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Which Way Wednesday?

Yesterday was a wild one and today is our last day before we get some real data to play with.

While I REALLY want to be able to put on a happy face, I have tossed and turned on this all night and I have decided that I am still fairly bearish, despite the big sell-off (which looks a little overdone) and despite this morning's pre-market excitement.

Had we had this bounce at 2:01 yesterday, I would have felt better about it, I would have thought that real buyers were anxious to get back in the market and put money back to work but we DROPPED 125 points AFTER the Fed minutes were released and trading curbs had to be placed on the markets near the days end.

If we are rallying, we are rallying on the basis that the economy is falling apart so rapidly that the Fed will have to reverse their posture and cut rates.  Whoopee!  Where do I sign up?  Also, do you really imagine that a rate cut from the Fed, EVEN a 1% rate cut, will save a person with a $250,000 mortgage whose 1.5% ($862/month) "teaser rate" is about to jump up to 7% ($1,663/month).  Is a 6% rate ($1,498/month) going to keep them in the house? 

Now what about the people who have $400,000 loans?  What about the small business owners who took adjustable lines of credit to get their business going during the past few years or the thousands of existing businesses who tapped the flow of easy capital with loans that ratchet up.  Is 1% going to save them?  Is 1% even on the table?

I still maintain that it would be a HUGE mistake for the Fed to demonstrate its impotence by firing their big gun into an overbought market to bail out speculators who bought at the topDefending $72 oil (up 80% in 3 years), $675 gold (up 68%), runaway food prices (up 32%), $248,000 median home prices (up 25%) or equities that are up 35% is NOT in line with the Fed's stated goal of fighting inflation.

The original mandate for the Federal Reserve in 1913 was to "prevent financial panics and bank runs by providing loans to the banking system."  This led to the Fed supporting a runaway bubble economy in the 20s that ended quite badly for everyone (well, almost everyone).   In the aftermath of the Great Depression, the 1946 Employment Act required the Fed to pursue "conditions under which there will be afforded useful employment opportunities … for those able, willing, and seeking to work, and to promote maximum employment, production, and purchasing power."  In 1978, the Full Employment and Balanced Growth Act required the federal government to "promote full employment … and reasonable price stability."  

The Fed has slowly but surely drifted away from their Carter-era mandate and moved back to the Federal reserve of Herbert Hoover, defending corporate interests ahead of those of the citizens.

As Michael Shedlock pointed out (when the Fed conceded to Cramer's plea to bail out his hedge fund buddies by opening the discount window on the 17th): "Once again the Fed refuses to let the free market work. Bernanke is no better than Greenspan; he proved it today. The moral hazard of the Fed's actions are if anything likely to accelerate, but they won't work. Here is the key: There is both a decreasing demand for credit and a decreasing willingness to extend it. But there is a hell of a lot of pent up demand for cash. To understand the difference, please see Sudden Demand For Cash."

"The psychology towards risk has changed and that is why Bernanke is doomed to fail. He can either let the free markets work, or he can risk letting this play out over 18 years like Japan did. Given his misguided beliefs about the cause of the great depression, his path is already laid out."

Now, let's get positive!

Asia had a slight (for them) sell-off with the Nikkei dropping 274 points and the Hang Seng off 343 points but both indexes made a bit of a recovery towards the end of the day.  When there is no after-market news in the US there is little for Asia to do but follow our markets as they wake up (in the Land of the Rising Sun) while the rest of the civilized world is fast asleep so nothing we know at 3:30 is any different than what they know at 9:30.  It's the later-day action in Asia that usually gets my attention…

There was no particular bad news other than China's CB acknowledging that consumer price inflation could exceed the government's target of 3% this year, but they said the problem remains confined to food and expressed confidence that the government can keep overall prices under control.  "Even though we have increased our macroeconomic control efforts, price increases this year might still exceed 3%.  We believe that as food prices are controlled, inflation will also be effectively curbed."  See yeserday's article on denial but we'll give them a pass for today.

Europe is making huge gains off a terrible open but is faltering near yesterday's tepid close.  In a story you would think would not be buried today by an objective MSM: "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."  We can add this letter to our collection of hedge fund blow-ups.

In news you are likely to hear a LOT more about (and thanks to Bigsmokey for posting this!): "Politicians, regulators and financial specialists outside the United States are seeking a role in oversight of American markets, banks and rating agencies in the wake of recent problems related to subprime mortgages."  Oh sure, like WE'RE the bad guys, like WE'RE the irresponsible ones, like WE make insane loans on overpriced assets…  Oh yeah, that IS us!

Their argument is simple: The United States is exporting financial products, but losses to investors in other countries suggest that American regulators are not properly monitoring the products or alerting investors to the risks.  "We need an international approach, and the United States needs to be part of it," said Peter Bofinger, a member of the German government's economics advisory board.  "America depends on the rest of the world to finance its debt," Bofinger said. "If our institutions stopped buying their financial products, it would hurt."

Back home, we stick to my plan from last night, which is: Don't panic (yet) and remember that we take our index puts to protect our calls so if we end up neutral it is, literally, no loss.  We will let the market be our guide, keeping an eye on our levels.  If we retake them, we can consider getting bullish – scaling back on our puts and adding calls but if we, like Europe is doing, sputter around there, it may be a good opportunity to lighten up on the calls and tighten up our downside protection.

We have our oil inventory report at 10:30 and we should get some kind of rebound in the energy patch ahead of (or possibly after) that news breaks but tomorrow is data day so let's see how gold (now $675) and the dollar (80.75) do ahead of and after our economic news.

David Fry was on fire this morning with an excellent chart-fest and I recommend it as a nice overview of the markets as we keep a sharp eye on our levels:

  • Dow 13,100
  • S&P 1,440
  • Nasdaq 2,500
  • NYSE 9,350
  • Russell 775
  • SOX 486


Let's be careful out there!


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  1. Phil, I’m looking for a good source to learn about Fibonnaci #’s . i’ve heard you mention them, and hope you could direct me to some-thanks

  2. Phil,

    I don’t know if you heard about this but because of our reckless lending the people who bought that debt in Europe and Asia want international oversight of our financial system. This is pretty scary here’s an article if you have not seen it.

  3. ONXX new alltime high in Pre-Market. .

  4. To admin:

    FYI: one of the images is down in the post… remote linking not allowed on that server.

  5. “do you really imagine that a rate cut from the Fed, EVEN a 1% rate cut, will save a person with a $250,000 mortgage whose 1.5% ($862/month) “teaser rate” is about to jump up to 7% ($1,663/month). Is a 6% rate ($1,498/month) going to keep them in the house?”

    I think this is very important. If a cut is forthcoming I think any subsequent rally is still on very shaky ground, the real problem – excessive credit – is still there.

  6. BIG making BIG moves, 12% in pre market

  7. I’m glad you have a lot of compliments on your site yesterday.. You well deserve it.

    I do think 200 dollars is a bit bigger deal to the average American though…. I know it’s like commissions for us on a trade, but 200 is like their monthly electricity bill, or food for a few weeks, etc. I can see your point about it, but I think real danger that it does take a while for the cut to realize in the economy.

    The bounce could be on “no bad news is good news”… But due to the lack of buyers in yesterdays market, I think it’s more of a dead cat trying to buy down stocks.

    I’m not too sure, i’m far less experienced than you, so I’m probably wrong if anything.

  8. Slowly buying back Q puts sold yesterday.

  9. A big WTF ? to today’s open.

    We closed with TRIN at 3.30 ! Its now 0.50.

    What changed ?

  10. Fibonacci – LOL, you’re talking to a guy who learned economics and statistics in pre-spreadsheet days but remind me on the weekend and I’ll be happy to poke around and find something that gives a reasonable overview.

    Thanks Big! (smokey that is)

  11. Mornin’ all

    JOYG callers are squirming now aren’t they.

  12. Phil -

    have been watching AA recently. Beat up in the last month or so, has come back to break through its’ 200 day ema, now coming back to test…Good long term play if it holds above it?

  13. Optrader

    You in Sep or Oct Q puts?

  14. KHANNN- congrats my friend
    APPL- glad I went long yesterday along with you Phil. And thanks to the new member who mentioned the news on the 5th

  15. Your guess is as good as mine right now Demetrius – this could be anything, especially in a very low-volume pre-holiday week. It is so easy to move the market this week that there will be very little to be learned from it but I’m just waiting to see if we hold up here, at the levels we hoped to hold yesterday when we were down “just” 150 points.

    Nothing changed but I did think this was the reaction we should have gotten to the Fed minutes at the close. Why we didn’t, I couldn’t say, because if it was selling into strength then I don’t see how that small volume could have exhausted the sellers.

  16. Nice call Phil on AAPL. In aapl sept apvig yesterday @ $3 out this a.m. at $4 b/c live E*trade down again and didn’t want to risk profit on 20 minute delayed quotes!!!

  17. Nadir,
    Great play on BIG. Im in on some calls, sure to be a nice squeeze today.

    Sold the puts, waiting for a little short covering to drive up the puts.

  18. Thanks BBD

  19. Calls that is (NCTY)

  20. Phil:

    I also joined you in AAPL. Thanks, will follow your lead on the Sep 135s.
    ADBE- Our old friend finally breaking out?

  21. Great AAPL play Phil. Are you taking profits here?

  22. Fidelity ATP – anybody use ATP .. I’m not getting live quotes .. anyone else same issue?

  23. AAPL –

    AAPL Sept 135s (APVIG) basis $3… Are we waiting for $5 or is $4 overnight good enough? I want to cut and run…

  24. ATp is WTF this morning.

  25. size123 – figures. Happening more often lately ..

  26. I don’t really understand why hedgefunds don’t take advantage of this low volume… Say just Short apple to the ground and then buy every single call out there known to man. When you see Apple gaining momentum on the upside the day before everyone coming back, cover your short at a loss, and that’ll start a mega rally… Maybe… But you would get calls at a stupid discount.

  27. Any thoughts on AKAM long term??


  29. Phil, BBD

    Holy Cross at Umass this Saturday. How many points will you give my ‘ol team in a wager.

  30. Phil, I’m doing the calender play that you do (buying LEAP and selling front month) with GS, now the front month 200 call is pretty much worthless, should I buy it back and short the 195 calls?… And keep laddering down?

