by phil - February 12th, 2015 8:37 am
Want to make 100% in 5 days?
The GREK Feb $11/12 bull call spread is 0.50 and, if GREK finishes over $12 next Friday, you get $1 back. Each 100 option contract is $50 so, if you need to make $500, you buy 10 of them and come back next Friday for your $1,000.
Can something go wrong? Sure, the deal with the EU can still derail and GREK may fall further so you are risking your $500, make no mistake about that but you can always close the spread and, since you are buying the $11 calls for $1.20 and selling the $12 calls for 0.70 and since the $12 calls are all premium and will decay over the next 7 days at 0.10 per day – you should remain in pretty good shape as long as there isn't a drastic drop.
How else can you make 100% in a week? Well, in this morning's news, in our Live Member Chat Room, we noticed the ports on the West Coast are shutting down for 4 of the next 5 days to teach those pesky workers a lesson (they dared to ask for money!!!). The West Coast handles 40% of US Trade so this is not at all insignificant. And who is affected? The Transports, of course!
IYT is pretty high at $160 and just came off $155 so let's say this strike drops them back to $155. Well the Feb $159 puts are only $1.20 and, at $155, they would be worth $4, that's up $2.80 or 250% if our premise wins out. I'd certainly take 1/2 off the table up 100% ($2.40) and put stops on the rest at $2 to lock in an 90% win and, if we hit our $4 goal, that will be $2.40 + $4 back, which is $3.20 average for a very nice 166% gain for the week. Nice work if you can get it…
Again, our premise could be wrong so we don't bet the farm on these trades but, if our farm has 20 pigs and we bet one pig on a bet that doubles – then we have 21 pigs and we're going to have a
by phil - February 11th, 2015 7:51 am
It's been an impressive rally.
But, as you can see from Dave Fry's SPY chart, the volume is total BS so here we are, back where we have been 5 times since December, at the top of a range that we never quite punch our way out of.
It's been a series of low-volume rallies followed by high-volume sell-offs with bouts of stimulus and Fed-speak talking us off the bottom of our range (S&P 2,000) while it takes nothing but gravity to pull us back from S&P 2,060-85ish.
On our Big Chart, the NYSE usually gives the game away by never quite getting over the Must Hold line at 11,000, with the broadest market index dragging far behind the others. Usually, it's the very volatile Russell 2000 that shows us the way near the tops and the bottoms, either bouncing back at 1,160 or failing at 1,200 – which is what we're looking for today:
If the rally is real, we should quickly get over 1,210 on the Russell (/TF Futures) but, if not, then 1,200 will not hold and it makes a great short line as 1,160 is $4,000 per contract away. It may be a bit early, but TZA (ultra-short on the Russell) is often a fun trade at these levels. Now at $11.68, it's low enough where we don't mind owning it as a long-term hedge so the March $11/13 bull call spread at 0.70, selling the $11 puts for 0.50 is net 0.20 on a $2 spread. You make 10x your money back if TZA is over $13 in 37 days.
When you have a 900% upside on a hedge, you don't have to commit a lot of cash to protect your portfolio – that's what we teach you at Philstockworld.
As noted yesterday, our paired portfolios (LTP and STP) were at $840,000 yesterday morning (up 40%) and they finished the day at $845,000 – up $5,000 (0.5%) on a day when the S&P went up 0.6%. That means, very simply, that we are balanced just a bit less bullish than the S&P.
by phil - February 10th, 2015 8:24 am
Thank you China, may I have another?
Another $7.2Bn that is as those Godless Communists inject another round of stimulus into their Financial System to boost the markets and stave off deflation. That's right, as you can see from the prices in this Lianyungang supermarket, everything is on sale in China as inflation falls to a 5-year low (0.8%), which is the worst since 2009 and, much more worrying to the Capitalists, Producer Prices FELL 4.3%.
Have I mentioned that we're short FXI? I'm sure I have and, if not – we are. That short is based on the pretty obvious fact that if Producers are collected 4.3% less for the goods they sell – they are screwed. FXI fell from $70 in 2007 to $24 in 2009 and, since then, has clawed back to $42, so it makes an interesting hedge on China imploding.
