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Which Way Wednesday?

Now what?

I have no idea myself, I'm asking you…  The market showed it's displeasure yesterday with a "not enough to make Cramer happy" quarter-point rate cut and, other than a brief bounce from 13,500 to 13,566, the market sold straight down to 13,432, more than a 300-point drop from our pre-Fed level

Unfortunately, the Fed cut was enough to tank the dollar in overnight trading and oil rocketed back over $90.  The October Trade Deficit was $57.8Bn while the cost of imports is up 11.8% for the year, which is the inflation the Fed can no longer ignore just to keep the financials happy.  Import prices for October alone were up 2.7% vs. September's 1.4% increase so we are in an accelerating inflationary spiral that is beginning to have a noicable impact on consumers.

The WSJ titled the market's reaction "A Snub for the Fed's Gift" and I discussed last night how I think it's a good thing that the Fed realizes they are effectively dealing with cheap money addicts, who lack the ability to help themselves and the only solution is to cut them off.  Although we had a big sell-off yesterday, the global markets seemed to take it in stride.  While the Hang Seng gave up their usual 705 points, the Nikkei came back sharply after lunch, gaining back all but 112 of the 350 points they dropped at the open.

Inflation is also accelerating in China and it's now getting to the point where people can't afford to live with staples like cooking oil up 35% for the year and pork up 56% this year leading food inflation alone 18.2% higher.  "The government has kind of hinted that this [inflation] would be temporary, and sent out [mixed] messages," says Hong Liang, China economist for Goldman Sachs in Hong Kong. Beijing "has already missed some of the critical times in the third quarter to get this under control….Once you get inflation in the 5% to 10% range, it's a much more serious problem."  Oil prices are so out of control in Japan that the government has announced an oil-price relief package to help people get through the winter but, with $7.2T in debt of their own, the world's second silliest economy will have a hard time keeping it going. 

Something's gotta give folks!

Europe is trading mildly off ahead of our open but our pre-market is on fire if you can believe the bids that are being put in.   There seems to be some kind of coordinated plan by US and other Central Banks to inject liquidity into the market and in the time it's taken me to look for an article on this (5 mins) the pre-market has jumped from up 75 to up 250.  This has the potential to cause a massive short sqeeze at the open.

I'm going to be grabbing GS $220s at the bell as they're always good for a bounce but I still look at this as just another market rumor, much like Paulson's plan, which may amount to very little once the details come to light.  Let's be ready for anything today but if we can't get back to yesterday's open at 13,750, then we are most likely looking at a ride back to 13,400 – only perhaps a little slower this time.  The last time the CBs did something like this was after 9/11 and it did work very well.

It's oil inventory day and estimates are from -2Mb to + 2Mb but they are driving oil higher on a falling dollar, Fed easing and "Norway's largest oil spill – EVER" as CNBC has been repeating every 15 minutes.  What they are not bothering to mention is that this record oil spill is 21,000 barrels, the amount the US consumes in 45 seconds.  When you see nonsense like this coming from corporate shills like CNBC you know the fix is in and the powers that be want oil higher but let's watch SU to see if this "rally" looks sustainable to the company most affected by the long-term price of crude.  If they do start taking off, the SU $100s make a very nice momentum play.

All we can do today is go with the flow as it's possible that we will still get a lot of selling into any strength but, no matter what, it's going to be a wild one!


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  1. fed comes thru, but the timing was wickity wack

  2. Our gov’t will do EVERYTHING to keep asset prices HIGH (and they love to sucker in the shorts just before doing so)

  3. AAPL- so going to new highs this JAN- maybe this month if news flow becomes too forward looking and we price in a lot of earnings.

    film/reainharden- i want to rebuild into JAN 190/200s and start selling the 210s along the way.

    i think we r all systems go now- any thoungts?

  4. Futures are cracking up .. up

  5. This should be interesting … will it be Party on Santa Claus ? or Sell Rallies ?

  6. cap- i think so- at least with AAPL

  7. Due to work & life events, I have not been able to get on certain plays and such. I am still in the AMGN Apr 52.5′s (now naked). Is it still advisable to roll to the Apr 50′s as I believe was done, or is there a better play to be made today?

  8. BA

    Morgan Stanley downgraded to equal weight which I think is a buy opportunity. I’ll be selling the 85 Puts as I believe the longer term story is fantastic and once BA gets past the skepticism they’ll see why the stock was at $107 not long ago.

  9. Repost from other article:


    I think I’ve almost achieved nirvana…I checked the total value of my portfolio and I was up $2,700 on the day. On days like this in the past I’d be down at least $10,000 – $15,000 and thought this was normal. This includes my mutual funds which move with the market.

    My up days may not be as strong but I was actually relieved at the fall yesterday as it gave me a great chance to move some callers. Thanks for all your insight.

  10. This auction idea has got to be Dollar dilutive right? They say that it’s collaborating with the other central banks, can’t imagine they’re going to split the bill equally though..?

  11. AAPL up to $193 in premarket lol. Gotta love this market.

  12. I am not buying this bounce. May short at open, but this is not all systems go to me.

  13. It’s going to be nuts today guys, watch out for systems outages as you try to trade and I find it very, very strange that they would let the global markets tank and then roll out this plan AFTER Asia closed (did Japan find out at lunch?). Do they do these things to screw China?

  14. well I don’t know how santa could push the markets but most of my picks are right now near pre Fed Levels… or even more likie PBR

  15. Good point Phil, couldn’t understand the timing but you’re right – this will really piss them off over in Chinatown.

  16. Fred – If you come through today unscathed as well that will really be nirvanah!

    I’m not doing anything in general – sometimes you have to take a hit, take a breath and then come up with a rational course of action. Let’s see what levels we get to before buying into this. I’m not sure how much this really helps anything other than giving the bulls an excuse to rally. The CB’s have been giving money out like candy anyway, this is just more of the same but we’re not going to fight the tape.

  17. Phil,

    Been on your site a relatively short while, but agree with the wisdom of building the LTP. Does it make any sense to do so around year end with all the choppiness (not that it will go away in 2008)? Was thinking of beginning to buy dips on GS, BA, SGR leaps and selling the near month calls. Any counsel is appreciated.

  18. well, that just fried my IWM puts. I hate holding anything uncovered overnight.

  19. so, I really just woke up, have no idea what the news is, but this is kind of what I suspected would happen. I will uncover AAPL if we cross 196. Not until then. That is just me though.

  20. GS

    I was going to bite on the $220 calls but the gap up was too big to grab so far.

  21. BA

    Selling the BA Dec 85 Puts for .60.

  22. The “best” they can possibly achieve with this is continue to pump up asset and commodity bubbles even more, ultimately losing any control over inflation that they may have had.

  23. Taking profits on calls bought yesterday at close: NVDA, AAPL and WFR. Covers some of the losses on the puts. Hoping for a pullback now. This market is so tough to trade.

  24. FSLR

    Spreads are gigundimo.

  25. BA really wants to justify your trust Phil – but it’s a long road up!

  26. I’m going for coffee

  27. thanks to all for their AAPL insight, especially Film & xian. I held yesterday & DD before close. Sold into the initial excitement this morning as Phil’s always says. Whoot whoot!!!!

  28. Good Lord! This us just incredible! I sound like a rookie talking like this but the volatility is amazing.

  29. has anyone been looking at WCG? the bad news was an investigation for fraud a while back, which some made quite a big deal over…. Subsequent news has stated this investigation was of quite narrow focus, much smaller scope than the MSM seemed to portay, which didn’t make the headlines. Anyone see a play here? unusual chart. maybe quite a bit of upside…

  30. WM & C down on day . . .

  31. fed- in the next month everything will b fine: banks can writedown whatever they want, more “infusions” may come in and the fed is being reactive.

    this is good enough for the next month, considering the FOMC meets again on JAN 29/30 where people will rally for a cut.

  32. MrN

    BA…the issue is the analysts lost faith when they did that update and failed to push the timeframes back properly and I believe it was mostly the project manager. If they hit their power on at the end of January or close to it then the stock will rocket. Until then I think the analysts feel burned and nobody is going out of their way to upgrade this.

  33. sitting on a bushel of AAPL Dec 195 puts, but I have a real itchy trigger finger.

    CSCO loves it. GOOG thinks it smells good. AAPL wants seconds.

    Here we go. AAPL looking at the lows, lets see what happens.

  34. Phil

    Any recommendation on DIA dec puts? Tempted to hold, but maybe roll to Jan? I have the 133

  35. Hey Phil,

    I am trying to follow the 10K portfolio and now have NEM Mar 50s uncoverd, should I sell the Dec 50s again?

    I also have the AMGN Apr 52.5s uncovered. I wasnt able to sell the Dec 52.5 caller orignally, so I am down about $1 on the Apr call. Should I sell the Dec 50 or 52.5?


  36. LTP – I’d wait a bit for a real dip. 13,700 is so close to the top of the year’s trading range that you are much more likely to be overpaying than underpaying.

    I’m tempted to short here actually but I’ll just be happy if this lunacy calms down here. I’m really getting fed up but S&P 1,505 is nothing to rally about and all I see is a ton of blocks being sold to retail investors who think $40Bn tossed out by the CBs is going to solve something. If they Dow breaks back below 13,600, we can probably short anything we wished we shorted yesterday, like XOM, which is now up over yesterday’s high and very close to it’s 10/29 high of $93.61 (spike to $94.27). At that point, out of prinicpal, I will have to bet the farm on XOM going down!

    If you are long, I would suggest exiting with the big boys and just being happy you got out of yesterday’s mess with little damage. Let’s wait for a real breakout before we start “bargain hunting.” If you are short, I would roll up to Jan puts but you have to assume Dec is dead as we only have 8 sessions left.

  37. out of AAPL puts.

  38. RIMM_Still looking weak.

  39. from last night’s comments phil wrote:
    If you can’t monitor positions closely then stay away from naked ones and stay away from close spreads (less than 2 months) but condors, butterflies and Mar/Dec or better spreads are very unlikely to penalize you if you have something better to do with your day than watch a lot of squiggly lines move randomly on a screen. Embrace the mathematical advantage you have over your callers and the fact that you control time and space (the positions you choose) and not your caller. Once you get the hang of things, you’ll be very comfortable moving things on their own. I believe Windy can attest to that!

    Yes, I can attest to that in spades. But getting to this point was not at all an easy road for me, actually one of the more difficult achievements in my life. I’ve been involved in the market for years, and trading options the past 2 years. Been on this site since May, and have read and studied everything written here since that time. I started applying some of these trades in a haphazard manner, not fully understanding the ‘rules’ or that it was a system. So I made a bunch of winning trades, and a bunch of losing ones, overall came out ahead, but very frustrated. Then on Sept. 18 when the Fed cut by .5, and I was so strongly positioned for a drop in the market, I got slaughtered. It was 3 days before expiration and I was sure there would be a pullback, which didn’t come, and my losses got even more extreme, wiping out a huge percentage of my life savings, that….well, I don’t know how to finish that sentence. Maybe some of you have been there. It’s a dark and awful place.

    But I wasn’t willing to accept that as my reality. My family urged me to stop, and walk away. That would have meant accepting that. I would not. Since then I have studied Phil’s philosophy with a level of commitment that is truly a graduate school level education. It’s become my primary occupation, and I fit everything else I still do around this. I could not have done it completely on my own, and have received alot of assistance. This group has been tremendously supportive and I am grateful to everyone here, because you are my support team. K1, I am constantly impressed with your magical powers of conjuring up info.

    So I’m writing this because I read alot of comments yesterday from people struggling. Although I think you can invest in the market as a hobby, I don’t think you can do this as a one. It requires commitment, attention, nimbleness, mathematical experise, seeing through all kinds of crap, withstanding nervousness and regret as well as satisfaction. I’m constantly wanting to know what will happen, and I’ll never know that until it’s happened, and I still want to know what will happen next. But I do believe that Phil is a genius who has figured out a way to use options to create income in an astounding manner. We all see that. But sometimes it takes quite a long time to perceive the level of complexity involved, and that it’s a complete system. It cannot be initiated in part, and it cannot work if not fully understood. It might for a while, but with the level of volatility we’ve been experiencing that won’t last. If you’re not up for the complexity, don’t do it. Trade options differently, or do something else. Don’t just jump in and follow one of the portfolio’s. Paper trade first. Get through some complex situations where you don’t know what to do next.

    Today’s market is nuts. I don’t understand it. But I made progress on my positions yesterday and I’m doing so today as well. NOW THAT IS ASTONISHING! Thank you Phil for your genius and your kindness and generosity in sharing and teaching it!!!


  40. Phil, thanks for the LEH setup last night. There was a big gap up at the open but its calmed down again to about 62. Do you still like these strikes?

    +1 Jan 62.5 call
    -1 Dec 60 call
    +1 Jan 57.5 put
    -1 Dec 60 put

  41. Energy bill: Senate update

    Latest thinking is remove the electricity component which requires 15% renewables, bad for solar, etc. but keep the tax component for big oil. Won’t get past the White House anyway so why bother? Veto for sure if the tax is there on big oil.

  42. Phil, your thoughts and plan on BA would be much appreciated.

  43. hi Phil,

    I have BA May 95 Call and sold Jan 95 Call with $8.25 premium.
    should I roll my caller down to Jan 90 for $4.7 premium with a better protection for my May Call?


  44. I am out for a while. Good luck hope the inventories news is good… for us.

  45. Phil, I did not take the GE caller out yesterday in the 25KP. Shld I take him out now or wait?

  46. windy,

    Thanks for you extreme candor. I think it helps put things into perspective for everyone. People are always willing to share their big successes but never their setbacks and this results in a warped view…what’s wrong with me? You add a valuable component to newcomers.

    Take care.

  47. COF-Red

  48. DIA Dec puts – I’m only in Jans but I’m not covering.

    NEM – after yesterday you have to ask? Yes, cover! AMGN – yes cover! This Fed thing is just more smoke an mirrors, likely capitulation to Paulson’s pals who got caught with their pants down yesterday and need someone to sell to. Remmbemr in yesterday’s comments I noted that there were NO buyers, that could have been catastrophic if it continued today thus the BS move followed by a hard-core media blitz to tell you how great everything is.

