by Option Review - April 24th, 2013 8:50 pm
Today’s tickers: IRBT, AIG & GLW
by Phil Davis - May 10th, 2012 8:28 am
Not much happening overnight.
Dollar at 80.30 as we wait on Bernanke at 9:30. The Euro is still dead at $1.296, Pound up to $1.615 as BOE holds rates steady (easing was expected). 79.65 Yen to the Dollar and 1.201 EUR/CHF shows those guys are still serious about supporting the Euro at all costs – and it must be costing them a fortune to do this.
I would say anyone who is holding large Euro positions and isn't taking advantage of the fact that the Swiss are backstopping it to get out is very foolish. The Euro is closer to dissolving now than it was last year. Greece will default on $500Bn in debt, Portugal will either default or need a huge bailout, as will Spain and just because Italy and France and Ireland are quiet at the moment, doesn't mean they are fixed either.
Clearly the only reason the Euro is holding $1.29 is because the Swiss are buying it – this is certainly not a reason to be holding the currency. If the Dollar were only staying over 80 because Canada was buying them to keep the Loonie from going to $1.20 – would that mean you should stay in or get out before the game falls apart?
If the Euro is artificially strong, then the Dollar is artificially weak and if the Dollar begins to rise (and the BOJ would love to see that) then we know there will be a dip in the price of dollar-denominated equities and commodities. So we need to continue to tread carefully because much of what we currently see is based on this artificial construct of a relatively weak Dollar and a relatively strong Euro – and that's distorting reality in many ways.
Also keep in mind that these little CB money-printing schemes can go on much longer than one would think logical so it's more of a big-picture sort of observation than an actionable item other than I sure wouldn't want to tie up too much money in Euros – just in case the SNB does run out of money one day.
by Phil Davis - May 2nd, 2012 6:40 am
Yesterday did not count.
Until the end of day, the volume was low and, as you can see from Dave Fry's SPY chart, the morning pump was mostly erased by the end of the day. In fact, on the Russell and Nasdaq – it was entirely erased. What a friggin' joke, yet no one will investigate it and few will even question it.
As we often say at PSW – We don't care IF the game is rigged, as long as we know HOW the game is rigged and get to place our bets accordingly. In my Morning Alert to Members at 10:05, my comment on the move up was:
Not too many markets are open so super low-volume means we can pretty much ignore whatever's happening. Some wild gyrations at the open already with AAPL popping $10 to goose the Nas and they are spiking us up and down at will on this low volume.
At 12:02 we made our planned adjustments to our 4 active virtual portfolios, taking advantage of the big, bad spike to move to cheap June bear positions and cash out our long plays and just get generally more aggressively bearish at what we thought was going to be the top for the day. The most aggressive move was made in our most aggressive, $25,000 Portfolio (pictured here from its 10am status BEFORE many changes were made), where we flipped our protective TNA hedge from bullish to very bearish – shifting the balance of the portfolio much more bearish with a single move:
TNA – $60s are now $4 so let's take that and run on 5 (1/2), as that's more than we paid for the spread and we'll ride the $63s half-covered with a stop on 5 at $3 (now $2.25). Also, a stop on the 5 remaining $60s at $3, at which point we would reset the stop on the $63s, of course.
Needless to say, that trade worked out huge already as the $60s all stopped out at a $3.50 average ($3,500), which is $500 more than our max potential gain on the spread and the $63 calls already finished the day at $1.10 ($1,100) for a net of $2,400 (so far) off our $1,450 entry on 4/26 – so up 65% in less than a week on the trade we used to…
by Phil Davis - March 19th, 2012 8:23 am
We are still trying to get more bullish.
Over the weekend we set a new, higher set of levels for our Big Chart on the assumption that our breakout levels hold up and our new Must Hold lines become Dow 13,600 (not there yet), S&P 1,360, Nasdaq 3,000, NYSE 8,000 and Russell 800, which means it's now up to the Dow and Nasdaq to continue to show leadership if we're going to be having a rally good enough to get us to add our next 10 bullish plays.
I already added 2 aggressive upside trade ideas on XLF and SPY in the weekend post and last week we already looked at WFR, X, BAC, GLW, BBY, CHK, AAPL, AA, and BA but we also added a new Long Put List (Members Only), which had 19 stocks that we thought were good downside horses to ride if, per chance, we fail to hold 3 of our 5 breakout levels.
