Archive for 2007

Record Weekly Wrap-Up

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Another week, another record — Ho hum!

While we did set out with the intention of paring down our positions, we ended this option period with more open positions than we started with as it was just an incredible week full of interesting trading opportunities.

We are however far more hedged than we were entering the week and I will feel downright silly if we don’t get some kind of pullback ahead of the holiday weekend as covered calls account for many of the 97 open positions in our Short-Term Virtual Portfolio, which has a ridiculous average gain of 220% (due to hedges dropping our basis and some real runaways) but a loss of capital of 1.7% on just 22 average days open as we have pulled most of the winners off the table but still have our large protective puts (obviously not winners!) in place.

Our Long-Term Virtual Portfolio was spectacular this week with the gain on capital climbing to 77% on 72 average days open for 47 open positions and we are slowly but surely rebalancing our virtual portfolios to bring the STP’s percentage down but it’s left us with plenty of cash to deploy, whichever way the market goes.

In this busy week we closed 63 positions with an average gain of 133%, slightly less than our gain on capital of 140% but, as I said, we were closing out mainly winners this week so it was hard to miss.  Our average hold was just 14 days which either indicates I was on a heck of a roll or this was a real "monkey with a dartboard" kind of market (hard to miss).

 


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Friday Virtual Portfolio Moves

Expiration Day Game Plan

$10KP – This is the end of this $10KP, we start a new one on Monday, open positions will go to the STP with the exception of DNDN which will go to my stock virtual portfolio.

  • DNDN – I’m still hoping for a jackpot on the calls but the June $7.50s are .38 so I’ll be selling 1/2 my posiiton in those eventually as that’s a pretty good monthly return on $6.
  • EBAY – I think they are pinned so letting the Jun $32.50s ride
  • FDX – have to pick a spot to buy out $105 caller.
  • GENZ – caller goes worthless have to hope for recovery on J $67.50s
  • HLYS – caller deal, Aug looks dead too!
  • ICE – cutting it close!  $1.25 stop on May caller, now .85
  • JDSU – hopeless
  • OXPS – holding leaps naked for bounce, will move to LTP
  • TASR – holding naked for now.  June $10s are .25, sell half at .40

The STP and LTP moves are assuming a flat market.  If we have some insane rally I may be more inclined to just raise my DIA protects to $134 or $135 puts but in a drop I will continue to use 20% of profit stops to cut back positions.  Positions not mentioned are not changing.  Obviously I will try to get a little more or pay a little less for each position but these are the numbers I see right now (6am):

STP

  • AUY – DD on Jan ‘09 $15s at $2.90
  • BBY – sell Jun $57.50s for $1.30
  • BIDU – cutting it close on $130 caller, since I will roll not too worried about a run so unless there’s a big move I will ride him out.
  • CCJ – I still think it’s pinned
  • COP/Other oil puts – I am hoping for a big drop after the holiday weekend so I’m inclined to DD when I get to 1/2
  • CSCO – DD at .22
  • DIA June $134 puts - I find it very strange that these have not lost more value.  I’m inclined to stop out on mo at $1.25 and try to buy $135 puts at the top (maybe $1.50 or less)
  • DNA – waiting for a comeback to sell (I hope)
  • FIZ – buying Oct


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Freaky Friday

Sometimes you just have to give up and join the rally!

A nice, normal, healthy pullback would have been nice but the pre-markets say we're going to go for 13,500 today and at least 1,520 on the S&P.  It's options expiration day and I wrote a whole series of plays to make on our positions but let's play the momentum game IF the market is determined to rally.  As obvious as this advice seems – do try to buy low and sell high!

I'm still thinking that a lot of this rally in the face of high oil prices is a result of this week's Congressional hearings on energy and that the writing is clearly on the wall to signal an end to this farce and the run-up in oil prices despite fundamental evidence to the contrary (across the board inventory builds, rising imports) is simply a last, desperate effort by the oil roaches to draw in some more suckers before they run for the exits.

Asia had a mild sell-off but copper went limit down (5%) in China, which spooked the commodity markets so a 100-point drop is no big deal (but they did close at their lows).  A mosque was bombed in India  and two other unexploded bombs were found by the police.  This could erupt over the weekend so let's make sure we are well covered by the day's end, no matter what! 

