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Wednesday Virtual Portfolio Moves

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):

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 know what you have and we’ll see if we can fix it.

Dow strangle turns into a mattress play whichever direction we go. Right now the best new buy is the $138 puts at $2.10 and the $138 calls at $2.29. When it starts moving, you want to have a .25 stop on both ends and then, once you are naked with, let’s say 100 shares, you should buy 50 more shares of whatever the next $1.75-$2 contract is. At that point you put a .15 stop the $138s (which should be well ahead) and an even stop on your new position. If it keeps going, you take 50 of the next level and 50 and 50 and so on. Your top level should always have very tight stops and then you can raise stops on lower levels up to .25 as you keep going but this strategy guarantees you WILL lose that last position (thats why we go 100,50,50,25). As a rule of thumb, I will usually expect to be done when the Dow has gone 200 points in a day and I look to get out while I’m getting paid for the mo.

LVS – yes, bought caler back for $5.50, rolling my calls down to $135s for $2.20 and selling Nov $135s or $130s probably soon if they can’t break $135. WYNN is bouncing back so let’s watch them.

YHOO is looking weak so make sure you are fully covered on them (set stops on 1/2).

Holy cow am I glad I got out of those WYNN puts! ALWAYS sell into the initial excitement!!!

October 31st, 2007 at 10:33 am | Permalink   edit

CCJ – it’s not the guidance so much as the LONG term outlook. You are thinking like an option trader but long-term trends are for massive nuke plants being built so this is a fantastic retirement stock until they invent fusion. People are getting into this stock with decade-long timeframes, that’s why it’s one of the best ones in the market to buy leaps and sell calls on.

PMI – that is the Midwestern guage of factory “health” and should be taken very seriously as it includes Detroit. Any number below 50 means that manufacturing activity is “contracting”, simply heading in a downward direction. If you look at that link, you’ll see how rarely that happens and, if you compare it to a Dow chart, you’ll see it’s a pretty fair corellation to market corrections.

QQQQ – I have not been moved to kill my puts yet. $54.50 is my give up point, otherwise I’ll be rolling to the $53 puts. Markets are looking stronger now.

SA – not my favorite. I like ABX, GOLD, AUY, HMY, NEM (I LOVE NEM right now!) and my non-option favorites are MRB and NAK (who I just sold because they are a longer term play and I’d rather have the money for HMY after earnings).

Oil flying as supplies down yet again. Down 3.9M barrels (expected flat). Gasoline built 1.3M (draw expected), distillates up 800K (draw expected) and capacity was down 1% to 86.2% (means they’re not making product yet it’s building up). This is such a crock but let them rally it and we’ll short later.

SLB $100 calls as a mo play at $1.50, stop at $1.25 looking for $2+ XXX

October 31st, 2007 at 10:50 am | Permalink   edit

Wow Cramer’s flock is buying DRYS like crazy but it doesn’t seem to occur to them that the stock is flat becuase other people are selling it like crazy…

NFLX – ow, that is so painful if you never rolled up. Hopefully you learned something (like stick with more stable plays under your restrictions)… Since you can only make one move maybe you want to spend $1 to roll him to 2x the Dec $25s at $2.40 (and it’s $1.40 now but you should go for $1 and hope to pick it up on a dip). You can put yourself in position for that now buy taking a round of Mar $27.50s, which is what you’ll roll the Jan’s in to cover (will cost .75 on the DD but you gain a month overall).

It tightens up your spread, puts him 1/2 out of the money, buys you a month and cuts your spread in half (same margin though because you are doubling). Sure beats giving him $1.90!

LVS – I’d stay out. You missed the lows and, don’t forget, I have no faith in them, we’re looking to make money off the caller on the volatility crush, nothing more. Since we beat our first caler out of $10 and we’re in for $16 after the roll, selling the current $135s for $7 gives us a better than free ride. Entering from scratch is just gambling and this thing is way too volatile but I will look for something on it AFTER the Fed.

