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Thrilling Thursday – The Appleconomy Reports Tonight!

Good golly what a mess!

As you can see from the big chart, it's been 4 days of Hell for the markets, which is why, this weekend we had our "5 Plays that Make 500% if the Market Falls", which followed Friday and Wednesday's TZA hedge (now 100% in the money) and followed-up with Monday's DIA $135-131 bear put spread which is also 100% in the money and up 47% in 3 days already.  

If you want to get fancy, the DIA $135 puts are $5.20, which is more than their max pay-off so it can be turned bullish on a bounce by pulling some or all of the long puts and leaving some of the short puts naked (tight stops, of course).  The same goes for the TZA Jan $12 calls, which are $4.10 and the spread was only $3 max at close and we paid $1.90 so up over 100% if the short puts expire worthless. 

Again, don't think of these as all or nothing moves, you can exercise a lot of control by buying back a few and selling a few more as the market gyrates – just as we work our AAPL position in the $25KPs.  We gave up on AAPL short-term (too risky with earnings) but remain long-term bullish and will buy more if they fall this evening (and BBY and CROX should be good entries as well when they're done falling from poor reports today).  I mentioned our bottom fishing expeditions in yesterday's post and, in yesterday's Member Chat – we drew a bit of a line in the sand as the Transports tested 5,000, which is nicely coinciding with the 200 dmas on the Nasdaq (2,972) and the Russell (805) although we might see Dow 13,000 before we're done – we would hate to see S&P 1,375 and NYSE 7,968, which is still far away.  

SPY 5 MINUTEAs you can see from Dave Fry's SPY Chart, The S&P had a rotten day yesterday as it plowed towards our 2.5% line at 1,400 but look at that MACD line at the bottom – if that's not oversold, I don't know what is.  While we've had some very poor earnings reports this week and we continue to get a lot of negative guidance, the fact is that 69% of the S&P companies that have reported so far have BEATEN earnings estimates (albeit low-bars).  

What's been TERRIBLE is the revenues – 59% of the S&P companies that have reported so far (about 300/500) have missed revenue expectations.  That's why AAPL's number tonight is critical, AAPL is now about 5% of the S&P by size but their earnings are more like 10% of the total so tonight's report by AAPL can make or break the quarter for the group.

In Q4 last year, for example, the S&P showed 0.5% growth in profit margins but, without AAPL's very impressive 30%, overall margins were down 0.22%.  AAPL is, of course 20% of the Nasdaq, which is ridiculous and why we call it the AAPLdaq – and tonight, they will make or break the index at that 200 dma.  

[Chart]We had a nice little rally going this morning but, as usual, the Euro began falling again and fell right through the $1.30 line as the BOJ pushed the Yen back over 80 (now 80.2) buy buying Dollars and that Yentervention is sending the Dollar back over 80 (up 0.3%), which is putting a damper on the indexes despite a pretty good Durable Goods Report (up 9.9% headline, up 2% ex-transports).   

As you can see from the chart – this is a very strong reversal and may indicate that it was last month's 13.2% drop that was the anomaly and we are, in fact, bottoming out in manufacturing.  

This flies in the face of the MSM Doom Squad, who have been saying that fears of the Fiscal Cliff have frozen businesses and consumers in their place.  It's a nice story, but where's the evidence.  All it really is is a bunch of Conservatives with microphones, who are essentially saying "Vote for Romney or we'll shoot this economy."  

Speaking of Conservative idiocy – the US is now producing 10.9Mb of oil per day – that's 28.5% more than was produced under GWB just 4 years ago (8.5Mbd) and, even more significant, just 700,000 barrels a day less than Saudi Arabia.  Gosh, that's not what they tell us on Fox, is it?  In fact, one of the reasons record amounts of oil money are pouring into the Romney campaignas well as GOP candidates around the country ($200M for Romney alone!), aside from the Republican war against renewable energy, is Obama's 5-point plan to crack down on price manipulation in the energy markets, in which he proposes to:

  1. Request Immediate Funding to Put More "Cops on the Beat" Overseeing Oil Markets: The President is calling on Congress to pass an immediate increase in funding to support at least a six-fold increase in the surveillance and enforcement staff for oil futures market trading at the Commodity Futures Trading Commission (CFTC).
  2. Fund Critical Technology Upgrades in the Oversight and Surveillance of Energy Market Activity: The President is also requesting that Congress provide the CFTC funding for critical IT upgrades to strengthen monitoring of energy market activity.
  3. Substantially Increase Civil and Criminal Penalties for Manipulation in Key Energy Markets: The President's proposal includes a ten-fold increase in maximum civil and criminal penalties for manipulative activity in oil futures markets. These heightened penalties will make sure that penalties reflect the seriousness of misconduct.
  4. Empower the CFTC to Raise Margin Requirements in Oil Futures Markets: The President is also calling on Congress to act immediately to give the CFTC authority to direct exchanges to raise margin requirements to address increased price volatility or prevent excessive speculation or manipulation. This authority will help limit disruptions and reduce volatility in oil markets.
  5. Take Immediate Steps to Expand Access to CFTC Data to Better Understand Trading Trends in Oil Markets: These executive actions will allow additional analysis of CFTC's data to look for patterns and better understand trading activity in energy markets.

As you can see from this Bespoke chart on oil inventories, we are continuing to build record surpluses in US petroleum inventories, with an additional 6.7Mb added in this week's Inventory Report alone.   And that's WITH the US EXPORTING a record 1Mbd of petroleum products to other countries.  We simply have much more oil than we need yet the US oil cartel keeps prices artificially high as they desperately try to get their guy elected before the President can take action to reign in this madness.  

The UK surprised this morning with a 1% growth in GDP, but that probably had more to do with the August Olympics than any real turn-around in the economy.  Still, it's making the European indexes happy and, if we can keep the momentum going – we could be on the way to taking out those strong bounce lines (see yesterday's post) after failing at the weak ones yesterday.  

After that, it's all up to AAPL to make or break this market.    


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  1. stjeanluc

    Oil Lines

    R3 – 89.75
    R2 – 88.61
    R1 – 87.22
    PP – 86.08
    S1 – 84.70
    S2 – 83.55
    S3 – 82.16

    Yesterday's high and low – 87.47 / 84.94

  2. scottmi

    AAPL/Phil – Good morning. Looking for an insurance play for about $20k against an apple miss that would whack apple to ~$580 zone.  Say 10% cost so is there a $2000 play to give me $20k cover at AAPL $580?  Short term as in the hit will be tomorrow or else it will be up.   Thinking long puts for either AAPL itself, and/or SQQQ calls.  Staying with AAPL puts for the moment, and as this is specific and AAPL earnings event driven, would you go with something close and cheap like this week or next OTM puts or spend more up front, go longer date like January puts which won't collapse and can be sold back (for a smaller loss) if AAPL does hold up?  where would you look first for this? and naked long? vertical? calendar? thanks!

  3. stjeanluc

    25KP / Phil – We still have a lot of exposure to AMZN in the 2 portfolios with 14 short puts. Do we need to cover in case they miss badly tonight?

  4. 1020

    Good Morning!

  5. rkyroma

    Scottmi / Phil / Moneyflow indicator – How reliable of an indicator do each of you think it is?  I understand that it indicates more urgency in one direction or the other, but the bottom line is that there is always someone on the other end.  I've never been able to fully grasp this concept.  Insights appreciated.

  6. rkyroma

    FB – and based on the moneflow.  Thoughts on selling the Nov. 25 or 26 calls?

  7. rj_jarboe

    The problem I have with this earnings period is that many of the companies reporting that have "beat" earnings have simply beat lowered analyst earnings projections. Most of these companies are reporting lower revenue than the same quarter last year (in many cases lower profits also). The stock price of these companies that "beat" move up somewhat in price to reflect the "beat", but their price is already well above their prices from a year ago when revenues were higher. So, are they a good buy because they "beat" or are they already overpriced? Were they underpriced a year ago? Are we simply saying prices do not matter because intentions are to inflate assets prices regardless of company growth prospects or profits?

  8. Pharmboy

  9. 2can

    Good Morning!

  10. ceegee

    Neverworkagain: On your SPY/SPX put backspread / mattress plays, I have a few questions: Do you adjust the long puts during the 6-9 month period or do you just let them run even if the market moves up? Do you set up one backspread sized to protect your portfolio or do you set up part-sized backspreads every 3 or 6 months or so? Do you set your short front month puts – slightly in or slightly out of the money? You talked briefly about the difficulties of sizing – how do you approach that problem? TIA!

  11. scottmi

    Moneyflow/rkyroma – i like moneyflow itself as a simple measure to review if the action was more bullish or bearish for the day.. just adds to background 'feel'.. is the stock looking weak or is there real support at any particular levels. haven't yet determined if i can find any actionable meaning from block trades.. i don't know if these are corp treasury purchases, geitherner and co mucking around, or brokerage houses wrapping up customer orders all into one big buy to make it look like one thing, while they sell the shit out underneath from their own accounts..   the overall number for the day is, like price, and volume, about the only 'real' data one can put a finger on.

  12. stjeanluc

  13. rainman

    3) Substantially Increase Civil and Criminal Penalties for Manipulation in Key Energy Markets 
     
    Key Energy Markets?  Why not Manipulation in general?  Who's he protecting?  Uncle Ben?  PPT?

  14. stjeanluc

  15. stjeanluc

  16. stjeanluc

  17. stjeanluc

    lflan – We need to take action in the MoMo portfolio ahead of earnings I think. 

  18. button

    Phil,
    Can you help with a position I have in HOV?  I own 10,000 shares with basis of $2.42.  I sold 50 $2.50 Jan 13 calls @ $0.45 and 50 $3.50 Jan 13 Calls @ $0.45. I like HOV and I was wondering the best way to stay in the position.  I have been trying to sell 50 Jan 15 puts @ $1.00 for the past few days with no takers.  What would you suggest?  I am guessing a little patience as this run in HOV has been spectacular and may reverse?

  19. button

    HOV / Phil,
    Sorry those Jan 15 Puts are $3.00.

  20. Phil

    Good morning! 

    Dollar back over 80 – not a good start.  Euro $1.297, Pound strong at $1.613 and Yen weaker at 80.30 and the Nikkei is loving it at 9,125 and might make a good short (/NKD) when the Yen tops out or even tonight as a way to hedge AAPL earnings because they will be slower to react than our indexes so we can play them down and add more if AAPL tanks or buy them back real fast if AAPL has good numbers.  

    We're getting rejected at weak bounces already – not good:

     

    • Dow 13,200 is a weak bounce, 13,300 is a strong bounce (we don't become more bullish until we hold strong bounces through the close).  
    • S&P 1,420 is weak, 1,430 is strong. 
    • Nasdaq 3,030 is weak, 3,060 is strong, 3,000 must hold. 
    • NYSE 8,250 is weak, 8,300 is strong
    • Russell 815 is weak, 820 is strong 

    TZA still a great hedge – Jan $12/16 bull call spread still just $2.20 with TZA at $15.70.   Another good one for tonight is QID Nov $31/32 bull call spread at .26 – makes almost 3x if the Nas falls about 3% so should cover bad news from AAPL so, if you have $20K on AAPL and you want to hedge against a 50% drop, you can put $2.5K into the QID spread and you've got $7,500 of downside protection, but only against a sharp move down, not a dip.  The TZA is better for dip protection as it's already in the money.   Obviously, if we get our AAPL wishes, we try to pull the QIDs for maybe $1,500 to $1,000 and then it's pretty cheap insurance – especially if you're in an AAPL spead that doubles up on a small move up. 

    The VIX is back to 17.50 and TLT is down to $120.50 so no worries so far today but no real enthusiasm to the markets either so far.  

    At the open: Dow +0.55% to 13150. S&P +0.81% to 1420. Nasdaq +0.8% to 3005.

    Treasurys: 30-year -0.61%. 10-yr -0.38%. 5-yr -0.19%.

    Commodities: Crude +0.96% to $86.55. Gold +0.91% to $1717.05.

    Currencies: Euro +0.12% vs. dollar. Yen +0.59%. Pound -0.57%.

    Market preview: European shares and U.S. stock futures are solidly higher as the earnings reports come flooding, with sentiment no doubt boosted by positive comments out of China, animpressive rebound in durable goods and falling jobless claims. The S&P benchmark is +0.5%. PSS World Medical is +32% on news it's being bought by McKesson. From the earnings barrage, Zynga is+14.6% and Unilever is +4.1%Later: Pending Home Sales, Apple and Amazon results

    Initial Jobless Claims: -23K to 369K vs. 372K consensus, 392K prior (revised). Continuing claims -2K to 3.25M.

    North American companies have announced plans to cut 62.6K positions here and abroad since Sept. 1, according to Bloomberg, the fastest 2-month pace since the start of 2010. "Let's be lean and mean until we have a better idea of (2013)," says a fund manager describing firms' attitudes. It's a "gross" figure, yes? What about hirings? [

    September Durable Goods: +9.9% vs. +7% expected, -13.1% prior (revised). Ex-transport +2% vs. +0.9% expected, -2.1%prior (revised)

    The Bloomberg Consumer Comfort Index inches up to -34.6 from -34.8 last week, extending a gain from near -50 in August. It's "not the norm," says Bloomberg, noting no similar trend has occurred in the run-up to any of the 6 presidential elections since the index began. For those with incomes greater than $100K, the index registered positive for the 2nd straight week.

    China's Ministry of Industry & Information Technology gives an upbeat forecast for Q4, saying industrial output should grow faster than in Q3. The ministry points to improving PMI, monthly increases in output growth and a rise in power generation to argue its case. However, the ministry is still well aware of overseas weakness, rising costs, financing strains and falling profit margins.