  31. Chem,

    I’m glad u got in on some, I got out of half for a double, and am going to let the othe half ride as I am expecting a massive squeez (25% float short).

    The best part of this board is people bringing ideas to one another.

  32. CFC, BSC, GS- getting killed

  33. Phil:

    Are you and Z still doing the radio thing at 10:30?

  34. Phil, AAPL that was a great call, thanks.


  35. jeddah62
    Yes Fidelity wasn’t working for me either.
    UMASS- Please Football? Now Hoops we can talk

  36. anyone still in COST puts from the other day. showing more strength today compared to markets than i’d like to see

  37. Phil

    Any thoughts on oil plays this morning?

  38. Hello! I’m new here. What’s the best method to keep up with the comments as they are posted (RSS, page refresh, e-mail, ,etc)?

  39. For those of you playing AAPL, our old friend Tom ( had a nice article on it returning to $127 (from a technical perspective).

  40. Interesting behavior in OXPS today

  41. phil, what do you think about establishing LEAP in Sprint? The jan 09 20 seems cheap and we could sell the sep 19 against for a solid premium

  42. CROX red

  43. Listening to Phil and Z on mn1. Phil likes VLO ’09 leaps.
    Boy, Andrew is a real piece of work ! ! !

  44. JJflash,

    If your’e an active trader, I think page refresh is the best way. Sometimes this board can get very fast paced and you wont want to miss out on some good plays.

  45. That guy on looked entirely baffled.

  46. thx Nadir

  47. Got out of AAPL 135′s with a 45% gain (bought them later in the day… didn’t feel good buying them before the fed minutes release). Thanks for the call Phil!!

  48. Apple is planning a special event for Sept. 5th, 10am PDT. Anyone want to guess what they’re announcing?

  49. PHil Likes VLO Leaps? You must mean Puts LOL

  50. AA – great if we don’t spiral into a recession (how’s that for a stamp of approval?)

    Money is flying back into treasuries (cash) so watch out. VIX is still way up, still can’t get a full handle on the cause/effect there.

    Etrade – any class action lawyers out there? Must be Billions in losses due to their screw-ups the last couple of days…

    AAPL – be happy here (around $132), especially if the market starts to fall (watch the Nas). If GOOG can’t break $510 I will start adding back the overly excited $130 covers against my longer plays. As to the $135s, we take that bonus and run in this kind of market (when in doubt, sell half!).

    Hedge Funds vs. Apple – too dangerous, you never know when good news will pop them up $5 (like now).

    UMass vs Holy Cross – last time I was at that game I think UMass lost 73 to 0.

    AKAM – if they can show me that they hold $30 once more I’m in. Great play for next year as event season heats up on the web.

    A lot of things look tempting now but the question you need to ask yourself is how much do you think you can gain (let’s say 20%) and how much do you think you can lose in this volatility (let’s say 20%). Then you are faced with a choice of, starting with $100 in uncertain times either having $120 or $80 once certainty (to whatever extent) returns vs the guarantee of having $100 which you can place a certain bet on if you stay with cash. If we assume the certain bet down the road returns 20%, then your outcomes are $80-$96, $100-$120, $120-$144. So what you are really faced with is the certainty of having $120 by exercising patience vs the 50% possibility of having just $96 (-20%). While we always want to win, and win more, the reality is that making over 20% 6 periods (going to cash every other time), returns a 198% gain whereas a mix of 12 20% gains and losses yeilds diminishing returns if the 20% gains and losses alternate. Even if your mix was ++-+-+-++--+, which is 7 oout of 12 wins, you would end up with just $117.41 at the end of the cycle.

    I would urge people to set up a simple spreadsheet and play with these numbers as the fallacy of chasing large profits rather than taking small profits more often is probably the most damaging strategy pursued by traders.

    Sorry but I forgot I had the radio show. Picked XOM $85s and VLO leaps (’09 $70s) and TSO $50s as plays off a very big drawdown (about 7M oil and gas) ahead of the holiday. Obviously not a good time to have puts in energy but we may shape up to a nice shortign opportunity ahead of the weekend, which I still think will be disappointing from the demand side.

  51. ALBO- I have met Andrew in Dallas. Nice guy- pretty much clueless.

  52. iPhone-like iPod!

  53. BBD, ‘Nice guy – pretty much clueless’, is this a Texas thing :-)

  54. Ramana, I would take issue with the “nice” part.

  55. phil, what’s the best XOM diagonal or calendar put spread?

  56. Size123- people are MUCH nicer down here. That is for sure

  57. BBD:

    Exactly as he comes across. Was it Gomer who used to say G-O-O-O-O-L-L-Y ?

  58. BBD, I was just kidding. :-)

  59. Phil
    Did not see or know of your radio show. Expand your explanations on your oil picks please with months etc. please


  60. Nadir,
    Where do you get the shorting % info? I would like to learn more about it as to how to use it and where to find it.

  61. BBD, I was referring to the one Texan that I thought Ramana meant, not all.

  62. The market is rallying because Edward Hyman is saying the Feds will cut rates to 4%.

  63. Should I get out of my shorts?

  64. Back in AAPL puts

  65. Texas- guys no worries! LOL Remember I am from the burbs of Boston.

  66. OIH is all over the place. Got the 175′s for 4 for a quickie…hopefully

  67. Cman,

    From Yahoo, however, sometimes the data is old (click key statistics on the right). Also has cool short interest filters, but watch out, his picks are real hit or miss.

  68. Who is Edward!? Why does (did) the market believe that junk!.

  69. GS – I prefer the BSC Jan ’10 $110s for $24.25 against which you can sell the $115s for $3.50 (but waiting for a bounce). On the GS, absolutely when you get way ahead early you want to take out your caller (with stops) or roll him down to one with a bigger premium if you don’t think it’s going to bounce. In GS’s case, it looks like this may turn into a real rebound so maybe see how they do around $175 before reselling. Also, whenever you take out a caller, one of the things you should consider first is should you be rolling yourself down to a tighter call, it reduces your margin requirements and increases your leap’s Delta so a strong rebound won’t burn you as badly when you have callers.

    If your leap is the ’09 $195, it costs you just $5 to move to the $180s or $7 to go to the $175s from where you can sell the current $180s for $3.85 vs selling the $195s for .80. Effectively you will repay the cost of the roll after just 2 sales.

    UMass – Ah, basketball – that’s a sport we can win! I’m in football mode right now, not as big a BBall fan.

    COST/OTHER puts – my rule from Monday applies both ways, let yourself stop back to cash. Oil is at $73 and that’s got to be bad for someone but you wouldn’t think so from this market. We are in real manic/depressive mode right now.

    S – I’d go with the ’10 $20s and just relax and sell the $19s, where you get .50 for calls that are 10% out of the money! I think Telco comes back someday but not too soon.

    MN1 – Andrew is a nice guy but does not respond well to new ideas but I’m not sure how distracted I would be trying to manage a radio show while checking the markets, watching the camera, listening to technicians and program directors talking in my ear and trying to keep guests on topic and within a timeframe while trying to entertain the listeners…

    Oil picks – sorry, I forgot I had a show until the phone rang at 10:25. A lot more worried about the overall market now. I’m more interested in an OIH put if they are going to test $175 and I still am not feeling this “rally” has real legs so I’m pretty neutral which makes the VLO spread the best play.

    4% – I guess they read my article where I said one point won’t be enough…

  70. Optrader, which aapl puts did you pick?

  71. AAPL puts- Slimer, I bought the Sep $125′s at $2.50. Sep’s because it is a daytrade, as most of the times when I buy AAPL puts. Always a cover to my boatload of Leaps.

  72. AAPL puts – I’m not a big fan of those. I really like selling the calls much better (Google too) as they are so much slower to gain than lose value. I’ve sold the $130s for $8 with great success and am now contenting myself with $7 on 1/3 so far at this level. If Apple goes to $137 against my longer calls, paying back my caller is a minor issue.

  73. bought GES sept 55 at 1.15 for earnings prerun hybrid strangle. waiting on puts looking to be overweight long on earnings after the bell Tuesday next week. JCG in on wed.

  74. Phil,

    If you were to add to an existing Apple short term/LEAP position what would you be looking at?


  75. Phil, these strategies are very different. You sell calls to establish calendars, letting them lose their premium. It is a longer-term strategy than what I am doing: I am just buying puts for intraday movements, when stock is up a lot, to protect my gains on the Leaps. I am almost always out before the end of the day.

  76. My issue of the day with ETrade… today all of a sudden it says my basis on one position is double it was yesterday. So now i’m down 60% on it instead of up. I was able to squeeze 4 free trades out of them for yesterday’s problem.

  77. Hi Phil, and all, (first post here)

    I have a significant long stock position in AAPL, and have been protecting gains recently with puts. My intention with the long position is to hold indefinitely, or until Jobs dies/resigns. Covered calls seem interesting, but the last thing I want is to be assigned. Do assignments happen fairly quickly after calls go in the money?

  78. Out of AAPL calls at $4.60. Not going to be around much this afternoon
    and +50% in one day works for me. Thanks, again Phil ! ! !

  79. Only in the USA:

    “Helmsley Dog Gets $12 Million, but Real Estate Billionaire Leaves Nothing to 2 Grandchildren”

  80. Phil,

    Interesting GS play. The diagnoals I’ve seen you recommend before were close to neutral or even credit – i.e. buying the Jan $60′s of something, and selling the short month $55′s.

    So what is this new GS play called where you buy the $110′s and sell the higher $115′s? A “Reverse Diagnonal”? For optimum results, what do we hope will happen on this play in both the short term and the long term? Any additional clarity on this type of play is appreciated. Thanks in advance.

  81. Apple calendar spread – My ’09 $140s have been very good to me but the ’10 $150s are practically a no brainer. They are $32.45 and the roll to the $140s costs just $4 more if you need to roll down (and if you don’t go into your leaps knowing this stuff then you are not doing enough homework!). Since you can sell the current $140s for $2.77 and you have 28 months worth of leaps to sell, it’s a very positive return expectation without much fuss. Of course you can get riskier and play around with selling tighter calls and never forget you don’t have to sell all of anything. If I’m thinking of selling the $140s for $2.77 against my whole position, wouldn’t it make more sense for me to sell the $130s for $7.35 against 1/2 of my position? I collect about $1 more per leap than I would by selling the $140s and I have less upside risk and the flexibility to do something else with the other half.

