Thursday – Greece is the Word
by Phil - February 4th, 2010 8:29 am
Greece is the word these days.
We are getting a sell-off every morning as Europe goes through the daily ritual of waking up and seeing the cost of default protection rise and rise. This morning Greece is with STUPID (Spain, Turkey, UK, Portugal, Italy & Dubai – coined by Zero Hedge) as five-year sovereign credit default swap spreads were recently at 4.23 percentage points, compared with Wednesday’s closing level of 3.97 percentage points. That means the annual cost of insuring €10 million of Greek government debt against default for five years had risen €26,000 to €423,000. In a nutshell, that’s 4.23% annually to insure Greek bonds from default so Greece needs to offer 4.23% more interest on their bonds than an Aaa nation to attract investors.
Of course, my new "I’m with STUPID" T-shirt franchise is going like gangbusters as we are getting orders from all over the US, especially California, as our own triple-A credit rating may not last the year. Japan is a strong customer (mostly small and extra-small) and sales are strong in France and, of course, Mexico and all of South America.
Keeping up with the STUPIDs is no easy feat as Portugal’s CDS spreads jumped 15% overnight to an all-time high 2.26 while Spain gained 10% to 1.68%. (Have I mentioned I like TBT lately?) The moves followed news Wednesday that the European Commission had put Greece under more pressure to cut its deficit; that the Portuguese government sold only €300 million of treasury bills at an auction, compared with an indicative offer of €500 Million; and that the Spanish government had raised its budget deficit forecasts for 2010 through 2012.
As we expected in yesterday’s post, Greek workers were none too pleased with the EU’s budget plan for their country and is rejecting the idea of wage freezes on top of wage cuts. Greece’s biggest union is moving towards a mass strike and the public-employee union is planning a job action next week as well. Tax collectors are striking, customs workers are striking, which is screwing up the airports and shipyards and delaying commerce all over Europe – shades of things to come perhaps?
Napoleon said: "A revolution is an idea which has found its bayonetes" and John Kennedy said: "Those who make peaceful revolution impossible will make violent revolution inevitable" and what we are seeing here is backlash as workers of the world have been pushed…
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DiggFreaky Friday – Options Expirations Promise a Wild Ride!
by Phil - January 15th, 2010 8:40 am
As Jesse notes over at Cafe Americain, it’s shenanigans central today.
We are mostly watching the action with a detached interest. As I said to Members in yesterday’s morning Alert: "Tomorrow we have CPI, Business Inventories, Industrial Production, Empire Manufacturing (which was awful last month) and Michigan Sentiment and then the 3-day weekend so cash will be comforting until Tuesday at least!" Yesterday was an excellent day to take the money and run on our bullish positions, even though we did finally make our levels, my final word in that Alert was: "Be very careful today, I still feel like this whole thing can snap on one bad news story."
We did take earnings spreads on JPM and INTC, both of which seem right on target at 7:30 (see this morning’s Alert for adjustments) with INTC giving us the strong numbers we expected and JPM doing well, but not well enough to live up to the hype.
Earnings season is like party time for options traders, especially on expiration week where we can take advantage of low premiums on the things we buy while still selling high, earnings-inflated premiums on the things we want to sell. The INTC trade was taking the Feb $22/23 bull call spread for .27 (a cheap way to make $1) and reducing our basis by selling 1/2 that number of Jan $22.50 calls for .12 (a ridiculous price for a call that was $1.20 out of the money when we made the trade in the morning but we only sold half, just in case!) and also selling the Feb $19 puts for .17. Those we sold the full amount of as we REALLY don’t mind having Intel put to us at net $19.04 as .17 and 1/2 of .12 = .23 off our net .27 purchase of the bull spread so we’re in for a grand net total of .04 with the upside potential of making $1 if INTC makes it to $23 by Feb expirations. Even if we only cash out our Feb spread for .12 (less than half of what we bought it for), that’s still a 200% profit on the net spread! This is why we LOVE earnings season!
Our Trade Idea for JPM was in that same 10:47 Post and in that one I said to Members: "JPM – Great Expectations so I like the $44 puts for .55, selling the Feb $41 puts for…
Testy Tuesday Morning
by Phil - January 5th, 2010 8:27 am
Wow – what a lot of work to get back to last Tuesday’s high!
As usual, the vast majority of gains came in pre-market trading and the rest came in light-volume, early morning trading while the rest of the day was dominated by every buyer finding a willing seller for 75% of the day’s volume. We saw what happened on Thursday when someone big wants to sell and there are no buyers so we’ll see how long the bull’s luck (manufactured or otherwise) will hold out as we begin to get economic data along with some early earnings reports.
The Ag sector popped 2% yesterday ahead of tonight’s earings from MOS with MON checking in tomorrow morning so we’ll see how wise those last-minute bets were in short order. SONC also has earnings tonight and we like those guys long-term. SONC makes a decent buy/write candidate as you can buy the stock for $10.29 and sell June $10 puts and calls for $2.25 for a net entry of $8.04 with a very nice 24% profit if called away at $10 and an average entry of $9.02 (a 12% discount) if more stock is put to you below $10 in June.
