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Federally Funded Friday

What a crazy week!

It's "Quadruple Witching Day" today, when the contracts for stock index futures, stock index options, stock options and single stock futures all expire on the same day.  This hapens at the options expiration day near the end of each quarter (that's right Q2 ends in just 15 days.

With so many options finishing in the money this week it's possible that the markets are simply being pinned around 13,500 for this expiration and they will reveal their true nature next week.  Of course by next week we are into the "window dressing" period for fund managers so this could continue through July 1st! 

Our virtual portfolios held up great this week and made a little progress because we played for this starting way back on May 25th, when the Dow was around 13,500 and I said at the time: "If we do get a couple of week’s of consolidation around 13,500 then we will have played this perfectly as that’s about where we hedged out our positions, especially the calls we sold against our longer-term positions but let’s keep alert and be ready to go with the flow as we are still in danger of a big break in either direction." Now I know that rising 200 points, dropping 500 points and then rising 300 points hardly feels like consolidation when you are experiencing it, but that's all it really is in the grand scheme of things.

Just like any roller coaster, you go up and down and spin and turn but then you get right off at the same place you got on!  Last options expiration day (5/18) we closed at 13,556, yesterday we closed at 13,553 and yesterday was the day we took out our remaining June callers (other than those expiring OTM) as their premium was about done.

The BOJ should get us off to a good start by leaving rates unchanged, giving us a whole summer of carry trading to look forward to.  As long as you (well not you per se, but rich and powerful people) can go to Japan and borrow at 0.5% and put it into – well, pretty much ANYTHING – then the global economy can continue to expand.

Unfortunately, in Japan, printing up all that money and giving it away is not helping their own economy and the BOJ will likely be forced to raise rates later this year in order to get things back on track.  Of course printing money is not the sole game of the Bank of Japan:

"The Federal Reserve system pays the U.S. Treasury $20.60 per thousand notes — a little over 2 cents each-- without regard to the face value of the note. Federal Reserve Notes, incidentally, are the only type of currency now produced for circulation.  They are printed exclusively by the Treasury's Bureau of Engraving and Printing, and the $20.60 per thousand price reflects the Bureau's full cost of production.  Federal Reserve Notes are printed in 01, 02, 05, 10, 20, 50, and 100 dollar denominations only; notes of 500, 1000, 5000, and 10,000 denominations were last printed in 1945." — Donald J. Winn, Assistant to the Board of Governors of the Federal Reserve system

All this free money is flowing into the energy sector and has driven the CPI up to .7%, an 8.4% annual rate of infation but the same government that prints all that funny money has decided not to count food or energy costs so the "core" CPI is just .1% (1.2% annual rate) and we are going to be on a rampage today as all those non-eating, non-drinking, non-energy using market gurus take the markets up another notch.

Gasoline was up 10.5% this month but airline fares were down about a point so let's short them!  The empire Manufacturing Index came in at 25.75 and anything under 50 indicates contraction but, since the last reading was just 8, this too is being considered a good thing.  If you recall, we started the week with my motivational poster for the week that said: "Some days, it's better just to set your expectations low."

So let's not worry about the fact that 7.2% of all increased spending is going into the great oligopolies of the Food and Energy industries (who just happen to also be the nation's top campaign contributors) or about the fact that would be profits are being diverted from other industries as their energy costs increase.  We're not going to worry about it because few people think about these things until after the fact so they party until the crash comes and then, after the fact, all the economic geniuses come out and tell us how we should have seen it coming.

When there's a party going on, even if we know it's going to end, we can still stop by and grab a beer or two.  The IGW $65s at .60 should make a nice momentum play as INTC just caught an upgrade but it's a risky expiration day play.  INTC Oct $25s are not too far fetched at $1 and we can sell the July $25s for .50 or so so I love this spread.  GOOG should make a dash for $510 this morning but the play to make may be picking up the $500 puts for .25 and hoping for a pullback.  $510 calls were .25 at the close and if I can collar them before noon I'd be willing to play it as a gamble on a move near the close but, like a horse race, it is very likely we rip up that ticket at the end of the day!

We should get some good action on our DIA Aug $138s and thank goodness for them as they pay for our losses on the DIA puts but I think the play is to take a chance and sell the late June $137s (HLKFG) for $1+ as the core CPI was actually 1.49% so had just one condo in Florida sold for an extra $10,000, we would have had a 2% reading and the markets would have crashed! 

Let's not worry about levels today, we'll keep an eye on the S&P which must hold 1,530 and shouldn't have too much trouble through 1,540:


As foretold by my trader friends yesterday, Uncle Ben came out with some very bullish talk this morning and actually said (effectively) "Rah, rah, rah – Gooooooo Markets!":  "In the United states, a deep and liquid financial system has promoted growth by effectively allocating capital and has increased economic resilience by increasing our ability to share and diversify risks both domestically and globally," he said in prepared remarks to an Atlanta Fed conference

We'll see if oil chooses to give us a break at $68 but since energy costs don't count, I'm going to stop worrying about them…   

Come on everybody!  We're going to party like it's 1999! 


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  1. FYI. The Securities and Exchange Commission [SEC] has eliminated the so-called “uptick rule,” which prevents short-sellers from selling stock in a down market. SEC commissioners voted 5-0 to eliminate the rule, which was established in 1938 as a way to prevent disorderly selling during market downturns. Under the rule, a short sale could only be executed on an “uptick,” i.e., when a share was trading up. The idea was to! prevent stocks in free fall from being forced ever lower by short-sellers.

    The SEC has considered eliminating the rule for years, and ran tests recently to see how individual stocks would trade if the rule was removed. It found that there was no substantial difference in performance so it’s eliminating the restriction.

    The development is of interest to the ETF community because many ETFs were exempt from this rule to begin with. That exemption was one of the selling points for ETFs, and often highlighted as one of the reasons they were appealing to traders and hedge funds. In reality, those traders will likely continue to use ETFs for short purposes, as the funds have other advantages over individual stocks as well.

    BTW, any interest in TIE leaps?


  2. Intel Upped To Buy From Neutral At Goldman Sachs

  3. I remember a comment a few weeks ago about MFSTs hands on table tops that are to sell for more than $5,000. Someone said they were crazy. I had no clue what they were talking about. Well, I have found a video, and it is pretty cool. I could see casinos using these.

  4. MA, HANS,
    Hansen Natural (HANS): Goldman Sachs Says $52 On Its Own or $70 in Buyout

    Mastercard (NYSE:MA): Estimates upped to new Street high at SunTrust
    - SunTrust is reiterating their Buy rating on Mastercard (NYSE:MA), raising 2007 and 2008 revenue and EPS estimates and boosting 12-month target price to $185 from $175. Firm notes they remain bullish on MA and have moved aggressively above Street mean estimates. New 2007 and 2008 revenue and EPS estimates are now at $3,912 million and $5.25 and $4,418 million and $6.43, respectively (consensus EPS stands at $4.78 & $5.75, respectively).

  5. MON
    increases full year target, POT should get a boost

  6. Nice way for Goldman Sachs to make a quick buck on HANS. . .buy a ton of June 40 Calls on Thursday and then upgrade the stock the next day. . . I’m sure they don’t do that but makes you wonder. . .

  7. Phil, your comment this morning:
    “Gasoline was up 10.5% this month but airline fares were down about a point so let’s short them! “. Short who, refiners or airlines. I ask because I’m in AMR and it won’t move because of fuel prices. Thinking there should be relief soon (yea, right!).

  8. New post up!

  9. z, anymore upside left in WHT? Bought in when you did at 3.19.


  10. was just emailed a joke, thought i’d share it…
    a guy is walking with his friend who is a psychologist. he says to his friend, “i’m a walking econonmy.”
    friend asks, “how is that?”
    “my hair line is in recession, my stomach is a victim of inflation, and both of these together are putting me into a deep depression!”

  11. eBay Making PayPal More of a Financial Powerhouse

  12. CPI -lol Phil, I’m less worried about excluding gas & food, and more concerned about their “substitution’ policy —- when my golden years arrive, they’ll allow catfood as a substitute for ‘prime rib’ based on protein/carb count – lol

    The whole metric is a sham (since early 90′s) to keep Social Security payments and other Gov’t entitlement payment escalators from blowing up up up

    -looks like a fun day in front of us – glta !

  13. GLW
    Corning sees tight supply for LCD glass substrates in 2Q
    Rebecca Kuo, Taipei; Emily Chuang, DIGITIMES [Friday 15 June 2007]

    Supply for LCD glass substrates in the second quarter are tight, said Alan T Eusden, president of Corning Display Technologies Taiwan, adding that the tight supply will persist in the second half of 2007 as peak seasons are approaching.

    Corning, however, stressed that the company will continue providing stable shipments to clients based on supply agreements.

    Prices for glass substrates from Corning only dropped slightly in the second quarter. Corning will not provide any price forecasts for the substrates industry in the second half, said Eusden.

    Amid buoyant demand in the LCD TV market, Corning recently updated the forecast for the global LCD TV market to 73 million units in 2007, up from 68 million units, made earlier this year. By the end of 2007, the penetration rate of LCD TV will reach 36% of the overall worldwide TV market, compared to a previous estimate of 33%, the president noted.

