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Wild Wednesday Morning

D Fry Market Outlook 22 08 2007_017Yee-haw, here we go!

Another day, another 600-point gain for the Hang Seng, now back at 22,346 and up a healthy 3,000 points from Friday's low.  Are they crazy or are we simply missing the party?

David Fry notes that we are not getting the index action we would expect of such a bold move in the China market but I'm not surprised, I went to cash this month and, as we can see from the treasury action, so did pretty much everyone else.  The problem we've been discussing on the member site this week, as we sit around counting our cash, is that there simply aren't any "good" alternatives for our money! 

  • Cash – dollar is unstable
  • Mutual Funds – underperforming the markets
  • Money Markets – low returns
  • International Funds – too scary
  • Commodities – looking toppy
  • Hedge Funds – aren't they being investigated?
  • Real Estate – LOL
  • Bonds – low returns and looking riskier
  • Mortgage Backed Securities – ROFL!

US equities anyone?  We may actually be the least sucky place to put your money in the second half of '07.  For foreigners, the dollar doesn't seem like it can go much lower and for local investors, it's hard to find a place to park a significant amount of capital.  Sure we have this overhang of sub-prime mortgages and we're fighting a war of attrition for goals we're uncertain of at an absolutely staggering cost while plunging the economy onward to $10T in debt but – so what?  We've been doing that since 2003 and the market is up over 50% since then and last year I dubbed it the Meatball Market because bad news Just Doesn't Matter!

We touched 12,500 (a 10% correction) and are likely to see it again but, if we can consolidate around 13,000 for the quarter, there are enough pockets of strength among our 9,000 public companies that we may get a chance to rally around a new leadership.  That will let us markets take us to new highs that can be sustained on fundamentals – an that's a good thing!

Yesterday we finished out virtual portfolio purge and got down to just 10% invested but boy do I love those remaining positions.  In thinking about what to invest in first I decided we need to first consider adding more to the successful positions we already have and I will have a Long-Term Virtual Portfolio Review ready by mid-day on the member site.  Meanwhile, we certainly have enough free capital to make a few moves on short plays so Happy and I will be combing the markets for some timely trades.

Europe is in a pretty good mood this morning but is it good enough to give us some lovin' on the Big Chart?



2 Week





























































Hang Seng














BSE (India)














CAC 40














On the whole, nothing happened since last Friday!  The Hang Seng is still greener than green while the CAC and FTSE are still redder than red (along with our markets, of course) but the Nikkei is recovering from a 1,711-point drop in the first two weeks of the month and the SOX and the Nasdaq are sneaking up on us.  If we can get the Transports and the Russell in gear, we may be ready to get behind some new leadership.

While the fundamentals of the market are still terrifying – I also pointed out this weekend that we can't play things TOO safely, as we can end up defending ourselves into a corner.  Winners look for an opening and fight their way out and, as we say at PSW – There's Always an Option!

You would think TOL is out of options looking at their abysmal earnings report (down 85% to .16 per share), poor outlook ("Tightening credit standards will likely shrink the pool of potential home buyers, mortgage market liquidity issues and higher borrowing rates may impede some customers from closing, while others may find it more difficult to sell their existing homes.") and lack of guidance ("In the current environment, we are not comfortable providing fourth-quarter guidance at this time or confirming any previous guidance.") but they are UP 3% pre market.  Why?  Because it just doesn't matter!  We know housing is a disaster – tell us something we don't know - we're bored and we need something to buy, even TOL…

Cramer was talking up dividends last night and Bespoke put up a nice article listing some dividend-oriented ETFs, this is a nice place to park some of that cash.  DOO is very interesting as they are 50% global financials and have taken a huge beating of late, meaning your dividends as a percent of share price will go up!  PID pays a higher dividend (3%) and has also come down nicely below $20 – you'll notice a very strong flush on the chart on the 16th (div was paid on 15th), much like the one that preceded a 20% gain from March – July!  If you have to park cash – this is a BUYBUYBUY at $19.62.

LFG was one of our favorites on the way down the past couple of months, along with their pals at FAF and FNF so let's keep an eye on them if the housing sector starts to rally as I think LFG should get good support at $53 (down 50%) and the Jan '10 $55s are an irrational $12.65 as we can sell the current $55s for $4.35!  This whole group can make for fun momentum plays if things pick up.

GOOG is finally monetizing YouTube with commercials that they claim will be "less annoying" as they will run in an overlay at the bottom of the clip.  If this works they are going to be rich(er) but this will be attempt # 1,675,482 by advertisers to convince us to like commercials so I'm a little dubious.  Still, anything that adds income to GOOG will get people crunching numbers again so I'll be looking to roll my positions back a bit and giving them room to run.  Hopefully we'll get a pullback but I already have Sept $530s, $540s and $570s so we'll see how they do today…

Time to work on the members picks but I'm cautiously optimistic as the CB's are putting a huge effort into maintaining the markets and people seem to be buying it.  Let's be very clear though – I am maintaining very tight index puts on every gain and I fully expect to go back to 12,500 but let's enjoy the ride – we don't stay off the roller coaster because it goes up and down!

According to the WSJ:   "The Federal Reserve injected $3.75 billion, following the $3.5 billion it put into markets Monday. The European Central Bank allotted €275 billion ($371 billion) in one-week funds, which is €46 billion more than it estimated banks need for routine business. And the Bank of Japan put 800 billion yen ($6.96 billion) into its market, following an infusion of one trillion yen Monday.

"Meanwhile, Russia's central bank hurried to buoy the weakening ruble and keep money rates stable. In a rare move, Russia's central bank sold around $4.5 billion on the market yesterday to help support the ruble, traders said. It also injected 87.8 billion rubles ($3.4 billion) into the market through two one-day securities repurchase agreements."

Look at that, all the world working together in peace and harmony to bail out rich folks – it's a beautiful thing!  8-)


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  1. BCSI- Showing up $8- $9 this morning. Sell into the excitement. $$$$
    ALBO- I know you are playing ISRG do you mind me asking what you are in? I entered OCT 200′s yesterday

  2. Good morning!

    Anyone else here having problems with RIMM options at eTrade?

  3. Ahh, thank god i sold those NMX calls on monday!

  4. 1ducth,

    What kind of problems? Mine adjusted fine.

  5. HXL –

    I was running a scan yesterday and found this one. It bounced off a support around 20 in the last couple of days, has decent short interest, etc. Thinking that Sept 25s @ 0.40 are a decent play here. Any thoughts?

  6. Isn’t NMX going higher?… There’s merger talks with NYX

  7. I hear ya, chemistry…..sold the rest of my NMX off last week, and got rid of my AAPL at a loss yesterday morning.


  8. 1Dutch


    The Calls I sold yesterday reappeared.

  9. Ive always heard NMX would get taken out around 160, but you never know how this will behave after a 10 dollar jump.

  10. BBD:

    I’m in the Sept 210′s. Got in yesterday morning.
    I’m out of VIP with a small profit, on a poorly manged trade.
    Lucky to make a little money. Take a look at VIP.
    Change in the ration of ADRs.

  11. NMX – yeah those taxes are such a bitch! 8-)

    RIMM – mine were/are screwed up, I got assigned the wrong contract amount but the symbol checks out across platforms so I don’t know what’s going on…

    AAPL – I’m going to get reamed on the calls I sold yesterday to cover my leaps but at least I have the $135s and $140s above them…

    I’m working on a LTP post so I’ll be in and out this morning but if we can’t hold 13,200 I will quickly become concerned…

  12. sold my RIMM 240 calls on frid at 220…

    we all screw up i guess

  13. RIMM

    Options not showing value and not possible to place order…….also symbols showing strange in portfolio

  14. Could be a little squeeze in BCSI. 14 million share, about 3 million short.

  15. Phil

    What are your picks in the oil patch today?

  16. Phil – Thoughts on what to do with ZUMZ pre-earnings this afternoon? I have equal number of Feb 50s long calls and Sep 45 short calls and stock is zooming higher to 46 this morning…

  17. Zolt may be a better play HXL

  18. BillBigD,

    Thanks for BCSI

  19. I posted this earlier today under Sages essay. copying here to see if Phil or anyone else has advice for me. Feeling uneasy based on Phil’s boyant mood about up markets today.

    Posted August 22, 2007 at 8:12 am | Permalink
    Hi Sage: 35% of my portfolio is longer term stock which I didn’t want to sell even during this correction. I tried to do some matress plays to protect but kept getting my timing wrong and stopping out. I think I finally got my timeing a bit better by buying QQQQ Sept puts 47s, 46s, & 45s Mon at close and yesterday near highs of the session. If the markets, NDX in particular break above the resistance you describe, my puts will be deeeper under water then I would normally be comfortale with. I still believe we will retest the lows (before Sept expiration) so if I stick to my guns I will need to buy QQQQ calls to offset my puts, right? Do I start buying the calls as soon as resistance is broken? Do I buy the close to the money or a bit further out calls and get more for the same money? Do you agree that even if we break resistance we will still need to retest the lows of last week?


  20. Miners are on fire – RTP, BHP – good time to build up gold plays. Adding NAK at $10.30 and rolling down some calls and adding to others. AUY, GG, ABX, MRB…

    Oil – RIG, DO (the OIH), HAL but you have to be real careful into inventory. If they can’t hold $70 then I’d rather be shorting the winners (but not in the service sector!).

    ZUMZ – sounds like you’re fine as you’re playing for earnings move right? If there’s upside mo you may want to lighten up on the calls and rebuy for less later but that’s a risky play too.

  21. IWM – if it can break resistance at 80 bucks and hold, this might surge the Nasdaq.. JMO .

  22. Phil: CFC going wrong way still – you still confident? Dump, add…
    Glad I “gambled” on metals yesterday – GFI, AUY, SLW.

  23. FRED- cool I am glad you jumped in. They are talking about them on CNBC in 2 minutes

  24. OK, now I am really mad at myself. I wrote this long post on Thursday about all charts showing a perfect reversal, and still I stayed protected on most of my positions. I know we are not out of the woods yet, but there were a lot of opportunities in these 4 days that I should not have missed. I just hate missing a rally, and I hate even more being right about direction and not making money.
    Markets are not about being right but about making money. Sometimes you just have to trust charts or whatever your plan/strategy is saying. It’s called discipline. The turtles who failed were the ones who did not follow all the signals, and did not enter all trades because of reasons that were not part of the strategy that was given to them.

