Price drop: 8 GB for $199, 32 GB for $299, 64 GB for $399. Available October 12.

    10:54 a.m. Today, we’ve got the iPhone 4S.

    10:54 a.m. It starts with a retina display, glass in front and back, same form factor as the iPhone 4. But “inside, it is all new.” It’s got an A5 processor. It’s an Apple designed chip, dual core processor, dual core graphics (up to 7x faster than previous iPhone).

  97. 490union

    Phil…Bot Jan. 12    25calls at 5.40  and sold offsetting Jan.  40calls  at 3.50 and  Jan  75calls at 1.90. Now way up on the 25 calls,how do I lock in profits and still hold onto premium in sold 45 and 75 calls? Thanks

  98. Pharmboy

    If 108.80 area breaks, look out below.

  99. celesteschein

    After loading my ten year olds backpack with her 20 pounds of schoolbooks, you would think apple would take on the archaic textbook system and put all schoolwork on ipads. It would save a lot of kids backs!

  100. Phil

    AAPL getting tanked on this event.  Clearly people wanted a lot more out of them.   Weekly $395 short calls fell to .44 so I think take them back and hold the $380s (now $2.25) to see if they bounce back.  Short puts should be fine – disappointment should not take them down 10% and now earnings can really pop them.  

    Gold testing $1,600 again.  Dollar 80.10.  

    RIMM/Kustomz – Like I said, those things can really backfire on you.  

    Mystery hedge/490 – I give up – what ETF?

    More AAPL:

    11:00 a.m. Second: the wireless system. Phil’s talking about the iPhone 4’s stainless steel band. The iPhone 4S will intelligently switch between two antennas to both transmit and receive. It can do this in the middle of a call. It improves call quality and can download data twice as fast as before. It can achieve 14.4 down and 5.8 up (that’s Mbps). Sound familiar? It’s 4G performance, same as the Motorola Atrix 4G, HTC Inspire 4G, LG Thrill 4G.

    11:02 a.m. Next, a world phone. The iPhone 4 came in two flavors, GSm and CDMA. GSM lets you roam around the world. The iPhone 4S is a world phone, it has both GSM and CDMA.

    11:03 a.m. Third: the camera system. The iPhone 4 is the most popular camera used on Flickr. “We set our sights on competing with great point and shoot cameras,” Phil says. So what’s the new camera like? It’s got an 8 MP sensor, you can take photos that are 3264 by 2448. That’s 60% more pixels than the iPhone 4’s camera sensor. But that doesn’t necessarily make a picture better. The new sensor is backside illuminated, which gathers 73% more light than the iPhone 4’s sensor. It’s 33% faster than the iPhone 4 camera as well. On top of that, it’s got a hybrid IR filter for better color accuracy and more color uniformity.

    11:05 a.m. The iPhone 4S has a five element lens (there were four in the iPhone 4), this provides a 30% sharper image. It’s got an f/2.4 aperture, which lets in more light.

    11:06 a.m. Apple also uses that A5 chip, which houses an Apple designed image processor. There’s face detection, it has 26% better auto white balance than the iPhone 4, and the chip takes super fast photos.

    11:06 a.m. We’re looking at a chart of smartphone camera speeds. The iPhone 4 takes 1.1 seconds for first photo, half a second for second photo. Droid Bionic takes 3.7seconds for first photo, 1.6 seconds for second photo.

  101. Burrben

    I wouldn’t sell RIMM puts if you paid me.  Until they re-invent themselves (like apple did) I can’t imagine them coming back.  
     
    I don’t know much, but I know that’s a stock I DON’T want to own……

  102. jmm1951

    AAPL/iPod touch
     
    A friend bought one yesterday, the 8gb model for $176 in Office Depot. Nice little device. I was able to read Philstockworld on it. I would think a better buy than the Kindle Fire for a reader. Although the screen is small, the definition is terrific and you can use it with a magnifier. If the screen was double the size it would be the perfect device. It is almost too small for the hand too. It needs to be a bit chunkier. Probably you can buy an aftermarket holder.

  103. drcraig

    The new iPhone sounds awesome. Imagine the market reaction if they had just called it the iPhone 5…

  104. Phil

    School books/Celest – I think if budgets weren’t so tight, things would already be in motion.  AMZN or BKS is in better positions with publishers than AAPL to make this happen and they should take the lead before that whole business goes away from them. 

    11:09 a.m. Next, video recording. It can take 1080p HD video with real-time video image stabilization. There’s also temporal noise reduction, which helps in low light scenarios. Now we’re going to see a sample video of the kind of quality you can expect from the camera. The colors are bright, vivid. It’s a video of three ladies and going hot air ballooning.

    11:11 a.m. Now, AirPlay. You can stream photos and videos straight to your Apple TV setup. It also has AirPlay mirroring. If you don’t have an Apple TV, you can plug in an HDMI cable and do wired mirroring.

    11:13 a.m. “What we really want to do is talk to our device, and get a response. We don’t want to be told how to talk to it, we want to talk to it however we like,” Phil says. This feature that does this is called Siri, your intelligent assistant. It helps you get things done, just by asking.

    11:16 a.m. You can also ask the question a different way to get the same result. You can also ask something conceptual like, “Do I need a raincoat today?” Siri responds: “It sure looks like rain today.” The audience laughs and applauds.

    11:16 a.m. Now, a question about the clock. “What time is it in Paris?” Response: “The time in Paris, France is 8:16 PM.” What about the alarm? “Wake me up tomorrow at 6am?” “OK I set it for 6am” Siri says. Impressive.

    11:17 a.m. You can ask Siri about stocks. Siri says “NASDAQ Composite is down right now.” Siri is also partnered with Yelp, so you can ask something like “Find me a great Greek restaurant in Palo Alto.” Siri responds “I’ve found 14 Greek restaurants, 5 of them are in Palo Alto. I’ve sorted them by rating.” The ranked listing follows below.

    11:18 a.m. You can also ask Siri Maps related questions, and it will show you the directions. Siri has a robotic female voice in this demonstration.

    11:19 a.m. If you get a message, and your phone is in your pocket, you can ask Siri to read it to you, hands free. You just have to say “Read my message.” Siri reads the message, and asks if you want to “Reply” or “read it again”. You can also ask it questions about your calendar. Scott checks he’s open on Friday, then tells Siri to reply “I can do Friday.”

  105. kustomz

    jmm double the size…its called the IPad ;-)

    Boy I cant imagine what these moves are doing to the psychology of traders. Looks like they are trying really hard to crush the little guys.

  106. rustle123

    Heard the IPhone 6 replaces wife/girlfriend.

  107. Phil

    Touch/JMM – You mean something between the IPhone and the IPad?  I would like that.  Something the size of a paperback book would be nice.   Meanwhile, Tina (an Apple hater) broke down and bought the IPad yesterday.  She was over in BBY and couldn’t resist a white one with a pink cover and now she keeps running in to show me all the cool features – to which I say "Duh!"  She was the last holdout in our house – the kids have touches and my old IPad and I have my new IPad, my IPhone plus my big IMac and we can all face-time and share apps and music and pictures so I guess Tina felt kind of silly with her Kindle and her droid phone…  

    IPhone 5/Dr C – I think they don’t want to piss of the people who bought IPhone 4s a year after the IPhone 3s came out and also, clearly they have no need to create demand in the marketplace.  They did just what I wanted, which was improve the camera and the web speed but if they are doing all of this as an mid-cycle upgrade – imagine what the actual IPhone 5 will do!  

