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Thrilling Thursday – 880 or Bust on the Russell

Go small caps, go!

The Russell is bumping right up against our 10% line and it's always a good sign when we have to contemplate drawing the next set of lines on our Big Chart but, let's not get ahead of ourselves as the poor Dow is dragging behind – down 11% from the Russell on our performance measure and down 8% for the year, overall.  

As we were discussing in Member Chat this morning – this is not surprising to us as we had done an extensive review of the Dow back on September 25th, where we decided at the time that there weren't enough bullish fundamentals to justify a move over our Must Hold line and that kept us from being bullish at the top of that rally.  

Now we're back at about the same place we were then and we'll have to watch those Dow component earnings reports very closely to see if we can justify at least a 1.5% move up past 13,600 (our Must Hold level) and then another 5% to 14,400 (these levels don't base off 13,600 but off the real long-term goal of 16,000 that we're nowhere near yet but were predicted under our 5% Rule way back in 2009).   

RUT WEEKLY We got a good start with AA yesterday, not so much boosting AA (but we're long), but easing concerns about a continued Global slowdown.  Flat we can handle, slow growth is downright thrilling and, as I said in yesterday's post, sentiment is too negative and we're now climbing that proverbial wall of worry as we put our Trillion Dollar coins to work in the markets.  

In addition to the bullish long trade idea I gave you on AA in Tuesday morning's post (we don't need to wait for earnings when we know what's going to happen), which is already up 10% on the short puts and up 24% on the net .70 spread (now .87 and on track to a full 200% gain), we also hit the nail on the head by calling the AAPL bottom at $513 (and back to our $531 bounce target this morning) and our BA prediction is already paying off with those short 2015 $55 puts down from $4.30 back to $3.70 (up 14%) and the $70 puts hitting our $10 target on the nose and now back to $8.55 (also up 14.5%) and YUM's short July $62.50 puts came in right at $4.20 and are back down to $3.70 for a quick 12% gain in 48 hours and the longer short 2015 $50 puts topped out at $4.87 and can still be sold for $4.60 and the Jan $62.50 puts can still be sold for $6 – so I still like those as new trades if you missed it.  

IBB WEEKLY And that was just the free stuff in the morning post!  In Member Chat, we took full advantage of the morning dip with another bullish BA play in the Morning Alert as well as as a bullish play on SHLD, who also had a nice, quick turnaround off that spike low.  Of course, if we fail to hold our 4% lines (see last week's post), we can always cover with TZA longs but holding them kept us bullish this week and now we're back to looking at our 5% lines (short-term, not the ones on the Big Chart) at Dow 13,447 (47 under), S&P 1,456 (5 over), Nasdaq 3,056 (49 over), NYSE 8,660 (24 under) and Russell 873 (6 over).  

Note Dave Fry's chart above, Russell 880 is key but already over technical resistance (or 5% Rule is not an industry standard but it works for us) – we just need it to confirm but, more importantly, we need the NYSE to get over it's own hump and then we can watch Dow earnings to see if we're willing to ignore that index's poor performance and we might as swaps in the Dow Components can wreck havok with long-term predictions like our Dow 13,600 line.  Still, it would be nice to actually hit it….

IBB is one sector having a great run and, in Member Chat yesterday, Zeroxzero noted his "Farmfund", tracking Pharmboy's trade ideas, was already up 27.7% for the year.  If we don't get through that $147.50 line on IBB, it may be time to take some profits off the table but, if we do pop over – we'll all be begging Pharmboy for some more Biotech plays!  Many of those picks have been, as I noted on Tuesday, summarized in Market Shadows, which comes along with Stock World Weekly and take a look at Pharmboy's write-up on SGEN from the December 17th issue, which has jumped 25% itself since that note as well as IMGN, from the same post, picked at $12.92 and already $14.50 (up 12% in 3 weeks) – you don't even need options when the stocks are making those kind of gains!  

FXY WEEKLY GDX and GLD are other ideas we've been pushing lately and gold is bouncing back to $1,670 this morning as the ECB leaves their rates unchanged (as predicted by me in Member Chat) and that's pushed the Euro back over $1.32 and dropped the Dollar to 80.20 so, of course the Markets are jumping.  We made a quick .40 shorting oil Futures this morning in Member Chat, from $94.40 to $94 but now we're back at $94.50, which will be perfect for our USO play as we love to short oil when it's goosed by a Dollar drop.  Shorting off that $94.50 line in the Futures (/CL) is also a good play as it's way too high given yesterdays massive build in inventories.  

AAPL (we may have mentioned them once or twice) is testing our $531 line in the Futures this morning as Tim Cook visits China and, more specifically, China Mobile (CHL), presumably to seal the deal on IPhone distribution in the Middle Kindgdom.  CHL is famous for being the only Chinese ADR I would endorse but we're done with them after an almost 50% run from last year.  Still, it's good news for AAPL as CHL is a $230Bn phone company that services 650M subscribers – so it effectively doubles AAPL's total global consumer reach with the swipe of a pen.  AAPL will also be opening 14 new Apple Stores in China, up from the current 11 total.  

AAPL WEEKLY AAPL supplier Dialog is on the pink sheets but they jumped 5% this morning as they raised revenue guidance from $225M to $268M for Q4, driven by strong demand for components they supply to AAPL for IPhone 5's and IPad Mini's.  Both T and VZ have been hit recently as investors worried they sold so many IPhones that their up-front subsidies may be impacting current profits.  Meanwhile Tim Cook is flying first class to China – that's for sure!  VZ's 9.8M smart phone activations were up 44% from Q3 and up 29% from last year and 46% of them were IPhones.  I certainly hope I don't have to draw any conclusions for you here…  

 According to SA's Market Currents:  One more reason why a cheaper iPhone could make sense: unsubsidized iPhone prices are often even steeper overseas than in the U.S. The 16GB iPhone 5 sells for $649 unlocked in the U.S. (or perhaps ~$700 after sales tax), but for $840 in China, $735 in Sweden, and a full $955 in Italy. A source tells Bloomberg Apple (AAPL) is weighing prices of $99-$149 for a low-end iPhone, while adding the device "may be smaller than current models." The ever-bullish Gene Munster imagines a $149-$199 price tag, and thinks the device could add $6.5B in annual sales.  

I'll be on TV next Tuesday and I'm still considering AAPL as my "One Trade" for 2013.  We're already positioned that way with our now-naked longs in the $25,000 Portfolio as wel as our special AAPL Money Portfolio and I've been shying away from it as it's such a sickening ride, but that didn't stop us from playing BAC as last year's "One Trade" and, as with BA – as long as you PLAN to scale into the trade over time – then a dip is only another buying opportunity and, like BAC – this is a ridiculously undervalued stock, trading at a price you may never see again.  


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  1. stjeanluc

    Oil Lines

    R3 – 94.82
    R2 – 94.23
    R1 – 93.85
    PP – 93.26
    S1 – 92.88
    S2 – 92.29
    S3 – 91.91

    Yesterday's high and low – 93.65 / 92.68

  2. stjeanluc

    Income Portfolio news:

    F - Doubles its quarterly dividend to $0.10. The dividend yield is now 3%.
    SVU - Reported earnings today and apparently there is a deal on the table from Cerberus at $4.00 a share. Up big this morning. I guess we cash in our Income play!

  3. stjeanluc

    The SVU deal might not be a complete buyout so we have to wait for more details:

     

    *WSJ: Cerberus, Supervalu Strike Deal – Sources

    *WSJ: Cerberus To Buy Albertsons Chain For $100M Cash – Sources

    *WSJ: Cerberus Will Also Offer To Buy Supervalu Stock At $4 Per Share – Sources

    *WSJ: Cerberus Will Offer To Buy 30% of Supervalu

    And earnings were disappointing – missed on EPS at $0.03 but slight beat on revenues. It will be the one to watch this morning as the dust settles.

  4. stjeanluc

    Speaking of the Income Portfolio, I ran a quick margin and profit analysis on the open positions and my guess is that we are now using $337,000 of Reg-T margin (PM margin is obviously lower but too tedious to calculate). So the $62,560 of profits (as of Monday) are actually an 18.50% return on margin. Not bad for 6 months! Here is a table of the profits and margin used by each position as well as return on margin for each:

    Interestingly enough, our biggest position is in CMG, long a hated stock at PSW. But also our biggest profit there was well. The best return on margin is X with 194%. Slightly ahead of inflation there. These calculations are estimates, not precise numbers but should give an idea of where we are.

  5. newt

    SVU/ StJ: what is the best way to cash those plays in?

  6. Gingbaum

    Hey Stjeanluc,
    If Cerberus is buying the best assets of SVU, do you think that SVU could ever rally higher or more than likely sell off if the deal goes through?  I own SVU at $7.00 from a recommendation of Phil January last year. I am just wondering if I should sell it into excitement today?  What do you think?
    Cheers

  7. stjeanluc

    SVU / Newt – We have a 1.5/2.5 BCS in the Income Portfolio. There is a good chance that it will be close to 100% if this deal pans out.

