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Final Friday of 2006!

Congrats to all on making it through another year!

This has certainly been a fun one for us investors and I’ve sure had a great time writing about it.  I’m not going to get all retrospective as that’s my job for the weekend but I want to wish a very Happy New Year to those of you who are sensible enough to have something better to do on the weekend than hear what I have to say…

Asia was flat today but Australia closed at a record high.  China’s final 2006 growth tally looks like 10.5% and CHL got a little more hope on the long-awaited licenses.

Europe is off a touch this morning but everyone is going home early at this point with not much happening.

I have an easy morning because nothing happened yesterday and we are watching the same downsidelevels as yesterday:

There is likely to be a lot of wild selling today, especially in the few stocks that give people a tax loss for the year to offset a lot of huge gains but they have to be stocks you are willing to live without for 30 days, tricky for losers like Intel or SNDK who could pop at any time.

Apple will get a relief rally and we’ll have to decide what to do with our callers this morning so tune into comments for that discussion.  Let’s not forget that Apple says Apple’s probe clears executives.  While it is highly unlikely they are, at this stage, filing a false report with the SEC, anything can happen so let’s just not go crazy and overpay our callers.

selling your soul cartoons, selling your soul cartoon, selling your soul picture, selling your soul pictures, selling your soul image, selling your soul images, selling your soul illustration, selling your soul illustrations

Oil continues to slip in European trading, even as the dollar slips further (as dollar calls seem to be something people can live without for 30 days).  WTIC looks like  it’s trending down to everyone but the analysts on CNBC (Can Not Be Confirmed) and I continue to be amazed at the amount of people willing to go on the record pretending that oil (and now Exxon) is still in rally mode.  My guess is that, along with the dollar, the price of a soul must be nearing its all-time lows!

We’ll keep an eye on oil as we head into the long weekend and it will be a very bearish sign if they fail to get back over the $60.80 mark, especially if the dollar continues to face it’s own resistance at 84.

As I’ve said before the flaw in most people’s analysis of oil is that they accept forced (pumped) data points as real and plot the trends the manipulators want them to plot.  Oil has been artificially supported by traders, a parade of oil bulls on CNBC (Causing Numbskulls to Buy Crude), OPEC, Nigerian Rebels, the Swedish Government, the Russian Government AND the Russian Mafia, Iraq, Iran, T Boone…  who have all been spending every single day since 9/11 trying to keep oil over $60 – and this is the best they can do?

People worry about where the next wave of capital will come from to fuel the rally in 2007 but I think we may get to shake our own tree as several Trillion dollars of misdirected funds may find their way out of commodities and make their way into companies that grow and produce revenues rather than pouring it into the stuff than things are made out of.  2007 may indeed be the year that $1-2T moves up off the bottom of the value chain and finally gets to work in the markets.


No trades, let’s just relax and have a happy new year!

CEO is a big company ($40Bn) but their parent company, China National Offshore Oil, is much bigger (unlisted) and has announced plans for 16 major projects in the South China Sea next year At least one oil company is seriously exploring!

Hopefully we can end on a posiitve note but the battle is already won for 2006, we are still waiting to see if the NYSE is even open Tuesday (due to Ford’s funeral)  and I may pick up a few DIA $125 puts to cover a catastrophe (as 12,500 should be slow to pull away from) but, as I’ve said, these are faily light positions and there’s no reason to run out as long as we hold our levels.

T should get a nice jump as they move forward with the FCC on the BLS merger.

Have a very happy new year one and all!

- Phil





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  1. Recommending Jan $35 puts buy on PWEI. Short float is 58% and increasing; 52 week low $18.15 (12/29/05; high $38+(11/26/06); now at $35 with heavy action on Wednesday after dividend declared.

    Short term profit play. History prices over months says the play is safe

  2. Phil!!

    Let no man question your studliness! Your statement re AAPL earlier in the week was more than prophetic and saved/made me mucho mullah. Thank YOU!

  3. Phil:
    Thanks so much for the physics. Homeschooling, there is nothing like it.

  4. I homeschool my kids, as well. I hope to teach them what I’m able to learn about investing.

  5. Hi Phil -

    I finally made it over hear.

    Methinks 84+ pre market may be the top for AAPL today. I caught up w/ your commentary on AAPL the past few days … spot on !

  6. Question …. is there any way to see new comments real time ?

  7. Markets officially closed Tuesday!

    Absolutely buy those DIA’s to protect….


    I don’t know about PWEI, I see a lot of commercial builders I’m working with upping their use of PVC over copper and this little bounce is scaring them into leaning back that way.

    I see your logic but I wouldn’t want to chase them until I know for sure they are below the 50 dma at $35.15 to stay.


    Wow, I guess all schools do suck! I send my kids to school although very frustrating as I like the socialization aspects but we spend a lot of time “re-educating” them when they get home!

    I was so proud of my 6-year old today as she got a puppy alarm clock and there was a card inside that said collect all 8 and she said “Collect all 8! These people are so greedy – who needs 8 alarm clocks?”

  8. Relevant quote from NOte 2:

    “CEO Grants—During the relevant period, the Company made two grants to CEO Steve Jobs. The first grant, dated January 12, 2000, was for 10 million option shares. The second grant, dated October 19, 2001, was for 7.5 million option shares. Both grants were cancelled in March 2003 prior to being exercised, when Mr. Jobs received 5 million shares of restricted stock.

    With respect to the grant dated January 12, 2000, the Board on December 2, 1999, authorized a special “CEO Compensation Committee” to grant Mr. Jobs up to 15 million shares. The evidence indicates that the CEO Compensation Committee finalized the terms of the grant on January 12, 2000, although the Committee’s action was memorialized in a UWC transmitted on January 18, 2000. Because the measurement date is the originally assigned grant date, the Company has not recognized any stock-based compensation expense from this grant. If the Company had determined that the measurement date was the date when the UWC was executed or received, then additional stock-based compensation would have been recognized.

    The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83. The terms of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise price of $18.30. The approval for the grant was improperly recorded as occurring at a special Board meeting on October 19, 2001. Such a special Board meeting did not occur. There was no evidence, however, that any current member of management was aware of this irregularity. The Company has recognized $20 million in stock-based compensation expense for this grant, reflecting the difference between the exercise price of $18.30 and the share price on December 18, 2001 of $21.01.”

    TOTAL IMPACT = $105 MILLION (pre-tax)

  9. Hey welcome Cap!

    Real time comments? I’ve got 9:26 – how about you?

  10. Phil.

    Which DIA’s are we buying?

  11. AAPL calls anyone? I’m assuming it won’t fill that pre-open gap…?

  12. Re AAPL:
    85.50 about, is the underside of the uptrend from July. It may stop there today and breakout on subsequent days.
    84 is minor resistence from 12.19.

  13. If you are able, the best move at the moment for Apple is to sell your Feb call and stop out and buy the Jan call when it turns as there is very likely to be some profit taking around here.

  14. DIA Jan $125 puts to cover open calls over the 4 day break (if the global markets drop 3% we could get hosed at the open and it’s unlikely the Dow will gap up over 12,550 and, if it does, we would wash out with existing calls).

    It’s an insurance play depending on how much you need it.


    The sheer volume of Apple $75, $80 and $85 calls (200K) make $85 a tough barrier.

  15. EBAY still heading lower.

    Buying Jan30 calls for $1

  16. Thanks Phil … what I meant by “real time” was to be able to see new quotes without having to refresh my page.

  17. Apple:

    Feb $80 $8 – Jan $80 $6.4, that spread is improving

    Feb $85 $5.30 – Jan $85 $3.70, also improving

    I’m willing to buy more Feb $85s on the way up, same as Wednesday – selling the Jan $85s against as soon as the mo slows.

    We do have MacWorld coming next week but the IPhone may disappoint and they don’t discuss earnings although last year they gave some sales numbers.