China's Central Bank will raise interest rates in an effort to cool off their economy and to please Hank Paulson.  In addition to copper worries, steel exports were down 4% in Japan for March which exacerbated the decline in miners.

Europe seems to be in a good mood today as GE looks to be moving forward with their $11Bn sale of the plastics division, a move I mentioned would be made way back on Jan 19th when we reviewed their Q4 earnings and I decided that June was the right time for the sale to go through.  Now would be a good time to review last month's prediction on Tech where my example from the past was — Plastics!

Airlines are, of course holding Europe back as oil prices climb back to $65 and BAB (who I got tired of shorting…
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Expiration Day Game Plan

$10KP – This is the end of this $10KP, we start a new one on Monday, open positions will go to the STP with the exception of DNDN which will go to my stock virtual portfolio.

  • DNDN – I’m still hoping for a jackpot on the calls but the June $7.50s are .38 so I’ll be selling 1/2 my posiiton in those eventually as that’s a pretty good monthly return on $6.
  • EBAY – I think they are pinned so letting the Jun $32.50s ride
  • FDX – have to pick a spot to buy out $105 caller.
  • GENZ – caller goes worthless have to hope for recovery on J $67.50s
  • HLYS – caller deal, Aug looks dead too!
  • ICE – cutting it close!  $1.25 stop on May caller, now .85
  • JDSU – hopeless
  • OXPS – holding leaps naked for bounce, will move to LTP
  • TASR – holding naked for now.  June $10s are .25, sell half at .40

The STP and LTP moves are assuming a flat market.  If we have some insane rally I may be more inclined to just raise my DIA protects to $134 or $135 puts but in a drop I will continue to use 20% of profit stops to cut back positions.  Positions not mentioned are not changing.  Obviously I will try to get a little more or pay a little less for each position but these are the numbers I see right now (6am):

STP

  • AUY – DD on Jan ’09 $15s at $2.90
  • BBY – sell Jun $57.50s for $1.30
  • BIDU – cutting it close on $130 caller, since I will roll not too worried about a run so unless there’s a big move I will ride him out.
  • CCJ – I still think it’s pinned
  • COP/Other oil puts – I am hoping for a big drop after the holiday weekend so I’m inclined to DD when I get to 1/2
  • CSCO – DD at .22
  • DIA June $134 puts - I find it very strange that these have not lost more value.  I’m inclined to stop out on mo at $1.25 and try to buy $135 puts at the top (maybe $1.50 or less)
  • DNA – waiting for a comeback to sell (I hope)
  • FIZ – buying Oct $15 for $1.35
  • IGW DD at .55


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Thursday Virtual Portfolio Moves

Posted May 17, 2007 at 9:49 am | Permalink (Edit)

CCJ – very good, I was just looking over those! CCJ is not like other commodities as there is an ACTUAL shortage of uranium and my current thinking is that they are just being pinned at $50 for expiration. I have the Jan $60s at $3.60, now $3.30 and I’m going to sell the May $50s for .50 . Even if they go up, it’s just a bonus .50 as I roll my caller to June tomorrow afternoon. XXX

Posted May 17, 2007 at 9:52 am | Permalink (Edit)

TSO I am out and hoping they get a nice pop into gas inventories so I can get back in.

CCJ – so much for that plan! No one would give me .50 so I guess I’d better sell the June $50s for $2 before this gets ugly but now I have to do that with a $2.50 stop (and treat it like a mo play with a .35 trailing stop.) XXX

Posted May 17, 2007 at 9:59 am | Permalink (Edit)

I picked up the DNDN Jun $7.50s for .35, just for fun – could be worth nothing or $10 over the next 4 weeks… XXX as a craps roll but I would buy 7 for the $10KP

Posted May 17, 2007 at 10:24 am | Permalink (Edit)

MEE – that’s a keeper for me as they are fundamentally screwed by this lawsuit. As I said the other day, this is no XOM that can spend $10M a year delaying and appealing until they buy enough judges to get a better ruling. These guys government face fines bigger than their net worth and THEN they will be sued in a class action case. The timing of the case brings them right into a Clinton presidency. One of their best defenses is that some of these violations occurred befroe they owned the mines that were clearly in violation – that’s not very encouraging…

Big test for MEE is the rising 50 dma at $25.60 and below that they should get some kind of bounce off the 200 dma at $24.50 but $27…
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Thursday Wrap-Up

That wasn't so bad was it?