  8. 1020

    Good Morning!

  9. stjeanluc

    SVU / Gingbaum  - We need to wait and see what the deal actually is. But $7 is a big stretch… I hope you sold premium along the way!

  10. stjeanluc

    And AAPL struggling to go over the $529 line again… Maybe the open momentum carries us over!

  11. newt

    StJ: I have a BuyWrite on it w/ Jan13 exp on the short 2.5 call

  12. stjeanluc

    SVU / Newt – Then it's good news…. Wait for the market to open and check your P&L on the position. 

  13. zeroxzero

    China optimism:  Since China appears to be planning another round of Quantitative Construction Stimulus, with iron ore imports up sharply, ideas welcome as to how I might I reintroduce my portfolio to the materials sectors.

  14. 1020

    Phil – So "Jim" Cook is flying with his brother "Tim" Cook, to China?….. ;)

  15. wombatcreative

    StJ
    newt
    SVU 
    Iam holding the Jan14 $2.50 PUTS – advice ? This deal changes every time I look at the board >>

  16. Pharmboy

  17. wombatcreative

    StJ 
    Sold PUTS – cost basis is $1.83

  18. stjeanluc

  19. stjeanluc

    SVU / Wombat – Then you should be happy, these puts are now below $0.30! Big win…

  20. newt

    SVU/ wombat: Congrats! nice return — wash spin repeat? you have collected $1.48 of the premium about an 80% return. is it worth holding to Jan14 for 20%?

  21. stjeanluc

  22. stjeanluc

  23. stjeanluc

    Another open to fade with AAPL. That $529 line is like kryptonite now!

  24. wombatcreative

    I'm showing a 45% return – sorry, Fidelity interface sucks, even after years.  ( +.30 )
    How do you suggest Wash, Spin, Repeat ?

  25. stjeanluc

    I am thinking of resetting that portfolio now since lflan is changing strategy and I don't know that we want to carry that AAPL baggage along with us. Suggestions?

  26. stjeanluc

    The SVU Jan 13 1.5/2.5 BCS is now at $0.95 (95% of potential) in the Income Portfolio. Do we take that and move along Phil?

  27. newt

    Wombat: wash spin repeat comes from the buy/write kung fu. Always sell premium. so when your current short holding is crushed consider buying it back (you are not being the house here) to get it off your balance sheet then initiate another position if you are still loving the underlying or if there is premium to justify the risk of a naked put-- or consider another strategy. 

  28. lflantheman

    stjeanluc…….I would just take lflan's (that's me) admission that  50% of the portfolio was lost over 6 months trading mostly AAPL and staying  mostly long.  The present strategy is as outlined yesterday,  and does not include AAPL, which is covered adequately elsewhere.  So I would just reset it at 25k starting yesterday, and we can go from there.  Doesn't really matter to me, even if we let it stay as is. 

  29. phil

    Good morning!  

    Woo-hoo on SUV, about time on them.  Not much to do with our bull call spread in the Income Portfolio as it's not a total buy-out but, hopefully, they'll settle down near $1.  Let's see if we can get $2.75 for 100 (1/2) the $1.50 calls and then try to buy back 100 of the short $2.50 calls for $1.60 and then we can do the same with the other 100.  Once you have naked short $2.50 callers, you have to put a stop on them at $1.80!  

    Dollar 80.11 and not going below 80 so limit to how high we can go this morning (0.5% most likely will top).  AAPL harshly rejected at $531 – that's heart-breaking but XLF back over $17 is market bullish as is oil holding $94 (but another quick .40!) and gold back at $1,670 and, oh yes, copper $3.70 – so plenty if things to watch.  

    NOK going nuts, up 17% on really strong sales update.  Maybe that's what's spooking AAPL but silly as it just seems that people are buying a ton of phones and the economy is recovering:

    More on Nokia: Lumia shipments totaled 4.4M, up from Q3's 2.9M and generally above forecasts. Stephen Elop says Lumia 920 sales were supply-constrained. Total smart devices sales were 6.6M, -64% Y/Y, but (thanks to higher Lumia mix) their ASP jumped to €182 from Q3's €155. Total mobile phone units were 79.6M, -15% Y/Y, ASP roughly even Q/Q at €31. 9.3M Asha phones sold, up from 6.5M in Q3.NOK +17.6%. (PR)

    More on Nokia: Thanks partly to lower-than-expected opex and a €50M patent payment from RIM, Q4 Devices and Services operating margin now expected be 0%-2%, above guidance of -2% to -10%. Margin for seasonally weak Q1 seen at -6% to +2%. Nokia Siemens sales were €4B (+5% Y/Y) with an op. margin of 13%-15% (lifted by a €30M patent payment), above prior guidance of 4%-12%. Q1 op. margin expected to be -1% to +7%. (PR) 

    At the open: Dow +0.41% to 13446. S&P +0.56% to 1469. Nasdaq +0.69% to 3127.

    Treasurys: 30-year -0.4%. 10-yr -0.21%. 5-yr -0.09%.

    Commodities: Crude +1.27% to $94.28. Gold +0.85% to $1669.55.

    Currencies: Euro +0.95% vs. dollar. Yen +0.38%. Pound -0.4%.

     Thursday's economic calendar:
    8:30 Jobless Claims
    9:45 Bloomberg Consumer Comfort Index
    10:00 Wholesale Trade
    10:30 EIA Natural Gas Inventory
    12:45 PM Fed's George: Economic Outllok
    1:00 PM Results of $13B, 30-Year Note Auction
    2:00 PM Fed's Bullard: U.S. Economic and Monetary Policy
    4:30 PM Fed Balance Sheet
    4:30 PM Money Supply
    8:00 PM Fed's Kocherlakota: “U.S. economy with Marketplace Money 

    Market preview: U.S. stock futures build on earlier gains despite worse-than-expected jobless figures, with sentiment buoyed by strong export figures from China and falling Spanish bond yields. The S&P benchmark is +0.4%. Nokia surges 22% after saying Q4 earnings were better than it expected, while Herbalife is +0.9% but down sharply from earlier highs as a much anticipated investor meeting gets underway. Later : Bloomberg Consumer Comfort Index, Wholesale Trade, Lots of Fed speak

    Initial Jobless Claims: +4K to 371K vs. 362K consensus, 367K prior (revised). Continuing claims -127K to 3.10M.

    Almost all of the Pentagon's 791,000 civilian staff will have to take a month of unpaid leave if automatic spending cuts come into force in March, as now scheduled, defense analyst Todd Harrison calculates. Those employees are the ones who would have to renegotiate many weapons contracts that the reductions would force. It could all turn into a "nightmare," says Harrison, although it's not going to be the "apocalypse." 

    The Bloomberg Consumer Comfort Index falls to -34.4 from -31.8, but continues a run of 16 straight weeks higher than -40, a level associated with severe economic distress. Still the index is 18.5 points below its 27-year average, and way below the -20 read at the start of 2008 and -5 at the start of 2007.

    Retail analysts start to get a little edgy after an early round of reports on holiday sales (AeropostaleTiffanyAscena Retail Group) show considerable weakness in consumer spending. It's still early in the reporting season, but the early tone flowing out from the sector doesn't bode well for retail-focused ETFs such as XRTXLYPMR, and RTH. 

    The euro adds to gains as the ECB stands pat. A month ago, many were sure a rate cut was coming, but a continued easing of financial conditions allowed the bank to stay on hold. As David Tepper has said, Draghi has the rate cut in his pocket any time he needs to use it. The euro +0.4% to $1.3115.

    Mario Draghi's post-ECB decision press conference is about the get underway. Watch live here. Earlier, the ECB left policy unchanged. These events have been big market movers for the past couple of years, but – crisis apparently over – few fireworks are expected today.

    Draghi press conference: The euro shoots higher as he says the decision to hold rates was unanimous. Last month, pretty much everyone except Draghi and the Germans voted to cut rates. FXE+0.9% premarket.

    French industrial output +0.5% M/M in November vs -0.6% in October and consensus of +0.3%. On year, -3.6% (PR). CPI +0.3% M/M in December vs +0.2% in November; On year +1.3% vs +1.4% (PR). Banque de France business confidence rises to 95 in December from 91 in November, pointing to a 0.1% drop in GDP in Q4. (PR) 

    Spain begins funding it operations for 2013, raising €5.8Bfor bonds of varying maturities, above its target of €4B-€5B. The 10-year note yields slides 17 bps post-auction to a 10-month low of 4.97%. Shares in Madrid, however, are off a hair, -0.2%.

    The banks will not get this country in trouble, I guarantee it," says major bank investor Warren Buffett. "The capital ratios are huge, the excesses on the asset side have been largely cleared out," he adds, seemingly making more of a case for the debt and the preferred, rather than the common equity. He's in no hurry to convert his Bank of America (BAC) preferred and says if the bank wants to call it, it's free to do so.

