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Wednesday Rally: 1,500 or Bust on S&P, 555 or Bust on AAPL

QQQ WEEKLY And away we go!

We're off to a fantastic start in our big earnings week with both IBM and GOOG giving us nice reports yesterday (Dave Fry's QQQ chart).  I sent out an early Morning Alert to Members already on positioning our earnings plays and I even tweeted it, in case you are interested in a full review.  Our IBM play from yesterday's Morning Alert for our $25,000 Portfolio (see virtual portfolio tab for all tracking) was slightly bullish, buying 5 of the July $190/200 bull call spreads for $5.25 ($2,625) and sell 3 March $200 calls for $2.60 ($780) and 3 July $180 puts for $4.70 ($1,410) for net $435 for the $2,500 worth of long spreads

IBM is tracking $204 pre-market which means, so far, we can look forward to a full $2,500 on the bull call spreads with the short puts expiring worthless and owing the short callers, at the moment, 300 x $4 back for $1,200 so net $1,300 of our $2,500 potential realized if we flat-line here, but a lot can happen between now and March – and then to July so we're not sweating that one.  

Our other earnings play for this morning was GOOG and that one was from the 17th:
GOOG;/Itrade – Big deal on GOOG is going to be mobile search.  Doubt there is much growth in desktops. Earnings are on the 22nd (next Tuesday) and don't forget Monday is a holiday so I kind of like the June $665/700 bull call spread at $21, selling the next week $725 calls for $15.50 for net $5.50 and the plan would be to roll those Tuesday (hopefully picking up some premium crush over the long weekend) and sell Feb calls to cover, hopefully for another $5 to make a net free spread.  If GOOG has good earnings, we can deal with it by rolling and if GOOG has bad earnings, the caller goes worthless and it's a free(ish) spread and we can salvage what's left or sell puts and roll down if we think it bounces back.  Let's do 3 of these in the $25KPA as it will be a good thing to follow along.   
GOOG WEEKLY Savi asked in Member Chat yesterday if we should buy back the short calls and my response at the time was:
GOOG/$25KPA, Savi – I had decided not to but may change my mind.  They are still $9 and, if we buy them back, we raise the net on our $35 bullish spread to $28 AND leave it unprotected with GOOG not even at the top of the spread.  If we leave the short $725s in place, we have a net on our $35 spread of $6 with $29 of upside before we have to pay back the weekly $725 callers and, of course, we have 6 months to roll them AND we can easily buy more longs and roll the callers to 2x and our break-even is $754 and StJ says GOOG only averages 6.7% (moves on earnings), which is $746 so we have many, many ways to win by leaving the spread as is whereas, if we pull the short calls – we only have one way to win – and we win a lot less. 
GOOG is right about $735 pre-market so perfect if they hold there or just a bit lower.  We paid a net of $1,650 and max pay-off is $10,500 and that bull call spread looks safe enough, and we didn't even sell puts, so it's all about how well we roll the short puts, which expire on Friday and we've got 5 more months to deal with them – we can even turn a bigger profit on this trade selling more calls but that's just greedy when we're on track to make 536% on cash already!  

As I said in yesterday's Morning Alert to Members, it's Apple $555 or bust on earnings later and that's very true in our AAPL-bullish $25KPA and AAPL Money Portfolios – we'll press our SQQQ hedges this morning but an insurance pay-off would be a bitter pill to swallow if AAPL misses!  Google just reported quarterly earnings of $10.65 and popped to $735 a share (up 5%) and AAPL is about to report earnings expected to be $13.41 per share (26% more) and trades at $500 (32% less) – go figure

Yesterday we set our aggressive levels at:

  • Dow 13,600 (Must Hold)
  • S&P 1,480 (7.5%)
  • Nasdaq 3,100 (2.5%)
  • NYSE 8,600 (7.5%) 
  • Russell 880 (10%)

And we're well above them all now so all we have to do is not blow it, and I'm not seeing anything in the news to do that and, so far, earnings aren't too disappointing either (expectations were low) and, more importantly with all the stock buybacks recently (2.6% of the S&P in 18 months) those EPS targets get a lot easier to beat when there are less shares to distribute those earnings to.  Another 3% drop in the S&P share count is expected this year – that's a built-in 3% beat for the S&P, since analysts rarely take share adjustments into account when posting their outlooks.  This can go on for a while if AAPL (or Congress today) doesn't kill it:  


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  1. dclark41

    http://frugaldad.com/2013/01/04/college-isnt-cheap/
    I thought this article was interesting for those of you who are facing tuition costs over the next few years. I will have put my first child through in June. Only two more to go!

  2. phil

    Good morning!  I wrote a whole posts worth of stuff and a BTU trade idea in morning chat – in case you're interested.  

    College/DC – What a nightmare that is for most people to pay.  And, if the parents don't pay it, what's the alternative?  The kids get out of school $100K+ in debt and are lucky to get jobs that pay $40K and maybe 10 years later they are out of debt at 32 (assuming they don't want a car or a home)?  No wonder consumers aren't spending, they go from College Loan to Car Loan (to get to work) to a Wedding/Honeymoon, then they get a home, fix the roof, get their own kids through college and it's almost time to retire.  What a mess! 

  3. roberthjrfl

    Phil, good morning.  On the SPX spread, I don't see how if the SPX flatlines you pay $22.  With the modification of the spread, you are now short the SPX Feb 1490 call and long the SPX Feb 1495 done  for a credit of $17.15.  If SPX flatlines at 1492, you owe $2 for the short 1490.  But, you also collected $17.15 so you come out for a Net of $15.15.  If the SPX blows you out and goes to 1525 lets say, the long call limits your risk so the maximum you could loose is $5.00 on the spread and at that point you still walk away with $12.15 of the credit you received.  If the market pulls back and is below 1490 at expiration, you pocket the entire $17.15.  Where am I looking at this wrong?  I dont see the payback of $22 let alone $25.  Thanks for the help.

  4. phil

    My mistake, I though it was the 1,470s, not 1,490s but you're still not selling a  Feb 1,490 ($16.50)/1,495 ($13.50) for a $17.15 credit – you do understand that right?  It's a new trade and you're getting a $3 credit to risk losing $2 if the S&P is over $1,495.  There's nothing special about it, it's a flat risk/reward play with a 50% advantage to you if the S&P falls below 1,490 but there's no premium – it's essentially a 1:1 move in either direction and you have a built-in stop loss at $2 but a 3-point+ move in the S&P puts you or your caller in the money in 22 days so it's really a coin-flip.  I guess I was thrown off by there being no possible way there was a $17.15 credit on a $5 spread but, if there are – get me 5Bn (I don't want to be too greedy).  

  5. dclark41

    Phil/tuition
    I couldn't agree more.  If I didn't own my own business and wasn't fortunate to make what I do, I would be under a lot of stress and a lot of debt.  I am not sure it's worth what they charge today, but I won't deny its requirement. Kind of a nice business when you live under the umbrella of "education".  After all, who's against education? I look forward to the day when the majority of the public evaluates them on something other than football or how beautiful the campus is.  My university (Michigan) has changed completely since I last attended in 1987. 

  6. Pharmboy

  7. jomptien

    DC, It was great back in 65' – Commander Cody and the Lost Planet Airman playing on weekends at Schwaben Inn downtown – at the time were just SAE guys in their band. Nichols Arcade, Arboredum, nice place

  8. dclark41

    jomp
    A little before my time (was in Japan in '65), but if it counts I spent some weekends at the Blind Pig It is an impressive venue in the late 80's and early 90's. Did you know that Soundgarden, The Screaming Trees, The Smashing Pumpkins, Pearl Jam, and Nirvana (many others too) all played there before they were famous? I remember the hash bash, nude run, and walking to class through the Diag taking in the strange sights while hoping not to walkover someone. Great memories indeed.

  9. 1020

    Good Morning!

  10. 1020

    ….and to think, I spent my college years skiing Squaw Valley….what a waste… ;)

  11. yodi

    Phil GOOG In addition to the google play I sold still the Jun13  605p for 10.50 bought back this morming paying 4.50 premium do you call this prudent or shall one be greedy wait for the rest till June? I cash +- 60 % in 6 days.

  12. stjeanluc

    Sorry late start… early appointments. I'll update the portfolios now.

    Oil Lines

    R3 – 98.60
    R2 – 97.74
    R1 – 97.16
    PP – 96.31
    S1 – 95.73
    S2 – 94.88
    S3 – 94.30

    Yesterday's high and low – 96.90 / 95.47

  13. millcreek

    phil.
    two questions same subject.
    from the old svu trade the only remaining positions i have are as follow.
    i am short the jan14 3 puts and the 5 calls.
    i dont expect the calls to come into play.  since  im short the 3 puts doesnt it make sense the short the either july or jan 14 3.5 or 4 calls with the thinking of offsetting /hedging the put in case something were to happen.
     
    im also short bby jan 15  13 puts. i closed out the long 15 calls earlier as i didnt think a deal would go higher than 17 or so.  
    so i was thinking of shorting the sept 18 call as an offset to the put. 
     
    would like your thoughts re the thinking………….tks

  14. stjeanluc

    FAS just on a tear now and swallowing our short calls one after the others! If it was not for the fact that decay is brutal on these 3x ETF it would make sense to setup a calendar. But we tried that in the past and we also got heartburn from that!

  15. stjeanluc

  16. button

    Phil 
    I am in the Feb 35 USO puts for $0.955 basis.  They are now at $0.655.  Any thoughts on adjustment?

  17. stjeanluc

  18. Burrben

    College
    I never really comment on off topic subject, but I'd like to share what I believe on this fact.  My parents sent me to Penn State and since I was an in-state resident the cost for 4 years of school with room and board was all-in, 40K.  They told me in high school that they had nothing saved, and that I would have to pay for college myself, so therefore:
    - Pick a college that's good, but cost effective.  At the time PSU was a great blend.  Huge name, tons of alumni, cheap but not a community college….but I could have gone anywhere that would have taken me.
    - Figure out ahead of time what you're student loans will be and pick a career that can support it.  Therefore I went into CompSci instead of Social Work.  Goto Harvard if you want, but then you better be a high priced lawyer or M&A guy.
    - If I screw up, or slack off, it's on me.  If I skip class, it's on me.  If I drop a class, it's on me.  If I need beer money, it's on me…work.
     
    1.5 years after I got out, and had a good job, and was paying my student loans off, they suprised me with a check for the balance of the loan, somewhere around 35K.  I couldn't believe it, but what a awesome thing to do!!  I plan to do the same thing with my kids.  It's not a forgone conclusion that I will pay…they have to earn it.  And they will never know that I going to pay….to make them responsible.  In fact I'm going to try and put them on their own as soon as possible so they can get as much grant money possible.   I'm also going to offer to send them to see the world for a year after high school, since I think a break after highschool is massivly necessary.
    Just my 2C.  

  19. stjeanluc

    IBM flying, GOOG flying…. And AAPL day is now upon us!

  20. stjeanluc

  21. newmexker

    Phil,
    COH getting bagged today.  Do you think this would make a good entry point?