     

    11:22 a.m. Web search is also integrated with Siri. So if you’re looking up info on the space program, you can tell Siri to “Search Wikipedia for Neil Armstrong.” The relevant Wikipedia page comes up in Safari almost instantly. Siri is also partnered with Wolfram Alpha (awesome!).

    11:24 a.m. If you’re counting down to a special event, you can ask Siri. How many days until Christmas? 82 days (or 2 months, 21 days, 11 weeks 5 days, 58 weekdays, .22 years). Pretty precise there, Siri.

    11:24 a.m. Siri can also play any song you want, if it’s in iCloud or on the device, you can use it to make calls, send messages, set up meetings, set reminders, get directions, dictate and send emails, find out the weather, get information about stocks, set alarms, find a contact’s address, write notes, perform web searches, and answer any questions you’d normally ask Wolfram Alpha.

    11:26 a.m. What is Siri, exactly? “I am a humble personal assistant,” Siri replies. Much laughter and applause.

    11:27 a.m. With Siri you can use natural language. It’s conversational, contextual, personal. It works with built-in apps, adds dictation anywhere there’s a keyboard. It works across Wi-Fi or 3G. It’ll be built-in to the iPHone 4S and support English, French and German. It will be beta to start: more languages and services will be added over time.

    11:28 a.m. Now we know all the features that are added in the iPhone 4S. To be clear, Siri is iPhone 4S specific.

    Those bastards!!! 

  108. Phil

    Chart from Rustle:  

    • The U.S. stock market might be cheaper today than three years ago.

    On October 3, 2008, the S&P 500 closed at 1099.23, the exact same level that it closed at last night.
    Let’s compare the data points from three years ago with today.

    In observing this data, one can make the case that the U.S. stock market might be cheaper today than three years ago.

  109. kustomz

    People are nuts, so they introduced the IPhone 4s and not an IPhone 5…you say potato i say potato

  110. drcraig

    So what’s the "one more thing" going to be??

  111. jabobeast

    Is the stick dead???
    FU broken stick!!!

  112. Phil

     11:33 a.m. The iPhone 4S will be avilable in black and white. 16 GB for $199, 32 GB for $300, $64 GB for $400, with a two year contract. The 3GS will now be available for free, and an 8 GB iPhone 4 will now be available for $99.

    11:35 a.m. Pre-orders tart on Friday October 7th, and the iPhone 4S will be vailable October 14th in Uthe US, Canada, Asutraklia, the UK, France Germany and Japan.

    11:36 a.m. On October 28th, it’ll hit a bunch more ountries, and by December, over 70 countries, over 100 carriers. This is the fastest roll out ever for an iPhone.

  113. exec

    Look at that….Cramer was pumping Ford this morning and it’s up in the face of disaster.

  114. Phil

    There was no "one more thing" – that’s silly of them.  I guess they think that’s Steve’s deal but I think people would want to see that tradition kept up.   

    DECK making a comeback after a LOVELY drop (on our Long Put list).  

    CMG clawing back.    PCLN – not so much…  

    WFR up 2.5% today (but under $5). 

    FCX holding $30.  Things seem about right to me – low but right…

  115. danosu77

    Portfolio Balance:
    Phil, I have a small portfolio.  I would like to see if you have time to comment on how I can be more balanced.
    I currently have:
    2 -  FXE Oct 129 Short Puts. Sold at 0.62 Now 1.075
    2 – IBM Jan 105 Long Puts purchased at 1.04 Now 1.055
    5- INTC Jan 19 Short Puts. Sold at 0.65 Now 1.19
    As I mentioned, I don’t have any stock and I have small portfolio.  The shorts were sold to fund bullish plays that did nto pan out with the Fed announcement.   If we drop, I need to kick the short puts down the road, but hopefully I will make some money on the IBM and I can roll the puts.  If we climb, then I have more breathing room on the puts, but I don’t really have any other longs.  Any feedback would be appreciated.
    Dan

  116. l4real

     Phil,
    Is that a stick or a trick?

  117. gucci

    hi Phil — add more hedge at this point if I only 1/2 hedge now. thx

  118. Phil

    USO Friday $30s back to .35 and that’s a DD for a .53 avg on 20 in the $25KP. 

    Overall, gold (now $1,599) is trashing the miners and oil’s huge rejection at 78 (now $75.44) is crushing energy and banks continue to suck so how can we rally?  XOM is off 1.67% and CVX off 2.75% so no go on the Dow.  AAPL down 4% now – disaster for the Nas too.

    Dow volume a healthy 156M coming up on 3pm – so so…

    Balance/Dano – That’s very small!  You can’t really afford to buy premium in a small portfolio.  If you go back to early last year on our Portfolio Tab, you can find where the $10,000 portfolio started and I’m sure some of the positions and commentary there can be helpful.  IBM is insurance you expect to lose but can you afford to lose $210 against $200 of FXE short puts and $600 of INTC short puts?  Also, is IBM a proper offset to INTC + currency and why the hell are you trading currencies with such a small portfolio?  

    You don’t hedge your trade, you hedge your anticipated losses but IBM doesn’t correlate well INTC and neither have anything to do with FXE (see chart).  I like the FXE short put as a trade but what is your trading goal here?  The margin on the short FXE puts is about $4,500 and I like the INTC short puts as that’s just $1,300 margin but still, do you even have the money to own 500 shares of INTC at net $18.35 ($9,175).  I guess you do because you are tossing it around in margin but this is a very dangerous environment to be taking open risks in a small portfolio.  

    If you want to make $325 being long on INTC, why not BUY 6 Jan $17.50/19 bull call spread for $1.10 ($660)?  That pays $900 at $19 (up $270) and it’s a lot easier to ride out than the short puts with no margin requirement.  

    On FXE, you can be long on them to make $125 with 4 $129/130 bull call spreads at .70 ($280), which pay $400 (up $120) if FXE holds $130.  

    Now you have 2 trades using no margin that can lose not one penny more than $940 and you can assume you will pull them with a 50% loss at $470 and then you can look to hedge 1/2 of that loss on a market downturn and if you wanted to do that with IBM, you could pick up just one Nov $160/155 bear put spread for $1.10 ($110) that pays $500 on a big drop.  

    Given those two positions, what would really be bad for you is the Dollar going up so you could, instead, buy 4 UUP Jan $22/23 bull call spreads for .41 ($164) and that pays $236 if the Dollar keeps going higher.  

    If you only have $10,000 – then always keep in mind that pulling out just $100 in profit once a week is a 50% gain for the year so you need to trade with the mindset that EVERY gain is precious and you should not try to go for big wins – as soon as you make $100 – take the money and run.  As soon as you lose $100 – get out – as it’s a lot of money!  

    Of course, that means you NEVER buy premium – by the time you buy premium, you are probably down $100 as soon as the order fills…

  119. rainman

    If they can get /DX < 80, it’ll be a stick.

  120. Pharmboy

    AAPL coming to the 200d MA.  That is not good…..

  121. exec

    Stick or Trick,
     
    I’ve noticed a pattern.  Stick one day…..Anti stick the next.  Not perfect but somewhat consistent.  Yesterday was anti.  FWIW

  122. Pharmboy

    SPY 107 P calendars for 1.94.  Sell Weekly, buy Oct Months.

  123. Phil

    Stick or trick/L4 – Is that a trick question?  Sticks are tricks, aren’t they?  I think that down move may have been a trick – this is just more silliness near the bottom of our range – we should be used to this by now.  That’s why we’re pretty much ignoring it today and just waiting to see if we pass or fail on the S&P. 

