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Merry Monday Morning – Will Santa Come to Town?

Is it time for the Santa Clause Rally?

For a thing people seem to take for granted – they never seem to know what time (or day) it's supposed to start or how big it's supposed to be or how long it's supposed to last.  That doesn't stop the MSM from obsessing over the "Santa Clause Rally" each December and, the closer we get to Christmas – the more likely they are to claim any forward market movement to be a rally – much as my daughter used to call any old man with white hair and a beard Santa when she was five and we'd be in New York during the holidays.  

If you believe in something hard enough – you can see it.  Some call that faith, some wishful thinking, some madness and hallucinations.  There's a lot of all of that in Stock Market Technicians and the truly "faithful" are put on television and given the task of recruiting others to their cause.  Sometimes they share visions of the futures and sometimes they even show signs of the prophesies being fulfilled – and who doesn't love being shown a quick and easy way to get into heaven?  

At our PSW Conference in Las Vegas last month, we spent a lot of time extolling the virtues of slow, steady investing strategies.  While it's fun to "bet" on short-term market moves, Santa Rallies, Fiscal Cliffs, etc (whatever the fad of the moment may be) – investors often lose focus in WHY we are investing in the first place – and that's to BUILD a future for ourselves.  

There are two ways to build a building.  One way is to save up money each month, buy materials, make plans and set aside time to put in labor and keep repeating the process week after week, year after year – until the project is completed.  The other way is to save up money each month, gamble it – and hope one day you win enough to buy a building with.  The first way has a 99% success rate and lets people retire in buildings they built and earned through years of hard work.  The second way has a 15% success rate and lets people retire in buildings they lucked into.  Unfortunately, most "investors" prefer to take method number 2.   

We spend a lot of time with new Members at PSW trying to break them of these bad habits.  This morning, for example, in our Member Chat, we discussed a trade idea for T in which we buy the stock for $34 and sell 2015 $30 puts and calls for $8.50 for a net entry of $25.50.  If the stock is called away at $30 in Jan 2015, we make $4.50 but we also collect (assuming it doesn't change) $3.60 in dividends for a total profit of $8.10 against our $25.50 entry.  That's a pretty nice 31.7% return over 2 years and our worst case is we are forced to buy another round of T at $30 (from the puts) if the stock is below there and then we have 2x T at net $27.75 but we still collect our $3.60 in dividends so net/net $26.15 per share, which is 23% below the current price.  

So here's an INVESTMENT, where we either make 31.7% over two years (and all T has to do is hold $30 to collect in full so it's got a built-in 11.7% hedge) of we buy 2x worth of T over two years at a 23% discount and THEN we would roll into a similar spread to further reduce the costs.  This is, I realize, VERY BORING but, if you invest like this regularly, the returns can be VERY EXCITING over time.  

We discuss more on this subject in "Dividend Investing – Giving Yourself and Automatic Edge" but what you have to be willing to give up to be this kind of investor is the excitement of short-term investing.  There's nothing exciting about building a portfolio of blue-chip stocks and working your way into long-term, inexpensive entries over time.  In fact, what we are taking advantage of by being the sellers of long-term premium, is the IMpatience of others – who would rather pay $4.80 for a 2015 $30 call on T, for the thrill of leverage, than just buy the stock for $34.  That $1.80 of premium they pay is what we collect as a bonus for actually being willing to buy the stock and BE PATIENT. 

Our advantage is we KNOW, for a fact, that we will collect that $1.80.  Whether T goes up, down or sideways.  That means that if we ALWAYS own T and we ALWAYS sell that premium, that after 19 sales cycles, we will have collected 100% of the stock's price back in premium.  Let's say we had done that with a terrible stock like Yahoo for the past 20 years.  Even though it's down from $300 to $18.77 today (and YHOO is no blue-chip!), the bottom line is it's still a free stock by now and we STILL can sell the 2015 $17 calls $4.40.  That's money for nothin' (and chicks for free).  Is it possible everything we ever needed to know about long-range investing was explained to us by MTV 30 years ago?  I guess so…

That ain't workin' that's the way you do it
Money for nothin' and chicks for free
Now that ain't workin' that's the way you do it
Lemme tell ya them guys ain't dumb

Them guys on Wall Street are not dumb.  They built these casinos and they charge their fees win, lose or draw and that built up a tremendous Financial Industry in the US.  The mistake they made – that many men make – is simple greed.  In going public they went from being long-range, goal-oriented investors to short-term gamblers who felt forced to outperform themselves quarter over quarter and we know how that ended – the wealth accumulated over generations of investing squandered in just a few years – gambled away like it was nothing.  

It's so easy to get rich.  Take $10,000.  Put it in an account that makes 6%.  Add $1,000 a month.  Wait 20 years.  $500,000.  There – that wasn't hard, was it?  Won't inflation wipe it out?  NO.  Did you have $1,000 a month to put away for the past 20 years?  Would $500,000 be nice now?  Well, then inflation wasn't an issue, was it?  

Keep going for another 20 years and that same plan grows to $2M and, 20 years after that, $7M.  Now, go smack your kid in the back of the head and tell him to open up a savings plan – NOW!  If you are well off – set one up for each of your children or grandchildren – $10,000 down and $12,000 a year for your baby grandchild and you've given them $1M on their 30th birthday.  That's all it takes to be an INVESTOR – is it worth being a gambler when investing pays so well?  

The blue-chip dividend strategy we discussed with T and other stocks we use at PSW to get the best of both worlds can return 15-20% on a fairly regular annual basis.  Call it just 12% a year and it's only 20 years to your first million by sacrificing just $1,000 a month to "boring" investments.  

I would encourage you to play with the compound interest calculator and think about making an investment plan for your FUTURE – that means not next year, but for the rest of your life.  Where do you want to be in 10 years, 20 years, 30 years and how are you PLANNING to get there with your current investments?  Let's spend December looking for those long-term opportunities that will be under our tree for many years – not just the poppers that give us a quick thrill and are gone.   

Of course there's room for both – but let's all try to build something that will last this year.  


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  1. stjeanluc

    Oil Lines

    R3 – 90.70
    R2 – 89.84
    R1 – 89.39
    PP – 88.53
    S1 – 88.08
    S2 – 87.22
    S3 – 86.77

    Friday's high and low – 88.99/87.68
    Daily Fib lines – 89.79/89.34 and 87.37/87.17

  2. 1020

    Good Morning!

  3. Pharmboy

    Buenos dias….y PP para ti!

  4. albo

    WOW !   Goldman goes from sell to buy on DELL>

  5. stjeanluc

    Saw that Albo… Good for you! I think that will do OK in the long run.

  6. stjeanluc

    $1000 a month / Phil – How many people in the bottom 50% can even dream of that though… Or even the bottom 75%? Up to 12 years ago, I could not do it and I lived well within my means! 

    But even if you start with $200/month when you are 20 years old, you do well by the time you retire. I have been banging on my kids head about that. My oldest one is getting the message, the youngest one still needs a little work!

  7. jelutuck

    The SVU Cerberus buyout falters and the stock is up 13%.  Any insight into  what is going on with this stock we love to hate?