This is China's 7th consecutive week of cash injections (over $50Bn) and they are STILL losing ground on prices so we're not terribly impressed – especially since just last week they also did a drastic rate cut that essentially pumped ANOTHER $80Bn into the economy by lowering reserve requirements and that didn't help either.
“Basically, domestic demand is still pretty weak,” said HSBC economist Ma Xiaoping. “We still don’t see any positive effects of the stimulus measures put through at the end of last year. Obviously, policy makers need to do more.”
Of course, like our own Fed, bad news can be good news as all those Chinese Capitalists expect to be bailed out by more QE from their Central Bank – don't these "planned economies" make you sick? When will their Governement ever learn that interferring with the Free Markets does more harm than good?
Just because their devious, greedy Banksters hold out their hands to be absolved of all their mistakes doesn't mean their Government should bow to their wishes and rob their own people to enrich the few in power
by phil - February 9th, 2015 7:56 am
Greece is a problem again.
Not that it ever stopped being a problem. I wrote about Greece in 2011 ("Greece is the Word") and recently I wrote "Greece is the Word, Again" and "The Greek Tragedy Continues" just last week because this is one of those macro market-moving events you do HAVE TO PAY ATTENTION TO.
I know it's far away and I know it's complicated and I know Fox likes you to think it's simple and the Greek people cheat on their taxes and retire at 40 after living on permanent vacations. If that were true, rather than condemning the Greeks, we should all be adopting their system!
The reality is quite a bit more complex (read my posts for an overview) and, like any Greek Tragedy – the story is replete with heroes and villains and, of course, a sacrifice. In this case it's the Greek people themselves who are being sacrificed on the Altar of Austerity to secure the terrible power of the EU over other subjugate nations.
Of course the US and EU Corporate Media are rooting for the Troika to triumph over the Greeks.
The Troika is a proxy for all of the top 0.01% and the Greeks are the downtrodden masses in the bottom 90%, who have been bled dry by interest on debts they never should have incurred. Debts which have been made unpayable by the very contracts they agreed to – in order to avoid default on the original, MUCH SMALLER, debt.
Look what the Troika is doing to Greece:
- They rolled some but not all of their debt into notes but the notes still have to be rolled over by Greece at market rates. The Greek debt is $360Bn for a nation with 11M people, so $33,000 per person.
- The Troika mandated austerity measures that cut Government Spending by 20% and the Government, in turn, cut services to meet harsh mandates for annual debt to GDP ratios.
- That caused the economy to contract and 26% of the population are unemployed without benefits.
- The Troika puts
by phil - February 6th, 2015 8:18 am
What a recovery!
It's even better than the last two recoveries last month but not quite as good as the recovery we had in December. From a Big Chart perspective, using our 5% Rule™, we're still waiting for the NYSE to finally confirm a real rally by going over 11,000 – now just 104 points away!
Still, the rally was good enough that we gave up on our March TZA hedges in the Short-Term Portfolio, which has fallen back to up just 99.7% ($199,725) – down 4.8% since Tuesday's open in our smaller portfolio. Fortunately, however, our much larger and much more bullish Long-Term Portfolio gained $19,585 over the same period, netting us a $14,785 (2%) gain for the week on our primary paired portfolios.
Those of you who followed our call last Friday to go long on the oil Futures at $44.50 (/CL) should be happy to wake up this morning at $52.50 for an $8,000 per contract gain for the week (you're welcome). We took our money and ran on those trades and now we'll see if $50 holds next week and, if it does, we may want to take some more longs.
The long Natural Gas Trade Idea from the same post is still playable with Nat Gas Futures (/NG) at $2.59 this morning. Our target for that trade is $2.70 for $11,000 per 10 contracts in gains but the trade idea we put up Friday was for UNG, the ETF that tracks Natural Gas, for those of you who haven't graduated from our Futures Trading Webinars yet.
And, of course, for the options challenged (boy do you need our help!), there's nothing wrong with just going long on UNG ($13.25 this morning). For example: One of our Members, Rustle123, played the stock on IRBT yesterday morning, when I called for a long on the earnings sell-off in our Live Member Chat Room and, just 3 hours later, he had this to say:
Bought IRBT from 28.22 – 28.55 after your call Phil, sold at 29.45 for quick trade and hoping to buy back lower tomorrow. Almost paid for membership for
by phil - February 5th, 2015 8:28 am
As you can see from the chart on the right, Greece's $360Bn in debt is mainly owed to the EFSF – the European Financial Stability Facility, which has loaned Greece $162Bn since 2010, rolling over half their debt into this "bailout" fund.