It shouldn't be too much to ask – IF this is a real bull market. We've been extremely skeptical up to this point and, Fundamentally, I still have my doubts but Technically, we can't keep fighting the tape so were drawing a line in the sand for Mr. Market to cross and, if it does so, we're happy to play along. If it fails to do so, however, well – we've already made those bets!
Our aggressive take on the Dow is the result of analyzing the 5 components that were replaced since the crash with MO and HON thrown out for BAC and CVX in Feb of 2008, AIG replaced by KFT in Sept 2008 and C and GM replaced by CSCO and TRV in June 2009, causing a massive distortion in the index, meaning 16,000 is the old 15,000, possibly even lower:
The Nasdaq is similarly distorted by AAPL, who are up 500% since 2009 and when a stock that is 11.5% of an index is up 500%, that stock alone causes the index to go up 57.5%, which is why we now call it the AAPLdaq. The AAPLdaq itself is "only" up 100%, which means the ENTIRE rest of the index is lagging with a 42.5% contribution – those who tell you that tech is somehow loved again are fooling themselves…
by Phil Davis - January 11th, 2012 8:21 am
Once again, we're done with our day before you get up.
In my 5am note to Members, I said: "I see nothing in the news to justify this pre-market "recovery" and I hate to sound like a broken record but I like shorting oil (/CL) if we get below that $102 line with tight stops and the Dow (/YM) is right at 12,400, which is a great spot to short. RUT (/TF) is at 762 and below 760 (same as yesterday) will confirm a downturn but 12,400 is a great line so why wait?" By 6:26, I was able to follow it up with:
And wheeeeeeeeeeeeeeeeeeeeeeeee! There go the Futures!
It's 7:07 and we're still going down, with oil at $101.24 (up $760 per contract) and the Dow at 12,340 (up $300 per contract) and, as Dennis said: "Good enough for steak and eggs for me!" Roro got up late but still caught the Dow at 6:16 and that was right on the nose for the oil drop as well as we hit it right on the nose this morning and now we're done and waiting for the next good set-up.
Of course we scale in and scale out of positions as there's no need to get greedy in the Futures, where a single remaining contract catching a $1 move down in oil (now $101.25 again) pays $1,000. This week, we have even stationed our own Craigzooka in New Zealand, where it's tomorrow – which makes it much easier to bet on today's action as he can tell us what happened already! Not that today was all that hard to predict, right? My comment to Members LAST Wednesday was:
It’s been a pretty reliable bet that they tank the markets into the longer-term note auctions because it scares people into T-Bills and keeps the rates low. From this line-up, it seems to me they intend to jack us up on Friday and then zap us on Tuesday as Esther George releases something hawkish ahead of the 3-year and it’s no coincidence that Plosser, by far the biggest Hawk, is given the floor at 12:30 on Wednesday – just 30 minutes before the critical 10-year auction. Coincidence? Surely you cannot be that naive!
by Phil Davis - 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…
by Phil Davis - July 20th, 2011 8:13 am
Here we go again!
We blew right though our expected bullish levels of Dow 12,500, S&P 1,317, Nasdaq 2,775 and Russell 825 but failed to make 8,300 on the NYSE so, as usual, our biggest and most difficult to manipulate index is holding us back – flashing a warning sign while the other indices scream for us to "party on." Fortunately, as I mentioned in yesterday’s morning post, we had already gone aggressively bullish with the SPY Aug $128/131 bull call spread at $1.83, selling the Sept $120 puts for $1.57 and that net .26 spread is already net $1.86 – up 615% since I posted the trade idea at 12:53 in Monday’s Member Chat.
It’s good to have a few aggressive trades like this to take advantage of market bounces. Before that we had taken the SSO Aug $51/53 bull call spread at $1.05, selling the Sept $44 puts for $1.07 for a net .02 credit at 10:46 in Member Chat (the SPY play was for late-comers who missed out on SSO). The Aug $51/53 spread finished the day yesterday at $1.35 but the real win comes from the short $44 puts, which fell to .70 so the .02 net credit is now a .65 net credit for .67 total profit, up 3,350% in less than 48 hours. See, options are fun!
The only other trade ideas from Monday were a long-term bullish play on RIMM (selling 2013 $22.50 puts for $4.20) a long futures play on the Russell Futures (/TF) off the 810 line (now 835) and I reiterated our bearish spread on CMG as I felt they would disappoint on earnings (they did). Yesterday we picked up a long-term longs on GLW, RYAAY and WFR, half covered our FAS longs (iffy so far), took a poke at shorting the DIA that worked for a quick 10%, shorted oil with a DUG spread (futures too scary) and picked up another short spread on CMG – selling 3 Aug $330 calls for $16 ($4,800) against 2 long Dec $360 calls at $18 ($3,600) for a net $1,200 credit – those should be nice winners this morning!