    Meanwhile, SLM at 52-week low (their deal is dead), MBI heading down, GM down, C down, COF down – this is a textbook study of a sucker’s rally. FRE down, FNF down, AET down, BAC down, WM down….

  49. Energy:

    Stock positions aside I think it’s a sad day that the component that appears to be losing out in the energy bill is wind, solar, geothermal….business as usual in Washington. Will we ever wise up and do something that’s right instead of expeditious?

  50. Phil,
    I could not roll the 175 caller yesterday – I have 2x Dec 185s against it. Can you help me bail out ?

  51. Picked up 15 JOSB 30′s as an earnings spec play

  52. Phil,
    I have QID July 38, what Dec Strike should I cover?
    Thanks for your advise.

  53. Phil-

    Hold GE calls from yesterday?

  54. Big givebacks in the financials so far, notably WM, C, CFC. Until these things stabilize, I’m not buying it. After all, these are supposed to be the guys who this Auction Facility helps.

  55. VMW-up $7

  56. BA

    Sold some more BA $85 Puts for .80.

  57. Phil
    i want to cover AXP Apr 55 with DEC 57.50 or would you suggest 55′s? Thanks Henk

  58. Phil, whatta think about initiating a position in CCJ in here??

  59. !!!!CNBC BREAKING NEWS!!!!!


  60. atleast the shorts are not buying this rally. Another 100-200 points up will be fun end of the year.

  61. LOL!

    Criminal Narrative Bread Cutters

  62. Phil, perhaps this is a question/discussion for after-hours, but I’ve been thinking about the perception in the market and the reality. Personally I have been negative on real-estate/economy for about 2 years. However at the same time I didn’t lockup and stay out of the market.

    Your articles always put more economy related details into the picture. But although the market has been volatile, there still seems to be a perception that all is ok. I do not see/feel significant bearishness, perhaps that is the intention of the media/big boys. I guess the famous quote comes in here, “Market can stay irrational longer than you can stay solvent”. Given all these new tools I believe staying solvent will be easier than before :) , but at what point does sentiment change and becomes obvious, do you feel we will know or get blindsided.

    Just something I’ve thought about and would like to get your feedback.

  63. ENERGY REPORT!!!!!

    Crude – -.7MM
    Mogas + 1.6MM
    Distillates + -.8MM

    Bearish considering the shipping channel was closed. Oh that tule fog.

  64. I shorted a whole bunch of GS 185 puts right at the market close yesterday. Covered this morning for a nice profit.

  65. LEH – sure that still works but the V puts a little more risk in. Are you sure you make money buying just 1 of each? Seems commissions get painful there.

    BA – my plan is to buy more leaps for less money. This is about the deal they made to outsource some manufacturing limiting their upside because analysts think the alternative would have been to knock down Bill Gate’s house and put up a plant there or something. How the hell did they think BA was going to deliver 1,300 more planes in 5 years? I think there should be a rule that an analyst should have some clue about what a company actually does for a living before they are allowed to spout off about a company. Maybe they could have a vetting process like they do for jurors where the company to be analyzed has the right to reject unacceptable candidates if they can demonstrate that they are unfit to talk about them.

    On the BA May/Jan $95s – I’d take him out for .08 (tough decision) and roll to the May $90s for + $2 and sell the current $90s for .55 since the Jan $90s pay for the roll at $1.90.

    Oil inventories down 700K but gas built again to 1.6Mb and distillates down 800K so net neutral but a disappointment overall. Refiners should lead us down on this one, that would be VLO, TSO and SUN but I’m sticking with XOM $90 puts right now at .60 as a mo play and the Jan $90 puts at $1.67 as my focus put but I’m not expecting much movement if the market stays up.

  66. Not much of a reaction to the inventory report

  67. BA is getting hammered again.

  68. COH- bought back Dec 35 against Stock.
    RIG & DO

  69. CYNO-What happened? back in at 28.8

  70. well GS going down after the oil report.

  71. BA- when do we buy those leaps? Now? Or will it go down further?

  72. EMKR – my only bright spot. Been selling deep ITM calls against my stock then buying back & went into today naked. Just sold 10 calls again. If they hold this gain to the end of the month they can have my stock back.

  73. CYNO-I am out. This is too scary.

  74. Phil,

    I now have LDK June/Dec 50, should I roll my caller to Dec 55?
    Thanks for your advise +:)

  75. LEH – naw, doing ten lots but I have a habit of reducing it down to “per-contract-lot” when I write it. I have a bid in for ten lots @ .50 debit and no one’s bitten yet.

  76. Just a general question,

    Do you include non-trading days (weekend, holidays) in options decay calculations?

  77. BA – oh sorry, I just realized you had Jan $95s and not Dec which is too bad as the Decembers got toasted! The advice is the same though, spend $2, spend .20 to roll your caller to Dec $90 THEN roll back to the Jan whatever is appropriate. You turn .78 you won’t collect for 6 weeks into .55 you’ll collect next Friday and improve your position by $5 for a net cost of $2.20.

    GE – holy cow I missed the chance to sell there in the morning! Gosh that’s got to be a concen with GE dropping 3% since the open… It’s a tough call now but maybe wait to see if we test $37 as that seems likely right now and, if not, you don’t owe him more than his money back until $38.30 and by then you can probably roll to the Jan $40s for the same .40 you want to give him now which would leave you naked. I already bought my guy out so I made my bed and now I’m lying in it but you are in a different position with new information (the stock got sold off hard at $38). I will, in fact be looking to sell between .80 and $1 so just send yours over to me at that point – we could be like a miny IAB if we get that working!

    Windy, that is really great! I’ll have to add that advice to the strategy section…

    CMan – Apple I assume? Well if you liquidate you get $2 so lets see what we could do. You could roll him to 2x the $190s at $14.50 which will cost you $2.50 per contract of yours but net you a possible $5 per contract return (if Apple finishes above $190. If it were my position I’d roll out to the Jan $195s and roll him up to the 2X the Dec $195s which will cost you $5 per contract but that’s what you owe him anyway and you have another month to play with Apple and, if you then sell the $200s, now $9.62, you get almost all your money off the table with a $5 spread.

  78. CYNO – not sure what happened. They are supposed to present at some healthcare conference. Hopefully the guy didn’t say anything bad. In the meantime, the dip allowed me to take out the Jan caller I just sold yesterday. Looks like it’s stabilized now and starting to head back up.

  79. windy – great post. I can certainly relate, as I have also been there (arguably still there at times). Completely agree that to learn this requires total commitment and discipline in applying the system (something I don’t/can’t always do, and need to do better in this department).

    Phil – I’ll take this opportunity to thank you again for your patience and willingness to share/teach. I’ve learned a ton since joining the forum in late Marc, though there’s still much more to learn.

  80. GRMN-Red! Amazing.

  81. Phil, do you have any thoughts on earnings for COST tomorrow? I have some 09 70 Leaps protected with DEC 67.5′s that are slightly in the money (the call is ITM) . Can’t decide whether to roll the caller to 70′s and get more premium or just sit on the 67.5′s for downside protection (2.75 protection). I think if they give any negative guidance even if they beat, they will tank. If they jump to 75 or higher, goldman will take them off their conviction buy list based on valuation and they will probably go down as well.

  82. KC-Cyno. I just traded it 3 times. Can’t find any news. Keeping some from last trade just in case it bounces more.

  83. Optrader, I bought the kindle on your advice. It’s awesome!

  84. Phil,

    If you have calendar spreads and stock gets downgraded obviously options values go down with the stock. What do you tipically do roll down and wait out – but this way you need to pour more money into it. What about if you don’t have too much time in the option anymore? I’ve got Feb $40 AKAM which has been downgraded
    today and it has come down a lot just today. I’ve had it since Nov, sold Nov and Dec against it, but now it’s looking pretty bad.
    I would appreciate your advice.

    Thank you.

  85. Are the round numbers on the index’s going to become support?

  86. Optrader,

    There is some rumor that Apple is working with TomTOm to develop a GPS module. Perhaps that’s why GRMN is taking a hit.

  87. or resistance?

  88. I am back and back in AAPL puts. Man, CSCO is so happy today.

  89. Keeping it simple so far today.

    8 QID trades …. in and out.
    selling BA Dec 85s in a 85/75 spread. (sell 85 buy 75)
    selling XOM Dec 95s in a 95/100 spread. (sell 95 buy 100). limits impact on margin buying power.
    thinking about C Dec 30 put sale also.

  90. Adding to Phil’s comment, …

    …”I think there should be a rule that an analyst should have some clue about what a company actually does for a living before they are allowed to spout off about a company.”…

    How about if we also make it a rule that members of congress who vote on budgets actually have a little knowledge on economics, accounting, and finance!

  91. Anybody/Phil. XMSR condor. This is my first trade like this and just wondering how we close it out. Will we just let it expire two fridays from now or will we buy back the short postions and sell the longs (if they are worth anything..!) the day before expiration. Thoughts???

  92. Phil,
    OOOOps! yes – you guessed it right . It was AAPL.

  93. CYNO – I still have Mar calls. Let’s see if it bounces back to low 30s again. Need to check and see if there is any news on CUTR/PMTI etc.

  94. QID – I know, I was greedy and didnt’ sell yesterday either. I’m not going to yet but if we hit $38.50 again I probably will sell the $39s.

    AXP – ugly, the $55s.

    CCJ – As a leap yes but you have to sell against them and they are very stressful to hold.

    LOL Khan!

    Yev -that is a good weekend discussion. As I mentioned last weekend it’s the little things that tip us off to a real recession like my daughter noticing there were a lot of cars with dents in the mall parking lot. People are already having to cut one thing to pay for another and think how badly they NEED a bailout if the Fed has to keep lowering rates. Look at what Japan did today and their Fed is broke too. These are desperate measures and we are pretending that these are not desperate times – that makes no sense in general. If this is what they are doing in a “decent” economy, what is their plan if the economy goes “bad?” That’s what scares me, the lack of acceptance and the business as usual attitude from CBs and government in the face of a global commodity crisis that threatens to swallow up all the available capital on the planet or force a massive and painful correction.

    IMB 52-week low – yep, everything is great!

    BA – $85 is a good floor but you have to be willing to roll and DD at $75 or you might not enjoy owning this one.

    LDK – WOW, those are huge premiums! How could you not sell the Dec $60s at $5.25? I’m doing an immdeiate butterfly there myself selling the $60 puts and calls for $11 and buying the $70 calls for $2.27 and the $50 puts for $1.77 so I get a $7 net credit with a max risk of $3. XXX

  95. BUD moving.

  96. I subscribe to a service ( with a focus only on breakouts. Today, for the first time since I’ve been following it, he is recommending two stocks to short on breakdowns: BIDU & SPWR. The guy has a good track record and the subscription is cheap.

  97. The XLF (Financial Sector SPDR) is trading 4 cents above unchanged on the day, which is down over 3% from this morning’s enthusiastic levels.
    I guess everyone remembers what happened last time we formed an international coalition to better the world…

  98. THQI finally a pull back

  99. AAPL looks destined to settle at 190 this DEC

  100. Phil:

    How about a 1% a week portfolio
    That .20c on a $20 stock ; But it translates to 50% a year
    Why is this so hard???

    For yield does it make sense to get the new JNK etf. portfolio and sell the June 48′s for an extra 2% for the next 6 months…

  101. In with you on JOSB, KHANNN. I moved out to Jan 30′s as I am sure we will get some IV push on a pop. I also put in an order to buy all the Dec 35′s I can for $.05. Doubt I will get any, but if I do, I will be selling those things at open.

    Crap. I only got one Jan 30. I will see what happens and grab something later if I don’t get some love.

    XIAN!!!!! I think AAPL closes between 195 and 200. Definitely not over 200. Going to see if there is a play there that I want to make.

  102. BA

    That’s like an analyst saying that GM, Ford & Toyota should make all their own parts. That’s just plain old stupidity. Perhaps we should all grow our own vegetables rather than let those with expertise in each competency do so.

    Once Boeing has the supply chain cranking they’ll be able to raise production levels dramatically from where they’ve been in the airline industry. It’s kind of like saying an assembly line was a stupid idea.

  103. Phil,

    C (Citi) – What is your view now that Pandit is in and stock is revisiting 31-32s?

    I own the stock at around $32.20 and sold Dec 32.50 Calls against that. Just wondering if I should cash-out of the option (up 50% since I sold) and get rid of the stock too, or hold on for the 0.85 option-premium till expiry next week.

  104. AAPL- DEC expiry, i must roll my DEC 190 callers. i should probably just roll them to JAN 210s next week when the DECs r trading at 4ish.

  105. BA suppliers – does this mean a buy opportunity for some of BA’s suppliers like TDG (and I believe ATI)? BEAV approaching ATH again.

  106. BA suppliers – actually, I should rephrase. Not buy now, but put on watchlist for later purchase.

  107. Greg,

    There is no way I would short SPWR other than for a quick day trade. This just got upgraded and I think their technology is better than FSLR.

  108. That LDK filled as a spread in 2 seconds, I think I could have done better.

    Including non-trading days – when it’s close I do but when it’s more than a month it’s too much hassle and as long as you are calculating both ends the same way it doesn’t really matter.

    COST is tricky because they lose so much money on gasoline when it’s high but I think they should do well but I’d roll him to the Jan $70s near even so you can get that premium. If they tank you’ll have to ride it out but I think they’ll hold $67.

    Downgrades – well it depends on if I agree or not. With BA I think the analyst is an idiot but with AKAM I’m not so sure… You can’t just apply this strategy to random companies, if they don’t come back you are just screwed. Still, it only cost you $1.80 to roll to the $35s and you can sell the current $35 for $1 and the Jan $35s are $2.25 so from a pure math perspective it makes sense assuming you want to stay in it.

    Seattle – now you are just fantasizing!

    XMSR – unless we close right at $15, with most brokers you are better off closing out the position. Our max possible gain is about $3.30 and we’re up .80 so it’s a little early to shut down but at around $2.20 it becomes a sirius (get it?) consideration.

  109. xian
    what would you do if AAPL surprises and goes down to 180? i’ve been learning that i must always look at both possibilities, and figure out a plan for each. if there’s still premium, and you’re in an appropriate spread, then just wait it out, absorb the premium, and roll on X day.