    Oh well, at least I am making a ton on these AAPL Leaps….

  25. HXL is undergoing a lot of restructuring internally. I work in this area, and they are trimming their operations and selling off sections of their business. Its a risk if you ask me.

    ZOLT should do ok for the next few years, since carbon fiber demand it going to stay strong and they are probably the lowest cost supplier (but not as good quality) out there. Then again, they havent executed their business plan very well last few years.

    Its too bad we cant buy the suppliers of carbon fiber to the aerospace/military industry. Toray is the leader atm in this and carbon fibers is a small part of the large conglomerate.

  26. Greg – index puts are an insurance investment. You put down a lump sum and then you roll incrimentally to keep yourself well covered but you should focus on the one that’s closest to the the current price otherwise you are worrying over too many positions. If it moves way against you, you should be stopping out – your calls (the ones you are protecting) should be making more than enough to cover you otherwise you need to rethink your balance.

  27. Booyah on BCSI. your welcome.
    Phil been dealing with these RIMM issues to in my account that split messed alot of things up.

  28. well we touched 13200 and now were backing off. any cause for concern phil?

  29. Great job on BCSI, dragon!!

  30. CFC – not at all confident but it’s a light entry and I have a month so I think I’ll roll up once and see how it goes. If the market makes and holds my 13,250 level then I’ll give up but I’m also devoid of puts so I’m not sweating the loss.. Good timing on metals.

    13,200 concern – holy cow, give it 10 minutes! I’m not making any major commitments but as long as we hold 13,100 I’ll be happy today (providing the Nas and S&P hold their levels). This is amazingly green so far. Let’s see if MRVL moves, they are the dog of my main screen.

  31. Is there a trade on PTR ahead of earnings?

  32. RIMM- No problems with the split in Fidelity
    Juliet- hope you were in BCSI.

  33. XOM $85s must be sold, currently $2.40 but if those things go up the premium is ridiculous and I don’t see XOM breaking $90 again. I’m considering selling them AND the $85 puts, now $3.30 as I won’t mind having XOM put to me for net $80 either (especially if people are willing to pay me $2.40 for calls that are $1.25 out of the money!)

  34. bmb, Demetrius –

    Thanks for your inputs and the ZOLT idea. I’m checking that one out.

  35. PTR should do well as their earnings are actually coming from increased production (bet you didn’t know oil companies could do that!). I like the Oct $145s at $4.70 against the Sept $140s for $4.25 but it’s a little dangerous.

  36. BCSI:

    Congratulations guys !
    Sorry I wasn’t in it with you.

  37. What do you think about Abercrombie & Fitch (ANF) in earnings.

  38. PCU & FCX not going out of business today
    VMW- need I say more $$$$. Don’t worry there will be a pullback. When I don’t know. LOL

  39. AAPL- Playing some puts again as protection. Entered at $131, stop at $131.7.

  40. My zumz looking to sky high after earnings too, up almost 50% on the calls already looking for another free ride.

  41. Bill I love VMW. I just don’t own enough bcuz it is a stock. Options are suppose to open up this week supposedly. Bet the spread is ridiculous though. i would love to own 100 contracts of the LEAPs.

  42. GT OCT 30 Calls for 2.3?

  43. I would buy EMC over VMW… EMC owns a 90% of VMW.

  44. VMW- I will say one thing and then shut up. Well two things. LOL The ROI on the product is insane and this is not even in the production side of a IT site.

  45. OMG
    Might be worth a look, breaking out of short term downtrend.
    OM Group, Inc. (OMG) is a vertically integrated international producer and marketer of value-added, metal-based specialty chemicals and related materials. The Company applies technology to unrefined cobalt and nickel raw materials to market more than 775 different product offerings to approximately 1,900 customers in over 40 industries. In March 2007, OMG completed the sale of its Nickel business to Norilsk Nickel. The Company’s Specialties segment will continue to sell nickel-based specialty products to end markets in the electronic chemicals industry.

  46. I’m on the phone with e-trade now. My platform is showing no cash buying power, when I’m 80% cash. How frustrating. They say it’ll take 1 business day to fix the problem. I told them I’ll send them a bill for the opportunity cost.

  47. any of you guys playing RIMM right now? opportunity?

  48. Anybody remember what I said on JSDA yesterday? If it broke $10.50, watch out. . A lot of shorts are now trapped.. . although this thing seems to always sell off in the afternoon

  49. I’m with Etrade, no problems. Canadian side though.

  50. Lost 3K already on RIMM options because I can’t sell online………and waiting 40 mins on phone already :-( eTrade will conpensate the loss the told me …..Well,let’s see first :-(

  51. Looking toppy here.

  52. Does anyone have an opinion on ICE right here? I’m seeing a head and shoulders pattern with a neckline around $140 right here technically… any suggestions anyone?! Thanks ahead of time!

  53. Demetrius
    That is why there is a stock market. VMW is the play IMO

  54. ANF should do very well based on other retail reports.

    AAPL – had to take $7 for more $130 puts on my uncovered set of leaps. I mean, come on, a $6 premium?!?

    ETrade did that to me several times, I can’t believe they stay in business like that!

  55. Thanks for that gem my man Bill, 33 million float and you squeeze that type of ROI and PM into it and its a blockbuster.

  56. Where is everyone on Happy’s site?

  57. I closed out DKS for 100% yesterday, could have been 200% if I waited till today.

  58. E*Trade blows, although I do like the look and feel of Power E*Trade Pro. Anyone switch from that platform to something they now like better?

  59. BCSI – Thanks Dragon, Juliet and BBD :-)

  60. AAPL-$6 premium: would take less than 2 days. It’s only 5%. This is why I’d rather by puts right now as protection, and only as a daytrade, nothing overnight. There were a ton of good news in the last 2 days for AAPL: very strong sales of Phones and Macs, and deal very close with France, Germany and UK for Iphone.

  61. Hey Phil-

    What is your plan with the VLO OCT calls you picked up yesterday?

  62. Phil:

    Any thoughts on EMC leaps?

  63. The only reason why I stick with etrade is because of the RSA security feature (the key chain with the constantly changing password). Do any other brokers offer this?

  64. optionsdragon – what is your play on ZUMZ? you overweight the long calls to shorts 3/2 ?

  65. You’re right Bill, I just hate betting against the Fast Money guys… I’m a bit late for entry now I think though.

  66. Andrew, i just can tell you I’m training (no real money till next week) with optionsXpress, I can use all the platform like a big boy, I they adjust me the RIMM 240 split manually ( if is was real trade it would be done automatically

  67. Happy site
    The server is having problems…

  68. Nadir, unless you trade from a cibercafe, is a little paranoic that “RSA feature” in fact if you have trojans it is near useless, and I know what i’m saying

  69. Out of VLO but not rushing into oil puts as the inventories were very strange with a huge draw in gasoline (5.9Mb) and a huge build in crude (1.8Mb) and distilates (1.3Mb) which nets out at about -3Mb so these guys are running all over the map but I think oil will break lower on the whole.

  70. Optiondragon,

    VMW is optionable (no leaps, though) out until April. Maybe you’re already aware of this.

  71. I hate it when i post something and it says busy and it wipes out my whole comment without saving it.
    blogging technology needs to step up a bit.

    ZUMZ- Yang if u are worried you need to sell half and hold the rest for earnings with a small strangle.

    new ZUMZ earnings positions are riskier now that it has moved up but it is still a high prob play.
    I would buy the 50calls and 45 puts 2.5 to 1 overweight long dollar weighted

  72. Thanks VMW options just saw it the spreads are ridiculous

  73. Nadir,

    I use IB and they gave me a Secure Computing credit card device that works similar to RSA.

  74. Bought EMC Jan 09 20′s for $3.30.

  75. I’m in Phil’s ZUMZ play from yesterday (4:3 long:short)… it looks ugly right now but that’s just because the spreads are so wide, and my screen displays the value of the longs at the bids and the value of the shorts at the ask. In reality it’s fine.

  76. Phil, do you still like TIE?
    making a comeback from upper 20s

  77. Phil,

    I’m afraid I sometimes have trouble following your trade descriptions. I’ll use your 9:57AM XOM post as an example. After being confused by it, I looked at the Portfolio page to find your current positions. All I see are Jan 75 puts in the LTP. Your XOM post says “XOM $85s must be sold”. I know you mean the calls, so does that mean you’re writing NAKED calls? If so, I would assume you’re bearish on XOM short-term (and longer-term too, given your previous XOM comments and put holdings). But you then say “I’m considering selling them AND the $85 puts”. Would you sell the puts together with the calls (making it a reverse straddle) because you expect little stock movement? Or would you sell the puts as protection against your long Jan 75 puts? You say “I won’t mind having XOM put to me for net $80”, which suggests bullishness.

  78. VMW- give it some time they will close the spreads.

  79. Any comments on the Drug Sector?

  80. MRVL waking up a little before earnings tomorrow.

  81. My situation right now with e-trade reminds me of the last time I was in Paris. I was in the train station with the intention of boarding the high speed train to the airport (the last one of the night). All the ticket windows were closed, you had to buy your ticket from an automated machine. The machine didn’t take euro-bills, only coins. By the time I found someone to make change (I had to pay him a 2 euro premium), the train left, and I had to spend the night outside on the street. I hate France (pardon to all the french guys on the board).

    Today, I’m stuck with 80% cash, and no way to make it work for me, and it looks like the train left the station.

    A side note. . . On that same trip, I was evacuated from a newly constructed terminal in Charles De Gaulle airport, right before it collapsed killing 4 people.

  82. Bill- VMW true. if we could get some more MM’s in there it should. I am tempted to buy the Sept 80 calls or Jan calls and sleep on them.

  83. Sold yesterdays VLO Sep 62.5 calls @ 4.20 on slowdown. Maybe a little early but I’m getting a lot less greedy in these mkt conditions. I’ll take the 40%


  84. ICE – up on rumors but you can’t short them into a general rally.

    AAPL – $6 is $6 (the same 5%) and I bet if I take it every month between here and Jan ’09 I make out OK with my $96 worth of premiums! I still have my naked Sept calls that I had almost given up on so this whole thing is a huge gift.

    EMC – seems a little like chasing here. I would have loved them at $18 last week.

    RSA – with all the hassles from using ETrade, I’d rather get ripped off once in a while! Of course I would never trade on a laptop or on an unsecured network anywhere…

  85. ZUMZ 17 million float, 28% short interest.
    those shorts are gonna be vaporized oh well. natural selection.

  86. I wonder why CELG have trouble going up.


  87. GRMN – is this still a play?

  88. CELG- Juliet- Bioman says the reason why is PHRM- they released those great results on their new drug that competes in the same indication for MDS.

  89. Does Happy have a comments section on his site? If so, how do I access it?

  90. your welcome juliet. :) bioman knows all in drugs. worked at Fred Hutchinson Caner reaserch lab one of the best cancer facilities in the US.

  91. RSA- another product owned by EMC LOL And I am not chasing.
    VMW- option spreads aren’t bad for SEPT and OCT

  92. Bill true with that type of float it is decent but some more MM for liquidity would be nice or should I just buy 100 contracts now? lol

  93. optiondragon & phil, thanks for the direction. zumz i bought yesterday and will hold until earnings. I’ve been down and out, but not KO’ed yet. Making a small comeback so far..Much appreciated.

  94. Nadir:

    Been through Charles De Gaulle three times. The first time the bus drivers were on strike
    and we sat on the tarmac for two hours. Next time Air France cancelled our flight one hour
    before takeoff and we had to wait 8 hours to catch another flight on UAL. The third time
    we missed our connecting flight. C’est La Vie ! ! !

  95. Is it just me or is philstockworld having server problems?… We need a chatroom!… Maybe group chat in AIM?

  96. Dragon-
    Thanks for sharing the BCSI idea and the training block on strangles. Out at +150% assuming those puts evaporate worthless.

  97. Steve Smith of says that usually on IPO it is 5 trading days and they open options but there might be some exceptions to the rule.

  98. Dragon/all – before I post anything I select and copy the text – takes 2 seconds. That way if there’s a glitch it’s in the buffer and I just past when I recover the page. As long as you don’t have an IE crash it stays in your clipboard.

    TIE – absolutely! BA alone will keep them humming for years.

    XOM – sorry but yes, writing naked calls – or finding a call to write them against or the reverse straddle assuming they hold $85ish for the month. I am bearish about them breaking $90 and bullish about them holding $80, they can coexist! As with Apple, as long as some idiot is willing to pay me a 4% monthly premium I really don’t care which way it goes.. If the market is going to go choppy like this, we are going to have to learn to be happy with 5% per month on many trades. You aren’t going to get wild returns every week if the market starts to flatline. In ’04 through early ’06 we considered 20% to be a great week – you guys are just spoiled for the past 12 months…

    Poor Herb Greenberg – he’s like my inner fundamenatalist out on his own. He’s freaking out about the Fed and the economy and all I can think of is “Don’t Worry, Be Happy!”

    Oil flirting with $68, looks like the oil sector may start to put a drag on the market but I would be thrilled to hold our levels today if the energy sector turns red.

    CROX stopped out – don’t know why, don’t care.. XXX

  99. Sold EMC Sep 20′s at .65 against ’09 leaps.

  100. Nadir

    I’ve used Schwab for years, no problems whatsoever..(lucky?)..for the little trading that I do….401k went to Ameitrade in JAN – so far no problems and a suite of streaming tools that I use with no minimum account balance, Schwab is 50k or 48 trades a year for their streaming suites.


  101. Phil,

    I want to get SLB Puts, what do you think. :) Last time when you suggest SLB Puts, I did bought and cash out with over 100% gain. HEHEHE!


  102. Drug sector – not sexy enough in a rally. Better as a defensive play.

    Nice travelogue Nadir! What would have happened if you just got on the train? 80% cash isn’t stuck, it’s flexible and if we don’t break 13,250 we have proven nothing today.

    Server – I had a couple of posting glitches but not much. We are upgrading server shortly, should be much more robust.

    48 trades a year? I’d need to open about 200 Schwab accounts!

  103. optiondragon thanks for the infor on CELG. I’m still holding Oct. 60 and getting antsy.


  104. SLB – yes but last time was a good time to get them. This time you are asking at a random point… As I said earlier, I am willing to short oil EXCEPT the services – they are way too strong and deservedly so.

    DNA is having a farewell Phil party as I finally got sick of them and gave up.

  105. Oh optiondragon, thanks for keeping me stay in BCSI calls…so glad I did. Now thinking whether to hold ZUMZ or not. I guess you are going to hold, right?

  106. Woo hoo – oil at $68.95!

  107. anybody nibble on VMW options? tempted, but using all my strength not to pull the trigger with this market

  108. Your welcome Keyser. as you begin to understand straddles and strangles it becomes easier. put in 4 years of intensive every Q earnings studying and you get a good feel like me.
    After i took 2 separate accounts to half a million a piece, one in 2005, one in 2006. The 2005 one I started with $25,000 and the 2006 one was i believe started about at $10K. Alot of those huge gains were made on strangling earnings and biotech catalysts. i mean you string together several 5 baggers in a row and it doesn’t matter how much you start with. For example the WYNN earnings play was over 500% gain on Monday and PCLN the next day was over 800%. case closed.
    Right now I don’t want 500K i want millions and I know how to get there esp with Happy and Phil and Bill and the rest of you guys on our side but that should be in everyone’s cards here! everyone here is already going to be a millionaire as long as you study hard and TAKE some risks.

    Oh just like the best traders ever, if you’ve blown your account that is a rite of passage.
    Soros went broke twice before hitting concistant homeruns. i am a big Soros fan and watcher!
    Blowing your account has more to do with understanding yourself and learning how to develop an appetite for risk. i blew my account back in 2000-01 shorting 10,000 shares of every internet stock i could find
    I was right but i didn’t have the money so they margined me out quickly. I made money but I learned a valuable lesson there at age 23.

  109. Juliet , yes but strangled to protect profits in the 45 calls.

  110. BCSI- Jan 55′s slowly being cashed $$$$$. With move higher

  111. I have an old Rollover IRA at Schwab and they have been good to me, but they are very conservative. You can not do spreads or sell Naked Puts, regardless of whether you have the cash to cover it. Although surprisingly (at least to me anyway), you can buy naked calls and puts inside the IRA’s, which is a nice feature.

  112. Your right Phil,

    I shouldn’t really complain considering that I doubled the value of my aggressive portofolio in the past 3 days (thanks, of course, to PSW and Wang’s World), and I should be ready to rock and roll again if we confirm the rally.

  113. Optiondragon, those stories ARE AWESOME. I love hearing stories like those… Taking 10k and turning it into 500k in a year is amazing. I love it. Congrats.

  114. OptionDragaon, that is cool. Hats off to you. Doing it consistently and profitably….wow. Thanks again.

  115. When you have lost all your money you realize that it is only money. Once you have learned to detach yourself from your net worth and money, you find freedom and happiness.
    And you become a better trader.
    I’ve been trading for so long since 18 that i really am matter of fact about it. It doesn’t seem real to me.
    i just try to be the greatest trader in the world and i can honestly say that if you find another trader who gets a 5 bagger one day and a 8 bagger the next or is even like Happy who gets baggers eveyday. i’d like to meet them, if there are others, which i am sure there are but the risk reward ratios here beat out any other instruments in high finance.

  116. ACH
    check out the daily chart. 4 consecutiave gap-ups!

  117. One of my best friends Dad didn’t believe that I made $200,000 strangling GOOG earnings back in 2005 2nd Q earnings. I run into these people everday. I just shrug my shoulders and move on when they don’t take my ($1000)bet that i did.
    What are u gonna do?

  118. Optiondragon-- Is there an education post or a long comment somewhere about your earnings strangling strategy? Congrats on the success. Thanks.

  119. ALBO- you have a target on ISRG?

  120. Optiodragon….
    RE : MEDX
    I am in Tucson today ( I live in the BAy Area) to meet with the head of the University of Arizona Cancer institute—my mom is enrolled in a Phase 2. --my mom was diagnosed wsith stage 3 Ovarain last year--after surgery and six months of Chemo (carbo platinum based) the cancer was back with a vengeance— after the Chemo returning she was diagnosed as carbo platinum resistant which basically means you have very limited choices (I.e. your pretty screwed)—
    The Dr. in Tucson started a Phase trial with Gennetach (he actually came to Gennetech with the study)—study combines antibody treatments using the combination of Tarceva and Avastin—-previous treatments were cytotoxins attacking the white blood cell count and basically kicking the living shitt out ofthe patient—
    After two months of being in the study my mom’s CA 125 levels have taken a solid turn down and she is having some good results —--she also has a lot more energy and less side effects vs. the traditional chemo (made side effect has been a terrible rash —-and I mean terrible)
    These treatments (avastin and Tarceva) were previously targted towards other cancers e.g. prostate cancer--basically a lot of Doctors l using the antibody treatments in combination for better alternatives to the cytoxins—
    This Doctor/head of the institue is a great guy and I’ll have about 30 minutes with him today—-
    I wish I was better versed on the MEDX story etc. Please let me know if you have any points or direct questions regarding MEDX and its studies as well as the antibody treatments—this guy is the top in his field regarding cancer research and could be a very good source—-I am happy to be a conduit for any questions you might have—--


  121. Damn Bill i should have made a bet with you that BCSI would go up $10!

  122. I never talk about how much we make trading options. Regular people simply can’t believe it and they always know a guy who’s smarter than me who got taken to the cleaners so I must be doing something illegal if I’m making money… It’s just not worth it. I tell people I’m a financial writer and they leave me alone. If they press me I start telling them how facinating it is to compare the fee structures of various mutual funds and they usually find an excuse to run away within 90 seconds!

  123. Any thoughts on LTD before earnings? It seems pretty beaten down and like it might pop on any good news in the release…

  124. cfc sold @ small profit on TS, must have been too tight but I was away – o well.

  125. non- show him this clip if possible

    ask him if MDX can be combined with AVAstin/ Tarceva, tell him that MDX should change the way cancer will be treated in the future and to please take a look at it so that his patients and collegues can benefit.