  22. cdel360

    GOOG/Phil – Nice GOOG play!  I have a 720C calendar, sold this weekly (9.70) and bought next week (11.10).  As of right now,  the position is flat with equal  loss on short call as gain on the long call.  I am fairly new to calendar spreads and am hoping to get some advice on how to best manage this trade to profitability.  I was considering spreading the long call to a 720/740 (collecting 11.50) BCS…thoughts?  roll the short 720C?

  23. yodi

    Phil GOOG 725 weekly has no more premium suggest roll to mar13 750 for a debit of 3.70 what do you think TIA

  24. cdel360

    StJ – something is weird with the GOOG position % in the MoMo.  Short Put in GOOG should be 99% green.  Probably changes the p/l too…

  25. yodi

    GOOG same roll now only 2.90 so possible by tonight it will be still much lower!!!

  26. dclark41

    Burr
    Great plans. I like it. I paid for my own working three jobs. Unfortunately, because of a divorce I pay for my kids tuition, but I more agree with your plan. Regardless, I preach to my kids that college isn't everything. And having a plan like you suggest will bring more value to their experience. But at some point, they will have to go out and make it on their own. Too many people go to college just because they believe it will open doors; and it usually will. Although, once it's open, then what.  If their parents didn't teach them good work ethic, discipline or self motivation, good luck!

  27. stjeanluc

    I thought we had a spending problem!

    http://www.motherjones.com/kevin-drum/2013/01/government-spending-down-obama-era

    What we have isn't a spending problem. That's under control. What we have is a problem with Republicans not wanting to pay the bills they themselves were largely responsible for running up.

    Idiots!

  28. phil

    Change/DC – Well, in my freshman year, the school paid for 4 trucks full of beer to pull up on the quad and we had a wild barbecue party for orientation day.  That was 1981, so things have REALLY changed since I went to school with my trusty Apple III with it's green screen and my dot-matrix printer.  Amazing what's available to kids these days yet they still go to college and carry a bunch of expensive books and walk from live classroom to live classroom that fit 30 people at a time or, if in a lecture hall – then there's really no point to going there live, is there?  College is completely outmoded – I wish I had time to change it – it really needs doing…

    Squaw/1020 – One of my favorite places – never a waste. 

    GOOG/Yodi – Well, there's no much chance you'll get in trouble with the short puts so really just a matter of whether you have anything better to do with the margin than wait around to collect the $4.50.  Of course, if you still have the short calls, the net margin is free AND the short puts are insurance, so I wouldn't kill one without the other myself – unless I had a very good reason to think GOOG would be turning.  

    Speaking of GOOG in the $25KP – $747 is higher than we like but we'll give it time to settle down.  Our June $665 ($93.50)/700 ($67.20) spread is golden at net $26.30 at the moment with $8.70 more to make while the short weekly (Friday) $725 calls are $22 (no premium left) but can be rolled to the Feb $730s ($24) or we can sell June $640 puts for $8 and use that $8 to roll the callers up to the Feb $745s at $14 but let's see where GOOG settles because we still may luck out if they pull back to $735ish.  

    IBM is a bit high too at $208 but plenty of time for that one to play out.  

    SVU/Mill – You are already short the calls (Jan $5s), aren't you?  If you then sell July calls, then you are 2x short.  You could roll the short Jan $5 calls to higher-priced July calls but handbirdhand = bushbirdbirdbush so I am not sure why you want to tighten up your targets like that.  What you''re really doing is saying "I have an SVU spread where I win if they end up between $3.50 and $5 next January and it's on track but I want to change it to a spread where I am both short and long at $3.50, so any move above $3.80 now costs me money on the bull side but at least I'm safe from a drop to $2."  SVU is at $3.50.  If you really think it's going to $2 – GET OUT NOW!  Why on Earth would you be in a stock that you think can fall 42%, forcing you to take on risks to hedge it?  

    BBY/Mill – Again, what if they get bought for $25.  Not likely but you lose a quick $7 with no recourse.  It's not good to go long and short on anything.  If you can't decide if you like a stock or not – pick a stock you do like.  You can sell the BBY 2015 $20 calls for $1.10 and, hopefully if they get bought out for less than $21.10, you'll make money.  OR, you can sell the 2015 $13 puts for $2.20 and, if they get bought out for more than the current price ($15.50), you make all $2.20 or, if they don't fall lower than $10.80 (30%), you make money.  So having a bit of conviction is MUCH more profitable than hedging yourself to death and, if you aren't going to be HAPPY to buy BBY at net $10.80 – why would you spend a dime on any kind of bullish position at $15.50?  

    FAS Money – XLF $17.25 is running hot with FAS at $140 but it's only a 3 of 20 sale and the $135s ($7.80) can be rolled to 2x the $142s ($3.80) about even so we'll keep our eye on that and then the March $148s are $3.90 and that's up 6% so 2% on XLF is $17.60 so we'll call $17.50 our danger line on XLF and it's still too early to risk selling puts.  

    AAPL Money, $25KPA – Last chance to bail on AAPL!  If you are staying in, SQQQ is down to $36 and $39 is 8% away so 2.5% on the Nas with AAPL at 20% of the index means it would take a 10% drop in AAPL to put us in the money.  That's not very good protection then, is it?  So, we'll take our .55 for the Feb $39 calls and spend another $1.60 ($3,200) to roll to the March $36 calls ($2.15) and we'll leave the short Feb $43 puts to burn and sell 10 more March $41 calls for .90 ($900) to pay for a bit of the roll. 

    USO/Button – I'm in favor of waiting to see what inventories look like, as there's 3 more to go between now and those Feb expirations. 

  29. stjeanluc

    Income Portfolio news:

    ALU - Upgraded from Sell to Neutral at Citigroup (what timing – wait until they are up 50%!)
    F - Downgraded from Buy to Hold at Deutsche

  30. 1020

    Phil/Squaw  You know I was j/k….It was a great time in my life before getting married and getting serious….I will encourage our kids to enjoy a bit of their youth after high school, doing the things that they may not when they get old…..

  31. jomptien

    DC, didn't know about those bands playing there then, diag and hash bash remember well. Some popular place on Liberty I think – "Pretzel" or something like that?

  32. stjeanluc

    Looks like we have to keep hedges on:

    http://www.bespokeinvest.com/thinkbig/2013/1/22/796-of-sp-500-stocks-overbought.html

     

    Today's rally pushed the S&P 500 to another new bull market high, and the index is now up 10.29% since making its post-election closing low on November 15th.  As we highlighted yesterday, the S&P 500 is now extremely overbought, and the percentage of individual stocks in the index that are overbought is up to 79.6% as well.  

    Below is a chart showing the percentage of overbought stocks in the S&P 500 on a daily basis since March 2007.  As shown, the reading is now as high as it has been at any point over the last five years with the exception of late October 2011.  With futures up after hours on strong earnings reports from IBM and Google (GOOG), we could certainly cross above 80% tomorrow.  As you can see, though, once the reading gets up to these lofty levels, it typically doesn't stay there long.

  33. dclark41

    jomp
    You are referring to the old Pretzel Bell.
    http://arborwiki.org/Pretzel_Bell

  34. millcreek

    phil…………tks

  35. stjeanluc

    Now that could be interesting:

    In today’s call, Google CEO Larry Page said that “In today’s multi screen world, the opportunities are endless… battery life is a huge issue… when you drop your phone it should not go splat. There’s a real potential to invent new and better experiences.” Page also mentioned phone recharging as a pain point for people. This is speculation, but the obvious interpretation of these comments is that Google is working on—or at least thinking about—phones with extra long battery life, some kind of novel (perhaps wireless) recharging capability, and a case that won’t break when the phone is dropped. (Which is possibly a reference to earlier rumors about Google’s X Phone using an extra-hard case that incorporates ceramics.)

  36. phil

    College/Burr – Well, I'm not sure how old you are but now Penn State is $15,000 a year for in-state and that's just tuition.  Figure $5K to live in squalor or a more realistic $10K and it's $100,000 in debt, not $40K and when I got out of school it was very easy to land a $20,000 job but my kids today can't walk into $60,000 jobs to compensate for the additional money spent on college.   Good idea on seeing the World – learn a lot more from that than from college.  I told my girls I expect them to spend at least a year studying abroad in a non-english-speaking country, that's also a good thing to experience.  

    COH/Newmex – I think they are struggling and Europe and Asia won't turn back up for a while and even the rich in the US are paying more taxes, so not a good time to be selling $2,000 bags.  I think I'd let them find their own support before jumping in – especially as the VIX is so low that it's hardly worth selling puts.  Just to keep an eye out – at $40, I think they would be attractive and the current $40 puts are $4.50 and the $50 puts are $9 so, if they get to around $7.50 they begin to get very interesting as a net $32.50 entry – at which point you should be THRILLED to DD (should they go so low).  

    GOOG/Cdel – Well a week to week calendar spread is a loser waiting to happen.  You essentially paid more premium than your caller for a week but the real premium was the earnings and you don't actually have an advantage other than a very brief period where you have more premium left than the caller does.  I see the Friday $720s now $24 and the next week $720s now $25.50 but the problem is GOOG is way too dangerous to leave the caller naked, although that would be the "proper" move – selling into the initial excitement and then letting the weekly caller drop a bit on a pullback.  I think, unless you are willing to risk stopping out in 2 segments, you have an even trade and any trade you move to is just a new bet and I don't think you can call GOOG $720 or $760 in the next 10 days – or tomorrow, for that matter.  Our trade worked because we sold a lot of premium ahead of earnings and now the premium is gone – so we win.  End of story.  Now there are no earnings and no outsized premium so I would not, for one second, consider making more bets on GOOG without some very compelling reason.  

    GOOG/Yodi – As above, watching and waiting are prudent at the moment.  Did GOOG merit a 6% pop on those earnings?  They are getting a ton of upgrades but, as I pointed out above, they make 26% less per share than AAPL and are PRICED (not valued) at 33% more per share than AAPL.  One or the other is going to snap – and I'd like to see which is which before making any adjustments.

    Spending/StJ – We do have a spending problem – it's called electing the GOP.  

    Getting to do stuff/1020 – Than goodness I did all my stuff when I was young or I'd be a ski-bum now.  Actually, had they had poker in Tahoe when I was a kid – I doubt I ever would have bothered working (or leaving).  

    Overbought/StJ – That's kind of scary.  

    You're welcome Mill.  It's good to step back from the position sometimes and just draw out your end points so you can think about what you really expect to happen.  

  37. lionel

    CRIS/
    Pharm, the stock is close to its 1yr low.
    Are you buying the stock or $2.5 calls?

  38. Gingbaum

    Phil, 
    What's your thoughts on small gold miners right now? Seasonality looks good, but they haven't taken off yet?
    Thanks

  39. wombatcreative

    StJ // SQQQ
    I'm in on AAPL hard. Also, I seemed to have missed the puts mentioned in either of the port sheets ? 
    AAPL Money, $25KPA – Last chance to bail on AAPL!  If you are staying in, SQQQ is down to $36 and $39 is 8% away so 2.5% on the Nas with AAPL at 20% of the index means it would take a 10% drop in AAPL to put us in the money.  That's not very good protection then, is it?  So, we'll take our .55 for the Feb $39 calls and spend another $1.60 ($3,200) to roll to the March $36 calls ($2.15) and we'll leave the short Feb $43 puts to burn and sell 10 more March $41 calls for .90 ($900) to pay for a bit of the roll.

