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…

Tags: AAPL, ABX, ACOR, AKAM, AMED, AXP, AYE, BRK.B, C, CCJ, CSCO, DELL, DIA, DXD, EDZ, FCX, FXI, GE, GLW, GOOG, GSK, IBM, ITMN, IYR, LLY, LOW, MRK, NLY, NYX, PM, SDS, SPWRA, SRS, TBT, TM, TNA, USO, UYG, WFR

Posted in Immediately available to public, Uncategorized | 2 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Love Letters (Weekend Reading on Valentine’s Day)

by Phil - February 14th, 2010 8:25 am

Happy Valentine’s Day!

Last Valentine’s Day was as Saturday, following a frightening Friday the 13th, where we had fallen through the 8,000 line on the Dow.  I wrote a very interesting post that morning discussing how I came about my political views, which is good for new Members to check out.   We also flipped short that day on SKF, too early at $130 but that ended well as we kept after them and it was our biggest bet by March 6th, which eventually returned over 1,000%.  We also stopped shorting GOOG at $350 (it did keep going to $300 but the upside was nice too).  I closed the morning post with:

For us, it’s all about the levels as we try to remain unbiased as investors, no matter how voraciously we defend our political views.  Dow 7,800, S&P 820, Nas 1,460, NYSE 5,100, Russell 437 and SOX 203 all better continue to hold today but, even if they do, we’re nowhere near where we want to be and we’re going to take some bearish covers into the weekend - just in case.  So whether you are a witch celebrating the horrors of the 13th or waiting for a rose from your true love the next day, remember to be careful out there - we are certainly still deep, deep in the woods!

That Tuesday (Monday was President’s day) we fell 300 points and another 300 points by the end of the week!  That was a fitting way to mark the 80th anniversary of the St. Valentine’s Day Massacre when Al Capone’s "South Side" gang, dressed as cops, rousted a garage run by Bugs Moran’s "North Side" gang and had them stand against the wall and then executed all 7 men.  They shot them 70 times with machine guns and made their escape by using the Capone men dressed as cops to "arrest" the other Capone men and drive them away from the scene in broad daylight.  Now that’s what I call a good plan! 

Here’s a great chart that summarizes our year to date. Someone else found this, I wish I knew how to use StockCharts this well, they have tons of good things in there:

It’s a bit worrying that XLU is doing so poorly - so much for diversification keeping you safe…  It’s going to be worth rummaging through the utility companies looking for good dividend payers who are on sale.  SO is one we like to play with a 5.6% dividend and, as long as they…

Tags: AAPL, AINV, ANF, CF, CHL, CIM, DT, ELNK, GOOG, HIMX, KFT, MRK, MSFT, NFX, OTE, PDLI, Q, SKF, SO, STD, TEVA, WFMI, XLU

Posted in Uncategorized | 7 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

2010 Outlook - A Tale of Two Economies

by Phil - December 27th, 2009 6:54 am

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way–in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." - Charles Dickens, 1859

Dickens famous novel (which was originally written as a weekly series in 31 installments) depicts life in the time of the French revolution but was also a parable, meant to warn the British aristocracy that they should not ingore the parallels to the social inequities that existed at the time in England.  Dickens warned the nobles that the seeds of revolution were planted through unjust acts and surely there would be a time of reaping yet to come. 

It is said that the French Revolution was sparked by outrage over a statement by the Queen Mary Antoinette who, when told that the peasants had no bread to eat, supposedly replied (she never actually said this) "Qu’ils mangent de la brioche" or "Then let them eat cake."  It’s hard for us to imagine the impact of this statement in modern times but "peasants" were 90% of the population at the time and bread was 90% of what they ate, consuming 50% of the average family’s income (people weren’t silly enough to pay for housing back then - they just found a bit of land, bought some wood and nails and built their own homes).  Brioche was a luxury combination of bread enriched with flour and butter so the statement "Qu’ils mangent de la brioche" implies both lack of caring and cluelessness on the part of the Queen. 

The United States had what passes for a revolution between 2006 and 2008 as we threw out the Republicans and went with a Democrat-controlled government.  While the Bush administration, the Republican Congress and Fox News may have been as clueless as a French Queen to the plight of the people - the fact of the matter is that the base pay of top management rose 78% from 2002-2007 while…

Tags: AMAT, AMGN, BCE, BSX, CCL, CELG, GLW, IHG, INTC, ISRG, MAR, MDT, MRK, OWW, PFE, SPWRA, STP, THC, TMO, UHS, WFR

Posted in Uncategorized | 32 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Merry Christmas Eve

by Phil - December 24th, 2009 8:28 am

First of all, what are you doing here?