  126. SPWR
    gaining some speed!

  127. Phil- LOL you live in my world too. thats why i like it here.

  128. 11:47 am :-)

  129. Dragon, now that is a trading diary I’d like to read! Sounds like Darvas…

  130. Optiondragon-you were right on $10. We are now even on that drink. My Oct 65′s are doing well. So all is good.

  131. Thats why i like it here I love teaching and helping it boosts my Karma which is the true currency i am after.

    Hey Phil lets save the world, what do you say?

  132. Bill how about ZUMZ up $10 tomorrow will you take that?

  133. BBD:

    Probably run into some resistance between here and 215.
    If it clears that it should make another run at ATH at 225.
    Looking to sell half up a little from here and then stop
    the rest since I’m in Septs.

  134. People have the image that stocks, never-mind the derivatives, are a complete gamble… That drives me nuts…. I keep telling them that gambles are when the odds are against you… Stocks have the odds with you. They look at me like I just doomed the rest of my life… It’s really frustrating.

  135. Uh i take that back how about $5

  136. Open Question to anyone here … looking at the candlestick charts on, what is the difference between the solid red bars and the solid black bars? ~ Thanks very much ~

  137. Optiondragon- yes
    ALBO- ditto my short term was $213 to $215 , longer much higher (I hope) LOL

  138. D. Michael- its sad really and then they go to the casino to lose all thier money with the odds stacked against them. i get that all the time, they just wait to hear that you’ve lost all your money just like their “smarter” friends. it shouldn’t frustrate you if your hopping in your Ferrari though. :)

  139. $5 Bill not 10 will you take that?
    i just looked at the chart and think that it would be a less prob.

  140. Phil, Option Dragon, Option Sage, or anyone, I know you’ve stated some good books before, I looked this weekend and couldn’t find them. Hope you can give me two good option books thanks

  141. GOOG
    running up!

  142. Dragon, what is the “training block” Key mentioned. Did you post an article ?

  143. PHIL
    You mentioned new plays anything catching your eye or waiting for a pullback?
    ZUMZ- no problem Optiondragon

  144. Nonsequitor, good luck to your mom in her treatment.

    Dragon and Phil (and Happy too), the way you are going, you can just buy the world soon and then save it that way.

  145. Anybody buying GOOG here?


  146. building good karma, smart man, optiondragon!

  147. LFG up 5%, FAF & FNF have yet to get in gear; writing the LFG Sep 60′s @ 2.7

  148. Ferrari is very nice… Can’t afford it yet though… Not unless I liquidate half of everything :/.
    But I wouldn’t this either:

    Then again, both is an option when you’re successful.

  149. ZUMZ-OptionDragon, trying to analyze your strangle plays. You recommended earlier, as a new play, to buy the 50 calls and the 45 puts, with a 2.5 dollar weight.
    That would be 30 calls for each 10 puts, right?
    In this situation, assuming that we have a 30% volatility crush tomorrow, which seems reasonable, then your break even points would be $36 and $52, anything in between will lose money. Am I missing something or do you feel comfortable with these odds?


  150. dooog1,

    The best one is available under the education tab on the top of this page. Available free to us courtesy of the author himself, Optionsage.

  151. Fast Eddie:

    I believe that’s when the bar is lower for the day (or time period) but closing higher than the previous day.

  152. nonseq – best wishes to you and your mother!

    BBD, Dragon –

    Have you guys come up with any option plays on VMW yet?


  153. On exotic cars,

    A buddy of mine has a Lamborghini Marciellago. I went with him the other day to pick it up from the shop. Repair bill for the clutch was $17,000!!!!! Thats right $17,000!!!!! Definetly not worth it.

    I have a semi-exotic car. AMG SL-55. I’m over it. Unless youre single, too much to spend on a toy.

  154. Dragon -

    I edit books on karma for a living. I’ll gladly share whatever I know on the topic for a fraction of what you know about options. :)

  155. appreciate your response Nadir, thanks

  156. I smell a sell off.

  157. Feels like a selloff on its way

  158. “BMY Jan ‘10 $30s, basis $2.90, now $2.85
    Sold Sept $30s for .65, now .60
    We just took these yesterday but I love this trade!”

    Phil, do you love this trade enough to take it at a 3.10-ish basis and sell at .50? Wondering if I should wait for better pricing or just take it and realize I have over 24 months(!) to sell calls?

  159. “options as a strategic investment” by mcmillan is a great reference too dooog1

  160. VMW-those OCT 70′s can be split. But doesn’t hurt to wait

  161. For anyone interested, SPX 1462 and 1485 are fibonacci retracement levels of the entire decline. I expect some resistance at these levels. In fact, I would not be surprised if we go test the lows before resuming the uptrend can resume.

  162. Happy/optrader -> is $513 the Maginot line for Google today?

  163. 1462 is Fibo 50%. Amazing that it is exactly where we stopped today!

  164. market
    a little unstable, some profit taking; but, both Nasdaq and SPX are above their 10-day MAs. Don’t panic! I’m locking in some profits, though.

  165. thedraz: just glanced at a couple of charts, and that looks right – thanks for helping me out.

  166. And 1455, where we are sitting right now, is the 200MA, which has been key sup/res lately. We are at a juncture right now, might get very interesting.

  167. Optrader, What lows do you think the SPX will go to?

  168. Should we do a quick pump and dump SPY put option after it retraces a little bit higher?

  169. Phil, what do you think of ETFC and NSM as long-term buys? Both have been beaten down badly in the last month.

  170. COH-someone quietly trying to sell thier stake.

  171. thanks Option Sage

  172. COH – yah looks like someone dumped over 200k shares on market at 10:46

  173. Found support for the second time today 13170, looks like the big boys are testing support levels of the day…..need to get over 13190 and head back to 13220. 13170 has thin support from 17th, 21st, today.

  174. D.M, I think we will retest last week lows. I know it’s a stretch, but I don’t really believe in V bottoms. But nobody knows, and I will change my mind if we break key levels to the upside. You have to be very open-minded in this market. My feeling right now is that we need to pullback a little bit from overbought levels, then it will be interesting to see what happens when we retest 5MA’s.

  175. OptionDragon,
    I always read your comments with interest. You are a good trader, and I appreciate you sharing your trades and ideas with us, so that we can all share in the wealth of your knowledge. May good karma continue flowing to you and all of us.

  176. Opttrader … was looking like FMD for a while. Good points on support / resistance.

    You remember my fractal guy … he is looking for close over 1455 as bullish (short term), w/ big up move possible.

    Optiondragon … you are amazing …. please keep the ideas coming; need to learn more about how you do it.

    Financials still dragging us down.

  177. Hey I’m back! Had to run out for a few that turned into a lot… Looks like I didn’t miss much.

  178. Cap, I agree, 1455 is key here.

  179. BBD:

    Stopped out of ISRG up 35%.

  180. Thanks Optrader and OpSage: I bought way too many QQQQ puts the past two days (kept adding) – big mistake. I keep thinking/hoping we retest the lows. Even if we do retest the lows and I come out all right, I will still feel I made a mistake (and hopefully learned from it) by taking on way too big a position. I have had my stomach in my throat all morning watching for resistance to be violated and having to take my lumps. Everyone elses optimism didn’t help my confidence either.


  181. any thought on trading the VIX? Its fallen quite a bit in last 2-3 days – maybe to hedge a long port?

  182. ALBO-nice
    Nat Gas-getting killed again
    Pound below 2 to 1 ratio, guess I can go back to London

  183. Greg, I am loading with Q puts as well, if it makes you feel better, bought more this morning. Most of it is protection to my Leaps though, even if at this point I am weighted to the bearish side. Do you have some calls as well? You should not be naked in this market.

  184. I’m thinking of buying SPY puts right now, is this a bad move?

  185. More important, you should not have a position so big that you are not comfortable with. Position sizing and money management are very important.

  186. Evaporating premiums cost me 25% of my PSW account value. That’s a big ouch.

    I can’t say PPSW posters didn’t warn me though. Will I ever learn?

    I like BKUNA TOL KBH CTX RYL CFC put plays today though. I’m trying to beat pricey spreads right now. So far I’ve gotten KBH Jan-20 puts for 1.25.

    Internet connectivity at work is completely down so I’ve been out of the action the last couple days. Not sure how much longer that will last (it’s business Qwest BTW, they have lost service to pretty much ALL of Seattle for days on end, not exactly promising service performance…)

  187. Correction, I bought spy puts, Are there any points of support that I should be aware of?

  188. Optrader thanks for those spx levels….
    Do you know of any charting site that allows you to draw the fibo levels
    automatically ?

  189. and stopped out. :/

  190. Optrader: Position size and money management are the lessons I hope to take away from this “mistake” even if I end up making money on the position. I have 2 long stocks that are 40% of portfolio and 2 LEAPs and are under 10%. With all these QQQQ puts I am still weighted bearish.


  191. Listening to CNBC all day is a job in itself. Arguing with my TV cant be healthy. GOOG and AAPL held up during that short sell off, i like this afternoons possibilities.

    GM closing plants, housing, mortgage, banking and retail. How many jobs will be lost in the coming months. Question of the day. Toyota needs to come out with reassuring news.

  192. GM ramping up to build 60K Volt plug in hybrids that will actually be affordable for normal people (~$30K) AND cutting back its large truck and SUV facilities.

    Can it be?????!!!!!

  193. Does anybody here use VMW at work?
    Some of my coworkers use it and it seems to show promise if only because
    it has the potential to save money on hardware. It would really be interesting if
    distributed computing as we know it goes back to silos and mainframes with
    virtual machines instead of clusters everywhere.

  194. VMW is not new entirely… I think Sun uses similar technology as well. But their Java platform is terrible for the consumer and everyday use.

  195. ADBE trying to break thru 50 and 200 MAs.
    Maybe there is some life in that old dog after all.

  196. Anyone know about TXN? Seems to be doing that slow steady build thing.

  197. JE, if you read the GM article all the way to the bottom, you’ll see:

    Creating a high-volume, plug-in electric car with a lithium- ion battery within three years may be impossible, said Menahem Anderman, president of Advanced Automotive Batteries, an industry consultant in Oregon House, California.