  110. Greg – is that Peter Mauthe?

  111. LDK

    I’m in on this one, as you say XXX.

  112. windy- totally, i’m not rolling my DEC 190s until at least next monday.

    i don’t think AAPL shoots down to 180- but it could on some crazy news about jobs options or cancer- and if it does i’ll b a buyer.

    i entered this trade just looking at JAN earnings expectations and and macworld hype.

    i’ve read posts about AAPL going to 220+ in JAN, but my play is just looking for 210+- i think that is so in the cards.

  113. MrN – It is actually spelled Muathe. The first time I saw Peter Mauthe in the financial times I thought they were the same guy, but the analyst Greg is referring to is Eric Muathe. The guy is pretty good. I also subscribe. I actually don’t trade alot of his breakouts, but I have learned alot. This is the first time I have seen him put out a bearish recommendation.

  114. SPWR

    You can do a similar butterfly with the 130s and 135/125 covers. with $4.20 credit and max risk of less than $.80.

  115. JNK – There was one of those I liked better but I forget which one but yeah, with the Fed so actively bailing people out the risks are probably overstated.

    C – I shorted them yesterday on the news but we planned that from way back. I’m off the financials until we get a real handle on this crisis (maybe 2010!).

    I will reiterate that WM LIED about $4Bn in losses and UBS LIED about $10Bn in losses – who knows how bad this really is?

    I still like the ATI play long term, they are getting to be like SNDK with their wild swings for no apparent reason. They’ve been channeling nicely between $90 and $95 for a while so picking up $90 leaps and selling $95s when they top out the channel is a good income producer.

  116. Yeah, trying to get a fill on LDK. I’m asking 7.20 and the mark is bouncing around between 7 and 7.30…

    And low delta, I like it!

  117. Phil or anyone:

    What should the normal margin be for a deep out of the money credit put/call spread? For example the APPL 170/160 credit put spread? In your opinion what’s the best stock/option trading service?

  118. Phil

    I thought you picked up the 10 C’s? Still holding them i assume?

  119. Phil XMSR. Great trade, ‘Sirius’ly…

  120. MrN & bigs – yes Eric Muathe, thanks.

  121. Got my Jan JOSB’s.

    If I didn’t want to keep my capital available, I would buy the AAPL Dec 190s and sell the Dec 195s. Especially if we get another crazy sell-off and you can leg into it by buying the Dec 190s first. But, if you bought it at market now, you are paying $2.80 to get $5.00. If we get a sell-off, you might be able to get that for $2.

    Good news, the bid is actually going up on my C Jan’10 60′s. I am not the only idiot who wants these.

    So, I am looking at the AAPL Dec 195′s and the open interest has spiked tremendously the last 4 days. No one wanted to sell them when they were at $40 and $30 two weeks ago, but now that we are closer, they started selling like mad when they got under $9. My takeaway from that is that 190 is definitely a SOLID floor for expiry. I would even argue that the people writing these think that 195 is a good bet, too. I will check other chains and get back to you.

    Gotta get ready to close some AAPL puts.

  122. xian
    if you’re so sure about this, then why do a spread at all? just buy straight calls.

  123. Phil,

    C – you got rid of your LEAPs too?

  124. DO at an ATH, I’m wondering if it’s a blow off after plunging to $126 yesterday. I like spreading the Jan/Dec $130s for $3 as you pretty much win either way. XXX

  125. Phil,

    Opinion on rolling back a month at the same strike price for an ITM caller I sold? Example, I sold XOM Dec 90 Calls and believe the stock is headed south so I can sell the Jan 90′s $1.30 credit. I don’t improve my position against the caller at all but I do improve my cost basis in the event I ultimately need to buy back the caller. Either way I’ll wait until next Thursday or Friday before I do anything.

  126. Trading these AAPL puts is going to be tough since, the MM’s obviously have no problem selling them at these levels. Still think AAPL pulls back some more, but IV could start sucking up the down drafts.

    OI peaked on the 170 calls two weaks ago and then next strike OI peaked a few days later, repeat. We are now about to peak on the 190s. Obviously, this has something to do with spreads and rolling, but I think this also points to a floor at 190.

    So, FWIW, I am calling a FIRM bottom on expiry at 190. Means nothing now, but if we are blessed with a sell-off below 186, then I will feel comfortable initiating some plays to take advantage of that.

  127. windy- i used to just go naked, but i’m trying to have a less stressfull and more responsible portfolio.

    besides, if i buy spreads and they make 2x or even 1.5x the money, then what’s wrong with that?

    should it make me disappointed that going naked could b 10x (or whatever)?

    i’m very sure about AAPL breaking to 210+ (others r even more bullish) in JAN during macworld/earnings run up, so going naked would b the most profitable- but that doesn’t make lower octane spreads a bad idea or betrayal of my bullishness.

  128. C – no I still have 2010 leaps, I think that’s enough time for them to recover. That’s another nice thing about having leaps with a beaten caller, I am covered on my puts to the upside!

    JD – I dont’ know what you mean by normal margin. Do you mean what you should expect to make? I use OXPS and I’m happy with it and TOS and IAB seem to be the top favored alternates.

    XOM – of course roll him up. That’s the point of a leap, even if your caller beats you so bad that you can’t buy him out, you can always buy more time with a horizontal roll at no cost. All the stock has to do is fall once between now and your leap date and you’re a winner.

    Pisani says traders say the Fed deal is still not enough. I’m telling you they are crack addicts, there is no amount of money you can throw at them that they don’t want more so they can keep making the same mistakes.

    OIH tempting again!

  129. LDK … did 1 short contract Dec 65′s at 3.40 just for kicks.

    Phil … AAPL, I have Jan 165 calls, but had sold Dec 165 calls and Jan 170 calls against (no cost basis anymore). Anything I can do to improve my position here ?

  130. Down we go I think!

  131. XOM $90 puts at .65 going for .90, DD at .50, stop at .40 XXX

  132. Just checking in, I’m buying BA, if they give me my price of course… Looks like a good place to enter…. Have fun boys.

  133. film- what do u mean about IV sucking up downdrafts?

    do u mean that the DEC options will keep premium even if AAPL falls b/c the IV will rise?

  134. Phil

    What I mean by margin is how much capital you are required to put up to make that trade? For example we’re being charged 10K for selling the Dec AAPL 170 puts and buying the Dec 160s on a ten lot, that seems a little high to us, so we’re curious if that seems high to anyone else?

  135. I would not bet against Phil right now. The overexuberance is going to wear off. If not this afternoon, then perhaps tomorrow or even the day after. I just think it’s a natural selling point after a nearly 1000 point swing. I think i’ll call it the mini-correction. I’m very leary about doing anything myself at the moment because today’s has confused the hell out of me. So, i’m sticking to buying good companies with Leaps and daytrading tops but not really shorting any companies unless the fundamentals suck. Be careful out there!

  136. JD. Margin is the difference between the long and short on 10 contracts.
    10 x 100 X $10 = $10k

  137. jd334- i think that margin requirement is just the way it goes- i could b wrong.

  138. Closed AAPL puts. Maybe too early, we’ll see.

  139. BIDU could be good for a nice drop. $380 puts are $11 XXX

  140. FSLR $230 puts at $6, stop at $5, get $10 XXX

  141. parchesia – I agree. The USD/CAD has been strengthening in the last 4 hours, so the US isn’t dead. Atleast the real money managers don’t think so.

  142. HES another blow-off top candidate.

  143. AAPL Jan/Dec – well you have to do something… If you can afford to you can roll them and yourself to 3X the $190s. You’ll have to take some out of your pocket but you are buying $12 in premium for each of your callers you roll up. Otherwise, just roll them to the $190s for $17 and $20 and roll yourself up to the $190s for $17 so you can at least capture a little premium. Another play I like that would cost you a bit is rolling them to the Jan $185s at $15.93 and rolling yourself to the Apr $180s at $29.85, that way you have time to work the position.

    $25KP DD on AAPOL $190 put at $3.75, look to get all out even. XXX

  144. xian, I think the Dec puts have enough premium in them that you have to be very nimble to trade them as the highs that are reached by down spikes will be quickly retraced and hard to get back. Just like when a call jumps on a new ATH, but then takes an ATH 5% higher to get the call you bought on a breakout to even.

  145. “Atleast the real money managers don’t think so.*” … Obviously I’m assuming forex money managers manage more money than hedgefunders… Ergo, are smarter. It’s because I’ve seen soo many dumb ass hedgefunds vs forex funds, that it makes me wonder. Hopefully Phil can change that, and finally make a *gasp* profitable hedgefund.

  146. GRMN-Dying.

  147. Margin – no, that’s what it is unless you have portfolio margining in your account, you will be charged the difference between your strikes no matter what you think the risk really is.

    Just remember that if we close at +60 or less it’s a very serious 2.5% rule failure to bounce 20% off yesterday’s drop, which is a very strong indication that we will head down another 2.5% before the next possible turn.

    There are many profitable hedge funds but they don’t need to advertise. Once I get a $1Bn fund up and running if I’m maxed out on members and we’re making 50% a year, why would I want publicity? The guys you see on TV either need investors for whatever reason or they are publicity hogs, neither are the types you want to give money to. Hedge funds have been around for years but they used to be things rich people whispered about – the good ones you keep to yourself.

  148. Yay BA filled, i think 85 is a big support for it. I just can’t be active right now, so I’m shotgunning it.. Take care boys.

  149. COF-Dying too. This is turning into a very nice day. have not done much trading but glad I sold all calls this morning.

  150. MA getting whacked today. Stopping out of my very ahead $210 and $190 calls and taking covering $220 calls that I sold with $230s at $1.50 XXX Tight stops on my puts as I dont’ need them anymore.

  151. Just got my 3 lots of LDK filled at $7.20. $2.80 max risk, I like this one.

    Earlier this morning I bought back the DIA Dec 133 puts at .65 I sold at the close yesterday for $1.35…a few more dozen points down and I’ll be ready to sell them again. Wild ride!

  152. wow, definitely sold the AAPL puts too early.

    Xian, I am looking to start buying back some Jan 210′s at around $4.40. Only part. I will buy back more every $.40 down.

  153. BIDU – DIE!!!

  154. Bah, should have DD my DIA puts this morning.

  155. We going to hold 13500?

  156. 50% annual on $1Bn? Net? Where do I sign up? You’re in Cohen, Simon, Pickens territory there. Rarified air.

  157. getting greedy, but offering to buy back Jan210′s at 4.00 and 3.60

  158. Here’s the 20% bounce off yesterday’s drop – Hyper critical failure if we break here, which is conveniently just under 13,500. Nas 2,675 keeps popping up as an inflection point as does S&P 1,485. Right now the energy patch is holding up the whole market so if XOM does go you’d better damn well be covered elsewhere because this could go fast!

  159. GRMN-Selling 1/2 puts as we get close to $100, which is also 20MA.

  160. And just as Phil says it, Goodbye!

  161. On yesterday’s Fed move – comments on an Asia based site I frequently read – very similar to Phil’s addict comments…

    The addict got his drug…

    …or so it seemed! But seemingly, he wanted more of it. With the druggist refraining to give him that extra dose, citing concerns of a hangover, the addict went berserk! Or so it seemed! To cut the long story short, the druggist (the US Federal Reserve) in its monetary policy meeting (drug delivery session) yesterday, decided to lower the federal funds’ rate by 25 basis points (0.25%) to 4.25%.

    This is 1% lower then the pre-September fed rate of 5.25%, when the US central bank first thought about releasing the dosages of cheap money into an already gluttonous and insane financial system (the addict).

    … Fed Statement Here …

    These statements are testimony to the confusion that the US monetary policy has created, with its members being concerned both about a slowing economy (requiring interest rate cuts) and inflationary pressures (requiring interest rate hikes). But, so far, the central bank has decided to go with the financial system, which is in need of cheap credit, and more of it. And another big irony of the entire situation is that this very financial system cheers when there are signs of economic growth (like strong employment numbers), which warrant an interest rate hike, and sulks when the Fed does not reduce the rates at a faster pace!

    “You do anything long enough to escape the habit of living until the escape becomes the habit,” said David Ryan. Probably, nothing else could sum up the scenario in the global financial system. Here, investors have been habituated to seeing asset prices rise on the back of cheap funds that any sign of money getting expensive or ‘not getting cheaper fast enough’ leads to panic like situation. The US markets of yesterday and the Asian markets make this point clearer.

    “Every form of addiction is bad, no matter whether the narcotic be alcohol or morphine or idealism…or money,” said Carl Gustav. (Well, the ‘money’ part comes from us)

    Have a safe and addiction-free investing!

  162. DM

    Hard to believe but in case you missed it I listened to the entire update call and thought it was excellent with an honest assessment of risks still remaining. Anyone that says there are no risks with a new plane would be a liar. I sold two batches of Dec 85 puts this morning.

  163. GRMN loosing the 100 mark!

  164. HES is still up 5%, but not for long…

  165. film- i just wrote a post (but it i “typed to fast”) that said i wanted to start scaling into more JAN 190/200s as AAPL breaks 190.

    i’ll start selling the JAN210s as we rally into macworld.

    we only have one month to go and the xmas season is going to b way beyond any estimates on the street.

    AAPL has the high-end resilience advantage as well as the aspirational/fashion buyers who rationalize this as “functional”

    also anecdote: 2 good friends (one of them totally non techie, he kept using a pager until 1999 when he got a cell) r buying macs this xmas to replace home desktops- one may even add a macbook.

    anyway- they r stubborn/disinterested tech buyers and AAPL products/store has converted them (at least for this earnings report!!!)

    …it’s like i see a huge pile of money in the corner with everyone unawares and all i have to do was walk over and pick it up

  166. can’t wait for the old me to get back. Just opted to not collect $3000 for 10 minutes of minor risk.

    Go ahead and collapse market, I am going to get some food. Need energy to take your money.

  167. Call me crazy but even with AAPL, i’m waiting a day or so before getting back in…

  168. C getting beaten with the ugly stick !

  169. Speaking of C, Pandit was making the TV rounds yesterday.

    I saw him interviewed by Neil Cavuto last night. Cavuto is such an excellent interviewer; the best on TV for business. Pandit came across as totally lame. Everything Cavuto asked him about, he punted on . This is a board decision, that is the CFO’s area. That type of thing.

