Archive for 2007

Weekly Wrap-Up

What a wild week that was!

For the second week in a row the rewards of being bearish were very rich indeed despite our move to a substantially cash position.

I think I really nailed the market's direction in Monday's wrap-up when I posted this picture and said "That was the least exciting 90 points we ever gained."  It was a tired and pathetic attempt to get to 14,000 and, if anything, made us even more bearish on Monday as we loaded up on mattress plays, the index puts we use to cover our virtual portfolio.

That led to a huge lucky (some would call it skill but I'm not that delusional) break on Tuesday as the market began a 700-point, 4 day decline that generated incredible returns on what were originally intended to be covers on our remaining calls.  The nature of the drop was such that we had a scare on Tuesday, a chance to get our calls off the table on a rebound on Wednesday (that caused us to buy even more puts, including XOM et al!) followed by 500 additional points of decline on Thursday and Friday when we were pretty much all bearish.

How could we not have had a great week?!?

As Bryan E said in Tuesday's comments: "Today reminds me of that Barrons commercial…”The market goes up you make money, the market goes down you make money….but this time it’s because of PHIL, HAPPY, and ZMAN."

We were so hot predicting this week's action that we even nailed the titles for the day with "Whip around Wednesday,"  "Thursday Thump" and "Freaky Friday" so I won't even bother going into detail on what we said as there are no highlights – the whole week was a highlght!  Option Sage got the week started  with his excellent title "The Four Horsemen (of the Apocalypse?" which warned us that Apocalypse isn't traditionally a BUYBUYBUY celebration.

Far be it for us to fight the markets, we just like to go with the flow and enjoy the ride and what a ride it was this week!  Fundamentals really did start to matter in the market and even the mighty XOM corporation felt the pull of gravity as the company shed…
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Navigating the Stock Market – Isn’t it Ironic?

"It's like rain on your wedding day
It's a free ride when you've already paid
It's the good advice that you just didn't take
Who would've thought … it figures"

Alanis Morissette

It's been a very bearish two weeks for me and the last few days in particular I started to get the feeling the party was over, at least for the short haul, as I didn't like the look of the last leg of our rally to 14,000 and I especially did not like the look of the first few days of this week.  As I said on Monday: "That was the least exciting 90 points we ever gained."

Barry Ritholtz published a great cartoon that summarized yesterdays action quite nicely:


While we are not entirely immune to this sort of behavior on the member site (yesterday, for example, we decided to do shots every time the Dow crossed 13,400 in either direction, leading to 6 shots between 2:15 and 3:00!), we do try to keep a level (if not sober) head about this nonsense.

If you've been keeping up with us this week, you know we loved yesterday's action.  Despite the fact that we wish the market would recover, we always keep our post-it firmly affixed to our monitor which reads "It is NOT my job to save the market" which kept most of us from hitting the buy button during the 4 "recoveries" we got in the past 48 hours.

The members were certainly pleased:

biodieselchris – Posted July 27, 2007 at 12:37 pm | Permalink

"Phil I’m up 28.2% over 2 days and you can FP that number if you want, I blew away the other guy you quoted last night by 2X, much thanks to PSW!"

jeddah62 – Posted July 27, 2007 at 3:00 pm | Permalink

"Phil, really looking forward to more emphasis on the LTP! For the most part, my spread positions have been pretty good but I keep getting dinged on swing trading and now have to stop it. I’m one of those who needs a good working port like the LTP that doesn’t require constant attention all day
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The Mircowave Oven Theory of Behavior

I started the day with a very simple statement:

Don't you wish other people would be that honest with us?  It's very hard for people who give opinions for a living to stand in front of an audience and say: "I don't know."   Somehow they seem to feel that they have to know and, what's worse, once they force themselves to make a decision, they somehow feel obligated to defend it, even if new evidence comes out to the contrary.

This is exactly what's wrong with financial reporters and analysts, especially the clowns on TV (as well as pretty much anyone who makes a living giving you their opinion).   My members are familiar with something I'm going to share with you now.  It is a Nobel Prize-worthy theory that I feel helps make me a better trader and I thought this would be a good time to share it with you:

People love to make random decisions and stick to them like they were directly given it as a commandment!

How does this relate to microwaves? Well, aside from the fact that our brains are constantly being fried by the things every day (ever drive on the highway and see one of those dishes aimed right at you?  Do you know birds die if they fly too close to them?), this is what I observe:

You put something in the microwave, say pizza, and you put in a time, say 3:33 (or maybe you are a whole number person and do 3 or 4 minutes). Now, unless you are a chain store pizza buyer your pizza slice is probably not always the same size or maybe it has different toppings etc., but you probably put in the same number every time.

Theory number 1:  People tend to repeat behavior, especially if it was successful in the past.