  8. stjeanluc

  9. stjeanluc

  10. stjeanluc

  11. stjeanluc

  12. neetcorp

    the large POMO sell operation this morning

  13. stjeanluc

  14. rpme

    How can Germany and France be outpacing the U.S market when they are in a recession? Should they not start heading the other way and the Euro weakening?

  15. yodi

    stjeanluc
    Keep on bashing their heads My father even made me save out of my 5 DM pocket money!!!!

  16. Pharmboy

    rpme – not when Germany and France are going through austerity and we are throwing money out the window.  Has nothing to do with the 'market' and everything to do with paper……this will serve as the winds of change….

  17. lflantheman

    MoMo trade:   STC  6 CMG Dec 22 276 calls for 3.30.  Significant loss on that trade.  We move on. 

  18. Pharmboy

    FYI – you have seen the companies before, but an article on SGEN, PGNX and CLDX.

  19. yodi

    Decker up 3.55$

  20. phil

    Good morning!  

    Merkel said Greece may possibly be able to write off some debt down the road.  Big change of posture and very bullish.  

    Spain finally asked for the $50Bn they don't need – people are happy about that too.

    Dollar below 80 also helping markets and people still happy about those improving PMI reports (see weekend comments).  

    Oil testing $90 but gold still $1,718, so mixed signal on commodities.  Gasoline up too ($2.76), nat gas $3.59, silver $33.71 and copper $3.64.  

    We're holding a jammed-up open so far but we'll see what happens when the volume comes in.  You know I don't like pre-market rallies…

    DELL/Albo – Interesting flip-flop.  Very good call on buying them a couple of weeks ago at $9 – congrats.  

    Starting/StJ – It doesn't really matter what you start with, it's the discipline that counts.  When you get a raise, you need to save more – not save the same and spend the rest.  That's a huge mistake young people make.  Savings seems like a punishment to people – that makes it tough to make a habit out of it.  If you think about it, if we had saved that $1,000 a month 20 years ago and it was now $500K, at 6% it would already be spitting back $2,500 a month.  Even if you came out of college with a $35,000 job and now have a $70,000 job – it's still a big bump to your monthly income but the key would be upping your own contributions to $2K a month and keep the cycle going.  The problem is people are so conditioned to buy a bigger house, bigger car, better vacation, etc. – they spend away their future on all the short-term BS.  

    SVU/Jet – Falters is not broken so hope is still there that a deal may come.  Last week, people thought Cerberus was out so the fact they are looking at alternatives is a relief.

    Wow, pretty quick reversal.  

    FAS Money still my favorite way to play.  Gotta take $2 for 2 of the weekly $109s – even though we're right on the money – it's a silly amount to pay us.  

    $25KP still keeps falling up but it's a tricky time. 

    AAPL Money caught up to $25KP already (up $15K in 60 days).  

    Germany and France/Rpme – One would think but sentiment there has been terrible.  It's really the US markets that should be much higher as we totally over-reacted to the gloom of other markets while our own economy has been improving pretty steadily.  So, if the rally is real, look for us to pull some serious breakouts.  

  21. kustomz

    ISM sucked 49.5 vs 51.3 exp

  22. albo

    Watching GOOG.  Stock has been strong, but so far rejected at the 50 SMA.  Not a lot of resistance in here.

  23. lflantheman

    MoMo trade:    5 AMZN Jan 19 250 calls sold for 10.87  or + 12%.  Not the last of that one.  We'll be back later.

  24. jabobeast

    neetcorp;
    what are you thinking?
    the large POMO sell operation this morning

  25. jabobeast

    Phil—today's writeup is fantastic… thank you!

  26. neetcorp

    jabobeast,
    What' I mean is Outright Treasury Coupon Sales that will increase the risk for an oping gap reversal.

  27. jabobeast

    thanks neetcorp…
     
    even if I don't know what an oping gap reversal is ;-)

  28. phil

    Father/Yodi – Now THAT's saving!  My grandparents always had a big jar for change by the door and we'd always empty our pockets when we came home and put all change in.   When we went on vacations, Grandma would take us to the bank with a jar or two and we'd cash it in and that was our spending money – which was quite a lot!  Always a good lesson for kids.  

    Supercycle/Pharm – Elliot wavers still on the Doom Train?  

    ISM was painful but market shaking it off.   Probably getting a pass on hurricane while Construction Spending is very encouraging.  

    AAPL playing with $590 while GOOG plays at $700.

    At the open: Dow +0.42% to 13080. S&P +0.49% to 1423. Nasdaq +0.65% to 3030.

    Treasurys: 30-year -0.5%. 10-yr -0.21%. 5-yr -0.1%.

    Commodities: Crude +1.45% to $90.2. Gold +0.24% to $1716.85.

    Currencies: Euro +0.4% vs. dollar. Yen -0.16%. Pound -0.39%.

    10:00 AM On the hour: Dow -0.07%. 10-yr -0.07%. Euro +0.47% vs. dollar. Crude +0.87% to $89.68. Gold +0.56% to $1722.35.

    The Fed ought to pare back its purchases of Treasurys to $25B/month in 2013, the St. Louis Fed's James Bullard tells the WSJ, arguing it would be just as stimulative as the $45B currently being undertaken in Operation Twist. It's pretty frightening this is what passes for hawkish at the Fed these days.

    Oct. Construction Spending: +1.4%, vs. +0.4% expected, +0.6% prior.

    Nov. ISM Manufacturing Index: 49.5 vs. 51.7 consensus and 51.7 prior. Prices index 52.5 vs. 55.0 prior. Employment 48.4 vs. 52.1 prior. Inventories 45.0 vs. 50.0 prior. New orders 50.3 vs. 54.2 prior.

    More on the ISM report: The 49.5 read is a big miss, the 4th contraction in 6 months, and the lowest print since July 2009. It was led by big drops in New Orders and Employment, but also Inventories, which declined 5 points to 45. Customers' Inventories dove 6.5 points to 42.5, suggesting purchasing managers feel they've gotten far too lean. Stocks give up a chunk of their early gains, the S&P 500 +0.2%.

    US Nov PMI Manufacturing rises to 52.8 vs consensus of 52.1, 51.0 in Oct. Output 53.5 vs. 51.4 in Oct. New Orders 53.6 vs. 51.1 in Oct. Employment 52.6 vs. 51.8 in Oct. (PR)

    More on the Markit PMI (the ISM read is set for 10 ET): The 52.8 print is the highest level in 6 months and ahead of the flash read of 52.4. Of particular note are New Export Orders, which jumped to 50.3 from 47.2, the first time in expansion in 6 months. "The boost in the figures can also be partly attributed to new work resulting from Hurricane Sandy," says Markit.

    The FRBNY's Bill Dudley notes a widening spread between primary and secondary mortgage rates. In English, lower mortgage rates as a result of the Fed's MBS purchases are not being fed through to consumers. Who could have guessed that ever happening? It's no shock to mREITs, many of whom have noted origination capacity – decimated during the financial crisis – isn't coming back overnight. For those still in the origination business, it means fat profits.

    1:40 PM Fed's Bullard: U.S. Economic and Monetary Policy

    Not surprising given the firm's 1575 target for the S&P 500 next year, Goldman's Global Strategy Team upgrades U.S. equities to Overweight for the next 3 months. Global growth is "a hump to get over, then a clear road ahead," is #1 among the Top 10 themes for 2013.

