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Tip Toppy Tuesday – Markets Make Record Highs on Record Low Volume

SPY  5  MINUTEAnother day, another new high.  

Yawn.  We'd be a lot more impressed if all the gains for the day didn't come pre-market – in the even thinner-traded futures, followed by a day of choppy trading on anemic volume.  

Still, it is what it is and what it is is another new high and another record monthly gain and we don't know why but we made $10,000 yesterday in our Short-Term Portfolio as our bullish positions (because we thought we were too bearish last week) came through for us in spades.  

$10,000 is, of course, a ridiculous amount of money to make in a single day in a $100,000 porfolio.  In part, it's a reflection of the extreme volatility in the options chains, as those prices fluctuate wildly.  Since we sell a lot of premium when the VIX is high, we benefit when it gets low again.  Also, we're getting closer to January and we have a lot of January plays where time is on our side – it's not really an accident, this is how we set up our trades – they are simply working out better than we expected them to.  

Now we're up 70% for the year again and we have to consider whether or not we should take the money and run or just let them ride.  To some extent, we're protecting the much larger gains in our $500,000 Long-Term Portfolio, which is up 26% for the year ($130,000), which puts our $70,000 gain in the STP into the proper perspective.  

If we cash the STP, then the LTP is unprotected (as it's all bullish) and that's not acceptable but we COULD decide to cash out our longs and that would leave us VERY BEARISH in the STP, probably over-protecting the LTP but that might be a good thing into January.  

So, let's consider our STP longs and what we should do with them:

20 USO Jan $29 calls at $1.05, now $1.30 – up 23.8%

We just bought these last Thursday and our premise remains (success at the OPEC meeting this weekend – I guess…
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No indictment in Ferguson case

No charges to be filed against police officer Darren Wilson for offenses ranging from involuntary manslaughter up to first degree murder (not indicted). Not surprisingly, the news sparked a night of rioting, looting and gunfire in Ferguson and protests across the nation. In Ferguson, businesses burned, 61 people were arrested, protesters threw bricks at police officers and set police cars on fire. The St. Louis police claimed the violence was worse than in August. (Source).

News first appeared on USA Today:

FERGUSON, Mo. — A white police officer will not face charges for fatally shooting an unarmed black teenager in a case that set off violent protests and racial unrest throughout the nation, an attorney close to the case said Monday night.  (Full article) 

Hopes for peaceful demonstrations vanished quickly as violence erupted right after the announcement. 

FERGUSON, Mo., – Violent protests erupted here Monday after demonstrators learned there would be no criminal indictment of police officer Darren Wilson for the August shooting death of unarmed teen Michael Brown.

Demonstrators taunted police, shattered windows and set fire to two St. Louis County police cars. Scattered, intermittent gunfire was also reported. Scores of police officers, armed with riot gear, dispersed a crowd of about 300 with volley after volley of tear gas, pepper spray and bean bags. Looters plundered a Walgreen and Autozone store, while a Little Casears pizza restaurant and local beauty shop were set ablaze. (Keep reading: Violence erupts following Ferguson grand jury announcement)

How did officer Wilson escape further inquiry?  argues that his story makes no sense in Officer Darren Wilson's story is unbelievable. Literally.

So Brown is punching inside the car. Wilson is scrambling to deflect the blows, to protect his face, to regain control of the situation. And then Brown stops, turns to his left, says to his friend, "Here, hold these," and hands him the cigarillos stolen from Ferguson Market. Then he turns back to Wilson and, with his left hand now freed from holding the contraband goods, throws a haymaker at Wilson.

Every bullshit detector in me went off when I read that passage. Which doesn't mean that it didn't happen exactly the way Wilson


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Comment by yodi

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  1. yodi

    Just for new comers on planting your tees and building up you portfolio

    Guide to Option and stock trading.

    First where do we find stock for investing?

    There are many sites and resources to find suitable stocks.

