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Whip Around Wednesday

This is why we use cover plays – One day does not a trend make!

We had a very bullish stance going into the weekend and, while we certainly trimmed down a little, we kept a very bullish stance, especially on GOOG, which we left uncovered after buying back our callers and the LTP, which got of relatively unscathed in yesterday’s carnage.

We found ourselves a little too bearish at the end of yesterday (because we had made too much money on uncashed puts) and switched to upside index covers on the DIA ($140s) and QQQQ ($50s) as we expected good things from tech and we covered our oil shorts with COP $85s.  These single index (or sector leaders in COP’s case) plays make a lot more sense than flipping in and out of individual positions whenever a market breeze blows against us.  If you get your portions right, they can give you just enough protection without impeding your ability to make more money once the market gets back on track

Sometimes, like yesterday and it looks like again today, your covers can accidentally make you money, but it’s important to remember that is not why you bought them and to treat these gains as a very lucky bonus since you took them to protect you if the market DID NOT do what you thought it would do!  As I often say to the members – "Remember why you took your position in the first place, don’t lose site of your goals."

Let’s not forget that yesterday was a TERRIBLE day in the markets with 90% of the very heavy volume coming to the downside so the expected boost we will get from BA (terrific earnings) and AMZN (up 24% pre-market) early on may not be enough to override the very cold slap in the face we got from CFC yesterday.  We’ll be watching out for profit taking into the rally, especially with AMZN as I am one relieved investor after yesterday’s scary fall!  On our Oct/Aug spread, I will be leaning towards selling the Octobers into the rally and waiting to buy back the Augs when the stock turns down.  Margins can be dealt with by buying $95 or $100 calls to turn the position into a bear call spread and we will discuss more complex plays as well as some new plays in chat but the $85/$95 bear call spread should be a nice play as a new entry.

Asia held up well this morning with "just" 143 points coming off the Nikkei and "just" 110 points coming off the Hang Seng but South Korea’s Kospi hit an all-time high as Q1 GDP over there is trending at 7% annual growth.  Financials were strong leaders in Korea and I’m not shorting them over here as a few billion in losses on sup-prime loans are likely to pale in comparison to the fees collected on $2T worth of M&A activity for the year.  Japan’s largest investment bank, Nomura Holdings, said Q1 profits nearly quadrupled despite their $260M write down of their US sub-prime virtual portfolio.  Energy was the biggest drag on the Asian markets and that’s just fine with us!

SGR and  Westinghouse Electric (owned by Toshiba) signed an agreement to build 4 four nuclear reactors in China that will be operational by 2015.   China plans to increase their nuclear output from 7 to 40 Gigawatts by 2020.  Westinghouse CEO, Steve Tritch said "They have an ambitious program here to build at least 30 more nuclear plants over the next 20 years or so, and we think that will require additional work for Westinghouse and input from Westinghouse to do that."  Mr. Tritch noted forecasts from a senior U.S. energy official that there could be as many as 1,000 nuclear power plants globally by 2050, compared with some 435 now.  This is why we are long on CCJ!

Europe has already made a nice recovery ahead of our open but have a long way to go to retrace yesterday’s drop so let’s keep an eye on them.  We get the Beige Book readings this afternoon (2 pm) so any rally on this side of the pond needs to be taken with a grain of salt until we see some numbers that are, if not good, at least not terribleCTX confirmed low expectations this morning and we’ll need continued capitulation in the energy sector to drive money into the broader markets so we’ll be watching the Transports with great interest today to see if 2,950 can hold or if we are heading through the 50 dma right on down to 2,800 which would signal a VERY weak economy, no matter how the Fed tries to spin it!

The dollar tested 80 yesterday and finished at 80.13 but made a spectacular recovery overnight and is back over 80.25, driving gold and oil lower as that’s starting to look like a trend to nervous foreign traders, who have been betting heavily on a breakdown below 80.

Until we get a 50% retracement of yesterday’s losses this is nothing more than a bounce so don’t get too excited.  On the other hand, we can finish the day back over Monday’s open then we could be off to the races, especially if AAPL gives us a good reason to be later today.  ZMan has a great take on the energy market this morning.  He and I will be addressing the nation live on Market News First at 10:25 so tune in for those fireworks but we picked up so much downside action in oil yesterday I’m more concerned about a negative surprise.  We took COP $85 calls, now $1.60, as upside protection yesterday and I also liked the SUN $75s, now $1.75, for a bounce.

BA will give the Dow a huge lift right out of the gate and if they stay strong we have a pretty good chance of making a full recovery but if BA runs into profit taking, we have some serious problems!

 


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  1. Pre market…

    GLW – down $1.19 to $25.00 (Quarterly profit slips 5%)
    BA – up $3.06 to $106.80 (Reports profits; raises outlook)
    QI – (reports loss) http://www.forbes.com/business/feeds/afx/2007/07/25/afx3948524.html


  2. Zman post up. Extreme caution urged today in the oils as expectations for today’s report vary wildly. Even when the numbers come out, unless they’re mongo big or small there’s going to be lots of confusion so be wary of the head fakes. I pulled back on refinery puts substantially late yesterday (except FTO) but nothing matters this morning before the numbers.

    NBR had a blah quarter.
    COP, ECA and XTO pretty good ones.


  3. Pre-Market Analyst Calls (July 25, 2007)

    AGP raised to Outperform at CIBC.
    ALSK raised to Equal Weight at Lehman.
    AMZN upgraded at Credit Suisse, J.P.Morgan, RBC, Lehman, and Bear Stearns.
    BER raised to Buy at Citigroup.
    BIOF started as Overweight at J.P.Morgan; started as Buy at Citigroup.
    CFC raised to Mkt Perform at KBW, cut to Underperform at FBR.
    GSK cut to Underperform at Bear Stearns.
    HAIN raised to Buy at UBS.
    IPAR cut to Neutral at Oppenheimer.
    KMB raised to Hold at Citigroup.
    MTG cut to Mkt Perform at FBR.
    NTRI cut to Equal Weight at Lehman.
    OSG cut to Neutral at B of A.
    PMI cut to Mkt Perform at FBR.
    RDN cut to Mkt Perform at FBR.
    RUTH started as Overweight at J.P.Morgan.
    RYN raised to Hold at Citigroup.
    SKX cut to Neutral at First Albany.
    SPPI cut to Mkt Perform at FBR.
    STX raised to Outperform at Baird.
    SYPR raised to Outperform at Baird.
    VSE started as Buy at Citigroup.
    WTW cut to Underweight at Lehman.


  4. Looks like SPX should open at about 1518-20.
    I am looking for a test of 1525-30.


  5. Earnings Gappers (July 25, 2007)

    (AMZN) Amazon.com trading up over 20% after beating earnings and raising guidance; has 5 upgrades so far.
    (ASH) Ashland $1.35 EPS vs $1.11 estimate.

    (BA) Boeing $1.35 EPS vs $1.16 estimate; guidance looks soft if not on items; shares trading up 2% pre-market.

    (CACH) Cache $0.12 EPS vs $0.07 estimate.
    (CBR) Ciber $0.13 EPS vs $0.12 estimate.
    (CL) Colgate-Polmolive $0.84 EPS vs $0.83 estimate.
    (ETH) Ethan Allen $0.65 EPS vs $0.65 estimate.
    (FLIR) FLIR Systems $0.38 EPS vs $0.36 estimate.
    (HES) Hess $1.75 EPS vs $1.45 estimate.
    (JOYG) Joy Global issues earnings warning.
    (KEM) Kemet $0.12 EPS vs $0.10 estimate.
    (MDCO) Medicines Company $0.03 EPS vs $0.02 estimate.
    (MPX) Marine Products $0.14 EPS vs $0.12 estimate.
    (NTRI) NutriSystem traded down another 10%+ after beating estimates, but lowering guidance.
    (PAS) Pepsi Americas $0.60 EPS vs $0.50 estimate.
    (PFCB) P.F.Chang’s $0.36 EPS vs $0.36 estimate.
    (RAI) Reynolds America $1.10 EPS vs $1.21 estimate.
    (SEE) Sealed Air $0.41 EPS vs. $0.42 estimate.
    (TRAD) TradeStation $0.18 EPS vs $0.18 estimate.
    (TRB) Tribune $0.47 EPS vs $0.48 estimate.
    (TROW) T.Rowe Price $0.58 EPS vs $0.58 estimate.
    (XEL) Xcel Energy $0.29 EPS vs $0.26 estimate.


  6. Morning all. Thanks Karm. Another exciting day to look forward to.


  7. Buy opportunity for NTRI?!


  8. AAPL RIMM
    For those who did not see this Suria piece on Seeking Alpha, more positive news on AAPL:

    I also plan to strangle the maker of the popular Blackberry devices Research In Motion (RIMM) with a slight short bias as I expect Apple’s iPhone to eat into RIMM’s market share and profit margins. After conquering businesses, RIMM decided to expand beyond their core business customer base and target regular consumers with their Blackberry Pearl. I currently use a Blackberry 8700 and can personally vouch for how good the device is for email, checking stock quotes as well as making calls. I also had a chance to play with both the Pearl as well the Blackberry 8800. However when I got my hands on an iPhone a couple of weeks ago, I was totally blown away. The interface is so simple and easy to use that even folks who are not gadget freaks would love this device. Stock quotes with charts, Google maps with traffic overlaid, a video iPod, a Safari web browser that is very usable, a decent camera and Wi-Fi internet access beyond AT&T’s EDGE network – it is hard not to fall in love with this device. I liked it so much that I picked one up for a gift last week.

    As for business users, the iPhone offers the ability to get email either through a POP3 connection or directly from an enterprise exchange server similar to Windows Mobile devices like the ill-fated Motorola (MOT) Q. While RIMM derives more than 75% of its revenue from hardware sales, it does enjoy very good margins from software sales. Blackberry Enterprise Server for Microsoft Exchange with a 20 user limit can set back enterprises as much as $4,000. Once you include this cost, the iPhone almost begins to look cheap for businesses. In fact I noticed the price of the Pearl and 8800 drop significantly a couple of months before the release of the iPhone.

    So based on this slightly bullish sentiment on Apple and the slightly bearish sentiment on Research in Motion, here are the options I am going to buy for the SINLetter model portfolio to create the strangles. I am going to purchase the options for Apple right now in order to cover the earnings announcements today and will purchase the RIMM options sometime in September to cover the earnings call on September 27, 2007. I will use yeterday’s market closing price as the price for these options.

    # 4 Contracts of Aug 2007 $140 Calls on Apple
    # 3 Contracts of Aug 2007 $130 Puts on Apple

    JB


  9. BillP

    de nada, I know what you mean about another exciting day coming up…..I feel like a kid in a candy store but with only a couple of bucks to spend! Decisions, decisions!


  10. GSK – Looks like today will be a good day to execute on the 5 50s/5 52.5s AUG sale against NOV 52.50′s. Phil, what are your thoughts no price points?

    I’m thinking 50s@~3.5 or more and 52.50′s@~2 or more in initial excitement, likely easing in.


  11. Apple Inc. (NASDAQ: AAPL; 134.89)
    Rating:
    Risk Qualifier:
    Outperform
    Above Average Risk
    iPhone sales, Where Art Thou?
    • Channel Checks Suggest Sustained iPhone Momentum. Current checks at
    Apple and AT&T suggests iPhone demand/sales momentum remains steady,
    following the huge initial surge in iPhone sales 1st weekend of launch.
    • AT&T Reported 146k Activations Q2, implying sales only slightly light to
    our 450-500k Q3 Sell-in Estimate. However, this may not reflect Apple’s true
    Q3 sales, excluding buyers who experienced activation delays, and units sold
    but not activated. Incorporating these factors suggests Apple may have sold
    350-450k iPhones to users.
    • 400-500k Phones Reported Sold Q3. Given Apple will report iPhone sell-in
    Q3 (i.e. sell-in to AT&T, sell-through online and Apple stores), Apple may
    report 400-500k iPhones sold Q3.
    • Expect Valuation Volatility off iPhone Q3 #’s. Variability around consensus
    estimates for Q3 iPhone sales is expected to cause valuation volatility. We
    would accumulate the stock on these opportunities as we expect Apple to
    resolve these issues and subsequently reinvigorate iPhone sales.


  12. GSK – we have to see where they go in the morning but naked selling into the excitement is the way to go. Right now it’s AMZN time!


  13. AAPL: from RBC this morning


  14. This is a good time to take stuff off the table that was killing you yesterday. Nothing has really changed other than a few companies that were supposed to have great earnings having great earnings so be realistic. STM and GLW were disappointing but no one seems to care…


  15. BBD – nice call on the NOV yesterday!


  16. Thanks for the data, Karm.


  17. Morning, all.

    Good luck, windy.


  18. RBC, July 25

    Uranium Weekly
    Market Weakness Continues – Spot Price Falls $10/lb
    The uranium spot price dropped $10/lb to $120/lb for UxC while remaining at $129/lb for
    TradeTech. The long-term price remained at $95.00/lb for both UxC and TradeTech.


  19. Hang in there Windy, I know the feeling.


  20. phil,
    AMZN – was not allowed to sell the calls while i held naked puts
    holding both currently
    any guidance as to how to proceed?
    thanks in advance.


  21. THANKS GUYS!!!


  22. buying FFIV AUG 95 calls @ 1.80 for start of an IV earnings play scalp or hybrid into a full strangle.


  23. Phil: Good morning.

    BA – I own the JAN 08 95′s (cost basis 12.44) and I’ve sold the 100′s against them (sold for$3.51). Advice on how to roll up for both the LEAP and the sold calls? ~ Thank you ~


  24. I’m surprised they expect a 1.9Mb draw in crude – that’s a number that can disappoint but they really took Aug NYMEX barrels off at the last minute so perhaps they are creating an artificial shortage in Cushing.

    AMZN – took 40 $90s for $1.45 and will sell 20 $85s, now $3.50 and am holding Oct $80s, now $8.60 so I’m now in with 40 Oct $90s, sold 20 $75s, now 9.75 and the 20 Oct $80s. Once I am sure there is no short squeeze, I will cash at least 1/2 my Octobers and sell 10 more Augs. xxx


  25. AMZN – another nice way to get out of the Oct $80, Aug $75 play is to roll yourself to 2X the Oct $90s and roll your caller to 2X the $85s – this is a near even roll and puts you in much better margin position. XXX


  26. NBR down $0.50 on an up OIH day. BJS thinking about going lower.


  27. BA – same thing, roll up to 2x $105s at $9.95 and sell 2x the $105s, now $4. It will cost you about $1.20 per contract on the Jans but it’s an even roll on Aug and picks you up $2 in premium and $5 in position on your caller. Still 4 rolls left to go.


