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Why be a Wallflower Wednesday?

There's a global stock party going on and I hope we are invited!

The Hang Seng jumped over 400 points to 19,725.  We can no longer ignore the FXI, an ETF of 25 major Chinese stocks that I have been avoiding due to the inclusion of ICBC, a bank with a p/e of 32.  But you can't ignore this chart or what is now going on in China so we will start watching this along with our usual global indexes.

I can't bring myself to buy these stocks at the moment (we do have CHL) but ICBC jumped another 11% this morning, LFC rose 8.2% and Bank of Communications (another holding) gained 6.2%.  Despite these amazing performances, the Hang Seng was out gained by mainland China's market which rose 5.7% this morning to 10,137 - Now that's a Santa Clause Rally!

"People have to realize hedge fund managers from around the world are looking at China, Japan and India as the big plays for next year," said Chris Tang, a fund manager with Marco Polo Investments. "

China is not immune to growing pains though, the CB is concerned about inflation and the auto industry may be overproducing (as Chinese demand is NOT what people tell you).  And please, let's never forget how this economy is being built – it's not all fun and games at the Barbie factory!

The rest of Asia was up but a little more modest than China, who is clearly the life of the party (this is why my 2 girls are learning Mandarin!).  Toyota, Honda and Mazda all gained about 2%, taking the Nikkei to a 7-month high at 17,223 and all of this went on as an earthquake knocked out a lot communications throughout Asia!

Europe continues it's slow but very steady march up, not looking much different than our major exchanges with the CAC, DAX and FTSE all just off slightly from their highs – only they are not fretting over it like our traders are!

Over here, we had a very nice day yesterday and hopefully we can return to looking at our upside targets again.  I am still calling for 75% cash into the long weekend but, if we survive next week, we have plenty of positions we can add to:


Oil will face a test of confidence today at the $61 mark.  It would be astounding if they can't crack that ahead of inventories tomorrow which will still be showing the effects of last week's Houston ship channel disruption.  I'll be happy if we can just firm $62.40 as a nice top for the week!

Kustomz points out that our man T. Boone is on the case and the roaches are baiting yet another ETF trap through the NYMEX in order to rustle up some new money as it is (and I kid you not – they actually say this) "designed to attract small investors."  This is clasic late-stage Roach Motel Theory in action as the trapped roaches must pull in new money if they are going to make it out the door.

We get the natural gas inventories as well and the warm weather is just killing that market!  Zman writes that our "heating degree days" are running over 20% below normal and we were only willing to pay $4 for gas in September (no hurricanes), when we still thought the winter would be cold…

The dollar will be very interesting to watch at the 84 level and will likely be moved by the refinancing index, which shows loan demand has fallen to a 5-month low, down almost 20% in 2 weeks.  Essentially, what this means is that, even at an average of 6.12% for a 30-year loan, people simply are not willing to buy homes at these prices!

Gold got very little boost from the Iran sanctions and may fall sharply if this news doesn't drop the dollar, something gold traders are getting a little tired of waiting for something bad to happen…


Oh and Gerald Ford died as our oldest President, at 93 – our only President that was never elected in a national election.  He came into a very tough situation and did what had to be done and took the fall with grace and dignity.

Amazingly, he was only ever elected a congressman in Michigan by about 100,000 voters but he was reelected 12 times and gained the respect of Congress over those 26 years.  

In 1975 he ordered the arilift of 250,000 Vietnamese refugees and gave them safe passage to the US, a brave, unpolitical, charitable act that changed so many lives for the better.

Two people tried to kill him yet he kept marching out in public and he was the first incumbant president to agree to debate his challenger, who beat him by 2%. 

Carter aknowledged Ford at the time saying at his inauguration: "For myself and for our Nation, I want to thank my predecessor for all he has done to heal our land."   Amen.


Tempting though it may be, it's another day to watch the action and see what's moving where so we can have a clear head (and virtual portfolio) moving into the new year.

Looks like we may have picked the wrong day to initiate AAPL yesterday as there seems to be some mounting options issues rolling around the boss!  Word is that Jobs has had to retain counsel as the questions are heating up.  While it may be old news, it's new to most people watching today so let's look for a possible buying opportunity!  Here's a great WSJ video on the options scandal in general.  I think it is this, and not industry fundamentals, that are holding back the SOX this year.

Not all biotech news is bad.  ANX is moving into phase II with a drug that is designed to lessen the toxicity of chemotherapy.  They jumped 11% yesterday to $2.93 and I'm going take the Jan '09 $2.50s for $1.25 as it's not a bad premium and I will add monthly while selling the Apr $5s for .20 or better.

I'm not comfortable just having the puts on CHKP.  It was meant to be a spread  and so far we only have the Apr $20 puts, which gained 50% in the past 2 weeks as a backstop to the Apr $22.50s which I targeted at $1.15 back on the 18th.  It hit my target yesterday and thanks to Kustomz for reminding me why I liked them!

I like having a look at HAS as they are about to run into their rising 50 dma at $27 after 2 months of consolidation.  They just got a renewal on Star Wars toys this morning, key in this 30th anniversary year.

IBM will be rockin' and rollin' today as Think Equity moves them from a sell with a $70 target to a buy with a $110 target!  I've been waiting for a pullback that just isn't coming on this one!   8-(

LLY got their Zyprexa patent upheld through 2011 and should be back in good shape with our Apr $55s, which have an adjusted basis of $1.45 and may still be cheaper than that this morning.

NBR has become something brand new that I love – an oil company with an option scandal Boo-Yah!

UNH got their stock option investigation upgraded to "Formal" by the SEC!

We were discussing VZ and the "last mile" wars in comments yesterday and I just want to make sure people get a chance to read Reinharden's very good summary of Wimax vs. Fiber Optics as we will be dabbling in this space in the year ahead.

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  1. I forgot to say that my Apple target is the 5% rule but it may go lower so let’s be careful!


    HAS has Feb $27.50s for $1 which I like. I think we may need to get out if it falls below $27.