    Don’t forget to place a value on flexibility. A lot of times, I buy out my caller just so I have a clean slate. I may resell it later but having to execute a sell, then a buy on a big market move slows you down.

    Opt – no I’m talking day trading too. Those contracts overinflate by about a buck on a good run and it’s easy pickins to sell into the excitement. The $130s have been a very reliable sell at $8ish for the past week, good for $2 or so each time. The $125 puts move well too but if Apple breaks up there’s nowhere to go.

    GOOG still can’t break $510 but the indexes are holding up well. I’m fine on the calls and chasing my puts up to follow the Dow. This is great for the LTP, now up 190%, a really good recovery from yesterday and the STP was bullish enough that this only gave back 5 of yesterdays 20% gain there.

  82. Optrader:

    Even if you are day trading, wouldn’t you get a quicker move by
    selling the calls against your leaps?

  83. Optrader, Thanks for the aapl info. J

  84. Albo, this is a good question. I would sell calls against my Leaps if I thought there would be a drop in IV. In this situation I don’t think it will happen. I will probably sell these puts by EOD but if I end-up keeping some, IV has a tendency to rise before events/earnings, so premium is not going to go down much. The difference between both of them is not that great, it is equivalent to doing some Gamma scrapping. If I was going to hold for a longer term, then I would sell calls to profit from diminishing theta.

  85. Also, I am not a big fan of selling options in general. I don’t like the limited profits for unlimited risk. But this is just a question of personal preference.

  86. Phil I’m not suggesting you’re point of view is not credible, there are many things that lead to you being right. But a rate cut that big is something I really don’t feel the fed would do… Even if the economy needs it.
    I think a series of 50bp cuts is more realistic, but Bernanke does not seem like the kind of guy to cut anymore than 50 if inflation is still his major concern. (Despite the deflationary direction we’re in)

    What I’m saying is that what we need, and what Bernanke is going to do are two different things. The market is reacting very positively on the news, but it might just slam way harder if Bernanke denies the possibility. (We need a cut, we’re not getting a cut, short the market).

    You’re a lot smarter than me, not only by your track record, but the way you talk and handle ideas. I don’t like disagreeing with people who are far more experienced than me. And at the end of the day I only really subscribed not for your trades (which are wonderful), but to learn.

    I don’t want to be a sheep, I want to eventually trade by myself without anyone holding my hand. When I go against your point of views, or people who agree with you, it’s to help me understand how you think. I learn through an argument. It’s terrible, so forgive me. You’re very humble, but feel free to call me an idiot sometimes and tell me why I’m wrong.

  87. OIL-screaming

  88. One last thing: if stock drops a lot, Gamma is going to increase much faster on the puts. The calls are going to go down, but they will keep some premium, then their delta is going to be very low and you end-up not making much money on them compared to what you are losing on your Leaps. The opposite happens with puts. Of course you can always roll your calls to get a better gamma, but you need to be real good at it, like Phil, to optimize profits.

  89. BBD,

    Are u playing TIF for tommorow morning?

  90. Phil
    Bought the GE Oct 40 call yesterday for 78cents thinking of selling Sept 40 at 35cents?

  91. I misread the news, Hyman wants to ease, not a complete cut to it.

  92. phil, the VIX Feb 27.50s and Oct 30s are the same price…. is this wierd or expected?

  93. TIF-no I am not playing

  94. Just checking in after 18 holes – what happened to my SOX last night?

    BBD, what do you like today? Have to read what you guys are saying today….

  95. Welcome Spoon!

    AAPL (eww) Stock – generally you are not assigned until expiration day when you are automatically called away if your caller is more than (about) .05 in the money. The trick to that is, if you don’t want to be assigned and you don’t want to pay back your caller, you can simply roll your caller out to the next month. As a long-term holder, this should never be an issue for you as you always get a little something extra and, if your caller is in the money, he simply provides more (free) downside protection for you. Effectively selling calls is like some guy saying (using the $130s as an example) I’ll give you $7.50 (the price of the call, which will be worthless if the stock drops) worth of life insurance and I’ll pay you $5 (the premium for less than a month) to take it. I can never understand why people, other than for obscure tax reasons, would ever hold a naked stock…

    Great bull and bear debates today on CNBC. You can tell people are heavily invested on both sides and neither one is sure of their position.

    Congrats Albo!

    Helmsley – can you imagine how screwed up that relationship must have been? She left a couple of Billion to charity too so it’s like she wouldn’t give them the interest on the interest of what she had. Those kids have GOT to learn how to suck up to rich relatives!

    BSC, not GS – just a calendar spread. You have to play the market so I’m long on GS over time but I want to protect but I think they’re good for a recovery so I’m not going to sell a call too close to the money until I think they’re staying at a certian level. This is the problem with labeling things, you need to do what’s right at each juncture, not force a trade into some box.

    Rate cut – I’m NOT predicting a 1% rate cut! I was just pointing out that even a 1% rate cut won’t help. Gosh I hope that wasn’t the impression people got (no wonder the markets are rallying!). What we need is what Paulson said last week: “Markets go up, markets go down – deal with it you wimps!” A Fed intervention of any type here sends a terrible message to investors, exactly the kind that leads to irrational buying sprees. In 1997-1999 the rates were generally around 5.5% and the market did just fine. It could be argued that THAT was too low for the business environment. There is no sense in growing the economy based on easy money – it doesn’t encourage businesses to become more efficient/productive, which is the only thing that leads to lasting growth.

    Anyway, Bernanke’s not an idiot, he knows this but he also has to bow to a certain amount of political pressure and the last thing the Republicans need now is a market crash on top of their usual scandal of the week (another gay senator this week I think). So it’s scary to be short and it’s scary to be long as a word either way can rush the markets. Ben speaks on Friday but it comes on top of a boatload of data so it will be an interesting end to the week. Always feel free to disagree with me – I need to learn as much as anyone else here!

    AAPL – just to be clear. I only sell naked options when I feel strongly that there is a channel to trade into. As you can see from the portfolio, it’s perhaps 5 of 200 posiitons and not for big money as I also do not like the concept of an unlimited downside, theoretical though it may be…

  96. Hi guys, Phil,

    Any way to put a couple of trades in exhaustive detail on the FAQ somewhere, for us newbies? Something that explains the terminology on this board, and deconstructs a couple of trades (rollovers, leaps, etc). It would be as useful as the great strategy paper you have.

    After hours, of course, and when you have time :-)


  97. Phil, Do you think this “Fed Cut Rally” will holf thru the close? Tks J

  98. GE – I agree if we close below my levels but I’ll stay positive as long as we hold them.

    VIX pricings are independent of each other (although somewhat correlated) as you are placing a bet on where the VIX will finish at the end of the month. If you look on David Fry’s VIX chart – you’ll see how silly it is to use one month to predict another. I was lucky enough to take up the November 13s when the VIX was near 10 a few months ago and I have sold calls “agains” it as the far out calls tend to follow the short ones to some extent but the closer my front month gets to my leap, the more dangerous that is for me (I bought out my caller yesterday but will sell again if we sustain a rally).

    JPL – What happened? Well you know that song that goes: “What goes down must come up?” Well, I don’t either but it seems to be the thesis the market trades under…

  99. I second Dmitry. It can be confusing and exhausting trying to decipher the “inside”stuff.


  100. JBL
    SOX-As my budd said, Hey I’m still up 7.
    I jumped into RIMM today, Oil services strong again. But with Nat Gas tomorrow will probably sell off.
    Where did you play?

  101. Welcome Dmitry!

    Sorry but no being lazy. New members get oriented by going back about a month and reading all posts and comments (about 200 pages). Once you do that, any question you may have is probably and excellent one as there is very little that doesn’t come up in 30 days. Also, it sounds like you missed the Education section (tab above) where we have a book and a ton of posts that exhaustively follow specific trading strategies. Hope that’s a good start!

    Oops, the worm is turning down! That makes the answer to Slimer’s question – no.

  102. LOL, Phil, If it were me I would be calling once a week asking:

    “Grandma, can I come over and pumice your corns?”

  103. Phil, I did not get into the COH leaps yesterday – did you get filled? This is still a good Leap trade right?

  104. Inside stuff – an important point for new people is that this is a profession, thus there is “jargon.” If you showed up at an operation and said “Doctor, please don’t tell me to resect the bowel – I need a detailed description of the procedure with several examples and please don’t use any words I would have had to go to medical school for” then the patient, like our trade opportunities, would be long dead before you made an incision (or began to scale in as the case may be).

    It is, to some extent, up to you to get up to speed and study a bit, especially if your goal is to follow the more complex strategies we discuss. We have 500 members and plenty of new people come on whenever we let people in so usually if you go back 30 days and really read through it, you’ll find that chat starts making more sense pretty fast. For simple moves, you can look at my recent post of the Long-term portfolio update. When there is time, we make very clear layouts but that’s just not even practical for intraday trading in this market as it’s far too volatile and opportunities come and go quickly. I’m sure there’s a dozen people here who followed yesterday’s Apple trade, that can tell you that once you are ready to take advantage, the trades can be very rewarding!

    Big rollover if the Dow can’t hold it together here. Nasdaq 2,525 would be a bad break too.

  105. COH – no, I was so busy with the silly DIAs that I forgot but this is a good spot for a long-term play – notice the huge buy volume when they touched $40.50, someone seems to have a pretty good order in down there…

  106. BBD – I play at Riverside Golf course – just south of the airport – it’s pretty nice and in great shape. Tee off about 6 45 and back home by 11 ish. Do you play? I thought you were a Yankee fan – I always had to hide my Red Sox banner in the city. We are still up 7, and we will get them tonight.

  107. Hey Bill are you going back to the well again on VMW here?

  108. Erin was looking smoking hot today! Markets had to go up! LOL

  109. 2 year note auction went well with 4:1 oversubscribed. I don’t see the fact that people are desperately clamoring to lock in 2 year’s worth of interest at 4.11% to be a big positive. The bull logic is that there is a ready supply of cheap money to grow business with but that’s based on the assumption that the people buying notes would be as happy to buy corporate notes – this is not something you can count on…

  110. Erin – I was going to say…nobody noticed that Erin was wearing red today..including BBD :)
    lookout markets !

  111. I think the 800 pound elephant in the room, the reason why the Fed cannot cut, is the US Gov’t is in the credit business too. We sell treasuries to finance everything from a $460B military budget to $600B wars and these things create absolutely no value and God forbid we actual ask folks who can afford to pay for it, to, well, pay for it. In the dangerous game of draconian tax cuts and massively increased spending, you have to ask yourself, what happens when the US gets a ten trillion dollar margin call?