  14. is this a real rally or someone is trying to sell into strength

  15. real – DOW to 18000 soon, MA is the next goog going to 350 by EOY, CME jumps to 700 etc etc

  16. Hey Zmann –

    WHy is it they dont open OIH options til like… 9:45 ? Its always annoying.

    Course…. you really dont wanna do anything til 10 anyway, but itd be nice to at least have the option…

  17. and dilbert goes public

  18. GOOG might actually show life today.

    Im sure CPI numbers are central to its business…

  19. Uramin in London being bought. CCJ/USU implications

  20. Hey Phil – I really have been enjoying this site. Great commentary, great sense of humor. I am amazed at the depth of experience of all the contributors. I also am amazed at how hard you work for all of us! Thank You!

  21. XLU
    any thoughts on the utility sector. XLU down 7% from ATH after pretty hard selloff. This is ~the same retracement as Sept 2005 where it formed a double-bottom before launching.

  22. Phil, ditto Johne! Really would like you to get that investment club going though. I just can’t keep up with the trades you and the rest of the Board (Z, etc.) are making.


  23. Uptick – good info, thanks Jazz.

    TIE – I have the naked July $35s, which I think I’ll be very pleased with, will probably roll them to a leap if we get a good run.

    ADBE earnings looking a lot better in a good market.

    Market trick- bid a buck for the DIA $135s at the open, you may get lucky from open sell orders! XXX

  24. XLU

    Interest rates go up, utilities (which are held for yield) get competition and go down. Like clockwork.

  25. ZZZ,
    Hey thanks for the post update. I wrote you a quick comment. Have fun down South.

  26. Phil (and all): I gotta echo Johne’s sentiment.

    Ive been here a week and am amazed ath the work goin on here – both intraday and beyond.

    No way I can follow what goes on here intraday. You guys are fast !

  27. Jazz – I still like it.

    djczing – dunno but it’s annoying. More annoying to me is makers who price the bid under Intrinsic (like CRK calls all day yesterday)

    BBD – thanks. will do.

  28. Happy,

    Great call on FFIV +2!! to open.

  29. XLU – tnx LithiumRB

  30. AMZN dropping like a rock???

  31. Bill P,

    AMZN – pinning 70? wondering if CROX will pin 45 bucks.

  32. TRMP exploding on Penn Gaming deal.

    Gas Airlines – short the airlines, fuel is 1/3 of their cost and they aren’t raising prices – bad mix.

    GOOG – selling $500 calls for $7.10 buying 3X $510 calls for .30 so I’m in pretty good shape if it pops through XXX

  33. BBD

    re MUR – it’s like MRO except without all the success. I’d look elsewhere for a mini-major to buy but shorting them is just as frustrating. They do get shelled occasionally for the occasional bad exploration well in the Gulf of Mexico so maybe the play their is playing the volatility of the next big well with a long spread.

    HC – I like compression, especially with the rapid growth still underway in Texas but also with the nascent growth in several shale plays in the south. Add a compressor = don’t build a bigger pipeline for the extra gas. Very cost effective. As you know, HC is merging with their biggest competitor to form the biggest compression company out there and will probably continue to run. Check out NGS, smaller player, either gets taken out or just runs until its price seems like it has!

  34. NMX continues the parabolic route. GOOG 510 and above will be cool today!

  35. WYNN – sold Jul95s for $4.80, hopefully not too early
    CCJ – what’s going on? $60 before open (supposedly with earnings estimate lowered) and now down 5+

  36. GME- Used Phil’s 5% rule gone on OCT 35 calls.
    NMX- took some at $146.50.
    FFIV- a much better buy at $78

  37. Thanks Johne and welcome!

    AMZN $72.50s for .12 as a craps roll XXX

  38. IYR – is up +$0.95 to $81.73, if logic and sanity exists (apparently they dont), this one should be heading south. :-)

  39. Could be interesting. the Index Options expire at 10:00 a.m,right? Could be quite a swing after that, who knows. .

  40. TSO

    When do we DD.

  41. yep, thinking definite CROX will be pinned at 45, unless this is a headfake. .

  42. NMX volume is again amazing! ICE just broke 160! Yes, it is 1999 again :-)

  43. UNP – Phil, I’d like your suggestions on this one. I have the Jan ’08 100′s @ 11.33 (currently 25.00) and my caller has the Jun 115′s @ 1.94 (currently 5.75). The stock is going up fast this morning (initial excitement). I need to roll this guy but would like ideas on where to roll him. I also am considering bracketing up myself. Another option is to just close him out at about a 200% loss and sit naked.

    I was first considering rolling him to the Jul 115′s looking for a nice pullback. But the 120′s have more premium. What are your thoughts on this?

  44. Was this the morning to trade the “fading gap?” My watch list was filled w/ opening gaps up and then a quick plunge. RIMM, MRVL, AMZN. Is that any indication of what’s ahead for the day?

  45. LOL Z – “it’s like MRO except without all the success”

    CCJ – nice break for me as I didn’t take out my June caller yet! That may have been the biggest pin I’ve ever seen…

    Strange things going down like X and JOYG, now ADBE, HAL…

    EXPE is down, PCLN is making ATH – very strange things. LVS up, WYNN down. On the whole, it’s a typical options expiration day where you can’t believe anything that happens.

  46. Housing – Credit Suisse Housing Expert Zelman Resigns

    Ivy Zelman, a blunt-speaking bearish analyst with a knack for spotting signs of trouble in the housing market, is resigning from her position at Credit Suisse Group.

    After relatively upbeat statements by Toll Brothers Inc. chief executive Robert Toll during a conference call last December, she asked, “I am wondering which Kool-Aid you’re drinking?”

    She was ranked the top home-builder analyst in The Wall Street Journal’s 2006 “Best on the Street” analyst survey.

  47. I agree Matrix. Looks to me like lots of pinning going on. Have gone mostly cash lately. I think I’ll use this time to find some good leap deals.

  48. GRMN- taking some off
    BSCI- All gone

  49. TSO – now’s a good time!

    Consumer sentiment at a 10-month low! 83.7 vs 88.3 – funny how the actual consumers see inflation even though the Fed doesn’t…

    Be careful or we may find out why rule #1 is ALWAYS sell into the initial excitement!

  50. Nasdaq on rocket fuel and MRVL down . . that is total BS. . talk about Option Expiration Manipulation . .

    still liking HK ?? More upside left??

  52. DIA $136 puts for .12 are a very cheap cover! XXX

  53. fda decision on gild PAH drug on June 18th. decision on ency’s competitive PAH solution today

  54. If you did the GOOG trade you should buy back 1/2 of your puts so you have your calls for free, or, in the very least, put a tight stop on them because it’s very doubtful you’ll get your $510 money back. XXX

  55. BillBigD, I was in GME July 40s at .70 (I should have doubled down just days ago, I know). Out at 1.20.

  56. CCJ will not be denied, looks ready to pop so I’m grabbing some $55s for .25 just for fun. XX

  57. MA- Thinking Phil might be right, taking some off from buy at 147

  58. Phil,

    MO – I still have 7 JUN (basis 5.0025) / 7 JUL (basis 5.1175) from the spread play and just can’t seem to get fills without losing money.

    I’ll keep working on exiting during the day but seeing this, would it make sense to just get assigned at expiration, get a maintenance call and sell the stock on Monday. Whatever it does I’m still protected on the downside with the JUL and if it does go up more…

  59. phil – your thoughts on selling jun 60′s on ccj against my long 55′s

  60. Holy double @!X*&!# they did it again!

    ACH out at 41.85 on buys at 38.76 yesterday

    I REALLY love these Chinese gappers 2 days in a row!

    back in at 41.15 will see how it plays out

  61. UNP – first of all, very bad and greedy not taking him out earlier in the week! Lucky for you the premium is astounding so best play here is to roll yourself to 2x $120 calls for $11.50 and sell 2X the $120 calls for $4.70. This takes $2.50 off the table, puts another $3 per current share in your pocket and gives you $4.70 worth of protection (almost half your call) with a $3.50 premium on your caller. This trade is XXX as a new LTP play (but we’ll be rolling to the ’09 $120s soon).

  62. ACH out at 41.90 on purchase this morning at 41.15 will look to re enter

  63. Sorry that was selling July $120s of course.

  64. Phil,

    CCJ – 52-week high is $55 – You expect it to go above $55.30 today (or someone selling you call seems to think so). I was considering selling the July 55 call for a nice $2.45 against my 60 leaps.

  65. Ivy – she’s a good person, probably can’t take the sham that’s holding up the housing market and getting pressure from above to keep a lid on it.

    MO, if you can afford it, sure but it’s a bit of a hassle to save $150 or less so make sure you really want to.

    CCJ – I’m not selling until next week, very likely being pinned just for today.

    ACH – great play!

  66. SLB & RIG- all gone on July’s, Will move to Aug on Monday

  67. CCJ – no just looking to get .40 and get out. When you mo trade options you have to get strikes out of your head, I’m just playing for the contract to get more expensive.