    I think the WinMacs have been a huge success and they may point that out plus Piper will be doing a victory lap off this positive Apple report today so it’s all up to Barron’s and the 2 day of foreign trading (Tues and Wed am) we will miss out on.

  18. LOL Cap – I know! I think Jared is working on some kind of RSS thing but we’ve been having trouble, best for now is to make sure you’re in the permalink for this post and hit F5 to refresh.

  19. Let the year-end rally begin!

  20. Feb $85 are still a great deal if you can buy the spread for $1.50 as the Jan $90s are $1.95. Part of that is earnings inflation but if you are Apple bullish it is an excellent postion to take up considering your caller is willing to pay 130% more premium than you will be paying for the same position.

  21. Karl – Good call on PWEI.

  22. soccer

    I have been looking at ebay this morning. You know when they report?

  23. Phil those CY calls are shaping right up. Some rumbling from a hedge fund to go private didn’t hurt a bit.

  24. Online retail summary – looked like a good year – first time over $100B

  25. AAPL seems to be ignoring that 85…strategy if it breaks through aggresively?

  26. Based on my discounted cash-flow analysis, EBAY is worth around $45 per share. EBAY is not dependent on the US market as it operates in in 33 markets, including Germany, U.K., France, Italy, Korea, and now China.

    EBAY reports on 2/20

  27. Ebay Jan 15th – watch out because they just gave up that China revenue (although for good long-term reasons).

    I’m hoping $30 is a good bottom as I’m going to DD my Jan $32.50s at .25 (.30 if I have to) and I’ll be thinking about the Fed $32.50s if they come down around .80.


    CY – glad we pulled the trigger, I had that post-it on my monitor for 2 weeks!


    On-line huge and should be added to overall retail numbers (it isn’t in most surveys).

  28. Apple at 5% rule, this is it, we could be off to the races if it breaks!

    I’m in with more Feb $85s at $5.5, waiting to see here on selling the Jan $85s. I can afford to wait as I still gain on the Jan $85s I already sold if it dips on me.


    I got my Ebay Jan 15 date from Investools, they are usually reliable and the last earnings was 10/18 so 1/15 makes sense. Where did you get 2/20?

  29. Soccer ~ had my eye on EBay. I plan to take the Feb 30s after the 4-day weekend, right along with some AMZN puts for same month.

  30. EBAY — the company was losing money in China. The new joint venture with Tom Online (49% owned by EBAY) is a good way to stop the losses and build a good long-term position in China.

    PayPal (w/ 125 milllion users) continues to perform well and Skype has unlimited potential with its 135 million users.

  31. Remember if you are holding an Apple spread, you have 32 trading days and your caller has just 12 after today (MLK day too).

    Your premium on the Feb $80 is $3.50 and you will lose .10 per day (all else being even) while your caller’s premium is $2 and he will lose .20 per day so there is an extra buck in it for you to wait.

    Earnings are the 17th and all hell can break loose then.

  32. Sorry, I meant to type 1/20/07 — it’s in my trading notes — but that’s a Sat, so probably 1/18 or 1/19 is the date.


    EBAY Q4 2006 Q4 2006 eBay Earnings Release $ 0.28 (est) $ 0.24 (last qtr)

    Reports between 15-Jan-07 – 20-Jan-07 (specific date unconfirmed)

  34. $87.50 is my super mega break-out number for Apple, if they get through that they are likely to post a new ATH.

    Meanwhile, they are respecting the 5% rule so far.

  35. Soccer, not to harp, but from where do you get the 100 million number on AAPL?


  36. Rein,

    Apple Files 10-Q and 10-K

    Apple to Record Non-Cash Charge of $84 Million

    CUPERTINO, California—December 29, 2006—Apple® today filed its Form 10-Q for the quarter ended July 1, 2006 and its Form 10-K for the fiscal year ended September 30, 2006 with the Securities and Exchange Commission (“SEC”). Both filings had been delayed pending the conclusion of an independent investigation by the special committee of the board of directors into past stock option practices and the resulting restatement of the Company’s financial results. Apple undertook this investigation on its own initiative and has informed the SEC and the U.S. Attorney’s Office of the results.

    Based on an analysis of the findings of the independent investigation, the Company has recognized total additional non-cash stock-based compensation expense of $84 million after tax, including $4 million and $7 million in fiscal years 2006 and 2005, respectively. The restatement arises solely from certain stock option grants made between 1997 and 2002; the investigation found no grants after December 31, 2002 that required accounting adjustments.

    “The special committee, its independent counsel and forensic accountants have performed an exhaustive investigation of Apple’s stock option granting practices,” in a joint statement said Al Gore, chair of the special committee, and Jerome York, chair of Apple’s Audit and Finance Committee. “The board of directors is confident that the Company has corrected the problems that led to the restatement, and it has complete confidence in Steve Jobs and the senior management team.”

    Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning desktop and notebook computers, OS X operating system, and iLife and professional applications. Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online store.

    Press Contacts:

    Steve Dowling


  37. Meanwhile, in the rest of the market – Apple is making our Qs fly and the SOX are up a point too!

    Transports are agains being rejected at 2,600 – just barely holding at 2,603 but we’ll take anything over – it will depend on the crude pump.

    TSO still hanging tough.

    I’m doing a DD on PTR Feb $130 puts at $1.50ish (offering $1.50)

    AFL flying up

    DD on AIG Feb $75 at .4

    BBY jumping



    ONLY 46Bcf draw in gas – it’s a disaster!!! Lower than even Zman thought!!!!

  38. Crude just cracked 60 for like 2 seconds. :)

  39. hello phil – great call on CY.. when should I exit that position. please advise

  40. DD Jan $50s for .35 as a mo play

  41. Tjee,look at SNDK…..What a crap stock that is :-(

  42. CY, usually, if I pick up a 3 month contract it’s because I like it as a hold. Although that is a great short-term gain, I think there is huge unappreciated value in this stock and a nice 5% gain today may get us the attention we need over the weekend so I like them as long as the SOX hold up over 470.

    Also, keep an eye on SPWR, which CY owns 80% of but they look about to break out too!

  43. thanks. I will hold on to CY.. if I want to enter AAPL now, which calls/spread do you recommend

  44. Yev, yes, I’ve seen lots of AAPL stuff today; however, Soccer threw out $105 million (not the $84 million from the PR) in his earlier posting and was seemingly claiming that it was due to the CEO stock grants.

    Having just searched the SEC filings again, I’ve found the relevant section.

    As discussed below, the Company’s analysis determined that the originally assigned grant dates for 6,428 grants on 42 dates are not the proper measurement dates. Accordingly, after accounting for forfeitures, the Company has recognized stock-based compensation expense of $105 million on a pre-tax basis over the respective awards’ vesting terms. No adjustments were required for the remaining 35,649 grants.

    So the total impact of all the options was $105 million.

    FWIW, if you read the relevant text closely, you’ll likely discern that the vast majority of those 6,428 “not the proper measurement dates” grants came down to delays/mistakes in paperwork, not intentional back-dating.

    Anyhow, well beneath my max pain number of $600 million, so I’ll declare victory and move on to worrying about MacWorld and Jan earnings.

    Although I’ll first note that 1/7 of the total grants turned up tainted and if we multiplied the $84 million charge by 7 (since I purposefully used all options for the worse case), we’d be awfully close to my $600 million so perhaps I have career potential as a forensic accountant after all… ;-)


  45. Phil,

    next week – what do you think of the possibility of the Big Boys ramping up the market a bit more, sucking in a bit more of John Q. Public’s money (selling him their inventory), before pulling the rug out of the market? I wouldn’t think “they” would want to start off the new year on a sour note and John Q. Public might not get into the market if he sees it going down from day 1.

    I know – anything is a possibility.

