Archive for February, 2007

Which Way Wednesday?

You may have heard that the Chinese word for "crisis" is also the word for "opportunity"

Chinese character ji1 -- in traditional form ?

While it makes a nice catch phrase for bored business writers it is not actually correct.  The Chinese word for crisis is composed of 2 elements that signify DANGER and CHANGEYou will hear many pundits today telling you how real men buy on the dips or some such nonsense and you must ignore them!  These people are up to their eyeballs in positions and they want you to come in and save them.

Today I would like you to take a post-it and put it up in the corner of your monitor, where you can’t ignore it and write in a nice, thick marker: It is NOT my Job to Save the Market!  Opportunity, yes but DANGER!!!   Real men (and women) protect their families (and their assets), not their egos.  If we are having a real recovery than we have a 400 point gain ahead of us – you will not miss anything by sitting out the first 100!


A 20% retracement of yesterday’s losses will put the Dow up 83 and the Nasdaq up 24 and the S&P up 12.  If you drop a ball from 5 feet and it bounces 1 foot do you bet 10% of your virtual portfolio that the next bounce will be 2 feet?  No – you get the air pump!  If that doesn’t work, it’s time to get a new ball…

Is the air coming out of the global economy or did China just spring a small leak?

The Shanghai Composite recovered 3.9% today and that is the headline of every section of the on-line WSJ as they and CNBC put on their cutest cheerleader outfits but Europe is off 1.25% this morning and Asian markets, led by a Nikkei 500 point, 3% drop had a terrible morning!

Let’s not forget that a 4% gain off a 10% loss is really only a 3.6% retracement at best, the math trick is that you are starting from a lower point.  This is like buying IBM at $100, having it drop to $50 and, when it bounces back

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Terrible Tuesday Wrap-Up



What a great day that was!

I'm finally seeing stocks at prices I may want to enter and we used the 5% rule to take some off the table and pick up a few positive postions at the close (just in case).

Even after removing these superstar positions, our short-term virtual portfolio still finished up 28% in total (not bad after a 600 point drop in 5 days).

I was starting to feel silly sitting on all those puts and writing every other day that there were terrible things wrong with the economy and people were starting to laugh at me when I said that commodities (which includes housing, of course) are still in a bubble.

Today justified a lot of those fears…  As Option Sage said in our very first educational post: "The next rule we should be equally cognizant of is The Cardinal Sin of Investing which is to ignore risk management – Don’t every do it!!!  Simply put “Don’t ever put all your eggs in one basket” otherwise Murphy’s Law kicks in and no matter how confident you were in the position you might quickly find it moves against your initial expectations!"




My initial expectations of this drop began on Jan 10th when I said: " Are you prepared for a down 295 point day?  Let’s remember I am a bull with a short-term target of Dow 11,500!  I would like to say I would be pleasantly surprised to be wrong but I will not be able to really enjoy additional advances unless we get a long-overdue correction out of the wayI’m saying this today as I see several disturbing market trends while I also see a lot of irrational exuberance on our member site and like Uncle Greenspan, I may feel the need to take away the punch bowl if the party starts getting out of hand!"

While many of you may have forgotten my cautionary words, the virtual portfolio didn't as we tracked progressively more bearish over the next 45 days.  Our weekly short-term profits slipped from 100%+ to 42% as I hedged like crazy but, at the same time, we let the long-term virtual portfolio run and gained a ridiculous 100% there.  We suffered for our bullishness in the long-term
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Tuesday Virtual Portfolio Moves

Posted February 27, 2007 at 9:43 am | Permalink (Edit)
  • Out of TSO Mar $90 puts at $3.30
Posted February 27, 2007 at 9:48 am | Permalink (Edit)

Taking half off all March and April oil puts if XOM gets back over $75 (now $74.97) – no time to post it all!

