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TGIF!

Let's go markets, let's go!

Well we've tried everything else, we may as well pull out the cheers.  Of course all the cheering in the world doesn't help if your team sucks so let's hope for the best…

I've gotten my depressing article out of the way so let's accentuate the positive this morning and look for some positive signs to develop.  Japan pulled back just a bit and the Hang Seng gave up a little ground while the Shanghai continued to post new records.

Europe was drifting lower but US durable good were up a surprising 5.9% in July, which is a nice ray of sunshine and those markets are ticking up in their afternoon.  Both the US and Europe shook off a lot of good news yesterday and went nowhere and I will remind folks that last Friday we had a good start and a bad finish too so let's not go crazy.  My intention is to strangle the Dow by the end of the day so a 300-point move either way next week will add to our cash reserves.

Although durable goods are nice, that was July and they will be followed by July New Home Sales at 10 am and no prize for guessing how that will come out.  Next week we lead off with Existing Home Sales on Tuesday followed by Consumer Confidence and the Fed Minutes on Wednesday (and of course Oil Inventories).  Thursday will be a biggie with the Preliminary GDP report and the Preliminary Chain Deflator, Jobless Claims, Personal Income and Spending.  We finish off the week with the Core PCE Inflation, Chicago PMI, Factory Orders and the Michigan Sentiment.  Yep, you've gotta love the 300-point strangle…

We are just skating along at critical levels in this no-data week when CBs have been dumping Billions on the markets every day to support them – that data had better be darned good next week or the panic will become palpable!

 

 

Recent

Must

Comfort

Break

Next

Index

Current

Move

Hold

Zone

Out

Goal

Dow

13,235

0

13,000

13,300

13,500

14,000

Transports

2,825

-30

2,800

2,900

3,000

3,250

S&P

1,462

-1

1,470

1,505

1,530

1,550

NYSE

9,478

1

9,400

9,800

10,000

10,250

Nasdaq

2,541

-11

2,525

2,550

2,600

2,750

SOX

492

-3

480

490

500

560

Russell

788

-10

810

830

850

900

Hang Seng

22,921

-45

20,250

20,750

21,000

22,000

Nikkei

16,248

-67

17,400

17,700

18,300

18,500

BSE (India)

14,424

260

13,500

14,100

14,725

15,000

DAX

7,479

-32

7,300

7,600

8,000

8,200

CAC 40

5,523

1

5,750

6,000

6,100

6,300

FTSE

6,196

0

6,400

6,550

6,600

7,000

Remember we are VERY concerned with the Russell as those companies reflect the debt picture most accurately.  If they can't borrow, they can't grow and that's a domino we can't ignore!  But this is supposed to be the upbeat article so let's just root for the S&P to get green, just 8 points away

 

Happy still holds out hope for the S&P but I maintain that $70 oil will put a cap on the markets as the World is running out of money – so if it goes to one place it has to come out of another.  Every home that turns into cash takes $300,000 out of circulation and if investors choose not to redeploy that money into the markets it creates a demand for cash which puts upward pressure on the dollar no matter how much money the Fed tries to print.  I don't have the exact figures but if just 500,000 more homes are sold than bought in a year, that's $1,500,000,000,000 of cash that may not be going back to work in the economy.

Oops, sorry, positive article…

Anyway, Hank Paulson tells us not to worry and who are we to argue with the winner of the Mr. Potter look-alike contest?  As Jimmy Stewart said in "It's a Wonderful Life": If Potter gets hold of this Building and Loan there'll never be another decent house built in this town.  He's already got charge of the bank. He's got the bus line. He's got the department stores. And now he's after us.

"Why? Well, it's very simple. Because we're cutting in on his business, that's why. And because he wants to keep you living in his slums and paying the kind of rent he decides. Joe, you lived in one of his houses, didn't you? Well, have you forgotten? Have you forgotten what he charged you for that broken-down shack? Here, Ed. You know, you remember last year when things weren't going so well, and you couldn't make your payments. You didn't lose your house, did you? Do you think Potter would have let you keep it?

"Can't you understand what's happening here? Don't you see what's happening? Potter isn't selling. Potter's buying! And why? Because we're panicky and he's not. That's why. He's picking up some bargains. Now, we can get through this thing all right. We've got to stick together, though. We've got to have faith in each other."

We've got to stick together, we've got to have faith in each other and we have to have plenty of cash because that's the game Paulson Potter likes to play.  The last man standing around with cash gets to buy up all the oversold assets for pennies on the dollar – it's the American way!

Happy hunting,

- Phil

 


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  1. Dow Strangle – Phil, are you taking SEP or OCT options? Which strikes would you suggest?


  2. The whole hedge-fund thing is an evil cycle… I’m shorting oil, should I cover and take my losses or is anyone left still bearish?


  3. Hey Phil is that a picture of a young George W. Bush as yell leader? In the cheer outfit?
    wow you shouldn’t have that is too coincidental.


  4. I was wondering the same thing Dragon. That picture was OJT!

    It does crystallize the reality of what the office of president has become these days.


  5. Still interested in TRMP?


  6. MRVL- Sold 1/2 calls at $0.20.


  7. MRVL-Sold 1/3 puts at $4.


  8. Phil,

    What’s your expectation for CFC? Below 20?


  9. DIA – as I don’t have a lot of faith in the upside I’m going with Sept calls, maybe 300 against my 400 Sept puts, which I am starting to roll to October.

    Shorting oil – good long term, always dangerous short-term but if they keep pumping it up like this I’ll probably start shorting them too. Oil is about the last thing left these hedge funds have going for them, if that fails it is really going to hit the fan.

    Bush – I have no way of being sure but that’s what the original poster of the photo claims!


  10. CFC – I would not be greedy

    TRMP – mildly interested. The movement yesterday suggested something was up but I didn’t turn up anything and, after giving it some thought, it occured to me that very few people will have the capital to make a buy of a near-bankrupt casino, even if they wanted to. If a deal comes it will likely come from MGM, who just got a ton of oil money and need a better presence in Atlantic City but that would take a while to sift through and it’s a long-shot at best.

    MRVL – great trade Opt!

    CFC – I think it holds $20, no sense in being greedy.


  11. anyone else out there see BAC’s $2B “stake” in CFC as a just a bit suspicious ? the timing of four banks (BAC, C, JPM, WB) each hitting up the fed for $500M, as a “symbolic” move, just before BAC went to CFC with the same amount seems far too convenient. the $2B “infusion” just might look a little better coming from BAC than from the fed. it seems all too convenient. am i just a bit late in recognizing a fed bailout in disguise or is my skeptical nature getting the better of me here? or am i losing it ? (tell me – i can take it!)


  12. Dragon:

    I believe you mentioned PHRM the other day. Any thoughts on the chart?


  13. phil,
    can you please give specifics on the dow strangle? i like the concept, but don’t know enough to execute it on my own.
    thanks very much.


  14. That occurred to me too rkbos, but I don’t have the frame of reference to evaluate the idea, any more educated opinions on it out there?


  15. RKBOS –

    Until you’re on meds in a padded cell, I’m not sure you can ever be skeptical enough – even then I still wouldn’t be sure.

    Conspiracy theorists love the Fed, and when you read a little more about the institution it gets worse. Someone else pointed out that the role of the Fed is to keep the *banks* and finance industry churning along through use of monetary policy. While not entirely fair, it’s not too far off base.


  16. rkbos

    Check out this article from Naked Shorts yesterday.

    http://www.nakedshorts.typepad.com/


  17. I’m so blinkin’, blankin’, stinkin’, MAD!!!!!!!! I couldn’t start either the E*trade Pro platform or the website this a.m. – still not in solid. Can you imagine if I still had MRVL naked long?!?!?!

    Opt – would you consider posting your full trade on MRVL w/ options, strike, price etc.? I would really like to study it ah to learn how to adjust trades! Thanks ahead.


  18. if the market rallies what sector has the most to gain today? tech or financials?


  19. RE: Age
    Sorry guys- err, sirs, I drop the line to 23 years…


  20. Hi Phil,

    I’m thinking to get some GOOG calls, what do you think? :)

    THanks,
    Miles


  21. Happy: You are so brilliant on trading directional upside plays, even more impressive during this current correction, which just makes me wonder why you don’t seem to look for directional trades that take advantage of down moves? Is it just your preference to stay on the long side? No real point here, just wondering?

    Greg


  22. doubleclick: gotcha beat at 22 ;)


  23. phil,
    FXI sept 133 puts: would you please advise as to the strategy with these? i know you did great with those calls so decided to follow you on these this time. don’t know if i should hold, or cut losses.
    thanks in advance


  24. the fed said they are watching energy prices, which now wants to go to the moon. Cool we can probably expect for a rate hike soon :-)


  25. Optrader

    Great trade on MRVL!!! thanks so much!! My first strangle..think I might become the Boston Strangler

    Zinger


  26. Dow strangle – risky if you aren’t playing it out of an existing hedge but effectively I try to pick up the two strikes closest on each side which, at the moment, are the DIA $132 puts (already have) and the $133 calls, both $2.50. To make this work you need to stop out of the losing side and let the winning side run and we are hoping for a BIG day, like we had last week.

    Of course it’s best to work our way into these by buying low and selling high so, if I were going in fresh I’d start out light and just hope to get a chance to buy cheaper if the Dow channels for a day or so. Don’t forget there is no economic data on Monday and we do have the possibility of some M&A news (as well as a sub-prime disaster). If it’s a normal Monday, we’ll open higher – possibly a good time to buy puts.

    Meanwhile new home sales are suddenly up 2.8% so it’s a good thing I did cover that upside! Watch those puts people, kill CFC for sure! XXX

    Ideally we will make $2 on the upside and lose less than $1 on the downside. Sometimes you can win on both ends (like yesterday we could have cashed out in the AM on the calls and then cashed the puts on the 150-point drop, but we don’t count on that.

    What we do count on is selling into excitement and not being greedy. As with any spread, once you make 20% you should be looking to get out.


  27. Zinger- where in boston are you? I’m in the North End.


  28. JBL
    Yesterday you asked me about NOV. Here is what I am looking at.
    NOV 120′s and/or Nov 125′s
    This way you get the split and earnings.
    But that beening said I would wait for a pullback as the STOCK is up $20 from my buy on last Thursday $$$$


  29. Optrader good one on MRVL, strangles and straddles are fun huh, just gotta change the way you view the trade and most importantly strategize a way out that maximizes profit. Very tough to do.


  30. Morning all

    Phil – I sent you an email, nothing that can’t wait till after hours though.


  31. Andrew

    Sorry not in Boston actually in NJ..didnt think there was a NJ Strangler LOL


  32. hmm i thought the financials would be doing better after the home news than what they are at now


  33. ISRG
    taking off!


  34. OIHs, LVS/WYNN


  35. NOV!!
    thanks, BBD!


  36. EMKR – does anyone follow this one who can give me the skinny. I’ve held common stock for months but wonder if this is it for now. I’m still have either cpu, server or E*trade problems


  37. ACH
    going for new high?


  38. Mrn,

    MRVL-Everything is posted in previous comments with IV etc..For a quick recap:

    Bought 30 MRVL $20′s puts at $2.20, bought 39 $17.50′s calls at $1.05.

    This morning, sold 20 calls at $0.20, and 10 puts at $4.


  39. BBD, that trade you made at 98 was spot on – and it has run from there – on a pullback – where would a good entry be? These things are pricy. Thanks – great trade – will you sell against them or just dump them on a pullback?

    We had NUE yesterday – no guts


  40. Mrn,

    I was having etrade pro problems myself this morning, had to reboot


  41. CHL 52 w high…sweet.

    j


  42. Phil -

    Still like that COST trade today at 25% off?


  43. OIH

    Looking more and more like it could go to 176 and change soon. May take a small play here for starters


  44. DDAY97- your the man on OIH LOL
    JBL- Still have alot of the Feb 100′s thank goodness 9 didn’t fill a while back LOL. I am looking for a double so I can you use the house money. (27.50)


  45. Phil,

    Are you adding to more of your XOM Jan 75 puts or do they have higher to go?


  46. i dont get it. housing # today up. market up. financials down?


  47. BBD

    Lol, have to get back in the loop its been awhile.


  48. OIH- I missed it but did pick up SLB yesterday.
    GME- beautiful sale yesterday at $46 LOL
    MRVL- congrats on this trade I am assuming everyone made money. I didn’t play it, think company sucks LOL


  49. AAPL

    Selling Sept 145′s for 1.60…why wouldn’t I?


  50. Dday are you naked when you’re selling?


  51. BCSI – up +$3.10 this ride is something….


  52. Demetrius

    In this case I’m not. I have Jan ’08 150′s and ’09 200′s.


  53. MRVL

    Bracketing down my ’09 25 calls to 20. Looks like I can get 1.85 for those. Will look to sell against that when I see how today pans out a little bit.


  54. You know that’s a good idea, I’m going to follow you on the calender play. Do you think 8.8 is a good entry on the 150 Jan 08?


  55. Happy, Phil:

    My LVS SEP 95 limit order just tripped (for 50% gain thank you very much)

    Question: Should I roll this up to the SEP 105s (-LVSIA) for a momentum trade? Or let this one alone and wait for it test the near time bottom of 94?

    “SAFETY IS JOB #1″


  56. ZUMZ-VERY weak. These puts from yesterday morning are looking very good now.


  57. I’d be interested in comments on WM. To me, their chart looks a bit shaky, but would be in earthquake territory if there is any previously unacknowledged exposure to sub-prime.
    Also interested in opinions on GM, on of Phil’s old favorites.


  58. BCSI-Is it a short squeeze? I mean numbers were not that good, were they? $50 to $80 in 2 weeks? I hate shorting this kind of stocks, but might start watching it closely.


  59. WFMI & KR – Dude!!! But as Phil would say: “Aren’t they still a grocery store?” Maybe in an economic meltdown; it gets bad enough that people figure out they actually need groceries more than they need an armored tank to try to navigate overcrowded roadways?!?!?! Just my thoughts! :)


  60. Not a very impressive move on that housing report. I think people are fed up.

    Gold over $670, not good.

    I didn’t include this hedge fund letter as it didn’t fit the tone of the last article but at least this one is honest:

    http://bigpicture.typepad.com/comments/files/longorshort_capital_dear_valued_client.pdf

    Market rally – sadly it’s oil that stands the most to gain.

    GOOG calls – I’m thinking of selling some – how much are you offering? I am going to cover into the weekend, I picked up some quick bucks yesterday but stopped out, hoping for another crack at $515 so I can sell the $520s for about $13, I feel safe(ish) with that one as a short-term cover.

    FXI – we have to have another weekend discussing scaling in. First of all, these were a counterbalance to the $145s I rolled my existing calls into yesterday. Second of all, it should be great that we get to buy our second round at $4.10, that cuts our basis down .75 but I’d rather spend that money to roll to the $138 puts, gianing $5 in position for $1.85. XXX If it goes up again, THEN we can double down. Juliet’s joy is our pain right now…

    The Fed says a lot of things… Hard to say what they mean anymore.

    COST – yes, high gas prices are bad for them as they use it as a loss leader to club members.

    OIH – very dangerous short. XLE might be worth a shot if they fail at $70. This month should end very badly at the NYMEX, especially if there are no hurricanes.

    XOM – I just did a DD so I’m standing pat for a bit. If they break $85 I may sell some $85 puts as a mo play.


  61. GM doesn’t even have a cool car in their line up.

    Like Nissan has the GTR
    http://upload.wikimedia.org/wikipedia/commons/archive/5/59/20070204233958!Nissan_GT-R_2005_TMS_1.jpg

    Mitsubishi has the Evo X
    http://www.automotorsport.se/bigpix/2007/mitsu_x_snefram_big.jpg

    Toyota has the Supra… Is cool not profitable anymore?!


  62. Phil, what are your favorite Gold (companies) plays?

    Thanks.


  63. GME – is anyone still playing this? If so what’s your current strategy on it? Any help is much appreciated!


  64. LOL I’ve been shorting XLE before the Rally… Talk about pain. WOO… Services are always sketchy to short. Phil, should I DD when you’re confident in shorting the XLE?


  65. Subprime – http://www.bloomberg.com/apps/news?pid=20601087&sid=ai2vazmTzqvY&refer=home

    Bank of China Shares Fall in Hong Kong on Subprime

    Aug. 24 (Bloomberg) — Bank of China Ltd. had its biggest drop since going public last year after the nation’s second- biggest bank said it holds almost $9.7 billion of securities backed by U.S. subprime loans, the most of any Asian company.

    The 5.4 percent decline in Hong Kong erased $10 billion of Beijing-based Bank of China’s market value. Almost 1.5 billion shares were traded, more than four times the daily average over the previous six months.

    “Bank of China disclosed numbers that no stockholders wanted to hear,” Warren Blight, a Hong Kong-based analyst at Fox-Pitt Kelton (Asia) Ltd., said in a research note today. “The market is likely to be very surprised by the scale of the exposure.”


  66. The Commerce Department reported Friday that new-home sales rose 2.8 percent in July, after falling 4 percent in June.

    The aliens have landed on the earth and bought some new cheap houses here on earth with their alien dollars :-)


  67. To be honest 8.8 seems a little stiff for the 150 ’08′s but it all depends on how you feel the stock will perform for the next 4 months and earnings are on 10/17 which I think should boost it quite a bit. Right now my basis is 6 bucks for those but I added and averaged down when it dipped.


  68. People fed up: Phil, I agree. This is the feeling I get from talking to people too. They are just tired and need a break at this point. This is why we are seeing very low volatility. But as we know in the market, that could change in a minute.


  69. ZUMZ-Closing the gap.


  70. Phil- Can you describe what trading/quotes/news broker and platform you use? Thanks.


  71. AAPL – Why not sell the $145s for $1.60? Because you can sell the $140s for $2.67 and the stock has to finish up $10 before you even have to give your caller back his money. I’m going to take some Jan $140s for $10.50 and sell the $130s for at least $7 today. XXX We’ll see if Apple can break up to $135 but I doubt it.

    LVS – great job Quarry! You made $4.20 but rather than take more than 1/2 the profits and risk them on the $105s, I’d rather take the Oct $110s for $3.35 and sell the $105s for $3. $105 is the ATH so you have to think there will be some restistance there and you can always set a sell-stop on your caller at $4.50 which would leave you holding almost in the money Oct $105s for just $1.85 more than you were willing to pay for the Septembers worst case…

    WM – already being treated like they did something wrong. GM – true to form yesterday, I was hoping for more of a run as the puts are so overpriced.

    MRVL – holy cow!

    KR has 1/2 the cap of WFMI but WFMI doesn’t annoy me at $40 the way they do at $47.50 where I probably will go back to shorting.


  72. I’ll wait then, I concur that it’s pricey. I think the market will dip again to last weeks lows atleast…. I mean V bottoms don’t exist do they?


  73. AAPL – Jan 140′s – $13+ – do I have a bad print?


  74. AAPL I sold the Sept 125 puts, is this the right thing to do, Phil? I think AAPL is going to $143.

    j


  75. wynn finally back above 120.


  76. old – still like AUY very long (they have to work through this buyout) and the GDX. ABX is a good income producer as you can get a $1 premium on close calls but I’d take the ’10 $35s at $6.35 and let it run a bit – you can always roll down for $2 more and start selling the first of your 28 $1 premiums. XXX

    GME – too high I think. Oct $45 puts were $7.50 last week, now $1.50, too tempting not to play. XXX


  77. Demetrius

    Or you could try Phils play on AAPL above. I’ll stick with mine but if you roll with his it’s a good play.


  78. GME – Thanks Phil.


  79. JPL

    No, that price is correct.


  80. AAPL-took Phil suggestion and sold Sept 140′s for $3.10. Something to do and it made sense. But I think Phil meant Jan 145′s for $10.50 correct


  81. AAPL-Amazing!


  82. Where does MRVL become a buy again?


  83. Yeah he just had a typo. One too many non fat white chocolate mocha’s for breakfast :)


  84. Phil, how long have you been trading for?


  85. France and South Korea in talks with AAPL to market IPhone….go AAPL.

    j


  86. AAPL-Phil the Jan $140′s are at $13. I know , that’s what I own :)


  87. AAPL-Buying puts as a cover right now. Don’t want to give up any of these amazing gains. Easy stop at $134.5.


  88. slowly chugging our way uphill today and for the week…


  89. Thanks Dday, I’m going to stay out of the market right now… I’m seeing too much red right now in my portfolio, and I don’t really understand options enough to play the calender spreads right now,


  90. XLE – roll before you DD. The logic is that I have (for example) the $66 puts which I bought for $2, now $1 with XLE at $68.52. If I roll to the $68 puts for $1.68 my basis is now $2.68 but a $1 pullback will get me back to even. If it goes up $1 on me, I should then be able to DD at $1.30, putting me in with a $2 basis and a $1 move my way will still put me back in the money.

    Trading quotes etc – Options Express, Merrill Lynch (live traders), Etrade Power Pro (but I hate Etrade trading), Esignal, Investools, Yahoo finance (love the charts) and Stockcharts.com.

    AAPL $140s – oops, that was the Jan $145s! I forgot they go in $5s way out there. I’d spend the extra $2 of that’s all it is though… Selling puts – as long as you don’t mind owning them down there (I wouldn’t) it’s a great play.

    WYNN – if the market turns down, the $115 puts will be fun again.

    AAPL – why is it amazing that all these crappy companies are going wild and one of the best companies in the country is nearing it’s ATH? Meanwhile, the fact that Apple is talking to other countries is no reason to rally it in particular. Do we rally MOT when they roll a new phone out? Do we rally GPS when they ship jeans to foreign countries? Optrader is right, gotta cover here, at least half if in doubt!

    Trading since about ’91.



  91. China is where it is at now. No recession there and looking 6 months out we have the Beijing Olympics, Gov’t will buy success and spend probably more than any country in history on this global event.
    FXI is expensive so I am buying a basket of LFC sept70, CHL, ACH sept 55 calls


  92. Am I just paranoid? This sort of chugging up, on a Friday, feels like riding the roller-coaster to the top only so you can get good momentum for the ride down! I wonder if this will be another one of the Friday afternoon thriller-rides. It all great fun, as long as you can stay PUT for the plunge. All the way up I’m hearing put, put, put…


  93. AAPL- I said amazing, because of the move. $112 to $134, that’s a lot of money on the Leaps. But I agree with you about Apple the company of course, or I would not be loaded like this.