    Nobody could have seen this coming: Implementation of Basel III by the eurozone isn't happening in January. "It is unrealistic" to expect such, says the Bundesbank's Andreas Dombret. His best guess is for the middle of 2013. The U.S. has already postponed indefinitely its implementation of the rules. 

    Germany will balance its public finances this year after previously forecasting a deficit of 0.5% of GDP. The finance ministry has cut its debt-GDP ratio forecast to 81.5% from 83.5%, with federal net new borrowing expected at €25B vs a prior prediction of €28.1B

    Greek 10-year bond yields plummet 1.46 percentage points to 14.66% following the government's release of details about its debt buyback program, while the ASE share index rises 1.3% in Athens. Spanish bond yields are also falling, down 9 bps to 5.22%. 

    Negative deposit rates may come to Switzerland as Credit Suisse reportedly informs clients it intends to make them pay for the privilege of banking cash there. The euro/Swiss franc cross shoots higher to CHF 1.2090, well above the SNB floor of 1.20, and perhaps taking pressure off the bank to keep buying every euro in sight.

    Japanese capital spending excluding software +2.4% Y/Y in Q3 vs +6.6% in previous quarter and consensus of +1%. The report adds to the unexpected 1.8% increase in industrial production in October and indicates that Japan's contraction could be a short one, although economists at RBS and Daiichi Life still believe the economy will shrink in Q4.

    China PMI Rises But Misses Expectations For Fifth Month In A Row As Uncertainty Prevails. (graph)

    Shanghai’s disturbing stock slump. The benchmark Shanghai Composite Index ended last week near four-year lows, having lost a total of 67% since its October 2007 record high.

    The National Association of Insurance Commissioners has voted in favor of new regulations for how life insurers fix reserves for future claims in a decision that could free up billions of dollars for acquisitions, dividend increases and buybacks. However, critics, who include New York's Benjamin Lawsky, fear that insurers will become under-reserved and vulnerable to economic downturns.

    Shares of Supervalu (SVU) are up 13% premarket as Cerberus continues to drive closer to a purchase (full or partial) of the grocery store chain's assets. With shares swapping hands at $2.68, the dreamy bulls who were calling out a run to $3 for SVU are starting to look good.

    Shares of Best Buy (BBY) move up 1.2% premarket with the progression of Richard Schulze's bid to take the firm private still a major focus of investors. Also in the mix is the profitable quarter (III) just turned in by Conn's on the back of its double-digit same store sales growth. Did Conn's push the right button by focusing on furniture over lower margin consumer electronics items? Just ask RadioShack (RSH), down 79% YTD.

    News Corp. (NWS) has reportedly advanced its break-upinto two companies to the end of this month in order to limit the damage from the U.K. phone-hacking scandal to the publishing arm of the firm. In June, Rupert Murdoch said the unit's split from the film and TV business would take 12 months. The speculation comes along with reports that WSJ managing editor Robert Thomson will become CEO of the publishing ops, while News International CEO Tom Mockridge is leaving.

    Research in Motion (RIMM) is downgraded to Sell at Canaccord, which says the fundamentals don't support the recent 30% gain in the stock price. The BB10 is an improvement, says Canaccord's Mike Walkley, but he assigns "a very low probability" it can turn around the company's long-term business trends. Shares-1.7% premarket.

    The iPhone 5 will be available in over 50 additional countries from Dec. 7-Dec. 21, including South Korea, Russia, and Brazil, says Apple (AAPL). Along with announcing a Dec. 14 Chinese iPhone launch on Friday, Apple mentioned the iPhone 5 was available in 47 countries, a number that disappointed some. But with supply constraints lifting, it looks like the company will support close to 100 by year's end. Shares +1.1%, following tech higher. (PR)

    The Surface: I Came, I Saw, I Left (Jeff Matthews Is Not Making This Up)

    The he-said-she-said posturing over the fiscal cliff continued over the weekend, with Republicans and Democrats saying that the other will be to blame if the economy falls over the edge, which they both said it might do. Jim Kessler of The Third Way think tank says that while "this thing could fall apart…there's still a few more days where we should expect this kind of rhetoric before they start to coalesce around a deal."

  29. neetcorp

    jabobeast.
    An oping gap reversal : Market gap up and reverse back to the last day closing point or lower later.

  30. rustle123

    Great clip of someone giving it to Fox News as his interview got cut short immediately:
     
    http://www.upworthy.com/the-one-where-a-national-security-expert-says-what-we-all-know-to-fox-newss-face?c=upw1

  31. jabobeast

    neetcorp ;-)
     
    will you please have that done with PCLN!!!!

  32. neetcorp

    jabobeast,
    I don't play PCLN, P/E too high.

  33. phil

    Thanks Jabob.  

    Fox/Rustle – Aren't they funny?  It would be great if more moderate guests would simply stop going on Fox and playing their games.  By just showing up and answering their ridiculous questions, it gives them legitimacy they shouldn't have.  

    Good chart of Corporate Profits to GDP (red) and Corporate wages to GDP (blue) since 1940 – you can sell the transfer of wealth kick into high gear the second Bush takes over in that interesting election of 2000. 

    image

    This is what the Reps are now fighting tooth and nail to protect.  It's a war of many fronts – labor laws, wages, taxes, regulations, commodity regulations – but it's the end result of all those little changes that makes the big difference – Corporate Profits up over 100%, Wages down 10%.  Can we afford another decade like that?  

  34. Burrben

    Phil /  20 Richest Debt Free companies in the world
    What do you think about this screen and it's results?  Any interesting ideas you like?
     
    zero debt; total cash and short-term investments of at least 10 per cent relative to total assets;
    total assets of at least $100-million;
    market capitalization of more than $1-billion;
    positive free cash flow that is growing year-over-year.
    Each firm had to have an average analyst recommendation of “hold” or better (1=buy, 3=hold, 5=sell);
    Companies involved in lawsuits or legal issues over the past 12 months were excluded.
    http://www.theglobeandmail.com/globe-investor/investment-ideas/number-cruncher/the-20-richest-debt-free-companies-in-the-world/article5815397/

  35. phil

  36. Savi

    Good Afternoon—-
    Phil--glad you are feeling better

  37. Inkarri19

    Hello All – I keep reading articles on the SS debate.  Unless I am wrong, the SS Trust Fund money was spent long ago and since the US doesn't have a savings account somewhere with trillions of dollars in it, it has to either borrow and/or print money to give to SS when there is a deficit.  The SS Trust Fund money is gone.  Am I missing something here when I hear people say the SS is not in trouble? 

  38. kinkistyle

    "Shanghai’s disturbing stock slump. The benchmark Shanghai Composite Index ended last week near four-year lows, having lost a total of 67% since its October 2007 record high."

     
    Does "disturbing" mean we are hitting some sort of a bottom in China?

  39. williex

    Stjean
     
    I've been away on a project and just now getting back into managing the portfolio.  Last time I was around you were talking about buying leaps and selling calls against them.  have you started? 
     
    I talked to the broker about SKX and he went into that was a plan used when interest rates were high and that with interest rates being low they haven't been doing it.  He went into a lot of other stuff that lost me but he never said don't do it.  Is this still something you are looking at?  