  21. stjeanluc

    CLF down 10% today. Not unexpected

  22. jabobeast

    BBY—what a POS

  23. qcmike

    Pharmboy
    BMRN   did you roll your NOV. 32 put to 32 Jan 13 ?
     
    Thanks

  24. stjeanluc

    Trying to sort out all the earnings reports tonight and lots of big movers besides AAPL (which actually only moves about 5% on earnings). Here is what I have:

    AMZN – Over 10% on average
    DECK – Over 10% on average
    EXPE – Around 8%
    CSTR – Around 8%

    I'll go over the options and maybe Phil can have some plays for us.

  25. dflam

    Hi Phil; I need your guidance on this first time position of selling short term options against a long term option.My current position on CSCO after  a previous roll and selling Nov. $18 P last month is a net debit of $.36. My current position is:
    Long 10 Jan. 2014 $20 C at $1.89 (now $1.00),short 10 Dec.$19 C at $.82 (now $.26) and ,short 5 Nov $18 P at $.40 (now $1.08).
    I was thinking of rolling the five Dec. $19 P at $1.08 to the July $17 P at $1.70 and the 10 Dec.$19 C at $.26 to the FEb, $18 C at $.82. What do u think? thank you

  26. rustle123

    Ben Stein threw a curveball to the moronic Fox Morning team.
     
    http://www.upworthy.com/win-ben-steins-money-no-need-he-wants-to-pay-more-taxes?c=upw5

  27. stjeanluc

    BBY better have some buyout news soon…. Making a $12K hole in our Income Portfolio now.

  28. neverworkagain

    Ceegee / Mattress:  I do not let my long puts (about 50 SPX points OTM) get to less than 3 months to expiry… at that point I roll them along to the next quarter.  I sell my weekly or front-month covers (putters) slightly OTM, to raise the odds they just expire worthless.  On size, I tweak the combination of the longs and covers so that I get the portfolio payoff profile I want. I use IB's Risk Navigator for my overall portfolio view. So I make sure my portfolio has a positive P&L tail in a crash (-15% and worse).  But that doesn't mean that my overall portfolio can't be delta positive ATM.  Hope that covers your queries.

  29. stjeanluc

    Here are some option figure for the companies reporting tonight that I outlined above:

    AMZN – The weekly 230 straddle currently pays about $19.50. Based on current prices and average move on earnings, we can expect a $23 point move. Looks to me that the options don't compensate for the risk. Estimate for are an $0.08 loss. No whisper estimate there.

    DECK – Doesn't have weekly options, but the Nov 37.5 straddle pays $5.60 or 15% of the current price when we expect a 10% move. So there might be a play there as the options seem a bit overpriced. Since these are Nov options, there is some added time premium though. Whisper expects a beat.

    EXPE – Doesn't have weeklies either. We are in between strikes for the November options. The 50 straddle pays $8.70 and the 55 straddle pay $9.00. That's 16% of the price when we expect only an 8% move. Since these are Nov options, there is some added time premium though. Whisper expects a beat.

    CSTR – Same, no weeklies. The Nov 45 straddle pays over $6.50 or 14% of the current price when we expect an 8% move. Since these are Nov options, there is some added time premium though. The whisper is for a beat.

  30. ceegee

    Neverwork: Thanks for the info – very useful. I like your approach with that strategy.

  31. mampcsA

    Stj, your price for the short AAPL 655 calls in the 25KPM are incorrect. You used the price of the 665 calls by mistake.

  32. rainman

    Anyone have a good site with up to date iron ore pricing charts?

  33. stjeanluc

    AAPL / mampcs – Sorry, you are right!

  34. stjeanluc

    This looks promising:

    http://gizmodo.com/5954813/amazing-new-grid+scale-battery-has-electrodes-that-dont-degrade

     

    Developed by Yi Cui and colleagues at Stanford University in California, the battery's key advantage is its electrodes, which can run for a thousand charge cycles without degrading. Battery electrodes typically degrade over time as ions in a battery cell repeatedly slam into them and are ripped away again.

    By coating the negatively charged cathode in copper hexacyanoferrate and using an anode made of activated carbon and a conductive polymer – compounds that allow electricity-carrying ions to move easily in and out – the team were able to build a prototype battery with electrodes that didn't lose capacity over time.

  35. stjeanluc

    Looks like the European automobile market is not doing so well – Ford (F) talked about losing $1.5B there this year and they have closed 3 factories already.

  36. angelcur

    rumors of US credit rating downgrade by fitch  as everyone gets bulled up on china again…shanghai comp trades like its about to roll over again i would be shocked if that fitch rumor is true
    ahead of election i do think if romney wins…we get downgraded within a few months

  37. stjeanluc

    Felix takes self-serving CEOs to task:

    http://blogs.reuters.com/felix-salmon/2012/10/25/ceos-self-serving-deficit-manifesto/

     

    So when the CEOs talk about “our growing debt”, what they mean is just the debt owed by the Federal government. And when the Federal government borrows money, that doesn’t even come close to making up for the fact that the CEOs themselves are not borrowing money.

    Money is cheaper now than it has been in living memory: the markets are telling corporate America that they are more than willing to fund investments at unbelievably low rates. And yet the CEOs are saying no. That’s a serious threat to the economic well-being of the United States: it’s companies are refusing to invest for the future, even when the markets are begging them to.

    Instead, the CEOs come out and start criticizing the Federal government for stepping in and filling the gap. If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return! [...]

     

    Maybe they should have just asked for a pony for everybody instead: that would be easier. You can’t have lower rates and higher revenues — not without eviscerating pretty much all of the tax deductions which much of the middle class has learned to rely upon. Mortgage-interest tax relief, the charitable deduction, even the deduction for state and local taxes: pretty much all of them would have to go. That wouldn’t just get blocked by Democrats: it would get blocked by Republicans, too. And because most of these tax expenditures go to the middle class, broadly defined, the one group which would see most of the benefits while bearing very little of the costs would be the top 1%: the very CEOs who signed this letter.

    In other words, the letter basically just says “please cut our taxes, raise taxes on everybody else, and cut the benefits they get from Medicare, Medicaid, and Social Security, which are programs we individually don’t rely upon”. It’s gross self-interest masquerading as public statesmanship.

    Idiots…

  38. scottmi

    AAPL/phil – thanks for the QID idea. what are your thoughts re 10 AAPL Nov1(next week)/Jan13 $580 put calendar? offers 18K payout next week if apple bombs. challenge is the trade will cost more like 20% if stock snaps up on good earnings… I haven't worked out yet how i would roll/cover the long puts to recover costs, but expect there are opportunities between now and jan to continue selling against. Should the long put start as a higher strike?

  39. jr_mints

    Last week someone mentioned having a new computer, running four monitors, extremely fast  around $699.  I can't find the post and in need of a new puter.  Anybody remember?

  40. 1020

    stjean/idiots   I second that sentiment…… :)

  41. rkyroma

    BBY / Phil – I am short BBY Nov 16 puts.  Should I roll them now?  DD and roll to $15 ?

  42. 1020

    jr – I remember it was an ASUS – I'd buy that as well…..

  43. occam

    Interesting chart on Amazon by Alexa.com, an Amazon company.  I don't know whether the chart (reach % maxed out to the longest time period) has any correlation to earnings/revenue.  There is a big change in trend last quarter as compared to the prior two.  It will be interesting to see whether this change is reflected in the revenue.  There was no correlation with Ebay.  

  44. shadowfax

    jr_mints
    That would not include 4 monitors or the video drivers but you can find deals like that on Newegg and Tiger Direct on line.
    If you want to run 4 monitor make sure you get 8 to 12 GB RAM in the box. For blazing speed you will need video cards with about a gig buffer each, they can be had for $50 each to run 2 monitors.
    Good luck

  45. williex

    1020
     
    I think idiots would resent being compared to CEO's

  46. Phil

    10x insurance/Scott – Maybe in fantasy-land.  Unless you want to hedge with a short sale of something, you're never going to get that BUT you can sell 1 AAPL 2015 $450 put for $59 ($5,900) and that's $4,500 in margin (but then you're spending the cash too) and you can buy 1,000 SQQQ Nov $44/46 bull call spreads at .45 ($4,500) which pay $20,000 on a 3% drop in the Nas (9% on SQQQ, currently $42) and you still have a $1,400 credit left on the short AAPL $450s.  Note, however, that if AAPL drops $100, your margin on the $450 puts will rise to about the level of the $550 puts, which would net out around $15,000.  If you can ride that out, however, or, if you REALLY want to own 100 shares of AAPL for net $44,800, it's a really great hedge.  

    So, on AMZN in the $25KP, we sold $8,260 worth of short calls and we're down $5,600 but the Jan $205 puts are, of course, all premium for $4,746 of that so, rather than spending $9,114 to buy back the Oct $235 puts, let's roll them to 10 short Jan $200 puts at $5.80 ($5,800) for $3,314 and now we make back $9,790 if AMZN holds $205 and, since we lose $1,700 for each $1 below $200 and we have net $6,476 collected and we lose $3,500 on the $205s to $200 which leaves us about $3,000 so we're essentially even through $198 and we need $8,500 more protection to take us to $193 (down 15%) and we can spend 1/3 of the $6,600 we will gain on a bull move for an additional hedge so let's go with 20 of the QID $29/32 bull call spreads at $1.15 ($2,300) as a cover and those make $3,700 on a fairly small move in the Nas (QID now $30.32) and then we can layer it for a longer-term drop (later – no rush) 

    Money flow/Rkyro – I like to look at it but not the be all/end all.  While there is a buyer on the other end – if there are 100 shares of stock at $10 each at the beginning of the day and they trade 100% of the stock back and forth and, by the end of there day there are 100 shares of stock at $9 each – then $100 (10%) has flowed out from that stock.  The problem is you think of it as a zero sum game, but it's not – when 1 share of AAPL is traded at $1 below the last price – the other 999,999 shares are now priced at $1 lower so they have lost $1Bn in value.  Even though you may match buyers and sellers perfectly at the new price – that $1Bn will not be recovered.  Realistically, though – 100% of the stock is not traded and your net outflow of cash will be whatever fraction of $1Bn x the number of trades.  In AAPL's case, 20M shares trade on an average day so the money flow at -$1 average would be $20M out but then you have to look at the market cap ($600Bn) and realize it's not very meaningful – which is often the case with money flow when you look at the bigger picture.  

    On FB – I would have sold the $25s happily into yesterday's pop but today they may move up with AAPL so I'd rather hope for a re-test and keep my eye on them.  

    Low expectations/RJ – Yes, that's often my problem with earnings.  It's the revenues that really suck.  Cramer made a good point last night – there are winners and losers in most sectors, you can't make generalizations, some companies are just better at riding out tough times than others and we need to be selective in our picks but it's not a total disaster.  FAF gave a good report today in a terrible housing market, ORI, who directly compete with them, did not.  SCHN was surprisingly strong in the steel sector, RCL continues to make money no matter what conditions are thrown at them, DBD continues to suck, IMAX contines to be impressive despite declining box offices, PHM was so bad they spooked the whole sector, including HOV who already reported kick-ass earnings.    SPG was another one I noticed doing well as the REIT sector is so out of favor but they are doing great – still they can't attract buyers.  So there are tons of losers but a lot of winners if you dig through the trash.  

    FAS Money – Up 20% since last week.  I will keep pointing this out until all the people who waste their time chasing aggressive and risky $25KP plays stop and start practicing on this one instead.  This is not a complicated thing people – The long XLFs cover any move up in FAS, as long as we keep the ratio under 3:1 and we're confident enough in the Financials with QInfinity that we don't mind selling the occasional put as well.  

    Key markets/Rain – There are many, many things that are considered energy trading like heating oil, coal, kerosene, oil, nat gas…  I suppose they are allocating funds and don't want to over-commit, nor do they want those sneaky Republicans to allocate $50M (that's all they're asking for but it's been blocked) to the CTFC and then demand that they use the funds to site inspect every gas station and hardware store in America that sells propane and propane accessories.

  47. 1020

    williex – My apologies to all idiots – except sarah palin…..

  48. Pharmboy

    and Ann Coulter…1020.

     

    BMRN/qc – we bought everything back late last week.  This is a new position.  32 Ps Nov are fine if you still have them.  If you still have the 42/45 BCS, just let it ride.

  49. kustomz

    /DX back to Tuesdays levels, which had pretty good volume. The run may be nearing an end or its setting up for a push higher.

  50. 1020

    Poof!…..and it's gone….
     
    Next stop: 1375 on the ES…..

  51. qcmike

    Pharmboy
    Is the new BMRN position Jan 32 puts ?
    Thanks

  52. Pharmboy

    Yes….STO though, not buy.

  53. yodi

    1020
    WHAT STOCK IS SARAH PALIN

  54. jabobeast

    FU market!!!

  55. rainman

    1020 — Apology accepted :)

  56. 1020

    Pharm – You mean Andy Coltour with the abnormal laryngeal prominence?… total schmuck….. :)

  57. williex

    here we go AApl long for a day trade

  58. 1020

    yodi – WM…. :)

  59. yodi

    1020
    Sorry thought I was at a site where they trade stk and opts

  60. yodi

    Looks like the sheep are exiting early today

  61. 1020

    A tune I'll be singing when in the voters box, signing off for Obama……
    http://www.youtube.com/watch?v=S0JV2ccpaH4
     
    ….with all due respect…. :)

  62. 1020

    yodi – mostly…. ;)

  63. jr_mints

    1020 and shadowfax, thanks for the info.  Not sure I want to run four monitors but was impressed with the speed and price along with the capability to run the monitors. 