    Subscribe to http://seekingalpha.com/  www.philstockworld.com  membership

    www.investorsplace.com www.fullyinformed.com

    www.gamechanger.investorsplace.com  membership

     www.barchart.com  www.stockcharts.com www.earningswisper.com

    www.investor.com http://www.barchart.com/headlines/search.php?feed=BC&series=COD

    http://finance.yahoo.com/ very important site for stock evaluations

    Once you have find a stock start evaluating the stock.

    Check stock on http://finance.yahoo.com/  study the stock on general profile what they do. Check on yearly and quarterly cash flow and balance sheet

    Does the stock pay a dividend? Must have a trading volume over 250,000 per day, P/E ratio not over 25 to 30, check high and low over 52 weeks.

    Check on present stock value. Enter any play at a dip and possible not on top of the 52 week trading range. Avoid to trade stock which make their quarter declaration during the same month. Do not trade stocks under 10$

    Do not trade stocks under a market cap of 250 million Read key statistic on Yahoo. As well analyst estimates on Yahoo, any news info.

    Once you got all this check on TOS the trading of options. Do you start with a Buy write or leap BCS? This depends largely on stock paying higher div. (over 3%) If they pay div. you will find the option premium they pay are lower than stocks which do not pay div. If you decide to go for the buy write you wish to buy the stock for a discount of say between 15 and 20 % which you can achieve by selling the leap call just at the money or slightly ITM. Obviously you decide to sell a put the same has to be well OTM. Check chart as said below.

    Now you just about ready to place the first leap option BCS or buy write. Study the chart if you wish to reduce the cost of the BCS by selling a leap put. Check your chart what are the lowest points over the last year. Do not go much higher on the put as over the lowest points. Remember by selling puts you must like the stock at the given discounted


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Comment by stjeanluc

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  1. stjeanluc

    Wow, slow day… and slow week overall I am sure. Here is a good chart:

    U.S. Stocks are 2nd Most Overbought In HistoryEveryone knows that, as a whole, the U.S. stock market is overbought. At the moment it doesn’t even matter what duration one is talking about, short, intermediate or long-term. But just how overbought is it? Today’s Chart Of The Day takes a look at the issue from 30,000 feet up. Measured against its long-term monthly trend since 1871, U.S. stocks are the 2nd most overbought in history. That is, if we can consider the stretch from November 1998 to July 2001 as one period. Outside of that period, stocks have never been this far above their long-term trend.How do we arrive at that? We are using the inflation-adjusted S&P Composite data available from Robert Shiller’s site. This composite is essentially the current S&P 500 with re-engineered pricing prior to its inception in the 1950’s with available stock prices from the time. We used exponential regression smoothing to find the “best fit” trend line on the series since 1871 (h/t to Doug Short on this.)After finding the best fit trend line for the composite, we can measure how far above or below prices are at a given time. As it turns out, outside of the afforementioned 1998-2001 period, November 2014 marks the first month in its entire history that the S&P Composite is 90% above its long-term trend.So what does it mean? We aren’t going to go into a long essay on its implications. We and others have written extensively on long-term, or secular, cycles. (See our November newsletter published today for one example). Suffice it to say, the stock market is extended. Can it stay extended? The past few years prove that it can. They also prove, in our view, that the intermediate-term (i.e., from months to years) is the best time frame to focus on when considering investing.I will only leave you with this: it likely is not the best time to commit a lot of long-term capital to the U.S. stock market. Sure, after reaching a similar overbought level in 1998, the market continued higher for another 20 months or so. So it is possible that the market continues higher unimpeded. However, looking historically, that period was an anomaly. If you are willing to bet on it happening again, go for it. If not, you may consider adopting measures, or managers, to aid in managing risk.Just my .02.____Read more from Dana Lyons, JLFMI and My401kPro.







Lower Oil Prices And The U.S. Economy

Lower Oil Prices And The U.S. Economy

Courtesy of James Hamilton of Econbrowser.com

For the last 4 years, the national average retail price of gasoline in the United States stayed within a range of $3.25-$4.00 a gallon. But that all changed this fall, with U.S. consumers now paying an average price of $2.82.

pricechart

 

This usually is the time of year when gasoline prices tend to be at their lowest. But the current U.S. price of gasoline is exactly what we’d predict given the long-run relation between the price of gasoline and crude oil. There’s essentially no seasonal component in the price of crude. In other words, if crude stays at its current value (namely, Brent at $80), the lower price of gasoline is here to stay.

