Prior Weekly Wrap-Up - February Expiration Day Special!
by Phil - February 19th, 2010 7:17 am
I didn’t get to do a wrap-up last week so we have a lot of trades to go over and, with expiration looming and the Fed tightening, I thought it would be good to just get the list out on Friday so we can adjust our rolls to March where neccessary (in bold under appropriate positions).
In our Feb 7th Wrap-Up, I was gung-ho bullish saying "It’s Only a 55-Point Drop You Wimps!" and we had been BUYBUYBUYing at the bottom all week, especially Wed-Fri as the market spiked through our projected support at Dow 10,000 but not enough to change our minds as we bottom-fished on AAPL (2 trades), ABX, ACOR, AKAM, AMED, BRK/B (2), C, CCJ (3), CSCO, DELL, FXI, GE, GOOG, IBM, LLY, LOW, NLY, TBT (5 times!), TM (3), TNA, USO (yep, we wen long oil) and UYG. To say we were weigting bullish by that Monday was an understatement as we has finished the weekend in a bullish stance and were relying on our disaster hedges to protect us.
Those disaster hedges are an interesting set to look at, especially now that we’ve recovered 400 points:
- DXD July $27/33 bull call spread at $2.50, now $2 - down 20%
- We can roll the $27 calls to the $25 calls for $5 to widen the spread and drop our b/e from $29.50 to $28.50
- EDZ July $3/8 bull call spread at $2.10, now $1.60 - down 23%
- EDZ Apr $10 calls sold for .70, now .15 - up 78% (pair trade)
- SDS 2011 $36/40 bull call spread at $1.30, now $1 - down 18%
- We can roll the $36 calls to the $33 calls for $1.10
- TBT Jan $35/45 bull call spread at $6.30, now $7.40 - up 17%
- TBT March $50s sold for .65, now $1.22 - down 87% (pair trade)
This is what is great about disaster hedges. The potential upside on these spreads, if the market headed south was up about 100% on the 4 trades so a commitment of 5% of your portfolio to each one (20%) would give you back 40% of your portfolio in cash if the markets tanked. Already, after 2 weeks, we have the markets heading in the opposite direction and what is the cost? Not even 20% of the 20% you may have allocated, a 4% insurance premium while the 80% of the portfolio that is bullish caught a huge rally up and this insurance is still good through July!
Monday (2/8) Market Movement
I pointed out how much chart people love…
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Wild Weekly Wrap-Up - August in Retrospect
by Phil - August 29th, 2009 8:28 am
It has been a crazy few weeks!
I went back over our Long Shots list from August 9th, thinking all our picks must be doing great but really only C, with a 67% gain, is really outperforming. Long spreads on UYG and BHI are on target for nice gains but haven’t moved much. Looking at our original picks in Pharmboys Phavorites from the same week, GSK is on track and up nicely already, our AZN cover is up 45% and MRK flew up 19% already. On the riskier Biotech side, ARIA’s stock is up 16% and our spreads are all performing well, ONTY has been flat, OGXI is up 33% and the Jan $17.50s are up a rockin’ 63% with that "cautious" spread up a surprising 75% already.
SPPI had a wild ride (as we predicted with TSCM’s failed assassination attempt) and the buy/write is already up 24%, the Feb vertical is up 50% and the naked Jan put sale is up 27% and our Feb hedge play is right on track so all good there and a fine example of how following Cramer and his lackeys and and doing the opposite of what they say can be very profitable! Congrats to Pharmboy for a very fine set of picks, proving once again that there is room for research and fundamentals - not a single loser in the bunch in a choppy market! It was very timely as I had mentioned just that week in my interview with AOL Finance that XLV was my favorite sector and our IHI pick of 8/10 is up 28% on the naked Feb $45 put sale while the Feb $45 calls have already jumped 16%. It was a great call as IHI outperformed XLV and all our major indexes.
So our energy service pick (BHI) and overall financial pick (UYG) have not done much in 3 weeks and those were our leading sectors into my call to cash out our exposed long calls on Aug 13th, ahead of expirations. The Dow was at 9,400 on that day and now, a bit more than 2 weeks later, we’ve gained another 144 points but to listen to the MSM, you would think you are missing the rally of the century the past couple of weeks. This is one of the reasons I’ve gotten a bit more cynical about the rally - there is so much hype and so little actual progress, something must be wrong.
Back on Thursday, Aug 6th,…
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Pharmboy’s Phavorite Phings
by Phil - August 8th, 2009 3:02 pm
Greetings PSW members from Pharmboy!
This is my first shot at writing a formal post for everyone on a few biotech/pharma picks that I believe have promise for nice returns over the next 6 to 18 months. Much of the work here is a compilation of readings elsewhere, summarized for you all to make your own conclusions. Here we go:
Big Pharma
GlaxoSmithKline (GSK) – has a robust pipeline in inflammation, cancer and other therapeutic areas. A few line extensions could do well generic simvistatin (Zocor) + Avandia) for cardio/diabetes. Will compete against Vytorin, and others like it. In the pipeline, GSK has an Orexin antagonist for sleep disorders (very hot area), several drugs for asthma/COPD in Phase II including a PDE-4 and FLAP inhibitor. The asthma/COPD drugs have huge potential as a monotherapy or in some combination, as they are the newest line of therapies that have come along for asthma/COPD in some time (GSKs strength). GSK also has a VLA4 antagonist for multiple sclerosis in phase II.