  64. edro00

    AMZN-
    Phil – I've got -2 Oct 235P sold for 6.35 now 13.72 – What would you roll those to?
     
    Thanks

  65. shawnk3

    Phil & IFLAN – How can I get the most bang for my buck if I don't think Apple will be above $560 by the end of tomorrow?  I can buy a bear spread on the Oct26 (Weekly) calls by selling the $665 call for $1.15 and buying the $670 call for $.88 with the expectation they'll both expire worthless and I'll make $270 per $5 spread….but since both of you know Apple really well, I was hoping you might be kind enough to let me know if you're aware of a more profitable trade.
    Also, I experienced an interesting phenomenon with an Apple calendar spread yesterday that I'm hoping you might be able to explain.  I bought Nov $625 calls for $19.20 and sold Oct26 weekly $650 calls for $2.90.  Since the weekly calls only have 3 days till expiration, I thought they'd plummet fast and my ITM Nov calls would stay stable BUT….it's been the opposite scenario.  My Nov calls are down to $17.90 while the Oct26 calls (which expire tomorrow and are $35 OTM) are about the same at $2.8 and even went as high as $3.93 today.

  66. jr_mints

    Phil, re: your comments on the FAS money portfolio, couldn't agree more.  That, along with a few calendars are all one really needs to do quite well in these markets.  I love FAS money

  67. rkyroma

    Windows 8 is supposed to be much better for multiple monitor setups.  Anyone else trying it out tomorrow?

  68. scottmi

    AAPL/shawnk3 – going under 560 tomorrow? wow! how do you figure that?

  69. shawnk3

    Scott- Thanks for catching my error.  I meant $660.  Even on an earnings pop, I don't see AAPL going up to higher than $660.

  70. rpme

    According to Strategas Research Partners, since 1953 earnings growth has turned negative 18 times—and all but three of these marked periods of sustained negative/flat earnings-per-share growth (an average of 3.4 quarters before a return to positive growth). Negative earnings per share usually are seen during recessions or mid-cycle slowdowns.

  71. 1020

    jr-mints – this looks good with win-8 and the latest INTC chip – not sure if you can swap out video card….
    http://configure.us.dell.com/dellstore/config.aspx?cs=19&dgvcode=ss&c=US&l=EN&vw=list&oc=FDDWRT12hf&dgc=CJ&cid=7420&lid=566643&acd=10550055-227502-F012A00C321007C0A99321007C84A01A0A0

  72. Inkarri19

    Morning All – Looked at the Sprint numbers and they reported 1.5M iphone sales in the latest quarter.  That number is the same from Q2.  Apple reported 17.7M iphone sales in Q2.  ATT sold 4.7M, VZ sold 3.1M and now Sprint sold 1.5M in Q3. 

  73. kustomz

    Markets should have perked up much more by now. EUR looks like a coiled spring.

  74. 1020

    This is a great site for deals on anything tech…..
    http://www.techbargains.com/

  75. amitshenoy174

    has anyone done double calendars … just thinking with vol so high why not do a double calendar at 560,670 strikes thoughts please

  76. jr_mints

    1020,  thanks for the link.  Currently running Dell but old and s l o w!  Just looking for the moment but looking to upgrade pretty soon.

  77. newt

    AAPL/ Flan: How about that Feb spread you referenced last night?

  78. scottmi

    Jr_mints – if you want to go custom, this is an excellent QUIET choice..
    http://www.pugetsystems.com/serenity.php

  79. scottmi

    AAPL – so who is dumping out of apple today? the hedgies last run out or scared individuals?

  80. Phil

    Speaking of propane – those things are surprisingly hard to blow up.  

    Europe dropping off sharply into the close – Dollar 80.12, Euro $1.295.  

    HOV/Button –  Does that basis include the short calls?  So either it doesn't and you have a nice profit to get called away on or it does and I assume you covered to reduce the basis of a losing position and mission accomplished there as well.  The Jan calls average $1.45 and they can be rolled to the 2015 $4 calls at about $2.35 so you drop your basis .90 to $1.52 and you have a call-away at $4 and then you can sell 2015 $2 puts when and if they ever give you $1 for them but, otherwise, what's the difference when you make $2.55 at $4 (175%)?  Keep in mind you are totally in the money for a profit – there is no pressure on you to take a bad price – you still have 3 months to roll.  

    CLF/StJ – A bit worse than we thought but the trade from yesterday was selling 5 Jan $40 puts for $3 ($1,500) against 4 April $36 puts for $3.20 ($1,280) for a $220 credit and the Jan $40 puts are now $5 ($2,500) and the April $36 puts are now $4.75 ($1,900) so only -$380 despite the 10% drop – that's not bad!  Obviously, it can and should be ridden out since the Jans are 70% premium and there's a dozen ways to adjust it with plenty of time.  

    BBY/Jabob – F them!  

    Actually, BBY is a great chance to enter on speculation of a buy-out as well as the chances that Christmas won't be as bad as people think.  In our Income portfolio, we had sold the 2014 $15 puts for $2.30 in August and they are now $3.20, so I still like that sale as an entry at net $11.80.  We paired it with the purchase of the $15 calls, now $2.85 for a .45 credit and a $14.55 break-even and you get all the upside if they do get bought.  

    Earnings/StJ – I prefer the ones that move less than they are priced for.  

    Dow volume just 40M at 11:45. 

    CSCO/Dflam – So you have 10 2014 $20s at $1.89 less the .82 and .20 collected is 0.98 spent on the longs with CSCO at $17 so it's all premium.  The Dec $19 callers are toast at .22 and you can roll them to Apil $17 callers at $1.33 for $1.11 in your pocket.  That pays for you to roll your .98 2014 $20s to the $2.70 2015 $17s at $2.70 for .59 out of pocket.  The short Nov $18 puts are $1.38 but you only sold 5 ($690) so you can roll them to 2x the Jan $17.50 puts at $1.25 ($1,250) for a $560 credit and now you got the money you spent on the roll back so you pick up 1 year and $3 in strike and only sacrificed 6 out of 24 months of call selling – seems like a good deal. 

    Stein/Rustle – Doesn't look like they were prepared for that.  

    BBY/StJ – We're at $15, they're at $15 and we haven't even got 2015s yet.  I still like it (see above).  

    DECK/StJ – Well, expectations are sure low enough.  That was a nice one to short back when we hated them at $100+.   I'm still not a big fan but they could beat estimates for $1.04 as it's down from $1.59 last year and that's been lowered from a $1.15 estimate as of last earnings (-10%),  The paranoia around DECK has the Dec $32.50 puts at $1.80 so net $30.70 is 17% below the current price and, of course, rollable so let's sell 20 of those in the Income Portfolio for $3,600.  

    EXPE/StJ – Similar with the Dec $45 puts at $2.20 for net $42.80 with the stock at $51.93 so 17.5% cushion there.

    CSTR/StJ – I like the Jan $40/42.50 bull call spread at $1.50 with the stock at $45, room for  a 5% drop is not so great but $50/52.50 bull call spread is .80 so doesn't look like all that much risk on a 20% drop compared to reward of 66% on any drop less than 5%.  Let's do 20 of those in the Income Portfolio at $3,000 with a $2,000 upside.  

    AAPL/Mampcs – Thanks.

    Iron Ore/Rain – Try this.  

    Battery/StJ – Cool.  We need advances in batteries more than anything (and AONE up to .14 again!).  

    Romney/StJ – Yes, it's very clear to the rest of the World how irresponsible his economic plan is.  

    Idiots/StJ – Amen. 

    AAPL/Scott – Having Jan AAPL calls and thinking you are buffering against a drop is delusional.  The Jan calls are ahead of earnings, not behind and you have very little protection if sentiment turns down – they are about as propped up on pre-earnings hype as the calls are.  I don't even understand your math since the Jan $580 puts are $26.50 and the next week $580 puts are $8.50 and if AAPL drops $60 to $550, you will owe the $580 putter $30 and your Jan $580s would be worth about what the current $640s are, which is $56.50 so you are up $30 but paying $21.50 of it right back and you'd need to time it very well to get out property and we're assuming the volatility crush doesn't get your Jans as they would only be $30 in the money with no catalyst.  To the upside, again there may be premium crush on your longs and you only have to go down to the $565 puts before you are beyond your $8.50 protection so you have $15 of AAPL to the upside before you're in a losing trade.  

    If you want to be bearish on AAPL earnings, why not buy the April $665 calls for $34 and sell the Dec $635 calls for $21.50 so you only need $10 in margin and you have to go all the way up to April $750s (+85) at $13 before you exhaust your cover so figure you come out ahead to the downside all the way to AAPL $526 and, if you think AAPL is going to $526, you can just buy the Nov $555 puts for $6.80.   Realistically, you can make very nice gains on any minor dip in AAPL and AAPL has to go up more than $40 (6.5%) before you even have to roll the callers.  If you have money to DD the longs and roll the calls to 2x a higher strike (the Jan $695s are $10.30 for another $60 of upside) then I like this play better.  In fact, let's 3 of those in both $25KPs, which should have about $9K in total margin used and gives us slightly more downside protection on AAPL.  

    BBY/Rkyrom – Well, at $1.40 with BBY at $15.15 they have .55 of premium left (35%) so this is right about the time you should be looking.  I'd give them a day or two to see if they bounce of if the downgrade police show up, especially if you are willing to do a 2x roll anyway.   Just keep your eye on the Jan $14 puts at $1.30, which is close to an even roll and should become one as your Nov premium burns off.  

    AMZN/Occam – Worth looking at but not a very long study period.  Hard to say what normal fluctuations may be.  Kids going back to school and not buying music all day may be a factor.  Ah, found a bigger chart – notice last year they started Q4 with almost 30% less traffic than now – that's perspective!  

    LOL 1020 – Sharon Osborne agrees.  

    AMZN/Edro – Depends how much buying/selling power you have.  If low, just roll the loss to Jan whatevers but, if you have room, you can roll $13.72 to 2x the Jan $205 puts at $7.20 and AMZN has to fall 10% to put you in trouble.  If you just want to roll the $7.50 loss to 2x, you can go to the Jan $190 puts at $4 and that's down $37 (16%) from here and, if you think AMZN is going to fall more than 16% – don't you think you shouldn't be playing them long in the first place?  

  81. shadowfax

    jr_mints
    I hope you understand that all computer companies use the same parts. INTL processors are more reliable than AMD and running fast has more to do with how much and how fast is the RAM. You need enough so your hard drive is not used as a buffer. With lots of updates and sypware, anti ,and cookies uses more Ram than was normal. The only issue to multi-monitors is a big enough power supply. Buy whatever is on sale but get the top end, those minimum machines slow down fast. Think after new year sales!

  82. Phil

    AAPL/Shawn – I don't think so either at this point ($660, not $560).  Will be some slam if it is.  I like the above play we added to the $25KP because I STILL think they have to creep up in Q4 either way.  You got screwed on your spread (which was ridiculously dangerous) because you didn't account for supply and demand coming into earnings.  You will be much more screwed when you realize the premium on the Nov calls will zero out just as fast as the weekly calls tomorrow.  

    FAS Money/Jr – Does my heart good to hear some people get that.  

    S/Ink – Thanks.  

  83. stjeanluc

    Hey Pharm – looks like AAPL is completing your H&S move today… Going for 605!

  84. Phil

    QQQ/StJ, $25KP – I just realized you substituted $10,000 worth of AAPL for $4,000 worth of QQQ – that was not the idea, there should be 25 of the QQQ spread, the idea was to cut margin, not exposure or, even in a best case, we'll never make the money back.  

  85. Lincoln

    Phil: LULU
    I am short 10 Dec 67.5 calls and 20 Jan 72.50 calls and short 10 Nov 70 Puts with earnings in early Dec.  It is a volatile stock I'm in and out of and don’t mind working with it through the gyrations up, less crazy about selling more puts because I’m generally bearish on it.  Would it make any sense at this point to roll both call positions into 30 Jan 70 calls for another $1600 in premium and perhaps make for better rolls up on a spike after earnings? Or just patiently stand pat given the calls are almost all premium?  TIA

  86. stjeanluc

    Hey, I love FAS Money too….

  87. Phil

    $25KP/AAPL – Let's take out the 1 short $665 calller at $5 – worth the risk.  Let's also buy back 3 of the $655 callers, now $7.  If AAPL gets worse, we'll sell 3 $645 calls, now $9.50, for $7.50 but hopefully we go up from here.   

  88. rkyroma

    PPC – earnings tomorrow.  I'm already in and rolled from a couple months ago, but holding through earnings.  I think sell-off is overdone.  Anyone else have an opinion on them?

  89. shawnk3

    Thanks Phil.  Anything I can do to recover some of my losses on that calendar spread sooner than waiting for December?  Perhaps I could sell the weeklies from next week (expiring Nov 2) against April calls I buy?

  90. button

    HOV/Phil,
    Thanks very much for the clarity. The basis does include the short calls.  I like the idea of dropping that by another $0.90 and will look for a good opportunity to roll to 2015.

  91. rainman

    Phil / iron ore — Thanks, I use that one but was looking for something a little higher resolution.  Are there futures on iron ore? 

  92. shadowfax

    Windows8
    I have looked into this and I find reports are so far confusing what it is and what it can do.
    First it is not ment to replace Windows 7 especially in an office setting.
    Second it is made to moble, to compete with Apple on tablets and phones.
    It provides a new operating system for touch pads and slide and flip scrolling.
    It would not be a logical upgrade for traditional desktop and laptop setups.
    How well it works is yet to be seen but microsoft usually requires many updates before the bugs are worked out. Jumping on right now would most likely be troublesome.
    It is also very clear that they are at least 5 years late to the table, and it better be good!

