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Testy Tuesday Top Off

I don't know what to make of today…

The Dow had a good start but pulled back and couldn't hold 13,100 BUT the Nasdaq had a pretty good day BUT couldn't hold 2,525 and the S&P made a nice break back over 1,450 BUT couldn't hold that.

In comments this morning I reminded members: "Market future – I said last week (or the week before) that it’s very hard to be short when the Fed is stepping in to stop a 10% correction from happening. Now we have US Senators (head of the Budget committee no less!) freaking out just because a respected Fed Governor says maybe we should wait until the Sept 18th Fed meeting to make a decision.

"That’s why I’m saying cash, not shorting. We need to let the market find a bottom but if the Hang Seng can be thrown up (and I use that term because that’s how the shorts must have felt) 15% in 3 days then I wouldn’t be surprised by any move the market might make but I seriously have no idea if we will go up down or stay flat right now and I personally would rather wait a week (especially this no-data week) to see how things shake out than play for the sake of playing."

Oil dropping $2 mid-day forced me to cover our DIA Sept $130 puts with additional DIA Sept $132 calls at $2.95 (we already have the Oct $131 and $133 calls so now it's a strangle) as I have often said that oil drifting back to the mid-$60s is the one thing that can reignite the markets.  Every dollar per barrel we save is like $180M a day thrown back into consumers' pockets (as we pay for our global 90Mb/day habit in several mark-ups).  That's $4Bn a month of discretionary consumer spending that is released every time oil gives back $1 of the $30 per barrel they have stolen from us for the past 2 years – almost $1Trillion of excess profits that have been sucked out of the global economy and placed into the pockets of the energy sector – not to mention into the hands of governments who hate us!

We haven't added any puts (other than CFC) and we've stopped out of virtually all our existing puts but there are very few short-term calls left either, so I guess we are looking for a recovery but we're not sure when.  TGT had encouraging numbers and left guidance intact and COST put up huge numbers, which means the consumer may not be dead – just WMT's business plan…  WMT's poor 8/14 earnings clouded a strong July Retail Sales Report, sparking a 400-point drop in the DowIf this is why we broke support at 13,200 (don't blame sub-prime, it's old news) and we retake it this week, we may be looking at that level as very firm support.

Happy Trading, Option Sage and I are keeping a close eye on the S&P and the Nasdaq and the S&P did break the 10 dma so now it's up to the Apple-led Nasdaq (we need Google to come play too!) to get back over 2,525 and stay there:

 

I still think the overriding fundamentals are very dangerous and I won't do anything without being well-hedged to the downside BUT, after reviewing Happy's trades for the past 2 days I have decided we can not sit out while we are presented with such a smorgasbord of bargains.

While I've been sitting in cash Happy has plugged away with his normal (and very successful) selections and his day's closings were stunning:

  • ZOLT Sept 40 calls, LVQIH, at $3.6, +44% (partially out)
  • NOV Sept 120 calls, NOVID, at $4.2, +23.5% (partially out)
  • ZOLT Sept 40 calls, LVQIH, at $3.6, +43% (all out)
  • RIMM Sept 240 calls, RFYIZ, at $16.8, +118% (all out, post split, sold Sept 80s at $5.6)
  • BIDU Sept 190 calls, BDUIR, at $16, +119% (all out)
  • GOOG Sept 220 calls, GOPIV, at $8.2, +17% (more out)
  • POT Sept 80 calls, PVZIP, at $6.4, +6.7% (partially out)

This is an amazing performance in any market and we have far to much cash on the side to not take a few swings when so many good pitches are being thrown to us.  We nibbled on Google (made 25% in an hour) and VLO (ahead of inventories) but, for the most part, we took plays off the table, including half our very successful CROX and GSKs from the $10KP, leaving it with $11,761 in cash and $4,440 in securities – I think it's time to make a few plays!

We're not going to go crazy but 90% cash leaves us lots of room to play without over-committing.  I'll be bargain hunting in the morning so expect lots of trade ideas on the member site as my watch list is now teaming with nice looking opportunities

There are a few things we'll be looking for:

  • I want to see the VIX confirm an up move in the Dow

    • Vix back to 20
    • Dow back to 13,250
  • I want oil to stay below $70.  If inventories are bearish, we could head for $66 very quickly – that's close to $1Bn per day back in the hands of consumers!

    • I've often commented about the glut of oil in Cushing and today was a day to pay the piper.  My comment this afternoon was:  "Oil – today is Sept expiration day so no surprise that September barrels are being dumped like crazy but the Octobers and Novembers are getting killed too. Right now the Octobers are .20 lower than the Septembers so we will get an even lower open tomorrow and December is just bloated with 198M barrels already on order (about 150M more than a normal 3rd month) so it will be very interesting to see what happens with almost 650M barrels on order over the next 90 days (150M more than usual). I think with no hurricane action we could get on mofo of a correction between now and October’s close."
  • I would like gold to stay at the evil Goldilocks level of $666.
  • I would like the dollar to stay above the 50 dma (roughly 81.50).
  • I want to see Europe recover and Japan to get going again (China is already flying)

    • Tune in tomorrow for the big chart!

