Archive for 2007

Weekly Wrap-Up

We’ve been having problems with the server changeover so I’m going to keep this short and sweetI am still , as of Monday morning, unable to access the member site, if this contnues throughout the day we will hold chat here, on the free site but hopefully the issue will resolve itself before then.

We made new highs and that’s all that matters at the end of the week.  The markets are hot and that’s undeniable and we’ll see how the first real week of earnings season treats us

We started the week in crisis but I titled the Monday Morning Post "What doesn’t kill us, makes us stronger."  After  a very brief dip, it turned out that confession was indeed good for the Financial Sector’s sole as the XLF caught fire and looked strong all the way to a retest of 36, which is up exactly 5% from the Sept 10th turn around.  While I still think we’re wistling past the graveyard – what can you do?  As I said Monday night: "The train has now left the station and all we can do is grab the bumper and hold on tight because it looks like it’s going to be a wild ride…"

Tuesday morning we looked for some justification for our bullish behavior but there really isn’t much, other than the global trickle down theory, where we stand firmly at the bottom of the barrel, picking up scraps as the rest of the world markets are running away with the ball.  By the end of Tuesday we closed out 53 positions in just 2 days as we moved to more cash and a more bullish stance with 40% of our Short-Term Virtual Portfolio in open calls.  By Wednesday morning we were bullish enough not to buy the sudden does of bll that was spewed by the media and by Wednesday night we were certain it was just a shakeout.   We were properly positioned Thursday and Friday but by Friday we were back to covering ahead of the weekend as we can only take "Don’t worry, be happy" just so far!

Of course we had a good week:

  • Short-Term Virtual Portfolio up 64%, 749% for the year.
  • Long-Term Virtual Portfolio up 7%, 228% for they year.


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Welcome to the New Site

OK – we finally got the new server up and running!

Now we need to debug this site so please use these comments for anything you notice not working right.   It will probably take a week to shake out all the bugs.

Also, we are waiting for the programmers to bring over the last few posts and comments.   I think they thought we’d be down all night so they didn’t do it yet but we’re not down and it’s driving me crazy not to be able to get my work done this morning!

On the main page, where you see my article and a box for Sage, there should also be a box for Happy Trading, and there will also be daily features from Stock and Options Trading and that is also where we’re creating a box for member contributions.  Hopefully during the week we will have all that working correctly.

I know the type is annoyingly small on the main page but it’s just supposed to be for headlines, maybe a paragraph or two, not the whole article – nonetheless, whatever the next font size up is, they need to switch to that!  It’s a mistake that, in that view, you can see my whole article.  If you want to read the articles, click on the title or on my section, which gives you the week’s view in the proper size.

Thanks for putting up with transitional nonsense, no suggestion is too small to deal with as it would be nice to attain perfection at some point so feel free to say whatever.  The faster we get these bugs out, the faster we can get back to our markets!

Have a great weekend,

- Phil

 

 





Beating The Bear

32 weekly Trade Alerts issued.  25 Trade Alerts closed for a profit with 7 still open. Only 1 of those 7 went against expectations. That’s our record at Stock & Option Trades.

While most would try to shove that 1 trade under the rug and ignore it, we recognize that surprises happen in the market and we have a plan to deal with such surprises.  So, we were delighted when Phil offered us the opportunity to present the 1 trade that went against us in the last 6 months and spotlight how we have saved it.

On the week of September 16th, anticipation was reaching fever point as the Federal Reserve was due to announce its decision on rate cuts.  Moreover, Bear Stearns, Goldman Sachs and Morgan Stanley were due to announce earnings reports.  With such palpable excitement in the air we felt that we would certainly see volatility in the prices of the aforementioned stocks.  And, we had a double-shot at benefiting from such volatility.  If the rate cut didn’t cause a move, surely earnings would.

We decided that Bear Stearns, being the weakest of the companies, would be most likely to react most violently.   We believed its volatility would be greatest and sought out a trade that would take advantage of the expected big moves.

With same confidence that had led to our previous 6 months of winners, we entered our trade, a Ratio Put Backspread.  Along with our target goals, our risk management section and indeed our fundamental and technical analysis sections we highlighted the following in our Trade Alert.

  • Sell To Open September Short Put Strike $125 (symbol: .BSCUE – Bid: $9.40)
  • Buy To Open September Long Put Strike $120 (symbol: .BSCUD – Ask: $6.10)
  • Buy To Open September Long Put Strike $110 (symbol: .BVDUB – Ask: $1.95)

Essentially, we needed the stock to move up or down by $10 to make our return during the week.

As the week came to a close Goldman Sachs had vaulted higher by almost $15 but Bear Stearns had astonishingly ended flat!  Needless to say our existing trade was not looking nearly as great as we had expected.  The stock had gone up during the week and it had gone down during the week, but in the end, which is what counted, it was the same place it began the week!

If we were like…
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Weekend Reading – Always in Progress!

Well I can't get my review done until they fix the site so I'll just share some notes as I go in and out this weekend:

Very disturbing looking jobs data acourding to this article in Financial Sense, which pretty much sums up what was bothering me about the figures.  I knew something wasn't adding up and I think Chris hits the nail on the head by pointing out that the bulk of our job "growth" is coming from the administration tinkering with the numbers, not from actual jobs. 

1005h16He points out that changes in the BDM, the Birth/Death Model which is used to derive the NFP (Non-Farm Payroll) number has been adjust downwards by 69% since the beginning of '05, which causes job gains to appear 69% higher than they would have been under the old model.  While I'm sure the President thinks that this amazing drop in mortality is a reflection of his health care plan (or lack thereof), it's really the birth and death of businesses they are tracking.

The BLS surveys 160,000 employers at 400,000 worksites across the countty to product the NFP number.  It adjusts those results using the Birth/Death model to account for how many new businesses are "born" and how many "die" during the period.  So if the average construction project employes 40 workers and the government assumes that there is a 10% birth-rate in construciton jobs, then there's 5,000 more jobs right there (95,000 construction jobs were "born" in '06)!  There was a big deal made about phasing in adjusted numbers and they started making changes in 2000 with the final adjustments made in 2003 but the sampling assumptions are based on business growth during the Clinton administration, where 22M jobs were created in 8 years.

It is very possible that the 100,000 jobs claimed to be added recently are simply the statistal average between the 275,000 per month average of the 90s, on which the model is based, and the reality of 75,000 lost jobs per month this decade.

How do they tinker with the numbers.  Simple rule changes:  A non-respondents' (a place of business that doesn't answer the phone) job growth is automatically given the same growth rate as the average respondant.  In other words, "That business isn't dead, they just don't answer their phones anymore."  Also, by
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Friday Virtual Portfolio Moves

Posted October 5, 2007 at 9:34 am | Permalink (Edit)

Good morning!

Best play with RIMM is to sell our calls into the rally and wait for a pullback but better make sure one is coming first!

Posted October 5, 2007 at 9:36 am | Permalink (Edit)

Rolled RIMM $110 calls I own to Nov $115s for $1 to prevent my loss but keep a cover. XXX

Posted October 5, 2007 at 9:40 am | Permalink (Edit)

Bought out putter for $3.25, rolled my puts up to $110 puts for $3.55 for when the Golman sheep get tired of buying. XXX

Posted October 5, 2007 at 9:41 am | Permalink (Edit)

Wow, I so lucked out by going to 2/3 covered on Goog last night!

Naked sold RIMM $110s at $4.50 as a mo (or loss of mo play)

Posted October 5, 2007 at 9:59 am | Permalink (Edit)

HMY – all over the place but they went down on what seems to me to be a very correctable problem in their mine so I still endorse the play at .35 (Nov $12.50s) but we’re only trying to get to .50.

BXP is a DD if you are into the speculative puts. VNO too at $2.25 (Nov $110 puts). XXX

This is why you MUST scale into positions. The fact that we start buying puts motivates people to try to shake us out. If we are scaling in we say “Yah, more puts for less money” but if you are already fully commited you freak out and take a 30% loss.

DM – I told you NEVER to short GOOG. I do short them all the time but by selling calls, the damn thing is like a play-doh premium factory that just keeps cranking out high V options to sell against longer positions! Here’s the roll spot by the way, $590s are fetching $20, that covers us to $610 – always a good thing! XXX

Posted October 5, 2007 at 10:07 am | Permalink (Edit)

TSO – it’s a good recovery play and you can sell the $50s for .90 and roll…
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Thursday Virtual Portfolio Moves

Posted October 4, 2007 at 9:47 am | Permalink (Edit)

BTU puts for sure ahead of a build in nat gas at 10:30. The $45 puts aren’t worth owning so it’s really the $50s as a mo play. XXX

No meat to this open so far – Europe could not possibly have been nicer without being irresponsible assholes like our Fed so I guess the “I want a rate-cut” crowd is selling off.