Why it’s Christmas Eve, Mr. Scrooge - Most global markets are having a half day so, if you are waiting for a Santa Clause rally on a half-day’s trading, you are very likely to be disappointed.

Remember Marley, who cried: "Business!  Mankind was my business. The common welfare was my business; charity, mercy, forbearance, and benevolence were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business!"

Marley was a man who worked and worked until the day he died and regretted it every day after.  If you don’t believe in an afterlife and you don’t believe in leaving behind the World a better place than you found it, at least find some time for yourself so people don’t call you "a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner!" 

Those covetous old sinners in Congress passed the Health Care Bill in the Senate today with a 60-39 vote (Republican Jim Bunning did not vote against the bill but was too chicken to actually vote for it) so we can pretty much count on it moving through the House and on to Obama’s desk in the very near future.  While it’s a total botch-job of a bill, at least America has taken the first civilized strep to recognizing that health care is a right and not a privilege - Tiny Tim would be very proud!

We were told by Fox that Health Care reform would destroy the universe but the market has taken the December passage of the bill very much in stride so maybe we should have just gone for it with Universal Health Care after all…  Oh well, maybe next year!  Meanwhile, we’ll be looking for good investing opportunities once we get a handle on the final bill but I still favor the device space (IHI, MDT, BSX, JNJ, GE, ISRG) as well as big pharma (MRK, PFE), who will be able to serve tens of millions of new customers.  Hospitals (UHS, THC) should also start filling up and we always like our CELG as well as AMGN, who should also benefit from adding a population the size of England to the health care rolls right here in the USA.  I’m waiting for the final bill but home health care providers (AMED, ADUS, GTIV) also look like winners so lots of fun investing opportunities in one of the fastest growing markets on…

Tags: ADUS, AMED, AMGN, BCS, BSX, CELG, GE, GITV, Health Care, HI, ISRG, JNJ, MDT, MRK, NYMEX, PFE, THC, UHS

Posted in Uncategorized | 90 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

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,…

Tags: AAPL, AIG, ARIA, BHI, C, DIA, DRYS, DXD, EDZ, ELN, EP, ERY, FNM, FRE, FXP, GENZ, GNK, GOOG, GS, GSK, IHI, JNJ, MRK, NVS, OGXI, OIH, ONTY, PALM, PARD, SNY, SPPI, SRS, TOL, TSCM, UYG, XLV

Posted in Immediately available to public, Uncategorized | 49 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

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…

Tags: AMGN, ARIA, AZN, GSK, MRK, OGXI, ONTY, SPPI

Posted in Portfolio Review | 23 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Bearish Put-Spreader Paws Profits at Merck

by Andrew Wilkinson - July 28th, 2009 4:20 pm

Today’s tickers: MRK, IMMU, AET, ODP, FSLR, EEM, MFA & XLI

MRK – The pharmaceutical company declared a quarterly dividend of 38 cents per share for the fourth quarter of 2009 today, amid a 3% decline in shares to arrive at the current price of $29.81. A bearish put spread established in the October contract suggests some investors are wary of further declines for the company. The spread involved the purchase of 7,400 puts at the October 31 strike price for 2.23 apiece against the sale of 7,400 puts at the lower October 29 strike for a premium of 1.28 each. The net cost of the transaction amounts to 95 cents, yielding the investor maximum potential profits of 1.05 if the stock slips to $29.00 by expiration. The current market price of MRK is currently lower than the breakeven point on the trade of $30.05. Thus, the investor responsible for the spread has already earned 24 cents by assuming a bearish stance on the stock. – Merck & Company, Inc.

IMMU – Shares of the biopharmaceutical company engaged in the development of products designed to treat cancer, autoimmune, and other serious diseases, have surged more than 14% to $5.24 during the trading session. Bullish movement in the stock was fueled by the news that IMMU has entered into a partnership and cross-licensing agreement with Alexis Biotech Ltd., of London, England. The firms are combining efforts in order to develop “targeted vaccines against cancers” such as melanoma and chronic lymphocytic leukemia, as well as infectious diseases such as AIDS. Option traders hoping for continued upward movement in the price of the underlying were seen getting long of bullish call options in the September contract. The September 7.5 strike price had approximately 3,500 calls coveted for 38 cents apiece. Investors holding the calls will begin to realize profits in the event that shares climb another 50% to surpass the breakeven point at $7.88 by expiration. – Immunomedics, Inc.

