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Will We Hold It Wednesday – Dollar Dives to 79, Futures Flat

Let's not make this more complicated than it needs to be

A weak Dollar lifts the markets and, this morning, the Dollar fell from 79.50 at yesterday's close to 79 at 6:45 and that's why, despite earnings disappointments from both INTC and IBM, the Futures are up slightly 3 hours before the open.  As you can see from the chart on the right, to say there's a strong inverse correlation between the Dollar and the S&P is quite the understatement.  Over the longer run – the effect tends to wash out but, over the short run, it's an almost perfect match.  

Of course, this also has a very direct effect on commodity pricing and part of the reason for the Dollar's big sell-off last night was the much-better-than-last-time performance of Barack Obama in the second Presidential Debate as the future of the Fed and all that free money hangs in the balance.  

After the first debate, two weeks ago, Romney clearly won and has made it known that he will kick both Big Bird and Big Ben to the curb as soon as he gets in office – that sent the Dollar up from 79.10 to 80.21 (up 1.4%) last week and dropped the S&P from 1,460 to 1,430 (2%).  After last night, Romney looks to be back off the table and that leaves the Dollar to resume it's downward slope – giving another lift to the markets.  

At the same time, Moody's left Spain's credit rating above junk this morning and that's lifting the Euro to $1.31 and the Pound is moving in lock-step at $1.61 BUT the Yen dropped 0.5% to 78.63 and it's not likely the BOJ will let the Dollar slip below 79 as that makes Toyotas and Sonys more expensive just ahead of the holidays.  Also, the Nikkei finally got back to 8,850 last night and you know they hate to lose that line.  

So get set for some heavy-duty Global Market Manipulation by our Central Banksters as everyone but Europe tries to race for the bottom.  Europe, interestingly enough, doesn't mind a strong currency as they are fuel and goods importers and most of the goods they export are "luxury" class and less susceptible to currency fluctuations.  With strong intra-zone trading the backbone of the EU economy, it doesn't matter where the Euro is trading from that perspective either and, of course, the SNB works very hard to keep the Euro up against the Franc.  Almost as hard as the BOJ works to keep the Yen weak against the Dollar

That means we'll take this morning's open with a grain of salt as the 0.5% dive in the Dollar since the close SHOULD have the markets gapping up at least 0.5% but it's hard to imagine that INTC and IBM won't put a drag on both the Dow and the Nasdaq (and the SOX) with their less than exciting reports.  IBM alone is down $7 pre-market  and that's over 50 Dow points right there – in the very least, we're going to take a bite out of yesterday's momentum. 

I mentioned in yesterday's morning post we were playing AAPL bullish and the Nov $660 calls jumped from $13.63 at the open to $20.70 at the close, up 51% for the day and that was a gain worth protecting, of course.  The TNA Oct $61 calls I also mentioned in the morning post finished the day at $1.10 but we took .95 and ran – up 111% from our last entry at .45.   In fact, our last trade for the day in our $25,000 Portfolio was a bearish one as we picked up the weekly DIA $135 puts at .65 as we were worried Romney would win again and tank the markets – we won't be sticking with them if the Dollar stays down this morning, though.  In the Morning Alert to Members, we also put an earnings play on ISRG:

ISRG – Looking at UNH's numbers and XLV in general, I would think ISRG is doing well.  The stock is low in the channel, right at the 200 dma,  I think the way I would play them for earnings is to set up an April $510/485 bear put spread for $10 and sell the Oct $500 puts for $11 so a net $1 credit on the combo and ISRG would have to be below $475 before you're down more than the $25 you make on the spread and, of course, the short puts are rollable and we like the company.  Let's do 2 of these in the $25KPA to see how it goes.  

ISRG had a nice beat last night but not good enough to justify the run-up into earnings and they were back to $510 after hours which is, of course, PERFECT for our bet.  The Oct $500 puts should expire worthless and whatever value remains on the bear spread, plus $1, will be our profit – times 200, of course, for 2 contracts in the spread – hopefully about $2,000 in profits for the day's work.  These are the kind of quick earnings plays we love and, so far, this earnings season has been a lot more reliable to predict than the last

It looks like we're getting past BAC's earnings without too much damage, EPS was 0.07 vs 0.00 expected but Revenues missed by 7.5% and I'm more than a little concerned that 83% of the Mortgage Loan volume is refinances because what we're doing here (and this goes for all banks) is borrowing business from the Future because every home you refinance at 3.5% is a home that will not be coming back to you for 3 decades for another loan, once they start moving back to more normal (unsupported) rates.  

The banks are also locking in 30-year periods of low returns on their loans and, of course, it doesn't take much inflation to wipe out all of their gains.  All this refinancing at lower rates is also bad for REITs, who are very out of favor at the moment but there are some that make good long-term entries for the patient investor.  

NLY, for example, has fallen to $15.50 and their board got fed up and approved a $1.5Bn share buyback (10% of float) yesterday so probably $16 this morning.  They still pay a $2 dividend and you can buy the stock for $16 and sell the 2015 $13 puts and calls for $4.85 and that drops your net cash outlay to $11.15 with an obligation to buy another round of shares at $13 if NLY finishes below.  That would put you in 2x at net $12.08, which is still 25% below $16 and you only have $11 cash in the stock so that $2 dividend becomes an 18% annual bonus while you wait.  

Meanwhile, September housing starts are up another 15% to an annualized 872,000 vs 765,000 expected so a really nice beat and that should pop the Futures.  Even better, permits jumped to 894,000 vs just 810,000 expected so a 10% beat there as well.  

As of this moment (8:40) it's not reflected in the Briefing.com chart but I'm sure you can imagine the impressive uptick 872,000 will give us.  More employment, more housing – I'm sensing a trend.  Poor Jack Welch must be turning over in his grave.  

Tomorrow we get the Philly Fed, which may turn positive after last month's -1.9 reading and also we'll see Leading Economic Indicators, which also should turn positive based on the improvements we're seeing in recent data.  The last data-point for the week is Existing Home Sales on Friday and next week we continue in the housing vein with the MBA Mortgage Index, New Home Sales and the FHFA Housing Price Index – all on Wednesday along with another Fed decision that afternoon.  Thursday will be Durable Goods and Pending Home Sales and Friday we get another look at Q3 GDP, which will possibly be revised up from 1.3%.

Unfortunately, Germany revised their GDP down for 2013 this morning, from 1.6% all the way down to 1% as austerity blows up right in their face.  This year is projected to be an equally anemic 0.8% so and optimist could say things are picking up but 2010 was 4.2% and last year was 3% so basically, it's just sad.  "Germany is navigating stormy waters because of the European sovereign debt crisis and an economic weakening in emerging nations," Economy Minister Philipp Roesler says.

That being the case, it's a good idea to reiterate yesterday's trade idea for a TZA hedge from afternoon Member Chat to lock in our current gains:

Ultra hedges/Bdon – You just can't beat TZA at $15.  The Jan $12/15 bull call spread is $1.50 so 100% upside if TZA simply doesn't go any lower.  If they do go lower, you can sell the April $11 puts, now .50 for $1 (the Apr $12 puts are .92) before your $1.50 is even out of the money and then you'd be in the Jan $12s at net .50 and worst case is you get assigned at net $11.50 in April but, of course, you can roll or simply accept the assignment and cover and then you have more long-term protection.  

While the US is clearly improving – we're simply not out of the woods yet internationally and an economic collapse in Europe or Asia will send people flying back to the Dollar – and you know what that will do to the S&P!  


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  1. Burrben

    Phil / Futures – Thanks, I know how it normally works.  I did very well with the silver trade yesterday, so my brain woke me up at 5am today and wanted to make more pre-open money.  There is something extremely satisfying about making $$ before 9.30am, and then just heading out and having fun during the day while waiting for the longer term option positions to mature.
    Thanks again!

  2. 2can

    Oil never went below 92 over night.  Looks to me like it will test 93 or better this morning.  What do you think Phil?

  3. jromeha

    Phil- just want to confirm we are selling the 135 oct dia puts at the open?

  4. 1020

    Good Morning!

  5. Pharmboy

  6. stjeanluc

    Oh well missed my connection in Detroit so I'll miss the market open now!

    2 for 2 on earning plays so far Phil. I need to see what is next on the list.

  7. phil

    Good morning!  

    Futures/Burr – Congrats on silver.  Believe me, much more fun being right most of the time than wrong.  I agree on the mornings – gotta love that Egg McMuffin money to start the day off right!  Best play today should be an oil short on inventories.  A build is expected so we need more than 3Mb to shock anyone but $93.50 should be a good ceiling regardless.  

    Oil/2Can – We should get the normal enthusiasm into the inventory report but the strip is still bloated with a whopping 115Mb of contracts still open with 4 days to trade in Nov and 330Mb already stacked up in Dec with Jan providing little relief at 157M.  550M is the magic number – above that means selling pressure in the front 3 months and over 600M is very bad and, since this month is over – if you add the 75M from Feb – they're way over 600M once the rolling is done.  

     

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Nov'12 92.08 92.76 91.96 92.47 08:56
    Oct 17

    -

    0.38 37179 92.09 115046 Call Put
    Dec'12 92.52 93.19 92.41 92.89 08:56
    Oct 17

    -

    0.35 25688 92.54 330318 Call Put
    Jan'13 93.25 93.65 92.94 93.35 08:56
    Oct 17

    -

    0.31 7736 93.04 157794 Call Put
    Feb'13 93.60 93.84 93.37 93.73 08:56
    Oct 17

    -

    0.25 3366 93.48 74697 Call Put

    DIA/Jrom – I'm not inclined to dump them as the housing numbers (very strong) failed to get a big rise and, of course, IBM is a 50-point drag AND the Dollar is at 79.065 and you know the BOJ don't like that one bit (78.65 Yen to the Dollar) AND commodities are all pretty weak, which means they're not too confident the Dollar stays down.  So let's give the open a look and see how we feel but, when in doubt, sell half is always a good rule of thumb if the position is making you nervous.

    Annaly (NLY) is upgraded to Buy from Neutral at Compass Point following last night's buyback announcement, "a smart reallocation of capital … (and) a floor for the share price." Noting likely high prepayment rates, Compass Point says the Fed's continued bid for MBS should keep book values – for Annaly and the rest of the sector – strong. Shares +2.2% premarket. 

    UK is up 0.55%, Italy up 1.2% and Spain up 1.4% but Germany up just 0.12% and France just 0.32% so things are all over the place and, as I said, the pre-markets are way weaker than they seem with the Dollar down 0.5% so be very careful.

  8. phil

    Earnings/StJ – I love your system – it's giving us very good picks.  

  9. stjeanluc

    Thank goodness for remote desktop….

    oil lines

    R3 – 94.3 / R2 – 93.54 / R1 – 92.89 / PP – 92.08 / S1 – 91.41 / S2 – 90.69 / S3 – 89.95

  10. stjeanluc

    Portfolio updates when I get home….

