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Will We Hold It Wednesday – S&P 1,440 Edition

I love this part of a market

This is the part where the MSM begins to realize that Manufacturing is slowing down, stimulus won't create jobs, earnings are not going to be as good as expected, Europe is not fixed, housing is not as strong as expected and the stock market is being manipulated.  Yep, all the stuff I've been telling you for months

Last week I told you there will be a dip and we will be buying it and this morning, in Member Chat, Denlundy asked:

Phil:   Immediately after Q3 was announced you discussed the possibility of a 3 to 4 percent drop before the Q3 injection would make its impact felt via rising indexes.  Could this be what we are experiencing at present?

My answer to that was, of course, yes – this is it.  So far, we're only down about 1.5% from the QE fever of less than two weeks ago but people are already freaking out like it's the end of the World as we know it.  This is just what we expected to happen and also why we decided to hang on to the short positions in our $25,000 Portfolios after QE3 was announced – it doesn't really fix anything and the exuberance was irrational.  

imageHow far down is 4% – right to those rising 50 dma lines you can see in our Big Chart.  That's what we're thinking the worst case should be as the Euro normalizes back below $1.30 and the Dollar normalizes back above 80 and THEN it's time for earnings and we'll be salivating over companies that have big sell-offs like FDX, CAT and JOY because it gives us a chance to get back into them 20-30% off the tops just in time for Global QE to begin to kick in (and it better happen soon – before China melts down – again).

We did a little bargain-hunting last week, in case there was no sell-off, but our main Income Portfolio is still less than 20% invested as we wait for those earnings "disappointments" to give us some good prices.  Already we see analysts' expectations for earnings coming down sharply or, as we say at PSW – finally getting realistic…    

I published a major portfolio update for our Members on Monday and, so far, it's looking like our TZA hedge (ultra-short Russell) is right on the money with the Russell diving from 865 to 840 (2.9%) since last week and still another 25 points away from the 50 dma at 815.  Hopefully we won't end up testing those lines, but we do need to be prepared for it.  

Meanwhile, in pre-market (8:30) the Dollar is testing 80 and oil (/CL) is testing $90 so we hit that long on oil futures.  This is the exact target we talked about last Thursday in the morning post, so no change in strategy – just a 2nd chance to execute it.  The last one was good for a run back to $93 and that was a nice $3,000 per contract gain!  

Also according to plan is the usual market sell-off into the 5 and 7-year note auctions.  As I said to Members on Monday in reviewing the week ahead: "At least the Fed shuts up this week but 5 & 7-year notes Weds and Thurs often come with dips to encourage buyers."  So we're right on schedule with TLT heading back to $125 as Treasury looks to peddle about $70Bn worth of paper today and tomorrow.  The last round of auctions were a bit disappointing as we were rallying so we didn't expect "THEM" to let things slide twice in a row or soon it will be Americans taking to the streets and rioting as our country finally is no longer able to borrow $100Bn a month to pay its bills.  

That's what was going on in Spain last night and what is going on in Greece this morning – kind of makes our own Occupy Wall Street movement look a little wimpy, doesn't it?  Spain is looking more like Greece, as austerity protests and planned budget cuts shoot yields on Spanish 10-year bonds back near 6%.  The Catalonia region announced snap elections for November 25th, which could lead to independence for Spain’s most economically important region and the IBEX is down 3.5% this morning on that news.  

Don't forget they're even protesting in China now and the Shanghai Composite tested 2,000 this morning on a 25-point drop and barely held it at 2,004.  Note that a significant deterioration in Chinese data is #3 on Zero Hedge's list of potential Global downside risks (great article) and is, I think, the most likely thing to tank the global economy.  Unfortunately, I'd say it's not deterioration that worries me but the realization of the deterioration that is currently being covered up

In some ways, that's good because I don't think China's economy has a lot further to fall – I just think it fell already and hopefully will begin to recover.  What worries me is that, other than the CEO's of CAT and FDX – no one in the West seems to realize what a mess China is.  The US fiscal cliff will be extended, Europe will muddle through, we discussed the inflation issue and how to hedge it on Friday, the sale of core bonds doesn't seem that likely as there's nowhere for the money to go but into stocks and that's why we like them long-term and protectionism is not too likely as our Global economy is now so entwined that those games should quickly end in ties. 

We're still far from being gung-ho bullish – we're simply amused at how quickly others are turning bearish on the market's first dip in a month.  


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  1. Phil

    Oil testing 90 with Dollar testing 80 so good time to poke long on (/CL) but, obviously, out if either the Dollar goes over or oil goes under.  

  2. aaronc

    Good Morning! VXX getting bid up as of 8AM Eastern on pretty decent volume. Should be a fun day today.

  3. amitshenoy174

    GM Everyone VIX is right at resistance today is gonna be very very interesting we fail it I am buying vxx leap puts.

  4. diamond

    amitshenoy174 – VXX will reverse split on October 5th. 

  5. hoss18

    Remember, 3Q ends Friday so firms selling winners to solidify their gains…ie AAPL….some of those could continue down through Friday and then snap back hard….could have some nice looking windows come next week!

  6. newt

    VXX/ Amit:  Thanks-- What strike on those Puts?

  7. aaronc

    Amits/VXX – I'm with you. I'm going to be buying to cover 1/2 of my short puts on the enthusiastic opening. Something I learned here, when in doubt sell 1/2 (in this case buy). Am I am certainly in doubt. 

  8. stjeanluc

    Oil Lines

    R3 – 95.40
    R2 – 94.30
    R1 – 92.77
    PP – 91.67
    S1 – 90.14
    S2 – 89.04
    S3 – 87.51

    Wide range again. I also have Fib lines at 91.57, 91.19, 90.57, 89.94, 89.56!

  9. amitshenoy174

    newt-- VXX is supposed to become 56 if I am not mistaken .  So I will buy a 40 leap put and let it go .
     
    Last time i did a vxx 10 put leap for jan and sold as much calls as i can on it .

  10. BruceE

    Thanks on oil Phil.  Got $90.50 and got out with my egg mcmuffin money!

  11. 1020

    Good Morning!

  12. newt

    Amit: Thanks.

  13. Savi

    Good Morning—-
    Phil—there is a disconnect between /RB and /CL this morning—-am I missing something here?

  14. millcreek

    phil,
    your thoughts re the banksters fixing anything………..
     
    is the ecb or the fed really going to help the man on the street in any of these countries ?
     
    arent we whistling past the grave yard
     
    it seems we are not going to have to wait six months……….
     
    im surprised it hasnt erupted sooner………
     
    whats ur timeframe and can stimulus from the cb's really continue to prolong…….tks

  15. jasu1

    Phil,
    Any trade on APPL in the open excitement? Closed the trade on the 675 Oct call at the close….Thanks

  16. Phil

    Good morning!  

    Be careful with VXX or VIX – probably a very temporary move up.  

    Good point Hoss, lots of EOQ profit-taking in addition to shaking out the weak hands and, of course, the Treasury auctions.  I really don't see us failing those 50 dmas (down another 2%) but, more likely, we turn up this afternoon or tomorrow afternoon.  

    Nicely played Bruce!  

    Don't forget inventories are 10:30 – I won't be around as I have to take my car in for service but only gone until 11:30ish.  

    Gasoline/Savi – No, they are just messing with you with a spike down ahead of the move up.  Still gasoline not as predictable as oil and demand should be heading down fast now that summer is over.  The only predictable play on gas is going long into weekends.  

    AAPL $666!  $25KPs – Let's buy back the rest of the $695 callers at $8 and we still have the 3 short $675 callers, now $15.50 and we'll put a stop on them at $17 and then we'll see if AAPL can get back over $670 but our goal is to re-cover, in full with $696 callers at $13+.

  17. aaronc

    VIX – Talk about a head fake. Sold off into the open them wham, gapped up. Think I'll hold off on covering for a spell.

  18. stjeanluc

  19. Pharmboy

  20. Burrben

    The AAPL Jan15 400 Puts recommended last week for $25 are now $32.58 if you are scaling in.
    The AAPL Jan15 400/500 Bull CS recommended last week for $106 is now $98 if you are scaling in.

  21. hemas03

    Phil, was not able to cover AAPL with 675 callers yesterday, I have cashed all 695 short calls.  Any suggestions or stay put for now?  Thanks as always for your advice.

  22. newt

    AAPL:  I need some guidance on my $690 calls I picked up yesterday.  These are trading now at $9.10- so DD ($4550) at this price or roll to $680?  I am trying to apply all that we learn here…..

  23. Phil

    Banksters/Mill – Unless the EU wants to see Spain times 27, they will have to do something for their citizens.  Governments can't sustain 20% unemployment for too long before the revolutionaries begin to gain an audience.  I liked the Anarchists in Greece today setting fire to the press tent.  They are right – no Government is better than what they have now.  That kind of thinking makes people in power very nervous.  I don't think QE3 is a solution (including what the ECB is doing) – nothing is a real solution until they start putting people back to work and that's up to the Governments – this austerity madness has to end and the Fed needs to change their stance of "As long as you refuse to hire people, we'll keep giving you free money" – that is the stupidest policy of them all!

    Good call Jasu.  On AAPL in $25KP – if we fail to hold $660, then we want to sell 3 $660 calls, now $23, for $20 and then the 3 $675 calls should be $13 so we put a stop of $15 on them and that would put us back to 3/10 covered.  If AAPL goes up, then our 3 short $675s stop out and we have 10 naked $685 calls and we just set sensible stops to sell covers.  If AAPL keeps heading lower – we do the same thing on the next $10 drop ($650) and then we'd be 9/10 covered with stops on the top 2 sets and, at that point, we'd have to roll down the $685s but I doubt that will happen before I come back.  

    FAS Money – Ouch on the short puts but we can always roll them.  

    AAPL/Hemas – Not good to miss that cover but I think $660 should hold – if not, you need to cover with 3 or 4 $660s and then, if $650, you'd have to get cover up to 8/10 and roll lower so you don't have a $35 spread but, otherwise, not a tragedy with 23 days to go on the October calls.  Keep in mind there is no negative AAPL news – it's just caught up in the general panic. 

  24. stjeanluc

    Avg. Cost – V $1.42, PCLN $8.17, AMZN $9.17

  25. stjeanluc

  26. stjeanluc

    The Momo Portfolio is in cash now!