Posted February 27, 2007 at 10:16 am | Permalink (Edit)
  • PTR buying 2x June $125s for $2.70
  • selling AS A STOP – 1X Apr $120s for no less than $2.60
Posted February 27, 2007 at 10:28 am | Permalink (Edit)
  • AIG – offering to buy 3 more Jan ’09 $70s at $8 but will pay $8.50 if it starts coming back.
    • Looking to fill position of about 20 at some point but in no hurry – could be a week or two as I have 2 years to sell puts once it hits a spot I like.
  • Got rid of all my SU $70 puts at .70
    • just thankful to be out of those!
Posted February 27, 2007 at 11:05 am | Permalink (Edit)
  • AXP Apr $60s are a risky DD here at .40
    •  if we can get them that cheap.
Posted February 27, 2007 at 11:26 am | Permalink (Edit)
  • FXI – settled on taking $2.45 for the $100s
    • a little risky but it’s a huge premium and I’ve got lots of time to roll him (Apr $104s are $2.60).
  • Took MUR Mar $50 puts for .35

    • only $2 out of the money.

Posted February 27, 2007 at 11:39 am | Permalink (Edit)
  • TSO – bidding $1.90 on the $90 puts I just sold
Posted February 27, 2007 at 11:55 am | Permalink (Edit)
  • PBR $95 calls for cover at $1.30!

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Testy Tuesday Morning

We're having a China Syndrome type melt-down this morning!


The Shanghai stock exchange dropped 9%.  Yesterday morning I said "his (Greenspan's) most interesting statement is that investor appetite for risk has led to risk premiums on financial assets being "extraordinarily low," which could pose problems in the future."  While the US traders may have generally ignored Greenspan's comments yesterday, Asian investors took it as a sign to take a little off the table and did so with a vengeance early today.

"Investors are choosing to cut their positions to avoid the fluctuations in the market, but it's still too early to say the market has reached its peak," said Chen Huiqin, an analyst at Huatai Securities.

A 9% drop is VERY bad over there as they have a 10% limit down on Individual securities so that indicates a pretty broad and nasty sell-off.  All of Asia was down 1-2% in sympathy except Taiwan, who somehow managed to gain a point.  Airlines got clobbered and we need a clobbering to save our BAB puts – I'll be taking a very non-greedy exit there if I can!

Let's keep some perspective as this is a 9% pullback off a 183% 18-month run and this drop was so widespread that it very well may have been program trading catching up after a week-long holiday.  We'll have to wait an see how our markets react (like scared rabbits so far this morning) and what kind of follow through Asia has tomorrow before we throw in the towel over here.

Europe is a nice, mature market and is taking a nice, wait-and-see attitude this morning with only a slight sell-off but our futures are looking terrible (7 am).  In a move that may finally goose our AIG leaps, French reinsurer SCO is attempting a hostile takeover for Swiss reinsurer Converium.  "The unsolicited proposal fundamentally fails to recognize the value of Converium's franchise and growth prospects, and is, therefore, not in the interest of Converium, its shareholders and its customers," it said in a statement.

Any time something like this goes on it draws analysts attention to industry fundamentals and I'm be adding to our AIG Jan '09 $70s at $8.50 or lower, hoping for a move here, still a…
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Monday Mop-Up

That was a bad way to start the week!


We didn't hit one level!  And after having such a nice open – not a good sign…

Combine all that with a gain in commodity prices and that was one crummy day!

Oil was up .25, not impressive enough to chase us out of our puts (in fact I added in the morning) and the new contract was saved at the last second from a very nasty plunge to $60.50 to finish at $61.14 so we'll try again tomorrow.

Gold tested $690 again but could not break it, finishing the day at $689.  The dollar broke below 84 but I said at 10 am: "Oil – I’m just not seeing real strength on a weak dollar. Things are just not what they seem here. I’m getting the feeling that big boys are taking this opportunity to dump like crazy."  We'll see how this pans out…

On the whole, nothing to celebrate.  Al Gore won an Oscar and in his film he said Antarctica was "a canary in the coal mine" - I wonder what he would think of today's market?


We didn't make too many moves as I said early in the morning, despite the good open: "Markets are not looking that good – still on my IWM puts – way too dangerous looking.  That was a terrible pullback off the morning open on the Dow and Nas!  I was looking for oil to buy and I ended up adding to my puts… "

It was a good day to initiate our weekend set-up of CY as we sold the Apr $20s for our $1 target and bought the Jan '09 $22.50s for just $2.70 – a better spread than we thought!  The stock was kind enough to go down for us yesterday too!