  68. UNP – Yeah, it was a few minutes ago I realized I should have taken out my caller ealier in the week . Good lesson to learn.

  69. MO, not exactly a can/can’t afford but since I got maintenance called yesterday for having 600 shares assigned and had no adverse effect I’m thinking it’s an option.

    Still, I’d rather close and be done with it today.

  70. Just for my knowledge, is June option expired at 12:00pm or at 4:00pm?

  71. GOOG – how was that for a good top and bottom call? 8-)

    Buying $500 puts for .20 just for fun so now I own the $510/$500 put strangle for 0.

  72. Phil:

    Great trade on GOOG !

  73. Crasher

    HK – I took my profits there. It’s had a good run, could use a rest.

    PQ – still have my July’s but it’s in the same camp.

    Still like them both but man they’ve run.

  74. ACH back in with half position at 42.13 now logic says it HAS to fade from here
    but logic with Chinese stocks doesn’t seem to apply

  75. Corey – I never mind taking a loss if I learn something from it – those are lessons you tend not to forget… Especially during expirations week you need to use real stops on ALL current contracts, including the ones you sold unless you feel there is NO way they will go in the money or unless you are going to roll and don’t really care which way they go.

    MO – I’m stuck with the damn July puts naked now and I need to sell them, will take an unfortunate loss if they don’t drop back to $70.50…

  76. FCX- gone on All Aug 80 at $8. Lowest buy at $2.9.
    I am getting ready for a Victory Bloody Mary. LOL

  77. TEX nice pop probably pinning to 85

  78. Phil: Your CHA trade would have worked o.k. overnight but it’d have been good w/in two days. I didn’t take b/c I already had too much gambling money on the table.

  79. FFIV
    screaming!! Out for now for +56% in one day!

  80. My TINYs are making a nice move all of a sudden.

  81. ZZZ,
    I meant to ask you about HOC on your blog not HC.
    MUR- starting to look good, big VOL yesterday

  82. BillBigD,
    Awesome tradings this week! You’re a money “printing” machine!! =)

  83. PTR – knocking on $140s door. Glad you (happy, zman, BBD) talked me into holding yesterday.
    my oil puts on the other hand….

  84. HOC = poison. Out of control stock. Hate the spread on the options too. Better to use cash to start your charcoal than mess with that thing.

  85. ATI

    Happy, U still good with this one?

  86. if we get above 1540, we could have some serious short covering, lol. .. although, with option day this could be a headfake, but I doubt.. already 1 billion shares on NYSE and it is only 1:15 minute into trading. . I’m guessing at least 3.5 billion on NYSE today. .

  87. Doubleclick and Happy nice trading.
    Why do they keep mentioning opening print on SP? They talked about it last month also. Say it is very bullish and I don’t understand why. LOL

  88. ATI
    Jeddah62, I’m still in!

    sgraham7, thanks!

    KC, I’m cashing out at 140 (at least that’s the plan right now)!

  89. Phil, followed you into CCJ 55′s. Thanks!

  90. BillBigD,

    I believe the Opening Print for the S&P Futures is where the most open interest is and I thought they had mentioned that expire at 10:00 a.m. . I don’t understand it either. .

  91. PTR – I have a very tight TS on them in case it turns down.

  92. Darn – it’s always time to buy more WFR! I didn’t think I had to worry about my June $60 caller and now I do…

    XOM at GS levels of irrationality going into July earnings but that’s a big train to get in front of right now.

    Highest non-core CPI since April 1999 but the market didn’t collapse for another year so party on guys!

    EOG Jul $75 puts looking good at .90 XXX

  93. ACH
    still flying!!

  94. HOC

    ZZZ, why so bad? 3 year chart shows a much smoother ride than the likes of VLO, FTO. It’s always one of the first to bounce back when refiners are down.

  95. IRBT looks like it’s on autopilot!

    SU $90 puts for .15 as a mo play XXX (gamble).

  96. Phil

    Thanks to your suggestions I now have a bunch of DIA aug 124. Should I roll to an OTM strike?

  97. I meant 134′s, still nice.

  98. Calls that is

  99. jeddah62
    I kind of laugh at ZZZ comments also. The spread is 30cents. No VLO but not that bad.
    TSO and SUN gone on earlier buys this week.

  100. YHOO – If I remember right, the 10K port has the Oct 30′s and sold the Jul 27.50′s against. My specific position is the Oct 30′s @ 2.30 (currently 1.525) with Jul 27.50′s sold against @ 2.35 (currently 1.375). YHOO looks to be at a bottom with my caller down 42%, I’m considering taking him out as I’d like to free up the margin and sitting naked on these Oct 30′s probably isn’t all that risky (perhaps they should be rolled down to the 27.50′s though). What are your thoughts on this? Or did I miss some 10K port moves over the past week where this position was changed?

  101. Wow, a double on those DIA Aug $138s!

    Open Print – the index futures expired at 10 so that opening print was a major Ka-ching for bulls, who bet those heavily ($Billions). There’s another expiry at the close so lot’s of people want it to stay up and lots of people want it to go down…

    CCJ – yw! Don’t be greedy, half out with better than a double is nothing to be ashamed of. I’m stopping my other half at .25, now way do I give up a 60% gain on the total..

  102. I’m still thinking big up open, big down close today.

    I bought 10 DIA 136 puts for a gamble.


  103. Aug $124s! Wow! Congrats… Why risk it? I’d roll half the profits up to the $139s for $1.90 and sell those late June $137s (HLKFG) for $1.10 as you risk just .80 to the downside and he’s paying you a 200 point premium for 2 weeks (Dow has to hit 13,820 by 6/30 before you owe him a penny and your shares should pick up a buck by then anyway so upside risk is very low). XXX

  104. GME
    nice jump!

    anyone trading this one? I think sooner or later it’ll get bought.

  105. NCTY
    on a breakout path!

  106. Phil: Worrying about callers ?

    Man im about sick of rolling up callers, but I know as sooon as I leave myself naked the market will come back down.

    Point of clarification: when you enter a calendar position in this case wiht July short calls, do you use the 20% loss rules on those callers ? or on the overall position ? Ive had so many callers this week hit the -20% mark this week. — should I be buying and rolling at that point ?

    I played the market to be stodgey this summer — ends up im legging around these spreads like a mad-man — something I wanted to get away from.

    Any tips appreciated.

  107. YHOO – we have fully sold July puts against but they’ve been such a huge disappointment (and .20 on a huge day is no sign of strength) that I’m unwilling to cash out my caller but only due to the lack of flexibility in the $10KP, in general you may as well as you can always roll yourself down and sell again.

  108. BillBD,

    HOC just has always been resilient. One of my long term favorites. ZZZ will probably get the last laugh when it goes down in flames.

  109. Biotechs/BTK/CEPH
    Time to pay attention to them again! BTK is attacking its 30-day MA! CEPH is breaking out!

  110. phil,
    can i still get into the INTC 25s at 1.15 or wait for a pullback?

  111. FCSX and FWLT and CROX down

    SBUX CFC HD and XHB up

    its Bizarro World!

  112. Rolling callers – I generally don’t bother rolling them unless the roll is very advantageous IF I intend to sell the next month anyway. We’re not trying to “beat” the caller, just collect the premium, which he will give us no matter which way the stock goes. If there’s an extreme change in value, we just do what I discussed earlier witn UNP, bracket yourself up and sell more calls. Essentially you’re upset that the condo you are renting out is becoming more valuable every month but you gave your tennant an “option to buy” while you rent it to him. The way stocks are better than real estate is that YOU can decided whether or not your caller gets to exercise by rolling him over to the next guy who you dangle an option in front of in exchange for a premium. Belive me, if your stock goes up and up and up and up for 12 consecutive months, your basis will be far enough below your final caller that you should be able to easily pay him in cash..

  113. Phil, I have the Oct ADBE 42.5 calls with a net basis of 2.7. Should I hold on to it ?

  114. old news for some, but a plausible reason for strength in CCJ:

  115. INTC – I’m in at $1.05 and I got .50 for the Julys so I’m a nickel worse than expected and not happy about that. At a dime worse I don’t think I’d want it.

    My oil puts are working! Hope it keeps going…

  116. TM/Happy

    - do you have a target for TM ? -

  117. AKAM – breakout lookin real good. The daily chart and the support at 46 is striking and the breakout above it is real purty. Started scaling in yesterday – just naked 1/4 of a position now.

    OIH : I think its done for the week. Wow what a week for OIH.

    WLP: The only calendar I have that is sittin there doing what it should do.

    SPY: Back a few months ago I was too worried bout the market to do much. Since I was so fixated on it, I decided I might as well play it. Ive played around a SPY position ever since. Keeping it covered with callers this last week has been difficult… ok impossible — it is nice to be able to look at futures that are 99.9% correlated with my position though…

  118. TM
    should be good for months to come. I like it a lot! It’s got an initial resistance at 128. It should make a sizable jump early next week.