    At one point Cavuto, tired of his refusal to answer basic questions, asked him “Chocalate or Vanilla ?”.

    Hysterical. but sad for C.

  170. xian, totally agree. I am buying back my Jan 210′s to leave me as naked as I can get on my Jan 200′s. Even if we do drop to 180, I can handle that. The second half of my uncovering won’t happen until we pass 186, I think.

    This bounce will fail. I definitely must eat first.

  171. Phil,

    I’m in the LDK condor at 7.30 credit, which seems like a good entry. I’m in this for the learning experience, hoping I don’t die a horrible death. What type of movement should be looking for to maximize profits? How close to expiration should this position be held or not held?


  172. Hi Phil, I bought BIDU Jan 380 put this morning. Should I cover?

  173. FLSR- took the $1.5 gain. Thanks Phil

  174. let’s see what happens after 1:00 when lunch hour is over, not that anyone really takes it anymore.

  175. parchesia- i know- i haven’t yet, i think u r right to say that time is an important factor the markets to find some kind of footing.

  176. Conergy profit warning. Didnt FSLR make that huge jump after the deal with Conergy?

  177. Xian-I tend to take Phil’s approach with bottoms, it’s better to miss out on the first 2% than try to catch the falling knife. This should just be consolidation. It’s certainly no worse than the panic of a month ago and we’re very due a pullback. The problem now is that most big money has cashed out their gains for the year and they’re on the sidelines, so there’s very little support up or down and we’re in turn making ridiculous swings.

  178. OIL up $3

  179. um, that would be 11,816 barrels every 45 seconds, Phil.

    You would need a full minute and 20 seconds to burn up that Norwegian spill … looks like we have a CNBC hater in the house! :)

  180. are we bottommed yet ??? can I sell my dec 133 DIA puts agains my 134 ???

  181. parchesia, I have multiple accounts in the AAPLFILM play so, I have to put in a range of limit orders if I want to catch a quick movement.

    That reminds me, I need to go put in more buy orders for the stock. 192 will be a great price to get short again. If you look at the 10 or 15 minute charts, we are forming a triangle on both GOOG and AAPL. When we break that triangle and the selling slows, I will be buying something as I believe this is the kind of false breakout on a short timeline that catchs novice traders dabbling in TA.

  182. 50% annual. It remains to be seen for sure if I can scale to $1Bn it but 50% would be a terrible year for the LTP, which is the strategy my fund is pursuing. We’re probably going to start with just $200M, which I’m very comfortable with and we’ll scale it up over time.

    LDK – looks like we could have picked a better entry but it’s fine unless we break below $55 but the rolls should be kind to us so I’m not going to worry.

    Pandit – I felt bad for him because he’s really not trained to be in public like that but it was poor judgment on his part to make so many public appearances when he should have done a controlled conference and not come on interview shows until he had a plan with bullet points and such.

    BIDU – $12 down from the high is a little late to cover. About the point where I selected the $380 puts, now up 30%, would have been a good time to cover! Greed, greed, greed is all it is, we make fun of the financials wanting more and more and more but if we make 20% in 2 hours we want more – that’s kind of nutty don’t you think? Anyway, We seem to be holding the levels I just laid out but now we need a 20%+ bounce off that to confirm an uptrend so look for 13,560+ as the upside breakpoint at which you may want to cover, maybe $390 on Bidu where selling the $390s for $14 would be a nice day’s work.

    X is flying – something’s up over there.

    No volume to this bounce so far.

    BDC – are you saying it now takes this country 80 seconds to burn through 22,000 barrels of oil? You know, sometimes I think this country isn’t even trying to be #1 anymore…

  183. Film-You are far and away the AAPL guruu. I just want to consolidate, in a perfect world, to about 13,460 or so overall. If not, i’ll jump in on the momentum with you guys…just going to wait and hopefully get that pullback.

  184. COF 52-week low.

    Oil up $3.68 now, that’s $5 in two days thanks to the Fed. At 20M barrels a day that’s a $100M a day instant tax on US consumers to make these jokers happy but since we pay $120 for a refined barrel it’s more like $130M a day. This just continues the crack analogy where the problem is so widespread that petty crime against ordinary citizens starts going up as the addicts need money to feed their habits.

  185. “Guru” really heaps the pressure on. I prefer guide. If I am your guide and you are the only one who falls off the edge, it is your fault. If everyone falls off, it is my fault.

    I am trading AAPL for one more down swing. And then going long and naked. If there isn’t a powerful move off that bottom. I will lighten up. But, AAPL and GOOG are almost to my reversal points. It will probably be a gradual top and the selling may not start until tomorrow. I am not leaving anything naked overnight until I see a good bottom to get naked.

  186. LOL-You follow it a bit more closely than I do. So, you can be my guide while it’s still very much up to me to be rational. And I just had to bring up the last line you wrote, “I am not leaving anything naked overnight until I see a good bottom to get naked.” I just had to laugh when I read that.

  187. Phil – You got one of those red things on CNBC… sweet!!!

  188. Film

    You love that dirty talk don’t you?

  189. parch/film- i always feel better buying the pullback and want one as well- i think 180 would b the bomb to buy into, especially with the strong bounce back- but i don’t think that happens, maybe 185ish (just my opinion)

    when i’ve posted that i want to start buying JANs again, it’s b/c we just came down from 196, so that’s a nice start to a washout and not a bad time to think about buying.

    also, i feel underexposed now (ie pared it down last week) and want to build back up soon.

    of course, i always scale- and am taking to heart parch’s comment about giving it time to settle out a bit more.

    if i dont; get the nice 188ish opportunity this week, then i’ll start buying next week for sure as i am rolling my DEC callers then anyway.

    feeling very good about this trade.

  190. GRMN-Buying back the puts sold at $100.

  191. X

    Speculation for weeks now that they are a takeout candidate…perhaps it’s true.

  192. naked bottoms? LOL LOL LOL

    now that’s punnery!

  193. I hate the XLE. Why do I give it my AAPL profits? WHY???

    Anyone listen to the new Eddie Vetter stuff. Seems like he might have a future after dropping that albatross of a band. ;)

  194. Nice post on the “Term Auction Facility” at Calculated Risk:

    Points out that if the liquidity were made available at a penalty rate, it would add liquidity for the “crisis” while at the same time discouraging the type of nonsense that led us here.

  195. CSCO back above AAPL in market cap. CSCO forward P/E at 16 is still less than MSFT’s at 16.9

  196. Phil, any thoughts on ANDE? Looks cheap from a valuation perspective and I like the fact that it’s business is well diversified and showing strong growth. The fact that it was added to the S&P 600 SmallCap index should help as well. I closed out my Jan 45 calls for a small profit on today’s bounce, but I think it would be a great long term play. On the cautionary side it is a thinly traded stock.

  197. Phil –

    For the hedge fund, I assume it is for accredited investors and likely $1+ million to start?

  198. DAMMIT. Those aren’t puns. That is word play. That is high art. =)

    Ok, it is lower art. But, I still don’t think they are puns. I am never accused of puns except on this forum. My family has a high disregard for puns. We aspire to more clever humor. I did think naked bottoms was funny though.

  199. > Film-You are far and away the AAPL guruu.

    Oh, I don’t know. He missed yesterday’s low by $1.39. I missed by $0.11. ;-)


  200. Film

    You are correct: I think you are using what we word play artists call a “Double Entendre”.

    A pun (or paronomasia) is a phrase that deliberately exploits confusion between similar words for rhetorical effect, whether humorous or serious. For example, the sentence “the world is perspiring against me” is a pun on the paranoid’s motto “the world is conspiring against me”, that exploits the similarity between “conspiring” and “perspiring”.

    A pun may also exploit confusion between two senses of the same written or spoken word, due to homophony, homography, homonymy, polysemy, or metaphorical usage. As Walter Redfern succinctly said: “To pun is to treat homonyms as synonyms”[1]. By definition, puns must be deliberate; an involuntary substitution of similar words is called a malapropism.

  201. “DAMMIT. Those aren’t puns. That is word play. That is high art. =)”

    it was a pun:

    but a shan’t accuse u of punnery again- instead, i’ll call it “high art”

    although, i must say the “lower art” comment had elements of “high art”

    wait- now i’m confused…

  202. I can’t believe what they rent those cars out for! 200 rentals covers the whole cost of the car. I would imagine they lease them with a mileage penalty and pass on the mileage penalty to the renter so figure they only need to rent them 1 day a week to cover their nut – nice business considering the profit on 5 days over break even a month would be about $5K per car!

    I always tell people, if you’re going to go into sales, make sure you sell something really expensive. It’s the same amount of effort but you get paid much more!

    ANDE is pretty cheap for an Ag play but yes, to small and thin for me to play.

  203. Fred – you must join my mother and son for a conversation. They are English grammar teachers!

  204. Phil,

    Would you recommend to buy back December callers (which are worth very little at this point) and cover with January callers for a better coverage?

    As always I appreciate all your insides.

  205. Is that what your $.11 comments were about? I missed that prediction. It was lost in all that talk about how AAPL was going to gap up intraday to $200. ;)

    Planning on shorting the next bounce to $192 or close to it. If it breaks down from here. I will just let it go and focus on getting my callers bought back.

    Xian, I was also heartened my the spread moving back up on the AAPLFILM play today. I think we are in a good spot and can FINALLY find a spot to uncover and streak the forum.

  206. fred- that was awesome.

  207. Prob. calculator – Phil/anyone, do you use the calc. avail. through Investools, and if so, how good is it? Wondering if it can be used to determine the entry points for an index condor. Thanks.

    Reinharden – thanks for info on AMD yesterday; didn’t realize that. Looks like it’s already baked into their price though.

  208. This working for a living thing is so inconvenient. Wish I’d been around this morning, I’d have sold some stuff at $194 in hopes of buying it back.

    Anyway, I’ll note that AAPL is up about 1.4% while QQQQ is up about 1.1%, so AAPL is still doing a bit better than the market. GOOG looks like 0.7%, so that’s a worry.

    I’m still keeping my AAPL Jan options expiration target centered between $200 and $225 (aka $212.5), but leaning higher. Frankly, I fully expect my outstanding $200 and $220 options to be in the money by then. I hope the $240 options are in play, but I’m not planning on it. I’m hoping (never a good idea with real money) the resulting increase in volatility gives me an profitable exit from the higher strikes prior to the MacWorld keynote, but if things move unexpectedly higher, I’ll be happy.

    Centurion? What’s that? If I had one, wouldn’t I have to kill you if I admitted it? Nah, I don’t have one. But the two people in the offices next to me do. ;-)


  209. film- i swore off streaking- that’s y i’m here!

    but i think i have a similar idea (seeing as it was urs in the first place), i want to buy more JAN 190/200s on the long side and go naked a little before i start selling the 210s- i think once we cross 205ish nicely.

  210. rein
    anyone who makes quadruple digit percentage gains is qualified to be my guru! so don’t worry.

  211. FILMflam, let’s be fair, AAPL was only going to hit $200 if the Fed cooperated. ;-)

    By my calculations, working for a living this morning caused me to miss out doubling nearly everything I bought yesterday afternoon. Sigh. Oh well, back to work. ’cause if we can make this particular startup work (I say it’s got about a 0.5% chance), I’ll get me two of them thar Centurion cards. ;-)


  212. I guess I would take issue with that definition of pun. I would grant the second part, but not the first. A pun to me is the use of a word that is a sound-alike for a cheap laugh. Hence, “That was punny.” If you look up the definition of wit in that dictionary, this is what my humor attempts.

    WIT suggests the power to evoke laughter by remarks showing verbal felicity or ingenuity and swift perception especially of the incongruous

    My jokes are only funny if you are aware of the double meanings and not just sound funny. Granted, naked bottoms was scraping close to that line.

    Oh my god. Is there really nothing moving so we can talk about stocks again…?

  213. Film- not to distract you from the verbal gymnastics, but wanted to point out that GOOG Jan 750s have dipped down to the 28.x% IV range, which I believe was the target?

  214. Fred, just saw your post. Double entendre. That was the phrase I was looking for. And I have no idea why my post blew THAT MUCH.

    There’s your pun. I will be here all week. 10 o’clock show is different from the 1 o’clock show.

  215. tip ur servers if u drink, and if u do- don’t drive

  216. K1, I was just htinking about who that was that I had talked to about those. I am eyeing those BIG TIME. Just hoping I can get some price pullback on those. The low of yesterday was 9.40. I would LOVE THEM at $8. One of my accounts is all bound up because I sold AAPL covers and now can’t afford to buy them back even as they go lower. Gotta figure that out.

  217. Film, can you cover the GooG earnings play or point to it. Forgot which day it was on :)

  218. OIL- up $4.73

  219. xian

    So what should we do at those drive through package stores they have down there in Texas?

  220. WHY????

  221. Phil, have you closed out your BXP dec puts? The spread on this guy is crazy (1.85/3.70). I pulled the trigger and closed out my tiny position @ $2.50.

  222. Film,

    I’ve lost track, what is the most current AAPLFILM spread we are in?

  223. Hedge fund – yep, normal rules.

    Film – I don’t know much about art but I know what I like… I think Frank Zappa said “Art is making something out of nothing and then selling it.”

    Oil up $4, making it very hard to hold puts. I’m still in the Jans but it’s just silly to hold Decembers at this point. Market did not make it back to a 50% bounce, which means little but it would be a hell of a lot better if we finish up 150 than up 60, which would be a total failure.

    BA comeback is a big help but XOM is the star of the Dow with a 3% gain on a heavy-weight stock. MMM is also up 3% with large weighting. C is down at the 5% rule, IBM up 2% and T blew through 5% to the upside (sadly, we covered those). MCD pulled back off a huge run and the only other negatives are AIG, AXP, HON, MRK and WMT – none too significant. Even GM made it back to flat.

    Buying back Dec callers – I would not make a blanket statement here as we could go either way. Unless you think the Jan you intend to roll to will lose more money than the Dec you have left between now and next Friday, a roll this week is premature. Better to roll to a December that gives you more premium.