The current price of gasoline is 80 cents/gallon below what it has averaged over the last 3 years. Last year Americans consumed 135 billion gallons of gasoline. That means that if prices stay where they are, consumers will have an extra $108 billion each year to spend on other things. And if the historical pattern holds, spend it they will.

Lower gasoline prices likely also contributed to the recent rise in consumer sentiment. Historically a 20% drop in energy prices would predict a 15-point rise in consumer sentiment. That relation weakened considerably as consumers got accustomed to the up-and-down yo-yo of prices in recent years. Nonetheless, consumer sentiment is now at the highest level it’s been since the Great Recession.

 

Source: Calculated Risk.

Source: Calculated Risk.

But another thing that’s changed is that much more of the oil we consume is now being produced right here at home. While lower prices are a boon for consumers, they pose a potential threat to producers, especially the higher-cost operatorsJim Brown reports that “the most recent companies to announce capex cuts are Exxon, Shell, Conoco, Continental Resources, Apache, Energy XXI and Hess.”

If there are employment cuts in places like Texas, Louisiana, and North Dakota, that would obviously offset some of the gains to consumers noted above, and ultimately undercut the major force keeping the price of crude…
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The Fed Concerned About “Importing” Disinflation

The Fed Concerned About "Importing" Disinflation

Courtesy of SoberLook.com

The latest Reuters poll is showing 24 out of 43 economists projecting the first rate hike in the U.S. by June of next year. The futures market is pricing lift-off by September. Citi's latest analysis puts it in December. And all of these forecasts are running way behind the so-called Taylor Rule, which suggests that the Fed Funds rate should already be at 1.5%.
 

Source: @Schuldensuehner, Citi


In fact the U.S. economy can easily handle non-zero short-term rates at this point. The banking system is quite healthy and can easily manage funding costs of 1.5%. Corporate borrowers can deal with slightly higher rates as well. And as far as mortgages are concerned (to the extend higher short-term rates extend to longer maturities), borrowers for whom payments become prohibitive at 5% vs. 4% should not be taking out a mortgage to begin with. Furthermore the issue with the housing market these days has more to do with tighter mortgage credit rather than rates.

But it's no longer as much about the U.S. economy as it is about external factors. The international situation has made the Fed's policy planning much more complex. The monetary policy divergence among the major central banks is the issue at hand. With the BoJ suddenly accelerating its QE program, the PBoC cutting rates, and Mario Draghi hinting at a potential QE program in the Eurozone, the Fed is becoming increasingly isolated in its plans to begin rate normalization. Even India's RBI, who has kept rates elevated for some time, may begin to ease soon as the nation's inflation and money supply growth slows.

As a result of this divergence, the U.S. dollar has been on the rise this year.
 

 

Of course the recent increase in and of itself is not tremendous relative to historical levels. However, given the disinflationary pressures around the world, the rising U.S. dollar effectively "imports" disinflation into the U.S. Moreover, the massive drop in energy prices, caused by a combination of a significant rise in North


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Comment by phil

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  1. phil

    AAPL/JMD – Well, there's not much point to short 2016 $78.57 puts (now $1.70), it's not worth tying up margin on those when you could sell the 2017 $80 puts for $5.  You could sell 1/3 as many for the same upside or sell the same amount and make $2.50 in a year (assuming normal decay) vs $1.70.  Same goes for the other short puts – you COULD roll them or at least put stops on the ones you have so, if AAPL drops, you can flip to better puts in 2017 at some point (assuming you intend to be a long-term holder).  

    As to the calls, it looks like you have 125 longs at about $90ish vs 105 shorts at $105 and then 85 more 2017 $90/120 spreads.  As I've said to others, you have a very large amount of AAPL positions so I certainly hope this is, in the very least, a $5M portfolio and you can afford to take these risks – otherwise, you should be looking to lighten up after a good run.