  119. No more Longs for me
    mean reversion says we “gotta” pull back a little unless there’s a lot of short squeezers left

  120. ADBE – oh man and you didn’t cover? That was never a play to leave naked. There’s still a good premium on the Jul $42.50s at $1.73 and I do think they’ll recover so I’m going to stay naked on my October $42.50s for now but my basis is just .70 (assuming my caller keeps his .30).

    $10KP DIS with a very nice move, FIZZ is being pinned big time, MO is killing me, TWX I hope it’s pinning, FWLT should be rolled up on both ends, DNDN just hoping for a miracle, YHOO predictably disappointing.

    Gold group heading south, oil backing off – 10 year falling suddenly.

  121. POT sudden sell off, FDX being pulled down, TGT bounced off top, could be early signs if they break down from here but good sign if they pull it together from this spot.

  122. Phil, Sorry for the confusion. The Oct 42.5 calls are naked with a net basis of 2.7. Now what should I do – hold or lock in the profits?

  123. Happy:

    I agree with you on the biotechs; starting to look interesting.

  124. Ok, I get it regarding ADBE :-)

  125. Anybody see Grant (Grant’s interest rate monitor) on Bloomberg last night. Pretty sobering opinion. The other guests point out that MS is the most highly leveraged – toward fads (subprime, corp real estate etc.) When this thing start to crack, that will be a nice ride down. Of course, it will never crack.

  126. FFIV- 1/2 out from buy last Friday on IPO of comp
    DO-out of July’s

  127. libertarianwackjob

    Mean reversion is what got LTCM in trouble.

  128. Sirius- sneaking up.

  129. Also, Anybody think BSC timing on the $4B subprime sale was interesting? Any chance they got a good deal on that toxic waste?

  130. how convenient

    By Ana Campoy and Russell Gold

    The cost of building or expanding oil refineries is rising rapidly,
    contributing to delays in increasing the U.S. gasoline supply at a time of
    near-record prices.

    The oil industry is blaming cost escalation — driven by shortages of skilled
    labor and construction services, along with higher materials prices — for a
    spate of pushed-back or scrapped expansion projects. Valero Energy Corp., the
    U.S.’s largest refiner in terms of the amount of crude it can refine, has
    delayed expansions in Quebec, Canada, and in Texas. ConocoPhillips has put off
    projects at refineries in Texas and in Louisiana, while Tesoro Corp. canceled
    the installation of new equipment to process cheaper crude at a facility in
    Anacortes, Wash.

    The decision to rethink construction comes as the industry, flush with
    profits from high gasoline prices, is under fire from Congress and consumer
    groups in the U.S. for not doing enough to build capacity. Delays could expose
    the industry to additional criticism and unwanted oversight.

    The average price of regular gasoline in the U.S. was $3.08 a gallon
    yesterday, up about three cents from a month ago and up from $2.90 a year ago,
    according to AAA, formerly the American Automobile Association.

    Years of industry underinvestment have contributed to the current rise.
    Refiners in past years blamed low fuel prices and poor returns, as well as
    environmental opposition to major expansion efforts and the cost of keeping up
    with fuel regulations. In the U.S., no new refinery has been built since 1976.

    Even today, with prices high, refiners are loath to build new facilities for
    those environmental and regulatory reasons, as well as concerns that fuel
    prices might moderate long term. Instead, the industry has invested in
    expanding or modernizing existing facilities, resulting in gradual output

    Meanwhile, the big push for new refineries has been in the Middle East and
    Asia, where demand for fuels is rising much more rapidly than in the U.S. Some
    of these refineries plan to ship part of their output to the U.S.

    Refiners say escalating costs threaten projects outside the U.S., as well.
    ConocoPhillips might back out of participating in a massive
    500,000-barrel-a-day refinery in the United Arab Emirates with International
    Petroleum Investment Co. of Abu Dhabi. In April, ConocoPhillips Chief Executive
    James Mulva said the refinery’s costs were “challenging,” and he questioned
    whether the Houston company would participate.

    The swiftly rising costs compound the industry’s trouble in keeping pace with
    growing fuel demand world-wide. With demand soaring again, the industry’s
    attempts to catch up are overwhelming the engineering and construction
    capacities to build refineries, as well as the global market for specialized
    refining equipment.

    This couldn’t come at a worse time for global consumers, and it could keep
    transportation-fuel prices high for years to come. Today, despite high pump
    prices, global consumption of gasoline and other refined petroleum products is
    rising, paced by rapidly growing demand in China and other developing economies
    as well as continuing growth in the U.S.

    The energy industry already had been dealing with runaway costs for projects
    that extract oil and natural gas from the earth. The causes were a scarcity of
    engineers as well as high prices for steel, concrete and other basic materials.
    This inflationary environment is now hitting the rest of the energy industry.

    “All of you who cover our industry certainly are well aware of the rapid
    escalation in costs in the exploration and production segment in particular,
    but it has spilled over into refining and chemicals,” said Rex Tillerson, Exxon
    Mobil Corp.’s chairman and chief executive, at a news conference following the
    company’s annual shareholder meeting in late May.

    U.S. refiners say costs started rising in 2004 and jumped after the hurricane
    season in 2005 as the Gulf of Mexico region absorbed much of the available
    labor, materials and construction services for the repair of hurricane damage.
    Moreover, refining companies are competing for resources globally.

    “A lot of the skilled labor has moved on to other industries or other areas,”
    Valero President Greg King said. Valero’s costs for steel have gone up 74%
    since 2004, while the cost of Gulf Coast skilled labor has risen 60%, Mr. King
    said. The competition for labor and construction services has also resulted in
    a productivity drop of 35% as the most skilled contractors take jobs elsewhere,
    he added.

    In recent years, refining projects have sprouted all over the world amid
    growing demand for fuels. The refinery-related backlog of Foster Wheeler Ltd.,
    an international engineering and construction firm, almost doubled in 2006 from
    the year before to $1.74 billion. The Bermuda-based company warned investors in
    its annual report that as costs rise and “the delivery schedule of engineering
    and construction services lengthens, clients may elect to cancel or delay
    investments until the market slows.”

    Still, many projects are going forward. “Not every project is unaffordable,”
    Valero’s Mr. King said. This year, the company finished an expansion of the
    crude unit at its Port Arthur, Texas, refinery that increased capacity to
    325,000 barrels a day from 295,000. Valero is discussing plans to expand its
    refinery capacity in Delaware City, Del., by 20,000 barrels a day.

    Marathon Oil Corp. stuck to its plans to expand its Garyville, La., refinery
    even though the price tag will be much higher than originally anticipated. At
    the beginning of 2006, the company had expected the expansion to cost $2.2
    billion, but it raised its projection to $3.2 billion by the time the project
    was approved in November that year.

    To deal with the global scramble for labor and materials, Marathon is looking
    to the future. This year, the Houston-based company organized a job fair to
    start recruiting and training people to build and operate its expanded
    facilities. In 2006, before the ground in its construction site had been
    cleared, the company ordered some of the massive equipment that will run the
    refinery earlier than usual.

    “It’s a big project,” said Chris Fox, spokeswoman for Marathon. “You can’t
    leave anything to chance.”

    (END) Dow Jones Newswires

    06-11-07 2016ET

    Copyright (c) 2007 Dow Jones & Company, Inc.

    20:16 061107

  131. Phil,

    Trying to understand what’s going on with adjusted DIS Jul 37.50. The stock is up, but the option has moved Can the delta be that low?

    Also on JSDA, I saw that Starbucks dropped them, but analysts estimate that Starbucks is 1-3% of total rev. Time to DD?


  132. SIRI should easily break over 3 with any positive news. Maybe next week. Probably pinned under 3 for today.

  133. Phil – this may be a really dumb question but have you ever ‘rolled’ in to the same month/strike? For example: you sold some calls for not much premium and then the stock took off and the premiums for the same month/strike are now 4X higher. Does it make any sense to buyback what you have and re-sell for the greater premium?

  134. Wow oil up again today.

    Its gonna hit the Schumer…err… maginot line soon – then just like last time, our rent-a-reps and all those whose rampant self-interest (as opposed to genuine compassion) compels them to take the populist views that oil is crooked will step up, talk about windfall taxes and how they can stop all the evil in the oil patch.

    At that point the crude manipulators will again see that their gravy train could be derailed by welling sentiment, take their profits, and sell crude back down to $60. Maybe $55.

    One real question though – will the new finds by China put any kind of dent in the supply/demand picture ?

  135. ADBE – like I said, with my .70 basis I wait but with a $2.70 basis I’d protect by selling at least 1/2 the Jul $42.50s.

    Grant – true and enough people watched it to hit MS after the open. I can only hope BSC takes a dive as I got stuck in the $150 puts yesterday.

    BEAV way up there!

  136. DIS – few days back the DIS changed to HFW and if you are using Interactive Brokers (IB) the symbols have changed…so when we talk about DIS…are we referring to the new option symbols or ..? Thanks

  137. SNDK exploding all of a sudden!

  138. MU too – it’s a chip party! That’s it, I’m taking out my WFR caller, too risky!

  139. HT – thanks on TM

  140. does anyone think rimm will run up before earnings

  141. Phil: re: the callers that go ITM… I think Im starting to see.

    Basically no matter what happens, if I leave that option out there the time value will be mine. When it comes time I yank back the intinsic value, and roll it out (and I guess up) – essentially converting that intrinsic value back into decaying time – and sooner or later thats gonna pay off.