    `Totally Ridiculous’

    A 60,000-unit target “is totally ridiculous at this point,” Anderman said in an interview. “To reach that level by 2010, they’d need to be placing the orders right now.” If GM proceeds with A123 as the main battery supplier, “they would be doing it with a company that has no experience in high-volume manufacturing on such a scale,” Anderman said.

  198. Books – yeah we were supposed to have a book club but we forgot all about it. We should work on that again with new members coming in. If people would please make additional book comments under the “Book Club” post about any other books, I will turn them into proper posts. Thanks.

    New plays – I’ve been worrying over the LTP – there’s a new post up on the first half so far. The problem today is we opened up 100 and died here so there’s not much to trade off. Oil is once again pulling the brokers under with it and I’m concerned that the brokers really can’t take a bursting oil bubble on top of the bursting housing bubble and we are still too dependent on the financials to move on without them.

    Best of luck today Non-seq. My Stepmother has been terminal for 10 years now and has been given 3-6 months to live pretty much every 3-6 months but we keep at it and Tina and I just kissed her goodnight at my cousin’s wedding at midnight on Saturday because there was no way we could keep going like she was that evening. It’s differenct for everyone but I think attitude is everything – she refuses to quit and she gets up every day and goes to work (BOE administrator) like a badge of honor, no matter how she feels and I think that keeps her going – the daily challenge she sets for herself. I would say the psychological is as important as the physiological, don’t neglect either and don’t forget to enjoy the time you have…

    LFG – up nicely but I never got filled on the very thinly traded ’10s. 8-( I only like these as hedged plays, not naked as the reality of the housing market still sucks.

    There’s only one car I want:

    Karma – my wife and I always teach our kids about karma, it’s a little bit of cosmic physics I like to point out whenever their actions cause them to reap what they sow!

    Sell-off would be a huge disappointment. A lot of effort has been put forth to tee up this market for a big day and I will be very surprised if we end with a whimper instead of a bang.

  199. Tommy
    Hardware is only one thing. Another savings is electric/AC which the techies do not see. But Believe me the C-levels do. LOL THUS THE ROI

  200. Fish, I hear you. I’m just amazed that any of the US car companies are coming around on this stuff. I think it’s great — let them think TOO ambitiously for once.

  201. Bought STP sep 40 calls @ .60 for a potential breakout on broader mkt move. Daily chart looks good.

  202. Phil,

    This is the perfect motorcyle to accompany that aquacar

  203. All the best and health for your Stepmother. If more people had that kind of determination, the world would progress a lot faster.

  204. Heres the car I dream of:


  205. BCSI- up 26% crazy

  206. BCSI – been doubling down on puts as a gamble play. Hope I’m right and comes back down by the close…The rise is ridiculous…

  207. I got you BBD..I’m starting to regret watching vmw at 51 and sitting on my hands :)

  208. Been range trading some of the I-banks past week or so. Mostly LEH and MER. Going long the sell-offs has worked consistently. Absent really bad news, these look stuck in range. The other way would work well too. Example … LEH opened up 59 ish. Traded down to low 56′s . Now 57.50. Bought the low end of that range and now out.

    The sell-offs are not sticking in the absence of a full blown market selloff. In what is generally an up market, they bounce back nicely.

  209. Phil, my CHL calls are up nicely. Do you think now is the time to sell sept 60 against my dec. 55? Thanks.


  210. Investment club ?

  211. PALM has been real weak since yesterday morning.

  212. ?????

    Did anybody catch da 5 day 15pt move in FCX? Does it still have room to run or does it sit or flip?? Strange markets !!

  213. JOYG – Who was watching that besides me? They’ve been beat down but did they reverse at key support? Almost doubled BUCY move today. Any plays?

  214. On Jeff Macke’s comments on ZUMZ,

    Despite the run-up pre earnings, the street is still bearish, according to the sentiment indicators, put/call OI is 1.2, (higher than 93% of the reading in the past year) and Short interest is 10.8. There are still a lot of buyers out there to continue the run up, if earnings are good.

  215. Is there DNDN news or is this just a random blip?

  216. mrvl – phil I bought in too early on 09 25′s and rode them naked down & back to even just now. How should I play with earnings coming?

  217. Book Club suggestion: Pit Bull / Marty Schwartz.

    Optiondragon, I think you would love it …

  218. Nadir ZUMZ headq is up here and we know the zumz story well Xtreme sports is a big trend!
    My bro used to work there and back in the day it was one of the coolest spots to shop, still is.

  219. bob812many
    Of course I did, I secretly bought some on Monday as people are sick of me talking about this and PCU

  220. BBD --

    Some of us are hanging on your every LOL. Post away!

  221. Dragon,

    ZUMZ sep call 50 is a good play ?

  222. Book Club

    Fooled by Randomness/Black Swan – Taleb
    Intelligent Investor – Graham
    The only three questions …. – Fisher

  223. Lithium- I completely agree about the Taleb books. They are outstanding!

  224. Dragon, you never answered the following message. Could you please let me know if you agree on the numbers? Thanks.

    ZUMZ-OptionDragon, trying to analyze your strangle plays. You recommended earlier, as a new play, to buy the 50 calls and the 45 puts, with a 2.5 dollar weight.
    That would be 30 calls for each 10 puts, right?
    In this situation, assuming that we have a 30% volatility crush tomorrow, which seems reasonable, then your break even points would be $36 and $52, anything in between will lose money. Am I missing something or do you feel comfortable with these odds?


  225. Pit Bull is a really good book — I second that recommendation. That book taught me a whole lot, particularly how many structural advantages there are to trading futures and options on futures, in addition to equity options. Before I read the book, I never knew that (1) in a futures account, you can use treasuries as your primary performance bond, thereby ensuring that you start your trading year already up by the risk-free rate (that’s a nice little cushion, and your broker is not allowed to tell you about it, because when you convert your cash to treasuries it costs his firm the interest rate spread on your trading capital!), and (2), unlike in options, all short-term gains on futures and options on futures are taxed 60% long-term/40% short-term. It pays to incorporate futures, but only after you have done a lot of learning and have a firm plan. as a result of this book, I now do all of my index option trading in the futures market, to benefit from the tax advantages. It can really add up!

    I also recommend the three “Market Wizards” books (obviously), Heiserman’s “It’s the Earnings that Count” (for the fundamentally inclined) and Dronby’s “Inside the House of Money”, to name just a few.

  226. people experiencing crashes – i’m pretty sure there’s a script for greasemonkey that saves the contents of your comment box before you press the submit button that would probably help you guys out a lot since psw does occasionally hiccup. you’ll never lose the contents of another post again since it automatically backs things up.

    in fact here it is. firefox users only –

  227. Question for the momentum traders / tech analysts here:

    Do you go long AAPL here ?

    This chart pattern suggests that maybe you do.

    Emman, you are the AAPL expert, what say you ?

  228. keep it coming guys, I’m up-armoring the ‘investing’ shelf of my living room bookshelf.

  229. CROX- interesting little selloff

  230. set-ups…. traders that are successful and active please advise to the most consise setups
    1. Trading Platform
    2. Charts that you run on above?
    3. most effective way to monitor?

  231. “the technical analysis of stock trends” Grahm and Dodd

  232. We are just stuck on this 1455 line.

  233. BMY – yes, it’s so cheap on the leap that it’s almost bullet-proof. I think I’d hold out for .60 though but if it starts touching .35 again (it did briefly yesterday) then perhaps give up and take .40 but don’t worry about missing it as you can still sell the $27.50s for a good premium.

    GOOG – probably retest of $515, I’m opening Dec $530s at $26.50 to capture earnings and will look to sell $520s or possibly $510s as downside mo plays if we get a rejection at $515 or $520 (I will sell some $520s at $520 even if it does look strong, hopefully for $15). XXX

    Market is following pattern I predicted earlier in the week with bulls and bears herding it into a channel between 130 and 132. There’s a LOT of money to be made here but we have to morph into swing traders, which will require an attitude adjustment once we confirm the range.

    Oil making it’s usual BS run up but it would be really nice if they can’t retake $69.50!

    ETFC – after this morning’s discussion you dare to ask me how I feel about these bozos? 8-)

    NSM – could be ready to pop over $26.50. Not in a good option position though. TSM has a much better chance of rockin’ and rollin’ and they are conveniently at $9.96. I like owning the stock and selling the Jan $10s for $1.20 for a 13.6% return or buying the ’10 $12.50s for $1.73 and selling Oct $10s when it weakens, currently .65, pretty nice coverage! XXX

    COH – getting very tempting down here. They are executing a very good but very expensive strategy and I’ve been waiting for a bottom since the Spring. My target was $40 but if they hold up here I’m going to start building a long position. I’m hoping to pick up the ’10 $40s for $10 but they are not so bad at $12 for an initial entry. $45s can be sold for $1.12 and there are 28 sales ahead of us!

    Note the picks I am making are ones I will be happy to buy more of and DD if the market drops another 1,000 points. I’m taking no more than 50% positions (mostly 25%) on anything right now but there’s no reason not to play a little if we can pick up sensible hedged positions.

    Oil running into sellers at $69.50, this will be a fun 30 minutes…

    Index puts – I have not as yet rolled my remaining DIA puts but I took a hit on both ends as the VIX drop trumped a 100-point rise in the Dow. I rarely play the Qs as they simply don’t move enough to give me a jackpot in a day and that’s all you can count on with these things. I will spend .30 to roll to the $131 puts in the DIA but this is just a robotic tightening as the only way to win at an insurance strategy is to always be insured. By ratcheting up on the downside I force a squeeze that either pays me for a pullback or puts my October calls into the money, where the crashing VIX will be less of a factor. I’m also considering selling some Sept $134s as they are outrageously priced at $2 and I am well covered to the upside with my other calls.

    An VIX call is a good hedge against long positions as it has only run up when the market turned down. It has the added bonus of paying out if we have an insane run-up as well but I’m waiting for 20. I already sold some sucker the Sept $30s for $4.50, now $1.50 and I still won’t buy him out (I feel so evil when I’m doing it to someone else!).

    I don’t see this fascination with Q puts. What besides “what goes up must come down is the premise?” Goog, Apple, Rimm, AMZN, EBAY, SOX… what weakness are you playing for?