  2. Phil.

    Are you still looking at the Feb 07 85′s for AAPL?

  3. hello phil – do you suggest to add more aapl calls today. please advise
    Thanks !

  4. AAPL – LOL, that train has sailed! Now we can get the Feb $80s for $4 and I think that’s one I’d be happy to DD on if it drops further.

    Apple will be releaseing an official filing by Friday and there’s a chance this whole thing could be over by then (or we can be screwed so realize this is quite a gamble!).

  5. Hopped on the AAPL train with Feb 85 calls at 2.50. RSI on daily chart is at 28.

  6. It’s a long way to $85… the Jan $85s are $1.50 still, would be nice if you can sell close to $2 on a spike, that should do you well into earnings!

    Jan $80s were $4.90 this morning and you know I would take that in a heartbeat for a no-lose sceario with .90 in my pocket!

  7. Meanwhile – WOW as to the rest of the market!

    Oil patch still weak, crude down .31 just under our $60.80 mark, but I wouldn’t bet against anything just now. Ngas $5.90…

    PD and RTP still weak but I’m watching them nervously


    Nov New home sales up 3.4% – BTE!

    Inventories working off a touch

    For some reason this hurt oil – perhaps less pressure on the Fed to ease means a stronger dollar which can push crude over the edge…

  8. Interesting, on my AAPL vol chart it looks like pre open the volume of traded shares was much higher per minute than since the open. Is this a typical action for this kind of sell on the news action?

  9. wow aapl diving

  10. Nasdaq would be up 20 if Apple weren’t killing it!

  11. think it will go below 77 this week

  12. Pitch – you need to get a more up-to-date trading platform! Apple recovering is the story. We’re not out of the woods yet but if it holds $78 through 11 we probably will be.


    Uh-oh – exchanges may close for Ford’s funeral! If the funeral is Tuesday, that would make 4 straight days closed – they NEVER do that!

  13. I just got on and didnt check today’s low.

    Guess question is do you think today will be THE day or will it get even worse sometime later this week. Of course if the news on Jobs is not good, then Katie bar the door.

  14. We’ve known about Apple option issues since June at least, they delayed their filing and got a delisting notice (automatiic) from Nasdaq on the 15th which caused them to drop from $90 to $82.

    This is/was a $75Bn company that makes over $2Bn a year and is growing around 15-20% not even accounting for new products (which may or may not exist).

    Don’t get me wrong, if this gets worse or they blow earnings, they could be back at $50 on the 18th but I think that report was timed to take the stock down today as there was nothing in it that actually happened yesterday (or this week even!). Whenever people are manipulating the markets to get me to sell – it really makes me want to buy!


    10:26 Reminder: Petroleum inventory data is delayed until tomorrow, due to the holiday

    Hmmm…am I the only one still in XOM puts? Still holding the Jan 75s

  16. No, I’m there with you Slackin.

  17. Great line from Z’s blog:

    “Iran’s parliament has voted to urge the government to “revise” ties with the UN nuclear agency in a move designed to reduce the country’s co-operation with the international atomic authority. Anywhere else the legislative body would be urging their president to act with some measure of caution towards the UN , but not in Iran, on no! You can almost here the Israelis warming up their afterburners.”

  18. Phil,

    I managed to sell the Jan 80′s yesterday against AAPL stock I already own. With the big potential downside (50′s), should I look at a protective put?

  19. If “apparently falsified” stock option documents turn out to be indeed falsified, Apple will drop a lot more.

  20. XOM – I’m considering rebuying but I think I’ll wait until tomorrow’s likely morning pump. Look at the bounce by OIH this morning – still plenty of shenanigans to be played it looks like.

  21. Soccer, the “falsified” documents were supposedely falsified by former employees, as Phil said there was nothing in this “news” that wasn’t disclosed in October. To me it seems as blatant manipulation. Can we see lower, sure but not because of the documents I don’t think.

  22. Yev – we knew about options backdating, but not about falsified documents provided to the Feds. The news that Jobs hired his own legal representation, separate from Apple’s lawyers, tells me that there is more to this story than just backdating (which is a crime in and of itself)

  23. Soccer I totally agree. Talked to a couple guys who’ve loaded up on AAPL all year and one got up and sold all his shares before we could finish our conversation.

    Every kid on every block in America has either an IPOD or a knock-off MP3 player. Nobody really believes that the IPhone is going to be anywhere near the catalyst the pods were. Apple computers are niche products and always will be. What is there to really drive this stock at anything near the rate seen for ’06? Risk is a bit much to hold this stock.

  24. Yes, that’s the distinction. Giving false docs to the Feds stinks of Enron.

  25. Soccer and Yev,
    I am no lawyer, but if I did nothing wrong, but was head of a 75 B company and had two former employees that the Feds were investigating I would have a lawyer right on top of it all. It is not an admission of guilt.

  26. We need a clarification here:

    What it says is “company officials may have falsified stock-option documents to maximize profits for executives.”

    It doesn’t say anywhere that documents provided to the Feds were falsified.
    There is a big difference here.

    Slackin and Soccer what both of you just said is completely different then what is stated. This is how rumors start and this is exactly what hedge funds pray on.

  27. hello phil – if you think that aapl might have big swing either way, can we play spread (buying jan 85 call and jan 70 put). please advise. Thanks !

  28. Daniel – c’mon now. The 2 former officers accused of the fraud were General Counsel Nancy Heinen and Chief Financial Officer Fred Anderson.

    Forgive me for not buying the innocent CEO bs (a la Enron) when the general counsel and CFO are in on the fraud.

  29. Looks like a global rally, no doubt. DAX trading crossing 6600 for good, looking to hold a new record level EOD. Nice pic in todays report, Phil, with voracious Chinese economy dragon, hungry for raw materials of every sort?

  30. If the entire daily volume of a stock being sold in the first hour of trading only takes a stock down 4%, then I like that stock!

    Jobs got the lawyer weeks ago – it is only news if you didn’t hear it and the compilation of all these “events” into a news story on a slow week just stinks of trying to shake out the callers ahead of a good quarter.