  27. Phil

    AAPL/Newt – First of all, if you are going to gamble on naked, out of the money calls like that, you are often going to get burned like this.  Hopefully, you portioned yourself so you are THRILLED to scale in but let's assume you are doing it properly and initially committed 1/4 of your full allocation to the $690s at $15 ($7,500).  If you DD at $9 then you have 10 at $12,000 for an average of $12 with the $690s at $9 but if you spend the same $9 to roll lower, you are in 5 $670s ($17.25) for a total of $23 and yesterday the $670s were $28 at 2pm so not too far-fetched to get even on those and, if AAPL runs up, you can sell 5 $685 covers for $17+ and then you're in a sensible $15 spread for net $6.  Which position sounds better to you?  

    $25KPs – No other changes.  If we go down further, AMZN and PCLN should finally break.  Tempting to DD on FAS and QQQ but too soon. 

  28. newt

    Phil- Thanks.

  29. stjeanluc

    And all these guys are still on TV or giving advice….

    http://www.ritholtz.com/blog/2012/09/stupid-denial/

     

    February 2000: Larry Kudlow, CNBC host. “This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.” He’s still hosting his own cable show.

    September 2000: Jim Cramer, host of “Mad Money.” Sun Microsystems “has the best near-term outlook of any company I know.” It fell from $60 to below $3 in two years.

    June 2002: Larry Kudlow, CNBC host. “The shock therapy of a decisive war will elevate the stock market by a couple thousand points.” He also predicted the Dow would hit 35,000 by 2010.

    And many other idiots at the link!

  30. jyoti

    Phil / QQQ

    I still have the Sept 69 callers, hold or roll?

  31. stjeanluc

    Might be too early to jump in the Shanghai index:

    http://dragonflycap.com/2012/09/26/china-is-not-a-bargain-compared-to-the-us/

    Maybe the valuations on the Shanghai Composite are low, or even a steal, but that does not mean that they cannot go even lower. It also does not mean that the opportunities there will outperform those in the US. This chart suggest that you keep your money at home.

  32. Phil

    Kudlow and Cramer/StJ – Remember when they had a show together?  That was pure magic…

    QQQ/Jyoti – This week?  That's not good.  Didn't cost too much, we rolled to the Oct $70s for free and now it's .23 but I'm not brimming with confidence for the $70s either.  Always keep in mind that you are in weeklies for a day trade – almost never overnight.  

    XLF holding $15.50 nicely – that's FAS $104 and right about where we thought we'd be safe – let's see if it sticks. If XLF loses $15.50 and AAPL fails $660 and AMZN fails $250 (at least that one we're betting on) then we probably have another leg down coming but, on the whole – it's just 29M shares on the Dow at 10:24 and it's down 19 points – not exactly a conviction sell-off. 

    Oil back below $90 coming into inventory.  

  33. Savi

    jyoti—-I think  Phil made a comment of rolling to Oct 70s yesterday

  34. stjeanluc

    I'll post again the AAPL lines I posted on 9/20 but updated with today's prices:

    Could not go through $705 and now $668 is acting as resistance…. I doubt we test $638, but we could hang around that level until the earnings.

  35. Phil

    Consumer stocks still green on the Dow (see yesterday's discussion):  KO, MCD, MMM, MRK, PG, T, VZ, WMT.  DD, INTC and BA also green, the rest are red with AA down 1.7%, CSCO down 1.2%, DIS down 1% (???), BAC down 1.5%, HPQ down 2.7%…

    Draw on inventories – /CL bullish over the $90 line again!!

     EIA Petroleum Inventories: Crude -2.4M barrels vs. consensus of +1.6M. Gasoline -0.5M barrels vs. +0.3M. Distillates -0.5M barrels vs. +1.0M. Crude futures -1.47% at $90.03.

    That should give us a bit of a floor and I have to go – back around 11:30. 

  36. aaronc

    Phil, can I get your thoughts on shorting some puts on PBY. Don't laugh, but the reasoning is that according to their 2011 first quarter 10Q they valued their real estate holdings as ~700MM. The market cap for the entire company is ~542MM. They are trading in the 10's but recently had a offer from a private equity firm in the 15's (offer rejected I think). Could this be a play on recovering real estate values? The only thing I see is that their doesn't seem to be a whole lot of premium to sell. 

  37. davidkordack

    1/2 out on PCLN at $8 right?

  38. Phil

    $25KP – Let's DD on QQQ Oct $70s at .30.  

  39. stjeanluc

    That's interesting:

    http://www.engadget.com/2012/09/26/texas-instruments-dumping-mobile/

    Texas Instruments has made the startling announcement that it's going to wind down its wildly successful smartphone and tablet business in favor of embedded systems. VP Greg Delagi told investors that the switch would create a more "stable" and "long-term business" than the cutthroat battles it's faced in mobile. While, currently the world's third biggest semiconductor company, it's concerned about losing ground to players like QualcommSamsung and Apple -- despite its latest OMAP CPUs powering tablets like the Nook HD and Kindle Fire. We're scratching our heads as to why a major player would drop such a strong position like this, but perhaps they know something that we don't.

    It's possible that there is no money to made in that processor segment due to the competition.

  40. Phil

    PBY/Aaron – Remind me later. 

    PCLN/$25KP, Davidor – Yes, we want to get 1/2 out even but, if it's going our way, I'd rather stop out at $7.50 than miss seeing $10.  

  41. Peter D

    Good morning,  VIX is going up so let's roll the RUT putters down in the virtual short strangle portfolio:
    - Buy back 7 RUT Oct 770 puts for $2.425 debit, sell 14 RUT 745 puts for $1.25 credit

  42. stjeanluc

    Oil below $90 – bounced off S2 at 89.04. Could get ugly….

  43. davidkordack

    So get all out of PCLN at $10 or half?

  44. stjeanluc

    Could probably raise that PCLN stop to $8.00 now… 

  45. Phil

    Oops, I'm still here – Tina wasn't ready!  

    So let's take $9 and run on all the PCLNs and we'll make AMZN the one we press ($25KP). 

  46. shadowfax

    Today is showing more signs of limited liquidity. If selling resumes the drop could be suddeny severe. No one is buying this dip.

  47. Phil

    Now she's ready….  OK, so the Dollar is up half a point which, of course, makes me less worried about a half-point drop in the indexes.  I think this is bottoming but we'll know when I get back.  Don't forget max panic into note auction, which is held around 12:30 and reported at 1 so it's around there I think we turn up but maybe sooner at TLT is at goal ($125) already.  

  48. nicha

    scottmi – you on the board?

  49. samz3700

    Phil – I am not already in the apple play -
    Any advice for long term plays - 
    I was looking at 500/600 Jan 14 bull call spread / as well as 550/650 -
    500/600 @ 64 or 550/650 @ 53 – Is a nice easy double (paired with a few deep out of money put sales) that I can be very happy with
    I did very well with your 350/400 Jan 13 Bull call spread – way back when

  50. zipla

    Pharm/LLY
    Are you still holding the long LLY Oct 41 puts?
    Is this dead in the water or is there any way of rescuing it?
    TIA

  51. Burrben

    Phil,
    Would you add any more short AAPL Jan15 400puts here?  Current price is : 33.88.  I'm only short 5 right now.  

  52. Pharmboy

    LLY/zip – I think they are dead.  I am still in them, but am contemplating selling the 43 Oct Ps and using the proceeds to roll out to the Jan 43 Ps.

    Pbars – 144.10 on SPY:  2 of them in TOS.

  53. stjeanluc

    Funny, in all that red ink, NFLX is up today… They have been beaten up though!

  54. amitshenoy174

    Loaded boat on VXX put wish me luck

  55. stjeanluc

    That's not a good trend and it shows that taxing capital at a lower rate than labor will only make the revenue problem bigger:

    http://blogs.reuters.com/felix-salmon/2012/09/26/chart-of-the-day-the-long-decline-of-labor/

    2012-13-1w.gif

     

    There’s a big lesson here for anybody serious about fiscal policy, too. (Paul Ryan, I’m looking at you.) As the labor share of income goes down and the capital share of income goes up, the only way that we can stop tax revenues from plunging disastrously is to tax capital income at least as much as we tax labor income. By contrast, the Ryan plan proposes taxing capital income at zero — putting ever more of a burden on working Americans, while giving unearned income a massive tax break the rich really don’t need.

    There are big global forces driving this chart, most importantly the way in which labor is becoming increasingly global and fungible. Labor income has been declining for a good 25 years, and the only substantial countertrend was the dot-com bubble. The trend is a bad one, and it’s getting worse. And while I don’t see any policies, on either side of the aisle, which really try to address it, the fact is that Republican policies seem explicitly designed to exacerbate it. Think of capital income as the money flowing to “job creators”, and the chart is very clear on that front.

  56. Jbur

    Pharm: What's the significance of the PBars? And are you looking at a 1, 3, or 5 minute intraday? Thanks.

  57. Pharmboy

    AMZN P/C ratio is 1.4….if 'they' move it up, it is gonna fly…..

  58. Pharmboy

    3 min intraday.  Pbars are sometimes a prelude to future direction…..

  59. Phil

    Did I miss anything?

    Nice dip in oil down to $89 but already back to $89.50 – big problem if they can't get back over $90 on a draw-down.   Strip is very heavy at almost 650M for front three months – maybe that's why:

     

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Nov'12 90.82 91.34 88.95 89.63 12:15
    Sep 26

    -

    -1.74 170502 91.37 328262 Call Put
    Dec'12 91.20 91.65 89.31 89.98 12:15
    Sep 26

    -

    -1.73 49547 91.71 199672 Call Put
    Jan'13 91.55 92.04 89.72 90.41 12:15
    Sep 26

    -

    -1.68 23160 92.09 116807 Call Put
    Feb'13 91.96 92.24 90.19 90.78 12:15
    Sep 26

    -

    -1.69 11925 92.47 68827 Call Put

    Dollar back to 79.95, Euro $1.286, Pound $1.6145, 77.77 Yen to the Buck.  

    So far, just a weak bounce, or not even on a 250-point Dow drop so 20% would be 50 and that's 13,460 on the Dow which is just about exactly where it was just rejected – that's not good!  