  94. Well, I got hosed on the BCSI puts. Had to take the $8K loss. Should I bother rolling them to a set further down the line or move on?


  95. Phil- Weird, Same age, UMASS grad and really trading from 1991 also. But no kids LOL


  96. So your like Bizarro Phil lol.


  97. MRVL-It will become a buy after it has bottomed and the trend has changed. Why would you want to try and guess a bottom?


  98. what is Investools about


  99. phil which of the 2 is your favorite play, COST or GME? need to decide on one but cant make up my mind


  100. Opt – right, thanks for the remind.


  101. Optrader- great advice, you took the money. Why would you want to buy earnings sucked. Look at things that are doing well


  102. Phil,

    I sold some aapl sept 130′s for $3 a couple of weeks back against my jan 135′s, Should i roll?


  103. AAPL guys – Have the Jan 140s right now with the Sep 135s against them and started to get nervous now. Thoughts on my next move?


  104. I want to buy some VIX as a hedge agaoinst long port. Thinkin about Oct 30 @ 1.4 (esp. given historical oct down days). What VIX would you play for protection – or should I wait till VIX crosses 20? thx


  105. AAPL

    My opinion is that there is still plenty of premium left on those callers and you have plenty of time to roll. You bought it for premium and not necessarily to win..verdad?


  106. BBD,

    DE and ATI – you like or not? Where would they look good to you?


  107. AAPL-Jonathan, this is why I am not a big fan of calendars, especially when you have a strong trend and a lot of volatility. Calendars are great when market does not move much (or when you are an expert like Phil, who always manage to sell some good premium at the right time).
    I think it is always very important to know what you are doing and why you are doing it. Are you bullish on AAPL? If so, a calendar is not really a good play, because if it goes up strongly you are going to lose money. Or if you do it as a protection, have a tight stop on the short calls. Nadir, you sold some Sept at $3? They are now $8! What were you waiting for and what were you expecting? When you get to a certain point on these plays, especially when the front call gets in the money, you are going to lose money every day whether the stock goes up or down.
    I am sure that Phil will disagree with me as it is his favorite play and he is very successful at it (one of the reason being that it views them as a very long term play, selling premium every month and you are getting anxious because you are not making money right away on a position that you think you were bullish on), but it is good to have different points of view.


  108. VSEA- almost at ATH


  109. I have to go out this afternoon but keep an eye on FAF/FNF/LFG, if there’s a real turn up in real estate, they will show it but I’m not expecting much (other than maybe a fake pump) ahead of the weekend.

    COST or GME – my favorite would be whichever one goes the wrong way. If COST goes up to retest $64 or GME attacks $60 (but is rejected) then the puts are pretty cheap. I was just saying to draz yesterday, the key to trading with less money is more waiting. Find a play you love, wait until it does the opposite you think, then check your premise and, if still sound, make the invesment. You may track 20 stocks a week and only get lucky on one but that strategy will double your winning percentage, which is the most important thing with smaller portfolios.

    Also, don’t forget (and this goes for many plays I make) that this is in the context of finding puts to offset a very bullish portfolio. Balance is the other most important thing in a small portfolio. Also most important is position management…

    AAPL leap roll – ouch, down $5. I don’t think today is the best day to roll, you have really good protection going into the weekend, no sense in giving it up and the $135s are $5.15 so it will cost you about $3 to roll whenever you do it. Spending $3 to gain $5 in position isn’t the best ratio, better it should run up more and you spend $2 to roll. Then you are spending $2 to gain $5 in position, a much nicer trade…

    JP – same deal really. I’m not getting enough bang for my buck to throw out my downside protection. Next week could be a catastrophe if the data goes bad and the Fed has their Jackson Hole meeting with the topic of “Housing and the Economy” so this story will not die…

    Gold $673, Oil $70.50, I’d have to guess dollar is diving, can’t get a chart… So we are rallying because the dollar is collapsing and our equity commodities are becoming more valuable – for now. Still waiting to hit our levels on S&P and Nasdaq…

    VIX – LOL! How about selling the Oct $30s for $1.45 agaonts the Feb $27.50s at $1.80? XXX 10 in $10KP!!!

    SNDK – $55s at $1.68 XXX


  110. I guess the questions you need to ask yourself every time you enter a position are: “Why am I doing this? Am I bullish/Bearish? ST, LT? Where is my stop?
    And then pick the strategy you want. If you did the calendar just to collect rent every month, then you should not be anxious and it was the right play. If you are bullish, then it was the wrong play. Better to just buy calls and have some good stops, or to buy some puts very short term once in a while to cover profits on the Leaps.


  111. DE- I am in the DEC 130′s. EVEN I think!
    ATI- Not currently playing. I know I will be kicking myelf but so far I have no interest or TIE either


  112. Sorry for a newbie question, but what does XXX mean? I tried to find on the site but all I got is DD (for double down)


  113. BBD – thanks


  114. Oskar,

    XXX are trades that Phil is actually executing, and not just discussing


  115. XXX – new trade/position


  116. Opttrader makes good points – I do not play spreads to “win.” Generally I take them and ignore them unless they get way out of whack, at which point I adjust as needed. If you are making money then your caller is making money, perhaps more than you at first but that’s what you get for taking on a partner! One thing you need to realize (and I tell M&A clients this all the time) is that you probably wouldn’t have bought (for example) 20 naked calls, so the .40 x 2.000 yoiu gain on the spread may have just been 500 x 1.20. 90% of the time that people are concerned about a spread it is either impatience (the caller will have most of his premium until about 10 days out) or greed.

    When you are right about a call, it stinks that you hedged. But, if you hedge consitently, the times you are wrong will hurt much less and you’ll have more money to play with on the calls that go right.

    XXX is a generally recommended trade, as opposed to a trade I am just discussing or making for myself (as I make some dangerous trades sometimes that most people should not attempt).


  117. Is anyone still in Celg? I have Sept60c-stay in or take loss? Any comments appreciated. Thanks


  118. Phil,

    Does “SNDK – $55s at $1.68 XXX” mean you’re buying the calls? You’ve previously mentioned liking to write against your LEAPS, so I’d be expecting you to sell these front-month calls.


  119. Phil [you said]:LVS – great job Quarry! You made $4.20 but rather than take more than 1/2 the profits and risk them on the $105s, I’d rather take the Oct $110s for $3.35 and sell the $105s for $3. $105 is the ATH so you have to think there will be some restistance there and you can always set a sell-stop on your caller at $4.50 which would leave you holding almost in the money Oct $105s for just $1.85 more than you were willing to pay for the Septembers worst case…

    QUESTION: when you say set a sell-stop on my caller at $4.50: Do you mean set a limit order to buy back [cover]the SEP 105 calls at [sic, 50% higher price] $4.50 ?

    QUESTION: Why not a simpler calendar spread at the 105 strike? Is the potential gain that much greater on the out-of-money 110 strike?

    One of our sayings applies to your trade as well: “STAY OUT, STAY ALIVE!”


  120. Calendar question for Phil/Optrader…. if you are strictly long term in your outlook, and are just collecting rent every month-- does it even matter what the underlying stock does? I mean, if the stock soars you can just roll up and out on your caller until the stock settles-- if the stock is flat, just let the caller expire worthless-- if the stock tanks, the caller becomes worthless quickly and you can buy it back cheaply, or roll down to the next lower strike. right?

    if the stock tanks, and you paid $10.00 for the LEAP and now it’s worth, say $7.00-- do you even care? i mean, if you can sell calls each month and gain more than $10.00 over the course of 17 months, do you even care? Is this the way to think about it?


