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Wednesday Wrap-Up

Wheee!  What a day!

Thanks to our man Ben (see below) we got just what we needed to get this party started – now let’s see if we can follow through tomorrow and Friday, another 100 points should do it.

We had pretty much a perfect day for my levels, first time in a long time:

Disney's Tinkerbell Bev Napkin 16 pc - click to enlarge

Oil did it’s thing today, giving up another dollar even though the actual dollar gave up half a point as soon as Ben said he wasn’t worried about inflation.  A .61% drop in the dollar saved oil from the embarrassment of closing below $58 but not for long as only the front-month March contract fell $1.06.  Other contract drops were worse and worse down the line: April $58.57 (down $1.28), May $59.25 (down $1.36), June $59.82 (down $1.40)….

More barrels were traded in our 4 closest months today (498M) than yesterday (487M) as traders continue to play hot potato with the remaining 140M barrels still on scheduled for March at $58 (down 32M).  April shot up to 307M (up 25M), May jumped to 103M (up 11M) and June held firm at 102M.  The only person making money in all this frenzied trading is NMX!

There are now 650M barrels of oil contracted for delivery between now and June 30th at less than $60.  The entire US imports 11M barrels a day so that’s 1/2 of our total import consumption already guaranteed below $60 through Memorial Day plus one month!  That is just 50M barrels less than the entire Strategic Petroleum Reserve!

  • Add to that the 330M barrels we have in private storage
  • Add to that the 230M barrels of gasoline in storage (not counting gas stations)
  • Add to that the 130M barrels of distillates in private storage

That’s 690M (private storage) + 750M (SPR) + 941M contracts written for the remainder of ’07 – a total of 2.38Bn barrels of crude that, in an emergency, we can be assured of getting.    If ALL of our top suppliers (other than Canada and Mexico);  Saudi Arabia (1.4Mbd), Venezuela (1Mbd), Nigeria (1Mbd), Iraq (500Kbd), Angola (500Kbd), Algeria (250Kbd), Kuwait (250Kbd) and Ecuador (250Kbd)… If they ALL cut us off without a drop (5.15Mbd), it would take us 462 days before were would be unable to fill up our tanks with oil that has already been purchased at $65 or less..

You are paying a $30 a barrel "Fear Premium" only because you believe the fairy tale that the NYMEX pump crew is telling you!  There is PLENTY of oil.  There is so much oil that OPEC, STO, TOT, CHK, CVX, MUR, BP, RDS.A all CUT production this year and we still had inventories build to record levels… 

Only when the American consumer stops consuming mass quantities of oil at any price will this equation change.  Don’t think it can’t happen look at Ford Motor company’s $22Bn in profits in 1998 – I’ll bet they said that party was never going to stop either! 

Gold held firm today at $672 but with North Korea off the table, it’s hard to hang your hat on Iran to destabilize the planet all by itself.  There was a false reaction to some key wording changes in Bernanke’s prepared text: First, the Chairman described the Federal Open Market Committee’s predominant concern as "the risk that inflation will fail to ease as expected" instead of "some inflation risks remain." Second, the Fed is "prepared to take action to address inflation risks if developments warrant" instead of "the extent and timing of any additional firming that may be needed."

This is what tanked the dollar but here I will say that oil traders may be smarter than dollar traders as there is nothing really here to suggest that rate hikes are off the table.

==============================================================

What did come off the table were some of our trades:

ANF Feb $72.50s were done at $9.90 (up 11%) a nice recovery from being way down at the beginning of the month as we got killed by selling the diagonal position and barely rolled out of it.

We took a DD on BHI Mar $67.50 puts ahead of earnings but the basis is still a steep $1.30 – we’ll see in the morning if we threw good money after bad of if our oiginal premise was correct.

LLY Apr $55s were taken half out at $1.50 (up .05) this was a DD and we are happy to get even at a lower basis.

VLO $55 puts were taken off at .30 (up 50%) as you can’t trust these overnight.

We initiated several other oil puts on today’s inventory report but the patch held up well in general so we may have to grin and bear it if we don’t get a good drop tomorrow


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  1. Hi, all! Just came back from the V-day activities! Hope everyone had a lovely day!!

    Market
    Will the 3rd time be the charm?! Nasdaq looking good, with help from SOX. If we break 2500 tomorrow, we might frustrate (and convert) enough bears to make it stick above 2500 for a couple of days; then, another thrust would push beyond the gravity!!

