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Terrifying Tuesday Morning

Deny, deny, deny!

It's what most attorneys and crisis managers will tell a guilty client to do at the outset of a scandal.  Wikipedia has the following advice on the subject:

  • "Crisis communications professionals preach that an organization’s reputation is often its most valuable asset. When that reputation comes under attack, protecting and defending it becomes the highest priority. This is particularly true in today’s 24 hour news cycle, fuelled by government investigations, Congressional or parliamentary hearings, lawsuits, and “gotcha” journalism.
  • When events like these happen, the media firestorm can quickly overwhelm the ability of the entity to effectively respond to the demands of the crisis. To emerge with its reputation intact, an organization must anticipate every move and respond immediately and with confidence." 

Over in Europe, "Barclays Capital denies 'hundreds of millions' debt exposure" as reported by the Financial Times.   A Barclays Capital spokesman said the estimate is "wholly inaccurate" and added that the true figure is lower, but declined to elaborate further.  The spokesman also said that Barclays Capital did not provide any financing to Sachsen Funding 1, an investment vehicle it set up on behalf of troubled German bank SachsenLB, which has been hit by the recent credit market turmoil.  BUT the spokesman said it is not yet known whether Barclays, WHICH SET UP AN D MARKETED THE FUND, will be required to provide it with back-up financing.

Well, I certainly feel better – don't you?

"The risk exposure for Barclays appears small," said Robert Sage, an analyst at Bear Stearns (another company well versed in denial) in a note to investors. 'However it is the reputational risk and revenue implications which are of greater concern for the bank in our view."  All it takes is a crisis of confidence to lead to an actual crisis in a global economy that is greased by liquidity.  European financials are leading their markets down this morning and it's the WSJ's numbers that are in denial as their figures for both Europe an Asia are frozen from yesterday.

The Journal (and several other media outlets) still lists the Hang Seng as being up 655 points, yesterday's total, when in fact it fell 213 points this morning.  Generally I find an 868-point error to be a little disturbing and even suspicious when the finaincial media is obviously doing all they can to present the sunny side of things, but I'm just pleased that this inaccurate news is not yet presented by naked women!

Also in denial is the Carlyle Group, who have agreed to "lend" ANOTHER $100M to Carlyle Capital Corp, "a highly-leveraged fund that has been forced to cancel its dividend and sell assets to meet margin calls less than two months after listing on Euronext Amsterdam."  Carlyle Capital already used up the entire $100M they were lent LAST WEEK so it will be interesting to see how long this round lasts them.  I love the word "lend" because it carries with it the assumption of repayment!   Carlyle Capital floated on Euronext Amsterdam in July with about $880 million. By using borrowed money, it leveraged a virtual portfolio of U.S. residential mortgage-backed securities and other asset-backed securities by 26 times, to $22.7 billion in investment assets.

That means that by losing just 0.4% of their asset value, the company can wipe out 100% of their working capital!

This is how that game is played – the end commodity "values" of homes, oil, metals, stocks… are determined by a series of paper transactions that "create" wealth on balance sheets but that "wealth" (which in Carlyle's case is leveraged 25 to one) is very difficult to return to investors unless there is another heavily leveraged sucker willing to pay even more in the next round.

I know I should stop being stunned by this nonsense but CNBC just (7:35 am) reported that Carlyle Capital had lost "just" $30M to $40M on the $900M worth of assets it has been forced to sell to meet debt obligations.  What about the other $21.8Bn?  Did they lose 3.3-.4.4% of that too ($800M+) or was that perhaps the strongest assets they had (since you usually can't sell the weak ones in an emergency)???

As posted in yesterday's wrap-up, we allowed our stops to lighten up our DIA calls yesterday while, at the same time, adding to our DIA puts leaving us 650:275 bearish but still protecting a lot of bullish positons so just a bit below neutral.  My advice to members yesterday for navigating this chop was: "Best bet in general is to just let the stops be your guide and get the winners off the table and then we’ll decide how pathetic the losers are."  We are NOT rooting for a downturn, it's just that we're not denying the possibility…

Over in Asia, Singapore's DBS Group Holdings Ltd had denied the possibility that it's sub-prime exposure was more than $850M but it turns out (funny story actually): "We initially did not include ROSA as part of DBS's own exposure to CDOs, on the assumption that ROSA would continue to be funded by investors," DBS said. "Following the market volatility in recent weeks, some [asset-backed commercial-paper] conduits, including ROSA, have had to draw on liquidity facilities provided by banks."  How much more?  Another $724M – so far!  Don't worry though "Most of the S$1.1 billion CDO assets in ROSA are rated AAA. We do not expect these assets to default."  Denial is not  just a river in Egypt my friend!

Other than the Hang Seng, where a 213-point pullback is merely a hiccup, Asia was generally flat even though another run of Yen strength once again threatens the carry trade and, of course, Japanese exporters.  We talked about Europe but what I found to be the biggest news there was a statement from the ECB stating that they are NOT "pre-committed" to an interest rate bump at the next meeting.  "The next assessment of the Governing Council will be made" on Sept. 6, Trichet said. "We will have to assess all elements of the situation with more information to come in all fields. We will then have to assess the risks to price stability in the medium term and take our decision at that moment.That is BIG news and takes out one leg of my premise that our Fed can't cut!

So let's look for our markets to hold on to half the gains off their lows.   For the S&P, that's 1,440, for the Dow – 13,100, Nasdaq – 2,500, NYSE – 9,350, Russell 775 and SOX 486.  Of the group, the SOX is closest to failing but let's stick to watching the S&P which Happy Trading points out failed at the 30 dma:

 

Happy says: "We’ll have to be really careful for the next few days. As I said this weekend, “This could be the test for the recovery. If the market oscillates around the 30-day MA, but, stays above the 20-day MA, it might lure enough sideliners to come in and carry things higher.” So, I’ll be watching the daily MAs closely."  Good plan!  Kudos to Happy for giving us a VERY profitable special call on Chinese ADRs yesterday morning as well!

Of course I'm furious that oil is up at $72, continuing to suck actual cash out of a financial system that needs it badly.  Unlike a housing decline, a decline in oil prices puts money INTO consumers' pockets, something we discussed last Tuesday when I pointed out that every $1 drop in the price of a barrel of oil is $180M per day going back into global consumers' pockets.  We're not expecting any real relief ahead of the holiday but we've initiated a few oil puts on anticipation of a pullback next week as well as a nice hedge on a general collapse.

Let's be careful out there!

 


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  1. Phil –

    Great post to put things into perspective, especially the way wealth is “created” on paper. One of the many strengths of the site (in addition to the strong community and profitable trading strategies/ideas) is the energy you put into sharing the economics and finances behind the numbers. This, and previous posts like it, really helps understand the “why” behind what’s going on with the economy and markets in ways that I don’t see anywhere else.

    Thanks.


  2. Phil: I second KeyserSoze, your site would be worth the subscription price just for the morning commentary and daily wrap up, as a road map of what is happening and where we are likely to be headed. You are able to put it all in perspective in a way that I could not no matter how much news I read.

    Cheers to you!
    Greg


  3. Thanks Keyser – I can’t tell you how great it is having a place to go to discuss these things on a daily basis with people who get it too!


  4. Phil: re. your secret – “I’m going to let you into a dirty little financial writing secret and tell you that readership goes down if I take off my cheerleading dress.”

    I know I’d quit reading if you did this with centerfold pictures!!! :) BUT, the fact that you try to give the NAKED and UGLY truth, is the #1 reason that I subscribe to this site and have tried and canceled dozens, literally, of others that are premaoil, permagold, permaequity, PERMABULL!!!! I think that the type of trader/businessman that you’ve attracted will be able to sniff out the cowardice if you became an image manager rather than a money and fund manager!

    I often disagree with your perspectives on social policy, politics – even karma (interesting that you quoted the Bible to support it -”sow/reap” Galatians 6:9 – but detach the concept from the eternal, spiritual truth). But, I respect someone who will stake a clear position rather than hiding behind double talk.

    Keep up what you’re doing: Tell the truth about the markets, money and stupid human behavior – especially mine when I make stupid trades that violate the rules and the discipline you teach!!!