  46. SNKD – tax selling is killing them, they are probably one of the most widely held losers of the year. No one wants to sell INTC with Vista finally shipping so SNDK is the whipping boy. This is a very good leap for us and I’ve sold Jan and Feb calls against it as I think it will take that long for it to get going.

    DD’ing on COP $70 puts at .55

  47. Phil, quick question. In the conservative portion of my 401k, i have a reit mutual fund cgmrx and it dropped 20% yesterday? Is this year end stuff, and should i take advantage of this inefficiency and dd or is this something else. thanks

  48. General question,

    Does anyone know of a service providing options sales data? I am talking about who buys, who sells, buy volume vs. sell volume?

    I am looking for something more detailed then what we get on Yahoo.


  49. AAPL – I still like the Feb $85s but don’t go into the weekend without selling the Jan $85s against them.


    Roz – you’d better include a legitimate rally to 15,000 under “anything.” If this rally is a pump job, it’s a flawless one so far…


    Watch the Nasdaq, I’m seeing waves of selling come in on a lot of individual stocks, might just be one program lightening up a little.


    Out of T at $1.20 – didn’t want to risk it as it was killing me last week.


    Check out YHOO! May as well DD on the $27.50s just for fun at .20.

  50. CGMRX usually pays a large dividend near the last trading day of the year (last year it was $10+), so I would expect that this was just the year-end dividend. And if you’re set up to reinvest, you’ve already purchased some more.


  51. CGMRX – it didn’t happen last year or the year before. I see no news and I don’t see other REITs getting hit like that, very strange…

    I don’t know enough about it to say but that seems like something funny is going on over there. Perhaps they did a distribution – check with your fund manager…


    Yev – sounds great! Let me know if you find it…

  52. Is it time to get the AMZN Apr puts yet? The stock seems to have flatlined at around $40.

  53. I think there is something tax inefficient about buying into a fund at the end of a year – accounting is not my strong suit!

  54. AMZN – you’re late (but not punished for it), we took the Jan $40 puts for $1.50 on the 21st. But I’m moving to the Feb $37.50 puts for $1.50 at this point.

  55. BSX – Finally getting a little respect!

  56. The problem with buying into a fund at the end of a year is that you might be liable for taxes if there are any capital gains. So if you buy a fund today and there is a distribution you will be liable for taxes even though you haven’t made anything.


    Phil, I guess that much options info would be putting too much power into our hands, and funds would certainly not want that.

  57. Disney investigating Pixar option grants (per CNBC who must be on the payroll of someone who is short on Apple!).

  58. CGMRX – Um, Phil, it definitely happened last year.

    Yahoo’s Historical Prices shows (probably with horrible formatting):

    Date Open High Low Close Volume Adj Close*
    29-Dec-05 27.18 27.18 27.18 27.18 0 26.76
    29-Dec-05 $ 10.04 Dividend
    28-Dec-05 37.39 37.39 37.39 37.39 0 26.92

    It’s a REIT, they’re required to disgorge essentially all profits at the end of the year!


  59. BSX – this is why its good to have a seperate section for long-term plays, it saves me from agonizing over them!


    Nat gas is holding $6 on “the smallest draw ever” for this time of year at a time when we have “the most gas ever” in storage for this time of year.

    I love this new world we live in where supply and demand is just something traders heard of back in college but it never actually comes into play in real life….

  60. Reinharden — page 88 of the AAPL 10-K

    The 105 million number is pre-tax as indicated in my post above. Your link mentions the 84 after-tax number, which is misleading somewhat.

    I tend to go to the original document for info (as opposed to rely on someone’s interpretation of it).

  61. Oh thanks Rein – I was just looking at Stockchars and I guess they adjust the stock for dividends, which makes sense but they should tell you they’re doing it!

    I guess that means the good move is to buy at the open on Wednesday.

  62. Pixar/Disney – Gosh, that’s new news. I mean it’s not like it wasn’t reported back in, oh, June and August and such. ;-)

    Anyhow, I’m late for a meeting, so I’ve got to quit screwing around and get moving…back later.


  63. Phil ~

    What is the purest play on nat gas (besides futures)? BTU?

  64. nothing tax noteworthy if the purchase or sale is in an IRA however.

  65. reinharden — just to put that number in prospective, AAPL’s net income for the 3 years of 2001-2003 was only 109 million. So this effectively wipes out 3 year worth of profits.

  66. Originals – I know, now that I’ve gotten older and hired and fired enough of these people in my life, I know not to trust a thing they say!

    They are under the same deadlines, pressures, homelife concerns etc. that anyone else is and they fudge the research as much as anyone else does. The speed of the web economy causes any crap to be taken as a fact once someone with a marquis name puts it on their web site.

    It’s very hard because we have to react faster than that but checking should never be skipped!

    Meanwhile that internal weakness I was seeing is real and we are unlikely to hold these levels as energy is dragging the markets down. I think $1 was indeed the right price on those DIA $125 puts!

  67. Soccer – I was simply confused by your juxtaposition of a lengthy quote about CEO stock options followed by your summary of Apple’s summary of the total charges that seemed to indicate that the “total impact” of the CEO stock options was $105 million.

    I’d be hard pressed to call the $84 million an interpretation as it was the actual expense taken. ;-)

    But I’m admittedly oversensitive about such things as I’ve been writing letters to editors about sloppy reporting on this topic for six months now. ;-)

    I’ve tried to deal with stock options for small’sh companies in the past and the regulations are ridiculous. Getting the paperwork filled out really can be a chicken/egg problem. You’ve got to have the paperwork to approve it, but you can’t approve it without the final numbers…which you can’t get until it’s approved. And if you involve external approvals, it’s just a, um…well…that language would be inappropriate.


  68. BTU – LOL – they don’t have ANY gas!

    ECA is the least hedged I think.
    EOG is very gassy.
    SWN was an excellent choice by Z on Tues.

  69. MOT – Phil, I did my part, bought three MOT cell phone for Christmas presents. Anyone else helping the cause?

  70. Soccer,

    For someone who is trying to be neutral and objective, your posts have negative “bearish” undertones. In 2001-2003 Apple was a different company compared to today. Income back then is not really relevant to today is it?

    It is really bizzare but for a company that has done so well since 2003 there have been sceptical undertones from every side taht I can remember. If I listened to anyone who has been as skeptical and bashful on Apple i would of missed out on a huge run-up.

    People have something against Apple, I have been trying to, but cannot my finger on it.

  71. It looks like NEM was right yesterday, the rest of the gold patch is following them down now.

  72. *red faced* I really must move away from these damn sticky notes!

    What is the best options broker? Is there any broker that allows you to have a protective stop loss and a take profit order open on the same position at the same time? Next week, when I have to actally WORK at work, I don’t know how much I can babysit multiple positons. Need a way to set and forget…that will eliminate the emotion and keep me employed…

  73. MOT – now you need to go to Africa and India and spread the word because we have 200M very cheap phones sitting in a warehouse and someone better buy them!


    AAPL – we need at least one skeptic or we all would have been buying naked calls today! Go to Yahoo’s Apple board for 15 minutes and you’ll realize Soccer is bullish compared to the psycho Apple bashers there.


    NYMEX closes at 1 so the pump (if it comes) will come early. I know I wouldn’t want to have no oil over a 4.5 day break but Wednesday could be a cliff dive if nothing happens over the weekend.

  74. Yev – I mentioned several times that I hold no APPL positions. None.

    I’m just trying to provide unbiased info in a see of bullish sentiment, where people are willing to overlook just about anything.

    The reason I pointed out net income starting in 2001 is that options fudging started in 2001.

    Not to boast, but I wrote my master’s thesis on accounting for stock options (yes, I have a master’s degree in accounting) back in the late 1990s. I do know a few things about options, restricted stocks and accounting for them. I also lived through Enron and tend to be sensitive to any executive fraud. This is no exception, even if you & most others here are long AAPL.