    I don’t mean to get punchy but I don’t understand ’9-11 changed everything’ mentality. You’re going to try tell me you woke up on 9-12 and realized the world was a dangerous place? Try telling that to 46 million Boomers that hid under their desks in school during nuclear weapon attack drills. Give me a break. What exactly did 9-11 change? Our ability to collect revenue and spend it responsibly. One time I saw a hung over party-goer peel herself off a fraternity couch at 7 AM and shamefacedly stumble out into a gorgeous morning. The walk of shame. Why do I feel like that girl right now?

    This is why I pay good money for PSW. The MSM is useless. It would be a conspiracy theory to say they are involved, but I would pay attention to such a theory if someone wrote about it. Look at today’s post – where’s the cash? That’s exactly right, and that’s the kind of insightful question and discussion that needs to be addressed. Are you sitting around waiting for social security, your FDIC insured savings account (when there’s a bank run), federal insurance from a hurricane? — yeah right — SHOW ME THE MONEY. We pissed it away in Iraq and Afghanistan (and still didn’t catch OBL — I mean seriously WTF?).

  112. JBL-You want my COH shares? Starting to piss me off. LOL

  113. Optiondragon and Phil,

    Do you ever follow—SIGM—-they report this eveneing—small float 22mm short 5.8mm—short analyst just reversed his position admitting he was too early and company was going to have strong earnings and guidance—great technology and space— chart breaking out

    curious if you are familiar with the comapny or have an opinion on the play into earnings--


  114. You go BDC.

    At least we still have our liberty- oh wait, I have had my head in a hole for 6 years, we lost that.

  115. Just had an idea, since you’re doing a site redesign in sept… Phil, since making a newbie faq is probably the last thing on your mind right now, why don’t you have jared add a “wiki” tab to your wordpress (or whatever interface you guys are going to be using)… the wiki could be freely edited by any registered user and could provide that extra step and increase new member retention rates

    Also, i don’t know if you guys are going to try and go “live” with your comments, but if you are sticking with wordpress, you can modify some AJAX sidebar’s to make your comments live…

    i dabble in web design/programming, if you guys need any help, let me know. I’ll repost this at the end of the trading day

  116. Tommy
    I really don’t pay attention to ERIN until the afternoon when she has the REAL Makeup people work on her. There is a HUGE difference. LOL

  117. COH

    Phil. Looking at a 1 year chart, it’s pretty scary. I don’t see a sideways trend, just a southern one with more lots of downside potential. Why does this make a good candidate for the LTP. I always thought you looked for more of a sideways “V” pattern.

    thanks for your insight – Brian

  118. non- SIGM shows that you can play after earnings and still catch a move. higher prob play after earn.

  119. I wrote the statement about “inside” talk. I did not explain myself very well. I know trades, stocks and options. I have learned to like and trust your opinion on the market and trades and that was why I signed up. All of the people on this site seem like nice people but I do not have time nor trust for their insights. I am sure some are really good but I do not know who. I find it time consuming to read through all the stuff on internet cafes in Europe, Amsterdam and golf courses. I just want to find out YOUR current, up to the minute information on YOUR picks pre, during and post market analysis.
    Is there some way you can send out email to us and talk about your trades as they go on during the day? This way us “a-social” people can make trades and follow the rest of the market. Not to mention, mowing the lawn etc. I apologize to all but I just want the facts, not the story.
    No offense intended.

  120. @irished,

    Heh, the technology’s out there, we could just have ideas text messaged to us…. though it probably defeats the purpose of this site.

  121. CNBC anchors without makeup. . .

    I couldnt even recognize Becky Quick when she was reporting from Omaha last week and had no make-up on.

    Melissa Francis needs makeup to make her mouth look smaller. ITS HUGE!!!! She reminds me of Venom from Spiderman

  122. irished – I agree.

  123. This site has a hell of a lot more to offer than just trades, even though I could understand someone wanting just that.

  124. Phil,

    Where can I find your trades…in consolidated format?

  125. Nadir,
    mary thompson is much more appealing to look at than Melissa Francis

  126. Pleasant market day, folks…

    Phil, is there a particular FXI diagonal you’d look at now? September ATMs still have a pile of premium and I was looking at going long the Jan 150′s then selling Sep 145′s. Would like something neutral to slightly negative here.

  127. Non sequitor,

    I had been following SIGM for a long time, before it grabbed the attention of the broad market, I played earnings last quarter and got burned so this time I’m waiting till after, calls dont look to good anyway b/c of an IV crush to be expected. I used to be very bullish on thier technology. They are highly levered to Blu-ray and will probably talk up the ramp up into the holidays during the conference call. However, I am a little worried now, b/c the future is not Blu-ray or HD DVD, but Video on Demand, so have lost my long term bullishness for them.

  128. David,

    Check the portfoilio tab at the top of this page for positions, And intraday for the trades.

  129. I’d be happy to contribute to a wiki for new members (…because I certainly don’t contribute to the intraday trading discussion :o ).

    Maybe those looking for email alerts should check out happy’s “Happy Trading” service(?) (I’m not subscribed, but I think that’s what he does.) It’s a different product, but if it makes _you_ money…

  130. I agree with size123 also but let me have the option of reading the posts all day if that is my cup of brew or just reading Maestro Phil’s picks during the day. We can both be happy and if I want more information, I can ask here at my leisure. I feel chained to this page so I do not miss any insights. Maybe it is just my old age and pre internet experiences. Maybe I do not read fast enough. I just think there is a place for all, chat people and the rest (me).

  131. Becky- Without been mean, I wouldn’t even look twice. Saw her one time remote from Idaho 5am. Ouch

  132. (Happy Trading is under the “Wang’s World” tab.)

  133. irished:

    I see your point, but I think you are missing a lot by not reading what
    others have to offer. I have learned a lot, not only from Phil, but from
    Optrader, Option Sage, Option Dragon, BBD and many others. Sounds
    like you should be interested in the investment club vehicle when that
    gets going.

  134. irished, hubavka – my intent for being on this board is to proverbially “learn how to fish”.. and Phil is a great fisherman willing to share the method to his ways.. (as well as telling us where the fish are biting..) If you’re just looking for direction on what to buy/sell, maybe Happy’s e-mail alerts would be more your style..

    I’m pretty sure I’m not the only one here actually looking for the discussion, interaction, and education.. Beyond that, Phil and others have helped me fix/improve my own trades..

    Besides, if recent memory serves me right, Phil’s trading anywhere from 10-100+ times a day in multiple accounts from 10k through 2m.. Unless you have the same setup, following his trades blindly would be ill-advised.. -peter

  135. BBD,

    Your opinion on VIP??


  136. Nadir:

    Thanks. I checked there but it does not show any trades from today.

  137. David,

    Phil updates it at the end of the day

  138. Nadir:

    I am looking for intraday activies. I am away from my desk many times for over 10-20 mins. It is difficult to read throgh all discussions. Some times I am just done reading and I have go away again.

  139. I agree I mostly want the rationale and attitude behind the trades…
    But I guess a filter for the XXX to another thread would do the job to have it both ways

  140. Hi Phil,

    New member here, happy to join.

    I’m usually writing OTM spreads and follow BB Bands and seasonality in the stock , like in Sep usually is the worst for Telecom and Communication sector, most of the stocks are in upper channel/BB anyway.

    Question Phil: When you make suggestion, do you care if the stock must be above/below moving average or Upper/Middle Bollinger Bands ?


  141. Phil, need some advice on JOYG. I bought the Oct55 and sold Sep50 for a total credit of .05. Do I just close out both legs at this point or just place a stop order to close out the Sep50, ie, do you believe the Oct55s will hold their value till Sep expiration?

  142. JCG is the new GAP for the cool , people love buying basics there. consumer trend. good technicals and fundamentals, buying the sept 50 calls at 3.20 for pre earnings IV play with a possible strangle going into earnings with a long bias.

  143. Biodieselchris – $600B wars actually do create value…for defense companies! Wasn’t is Eisenhower who first warned us about the gov’t/military complex perpetuating itself.

  144. OIH

    Yeah, you go girl.

  145. PKX/ISRG

  146. Dragaon – you know what I want to see? I want to see Forever 21 go public… that damn place has about 10 times more women in it than any other store (my wife included). It’s a jungle of colors to me… hurts the eyes… but dang they HAVE to be making money. We don’t have an H&M in Dallas yet, but this is like the ladies spot until one is built.

  147. Mark- never heard of it. interesting.

  148. I found someone out there even less US-Dollar-Rosy than me!

    “The bottom line, though, is simple and straightforward: things may appear normal for the moment, but we are heading into a shit-storm as sure as Sam Walton’s descendents contracted to buy all the three-ringed loose-leaf binders made west of the international date line. America, you’re about to go back to school the hard way.”

    It’s hilarious because it’s true.

  149. Today is the mirror image of yesterday. maybe we will see +300 pts rally today?

  150. Dragon – still private company, but hoping it goes public someday…

  151. forever 21. never heard about it until about a month ago. WOW. absolute zoo in that place. so many people from all ages. i’d buy into that without even thinking about it

  152. I’m bearish, but it’s not the least bit hilarious.

  153. Tax Question – The IRS government website search engine is lacking to say the least. I tried searching documents for “calendar spread”, “options”, “straddles” but the results seem to be completely random no matter what search term I put in. If anyone has the IRS publication number handy that explains the rules, with some good examples, I’d appreciate it.

    Tax example – I buy XYZ Jan 2010 calls, and sell the September calls today which eventually expire worthless. I sell October, November and December calls and some of them expire worthless, others I have to roll into subsequent months. Perhaps XYZ has a big run up in December and I have to roll up the long leg to the next strike price.

    Tax Question – So come tax time next March/April, how do I account for all of this? Can I really just ignore the 2010 call until I sell it in 2010? And do I only report the short term calls that I sell every month for whatever premium I can muster out of them? Or are there special tax rules for these spreads that require me to account for that 2010 call in the 2007 tax reporting year? If I do have to account for the 2010 call now, is it only *IF* I have to roll-up or roll-down the long leg? Or do I have to account for the long leg regardless, because of some whacky IRS rule?