    There are 400,000 open contracts above $75 on Apple for January and the stock has already been jammed down below the 50 dma to $82, pushing 300K of them out of the money but that isn’t enough for someone!

    Meanwhile, there are now almost 200K put holders that are now in the monthe with another 150K beween $75 and $65 that have already jumped 50% today.

    So Jobs hired an attorney when a Federal investigation is being conducted – whoa, stop the presses – that must mean he’s guilty of something! I just don’t trust “anonymous sources” who comment on SEC/Federal investigations who comment to a SF “Law Journal”

    Timing this report just 2 days before the ammended filing comes out seems a lot less like breaking news to me than a blatant attempt to maniupulate the stock. If a manipulator knew the real news was bad, they certainly would have waited before telling you so they could short wouldn’t they?

  31. Not to mention…they are both gone.

    But Rangaiah has an excellent point. My puts are far into the money, perhaps time to hedge up on the high side. Phil, thoughs on a straddle here?

    SOMETHING is undoubtably going to happen when everyone returns from the slopes.

  32. On the China front, FXI is the ETF China Index, with options.
    Good for a long term position on a pullback to 108.5?

  33. What do you guys think of SHLD here, looks really oversold here and on support?

  34. HPQ hitting 52 W/H, taking some off the table. still believe 45 is possible but i’m not greedy.

    MET off the table.

    AAPL i am sure is cooperating and being transparent as possible. Buying opportunity as this will be cleared up.

  35. I don’t like the Jans – just 2 days to react!

    There are several good apple plays:

    Time spreads of the $85s: Jan ($1.65), Feb (2.80), Apr ($5.40) and Jul ($7.70)

    On the put side I think the best bet is to pay $1.30 to spread the July and Apr $75 put as there’s a very good chance of having $1.30 left, even if Apple is at $100 in April.

    I’m risking it to the upside only at the moment but I will likely grab a cheap put to protect myself ahead of earnings (or if we break the 5% rule today).


    Gold fell below $630 again…


    Look at UNH recovering from yet another scandal news (and that IS a formal investigation).

  36. For followers of RIMM, it is sitting on its early October-December trendline.

  37. Phil, I have no AAPL positions, so this is just my $0.02.

    1.) If Jobs hired his own legal representation, separate from Apple’s lawyers, his personal interests are different than the company’s. Think about that. Why pay for your lawyers out of your own pocket (lawyers are expensive) if you could have the company pay for it?

    2.) As a general point, any company that delays the filing of any SEC document (10-Q, 10-K) should be penalized by shareholders. It should never be accepted or normal practice.

  38. Slack – If you have AAPL puts that are in the money then taking the $80 calls is a no-lose for you through Friday. While you may be capping your gains where they are now, you are also protecting them while giving yourself a very cheap entry should my theory be right and this thing takes off.


    FXI may never pull back!


    SHLD – I have the ’09 $190 leaps, they’re the same price I bought them for on 11/11 when the stock was $10 higher so sentiment must be building my way.

    I think they are just about done going down – I said yesterday it was about the commercial RE, not about the operations.


    HPQ Jan $40s are a nice double now, not getting out but I will stop out if it flinches on me at this point!

  39. RIMM – I hope it finds some support, I was counting on taking out my putter cheaper than this!


    Soccer – Billionaire logic is not like millionaire logic. A Billionaire will spend an extra $500K just to protect his reputation or to have “his guy” oversee the proceedings. The board may be putting pressure on him to give up $100M in grants that are totally legit “just to speed things up.”

    Lots of very good reasons for Steve to have a lawyer including the fact that, politically, the company’s regular firm may not be right for this job.

    I’m not saying they shouldn’t be punished, this options backdating is a scam of epic proportions but let’s not go on a witch hunt until we at least know it’s a real nose!

  40. Phil,
    Are you looking-thinking GOOG strategy with its rise today?

    More on the AAPL front:
    Apple Computer: JP Morgan says “Recorder” article has little news on Steve Jobs; reits Overweight – Bloomberg


  41. Thanks for the Call strategy Phil! I’m lining this up presently for my Jan 85s.

  42. GOOG – I’m thinking I should have had more faith in my $450 bottom call!


    Calls – the trick is to buy yours first and try to selll at the top, maybe back at yesterday’s close…

  43. Hello Phile – Now that GOOG is moving up, do you suggest any GOOG calls.

  44. sorry for the typo Phil.

  45. I am very strangely losing no money on my DIA Jun $124 puts…

  46. 11:58 AAPL Apple Computer: No new facts from options case- Soleil (79.76+ -1.75) -Update-

    Soleil notes an article today in The Recorder, regarding Apple’s stock options investigation, is putting pressure on the stock. The firm says the article does not provide new facts regarding the alleged backdating, but does claim that CEO Jobs has retained personal counsel. The firm notes the article does not provide a link between CEO Jobs retaining outside counsel and any personal involvement Jobs may have had, beyond what Apple has already disclosed. The firm says they to assume that if the board had determined that actions taken by Steve Jobs had raised “serious concerns”, they would not have stood behind current management. Further, they say had Jobs actually been intimately involved, one would assume that he too would have retained personal counsel long ago, as both Anderson and Heinen did.

  47. Soccer,

    Tons of reasons for Jobs to get a lawyer.

    Overzealous prosecutors or regulators are BAD news! Ask Martha Stewart – convicted for lying to a fed. not convicted on substantive crime.

    What Fed would not like to put on their resume that they bagged Jobs.

    You have to be careful what you say to those people and by having the lawyer Jobs does not have to talk to them directly. Plus he can devote his time to the business.

    And these are just a couple of reasons.

  48. Phil:
    GOOG, “maybe back at yesterday’s close…”
    Sell at a top, or sell calls at a top I get, but “yesterday’s…” implies GOOG seeeking a lower price than today?


