Thursday Fix – Victory In Our Time!
by Phil - October 27th, 2011 8:24 am
You ask, What is our aim? I can answer with one word: Victory—victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory there is no survival. – Winston Churchill
I do HAVE to say "I told you so!"
When I was interviewed on Monday and they asked why I’m bullish, I replied that "stimulus trumps everything" and that’s what we’ve been playing for, especially in our new White Christmas Portfolio, which will be off to a rockin’ start with the aggressive upside trades that I not only mentioned in yesterday’s post - which made easy fills yesterday morning, as the markets shook out the last of the weak hands on yet another rumor-driven dip.
We got our daily double on the AGQ calls, as expected and SSO fell all the way to $44.20 (150% profit on that trade if they finish Friday above $45) while FAS dropped $13.35 and that spread will be good for a 2,100% gain if FAS can get back to and hold $14 – which should be a snap thanks to our friends at the EU.
In the morning Alert to Members, I put up this cute little Gif to illustrate the day’s action and it was a real roller-coaster day but we stayed generally bullish, taking quick profits off our morning bear plays on DIA and USO. We added a bullish trade ideas for AMZN (complex spread), TNA (short Nov $40 puts at $3.60) but that was it for the day because my comment to Members at 11:01 was: "Dollar rejected at 76.80 – still hope for the bulls!"
Well, those bulls were us and we already had our bets in place from last week, when things were cheaper so there was nothing to do but watch as the markets took off like a rocket from that point forward. Heck, we were so bullish we even sold NFLX puts (Nov $67.50 puts for $3) as a bullish offset to a DXD hedge (which we’ll pull the bottom of today). On Monday we had picked up bullish trades on AAPL and GLW and I mentioned EWG in Friday’s post (those should be looking good this morning!) as well as our plays to go long in the Russell Futures at…
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DiggJust Another Manic Monday – Value Investing
by Phil - September 26th, 2011 8:27 am
Up, up and away!
As I mentioned in Friday’s morning’s post, we did a lot of bottom-fishing on Thursday as we began to develop Disaster fatigue with long plays on XLF at $11.50, shorting TLT at $123, shorting VXX at $49.50, TNA at $34.50, BRK.B at $65, AA at $10.20, VLO at $19, IMAX at $15.75, BA at $58.32, AGQ at $170, CHK at $27.50, DIS at $30.14 and ABX at $47.50. They were hedged, of course and, for the most part, you still had a nice chance to make those entries on Friday – but not so much this morning as the futures are up about 1.5% already (7:30).
Friday morning, in my Alert to Members, I reminded them that BCS looked like an excellent VALUE to me, no matter what the PRICE was ($8.75 after hitting $8.40 the day before) and this morning, that PRICE is up well over 10% in EU trading. Did the VALUE of BCS change materially over the weekend? Of course not, certainly not by the $4Bn their market cap gained – like the song, the VALUE remains the same – only the highly variable price of a share of BCS is undergoing ch-ch-changes…
I pointed out similar hedged, long-term plays could be made on GS ($94), MS ($13), BAC ($6) and C ($24). Of course we hedged them per our discussion in the morning post (TZA was our morning choice but we’re out over 650 on the RUT) but then we went long on EWG (Germany) again with the very aggressive Oct $16,18 bull call spread at $1.30, offset by the sale of the $17 puts for .90 for net .40 on the $2 spread. 10 of those in our virtual $25,000 Portfolio cost $400 and can return $2,000 in less than 30 days if EWG is over $18 and, guess what – they’re over $18 this morning!
Another bullish bet we placed was USO Nov $28/30 bull call spread at $1.30, selling the $27 puts for $1.10 for net .20 on the $2 spread with a 900% upside if USO simply doesn’t drop from where it is now. That’s what’s nice about options – you don’t need the market to go up to make money good money. On this trade idea, your worst-case scenario is owning USO at net $27.20, about 10% lower than it…
TGIF – Stop the Week, We Want to get Off!
by Phil - September 23rd, 2011 8:35 am
What a disaster!
