Archive for 2007

Weekly Wrap-Up

I love a good recovery but not so much when I'm betting against it!

While I am pleased I managed to hang onto our positive plays in the STP and we were well protected in the LTP, on the whole we could have managed with less insurance.  On the other hand, our insurance policies are still good for another month, leaving us in a pretty good position to take an aggressive stance.

A virtual portfolio is not just a couple of plays (or at least it shouldn't be) it is a living, breathing COLLECTION of strategic positions that need to adapt and change with market conditions.  As Sage said in last weekend's educational piece, it's all about risk tolerance and finding your comfort zone.

We talked about our low-risk strategies for choppy markets with WMT being our latest.  How is that one working out?  We bought the Jan '09 $55s for 3.40 (now $3.30) and the Jan '09 $45 puts for $3.30 (now $3.20) and we sold the Apr $50s for .50 (now .15) and the Apr $47.50 puts for $1.10 (now .50).  So, on the whole, we laid out $6.70 and got $1.60 back for a net outlay of $5.10 and, if we were to close it out today, we would be ahead by .95 – roughly 19% in two weeks.  Tedious but effective.

If you can't be satisfied with that rate of return making up the bulk of your trades then our strategies are not for you as this is how we balance the bulk of our long-term trading strategies, not always the same stock but in the virtual portfolio as a group.  Our SHLD play was not hedged on the put side (as I love the stock and wouldn't short it) and they had a nice (for our caller) $7 run this week.  Our Apr $180 caller stopped out at $4.50, costing us $1 but our June $180s jumped back to $11.25, a $5.25 gain for the week so we are certainly not complaining – especially as our basis on this play is just $3.15 ($2.15 plus the extra $1 we had to pay our caller) for a nice 257% gain so far.

This is how we should be playing the bulk of our option virtual portfolio, not in open positions that can…
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Confessions of a Phil’s Stock World Neophyte

[Ed: member gumbaphil submits:]

Confessions of a Neophyte “Phil Groupie”

“So, Cory old buddy, whadya get for your birthday???”

(I suppose I can use triple question marks…in keeping with the “Phil” lexicon)

“Well”, sez I, “I bought myself a subscription to PhilsStockWorld.com. Figgered I oughta find somethin’ interesting to do while recuperating from back surgery. Sitting is a might more comfortable than lying around in the bed doncha know; and I don’t care much for no soap operas on TV.”

“PhilStockWorld?…What’s that?

“Good question. I’ve been a member now for 12 trading days and it appears to be part Options trading education, part trading “hints” (he don’t give no “advice” since he’s not a registered securities “advisor”), and a whole batch o’ political and economic commentary”.

“That’s it? You just glue yourself to a computer monitor all day, and READ stuff?”

“No way man. I launch my Ameritrade Control Panel which is a poor man’s trading platform and do my best to mirror the stock option trades (hints) that Phil posts on his commentary Phorum. “

“And that’s not all either. I discovered that the second by second monitoring of some the more “risky” positions was an excellent way to test out this little heart rate monitor that my son gave me. So far, it sez I’ve registered about 99 million calories by just sittin’ at the keyboard.”

“So, ya made any money?

“Well…yes…and…no.”

“Whaddya mean yes AND no?

“Well, I FOLLOWED PHIL’S DISCIPLINED APPROACH on most trades, which is basically the 20% rule, and took my gains off the table. But I made the classic mistake of DENIAL on my oil PUTS and let my losses pile up, without directional protection, to the point that my losses on them may well exceed the gains on my closed positions.”

“HOWEVER, I still have some time on my side with those oil PUTS (Apr 21st) and I’m so d@&mn far underwater with them that I may let them ride and hope for a miracle.”

Here’s the 12 trading day breakdown:

Virtual Portfolio Balance $25,000  
CLOSED Positions (24)    
   Net Gain $3,870 15%
   Total position trades 24  
   Avg value per trade $600  
   Avg gain per trade $161  
   Avg


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Friday Morning

"It was a wishy washy day on the markets but we took the opportunity to lighten up on a few calls while entering some more oil puts (so far, so bad!)."

That was what I said at the end of Thursday, Feb 22nd.  It was right after the Tuesday contract rollover and oil had gone up and smoked our March oil puts.  Things looked generally bright and, although I was bearish at the time and we had closed out a large number of calls for the week, we were still looking hopefully upward even though oil had just broken back above $61. 