RIMM – here’s a butterfly that pays between $92.35 and $107.65, you get a credit of $7.65 and a max risk of $2.35 so let’s do 5 in the $10KP and 5 in the $25KP since we have some margin room (and V gets crushed tomorrow). The proper way to enter these is to buy your directional (with the momentum) leg first, then cap the move by selling against it, then take the rebound play as momentum but that’s tricky and this play would be fine if you just buy it. XXX

Buy RFYVR Oct 90 PUT $3.70
Sell RULVT Oct 100 PUT $8.45
Sell RULJT Oct 100 CALL$6.10
Buy RULJB Oct 110 CALL $3.10

Posted October 4, 2007 at 9:59 am | Permalink (Edit)

SHLD – I know, it’s crazy! News is fully spread today, I’m at least going to roll, 183% since Tuesday on the Nov $130s – I’m sorry as I thought it was too risky for Happy Trades…

OIH – I don’t know but I am getting ripped off on my SLB $105 puts, still just $3.30.

NEM – dollar is coming back a bit, gold is touchy at the moment. Markets pretty lame considering so I’m not out of FXI/PTR puts just yet but VNO Nov $110 puts at $2.75 are my next good short. XXX If they break $115 we have to give up and we can hopefully get them for $2.50 on an uptick. BXP is also right on the 200 dma at $110 so the Nov $105 puts for $195 for them are fun downside protection too. XXX

Posted October 4, 2007 at 10:17 am | Permalink (Edit)

Factory orders worse than expected. Down 3.3% vs 2.2% but July number was stupid high so it balances a bit.

Letting FXI and PTR…
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Fantastic Friday Morning

And away we go!

The much anticipated jobs report not only came in 10% better than expected at 110,000 new jobs but the August payroll was revised upwards from -4,000 (which caused the Fed to rush in with a rate cut) to +89,000, that’s a 2,325% adjustment folks!

As I said in last night’s wrap-up, I’m pretty sure these jobs numbers are the product of a random number generator as no human being could possibly miss by this much this consistently.  The fact that we lend any credence to these reports is a total joke but the joke is on us so we may as well laugh along.

This should push us firmly into record territory despite the fact that unemployment was actually UP from 4.6% to 4.7% while average wages were up 4.1%, an inflationary indicator that could just as easily have tanked the markets on the heels of an inflationary rate cut which now looks like a massive overreaction by a Fed that is clearly (as Barry Ritholtz so aptly put it) "Wall Street’s Bitch."

Just remember when Cramer punches his "they know nothing" button that it is clearly he and every other Fed basher that knows nothing as these job numbers and wage report clearly indicate that the Fed was absolutely correct in their assessment that the economy was not in danger of slipping into a recession and that inflation should have been much more of a concern than bailing out Jim’s speculator buddies who had followed his advice all year to BUYBUYBUY anything that moved based on his "if the stock is at $80, it’s going to $100 and if the stock is at $100, it’s going to $120" premise.  This is the same ridiculous bubble hype that bankrupted millions of investors in the early 90s and the Hypemiester General knows that sustaining a bubble like this requires a constant supply of new capital in order for his pals to get out at the top.

OK, that’s enough of that, time to switch off our brains and enjoy the rally!

President Bush will come on TV at 9:55 to speak about the economy, this is incredible timing as he scheduled this conference well in advance of the jobs report and didn’t schedule any such conversation following last month’s dreadful…
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Thursday Wrap-Up

As expected it was a pretty dull day.

Nobody wanted to commit one way or the other ahead of the jobs report but it was evident that FXI and PTR were done going down by 10:17 when I called an end to those hugely profitable puts.  It’s always difficult to say goodbye to our big winners and often we take the sting out by rolling (kind of the options way of saying "I’ll call you baby") but we turned bullish as we held our levels and we expect a Hang Seng bounce into the weekend.