  28. Selling AMZN calls bought this morning for 3.50. lil early it seems.
    missed out on the strangle on AMZN -kicking myself for that.


  29. KC,

    PCLN – do you see a good entry point here?


  30. just in NTRI… Jan. 08 calls


  31. If there is only one for sure thing right now it would be volatility. VIX levels very high.
    CTXS and JNPR are my edge on FFIV numbers and FFIV did better than CTXS, that has been noted by a recent analyst. I’m going long volatility.
    Strangling BIDU- bought Aug220 calls to start at 5.00


  32. Kick, kick. Overhedged on AMZN. Will make a few $, but really limited my gains. Have to learn to position/buy protection better. Now have to think about AAPL.


  33. What are people doing with BA? I have a double + on August 100 calls. Don’t be too envious; most everything else I have is missing their numbers.

    Jazz


  34. COP calls flying, that was a good choice and SUN calls still available if you need cover ahead of inventory. I’m very disappointed with the lack of returns from my DIA and QQQ calls so I’d have to say sentiment is still VERY bearish. So the way we play covers like COP is we sell them into the initial excitement and then use that gain (.30) to augment the stops on the now naked puts we’re protecting. In other words, I’m up .60 on my OII puts so rather than a .15 tstop, I’ll go .30…

    New Home sales were terrible back to the mattresses!!!! XXX


  35. BA took my profits and ran, markets look weak. I will be looking to buy back in, CC yet to begin.

    Home resales looks BAD. Good for me as im in the market.


  36. Oh this is my top call for AMZN by the way!


  37. WNR still up but other refiners turning sharply down. Of course, it means little until the number . FTO and HOC getting bludgeoned like baby seals.


  38. AMZN- gone! yippee No Cover
    NOV & FCX big numbers real nice gain on NOV
    JOYG- smoked DAMN
    CMED- getting ready maybe to play again. But being careful
    Retail weak! DECK COH RL etc
    PCP- nice move on BA numbers but missed buying yesterday


  39. OIH green, both NE and DO down more than $1!


  40. which do you all prefer Optionhouse or OptionsXpress?
    would appreciate your input.


  41. AMZN- Phil, so do the other 45 million shares looking to cover! Going to 95 before 80, IMO.


  42. If the gasoline number is bearish this $1.30 rally in WNR makes a good entry for the $55s puts.


  43. optionhouse way better.


  44. BillBigD:

    Nice call on NOV ! ! !


  45. PCLN – sorry, was busy dealing with AMZN and BA positions. I’d wait for it to go back above $68 and hold there before taking a position. I still have my caller in place.


  46. Hanging on to AMZN leaps. Will be looking to sell calls against as stock begins to settle.


  47. JCI- 3 for 1 stock split
    EDU- rolled down to Aug 55 at 2


  48. BA – out with profit. Thanks, Phil


  49. IMB freely falling, probably just learnt what CFC said yesterday.


  50. sold my appl aug 145 calls I bought at the close yesterday for break even. Got the bounce in the stock but not the option price.
    crooks


  51. Not a bad idea to take a little off the table if you’re still short FTO.


  52. EDU – also rolled down to Aug 55


  53. If you want to play oil down PTR is still flying high and COP $80 puts are a fun bet at $1 and XOM $90 puts are always a challenge at $1.80 but I’m just riding what’s left of my puts from yesterday with normal stops, happy to get to cash in energy if the report comes in bullish but I still think there’s a chance one of those offshore storage tankers dumped their cargo while they could get $75 which could give us a huge build but I’m not counting on it.

    FWLT is turning into quite a little cash machine for me (selling $120s when it rallies), reminds me of TSO and RIMM when they were trying to sustain unsustainable highs…

    Radio in 5 mins I think (they never let us know until the last second).

    Internals falling apart now, be very careful!


  54. BIDU JAN/AUG 200′s at $20.30/$9.20 for a spread w. earnings this eve.


  55. Happy – Any idea what happened to CMED this morning? Looks like you had good timing getting out yesterday. I unfortunately was not so lucky. Thoughts?


  56. Shipping – DRYS, NM, EGLE & EXM – on the move.


  57. MN1 has a guest host and they are running late again so who knows what they are doing – they have no concept of the fact that the inventory is exactly 10:30 and it’s not a good plan for us to come on at 10:29:55 like we did last week!


  58. Sold AMZN 85′s at 6.30 watchin it real close


  59. CLF – Sub 80′s and crossed under its 50 MA… Yaouch! Let’s hope for a nice earnings suprise to exit the second leg of the spread with another positive slant. :|


  60. Phil,
    Any good plays on CIT leaps. They seem to have made the decision to just get the subprime off thier backs but the mkt has killed them.


  61. Phil,
    First-time poster, just signed up last week. Wondering what you still think about the INTC aug calls? I have a small loss right now, should I get rid of them and move on?


  62. FAF making an interesting move up.


  63. I gave up on my FTO Aug 40 puts last week, sold for a loss. Same with my XLF Aug 36 puts.

    I AM A PUTZ!

    Greg


  64. traderdon – the option didn’t bounce back as much because the short term volatility for aapl is lower today than it was yesterday (where it was the highest I’ve seen AAPL in the past 6 months).. After the T earnings, aapl started to move quickly and it makes perfect sense for the folks selling you calls to charge more for them.. So far today, things are calmer, so the volatility is lower, causing lower premiums.

    If you were on the other side of the trade, you would (or should..) have done the same thing.. why should those “crooks” be giving away money?


  65. Greg – ditto on the XLF Aug puts.


  66. wow Bezos woke up 2 billion dollars richer this morning! shorts one billion dollars down, margin call maybe?


  67. Phil,

    Ask them what phone system they use so we can short it! I can’t get back in.


  68. NBR and BJS crashing now.

    FTO getting whacked, WNR a good bet hereon puts!!!


  69. arent spreads on wnr options a tough nut?


  70. market breaking down big time. . 1500 here we come. .


  71. dragon are you in on amzn calls on the short squeeze?


  72. Is at&t paying apple the 200+9/mo for the 15k phones it’s giving to the aapl employees?

    If so, then giving them away may hit the top line, but aapl will have their bottom line covered..


  73. I can’t get back on P. I’m not doing this with these guys again unless they fix this crap. It’s embarrassing and it’s a waste of time. They’ve had me on hold for 10 minutes.


  74. SHLD, look out below!


  75. LOL – that was like calling the Keyston Cops Radio show, the new guy doesn’t know how to work the buttons and kept cutting us off. Oh well, bottom line is that was not a good inventory for the bulls and it was totally brilliant of me to flip short ahead of the game – 8-)


  76. Buyers are trying to keep in green, don’t think it is going to happen, anyone else?


  77. BG finally breaking down but it’s in the company of 8,900 other stocks I think!


  78. Phil, with Amazon, why roll to 2x the Aug 85/Oct90 combination specifically? Why is this better than the Aug 90/Oct 95 combination?


  79. Phil, that MN1 segment was great — I enjoyed your discussion with the host (he’s really good).


  80. phil, for the amzn roll, you meant 2x Oct 90s and 2x Aug 85s?


  81. FCX down 7?


  82. XLE $70 puts at $1.33 still the slow mover if you want to paly oil down. Woo hoo on XOM and COP!


  83. Chem bought this morning for a doubler but now sitting out cuz i don’t want to give it back.


  84. Problems with Chrysler financing possible -CNBC

    Look out


  85. Bought em back for 4.10…sweet!


  86. AMZN – yes 2X each, sorry crazy at the moment but I’m playing for a meltdown right now.

    FXI in a massive drop after a very silly gap up too expensive to play but very bad news if they fall below $138.

    PTR coming down nicely already.


  87. Don’t think 1500 will hold, 1490 good entry point possibly?


  88. Chrysler – I said when the M&As start to unwind it is time to be all cash or short the market – this is that time!!! XXX


  89. TSO finally finally below 50!!

    VLO falling much faster.

    What the heck happened to X.

    GOOG falling, I guess the low on friday was around 507, so we break that then it could see 500 soon.


  90. Happy-
    Gold slides in NY as carry trade unwinds, dlr up
    Wed Jul 25, 2007 10:15AM EDT
    Email | Print | Digg | Reprints | Single Page [-] Text [+] Market News
    Boeing reports profit, raises outlook, shares up
    Stocks up on Boeing, Amazon.com; housing eyed
    Oil slips as U.S. refinery fuel output seen higher
    More Business & Investing News… Featured Broker sponsored link
    Power. Price. Service. No Compromises. NEW YORK, July 25 (Reuters) – Heavy sales related to a
    rebounding dollar and the unwinding of yen carry trades sent
    U.S. gold futures more than 1 percent lower early on Wednesday,
    as investors and gold producers consolidated profits after the
    recent rally. Traders said that gold futures should find support at current
    levels, but Thursday’s August gold option expirations could add
    more volatility to the market. “It’s definitely (because of) a snap back from the euro,” said
    Jonathan Jossen, an independent trader from the COMEX floor. “The yen carry trade was unwound. But there was a big euro
    currency, gold trade that went on last night. They’re selling
    gold and the euro, just taking a profit.” At 9:58 a.m. EDT (1358 GMT), most-active gold for August
    delivery (GCQ7: Quote, Profile, Research) on the COMEX division of the New York
    Mercantile Exchange was down $9.20, or 1.3 percent, at $675.60
    an ounce, dealing between $674.40 and $682.50. Jossen cited yen carry trades — the use of low-yielding yen
    as a cheap source of funds to buy higher-yielding currencies and
    assets, a sharply stronger euro and profit-taking for gold’s
    weakness on Wednesday. Carry traders used gold and silver futures to park their carry
    trade profits, and futures prices usually fell as they closed out
    their long gold positions to unwind riskier carry trade
    positions. Jossen pegged August gold’s support at the current levels. If
    prices fell further, support should be seen at $673, and then
    $671, and $668, he said. He added that a strong oil helped
    stabilize the bullion market. The dollar rose broadly against a basket of currencies on
    Wednesday, rebounding from multiyear lows as investors trimmed
    exposure to risk. Wobbles in stock markets over troubles in the U.S. subprime
    mortgage sector showed signs of subsiding with U.S. stock market
    opened firmer after hefty losses on Tuesday. George Gero, vice president of RBC Capital Markets Global
    Futures in New York, said in a note that there was no evidence of
    central-bank sales yet on Wednesday, but further government sales
    could be possible. Gero said that gold producers were locking in profits as the
    price of gold was currently twice the cost of production. In addition, August gold options are scheduled to expire on
    Thursday. Option expirations added volatility to the market
    because of the interaction of different trading strategies by
    investors.


  91. WNR getting sliced. TSO through $60.

    NBR falling apart now. BJS next


  92. ECOL moving up again finally.


  93. JE – you really know how to hurt a guy. That moron can’t use a phone.


  94. CMED
    I’m not quite sure why this went down so much today. I was just cleaning things out and staying with cash. Just be careful. The market has broken through the levels that I talked about in my post last night.


  95. Transports off a cliff even with declining oil prices. I’m letting the rules dictate what I get out of with Aug and Sept stopping out on 20% of the profit pullbacks (which is most of them). The DIA puts are in great shape again but at this point I’d rather take a fresh look at things in a couple of more day sthan try to “save” things now.

    When you are up 100% and then go down 20%, it is crazy to try to use the 80% to get the 20% back by taking additional risk!


  96. Can someone explain to me what a mattress play means?
    THANKS!


  97. All my oil puts have turned the wrong way at the same time (I know, quit looking at the 5 min. chart).


  98. WNR – awesome call Z – sorry I didnt get a chance to talk to you on the radio!

    BOOM suddenly exploding.

    This is an excellent time to write down (post) anyone you see recovering or holding up well at this point, those are plays we can key on for future growth like GRMN, PEP, EBAY, IBM, INTC, GS coming back…


  99. Don’t get caught by a head fake.

    DCX news is horrible.


  100. Dragon – what is your ratio on your spread for CROX earnings?


  101. nice little headfake going red. . .



  102. Sorry Z! It obviously would have been twice as good if you were also on the line! The thing I liked was that the segment was an actual back and forth discussion and, notwithstanding the tech problems, seemed less scattered/haphazard than when Coffey runs the segment. But I agree — that guy needs training on the phone system. In any event, you and Phil do great work on the oils. I’ve learned so much and after a few hards months of learning the ebbs and flows am finally seeing some green in the space . . . . I can’t thank you enough.


  103. I am tired of thinking that I know what you mean around many of the common terms and stratagies and losing money because I don’t have the full grasp. It’s difficult for me because I learn through hearing (remember everything) rather than reading -so questions that I have that could be anwsered in a short 1 minute conversation have to be placed here- my email address is marathonman@usa.net if it applies to the comments feel free to post here if not please email me directly when good for you..

    What does “short Squeeze mean” what do you look for when does it occur and what’s the best plays around this?

    What is our basic strategy--buying long term out of the money LEAPS and then writing monthly calls against those positions (writing covered calls?) or something similar? I try to follow the trades that Phil/Happy/Z/BBD/OD and others play but it seems as if I miss part despite religously staying on top of them (Chesapeake as an example…in but with only my 20% rule to get out)- I take full responsobility for my trades…and I want to get much much more understanding to make much better positions, in and out entries etc..

    Believe me, any comment or insite that you choose to share with me is much appreaciated…I am fantastic with numbers/analysis/ execution but as stated- I am pretending to “know” and it is a waste of time and money when there are so many experienced people here to learn from…


  104. Should I mention PCU as HOLDING UP! LOL


  105. WNR down 3.5%
    FTO down 6%
    Hoc down 4%
    NBR conf call on now: down 3% here. They’re starting out rehashing old news but I’ll keep you up.

    NFX up on this down energy day. Conf call tomorrow


  106. Thanks much….in advance…Don Nenninger


  107. CHK – If buying now before the earnings next week, which LEAP is better?

    Jan08 35 Call at $2.50 or Jan 37.50 at $1.60?


  108. JE – I was kidding you.;-) I just hate it when Phil gets all the limelight! LOL!


  109. Gold
    thanks, dragon!


  110. marathonman, check out this site: http://www.investopedia.com


  111. FCX, NOV nice buy on the dip. I am trying hard to buy anything esle today


  112. Adding NFX 45s calls here. Big volume there today. Earnings tomorrow.

    USO exploding to upsdie now. Anyone see anything?