We had no idea it would take a single word on Monday to take down the markets when Dr. Greenspan said "recession."  Actually, nothing happened ON Monday, but by Tuesday – well we all know that story.  Because we went into that weekend bearish, it was one of the best weeks we had in the markets but I think right now we may be in the throes of end-of-quarter window dressing by the funds and that may mean we have 7 days of shenanigans ahead (or we may be in a genuine recovery – I am trying to keep an open mind about this).

Still, things were great that day and here's the levels from that time with today's updates in brackets:

 

I think one of the things that made me a better trader was keeping a journal of what was happening when I made trades so I could analyze, not just the trade I made but the factors that surrounded my decision at the time.  This…
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Thursday Wrap-Up

I’m just working off my laptop and I’m about 120 inches of screen space short so I’ll be brief (well brief for me anyway).

That was a very so-so day in the markets and very disappointing after Europe and Asia gave us such a nice head start but the Dow held up and there were no major technical breakdowns.

House of PainKBH had a technical breakdown in Q1 earnings, off 84% from last year but the CEO did refrain from using the word "suck", which is either smart or dishonest – we’ll know by June…

"We’re not ready to say that the markets have stabilized and prices have stopped eroding," Mr. Mezger said on a conference call with analysts.  He said the difficult conditions "likely will continue for at least the remainder of 2007" — crimping quarterly and full-year results relative to last year’s levels. (does sound kind of sucky, doesn’t it?)

Speaking of which, I’m down in Washington and getting lots of good info but there’s something very, very fishy going on here as Roger Cole, the Fed’s Director of Banking Supervision and Regulation, told the Senate Banking Committee today that he didn’t see “spillover effects from the problems in the subprime market to traditional mortgage virtual portfolios….

At the same time he is making his testimony, LoanCity of Santa Fe is shutting the doors on the last of their 12 offices, putting 300 people out of work.  LoanCity did NOT make subprime loans! 

The company says problems in subprime have made it difficult to get funding from banks to make new "prime" loans.  “We didn’t have a big subprime explosion. That’s not what happened here,” said Rick Soukoulis, chairman and CEO. “But a tightening of credit did affect us. We just didn’t have the capital to withstand the continuing of the credit crunch.”

The industry is shaking out because loan volumes are down and are likely to fall further,” said Mark Zandi, chief economist at Moody’s Economy.com.  “The ENTIRE mortgage market is shrinking — prime and subprime.”  As this trend has picked up, it makes it harder for the ENTIRE market to get credit at reasonable terms, he said.  Move along folks… Nothing to see here…

This new mantle taken up by the Fed demands a better phrase than "Fiddling while Rome Burns."  We need a way to describe blatant government manipulation of data and information, against all facts to the
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Thursday Morning

"I imagine one of the reasons people cling to their hates so stubbornly is because they sense, once hate is gone, they will be forced to deal with pain." – James Baldwin.

I was going to start this morning by comparing this market action to Nero fiddling while Rome burned but then I realized that, in itself, was a forced analogy.  Nero absolutely did not fiddle while Rome burned, this was something made up much later to exemplify the decadence of the Roman Empire.  First of all, the fiddle (violin) wasn't even invented until the 16th century and second of all, Nero actually raced back to Rome on news of the fire and spearheaded a grand reconstruction project, housing homeless people in his palace until homes could be rebuilt.

So I have to think to myself, are things really that bad or am I just clinging to some old prejudices that won't allow my to just put on my rally cap and enjoy the game?

 

After the Thanksgiving dip I suffered a similar bout of introspection and I came up with a plan (Burn Dollars to Fight Gravity) to send Paulson to Asia to make a deal with China to devalue the dollar, allow commodities to run wild while we run our dollar printing presses at full speed to shrink our deficit through inflation.  Who'd have thought they'd actually do it?

I said at the time: "That’s where the old Roach Motel Theory kicks in  – not as it applies to oil, but as it applies to dollars.  The Chinese have a Trillion US dollars!  While they may threaten to diversify them into something more stable Mr. Paulson is going to point out to them that they are not the only roach in the motel.

Japan also has a Trillion of our dollars, we send them more every time we buy a Toyota but the biggest joke of them all is that we’ve been shipping these ever devaluing dollars to OPEC and every other oil producing country at the rate of $165Bn a month (what, did you think Jihads just fund themselves?).  Oil is traded in dollars, people who want to sell oil must accept dollars, people who want to buy oil need dollars to
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Wild Wednesday Wrap-Up

Was it something I said?