Of course, it's not actually a bailout fund if you have to pay it back, with interest. Fortunately, for Greece, the interest costs are low (2% over EURIBOR, which is almost 0) but that's not really the point when Greece couldn't pay the original debts in the first place so adding more debt and more interest certainly wasn't going to help.
Here's what happened. In 2006, Greece was $220Bn in debt, about 70% of their GDP but it was worse than it looked because, since 2002, Goldman Sachs (GS) had been helping the Government hide debt from the EU by juggling their books. This trick worked until the Financial Crisis, when Greece actually needed the money Goldman was pretending they had (kind of like sub-prime loans here). A new Government was elected, uncovered the plot and Greece's debt suddenly jumped 60%, to $345Bn without any benefit whatsoever from the borrowed funds.
With the uncovered shenanigans, the cost of borrowing shot up for Greece and they were rolling debt over at 10-20%, putting them $30-50Bn more in debt each year on interest alone until the EFSF was formed in June of 2010 and began to roll Greece's debt at more normalized rates. But it was too late – the damage was done because two years of EU dithering had cost Greece $100Bn.
Even worse, the EFSF was a Central Bankster solution and essentially what it did was REWARD the people who sold Greece 20% notes by guaranteeing their EXTREMELY RISKY PAPER as if it were AAA-rated.
That's not how bonds are supposed to work! People putting the screws to a country for 20% interest on loans know damned well those loans have a high likelihood of default. Not in the EU, apparently.
by phil - February 4th, 2015 8:01 am
As you can see from the 6-month SPX chart on the right, we have a serious Spitting Cobra pattern setting up on the S&P and those babies rarely strike upwards. Until and unless we break that upper downslope, every move up is nothing but a head-fake and yesterday's was a doozy as we were goosed by more monetray meddling – this time by Minn Fed Gov Kocherlakota, who said:
Given my current outlook for inflation, I anticipate that, under a goal-oriented approach, the FOMC would not raise the fed funds rate target this year.
That, of course, is all it takes to set off a Global buying frenzy these days. Kochlerakota made his comments around 12:30 and reversed the lovely dip we were making good money on in the morning (see my shorts from yesterday's post). This morning, China has added fuel to the fire with an additional $85Bn stimulus via yet another 0.5% reduction in bank reserve requirements.
Oil also went flying up and the only Futures play that held up all day was Natural Gas (/NG) which ran up from our $2.69 long all the way to $2.77 before pulling back, good for $800 per contract in gains.
While our short Oil Futures (/CL) may have burned us, our long trades on USO and UCO benefitted tremendously as oil ran up almost 10% intra-day and we were able to cash out our leveraged options positions (with almost a perfect call at the top at 2:13pm from our Live Webinar) with 120% gains.
Don't blame me if you missed them, we've been talking about our various longs on oil and oil services all month and just this weekend, in our Top Trade Review, we discussed selling the USO 2016 $22 puts for $5.65 and buying the 2016 $12 calls for $5.75 for a net entry of 0.10. Even if you missed our perfect exit yesterday, the calls closed at $7.95 and the puts closed at $4.30 for net $3.65 – up $3.55 for each dime of cash put into the trade…
by phil - February 3rd, 2015 7:54 am
Boy this is fun!
It sure is fun for those of us getting in and out of our Futures trades as the lines have been fairly reliable in the channels as we make lower lows and lower highs on the way down, with plenty of up and down action in between.
While generally, we find choppy markets annoying, when we have choppy action for this long we begin to play for it and then it becomes a great source of profits for us. Just this morning, in our Live Member Chat Room, we were taking full advantage of the gyrations in Oil (/CL), Natural Gas (/NG) and the indexes (/YM, /ES, /NQ and /TF) to make some pre-breakfast profits.
At the moment (7:45), we're short /CL at $51 and short /TF at 1,180 and /NQ at 4,200 and /YM at 17,350 and /ES at 2,025 but long /NG at $2.69 – how's that for confusing? If you want the logic, go to our live chat room and read the discussion but these are our trades and we're sticking with them.