  40. yodi

    Phil Thanks for your comments

  41. wombatcreative

    Phil // SQQQ
    Ultrashort filled BCS 36/41 – thanks – great idea.

  42. stjeanluc

    SQQQ / Wombat – I am sure he meant the 43 calls!

  43. yodi

    stj
    here a copy what Phil said on SQQQ
    $1.60 ($3,200) to roll to the March $36 calls ($2.15) and we'll leave the short Feb $43 puts to burn and sell 10 more March $41 calls for .90 ($900) to pay for a bit of the roll.

  44. scottmi

    SVM – so many sectors overbought.. but not miners. SVM is looking very tempting, but i've been cut too many times from falling knives, and the 'shareholder advocates' aka securities litigators are really ganging up on them.

  45. scottmi

    HL – VIX is so low there must be some buying opptys.. with Hecla, the Sept $4 calls only have .12 premium.

  46. rperi

    My kids are both younger than three but I think I am just going to buy them PSW memberships for 4 years, have them put on the "One trade" idea each year to pay for it, and any additional proceeds can go towards that year travelling the world.  Phil I'll just need you to stick with this for another 15 years or so.

  47. yodi

    CREE up 19% 6.60 !!!!

  48. stjeanluc

    SQQQ / Yodi – But we don't have the short 43 puts now, we have short 43 calls that are now $0.18 so I imagine that Phil meant we leave those to die worthless while we sell the Mar 41 to pay for the roll. That's what makes sense to me.

  49. rperi

    WFR just rockin.  Glad I rolled and rolled with both them and RIM.  Finally paying off.

  50. stjeanluc

    And once again, AAPL sticking around that $509 line!

  51. Opesbridge

    Phil/AMD – With just a slight Q4 beat and below-consensus Q1 guidance, does it make sense to sell some more calls into this rally? Currently, we have 1/4 of the position sold in the Apr 3 Calls.

  52. stjeanluc

    AMD flying too this morning even though they reported lower revenues and wider losses. But they had a good conference call talking about diversification.

  53. escohen5

    Scottmi — SVM and HL — I wouldn't.  Those two never work out.  Unless maybe you're just selling premium…if you can. But those are chronic underperformers, with silver doing relatively OK.  Much betters ideas in that space.

  54. wombatcreative

    PSW //
    As SOP, do you guys reco putting stops on your options ? Right now I'm specifically talking about AAPL, but in general do you stop out or just roll with the market ///

  55. wombatcreative

    SQQQ / Yodi
    Yep, got it. Thanks

  56. randers1

    Pharm,
    Do you have an opinion on SGMO?

  57. stjeanluc

    Here are the interesting companies reporting tonight with the average move:

    AAPL – 5.7%. The options are pricing a 6.7% move.
    FFIV – 9.8%. The options are pricing a 8.7% move.
    NFLX – 13.4%. The options are pricing a 12% move.
    SNDK – 12.3%. The options are pricing a 7.4% move.
    WDC – 6.4%. The options are pricing a 7.6% move.

    Any plays Phil?

  58. phil

    Miners/Ging – I like ABX, HMY, NAK and GDX – that's it.  HMY is nice and low at the moment, at $7.61, you can just sell the 2014 $8 puts for $1.40 and see if you get them for $6.60 or pair it with the $5/8 bull call spread at $1.85 for net .45 on the $3 spread that's $2.50 in the money to start and a break-even at $6.73 (12% off).  It's a fairly aggressive play that they go over $8 and stay there but, if they do, you clear $2.55 against about $3 in cash and margin in 12 months.  

    SQQQ/$25KP, AAPL Money, Wombat – My mistake, I meant to say we're leaving the currently short Feb $43 CALLS to burn off the remainder of their premium as they are now so far out of the money, they're not worth buying back.  

    You're welcome Yodi. 

    And you're welcome Wombat.  Just don't lose site of the fact that they are really a direct hedge against AAPL failure – we're not looking to ride them out if we don't need them tomorrow.  

    Thanks for the job security RPeri!  Nice job sticking with WFR and especially RIMM.  

    AMD/Opes – I wouldn't sell just yet.  Report was pretty good (as in not as bad as people thought) and we should give them a chance to test $3.

  59. Pharmboy

    CRIS -Selling Mar $5 Ps.

  60. stjeanluc

    And another worrisome chart:

    http://www.bespokeinvest.com/thinkbig/2013/1/23/percentage-of-stocks-above-50-day-moving-averages.html

    Yesterday we noted that 79.6% of the stocks in the S&P 500 were overbought.  Below is another breadth measure indicating that the market is extended here as well.  As shown, 90% of the stocks in the S&P 500 are currently trading above their 50-day moving averages.  This is the highest reading we've seen over the last year, and it's only the sixth time we've crossed the 90% barrier since the bull market began in 2009.

    More sector charts at the link.

  61. wombatcreative

    Phil //
    Sorry, should have addressed this to you if you're filtering 

    As SOP, do you guys reco putting stops on your options ? Right now I'm specifically talking about AAPL, but in general do you stop out or just roll with the market ///

  62. phil

    Earnings/StJ – NFLX is a very tempting short but, if AAPL hits then all Nas takes off but, if AAPL hits and talks up TV deals for 2013 – maybe NFLX dives anyway.  SNDK is always a wild-card and WDC already had it's run (and we liked STX better when they were down around $10 so they both seem pricey now).  

    FFIV I like but not too cheap and held down by the 200 dma at $100 so I think maybe I'd sell 3 Friday $100 calls for $2.90 ($870) and buy 4 April $100/110 bull call spreads at $3.30 ($1,320) for net $450 ($1.13 per long) on the $10 spread.  Let's do that one in the $25KPA.  

    Worrisome Charts/StJ – Stop doing those – too many negative vibes!   

    Stops/Wombat – I think it's always good to have mental stops but hard stops often get flushed.  In general, any 20% loss or gain is an inflection point at which you should make new decisions.  If you lose 20% and you are not willing to DD if the contract drops 40% (so you'll have 2x down an average 20% when the contract is selling for 40% off) – then you have no business staying in at at down 20% and you should get out.  Obviously, if you plan to DD at 40% off then you must already be planning to DD or roll should the contract drop another 20% (60% off) – otherwise, that should then become your hard stop.  So always try to stay no more than net 20% down which, in options means you can come back in a day and, also, don't forget then when you do come back – you should immediately be looking to take the extra money off the table and get back to 1x but now in a better position than when you started.  There's a whole article on scaling in our strategy section and lots of comments on position sizing, rolling etc.  

  63. stjeanluc

    Fascinating study:

    http://gizmodo.com/5978304/theres-a-math-formula-that-tells-us-how-long-everything-will-live

     

    NPR's Robert Krulwich has a whimsical piece on the one formula that rules it all, from unicellular organisms to whales and sequoias and humans. A math formula that governs our life and tells us when to die.

    Even more interesting: the same system scales to other things too, like societies and economies. And it's all bound by one seemingly magic number. [...]

    And a quick wink!

    Maybe Douglas Adams was right all along and the answer is 42.

  64. stjeanluc

    Negative / Phil – I had a stat yesterday saying that if IBM was up today we would have a 5 week rally. Just trying to have a balance point of view   :-)

  65. yodi

    Phil AAPL Clock is ticking Still holding 6 Feb 475p sold for 13.32 now 9.02 I think they might  and I say might be a bit close to the fire as it would be possible if it goes negative the stock could dropp 50$ or even more. thinking to possible roll the putter to say Jun13 430p for a net credit of 3.15. What do you think with your cristal ball in hand. TIA

  66. phil

    $25KPA – After due consideration and consultation with the boys from Opesbridge, we have decided to roll the April $500 calls ($37.30) to the July $450 calls ($77.25) and sell the April $555 calls for $16.70 for net $23(ish) to add 3 months and $50 in position (all intrinsic).  While this somewhat limits the upside to $105 plus whatever we can roll it to – it also protects our downside and, if AAPL has a horrible miss – we can sell puts and roll down again and sell more calls.  If AAPL stays flat, we have 3 months and $50 in position to sell $20 worth of short calls to make it a free roll and, at $500, we cash out $50,000, which is $12,700 more than the position is currently worth.  At $555, our upside is another $50,000 and, assuming we can do some rolling – probably we're capping our gain at $75,000 on this position – we should be able to live with that in the $25KP – so let's make that the official move.  

    House passed debt deal! 

  67. phil

    Disclosure note:   Opesbridge also has long 2015 $450 calls and short 2015 $400 puts (AAPL Money) so we're more long-term aggressive while short-term being a bit cautious with what is essentially the $25KP spread as we already have an aggressive long.  

  68. Pharmboy

    THLD….hello kitty…..

  69. Burrben

    Yodi / AAPL
    This might be overly simplistic, but why not wait until the EOD and just close out the short putters, don't assume the earnings risk, and then open another trade manyana?  
    I was short the 420's that I sold for a $1 and closed for 0.10 today.  No reason to risk it or roll it.  I don't like playing binary bets unless it's with fun money.

  70. Burrben

    Ok, taking my dog to the groomer + lunch + getting gas just cost me a WHOLE lot more $$.  I was short /CL off the 96.85 line and closed it out before I need to run errands.  Oil at 96
     
    Now I'm really mad at my dog!

  71. williex

    Phil
     
    thoughts on CRUS

  72. jasu1

    Phil,
    I read your move with the Opesbridge people. Ok, so what do we do here?
    Have a 2015 500 Call bought/entered at 110, and a 2015 360 Put sold /entered at 41.56. Took the 2015 650 sold call profits off the table when AApl was at 500 a couple days ago….Again, thanks for your help, always.

  73. yodi

    Phil AAPL  I take it you are selling the Apr13 550 caller ??

  74. jerconn

    Oil seeing some action…down

  75. button

    Phil / USO, Thanks for convincing me to hold the Feb 35 PUTS.  BIG WHEE on OIL!

  76. phil

    42/StJ – Same logic as Fibonacci, really. 

    AAPL/Yodi – If you can deal with the risk of assignment (maybe they fall $100), then your net is way down at $462 so risking just -$12 at $550 realistically and then you can always roll.  If 600 share of AAPL for $285,000 would bother you – especially if they were down $30,000 ($50) or so, then that answers your question and it's a foolish position to be in because you may end up making decisions based on margin pressure – rather than doing what's right if things go against you.  

    Dog/Burr – Oil at $95 now – wheee!!!  Congrats to the players on that one – now let's figure out why???

    AAPL/Jasu – Not much to do unless you want to take advantage of the roll from the $500s ($83.50) to the $450s ($107) for $23.50, in which case you can do that by itself or sell those April $555s (now $14.70) to pay for most of it.  Figure if you are "forced" to do such a move each quarter – it will cost you another $30 over the next 3 quarters to roll down another $150 to the 2015 $300s and, if that doesn't appeal to you – no sense in doing the first roll, is there?