  113. Hi Phil,
    a few days ago you suggested a ‘VIX-play’.

    I thought this was a very good idea, so I bought the Feb’08 $15s for 4.20 and sold Aug $18s for 1.25 against them (VIX has been at 17 at the time).
    So yesterday VIX shot up to 19 and I rolled my Aug $18s to the Aug $19s. This roll cost me $0.30 and the Aug $19s are now at 1.20.
    Now do you think this roll has been a good one or should I rather have waited until most of the time value of the sold calls has evaporated?
    Provided you have the time, I would really appreciate if you could give a more specific description on these ‘VIX-plays’. Needless to say that VIX options behave a little different from stock options, so any additional hints are welcome …

    Have a nice day,
    Ricky.


  114. AMAT
    staying very strong through all of this back-and-forth!

    GOOG
    staying above 500 is good for the overall market!


  115. CROX strangle – 2 to 1 overweight long, bullish, usually their best Q, buy Aug55 calls and the aug 40 puts or 45 puts. chart looks bullish and ready to move after earnings on Thursday afternoon. we like DECK too.
    Keep an eye on RTH though since there could be an influence.


  116. Hold XOM puts til conf. call tomorrow or dump before? They’re practically at even (Aug 85′s at .52)


  117. marathonman – bigger questions tend to fit a bit better after the close.. too much to read during the day.. :)

    short squeeze – http://www.investopedia.com/terms/s/shortsqueeze.asp

    strategy – the only common strategy here seems to be there is no common strategy here. Leaps + selling short term calls is good for long term investing in specific stocks. Mattress plays are good for protecting yourself on a bad day/week/month.. there are as many ways into a good trade as a bad one with options.. So be careful, start small, and don’t forget to have fun…


  118. BIDU – nice play Scobe!

    So this is why I work off stops, as soon as I started setting them, the market stopped dropping but I am raising them with every tick up and will be getting the hell out if we fall again. XXX

    BA and MRK are most of the Dows gain.

    CIT is not a good income producer due to high volatility and low(ish) premiums but the ’09 $50s are just $4.95 and you can sell Sept $50s for .65 which won’t make you rich but does make a nice play on the actual stock making a comeback. XXX

    Weclome Rs23! As you can see, I’m not big on adding Aug anything right now, despite this little rebound but INTC is one of the best and will be in good shape if they hold $24.50 but I’d rather see them get through the weekend first. Oct $27.50s are .42 and you can sell $25s, now .42 on a downturn but I want to emphasize that there is nothing good about a recovery in the oil sector leading a market rebound today and there is no data to support the last half hour’s move in oil anyway.

    13,700 has been hanging tough – will 3rd time be a charm?

    Done with oil puts on that turnaround of course. XXX


  119. does anyone have any thoughts on the coal industry?
    btu downgraded


  120. DECK #6 on IBD top100. strangle overweight long 2 to 1. AUG 110 calls and AUG 90 puts. IMO-watching

    CROX short interest is now 58% short. 63 million float. Wow.


  121. Sold AMZN Sep 95s for 2.50 against leaps. Now at ~2.25. Also picked up Sep 85 puts for 4.65 – now 4.80.


  122. I think around 2 – 2:30 p.m we are going to get an idea where this market is headed. . Fell apart yesterday around 2:00 p.m and could very well so the same thing again today. .


  123. VIX – These options are of the European kind (they only exercise at expiration), which makes the time premium expectations slightly different. From playing with the VIX over the past 6 months, what I can say is that the closer to expiration the more the option will fluctuate with changes (which makes longer options feel very sticky and having high inertia before following the VIX).

    As the VIX moves up and down a couple points often these days, you can make money selling short when the VIX is high and covering a few days later while your long VIX barely move. Rolling is only really necessary when you get to expiration time with an elevated VIX and your shorts still around.


  124. xom still leading indicator.


  125. IBM, BA, MRK, HON keeping DOW positive


  126. TOT taking a major dive. RDS.a, BP too, that means Europeans are still dumping oil, not as dumb as American investors! PTR is still a short I like and COP $80 puts are on sale again and, of course, the XLE as any major reporting badly will hurt them.

    BIIB rumored offer from PFE. They are partners with ELN on a couple of drugs and I’m going to take a few ELN Aug $20s at $1.10 just for fun.

    AMZN choices – better is defined by my expectations of price movement, not the option spread. I felt $85 would be the consolidation point so I sold the $85s, it was a bearish call at that spot that would give me the most benefit on the way down. Also, I think support will be found around $75 which makes a reasonable roll or resell for my Oct $85s but is a little far away for the $90s.


  127. IBM
    ATH!!


  128. Lindsay – coal will trade with nat gas so it’s a bit early. I like ANR best of the group.


  129. Thanks Dragon


  130. Any thoughts on BBI would be greatly appreciated.
    Thanks


  131. DO and XOM have earnings tomorrow.
    Thinking about a DO on a techincal buy and strangle.


  132. Phil,
    I did the AAPL spread you described yesterday. Bought Jan ’09 $140 leaps and sold the Aug 140′s against them for debit of $23.83. Are you still good with this play??


  133. Happy says AMAT is holding strong – I got some AMAT.

    Phil says have some mattress index puts for insurance – got those.

    Zman says take some profits on FTO puts – did that.

    Burned myself chasing GLW yesterday so I’m trying to slow down and really listen to the smart guys – Phil, Zman and Happy esp – Z thanks for the FTO puts, almost makes up for the big loss I just took on GLW – just when I start to get cocky, reality comes in and smacks me hard!


  134. Dragon, followed you into FFIV..are you long Crox?


  135. FFIV train about to leave the station.


  136. Taking a wait and see approach to CROX due to market conditions.


  137. BA CC sounded bullish 300 million being added to R&D for the 787… Sep first flight looks like a go…this would be the only negative that could affect stock price (only ?), 787 will be profitable from first plane…. nothing said that would make me think BA wont reach 120 as per Cramer call. HEHE! I think this stock can be traded for the next 3 years without worry (all in the timing).. (the 787 FF has to be on time). Planning to repurchase stock more aggressively in second half of the year due to higher cash flow.


  138. I am a little confused – IF I think oil is going to get crushed in the next 6 months what would be the best way to play it through options?


  139. alfamike, I suffer from the same problem….(“when I start to get cocky, reality comes in and smacks me hard”) and being here for this last year straightened me out…almost =)


  140. Phil- Do you have a longer term play for MRVL? With STX having better demand for disk drives (they are a large customer) and of course the iPhone and the WiFi chips they make for laptops, things are looking better for them. I was thinking Jan08 20 calls. What say you?


  141. NOV- pulled it off the table again.


  142. Call volume way up on NFX 45s , 50s up as well.


  143. GRMN looks really good right now! Looks like a breakout but a breakout without the market is lower probability. Earnings next week. seems to be some earnings positioning and pre run. Their earnings should be stellar.
    Looking at a strangle Aug 90 calls @2.25 overweight 2-3 to 1 with 75 puts.
    CIBC upgrade on GRMN today 79 to 89


  144. aapl – cnbc reports that some twit analyst following appl downgarded the stock yesterday but at same time raised his target price for the stock. talk about covering your a** !!


  145. Highlander…

    Sounds like a basic options hedging technique…I think it’s called an “analyst strangle”. :-)


  146. DCX – it may be possible that they just can’t get financing for Chrysler since it is, in fact, an American car company and this is not a trend but it’s nothing I want to take a chance on.

    The VIX is calming down now pretty consistently going down when the markets go up, indicating up is still the right direction but things seem pretty out of control to me if XOM can go up and down $5Bn in value 3 times in 2 hours.

    BA isn’t doing anywhere near as well as it should.

    The dollar hit 80.66! That’s a hell of a bounce…

    Marothonman, for basic terms try Investopedia, they cover the basics well. Also, Sage has a book under our Education tab which covers a lot of the basic strategies and there are dozens of articles there detailing trades for most of those strategies. Any questions you have after reading through those would certianly be worthy of discussion here (preferably after hours though) and on the weekends I’m sure you will find lots of people happy to go over things in great detail (myself included). If you are having trouble maybe pick one trade you want to make and then we can track it together, preferably something that’s already in the LTP – I just did a reveiw of half of it last week (and I will really try to finish this week!).

    VIX Play – you have to remember that these are proposition bets, there is no underlying stock to deliver so the value is completely arbitrary. I don’t disagree with a .30 roll to gain $1 in posiiton when you are nervous but now you have collected net .95 against the $19s. You have 5 more months to roll and as long as you have a reasonable chance of collecting $1 per month you have nothing to worry about but I will remind you that rule #1 is: “ALWAYS sell into the initial excitement” but that means 1.a is “NEVER buy into the initial excitement” which is what you did when you rolled your guy. If you intend to roll, you have little to lose by being a little bit patient and, if you feel you can’t stand to follow rule #1, that’s why rule #2 is “When in doubt sell (or buy) half.”

    Coal – can’t thrive with nat gas under $7, coal is a great place to jump on if nat gas shoots up as it’s a substitute in electic generation.


  147. anyone have thoughts on NIHD going into earning?
    thanks ,
    marlen


  148. My take on indexes FWIW.
    Market tested 1510, a bit below.
    This market wants to go higher.
    Beige book this afternoon and AAPL are keys to direction IMO.

    If direction is up, move will be big.


  149. Phil,
    SNDK holding up well in the tech arena over the last few days. the ultamate hard drive killer.


  150. wassup w/ GOOG ?


  151. Phil/Mary/all…thanks much, already got more clarity in the last 1/2 hour!


  152. NBR – call was kind of eh. Will continue to hold puts with a stop in place if it decides to rally with oil.


  153. AAPL – Is anyone following the TAG speculation on AAPL discussion boards? Apparently, each phone has a unique IMEI number following in sequence. Some posters suggest that over 1 million phones have been sold & activated since launch date.


  154. Glad to help Don, just ask.


  155. Phil,

    What are you looking for an Amazon response for BA? It’s an old school industrial, I think 3% is pretty good.

    Bryan


  156. Phil, I assume from your BA comment that you are saying hold on to your ITM August calls?

    Jazz


  157. Phil: This really confused me on oil puts. Did you flip from short to cover and back to short in 11 min? Or was XLE not a part of this group? ”

    11:16 am | Permalink Done with oil puts on that turnaround of course. XXX”

    11:27 am | Permalink
    TOT taking a major dive. RDS.a, BP too, that means Europeans are still dumping oil, not as dumb as American investors! PTR is still a short I like and COP $80 puts are on sale again and, of course, the XLE as any major reporting badly will hurt them.


  158. ATI
    down, even with good earnings!

    RTP
    down another 12+ points!!


  159. Anybody like QCOM in advance of earnings this pm?

    Jazz


  160. Phil,

    What do you think of CMG as a pre-earnings play, pulled back to the 80 support level, and short interest sits at 8 day avg trading volume. Reports on the 31st.

    Thanks


  161. Buying an AAPL strangle AUG 150 calls and AUG 125 puts. Starting with AAPL calls @ 2.75.


  162. Phil,
    any thoughts on my aapl spread question post earlier today?


  163. BTK
    up 13+ points today. Good to see the biotechs up!

    LLY/GENZ
    both up pretty big!


  164. XOM – I am adding back puts into earnings. If they miss then $1.75 for the $90 puts will be a real bargain. There is what I consider to be an irrational expectation that they will earn 14% more money despite tha fact that sales are down 1.5% (at least). Now these guys can make their numbers say anything they want them to as they take in $100Bn a quarter in revenues but politically I think they wouldn’t mind a miss this Q as it will carry them all the way through the Summer able to tell Congress how they are just a poor struggling energy company that’s just trying to make a nice return for all the widows and orphans who own the stock. They do have 5% less shares than last year but I think costs are way up. If they miss, it will be a Dow disaster.

    AAPL spread – yes, this is a long-term premium selling play. You are not trying to “win” the short trade, just collect the $9 premium on the $140s, which you will get no matter what happens.

    When GLW and TXN both report disappoinments then buying tech is just plain silly! Don’t forget that Cramer pushed tech like crazy last night so take a lot of those gains with a grain of salt.

    Oil crush – I have XOM ’09 $80 puts that are the same $4.90 as my basis, that’s my long-term oil play. I would have done much better on it if I had sold more puts against them but I kept thinking XOM would go down one day – no luck so far in week 12 of owning them!

    MRVL – they pay a great premium on close calls so the ’09 $20s at $3.15 selling the Sept $20s for .75 is a good way to start, that’s better than 10% a month for holding the ’09s so you can even go with 4:3 ratio and still get 7.5% a month with a nice upside. Again I will stress that I’m not making any positive market plays myself at the moment! We will have to cover the Beige book though as Cap is right, markets want an excuse to go up….

    Analytic Strangle – LOL!

    SNDK – I gave a whole thing on them a couple of days ago. They are a great Long-Term hold also with great volatility to sell against as people don’t understand that chips are just a commodity and SNDK owns all the great reserves.

    GOOG – I’m very sad about that, they can’t get it back in gear but this is the last day that people have to clear margins I think so that could be causing selling pressure.

    BA – 3% is great, that’s why I sold the $105s. I expect them to grind up from here and will continue long on them for the rest of the decade. As to holding Aug calls, watch your premiums, if they start to decay then lighten up.

    Flipping – er pretty much yeah but that’s because I stopped out of my puts on what I considered a BS rally so I scale back into some new puts as they rise. It was actually a pretty good top call on XLE…


  165. BIIB
    breaking out big time!!


  166. QCOM

    Cramer likes them before earnings..so I wouldn’t touch it. He also liked GLW before earnings and didnt like BA or AMZN before earnings. Basically be a contrarian to what he said this earnings period and you would’ve been rich.


  167. CMG good contrarian play but I’ve seen some rising food prices on avocados and chickens. i expect guidance to be muted due to higher food costs which they cannot avoid. PNRA came out with earnings and was downgraded and looks bad. avoid or put a small strangle on bcuz it is really volatile. i might do a 1:1 strangle. Long volatility.


  168. MRVL- Thanks Phil


  169. more money rotating into biotechs?


  170. OIH/NE
    green!


  171. Dragon – what will your eventual ratio be? Thanks for AAPL


  172. Globex futures have been down since 30 minutes after the oil report came out. This rally is on extremely light volume.