  5. Home prices down 3.2% nationally


  6. Morning all…lets hang on cause I think its gonna be a bumpy ride today…Looking to get some movement on my CFC, BCSI and GME puts. I’m doing something that I shouldnt be doing. Trying to get revenge on BCSI. Of course, I could always say that I gave up too soon on those puts…


  7. I had a small strangle on SNDA the volatility crush cut the legs off both sides WOW


  8. Was thinking SNDA would be up a decent amount on the report. Clearly i was wrong.


  9. JOYG? Plan since we’re not covered down yet?


  10. JOYG – If you haven’t covered you should have stopped out!


  11. Phil – I’m in the SBUX Jan 09 25s… at this point would you prefer selling the Sep 27.50s for $0.65 or the Oct 27.50s for $1.00?


  12. JOYG – Wow, that was an expensive 1 day trip!!!!


  13. Reminiscences of a Stock Operator by Edwin Lefevre;

    It takes a man a long time to learn all the lessons of all his mistakes. They say there are two sides to everything. But there is only one side to the stock market; and it is not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock speculation.


  14. Philippe, thank you for the site you posted yesterday. Great tool for Straddles/Strangles and Iron condors. Decided to pass on SNDA as it only had 2 stars, looks like it was a good move.


  15. Feeling better lately about loading up with puts in the last week. Felt stupid for a while :)


  16. VMW- FYI LEAPS came out this morning.


  17. Any news on JOYG?

    I picked up puts yesterday so I’m still even on the overall position but curious as to what’s causing the drop.


  18. Phil,

    Back to 13000 now ? or just volatility ?


  19. Optrader, Philippe,

    would you mind reposting the Straddles/Strangles site link you referenced. I could not find it on yesterdays comments (IE search really sucks).

    thanks much


  20. Jeddah:

    It’s:
    http://www.optionslam.com


  21. I second Philippe’s question :)


  22. Phil:

    I also agree with Keyser’s comments. Thanks for the time, energy, and effort
    you put into this site. I really appreciate everything you do, especially your
    insights.

    Question: If someone were to take an account and do nothing but calendar
    spreads and manage it reasonably well, what would be a realistic expected
    return? Thanks.


  23. Optrader: I am also loaded up with Sept index puts and have been feeling really stupid. Can’t tell you how may times I wanted to pull the trigger and take my lumps. I did stick to my guns ultimately, but not without lots of inner struggle to hold on to my resolve, analysis and belief that this correction was not over and at the least needs to retest it’s lows.

    I had some Aug put positions (DIA, XLF, RSH, LNG that I gave up for a loss on July 20th, just before they would have paid off big. Didn’t stick to my guns then and I was really kicking myself afterward.

    Greg


  24. thanks Mr_Sparkle


  25. Philippe can you repost the option link here?


  26. JOYG – Here’s something from Zacks. Wish I’d read it before yesterday!

    Companies That Could Issue Negative Earnings Surprises during the Week of Aug 27 – 31

    Joy Global (JOYG, Trade ) warned last month that “sustained weakness in the U.S. coal market” would cause fiscal 2007 earnings to be well below the guidance provided in December 2006. (The company had forecast full-year earnings of $2.85 to $3.25 per share). The warning caused the majority of the covering brokerage analysts to lower their projections. These revisions caused the consensus estimate for fiscal third-quarter earnings to drop by seven cents to 71 cents per share. The most accurate consensus is more bearish at 69 cents per share. The manufacturer of mining equipment has missed expectations for two consecutive quarters. Joy Global is scheduled to report on Wednesday, Aug 29, before the start of trading.


  27. NVDA .. really starting to come down. Maybe just a flush though.

    Phil: Another cheer from the crowd!! In a nutshell, I could not trade without PSW. Your insight into “why” things work is outstanding and has changed the way I approach investing. Just hoping PSW doesn’t get to big and unwieldy as I’m sure you are in high demand.

    PS: the “un-cheerleading” you speak of has saved my butt several times.

    Thanks again .. Brian


  28. Greg, good luck to you on those. It was very dangerous though to have all those uncovered.
    I started my Q puts as a cover to my Leaps, but I just kept added with the last batches on Friday and yesterday morning.
    I also have some CROX bought yesterday on that stupid plastic clothing news, as well as ZUMZ, COF, AAPL, and CRM.
    A lot of charts I look at turned bearish yesterday. let’s see what happens this week, but I am keeping tight stops on all these puts for now.


  29. NVDA- LOL yes down a whole 2% from it ATH


  30. looks like yet another day delaying the inevitable restest of the lows. gee, consumer sentiment didn’t drop off the planet entirely so all’s well, I guess.


  31. Optrader: I am going sailing with my youngest son at noon today (first time ever for both of us). How would you suggest putting hard stops on that will protect me while I am incommunicado but not get me whipsawed out at just the wrong moment?

    Thanks
    Greg


  32. BBD,

    VMW – which leaps do you like? Thanks


  33. NVDA

    BillBD – you thinking it’s just a flush?


  34. What the fastest way to check on the movement of the dollar?


  35. JBL
    I bought those 3 of Jan 70 09′s for giggles. I will be buying some higher priced ones later. I am in no rush.
    Jeddah62
    NAS- is down 30, NDVA down 2.75% no biggie in my mind. You seem concerned to you have Sept’s?


  36. Hi there everyone, I’m back with a vengeance (yes, I did indeed trip the market yesterday on my way out after a few days in New York…).

    Seriously, I was glancing at the action last week feeling left out, not so on my first day back home. I think I’m going to wait and see some more of the action unfolding before committing any of my now much reduced resources (oh! AAPL just took a peek under 130 on the 15 min).

    Of my past plays, can anyone give me their feeling on these… AAPL, MEDX, DNDN, GSK, TASR, YHOO… while I go back and read the past 3-4 days of comments and look at longer timeframe charts to catch up.

    And Phil… Not only are your thoughts priceless, you have been an absolutely amazing fulcrum by attracting such an eclectic and talented group of people to learn from and exchange ideas with. I am so glad I could tag along.


  37. Greg, I don’t know. It depends on where you bought and what the intraday momentum is, but especially what your time frame is on those. Personally I am not daytrading much right now, except to adjust/change size, so I won’t get out of my puts unless they take yesterday’s highs. You can use that stop if you want.


  38. Phil,

    MA getting killed today, is it a long term play below $130?

    Bryan


  39. So glad I bought DIA puts yesterday. I wish I also bought some SPY puts.

    j


  40. joyg – anyone playing today? Calls or puts – or which strategy? I need to make 10k


  41. NVDA – No, not concerned. In Sept’s. See a good “venting” (Happy term) though.


  42. Dow chart looks bad

    IWM puts and NEM calls are my only trading positions at the moment


  43. WSJ – Unbelievable. Thanks Phil for the insight. My apprehensions of Murdoch ownership of WSJ is sadly coming true ?


  44. AAPL now below 50MA. This is very interesting technically. If it closes below today I would not be surprised to see it retest the $110′s, which should be a great buying opportunity.


  45. Mrn,
    I believe you can find good information on the dollar vs. other currencies at the bottom of the http://www.kitco.com home page. As for the $usd quote, I don’t where to find an intra-day quote, just the final quote at Stockcharts.com.


  46. Juliet,

    You still hold CHL calls and LFC calls ?


  47. Optrader – AAPL, there it goes… market to follow? Wonder about buying some VIX calls… (erhm…)


  48. Hey I’m back – got an emergency CC on a deal that was blowing up (financing of course!) if anyone has $200M an wants to take a subordinated note to buy out a software company give me a call!


  49. Thanks Daniel. I have an alert for the metals from Kitco – “duh” – I should have checked.


  50. Hi Phil,

    Back to 13000 this evening ? or just jitter ?
    what happens ?


  51. Optrader:

    Time for FSLR puts? Thanks.


  52. Dragon,

    Still bullish on ACH ? currently : -10%


  53. Sorry, Phil, I only have $180M right now “available for cash” in my account.


  54. A software company? Now that’s what I call a risk-free investment! Subordinated too!!


  55. Sooo happy i went mostly cash yesturday.

    Phil is this software company trading on the OTC?


  56. FSLR-I like to enter puts when price goes below 5MA and 5MA turns negative. That would have been yesterday on that chart. That being said it probably has more room to go. Maybe enter a small position and then double on a bounce, keeping your stop at 5MA.