  40. 8800

    Phil,
    Since we seem to be in paint-drying watchfullness behind the fiscal cliff issue I wanted to re-post a question on Divid Investing/conservative investing topic you addressed very persuasively last w/e and again today.
    Unless we get a 20--40% correction, we are essentially only committing 25% of capital to buy-writes, etc (and selling serial calls) which generates a very healthy 12-17% ROI on capital actually invested. However, if the mkt continues w/o a >20% correction, then the balance of the acct (75%) remains in cash (uncommitted) dropping the ROI to 3-4%. Is there any conservative strategy that could be used to augment the ROI in keeping with this dividend appr to achieve the goal of being more fully invested other than waiting for a significant correction? Relevant for us folks nearing retirement. Understandable if you prefer to respond later to this in the Dividend Investing post.
    Thanks

  41. Pharmboy

    So, THIS IS WHY we invest in biotechs…..and why I work in one.

    Over the past generation, the economics of drug development have grown ugly. A U.K. think tank reviewed the literature and concluded that the average cost of developing an approved drug has increased tenfold, jumping from $199 million to $1.9 billion since the 1970s. And the Office of Health Economics fingered four key factors for the math: soaring out-of-pocket research costs--in inflation-adjusted dollars--a success rate that's been dramatically cut in half, a vastly longer amount of time spent in the clinic and a significantly increased cost of capital as regulatory demands grew alongside scientific complexity.

    The OHE asserts that out-of-pocket R&D costs have surged 600% since the 1970s. Meanwhile, the chances of success dwindled from one in 5 to one in 10. And the average time it takes to get the data needed for an approval jumped from 6 years to 13.5 years. While probably not a shock to anyone who's been observing the industry in the past decade, they are also some of the worst figures ever used to explain development costs.

    There have been a number of figures bandied about in recent years over the toll rising R&D costs and the rising risk of drug development have had on the industry. When pharma companies aren't using these figures to cite the need for a radical overhaul of the whole development process while axing unproductive efforts, they're also used to defend the rising cost of new drugs. The numbers in this report--partially financed by AstraZeneca ($AZN), which knows firsthand just how painful clinical failure has become--also help explain why regulatory issues can be so frustrating for industry groups.

    The Financial Times looked over the full report and concluded that among the most important lessons in the numbers is that pharma companies would be well advised to spend more time in earlier-stage research before rushing a drug into expensive late-stage testing. Biotech companies can be an efficient source of less-risky products, notes the FT. Also, as the scientific complexity of drug development has increased, there's a greater need for better collaborative efforts to reduce risks.

  42. Pharmboy

    On that front (animal health), we are getting closer to getting the asset out of my old company.  Negotiations are underway, so should be after Christmas now (ugh!).  Once we are there, I will come knocking…for those that expressed interest….

  43. stjeanluc

    Calendars / Willie – Indeed, I still think that  it's a good plan. I don't know what your broker is talking about though… And remember, we are not looking at home runs, just making 20% a year would be good for me.

    Right now, I am looking at QCOM as my first trade. These guys have chips in just about everything – phone, tablets, etc… They are not cheap, but they might not get cheap for a while unless we hit a brick wall sometimes. A discounted cash flow analysis gives a value of about $50 to the company so that I would be my anchor for the 2015 calls.These 2015 calls only have $4 of premium and you have 8 quarters to recoup that. You could start by selling the Jan 13 65 calls for $1.10 and that's 25% of the premium there. I don't want to go further in time because they report on 2/6. We can sell more premium after they report. That 50/65 diagonal is profitable between 62 and 75, not much protection on the downside, but plenty on the upside which is good for me. You can sell different strikes based on what you want in protection. For example, if you are really bullish, you can sell the 70 strike and you have no risk on the upside but no protection on the downside. Up to you. And I might close that trade in January depending in where we are but I would rather get going from there. I fully expect that QCOM will be higher than $70 by 2015…

  44. 1020

    Pharm/This is why….. I'll just wait for your opinion in this area…. ;)

  45. Pharmboy

    NFLX…fall on face n go boom…..

  46. hextra8

    Phil,
    Need your advice on EXPE. Have the Dec. $45 puts @ 2.20 (+ $1,088 to date). Should I take profits? Let it expire? Thanks.

  47. phil

    20 Richest/Burr – It's a good scan.  I'll check it out. 

    Thanks Savi.

    SS/Ink – Well the fund was given IOUs in exchange for the money that was stolen from it.  The problem is the IOUs don't keep up with inflation so, even if the other hand of the Government gives all the money back – it's not enough.  And more money comes in every day.  40% of all taxes collected by the US Government are Payroll Taxes meant to fund SS, Medicare and Unemployment.  That's $880Bn out of $2.2Tn collected is SUPPOSED to pay for the entitlements the Reps want to eliminate.  Of course, they want to eliminate the entitlements but keep collecting the money so they can give it to defense contractors – but they fail to mention that part of their "savings plan."

    So 40% of what we take in comes from SS & Medicare Collections and then 43% of what goes out pays for them ($1.58Tn) – this wouldn't be a problem if we hadn't squandered the surplus of the past 50 years but we did so water under the bridge there.  Of course the GOP wants to cut it – they "borrowed" it to pay for unfunded wars and tax cuts and now, rather than pay it back by cutting military and increasing taxes, they run a massive PR campaign that gets everyone to call these SAVINGS PROGRAMS "entitlements" as if the people who worked and contributed into a Government Savings Program their entire lives are actually just begging for undeserved hand-outs when they turn 65.  This is a total betrayal of the American people by its own Government and shame on all of us for participating in it.  

    Disturbing/Kinki – I think it means people have completely lost faith in China's scam of a market.  It's not about the numbers so much as a complete lack of trust in the companies that are listed in the Shanghai – something I have warned people about for years.  When the economy is booming – you can run these shell companies for ages but, when the money stops flowing – it doesn't take much for these companies to get wiped out over-night.  Mainland companies are just too risky to invest in with China slowing.  

    ROI/8800 – Well, they question answers itself.  There is a proper, conservative way to work into the buy/writes and that's the objectionable 3-4% ROI – but only for those starting in year one.  It is not the fault of the strategy that this happens to be the first year you will commit to it or that this year happens to be a poor one for jumping into bargains or that you left it too close to retirement and are now very impatient.   So don't expect there to be some magic wand that violates the rules for your special situation – there just isn't.  The real question is – what can you do with a ton of free margin to augment your returns while you wait and there the answer can be selling puts on the second set of stocks you REALLY want to buy if they get cheap.  So let's say you invest $250K and have buy/writes and may end up $500K invested on a 20% dip but, as you fear – what if the dip never comes.  Well then you have $1.5M of spare margin and there would seem to be no reason you can't collect, for example, $6,200 for selling 20 MCD 2015 $65 puts (allocating $32,500 to buy 2,000 shares of MCD), $5,700 for selling 10 CAT 2015 $60 puts ($30,000 allocation for buying), $6,800 for selling 20 KO 2015 $35 puts (allocating $35,000 to buy 2,000 shares of KO at net $35)…  

    So you can allocate about $500,000 of your $1.5M spare margin and collect about $80,000 for the short calls and that's another 4% a year against your $1M and all you are doing is saying IF CAT drops 28%, THEN you are willing to buy 1,000 shares.  Still fairly conservative and you double your early returns.  In cycle two – those returns double themselves but you still have the margin to do this again and, by cycle 3 – you will be very happy with the normal ROI going forward.  Of course you'd have to manage a portfolio like this more aggressively with stops and hedges but it should get the job done.  

