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I’m Dreaming of a White Christmas – Portfolio

Wow, what a market!

Maybe we closed out our $25,000 Portfolio too early last week, with a virtual gain of $105,000 (420%) for the year, but we still have our Income Portfolio, which was quite bullishly positioned and well ahead of goal as well as positions in our very aggressive September’s Dozen List that are winding down, so we decided to set up this new virtual portfolio with the goal of turning $15,000 in to $25,000 between now and Christmas to have a little extra spending cash for the holidays.  

The strategy is the same as the $25,000 Portfolio, which is meant to be the aggressive, "risk" portion of a $250,000 or larger portfolio, utilizing excess margin to our advantage with the goal of making a series of hit and run plays, with the goal of making $1,000 a week for the next 10 weeks.  Also like the $25KP, we take our winners off the table and work out our losers as best we can because, above all else, this is an exercise in adjusting and managing short-term positions.

This virtual portfolio will be available to Voyeur Members but trade ideas during chat will have their usual 1-hour delay. Premium members will get the trades with no delay Basic Members also see WCP-related comments with no delay as well.  New trade ideas and updates will be copied into the comment section of this post or, assuming I write one, the updates of this post.  If you are not a Member yet, now is a good time to join. Check out the subscription page – Our EXAMPLE trade on C closed up 200% and our ENP example returned 137% – not bad for free samples, right?

Our first official trade for the new portfolio was one we discussed on the weekend, GNW, which I added to the main post on Monday (and discussed that afternoon, in part, in my BNN interview).  We’re not going to re-hash the logic for every trade here, this is simply a review post to track the trade ideas (and, while we do our best to be as accurate as possible, we do NOT include trading fees, which vary greatly so always take that into account) so we can see how they are doing and discuss how they can be adjusted but, of course, all the live commentary goes on during trading hours in Member Chat:  

It was a very busy first week and we’ve already closed (and opened) the following positions:

  • 10 SSO 10/28 $45/46 bull call spreads at .40, out at .90 – up $500 
  • 20 FAS 10/28 $13/14 bull call spreads at .60, out at $1 – up $800
  • 5 AGQ Nov $70 calls at $2.10, out at $4.20 – up $1,050
  • 10 DIA Nov $114 puts at $2, out at $2.15 – up $150
  • 4 DECK Jan $115 calls at $6.25, out at $10 – up $1,500
  • 10 DIA Nov $119 puts at $1.85, out at $2 – up $150
  • 10 USO 10/28 $36 puts at .14, out at .15 – up $10 

So, we have 7 closed positions with $4,160 worth of gains in our first week.  That’s not too shabby but we have to also see how our open positions are doing and they can get ugly in the early stages of these portfolios as tend to take of our winning positions and let the losers ride – including the losing half of a spread – like the DECK short calls.  These aggressive portfolios are not for the feint of heart, that’s for sure!  In fact, here are my comments from Wednesday’s Member Chat:  

As I have said early and often, the WCP is not meant to be played by people who only have $15,000.  For one thing, you can’t day-trade $15K without getting flagged.  It’s meant to be the RISK PORTION of a larger portfolio that should be mainly in cash in this disgusting market and that means margin should be a non-issue.  If you do want to make a trade like FAS and you don’t have the margin then A) you probably shouldn’t be making such dangerous trades in the first place and B) you can sell something else for .65 ($1,300) that you can afford and that you REALLY do not mind having assigned to you for the net strike.  

It is not appropriate to sell ANY short puts if you are not in a position to buy the stock – that is how you set yourself up to get forced out of trades at the worst possible prices.  

Keep in mind we try to keep a balance of bullish and bearish plays – if we don’t have losers, we are probably doing something wrong.  The worst thing that can happen in a portfolio like this is a break outside of our trading range which catches us off guard because we can get burned as we usually lighten up on the bullish side at the top of the range and lighten up on the bearish side at the bottom of the range (taking our profits off the table and waiting for the losers to bounce back).  That’s what led to our decision to just cash out the $25KP last week – we were at the top of our range and, while we THOUGHT we would break through – we were already at goal for the year so it just wasn’t worth pushing.  

So we banked our virtual $130K along with the $10K we took off the table earlier in the year which made a total of $140,000 off of last year’s $10,000 start.  Then we take about 10% of that virtual cash out of the bank (and the bank can be a more conservative, long-term portfolio because Lord knows actual banks don’t pay you any returns!) and use it to gamble into the end of the year.  Always remember – it’s not a profit until you take it off the table!  

Our remaining open positions are:  

  • 10 GNW Jan $5/7.50 bull call spreads at $1.10 ($1,100), now $1.43 – up $330
  • 10 GNW Dec $6 puts sold for .85 (-$850), now .50 – up $350 
  • 20 FAS Nov $11 puts sold for .65 (-$1,300), now .15 – up $1,000
  • 12 DXD Nov $16/17 bull call spreads at .50 ($600), now .30 – down $240
  • 2 NFLX Nov $67.50 puts sold for $3 (-$600), now .70 – up $460
  • 5 DECK Nov $105 calls sold for $7.50 (-$3,750), now $14 – down $3,250
  • 5 SCO Nov $45/48 bull call spreads at $1.10 ($1,100), still $1.10 – even 
  • 5 SCO Nov $42 puts sold for $1.60 (-$1,600), now $1.55 – up $25
  • 5 DIA Nov $119 puts at $1.52 ($1,500), now $1.38 – down $70
  • 10 USO 11/4 $35 puts at .33 ($330), still .33 – even  

Not so bad actually, down net $1,395 is not catastrophic for our open positions and, clearly, it’s all DECK and we purposely made the very aggressive move (too early, unfortunately) of cashing out our longs with the intention of rolling the short calls up to 8 Dec $115 calls (now $9) as we really don’t think DECK will hold $115.  This is one of those trades that you NEED margin ($18,000) to make and one of the great reasons to run these virtual portfolios – it gives Members a chance to experience many types of live trades as they unfold in real time (and I strongly suggest going back through the old $25K Portfolio to get an idea of how we work trades over time) so it can help you identify what kinds of trades are appropriate for your trading style BEFORE you commit to them.  Also, of course, the trade could have been stopped out without dipping into margin, something we discussed earlier in the week, when it was up considerably early on.  

stock photo : Risk Analysis Concept Word Cloud as BackgroundOverall, our WCP is well on track with a net $2,765 profit in week one, not bad for a $15,000 cash allocation (18.4% for the week).  Of course, our closed net $4,160 of winners brings our cash up to $19,160 and we actually SOLD another net $4,130 in our open positions, bringing our cash up to $23,290 – which is practically our goal for the year in our first week so the trick is now simply to close our remaining positions without giving any cash back!  

That’s not likely to work out perfectly but already in the first week you can see how this strategy does work:  We take a series of BALANCED trades – SELLING as much premium as we can so that time (theta decay) is always on our side.  We take our profits off the table and, when we have to – we take our losses but generally we try to adjust the losing sides of our positions with the expectation that the markets will remain in a trading range and make the occasional reversals.  

We continue to play that range while the Big Chart is below the +10% lines, which are still 5% higher than here.  That means we will get MORE bearish as we move higher but, as I said, we BALANCE our trades so we WILL be looking for more bullish positions if we are over those +5% lines on Monday.  Our bearish expectations are based on possible Yentervention by the BOJ, negative analysis of the EFSF over the weekend and LACK of additional stimulus by the US, China and Japan to match the strong but Globally inadequate EU contribution.  

 


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  1. NF**X

    WCP – Sorry if I jumped the gun. I forgot Phil was going to post re WCP – and, again, my to-date results may not be representative (entries, exits, position size, etc.) – but my cursory review of my use of the WCP trades still look pretty white and x-masy. Look forward to PD’s official review.

  2. NF**X

    WCP/Open Positions – I’m not ignoring the import of the opens either. I have some version of most of what PD shows open – some I closed perhaps for lesser profits (NFLX, FAS) and it was only by chance that I missed the DECK play (which I’m sure will play out fine.) Funny aside: in the flurry (work, trades, etc.) I think sold the DIA 119s and at 118. Oh well. Getting in a WCP groove.

  3. rokjok777

    This is a superb summary and just what we need. Thanks Phil! (Disney margaritas are a little watery but if you ask the bartender for a strong one he’ll be glad to help…)

  4. Savi

    Thanks Phil—--that was a great summary--I actually understood every word—did not get all the trades but will watch diligently from now on

  5. jmm1951

    Why no stop loss on the DECK calls? I didn’t make the trade, but I may join the party at the roll.

  6. Savi

    The only reason I did not do the Deck trade is that I have heard it mentioned as a take over candidate—and with my luck……..anyone else heard that?

  7. biodieselchris

    Savi – was there any deposit leftover?

  8. biodieselchris

     prognosticating
     
    back in 2008 I told a friend to wait to buy a house until Feb 2011 (in Seattle). 
     
