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Thrilling Thursday Morning – In Progress

Good morning Global Markets!

It's a fine day to be a bull with Asia staging a brisk recovery and Europe getting quickly back in gear.  MMM and AAPL gave mighty fine reports and are lifting the Dow and the Nasdaq in the pre-markets.  Apple's profits jumped 88% – take that Google!   $56Bn MMM made an extra $500M and, although it was mostly from the sale of one of their divisions, that's one of the ways global corps routinely make money so we don't really discount those gains.

The WSJ is finally catching up to what we were talking about for the past 3 months – the disconnect between the market and the economy so it must be time for me to move on before they realize 50% of this "rally" is due to the dollar's decline.  Remember, 40% of the S&P 500's revenues come from overseas and we pay our service sector in declining US dollars and collect rising foreign currencies, it's a great scam while it lasts.  We buy cheap goods from manufacturers who have to pay their own laborers the good stuff while we run the printing presses day and night in exchange for their hard goods – what can possibly go wrong?

I post charts like the one above to remind my readers that we need to take this rally with a huge grain of salt, even as we pursue my weekend plan to "go with the flow."  A lot of the worst is already priced in but if we can move through the trough in construction and home sales without too much damage (as Europe did last year), then we may be able to keep at least a junior membership in the World Market Rally.

Asia was the life of the party today with the Nikkei (we picked up the EWJ May $14s for .60 on Monday) adding another 200 points and the Hang Seng chipping in for 130.  India took a pause today but held positive at 11 after a week of leadership.  The key to investing in Asia is just pick the stocks with the obvious names:  China Molybdenum gained 68% in their IPO and the Industrial and Commercial Bank of China continues to fly.  Gee, who'd have thought those guys would catch on.  I'm waiting for the IPO of All the Tea in China, Inc. as I've heard it's quite a lot!

Another "Duh" investment, Nintendo, made $1.47Bn for the quarter (up 77%) as Wii sales (335K) embarrass both MSFT XBox (228K) and Sony PS3 (127K).  Despite the setback SNE continues to hold strong and MSFT is on our watch list as we expect a break over $30 along with an S&P breakout at 1,500.  The MSFT July $30s are just .72 and make a nice earnings play but we're really hoping for a miss this Q so we have a chance to go long and deep on this stock!

There's a book's worth of things going on in Asia that are very important; Nissan is awful (explains why they were willing to talk to GM), MER is making a $2.9Bn move in Japan, the aforementioned Industrial and Commercial Bank of China made $2.4Bn (up 52%) and Sharp jumped 15% to record profitsWe're going to wait for a move in our CC leaps but I'm close to issuing a BUYBUYBUY on BBY at this point!

European stocks hit a new 6.5-year high as their earnings start to pour in with nice results.  The battle over ABN is lifting all financials and NYX/Euronext had fantastic numbers (and congrats to our guys for buying on that dip!).  ERIC has a 27% gain in revenues, which wasn't good enough to give them a new ATH but bodes well for our MOT, TXN and Semi plays.  IGW July $70s are $1.15 and I like accumulating these as we can always sell May $65s if the momentum fades.

At home it's APPL day but XOM pulled out another beat as that 40% refining mark-up they charge you at the pump made up for a downturn in the price of the crude they sell to themselves.  I said yesterday that at these levels I would be thrilled to just hold half of yesterday's gains today but now we may get to see the S&P take a run at 1,500 – a very significant break-out!

 

 

Day's

Must

Comfort

Break

Next

Index

Current

Move

Hold

Zone

Out

Goal

Dow 13,089 135 12,468 12,600 13,000 13,500
Transports 2,959 70 2,825 2,900 3,000 3,250
S&P 1,495 15 1,430 1,460 1,500 1,550
NYSE 9,746 98 9,218 9,465 9,600 10,000
Nasdaq 2,547 23 2,454 2,500 2,600 2,750
SOX 502 3 477 490 500 560
Russell 832 5 803 820 850 900
Hang Seng 20,667 130 20,200 20,600 21,000 22,000
Nikkei 17,429 193 17,400 17,500 18,300 18,500
BSE (India) 14,228 11 13,200 14,000 14,725 15,000
DAX 7,401 58 6,900 7,000 7,400 8,000
CAC 40 5,973 26 5,650 5,800 6,000 7,000
FTSE 6,505 43 6,325 6,450 6,600 7,000

Wow – what a tremendous move on our chart!  Compare this to where we were just Monday morning and you'll see what a freight train this market is…

Gold is doing an early fade on the threat of a peaceful settlement in Iran as European negotiators have been making great progress since sending our guys home.  They are moving ahead despite the objections of the US, Britain and France but Javier Solana, the EU's top foreign policy official has the backing of Russia, China and Germany and is working through a settlement and is "expected to brief U.S. Secretary of State Condoleezza Rice next week, when he attends an EU-U.S. summit in Washington."  In other words, he won't go out of his way but while he's in town he will tell us what they decide to do.  Welcome to the Second World America – next stop, Third World!

This should put a damper on XOM's profit celebration as oil prices pull back and is perfect for our spread play as we will now have the opportunity to sell puts and calls against, we'll be watching them as well as our SU puts, which I still have faith in as they have all of XOM's weaknesses and none of their strengths.

Zman made the most amazing call on NFX the other day and congrats to our members who took him up on it!  He's got an update today (conference day).  Last week's TK calls came off the table up 170%  and today we'll be keeping our eye on nat gas as it's inventory day in that market.  Z's HK pick is now at the critical $15 mark and I think they will pop it big time so let's set stops on our current $15s and look to move to June on any dips.

 

Over at Wang's World the chart of the day is GOOG as HappyTrading makes a bold $485 target that we'll be watching this morning for an opportunity to line up some new trades.  Did I forget to mention the dollar?  Perhaps it's because I now keep all my money in Yen

 


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  1. I’m now sitting on a large pile of naked AAPL calls, Jun 100′s, Jul100′s and Jul95′s

    When these price this A.M. I’m gonna be feeling rather overweight on AAPL. By the same token, I think the forward looking fundamentals for AAPL look great.

    I suspect a number of us are in the same boat,

    Any thoughts?

    Gordo


  2. yes..sell quickly before MM’s decide to take all ur money


  3. Phil, any thoughts on SNDK earnings. I have the 40 Leap and currently sold the 45′s against. With earnings being so good lately, I was thinking of buying back the call and maybe buying a 40 put for protection on a big miss.

    Thanks,


  4. Phil,
    AAPL, have the jun 105 call and sold 105 call yesterday
    should i buy back the caller at the open?


  5. okay so i played aapl straddle. may 90 puts at 1.40, may 100 calls at 1.75. need the calls to exceed 3.20 to be even. opinions on sell, hold strategy?

    akam – bought 1000 shares last night at 48 and sold this morning at 49.20. should’ve waited for at least 50 this morning…

    some earnings plays:

    pmti – missed but better than clzr, cutr 22% short
    nde – 40% short, cfc missed
    sndk – crapshoot
    zoll – checking it out 8% short
    eqix – akam beat up, 17% short
    boom – 15% short


  6. GPI missed, also has 10% short interest.


  7. tm off hmc dd or what?
    fmd 12% short


  8. AAPL –

    Rule number 1: ALLWAYS sell into the initial excitement
    Rule number 2: When in doubt sell half.

    Breaking one commandment is forgivable but breking two often brings down the wrath of the markets!

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

    SNDK – I’ll look at that later but the 200 dma is $46 so I think we’d have a chance to get out before it skyrockets so I’ll have to think hard about trading in my $1.20 of protection in exchange for buying $1.20s worth of protection that I hope will expire worthless…

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

    Cool – NEVER buy out your caller into the initial excitement for the same reason as you ALLWAYS sell. Watch his premium evaportate, even if the stock goes up. You are in a beautiful spot!


  9. would appreciate anybody’s opinion on JetBlue. tempted a little here? Bottom?


  10. Phil, what are your thoughts on the MU May 11s and the MCDs may 47.50 calls?


  11. I guess there are idiots selling AAPL and buying energy stocks. TSO and VLO up, AAPL going down


  12. thought semi’s would be doing a little better here with the sector upgrade earlier


  13. EWJ calls, outside of the global bull market, this gets crushed by any dollar rally it seems


  14. Analyst comments on AAPL --

    - According to Piper Jaffray the key question is: are we at the peak of EPS upside or is thissustainable? They believe we are not at the peak of EPS upside, given the firm believesApple is entering what will be the 3 strongest quarters in the company’s history withthe following catalysts: 1) iPhone, 2) new product in Jun/Sep (video iPod, tabletMac, or other new consumer product), and 3) continued Mac market share gains. The more important point is that Apple has the pole position as it capitalizes in ashift in computer buying behavior. It is obvious consumers want computing devices that are focused on entertainment and creativity. To date, they have not seen any credible competitive threats in Apple’s core markets (Zune is a flop in the MP3space and Dell & HP have failed to deliver PCs that rival the Mac). PJ believes thatin the coming quarters Apple will hold its massive lead in portable audio and grow share in the personal computer market. Maintains Outperform and ups tgt to $140 from $123.

    - Goldman Sachs notes that even eliminating the help that Apple received from favorable component costs, the company still produced over a $0.10 beat to consensus earnings estimates in what should have been its toughest quarter, setting the tone for the rest of the year. Apple is right in front of a major change to its business model which, if anything, will increase the quality of what is already a strengthening model, delivering more predictable revenue and margin leverage. Firm’s new earnings estimates for calendar 2007 and 2008 are $3.52 and $4.09, up from previous $3.16 and $3.89, respectively. Moves tgt to $120 from $110.

    - Morgan Stanley notes they are keeping their $110 target for now but feel incrementally more confident that the $160 bull case scenario will play out in the next 12 months. Remains Overweight.


  15. HAR getting bought for $8Bn (up 25%) by GS and KKR! Trying to sell the $120 puts for $10 or better!

    AAPL – May $100s opened at $4.40 and you really should have taken $4 as any profit on a spread needs to be taken off the table ahead of earnings unless you have huge mo. If you’re still holding at $3.40 (puts are .25) then you may as well watch the $100 line and get out even if we lose it or you could DD on the puts and ride the month out but with a spread you need to be thrilled to make 25% – you are lowering your risk by immediately sacrificing what would be a double so a 25% gain on the spread is a 125% gain on one side – expecting better is going to lead to disappointment.

    For those of you looking to get out of AAPL on either side, try playing the spikes, we’re probably going to have them in both directions today and I will be looking into working my way into a strangle, starting with an offer of $1.50 on the $100 puts and either getting the $100 calls for the same or grabbing the $105s as a mo play.

    Yesterday’s cheapy pick GE just jumped 2% and I will take a bow on that one! Don’t forget MSFT! BA coming back to life too!


  16. Current TSO Position: May 100/Aug 105 puts vs. short May 110 puts

    Time to dump the 100s at 0.5. What do you think about selling the May 120 calls at $3.5? Any other play at this point? (I am still going for a saving plus move here)


  17. Happy – where does it look like ATI is heading – up down sideways etc – thanx


  18. Hey Happy!, do you have an opinion on JSDA? Getting ready to pull the trigger, I think.


  19. TM (5/9) – We took the loss on the $130s on Monday at $1 but now is the time to go for the $125s at $1.50 XXX.

    MU – Very greedy to not take at least half at the critical $12 mark – that’s a huge move since our pick. Oops, I stopped out now anyway.


  20. what’s the trigger on akam again?


  21. POT- always sell into the excitement
    AMX & NIHD-Mexican wireless doing well


  22. dumped remain VLO calls – for a 30% 1 day gain…I’m learning from you Phil & Co!

    NFX met expectations, don’t worry about the derivative loss, it’s non cash. The stock’s off with the group but may roll higher if commodities permit. I’ve been trying to add a June $45 call position here but have been too cheap. My money says it gets a little more respect on the deep discount and improved Woodford results.


  23. Phil: If you’re still calling TM then is EWJ a good buy now since it’s down from Mon? DOW mattress plays add for the U.S. side?


  24. Phil: any suggestions on SNDK for May


  25. MCD/all other stop questions – Don’t think, set 20% of the profit stops. That means that you take the highest price paid for your contract and, if the price paid goes 20% below that you should sell at least half. 20% below that you should sell antother half or, if you still love it, then buy back some more as you just saved yourself a fortune by not holding that first half too long.

    If it turns around on you after you sell your first half and gains another 100%, you will have still given up less than 50% of the maximum possible gain while every 20% down that you take no action costs you a full 20% of your gains while time eats away at your premium.

    If you want to be in something for the long haul and ride out the dips – DON’T PLAY OPTIONS WITH LESS THAN A 90-DAY WINDOW!

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

    LOL – EWJ got crushed! Stopped out there too. If we hold up today I will buy them back.

    FXI too – if you guys don’t have mattress plays I strongly suggest them.

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

    TSO – I sold the May $115 calls for $5.50 yesterday to some sucker (at least I hope he’s the sucker..)

    Will sell the $120 puts for $6.70 if oil turns up (gas inventory out soon). Depends wheich side of $65 we’re on, still $65.36


  26. GOOG finally up today


  27. GOOG rocking up!


  28. Phil,

    Are we still liking the LEN Aug 45′s Puts to stand pat. They have started to bounce a bit.


  29. That SU release was not so good. Reduced guidance and therefore had to bump up per unit costs. No explaination given in PR. Continuous operation of these kinds of things often prove to be anything but. LOL.


  30. ZZZ
    Nice trade on VLO! Do you follow ALJ?


  31. AKAM – I didn’t think earnings were that bad but the calls re way too expensive now so I won’t play it.

    Very stiff penalties for not selling into good earnings this morning – makes me think big boys are calling a top here. If oil doesn’t calm down, if the SOX don’t go positive, if the S&P doesn’t break 1,500 – we may have some trouble..

    SNDK may be grossly underestimated so the $45s are a pretty good gamble. I’m no longer happy with my Jan $40 leaps as they are too in the money at $9 so I’m rolling those to the Jan $45s for $6, taking $3 off the table and leaving the puts I sold in place – hopefully I won’t get gapped out…


  32. SU now positive for the day. Oil stocks are an exception and will go higher even if they guide lower :-)


  33. Wow, JCREW is up handily today….


  34. XOM – estimated earning for first quarter 2007

    http://tinyurl.com/2fuozj


  35. SUN- moving higher on VLO earnings
    WFR- picked up some on the pullback


  36. LENs are long gone from last month – sorry. I don’t even remember when but I lost interest in HB puts a while ago. I wouldn’t play a call but I think they may be at a bottom here.

    SU – I don’t know what’s keeping them up! Average production was BTE but they lowered forecasts for the year by 5Kbd ($118M). I’m not complaining, the $80s are a double from yesterday now and the June puts are still $2 so I’m tight stop on the calls and then tight stop on the puts on the turn.

    Build in gas 18Bcf – good for SU.

    VLO now catching TSO fever!

    CME heading back down. NYX $90s for $1.45 as mo play – was $2 yesterday and $4 on Monday XXX


  37. ATI
    JPL, you can probably day trade ATI, but, the best man for that would probably be BillBigD. Metals are going through some consolidation right now, so, be careful.


  38. JSDA
    momoneyplz, are you looking at common or options? I’d wait if 24 holds. If it goes below 23, start thinking long!


  39. CEPH
    Gave pre-earnings announcement that they are going to beat the estimate handily, so, we don’t have to guess!


  40. ANF
    is looking pretty good!


  41. Happy, seems there are not options for JSDA, I would like to take a small common position in it. 3 or 4 bux move on it is easy, but in which direction?!


  42. tso is the energizer bunny aaargh

    Phil” can you look at plt may aug 25 calendar for .90c does this make sense?
    thx


  43. JSDA
    momoneyplz, it has been sliding, and the daily MAs are flattening out. 10-day MA is starting to turn lower. I’d still wait to see if 23 holds. If this stock is a mover, that shouldn’t be too hard.


  44. EQIX
    screaming today before earnings!


  45. bw


  46. EQIX
    90+!!


  47. Phil,

    JWN July 60s. In at 1.7. Any calls to sell till this one starts to move up?


  48. TLT interesting short here. Any thoughts Phil?


  49. TSO – Even if they hit their number, it only puts them in-line with last year’s earnings and can’t possibly justify this premium to VLO. I still have the June $110 puts from yesterday, holding $3.30 so I’m out of the current $110s if I should be lucky enough to hit $3 but I won’t DD there now.

    Plan is still to roll losses to Aug $105 puts (up from $100s) at $3.90, hopefully $3.50 and then sell puts against those for a while.

    I also like the spread of the Aug $120 puts for $9.70 and selling the Aug $130 puts for $15.85 – you make money as long as TSO doesn’t finish between $124.15 and $130 and if it looks bad going into July the loss should only be couple of bucks vs. a $6.15 potential gain. XXX

    67% of the S&P has beat so far – keep that in mind when you short! Anybody who exports anything is in good shape but domestic companies remain very questionable.


  50. ISE- totally out of all stock bought from a year ago! DEAD MONEY
    RIG- added to Aug 85′s
    PCLN & GLDN breaking out!


  51. ANF
    new high!!


  52. SIRI any good news?


  53. Phil,
    Thoughts on where BIDU goes after earnings. Thanks.


  54. HAPPY
    ANF- right there with ya Brother. Finally picking up steam! Phil you have played this one before any ideas for earnings in late May?


  55. Phil, I don’t understand your spread on TSO Aug. You said buy the Aug $120 puts and sell the Aug $130 puts? This is a bullish position and will lose money if TSO finishes below $124.

    Did I miss something?


  56. FSLR will unlock 20 million shares on 5/16


  57. ANF
    BillBigD, cool! you got me interested in GLDN. Also, looking at your VSEA!


  58. PLT (5/1) – Very low expectations and no, not a good idea unless you are very bearish as your guy is in the money for $1.22 ($1.18 premium) and you are in the money for $2.08 ($1.94 premium) so who’s the sucker here? While you will hold up better on a drop, you will also only gain $1.52 on a $2.50 gain (see the Aug $22.50s) and that assumes you don’t lose earnings premium. Your caller will get $1.18 of a $2.50 gain, even if his premium completely evaporates and then will out gain you roughly 5:2 (see Aug $20s) above that. PLT was at $37.50 last April when non-growth taniked the stock and then missed by 10% in Q2 and droppped to $15. They are at a 50% recovery but sales and profits are on the rise so this one just seems too risky for that strategy (plus look at the numbers on handset sales).

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

    JWN – tough one because earnings are 5/17 but I suppose taking the .70 profit off the table an moving to the Jun $60s for .90 is the best way to hedge this one. To do this you can get out here (since this looks double toppy for the week but always trying to get a little more and buy for a little less) and wait for a dip or buy in at $1 if you have to on a breakout over today’s high. That way you are only risking .30 or less on earnings. XXX

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

    TLT – I’m always tempter to play these but they are pretty random on the whole. They are no fun to spread as the close premiums are too low but if they hit 87 again within 10 days then the Jun 87 calls get very attractive around $1.20 unless the dollar continues through resistance (but who are we kidding?).


  59. VSEA
    Earnings tonight!


  60. Phil,
    BIDU up more than 8 in 3 days, earnings tonights
    maybe buy some puts.. sold my postions yesterday!!


  61. VLO

    I have had a 3/2 play still on at 70 similar to the one we have on BIDU.


  62. BIDU Flying! We have 3 June $105 calls and sold 2 June $105 calls against them in the $10KP and those $105s have an insane $5 premium. I think they should do as well or better than Google since they get help for a lot less money and aren’t acquisition happy but they may also get the ho-hum Google reception on great earnings.

    ANF – should do great but it’s too high and options too much for my taste here. Last Q they did great and sold off for no reason so, like BA yesterday and IBM last week, I’d rather buy them on some silly dip when the premiums come down.

    TSO – LOL you’re right – I was thinking as an upside cover and forgot my downside! I’m watching way too many things if I’m going to start missing things like that! I was thinking about protecting my heavy Aug put position against catastrophe but that does not work as a new play for people other than the uber bullish. Sorry!

    FSLR – the p/e is down to just 936!


  63. big oil taxes puts on xom?


  64. Dem senators (Webb, Lehey, Casey) been reading my column and calling big oil war profiteers! Excess profit tax of 50% for profits over $50 a barrel. House dems working on price gouging legislation and bi-partisan group looking to raise lease rates for oil extraction…. Sounds like Daddy’s going to take the TBird away!

    TIE waking back up

    Knot waking up. Oct $20s are still $3.90 (same as 4/4 entry + .2)


  65. that news and xom going up????????


  66. Hi all, just got on……ty APPL for the pi,

    JBL (If it keeps going Phil those May 27.5 may actually rise from the dead!!)

    Watching ORCL MOT and F about as exciting as watching the grass grow…..

    TSO may be overvalued, but they are keeping it a very big secret from the buyers!


  67. GRMN (5/2) – $55 puts are $1.30 and TomTom just gave good close of europe results so there should be some panic about price competition and market share for garmin – just a mo trade (.30T)


  68. So long MSFT looking pretty good here?


  69. QCOM – with earnings over, looking to sell calls against Jan45s. May45s have ~0.75 premium, but that’s better on a per day basis vs. the Jun45s. Are there other alternatives I might be missing?
    BA – took out my 95 caller on the dip; getting back in for $1.50
    BIDU – I’m naked on the Jun105s, took out the May caller already last week. Hold for earnings?
    HWCC – finally made it past $30!! I know I’m greedy but waiting for earnings next week; maybe sell near calls as hedge
    TM – roll down to $125s instead of DD?


  70. Couldnt resist the JBL Jun 25′s for .60 stock is a sleeper and was pounded down due to option and temp inventory probs, should pop back to its normal 27-30, but when?


  71. AMZN – when will it stop going up?! Still waiting to roll up my May45 caller.
    AAPL – Jul95/May95; in same position as AMZN but there’s still ~$1 premium left in May95s. Is the right strategy to wait until the premium goes away before rolling (if necessary at that point)? Thanks.


  72. Phil, still holding the MDT 50s that you recommended. Earnings don’t come out until 5/22. Dump half?

    Jazz


  73. XOM – I think the news wasn’t as bad as they thought.

    JBL – I never played that did I? Now I’m really feeling like I’m losing it if I did…

    TSO – I predict we will be able to film a reality show called “When analysts attack” if their earnings aren’t mind blowing but they hold evey gain that any part of the oil sector makes and shake off any loss right away. BSC cut them 3/26, DB gave them a sell the same day, FBR just dropped them from Outperform to Sell on Monday but they still have 12 buys and 4 sells (5 holds). Google, by comparison has 35/3/2, AAPL 24/3/0, VLO 14/7/1 and XOM 10/11/0 yet TSO has outperformed them all by a mile.

    Interesting to see PEG going down here ahead of earnings.

    UNH getting killed here. Taking out May $55 caller for .35 – have to consider selling $50s for $2.90 as a mo play (selling at $2.75 with a .25 stop). Nonetheless, doing a DD on Jan $55s at $4.35 as I just made .65 on my first batch so it’s good cushion and earnings were pretty good with all the weaknesses fixable. XXX


  74. AXR looks like interesting long. Short interest 2mln shares, float 1.9 mln. Any thoughts?


  75. KC – Me too on those AMZN May 45s – I’m looking at the May 60s (1.50 premium, though no intrinsic, very expensive roll) and either the June 52.50 (~6.50 – 1.42 prem, 5.78 intrinsic) or June 55s (~4.45 – 2.02 prem. 3.28 intr). Haven’t decided which ones yet. Though the longer I wait it seems the less I am losing. I was at a $580 loss yesterday while today between 420-480.


  76. democratic debate tonight bad for big oil? i hope, i hope…


  77. phil, what do u think of NYX of more of an intermediate hold here as they had earnings release this morning could be a bottom here if stock closes gap target of 91.90 in other words instead of playing for 50 or 60 cents today could play for several bucks


  78. XOM – How long should we hold the straddle? (Or have we already gotten rid of it [sell on the excitement, or lack thereof])


  79. My MSFT play is 2:1 ratio May 30 calls : May 27.50 puts.

    I’ve missed out on all the fun playing the bear over the last month. I think I’m done hibernating though. I’m going over to France for a week soon and I get 73.5 eurocents to the buck?? This weak dollar rules if your selling 40% of your goods to foreigners but when your buying 100% of your wine from them – not so good! Maybe I should take over something to sell to them? A subscription to Phils World perhaps? Any kickbacks for international sales and marketing Phil????? ;)


  80. ALJ – not really, I know it’s one of the Fast Money Five’s picks. They like it a lot but they like everything a lot.


  81. zman, any word on the HK presentation, still holding some here

    thanks


  82. fmd just spiked


  83. MSFT July $30s is an earnings gamble but if I lose I go long and large on Jan $27.50s or whatever it ends up at so I’ll be distributing let’s say a .25 loss to each of my leaps if it’s a disaster.

    QCOM – I’d wait on selling calls, earnings were good, market just not in the mood for them today. We need a rest after yesterday but all we have to do is hold flat. GDP is tomorrow and, as I’ve said before, how can it miss if corporate profits are BTE across the board. Sales are up, wages are up, energy is up, profits are up, tax reciepts are up… at a certain point you have to say hmmmm to a 1.8% projection which would track us for a 35% drop from last year’s 3.3%. The last time we had a 1.3% drop in annual GDP (inflation adjusted) was 2001 after 8 years of almost 4% growth. Q4 was 2.5%. up from 2% in Q3 and housing isn’t crashing (as much) this Q.

    The dollar stays down for the day and interest rates are going up ahead of a treasury auction so watch those closely. Apple is hodling up the Nasdaq and the Dow is meaningless but the NYSE is not doing well and the S&P can’t hold 1,495. Oil is crushing the Transports and the XAL is flat. If the GDP misses it could be really messy and too hot brings Fed fears so we need 2.1-2.4 for a pleasant surprise.

    Picking up YHOO June $30s for .45 XXX


  84. NDE just broke through resistance and is brkng loose, I have the JUN 30 P’s btw :sad:


  85. YHOO could be a good call there, I’m in that with you, could run to around 32 if the big boys let it.


  86. you guys see MRO has a refinery burning right now?


  87. took some May 75 calls on VLO for $1.30 as a DT


  88. small fire, put out immediately but the unit is offline


  89. DNDN taking it on the chin. . if it falls through 14.90, most likely headed lower


  90. DNDN – is there news?


  91. EBAY slowly coming back to life. I picked up the 35s for .40; they trickled in one by one…


  92. dndn,
    one of the naysayers published an open letter to fda as to why provenge should not be approved


  93. Contemplating NVDA June 30 puts. Anyone else following them?


  94. bought YHOO Jan-08 30 calls at 2.60.

    I hope this Panama ad thing is a success.


  95. buying Ceph calls May80s, its moved 5 points but if you look at the daily cahrt CEPH has a tendency to move 15-20 points on extreme moves or volatility.


  96. CEPH caught shorters by surprise, 65 million float- 10million shares short, 7 day short ratio and 15% short.
    Probably up another 5.


  97. CME $2 away from 200 day support


  98. 2 big blocks on CEPH for 38,000 and 31,800 buys. ????


  99. BIDU – in a $10KP I would not hold those profits into earnings. You need $116 (+7%) just to keep your money. In a STP I now like the Jan $120s for $10.95 and selling the $115s for $3.40 as there is plenty of time to roll.

    TM – you missed the $125s for $1.50 this morning but yes, rolling over DD.

    AMZN cracks me up! They were $27.50 last summer when we took leaps in the old folder and they barely got to $35 ahead of the holdays.

    AAPL/AMZN – with spreads you are looking to make 20% – as long as you still see your way clear to getting that through roll or expiration, don’t worry about them.

    XOM – 6.9% share buyback accounted for 1/3 of EPS growth. It cost them $31Bn to do this and they earned $9Bn this quarter – this will be one painful merry go round for people to get off one day (not today apparently).

    MDT – that is kind of an embarrassing amount of money to make (and much worse if you lose it). I set my last stop there at $3.25 when it was $3.50 but at $4.30 I think a .50 trailing stop will preserve more than a triple. If you have a lot (ie if losing half would ruin your week) riding on it, then by all means take half here and don’t risk an overnight but this is the 4th day in a row I’m glad I held through a dip… If I had made less money I might want to sell the $52.50s for $2.05 to pick up another .50 but that’s just being greedy at this point and I’d rather have the cash.

    AXR – I don’t know their properties well enough to understand what happened to them. Probably a normal sale of assets at what the figured was a top but I couldn’t feel comfortable looking at that relentless sell-off. There’s a huge difference between a $13Bn cap company like BXP and a mini like AXR they look solid and focused with an interesting revenue stream off magazine distribution but a company like this is just one bad deal away from being insolvent.

    NMX rocking AND rolling!

    NYX now a good LTP candidate but I’m waiting as I would rather be selling the $90s when it moves up or the $95s when it moves down.

    XOM spreads – I have both still. The July $80s are still $5 and the June $85/May $75 is down .40 but we didn’t expect those to work. I will probably sell the $80 puts against my $85 puts OR sell the $80 calls against my June $85s as I have the Julys for protection but I can give it until next week so see what happens as the $80s should hold $2.50 as a pair through next week.

    Have a good trip BDC! Jared did set up some kind of sales affiliate program so go spread the word throughout Europe!

    That does it, I’m tired of DNDN going up and down like this! Buying $15s for $4.50, looking to sell $17.50s for same (currently $3.70). Will stop out of $15s at $4.25 rather than stay in trade, maybe try again at $4. XXX (for crazy people only!).


  100. Phil – Specifically with the AMZN spread (and generally with other spreads) you mentioned that we should wait until there is $1.50 premium in the leg we are rolling to. What is the reason for this? Is it because of the 1.50 of protection left in the option? Why 1.50? Does that give you enough intrinsic value for the option to still be fairly expensive? thanks


  101. Buyout rumor on SUN. What else is new. Sun could be the 3rd head of the Refiner monster. TSO is too expensive fundamentally and overbought technically. VLO has too large a float and moves slowly. SUN looks to me like the new one to trade.


  102. Opus Re HK – Nothing yet, the presentation is 113 pages long and I’ve failed to get it to download 5 times! The basics should be the same, whether or not there is enough there to woo the fence sitting analysts is another matter. I’ll let you know.


  103. GST – Is this still interesting Phil/zman :-)


  104. AMZN!!!!!

    You know it’s a bull market when OSTK finds buyers (probably based on AMZN)

    DNDN – “naysayer” = “short” There are funds that will take SUBSTANTIAL losses if this goes to approval – there is no saving being on the wrong side of that call last week.

    NVDA – No way since I’m getting my move out of HPQ.

    YHOO – can it really get any worse? That’s my logic as YHOO is a cheap proxy for a BIDU/GOOG breakout tomorrow or Monday.

    CEPH – yeah that was pretty obnoxious of them – I love it! If I had a public company I would take every opportunity to screw people who were shorting me… I missed them on the dip in March and couldn’t bring myself to buy up here.

    CME has support???


  105. SIRI ready to break above 3 bucks. .


  106. anyone dare call a top on TSO?


  107. Bio..

    I wouldn’t bother.. I think at 80 we have been thinking it was a top. .


  108. Phil don’t you have the covered call play on DNDN?

    Why worry about the stock move?


  109. AMZN $1.50 – they are a $2.50 roll (although now $5s) and $1.50 is about as much premium as you are likely to get in a bracket so you are selling the max premium. I hope I didn’t say it is the same for all as it’s very dependent on the contract you have and where you’re going.

    In GOOG for example. If I were stuck with the $450 caller who at $33.40 has a $3 premium and I’m looking to roll him. I look up the ladder at the biggest premium I can get, which is $10 for the $480s and I either take that or, strategically, wait until either the $490 or the $470 get that premium, depending on which direction I think as well as how much I am willing to lay out at the moment. Happy to discuss this more on the weekend as it’s an important concept.

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

    Anyone who buys SUN at $10Bn and didn’t buy TSO at $5Bn is an idiot of the highest degree. TSO sells the cheapest oil for the most money and generates 15% less profits on 60% less sales than SUN. TSO has more NTA, better cash flow and younger equipment. Now that they have run up TSO is no bargain but sun is up 20% since Jan 1 and TSO is up over 100% so unless the buyer just woke up this morning and realized the need a refiner – the guy should be fired immediately for missing TSO for the last $4Bn of valuation.

    On the other hand, if there is legitimate interest in SU and not TSO – then you know the valuation of TSO is considered ridiculous by the buyers… Still, IF I needed a refinery then TSO would have been my choice at $60-65 from 9/15-1/15 as they had dropped off from $70 earlier in ’06. SUN dropped from the mid $70s to the mid $60s in the same period.

    The reality is that no one is very likely to want SUN at $90 – it’s too risky with Dems on the warpath, especially if they realize that price gouging begins at the refinery!

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

    GST off my radar but the chart looks nice. Assuming they were a true value you would want to either catch them after they get over $2.25 with some mo or if they get down to $2.05 or less again and hold it (for at least a day). They look like they are having trouble at $2.15 so establishing a new floor there would be a good sign while a cieling there would be bad.

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


  110. wow my 60min chart on TSO shows all green volume bars for 12 straight and counting!!!


  111. bought may 80 puts on xom.
    may 25′s hov
    out of aapl may 100′s


  112. DNDN says bye-bye 15 & bye-bye LEAPS not buy, buy?


  113. GST – got delayed in doing further work up on that one. It’s in the hopper for an update.


  114. Top on TSO – $105 and I’m sticking to it!

    DNDN – I’m not worried but if I can scam a free ride I sure will! It’s just fun to have zero cost positions you could care less about and then suddenly you get paid… I didn’t like the action so I’m out at $4.60 with a dime profit and I will try again tomorrow. I decided to do this because I am amazed at how well these options hold thier value. XXX

    SIRI – selling $3 ls for .20 when I can on half my positions (I am DD and DD on my originals so looking to exit half). My basis is $.95 and this makes it .85 so I would get 1/2 out at $1 which would drop the basis to a comfortable .70 as I want this for a long-term hold. XXX


  115. GDP tomorrow!


  116. Phil: How did you scalp .1 when the stock dropped 15.6 to 15 in that time frame? It wouldn’t have been possible w/ the fills @ E*trade. I’m beginning to think you’re right on slow execution & I need to shop for a new broker.


  117. on DNDN sorry


  118. TSO – my $115 caller is lauging at me! I have to take out my $120 putter, no way can I afford to risk this overnigt but the $115s are covered by my $105s so I’ll just leave him.


  119. Ebay catching a bid?


  120. phil: also see avp may june 40 call calendar for .40c sell for 1.10 buy for 1.5 ?
    Is this sensible? thx


  121. MrN – on DNDN? There were a ton of sales between $4.50 and $4.70 after 2 and while I was trying to buy it people were paying $4.80. I got filled at 2:15 and the sales shot back up to $4.70 but then started ranging lower and by 2:30 I put a sell in as it started drifting down. They’re still getting $4.40 and some $4.50s and if Etrade isn’t giving you that then get out! Of course you have to set your ask, you can’t just put in a sell, that’s true of any broker.

    Note to all: When I post a price I post the current price which, in a non mo trade, is the MOST I am willing to pay. I will usually put in a bid for a dime (if over $1.50) or a nickel less and wait. I’d rather not get the trade than pay 10% more than my target for something.

    DNDN is back to $15 and you can sell the $15s for $4.40/$4.50 – once again a great play for any portfolio! XXX


  122. What the hell is AMZN doing? Does anyone think its worth 60.50? I’m having a hell of a time getting out of my position. I can’t seem to roll or close the position. ANy ideas


  123. BIDU up 11 in 3 days


  124. AMZN giving TSO a run for its money!

    EBAY – rolling to June $35 at $1 (+.50) rather than DD here – will likely DD there at .50 but I really hope not!


  125. phil- been seeing alot of talk about BRCM’s action today ahead of earnings.alot seem to think it could be setting up for a big move. what are your thoughts on it? do you notice anything out of the norm?


  126. Dumping BIDU, that was a fun spread. YHOO working out well, good heads up on that one Phil.


  127. irrational exuberance at AMZN. They open under 60 tomorrow.


  128. Phil, what EBAY are you rolling to the Jun 35s?


  129. XAL falling again!

    AVP – If you’re bullish sure. They have tough numbers to hit but they are quite the China story. This is a double tap at $40 for them and last time they were going through (after Feb earnings) but 2/27 hit so I’m going to XXX the June $40s for $1.55 but hold off on selling the May $40s until we see tomorrow’s market (assuming you have some general covers) as another good move could pop them over.

    Daveo – patience is the only thing – it really can’t get worse so it can only get better (but it probably wont).


  130. BIDU- gone not holding for earnings
    COH- coming back from getting killed on Tuesday Ditto for ATI from yesterday
    WFR- taking the trade from this morning off before earnings. Gain .7
    NMX- wake me up when it is back at $135 so I can sell some May calls.


  131. I would love to see GS at 150 in 6 months. Or at least, my Oct 185′s would …


  132. Phil:

    I bought some SIRI Jan 08 2.50s for .80. Would you sell the Jun 3s for .20
    or the Sept 3s for .35? My cost on the Jans would actually be .05 cheaper
    than the called away price on the Septs. This looks like an unusual
    difference to me. Thanks.


  133. Wow as calculated on 50 million shares short on AMZN thats almost a $1 billion loss. Talk about a margin call.


  134. any sndk plays into earnings taday


  135. BRCM should be good but they have tangential issues with lawsuits and stuff so risky.

    Based on what I see though I say they blow it out and I wish I had done this before but I’m going to take the June $37.50s for .85 and the $32.50 puts for .40 XXX


  136. P –
    at least SU acting right now. I’ve still got a load of the May 80s and some next to worthless $75s.


  137. Phil,
    CCJ- doing anything here before earnings tomorrow


  138. GST – thanks Phil


  139. sorry but ‘blow it out’ as in beat?


  140. Phil would that ebay play be a good idea for NIKE may $55 also thanks


  141. out of BIDU, SNDK, AAPL spreads. Added TSO, ATI, NTRI, PKD naked calls for now but have contingent orders to add coverage as needed.


  142. General trading practice question…should one always specify all or nothing on orders or is that dependent on order size? I’ve had situations where I’ve only been filled partially, even on small # contracts, and really had to scramble when trying to unload quickly. Thanks.


  143. EBAY – the current $35s at .45 (all I could get) rolled into the June $35s at $1

    SIRI – I’d rather get out with a profit now and make a new decision next month if I can – I wouldn’t want to get tied up too long as either SIRI or XMSR could declare bankruptcy in order to circumvent the FCC so the other one can LBO the assets.

    Negative whisper on MSFT spooking the markets. If they beat there’ll be a whole new squeeze tomorrow!

    OK, now AMZN is just messing with people! PE up to 137, 66 for next year assuming all goes well.

    Selling May $47.50s for… LOL (really lauging now)… $14.25 – I just can’t take it anymore, they were .85 on Tuesday!


  144. That was a fun ride on BIDU.

    BRCM looks like a good bet.


  145. Good trading day today kids. Off to take the training wheels off my kids bike, see you tomorrow.


  146. AMZN

    Epitomy of a short squeeze ! ! ! What a move.


  147. WFR down by $8


  148. SNDK, break even, ouch.


  149. well…so much for BRCM


  150. SU – you didn’t sell those $80s for $3.50??? Remedial classes for you Z!

    AMZN – sorry I ran out of time (I know too late). The correct move on those is to trade the May whatever calls sold for the $60s at $4.60, which carry a $2 premium but I realize this is prohibitive for most people, which is why it took me so long to make the last post as I was racking my brains for a solution.

    One is to move yourself to the Oct $65s for $5.50 (you can go to July $65s for $3.35 but it’s much riskier) and roll your caller to the May $60s for $4.60 – this will cost you about $1.10 per spread but pushes you 5 months out just out of the money with 80% coverage this month so that’s the XXX move. Going for the Julys nets you cash but the danger is a continued run puts you back to scratch (but then we just do this again until it works).

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

    CCJs stopped out Monday. Had I notices how far they had fallen since I would have bought calls but it was just too much money into earnings.

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

    YAY! MSFT scores!!!! .50 vs. .46 – once again analysts prove themselves clueless! Guidance raised on earnings but not revs. but we will take it!

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

    LOL – blow it out as in beat but they missed by a mile! Looks like we’ll have another YHOO where the puts will save us. Revs were in line so they have some ‘splaining to do!

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

    KC – more important that you enter a trade gradually so an all or nothing should be meaningless to you. The only time I make all or nothing orders is when I don’t really want to execute them but I’m teasing the MMS by, say, offering 1,000 TSO $110s for .25 over the bid. This means I’ll take it if they offer it but what I’m really doing is letting them know I’m out there, setting a sort of floor or cieling (sometimes while I’m accumulating the other end of a spread). When I want to sell (or buy) something I put in an order (always day orders only) at a fixed price and it either fills or it doesn’t. A lot of times if it comes near my price or I get a few fills I often lower my bid. Since I initially offer a nickel or dime less than the bid, if I have to chase up the nickel or dime for the rest I end up where I thought I’d be but sometimes I get lucky and get it all lower.