  173. Phil,
    I got the SBUX Jan 08 naked. Should I sell covered call now or just leave it for now? Any suggestions?


  174. Phil: SO are you short XLE again – which puts?


  175. LVS moving up


  176. DOW 10 min turning up if it doesnt hit a wall 13780, we may see a decent runup
    CAT, DD, MMM weighing on the DOW


  177. AAPL- 2 to 1 or 3 to 1, looking for a free ride if I can get it.


  178. LVS/WYNN
    breaking out!!


  179. Nice call on WYNN happy!!! strikes again.
    Phil I love your spread plays i usually add them to my LT port.


  180. AAPL- just sold some Aug 150′s at 3 against Sept and OCT


  181. GS/XLF
    making the bounce like I said in my post last night.


  182. WYNN to 105
    LVS to 90
    near-term targets!


  183. Happy on your WYNN call was that a techincal call more less?


  184. Phil, I’m long GLW with 09 and 08 leaps. No cover into these earnings. Bummer. Do you recommend DD or hold and wait it out. Looks like business it great with good long term growth.


  185. From Barron’s 7-23-07:

    “The play here is Las Vegas Sands [LVS]. It is one of six concessionaires, but it is doing so much more in terms of development than anyone else. It is the stock of stocks. This company has the potential to double from the $80 area. Their capital commitment in these two areas is probably in the neighborhood of $7 billion by the time the first stage of development in Macau is finished and the casino in Singapore is finished. They will be able to make asset sales that will essentially reduce their invested capital to below zero. The asset sales consist primarily of shopping malls that are going to be part of the casino convention complex. In 2010, Las Vegas Sands, which is making about $800 million in cash flow now, will probably have cash flow over $2.5 billion and basically much less debt.”


  186. Zman, amazing call on TSO about rebounding from 50! Sold some TSO Aug 47.5 at the high, selling it initial excitement :-)


  187. WYNN/LVS
    near-term targets, technical call? Yes!


  188. WYNN/LVS
    provided that the overall market cooperates, of course! We got shook out yesterday, playing it safe. Just be careful! But, some people really want to drive these higher!


  189. Phil, i see you have some LVS puts. can you recommend some great spreads on LVS and WYNN?
    Thanks!


  190. Hope Happy you are right with WYNN high of 105. I am short 105 calls against my sep 100s from earlier play. Might roll to sep 105s.


  191. Thanks Phil on the explanation for which particular set of AMZN rolls to take.

    Options Calculator – I asked if there were any good ones a while ago and got some useful links, but I’ve decided to put together my own set of Excel tools. I’ve got the first edition (very rudimentary so far) ready and it seems to be working, but I’ll be putting more work into it in the next few months as time allows. Anyone on this board that wants a copy is welcome to it. Anyone that wants to collaborate and work together to make it better is even more welcome.

    Black Scholes formula – This is complex in Excel because I have to calculate it with 3 different formulas that build off each other, and despite my efforts, I haven’t figured out how to tie it into a SINGLE LOOOOOONG formula. Anyone know any other options pricing formulas that perhaps are not as accurate as Black Scholes, but are a bit simpler and come PRETTY CLOSE.???


  192. Thanks MJ 23! People love round numbers. Plus, and I haven’t said this in a while. TSO is A LOT CHEAPER than it was just one month ago at under 9x forward earnings. However, I don’t think we get a V-Shaped recovery for the refiners b/c seasonally they should weaken now and when RBOB goes through $2, which I’d expect soon, the psychological damage can take another 10% out of the Big Caps and 15 to 20% out of the hide of also-rans WNR, FTO, HOC. SUN will continue to suffer a little as well as their margins normally stink and they will return to stink status quicker than most.

    On the TSO, glad it worked, but don’t fall in love with those CALLS.


  193. Dragon

    In a couple of your posts, you’ve mentioned strangles and “long volatility.’ Does this mean you expect vol to rise before selling your position, either before or after the event (or possibly both, closing each leg at the appropriate time)?

    Am I close, or way off base? Any explaination or brief example appreciated. Just trying to grasp the concept.

    thx
    ss


  194. BA
    like Phil said, I also think it has more to go up, if the market conditions are good!


  195. Phil, On your AMZN Oct 90 / Aug 85 play, what is the stop that you recommend for the Aug 85? Hold till August expiration or roll up if stock goes up?


  196. Thanks Z. I meant sold some Aug TSO 47.5 puts against my leap puts when it spiked lower below 50.


  197. OIH -moving higher


  198. EG, I could use your options calculator. Is there a download site?


  199. Phil, any earnings plays for POT tomorrow? August 85′s are still $1.50, 90′s are .85. They were an $85 stock two days ago…


  200. AAPL picking up nicely.

    CMG – they are still up $30 for the year so it’s hard for me to imagine that they are still being underestimated by the markets. Mid-range dining has been a mixed bag and they are losing their novelty appeal with 35% growth expected – not for me.

    Highlander – wasn’t that the leap one I answered earlier?

    ELN – I hope I don’t have to mention that taking a 50% profit off the table in 60 minutes is a good idea on at least 1/2 the position! XXX

    Biotechs are a good hedge fund gamble when their other plays aren’t working.

    SBUX – tough spot to sell, right at $27.50, especially down .50 today. I’d go 1/2 sold on the $27.50s at $1.20 as they have .80 in premium so it’s better than selling the $30s for .32

    XLE – the $72 puts are the best right now at $1.50, I’ve been offering $1 on the $71 puts but no takers. This run up in oil has me interested in the COP $80 puts again as it seems that everyone forgot what a huge nat gas play they are. Once again the NYMEX is being manipulated on the energy report as the front month contract amazingly goes up .89 while they trim 11M barrels off the total open interest and the longer contracts, even as close as Jan, continue to fall:

    http://futures.tradingcharts.com/marketquotes/index.php3?market=CL

    Think about it, if you could buy the GOOG Jan ’09 $0s for $3 less than the Aug ’07 $0s, wouldn’t you be loading up on them unless you thought there was NO WAY that stock was going any higher? These are not options, these are contracts for physical delivery of the product so there is no “premium” here. None of these sophisticated traders who scream $100 oil every time someone points a camera at them, are willing to put down $71 for a barrel that is to be delivered after Dec ’09!!!

    LVS – someone just told me the other day that I backed the wrong horse between LVS and WYNN when I picked it as my top casino play on the 13th on a pretty good bottom call (I know this because it’s on my watch list but I didn’t pull the trigger as I wanted to see if it would hold $80). I still have the puts as they pay a hell of a premium on short sales, currently I have the $85s sold against at $4.40 avg.

    GLW – I’d sell the $25s against the ’08s and keep the ’09s naked. If it comes back you’ll be half happy and if it goes down you’ll only be half miserable (but still with lots of time to recover).


  201. IMF raising global growth projections, may help CAT bounce.


  202. Folks, Any idea what happened to MTW and MON? Seems way down on very little news


  203. EG, look at the Excel option calculator here: http://www.hoadley.net/options/options.htm.

    It’s inexpensive and very thorough. It does Black-Scholes, plus the binomial. It will also do non-log-normal distributions, which are more accurate than the others. I use these tools, and embed the functions in my own spreadsheet.


  204. If any homebuilder bears care to give me their most-in-trouble prediction I would appreciate it.

    I’m looking to add 10 out of the money LEAPs of one builder or another but having trouble pegging one in particular.

    I already have TOL KBH. Looking at LEN MTH BZH … others …


  205. Craig that link goes 404 …


  206. Happy,
    On RTP, I see you are following it. I stuck my toe in this morning on the SEPT 310′s.
    Aside from the markets being down, what is your take on RTP being down?
    It is at its lower BB, its is acquiring, the dollar is up a bit. But PCU is holding steady, as is
    FCX, etc.
    Any thoughts?
    Thanks,
    JB


  207. Bio, just copy and past the link to google. take the “.” off at the very end, and it will get you there.



  208. Hey guys, natural gas explosion in Dallas. Breaking news.


  209. biodieselchris, take the period off the end of the link. I tend to put periods at the end of my sentences, and it got added to the link. Here’s the correct link:

    http://www.hoadley.net/options/options.htm


  210. AMZN – on the sold $85s I expect a correction, there is nothing here that makes me think AMZN is underpriced at $85 in a cold market. My guess is this is a short squeeze that will be followed by profit taking as their p/e approaches 150.

    OIH – that’s the only part of the oil patch I’m still scared to short.


  211. Fish, dont think it was natural gas explosion. Just some welding type shop that carries acetelyne. But it did make some big flames!


  212. biodieselchris,

    It was Prof who gave the tip about buying leap puts on homies and subprimers few months back. Anyways, don’t know if you saw he posted a comment in yesterday’s post. There you go BZH is the answer.

    Copying it here,

    #
    Prof
    Posted July 24, 2007 at 11:58 pm | Permalink

    wow – what a day in the market …

    housing troubles FINALLY coming home to roost now, fully 2 years after the peak of the bubble.

    i still stand by my previous call that bzh will be the first hb to go bk. (still holding jan-09 30 puts purchased back in feb-07 as hedge to falling home equity)

    i’m not sure we won’t see LOWER U.S. interest rates coming — with housing prices crashing, consumers pulling back, and blue chips having nothing better to spend their $ on, than to buy back their own shares.

    if the fed managed to keep rates low for five years of surging home, energy, food and health care prices, who’s to say they can’t cut when spending demand starts lagging?


  213. CMED – There was an article about the currency rate adjustment is going to affect the ultimate conversion of debt to equity. I only skimmed it but the ADS ends up with a bunch of extra shares when it converts.

    http://biz.yahoo.com/prnews/070718/lnw102.html?.v=1


  214. Housing shorts-The SEC formalized its investigation of Beazer Homes (BZH) yesterday.
    OIH-Phil did you just change your mind. LOL


  215. Housing-Two more mortgage lending firms went belly-up and closed their doors yesterday and today bringing the total to 102 for the year. It can get uglier I guess


  216. Sorry for the explosion post – news today is so fear-based and attention-grabbing that it made me jump.

    Speaking of scary, GM is just looking uglier and uglier everyday.


  217. Arindam:

    On MON, the patent office has found all claims of four of their patents invalid.

    http://sev.prnewswire.com/agriculture/20070724/DCTU02224072007-1.html

    That may explain their drop today.


  218. FCX- getting interesting again


  219. Just don’t forget how much the PPT loves GM as its poster child.


  220. BBD

    FCX – where is your entry point? Thanks


  221. BBD -

    Where are you thinking of getting back in FCX?

    Thanks


  222. RTP
    I’m waiting to see if it finds a bottom here. Metals are weak so be careful. I suspect that some money is being rotated into biotechs.


  223. POT – “they were an $85 stock two days ago.” I love that logic! They were also a $50 stock two weeks before last earnings and were a $30 stock 12 months ago. The only play I would make on these guys is a strangle but the options are really expensive but they move a loot so perhaps the $75 puts with the $80 calls for about $5.50 but you need a pretty good move to cash in. I guess if you are bullish you can spend the same amount of money on a 4:3 play with the Sept $76.62s at $5.65 against the $75s for $4.70. If their earnings are in the morning you might to well to pick up the Septs first and hope for a little run into the close but I’d make sure they hold $76.15 before I put a dime on the plus side.

    Builders – find the ones that expanded most agressively in ’05, ’06, especially ones where long-term investments or inventory (land) shot up on the balance sheet (or you can go to the 10Qs for the real numbers). Anyone who bought a lot of land prior to June of last year is known as a bagholder and if that hasn’t been written down yet – that would be your jackpot. TOL is one that comes to mind as “Inventorty” is up from $4Bn in ’04 to $6.1Bn while “Long-Term Investments” have grown to $430M from $200M with no write down that I see. I know they are already down 60% which is why I don’t play them short but that’s the kind of thing I look for.

    Gas explosion, pipeling rupture – funny how all this stuff happens on down days isn’t it?


  224. 13680.. markets held…i suspect the markets are waiting for the Fed’s Beige Book…. will be released at 2 p.m. Eastern…the market holding makes me think we may recover this afternoon.


  225. From Seeking Alpha – Sorry if it’s already been posted

    Jazz

    RBC Capital comments on Apple (NASDAQ:AAPL) saying their channel checks suggest sustained iPhone momentum. Current checks at Apple and AT&T (NYSE:T) retail stores in major US cities suggests, contrary to concerns, iPhone demand/sales momentum remains steady, following the huge initial surge in iPhone sales on the first weekend of its launch. Replenishments appear to have restored Apple store iPhone inventory to 90%+, and checks show AT&T stores have stock. Early activation issues appear largely resolved and returns appear to have been minimal to date.

    AT&T Reported 146k Activations Q2, implying sales only slightly light to RBC’s 450-500k Q3 Sell-in Estimate. AT&T reported 146k iPhone activations Q2 (June 29 and 30). However, this may not reflect Apple’s true Q3 sales, as AT&T excludes iPhone buyers who experienced activation delays (up to 40% – 50% of est. buyers), as well as additional units sold but not activated until after the weekend, as well as those purchased for gifts, and non-US buyers. Incorporating these factors suggests Apple may have sold 350-450k iPhones to users the first weekend.

    Given Apple will report iPhone sell-in Q3 (i.e. sell-in to AT&T, sell-through online and Apple stores), Apple may report 400-500k iPhones sold Q3 (2 days ended June 30).

    They would accumulate the stock; expect Apple to resolve the connectivity/pricing issues and subsequently reinvigorate iPhone sales through new launches at attractive pricing and faster network technology; as well, they expect subsequent Mac/ iPhone momentum to overcome margin concerns.

    Notablecalls: RBC’s comments regarding AT&T yesterday excluding iPhone buyers who experienced activation delays from their iPhone numbers make sense. I suspect these comments will generate some covering/buy interest in AAPL stock early on but I’m not entirely convinced it’s enough to generate a meaningful bounce today ahead of earnings.


  226. JBL- I will look at it again at $91 like last time. But Fidelity is giving bad quotes today and I stayed out much to late last night so I am a little slow. Never saw it below $90 earlier today


  227. BBD – thanks and supposedly at some point today it hit 89.14, and the current ask is 91.92.

    oil 75.28 +1.73


  228. BZH – if Prof says so I back that! He’s been on the money on these guys since ’05!

    GM – looking beautiful to my Jan puts!

    MON – also the general wash out of $75 oil affects the biofuel mania that’s driven these guys to record highs. Seriously guys, here’s a dull old company that goes from $10 to $20 between 2000 and 2005 and is now trading at $70 – does nobody think that might be a problem??? BG is the same thing, so is ADM… it’s a fad, farming is COOL this year but these are companies that have a historic p/e of 8 and MON is trading in the 30s. Unless they are curing cancer now, I don’t see where they can cover it. Plus agriculture was the thorn in DD’s side on this earnings report.


  229. VIX and VXN above 19 now!

    VXN used to be a bit higher than VIX, but not much difference in the two.


  230. aapl. I have not heard anyone mention the interview Jobs gave with T boss some time ago that mentioned that they have iphones in test with potentail corporate customers. If news is given on that in CC this could really chnage momo.