  75. Intc- Whats up with the Intel Jan 20 puts? Do you think they still have an upside?

  76. guess not everyone liked Ford…

    11:25 NYMEX to close Tuesday Jan 2 to honor passing of President Ford -Reuters

    NYMEX says electronic trading will be open Tuesday Jan 2 – Reuters

    11:23 CME to close some mkts Tue for Ford funeral; says Ag, Equities to be closed; Eurodollars, FX open till Noon CST Tue. The CME floor announcement did not address Globex – DJ

  77. Meanwhile, there is no confirmed decision on the Tues bond market close as the big dogs who might help officials pull the trigger there are home roasting their chestnuts.

  78. For two more cents on the financial impact of the restatement, from briefing;
    The mishandled options will result in an additional noncash charge of $94 mln, according to filings with the SEC. Apple filed its full year financial reported with the SEC today which had been delayed due to the options probe. Apple stated earnings for the fiscal year 2006, 2005, and 2004 will be reduced by $4 mln, $7 mln, and $10 mln, respectively. The financial impact from the restatement is immaterial since it accounts for 2% in net income over the last nine years, according to Piper Jaffray.


  79. I don’t think the SEC can take a hard line on these options issues or they will end up jailing 200 CEOs so this will be an interesting test case.

    Those of you in big companies can appreciate how a CEO can “OK” options dating at a meeting without it seeming like it was a big deal as you have to trust your CFO and attorney to take care of that nonsense.

    It seems to me that this incident came up long ago and jobs penalized himself by giving up over a Billion in options that could have been handled much more in his favor. Since it doesn’t seem like a continuing practice and since $100M is an inconsequential number to Apple I think they may escape this one.

    As I said when this thing started this week, it seems more to me that sometone REALLY wanted to take this stock down and that just makes me want it more.

    My current position is:

    Standing pat on the Feb $80s with the Jans sold against.
    Standing pat on the Feb $85s with the Jans sold against.
    Holding another round of Feb $85s and considering whether to sell Jans.

  80. INTC – I don’t have any puts on them. I have calls at $20 which I feel good about and $22.50s that may be a lost cause but I will roll into the second the $20s go black.


    Tues markets – what a mess! All closed or all open I say, just asking for shenanigans like this.


    Sell program ended abrubtly and everyone is popping back up – closing on a record would it be cool!

  81. Soccer,

    Gotcha, now that I know of your background in accounting, your take makes more sense.

    As far as Yazoo, I used to post and read it last year until it got out of control in January when the downtrend for AAPL began.


  82. Hey Phil, what da ya think of IPS (ipsco)….Down a bit today due to lower earnings guide but i fully think they’ll recover. What da ya think?

  83. This is my last post on AAPL, I promise :)

    JB – Piper Jaffray is obviously long AAPL.

    -- “mishandled options” — how about intentional backdating to maximize benefit for executives, including the CEO. How about intentional collusion by the CEO, CFO and General Counsel (i.e. “the top at the top”)
    -- “noncash charge” — lol, can they be any more biased? Depreciation is also a noncash charge, should companies start to “mishandle” the reporting of it?
    -- “last nine year” — why not go back to the date of incorporation? I bet you’ll get a lower annual impact
    -- “impact from restatement is immaterial” — why restate then?

    /end of sarcasm/

  84. meant to type “tone at the top”

  85. Yay! Wish I could be there to watch.

    11:49 Saddam to be executed by Sat at the latest, says Iraqi judge – DJ

  86. sorry – I met int6c jan 20 calls. Thanks for the infor.

  87. My rant against AAPL is more a rant against the executives of the 200 companies who manipulated and backdated options.

    We’re talking about highly compensated executives. Their blatant attempt to increase their comp even more by fraudulent backdating is criminal.

    Imho, all of them should be banned by SEC to ever serve on any public company. Many of them should go to jail (even if it’s only for 1 day).

  88. Slackin:
    Think or Swim has “one cancels other” orders which is what I think you are looking for.

  89. must restate due to violation of Sar-Box created SEC rules and Regs. regardless of accounting measurement of materiality. If it was merely an interpretation of GAAP which caused an under or overstatement then the auditors will calculate materiality and suggest restatement or not.

  90. Completely agree, but what really matters to traders is what the market thinks. Short of tossing out Jobs…history has shown over and over again that the options fiasco are short term things that are eventually shaken off.

  91. thanks Lars. That’s exactly what I want.

  92. Hey Phil. I’m up 60% on my AAPL Jan 80′s. Would you roll them to the 85′s now and lock in some profit?

  93. Phil,

    Dow 15K?! that would be quite a stretch if we get a 20-25% correction down to mid-9K. then again, with all the money the Fed is throwing at the market, we’ll be lucky to see a 2% correction.

  94. Slackin – sadly. you’re correct.

    In most companies, the warehouse manager who is caught stealing an item worth $20 is fired and in most cases prosecuted. Or the cashier for stealing $10. Or the purchasing manager for getting a $500 “noncash” kickback.

    But when it’s executives “stealing” millions, it’s only a short-term blip.

  95. Phil:
    MOT charts may show it bottoming out here, do you have an opinion on whether there is anything in the near future that might provide a decent upside impetus ? . . . and I believe earnings release is in mid February, should that enter into our considerations . . . knowing that so often decent results are not enough to satisfy this market causing that immediate plunge in price.

    But I like your comments on CY, I believe implying good things for the longerterm.

    Happy and prosperous New Year’s wishes to all.

  96. IPS – p/e below 7, 20% growth this year – what’s not to like?


    Soccer – as a frequent Apple shareholder since the 80′s, I have to tell you that you cannot possibly compensate Steve enough for what he does!

    The board of Apple has proven time and again that they are often the problem and I suspect that this is one of those times. It is very possible they said “Steve, we’re going to give you 10M shares” and Steve said “thanks” and everything else was just accounting nonsense (and in pre-enron, pre Sarb-Ox it all was) that he didn’t know or care about.

    I know from your side of the table you think he should be responsible and, ultimately he is, but from my CEO side of the table I can tell you that I rely on my CFO 100% to put papers in front of me that are signable and I almost never read that stuff – even though I know I should and I am ultimately responsible…

  97. Correction on my MOT earnings release date comments — that should be mid January.

  98. AAPL seems to be riding an intraday trendline upwards, currently at 85.05.


  99. Hey Phil, disregard my last comment on AAPL. Ran into the office and posted prior to reading your comments.

    Happy New Year!

  100. APPL Jan $80s, you’re up $4 so perhaps take the $4 profit and go into the Feb $90s, which give you much better leverage at $3.60, set a stop at $2 so you will, at worst, be up 25% and, if it really flies up into earnings, you can still sell the Jan $90s, which are already fetching $2.15.

    It would be a very nice, more conservative play to cover over the weekend though! You would be taking it almost all off the table while maintianing a very good continued upside.


    15,000 is 20% away! If we don’t get a big correction that is very possible in the next 12 months. Once we get over 13K, all the normal physics you take for granted cease to apply.

    Really really take a good hard look at the Nikkei and Hang Seng – do you really believe that those companies are worth that much more than ours? Either they correct or we do…


    MOT – the Jans are a wrong position, I’m going to take a leap on them next week as I have absolute long-range faith but the environment is changing much faster than the analysts can adjust to and that’s holding them back.

  101. Hey Phil, trying to establish a position in IPS….What option would you recommend??

  102. 15 minutes to NYMEX close of 4 days – oil is down 3.3% for the week and down 5.096% from $63.15 which was the median top since Thanksgiving.

    So in 30 days of trading, we are coming to rest at the 5% rule.

    The dollar was at 83.5 the last week of November and is at 83.70 now so this drop is all about the crude.

    Add to that the fact that, if I were responsible for trading crude, I sure would make sure I had plenty on call over a 4 day break with all this “global tension” about! I almost don’t want to cover….