    I realize many of you may just hand this stuff to your accountants for them to handle it, but Im one of the control freaks that wants to do my own taxes, and hopefully learn something in the process. Appreciate any input from those have already gone through the learnign curve on the spread irs rules.

  154. my younger daughter loves forever 21 – i think their appeal is that they
    don’t have just one look like say jcg which is preppy… and yet. they are
    always trendy and cutting edge…


  155. I’m going to early lunch, please keep the market happy for me…lol.


  156. XOM still leading and jumping!!!

  157. Seattle – My understanding after struggling through this last year is that the IRS just looks at as a buy or a sell of a security or an option, profit or loss and if it’s over 1 year or under 1 year for capital gains purposes. They don’t care that you call it a roll, straddle, strangle, etc. To them they are all independent transactions. At least that’s my understanding.

  158. oh … and vey resonably priced ! (forever 21)

  159. Seattle – one more thing…the expiration date is irrelevant to the IRS. They only care about transaction dates and realized gains/losses. If it’s unrealized it’s not reported (except wash sale stuff which is it’s own discussion).

  160. here we go glad i bought those qqqq calls

  161. What possible rationale could there be for CAL to rally on a $1,50 rise in oil? US Airlines fly 3.5M flights a year at about 1,000 gallons per flight = 83M barrels. That means a $1 rise in gas costs the airline industry $3.5Bn or pretty much $100M for every dollar rise in a barrel…

    The air force (who are not even in Iraq in force) uses 60M barrrels a year too = $4.3Bn

    Thank you GOOG, sold some $510s to cover too.

    Is the MSM involved? How much money would Rupert have paid for the WSJ in a depressed economy? How far will the Bancroft family be willing to go for an extra 25-40% of $5Bn? How about NYT or GCA? How about DIS/ABC, NWS//FOX, GE/NBC CBS, VIA, TWX… how ridiculous to think there isn’t a bias among $500Bn worth of media companies to maintain their value. It would, in fact, be a violation of their responsibilities to the shareholders not to do everything they legally (NOT ethically) can do to maximize shareholder value. Where do they draw the line and how often is the line crossed before they move it?

    SIGM – I don’t follow them.

    Steve – whatever that means it sounds good so I’m forwarding this to Jared (who is busy up to his eyeballs).

    COH – I don’t even look at a chart until I’ve studied the company. They changed their marketing strategy to curtail knock-offs and discounters and it’s hitting them this year so all the short and most of the mid-term investors are bailing. Over time it’s a very strong move that will start to pay of by Q4 next year but mainly they should drift around here, which is perfect for selling calls against. This is the kind of play I’m willing to initiate in a dangerous market, I feel they have a deep, funadmental value AND they’ve already taken their lumps in an out-of-favor sector.

    Irished – Wow, sounds like I want your day! Happy is testing out an alert system and if it works smoothly I will be adopting something similar for trade alerts but I don’t know a good way that comments can be sent out from one specific person during the day. There’s certainly a valid segment of the audience that simply can’t be on-line all day but do want to “listen-in” in some way.

    Trades are consolidated in the above Intraday tab, next to the Portfolio tab.

    FXI – the problem with a diagonal is that they could lose $10 in a day, which really hurts… They will have trouble back at $153 (if they get that far) on the upside and you can get $6.75 for the $150s so let’s start there and work backwards. If you have the margin for it, I like the Jan ’09 $160s at $21.85 since the roll down is $5 so the stock would have to drop more than $20 (7%) before you were out of position for another sale (and of course you can roll your caller on the way down). On the put side, the Jan ’10 $140s are $23.75 and, with 28 sells to go, I’m content to pick up $1 per month on starting with the $125 puts at $1.95 on the no so off chance that China has a 10-15% correction.

    Wiki – I like this idea. I love Wikipedia but I looked into it once and I can’t imagine how a cohesive article comes out of that system so it would be great fun to actually watch.

    Let’s not forget that Happy was once a humble member so I find member contributions to be extremely valuable but when a publishing house was courting me, it turns out that 90% of their audience is more like Irished – people who would rather have things sent to them than take an active role in a site and there’s a million good reasons that that works for some people (similar to the profile of my hedge fund investors, people who focus on something else to make money and trade on the side or are fortunate enough to be out of the ratrace and don’t want to spend all day worrying about money). Doing something for this crowd will be the next step after we get the site redesign up and running smoothly.

    Intraday is something I manually update at the day’s end, it’s not a running summary but that’s another technological hurdle we hope to conquer one day. David, my comments are in blue for you aren’t they?

    Welcome Carlos!

    Do I care about bands? Sure, it’s a factor but sometimes I will buy at the top to get a good premium on the calls I sell and sometimes I’ll buy at what I hope is a bottom and hold the position naked looking for a sell on a run up.

    JOYG – If you can put in a .10 sell on the spread you may as well give it a shot for a week but the Septs are pretty certain to expire worthless and you should be able to still get a dime then and it would be shocking if you didn’t get your nickel.

    SIGM is flying!

  162. DDAY- OIH there you go. NOV and SLB doing me right

  163. the IRS blew it with the schedule D. It’s a total mess.

  164. Looks like I got back in Q puts a little bit too early. Very surprised by this bounce.

  165. Phill,

    I own amzn oct 75 puts, any suggestions? I bought 20 @ 3, I sold 10 @ 3.90, I’m still holding the rest, thank you

  166. Optrader: I expected some downside follow through today. I have given back every bit of yesterday’s gain today. That sailboat ride yesterday afternoon which I purchased at a charity auction turned out to be considerably more expensive then I expected. Oh well, I am still sticking to the position, but the lack of downside follow through has me more concerned now.


  167. Deliberately lying in a news program is protected speech.

    When I was in France this summer, I’d watch the only channel I could understand, CNN, and I actually saw REAL news and REAL documentaries on stories that effect REAL people, and for some reason I was really surprised. I mean it’s like night and day, like the aggregate average mental capacity level of cable news’ US audience is MAYBE 3rd grade.

    So did Lindsey Lohann really go to jail or not? I’ll guess we’ll really never know thanks to Fox …. maybe they made that up too …

  168. phil -
    do you think this is still a deflated ball bounce (re: radio show this morning)?


  169. Wow, huge buying program (I know it’s a program becuase someone is buying GM, no human would be so stupid!). These are good levels and the VIX is sure happy about it. Stops still apply both ways on winners but I’m more inclined to roll or DD on puts that aren’t working right now.

    Data Tomorrow – can’t be stopped. GDP of all things and they take a chance like this! GDP is “expected” to be about 4.1%, up from 3.4% in Q1 – what will happen if it’s not? That and the chain deflator for Q2, a very serious report that better not be higher than 2.7%.

    Friday is Personal income and spending (hours worked is up but wages are off), the PCE for July when oil and gas went nuts, the Chicago Aug PMI and July factory orders and Mich sentiment, all before 10:01!!! Friday Bernanke better say that the Fed is going back to 3% or those Auto sales numbers and construction spending figures may get depressing.

    (this reminds me how much I’d love to be able to insert Cramer’s “guy jumping out a window” sound effect”)

    Cool – Chuck Schumer on the attack against CFC! Must have read my post the other day….

  170. Greg, I was expecting some kind of bounce from oversold levels, but this is much stronger than I thought it would be. I sold 2/3 of my puts yesterday, so I am doing fine, but starting buying back too early this morning. This is a tough market to trade right now.

  171. ALBO-you ever jump back in ISRG?

  172. Optrader,

    What strike on those Q puts did you go for?

  173. Phil:

    Your comments are “understandably” in blue. Just as I would like to see a consolidated trades, there are others, i saw their posts, too. Both can be achieved, once Jared is done moving stuff to new server. It is just an idea.

  174. MikeC, I have been playing the Sep $47′s.

  175. You guys should check out the virtual cramer sound board. a lot of fun

  176. I think what were seeing today is the PPT in action.

  177. BBD:

    In and out again on a scalp. Wish I had kept it !
    Speaking of scalps, I made $.55 on the VLO Sep 67.50s
    bought during Phil’s radio show. As my elementary school
    teacher might say, “Not the sharpest knife in the drawer,
    but follows directions well.”

  178. BBD:

    Are you still in ISRG?

  179. Maybe the Senior Traders told the little guys stuck minding the desks not to let the market crap out on them while the big boys are gone this weeks (in the Hamptons with cap) ;-)

  180. ALBO- yes but very close to selling half and this was my first target if you remember

  181. GOOD JOB!

  182. Dude, seriously, what is up with Nintendo? I can see the hottest gaming console being tough to get your hands on around Xmas, but it’s been 8 months, and they still don’t have any in stock anywhere in Seattle, and that’s not expected to change anytime soon?

    I will get one for my wife this christmas come hell or high water — mark my words!

  183. If the war was only $600Bn we’d be in great shape…

    Taxes – I understand wanting to do stuff yourself but I do consider it to be one of those things in life that are best delagated… One very important thing is to understand getting yourself Trader Status as it’s a whole different set of rules if you qualify and lets you treat your trading much more like a business.

    AMZN $75s – I suggest you should have stopped out this morning with a 30% profit! It depends on a lot of things, I’m not buying this rally as I’m simply using it as a good way to recover some cash I thought I lost on my calls and to roll my puts up while they’re cheap (still maintaining a tight, slightly bearish strangle overall). I wouldn’t play those puts, it could go either way (see earlier discussion on the value of not guessing).

    This is the result of a letter Schumer released where Bernanke said Fed was ready to act… Not a very strong run-up considering but that explains the buy programs kicking in.

    VIX stopped dropping.

  184. Greg

    Or maybe Hank told da boys he needed a little cush before the numbers come out latter this week.

  185. Phil,

    So you’re saying selling Sep 130′s on AAPL at around 8 are a pretty good bet? :)


  186. FWLT out of control again.

    CNBC says my prediction that we would officially run out of natural gas storage has come true right on schedule. They physically can NOT pump another cubic foot into storage, which is a shame since they sell Billion cubic foot lots… That’s why CHK is one of the only down stocks on my screen…

    Despite this madness, I will rebuy DIA $132s and/or $133s by the close, I’m not going into the close without being fully covered but you’ve got to respect this market move.

    LOL Albo!