  11. scottmi

    Earnings/Phil – can you reiterate what Stj's "system" is for earnings? 
    (re "Earnings/StJ – I love your system – it's giving us very good picks. ")

  12. scottmi

    Earnings/Stj – or can you spell out your system? I must have missed that discussion.

  13. phil

    I'm starting to think IBM can't be reflected in the Dow futures – maybe a big drop at the open.  IBM down $10 and that's 80 points and I can't see the rest of the components being that far up to offset.   0.5% of the Dow is 67 so Dollar down doesn't cover it.  

  14. jerconn

    Phil – the AAPL callers toying with $10

  15. phil

    Earnings system/Scott – StJ is tracking the normal volatility on various stock earnings vs. the potential volatility reflected in the current option pricing so, when we get a stock that has a higher than normal anticipated deviation and we don't believe it will happen, we set up a spread to take advantage of the front-month, front-week premiums on the inevitable burn-off after earnings. 

    Dollar 79.13 (climbing) but Dow not so weak, holding 13,500 so far.  If that breaks, not much support all the way back to 13,400 and we'll be loving those puts! 

    AAPL/$25KP –  back where we covered – we need to watch them closely (stopping 2 calls at $10 and 2 at $12).

    Oil already failing to hold $92.50 – also not too encouraging and gold failed $1,750 despite Dollar weakness.

    So a drop is to be expected – it's what we hold that matters and if all this just ends up as a mild pullback – then it is definitely time to get more bullish.  RUT 835 is a good line to watch as is 13,500, of course, and 8,400 on NYSE and 1,450 on S&P and I guess 3,100 on Nas but that's blown already. 

    ISRG/$25KP – holding up better than expected, back to $527 already and the short puts are $1.35 and the spread is still $10 so we're good for just about $2K but, with the spread way out in April, we can wait the 2 days for the front-month puts to expire worthless. 

    XLF very happy at $16.17.  

    Oops, there goes AAPL. 

  16. phil

    $25KP – Let's add 4 short AAPL $650 short calls at $5.15 and stops on our 4 remaining $645 short calls move to 2 at $10 and 2 at $12.  

  17. Jbur

    MTB & HCBK:  Whoa! The market likes it:   M&T Bank Corp. reported its third-quarter profit jumped to $293 million, or $2.17 a share, from $183.1 million, or $1.32 a share, from a year ago.
    Wall Street analysts expected M&T Bank (NYSE: MTB) to earn $1.85 a share on earnings of $1.07 billion.
    http://www.bizjournals.com/buffalo/news/2012/10/17/mt-profit-up-60-in-3q.html?ana=yfcpc

  18. scottmi

    Earnings/phil, stj – thank you.

  19. 2can

    is oil at 10;00 today?

  20. phil

    Only CSCO, HPQ (of course), IBM, INTC, MCD, MSFT, PFE and UNH are down on the Dow 22 components up offsetting IBM nicely so far but no one particularly strong – just 22 stocks up .50 vs IBM down $9. 

    Clearly there's a strong buying bias back in the market now.   XLF $16.22, RUT going nuts at 838 so watch 840 for a very positive break up.  

    Dollar back to 79.04 helping too.  

    $25KP – Let's sell 15 of the DIA $136 puts for $1.15 and that's all our money off the table and enough to pay for us to roll to Nov 134 puts (now $1.62) for nothing out of pocket and then we can roll the $136 short puts down to the weeklies tomorrow.  

  21. harip

    Phil,
    What is your opinion of selling long term puts on dltr at this levels? They announced a slight miss for the third quarter

  22. phil

    Banks/Jbur – All doing well and this isn't even reflecting the free money yet.  

    You're welcome Scott.  

    Oil/2Can – 10:30.  

    DLTR/Harip – They haven't been hit by the downgrade police yet so you may want to wait on an entry.  $40 is logical support so I wouldn't call it a floor and DG just reported good earnings so it's not a sector thing, DLTR is making some mistakes.  

    RUT 840 and Nas back over 3,100 – no reason to be bearish if those hold.  

  23. Burrben

    Phil / INTC Bear spread
    I'd like to put on a mid to long term Bearish bet on Intel, maybe using a ITM Bear put spread, what do you like in terms of timeframes / strikes.  I think they will continue to decline unless they make in-roads into the tablet market.

  24. williex

    Yea…..Go Amazon

  25. phil

    At the open: Dow -0.28% to 13514. S&P +0.02% to 1455. Nasdaq -0.28% to 3093.

    Treasurys: 30-year -0.53%. 10-yr -0.25%. 5-yr -0.09%.

    Commodities: Crude +0.29% to $92.81. Gold +0.03% to $1746.75.

    Currencies: Euro +0.47% vs. dollar. Yen -0.2%. Pound -0.27%.

    Market preview: Stock futures get a leg-up from strong housing starts, with the S&P benchmark +0.2%. It's probably also helping that Europe is bright green as Spain's credit-line bailout gets closer. With earnings season beginning to ramp up, notable losers this morning are IBM at -4.1% and Intel at -3.8%. BofA is -0.1% and Abbot Labs -0.3%Later: EIA Petroleum Inventories

    10:00 AM On the hour: Dow -0.08%. 10-yr -0.29%. Euro +0.56% vs. dollar. Crude +0.73% to $93.22. Gold +0.17% to $1749.35.

    10:30 AM EIA Petroleum Inventories: Crude +2.9M barrels vs. consensus of +0.9M. Gasoline +1.7M barrels vs. +0.8M. Distillates -2.2M barrels vs. -0.7M. Crude +0.64% at $93.13 – Net around where we thought, not a big mover but large amount of open orders mean we likely go down so shorting /CL at $92.50 is good with tight stops.

    Sep Housing Starts:+15% to 872K vs. 765K expected and 758K (revised) in Aug. Permits 894K vs. 810K expected and 801K (revised) in Aug.

    More on September Housing Starts: Both starts and permits post their best numbers since the summer of 2008. August's gains are revised higher to +4.1% from +2.3%. As hoped, it appears housing starts are catching up to large previous gains in builder confidence. (see also)

    MBA Mortgage Applications: -4.2% vs. -1.2% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) increased to 3.57% from 3.56%

    The Postal Service hit its $15B borrowing limit for the first time ever last month and now has to rely on its own income to fund its operations. However, the USPS still had enough money to meet a $1.4B payment for workers compensation that was due on Monday. The USPC is unable to make major changes to turn itself around without the say so of Congress, which is out campaigning at the moment. 

    Germany cuts its 2013 GDP growth prediction to 1% from a previous forecast of 1.6%, but says that growth this year will be 0.8% rather than 0.7%. Both new figures would represent a slowdown from 4.2% in 2010 and 3% in 2011. "Germany is navigating stormy waters because of the European sovereign debt crisis and an economic weakening in emerging nations," Economy Minister Philipp Roesler says.

    U.K. unemployment drops to a 15-month low of 7.9% in June-August from 8.1% March-May and vs. consensus of 8.1% also. The number of unemployed was 2.53M, down 50,000. The number of people claiming jobless benefits declines by 4,000 in September to 1.57M. (PR)

    Circles. Moody's decision to maintain Spain's investment grade credit rating last night was based on the agency's expectation the ECB will soon be buying the country's debt. But Moody's move – by causing a rally in Spanish paper - takes pressure off the government to seek being bailed out. "All clear? Welcome to Europe," writes Art Patnaude. 

    Any stimulus plan for Japan will be limited to tapping slim discretionary budget funds as the legislature refuses to lift the nation's borrowing cap. This leaves the Noda government with about ¥1T for new spending as opposed to the ¥3-4T likely necessary to make even a dent in the ¥450T economy. The dollar retraces yesterday's gain vs. the yen, -0.3% to ¥78.66.

    Their attention likely fixed on U.S. Presidential politics, China's mandarins allow the yuan to punch out another 19-year highvs. the dollar. Governor Romney made clear again last night his intention to label China a currency manipulator on Jan 21, 2013. The move would allow the president to slap tariffs on a range of Chinese goods.

    The Bank of Thailand unexpectedly cuts its benchmark interest rate 25 basis points to 2.75% just days after the central bank governor said there was no need to ease. "The substantial degree of uncertainty surrounding the outlook could hamper exports," says the bank. THD +26% YTD.

    Citigroup (C +1.7%) catches a multi-notch upgrade to Buy from longtime management critic Mike Mayo, who cites a "more proactive board." He also raises his price target from $31 to $43.

    Several homebuilders get downgraded at Raymond James, among them TOLMDC, and RYL. All three – along with the rest of the sector – are showing solid premarket gains, however, as the stronghousing starts number controls the tape. XHB +2.1% premarket.

    More on Halliburton's (HALQ3 results: HAL has a bigger chunk of its business in North America than peers, so it's feeling a bigger pinch from the drilling slowdown created by lower natural gas prices. North American on-land nat gas rig count -18%, revenue -5% Y/Y. Costs rose due to higher prices for materials used in fracking and disruptions from Hurricane Isaac. HAL -1.9% premarket.

    Danone (DANOY.PK) can't overcome faltering economies in Italy and Spain as consumers switch to cheaper yogurt alternatives. The company's dairy division saw revenue slow to a 0.7% pace with volumes dropping. The plight of Danone has implications for yogurt sellers such as General Mills (GIS) and Nestle (NSRGY.PK) if pricing in the sector gets pushed lower. DANOY.PK -4.1% in Paris trading.

    UBS lowers estimates on McDonald's (MCD) ahead of the restaurant chain's Q3 report on its view that September's global same-store sales slowed. Analysts with the firm take Q3 EPS to $1.50 from $1.53 and full-year EPS gets shaved to $5.46 from $5.50.

    Highlights from PepsiCo's (PEP) earnings conference call: The company sees tremendous growth opportunities in Southeast Asia and calls out Gatorade to see a short-term sales boost. On an interesting note for Monster Beverage (MNST) investors, the company takes a rather tepid stance toward making any aggressive M&A plays in the energy drink sector. Execs pass on issuing any guidance for 2013 when asked, saying they will give estimates when Q4 results are released in February. Shares -0.2% premarket. (webcast)

    More on PepsiCo (PEP): Organic growth up 5%, while the Y/Y decline in revenue reflects a negative 5-percentage-point impact from one-time structural changes and a negative 5-percentage-point hit from foreign exchange. A 3% rise in Frito-Lay North America paced the snack food side, while Asia, Middle East & Africa saw the sharpest falloff for the beverage business. Reiterates prior 2012 guidance, expecting a decline of EPS by 5% with foreign exchange a drag. (PR)

    Coke vs. Pepsi: The execution at Coca-Cola (KO) looks a little crisper this morning after its 2% gain in U.S. beverage volume for Q3 beats PepsiCo's 3% decline by a healthy margin. The company also has some favorable comps to look forward to in future quarters, according to analysts. 

    Starbucks (SBUXhears calls from a member of Britain's parliament to investigate how it avoids paying taxes on a hefty portion of its sales in the United Kingdom. If a probe occurs, any resulting damage could be considered somewhat self-afflicted after the company told investors its unit in the U.K. was profitable while telling the taxing authorities the unit wasn't.