    Hedge/Gucci – I wouldn’t add more unless we fail on the S&P.  As usual, I prefer to be 15/10 or 20/15 bullish when we’re testing our bottoms as there’s a good enough probability that we bounce that it’s worth taking the chance and we certainly have plenty of bearish profits to cash out and bullish bets to press as well.  

    Dollar right on that 80 line. 

  124. rustle123

    How high would the Nasdaq be right now if AAPL was flat?

  125. exec

    Phil/Pass    
     
    What is the pass figure you’re using.
     
    Could be a nice short squeeze tomorrow.

  126. l4real

     Good one Phil! 
    By the way , thanks Phil/JRW III for follow up and the IWM lines yesterday! They worked out okay!

  127. nicha

    exec/Pass – I believe it’s 1072 on the S&P.

  128. exec

    And the squeeze begins.

  129. jcaesar

    According to Zero Hedge, this is why we’re going up, and they’re not impressed.

    http://www.zerohedge.com/news/non-news-dexia-bad-bank-sends-market-soaring

  130. SellPremium

    Phil – Do you think today is dead cat bounce?

  131. Pharmboy

    Dead cat bounce SellP – no, this is stick is trying to get retail in…..that is all.  They are tired of selling to themselves, so the only way to make money is to squeeze the shorts.  I don’t by it, and am still net short.

  132. stjeanluc

    There is one thing that I don’t understand – why Apple doesn’t release a 4G iPhone. My kid now has a 4G Android phone and the speed difference is amazing. When you have 4G coverage, it’s as fast you home connection – up to 20 Mbps download and sometimes more. She can tether her laptop wherever she is and run Skype video without a hitch! Just like being home on a Wifi network! I know 4G is battery intensive and that might be the reason for Apple, but Verizon and all are all rolling out 4G networks everywhere for a reason! Hopefully the iPhone 5 will have that.

  133. rainman

    Now that’s an impressive stick. 4% on the rut.

  134. russellb73

    Phil
    Should we short this rocket up?  As far as I know the world is not now fixed?  Or what am I missing??

  135. stjeanluc

    Dollar has bounced off the 79.75 line  last time! This has held since the run up yesterday afternoon!

  136. Pharmboy

    SPY 112 Calls.  Sell the weekly, buy the Month.  I am still in the 117s as well, sold the 113s (rolled down).

  137. Phil

    3:00 PM On the hour: Dow -1.68%. 10-yr -0.17%. Euro +0.49% vs. dollar. Crude -2.68% to $75.53. Gold -3.38% to $1601.75.

    Apparently sparking the turn higher in stocks the last few minutes is the recycling of news that EU finmins are looking into recapitalizing the banks. There aren’t any details, just a realization from the leaders that not enough has been done to convince markets the banking system can absorb the hits from the debt crisis. (see also

    Aug. Factory Orders: -0.2% ($451B) vs. consensus of 0%. Factory orders had increased 2.1% (revised) in July. Ex-transport, -0.2%. Shipments -0.2% vs. +1.2% (revised) prior. Inventories +0.4%.

    Redbook Chain Store Sales: +4.1% Y/Y vs. +4.2% last week. Unlike ICSC, Redbook says "spending is concentrated in consumables and basics," and sees weakness ahead in October.

    ICSC Retail Store Sales: +0.1% W/W, vs. -0.2% last week. +3.7% Y/Y, vs. +2.7% last week. "Falling gasoline prices are giving a boost to the consumer’s discretionary purchasing power."

    Greek finmin Venizelos says the country has enough cashto continue paying bills until mid-November, about a month past what had previously been thought. This gives the troika a bit more time to review Greece’s books and possibly come to agreement on releasing the next tranche of bailout funds.

    "If I can buy dollar bills for 90 cents, I’ll buy them," says Warren Buffett of his decision to start buying back Berkshire (BRK.A) stock. "The book value happens to be an understated measure," of Berkshire’s value he says, explaining why he will buy shares for up to 110% of book.

    If Friday’s jobs report is the only thing that can shift the focus away from Europe, then a new Intuit report might offer a glimmer of hope; according to its monthly small business employment index, small businesses continued to hire in September, and employees worked a greater number of hours and were paid more. 

    Cutting government spending now, Paul McCulley argues, is "ludicrous"… like putting an anorexic patient on a diet. When the private sector is reducing debt as it is now, the last thing the government should do is cut spending, he says, because government spending is the only thing that can keep the economy afloat. 

    Kohl’s (KSS) announces it anticipates hiring 40K seasonal workers this holiday season, marking a 5% jump from last year’s total. Any positive gain at all in seasonal hiring may be welcome relief for the Street with forecasts of "tepid" hiring prevalent. Shares -1.3%premarket.

    The WSJ reports, flailing Dexia will set up a bad bank to park €180B of assets, part of a larger plan that looks to essentially dismantle the lender ($2B market cap). France and Belgium will initially back the bad bank with guarantees, looking to eventually take over its ownership. (see also

    As gold gets slammed, so do gold shares: Agnico Eagle (AEM -5.6%), New Gold (NGD -4.7%), U.S. Gold (UXG -13.3%), Randgold (GOLD -7.8%), Barrick Gold (ABX -5.2%). 

    Large-cap energy stocks have been trashed – down 25% this year – but are now selling at just 1.6x book value. It’s a buying opportunity for patient investors, Russ Koesterich writes, noting that spreads for refined products are close to record levels, which should lead to strong cash flow for refiners and integrated oil companies.

    Coal stocks, hammered yesterday following Arch Coal’s (ACI +7.9%) guidance cut, are staging a rally today. PCX +11.4%.BTU +3.5%ACI +7.9%ANR +6.2%. [[JRCC] +13.9%. Oil refiners are also in rally mode, thanks to a 1.9% jump in the crack spread.WNR +7.1%SUN +2.8%MPC +4.4%VLO +2.9%.

    Solar stocks, some of the worst performers of 2011 thanks to a non-stop stream of bad news on the demandpricing, andregulatory fronts, are staging a big rally today, perhaps with some help from covering shorts. STP +17.4%JKS +16.8%CSIQ +10.3%.FSLR +5.4%TSL +7.7%JASO +6.6%

    Alcoa (AA) suffers another analyst downgrade stemming from softer demand and lower prices for aluminum, as Dahlman Rose cuts its Q3 earnings estimate and lowers its price target to $17.50 from $19. Deutsche Bank lowered its rating yesterday, but the moves seem like piling on; shares have been cut in half in the past six months. AA -3.1% premarket.

    "We have certainly seen a slowdown," admits a Rio Tinto (RIO) VP of demand for aluminum, but "the wheels are not falling off yet in terms of demand." He says Asia remains "pretty good," North America is flat, and the weakness is coming from Europe. Shares -1.5% premarket. 

    Sonic (SONC -5.9%) takes a hit after it says same-store sales fell in FQ4, missing estimates and halting its gradually improving sales trend. Net sales increased 0.4% for company drive-ins, but declined an estimated 0.5% for the overall system.

    IMAX moves +1.5% higher after being Piper Jaffray raises estimates, saying company is likely to beat Q3 expectations. 

    MEMC (WFR +9.6%) rallies after Gilford upgrades shares to Buy, citing their low valuation. MEMC has been crushed this year by weak solar demand, which has badly hurt pricing for the solar wafers its sells to module vendors.

    Crazy cheap stock!   

  138. Phil

    Crazy cheap stock!   Though Boeing (BA) doesn’t see the North American commercial aircraft market posting the kind of growth expected from the Chinese market, it still sees the North American fleet growing 41% by 2030, to 9,330 planes. This leads Boeing to predict airlines in the region will take delivery of $760B worth of planes over the next 20 years.