    The exact low according to Case Shiller — Feb 2011!!! (well, the low so far …)
     
    Clairvoyance!

  9. Lincoln

    BAC:
    As a long time Charlotte resident with many friends/neighbors at "The Bank" I thought this guy hit the nail on the head re: Moynihan being incensed about OWS.
     
     http://www.thesunnews.com/2011/10/29/2468257/issac-bailey-anger-aimed-at-banks.html

  10. Savi

    Bdc—-did you not receive the $59 refund? I will check if it came back—what is your pay pal acct e-mail—if it came back will send again

  11. zeroxzero

     The Sun News writes: "He was integrity-filled and made it a point to lend to people – like me – who had little income or assets but potential, just because he felt it was the right thing to do, to give back."

    Read more: http://www.thesunnews.com/2011/10/29/2468257/issac-bailey-anger-aimed-at-banks.html#ixzz1cEZCiwQg
     
    I believe there is a very serious lack of conceptual clarity on this issue.  I am [or was] a corporate lawyer on Wall Street, and I can assure you that the executives of a public company are charged — by law — with acting in the best interests of the shareholders they purportedly serve.  Lending to people with "little income or assets but potential," if it resulted in unanticipated losses to the bank, would certainly be grounds for dismissal, and potentially a shareholder’s suit against the bank for consciously acting in a manner likely to result in losses to the company with whose management they are entrusted.  I assure you that there is no legal protection for executives who spend company money, or take company risks, based on personal predilections rather than putting the interest of the bank and its shareholders first.
     
    I am not saying this is right, or good, or the way it should be.  I’m saying that it very definitely it what current corporate law provides, and woe is the executive who takes a chance on "boosting the public image of the bank" by spending money on pet social  projects.  Much of what Phil derides — and rightly, from a moral standpoint — is U.S. public companies, particularly the banks, accepting immense public bailouts to save their institutions [and often their jobs] after they turned the public trust of running a bank into a derivatives gambling casino so they could reap astronomical bonuses, orders of magnitude greater than any possible contribution they could have made to bank profitability or the public weal.
     
    But bashing bank executives is just shooting in the wrong direction.  I will argue — and have argued on PSW often — that, instead of mounting ad hominem attacks on the public company executives — venal mediocrities that they may be — the U.S. public needs to understand that, once its Supreme Court has decided that "U.S. based corporations" — that theoretically may have not a single U.S. citizen as a shareholder — are "persons" or "citizens" that can give, directly or indirectly, unlimited and highly targeted cash to U.S. public office seekers, then there is one, essential thing that must be done — to change the law.  The Supreme Court interprets law.  While there is some wiggle room around the edges, if the U.S. Congress writes a law categorically stating that public companies cannot make any contributions to any U.S. public office seeker at any level ever — that will be the end of the story.  The Supreme Court, U.S. Courts of Appeals, District Courts etc. all the way down will be constrained to prohibit and punish the practice.
     
    Oh, yeah, I forgot, it’s exactly those politicians receiving the tanker-loads of corporate cash that would have to vote for such a law. That, Lincoln, in a nutshell, is why public companies can receive massive bailouts and subsidies while throwing thousands of workers into the street and jacking fees and imposing hidden haircuts on depositors with impunity — because the law doesn’t prevent it.  
     
    The point is this: U.S. public company executives are legally obliged to do everything possible to maximize profits and the longer-term value of the company they serve within the laws of the United States of America and it’s States and political subdivisions. That is where the constraint must lie --, not in pining for "nice guy" CEOs that might have survived in kinder, gentler times, but in writing laws that reverse the immense wave of political influence-peddling and legal corruption that allowing Non-Citizen corporate entities gain more financial and political leverage over America’s political class than the voters who elect them.
     
    Since that is about the last thing on the planet our bought-and-paid-for political class will go along with, it just might take The Second American Revolution [copyright reserved, lol]  to bring the needed changes. I’m not holding my breath — Napoleon was very clear about the great majority of battles being settled in favor of the larger army, and we know which army that is.

  12. zeroxzero

     And back to making money: http://www.telegraph.co.uk/finance/comment/liamhalligan/8857518/Why-the-latest-eurozone-bail-out-is-destined-to-fail-within-weeks.html
     
    Or, why you should trust bond market rather than stock market reactions [Euro bank shares up 12% on the news, Italian 10-year borrowing costs sent on Friday to an all-time high since it's entry into the Euro] to the latest European bailout proposal.
     

  13. jmm1951

    Zerox/companies
     
    I suspect that the laws of all nations charge the management of public companies with acting in the best interests of shareholders, but it seems that companies in the US interpret this in a particularly hardheaded way without reference to community standards and common sense morality. It was once said that what was good for General Motors was good for America. Today one is more likely to say that what is good for the Bank of America is bad for America.
     
    Of course, when you have a court that decides that corporations in a democracy have the same status as individual voters, it is the mental health laws that need to be changed.

  14. Lincoln

     0 X 0: corporations
    Point well made!  And sadly, I think you are correct about where this experiment in capitalism and democracy goes next. Indeed history may point to this corporations are persons nonsense as the point of no return.  
    What struck me was the much smaller point that a banking CEO still doesn’t get that without understanding your customers it’s hard to see how he can maximize the "future value of the company."  
    Joe Martin, the "nice guy" was never CEO ,he was more of the banks goodwill ambassador who suffered with ALS so a very compelling human face back in the day when banks were more interested in depositors than  derivatives.
     
    cheers

  15. sparky123

    Zero
    Well written. You cut to the chase of the most important issue that capitalism and hence democracy faces. A legal construct has no conscience, and yet it is allowed to purchase our fate, imperfectly, perhaps, but relentlessly for certain.

  16. revtodd64

    Zero – Here’s to the Second American Revolution!  Beneath all the skirmishes over budgets, taxes and policies, the deeper structural change in the balance of power between citizens and corporations need to be addressed.  Without that change, skirmishes may be one here and there, but the war for representative democracy will be lost.  While there are various groups that would be sympathetic to this point of view, Move to Amend has this single issue focus.  Here are there basic principles from their website:

    We, the People of the United States of America, reject the U.S. Supreme Court’s ruling in Citizens United, and move to amend our Constitution to:
    * Firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.
    * Guarantee the right to vote and to participate, and to have our vote and participation count.
    * Protect local communities, their economies, and democracies against illegitimate "preemption" actions by global, national, and state governments.

  17. Phil

    Hey guys. Just checking in. We have no web access at home. Not even cell my house is one of the few with power.

  18. revtodd64

     jmm1951 – Since you mentioned that maybe it is the mental health laws that need to be changed, it is interesting to note that the Psychologists for Social Responsibility recently released a statement  challenging the idea that corporations are persons.  There main argument:
    Corporations are not people. From a psychological perspective, corporate personhood is a misleading and highly dangerous legal fiction. It provides protection to corporate leaders for activities in which they would otherwise bear personal, lawful responsibility. This legal validation of corporate personhood therefore shields select, powerful corporate officials from the law and liability, encouraging recklessness in the form of unethical, dangerous and, in some instances, illegal behaviors. Operating within these overly expansive legal shields, the prioritization of maximizing profit over human welfare has contributed to a sense of widespread discontent directed toward corporations and the law, and equally toward our government, which is perceived to fall short of a democracy that is "of, by, and for the people."
    http://movetoamend.org/news/psychologists-social-responsibility-stands-against-harmful-legal-definitions-corporate-personho

  19. revtodd64

     Zero – make that, skirmishes may be "won," not "one."  Guess I was in a bit of a hurry to get to the bar for the Giants game today!

  20. jmm1951

    revtodd64/psychologists
     
    Yes, this does not surprise me. Once you take it as gospel (excuse the expression) that shareholder profit is the sole purpose for the existence of a corporation the next question becomes: "How can we maximize ripping  off our customers and screwing over our employees." [Solution: pay your employees partially in stock, then run the company into bankruptcy.]
     
    Before I retired I spent about 35 years working in mental health care in various countries mostly in the public sector. In public sector health care such as the UK NHS or the VA in the US, or a state mental hospital, the question is: "How can we provide the best possible health care to our patients without actually going broke or over budget.?" whereas in the private sector the question would be: "How can we provide as little care as possible so as to make a profit?"
     
    Here is a perfect example of the difference in ethos.
     
    In the government mental hospital in Bermuda some years ago there was (probably still is) a young mentally retarded woman who was big and strong and had terrible behavior problems. She would attack other people (staff and patients) and have temper tantrums and screaming fits that made it necessary to lock her away in a private room almost daily. The hospital psychologists tried all kinds of behavior modification programs. Something like if she was good for 15 minutes she would be given a piece of apple, or if she was bad she was shown a yellow card as a warning, then if she persisted she would be shown a red card and put in the locked room.
     