  93. shawnk3

    APPL/Phil -  Curious why you prefer selling the Dec calls (vs Nov calls) in the $25KPs below.  The Nov $635's can be sold for for $12.68 and per your message earlier, it seems they'll drop a lot tomorrow if Apple doesn't make a strong move up.  I hope you don't mind my question….just trying to understand the logic…since the Nov calls seem like they'll offer a bigger drop, will also expire earlier (allowing us to sell December calls after the Nov calls expire), etc.  Then again, my calendar play also looked solid on the surface :) .
     
     
    'If you want to be bearish on AAPL earnings, why not buy the April $665 calls for $34 and sell the Dec $635 calls for $21.50 so you only need $10 in margin and you have to go all the way up to April $750s (+85) at $13 before you exhaust your cover so figure you come out ahead to the downside all the way to AAPL $526 and, if you think AAPL is going to $526, you can just buy the Nov $555 puts for $6.80.   Realistically, you can make very nice gains on any minor dip in AAPL and AAPL has to go up more than $40 (6.5%) before you even have to roll the callers.  If you have money to DD the longs and roll the calls to 2x a higher strike (the Jan $695s are $10.30 for another $60 of upside) then I like this play better.  In fact, let's 3 of those in both $25KPs, which should have about $9K in total margin used and gives us slightly more downside protection on AAPL.  re selling the Dec

  94. occam

    AMZN chart – Phil you cited the Search Engine chart.  That's likely to correlate with ad spending on search engines.  The reach % move from 4 to 6% in the past two quarters (approximately) seems to match the 11% revenue growth in the past two quarters.  The interesting aspect is that this quarter the increase is only about 4 to 5% because of the dip (probably Olympics related).  Whether reach % has any correlation with revenue is something to be seen this quarter.  I believe the Search Engine % correlates with ad spending (may be why Google was off this quarter).  But who knows what it all means?  It's too bad that squiggly lines can't talk.  After earnings I'm going to put them all the charts together, as perhaps an uber indicator is meaningful.  

  95. cslanson2

    Phil,
    Re: AAPL earnings. Don't you think the call this evening will be at least as much about forward visibility as about the results of July-September? If so, with the product launches announced in the past 30 days, what in your opinion is the likelihood that Tim Cook would paint a negative picture for the Christmas quarter?
    Appreciate your comments.

  96. occam

    CRM lovers – CRM down on layoff of 100 workers.  Wonder if they gave them stock options before they fired them.

  97. barfinger

    http://blogs.reuters.com/great-debate/2012/10/19/everything-you-know-about-inequality-is-wrong/
     
    Guys, I'm sure you will have a good time with this one after hours :)

  98. neverworkagain

    FAS Money vs. AAPL Money:  I love the idea behind FAS Money, but I am less excited by the banks than Phil.  Taking some of Phil's recent long term AAPL ideas on board, I am planning on starting an "AAPL Money" position post earnings (I have not been trading AAPL recently, so am hoping to get in cheap). I think Phil's previous long term idea was Jan 2015 $400 putters coupled with a Jan 2015 $500/600 bull call spread. And then selling weekly callers against that. I think that is a high probability money maker and a better choice for most people on PSW than the various AAPL $25k trades which have way more risk, chew way more margin, and require too many rolls and trades.

  99. kustomz

    Forexlive
     
    DJ: S&P downgrades BNP Paribas one notch

    To A+ from AA-
    Outlook negative
    S&P also lowered France’s economic risk score to 3 from 2

    EUR/USD back to the session lows…

  100. rexx

    Phil – Income portfolio CLF trade? Buy 2015 25/35 Bull Call Spread @4.90 sell 2015 Puts @ 6.35.  $1.45 Credit so worst case is buying CLF at $23.35. Best case $10 on the 25/35 all in the money.  Margin is $1500 on 10 contracts,

  101. checho

    lflan/ FB
    Lflan, saw your comment on FB yesterday and I  did exactly the same thing sold a put to finance long calls prior to earnings, which gave a nice pop.  I agree with your long call overall on FB, given the huge surprise on ad revenue on mobile, but particularly of interest is the change of stance by Zuck'g on how the business is run.  I read an article on linkedin which goes into how the new product teams are now organised to build in ad monitisation into the build…..Given how much it has fallen since listing, it can develop into a perfect momo, if the ad revenue shows the increase it has shown for the next Q's, which I strongly believe it will.   I  use FB on mobile, and I must admit I don't get irritated by the ads showing up as some of them are something which I find useful, like wifi being available on london underground network..  I think this can be huge. 
    One point to note is that over a billion shares which had a restriction, will be free to sell in Nov, (someone posted this a few days ago), so maybe some downward pressure near term?….But this could be a nice little puppy that can pop a la Amazon way to ridiculous p/e levels, burns all and sundry shorts on the way, before it bursts and settles into a more palateable valuation….
    Would be in interesting to have your take on the company and any other reasons you find this attractive. 
    Earlier Phil had said that he finds them okayish around 15.  Phil, wot's ur take medium term on them and whether FB can be an early stage Momo?  

  102. lflantheman

    AAPL MoMo adjustment:   Sell to close the 10 Jan 620s for 34.50 and buy to open  10 April bull call spreads 600/700  for 62.10/23.40  , or  38.70.  

  103. stjeanluc

    AAPL Money / Never – I had been thinking the same, but using just a BCS as the long position. And sell weeklies against that. A 2015 600/700 is only $37.25. Buying 4 of them ties up about $15,000. There is no reason we can't recoup $37 in 100 weeks selling 1 weekly (at $12K of margin) against it every week. The total setup ties about $27K of capital. Max $40K if we need to DD on the short calls. Much more manageable I think.

  104. stjeanluc

    Good deal lflan! Thanks.

  105. stjeanluc

    25KP / Phil – OK, we'll adjust the position.

  106. lflantheman

    Does anyone NOT like the AAPL MoMo portfolio adjustment, or think they have a better trade? 

  107. zeroxzero

    I assume everyone's aware of this, but since I've not seen it mentioned today, I'l point out that Hurricane Sandy ran over us over the last two days, and it is shaping up to be a potential storm of the century, whacking the U.S. somewhere between the mid-Atlantic and NYC at the peak of the full moon tide.  This might easily be a billion-plus dollar storm in terms of damage, the conditions under which is has formed are extremely favorable, it's already a Cat 2 pushing a large storm surge and, through pure bad luck, I'm supposed to fly into NYC 12 hours after it [potentially] hits the city.  I'm trying to book a submarine.

  108. cslanson2

    lflantheman
    It's not that I don't like the MoMo adjustment but would it be fair to draw the inference that you're becoming a little less bullish on AAPL – at least for the current quarter?

  109. 1020

    shadow/win8   Good points!

  110. newt

    Flan: I have the Feb 665/685 that I have been pulling covers off and on (currently fully covered into earnings). I struggle with the roll only b/c of the loss my longs have. Long term I am bullish on AAPL. Maybe after this earnings call I will start selling calls against the BCS as STJ and Scotti have talked about (i have the jan15 500/600) What do you think?

  111. williex

    Phil
     
    I'm long Nov AAPL 240 calls at 13.08 .  any opinions for a hedge today?  Willing to take the loss if I have to.

  112. newt

    Opinion not on STJ and Scotti's strategy.

  113. lflantheman

    cslanson2……I would describe it as uncertainty that I'm feeling.  I believe they will have good numbers, but I'm not sure what investors will do with that.  I think there is a 60/40 odds of a pop/drop post earnings.   And I think it could be as much as 50 points either direction.  I certainly agree with Phil that the Jan calls or even spreads are not the best way to go right now.  During the next quarter, I think the stock moves up.  I'm thinking it's over 700 by April, and thus the choice of the BCS at 600/700

  114. nicha

    Iflan – is there a way to reach u by email 

  115. kustomz

    Phil, thoughts on SPR?

  116. lflantheman

    lflantheman@gmail.com

  117. cslanson2

    lflantheman,
    Many thanks for your thoughts. As it happens, at this moment, I'm sitting with a fairly large block of uncovered Jan 13, $650 Calls. Previously Spreads but recently, I bought back the covers. Given that you feel the trend of the stock price is up, what do you think about writing the weeklies against these $650 Calls for the next few months as opposed to rolling them forward? Thanks again!!

  118. nicha

    Iflan – sent u an email. 

  119. shawnk3

    lflan-  What kind of movement do you see (in the next 24 hours) in the Nov 17 $650 calls (currently $8.83) and Nov 2 $650 calls (currently $4.85) if Apple's earnings are so-so (or worse) and the stock price stays under $640?  Thanks in advance.  Been reading your calls on Apple and you seem to know that stock like the back of your hand.

  120. 8800

    Phil,
    I'm interested in rolling AAPL jan 560 puts ($19) to benefit (hopefully) from Xmas sales. Would you roll to Feb 540 ($20), or 560 (26) or go out farther?
    Thanks as always

  121. neverworkagain

    STJ / AAPL Money:  Yes, I like your idea too. One thought that I have on this is that if you think you are buying at a bottom (ie. if AAPL misses earnings and you buy in the next few days), it probably makes sense to buy a 'cheap' 2015 call (like the $550 or $600) and just sell weekly callers against that. Then when AAPL makes it back to $700, you can turn it into a spread and continue selling the callers. It just worries me a bit using call spreads against a weekly caller when AAPL could be ready to move $100 off a bottom.

  122. gandhjo

    Hi Phil
    Your recommendation on SQQQ hedge – the math does not seem to add up. Let us say I buy 20 Nov 44/46 at 0.5 and that will cost me $1000. Now let us assume tat SQQQ gets up to $46 on Friday. I plotted this on TOS RiskProfile (under Analyze tab) and it comes up to $840 on Fri. So, how is this a good hedge if it does not even double up. Maybe I am doing something wrong – can you please point that out.
    Thanks,
    gandhjo

  123. zipla

    APPL/Phil
    I'm still in the 
    5  Jan 19 2013 630/650 for $10.20
    2  Apr 20 2013 635/685 for $26.18
    2   Apr 20 2013 630/685 for $23.00
    4  Apr 20 2013 630/700 for $22
    Any thing I should do to adjust in the next hour or wait and see now?
    TIA

  124. jr_mints

    neverworkagain, I like the idea of a AAPL Money portfolio and would probably participate.  I certainly think it would be a lot less stressful than what has been going on here lately with AAPL, would like to get Phil's thoughts on it. Maybe we could run it as a virtual portfolio in lieu of one of the others……would hate to put any more on STJ as I am sure he has his hands full. 

  125. stjeanluc

    AAPL/ Never – I moved away from the single call and toward a BCS because there are no "cheap" 2015 calls. The 2015 550 calls are $150 with over $90 of premium. It's somewhat mitigated when you sell calls against it, but it's a big investment up front. And to be flexible with rolls I would rather have multiples which I why I favored 4 long BCS and selling one call each week to start with the option to roll to 2 in a bad week and still have enough long coverage. But if you have the margin and/or capital, your strategy would work.

  126. stjeanluc

    And BTW, the 600/700 BCS could be a lot cheaper tomorrow!

  127. Phil

    LULU/Lincoln – They're at $68.04 and you are talking about taking on another $5K in risk by rolling those $72.50s down to $70s.  As a rule of thumb, you should never have more short calls or puts than you are willing to roll to 2x and out a few months – otherwise it means there's a point at which you can be stopped out with heavy losses..

    Recover/Shawn – The same way we are in the $25KPs, back up to a reasonable position you can afford and make it back PATIENTLY over time.  The more you try to make the more risk you take on, the faster you try to make it, the faster you chance being reduced to zero – once you are at zero, all the time in the World won't get your money back.  Of course, it's good to realize these things BEFORE you start betting in the first place.  This is why, on two separate occasions, when we got even on AAPL in the $25KP I said if being behind made you uncomfortable you should get out of the trade – you have to learn your limitations and learn to stay our of trouble.  

    HOV/Button – All the signs do point to real estate slowly climbing back.

    Iron/Rain – I don't know of any.

    Windows/Shadow – I have never seen less interest in the new Windows.

    AAPL/Shawn – Because the Dec calls are 50% more than Nov and, if AAPL drops, to get the same money, you will have to sell calls at significantly lower strikes and then you cap any possible gains.  They have essentially the same delta but you have 50% more upside protection by selling the more expensive calls and it's all premium.  You are selling Dec calls against April calls so you still have 4 months to sell out of 6 so you are sacrificing 20% of your sales to collect 50% more money up front and, since the front month is subject to a very violent move – this would be a good time to have a bit more protection, wouldn't it?  

    AMZN/Occam – Do you have a longer-term traffic chart?  

    AAPL/Csl – I am not bearish but clearly the stock is.  It's either a massive head-fake or it will take more than one night to get investors back on board.  In order for AAPL to go up 10% now – it has to increase $60Bn with at least $6Bn flowing in.  At $600 a share, that's still 100M shares to trade on a stock that averages 16M per day – very, very doubtful they will pop that fast.  Generally, after earnings, they get near 40M for a few days so it will take 3 days for them to stabilize a 10% gain and, after this week – I'm pretty sure there are plenty of people who regret not taking $666 and running who aren't going to be willing to wait 5% more to see if they can get over $705.   This is the same logic I had back in late July when I warned that AAPL was getting "Too Big to Succeed" ahead of those earnings, when the dropped 10% (but then came back nicely).