    BIDU
    So, it basically didn’t do much AH. I thought the charts had bottomed, but, the way the BBs were going, it’d be hard to have a big quick jump, http://www.philstockworld.com/members/?p=287#comment-14232. But, I do think the earnings were great! And, tomorrow morning may still be a great time to buy calls. March 120s? Feb 115s? http://www.philstockworld.com/members/?p=287#comment-14242
    Let’s watch the before market actions closely. This can still be a very lucrative one! But, I think BIDU will ramp up tomorrow.


  2. SHLD
    Nice action today. It is gaining momemtum. Charts look good. On the daily chart, it is climbing the upper BB nicely. Would like to see more buying volume and push the upper BB higher at a steeper angle.

    RIMM
    Daily chart looks nice. Can’t really see intraday charts clearly. I think the data is messed up or something. If the market environment is good tomorrow, we may just see 140!

    Oils
    Still haven’t figured out a direction.

    KBH/LEN
    Still waiting on the sideline.

    MGM/LVS/WYNN
    May have chickened out the MGM puts a bit early. These are starting to lose strength. Will have to wait and see. If the market conditions are good, puts are still dangerous.


  3. Hi Phil…

    To fill up again 462 days…wow. And more than year….what will happen to profits for 2007!!!

    Very nicely put….

    thanks

    regards
    - ramana


  4. Be careful – BIDU may be pinned into expiration. Those were very expensive contracts ($115s were $4.50 yesterday – 4% for a 2 days!) on both sided and there is no question that $120 is “Max Pain” so it will have a hard time getting a real breakup when 20,000 contract sellers would rather it didn’t.

    Effectively, you have one day’s worth of average share volume of a fairly small company that are highly motivated to hold the stock down for 2 days… They cut outlook so it’s not all wine and roses and revenue (not earnings) was actually a touch shy of expectations.

    This is why I love my FXI’s – betting on individual ADRs is madness!

    Meanwhile all you BIDU people missed a great one – the Mar $120s were $4.70 at the close and the Feb $115s were $4.50… Very tough to lose money on that one!

    ================================================

    BHI looks like a miss to me, I haven’t had a chance to read it yet but it looks a little shy, even if you back out the one-time charge.

    ================================================

    462 days – I woke up this morning to a CNBC blitz of oil fear news. Al Queda (the Saudi Branch) says they will disrupt global oil supplies, the summer driving season is comiing and OPEC won’t say it but they brought on two “experts” who contend that they will vigoorously defend $55… Expect to hear from Nigerian rebels before Friday’s close!


  5. Question of call spread strategy…..You buy a Jun 40 call and sell a Mar 40 call in equal increments, but the Mar call that you sold is increasing at a greater % in price…..what is the action required. (The spread was initially 2.70 debit and is now 2.00 debit.)


  6. The stock in question is NTRI and looks to be up 14% or 6+ pts in pre opening activity. Suggestions??


  7. I was going to buy some Calls on NTRI yesterday, but from what I am learning from this board the premium built into the earnings would require a significant move to make any money. . I remember this last year when I bought some Puts right before the bell on earnings, and the beat expectations but their CEO was leaving and the stock dropped 24% the next day. I only netted a 100% gain. . . With a 24% drop in equity, I would expect more than that. At the time I didn’t understand why the gain wasn’t bigger, but now I do. .

    In terms of buying some Puts on this stock, I think that would be suicidal since Momentum has shifted the other way, but I could be wrong. Is the premium still higher the day after earnings are announced? May be worth buying some calls if they try to knock it down to 45 or 46 this morning.

    John


  8. Juliet,

    Looking at BIDU at Pre-Market. .not looking good on the Call lottery ticket, but it could be a headfake! : )


  9. John,

    NTRI Mar 40′s were up 30% yesterday and will pop big time with NTRI up 6.3 as of 8am….the question being since I sold the Mar 40 calls and bought the Jun 40 call the exponential increase in the Mar 40′s are causing a positive rise in the stock to be a negative….do I BTC on the MAR 40;s or just wait?


  10. MA got a big bounce yesterday. Any ideas on playing the rebound?
    W


  11. Hi Karmcon,

    Phil should be able to help you. I’m still new at this stuff. .What is BTC? Buy the caller?