    The 2016 $90(ish) calls are you big problem, they are $29.50 with AAPL at $116.50 so $3 in premium means they lose 1:1 for any drop in AAPL yet, since you sold $105 calls, they also only have $15 of upside.  Obviously, you have 20 extra and they can be rolled to 30 of the 2017 $90/120 spreads to give you $45,000 more upside – so that's easy.  

    As to the rest, the short 2016 $115s are $13.75 so the net (averageish) of the remaining spreads is $15.75 and you make another $9.25 if AAPL holds $115, so you either believe that or you don't and, if you don't – again the case for lightening up.  Since the 2017 $90s are only $33, it's ridiculous to keep your money in the 2016 $90(ish) calls but, since you sold $115s, what I would do is, as follows (again, assuming you want to remain very bullish on AAPL):

    I'd do that roll of the naked longs to more 2017 $90/120s and then you have 115 of them and also you have 70 remaining short puts (because you cashed the silly 51) at about $5 so I'd keep a stop on those


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Official Moves in the Market Shadows’ Virtual Portfolio

By Ilene 

Screen Shot 2014-11-20 at 12.37.21 PMI officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. the most timely way to read our selection of informative, educational and thought-provoking articles and comments is by visiting me here - the Phil's Favorites section of PSW. 

2. The fastest way to get alerts for the Market Shadow's Virtual Portfolio buys and sells is to subscribe to the alerts by entering your email at the top of a Market Shadows' webpage

[Picture from EZCH's website.]

 





Why the Economy Isn’t Slowing and Why That’s Bearish

Why The Economy Isn’t Slowing and Why That’s Bearish (Video)

Courtesy of Lee Adler of the Wall Street Examiner

Housing may be slowing, but the broader economy isn’t. And that’s bearish in the big picture.

 

This video was originally published for Radio Free Wall Street subscribers on September 23, 2014. To see the latest videos in real time, subscribe here

Get regular updates on the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Click this link to try WSE's Professional Edition risk free for 30 days!

 





Thanksgiving Top Trades Review – Using Options to Reduce Risk and Increase Profits

Happy Thanksgiving (almost)!  

We added a new feature last month called Top Trades™ (Members Only) so I thought it would be a good time to see how we're doing as well as give a few tricks and tips to our new subscribers.  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.  Let's see how they performed so far:

We already reviewed our first Top Trade Alert™ in Thursday's post and our first 7 ideas are already up a combined 3.7% for the month but, officially, GSK was the actual Top Trade that day, and it's already up 6.1% for the month – a great way to get started!  Also on Thursday, we checked out out 2nd Top Trade Idea for CAT and, with Friday's 4.27% gain, the stock is already up 9% in a month but, of course, we don't just play boring old stocks at Philstockworld – our option trade Idea was:

As a new trade on CAT, I'd sell the 2017 $80 puts for $7.30 for a very nice $72.70 net entry.  That's more than the $5.60 dividend you'd make owning the stock for 2 years and a 26% discount if put to you.  That's great as a stand-alone play or it can be paired with the $100/115 bull call spread at $5.50 and you still have a net $1.80 credit (so net $78.20 entry – 20% off) but 100% of the upside over $100 for the next two years.  

As of yesterday's close, the $80 puts were $5.70 (up 21.9%) and the bull call spread is now $7.35 for net $1.65 plus the original $1.80 credit is $3.45, up 191% in a month on the option play.  Isn't that more fun than just making 9% on the stock?  

This is what we teach our Members at Philstockworld.  Rather than
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Zero Hedge

About Those Eyeball-Based Valuations: "Half Of Twitter Accounts Created In 2013 Have Already Been Deleted"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Still paying a #Div/0 valuation for Facebook or Twitter based on expectations of exponential growth in eyeballs, or rather "eyeballs"? Then perhaps read this first.

... many of the “users” on social media sites aren’t real people at all – they’re celebrity staff tweeting on behalf of their employer, or PRs promoting a company, or even fake accounts for people that don’t exist at all. In fact, half of all Twitter accounts created in 2013 have already been deleted.

 

These fake accounts are often created by unscrupulous firms that will beef up your follower count in return for cold hard cash.