    After several years of failure, everyone was in despair and decided to see what else was available for her. A private facility in Florida advertised a program that offered state-of-the-art therapies for this kind of patient and it was decided to give it a try. This didn’t come cheap. I don’t remember how much, but maybe $100,000 a year. A government grant was obtained, funds were donated by local charities and foundations, and fundraising event were held to raise the last bit of money necessary, and off she went.
    After 2 years, she was visited by a government psychologist from Bermuda who found that her condition was actually worse, and that she was not being assessed by a Ph. D, clinical psychologist, as promised. In Florida she had been assessed one time by a psychologist on arrival, and that was it. In Bermuda she was seen by a psychologist at least once a week, and a psychologist was part of the treatment team that met 2 x weekly to discuss her treatment and formulate strategies.
     
    So she was shipped back to Bermuda, and on arrival her behavior was definitely a lot worse than before. She was also found to have scars of cigarette burns on her back, which photos showed were not there before she went to Florida.
     
    This is the difference between for-profit health care and government health care. In government health care the objective is to serve the patient. In for-profit the objective is to make a profit at all costs.

  21. NF**X

    Corps As People – I’ve always thought that repealing or changing this interpretation – esp as it affects civil and criminal liability, is the one thing the 1% will kill you/us for. Really. On this issue they will get to the guns (figuratively if not eventually literally) long before we do. What’s that mean in practical terms? Don’t know.

  22. zeroxzero

     Thanks for the encouragement, guys.  U.S. politics is usually cast in terms of liberals and conservatives.  I come from a conservative tradition – W.F. Buckley Jr. was my godfather, fer crissakes — and what that tradition means to me is favoring the power of the individual over the state.  In that sense, I am indeed a conservative, believing that maintaining individual liberties in the face of the always-overweening "will to power" of the state — any state, of any ideological stripe — is worth fighting for.
     
    This is different.  This is like the goddamned "Matrix" — a fight to maintain individual liberties against the power of faceless corporate machines that have been legally designated as "citizens" despite quite evidently being alien in a very real sense.  Phil’s "liberalism" and my "conservatism" refer to a certain balance among people — humans.  But I do not hesitate to make common cause with all of my fellow flesh & blood citizens against the waxing power of a corporate state — Galbraith’s "New Industrial State" [he was a liberal, by the way].
     
     But this is no movie — there will be no "Neo" to vanquish the corporate goliaths.  We, as free citizens of a representative democracy, are going to have to do it ourselves.  All very romantic, but in the real world, it’s hard to see how this is going to happen, since our political class is on the side of the machines that feed them.   It just might require taking to the streets, and revolutions are brutal, messy things, whatever form they take, so I still nourish some hope that it might be accomplished through the electoral process, with a few Molotov cocktails for punctuation. 

  23. rokjok777

    Ever since Roman times when guys were hanging around in togas they’ve lamented the toxic brew of money in politics. Here’s a little-known quote from Albert Einstein from 1949, geez that guy was smart:

    “Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of the smaller ones.
    The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organised political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature.
    The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population. Moreover, under existing conditions, private capitalists inevitably control, directly or indirectly, the main sources of information (press, radio, education).
    It is thus extremely difficult, and indeed in most cases quite impossible, for the individual citizen to come to objective conclusions and to make intelligent use of his political rights.”
     

  24. revtodd64

     As an example how difficult the struggle will be against the Citizens United ruling, Obama is taking heat for issuing an executive order mandating that any company that wants a government contract must disclose political donations.  This is being met with cries of an assault against democracy and free speech by the Heritage Foundation and Mitch McConnell.  Its a long road ahead for real democracy.  So if I understand correctly, McConnell and Heritage think government is the problem, things should be turned over to the private sector, and yet there should not be any disclosure or oversight of companies receiving tax dollars for services to the common good.  So while decrying that government spending is wasteful, they also are making it more likely that spending will be wasteful because it will help keep crony contracts in the shadows.  
    http://www.politicususa.com/en/obama-citizens-united
     
    Let me ask, is it partisan politics to make this point?  It seems like accountability and disclosure of lobbying practices and of companies receiving public money should be American values, not just party values.  I know I have to be accountable for the government money my program gets.  Each quarter I have to show that we actually produce what we get paid to do.  

  25. jmm1951

    zeroxzero/Neo
     
    One of the problems with corporatism is that it actually destroys the quality of life. For example here in Florida it is almost impossible to find  a decent restaurant meal, sandwich or cup of coffee. This is because nearly all the restaurants are run by chains or franchises that operate on the idea that you buy as cheap as possible and sell as expensive as possible, without any thought to the quality of the product in any kind of objective terms. I should say that I am a fairly good cook, can make breads, cakes,  apple pies, mayonnaise, pizza etc. from scratch, so my criterion for a decent restaurant meal is that the food is good enough to be worth paying extra instead of fixing it myself, or is better that what I could have fixed myself.
     
    For example in my favorite breakfast restaurant in the Dominican Republic, you start with a fresh fruit salad composed of slices of orange, and chunks of mango, pineapple, and papaya, followed by bacon, eggs, and homefries that come with a croissant, and a couple of other toasted breads that are excellent and also a glass of orange juice (canned, I think) and a cup of coffee, all for $5.
    Now I COULD prepare the same b’fast myself, but is it worth the trouble of buying four types of fresh fruit and peeling and preparing them, and three types of bread to toast? No, it is time consuming and not cost effective, so eating out for breakfast is great value. However here in Florida, you probably have to pay $10 for the average breakfast, which is OK as wages are much higher, but it is AWFUL, the bread is awful, the coffee is awful, the bacon is burned, everything is awful,  and the average ten-year-old could do better, so you are paying $10 for a $1.50 breakfast. And this is how corporatism imperceptibly destroys the quality of life.
     
    i actually regard myself as conservative. I stopped going to church when they got rid of the wonderful seventeenth century prayerbook and replaced it with "modern" language, which I am sure God, if he existed, would find really tacky, but I don’t think opposition to corporatism is a left/right issue, it is more of a quality of life issue.

  26. Lincoln

     Phil: rolling
    If you don’t mind a quick review of how I should be planning for eventual rolls on some short calls or puts.  for example I’ll sell 5 HOG Dec 40 calls with the intention of going to 2X and then 2X again if it goes against me. Dec’s are at $2.15 what might I be estimating my roll to price would be in Jan and then Feb assuming just rolling out even, although I likely would be more aggressive and be looking for some additional premium on each roll.
    TIA

  27. Burrben

     Phil / DXD
    1)  Phil, you stated that we were to close "the lower half" of the DXD bull call spread earlier this week, so we should just be left with the short 17 call.  I think I’m correct on this
     
    2) It’s amazing how a portfolio review can turn into ranting on corporate politics.  Can’t we have a "Politics" tab up top where the ppl who care about this stuff can post and rant to their hearts content??  

  28. deano

    Phil called it:
    Japan Intervenes on Yen – WSJ.com
    http://online.wsj.com/article/SB10001424052970204528204577008650708281694.html?mod=WSJ_hp_LEFTTopStories

  29. GBorGH

    So what have they actually done? How are they capping it?

  30. zeroxzero

    Japanese intervention, and Azumi promises more if needed.  U.S. stock futures selling off in Japan.  The Euro appears to be falling slowly but steadily.  And the European bond market already called Merkozy’s bluff by falling on Friday, sending the Italy’s sovereign yield to a post-Euro entry high. We might get some very nice entries on the White Christmas portfolio this week if the Euro tanks 3% or more.

  31. kustomz

    MOF, they burned through a billion in 2 hours.

  32. zeroxzero

     Burrben:  As the most verbose of the corporate political ranters, while I firmly agree that generalized political or economic discussions should not take place during trading hours, I disagree that the topic discussed bear no possible relevance to the performance of investment portfolios.
     
    The trajectory of large corporations in an environment of reduced consumption and reduced competition will be to suck even harder on their consumer base, which requires political support. If, as a consequence, a political backlash takes on coherent and large-scale form in Europe and the U.S., then I cannot imagine an event that would have more relevance to where and how I invest my capital.   Having said said, I invite you to utilize the "ignore" button for the worst offenders.

  33. angelcur

    burbs..you are asking the ranter in chief( RIC) for a dispensation that cuts off ranting…ranting is good..i mean you place your bets and then…rant…’you rant always get want you want…’ 

  34. NF**X

    Wiki – Holy crap. I am a dumb a**. I just dug in on the Wiki – which is gonna be so great as it grows – and realize after 15 years of regular investing; I don’t know dick. I am resolving to spend the next few weeks only following, reading and learning here. Maybe a question or three during chat. But no opinions on anything from me. I know nada. I’ll have something to say when I’ve earned it.