AET – The third-largest health insurer in the United States has enjoyed a rally in shares of more than 13% to $29.08 this afternoon after receiving an upgrade to ‘outperform’ from ‘neutral’ at Cowen and Company. Call options exchanged on the stock today exceeded the number of puts by a factor of more than 3-to-1, reflecting bullish sentiment by investors. The near-term August 30 strike price had more than 8,800 calls purchased for an average premium of 75 cents apiece by…

Tags: AET, EEM, FSLR, IMMU, MFA, MRK, ODP, XLI

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Double Top Testing Tuesday - 8,900 or Bust!

by Phil - July 21st, 2009 8:30 am

Whee, what fun!

We got the S&P stick that kept us well and truly above 946 into the close.  If we hold it for a couple of days, we won’t be calling it a "stick save," we’ll be saying this was the day that 946 turned from resistance to support - a good chartist needs to travel to the future, look back at today’s charts and think about them in context of the follow-through move they expect.  Looking further back in time, however, what we have so far is a double top on the S&P at the upper end of our primary range on very low volume.  956.23 was our June high and that still needs to be both taken out and held (preferably at decent volume) in order for us to don our rally caps for the next leg up. 

I’m encouraged this morning that we may be able to do it though - CAT had great numbers, beating estimates of .22 by .38 per share, that’s very impressive for what was a $35 stock yesterday.  Fellow Dow component KO had a nice beat as well as did DD, MRK and UTX,  That’s 5 Dow beats in one day and yesterday we finished at 8,848 which is why I’m saying 8,900 or bust today.  If we can’t add 52 little points on these earnings, then surely the rally into these earnings was overdone.  If, on the other hand, we can hold 8,900 and build from there - then perhaps we are ready to move 8,650 to the bottom of our range and look to make a 10% move over that to 9,500, a mere 32% off the highs.

I’m excited because it’s almost time to pull out a brand new Big Chart with all new targets - if only we can prove this move is real.   Let’s not get too ahead of ourselves but I was already very pleased with last night’s eanings when all 20 reporting companies beat estimates with PKG and TXN raising guidance of all things!  This morning we also have both ICSC and Redbook Retail Sales reports and Bernanke gives the old Humphrey-Hawkins address to Congress against a very pretty market background which will hopefully overshadow TARP Czar Neil Barofsky, who will be reporting to Congress under the shadow of his "leaked" report that shows that the government’s POTENTIAL exposure under TARP is now $23.7 TRILLION.  To get to that figure, Mr. Barofsky combined direct spending…

Tags: CAT, DD, KO, MRK, TXN. PKG, UTX, YHOO

Posted in Uncategorized | 177 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Whirlpool Call Buyers in a Spin Over New Chinese Factory

by Andrew Wilkinson - July 16th, 2009 5:49 pm

Today’s tickers: WHR, MRK, EBAY, RHI, XLP, MOS, GE, LSI & MGM

WHR – The manufacturer of appliances and products for home use experienced a 7% surge in shares to $53.34 after announcing yesterday that it has opened a new factory in China with another appliance company known as Hisense-Kelon Electrical Holdings. Option traders were seen buying bullish call options at the July 55 strike price where 2,800 lots were scooped up for 28 cents each. One investor was seen locking into gains by purchasing a put spread in the August contract. The August 50 strike price had 2,200 puts bought for 2.61 apiece spread against the sale of 2,200 puts at the lower August 44 strike for a premium of 86 cents. The net cost of the spread amounts to 1.75 and yields maximum potential profits of 4.25 if shares of WHR recede to $44.00 by expiration next month. Finally, additional bullishness was observed as high as the August 60 strike price where traders bought 1,200 calls for an average premium of 1.37 per contract. Option implied volatility on Whirlpool has been steadily rising over the past two days, opening at about 53% on Wednesday and increasing to the current reading of 60%. – Whirlpool Corp.

MRK– The pharmaceutical company appeared on our ‘hot by options volume’ market scanner this afternoon after a ratio put spread was implemented in the October contract. The investor responsible for the transaction appears to be positioning for continued downward movement in the stock. Shares are currently lower by less than 0.5% to $27.69. The ratio spread involved the purchase of 5,715 in-the-money puts at the October 29 strike price for a premium of 2.70 each against the sale of 11,440 puts at the lower October 26 strike for 1.20 per contract. By selling twice as many puts, the investor reduced the cost of the transaction to just 30 cents. Thus, he will attain the maximum profits available of 2.70 if the stock declines to $26.00 by expiration. – Merck & Co., Inc.

EBAY – Shares of the online marketplace have enjoyed a rally of more than 4% today to arrive at the current price of $18.61. Investors who are hoping for continued upward movement in the price of the underlying were seen positioning themselves in the August contract. Approximately 6,500 call options were coveted at the August 20 strike price for a premium of 34 cents apiece.…

Tags: EBAY, GE, LSI, MGM, MOS, MRK, RHI, WHR, XLP

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter