Archive for 2007

Staging Trades

Nothing pleases me more on the weekend than having an opportunity to chat with wily old investors that have “been there, done that and seen it all!” So, it was with great pleasure this weekend that I scheduled a chat with an old friend who has been around the real-estate investing block more times than he cares to remember. 
In the midst of our discussion he spoke of his children. One son in particular had a penchant for starting a venture involving organic fresh food. Given the increased sophistication among the general populous towards exercise and diet in recent years I thought this sounded like a winning concept if he could execute well. However, it came as a surprise to me that my friend strongly discouraged his son from launching his company. Instead, he encouraged him to become an investor.
The reason behind his advice emanated from one of the habits discussed in Stephen Covey’s “7 Habits of Highly Effective People”, which is to “Start with the End in Mind”. For most of us, career and learning take up most of our formative years while investing is shelved to a later stage. The danger, as he perceived it, for his son was that he would work a lifetime, save a nice sum of money and one day would seek to invest it but would have no idea where to begin.
Just think about all the hours demanded of the average employee. So much time and energy is invested to save money and yet, at retirement, many people who worked so hard for the capital they saved, often deploy it quickly to “investments” without much due diligence or consideration. The old investing rule of thumb is that if you spend more time researching the purchase of a car then you do purchasing a stock that is comparably priced, it’s time to stop trading and start learning! 
With that said if you know that you are going to be an investor, do all you can to learn as much about investing as possible as soon as possible. We are here to help in any way we reasonably can.
Digressions aside, let’s get to the concept of staging trades. Most novice investors follow the rash decision-making process I

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Weekly Wrap-Up

Last Friday at 13,600 I baited the bears.

My words at the time were: "Come on bears, is that all you’ve got?  I called for a retest of 13,500 yesterday but below that and things may get very ugly indeed as we could easily drop back to 13,200 and even the dreaded 13,000 mark where we failed to consolidate properly back in August when we had the chance."

A week later we are pretty much on target with the Dow finishing at 13,042 but we were lucky enough to call a top way back on Oct. 29th, when the Dow was still up at 13,900 and I moved our doomsday clock up to Jan 13th, 2000 (5 days before the crash) including the fact that we would get a BS Fed bounce that would signal the end on the 31st.  That was the night I accused the MSM of "yadda yaddaing" the bad news…

I won't get into why we crashed, it's easy to see now, less so when we were discussing it before the actual pullback (when people were calling me a "perma-bear" because I expected a pullback) but there are 100,000 places where you can go and here how smart people are after the fact, I prefer to use this space to discuss the future and how to invest in it.  The weekends, however, ARE a time to be retrospective so let's just see how we handled the worst week in the markets since 2002:

On Monday, after surviving a 400-point dip the week before, I worried "Have I gotten too bullish?" and I cautioned we had been conditioned to "buy on the dips."  I went into what has lately become a mantra for me: "We won’t be able to post a real rally until the financial community steps into the confessional and clears the deck so we can see where the floor is."  The question remains – is THIS a floor and, if not, how much further down into the pit can we slip?

Monday evening I decided the foreclosure crisis was reaching critical mass and NY AG Cuomo threw a spotlight on the issue by going after the home valuation scam, which we noted would reverberate throughout the financials as their…
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k1 Project – Trend Following II – Cooking with Optrader

My second month with PSW coincided with the huge increase in volatility and big drops of August 2007. In the midst of that craziness, Optrader posted a significant thread on his trend following strategy. This situation has recently been repeated, with the big drops on Nov. 8-9. Collected here are a bunch of those postings, arranged to give a beginner background on the strategy.

Balancing Act

You must have balance Daniel-san!

Some things stick with you your whole life and that line, or concept, from the Karate Kid was one of those things for me.  As Mr. Miyagi says to Daniel: "Lesson not just karate only. Lesson for whole life. Whole life have a balance. Everything be better. Understand?  Better learn balance. Balance is key. Balance good, karate good. Everything good. Balance bad, better pack up, go home."

In life we need balance.  Work and family need to be balanced (and you type-A workaholics should rent the movie "Click" and think about your lives!) and our virtual portfolios need to be balanced as well.  If we are going to keep capital in the markets, we need a strategy that keeps the bulk of our positions market-neutral so that we can play on the fringes, spending our time looking for market opportunities rather than trying to preserve our capital.  On Survivor a couple of weeks ago there was a game where one team tries to throw water into a boat while the person in the boat tries to either paddle to avoid the water that is coming in or bail it out (with their hands).  Of course this is a hopeless choice as either you are bailing water and a sitting duck for more water attacks or you are a moving target that is taking on water but not doing anything to bail it out.  The winner was the team that sank last but, inevitably, there is no strategy that can keep you from sinking eventually.  The winners were the ones that achieved a good balance of time between avoiding the other team AND bailing water out.