  231. Dragon
    re: earlier volatility question

    Reviewed your reply to Karm on the subject in yesterday’s comments. That helped make it a “little” less foggy. I still need to work on it to completely clear the picture…..

    The knowledge in this group is unbelievable!! Thanks to all for sharing.

    ss


  232. DIA – I’m scaling into DIA $137s ahead of the BB and I expect to get a signal THE SECOND it comes out, well before any human being could possibly read it. If THEY are going to take the markets up, they don’t give a damn what the book actually says, it’s just the excuse of the moment. I’m already well layered to the short side and will be able to ease out of those once I’m covered. XXX


  233. I am thinking of nibbling some GOOG calls here, 505 to 507 seems like a good support area.

    ICE and NMX getting raped again.


  234. JBL- thanks on the oil update! What is causing the spike today. Thought inventory was bearish.
    NOV- sold sept way early.


  235. VIX is still up on every down Dow move, still indicating sellers are wrong.

    I’m actually watching the 1 min chart on DIA – very exciting! 8-)


  236. $10KP turned positive thanks to FWLT! Can’t be greedy, need to keep tight stops (.50 tstop) on the Aug $115 puts and $9 stop on the Nov $110 puts as that position has been a nightmare we’ll be glad to be rid of. XXX


  237. AMZN- its more of an operating margins story. IMO


  238. PFE
    I’m still holding the SEP27.50s (c/b=0.26, now 0.05). To salvage something out of this one, I was planning to sell the AUG25 (0.30). I think PFE is going to hang in the 24.50-25.00 range for a while and anything below 25.25 leaves me just about right where I am today. Thoughts ?


  239. DIA – here it goes!


  240. Phil, we will memorialize that post, that you are watching a 1-minute chart!


  241. LOL! I forgot I was looking at the 1 min chart – I dont’ know how you people can stand those things!


  242. MJ23. Ah, even better. Still, I wouldn’t fall in love with the long side on TSO as this oil move looks contrived.

    NFX moving up again and call volume is stout!

    WNR giving another opportunity to short.


  243. 1 min chart – That is so true! I graduated to the 10 min charts about a month ago after months of 5 min charts… Everything is so much more peaceful at 10 min. and I can switch to other intervals when I want to see the micro picture of something.


  244. AAPL – bought back my puts I sold yesterday, for quick 25% gain. Not holding any options on AAPL ahead of earnings, tho I own a few shares. My timing was less good on puts I sold on DRYS this a.m., which resulted in a nice % loss.


  245. NOW its going 2.5% growth. Consumer spending light due to high gas prices. CapEx on upswing. Residential construction down, lending down, wages under control…

    NY says job gains.

    That’s it guys, this is very mediocre and no one is buying so we’re off for another test of 13,700 but I’d say we’re going down…


  246. Hmmm… not much effect at 2pm, was the release delayed or are people actually reading it?!
    Oh… we’re going down now?!
    What!? :)


  247. Banks wont make as much money, wage pressure not seen as a threat to inflation,
    gas and food seen as only question mark.

    Lets see how low they take it before they bring it back


  248. LVS:

    Phil, I was the person who commented on LVS vs. WYNN. I commented that Juliet
    had just stated that she owned WYNN, not LVS, and it was WYNN that was moving
    up at that time. I didn’t say you picked the wrong one. I hold leaps on both.


  249. silentstudent- Playing for volatility is relative to how much volatility is expected. I’ve noticed after the options explosion in retail that volatility is sometimes already gamed in the options with high premiums so it is still about picking the right stocks at the right time with the right strikes.


  250. By the way, Ken Heebner is heavy in LVS. He’s a pretty good
    stock picker.


  251. PPT we desperately need you :-)


  252. albo- I agree with you on Heebner. He also played the housing market like a champ


  253. That Chrylser deal is just plain nuts…i wouldnt invest $5 in any of the Auto makers.

    Goes to show how wreck less the banks are with cheap money, i think the mess that’s brewing will become an even bigger mess, and we can thank the Fed. I guess when the Shi’ite hits the fan it will cleanse the system and we can start with a clean slate, but it wont be cheap.


  254. USO new highs for the day. May be it really liked something from the Beige book.


  255. And I hope it is Sunni’er rather than later!


  256. CAL tanking.

    PFE – it’s a good strategy but I’d DD at .05 and sell the $25s so I don’t get totally murdered on a run although you could also take the $25s yourself and sell the $22.50s on downward momentum and get out as soon as you make .50 but that’s very tricky. I guess I would Triple down at .05 and sell 1X the $25s for .30 and hold the other 2/3 for a scaling in at .60 and $1 if it has a run so your average sale would end up around .63 which is quite a bit higher than they’ve been since earnings.

    Keep in mind that the Beige book is the Fed’s positive spin on the economy. Still 13,700 is proving very tough!

    LVS – ok Albo, I feel better then!


  257. Phil, Does gold go down any more from here or is this a bottom?


  258. XOM day highs.


  259. NOV- $120 baby


  260. Bill- NOV was good, now FCX?
    Erin is looking smokin today.


  261. Phil,
    on the aapl spread what do you mean that i get to keep the $9 premium regardless of what happens?

    ************************************************************************

    AAPL spread – yes, this is a long-term premium selling play. You are not trying to “win” the short trade, just collect the $9 premium on the $140s, which you will get no matter what happens.


  262. Well I might be wrong, I think people are looking at the BB as not so bad and that’s good enough for them… DIA $138s at $2 so I’m buying them as a cover while I sort this out. XXX


  263. crude goes higher, and the market follows! PPT should probably buy USO or crude contracts rather than GM. :-)


  264. TOT $80 puts at $2 are a nice upside mo play if that sector is coming back. XXX

    BP $70s at $2.77 have very low premium for a good mover but I’d like to see them break $72.50 so I’m pre rolling to the $75s for .35 XX


  265. I bought a AMZN spread as well buying the OCT 100 and selling the Aug 85


  266. FCX- I am not worried about these guys! Rev 4x Earnings 3x that is a company I want. Ditto PCU. 2 day supply of copper in LME. With 2 guys holding warrants for 137%.
    ERIN- wish I could see but this might be a rally, when she gets dolled up we go up.But still can’t match the women in Colombia LOL


  267. BP – I meant they need to break $72.50 first!


  268. bilbigd — can you expand on your comments about lme copper,


  269. NOV running like the boogie man is after him.


  270. Gold – huge overreaction to a weak dollar bounce. I think gold traders must watch the dollar’s 1 min chart…

    AAPL – you have a leap so you want it to go up. Your caller is paying you $6 (about) to be $3 (about ) out of the money so that’s a $9 premium to your position (you are paying nothing more to sit tight). If the stock stays flat, you get $6, of course but even if the stock goes up $3, you still get $6. If the stock goes up $9, you give your caller back his $6 but you gained $9 in position – that’s all you ever want to do. It’s not about winning, it’s about mitigating your risk on a long call while you wait for the stock to grow into your target price. Anything else should be viewed as a bonus.

    LOL – that 1 min chart really does make you panic! I’m getting back to my first instinct which is get to cash (other than Oct+ plays) and wait a few days to see what happens. XXX


  271. BBD/Dragon:

    What month/strike are you guys looking at for FCX?

    Thanks.


  272. FFIV IV getting a strong pump before earnings.


  273. AAPL movement


  274. JPL,

    PCLN – looks like they finally found the bottom today, but the chart still doesn’t look all that great (MACD still negative and they’re below their 20ema). If you want to try a spread, I currently have the Jan70s with Aug65s sold against. Decent premium with a few more months to sell calls.


  275. FCX wait and see for me but watching the AUg 95 calls for 3 or a spread of buying the sept 100 and selling the Aug 100


  276. Fully strangled FFIV and AAPL going into earnings


  277. CAT – looking better n better for Leaps
    TASR – Getting back into Leaps here as well.
    BNI – Let it blow off a litttle more than get Leaps
    OIH – If it drops below 185 again, I’ll take the calls


  278. CCJ – Phil, what’s your latest thoughts on CCJ from a position adjustment perspective, still roll to Jan’09 50s or maybe lower strike. Thanks.


  279. optiondragon – FFIV, what’d you take on the put side and are you equal weight or overweight on the call side? Thanks.


  280. FCX- optiondragon has more game than me. I hold Nov 95′s and have traded the Aug 95 today but bought the Sept 95 on that last smackdown.
    NOV-$123


  281. Thanks, Dragon…..actually, I nibbled on Sept 105…hope it works out for all.


  282. Dragon,

    FFIV- would you hold naked long into earnings ? What’s the chance of a beat ie. JNPR or is that priced?


  283. I bought my puts for 1.70 AUG 75 puts. IV increasing both puts and calls, I could sell both right now for 20% gain.
    I am overweight long 3 to 1, dollar ratio.
    CTXS and JNPR are my analytic edge on earnings. Volatility is also my edge. High probability, gotta go with my gut and analysis. Its also a bit safer since we are not in opex week.
    IMO it is going to fly.


  284. phil,
    would you please clarify what the AAPL position is you are discussing? i can’t seem to locate the beginning of that conversation thread and wish to understand it better.
    thanks in advance


  285. FFIV naked, better to be safe than sorry. What a little insurance? Buy some puts, you drive around with insurance I hope.


  286. Some complex AAPL plays from an option pundit:

    # Buy 120 Put calendar and 150 Aug/Sept Call calendars for 1.20 and 1.75 per spread. respectivley. This trade is interesting as break-even points are 113 and 166 (a $53 movement!!!!). As of this writing, Apple is trading at $136.5 that gives me about $30 coverage on the high side and about $23 on the lower side. Easily able to accomodate > 15% fluctuation. Maximum profit points are $120 and $150. winning-trade_11.jpg
    # In addition to the above trade, also buy 115 Aug/Sept put calendar and 155 Aug/Sept call calendar. This widens breakeven points to $109 and $171 i.e. move of about 20%.


  287. optiondragon – thanks for the FFIV strangle details. following you on this play.


  288. WFMI – low for the year.

    Thank goodness the NYMEX isn’t a sham or I’d be suspicious that the Nov contract shot up from $73.40 to $74.50 EXACTLY right before the close: http://futures.tradingcharts.com/intraday/CLX7

    Or I might think is was odd that the October contract jumped up a dollar in afternoon trading to hit $75 to the penny: http://futures.tradingcharts.com/intraday/CLV7

    At least we can be certain that the September jump from $74.40 to $75.55 after lunch was simply the result of entusiastic buying since they added an extra nickel so it doesn’t look funny as that’s the quote that prints: http://futures.tradingcharts.com/marketquotes/index.php3?market=CL

    CCJ – I settled on 40 open Jan $42.50s and 40 Sept $50s at $1.20 which I sold Aug $50s against for $1.75. I’m hoping to claw back some of my losses while I wait to it to pop and, if it pops early, I’m half covered.

    At least I’m in tune with the market. I couldn’t decide what to do and neither can the market but take out BA’s gain and we broke through all resistance today…

    AAPL – I don’t even know which one it was anymore! I have too many myself and it’s hard enough watching those…

    UAUA tanking and they had good earnings yesterday. Once again the oil crooks are wrecking the broader market.


  289. Thanks Dragon


  290. bye bye FFIv


  291. great buy on fcx


  292. FFIV – that’s just great!


  293. TXT $120s for $3.30 make a nice mo play..


  294. And the VIX is dropping off fast as the Dow flies up.


  295. LMAO they just showed a CAT backhoe and oil shooting out of a pipe in the road in Canada, would hate to be the engineer on that job


  296. Thanks Phil, looking for a 5 bagger on FFIV calls.


  297. AAPL – Going into earnings I’m 2:3 bullish call spreads 135′s against various lower strike OCT and JAN, leaving me with 1/3rd unhedged calls for upwards mobility. But I’m thinking of protecting these with a few AUG puts…

    What would be a good choice? I’m thinking slightly OTM 130-135′s, hoping to pick them up on a pre-earning excitement run in the next hour.

    Thoughts anyone?


  298. Wow, talk about gunning the market at 3 pm.


  299. Remember the free ride I talked about?
    Those holding naked or are too overweight this is your stop before the ride begins.
    Cost avg out and get a free ride by taking out your risk capital at 1.50-2.00. its probably going to double to 3.00 and you can take half off.


  300. 100% gain before the gates open.


  301. HOLY PENNY STOCK, BATMAN ! ! !

    Out of BSEG with almost 30% profit ! ! !
    THANKS, Phil that was fun !


  302. NFX!!!

    call volume big on the 45s,50s and accelerating in the $55 which would be a big stretch for anything they could say on the call.


  303. Phil,
    TASR – I got a naked leap. Should I wait to cover since the stock is quite low now?


  304. dragon; don’t be fooled. AMZN’s margins still suck. This is a short squeeze, tightly controlled float. That is the only reason it is at 85, which is still 100x + PE.


  305. phil, or anyone,
    which AAPL combinations would explain this statement:

    AAPL – you have a leap so you want it to go up. Your caller is paying you $6 (about) to be $3 (about ) out of the money so that’s a $9 premium to your position (you are paying nothing more to sit tight). If the stock stays flat, you get $6, of course but even if the stock goes up $3, you still get $6. If the stock goes up $9, you give your caller back his $6 but you gained $9 in position – that’s all you ever want to do. It’s not about winning, it’s about mitigating your risk on a long call while you wait for the stock to grow into your target price. Anything else should be viewed as a bonus.

    it is impossible to understand in the abstract, and i’m trying oh so hard here….
    thanks again, in advance!


  306. CAP- I agree with you on AMZN. But laugh to the bank on it today. I’ll look at it again in 3 months LOL


  307. Windy – Looks like it might have been the AUG 140 calls (now ~$7 and ~$2 out of the money) against any longer call.


  308. NEM FCX
    On the gold front, yesterday briefing had a long two part piece saying they were bullish gold long term, citing several factors, seasonality, technicals, the dollar, etc.
    Went on to say the two best single way to play it was NEM, for the reasons Phil said 10 day ago, becoming unhedged, and FCX.
    JB


  309. windywheel – here you go from earlier this morning

    Highlander
    Posted July 25, 2007 at 11:35 am | Permalink
    Phil,
    I did the AAPL spread you described yesterday. Bought Jan ‘09 $140 leaps and sold the Aug 140’s against them for debit of $23.83. Are you still good with this play??