So the light goes on and the little thing spins and you are either a watcher or a walker (as you may have guessed - I hit the button and leave the room!), but either way you usually end up standing by the oven with 20 or 30 seconds to go waiting for it to stop.

Here's where the Nobel Prize committee has to recognize me:

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Friday Virtual Portfolio Moves

Posted July 27, 2007 at 9:40 am | Permalink (Edit)

CROX – I don’t think yuou guys get the fact that we only spent .05 on this play so we have a ton of options. If we had the margin for it the proper move would be to take a couple of Septs off the table into the initial excitement (the naked play is gone already) then wait for the same thing that happened ot AMZN and BIDU to happen to our boy but, in the case of the $10KP the best move is to roll the Sept $52.50s to 2X $57.50s and roll the caller from the Aug $50s at $8 to the 2X the $55s at $4.35 XXX

Posted July 27, 2007 at 9:46 am | Permalink (Edit)

IMB – missed your chance to get out even already! Maybe a flush on the way down… 8-(

In general – remember what I said yesterday about trading curbs leaving a lot of sell orders backed up at the brokerages. If we don’t get off to a good start then those orders will be reupped today so we let the DIA and Q calls die and don’t take the puts off the table until we break positive. Until we get back to 13,600 nothing we see will be more than a minor bounce.

CVX is going down on those earnings so what does that tell you?

This time I’m not going to miss shorting Google against 1/2 my longs, probably the $510s, possibly the $500s as a mo play down. XXX

Posted July 27, 2007 at 9:53 am | Permalink (Edit)

Emergency White House “Economic Summit” will attempt to spin the GDP and the economy this morning so watch those puts in case we have to dump them.

Posted July 27, 2007 at 10:00 am | Permalink (Edit)

Rolling logic – only the assumed margin restriction of a $10KP. If CROX takes off, that will be our next roll, rolling the caller up to 2x the $60 calls, which right now are $2.55 of pure premium and already outgaining the $55s.

VLO – great call Z! They are already turning off…
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Freaky Friday

Which way will we go???

I was just laying out my DIA puts and calls and my QQQQ calls in member chat and I realize that those positions clearly indicate that l have absolutely no idea what's going on.

As I expected last night. the GDP data gave us a nice Goldilocks set of numbers but the PCE including food and energy, which the Government likes to ignore, was up 4.3% for the quarter, up from 3.5% in Q1.  The "core" PCE is up just 1.4% for all you non-eating, non-energy using citizens so let's all party like we are Amish people on a hunger strike!

I can kid about the Amish because they'll never read an electronic document but, for the rest of us, I still urge caution, caution and more caution as the DIA calls and QQQQ calls we took were UPSIDE PROTECTION, meaning they are there to protect our terrific gains on the put side.  We could make money on both ends of this trade today as we wait for some Federally funded BS to hit the markets from Paulson, Bush (oh no but, yes, he's speaking!), Bernanke et al who'd better say something positive before we start making Asian-style declines.

The Hang Seng missed my down 1,000 target by 222 points and recovered 127 into the close so kudos to them for making it back over 22,500.  The Nikkei dropped 418 points, also with a 100 point gain at the last minute so I'm taking all of Asia with a grain of salt this morningNTT's profits dropped 25% as they experienced the kind of cost inflation that our government doesn't believe in.

Europe is off about a point ahead of our open and has been gathering strength in their afternoon, so we will watch that finish with great interest but it will take a lot for us to jump back in and BUYBUYBUY.  We certainly have the cash on the side ready to do it but we're going to need clear tech leadership, not energy leadership, to even consider jumping back into this very chilly pool:


We actually played OIH to the plus side yesterday.  Happy Trading says they still have room to run and we do not argue with Wang's World, as he's
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Thursday Virtual Portfolio Moves

Posted July 26, 2007 at 9:40 am | Permalink (Edit)

Mattress plays – I hate to talk about them while we’re dropping as the worst thing you can do is initiate a play in a panic – NEVER buy into the initial excitement! But, if you don’t already have them the rule of thumb is to take 2X of whatever costs $2 and 1X of whatever is one bracket below that. Right now that is the Aug $136 puts at $2.05 and the Aug $135 puts at $1.67. When the $135s get to $2 you add 1x to them, sell 1X of the $136s and add 1x of the $134s setting .25 stops on the whole group (your 2x position in the Aug $135s will have a blended basis of $1.84.

Posted July 26, 2007 at 9:45 am | Permalink (Edit)

Sorry, very important to mention that I am currently scaling into 1x DIA $137 CALLS as an upside play and I will roll these down if the $136s get cheap and then possibly DD.

AAPL – WOW! $140s opened at $10 and are now $8.45. Tough call if you didn’t sell yet but if they hold $145 I guess it’s worth riding a little. Obviously the opposite is true for callers – now way do I pay them unless I have to!