GOOG Apr $530s were
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Monday Virtual Portfolio Moves

Posted February 26, 2007 at 10:19 am | Permalink (Edit)
  • VLO - added $55 puts at .20 to lower basis to .40
    • looking to get out there if possible.
Posted February 26, 2007 at 11:02 am | Permalink (Edit)
  • AAPL $90s for $1.60 as a mo trade
    • (nickel stops for the first .25, then .10 stops next .25, then .15…)
Posted February 26, 2007 at 11:09 am | Permalink (Edit)
  • Taking out KMI $105 puts for .35 if I can
Posted February 26, 2007 at 12:57 pm | Permalink (Edit)
  • Setting stop on 1/2 Goog $480s at $18
  • PBR $95 puts at $1.40
    • to make up loss on my $90 puts – out the second I get even
Posted February 26, 2007 at 12:58 pm | Permalink (Edit)
  • Selling BA $85s for $4.70 against leaps
  • Buying BA $90 puts for $1.80
Posted February 26, 2007 at 1:58 pm | Permalink (Edit)
  • Out of IWM $81 puts for $1.22
    • not particularly bullish – was a weekend insurance play, happy to make a small profit!
  • Buying back GOOG Apr $530 calls that were sold for $5 for $2.90.
    • Taking .70 of profit to DD $520s and $530s
  • Out of GOOG $480 puts at $19
Posted February 26, 2007 at 3:08 pm | Permalink (Edit)
  • Selling Goog $470s for $8.60
    • Buying 2X that amount of $480s for $4.60 (will pay up to $5 EOD)
      •  net cost .70 per contract more at most.

Posted February 26, 2007 at 3:12 pm | Permalink (Edit)

  • Taking out SBUX $32.50 caller for .45

Merger Monday


Hmm, Greenspan calls for a recession and the markets fly up in the futures…

No wonder we have half puts and half calls!

I'm in a bad mood this morning because I sold my Dow $45 calls on Friday.  I'm not even going to discuss how awful that timing was!  Oil heading higher is also annoying me so keep that in mind if I come across a little grumpy.

Hong Kong was grumpy today too, down 203 points, and most of Asia was off a bit in sympathy but Japan held up and we can excuse the activity as a little bit of catch-up (down) as China was closed all of last week.  Miners continued higher as gold broke $690 as Cheney continues his war of terror (a Freudian typo that I'm leaving in!) by visiting Pakistan to make sure that at least those nukes are pointed in the right direction

Sanyo had a 4% bounce back, which should be a relief to poor GS but the big story there, like it is here, is M&A mania with deals involving Coles, PKX, BEN, MITSY and Consolidated Minerals adding to our own TXUHBG, DCX and DOW (possible)deals as well as ERIC over in Europe to push today's total to well over $100Bn.

With all that money pouring into the markets you would think we should be heading up from here but let's make sure we are really breaking up before we all go and drink the Kool Aid:

MRK is adding fire to the Dow, up 4% pre market as NVS's competing diabetes drug gets an FDA delay.  DD is up 2% on the DOW buyout talk, GM is up a point on DCX talks…

If oil stays over $61 it will be time to quickly revalue those positions but we can certainly expect a test
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Recession? Economic Data and Margin Rules – Oh My!

Alan Greenspan says we may be heading into a recession.

This is not something you want to hear to start the week but the markets are probably more comfortable hearing him get back to his usual "doom and gloom" prognosis than they have been with his recent "housing may be bottoming " BS that he’s rolled out as his last few appearances.

Greenspan getting optimistic about housing is sort of like Darth Vader asking you over for tea – you’d like to think he’s really changed but you still have trouble really getting comfortable with the situation.

We like our bad guys to be bad and our bears to act bearish – then we all know our place in the world and can act accordingly – it’s way too confusing when people start switching sides!

It’s a very busy data week so we’ll see how sharp Mr. G’s forecasting skills are as we get some biggies.  Here’s the list from