    Apologist/Barf – I will have no time for that unsubstantiated nonsense.  Why bother showing an article where a guy says "it is surprisingly east to find non-confirming evidence" and then makes statements with no backing?  It's just an idiot spouting off some BS he spread somewhere else (those are the links) with no actual evidence to support what he's saying.  

    AAPL Money/Never – We've talked about that but not a good trade to initiate on earnings.  

    CLF/Rex – That's a fine trade but, in our Income Portfolio, we just sold the 2015 $25 puts for $6.50, still $6.50.  Worst case is entry at $18.50 so I can do 1.5x of those with a far lower break-even and make the same $10. 

  128. hextra8

    Phil,
    Have  AAPL Jan 2015 $570/$800 bull call spread for $100. Any adjustments that should be made before the close today? Thanks.

  129. rpme

    Phil, bought some AAPL stock at 310 and covered at 540 (dont ask why), spent the last several months feeling like a putz, well back to even today, less putzish.

  130. Inkarri19

    Rumors of AAPL launching radio service in early 2013.  Pandora halted.

  131. hemas03

    Phil, are you still comfortable with holding the AMZN Jan13 225/185 Bear Put Spread through earnings?  TIA

  132. Phil

    AAPL/$25KP – If you haven't already done so with Nov calls, let's sell 3 Dec $660 calls for $12 for 9/10 covered. 

  133. scottmi

    AAPL/lflan – my only question is if you are uncertain and closing, why even be in it at all? why initiate the new trade?

  134. yodi

    AAPL planing to open a internet radio service in 2013

  135. yodi

    Pandora down 15%

  136. newt

    Phil: Education point here. So you have the 6 Nov 665 plus the 3 Dec covering the April BCS?

  137. Pharmboy

    NUVA – Selling a few Mar 15 Ps…2.40 or better.

  138. Phil

    Hurricane/ZZ – Looks bad but may roll back out to sea still.  

    AAPL/Willie – Other than a vertical, you can't hedge Nov – the possibility of a 10% move up or down make it a very bad idea as you don't have time to recover.  

    SPR/Kustomz – What's that?

    AAPL/8000 – You own the puts or you sold them?  If you sold them, I'd leave them unless you have to roll.  You're good to $540 and that's more than 10% away and then you can roll to April $540 puts anyway.

    AAPL Money – Will be very exciting if we can establish a low base, as we did with XLF. 

    SQQQ/Gandhjo – It's not going to pay in full until November.  A November spread won't pay in full until November expiration – this is options 101.  If the Nasdaq bounces back by then and SQQQ goes back below $46 – then probably the stocks your hedging recover as well and you didn't need the hedge after all.  

    AAPL/Zip – As I said yesterday morning Zip, I do not like that spread, you have no downside coverage and – hey, tell you what, let's save time:

    AAPL/Zip – You are still banking very much on AAPL having good earnings.  You say "possible gain" but AAPL has to gain almost 15% to hit your levels.  We're in the $630/$685 spread in the $25KP BECAUSE we sold calls for $10 and we are only worried about the upside.  If AAPL drops $50, then we can expect to drop to the value of the $680/735 bull spread (now $13) and that spread, of course, can be rolled down $50 by selling another $10-15 worth of calls and we WANT to be in the $580/635 bull spread with a few more months to sell.  So we can see a path to making money whether AAPL goes up or down 10% – you will simply lose 50% if AAPL drops 10% and, if you can't sell offsets to make a roll – you're stuck with either taking a loss of praying for a miracle in which AAPL rises 20% to cover your April position.

    You can sell AAPL Jan $665 calls for $20 and the 2014 $700s are $60 but there's a margin issue ($35) so maybe you need to be in the $665s at $73.  So that's net $53 and you can afford about $6 and I AAPL goes up 10%, that's $680 and obviously you can roll the short calls and your $700s probably are worth what the $630s are, which is $87 so up 6x $14 = $8,400 and you have a whole year to make more sales of, hopefully, around $6,000 a month.  Flat is obviously the same deal and down 10% should drop your longs to about the price of the $725s, which is $53, so down just $20 x 6 and all you have to do is sell something else and roll down and wash, rinse repeat until AAPL comes back.  So, using the calendar spread, your loss is a little less to the downside (and much less if not a big downside) but the more important point is that it's recoverable – whereas the bull call spreads effectively freeze you because, for the same reason you can't afford the margin to sell short calls, you can't afford to buy back your caller and roll down, right?   This is very much like chess – look a few moves ahead and make sure you are not backing yourself into a corner.  

    I suggested you move to the QQQ play like the $25KP (that's where that trade idea came from).  Now that AAPL is down another $15, my opinion hasn't changed, you are just more screwed…

    AAPL/Hex – I hope at some point you sold calls against it.  You could have bought 2 of the $500/600 bull call spreads for $100 and you would have $30 less upside potential but at least you'd still be in the money with $58 down left before you are below break-even.  By selling a "cover" that far out of the money, you screwed yourself because you were still the sucker paying a ton of premium as you essentially bought AAPL for $670.  As you can see, your $800 caller lost $30 less than you did so your position is down 30% at $70.  You can roll the $800 calls down to $650s at $105 for +$53 and that $53 can pay to roll your $570 calls ($138) down to the $460s ($196) and then you're in the $190 spread for about the same $100 – much less greedy and more realistic.

    AAPL/Rpme – Funny how those things work out.  Maybe look to roll the callers to more premium?   You can take the stock and turn it into a deep in money bull call like the one above and then leave the short calls and, since the bull call is 1/6 the cost of the stock – If AAPL goes higher you can DD on the bull call and roll the caller to 2x something smaller and even 4x if necessary.

    P/Ink – Funny how something like that hurts P but has no benefit to AAPL. 

    AMZN/Hemas – Yes, I still like that.   

  139. Phil

    AAPL/Newt – Yes, that's the current coverage.  The Nov calls got too cheap to bother selling so may as well take the money for calls that are $55 out of the money.  

  140. newt

    Thanks!

  141. zipla

    AAPL/
    Go to cash then? Now first.

  142. hemas03

    Thanks Phil!

  143. Pharmboy

    AAPL AAPL AAPL…every one wants a bite of an AAPL…..gimme a Y, gimme a M….gimme an I….YMI…lots cheaper and multiple upside potential…

  144. jabobeast

    amzn…

  145. gandhjo

    Thanks Phil – that makes sense. Anyway, I am getting out of half of my long APPL spreads at a loss. Probability of AAPL tanking here is way too high. 

  146. zipla

    AAPL/Phil
    forget the last comment. Will just wait and see and then do something sensible.
    TIA

  147. Inkarri19

    AMZN at -0.60 EPS

  148. rkyroma

    Phil – I'm long 100 AAPL 620 Nov. calls.  Should I cover before earnings?   Just kidding.
    Drum Roll please……

  149. Phil

    And AMZN is light on earnings and I don't even see EPS but they are down to $210 already! 

  150. shadowfax

    AMZA -$.27

  151. kustomz

    SPR/Phil they were spun out of BA.

  152. shadowfax

    AMZN loss 27c

  153. 1020

    AMZN is so much more than electronics….. Still, may be good for BBY….

  154. Inkarri19

    coinstar misses too

  155. occam

    Yea!  Amzn tanks!  I didn't want to say this too strongly Phil, but I think the charts showed that Amazon's traffic tanked, and then they had to pay up for traffic to get close to making their revenue numbers.  I don't have a longer chart, but I was short AMZN, so I'll cough up the money to monitor their traffic and get more detailed analysis for next quarter.  Right now, their next quarter doesn't look good, about on par with last year.

  156. 1020

    I picked up a little BBY @15.15…..

  157. scottmi

    AMZN hammered. and call not even started yet?

  158. rj_jarboe

    spr/kustomz
    I know them very well if you have a specific question. Am I buying them today NO.

  159. rkyroma

    1020 – please explain the BBY connection?

  160. gandhjo

    AMZN miss – APPL moving up after hours

  161. yodi

    Strong AAPL buying

  162. diamond

    Phil/stjeanluc - Perhaps the AAPL Money portfolio can be combined with FAS Money into a FAS/AAPL Money portfolio since both will utilize the same investing principles.

  163. Pharmboy

    rky – real estate play now for BBY.  Their business is dead.  There is word that they are trying to sell off the Geek Squad….and Target is trying to negotiate it away.

  164. stjeanluc

    EXPE up after beating! 

    CSTR down only 5%. Hopefully we stay there!

    DECK halted. They beat on EPS, light on revenues. Guidance looks bad… Could be trouble.

  165. cdel360

    EXPE looking good

  166. Phil

    Holy crap, they are going to test $200 on a loss of .23 a share vs. .08 expected.  How are they going to talk their way out of this one?  Must have sold a lot of Kindles to lose that much money – what a great business plan!  

    AAPL earnings in 30 mins.  

    Good luck Zip!  

    AAPL/Rkyroma – Very funny….

    SPR/Kustomz – Never heard of them but they dropped 30% today.  Writing was on the wall last Q when profits dropped 50% and today was just a warning that they're taking a $590M charge ($1.82 per share), which is all the money they made in the last 3 years.  That's not good…

    AMZN/1020 – Yes, at some point you have to realize you are selling things too cheap to survive.  That's the problem with companies like AMZN, they put retailers like BBY out of business because they can BS investors for years while they lose money selling stuff.  

    CSTR – Well it looks like we'll be testing what happens to our spread on a 10% drop.

     

    Coinstar's 2012 third quarter and nine months financial highlights included:

       

    2012

     

    2012

       

     Third Quarter

     

    Nine Months

       Consolidated revenue

    $

    537.6

    million

    $

    1,638.0

    million

       Income from continuing operations

    $

    36.8

    million

    $

    127.3

    million

       Core adjusted EBITDA from continuing operations* (See Appendix A)

    $

    117.8

    million

    $

    368.2

    million

       Diluted earnings per share from continuing operations

    $

    1.14

     

    $

    3.90

     

       Core diluted earnings per share* (See Appendix A)

    $

    1.26

     

    $

    3.88

     

       Net cash flows from operating activities from continuing operations

    $

    117.5

    million

    $

    311.7

    million

       Free cash flow from continuing operations* (See Appendix A)

    $

    61.0

    million

    $

    178.5

    million

    This is only a $1.3Bn company that's dropping $200M in FCF annually.  Silly sellers…

    AMZN back to $215 – hopefully our short puts are safe.  

    AMZN/Occam – I didn't think they would do well, just that they wouldn't do that badly.  Hence the bear put spread and the short puts.  Too bad we chickened out of the long puts but AAPL was killing us and it wasn't worth the risk once we got even.  

    BBY/1020 – Mazel Tov! 

    PCLN popping with EXPE.  

    DECK/StJ – I  think our short puts are safe. 

  167. cdel360

    AMZN bouncing…repeat of last quarter?

  168. Inkarri19

    So what you're trying to say StJ, is that people are traveling more, not renting DVDs as much or cashing in their coins, not buying as much online and holding off on puchasing outdoor footwear?

  169. 2can

    Why is PCLN up $15 AH?

  170. kustomz

    Thanks Phil

    rj let me know when they seem interesting. I like to play beaten up stocks for the bounce.

  171. Phil

    AMZN bottomed at $204 and now back to $218 – it's the stock that will not die!  

    PCLN/2Can – Because of EXPE but they don't really have the same business model.  

  172. zipla

    Thanks Phil,
    Just want to break someway even out of this now. Lesson(s) learned and didn't want to get out and into a whole new trade with the QQQ play that I hadn't thought through, no matter how much sense it made to you.
    But thanks for the good wishes. Will probably be asking you for some more advice once we see how it goes. But out of AAPL spreads for a long while until you do something like an AAPL money perhaps.

     

  173. kustomz

    By looks of AMZN, AAPL would have to miss big in order to head lower.

  174. 1020

    Lowes Ceo James Tisch…Fracking Expert…..
     
    I know opinions are like…you know…..Everyone Has One!!!   :)

  175. stjeanluc

    lnk – Or traveling to warm places where they don't need Huggs and  where there is no electricity for DVD players…

  176. occam

    I think Bezos is buying AMZN to 220.  Who is doing this?

  177. rustle123

    Last qtr when AMZN had bad earnings, it went down immediately in the after market and went up the next day which made no sense especially when they forecast this qtr would be light.  Now they disappoint again and the stock is almost back to even.  This is why I won't play AMZN, no logic to it at all.

  178. Inkarri19

    apple beat

  179. kustomz

    8.2.b dissapointed

  180. stjeanluc

    AAPL – $8.67/share. Consensus was at $8.85 and whisper at $9.81. 

  181. rkyroma

    what pissed off the futures??

  182. Inkarri19

    bad guidance for q1 it seems

  183. Inkarri19

    26.9M iphones sold

  184. stjeanluc

    Guidance lowered as well… We'll see what happens now.

  185. terrapin22

    looks like Apple crushed it!!  yeah!!!!

  186. jabobeast

    phil--opinion? prediction?

  187. terrapin22

    i take that back.  i guess they missed whisper figures.  but holding up okay so far.  