  57. $usd index NYBOT 30′ delayed chart at
    http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax


  58. aapl fighting hard


  59. CROX dropping hard


  60. SBUX – why give up 30% and give your caller an extra month? Always try to sell as short as possible unless it makes no sense for commissions (like maybe a .10 that you can get .25 for 3 months).

    JOYG – I said yesterday I was bearish so no surprise on the drop. If you are stuck with it you can still DD on the Oct $55s at .90, which would reduce the basis to $1.68 and sell the current $50s for $1.40 which is actually a better spread than we had yesterday.

    Reasonable calendar return – I tend to believe a chimpanzee should be able to make 20% but I’m surprised at how many people have pursued the strategy and got killed so, like everything else, it all comes down to picking the right positions. My BSX Jan $17.50s are down 75% and my MTU Jan $12.50s are down 79% and my CC Jan $22.50s are down 100% and my COF Jan $75s are down 53% and my M Jan $37.50s are down 69% so, within 185% worth of gains, there are a number of losers (plus, of course, we already cut some loose).

    Not everything makes a good calendar spread, that’s why I generally start them in the STP (which I watch constantly) and “graduate” the posiiton to the LTP after a few months, when I am comfortable enough to leave it alone.


  61. CELG-one of the few greens. September is usually pretty good for Bio.


  62. AAPL-nice sale on Sept 130′s Phil


  63. ACH good bounce back play but with Fed minutes out you should practice patience and plan to not make a trade for the rest of the week. :)


  64. Phil,

    A few days back I believe you sold some AAPL Sep 130 calls, are yous till holding those? I sold them as well, they are in the green now, trying to decide if to hold on to them a while longer or buy back.

    Thanks


  65. Hey BillBigD, you picking my brain :)


  66. Dragon,

    Thanks
    I trust you, I don t make any change on ACH.


  67. Qs sitting on 100MA.


  68. Hey, what’s going on with NEM? Just about every PM stock is down except NEM and HMY and NEM is up big with over 40,000 September calls bought today.


  69. JOYG – Thanks Phil, on the adjust, but also on the warning. I sold longs and took more cover all the way up to yesterday and it’s all stabilizing the portfolio nicely!!!! This was the only one I left naked & wouldn’t you know it!!! I didn’t cover yesterday since we didn’t get our price and the drop was so fast this a.m. that a hard stop would have been filled right at the bottom. I’m going to still try to spread it as suggested as I already DD b/tw .85 & .9. Hope this doesn’t b/cm more of the “dumb tax” on my education or I may not be able to snatch up future offers like your $200ml software co.


  70. PCU
    sliding faster and faster.


  71. philippe, when trading you must have set parameters for stop losses and taking profits, please read OptionSage’s book and in Phil’s education section for more info. You can’t just be holding and hoping, take profits or die.


  72. Greg – re. hard stops. If I’m going out for the day I much prefer index puts. How much did you lose on the 100-point drop? Then pick up enough puts so you will not lose on the next 100 and watch your brackets to see that you would net about even with what you would gain back in a recovery. Easier than jumping in and out of things.

    Ugly market movement!

    Welcome back Fab – all stocks are bad right now… Goog holding $510 is interesting, if Apple retakes $130 I may be inclined to pick up some Qs.

    MA – stay away from the consumer until either Europe (9/6) or the Fed cuts rates.


  73. when is the fed minutes?


  74. Anyone shocked and taking advantage of the huge premiums still in AAPL Sep 130s and 135s and selling them?


  75. Looking at establishing a straddle before Fed, by buying Q calls. Will protect the big gains on my puts. I think we will have a big move either way.


  76. Stocks bad indeed… I have a feeling AAPL will find it hard to retake 130 today


  77. I’d like to give more kudos to Phil and others on this site. I’ve learned so much since subscribing at the beginning of the year. I’ve learned the value of hedging and covers and made profitable adjustments to my trading tactics as well as investing strategy. The daily analysis/remarks are fantastic and the continued retrospective follow-up is like nothing I’ve read elsewhere. Keep up the good work!

    p.s. SOLD my first calls last week (AAPL 140s @ 3.10) with good understanding of why, even though I’m bullish on AAPL in the long-run. A few months ago I would have (and did) just gone out longer term and ridden out the bumps, won’t make that mistake again.


  78. Dilbert, it’s at 2PM


  79. Thanks Phil: I am actually over weight on index puts, not calls, so up big so far today. I’m pretty sure I will be safe while away this afternoon.

    Greg


  80. AAPL – will roll callers down to $125s if $125 breaks but BEWARE a pointless reversal based on a single word in the Fed minutes. BEWARE, BEWARE, BEWARE!!! On the $130 calls that are green, set stops. Mine are up $2.60 so if Apple breaks back over $130 WITH a market rally, I’d take $1.50 profit and be happy for the moment. They are more likely to retest $125 though…

    Did I say WOO HOO on my FXI puts by the way?

    PTRs going well too…

    13,000 – Now THAT’S negative Philippe. I certainly hope not but we could use a good flush back to 12,500 this week.

    Optrader – you’ve got to get portfolio margining, we can free up that extra $20M!

    Software co – if it was OTC I couldn’t discuss it anyway… Deal not dead but, like all deals, the bank is coming back for concessions that weren’t there before. This is the kind of thing that grinds small caps to a halt.

    NEM – someone bought a lot of calls and other people think they know something…


  81. Optrader – good idea on strangling Q’s; reminds me to strangle DIA, since I closed my calls yesterday.
    Phil – what strike would you take, 132s or 133s?


  82. Dragon-

    Have you decided how you are going to play NCTY? Naked calls or strangle?


  83. Fed at 2:15

    AAPL – good point JP! $2.83 on the $135s is a little silly with the stock at $127.

    Nice Chix0r! 8-)

    Huge gain in STP thank goodness, small loss in LTP but VIX is flying back to 25 again and topping out there so BEWARE! Last time the VIX was at 25 was the 21st, when the Dow was at 13,090 so this action is interesting as it’s already at 25 after gapping up 2 days in a row. Before that, the VIX was at 25 on the beginning of the 17th, when the Dow was at 12,848, which was a 300 point up day.

    Does the overreaction of the VIX indicate a HUGE snap coming at 2:15?? We won’t have time to play the mo so the most logical thing to do is bite the bullet and press our strangle by rolling the remaining DIA calls down to the $133s and evening out the coverage.

    I’ve got 30 and 38% gains on the Sept $133 and 134 puts so I’m taking those off and rolling to the $131 puts, now at $2.35 but scaling in and hoping not to have to cover fast. The October $132 puts I’ll leave alone (up 27%) and my remaining October calls ($131 are back to about even so nothing to do there.


  84. E-Trade – do you ever find that positions just disappear from your account for a day or so…. I was sure I bought FXI puts yesterday afternoon but they are not in my account anymore!!!!


  85. Etrade – LOL! That happened to me, I couldn’t take those guys – maybe it’s just options but I’ve never seen a worse system…


  86. Rahul,

    I thought I’ve experienced every frustration e-trade has to offer, but never that one.


  87. Premiums on AAPL calls, there is an expectation of an event coming up, new iPods, etc. I would guess that’s why the premium, so I’d be cautious as this thing might snap back hard on any news.


  88. AAPL – DD on the $130 calls. As they say in poker, either raise of fold. And I really like Apple here.


  89. E-Trade – I’m glad I have the e-mail confirmation of the trade going thru… I thought I was losing it for a minute there!


  90. Phillipe, yes, I still have CHL & LFC…wish I took profit or did a covered call yesterday.

    j


  91. etrade – i bought RIMM puts a day or two after the 3:1 split and the next day my account had a placeholder instead of the correct symbol and it wasn’t tradeable online (or by phone with broker) that day. Was fixed at start of the next business day. Thankfully i was just scaling into the position (which is looking pretty good today!) and didn’t need to trade it, but not being able to trade is a HUGE problem in my opinion.

    Note to self: look into OXPS account…


  92. chixor
    ive mentioned before on this site how satisfied i am with i oxps – and i’m really starting to dislike fidelity even more – which is the other account in trade in.

    m


  93. Phil – You use optionhouse don’t you? How do you like their executions? Scottrade sucks and I’m looking to make a change.


  94. We’re back to support levels reached on the 23rd, 30 min DOW chart looks plain scary but we managed to hold support which makes me believe this may just be a setup for an afternoon rally.