Bad virtual portfolio management is like that.  When we are unbalanced in our virtual portfolios and the market shifts against us, we have to spend all of our time bailing out of losing positions, leaving us less time to steer ourselves to safer waters.  If we choose to concentrate on changing our investment direction then we don't have the time (or capital) we need to salvage our misdirected choices.

As I often say, for me, being 100% bullish means 70% of my virtual portfolio is bullish and 30% bearish and when I'm 100% bearish then 70% of my virtual portfolio is bearish and 30% is bullish.  This is why on Thursday…
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Friday Virtual Portfolio Moves

November 9th, 2007 at 9:40 am | Permalink   edit

OK, let’s see if 13,100 can hold!

November 9th, 2007 at 9:44 am | Permalink   edit

I took out my GOOG callers but added back $670 callers just in case, will take them out in stages if we go up but it leaves me free to play the upside naked (not for the $25KP though). Picking up $690s at $10 XXX

COH – they are restructuring an no one has patience. I do really like them long-term.

November 9th, 2007 at 9:56 am | Permalink   edit

13,100 holding is huge.

COH – I have the Jan ‘09 $35s but just a small entry.

Below 13,100, 13,000 should be a big bounce spot so we don’t want to go crazy with downside betting either way. When in doubt, CASH!

November 9th, 2007 at 10:10 am | Permalink   edit

GOOG $25KP – I assume you mean December calls and the answer to that is roll them down. For $5 you can roll the $730 calls to the $710 calls so let’s do that with the open ones. XXX

November 9th, 2007 at 10:19 am | Permalink   edit

IBM/Any $5 roll – try to roll for $2.20 or less. With $10 rolls, try to roll for $3.50-$4. It’s pretty much a no brainer to spend 40% to improve a position, as long as you still believe in the position.

Out of index puts now. XXX

November 9th, 2007 at 10:32 am | Permalink   edit

QQQQ – longer is better but if you really want it then get it now so you can sell calls against them if it gets put to you.

Very broad buying kicking in but GOOG has to go somewhere if we are going to be serious about this.

APPL/GOOG V – yes these are day trades only! Holding a Nov overnight, especailly over the weekend is crazy.

November 9th, 2007 at 10:36 am | Permalink   edit

PTR and CEO both moving up.

JSDA having a strange couple of days.

GSK breaking $50.

As usual, it’s amazing how low our expectations have gotten that we are happy to bounce off 13,100!

YHOO pathetic!

If GOOG doesn’t break $680 by lucnch it may be in serious trouble.

LVS popping.

GOLD looking good (all gold stocks too).

STX coming off the floor, I like the Dec $27.50s XXX

November 9th, 2007 at 10:43
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k1 Project – Basic Tactics – Trend Following

"I don’t know if we are out of the woods, no one knows. And it should not matter to us. We should only follow price, and price is going down, has been for a couple weeks now." – Optrader

Freaky Friday

Here we go again!

All aboard the volatility train.  We have trade data out today and Congress is debating taxes, which always freaks Wall Street out but it's the same old, same old that is spooking the markets this morning.  The timing of these events make me wonder if this market melt-down isn't being used to help conservatives push their new mantra (which I heard 75% of the guests on Fox say) – "Now is not the time to be eliminating the AMT."

The Alternative Minimum Tax is a crushing and ridiculous tax law that might have made sense in 1970 but has never been adjusted for inflation and was intended to stop the wealthy from avoiding taxes but has been perverted into an onerous burden on the middle class that will affect 1 in 5 taxpayers next year and shifts $1 Trillion dollars of tax liability from the top 1% of the country down to people in the 75-99% income range (this is probably you if you earn $50K+!).  According to Wikipedia: "In 2006, the IRS's National Taxpayer Advocate's report highlighted the AMT as the single most serious problem with the tax code. The advocate noted that the AMT punishes taxpayers for having children or living in a high-tax state, and that the complexity of the AMT leads to most taxpayers who owe AMT not realizing it until preparing their returns or being notified by the IRS." 