  188. Inkarri19

    I think it is still halted Terra

  189. cdel360

    probably not good…QQQ falling sharply

  190. deano

    Apple® today announced financial results for its fiscal 2012 fourth quarter ended September 29, 2012. The Company posted quarterly revenue of $36.0 billion and quarterly net profit of $8.2 billion, or $8.67 per diluted share. These results compare to revenue of $28.3 billion and net profit of $6.6 billion, or $7.05 per diluted share, in the year-ago quarter. Gross margin was 40.0 percent compared to 40.3 percent in the year-ago quarter. International sales accounted for 60 percent of the quarters revenue.
    The Company sold 26.9 million iPhones in the quarter, representing 58 percent unit growth over the year-ago quarter. Apple (AAPL) sold 14.0 million iPads during the quarter, a 26 percent unit increase over the year-ago quarter. The Company sold 4.9 million Macs during the quarter, a 1 percent unit increase over the year-ago quarter. Apple sold 5.3 million iPods, a 19 percent unit decline from the year-ago quarter.
    Apples Board of Directors has declared a cash dividend of $2.65 per share of the Companys common stock. The dividend is payable on November 15, 2012, to shareholders of record as of the close of business on November 12, 2012.
    Were very proud to end a fantastic fiscal year with record September quarter results, said Tim Cook, Apples CEO. Were entering this holiday season with the best iPhone, iPad, Mac and iPod products ever, and we remain very confident in our new product pipeline.
    Were pleased to have generated over $41 billion in net income and over $50 billion in operating cash flow in fiscal 2012, said Peter Oppenheimer, Apples CFO. Looking ahead to the first fiscal quarter of 2013, we expect revenue of about $52 billion and diluted earnings per share of about $11.75.

  191. deano

    Sorry for the long post.
     
    Well, they can tank, but they still generate a billion in cash per week!

  192. scottmi

    Logic/rustle – lol! who expects logic in this market?!  what i'm amazed at is how my amzn short calls which are well out of the money and expire tomorrow, have shown virtually no decay this whole week. i guess it ALL comes tonight..or with amazon, maybe not till end of day tomorrow. good grief. should be "paying" me $6,766 tomorrow, and only shows $374 of that so far. we must have some wacky weighting baked into the option pricing models.

  193. kongen

    Re: an AAPL strategy: "AAPL Money / Never – I had been thinking the same, but using just a BCS as the long position. And sell weeklies against that. A 2015 600/700 is only $37.25. Buying 4 of them ties up about $15,000. There is no reason we can't recoup $37 in 100 weeks selling 1 weekly (at $12K of margin) against it every week. The total setup ties about $27K of capital. Max $40K if we need to DD on the short calls. Much more manageable I think."   I guess this only works with PM – in my accounts, the short weekly would require 25% of stock value and would be unaffected by holding the BCS.  What am I missing (besides a PM account)?

  194. Phil

    AAPL $8.67 is in-lineish but hard to complain and not justifying huge sell-off.  Looks like short calls are safe though.  

    Good note re. IPad mini

     

    There have been a bunch of theories about why Apple decided to put a $329 price tag on the iPadMini when well-reviewed competitive tablets from Amazon and Google are priced at $199. (In the accompanying video, TechCrunch East Coast editor John Biggs and I discuss Tuesday's Apple event which he says lacked the shock and awe of previous product announcements.)

    The theories include:

    • Because Apple can charge this much--its fans are either so brainwashed or so locked-in to Apple's ecosystem that they'll pay anything
    • Because Apple wants to protect its extraordinarily high profit margin
    • Because Apple's "mini" is better than the Google and Amazon tablets

    All of those theories probably factored into the decision.

    And now there's a new report out of Asia that adds a fourth theory, one that also makes sense: Apple's iPad mini production, at least for the time-being, is supply-constrained.

    Apple did this with the original iPhone, you will recall--pricing it at a positively usurious price in the early going, and then rapidly cutting that price when its supply chain and carrier networks ramped up. And the strategy certainly paid off then.

    Oh wait, AAPL halted – who knows how this news is being taken?   Qs are heading down pretty hard (1%). 

    No logic/Rustle – There is some logic, that's why we sold the puts – the damned stock is like a weeble.

    APPL/Jabob – Well,, AAPL is halted but it looks like Nas traders think it's going to tank.  

     

    Analysts on average are modeling $35.86 billion and $8.84 per share.

    International sales accounted for 60 percent of the quarters revenue.

    Update: Apple is reporting $36 billion in revenue and $8.67 per share in profit.

    The company said it sold 26.9 million iPhones in the quarter, somewhat higher than recently reduced estimates in the neighborhood of 25 million to 26 million.

    Apple’s sales of iPads totaled 14 million, down from even recently reduced estimates for 15 million or so. Mac computer sales totaled 4.9 million units, while iPods totaled 5.3 million units.

    Apple’s gross margin totaled 40%, roughly the same as the year-earlier quarter.

    For the current quarter the company forecasts $52 billion in revenue and $11.75 per share in profit, way, way below the consensus $55.15 billion and $15.59.

    Cash and marketable securities at quarter’s end totaled $121.3 billion.

    Apple shares are set to resume trading at 4:50 pm, Eastern time, with a quote time of 4:45 pm.

    That guidance is really low – that's the real problem – especially as they didn't beat this time so now people are worried guidance might be real.  

  195. zipla

    AAPL/Phil
    "… just more screwed."
    And just more screwed again I guess. Bah!

  196. stjeanluc

    Hey, we might get a low entry to start AAPL Money!

  197. Inkarri19

    Is there any other company put there making $1B a week in FCF?

  198. stjeanluc

    Not bad so far…. $600 or so.

  199. gandhjo

    so glad I got out of half of my AAPL longs and bought lot of SQQQs – hopefully I should be positive tomorrow. AAPL has to be my worst trade ever – lots of lessons here for me

  200. Phil

    AAPL/Kong – TOS says selling a naked AAPL Nov $640 for $10 ($1,000) ties up $9,348 in net margin.  Can't imagine why you're seeing such a huge amount.  

    AAPL/Zip – Should still be able to retreat back to something but, no matter how you slice it, they are making at least $45Bn a year and growing 20% so even a p/e of 15 gives us a $675Bn valuation and they are already down to 14.5.  This is simply silly and it too shall pass but that's why we rolled for time – give it a chance to heal.  

    AAPL trading now around $600  - touched $585 but plenty of buyers there.  

    Now we see what the CC is like but I imagine that 60% International Sales is their biggest problem. 

  201. dpastramas

    AAPL is trying to pull an AMZN.  Lucky guys bought at 585$.  Thats dead on the 200MA. Maybe we visit that level in the next days

  202. lflantheman

    AAPL   Fairly muted response thus far to an earnings report that is more or less what was expected.  I actually think most of us are well positioned on AAPL, with 6 month out  BCSpreads.  If response remains muted anyone who bought puts or calls will make no headway here, as value will erode tomorrow. 

  203. Inkarri19

    Q1 EPS was estimated to be $15.75?  How can anyone realistically expect EPS to go up 40-50% from the previous quarter??

  204. gandhjo

    wow aapl holdinog up well now. It will be just a perfect day for me if AAPL holds up well tomorrow and QQQ goes down on AMZN :-)

  205. stjeanluc

    Looks like we might have actually found a bottom with AAPL!

  206. lflantheman

    Inkarri19……I'm very glad to see the Q1 guidance on AAPL at  11.75, as I've no doubt they can handily beat that when the time comes. 

  207. rustle123

    options/scottmi
     
    Before a company (especially a company with volatile moves) comes out with earnings, you will rarely see decay that week and option premiums frequently go higher right before earnings release.  The next morning you will see a tremendous amount of decay.

  208. stjeanluc

    On the other hand, DECK getting killed now… Down almost 18%. Guidance is what killed them.

  209. lflantheman

    stjeanluc….I believe you are correct.  Unless we hear something in CC that scares everyone out tomorrow, then I would not expect AAPL to get below 580.   That number is in my head as the likely real bottom. 

  210. stjeanluc

    And CSTR around $40. Hopefully that holds.

  211. gandhjo

    I still think AAPL will test 580 (can't deny TA power)

  212. 1020

    rkyroma/BBY    I live in California and recently, AMZN had to start collecting sales tax. So the advantage we had was using a BBY as a showroom to check out their products, then going home to order what we liked. As a prime member, I could get free shipping as well, with excellent AMZN two day service.
     
    38 million people live in California…..

  213. Phil

    AAPL hanging above $600.  I think this will all work out well in the end but what a friggin' ride!  

    $1Bn a week/Ink – Nope.  That's what's funny about it, what on earth are you moving your APPL money to that would be a better stock?  Stock fundamentals are so out of fashion people don't think of them as businesses.  I buy my % of AAPL for $600 and each year they make $50, that's 8.3% back on my money and I'm somewhat protected from inflation and the $50 is growing at 20% a year.  Why would I buy a TBill?  

    AAPL/Ink – It's their holiday quarter, they made $13.87 last year but, when they reported that number in Jan – they shot up from $410 to $640 (up 50%).   Revenues last year were $46.3Bn so it's interesting they are guiding $52Bn (up 12.3%) but guiding earnings at $11.75, which is DOWN 15.2% – one of these numbers does not make sense unless they are shoving a ton of R&D costs into next Q because they held their margins to revenues on the button this Q and there's no way they are diverging 27% in the next 3 months.

    DECK – Ouch!  

  214. stjeanluc

    AAPL / Phil – There is now way revenues go up 12% and earnings go down 15.2%. But we could probably see some margin compression with new products. iPhone 5 seems to be a pain to manufacture (scratches) so maybe costs have gone higher. Who knows. But not a 27% divergence… Something will have to give.

  215. Inkarri19

    AAPL has $121.25B in cash.  Wow!

  216. deano

    I think that if AAPL and AMZN both go green tomorrow, after their respective earnings, it will be extremely bullish for the market in general, and they are not far from doing so.

  217. Phil

    $121Bn/Ink – Damn, I always forget that when I'm looking at p/e.  Any responsible buy-out firm is going to take that right off the top of cap so at $600 a share that's $565Bn less $121Bn is a net cap of $444Bn and now we look at $45Bn a year and their p/e is actually 10. 30% lower than it looks.  

  218. 490union

    PHIL..AAPL….own 2015 500/600 BCS at $52…didn't sl puts yet.What do you think to max profits? Sell 2015 420puts at 50 and by back 600 calls for $21 profit and sl 700calls for 90,net 70..now in 500/700 BCS with short 420 puts.Does this make sense…I'm still learning.Thanks in advance

  219. Phil

    AAPL/490 – Still learning and still greedy I see.  AAPL could still get a downgrade and go lower, why pay to take away the insurance you have.  You make 100% if AAPL holds $600 and, if you sell puts for $40, then you make 700% at $600 – do you REALLY need to do better than having a net $12 spread that pays $100 if AAPL simply holds $600 for 24 months?  Why oh why would you take a lovely set-up like that and turn it into something much more risky?  

    You would have to spend $126 – ALL PREMIUM – to buy back the $600 calls and that takes your net up from $12 to $138 and, even if you re-cover by selling the $700s for $90, you still are in your $500s for net $48 (400% of where you started) and now, at $600, you only make $52 and at $550, you lose money instead of making $38.  If you are SO positive that AAPL can't possibly go to $550 or lower, aren't you better of gong 2x on this play, which pays $88 x 2 ($176) at $600 than 1x of your proposed spread which only pays $152 at $700?  

  220. grenowoods

    I held somebody's iPhone 5 today. Man is that thing ever light and it felt perfect in my hand. Me – after 2 weeks, I'm nine thousandth in line for my iPhone 5 at my provider in Canada. When I started I was at eleven thousand. Suggests that they just can't get supply. On the plus side, I get a $50 future credit for every two weeks I have to wait for the first month. That's just $79 short of paying for the thing!

  221. stjeanluc

    I am thinking more and more of that AAPL Money portfolio. I think that it might quench everybody's thirst for a "safer" AAPL trade. Going back again, a 2015 600/700 BCS is now $38.00. 4 of them cost $15,000. Break even is at $642. If we can sell $15,000/110 weeks = $137 a week of premium, 2 years from now we have 4 free $100 spreads or $40,000. Selling only one contract a week (or a strangle – same margin) would tie up about $25K of margin. With so little premium to sell each week, we can certainly look for safer strikes – AAPL is not going to move 10% a week. Without going for broke, we return 160% on investment if AAPL is over $700 2 years from now. It's not 500% a week, but still pretty good ROI! And who knows, a couple of great earnings and we cash in early!

  222. stjeanluc

    Not a big fab of Ayn Rand:

    http://livewire.talkingpointsmemo.com/entry/obama-ayn-rand-is-for-misunderstood-teenagers

    Obama in Rolling Stone (still the best political magazine out there)

     

    Have you ever read Ayn Rand? 
    Sure.

    What do you think Paul Ryan's obsession with her work would mean if he were vice president? 
    Well, you'd have to ask Paul Ryan what that means to him. Ayn Rand is one of those things that a lot of us, when we were 17 or 18 and feeling misunderstood, we'd pick up. Then, as we get older, we realize that a world in which we're only thinking about ourselves and not thinking about anybody else, in which we're considering the entire project of developing ourselves as more important than our relationships to other people and making sure that everybody else has opportunity – that that's a pretty narrow vision. It's not one that, I think, describes what's best in America. Unfortunately, it does seem as if sometimes that vision of a "you're on your own" society has consumed a big chunk of the Republican Party.

  223. Inkarri19

    I am seeing articles claiming that Apple's earnings were "lackluster", "misses by a wide margin", etc.  I know the MSM is here to sell junk but this is just ridiculous. 

  224. Savi

    stj—AAPL money sounds like a great idea

  225. Pharmboy

    Holy Christmas batman….A's bringing their game by not going down.  Warm fuzzy boots on the other hand….not so much.  Can we do a cloud of today's talk….one big AAPL would be in the middle of that could.

    Phil, just rename the site Apple's Stock World.

  226. jr_mints

    shadowfax, what would you consider to be a good computer set up to run multiple monitors with lots of speed that won't have to be replaced anytime soon that also won't break the bank?  I guess what I am asking is how would you spec it out?