  95. ELNK with a big jump on stock buyback and job cuts.

    J – not even half off? For shame…

    OptionHouse – not yet. I’m talking to them about setting up the fund on their site but I haven’t moved my personal account off OXPS – I’m way too satisfied with them to change easily.


  96. Etrade

    I bought 5 RIMM call befor the split
    Sold the 15 calls after the split
    Next day the call were back – I sold the again
    Next day – I had a a debit of 15 calls – bought to cover
    Next day – I had 15 calls and -15 calls – sold and bought to cover
    Yesteday they were back and I called – they are gone now.
    I made an extra $1400 on the free calls but it was not worth it.

    If also had trouble with the NFI reverse split.

    morale – if you are playing splits with options on etrade keep vigilant and use the phone if you need to. Don’t assume it will straigten itself out.


  97. now its do nothing time. were wading between 130s and 150s… we have to wait until the money temple adjourns


  98. Phil,

    I have an SPY diagonal, Sep/Mar, 150/148.. It’s up 11% over the past month, with 67% gain on my caller greatly outweighing the 15% drop on my long call.

    Any thoughts on rolling? Given my 30 day hold rule, so I won’t be able to re-roll or change the position for at least 30 days..

    My gut says I can probably squeak a bit more out of the caller, so I should wait a bit.. But when the time comes I should probably roll into the 148 octs. Either way, I should make sure there’s some room at the other end of my 30 day window before expiration of the octs.. Cheers -Peter


  99. Rally – I agree, we held the levels I set this morning except the SOX so I’m watching them for signs of life… GOOG still giving me hope as they have no major reason to hold $510 other than to deny my target of $20 on the Dec $540s…


  100. Phil, yes, shame on me for getting too greedy. I’m never going to let this happen to me.

    j


  101. tesorohaters- sept calls 45 and the sept 35 puts , $2.5-3 to $1 dollar weighted, overweight long, long volatility with a strong long bias.


  102. I love optionhouse and have saved so much money it makes me happy.


  103. SPY has descending 50 dma now at $149 and you would have to buy out your caller for $1.88, which is a lot right now. If you intend to roll, even if they SPY goes to $150, you’ll still get another $3 in premium on the October caller plus your leap will be much better off so nothing to really lose by letting his premium run down (this is based on the fact that you can’t get in and out, otherwise I’d set a tight stop ahead of the Fed and get back in on a bounce).

    AAPL – that’s enough on the $130s, buying back for $5 (up $3) and DD on my own $135s at $3.05. XXX


  104. Dragon – Optionhouse. Good executions? That’s the main money-saver in my book!


  105. 5 AAPL $135s at $3.05 in the $10KP (was $5 yesterday). XXX Stop at $2.50.


  106. NCTY- 13million share float with 2 million shares short with 10 days to cover, 15% short. Watching the tight range means a possible Darvas pop. Historic volatility(5+ points on news driven events) as well as the binary event of the release date for Burning Crusade will make it volatile. Read some of the past rumors and news items on Google finance gives you the story. Figure out the story and you can game the ending.


  107. Thanks for the update yesterday Phil keeping me informed!

    If I had a chart I would almost guess that we hit the down-trending resistance lines posted in charts just over a week ago and got rejected….if that is the case then this really is getting too easy and maybe that VIX rising can try to fake us out!

    Meanwhile I am spending $3 on Coca Cola bottles that seem one forth the size they are in the US….now if only KO had decent premiums……..


  108. yes good executions, are you kidding me, like id waste my time.


  109. How about a spec play? VG Oct 2.50 Calls for 30 cents..
    If they win the court case, the stock doubles. If they lose, the stock halves.


  110. APPLE CALLS

    Phil,

    Did you add APVIG?


  111. how do you come up with your must hold, breakout, etc levels phil?


  112. WMT creeping up. That’s a good leap, may as well pick up some Jan ’09 $50s for $3.75 and wait for something to happen. XXX

    Good enough on COH I’m liking the Jan ’09 $45s at $6.30 since the Oct $42.50s are $2.15 but no hurry to sell as I’d hope to get the same for the $45s on a rebound.

    Oil refusing to go down but sector doesn’t care, indicates totally pumped up pricing on crude. USO $54 puts at $1.32 make a fun play but SU has the most to lose and the Oct $85 puts are a fair price at $3.50. XXX


  113. NOV is flying


  114. COH-welcome aboard
    JBL- Did you ever get in on NOV today or yesterday


  115. Crude projected down 1.25M, Gas projected down 1.7M, distilates projected up 900K – net negative 2M expected tomorrow with lower utilization which doesn’t make a lot of sense if they shut down production for Tropical Drizzle Dean.

    KO – it’s not them it’s the local bottlers!

    APPL $135s – yeah they filled at $3 in 2 seconds – nice and liquid.

    How I come up with levels – I look at where they are going and write down the number. The rest is just practice… 8-) Seriously, that’s a weekend question but it does take over 15 years of practice (so far).


  116. Phil,

    Thanks for the site, new member..

    Got APVIG at $3.00, remember Apple has their new iPod unveiling on September 5th, supposed to be a new iPod series with the Mac OSX in-built, possible rumours on Video playback on a wide screen with iPhone interface. Let’s see. Stop added at $2.50 -


  117. Phil,

    Are you picking up the GOOG Dec 540′s for under $20 now or waiting?


  118. phil, is the COH an XXX?


  119. phil, what are your thoughts on COST that you mentioned a couple days ago. did you have a target in mind?


  120. MEDX -

    What’s driving this one down today? I can’t find much on Yahoo/Google.


  121. GOOG – looks like it’s breaking down!


  122. Andrea Malagodi…welcome

    I noticed WMT as well SHLD held up fairly well, BBBY 52 week low retail mixed


  123. optiondragon, what ratio in NCTY call:put?


  124. Rahul – Breakdown is a relative term today. GOOG is still off less than a percent.


  125. LOL – my PTR Sept $150 caller is still asking $2.05, needs a serious reality check!

    Nice double on CAL, done with them.

    Giving up on my WYNN puts if they break $119, these guys just won’t go down.

    Rolling X $95 caller down to $90 caller for + $2 and rolling Jan $105 call to Jan $90 call for + $3 – seems like a good trade!

    Oops, there goes Google! Not good!


  126. conceivable- very good point
    Andrea- welcome and thanks for the AAPL info


  127. mr sparkle nothing just profit taking and technical cycle.

    $250-$300 on the calls and $100 on the puts, thus the $2.5-3 : $1 , dollar weighted


  128. I am hearing a lot of people saying that the Fed is going to save the markets today and we will have a big rally. Makes me feel even more bearish…


  129. Phil,

    I have naked OCT 45 GME puts, at what price would you start selling? I was thinking of getting all out at $46 but if we retest the bottom, GME could go to 43-44.

    Bryan


  130. CELG
    above 60 today on an outperform rating.


  131. Welcome Andrea!

    GOOG $540s, waiting. Now that we’re here, we may test below $500 so I can shift to the $530s and ha ha to those jerks for not taking my $20 bid earlier!

    COH – it may test $40 but good for scaling in here.

    COST failed 50 dma test at $60.25 and 200 dma looms at $56 so not too keen on them here plus gas isn’t coming down enough. Best would be a nice sell-off here and then get them as a Q4 holiday play.

    MEDX – looks caught up in normal profit taking as people scramble for cash. Like I said about Carlyle, you sell the winners first, not the losers. Once they start selling the losers, look out below (no not there, below there… no, lower… a little lower.. yeah – right there!).

    I like SHLD too but I’m kind of hoping they get back to $130 or at least take a week at $140 so I can get comfortable. I’m selling some $130 puts for $1.23 because I’d be willing to buy them for $128.77 but I’ve got my eye on the Jan ’09 $160s at $20.65 as you can sell the Oct $155s for $3.10, which is just $1.25 less than it costs to roll to the Jan ’09 $150s so not much downside on this trade. XXX


  132. Anyone else notice all the air time BEAR Herb Greenberg has been given the last week on CNBC, he phrases his questions in a way that the guest doesnt even have to reply.


  133. VIX

    Phil, what’s the significance of 2:15 in your earlier comment?

    “Does the overreaction of the VIX indicate a HUGE snap coming at 2:15??”