    I know im makin it more complicated than I need to, but once I can convince myself to leave the bloody thing alone I might just become a better trader…

    As always, ‘preciate your ‘sperience and wisdom.

  142. HOC – I wouldn’t buy as it’s one of the most expensive in the group and there’s no justification for the rich valuation, nothing really special about them. I was referring to it being poison from a short perspective, not long. It’s a darling of the Eric Bolling up, Up, UP crowd but it’s too rich for me to go long.

  143. Phil, AAR up too! What else trades with BEAV and AAR?


  144. KC
    Nice call on PCLN & MICC Thanks. You ok on NMX? I think you were covered?
    CCJ- nice trade Phil, I entered with more Sept. But losing of my June 55′s that seemed so safe when CCJ at $52.50 LOL
    OIH-gone on July 170′s, 100% gain

  145. z: heh – you noticed that about bolling too eh ?

    Tell ya what – I wanna short TSO so bad I can taste it – cuz when it breaks, its gonna break hard.

    I heard a story the other day I found interesting. Basically talk about OSHA creatig a new ‘refinery safety team’.

    They say that the group will be formed due to all of the catastrophic accidents and people being hurt lately. They would essentially go around to refineries and give em safety inspections.

    Of course… my suspicious (and hopeful) side thinks this might just a be a cover and what they really will be doing is gauging whether the refinery outages are real or contrived – and gathering supporting data to that effect.

  146. BillBigD,

    NMX – I had to take a loss on the caller a couple days ago when it started running up; have been naked for a few days, so benefiting from the run-up. I’d rolled up yesterday, and now I wish I hadn’t. Holding on to see how the whole buyout thing shakes out.
    PCLN – sounds like you made a quick profit. I’m in a longer term play. Sold Jul calls today against my Jan calls (a little early), but the stock has been trading in a channel and I think/hope?) it will trend back down.
    MICC – trying to limit my plays, so I didn’t enter yesterday. Regretting it today. Maybe next time. What do you think of NIHD?

  147. ITM Callers

    Aren’t you tying up money that can be better leveraged OTM, if you are not selling against?

  148. SIRI – should have thought of that one! They need to close above $3 in order to create July $3 calls so imagine the motivation to do so….

    Refineries – pure PR BS! Oh the poor refiners, with a $30 per barrel crack spread a 300,000 barrel a day refinery just isn’t worth building these days…

    DIS – sure they’re pretty far out of the money still, needs a better move than this (but this is a good start).

    Roll for premium – sure but you are also increase your risk if it snaps back on you so be sure it really makes sense.

    New oil finds – China will join OPEC as soon as they find enough to export! I agree re. US politics, what a joke…. The problem is there is no real “anti-oil” lobby. If every citizen put .10 per gallon towards a lobbyist to keep oil prices DOWN, we would have $13.7Bn a year to give to Congress to lower prices but Al Gore was derided for wanting to put a .13 per gallon tax on gas to earmark for alternate energy back in 1991, when gas was $1 per gallon!

  149. Someone explain the MS chart & bars b/tw 75 & 89? That’s an impossible “scalp” isn’t it? Or is that just the charts thru *E-raid?

  150. Create July $3 Calls on SIRI? Phil, could you explain.

    Thanks, John

  151. Boeing Buddies are AIR, TIE, BEAV and ATI (BOOM is a cousin)

    OTM/ITM – I’m not usually a big fan of being too far in the money but some of the people I work with have a very low risk tolerance so we set those up as fairly safe income producers (protected by long puts).

  152. HOC,

    ZZZ – tnx, makes good sense. I’ve always wondered why it’s just so buoyant.

  153. SIRI – I don’t actually know the rule, as it only happens with small stocks I stay away from, but there’s a threshold that has to be crossed before they will allow non-quarterly options to be written (maybe the quarterlies too, not sure). What I do know is that SIRI failed to close over $3 this month so no options for July yet.

    BSC – thank goodness, half out even (I had TD at .10, now wish I did more!) getting all out if it even twitches up and glad to get rid of it.

  154. mrn: I’ve got the same wierd chart for MS on my E*Trash screen. I don’t get it either.


  155. Ameritrade – looks like the site is down (!?). I haven’t had access for about 15 minutes now. Anyone else with ameritrade accounts having problems?

  156. Yeah, Amer is down.

  157. Premium

    So Phil, for a TM (@125.2) spread, would you look at selling the ITM July 125 @ 3.3 (~3.0 in premium) versus the OTM July 130′s @ 1.25 (~1.0 premium) against the Jan 08 130′s @ 7.4. I figure if it makes 130.0 by July exp, the 125′s would be worth around 5.0 which you could in turn roll up to the 130′s for around 3.20 giving you 1.0 in new premium after buying back the 5.0 caller. Sure my math sucks, but it looks like a lot of premium for manageable risk. I guess this is really a question of selling OTM/ITM decision making.

    EOD reply is fine if you remember.
    tnx – Brian

  158. KC
    NIHD- took it off my screen a while back.
    PCLN- no still in, was just thanking you. I love priceline as I use it. But I don’t understand why they haven’t expanded to South America. Maybe Phil can get on that gig with them.

  159. jjm..i am having the same problem with ameritrade…dont see the login screen.

  160. JE – thanks for confirmation…

  161. vishnal – I called 800# got a message saying they were having problems, no details. And here I am in the middle of rolling out positions…. ugh!

  162. Ameritrade Site – Yes, same problems. I do however do have the Apex (Java app) running just fine – means I can see my watch-list etc., plot day charts too but cannot place trades as the main Amtd trade/balances window is dead and will not even give me the login!

  163. CCJ-screaming

  164. mSquare – yup. same for me except I shut down my streamers, etc, thinking the problem might be on my end….

  165. Does anyone else smell a selloff? Phil I think you were maybe two hours early. HEE HEEE

  166. Wow, those CCJ 55s are at a buck now! Cool call, Phil. (Wish I was in it!)

  167. Phil, I sold BA June 100 calls which will expire worthless. Do I sell the July 100′s now or wait for next week?

  168. CCJ – I want my 1/2 back!

    Builders turning down.

  169. Out of DIA calls. Puts starting to make money. Oil prices not good for the market. I think sell-off may be coming.

  170. Phil: My CCJ Jan 60′s are naked. If I understand you right you wouldn’t sell cover til next week?

  171. Great craps roll on CCJ Phil. Never thought it would get over 55.

  172. PRAA up 2%
    ASFI down – what would be a good entry?
    FCFS – pawn shops
    Any other plays in this space?

  173. BBD

    What are some of the stocks on your watchlist that you trade off of? Thanks in advance.

  174. Bill P

    why not bet that oil comes down first? There was a build in crude, there are tankers full of the stuff floating in the gulf and the refiners are to poor to process the stuff.

  175. Furnace73
    I have 200 I watch with that changing. Go to Wang’s World as he follows some of the same one’s.
    oil and gas

  176. SNDK --

    - Happy, big pop today on SNDK gapping up above its 200EMA after bumping against it 3-4 times — I’m liking it, what’s your take for entry/target ?


  177. Phil, is this interest in AAR and BEAV a Paris Air Show phenomenon? It’s next week.


  178. TM – I would do it without the cap, still have 5 months of rolls ahead. At $2 in premium per month, no matter how far ahead of you it gets you should be ok (unless it jumps like $30 in one shot, but is it worth spending $6 in covers to protect yourself from that?)

    AMTD – not able to log in on Exp Day – nice!

    Come on GOOG – $10 either way, I don’t care which!

    BA – if the market holds up it hardly seems like one you want to dump. You can’t make judgments based on expiration day.

    Very strong market in general

  179. CRDN ath

  180. Pick up some ICE July’s 150 for giggles. Hits $159/160 I gone. That’s the plan anyways.

  181. Lithium RB. I agree, oil should come down. It just nevers seems to pay any attention to fundamentals. Every time I bet on it coming down, I lose. Gave up on shorting oil a while back. Just think the world situation is getting uglier, and that will push oil prices up, or give the roaches the reasons needed to push it higher. But what the hell do I know!

  182. CCJ – right I think it would have really taken off today if not for expirations.

    Air show – always seems to give a boost but BA may be selling on thoughts of what more could they possibly say? It’s like going to a software conference and listening to MSFT recite market share, do they dominated with 90% of the market or 91%?

  183. SFY at 2007 high following their announced intention to punt their New Zealand ops. This one probably runs well with stable oil prices next week.

  184. phil,
    yesterday i sold shld jun $175′s @ $0.50 (for some reason i they did nor erode much yesterday) against my shld jan 08 $200′s. should i now buy out the caller or let it expire! what is the general rule in a case like this?

  185. NMX and ICE well off today’s highs. NMX 52 week high is around 150, which should most likely be taken out next week.

  186. CCJ – Why is it taking off today? Are there any news or purely technical?

  187. thanks Phil on BA.