    AAPL $130s – generally yes but I’m not too keen to short here, I’m off the Googs already even. I’d rather let my calls run

    For some reason mortgage bonds are going the wrong way (pushing rates up), which makes no sense given this rally premise that the Fed is easing but there’s no logic now – even my TSO pick is kicking ass and they suck!

  187. interesting ….

    “Her Realtor, Janice Spencer in Antioch, has marketed the house aggressively. Its $475,500 price (down from $495,500) is moderate for the area, especially considering that it has a pool. In seven weeks on the market, the house has been viewed by just one prospective buyer.”

    “‘How can there be no buyers? None?’ Damonte asked. ‘It’s not even a buyer’s market; it’s a nobody market. We’re not flipping houses or trying to cash in. We just want to move on with our lives. We’re in a tough spot.’”

    What price would this person need to drop to in order to get a stampede of prospective buyers? $350k?

  188. VOLV Apri $17.50s are $1.93, I have them for $1.80 but I like them for a recovery. XXX

  189. NOV-Stock up $25 from Aug 16 buy at $98

  190. Phil,

    I never though I would say it but, I love Chuck Schumer. That may have something to do with the load of CFC puts I have.

  191. BDC


    this might help – Dell might have them

  192. I didnt know Burt Reynolds traded options.

  193. SPF is up 7% and the call options are down across the board. Are you trying to tell us it’s tough to value risk in this market Phil?

    (SPF puts – Leaps on the p.o.s. is a money printing machine)

  194. 20% should be the magic number for home prices so around $395K should get some bites if she wants to get real. This is the problem, the realtors don’t understand that price does not equal mortgage and no one gives a damn about a $20,500 reduction if they have to pay 7% for the loan. Also, with the new rules, half the people who used to qualify don’t anymore and, if they have to take a jumbo, it’s much worse.

    Poor people ($250K home owners) move because they have to. Rich people (jumbo home buyers) move because they want to and that’s key. The rich people won’t walk away from an asset (their current home) at a loss as long as they think it will come back so they put off moving so they don’t even look at her half million dollar home.

    I like the DIA Oct $132 puts at $3.60 (less than what I paid today) and the Sept $133 puts at $2.75 but these are protective puts, not market plays!!!!

    MA is going up, now we know everything is recovering..

  195. Hi Guys,

    Just joined 2 days ago – great site Phil! I need your thoughts on stops please (I’ve read your strategy page already). The AAPL 135s from yesterday is a perfect example. I bought some at $3 with a stop at 2.5. After it hit $3.6 this morning a set trailing 5% stop – trying to lock in at least 15% gain. I was eventually stopped out at $4. This was a great trade overall, but what about letting your winners run?
    Phil, just from reading all your posts I imagine that you would say dont be greedy- 30% in one day is great, but at the same time the ability to really catch a nice trend makes a difference in profits. Should I be less aggressive with my stops after a trade hits +20% (ie keep a stop at 20% gain, or should I just be be happy to make the money I did overall and keep use a 5% trailing stop and aim for lots of +20% trades?) Thanks!

  196. that’s a useful link LiRB, thanks

  197. Down 280 one day, up more than 200 the other day. This is just unbelievable. Don’t remember seeing this kind of volatility ever.

  198. Optrader

    I’ve never seen this before either but I have a funny feeling when the market really brakes out it will be to the downside.

  199. OIH

    Yep, that was the quickie I was talking about. I’m out of the 175′s, 2.10 is good enough for me for a half days work.

  200. Phil,
    subprime what?????? LOL

  201. Everyone – Just got McMillan on Options, like his non-academic writing style so far… any other suggestions on books? I also have Natenberg, but haven’t dived into it yet…

  202. Put in a $5 limit order on those AAPL 135 calls from yesterday’s recommended trade and it just filled. Don’t want to be too greedy. Thanks Phil.

  203. DDAY- congrats nice play

  204. Bigsmokey and Optrader: I just keep looking at the charts of previous corrections and there is NO correction in the past 5 years that didn’t retest and/or go lower at this early stage of the correction. They just don’t unfold this fast and recover. Especially now with what seems like good fundamental reasons for a correction.

    I am no expert but I am sticking to what the past patterns show me (am hoping I am not dead wrong).

  205. bears are hibernating!

    whoever called dow up 300 thank you!

  206. bigsmokey…I’m with you on that notion. Still need to be very careful!!!

  207. FYI:

    RUMOR: Apple to debut wireless iTunes Store sales direct to iPod, iPhone next Wednesday
    Wednesday, August 29, 2007 – 03:01 PM EDT

    Apple will debut “wireless-capable iPods” next Wednesday along with “wireless iTunes Store sales,” enabling users to buy content “directly from iPod and iPhone,” a single source often familiar with Apple’s digital content plans tells MacDailyNews.

    The “new iPods will definitely be Mac OS X-based,” according to the source. “Prepare to be stunned [with] iPod’s new capabilities.”

    MacDailyNews Note: This is a rumor. We have no other information. We cannot confirm this information independently at this time, but felt it plausible enough to bring to your attention. Do you think Apple will actually remove the computer* from the iTunes+iPod/iPhone equation?

  208. check out an email IB sent out:

    “In light of recent market volatility and increased concern over liquidity and credit exposure, we would like IB clients to be aware of our investment philosophy regarding their funds.”

    haha GLOBAL DAMAGE CONTROL. Right on schedule!

  209. Looks like my T 42.50 caller has lost most of it’s premium. Think I might roll to 40′s with this bump.

  210. fuunji – 5% could be too tight and trip by accident.. for a 4$ contract, that’s 20 cents.. steve jobs could sneeze and apple would drop enough to move your contract that much before anyone figured out it was allergies and not him dying..

    trailing stops need a little room to work.. especially with apple.. if you set a 10 or 15% trailing stop instead, you’d probably still have them in the ~5 range instead of out at 4.. Of course, you’d risk a bit more.. and it’s all about risk/potential reward.. Phil’s rule is generally a 20% stop, but he seems to handle them manually… -peter

  211. LOL, now upside trading curbs are in! I think I mentioned last week that all the hedge quant funds tinkering with their programs can cause this sort of nonsense…

    Welcome Fuunji!

    For you I will go over the most important rules in trading:

    Rule #1: Always sell into the initial excitement.
    Rule #2: When in doubt sell half
    Rule #3: Weren’t rules 1 & 2 clear enough?

    ie. You always sell into a run and, if you really want to hold the position, then sell half into the run, adjust your basis to reflect the profit and set a stop at 20% of the profits (irrespective of the stock price).

    Damn, if this would have happened at 2:15 yesterday when I thought it would I would have made a fortune!

    This volatility – Ah Optrader, but ponder that this is happening with the VIX falling back to 23 while we have seen the VIX at 37 less than 2 weeks ago. I prophesized an Asian-style market if the Fed screws around and that’s just what’s happening. To me, this makes the index strangles a great bargain until they start pricing them up properly.

    Interesting that FIG and BX are still dead money…

    Cool – there was a scene in Star Wars that explains this. Obi Won waves his hands at investors and says: “These are not the defaults you were looking for…”

    Congrats Bri!

    Greg – I have no friggin idea what’s going on here and I’ll bet neither does anyone else throwing money around. This is a total Bugs Bunny market (where he throws a switch and everyone stampedes in and out of the theater) and all you can do is try to ride the waves as they break. I held on to yesterday’s gains and I’m thrilled.

  212. I guess yesteday didn’t really happen.

  213. Well, ugly day for me today. You have to have some of those sometimes, take your losses and move on.

  214. bought a few ACH 50 puts for 0.90. What the hell, 10 trading days they were at 34 (ACH that is)

  215. dday97: Are you part of a group that does a PSW “stock club” which tries to summarize his trades in real time? If so, please let me know how I can get invovled in it. Thanks.

  216. Taxes – thanks for the comments, Phil and conceivable.

    Trader Status – Im probably years away from quitting my job and joining the ranks of Phil and crowd who get to read news all day and trade for a living.

    Taxes part 2 – It’s not that I don’t trust the tax professionals, it’s that I don’t trust the software they are using. Every year, I use one of either turbotax or taxcut to alleviate some of the confusion. I start off by importing all my trading records into those programs, and then I put in hours of manual labor – trade by tade – to make sure I agree with the software. It sounds crazy, but every year I ALWAYS find mistakes. I would gladly pay a *GOOD ACCOUNTANT* a consulting fee to sit with me for an hour and explain the complex rules to me. But from what I see, most of these tax accountants charge a few hundred bucks and then just blindly import your data and trust that their software programs got it right. And in addition, a lot of them are just not that experienced in taxes as they relate to shorter term trading.

    Sample errors I found this year – I don’t have the specifics but Turbo Tax made some really blatant errors on at least one transaction by using a ZERO COST BASIS instead of what I actually paid, which had I not caught it, would have increased my tax payment by several hundred bucks. Other item which sometimes (not always, but at least a few every year out of my list) confuses the tax software are the leap symbol conversions, splits or other random symbol changes, and also matching the hedges (covered calls) with the right underlying symbol.

    Another question for Phil or others – Are these spreads a relatively new thing in the trading world? The reason I ask is that Charles Schwab and Fidelity, which have been around for decades do not allow them, and it seems only the new guys on the block – Optionsxpress, tradeking, and others support these spreads, straddles, naked puts, etc.

  217. Thanks Phil and fotoaddict! Have a good night.

  218. Holy Crapola! – We are up about 1% before I left for lunch, and now we have recovered all of yesterday’s loss plus some!

  219. Very good day, slaps on butts to all.

  220. seattle
    you can trade spreads on fidelity – you need to have margin and i think min. level 2 trading status.


  221. Mike,

    The Investment Club idea has not materialized yet, but yes we are trying to put one together and it will follow Phils LTP. If your looking more shortterm and STP stuff, this won’t be for you. Much of the work is done but we haven’t gotten the interest yet to make it worthwhile…but we aren’t that far away (I hope). I’ll be sending a message to all that are on the interest list very soon, don’ t worry I haven’t forgot you all. If you want to be on the list and want an explanation of how it will work when I send out the explanation, send me an email with your name and PSW ID name (for recognition purpose).

  222. My portfilio must be perfectly hedged. Positions moved up and down over the past two days, but total value pretty much unchanged!

  223. … now if we can only get some direction and I might actually make some money!