  310. ZMan
    Are you still holding BJS puts?


  311. BIDU earnings after the close….up almost $10 now! strike 280 short calls offer $1.15 :-)


  312. Cap, they have no more infrastructure costs. Its pure profit. Now they are leveraging their infrastrucure for additional revenue streams. I have some Harvard computer friends who love the search engine if you think thats weird. They are a international retailer and partly own and are directing the largest online company in China- Joyo (i think thats the name). 500 million young chinese consumers.
    I value them on future cash flows discounted and compared to retailers. ESTimations are for beats so how many beats and extra EPS, maybe thats not how they used to do it just thinking outside the box.
    Phil is long term bullish and short term bearish is all!! LOL
    Cramer was just talking about how much emails he’s getting for being that way!


  313. FCX --

    OK, after much studying (without necessarily all that much comprehension or retention), I’m stepping my first toes into a calendar spread. I’ve got the Sept 105s long @ 2.75, against which I’ve sold the Aug 105s for 1.10. Does this sound reasonable, or do I have it all futzed up?

    Thank you to whomever can set me straight.


  314. _fab and kc,
    thanks very much!


  315. I keep saying PHIL and Cramer are more alike than Phil wants to admit.


  316. Here is a summary of the market

    Steve Liesman

    The market could be in trouble because there is an increasing risk premium and borrowing costs are going up enough to prohibit new deals

    Dylan Rattigan

    So what, there a tons and tons of pettrodollars waiting to buy dollar denominated chocolate covered feces.

    I am paraphrasing of course but not by much.
    Anyway, it is never boring.

    Party on.


  317. AAPL – I have the $135 puts – I figure if it goes down, it goes down hard.

    S&P needs 1,520 to make this thing real. Dow needs to get back to 13,850 to make up 1/2 its losses for the week. Nasdaq needs to retake 2,675 to catch Friday’s low or yesterday’s open but still way below Monday’s high of 2,705, which itself was pretty far down from the 2,720 close on the 19th.

    I hate to be the grouch but I really don’t think much of this movement and everyone else seems to be buying like crazy so I’ll take the contrary position for the day…

    Apple might still save the markets with spectacular numbers that put them well over $150 as it’s a great consumer story. BUD just released great numbers but I’m not sure if it’s good that people are drinking heavily.

    BIDU is after the bell and if that doesn’t save GOOG nothing will. ETFC could go either way, FFIV everyone seems to be betting on. IRBT will be interesting, WFR will move the SOX, NFX should be good, PHM could be another disaster along with RYL, SYMC is important and ZMH will move their sector.

    Tomorrow we have MMM, APA, AZN, BZH (Danger Will Robinson!), BDX, BDK (big consumer indicator), BBI (probably trouble), BMY, BC (are people buying boats?), CELG, CMCSA, CMI (put up or else), DO, DOW, ELN (I’ll keep my half), XOM (I’m back in the $90 puts), F (LOL), GT (prob bad), HTZ, ICE, K (butter), LLL, LVLT, ORI (title insurance), PENN, POT, RTN (guns), SU, TDW, XMSR – all before you can make a bet! Yep, cash for me thanks…


  318. Options Sage

    Jeez, the Bidu short call seems to be like free money to me.


  319. Bearish engulfing candlestick forming today on the markets. . Yuck. .


  320. Jaf – yes and the NBR ones.


  321. sorry,
    Jaffy – still holding the BJS and the NBR puts


  322. Amazing how well this market is orchestrated.


  323. dday97 i am not a fan of naked calls in general but i missed $0.70 on apple 200s a few days ago so i can’t refuse this $1.15 $100 out of the money


  324. EDU-nice little comeback off the canvas today.


  325. implied volatility is 101 on that 280 option


  326. OptionSage,

    I’m very rarely on naked calls. I got some for 1.10. Even if they get a pop isn’t the premium for the 100 OTM kinda ridiculous? I think so too.


  327. KC,

    Thanks for the feedback on PCLN – I have some issues with CCJ at the moment…Thanks again


  328. Matrix, no way, its a spinning top usually indicating a reversal of current trend.


  329. optiondragon, thanks. you’re right.


  330. GS
    203+!! nice!


  331. Dragon, we can agree to disagree on AMZN. All the stuff you mention is overdone, including AMZN’s stake in Joyo, which is an insignificant player in China. Clicking on all cylinders, AMZN will still make less than a buck in EPS with crappy margins. Where is the earnings growth going to come from ? They didn’t even beat, just upped revenue guidance by 50 million.

    Its a controlled stock baby, that’s it. Put a normal float on it and its Ebay.


  332. Sage

    The margin requirement is about $27880 per contract !!!!!!!

    Edro


  333. BBD congrats.

    Would love to understand how you do it !


  334. FFIV- wow, that was quick…


  335. JPL – no problem. I think many of us have issues with CCJ currently, sigh.

    Phil – speaking of which, thanks for the reply. With today’s move, I ended up taking the Jan45s instead, hoping for further price movement before dumping my 55s and selling covers.


  336. BSEG – I’m still holding: http://biz.yahoo.com/bw/070719/20070719005240.html?.v=1

    TASR – IRBT may be saying something that moves them tomorrow as they are arming with Tasers for some army thing. It’s hard to sell down here but you don’t want to let .88 for the $15s get away from you so this is doubt and we sell half!

    AAPL – I was just talking about the fact that the $140, now $6.50 is $2.50 out of the money so the premium is $9 against the leap. I took these this afternoon (thanks Highlander) in a 4/3 spread. The Jan ’09 $140 calls came in at $29.20 and I reduced my basis to $23.40 on my first sale with no margin issue. If the stock flies up I simply roll it to the next guy who will pay me a $5 premium. If I collect a $5 premium (cash+position) every month for 18 months I will get $80 against my $23.40 investment but it will probably go down one day so I won’t count on it but I will count on having an excellent chance of getting at least the $1.50 per month I need to get me even in virtually any circumstance.

    BIDU – I guess I should have held those calls for more than $2 yesterday!

    AMZN – I think they are great too long term, just a little overdone at the moment.

    Choc covered feces – meanwhile Dylan gets an hour show to shovel his crap and Steve is a fleeting spot.

    Pisani is again the voice of reason, infrastructure, steel, etc is down and energy is driving the market which is making the brokers happy – big friggin deal!


  337. AAPL/GL folks


  338. Okay, gonna go get a cocktail to watch this. C’mon Steve – make my day.


  339. AAPL – Wild Turkey and Coke for me!


  340. oof


  341. BSEG

    I never put much into penny stocks, but I did make enough to take my wife
    to the Inn at Little Washington ! Thanks again.


  342. Straight up phil, don’t ruin it with coke :)


  343. wfr – moving up alot after hours
    may have announced?


  344. Pastis for me…good for the stomach for mkts like this week


  345. Actually I like Connamera…nothing like an Irish Whiskey.


  346. Dont see any news yet


  347. WFR

    4:06 pm MEMC Electronic Q2 net earns 70c vs 36c Marketwatch
    4:01 pm Memc Elec Materials 2Q Sales $472.7M Vs $370.5M, +28% >WFR Dow Jones Newswires
    4:01 pm Memc Elec Materials 2Q EPS 70c Vs EPS 36c >WFR Dow Jones Newswires


  348. massage and then cocktails para mi


  349. My VIX leaps (nov $13s) LOST .40 today! Go figure…

    DDay – I’m not my Grandfather yet! From the time I was 8 years old he used to get mad at me if I wouldn’t have a shot of whiskey with him before bed…

    WFR added to the S&P!!!
    Summary of second quarter results:
    — Net sales of $472.7 million
    — Gross margin of $245.6 million (52.0% of net sales)
    — Operating income of $207.3 million (43.9% of net sales)
    — Cash and short-term investment balances of $995.7 million
    — Share repurchase program implemented
    — MEMC added to S&P 500 Index


  350. Dang my ticker went down, where else can you get AH quotes that isn’t delayed 15 minutes?


  351. LOL Phil,

    When I was that age my Grandpa used to make me chew Red Man with him when we went spear fishing. Ahh, the good ‘ol days.


  352. Stick to the rocks Phil, havent you heard? Drinking soda will kill ya!!
    Sounds like most are well hedged, surprised Rein hasnt chimed in.


  353. FFIV – .47 vs .41 (L/Y) and 2-1 stock split.


  354. Wow, I had to check, all naked thank goodness! That could have been a painful cover on WFR…

    AAPL moving up nicely. I don’t see earnings yet but they are flying.


  355. AAPL poppin, somebody knows something


  356. aapl climbing, anyone see news?


  357. Congrats all WFR holders.


  358. AAPL’s bid is about $4 higher than their ask after hours
    i never saw that before!
    did anyone else?


  359. WFR

    You went naked into earnings? So unlike you.


  360. WSJ thinks they know something, page one story: http://online.wsj.com/article/SB118532502435077009.html?mod=yahoo_hs&ru=yahoo

    FFIV – something wasn’t good, they flew down…


  361. Appl initially hit $143 now under $140


  362. WFR moving in the right direction


  363. gl w/ AAPL all …


  364. When I was that age, my Grandpa was taking me to the pits in the Board of Trade to watch everyone yell at each other (just like Trading Places). You’d think that would have given me some genetic predisposition to trading. Unfortunately, I only got the math skills, not the judgment. Very dangerous combination.


  365. Phil --

    Thanks a squillion for WFR!!!


  366. WFR – I had moved the bulk of my position to the Jan 10 $70s as my logic was that rather than hedge it, I would spend the money on length that would insulate me from a drop (and if they dropped I would have rolled down to the $60s for little more than it would have cost me to roll out to the $60s in the first place). I left 10 Jan $60s naked as a “risk” but it’s $25K safe(ish) to $6K at risk.


  367. Wild Turkey and Coke – don’t forget that a soda a day can … ;-)


  368. May need another bottle of East Chicago Muscatel…. AAPL up, then down, then up… WTF? Probably should have hedged more… oh man.


  369. SYMC – up 10% AH!


  370. FFIV

    Not seeing anything wrong here, everything looked pretty good. Someone see something I don’t


  371. WFR: UBS will find something negative in WFR’s earnings and/or its channel checks on or just right before August 17th.

    Jazz


  372. ETrade did well despite sucking as a service. Bodes well for their competition.

    IRBT kicked ass, sorry I let those go.

    SYMC up 10% already. Good sign for Nas. low profits but better than expected.

    AAPL looking to be the grand finale?


  373. Also AKAM, revenue up 52% vs. L/Y; EPS of .12 vs. .07—shares down 4.5%!! The market is tough on this earnings season.


  374. WFR – oh no doubt! NOW we can sell calls. This stock is one of the best in the market at wiping out short-term optionholders. I hope joining the S&P doesn’t mellow them but it sure didn’t calm GOOG down.

    AAPL mounting another newsless run.


  375. FFIV – maybe they “missed” revenue by .28 M? 132.4M vs 132.68M (avg estimate)


  376. Jobs likes the attention, basically let all the riff raff announce so I can get on the stage.


  377. QCOM not bad considering the challenges they faced this year.


  378. Ravi,

    Yeah my whole trading system went down before I could do my skim. No real time news, AH quotes…nothing. Thanks for the numbers.


  379. Holy shit bidu poped


  380. Ok, got some stuff back up and running…was AAPL halted?


  381. BIDU beats 5% rev, 10% eps. $220


  382. BIDU $220!!


  383. BIDU at 215


  384. AAPL 92cents vs 72 est ?? wow


  385. WFR – unfortunately, for me, I was fulling covered on WFR – short Aug 60s @ 2.75. I am long Aug 65 and Oct 65. Those should get a nice pop in the morning. I’m just hoping I can get out of the aug 65/60 close to even tomorrow. I’ll worry about the Oct65/aug60 later. They definitely won’t expire about 62.75 so I’m not too worried (yet).


  386. FY 07 Second Quarter Results Conference Call
    WHAT: Apple® FY 07 Second Quarter Results Conference Call

    WHERE: Via conference call. The dial-in number for press is: (719) 457-2648

    WHEN: Wednesday, April 25, 2007, 2:00 p.m. PDT/5:00 p.m. EDT

    Edro – BIDU needs to move 55% to be in trouble….according to Optionslam the most movement the stock has had in last 10 reports is 48%….of course there are no guarantees and this is still an aggressive trade.

    http://www.optionslam.com/stock.html?hide_transactions=1&symbol=bidu


  387. Wow, look at BIDU. Up $20+ after-hours.


  388. AAPL 92c vs 72c


  389. no details on i-phone sales to date … “hope to sell 1 mil by end of first full Q” sounds light, no ?


  390. Appl 92c vs 54 c


  391. bidu flying, over 214!!!!!!!!!


  392. GO STEVE!!!


  393. HOLY SMOKES AAPL!!!!!!!!!


  394. APPL with a 20 c beat, dont see anynews on Iphones tho


  395. What’s aapl at? my AH quotes arent moving


  396. AAPL beats by .20!!! ROFL! Analysts are such morons!

    Company hopes to sell 1 millionth IPhone at the end of first Q on the market??? That’s a very strange statement. Guidance is low(ish) and stock is halted…


  397. AAPL halted AH.
    Lack of I phone specifics and very conservative guidance may be a problem here (and a helluva buying oppty if it trades down)…. stock halted.


  398. 20 cents! whoa


  399. Sage-

    Good trade – wound up with a 280/260 bear call spread – margin requirement a lot less for the same free $1.

    Edro


  400. AAPL RE OPENS IN 10 MIN


  401. bidu 0ver 222!!!!


  402. Edro I am set up with portfolio margin and my requirement was $1600 according to Optionsxpress


  403. SPY trading lower … expects AAPL to as well ?


  404. It’s hard to believe conservative guidance when you’re reporting a 20 cent (almost 30%) miss to the conservative side. Supports the hypothesis that Steve always sandbags and over delivers.


  405. It’s hard to believe conservative guidance when you’re reporting a 20 cent (almost 30%) over delivery versus guidance. Supports the hypothesis that Steve always sandbags and over delivers.


  406. Look deeper into AAPL press release:

    iPhone and Related
    Products and Services(6) – – – – 270 5

    Think that means 270K phones sold in the quarter

    (6) Consists of iPhones and Apple-branded and third-party iPhone accessories.


  407. SNDK heading lower A/H, contribute that to AAPL


  408. Mac Sales up 33% at 1.764M, 9.8M IPods (up 21%). $1.2Bn in cash flow on $5.4Bn in sales – very nice!

    BIDU popped?!? Holy understatement BMB! Oh my god, I actually had a bunch of those calls in my hand yesterday and I sold them. 8-(((((((


  409. If Steve was going to split the stock, would they have announced by now? Split would be huge right now.


  410. Sage-

    Good point – I am moving to Optionshouse (from Fidelity) and will apply for portfolio margin there.

    Edro


  411. Me i got scared by the drop and after doubling down on Sep 220′s, i sold Aug’s. Now my gains will suck, but at least i wont lose money…


  412. Look at FFIV … thank god for that strangle!


  413. I see bids of 150 and offers of 127 for AAPL. since its not trading, its HF MM psych job


  414. SAN FRANCISCO (MarketWatch) — Apple Inc. on Wednesday reported a fiscal third-quarter profit of $818 million, or 92 cents a share, compared to $472 million, or 54 cents a share during the same period a year ago. Revenue rose almost 24% to $5.41 billion from last-year’s $4.37 billion. The results topped the estimates of analysts surveyed by Thomson Financial, who forecast Apple to earn 72 cents a share on $5.29 billion in sales. Apple said that it sold 1.76 million Macintosh computers and 9.8 million iPods during the quarter. In a statement, Chief Executive Steve Jobs said the company expects to have sold 1 million iPhones by the end of its fiscal fourth quarter.


  415. BIDU, finally I own an earnings popper. Own shares w/ covereed calls sold … nice.


  416. I told ya, Jobs = major league sandbagger (again)


  417. aapl dropping quite a bit


  418. Will be nice for me if they hover around 135-140..:) get all the option premium from my covers


  419. I think directional AAPL option players are going to be very unhappy.


  420. Where is everyone getting after hours quotes?


  421. AAPL PR – there’re also a couple deferred revenue line items for this quarter

    Deferred revenue-current:
    iPhone and Apple TV $92
    Deferred revenue-non-current:
    iPhone and Apple TV 88

    Anyone know how to properly interpret these figures?


  422. AAPL PR – there’re also a couple deferred revenue line items for this quarter

    Deferred revenue-current:
    iPhone and Apple TV $92M
    Deferred revenue-non-current:
    iPhone and Apple TV $88M

    Anyone know how to properly interpret these figures?


  423. No kidding AAPL down almost $2 something in cc discussing 4th qtr must not be good!


  424. test


  425. so, whats the average some of you are in with FFIV and aapl?


  426. Current deferred will be recog in 1 year or less, non-current = longer than a year and the two together represent the 24 mos period of recog net revenue for both the iPhone and iTV


  427. Edro – effect of implied volatility smile is to cause further out of the money short call option to suffer more on a relative basis than the short call at the lower strike in the bear call. The bear call looks better from a risk perspective should a massive increase occur but without that the short call should suffer from implied volatility crush quicker. Return on margin requirement is 71% – tomorrow we’ll see whether implied volatility crush dominates over stock movement!


  428. AAPL is trying to come back. By now the “disappointing” I-phone forecast is built in. Every other number is great. It’ll be up to the CC. If it stays flat, I’ll be okay. Not as good as if it were to go up, but okay. Have covered short calls and left long calls uncovered, but will be okay by January.


  429. Hi Sage,

    Any guess as to how the AAPL news affects RIMM?


  430. AAPL – I think they are just laughing their asses off as they get people to swallow this nonsense. They shipped 1.7M IPhones, are we really expected to believe they don’t expect to sell more than 1M in Q1?

    270K – that makes more sense and, while obviously the first weekend is a blockbuster. AT and T didn’t hire 2,000 people to sell 100 phones each! As to how many can be sold, RAZR sold 3M a month for 3 years…

    This year ends in September for them and they are trending to $3.75, up from $2.25 last year so I imagine they don’t feel the need to do anything else this year. The CC will be interesting as 28 professional analysts who follow this stock were not even in the neighborhood of earnings (highest estimate was .79). Fine by me, $135 is right on the money for me to take out my callers (too bad I chickened out of my $135 straddle).


  431. Also incl in the current and noncurrent def rev would be the one-time up front fee AAPL is supposedly receiving from T. Will be recog 1/24th per month (same as iphone and itv) Monthly royalty of course is current unless contract says T only pays every 4 mos (any payment longer than one month)


  432. WFR up to almost 62! Making my crappy day now a happy day!


  433. AAPL basically flat now in AH, CC going to be the difference maker for more clear guidance (perhaps)


  434. phil--are those 2,000 folks salary or just commission?


  435. Apple’s insisting on using Quicktime as a conference tool is getting them off to a bad start as something is screwed up and delaying it.



  436. started at 5


  437. Now we’re climbing… Was I right or what?


  438. AAPL Up $3 AH now

    Guess just needed to start the call!


  439. Now Apple’s popping – I’ve got 140 in AH…


  440. Phil,
    The BIDU JAN/AUG $200 spread from earlier will be ITM by approx $20 at the open tomorrow & I guess no premium left on the front month short. Any tips on how to roll??


  441. $143


  442. 2,000 T store sales people are almost certainly salary.

    Oh damn, there it goes! So much for cashing in on both sides!


  443. wow AAPL $143 now.. wouldn’t it be fun to trade options AH


  444. DAMN selling those BIDU 280 calls requires ginormous margin. Thank you Option Sage. Hope it does not go close to 280!

    GO AAPL!!!!!!!!!


  445. looks like AAPL might run tomorrow. Going to be good for the NAZ.


  446. BIDU – let’s worry about it when we see where they really open. Best is if you can afford to take a $5-10 hit and roll them higher.

    So they reiterate goal of selling 10M Iphones in 18 months but will only sell 1M phones in the first 3? They are purposely fudging IPhone and ITV revenues together as I very much doubt that ITV accounts for much of that $180M in deferred revenue. Meanwhile, if they are deferring $180M in revenue from AT&T and they only sold 170K phones, isn’t that $1,000 per phone???


  447. Sage

    BIDU 280/260 bear call

    My hope is that the IV crush drives both positions worthless – same as expiration. Then I keep the $1.

    Edro


  448. WoW,
    unless my math is wrong aapl will soon overtake dell in pc unit sales and with a much higher asp. they are now around 74% of dell unit volume.


  449. AAPL, The numbers are skewed because the end of the quarter was saturday night, no sunday sales which were next quarter sales


  450. 270k phones, not 170k phones. But AAPL wouldn’t have received any bounties in the last quarter, so it’s not reflected yet.

    reinharden


  451. $5M revs per store per quarter – nice!!!

    9,000 customers per store per week!

    $5.7Bn next Q vs $4.8Bn last year that’s up 6%. These guys are just making so much money they have to defer it or Hillary will want to take their money!


  452. BIDU

    Not worried in the least about my naked 280. If I have to take a hit like Phil said to roll, so be it.


  453. Phil: they said 270K I phones in the first 30 hours.


  454. AAPL, That should be 450000 for the weekend of the launch. But ALL the stores I went to ATT and Apple were sold out, so something doesn’t make sense.


  455. AAPL $144 AH

    Imagine if these guys actually gave real guidance and answered questions with real answers.. I bet $150?


  456. Are we looking at a spike in T, because of the new numbers?


  457. AAPL, It’s a great shame that they cannot level with shareholders about iPhones sales


  458. AAPL – Real guidance? They guided to $0.72 and made $0.92. If we assume the same ratio, why wouldn’t the stock be 27% higher? ;-)

    reinharden


  459. AAPL cured cancer! 146.


  460. go apple go ! but not too far. i shorted the aug 150′s against my jan ’09 140 leaps


  461. AAPL – Not sure it matters… briefly crested $146! Glad I freed some hedging and I couldn’t fill the puts, still would have been nice to not have any hedge (but then that’s greed speaking and I learned to not listen to it).


  462. Something about AAPL guys pleaded the fifth over and over is impressing investors – $147.5

    Weird stuff…


  463. _fab,

    you’re right! this pig keeps getting slaughtered but phil is beginning to have an impact on me. I hope it comes while i still have some $ left.


  464. AAPL, I am short 160s against my 08 and 09 150s but less than 1 short for 3 long. So higher the better :-)


  465. AAPL eluding to new products not yet out, cannot comment on product cycles.


  466. I hope so, I have a whole lot of T I just noticed…


  467. aapl-
    sweet vengence. aapl hits ath in after hours with the market manipulators hands tied by the volume which is higher than normal regular trading hours.


  468. T-
    i sold my T and bought more aapl after thier bs unit # reports as well as the kiss axx blackberry advertisements put on during the iphone release.


  469. I’m sorry for the profanity, $ one hundred and friggin forty nine!


  470. 149!


  471. AAPL @ 149.50 will make my accounts shine in the morn….


  472. I couldn’t help myself. I sold some of my AAPL shares at $149+ since I can’t sell any options after hours.

    reinharden


  473. $150!!!!!!!!


  474. Looks like I should have held out for $150. But I’ve way too many options to not secure some of the current profits…

    reinharden


  475. Corporate customers piloting email and very happy, yeah


  476. I am SO going to sell against the rest of my leaps in the excitement tomorrow…


  477. 151!


  478. the CEO at CFC netted $118 MM knowing his stock was going to crash (with properly documented SEC filings).

    Just sayin’ … when smart money moves out, BDC moves out.

    Link


  479. AAPL 150! Hope it gooses QQQQ and T as well, that’d be sweet. Bought 30 Q 51′s at close…


  480. com’on aapl, announce the 4-1 stock split and kill the shorts!!!!


  481. 5 months before iphone comes to Europe :-(


  482. wow again …. went out for an hour AAPL was at 135. Now over 150. Congrats longs. Knew I should have picked some up in low 130′s AH … damn.


  483. Apple 150 is the best birthday gift i can ask for (today is my 27th)


  484. Shipped 270K units of iPhone to T with minimal in inventory at 6-30-07 (in 30 hrs!)

    AAPL, great margins at 36%, compare to MOT at 6% (lead engr bro used to work there)

    Tremendous growth % YoY on iPods and Macs!

    Good work on effective tax rate only 32%

    Great cash flow for 3rd qtr and estimated (prob low) for 4th.

    q4 – 65c EPS estimate ?? Huh, really sandbagging after 92c this qtr! Getting nicely drilled with ?’s on this sandbag estimate….AAPL says its due to commodity increases projected and other promotion expenses (like they can’t squeeze their suppliers (aka Walmart) just like this qtr!)

    Projecting 750K iphone units sold in next qtr (low estimate) and 10M by end of calendar 08.

    Really being silent/secretive on the T fee revenue.

    Won’t comment on any other revenue fee arrangement with other vendors. Won’t even admit if there are any addl fee arrangements existing.

    Deferred revenue only includes hardware for iPhone and iTV, not accessories or T fee accruals. Def Rev is net revenue for iPhone and iTV(sales price – cost of sales).

    Good ? on how they plan to get corp email market….crappy no news answer though, no hints of massive R&D to tackle the issue now….simply said, with some corp IT “tweaking” works great…….:?:

    Apple stores traffic increased YoY 40% with increased sales of 400K (avg) per store.

    Numnut ?….guy wants to see segment reporting for each individual product???? Sure, just tell your competition what product to copy (the one with the largest margin)!

    Makes sense 3rd Qtr typically weak with buyers in K-12 (school grade) primary buyers/buying for by Parents. 4th qtr higher end customers (new college students and graduates starting in the work force).

    Demographics for iPhone buyers? crappy response, 90% very happy, 85% would recommend = not demographics!

    iPhone contributed 5M in 3rd qtr. Beginning Europe iPhone intro next qtr with rest of Europe and Asia in 2008.

    over…web cast avail at apple.com/investor


  485. 270K phones in 30 hours is what they are saying. They keep repeating “We hope to sell our 1,000,000th IPhone in the first quater” way too often – they are trying to keep expectations down really hard.

    They refuse to break out revenue of IPhone and ITV, this explains the push for ITV, it’s a smokescreen to hide IPhone numbers…

    Nice $16 move from AH low in just 45 mins.

    GOOG getting a good pop from this too.

    GS guy with a good question – they may be getting fees from the companies they give screen space to on the main screen. They dodged the question but the pause said “yes” to me. I know I’d love to sponsor the stock tickers!

    Damn, they are rockin’ to $150 now, my 50 $135 puts are smoke! Still it does work out better than selling the $140s if they fly past $150.

    Estimates for next year are off by a mile! Analysts are looking for $4.19 per share in a year that starts this October and they are putting up .92 in what is usually a very mediocr quarer and they are flat out elling people they expect to sell 2M IPhones per qtr over the next 5 so they almost have to book 3M in the Xmas qtr.

    They expect to open 12 stores next Q and they booked launch expenses for the IPhone in this Q (and that was a big ad campaign!).

    Again they are refusing to break out ITV.

    This was a 30% upside surprise and guidance was already raised from .67 to .72 over the past 90 days. Last June Q they had a 22% beat at .44 and last Sept Q ey had a 22% beat at .62. Expectations for next Q are for .83 and they will have to bump those up to about .95 based on this and Apple may come out with $1.05 which would put them at $4 for the year vs. $3.56 currently estimated. That’s gotta put them around $155 fair value, possibly more as $4 gives them a p/e of 34 vs the current p/e (at $137) of 43 so there’s 26% of play in the target ($173). None of that will happen overnight, first the quarter will be raised, then the year, then holds turn to buys and then targets get raised.


  486. Steve Jobs is the only man in this world that i want to give a great big kiss!!!
    3 cheers for SJ….


  487. It’s getting really hard to keep from being over exposed to a single stock when apple keeps running like this :)

    My net apple positions (there are 7, including 3 sold calls) should be up about 50% tomorrow with apple at 150.. Not bad considering 2/3 of the long contracts are jan8/9/10..

    Phil, I might need some help in a bit rolling one of my covers that’s come into the money.. A good problem to have.


  488. Apple Jacked

    By Jim Cramer
    RealMoney.com Columnist
    7/25/2007 5:50 PM EDT
    Click here for more stories by Jim Cramer

    1. The Top 10 Rocket Stocks for This Week
    2. Seven Reasons to Be Bullish Now
    3. Huge iPhone Fees Juice Apple
    4. T. Boone Pickens Calls It Again
    5. Apple iPhone Stumbles Out of the Gate

    This piece is all you need to know why the Apple (AAPL – commentary – Cramer’s Take – Rating) guidance doesn’t matter. Here are the numbers:

    For March 2006, they said they were going to do 38; they did 47 cents.

    For June 2006, they said they were going to do 41; they did 54 cents.

    For September ’06, they said they were going to do 47 cents; they did 62 cents.

    For December ’06 they said they would do 72 cents, and they did $1.14.

    For March ’07, they said they would do 55 cents; they did 87 cents.

    For June, they said they would do 66 cents; they did 92 cents.

    And now they say they are going to do 65 cents?

    Do you need to know any more? Do you see why the guidance doesn’t matter?