Posted July 26, 2007 at 10:02 am | Permalink (Edit)
New home sales down 6.8% in June and May is revised to down 2.2% so they lied to us then too! Median prices are still dropping as well and inventory is up to 7.8 month’s supply – this is worse than terrible!!!!
Posted July 26, 2007 at 10:17 am | Permalink (Edit)
GM – I hope those are put leaps! I haven’t sold against mine as I am very nervous that they will drop $6 in one day if, perhaps, someone sees their books… If they start going up, I would sell, for example, 1/2 the $32.50 puts as a momentum play but only that.

Buyers are coming in but it remains to be seen whether they run

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Thursday Wrap-Up

"Thanks gang. Also…thanks for the training that set me up to be up 13.5% on a down day like today. That NEVER would have happened without the day to day classes all of you have been giving." – KeyserSoze Posted July 26, 2007 at 4:48 pm | Permalink

What can I say?  I'm very proud!

We had a fantastic day as everything went perfectly for our short positions, especially our mattress plays that usually protect our virtual portfolio but today were the stars.

It also didn't hurt that we've been short on oil for the month and it finally paid off in spades, especailly our old buddies XOM, who lost about $26Bn in market cap in what can only be described as a rough day.  As I mentioned in yesterday's wrap-up, we were keying on XOM and the XLE for put plays, capitalizing on the strategy Zman and I have been playing up for weeks – that producing less oil leads to less profits! 

Our MN1 broadcast pick, the PTR $150 puts, had a fantastic day as well as they doubled on the $5 dip.  We held onto those, hoping for a very hard slap in Asian trading to drive the stock back to the 50 dma at $143.

Our Apple plays (also reviewed last night) went off spectacularly, with the stock coming in right at our sweet spot and we closed out $135 calls for a 20% loss, the $140 calls for a 105% profit, and the $135 puts with a 50% loss leaving us open  with the Jan $150s with a 121% profit, the Oct 140s with a 223% profit and the Aug $150s with a 32% profit in the Complex Spreads Virtual Portfolio, putting it up 135% for the year, an 11% gain on the week.  We also still have the Jan '09 $140s, up 20%, against which we sold the Aug $140s and $145's in the Long-Term Virtual Portfolio.

Tomorrow it will be our CROX Sept $50s that make us very, very happy as the earnings were so good they had to halt the stock!  We also have a spread of the Sept $52.50s and the Aug $50s in the $10KP that cost us a nickel so we'll be looking for a dollar or…
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Thursday Thump???

"When the M&As start to unwind it is time to be all cash or short the market – this is that time!!!" – Me, in noting the problems with the Chrysler funding, yesterday at 10:50

[chart]5 minutes later I said: "Transports off a cliff even with declining oil prices. I’m letting the rules dictate what I get out of with Aug and Sept stopping out on 20% of the profit pullbacks (which is most of them). The DIA puts are in great shape again but at this point I’d rather take a fresh look at things in a couple of more days than try to “save” things now."

11:16: "So this is why I work off stops, as soon as I started setting them, the market stopped dropping but I am raising them with every tick up and will be getting the hell out if we fall again."

11:50: "The VIX is calming down now pretty consistently going down when the markets go up, indicating up is still the right direction but things seem pretty out of control to me if XOM can go up and down $5Bn in value 3 times in 2 hours."

12:16: "XOM – I am adding back puts into earnings. If they miss then $1.75 for the $90 puts will be a real bargain. There is what I consider to be an irrational expectation that they will earn 14% more money despite tha fact that sales are down 1.5% (at least). Now these guys can make their numbers say anything they want them to as they take in $100Bn a quarter in revenues but politically I think they wouldn’t mind a miss this Q as it will carry them all the way through the Summer able to tell Congress how they are just a poor struggling energy company that’s just trying to make a nice return for all the widows and orphans who own the stock. They do have 5% less shares than last year but I think costs are way up. If they miss, it will be a Dow disaster."

3:38: "S&P needs 1,520 to make this thing real. Dow needs to get back to 13,850 to make up 1/2 its losses
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Wild Wednesday Wrap-Up

Wheee, what a day!

We broke 500 comments on the member site for the first time so you know a lot was going on.

The trades were flying fast and furious but I considered it very lucky that we had gone long DIA and QQQQ right at the end yesterday and I decided today was a good day to go further into cash.  Right at 9:32 I said: "This is a good time to take stuff off the table that was killing you yesterday. Nothing has really changed other than a few companies that were supposed to have great earnings having great earnings so be realistic."

The timing was great for cashing out our oil puts just after the inventory as that sector turned around sharply (for no good reason) and the energy sector made up much of the afternoon rally.  We messed around with some new oil positions on both sides but, other than XOM $90 puts at $1.40 ahead of earnings, much lighter than we have been in a long time, as I said in the morning post: "We picked up so much downside action in oil yesterday I’m more concerned about a negative surprise."