    That would be silly though so I think I’ll go with the old reliable XOM Apr $80s, hopefully for less than $2.50.

  103. IPS – earnings are 2/5 so the Jans don’t make sense. The Feb $100s will give you a great return if it goes back to par but be careful as you may well have to DD or move to the $95s if this thing gets a downgrade.

    There are 7 buys and 2 holds withthe last 3 this year all buys so work into a position here carefully. I’d be looking to pick up the Febs on momentum and sell the Jans against it at around $97

  104. Phil, sadly, the same could have been said of Enron in 2000.

    1.) Lay and Skilling magically increased revenues/profits/market cap year after year
    2.) Fortune named Enron “America’s Most Innovative Company” for six consecutive years (1996-2001)
    3.) In 2000, it won the Financial Times’s “energy company of the year” award
    etc, etc.

    History (and Enron, Woldcom, etc.) teaches us that when top executives are involved in a collusion of this magnitude, noone can stop even fraud of massive proportions (and $105 million in this case is massive, imho). Auditors are helpless, analysts keep cheering the stock on, business publications write positive articles, etc. Check out and be impressed by Enron’s code of ethics:

    Let’s not kid ourselves. A few years of Sarbanes-Oxley will not protect us from another Enron. Enron had revenues over $100 Billion in 2000. Worlcom had assets over $100 Billion.

    The stock jumped $4 the day after it’s reported that the fraud was only $105 million. What’s the message here?


    This is the 10-K quote that troubles me ” . . . the investigation found that CEO Steve Jobs was aware or recommended the selection of some favorable grant dates . . . ”

    This goes directly to entity level controls at the company. The “tone at the top” is critical for any company.


    On a related note: “The Investigative Team spent over 26,500 person-hours searching more than one million physical and electronic documents” — why should shareholders pay for this? This easily cost more than $20 million. Was it the shareholders’ fault? Why not deduct all the costs of the investigation (including legal and audit fees) from executives’ pay?


    Happy New Year, everyone!

  105. Out of SNDK, might have exited early but the money at the moment was guaranteed

    Will exit AAPL before the end of the day there is a level of profit i would like to reach this year and i am very very close.

  106. Wow, they missed the Nat gas drawdown estimate by 36Bcf! When the nat gas draw exceeded estimates by 4bcf a few weeks ago they took the price of gas up 10% in one day.

    Oil pumping to $61 at the close – an amazing rally of .60 in the past 10 mins! LOL – these guys didn’t want it all day at $60.30 but at 12:50 they just can’t buy enough at $61.20.

    Rather than worrying about Jobs, it would be nice if SOMEONE took a look at this massive daily fraud that affects every single person in this country every day.

    You choose to be an Apple shareholder and you can cash out any time you don’t like the company but oil is an unregulated vital utility that people depend on to survive! Yet California can’t even get paid on what these crooks take out of the ground…

  107. HAPPY NEW YEAR SOCCER and let me be the first to say your right on with AAPL, but your thinking goes against everything WS stands for and its keeping you from profiting from it.

  108. BAGHDAD (Reuters) – Saddam Hussein could be hanged within hours, a senior Iraqi source told Reuters

  109. Enron – you’ve got to admit, that was pretty innovative!

    I understand your point about Jobs but, in 2001 if you said to me, “we can do better for the employees if we date them either here or here” I would have “recommended” the date I felt did the most good and thought nothing more of it.

    I’m not giving Steve a pass but he did just come back and those were not his guys (that “tone” was set by the previous administration) and I’m sure he had a lot on his plate at the time. Is he ultimately responsible? Sure! Was he evil? I very much doubt it…

    This is why an underregulated environment is poison for investors. There need to be rules about options AND executive pay that investors can count on with any companies – no one can check out the various idiosyncracies of every company they are interested in.

    Executive compensation should, in the very least, be filed and summarized exactly the same way a balance sheet or income statement are, perhaps with the caveat “if they exceed certain guidlines.”


    Looks like SNDK was just waiting for you to sell!

  110. Hanging Saddam is a sad day for the book publishing world – I would have loved to have heard his side of this story!

    A Very Happy New Year to those of you who are leaving (although hopefully not leaving the way Saddam is!).

  111. Trust me Phil i do it to punish myself, i seen the resistance on the chart around 43.20 but decided to put my sell in lower, don’t ask me why.

    Let me sell AAPL now and lets see if this is a conspiracy

  112. I’m holding Apple open unless it falls .50 – too many positiives, none of which have even been discussed with all this other nonsense. It does seem to me like a huge conspiracy to keep the price down into blowout earnings.

  113. Phil,

    Any thoughts on SBUX? Testing 200 dma. Earnings on 2/7. Apr/Feb 35 spread?

  114. Soccer – for trying to be unbiased, you’re bringing a lot of interpretation into the facts.

    Yes, you can argue that they wiped out the profits from 2001 through 2003. But as their earnings went -$37M, 65M, and 68M, that’s kind of deceptive. Especially as you’re using the pre-tax number to “wipe out” the post-tax profits. Post-tax still left them $12M over those three years.

    Anyway, these restatements went back to 1998. Previous after-tax earnings from 1998 were (my 1998 through 2005 numbers don’t reflect todays restatements):
    1998 – 309.0
    1999 – 601.0
    2000 – 786.0
    2001 – (37.0)
    2002 – 65.0
    2003 – 68.0
    2004 – 276.0
    2005 – 1,335.0
    2006 – 1,989

    In the grant scheme of things, I don’t see $105M pre-tax, $84M after-tax as reflecting massive fraud. Especially when measured against the 5.392 *billion* in profits across the years being restated.

    Soccer, you’re talking about intentional collusion to benefit the executives when the current evidence is more easily explained by run-of-the-mill incompetence.

    $6M/$105M was due to 8 years worth of new hire/promotion dates and what appear to be 126 screwups out of 3,892 grants. That’s not likely benefiting the Board of Directors or the executive staff.

    $29M/$105M was due to 5 years worth of the annual review option grants (and two grants were off by one day!)! That’s the rank and file.

    $48M/$105M was due to 660/1,082 grants that fell outside the normal process and required approval. Frankly, I’m curious about these…although I’m not surprised that grants that fell outside the normal grants were the ones that most often got screwed up.

    There was another $2M category that was too trivial to bother with (looks mostly to be paperwork related)…and all told, that’s accounted for $85M/$105M and nothing has involved the *collusion* of the CEO.

    Mr. Jobs did account for $20M/$105M; however, it’s hardly collusion cause in truth, the delays on the part of the board *cost* him money.

    ” The grant dated October 19, 2001 was originally approved at a Board meeting on August 29, 2001, with an exercise price of $17.83. The terms of the grant, however, were not finalized until December 18, 2001. The grant was dated October 19, 2001, with an exercise price of $18.30. The approval for the grant was improperly recorded as occurring at a special Board meeting on October 19, 2001. Such a special Board meeting did not occur. There was no evidence, however, that any current member of management was aware of this irregularity. The Company has recognized $20 million in stock-based compensation expense for this grant, reflecting the difference between the exercise price of $18.30 and the share price on December 18, 2001 of $21.01.”

    In other words, Mr. Jobs was given a grant in August at $17.83, but the paperwork didn’t get sorted out until December. Even with the “backdated” grant of $18.30, Mr. Jobs lost out on $0.47/share!


    Anyhow, I agree that there’s a lot of potential stock option abuse, but as yet I’ve not seen any evidence that AAPL had anything in common with Broadcom or United Health or others of that ilk.

    Sadly, the rumor-mongers have undoubtedly driven the relatively naive investors out of AAPL over the past month or so. The truly pathetic thing is that “back-dating” wasn’t even against the rules for most of the period of interest, nor was there a requirement for timely disclosure. Sigh.