    Long-term positions are those trees you have to tend for a while but, once they mature and take root – you'll know you don't have to worry anymore. 

    AAPL/Yodi – Yes, it was the April $555 calls sold short in the $25KP. 

  77. stjeanluc

    These USO puts are up about 8% now with inventories tomorrow.

  78. phil

    $25KPA – Let's get out of 1/2 those USO Feb $35 puts at .97 as we're happy to be back to 10 at net .85 ish.

  79. albo

    Pharm – Why the action in CRIS today?

  80. Pharmboy

    CRIS….no idea. 

  81. scottmi

    WDC/Phil – at tip top of channel. earnings tonight. you think all priced in or likely to launch into new growth phase?

  82. phil

    What a quiet day – 62M on the Dow at 2:35.  Oil finishing down at $95.30 but I don't see why – maybe some misinterpretation of this as it's not really a big deal:

    As China's demand for crude oil rises to a record 10.58M bbl/day, it seeks to cap its dependence on foreign crude to 61% and its electricity consumption to 6.15T kilowatt-hours by 2015. The rise in demand is linked to the pickup in China’s economy, which grew at a 7.8% clip in Q4, and higher growth is expected in 2013, thus throwing into question the country's best-laid plans. 

    NFLX up a ridiculous 70% from where they fell to after last Qs report. March $82.50 puts at $2.10 are fun for a short play – in case they drop $20.  

  83. phil

    WDC/Scott – I think STX justified their value so no reason to think WDC won't but I think fairly priced up here and no reason to think they disappoint so nothing to do but watch and see.  

  84. phil

    ROFL – The oil they were pumping out of Cushing using the Seaway Pipeline is now piling up at it's destination in Texas because THERE IS TOO MUCH FRIGGIN' OIL EVERYWHERE!!!  

  85. Pharmboy

    Threshold Pharmaceuticals (THLD +18%) soars after Celgene (CELG -0.7%) reported positive Phase III data for Abraxane, its prospective treatment for pancreatic cancer, but the data came in slightly below analysts' expectations. Stifel Nicolaus reiterated a Buy on THLD after the news, saying that its own treatment will be more competitive with CELG's product.

  86. Pharmboy

    IWM….rolling this week's 90s to next weeks 91s for about even.

  87. RangeTrader

    Hi Pharmboy
    Any idea on ARNA? I shorted Feb-$9-Put for $0.6 credit. Don't think it will be lower than $8.5 before next CHMP.

  88. Pharmboy

    ARNA….long term, should be fine.  You can always watch the rolls, as Apr 8s are about the same…..the 200d MA is rising and right on that number…so wait and see.  If you really want to play with the MMs, then sell the 9 calls, Mar or Apr, near OPX IF you think you are going to be put the stock….

  89. Pharmboy

    Oh, that sweet smell of an ATH…..go go go…wait, back back….

  90. phil

    Pharmecuticals/Pharm – Speaking of which:  

    Uh, oh – AAPL getting expensive already.  

  91. Pharmboy

    Yep, Phil…that's why I am in the biz.  You should see what we spend on our animals….!!!

  92. newt

    AAPL/ Phil: Yea, what does it mean?

  93. Pharmboy

    Link.

  94. wombatcreative

    Phil / AAPL dilemma
    I sold a really good price on the Jan15 $400 puts ( $54 ) so I'm sitting on a 25% return.   ( 13 K )
    Should I close this and keep the original spread below. That margin release could finance a double down if they fail.
    I also have your recommended BCS 400/500 but much less premium for the 10 $350 puts  ($27 )
    Yep, last minute. I will read the articles you mentioned – promise.

  95. scottmi

    Oil/phil  - still shortable crossing below 95.50?

  96. stjeanluc

    Oil / Scott – 95.21 was S3 and that where we bounced up. 95.59 is S2 and that could act as resistance. Got to watch it close.

  97. terrapin22

    Apple schmapple.  I've got 2nd row seat to tonight's Rangers/Bruins game.  Client taking me.  

  98. phil

    At the open: Dow +0.26% to 13748. S&P -0.02% to 1492. Nasdaq +0.43% to 3157.

    Treasurys: 30-year +0.17%. 10-yr +0.1%. 5-yr +0.05%.

    Commodities: Crude -0.24% to $96.45. Gold -0.04% to $1692.55.

    Currencies: Euro +0.06% vs. dollar. Yen -0.21%. Pound -0.21%.

    Market preview: Stock futures are fairly flat as earnings season begins to pick up speed, with the S&P benchmark -0.1% but the Nasdaq +0.1% as heavyweights Google (+5.2%) and IBM (+3.6%) benefit following their reports yesterday. AMD is +4.1% despite widening losses, although TI is -1.1%. Investors will also probably be keeping an eye on the House, which is due to vote on suspending the debt ceiling until May. Later: FHFA House Price Index, Apple earnings

    12:00 PM On the hour: Dow +0.4%. 10-yr +0.11%. Euro -0.11% vs. dollar. Crude -0.3% to $96.39. Gold -0.35% to $1687.35. 

    2:00 PM On the hour: Dow +0.48%. 10-yr +0.08%. Euro -0.10% vs. dollar. Crude -1.49% to $95.24. Gold -0.49% to $1684.85. 

    The debt ceiling fight appears to be over, with the House passing a 90-day extension on the debt-limit. The bill now moves to the Senate where it is expected to pass.

    The December AIA Architecture Billings Index falls to 52 from 53.2 previously, but remains in expansion territory for the 5th straight month. The New Projects Inquiry Index is off just a hair to 59.4. "We are hearing a much more positive outlook in terms of demand for design services," says the AIA's Kermit Baker. Via Bill McBride is along-term chart of the survey.

    More on FHFA Home Prices: For the year prices rose 5.6%, putting them 15.7% below the April 2007 peak, and about equal with prices in July 2004. (full report)

    Perceptions what is "low" on the VIX (VXX) are skewed by the financial crisis, writes Adam Warner. Prior to 2008, a VIX above 30 for any length of time was unheard of, and a level in the teens was the norm for years on end. This doesn't mean options aren't cheap at these levels – they are, and replacing stock winners with calls at these prices wouldn't be a horrible strategy.

    The IMF scales back its 2013 estimate for global GDP growth to 3.5% from 3.6% at October's forecast, with Europe – now expected to contract 0.2% instead of grow 0.2% – the big mover. Lagarde: Market optimism isn't yet being reflected in the real economy. Markets lead, do they not?

    Greenpeace issues its starkest warning yet about the need for action on climate change, pinpointing 14 coal, oil and gas projects- in Canada, the Arctic, the U.S., Venezuela, the Gulf of Mexico, Brazil, Africa, the Caspian Sea, Iraq, Kazakhstan, China, Indonesia and Australia – it says will soon add 20% to emissions already causing climate change.

    Senator Harry Reid promises he will try to push through an online poker bill in 2013 after his efforts last year fell flat. The window is opening again because opponents of other broader forms of online gambling see legislation to let poker online as a small concession. If Reid can "thread the needle" with Congress and governors it could be a win-win for casinos which can generate poker sales online while also protecting brick-and-mortar operations from a landscape of rampant online gambling.

    Some enterprise software stocks have rallied following market-pleasing reports from IBM, SAP, and CA. IBM's earnings calltone and forecast for mid-single-digit 2013 software growth are going over well, as is SAP's (SAP +1.2%guidance for 2013 software license/cloud subscription revenue growth of 14%-20% at constant currencies – cloud is expected to make up €750M ($998M) of this total. INFA +4.5%CRM +2.2%JIVE +2.5%RHT +2.4%CTXS+2.2%CVLT +1.5%VMW +1.7%.

    "For all its complexity, IBM (IBM +5%) continues to emphasize a simple goal – growing EPS through a variety of tools,"writes CLSA. Big Blue's Q4 report and 2013 guidance indicate it remains quite successful in this respect in spite of minimal top-line growth, and the market is responding accordingly. As far as the top-line goes, UBS is encouraged by an upbeat earnings call and opportunities in focus areas such as emerging markets, analytics, and cloud solutions. ISI is more cautious, arguing IBM's valuation (12.3x 2013E EPS) is a little too high.

    Textron (TXT +2.5%) moves up despite a miss on its Q4 earnings report. Net earnings swung to a profit however, on strength in its Bell helicopter segment, and benefiting from a year-earlier period that was saddled with a mark-to-market charge. Despite a weak showing for Cessna, CEO Scott Donnelly forecasts revenue growth for the segment in FY13 on increased jet deliveries, and predicts its Bell helicopter business will see modest growth as well, boosted by higher commercial helicopter sales.

    Ryanair could reportedly sign a deal within weeks for at least 150 Boeing (BA) 737 jets, providing the plane-maker with some good news after its 787 troubles. The aircraft are likely to be the current-generation 737s rather than the more advanced and fuel-efficient MAXs, thereby allowing the Irish budget carrier to secure a significant discount. Meanwhile, a Ryanair 737 has made an emergency landingin Genoa in Italy after instruments signaled possible cabin pressure problems.

    U.S. regulators give final approval for a plan to charge duties on washing machines imported from Mexico and South Korea in a move which will help Whirlpool (WHR +2.7%). The action follows a Commerce Department finding from last month that foreign manufacturers were dumping products on the market at artificially-low prices to gain an edge

    The GDX slides 1.6% after middling production reports and outlooks from Newmont and IAMGOLD, with IAG getting a couple of downgrades (III) and diving 10% after results missed guidance.

    Molycorp (MCP -7.4%) plunges after warning of substantially lower than expected production in Q4 2012 and H1 2013 while foreseeing a $250M cash shortfall even with its proposed $300M capital raise. But hope springs eternal for some, as Oracle's Laurence Balter remains bullish: "They are raising less capital than I thought… Investors need to be patient."

    Tidbits from McDonald's (MCD +0.5%) earnings call: 1) CEO Don Thompson expects growth in the restaurant industry to remain subdued for the rest of 2013. 2) The company will look to boost sales with new products (Fish McBites and $1 Grilled Onion Cheddar Burger) and longer store hours. 3) Commodity cost inflation of 1.5% to 2.5% for this year is forecast. (webcast)

    Oppenheimer walks away from a meeting with SodaStream (SODA +1.7%) convinced the beverage machine company had astrong holiday season. Analyst Joseph Altobello reiterates his Outperform rating and adds $5 to his price target to take it to $60. The company is only ten days away from a big introduction to the U.S. consumer market through a high-profile Super Bowl advertisement.

    Riley Caris thinks Disney (DIS +2.3%) will see improved results with wider margins at its theme parks and higher advertising rates for ESPN. The firm ups its rating to Buy from Neutral and sets a $63 price target. After taking on some scattered criticism for its $4B Lucasfilm purchase, Disney has seen its shares calmly meander to new all-time highs.