    Good point on Biotechs, Pharm.

    EXPE/Hextra – I think $45 is far enough away from $52 that you don't have to worry about having the stock put to you and, if you REALLY wanted to own EXPE for net $42.80, then you shouldn't even be thinking about worrying about this one.  Unless you have a better use for the margin – other than maybe setting a stop if EXPE fails to hold $60 – I wouldn't worry about it.  

  48. Pharmboy

    OK, for those that have done the math and I am struggling with the final outcome…..solar on the humble abode?  Rent (lease) or own?  I will be there a while, and I want to be either 80% covered on the bill or wipe out my bill entirely….is it worth paying the extra to go off 'the grid?"  ROI is a bit longer for the ownership, but seems to me that owing is much better than leasing…I think of it as a car….but one that does not drink its way from place to place….

    Also, the new panels have microinverters on them…is that worth the extra bit as well.

    After hours is fine…just doing some research on it….

  49. Inkarri19

    Pharm – If you haven't done so already, maybe this might be worth some investigating:
    http://www.sunrunhome.com

  50. lol730

    @Pharm
     
    And what happens if your roof leaks?
    Do you have to move it all to make simple sealing?

  51. kustomz

    Does not expect Chinese economy to “bounce back” next year
    Sees 2013 global GDP at +2.5%
    Will sell assets to cope with slower growth

    Dow CEO remarks

  52. stjeanluc

    Sunrun / lnk – Do you have experience with them? I have been wanting to install solar panels as well, but kind of expensive.

  53. stjeanluc

    The biggest political cowards….

    When you run for Congress, you accept a certain responsibility to show up to vote. Especially on the big questions. Now, however, House Republicans are floating the possibility that they simply vote ‘present’ when extending all but the highest rates of the Bush tax cuts. In other words, not vote against or for. Simply not vote at all. And then regroup early next year for another round of debt limit hostage taking.

    Just sickening!

  54. Pharmboy

    lnk – thanks.  Talking with one that is very similar to Sunrun.  Can decide to pull a trigger or now on buy vs. lease.  Yes upfront is high, and ROI is a bit longer, but overall, seems to me that it is better to buy…have not really pushed the numbers hard though to figure it out.

  55. 1020

    Pharm – I've heard great things about this combo: http://www.sunrunhome.com/sunrun-advantage/how-sunrun-works/solar-installation/installer-directory/verengo-solar-plus/
    And, I like the PPA vs. Purchase
    http://www.sunrunhome.com/solar-lease/

  56. Inkarri19

    StJ – Sorry, but not personally.  I have been in communication with them re panels in my house but I put it on hold as other more urgent matters have come up recently.  If I recall correctly, the costs(for me) just didn't seem worth it at this point.  My monthly electric bill is about $100 and paying $20K for a solar system just didn't seem worth it right now. 

  57. phil

    Solar/Pharm – I think the question is whether or not there will be such better technology in 10-15 years (whenever you "own" your panels) that you won't want them and neither will anyone else.  Like a car lease, sure, you can argue you are better off owning but I happen to like using a car for 3 years and just walking away and getting a new one.  I never end up owning a car but I always drive a pretty new one.  Solar panels are more like computer chips – would you be happy you locked in your 2001 P4 server with a sale contract instead of a lease so here we are in 2012 and you have a pentium 4 server you own free and clear?  T think there will be a tremendous amount of improvements over the next two decades in solar and what's finite is your roof space – that means it's wasteful to cover it with less than the most efficient possible processors.  The only trick is that subsidies you get now (if any) may not be around in 20 years but we need to have faith in the free markets for that one.  

    Fed/Ink – Isn't that crazy?  

    China/Kustomz – As long as they don't implode.  

    The poor reads of recent economic indicators tells John Hussman the U.S.has joined the global economy in recession. By his regression analysis, the Philly Fed index is the most reliable leading indicator, and its plunge doesn't bode well. Confirmation of the Philly Fed comes from the New Orders components of the Chicago and National PMIs, and they've swung down as well.

    Among JPMorgan's (JPM) 9 market themes for 2013 is its belief European equities will outperform the U.S. as fiscal issues which have dogged the Continent for so long now move across the pond. It's more continuation play than contrarian play as Europe (VGK)has bested the U.S. (SPY) by nearly 300 basis points thus far in 2012.

    AMD (AMD +10.7%) is ripping higher again today; shares are now up 30% since the hard-luck chipmaker announced it would sell and lease back its Austin campus for $150M-$200M. 27.9% of the float was shorted as of Nov. 15 – are diminishing insolvency fearsfueling a short-covering rally?

    The SEC files charges against the Chinese affiliates of the Big Four accounting firms, accusing them of refusing to produce documents relating to China-based companies under investigation for accounting fraud.

  58. shadowfax

    It might be woth a thought about what has happened in the last 3 weeks. The markets crashed and made a V recovery. The V is no looking more like a square root and what may come next is the down leg of an M. It is not just China, the intire world most come to grips that the policies since 2000 have drained the supply, it can not be made up in 1/13 the time especially when the powers refuse to accept what took the world down. I see more selling as investors realize they are not going to keep all the perks after January1. Witout a deal is there any chance of going back to September 14 high?

  59. Pharmboy

    Higher education is worth it, right?

  60. CaFords

    Solar Panels are now under $1 per watt which is very attractive.
    Scalable Grid-Tied Inverter for household power; to charge a battery backup and to sell excess power back to the electric co.
    And the Batteries. Unfortunately very expensive.
     
    ROI becomes very attractive if you can sell at least a small portion of power back to the electric company.

  61. 8800

    Phil/ROI,
    Thanks for the thgts/insights

  62. Inkarri19

    Fed-Phil – Very disturbing indeed.  Who knows exactly how this all plays out but if history is any guide, the guess is not well at all.  Our Fed and banks are busy buying up treasuries and other paper goods while I read more and more that the Chinese are buying up commodities, mines, real estate, etc., hand over fist. 

  63. neetcorp

    Pharmboy
    Your thought on SCMP. Thanks.

  64. rdn4evr

    Pharm, Solar,
    Phil's got a point; I've been consulting on a solar development project, and pretty much every day that goes by the panels get more efficient and the project requires less land.  I would also think you would definitely want the inverters, even if it means waiting awhile until they get more cost efficient.

  65. stjeanluc

    Philly Fed / Phil – One more reason not to go with an austerity program right now as we all know where that leads!

  66. stjeanluc

    So far, good premium burning day…. The short weekly AAPL 590 calls are up 36% now!

  67. stjeanluc

    And that $595 line is like kryptonite on AAPL so far!

  68. scottmi

    O – another nice IRA entry to consider.. selling O June 2013 $40 put for $2.50.  If put to you, net is 37.50 entry to then sell straddle.. if not put to you, earned 6.25%on your tied up $4000 in 200 days which is 11.25% annualized…

  69. Pharmboy

    SCMP/neet – I did not realize that constipation was that big of a market, esp. opioid caused. When EX-Lax was withdrawn from the market due to colon cancer increases, people lost a big portion of their ability to ……  The lubiprostone (love that name…lub'e' for constipation – sick joke?)….the drug works, and should be FDA OK'd next month.  Let's see where it fall to, and maybe initiate a BCS on them.  Takeda is with them on the marketing….so time will tell.  The rest of the pipeline is not that interesting at this point.