  115. Phil,

    Pardon my ignorance, but I need to understand what happens if you sell a short leg of call option of your spread against a long call option and the short call option is in the money. Doesn’t one run the risk of someone exercising the short call option?

    So, for instance, if I buy an Apr07 $80 call and sell the Jan07 $80 call against it, and the stock is $81. If the caller exercises the Jan07 $80 calls, does that mean that I will have to pay the caller $8,000 per contract?

    How do I mitigate this with my long Apr07 $80 call? Is the idea to buy the short position back before it gets in the money to avoid this? And if I cannot buy the position back, how do you pay the caller with the long position?


  116. Hey — Al Gore is on Apple’s compensation committe, LOL (click on Governance -> Committee Composition)

    Shareholders are in good hands now. Al knows how much executives should be paid, after all, he invented the internet, LOL.

  117. SBUX is a nice leap for us to sell against. I haven’t decided yet as the optiion pricing is nasty and it’s a tedious play that may demand more attention than it’s worth.

    I’m leaning towards the Jan ’08 $37.50s for $4 with a protect on the Feb $32.50 puts at .45 into earnings, then see about what we can sell against it.

  118. REIN, i cant help but say thank you. Its rare another man can make me feel so much joy!! They can have my AAPL shares when they PEEL them from my COLD DEAD HANDS.

    If my account would have received the cash from my sale of SNDK i would buy YES buy more AAPL!!

  119. Phil,

    I have 15% exposure in the small cap sector which has done quite well this year, any suggestions to protect from any downside with IWM.

    Wishing you all a Very Happy & Prosperous New Year.


  120. And here I thought I was done with AAPL for a brief bit.

    To compare Apple with Enron and WorldCom is simply wrong.

    Enron and WorldCom engaged in massive overall fraud, made up non-existent revenue, made up non-existent expenses for tax purposes, hid real expenses in “off-the-books” deals or by treating them as capital investments, and well and truly “cooked the books”.

    Enron and, I believe, WorldCom were infamous for making round-trip deals where they agreed to buy/sell the same asset at the same price from people (oftentimes themselves) so as to drive up their revenue numbers!

    Making up billions in revenues per year and hiding billions in expenses per year isn’t the same thing.


  121. Mike – you are not specifically selling it to anyone, it’s a virtual sale and I don’t believe any broker will force you to cover ahead of expiration.

    Puts are different, when you hold an in-the-money put, the holder of the stock can force you “the virtual you” to convert at any time. As far as I know, calls are not treated the same way.

    In either case, if you are ever forced to cash out one end of a trade you simply need to cash out the other end as well, hopefully ahead. I’ve never had it happen to me with a call but my account is not normal so I defer to the experience of others on this.

  122. Happy NEW YEAR DAYA thank you.

    SNDK looks great today.

    I’m sure AAPL will be volatile until this whole thing blows over and the SEC makes an official statement.

  123. LOL Kustomz – you sound like Scrooge thanking the ghost for showing him the true meaning of Christmas! (I watched like 4 versions of it over the holdiday with the kids).

    IWM – I take it you’re trying to be tax efficient and hold your gains? I’d take the Mar $75 puts (assuming 3 more months is enough) for $1.65 as a cover as they won’t lose much as the M$73 puts are still $1.25.

    If all goes well next week you can take it off the table as .20 insurance or sell the Jan $75 puts for .25 and then the Febs for a nice cheap policy.

  124. Oh yeah, In the words of Steve Jobs – “One more thing…”

    Of course, I could be wrong. ;-)


  125. IWM – Thanks Phil.

  126. cnbc just reported that crude draw report was “an error”; DOE not disclosing the amount of the error. LOL

  127. reinharden – I hate to disrupt Phil’s board with this discussion.

    Bottom line, you steal an iPod or a Mac from an Apple Store and you get prosecuted and probably go to jail. Executives in this case get caught with a $105 million scheme and you make all kinds of arguments as to why it’s not such a big deal. I’m not buying, sorry. People did benefit from those backdated options. including Jobs (see below).

    Besides, in Jobs’ case, let’s not forget Pixar. Between 1997 and 2004, five out of seven Pixar option grants were recorded at the lowest possible price within the years they were granted. What are the odds of that happening? He may be a genius tech guy, but he’s not the ethical person everyone thinks he is.

    As for Apple, the company concluded its internal investigation and filed the restated financials. But did the SEC and DOJ wrap up their investigations?

    This may not be over just yet.


    Back of the envelope calculation of this option saga:

    January 2000 — Jobs was granted what was, and still is, the largest option grant in history: 20 million shares (40 million split-adjusted)

    October 2001 — Jobs granted 7.5 million (15 million split-adjusted) addition options as previous grant was under water

    March 2003 — Jobs voluntarily cancelles his 55 million shares (split-adjusted shares) & gets in exchange 10 million restricted stock shares based on the option values due to the favorably chosen “backdated” dates — the argument can be made that he should have received fewer shares if actual grant date valuation would have been used for options

    March 2006 — Jobs cashes in the 10 million restricted shares for $620 million

    As you can see, Jobs did benefit from backdating options as his restricted shares were based on the value of options based on those backdated dates. Also, there are questions regarding the validity of the additional 7.5 million options – you miss the point altogether on the price.


    How I wish I could just backdate my stock and option purchases. Easily look back to the last year, find the lowest point for the year and say, that’s where I bought it.

  128. HA! I knew it – the crude inventory drop was a “reporting error”!!!

    DOE says there was a mistake but I see nothing on their web site to correct it. I predicted this would happen, they would come up with some BS number and then adjust it when no one was looking (is anyone looking?)

  129. I agree w/ soccer … Jobs can’t get away w/ the “I didn’t know” or “I trusted my CFO and GC” excuses. No clean hands here. He may be too big to take down; probably a Dem cash contributor, eh Phil ? If it was, say, Ken Lay, the media would be all over him like flies on s …..

    Oh yeah, Jobs IS the media. The silicon valley superstar.

    Just like HP’s guy got off clean.

    And then there is RIMM, with their “management initiated voluntary review” …. crooked canucks.

    Jobs also traded in his dirty options for a boatload … $850 million … of restricted stock. So its not like he just “gave them up”.

    The buck stops with the CEO and he was feeding at the trough.

  130. Phil … the Dem comment …. in jest, my man.

  131. Wow, that was an amazing crude pump right before 1pm! Its getting more and more ridiculous.

  132. Big crude stock cut in DOE data from reporting error, according to source- DJ

    Dow Jones is reporting a large, unexpected 8.1 million-barrel fall in U.S. crude oil inventories reported Thursday by the Department of Energy was largely due to the correction of an error in a previous government report, a person close to the department said Friday.

  133. Cap, Phil — how can you be so bearish on oil? LOL

    Nah, those nice people would never do such a thing :)

    In reality, it won’t matter. Oil bulls will only see and hear what they want to hear. Much like Apple bulls dismiss any potential problems with the company :)

    With crude over $61, Saddam’s hanging in a few hours, the long weekend for Rent-A-Rebels, and a new year for XOM shareholders next Wed., oil stocks can only go up :)

  134. Phil,
    In light of ‘reporting error’ would you keep, over long weekend, XOM JAN $75 puts or roll them into FEB $75 puts?

  135. Mike_c

    I’ve had this happen once in two years (35+ spread positions). As Phil says, you “simply” liquidate the other side. I had a position in GS where the dividend was going to be paid just before expiration… I was partially assigned and owed the dividend (as well). Lotsa money in my account – which I owed somebody!! I had plenty of margin, and after a few days I bailed out better than where I was at the time of assignment by buying the stock in the equivalent number to what was assigned. I still held the balance of the position as planned, and no margin notice from OXPS.

  136. Cap, I’m offended!

    Steve is on record as having given a check to Paul McCloskey – a REPUBLICAN! – I’m sure if McCloskey had won back in 1982 Jobs would have given him another big check.