October 31st, 2007 at 11:09 am | Permalink   edit

BOOM – No our BOOMs went bust although they would have worked out well on today’s jump but I didn’t like the ATI and TIE fade out as the three of them usually trade in the vicinity of each other:

FTK (11/1) goes in with my theory that you’d better have some friggin’ amazing earnings to justify a 400% increase in your value since last earnings. They are a great company and I wouldn’t bet against them but the value is way stretched, the p/e is out of control and if SLB is trading down, something must be wrong in the sector.

HMY – getting out at .10 (after big DD’s to get even) is mission accomplished. Once you make a move to save a trade, the biggest mistake people make is getting greedy and not getting out when it gets even – good job Dan!

BWLD – happy to go over the strategy there. In general, if a spread blows you out on one side, you take out your (in this case) caller into the intial excitement and sell your own puts if you can (you can also roll them farther out to lock in the profits on your closer ones – back in time works too but costs more money). Depending on what happened, we may want to tighten up the calls, looking for a recovery, or go longer and sell more calls against.

I very much like BWLD at this level. They were hammmered by chicken costs, that will be fixed. Business is good otherwise, earnings were up 20%, just not enough to justify 100% increase in stock price but I love them at $30. They backed forward growth of 20% plus and they are a young franchise – even McDonald’s made mistakes along the way (remember the fish sandwiches?).

So it’s BWLD Jun $35s at $5 XXX, they were $10 last week and you can sell the Dec $35s for $1.35 but I’ll wait a while.

October 31st, 2007 at 11:21 am | Permalink   edit

CHK – earnings should be good but they did hold back production to keep prices up so it’s tough to call (which is why I got out). If you’re well ahead with the $40s sold, they are doing you no good anyway but you can take $1.50 off the table by rolling to the Jan $40s and sell 1/2 the Dec $37.50s which kill your upside on half but protect almost your entire position against a drop while leaving your naked half room to fly.

That’s an XXX as an earnings play on them by the way!

IMCL – sorry, I got sidetracked but that meeting is one of the reasons I wanted them. I’m starting to think the recent action (just a pullback of the ATH) is a shakeout and I’m ready to call a DD if we get a Fed pop later, although the trade is around even so far.

WFR getting hit.

NEM – sold $50s for $1.85, stop at $2.25 (against Jan $50s) XXX

October 31st, 2007 at 11:26 am | Permalink   edit

DNDN – I don’t want anyone ever telling me they didn’t get a chance to buy it!

FXI going insane!

October 31st, 2007 at 11:50 am | Permalink   edit

POT – it’s a fed gamble, not set stop.

CCJ – You can get $1.77 for the current $15s and that’s 1/2 of what it would cost you to roll down from the ‘10 $50s to the $40s so that’s the best place to start. If you have to roll down twice it will cost you $8 more to be in the $30s, the cost of selling maybe 5 month (out of 26) worth of premiums. How can you not love this stock? That would be an XXX for anyone looking for an LTP position.

DRYS – these guys are too risky if they Fed eases so, unless you are already in, ahead and covered it’s not worth messing with. You can’t just watch the index, this is why it was somewhat of a suckers rally. Whenever you hear a jackass analyst pump up 1/2 of a story (cough, Cramer, cough cough) you can be pretty sure he’s just fronting on the stock. Just like GM, it’s easy to move product if you give it away. The shippers have been in a rate war as they all got nervous the economy would slow so they bid down to lock up business. Just like gold miners who hedge production, it will take them a while to work through that, even if the economy does hold up.

Wow, look at the rebound on SU! OIH coming back strong. FWLT weak of all things.

NFLX – like I said, you owe him $1.90 now and for .35 more you have the right to sell another 2 months of premiums while keeping yourself 80% covered should give you enough leverage (at $1 per month in premium) to ride out a dip or, at worst, collect $3 from the Dec-Jan rolls (you’ve laid out $3) and end up whatever value you have left in the Febs as profit. It’s not sexy but it’s not a loss.