  134. BBD,

    25 words or less – NO dammit… I have watched it and I thought it was going lower – and I know I missed this chance – but thanks for the reminder and next time it looks like a good entry – kick me will you.

    I did get in DE and AAPL, and so far so good.


  135. PCLN – starting to move. Sure I jinxed it.


  136. Nobody likes my VG play? The option is cheap… FINE $(#%@#()%*$@#


  137. Three news items:

    American poverty rate declined significantly biggest drop since 2000

    American obesity rate at all time high All 50 states showed increase

    Foreigners continue to believe Americans are ” fat dumb and happy….”


  138. GME – me too! I only got my first round as it went down too fast but I’ll stop out up 20% if we rebound. On that play there were no fundamental reasons, it was a purely technical short based on what I thought was an exagerated run. If they have trouble breaking $47.50 I’ll hold on but if they break through there’s no reason to hold this one.

    CELG – I like them. I like the ’10 $70s at $12.65 if you can sell the Oct $65s for $1.15 (waiting of course in case we recover a bit).


  139. what do you guys think about wynn?


  140. phil- oops sorry didnt specify. you mentioned COST puts not calls. something about a cramer rule. but by the answer it seems you’re more bearish on them. I have the 60 puts now. hold on or take them off?


  141. Optiondragon –

    Thanks for the info. I’m neutral in the position but always curious.

    When it gets takes these periodic drops, do you add longer calls? (And the inverse with runs up.)

    Their pipeline looks to be more extensive than other biotechs, and I wonder just how much – or little -damage might result with a negative from Phase 3 on the MDX-010 beyond the initial knee-jerk.


  142. Would this be a good time to add to BA leaps? (and sell more covered calls later)


  143. New member, thanks for the insight e-one. It sure makes watching the market take on a different perspective.

    Spent 6 years at BSC in fixed income – new to options, trying to get up to speed on option lingo


  144. Thanks Phil, I’ll watch 47.5 then. It’s a good trade so far.


  145. Foreigners continue to believe Americans-I can say I’m at least two of the 3. Some would say all 3. But I am dieting.


  146. I love Herb Greenberg – he’s like the little voice inside my head with a suit!

    VIX – I view the VIX as a rubber band which stretches (increases in volatility) when the market is going the “wrong” way. That means that this last 250-point drop in the Dow has made the VIX “tighten up” like it was a 500 point drop, which means we could get a very fast snap back up, similar to what happened on the 17th (although on that day, the Dow was bouncing off the 200 dma so it’s not quite the same). Still, a catalyst like the Fed could be used for a rally, even if it’s a fake one back to 13,300 rather than a breakout back to 13,400. Don’t forget though, as with my picture on top last night, rubber bands sometimes break!

    VG – are they still in business?

    20 minutes to minutes!


  147. BBD, at least you can do something about that. Dumb is permanent.


  148. WASHINGTON (Dow Jones)--Days before cutting the discount rate on Aug. 17, U.S. Federal Reserve officials were worried enough about eroding financial conditions to consider that they may need to take policy action, according to the minutes of the Federal Open Market Committee’s Aug. 7 meeting released Tuesday. “A further deterioration in financial conditions could not be ruled out,” the Fed said in the meeting minutes, released with the usual three-week lag, and such a development “might require a policy response” if it affects economic growth.


  149. GS selling off


  150. COST – unless gasoline comes down or the market takes off. The problem with $60 on the way down is there are plenty of people (you perhaps?) who feel that arbitrary whole numbers are somehow significant places to make buys and it skews the normal movement of a stock. There’s no narural support for them until $58, which is right back on their pre spikey trendline and would make a nice entry on the upside but, on the whole, I’d let the put ride with a stop around $60.50.

    BA – not really, just a $3 discount. Assuming you’re going to sell calls there’s not enough of a downturn to rush in. At this point, as a new entry, I’d rather see them prove they can take $100 back before testing the 200 dma at $93, where I would get very interested in leaps.

    Welcome Scott!


  151. BBD- You make me laugh everyday dude!


  152. Covering DIA with $131s at $3.40. XXX


  153. are the minutes not available here already:

    http://www.federalreserve.gov/fomc/minutes/20070807.htm

    ??


  154. Hey Scott, were you laid off from BSC?…..and welcome


  155. Damn, minutes are out already and nothing is happening! That’s not good. I’ll have a low tolerance for my DIA calls if we turn down here!


  156. Not moving either way, not crashing is always a good sign. If i wanted to get out of the market i would do it by 2:30, no one would want to be the last one out.

    Lots of good stocks that rallied back from the huge drop we had are showing weakness


  157. I see the statement, no minutes but CNBC put something on screen that sounded bullish. Very strange!


  158. That link, if it’s correct, seems to say a cut’s unlikely and that inflation is still their primary worry…


  159. nah – worked there several years ago, but I know many people are VERY worried


  160. Jack O – here’s from Bloomie:

    Aug. 28 (Bloomberg) — Federal Reserve policy makers put
    aside concerns about the rising cost of credit at their Aug. 7
    meeting because they weren’t convinced a slowdown in inflation
    would last, according to minutes of the session.
    Ten days before the central bank was forced to cut a key
    interest rate, the Federal Open Market Committee was given lower
    growth forecasts by staff economists and noted that “strains in
    financial markets” jeopardized the expansion. Further turmoil
    might require a response, Fed officials said.
    “Policy makers would need to watch the situation
    carefully,” the minutes said. “For the present, however, given
    expectations that the most likely outcome for the economy was
    continued moderate growth, the upside risks to inflation remained
    the most significant policy concern.”
    The records don’t include the Aug. 16 emergency video
    conference when officials revamped their policy statement and cut
    the rate the Fed charges banks on direct loans. The benchmark
    lending rate was kept unchanged.
    “Mortgage loans remained readily available to most
    potential borrowers,” and the “supply of credit to finance real
    investment did not appear significantly diminished,” the Fed
    said in the minutes. “Members expected a return to more normal
    market conditions, but recognized that the process likely would
    take some time.”
    Traders and economists expect the Fed to lower its benchmark
    rate at or before the next meeting, on Sept. 18.

    Looking to Bernanke

    Chairman Ben S. Bernanke may offer insight on the Fed’s
    current assessment of the economic outlook and credit market
    when he speaks on Aug. 31. Bernanke will address the Kansas City
    Fed’s annual symposium in Jackson Hole, Wyoming, traditionally
    attended by most Fed governors and district-bank presidents.
    As policy makers gathered three weeks ago, reports showed
    that inflation had slowed while economic growth had accelerated
    in the second quarter. Gross domestic product rose at a 3.4
    percent annual pace in the second quarter, the fastest in more
    than a year.
    On inflation, “meeting participants believed that the
    readings for the past few months likely had been damped by
    transitory factors and did not provide reliable evidence that the
    recent level would be sustained,” the minutes said.
    Officials kept the target rate for overnight loans between
    banks, the main policy tool, at 5.25 percent for a ninth straight
    meeting. While the Fed acknowledged that “downside risks to
    growth have increased somewhat,” citing tumult in financial
    markets, officials reiterated in the Aug. 7 statement that
    inflation was the “predominant” policy concern.

    Signs of Stress

    That disappointed some investors and observers, who argued a
    balanced assessment was warranted by increasing signs of stress
    in financial markets, sparked by an exodus from securities backed
    by subprime mortgages.
    The Standard & Poor’s 500 Index fell 5.7 percent from its
    record high on July 16 through Aug. 6. The premium on investment-
    grade corporate bond yields compared with benchmark Treasuries on
    July 25 jumped the most in five years, data from Merrill Lynch &
    Co. showed. Sam Molinaro, the chief financial officer of Bear
    Stearns Cos., where two hedge funds failed in June, said Aug. 3
    that the fixed-income market was in the worst shape in 22 years.
    Fed officials “still saw moderate economic expansion in
    coming quarters as the most likely outcome but that the downside
    risks to growth had increased,” according to the Aug. 7 minutes.
    Three days after officials met, the Fed pumped $38 billion
    into the banking system — the most since the response to the
    2001 terrorist attacks — in its first effort to contain the
    credit crunch. The effort failed to quell the upheaval, as the
    amount outstanding of commercial paper, a key short-term
    financing tool for some finance companies, slid the most in six
    years.
    The following week, with borrowing continuing to dry up, the
    Fed took steps unprecedented in recent years: It cut the rate on
    direct loans to banks while issuing a revised outlook that
    recognized economic risks had risen “appreciably” and omitted
    any mention of inflation.
    The Fed announced the actions on Aug. 17 after a
    videoconference among officials the evening before.
    Minutes of the FOMC’s Aug. 16 videoconference will be
    included in records of the Sept. 18 meeting, to be released Oct.
    9. The Board of Governors’ separate decision to cut the discount-
    lending rate to 5.75 percent from 6.25 percent will be detailed
    in another report, around Oct. 16.