    I love this – see how a statistic was spun into a rumor that killed the stock yesterday? Adding to AMR’s (AMR +17.7%) bounce today is a statement coming from the airline pilots union denying that some pilots were seeking earlier retirement based on special knowledge of their employer’s finances. The union says the likely cause was change made by Congress in mandatory retirement age from 60 to 65 created a backlog of pilots who otherwise would have retired at age 60. 

    In a disappointing piece of data for Tesla Motors (TSLA), and perhaps also GM and Toyota (TM), a Deloitte survey of consumers in 17 countries finds electric cars meet the expectations of 4% or fewer respondents. Complaints exist not only about high prices, but also limited range (when on an electric charge) and long charge times.

    Apple (AAPL -4.5%) is now selling off harder following its iEvent. While the iPhone 4S should be well-received, Google (GOOG) is likely breathing a sigh of relief, as the product wasn’t the game-changer some feared. In particular, Apple’s decision not to increase the iPhone’s display size allows Android to maintain an edge in appealing to phone buyers who want more screen space. (more)

    Apple (AAPL +0.6%rejects Samsung’s (SSNLF.PKoffer to settle their tablet computer dispute in Australia, perhaps killing off the commercial viability of Samsung’s new Galaxy 10.1 tablet in that market. An Apple lawyer asks the court to proceed in ruling on its claim that Galaxy’s touch-screen technology infringed an Apple patent.

    Research In Motion (RIMM -3.8%) posts a whopping intraday reversal, as shares plunge to new 52-week lows at $19.91 after Apple’s (AAPL -1.2%Tim Cook says iPhones comprise 5% of all mobile phone sales but 93% of Fortune 500 companies are testing the iPhone. Shares had spiked earlier on takeover rumors.

    Three lunchtime reads:
    1) On Wall Street, a protest matures
    2) Making money in credit: HYG vs. TLT
    3) Kass: 10 questions for the bulls 


  139. drcraig

    Holy cow… I’m away from my desk for 10 minutes and we get a mini mega-stick! Glad I had the guts to buy those TNA calls first thing this AM!

  140. lapper

    is that a stick you think? :)
    imagine going for a dump with a short position?

  141. jcaesar

    I guess everything’s better now! 

  142. SellPremium

    Thanks Pharm. 
     
    Btw, I’ve gotten killed in my AMRN call position the last couple of days.  Do you see them getting back to $10-11 anytime soon?

  143. rainman

    Ok, make that 6.9% on the RUT! Impressive with that break of 79.75    

  144. Phil

    AAPL/Rustle – It’s about 10% so add .1% at the moment (nice bounce back by them and THAT is why we buy back the caller on those moves!).  

    Pass/Exec – See headline on today’s post.  

    Dead cat/SellP – No I think it’s the bottom of our range and we should at least move back to the middle of the declining range like we have 6 other times in the last 2 months.  If we only make that 50% line, then it’s a dead cat bounce but if we clear to the top – then we’re just trading the range – which you should be learning to love as we have many, many opportunities to flip at almost the exact right times.  

    4G/StJ – I think it is mainly batteries at this point.  Also, T just can’t handle it and I’m sure AAPL protects them somewhat.  

    Short/Russell – Only if you are too bullish.  This is the move we’ve been patiently waiting for.  

    Wow, what a stick that was!  Haven’t had one of those in a long time….

    Dollar at 79.59 and still falling.  Oil back to $77.50 and gold bounced off $1,600 back to $1,623 with silver back to $30 and copper $3.12.  

    What a fun day! 

  145. mrmocha

    Damn, so much for buying more ARIA on the dip, missed that window…

  146. Burrben

    Now there’s a nice 33% return on those USO Calls.  Bought 200 at 0.45.  Sold 200 at 0.60.
    That pay’s for the Vegas trip.  Thanks Phil!

  147. Pharmboy

    AMRN – why did you buy that?  I don’t like them, even though they had good data and approval for their ‘fish oil’, GSK has a similar product, and who is going to pay for that?  Insurance will not!

     

    That stick was quite incredible, and I was afraid of that today and some follow through tomorrow, but watch out by weeks end….

  148. Pharmboy

    mrm, there will be another time.  Orchastrated to take out the shorts and day traders.  You could buy tomorrow for a move to 9.50-10.

  149. stjeanluc

    Wow, FAS over 10 again! Impressive… 

  150. danosu77

    Thanks Phil!
    I do have more funds, but I am still trying to figure things out, so I trade in small amounts.  Stock ownership would take up a lot of space in my portfolio.  INTC and FXE were offsets to other bull call spreads.  When I had to kill the spread, the short puts were not in trouble, so I left them on.  I did not know that FXE was "bad" for me to be in.  We used that to fund a bullish play before the Fed that I pulled.  I guess the struggle for me, is trying to figure out how to use the plays that you post on here each day. How do I water them down for my portfolio?  As far as going back to the $10k I thought that was a really risky portfolio? (or are you referring to the articles on the small, medium and large portfolios that you and OptionSage did?)
    I appreciate the feedback and I will study it intently before our weekend in Vegas!  http://www.youtube.com/watch?v=Ow7YCgkdN3Y&feature=related

  151. dflam

    Phil/GLW: I bought 1000 shares at $16.67 and sold 2013 $12.50 P & C for $5.30 for net $11.37/$11.94 .Stock now at $11.83 and chart looks like it’s in free fall. What ‘s your opinion.Thanks

  152. stjeanluc

    Tough times for the financials… Performance and CDS changes:

    http://www.bespokeinvest.com/thinkbig/2011/10/4/trouble-in-financial-land.html

  153. jmm1951

    Damn, I just went out on the high school pickup run and came back to find the bulls had stampeded while I was gone.

  154. stjeanluc

    Ezra Klein looks at OccupyWallStreet and explains who the 99% are:

    http://www.washingtonpost.com/blogs/ezra-klein/post/who-are-the-99-percent/2011/08/25/gIQAt87jKL_blog.html

    These are not rants against the system. They’re not anarchist manifestos. They’re not calls for a revolution. They’re small stories of people who played by the rules, did what they were told, and now have nothing to show for it. Or, worse, they have tens of thousands in debt to show for it…

    This is why I’m taking Occupy Wall Street — or, perhaps more specifically, the ‘We Are The 99 Percent’ movement — seriously. There are a lot of people who are getting an unusually raw deal right now. There is a small group of people who are getting an unusually good deal right now. That doesn’t sound to me like a stable equilibrium…

    What gives their movement the potential for power and potency is the masses who just want the system to work the way they were promised it would work. It’s not that 99 percent of Americans are really struggling. It’s not that 99 percent of Americans want a revolution. It’s that 99 percent of Americans sense that the fundamental bargain of our economy — work hard, play by the rules, get ahead — has been broken, and they want to see it restored.

     

    Wall Street caused this mess, and the government paid off their debts and helped them rake in record profits in recent years. The top 1 percent account for 24 percent of the nation’s income and 40 percent of its wealth. There are a lot of people who don’t seem to be doing everything they’re supposed to do, and it seems to be working out just fine for them.

    Reasons to be angry for sure…. 

  155. kustomz

    Boy, those guys in Europe are busy bees considering it was after 9PM there when the news about Dexia finally filtered out and just so happened to coincide with the US markets close..

     

  156. stjeanluc

    They are already making comparison between the new iPhone 4S and current Android sets:

    http://www.engadget.com/2011/10/04/iphone-4s-vs-the-smartphone-elite-galaxy-s-ii-bionic-and-tita/

    Competition is getting better which I guess is good for users! 