Dan – if you see a pair the second is probaly a short but download the regular spreadsheet, which gives those details properly (it’s a flaw in the system I use). The $10 and $25KPs are designed not to be daytraded so as long as you can check in once or twice a day it should be easy to follow. I wouldn’t try to “catch up” we take new positions all the time but you could enter one of our spreads that we are losing money on – that just means you’re getting a better entry than we did!

October 31st, 2007 at 11:57 am | Permalink   edit

DNDN – NO, I can’t restate it! It took me 1/2 hour to write it! It was about 5:30 on Friday. 8-)

Best moving ETF – DIA is the one I count on but the Qs are stretched right now.

IBM nice comeback!

POT – generally I will only double down when I am 20% or 40% down and I am determined to stay in a position. I tend to pick numbers that make things work out even, like if I’m in at $6.20, I like to DD at $4.80 to give me an even $5.50 or, even better, $3.80 for an even $5. It’s silly but it makes me happy…

October 31st, 2007 at 1:27 pm | Permalink   edit

Marcb/Nov BIDU spread is great! In my $330 puts, my putter lost $1.60 and my March puts gained .10 on the volatility increase!

October 31st, 2007 at 1:30 pm | Permalink   edit

We’re going to get $95 oil and $800 gold and a 75 dollar (down 8% in 2 months) if the Fed cuts rates – I really don’t understand what the party’s about but pass the punch!

October 31st, 2007 at 1:52 pm | Permalink   edit

I’m buying GS $240 puts for $5.50 ahead of the Fed simply because NOBODY is playing for a drop. VERY dangerous play.

DNDN with a stop is a good gamble but I’d rather own MU or HMY at the moment as actual sticks (DNDN can gap down on bad news).

Thanks Rein! Don’t forget everybody, I’ll be accepting investors for the PPhone. It’s going to be very cool and have “stuff.” You may begin throwing money at me now.. 8-)

Good point about the systems getting slammed Pachesia! I’m going to go ahead and roll up to the DIA $139 puts for .37 and I’m going to pick up 1/2 more $140 calls at $1.35 (I have Q puts that offset them). My feeling on the calls is I won’t lose more than 1/2 and I’m happy to roll the puts as we still have 10 days to pullback after another idiotic Fed rally.

October 31st, 2007 at 2:01 pm | Permalink   edit

I’ve got to tell you if I were Bernanke I would have to stand pat. But that’s because my main concern would be preserving the integrity of the Federal Reserve (and appearing not to be such a wuss). There is no data supporting an additional cut here. The BOJ said they will be raising rates, China is tightening the ECB is absolutely going to tighten to fight inflation over there (ironically the commodity inflation Bernanke caused with his last cut).

We’ve got a 3.9% GDP and jobs aren’t so bad which means our biggest fear SHOULD be inflation, not whether or not some arbitray stock index holds a meaningless level or not. An easing here will put us right back to $3 gas and, even worse, $3 heating oil, that’s a new one as we haven’t been that unlucky yet.

Anyway, there’s what’s right and then there’s what the government does. We’ll see in 15 minutes…

October 31st, 2007 at 2:07 pm | Permalink   edit

Under the Federal Reserve Act of 1913 and amendments over the years, the Federal Reserve System:

“Conducts America’s monetary policy.”

“Supervises and regulates banks and protects consumers’ credit rights.” Doesn’t seem like this one is high on their ToDo list does it?

“Maintains the stability of America’s financial system.” Well that went out the window years ago!

“Provides financial services to the U.S. Government, the public, financial institutions, and foreign financial institutions.” That’s who pays for them to fly around first class and stay in fancy hotels while collecting honorariams and lining up private sector jobs for after their tenure.