    Evaportating premiums – I hate to say I told you so but I will say I TOLD YOU SO because maybe next time you guys will believe me. If you don’t trust anything else I say please, please, please belive me when I tell you that premiums are too high as it’s a stealth wipeout of your portfolio. The reason I’m getting into buying again is because of the premiums finally coming down to more reasonable levels but notice I’m only taking hedged positions as I want my caller to deflate with me.

    CFC – getting back to reality.

    GM – if wishes were fishes…

    TXN – I like all semis right now as I see corporate spending moving up.

    LEH killing 1,200 employees around mortgage units, if the market shakes this off I’m very happy.

    Oil closed at $69.20!

    LOL – what a coincidence with that comment by Fish! That had to be some subconscious thing as I scrolled up… Meanwhile, there is not no experience at GM. Check out the morning action on QTWW, this would be the company GM would most likely turn to if they try to pull this off.

    Cool bike but I am holding out for the flying car. Ah, there it is, thanks Greg! That’s one technology I don’t think I’ll be an early adopter on – what a silly way to die…

  234. Book Club recommendation – Bankruptcy 1995. It was written prior to 1995 and obviously dated, but it gives very good info on the social security crisis, and it is a quick and easy read. Even better, it can be found on the Amazon used section for just a few bucks.

  235. does anyone really believe NFI can stay solvent?

  236. AAPL-Cap, I am still very bullish, with huge Leaps position. Trend is obvious and it is up. Being very careful though because of market, and every time I see an opportunity I buy some puts with tight stops as protection.

  237. “come into my trading room “- alexander elder

  238. Book Club

    Anyone like Elder’s books? Welcome to my trading room etc. Anything by Brett Steenbarger. I am biased toward Psychologists.

  239. Phil reading a LOT from you about “overpriced” how do you value that? experience? formula? percentage? that would help me to see where you are coming from.

  240. Optrader sorry was busy actually trading.
    I strangled already half of a free ride from a profitable ZUMZ buy yesterday.

    Ah, yes, you assume incorrectly depending upon the time to expiration. Since we are far away from expiration an IV crush is lessened if price stability occurs in the opening range. Take a look at BCSI chart for the options to get a good look. The MM or options IV then says wow nice jump so you mean you are going higher even after earnings therefore instead of a 0 to $1 for time value and IV they stabilize it to $2-$3 time and IV from maybe a pre earn level of $3-$5 sometimes higher depending on sentiment too, it collapses but at slower stable rate then reaccelerates at a more stable pace than during optionexp.
    also dollar weighted means $250 call to $100 put.

    Books I like and think everyone should read

    Trader Monthly Mag- new one is awesome, only serious traders, inside knowledge
    Trade Like Jesse Livermore- any of his books are really good
    Reminiscences of a stock Operator- about Livermore trading as a teenager in early 1900
    High Probability Trading- Marcel Link
    No Bull- Michael Steinhardt
    Jim Cramer’s Real Money- all his books very good
    Lessons for the Greatest Traders of All Time- must read and read every trader’s book inside
    darvas books
    William O’Neil Books
    The Alchemy of Finance- Soros- one of my alltime favs, any of his books are great
    Warren Buffet Books

  241. Amazing volatility squeeze on the market. It will be powerful when it breaks.

  242. optiondragon,

    monday a.m. you mentioned a “new IBD list” – FTK, VDSI, WNR, POT, etc. was this your watchist from the weekly 100 or something else ? thanks.

  243. Cap-I would follow Optrader on APPL, he has done great. That said I entered and added today

  244. Thanks, Phil. Your customer service is the best.

  245. Yes weekly 100
    IBD is a must read.

  246. rd2.0
    Re: Dragon’s straddle “training block”.
    Sorry if this has been addressed but I just got back from a meeting.
    There was nothing specific that I know of. I was referencing the past couple weeks of posts where Dragon has been kind enough to share his thinking in the moment regarding trades he was setting up on plays like WYNN, PCLN, and a couple others.

  247. Dragon, Thank you for your answer. So do you believe that there will be no IV crush at all? Even if it is the case, break even points in a new position (I know you already bought one leg, but I am working on the new position) should be around $37 and $51, do we agree? Just want to be sure that this is what you would be shooting for.
    Also, in your strategy, what is your contingency plan is the first leg goes against you pre-earnings? Do you still enter the strangle for earnings?

  248. “Trading for a Living” by Eldr with the work book is very good.
    Also “Fortunes Formula” by Poundstone is a very entertaining read
    which discusess Kelly criteria and its relation to a host of subjects
    including Thorps hedge fund and LTCM.

  249. CHL – I’d let it run (nice play, by the way). They are the most likely target for Chinese investors allowed to invest in HK-listed companies so they could go hog wild if they break out over $60 but maybe sell 1/2 if they fall back below $60 as the last rejection was a bitch.

    JOYG – damn, I looked at them pre-market and was surprised they weren’t moving and forgot about them…

    MRVL – if it were my buck to protect I’d sell 3/4 the $17.50s for .82 and then resign myself that rolling even for 4 months sure beats losing but I would never have bought the $25s in the first place as the chance of the company gaining 50% in 16 months is pretty slim.

    You go long Apple because it is one of the best companies on the planet, not because some wiggly lines seem to be making a pattern…

    I recomment The Decline and Fall of the Roman Empire by Gibbon and The Great Crash: 1929 by Galbraith but, then again, I’m a fundamentalist…

    Overpriced – so many factors involved I have to say experience. That experience though, comes from years of being a numbers geek and internalizing all the formulas so I no longer think about them when I look at an option tree. It’s a profession and it’s kind of like asking a surgeon if he just cuts away or is there a cheat sheet…

    Actually trading – Dragon how could you? 8-)

  250. Phil, good point…where to reference the formulas that you found most useful?

  251. Now it is time for the FAF $45s at $1.75 if you want a mo play. XXX

  252. Phil,

    Do you mean FAF call sep 45 ?

  253. Lith- I love those books too. Trading for a Living is a classic. I am just starting on Dr. Brett’s books but I am wondering if it ain’t broke don’t fix it. sometimes worrying about worrying is just as bad.

    At the highest levels of this game it is all psychological. Alot like a Star athlete.
    In the end thats why I say self made non computer driven traders have a certain personality thus psychology plays an ultimate role.

    Trader Monthly mag’s trading coach says that he believes overconfidence is usually the last hurdle for a great trader. makes perfect sense. the Icarus theory.
    Staying humble and grounded is important.

  254. julian Robertson’s books are very good too.

  255. Phil, interested in your opinion on the $$ trading back down today. I’ve been following it as a potential tell on equity direction, as it supposedly traded up recently on repatriation activity. I wonder whether the down day is an indicator of repatriation activity slowing, or of the fact that more and more experts are expecting a cut on 9/18, or something else entirely? What do you think?

  256. Couldn’t help getting more into CFC Buffet or not. CFC Sept-15 puts for 0.90

    Can someone please explain how stupid this is so I will stop?

  257. INFY – I made a few (nice) bucks buying INFY Sep 45 Puts when they were $0.35 and sold most yesterday at $2.40-$2.50 yesterday. Looking at Oct Puts in INFY and CTSH.

    I am currently in India financial media here and especially TV (local CNBC TV affiliates, BBC-Asia) routinely are calmly interviewing bigwigs who are talking of a 10-15% correction to come in the near future. They always say more in some EMs and likely less in India due to less GDP dependence on exports but they all seem to almost calmly saying in unision WAIT-WAIT-WAIT rather than the US bubblevision saying the opposite! They all point to various degrees that the US led credit markets squeeze/freeze and it leading to an eventual global markdown in stocks as if it were almost inevitable…Like Phil said on his EU travels, traveling somewhere physically opens your mind to a totally different worldly perspective!

  258. Anybody playing GME for thurs

  259. Optrader- Usually I have a bias going into it and trade around that thesis. So it is much more complicated depending on factors. I am not a lit major or journalist just a bad ass trader loving to share ideas and make money so I have a harder time articulating exactly how to play this or play that, one day a blue print works another it doesn’t, gut feel has alot to do with it as well as past techincals. Alot of factors.

  260. I suspect the appeal of the Q puts is that the premiums seem cheap compared to the DIA’s (Sept Q 46′s @ .63 vs Sept DIA 130′s @ 2.30) – and if option premiums are still very “Overpriced” – and since many of us are not blessed with Trading Superpowers and aren’t sure exactly what is going to happen next – they seem like the least risky way to protect our long positions.

  261. Phil if you liked the rise and fall of the roman empire you might like the Making of the Atomic Bomb is a fascinating read. On the lighter side, Peter Mayle’s A Year in Provence — even two weeks in the Luberon valley is a priceless experience — is a great book.

  262. Formulas – I don’t even know anymore it’s been years but look for sites that teach “Greeks” or “Black-Scholes Calculations” and volatility formulas. I’m sure there’s probably a good technical book that covers it but I’m not talking about USING calculators, I’m talking about learning how to do the calculations on spreadsheets and in your head as that was how we did things back in the old days!

    FAF – yes, whenever I say $45s without a month I mean the current month. There’s only so many times in a day I’d be willing to write Sept…

    I find Dr. Bretts books and site to be most helpful in reminding yourself that you can get caught up in things and that many “investment decisions” you make are being made for reasons that have nothing to do with investing. Recognizing that is the key to being a professional trader. Again, it is like surgery, years of practice to develop a professional detachment…

    Dollar down means no one wants it. We had a very weak treasury auction this week with poor foreign participation and the weak dollar drives the market up as stocks are a commodity too. Expectations of a 9/18 cut also contribute but I don’t see the Fed actually cutting – the question is, how disappointing will that be (and during expiration week no less!).

    Looks like I’m getting my big finish!

  263. So I’m getting a little worried with my equal number of ZUMZ Sep 45s long calls and Feb 50s short… any suggestions for last minute fixes with ZUMZ at 47.5 right now, assuming I’m still bulling on earnings?

  264. mSquare — I like EEM puts as protection from all this “rallying” !!

  265. Here we go … seems like financials, oils only.

  266. NVDA- I added
    GME- took some off today as I bought some below $40

  267. Book Club


    When Genius Failed
    Liars Poker
    Smartest Guys in the Room

  268. Nadir ZUMZ baby!

  269. Phil --got it, but as a novice (after months) I still have to start somewhere, so that I have something to internalize or something to put into a spreadsheet so that I can practice and learn

  270. Hello all, back from my 3+ week hiatus. Got some serious reading to do here to catch up plus all the piles of junk of other work that has piled up over vacation. I’m heading out again in two weeks for two weeks in the mountains of Colorado so I should be caught up by then. It is good to be back though.