    S&P fell from 1,465 to 1,432 (33) so 6.6 is a weak bounce to 1,438.6 and, wouldn't you know it, also the fail point…

    You get the idea – we have to do better than this.  Bond auction should be wrapping up soon.

  60. Lincoln

    Phil: rolling naked calls
    Now that my portfolio is made up primarily with sold premium I wonder if there are  ever times it makes sense to roll a position out and up while the position is still 100% premium.  For example short (20) Hog Oct 44 calls @ .44 and I’m in a ½ position so I can still DD when it moves against me and I have to roll. Or is it better to roll now to say 20 Nov 45 calls @ .88. Thus getting paid $880 more for waiting a month at a higher strike.  I would look at the return as the additional $880 on margin of $22,500 = aprox 4%/mo.   I also sell a small number of puts in a position like this when I don’t mind owning some.  I know one approach would be just wait out the Oct expiration and then if expired worthless move on to something else.  But in my case I have about 20 stocks I focus on and would rather keep working those stocks up and down within a range.  Advice?    TIA  

  61. aaronc

    Amits/VXX – Good luck! I exited my shorts and went long VXX puts. I'm doing something a little different using the DEC contract with a 6 strike (paid .06 on half my desired position). The VIX pinged my long term trend line and didn't hold. I'm looking for mid 6 handle before December. I feel MUCH better being on this end of the trade.

  62. amitshenoy174

    Aaronc-- we are both on the same side I bought the puts :)

  63. aaronc

    *gentle reminder* – "Phil, can I get your thoughts on shorting some puts on PBY. Don't laugh, but the reasoning is that according to their 2011 first quarter 10Q they valued their real estate holdings as ~700MM. The market cap for the entire company is ~542MM. They are trading in the 10's but recently had a offer from a private equity firm in the 15's (offer rejected I think). Could this be a play on recovering real estate values? The only thing I see is that their doesn't seem to be a whole lot of premium to sell."

  64. ksone88

    SPLS/Phil – Any thoughts on Staples? It has been looking very weak….maybe too late to play.

  65. scottmi

    Nicha – yes hello i am here.

  66. nicha

    scottmi – not much of a good day, is it?mare you still in those callls?  I am thinking of rolling to Dec 680/700 bcs. 

  67. Phil

    PBY/Aaron – Lots of old cars should be good for them and I agree re. break-up value and that's good if your goal is simply to establish a long-term hold but, near-term, if they aren't selling – what's the difference?  I had similar logic buying SHLD when they were down around $40 and that worked…  The question is, do they have good growth potential?  I think only short-term because, long-term, more people will buy new cars and new cars don't need these guys for the first 3 years.  As you note, not great premium to sell but, at $10.05, you can buy the stock and sell the Apr $10 calls for $1.10 and that nets $8.95 with a 12% gain at $10 plus the dividend for another 1% and then, IF they take a dive – then you can sell some puts and pick up another $1 or two for the $8 puts and, assuming $1.50, you would be in a buy/write at net $7.45/7.73, which isn't bad for a long-term hold.  

    PCLN/$25KP, Davidor – All out at $9 – was too much of an improvement over yesterday's $3.85 not to take it.  If we were way ahead in the $25KP, that would be different but we need the $9,000 – especially when $4K of it is profit.  Unlike AMZN, most of PCLN revenues come from overseas so, if they recognize them against a weak Dollar – they might look nice.  

    TXN/Pharm – I get it.  They make processor chips and AAPL and Samsung are making their own now and I'm sure it costs a fortune to produce a competitive chip just to try to keep the remaining 20% of the market running and, of course, there's no margin in it anyway with Nooks and Kindles priced in the low end.  I like TXN, they make a lot of good strategic decisions but they get no respect when they do it – they'll be a nice pick-up if they get back to $25 or lower.  

    Liquidity/Shadow – Oh if there's ever a real panic, it'll be a good thing they have breakers on the market.  

    AAPL/Samz, Burr – I agree with shorting the long puts of course.  The net on selling the 2015 $400 puts at $34 is $366 which is 45% off – what's not to love about that?  They don't even make a lower strike and the April $400 puts are $4 and that's 7 months and Jan 2015 is 27 months, which would be $16 then if the math were linear.  As to more aggressive spreads – I think the pricing on the 2014 $500/600 bull call spread at $64 is a really good deal and you can sell the $500 puts for $39 for net $25 on the $100 spread that's 166% in the money to start.  For no margin, the $550/650 at $53 is nice too but maybe 1/3 could be the 2015 $650/820 bull call spread at $40 with $130 of upside and no margin or you can sell that $400 put for $34 and it's net $6 on the $170 bull call spread that's already $15 in the money.  TOS says net ordinary margin on the spread $4K with a $17K upside potential – a good use of margin I think…

    Taxing capital/StJ – There is simply no incentive to produce things and that's a big problem.  We also do have to come to grips with the fact that there is simply no need for 50% of the people in this world to work at all and probably we can get by with 1/3 working.  Takes a whole re-thinking of society, which is why when the Conservatives start complaining about funding arts and education – I want to throw up.  Essentially, a man is only worth what dollar value he can produce and the reason for that is because the "job creators" TAX the worker for the majority of what they produce.  Take XOM, for example – 82,000 employees generate $486Bn in revenues or $6M per employee and, after the salaries are paid, there's still $41Bn in profits, or $500,000 per employee – that's the TAX management places on labor that is taken from the PRODUCT CREATORS and distributed to lazy shareholders.  

    Oh there's the auction – went off well, of course, Rick gives it an A and now the markets can go back up.  

  68. scottmi

    AAPL/nicha – yes still in. i have been entering in tranches, now 3/4 in.  building a 'stupid spread' - rather than another roll down i bot Oct 680 calls this morning for $12.00 as it bounced along (and spiked under) S1.

  69. dclark41

    Phl:
    DD on FAS from yesterday?Oct. $104 calls @$4.85

  70. aaronc

    Thanks Phil.

  71. nicha

    scottmi – What month and strike spread are looking at?

  72. Phil

    Rolling/Lincoln – Keep in mind you are in the business of selling premium so, if you fail to sell the premium or, even worse, sell premium but then pay even more premium because you get nervous – you're probably not doing your job.  Unless the fundamentals on the stock or the macros change and your initial sales premise is no longer valid – odds favor staying the course.  This is much like a casino – they don't suddenly regret letting someone place a wager and close the game, do they?  Unless they realize their strategy is failing (odds not what they expected), they know that all they have to do is let people keep playing and they will do just fine.  HOG had some good news, popped to $46.38 and is now back to $42 and you are about even on the calls at .40 but maybe your decision should be there are better places to risk a naked short call than a stock that goes up and down 15% in two weeks…  If you have 20 stocks and 15 are nicely predictable and 5 are not – get rid of the 5 that are not…

    SPLS/Ksone – Yes, I'd stay away as I just read this:  

    U.S. CEOs are less optimistic about the economic recovery than at any time in three years, a new Business Roundtable survey says. More CEOs expect to cut jobs (34%) over the next six months than to raise capital spending (30%); in the previous quarter's survey, those expecting more spending outnumbered those seeing job cuts by two to one.

    Double rejection at weak bounce levels is double plus ungood!  Let's watch 13,460, 1,438.60, 3,102.40, 8,240 and 837.60 as our weak bounces.  If we can't clear those – we'll need to add bearish positions.  

    FAS/DC – Tempting but not until we see our indexes clear and hold weak bounces at least.  

    You're welcome Aaron. 

  73. stjeanluc

    Even though it surprised on the downside, the current inventories can't support the oil prices:

    http://www.bespokeinvest.com/thinkbig/2012/9/26/oil-inventories-surprise-to-the-downside-but-still-at-record.html

  74. scottmi

    AAPL/Nicha – all october. all long calls at this point. Oct 680s, 685s, 690s.  IF aapl moves down more, probably will roll the 690s down to 680s. i'm with phil re no bad aapl news, end of quarter balancing, and funds wanting back in at these prices, and fair degree of support here at 660-670 level. .

  75. nicha

    scott – thanks. Can you email me if you can. Had a couple of questions. nichania@gmail.com

  76. stjeanluc

    VXX for dummies:

    http://marketsci.wordpress.com/2012/09/25/vxx-and-tvix-etc-for-dummies/

     

    If futures are contangoed and you’re right that volatility will rise, you will likely profit. If you’re wrong, you will lose. Fair enough.

    But if volatility neither rises nor falls significantly, you will also lose. And that’s why the odds are stacked against you.

    Unlike buying a stock where the possible outcomes are: win, break even, or lose, here our possible outcomes are win, lose, or lose more. If this were Vegas, you’re choosing to be the gambler instead of the house.

    Just a bad instrument….

  77. kustomz

    Meg Whitman announce a BB?

  78. scottmi

    Nicha – sure.. emailed.

  79. rkyroma

    stjeanluc / VXX – useful chart.  Thanks for posting.   Question – why don't more people just trade VIX options?

  80. ccsincsd

    Rolling / Lincoln
    A good tool to use in your decision & selection, is one that Phil gave us not long ago, is to divide the premium by the days remaining.  When faced with a time frame and/or strike decision, buy the lowest premium/day, sell the highest.  Hard to find fault with the logic.

  81. pat_swap

    Pharm,
    How do you see the P-bar on the chart? How does it look like?
    Thanks.

  82. stjeanluc

    VIX / rkyroma – The problem with VIX options is that they are no conventional. For example, look at the 16 Puts  - they are $0.70 in Oct., $0.90 in Dec. and $0.68 in Jan and $0.58 in Feb. It's not what you would expect from the standard option set. So you need different strategies. I had a post a while back explaining that your VIX calls could actually lose money even when the VIX is up because of where the VIX futures trade. Much too complex for the average investor.

  83. Lincoln

    Phil: follow –up
    I can see I wasn’t clear  in my earlier comment.  The price of .44 is what they were at the time I wrote this morning, not what I sold them for.  Actually I sold for $2.32.  So more than 80% profitable but still all premium, does that make a difference with my plan to roll to November?  Maybe just drop back and sell 10?   Through experience I have learned to not get nervous, within reason ;)   TIA

  84. Phil

    Oil/StJ – Wow, that's a lot of oil!  