  227. jr_mints

    STJ, re: AAPL money, I'll play!  Did I mention that I love FAS Money?

  228. Peter D

    stjeanluc/AAPL Money Portfolio – 7:01PM post,
    You got us too excited with that post.  So excited that I had to run a manual back test on it and the results weren't as good as we thought.  Selling $137 per week in premium is much harder in reality, so we'll need to scale back the bull call vertical to $60 or $80.  It still works, but needs care and maintenance.  Here is the manual back testing:
    1- Selling weeklys in Non-earning weeks -  Thursday, 9/6/12, back test: AAPL = 676

    - Need to sell a put of $0.7, which is Sep2 635 put at $0.8.  Plus selling the Sep2 720 call is $0.7.
    - The cushion is 6-7% on the put side, and same on the call side.

    2- Selling weeklys in the earning release week – 10/25/12 back test:  AAPL = 609.5

    - Nov1 570 put at $5.95 is the lowest strike available for the next Weekly (Nov1 option chain) – Kinda risky to sell prior to earnings
    - Nov1 670 call at $1.25 is the highest strike available for the next Weekly (Nov1) – also risky to sell prior to earnings

    3- Selling monthly in non-earning month – Friday 8/17/12 back test for selling September:  AAPL=648

    We'll need 5x$1.37 (5 weeks) = $6.85 premium from 1 put and call short strangle.  That means selling Sep 600 put for $3.725 and Sep 700 call for $3.5.  That's a smaller cushion that we would have liked.

    4- Selling monthly on earning months – Friday 9/21/12 back test:  AAPL = 700

    Similarly, we'll need 4x$1.37 (4 weeks) = $5.48 premium from 1 put and call short strangle.  That means selling Oct 635 put for $3 and Sep 755 call for $2.5.  We would be in trouble with this short sell as AAPL was at 632 on the expiration day.  Some nail biting would have been required.
     
    At the least, we'll need to reserve double the margin to $50,000 for adjustments, reducing the potential return to 80% for 2 years.

  229. shadowfax

    Samsung vs Apple
    http://finance.yahoo.com/news/samsung-posts-7-4-bln-234859667.html
    This was easy to see even though I didn't play it, hope sombody did!

  230. lflantheman

    I'm happy as a hog in corn, as my mother used to say.   Some years back, when I first came on the site, people asked me in what stocks I invested.  I told them "Apple".  "What else?" , they would say.   Well, not much else.   You really don't need to play 25 stocks, or even two.  You just need to trade AAPL.   Heavily traded,  narrow spreads, volatile, interesting.  An option trader's dream.   Now during the past few weeks (months?) nearly everyone on the site has focused on this stock, including Phil.  Most of us have been beaten down by trading it over the past few weeks, but not deterred.   We will continue to trade it, because it's becoming evident to many here on the site that if you do it right, you can make lots of $ trading this stock.  And we will get it more right the next 6 weeks than we did the last 6 weeks.  I may not deserve the credit for turning everyone on here to trading AAPL, but I'm going to take it anyway.  So, yes, let's just rename the site Phil's Apple Stocktrading World, and be done with it!     Sure, we'll trade a wee bit of FB, and AMZN, and this and that, just for fun, but Apple will be our focus and our moneymaker.    So where to start?   Well, I see in after hours trading that AAPL is trading within .01% of where it closed.  Know what that means?   It means earnings are over, and nobody is running scared.  It means the big buyers will move back in tomorrow and start repurchasing the stock.  It means we need to see that we have bottomed, and that we need now to take our money, and lots of it, and establish some really good long-term bullish plays on AAPL.    As I see it, here's where you will &@#% or get of the pot, as they say.  Go now, go long, go strong.  APPL will be 700+ this time next year, for sure.  Prepare your portfolios for the event.     :)

  231. scotbraze

    "It should be mentioned that Apple Inc (NASDAQ:AAPL)'s stock was halted before the company released its Q4 results"
     
    http://www.insidermonkey.com/blog/apple-inc-aapl-stock-halted-but-now-sideways-after-hours-25835/

  232. shadowfax

    jrmints
    Specing out a system is this simple. If ever to add multi-monitors you need a power supply of at least 500 watts. I personally feel you should have 12 GIG RAM  min 8 high speed? they never come included, but it must also have a minimum of 2 PCI slots to plug in the video cards, 3 would be better because cards that drive 2 monitors are about $50, the 3 monitor cards cost a lot and sometimes you need to buy more expensive monitors. Any quad processor is OK but AMDs have limitations with some setups INTL are bullet proof. The software to run multimonitors comes with the video cars. Expensive video cards are only for geeky gamers, anything does what we do, with cooling is smart.

  233. stjeanluc

    Peter – Thanks for the analysis! It's not without risk for sure. But we could give it a try. Over the last 100 weeks or so (earning and non earnings combined) AAPL averages a 2.5% weekly volatility (I ran the analysis) which is what we have work with. There will be roller-coaster weeks as we have experienced with FAS Money but there is plenty of time to recover. You are correct, you have to plan for adjustment and if we have to plan for lower returns, so be it. Even 80% over 2 years is better than what you would get with most hedge funds and we don't charge 2/20!

    I'll let Phil decide if he is interested or not!

  234. stjeanluc

    Also Peter, what do you think of using delta as a guideline for selling the strangle. For example, I imagine that a 10 delta strangle has a pretty good chance of expiring worthless. There will be weeks – this week for example, where that might not be the case, but it's earning week. Actually, I checked and a 10 delta strangle last Thursday was a 570/690 strangle for $4.17 so would have been OK anyhow even with the horrible week we have had! But premiums were inflated because of earnings. Next week the lowest delta on the put side is the 570 strike, but it's 20 and pays $6.00 so we would wait to sell. On the call side it's at the 665 strike which looks somewhat safe now. Just running some ideas now!

  235. stjeanluc

    Now that Applemania is behind us, maybe we can recover a little bit!

  236. Opesbridge

    Iflantheman / AAPL
    That was a definitive manifesto.  You are on the record!  : )
    Ron

  237. kustomz

    Japan cabinet approves $5.3 billion economic stimulus measures
    http://www.reuters.com/article/2012/10/26/japan-economy-stimulus-idUSL3E8LQ04U20121026

  238. jr_mints

    shadowfax, thanks for the guidelines, I will take them into consideration.  One more question, what do you mean by cooling, air….liquid???

  239. zeroxzero

    Phil: "Hurricane/ZZ – Looks bad but may roll back out to sea still."  Might be, but it doesn't look like that tonight.  A better guess is that it heads for New Jersey.  The two most reliable models have Sandy smacking into Seaside Heights at the moment.  The baro is very low on this one, big energy machine — Bernanke's "fiscal stimulus" dream storm, perhaps, as it looks to be quite destructive.

  240. jabobeast

    futures looking ugly now?

  241. neverworkagain

    AAPL Money / PeterD / STJ:  One other idea which would be lower stress for the covers, is rather than selling a weekly strangle, sell a 2015 $400 Putter at $40, or about $0.40 per week.  Then that leaves just $1 of caller to sell a week, which is quite a ways out of the money.  Likely the $400 putter will never be in jeopardy, and if AAPL surges to $700 in the next few months, you might be able to get out of the putter at $20 (a 50% return) and accelerate the profits.

  242. gerryf

    AAPL Money / PeterD / STJ/Never
    The 600/700 BCS at $38-$40 with the sale of the 1915 400 Put at approx $40 puts  you in the $100 spread at $0 it seems to this novice. What would be the margin required on that combination?  
    Why sell all the weeklys if you really believe APPL will be at $700 in 1915? 
    Almost like an Income Port play. 

  243. occam

    great video on apple.   
     Iflan –  you need to consider what the rest of the market will do.  AAPL is a great buy here, but an even better buy at 585 or 575/565, the area of the 50 week sma of the weekly charts, the usual area of support.  We seem to be heading into market despair here, with the NYMO possibly hitting a despair point of 100+, and we are only around 50 here.  With Apple, there is also a possible NASDAQ rebalancing, and negative wds from analysts.  They didn't seem too supportive, even the bulls (Munster); and surely CNBC will trot out a doomsday apple analyst.  In my view, the analysts weren't bullish enough, a market sentiment indicator, and others will pile on this.  Mid November may be a bottom.  I don't think this is a shit or get off the pot moment.  To let you know how I feel about AAPl, in two hours, I am buying two IPad minis!  But the stock, I can wait until it tests and goes above the AH lows.

  244. occam

    On the SPY it looks like we need 4 weeks before a buy point.  Apple will probably be a buy before then.

  245. occam

    Since I seem to be on a rant here, I'll continue . . .I think that the biggest earnings miss was Dupont.  If the biggest speciality chemicals maker is overvalued, the whole market is in trouble.  When Dupont is in the low teens, the market will bottom.  AAPL may defy this gravity.  I don't think that occurs until Jan though.  Too many headwinds.

  246. zipla

    AAPL/Phil,
    At the risk of ridicule, and since I'm still in those bulls call spread positions I mentioned yesterday, I'm thinking what I should do is buy back the shorts if there's a chance of a profit in the a.m. — if AAPL drops a little but seems to have bottomed — so I can then enter calendar spreads on the longs and sell against them over the next few months.
    You mention the advantages of the calendar spread in your repeat message to me and I see the point. If you can be patient enough to suggest some target prices I will be listening.
    Of course, in the event of a miraculous and sudden rise, and I suddenly start to break even on them, I'm sure the advice is get to f**k out and work on that QQQ spread or just straight FAS Money.
    Once burned…….

  247. diamond

    I just ordered my Black & Slate iPad mini … paid for by selling AAPL puts expiring tomorrow! :-)

  248. jerconn

    Lflan – thanks for the words of encouragement – and yes let's focus on AAPL!

  249. Phil

    Good morning!  

    Dollar 80.26 with the Euro testing $1.29 so, actually, the Dollar is pretty weak despite the Euro collapsing (again).  Pound strong(er) at $1.61 and Yen stronger too at 79.89.  Nikkei down to 8,925 for a fantastic 200-point gain ($1,000 per contract) and that's a good spot to cash in for sure.  

    Oil back to $82.23, gold $1,705 after testing $1,700 again (good spot to go long on /YG, as long as it holds), silver bounced off $31.60, now $31.72, copper testing $3.50 – not a good sign, Nat gas $3.40 and gasoline $2.62.

    Futures down about 0.75% and we have Q3 GDP numbers out at 8:30 – this is the first estimate (of 3).  Europe is down half a point but much better than Asia who were down about 1.5%.

    Friday's economic calendar:
    8:30 GDP Q3
    9:55 Reuters/UofM Consumer Sentiment
     

    Notable earnings before Friday’s openACIAONARLPAXLBCMCSACVHDANDLREGOERICGT

    HMSYIMGNIPGKKRLMLYBMCOMRKOHIOSKQSIITASRTCBVTRWY

    4:18 AM Asian and European shares are lower following disappointing results from Apple and Amazon, and ahead of U.S. GDP figures later today. Japan -1.4%, Hong Kong -1.2%, China-1.7%, India -0.7%. Euro Stoxx 50 -0.9%, London -0.5%, Paris -0.7%, Frankfurt -0.5%, Milan -1%, Madrid -1.4%. 

    6:00 AM Overseas: Japan -1.35%. Hong Kong -1.21%. China-1.68%. India -0.42%. London -0.58%. Paris -0.43%. Frankfurt-0.39%

    CEOs from more than 80 big companies pen a Deficit Manifesto urging action on the debt and deficit, saying "everything should be on the table" with tax increases and entitlement cuts essential no matter who wins in November. Not everyone agrees: Felix Salmon thinks the U.S. needs higher deficits, and Derek Thompson believes big companies want big deficits.

    "I am alarmed by the reflexive groupthink of our leaders," says David Einhorn, following Hugh Hendry at Buttonwood (live here). It's not that Fed policies are delivering a diminishing boost to growth, they're actually retarding it, he argues (anyone who has spent the last week listening to financial firms' earnings calls can attest to this).

    The fiscal cliff could knock a lot more out of GDP than the 3% being bandied about, says Jamie Dimon, because the analysis doesn't take into account people's reaction. CEOs he's talking to are clearly delaying investment decisions and hiring plans.

    Doug Kass moves to his largest long exposure in 5 months, picking up SPY along with several well-known big caps. Catching his eye is the rise in long-term bond yields amidst gloomy earnings reports. It tells him there's plenty of pent-up demand in the economy once the fiscal cliff is worked. through.

    World trade volumes declined 0.4% in August, the third consecutive monthly fall, according to the CPB, and the worst streak since the implosion following Lehman Brothers. Import volumes were down everywhere, while a 1.4% decline in the U.S. led the slide in exports.

    Japanese CPI -0.1% Y/Y in September vs consensus of -0.2%, with the continued deflation increasing the pressure – not least from the government – on the Bank of Japan to announce further easing in a policy meeting next week. Economist Yoshimasa Maruyama expects "the BOJ will top up its asset-buying program by 10T ($125B) yen."

    China hemorrhaged $3.79T in money that was smuggled out the country between 2000 and 2011, research and advocacy group Global Financial Integrity estimates. The pace of the outflow, which comes from corruption, crime or tax evasion, is speeding up. In contrast, legal foreign direct investment was $310B. "The social, political, and economic order is not sustainable in the long-run given such massive illicit outflows," says GDI. (PR)

    Spanish unemployment rises to a new record high of 25% in Q3 from 24.6% in Q2 and vs consensus of 25.1%. The figure was boosted by labor reform making it easier to fire workers.