    Diageo (DGE) rides growth in emerging markets to a roughly in-line 5% increase in sales for FQ1. The spirits maker reports sales in Latin America and Caribbean increased 16% Y/Y, while Africa jumped 11%. Though weakness was cited in the Asian and European markets, price increases in the U.S. took hold to help boost results. (PR)

    Potash (POT-2.2% premarket after cutting its FY2012 EPS guidance to the low end of its projected $2.80-$3.20 range, and seeing Q3 at the low end of its prior $0.70-$0.90 range (analyst consensus $0.83). The change primarily reflects lower than forecast potash sales volumes due to delays in new contracts with buyers in China and India. Also: MOS -1.6%.

    Nike (NKE) says it will end its contract with Lance Armstrong as it condemns the athlete for his alleged use of performance-enhancing drugs. While a fall from grace is nothing earth-shattering in the world of high-profile sports world, Nike and Lance Armstrong became more interwoven over the years with the Livestrong brand prominently displayed at stores and through its website.

    While most automakers continue to see demand tail off in Europe, Hyundai (HYMLF.PK) and Kia Motor (KIMTF.PK) buck the trend with gains in registrations of 3.3% and 4.9%, respectively. Unburdened with expensive factories and tedious labor contracts on the continent such as American counterparts GM and Ford, the South Korean companies have been able to stay nimble with fresh designs and production that can be more easily ratcheted up or down with demand. 

    Enterprise IT stocks slump following IBM's (IBM -3.7%Q3 revenue miss, which had much to do with drops in mainframe, storage, and middleware sales. Earnings call remarks about weak September demand aren't helping either, though some might be encouraged IBM's Chinese sales rose 19% Y/Y at a time when others (III) are seeing Chinese demand slump. EMC (EMC -1.5%), VMware (VMW -1.9%), Citrix (CTXS -2.2%), Red Hat (RHT -1.7%), and Tibco (TIBX -3.6%) are among the losers. 

    If IBM's ~4% premarket drop holds up after its Q3 revenue miss, the stock's results would bode ill for the overall market in the coming weeks, Bespoke analysts say. Since 2001, IBM’s one-day stock move in reaction to earnings has been directly correlated to the S&P 500’s move over the ensuing five weeks about 75% of the time, including the last four quarters.

  26. scottmi

    DIA/phil – ok, so the play described is to cover the 20 Oct 135 puts with 15 Oct 136, and ALSO do the roll of the 135s to the Nov 134s.. is that roll supposed to be done now?  

  27. phil


    More on Textron (TXT -5.3%Q3: net profit +6% to $151M. Revenue breakdown: Bell helicopters +20% to $1B, with 46 choppers delivered vs. 26 last year. Industrial revenue +4% to $683M. Systems, which sells UAVs and armored vehicles -13% to $400M. Cessna +1% to $778M after "very quiet ordering." Raises EPS FY outlook to $1.95-$2.05 from previous guidance of $1.80-$2, but still below consensus of $2.10.
     

    Susquehanna takes its rating on IMAX down to Neutral from Positive on a valuation call. Analysts with the firm say IMAX has been on a steady growth track with superhero movies and its penetration in Asian markets fueling it, but looks topped out as shares approach their 52-week high.

    What a roller coaster:  Education stocks get hammered in early trading after Apollo Group (APOLslashes revenue estimates and closes many of its physical locations. It's also possible traders could be reading something into the soft answers given by both candidates at last night's Presidential debate when college funding was tied into the lead-off question. Naturally, analysts see Romney taking a harder line on federal funding if elected but also contend a 2nd term for Obama is no easy ride for federal backing of the sector. Decliners: APOL-15.5%DV -5.1%STRA -5.0%ESI -4.1%COCO -2.4%CECO-1.9%.

    Though unconfirmed rumors are out that tip off Las Vegas Sands (LVS) has lined up banks to help it finance the dreamy resort in plans for Spain with costs estimated to be in the tens of billions, Nomura's Harry Curtis still sees roadblocks ahead for the project. The analyst says another $5B in financing still needs to be dug out as he reiterates his belief the Vegas-in-Spain vision isn't the best path for the company. 

    Check Point (CHKP -11.6%) joins security hardware peer Fortinet (FTNT -17.9%) in tumbling post-earnings. Though Check Point's Q3 results were respectable, the firewall vendor guided on its call for Q4 revenue of $355M-$387M and EPS of $0.84-$0.91 vs. a consensus of $381.8M and $0.90. The big question: to what extent is the guidance the result of soft IT spending and strong European exposure, and to what extent is it due to competition from Palo Alto Networks (PANW -1.2%) and its disruptive next-gen firewalls? 

    More on Cisco: Shares -1.6% premarket thanks to adowngrade to Hold from Cantor. The firm thinks shares are likely to be range-bound near-term following the rebound seen over the last 3 months, and believes there's growing evidence the firm's "recovery thesis" will be delayed by a quarter or two. MKM upgraded Ciscoearlier this month following positive reseller checks.

    Cree (CREE+9.7% following its FQ1 report. Results were ho-hum, and so was guidance: the company expects FQ2 revenue of $320M-$340M and EPS of $0.27-$0.31 vs. a consensus of $333.6M and $0.30. But shares have been depressed, and Cree's improving gross margin (it rose 120 bps Q/Q to 37.5% in FQ1, and is expected to be around 38.5% in FQ2) is going over well. Needham sees the report as evidence Cree is executing well on its vertical integration plans. (transcript)

    Those rumors about a $99 Google (GOOG) Nexus tabletwon't go away. Sources tell Digitimes the device will arrive in Q4, be manufactured by Quanta, and feature a no-frills processor from China's WonderMedia. NPD's Richard Shim also recently claimed a $99 Nexus tablet is in the works, to go with a high-end Nexus model from Samsung. Google's losses on such a device would probably be significant, but it would also significantly undercut the Kindle Fire and iPad Mini at a time when tablet penetration remains low in many emerging markets.

    Amazon (AMZN) says it will make a big push to see its Kindle e-readers and tablet computers be the device of choice in schools as it tries to cut into an established lead that Apple has carved out in the education market. The company has set up a program to help teachers and administrators set up classroom accounts with Facebook and full Internet access blocked.

    Best Buy (BBYplans to sell its own-brand tablet, the "Insignia Flex," for $239-$259, Reuters reports. That's well below the $499 starting price for Apple's (AAPL) 9.7-inch iPad and Microsoft's (MSFT) new Surface device, but above the $199 for Amazon's Kindle Fire HD and Google's Nexus 7. The Insignia Flex, which runs Android, is due to go on sale on November 11.

    Quick analyst reaction to Best Buy's (BBYplan to sell its own tablet is muted at best. Despite the foray into the market right in front of the holiday season, a worrisome vibe remains on the retailer as an online pricing war with Target, Wal-Mart, and Amazon looms as a margin eroder.


  28. 2can

    down oil down down down  yes

  29. yodi

    Phil FAS up 2.70 today any new plays in this direction

  30. phil

    INTC/Burr – Market is very bullish and INTC is mainstay in many ETFs so might not work out so well.  Lots of people will see them as a bargain because it will take a lot more than a few bad quarters for people to give up on them.  Also, as you say – UNLESS – one big design win and order from AAPL or AMZN and they're back in business.  With INTC at just $21.77, it's just not very exciting to sell, for example, the 2015 $22 calls for $2.50, is it?  Spreads are the same, they don't pay well – I'd avoid. 

    DIA/$25KP, Scott – Yes, at the moment we have 20 Oct $135 puts at .65 ($1,300) covered with 15 Oct $136 puts at $1.15 ($1,725) for a small credit and our intention is to roll both IF the Dow can't punch over 13,600 but not until we have weeklies tomorrow but I may change my mind of the Nas doesn't hold 3,100 and the RUT doesn't hold 840. 

    Oil holding $91.90 so far and now we can short a break below but taking the .60 and running on the first /CL short is a good idea.  

    FAS/Yodi – Target is $16.50 for this run -maybe tomorrow.  Takes FAS up to about $121 so let's say I wouldn't mind selling the Oct $120s for $2+ on a big move up for the quick premium burn but this is another example of one where we're better off waiting for the next weeklies to come out tomorrow. 

  31. yodi

    Phil FAS thanks got it

  32. angelcur

      tech sector earnings pretty bad so far…singapore electronics exports(gauge of tech hardware demand) announced last night down -16.4% in sept.

  33. amitshenoy174

    Phil any play on MLNX. Its reporting after 4PM the vol is extremely high for this week compred to November

  34. scottmi

    NLY/Phil – watching this one. want to play, but concerned with co-CEOs comments that it is fantasy to expect the company to perform like it had been. I wonder if this suggests dividend cuts to come?

  35. kustomz

    INTC, AAPL putting together a very strong team of chip designers. How much longer INTC remains a supplier, who knows, but it looks like they will be moving away from outsourcing in the next few years. With AAPL deep pockets maybe sooner.

  36. Inkarri19

    Hello All – For you Apple experts, I hold the Jan 2013 $625 calls at $41.  Would it be advisable to do something like sell the $700 Jan 2013 calls for $16?  TIA

  37. phil

    Europe closing at highs for the day:  FTSE up .74%, DAX .27%, CAC .61%, Italy 1.47%, Spain 2.21% – probably not final but close enough.

    Tech/Angel – I think INTC confirms that.  Not at all a surprise though, SOX already down more than 10% since Sept into earnings and acting relieved now that news is not worse.  

    MLNX – I hate playing the fabless semis – they are so hard to peg.  They are priced for a 15% move but last earnings they popped up almost 50% so I'm not sure of your definition of high compared to November is – they have earnings today – of course it's high.  I certainly don't know the company well enough to guess which way they would go and the fact that they popped 50% and all you can collect is 15% means the risk is probably a lot more than the reward so I wouldn't play it.  

    NLY/Scott – I don't have a problem with the guy being honest.  The company has been growing at 15-20% a year – as long as they pay their dividend, we don't need growth for our play to work.  I very much doubt they'd buy back $1.5Bn in stock and then cut the dividend.  Board Members collect dividends too, you know…

    AAPL/Kustomz – That's one of the trends that puts me off INTC.  Samsung, of course, will do their own chips and anyone who's moving a ton of tablets has the cash to make their own chips or outsource.  Someone on CNBC just said the same thing – you don't need state of the art for phones and tablets – there goes INTC's entire advantage.  Maybe in a few years, they'll reconfigure and come out with chips that use 1/2 the battery of any other and then they'll come back but I think they at least have a rough few years ahead.  

    Ad/Jabob – As I've said, that's exactly the ad Obama should run under the banner "Stop Congress Now" – I don't even know why he wants to be re-elected if he has to spend 4 more years with those idiots blocking everything he tries.  Here's a partial list that clearly shows why, 4 years later, we're still trying to accomplish basic things that would help this country:

     

    When John McCain led the filibuster of the Defense Appropriations Act yesterday, he blocked far more than the DREAM Act and repeal of DADT. Here are just a few of the other blocked provisions, courtesy of Mother Jones.