    Hey guys – here's a chance to become the World's Next Great Investing Columnist at Market-Watch.  They already carry my stuff so I can't enter but could be fun.  If I were entering – I think my opening comment would be "You people are all sheep and you make me sick!"  That's mainly because I've read some of the crap that's been entered and it's just scary that people take this stuff seriously.  Still, almost anyone here is 10x a better writer than this crap and we'd all vote for you..

    D'oh – rejected again at the weak bounce lines!  

    Whitman/Kustomz – They lost 2% yesterday and this morning because John Chambers said HPQ was going to be tough to turn around.  Got it all back since as people realize HPQ and CSCO are rivals and also because – WTF?  $16.50???  They made $7Bn last year on $127Bn in sales and their market cap is $33Bn – not even a p/e of 5.  Forward p/e is about 4 and they pay a 3% dividend while you wait for sanity.  They have $9.5Bn in cash, $14Bn in "other assets" and $10Bn in long-term investments so they could easily buy back 10% of the stock.  They dropped $1.2Bn to cash flow last Q too so not much reason not to.  

    Looks like we may have to wait for tomorrow's auction before we move up…

  85. dpastramas

    AAPL/ Yom Kippur – Guys, I want to apologize beforehand for my ignorance.  I read a lot today that AAPL weakness might be attributed to Yom Kippur.  How can a holiday affect AAPL? thanks for any clarification, cheers!

  86. rpme

     

    It's Time to Buy Volatility

    By Steve Smith Sep 26, 2012 11:05 am

    Read more: http://www.minyanville.com/business-news/markets/articles/255EVIX-255Egspc-255EDJI-spy-vxx-volatility/9/26/2012/id/44433#ixzz27bHjYdlm
     
    A good article on the VIX, essentially he says retail investors should avoid.

     

  87. roberthjrfl

    STJ, on the VIX, doesn't that assume you are holding a long position?  What is you take the opposite and be the seller.  Then your outcome would be lose, win, or win big.  Thoughts?

  88. Phil

    HOG/Lincoln – Well, in that case I'd refer you to our rule of thumb that when you sell a call or put and you are up 50% with more than 2 weeks to go – you put in a tight stop and same with 70% in the week before expiration and 85% on expiration week.  For long-term sales – change weeks to months.  If you made $1.90 out of $2.32 you're still holding all that margin just to make .40 more – surely that's not worth it.  Just think – "Can I put this margin to better use?" and that's your answer. 

    Bill Gross back to remind us that reanimated corpses are just not the same as live people.  

    AAPL/Dpast – 'Cause Jews love AAPL!  Actually, a lot of Wall Street traders are Jewish and, of course, Banksters are too so most are not working today (I'm working but at least I'm not eating) which leaves the goyim in charge for the day and that's never a good idea because crazy things can happen like AAPL going below $666 and nobody buying it.  I imagine that's what they mean…  Realistically, Funds are loaded up with AAPL already so if it drops today, no one can even call the boss (including Lloyd) to ask if they can raise the allocation to take advantage of the dip.  

    Speaking of AAPL – $670 baby!  Watch those $675s in the $25KP, now $17 is very near our buy-back level ($17.50).  It's a good target as they have to properly break $670 for the $675s to hit $17.50.  

  89. rkyroma

    stj / rpme / VIX – thanks. Good stuff.
    HPQ – and this cloud news may also be a driver.  Sorry if it's already been posted.
    http://www.theonion.com/video/hp-on-that-cloud-thing-that-everyone-else-is-talki,28789/

  90. stjeanluc

    VIX / roberthjrfl – If you are talking about VXX I am sure it can be shown that selling would win most of the time… Look at the charts – the half life of that index is probably less than 6 months! Sure, it can ramp up quickly on panic, but it's usually short lived.

  91. hoss18

    Thank you so very much Phil!  You have taught me well.  Following yesterday's moves in AAPL, I saw the dip down to the low 660s and rolled my long calls down to 665 and 675 and waited for a pop.  I didn't panic, or freakout, I simply saw what was happening, made a decision to move my position and acted upon it.  My thinking was alot of the action was end of quarter followed up by people who got pinned at 700 bailing on their now underwater positions.
     
    To backstop it, I sold off the DIA 135s I bought yesterday for a small profit on this morning's dip.  Now I'm looking to sell long calls against my now lower call entries, however I'm not sure there isn't a little residual upside energy from ppl who shorted it thinking it would fall further, and from funds who can enter 4Q with AAPL under 675.
     
    Without all the hours of making trades and watching how you do it, I would never have had the nerve to pull this off.  It looked ugly on my net liquidity for a while, but I had a plan and now its working.  So thank you.
     
    Trav

  92. Lincoln

    ccsincsd:  thx for the input earlier

  93. dclark41

    Hoss
    I saw your moves yesterday. Good job! You did well.

  94. dpastramas

    AAPL / Phil – Thanks for the clarification.  Are all these guys back to their trading desks? I need some loving in AAPL.  Regardng LLOYD, i would expect him to be a satanist or worst case scientologist ;-)

  95. nicha

    hoss/AAPL – a follow up to your strategy. Since rolling down costs money, don't you have a higher break even? Also if you don't mind, what month were they?

  96. amitshenoy174

    stjeanluc--great explanation thanks 

  97. David Ristau

    Hey all,

    EQuity trade idea for those interested. Seeing a lot of good volume coming into Las Vegas Sands (LVS). Good story brewing there with China/Macau demand coming back and company potentially splitting stock into several parts. 200-day is last resistance at 47.40. If that breaks, see ya!

    Long LVS…target an exit at 47.30ish and then wait for breakout. 1-2 week hold.

     

    Good Investing!

  98. Inkarri19

    Pharm/YMI – Hello Pharm.  Do you expect any news out of YMI in the next 3-6 months?  Thank you.

  99. Phil

    At the open: Dow +0.1% to 13471. S&P -0.03% to 1441. Nasdaq -0.11% to 3114.

    Treasurys: 30-year +0.62%. 10-yr +0.19%. 5-yr +0.03%.

    Commodities: Crude -1.2% to $90.27. Gold -0.91% to $1750.35.

    Currencies: Euro -0.34% vs. dollar. Yen -0.01%. Pound +0.12%.

    Market preview: Stock futures inch lower, extending yesterday's losses, as investors grow increasingly anxious aboutSpanish instability and the eurozone's debt situation. S&P futures-0.2%. European markets are broadly lower, with Spain's IBEX -3.6%. Crude oil futures near $90/barrel; yields on U.S. 10-year Treasurys are down to 1.64%. Still ahead: new home sales.

    10:00 AM On the hour: Dow -0.07%. 10-yr +0.19%. Euro -0.36% vs. dollar. Crude -1.62% to $89.89. Gold -1.02% to $1748.35. 

    11:00 AM On the hour: Dow -0.26%. 10-yr +0.22%. Euro -0.45% vs. dollar. Crude -2.35% to $89.22. Gold -1.28% to $1743.85. 

    12:00 PM On the hour: Dow -0.11%. 10-yr +0.15%. Euro -0.36% vs. dollar. Crude -2% to $89.54. Gold -1.08% to $1747.35.

    1:00 PM On the hour: Dow -0.04%. 10-yr +0.17%. Euro -0.28% vs. dollar. Crude -2.12% to $89.43. Gold -0.88% to $1750.85.

    2:00 PM On the hour: Dow -0.2%. 10-yr +0.32%. Euro -0.33% vs. dollar. Crude -2.01% to $89.53. Gold -0.8% to $1752.35.

    The Treasury sells $35B in five-year notes at 0.647%. Bid-to-cover ratio of 3.06, vs. previous 2.92; indirect bidders take 42%. Direct bidders take 10.7%. - 0.647% for 5 years – Are people insane?

    Aug New Home Sales: 373K vs. 380K expected, 374K (revised) prior.

    MBA Mortgage Applications: +2.8% vs. -0.2% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 3.63% from 3.75% 

    Why your house is worth more (or less) (Washington Post)

    ROSENBERG says Housing Recovery Is Doubtful, And Won’t Help The Economy (Business Insider)

    Fed Helps Lenders’ Profit More Than Homebuyers (Bloomberg)

    Chicago Fed's Charles Evans fires back at QE3 critics, warning of a U.S. "lost decade" if the Fed limits itself to modest policy actions. There's no surprise here, as the hard-core dove Evans finds it “essential" to do as much as possible now to prop up the economy; his most noteworthy comment is that 3% inflation "not an unreasonable cap" on policy.

    A time of hoarding and inflation fears, 1930s edition (FT Alphaville)

    Oil's recoupling to China and emerging markets has made it even more dependent on China's economic miracle continuing than investors might think. "The stronger the global economy, the higher the oil price, the stronger China's demand. And vice versa, the weaker, the weaker, the weaker," Deutsche Bank's Paul Sankey argues.

    Transocean (RIG -1.7%) shares are lower despite Goldman Sachs' upgrade following "noteworthy underperformance" vs. offshore drilling peers. Although RIG operates one of the oldest fleets in the industry and may continue to face downtime and cost issues, the firm thinks "risk-reward has recently come more into balance" and expects RIG to beat Q3 consensus estimates.

    Chesapeake Energy (CHK -0.9%) is downgraded to Hold at Stifel Nicolaus on valuation, a view that remaining asset sales will have less of a positive impact on shares, and that the focus will switch from distressed valuations back to going concern valuations which will make it difficult for CHK to move much higher absent a meaningful gas recovery.

    Magnum Hunter Resources (MHR -4.7%) says it has shut ~400 natural gas wells in Kentucky during the current quarter due to lower natural gas prices and higher transportation costs, reducing production by 1.7 MMcfe/day. MHR also estimates output of ~9.5 MMcfe/day was curtailed after Appalachian wells were affected by a June storm.

    Higher barley prices could push up input costs for beer companies if they aren't hedged properly, warns analysts. It's a cost that might not be easily passed on to consumers with online petitions in Europe already cropping to protest beer price hikes. Feeling the heat: BUDHINKY.PKSBMRY.PKSAMTAP.

    The Paris Auto Show launches at the end of the week with the mood more than likely to be on the somber side. The latest forecast suggests that eight of Europe's top ten car markets will see big sale drops this year and 40% of the continent's largest car plants are now running below capacity. Renault (RNSDF.PK) and Peugeot (PEUGY.PK) will showcase rival crossover concept cars in two of the show's most interesting unveilings.