  70. Inkarri19

    Now the Treasury saying debt limit will be reached by the end of December after Timmay ssaid it wouldn't be until February last week.  Looks like the scare tactics are ramping up.

  71. shadowfax

    Solar all,
    I have been looking into this also. Right now panels are too expensive but the sizes are very close to as small as they can get. The don't have to track the sun every day but a biggy is the angle need to be lower in the winter, higher in summer. There is too much markup between the cells and the panels which will go down with volume but this is a chicken egg thing.
    I want to buy the cells and make my own, anyone have a link to purchase them or the manufacturers?
    Thanks!

  72. angelcur

    http://finance.yahoo.com/news/nam-tai-sales-over-1-110000721.html
    should be over 2.75 by end of 13..
    MIL is looking better to me..book 12.74 stock trading mid  8's..news coming soon imho
     
    china pmi slight increase on fri. night…all weekend the headlines were "china back on track"…."asian indices open higher on strong china pmi"….shanghai comp opens higher and sells off rest of day finishing down another -1.0% to another multi-year low….its crazy

  73. Pharmboy

    Solar – thx all. 

  74. neetcorp

    Pharmboy
    : $SCMP FDA Delays GI Drug sNDA for 3 months with Eye Drug Decision Expected by Year-End

  75. lflantheman

    MoMo portfolio:  BTO 10 DECK Mar 42.5 calls for 5.40

  76. Pharmboy

    SCMP/neet – sorry, I read it as the delay was until next month.  Yes, 3 mo delay, so March – May.  Wait and see how they fall.  Then we can initiate a BCS with the sale of puts.  I still think they get OK'd.

  77. Pharmboy

    SGEN….Adding a few Dec $25 calls.  Bought back the Dec $30 calls and Mar $35 calls.

  78. Pharmboy

    $1.15 for the Dec calls…no more than that.

  79. Pharmboy

    $1.10 for the March Calls, adding a few there as well.

  80. phil

    Deal/Shadow – Without a deal we should be crashing again but people are betting on a deal at the moment – and expecting a rally off a deal too.  

    College/Pharm – Wow!

    Good links Cafords, thanks.  That is what makes it attractive in NJ – we can sell our power.  

    Headlines/Angel – Yep, certainly no way to know what to think based on those.  

    ESM chief Regling is unable to understand the downgrade of the rescue fund by Moody's on Friday. He says the agency did not sufficiently take into account the ESM's robust capital structure … is that the one where some of the fund's guarantors are also those in need of a bailout? In the meantime, the ESM is set to transfer assets to Spain to assist with the recap of its banking system. 

    GOP counter offer to the White House includes $800B in new tax revenues (but without higher rates), and $1.4T in spending cuts. House Speaker Boehner calls the White House's original proposal a "la-la land offer."

    Heard on Ford's (F -0.1%) sales call: 1) The automaker will continue to work on new Escape and Fusion models to fix a potential engine overheating issue that can lead to fires. The automaker notes "very few" problems have been realized over the issue and it's had no effect on showroom traffic. 2) Reports 73 days supply at end of November compared to 81 days supply at end of October. 3) Incentive spending by Ford is flat compared to last month and lower than last year's level. 4) According to execs, commercial truck buyers are turning to the company due to the fuel economy advantages of models. (webcast)

  81. sundevils

    Phil,
    Do you still think the Buy/Writes on T and others are worthwhile even in a 401k where the full cash amount of the put sale is held back until expiration? Obviously buying on margin is the way to go but unable to in the tax deferred acount. Thanks

  82. phil

    Wow, is that the bell already?

    Caught me by surprise today.  

    Dow 76M coming into the close and we began the day up 0.4% and finishing down 0.4% – which is a bit more realistic based on headlines.  

    VIX 16.59 so no one seems too worried.  TLT $124.65 means money still going that way, though.  

    Dollar went no where today, still 79.89.  Oil $88.94, gold $1,717.   

    There's the bell and we're at 100M on the Dow – very low volume day so essentially meaningless.  

    Tomorrow maybe we test 1,400 again and then move higher.  

  83. angelcur

    aapl running out of steam at 200d, spx reversal at 50d, fb reversal on volume, econ surprise index rolling over, china cant rally…red flags abound
    have a red flag and some mint jelly very festive and as useless as a clapperless bell

  84. phil

    Buy/writes/Sundevils – It depends if you have anything better to do with the margin or not.  The point of a buy/write is to scale into a property you want to buy so the margin advantage, if any, is really just a bonus.  In other words, if I have $1M to buy stocks and I'm not buying on margin, then I have $1M to buy stocks with and I'll allocate $50,000-$100,000 for a full position in any single stock and if I intend to own $100,000 of BA, then I will look to buy about $25,000 in round one and maybe buy 500 shares for $74 ($37,000) and sell 5 2015 $70 calls for $11 and 5 $60 puts for $6 for net $28,500 and, whether I'm using margin or not, then I have another $30,000 committed to buying 500 more shares at $60.  

    Of course, TOS says the net margin on the trade is just $6,000 on the put side, vs $30,000 in your 401K so the real question is – is the amount of tax you avoid paying on the gains worth the loss of the use of $24,000 for 2 years?  It's a hard question to answer but I'd rather have the money to play with – I'm only going to pay taxes on the profits.  It's also possible to have separate accounts and use the 401K for the stuff you expect the gains on and use regular accounts for hedges and other bets you expect you may lose so you take your losses against ordinary taxes and your gains in the tax-free environment but you need to sit down with a really good accountant to work that stuff out.

    Mint jelly/Angel – As long as you have a nice rack of lamb to go with it.  

     At the close: Dow -0.44% to 12968. S&P -0.42% to 1408. Nasdaq -0.27% to 3002.
    Treasurys: 30-year -0.01%. 10-yr -0.04%. 5-yr -0.04%.
    Commodities: Crude +0.15% to $89.05. Gold +0.30% to $1717.75.
    Currencies: Euro +0.49% vs. dollar. Yen -0.27%. Pound -0.49%.

    Market recap: Stocks finished broadly lower after this morning's sickly manufacturing report, which saw the ISM index slide under 50, the level that separates expansion from contraction. Add in reports from other big economies, and the upshot is that global manufacturing remains weak, going well beyond Sandy and the fiscal cliff.

  85. phil

  86. edro00

    Pharm -
    Check out http://www.sunelec.com/
    They have a warehouse in PHX and good prices
     

  87. Canuck

    Phil/T,
    following from the buy/write discussion, what about a calendar on T?  With the 2015 $30c at $2.75, you could sell the 2013 Feb $35 for $0.52, for 19% on the first write, and you can do that 8-9 times. 

  88. Canuck

    Phil/T,
     
    make that $4.75.

  89. ceegee

    Pharm/SGEN: Why did you buy back the Dec $30 and Mar $35 calls?

  90. shadowfax

    Thanks for the hints on solar cells! Now if I can find someone in the USA to sell them instead of China. Importing a lot of them will cause a problem.