  121. AUTOMATED EXCEL SPREADSHEET FOR STOCK RESEARCH

    I like to do stock research at a lot of different web sites, and I tired of having to open each site one at a time, enter a stock symbol, then wait for the new page. I created an Excel spreadsheet to greatly simplify the process. I’ve posted an example spreadsheet on my web site hoping it will be of use (or inspiration) to others. Here’s the link: http://www.csi3.com/investing.htm. Note that you have to enable macros to make it fully functional.

    The spreadsheet has two main functions. For the first, I enter a stock symbol and then click a button. After a few seconds, 11 Internet Explorer tabs open showing various web pages specific to that stock. The pages include a Yahoo! stock chart, Morningstar summary page, options volatility charts, a short interest page, and the Yahoo! message board. This saves me a lot of time when I want to quickly learn about a company.

    The second spreadsheet function automatically imports data from a number of web pages. I get data such as the stock price, Morningstar rating, analyst ratings, short interest, P/E ratios, etc.


  122. Phil, any thoughts on ccj? are you still bullish on them longterm? still bullish on TM longterm? thanks


  123. Movies- Anyone see Superbad? I heard it was pretty funny


  124. Craig- Thanks for the pointer. I’ve had the same frustrations, and look forward to digging into your model. Thanks for sharing.


  125. My previous post contains a link which doesn’t work because there’s a period at the end. Here it is without the period: http://www.csi3.com/investing.htm


  126. BillBigD,

    I asked my 20 year old son what he and his friends thought of the movie and received the one-word reply: “Superbad!”


  127. 10KP VIX spread – OXPS is telling me I must maintain $50K in account value. It this to do with trading the VIX? Because I have other spread trades (mostly credit spreads) and they haven’t complained.


  128. Optrader- I’m late to the board today and focused on some other things. But thanks for the MRVL strangle yesterday. Very educational. My ratio was too bullish, so I’m just getting out even. But stoked none the less.


  129. lol. no bigD not yet. but i cant wait


  130. Dragon
    I like the ACH, LFC and CHL comments. The all took off at that point, as did the market.
    JB


  131. Quarryman
    That was pretty funny! Welcome aboard!


  132. Nice Point over chineese Dragon I’ve done it too


  133. I like this guy’s video blog:
    http://www.youtube.com/user/thermal1

    Show of hands of the folks who want PSW to video blog?


  134. China stocks- although no options ZNH is very strong


  135. SHLD
    starting to look interesting!


  136. 10KP VIX spread – after reading the margin requirements it seems that they think I am writing a naked index call option. Any ideas? I am trying to buy the feb 08 $27.50s and sell the Oct $30s. It’s like they don’t see the long Feb 27.50s. How can this spread be seen as a nake write?


  137. Calendars- Your outlook is long term bullish and short-term bearish.
    Highly recommended to check strategies before you enter them: http://www.888optionsnet.com/investigator_2/wi_strategyExplorer.asp

    You can see all strategies, what the outlook is, and if you click on one of them you will get all the information you need. This is a great tool for all beginners who are confused about spreads.


  138. BBD,

    It was hilarious. Arrested Development was one of my favorite shows, so I was happy to see that kid in a feature film.


  139. craig – great job w/ the spreadsheet. thanks


  140. regarding trading options after a stock split at Etrade, i have a personal relationship manager at etrade, and asked him about this after yesterday’s issues came up, and this is his reply:

    Regarding splits and options … when there is a stock split the associated options must also be adjusted, so execution on those options are limited for a time to broker-entry orders only. Once the adjustments are complete, clients are again able to execute their own option orders. This protocol is inconvenient, but necessary to protect E*Trade and our clients as erroneous executions could be very costly.


  141. I own a condo in the building over his right shoulder


  142. DRAZ- EMC trying to go past $20


  143. SNDK – I did write calls and they are down .70 from yesterday so I like them for an upside move in a rally, especially as the SOX are being dragged down by MRVL, whose problems seem unique to them.

    LVS – yes, actually sell-stop was the wrong word but I did mean you take out your caller on momentum if he starts running up on you, otherwise, just let his premium expire and you end up with very cheap Oct $110s and very little of your original wager at risk. If RIMM gets to $105, you’ll have $2+ left, better than you would have done owning the $105s, if RIMM goes down, you are only risking .35 and you are way ahead on the trade. Why not the $105 – because it’s risky and this goes back to greed – you already made a huge profit, why risk a lot of capital trying to double that when the chance of a pullback here is huge?

    On the $105/$110 spread, you cannot owe your caller more than $2 before you are in the money, at that point only need to have $2.35 in premium to be ahead (on a .35 entry). With a $105/105 spread, you are in for $2.30 (7x more) and the spread betwen the $100s is just $2.25 and the spread between the $95s is $2.25 so you stand to get pretty much nothing on a run-up and, if it goes down, you are out of the money and in for $2.30 with only a month to go. Both plays are valid, I just like to take more of the table in a choppy market.

    Speaking of DIA puts earlier – now is a good time to add some $133 puts at $2.40, down .60 (25%) on the day if you are going for a strangle or mattress plays to protect gains. I’m moving into the $134 calls, now $2.10 and I will be taking the $133s off the table at $2.75, just a quarter profit that lowers the basis of my $134s by .20 (after fees) as the calls (3/4 of puts) are there for protection so, like the LVS play, the less risk exposure the better.

    Long Calendar plays – no it doesn’t really matter. I’ve gone away for a whole summer and done all right on those plays without touching them but the real trick (if you are trying to make more than 15%) is timing entries and exits and picking the right calls to sell and deciding when to go naked into events. The LTP isn’t up 185% by ignoring it! The short answer is I try to make plays where I don’t care… much… about the underlying movement but you have to be careful to pick stocks that have good long term support and a reasonable V profile over the shorter run.

    CCJ – I still love them but I’m trapped in an abusive relationship!

    TM is another one of the world’s top companies but more dependent on outside influences, like a recession but I should have picked them up at $113.

    VIX – that makes no sense. You are closer to the money on the longer leg… Call them up, they are usually super helpful.

    Well, I’ve got to go – hopefully I’ll make it back before the close!


  144. dragon whose will be your target levels for the chinese ACH LFC CHL ??


  145. optrader
    Can you please elaborate on your purchase of aapl put and ” easy stop “. I am trying to learn how to use puts to protect my long calls, but so far I have lost more on puts than I gained on the long calls. I have 23 contracts of aapl 2010 $140. I bought 20 oct. 110 when the was down to protect the calls, but with markt recovering, the puts have lost most of their value. I appreciate your help.


  146. GME is going out of control. Figures, I bought the put! Hope profit taking starts in sooner than later…


  147. optrader
    oct. 110 are put.


  148. VIX – It would not surprise me if the broker would not give you “credit” for having the short calls covered by the long. Because these options are european ie; they can only settle on the expiration date, options in the out months DO NOT trade like other options. On a spike they can move very little while your closer call goes to the moon. This is exactly what happened last week. With the VIX at 36, you could have bought feb 20 calls for something like 6$. The Aug calls, however, were tracking the vix leading to a very painful spread.


  149. phil,
    when you get a chance, regarding FXI, i bought the sept. 133 puts naked, not as a hedge as you did
    would you still recommend rolling to the 138′s?
    thanks in advance.