  49. 12:06 GOOG Google sets new session high, attempting to reclaim its 50 ema at 466.71 (466.60 +9.07) -Technical-

  50. Got the AAPL feb 80s for 4.40 ~ now what ~ LOL

  51. Apple back over $80

  52. GOOG – no, I was talking about Apple (at least I thought I was!).

    Google is getting away fast but I’m just not dying to chase it, still down 3% from where I almost took it before so I feel like I can afford to wait just a bit.


    AAPL – ideally now you sell the Jan $80s ffor $4.40+ so you have 0 down and you make a 1M% profit on whatever you get on Jan 20th.

    Once you get your $4.40+ back you are free to bet again or just wait for the profits to come on the original play.

  53. Thanks.

    I was hoping to sell the Jan 85s for 4.40 ; – )

  54. I’m looking to get some XOM puts again.

    The main reason is XOM’s Russian Sakhalin-1 project.

    As Phil mentioned last week, Putin robbed Sakhalin-2 partners of 51% of the project. Shell reduced its share to 27.5%, from 55%; Mitsui to 12.5%, from 25 %; and Mitsubishi to 10%, from 20%.

    Sakhalin-2 partners spent about $12 billion so far and Gazprom will pay $7.45 billion for the controlling share. That repays the partners’ investments to date and gives Gazprom 51% of the 4 billion in oil reserves for free.

    How can Putin resist a simialr “deal” on Sakhalin-1?

  55. AAPL , stinks for the poor old guy that got advice to buy AAPL and sold thinking it was going to 50, but hey if that’s the way you trade then you deserve it. WS can be ruthless.

    Cramer even mentioned it before the break. That some stocks would be manipulated down, but if it werent for these types of shenanigans we wouldn’t make as much money as we do.

  56. As I’ve mentioned, I’m mostly not paying attention to the market this week. That having been said…

    1) I DD several AAPL positions at these lovely prices.

    2) I saw no new news in the report.

    3) If Jobs retained counsel, for all we know, it was a divorce lawyer or he wanted a new will to set up a charitable foundation.

    4) How exactly did anyone think that a company backdated grants without “falsifying documents”? As soon as you wrote down the backdated grant date, it was a “falsified document”. Stupid that the market reacts this way.

    5) None of this means that the stock might go back up.

    6) I remain of the opinion that the impact of AAPL’s stock backdating (which we know was limited to 15 grant dates) (although each grant date could affect hundreds of employees) will primarily be to restate away some prior profits. And possibly an impact on current cash position to pay taxes related to the restating.

    7) So, all things considered, I hope for an explosive rally if my thesis is correct and the uncertainty of “Mr. Jobs might have to leave” and future profits are both resolved.


    PS: As to AAPL in terms of no products and always a niche company, I can’t help but notice that AAPL should pass Gateway and move behind HPQ and DELL as the #3 computer vendor. Not a bad “niche” and one that is growing substantially faster than the overall computer market. I’ll take that in a “niche player”.

  57. Drats, dropped the phrase “this quarter” from “AAPL should pass Gateway and move behind HPQ and DELL as the #3 computer vendor” “this quarter”. ;-)


  58. AAPL – 44M shares and down a buck. So they scared 5% of the shareholders into selling but there were 2 days worth of buyers waiting to snap up all those shares in just 3 hours of trading – ahead of earnings – under a breaking scandal….

    Imagine what will happen to this stock if they get good news!

  59. Hello Phil – if you are advising to sell aapl jan 80 call at 4.40 plus, do you mean sell to open (naked calls ?). sorry if I am asking dumb question. I am still learning options trading

  60. I’ll also note (as I’m breaking my not paying attention concept) that this means that AAPL has partially filled the Oct 19 earnings-induced gap. If you’re into things like gap filling…

    Also nice to see C continuing to move up. Too bad BAC isn’t keeping up.

    MSFT is fine.

    And DIA bounced off 12,494? Hmm, 12,500 isn’t looking like much of a stretch. But superlight volume on the DOW… I’ll stick with “Hmm”. ;-)


  61. Angar, I’m all but certain that Phil was talking about selling Jan calls against previously purchased Feb calls. Do not, do NOT, DO NOT sell naked calls against AAPL unless you’ve wealth to burn.


  62. Did AAPL register iFraud yet? LOL

    Just kidding.

  63. TXN not to jump the gun but TXN moving into safer territory a move over 30 today would be NICE.

    SNDK nearing my buy level for a quick trade.

    GOOG up nearly 10 i would categorize as NICE.

  64. Anybody else notice that everytime CNBC runs another AAPL (FUD) segment that the PPS takes another bump up?

  65. I’m thinking AAPL should get iChing. ;-)

    Then it can either provide eastern wisdom *or* it can be the sound of cash registers. Nothing like killing two birds with one stone. ;-) Of course, that’d probably be considered somewhat impolitic in China…so maybe not.

    As we’ve now at least tangentially referenced “iPhone”, I’ll say that branding would seem to require the presence of iPod in the name. But considering iLife and iWork, one would think that iTalk would be okay as it reflects what one actually does with the product (in theory iPod was supposed to be the center of your digital world and have add-ons…but not much has come of that yet). Anyway, Apple has a lot of lawyers and lot of creative people and they’ve been in way too many lawsuits over names. So I’m all but certain that they didn’t screw up the naming process (again!).


    I also like IGW or SMH as a longer-term play as the semi’s seem to almost always get pounded in the 4th quarter (seemingly every year). ’cause everybody forgets that you order components for delivery in the third quarter in order to make stuff and ship it by ship and rail to be in the stores for the fourth quarter.


  66. Gene Munster, analyst at Piper Jaffray, pegged the odds that Jobs was involved in any shenanigans at less than 5%.

    “We believe there is a very low likelihood that Steve Jobs was involved in the falsification of options documents, although we expect the investigation may continue to point to former Apple officers,” Munster wrote Wednesday in a research note.

    He reiterated his outperform on the stock.

    Further details about Apple’s situation are expected to be unveiled Friday, when the company plans to file several quarterly reports and its annual report for the fiscal year ended Sept. 30.

  67. hello reinharden – thanks for keeping me straight. I do have FEB AAPL calls and do i need special approval from e-trade to sell Jan calls against
    them. kindly elaborate.