  224. Phil.. stops – in the above aapl (Fuunji) example.. if I’m in at 3, and it’s up to 4.. a stop that’s 20% of the profits, is 20 cents.. Does this work for the typical user who has their orders in as automated trades?

    I’m assuming your personal stops are more alert like, after which you execute or not after determining if it was a random tick or not.. -Peter

  225. seattle.. fidelity does allow spreads.. check under the “Trade Multi-Leg Options” page..

    They’ll often trade slower than doing both sides individually.. you’ll save on commissions though.. -Peter

  226. Seattle,

    Years ago “Money” magazine profiled a typical Yuppy DINC family’s income and turned over the transactions to six different accountants across the country.

    It was remarkable the variance in tax liability that resulted. It made it obvious how formulaic and pressured many CPA firms have become… particularly as April 15th approaches!

  227. SIGM- those that were long congrats.
    Off for game 2 of Sox vs Yanks

  228. Seattle

    At Fidelity, you can trade spreads. If you are trading spreads in an IRA, you need to have Options Level 2 and fill out the ”

    SUPPLEMENTAL OPTIONS SPREADS AGREEMENT for Fidelity Individual Retirement Accounts” form and mail it in (or walk it in to your nearest smiling fidelity office).

    Word of warning though, for IRA’s and spreads, you can use ATP to initaite a spread position, but if you want to leg in/out, you have to actually CALL A BROKER!! They claim they are working on getting their core system working to allow this from the web, but for now, it’s manual. Not a bad thing considering it keeps my trading lower while I learn.


  229. Index strangles

    Phil, I know most of your DIA strangles are “Protective” in nature. are there an index strangles you play as Market Plays?

  230. Hello Jared and Phil,

    I had commented earlier about possibilities for you for your site redesign and I have a couple of suggestions for the followup.

    1) Create a user-editable wiki. This way the collaboration that you have on your site through comments every day can be funneled into a more permament resource for new and old users alike. I like using… the free service has ads but the premium service is pretty cheap too, and you can get your own domain and control read/write access.

    2)Create live comments. This is under the assumption that you are still sticking with WordPress… if not, there are similar options available. The best way to do live comments is to incorporate AJAX into your comments. “AJAX Comments” and “AJAX Shoutbox” are both free plugins for wordpress that allow for live comments.

  231. Tax accounting – VERY valid points Seatle and I agree 100% with finding errors in tax software accounting of taxable sales and even worse tax consultants – I have had quite a few of each over the past 10 years of both.

    I found the web-based Gainskeeper (also a subset provided free to Ameritrade Apex clients and some Scottrade clients) better than most to do this very tedious task – typically saving lots of $s on proper tax accounting.

  232. biodieselchris,

    the target, here in scottsdale gets some wii’s every sunday morning. I just got one the other day!

  233. Is there any reason they can’t stick the IPhone browser onto an IPod. We know Apple has a $250 mark up so components cost $250, less the drive (Ipods got one) less the ram, less a lot of redundant parts… Would I pay $100 over the cost of a standard IPod for a big-screen video IPod that has wifi and lets me browse the web at SBUX and at airports without hitting my laptop (actually I’d probably pay a lot more than that but don’t tell Steve Jobs I said so!)…

    In fact, if I were to have such a device for a year, when my current phone contract expires it might seem downright foolish for me not to just get an IPhone so I can have just one device…

    IB – can you find a link or post all?

    Spreads – they’ve been there forever and older hedge funds used to live off them but now that you need Billions rather than millions in your fund to be taken seriously, they don’t have time to lay off $100K here and $100K there (this is the hole I’m stepping into with my modest fund). The problem with spreads from your broker’s perspective is that once you establish one – you stop trading! As Pink Floyd said: “How can they churn your account if you aren’t doing any trading?” It is UNprofitable for them to offer you strategies that encourage you to establish static postions that rely on time deterioration.

    All I can say about today is thank goodness I just let the market dictate my positions. I let myself stop out of the puts and then waited for the levels to break. I covered the DIAs a little early but that’s OK and at least I can sleep at night!

    Real fireworks tomorrow I think – I can’t imagine no response to the GDP when they expect 4.1%. I think 3.9%+ is a rally and -3.6% and we’re back to yesterday so maybe calm at 3.7 to 3.8% but good luck with that…

    Rahul – Congrats! That is step one to controlling the markets. If you can stand calm and make your decisions when you want, no matter what is going on, you are ahead of 99% of the people playing the markets… Of course now the trick is to pick the right spots to make the changes but nothing is better than observing your own positions as they change under stress to get a feel of what works and what doesn’t.

    Stops – No! Hard stops are never what I am talking about. You need to set a stop in your mind and when it hits that point you MUST decide if it’s real or just some spike. You never want to react to a 1 min move but if a trend is forming you need to error on the side of caution. If I set a .20 stop and I lose .18, then .12, then .06, then .10 – I’ll get out with just the .10 drop rather than give it another shot UNLESS I feel very strongly about the position.

    If you have trouble watching your stuff or catching the stops, then sell 1 or 2 shares with a hard stop and that will alert you that you may need to pay close attention. My stops are, by the way, based on the best price sold, not bid/ask, as I think if no one is actually buying or selling what’s the point. So that means for AAPL $135s, the best sale of the day was $5.50 so, from there, you would (off of $3) set a stop at .50.

    In my case, I sold 1/2 at $4.50 which reduced my net basis on the remainder to $1.50 and thus a $3 profit so my running stop from there was .60 but, since I had far less at risk and a $2.40 profit on a $1.50 net investment even if I stopped out, I could afford to be loose with the stop so I decided that I would ignore the spike up to $4.75 and not get out of Apple when it spiked down to $4. I covered those remaining Apples with DIA puts at the close in case the GDP kills us but Apple was more than $10 lower the last time this call was below $3 AND the VIX will shoot up if we drop that far so I have layers of protection on the calls (plus I have other Apple positions I sold calls against so hedged, hedged and hedged).

    If you want your taxes done right, give everything to your accountant by Jan 31st. You’ll be one of his only prepared clients and he’ll have nothing else to do until March…

    Index market plays – yes but not in this market. My DIAs are too critical to mess around. In a regular market (what’s that?) I love to simply play the lagging index positive and the leading index negative on the turns.

    Steve, I sent that to Jared, I like both ideas. Can you point me to a site using AJAX? I’ve got to feel comfortable using whatever or it will mess me up (as you can imagine, I am multitasking pretty heavily during the day).

    I hear very good things about Gainskeeper.

  234. disgusting – yahoo went with ‘fox business’ on their finance page.

    time to switch to google.

  235. Information About Customer Funds Investment and Interest Benchmarks

    In light of recent market volatility and increased concern over liquidity and credit exposure, we would like IB clients to be aware of our investment philosophy regarding their funds.

    IB’s Policy on Customer Funds Investment

    As a regulated broker, IB is subject to SEC and CFTC regulations on investment of customer funds. Permissible investment vehicles include bank deposits and a variety of top-rated government securities and related instruments. IB’s effective investment policy is even more stringent than this, reflecting our risk-averse philosophy. We only invest customer funds in government securities and repos, cash deposits in bank accounts at the largest banks and the triple A-rated JP Morgan Prime Fund (in which we invest less than 1% of customer assets).

    Additionally, we limit customer exposure through the following credit policies:

    * Keeping investments in highly liquid, short-term instruments
    * Distributing client funds among a variety of banks and counterparties to avoid concentrated exposure to any single counterparty
    * Rigorous analysis by our Credit Committee of counterparty financial condition, as well as review of risk factors prior to permitting investment activity with or via any counterparty

    IB’s investment policy is very conservative. Our strict policies when investing client money minimize our and your exposure in uncertain credit environments.

    Benchmark rates in USD changing from Libor to Fed Funds

    In order to ensure that the benchmark IB uses for interest calculations accurately tracks our investment policies, IB will change its reference rate for USD interest from Libor to Fed Funds. Specifically, we will use the Fed Funds Effective rate which is announced daily by the US Federal Reserve and represents the weighted average of all transactions executed the previous day. This change will take effect 1 September 2007. For reference, the value on Friday, 24 August was 5.11.

    More information about the Fed Funds reference rate as well as the official published values can be found on the website of the NY Federal Reserve Bank:

    Reuters: USONFFE=
    Bloomberg: WX 2862

    Interactive Brokers

  236. So I have a small thought, AAPL has an event to announce new iPod’s on Sept 5th, GOOG seems to be announcing a new cell phone based on Linux OS (not MAC OSX), hmm GOOG web apps are on AAPL iPhone – lovers quarrel?

    On the site, I feel from a usablity perspective you could probably review what are you publishing;
    - Strategy
    - Articles (daily)
    - MarketChat (daily – older threads are useful for new arrivals)
    - Education
    - Portfolios
    - FAQ

    I think you could benefit from splitting the daily market chat threads and the articles, they often share context, but really they are 2 different functions of the site. So I would suggest to split them, also this means that you can split the webtraffic to feed the high-volume through a peak traffic link and the lower traffic through a smaller bandwidth pipe. Again this work your technical team can help you with this. On the feed side I think it is quite simple development work, you could quite easily find a web developer that can put this together.

    Anyway just a few thoughts

  237. Phil – Thanks for the list of 8/28 position close-outs you posted earlier today. Next time can you add a short/long column? The way it seems to read now is that you went long AAPL calls on 8/27 and sold them for a profit on 8/28. I know you’re good but that would have been impossible!

  238. Gainskeeper – I have used it but it too is not 100% accurate and does require manual intervention. But the beauty of gainskeeper is you can put the manual labor in a little at a time when the trades are fresh in your mind, as opposed to figuring out the proper tax basis 9 months later on average – during April tax time.

    Tax software error – Here are 2 more examples. 1) When you transfer accounts from one brokerage to another and you migrate everything, including open positions. The cost basis information is either completely lost on the transfer, or just really gets screwed up. For anyone migrating a taxable account, I highly recommend not just blindly trusting the tax software to get it right. And for that matter, not trusting any accountant who doesnt manually check his own software – line by line.
    2) Snowballing error effect – It’s feasible that the reason some of the errors are made in tax software is because of software bugs at the actual brokerage houses. If a software glitch at Scottrade garbles a character or “.” in my history, then the tax software could get confused and screw this up, possibly adding a few glitches of their own. It’s really time consuming for me to manually veify every trade before submitting to the IRS, but like I said, I FIND ERRORS EVERY YEAR.