  151. BRCM

    I guess that’s why we play both sides of the fence.


  152. SNDK – man am I happy I moved those!!!

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

    WFR – wow, I am nailing these – the only ones I have covers on are failing…

    As someone once said, I’d rather be lucky than good!

    See you all later!


  153. BIDU-showing $130ish up $27


  154. BIDU exploding! Thank goodness we did a 3/2 spread in the $10KP or that would be painful!


  155. VSEA-showing up 8


  156. Got out of the spread on BIDU but I’ll be very happy I picked up a few 125′s as a gamble!!!


  157. Any hope that TSO is showing DOWN 20?? :wink:


  158. Got greedy on WFR and it cost me on my options and my holdings. I am afraid to listen to the conference call. These guys were very optimistic last time. Last time they were pretty sure that they were the major player in the field and the chip pricing structure would not diminish. After the beating I took on YHOO, you would think I would have learned my lesson.

    Jazz


  159. Z

    Left you a post re NFX Large % increase in option volume related to the Jan 08 50′s, Dec 45 P’s and Sep 40 P’s….maybe the perplexion I have regarding the diversity with the option increases between both calls and puts is an indication I should stay away?


  160. Congrats BillBig – great call earlier!

    Now we see if my YHOO as a proxy theory works out. Really this just makes Yahoo management look like idiots with Goog and Bidu cleaning their clocks but you can’t deny the overall value of Yahoo’s property and it’s way more than $28.50.

    Meanwhile my BIDU $115 caller is laughing at me but my leaps should do ok – will probably have to bracket them all up though.

    I hope KC took the Leap play because if he just cashed out he’s going to kill me! Sorry KC but it really was just a crazy risk naked for a $10KP but hopefully that wasn’t your limit.

    That one extra June $105 call is going to be about a $2,000+ gain in the $10KP if we hold $130, not bad on a $680 spread (pat, pat).


  161. BIDU- THAT’s an awesome trade!!!!
    WFR- Those sold May 65′s was a great cover also.
    NOV-forgot to make a play for earnings manana! DARN


  162. P – Question for you. Is open interest on optionsexpress or any trading platform current or prior day?

    It would to know to answer Karm’s question re NFX.

    Karm – In general NFX gave me pretty much everything I was looking for in their reports last night. I like them as the resurection of a once great mid cap E&P name. They’ve been through a rough patch and are just starting to garner some new attention but are very cheap. They were up 1% while meeting estimates on a day when most gassy stocks, as indicated by the XNG fell 0.9%. I’d say I’m not the only who was pleased.


  163. Phil,

    AON – The positions I take are nowhere near the size you take, so I’d get killed commission-wise if I scaled in. But, I will certainly keep that in mind if/when I trade in the 100′s of contracts (LOL). I actually seldom use AON, so I’ll keep it that way.
    BIDU – still long on the Jun105s, though barely – I got a bit nervous when it was $111+ and put on (what I thought was a loose) trailing stop. Luckily I caught it in time when stock dipped a couple bucks or it would’ve triggered. Looking forward to tomorrow. Thanks for a great play. BIDU leaps? I don’t recall seeing one mentioned; in any case, it’s too late now.
    AMZN – still waiting….

    In general, thank you very much for putting up with all my questions. I’m sure I’ll have more ;-)


  164. What the heck is going on??? Read the following and make your educated guess the end result of the markets reaction to the Co statements/earnings filings…….wth am I missing?

    MHO said its first-quarter earnings fell to $2.2 million, or 16 cents a share, from $16.4 million, or $1.14 a share in the same quarter for 2006. The home builder said Thursday its results included after-tax charges of $2.1 million for inventory impairments, deposit and pre-acquisition cost write-offs, and workforce reductions. New contracts fell to 942 from 1,137 in the year-ago quarter. “Our first-quarter results reflect the challenging conditions that we continue to face in most of our markets,” said Chief Executive Robert Schottenstein in a statement

    Last: 30.27+1.74+6.10%

    California mortgage lender IndyMac Bancorp said Thursday its first quarter profit fell 34% as mortgage profits took a hit from a shakeout in the subprime, or least creditworthy sector of the market. First quarter net income slipped to $52.4 million, or 70 cents a share compared to $79.8 million or $1.18 a share a year ago. The company said it expected continued stress on its mortgage operations in the second quarter. “With respect to mortgage banking revenue margins, the spread widening in the private mortgage-backed securities markets that occurred in the first quarter will continue to impact margins in the second quarter,” IndyMac President Richard Wohl said in a press release. Wohl also said he expects mortgage-banking revenue to drop at the firm’s reverse mortgage unit, Financial Freedom, in the second quarter, after performing well in the first quarter. “We expect net income for Financial Freedom to decline from $28 million in the first quarter of 2007 to roughly $12 million in the second quarter and then likely grow from there,” Wohl said.

    Last 31.98 up 3.2%!!!

    And finally…..

    RYL late Wednesday said it swung to a first-quarter net loss of $24.4 million, or 58 cents a share, from net earnings of $90 million, or $1.86 a share, in the year-ago period. Excluding certain items, the company said first quarter 2007 earnings came in at 70 cents a share. The Calabasas, Calif.-based homebuilder said revenue in the three months ended March fell 34% to $706.4 million from $1.06 billion the comparable period last year. Analysts polled by Thomson Financial were expecting, on average, a per-share loss of 47 cents on revenue of $637 million. New orders in the first quarter decreased 25.7% to 2,989 units, while closings totaled 2,302, down 35.2% from a year ago. Ryland also said it does not expect to achieve its prior earnings guidance and can’t provide a new forecast at this time. The company had forecast 2007 earnings of $3.75 to $4.25 a share.

    Last: 47.79 up 4.3% Fundamentals? T/A?


  165. OpEx open interest and volume is today’s (delayed however).


  166. karm in that case those dec puts were a dt or a close, oi is 2 at end of day.

    the Jan call staying in overnight.


  167. wow did i miss bidu. i sold amzn calls way too early, leaving 8k on the table!!!!!!!!! and then sold aapl calls a few hours late. AND i bought xom 80 puts today…. hope everyone else was doing better today.

    tzoo (see below) has 30% of the 3m float sold short and they just announced a buyback of 1m shares. phil?

    Share Statistics
    Average Volume (3 month)3: 438,933
    Average Volume (10 day)3: 820,762
    Shares Outstanding: 15.25M
    Float: 2.94M
    % Held by Insiders4: 85.91%
    % Held by Institutions4: 53.40%
    Shares Short (as of 12-Mar-07)3: 2.20M
    Short Ratio (as of 12-Mar-07)3: 6
    Short % of Float (as of 12-Mar-07)3: 29.30%
    Shares Short (prior month)3: 2.06M


  168. Phil,

    Just fooling around on OptionsXpress and looking at a pullback on AMZN. It suggests in the strategy scan that buying 12 May 55 Puts for .65 ea and selling 6 May 70 Puts for 10.30 for a credit 5400 with a risk of 600.