    Can you let me know your thoughts on this. Buy SU Jan09 90 puts for 9.3 and sell July 85 puts for 0.9. Sounds like a good income producer?

  188. phil,
    if ccj is about to take off should i buy back my jul $60′ callers ? (shorted them at $0.48 against my Jan ’08 $50′s which i bought @ $7.20)

  189. Happy, thanks for the FSLR. Been a winner all week.

  190. CROX finally starting to move in the right direction.

  191. Me thinks we close the S&P at 1540 today. . too much going for the bulls. .

  192. Ameritrade Site – this stinks! Anyone have the Preferred Service 800# for them? I have been on hold on the generic number and it says 20 minutes more!

  193. LithRock: you’re right about mean reversion that’s why i dont bet the house on it
    but if i miss any up from here to close so be it ….the hogs get slaughtered thing

    My LTP will love it though!

  194. Apex # is (888) 871-9007 – i’m not having any problems at this time with Ameritrade Apex.

  195. CCJ, guys earlier today URAMIN in London received a CASH offer from Areva. I posted at 09.20.

  196. SNDK
    it is breaking out!! I think it goes higher from here. Intraday a little toppy, might want to wait a little. Breaking above 46.5 can be big!

    you’re welcome!!

  197. JAZZ,
    Good thoghts on the Paris show. If I recall BA jumped last year.
    Looking at slowing buying some Sept’s on NMX, from sales at $146.50 earlier.
    US OPEN-this course is kicking butt

  198. CRDN new ATH

  199. CNBC viewers: No doubt about it, I would hang the RebTel sign on my front door for the summer for $75K.

  200. Happy
    what calls you suggest for SNDK?

  201. BillBigD,

    PCLN – you’re welcome. Let’s hope it continues to run, though I’m covered.
    HWCC – are you still in this? My Sep25s finally showing some life (leftover from earnings).
    200 stock watch list !! – wow, I find it hard to keep up adequately with a portfolio of 40. Hats off to you since you’re always finding plays/oportunities.

  202. SNDK – took initial position in Jan’08 – will rent it out on a few interim ‘sublets’ and hopefully gain/exit if there’s a Holiday runup

  203. MA at ATH. Guess shorts are reallly covering at this late afternoon….Maybe a short opportunities with fresh money

  204. You’re right. . Ameritrade not working now when I tried signing on to Laptop.. What a great day to have the site go down. .

  205. Phil--

    In keeping with my lifelong investment bad-timing theme, I tried a few SU puts for today because I didn’t want to chase the CCJ’s. Got in at .15, the bid is now .01. Do you recommend riding it for a while still, or just grabbing anything so as not to have a total loss?


  206. I can get in Ameritrade, but to execute a trade or even to look up bid/ask, forget about it. takes forever…..The funny thing is these online brokers always get away with things like this without a class action!

  207. CNBC- I am getting a phone survey from them sometime next week. Anything I need to say? Remember I am LONG oil.
    HWCC-no not on list,
    I’m a wimp, compared to Phil! Only one computer. LOL
    Erin looks a little washed out today.

  208. AMTD sucks almost every options expiration day. That’s why I left them. They screwed me when they bought Datek and they will screw me again if they buy OptionsXpress. Oh well. Merit has never been a good requirement for success…

  209. DIA is at almost exactly where it started trading today what a bizarre day

  210. SHLD – that’s because they could pop $1 in 5 seconds, you need to ride that out to the bitter end if you want your .50 so it just depends on how much you like to play Russian roulette. Personally, I would have the conviction that they will pin just resign myself to roll the guy near the close if they dont.

    NMX/ICE – I wouldn’t short either the way they’ve been going (and the market). WHEN the market turns down, that’s the time to jump on them.

    CCJ – huge global uranium demand, active London market today so they couldn’t keep a lid on it.

    SU – it’s fine but you really don’t need to be so cautious (unless you are just very short and hedging). I like to start off my leaps with closer sells in case I’m wrong. If I’m right – well on this one I still get a $3.40 premium for the $90 puts and the ’09 $100 puts are $14 so if the stock drops $10 I’ll be in the money for $15 net, perhaps a $1 loss with 18 months to make it up but in exchange I get $2.40 of upside protection if the stock takes off on me.

    CCJ – I wouldn’t give them a profit. You have so much room the least of your problems will be the stock goes up $6 from here.

  211. Is there an Erin cuteness daytrade we can concoct?

  212. BBD: It’s that ugly blouse she’s wearing. Or maybe she had a bad night. Tell CNBC to pump CROX, RIMM, CCJ, SIRI.. .. get back to you on the other 20 or so :)

  213. DIA dropping like a rock, my 136 puts may pay off today after all.


  214. Phil,

    WM – do you still think they are a takeover target? if not, I’m going to look for an opportunity to sell Jul calls against leaps. Thanks.

  215. GRMN
    coming back!

  216. May have gotten a bit over excited on my last comment, on the one minute DIA chart it looked like a big drop was starting. Hope vs logic.


  217. FXI-Phil you have a target price on this?
    PENN-I pulled the plug a few days back as it wasn’t doing anything. JP Morgan says it could go to $80

  218. My guess is this will be a minor pullback before surging higher near the close… Just a thought. . guess i’m too bullish today. realistically S&P would be good to close at 1530. .

  219. Phil, your SU trade sounds good. I will try to play this one. SU P/E multiples now getting closer to that of a lot of tech stocks. Their FY07 (dec07) EPS est is 4.33, even if they make $5, that is a 20 P/E.

  220. CCJ – Crazy spike in volume

  221. Just got 20 free trades from AMTD, yes they suck.

  222. BIDU – up nicely today, but can probably go higher still; perfect before I get out altogether

  223. Phil

    Do you like the CCJ July 60 @ 0.95?


  224. Do you think CCJ will go higher next week after today’s run?

  225. Thanks Dom by the way!

    SNDK – very volatile, I would never chase them. I play them all the time long short but naked short is crazy on this stock. One thing I’ve been thinking of with SNDK (and others) is a laddered bear call strategy. You can buy the Jul $47.50s for $1.20 and sell the $45s for $2.50. If it fiinishes in the money you owe your caller $2.50 and you lose $1.20 on your call so you sell the Aug $47.50s against the Aug $50s for another $1.20 spread and you just keep doing it until you win, never laying out more than the $1.20 and most likely getting a double at some point in the next 12 months.

    SU – Sure you take your dime back!. Those are craps rolls, where you make 3 trades and hope to have a double on one but there’s often no way to get it back so any recovery is lucky. I’ll spare you the lecture on how it went to .30 at 11:30 and what the heck were you thinking not selling half… Now we’re getting the action I was expecting then, just a little late now that it shot up all day.

    When you enter a mo trade, you should put a sell in on 1/2 at 40% (the MOST) the second you buy it and then stop out the rest no less than your original entry becuase (3rd time this week) MAKING 20% IN ONE HOUR IS GOOD!!!

    CNBC – Ask them why they never have me down to the studio – I live 20 mins from them, I could be there anytime they need an opposing viewpoint to TBoone or one of the other oil criminals they kiss the ass off 24 hours a day (hmm, maybe that’s why they never invite me…)

    DIA – I’m very surprised that they don’t finish back at 13,550…

  226. Phil, are you bullish on BBW? Just teasing.. wanted to have some fun. ..

  227. KC
    MICC-Thanks I am gone. Owe you a cocktail

  228. Crap. I put in an immediate sell order on SU at .30 and then had to take a work call. I guess it never filled!

    Thanks for the lesson, in any case.


  229. BIDU/GOOG
    has taken off again. Might make a new high next week!! So, keep an eye on GOOG! I think it’s time for me to give an new update article on these.

  230. Phil,
    When are you going to Rome? July? I just got some of my Bills. OUCH LOL

  231. BillBigD,

    MICC – Congrats, that’s >$4 gain over 2 days? Funny that you’re thanking me since you/happy first made me aware of them. But I’ll take the cocktail LOL

  232. Going to Europe? I was in France for a 4 week vacation recently… needless to say shopping was done very lightly!

  233. HAPPY
    Why don’t you add MA to your charting blog tonight

  234. Drop mo’ MO!

  235. WM – I gave up on them. I’ve been picking them for a takeover since 2005 and I got tired of waiting.

    FXI – my target was $120 in Jan ’08 so what do I know?

    Now JOYG is flying.

    CCJ – no but I like selling the July $60 for .95 (I’d wait until Monday for more) against the Sept $60 for $2.67. If it goes the wrong way you can sell the Jul $85, now $2.85. For next week, I think it is only under $62 now because people are trying to keep it down into expirations.

    10-year fell way off to 5.16%

  236. MA/NMX
    BillBigD, yes, I’m thinking of the same thing!! Pretty amazing! Same thing with NMX! These are the trades that make $millionaires!! =)

  237. SU – never ask for a double, if I can’t watch .25 I usually ask for .35 or .40 if I’m feeling frisky. When I’m watching I take a double absolutely, even if it’s still going up (see CCJ earlier) as it takes a special kind of idiot to say “no I don’t want all my money back with a free ride forward from here where I can lock in a 50% gain by simply setting a trailing stop at 1/2 of the current price”.