    The Libor probe widens, reports the WSJ, with state subpoenas having been issued in August and September to 9 additional banks. Among the lenders receiving subpoenas are Bank of America (BAC), Credit Suisse (CS), Lloyds (LYG), and Royal Bank of Canada (RY).

    Bank of America (BAC) staff could face civil fraud chargesas part of a government lawsuit that accuses the bank of misrepresenting the quality of home loans its Countrywide unit sold to Fannie and Freddie, causing losses of over $1B to taxpayers. It would be a rare move given the lack of cases brought against individuals over the financial crisis. 

    Global spare oil output capacity excluding Iranian productionrose to 2M bpd in Sep-Oct from 1.8M bpd in the previous two months, Reuters reports, citing EIA estimates. The latest level is historically low but does give Western powers room to continue squeezing Iran over its nuclear program. Despite that pressure, though, preliminary data shows that Iranian crude exports have slightly increased since July.

    China's apparent oil demand climbed 9.1% Y/Y last month to an average 9.8M bbl/day, the highest on record, according to a Platts analysis. The rise marks a rebound from a 1.5% contraction in August to 8.95M bbl/day, which was the lowest since Sept. 2011. "September's strong refinery runs and rise in net oil products imports suggest underlying demand was fairly stable" in Q3.

    China received 152 bids from 83 companies in its secondauction of shale gas blocks, indicating strong interest despite high development costs and a lack of technology. After only two blocks were awarded in the first auction in June, the auction was opened to non-state-owned companies this time around.

    Gold will be at $5000 in two years, and that may be the low end of the range, claims Peter Schiff. Granted, we've already seen a spectacular run in the yellow metal over the past decade, but it's going to accelerate even more from here as the pace of inflation begins to pick up. Not only that, but the government continues debasing the dollar faster and faster, so gold logically has nowhere to else to go – but up. (video)

    "The gold miners are a source of death of insanity," says Hugh Hendry, who just completed his chat at The Buttonwood Gathering. Countries who weren't interested in your mines at $300/oz. will be very interested at $3K, he adds, explaining why he's long the metal and short the companies digging it up.

    Weak pricing and higher costs were a disastrous Q3 combo for Cliffs Natural Resources (CLF -9.4%): Cash costs in CLF’s Canadian division rose 21% Y/Y to $106.06/ton, while the price of seaborne iron ore fell 36% to an average $112/metric ton vs. $176. CLF says key Q4 goals include continued expansion of the Bloom Lake mine and maintaining the dividend through this business cycle.

    As Pharm has been telling us:  Drug companies are facing a "patent cliff" this quarter, where patents for drugs expire in major territories but aren't replaced quickly enough to replace lost revenues. Three major European drug companies have already experienced earnings declines so far this quarter, which emphasizes the challenge facing pharmaceutical companies as drugs lose patent protection and competition increases from cheaper versions. 

    More on Deckers Outdoor's (DECK) Q3: Cites warm weather and high costs for sheepskin as two drags on results. Ugg sales down 11.6% Y/Y to $332.8M. The company cuts its outlook for Q4 sales growth to 6%, from a prior estimate of 19%. A trading halt has come and gone, shares -15.7% to $30.02 AH. (PR)

    Coinstar (CSTR): Q3 EPS of $1.14 misses by $0.02. Revenue of $537.6M (+15.5% Y/Y) misses by $24M. Shares -10.4%AH. (PR)

    More on Coinstar's (CSTR) Q3: The company cites the Olympics as negative influence on consumer viewership during the quarter. Redbox segment revenue up 17.9% to $459.5M. Coin segment revenue increased 2.8% to $77.6M. Looking to Q4, the firm notes a soft quarter for titles in Q3 could affect the pace of returning customers. For full-year 2012, expects revenue of $2.19B-$2.24B and EPS of $4.50-$4.60. Shares -7.5% AH to touch a 52-week low. (PR)

    I told you 3D TV was a huge mistake:  Big screen TVs are making a comeback as consumers pass on 3D TVs and play a waiting game to buy connected devices that can function for sports and other live events. The NPD Group estimates sales in the U.S. of TVs 55 inches and bigger grew at a 28% clip in H1 of 2012 after seeing flat sales, due to lowee prices, in the recent past. Big screen manufacturers hoping for a boom: Samsung (SSNLF.PK), Sony (SNE), Panasonic (PC).

    Someone has to stop this idiot!  "Is it fair to say we're going to do more hardware? Obviously we are…," says Steve Ballmer, making clear Microsoft Surface (MSFT) isn't a one-off product for the software giant. PC OEMs, some of whom are already upset over Surface, might not be happy to hear that, but it's not as if Google, their main alternative, is acting any differently. Ballmer has already hinted at a stronger hardware push by Microsoft, which now sees Apple as its biggest enemy. (Surface RT reviews) (Windows 8 reviews) 

    Wow!  Samsung (SSNLF.PK): Q3 net profit +91% to 6.56T won ($6B), third straight quarter of record profit. Sales +26% to 52.2T won. Telecom unit op profit more than doubles to 5.63T won, boosted by sales of Galaxy S III. Chip division -28% to 1.15T won. Company indicates that momentum may stall in Q4, saying it "expects market competition to intensify" and "muted" seasonal demand due to the global economy. (PR)

  250. Phil


    Samsung (
    SSNLF.PK) didn't say in its Q3 report, but research firm Strategy Analytics estimates that the Korean firm shipped 56.9M smartphones in Q3, taking 35.2% market share and keeping hold of the lead. Apple (AAPL) retained second place with 26.9M handsets, or 16.6% share. Nokia (NOK) slipped out of top three for the first time. Total global shipments +35% Y/Y to 162M units.

    Best Buy (BBY) looks like it's finally making online atop priority based on its recent moves (online price matching) and recent hires. The company will pour resources into an Internet business which analysts say should be much larger than ~$2.5B per year in sales it churns up right now. Separate sales channels will be set up for categories for the first time.

    More on Amazon (AMZN): Q3 loss includes a $0.37 per share hit from LivingSocial related to impairment. Product revenue +23.1% Y/Y to $11.55B. Service revenue +51% Y/Y to $2.26B Company expects Q4 net sales of $20.25B-$22.75B.  Conference call at 5:00 ET. (PR)

    Amazon (AMZN) was as secretive as ever during its Q3 call (webcast/slides). No comment on which European markets are weak, and no comment on the impact of sales taxes (it now collects on over 50% of sales). Amazon also dodged an amusing question about whether it's made a "philosophical" decision to keep running near breakeven. But it did note paid unit growth was 39% Y/Y, and active customer accounts rose by 8M Q/Q to 188M. Gross margin was 25.2%, down a bit from Q2's 9-year high of 26.1%. Shares -0.9% AH – like Apple, some bad news was priced in. (more)

    More on Amazon: Q4 revenue guidance is below a $22.8B consensus. Q4 operating income (inc. stock compensation) expected to be anywhere from -$490M to +$310M vs. +$260M in year-ago period. North American revenue +33% Y/Y (includes web services), international only +20% (would be +27% if not for forex). Media sales +11%, other merchandise +36%. Headcount rose by 12.3K Q/Q to 81.4K, fulfillment expenses +36% Y/Y, technology/content expenses +55%. (PR)

    Pandora (P -11.7%rises 3.7% AH after music execs tell CNET Apple's (AAPL) Internet radio service is far from a done deal. Though requesting more flexibility for its service than what Pandora and others can offer, Apple reportedly is pushing for a lower royalty rate, and some think its offered cut on iAd sales isn't high enough. However, studios are said to be worried a spurned Apple could join Pandora in supporting the Internet Radio Fairness Act. (Bloomberg report) (more on Apple)

    Apple states on its FQ4 call (webcastlive blog) it expects an FQ1 gross margin of 36%, down 400 bps Q/Q and 870 bps Y/Y – growing iPad/iPad Mini sales bear some responsibility. Tim Cook says it's hard to predict when iPhone 5 supply will match demand. FQ4 iTunes sales totaled $2.1B, and 1.3M Apple TVs were sold (+100% Y/Y). China sales +26% Y/Y (about even with total growth) and 15% of total. iPad channel inventories are slightly above target, iPhone inventories are below. 82% of cash is offshore. AAPL -0.4% AH. (more) 

    More on Apple's FQ4: FQ1 guidance is for revenue of $52B and EPS of $11.75, below a consensus of $55B and $15.41 – guidance is typically conservative, but the EPS figure indicates margin pressure. iPhone sales above expectations, but iPad below lowered estimates. Gross margin was 40%, down 280 bps Q/Q and 30 bps Y/Y. Exc. retail, Americas revenue +43% Y/Y and Japan +113% (higher than FQ3), but Europe just +8% and Asia-Pac +15% (lower than FQ3). Retail +18%. AAPL still halted, to resume trading at 4:50PM ET. CC at 5PM. (webcast). (PR) 

    More on Apple: Cash balance stood at $121.3B at end of FQ4. 4.9M Macs shipped (+1% Y/Y). iPhone (main profit engine) units +58% Y/Y and revenue +56% (up from +28% and +22% in FQ3). iPad units +26% and revenue +9%, a major slowdown partly caused by inventory changes. Mac desktop units -24%, notebooks +9%. iPod units -19% and revenue -26%. Implied iPhone ASP of $636 ($625 in FQ3), iPad ASP of $536 ($538 in FQ3). Bad news was clearly priced in. CC at 5PM ET (webcast).

    More on Apple: Though some are unhappy with the iPad Mini's pricing, CFO Peter Oppenheimer claims its gross margin is "significantly below" that of other Apple products. He also calls FQ1 and its expected margin drop "the height of the cost curve" for Apple. Tim Cook calls Microsoft Surface a compromised and confusing product, and promises Apple will never release a 7" tablet – the 7.9" Mini's display is 35% bigger. Apple thinks some iPad purchases were delayed due to iPad Mini rumors. The new iMac is facing supply constraints. AAPL nearly unchanged AH. (live blog)


  251. stjeanluc

    AAPL / gerryf – That's true, but where would be the fun… Margin wise, not much of a difference – you'll need about 30K for 4 of the BCS + short put setup.

  252. Phil

    APPL Money/StJ – I'm all for it.  Something like a 2015 $550/700 bull call spread at $60 means we're buying in at net $610 (I really have no idea why anyone would buy the stock) and we have $90 of potential upside (150%).  With 27 months to sell, we will be thrilled to make $3 a month and I'd go with 4 longs, tying up $24K and we'll sell generally 1-2 calls and or puts at a time. Realistically, I think it's great to combine that long spread with the short 2015 $360 puts at $40 for net $20 on the $150 spread.  TOS says margin on the shorts is $15K for 4, which I think is pretty worthwhile as you tie up $39K in cash and margin to be in 4 AAPL 2015 $550s at $20 with an upside cap of $150, so $52K upside at $700 on 4 spreads (133% return on cash and margin) and worst case is owning 400 AAPL at net $380 ($152K), which would be $76K margin and, of course, 37% off the current price.  So, for this trade, you need to start with $50K in cash and $100K in margin as I'm pretty sure the short call sales won't be more than $24K in margin but that's against the worst case drop – otherwise there'd be $61,000 in margin available for short selling.

    Rolling Stone/StJ – They really do good work.  Thank goodness someone still does journalism.  

    AAPL Stock World/Pharm – Could make a good-selling newsletter.  

    Computers/Jr – My .02 is to just call Dell and tell them what you want because they'll test and configure it for you unless you are really good at resolving conflict issues with multiple video cards and drivers.   There are also companies that specialize in multi-monitor set-ups if your goal is convenience over cost.  Personally, I have 3 monitors on my main Dell computer – a Mac 30" display (which holds 3 full-page windows) and it's flanked by 2 21" Dells on each side and I'm doing DTP plus watching stocks.  On the left side of that (I have a wrap-around corner desk) I have a 27" IMac that does nothing but Power Etrade Pro and on the right side I have an HPQ Touch Smart 23" with nothing but ThinkorSwim.  I have found that it's good to offload the trading platforms to separate processors.  On my main Dell, I have generally 5 windows open – full screens on the left and right screens and 3 long pages in the middle and each one has about 6 tabs so 30 screens of stuff right in front of me.  That's what I ended up with after years of trial and error and I'm very happy with it.  

    Nice analysis Peter but don't take away the fun of decision-making.  I'm sure FAS Money would have a similar outcome in a back-test but we manage to consistently outperform that too.  

    Samsung/Shadow – Very impressive.  They make their stuff for nothing apparently. 

    Applefesto/Lflan – Viva la revolution! 

    Big Chart much uglier this morning.  I guess they are jamming the 200 dmas on the Dow, Nas and RUT.

    Japan/Kustomz – I think it was $10Bn but what a joke.  Why even bother?  

    Hurricane/ZZ – They have my town preparing for floods (we flood badly – not me, I'm up on a mountain but all the little people that we trickle down on) and school closings and power outages so I guess they are pretty worried about it hitting NJ on Monday.  

    AAPL/Zip – How about not making rash decisions on a daily basis?  At this point, it might be prudent to see what happens and maybe consider whether or not you can move to the above AAPL money play, which has a 133% return on cash and margin, not including the weekly sales, if AAPL climbs 15% in 2 years.  Even if you just do the bull call spread and nothing else, you essentially own AAPL at net $610 and that costs $6,000 per contract and makes up to $9,000 at $700 (150% on cash).  That's the best way to try to make money on AAPL but yes, FAS Money should get better returns.  

    Mini/Diamond – Very nice.

    Damn, late for work again!  

    Pre-market recovering but nothing matters until GDP at 8:30. 

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