    He may have also supported a few Democrats…

  137. Hi Phil,

    How does reporting error effect the price of oil — I’m real confused what the error is and the effect of it.

    Next question on “IWM – I take it you’re trying to be tax efficient and hold your gains? I’d take the Mar $75 puts (assuming 3 more months is enough) for $1.65 as a cover as they won’t lose much as the M$73 puts are still $1.25…”

    I bought some iwm puts – feb. $79 – a different month and higher strike price. I’m wondering what thoughts went into your selection since mine was more or less random. But in the future, how would I evaluate which puts to buy, given a general sense of the market going down but not sure how to determine which puts are the best. Thanks, Ilene

  138. CNBC now pumping Vodka

  139. RE: short and long calls
    I have had both sides of this happen to me. I owned long calls into expiration. Because they were in the money, after expiration I ended up with 100 x # of contracts shares of stock. Of course that did a number on my available margin, so I just sold the stock. I think I paid commission for both getting the stock and for selling it.

    Once I was also short some calls in a calendar spread, and I got called on part of them. In this case I ended up with a potential short position, but the broker called me and asked to enter an offseting transaction. So two things happen at this time:
    1. Someone takes some shares from me at the strike price + I pay commission on the call assignment transaction. (this is calculated as an options commision, not stock)
    2. If I don’t actually have any shares (in the case of an options spread), the broker will probably call and get me to enter a buy order for the same amount of shares. I have to pay market price for those, so I am on the hook for (Market price – strike price) x 100 x # of contracts. For example, if the shares are $2 in the money, I will be on the hook for $200 per contract.
    I also get to pay comission on this transaction as well, calculated as a stock transaction.
    If I do have the shares, as in a covered call situation, then the shares get taken and that’s it. (as always, plus commsion)

    Hope this helps,


  140. ilene – the “reporting error” should have cause oil prices to drop (as the drawdown in crude inventories was overstated), yet XOM is up $0.20 in the last 15 minutes :)

  141. XOM – I’m only in the Feb puts but I also covered with the Apr $80 calls in case there’s a special on Rebel attacks over the weekend.

    I had the April’s last month and they did their job, they went up when crude went up and they took a long time to drop as we are able to use the lemming-like behavior of the Exxon buyers (and the Exxon corporation) to keep the price up no matter how bleak things truly are.

    Exxon does sell natural gas too. The only way they could have gotten worse news on gas would have been if people realized it was actually a waste product of the drilling process thay have tricked us into using only because it could be delivered cheaply (shhhh!).

    Notice how gas prices were under $2 for many, many years while they ran ads and promotions to swtich people off of oil and electric heat and they got governents to rip up roads and lay lines all over the country and then, once they saturated the market, suddenly they noticed there was a shortage!

    Don’t forget that CHK had to cut production back in October to support prices, and they certainly weren’t the only ones…

    Last year there was 2,663Bcf in storage. Right now there is 3,167Bcf – 20% more and we are using 50% less. At the same time production is up 20%… this is a train wreck!

    Like I said earlier – if we lived in a world where supply and demand determined prices they would be handing out free steaks just to get you to use the barbeque!

  142. In all cases for short options, we get to keep whatever we got by selling the options.

  143. XOM may lead the maket into a green close

  144. RE gas production
    I have heard that ECA is drilling about 65% less wells this year up in the not-so-frozen Northern Alberta, on account of the very low gas price. The cutoff price for many producers is $6-7, below that a lot of new wells are not economic and a lot of stock prices are not supportable.

  145. XOM 7M shares, the last hour of trading was almost certainly the company buying their daily portion of 2M.


    Yes, the “reporting error” (cough *scam* cough) doesn’t directly effect the price but since people trade off the number then one would assume different decisions would have been made. Revealing it now, after the NYMEX close and a huge pump is a disaster for US traders who may get taken to the cleaners by 2 Asian and European trading sessions ahead of Wednesday’s open.

    I don’t know why people are surprised, they adjusted the first half of the year up 80M barrels – that’s almost 2M barrels a week they were underreporting. Yet they’re worried about Apple!

  146. For those who are new to oil/gas — Zmann’s blog has tons of good analysis — Z is a member here but doesn’t post often.

  147. SOLD my AAPL, now watch it take off

  148. Every day this week, 1:30 on the button, someone turns on an XOM buy program! It’s responsible for $2 of Exxon’s price for the week!


    IWM – first of all, always be aware that your in-the-money puts can be put to you without notice at any time. It doesn’t happen often but it can happen so talk to your broker about their rules.

    There’s so much that goes into selecting each position it’s hard to say one thing or the other. In selecting the March $75 puts, I was looking at the surrounding boxes to see which strikes give me the least downside per dollar as these are being used as a cover and I want to lose as little as possible while my other stocks go up.

    The more in the money I am the more I lose if it goes against me and, also, I don’t want to tie up too much cash. The Mar $75s also offer me a chance to recoup a little by selling 2 closer months if I decide to while the Febs don’t have that flexibility and the Mays cost me more premium than I am willing to pay.


    Meanwhile, someone is sticking to the XOM buyers!

  149. Holy Cow am I glad I have those puts!

  150. LOOK OUT BELOW!!!

  151. Selloff ahead of 4 day weekend underway

  152. I think it was a program – it depends how many others there are but that was too widespread and evenly distributed to be normal trader reactions.

    Actually programs are normal traders these days, it’s us that are the anomoly in the system!

  153. According to the just issued filings, no improprieties were found with the 10 million share grant from January 12, 2000. [That'd be 40 million shares on a split-adjusted basis...]

    Historically, it’s been quite common for Apple to have a board meeting immediately after MacWorld because usually everyone is there for MacWorld. January 12 was the day after Steve Jobs’ MacWorld keynote. Which squashed the stock because no one liked the Mac Cube’s price point.

    At least according to the filings, all was kosher with this grant. So I don’t see that you can rationally wave it as a bloody shirt.

    The subsequent 7.5 million grant (15 million split-adjusted) was, as I demonstrated earlier, screwed up to Steve Jobs’ detriment. Apple took an adjustment on this grant, but I think the commonsense view would find Jobs above reproach in this instance.

    Jobs did later surrender these options and he was given a 10 million share grant. However, Apple never stated that there was any relationship between the theoretical value between the underwater options and the restricted grant. That’s only based upon speculation from various people.

    Granted, if you willingly rewrite history so that the first option grant was fraudulent (although all available evidence is to the contrary) and you further rewrite history so that Jobs fraudulently backdated the second option (although all available evidence is that he was in fact screwed out of $0.47/share on the deal) *and* if you then make up a relationship between the Black Scholes value of the options and future money value of the restricted stock grant…well, once you make up enough stuff, you can prove anything.

    And like I said before, trading in those shares for restricted stock has cost him more than $2 billion. Which seems to be the opposite of feeding at the trough.

    You can’t reasonably compare the current value of the restricted shares to the 2003 value of the options and declare that greed. You’ve either got to use the current value of both or the 2003 value of both. Of course, that approach doesn’t yield good hysteria…

    Also, if anyone was paying attention back at the time, they’d recall that Apple was getting beat up for its excessive stock option overhang. And most of those options were underwater. Jobs allegedly had options for 5% of the company. Granting him restricted shares for circa 1% went a long way to lightening the overhang and ensuring that he’d stay.

    I’m not saying that it’s the case with Apple and Jobs, but in an infinite universe, some people do win the lottery. And there are at least a half-dozen people in the United States who’ve won million dollar prices more than once. Should we retroactively declare that they must have fraudulently gotten lottery tickets imply because they won.

    Anyhow, imagine me throwing my hands up and muttering “If you make up enough facts and relationships…” ;-)


    PS: The “questions” raised about the validity of the 7.5 million share grant were answered in today’s filing. You might also recall that the “questions” were made up by anonymous sources.