FDO and WOR also report tomorrow morning. FDO will be interesting but a weak dollar probably hurt them last quarter. Tomorrow night we hear from BBBY, BLUD, OHB and Sonic competitor RT, who seem a bit pricey at $7.50. Thursday we get our first real builder, LEN along with STZ and TXI. After the bell on Thursday we hear from APOL, CRI and SCHN with GBX and PSMT on Friday. AA officially kicks of earnings season next Monday with GAP, INFY, KBH, BGG, SCHW, SHFL, INTC and JPM highlighting the reporters.
We have plenty of data this week including Factory Orders and Pending Home Sales at 10 am along with December Auto Sales throughout the day (did you get a new car for Christmas?). Tomorrow is jobs day, with the ADP Report and Challenger Job Cuts ahead of the bell followed by ISM Services (yesterday’s ISM was a nice beat) and, of course, Crude Inventories at 10:30 which are unlikely to sustain $82 oil (USO Jan $40 puts for .80 are a good way to play this). We talked about the other stuff yesterday so I won’t repeat it – suffice to say we have plenty of data this week to see if we justify these lofty levels.
Everyone is talking…
Thrilling Thursday Morning
by Phil - July 30th, 2009 8:21 am
This is starting to get funny.
The Beige Book was certainly no great shakes yesterday but we got our usual afternoon "stick save," with the indexes gaining 1% between 1:30 and the close to bring us to barely negative finish. By the time Asia opened, another half point had been added to the US futures and that allowed China to bounce back and we made yet another half point on Europe’s open around 3am. So here we are at 7:30, with our futures up almost a full point on no particular good news.
Of course, this is the same pattern we got in the days following the last Beige Book – a blow-off top into the cliff we fell off on the following Monday and we’ll have to see what we get this time. This is why I said in yesterday’s morning post: "We’re in "take the money and run" mode on our puts as we’ll be happy with a quick dip and a quick profit as we test our lower levels." You can’t press your luck in this market – especially if you are a bear! I screwed up because I thought the GDP was today but it’s not until tomorrow and that makes a very big difference and explains why the pumpers were able to come out in such force yesterday, as they already think they have the jobs nuber "in the bag."
I’m starting to think the GDP may be in the bag too as we have to pin this new round of market exuberance on our President, who managed to get himself quoted all over the planet saying "the Recession is Over." Now, what he actually said, in the proper context was:
Now, I don’t know if any of you noticed it. Maybe they’re selling Newsweeks by the check-out stand, but the latest cover of Newsweek says, quote, "The Recession is Over." Now, I bet you found this news a little startling. I know I did, because obviously people are going through a tough time all across the country.
This is a really good tactic for Obama to take. He gets to be quoted (like Nouriel Roubini last week) completely out of context but, if anyone comes back to question his wisdom later he can easily point to his statement and say "that’s not what I said at all." …
Thrill-Ride Thursday
by Phil - May 14th, 2009 8:31 am
Wheee, another fun day yesterday!
Right at the top of the morning post I talked about our XOM play on the $70 puts at .70 as a play for the inventories and they gave us $1 straight out of the box (up 42%) and I noted in the first Member Alert of the morning that we should take that money and run. We went back in the XOM puts at 12:33 for .55 and it only took until 1:05 to call them off the table with ANOTHER 63% profit! Also in that same first alert, I set targets of Dow 8,300 and XOM $69.50 and both finished the day right about there. Also in the morning post I mentioned our FSLR $185 puts, which again doubled for the day – that’s up 300% in 2 days on that one. The BIDU $230 puts, AMZN $75 puts and DIA puts were all huge winners as well and we played POT all day in member chat with huge gains on that big dip. I got a great compliment from new member BK who said: "Thanks for the welcoming gift of the POT at a buck - just paid for this month and my membership is not even 24 hours old!" THAT’S the kind of trading we like!
If you are reading all this AFTER the market opens it’s because you did not subscribe to our FREE, NO OBLIGATION trial of the PSW Reports using this link and that’s a shame because you MUST be a Report Subscriber or higher to be an Alert Subscriber. Once you are a Member, you will be able to earn a FULL FREE MEMBERSHIP and even make money by referring others to PSW but there are just 17 days left to sign up as a Report Member at no charge. Report Members get to read the morning post WHILE IT IS BEING WRITTEN – well before the market opens and also have access to comments and trade ideas from 7-30 days old (as the members are usually done with them by them), which gives you a great feel for what the Basic and Premium service is all about – End of commercial!
Of course that second XOM pick was Members Only, as were our sale of DIA $84 puts that gained a very quick 20%, POT puts that made 71% and another POT play that gained 20%. We don’t usually look to day-trade like this but we’re mostly in cash and it’s option expiration week so we’re having some…
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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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