  35. jmm1951

    re politics.
    I think discussion of geopolitical factors and social change is very relevant to the long term future of corporations in determining which ones have a healthy future (growth) and which are likely to decline. For example if there is a major move towards credit unions and cooperative banks and away from the major profit-making banks, this will be significant for banking stocks. Likewise if home ownership declines in favor of renting. Or if oil prices escalate, there may be a move towards more public transportation, which could affect fast food businesses that rely on customers driving up in personal transportation. Employment numbers may affect what percentage of the population own smart phones. Factors like these certainly affect which companies form the backbone of my portfolio. (My preference is for commodities and utilties.)

  36. Phil

    This is bad I’m at a hotel 20 miles from home and they don’t have web access either. Will try anther place but’ so far, only.ipad working with 3G access.

  37. pentaxon

    Good luck Phil.
    ( wouldn’t that be good time to discuss if it wouldn’t have been better to use the money printed by uncle Ben to pay workers to improve the US infrastructure. I live in the alps lots of snow sometimes but hardly any overland lines and hardly any outages… – sorry, actually I do know it’s NOT the perfect time to discuss this )

  38. jmm1951

    pentaxon/infrastructure
     
    But in another sense it IS the perfect time to discuss this. After Hurricane Emily blew through Bermuda in 1986 and many people were without power for several weeks, The Government and Belco (Bermuda Electric Light Co.) decided that the cables  needed to be put underground, and so that expensive and time consuming projected was started and took about 20 years to complete--, much to the annoyance of motorists at points where the road was dug up/
     
    Fast forward twenty years to Florida in 2006 when Hurricane Charley came calling. Same old story. Electric cables on poles threaded through trees in residential areas created havoc. 2011. No change. The interesting point about Belco is that it is a publicly traded company but their top management were not scared of a shareholder revolt if they put the cables underground, because everyone could see that it made sense to do this, even if it cost money or led to an increase in charges for consumers. (Fortunately due to the climate and other factors, few people in Bermuda need domestic heating, air conditioning, or have domestic washing machines.)
     
    Of course the US is a much bigger country, so a project of this kind is no small deal, but hurricanes and snowstorms are not exactly black swans in many parts of the nation.

  39. Phil

    Submitted on 2011/10/31 at 10:07 am

    The DIA $119 puts, I’m not so sure about, they are $2 and we only have 5 but we no longer need the hedge – we only kept it because we thought there was a good chance it would come back to profitability and now it has.  Me feelings are take $2.05 and run but that’s because I’m at a hotel and have poor visibility so I get nervous about all my positions and would rather be in cash.  Officially, for the WCP – let’s see how the day goes.  

    Submitted on 2011/10/31 at 12:44 pm

    DIA/WCP, Jerconn – I think $2.05 was what I wanted, we don’t need them as protection, so they are a trade and we’re in at $1.52 so it’s a neat $250 so I say take it as we have the DXD spread for a longer gain if the Dow keeps going down.

    USO Weekly $35 puts went back down to .29 so let’s buy 10 again in the WCP – we’re not to proud to double dip!  

    DXD/WCP, Burr – But we didn’t decide to do it after all as we went more bearish.    Planning to do something and doing something are not the same things.  

    USO/2nifty – Welcome!  We’re not going to close it officially in the WCP as it’s a small bet and we think we can do better tomorrow as the Dollar is at 76.60 and probably has overnight momentum and all the indexes are off a lot more than oil so oil can still snap down and we got a cheap entry and we’re up .20 on the last batch so we have a lot of leeway.  That’s our decision process for USO.  

    Submitted on 2011/11/01 at 9:59 am

    In the WCP to be safe, let’s take the USO puts off the table.   We still have SCO and this is a gift!  I’m on my laptop so let me know the exits but this was a great sell-off we should be taking advantage of.   DECK came back nicely too but not enough to satisfy us yet and the others are works in progress but on track.

    As an upside play for the WCP, I like the DDM Nov $56 calls at $2.15, they were over $4 yesterday so a fun bounce play on the Dow.  Let’s do 5 of those with a stop at $1.80 and see how it goes before we get more bullish. 

    USO/WCP, Enni – Nice job.  That’s the way to do it, don’t wait for me to tell you to take a 200% gain off the table!

    SCO/Nicha – No change from WCP, I’m not convinced we can’t get our full profits yet.  

    Submitted on 2011/11/01 at 12:11 pm

    NOW I like oil up as clearly there was a huge effort made to jam them higher.  Selling USO Friday $35 puts for .87 is a good way to go as you have the premium buffer and that can be paired with the purchase of the $34 calls at $1.17.  In the WCP, I’m interested only in buying the $34 calls for $1.20 (low of day was $1.05) so 10 of those with a stop at .95

    Submitted on 2011/11/01 at 12:39 pm

    FAS Nov $12 puts can be sold for .96 and Friday $12 calls are $1.50 (.30 premium).  10 in the WCP.  

    FAS/WCP, Oscarz – Yes it was buying the Friday $12 CALLS and selling the Nov $12 puts to offset (10 of each).  While we’re at it, let’s put a stop on the FAS $12 calls at .95 in the WCP so we maintain a credit of .40ish on the short puts, worst case.  

    FAS/WCP, Mr. M – Good point, we don’t want to hold that long, just playing off $13 being too low on XLF.  Don’t forget, playing both sides like this is VERY aggressive!  

    USO/WCP – The $34 calls are $1.65 and that’s up about .48 so good enough not to risk.  Same goes for the short $35 puts, now .50 if anyone played those.  So all done in WCP now that we hit the NYMEX close.  

    The Dow (DDM) calls I still like.  

    Good question Jerconn.  Our goal with the WCP is just to take profits early and often.  If we stay balanced, then we can afford to leave a few things overnight but it’s not really a betting portfolio.  

    Those DECK calls bottomed out at $8 today.  If we bought back the 5 in the WCP for $8, that’s $4K, which is what we sold the Jan $115s for and that would leave us with a net $1,250 profit on the trade so very tempting to get out there and keep that number in mind.  Had I noticed it this morning, I would have taken it as it’s a huge improvement over Friday but it’s not such a strong day and I still believe DECK can’t hold $110 for a month so mostly just informing anyone who is nervous that the opportunity is there and to give you my thought process.  

    Good morning!

    Looks like we’re opening at the pre-market highs and I’m not sure that’s good as we had quite the rejection at 4am. 

    Of course the Dollar bounced off the 77 line at 4am and, at the moment, we’re below it at 76.85 so all should be well as long as the Dollar stays down and that’s up to the Euro staying up and the BOJ leaving things alone so place your bets accordingly. 

    I think we can keep things up until 12:30 (EU close) and then it’s all up to the Fed Statement but it’s still take the money and run (there’s a reason Rule #1 is: ALWAYS sell into the initial excitement, isn’t there) on our short-term bullish bets like yesterday’s USO $34 calls in the WCP (was $1.20, now $2) the DDM calls (were $2.15, now $2.50) and, of course, if you read my post this morning, the FAS combo, with the Friday $12s at $1.65 (up 10%) and the short Nov $12 puts at .78, up .18, which may seem like a small gain but it’s $330 in a day on a $15K portfolio (2%) – that’s GOOD!

    Other than that, we watch and wait for the Fed with as much cash as possible but the announcement at 12:30 is only a prelude to what Bernanke says so be very careful.  

    Submitted on 2011/11/02 at 10:36 am

    USO Nov $35 puts at .90 – buying 10 in the WCP.

  40. Phil

    WCP Update – Week 2

    Just doing a quick update on the WCP prior to taking off for vacation.  I’ll be on a ship but should be on-line most days next week.  I’ll leave chat is weekend mode so all Members can see comments from each other so hopefully senior Members can help out a bit with questions.  

    I just made a bullish call on the Futures in Member chat so we’ll see how that plays out but I just thought (after much consideration) that we were being yanked around in the Futures.  

    Our second week with the WCP was quieter so let’s see how we’re doing.  We closed the following positions

     

    •  5 DIA Nov $119 puts at $1.52, out at $2.05 – up $265
    • 10 USO 11/4 $35 puts at .33, out at .55 – up $120
    • 10 USO 11/4 $35 puts at .29, out at .95 – up $660
    • 10 USO 11/4 $34 calls at $1.20, out at $1.65 – up $450
    • 5 DDM Nov $56 calls at $2.15, out at $2.50 – up $175
    • 10 FAS Nov $12 puts sold for .96, out at .78 – up $180
    • 10 FAS 11/4 $12 calls at $1.50, out at $1.65 – up $150

    Not bad for a week’s work – we took an even $2,000 of additional profits off the table, bringing our virtual cash total up to $21,160.  Don’t forget our goal is just $25,000 (from our $15,000 start 2 weeks ago!) so all we need to do is squeak out a few thousand more dollars and we’re up 66% – not bad for two weeks!  

    We didn’t open any positions this week that we didn’t already close, playing it tight in a choppy market.   

     

    Our remaining open positions are:  

    • 10 GNW Jan $5/7.50 bull call spreads at $1.10 ($1,100), now $1.20 – up $100
    • 10 GNW Dec $6 puts sold for .85 (-$850), now .75 – up $100 
    • 12 DXD Nov $16/17 bull call spreads at .50 ($600), now .45 – down $60
    • 2 NFLX Nov $67.50 puts sold for $3 (-$600), now .60 – up $480
    • 5 DECK Nov $105 calls sold for $7.50 (-$3,750), now $10 – down $1,250
    • 5 SCO Nov $45/48 bull call spreads at $1.10 ($1,100), still $1.10 – even 
    • 5 SCO Nov $42 puts sold for $1.60 (-$1,600), now $1.30 – up $150
    • 20 FAS Nov $11 puts sold for .65 (-$1,300), now .40 – up $500

     

    Up $20 – AMAZING!  Quite the turn around from down $1,395 last week.  It’s all about DECK and that position can even GIVE us $3,750 if it expires worthless but we should be THRILLED to get away with a small loss (we cashed the other side of that trade at $4,000 and we started with a $1,250 credit so it’s all good at this point).  

    We’re a bit bearish in our balance of open positions so I hope we’ll have a reason to grab something bullish today but, if not, then the DECK play will be looking very good!  GNW has earnings tonight so we’ll see how that goes and I’m not looking to take a lot of positions until I see how good my web access is next week (tomorrow is no issue as I’ll be at Disney).  

    I don’t see any need to touch GNW, NFLX or FAS as we let time do their work there.  That leaves DXD, SCO and FAS so two bears and a bull but oil shorts and financial longs are not necessarily contradictory as we expect the EU to calm down and take risk premium out of commodities so they could both win.  DXD is the true hedge to FAS as it’s not likely the Financials fail without taking the Dow down and if the Dow does go down then oil should go down so you see how the little strings are all connected there…

    So net $21,180 is up $6,180 (41%) in two weeks – not bad!  I’m sure you guys are all bored with this portfolio already so we’ll just kill it at $25K.  No, just kidding, we’ll keep going through Christmas and see what happens but keep in mind our goal was simply to make $10K off a $15K Christmas budget so we could have a really cool Christmas.  Blowing it would be really, really stupid at this point!  

  41. Phil

    Submitted on 2011/11/03 at 10:04 am

    ISM numbers were not good and I still like my USO puts (Nov $35 puts are .90) as well as DIA Nov $116 puts at $2.  Let’s do 10 of the DIA puts in the WCP with a stop at $1.75

    I have to wonder if the Nas is spiking just trying to get rid of our $57 puts, now .24.  It jumped way higher than the other indexes and yes, I still like that play although now the $58 puts are getting very appealing at .67 so worth a roll for .40 to make net .78 and then a planned DD at .42 for a .60 avg.

    So for the WCP, let’s pick up 10 of the $58 puts at .67 ($670) and plan to DD at .53 for a .60 average entry on 20 ($1,200).  

    QQQ/WCP, GBor –  In the WCP, we are in 20 at net .60 so a 20% stop would be .48 and they are now .55.  If we can get 1/2 out for a small profit today (.65-70) then I’d be happy to let the other 10 ride over night at net .50 or less but, of course, they will decay very quickly tomorrow morning so you have a pretty high risk on the overnight.  So, bottom line is we take the $240 loss at .48 if we have to and we’re simply wrong in guessing we topped out.  Of course, if we’re wrong and the market heads higher, we have $800 coming to us on the FAS short puts and $120 on the NFLX short puts so not to terrible overall. 

    RVBD/NF – Good niche player but priced for what may be unrealistic growth.  I sure wouldn’t hold them unhedged.  

    This is why you don’t set hard stops, a stop is really the place at which you force yourself to re-evaluate and make a new decision…  Now we need to see the Dollar move back over 77 as easily as we failed it or it’s time to cut losses on bear trades – that goes for WCP too.  I’ve got to get ready to go but I do expect profit-taking into the close ahead of NFP at 8:30 tomorrow.  

  42. Phil

    November 4th, 2011 at 10:00 am | (Unlocked) | Permalink 

    USO Nov $35 puts coming in at .60 is a great deal (see main post), 20 in the WCP, as above for a weekend hold, at least unless, of course, we can get .90 today – in which case we’re not greedy!

    November 4th, 2011 at 10:13 am | (Unlocked) | Permalink 

    Thrilled to get .50 back on those QQQ puts in the WCP so don’t let it disappear on you if Obama starts the happy talk.  

    We’re officially out of the QQQ puts in the WCP at .60.  We have other bearish bets, don’t need them and thank goodness we’re done. 

  43. Phil

    I’m inclined to hold the USO Nov $35 puts open in the WCP for another day as they are not weekly and the Dollar is holding 77, which is not going to be good for commodities or the markets if it hangs tough here.

    GLD Weekly $177/174 bear put spread at $2.10, 5 in WCP. It’s a bet gold can’t hold $1,800 this week.

    Also in WCP, rolling 20 Nov $35 puts, now .36 to 20 weekly (Friday) $37 puts at .60 for net .24 ($480). I WILL NOT BE HERE but the goal is to get out even (net .84) or stop out at .45 and take a nasty $800 loss. 

    Oil’s downside remains very much a question of inventory but pressure is on the Dec contract holders now so anything less than a big draw (net 3Mb) is likely to be a disappointment. Don’t forget our goal in the WCP was just to get even and get out (about .80) although you may have a lower basis or better strike if you pressed it yesterday but getting out at .60 on the dip would have been a smart, conservative move too after the damage we took on that one.

    Using 11,870 as a stop, I like the DIA Nov $115 puts at $1.07, 10 in the WCP and let’s call the stop .97, if the Dow catches up to the Nas, these should be good for $1.35-$1.40 so that’s our goal (.25 profit).  

    Done on DIA $115 puts at $1.20 in WCP – not as good as we hoped but not bad for 30 mins.  

    Good time to take a stab at reloading on DIA puts. Nov $116 puts are now $1 so 10 of those in WCP with a stop at 11,950 or about .90. 

    Oops, there goes the Dollar – out at $1.10 on DIA puts in WCP.  

    WCP/Etrad – Yep, on my list to update. Very few trades since our 11/3 update as I went away but they’re right in the comment section under the WCP post. DECK is doing just what we thought, the stock is at $108.22 and we have naked $105 calls we sold for $7.50 and we already cashed out the longs for a nice profit. I don’t know why you have Dec $115 short calls but it’s the same thing. GNW is simply on track for our $7.50 target in Jan, not much to do there.  

    Submitted on 2011/11/14 at 1:04 pm

    SCO/WCP, Savi – Ah, thanks for reminding me. At $40.65 I’m inclined to wait until tomorrow but it does look like we’ll have to roll the short $42 puts, now $2, down to the Dec $38 puts, now $2.25. That would give us a net .45 credit on 5 short puts, even if the bull call spread goes out completely worthless but we can also pull another .25 by cashing the $45 calls by tomorrow and leaving the naked $48 callers and that would leave us in 5 short Dec $38 puts at net .70 credit – we can live with that.

  44. Phil

     

    Very quick WCP update:

    We left off on our Nov 3rd update at $21,160 in virtual cash and up net $20 on our open positions for a balance of $21,180.  Now we’ll see how we did while I was away.

     

    We closed the following positions:

     

    • 10 DIA Nov $116 puts at $2, out at $1.75 – down $250
    • 20 QQQ $58 puts at net .60, out at .60 – even
    • 20 USO Nov $36 puts at .84, out at .70 – down $280
    • 5 GLD 11/11 $177/174 bear put spreads at $2.10, expired at $3 – up $450 
    • 10 DIA Nov $115 puts at $1.07, out at $1.20 – up $130
    • 10 DIA Nov $116 puts at $1, out at $1.10 – up $100

    Woops, what a lot of work to make $150!  Oh well, beats losing, I guess…  

    That leaves us with a total of $21,310 in virtual cash and the following open positions:

    Our remaining open positions are:

    • 10 GNW Jan $5/7.50 bull call spreads at $1.10 ($1,100), now $1.45 – up $350
    • 10 GNW Dec $6 puts sold for .85 (-$850), now .39 – up $460
    • 12 DXD Nov $16/17 bull call spreads at .50 ($600), now .25 – down $300
    • 2 NFLX Nov $67.50 puts sold for $3 (-$600), now .10 – up $580
    • 5 DECK Nov $105 calls sold for $7.50 (-$3,750), now $4.20 – up $1,650
    • 5 SCO Nov $45/48 bull call spreads at $1.10 ($1,100), now .20 – down $450
    • 5 SCO Nov $42 puts sold for $1.60 (-$1,600), now $2.30 – down $350 
    • 20 FAS Nov $11 puts sold for .65 (-$1,300), now .15 – up $1,000

    Wow, up $2,940 – that’s a nice improvement over up $20 when I left.  See how nice it is to go on vacation with a balanced portfolio?  Some stuff went up, some stuff went down but, since we mostly SOLD premium and 12 days went by – we made money.  

    If we can hold onto that gain, we’ll be at $24,250 – just $750 short of goal (up 66%) in less than a month – not bad!   An extra $10K to spend for Christmas in time for Black Friday is much better than we could have hoped and notice we didn’t get there trying to be super-aggressive – we just made lots of little plays in both directions and took advantage of the swings between our trading range. 

    Congrats to all who played so far.  We’ll keep going, of course as it’s good to focus on small, balanced trades week by week but keep in mind how fantastic gaining 66% in a month is and don’t go risking it foolishly – the purpose of this portfolio was to be able to have a very happy holiday and spread a little cheer – if you did well on it, please remember those who are less fortunate and share what you can.  Even going through your closet and finding some old coats and shoes that no longer suit you can make all the difference in the World to people who are out on the streets.  

    Thanks and have a wonderful Christmas!

    - Phil

     

  45. Phil

    Phil/WCP – Nov $105 calls were sold for $6.60 not $7.50.

    Submitted on 2011/11/15 at 9:50 am

    Oil is popping up to $99 at the open and I still think they are trying to shake the shorts but hope is not a strategy and thinking is the enemy of the day trader so we’ll have to make adjustments to our open SCO position in the WCP if we don’t get a big re-trace by lunch. Actually, scratch that. $100 oil is not happening so let’s pick up 10 SCO Dec $38/43 bull call spreads in the WCP at $2 and we’ll look to cash out our Nov $45 calls later, leaving the $48 caller to expire worthless or, if not, then woo-hoo on the new spread!

    Submitted on 2011/11/15 at 12:51 pm

    USO Friday $39 puts at $1.03 are a nice trade – 10 in the WCP with a stop at .90, just looking for a quick .20+

    Submitted on 2011/11/15 at 1:02 pm

    FAS Nov $64/66 bull call spread is $1.05 for some reason with FAS at $65.70 so 10 of those in WCP.

    USO $39 puts right at .90 but I’m not into stopping out – let’s risk another $100 (.10) before deciding to quit in the WCP. No hard stops, of course, as I said, I think they are trying to hit $100 on oil to trigger short covering (including us, who probably caused a lot of volume today).  

    Back around Monday’s open except for NYSE, which is way lagging by about 1% and, since they are the hardest index to manipulate – I’d be very suspicious of the movements of the others. Still, very impressive job by the bulls – didn’t know they still had this kind of action in them – especially that stunning move on the Nas today but 2,700 is going to be a tough nut to crack I think and that’s still 1% below the 5% line.

    Dollar not likely to just roll over and die under 78 either just because 2 Fed doves said something doveish.

    Last week, we popped on Tuesday too and then dropped like a rock on Wednesday with 12,200 acting as a tough barrier all around. Still 100 points to play with though so let’s not count the bulls out too early but I want to stick with the USO puts in the WCP, now .86 and a DD at .70 or .60 would be recoverable as USO is at $38.55 so we are only 1/2 premium.  

     Submitted on 2011/11/15 at 3:33 pm

    SCO/WCP, Zipla – Yes, that sucks and we’ll have to roll it – not too likely we get a winner now but also not likely we will be more screwed on inventories so no point in not waiting.

  46. Phil

    Submitted on 2011/11/16 at 9:50 am

    Wow, oil $101.50 and it’s all about rolling now. We want to stick with this, of course and pick up December shorts. They can keep this up for a day or a week but a month is going to be very hard work.

    In the WCP, we have 10 USO Nov $39 puts at $1.03, now .38 so let’s roll them to the $40 puts, now .95 for .57 and DD at .95 for 20 at an average of $1.28 and we’ll play for a pullback on inventories. The $40 puts are .67 in the money and were over $2 yesterday

    Submitted on 2011/11/16 at 11:15 am

    QQQ $59 puts at $1.15 have very little premium. 10 in the WCP with a stop at $1.

    Also in WCP:

    FAS Nov $64 calls can be bought back for $2.30, leaving naked short $66 calls at $1.40 with stop at $1.75

    SCO Dec $43 calls can be bought back for $1.30

    SCO Dec $38 calls can be rolled to the $36 calls for $1.

    DXD Nov $17 calls can be bought back for .80

    USO Nov $40 puts are .95 still so fine for now.

    Obviously bearish moves across the board. We’ll have to scramble if Dollar fails to hold 78.  

    Submitted on 2011/11/16 at 12:02 pm

    FAS/Zipla – Oh my bad! I meant to SELL the FAS $64 calls that we bought in the WCP and leave the naked $66 short calls to expire worthless. I am now bearish on FAS going higher.

    Submitted on 2011/11/16 at 2:26 pm

    SCO/WCP, Kevin – No, they are essentially a goner if oil doesn’t radically pull back. The entire spread was a credit so it’s all about rolling the short puts down next month to stop it from being a loss (assuming oil doesn’t go over $105).

    SCO/WCP, Kevin – Yes, I’m still holding out hope we get a big move down.  

    Wheeee -saved by the bell!

    That was totally excellent – congrats to all the WCP players as we nailed it!  

    Submitted on 2011/11/17 at 11:46 am

    78.17 so they are ditching the Dollar now the EU pressure is off. Ticking down to Fed speak in 45 minutes so we’re back to thinking we may get a move up. Volume pathetic at 45M on the Dow at 11:45 and those QQQ $56 calls are still .93 so let’s grab 20 of those in the WCP to protect our shorts with a stop I will call no lower than .85. Obviously, if we lose $200 on this cover, then our shorts are doing great.

    Looking weak, I say kill the QQQ longs in the WCP, now .86. 

    So the logic on that WCP play is better to sacrifice $140 than to let ourselves get stopped out of short positions we’d rather hang onto until tomorrow (or a nice collapse today).  

    Ugly close – looks like day’s lows.

    SCO/WCP, Kevin – Yes, tomorrow. Worth a gamble as it only affects which strike we roll to. 

    Cash/Dennis – A wise move. I don’t think you miss anything with cash. If you happen to be sitting around and see a good play, you’re still free to make it, the only thing you miss is the ulcer from watching your positions go up and down like a yo-yo. What do we do with the WCP? It’s a series of generally quick in and out trades but it still made 66% in a month – that’s what you can do from a cash position!  

  47. Phil
    Another quick WCP update:
     
    We left off on our Nov 15th update with a virtual balance of net $24,250 but it seems there was an error in the sales price of the DECK calls so I’ve adjusted that now ($450 less at $6.60).  Let’s see where we are in our now very bearish portfolio:  
     
    We closed the following positions:
     
    • 20 USO Nov $40 puts at net $1.28, out at $1.90 – up $1,240
    • 10 FAS Nov $64 calls at net $1.05, out at $2.30 – up $1,250
    • 10 QQQ Nov $59 puts at $1.15, out at $1 – down $150
    • 10 SCO Dec $43 calls closed at $1.30 (cost netted to $38 calls, now $36 calls)
    • 10 DXD Nov $17 calls closed at .80 (cost netted to $16 calls)
    • 20 QQQ Nov $56 calls at .93, out at .86 – down $140
    A nice net $2,200 added to our virtual cash pile of $21,310 for a total of $23,510 – this is not bad as we started on Oct 24th with $15,000, now let’s see how our open positions are doing: 
     
    Our remaining open positions are:
    • 10 GNW Jan $5/7.50 bull call spreads at $1.10 ($1,100), now $1.15 – up $50
    • 10 GNW Dec $6 puts sold for .85 (-$850), now .55 – up $300
    • 12 DXD Nov $16 calls at $1.30 ($1,300), now $1 – down $300
    • 2 NFLX Nov $67.50 puts sold for $3 (-$600), now .05 – up $590
    • 5 DECK Nov $105 calls sold for $6.60 (-$3,300), now .25 – up $3,175
    • 5 SCO Nov $45/48 bull call spreads at $1.10 ($1,100), now .0 – down $1,100
    • 5 SCO Nov $42 puts sold for $1.60 (-$1,600), now $2.75 – down $1,150 
    • 20 FAS Nov $11 puts sold for .65 (-$1,300), now .15 – up $1,000
    • 10 SCO Dec $36 calls at net $4.30 ($4,300), now $5.10 – up $800
    • 10 FAS Nov $66 calls sold for net $0 ($0), now .80 – down $800
     
    Net $2,565 here means we are over goal at $26,075 but, unfortunately, we are 100% bearish so hopefully (not a valid investing strategy) we don’t get a big pop in the morning to ruin our day.  
     
    Making our $10,000 profit goal (66%) in less than a month is a great reason to cash out ahead of  the holiday so that’s my goal for tomorrow on most of the positions, maybe all!  We’ll keep the portfolio going, looking for good short-term trading opportunities but $10K means Whole Foods can cater Christmas dinner and we can even afford to make some poor people work that day serving us if we want to – what could be a better Christmas than that?
     
    At http://www.foodbanknyc.org/ – we’ve arranged for matching donations!   
     