    Rome – August. Maybe the dollar will have fully recovered by then… 8-)

  238. Rome – I was there two Augusts ago with the family. Had a great time.

  239. “Rome – August. Maybe the dollar will have fully recovered by then…”

    Oh… I so wish it could be true!

  240. WM – Thanks. I’ve been thinking of bailing myself as the premiums on the covers aren’t huge; should be able to get higher returns on same money. Will look to close on the next spike up.
    AMZN – do you have a good put play like you outlined for SU?

  241. CHK – Have stock and just sold my loosing June Call so that I keep the stock. Want to make some money off it though – anyone recommend a ‘good’ option to sell against it?

    Jan 45 Call is $0.75 and Jul 37.50 is a $1.00 (almost all premium) – which is ‘better’? I guess CHK will head for 40s after first decent hurricane but aiming to cover the call for less if none for a while…

  242. GOOG going down, this will be interesting if they turn red.

    QQQQ $48 puts for .29 – very dangerous but fun! XXX

  243. TM
    picking up speed!

  244. AMZN – not the same, too much chance of a major move one way or the other.

    WFR = WTF???

    CHK – on a $37 stocks you can sell the July $37.50s for $1, that’s 3%. If he’s in the money then roll to july and repeat until you get bored making an extra 36% a year and let yourself get called away. Understand that if it spikes to $40 and you owe him $2.50, you’ve still got his $1 and you can sell the $40s for $1 which is .50 out of your pocket but now you have a $40 stock.

  245. India Mining company coming public on Tuesday!
    JOYG and BUCY might get bump.

  246. Google is such a tease!

    Check out these amazing coincidental numbers:

    AAPL – $120
    CME – $550
    EBAY – $32.50 (will be)
    GOOG – $500?
    IBM – $105
    MRVL- $17.50
    SHLD – $175
    PTR – $140
    SLB – $85
    TOL – $27.50

    Aren’t numbers fun!

  247. Phil,

    DNDN – I know you’re probably out by now. I still have stock (16+ basis since I was short with Jun caller in late May when stock jumped) and Jul10 calls. I don’t want to sell the Jul7.5s since there’s not enough premium there to make it worth the risk. Seems the best play is to roll to the Jan10s for another 0.55 and pray for that next big spike sometime this year (and if the spike doesn’t take stock to at least $13 so I can get out even on the stock, I could then sell against for higher premium). Appreciate your thoughts.

  248. Expiration – I have to say I’m amazed at how consistent MM’s can be on expiration day! Some stocks just make a beeline towards a strike and barely budge.

    For instance AAPL is definitely going to end around 120 (hats off Phil!) but leaves me with a question as to what will happen past expiration. We’re in the weeks to iPhone release with much positive press (latest being AT&T expecting a 1 million customer increase through iPhone only) and minor negative coming into exp. week (WWDC with no major news, iPhone touch keyboard) so I’d expect the stock to resume going up on iPhone expectations alone.

    But to sanity check, anyone thinks otherwise?

  249. HAPPY
    Yes $$$, I first got in ICE in June of Last year at $55.

  250. If GOOG is pinned to 500 today, will there be pent up demand to make it pop on Monday?

  251. FSLR
    still flying!!

  252. Phil,

    “For next week, I think it is only under $62 now because people are trying to keep it down into expirations.”

    Do you mean next week, you think it is $62 or is it just a typo?

  253. AAPL: buy the hype and sell the news. This may sound flip, but I wouldn’t be suprised if AAPL falls the day after the IPhone goes on sale. Leading the way for revision to the mean of the markets in general.

    How’s that for a prediction?


  254. iPhone restrictions : that may be put a dent or two to the hype factor

    But what do I know , I don t even have a cell , but I am pretty sure the iPhone won t be my first cellphone …

  255. Oil 68.- who is going to pay the bill??

  256. Greg – I don’t really plan on sticking with upswinging AAPL by the time the iPhone is released. I’d wait some before deciding at that point.

    I’m more interested in what could be next week’s action at this point…

  257. OIH – Is this time to add to OIH July puts?

    Jul 170 Put was $3.40 yesterday and $2.65 now. This is so that can sell some $175s against it next week…Had bought the Jul 170s playing along with Phil’s excellent idea yesterday to pocket $1 for the expiring Jun 175s sold against it…

  258. DNDN – you own it with a $9 loss and no puts? Ouch. I would sell them and buy 2x Jan ’09 $7.50s for $4.05 and sell 1/2 Aug $7.50s for .82 leaving the other half for a spike or a later sell. That gets you 10% back in 60 out of 540 days you have to make it up while still leaving you an full upside on the same number of shares as you have now AND less downside loss (the ’09 $10s are $3.50).

  259. Does BSC pay the piper on monday? I am itching to go short but I am not that b

  260. Closing imbalances, nowhere near the size of the opening

  261. GOOG – maybe yes maybe no but I hate close calls on goog.

    CCJ – no I meant $57, someone said $60 and I got that in my head.

    Interesting theory Greg. True that Apple or Goog could lead the markets down (maybe RIMM too).

    IPhone – when I’m in NY, the general conversation from once-rational people is how many IPhones they need for their family and who knows who who knows someone who can get them in early on the list/line/whatever to get one. I wouln’t bet a penny against it.

    OIH/all puts – not with oil at $68 but I am rolling up ahead of the weekend just in case.

  262. VIP- ATH selling some July’s 100′s still own Sept
    JOSB- buying back July 35
    PCU- buying back July 90′s
    CCJ-covered on June 55. LOST $400 Now I hope it hits $60
    What a week, got a bottle of Silver Oak getting ready to drink

  263. RIMM is taking offfff

  264. Taking an initial small position in MA Jan puts. Higher PE than Goog. Don’t think its
    worth it.

  265. Phil – thanks on DNDN

    BillBigD – Silver Oak cabs, great stuff!

  266. FSLR- HAPPY hope you are still in!?
    V- poon
    RIMM nice call
    MA- jumped out WAY to early on July’s

  267. USU

    Any insight on this other Uranium supplier. They’ve been pounded down pretty hard and may be turning around. (chartwise .. don’t know much about the company).

  268. TRMB- exploding! Playing catch up to GRMN?

  269. Any last bets b4 the w/e?

  270. My theories aren’t worth much, but I do not think that the markets can sustain the current angle of ascent. I wish we could just have our blow off top and get it over with. I have a few core long stock positions and 50% cash. I am waiting for a chance to go short using options. By the way, I don’t think GOOG is overextended, in fact it has only recently moved out of a seven month funk. I really like RSH as a short candidate if it cannot break out of it’s long term resistance, which it appears to me to be testing.

    Have a good weekend all.

  271. GOOG really messing with people now!

  272. KC
    Yes it is either a 1996 or 95. I need to start drinking them.

  273. By the way, you REALLY don’t want to end the day with GOOG $510 calls that are .10 in the money (didn’t happen but do keep in mind).

  274. Phil

    TSO puts

    I have:
    jul 62.5′s
    jul 57.5′s
    aug 55′s

    Should I consolidate?

  275. Great weekend everyone! I might have couple of new posts this weekend! Stay tuned…

  276. That was a fun week.

    Have a great weekend all.

  277. Enjoy your weekend!

  278. P – newsletter copy sent to your email. Call if you’ve got any questions.

    Gang – see you on the 25th. Good luck and have great weekend and week ahead!


  279. Have a great Fathers day everyone!!!!

    Phil you da man, cant tell you how much you”ve helped me the last few months. Your mind was made to trade. If it wasn’t for your direction i wouldn’t be up as much as i am today. You can be my fund manager any day.

    Happy Fathers Day!!

  280. Great week! Have a great weekend all. Time to start putting the mulch out… and maybe a Leiny or two.

  281. TSO puts – I would consolidate just to save folder space! They took a dive at the close, as did VLO so I’m very please with my roll up (for the next 48 hours anyway). I always look at the brackets above and below and try to figure out my best risk reward. For TSO you have

    July $57.50 – $0.90 (-60)
    July $60.00 – $1.50 (-$1)
    July $62.50 – $2.50 (-$1.35)
    July $65.00 – $3.85 (-$1.70)
    July $67.50 – $5.55 (0)

    So the $60s are -.60 to the downside and +$1 to the upside but the $62.50s lose $1 if they bracket down but gain $1.35 on a bracket up (a $2.50 move in your favor). That is actually WORSE for you than staying where you are. In that case, you are better of doing a DD in the $60s than spending $1 to roll. The same is true at $65 ($1.35 down, $1.70 up).

    This is not an always thing, it changes from day to day but, as the month goes on, you’ll see various opportunities develop.

    With this much time to go my logic of the $60s is: I’m in for $2.50 (example) and they’re at $1.50. If I spend $1 to roll to the $62.50 my basis will be $3.50 with the $62.50s at $2.50 and if TSO drops $2.50 I will be up .35.

    If, however, I dd on the $60s at $1.50 and leave them, my basis goes to $2 with the put at $1.50 and a $2.50 drop in TSO will (in theory) put me .50 ahead.