 

...



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Phil's Favorites

Crude Plunges Following OPEC Decision to Not Cut Production

Courtesy of Mish.

For five consecutive months OPEC produced over its alleged quota. Nonetheless, and in spite of falling prices and pleas from Venezuela to restrict production, OPEC decided to take no action.

In the wake of the news, West Texas Intermediate plunged nearly 7% and Brent fell over 8%.

WTI Crude Futures



Brent Crude Futures



Please consider OPEC Fails to Take...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Chart School

Michigan Consumer Sentiment for November Slightly Trims Its Strong Preliminary Reading

Courtesy of Doug Short.

The Final University of Michigan Consumer Sentiment for November came in at 88.8, a bit off the 89.4 preliminary reading but up from from the October Final of 86.9. As finaly readings go, this is a post-recession high and the highest level since July 2007, over seven years ago. Today's number came in below the Investing.com forecast of 90.2.

See the chart below for a long-term perspective on this widely watched indicator. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.


...



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Insider Scoop

Morgan Stanley: Nimble Storage Increased Its Market Four-Fold

Courtesy of Benzinga.

Nimble Storage Inc (NYSE: NMBL) reported its third quarter results on Tuesday after market close. The company reported a loss of $0.15 per share, slightly better than the $0.16 per share loss analysts were expecting, while revenue of $59.10 million was higher than the $57.75 million analysts were expecting.

In a note to clients on Wednesday, Katy Huberty of Morgan Stanley noted that the company “continues to disrupt the storage market” as new customer adoption doubled year-over-year, increasing its installed base to more than 4,300 customers.

The analyst also notes that international investments are “beginning to pay off” as revenue grew 135 percent from a year ago, contributing 20 percent of total revenue in the quarter.

However, Huberty singles out the addition of the Fibre Channel (FC) protocol. The analyst states that the company has now ex...



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Sabrient

Sector Detector: Holiday fever takes hold of stock investors, but a pullback is needed

Courtesy of Sabrient Systems and Gradient Analytics

With warmer weather arriving to melt the early snowfall across much of the country, investors seem to be catching a severe case of holiday fever and positioning themselves for the seasonally bullish time of the year. And to give an added boost, both Europe and Asia provided more fuel for the bull’s fire last week with stimulus announcements, particularly China’s interest rate cut. Yes, all systems are go for U.S. equities as there really is no other game in town. But nothing goes up in a straight line, not even during the holidays, so a near-term market pullback would be a healthy way to prevent a steeper correction in January.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based Sector...



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Digital Currencies

Bitcoin Mining

Bitcoin Mining

Courtesy of Global Economic Intersection

By Rod Garratt and Rosa Hayes - Liberty Street Economics, Federal Reserve Bank of New York

In June 2014, the mining pool Ghash.IO briefly controlled more than half of all mining power in the Bitcoin network, awakening fears that it might attempt to manipulate the blockchain, the public record of all Bitcoin transactions. Alarming headlines splattered the blogosphere. But should members of the Bitcoin community be worried?

Miners are members of the Bitcoin community who engage in a proce...



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OpTrader

Swing trading portfolio - week of November 25th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the Happy Thanksgiving Edition of Stock World Weekly!

Click on this link and sign in with your PSW user name and password. 

Picture via Pixabay.

...

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Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



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Option Review

Yamana Gold call options sink

Yamana Gold call options sink

By Andrew Wilkinson at Interactive Brokers

A four-year low for the spot price of gold has had a devastating impact on Yamana Gold (Ticker: AUY), with shares in the name down at the lowest price in six years. Some option traders were especially keen to sell premium and appear to see few signs of a lasting rebound within the next five months. The price of gold suffered again Wednesday as the dollar strengthened and stock prices advanced. The post price of gold fell to $1145 adding further pain to share prices of gold miners. Shares in Yamana Gold tumbled to $3.62 and the lowest price since 2008 as call option sellers used the April expiration contract to write premium at the $5.00 strike. That strike is now 38% above the price of the stock. Premium writers took in around 16-cents per contract o...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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