    Petrobras (PBR) says it is taking advantage of high electricity prices as Brazil's hydroelectric power system nears record lows and unusually hot weather raises concerns the country could face energy rationing. CEO Maria das Gracas Foster notes PBR can make some quick cash during days when spot-market electricity rates skyrocket because of strong demand.

    LOL – like taking candy from babies!  ArcelorMittal (MT+2.7% premarket after raising $4B in a stock and convertible note offering, despite its junk level credit rating, after expecting to raise $3.5B to pare down debt. "The major concern for Arcelor was the fact that they were struggling with their balance sheet… With this transaction, they remove [the] balance sheet issue totally," an analyst says.

    Molycorp (MCP -19.3%) plummets at the open after projecting lower-than-expected revenue and cash flow this year due to weakening rare earth prices. J.P. Morgan cuts its price target on shares to $5 from $8: "We continue to believe MCP will likely have to seek additional capital beyond just a revolver and/or equipment leaseback." AVL -3.9%REE -3.1%. 

    Shares of Ford (Fmove up 2.4% premarket after the automaker doubles up its dividend payout rate. More good news for Ford: The stock also lands on a list from Douglas Kass of his top stock picks for 2013. He expects shares to rise to above $17.50 during the year.

    Supervalu (SVU): FQ3 EPS of $0.03 misses by $0.04. Revenue of $7.9B (-5% Y/Y) in-line. Shares +15% premarket. (PR)

    More on Supervalu (SVU): The Wall Street Journal reportsthat in addition to buying Albertson's, Cerberus also plans to offer to take a stake in Supervalu (SVU) at $4 a share. SVU +16.5%premarket to $3.54 with no formal announcement from the companies on record just yet.

    The Supervalu (SVUdeal with Cerberus will involve selling five different brands – including Albertson's, Jewel-Osco, and Shaws – for a sale price of $3.3B. In addition, Cerberus will lead a consortium that will make a tender offer for up to 30% of the company at $4 per share. Supervalu shares have fluttered around wildly in premarket trading, but now stand up 21.1% to $3.65 with more clarity on the terms of the deal.

    Herbalife's (HLF +3.4%) investor meeting is getting under way, with the nutrition-supplement company, which has become the subject of a battle of investor titans, expected to rebut Bill Ackman's assertions that the firm is nothing more than a pyramid scheme. You can listen to the Web cast here and follow a live blog here.

    Carl Icahn has reportedly entered the battle of the investor titans that's raging over Herbalife (HLF) by acquiring a stake in the supplements company. Icahn has joined Dan Loeb on the long side, thereby going up against Bill Ackman on the short. "It's going to be an Ackman sandwich," a hedge fund manager declared. 

    Aeropostale (AROreports holiday sales fell 6% to $645M while sales at comparable stores declined 8%. CEO Thomas Johnson says sales and traffic "deteriorated significantly" after the Black Friday weekend. As a result of the sales shortfall, the outlook for Q4 EPS is lowered to $0.20-$0.24 from prior guidance of $0.36-$0.41. ARO-10.9% premarket.

    The U.S. could save $2T in healthcare costs over ten years, a report from the nonpartisan Commonwealth Fund ar

  30. yodi

    stjeanluc
    AAPL I see only a bunch of day trader rolling this stock around but as I said yesterday they run out of sellers and buyer sitting on the side line

  31. Pharmboy

    Bullish sentiment 51%, bearish 24%.  Time to buy some Puts.

  32. phil

    Oil back to $94 again – the gift that keeps on giving!  

    USO Feb $34 puts hit our DD target but, just in case no one was paying attention yesterday – let's DD on them in our $25KPs – now .85.  

  33. stjeanluc

    SVU / Phil – The Jan 15 1.5 calls are trading around $2.00 now so only $0.04 of premium. $2.75 would be a stretch and assume that the buyout is at $4.00. The 2.5 calls are at $1.05 now so $1.60 would also assume a $4.00 buyout.

    Not sure that the deal will get much better than what we see now though:

     

    SVU also announced the signing of a definitive agreement to sell its Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores and related Osco and Sav-on in-store pharmacies to AB Acquisition LLC , an affiliate of a Cerberus Capital Management L.P., in a transaction valued at $3.3 billion.     

  34. stjeanluc

    MoMo / lflan – Thanks. I'll reset the portfolio for tomorrow's update.

  35. sank1

    2013 One Trade / Phil,
    Thoughts, please, on how to structure the AAPL One Trade?

  36. wombatcreative

    newt
    SUV – apparently not a lot of volume on the options. sold out +.45, took everything and bought Feb $4 puts – looking at Phils reaction as well. The deal is not great – I thik theres some exhuberance here.

    Might have multiple positions on this == any advice from anyone ?

  37. newt

    Wombat: Awesome!

  38. wombatcreative

    USO DD – filled at .84

  39. phil

    F/StJ – Feeling greedy without the cover.  

    Margins/StJ – That is fantastic, thanks!   Players should keep in mind, that's out of $1M total ordinary margin so right about on target (1/3 invested) to where we want to be as we can still easily double down in a crash and we still have plenty on the side-lines to take advantage of opportunities as they come along.  

    SVU/Ging – Keep in mind they're running to $4 (spike high) as they sold off their assets, which will diminish future earnings potential.  They're not getting paid for it, Cerberus is essentially assuming about half their debt but that still leaves them with $3Bn to pay off an less future cash flow to do it with (but a marginal improvement).  The $4 per share offer is first going to current investors, not to the company, so they may not see any cash from that if the share price is still under $4 when that part triggers.   The 200 dma on SVU is $3.50 so they are consolidating around there but they're dumping 877 out of 4,400 stores and it's hard to say if those were better performers or not but it's doubtful Cerberus paid up for crap.  On the whole, I don't think they'll be much below $4 for long but, if you can get out with a good price – could be time to move on as they're up 50% for the month.

    AAPL $518 again – Son of a bitch!  

    Materials/ZZ – GDX, AA, MT – all picks from this week.  

    Dollar at 80 – not much of a rally considering almost 1% dip in the Buck.  Dow volume 28M at 10:20 is pretty strong though.  

    Cook/1020 – Oh you know who I mean….

    SVU/Wombat – You are short SVU?  Ouch!  If you sold the puts, you are in great shape and may as well wait for them to expire.  If you bought puts – that's NEVER been our position and, once again, at least it's worth paying for the lesson that will hopefully teach you not to be the sucker that PAYS premiums.  Once that sinks in, things will get much better for you. 

    I don't know if you were here last week but we had a conversation re. it's a terrible time to short stocks because M&A activity (like SVU) is kicking up and that means stocks can pop 10% on you overnight.  Oh wait, it was you I was talking to about that very subject regarding shorting LULU:  

    Also,  you say $4,100 is a 2% risk but that would indicated a $200,000 portfolio yet you seem to forget you spending $26,660 and, if LULU gets bought by NKE tomorrow, those puts will become worthless overnight.  I'm not sure what day they have earnings, but the value of those options will drop like a rock if LULU has good earnings as well.  All these calculations are fine in theory but this isn't a book – option trading is fast and risky and you are leveraging an extreme amount of risk on a trade like this.  The only thing that is certain here is that the premium you pay will evaporate over the next 38 days if LULU stays flat and the whole trade will be crushed if LULU goes higher (and it was 10% higher just last week) so you have 2 ways to lose and the 3rd way doesn't even give you a win unless LULU falls far enough, fast enough to hit your target – otherwise, that's a loss too.  

    Nat gas with a big inventory draw but not helping oil much ($94.09) but nat gas jumped from $3.14 to $3.21 but nothing all that exciting about a 201Bcf draw in the middle of the winter.  

    EIA Natural Gas Inventory: -201 bcf. Futures +1.30% to $3.15

    The only reason we seem to be narrowing our deviation from average slightly is because this is year 3 of pinning the top of the range so now the 5-year average is including this "new normal" and our massive builds don't seem as impressive.  

    Well, we're rejected at 880 and it does look like we're busting – volume turned very negative and 33M now at 10:38 indicates some very heavy selling in the last half hour – what's important is what we hold but so much for making more 5% lines if the NYSE fails 8,660 (now right on it).  

  40. dclark41

    Phil:
    Wow! That was a "sell into the initial excitement" moment with AAPL!

  41. 1020

    Phil/Jim  :)   I just thought you'd like to know I do read your morning write-ups!

  42. wombatcreative

    Phil
    SOLD PUTS at $2.50 Jan14 – cleared +.40. The only play I could see was to BUY puts to watch the stock readjust – then I'm out.
    Might even reload with selling $2 puts if it falls hard.
    Done my share of research – short term ride.