    Profits look below 57 and above 61.50. Seems mildly interesting. Any thoughts.


  169. Oops, never mind the may 70′s are only 7.4 not 10.30. Sorry….sounded too good.


  170. Wang’s World
    new post up!


  171. Thank you Phil for MSFT – very nice! Wondering about MRVL tho – should I get out now, or wait a little longer to see if they get some help from the strength of the other chipmakers?


  172. greed, you sure about those % holdings for TZOO? Adds up to over 100% Any short interest share data for April?


  173. NC’s 4-25-07 take on AMZN hinting short:

    Lots of positive commentary on Amazon.com today after the co released stronger than expected Q1 results and raised guidance for both Q2 and YE07. We have at least 2 upgrades with estimates and price tgts raised across the board. There seems to be only one major firm out there that is keeping its cool. It’s JP Morgan:

    - JPM’s Imran Kahn notes that after three straight quarters of 100+ bps Y/Y declines, gross margins in 1Q07 fell only 17 bps. While sales mix and lowered prices still pressured margins, growing third-party sales internationally slowed the decline. Continued growth in 3P units internationally is a key lever for moderating gross margin erosion. Looking forward they think gross profit margins will decrease 40 basis points Y/Y in F07 due to the impact of seasonal mix shift toward EGM in 2Q and Harry Potter book sales in 3Q (expected to be sold at 46% discount).

    Although the International segment benefited this quarter from an increased mix of third party units from traction in Merchants@ and an acceleration of units sold, the firm believes this dynamic may impact AMZN’s ability to show continued strong organic revenue growth.

    Amazon’s 1Q’07 tax rate was 23%, significantly lower than its 2006 effective tax rate of 50% and its 42% tax rate for the fourth quarter. As JPM was modeling a 35% tax rate for the first quarter, AMZN delivered GAAP EPS $0.07 above their expectations on the basis of the tax change alone. Amazon’s 4Q topline results of $3.02B include an $84M Y/Y positive impact from foreign exchange. AMZN had more than 66M active customers at the end of the quarter, up 15.8% Y/Y – slowing somewhat from previous quarters.

    Is Amazon a Buy? They think valuation is too rich. While AMZN’s 1Q was solid, they think the valuation may not offer much upside. The stock is trading 50x firm’s F07 GAAP earnings estimates, compared to its peers which are trading at 41x F07 GAAP estimates. Maintain Underweight rating.

    Notablecalls: Looks like AMZN managed to pull a pretty decent quarter. While the whisper numbers indicated some upside, it was viewed largely as priced in already. I happen to know some pretty savvy market participants that were short the name going into the release. Overall, I suspect that absent the fairly large short lines, the stock would have been up no more than say 2-3 bucks in after hours action. With the help of some panicky shorts, the stock ended up almost 6 bucks.

    Looking at the numbers, couple of things stick out:

    - Approximately half of EPS (GAAP) upside came from the lower tax rate. Also, favorable FX contributed most of the revenue upside. Absent these two, AMZN would have posted just a slight or normal beat.

    - 3rd party business helped the margin performance. Based on what I’ve heard, margins are shrinking there as well (for the merchants). So, I’m not entirely sure the upside from 3P is sustainable.

    Most of the analyst community is going ga-ga over the results, with Piper Jaffray upgrading their rating, just after downgrading the stock on Monday. Also, Citi is upping their rating to Hold from Sell. Most targets go to the $50-$55 range with one exception. A large tier one firm is upping their tgt to $60.

    Yes, I do think AMZN’s a short at around $50.30 (last price in after hours). Even the most bullish analysts see only 10-20% upside from these levels, which is likely not enough to compensate for the risks. This, coupled with what I consider to be poor quality of upside in results pretty much caps any further upside in the stock.

    Given there are still many shorts in the game, I would scale in to the short squeeze.


  174. Phil, Your thoughts on AMZN Jan 09 50 puts for 3.3 or lower. I know this might be totally foolish, reckless and equivalent to throwing out my money. I am looking at less than 5 contracts. More on the lines of buying and forgetting about it.


  175. kc you’re right. that doesn’t make sense 2.2m shares is not 30% of 2.94m float. yahoo finance ?????


  176. Open interest – you can see the number of contracts open in Yahoo and I use investools to track the volume and price movements of contracts as well as OptionsXpress.

    KC – I am so happy to hear that!

    MHO – easy answer: 24% of the float shorted as of 3/12, who knows what it was yesterday! They beat estimates of .12

    RYL/Indy – same deal, 25% short. RYL had 4x puts than calls – this is why I’m not shorting this sector, expectations are below zero, all they have to do is not actually burst into flames during the conference call and analysts are relieved.

    TZOO blew earnings by a lot and I didn’t like the CC but I will buy them on a bottom so remind me next week. There was shockingly no reaction to the buyback – best entry will probably be going long and selling closer calls. As near as I can see TZOO is 85% held by insiders and most of the rest is held by funds so they are effectively voting to borrow $28M to prop up their stock price but they have no debt and good cash flow and when I see a self-serving act like this I have to wonder if they tanked earnings so they could buy their shares cheap, especially as they waited 2 days while 4.6M shares traded (vs. 250K on a normal day).

    AMZN spread – those trades are great (assuming the money works) but it’s better to find those kind of plays in a pre-earnings or pre news environment as you only have 22 days to hold the ATH through expiration or drop 10% so it’s a pretty bullish bet. If you found a spread that tight on CME or GOOG, that would be great but the best is to hit those ahead of earnings.

    MRVL is a big problem because they haven’t filed Jan yet! 1st thing next week we need to roll these guys or something. – congrats on MSFT!

    AMZN puts – this is from the Spinning Wheel School of Stock Picking (Motto: What goes up, must come down). I used to be the lone perma-bull on the YHOO AAPL board back in ’04 and I watched a neverending series of people tell me what an idiot I was until they had their we connections disconnected and their homes repossessed only to be replaced by a new bunch of gravity experts as Apple went from $10 to $20 to $30 to $40 (split adj). Then it dropped $8 to $35 in Q1 ’04 and the shorts went wild on it and they too had their children repossessed when Apple went straight from $37 to $90 almost without a pause.

    We just saw TSO do this too (to us!) but we weren’t betting the farm on it (it just feels that way). So the moral of the story is watch out when a company gets on a roll. I figured that tax issue yesterday so I don’t think that’s going to shock people into dumping the stock. I do think it’s too high, I sold my calls at the close as it just seems silly but I’m not going to turn around and put it until it falls back below $60 AND there’s a fundamental issue (aside from the kooky valuation).


  177. Phil, I like your cynicism on TZOO…..Many times things/people are not as they appear (especially those veiled mid-east women (and you just sliced right through their veil :!: ))