  271. biodchris –
    just finished peter mayle’ s ” a good year” – light reading but similarly enjoyable to “a year in provence.’


  272. CFC – I have the $20 puts. There is no Buffett bail-out, see yesterday’s extensive comments.

    Thanks MSquare – I took my eye off the ball in India, feel free to update anytime! They are a lot more mature than the other EM’s and I would take their caution very seriously.

    Q puts cheap – Holy cow that is so not the way to look at things! The QQQQ Sept $46 put at .58 with the Qs at $47.59 needs a 4.5% move in the Qs to put you in the money while a DIA $130 put at $2.15 with the DIA at $131.97 needs a 3.1% move to put you in the money so you are actually paying a 50% premium to the DIA puts to “save” money on the Qs. Since the chance of a 4.5% unidirectional move in the markets is probably 1/10 that of a 3.1% move, you are literally flushing money down the toilet with the Qs. Forgive me for making an example of you but this is one of the most serious mistakes option traders make – price does NOT equal value!

    BDC – I’m still catching up on my Harry Potters!

  273. WOW what a different tone on the blog today. Amazing what 700 points does LOL

  274. Just got in from taking kids to first day of school and somehow it took two days….go figure

    Phil, has CCJ found a bottom here? Any Leaps on CCJ?

  275. Thoughts on AMZN please, thank you.


  276. dday97 welcome back!

  277. Phil,

    Is now a good time to cover CCJ and UTX leaps or do you think waiting for them to go up higher is more appropriate? I’m still trying to figure out the best time for entry and exit for these callers.

  278. Dragon,

    Zumx living up to its symbol, zooming

  279. Dragon, thanks for zumz. However a part me say buy on the rumor and sell of news…I’m holding on with no seatbelt on this one…

  280. Anyone see the JDSU run today?

  281. Welcome back Dday! If you have a place for club questions to be sent I think people are way backed up…

    VIX crashing!

  282. So VIX crashing means get ready for the next whuppin’ for the “I told you so lesson” on the price of volitility crush?

  283. Dragon, does RealTick tell you in the Watchlist when each stock in your watchlist has Earnings due?

  284. Crazy CNBC sound effect,

    I thought my TV was going to transform and drive off

  285. KC
    Haven’t seen you around. Your PCLN is doing great. Congrats

  286. pathetic volume in INTC, MSFT and CSCO today.

    Don’t understand the recent rush to high beta stocks such as RIMM and BIDU. Probably an easy way to suck in more buyers into the market.

  287. 700 points – I’m telling you it’s this chair!

    CCJ – I have the leaps and I endorse the leaps and I love this company. I have the Jan ”09 $40s, which are up just $1 today at $8.60 so I still like them.

    AMZN – too rich for me but I wouldn’t bet against them.

    Cover CCJ and UTX – not unless the market pulls back. Still looking for my 13,250 breakout.

    FIZZ flying today but I lost interest in it as it goes up and down for no reason.

  288. Happy: should I roll my LVS 95s up to 100s?

    i.e. is LVS going to test the recent 105 high?

    “If you didn’t grow it, you had to mine it”

  289. Phil,

    Investools has the capability of displaying over-valued/under-valued option prices. Do you think this is a valid mechanism for evaluating the options?

  290. VIX – well going from 25 to 20 is not going to be as painful as 35 to 25 has been for your premiums. Also, on the call side, demand will begin to factor in if we start breaking up but the VIX can go back into the teens while the market goes back to 13,500.

    PCLN – I got out yesterday, made ridiculous profits, couldn’t take it anymore!

    It costs $10Bn to move MSFT up $1 which is 50% retail owned while it costs $1.5Bn to move RIMM $1 but it is only 23% retail owned so just $400M of retail buying will do it while the insiders stand pat. While I like to say “those bastards are manipulating the market” there are sound, underlying fundamental reasons for these things as well…

  291. Phil, always nice to get those ridiculous profits.


  292. I wonder how many mortgage brokers were dumb enough to put themselves in ARMs. They’re all losing their jobs now! (Though I guess the good ones can sell any sort of widget and do fine.)

  293. STP above 36.00, printing a very pretty candle on the daily, could be nice tommorrow

  294. Over/Under valued – I never look but as long as they apply a consistant measurement (and their stuff is usually good) then it makes a great guidline but just because a position is undervalued doesn’t mean it it’s a buy. They show the GOOG $550s at 38% undervalued but I very much doubt you’ll get your $2 back on that one at the month’s end. I think it’s very funny that they list the $420 put as 2,095% overvalued at .25, seems kind of arbitrary at that level…

  295. Optiondragon, I have BCSI sept 60 calls, should I take profit and roll to Oct?


  296. Wow, this day is ending much too soon – we’re having fun again!

  297. Seems like a big pivot point right here. Do we pivot down or push up through it ? Tomorrow will tell I guess.

  298. THE CHAIR- I am glad you are back in it.
    PCLN- not yesterday but ditto.
    ZUMZ- goodluck to all YOU guys. I am gone.

  299. BillBigD – I’ve been here but just lurking, nursing some postions that are in less than ideal shape. PCLN – I closed out the position last week when my caller gave up most of his premium; wish I’d held until this week. I’ve considered getting back in but very cautious right now, given my still bearish outlook but bullish environment. Congrats to you on your VMW & BCSI plays.

  300. ZUMZ – nice beat and guided up.. but guided up to midpoint of where Street already had them… we’ll see what happens

  301. India – Right now there is quite some local political clouds – if the current coalition govt. has their support pulled out from under them (as it has been threatened) and early elections have to be called for (scheduled for fall 2009) the markets here will indeed take a big hit – as much as 7-15% and it will be time to buy good Indian ADRs on the cheap.

    This is besides the global events like yen carry and credit crunch etc. that affect all and specifically EMs. In addition the Indian Rs. is expected to get (even) stronger against the us$ and thus, I like the Oct Puts on IT biggies like INFY and CTSH (to a lesser extent). Also waiting patiently to accumulate IBN and HDB on a pullback (IBN below $40, HDB below $80) – I typically do this via selling the costly Puts but please do suggest better ways/options to get the same result.

  302. ZUMZ-Good luck to everyone here. IV was at 67% before market close on those, let’s see what happens tomorrow, it will be a good test.

  303. BMY

    Phil, many thanks for this one!! Great spread to add to my collection of KFT, UTX and GSK spreads. The KFT ’09 spread is paid for so any premium sold is all profit. I love these low cost LEAPS!!

    These spreads have held up very well in this downturn .. much better than my diversified “stock” portfolio which just got crushed. Glad to have shed everything BUT my spread positions.


  304. BBD:

    Guess I had my stop too close on ISRG. Got whipsawed.
    Hope you’re still in.
    Took VIP off my screen now that it’s a $20 stock.

  305. Another good day on Wang’s World!
    AAPL Sept 125 calls, APVIE, at $10.1, +58% (partially out)
    GS Sept 180 calls, GPYIP, at $8.3, +15% (partially out)
    POT Sept 80 calls, PVZIP, at $7.3, +22%
    GOOG Sept 220 calls, GOPIV, at $9.7, +38.6%
    AAPL Sept 125 calls, APVIE, at $10.1, +52% (all out)
    PCP Sept 135 calls, PCPIG, at $6.3, +21% (partially out)
    GS Sept 180 calls, GPYIP, at $7.6, +5.5% (all out)

    Should’ve kept POT and AAPL longer. Both could go up more, so, we’ll see what happens tomorrow.

  306. How bad can it be when banks have to be forced to take the feds money (discount window).

    PCLN i thought a few months ago that EBAY would want to buy them, guess not.

  307. LVS/WYNN
    Quarryman, both of these look good and should run higher if the market goes higher. What’s your reason for rolling?

  308. FYI. The release doesn’t give any reason for departure other than “to pursue other, earlier-stage entrepreneurial business opportunities, while remaining one of the Company’s largest shareholders.”

    optionsXpress Announces Executive Management Team Changes
    Wednesday August 22, 4:30 pm ET

    CHICAGO--(BUSINESS WIRE)--optionsXpress Holdings, Inc. (Nasdaq-GS: OXPS) today announced that David Kalt has elected to step down as Chief Executive Officer effective September 30, 2007. Upon Mr. Kalt’s departure David Fisher, currently President of optionsXpress, will assume the role of Chief Executive Officer and Mr. Kalt’s seat on the Board of Directors.

  309. Nadir, Does yahoo screener display the Earnings date?

  310. OXPS – damn, that’s one I would have liked to have bough in the AH market, fell all the way to $22 on that news. This move could actually precede a merger or buyout but may just be a founder cashing out as the forward projections start to stagnate…

    I have a dinner meeting, later all!

  311. happyTrading- do you really not have any losses?

  312. Andrew, I asked the same question yesterday :) It is just amazing. I don’t think I have ever seen him post any losses.

  313. rd2.0,

    Not that I know of, I use for earnings dates.

  314. Happy Losses – anyone remember MICC?

  315. Ok thanks Nadir

  316. BAC invests 2 billion in CFC

  317. CFC- WTF I can’t believe these people wouldn’t let it die.

  318. lol wangs only loss was the only trade I took out of him when he was free…. NE…. NOBEL ARGGGG. I was stupid and put too much into the trade…. I tend to do that when I believe in something.

  319. INFACT, I’m renaming Nobel’s Ticker to &!%#…

  320. I hope the CFC-BAC euphoria holds over night, I’m in Phil’s Sept put play and will probably roll to 09″s in the morning . Could make for a pretty good entry point. I can’t imagine 13B in new debt, in less than month (I know the 2B today was preferred stock), laying off a big chunk of your staff and your primary business being in the toilet, Not to mention the hit to there image, being very good for the bottom line going forward.

  321. Phil – you commented early this morning (9:42 am) “on index puts as an insurance investment… if it moves way against you, you should be stopping out.” What kind of stop do you recommend on insurance – 20% or higher? When do you suggest to roll Oct’s?