Of course, that’s why we have Disaster Hedges, right? August 11th was the last time we did a "Hedging for Disaster" post which included a LONG trade idea on gold that’s done now (we’re short) after gaining over 300%. We’re a little mixed in our results on the other hedges but that means we can SWITCH HORSES – from the trades that have already worked to the ones that haven’t yet. That’s how we cash out our winners on a regular basis – it’s the pony express of investing. Our other Disaster Hedges from that post were:
- DXD Oct $23 calls at $2, selling Oct $27 calls for $1.15 and the Oct $19 puts for .70 for net .10. That spread is currently -.05 so down 150% so far and a nice horse to switch to, offering a .05 credit on the $4 spread.
- FAZ Oct $65 calls at $22, selling Oct $72 calls for $20 and selling JPM 2013 $20 puts for $2.05 was a net .05 credit as a backstop to our long financial plays. FAZ is now at $71.34 and the October FAZ spread is now $3.70 but the JPM puts are now $3 so net .70 is only up 1,500% so far. Should the financials stay low, we get the full $7 from the spread and we’re obligated to buy JPM for $20 (now $29.27) in 2013.
- SDS Sept $26 calls at $3.20, selling Sept $32 calls for $1.65 and selling VLO Jan $15 puts for $1.20 for net .35. SDS is only at $25.73 so far (not a disaster yet) and the spread is now net $1.25 and the short VLO puts are .17 so net $1.08 on this one is up 208% and we’re not even at goal – that’s pretty good! Note the spread is LOWER than when we started so this can also be used as a fresh horse with a different offset, like X Jan $15 puts for $1.20 for a net .05 trade.
- TBT was stopped out with a small loss at $24 (fortunately). My comment at the time, with TBT at $24.88 was: "Keep in mind though, that the Fed has said rates will stay low through 2013 so it would be wise to uses stops on the puts, at least, if TBT fails to hold $24!"
- EDZ
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Make Billion$ With StockTwits (and Win a Free Quarter!)
by Phil - July 9th, 2011 4:34 pm
Billions!
That’s right, if you followed Philstockworld on Stocktwits this past month and followed our trade ideas, you could have made Billions of Dollars. Not bad but that’s only a tiny portion of what you get at PSW every day. Needless to say, we’ve had a good month but it’s no fun being right if nobody knows it so let’s review a month of Tweets and also make it worth your while to send others to Our StockTwits Link and follow us there.
For the month of July, every new follower will be entered in a random drawing and one will be selected to win a free 1-year subscription to the PSW Report – our twice-daily Email that gives you access to all of our non-Premium posts as well as Stock World Weekly. If you are already a paying PSW subscriber and win this drawing, we will give you a 3-month extension of your Current Membership Level instead added to your current subscription.
If you are a Member and your friends subscribe and tweet us your name – one of those named members will also be the winner of a 3-month extension of that member’s current level. The more friends you have, the better the chances to win!
We’re doing this because we need to build up our social networking presence so I’ve been tweeting more in June. You can go to our StockTwits site and see all 45 Tweets posted since June 1st (there are many also before that) but I’m just going to review the ones that were less generic (we auto-tweet my posts) to give you an idea of what kind of value your friends can get out of this free service:
philstockworld Phil Davis
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Vacation-Proofing Your Virtual Portfolio
by Phil - June 25th, 2011 7:55 am
Option Sage Submits:
When driving a car and some object appears on the road ahead do you usually run right over it or do your best to avoid it?
Don’t we all take action in real-life based on the new information we receive that changes the old paradigm? Take the first two guys in this video: Who would you rather be, the first or the second guy? While the second gentleman reacts and looks ridiculous in so doing, he’s the guy that is more likely to survive when real disaster hits because he’s reacting to new information. In fact he doesn’t even know what’s making everyone else react, he just knows that when 99% are moving one way in panic, it’s best not to fight the crowd or he will be trampled. It’s no different in the market. Pride, ego and old theses have no place when new information directly contradicts an existing trade.
This week, we used DIA and QQQ puts and calls to "react" to quick changes in the market while we waited for better information before making more permanent changes in our positions. This gave us the benefit of the
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F’ing Dip Thursdsay – Do We Buy It?
by Phil - January 20th, 2011 8:06 am
Just buy the f’ing dip.
That’s the great advice we had back on December 2nd, as it was pointed out by Captain Broccoli that we should just ignore all the so-called "facts" of the economy and "just borrow money at this ridiculous low interest rate and just buy the f’ing dip." "It’s not a pyramid scheme, you idiot," says the Captain – "It’s a dip buying scheme!" So far, on every little dip we have had since December 2nd – the Captain has had the winning strategy – do we dare ignore his sage advice today?