We got that negative surprise today as oil flew up $2.32 (only in the front months of course as the farce continues) but it's all up to XOM tomorrow who will have to justify what is now a $522Bn market cap.  XOM has gained over $50Bn in market cap since June 27th, more than the entire value of VLO ($38Bn), SU ($43Bn), OXY ($50Bn), the newly combined RIG ($33Bn) & GSF ($17.5Bn), or the total combination of SUN ($8.5Bn) + TSO (7Bn) + CHK ($16Bn) + GSF ($17.5Bn) so it will be very interesting to see how they manage to justify this runaway valuation.

The Dow was up and down 100 points four times today but ended up nowhere in particular, closing under 13,800, but at least 13,700 seemed to form some sort of a floor.  We will be watching the S&P closely tomorrow as Happy Trading and I were disappointed we couldn't close above 1,520:


Our AMZN bear call spread is working out nicely so far as the $85s went off at $6 on the morning jump and have already calmed…
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Wednesday Virtual Portfolio Moves

Posted July 25, 2007 at 9:30 am | Permalink (Edit)

GSK – we have to see where they go in the morning but naked selling into the excitement is the way to go. Right now it’s AMZN time!

Posted July 25, 2007 at 9:32 am | Permalink (Edit)

This is a good time to take stuff off the table that was killing you yesterday. Nothing has really changed other than a few companies that were supposed to have great earnings having great earnings so be realistic. STM and GLW were disappointing but no one seems to care…

Posted July 25, 2007 at 9:43 am | Permalink (Edit)

I’m surprised they expect a 1.9Mb draw in crude – that’s a number that can disappoint but they really took Aug NYMEX barrels off at the last minute so perhaps they are creating an artificial shortage in Cushing.

AMZN – took 40 $90s for $1.45 and will sell 20 $85s, now $3.50 and am holding Oct $80s, now $8.60 so I’m now in with 40 Oct $90s, sold 20 $75s, now 9.75 and the 20 Oct $80s. Once I am sure there is no short squeeze, I will cash at least 1/2 my Octobers and sell 10 more Augs. xxx

Posted July 25, 2007 at 9:47 am | Permalink (Edit)

AMZN – another nice way to get out of the Oct $80, Aug $75 play is to roll yourself to 2X the Oct $90s and roll your caller to 2X the $85s – this is a near even roll and puts you in much better margin position. XXX

Posted July 25, 2007 at 10:01 am | Permalink (Edit)

COP calls flying, that was a good choice and SUN calls still available if you need cover ahead of inventory. I’m very disappointed with the lack of returns from my DIA and QQQ calls so I’d have to say sentiment is still VERY bearish. So the way we play covers like COP is we sell them into the initial excitement and then use that gain (.30) to augment the stops on the now naked puts we’re…
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Zero Hedge

Enemy Of The People?

Courtesy of ZeroHedge. View original post here.

Via The Zman blog,

There has never been a time when normal people did not know the media was biased and biased in a predictable direction. For every non-liberal in the media, there were at least ten liberals. The ratio was probably higher, but then, as now, some lefties liked to pretend they were independents or some third option.

The media used to invest a lot of time denying they had a bias and an agenda, but the only people who believed them were on the Left, which had the odd effect of confirming they had a bias and an agenda.


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Phil's Favorites

A 2019 Earnings Recession?


A 2019 Earnings Recession?

Courtesy of 

Shout to Leigh!

On the new Talk Your Book – Josh Brown is joined by Leigh Drogen of Estimize, one of the leading providers of crowdsourced financial and economic data to talk about the trend in corporate profits that could potentially lead to an earnings recession later this year.

What is the thing that Leigh is seeing in the data that Wall Street isn’t yet picking up on? What segment of the stock market is most at risk? Why is the crowd smarter than the narrow consensus of Wall Street analysts?

Check out Estimize ...

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D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...

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Kimble Charting Solutions

Gold & Silver Testing Important Breakout Levels!

Courtesy of Chris Kimble.

Gold and Silver from a long-term perspective have created a series of lower highs over the past 8-years. Will 2019 bring a change to this trend? A big test is in play!

Gold since the lows in 2016 has created a series of higher lows, while Silver may have created a double bottom.

Gold & Silver are currently facing break attempts a (1) and (2). These falling resistance lines have disappointed metals bulls for the past few years.

The direction of Gold and Silver weeks and months from now should be highly influenced by what each does as they are attempting to break above important resistance levels.

To become a member of Kimbl...

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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ... more from Insider

Digital Currencies

Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions

Courtesy of Zero Hedge

While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.

As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spri...

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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 failure based on his personality, which was evident years ago. This article, written in 2017, references a prescient article Bill wrote before Trump became president, in July, 2016, 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...

Learn more About Phil >>

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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 >>