    • No permanent military bases in Afghanistan.
    • Report identifying hybrid or electric propulsion systems and other fuel-saving technologies for incorporation into tactical motor vehicles.
    • Protection of child custody arrangements for parents who are members of the Armed Forces deployed in support of a contingency operation.
    • Improvements to Department of Defense domestic violence programs.
    • Department of Defense recognition of spouses of members of the Armed Forces.
    • Department of Defense recognition of children of members of the Armed Forces.
    • Enhancements to the Troops-to-Teachers Program.
    • Fiscal year 2011 increase in military basic pay.
    • Improving aural protection for members of the Armed Forces.
    • Comprehensive policy on neurocognitive assessment by the military health care system.
    • Authority to make excess nonlethal supplies available for domestic emergency assistance.

     

    Senator Franken’s Anti-Rape Amendment to the Defense Appropriations Bill – Makes it so that women raped overseas while working for foreign contractors have the right to have their case heard in an American court instead of having their case mediated by the company they work for. Only Republican men voted against this, but it passed.

    Benefits for Homeless Veterans- Would have expanded benefits to homeless veterans and homeless veterans with children. Republicans blocked this.

    Affordable Health Care For America Act- Prevents insurance companies from discriminating against you on the basis of “pre-existing conditions”. Requires that insurance companies spend 85 cents of every dollar that you pay on your actual health care. Limits health insurance companies profit margins. Republicans blocked this for months before it finally passed and have vowed to repeal it if they are elected.

    Health Care for the 9/11 First Responders who got sick from being at Ground Zero- Would provide billions of dollars in health care to help the 9/11 First Responders who were at Ground Zero on 9/11 and are now sick because of it. Republicans blocked this.

    The Jobs Bill- Offsets the payroll tax for 1 year for companies that hire new employees, or people receiving unemployment insurance. Also gives other tax incentives to companies hiring new employees. Republicans attempted to block this.

    Wall Street Reform- Puts stricter regulations on the banks, preventing them from becoming “too big to fail”. Curbs reckless spending practices that caused the banking crisis. Republicans attempted to block this.

    American Recovery and Reinvestment Act- Pumped billions of dollars into state and local Governments to prevent us from sinking into a second Great Depression. Republicans opposed this but now want to take credit for the parts of it that we know are successful.

    Oil Spill Liability- Raises the liability on what companies can be made to pay to clean up after an oil spill. Republicans blocked this.

    Immigration Reform- Republican suggested comprehensive immigration reform until Obama supported it. Now they’re rabidly opposed to it and even voted against their own legislation. Republicans blocked this.

    Unemployment extension bill HR-4213- Would provide additional aid to the millions of Americans still on unemployment who are just trying to support themselves and their families. Republicans blocked this bill for 8 weeks before it finally passed. Republicans blocked this for 8 weeks before it finally passed.

    Fair Pay Act of 2009- Also called the Lily Ledbetter bill. Requires that women receive equal compensation to men for doing the same work. Republicans attempted to block this.

     

    Tax on Companies that ship jobs overseas- A bill that would have eliminated a tax break that companies get when they ship jobs overseas. Republicans blocked this, allowing companies to keep the tax break they receive when they ship jobs to other countries.

    Political Ad disclosure bill- Would have required all donors to political campaigns to reveal themselves. Republicans blocked this, not once but twice.

    Subpoena Power for the Committee investigating the BP Oil Spill – Give subpoena power to the independent committee responsible for investigating BP’s roll in the oil spill. Republicans attempted to block this.

    The Small Business Jobs Act -would give LOCAL, community banks access to billions of dollars to loan to small businesses. Republicans blocked this, then attempted to block it a second time and failed.

    The DREAM Act- Gives immigrant youth who were brought here as children a path to citizenship by earning a college degree or serving the military for 2 years. Republicans blocked this.

    I would absolutely run solely on this issue.  It's not enough to re-elect the President, the despicable gang of GOP thugs in Congress MUST be removed or this nation will never be able to move forward.  Notice how Romney mentioned half of these things as things Obama didn't accomplish that he promised.  I don't know why Obama let that slide – they drafted and proposed this stuff – the GOP simply didn't want to get it done because – as they have often said – their top priority is to make Obama a one-term President.  Serving the best interests of the United States of America is apparently a distant second or maybe 3rd behind repaying their backers.  Obama's biggest mistake when he came to office was trying to work with these animals – they delayed him for 2 years, then ran on the fact that he didn't get stuff done and, since the GOP took over Congress – it's been a total sham.   Even before they had the majority in Congress, they tied up the Senate with filibusters:

    Obama can't even get appointments confirmed after 4 years:  

    AAPL/Ink – Naked is a big risk into earnings.  The $625 calls are $53.70 so you have a 30% gain but you are saying that's not good enough and you must risk it on earnings.  Since you are betting AAPL goes higher, why not move to the $650/700 bull call spread at $20 and then you're not likely to lose more than the $12 you already gained and you stand to make $30 more if they make $700.  

    AMZN/$25KP – The short $245 puts are down to $1.10 so why risk it?  Let's buy those back and that leaves us with the naked Nov $240 puts, now $7.90 plus the $3.40 we made on the short puts is, I think, back in the black on that trade and we'll see what comes out tomorrow.  

  38. qcmike

    Phil
    For a new trade in AAPL
    What do you think of the   Jan 13 $ 650/ 700 BCS   for about $20.00?
    Thanks

  39. phil

    Good info on Roth IRA conversions:  

     

    The sneaky way into a Roth 
    Still, there's a way for many high-income taxpayers to get into a Roth. It takes a bit more work, but it can lead to the same result.

    Everyone is allowed to contribute to a traditional IRA, no matter how much money they make. The only question is whether you can deduct that contribution. If you aren't eligible to participate in a retirement plan like a 401(k) at work, then you can put money in a deductible IRA no matter how much you make.

    So the strategy goes like this: Contribute to a regular IRA but then turn around and convert that IRA to a Roth. Because Congress took away the income limits for Roth conversions back in 2010, you can do that — and if you do, then the added taxable income from the conversion will exactly offset the deduction from the regular IRA contribution, leaving you in exactly the same position you would've been in if you'd been allowed to contribute directly to a Roth.

    Why it's worth the effort
    That may seem like a lot to go through just to get money into a Roth. But consider the benefits:

    • Having a Roth means never having to worry about what tax rates will apply in future years. With the current fiscal cliff, that certainty is worth more than ever.
    • In particular, keeping certain stocks in a Roth has huge advantages over keeping them in taxable accounts. The obvious examples are mortgage REITs Annaly Capital (NYSE:NLY  Chimera Investment (NYSE: CIM  , and American Capital Agency(Nasdaq: AGNC  , each of which yields well over 10%. With effective tax rates on their dividends set to move above 40% in 2013, the value of tax-free treatment will increase dramatically. The same is true for rural telecom stocks Frontier Communications(Nasdaq: FTR  and Windstream (Nasdaq: WIN  , both of which stand to lose preferential 15% maximum tax rates on their dividends if current tax laws are allowed to expire.
    • In retirement, Roth distributions don't add to your taxable income. That has huge implications for many things, including eligibility for benefits as well as taxation of Social Security and other income.

    So if you've never looked at a Roth IRA because you figured that the income limits governing them were too strict, don't give up. With a little effort, having your own Roth could be just a few steps away.

  40. cdel360

    Any trade ideas on CMG and/or GOOG for tomorrow?

  41. CaFords

    Another fun trick with Roth's for high income earners. Non-deductable IRA contributions are not taxable when converted to a Roth.

  42. phil

    Nat gas/Angel – Yep terrible but great to bet on trend normalization when they're done.  

    AAPL/QC – I mentioned that above but I'd rather play the Feb $600/650 for $28.70 because, essentially, you're giving up $8.70 to have a $50 better position and you still make 74% if it works out.  If you want to get the $8 back, you can either sell the $510 puts for $8.50 or the $780 calls for $8.70 or 1/2 of each so you have either side covered.  

    CMG/Cdel – They never came back enough to get interesting.  I doubt they go down further – people have already dealt with the shock that they aren't as great as they thought.  I think I'd play them with the 2014 $460 calls at $5.30 because the $510s (a $50 drop) are $2.50 and the $410s ($50 rise) are $12 so risk $2.50 to make $6.70 and that's a nice way, if it works, to establish the bottom of a bull call spread that you can then sell calls against.  

    GOOG/Cdel – They've settled into 15% growth and I wouldn't expect any surprises.  They are priced for more like 10% growth so a good play in general but last earnings were a non-event (7/23) with a $20 pop but, a month later they were up another 10% so I'd go with the 2014 $700/800 bull call spread at $48.50 and sell the Oct $775s for $10.20 and, hopefully those will lose their premium without doing too much damage and then we can sell Nov $795s for $10 and it's not hard to see how fast we knock down the long price and make a free spread out of it.  

  43. stocksandbondage

    Regarding Roth IRA, you can make a non-deductible IRA contribution and then immediately convert it to a Roth without having to pay taxes, unless you have pretax money in other IRAs, SIMPLEs, or SEPs in which case you will have to pay taxes on a portion of the converted non- deductible contribution.  Consult your tax advisor before doing so.  

  44. scottmi

    ROTHs – i converted an IRA to a ROTH years ago.. and regret it. paid lots of taxes up front (so that money is gone) and very possible that in the future (before i get to start withdrawing from my Roth IRA) we have a switch to a VAT (from an income tax to more of a consuption tax system) so then they get me at the other end too. unless you are near to starting withdrawls, it seems to me to put off taxes paid for as long as possible to minimize chance you'll get taxed again.

  45. qcmike

    Phil
    Thanks for the AAPL trade
    AAPL Are you still recommending selling Jan 14 400. Puts for extra income? Or wait on this trade.
     
    Thank you for the help

  46. stjeanluc

    Finally home…

  47. scottmi

    Whoa! someone unleashed some new sell programs.

  48. phil

    AAPL/QC – Sure, as long as you REALLY want to own AAPL for net $361, I like selling the 2015 $400 puts for $39.

    Welcome home StJ!

    Speaking of AAPL – Let's buy back the 4 remaining Oct $645 calls at $5 in the $25KP and that will leave us with just the 4 sold $650s, now $2.95.   We'll cover more into the close but, hopefully, we close up from here.   

  49. stjeanluc

    That portfolio is also coming back home!

    Let me know if I missed anything – my head is still between Seattle/Minneapolis and Detroit!

  50. stjeanluc

    I'll update the cost basis for AAPL and AMZN tomorrow morning.

  51. stjeanluc

    Obviously the AAPL position is now out of date – thanks Phil! Just wait until I get off the plane and start updating the portfolio to make a trade!

  52. stjeanluc

  53. phil

    11:00 AM On the hour: Dow -0.04%. 10-yr -0.38%. Euro +0.51% vs. dollar. Crude -0.18% to $92.38. Gold +0.17% to $1749.35.