  43. wombatcreative

    P.S. Forget about the OpT trade -I agree with you. Lets move on.
    OpT and I have been chatting and honestly I just dont see the risk/reward with the strategy.
    ACOM, ZIP, SVU – the M/A has been very kind to us last year
    But just so you know – I love your brash sarcasm and I suspect you are simply wanting to teach me the old-fashioned way ( letting me lose my money : > ) and watching my back 
     
    JJ

  44. zeroxzero

    Phil:  No hurry on a response, but GDX?  Do you a positive slant on gold generally?  Inflation, sure, at some point, but you must have something more in mind.

  45. partha

    PHil – MCP – any play on the drop.  Is it worth a longer term – Jan 2014 – Sell 8 puts for $2.6 ?
    Thanks,

  46. kustomz

    UK FTSE flat
    French CAC -0.5%
    German DAX -0.2%
    Spain IBEX +0.3%
    Italy MIB +0.7%

  47. kevinb63v

    Phil,
    After several corrections to a b/w at $7 on SVU, I'm left with 1000 shares net $5.29, 10 sold JAN 14 $3 calls and 40 sold JAN 14 $3 puts. Any suggestions?  

  48. stjeanluc

    No more Timmy to kick around but the new guy doesn't look like a pushover:

    http://www.slate.com/blogs/moneybox/2013/01/10/the_reason_republicans_don_t_like_jack_lew.html

    But it emerged over the course of the negotiations that John Boehner and other Republicans kept trying to kick Lew out of the room to make a deal. That's because what Boehner wanted to do was make a deal in which spending cuts would be balanced by flim-flam, and Lew kept saying that the flim-flam didn't work mathematically. To put a balanced package together, Lew insisted that you needed to have real revenue-increasing tax hikes not just "tax reform" and handwaving. This kept spoiling the party, so Boehner wanted to make deals with Daley—with the political fixer rather than the budget guy. But ultimately you couldn't get a deal done, because you can't just smuggle a deal past the OMB.

    I am sure his hands are not completely clean either – no on in DC is anyway! But good for him.

  49. RMax1

    Phil:
    RE: BBY
    I have 24 Jan 15 short puts @15. Yes, I was playing for the take out. But as it stands today analysis
    are pegging $13.  If sales come in respectable, what is the correct play?  Thanks for the continued
    support and insights.

  50. wombatcreative

    StJ
    Ha, I thought you were talking about me ; >

  51. pete

    Phil / group
     
    I can buy AAPL Feb(36 days) $515 Call and sell Jan4(15 days) $520 Call for net $7.20.  This lets me control an AAPL call for 3 weeks for a max risk of $7.20.  I believe I can make more than $7.20 by selling calls (covered by the Feb $515 Call) for the 3 weeks available after the Jan4 calls expire.  Even if AAPL drops to $450 after Jan earnings, the Feb $515 call should still be worth around $3, so max risk can probably be managed to around $4.20
     
    I have not used Calendar spreads like this before.  Any comments are appreciated.

  52. Pharmboy

    Phil – Thx for the bump….I have been tweeting from our site here now that the little "tweet" link is there……

  53. kevinb63v

    Phil,
      In a Bowmar Brain moment (too bad their clever ads didn't translate into success) I misstated my net on SVU. It is actually $2.49, not $5.29; hey what's a couple of bucks between friends, right? So I actually have 1000 shares, net $2.49, with 10 sold JAN 14 $3 calls and 40 sold JAN 14 $3 puts. If I'm calculating right this time, I could close the whole shooting match down for a $190 loss. Would you suggest doing so, or is there a better play? 

  54. Pharmboy

    OK, THLD….selling the Feb $5 straddle.  95c.  a 1/2 cover will give nice upside price movement, and put another 1/4 entry into the stock if put to you.

  55. Pharmboy

    JPM Biotech Conf is wrapping up.  Time to think about cashing out of a few winners, or at least take 1/2 off the table….which ones….any one you are up on….I am out of SGEN Jan items.  Holding or covering the rest.

  56. rexx

    AAPL/ "One" trade  for 2013. I like that.  As a start I am liking selling 2015 300 or 350 Puts.  Why? Because AAPL will have at least $200 per share in cash by expiration.  They have $125 cash per share  right now – and that's not counting what they booked in 4th quarter.  (Probably another $15 per share). They'll have $200 per share by 2015.
    Lots can go wrong with the price action, of course.  I can see them losing a little market share in the smart phone business – even if IOS is a friendlier environment,etc. etc.

    So somewhere along the line the price could go back to $400 and the short 300 or 350 puts would double margin requirement.

    But I can't see Apple not continuing to make steady profits between now and the end of 2014.

  57. rj_jarboe

    In an article I read the following "As for the true state of inflation, Schiff argues it’s closer to 7% or 9% and going higher. And he sticks to his claims that we could have hyperinflation if foreign central banks start selling dollars." 
    I assume he is saying that a flood of dollars on the market will drive down the value of the dollar, but isn't that what we have been hearing for a couple of years now?

  58. kustomz

    Pharm CLDX moving  :-)

    Pharm, CLDX PLX TSRX CGEN CERS ZLCS AVEO EXEL PGNX SGEN WCRX ARNA VRTX CRIS GTHP ARRY.

    Any new ones to add to the list,  SGEN, PLX which 3 would you add to make your top 5 list. Thanks P.

  59. phil

    Well, you can see while TZA is our favorite hedge – RUT slammed down  from 883 back to 877, which seems harsh, but we're up from 831 on the 31st so not even a retrace yet.  

    Wash spin/Wombat – Well, much better if you shorted the puts. I don't think it's a repeat issue, we played for the deal, the deal happened, let's look for the next deal.  

    Reset/StJ – I'm all for that on the MoMo as it's always nice to benchmark from the start of a new year.  

    SVU/Income Portfolio, StJ – Yes, .95 is fine if we can't get fancier with the exit.  Why wait a year for a nickel?   We know we can do better than that with .95 cash.

    Gold seems happy enough and Dollar just failed 80, which makes the move in the markets even more pathetic.  

    Bullish/Pharm – Sometimes, when everyone is on one side of a trade – it's only because it's obvious. 

    SVU/StJ – $2.75 must have been the 2015s, which makes sense at $4 but now not even close and those were $1s, not $1.50s.  We have, of course, the 2014 $1.50s, which topped out at $2 (but, obviously, only because no one sold them at $3.90 or that would be net $3.50 and a huge discount) and are now back to $1.85.  Anyway, as above, let's take net .95 and run but the concept (first sell your calls, then cover the short calls) is how you exit a news pop like that.  

    AAPL/One Trade – Sank – Well, there's the ball-breaker but I think just an artificial buy/write, selling the 2014 $400 puts for $23.60 and buying the $400/450 bull call spread for $35 for net $11.40 on the $50 spread that's $67 in the money and makes 338% if AAPL simply holds $450 for the year.  Worst case is owning AAPL at net $411.40, a nice 20% discount to the current price and, of course, rollable.  Net margin on the short puts is just $4,000 plus $3,500 in cash for the spread is $7,500 of ordinary cash and margin to make $3,860, which is still 51.4% ROI – not a bad place to park money but you have to REALLY be willing to own AAPL long-term if there's some kind of catastrophe – that's why I'm on the fence about this one as THE ONE TRADE.  

    Thanks 1020 – it's good to know.  ;) 

    Sold puts/Wombat – That's much better then – congrats!  The way you asked it, sounded like you were worried about them.  You were correct reading into my sentiment to sell (go short) into the initial excitement but it was a dangerous play I was suggesting to make with our already profitable spreads, not suggesting initiating a new short – but it did work out.  Again, I am not a momentum or swing trader – I don't tend to flip-flop and bet both sides of stocks – I either like them and buy the dips or hate them and short the pops.  There are plenty of stocks on both sides to trade that I don't see the need to play both sides of one stock.  Our premise on SVU (long) played out finally and we're glad to be rid of them as we began with a loser from a higher strike and had to roll and DD (hence the 200 contract spread) to end up with what was finally a very nice pay-off.  We took the money and ran on the short puts a while ago, when the first popped over $3 as we were thrilled to see that and we resolved to hold the spread until the buy/out or the end of the year – this is the "buy out" – so we're done. 

    Old fashioned/Wombat – Just don't take things too personally.  I often use a trade made by one person as an example of what not to do for all so it does come off a bit harsh but the idea is to learn from many people's mistakes – and not just our own – so hopefully we can avoid some of those money-losing "opportunities" along the way.  

    GDX/ZZ – Yes, inflation.  Trillion Dollar coins, etc.  ABX, for example, has 140M ounces of PROVEN gold reserves.  That's $235 BILLION (with the big B) worth of gold that they own – they just have to dig it out (they also have 1Bn onces of silver that are almost a waste product to the gold at $31Bn).  They mine roughly 7.5M ounces a year at a $4.5Bn profit, which is $600 an ounce if it were all gold but it's not.  The total company is only valued at $35Bn, a p/e of 7.7 and if the price of gold and silver were to go up 50%, their profits would double and I doubt their costs would budge and it would take them 20 years before they mine out their current supply so yes, I like the miners as long-term investments.  ABX was $55 in 2007 and again just last year and now they are $35.  GDX was $65 and now $45 – it's a ridiculously undervalued sector – even if you don't have an inflation premise but, since it's also a fantastic hedge against inflation – I don't see how you can have a long-term portfolio without it.  