    Reach more New Yorkers with a matching gift!
     
  48. Phil

    GNW/WCP, Sage – I still like them and don’t think we need to kill it until we see real damage done next week. The problem is the WCP is a short-term portfolio and we don’t REALLY want to own GNW in Jan – in fact, we plan on being in all cash the last week of December and starting a new $25,000 Portfolio in Jan.  

    As I said earlier – hopefully this will mark the day’s lows as EU funds flood to Dollars into their close. Watch the $78.25 line on the Dollar – over that is bad and we’re not bullish until we fail to hold 78.20 again but I’m ready to close out our WCP bearish bets if we do.  

    SCO/WCP, Kevin – Still hoping for $95 but, as above, greedy. The reason I don’t care is we’re only going to roll loss to Dec anyway but if we can get out for .50 and be done with it, that would make me happy too.  

    WCP Moves:

    • DXD $16 calls (.85) rolled to Dec $15 calls at $2 and paid for with sale of $17 calls for $1 (new net $1.45)
    • NFLX Nov $67.50 puts should expire worthless (stop at .25, now .01)
    • DECK $105 calls should expire worthless (stop at .25, now .10)
    • SCO Nov $45/48 spread will expire worthless (bad)
    • SCO Nov $42 puts now $1.20 need to be rolled to Dec $37 puts, now $1.50.
    • FAS Nov $11 puts should expire worthless.
    • SCO Dec $36 calls at $5.80 can be cashed out
    • FAS Nov $66 calls should expire worthless.

    That will leave us with just the GNW spread, the DXD bull spread and the short SCO puts.  

    By the way, notice what we have in the WCP – BALANCE!  

    Submitted on 2011/11/21 at 11:12 am

    10 QQQ weekly $54 calls in WCP at .94 – out at .80.

    WCP moves:

    • Buying back Jan $7.50 calls for .24.

    • Selling DXD Dec $15 calls for $2.80, leaving $17 calls naked.

    • No change on SCO short puts or new QQQ calls.  

    QQQ/WCP – I’m a little torn here as we’re up .25 but we could be up $1 tomorrow so do we take $250 and run or risk $1,100 to make maybe $500 more? Since we won’t likely get wiped out, I think we’re risking less than $500 to make $500 and I still feel good about it so most likely let it ride. If we had more than 10 – I would certainly cash half out at $1.10.  

    Submitted on 2011/11/22 at 10:14 am

    Notice our Futures trades were great lines to work with so let’s continue to keep our eyes on Dow (/YM) 11,500 and oil (/CL) $97.50 along with RUT (/TF) 700 as true lines in the sand. Nas 2,200 in Futures is also a serious support line we DO NOT want to lose (especially as we have those QQQ calls in the WCP).

    QQQs stopped out in WCP – Very stupid and greedy not to take the profit and be done with them last night!  

    20 QQQ NEXT Weekly $55 calls at .48 in the WCP.

    5 TNA Dec $35/40 bull call spreads at $2.25 in WCP

    TLT Next week $121/119 bear put spread at .75 is a fun spread. 10 in WCP on thoughts that the 7-year note auction might not be THAT good.  

    XLF Weekly $10 calls are $1.85 with about .02 in premium, 10 in the WCP into the close but out at the close no matter what – looking for $2.05 or better. 

    WCP:

    • QQQ Next week $55s at .42 are a risky hold but let’s trust that Fib line.
    • TNA spread I’m not too worried about.
    • TLT spread makes sense, they don’t hold this level for too long.
    • XLF calls we’ll be out of at close.  

    Submitted on 2011/11/25 at 9:42 am

    FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one.

    Submitted on 2011/11/28 at 10:14 am

    We got a wild one today and let’s not forget our Rule #1 is "ALWAYS sell into the initial excitement." We only have 2 Rules so it’s not so much to expect you to know Rule #1 and Rule #2 is the same rule but "When in doubt, sell half." In other words, if you think this is only the beginning of a 1,000,000-point rally – then fine – just take half off the table in case you’re wrong and you’ll still catch 500,000 points worth of gains.

    Now selling doesn’t mean selling right away – just setting reasonable stops and stopping out doesn’t mean you can’t get back in – just that you will miss a small gap between where you get out and where you next decide to get in. In a more realistic 500-point recovery for the Dow, for example, we just flew from 11,250 to 11,500 and we KNOW we hit heavy resistance (the Must Hold line) at 11,590 so, in the very least – we need to have our finger on the trigger there to either take some money or cover or SELL?

    What does SELL mean? Well, in the WCP, for example, we took the this week QQQ $55s at .48 last Wednesday and they are now .55 so not very exciting but better than .23 on Friday so that’s up 100% in a day. The fact that we entered at the wrong time should not affect our decision to get the hell out of this trade if it falls back to .45 because we should be THRILLED to take a small loss so let’s call it a .15 trailing stop with a hard stop at .45, which is just .10 at the moment.

    Oh yes, so we set a stop but what else could we do? We could SELL the $56 calls for .22 to give ourselves cover and take 1/2 off the table or, if in doubt, we can just sell half our position for .55 (.07 profit) and cover the rest for .22, which would leave us in the $1 spread for net .08 on 10. That’s what I mean by ALWAYS SELLING – find some way to make it work for you – even if you are too greedy to take $140 and run after narrowly escaping being down $400.

    This rally SHOULD have legs and I do expect the Dow to get over the Must Hold line. The real test is going to be the Nas (2,600) and the S&P (1,235) and they both are about halfway there at the moment. STILL – keep in mind that this is nothing more than a weak bounce off the 10% drop until and unless we cross the 50% retrace which is, not too coincidentally, our Must Hold lines!

    Not for the lagging NYSE and Russell – they need to get back to their -5% lines so, overall, there’s nothing "strong" about the market right now – just a relief rally, nothing more and that’s a great reason to SELL – just to be safe!  

    Speaking of the Qs – In the WCP, now that we got .65 on the QQQ $55s, let’s just take it and run. We have plenty of bullish plays so we don’t mess around with a weekly!   

    Testy Tuesday 11,590 or Bust! (from the 11/29 post)

    As I said yesterday, we saw this rally as an opportunity to cash out our bullish positions and we killed our weekly plays as we topped out in the afternoon and today, if we fail to get over 11,590 on the Dow (our Must Hold line) – then it’s time to pull the plug on the rest of the bull side (short-term bets – including our WCP) and get back to cash.

    FAS weekly $51/52 bull call spread is .60 and makes .40 (66%) if FAS holds $52 (now $52.84) through Friday. If you stop at .30, you can be wrong twice and right once and still break even so let’s do 10 in the WCP and see how it goes. 

  49. Phil
    WCP update:
     
     
    We left off on our Nov 18th update with a virtual balance of net $26,075, up 74% in a month but greedy for more!  So we were playing for a new 70" flat-screen and a generally kick-ass Christmas but now we’ll go for the 100" and, of course, let’s not forget we’re now playing this bonus round for charity as well (see last update), 
     
    Our virtual cash balance was $23,510 and the rest was unrealized gains from our open positions.  Since then, we closed out the following positions:  
     
    • 2 NFLX Nov $67.50 puts sold for $3, expired worthless – up $600
    • 5 DECK Nov $105 calls sold for $6.60, expired worthless – up $3,300
    • 5 SCO Nov $45/48 bull call spreads at $1.10, expired worthless – down $1,100
    • 20 FAS Nov $11 puts sold for .65, expired worthless – up $1,300
    • 10 SCO Dec $36 calls at net $4.30, out at $5.80 – up $1,500
    • 10 FAS Nov $66 calls sold for net $0, expired worthless – even
    • 10 QQQ 11/25 $54 calls at .94, out at .80 – down $140
    • 20 QQQ 12/2 $55 calls at .48, out at .65 – up $340
    • 10 XLF Dec 2nd $10 calls at $1.85, out at $2.10 – up $250
    An amazing net $8,250 added to our virtual cash pile for a new total of $31,760 in realized gains – not bad for a week’s work!  While I wanted to get back to more cash this morning (and said so in the morning post), we didn’t do any specific closes so I’m going to consider the other positions open, which is fine as we’re supposed to be practicing working out of losing positions anyway and, who knows – we may still take off again.  
     