  150. MRVL Strangle

    Optrader, this is pretty nice! In my options calc, I show a profit of 90% on this strangle if I had initiated the position near the close.

    Would the thought process for stangles be:
    “IV is lower than HV (Historic Volatility), thus going into earnings, we can expect (hope) for a huge jump in IV”?

    I’m trying to get a feel for the volatility “factor” and it’s implications on strangles. Sorry for being thick and asking so many Q’s.

    For anyone interested in volatility, an excellent site is http://www.ivolatility.com
    It will blow you away with depth/breadth of data.

    Brian


  151. Ash,

    I don’t buy puts when the stock is down, I buy them when the stock is up, as a protection. This morning I entered near the top of the day, this why I said “easy stop at $134.50, as it was the recent high. About stops, when I say $134.50, it does not mean that I exit the minute it touches $134.50 and I am the fool whose stop is taken. I always look at the chart and momentum and wait at least a couple minutes. On these puts I have been in and out 2 times already since this morning. I am out right now, but will re-enter if I see a break on the 15 min chart.
    I don’t mind if I lose $0.10 on those a couple times, but I want to be sure that I catch a downtrend if it happens.
    I am surprised that you are still holding the Oct $110′s, where was your stop?


  152. Phil, Im not sure I follow your XXX logic. From your comments above, it seems you use XXX for a recommendation and imply the XXX is less dangerous than recommendations without XXX. But your AAPL XXX above was for a diagonal calendar spread (Jan 140 / Sep 130). I do like the recommendation, and may play it as well, but I think this one is quite dangerous as well due to the diagonal??


  153. FXI/COST/GME – of course if we keep rolling stopping out is the best way to go. Again, scaling in I have low commitments to initial entries so I’m more inclined to take my second round on the run-up. We are breaking out on all indices – you have to respect the Big Chart. Europe and the Nikkei are way behind, if they get the impression they panicked for no reason, we could get some fun gains over there.

    Please note that I do not believe there is no reason…

    Now I’m late!


  154. Seattle-xxx does not mean risk. It means Phil did this trade. That is all


  155. Seattle – XXX is a matter of opinion. I am not saying “safe” per say, nothing is safe. I’m saying it’s something I would recommend to others but it always depends on your portfolio mix, risk profile, cash and margin position etc…

    Really, really going now!


  156. MSTR – Looking good today !
    Needs more volume.


  157. optrader
    Thanks for the explanation. I did not have a stop on the put, because I believed the market was going much lower. That’s why I picked the oct. to give it more time.


  158. Phil’s gone so someone explain “I do not believe there is no reason…” Does that mean Phil believes there is a reason for the run up? (Please forgive me b/c I grew up with an English grammar teacher for a mother who hammers me, still, on the use of double negatives. “No such thing in English!”)


  159. Albo
    I know you took VIP of your screen but earnings next week FYI


  160. mrn, Phil believes that there is a reason for Europe and the Nikkei to be down, as I read him. It is not for no reason that they are not up! Clear, huh?


  161. I like FFIV Sept 30 Call for 7.2…. grows earnings at 40%. No debt, and over $10 a share in cash. And the Daily chart looks good. Nice high volume reversal on bottom, and looks like it’s going to break higher if it closes above 36.4


  162. Ash, you should always have a stop, no matter what you think about the market. This is the most important thing about trading, bar none.


  163. Dragon and everyone – Phil stated earlier when writing about calendar plays, “… support and a reasonable V profile over the shorter run.” Is he referring to volatility? Just making sure I understand the lingo…


  164. you can pick up CFC Sept-10 puts right now for a dime (BK play)


  165. Thanks size.

    BTW I’m still very happy with those metal longs from two days ago: GFI, SLW, AUY, NXG!!! (Wish I’d pulled the trigger on JOYG.) I wonder if that means I’m in danger now? When I first started trading, starting to count my $$$ was an early sign I should start exiting. But I’ve over-corrected by taking profits too soon. I struggle more w/ commodity plays.


  166. an entry from ronald reagan’s diary, in reference to george bush, senior:

    “A moment I’ve been dreading. George brought his ne’re-do-well son around this morning and asked me to find the kid a job. Not the political one who lives in Florida. The one who hangs around here all the time looking shiftless. This so-called kid is already almost 40 and has never had a real job. Maybe I’ll call Kinsley over at The New Republic and see if they’ll hire him as a contributing editor or something. That looks like easy work.”

    -- Ronald Reagan in his recently published diaries , May 17, 1986.
    Sally


  167. take a look at ALGN, probably too late to chase it with puts

    Greg


  168. optrader
    Learned the lesson. Thanks.


  169. BIO
    No FFIV comment? I was nicely waiting. LOL


  170. God, Windy, that is great, I will have to pass it on.


  171. I haven’t even been paying attention to FFIV but I wouldn’t mind a call play on them …



  172. love that post windy !
    m


  173. Phil, with your BMY play the other day (Jan ’10 $30 / Sep $30), any new thoughts with BMY approaching $30 so soon? Im already up about 10% on the spread, but it seems like the risk is still pretty low to let it ride longer. Even if it breaks 30 and ends around $31 at the September expiration, I could just buy back the September $30 for $1, and sell the October $30 for more than $1 ($2 maybe???). We still have 4 weeks before September expiration but I want to anticpate the moves ahead of time so I dont panic if we get a big change before then. Thoughts?


  174. Anybody think we can hold this gain by close? The last couple of Friday’s haven’t been the greatest with the fear factor. .


  175. Phil, which month DIA 133 puts? Thanks.

    j


  176. Let’s hope shiftless George’s economy is really as bad as I think it is – if CFC is tits up by 9/21/07 I’m up $46k …


  177. VSEA- ATH


  178. The boy who unlocked IPHONE on CNBC.

    j


  179. juliet – I think Phil has moved to Sep134 puts, but taking Sep133 calls for a strangle
    Seattle – I believe the BMY LT play was to collect rent in the near term, so I’d wait until expiration. You don’t owe the caller anything until $30.70 or whatever premium you got when you sold. I was thinking about this but acted too late (leaps already went up like 0.40).
    FFIV – why Sep30s, when Sep 37.5s for $1.55 would give you much better risk/reward? Happy, what say you, since you’re the master at these mo plays?


  180. Windy
    Thanks. That was great.


  181. Thanks KC.

    j


  182. iPhone unlocker- Who says our kids aren’t smart?


  183. Biodiesel,
    CFC going under seems like a long shot with this BAC deal, doesnt it?


  184. CFC aint going that low if it does it would be a strong buy.


  185. MICC – anyone still playing MICC? Interesting couple days down then up.
    BillBigD – got a VIP earnings play?


  186. KC
    I am already In on VIP. I will look at things later next week. But optrader and Optiondragon do the more complex plays


  187. VIP:

    Good move for a $20 stock !


  188. BillBigD – I’d be shocked if you aren’t in VIP LOL. So you’re going into earnings naked or at least partially hedged?


  189. Albo
    I don’t think the run is over just because the new ratio IMO


  190. boidchris
    i’m curious – outside of the obvious….what made you take that trade on cfc?
    just pure speculation?
    thanks
    m


  191. Does any one here trade warrants against the miners? e.g. SLW has 2010 SLWBF.


  192. KC

    I played MICC this mornig , was a flashing idea… and it has worked great.
    I’m congratulating myself, it has been my fisrt own trade … :-)


  193. Kc it was for the after hours markett i picked MICC


  194. rankxerox – great MICC play. I was asking as my position was blown away after last earnings. I’ve been slowly recouping losses by timing front month sales and buying back on dips. Chart looking a lot better now, but asking to see if anybody understands yesterday’s $2+ drop and then today’s $4+ gain (though I took advantage of it).


