by Phil Davis - September 7th, 2012 8:30 am
This rally is never going to end!
Just look at this chart – we're breaking every level. THIS time is different – not only are we going to go on to 1,450, we're going to 1,500 and 1,550 and then 1,600 and then we're going to 1,700 and 1,800 and 1,900 and then we're going on to take on 2,000 – yeeeeeergh!
Sorry, I was channeling my inner Dean… Now that I've calmed down, I realize that this chart that got me so excited was actually the chart from March 5th and, as you can see from my end of February headlines like "Sell in March and Go Away," "This is the End – But For Who?" and "Fake-Out Thursday (March 8th) – Dollar Sacrificed on an Altar of Lies" – where I pointed out that rumors of more Fed easing (by John Hilsenrath of the WSJ, of course) had dumped the Dollar to 79 and that was accounting for the 1% gain in the S&P that day so – don't be fooled!
The ECB had just dropped $712,800,000,000 in fresh stimulus on the 29th and I asked "Will Another $712Bn Buy Us Another Day at 13,000?" Was I early? Yes. Did we miss the end of the rally? Yes. In fact, our $25,000 Portfolio at the time was so bearish, we were down almost $8,000 with huge bearish bets like 10 Short XRT March $55 calls, 10 short GLL March $17 puts, 10 April SCO 31/39 bull call spreads and 10 SCO short March $34 puts, 5 short FAS $88 calls, 5 March TZA $18 calls, 10 short SQQQ June $14 puts, 40 USO April $40 puts, 5 short FAS March $75 calls, 10 long FAS March $85 calls and 10 short FAS March $89 calls (a bearish spread), 10 TLT March $114/115 bull call spreads and 10 DIA March $129 puts.
The only bullish play we had at the time in our virtual portfolio was DMND, where we had 4 hopeless June $29 calls which we lucked out on when they spike on rumors in mid-March. Every other bullish position had been dumped and we were practically 100% bearish because the rally, at that point, seemed totally ridiculous. Just a months later, the Portfolio turned around and was up $8,000 and by May…
by Phil Davis - June 6th, 2012 8:23 am
Wheeee – isn't this a fun ride?
I warned the bears on Friday that the drop was a bear trap and we told you Monday was "Time to Buy" as CNBC chased the last of the sheeple out of their bullish positions so all their fund buddies (and us) could scoop up shares at super-low prices. Yesterday we targeted 1,284 on the S&P and we were off by a point as it rose to 1,285 at the end of the day – can't win them all, I guess…
In Friday's post I mentioned that the ABX 2014 $30/45 bull call spread at $6.60, selling the 2014 $30 puts for $3.40 for net $3.20 that we had picked up on 5/3 was only at $3.40 and still made a nice entry – ABX has been having a lovely week and popped from $39 to $42 and the spread is now $4.70 – up a lovely 38% in three days but should be well on the way to $45 today and the max gain on that spread is cashing the spread at the full $15 and a $11.80 profit for a 368% gain on cash so being up 38% in 3 days is what we call at PSW being "on track."
The other two trade ideas I singled out as still liking from Friday's post were both CHK plays and the 3 CHK 2014 $25/35 bull call spreads, selling a single 2014 $18 put netted out at a $1.20 credit on Friday morning but did even better as an entry on Friday as CHK fell all the way back to $15.60. Yesterday they were back to $17 (on the way to $18, I imagine) and the spread is already netting another $1.95 for a very quick 262% gain on cash, which is why we love those!
I called for a short on TLT in the $130s and they topped out right at $130.36 at Friday's close, tested it again on Monday and fell back to $127.60 yesterday while our long point on XLF was $13.50 and, so far, not much excitement there. Those were just the trade ideas from the morning post, of course – our real fun came in Member Chat where our aggressive bullish trade ideas during the panic Friday and Monday were:
- TQQQ July $43/47 bull call spread at $2, selling BA
by Phil Davis - June 4th, 2012 8:33 am
What a fantastic contrary indicator!
CNBC hit the panic button this weekend with their "Markets in Turmoil" special report where they trot out their crisis team of Jim Cramer and Maria Bartiromo in an attempt to stampede all the remaining sheeple out of the markets on Monday Morning (see our Friday morning post for our view on why we thought Friday's drop was going to be a bear trap).
"An awful May is replaced by the start of a frightening June" is CNBC's opening voice over and it gets dumber and dumber from there as "America's Financial News Network" bangs the fear drum right at Asia's open (9pm) and then uses the panic in Asia to prove their point to EU and US traders that there's something to worry about.
I could go on and on about how ridiculously evil this network is and how horrible it is that we allow these Financial propaganda networks to manipulate the markets to the benefit of the highest bidder but, in the long run – who cares? If you watch CNBC and take it seriously – just like people who watch Fox to find out what's going on in the World – you reap what crap you have sown.
We are not, in any way, gung-ho bullish but we're also not going to play bearish. On the whole, as we reviewed in this week's Stock World Weekly (available free this week!) - we are "wishy washy" in our positions, cashy and cautious and doing just a bit of bottom-fishing as we HOPE (not a valid investing strategy) that this is the bottom as we HOPE the G8 takes some rational action.
We made a bullish play on the Futures at 9:13 last night, while CNBC was clearing out all the suckers at Dow (/YM) 12,000 but we took that money and ran as we popped over 12,075 (up $375 per contract) early this morning and flipped to a bullish play on oil (/CL) off the $82 line and those contracts are already $82.40 – up $400 per contract at 8am.