RIMM was the topic of the day with close to 50 of 400 comments relating to that one stock.  This was partially my fault as we decided to make a complex butterfly spread first thing in the morning, based on my prediction that the only thing we could be certain of was that both callers and putters would lose their ridiculous premiums in the morning.  Our play went like this:

Buy RFYVR Oct 90 PUT $3.70
Sell RULVT Oct 100 PUT $8.45
Sell RULJT Oct 100 CALL$6.10
Buy RULJB Oct 110 CALL $3.10

We collected $7.75 (a little better than planned, it never hurts to ask!) making the play and risk losing $2.25 so if we are up $4 in the morning we may as well take it rather than let this crazy stock ride for a month.  RIMM actually beat estimates and gave strong guidance but I maintain it is still not enough to justify the 150% increase in the price of the stock over the past 12 months.  We adjusted the puts mid-day to grab an extra $1 which allowed us to pull back 20% of the callers and putters, which cuts our maximum gain slightly but prevents us from being tragically wrong.

 

We also took two diagonal plays on RIMM

Optrader came up with the Dec $103.38s at $9.90, selling the Oct 95s, which were outrageously priced at $9.15 so we took those along with another set of the December calls against the Nov $100s at $9.  These plays are against what we call the "volatility crush" something we featured in Option Sage’s educational segment last February.  We will make many of these plays during earnings season, it
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Thursday Morning

I don't mean to pick on CNBC but every day they seem to come up with something dumber.

Today they are running clips of Gordon Gekko telling Charlie Sheen that fund managers can't beat the S&P 500 because they are sheep, and sheep get slaughtered.  While that is very true, these numbnuts use it as the lead-in to tell you to watch their analysts' picks of the day!  Do they even understand the clips they are showing you? 

There is no worse a group of sheep on the planet than the flock who follow these ridiculous analyst picks.  I'm not saying there are no good analysts out there but certainly there are plenty of bad ones and when you get an up or downgrade from an anonymous person hiding under the umbrella of a large brokerage, what makes you think that person is any more competent that the average person in your own office is at their job? 

Here's a job listing for a Buy-Side analyst: " Buy side equity analyst for mid to large cap domestic insurance companies with a bottom up fundamental approach • Analyst will cover roughly 30 individual insurance names held in a $3.5 billion fund."  What do you need to land this job?  3-5 years experience.  3-5 years?  That means some kid who's been out of college for 36 months is qualified to pontificate on the short and mid-term outlook for AIG, a complex multinational insurance institution that has dozens of lines of business and is affected by everything from a bus blowing up in Jerusalem to the wind blowing in the Gulf of Mexico.  Baaaaaaaaah!  How can you follow these people?

At PSW, the mission is to teach you to trade and trading is not following the herd, as often as not, successful trading means going against them!  While I often cite aggregate analyst opinions as good indicators of a stock's sentiment, there's a lot more money to be made going against an up or downgrade than there is chasing it.  The important thing is to be able to make your own decisions, do your own research and objectively decide whether you agree or disagree with the call of the day.  The up and downgrades often point us to where the…
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Wednesday Wrap-Up – Did You Want Fries With That Shake?

Did you want fries with that shake?

That was my official market summary for the members today.  I saw noting in the overall markets that took me off my morning premise, that the mainstream media is a useless tool of market manipulators and you are better off flipping a coin to decide what to trade than to listen to the "experts" they parade out all day in order to "prove" whatever suits the management's purpose for the day.

I'm not getting 100% bullish just yet, we have a very hairy earnings season ahead of us, but I'm not ready to throw in the towel.  Unlike yesterday, we held fast to most of our positions today and my two comments on our boatload of DIA puts were right on the money today:

  • Posted October 3, 2007 at 9:58 am | Permalink
    • I’m not racing out of DIA puts, just putting .25 t-stops on 1/2 but I want to be shown something before I go all bullish.
  • Posted October 3, 2007 at 2:26 pm | Permalink
    • Now may be the time to take those DIA puts off the table, brokers are making a mild comeback and oil stopped going down so at least use stops. XXX

 

That was 10 points off the day's low and 20 points below the day's finish, we'll see if I was really right in the morning.  I wasn't confident enough to take calls but our protects had done their job and allowed us to keep a much more bullish virtual portfolio open during the dip.  Due to the heavy load of Index puts and a lot of callers that suffered greatly, the STP had one of it's best days of the year, jumping over 30% (off the basis) for the day.  FXI and PTR puts were huge winners and we left those as additional downside protection but we'll stop those out too if we get a good bounce in the morning.

 

The market performed very well considering there was a continued sell-off in the commodity sector (Yay!) and MS decided to put an "underweight" rating on INTC (are they nuts?), AMD…
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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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ValueWalk

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 ...

http://www.insidercow.com/ 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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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.

Market Shadows >>