    The clock is ticking for Tesla Motors (TSLA -0.4%) as sees its government loan tapped out and shareholders unlikely to back new stock offerings. The company holds on to $133M of deposits for customers waiting for Model S deliveries, but relying on future deposits could get tricky if production slows. Also, by the end of October the Department of Energy wants a repayment plan from Tesla for its outstanding loan. Will the rave Model S reviews fire up even more enthusiastic buyers to plop down deposits? 

    UPS announces that it will float a series of Senior Notes with 5-year, 10-year, and 30-year offerings planned for a total amount of $1.75B. The company isn't doing so bad for itself after it just saw an equal amount of bonds mature with a coupon rate of 4.50% compared to the rates of 1.125%, 2.45%, and 3.625% it's paying on the new issues, respectively.

    Shares of Staples (SPLS -3.4%) take another leg down as the company's sweeping reorganization plan continues to raise concerns on how much more downside is coming down the line. Peers Office Depot (ODP -3.5%) and OfficeMax (OMX -1.7%) are also in the line of fire of traders. 

    Kraft Foods Group (KRFTV) trades higher after nabbing a spot in the S&P 500. Of the two new entities spun off from Kraft Foods, the North American grocery business is expected to provide investors the more stable revenue flow and dividend payouts while Mondelez International will trade with questions on European growth and product popularity as a backdrop.

    McDonald's (MCD +0.3%) exec Bob Langert throws a bit of a monkey wrench in the theory that buying locally-produced food is more environmentally friendly than food purchased from national distribution chains. He says the company has extensively studied supply chains to determine that sometimes transportation efficiencies lose out to production efficiencies. If he's right, McDonald's may try to beat down some of the claims of superiority of Whole Foods Market (WFM -2.1%) and Chipotle (CMG -1.1%) on the environmental issue.

    Oppenheimer isn't happy with Texas Instruments' (TXN-1.5%plans to de-emphasize its mobile app processor business, and predicts it will create revenue headwinds for TI's wireless business (~10% of sales) similar to what the chipmaker has seen from its gradual exit from the baseband chip market (ed: that business' decline was accelerated by Nokia's freefall). Both Oppenheimer and Avian are downgrading TI to neutral following the move.

    Caris has downgraded Intel (INTC) to Above Average from Buy, and lowered its target to $26 from $29. Weak PC growth is the firm's unsurprising reason. Intel is off just slightly premarket – following the stock's selloff and plenty of other critical analyst reports, not to mention Intel's warning, the Street is taking Caris' move in stride.

    Dish Network vs. Network TV: The bitter battle between media persona non grata Dish Network (DISH -2.1%) and broadcasters rages on even as it becomes increasingly clear that the company won't back down from offering its Hopper DVR service that zaps commercials. Though execs such as CBS CEO Les Moonves continually try to hammer away at Dish over the feature, is a seismic shift in the advertising-supported TV model already occurring? Product placements inside of TV shows is already a reality and consumers have other commercial-free content options, not to mention the alluring fast-forward button.

    Departed Yahoo (YHOO -0.1%) CFO Tim Morse was "Mr. Margin Expansion," quips BGC's Colin Gillis, who thinks hisreplacement with ex-Fortinet CFO Ken Goldman augurs a period of more aggressive spending. Acquisitions are likely on tap for Yahoo, which should still have over $3B in the bank after returning most of the proceeds from the Alibaba sale to shareholders: the founder of one unnamed startup reportedly being courted by Facebook and Google tells the NYT Yahoo has come calling.

    Amazon (AMZNlaunches a new shopping webs

  100. Phil


    Amazon (
    AMZNlaunches a new shopping website for green shoppers that will run as a standalone site. Just like visitors to Zappos.com or Shopbop.com, shoppers won't be aware that eco-friendly Vine.com is an Amazon site as they choose between locally produced or fair trade products.

    IBM, which is hoping to generate $7B in cloud-related revenue in 2015, is ramping its efforts to sell cloud infrastructure and app platform services to mid-sized businesses, and hopes its extensive reseller network will give it a lift. The market has gotten pretty crowded lately: in addition to leaders Amazon, Salesforce.com, Microsoft, and Rackspace, many other big tech names, such as Google, H-P, Oracle, Dell, and VMware, are throwing their hats into the ring.

    Netflix (NFLX) CEO Reed Hastings says Europe will be a major focus of the company over the next two to three years as he sees the company's streaming service eventually landing in nearly every nation on the planet with the possible exception of the always-problematic China. He takes on the threat of Amazon head on, noting that Netflix spends 3X what Amazon does on content to the benefit of customers and calling Amazon Prime a "confusing mess" with an algorithm that isn't as clever as that of Netflix.

    Even as the NASDAQ stumbles, Google's (GOOG +0.8%) rally refuses to let up. Shares are making new highs again after Canaccord's Michael Graham argues (like Citi) that Google's ad click prices, recently under pressure, are starting to rebound. Prices for mobile clicks (average price of $0.47) are said to be flat, while pricing for PC clicks (average price of $0.98) is said to be expanding. Mobile is estimated to have made up 13.9% of search volume in August, up from May's 11.3%.

    Google (GOOG) is working on an iOS Maps app for the App Store, sources tell the NYT, but doesn't expect to have it ready before year's end. The Verge reports something similar. Apple's (AAPL) June decision to replace Google Maps in iOS 6 is said to have taken Google by surprise – the WSJ reported at the time that renewal talksbroke down over disagreements related to a host of issues, such as branding, turn-by-turn navigation details, and Google's wish to include additional features such as Latitude. (Eric Schmidt) 

    Barnes & Noble (BKSwill release two high-definition versions of its Nook tablet just ahead of the crucial holiday shopping period. A 7-inch tablet priced at $199 and a 9-inch version selling for $269 are priced at or below new offerings from rival Amazon. CEO William Lynch says the company has placed its largest device orders ever as he fully expects the company to grow market share by Christmas.

    Now that details are out from Barnes & Noble (BKS +2.2%) on its two new HD e-readers, Barclays Capital's Alan Rifkin has a fresh take on the Underweight-rated stock. He says the pricing for the tablets makes it clear that the company's focus will remains on content instead of trying to kick up any profits from device sales. This trend will continue to pressure margins, even more so with content channels increasingly crowded with new players.

    Research In Motion (RIMM +1.7%) is rallying again today (previous) as investors take kindly to BlackBerry subscriber data that wasn't as bad as feared. Observers are quick to point out, however, that subscriber growth is being propped up by low-end BlackBerry Curve sales to emerging markets. Tero Kuittinen warns RIM's current focus on developing high-end BlackBerry 10 models could put these sales at risk, as low-end competition from Samsung, Nokia, and others intensifies.

    Starbucks (SBUX -0.5%could benefit from the integration of its digital payment card into Apple's new iOS software and virtual wallet, according to SA author Freedonia Freelance. Though Cult of Mac doesn't expect the company to have an upgraded app until the next week, when it comes it could set Starbucks apart from other quick-service restaurant players. - I don't understand this yet (we still can't figure out what Square is doing), but it seems AAPL is putting store credit cards on the IPhone and that could be a crushing game-changer in mobile payments.  

    Chinese regulators have approved iPhone 5 (AAPL) models that can be used on China Unicom (CHU) and China Telecom's (CHA) 3G networks, a move that should allow Unicom to begin offering the phone by December. China Mobile (CHL), the world's largest carrier, remains the odd man out. Apple has reportedlypromised to support the carrier's 4G TD-LTE network, but it might not receive commercial clearance for some time. 

    TSMC (TSM) is receiving follow-up orders from iPhone 5 (AAPL) suppliers thanks to stronger-than-expected demand, Digitimes reports. With many expecting 50M or more iPhone 5 sales by year's end, monthly chip shipments are now expected to total 10M-15M from September to November. Among the iPhone 5 suppliers relying on TSMC: QCOMBRCMOVTICRUS. 

    Measuring iPhone demand (Asymco)

    Three lunchtime reads:
    1) Fat fingers and the price of oil
    2) Apple insider trading history: interesting, in a non-obvious way
    3) Germany moves to brake high-speed trading
     

  101. Phil

    Click to enlarge:



    Source: Russell

  102. amitshenoy174

    Phil-- I am sorry I missed most of the AAPL plays not sure when we took the 675 puts. Was that yesterday.

  103. kustomz

    I hear ya Phil on HPQ, looks like a lot of short covering as well.

  104. Phil

    Great Hoss.  Hope you got some covers.  We looked good for a few minutes there now it looks like we may have to re-cover if we fail $666 again but, hopefully not.  

    ROFL on that HPQ video Rkyroma!  I love it when the guy from 1950 says they're going to have "all the Gs"  

    AAPL/Dpast – Sorry, no trading allowed until after sundown this evening but then you're supposed to have a big dinner to break the fast so today is shot.  As to Lloyd, I don't think he can be a Satanist if he is Satan.  Also, couldn't be a Scientologist because they ask for money – Lloyd don't roll that way…

    LVS/David – If Obama gets re-elected I think Shelly may suddenly find he's going to have some of his shenanigans investigated. 

    AAPL/Amit – Not the puts.  We have 10 $685 calls and we bought back 6 of our 10 $695 callers for about $10 and then covered with 3 short $675 calls at $19 (see $25KP from earlier today).  We then bought back the remaining 4 short $695 callers at $8 and that left us with just the 3 $675 short calls but they went down to $15 and back to $17.50 and stopped us out so now we have 10 naked AAPL Oct $685 calls in the $25KP.  They are now $12.50 so we're down $10 each less whatever we made of short call selling (I would guess $5) and now the question is do we cover again ($695s are $9, $675s are $17) or do we risk being long 10 AAPL $686 calls overnight with no cover?  

    Most likely, the solution to AAPL in the $25KP is to sell 10 Oct $690 calls ($10.50) and roll our $685s ($12.50) down to the $665 calls ($21.80) but let's see how the next 30 minutes go.  

  105. hoss18

    Nicha, sorry, my four year old and her playdate are here.  I will have to get back to you, but I'm trading Oct.
     
    Phil, yes, 1/2 covered by selling the 680 calls.  will cover the other 1/2 if we break back below $665.
     
    T

  106. jasu1

    Phil,
    Any new TNA trade with TNA at 60.60? 