    Oil up $4.67, amazing what kind of nonsense these guys can pull off. There’s only 195M barrels in Jan now and just 240Mb in February so the adjustment looks doable for the NYMEX crowd. Hopefully Mr. Sparkle has a new chart for us but they fell from $99 to $86 from 11/19 to pretty much yesterday morning so $92.50 was the 50% retracement and blowing through that today is being taken as a good sign. Forget the fact that all this activity is in the front months and April is still trading at $89…

    What really cracks me up is how we now accept $90 oil as if it’s fine for the markets when every expert on the planet in 2005 said $60 oil would cripple the global economy.

    Anyway, I’m thinking we’re stuck down here and that we’ll go red into the close if XOM fails $92 as it will be like pulling the stopper out of a drain so root for whatever suits you but remember they are all connected.

  224. The GOOG earnings play is to buy Jan’08 calls at around 750 as that is where I think it will be around earnings. The IV now is low. And then it will be HIGH. I don’t know if I will be able to get 500% like I did last quarter, but if we hit my pullback target of 680 and you get the 750′s for $8, then maybe they are at $25 WHEN YOU SELL BEFORE EARNINGS. You are buying IV now and selling it to those who want to make bets on the earnings move. We take our profits when uncertainty is the highest, BEFORE earnings come out.

    Phil, now I understand what you meant by being LOCKED in vertical spreads. As the price moves up, it gets more and more expensive to get out of them. Luckily, I am okay with that with the AAPLFILM play, but it is annoying on some others that I now have to close if I want to free up cash.

  225. COF puts- 1/2 off.

  226. fred- i’ve heard about those things- talk about hypocrisy: one side of the gov’t trying to curb drunk driving and another side inviting it.

  227. My AAPLFILM play is buy Jan200′s sell Jan210′s.

  228. I agree with Santelli: that was real crap from the Fed to announce this this morning after hours, not giving a single chance to traders to react.

  229. film- GOOG play is to wait for pull back in shares, buy far OTM / low IV and sell them into the speculation?

    do i understand?

  230. opt- re FOMC moves, i think a realmoney contributor put it best: junior varsity is in charge

  231. I would also keep an eye on the Jan’08 800′s. If they get under $2.00 they could be a good play. I haven’t been going too crazy on GOOG plays yet as they are looking like they want to chill out.

    The important thing about the GOOG earnings play is that you have to predict what the ATM calls will be on Jan 16th. I am having a hard time with that right now. They need to find a bottom so that we can extrapolate a better target. So, I may nibble, but I won’t be going gun-ho. I still believe that GOOG will rocket 250 points in a month at some point here. But, as the earnings reactions, go they have been Up, Down, Up, Down, Up, I think. I know the next one would be down, but I don’t know how far back that pattern goes, and it has to be broken sometime. I would not be surprised if this is the time they do it as people get all psyched over their wireless plan, some news with AAPL (who will be around 230 by then), and jazzed on their earnings which will have to be huge as I assume people bid up adwords around xmas since there is no other alternative yet.

  232. The Fed announcement this morning did give me a chance to DD on my puts. That and Phil’s summary this morning kept me from freaking out of my puts from yesterday. That and I was just totally fed up with getting whipsawed out of all my longs yesterday.

  233. Cramer is hilarious

  234. Also remember that just because AAPL stops going up in January, doesn’t mean the nasdaq does. AAPL tops and NASDAQ tops do not correlate well at all. So, it would be a great time for GOOG to take up the mantle and run with it.

    Xian, yes that is the plan.

  235. i almost can’t believe all the AAPL 230 target- it’s too good to be true!

    i’ll probably leg my AAPLfilm into a riskier spread as it fills out to try and take a small part of that 230 range trading (ie selling back my calls)

  236. Calulator – I don’t use.

    BXP – good call! I sold my 30 at $2.50 too! You have to offer on the way down with those and we were too close to expiration to take a chance. With the stock at $98.50 I had to say, well it has to finish at $97.50 for me to get $2.50 and if goes up a buck I get nothing so it’s a bad risk/reward to stay in considering we’re protecting a double.

    Oil closed at $93.93 in the end, a small miss but a strong statement by the bulls.

    Optionetics – That thing gives me a headache! It’s a good range but I’d rather drop it $5 as what are the odds of even breaking $160 in the next 10 days? It’s very dull but you can’t knock picking up that premium in 6 days with virtually no risk, let me know if you do it.

    LDK right back where we started.

  237. Film- I’m dying to take positions for GOOG and AAPL for January, but I doubt I’ll be able to do so. I leave on vacation for two weeks this Sunday, and unless things go badly over the holiday, I expect both companies will not be offering entries when I return on New Years.

    I hesitate to take naked positions when I’m going to be away, and I feel like I’ve missed the clear entry points of a few weeks ago. Oy. Like I observed yesterday, this is another case where my paper trading account is going to show huge gains that I wasn’t willing to risk with real money.

  238. Bruce Springsteen

    “We’re going down, down, down”

  239. dow about to go negative.

  240. I’ve been trying to give the energy patch the benefit of the doubt but Oil is up $4 and there was a build in gasoline despite pathetic utilization numbers so it just seems to me that they are full of crap!

    I’m still out of my Dec puts today but I’m adding VLO $67.50 puts at $1.50 XXX

  241. Weak close, weaker open, then rally is the movie in my head.

  242. XMSR dropping down, out of its previous range.

  243. FILM- I still believe that GOOG will rocket 250 points in a month at some point here. Send me some of that stuff your smokin. Please

  244. Phil – yes – I made the spy trade for a net cost of about 40 cents

  245. IMMEDIATELY when oil starts going down CNBC rushes an oil bull in front of the camera to tell you $100 a barrel BUYBUYBUY. These guys are really amazing!

  246. bbd, don’t make me take more drinks from you.

  247. XOM-Beautiful!

  248. FILM. Get any APPL

  249. XMSR News?

  250. melt down mode

  251. xmsr dropping like a rock…deal must not be approved.

  252. First post to the forum, I’m following in the LDK trade and just noticed that earnings are expected about the 17th. What’s the thought on the trade with this info. Last time they reported it droppped for three days prior to release?

  253. GRMN-Back to $100. You got to love this market.

  254. I’m not even going to talk to people who aren’t taking some puts off the table into this fall, especially if you just recovered from getting burned in the morning! Don’t be greedy, take a little profit on the way down when the mo slows, not when it reverses. XXX

  255. xmsr, siri

    What was that…siri down to $2.76, xmsr down to $12.20 and then a bounce???

  256. wow- such non believers of AAPL out there- scaredy cats, i’m a buyer in the morning.

  257. Fslr-trade two, thanks again Phil

  258. OK Phil, I took some puts off, 1/4 only.

  259. Phil,

    Cover QID , pass your target 38.5 ???

  260. CYNO-12:35 CYNO Cynosure: Correction (29.43 -2.45) -Update-

    At 11:10 we published a summary from an RBC Healthcare conference that included a presentation from CYNO. We have been informed that the co’s presentation was part of a panel, and the comments we posted should not have been attributed to CYNO. We have removed our original comment.

    But the stock never recovered!

  261. Cynosure-CYNO defending shares, down on misunderstanding@JEFF
    The firm said shares are down on the misunderstanding of Q4 guidance issued at a competitors conference.

  262. Picked up a small portion of GOOG jan 750 at 8

  263. LDK – I’d be inclined to take a medium profit if the situation presented itself before earnings.

    $25KP/$10KP XMSR – take out $15 calls for .50 XXX

  264. Market drop last hour due to rumors going around trading desks of impending $6B GS writedown

  265. CYNO – What is the trade, Optrader?

  266. Took the first round of Jan210 covers off. about 20%. Will take off another 30% tomorrow morning. I think that is all I can afford to uncover.

    Also went for 20 Dec 190 calls at 3.4 and only got 5 dammit. Since it is only 5, I will probably hold until tomorrow when I can get the other 15 cheaper.

    Took covers off a tiny goog spread by buying back a Jan08 750. Have to see if I own any AAPL stock now. I had some orders around 185-186.

  267. brokers next week- i think they shake the tree and air a lot of dirty laundry

    it’s the perfect time

  268. XMSR – I see no reason for the drop other than to flush you out but that was too much money (+ $1.60) to turn down. Now we need to keep a reasonable stop on the other leg which is down $.52, perhaps .75 is the most we want to lose.

  269. nicely done bmb, I went to grab 10 of them and then realized I had 1 sold as part of a spread. Bought that back, but by then too late. Will grab it in the morning when it goes back down there.

    I just realized tomorrow I am on my own with the boy so I have to put orders in tonight and see what happens….

  270. AAPL – oh sorry, take those $25KP puts off!!!

  271. Damn – didn’t get the XMSR fill. Ask is now .7, I guess I’ll leave those calls out there.

  272. QID – yes sell the $39s for $1.10 if you’re in the Julys as you pick up $1 per month so the calls would have to hit $46 before you owe anything (plus premiums) back to the caller so it’s better than not selling but maybe a 2/3 or 3/4 sell just in case we dive.

  273. maybe this has to see … semms no more cheap money for the cracks adicts

  274. Yep, I am the proud owner of 20 shares $.02 off the low of the day. Totally random number I punched in, but it was enough to find the bottom. LOL.

    Also bought back some Dec 180′s that I am happy to have shaken. Going naked tomorrow and then evaluating in the afternoon.

    FWIW, AAPL broke below and is now above my lower trendline.

    70 of 103 covered on AAPLFILM right now. Hope to make that 35 tomorrow morning if I can afford it.

  275. Would I be stupid to sell off my 50 T shares now? bought in around $36. I think there is more growth in AAPL or GOOG than leaving it in T.

  276. Opt- thanks for the CYNO pointer. Those seem like free money.

  277. Woo hoo on oil puts! I always say, just when you want to throw up is the time to find some more cash and double down!

  278. Opt – what do you think about gluu right here?

  279. Phil may we expect GE to bounce back tomorrow morning?

  280. wondering if i should buy back my goog 700 callers and go naked on part of the position??

  281. Someone doesn’t want us getting filled at .5 on the XMSR 15′s. Those puts sure are spiking though.

  282. T – I’d sell or at least sell $40 calls for $1.70 to pick up an extra .40 because if we end up barely holding $40 through expiration you may decide to keep them with Apple earnings coming up.

    GE – back at yesterday’s bounce point, I think we hold here on the overall, same a yesterday really.

  283. Phil-

    Missed the .50 on XMSR – what do you recommend?

  284. interesting bounce, didnt expect that

  285. Damn, that was a buy at the low of the day on the goog 750′s. got lucky

  286. took 40 CSCO Jan 30 calls at $.72 because they have really wanted to rally in this bad tape. I may even get to sell the Dec 30′s for a good price if they get moving this week. I am always amazed at how narrow the calendar spreads are on CSCO. Sixty cents on the Dec/Jan 27.50′s. So crazy low. It moves that much almost every day.

  287. film- r u positioning as if this was the beginning of the climb into JAN- or at least the near the beginning (i think so).

  288. I was pretty happy for you BMB as I was pretty sure that was going to be a great price on those. I was going for $8, too.

  289. Yeah film, too bad i changed my mind and bought only half of what i intended to. Was going to leg in..

  290. RIG-bought some on the meltdown.

  291. Phil, in XMSR, is this a good place to just be patient and let the premium continue to evaporate by putting in a GTC buy order at .5 on the calls and than buying out the put side on a bounce? Or is it better to take a modest profit and head for the exit the next time we see a drop like that? It sure seems to me like there is plenty of premium to collect if we just hang tough. Still 0.70 on the calls and 0.50 on the puts if the stock closes at 15 by expiration. I am still in the orignal spread, just trying to learn so I don’t have to wait for you next time around.

  292. Now if only our XLE puts worked..LOL

  293. excuse me that was ‘if the stock closes at 13 by expiration’

  294. XMSR – still not filling??? Pay the .60 if you have to but this is a solid working trade, don’t let it get away. I’m thinking of rolling my puts up to the $20 puts, which have no premium (.15) and collecting the $15s .70 premium. Then we could sell the $12.50 calls at $1.57 with .90 premium against the $10s at $3.30 with .15 in premium and make big money again between $12.50 and $15 so actually XXX to that:

    Buy out $15 caller for .50 or .60
    Buy $10 calls for $3.30, Sell $12.50 calls for $1.55
    Buy $20 puts for $6.80, sell the $10 puts for .25

  295. i would call that a joyride but it was a little too wild

  296. I am going to be pretty busy, so I may not be able to check in at all tonight or tomorrow, although I am sure I will post thoughts, even if I don’t answer questions.

    Day 2 of consolidation complete. Should get one more shakeout tomorrow morning, BUYBUYBUY AAPL and GOOG on that. We should be over 190 and 700 by noon tomorrow if we are okay. But, feelin’ good about a nice swift consolidation and now I can get behind this rally on a real wall of worry.

    Xian, I think that was the first of two opportunities to get your portfolio bullish again. HOPING we get another in the morning, then $200 this week might actually be possible. See Rein, there is room for both of us to be right and rich.

  297. Oh damn, I didn’t realize we were that close to the bell…

  298. wow- today was a wild day in trading- a lot of people were thrown off by the feds head fakes.

    i love this game

  299. Phil, May we bto. some DIA calls and hold them unvovered overnight?

  300. Only regret today was not DD dia puts this morning. That would have paid off big..

  301. bmb, I don’t want to talk about the damn XLE. AAPL finished slightly above weak support. GOOG finished right below weak resistance and psychological level of 700. I am out for today.


  302. Have GS 230 spread with 09/Dec for a net 30. Sitting on a nice gain on the Dec, recommend rolling down or stay pat? If Dec expires worthless, i’ll have gained 25% of my cost basis in first month.

  303. It’s all good Phil, we will get it in the AM on XMSR. 10 contracts again in the 10k?

  304. Phil, the XMSR last leg is to buy $20 puts and sell $15 puts against it or $10 puts?

  305. Well, that was something. I am just exhausted.

  306. Phil, I have been stalking Pier 1 (PIR) for the past year or so waiting for a good entry point. Today it hit another 52 week low @ 3.60. I generally try to stay away from picking a bottom but this seems like a no brainier from a valuation perspective. At this point I feel like my downside risk has significantly diminished and am considering one of the following plays:

    Buy PIR @ ~3.60
    Sell Jun 08 2.5 Calls @ ~1.60

    My downside is reduced to $2 and if assigned I make a healthy and “safe” 25% return by Jun. I could probably squeeze out a little more profit by trading in/out of the cover if it continues to slide below 3.60.