Not dropping 100 points is good.  It would have been nice if we had a differenct leader than the energy sector, which was up 1.3% for the day but the fact that the industrials refused to fall off, even as oil spiked up over 3% in a single day indicates clearly that either this is the most amazing economy in the history of the planet or that people are just idiots – one or the other, we'll find out soon!

We tested 13,450 not once but 3 times during the day and tested 13,500 just once before running all the way up to 13,474 right at 3 o'clock sharp while the S&P punched through 1,515 on its second attempt of the day after making sure the 1,510 mark would hold.  The Nasdaq, unfortunately, made no attempt to break out of anything, even with another strong showing from Apple, dragged down by yet another poor showing by the SOX.

There will be no help from MRVL tomorrow, who had a so-so semi earnings report that were below expectation but really not too bad.  ADSK and INTU gave great reports which would ordinarily boost the Nasdaq but with tomorrow being expiration day I'm not counting on anything in particular

 

 

Day’s

Must

Comfort

Break

Next

Index

Current

Move

Hold

Zone

Out

Goal

Dow 13,476


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Thougthful Thursday Morning

Was I paranoid yesterday or is this really the top?

We won't really know until the end of next week but we've had far too good of a year so far to take chances up at this level and I doubt many hedge fund managers will disagree with me.  My comment on the subject yesterday was: "While we could drop 150-200 points by Friday I think that’s what most fund managers are expecting and NOT dropping 100 points by Friday will but me (as a fund manager) heading into the holiday weekend on the wrong side of the market. That will cause me to put money into things that seem like they will rally but should be safe like MSFT, GOOG, MRVL, UPS… solid names that haven’t rallied with the markets."

Asia held flat this morning, probably also watching and waiting to see how we handle 13,500 but, more importantly, how the S&P handles 1,520 and, hopefully, 1,530.  The BOJ held rates steady despite some pretty good economic numbers, cutting the dollar a huge break.  It looks like we may have take those PTR calls off the table too early with "just" an 800% gain as that company continues to gather steam and Mega Kudos to Happy Trading and Zman for sticking with this one as a focus stock in the oil sector.

A weaker yen is good for the dollar and good for our SNE position but I'm not going to push that one too far either (1/2 out yesterday) and I'll be happy to get out of our EWJs even if our markets start to turn down.  Europe had a weak finish yesterday but is trading mildly up ahead of our open this morning.  Insurance companies lead the pack over there but BT (British Telecom) caused a stir with a $5Bn buyback and MT announced a 40% rise in Q1 profitsFiat continues to gain market share as Europeans buy smaller and smaller cars as the well-educated European consumer "gets" that whole supply and demand thing.

It looks like we'll be bidding a sad farewell to Paul Wolfowitz in yet another signal by the rest of the World that the US doesn't call the shots anymore.  There will be a lot of pressure on Bush to pick…
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Wednesday Wrap-Up

Ho-hum – another day, another record for the Dow.

Much as I want to get excited about this I had to take it off the table this afternoon.  As oil stocks started recovering we dumped those puts (after hitting my VLO target of -$2) but, as we were getting close to my other target of 13,500 and nothing was stopping out, I decided to halve our uncovered positions.

We did manage to knock another 15 positions off the list but I couldn't help adding new ones again so we still have 83 open positions in the STP, but they are very well covered and, while we only have 15 puts, they do add up to 1/3 of the value of that virtual portfolio so we really are ready for anything for the next few days!

So rah rah markets – everything is great, it's an unstoppable money machine and if you're not in it you should buy high and sell higher blah blah blah….  You'll have to excuse me if I need to take a break for a few days.  As I said in today's comments, I'll be thrilled to hold here into the weekend and if we can get through next week without a drop we may be poised for an epic summer rally but we are gathering up our cash to target a new group of stocks (one of which was Google but they went and jumped the gun) that we expect to do well in the next leg up.