  68. Apple reiterates October statement that their internal investigation was satisfactory. Jobs did know about some options backdating but was not aware of the ramifications was the official statement at the time.

    The trick here is that Jobs was too high up to be involved directly. He may have authorized the grants, and even the dates of the grants but he did so under the advice of counsel (Apple’s – hence his own attorney) and under the direction of the CFO, who would have handled all the details.

    At Jobs’ level, his involvment would have been to allocate a percentage of income to options and then assign the task. The mechanics of it would have been far away from him, including his own grants. What he probably did wrong was say “yes” when asked if it was ok to change the grant date but when your attorney and CFO ask if it’s ok to date something – you do tend to assume they know what they’re doing…

  69. Angar – alas, as to the mechanics of selling Jan’s against Feb’s, I’m going to defer to Phil to attempt to answer as the process sometimes varies from brokerage to brokerage.

    And, um, I promised my girlfriend that I’m not paying attention to the markets today…so I really need to quit doing so soon.


  70. Phil you saved me some money today! AAPL has nearly filled the gap, but remember….the downtrend it was on to begin with!

    Please comment on how a negative story could result in turning the stock around? AAPL lost over 15% since turkey day…

  71. left this out….:

    Why won’t it simply resume it’s downward multi-week trend?

  72. I can’t resist.

    The story that drove AAPL down was essentially of interest because “federal prosecutors are examining the documents to determine whether criminal charges should be filed”.

    Duh! I mean, it’s kind of like saying “Local police are examining radar gun displays to determine whether speeding tickets should be issued”. Local officials say that speeds more than 20 mph above the speed limit could result in reckless driving charges. Reckless driving is often associated with driving while under the influence which carries a mandatory jail sentence. Killing someone while under the influence is often prosecuted as manslaughter.

    And this morning the markets decided that that means that Mr. Jobs was going to jail for manslaughter ’cause the police looked at their radar gun…

    Or maybe it’s just me who thinks this is all overwrought…


  73. Slackin’ – FYI my response was being written before I saw your question, so it wasn’t directly applicable. Sorry if that results in any confusion.

    AAPL is volatile. And it was driven up by positive rumors prior to Thanksgiving and it’s been driven down by negative rumors since.

    Whether is goes up or down from here therefore arguably depends upon what the next sets of rumors or news will be? I’ll not reiterate the rumors, but on the news front, we have a probable resolution to the stock options stuff as of this week followed by MacWorld in early January and earnings in mid-January. Each of those events could move the stock either up or down.

    My personal thesis is that, barring obscene runups from rumors ahead of time, each has the potential for tremendous upside. But, obviously, the opposite could be the case.

    Frankly, while I suspect that, for the Christmas quarter, AAPL will be reporting the best revenue and best profits in the history of the company (sans possible special charges related to the stock options things), I also note that AAPL didn’t run out of anything on their website this Christmas. Now, it was abundantly clear that they had some new inventory management things in place…but nonetheless, I’d have preferred a little bit that they run out of a few things. Even so, I don’t know whether that was a negative or a positive.

    Amazon ran out of iPod Shuffles a half-dozen times (and the other iPods dominated the electronics category most of the Christmas season), Target ran out and stayed out of various iPods, Best Buy and CompUSA intermittently ran out. Wal-Mart decided not to even sell the most popular ones online. Negatives or positives?

    I guess, at the end of the day, for me it’s a question of justifying a price and deciding whether or not the changes in the current price impact that. And even after the last month of stupid rumors driving the price down, I think we’ll find that the fundamentals support a higher price once reality is announced.

    But, of course, I could be wrong. ;-)

    And now I really am going back to paying attention to my girlfriend instead of the markets.


  74. Phil,

    seems like all you guys trade are the most popular stocks, and oil.

  75. AAPL Jan $80s at $4.40 were for selling against Feb $80s bought at the same price earlier today. I am very much against selling naked calls in general as there are very few who can afford that risk.

    Whether or not you can sell calls is a function of your broker so you may need to ask them about it. To me, always buying premiums and never selling them is not a good long-term strategy.

    The brokers would rather you didn’t as it encourages more buy-and-hold behavior than if you just have naked positions and they only make money when you churn.


    Soccer – no IFraud but I hear they may be coming out with an I10, 5 with good behavior! ;-)


    IGW and SMH still need to show me something before I get on board!


    Time for OIH to go negative again.


    AAPL – negative story got all the remaining sellers out in one day, nothing left but die hards! Follow that up with positiive news and you’ll get the stock going up with NOBODY selling and all the wishy washy sellers of the past month going crazy trying to get back in.

    On the way back up there’s the guys who sold at $80 who don’t mind getting back in there on the way up, the guys who sold at $85 who don’t mind getting back in there on the way up, the guys who sold at $90 who don’t mind getting back in there on the way up followed by the momentum players who jump in as the stock takes out it’s all-time high.

    See, easy!

    Betting against Apple has been the stupidest play of 2004, 2005 and 2006 (well, the second half anyway!).


    Rein – it’s hard to be the cooler head sometimes – but I find a cold pint always helps!

  76. Rozany we dabble in dabble as well, do you have any suggestions?
    I tried trading unpopular stocks but i lose money that way

  77. Roz – while I’m always happy to look at anything, I prefer popular stocks because they tend to have liquid options contracts. I own stock in BSEG that is “up” 30% from when I bought it but I haven’t been able to sell more than 5% of my shares on any single day without dropping the price.

    When sharing stuff with the group, it is irresponsible (ie. Cramer-like) of me to send a bunch of people chasing after something they will get stuck in.

    Also, I’m not really a value player, outside of my long-term plays. I’m looking for predictable events that will get a predictable reaction over a predictable time period – something that generally works much better with larger participation in a stock.

    I’m always happy to look at anything you may want to suggest though as I love to learn about new companies!