    MCP/Partha – That one is interesting as I spend most of my time telling people to stay away from that crap but they are finally interesting again back around their IPO price ($8.50) after topping out at $75 in last year's idiocy, when I had to yell at people who wanted to go long in "rare" earths.  (for those of you playing catch up, rare earth elements are not rare at all, they are simply rareER than other stuff you usually find in the ground so you have to dig up a lot of ground to get them.  Any country that is willing to allow their environment to be trashed by massive strip mines can churn this stuff out – right now that's China, for the most part)   MCP just drastically scaled back their outlook and will not be moving forward with a plan to double production so their forward assumptions are currently being flushed.  I wouldn't catch a falling knife here but it's not like they have much debt but also no growth at the moment so $7-$9 is a fair price.  You can sell 2015 $7 puts for $2.50 to net in for $4.50 and that's the one I'd keep my eye on as it's almost 50% off with low margin requirement so a good place to make a toe-hold in the space.

    Europe with a sad close.  

    SVU/Kevin – You say net $5.29 but is that after selling the Jan calls and puts?  If you sold 40 puts against 1,000 shares, you are way over-covered on that side but, luckily – as a bet it worked out.  I'd lighten up on those Jan puts as they must be ahead and you already made your bed selling the short $3s and you're going to get called away.  I wouldn't roll out to 2015 (you can roll the the short $4s better than even).  If you want to keep gambling with them, better to sell some 2015 $3 puts for $1.  

    Lew/StJ – Reps don't like him because he doesn't "play ball".  Lew used to be Tip O"Neil's Sr Policy Adviser and Tip didn't hang with light-weights and he's an actual lawyer with a Harvard degree so he's hard to BS AND he worked at OMB, so he knows everyone there.  He's a nightmare for the GOP compared to Geithner, who kisses Llyod and Jamie's pictures at night before he goes to bed.  

    BBY/Rmax – With the 2015s, I'd wait.  If they get bought over $15, the puts accelerate and go worthless and, if not, then it's a question of how we feel about tomorrow's sales report and Feb's earnings report with no buyers in site.  

    Oops, been a while since I submitted! 

  60. wombatcreative

    BBY

    Sold March $9 PUTS – up +.15 – suggestion on strategy ?

  61. roberthjrfl

    Phil.  what are your thoughts on what is crushing the dollar?  Seems like an aweful big move down with very little up in the market.  Is this the Europe deposit rate?  TIA

  62. phil

    CNBC doing everything they can to spin this AAPL analyst negative.  Meanwhile, he has an $875 price target that he cut from $900 and says they haven't fully factored in the upside of selling cheaper phones to more people.   So funny. 

  63. roberthjrfl

    Phil.  GDX or gold / metal stock.  what is your favorite trade…. maybe this could work into a good inflation hedge.

  64. stjeanluc

    Marc Faber in on the Futures Now show on CNBC online with his usual prediction of a 20% correction in the market. This guy has been right once in the last 10 years he has made that prediction and they keep on having this guy on all the time. So since 2009 the market is up 100% so we could correct 20% and he would claim to be right but we would still be up 80%. Him and Jim Rodgers are just caricatures now… 

  65. partha

    Phil – thanks … will leave some bait out at that level …

  66. wombatcreative

    AAPL
    thanks Phil
    just sold another 2015 $400 

  67. kustomz

     
    1:30 PM "I approach policy decisions with a healthy dose of humility," says Kansas City Fed President (and a new voter on the FOMC) Esther George, clearly setting herself apart from current Fed leadership. Sounding like she may be a dissenting vote to replace the outgoing Jeff Lacker, she reiterates her concerns about ZIRP and QE∞.

  68. phil

    AAPL/Pete – It's not terrible but you can get burned if AAPL goes up or down violently and what are the odds AAPL flatlines for 2 weeks this close to earnings.  We expected them to have a rough week due to Comdex but this China thing can really pop them.  CHL makes $20Bn a year and has a market cap of $230Bn – more than T on both counts.  They could do something different like offer AAPL an up-front deal for 60M IPhones – almost a whole year's sales – and Cook could be in China not only tying up the deal but tying up the supply side as well and cornering the semi and memory market for the next two years.  Don't forget, CHL customers pretty much have no smart phones at all – they are just upgrading their networks because T sells $160Bn and CHL sells a way more profitable $80Bn but would love to upgrade their clients and get them to spend $160Bn as well. Anyway, just a better case scenario – I'd still be conservative on AAPL until we know what's what but there are easier ways to make spread money – we've already demonstrated the QQQ spread in the $25KPM and that caught up very quickly from down $15,000 just using that one spread for a couple of months with a lot less trauma than AAPL has been giving us even though it's essentially the same bet.  

    30-year auction was a big success.  I assume that's what today's dip was really about. 

    Tweeting/Pharm – I do want to encourage that.  Kids today live on Twitter, if we're going to get the newsletters going – we'll need to build that audience.  

    SVU/Kevin – Well that's a lot better!  So you either get called away with a profit or you roll out and pick up another $1 for another year.  At that price – no harm in hanging on.  Cerberus isn't paying $4 a share to be embarrassed within 2 years.  Is it worth tying up your money to make .51 this year and maybe another $1 in 2014?  You could also flip the stock ($3.40) to 10 2015 $2.50 calls, now $1.20 so you pocket $2.20 in exchange for paying .30 in premium to have the same upside otherwise.  That way, if SVU is over $3, even if you can't roll the caller, you get another .50 and you've collected $2.70, which is more than $2.49 and, of course, if all goes well, you roll the short puts and calls for another $1 and now you have the .50 for this year and another $1 to make next year and another $1 to collect on the spread AND you've still got your $2.20 to play with while you wait.  

    Dollar fell all the way to 79.76, seems to be holding there.  Because the ECB didn't do anything crazy today – we are back to being the World's craziest Central Bank (other than the BOJ, of course).  

    AAPL/Rexx – As I said, as long as you REALLY want to own AAPL for $411 – it's a non-issue.  People get into trouble when they use margin to make bets they have no intention of fulfilling.

    Hyperinflation/RJ – I think it will happen but not from foreign selling – simply from the velocity of money accelerating.  China has 8% inflation and India about the same and Arab countries around 10% – it just hasn't rolled into the industrialized nations yet because our banks make about $20Tn disappear into a big, black hole that we're only just now filling in but, once that's done, the flood of money will have nowhere left to go and the Fed doesn't have a hose big enough to suck up all the liquidity they spent 4 years dumping before it all starts splashing over the sides and getting everyone wet.  

    Gold was $250 an ounce in 2006 and jumped to $600 in 2008 and then $1,200 in 2010 and hit $1,923 last year and we all sit around and debate how silly it all is and THAT is how inflation catches you asleep at the wheel.  The problem is no one studies history – so we constantly repeat the same mistakes by ignoring the signs:

    Between 1919 and 1921, Germany was no different than us from 2006 to 2010.  I'm sure they had little pullbacks along the way and I'm sure they had speculators on both sides of the trade.  Yes, conditions were different then, mainly because you actually needed gold to back your currency – but the point is that you don't get much more of a warning of impending inflation than we're getting now on commodities – yet our Government simply excludes food and fuel from their measurements, tells us there is no inflation, and we go on with our dreary lives as if it's true.  

    As I tell my daughters – you can ignore the monster under your bed until he's chewing on your leg – then you are forced to acknowledge his existence…    Edo, ergo ego sum (I eat, therefore I am).  

    BBY/Wombat – Wait for March?  I think you spend too much time starting at a screen and wanting to trade.  If you rent me your beach house for August and I give you 20% now and I'll pay you the rest in August, do you try to buy me out in February?  You don't get the money until I get to use the house so you need to WAIT for August to collect your rent.  Unless you are very concerned that BBY will fail $9 in March and you have no desire to own them if they do – then you have .30 left to collect (another 200% to what you get if you cash now) but, only if you are PATIENT.  

    Dollar/Robert – As above, we're just crazier looking than Europe.  They stood pat on rates, no major bailouts coming but our Fed is printing $85Bn a month (at least) and our Treasury is minting Trillion-Dollar coins – what then, is the real value of the Dollar? 