  161. VG
    Well it is a spec play !#@$!#@$ (my variation of your XXX??)

    Here, Cramer says a little somethin somethin about it.
    http://videoplayer.thestreet.com/?puc=tscnav&ts=1188307410978&bt=NS&bp=MAC&bst=FF&biec=false&format=flash&bitrate=300


  162. This makes no sense, these are bullish notes because it shows they were willing to take action. You could argue that inflation (per the idiotic government measure) is still contained and logically, per the minutes, there is enough economic danger afoot to warrant action.

    I’m holding the calls for the moment, this could be a flush. Putting tight stops on callers and picking up GE Oct $40s at .80 xxx


  163. Not an economist but i know how to read, i dont see anything that could lead us to believe a rate cut is immanent, im confused, our manufacturing is booming yet we are losing manufacturing jobs, im assuming mostly automated manufacturing, no humans needed here. Services industry obviously doesn’t pay enough since retail is slowing yet services jobs have more than off set the loss in manufacturing. No cuts when we continue to drive up deficits.

    Solid hiring in the service sector was partly offset by declines in construction and manufacturing employment. Most of the drop in construction employment occurred in jobs typically associated with nonresidential construction.
    Both the average workweek and aggregate hours ticked down in July. The unemployment rate edged up to 4.6 percent; it had remained between 4.4 percent and 4.6 percent since September 2006.

    Industrial production picked up in the second quarter after little net change over the preceding two quarters. The increase was largely attributable to a smaller drag from inventory liquidation and a modest improvement in net exports. Manufacturing production rose solidly in the second quarter because of substantial increases in the output of light motor vehicles, other durable consumer goods, business equipment, construction supplies, and materials. Production in high-tech industries rose relatively modestly in comparison to its longer-run growth.

    The growth of real consumer spending slowed considerably in the second quarter after substantial increases earlier in the year. The deceleration primarily reflected sharply slower growth in outlays for goods as purchases of motor vehicles decreased noticeably. Although a spike in energy prices eroded real income growth in the second quarter, there were solid gains in wages and salaries. Despite continued softness in house prices, household wealth moved markedly higher in the second quarter, mostly reflecting rising equity prices.

    The U.S. international trade deficit widened in May, as a rise in imports more than offset an increase in exports.


  164. I like the GE move, it worked last year.

    The cramer video is under Cramer on Demand, it’s his most recent.


  165. FMT downgraded to uber junk.

    They’re done.


  166. I like the GE move, it worked last year.

    The cramer video is under Cramer on Demand, it’s his most recent. Are you naked on GE thus far?


  167. Dragon,

    Do you keep the NCTY this night ?


  168. It doesn’t matter if a rate cut IS possible, which is enought to scare the shorts into covering and can pull money in off the sidelines (I just bought GE!). Don’t confuse this with fundamentals, this is the “Don’t worry, be happy/Meatball” segment of the market.

    If we do fail here, look lower than the last time I said to look lower but you have to remember those Fed minutes were from 8/7 with the Dow at 13,695 and just 10 days later they felt it necessary to lower the discount rate to bail the markets out on the 17th. On the 17th, they made a statement that risks had risen appreciably and that alone drove Fed Fund Futures to 100% chance of a half-point cut. We’ve had DREADFUL housing data since that meeting too so I can see people hanging their hat on ““strains in
    financial markets’’ jeopardized the expansion. Further turmoil
    might require a response”


  169. Dragon-

    I am on the investor relations email list for NCTY and got an email this morning that TBS will launch in Sept. No exact dates, though.


  170. sorry…….TBC


  171. Has anyone been watch SNDK today? Staying strong.


  172. Dear all,

    Today we announced that we will launch World of Warcraft®: The Burning Crusade™, Blizzard Entertainment®’s highly anticipated expansion pack for World of Warcraft, in mainland China in September 2007. It is expected that the launch of the 1st expansion of Blizzard Entertainment’s World of Warcraft will be a significant landmark for millions of World of Warcraft players in mainland China.

    The nationwide launch of the expansion in September will start a new era for the popular MMORPG in China. The9 looks forward to welcoming existing and new players to continue their epic adventures and achieve new levels of power and glory. For more detailed information, please see the relevant announcement on our Chinese official website for WoW: http://www.wowchina.com/news/main/70192.shtml


  173. philippe, yes or sell half and let the rest ride for a low cost basis going into the catalyst.


  174. FXI is good to pick up IF the Dow starts to rally but heeeeeeere’s Cramer (nope, nothing to say…)

    Oops we lost the Russell! Nas lost 2,525… still waiting to dump my puts or calls on a move but it looks like I’ll have to resqueeze into the open if this keeps up but more evenly weighted than I was last night.

    SNDK waking up.


  175. mrn…from notable calls http://notablecalls.blogspot.com/

    Sandisk (NASDAQ:SNDK): OpCo out positive on SNDK
    - Oppenheimer is out positive on Sandisk (NASDAQ:SNDK) saying their hannel checks as late as last night indicate that NAND flash supply continues to be tight from the majors Samsung and Hynix. Recent spot price declines have to do with Toshiba pressuring prices in a very low volume NAND spot market. SNDK slid last night on some misplaced concerns with IMFT/Apple. Firm believes some APPL orders might have been rerouted from Micron to the flash majors Samsung/Toshiba. Their checks indicate Apple orders intact and in fact very strong, with new iPod/iPhone refresh/launch on the way. SNDK should see upside to topline, market share gains and gross margins. NAND flash card OEMs as of last night indicating that they will end month of August in NAND flash shortage. Reiterating Buy and $70 PT on SNDK.

    OpCo believes SNDK is fundamentally in a very sound position. They believe 1) company has firmly established a cost leadership over competition – Samsung and Hynix over the past several quarters. Micron still remains fairly small to be market mover. Also 2) SNDK’s licensing outlook appears more stable and predictable than in the past 4 quarters. Also they believe an insatiable appetite from Apple and a continuing NAND supply shortage is sapping available NAND supply capping Taiwanese flash card OEMs and resulting in 3) market share gains for SNDK.

    Notablecalls: Expect to see buy interest in SNDK early on


  176. Kustomz – thanks. How are you playing it?


  177. Hi everyone. Looks like I should have stayed in the Hamptons !

    Phil … I thought the Fed minutes (headlines) were bullish also…. what can you do ?

    I see nothing but red everywhere (except HD). Financials getting killed.


  178. Anybody here like SIGM?

    j


  179. So Power E*Trade Pro is down. Just wasted 45 minutes on the phone. THey don’t know when it will be back up. God they suck.

    I do like the look of Pro though, the ability to move and size many watch list windows, and have them all link to one big chart window. I like seeing every ticker on the screen at once, and not have to click on different windows or pull down menus like I’ve seen on other platforms. Anyone else like the look and functionality of Power E*Trade Pro, got frustrated with their service, and found a similar platform?


  180. My daughter loves Warcraft!

    T with a huge giveback.

    Putting on my fund manager hat, I don’t pull the trigger until I see the selling subside. If I had to guess I’d say people are repositioning, not dumping (not everyone was smart enough to go to cash).

    LVS flying!


  181. Andrew – I’m still on E*crude Pro? I often will have to use task manager to clear JAVA then restart. Trade off the website w/ 20 min. delay quotes and trust Phil’s calls blind!?!?!


  182. SNDK – sorry about mentioning; it seems I had my usual effect – look at a stock and it turns belly up! :(


  183. Our title group (FAF, FNF, LFG) getting hammered, builders and brokers too. HOV at another 52-week low so I guess this may be going the other way, luckily the DIA $130 puts are still just $2.10 and shouldn’t lose too much if the market turns. XXX


  184. DRagon,

    Thanks, I m bullish and only have calls
    I will sell half


  185. Andrew, as much as I hate Etrade, I love Power Etrade Pro. I have tried everything else and there is just no comparison to the ease, of use and features. I especially like the “links” between lists and charts. I am keeping my Etrade account just because of the platform.
    By the way, it is not down today on my machine.