    It is almost humorous. This is like Japan, where they say they are going to do 60% of what they did.

    This was a great quarter for one of my Four Horsemen of tech, which are now up 17% in six weeks.

    I said Apple was going to $150. Let’s wait until it gets there and make a decision about what happens next.

    We shouldn’t have to wait that long.


  489. > Projecting 750K iphone units sold in next qtr (low estimate) and 10M by end of calendar 08.

    When reading the Apple tea leaves, one most be more careful.

    They didn’t project how many iPhones they expected to sell in the next quarter. Merely that they 1 millionth would sell before the end of the next quarter. For all we know, that goal could have been achieved on July 1 (probably not). ;-)

    They also remained committed to their 10 M units by the end of calendar 2008. Linearly, that’s only 1.66 million/quarter, but the actual distribution will be *way* bumpier than that. I expect that we reach the end of calendar 2007 with at least 4 million units. If Europe launches early enough, that number might be higher.

    reinharden


  490. It is amazing what 2 short hours can do to my demeanor!


  491. My AAPL strangle could eventually be up possibly 500% but have to wait and see. AAPL AUG calls.
    Also bought naked BIDU AUG calls @ 5.00 even, that could be up 250% but it was a schnitzel.
    FFIV not sure gotta see but it could drop 10-15 quick and then recover.


  492. Moving to CROX next.


  493. Great point Rein on that 1M sales goal, I should have caught that (I must be too high on those AAPL tea leaves!) :grin:


  494. I’m not counting any chickens yet, but I’m well pleased with my hedging from last week. AT&T gave us a great escape on the put side, and a great buying opportunity yesterday.

    Assuming we get any of today’s after hours tomorrow, I’m happy with my earlier (and rare) “buy, buy, buy”.

    reinharden


  495. I know 3 or 4 people who work at FFIV. They are not buying I have heard. Of course, they have options and all that anyways , so just a thought.

    -BDC


  496. Congrats to everyone on AAPL. Made my week for sure. Nice call yesterday Reinharden. Expect AAPL to keep climbing tomorrow. Thank you Steve!


  497. I can project problems for AAPL negotiating a royalty fee arrangement with China, which is why they will prob be the last Asian country entered…..push them too hard and Jobs might end up in a laogi. :shock:


  498. At least T shaved $2 off my Apple puts. Plus the $2 I made on the in and out $140s yesterday so I guess I can’t complain.

    Nice job by all holding out through that painful dip yesterday – as home runs go, this was an inside the park one that we had to run out to the end!

    Looking forward to a very pleasant morning, full of good possibilities. If XOM goes down, it will be a perfect day – 8-)

    Later,

    - Phil


  499. Phil --

    Question on AAPL for first thing tomorrow morning:

    I am only long calls. I have the Aug 140 @ 7.40, and, based on OptionSage’s shoutout yesterday, I picked up some Aug 165s @ .70. Should I close them all out on the opening bell because of the rapid IV crush, or are they worth holding throughout the day for greater gains. I only have small positions, but AAPL has eaten most of my major organs the past two years, so I’d like to gain at least enough to buy back my thyroid!

    Thanks for all your help and fabulous advice!


  500. Phil, I really enjoyed your comments on your style of teaching, brutal but effective… almost like the schools I went to as a lad. I havn’t thanked you enough for all the lessons I have learned from you. My favorite teacher before you was my french teacher when I was in high school(equivalent) she was a doll and blond too!


  501. Patrick – different target markets for the two companies though I expect AAPL should start to encroach on the RIMM’s space – almost impossible for me to believe RIMM won’t be impacted but even if it is its numbers will still look great I expect.


  502. Phil,

    How would you plan on selling Appl Aug 135 and 140 calls given the current after hours appl pricing? Hold for a few days or sell off tomorrow?


  503. (Not apple related) In case anybody cares – carry trade might be unwinding

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    3. Buy Home Depot While It’s on Sale
    4. Tech Stocks Check In
    5. More Drilling Firms May Give M&A a Spin
    MORE
    Sometimes You Get the Bear, Sometimes the Bear Gets You

    “IF I’M SO BEARISH, WHY AIN’T I RICH?” I asked my wife only half in jest after Tuesday’s 226-point thrashing of the Dow Industrials.

    Lest you think I engage in schadenfreude when the stock market gets whacked, rest assured I feel your pain. And not with any quivering of my lower lip in a disingenuous display of purported empathy. I lost real money in the rout along with the rest of you.

    Constant readers may be surprised given my oft-expressed concerns in this space about the durability and very validity of this bull market. I can only explain it thusly: The normal investor owns bonds or gold as a hedge against something going wrong; I own equities as a hedge against something going right.

    Attribute that to what you will. My colleague Jon Laing once hilariously invoked the Freudian notion about traumatic toilet training to explain the negativism of permabears. I can’t speak to that, but as a child I could definitely identify with Winnie the Pooh’s Eeyore.

    Or maybe it stems from my roots in the credit markets. For equities, the sky’s the limit. In credit-land, your upside is par at maturity and the downside is zero. That point was made clear to me more than two decades ago by Loomis Sayles’ Dan Fuss, one of the keenest fixed-income managers around. He explained he liked to buy bonds that go up. Buy a bond at par and the best you can expect is to clip the interest coupons and get back your principal at maturity. Dan would try to buy good bonds at 60 or 70 cents on the dollar and ride them back to the buck.

    Most fixed-income managers might as well have a “Kick Me” sign pinned to their backs. Like nerds at the beach, they’ve been lending money to the cool guys in private equity or other buyout boys, who paid a pittance for the credit and used it to make gazillions for themselves.

    Now, the credit market is saying, enough. No longer is it willing to stake the equity market with chips, at least at the rock-bottom “vig” it had been charging.

    Beyond the Dow’s tumble, junk bonds continued to slide Tuesday with no bottom in sight. KDP Investment Advisors, an independent research outfit covering the high-yield market, said spreads on its junk index widened out to 3.44 percentage points, the widest since the debacle in General Motors debt two years ago. (The yield spread represents the premium over credit-risk-free government debt demanded by the junk market to compensate for the risk of investing in speculative corporate credits.) In the last month, that spread is up from just two percentage points, a record low margin of safety.

    Lenders are backing away from providing credit for risky deals in the wake of the subprime meltdown. As Barron’s Roundtable bond maven, Pimco’s Bill Gross, wrote in his monthly missive posted on the firm’s Web site, the credit market finally woke up to the truth that speculative-grade loans at 2.5 percentage above Libor (the London Interbank Offered Rate, the money-market benchmark) didn’t cut it when default rates historically have run at 5% and recoveries in bankruptcies have averaged 60 cents on the dollar, resulting prospective credit losses of three percentage points — a half point less than prevailing spreads.

    The market has pushed rates up 1.5 percentage points in about a month’s time — a far more Draconian increase than ever contemplated by the Federal Reserve, Gross observes. And it isn’t just confined to subprime mortgages, he adds, but also is being imposed on funding for Chrysler’s leveraged buyout.

    For the stock market, this poses the acid test. So much of the rise in stock prices has been the result of arbitraging cheap debt against equity, via LBOs, repurchases or mergers and acquisitions. Indeed, a corporation that can issue debt that is deductible at a tax rate more than twice the 15% paid on dividends and capital gains would be derelict not to do so.

    Now, however, the credit market is getting picky about providing practically free money for such an arbitrage. Another risk barometer — the dollar-yen exchange rate — also is suggesting a backing away from risk.

    The yen rallied to less than 120 to the dollar early Wednesday in Tokyo, implying some yen-carry trades are being unwound as risk tolerance diminishes. (In a nutshell, the yen-carry trade involves borrowing yen at rock-bottom interest rates under 1%, which are then exchanged for riskier, higher-returning assets.) Reversing those positions requires buying back the Japanese currency to repay the yen loans, which would push up its exchange rate.

    The greenback fetched a peak of nearly 124 yen in late June — when junk-bond yield spreads were at their narrowest. Not a coincidence, I would assert.


  504. Karmcon-Thanks for the AAPL notes!


  505. AAPL – I’d like to know if I should close out the long AAPL calls first thing as well.

    XOM – still think they’re going to drop? What time do they report, is it after the bell?


  506. Dragon
    What position(s) do you have on AAPL? Being curious trying to learn how you played it.
    Thanks
    Don

    optiondragon
    Posted July 25, 2007 at 6:11 pm | Permalink

    My AAPL strangle could eventually be up possibly 500% but have to wait and see. AAPL AUG calls.


  507. Owned Aug 150 @2.75 calls with a Aug 125 put strangle @2.30 overweight long 3 to 1.
    Depending on price and +5 to +6 premium to it assuming a climb and reacceleration of IV after a stable open.


  508. Dragon
    I had 6 aug 145 calls this am and chickened out and sold for even. Wish I had kept them now. I did buy a couple back naked before close so will make a some on those.
    Thanks for the response
    Don


  509. Phil, for anyone who’s sold AAPL Aug 140′s, what’s the plan tomorrow morning? I am long October 140′s against them. Roll my caller up/out to say September 150′s? I’d also be interested in hearing your thoughts on where my position should be – when does it make sense to roll my 140′s up to something higher and/or further out?

    Thanks!


  510. BBD, No prob. I learned long ago my retention skills exponentiate when I write it down/type vs. using the pad of paper in my head. Here’s to you AAPL and WFR (OIH was no slouch AH’s either). Don’t want to count my chickens before they hatch, but tomorrow’s a.m. is looking muy bueno!


  511. AAPL’s 7-25-07 PR,

    Apple Reports Third Quarter Results

    Record June Quarter Revenue and Profit

    Mac Sales Set New Record

    CUPERTINO, California—July 25, 2007—Apple® today announced financial results for its fiscal 2007 third quarter ended June 30, 2007. The Company posted revenue of $5.41 billion and net quarterly profit of $818 million, or $.92 per diluted share. These results compare to revenue of $4.37 billion and net quarterly profit of $472 million, or $.54 per diluted share, in the year-ago quarter. Gross margin was 36.9 percent, up from 30.3 percent in the year-ago quarter. International sales accounted for 40 percent of the quarter’s revenue.

    Apple shipped 1,764,000 Macintosh® computers, representing 33 percent growth over the year-ago quarter and exceeding the previous company record for quarterly Mac® shipments by over 150,000. The Company also sold 9,815,000 iPods during the quarter, representing 21 percent growth over the year-ago quarter.

    “We’re thrilled to report the highest June quarter revenue and profit in Apple’s history, along with the highest quarterly Mac sales ever,” said Steve Jobs, Apple’s CEO. “iPhone is off to a great start—we hope to sell our one-millionth iPhone by the end of its first full quarter of sales—and our new product pipeline is very strong.”

    “We are very pleased to report strong financial results including cash flow from operations exceeding $1.2 billion for the quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the fourth fiscal quarter of 2007, we expect revenue of about $5.7 billion and earnings per diluted share of about $.65.”

    The numeric data released as pg 2 of the PR won’t copy in a readable format worth a shite. Here’s the link if interested:

    http://www.sec.gov/Archives/edgar/data/320193/000110465907056111/a07-20193_1ex99d2.htm


  512. Wang’s World
    new post up!!


  513. rmyadsk,

    You basically don’t have to roll these until the premium is gone, then it’ll be easier to see where to roll them if at all. Last I checked, the 140′s were $7 with the stock at 138 meaning there was $9 of premium in them. Tomorrow, some premium will evaporate (or more since now that earnings are behind, volatility might go down too) leading to an option at $10 + remaining premium (let’s assume opening at 150 for ease).

    The premium will continue decreasing until it’s 0 at expiration in roughly 3 weeks, which leaves plenty of time for the 140′s you’ve sold to expire worthless (assuming a drop) or at least the next strike level in the next expiration to be valued higher than your short 140′s at expiration (currently very likely with AAPL).

    To bring Phil’s very good image back, you’ve bought long term options and are renting them out each month for the premium of the closer month while your property appreciates. At the end of your ownership you may have to pay off your loan (last set of sold shorts), but you get to pocket the appreciation.

    For instance you’d likely roll into the Sept 145′s and Oct 150′s having pocketed the premium for Aug, Sept and Oct (say… $9×3) and assuming an expiration at 150, pocket the $10 of your long Oct 140′s for a total of $37 out of a $10 move… And if it expires at 170, pocket the $30 of your long Oct 140′s and pay the $20 for the 150′s leading to the same end result.

    (Hopefully I didn’t make a mistake and it is easily understandable, values are obviously inaccurate and meant for ease of calculation, actual trajectory of AAPL stock totally unknown… etc.)


  514. Karcom- can’t agree more with AAPL WFR AND BIDU. Hope ICE doesn’t cool down my party.


  515. Talk about crooks.

    JNPR up just 5% so that the executives unload some options and shares.

    Juniper Networks CTO Sells Shares — 300,000
    Juniper Director Exercises Options — 14,000
    Juniper Board Member Sells 30,000 Shares
    Juniper CEO Sells 500,000 Shares

    I guess it is just a coincidence or may be well timed with some huge amount of stock buy back today.

    This kind of ‘co-incidences’ are becoming more and more popular nowadays.

    I am happy that my Aug 30 calls have more than doubled now in just a week :-)


  516. AAPL Aug $140s, $165s (should you sell them?) – I love these questions as I know that this is one of the most complex rules in all of PSW which takes years of study to understand the nuances. Much like Einstien with his E=MC squared, I expect that mathemeticians will be debating the nuances of this rule long after I am gone as the subtle undertones can be interpreted so many ways that scholars will be writing books seeking to infer my exact meaning for years to come:

    ALLWAYS sell into the initial excitement!

    Now I know that these words can be interpreted many ways and I know that many wise men may disagree with me or may think they are smarter than the markets or may think their stock is going to the moon and that 10% gaiin at the open is nothing or (in Apple’s case) my $150 target is low by $20 or so. That’s why we have Rule #2:

    When in doubt, sell half.

    I wish I had a Rule # 3 but those are the only two I’ve ever needed, even after 2 years of helping other people with positions I just can’t come up with another statement I’d be willing to call a rule which is why Rule # 3 is: If you got this far without following Rule #1 or Rule #2 then Rule #3 isn’t going to help you!

    I think the people who held AMZN yesterday and watched about $2 or so get shaved off their calls within 45 minutes of the open can bear witness but I really don’t need to check – that’s why it’s a rule…


  517. Thanks Jamie, although I’m not entirely comfortable being in the same category as a blonde, French speaking dominatrix…

    Rod, Rmyadsk – see above!


  518. I just sold RTPMH to myself. I’m my own market maker!