Date ET Release For

My Target

Briefing Consensus Prior
Feb 27 08:30 Durable Orders Jan


-3.0% -2.0% 2.9%  
Feb 27 10:00 Consumer Confidence Feb


109.5 109.0 110.3  
Feb 27 10:00 Existing Home Sales Jan


6.30M 6.24M 6.22M  
Feb 28 08:30 GDP-Prel. Q4


2.5% 2.3% 3.5%  
Feb 28 08:30 Chain Deflator-Prel. Q4


1.5% 1.5% 1.5%  
Feb 28 09:45 Chicago PMI Feb


50.0 50.0 48.8  
Feb 28 10:00 New Home Sales Jan


1085K 1090K 1120K  
Feb 28 10:30 Crude Inventories 02/23


NA NA 3694K  
Mar 01 08:30 Personal Income Jan


0.3% 0.3% 0.5%  
Mar 01 08:30 Personal Spending Jan


0.4% 0.4% 0.7%  
Mar 01 08:30 Initial Claims 02/24


325K NA 332K  
Mar 01 10:00 Construction Spending Jan


-0.2% -0.4% -0.4%  
Mar 01 10:00 ISM

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Weekly Wrap-Up

What an interesting week that was!

Despite the drop in the market our bearish attitude about builders and oil companies netted us an average 84% gain on 23 positions closed with an average hold time of 19 days.

Our open short-term virtual portfolio actually improved a little this week, with a 35% average gain on 93 open positions (23 average days old) but the big jump in open positions is due to our new virtual portfolio tracker which now treats our 13 short-term spreads as two transactions.

The long-term virtual portfolio has an average gain of 92% on 42 positions (same spread issue) that have been held for a whopping 47 average days (seems like forever doesn't it?) but, now that we have our new system we're going to start tracking the cash gain, which is $156,091 or 104.27%.  There is a lot of noise in the average position gain since we buy and sell puts and calls against our positions constantly and, as we wear down the basis of plays like TIE (now down to .20) we have nowhere left to credit the money! 

In the short-term virtual portfolio, the balance (up 37%) is meaningless as the holdings change daily so I still prefer to look at the average gain there for a true performance picture.  In a choppy market like this our strategy is to have a diversified mix of puts and calls, keeping the bulk of the virtual portfolio fairly even as we cherry pick the winners and sell them in a nice non-greedy fashion

We only had to close 5 losers this week:

  • BAC Jan $55s were just too tedious to hold and was banished from the LTP at $2.55 (down 12%).
  • BTU Mar $40  puts stopped us out at .75 (down 21%) on Wednesday's run as they were the naked side of the calls we sold last week (too early it seems!).
  • DIA Mar $127 puts were last weekend's insurance play and came off Tuesday at $1.20 (down a nickel) and I WISH I had those back (now $1.60).  This weekend we have the IWM's…
  • GOOG Mar $470 puts (out at $5.50 for a 53% loss) are another one we could have hung on to, I guess I am too much of a Google optimist but

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Weekend Project

Well I spent the whole day messing around with ETrade trying to get it the way I like it.

I’m still using OXPS for my main account but I’m working on a project that’s using ETrade and I liked the way you could configure it.  This "should" save me a ton of time from now on but let me know if the new format bothers you too much.

The biggest downside is that I have to book spreads as two different transactions, which I don’t like from a cash management perspective but that’s about the only thing I really don’t like about it.

On the very bright side, we can now track positions sizes without killing me and I can now include symbols, current stock price, and daily price changes.  I’m not promising I will do it daily but down the road it’s a step!

The other system was burying me as I had way to much entering and formatting but if everyone can get comfortable with this way of virtual portfolio tracking, we’re on the way to a more robust tracking system.

As I want to get much more into talking about postion management, I think it will be good to start talking about the size of positions and how we move in and out of them.  Hopefully this will work well for all and believe me, I can spend a lot more time picking stocks now, rather than tallying results!

- Phil

LOL – I spoke to soon.  For some reason the spreadsheet came out to be 50Mb – not terribly useful… 

We’re going to work on it and hopefully have it up tomorrow but if anyone knows a stupid excel trick to figure out whats eating up all the space – please make a comment here.  All I did was have Etrade create an export spreadsheet which I then cut and pasted into my regular stuff…  Then I reformatted it but it looks normal to me.

[UPDATE] The newly formatted spreadsheet is available on our Virtual Portfolio page. As usual, it is viewable right in your browser but you can also download for offline viewing and sorting. -Jared


Zero Hedge

Philly Fed Unexpectedly Soars To Second Highest On Record

Courtesy of ZeroHedge View original post here.