    Is it all-or-nothing for Best Buy (BBY +2%) with the company either going private or going bankrupt? Maybe not, says Jim Cramer. He thinks Best Buy could adopt a "muddle-through" strategy to survive as a leaner and "less profligate" company that makes money. The factoid that bites: Best Buy BBY has 3X the number of employees of Google, yet only boasts 2% of Google's market cap.

    Netflix (NFLX +4.4%) has rallied above $102 ahead of today's Q4 report. Aided by Carl Icahnnew content deals, and optimism Amazon and others can be held at bay, shares are up 70%from where they closed the day after Netflix's Q3 report, whose disappointing cash flow and streaming sub guidance fueled a big selloff. In addition to subs, margins will likely be a focus area, given Netflix's huge content obligations. Today's gains come as Netflix and YouTube show off DIAL, a mobile/TV streaming solution similar to Apple's AirPlay.

    Cree's (CREE +20.2%) big FQ2 beat and strong 

  99. phil


    Cree's (CREE +20.2%) big FQ2 beat and strong FQ3 guidance is fueling a rally in LED stocks. SemiLEDs (LEDS +31.7%) is the biggest winner, but Aixtron (AIXG +7.9%), Veeco (VECO+4.6%), and (to a lesser extent) Rubicon (RBCN +1.3%) are also up.Piper has belatedly launched coverage on Cree with an Overweight, and Needham declares the report a validation of the company's vertical integration strategy. Cree noted on its earnings call LED pricing remains tough, but also forecast strong growth for its higher-margin SC3 products.

    Samsung (SSNLF.PK) has passed Apple to become the world's top chip buyer, per Gartner: the firm estimates Samsung accounted for 8% of global chip purchases last year thanks to a 28.9% increase in consumption to $23.9B. Apple bought $21.4B worth of chips (7.2% share), and H-P $14B (4.7%). Samsung is trying to source more of those chips internally, as evidenced by last year's acquisitions (III). Some major Samsung mobile chip suppliers:SWKSRFMDMXIMBRCMQCOM.

    Intel (INTC) says it won't make desktop PC motherboardsfor CPU architectures that succeed Haswell, which will launch later this year. In practice, this means Intel should be out of the motherboard market by 2015. The announcement comes two months after reports that Intel will change the packaging of its desktop CPUs in a way that will kill off aftermarket CPU upgrades and give the company more control over the motherboard market.

    Alcatel-Lucent (ALU +3%) moves higher after receiving an upgrade to Neutral from Citi. The firm, which now has a PT of €1.30 ($1.73), cites an improved carrier spending environment and lower bankruptcy risk (presumably thanks to Alcatel's debt refinancing deal). Shares are up 58% since the deal was announced.

    Low expectations and (possibly) short-covering are helping AMD (AMD +9.2%) rally following a slight Q4 beat and below-consensus Q1 guidance. The gains come even though CPU division sales fell 37% Y/Y in Q4 (Intel's PC CPU division sales fell only 6%), and GPU division sales 15%. But servers were a relative bright spot: AMD noted in its CFO commentary (.pdf) server CPU sales rose Q/Q, and mentioned on its earnings call its SeaMicro unit recorded "significant revenue growth." Gross margin was 39%, down from 46% in Q4 '11 but up from 31% in Q3.

    Windows Phone (MSFTgrew its smartphone share within the EU5 economies to 5.4% in 12 weeks ending Dec. 23, per Kantar Comtech. Italy was a strong point (13.9% share), and Germany a weak point (2.6%). The iPhone (AAPL) made up 51.2% of U.S. sales (up 630 bps Y/Y) and 66.2% of Japanese sales, but its EU5 share was barely changed at 25.6%, while Android (GOOG) rose 1020 bps to 61.1%. The iPhone's share of "Urban China" is pegged at 21.9%, and Android's at 72.5%.  (tables - PDF) (12 weeks ending Oct. 28- Let's translate that to "In countries where people can afford expensive phones, AAPL has over 50% of the market.  So, if they can capture 50% of the Planet's top 700M (10%), that's 350M phones to sell."  

    China Mobile (CHL) says it sold over 60M TD-SCDMA 3G phones in 2012, and hopes to double that figure in 2013. Moreover, the world's biggest mobile carrier hopes 80% of those sales will involve smartphones, which are more likely to use ARPU-lifting data subscriptions. TD-SCDMA baseband chip vendors Spreadtrum (SPRD), Marvell (MRVL), and MediaTek must be pleased to hear those remarks. So might Qualcomm (QCOM), which recently announced baseband chips for CHL's network. (Apple talks)

    "Investors are worried about iPhone demandiPad mix,Mac sales and most importantly margins," says BTIG's Walter Piecyk, discussing concerns going into Apple's (AAPL +1.4%) FQ1 report today. Piecyk took a lot of heat for downgrading Apple to Neutral last April, but shares are down 20% since then. He thinks an "old-school" revenue beat is needed to calm investors, but with shares now below 8x FY13 EPS exc. cash and earnings expected to show the first Y/Y drop since '03, expectations have come down. Revenue is expected to grow 18% Y/Y to $54.7B.

    That massive stash of cash held overseas to avoid taxes by tech giants like Apple Microsoft and Google (among many others)? Much of it is sitting in the States - in domestic bank accounts, Treasurys, and corporate bonds. As long as the money doesn't flow to the parent company though, it's not subject to tax. Absurdity doesn't begin to describe the tax system. 

    Three lunchtime reads:

    1) Doubt greets bank of Japan's easing shift

    2) Japan's economic woes are good for gold

    3) Predicting the next recession

  100. phil

    Deutsche Bank's David Bianco lists his 30 favorite big-cap stocks, each with a P-E ratio on 2013 EPS below 18 and EPS growth above 5%: DDAPDMSFTINTCIBMACNGOOGAPHEMC,AAPLQCOMITWROKUTXHONGDALLC

    USBPNCSLB,HALCAMBHILYBDISVIABNWSACBSMCD.

  101. kustomz

    LMAO, Pharm..

    good luck AAPL longs!!

  102. phil

    Animals/Pharm – That's why I liked PETS.  

    What does what mean, Newt?

    AAPL/Wombat – Shouldn't be a dilemma – if you are the slightest bit uncomfortable with the possible negative outcome of a trade – GET OUT!  If you REALLY want to own AAPL in 2015 at net $346 – then the margin wouldn't be an issue, because you are planning to allocate $173 (50%) and the margin requirement on the short puts is just net $40 and, obviously, can't go higher than the $173.  If you are just trading and can't afford to own AAPL – then you should be THRILLED to make 20% so quickly and take it off the table into a binary risk event.  As you say, you can always buy more if they fall and you still have your bullish spread so you want to know if it's OK to be greedier and it's not.  

    Oil/Scott – Not ahead of inventory tomorrow.  Hopefully they jack it back up and we can DD and roll again on USO and hit our $96.50 line for the 5th time this week – this is getting to be fun.  

    And what StJ said.  

    Rangers/Terra – Nice!  

    77M on the Dow with 10 mins left.  VIX 12.50, TLT 120.16.  What a calm market BUT, indexes are mostly flat as the S&P not convinced it should be over 1,500 and the RUT not liking 900 yet and the Dow and the Nas had to catch up anyway (tug-boat model) so all is well but all is still up to AAPL.  

  103. 1020

    Pharm/Full Moon  Last summers camping trip?…… ;)

  104. phil

     

    With minutes to go, this is what the world (according to the Google machine) is thinking ahead of Apple's earnings… and what the market expects…

     

    and what the market is expecting…

    • Revenue: $54.878bn (Guidance $52.00bn)
    • Operating Income: $16.97bn
    • EBITDA: $18.145bn
    • EPS GAAP: $13.531 (Guidance $11.75)
    • EPS Adj: $13.531
  105. Burrben

    I was looking at the AAPL one trade today, hoping to maybe get into it.  Anyway, it's now priced at 38.12 mid for the whole spread.  I think it filled for 23.08 in the income port.
     
    Wasn't there a time that port was down like 25k??? Man…..

  106. jelutuck

    I guess the NFLX trade didn't work out :-(

  107. 1020

    Short NFLX?

  108. stjeanluc

    Looks like a miss on FFIV… Guiding slightly higher for Q2 though. Down about $1 AH.

  109. phil

    Another great clip of our man Nigel Farage in action.  

  110. stjeanluc

    NFLX flying…. thankfully we didn't short them! They are actually making money while a loss was expected!

  111. stjeanluc

    Looks like we were a week early in the MoMo with NFLX.

  112. stjeanluc

    SNDK crushed it on EPS – reports 1.05 versus 0.76 estimated. Trading is halted until 4:25.

  113. stjeanluc

    FFIV moving up now. I guess people are actually reading the guidance now!

  114. dclark41

    tic, tic, tic, tic…..

  115. stjeanluc

    WDC also crushed estimates for earnings and revenues… 

  116. 1020

    ….happy to close TZA…..for now….. :)

  117. stjeanluc

  118. 1020

    ….can I have my TZA back?….. :)

  119. deano

    Apple® today announced financial results for its 13-week fiscal 2013 first quarter ended December 29, 2012. The Company posted record quarterly revenue of $54.5 billion and record quarterly net profit of $13.1 billion, or $13.81 per diluted share. These results compare to revenue of $46.3 billion and net profit of $13.1 billion, or $13.87 per diluted share, in the 14-week year-ago quarter. Gross margin was 38.6 percent compared to 44.7 percent in the year-ago quarter. International sales accounted for 61 percent of the quarter’s revenue.

  120. deano

    “We’re thrilled with record revenue of over $54 billion and sales of over 75 million iOS devices in a single quarter,” said Tim Cook, Apple’s CEO. “We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world.”
    “We’re pleased to have generated over $23 billion in cash flow from operations during the quarter,” said Peter Oppenheimer, Apple’s CFO. “We established new all-time quarterly records for iPhone and iPad sales, significantly broadened our ecosystem, and generated Apple’s highest quarterly revenue ever.”

  121. kustomz

    One positive, its going to be fun playing AAPL into next Q

  122. iTrade

    OUTCH !!!  Apple being hit afterhours! 

  123. deano

    $23b in cash on 54b in sales – remarkable!

  124. scottmi

    AAPL – good grief. NTFX skies, AAPL falls.  What are they saying?!  

  125. jabobeast

    FU AAPL!!!!

  126. 1020

    You Go Girl!!!  Secretary 'o State Clinton answers a question…..
    http://swampland.time.com/2013/01/23/best-two-minutes-of-clintons-benghazi-testimony/
     
    Sen.McCain and Paul made their own views known….and then asked a couple of questions….

  127. rdn4evr

    1020 – you can have my TZA if you give me what I paid for it!

  128. phil

    AAPL disappoints!   Not a huge move but lots of stuff to shake out.  

    Still, they are picking apart segments but overall, Revenue was a record $54.5Bn and they made record profits if $13.1Bn ($13.81 per share).  Don't forget this quarter was 13 weeks, vs 14 weeks last year so the comps are messed up.  

    Gross margin way down at 38.6% vs. 44.7%.  Cash $137Bn.

