Archive for 2007

Weekly Wrap-Up

Dow closes Friday 12/21 down 65 points from Friday, 12/14′s open!

Woo-hoo!  Party time, excellent – what a rally!  Quick, take a 3rd mortgage on the home and buy some stocks…  While I am pleased that we look like we’re making a healthy consolidation here, I’m still glad we went to more cash because there was nothing exciting at all about the weekly movement, right up until Friday when we made all the gains that kept us from posting the second negative week in a row.

Last week I wrote an article about making better use of your time by following simple hedging strategies and I know there are many of you out there who could have found better things to do from Monday through Thursday this week than watch the market do pretty much nothing.  This is especially true around the holidays for you parents as you will have hopefully 100 Christmases to spend in your life but only a dozen of them will be the ones that leave a lifetime impression on your young children.  This is what we’re working for folks, don’t let the work get in the way of our goals!

Option expirations days like Friday are always manadatory for options traders, there’s nothing we can do about that but we can try to have a nice couple of days and not worry about the markets if we hedge properly tomorrow morning so please glance over that article and let’s make sure we carry a fairly level portflio into next week.

gamblingOn Tuesday we discussed how tempting it was going to be to get into the markets with $500Bn being LOANED out by the ECB yet we got very little movement from the financials, who should have been the direct beneficiaries of this bail-out and that makes me nervous still.  The other fundamental issues remain and it’s times like this when it is very important to contemplate whether you are investing or gambling in the markets.  If you are investing, then you should sit out a rally the same way you sit out the dips, when you are playing for the long haul daily moves do not make a trend.  If you are gambling – then you hate to miss "your big chance" and that may lead you to overdoing it on the next bet before "it gets away from
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Seasons Greetings!

"I don’t want a lot for Christmas, there is just one thing I need, I don’t care about the presents underneath the Christmas tree…..make my wish come true….all I want for Christmas is….."  – Mariah Carey

Well it’s that time of year again when we are supposed to be thankful and spend copious amounts of time with family but somehow get derailed into all-day shopping trips and bargain hunting!  Or maybe that’s just me!   To those of you that are planning trips over this holiday season to visit friends and relatives, we wish you and yours a safe and happy holiday.

And when the festivities end and the new year begins we will be looking forward to another successful year of trading.  This past year has brought with it excitement and volatility and a good deal of prosperity.  But each year our goal is to improve upon our previous year’s performance and the only way to do that is to look back and learn from the trades that did not work out quite as planned while reinforcing those that did go well.

It all started out so easy with huge gains earlier in the year on Baidu, Intuitive Surgical, New York Stock Exchange, Google, Freeport McMoran and many others.  As the big market moves occurred we jumped on board the trends with long options.  Trade after trade worked out well as the Dow surged 1000 points higher from 12,000 to 13,000 between March and late April.

After the huge run we felt that the markets were overextended and in need of a pause and so we decided to take advantage of credit spreads that would take advantage of what we believed would be a channeling market short-term.  During May and June our series of trades were:

Bear Call – SHLD, Bull Put – FCX, Bear Call – TSO, Bull Put – AAPL, Bull Put – ICE, Covered Call – NYX, Bull Put – GS, and Bear Call – SHLD.  Each of the credit spreads expired worthless and we pocketed a nice chunk of change.

July was a rollercoaster with the market surging higher before collapsing lower and we decided to move from simple credit spreads to advanced hedging strategies, including ratio calendar strangles, advanced bull call spreads, and advanced collar trades.  When the going gets tough as it sure did in July we didn’t hesitate to hedge more heavily.  We’re okay…
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What Energy Policy?

President Bush signed into law last week legislation to promote energy efficiency and the use of ethanol fuel as a substitute for gasoline. The bill is being hailed as one of the most far-reaching accomplishments by Congress this year and passage was achieved when the Democrats were finally forced to DELETE a section loathed by Republicans that offered breaks for renewable fuels and paid for them by increasing taxes on oil and gas companies.  Also DELETED from the bill was a requirement pushed by the Democrats that electric utilities get 15 percent of their electricity from renewable sources such as wind or solar.  Also DELETED from the bill was a rollback of tax breaks for oil companies that has already cost the US over $100Bn since Bush started handing them out in 2001.

While these "tax incentives" are supposedly geared towards encouraging exploration and production.  E&P budgets as a percent of revenues have dropped over 60% since 9/11 while unfunded renewable energy production has gone up 72%.  Please Mr. Bush, let’s not give any money to clean energy companies or they may actually SOLVE the problem

What the hell is wrong with you people?!?  How do you allow your government to keep pursuing sensless, self-destructive policies that can only lead to the eventual downfall of our nation?  How do we continue to back a government that fails to make pursuing an energy policy that would make this nation self-sufficient a real top priority?  President Bush came on TV last week to placate the masses, telling you that he’s pleased that they have watered down the energy bill to the point where our entire energy policy is to get fuel efficiency to 35 miles a gallon by 2020. 

13 years?!?  13 years to get mileage up to the level that 50 different car models are exceeding today?  13 years to match the existing standards of Europe, Japan and China - this is our PLAN?!?  Replacing light bulbs by 2012 is also in the bill – 5 years to replace a light bulb?  Well that answers the question of how many years does it take a corrupt, do-nothing Administration to change a light bulb doesn’t it? 