Did we close these positions too soon?  I'm already wishing I still had the Intel's and T's but we'll see soon (we just need to click our heels together 3 times and remember that Cash is Always Good!):

Description

  Basis

Open

 Sale Price

Sold

 Gain/Loss

%

40 OCT 135.00 AAPL CALL (APVJG)  $  21,410 8/1  $  25,990 8/21  $     4,580 21%
8 JAN 30.00 ACI CALL (ACIAF)  $    2,530 8/1  $    3,030 8/20  $        500 20%
100 JAN 85.00 COP CALL (COPAQ)  $  22,010 8/1  $  41,970 8/20  $   19,960 91%
5 SEP 57.50 CROX CALL (CQJIS)  $    1,310 7/23  $    2,190 8/21  $        880 67%
20 JAN 55.00 EDU CALL (EDUAK)  $    8,010 7/24  $  11,990 8/21  $     3,980 50%
10 OCT 70.00 EOG CALL (EOGJN)  $    2,810 7/31  $    4,390 8/20  $     1,580 56%
20 SEP 510.00 GOOG CALL (GOPIU)  $  20,810 8/21  $  25,990 8/21  $     5,180 25%
5 NOV 52.50 GSK CALL (GSKKX)  $      885 6/1  $    1,065 8/21  $        180 20%
160 SEP 25.00 INTC CALL (INQIE)  $    8,010 7/18  $    7,990 8/20  $        (20) 0%
40 OCT 25.00 INTC CALL (INQJE)  $    4,210 6/15  $    3,790 8/20  $       (420) -10%
10 OCT 55.00 JWN CALL (JWNJK)  $        60 5/21  $       590 8/20  $        530 883%
7 OCT 20.00 KNOT CALL (BQCJD)  $    1,410 4/4  $    2,090 8/21  $        680 48%
10 JAN 57.50 NUE CALL (NUEAY)  $    2,910 7/30  $    2,990 8/21  $         80 3%
5 OCT 75.00 PCLN CALL (PUZJO)  $      735 7/5  $    3,490 8/21  $     2,755 375%
10 JAN 86.63 RIMM CALL (VHOAW)  $    3,210 7/6  $  21,490 8/21  $   18,280 570%
20 SEP 135.00 SHLD CALL (KTQIX)  $  12,510 4/19  $  19,990 8/20  $     7,480 60%
100 SEP 22.50 STX CALL (STXIX)  $  11,510 5/21  $  20,490 8/20  $     8,980 78%
25 SEP 17.50 SYMC CALL (SYQIW)  $    3,010 7/26  $    3,490 8/21  $        480 16%
40 OCT 40.00 T CALL (TJH)  $    6,010 7/2  $    5,790 8/20  $       (220) -4%
25 OCT 40.00 T CALL (TJH)  $    3,510 6/1  $    3,615 8/20  $        105 3%
20 JAN 120.00 TM CALL (TMAD)  $    3,010 5/10  $  10,790 8/20  $     7,780 259%
30 JAN 50.00 UNH CALL (UHBAJ)  $  14,260 6/1  $  11,690 8/20  $    (2,570) -18%
10 JAN 55.00 UNH CALL (UHBAK)  $      860 3/6  $    1,790 8/20  $        930 108%
40 SEP 65.00 VLO CALL (VLOIM)  $  10,810 8/1  $  10,790 8/20  $        (20) 0%

 


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  1. Phil,

    I did a calendar spread on the Sep/Oct 62.5s yesterday when the underlying stock was 62.4;
    I see you closed out the position you took. What’s your opinion on VLO now, close it out by the end of the day?
    I’d like your advice.

    SAFETY PAYS!


  2. Phil
    Thanks for the update on closing trades today. Boy I did miss your RIMM $86.53 play. Remember you buying the RIMM Jan 09 100′s which are working great. Congrats


  3. VLO – I didn’t close the new October play (but I never covered it – see extensive comments yesterday), that was an old Sept call that I decided was too risky to keep. My new VLO postion is a more modest 20 shares of the Oct $65s at $3, just looking for maybe $3.60 on a run-up around the 10:30 inventory. Your spread is good and should reward patience but remember that a 20% profit on a short/tight spread like that is as much as you should expect so, anytime you see it you should take it.


  4. RIMM – those SHOULD BE the Jan ’09 $100s. They were the $300s but for some crazy reason I got assigned the 86s so, of course, I sold some, but I’m expecting the phone to ring today with some flunky telling me they are going to have to reverse it. That’s why I just sold 10, I didn’t want to miss out on selling the Sept $80s for $7 so I look at it as either I cash out and I’m lucky or they reverse it and I have a 2/3 covered position.


  5. Thanks.