    • Record 47.8M IPhones vs. 37M last year.
    • Record 22.9M IPads vs. 15.4M last year.
    • 4.1M Macs vs 5.2M last year (laptops killed by pads?) 
    • 12.7M IPods vs. 15.4M last year.  
    • $23Bn in cash flow from operations.

     

    Apple is providing the following guidance for its fiscal 2013 second quarter:

    • revenue between $41 billion and $43 billion
    • gross margin between 37.5 percent and 38.5 percent
    • operating expenses between $3.8 billion and $3.9 billion
    • other income/(expense) of $350 million
    • tax rate of 26%

    $486 for their troubles at the moment – will be interesting tomorrow but very glad we covered the short-term trade.  

    NFLX goes nuts!  

  129. angelcur

    most aapl figures are quarterly records.

  130. dclark41

    Phil:
    Lets wait and see where the stock goes. Good call with an assist from Opesbridge. At least we are covered for more adjustments. It just seems like the bar is set higher for AAPL than anyone else. They beat on profits and barely miss revenues. Doesn't sound that bad to me.

  131. stjeanluc

    These profit margins down by 6% over one year with AAPL… It's really not unexpected but that would be the worrisome number for me. They bring in $8Bn more in revenues for the same profits.

    On the other hand, all the cash on hand. And adding to it by the shovel full. Good grief… 

  132. dclark41

    Phil:
    From what I was reading GM were expected around 37-38%.

  133. stjeanluc

    NFLX – P/E of 130
    AAPL – P/E of 11.64

    My conclusion, invest in the higher P/E!

  134. dclark41

    http://allthingsd.com/20130123/apple-earnings-good-not-great/?reflink=ATD_yahoo_ticker
    This story says it all. They just can't be good they have to be great!

  135. stjeanluc

    On the bright side, anyone who missed the entry on the AAPL One Trade could get a better setup tomorrow!

  136. shadowfax

    STJ
    No effect on me but as expected, over now they will go up from here.

  137. phil

    NFLX/Jet – That's why the naked puts were safer – would have sucked to short calls on that one.  $138.44 got hit.  

    FFIV actually popping to $103.  Everyone is forgiven for everything except AAPL.  

    Nas gave up all of today's gains in the Futures (10 points) but we'll see what's real tomorrow. 

    Big Chart looks crazy bullish. 

    Clinton/1020 – Wow, that's what people are making a big deal about?  She raised her voice slightly and gave an animated response – media's characterization of that is totally sexist.  If a guy did it – would it be news?  

    Waiting/DC – That's definitely the right play.  We're fine with flat and now we can get back to the call-selling business.  It's only a 10% drop we were worried about.  

    Profit margins/StJ – Depends why they were down.  Rolling our a whole new Phone, Pad and IMac was probably expensive.  And, as you say, $137Bn in cash against a $480Bn market cap means you can LBO the company and use the cash to make a 30% downpayment and their cash-flow certainly justifies getting a $343Bn loan on the rest.  Where's Henry Kravis when you need him?

    Margins/DC – Could be so many reasons for that.  Strong Dollar with 61% foreign sales is one very possible reason.  

    $485 now.

  138. phil

    Nas futures all the way back to 2,725 – where we went long yesterday for 25 points.  They (/NQ) pay $20 per point per contract and, if you want to call a floor on AAPL at $485 – they are a good substitute.  

  139. samz3700

    AAPL – wish they would announce an aggressive share re-purchase -
    Guess most of that money that is overseas (but parked in US banks) cannot be used for that.

  140. phil

    CNBC guys still dissing AAPL – "All they are is IPhones, it's just IPhones" – LOL!  They just posted record sales, one of the best quarters posted by a company – EVER!  

    CC starting so more color to come.  

  141. stjeanluc

    AAPL Margins / Phil – They forecast margins of 38% in the next quarter as well so rollout is probably not the only answer. I am guessing that manufacturing costs for the iPhone 5 are higher but they sell them for about the same price as the older models. Maybe some answers in the CC…

  142. jelutuck

    The big question is whether the entry for the one stock play will be good tomorrow (for those of us that missed it) and whether anything has changed with AAPL long term.  Phil, can you revisit this tonight or tomorrow?  
    BTW, I sent my $ in for Atlantic City and hope a lot of you plan to go!

  143. stjeanluc

    Clinton / Phil – The biggest hypocrite this afternoon was Rand Paul. What a moron that guy turned out to be:

    http://talkingpointsmemo.com/archives/2013/01/its_takes_a_lot_of_nerve.php

     

    Paul went as far as saying that had he been president he would have fired Clinton, while rattling off a few examples of State Department expenditures that he considers wasteful and frivolous.

    It needs to be said that Paul doesn’t have much use for the State Department.

    In his own budget proposal for 2011, which called for a half a trillion dollars in across the board spending cuts, Paul proposed a $20 billion cut to the State Department. By way of comparison, the State Department’s core budget for the 2013 fiscal year is $43.4 billion. You can see that provision of his budget at the bottom of the page here.

    The U.S. security failures in Benghazi were serious. They shouldn’t be downplayed or dismissed. But you don’t have to pretend there wasn’t a State Department failure, in order to conclude that it takes a lot of nerve to sit there and rip a secretary over the decisions made about how and where to deploy security resources when not only is the department chronically underfunded and having to make do, but while you yourself have called for slashing the departments budget by nearly half. That’s not serious. And neither is Paul.

    These guys don't care about the country, just looking at scoring some points against someone they fear will win the next presidential election!

  144. Burrben

    Yodi / AAPL
    Did you close out those 475 P's?

  145. zeroxzero

    Phil / BTU — Traveling, so slow on the uptake — BTU dropped a point today, trade still on?

  146. wombatcreative

    AAPL.com
    "Average weekly revenue was $4.2 billion in the quarter compared to $3.3 billion in the year-ago quarter."
    Incredible.

    These reports are screwy – I hope AAPL rallies tomorrow.

  147. stjeanluc

    AAPL below 470 in AH now… Unreal!

  148. terrapin22

    jelutuck – send me email with name to confirm.  I prob just dont know your board name.  thanks.  

  149. albo

    AAPL might have to sell the IPhone at a lower price because of competition ?   Thinking the carriers might not subsidize as much as in the past due to popularity of the Android.

  150. escohen5

    460!!

  151. stjeanluc

    460 now… It's time they close the AH session or that Fast Money guy predicting $425 might be right tonight! Is someone listening to the CC?

  152. stjeanluc

    Interestingly enough my next line as I posted before for AAPL is 464 which is a 61.8% Fib retracement from the high. It looks like we are hitting that now!

  153. i zega

    Awesome numbers, stock down 10% AH…. probably just what AAPL needed to make bottom. I will be an aggressive buyer at these levels…

  154. Burrben

    We still have 50min of AH to go.  AAPL 460…wow.  
    Who would have thought that HPQ would kill AAPL in % return?

  155. i zega

    At $460, 30%+ of the valuation of the entire company is in cash (if heard right stands at $137bn)…

  156. lflantheman

    I posted no AAPL earnings play because I had none.   Whew! ………….not only don't I know the answers, I can't even figure out the right questions on this stock anymore.  ??????

  157. shadowfax

    You need to understand big numbers get out of reach, AAPL is a good companybut they can not continue at those margins. Their problem is they lost the idea man and his name was not Steve, maybe they have another brewing, maybe not, they still have Microsoft if they will just link more with the big guys, IBM etc., the consumer is tapped out until everything changes.
    I have been unable to participate for a while but I still believe the collective is A+.

  158. malsg

    Wow .. a company like Apple pushed around like a penny stock.  Madness.
    PEOPLE WAIT TWO to FOUR WEEKS for their products.  They camp outside of stores in London, New York and in China sell their kidneys.
    I would not wait two minutes to purchase an MS or HPQ product and I sign a two year contract for an Iphone 4s.
    I'm waiting for the headline "Netflix to buy Apple"  Then I will know I have fallen down a rabbit hole.
    ?!?!

  159. wombatcreative

    Phil //
    Here we go. 
    Close the SQQQ, use the cash to DD on 'One Trade ? ( at least the spread )
    or

    Are you thinking a new trade altogether ?
    Enquiring minds want to know ; >

  160. 1020

    stjeanluc – Yeah, that "rant" paul is a real piece of…..work….. (I could not insult other fecal matter in that chamber)

  161. phil

    AAPL near $455, I was off by $100!  

    Waiting for CC transcript at this point.  Obviously CC not going well but the funny thing is the volume is not that heavy as they are below $560. 

    Nas failed to hold 2,725, now 2,713 – good for SQQQ but little else.  At least we'll get a good level test on our indexes now. 

    Apple (AAPL): FQ1 EPS of $13.81 beats by $0.37. Revenue of $54.51B (+18% Y/Y) misses by $220M. 47.8M iPhones, 22.9M iPads, 4.1M Macs, 12.7M iPods. Expects FQ2 revenue of $41B-$43B, below $45.6B consensus. Shares -4.3% AH. (PR)

    More on Apple: iPhone and Mac sales below expectations, iPads roughly in-line. FQ1 gross margin was 38.6%, down 510 bps Y/Y but above guidance of 36% and responsible for EPS beat. FQ2 gross margin guidance of 37.5%-38.5%. Exc. retail, Americas sales +15% Y/Y (was +43% in FQ4), Europe +11% (+8% prior), Japan +25% (+113% prior), Greater China +67%, rest of Asia-Pac +10%. Retail +5%. Cash/investment balance at $137B. AAPL -4.8% AH. CC at 5PM ET (webcast). (PR)

    A little more on Apple: FQ1 iPhone revenue +28% Y/Y to $30.7B (56% of sales), healthy ASP of $641 (was $636 in FQ4). iPad revenue +22% to $10.7B, ASP falls to $467 from $536 thanks to iPad Mini. Macs -16% to $5.5B, ASP rises to $1,359. iPods -15% to $2.1B, iTunes/software/services +22% to $3.7B, accessories +25% to $1.8B. Opex +14% Y/Y to $3.85B (7% of revenue) R&D spending +33% to $1.01B. Free cash flow of $21.1B vs. net income of $13.1B.

    Mentioned during Apple's FQ1 call: Tim Cook suggests taking iPhone build rumors with a grain of salt. But he also states Apple's guidance will now reflect actual expectations - FQ2 revenue guidance was below estimates. He downplays talk of a bigger iPhone, and asserts Apple isn't interested in revenue for its own sake. The iPhone 4 was supply-constrained during the quarter, a sign demand for cheaper iPhones is strong in spite of a decent ASP. iPhone channel inventory is in Apple's target range, iPad inventory below as the Mini remains constrained. AAPL -10.5% AH. (live blog) (FQ1: III,III)

    No quick turnaround it sounds like.  Good environment for call selling at least.  

  162. stjeanluc

    Something I just don't understand:

    Apple CEO Tim Cook was just asked about Apple's plans regarding larger-screened devices, like the Galaxy Note. Here's how he answered: "Without sacrificing the one-handed ease of use, we've put a lot of thought into screen size, and we believe we've picked the right one." Translation? Nope, not happening.

    One of my best friends who uses his phone a lot for business because he travels a lot just switched to a Galaxy SIII from an iPhone because of the screen. With the power that these phones now have and what you can do with it demands a larger screen. Of course, Apple also said that a 7" tablet was a bad idea! I am guessing that we'll see a larger iPhone soon as well as a cheaper one.

  163. newt

    Shadow!  Great to see you are here. 

  164. stjeanluc

    Rand Paul / 1020 – This guy is really despicable. The apple fell on the other side of the river in that family. I guess he must really feel at home with the Cantor, Ryan and Bachman of this world. Hard to believe that this guys have the reins of government.

  165. newt

    Bcbv gv v ;;:Gestapo aapl f BFF Q?bcn.       Nkvgg

  166. newt

    Whoa!  Sorry for the Gestapo aapl. Auto correct on crack pad. 

  167. scottmi

    AAPL – that's it Apple. This is the end.

  168. biodieselchris

    NFLX — YES!!! I haven't been right for awhile. They had a bullish chart, I knew it (and thankfully put some money on it…)

  169. Pharmboy

    BDC – u buy the NFLX Jan 4 125 calls for 35c…they are now $14…..

  170. scottmi

    NFLC/BDC, Pharm – Jan4 125 calls for 35c..oh why didn't you say something! :-)   Congrats!

  171. scottmi

    NFLX that is. jeepers.

  172. stjeanluc

    Good for you BDC!

  173. stjeanluc

    I guess if you can’t win elections then you have nothing left but trying to steal them:

    http://www.motherjones.com/kevin-drum/2013/01/republicans-are-not-being-cynical-enough-their-power-grabs

    Most of these bills assign one electoral vote for every congressional district, then give the two at-large districts to whoever wins the state. But the Carrico bill would assign the final two electors to whoever won the most districts….Had the Carrico plan been in place in 2012, Mitt Romney would have won nine of Virginia's electoral votes, and Barack Obama would have won four — even though Obama won the popular vote of the state by nearly 150,000 ballots, and four percentage points.

    The cynicism of these guys knows no bounds. It's like "We tried stopping people from voting and that didn't work, let's just change the rules so that votes don't count". Scary!

  174. jfawcett

    College:  I paid for my computer science degree, my spouses masters in business and a masters in education (currently paying for classes for her to be a principal).  Paid for my sons PHD in chemical engineering and my daughters degree in elementary education.  All cash, no loans (borrowed from my 401K and paid back every year).  The PHD was out of state but, the school paid for his classes after his first year, I only needed to pay the room/board.  Would not change a thing, nice the kids have no debt.  However, I am in the top 105 so I have no idea how others would deal with sending their kids.  I will say.. I worked my A$$ off (my wife also) to get where we are today, I had ZERO help!  So, it can be done. 

  175. scottmi

    NRA – as it's after hours, here is another set of reasons for not joining the NRA, in the form of a letter from Aaron Zelman of the JPFO to Ted Nugent, Board Member of the NRA. 

  176. stjeanluc

    College / Jfaw – I think that we have had that discussion before, but sure with hard work it can be done but you still need some luck along the way. Without the appropriate intellectual capacity do you think you would have received your computer science degree? Obviously not everybody receives that gift! And true, some do waste it and others never get the chance to realize it. That's one of many factors! And I am glad it worked out for you. But we should make it possible for many others as well.

  177. zeroxzero

    JFaw;  I'm no Commie, but Stj does have a point: timing matters.  I borrowed school loans through a bachelor's, masters and JD degrees, but then I went to work in late '77 NYC just as [debt-fueled] "morning in America" was in the offing, and had all of the '80s and a good chunk of the '90s to learn my chops and accumulate working capital, and the post-NASDAQ crash debt party to build a business and cash in.  Luck of the draw.  I'll bet that if had launched that sequence in 2005, I'd now be in Argentina trying out the first LBO of a cattle ranch or something equally quixotic, with little chance of an equal outcome.

  178. jfawcett

    Education in general – I would be all for opening it to everyone that has the capacity to make the world a better place.  As you can see from my post, we are pro education for all.  Believe me, those checks every year were hard to swallow.  I do want to the day this country figures out how to make the education system better with access to all.

  179. jfawcett

    And now to AAPL!  Phil, a new entry for the one play for the year please.  I suspect, as in the past, AAPL will recover to 500 soon.  705 – 460 = 245 so a 10% weak bounce to 485 or 20% to 510 is not out of the question.

  180. jromeha

    JFacett- I think I recall you offering to buy a coin awhile back, sorry I didn't respond been nothing but craziness since I got back… I just wanted to say I appreciate the offer but Ihave more coins than I know what to do with (deployed as a protocol officer a couple years back), if you want to donate money though, kiva.org provides low interest loans to 3rd world entrepreneurs and you get your money back.

  181. jfawcett

    jromeha – Will do and thanks.  Glad you are back safe and sound!

  182. phil

    Good morning!  

    AAPL $476 at the moment after bottoming at $457 overnight.  

    Nas futures right at 2,723 and still a good long over the 2,725 line.  

    Asia was mixed with the Nikkei up 1.3%, Hong Kong flat, Shanghai down 0.8%, India down 0.25% and Singapore up 0.5%.

    Europe opened flat but picked up nicely and, other than the Nasdaq, our Futures are holding up well so our biggest fear – that AAPL's earnings may be the straw that breaks the rally's back – is unfounded (so far).  

    3:55 AM European stocks are mostly lower as Apple's lackluster earnings – well it's all relative – cast a global shadow. "Despite the firm close in the U.S. and better-than-expected (PMI) data from China, European traders appear to be on a more cautious footing," says trader Jonathan Sudaria. "The after-hours release of Apple earnings have not been interpreted well." EU Stoxx 50 -0.3%, London +0.1%, Paris -0.1%, Frankfurt -0.3%, Milan -0.4%, Madrid +0.05%.

    4:32 AM Eurozone shares reverse course and turn solidly higher following improvements in German and eurozone PMI data, with even shares in France in the green despite the country's situation stayingrather depressing. EU Stoxx 50 +0.2%, London +0.2%, Paris +0.4%, Frankfurt +0.1%, Milan +0.2%, Madrid +0.3%.

    Profits at $1 Trillion Meet Valuations as S&P 500 Rallies (Bloomberg)

    Calling off the Recession?  Flash eurozone manufacturing PMI climbs to a 10-month high of 47.5 from 46.1 in December; manufacturing output 48 vs 46; services 48.3 vs 47.8; composite output 48.2 vs 47.2. The data "suggest that the eurozone economic downturn has eased," says Markit. "Forward-looking indicators…suggest that the rate of decline will continue to slow in the coming months, and a return to growth looks to be on the cards" in H1. (PR) 

    Flash German Manufacturing PMI rises to an 11-month high of 48.8 in January from 46 in December; manufacturing output 50.4 vs 47.1; services hits 19-month peak of 55.3 vs 52; composite output 53.6 vs 50.3. "Germany's private sector has kicked back into gear in January, as output rose at a pace that would deliver a swift recovery in GDP from the ground lost during (Q1)," says Markit. (PR)

    France still sucks:  Flash France Manufacturing PMI falls to 42.9 in January from 44.6 in December; manufacturing output 40.8 vs 43.3; services crashes to 46-month low of 43.6 from 45.2; composite output also hits a 46-month trough of 42.7 vs 44.6. "Sickly performances from both the manufacturing and service sectors resulted in the steepest drop in overall output for almost four years, while the…(speed) of job losses gathered pace," says Markit. (PR)

    Spanish 10-year bond yields may be only just above 5%, but the crisis in the real economy continued unabated in Q4, with unemployment rising to a record 26.02% from 25.01% in Q3. The number of people out of work reached 6M, or a third of the eurozone's jobless citizens. It was even worse for those under 25 as youth unemployment hit 60%. - On the bright side – 1/3 of Europe's unemployed are in Spain so, if we ignore them – things for the rest of the continent are looking up

    The euro turns positive against the dollar following Germany's decent PMI data and is +0.1% at $1.3321. Earlier, it hit a session low of $1.3288

    Almost flat earnings and a disappointing forecast from Apple (AAPL) leave a few casualties in Japanese trading today: Softbank (SFTBY.PK) – a Japanese carrier of the iPhone – is down 0.9%, Sharp (SHCAY.PK) and Foster Electric – both of which make parts for the phone – dropped 1.5% and 1%, respectively.

    Japanese exports fell a more than expected 5.8% in December, outpacing expectations for a 4.7% dip, as shipments to China slipped again and even U.S.-bound exports shrank. Imports rose 1.9%, sending the trade deficit to ¥641.5B ($7.24B), which was also wider than economists forecast of ¥548.5B. Exports to China have declined recently over political tensions between the two nations, fell 15.8% in December, while those to the U.S. slipped 0.8%, the first decline in nearly 14 months. Exports to Western Europe fell 12.3%.

     “These are bad numbers for the economy,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official. “The positive impact of the yen’s decline on exports has yet to be seen, but it is already boosting import values.”

    China's January HSBC Flash PMI rises to 51.9 from December's final read of 51.5. It's the 5th consecutive rise for the index which now stands at its highest level in 2 years. "Despite still-tepid external demand," says HSBC, "the domestic-driven restocking process is likely to add steam to China's ongoing recovery."

    China manufacturing capacity utilization in 2012 below 2008 level: UBSThe overcapacity problem in China created by booming economic growth in recent decades resulted in even lower utilization in the manufacturing sector in 2012 than during the global financial crisis in 2008.

    What Really Goes On In China.

    South Korea's Q4 GDP rises just 1.5% Y/Y, pulling growth for all of 2012 down to 2%, the weakest since 2009 and well below this summer's central bank forecast of 3%. The export-driven economy has been hit by the 1-2 punch of weak external demand and a strengthening won. The Kospi is down a fraction.

    More on Apple's (AAPL) FQ1 call: Tim Cook mentions over 2M Apple TVs were sold in the quarter, and asserts the TV is "an area of intense interest" (previous). The new iMac was also heavily supply-constrained during the quarter. The mix of current to prior-gen iPhone sales was similar to a year ago. CFO Peter Oppenheimer says new stock buybacks is something Apple continually assesses. This could be a good time for one. (live blog) (more on Apple) 

    Apple(AAPL) Sold More Than 2 Million Apple TVs Last Quarter, Tim Cook Dodges Question About Future TV Plans

    Boeing(BA) 787 to Stay Grounded as U.S. Can’t Explain FiresThe top two U.S. aviation regulators said they don’t know what led to battery flaws that prompted them to ground Boeing Co. (BA)’s 787, and defended their decision to not let the plane fly until the cause is found.

    And more oil:  Shale Oil Bonanza Reaches Australia With '$20 Trillion' Discovery. 

    Kashkari Resigns Amid 'Spotty' Fund Performance, Heads Back To Public Office.