We were also very excited to see AAPL back at our buy point of $555 early this morning as AAPL is pure rocket fuel for the Nasdaq when it bounces and AAPL can move quickly back to $580 on any hint of good news and that's…
by Phil Davis - May 18th, 2012 8:24 am
The World is still going to Hell but LOOK – FACEBOOK!
Ah, Facebook will save us. They have magical powers and will turn around the $60,000,000,000,000 Global equities markets with their $16,000,000,000 IPO, right? I mean, who are we to question the power of Social Media – probably the single biggest drainer of productivity in the history of all mankind?
How many Billions of hours of lost productivity have Facebook's 900M users put in over the past few years? How much is it worth to turn millions of people into couch potatoes and can those ever-fattening eyeballs be converted into advertising Dollars? That's the real question as Facebook currently does a pretty crappy job of converting – roughly 1/6th as good at it as Google is.
That won't matter to the people buying Facebook in a Frenzy this morning as they release about 400M shares at $38 a share and I predicted we'd end the day at $45 but maybe $50 or even $55 on a spike up during the day. We at PSW don't have much interest in playing these silly stocks until there are puts to buy (5/29) and then, if they are still in this nosebleed range – we will be very excited to short the hell out of this stock, which is really worth $25 tops.
So we are rooting for Facebook, as it will be two weeks before we can short them with options and we would love to see them at any idiotic valuation at that point. Even with 900M users, a $100Bn valuation says Facebook's users are worth over $100 each. Yelps users are worth just $20, Instagram's $30 and Twitter's $70 – but Twitter isn't public either so that valuation is nonsense.
In fact, no public company values users like Facebook is and 900M means not all these users are Americans or even Europeans, where the average per-capital GDP is about $40,000. No, we're into Asia and the 3rd World here were it's more like $5,000 per person on average. Are we really supposed to believe that Facebook will convert just as much revenue from a man who makes 100 rupees a day as they do from the average US consumers on steroids?
by Phil Davis - April 25th, 2012 8:28 am
A meteoric 10% rise pre-market is being celebrated by the Global markets even though it's really only part of the way back to the $644 high that was, very recently, supposed to be a stepping stone on the way to $1,000. Are we really going to get all excited just because AAPL's earnings didn't suck? That seems kind of silly as I'm pretty sure they were never going to get to $1,000 by just earning $10 a share per quarter, were they?
I have nothing bad to say about AAPL. We were bearish on them at $640 but $550 was our buy target and we didn't take direct action on AAPL yesterday as we were worried they might disappoint so our 1:31 bullish trade idea for Members was the QQQ June $60/63 bull call spread at $2.35 and those should be well on their way to $3 this morning as the Qs are up 2% to $66 pre-market already.
I mentioned in yesterday's post that we had already played TQQQ (ultra-long Nasdaq) the day before and that one was the more aggressive May $103/110 bull call spread at $4, selling ISRG Jan $350 puts for $4.40 for a net .40 credit on the $10 spread. Any offset would do, of course but we REALLY wouldn't mind owning ISRG for $350 if it goes on sale (now $560) but, if not, we'll take the free money. As a 3x ultra, TQQQ will be up 6% this morning, already at our $110 goal and, if they can hold it, we're looking at a very nice 150% gain on just the bull spread with a 2,600% gain on the full spread – either way, not a bad way to play!
We had also taken the QQQ MAY $63/66 bull call spread at $1.90 on Monday and that deal was so good we didn't feel we needed an offset. That's the difference between catching the bottom, like we did on Monday and chasing a run, as we did with the Qs on Tuesday – the rewards of being contrarian investors!
One trade that may not be going well for us was the AAPL weekly $575 calls, which we bought for $20.75 against the sale of the May $590s for $22 for a net $1.25 credit. We didn't think AAPL would pop $600 so fast, so we're a…
by Phil Davis - April 24th, 2012 8:29 am
If it's Tuesday we must be bouncing!
Clearly, from the recent sell-off, we have a whole lot of bouncing to do. Yesterday we failed our Must Hold lines on the Nasdaq, the NYSE and the Russell (the Dow never got there) and the S&P was briefly below 1,360 and recovered to end the day at 1,366 – still below our weak bounce level of 1,372.
That leaves us in the same place as we were on the 11th, when I titled the morning post – "Weak Bounces and Beige Books." As we expected at the time, we made it to our 1,384 level on the S&P and then failed to hold it and now we come in for our 2nd tests of our 3 significant levels – 1,360, 1,372 and 1,384 – that's our range until it breaks and THEN we can make some directional bets.
In this market chop, our best strategy has been to bet both ways and our virtual $25,000 Portfolio is now up about $16,000 for the year but that's nothing compared to our completely neutral FAS Money Portfolio, which has turned a $2,000 spread into almost $8,000 in profits in the same 4 months – just using our very simple strategy of selling premium on a regular basis:
Last year's FAS Money Portfolio was also a great performer and it's a great time to get started following as the current position is down $706 so you sure didn't miss anything but a loss by taking up the current position. It's a great exercise to set up a virtual portfolio and follow these trades along as we are constantly managing these positions to maximize the amount of premium we sell so it's a great practice portfolio for rolling and adjusting short positions, teaching you the value of BEING THE HOUSE!
Speaking of investing value – don't miss our contest to win 2 passes to Berkshire Hathaway's Annual Shareholder Meeting! Hopefully we'll get a nice report from whoever wins – it's always good to get a little insight into what the Oracle of Omaha is thinking.
My thinking is that – while our Virtual Portfolios are all performing very well this year – I still can't shake my overall feeling that the markets are very weak internally. Today we are hoping that AAPL will save us (earnings…