  157. stjeanluc

    But that Siri feature looks pretty cool I have to say… 

  158. hanna5

     Whoa! i picked a nice day to buy aggressively in the morning. MS and MGM up about 20% from this morning!!! GS up nearly 10% from 85 to 95. MT did great too. A couple more days like this and maybe those stocks i was gonna buy and hold, i should just sell!! :-)

  159. deano

     Why did we go up? Oh – did someone say free money for banks?
    3:40 PM Apparently sparking the turn higher in stocks the last few minutes is the recycling of news that EU finmins are looking into recapitalizing the banks. There aren’t any details, just a realization from the leaders that not enough has been done to convince markets the banking system can absorb the hits from the debt crisis.
    4:05 PM Market recap: News of EU finance ministers looking at ways to recapitalize European banks, plus Dexia’s plans to set up a bad bank, sent shorts running for cover, as stocks capped a furious last-hour comeback. Banks ripped higherMS +12%, GS +5%, BAC+4%. The euro reversed losses vs. the dollar; 10-year Treasury yields jumped 11 bps. NYSE gainers led losers three to one. 

  160. Phil

    USO/Burr – That’s the way to play ‘em!  

    FXE/Dan – It’s bad if you have a small portfolio.  Currencies are essentially random number generators, when you only have a little money – you don’t play the slots (well, people do but they are dumb-asses).   If your positions are only small because they are leftovers from a larger portfolio – that’s fine but the way you descrbed it, I got the impression that this was all you have to play with.  Yes, the $10KP was a very aggressive portfolio but we still played it for a series of very small gains until we built it up.   The point is to take pre-defined risks and then hedge accordingly – you can’t take open risks (naked shorts) and try to hedge them by buying premium – that’s a recipe for disaster if you don’t have room to roll and DD in your portfolio.  

    GLW/Dflam – I like them long-term.  Cycle is at a bad point but you’re in for net $11.37 and they are at $11.90 after a huge crash – shouldn’t you be pleased?  If you took ownership here, at net $11.94 for 2,000 shares, what would you do?  If you were still scaling in you could sell the 2013 $12.50 calls for $2.30 and the $10 puts for $1.75 to drop the basis to $7.89/8.95.  If you don’t want to own 4,000 shares at $8.95 (down another 25% from here) then you need to consider taking the loss now at net $6.60 on 1,000 (down $4.77 or $4,770) because you shouldn’t be tying up $11,900 plus whatever margin trying to get even on a stock you don’t even want to own.  Of course, it would have been better if you realized that at $15 or $14 or $13 or $12 but hey, at least now you’re looking it over!  

    The only reason you should EVER not take a 20% loss off the table is because you are willing to DD at a 40-50% loss and the only reason you should be doubling down at a 40-50% loss is because you will do it again if it drops another 20% (to about 66% below the original entry).  If you are not READY, WILLING and ABLE to do that, then all you are doing is painting yourself into a corner with a one-way gamble that either pays off or forces you to take a greater loss.   

    Europe/Kustoms – They work weekends too.  Our Congresspeople should be ashamed.  

    Moody’s downgrade Italy – way to kill the mood!  

    Nice job Hanna and yes, when you make "too much, too soon" it is a very good idea to take it with a grain of salt.  

  161. craigzooka

     danosu77, you can tailor the trades in the 25k portfolio for what ever level of risk you are ok with.  For example,
    "USO Friday $30s back to .35 and that’s a DD for a .53 avg on 20 in the $25KP"
    In the 25k portfolio we have 20 of the USO FRIDAY 30 CALL, if you are still learning just do 1 contract.  That way your risk is only $35. 

  162. kustomz

    Moodys DG Italy… 3 notches!!

  163. Phil

    At the close: Dow +1.43% to 10808. S&P +2.23% to 1124. Nasdaq +2.21% to 2131.
    Treasurys: 30-year -0.82%. 10-yr -0.44%. 5-yr +1.142%.
    Commodities: Crude -0.46% to $77.25. Gold -2.05% to $1623.75.
    Currencies: Euro +1.14% vs. dollar. Yen +0.39%. Pound -0.07%.

    Market recap: News of EU finance ministers looking at ways to recapitalize European banks, plus Dexia’s plans to set up a bad bank, sent shorts running for cover, as stocks capped a furious last-hour comeback. Banks ripped higherMS +12%GS +5%BAC+4%. The euro reversed losses vs. the dollar; 10-year Treasury yields jumped 11 bps. NYSE gainers led losers three to one.

    The news from Europe torches a few dollar bulls, as all of the "risk" currencies melt higher to the tune of 1% or more in the space of a few minutes.

    U.S. banks are spiking on the news out of Europe, with Bank of America (BAC) and Morgan Stanley (MS) having particularly sharp moves. Both stocks have jumped about 10% higher in the past few minutes. 

    The recent crash in financial stocks is leading Dick Bove tofinally turn bullish. Bove, who in May was alone among analysts covering Goldman Sachs (GS) in calling the company a Sell, thinks current sentiment indicates "hysteria, not reality," and argues banks are "stronger than ever" from a liquidity standpoint. (more)

    No wonder their bank sucks – it takes them this long to wise up on copper?  While others raise alarm bells for aluminum (III), SocGen isdoing so for copper, believing the all-important Chinese market is beginning to reduce its consumption. In spite of the report, and a 2.4% decline in copper futures, some miners rebounded sharply today. FCX +5.4%RIO +3.7%.   (previously)

    Nvidia (NVDA +8.8%) jumps after being named by Bank of America among semiconductor companies as “key beneficiaries” of smartphone demand. The news apparently helps lift the entire beaten-down sector; worries about declining demand has forced many chip makers to cut projections. Nvidia’s got the cash and growth prospects to ride out the tough market, Trefis Team writes.

    Yum! Brands (YUM): FQ3 EPS of $0.83 beats by $0.01. Revenue of $3.3B (+14% Y/Y) beats by $0.2B. Shares -1.8% AH. (PR)

  164. danosu77

    Thanks Phil and Craig,  See you this weekend!
    I have got to watch The Hangover again….

  165. barfinger

    Where’s the guy who mistakenly bought SPY calls yesterday? Dmoroz, I think? I gotta hear how you played it. It turns out you should be well ahead if you only managed not to piss your pants at the early action today.
    I have to say that playing 3x ultras in this market gives you more action than the craps table. Why go to Vegas?

  166. Pharmboy

    Didn’t people go bonkers right before the Lehman crash saying the banks were ok?  Italy is downgraded….jeepers….

    “In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today (from mid-Sept) in Paris. “The problems are worse than they were in 2007 before the crisis.”

    I don’t care how many times they tell me that everything is ok, when the patient is on life support, everything is not ok.  They are alive, but things are not ok.  Again, I would sell the news, b’c tomorrow, or the next day….they will say everything is not ok.

     

    I will start accumulating OTM puts on SPX and SPY (January).  I don’t think things last very long.  There is no reason to be up here either, and Dr. Copper, Gold, Silver, Oil all say that it is not going to stay up here.  The dollar has held pretty well, and China is buying US T.  I ask again, why would they do that with our ultra low yields?

  167. kinkistyle

    Tis the season to be jolly, fa la la la la la la la la! 
    Its almost that time of year and YUM brought us our first gift. ;)

  168. elliotteldrich

  169. roberthjrfl

    Pharm,  what strikes are you looking at on the OTM puts on SPX and SPY?  I have done a lot of research on the SPX long term options.  My concern would be that with the VIX so high, prices are very inflated (clearly).  Of course, with what is going on in the world, they still may be cheap.  My experience is that if the vix drops, the OTM SPX long term options will take a beating (the more leverage the more beating – basic)(my guess is that it is tied to the IV the MM uses and that can lead to huge wipsaws in price with the way long term way OTM option prices are calculated – i am guessing about pricing)( do you know if they "individually " set that part of the pricing equation) , any thoughts on how to hedge that?  I would love to hear.  I bet Phil has a take on this.  Phil, can you share your experience?  TIA.
     
    I will start accumulating OTM puts on SPX and SPY (January). I don’t think things last very long. There is no reason to be up here either, and Dr. Copper, Gold, Silver, Oil all say that it is not going to stay up here. The dollar has held pretty well, and China is buying US T. I ask again, why would they do that with our ultra low yields?

  170. jcaesar

    robert – Good question for Pharm.  My gut and intellect tell me he’s right about the market, but the VIX is very high right now as you note.  I’ll be interested in his response. 

  171. Izega

     I am trying to back-test some options strategies. Anyone know of a good source of historical option prices?

  172. jcaesar

    lzega – Are you looking for minute by minute prices?  When I looked into that kind of data it cost thousands of dollars.  Or are you just interested in backtesting, as you can in Thinkorswim?

  173. barfinger

    If you are going to play SPX options, Sell them!
    It is actually fun to sell weekly puts and calls and you can actually watch the premium decay, like watching the grass grow in florida in the summer…. For the last six weeks, I have been selling against whatever the move is that day. Today, I sold weekly calls (twice, once smart, once maybe not, lol) Yesterday, I sold more puts.

  174. barfinger

    I also have positions on the last quarterlies, 825 puts, 1300 calls. I have layered them on as the market moved. First of all, I consider it unlikely we reach either level. Second, if we threaten the downside, you will have a fabulous array of rolling possibilities. If we threaten 1300 by the end of the year, the VIX will be low, and rolling is more difficult.
    With PM, these way OTM options cost you almost nothing, so watch out how big you get. It can go bad fast when the market moves hard.

  175. barfinger

    On the weeklies, if I write them on Friday, I try to get $2 or a bit more. You can usually add another $2 play on Mon or even Tues, against the movement of the day. Otherwise, there is no system. I tend to write what I figure won’t happen and take whatever they give.

  176. Pharmboy

    The VIX fell 10%, and that was into the close.  I can see it dropping another 10% or so to hit the 50d MA at about 35.  If it closes below there, my longs should more than offset those.  I am not going crazy with puts, just have a bad feeling that the market will tank one night, and when we wake up…..well, it will be too late.  MS is on the ropes, and the EU is not fixed.  I don’t care about earnings that much, because this is a rotation, and I just don’t see things getting better without the gov’t spending and steriods that Dr. Ben gave us.  I might be wrong, but I don’t think I am….

    With these up/down movements and if tomorrow we open up, the SPX Jan 1000/975 put vertical is  ~5.90.  So that is about 10% down from here.  Things go down much faster than they go up.  Today was a classic short squeeze move on what?  Nothing, but that is where they make their money right now…it ain’t with retail.  The SPY 100 Jan Ps are also ~ $4.11, and very cheap insurance as well.  A few to hold, and DD as things move up….but I really don’t see them making it back to as high as JRWs chart after this move down.  Maybe 117 on SPY.

    SQQQ is also a very good one, as is TZA.

  177. Izega

     Thanks jcaesar. Daily EOD close would help. I don’t use TOS, I use Schwab and they don’t have a backtesting tool, unfortunately.  

  178. Pharmboy

    Here is is picture again for reference.

  179. Burrben

    W. Palm Beach
    Since I know we talk a ton about the wealth divide, I’d like to share a short story.  I drove down from juno beach, fl to West Palm Beach this afternoon to look around.  I’ve never seen anything like West Palm beach. Within 15min I saw 4 Bentleys, 2 db9, 1 dbr, 2 phantoms, and about 7 gt3′s. The houses look like French and Italian castles.  Just massive. No place I’ve been has had this concentration of wealth.  
     
    This is truly the divide.  There are people I know who have enough money to "not work" any longer, but they live a simple lifestyle without any lavish items.  I and they learned our lesson early from the "millionare next door" books.  Regardless, it was just jaw dropping.  
    #feelingpoorandlikealoser
    #eatingatoutbackbecauseIfeelpoor

  180. Burrben

    Pharm / SPX Options
     
    Just a note that SPX options are more tax advantageous to trade since they are treated with 1256 treatment.  They settle to cash, not a underlying.  So cap gains are taxed at 60% long / 40% short rates.  I always try to trade those instead of SPY , QQQ , etc
        

  181. barfinger

    Burrben: take a good look at the Ft. Lauderdale waterfront, in particular from the waterside. The millionaire next door is gonna be netted in the current class warfare struggle, while the super rich escape as always.
     
    I wish I could get Phil to understand that reality.

  182. barfinger

    Burrben: exactly. Of course LT cap gains tax rate may change. I’m not entirely confident in the survival of the 1256 treatment. SPX options that expire are the major source of my income since 2000. This has enabled me to retire on the West coast of FL, not the East. Maybe I should have gone bigger :)

  183. roberthjrfl

    Barfinger, where on the west coast of FL are you?  I am in Tampa, and like you, the major source of my trading income are SPX options expiring worthless…  Maybe meet for a coffee?

  184. kustomz

    Hackers will erase the NYSE
    http://www.pcmag.com/article2/0,2817,2394128,00.asp#fbid=ODWbw5WHiXX

    Is Paul McCulley feeling liberated by his retirement from Pimco?

    http://pragcap.com/trapped?utm_source=twitterfeed&utm_medium=twitter

  185. dmoroz

     UPDATE: I did keep my SPY 113 calls. I also, purchased some OCT SPY 106 puts and sold some OCT SPY 103 puts. ALSO, I sold some weekly SPY 113 calls. I was thinking (or maybe not fully) we are going to keep going down. I figured the 106 put would make money and the 103 puts would be some insurance. The 113 weekly short calls were a way to try to offset some of the loss on 113 long calls by cashing in on premium at the end of the week. Well, things did not go exactly as planned but I think I have something to work with. My biggest concern will be that I am on a plane tomorrow and the 113 short calls may fall in the money. Would like to here what I SHOULD have done.

  186. Burrben

    barfinger : What strat are you using for the SPX option selling.  Back in 04-06 ago I was generating most of my income from following the Iron Condor type system that Dan Sheridan was putting forth in the CBOE TV videos.  Before the crash came, I got a job that restricted trading.
     
    There were a few scary times though where a full year of profits could have been wiped out with the wild index movement.  And I used to bite my nails until the SPX prints came out mid day Ex Friday.   

  187. drcraig

    Burrben/PB – Have you ever walked around Mayfair in London? My buddy and I were there this spring and his exact words to me (after seeing Ferraris, Astons, Bents/Rolls, high end MBs, etc all carelessly parked on the side streets as if they were Kias) were "if there were ever a single scene to capture just how bad we’re getting our asses kicked economically, this is it."
     
    Must agree on Palm Beach though… it’s just sick. Did you see Rod Stewart’s yellow Rolls?

  188. jcaesar

    drcraig - The other day you mentioned "supply/demand nodes" with regards to trading JRW’s system with the futures.  I don’t know what supply or demand nodes are.  Do you mind explaining that a bit?  TIA.

  189. 490union

    Phil…Bot  Jan. 12  EDZ 25 calls at 5.40 and sold offseting Jan. 40 calls at 3.50 and Jan. 70 calls at 1.90. Now way up on 25 calls,how do I lock up some profits,and still hold onto premium in 40 and 75 calls? Thanks

  190. Phil

    SPX/Robert – From me, you are asking the wrong question.  The SPX options are essentially a bet on the exact finish of the S&P on a certain date.  As I’m sure you can tell from my regular comments, I don’t care if my Dec 2012 $200 put is at $50 or $100 or (currently) $204 because I have no intention of selling it now  and the same goes for the calls (now $95).  The bottom line is 1,200 is around my target (not my actual target) and all I care about, if I paid $200 for the 2 positions, is whether or not I will be able to sell more than $200 worth of puts and calls against them by Dec 2012.  Since I can sell the Oct $1,110 puts for $33 and the $1,180 calls for $11.50, collecting $44.50 for 3 weeks – the answer is yes on the collecting.  So my next real question is – how much do I expect to be able to sell (conservatively 10 x $40 = $400) and how much profit would that be if the puts and calls expire worthless ($200) and comfortable am I selling that spread (not very as the S&P was at 1,200 last week.  So, on that basis, I would have no interest in playing SPX right now as I’m not being compensated well enough for the risk I take that the S&P could go up or down 120 points in less than a month. 

    As to why China is buying our TBills – Someone has to or this whole ball of wax unravels and China would fold up like a circus tent if we stop buying their crap.  That means China has to bail out their biggest customer as the Fed is only committing $400Bn over 6 months, which is less than the $140Bn a month we sell by a long shot.  China wants to put more money in US Consumers’ pockets a lot more than Congress does. 

    West Palm/Burr – My brother worked at the Mercedes dealership there.  Most people just pay cash.  You don’t have to drive far out of that town to get to the other side of the tracks, where senior citizens live in shoebox apartments.  

    Millionaire next door/Barf – Well perhaps if the poor little millionaires would support fair taxation of their betters instead of fighting against a more equitable distribution of the wealth as if they were in the top 0.0001% like morons – then something could get done but all you wanna-be uber-rich line up inside the Koch Brothers’ asses and vote for whatever idiocy they tell you to.  You support a bunch of elitist schmucks who work for businesses much bigger than yours that they deregulate and hand cash to so they can crush your "next-door" business out of existence.  So no, I have no pity on the "Millionaires Next Door" if they support the Conservative lunacy that is destroying this country out of some misguided self-interest based on their own total failure to grasp reality.  

    EDZ/490 – The Jan $25s are now $13.40 (up $8) and the $40s are $8.50 (down $5) so you have $5 out of a possible $15 with $3 in profit so far.  Keep in mind that the $3 profit is 150% and many people think that’s good enough.  If you think that the $40s won’t get triggered and you can, then just pull the $25s and have $13.40 in your pocket.  You can set a stop on the short calls or 1/2 the short calls – perhaps 1/2 at $10 and then you still took net $8.40 off the table and you left 1/2 the $40 short calls naked and they can roll up to 2x something much higher.  If you want to protect against a big move up, you can pick up a longer bull call spread like the April $40/50 for $1.20 and that buys you $8.80 more protection above $40.  Those are simple ways to do it.  If margin challenged, you can roll the $25s to the April $40s at $10.50, taking $2.90 off the table plus whatever you have left once the short calls expire.  

     

  191. rsaxton

     Newbie here… which dollar index do you reference – is it DXY? 

  192. jmm1951

    dmoroz.
     
    It seems to me as if you are betting against yourself as you are long both the October 113 calls and the October 106 puts.
     
    I think you are OK with the short 113 calls, because you can roll them over to the next week anytime before the close on Friday. And you can roll to 114 at any time. I don’t know how your broker works, but with mine you can place contingent orders. For example to buy back the short 113 calls if SPY < 110.

  193. jmm1951

    drcraig/Palm Beach
     
    Nah, half of those wealthy individuals lost their savings to Madoff and the fake palaces and castles were sold off to South American drug lords with a need for discreetly ostentatious pads with a private dock.

  194. Dennis

    I went long on the Russell futures this morning and haven’t stopped out yet.  Now I find myself staring at the screen all night.  Is there a way to hedge them in the evening or am I just being greedy or stupid?  Thanks so much for the trade by the way, it was an amazing bottom call.  

  195. 1020

    Dennis – Personally, I’d take off half.
     
    Nice job….

  196. stjeanluc

    Dennis – I would sell 1/2 and set a trailing stop for the rest and go to sleep! Can’t lose now!

  197. Dennis

    Thanks 1020.  You’re right, I’m sure Phil will tell me that’s rule number two anyway.  

  198. stjeanluc

    Josh is not convinced by this face-ripping rally:

    http://www.thereformedbroker.com/2011/10/04/chart-anatomy-of-a-face-ripper%E2%84%A2/ 

  199. Phil

    Dollar/Rsaxton – On TOS we use /DX, which is a bit different from DXY but not much.  You can open a paper trading account on TOS for free and see their futures charts. 

    LOL JMM – I guess those big boat docks do have a purpose.  

    Stopping out/Dennis – Yes, half out and the question is how far down do you want to set the stops, which is tough as the Bots will often hunt down stops on a surprisingly wide margin but, if you didn’t stop out this afternoon, then I’m sure you wouldn’t mind 629 for 1/2 (assuming you get 1/2 off at 636 or better) as that averages 633, which is a nice gain for one day (a 5% move up in the RUT off 600).   Keep in mind you can set 1/2 to stop out at 634 and 1/2 at 629 providing the lots are less than 10 as the futures are pretty thinly traded this time of night.  It would, however, suck to miss a nice move up and the Dollar is just 79.70 so we have hope for the morning.  The more you have, the more you should take the money and run though as you’ll find those contracts very hard to dump out if if we begin selling off.  

    Palm Beach/JMM – Lots of speculation out there before the crash.  

    Josh/StJ – He doesn’t seem convinced by anything these days….

  200. sparky123

    Did the market misjudge ‘Twist" and will it drive bondholders into high yield (to cover 2012 rollovers) and ultimately equities? Any thoughts? Also I miss Angel.

  201. Dennis

    Thanks Phil.  

  202. davew

    3AM trade may be interesting tonight I’ll be there, anyone else feeling a litte insomnia brewing?

  203. 1020

    davew – Check out http://slopeofhope.com/ for others trading the wee hours….
     
    :)

  204. checho

    Can someone, pls tell me where I can a find more about this 3am trade? – thnx

  205. Phil

    Good morning!  

    The Hang Seng was closed so don’t go thinking they were down this morning and Shanghai is still closed and the Nikkei fell 0.86% and the BSE fell 0.42% BUT Europe is having a party and is up 2% in London and Berlin and 2.4% in Paris.  Our markets were doing nothing until 6 and just started moving up as the Dollar turned down from 79.80 to, at the moment, 79.54.  

    Oil is still just $77.60 and should be much higher if the Dollar goes below 79.50 so (/CL) those Futures are still good to play bullish above the $77.50 line.  

    Gold is still down at $1,612, silver $29.09 and copper $3.12.  Gasoline is $2.536 and natural gas $3.65.

    The Euro is still way down at $1.333, $1.546 to the Pound and 76.67 Yen to the Dollar.  EUR/CHF is $1.225 so the Swiss are doing better than the BOJ at controlling their currency at the moment. 

    We need MORE than 1.25% gains today or we have a bounce that is likely to top out at our -5% lines and will continue the downtrend.  I’ll talk more about that in the post.  