  195. That kid is from NJ and Phil is from NJ too, what’s in the water there?


  196. MRN:

    “When I first started trading, starting to count my $$$ was an early sign I should start exiting. But I’ve over-corrected by taking profits too soon. I struggle more w/ commodity plays.”

    I’ve been taking profits in metals, and rolling up my contracts all day long. Mostly in RIO bought a few days ago.

    I’m getting much better about taking big profits when I’ve got ‘em in flaky markets. I’d rather be a little early than too late. I can re-enter again Monday if things still look strong.


  197. Juliet- hope you are still long on CHL didn’t sell calls.


  198. anyone here think we’ll get some selling into close?


  199. Wowie! Still going up, that’s pretty good!


  200. Phil,

    Any thoughtson TLT puts as a play? There are 2 ways to win – a big recovery should pull mopney out of govt bonds – or – another big liquidity squeeze would pull money out of everything. Either way, there seems to be almost no downside risk priced into the puts…


  201. DIA strangle – Phil, I’m pretty sure you’re leaving your strangle in place over the weekend, but in general, what is your criteria for closing one leg and just playing the remaining leg? Also, you’ve initiated strangles in the past with strikes further apart. Appreciate if you can elaborate on when you’d go with the wider strangle. Thanks.


  202. Gordo: Thanks. I think you’re right. I was considering selling some calls against my longs for the weekend but I think Phil rec. against it on metals. He holds them as a hedge but I’m a little more bullish. I was right about the counting though. When I posted was the high of the day for my positions – time to sell some.


  203. It appears the explanation for the market performance was that it was sad that Phil went on vacation. Thanks for coming back Phil. Your teaching made this an up 35% month (profitable both up and down).


  204. No reason – I was saying that there WAS a perfectly good reason(s) to panic (at least a bit).

    This is a very low volume rallly and does not change my plan to hedge APPL and GOOG and I’m spending the .30 to roll up to the DIA $134s so I will be right there with my 300/400 strangle!

    As to calendar spreads – my attitude in taking the covers was that I was more concerned about protection that if my callers go in the money. If I make no money this month because the markets are stronger than I thought, then my ’09 leaps are in fine shape with 15 sales to go – I can really live with that…

    BMY – case in point! Wah, wah – my leap is in the money just 3 days after I bought it with 28 sales to go – wah, wah… Meanwhile you’re protected from a pullback with another .70 to go before you have to give your caller a dime. MOST spread plays are down 10% the first month due to bid/ask spreads on the 2 positions.

    DIA – I’m strangling Sept but also starting to build Oct 132 puts at $3.

    Good summary KC!

    SNDK doing well…

    What’s in NJ water – you REALLY don’t want to know. Let’s just say that the Simpsons got the model for the mutant 3 eyed fish right from my resevoir!

    FXI – crazy! Oil – depressing!


  205. MRN, for whatever it’s worth, I’m now 82% cash. Greed and hubris have killed me a lot more times than caution has left me without some kind of profits.

    I don’t trust these markets, but I’m loathe to short ‘em. Right now I’m working on developing RIGOROUS discipline, and it’s been serving me well. A big hit of thanks to Phil and everybody on this board for helping me to become a MUCH better trader (much more consistent) than when I got here last year.

    Thanks to all who participate.

    Gordo


  206. SPY’s reaching for 50 MA of $147.10. . see if it can hold.


  207. sorry, meant $148.10 .


  208. LEH jumping on buyout rumor ?


  209. Phil,

    You said, regarding calendar spreads, “If I make no money this month because the markets are stronger than I thought, then my ‘09 leaps are in fine shape with 15 sales to go – I can really live with that…”

    If the underlying stocks go up this month, can’t you just roll your callers to a higher strike, at more or less no additional cost? I’m trying to find the hole in this strategy, but with no luck yet.


  210. Anybody see an Ask price on the Sep 75 for CHL…I am very tempted to sell the 70s against them as a bear call to grab the $0.70 premium – stock up almost $16 since the low – I need some more hedges going into next week and only another 10% move up puts the position in trouble…


  211. Andrew a massive stock collapse or a big take over that destroys all premium on short options forever more can hurt the position – a trader’s impatience can hurt it too but other than that it’s a great strategy!


  212. CHL Sep75 – not on OXPS, Sage


  213. Did anyone go long on SHLD today? I’ve tracked a trading service that uses a similar strategy to you Phil that has had great returns (but still less than Phil) using SHLD as the underlying.


  214. (something about the water in NJ! :-) something about PSW – I just got off a plane after 24 hours travel and now I know I built up a dependency because this is the first site I checked to see what’s up with the market – you weren’t kidding Phil – this is the best place to get market updates when abroad!)


  215. thanks kc, i suppose i could morph it into a phil type play with some dec 75s for 1.75 and sep 70s crediting $0.70 but I’d prefer a credit


  216. TLT – the Fed will not lower rates, certainly not in a rally. That will keep them up here most likely. Puts are cheap though, especially as they just moved more than a buck in 10 days and dropped almost $2 the 10 days before that.

    Srangle/Unstrangle – totally based on gut feeling. This is a best-case scenario for the put side as I’m scoring cheap capitulation rolls while the possibility of a 300+ point drop has pretty much doubled now (although a run up to 13,700 seems unlikely) once I see how my other plays survive the weekend, I’ll very likely lighten up on one end or the other. I go in and out on spacing depending on where I think the move is and what I am looking to protect. When my portfolio is well balanced (as it had been for months) the DIA plays were additional protection, so I could play the guessing game (and I was on a roll there). When I have a seriously bullish portfolio, like now, I get a lot more serious about tightening up my downside protection.

    Being covered with index puts lets me buy back callers and leave my leaps naked with near impunity. It also lets me leave calls ride much longer than I would if they were naked. I negated the puts with DIA calls when I saw the Meatball attitude creeping back into the market but I am taking 100% of the profits from my DIA calls and putting it into rolling my puts up the ladder so that’s the purpose they serve. Obviously I will stop out of the calls pretty quickly on the way back down since I already spent the profits.

    VIX getting close to 20 where I think it will bounce. Since the VIX only goes up when the Dow goes down, this will be a good chicken and egg observation.

    So good to hear Lith! That gives me a good start to my weekend!


  217. Phil:

    Just curious. How much do you pay in commissions to buy 400 DIA puts?
    BMY, SNDK – Good calls.


  218. This has been a very low volume rally, looks more like a bunch of shorts covering their positions from last week than some real strength.


  219. VSEA- quality rising. Up 8%
    VIP-up 6%


  220. CNBC just did a piece on the Iphone hack and mentioned T, they put a chart up that showed a price in the low 20′s!!! Talk about giving people a heart attack


  221. DIA – I pay nothing to make that trade. I have a flat-fee managed account for block trades, 1% per year flat. Most years I make more than 1% to cover it. 8-) Optionhouse charges $10 for any trade, no other fees – that’s about as good as it gets I think…

    Gold $677, Oil $71.18, dollar in toilet – oh yeah, everything’s great!


  222. Optrader,

    Agree with the low volume rally most likely being a short covering. . .Monday we will need a confirmation. .


  223. Wow – were getting a pump into the close!


  224. Wow that finish just made my rollercoaster gut tighten more instead of relieving it. I think my inner fear is a contrarian indicator to the VIX (or vc. vsa.)?