  322. Sorry about the run on, I was on my wifes tiny laptop in the car. I’m not sure but heard the 2B preferred equaled 24% dilution.

  323. WTF — Rangers beat Oriols 30-3…

  324. Phil,
    need some help on the best way to play it.. got kind of messed up buying more
    now i have 16 APPL Jan 180 calls with c/b of 3.6, today those calls have a bid/ask of 3.6 to 3.8
    should i roll over to 150 or just sell it since i will be almost even on the trade
    thanx in advance

  325. When you buy 10 LEAPs of say AAPL Jan 180 Calls and Sell 10 Sep 130 Calls against it, the broker requires a margin of (180-130) * 10 * 100 = $50,000 right?

  326. Andrew/Optrader,
    I really haven’t had any losses this week (well, since last Thursday). If you “really” want to follow my trades, check out the “Happy Trades!!” page. But, on the public site, that page is only updated in the evening everyday. I update that page as the trades are made on the member site. I have losses like everyone else. But, like everyone else, I’m not going to jump up-and-down and say “Hey, look! I’ve got a loser here!”

    If you questions about my trades, it’s ok. Even optiondragon used to question my trades, until he started refreshing the Happy Trades!! page once every few minutes. Now, I have a member’s board, and email alerts, things are much easier. But, a lot more work for me. I’m even trying to post the trades that I’m looking to make. :-D

    Vishal, if you’re a Wang’s World member, go to my public site, and click on member site to log in. Thanks!

  327. S&P up about 12 points AH on CFC news

  328. CFC,
    cap, yes, check out my post this evening! Take a look at the financial sector. Even XLF is getting a jump.

  329. Happy, I am not questioning your trades of course, I know they are real and I think we all know that you are a great stock picker. You just have a gift to find these momentum plays. I was just amazed at your results as I don’t remember seeing a loss posted here. I would definitely check your blog if I have some time (been pretty busy lately).
    We all have a tendency to brag about our winners. I think it would be much better if people would post their losses as well, or at least let others know when they get out of a trade, or where their stop is.
    Again, congrats for your big wins, this is really impressive, especially on RIMM. It has been an amazing week for you and you should enjoy it fully!

  330. rd2.0
    that is what my brokes does, but i heard it varies with diff brokers and the type of account u have

  331. ok thanks coolkid

  332. if you want to see something really awesome, check this out…

  333. Optrader, thanks! :-D
    The trades, good ones and bad ones, are all “posted”. They are all on the Happy Trades!! page and the records go back to 4/24, when I started publishing some of my trades. I actually rarely post trades here, especially now that I have my own member site. But, at the end of the day, when I see all those plus signs, it is fun to share. And, it’s not about bragging. I don’t think too many people share trades here just to brag. I do like it when people share their successes, because it’s positive energy. Also, I don’t see other people’s good trades as competition. I want to profit from their posts.

  334. some tidbits from

    Dundee, NavCan latest liquidity victims
    Dundee moves to assure customers that its finances are sound after revealing that it owns up to $400-million of now-unsaleable commercial paper 10:06 PM

    The U.S. Federal Reserve Board has resisted an emergency cut to its overnight lending rate. Here’s how past emergency rate cuts have affected the Dow Jones industrial average.

    1. Oct. 15, 1998: The Fed cuts the benchmark rate to 5 per cent from 5.25 per cent, in response to the Asian financial crisis and Russian debt problems. The Dow rebounds 8.1 per cent in three weeks.

    2. Jan. 3, 2001: Poor economic forecasts indicate a potential recession, so the Fed lowers the federal funds rate to 6 per cent from 6.5 per cent. The Dow continues to fall, dropping 2.7 per cent in three weeks.

    3. April 18, 2001: U.S. economy continues to sputter and the Fed announces it will cut the key rate by a further 0.5 per cent to 4.5 per cent. The Dow recovers 2.4 per cent in three weeks.

    4. Sept. 17, 2001: In the wake of the Sept. 11 terrorist attacks, the Fed slashes the rate to 3 per cent from 3.5 per cent. The index continues to slide, reaching a low on Sept. 21, but then soars 10.1 per cent by Oct. 8.

  335. CFC – Ouch! I am reminded of BSC and GS bailing out earlier sub-prime blow ups but it turned out they were trying to hide the mess they were in… Still, this is why we balance, the environment is turning damn bullish again and my portfolio just so happens to be extremely bullish with that being one of my only puts so I won’t cry too hard. Don’t think I’ll chase it either but I would take it as a mo play since I think they have a great downside. You’ve got to love the AH reaction, up 20% on a 7.5% loan that converts to owning 16% of the company at $18 a share – nice dillutive event down the road! Also, a 20% jump in price on top of the 10% recovery they already had pretty much guarantees Buffett wouldn’t touch them with a 10-foot pole.

    Index puts – I like to have no less than 15 days so I usually roll to 45 days at that point. It’s a different play when you are longer than shorter as the shorter ones let you do nice, tight rolls for .30 (on the DIA) per 100 points but a lot of it is playing by ear. This morning I had 400 DIA $130 puts and I could obviously see the market up 100 pre-open so I dumped 1/2 right away at $2.25, a .63 loss which left my basis on the remaining 200 at $3.51. As I said at 2:45, I was waiting to roll and it cost me another .60 to roll to the $132 puts so now my basis is $4.21 with the $132s at $2.62 but that’s OK because I still need to DD to get back t my original level of protection. That would put me back to 400 at $3.40, down 23% on the play – not too bad for covering a 150-point Dow advance.

    Don’t forget the idea of doing this is to allow me to ride out a dip back to 13,100 without stopping out of my calls. The real value of this protection is it gives me time to sit back and watch the action without feeling any pressure to cut my calls and there’s a great value to that. Like I said after I stopped out of my puts on Thursday, I felt very vulnerable with 20% of my portfolio invested and practically no downside hedge. Even on Monday I couldn’t wait to get rid of stuff, even though I felt the market may come back so I’m not such a clever trader when I’m unhedged – I panic just like anyone else!

    Since I know that a drop in the Dow in the morning will bring the VIX back up and increase the value of my calls, I don’t mind leaving them a little less covered (with 200, rather than 400 puts). Plus today’s gains also act as my cover. This is something very hard to teach – that a 5% gain in one day doesn’t need to be protected as long as you can accept the fact that it was a silly gain. If half of it goes away in the morning I am in no worse shape than I was this morning so I guess the rule there is don’t go out on a limb to protect BS profits (kind of like the Fed is doing trying to bail out homeowners who overpaid).

    Chuck Dow himself said “Take your losses off the table and let your profits run.” That’s really the simplest advice in running these plays. If I’m losing $10K on my index puts, I’d better be making $30K on the rest of my portfolio or I have the balance wrong.

    30-3? In my kids’ soccer league they are not allowed to beat the other team by more than 5 or they get a fine, maybe baseball should do that for Baltimore…

    AAPL – not sure I see the problem owning Apple stock but $180s are probably a bit out there. If you DD’d to get even and now you are even, mission accomplished – set tight stops and don’t blow it. I got stopped out of my sold $130s today and I think Apple is going to lead the Nasdaq back up (I think I said that already) but I don’t think they are going to blow $30 past their ATH by adding $50Bn in market cap (50%) in 4 months, even if they sell $2Bn worth of IPhones (3.5M) next quarter. You can’t sell short calls against Apple right now, perhaps at $140 they will pause and pull back into expiration.

    In that position I would take half off into the rally (assuming we have one) and set a stop on the rest that keeps you in profits if I were worried about the money. If it were a typical 2% position though and it was running up another $5 tomorrow, I would sell the Sept $140s or hopefully $145s for $6 against 1/2 of my calls and spend the $3 per contract to rolll my Jan $180s down to Jan $160s with lots of flexibility and October earnngs coming after expiration (so a roll is not all that risky)…

    $50K margin – yep. Portfolio margin accounts are much more margin friendly and most brokers require $100K or less to open them.

    World Clock – that is totally cool but depressing! Clicking the “now” button is fun while you ponder the meaning of existence… It’s interesting that 30 people a minute have heart attacks, that’s a bigger market than I thought, makes me want to take another look at Pharma.

    Profits AND losses – I think it’s important to discuss both as I recognize that I am a tool for members and, like any tool, I’m useful for some things and not for others. That means different things to different people but the more information the better so when I blow it I tell you and when I call it, especially when it’s something I think you may need again in the future like my call on the VIX drop crushing our premiums – I remind people that I told them so. It’s not gloating, it’s important because next time I see the same thing it helps you remember, “Yeah, he does know about that stuff.”

    Happy knows his mo plays, Z knows his E&Ps, Prof knows real estate, Cap knows financial services, Juliet and Opttrader have amazing timing, Sage and Dragon are great with complex plays… the more we get to know each other the more we can rely on each other as a team but playing together means learning each other’s streangths AND weaknesses – that’s how we can all help each other in the clutch.

    Fed – I think part of the problem with Fed cuts is that they are reactive and slow so they often come late, possibly after the crisis du jour has already passed. That’s why the effect seems random.

    In 1998, the Fed cut against the Asian crisis made as much sense as me handing you a check because your neighbor’s house burned down. Money was already flying out of Asia and Europe was getting nervous so our maket was going up either way. There was a 600-point run (7.5%) the week before as I remember at the time wondering what the hell the Fed was doing. The real story there was the Dow ran up from 8K to 11K in 7 months.

    Jan 2001 – we were flatlining at 10.5K and there was a misguided attempt to goose the economy but the cut made people think something was wrong. By March we corrected over 10% so the April cut had no brilliance to it, the market had already bottomed and was already recovering, up 1,000 points from mid-March. The rate cut gave the rally topspin to 11,400, almost a 2,000-point rally but it was so overdone that we fell all the way back to 9,500 BEFORE 9/11.

    Sept 2001 rate cut actually did make sense, just to get money flowing again as people were in shock (and nothing brings a trader out of shock faster than dropping money into his hands!) but the market had now corrected from 11,400 to 8,200 in 4 months so there was really no shock to see a 50% retracement. Next time something like that happens I’m going to go on the Tonight Show and do a voodoo dance and tell Jay I guarantee a 50% recovery and I’ll become the most famous voodoo stock picker in America!

  336. Phil – thanks for the great comments on the index put. very helpful stuff!