Archive for 2007

Long-Term Trade Watch

I’m going to try to do this every week or 2 weeks prior to opts ex. and, since I don’t know if I’ll have time next week, I may as well get ahead this week…

I have no idea what format will work but I’ll just start writing and see what happens (so professional it hurts!):

  • AIG Jan ’09 $70s – basis $8.40, now $11.50
    •  Sold Jan $70s on 12/11 for $2.20, owe $1.65
      • No worries here, just let it ride and pay the piper (pay the guy off or roll to Feb prior to expiration)

Oops, I’m alredy breaking format for an explination….  That’s OK though, this is about teaching people how to do these trades and, since I’ve never taught it before, I have to learn by doing too!

The stock was at $70 when we picked it up for $10.60 so we’ve gained pretty much dollar for dollar in value but our caller still has a .50 premium which will go one way or another.  As a rule of thumb with these, once we are up over 50% within 2 weeks of expiration we should stop out our caller under the same rules that we would stop out ourselves on a trade.

So, if the contract drops to $1 but goes back to $1.15, we should take the guy out.  Any time the contract we sold goes below 25% of it’s original value (unless we are playing them out to expiration) we should take them out – you can always sell the next one!

This trade is a good example of what this is all about.  We came in at about $69.50 and paid a $10.10 premium for 24 months of ownership (.42/month) and we quickly charged a caller $2.20, a $1.70 premium for 2 months (.85/month) – do that for 24 months and you make $10.32!  That’s actually a very important thing to be aware of, your goal in the trade is to make 50% per year – any time you get far ahead of that you need to tighten up your stops as it may make more sense to redeploy capital into another trade!

Well, if that was just one this could turn out to be a long post!

  • BA Jan ’08 $90s – basis $2.70, now $9.80
    • Sold Jan $90s on 10/24 for $3.80,

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Weekend Ramblings

Hmmm, what to write about…

There is so much going on in the world I can't decide.  I'm currently stuck on a meataphor for the total catastrophe that awaits XOM shareholders this year so I'm shelving that article until inspiration strikes me and I'm still not confident enough to buy Google calls but that article is already written and waiting for the right target prices to firm up.

Sending 30,000 more troops to Iraq 1,000 of whom will statistically die (assuming things don't get worse) is stuff I will leave to other writers.  We couldn't even get Saddam's execution done right (as if making him a martyr was the right move anyway) and I'm ashamed to live in a country run by people who didn't think hanging a human being would play poorly on YouTube!

Hussein at the Gallows

I predicted this would happen on October 8th when I said (regarding war videos on YouTube at the time): "How much do you think the people are prepared to take? While we were momentarily angered by images from Abu Ghraib, times have changed, and still images just don't capture the imagination the way videos do."  Apparently the Arab world wan't prepared to take images of Saddam being insulted by Shi'ite guards on the way to the gallows – who'd have thunk?

Strangely, the Bush White House rarely calls me to discuss policy decisions even though the current score on making good policy calls is me 327, team Bush 3 – but hey, they've got 2 more years!  Of course I don't feel bad about it as they don't listen to the Iraq Study Group either who recommnended:

  • Withdraw troops by early 2008
  • Initiate a new diplomatic policy

    • include serious talks with Syria and Iran

  • Change course with the Iraqi government
  • Create economic incentives to rebuild Iraq for ALL people, not just Shiites

All this goes into Bush's brain and comes out: "Send more troops – but not enough to make a difference."

Oh sorry, I said I wasn't going to get into that…  Damn newspapers with their front pages – always throwing silly world events right
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Virtual Portfolio Update

Hi everyone, the online spreadsheets have just been updated.  A downloadable version has also been posted for January.


Weekly Wrap – How to BS the Stock Market 101


Gosh I thought I was going to have an easy week as it was only 4 days and we were mainly in cash but oil finally broke down on us and we had a week of hot an heavy trading!

That's the beauty of cash – it's easy to put it to work quickly when things go your way…

The general market sure didn't go anyone's way this week with a whimpering performance for the week.  Ironically, it was evidence of a strong economy and continued job growth that worried investors as it put the Fed back in the game as many investors were betting on a softening sometime in the spring.  Luckily I've been saying for months that is never going to happen and we've been investing accordingly…

Motorola single handedly killed a Nasdaq rally that began and ended Thursday but, as I said all day yesterday – selling 66M phones in one quarter is not a sign to get out of tech!

We can't fool ourselves though, these are trying times for the markets and we need to take advances with a grain of salt before we start committing serious capital again.  The reason we had such a great 2006 is because we took it off the table in May and didn't really play the upside again until July (see Year in Review).