Anyone expecting the coronavirus pandemic to hit regional Fed surveys following the recent plunge in the Chicago PMI was in for a disappointment this week, when first the NY Fed's Empire State mfg survey unexpectedly printed at the highest since mid-2018, and then moments ago the Philly Fed blew it out of the ballpark with a massive surge in its business outlook survey, where the current general activity rose nearly 20 points this month to 36.7, smashing expectations of a drop from 17.0 to 11.0, and the highest index reading since February 2017. More importantly, this was th...

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Phil's Favorites

Why Trump's post-impeachment actions are about vengeance, not retribution


Why Trump's post-impeachment actions are about vengeance, not retribution

President Trump fired Army Lt. Col. Alexander Vindman for testifying in his impeachment trial. AP Photo/Susan Walsh, File

Courtesy of Austin Sarat, Amherst College

Since the end of his Senate impeachment trial, President Donald Trump has carried out a concerted campaign against ...

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Biotech & Health

Deep learning AI discovers surprising new antibiotics


Deep learning AI discovers surprising new antibiotics

A colored electron microscope image of MRSA. NIH - NIAID/flickr, CC BY

Courtesy of Sriram Chandrasekaran, University of Michigan

Imagine you’re a fossil hunter. You spend months in the heat of Arizona digging up bones only to find that what you’ve uncovered is from a previously discovered dinosaur.

That’s how the search for antibiotics has panned out recently. The relatively few antibiotic hunters out there ...

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The Technical Traders


Courtesy of Technical Traders

Chris Vermeulen joins me to share the levels he is watching on the charts. If the USD hits a rough patch and rolls over that could be another driver for the PMs to run much higher. We also touch on the small (for now) bounce in natural gas and the trading opportunity Chris is playing.

Get Chris’ trade alerts complete with price targets, and stop-loss levels.


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Kimble Charting Solutions

King Dollar Going To Lose Strength Here? Gold & Silver Hope So!!!

Courtesy of Chris Kimble

Is King$ and the Euro facing important breakout/breakdown tests at the same time? It looks like it in this chart!

The US$ trend remains up, as it has created a series of higher lows since the start of 2018. The opposite can be said for the Euro, as it has created a series of lower highs since early 2018.

The US$ is currently testing the top of its 18-month rising channel, as the Euro is testing the bottom of its falling channel.

What King$ and...

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Insider Scoop

The Daily Biotech Pulse: Heron Pain Drug Review Extended, Disappointment For Teva In Tourette Syndrome Study

Courtesy of Benzinga

Here's a roundup of top developments in the biotech space over the last 24 hours.

Scaling The Peaks

(Biotech Stocks Hitting 52-week highs on Feb. 19)

  • Adverum Biotechnologies Inc (NASDAQ: ADVM)
  • Akebia Therapeutics Inc (NASDAQ: AKBA)
  • Ana... more from Insider

Digital Currencies

Altcoin season 2.0: why bitcoin has been outgunned by crypto rivals since new year


Altcoin season 2.0: why bitcoin has been outgunned by crypto rivals since new year

‘We have you surrounded!’ Wit Olszewski

Courtesy of Gavin Brown, Manchester Metropolitan University and Richard Whittle, Manchester Metropolitan University

When bitcoin was trading at the dizzying heights of almost US$2...

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What US companies are saying about coronavirus impact

By Aman Jain. Originally published at ValueWalk.

With the coronavirus outbreak coinciding with the U.S. earnings seasons, it is only normal to expect companies to talk about this deadly virus in their earnings conference calls. In fact, many major U.S. companies not only talked about coronavirus, but also warned about its potential impact on their financial numbers.

Q4 2019 hedge fund letters, conferences and more

Coronavirus impact: many US companies unclear

According to ...

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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.

Date Found: Tuesday, 01 October 2019, 02:18:22 AM

Click for popup. Clear your browser cache if image is not showing.

Comment: Wall of worry, or cliff of despair!

Date Found: Tuesday, 01 October 2019, 06:54:30 AM

Click for popup. Clear your browser cache if image is not showing.

Comment: Interesting.. Hitler good for the German DAX when he was winning! They believed .. until th...

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Members' Corner

How to Stop Bill Barr


How to Stop Bill Barr

We must remove this cancer on our democracy.

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia


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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires


Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:


The ‘experts’ I hear from keep saying that once 300B more in reserves have ...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:


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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. Contact Ilene to learn about our affiliate and content sharing programs.