  107. amitshenoy174

    Phil-- thank you so much appreciate it

  108. Phil

    Sound good Hoss, you're getting good at this. 

    I'm having huge problems getting motivated to cover AAPL as it's so cheap here but it started out as a net $4K risk and we really don't want to turn it into a $12K risk – even if we think it's a good one so I think we will end up with a "when in doubt, cover half" situation unless AAPL is back to $675 by the close (doubtful). 

    TNA/Jasu – Tempting but we're gambling on AAPL in the short-term portfolio so I don't want to add more upside risk.  Also, too close to the close as there's no way you want to hold a long overnight.  As a gamble, the weekly $62s are .50 and TNA is at $60.65 and TNA is down $1.60 today and was $66.50 yesterday so it's a fun gamble as you risk maybe .30 if it goes the wrong way vs. making $1 if we get a bull pop.

    You're welcome Amit. 

    Volume at 3:20 at 78M on the Dow. 

  109. angelcur

    Techcrunch saying a problem with iphone camera…killed aapl reversal

  110. angelcur

    MSB WORKING EXTRA HARD TO AVOID CLOSING SWOON

  111. Phil

    BBY actually green today. FB too.  TASR up on Spain and Greece riots – sadly, that was part of my premise for liking them in the first place – crowd control in the coming Global collapse…  

    Oil back at $90 but no longer looking like a fun long.  

    Dollar still 79.95.  

    iPhone 5 camera users reporting purple halo on certain photos

     

    Detailed by forum users at tech review site AnandTech, the flaw reportedly occurs on photographs if you aim your iPhone 5 camera toward a bright light source such as the sun or an incandescent light. If you then move the camera so the light source is off screen, a purple halo effect can be seen through the camera. That effect also shows up on any pictures that are taken.

    One poster displayed separate photos with an artificial light source and with the sun off screen, and the purple haze appeared in all of them. Another forum member posted a video displaying the purple lens flare.

    As with many such glitches, some users have experienced it and some have not. One user contacted Apple support and was reportedly told that this is a widespread issue, which the company is currently researching. Another person who spoke with Apple support was reportedly told that there have been a lot of calls about this problem.

    Some forum users suspect the glitch may stem from the sapphire crystal lens cover used in the iPhone 5's camera. Sapphire is a hard material and thus can protect the lens from scratches. But according to CultofMac, sapphire comes in a variety of colors, and the purple halo may be the result of light refracting through a purple sapphire lens.

    Well that settles it.  I'm not going to cover AAPL if that's why it's down.

    Philly Fed/Angel – Not pretty: 

  112. mrmocha

    Pharm / ONTY – I was way up on this one and now it's getting clobbered, but I dont' see news.  Thoughts?

  113. Inkarri19

    Philly Fed – Where is that app that flips charts upside down?  Down is the new up anyway right…

  114. dflam

    Phil: I bought 10 CSC0 2014 $20 C AT $1.89 AND SOLD 10 OCT. $19 C AT $.72 FOR NET $1.17 (my first venture in selling a calendar spread). The Oct. $19 C are at $ $.21 but have a .32 delta compared to a delta of .41 for the 2014 C. Ami better off rolling to the Nov. $19 C or hold the Oct.C to expiration (hopefully) and then sell the Nov. $19 C. I'm also thinking of selling 5  NOV. $17 P at $.33 as an initial entry for the stock. What do u think?

  115. Phil

    $25KP AAPL – Step one is roll down to the $670 calls ($17.60) for $6.50 or less ($685 calls are $11.20).  Step 2 is to cover with whatever we can sell for $10+ into the close (currently, that would be the $685 calls at $11.20) as long as AAPL over $666.  If AAPL is below $666, we cover with 5 (of 10) of whatever we can for $20 (currently the $665s at $20.50).  

    Remember – the idea is to get the roll first then look to see what we want to sell to cover.  

  116. rpme

    Phil, on your comment on SBUX, dont the japanese use their cell phones to buy goods like a credit card. I thought this technology already existed?

  117. diamond

    Apparently Samsung smartphones are not perfect.  Say it aint so! ;-)

  118. scottmi

    Iphone purple halo - apple's done it! they can now photograph souls!

  119. scottmi

    Iphone – my devout mother is sure to need the upgrade now…

  120. newt

    Scottmi- Rad!

  121. Phil

    CSCO/Dflam – I assume C was for calls and not Citi.  Doesn't really matter about deltas, what matters is making your nut every month.  You have a net $1.17 entry on the $20s so you are in CSCO at $21.17.  The Oct $19s are .50 out of the money and now .20 so you are up .50 with only .20 left to collect yet you risk earnings.  That is silly.  I'd roll to the Dec $19s at .70 and pick up .50 so now you collected $1 against the Dec $19 calls and your caller doesn't even break even until CSCO is over $20.  With such small contract prices, you really don't want to sell every month as the fees are probably 0.015 in and out and if you're only making .20 – it's almost 10% of your gains on fees.  

    Japanese/Rpme – Sure, they do everything a decade ahead of us.  Those guys just wave their phones at vending machines and stuff comes out (including beer and saki!) – a totally advanced society.  AAPL seems to have the kind of solution even our backwards economy can handle.

    Samsung/Diamond – I was going to say, it's not like AAPL is the only phone with glitches.  

    AAPL/$25KP – OK, I think let's just sell 4 of the $665 calls for $21 – that kind of strikes a balance that reflects my upside bias without too much crazy risk in case we spike down tomorrow.  

  122. stjeanluc

    That should save Apple:

    http://gizmodo.com/5946653/apples-next-revolution-prison-shanks

    Earlier this week there was a giant 2,000-person brawl at a Foxconn factory where they make iPhones. While labor organizations might try to protect workers from Apple, how Apple is protecting them from each other? Enter the iShiv.

    I loved that comment from a reader:

    We're very excited here in Cupertino because this is absolutely the thinnest, lightest, most beautiful prison shank we've ever made….The iShiv 5. It's 20% thinner and 18% lighter than the iShiv 4s! So go on and put someone's iOut with the new iShiv 5!

  123. Burrben

    AAPL 25KP –  I've been trying to follow along (not trade it), but what is the premise of the trade for AAPL?  What are you guys trying to do?  

  124. lflantheman

    Good Afternoon!     Just a note that I'm still in AAPL cash except……….I did sell a bunch of this naked weekly 700 calls yesterday (not a MoMo trade).   As for my next strategy on AAPL, I'm a buyer of January or later  ATM calls any time AAPL sneaks below 665.    Scaling into same.  I see support at 660. 

  125. Savi

    ok Phil--I totally screwed up the AAPL play—rolled down to 670 @ 6.50 and sold the 685 @ 11.75—ugh !! hope I have luck on my side otherwise help!!!!

  126. RealJLJ

    Phil, I had went with the 10 $685s to make sure I got it before the bell when the stock was at $666.50. Any issues with that since you ended up going with the 4 $665s?

  127. lflantheman

    stjeanluc……that is so COOL!…..the iShiv 5.       Think of all the implications!         :)   

  128. yodi

    Burr hard to follow AAPL looks like to roll the 685c oct long roll to 670 than sell to cover 685 and now sell 4 665 I guess all Oct. very confusing

  129. scottmi

    AAPL/lflan – why naked 700s and not the more rewarding 690s or even 685s? do you think aapl may get up to 700 yet this week? thx

  130. stjeanluc

    iShiv / lflan – Looks like they might actually need to start selling iTaser at the factories though…

  131. Phil

    LOL StJ!   iOut – priceless…

    AAPL/Burr – We are trying to capture a finish on Oct 15th over $695 but now we only need $685 to be very happy.  Originally, it was a $685/695 spread for $4 – we made about $5 playing with the callers so net around $0 but now bought back our covers for net around $10 so we're in for $10 and we spent another $6.50 to roll down to the $670s so we're in them for about $16.50 and now we sold some $665s to cover at $20, which is about $7 per long so our basis is now $9.50 on the $670s.  We'll continue to play, hopefully getting out of the covers on a move up before they cost us too much but we have a 10 x .47 to 4 x .51 delta advantage for a move up so it's only the downside we need to worry about.  

    AAPL/Savi – It's OK, many ways to win.  As above, the trick is to track back your net and make sure a $15 spread makes sense for you.  Let me know what you're in for and we'll think about best next move.  

    AAPL/Real – As with Savi – many ways to play and nothing wrong with yours but also, see if you can figure out your net at this point and we can discuss further. 

  132. shadowfax

    After the bell selling and down, about 800,000 shares at 83.12. some fund has dip buyers. Maybe you get your tomorrow up Phil. One buy is not not a turn but did clear the bench.

  133. kustomz

    http://www.forexlive.com/blog/category/all/

    Economic cal… tonight into tomorrow morn.

  134. nicha

    Iflan – same question as scottmi. Why sell the 700's? Also, why are u going to January for longs? Why not October?
     
    I sold this weekly 680' against Oct 690's. 

  135. roberthjrfl

    STJ, what i am thinking is selling credit spreads… that way you limit your downside and are not naked.  Any thoughts?

  136. denlundy

    Phil:  What are we thinking of doing with the AMZN 245 Oct puts?  The Nov 245's are expensive at this point.   AMZN has been sliding down but we won't realize a big payback until negative earnings are announced.  They will definitely announce a lose this coming quarter as management has already estimated being in the hole .90/share. We need them to come in worst than the negative foreward looking estimate given by management in July.

  137. RealJLJ

    Phil, I ended up covering some of the callers at lower prices so my net is $9.01 on the $670s.

  138. stjeanluc

    Credit spreads / robert – On what instrument?

  139. roberthjrfl

    On the VIX or VXX

  140. denlundy

    PHIL/AMZN:  The 3rd quarter earnings estimate is -.$0.02 not -.$0.90.   I guess that was just wishful thinking on my part.

  141. nicha

    Whatever happened to iPad mini?

  142. Jbur

    AAPL/Phil:  So this is why I don't aggressively trade very often, I will sometimes lose my path in the middle the trade..
    BTO 5 Oct 700's for 20.00, then BTO another 5 for 14.35.
    Rolled all 10 contracts to the Oct 670 for 11.00 debit.
    Was not sure about what cover to use today and didn't do it.
    Your input is always greatly appreciated.