Yesterday we had the biggest pullback since November 23rd with the Russell and the SOX, two of our most over-extended indexes, falling 2.5% in a single day. The Russell essentially gave up an entire month’s worth of gains in a single day because, as I have warned you over and over and over until I myself was bored hearing it, it has been a low-volume rally and the pure physics of the situation means that, when people finally want to sell stocks, there aren’t enough buyers in the world to support the prices they have run up to.
The Shanghai, which we’ve been watching closely, dropped another 3% today to 4-month lows this morning. We did the chart of the Shanghai vs the Hang Seng on Friday, when I was droning on about how weak the real Global economy is and how dangerous inflation was looking and how the government was papering it all over, etc. Even so, I reminded Members in Chat that none of that reality mattered and we still had to buy the dips until it stopped working. Is today the day or have we finally reached the end of the gravy train?
We did some hedged buying on Friday with new long-term bullish trade ideas on AAPL, AET, BAC, GENZ and INTC (2) as well as shorter-term bullish trade ideas on CSTR (April) and ABX (quick 50% profit and done). We also had a short play on PCX (up huge already) and hedged with RKH Feb $85 puts at $1.15 (now $1.80, up 56%) and rolled our losing QID position in the $10,000 Virtual Portfolio to the Feb $10 calls at an average of $1.15 (now .90, down 22%). This is how we can be long-term bullish and short-term bearish. Buying the f’ing…
Friday Fizzle – Week Ends with a Whimper
by Phil - December 10th, 2010 7:07 am
"Woke up this morning, what did i see
A big black cloud hanging over me
I switched on the radio and nearly dropped dead
The news was so bad that i fell out of bed
There was a gas strike, oil strike, lorry strike, bread strike
Got to be a superman to survive
Gas bills, rent bills, tax bills, phone bills
I’m such a wreck but i’m staying alive" – Kinks
I thought some uplifting music might help today as the markets have not been turning in a super performance this week despite a $1Tn tax cut/stimulus package pumped into it just 3 days ago. That morning, I posted Chris Kimble’s charts from our Chart School and we were looking at key resistance at S&P 1,224, Nasdaq 2,600 (NDX 2,191), NYSE 7,751 and Russell 756. We’re above all those this morning but what we’re not above is my 11,500 level on the Dow. In fact, if you look at the Dow over the past 6 sessions, you’ll notice we hit quite a wall at about 11,375.
What’s it going to take to punch through that wall and get us up over our 11,500 breakout target? We had this same problem in early November, when the Dow just couldn’t close the deal over 11,450 and fell sharply after 3 days of trying despite the fact that the Dow Transports are up significantly (but also flatlining) since then (how now Dow theory?).
I had said we would wait PATIENTLY for confirmation at 11,500 but it’s already getting tedious. Our picks from Tuesday’s post were C at $4.56 and BAC at $11.79, with BAC outpacing C but both positions much more exciting with option plays than straight stock picks, of course. By Wednesday morning I had done the math on the Obama Tax Cut and concluded that, for 95% of America, all we could say was "Thanks for the Gas Money, Mr. President" and I’m not even sure we’ll get that as oil once again tests $89 this morning, which is fine for us as that’s our shorting spot on the Futures and has paid us for many, many tanks of gas this week.
It is, of course, all about the Dollar and our poor currency has been brutalized in the past 24-hours, with…
Testy Tuesday – Dollar 77 Edition
by Phil - November 9th, 2010 8:28 am
The Dollar fell from 77.515 at 3:15 yesterday to 76.835 at 7:30 this morning.
That, my friends, is the story of the markets. A 0.9% drop in the Dollar overnight is a huge move, something that once upon a time would have made headlines as America’s $100Tn worth of household wealth has $1,000,000,000,000 shaved off of it in some overnight catastrophe. But there was no overnight catastrophe, just the horribly normal, shockingly ordinary destruction of the US Dollar, which has now become the plaything of International Market manipulators who boost it to pump the Asian markets up overnight and then crash it to goose the US markets in the morning. It’s MADNESS but we are loving it because, at least it’s predictable madness.