This is the first I have seen of this in a pipeline for clinical trials. VLA4 is the target of Tysabri from BIIB. One hypothesis is that a small molecule that binds to the receptor but does not completely knock out the receptor like a mAb may be better for MS patients. Remember, Tysabri has a potential of a rare neurological condition progressive multifocal leukoencephalopathy (PML) when administered in combination with interferon beta-1a, another immunosuppressive drug often used in the treatment of multiple sclerosis.
One other note for growth, Amgen (AMGN) revealed its commercialization strategy for osteoporosis treatment, denosumab, one of the most keenly anticipated new drugs set to reach the market for several years, naming GlaxoSmithKline (GSK) as partner in Europe and other countries. GSK has several cancer treatments as well as vaccines in various stages, so it is my belief that their pipeline is rich and diverse. Current yield is 4.8%.
Phi’s Take: 4.8% and Pharm likes the pipeline - say no more! We have nice solid support building at the 200 dma at $34 and the 50 dma already crossed up and is at $38 so we can be pretty confident that we can hold the early 2008 lows at $38 long-term. That makes this a nice buy/write as we want the dividend (so we need the stock) and we wouldn’t mind buying more cheaper. Best to go with the long play here with the stock…
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Monday Market Madness - Pandemic Edition!
by Phil - April 27th, 2009 8:13 am
It’s been a while since we had a flu scare.
We had avian flu a few years ago and the biotech stocks of companies that made vaccine went nuts for a while and then crashed when it turned out to be much ado about nothing. Of course before that was mad cow and that one devastated the beef and restaurant industry, especially in Europe where steak houses went bankrupt as people refused to eat meat so don’t underestimate how fast panic can spread and habits can change when people start dying. The pigs are getting a bad rap this time as this particular virus is a mix of swine, bird and human strains but logic doesn’t enter into these things and if the press is determined to label it "swine flu" then you bet that’s what the public will fixate on.
HRL is a big seller of pork products and could make a big breakdown if they can’t hold $30 but, rather than short them, I prefer to get in on a dip as these things do tend to pass. GSK makes a vaccine and is an obvious upside choice and they’ve been trading well off their highs so make a nice play either way. The June $30 puts can be sold naked for $2.17 and that’s a nice way to enter the stock (or get paid $2 NOT to buy it). Also buying the stock at $29.34 (which pays a 5.6% dividend) and selling the June $30 calls for $1.10 and the June $27.50 puts for $1.05 drops the net entry to $27.19 and an average entry of $27.35 if put to you, a nice discount to the current price (see "How to Buy a Stock for a 15-20% Discount" for details on this strategy). GSK 2011 $25 calls are also pretty cheap at $6.15 ($2 in premium) and we can sell calls against them on a nice run up, perhaps a 1/2 sale of June $30s at $2+ (now $1.10).
NVAX already got a huge pop on Friday when this story first spread and should continue to fly but that’s one of the ones we’re more likely to short as they get overextended. I think my other favorite upside play is MMM, who don’t make a vaccine but do make those blue masks that governments love to give out to make people feel like they’re doing something. It’s hard to get US…
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Monday Market Meltdown
by Phil - April 20th, 2009 9:07 am
Finally a down day!
I thought I was going crazy. We keep going bearish into the weekends and the market refuses to go down - it’s very frustrating. There is no particular bad news, mainly this is a long overdue pullback that we’ve been expecting, led down by oil, which is off 5% in pre-markets (8am) back at $47.50 now that the NYMEX shenanigans around contract expiration have run their course. This is nice for us as we were shorting oil futures since Thursday and I had just said to Members in in Friday’s chat: "Oil is still at $52.28, that’s a total joke. Also been flatlined since yesterday’s ridiculous pump (they did spike ti to $53.50 for a bit at Europe’s open)."
Today the joke is on the oil bulls as crude plunges on the same fundamentals that have been evident for weeks to anyone who read the actual inventory report and ignored the Criminal Narrators Boosting Crude and their ridiculous parade of industry "experts," who, along with the pump-monkey in chief, attempted to herd the sheeple back into the energy sector. OIH has been the focus of our shorting so far and we noted the weakness in XOM last week as a leading indicator that the party was over.
Now we’ll see how well our levels hold up during a commodity correction and we will, of course, be holding off on our bullish selections we made in both the $100K Hedged Portfolio this weekend until we see if we can hold the same old levels were watching on Wednesday: Dow 8,000, S&P 847, Nas 1,585, NYSE 5,321 and Russell 456 as those are our dollar-adjusted support levels. Below that are our chart levels of Dow 7,900, S&P 833, Nasdaq 1,580, NYSE 5,225 and Russell 444, below which is a full 5% gap to the next level of support so we get very bearish if we lose 2 of 3 of those levels.
As I mentioned in the Weekend Wrap-Up, where we reviewed all 30 of last week’s featured Trade Ideas, THIS is the week when the games really begin with 150 of the S&P 500 reporting and very little economic data to distract us from the fundamentals of earnings week. China did its best to distract the masses from clear signs of a slowing GDP and diving export numbers by having Premier Wen Jiabao say Saturday that the country’s stimulus package is working and the economy is "better than expected," but he cautioned…
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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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