  143. stjeanluc

    Robert – I would not touch the VIX options for reasons that I outlined earlier. As for VXX, as soon as they have the reverse-split, options might become more interesting for credit spreads (as you know, Phil is not a big fan).

    Although, with VXX, it might make more sense to just buy long dated puts as you know they'll come true eventually – for example $20 Puts 18 months out! They will reset when that sucker is down to $10 or lower again (and it will – check how many reverse split they have had over the life of the ETF) and by then you'll be up big. For example, in October 2011, the VXX Jan 13 $20 puts were $2, they are now $10. 500% in 12 months is nothing to sneeze at… Actually, it's probably the best investment out there! We should start a portfolio loading up on 3x ETF and future based ETF puts!

  144. stjeanluc

    A good analysis of the current political situation:

    http://www.theamericanconservative.com/articles/is-the-gop-still-a-national-party/

    I’m not the biggest fan of Eisenhower or Nixon, but they (and Reagan) are clearly preferable to this post-Reagan Republican Party. Those presidents won national majorities for a reason. They weren’t strict conservatives, but they certainly weren’t any less conservative than the Bushes, McCain, or Romney. They didn’t pretend they were going to abolish the welfare state — often, they didn’t even pretend they would cut the welfare state — unlike so many of today’s Republicans, who don’t follow through but do use their rhetoric to polarize. That gives us the worst of both worlds: big government plus the delusional sense within one party that it represents the antithesis of big government and may freely hate other Americans who don’t mouth the mantra. And what goes for big government goes for Judeo-Christian values, a strong national defense, and all the rest: the GOP’s rhetoric occupies a separate mental compartment from its actions, even as its voters and ideological apologists continue to believe that there is a profound moral difference between them and the rest of the country. It’s a losing strategy, and worse, it’s made the country ungovernable even as government grows.

  145. snow

    Japan/rpme, Phil – Korea's had the same deal for years also – works on public transit as well – buses, the metro, even taxis. You ought to see young women sort of swing their hip (with the phone in the hip pocket) at the fare box while boarding the bus……

  146. shadowfax

    Real snow
    The mountain behind my house is being hammered with lightning and snow, It is turning white! Still 74 at my house.

  147. angelcur

    SHADOW SKI MTN??

  148. shadowfax

    angelcur
    I am looking at Grand Targhee Ski Area, snow level about 8 to 8,500 feet. I have been debating skiing as I don't care if I fall and break my neck again, easy punch out, and tired of being scared.

  149. Pharmboy

    Pbars – I see them in the TOS screen as small lots of shares being sold.  I use the 3 min bars.

    YMI – Phase 3 is supposed to start next month.  Not really a market mover.  So no real catalyst unless they sign a partner or get bought out.

    ONTY/mrm – I don't see anything either.  So, no se!

  150. shadowfax

    Pbars they are significant if accumpanied by volume, today I saw one that was 70,000 shares and down we went. What is a problem is clearing stop/limit orders with 100 shares and then the market moves.

  151. stjeanluc

    Pbars / Pharm – I see one of them at 11:30 and another one at 1:40 (5 minute SPY chart). The strange thing is that both of them had the same high – $144.084. Has to be a bot! However, no abnormal volume on that these candles. Big sell volume at the close though.

  152. Pharmboy

    Yes, I see the 11:27, 11:30 and 1:40 on the 3 min chart.  The volume was some of the largest bars there.  Yes to the same highs as well.  Oh well, tomorrow is a new day…

  153. Pharmboy

    TLT – we have a TLT calendar, 125 Dec/125 October.  As Oct erodes, I will be buying put spreads on TLT.  Looking at the 119/115 Nov BPS.  I have some, but it is a much better deal now.

  154. Pharmboy

  155. scottmi

    AAPL – i asked investor relations today regarding earnings date. Here is the reply:
    Scott,
    Thank you for your email.  The date for the release of Apple’s fourth quarter financial results has not been determined.  Earnings announcement dates are typically finalized and posted on http://www.apple.com/investor around the end of each quarter.

    Regards,
    Apple Investor Relations
    T 408 974-3123
    F 408 974-2113
    investor_relations@apple.com
    http://www.apple.com/investor

  156. angelcur

    take care about getting too bearish US bonds..the market could skid through a good part of October..bonds won't be headed south..for those interested the French bond looks very vulnerable..

  157. Pharmboy

    US bonds/angel – I think they are going to move this market b'f the elections to highs….just like Oct 2007…no?  Bonds will suffer.  Then, and only then, will sheeite hit the fan…..Most likely after the new year.

  158. Phil

    Dip buyers/Shadow – Looks like it's sticking so far.  

    Euro stabilizing – Dollar 79.80 is helping the Futures.  

    AMZN/Den – Earnings not until 10/22 but any consumer weakness could send them lower.  We will roll if we have to – it's a position I intend to stick with through Jan if necessary.  Estimates are for 0.08 loss vs .14 gain last year.  Last Q was 0.01 but any sort of downward guidance will, of course, hit them hard.  Next year projected super-aggressive at $2.33 vs. .71 this year – fine if they pull it off but very easy for them to lose 20% if they don't.  This Q last year they missed by a dime – .14 and not .24.  Not one analyst has a sell on them.  

    AAPL/Real – So you are in the $670/685 bull call spread at net $9.  Nothing wrong with that but your goal is more like what we did yesterday and today, which is to hopefully buy back a few callers cheaply if we get a drop but just remind me next time you ask that you have the spread at net $9.  Notice your $670s are $17.50 so, if AAPL looks weak, you can, for example, roll the Oct $670s to Nov $695s ($19.20) for $1.70 and then you'd have the Oct/Nov spread and, once the premium burns on the short $685s – you can roll to, for example, the Nov $710s (now $14) for + $8ish and then apply that $8 to roll down about $15 to the Nov $680s and then you have the Nov $680/710 bull call spread at net around $11.  Lots of ways to work it but it's good to have a goal outlined so you can check to see if you are on or off track.  In a perfect world, you'll be disappointed if you "only" get the 66% gain on the Oct spread.  

    Keep in mind, when we initiated this position, that we paid $22.90 for the $685s just two weeks ago (7th).  AAPL was $690 at the time – fell to $656 and then back to $705 and now $666 – all within 12 sessions.  We have 17 sessions until Oct expiration ahead of us and hitting $705 again from the $670s would be good for more than $35 if uncovered – that's $35,000 – a good gain in a $25KP in a best case but we'll be thrilled to get something in between that and $0 – even the $6K you have coming if your spread works out unmodified. 

    When we paid $22.90 for the $685s, the $670s were about $33 yet here we are – in them for net $9 – that's the key to these trades – we keep trying to improve our position until it's so good – we don't even feel the need to be covered anymore….

    IPad Mini/Nicha – They are saving it for their Jan show.  

    AAPL/Jbur – Well, paying $10,000 in pure premium is never a good idea and it didn't get that much better when you paid another $7,175 in additional premium.  Then you spent another $11,000 to roll them down (that one I agree with) and now you are in 10 $670s for net $28,175 or $28.18 but the calls are $17.50 so you still need a good move up and you still have paid 100% premium and never covered, which could have saved you at least half of the $11K you are behind.  At this point, you can collect $11,200 by selling the $685s and then you can use that $11,200 to roll down to the $650 calls ($28.90) and that would put you in the $650/685 bull call spread for about $17.50 and you're about $16 in the money – that's a bit more pleasant than having a position that's $17,500 of pure premium when you're already down $11,000.  Obviously, there's still a huge risk in the trade but it's a damned site less risk than the one you already took.

    By the way, to all AAPL players – this is an expensive stock and you see how fast you can lose $1, $2, $3 on your calls so doesn't it make sense, when AAPL fails to hold a line like $666, that you buy something like the weekly $665 puts ($6) to cover with tight stops as they have a .47 delta and will cancel most of your downside loss.  Even if you just pick up $2 on a $5 drop – sure better than nothing!   If AAPL turns up suddenly on you – you make money on the bull side and you take a $1 loss off the table – beats panicking in and out of bullish positions too…

    VXX/StJ – That would be a good experiment.  

    Politics/StJ – Reminds me of this daily show clip:  

  159. Phil

    And yesterday's Daily Show did point out something interesting about Romney – he is getting stupider…

  160. Phil

    Korea/Snow – Yes, we're very backwards on things like that.  People here know very little about S. Korea (or North Korea other than they are pure evil) but now you have a fine ambassador to raise awareness

    AAPL/Scott – Thanks for checking into it.  

  161. stjeanluc

    Bullshit Mountain – I find it amazing that people actually believe the crap that comes out of that outfit. I mean liberal outfits have their own blowhards (Ed Schultz on MSNBC comes to mind) but they don't even come close to that level of bullshit… They just had a survey showing that out of all the comments made about global warming on Fox, 93% were scientifically inaccurate. Not 5%, 10% or 15%, 93 frakin' percent! It's just insane and unwatchable. It's good to watch or read opposing views as not to suffer from epistemic closure – but I am afraid I'll lose intellectual capacity when I watch Fox.

  162. stjeanluc

  163. Phil

    This is some pretty intense stuff – good to be aware of:  

     

    Deploying Shock Troops Against Blog Posts

    Email this post Print this post
    By Guest Author – September 26th, 2012, 7:00PM

    BR: In the post last week Fisking McArdle, there seemed to be a concerted, coordinated Troll effort both here and at naked capitalism to counter the factual criticism of McArdle with bad arguments and poor rhetoric.

    As someone who spends lots of time looking at patterns, the response looked totally non-random. Don Druid gives a solid explanatory as to why that is,

    It is an important enough point that I am elevating his comment to a post of its own.

    ~~~

    I’ll freely admit that I never read this blog until the eXiled directed me here. However, many of the comments made by ‘readers’ look very familiar.

    You’ve certainly noticed that as soon as your link went up, a bunch of mysterious comments appeared following the same pattern:

    1) Dubious compliments for you and your site, often with false claims of long-time readership (good catch on one of these very early in the comments);

    2) False statements that “all of this is already known”, “nothing to see here”, etc. about the facts on McArdle;

    3) False statements that “both sides do it”, “everyone does it”, etc. about McArdle’s naked conflicts of interest;

    4) False statements accusing you of being a Democratic partisan, designed to draw discussion away from McArdle;

    5) False statements arguing that there is effectively no such thing as a conflict of interest[!], and that McArdle’s financial interests in the subjects she covers mean nothing.