  186. mrn 70 price target seams kind of lofty to me maybe 58/60 in a good market
    Im not comfortable with the space, the only tech i like is CSCO AAPL im playing stocks like MET, GE, RTN, HON,SHLD…if we get a big pullback AAPL….seems a waste of capital using it on SNDK.


  187. Hey Phil-

    Are you holding oil puts into tomorrow? SU, USO, etc…


  188. Pisani makes a good point, too many senior traders on vacation for a serious rally to take place.

    RIMM taking a huge dive. PTR and FXI are great examples of why you have to take the money and RUN on China plays.

    BSC getting tempting.

    Damn, if we break -200 on the Dow I’m cutting down on DIA calls!


  189. Hussman: Why Stocks are Overpriced

    Stocks are cheap based on forward earnings? Uh, uh, here’s what the always astute John Hussman, of Hussman Funds, explains why in his weekly commentary that is worth the price of admission. A snippet:

    It’s particularly interesting that the forward operating earnings crowd has advanced the notion that stocks are as cheap as they were in 1990. Aside from the problems with forward operating earnings that I’ve previously detailed, this particular argument rests on overlooking the state of profit margins, which were quite depressed in 1990 and are at record highs currently. Think about that for a moment and you’ll see what’s going on. A forward P/E multiple on depressed profit margin assumptions provides at least some margin for error. The same forward P/E based on assumptions of the highest profit margins in history contains no such margin.

    Seen from another perspective, the price/peak earnings multiple was just 11 in 1990, with a long-term return projection for the S&P 500 of about 14%. Currently, the multiple is at 17.4, with a long-term total return projection of about 5%. Factoring in profit margins, the situation is worse. In any event, it’s enough to study the charts at the beginning of this market comment to get a good feel for the relative validity of these alternative approaches.


  190. Andrew, i hope you asked for 20 free trades for your troubles, i don’t let my brokers get away with that stuff without some compensation.


  191. Oil puts, not if we don’t fall lower and half out no matter what.

    BSC is good to scale into – Jan ’10 $110s at $26. You can sell Sept $115s for $4.30 so think how fast this postition can pay for itself but I’d hold this out for a bounce and be happy to DD or roll if it drops further with that rate of return. XXX


  192. Optiondragon – Big thanks for the buy recommendation on NCTY yesterday. Got some Sept 45 calls at 1.20, now at 1.80. I plan to hold till after earnings. Whether it be tonight or tomorrow night.


  193. I like the Power Etrade Pro platform as well. Been having problems all day. Seem to be able to only get minute charts. Hopefully they will fix it overnight. Fortunately mostly in cash and sitting aside for now.

    Waiting for other shoe to drop on markets, assume it is being unlaced as we speak.


  194. Phil or Experts,
    Would you consider bto. Sept puts on ACH, FXI, PTR, BIDU etc.


  195. Ouch, there’s our 200 points, look out below!!!!


  196. So much for the rally, looks like people slowing making their way towards the exits.

    MA rejection at 145 was a great sign to short. Not looking healthy.. Phil you mentioned 130 would get your attention. Still interested? Or would waiting for 120 be more tempting?

    Getting ugly


  197. As soon as I buy more puts the market will bounce.


  198. OCT put purchases, FMT (2.50′s for a quarter), IMB (12.50′s for 0.95)


  199. Jasper – all chasing now. The time to buy puts is when everyone is telling you how great they are doing and people who missed it start buying ridiculous calls (see yesterdays comments with the China plays). I think I said to Juliet yesterday that that is exactly the time I start to go short.

    Well that worked out well on the DIA’s, took a .20 hit on the calls but now I have twice as many puts as I would have if I hadn’t done that cover…

    MA – not if people think the Fed isn’t coming. It was the only thing holding up the market!


  200. sell off picking up steam


  201. Taking 1/3 off on Q’s puts. Huge profits.


  202. these spreads are HUGE on the financials


  203. BSC- I like the Jan-09 70′s for 5.80 and sell the 08′s for 2.85.


  204. Oh – holding off on those BSCs of course until we get a better bottom but I love that play!


  205. Well at least COST has worked out pretty well… taking out some profits there already after a quick day…


  206. Phil,

    Do you still endorse the APPL 135 play?


  207. GRMN- Can I get it again at $90. I am watching it


  208. good time to initiate leaps like WMT or COH or wait till the market settles in next few days (hopefully!)


  209. BSC – $70s? Get me 2,000 contracts at that price! Oh I see, those are some kind of strange contracts, I doubt your broker will count those as a hedge.

    What a friggin mess!


  210. Greg, I hope you enjoyed your boat trip :) Nice move here on the puts…


  211. AAPL – too dangerous right now, we could spark a mad correction in Asia like this which would likely freak Europe out and give as a bad open at best so I’ll maintain a bearish posture for now.


  212. Wow! Swan dive right into the close!


  213. Phil,

    I DD on the XOM Jan 75 puts like you did and so now I have 99 of these at a basis of $2.65 and have sold 65 of the Sept 80′s against these at an average of $1.00. I don’t have the margin to see any more of the Sept’s so would you cash out of the remaining 34 Jan 75 puts and apply the gain to the rest of the Jan 75 puts or hold onto these?


  214. This is so nasty-- I’m dying to pick up some DIA calls. Someone tell me I need to wait…


  215. Very light volume for a 2% drop on DIA, SPY, and QQQQ


  216. Heavy selling into trading curbs – I’d have to say that’s not a good sign….


  217. DW, only reason this isnt making me too nervous. Volume is low. Everything selling off


  218. Phil, buying some QQQQ puts is a good idea right now ?


  219. Your servers go temporarily out of service pretty often yesterday and today


  220. XOM – quite the nose dive here but you have your $80 puts offering some upside protection. If you DD’d to get even I’d give it a bit but maybe ask for $2.65 on 1/4 so you can start easing out.

    DIA calls, I see no hurry, we can always grab them as a mo play tomorrow (I’m about 2:1 puts right now).


  221. QQQQ puts – I’m really not in favor of chasing things down here, if we’re cracking back to 12,500 there will be lots of chances to short.

    Servers – we are getting new, bigger ones this weekend and some of the delays are file transfers they are doing.


  222. Sold another 1/3 of Q puts at close. I cannot believe my luck, the day I have the biggest puts position ever from accumulating last week, we drop almost 300 points. I hope everyone here was well covered, Phil was right about “Terrifying Tuesday”.


  223. Woo Eee! Called that 300-point move pretty much on the button! Unbelievable gains in STP.. time for another vacation I think! 8-)


  224. Shanghai , China – August 9 , 2007 . The9 Limited (NASDAQ: NCTY)(“The9″), a leading online game operator in China, announced today that it will host a conference call and webcast on Tuesday, August 28, 2007 at 9:00 PM, US Eastern Time (corresponding to Wednesday, August 29, 2007 at 9:00 AM, Beijing Time), to discuss The9`s second quarter 2007 unaudited financial results, which will be released shortly after the close of the U.S. market on the same day. The press release will also be posted on The9`s Investor Relations section of its website located at http://www.corp.the9.com.


  225. Phil,

    How could you have unbelieveable gains in the STP? I thought you were 80-90% in cash and the see that you put on very many short positions yesterday and today.


  226. I didn’t see that you put on very many short positions yesterday and today.


  227. It was the DIA puts, added 10% to the total portfolio, crazy gain on cash.

    JOYG with a huge comeback after hours. SHLD too.


  228. OPTRADER- congrats on PUTS!
    Letting GRMN and RIMM come on back to Papa after selling last week.
    Yanks and Sox tonight, a nice escape from the market.


  229. Is VIX derived from the volatility of the option prices or is it the other way around? I know VIX affects the option prices, but what is happening with my TOL puts is strange.
    On Thurs., 23rd, I bought TOL Oct. 20 puts @ 1.00. Vix was high. TOL stock price was about $22.50
    Today, TOL is down more than 2 full points from Thurs., but the put only went up to 1.10!!! VIX even higher.
    Here is a case of the stock moving a higher percentage, than the near term option !!!
    Why would this happen.
    Thanks for your insightful advice!