“The Federal Reserve makes loans to commercial banks and is authorized to issue the Federal Reserve notes that make up America’s entire supply of paper money.” Now THAT they are doing full tilt!

October 31st, 2007 at 2:15 pm | Permalink   edit

Dow strangle – see 1:52

By George K1, I think you’ve got it!

25 cut in funds and discount.

October 31st, 2007 at 2:17 pm | Permalink   edit

I dissent (Hoenig of Kansas City). They are still worried about inflation, that’s bad for markets, no rally off this, kill the calls!

October 31st, 2007 at 2:45 pm | Permalink   edit

“the pace of economic expansion will likely slow”

“intensification of the housing correction”

“Today’s action, SHOULD help forestall SOME of the adverse
effects on the broader economy” In other words – gee we hope this works, we haven’t got a clue!

They flat out state they are going into neutral inflation watch after this and they restate their charter to foster price stability (good that they know what it is!). That sounds like a warning to the commodity pits that they are willing to tank the economoy befire they’ll let oil hit $100 but it sure isn’t bothering energy traders into the NYMEX close but they will probably sober up soon.

This is all good to MSFT!

WOW – everything coming back now, be careful to the upside if we break over 13,850 and 1,540 and 2,850 (I know we have 2 of 3 already). GS breaking out like that was just what they wanted.

October 31st, 2007 at 2:52 pm | Permalink   edit

Mortgages are going up!!! The cut is being seen as inflationary in the bond market – that is the WORST possible reaction to the Fed cut. The financials should be loving it because it widens their “crack spread” but it’s going to do nothing for the corporate bond market, which was really what the Fed needed to save.

I’m sticking with my plan of rolling up the puts on the DIA spread, bidding .35 to roll up 1 level. This cut was bad news for CFC and other troubled lenders MER too) who needed a 2 point cut to bail them out.

October 31st, 2007 at 3:03 pm | Permalink   edit

At least my SUN calls are doing great!

Can’t turn off brain yet. There is no rally here – we are just back to yesterday’s open. If we don’t close over 13,900 it will be a huge loss of momentum and what’s the catalyst we’ll be looking for to break 14,000? Someone is working really hard to create a rally here but you can’t have a real stock rally with rates climbing – it’s like another pipe opening up for the water (money) to flow to. No matter how small, you’re going to lose some pressure.

Let’s remember I’m 95% neutral so we’re talking about side bets here but I won’t be buying this until we get through the weekend over 14,000. How anyone could have read that statement and interpreted it as “more cuts are coming” is beyond me but this is one of those times where I’ve gotta channel my inner Rodney Dangerfield and sell when they’re buying.

I miss Juliet! Tell her I hope all is well.

Holy Cow – I just filled 10 DIA $140 puts at $2.14! It never hurts to ask! This is not a roll, I’m staying fat in the $139 puts and adding as much as 1/2 the $140 puts. I got out of the call side in pretty good shape.

October 31st, 2007 at 3:07 pm | Permalink   edit

BIDU $360 puts at $11.50 XXX out at $10.50

October 31st, 2007 at 3:39 pm | Permalink   edit

POT – yep that one was awful. $3 was the top of the day but I certainly hope you didn’t let it get below $2.60. If you never lose more than 20% on a directional play you can make a lot more of them! If you still have them now you can DD at $1.50 ($2.75 basis) and spend another $1.75 to roll up to the $120 puts at $3.70 so you would be in for $4.50 on the $3.70 puts. Really, I don’t mke these things up, it’s just math. That way even a wiggle down will get you even and out but these kind of plays only exist when a trade is going against you, once the momentum turns the prices get very different. There’s no guarantee this will work either but, on the whole, I’d rather be 20% down on a position that’s right on the money than 33% down on a position that’s $5 out of the money.

October 31st, 2007 at 3:45 pm | Permalink   edit

Killed BIDU puts at $11, didn’t like the way FXI is going.

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