    Awfully suspicious, isn’t it?

    It’s almost as if these comments were crafted around a single playbook, with dos and don’ts handed down from above.

    Of course, if you keep an eye on Facebook ads, you’ll see the Kochs and their various shell organizations constantly putting feelers out for people to contribute to “online presence” for their anti-rule-of-law goals and missions. Heck, the Kochs even run a summer camp at GMU on this topic, described in the article about McArdle, to which a number of my friends in graduate and professional schools were invited this year (all declined).

    As was done with McArdle, the Kochs attempt to recruit students and young professionals and boot-camp them into this sort of false public pseudo-intellectual propagandizing.

    I’m pretty certain that the young shock troops have been deployed here and elsewhere to defend McArdle with the various lies and smears you can find in the comments made by others above.

    Thanks for taking them on – I’ll keep reading.

     

    Here’s the playbook:  http://cryptome.org/2012/07/gent-forum-spies.htm

     

    Can’t speak to the playbook but the pattern listed in the post closely corresponds to two very common logical fallacies, both of which are actually a form of red herring:

    1. The tu quoque fallacy; e.g., http://www.fallacyfiles.org/tuquoque.html
    Corresponds to items 3 & 4 in the pattern list. This fallacy is a classic red herring that attempts to turn criticism back on the the critic by a “you also” or “your side does it too” rejoinder. It is a fallacy because whether someone else does whatever is at issue is completely irrelevant to the truth of the original criticism or claim.

    2. ignoratio elenchi; e.g., http://www.fallacyfiles.org/redherrf.html
    Corresponding to items 1, 2 and 5 in the pattern list, this is the ultimate red herring, what Aristotle considered a major root of all fallacy: an argument that essentially ignores the conclusion it is supposed to be reaching, scattering shiny objects and other verbal debris as distractions along the path to nowhere.

  164. Phil

    Fox/StJ – I agree, I can actually feel my brain cells dying as I watch (mostly suicides).  

    Big Chart not looking too healthy.  If the Nas and NYSE blow those 2.5% lines, nothing to hold us up until the 50 dmas.  Dow good for a 200-point drop so a nice short opportunity there if we're heading down.  

  165. stjeanluc

    VXX / Phil – I am guessing that around the time they reverse-split VXX we'll start seeing Jan 15 options. The experiment would be to then buy 1 Jan 2015 $20 put and be ready to add to that position each month that VXX is higher than the previous month (in effect dollar cost averaging the puts). The reverse split target is $10 so that needs to be taken into account in the price of the puts. It's quite certain that over the next 24 months we will have VIX spikes and with it VXX spikes, but I very much doubt that we'll have an elevated VIX over the entire period so we should have some "selling" windows to collect some profits or adjust the position. Based on the figures I posted above, the VIX futures are in contango 82% of the time and that's deadly for VXX. The last reverse split was in October 2010 less than 2 years after he was started so it looks like 2 years is the charm because here we are again (that sucker was at $480 split adjusted 3.5 years ago)… Might be worth testing. 

  166. scottmi

    Good Hussman article re low interest rates: Eating the Future.

  167. randers1

    RPME
    Just finished reading yesterdays posts- (many meetings and presentations @ work).
    I stayed up late this summer & watched the mars landing with my 13 year old son. He is more
    interested in science now. Here is a game he plays to manage his own space program:
    http://kerbalspaceprogram.com/index.php

  168. stjeanluc

    Karma is a bitch…

    http://talkingpointsmemo.com/archives/2012/09/irony_karma_want_to_kick_mitts_ass.php

     

    So Romney desperately needs to prove he’s not an arrogant rich jerk who barely knows and couldn’t care less about the struggles of Americans who aren’t blessed with great wealth. And it turns out there’s an argument at hand: RomneyCare, the first successful effort by an American Governor to provide universal health insurance coverage at the state level.

    Too bad he’s spent the last two years shapeshifting into the butt-kickinist enemy of Obamacare and mandates and universal coverage this side of the Cayman Islands. His best, really his only argument is radioactive within his own party. Evan McMorris-Santoro has the story.

  169. stjeanluc

    I find that fact unfathomable:

    http://andrewsullivan.thedailybeast.com/2012/09/grains-of-sand-vs-stars-in-the-sky.html

     

    They said, if you assume a grain of sand has an average size and you calculate how many grains are in a teaspoon and then multiply by all the beaches and deserts in the world, the Earth has roughly (and we're speaking very roughly here) 7.5 x 1018 grains of sand, or seven quintillion, five hundred quadrillion grains. That's a lot of grains.

    But is you got a Hubble telescope and counted all the "distant galaxies, faint stars, red dwarfs, everything we've ever recorded in the sky" you'd end up with  "70 thousand million, million, million stars in the observable universe (a 2003 estimate), so that we've got multiple stars for every grain of sand — which means, sorry, grains, you are nowhere near as numerous as the stars."

    And all that was in the size of pinhead at one point! It sounds so incredible and so mysterious at once! Still so much to learn.

  170. shadowfax

    Phil false fakes
    A new line I have been hearing is don't beat the messenger follow by a trial story, they say it until someone buys it and then the backer story all without taking responcibility for  making something up. It is just a story. Next thing it has substance without anything or anyone verifing.

  171. hoss18

    nicha – what Phil said.  Yes, moving down increases my BE, and reduces the leverage of the spread(ie increases my cost).  But it allows me to sell more premium and raises my chances of going ITM, plus if I get my long strike low enough, I can afford to run uncovered on a pop up and go for a home run.  Moving the spread is like hitting singles in baseball, string enough successful ones together and you can score a run(sometimes a lot of runs).  Toss a homer on top and you can do really well….word of warning though, it's not for the faint of heart.  You have to be disciplined and have a plan.
     
    I screwed up in initiating at 700 in the face of quarter end, bond auctions and after a nice rally.  Pretty stupid, but I have learned enough to work my way out of a total jam, and can at least now make a little on this play, and with a few more good choices could be right back in it.
     
    Phil, Thanks for the explanations on the AAPL trades.  I am not very eloquent at explaining it, I just know from doing it that many times the right call is to recognize the roll early and make it.  Do it before the loss gets too big.  I see it does two things, one it improves the long strike(ie lowering it when I'm bullish on the underlying), and when done early doesn't cost a ton.  By moving to a lower strike, it allows me to sell lower strike covers which generate a lot more premium and carry a higher probability of ending up ITM. 
     
    I like the idea of rolling the longs to Nov on weakness. I prefer to be out of my front month long calls two weeks prior to expiration, unless the spread is ITM and Im done with the play.  Also had not thought about using weeklies as insurance, great idea.  I'll try that….thanks!  Very insightful.  T

  172. hoss18

    StJ if you like that check out Brian Greene's Fabric of the Universe on PBS.  The first episode defining space is mind boggling…..really incredible stuff….like all the physical parts of the Empire State Building, if you could take away the space, would fit in a teaspoon……Who needs drugs, just study cutting edge physics, it will bend your mind into a pretzel.

  173. diamond

    Excellent two page article:
     
    How Google was "skyhooked" by Apple's new iOS 6 Maps

  174. diamond

    Phil – I am thinking about a pairs trade: Long AAPL & Short GOOG …
     
    IF you were so inclined to put this on, which options would you use?

  175. diamond

    Interesting analysis of AAPL …
     
    Apple By The Numbers – No Smoke, No Hype – Seeking Alpha

  176. lflantheman

    scottmi/ 4:13 post……AAPL dropped 40+ points in less than a week?  Could it get back to 685 or 690 this week?  Sure, though not likely.  Could it get back to 700?  Totally not lilkely.  So I sold the 700 naked calls. 
    nicha/ 4:31….why go to Jan or later  for AAPL longs?  Christmas!  And what goes in the stockings?  iStuff!  This quarter plus/minus; next quarter….blowout!  

  177. Phil

    Good morning!

    VXX/StJ – Sure, once they split, shorting them long-term would seem to be the play.  

    Eating the Future/Scott – Nice way to explain bonds. 

    Cool site Randers. 

    Karma/StJ – I don't know why he thinks that won't come back to "haunt" him – the one time he was given power, he was a crazy socialist!  

    Universe/StJ – Size of a pinhead – makes you think….

    Stories/Shadow – That's status quo.  No one ever gets in trouble for it so it continues or even gets worse every year. 

    AAPL/Hoss – You are very welcome, I think it's a great help to everyone to discuss these in detail once in a while and you are really getting a feel for the play – that makes me very happy.  

    GOOG/Diamond – How could they not know.  There are only several sources for the raw data and, theoretically, GOOG should be updating on a regular basis.  Unless they have no good relationships with their data vendors, you would think one or two might mention AAPL is gathering the data.  I can't believe GOOG can be that oblivious…

    Pair/Diamond – I would not short GOOG and I doubt I would do naked long on AAPL but I suppose you can sell the AAPL 2015 $500 puts for $66 and buy the GOOG 2014 (no 2015 yet) $700/600 bear put spread for $34 and you net $32 even if GOOG is a total fail and if they both crash horribly, you can still make $34 if GOOG hits $600.  When 2015s come out you can roll but AAPL 2014 $400 puts are $17 so you should realize a profit (if AAPL stays over $666) well before the 2014 bear spread expires worthless.  

    AAPL/Diamond – Every time I look at their numbers, they look cheap.  

  178. deano

    From FT:
     The financial pressures on Mr Rajoy’s government have been intensified by a constitutional crisis brewing over the Catalonia region, which called snap elections this week that could hasten a move toward independence.
     
       “Spain is increasingly slipping from his hands,” said Alfredo Pérez Rubalcaba, the leader of the country’s opposition socialist party. “There are very clear fractures in Spain, and the one I am most worried about is social fracture.”
     
       Catalonia, Spain’s largest region by output but also its most indebted, has already been forced to request a €5bn bailout from the central government. Artur Mas, the regional president of Catalonia, who this week discarded his Convergència i Unió party’s longstanding moderate nationalism in favour of separation from Spain, said he could call a referendum on a split.
     
       While a referendum must be approved by Madrid to be legally binding, Mr Mas said: “Firstly there is the intention to do it in accordance with the law, and if that can’t be done we will do it all the same.”

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