  307. alright- everyone, thanks for the great discussions and ideas- i’m off (or i’ll try to b)

    oh look at that- AAPL being fought over in the AH- easy people, it goes higher from here.

    phil- do u have thoughts on the brokers next week? i think GS has a chance of being the smartest guys on the street again (at least comparatively)

    at any rate, a lot of new and important info is going to priced into the market next week.

    i think they take the opportunity to air it all out- new CEOs at different financials is the harbinger of clearing the books (a point u have made).

    also, the FOMC is bending over backwards to accomodate and respond, so they have incentive to come clean as the FOMC has been trying to make their boo boos better.

    just wondering about ur take on this broker info.

    thanks again

  308. Sorry, after posting on PIR I forgot to list the “other” trade option:

    Buy PIR @ ~3.6
    Sell Jun 08 Call @ ~.55

    Huge upside potential, but not as safe as the previous trade listed.

  309. BA shows support ~85-86 range. Good time to buy leaps, looks like.

  310. BIIB – Down $20 in AH to around $55. Says will remain indep. as no one wanted to buy it!

  311. BIIB is taking huge dump after hours.

  312. Optrader-Lyon is kicking butt! Isn’t that your team?

  313. Oh that was such total fun!

    XMSR – those $15 calls were .30 at about 3:15, then .40, and then .50 which triggered me out according to the rule I tell you guys 1,000 times which is: When you are up over 20% and ABSOLUTELY when you are up 50%, set a trailing stop when you lose 20% of your profits.

    We sold those calls for $2.10 and they dropped like a rock to .30 (which should have triggered the other rule to take any caller or putter you make 80% on off the table if you think they have even a 10% chance of coming back) but, IN THE VERY LEAST, it should trigger you to say, OK, I’m up $1.80 on this guy so I will damn sure set a stop at .30 from here or .60. That is simple and absolute as, even at .60, you still would be up 71% and I can’t tell you often enough that that is considered in some circles to be a good return on capital!

    It’s more complicated than that because on the spread we still had a .10 value on our call which means that when he was at .30 and we were at .10 that he was now within .20 of the best possible outcome out of $2.10 – how crazy is that not to take off the table??? Notice I didn’t sell the $20 calls, there’s no point for a dime when we’re so far ahead on that leg, maybe we’ll get .30 for them.

    OXPS lets you set trailing stops, I’m not sure about other platforms but you have to get in the habit of at least setting mental stops when you get ahead. Options go up AND down and just look at the DIA today to see how fast life can change. XOM was fun too, you can’t afford to be greedy, especially when you are the idiot who paid the front-month premiums.

    Yes 10 contracts if we can pull it off (and assuming there’s no meat to the downturn).

    $20 puts – we already have sold the $15 puts in that spread but if you are starting from scratch you’ll be better off than we are. What we’re doing is flipping a Bull put spread (where we hope it closes at $15 and wipes out our caller) to a Bear put spread (where we hope it closes lower than our net $4.20 minus our $20 strike or $15.80 so that the caller’s .70 premium becomes our profit).

    Ordinarily I don’t like those bear puts but in this case we owe the guy $2.60 (.70 profit to him) so I’m spending $6.80 on the $20s which pays me back $5 on any close below $15 and I would own him nothing, saving .80. By keeping that goal in mind, if I get .50 up on him at any point I know I can kill that trade and be happy. Since I have no premium and he has .70 of it, there’s a good enough chance of that happening to make it worth risking $4.20 to make .80, evne though I usually avoid negative risk/reward ratios like the plague.

    BIIB – holy cow! No buyer for them it seems. This is a ridiculous sell-off in after hours and I’ll be grabbing a leap if they get to $50 tomorrow. P/E of 50, 25% growth, no debt, $2Bn in cash… I love the markets!

    PIR is a toxic waste dump of a retailer. They are at $3.60 becuase they suck. If they keep going at this pace they will run their NTA down to 0 and they are a $300M company losing $200M a year. Their NTA would be negative now but for $360M in inventory that clearly nobody wants. Other than that your premise is good, as long as they don’t go BK.

    Brokers – I don’t think I’d touch them with a 10-foot pole. Maybe puts in case one misses but who the hell knows what these guys are doing? You’re right though, anyone with a new CEO will probably give lots of bad news.

    See you guys later.

  314. I have some April and July calls in DBA. To me, the chart looks good. Maybe a litle ahead of itself but very steady. It’s levered to food costs, of course, and I believe they’ll continue to go up. (Actually it’s almost identical to the KO chart for the past year, which makes sense since everyone knows Coke is one of the four major food groups.) Opinions?

  315. XMSR News (funny how big amounts of XMSR puts started moving 24 hours ahead of the letter) -

    US lawmakers express concern over XM/Sirius review

    WASHINGTON, Dec 12 (Reuters) – Lawmakers on the U.S. House of Representatives Judiciary Committee have expressed concern about the Justice Department review of Sirius Satellite Radio’s (SIRI.O: Quote, Profile, Research) proposed purchase of rival XM Satellite Radio (XMSR.O: Quote, Profile, Research).

    In a letter dated Dec. 11 to Attorney General Michael Mukasey, Reps. John Conyers and Steve Chabot wrote: “We were dismayed to learn of recent press reports suggesting that Justice Department staff may be trying to rush through the merger before you have an opportunity to fully participate, and that Assistant Attorney General for Antitrust Thomas O. Barnett may intend to grant the merger over the objections of department staff.”

    Conyers is a Michigan Democrat while Chabot is a Republican from Ohio. (Reporting by Diane Bartz; Editing by Tim Dobbyn)

  316. “PIR is a toxic waste dump of a retailer.” LOL! I should have the Hazmat team sweep my house and rid it of all things PIR. ;~) Seriously though, your point is well taken and I am aware of the risks, which is why I was looking to hedge by selling DITM calls.

  317. Film – I put in a GTC on those Google Jan 750 Calls and $8 and it triggered. Yeah. They’re are already at $10.40. Thanks for the heads up

  318. New to this site, and need a little help from the experienced folks to see if I’m doing this right…

    I bought GOOG Mar08 720 Call at 48.0 at $88 premium as long position, then:
    1) Sold Dec07 720 for $11.50 ($39.50 premium), covered for $8.50 at $43.50 premium (did this as abiding the 20%+ gain rule)
    2) Sold Dec07 700 for $17.00 ($23.25 premium)…stock ran up to $715, so I rolled up to Dec07 720. Covered 700 Caller at $26.50 ($12.3 premium), sold Dec07 720 Call for $15.00 ($19.50 premium) —> Was this roll too expensive?
    3) After today’s action, 720 Caller down to $5.00, but of course Mar08 Long call down to $44.00. What’s the next step?

    Should I roll the short call down to 710 to take advantage of the higher premium there, or just sit tight with the 720, assuming it expires OTM, and leave with the max $5.50 gain for the month?

    Would you roll down the Mar08 long call to 710, or roll to a longer time frame (May/June)?

    Also, according to the calculations by premium credit/debit, I should have been gaining a credit with each trade, yet I fail to see how I can win the trades by rolling up/down without actually having a short caller expire OTM. Obviously, the premiums drop quickly as Dec expiry approaches, so wouldn’t the shrinking premiums over the next 7 days basically flatten out my trade? I understand the rolling up/down concept, and likely the key is being able to roll down my long call at a credit to me, but I can’t do that currently with the closing prices today.

    Something still doesn’t quite jive….and I’ve studied k1 and optionsage’s pages on this topic a couple times already.

    Any advise on the next best step, as well as explanations on the above would be greatly appreciated!

  319. Well, on the one hand, I’m sad that my attempt to get APVAZ (AAPL Jan 08 @ $260) never got filled at $0.15 even though the last trade was at $0.13. The bid/ask walked back up to $0.25/$0.28, so I’d have gotten a daily double out of it if I’d gotten filled.

    But, on the other hand, I bought a ton more AAPL options on the afternoon weakness (again) and now I can really start selling the $200 and $220s into strength without feeling like I’m missing out come January — although I’d really like to avoid selling those until January just to push the taxes off another 3 months. ;-)

    I too picked up some GOOG $750′s and $800′s (although I missed the low of the day).

    So I’m either going to be really ecstatically happy come January options expiration or really depressed.

    If I’d have been more clever, I’d have looked for a good Apr option, but it’s hardly worth it with the current premiums and the Apr earnings report also now likely falling after options expiration. Sigh.


  320. Does anyone understand where phil is getting the net 4.20 figure from? The best I can calculate that to make the trades he has suggested will cost a minimum of 8.8.

    Buy out $15 caller for .50 or .60 – net 55 cents
    Buy $10 calls for $3.30, Sell $12.50 calls for $1.55 – net 1.75
    Buy $20 puts for $6.80, sell the $10 puts for .25 – net 6.55

    total net out of pocket approx 8.85.

    We are currently in this trade for a credit of 3.3. Which would put net capital in the trade 5.5. That is assuming we can execute at his stated prices.

    Which still makes the payout range pretty wide. It puts the breakeven at between 13 and and 17 as best I can tell. With a maximum payoff between 12.5 and 15 of $2. If we can sell the 20 call at some point for 20 cents maybe net profit of $2.2?

    Am I analysing this correctly?

  321. Phil/anyone,

    I’m holding some BIIB $75 calls, any suggestions?


  322. correction it would be a break even between 10.50 and 17 if I analyse this correctly. I think

  323. Reinharden-It’s good to have your expertise back! It’s always noticed when you go missing!

  324. BBD-No, my team is Marseille. Lost 0-4 against Liverpool yesterday :(

  325. I’ll be around a lot more later in the month.

    The good news about working with startups founded by people who have Centurion cards is that they tend to use them to travel towards the end of December. ;-)

    And the terms of my employment include, among other things, that I don’t work between Christmas and New Years. Primarily because that’s when I plan my MacWorld and January AAPL options plays. ;-)

    I used to read literally everything that was written about AAPL in that time frame. I suspect that won’t be the case this year simply because so many stories are now being written in the mainstream press (often a sign that things are getting overbought!).


    But, surprisingly little has changed since I was last active. I don’t recall off the top of my head that my sentiment towards the batch of companies that I last wrote about has really changed.

    I will admit that LVLT has been disappointing, but I still like them as a speculative gamble — even though I usually remember to caution that they’ll either do great long-term or go bankrupt…and I’m not sure which.

    And FNSR has a shot at anywhere from 10x to 100x their current size over the coming 3 to 7 years. More if my low probability/high return startup works. I bought them all the way down to $1.60 and I’ll buy more if they go down again.

    I recently added some ZHNE to my long-term portfolio. I’m not quite ready to recommend them in general; however, they’re on the cusp of possibly becoming worthwhile. They’ve about 173M in revenue with a $200M market cap / $192M enterprise value and are on the cusp of sustainable profitability. They’ve several interesting products that haven’t yet gained traction in the marketplace. *IF* they do (and I’m not yet willing to say that they will), you’d be looking at a $1.36/share stock with $1.00/share book value. That should be able to grow towards a 20+% operating margin. With a 20 PE multiple and the current revenue, that’d triple. But I believe that they’re about to hit a period of substantial top line growth that will result in 30% to 40% earnings growth and therefore a 30 to 40 PE. So given 3 to 5 years, I’m looking for a shot at at least 10x the current price.

    AAPL, BRCM, CSCO, CY, GLW, GOOG, INTC, JNPR, MSFT, STX, TXN, WFR, blah, blah, blah. I still like tech. Everybody loves BRK. I still dabble in AIG, BAC, D, GE, KO, TM, WMB, and WMT. Thinking about AXP, EMC, PFE, WTM, and others that slip my mind…

    Wish I could buy Samsung directly. Wish I was brave enough to short Oil on the Futures market.

    So that’s about the same as last year. ;-)

    Although I guess the big issue in December, 2006, was that everyone, especially Phil, was convinced that I was crazy to say that MSFT would top $30 before January, 2007, options expiration. ;-)


  326. Oil – Gartman on Fast Money says Oil is going to $100 in the near term.

    Maybe we should look to take profits in XOM Jan 90 Puts? Or, at least put trailing stop on them…

  327. rein: when you sell you own the stock itself? Like what happens if you sell someone a Jan $220 and apple closes at $225? Don’t you have to buy the apple stock and sell it to this guy?

  328. daveo, glad to hear it. Should get another chance to buy tomorrow OR for them to shake you out. Don’t fall for it.

    Glad I am back to making people money. Those last two weeks just sucked for me and anyone who listened to me. I hope we are (read: I am) out of the woods.

  329. henrycw- I started to try to answer your question, and realized I would probably make a hash of it so I stopped. Phil will be able to sort you out, for sure.

    One thing I will point out, though. When you decided it was a good time to roll your short caller down a strike, you probably should have considered using the credit from that roll to also roll down your long call. This would have preserved your relationship to the caller, preventing the situation in which he gains a lot and you only gain a little.

    As a general rule, be very careful about establishing spreads in which your short caller has delta on you. Unless you’re planning to pay to roll him, it can be a surprise.

  330. mrl14 – In this case, I’m going to be liquidating an options position that I initiated last May (and in some instances added to once or twice on the way). I never sell options totally naked. I’m way too chicken to deal with infinite risk. Especially when balanced against a very finite return.


  331. hello K1,

    I went thought the K1readings and past posts and can’t find a clear explanation of what delta and IV + other Greeks we should look for when buying/rolling a spread. Do you have any examples or know where i can find that information.

    Thanks for your help!

  332. XMSR – what a soap opera behind the scenes. Junior members at the DOJ are strongly against the merger. Senior officials are trying to rush through the merger. The U.S. House of Representatives Judiciary Committee decides to get involved and sends a bipartisan letter to the new Attorney General, Mukasey, asking him to get involved and review the deal.