So patience is a virtue we all need to practice in 2007 – we waited 3 months to make 100, 200 and 300% gains on our oil plays but wasn't it worth the wait?  At the moment, I would still prefer a much bigger pullback to shake out the nay sayers and to test our 200 dmas for support, not the pesky 50 dmas that most of our indices are playing kissy with.  BUT, what I prefer is what every old fart stock analyst prefers – the same thing I'm used to!

We all like to see our little patterns repeat themselves so we can nod our heads (and shoulders) and point to a "flat top" forming or point to the "ascending triangle" and discuss declining RSI at cocktail parties (ok, you've got me there, no one invites TA guys to cocktail parties!).  It is very disturbing for an analyst to
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Membership Site Update

Our new site is up and running, hopefully it will be leaner and faster.

Now to log in, you go to simply and log in at the top of the screen (although you can log in right at the top here too), there is no more seperate member site, just different access granted to members. 

Once we are sure the new site is bug free.  We will be able to add alerts and other features.  Meanwhile, please let us know (in comments on the weekend wrap-up) about anything you see that isn’t working right and we’ll see if we can get it fixed up before Monday.


- Phil



Friday Morning

Motorola Slashes Guidance!

More than anything else, that is spooking the markets today.  Japan is taking it especially hard with a 262 point drop in the Nikkei as investors were poised to take profits for any reason and this was a pretty good one! 

The Hang Seng bounced back 185 points but was alone in its recovery as the rest of Asia sold off in what was generally seen as profit taking.  Google bought a piece of Xunlei (and you’d better learn how to pronounce these if you want to invest in the global marketplace!) which should give them another 50M eyeballs.  It’s funny because people say "how can Google possibly expand further?" when all it takes is a few minor alliances to give them access to more people than live in all of North America

This is a good time to reread my last year’s article on Google "Next Week’s Action… Next Decade’s Action" which I will be updating this weekend as we are getting ready to make our next  major Google play.

Europe is off slightly but nothing alarming but they are also expecting growth to slow to about 2.2% next year – this does not bode well for commodities! 

The jobs report was MUCH better than expected and there were minor upward revisions to prior months with the service sector taking up much of the slack from manufacturing and construction with average hourly earnings up 4.5% over last year – this is not the kind of economy you sell short!

We’ll be doing another test of our lows this morning which makes my job easy as I just cut and paste my levels from way back on yesterday morning:

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Thursday Wrap-Up

That went very well for a Thursday!

We've had a lot of trouble with Thursdays and this was a pretty good one.  Last year we opened January with a 350 point gain in a 4 day week so I'm not going to do any victory laps just yet (especially as the entire gain was wiped out 2 weeks later) but that was coming off a very choppy year where no gain went unpunished.

Is it different this time?  Last January oil led the rally, with crude surging from $56 in November and December to $68 at the end of January.  Today we crossed back to $55.59, the lowest price for oil since June of 2005, when a 600 point Dow rally was killed by rising crude prices.  When oil settled down at $56 in late 2005, the Dow picked up 800 points.

It was a surge in oil back above $60 in the last week of December '05 that halted the Dow at 11,000 and a surge in crude to $75 in April that drove the market from 11,500 back to 10,700 in June.  We did recover so, yes, we can afford higher oil prices – but we certainly don't like it!

Today we liked it! We tested and held all my levels early on which gave us the confidence to call a buyfest during comments as we added a bunch of new positions, even as we continued to short oil:

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Thursday Morning

Wow, I think I need a rest after yesterday…

We made 21 trades in comments after starting the day with none – once upon a time 21 trades was a busy WEEK!  Still, we grab our opportunities when we can and we have a lot of open positions (albeit small ones as we went to cash 2 weeks ago) to manage in what looks to be a tricky market.

Let’s try to keep some perspective today as you can’t even call this a correction yet, we had a 200 point drop the day after Thanksgiving and THAT wasn’t even a real correction since it was the first real pullback in a 3 month run of 1,200 points.  We are still up 1,500 points from mid-July and if we are rotating out of commodities there is bound to be some pain in the process.

China had a bit of a pullback this morning with a 387 point drop but, like us, it’s a drop in the bucket as they have gained 1,200 points since 12/22.  We just had that discussion yesterday morning when I said:

 "I’m looking for a top to short. If the markets are going to collapse they will go first and they could drop $7 in a day easy. I’m thinking I’d rather take FXI $120 puts when it tests that level than DIA puts as I think FXI has a LOT more room to fall."  Too bad we were so busy with other plays as the index made a nice top out at $118 and I’m sure it will go way down this morning

There may be a chance to grab FXI $114 puts early if we put a bid in for $4 so let’s give that a shot pre-market.  This is just a market trick you can sometimes get away with – putting in an early high bid on something that hasn’t opened yet but is gapping.  With luck, you can scoop up sell orders from yesterday that haven’t cancelled.