    GDX/Robert – I like GDX as it spreads the risk and, with M&A coming back, you may see some consolidation in the sector that sends everyone higher and then, of course, gold could head back to $2,000 and the extra $300 an ounce is all profits for the miners.  Meanwhile, any single miner can have a strike or a collapse or get nationalized or fined or spend $1Bn to find out the yield isn't profitable so, GDX edges out ABX if you only want to make one bet on the sector.  ABX I love as well but gold itself could go up or down so not as good – except for selling front-months – where it is a fun trade.  GDX is 13% ABX anyway and 12% GG, who are pretty good and 8% NEM, who are not bad – you get the idea…

    Faber/StJ – They love guys like that because they know what they'll say and they can write their narratives around them.  They should have to run a guy's track record on screen while they are talking so the audience knows what clowns they are watching.  

    You're welcome Partha, Wombat.  

    Humility/Kustome – That's interesting, Lacker used the same word.  

  69. mrmocha

    Pharm - What is the average course of action for a company like ARIA at its present stage?  I still have a lot of shares and don't want to sell full covers if there is a chance of a buyout, but that seems like a long shot this early on, true or false?  I expect that I can milk the stock by selling calls for a year or so until the product has a track record, good idea or bad?  TIA!

  70. jelutuck

    Phil, I am short 20 of the ABX Apr $38 puts (most of the premium gone at $4.60 but I sold them for $2.85).  I could either roll to the Jan 14 $35's and ride it out with a lower entry or move to something in GDX, as this is my only precious metals position.  What would you recommend?  This is for a low-risk/income account.  Thanks.

  71. Pharmboy

    Kust – not sure what you mean, but top three are SGEN, PLX and GTHP for high, med, and low costs.

    Otherwise, that is my list.  I move in and out of them on price moves by selling calls or puts, but I have been less active lately as I am very busy with my primary job (new co.).

     

    TSRX is a takeover candidate, as is SGEN in my mind.

    CERS is good, but a small investment

    PLX is a waiting game and selling premium against.

    CLDX and PGNX are SGEN plays.

    ZLCS remains a play for any upside pain relief in more ways than one!

    VRTX is for premium only.  I don't see them being taken over, but ???

    THLD is new to my portfolio, and I was not going to chase…it is more attractive now in a small dose.

    ARRY is now in Phase III.  Cheap valuation, and LOTS of things in the pipe…but they are a bit to spread out b'c of that and thus raise funds a lot by selling stock.

    CRIS – waiting.

    AVEO -waiting for FDA and we will hold for the 'melt up' further.  On pullbacks, buy cheap bull calls spreads in Jul selling Feb puts to pay for part of it.  I still think they get approval, but it is by no means in the bank.

    IRWD – takeout by FRX.

    EXEL – cabo is their game, and I remain 'lightly' invested in them.

    MED DEVICE from PSW LV is my game plan this year, so I continue to watch the sector.  Not my area of expertise, but mid tier players will be consolidating this year.  LIFE, NUVA, VOLC, VAR, THOR, EW are all ones to watch.

    WCRX – generic maker, that is small and ripe for takeout.

  72. phil

    ABX/Jet – Why pay the fees when you may not need to.  ABX is $34.37 and April is a long way away.  You are in at net $35.15 so your loss is what?  .78?  You can roll them even to the Jan $45 puts or the 2015 $30 puts ($4.20) but you don't need to roll $4.50, you only need to roll your loss – if it becomes realized.  So I'd say that, at $34, you have to pay $4 back and that's a loss of net $1.15 and that can be rolled down to the Jan $30 puts at $2.30 and you drop your net to $28.85 and you still make $1.15 if they expire worthless so, unless that relationship turns sour on you – there's no pressure to roll.  

  73. millcreek

    phil
     
    had sold the svu jan 13 3 call for .40 now .45………used it to offset my jan 14 short 3 put. ….
     
    your thoughts on closing it out or rolling …………..tks

  74. wombatcreative

    Phil
    Thanks again for the public humiliation I'm getting used to it. ; >

    Your saying – its working – don't screw with it.
    My thought process for cashing out the +36% return on the 9's was to open a more aggressive position into 10's from my profits. 
    I DO NOT think BBY will challenge 9/10 but since I'm selling puts I wanted to limit my possible exposure to assignment ( worse case scenario )
    Thats where my head was.

  75. lflantheman

    MoMo trade:   Sold to Close   2   AMZN  Feb 265 calls for 11.10.   

  76. Pharmboy

    CGEN – lightly in them.  Again, SGEN play.

    ARNA – all about sales sales sales.  Then Eisai will buy them….maybe!

    ARIA – MrM – I don't see them being taken out just yet.  Drug revenue will come into play.  There are a ton of players in the leukemia field….so you are right to just sell calls and puts against the position.  Why not move to a synthetic and protect some of or much of your profit.  That one was a beast for us…and you especially as you were in it much longer than I!

  77. Pharmboy

    Phil – 4 UR portfolio picks for the world to see PSW out there…VIVO.  Buy stock and sell Jul13 22.5 calls and 20 Puts.  THIS is one I forgot about. 

  78. ariveraA

    Hi Phil:  Looking for some insight from experience here….
    I was looking at my trading/speculative portfolio winners from last year and noticed the biggest $ winners where sold puts a few days after a stock crashed. (knife catching?)  I look for already depressed prices and then wait for rumor/earning related crashes…For example, FCX, HPQ , JCP, X, BTU.  Currently I'm waiting for earnings season to see what goes on sale.
    Is this a reasonable speculation premise or a recipe for wipe out? 
    ps. My other portfolio is basically blue chip buy-writes…

  79. stjeanluc

    Goo article about energy:

    http://www.economist.com/news/briefing/21569037-why-worlds-most-harmful-fossil-fuel-being-burned-less-america-and-more-europe

     

    This means trouble for America’s coal miners. Coal production is likely to have fallen by roughly 100m tonnes in 2012, compared with 2011, or around 10% of the total. A surge in exports softened the blow: they rose by a quarter in the first half of 2012, to around 66m tonnes. The industry’s infrastructure is not geared to export—it is hard to get coal from Wyoming on to ships bound for China—but if that were rectified, analysts reckon, exports could reach 200m tonnes a year. In the meantime mining companies have been closing pits, shedding jobs and consolidating, especially in the least efficient mining areas of central Appalachia (West Virginia and Kentucky).

    The decline of coal, though, will be protracted. Coal-fired power stations are built to last—the oldest plant currently operating was built in the 1930s—so unless new rules force them to close, they will be retired gradually. By 2017 or so, reckons Brattle Group, a consultancy, coal use will stabilise again, as gas demand finally makes gas prices dearer than coal. Coal may be down in America. But it is not yet out.

  80. yodi

    Phil I am glad some one keep you of the couch 8(

  81. grant

    Phil – "CHL customers pretty much have no smart phones at all – they are just upgrading their networks…"  As I understand it iPhones use an incredible amount of "data" vs. a simple phone call.  1 iPhone = 20 voice calls?  So if China gets a huge influx of smartphones, who benefits the most in the infrastructure buildup (i.e., Who do we buy?) 
     
    Maybe that company should be your one bet for 2013.

  82. jasu1

    Phil,
    I have a 2013 ABX 35 put entered at 2.15…..Roll to 2014/30 P or 2015/28 P? Please explain how to evaluate these 2 rolls.
    Thank you for the education.

  83. jasu1

    What happend at AApl…$4up in 4 minutes?

  84. yodi

    looking at CHL not a bad stk steady uptrend 
    Short term play Buy stk @ 58.50 sell Feb 13 57.5C for 2.02 with a downside protection to 56.50 Return for the month 1.6%
    Your extrinsic value aprox .90
    no margin stk has a yield of 3.2% 

  85. wombatcreative

    Is LNKD on anyones radar ? – could use some advice on how to bearplay 
    Earnings 2/4 
    Their deferred rev is out of control.
    SA article pegs them at %60, currently trading at $118 with a P/E of 787

  86. 8800

    The ever-stimulating AAPL just retraced 50% of today's drop in a straight up short- covering fashion. Time to fade this move?

  87. yodi

    jasu1
    a day traders game nothing more

  88. kustomz

    Made notes, thanks Pharm

  89. Pharmboy

    I am sorry, but this is really getting ridiculous.  When we break the highs….I will just take out an SPX short and close everything.  The sandman is lurking, and the bulls are stampeding, but thar's the cliff……

  90. kustomz

    Pharm, not until we see a spike in volume and a new high….

  91. Winston

    Peace of mind / I have a portfolio mainly consisting of long term long calls, short term short calls and puts, and long term BCS. Three years, ago when I started my journey on this board I would be freaking out panicking as to what to do, as many of the short calls are ITM, Three years later (today) I look at the screen and serenely process the information. Three years ago, I inevitably made the wrong decisions which cost me a lot of money. Three years on I calmly roll the positions to whatever makes sense. No drama, no hair pulling, and a great cost saver. I guess they call that the power of education.

  92. zeroxzero

     Winston:  Are you sure its positions you are rolling that are making you so calm? :)

  93. craigzooka

    IRA Portfolio Update!