  225. IWM – up 1.27%. Looks like PPT is reading Phil’s worries on SmallCaps!


  226. LOL – I know, I even caught the low of the Euro on my trip. I’ve got to admit my timing is on a roll lately!


  227. Phil:

    Sounds like a sweet deal. How many trades per year do you get? Thanks.


  228. Phil:

    P.S. I’m not surprised you can cover the 1%. Plus a little bit more I’d guess.


  229. PHIL- I actually chuckled about that last week when the greenback was $82.50ish
    BCSI- really insane. I hope people kept some. LOL


  230. good weekend everyone !

    :)


  231. I think about 50 a month so I only use it for block trades – plus you can call their traders and get it done right (well you can if you have a big account, I can’t imagine everyone can bother them).


  232. BillBigD, yes I am still holding my CHL calls. Today I bought some VMW Oct. 80 calls. Are you in VMW?

    j


  233. What a great way to finish the week. The market finished at the 30-day MA! We are 100% green on closed trades this week, on Wang’s World. List too long to share here. Please see latest article!

    Have a great weekend everyone!


  234. Dow strangle – thanks Phil. I knew I wasn’t going to get a simple answer from you (LOL). But, that’s why I’m here to learn. Hopefully in time, I’ll develop better gut feel too. Interesting to hear you think another drop might be coming; I definitely have a bearish bias right now (which has hurt me this
    week) with the low volume up days and high(er) volume down days.

    Have a good weekened all.


  235. Yes – great job by all! It is so good to be back where the action is but now it is time to eat, drink and be merry so I’ll catch you guys later.


  236. Volume – I recall hearing during the run to 14k that machines made up >70% of the trades for the NYSE. If the machines were off as badly as reported (see quant letters on TBP and Phil’s post on hegies this AM), perhaps the machines have been dialed back a bit until the hegies are sure the models start to “work” again with the market. Just a thought.

    Markets – Look the potential H&S pattern with neckline at SPY:150, QQQQ:49, DIA:137/138. If those play out, we could see DOW 14,800, S&P 1,620, and NASDAQ 2,860! Look for the indicies to hit the necklines and retreat next week. I think most on the board are prepared for the eventual slide from the markets, but a short covering rally could be the blow off top.

    Have a great weekend!


  237. Have a super weekend Phil and everyone.

    j


  238. Juliet- congrats on CHL
    VMW- in big with Shares but slowly yesterday with Oct 70′s. But premiums are coming down for us which will be better for us later.


  239. Take care and have a good weekend Phil and everybody! Sleep in and relax!


  240. Have a great weekend all :-)


  241. TGIF – Thanks everyone and have a great weekend!

    Bottoms up!

    Greg


  242. Optiondragon “Sleep in and relax” Yeah right with all these impulsive Type A personalities! I’d be surprised if we average 5 hrs a night! Thanks everyone and have a great one.


  243. Regards FFIV – Remember I’m too new to options, I can’t really tell you what’s really a good contract or not… I suggested the $7.20 premium on the 30 strike because it’s completely in the money. It also gives you the option to write 40 calls later if you want. I think there’s resistance around there anyway.

    I’m not too sure if that run means anything because everything else ran the same way.


  244. Hi all, sorry I missed all the action today. :-(

    For anyone still around, I was wondering if anyone is familiar with an software or website that allow you to back test long term options strategies? I know there are packages for stocks. I was hoping to do some testing using actual options values rather that estimating IV and doing the calculations. Thanks.


  245. Hedge Fund Hit Man Hired by Cohen, Loeb, Sender, Says Insurer
    http://www.bloomberg.com/apps/news?pid=20601109&sid=aaza4TiCAtxE&refer=home


  246. Greg, KC
    Sorry I didn’t reply to your questions during the day. It’s harder for me now to catch everything that goes on here. I’m just trying to make quick posts on things that are moving.

    Greg, with volatile markets, it’s hard to “swing” from one day to the next. It’s a lot less stressful to focus on one direction and rest with cash while waiting for new opportunities. However, I have begun to trade more, both ways, so that we have something to play with no matter which way the market goes.

    FFIV
    KC, I think FFIV will be more interesting above 38!

    MICC
    rankxerox, great job!! I wished I had followed you in! I looked at it also, but, decided to go with other things.

    VSEA
    What a great day for VSEA. Congrats, BBD!


  247. VIX – VIX options are options on futures contracts, where the future is the implied vol for the next option expiration that settles one month before actual options expire. So VIX is not like a stock where a long call in 6 months can cover a short call for 2 months. Best use of VIX is to hedge any implied vol exposure you have for your call options on stocks in S&P 500.


  248. Phil,
    I seem to have trouble placing the stop orders. Can you please explain how you do it – Do you place a trailng stop loss ( at 20%??) at the time you buy a call? Or when and what stop do you start with and do you change it once it reaches a certain target. e.g. Once it gains 20% do you change it to trailing a certain amount like $0.25??
    I would very much appreciate your help on this as I have lost some nice gains in the past including last few weeks.


  249. Phil,
    Do you use Stop losses on your defensive plays as well such as DIA calls and puts? If so, do the same rules apply here?
    THANKS!


  250. Stops – check out the Strategy section as well as http://seekingalpha.com/article/16511

    Simplest explanation is that once I hit 20% profit on a position, I will set a stop (in my notes, not in a machine) at 20% of that profit. So if I make $1, I will look to get out if I give back .20 of it.

    There are then about 100 other factors involved in my decision (is it a spike, was there news, did it hit the 5% rule, is it just pulling back with the sector, am I planning to roll, is it a hedge, is it way under my target, is it too soon, is it too late…?????????…).

    If that’s confusing, I’d say the rule of thumb to follow is that a 20% profit in 60 days is a 120% profit annualized and giving up 5% of that is like giving back 30% of your yearly profits but giving back half of your yearly profits just makes you a schmuck, even if your winning percentage is better than 50%!

    Rule #2 (and there only are 2 rules!) is “When in doubt, sell half.” That means if you are up 25% but you are a greedy bastard and you refuse to take a profit even though that profit is outperforming 999 out of 1,000 fund managers out there – you should still take 1/2 off the table.

    If I take 10 Apple $125 call for $5 ($5,000) and it goes to $10 and I sell half, I reduce my remaining basis to 0 with a $10,000 profit. If it goes up $5 more from there to $15 I have $7,500 in profit (150%). Had I let all 10 ride, I would have had $10,000 in profit (200%).

    Had Apple gone the other way however, and I had taken the same $5,000 off the table and put a 20% stop on my $10 profit on the remaining basis I would stop out at $8 for a total $4,000 remaining profit (80%). If we had let the entire 10 contracts ride and took a similar $2 loss, we would be reduced to $8,000, a 60% profit – still not bad. What do you think happens more often, that you make a double and retain 80% of the profits or you let it ride and make a triple?

    The real difference comes with flexibility. Since I took $5K off the table in the first scenario I’m able to put that money to work. Tying up your profits has an opportunity cost. Since I have a new trading idea with some regularity, I tend to like to have available cash. Another thing is that if Apple spikes down my contract $4 on some silly news, with only $5K at risk (now $3K) and $5K in cash, I may be inclined to DD, retaking my original 10 contract position for $6,000, still with $2,000 in profits on the side, which actually puts me in for $4,000 net.

    If you had 10 contracts at $10 and it fell to $6 I doubt you would be as inclined to take advantage of the opportunity to double down or roll. Very much like blackjack, the game is pointless if you don’t take advantage of your oppotunities to press your bets when the odds are in your favor.


  251. I am a newbie and DID read the newbie section but cannot figure out how to see the live trades and live blog. Help?

    Thanks.