  78. aapl trying to go pos

    waiting on those jan 85s at 4.40 – : – )

  79. hello phil – thanks for detailed insight. I cannot afford to sell naked calls
    and still learning the concept of spreads. requested e-trade to upgrade my option level to 3 or 4 so that I can follow your tips. Thanks again !

  80. Piper chose to reiterate “outperform” on Apple. It would have been far safer to remain silent but the analyst (who is very good) chose to stick his neck right on the block with Jobs.

    Any analyst that helps me perpetuate “shenanigans” as a buisiness term is a freind of mine!

  81. Hi Phil,

    What are your current thoughts re: MRVL. Thanks.

  82. MRVL – if the SOX don’t pull it out soon, we may still get that market correction, which will be led down by the semis.

    Odd as it may be to talk about a collapse with the Dow skimming along 12,500, it’s a tower with weak foundations if the SOX and TRANQ aren’t performing up to par.

    Right now the transports are acting like 2,600 is some sort of foreing country just 6 sessions after spending most of 3 months above it.

    The SOX took a nasty hit off the 470 line this morning and that can NOT be a point of contention as they were at 559 when the Dow was still at 11,000 and the Nasdaq was 2,300.

    So we’d better all hope Apple gets to 100 fast along with Google making a more serious attempt than it has today to get back over $480 or this market may get punished when the big guys come back next week!

  83. Addictions are such horrible things…


    Is it just my imagination or has no one mentioned the housing report?

    In a perhaps unfair appropriation of text from “Between the Hedges”

    BOTTOM LINE: Sales of new homes in the US rose more than forecast last month as lower mortgage rates and more incentives helped builders reduce inventory, Bloomberg reported. The 3.4% gain followed an increase the prior month that was larger than expected. The median price of a new home rose 5.8% in November to $251,700. This was the biggest year-over-year price gain since June. Moreover, the median new home price is back to it second-highest level on record at $251,700. The only other time it has been higher was April of this year at $257,000. The supply of new homes at the current sales rate fell to 6.3 months’ worth in November, the lowest since May, versus 6.7 months’ worth in October. The ratio has fallen from a high of 7.2 months in July. New home sales soared 22.5% in the Northeast, 22.4% in the Mid-west and 19% in the West. Sales fell 9.3% in the South. I continue to believe the housing market is stabilizing at relatively high levels. With prices approaching record highs and inventories falling rapidly, the case for a housing “hard landing” looks increasingly difficult to make. The 10-year yield is rising 4 basis points on the news and the homebuilding index is outperforming, rising 1.2%.


    Haven’t read the report, but that summary makes it seem pretty newsworthy.

    Posting and running…


  84. Thanks Reinharden & Phil on the AAPL views. I guess I would have thought it would take some kind of “behind the lines” knowledge of something fundamentally wrong to drive such a major stock down 15% in a month, not just rumormongering. Good points though.

  85. REIN higher rates on the way.

  86. Big volume surge a bit ago on a 401K holding, mastercard MA. Haven’t found much news though. I wouldn’t mention it except that it seems to be continuing at the moment.

  87. Slackin – Re: AAPL

    I can’t tell you how disconnected the performance of the company sometimes seems to be from the performance of the stock. With AAPL, INTC, MOT and a few others, I’ve almost come to dread the phrase “best quarter in the history of the company” ’cause I gotten spanked quite a few times over the years when the stock sold off on that news. ;-)


    Kustomz: Even with higher rates, seems like housing prices moving *up* and housing supplies moving *down* might potentially mark a near-term bottom.

    And I’m not convinced that the Fed wants to rock the boat before late Spring/early Summer anyway.


    Nice to see DJIA back at 12495…maybe we’ll take out 12500 today after all.


    Phil – Semiconductors. I agree that it might not be *the* bottom yet, but those ETFs are definitely on my watch list. And, as I like semis in general, I own positions in them already.


    Well, the DJIA peaked above 12500…

    Back to the post-Christmas “relaxing with other people’s families”. ;-)


  88. Phil,

    I don’t have any specific suggestions. I was just thinking of stocks that are less visible and less prone to manipulation, more “off-the-radar.” certainly, liquidity is an important issue. but stocks that might have a better chance of trending in one direction or another for more than two days in a row, quietly going about there business without all the hype. steady movers (up or down) irregardless of what the broader market is doing.

    I know – if we could find stocks like that we could all get rich.

  89. Why the silence on the oil puts? I loaded up as the posts suggested yesterday. All the stocks up today. Being killed by these. PTR up $4. You folks still confident of a down turn?

  90. reinherden – you’ll be back :-)

  91. Re: SOX, look at a stock like SNDK, hangs in there as if it is about to got 30 dollars. Got some Jan45Cs at .70, even so, I can t help the feeling that I am making a mistake, why SOX is acting so weak, and that in the face of world wide positive market development. Is this still the tech hangover from the last big crash?

    Crude oil down, XOM and COP up, same old decoupling we have been seeing for weeks. Wonder how tomorrows inventory will play out on crude prices and big oil cos. Likely another big surprise draw, jump in crude, and big oil heading towards records highs, coz the boys want to finish up the year in style, right?

  92. Rozany, DHR is a nice, fairly steady, growing, well-managed stock that escapes notice most of the time.

    It’s a more than six-bagger in 10 years (along with two 2-for-1 splits).

    Worth taking a look at, but I don’t know that it’s all that suitable for options plays (although I’ve not looked at the LEAPs).


  93. REIN with all the incentives given to buy a new home, this news shouldn’t be a surprise.

    Rozany i want my stock to be manipulated, it works both ways. Big moves up and down yield highest returns, if your on the right side of the trade of course.

    I am watching SNDK as we speak and i see it being dragged down to its support of 42.38. I like it for a quick day trade.

  94. AKAM up $1.78 today
    Glad I bought AAPL this morning, $77.77

  95. Pantarei – Everybody’s afraid that the semi’s have grown capacity too quickly. But most of the everybody’s are being stupid about it. Semi’s have to order capacity two to three years ahead of time. So the fact that there’s a potential glut in 2007 is because they need to capacity for 2008 and 2009.