  91. zeroxzero

    If the Dow is falling on a weakening dollar, I'd hate to see what it will do if the dollar soars.  What are the chances?  Um, not bad, I'd say:
     
    "Spanish authorities on Dec. 3 formally requested aid for the country's banking sector, FXstreet.com reported. Bailout funds worth 36.5 billion euros ($47.6 billion) are set to be released Dec. 12. The funds will go to four nationalized banks: Bankia, Catalunya Banc, Nova Caixa Galicia and Banco de Valencia."  http://us4.campaign-archive1.com/?u=74786417f9554984d314d06bd&id=b2284b6607&e=01d0e58432
     
    Those losses are derived from many thousands of permanently underwater, never to be recouped mortgages and commercial loans --  entropy will do its work on those dwellings faster than housing market prices will ever recover.   To say the banks are "nationalized" is just a euphemism.  They exist only in name and the list of defaulted loans that goes with it.  This is just Germany returning the profits from all those BMWs that were cruising the [excellent, way better than the U.S.] autopistas in Spain for the last dozen years; I actually still own one of them over there, and the resale value is comical.  I don't know why the EU doesn't just say "we'll be picking up Spanish pension and unemployment expenses for the next decade" and be done with it.  Falling real wages are the future in Spain [and elsewhere, but I'll leave that to Phil to sort out].  Even if all the debts magically disappeared tomorrow, the current "austerity" budget is unlikely to be politically sustainable.  Spain needs devaluation, along with other, if not all other, Peripherals.
     
      I still favor Germany leaving the Eurozone, re-adopting the Deutschemark, letting the Euro fall to .75 on a dollar and having Germany pay off the Eurozone debts with it's soaring DMs, but no one seems to think that's as funny as I do.  I'm waiting patiently to hear a better plan; someone is going to take a massive hit [French farmers are at the top of my list] but I see no appetite for biting bullets as of yet.  But Hollande has my vote for "politician I would least like to be right now."

  92. albo

    CLSN – Seems like the stock is trying to resume uptrend despite today's doji.  Company has several key datapoints in January which could move the stock significantly higher or lower depending on outcome.  Any way to play it given those parameters?

  93. Pharmboy

    SGEN/ceegee – b'c I think they are going up…and quickly.  Gut call, out at 1/2 value of what we just DD on.  All bought calls from way back when we first did buy them are losing right now (not much thanks to the high IV and sold calls/puts), but the chart says up (consolidation) and why pay more to buy them back later if the stock does go up?  The STO calls are not helping IF the stock goes down, so time to either put up or get out.  I decided to put up.  The Dec BTO calss did not fill, the March BTO calls did.

    EOY is here, and pharma deals should heat up, they want to 'burn' that cash out of the coffers.

  94. Pharmboy

    albo – how about the March $5/7 BCS selling teh $2.5 puts for a net 40c credit…..don't have to own until $2.10, and that is a long way down….

  95. albo

    Thanks, Pharm.  Don't see the Mar calls.  Feb or Apr ?

  96. Pharmboy

    April.

  97. yodi

    Canuck
    On the synthetic B/W on T I establish on 11/16 the following positions
    Jan15 buy 30c @ 4.90
    Jan15 sell 35c @ 2.10
    Jan15 sell 28p @ 3.00
    Dec12 sell 35c @ .38
    I hope this help

  98. Burrben

    Yodi, on you're T entry, did you do the math that buying the Jan15 call was better than owning the stock and getting the div?  Just wondering.  

  99. stjeanluc

    Still having trouble around these 50 DMA!

  100. stjeanluc

    It's just incredible how much the GOP is willing to fight to stop the top bracket from going up only 4% – they make it sound like the end of the world is coming. There was a guest on Kudlow who mentioned that Reagan raised the capital gains taxes and for some reason no one called that class warfare then. I guess different president – different standards!

    http://www.motherjones.com/kevin-drum/2012/12/john-boehners-smoke-mirrors-deficit-proposal

    I bet you all their big donors are yelling and screaming at them. How much would that cost Sheldon Adelson for example?

  101. albo

    Stj -Believe it or not, I totally agree with you about the GOP not being willing to go along with a tax increase for the top bracket because it would hurt small business.  If I'm a small business owner, I'm not going to make hiring decisions based on my marginal tax rate.  If there's demand for my product, and if I can add additional workers to meet the demand and increase my profits, of course I'm going to do it.  Only 3% of small businesses are effected anyway.

  102. ceegee

    Pharm/SGEN: The short Jan $25 calls are good unless SGEN hits $25 by expiry – up nearly 18% from here. And the March $35 calls will not start to drop profit unless SGEN moves up by more than 37%. Are you thinking SGEN is going to move that much?

  103. jfawcett

    Phil (StJean) / LULU – Earnings on Thursday before market open.  Purely an educational play on IV Crush.  Weekly's are currently 96% IV vs December option at 60%.  TOS Market Maker Move +/- 5.40.  For a trade on IV (Account that has Margin Issues) would you bracket with a call spread and a put spread on each side and if so, what type of spread?  I know the basic concept is to sell the 65 weekly Puts and Sell the 77.50 weekly calls (underlying at 71.50).  But, since there is a Margin issue and to buy some insurance with the trade, a spread is appropriate.  What would you suggest?  I would like to track the suggestion through earnings for filing away in my educational filing cabinet.  TIA

  104. jfawcett

    Phil / Medical – Hope you are feeling better.  I wanted to pass on that my spouse and I have a MDVIP primary care doctor.  My fee is $1500.00 per year per person to have access to the doctor.  My doctor affords us a yearly physical that is followed up with near instant access not to mention that primary care physician IS the doctor in charge making sure medications and treatment is in my best interest (should you see a specialist).  When I say… near instant access…  I can email her, call her on her personal cell, or text her and the contact back is never that far to wait.  Not to mention appointments are not hard to get on my schedule.  Attached is the MDVIP website for you to look at.  And of course, if you need any more data from the patient end, just ask.  I recommend this type of doctor (they must be the best of the best to be in the MDVIP practice) to anyone who can afford the fee.  This will be my fourth year with my MDVIP doctor.  http://www.mdvip.com

  105. ceegee

    Pharm/SGEN: typo – Jan $30short calls, not Jan $25's. ie do you think SGEN is headed to $30 by end Jan, and/or $35 by end March? 

  106. jfawcett

    Pharm / STJ – With the 50 crossing the 200 this stock looks like it will retest 31.50.  Do you like STJ as a long term hold at this price level.  TOS has the JAN 2015 25 PUTS (STO) at 3.25 if STJ drops as I expect.  Looks like net entry would be around 21.75 if put to you.

  107. dclark41

    jfawcett
    You really caught my interests with MDVIP. Is $1500 the standard fee for all who join? Is that just to get access to your doctor or does that pay for some of portion of the wellness program(s). I just hit 50 and have never been that enamored with the level of care I receive just going to a doctor once a year. I have always been a boring patient with no great issues, but the older I get the more concerned get about catching potential problems early.  Can you shed any more light on what that program does for you and what it costs? Thx!