Bush is already threatening to veto the House measure that will raise taxes on the top 1% to prevent 23M households from owing more taxes next year.  Rangel's plan is to offset lost revenue by doubling the tax rate on so-called carried interest, the payment that executives at buyout and venture-capital firms, as well as real estate and oil and gas partnerships, receive for managing investments.


So that's what's bothering the US markets this morning and I know it sounds paranoid but tanking the markets is just what the conservative doctor ordered to get the Congresspeople to back off on the poor hedge fund managers.  Here is a chart detailing the proposed changes to the federal tax rate.  Notice EVERYONE making less than $500,000 a year gets a DECREASE.  Those making $500K-$1M will pay 1.6% more taxes and those making more than $1M per year…
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LTP Update

These are the open positions in the LTP.

I don’t think there are any pressing changes, the only things that aren’t covered are things that weren’t worth covering.  Don’t forget that STP puts are covering these guys too!


Description Type Cost Basis Opened Sale Price Closed Days Gain/Loss $ %
100 APR 08 175.00 AAPL CALL (APVDO) O $ 64,020.00 7/25/2007 $ 249,000.00   107
$ 184,980.00 288.9 %
10 JAN 10 150.00 AAPL CALL (WAAAJ) O $ 28,010.00 9/6/2007 $ 67,100.00   64
$ 39,090.00 139.6 %
10 NOV 07 180.00 AAPL CALL (APVKP) O $ 3,550.00 11/8/2007 $ 5,490.00   1
$ 1,940.00 35.3 %
100 NOV 07 180.00 AAPL CALL (APVKP) O $ 35,500.00 11/8/2007 $ 54,980.00   1
$ 19,480.00 35.4 %
Total Gain/Loss for AAPL
$ 245,490.00 187.3 %
30 JAN 09 60.00 AIG CALL (VAFAL) O $ 23,860.00 11/2/2007 $ 26,100.00   7
$ 2,240.00 9.4

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STP Update

These are the currently open positions in the STP.

YHOO is a DD.  The DIA calls I’m goign to roll down into the sell-off.  CSCO is a roll down.  PTR is a roll down unless oil crashes (will sell $210s at least).  Taking profits on DRYS.  Rolling ECA to Dec.  Rolling OIH up to $190 puts.  RTP is going to suck as the whole world is buying into this nonsense.

Description Type Cost Basis Opened Sale Price Closed Days Gain/Loss $ %
40 NOV 07 200.00 AAPL CALL (APVKT) O $ 8,210.00 10/30/2007 $ 1,000.00   10
$ -7,210.00 -87.8 %
40 NOV 07 195.00 AAPL CALL (APVKS) O $ 2,480.00 10/30/2007 $ 13,990.00   10
$ 11,510.00 82.3 %
Total Gain/Loss for AAPL
$ 4,300.00 40.2 %
20 NOV 07 35.00 AIR PUT (AIRWG) O $ 5,210.00 10/10/2007 $ 7,800.00   30
$ 2,590.00 49.7 %
Total Gain/Loss for AIR
$ 2,590.00 49.7 %
70 JAN 09 15.00 AUY CALL (VPPAC) O $ 12,250.00 2/23/2007 $ 21,700.00   259

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$25KP Update

FrankenGoogle lives!

Like the $10KP, we haven’t made many adjustments since Wednesday other than doubling the amount of Google positions.  Unlike the $10KP, the $25KP had a more bullish mix and we took a big hit in PTR but that was nicely offset by a very nice string of Google plays so far.

Total gains are up to $62,604, up from $56,079 on Wednesday even though our average gain dropped from 18.4% to 18%.  Again and again I will keep reminding you that it’s better to make 15% ten times than 100% once!

Description Type Cost Basis Opened Sale Price Closed Days Gain/Loss $ %
5 JAN 08 22.50 CAKE CALL (CFQAX) O $ 1,265.00 10/2/2007 $ 650.00   38
$ -615.00 -48.6 %
15 JAN 08 22.50 CAKE CALL (CFQAX) O $ 3,815.00 10/2/2007 $ 1,950.00   38
$ -1,865.00 -48.9 %
10 OCT 07 25.00 CAKE CALL (CFQJE) O $ 110.00 10/8/2007 $ 390.00 10/15/2007 7
$ 280.00 71.8 %
15 NOV 07 22.50 CAKE CALL (CFQKX) O $ 675.00 10/19/2007 $ 2,230.00   21
$ 1,555.00 69.7 %
5 NOV 07 22.50 CAKE CALL (CFQKX) O $ 225.00 10/29/2007 $ 375.00   11

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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 >>