    12:00 PM On the hour: Dow -0.07%. 10-yr -0.4%. Euro +0.58% vs. dollar. Crude -0.19% to $92.36. Gold +0.34% to $1752.25.

    1:00 PM On the hour: Dow -0.08%. 10-yr -0.42%. Euro +0.50% vs. dollar. Crude -0.17% to $92.39. Gold +0.33% to $1752.15.

    2:00 PM On the hour: Dow -0.22%. 10-yr -0.44%. Euro +0.53% vs. dollar. Crude -0.18% to $92.38. Gold +0.32% to $1751.95.

    U.S. Economic Confidence Best Since May (Gallup)

    Just how big is this conspiracy? (Economist)

    The average holiday shopper will spend $749.51 on gifts and seasonal items, a modest 1.2% increase from last year's mark, according to a survey released by the National Retail Federation. The percentage of shoppers indicating they would shop online rose 5.1 percentage points to 51.8%. 

    The surge in housing starts is real, but it doesn’t mean boom times are here for the sector or the broader economy. “Housing has a self-correcting mechanism… population growth," IHS Global Insight says. “The sector is much less important than it used to be," High Frequency Economics says, pointing out that new home construction accounts for 0.9% of GDP now vs. a peak of 3.9% in 2005.

    Despite Its Problems, Dodd-Frank Is Better Than the Alternatives (DealBook)

    Knight Capital (KCG -0.4%) gyrated early but has settled near breakeven after posting a Q3 loss. The “Aug. 1, 2012 technology issue” – the software glitch that caused dozens of stocks to fluctuate wildly – turned out to cost $461M vs. previously reported $440M. KCG has essentially ceded control over its operations to an investor group, but CEO Tom Joyce tried to reassure that clients have not fled.

    Although Sudan and South Sudan partially resolved a dispute that has shut down almost all oil production in the area, oil traders tell FT any sense of relief should be tempered by the likelihood the prolonged shutdown of so many oil fields has dealt them permanent damage. Lower output would force China, the biggest buyer of Sudanese oil, to ramp up its hunt for energy in other parts of the world.

    First Solar (FSLR +3.8%) adds to yesterday's gains on news it has won a contract to build a 13MW solar plant for the Dubai Electric and Water Authority. The project is set to be finished by Oct. '13, and could pave the way for future deals: Dubai has begun work on a solar park it hopes will eventually produce 1GW of electricity.

    Monsanto (MON -1.6%suspends soybean royalty collections in Brazil while it appeals a state court ruling on intellectual property rights siding with a group of growers that a patent on first-generation Roundup Ready soybeans had expired. MON expects appellate courts to decide whether collections can resume over the next several weeks, prior to the start of an actual trial.

    Shares of Dean Foods (DF +13.2%) spike higher after the company files (8-K) preliminary results for its WhiteWave-Alpro segment, poised for an IPO. In the latest quarter, the unit saw revenue jump 13% to $598M.

    More on Dean Foods' (DF +13.4%) WhiteWave-Alpro IPO: The company says its expects the 20M shares of WhiteWave-Alpro to price in a range of $14 to $16. The seller of dairy products will list on the NYSE under the symbol WWAV. (8-K)

    Green Mountain Coffee Roasters (GMCR +8.6%) rallies after an executive hiring suggests international growth is on the company's plate. Though it acknowledges that it's looking at opportunities outside of North America, Green Mountain has been cryptic over where the focus may be.

    Coffee wars: While Green Mountain Coffee Roasters (GMCR +1.2%) maintains a healthy market share advantage in the U.S. at the moment and Nestle (NSRGY.PK) is a force to be reckoned with in Europe, the battle for China is wide open. Though the consumption rate in the tea-drinking nation is still low, the prospect for lush growth is too enticing for Starbucks (SBUX +0.1%), Nestle, and new entrant Mondelez International (MDLZ) to ignore. The big question still to be answered is if Chinese consumers will skip drinking filtered coffee to jump right into the single-serve and store-bought varieties.

    Sonic (SONC +7.8%) rallies off of its Q3 results and rosy guidance for FY13. The company expects restaurant-level margins to improve between 50 bps and 100 bps while it holds its costs in line. Growth in terms of adding stores has been tempered at Sonic as it adopts a more "multilayered" approach to its model including increasing royalty and franchising revenue opportunities.

    According to a recent study, it appears that taking a multivitamin daily could reduce the risk of cancer. A large clinical trial of nearly 15K older male physicians followed for more than a decade found that those taking a daily multivitamin experienced 8% fewer cancers than the subjects taking dummy pills. Researchers say that it's a statistically significant reduction, and the findings will be presented today at an American Association for Cancer Research conference. Vitamin Shoppe (VSI +1%) and GNC Holdings (GNC +0.3%) both move higher on the report.

    Discounters take a beating with chatter picking up steam tipping off that companies in the sector are talking down holiday sales at an industry event and hedge funds are beginning to increase the pace they trim holdings of sector names. Dollar General (DG -3.9%) leads the charge lower, with Family Dollar (FDO -3.1%) and Dollar Tree (DLTR -1%) also showing weakness. 

    Intel (INTC -2.7%) remains lower following its Q3 report, which was accompanied by soft guidance and cautious earnings callremarks (III) about demand and inventories. Dell (DELL -1.6%) and Nvidia (NVDA -1.7%) are off, but most other PC industry names are near breakeven. There's plenty of downbeat sell-side commentary: Goldman predicts margins will fall further in 1H13, and Nomura thinks Intel's declining cash balance (now at $3.4B) will limit stock buybacks. Bulls are predicting Windows 8, for which expectations have fallen considerably, will provide a lift.

    Several LED industry stocks jump in response to Cree's (CREE +12.3%FQ1 results and FQ2 guidance: winners include Rubicon (RBCN +3.4%), SemiLEDs (LEDS +7.2%), Aixtron (AIXG+3.4%), and GT Advanced (GTAT +2%). Investors might also be taking heart in Cree's earnings call remarks about short lead times, in-line LED price declines, and strong LED lighting demand – the industry has been hammered by intense price declines in recent years.

    Alcatel-Lucent (ALU +8.1%) is up sharply today. Possibly helping its cause is a deal to supply 3K base stations for China Mobile's (CHL) TD-LTE 4G trials. Though Alcatel is just one of 7 suppliers for the trial – Ericsson and Nokia Siemens are among the others – Alcatel claims it will provide "the largest share of base stations." China Mobile's commercial 4G rollout, whose timetable depends on regulators, is guaranteed to be huge.

    Expectations for Nokia (NOK +2.1%) are very low heading into tomorrow morning's Q3 report, as Symbian sales crumble and Lumia remains a wait-and-see game ahead of November Windows Phone 8 launches. Cowen (Underperform) predicts Nokia will guide for only a "modest Q/Q increase" in Lumia shipments and ASPs. But just as Research In Motion beat depressed estimates thanks to strong low-end emerging markets sales, Nokia's Asha feature phone line could prove a saving grace.

  54. phil

    A pledge by?!?  A pledge by retailers Target and Best Buy to match online prices on select products doesn't pose a serious threat to Amazon (AMZN +1.8%), according to Piper Jaffray's Gene Munster. The analyst says customers may be initially impressed with the offer, but in the end it won't alter the online landscape considerably as they quickly see it doesn't apply to all products or is difficult to effectuate. (Previous on matching prices: TGTBBY)

    Walt Mossberg's review of Windows 8 (MSFT) is fairly positive, but also features some qualifiers. Microsoft's new tablet-centric interface (formerly called Metro) "worked very well, very smoothly and holds its own with iPad and Android," says Mossberg, but he adds (echoing the concerns of others) it "risks confusing traditional PC users, who will be jumping back and forth between two ways of doing things." He's also a fan of Win. 8's multi-touch gestures and Charms control strip. (more)

    More on Windows 8: 1) A recent Forrester survey adds to fears of poor enterprise adoption. Only 1/3 of respondents said they expect/plan to use Windows 8, compared with 2/3 who said the same about Windows 7 in '09. 2) Shipping times for the $499 Windows RT Microsoft Surface model have risen – Microsoft reportedly ordered3M-5M Surface units for Q4. 3) Windows RT and its pre-installed appsconsume 12GB of storage (12x more than iOS).

    "The iPhone 5 is the most difficult device that Foxconn (HNHAF.PK) has ever assembled … It takes time to learn how to make this new device," says an official for the contract manufacturer, providing color on the manufacturing issues that have contributed to early iPhone 5 (AAPLsupply shortages, and apparently caused labor disruptions as well. The comments come as Apple reportedly increases calendar Q4 iPhone 5 build orders.

    Science Debate 2012: Grading Obama and Romney on Science (Scientific American)

    Top American Science Questions: 2012 (Science Debate)

    Three lunchtime reads:

    1) "New normal" or old always?

    2) Is gold an inflation hedge or something more?

    3) Fed’s Dudley and Plosser spar over unwinding risks

  55. rdn4evr

    RUT holding on to 838 by it's fingernails

  56. stjeanluc

    Good stuff from the Economist about Jack Welch conspiracy Phil:

     

    INDUSTRIAL production rose 0.4% in September, a better-than-expected figure after a weak August report. That followed a 1.1% rise in retail sales in September that was announced yesterday; a rise in consumer confidence; the fastest rate of car sales since 2008; and the strongest level of existing home sales since 2010.

    So just how big is this conspiracy to fiddle the numbers that Jack Welch referred towhen the non-farm payrolls came out? It must involve all the nation's realtors, car salesmen, most consumers etc etc.

  57. phil

    LOL StJ – I like how AMZN changes so fast that you have a different price between the two portfolios.

    DIA/$25KP  - I'm not imagining a situation in which we won't roll so let's roll the $135 puts we own, now .50, to the Nov $133 puts at $1.25 for .75 so we keep .35 of what we collected and drop our net basis to .30 on the long puts against the short puts.  If this works out, we'll have some nice protection over the weekend. 

  58. Inkarri19

    StJ – I say all it takes is one Fed Chairman and his finger on the print button.

  59. stjeanluc

    And 2 shooters on the grassy knoll lnk!

  60. phil

    Conspiracy/StJ – I saw that one.  Poor Welch, now he's made himself into a total joke.  Nice legacy.  

    TBills/Kustomz – Has to happen sooner or later, current rates are simply ridiculous.  

    Dow may turn green!  Volume decent – 78M at 2:38 is about 20% above pace.  

  61. 2can

     Phil / TLT is at 120.60  .  bottom ot it's channel.   Any trade there?

  62. phil

    ISRG/$25KP – The $500 puts dropped to .30 so we're done.  Looks like $9 on the spread and that's fine – just short of our $2K goal so we're done with that trade and freeing up cash and margin for the next one.  

  63. zeroxzero

    Panic & Confusion:  WFR jumps almost 5% today, thought it was a "Phil Pick", and no mention on the board!!  Buy, sell or hold, dearies?