  108. scottmi

    Sundevils – i am happy for full cash cover in IRA..i've said before protects me from overcommitting and blowing up this longer term account. in the case of T, for example, once decided to go with them, what is a desireable entry? i liked 30 as an entry.. and sellign the the 2014 puts gave a whole year of dividend income for only the "cost" of buying at $30, rather than 34.15 where it was today. Do you think buying th stock today is better? It's all about yield. As it happened, i liked phil's buy write enough to buy the stock and sell a $30 call against it as well as write the put. So now i have an entry that gives me protection if the stock goes down a bit (and an entry i'm ok with--and covered for!--if assigned), fantastic yield if the stock stays flat (with just collecting dividends) and cash and margin freed again when called and/or expired. And remember, the 6% yield (vs 5.25%) on a cash covered put is as good as a fixed return, paid in advance. Not the same as a CD or term deposit though.. but i don't know of any that are offering 6% for a year right now, not by a LONG way…so my risk.. say T drops to --OMG-- $20!! overnight. well, yeah, we all just got @#$%! by the market, but rather than my $3415 (for a 100 shares) dropping by 47% with who knows how many dividends i was able to collect.. instead with my short put i'm only down 29% with my year's worth of dividends already collected. Then it is same decision, wait for it to come back or exit.. and still, in absolute terms, if i paid cash, i'd have lost as much as $1415, and with the sold put, only $820. Yeah i'd miss out if T runs up to be the new Apple.. But we're talking about T. This is not where or how i would play AAPl. This is relatively safe, conservative, acceptable yield.  ok, my world limit must be up. ;-)

  109. scottmi

    world limit..? oh dear. "word limit." yes, done!

  110. diamond

    dclark41 – I also have a MDVIP doctor. The service and care provided is exceptional. I have never had my doctor's cell phone and 24/7 access before! Just as jfawcett has already done, I would highly recommend them to anyone who can afford it. The $1,500.00 is their annual fee (which includes a total physical) and for me, each visit is a flat $30.00 fee whenever I need to see the doctor for anything. By the way, I NEVER feel rushed as the doctor will spend as much time with me as is needed. Their office also facilitates any and all referrals/appointments with all other specialist, labs, etc. I always feel that my general wellness (including prevention) is very important to them.

  111. dclark41

    diamond
    Thank you for the info. If you don't mind, could you summarize what is included in the total physical? I assume they will work with your health insurance carrier? Thx.

  112. yodi

    Burrben
    T  Here I am running on two tracks the one is a synthetic play on 5 options. the other I am playing with good in come, is a stock B/W since 2010 where I am holding the stock at 28$. As you can see on these plays, stock or synthetic, I always run with extra short puts covering more than the div., as I do not mind having these type of stocks assigned. On my stock play I sold for example on Jun 12 the Apr13 34p @ 2.43 now 1.83. For me the div. are just a cherry on the top as the putters make well up for the div. On top I always get hit with a 15% deduction the day I receive the div. On LP stocks it is even 35% helping the US to feed the 47% on food stamps. God knows what the tax deduction will be after Jan 1st. So you see Div. is just an extra to my option trading.

  113. aussie260

    An inside look at the logistics of Amazon…wow!
    http://imgur.com/a/q1WIO

  114. jfawcett

    dclark / MDVIP – Yes, my doc works insurance also. Physical is in depth, hearing also.  Chest xray, etc.  very comprehensive.  I interview with my docs retired doctor father and that complete data package is the printed out each year for reference.  I.E. – My wife went into the hospital and all I needed to do was hand over the complete patient history paperwork.  No other answers required the admitting physician had all the data.  The physical is covered by the 1500.00.  My office visits are my insurance copay.  Nothing more.  I may have a unique doctor for communication and access.  I have been with her since she went MDVIP.  She even takes calls from my daughter in Seattle (I live in Vegas) and provides recommendations over the phone or calls in prescriptions.(She does see my daughter when she is home also… no extra charge) (but.. I do believe my Doc is unique).  Another plus is if you travel, a MDVIP doctor in the city you are visiting will see you just as you were at home, now that is pretty cool.

  115. jfawcett

    MDVIP – And if I am not mistaken, you do not pay the access fee for your children, they are included under your fee.

  116. phil

    Good morning!

    Europe up over 0.5% but our futures are pretty flat so far with Dollar 79.74.

    Not much news to move things. 

    T/Canuck – There's nothing wrong with calendar spreads if you like them.  Just make sure you have a plan to pay off the premium in a reasonable amount of time.  The 2015 $30s are $4.75 so you are effectively buying T for $34.75 and paying a .50 premium – not too bad.  Now you are selling Feb $35 calls for .52 and that wipes out your premium but also wipes out your possibility of making more than .75 at $35 and, with your new net of $34.25, you have just .50 of downside protection so you've made a very narrow, targeted bet that T will be exactly between $35.25 and $35 in 3.5 months.  If you have no margin ability – it's fine – but there are much better ways to make money using margin, like just selling the T Feb $32 puts for .50 and buying the $32/34 bull call spread for $1.45 for net .95 on the $2 spread and now you make $1.05 (110%) and all T has to do is hold $34 and your break-even is way down at $32.95.  Of course, I'd go longer with a better spread but you picked Feb with that target.  

    Dollar/ZZ – Europe having a bit more certainty than us now and the Euro is very low so still a chance to keep the Dollar down for now.

    Big Chart – Looking a bit like resistance.  

    3% Affected/Albo – And keep in mind that the figure is 3% of small businesses are affected AT ALL.  Some are affected by $1, some $1,000 – only "small" businesses making over $500K are really going to start feeling a bite.  

    LULU/Jfaw – I'm not a big fan on making bets where I have no opinion on the stock.  You are setting out to bet against yourself and hope some form or arbitrage scratches out a win.  Why not find a stock where you actually believe one side or another is overpriced and play that?  These volatility numbers aren't random, LULU tends to make huge moves on earnings in a fairly random pattern – up or down.  Also, you have a misconception about the volatility because the move you expect to happen occurs on Thursday, not next week, so why would you only sell this week's premium when you can get paid double for selling next week's, which is inflated based on the exact same event you are betting on this week.  

    If you insist on betting against yourself – at least sell the Dec $62.50 puts for $1 and the Dec $80 calls for .75 so now you have a $1.75 spread against a 10% move but it all comes back to the question – what's the likelihood of LULU moving more than 10% on you and burning you.  Do you have a reason to believe they are flatlining or are you just playing the odds and, if you are just playing the odds – do you bet those odds consistently enough to ride out the times they are in your favor or are you making a one-time bet against an unlikely event that will completely screw you over if this happens to be the time that one-time event goes against you?

    If I were going to play it – I'd say the chance of them breaking $80 is pretty slim and you can sell the Dec $77.50 calls for $1.25 against the March $77.50/80 bull call spread at .90 so you have a .35 credit and some upside protection – just in case.  

    MDVIP/Jfaw – Thanks.  I have considered that but I do kind of like my doctor, who's on the board at our top local hospital so connections are never an issue.  Prior to this, I haven't had much use for a doctor at all and, hopefully, they'll clear this up and I can avoid them for another few years.  

  117. diamond

    dclark41 – Similar to what jfawcett said …

  118. zeroxzero

    jfawcett/Diamond:  Thanks for MDVIP.  I can mirror dclark's comment; nothing wrong with me, but my last checkup was 2007, which is just plain dumb.  Signed up today in NYC, which is a frequent stopping point, time to go over the machinery.

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