  154. reinharden – when the SEC closes its investigation, I’ll consider the case closed. Until then, nothing really happened, except management decided to end its own expensive investigation (at the expense of shareholders) which resulted in what was expected: management found itself not guilty.


    Really gotta leave now.

    Happy NEW YEAR, y’all!

  155. Phil on IWM- it happens to be one I watch closely from the options standpoint. Every month in 2006 there is a large seller of puts who comes in around 3 weeks before expiration….note the Jan Puts with over 100K open interest. This seller takes a range of 4 puts. His amounts are huge always over 40,000. He has not missed once in 2006.

    For January he sold the 78, 77, 76 and 75 Puts.
    I hope this is of value to you

  156. Yet another “one more thing” re AAPL. March, 2006 – Jobs didn’t “cash in” his shares, he vested in them and they were issued to him (along with the appropriate tax hit which we’ve previously discussed).


  157. Thanks, Phil, Sakiko, and Cris.

    I understand that upon expiration, the calls definitely gets assigned in the money.

    And I guess now I understand why the brokers require margin account in order to trade options spreads.

  158. Apple was rock solid during that sell-off, that’s all I need to know to ride my new calls naked into the weekend!

  159. Wow, I felt that -2G on DJIA.

  160. Follow up on the IWM puts…..I have never traded them. I do not know how to take advantage of this information

  161. Someone’s determined to keep XOM over $77

  162. Really happy new year then Soccer – don’t let the crooks get you down!


    IWM – sounds like a guy who’s rolling, expecting a crash at some point. We did the same sort of thing with oil for 3 months until we finally got paid but it’s kind of like doubling down on black on roulette over and over – it’s got to hit once, just hope you don’t run out of money before it does!

  163. Yeah, I agree with soccer_f1. We should trade the oil crooks and not the AAPL rookies… ;)
    Happy New Year!

  164. Man no trading for 4 days – it’s like a punishment!

    Happy New Year Everyone! I’ll be around on the weekend, hopefully I’ll get to do all the posts I plan…

  165. Phil,
    please excuse me for taking space if this is my ignorance.
    The IWM put seller is making money every month! He sells the puts which close out of the money so what he sold is pure profit

  166. mike_c – I think we’ve got a better shot out-maneuvering the 72.5 billion dollar AAPL “crooks” rather than the multi-trillion dollar oil crooks.


  167. Hope all sleep well tonight and have had a very healthy and prosperous year, and may you take all the good that’s happened to you this year into the next, if your year wasn’t what you expected than try harder dammit!!!


  168. Phil, how can you complain after AAPL gave us such fun the last three days!

    I wish every week gave me something that easy to play.

    Although, of course, I’d prefer that the initial downdraft not hit something I already had a position in. ;-)


  169. Happy New Year, everyone. I’m really glad I found this room to start off the New Year. And thank you all for your posts. I have much to learn.

  170. Rein – I told you you were impatient. I have literally waited since July for that damn thing to pull back enough for me to buy it – finally a Christmas miracle! No way am I complaining…


    Karl – I don’t quite see how he could consistantly profit on IWM puts as the index has gone almost straight up since July but he sure would have cleaned up from May-July.

  171. Phil, just to confirm on the IWM puts in hopes it is of some value to you. I do realize the index has had nice steady gains. The put seller has been lucky or very smart- the put sales about 3 weeks before expiration have consistently closed out of the money.
    All these are Nov puts on IVM
    Date sold 11/1 & 11/3
    77 sold for $1.90
    76 sold for $1.97
    75 sold for $1.10
    74 sold for $0.70
    IWM closed last day of Nov over 78

  172. What would be the advantage to the trader, to exercise either put or call contracts before expiration? Why not just sell the contract? wouldn’t it be cheaper?

    This is the kind of stuff I am eager to learn about.

  173. Phil,

    why didn’t you buy it (AAPL) before October earnings, stock got knocked down to 72, or did you feel it was too expensive before the announcement and too much risk?

  174. Phil … Al Gore on AAPL’s board ?!?!?!? I rest my case ….

    If there was ever a reason to be bearish on AAPL and GOOG, it is Al “Kiss of Death” “the icebergs are melting” Gore.


    Happy New Year Phil & everyone else here !

    GL & mucho profits in ’07

    & hang ‘em high, & bye bye Saddam …. supposedly is lawyers are looking for a US Court to issue a TRO …. Good luck w/ that !

  175. Don’t worry … Al Gore is laughing all the way to the bank thanks to his buddy Eric Schmidt.

    I don’t know if Gore’s Google holdings have been disclosed; the rumor his he has hundreds of millions of dollars of GOOG … basically a gift. That don’t stink now, do it ?

    Politics and Business; what a combo.

  176. Karl -
    On the IWM puts are you sure they were all sales? If two were sales and two were purchases then it was an long put condor position. Using your figures above, if the two center strikes were sales and the outsides were buys then the position was put on for a credit of .47 (1.97 + 1.10 – 1.90 – .70 = .47)

  177. Hussein executed, Iraqi TV stations report

  178. Well the puts I can see wanting to force because if I’m short, I may have trouble unloading them so I sell you puts and force you to buy my positions.

    With calls, like I said, I don’t believe you can force an exercise pre-expiration, of at least it’s never happened to me.


    Apple, yep options were too expensive and risk was too high, this is very different as they’ve proven they can break $90 yet here we are buying at $80 because of a rumor (and they would absolutely have hit $100 had it not been for the investigation).


    Al Gore $Millions – it’s the least they could do for the guy who invented the whole internet!

    Laugh all you want Cap but the man did champion the legislation that laid the groundwork for it. Also, I’m sure you heard about the huge polar ice shelf that snapped off the arctic – 41 miles of ice that have been there for millions of years just falling into the sea.

    It’s a shame that the conservatives choose to deride Al Gore because he cares enough about the planet to attempt to do something. Of course he knows it kills him politically, he’s not an idiot – just a guy with a conscience, something Limbaugh crowd simply can’t relate to…

    I’m not sure how enjoyable your beach house will be when the ocean is 15 feet higher than it is now but you’ll find out soon at the rate the arctic shelf is melting!

  179. Oh also, by the way – for those of you with huge amounts of money there is a reason to want to get called away.

    Let’s say I have 1M shares of Goolge I want to unload for $465M and I don’t want to move the market when I sell them. If I sell 10,000 $450 call contracts against them I not only make maybe an extra million on the premium but I save on the commission when I get called away.

  180. Phil,

    I remember you mentioned about OLED once. Today, at the last minute, the stock shot up 44.24%, although it traced back 12.46% AH. Volume also picked up to 113K at the last minute.

    It does have options, but the stock is very cheap.

    What’s your take on OLED?


  181. Does anybody know if LFC had a stock split?

  182. OLED – the old rule on them is buy them on the 10th of the month (arbitrary) whenever they are under $6 and sell half whenever they get to $7, we’ve owned this stock for over a year that way and it’s one of the few proper stock postiions I maintain.

    This stock will one day be at $25 but that day may be a very long time from now as the very cool technology is still in development but I’m betting they will be a winner in this field.

    We did do a full dump in October when they toppped out at $7.50 after having gone scary low on us but we came back in on 11/10 at $5.75 with another shot on the 10th of this month and a sale of 1/2 yesterday at $7 that reduced the basis to $4.50. Next time I buy at $6 I’ll be in for $5.25…


    LFC – yes it looks like it was 2.66:1. I had been thinking about buying them but they just floated more stock in a China IPO and that, combined with the split, made them very hard to value.

    I had to take the rest of my CHLs off the table too as they stopped me out in the morning so I’m a little concerned about what’s going on in China this week (but who knows why they do things over there…). I am always skittish about these Chinese stocks as I just don’t trust them although part of that is just my age showing as they are certainly more respectable that they have been in the past (or so it seems at the moment).