     
    Our remaining open positions are:
    • 10 GNW Jan $5 calls at net $1.34 ($1,340), now $1.45 – up $110
    • 10 GNW Dec $6 puts sold for .85 (-$850), now .35 – up $500
    • 12 DXD Dec $17 calls, sold for net $1.35 (-$1,350 – sold $15 calls from spread), now $1 – up $420
    • 5 SCO Dec $37 puts sold for net $1.90 (-$1,900), now $1.65 – up $125
    • 5 TNA Dec $35/40 bull call spreads at $2.25 ($2,250), now $2.70 – up $225
    • 10 TLT Dec 2nd $121/119 bear put spreads at .75 ($750), now $1.20 – up $450 
    • 5 FAS Dec $48/55 bull call spread at $3 ($1,500), now $3.70 – up $350 
    • 5 FAS Dec $40 puts sold for $2.40 (-$1,200), now $1.20 – up $600
    • 10 FAS 12/2 $51/52 bull call spreads at .60 ($600), still .60 – even 

    WOW!!!  That’s 8 for 8 on our open positions this week, not counting the new one (which is even).  That’s way better than I thought we were doing with an unrealized gain of $2,780 and that brings the net balance of the portfolio up to $34,540 – well past the 100% mark in 30 days!  I guess it’s a good thing we didn’t quit while we were ahead last week!  

    Congrats to all the players – we don’t have a goal anymore other than to not be dumb-asses and blow our profits.  I guess we’ll trade this up to expiration day in December so another 3 weeks and then cash for the holidays and we’ll start a brand new $25,000 Portfolio in January.  

    On the whole, we’re way too bullish and that’s why I wanted to kill it this morning but I was sick and didn’t get back to it.  Had I known there was that much profit (and it was more in the morning), there is no way I would have left it open.  We’ll see how tomorrow goes – I’d hate to mess up a perfect week!  

  50. Phil

    Submitted on 2011/11/30 at 6:03 am

    As you can see, I was up in the middle of the night updating the WCP, which is going way better than I thought it was yesterday morning so my instincts to take the money and run in the morning post were very correct although, since I didn’t specify outs, we’ll keep playing the remaining positions (and adding more, of course).  

    Submitted on 2011/11/30 at 11:48 am

    By the way, for WCP players – Despite the fact that I regretted not taking money and running yesterday on bull side, now that we have jumped 3%, I don’t feel the same way as we can now reverse all of today’s gains and still be fine so I’m more inclined to ride out the week than I was before all this nonsense started – it’s a buffer we did not expect and, since we’re playing with double bonus money – I think it’s worth a little risk.  

    Submitted on 2011/11/30 at 1:09 pm

    WCP/Rev – There will always be a small, aggressive portfolio unless the market conditions are just wrong for it.  I’d paper trade now and get the hang of what positions do and don’t work for your schedule over the next couple of months.  Don’t forget though, the WCP is meant as an aggressive carve-out to a more prudent portfolio, like our Income Portfolio – or to a large cash position for those who are sick of the nonsense – it assumes you have plenty of margin to adjust trades with.  

    Stance/L4 – Well, long-term, like the Income Portfolio, we’re hedged but pretty bullish and about 50% invested.  Short-term, in the WCP, we are almost entirely in cash with most of our long entries offset by short sale credits so we’re using margin but virtually no cash to make our trades with about $11,000 in trades (half debit, half credit) off $34,000 in cash so call it 1/3 invested and very bullish, with just the short SCO puts as a bear play.  Is it sustainable?  Sure, we oversold – that’s for sure and, if the World continues not to end, then a lot of stocks are way too cheap still.  

    Submitted on 2011/12/01 at 10:00 am

    That’s just NOT that bullish, is it?  I’m still not looking to fight the Fed and get bearish but it’s a good idea to have itchy trigger fingers for profit taking if you are not a gambler.  Dollar over 78.50 is the best single signal to get out (now "safely at 78.30) as it’s a barometer for the EU, etc and I’m pretty sure the BOJ won’t be risking any Yentervention while their market is running up with ours.  

    We are NOT playing the WCP conservatively so we’re still following through with the risk-on play and sticking with things as long as our technicals hold up but I will be looking for another hedge into the weekend.  Other than that, more watching and waiting to see what sticks – it’s a slow news day so far and I doubt ISM or Construction Spending will move us much but NFP can move us 300 points one way or the other pre-market tomorrow so we need to think about where we are before the day’s end. 

    Submitted on 2011/12/01 at 11:12 am

    FAS/WCP, NF – Oh yes, great point, if you can get $1 for it, may as well take it unless, of course, your broker does what TOS does, which is just drop the net $1 in your account if it closes in the money.  Whichever is fee cheaper in other words.  

    Speaking of TOS, Scott clarified that PSW members can still contact him to get either a flat $1.50 per contract or $9.99 per ticket PLUS .75 per contract (you have to pick one or the other method).  Of course, if your volume is big enough to put you at around $2K a month in fees or more, they are flexible from there.  

    20 DIA Dec $116 puts at $1.14 in WCP with a stop at $1 (over 11,200). 

    Submitted on 2011/12/01 at 11:28 am

    GLL $16 Dec $16 calls are .65 and 10 is fun in the WCP. 

    Submitted on 2011/12/01 at 12:18 pm

    Range/Beau – Yes, I don’t tend to flip-flop my macro outlook every other day!  And yes, everything has a range so we watch the range of the stock, the range of the index the stock is in and the range of the market and, when we find something that becomes a compelling value (like MT last week), we buy it – EVEN THOUGH it may go down further, because we PLAN to buy more if it does.  Why should you EVER buy a stock that’s not on sale?  There are 9,000 stocks to buy and, every day, someone is having a sale.   I love BA and we just jumped on them below $60 but, when they were $75, I still loved them but we wait for a market crash (or a plane crash) to take the price down.  If not, I love IBM too, and AAPL and HPQ (who did go on sale) and INTC and VLO and WMT and MO and XLF and FDX and UPS and CAT and CHK and AXP and GE and JPM and CSCO and MCD and V and PFE and UTX and VZ and T and…  well, you get the idea.  

    The same way I like Levis but have no reason to buy them unless they go on sale, I have no reason to buy stocks that aren’t on sale.  If there are no sales, I don’t buy – that’s pretty simple, right?  You should go back through the Portfolios tab and read trough our old portfolios – there’s a lot of explanation about why we like things and you can look at the charts with hindsight and see why and where we pick our entries.  As to the WCP, the trades are self-contained mostly.  Of course we try to balance and right now too bullish (which is why I did the DIA puts – just in case and it’s worth losing $300 to protect our unrealized gains rather than cashing out in a panic) so you just have to be careful with where we’re weighted as of your entry but we’ll be back to almost all cash tomorrow so a good day to benchmark.  

    Submitted on 2011/12/02 at 9:48 am

    CASH IS NOW KING AGAIN – Is that clear?  We are not up enough to have confidence and the Dollar was crushed and we didn’t break over our levels so CASHCASHCASH – that goes for the WCP, that goes for any short-term bullish position – IS THAT CLEAR???

    Other than that, I have very little to add at the morning – I just want to make sure this Alert goes out right away so let’s just get back to cash and have a nice, relaxing weekend and we can mess around with new stuff on Monday but – as you can see from the above post (and that doesn’t even include the WCP picks and our other bull bets) – it’s been a fabulous couple of weeks so why push our luck?  

    Submitted on 2011/12/02 at 11:07 am

    GNW/WCP, Ross – Yes, you are right.  We can get $1.15 for selling 10 Dec $6 calls for $1.15 and that puts us the $5/6 spread for net .19, PLUS short put profits – It’s like locking in over $1,000!  

    RUT Futures are a good short below the 740 line (now 740.5) with VERY tight stops.  

    TZA Dec $33 calls are $1, 10 in the WCP for a weekend play unless we make .50 or better today. 

    Submitted on 2011/12/02 at 2:01 pm

    TZA/2nifty – In that particular case, I was concerned with limiting damage if the RUT swung back up but still had a good upside and time to roll if we had to.  Since it was for the WCP, cost was also a factor as I don’t like to risk more than $500 on a trade (50% loss, in this case).  Another factor is the deltas.  The delta of the $33s is .29 and the deltas around it are ($29) .49, .43, .37, .33, ($33s at .29), .26, .23, .20 and .18.  SO – Assuming we go up $5, what do we gain?  We gain .29 + .33 + .37 + .43 + .49 = $1.91 BUT, to the downside, we lose .29 + .26+ .23 + .20 + .18 = $1.16 so we lose nearly half as much on a move against us as we gain on a move in our direction.  ALSO – TZA goes up, then the market is going down and the VIX increases and we likely make even more money as the premiums increase.  If TZA goes down, we also lose money fast due to premium contraction BUT the $38 calls are still .55 (down .45) as ultras tend to hold their value well, even far out of the money.  The $28s, on the other hand, are $2.30 so 45% loss on the $5 downside and 130% gain on the $5 upside.  Now you see why I don’t bother to explain the logic of every trade!  

    Submitted on 2011/12/02 at 3:12 pm

    Spreads/Kallen – If you mean the FAS Dec $48/55 bull call spread in the WCP, those are $6 and $7 is the best we’ll do so why wait?  With $3,000 in cash (5 contracts), I’m pretty sure we can find another way to make $500 over the next two weeks.  It would not be a terrible thing to hold the spread but be aware that FAS was $48 last Friday so you are risking $6 to make $1 and that was NOT the trade we originally signed up for.  

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