    Although the news wires didn’t publish the story until after 4pm, traders were already selling XMSR stock at 3pm, dropping the price by 9.9% Since the general public didn’t see the news during the trading day, I wonder if this will encourage more panic selling at the opening tomorrow? Or will $13 be the new, stuck price level until the next congressional letter or DOJ rumor or bad fortune cookie message occurs?

    The letter isn’t going to change the minds of either camp, but could delay the decision until next year if Mukasey wants to be polite to the House Judiciary Committee.

  333. Nexstar- there’s no real delta or IV stuff up because they don’t figure too much into Phil’s strategy. Remember that Phil’s internalized the option pricing formulas so long ago that he doesn’t use them (directly) to make decisions anymore. (Although Phil says the method he uses is impossible to program, I’d love a crack at it, as I ain’t your average bear)

    I would suggest going to and do some reading on delta and on IV. IV is particularly useful as it can be used to tell you when an option is “overpriced” or not, and then you’ll find yourself spelunking around on for vol stats.

    I found delta to be a pretty simple concept, which only took a little while to internalize. I find I don’t look at it anymore, I pretty much know what it is for the stocks I follow simply by strike and price. YMMV, but if investopedia isn’t enough information, there are a *ton* of books out there.

  334. Nexstar- one more comment on IV and delta. I don’t want to give the impression they’re not important. You need to study up and develop an understanding of the option pricing formula(s) and how changes in delta and IV impact your options.

    But the point is that Phil’s strategy uses options for leverage against fundamentals of the underlying, so he’s not looking for mis-pricings or other option strategies, as a general rule.

    Phil, as ever, please correct anything I’ve mis-stated.

  335. Is this playable? I’m watching Fast Money (delayed on Tivo) and as they’re talking about the financials they’re flashing on the screen:

    “Bank of America CEO Declines to Estimate Size of 4th-Quarter Write-Down”

    I’m thinking there’s nothing about that statement that’s good for BAC.

  336. k1- i’m not a programmer (i don’t even like video games – except some driving ones), but if a one wanted to make a program that trades like phil, then how would one start?

    oh, ur asking me? ok, then i think the best way would b to start by running the history of phils portfolios and finding correlations on the conditions that under which similar trades occur (like rolling a caller, initiating the position).

    trades and positions could b tracked and binned into “good” or “bad” or whatever-

    anyway- my point is that if a rich and large enough history of phils trades can b found, then mining it for patterns might b the first step to figuring what instructions an “in philico” phil would have.

    how about first finding a program that could do that (similarity/correlation search can b done on any set of data- i imagine)?

    at the beginning, would have to choose the stock for the program (or maybe just a simple screen) and then test it when parameters have been identified.

    like i said, i have no idea how to program an alarm clock let alone some tailored task- so this is all super time demanding and low probablility success.

    come to think of it- if u could make a program that copies anyone’s trading style well enough (using their trading history), that program would b useful in itself- yeah, sell it.

    anyway- ur thought about a phil program got me thinking about that.

  337. BAC

    Apparently the actual quote was:
    “While we do not make a practice of forecasting quarterly earnings, I think you certainly can assume results will again be quite disappointing,” said Lewis. “At this point, the final write-downs of collateralized debt obligations are unknowable, but we expect to be profitable in the fourth quarter.”

    At least that’s what it says here:


  338. xian- LOL. I was just talking about programming Phil’s option-pricing algorithm, which he carries around in his head. I wouldn’t try to extrapolate Phil’s trading style from the trades he places. Although I *have* heard about some really cool (but scary) software that can write music in the style of great composers based on the historical pieces they wrote…

  339. Thanks K1,
    I was just thinking if there is anything Phil or you do to sell calls with higher delta then the long leg to give it a better downturn protection for days like yesterday. =)

  340. k1- i’ve heard of similar programs that can copy people’s visual artistic style- a some debate about if the program was intelligent and creative- but it was clear that the program could only paint in the style it was programmed to (although it would create original art in the style of some painter)

    anyway- another note- guess what- AAPL- cramer gave the green light on AAPL, RIMM GOOG and select tech, so at least that’s a plus.

  341. Well, if you had a history of Phil’s trades and you were really bored, the lazy approach would be to put together either a neural network that you trained on the Phil data set or run a series of genetic algorithms that you evaluated against the Phil data set until such time that they duplicated Phil’s decisions.

    Of course, neural network and genetic algorithms don’t really answer the question…but they’re nice buzz phrases.


  342. Phil also keeps up with current news and daily events then analyze them rationally to see how each affects the stock market.

    How can you program that…

  343. nexstar- i think the whole idea of deltas. IV and stuff is best viewed in terms of taking “premium” from the people u have sold calls to (against the calls u own, like LEAPS in the simplest case).

    try to b selling calls higher than u buy them back each month (selling them when IV is high, stock is super extended, or other opportunities) and trying to get those calls (by rolling them around as things change) to as close to worthless at expiry as possible.

    then u roll that out another month and repeat- along the way u roll up ur LEAP but that’s another story that k1 has so nicely identified and marked for our benefit.

    k1/whoever, i hope that was at least a very crude description of phil’s strategy

  344. reinharden- all we need to do is get skynet up and running, but shut it down b4 it becomes self aware.

  345. nextstar- very true, this is wild idea that spawned from my misunderstanding k1- but the long term positions run for many successive months, so once the stock is identified as long term bullish, then let the wild and crazy thing program go

  346. XMSR … don’t follow it, but didn’t someone post yesterday about a huge PUT purchase … like 30,000 contracts ?

    If that’s the case, someone’s political donations are paying off big time in exchange for inside information. I’m sure the SEC is right on the case !

    LVLT …. Rein … not a fan; I’ve said this before; shareholder unfriendly management. They succeed at staying out of BK. They suck at creating or caring about shareholder value. Stay away. Crowe, Ohara, they suck.

  347. thanks Xian, K1 and everyone.

    I joined PSW 3 weeks ago and I still have lots to learn from Phil and you guys..

    I brought the NEM Mar50/Dec50 spread – but I found that when the stock falls, the Dec 50 I sold doesn’t gain as much as my Mar 50 loss which is all because the delta of the Dec50 is lower then the Mar50; that’s why I just want to understand more about delta + IV.

  348. Nextstar, is a good source for this info.

  349. Nexstar- news feeds and other things are “sentiment” factors. They’re not concrete, but they *are* quantifiable. The fuzzier the inputs to the calculation become, the more it becomes like forecasting the weather. The point is not to be right, the point is to be close.

    The more the operator’s personal worldview factors in, the more it becomes an exercise in providing “tuning” controls. The underlying stock/option feed and other concrete factors are the grist, but the art comes in providing inflection to the calculations.

    This kind of stuff shows up a lot in big macro models where you need to characterize human behavior and how it can change from one end of a spectrum to another, without the hubris of assuming you can measure it.

  350. Cap- that’s right, it was 40k contracts. Hope there’s some kind of investigation.

  351. Nexstar- NEM Dec/Mar spread, don’t worry about the March right now. You are at the same strike as your caller, and you have length. You have tons of options available to you. Just wait a week, and then roll your caller to something in January that gets you a credit and puts him out of the money.

    By the time March opex comes around, you should be fine.

  352. nikkei taking a beating- again

  353. Nikkei down 1.44%. Not sure that qualifies as a beating, but its down a wee bit.

    Things to watch for tomorrow:

    LEH and COST earnings.
    Mortgage insurers – positive or negative news flow.
    Oil sector – will it prop up the market again ?
    Financial sector – will it drag the market down again ?

  354. xian, phil/skynet project – harder than it seems. I’ve done neural net work for the DoD. Not only would Phil’s trades be programed but his adjustments and the reasons behind the adjustments all against the historic options price database. A few Sun Ultra’s would be a good start, but that’s probably how Skynet also got its start – traders looking for an edge.

  355. Phil/skynet project – Sounds great in theory, but can you algorithmically replicate Phil’s killer trader instincts, timing and analysis of current market events? I think not!

  356. Very good chance we have seen the worst of it. DJIA can pullback around yesterdays low to about 13290 and be very happy. (Ha, just realized that is also the 200dma) Look for a bounce there. Hopefully a gap down at open around those levels.

    It is amazing how two hugely volatile and draining days can leave me so bullish. There are MANY bears about. But, they may just be a month or two early. A drop to 13200 without an immediate and powerful bounce will be a very bad sign, however.

    Since my availability to trade will likely be limited, I put in my limit orders to buy back AAPL Jan 210′s and GOOG Jan 750′s. Will be around to close them if they look scary, but expecting that to be the only way to be sure I get them.

    Definitely getting my ducks in a row to move all the 401k’s and retirement accounts to cash. Getting the feeling that a global liquidity event is on the horizon. Feels like the worlds markets are about to play chicken first and check the pink slips second. Just don’t know if we get ourselves a nice jump to 14500 first.

    I don’t think it will, but GLD is only a few points from a bullish flag breakout. I suspect failure and a visit to 700, but just pointing out the inflection point we are at. I think that is why I suspect liquidity event. Stocks drop, bonds drop, gold drops, oil drops, cash levels drop. No place to hide in those 401Ks. I don’t even think the money market funds are safe, but believe that we are on a path to redemption in the dollar because eventually government will be forced to do something to stop the slide if it gets that bad.

    Phil, what do you think about a GTC Buy Stop order for OTM puts if they climb to a certain price. Might be able to find a black swan feather. Something like a DIA Dec 130 puts @ 1.00. (currently at .50) If they get to that price very good chance that the downside would continue for a long way. Just always keeping an order in the front month in there in case of armageddon.

  357. Asia Markets : Thursday, December 13, 2007

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



    Hong Kong*


    DJ Shanghai*






    Baltic Dry Index (BDI) +7 9936

    BDI Charts & Spot Rates –

    * at close
    Sources: Dow Jones, Reuters

  358. Asian Markets Are Subdued, Japan Sheds 2.5%
    Skepticism about plans by major central banks to tackle tight credit conditions kept Asian stocks subdued Thursday. Japan finished almost 2.5% lower. South Korea and Australia also ended down. The U.S. Federal Reserve said it would launch a temporary short-term lending facility for banks to secure funds, while the European Central Bank and counterparts in Canada, Britain and Switzerland announced similar moves. The Bank of Japan added that it would ensure stable money markets by conducting appropriate operations such as supplying year-end funds, as the world’s major central banks acted together to ease pressure in money markets. Australia also gave its support to the joint action.

    Financial stocks fell across the region, further hit by news that three of the major U.S. banks including Bank of America had warned of fourth-quarter write-downs and loan losses. Japan’s Mitsubishi UFJ, South Korea’s Shinhan Financial Group and Australia’s Macquarie Group were all lower. Citigroup’s Tokyo stocks dropped 5 percent. But investors bought energy stocks on the back of the jump in oil prices overnight.

    The Nikkei shed almost 2.5 percent as Mitsubishi UFJ Financial suffered its biggest drop in more than three years. South korea’s KOSPI closed 0.6 percent lower, led by steel maker POSCO; Australian shares slipped 0.3 percent to a one-week closing low as investors sold companies geared to U.S. growth on concerns about the outlook for the world’s biggest economy. In markets still trading, Hong Kong stocks dropped 1 percent as doubts over plans by the U.S. Fedand other major central banks failed to ease credit market strains, pressuring financial shares. Chinese stocks fell as bank and real estate shares continued a slide that began this week because of tightening monetary policy. Bank of China and major property developer Vanke were both sharply lower.

    Europe Shares Open Lower on Subprime Fears
    European shares opened lower on Thursday, tracking declines in Asia, as financial stocks fell on fresh concerns about subprime problems, while doubts arose about the impact of major central banks’ funding plan.

    By 0806 GMT, the pan-European FTSEurofirst 300 index was down 1.1 percent at 1,528.86 points. Northern Rock said it would take a 281 million pound ($562 million) hit from its exposure to credit market problems, while HBOS, Britain’s biggest mortgage lender, said it would take a 180 million pound hit on the value of assets.

    The DJ Stoxx European banks index fell 1.5 percent with Northern Rock down 1.7 percent and HBOS down almost 4 percent.

  359. Asia’s 2008 growth likely constrained by US economic woes, forecasts say
    Asia’s economic growth is likely to be constrained by an expected slowdown in the U.S. economy and potential spillover from the subprime mortgage crisis, two economic forecasts released Thursday said. Emerging East Asian economies, which includes China, will likely grow a collective 8 percent next year, down from the 8.5 percent rate forecast for this year, the Asian Development Bank said in a twice-yearly report.

    “If the U.S. economy enters a recession and the global economy substantially slows in tandem, the impact on emerging East Asian economies will be potent,” the report said.

    The U.S. economy _ a major export market for Asia _ has been buffeted by a slowdown in its housing market and a credit crisis after a spike in defaults on mortgages to borrowers with poor credit histories, which has led to losses at major banks and global market turmoil.

  360. Gold closes lower in Hong Kong at US$801.45 an ounce
    Gold closed at US$801.45 an ounce on Thursday in Hong Kong, down US$3.40 an ounce from Wednesday’s close of US$804.85.

    Oil Prices Slip to Near $94 After Jump
    Oil prices fell slightly Thursday in Asia after a jump the previous session on unexpected declines in U.S. crude stocks and following the Federal Reserve’s announcement of a plan to help banks through the credit crisis. The almost 5 percent surge Wednesday lifted crude oil on the New York Mercantile Exchange to its highest close since Nov. 27. Light, sweet crude for January delivery fell 33 cents to $94.06 a barrel in Asian electronic trading by midafternoon in Singapore. The Nymex crude contract jumped $4.37 on Wednesday to settle at $94.39 a barrel.

    A drop in the supplies of distillates, which include heating oil and diesel fuel, also helped to lift prices. The EIA said distillate stocks fell 800,000 barrels while the analysts polled by Dow Jones Newswires had predicted a gain of 300,000 barrels.

    In Asia, heating oil and gasoline futures were down from their closings in the previous session. Heating oil dropped 1.22 cents to $2.631 a gallon, while gasoline fell 1.42 cents to $2.3986 a gallon.

    November natural gas futures rose 7 cents to $7.478 per 1,000 cubic feet.

    In London, January Brent crude fell 42 cents to $93.60 a barrel on the ICE Futures exchange in London.