    Also, semi equipment providers have had a couple of good years as people have been scrambling to switch from 200 mm wafers to 300 mm wafers. And everyone and their mother has decided that making flash is a great idea. And AMD and INTC and even Freescale and IBM have headed back to the races and are rapidly driving from 90 nanometer parts to 65 nanometer parts to 45 nanometer parts.

    But when you move from 200 mm to 300 mm, you more than double capacity. And if you move from 65 nm to 45 nm, you about double capacity.

    So people are doing the math on the basis of there being “4 times capacity” for a market that’s growing 10%, 15%, whatever. Without realizing that it’ll take a year or two to bring everything online, work out the bugs, etc. And then you’ve got to make that multi-billion dollar fab work for 5 to 10 years.

    So the semis get cheap. When, really, it’s the semi equipment providers who have the greater near-term risk…


    PS: That isn’t to say that 2007 might not be a horrible year for the semis. There is excess capacity and if consumers stop buying stuff, component sales will fall off the proverbial cliff as well. But, as yet, we’re still in the realm of “excess capacity” versus a glut of capacity. And an accident/earthquake/fire/tsunami at one major fab could eliminate much of that “excess capacity”.

    PPS: And this all neglects what happens if thin film photovoltaics take off (which are essentially semiconductors and can be made on mostly the same equipment). Go ask CY about that. ;-)

    PPPS: No really, I’m not here. ;-)

  96. refiners are creeping up- how do we play the sector into tommorow’s report?

  97. You Know It’s Bad For Windows When…
    The editor overseeing has switched to a Mac. Robyn Peterson, executive product director for Ziff Davis, announced last week that he has jumped ship. “When Apple switched to Intel processors, I switched to a Mac. It was that simple. And judging by Apple’s latest financial report, millions of you are coming with me,” he wrote. Peterson proceeded to give other recent switchers a few tips for adjusting to life without a “Start” menu, a right mouse button and a C: drive. (RTR),1759,2072352,00.asp;

  98. Wow, I had to go out for a few minutes and I come back and we’re trying to break 12,500 – Amazing!


    Rein – home report is right in line with my home statement from last night (old link I posted on soft landings for housing). No real surprise but the builders are going crazy. Truth is they are spending a fortune to dump that inventory but, whatever it takes, it’s worth it.


    MS, AXP, MS (Discover) may all have early indications of a big retail number on the way.


    ROZ – I’ve held SCI since 11/15 – dull as toast with an 80% gain.

    FHCO WAS up 34% since 11/13 but pulled back to up 18% today with an 8% loss.

    Likewise NTFY was doing great yesterday but dropped from .25 to .18 since…

    Nope, I’ll stick to the popular ones for now!


    Oil – today is a no-action day in oil – we’re waiting for inventory and actually we expected a pump into inventory and the bulk of the positions will be taken tomorrow moning (if all goes well). Very important that you enter these trades very slowly as we often have to doube them down more than once to catch the right time. PTR already down almost half of yesterday’s entry but with the FXI going crazy, I’m not going to be adding any just yet.

  99. reinharden,

    thanks for the informed perspective on semis.

    nice summary for a ghost :)

    No kidding, the addictive effects of stock markets are fact, and girl friends (or wives) can feel the pinch. Should buying a nice diamond from the proceeds of your trading make up for the worst pain?


  100. CY – damn! I forgot about them….

    I wanted to buy them before everyon figures out what they’re worth!

    Mar $17.50s for .75 (4,300 already bought today!).


    Playing tomorrow’s report – we wait for the report, guessing has not been a good idea lately but it is killing me not to short XOM here!


    That was it Kustomz – your last post just pushed Apple green!

  101. AAPL in the GREEN! nice!

  102. TXN not to jump the gun but TXN moving into safer territory a move over 30 today would be NICE.
    TYPO should read 29

    TXN over 29 yippee!! I commented earlier it needed to get past 30 today meant 29,

    SNDK looking to get out 42.90 maybe. first resistance 42.70 but i wont be greedy!!!

  103. Things must be very bad at Taco Bell for that to be going on.

    I’m telling you – my 1st grader and her friends now use Taco Bell as the code word for deadly food. Seeing the mayor eat there on the 6 o’clock news is not likely to sway my 6-year old.

    The last time this happened was Jack-In-The-Box in 1993 and that lasted for years but Yum is lucky to have a lot of brands to fall back on.

  104. Over 12,500!

  105. AAPL--Phil just goes to show how big your base is!!

    12,500 have we broken the pull of gravity?

  106. Unfortunately, most of my calls have barely moved all day — EBAY, CC, SBUX, MSFT

  107. Volume is too low to draw conclusions – EXCEPT in AAPL where we’ve done 3 days’ volume today.

    XOM just 8M shares and $1.50 in the wrong direction from oil – how can I not take the Feb $75 puts for $1.70?

  108. Hey…it’s no big deal….

    14:59 F Ford issues statement on media website on Alan Mulally’s meeting with Toyota leadership (7.59 +0.10) -Update-

    “Following is our statement on Alan Mulally meeting with Toyota leadership: ‘We meet regularly with other automakers on a variety of topics of mutual interest.’”

  109. Loved F in the 6 dollar range, with all those billions borrowed they aren’t going any where near term and i would like to get in lower maybe on the next pull back if it happens.

    Cant find the strength to sell SNDK. HELP!!

  110. Phil, I’m waiting for an XOM put entry as well. Glad to see the enthusiasm for the stock (it helps the S&P500) but can hardly resist myself to jump in.

  111. Dow making a point to finish well above 12,500 so far!

  112. Wow. with a chart of Apple’s stock down .15 right behind her, the CNBC girl says that “the exploding option scandal is rocking Apple’s stock to the core.”

    That’s one big core then! You can see this pattern often: Some pr firm or whoever works this scam from the small newsbreaker at 6am to lead story at 8am and 9am to topic of conversation all day, regardless of the facts that may come to light in the interim….