    WiPOD – Phil, that was my exact prediction shortly after the iPhone release and I posted it here. I think the vision of an iPhone type gadget – without the phone – came to me in a dream. Maybe they will call it the “WiPod” – an IPOD that has the touchscreen feel of the iPhone, plus a wifi connection, but without the phone or service contracts.

    In closing, let me quote Phil’s famous cheer:
    “Markets, Markets, ooh la la…. Gooooooo Markets!”

  239. Phil – Is AUY your gold pick? Is there another company you reccommend for a long term position?

  240. Close outs come off a simple output list that I have to transfer to a spreadsheet and mess around with just to put it on the post so there’s no way I have time to add stuff to it. I don’t even know what they are sometimes unless I check back to see where it came from, it’s just an output of closed positions. That will be another benefit of me setting up my fund, trading assistants! Ah, now that I’m looking at it, those are the $130s I SOLD against my longer positions as a cover – I am that good! I have no control over this program and I have complained about this in the past (that you can’t tell if you were long or short).

    Actually you can tell because if the % is the wrong way (as it is there) then that’s the answer but it is very disconcerting because they fix the sale price (at what I sold it for so I suppose there is some logic) and adjust the basis on the sale… When I run historicals it looks fine so I don’t know why they can’t output it that way to Excel…

    Thanks for the IB post BDC but it just seems like good PR, getting in front of investor concerns over what they are doing with our sweep money (I know I was concerned!). I feel safer with MER holding my cash than BAC right now…

    Thanks Mal, anything to improve bandwidth is a good idea.

    You guys do have to realize that we are still a relatively small operation and can only handle so many projects at a time. Step one is to get a better server and redesign the site, that has been 3 months of work. Step 2 is going to be getting used to the new site – making a list of items like this is our next step and then prioritizing those… Frankly, I try not to get to into that stuff as my days are pretty full and I tend to feel that, on the whole, I’d rather make accurate market calls than play with site design. This is a KISS-rule site for now, as we bring in more writers and add staff, we’ll be making plenty of changes, (we even have on-line seminars in the works).

    AUY made a nice move today, and I was getting REALLY annoyed with them. I like GDX down here, it’s a good mover for an index if gold gets going. My MRBs are taking off and NAK has no reason to be at $10, both stock only and NEM is the best pure play on the price of gold as they are pretty much unhedged.

  241. Phil
    Thanks for all the hard work. I have learned a ton so far and am just now realizing how much more I need to learn. Your efforts on the site revamp are greatly appreciated and of course the market calls are kinda nice too :) . I have been trading using optionhouse virtual $ and the portfolio is up 60% the past 2 weeks, so something is sinking in. I wanted to learn how to do your system before risking real $ and my confidence is growing daily in your picks and your system.
    Thanks again and keep up the great work.

  242. 60% in 2 weeks! Don I’ll be subscribing to your site soon!


  243. Phil … great analogy re: Bugs Bunny. I think Towelie needs to make another appearance tomorrow b/c “I have no idea what’s going on”.

    Optrader; I agree very difficult to trade this market. Its ticking me off that I am only nibbling around the edges during all this when so much can be made (or lost) riding these tasty waves.

    Phil … do you have any info or resource regarding Trader Status … think I need it.

    AHR update for anyone still holding … very frustrating, but entire “mortgage” sector in the toilet. AHR sold some conv. bonds last week. Proceeds for New Investments and Stock buyback. Comapny bought back $12 million in stock 2 days ago at $9.13, about 50 cents above current price. Patience into Sept and divvy announcement is required. Closing price of $8.65 today is IMO a bargain and all of management’s actions and statements confirm that, but Mr. Market is making longs suffer and wait.

    I think Bob Pisani’s comments about the change to the short uptick rule having no affect is completely wrong. With buyers on sidelines, short can drive prices down much more easily without having to wait for upticks… just keep blasting bids lower and lower; take out all stops; panic the holders. I think SEC should rescind the rule.

  244. Cap,

    I think your wrong on the uptick rule. This is part of a free market, both long and short have equal ability to push the market around. Anyway were traders and that works in our advantage.

  245. Cap,
    Above limk has a lot of good info about traders – taxes.

    Are you planning on having a search tool/engine on your new site? I think it would be very helpful in finding info quickly e.g There were several questions in the last couple of days on STOPS and how to use them and you referred to one of them for last Friday’s / weekend’s discussion. If you had this search tool, one could search your site for the keyword and get the necessary answers quickly without bothering you.

  246. I don’t think Ben,Hank and George W. will allow bad GDP #’s tomorrow, unless it to setup a “White Knight” rescue by Ben on Friday. They don’t have any qualms about conjuring the CPI, and it’s probably a “Matter of National Security”, as far as they are concerned. There backs are against the wall and they need to buy some time. The “Pro’s” are back on Tuesday, I think we party like “99″ for a few days,weeks, until the next shoe drops. MHO but I’m usually wrong.

  247. Phil,

    Can we have a page, that will list the the daily action. Simply showing what you buy / sell daily. Sometime, if I went out to meet a client, and I come back next day, I don’t know if you have already sold the option. :)


  248. From Bloomberg:

    Basis Seeks Bankruptcy Protection on Subprime Woes (Update1)
    By Laura Cochrane and Tiffany Kary

    Aug. 30 (Bloomberg) — Australia’s Basis Capital Fund Management Ltd. sought bankruptcy protection for its second- biggest hedge fund, stoking concern that defaults on U.S. subprime mortgages will force more global debt-market investors to sell assets.

    The Sydney-based firm asked a court in the Cayman Islands for permission to liquidate its Basis Yield Alpha Fund, according to a petition filed in New York yesterday. The George Town, Grand Cayman-based fund has assets and liabilities of more than $100 million, according to the petition.

    Basis cited defaults on U.S. mortgages to people with bad credit for the losses on the high-yielding debt it bought. The surge in defaults has forced more than 100 mortgage companies to close while Bear Stearns Cos. has also sought protection for two hedge funds.

    “These funds are coming out of the woodwork and you have so many of them, no one is really sure how much exposure to the subprime market is out there,” said Charles Wiggins, senior dealer at Custom House Global Foreign Exchange in Sydney.

    full story:

  249. subprime -

    man that is scary. this thing is so international it’s just crazy, mind boggling. No one even knows how far it can spread because no one knows the extent that funds are exposed. Can it even be calculated or a valuation or risk assessment placed?

  250. OSLO, Aug 30 (Reuters) – Norwegian Air Shuttle (NAS.OL: Quote, Profile, Research) has ordered 42 new Boeing (BA.N: Quote, Profile, Research) 737-800 airplanes with a list price of $3.1 billion and secured rights to buy 42 more of the same model, the company said on Thursday.

    Taiwan DRAM makers not as pessimistic as iSuppli over price decline


    Seattle (dbTechno) – According to reports it appears that the Google gPhone may take some thunder away from the Apple iPhone as it may release in 2007.

    The Nokia N95 8GB is a little bit more than just the existing N95 with a paint job and memory upgrade – this version of the N95 has a larger screen and enhanced GPS, plus N-Gage gaming.

    Stock buybacks
    •Corning Inc. plans to buy back $500 million of its stock. The company also announced a dividend of 5 cents a share, its first since 2001.

  251. Asia Markets : Thursday, August 30, 2007

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



    Hong Kong*


    DJ Shanghai*






    * at close

    Sources: Dow Jones, Reuters

  252. Asia and Euro Markets

    Fed Comments Lift European Stocks Higher, as Do Earnings –
    European stocks followed the U.S. and Asia higher at the open Thursday, as fresh comments from Federal Reserve Chairman Ben Bernanke led investors to expect an imminent interest-rate cut.

    “It’s all about the Fed now … the Fed is ready to act if the financial turbulence starts to impact the economy,” Cyril Beuzit, head of interest rate strategy at BNP Paribas, told “Squawk Box Europe.” “We have no doubt the next move is going to be a cut.”

    Asian Markets Rise on Thin Volumes, Japan Closes Stronger –
    Asian markets rose in the afternoon session Thursday, but were off their morning highs. Volumes were thin amid a dearth of strong incentives, with many market participants holding back ahead of a long weekend in the United States. Japan and South Korea both closed almost 1% higher.

    China’s Shanghai Composite Index finished 1.1% higher, buoyed by a rebound of overseas markets and a positive speech by Chinese President Hu Jintao on developing the country’s capital markets.

    BOJ Hawk Mizuno Says Fed Cut Would Change Debate –
    The Bank of Japan policy board’s lone advocate of a rate hike said on Thursday a cut in U.S. rates would change the basis of discussion, as central banks wonder how gyrating markets will affect the world economy.

    The unexpectedly cautious tone from the central bank’s most hawkish board member, Atsushi Mizuno, comes as Japanese retail sales figures showed their biggest annual fall in more than two years, putting another hurdle in the way of Bank of Japan plans to raise interest rates.

    Australia’s Basis Yield Alpha Fund Files for Bankruptcy –
    Liquidators of Basis Capital’s Basis Yield Alpha Fund said on Thursday they were assessing if the fund could pay back investors, after it was placed into provisional liquidation on Wednesday.

    “At this stage we are undertaking an immediate assesment as to the financial position of the fund and likely return to investors,” Paul Billingham, national head of recovery and reorganisation for Grant Thornton said in a statement. “We will issue a further statement once this is clarified,” he added.

    Earlier in the month, the hedge fund firm told investors that one of its portfolios had lost more than 80% of its assets. Basis is among a growing number of hedge funds to have be plagued by the credit market turmoil. In July, Sowood Capital lost $1.5 billion and was forced to close down.

  253. Trader Status – as usual, the best source in the world is right here at PSW! (with thanks again to our resident accountant, Karmcon!)

    Search Tool – I hope so but some of the guys are working to put together a much larger PSW strategy and stuff guide which will cull that information and organize it somehow.

    Daily Action – at the end of the day I go through my posts and create a new page under the Portfolio Moves tab to summarize the day as a service for busy people. Generally, when I have time, I post the sells at the end of the wrap-up. For people who want to follow trades closer than that, we are setting up the Stock Club as well as a Hedge Fund as the demands on my time already exceed what I would have to hire 2 people to do.

    Funds coming out of the woodwork – very scary!