In the afternoon we flipped more bearish and picked up 10 SPY weekly $133 puts at $1.15 ($1,150 of our virtual dollars) for our $25,000 Virtual Portfolio and those are probably going to hurt this morning as the Dollar has been…
by Phil Davis - July 4th, 2011 8:29 am
What a crazy couple of weeks.
Ka-ching is the word though as we did NOTHING – as planned back on the 18th, in our last update - as we expected the market to go down then up. On Friday, we took our short puts off the table as we expect there is a better than average possibility that we go back down again between now and expirations (15th), so we took our short-term winners off the table. The only move we did execute in the past two weeks, other than taking our virtual money and running, was the sale of 10 FCX July $47 puts for $1.21 ($1,120) on the 24th and those cashed out yesterday at .13, up $1,080 two weeks early so of course we take it off the table!
Our other short July puts that were cashed out were:
by Phil Davis - June 18th, 2011 8:26 am
Well, this is embarrassing…
When we set up this virtual portfolio on April 9th, the idea was to create a virtual portfolio for people like my Mom, who just became a widow, and so many of her friends, who need a relatively safe place to invest their money but would rather not live off the 6% returns generated by the typical retirement fund. Our primary goals in the virtual portfolio is A) Don’t Lose Money, which is Warren Buffett’s Rule #1 of investing and B) To generate a relatively steady monthly income of $4,000 against our $500,000 virtual portfolio (about 10% a year).
Despite the fact that we have allocated less than 40% of our cash, we have accidentally made WAY too much money already and this is NOT the lesson we are trying to teach! What happened is, this past couple of weeks, we had a really nice dip in the markets and our disaster hedges kicked in – as they are supposed to – but our other positions were already well-hedged and well positioned enough that they haven’t really lost anything so we ended up far, far ahead of the curve. While that’s a good thing, obviously, the danger here is getting the wrong idea. We got lucky – and one day we may get unlucky – so let’s keep ourselves grounded and people who are just catching up need to keep in mind that this is not meant to be a get-rich quick virtual portfolio.
If we made too much money on a dip – it’s because we were OVER-hedged and that’s something we will attempt NOT to do in the future. To some extent, it’s a discipline problem for me because I essentially BET that the market would go down and then I BET the market would go back up with our DIA adjustments (as well as overriding our original plan to stop out our new short puts with 30% losses). There was a logic to it because we were only about 25% invested so we had plenty of cash to layer in bullish plays if the market did go up and they we would have rolled our protective shorts (which would have been losing) up to cover. Instead, the shorts paid off and we didn’t have enough bullish positions to hurt us. As we get more invested, we won’t have the luxury…
by Option Review - February 11th, 2011 4:38 pm
Today’s tickers: GLW, EXPE, ODP & TSO
GLW - Corning Inc. – A massive put spread purchased on the glass maker this afternoon appears to be the work of an investor positioning for the price of the underlying stock to decline ahead of August 2011 expiration. Corning’s shares increased 0.55% this afternoon to arrive at $22.28 by 1:40pm in New York. The price of the underlying stock has climbed more than 51.6% since August 27, 2010, to touch a 52-week high of $23.43 just last Friday. The large bearish stance employed in Corning put options today is perhaps a sign that at least one player believes the next six months may not be as fruitful for GLW investors as the last six. The trader purchased 28,000 puts at the August $22 strike for a premium of $1.83 each, and sold the same number of puts at the lower August $18 strike at a premium of $0.56 apiece. Net premium required to buy the spread amounts to $1.27 per contract, thus positioning the investor to profit should Corning’s shares drop 7.0% from the current price of $22.28 to breach the effective breakeven point on the downside at $20.37 by August expiration day. Maximum potential profits of $2.73 pad the put player’s wallet in the event that shares in GLW plummet 19.2% to trade below $18.00 before the contracts expire in August. Corning’s shares last traded below $18.00 back on December 1, 2010.
EXPE - – Expedia, Inc. – Contrarian options traders are initiating bullish plays on the online travel company this morning in the face of a more than 18.25% decline in Expedia’s shares to an intraday low of $20.99. Bullish strategists established near- and long-term positions that suggest the firm’s earnings miss has been priced in to its shares. Some traders are betting the stock is unlikely to fall much further, while others are initiating outright bullish bets that Expedia’s shares will recover somewhat in the next few months. Shares in EXPE dropped after the company…