  12. BTC = Buy to close or, yes buy the caller


  13. AMD -

    This one was most likely a dead cat bounce yesterday, but if it it indeed were a Key Reversal, we should see higher low’s and higher highs today. . I would say $14.70 the low and $15.25 the high (thought it would get there yesterday) and most likely close around 15 bucks again. But, it if has a low today, lower than yesterday, all bets are off. I’ll shut-up with AMD now.. Seems like I have been on a soap box with this damn stock, lol

    Thanks Karmcon.


  14. AAPL OS release end of March
    http://www.pcmag.com/article2/0,1895,2094873,00.asp
    ERTS mibile games for IPhone
    http://www.techshout.com/gadgets/2007/15/apple-and-ea-mobile-in-talks-for-iphone-games/

    AMD pushing strong lineup for 2007, ready for CPU+GPU in 2 years
    http://www.digitimes.com/mobos/a20070215PD216.html

    Samsung runs away with memory title in 2006, with 26% of the market, says Databeans
    http://www.digitimes.com/bits_chips/a20070215PR207.html


  15. CAT – Up 2.6% on 7.5 bln stock repurchase program. Phil, it certainly adds to our ‘sellers remorse’.


  16. Thanks to Notable calls

    Piper Jaffray is out with an interesting note on Apple (NASDAQ:AAPL) saying the Vista launch could prove to be both positive and negative for Apple. Firm’s survey indicates that Vista is driving a PC refresh cycle, which could impact Mac market share in the March quarter. But they also believe that widespread computer upgrades could lead consumers to evaluate their options, which may allow Apple to sway buyers toward the Mac platform. Long term, the firm is confident that Mac market share will rise; as the PC market shifts toward portables, Apple’s market share will benefit from higher share in this category.

    Due to pent-up demand for PCs with Vista pre-installed, the firm anticipates a spike in PC sales during the Mar-07 quarter, which could put downward pressure on Mac market share. They also anticipate a general increase in computer sales, including Macs, as customers consider several options for their computer purchase. More precisely, the firm expects Mac market share to decline from 2.5% in December to 2.3% in March. Historically, from Dec-04 to Mar-05, Mac units increased by 2.3% and the market share increased by 0.3%. During the Intel transition, from Dec-05 to Mar-06 Mac units fell by 11.3% and market share was flat. Overall, the firm is confident that Apple will gain share in CY07 despite the Vista-related refresh cycle.

    The firm surveyed 50 Best Buy stores around the country and found that Vista sales have not met expectations, but PC sales have risen since Vista’s launch.

    Maintains Outperform and $124 tgt.


  17. Wow, BIDU could open below 100 bucks. .


  18. Jumped on the BIDU wagon temporarily with the 110′s but bailed down 15%…..lesson learned yesterday and a bigger one today it appears (both lessons = dont jump into what you dont know and go with that gut feeling (even if it says BAIL))
    :cool:


  19. John you should check out notable calls….another write up on NTRI


  20. That is why I thought they should have bought both the puts and calls. With a stock like that, a big move was inevitable. The unknown was which way.


  21. John, BIDU what a mess. Sorry to all who followed me into this trade. Majority of people were very bearish and now I learned that it is not smart to go against it. Also last night show of Mad Money, Cramer said never trust the communist country. So that doesn’t help BIDU as well.

    j


  22. BIDU
    I just finished listening to the CC; they lowered first quarter guidance – even though all the numbers seemed to look pretty good. The 34.8 top line revenue is a just a little lower than avg analyst estimate. I guess that they’re getting punished in premarket because the high P/E isn’t justified with this guidance.

    Those of us that bought in as lottery tickets got what we came for. I am fine with this, but (one of) the other lessons is that we could have looked at BIDU as an investment play, and gone with the Phil discovered Mar 470C…

    juliet, we make our own choices. I bet accordingly!


  23. New post up


  24. Call spreads – I must stress that not all spreads are a good idea because you can get punished for a price spike. It is way easier for me to answer if I know the exact entries you are dealing with, otherwise there are too many variables so let’s take that up in the new post.

    =========================================

    BIDU caught a few downgrades, very unlikely to come back.

    =========================================

    CAT – on my decision list today!

    ========================================

    I’ll be surprised to see BIDU finish below $100 – too many putters going in the money. If they do, then the stock is in real trouble (and will make a nice buy when it bottoms!).

    Moving on to new post…