I have to pat myself on the back for saying, at 1:28: "DIA like a coiled spring right now, up or down 150 very possible… I think having $122 puts (BQQOR – .65) and $123 calls (BQQCS – .75) que’d up and ready to go is prudent on the Fed announcement."  Now if only I had pulled the trigger instead of thinking!

I made the mistake of actually taking the time to READ the Fed statement, which didn't sound so rosey to me but, obviously, what do I know?  The market roared straight up to my 150 point target in less than 30 minutes.  The $123 calls finished at $1.80 and the $122 puts held .25 of their value for a net profit of 45% so the lesson for next time is – take the darn spread and stop thinking…

My mistake (for the whole week actually) was to worry about the actual economy, which the Fed calls "mixed" and the problems in the housing sector, which the Fed calls "ongoing" (and they no longer see "signs of stabilization" like they did in the last report).  For some reason the fact that the Fed sees recent readings on core inflation as "somewhat elevated" or that there is a "risk that inflation will fail to moderate" bothers me a lot more when all I should have been focused on was the fact that they replaced the words "additional firming" with "future policy adjustments."

Based on that last 3-word change, the bulls ran wild and bought up pretty much everything in sight.  As I said this morning, perhaps they were already there, looking to buy on any excuse.  The reality check is that the Fed said "Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth."  So if investors run right out and buy up the markets (economic growth) and spark a commodity rally (inflation) – doesn't that pretty much guarantee a rate increase?  Not to mention the collapsing US dollar, which promptly dove through 83 on the announcement.

Oil did nothing on the day but the fact that it didn't drop allowed the oil sector to go hog wild this afternoon.  Of course, not dropping is a matter of opinion, but somehow they can take
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Wednesday Virtual Portfolio Moves

Posted March 21, 2007 at 9:51 am | Permalink (Edit)

AIR taking out $30 caller for $2.20

Posted March 21, 2007 at 10:40 am | Permalink (Edit)
  • Took a DD on TSO $95 puts at $1.70
    • 1/2 out at new basis $2.10
  • Selling COP $65s @ $2.8 (up .70)
Posted March 21, 2007 at 11:01 am | Permalink (Edit)
  • Sold XOM $70 calls for $1.45
Posted March 21, 2007 at 12:31 pm | Permalink (Edit)

$10K Virtual Portfolio Pick  – WCI is a builder with a p/e of 110.

  • 10 WCI June $22.50 puts are $1.20
    • Stop at $1
    • Sell at $1.60+
Posted March 21, 2007 at 12:56 pm | Permalink (Edit)
  • BA - taking out $90 caller for $1.95





Waiting for the Fed on Wednesday

"That's life, that's what all the people say.
You're riding high in April, Shot down in May
But I know I'm gonna change that tune,
When I'm back on top, back on top in June.

I said that's life, and as funny as it may seem
Some people get their kicks, stompin' on a dream
But I don't let it, let it get me down, 'cause this fine ol' world it keeps spinning around.

I've been a puppet, a pauper, a pirate, a poet, a pawn and a king.
I've been up and down and over and out and I know one thing:
Each time I find myself, flat on my face,I pick myself up and get back in the race
."

We know Sinatra was a gambler which is probably why the lyrics to "That's Life" are so appropos for the market of late.  He imparts good, solid advice to all of us when he says "I don't let it get me down."

Bulls and bears alike have been whipsawed by the markets these past few weeks and, while it's comforting to point to the "Wall Street Crooks" who manipulate the markets it has often been noted that we never complain when "THEY" are manipulating things our way…

The timing could not have been better this week for Cramer's take on manipulating the markets to snowball as this low-volume rally has all the earmarks of being manufactured but manufactured rallies can often lead to genuine rallies (see oil 2003) that take on a life of their own, whether intended or not by the original manipulators

I mentioned in my Cramer article how Fibonacci levels can be used to "lure" buyers back into the markets, just in time to trigger relentless sell-offs – this is one of the reasons I'm having a miserable week so far sitting out this "rally" as it breaks out of my 20% "danger zone" and heads right up the the critical 38.2% breakout zone. 