  64. Savi

    Good Afternoon—still traveling —sorry I have not responded individually to all who have sent me the money for the dinner--will do so when I get back—thank you
    but——of the 35 who responded initially I have only 18 payments and if this the case we may not have to go thru all these elaborate menu choices etc but could just reserve two tables and order what we please—  if you initially responded yes and now have changed your mind about the dinner please let me know asap and I will change the count
    Thanks

  65. Savi

    Figures I missed all the great calls by Phil

  66. zeroxzero

    WFR [cont.] – This is what I've found so far — perhaps fully assembled panels are next: http://online.wsj.com/article/SB10000872396390443294904578049230885307170.html?mod=WSJ_qtnews_wsjlatest

  67. phil

    TLT/2Can – Check out the rate of the drop on a daily chart – looks a little more like early Sept, where they bottomed out at $117.80 than the first week of Oct, where they turned at $120.92.  Since we're already below that at $120.70 and since there are no long bond auctions next week – I'd say wait and see how low we go but yes, I will like an upside play once we're comfortable with a bottom although, on the whole, I'm long-term bearish so I prefer to short them at the top of the ranges than bet on lower rates when we fall.  

    WFR/ZZ – The only thing left on them is long-term plays.  I like them as a long-term hold but we dumped out of shorter-term positions when they tested $3.25, which was a double off the bottom, where we were last excited about buying ($1.60). 

    Don't worry Savi – I'm sure we'll find something to trade tomorrow…

    Will Mr Stick make it 2 in a row?  

  68. Dennis

    Phil, your timing on AAPL is amazing.  What is it you saw that led you to make that call to buy back the covers?

  69. wappler

    Phil/GOOG,
    The GOOG Oct 775 puts that you are recommending above are nowhere close to 10.20 (29.70 at the moment) – did you mean the 735 puts?  They are selling for 10.45…

  70. phil

    AAPL/Dennis – Well going back to yesterday we had some consolidation at $644 in the morning before we broke up sharply so, logically, there's probably a buyer there so really just playing a hunch that it was still the right spot but, had I been certain, I would have taken off the $650s too.  I figure 4 of them will be easy to roll tomorrow if we have to though and I didn't want to give up all our protection in case I was wrong.  Also, as I mentioned in the morning, Nas 3,100 was critical and they held 3,097 and looked like they would break back over so I thought it was worth the gamble.  After all, we could always cover lower if we're wrong.

    Speaking of AAPL/$25KP – Let's hold off until tomorrow on additional covers.  So we just have the 4 short $650s, now $3.50 and they should drop pretty fast tomorrow.

    GOOG/Wappler – Well I guess they aren't but the CALLS are still $10.15 and, since I was in no way, shape or form referring to puts – that makes more sense, doesn't it?

  71. yodi

    wappler
    GOOG even the 730 will hit you with a 16500$ margin TOS From the other side 10% in 2 days

  72. yodi

    wappler
    GOOG Sorry my platform is always set up for two so they are 2 puts

  73. 8800

    Phil,
    Realizing the standard mREITs are suffering b/c of the FEd's MBS program, what about CMO which is in a subsector -variable rate mtg. Their stk has gotten trounced along with gdn var mREITs but perhaps with less justification. Your thgts please.

  74. scottmi

    ZLCS/pharm – news and analysts are just negative negative negative. but it goes up a touch today.. is there some new news?

  75. Pharmboy

    VRTX – buying a few Nov 55 Cs…..in addition to the 62.5s from the calendar spread….

  76. Pharmboy

    ZLCS/scott – no. Nada.  Just sit back, and take the 50 odd cents for pocket change in a jar and forget about them.  IF their channel inhibitors do anything for pain…and they should….things will be just pretty.

  77. rainman

    Why did SVU just pop?

  78. angelcur

      look at msb in aapl…5 points up in a few minutes on huge block buys on no news …daytraders dont bite…heads right back down..that is not natural and is designed to create self-fulfilling rally
     its manipulation and is happening all over the place every day…nobody cares

  79. Pharmboy

    Wecome to the World Angel….

  80. Inkarri19

    Nice pop on SVU and HOV today.

  81. phil

    XLF $16.31 – getting close to goal.  

    Dollar 79.07 – going nowhere.  

    IBM still down $10 – an 80-point handicap on the Dow while AAPL drags on the Nas – other indexes up 0.5 to 0.75.

    AXP should be good tonight, that should help and EBAY has been good lately too.   SLM is a wild-card but not much expected there so I don't see anything likely to tank the market in earnings this evening.   Tomorrow is another big one with BX, CY, DO, FCS, FITB, HBAN, MS, NOK, NUE, PENN, PM, SNA, LUV, SVU, UNP, USG and VZ as the highlights.  

    Tomorrow night it's Google time along with COF, AMD, CMG, ETFC, MSFT and SNDK – plenty of good information there.  

    For GOOG, I'm probably going to like a spread with the next weeklies in the morning if someone reminds me.  

    Failed stick – not so good.  Still, holding yesterday's gains after IBM and INTC is very impressive.  

    CMO/8800 – I would agree that they've been unduly punished and they took a big volume bounce at $12 so someone else agrees.  Options don't go far out but you can sell the May $12.50 puts for $1.15 for a net $11.35 entry but, because of the huge dividend ($1.44) the calls aren't even worth selling.  

    SVU/Rain – Earnings rumors I suppose.  There was an article yesterday that mentioned $5-8 upside.  

    What a fun day that was.  Unfortunately, AAPL fell back to $644 but that's the magic line.  

    AAPL/Angel – I think someone really wants it at $644 but not enough buyers to sustain it as it gets to $650.   On the whole, we're consolidating under $650 and next stop is $670 hopefully. 

    HOV/Ink – I miss my $2 HOV – was such an easy pick down there.   8(  

  82. kinkistyle

    SVU earnings are tomorrow morning.  Somebody probably knows something.

  83. txchili

    NLY – I could not sell the Jan '15 $13 Cs for enough to keep them from being called away on the dividend date. Asked 3.10 and 3.05 just to see and none would sell. I'm holding the stock now. If it goes up, then I can sell them. Otherwise, I will sell front months at .33 which is 2%.
    Do you have any other suggestions for selling the calls?

  84. Inkarri19

    HOV was a great call Phil…thanks!

  85. shadowfax

    After the bell selling and big numbers.

  86. wappler

    Phil/GOOG,
    LOL, I need to work on my reading skills!

  87. Burrben

    Good video from Scott discussing some of the financial names and drillers.  
    http://www.t3live.com/articles/market-analysis/3571-impressive-rally-enters-day-3-.html
    PS: Not a plug, I like watching videos at EOD rather than reading.  

  88. zeroxzero

     AAPL comment / Phone damage:  There's at least one video circulating the internet claiming that 30% of iPhone users are carrying damaged phones.  I wouldn't know.  I can say that my Samsung Galaxy Note was 1/ dropped off a kitchen counter onto hard tile last week [my son], slid out of the driver's seat of my jacked-up 4X onto concrete a day later  [my fault] and crash landed off a desk yesterday.  Not a scratch, not a hiccup.  I'm amazed, frankly — just the kitchen face plant should have been enough to total it, I would've thought.  I'm long AAPL, but I wonder whether this crash damage issue might not go viral.

  89. phil

    NLY/Tx – Good call, no point in selling at break-even.  Even the $15s are just $1.30 (.30 premium) which is BS.  Of course the long calls expect the stock to drop each ex-dividend date – keep that in mind.  

    You're welcome Ink.  Really it was like SVU, we liked them at $2, they went to $1 and we liked them more and now they are $4.  

    Recap/Burr – I just don't process information through video – it's so slow.  In 19 mins I can read the NYTimes on my IPad – can't make that trade-off.  

    Damage/ZZ – I know a lot of people keep using them when they break the screen – is that what they're talking about?  

    Meanwhile SLM beat low expectations, EBay beat by a penny but people are disappointed and AXP in-line and not thrilling people.  SCSS, interestingly has a nice beat and jumps up.  

  90. phil

    At the close: Dow +0.03% to 13556. S&P +0.49% to 1462. Nasdaq +0.1% to 3104.

    Treasurys: 30-year -0.95%. 10-yr -0.54%. 5-yr -0.28%.

    Commodities: Crude -0.1% to $92.44. Gold +0.21% to $1750.05.

    Currencies: Euro +0.52% vs. dollar. Yen +0.11%. Pound -0.21%.

    Market recap: Stocks inched higher, boosted by a strong housing report, but techs were weighed by disappointing quarters from IBM and Intel. Support came from Europe, where Moody’s held Spain’s bond rating above junk grade. Investors dumped Treasurys, sending 10-year yields up to 1.81%, near their highest levels since May.  NYSE advancing issues topped decliners five to three.

    With Spain holding onto its investment-grade rating, Treasury prices have sunk and yields are up by the most in a month: the 30-year yield +0.06 to 2.98%; 10-year +0.08 to 1.81%; five-year +0.08 to 0.77%. Of course, all that comfort with risk is contingent onformalizing Spain's request for a bailout, and the ECB's willingness to buy its debt.

    Financials (XLF +1.2%) lead today's sectors and extend their lead as 2012's top performer, now up 25% YTD and 33% over the past 12 months. While investors struggle to gain clarity on BofA's(BAC -0.1%) prospects, M&T Bank (MTB +5.6%) and BNY Mellon(BK +5.2%) rank among the day’s big gainers after both reported strong quarters. C +3%GS +1%JPM +1.2%.

    More on American Express' (AXPQ3 results: Operating profits in most business units fell Y/Y; income from U.S. card services slid 5%. U.S. cardmember spending rose 8% vs. a 7% Q2 gain, "slower growth than we were generating earlier in the year, a trend that we are seeing among major card issuers," CEO Ken Chenault says. AXP -0.6% AH.

    Everything to do with homebuilding moves up today onSeptember's housing data surge: Hovanian (HOV +9.5%), KB Home (KBH +8.3%), Toll Bros. (TOL +2.5%), Ryland (RYL +4.4%), Standard Pacific (SPF +3.8%) and Meritage Homes (MTH +3.4%) all trade higher, as well as makers of fixtures like faucets and cabinets: Masco (MAS +1.4%), Fortune Brands Home & Security (FBHS +3%) and American Woodmark (AMWD +3%).

    In its latest fleet status report, Transocean (RIG) says its backlog via new contracts or extensions is ~$8.1B, including $7.6B associated with the four newbuild ultra-deepwater drillships announced Sept. 28. The Sedco Express rig was awarded a 20-month contract for work offshore Nigeria at a dayrate of $600K ($360M contract backlog); the prior dayrate was $500K.

    The price paid by Exxon (XOM +0.9%) to acquire Celtic Exploration gives an indication of how North American gas asset valuations have fallen in recent years. Tudor Pickering analysts say the ~$4,800/acre price was below recent sales of $8K-$15K. Shell paid ~$13K/acre for Duvernay’s land in 2008, and PetroChina bought Encana assets for ~$8.5K/acre in 2011.

    AK Steel (AKS +4.2%) announces it is increasing spot market base prices for all carbon flat-rolled steel products by $40/ton, effective immediately with new orders.