  113. Pennsylvania Governor Ed Rendell hospitalized 2 hours after eating in a Taco Bell restaurant. The Governor was rushed to the hospital after experiencing agonizing stomach pain and unstoppable flatulence. The attending DR. reassured the Governor that it is a completely natural occurrence after dining in Taco Bell. The Governor was released and no further details given.

    JUST KIDDING this story is not to be taken seriously thank you.

  114. Last week, AMG reported a $10 billion outflow — this may be interesting

    Dec 13- Equity Fund Inflows $921 Mil

    November Equity Fund Inflows $8.3 Bil
    October Equity Fund Inflows $22.5 Bil

    Q3 Equity Fund Inflows $15.206 Bil
    Q2 Equity Fund Inflows $29.6 Bil
    Q1 Equity Fund Inflows $83.0 Bil

  115. XOM @ $77

    VLO @ $52

  116. Phil, I guess Google Finance is also part of the AAPL conpiracy — their top news (as of 3:44PM) reads “Apple falls 6 pct on concerns about options probe”


  117. I bought APPL FEB 80′s at 4.6 and sold Jan 80′s at 4.60………

    Now we just hold over the next 3 weeks, phil?

  118. LOL, kustomz

  119. Phil,

    3500 contracts opened on the 15 CY March Put
    5400+ contracts opened on the 17.50 CY March Call

    Not sure I would read this bullish yet – but I agree the valuation is just a joke right now.

  120. The Dow is up 100 points, S&P 500 up 10 points and MOT is up a massive $0.09 :(

  121. “the exploding option scandal is rocking Apple’s stock to the core.”

    Phil, I think she just wanted to say that line…!

  122. What a great day!

    . . . wait a minute . . . MSFT up $0.01, MOT and SBUX up $0.07, EBAY up $0.27

    Guess I need the DOW to go up 500 points to get my leaps moving :(

  123. MOT story the usual AAPL mention..nothing that hasnt been said before.

  124. Phil,

    Are we doing referrals in return for a month free membership?

  125. kallerid

    That is the idea. Wait til the Jans are about to expire. You are playing with the house’s $ now..

  126. Just my .02 worth………this site is worth the money…if I referred someone I would be doing them a favor. I do not think we need incentive to refer people to a good thing.

    If someone needs a ‘free’ month that can’t afford to belong and make the trades.

  127. There you go. Only $299.97 left to go!

  128. Holy cow, I crashed! Missed the whole close…

  129. Kaller – Yep! You have just gotten money for nothing! Congrats, this is one of the greatest trades in the market! Your best case scenario is that Apple closes right around $80 on Jan 19th but it’s looking stronger than that so you will net the time value of your spread.

    You currenltly have a $1.50 profit on nothing down. Your best case is about $3.50 (the premium of the Jan $80 call now) and if Apple were to finish $15 out of the money, you could expect to get at least the .65 that the Jan $95s are worth now.

    These are tricky to max profits out of but I’m in a similar boat so we’ll track this as we move forward.

    On trades like this I like to note that the LOD (low of day) for my contract was $4, while the LOD for the $80s was .60 so we are just praying for another 5% drop tomorrow! I set a stop to buy this guy out for $1 in my computer just in case I get lucky on some crazy down spike.


    MSFT, MOT – this is why we play “Are you diversified” – money flow still not hitting some people but VZ up 1%, NOK up 1% so I think 13,000 should be enough to get them moving!


    Referrals – unofficailly – yes. Officially, I need to write a post on it but we will be doing it as I want to try that before I start letting more people in.

    Karl – thanks but my attitude is that, one way or another, I pay to acquire new readers and, while not everyone needs to save the money, some people are beginning traders and (as I used to be one) I’m highly in favor of giving them a break rather than giving the money to Google.

    Also – AND THIS GOES FOR EVERYBODY – this site has a great mix of people and (as with any recipe) if I want to make it bigger without changing the mix I need to add more of the same. The most effective way for me to do that is to have you guys bring in like-minded people.

    It stands to reason that the people that we, as a group, know will be a fairly good reflection of the group as a whole. So if I get 5, 50 or 500 referrals, I would rather grow us that way first and foremost whenever we are going to add members.

  130. FYI, Ford’s funeral is Friday.

  131. AAPL news … Jobs stock options ‘not approved by board’ …..

    AAPL could be volatile the next couple of days

  132. I can’t imagine they will close the markets Friday through Monday, that will be crazy (very glad I’m barely in).


    AAPL – ouch! Looks like I’m going to get my wish on that 5% Apple drop again tomorrow… If this is true it’s major but it’s not in the Journal yet so I reserve judgment…

  133. Steve Jobs, chief executive of Apple Computer, was handed 7.5m stock options in 2001 without the required authorisation from the company’s board of directors, according to people familiar with the matter.

    Records that purported to show a full board meeting had taken place to approve Mr Jobs’ remuneration, as required by Apple’s procedures, were later falsified. These are now among the pieces of evidence being weighed by the Securities and Exchange Commission as it decides whether to pursue a case against the company or any individuals over the affair, according to these people.


    I hate to say it, but I told you so . . .

  134. Now it all makes sense as to why Jobs needed his own lawyers.


    7.5 million shares with an exercise price of $18.30 — that’s gonna have a huge financial impact. This will also mean restating all issued financials going back to 2001. This is a HUGE deal!!!

  135. I welcome more FUD, please bring down the stock again, so I can buy more.

    Here is an interesting article.

  136. soccer,

    keep looking you will find something

    “Jobs later surrendered his options before they were exercised”

  137. Soccer – oh you so did say it! I was just thanking you in the wrap-up because your contributions kept us grounded enough not to make any stupid, overly bullish plays. So Thank You!!!

    Huge opportunity for us tomorrow to buy out the Jan callers but, if this one is true, we are NOT going to get a quick bounce.

    We do not yet know the nature of the falsification – it is still possible this is being played up as it could be as simple as the board minutes reflecting not enough people and that having been “adjusted” to legitimize the grant after the fact – not legal but not exactly a capital offense but that would, at this point, seem to be the best-case scenario…