Trade Tim points out that the Russell has been tightly bound by the upper Fibonacci levels and the S&P is, as usual, a textbok example of an index that obeys its trading range:

I've been tracking the opposite retracement levels (from…
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Cramer Confesses to Market Manipulation

My thanks to Trader Mike, who wrote a nice article on a subject we had been discussing all weekend on the member site as all the market manipulation of the past two days made me forget to talk about the evidence of market manipulation we uncovered last week.

 

<==  Prof posted this clip on Friday and in which Cramer discusses how easy it is (and how he did) to manipulate the markets by pushing stocks up, down and all around virtually at will with the enlisted cooperation of the financial press, who would print whatever spin he wanted.

"This is blatantly illegal but when you have 6 days (to end the Q) and your company may be in doubt because you are down, I think it's really important to foment, if I were one of these guys, an impression that RIMM (the example) isn't any good."  Jim goes on to describe in great detail how he could spend just $15M to $20M to "knock RIMM down, which would be fabulous because it would beleaguer all the moron longs…"  

In the context, he was talking about RIMM as it was a fulcrum stock, one that moved a large portion of the market (like Valero) where the funds would concentrate their energy in order to rally (or crush) the broader markets.

"It's really important to get the Pisanis of the world and people talking about it as if there is something wrong with RIMM, then you call the journal and you get and get the Bozo reporter on RIMM and you would feed that Palm's got a killer (product) that it's going to give away…"

On Maninpulating AAPL: "Apple, it's very important to spread the rumor that both Verizon and AT&T decided they didn't like the phone…  and this is very easy because the people who write about Apple want that story and you can claim that it's credible because you spoke to someone at Apple because Apple doesn't issue any statements."  Cramer says he would do this in conjunction with placing large put orders (1,000 blocks) to create the impression that something was happening and then HE would call Pisani and say, "hey, something is happening, there's a lot of put buying going on at Apple."

"What's important when you're in that hedge fund mode, is not to do anything remotely truthful, because the truth is
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Trader Status and U.S. Income Taxes – Part Two

[Ed: Member karmcon submits the following important information. Part One is available here.]

Pros and Cons of electing “trader status”

Assuming the latency effect is in play I will discuss the Cons first.

CONS

1. Must “mark-to-market” most holdings at 12-31 each year.  This means you recognize any gain or loss on the securities in your virtual portfolio as if you sold them on December 31.  (You now know where the term “tax selling” really was derived as stocks and options with gains, not just losses, are sold off in December to prevent the taxation of phantom gain.)  The basis of the asset is adjusted for the recognized gain or loss and is taken into consideration when the asset is sold.  For example, you have 50 Jan 08 contracts that you purchased in November 2007 for 10000.  On December 31 2007 they are worth $12000.  You recognize $2000 of gain on your 2007 tax return and increase the basis by $2000.  In January 2008 you sell the options for 11000.  You then realize a $1000 loss on your 2008 tax return. (10K orig cost + 2K recog gain = 12K. 11K proceeds on sale – 12K adj, basis = (1K).)

2. Gains and losses are separated into (typically) four categories as you may be a trader in some securities and hold other securities for investment (see (a) below). The type of investment you are buying or selling and the related gain/loss is another category of “trader” gain or loss (see (b) below)..  Hedging transactions comprise the third category (see (c) below).  The fourth category is probably the only category you thought existed, the gain or loss from sales of equity.

  • Investment gains and losses:  The special rules for traders do not apply to securities held for investment (For example, you may buy Sirius stock in expectation of a buy-out sometime in the future (future being unknown, could be 6 months or 5 years). A trader must keep detailed records to distinguish the securities held for investment from the securities in the trading business. The securities held for investment must be identified as such in the trader’s records on the day he or she acquires them.  (A technical requirement that often times is done at the end of the year after you realize you are holding the stock for the long haul


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ValueWalk

#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

By Jacob Wolinsky. Originally published at ValueWalk.

Crescat Global Macro Fund update to investors on 1/19/2019

Crescat Global Macro Fund and Crescat Long/Short fund delivered strong returns for both December and full year 2018 in a difficult market. Based on ...



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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

Divisive economics

 

Guest author David Brin — scientist, technology consultant, best-selling author and futurist — explores the records of Democrats and Republicans on the US economy in the following post. For David's latest posts, visit the CONTRARY BRIN blog. For his books and short stories, visit his web...



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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

Cars.com 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 ...

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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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Biotech

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 www.shutterstock.com

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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OpTrader

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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Promotions

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.

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