    Is Contemporary Conservatism Just ‘Payola’? (Center for American Progress)

    The conservative movement is still an elaborate moneymaking venture (Salon)

    Dollar up and down but still around 80, oil $95.59, gold $1,681 with a lot of negative outlooks hitting them this morning, silver failed $32 ($31.975) so a good long over that line if the Dollar fails 80, copper down to $3.68 on China over-supply concerns (again).  Yes, it doesn't just magically go away…  Nat gas tested $3.50 and back to $3.58 but will suck for them when the cold snaps and gasoline refuses to lose at $2.85 but inventories today will be interesting.  Gasoline is a tempting but very dangerous short below the $2.85 line (/RB). 

    Notable earnings before Thursday’s open: ABCALK,ARGAVTBAXBMYBPOPCELGCYDOVEQTESIETN,FCS

    GWWJNSJVAKCGKEYLMTLUVMKCMMMMWW,NMMNOKORIPCPQSII

    RTNRYNSWKTZOOUALUNP,XRX

    Notable earnings after Thursday’s close: CPHDCRUS,EDEGHTETFCFLEXINFAJBHTJNPRKLACMSFT

    MXIM,QLGCRMBSRMDSBUXSCSSSXLSYNATTKRTPX,VRSN

    Thursday's economic calendar:

    8:30 Initial Jobless Claims

    9:00 PMI Manufacturing Index Flash

    9:45 Bloomberg Consumer Comfort Index

    10:00 Leading Indicators

    10:30 EIA Natural Gas Inventory

    11:00 EIA Petroleum Inventories

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet

  183. phil

    CNBC holding a gleeful funeral for AAPL.  

    AAPL's Conference Call.

    Funny how these word clouds can sometimes sum things right up:  "Company Introduced New Products" – that pretty much sums up the Q and explains the thin margins with $1Bn spent on R&D, which is $700M more than usual, which is 5% of the profits and accounts for the shortfall in gross margin.  

    Also ignored by analysts is the 13 week quarter vs 14 weeks last year (7%) as a huge handicap.  Guidance did not make up for things though but they are still well on track to make $45Bn+ this year – and that's a p/e of 10.  AAPL sells $4Bn worth of stuff a week and makes $1Bn and a week was missing from this Q – keep that in mind…

    They also bought back $4.5Bn in stock (1%), probably the best thing they could have done with their cash at these prices. Plans on giving back $15Bn a year to shareholders, which indicated dividend will be closing in on 3%. 

    Other highlights from the CC:

    500M iOS devices sold – 10 per second in the last Q (80M) so overall iOS sales are accelerating.  

    Cook reminds people quarter was short a week – no mention on CNBC, that's for sure

    Average weekly revenue was $4.2Bn vs $3.3Bn last year – up 27%

    This also explains drop in operating margins: "For segment reporting purposes we’re allocating certain manufacturing cost and variances including cost related to product tooling and manufacturing process equipment to our operating segments instead of including these expenditures in corporate expenses as we have done in the past."

    "We were very pleased to sell 47.8 million iPhones compared to 37 million in the year ago quarter, an increase of over 10 million iPhones."

    "This represents a rate of almost 3.7 million iPhones per week in the current year quarter compared to 2.6 million per week in the year ago quarter."

    "That’s an average increase of 39% per week consistent with IDC’s latest published forecast for the global smartphone market in the December quarter." – In other words, no loss of market share globally. 

    "And on a sequential basis iPhone sales grew 78% over the September quarter’s results. That’s over 3.5 times IDC’s latest published projection for sequential growth of the overall market resulting in iPhone market share growth."

    "Turning to iPad, we were thrilled to sell 22.9 million iPads during the quarter compared to 15.4 million in the year ago quarter. That translates to over 1.7 million iPads per week in the current year quarter compared to 1.1 million per week in the year ago quarter, an average increase of 60% per week, ahead of IDC’s latest published estimate of 56% growth for the tablet market."

    "As we projected a quarter ago, we were significantly constrained with respect to the new iMacs and were only able to ship them for the final month of the December quarter. We believe our Mac sales would have been much higher absent those constraints. "

    "Moving to iPod, we sold 12.7 million iPods compared to 15.4 million in the year ago quarter."

    "iTunes generated record results with revenue of $2.1 billion in the quarter."

    "The App Store had a record-breaking December quarter with over 2 billion downloads in the month of December alone. The App Store now offers more than 775,000 apps to over 0.5 billion account holders in 155 countries"

    "we’re delighted to have paid our app developers over $7 billion for sales"

    "Apple retail stores, revenue was in all-time high of over 6.4 billion with growth yield primarily by record iPhone and iPad sales. We opened in total 11 new stores during the quarter including four new stores in Greater China. We excited the quarter with 401 stores, a 150 of which are outside United States. We also relocated or expanded 14 stores that had outgrown their former space during the quarter. With an average of 396 stores opened, average revenue per store was 16.3 million or 1.25 million per store per week compared to 1.22 million per store per week in the year ago quarter. Retail segment income was 1.6 billion."

    "Operating expenses were $3.9 billion included $460 million in stock based compensation expense. (Inaudible) was $462 million and the tax rate for the quarter was 26%. Turning to cash, our cash plus short term and long term marketable securities totaled a $137.1 billion at the end of the December quarter compared to a $121 billion at the end of the September quarter, a sequential increase of almost $16 billion."

    "The increase in cash was net of 2.5 billion in dividends paid and 2 billion in an upfront payment in conjunction with our accelerated share repurchase program. Over 94 billion of our total cash was offshore at the end of the December quarter. Cash flow from operations was a record 23.4 billion growing by almost 6 billion year-over-year of 33% increase. Our Board of Directors has declared a dividend of $2.55 for common share payable on February 14th, 2013 the shareholders at record as of the close of business on February 11th, 2013."

    "For the March quarter we’re providing revenue guidance of between $41 billion and $43 billion compared to $39.2 billion in the year ago quarter. We expect gross margin to be between 37.5% and 38.5% reflecting approximately $90 million related to stock based compensation expense. We expect OpEx to be between $3.8 billion and $3.9 billion including about $480 million related to stock based compensation."

    "I know there has been lots of rumors about order cuts and so forth and so let me just take a moment to make a comment on these, I don’t want to comment on any particular rumor because I would spend my life doing that but I would suggest it's good to question the accuracy of any kind of rumor about build plans and also stress that even if a particular data point were factual it would be impossible to accurately interpret the data point as to what it meant for our overall business because the supply chain is very complex and we obviously have multiple sources for things, yields might vary, supply performance can vary. The beginning inventory positions can vary, I mean there is just an inordinate long list of things that would make any single data point not a great proxy for what’s going on."

    "If you look at the previous year, our Mac sales were about 5.2 million (units). This year, they were 4.1 million and so the difference is 1.1 million. And so let me try to bridge that. iMacs were down by 700,000 units year-over-year. As you remember, we announced the new iMacs late in October and when we announced those, we announced that they would ship, the first one, the 21.5-inch would ship in November and we did ship it at the end of November, we announced that the 27-inch would ship in December and we did ship that in mid-December. And so there were limited weeks of ramping on these products during the quarter, we left the quarter with significant constraints on the iMac. And we believe we know that our sales would have been materially higher if those constraints would not have exist. We tried to tell people this on the conference call in October, I think I said that we would have significant constraints on iMacs, but I recognized to some folks this maybe to surprise.

    Number two, if you look at last year, as Peter went through in his opening comments we had 14 weeks in the quarter. We have 13 weeks in the quarter this year. Last year, in the average week, we sold 370,000 Macs. The third part of the bridge here would be that our channel inventory was down from the beginning of the quarter by over 100,000 units. And that’s because obviously we didn’t have the iMacs channel inventory was in significant constraint. So, if you just take these three factors, they bridge more than the difference of between this year sales and last year sales.

    Now, in addition to these three points, I would point out two other things, and these are lesser things than these other than the total of these other three obviously. One, the market for PCs is weak. IDC’s last estimate I believe was around negative 6%. Two, we sold 23 million iPads and we obviously could have sold more than this, because we could not build enough iPad minis to come into a demand balance. And so there was – we have always said there is some cannibalization there. I am sure there was some cannibalization of Macs there, but the three large factors of it, the aggregated totals of three large, the iMac, the difference in seven days of the previous year having seven extra days and the channel inventory, I think more than explains the difference between this year and the previous year. As a side note, if you looked at our portables alone, they were in line with IDC’s projections of market growth."

    "If you look at our total China, total Greater China, which would include our retail stores that are in China. Our revenues were $7.3 billion in the quarter. So, this is incredibly high, it’s up over 60% year-on-year. And again, that’s comparing 13 to 14 weeks and so it’s really the underlying growth, it’s higher than that. We saw exceptional growth in iPhones into the triple digits."

    "In terms of cannibalization and how we think about this, I see cannibalization as a huge opportunity for us. One, our base philosophy is to never fear cannibalization. If we do, somebody else will just cannibalize it and so we never fear it. We know that iPhone has cannibalized some iPod business. It doesn’t worry us, but it’s done that. We know that iPad will cannibalize some Macs that doesn’t worry us. On iPad in particular, we have the mother of all opportunities here, because the Windows market is much, much larger than the Mac market is. And I think it is clear that it is clear that it’s already cannibalizing some and I think there is a tremendous amount more opportunity there. And as you know, I have said for two or three, actually three years now I believe that I believe the tablet market will be larger than the PC market at some point. And I still believe that. And you can see by the growth in tablets and the pressure on PCs that those lines are beginning to converge."

    I think AAPL's biggest mistake was not calling the IPad a Flat Mac, so they could have just kept it in Mac sales and impressed everyone.  Cook also made a point that average selling prices for IPads were down $101 – as the mini is much cheaper – but unit sales more than made up for it, giving them the better overall sales numbers.  

    2,725 not breaking up on the Nas (/NQ) so far.  Not good if we hit resistance there. 

    Playing AAPL/Wombat – We won't know until it opens and we see the option pricing.  On the one hand, if it rebounds quickly, there's no need to do anything and, if it falls further – we'll be glad we waited (assuming our plan is to ride it out, which it still is).  So no need for quick action except, possibly, selling puts if the pricing is favorable. 

  184. phil

    Great point, ZZ! 

    AAPL/Jfaw – We'll have to wait and see what the pricing is but the same trade should simply have a better entry. 

    RJ Matson -  - Sensible Gun Control-COLOR - English - Sensible Gun Control, Guns, Children, Schools, School Shootings, Assault Weapons, RPM, Rounds Per Minute, Speed Limit

  185. sgh225

    #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } Phil,
    I'm new and have had a trial subscription. I have put on the the AAPL Apr13 550/590 Call Vertical and sold the Apr13 415 Puts.  With the stock looking at a $50 lower opening, what should I do?
    Thanks,
    sgh225

  186. phil

    Welcome SGH!  

    As noted in chat above, we rolled our April longs to July.  Not sure how good that option will be now that they've missed but, although your April $415 puts will look like a big loss on paper – keep in mind that AAPL is at $465 and those puts will only cost you money if you panic out of them.  If we flatline through April or don't drop another 10%, for that matter, the puts still expire worthless.  

    Let me know (in the new morning post) what you paid for each leg and we'll take a good look once the market opens and we have the new prices.  

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