In yesterday’s post I reminded you about our $87.50 short on oil futures and we hit it again this morning and that’s exactly what I said would happen in my 2:21 comment to Members when I predicted they would run oil back up into inventories. We LOVE ranges – they are so much fun to play. Gold is now 20% above our $1,150 line and at the top of that range ($920-$1,380) we’ve been watching since March of 2009 so I updated our "Spinning Straw Trades Into Gold" post with a whole new set of trade ideas to help protect our cash if the dollar keeps getting weaker and gold keeps heading higher.
As I said to Members in yesterday’s Morning Alert, it’s all a huge sham but it’s the only game in town so we just need to learn the silly rules and figure out how to win if we want to keep playing (although I am currently advocating mainly cash and playing just for fun as we test our upside). We did go for an ABX trade in Member Chat on Friday, a play that was also made available to Stock World Weekly readers over the weekend (last chance to subscribe before we’re out of Beta and the rates double!) and ABX is, of course, flying as gold broke through the $1,400 mark yesterday. So we like gold as a small hedge against inflation eating into our sidelined cash but, on the whole, I’d rather short it – I just want to be clear about that.
We can’t short gold with Benny and Timmy running the…
Spinning Straw Trades Into Gold – Part 2
by Phil - November 9th, 2010 5:51 am
Thank you Mr. Zoellick!
It’s been a long time (March 2009) since we’ve been on the gold bandwagon, when I said to Members: "I still think we should get a correction in gold back to $875 (no longer $850 as the trendline has been yanked up) but we’re not hedging gold because we are worried it will hit $1,000, we are hedging because we are worried it will hit $2,000. That means that the difference between buying gold at $850 or $950 is not a big enough deal to stay completely out of it now. We would LIKE to be in the 2011 $70 calls for $20."
We didn’t quite get $20 but gold hit our entry target of Gold $875 in April and we had a brilliant rolling plan (see original post) that put us in at the right net price and those calls are now $67.72, up 238% as gold crosses $1,400 (up 64%). This is the beauty of using options for a hedge. Three ounces of gold were $850 each or $2,550 and you made $1,650 if you bought it then but 1 contract of the GLD $70s cost $2,000 and is now worth $6,772, a profit of $4,772 or THREE TIMES more than the profit on gold with 20% less money committed.
Do you see why, at PSW, we love options, now? In fact, we featured an ABX option play in our Stock World Weekly newsletter this weekend which has already gone into the money after just 24 hours. Are you interested in learning how to trade with options? Well, let’s go then!
- strong positive correlation
- moderate positive correlation
- negligible correlation
- moderate negative correlation
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Which Way Wednesday – Can We Ignore and Soar?
by Phil - October 20th, 2010 8:35 am
Wheeeee, this is fun!
Industrial Production was DOWN 0.2% vs up 0.2% expected. This 200% miss was led by a 1.9% drop in utilities as consumers simply can’t afford to keep the lights on anymore, even with very low natural gas prices keeping costs down. The only segment that was up was – you guessed it – MINING, as top 10% speculators hoarding shiny bits of metal in anticipation of the collapse of civilization drove production up 0.7%, marking 3 consecutive months of increasing activity.
Housing Starts dropped 10% in September and Permits for future starts dropped another 4% and this morning we got word that Mortgage Applications fell 10.5% last week as the price of a 30-year fixed mortgage went from 4.21% to an unaffordable (I guess) 4.34%. Imagine prospective buyers sitting at a table saying to the broker: "4.34%? Why that’s outrageous, we won’t pay it!" Inflation (real inflation) is 3.5% and you are paying 4.34% so that is a net effective 0.84% interest rate on a home AND STILL NO TAKERS! As we noted last week, 34% of Americans think their homes will go down in value next year.
That’s just silly – home prices are ALREADY down in value by 12% this year. Your home is, unfortunately, priced in dollars so the "stable" prices this year are only stable when priced in a currency that’s collapsing. To Japanese or European buyers, your home value is swirling down the toilet just as fast as it was during the first two years of the collapse.
It’s kind of like when the coyote is standing on a rock that has broken off from the cliff and doesn’t realize he’s falling with the rock – these illusions work just fine until you both splatter into the ground…
What then, is the point of giving us the illusion of economic health by debasing our currency faster than the economy is falling? Clearly we are not fooling the consumers – consumer confidence is in the toilet because a vast majority of consumers live in the real World which is currently located between a rock and a hard place for 90% of Americans. Oh, by the way, don’t forget that those polls where 60% of the people say the economy sucks include the top 10%, who think the economy is great – so great, in fact, that…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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