    Copper prices could trade lower next year in an uncertain economic outlook, but the consensus among metals traders and mining execs is that the move is more likely to be a grind than a collapse as supplies remain tight. Even though production is rising, inventories remain low and the mining industry is expected to again fall short of its promised production.

    McDonald's (MCD -0.5%) Q3 report, slated to be released before the market opens on Friday, could provide the tipping point that tells investors if the restaurant chain is or isn't entering a period of slower growth. While its heavy reliance on Europe (40% of sales) and recent slump in Japan are two ongoing headwinds, the company's growth trajectory in the U.S. is also on watch with Panera and Chipotle still trendy and Burger King stepping up its game. (EPS estimates: Street consensus $1.48, Estimize $1.47)

    Twenty two analysts have stepped to the plate to take a crack at Mondelez International (MDLZ +0.9%) in the scant two weeks since the stock spun off from Kraft with the vibe on the Street decidedly bullish. A total of 17 Buy/Overweight ratings are in the books along with five Hold ratings, while zip come in at Sell/Underweight. The thesis on the stock is pretty simple. If an investor firmly believe brands such as Oreo, Cadbury, Ritz, and Chips Ahoy can be localized and sold throughout the world, then the sky is the limit.

    Shares of Deckers Outdoor (DECK +6.3%) race higher withchatter circulating around that OTR Global sees sales in China improving. Squeezed on margins, the company needs demand to hold up so that it can avoid having to cut prices to clear Ugg boots from inventory. (DECK chart of the day: revenue vs. inventory)

    The FDA has approved a new use for Eli Lilly's (LLY) lung cancer treatment Alimta, now saying that patients may receive the drug as a maintenance therapy following first-line treatment. The FDA cites Phase III data, the first of its kind, that demonstrates better overall survival advantages with continued maintenance. Shares +1%AH.

    More on eBay's Q3: Q4 guidance is for revenue of $3.85B-$4B and EPS of $0.66-$0.69 vs. a consensus of $3.94B and $0.68. PayPal accounts +4% Q/Q and +14% Y/Y to 117.4M. PayPal revenue +23% Y/Y (was 26% in Q2), transaction volume +20% to $35.2B. Marketplaces revenue +9% (even with Q2), active users +10% and sold items +19% (boosted by mobile). GSI Commerce +12%. $47M worth of shares repurchased, down from $355M in Q2. CC at 5PM ET (webcast). EBAY -1% AH, shares are up strongly since Q2 report. (PR)

    Facebook (FB +2.3%) is closing higher after Wedge Partners argues the company's closely-watched mobile ad business is "near a positive inflection [point]." Facebook has been scrambling to roll out new mobile ad formats as PC usage slips in the U.S. and other markets thanks in large part to growing mobile use - mobile Sponsored Stories has been the company's biggest success on this front. Today, Facebook officially launched its mobile app download ad product. (also) 

    More on Facebook: Following its IPO, Facebook is reportedly having a much tougher time competing in Silicon Valley's talent wars. Says a board member of another tech company: "There are a whole set of companies … that people believe are going to be better places to earn money." Facebook, which was quite successfulat poaching top talent from tech giants before its IPO, has seen a string of executive defections in recent months. 

    Apple (AAPL) roundup: 1) In what appears to be an "acqui-hire," Apple has bought Particle, a Web app/marketing consulting startup. Particle has has done iAd-related work. 2) Going into Apple's Oct. 25 FQ4 report, the consensus for iPhone sales is around 26M-27M. 3) Janney now thinks Apple will sell 25.5M iPads in FQ1, including 6M iPad Minis. 4) Apple has received a patent for a wireless technology that appears to be an alternative to NFC, and multiple patents for improving camera image quality.

    Apple $1000: Why it’s time to buy (Bullish Cross)

  91. phil

    5 Investment Lessons from George Carlin:

     

    “People who see life as anything more than pure entertainment are missing the point.” ~ George Carlin

    Lesson #1: If you take everything you read as serious-minded information, well, the joke may be on you.

    Humor is an effective tool for reflecting upon our own folly; entertainment provides greater access to truth than seriousness because it disarms the audience and allows for truth to present itself in a more subtle way. When we laugh, we often laugh at ourselves:  The words humor, humble, and human all have the same root meaning.

    In different words, the ego is often removed when information is received as entertainment.  For example, reading about how some brilliant money manager outperformed the S&P 500 Index can be boring and thus fail to be instructive.  But an article about how a monkey can “pick stocks” better than a money manager is funny and we remain engaged.  Therefore it can be illustrative and illuminating.

    “Death is caused by swallowing small amounts of saliva over a long period of time.” ~ George Carlin

    Lesson #2: Don’t confuse causation with correlation (and don’t be too quick to attach meanings to patterns).

    Pattern recognition is too easy and therefore susceptible to error; attaching the correct meanings to them is the real challenge.  The most useful meanings (and profitable decisions) are often found in the failures of patterns. For example, if the collective trader herd expects a particular price movement based upon a pattern-detected support level or resistance level, and the price moves beyond that level, many traders are forced out of their positions, which often provides fuel for prices to move in the new, unexpected, more profitable direction.  However, if you see the failed pattern as a temporary fluke, the opportunity for greater returns is missed.

    “Think of how stupid the average person is, and realize half of them are stupider than that.” ~ George Carlin

    Lesson #3:  Never underestimate the irrationality of the investor herd.

    OK math people, Carlin should have used “median” instead of “average” but you get the point, which is to never underestimate the prevalence and resilience of stupidity.   This extends upon Lesson #2: It is easy to recognize the folly of crowds but it is difficult (and dangerous) to predict its depth and duration.

    Why did so many investors buy the Facebook IPO?  How can “Here Comes Honey Boo Boo” average more than 2 million television viewers per episode? There is fundamentally little difference between the attraction to the next hot stock idea and the attraction to watching humans behaving badly.

    “Some people see the glass half full. Others see it half empty. I see a glass that’s twice as big as it needs to be.” ~ George Carlin

    Lesson #4: Framing an investment strategy based upon either/or scenarios is not always prudent.

    This is a wonderful lesson in perspective.  It is important for a trader to remove him or herself from the dichotomy of bull or bear, right or wrong, which is often amplified by media noise.  For example, in hindsight, it is clear that it was not wise to either completely go with the “Sell in May and Go Away” seasonality or to completely goagainst it.  Instead, it was something in the middle that fortunate traders found to be most successful.

    The S&P 500 Index fell 9% from May 1 to June 1 and it rose 13% from June 1 to October 1, 2012.  Therefore the most successful trades this past summer were framed by neither the glass-half-full nor the glass-half-empty perspective; it would have been outside of the either/or box, which is often the case.

    “What if there were no hypothetical questions?” ~ George Carlin

    Lesson #5: Are hypothetical questions harmful, helpful or neither one?

    Financial news headlines, such as “Will the Halloween Indicator Work This Year?” and “Should You Buy Apple Now?” are hypothetical questions disguised as useful information; they may be of practical use but only if you are able to transform the abstract ideas into concrete decisions.

    Cleverly using a hypothetical question to determine the usefulness of hypothetical questions is not only humorous but it is reflective.  Do the “What if” articles commonly found in financial columns help you or do they cloud your mind with doubt about the future?

    Here’s another hypothetical question to ponder:  What if an ‘Anti-Columnist’ won this MarketWatch contest?  To close, dear reader, I hope you have enjoyed ‘the funny truth’ and I appreciate your support for enabling your humble author to endure to this stage of the competition.

    Now please go back to doing something more important…

  92. bdonnelly713

    Pharm – thanks for your chart comments. I always find it interesting to see what other folks use. I like weekly charts with the Elder impulse system and MACD. 
    Phil/All – anyone know why Nas/SPX futures are flat but it shores Russell 2000 futures up 1%? 
     
    Cheers,
    Brian

  93. jelutuck

    Pharmboy, apologize if you have recently answered this. Which large pharmas would you recommend now for an income portfolio selling puts to begin to establish a.few positions? TIA

  94. stjeanluc

    On a technical level, some things stick out – look at the bounce off the 50 DMA for Dow, S&P and to a certain extent the NYSE. The RUT punched through that line yesterday and now through the 5% line. NASDAQ is really the laggard now and will have to move up tomorrow or we will risk creating a resistance line at the 50 DMA. 

    Dow, NYSE and S&P are within distance of the highs where we had trouble last time. On the Dow, the 13,600 line has really been resistance. 1460 seems also to be a tough nut for the S&P. 

    All these indices seem to be in a descending channel of lower highs and lower lows, the best examples being the NASDAQ and RUT. Not as pronounced for the other ones. Looks like a flag pattern on all but the NASDAQ actually (distorted because of AAPL I am sure). That's a bullish pattern. We'll see.

  95. stjeanluc

    If you are under 55 years old, you should start saving money for insurance premium if Romney is elected:

    http://nymag.com/news/politics/elections-2012/obama-romney-economic-plans-2012-10/

     

    Let’s first imagine that, on January 20, Romney takes the oath of office. Of the many secret post-victory plans floating around in the inner circles of the campaigns, the least secret is Romney’s intention to implement Paul Ryan’s budget. The Ryan budget has come to be almost synonymous with the Republican Party agenda, and Romney has embraced it with only slight variations. It would repeal Obamacare, cut income-tax rates, turn Medicare for people under 55 years old into subsidized private insurance, increase defense spending, and cut domestic spending, with especially large cuts for Medicaid, food stamps, and other programs targeted to the very poor.

    Few voters understand just how rapidly Romney could achieve this, rewriting the American social compact in one swift stroke. Ryan’s plan has never attracted Democratic support, but it is not designed for bipartisanship. Ryan deliberately built it to circumvent a Senate filibuster, stocking the plan with budget legislation that is allowed, under Senate “budget reconciliation” procedures, to pass with a simple majority. Republicans have been planning the mechanics of the vote for many months, and Republican insiders expect Romney to use reconciliation to pass the bill. Republicans would still need to control 50 votes in the Senate (Ryan, as vice-president, would cast the tiebreaking vote), but if Romney wins the presidency, he’ll likely precipitate a partywide tail wind that would extend to the GOP’s Senate slate.

    Once this is done, I don't see a way back to the current system as it would be filibustered every time! I sometimes wonder if these Tea Party congressmen/women think about the time when they or their family will actually need Medicare. And then realize that the voucher system they voted for covers only 50% of the premium (if that) and see how much it costs to get healthcare insurance when you are 65 and have a slew of health issues. Of course, thinking ahead is way overrated nowadays! But I can imagine a lot of buyer's remorse.