Not to worry about the Hang Seng, they managed to hang onto the 20,000 mark where they sit a comfortable 40% ahead of the Dow on the 20-year chart.  Of course that’s nothing compared to the Nikkei, which gained another 127 today, bringing them to 17,353 outpacing the dow by 150% over the past 2 years (notice the very nasty 50% correction they…
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Wild Wednesday Wrap-Up

Wheee!  That was fun….  Can we do it again?

Unfortunately yes.  The market is either consolidating for a breakout or getting toppy, I’ll let you know which as soon as we figure it out but, as I said this morning – I don’t know and, apparently neither do investors who rushed in and out of stocks today like the audience in a Bugs Bunny joke.

Much like Bugs Bunny pulling the lever that said "Intermission" and causing everyone to run out and crush Elmer Fudd, we played today’s action pretty perfectly as we took our vacation on Friday long in the market and short on oil and today (until 1pm anyway) those were both right on.

The markets were indeed off to a fine start this morning and punched through record highs but pulled away from a fairly bearish Fed report that indicated the Governors aren’t as wild about the economy as investors are but I think people are taking the minutes way out of context and the sell-off was unwarranted, even though I expected it to happen.

We were very comfortable with our choices today as the market failed us at pretty much all of our targets so we got in and out of positions with pretty good timing:

Don’t blame oil for this one, they did their best by dropping and dropping and then dropping some more finishing the day way down at $58.32 below my $58.71 wish-list target!  Next stop may be $57.50 as the roaches scramble to leave the trap.

This is…
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Wacky Wednesday Morning

I don't even know what to say at the moment!

I have a lot of picks lined up but this is not the time to hit them, there are far too many unknows jumping into an unusually short week like this and playing catch-up with the global markets.

Over in Asia, the Hang Seng has moved another 400 points ahead of us since Friday, ending this morning's session at a whopping 20,413.  The Nikkei is reserved by comparison, perhaps a little toppy at 17,225 or perhaps consolidating for a power move!  Thailand took a 3% hit today, this time over a string of bombings in Bangkok.

Hong Kong November retail sales rose 7% over last year but Indonesian consumer prices rose 6.6% and concern about inflation is spreading throughout Asia.  If Asian CBs tighten to fight inflation – how low can the dollar go?

Europe is taking a break from a huge 1.5% gain yesterday and are flat into our open, waiting to see if US investors are willing to run with this up market thing. 


Before we get too excited about breaking orbit today, let's make sure are fully out of our bearish gravitation signals before we unbuckle our belts and attempt to float about the cabin

Our markets will open higher!  That is a fact, there are millions of unfilled foreign orders from 2 days of trading that we missed so we can set our expectations fairly high.

When you are slipping away from stock market gravity you should feel an acceleration, not a pullback at this point.  What happens is new money (thrust) is poured into the markets while the passengers (shareholders) sit tight, confident that they are safe and secure on the way to higher orbits (a higher trading channel). 

While there will always be some worry-warts who get space sickness and throw up (take profits), a real breakout should give us both an increase in volume (money flow) and a nice, healthy move up with little pullback if we are truly in the early stage of a major move.

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Zero Hedge

Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

Courtesy of ZeroHedge. View original post here.

A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

Several doctors from Hopkins an...

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Phil's Favorites

This Is The One Chart Every Trader Should Have "Taped To Their Screen"

Courtesy of Zero Hedge

After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the (balance sheet) B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade.

As Nomura&...

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The Competition For Capital Has Made Stocks Cheap

By Michelle Jones. Originally published at ValueWalk.

The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

StockSnap / PixabayVolatility carries into the new year

This past year was one of extremes, and the markets ended i...

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Kimble Charting Solutions

Stock declines did not break 9-year support, says Joe Friday

Courtesy of Chris Kimble.

We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

If you find long-term perspectives helpf...

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Digital Currencies

Transparency and privacy: Empowering people through blockchain


Transparency and privacy: Empowering people through blockchain

Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...

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Insider Scoop Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

Courtesy of Benzinga.

Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ... more from Insider

Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...

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Members' Corner

Why Trump Can't Learn


Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...

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Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.


Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.


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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...

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Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Free eBook - "My Top Strategies for 2017"



Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:


·       How 2017 Will Affect Oil, the US Dollar and the European Union


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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>