    CHK is starting to look nice and cheap again, initiating a position with the following

    SELL 2 CHK APR 16 CALL @ $1.03

    BUY 2 CHK APR 9 CALL @ $0.05

  94. Pharmboy

    How are those March SPY 150 Calls treating everyone?  Sheesh.  Even my DIA Jan 135s are getting there.

     

    Oh, and Tom DeMark just called 'exhaustion top'.  One more up day, then.

  95. jasu1

    Winston,
    You are where I want to be…..That's NIRVANA

  96. yodi

    sorry craig do not get this play CHK

  97. phil

    SVU/Mill – You're lucky you didn't get killed.  Cerberus WILL be buying 30% of the company at $4 – there's bound to be at least a run back to $3.75 or higher at some point.  You can risk when but you're generally lucky to get out alive.  

    BBY/Wombat – Habirdnd = Bubirdbirdsh

    AAPL hits $523 and is rejected at $523 again.  Wow, what a channel!  

    S&P now new highs, RUT 880 again – TFF.  

    VIVO/Pharm – Good idea, Greg should have that rolling shortly with Ditto Trade.  

    Selling puts/Arivera – Like everything else, it's situationally dependent.  All those stocks were OVERSOLD, not just crashing.  The trick is being patient enough to take advantage of real values – like we just did with SHLD, MT and BA, and not chasing junk like DECK might be at the moment or RIMM with it's endless fall (that did finally reverse but jeez).  CHK, for example, is iffy now – iffy doesn't cut it because, if CHK did fall below $15 – I don't think we want them.  If ABX, on the other hand, falls to net $25 – it's hard to imagine a situation in which we don't want them.  Your attitude is great – waiting for earnings season – just make sure you KNOW what you like when it goes on sale and not just buying stocks that crash because you are tired of waiting.  

    Coal/StJ – Hopefully oil will go the same way over the next decade – a legacy fuel people are nostalgic about.  

    Thanks Yodi.  

    China/Grant – They have already built the infrastructure.  Now the trick is getting their customers to go from spending an average of $10 a month to $20 a month and they need to put smart phones in people's hands to do that.  I figure it's worth CHLs investment to do whatever it takes to get 10% of their customers holding smart phones so figure 60M people with $300 subsidies is $18Bn to kick-start demand but, if it works and doubles their revenues over time, the return is $300Bn in market cap plus the additional $20Bn in annual profits and, keep in mind, they've already invested more than that in building the infrastructure.  So CHL themselves are not such a great bet in the short run as those costs will whack them (just like T and VZ when we were buying them for the same reason) but, long-term, we will like them as much as US Telcos.  As to infrastructure players – I don't have a clue who gets those jobs in China but, as I said, much of the build-out is done already as part of the last 5-years' stimulus package. 

    Hey, here's an idea for Cook – trade IPhones for CHL stock.  That could be a nice win-win.  AAPL doesn't need the money and they'll benefit from the app sales and accessories and all that will goose CHL revenues and ramp up the stock and, with a seat on the board – they'll swing a big stick in China for many years.  

    ABX/Jasu – Short put, I assume.  Same as above, why do anything?  ABX is at $34.50 and you sold a $35 put.  That's on target so why spend money to roll it?  I assume it's the Jan that expires in 8 days and is .80 so that's .30 of premium that burns off in 8 days no matter what ABX does but, if ABX rises 50 cents – then it costs you zero to "roll" it.  Please evaluate why on earth you would want to roll this now…

    AAPL/Jasu – Silliness taking a break.  

    LNKD/Wombat – I wouldn't short them, they are expensive but great growth model.  Kind of stock I wouldn't touch in either direction.  

    AAPL/8800 – Day trade them at your own risk.  

    LOL – and what Yodi said.  

    Thanks for earnings StJ – that's super-useful!  

    Peace/Winston – Good man.  "Peace in our time", as another guy with a British PM's name said. 

    DeMark/Pharm – You keep looking for reasons for the rally to end but it doesn't.  

    Speaking of calm – this was a tough day to ride out – congrats to all for staying so calm.  

  98. dclark41

    Craig:
    On your CHK trade were you looking at the April puts?

  99. ariveraA

    Thanks, Phil. 
    Ovesold - big difference from crashing.  Although I remember -10% days on most of them! 

  100. Pharmboy

    GOLD March 105 calls for an explosion into the 'golden ratio' of Maldor.

  101. Pharmboy

    Rally/Phil – I'm a sucker..what can I say…but one day….

  102. rpme

    It feels like a big move but really we are just getting back to where we were in Sept.

  103. scottmi

    SODA/Lflan – I didn't entered this, but looking for an upside momo. Still liking it?

  104. rj_jarboe

    In my watch list of 25 stocks only MSFT is red. This is starting to look alot like last Jan.

  105. stjeanluc

    Earnings / Phil – Hoping for some big misses though so that I can get better entries on good ones!

  106. newt

    GLD/ Pharm: Did you roll the March 170 calls down? What have / are you going to sell against it next week?

  107. phil

    93M on the Dow with 3 minutes left and we're holding up so far.  

    Haven't had very big volumes at the bell this week.  

    RUT finishing right on the 880 line – makes me look very clever with today's post title.  ;)  

    AAPL right on $523 – again.  

    VIX 13.53 – what volatility?  

    Oil $93.87 – congrats to the Futures players on that one.  

    Dollar 79.84.  

  108. wombatcreative

    Phil
    BBY/Wombat – Habirdnd = Bubirdbirdsh —— hahahahahaha   understood
    LNKD / I can't argue with the growth, It's the deferred rev that freaks me out – it keeps growing and growing

  109. lflantheman

    scottmi/SODA……I still like it.   I see > 50 soon. 

  110. phil

    SOX 400 – that's a good milestone!  

    1,472 on the S&P is the big number today – that one snuck up on us.  

    NYSE 8,713, RUT 881, Dow still needs 1% at 13,471 – all good stuff.  XLF $17.17.  

    131M and all bull right at the end is best volume of the week but still low, low, low. 

    HPQ sneaking over $16. 

    WFR over $4

    MT $17.50 – woo hoo! 

    Deferred/Wombat – Excellent reason not to buy them, not enough reason to short them.  

  111. lflantheman

    Daytrading AAPL/   Looks like bots doing most of it, but you can do it too.   Choose the weeklies, ATM.   Short above 528 and go long below 522.   Put buy and sell orders in the computer so you don't miss the turns.  Probably can do similar daytrades for another 10 days or so, if you're looking for some fun. 

  112. 490union

    Phil….I'm the sucker that bot AAPL Feb 550 naked calls,and I'm nervous! Any way to roll this into something that may work if earnings don't work out? Paid $25 a month ago b4 most of the attacks started.I like the position long term,it's amoney machine.Can't sell puts,as it's in an ira.HELP and thanks in advance for the tongue lashing.

  113. sank1

    ONE Trade, Catastrophe / Phil,
    Any thoughts on how we could join the artificial buy/write on AAPL with some kind of hedge/insurance that we "expect to lose" but would cover us in the event of a catastrophe? And even if this brings down the return on margin & cash down from the 51% to something like 35% or so, I'd certainly be interested in "parking" some cash there.
    Thanks. 

  114. stjeanluc

    Income Portfolio in fuego now….

  115. Winston

    2zeros / I have found consuming alcohol while trading unhelpful. It is probably much more fun with a paper trading account. As for anything else, I have lived a rather sheltered life, so cannot comment. But I did hear that the odd magic mushroom works wonders on triple witching Friday.

  116. zeroxzero

    Winston:  I have led a rather less sheltered life, and in the end decided that consuming anything but fruit, fish and spring water is generally unhelpful.  Although I've not seen a magic mushroom for a very long time, and I'd be willing to make an exception on just about any Friday, but only after shutting off my computer!!.

  117. wombatcreative

    490union
    I'll wait for Phil to address the straight calls, but you CAN sell puts in an IRA, they just have to be CASH and the margin usually close to full depending on the broker.
     
    JJ

  118. cslanson2

    Phil,
    Since many of us have AAPL on the brain and we're all aware that Tim Cook is currently in China and not on vacation, would you agree that Apple's CEO will either come back with a deal or a relationship in the immediate future with the largest telecom is dead.  Since the stock is trading in the "no growth" range of MSFT, CSCO & INTC, very little of a positive announcement is priced into the stock.
    Using the above assumption, if Mr. Cook were to announce either at earnings or before, a deal with the world's largest telecom (by a country mile), what is your estimate of the "gap up" in the stock price based on such news?
    I think the jist of my comment/question is:  it would be insane to be short at this point – I think.
    Your comments if you're so inclined
    Thanks

  119. ariveraA

    aapl/ Phil: Some of my feelings on apple (x 100, Denninger is, oh, deranged, emphatic?)
    http://seekingalpha.com/article/1105391-apple-s-slipping-grasp

  120. stjeanluc

    The Income Portfolio tab is now up to date – P&L is $79,020 against that 337K margin or 23.4%. I guess we should trade only 6 months every year and fold!