    There’s the decision – EXCEPT – the problem with DD is you can end up with too many contracts, which is dangerous in an illiquid position (not TSO). Also, you must be prepared to make your next DD or (more likely) roll. Any time that the NEXT move may worry you – probably you are better off not making a change here and just looking to get out. My general limit is max 5% of the portfolio in a position but I hate to do that. Once I get over 2% I’m usually looking to either just quit or shift the strategy to a calendar spread and let some other sucker keep rolling and doubling down while I suck up his premiums (it’s a jungle out there!).

  282. Thanks Z! I’ll call you later or call me if you have to go out.

    Happy Fathers Day all!

    Thanks Kustomz, that makes me really happy!


  283. Can someone please explain the 2X and 3X in front of the GOOG and UNP recommended trades today? Is this a recommendation on the number of contracts?

  284. Rahul,

    In the case of the GOOG trade, what Phil meant is however number of contracts of the GOOG 500 calls you sell, you buy 3 times that number of contracts (i.e. 3X) of the 510s. I might have the 2X and 3X mixed up; that’s what I remember from this morning.

  285. BillBigD,

    Enjoy. I’ve had a few of the 1978 or 79 and 1985 or 86 (but not more recent). All wonderful. In recent years, I’ve leaned mostly towards Italian (and sometimes French Rhone) reds.

  286. Weekend Wrap Posted!

  287. Hi Phil n all;

    TM – When you replied to a calendar spread question involving buying the Jan 130′s and selling Jul 125′s with “TM – I would do it without the cap, still have 5 months of rolls ahead. At $2 in premium per month, no matter how far ahead of you it gets you should be ok (unless it jumps like $30 in one shot, but is it worth spending $6 in covers to protect yourself from that?)”, what was meant by “I would do it without the CAP”?

    Got into the game late today which was probably a good thing as I prob would have dumped my WFR S Jun 60′s when WFR got soooo close to 60 today. Fortunately I wasnt here and they expired worthless.

    GM – same story except I prob would have talked myself into the Jul 32.50 P’s too early, ended up stepping into 20% of my position at end of day for .60 when GM had peaked at it’s high of the day. Large % volume increase in the Jun and Jul 35 CALLS yesterday and today though……:?:
    Will roll as you suggest if necessary and watch the chart and news.

    FWLT – If this quote is even close to accurate, I can’t help but thinking of Happy’s discussion on FWLT several weeks ago when he said a price of 150-200 was a real possibility, “The refinery-related BACKLOG (emphasis added) of Foster Wheeler Ltd.,an international engineering and construction firm, almost doubled in 2006 from the year before to $1.74 BILLION.” If I were management I would be hiring more HR personnel in order to hire alot more engineers. According to my ex in-law in the oil refinery business, a refinery from concept to an operable facility takes almost 9 years. I can’t find a good reason NOT to jump on this one again…..I was so happy to dump the AUG 100′s for 8.60 (now 13!!) after purchase at 6.80 in late May :neutral:

    AAPL – Despite some negative comments from the techno gurus, I believe the general public (you know, the ones who believe inflation is at the govt cited 1.2% vs. the real 8.4% annual growth rate) will make Jun 29 similar to the PS3, cabbage patch doll, XBOX and even VISTA first day available for purchase stampedes. Jobs playing it smart too, no prereleases of the product (yet) to consumer reviewing entities, like consumer reports. Going with my original thought, accumulate next week on dips, sell half 6-27 -> 6-28 and watch to see what happens after 6-29.

    Happy Father’s Day Phil and All :!:

  288. KC is right re GOOG. The play was risky in selling the $500 calls naked for $7.10 could cost me more than $2.90 if I left them naked so a cover is a must. Since the $510s were only .30 buying 3 of them means if GOOG went way above $500, I would still only owe my caller $2.90 more than whatever 1 set of $500s were worth but I would benefit from the value of my other 2 $510s so any finish above $511.45 would be net positive for me.

    Don’t forget that I’m playing it down, not up and as soon as GOOG dropped to $4 I took 1/2 off the table, which make my covers essentially free and raised the basis of the remaining $510s to $9.20 (the $3.10 profit I made on the sale of half, less the .90 per single GOOG contract I spent on the covers).

    As it was moving down I got greedy and added 3x $500 puts for .20, which I sold for a dime, so I lost an additional .30 per GOOG call there but I sold the rest of the $510 calls at $2 so the whole thing had a very happy ending!

    This is not a proper strategy for normal stocks but the fact that GOOG can jump up or down $20 in 5 minutes makes this too tempting to resist (for me anyway) on expiration days.

    On UNP – he already had $20 value calls at a lower strike so the 2x referred to selling the ones for $20 and replacing them with 2 $10s or whatever but when I say 2x or 3x it is that multiplier relative to whatever x we were starting with but always feel free to ask for a clarification as I do tend to not be 100% clear when trying to type these out during a trading day (but you can see what a great explanation you can get after hours!).


    TM – I think he said he was going to spend $1.? on the $130s as an upside cap.

    GM – holy cow I am so dying to short them! Market has to stop going up though.

    FWLT – we’re up to the Jan $100 puts in the $10KP but thanks to the great premium on the July $100 puts, we’re about even so far. I hope we don’t have to chase it up to $150!

  289. I got this via email today and was so taken back by the blatant honesty of these entrepeneurs I had to call to investigate.

    Dear Reader,
    I sincerely Write to seek your Co-operation and trust in
    respect to abusiness opportunity in our company.
    We are a multinational firm in asia with headquaters
    situated at the heart of Beijing China.We are into sales(Export)
    of Arts & Crafts.

    In the course of last year we made a turnover of some
    thousands of dollars but at our yearly board meeting our
    board of directors decided on increase in profit hence our reaching
    out to credible individuals.

    We have limited countries where our products are
    been exported.Due to the quality of our products we have some
    sucessfully few customers in America and Canada continent. And due to
    the high demand for our products in America,Canada and Europe,we have
    decided to move our products fully into the countries listed below;
    Colombia,Mexico,and Europe.

    By so doing,we are searching for reliable persons/companies
    who can act as a DISTRIBUTOR//RECEIVING OFFICER for us.
    He/She will act as medium between our customers and us in
    their established area.

    If aprroved as our Representative,you are entitled to an
    annual income of $25,000 USD and 5% of whatever amount you receive from
    customers who are making payments through you to us.Please if you are
    interested in transacting business with Us, we will be very glad.

    Please, forward to us your phone/fax number and your full
    contact address or just state your interest.
    Contact us via
    For more information.

    Thank you as we await your further response.
    Only trustworthy & credible
    individuals will be considered.

    In Trust And Good Faith,
    Mr. Long hung Dong.
    (Managing Director)

    Although they apparently didn’t invest in a good Chinese to English translation program and couldn’t speak English very well, I still felt I could trust them. The few, very well spoken English sentences included, “What is your bank account number?” “What is the balance in your bank account today?” and “Wook at your bank balance on Tuesday for your first transfer” were so genuine I knew I had found an easy way to make a buck. I will let you know how it goes next week, but am expecting great things!!

  290. :grin: :wink: :mrgreen: NOT :!: :!:

  291. Perhaps the name “Long hung Dong” should have tipped you off!

  292. Hey Phil – tell the market to sit still for awhile would ya ? Im likin the idea of my options portfoilio melting /up/.

    Speaking of melting things, heard on the news(tm) this morning that there are sharp divisions in the bush white house (like htere were in the argument to beat on poor lil Iraq) regarding striking Iran militarily.
    First of all, I wouldnt think the market would like hearing that at all.

    Second of all, I think its us telling Iran that the military option is still very much on the table – without actually putting a spokesman out there to say it.

    Hopefully the market already priced in this risk, but the common sentiment has been that we dont have the gear or people to go to war with Iran. Granted, an air strike isnt going to war – but in the heat of things perspective is the first thing to get lost.

    …what it spells is higher oil (again).

    Personally, im an American patriot — and I feel going to war with Iran would be tragic. I also feel that Iran having nuclear gear will be tragic. The smart ones knew this day would come just as soon as the nucular genie came out of the proverbial bottle. We cant keep the world from having nukes – yet we cant let some in the world have nukes. At least N Korea is a known commodity – in that Kim Jung Illlll is just trying to blackmail us to send more food and money to him so he can feed his peopl…err… military, and distribute food to the hungry black marketeer…errr… populace. Of course… converting a majority of his farms to grow poppies instead of food doesnt help that, but thats another story… Regardless, he doesnt relish the thought of being vaporized and will always back away.

    Iran on the other hand is …well… a little more fundamentally driven I guess.

  293. All war is tragic but killing anyone who MAY be a threat to us will only make us seem like a threat to everyone else which will cause us to kill them as they too become a threat to us and this will go on until whoever is left starts banding together and taking steps to eliminate the 4th Reich so, no thanks!

    While Jesus said “turn the other cheek,” I have to go with Allah’s “an eye for an eye” philosophy but YOU HAVE TO LET THEM TAKE THE EYE FIRST OTHERWISE YOU ARE THE BAD GUY!