  96. sank1

    GOOG Calendar question,
    I bought 2 GOOG $750 Call calendars (Sold 2 Oct $750 Calls and Bought 2 Nov $750 Calls) on Friday last week at a debit of $6.50 per calendar. I looked at the Analyze tab on tos, looking at the far more rapid theta decay on the Oct calls than on the Nov calls, seeing a profit of about $1,000 by end-of-day today on an outlay of $1,300 should GOOG remain at around $750. GOOG was at $745 when I bought the calendar and is at $755 now.
    My calendar position shows a net loss of $140 at end-of-day today (as opposed to the expected $1,000 gain). Delta on both positions is right about .55 or .56 and explains the increase in premium on both the positions. Theta, on the other hand, just doesn't seem to have kicked in at all, especially on the short Oct call.
    I'd appreciate some thoughts on why this may be and provide me some guidance on maybe why I shouldn't be positioning calendars leading up to earnings. Thanks.
    While the Analyze tab in tos isn't necessarily gospel, it has been fairly accurate for me in the past.

  97. sank1

    GOOG vs AAPL Premium pricing question,
    Something that I just noticed as I'm trying to rationalize the Oct $750 Call premium pricing on GOOG in my mind…..
    GOOG $755 Call pricing: this week $20.00 and Nov $25.80….. difference of $5.80 for 28 days
    AAPL $645 Call pricing: this week $4.55 and Nov $24.95….. difference of $20.40 for 28 days
    Is there really such a vast volatility difference between GOOG and AAPL or is this due to GOOG's earnings being tomorrow as opposed to AAPL's earnings being Thursday next week? And if it is the latter, can we expect much better premiums for AAPL next week that we can take advantage of beginning tomorrow when the next week options are open, to improve our 25kp AAPL trade position?

  98. wappler

    sank1/GOOG,
    Regarding your question why your GOOG calendar currently shows a loss:  It is exactly because GOOG's earnings are tomorrow after the bell.  On Friday morning you'll see volatility being crushed and your calendar will catch up, hopefully the way you intended it to!
    The phenomenon you are experiencing is discussed in Jeff Augen's books (e.g., 'The Volatility Edge in Options Trading'). 
    In a nutshell, when a company has earnings shortly before OPEX, the increase in volatility can outweigh the theta decay, leaving the value of your options more or less unchanged.  Augen actually proposes BUYING a straddle a couple weeks before earnings, because it does not significantly lose value and can benefit from any larger move before the event, giving it a very high risk to return ratio.  If there is no significant move, the straddle can be bought back right before earnings announcement.

  99. diamond

    "As the 2012 Election quickly nears, so does the best three consecutive month span for the S&P 500, November through January."

  100. chasw

    Iflan,
    What is your position on the Apple article posted by Phil at 5:50pm ?Apple $1000: Why it's time to buy (Bullish cross)

  101. phil

    Good morning! 

    Futures flat with the Dollar back down to 79.065 after topping out at 79.25.  

    Oil $92.57 with 85,000 contracts remaining so they cleared 30K yesterday and figure they can have 25K left on Monday so they need to knock off 60K more in 3 sessions – that's not so hard….

    Gold still having trouble staying over $1,750, silver $33.16, copper $3.75 on much better China news, nat gas $3.46 and gasoline collapsed to $2.77, finally down enough to affect pump prices. 

    Sliding gasoline prices in some key battleground states come just three weeks before the U.S. presidential elections. Prices have plunged nearly $0.20/gal. in Ohio and more than $0.10 in Wisconsin during the past week; even sky-high California prices have slipped a bit. The drop "is not the result of political maneuvering," Tom Kloza says, "but just the normal rebalancing of inventories and the typical autumn selloff."

    China GDP came in at 7.4%, a big relief even though you can't trust the numbers.  Nikkei up huge, just under 9,000 as they pushed the Yen all the way to 79.26 (up 1%/weaker).

    3:54 AM Asian stocks rise following China's data dump in which GDP growth fell again but other figures showed that the worst may be over. However, EU shares aren't convinced and open flat-to-lower following recent gains and ahead of an EU summit today. Japan +2%, Hong Kong +0.5%, China +1.2%, India +0.6%. Euro Stoxx 50 -0.25%, London flat, Paris -0.2%. Frankfurt flat, Madrid -0.7%, Milan -0.4%.

    Japanese stocks move higher out of the gate, as data-inspired gains for the dollar versus the yen gives a boost to exporters. The Nikkei Average added 0.9% to 8,888. Currency-sensitive exporters mostly rallied: Sony (SNE +2%), Panasonic (PC +2.2%), Renesas Electronics (RNECY.PK +3.6%), Toyota (TM +1.3%), Honda (HMC +2.2%) and Canon (CAJ +1.7%).

    Chinese Q3 GDP falls to an expected +7.4% Y/Y from +7.6% in Q2, marking the seventh consecutive quarter of deceleration; it's also the slowest pace of growth since Q1 2009. On quarter, GDP surprisingly rose to +2.2% from +1.8%, although Nomura economist Zhang Zhiwei is skeptical. "To me it is a little bit puzzling that Q3 quarter-on-quarter improved so much. I wouldn't read too much into it."

    More on Chinese GDP: despite the decline in growth, data for September provides hope that the economy may have bottomed out. Retail sales +14.2% Y/Y vs. August's 13.2% and consensus of +13.2%. Industrial production +9.2% vs. 8.9% and 9%. Fixed-asset investment in urban areas, a measure of construction activity, +20.5% in January-September vs. +20.2% in Jan-Aug and consensus of +20.2%.

    Plans for a European banking union are dealt a blow after the EU Council's top legal adviser says turning the ECB into a single eurozone banking supervisor is illegal, the FT reports. The scheme goes "beyond the powers" permitted under law to alter the bank's governance rules and would need treaty changes. 

    Yields fall as Spain sells €4.6B ($6.03B) of bonds, above the €4.5B upper end of the government's target range. Yields on 10-year bonds drop to 5.46% from 5.67% in a September auction, while the four-year rate declines to 3.98% from 4.6% and three-year costs fall to 3.23% from 3.68%.

    Bad loans at Spanish banks reach a new record high, rising to 10.5% of portfolios in August from 9.9% in July, with the amount increasing by €5.3B to ($7B) to €178B.

    Eurozone governments hope the cost of Spain's bailout will be well below €100B, with the ECB to take up most of the slack through bond buying, the WSJ reports. EU leaders are meeting today and tomorrow, when Spain, the banking union, Greece and Cyprus could be on the agenda. Greece and the Troika are nearing a deal that will allow the release of more funds, although Greeks are holding a 24-hour strike against austerity. 

    Greece faces anti-austerity shutdown as EU meetsGreek workers will walk off the job for the second time in three weeks on Thursday, hoping to show EU leaders meeting in Brussels that a new wave of wage and pension cuts will only worsen the plight of a people worn down by five years of recession. Mired in its worst downturn since World War Two, Greece is preparing 11.5 billion euros of cuts to satisfy the "troika" of the European Commission, European Central Bank and IMF, and secure the next instalment of its 130-billion-euro bailout. "Just once, the government ought to reject the troika's absurd demands," said Yannis Panagopoulos, head of the GSEE private sector union, one of two major unions that represent about 2 million people, or half of Greece's workforce. "Agreeing to catastrophic measures means driving society to despair and the consequences as well as the protests will then be indefinite," he said.

    Europe is flattish in the majors with Italy and Spain giving up 20% of their huge gains of the past few days -still very strong and we're still 1% behind UK and Germany and 2.5% behind France and Italy (+4%) and Spain (+7%) are leaving us all in the dust:

    No reason for us to have a bad day unless we get a negative earnings surprise.  Consumer Comfort at 9:45 should be improving, the Philly Fed at 10 should be improving and that should be confirmed by Leading Economic Indicators at the same time.  10:30 is nat gas inventories and that's when we'll watch for an oil sell-off and, after the close, we get the Money Supply and the Fed Balance Sheet.  

    Then it's Google time!

  102. phil

    6:00 AM Overseas: Japan +2.00%;. Hong Kong +0.48%. China+1.24%. India +0.97%. London +0.12%. Paris -0.09%. Frankfurt+0.28%.

    Big Chart – Nas still stuck in the mud at the 50 dma thanks to AAPL and INTC and RUT picks a funny time to get cautious but at least they're over their 5% line at 840 so it's up to the Nas to make a 46-point move higher to confirm (and GOOG and AAPL can do that for them) and then we're back to Dow 13,600 or bust.  

    In the Futures, 13,500 is the 13,567 line on the index so let's watch that carefully as it obviously needs to break over or it's going to be another disappointing day.  VZ was totally in-line so no pressure on the Dow there.  We're waiting for TRV, who have very high expectations and may disappoint and UNP, NOK, MS, NUE, PM, KEY & DO are big enough to affect some of the Dow components so not much to do but wait for the results.  

    Insurance/StJ – Buyer's remorse is right.  What a total catastrophe that would be.  

    GOOG/Sank – Those Analyze things don't work very well when there are outside considerations like earnings or other events affecting the prices.  Of course, that's why we're able to take advantage of them selling the ridiculous premiums to suckers who rely on calculators to buy option.  The spread you bought is not that good because earnings are tonight and the spread is on the money so, if GOOG pops $50 to $800 tomorrow, you will have to pay your caller $50 and, if you are lucky, your calls will be worth $55 because earnings are gone and your premium will wash out too.  And, of course, it's not likely you have $100,000 sitting around so you're going to have to sell them both at the same time so you can't even take advantage of the momentum.  Since this is a trade where you'll be lucky to make $5, what do you really gain by playing it?  If GOOG drops $50, your calls will be as worthless as the ones you sold and again, a loss.  The best you can hope for is a flat-line where the Oct calls expire worthless and then hope you hold more than $6 in value on your longs so, essentially, you are playing GOOG to be flat – in which case you could have just sold the Oct $725 puts for $7.50 and the $780 calls for $8.50 so you collect $16 and any move GOOG makes under $41 is a win.  You could do that and just roll the losing side and it's probably a better percentage play overall.  

    Unless GOOG has a significant upside surprise (and their biggest all year was 11%), they are only expected to earn $10.65 vs. $9.72 last year and last year Oct earnings were the 11% surprise and it took them from $525 to $670 into Jan, when they missed by 10% and fell right back to $565.  

    So, if you assume they are going to be 10% stronger than the earnings that took them to $670, then we can add $67 and we get $737 and GOOG has already priced this in with a run from $575 in July, where they posted $10.04 in-line earnings – all the way to $774 at the end of Sept and now back to $755.  So, barring any big positives, I don't think GOOG has much chance of going higher and the 200 dma is way down at $633 and the 50 dma is $720 so not much preventing a drop.  I wouldn't short them but it's just a very dangerous-looking play on either side.  

    And what Wappler said. 

  103. phil

    Interesting idea for playing GOOG:

    • You can buy the Nov $790/755 bear put spread for $20 – you risk $20 to get up to $15
    • You can buy the Nov $720/755 bull call spread for $21.60 – you risk $21.60 and get up to $13.40.  

    So now you've paid $41.60 and $755 flat nets you $70 (up 68%) and you do better than even on anything between about $725 and $785 and, of course, with spreads like this, you have a very good chance of retaining 50% of value on the losing side and that would be $52.50 (up 26%).  

    It's the kind of trade you run in a hedge fund, looking to make a quick 10% but should be interesting to watch how it works, maybe we can use it on something else after a few dry runs. 

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