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    7:30 Challenger Job-Cut Report
    8:15 ADP Jobs Report
    10:00 ISM Non-Manufacturing Index
    10:30 EIA Petroleum Inventories

    6:00 AM Overseas: Japan -0.9%. Hong Kong closed. China closed. India -0.4%. London +1.4%. Paris +2.5%. Frankfurt +1.9%.

    Notable earnings before Wednesday’s open: COSTMON,RPM

    Notable earnings after Wednesday’s close: MAR

    Eurozone private-sector growth contracts for the first time in two years, suggesting the broader economy could recess in Q4. Markit’s Services PMI fell to 48.8 from 51.5 in Aug. – while new business dove to 46.5 from 49.8, and expectations – which measures business optimism – shrank more than three points. (Markit

    After a brief sharp dip on the Italy downgrade, the euroresumes its uptrend begun at the time word hit of coordinated European bank recapitalizations and Dexia offloading assets into a bad bank. Like rock over scissors, government intervention trumps agency downgrades every time.

    In his testimony before Congress today, Fed Chairman Bernanke bluntly warns that the economic recovery, such as it is, "is close to faltering." Operation Twist, the Fed’s latest move to help the sputtering economy, will be "meaningful but not an enormous support." So, with few bullets left, could the Fed Chairman be hinting he’s ready to hand the baton back to Washington and the private sector to work its own way free the current economic morass? 

    The underlying message of the Wall Street protests is something the big banks and corporate America may finally have to grapple with before it becomes dangerous: accountability for unchecked power and greed. They’re the "Tea Party with brains" – but what do they want in capitalism’s place?

    Some 4.5M current and former homeowners will have a chance to get their foreclosure cases examined to see if they should be compensated for banks’ mistakes. Borrowers deemed to have suffered financial injury could be eligible for compensation, decided on a case-by-case basis by third-party firms hired earlier this year by 14 banks that signed consent orders with the government.

    Obviously a PSW graduate:  Bank of America (BAC) has been hit hard over the past few days, and has dipped over 37% since Warren Buffett bought his stake in late August, but he says he’s not concerned. "We agreed to hold it for at least five years, so what I’m thinking about is where Bank of America will be in five years, and nothing in the last 24 hours or 48 hours has changed my views on that."

    Jefferies forecasts higher credit losses at American Express (AXP) and Capital One (COF), prompting a lower rating and price target on both companies. The loss of $880M in annual legal payments from Visa (V) and Mastercard (MA) will inhibit AXP’s earnings growth in 2012; COF shares are cheap but the impact of higher credit losses isn’t yet priced in. 

    If you think the market is falling because of a crisis in Europe, you’re wrong, says Mark Faber in his latest Gloom, Boom and Doom Report. According to Faber, weakness in the Shanghai Composite and the collapse in the price of copper – as well as the recent downturn in most other commodities – is signaling a potential economic collapse in China which will bring new lows to global equity markets. - If we are weak because of China then we are weak for a dumb reason because China is slowing down on purpose and they can speed up on purpose too.  

    Speaking of people who are more loyal to China than their own country:  The recent currency bill working its way through the Senate may be dead on arrival when it gets to the House if Speaker Boehner has his way about it. "It’s pretty dangerous to be moving legislation through the United States Congress forcing someone to deal with the value of their currency," Boehner says. "While I’ve got concerns about how the Chinese have dealt with their currency, I’m not sure this is the way to fix it." – Perhaps Boehner is simply unaware that we’ve already said "pretty please with sugar on top" in our 15 years of trying to negotiate this issue while China has held an unfair advantage over US-based exporters through currency manipulation that has cost us 10s of Millions of jobs as they have used it to become the richest country in the World while we sank hopelessly in debt under a $600Bn annual trade deficit?  .

    Analysts think AMR is in bad shape, but not bad enough to be driven to Chapter 11 anytime soon. The company’s unrestricted cash balance of $4.3B is well above the $3B Fitch thinks could portend bankruptcy, and Rodman & Renshaw believes any bankruptcy filing will be preceded by demands for labor concessions. 

    AMR and Eastman Kodak (EK) may dominate the news, but GMI points out at least 11 more big U.S.-listed names that could go bankruptCLWRSPFDYNCYHBKSQUADDINCLGXSHAW,SPWRAVQ

    More on Yum Brands’ (YUMFQ3 report: Same-store sales showed a 19% gain in China, helping lift the international division to a 3% profit gain. U.S. same-store sales declined 3%, contributing to 16% falloff in profit. Reconfirms full EPS growth forecast of at least 12%, and says it expects to open 600 new stores in China this year. Shares -2.2% AH. (PR) - Look how much more important impact of US is than CHINA! in reality.  

    Costco (COST): FQ4 EPS of $1.08 misses by $0.02. Revenue of $27.6B (+16.8% Y/Y) misses by $180M. (PR

  206. Phil

    3am Trade/Checho – Often (not always) the Dollar is at the day’s high around 3am.  This is because Japan wants a strong Dollar to weaken the Yen, which makes their exporters happy and boosts the Nikkei.  At 3am, the EU traders step in and they will tend to trade the Dollar back to where it was before the BOJ began playing with it and then the ECB likes a strong Euro because they trade more with each other than the US or Asia and their biggest concern is import prices/inflation.  3am in the US (EST) is 9am in Europe and that’s the time they sometimes make pre-market announcements.  Also, US Banksters like to manipulate our futures higher, which is easier on low volume so they like to push the Dollar down to goose the relative price of the markets.  

    So, when the stars line up (and they often do), we see the Dollar take a dive at 3am and that gooses the futures but it doesn’t always happen at 3am – just often enough that we call it that but the idea is that, sometime after midnight through about 6 – we look for the Dollar to make a move down (now 79.38) that acts as a spark to send our futures flying higher (like they are doing now).  

    I often wake up in the mornings and look at the futures and the news (thank goodness for my IPad!) but usually go back to bed because it’s not interesting enough to post about.  This morning, for example, we were flat as a pancake and Asia wasn’t doing anything so I went right back to sleep but, at 6am, I saw something happening so I wrote the above alert (I rarely feel strongly enough about pre-markets to send out an Alert).  

  207. revtodd64

     Good morning Phil.  A quick question about value investing.  I recently read an analysis that uses enterprise value and free cash flow as its two major criteria for value analysis.  He was dividing enterprise value by free cash flow to see how cheap the company was relative to its free cash flow.  The list came close to many PSW favorites.  Here is the top 20 stocks based on the analysis for anyone interested.

    MSFT  BRK.B   PFE  CSCO  AMGN  LLY  FCX  ACE  GLW  MRO  CB  ATVI  SCHW  AMAT  NTAP  MHP  SYMC  ADBE  ALTR

  208. Burrben

    Phil,
    Any guesses on where to shoot for on oil?  78.50?
    (For some reason IB won’t let me submit a trailing stop outside of normal market hours….) 

  209. Dennis

    647 on the Russell!  I woke up to a nice bonus today thanks to your advice, the call to set the stop at 634 was perfect as it never triggered.  Appreciate the advice from Phil and others that led to another big gain.  

  210. neverworkagain

    Burrben: Trailing stops on IB. There is a toggle box for ‘allow outside of regular trading hours’ in the PRESET menu of Configuration.

  211. Burrben

     Thanks, I found that JUST AFTER oil touch 78.30…  Back down to 77.71… 

  212. ban2

    hi Phil
    Can you give another  SDS hedge this am?
    Would like to increase protection with such sharp jumps in the indices and in light of your comment that we could go back down as fast as we got here in the last 24 hrs
     
    tia
     
    tia

Dashboard

 Sector Performances (Today)

 Thermal Imaging