You've got to love the Nasdaq bounce we got today but I doubled down on our QQQQ puts at the close as I consider it cheap coverage (and we didn't break 2,550):

 

As Happy points out, we have great chart action on the Nasdaq and the S&P and the Dow is starting to look like the Hang Seng.  HPQ gave us some solid numbers after hours to hang our hats on for tomorrow but I was happy that the early gains in the markets came without commodity participation.  If we start seeing real signs of rotation then I will be able to get bullish very quickly but let's see how we do at the 13,500 mark before we bet the farm on 15,000:

 

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Wednesday Virtual Portfolio Moves

Posted May 16, 2007 at 10:03 am | Permalink (Edit)

SHFL Jun $17.50s – no I was having trouble justifying the extra dollar and decided that .75 would be a fine price to pay (splitting the difference between the .50 we started with and the $1 we ended with) so I have a bid in for that this morning.

Posted May 16, 2007 at 10:08 am | Permalink (Edit)

EBAY – I took a DD at .55 so my basis is not .65 but I will likely leave these be and take the Oct $35s (now $2.28) and sell the June $32.50s (now $1.48) against those to recoup my loss using the June $35s as a break in case the stock jumps up. XXX

Posted May 16, 2007 at 10:17 am | Permalink (Edit)

QCOM – pinned. I have the naked Jan $45s at $4.35 and I didn’t want to risk selling the Mays but I will take .50 if I can get it. XXX

MOT – that’s good news! Check out his effect on C. I’ve already got leaps (I alway own MOT) and I’m going to grab the June $18s for .62 (.50 premium) XXX I think they are pinning to $18 as they do have calls there.

Posted May 16, 2007 at 10:30 am | Permalink (Edit)

DE – got a little ahead of themselves plus lots of reasons to pin $120.

Have my finger on the VLO $72.50s at .55 in case inventory goes against us as I already have plenty of puts. Beware the head fake though…

Oops, there goes VLO, inventories must be bad but CNBC is in commercials

Posted May 16, 2007 at 10:32 am | Permalink (Edit)

Crude + 1MB
Gasoling + 1.7Mb
Distilates + 1.1Mb and CNBC weathergirl says it’s in-line! LIES!!!

Also, refinery utilization is 89.5, a bit low and that is not bullish for oil because it means that imports are rising and that is bad for refinery margins. Now would be a good time to take out that putter!

Posted May 16, 2007 at 10:40 am


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Which Way Wednesday?

It’s all about the Nasdaq today.

2,525 has been a very critical level for the Nasdaq since it gapped up there on April 20th and it matched the highs the index made the week leading up to the big drop on February 27th so Happy Trading and I think we need to draw a line in the sand here or we may be looking at a retest of the 2,400 mark:

nasdaq_5_15_07.jpg

2,400 on the Nasdaq translates to about $43.50 on the QQQQ, about a $3 drop from where we are now and the June $45 puts are just .43 so we’ll be keeping our eye on those today if we do fail this critical level.

Keep in mind I still think the Nasdaq should be doing better, not worse, as I think CDWC’s earnings and outlook mark a real change in tech spending.  A survey done by CDW also indicates that although Vista may be off to a slow start, much of that is due to the late roll-out which has backed up IT testing of the new system.  "Everything that we’re hearing from our customers is that they’re going to be patient about this and they’re looking more in the third or fourth quarter this year than the first or second," CDW CEO Edwardson said.

Asian markets held firm this morning with India jumping a surprising 197 points as foretold by the run in our IBN shares the past three days.  We sold the June $45s against our Dec $45s on Thursday but we’ll be watching them today in case we need to take those back quickly.  SNE (we have June $55s) reported a loss but better than expected overall and they raised guidance.  Sales of LCD TVs doubled to 6.3M for last year and the company forecasts 10M units for 2007.  "We expect profits from TVs to get a boost this year, led by LCDs. We had a huge cost for the battery recall, but we won’t have such expenses this year," Sony Chief Financial Officer Nobuyuki Oneda told a news conference.

Hmmm, 10M LCD TVs time 40 average inches diagonal is about 100M square feet of glass for Sony alone so I’d have to say that the GLW Jan $22.50s for $3.35 are a BUYBUYBUY.  I would expect to be selling the June $25s for $1 later this…
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#1 Performing Global Macro Hedge Fund Sees More Shorts Opportunities Ahead As China Bursts

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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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