  121. Savi

    490—-as womba said you can sell puts in an IRA but full cash—to mitigate this a little you can buy a real low put against your short put—fwiw

  122. craigzooka

    @dclark41,  yes, I was looking at the April puts,  I just abbreviated April as APR.
     
    @yodi, what don't you understand?  Is the notation confusing?  We are selling 2 putspreads in April trying to collect almost $1.00 for each spread.

  123. Savi

    craigz—you said calls instead of puts, i think--that is the confusion

  124. pstas

    BRK/B- new 52 wk. high and, I think more to come. 
    I laid out my trade plan back in November- buying 14-Jan 80's in the $10 range expecting to ride them up to the $95-$100 area and then lay on some covers. Good news the 80's are up nicely ($17); Bad news, I only filled 1/3 of my original allotment. I goosed the returns a fair amount with front month calls purchased for swing trades. Still in those also for a nice profit. 
    So now what? My $100 target for the B shares was a back of the envelope estimate of "fair value". I am now inclined to up that fair value number to $120. Not only did Warren up his commitment to purchase stock at 120% of book ($88); but Mr. Market seems to be appreciating the intrinsic value of BRK and is getting a dose of multiple expansion. 
    I came across an analysis of "intrinsic value" done by T2 Partners in which they calculated intrinsic value based on investment per share plus non-investment earning per share at a 8X multiple. Their number is $179,00 or $119.3 for the B shares. Historically, the shares have traded in a range to book value of 1.1 to 1.8 or an average of 1.3 or $97. $120 would be 1.6 x book of $74. 
    Given the Fed actions and general bullish market bias i will continue to hold long/naked with my trigger finger ready to sell some covers if things get shaky near term. 

  125. craigzooka

    @Savi, oh crap, that was a hell of a typo. I am sorry everybody!  The IRA Portfolio trade was supposed to be

    SELL 2 CHK APR 16 PUT @$1.03

    BUY 2 CHK APR 9 PUT @$0.05.

    I hope I didn't screw too many people up with that!

  126. craigzooka

    Someone needs to get to work on that Computer / Brain interface so I can just wear a funny hat and dictate directly from my brain onto the screen instead of having to go through my hands!!

  127. Savi

    Craigz—computer/brain interface  , sounds good I hate to see what my screen will look like  ;->—- I am sure they figured out you meant puts not calls—my trade did not fill today

  128. scottmi

    Craigz – no problem here, i passed on that one. But , this tip-trader is really pissed!  ;-)

  129. jfawcett

    FWIW – the Russell was weaker today than the S&P.  The (IWM/SPY) Ratio chart clearly has  the Russell outperforming the S&P since 12/16.  Today, that turned noticeably down.  Is risk being taken off?

  130. mjjwo9b

    Craigzooka:  Nice job on the IRA.  I have two IRA accounts that I am looking for an entry which require a +/- $20 stock.  Your TOS search skills far exceed mine.  Any ideas?  I just want to do a straight up buy/write.  Maybe a front month put to do the intial buy in.   Thanks.

  131. yodi

    Thank you craig and savi yes to me there is still a difference between calls and puts, as the calls in craig's case just did not make sense to me.

  132. stjeanluc

    Gee, almost forgot to post the lines!

  133. stjeanluc

    The NYSE chart is missing a 2.5% line which is pretty important as it's a S/R line now – 8600:

  134. phil

    Good morning!
    Dollar still just under 80, Japan loved stimulus and was up 1.4% but Shanghai fell 1.8% and Hang Seng down 0.4% on a 2.5% rise in CPI, up from 2% in November, which leads people to think the Government might tighten.  WSJ has very nice set of charts on China.  

    Europe pretty flat but oil down nicely to $93.18 even without a big move in the Dollar so great for /CL shorts and good (but not great yet) for our USO puts.  By the way – Don't forget if you DD'd at .85 to lower your basis – there's no point to lowering your basis if you don't then reduce back to 1x when you get even!  Oil is not like SVU or HOV or HPQ, where we DD until someone else realizes the fundamentals and then we can stick with them as the rise.  Oil is manipulated constantly and goes up and down regardless of reality.   We like to get in when there's a lot of downward fundamental pressure AND AFTER they have pushed it too high – but that only balances the odds slightly in our favor and it is foolish not to take advantage of the dips to lighten up and keep ourselves nimble.  
    Gasoline finally took a tumble, back to $2.75 from $2.82 yesterday.  Can't fight those kind of builds for too long. Nat gas flying from $3.12 to $3.25 on first big draw of the season.  Still plenty of time for winter to be cold but nothing to change my opinion that $3.50-$4 is a lot of money for Nat gas so no major recoveries expected.  

    Sucker/490 – Come on, that's just too easy.  Do we have anything that short-term in our virtual portfolios?  At $12.80, I'd roll out to the July $500/525 bull call spread at $13, which doubles if AAPL manages to hold $525.  Can't help you if a 92% profit in 6 months isn't enough for you – especially as you're rolling your break-even (on the remaining amount) down from $563 to $513 for .20.

    AAPL insurance/Sank – Well that's easy.  With our break-even at $411, that's over 20% down for AAPL so at least a 4% bite out of the Nasdaq takes the Qs down to $64 so let's say you did 10 of the spreads for $11,400 but you don't really want to own 1,000 shares of AAPL for $411,400.  You have a $38,600 gain coming to you if AAPL holds $450 so you can take $8,000 and pick up 40 SQQQ June $36/45 bull call spreads at $2, which pays back $36,000 if SQQQ goes up 15%, which would be a 5% drop on the Nas (but expect some decay in SQQQ).  As this spread decays and drops to $1, it should only be doing so because AAPL is doing well and then you can add another $4,000 (if you still feel the need) to roll the spread back to next Jan but, if AAPL is at $700 in April and the spread is down 50% – won't be much need to re-cover for a drop to $450 and you can cash the insurance with a $4,000 loss.  

    It's not 100% coverage but, it's plenty of money to let you get out of the position after it's taken a massive hit and $36,000 (a $28,000 profit) is $28 per contract to roll 10 $400 calls, so likely you can roll them down to $350 at least but the current Jan $600s (assuming you're $80 underwater) are $38 and $28+2 can roll them to the Jan $520s ($68) – so that's a lot of insurance!  Of course, if you are worried about owning AAPL $320 calls then you would be an idiot to put money into the stock when it's at $523 so these are not magic beans – we hedge against a reasonable risk because, if you want to be 100% hedged – stay in cash! 
    China/CSL – Tim Cook says AAPL will have more sales than US in near future – that should say something.  Even if US sales are 1/2 their total (probably more like 60%), it's still a 50% pop.  Of course, using the AMZN/AAPL theory of the markets – making those kinds of profits would be catastrophic for AAPL and the stock will probably plunge to $300 while AMZN finds another way to lose money and hit's $300, crossing AAPL before leaving them in the dust as AMZN reports a drop in sales.  

    I don't think AAPL will gap up on China as it's kind of expected, unless there is a special deal, like I outlined yesterday.  I think it's dangerous to fantasize about a sudden turn up in AAPL – even when they were $85 and I was screaming for people to buy them, it took 7 months (October '08 – April '09) for them to get back over $100 – and that was down from $200 – more than 50%, so it's not like nobody had seen better value in AAPL earlier – they had been over $150 for about a year and then spent 7 months at a 50%+ discount.  Now they fell from $600 (I wouldn't count the brief spike to $700) to $500 for about 3 months – maybe they still go to $400 and maybe it lasts another 6 months – you shouldn't care, you should be thrilled to OWN AAPL at that price.  But if you keep betting for a short-term pop, you can go broke while you wait. 

  135. rj_jarboe

    CraigZ,
    How about buying SPLS for $11.75 and selling the 2014 $10 Call for $2.45 for net $9.30. This makes $0.44 Div 4.7% and gives another $0.70 profit if called at $10 (12.2% total). Thats a 20% downside cushion and you still get to make 4.7% if the stock is at $9.30 next Jan.

  136. phil

    Denniger/Arivera – Stopped innovating?  What a tool!  Please send this to Karl and tell him to stick to supporting idiotic Conservative ideals because his market analysis is even worse.

    And what innovations have anyone else had other than to copy AAPL?  If AAPL stops innovating – woe unto everyone!  I go into Brookstone now and the front 1/3 of the store is all AAPL accessories.  

    $79.000/StJ – Time to fold up the tent and go home with that kind of gain!  

    Berkshire/Pstas – Great long-term company to own.  $85 is my usual entry on the B side, you hit it on the nose in November – congrats.  Watch for a bit of a pullback at $100 but I wouldn't be surprised to see $120s down the road.  Of course Buffett will die one day so good to keep a bit of dry powder in case they dive on that. 

    Oops, late for work! 

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