    Dollar Falls Against Yen in Asia
    The dollar retreated against the yen in Asia Thursday as suspicions grew that the planned joint action by global central banks may not fix the U.S. credit crunch that has hobbled the greenback. The dollar was trading at 111.73 yen midafternoon Thursday, down from 112.13 yen late Wednesday in New York. The euro inched up to $1.4721 from $1.4720. Speculators unloaded some of their long dollar positions built up during the U.S. unit’s overnight surge to a one-month high of 112.48 yen, traders said. Japanese exporters also sold dollars, they said.

    Some traders also said they weren’t sure whether banks _ which are reluctant to lend mostly because of uncertainty over who is exposed to subprime U.S. mortgages _ will make more loans simply because they can borrow cash at good rates from the Fed. “It may be too early to conclude that the latest action (by those central banks) will resolve all the problems,” said Tohru Sasaki, chief foreign-exchange strategist at JPMorgan Chase Bank.

    The dollar was mixed against other Asian currencies. The greenback climbed to 39.370 Indian rupees from 39.315 and 9,310 Indonesian rupiah from 9,300, while slipping to 3.3125 Malaysian ringgit from 3.3175 and 925.2 South Korean won from 926.6. The 13-nation euro rose Thursday against the U.S. dollar, which was hurt by bad economic news from Washington. In morning European trading the euro bought $1.4726, up from 1.4720 the night before in New York. The British pound dropped to $2.0432 from 2.0471 in New York.

  361. Welcome Henrycw! Well that is a kick-ass example of how, by employing a nice, lengthy spread, you can do things wrong and still come out OK… What you did wrong, and what pretty much everyone does wrong, is you overreacted to a run-up and sacrificed protection. I understand the way you are focusing on the premiums from the strike but you need to think more about simply how much OF THE VALUE of the call is premium.

    In other words (and I’m going to use current GOOG pricing or this will be hellishly confusing): The current Mar $720 is $43.20 and all premium with 100 days to go so it costs me .43 a day to own it. That means I’d better be selling at least (with 7 days to go) $2.80 of December premium to somebody or I’m losing money! All the calls you talk about fit that bill but what you also need to take into account, at all times, is downside protection.

    Shockingly, sometimes the stock you own goes up as well as down so we do not roll the second the stock jumps up in price. We roll when the caller above our caller will give us significantly more money than the caller we have AND we are sure that the protection offered is no longer worth it. We’ve had a Mar/Dec $690 spread in the $25KP since 12/5 and hardly a day has gone by when someone hasn’t asked if we should roll it but even at $720, with the contract at $37.50 (we sold it for $23.60) it still had $17 in premium with 10 days to go.

    There was no reason to pay him a premium that was almost as much as he paid us in total to roll him to a higher call that, yes, would have had more premium (marginally) but would no longer have protected our longer calls down to their strike.

    If you read back the past coulple of weeks you’ll see me telling people to stop trying to win all the time. It’s OK if your caller does well, he’s not hurting you as you are gaining intrinsic value, which you want to protect with his intrinsic value. If my caller were the current $670 at $33, I would roll him because I really don’t think GOOG is going to $670 and certainly I don’t think I need protection to $640. The same for the $680s at $26 but the $690s are just $20, protecting us down to $670 and they have $10 in premium so effectively they are paying me $10 by expiration day to give me $20 worth of insurance.

    The $700s at $13 may have more premium, but they just aren’t giving me enough protection against my longer call, especially since I am in the money and my delta will cause me to lose money faster than him on a drop.

    That’s the kind of things you need to think about when rolling. When in doubt, do nothing. When you buy on an upward spike you are buying into the initial excitement and I will do this when my caller has little or now premium left but rarely when their premium is still significant.

    In the case of you $720 call against the Mar $720. It costs you $11 to roll down to the $700s and you will collect + $8.50 for rolling your caller down to the $700s but, more to the point, you will also get + $9 for the Jan $700s so you are investing $11 to collect $16 by next Friday. Ideally, if GOOG holds or goes up, you will roll him up to perhaps the Jan $720s but if it goes down, you will be SO glad you weren’t trying to protect $43 with $4.60.

    Bigs – net $4.20 was for just that leg, not the whole thing. You are dead on with your numbers, I was focusing on the side I was concerned about.

    BIIB suggestions for JK – put in a sell order at the open (now actually) for $1 and be thrilled if you get it. Be happy you learned the very valuable (and expensive) lesson that when I say DO NOT be the idiot holding December contracts on the Wednesday before expiration, I really mean it. There’s not much you can do about a move like that other than staying out of biotech…

    Reinharden’s making a list and checking it twice!

    XOM – It depends if you are scaling in or not, I’m still waiting for a chance to buy more at $1.60. The problem you guys have is you DON’T daytrade enough. I bought some at $1.90, bought more at $1.80, sold them at $2.30, bought more at $1.60 sold 1/2 at $2.20 in the past few days. Had I just bought some at $1.90 and stressed out for 3 days I’d have little to show for it but an ulcer. If you are going to trade volatile stocks, you need to learn to take 20% gains off the table and have very clear entry and exit points on every trade or you’re just pouring money down the drain.

    It’s like the Dec $90s we played yesterday for a 50% gain. That’s it, that was the goal. Mission Accomplished means go home in victory, not get bogged down in a hopeless war of attrition for the next 3 years…

    K1 – so close I’m thinking of retiring, even the part where I feel the need to say just because I don’t use them anymore doesn’t mean they aren’t important! 8-)

    BAC – yeah that’s bad, I noticed they were acting strangely on yesterday’s action but they’re kind of low to be shorting (of course I thought that about WM).

    I spent 4 months (1 month over project allotment, they paid me double to stay the extra month) consulting for a hedge fund who tried to quantify my strategy and the end decision was that it couldn’t be done because my moves are too dependent on current events AND events that haven’t happened yet, which are very tricky for computers to quantify.

    Last Fed meeting we strangled the Dow and made a mint, this Fed meeting we only shorted and made a mint, there are probably 10,000 factors that go into those decisions and I would be loathe to go through all that crap again, even for the double rate!

    XMSR – sure you’ve got Clear Channel and Infinity/CBS pulling every string they’ve got to derail this thing. That’s why they younger guys are vocally against it, they’re easier to buy!

    NEM – Again, I don’t want to say you shouldn’t know about deltas and IVs but this is where they’re BS. Your NEM Mar $50s are down about .50 (assuming you entered on the $25KP) and the Dec $50s are also down about .50 but the Dec $50s are carrying a value of $1 with 7 sessions remaining – that’s just stupid! Sure the volatility suggests yadda yadda, but the reality is he’s going to lose that $1 a week from Friday no matter what and you’ll still have 3 months left on your gold play.

    This is another subtle thing about my “system” nobody seems to notice. I hit my targets. Check out the LTP from the weekend when the market was on a roll and I stubbornly refused to change my positions, which were set when I predicted our trading range through expiration would be 13,000 to 13,000. Most of my callers are within a dollar of their strikes a month later. There is no better way to win than that! This is why I keep telling people, you can’t just apply the LTP strategy to anything, you need to be able to accurately predict a stock’s movement for the next 30 days to maximize your profits. That’s why I test my leaps in the STP first, I need to be sure I know how they act before I send them off to the LTP, which I hardly look at.

    One of my favorite polo shirts is a Cyberdine Systems shirt. I wear it to CES shows and it’s scary how few people get it. People as me what we do and I say “Robotics.”

  362. good morning peoples!

    markets acting weak- looking bad for AAPL.

    AAPL – they reported earnings of 1.14 last JAN on estimates of 0.78 (high of 0.83)

    any guesses on this year’s beat? current estimates r 1.55 (high of 1.75)- i’m looking for >2.00- i think the 2-mark is a critical level to surprise.

  363. AAPL, AAPL, AAPL- from realmoney

    AAPL Can Jump 15% on Earnings
    By Jay Somaney Contributor
    12/10/2007 1:32 PM EST

    Apple (AAPL) is an absolute must-own till its earnings are released on Jan. 17, 2008. I would even buy it here for a 10%-15% ride higher from current levels into that date.

    The company is firing on all cylinders, and sales for all its product lines have been very strong. The sell-siders have been catching on to this trend and have been raising estimates for Macs (both laptops and desktops) and Leopard upgrades.

    (Anecdotally, I can tell you that in my circle of friends (about 20 families), each and every family has bought at least one Apple product this holiday season, from iPhones to Apple TV to Macs and iPods.)

    On a recent visit to the local Apple store, I was amazed at how packed it was. When my turn came, I asked the salesperson how business was going, and she said, “We are so busy; none of us even have time for lunch.” I asked her whether she herself had had her lunch — it was nearly 3 p.m., and she had started at 9 a.m. — she said that she had not.

    Analysts are expecting the company to report Mac sales for the quarter ending Dec. 31 of between 2.3 million and 2.41 million units, with 875,000-925,000 desktops and between 1.35 million and 1.42 million laptops. The all-time record for Mac sales in the quarter is 2.2 million Mac units in the quarter ended Sept. 30, 2007.

    The sell-siders are also expecting very strong Leopard sales. Apple indicated that it sold 2 million copies of the new operating system in the first four days after it launched on Oct. 26, 2007. Analysts are looking for Leopard sales of between 2.8 million to 3.1 million units. I expect the company to blow that estimate away.

    Apple finished the last quarter with 197 Apple stores and plans to add 40 more this fiscal year (ending September 2008), a rate of more than three a month. The company also had 230 Best Buy (BBY) stores selling Apple products at the end of the fiscal fourth quarter; that number is expected to increase to 270 by end of the fiscal first quarter (December 2007), an addition of 10 locations a month in the quarter. More retail points of presence mean more people looking at their products, and more people looking at their products means more people buying their cool stuff.

    The iPhone is also doing very well, based on what the sell-siders have been saying, and I have seen estimates as high as 500,000 iPhones sold in Europe and as high as 4 million sold outside North America in the December quarter. Recently, three of my friends have called me to buy iPhones for them here — they cost about half as much here as they do in Europe. So, anecdotally, things look very good there as well.

    Apple’s pipeline of new products, the seasonal factor and strong likelihood of a nice earnings beat make the stock a compelling buy into earnings, offering as much as a 15% jump in the coming weeks despite printing all-time highs just last week.

    Until the next time, happy investing.


    AAPL Still Can Run
    By Chris Versace
    RealMoney Contributor
    12/10/2007 12:34 PM EST

    Apple (AAPL) has enjoyed a great run, so investors could be forgiven for wondering if this name is getting overdone. But in my view, new product introductions and the potential for better-than-expected results in the current quarter should drive Apple shares even higher than current levels.

    With a little more than a month to go before the Macworld Conference and Expo, speculation is building about what new products and services Apple will introduce as part of the Jan. 15 keynote by CEO Steve Jobs. Over the last several years, Apple has used this event as a stage from which to announce new products, as it did last January when it announced both the iPhone and Apple TV.

    There have been several data points to suggest that more likely than not, those products — especially the 3G iPhone — would result in upward revisions to Street expectations and drive the stock higher.

    The 3G iPhone and either a repositioned iPhone or an entry-level model would bring Apple from having one product in this line to two or three, and that would probably make the 10 million unit forecast for iPhones conservative. Layer on the incremental revenue and profit from data services paid to Apple by the operators, and you have a positive for the bottom line — and subsequently, the shares.
    Possible New Products

    Internet columns, news stories and other chatter suggest that the new products announced at Macworld could include:

    A sub-notebook that would be 50% thinner that the current MacBook Pro and which would NAND flash memory over a hard drive. Speculation is running high on this idea. Such a notebook would fill a hole in the company’s product portfolio.

    A 3G iPhone that would be on sale by late May or early June. Comments by AT&T (T) CEO Randall Stephenson in late November hinted rather strongly that a 3G iPhone would be offered in 2008.

    I wrote in mid-October that one of the issues with the iPhone is that it is currently relegated to AT&T’s relatively slow EDGE network. With 3G chipset technology having matured over the last year — see product announcements from Broadcom (BRCM) and others — and with further improvements likely, a more robust battery life that can live up to consumer expectations is likely.

    AT&T’s 3G wireless network, currently deployed in 170 metropolitan markets, uses UMTS/HSDPA technology. According to AT&T, that network can provide download speeds between 400 Kbps and 700 Kbps with bursts to more than 1 Mbps, which would put it on par with Verizon (VZ) Wireless’ current EV-DO network. Aside from helping with demand in the U.S., a 3G iPhone would likely help drive demand in Europe as well.

    An entry-level iPhone. While talk of such a product is circulating, this could take the form of just another price cut for the current iPhone model. Such a cut could drive incremental demand.

    But I believe Apple will need to broaden its product portfolio and eventually address the entry-level market and add a mid-priced product as well. The current iPhone does and a potential 3G iPhone would address the high-end market. This should be an easy lesson to learn after watching companies like Palm (PALM) and Research In Motion (RIMM) find success with lower-end models.

    Of course, Apple could zig rather than zag — maybe by eventually bringing to market a device that would allow users to play interactive gaming titles on a touch screen while at the same time maintaining control of a secondary application such as a digital music player. Apple recently made a patent filing for just such multitasking of input technology and techniques. Time will tell on that one.
    Current Quarter Trending Well

    Results for Apple’s current quarter could also drive shares higher. So far, the news looks bound to be good.

    Last week I visited several Apple stores to get a feel for how the company is doing so far in the holiday shopping season. Keep in mind this is just anecdotal, the experience of one shopper — but during each visit, the stores were packed and seeing brisk business for iPods, laptops and related accessories. Comments from salespeople indicate that interest in and sales of the iPhone remain healthy. Traffic is also benefiting from the recent introduction of Leopard, Apple’s newest operating system.

    Other comments from several sources reinforce Apple’s brisk business in the quarter:
    CNBC reported that the iPod Touch is selling better than expected, with one of Apple’s manufacturers set to release 5.1 million units over the holiday season.
    Comments from RBC suggest that iPhone sales in Europe are outpacing competitors’ devices, despite the iPhone’s higher price.
    Investment firm American Technology Research, which in October waged concern that Apple may have been too aggressive in its outlook for the December quarter, says a new round of channel checks suggests the company will instead beat its guidance once again.

    I’d expect more positive commentary as the holiday season progresses.