  230. Previous post was for Phil. Sorry.


  231. BBD, I lived in NYC for 11 yrs and have always been a Sox fan – so go Sox!!! I think I smell a drink on these games – should wrap it up for the Sox.

    I think I am glad I didn’t get NOV after all. Maybe tomorrow with a friendly reminder.


  232. Phil,

    I dont see any afterhours change in JOYG…
    Another question – What do you use Investools for? What is the cost for it?


  233. skyking.. the actual VIX value is derived from the near month option implied volatilities.. I’m going to assume it’s a weighted average. .

    The tricky part though, is VIX feeds into the engines that market makers use to price their option quotes, along with a number of other factors.. So there is a bit of a chicken/egg issue here..

    Chances are, in your case, that the volatility specific to TOL has dropped since last thursday.. To be specific, TOL Oct 20′s historical volatility dropped from about 70% on the 21st, to about 55% yesterday.. That’s certainly enough to explain your lack of gains.. -Peter


  234. The VIX is actually a propostion bet which shows the market’s expectation of the 30-day volatility. It is set by taking a cross-section of the implied volatilities of S&P options so is inherently MORE stable than many individual contracts.

    To some extent, supply and demand of contracts play a role but Fotos take makes great sense. I do tell people time and again not to buy naked options that are 10% out of the money unless they have an excellent reason to take that kind of chance. Frankly, if you were going to pay me $1.50 for a put that says TOL will finish October at its lowest price since November 2003, I might just sell them to you myself!

    Had you taken the $22.50 puts on Thursday at $1.70, you’d be up .65 now, almost the entire additional cost of the option. Cheaper is NOT better with options, you gave up $2.50 (10%) in position to save .70 on the contract (and predicted a 4-year low on a stock that’s already down over 50% from its highs). This is why you very rarely see me make plays like this and, when I do, I often regret them!

    JOYG – I see some crazy spike back to $47 on Esignal but its back down now.

    Investools – I use them because I like their main charts, the fact that they track sector money flows and their live options grid as I have a critical need for live pricing. The way I work, layout is very important to me so I’m willing to pay for it. I think it’s $600 a year but people say you need to go to an expensive seminar first. They’ve given up bugging me to take courses a long time ago…


  235. Phil,

    Looks like your AAPL calls got stopped out at LOD?

    What do you think about the YHOO 20′s? They seem cheap to me and if we open lower tomorrow i thought a couple longs would be good.


  236. NCTY getting hammered AH.


  237. What is happening with NCTY ?
    results already presented ?


  238. Thanks, Phil & fotoaddict. I think they saw me coming. :-)


  239. Are we likely to see the CBs injecting liquidity again the next couple days? Just wondering if we’re going to see them trying to clip the declines again.


  240. NCTY big miss. will be some bizarre action tomorrow with the large short position.


  241. AAPL – no, that’s why I don’t set hard stops. I may regret it but I still have them.

    TOL – sounds like a cheap education as long as the lesson sticks!

    NCTY – my daughter will be devestated but now may be a good opportunity to buy here a few shares…

    CB injection – our CB can’t afford it, it’s Europe’s call to make. We just had a huge Treasury auction to cover what they dumped on the market the last 2 weeks!


  242. Looks like the bet thing I could do today was go sailing and let my puts ride. Maybe sell them into the gap down open tomorrow? But I really would like to see a retest of the lows.

    Greg


  243. Greg, good job on the puts. I said last Thursday that I was expecting us to retest the lows. Seemed crazy at the time and it felt foolish to keep buying puts, but it looks more possible now, especially after the break of that rising wedge. We are oversold right now so a bounce is possible but most charts are ugly.


  244. Optrader: I posted a link to this blog several days ago, even said I was pounding the table on reading “Market Thoughts part 1 & 2″ (now 3rd & 4th posts from top). http://eutrapelia.blogspot.com/ Nobody replied so I guess nobody read it or thought it worth commening on. I think it was what kept me in my puts in spite of the past weeks uptrend.

    This guy clearly explained what was happening and how it would play out.

    I wish you would read it and tell me what you think.

    Greg


  245. Greg- I remember you posting that link, and I did read the blog, but am not clear what part of his writing had you pounding the table. I’m not sure I’m following all of his points. But I’m with you, the various market commentary I’ve read, balanced against what I get here on PSW, is what has kept me with a lot of cash and positions well-hedged.



  246. Market thoughts – the problem with posting any unknown blogger is that without doing a lot of reading, we don’t know if the person is a perma-bull or perma-bear or whatever. I did glance over it at the time you posted and, of course, generally agreed with the guy but it wasn’t a very impressive timing call coming one week and 1,000 points from the top.

    I was a lot more impressed with Happy having the balls to call it “Do Not Panic Thursday” at 12:30 in the morning after closing down another 200 the day before. I made a call to stop out of puts and add DIA calls at 3:50 am so not too shabby either! Of course, now that I do know the guy and see that he’s got good points to make, I’ll be more inclined to read him in the future…


  247. Phil: you deserve a lot of credit for helping me stick to my guns as well, thanks.

    I will tell you about the guy who’s blog I recommended sometime, privately.

    Greg


  248. Toms thoughts
    http://tom2oc.blogspot.com/

    DRAM market to take a turn for the worse in September, says iSuppli
    http://www.digitimes.com/bits_chips/a20070829PR202.html

    =================================================
    FOREX: The dollar dropped further against the yen to 114.56 yen from 116.13 late Monday as risk aversion crept back into markets after minutes from the Federal Reserve’s last meeting failed to calm investors. The dollar rose against the euro after a report showed business confidence continued to slip in Europe’s largest economy. The British pound dropped to 2.0072 usd from 2.0129 late Monday. In other trading, the dollar bought 1.1996 sfr, down from 1.2031, and 1.0628 cad, up from 1.0530.

    BONDS: Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.52 pct from 4.57 Monday.

    OIL: Crude oil prices fell Tuesday on the New York Mercantile Exchange after closing higher on Monday. Energy futures fluctuated as concerns about refineries faded and OPEC suggested that the oil cartel sees no need to boost production.

    GOLD: Gold prices dropped as investors moved assets back into the US dollar, which climbed Monday against other major world currencies, including the euro and British pound. December gold fell 2.70 usd to close at 673.50 usd an ounce.


  249. News from across the pond and more
    A London money management firm, Cheyne Capital Management, may be forced to liquidate the assets backing its $10 billion commercial paper program in the latest casualty of the jittery credit market. Standard & Poor’s abruptly downgraded, by six notches, the ratings of the short-term notes issued by Cheyne Finance, a structured investment vehicle that the fund uses to bolster returns. http://www.reuters.com/article/mergersNews/idUSBNG23203420070829


  250. Asia Markets : Wednesday, August 29, 2007

    (The following is posted from WSJ; please cross check with other sources to confirm.)

    Japan*

    16012.83
    -274.66
    -1.69%

    Hong Kong*

    23020.60
    -343.16
    -1.47%

    DJ Shanghai*

    521.06
    -5.89
    -1.12%

    S.Korea*

    1826.19
    -3.12
    -0.17%

    India

    14976.38
    57.19
    0.38%

    * at close
    Sources: Dow Jones, Reuters


  251. Asia and Euro Markets

    Asian, European markets drop in wake of Wall Street sell-off; but Asia pares early losseshttp://www.cnbc.com/id/20488970/for/cnbc

    Asian and European markets dropped Wednesday following a plunge on Wall Street amid simmering concerns over global credit market turmoil and fears the U.S. Federal Reserve won’t do enough to ease a credit crunch.

    But Asian markets pared losses as the day progressed, with Korean shares recovering nearly completely, suggesting a measure of investor confidence.

    Japan’s benchmark Nikkei 225 index fell 1.69 percent at the close after dropping as much as 2.8 percent earlier in the day. Hong Kong’s key index was down 1.5 percent in late afternoon trading, and Australian stocks fell 1.2 percent.

    South Korea’s benchmark finished down just 0.2 percent after dropping as much as 3.1 percent.

    Major indices fell in China, Indonesia, New Zealand, the Philippines, Singapore, Taiwan and Thailand.