Spooky Federal Wrap-Up
by phil - October 31st, 2007 10:15 pm
The markets were just loving the Fed today!
It was an interesting day overall as we started off the day with a not too scary GDP report that showed 3.9% growth in Q3. The markets ran with the news but, like all good scares, the report was pretty creepy if you look under the covers:
Government spending jumped 3.7% (this is how our government pumps numbers before an election and this is why Bush is so pissed the Dems won't give him more money to toss around) – that number on it's own added 0.7% to the GDP. Exports added 0.9%, not because the economy got better, but because our dollar is now worth less than the toilet paper we export. Inventories added 0.4%, that's stuff sitting around that no one is buying and it's value is increasing because of inflation – that's not really good…
Wages were up 0.8% for the month, one would think a 9.6% annual pace of wage increases is inflationary but not our Fed – they don't believe in the inflationary Boogie Man (or more accurately, they worship at his altar). Meanwhile our friends at MA were very busy taking candy from strangers and charging them an average of 18.8% interest to do it. Even at those terrifying rates, credit card receivables are up over 30% from last year with $14.33Bn added in October alone! "Obviously, the U.S. consumer is under some level of stress. But it is not a severe stress," said chief financial officer Chris McWilton in an interview with The Associated Press. He added that weakness in low-end and middle-range retail spending has been offset by strong spending among the affluent.
A 3% rise in consumer spending (apparently on credit cards) contributed a full point to the GDP but, unfortunately, ALL of that extra money was spent on food and energy – the same food and energy that cost 3% less in the quarter before (but, according to our government, was not inflationary). So this 1% of our GDP added no jobs, but did push consumers 30% further in debt than they were last year (cue spooky music). That's 1% of our GDP spent on inflating necessities, 0.7% spent by Bush on whatever, .09% spent by foreigners taking advantage of a weak dollar (is that sustainable?) and 0.4%…
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Wednesday Virtual Portfolio Moves
by phil - October 31st, 2007 7:29 pm
October 31st, 2007 at 9:43 am | Permalink edit
Very quite this morning, everyone must be checking out the virtual portfolios. I hope that was worthwhile for you guys but I figure it’s better than going over every position one by one when everyone needs to position ahead of the fed.
I’m not buying this rally right now, I’m just not seeing the overall strength and the SOX are already failing.
DRYS is making a huge comeback but it was a Cramer pump last night. He told his viewers to DD so I’m not putting too much stock in it (but I sold $130 puts against my remianing positions). If they can’t take out $115 with authority, they’ve got big problems.
POT is moving down, I like the $115 puts as a mo play, XXX
October 31st, 2007 at 9:44 am | Permalink edit
Sorry that was $3
October 31st, 2007 at 9:48 am | Permalink edit
$10/25KP – Took out LVS $135 caller at $5.50 (couldn’t turn that down). Will sell $130 calls later, hoping for a nice bounce. WYNN puts are cashed out.
October 31st, 2007 at 9:52 am | Permalink edit
NEM – woo hoo on this move! No, they have a long way to go up and that makes all gold a BUYBUYBUY as my premise is intact and they are just minting money at this point (in retrospect, isn’t that kind of obvious?).
I’m back in them with the Jan $50s, now $2.80 and I’ll sell the Nov $50s or whatever when and if it turns. XXX
October 31st, 2007 at 9:54 am | Permalink edit
I like the GOLD Jun $40s at $4.35, we can sell the current $40s for about a buck or more later.
October 31st, 2007 at 10:02 am | Permalink edit
SPWR – took profits on that too early but I had CY and it seemed redundant. Oh yeah, and FSLR..
Holy crap! Chicago PMI report was 49.7 – that’s contraction!!! First time since February (when we crashed): http://www.econstats.com/rt_chi_pmi.htm
Construction spending up .3% but August was revised to down .2% from positive so these numbers are total BS.
October 31st, 2007 at 10:17 am | Permalink edit
Boeing Buddy BEAV is breaking ATH.
GOOG $703! DELL cranking.
BWLD – I feel bad, I never took it because it was so weak looking into the close but let me…
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Which Way Wednesday? Fed Edition!
by phil - October 31st, 2007 9:16 am
OK – we did a very extensive virtual portfolio review and I'm miles behind so this will be super quick:
I AM SO GLAD WE HAVE A DOW STRANGLE!
Who know what the heck is going to happen today? The GDP came in better than expected, the ADP jobs report looked strong, oil is calming down and the pre-markets are popping (but still not back to yesterday's open).
I wrote a couple of very long comments this morning under yesterday's post and I strongly advise people read it as they discuss rolling in detail as well as overall strategy, I always say I will turn them into articles but I never do so thank goodness for K1's project where we will hopefully salvage some of these!
The Fed absolutely should NOT cut rates today, the economy grew at 3.9% EVEN THOUGH housing was collapsing. All a rate cut will do is stoke inflation and IT IS THEIR MANDATE TO FIGHT INFLATION, NOT LINE SPECULATOR'S PROFITS! A rate cut is still considered "in the bag" on the futures market as the governors are under enormous political pressure to deliver a good market into next week's elections.
All I can say about today is that I took my naked positions off the table yesterday and moved closer to cash. I'm sure we'll find something fun to play tomorrow…
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The Happy 100
by phil - October 31st, 2007 9:15 am
This one is off to a very slow start.
We have left this alone pre Fed and will hopefully have more picks once the market sets a direction. We are glad we covered IBM and sad we covered HXL and we wish we’d covered IMCL when it was much higher. I have no adjustments on these yet as none are down far enough to warrant a move so let’s see what the day brings:
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AMGN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 JAN 08 55.00 AMGN CALL (YAAAK) | O | $ 9,310.00 | 10/9/2007 | $ 8,400.00 | 22 |
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| Total Gain/Loss for AMGN |
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| HXL | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 JAN 08 22.50 HXL CALL (HXLAX) | O | $ 5,910.00 | 9/26/2007 | $ 5,900.00 | 35 |
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| 20 OCT 07 22.50 HXL CALL (HXLJX) | O | $ 0.00 | 10/12/2007 | $ 990.00 | 10/19/2007 | 7 |
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| 20 NOV 07 22.50 HXL CALL (HXLKX) | O | $ 4,200.00 | 10/23/2007 | $ 2,490.00 | 8 |
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| Total Gain/Loss for HXL |
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| IBM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 JAN 08 120.00 IBM CALL (IBMAD) | O | $ 9,190.00 | 9/6/2007 | $ 6,000.00 | 55 |
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| 20 OCT 120.00 IBM CALL (IBMJD) | O | $ 2,410.00 | 9/10/2007 | $ 4,790.00 | 10/4/2007 | 24 |
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| 20 OCT 115.00 IBM CALL (IBMJC) | O | $ 7,410.00 | 10/4/2007 | $ 6,990.00 | 10/8/2007 | 4 |
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| 20 OCT 120.00 IBM CALL (IBMJD) | O | $ 3,810.00 | 10/8/2007 | $ 3,390.00 | 10/10/2007 | 2 |
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| 20 OCT 07 120.00 IBM CALL (IBMJD) | O | $ 210.00 | 10/11/2007 | $ 5,690.00 | 10/17/2007 | 6 |
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| 20 OCT 07 115.00 IBM CALL (IBMJC) | O | $ 0.00 | 10/17/2007 | $ 390.00 | 10/19/2007 | 2 |
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| 20 NOV 07 115.00 IBM CALL (IBMKC) | O | $ 4,100.00 | 10/19/2007 | $ 3,990.00 | 12 |
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| Total Gain/Loss for IBM |
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| IMCL | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 JAN 40.00 IMCL CALL (QCIAH) | O | $ 11,010.00 | 9/24/2007 | $ 10,600.00 | 37 |
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| Total Gain/Loss for IMCL |
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| Total Gain/Loss |
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Our Stocks
by phil - October 31st, 2007 9:11 am
Also, how tedious, how dull, yet they are up 50% on the year because I take 10% profits off the table all the time!
My other big booster for this virtual portfolio is my entry system, which is to sell puts of something I want to buy. The more I want to buy it, the tighter the put I’ll sell but those give me nice bonuses on a regular basis. If you enter a stock position and you’re already up 2% because you sold puts in order to buy it, that’s a pretty good start!
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| END | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 500 ENDEAVOUR INTL (END) | S | $ 1,085.00 | 6/7/2007 | $ 965.00 | 6/8/2007 | 1 |
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| Total Gain/Loss for END |
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| FIZZ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5000 National Beverage Corp. (FIZZ) | S | $ 57,410.00 | 5/1/2007 | $ 64,740.00 | 6/20/2007 | 50 |
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| Total Gain/Loss for FIZZ |
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| FNF | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2000 Fidelity National Financial Inc. (FNF) | S | $ 29,810.00 | 10/25/2007 | $ 31,260.00 | 6 |
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| Total Gain/Loss for FNF |
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The Complex Spreads
by phil - October 31st, 2007 9:06 am
These are not so complex anymore.
I took the opportunity to get out of Google into the intial excitement the protfolio is now mainly cash with two huge GOOG and one huge APPL positions remaining. I’ll be day trading these up and down but I decided that, if I’m going to play more GOOG, I will content myself to use what I have left, I’m not putting in new money at $700 (but I will dive in if they pull back to $620).
The reason I dumped out of Apple and Google was not because I don’t like them anymore, it’s just that I had a sickening amount of paper profits and I know from experience how mad I would be at myself if I blew it. With the Fed coming up, it just wasn’t worth the risk anymore.
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAPL | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 20 JAN 150.00 AAPL CALL (VAAAW) | O | $ 13,610.00 | 5/10/2007 | $ 121,300.00 | 174 |
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| 20 NOV 07 180.00 AAPL CALL (APVKP) | O | $ 20,700.00 | 10/23/2007 | $ 21,990.00 | 8 |
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| Total Gain/Loss for AAPL |
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| AMZN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 10 NOV 07 100.00 AMZN PUT (ZQNWY) | O | $ 12,100.00 | 10/22/2007 | $ 11,890.00 | 9 |
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| 10 NOV 07 110.00 AMZN CALL (QZNKB) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The Long-Term Virtual Portfolio
by phil - October 31st, 2007 9:00 am
The LTP is based on a different strategy so we expect to have high average gains (in fact, if we aren’t getting high average gains we boot the position). The average open position here is up 60% and most of them are ’09 or later so you can imagine what the total gains will be in 6 more months of following this strategy!
We do not rush in and out of positions in the LTP. If we are up 40% on a caller, we set a 20% (of the profit) trailing stop but we then quickly look to recover with another position, even if we go back to the same guy! These positions are not meant to be naked BUT, in this particular environment, we have mor open positions in the LTP than the STP because they are insulated by time so I’m willing to chance the Fed. Even so, the open calls are balanced by the XOM puts (really an STP play as it’s just Jan now) and the QQQQ puts, which are really redundant protection to the STP now so will not let those go below even.
This is a virtual portfolio I will be very proud with if I don’t have to touch it today. It’s up 312% at the moment and as long as it doesn’t dip below 306% as a group, I’ll be a lot more concerned with my closer positions:
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAPL | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 100 APR 08 175.00 AAPL CALL (APVDO) | O | $ 114,020.00 | 7/25/2007 | $ 308,000.00 | 98 |
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| 10 JAN 10 150.00 AAPL CALL (WAAAJ) | O | $ 35,010.00 | 9/6/2007 | $ 73,300.00 | 55 |
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| 10 NOV | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The Short-Term Virtual Portfolio
by phil - October 31st, 2007 8:51 am
There is no way to list out all open and closed positions but these are the open ones.
One thing you should notice about this virtual portfolio, as well as the $10KP and $25KP is the AVERAGE gains. In the STP, since I work hard to save every position and have a ton of cash, the average gain is 38.7%. I tend not to leave positions open that are up more than 50% because that is a lot of money!
In the $10KP the average of all open and closed trades is just 9.7%, yet it doubled in a month. This is probably the most important thing you can learn about trading. Like the elephant said (sort of) a win is a win, no matter how small… In the $25KP our average gain was 12.8%. The main reason for the differences is – the less cash I have, the faster I take a profit. Taking profits gives me more cash for next time. Not taking a profit gives me no cash but looks pretty. I’ve learned that pretty only gets you so far in life, once you turn 40 people are a lot more interested in the cash!
There are very few uncovered positions left and mainly it’s because they weren’t worth covering so we’re going to just have to go with the flow on these today. My main plan is to use the mattress plays first and worry about repostitioning individual positions later. At this point, if my callers get blown into the money – so what? As long as we don’t lose I’m going to be very happy to wiggle out of the rest but I will have 20% stops on any caller I’m up more than 30% against (ie. before I’m only up 23%).
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAPL | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 40 NOV 07 200.00 AAPL CALL (APVKT) | O | $ 8,210.00 | 10/30/2007 | $ 6,560.00 | 1 |
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| 40 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The $25KP
by phil - October 31st, 2007 8:39 am
Same comments as $10KP which were (since it’s silly to have to look at a different post):
We had a lot of luck on this this week so let’s not blow it!
We need to keep tight stops. On the spreads, this means pay attention to the profits on your spreads and don’t get out if it starts declining. We could shut this thing down right now at $23,829 and call it a good quarter so it would be insane to take chances, especially if this represents a significant investment for you.
Obviously we need to watch LVS and TSO closely as we have a lot tied up in each and watch FNF around the Fed because if we don’t get a pop today, that may be it for that position! It would be nice if UTHR works (currently down $1,165 on paper) but if get through LVS earnings within $5 of my $135 target, we should be in very good shape at the volatility crush destroys our caller. Rather than buy out our $135 caller ahead of earnings, let’s roll our Dec $140s back to Jan $140s for $2.30.
Additionally, specific to the $25KP, we need to watch that NEM position if it doesn’t come back soon and the Apr MSFT needs to be rolled up to the $35s but we’ll hold off covering them unless they slip below $35.50. CAKE is tight and we need to keep a tight stop (.75) on the callers in case sentiment changes re the consumer.
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAKE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 JAN 08 22.50 CAKE CALL (CFQAX) | O | $ 1,265.00 | 10/2/2007 | $ 675.00 | 29 |
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| 15 JAN 08 22.50 CAKE CALL (CFQAX) | O | $ 3,815.00 | 10/2/2007 | $ 2,025.00 | 29 |
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The $10KP
by phil - October 31st, 2007 8:31 am
We had a lot of luck on this this week so let’s not blow it!
We need to keep tight stops. On the spreads, this means pay attention to the profits on your spreads and don’t get out if it starts declining. We could shut this thing down right now at $23,829 and call it a good quarter so it would be insane to take chances, especially if this represents a significant investment for you.
Obviously we need to watch LVS and TSO closely as we have a lot tied up in each and watch FNF around the Fed because if we don’t get a pop today, that may be it for that position! It would be nice if UTHR works (currently down $1,165 on paper) but if get through LVS earnings within $5 of my $135 target, we should be in very good shape at the volatility crush destroys our caller. Rather than buy out our $135 caller ahead of earnings, let’s roll our Dec $140s back to Jan $140s for $2.30.
| Description | Type | Cost Basis | Opened | Sale Price | Closed | Days | Gain/Loss $ % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAKE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 JAN 08 22.50 CAKE CALL (CFQAX) | O | $ 759.00 | 10/2/2007 | $ 405.00 | 29 |
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| 7 JAN 08 22.50 CAKE CALL (CFQAX) | O | $ 1,791.00 | 10/2/2007 | $ 945.00 | 29 |
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| 5 OCT 07 25.00 CAKE CALL (CFQJE) | O | $ 60.00 | 10/8/2007 | $ 190.00 | 10/15/2007 | 7 |
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| 7 NOV 07 22.50 CAKE CALL (CFQKX) | O | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site