As you can see from our Short-Term Portfolio's balance box, sticking with them has been very, very good to us. That figure is just for our stock an options trades over the past year and doesn't include our Futures trades, which are more like side bets we make for fun. Our much larger Long-Term Portfolio finished the day up 20.3% on that BS surge (the one we are now shorting to lock in our profits) at $601,260, giving us a total of $806K – our best yet on our paired, primary portfolios and up more than 33% in a year.
Like our STP, our LTP is mainly in cash with $565,000 (94%) and, without our "risky" short-term hedges, we used very little margin, just $331,000 of the $1M allocated. This is what we mean when we say we are "Cashy and Cautious" but being in cash doesn't mean we can't participate – it just means we're very careful about how we allocate our resources – staying flexible in uncertain markets.
Because we are "Being the House…
by phil - February 2nd, 2015 7:19 am
Wheeeee, what a ride!
As you know, we called a floor at $44.50 even as we told you the market would falter on Friday morning and those /CL (Oil) Futures made almost $2,000 per contract on Friday's pop but that's nothing compared to the $3,000 per contract move oil busted on the shorts this morning (we're short now at the $49.50 line).
That puts oil up 13.5% in less than 24 trading hours – how's that for a bottom call? As noted in our January Top Trade Review, we pressed our long USO and UCO bets just last week in our Live Member Chat Room and made them our ONLY bets in our $25,000 Portfolio, which will very much reap the rewards this morning. We also have big bets on oil in both our Short-Term and Long-Term Portfolios, some of which we discussed in last week's Live Webinar (replay available here).
We also called a nice bottom in Natural Gas, using the UNG ETF to go long and that one hasn't gotten away – yet. As I often have to remind people: I can only tell you what is going to happen and how to profit from it, the rest is up to you!
Meanwhile, turning our attention back to the indexes, things are NOT GOOD. Last Monday we talked about Greece being an issue again and Tuesday's post was titled "Testy Tuesday – MSFT, CAT and PG Paint a Poor Picture", where we told you we were shorting Russell Futures (/TF) at 1,190 (up $3,000 per contract this morning) and Dow Futures (/YM) at 17,600 (up $2,000 per contract this morning).
Wednesday we took a break from the Doom and gloom to celebrate AAPL earnings (our Stock of the Year) but Thursday's title said it all: "Faltering Thursday – Weak Bounce Lines Failing After Fed" while we hammered the point home on Friday (in case you missed it) with "Failing Friday – Rejected at our Strong Bounce Lines – Again!." Those lines, of course, are the same ones we've been using all year:
by phil - February 1st, 2015 8:15 am
What an exciting start to the year this has been.
It's been a difficult trading environment, to say the least and this will be the first full year featuring our new Top Trade Alerts™ (Members Only) and I look forward to doing these educational review sessions at least each quarter (our last one was Thanksgiving) to review both our trade ideas and our use of options to make those trade ideas as profitable as possible.
Top Trade Alerts are sent out once or twice a week via EMail and Text Message from our Basic and Premium Live Member's Chat Room. These trades are just a very small portion of what we discuss during chat each day, but hopefully a good representative sample of the dozens of trade ideas we share with our Members each week in our Live Member Chat Room as well as our Weekly Live Webinars (Thursday's replay can be seen here).
Keep in mind these are just snapshots of trades as of today – it's up to you to take good trades off the table and cut the losses (or make adjustments) on ones that go bad. We're always discussing adjustments in our Live Member Chat Room – join us there for follow-ups.
For example, last time we did a review, we left off with an EWJ trade in which we had the Dec $12 puts at 0.25 and they were "only" up to 0.47 (up 88%) on 11/22 but EWJ continued down towards our goal at $11, finishing Dec 16th (expiration day) at $11.15 giving us a final price of 0.85 – up 0.60 (240%) per contract! That was still almost a double from our November Review – who says these things aren't worth going over???
On Nov 6th, however, we had an eventual fail on our BTU spread – it was the Dec $10/11 bull call spread for 0.65 and it did start out well as BTU hit $12 a week later but it never made it over and ended up falling back to $8 – causing the spread to expire worthless for those who held on to the bitter end. This is why setting stops on…