Also, by the year 2022, we’re going to use 36Bn gallons (not barrels) of Biofuels. It’s important for the President to  measure it in gallons because if you say it in barrels it’s just 857M, about 40 days worth of current
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Whiplash Wednesday


Ride that bull…  If this is a bull market I'd hate to see how a bear market treats us.  The best thing about this week is how funny it is to watch Kudlow and Company as he has now been reduced to senile rants where he repeats "Goldilocks" and "The greatest story never told" over and over like some demented mantra.

Kudlow and Cramer (who used to share a show) both follow the same pattern of telling investors how great the economy is, how global markets are on fire, how the housing crisis is a short-term issue, how commodities are still undervalued… while at the same time crying that the Fed must act to avert a crisis.  Which is it guys?It's not just them, we get these mixed messages from most of the MSM pundits and if I actually belived that these people beleived what they were saying then I would give up all hope for the US economy. 

Only by assuming these guys are shameless hustlers who are looking to manipulate retail shareholders into making misguided investment decisions in order to enrich the hedge funds can I continue to believe in this country because if these guys truly represent the actual thought processes of the investment community, then we are truly doomed!

Markets run in cycles and we have to let go of this bull cycle and ride out a bear cycle, in order to get to the next bull cycle.  The government, the media and the Fed have, for the past year, been trying to change the ordinary course of things by pretending we can just skip from one bull market to another bull market without all that messy correction in between.  Its simply not healthy.  The 5 stages of grieving are Denial (we went through 2 years of that in housing), Anger (who hasn't been blamed for this now?), Bargaining (Cramer et al screaming for Fed intervention), Depression and Acceptance.  The last two parts we keep skipping as every time the depression (a bear run) starts, the bulls ratchet up the bargaining and the Fed or the Government cave in and "rescue" the bulls.

Any good psychiatrist will tell you that avoiding these last 2 stages of grief will only lead to a much worse situation…
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December volatility clings to the bitter end in LDK Solar

Today’s tickers: LDK, LIZ, PIR, CELG, ERIC, RHT, NKE, ORCL, MBI

LDK – Shares in LDK Solar, the China-based maker of multicrystalline silicon wafers used the production of solar cells, cannonballed 26% to read $48.71 this afternoon after a single analyst downgraded the stock to sell, citing a tighter outlook for the company’s margins owing to higher silicon costs. Options in LDK, which for weeks now have been a marquee feature on our volume and volatility screens, traded on a volume of more than 84,000 lots this afternoon – measuring up to 40% of its total open interest and reflecting its highest level of call volume on record. While twice as many calls are represented in today’s overall volume, traders appear to be making fresh bets on volatile price action persisting into the eleventh hour of LDK’s December contract. They’re doing this through fresh buying and selling in the December 50/55 strangle combination, a position which costs a combined premium of $2.50 and covers the buyer against an upside break past $57.50 or down below $47.50 over the next day. A speculative seller of this combination would pocket the $2.50 premium, betting that even an end-week recovery for LDK shares won’t take the price past $50. A look at time and sales suggests that more of these combinations are being bought rather than sold – a clue that the market’s money favors volatility heading into the final day of the contract. While it’s odd to see fresh volatility plays like this on the eve of expiration, consider LDK’s sensational price action just over the past month. In late November the company’s shares were trading at around $27.

LIZ – Earlier this week we noted an upward spike in option volume in womenswear maker Liz Claiborne, coinciding with a 52-week low, and despite high-panache measures from the company to rejuvenate the brand by recruiting “Project Runway” Tim Gunn and even hiring climatologists to chart weather patterns that will make its seasonal garment shipments more weather-strategic, its share price can’t seem to escape its current cloud. Liz shares are trading .60% lower this afternoon at $21.36, about 50 cents higher than the 52-week low set on Monday. Implied volatility remains elevated at 51% and a 16-fold increase in option trading volume showed the highest level of put traffic in at least a year. Given the comparable volumes at play, we surmise…
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Fa-la-la-la-la Friday


Inject the markets with lots of money
  Feda-la-la-la-la, la-la-la-la
'Tis complete financial folly
  Feda-la-la-la-la, la-la-la-la
Dow Jones pumped to record levels
  Feda-la-la, la-la-la, la-la-la.
Ignoring ancient bearish signals
  Feda-la-la-la-la, la-la-la-la.

See the blazing bucks that poor us.
  Feda-la-la-la-la, la-la-la-la
Striking writers join the chorus.
  Feda-la-la-la-la, la-la-la-la
Bush led us to a deep quagmire.
  Feda-la-la-la-la, la-la-la-la
How long until his term expires?
  Feda-la-la-la-la, la-la-la-la

5% this year the markets gained.
  Feda-la-la-la-la, la-la-la-la
Losing ground to inflation's pains
  Feda-la-la-la-la, la-la-la-la
Ignoring danger, we'll give thanks.
  Feda-la-la-la-la, la-la-la-la
Next year we'll have a run on US banks.
  Feda-la-la-la-la, la-la-la-la

Whee hoo!  It's Santa Clause rally time! 

Just yesterday we discussed how Paulson and Bush caved in to their Chinese masters and backed off on regulating Soveriegn Wealth funds and just 2 days ago, in member chat, we were talking about all the distressed financials and I said: "This is the kind of thing that you can expect BX to bring some Yuan into as it’s a good way for China to circumvent Congressional objections as they take positions in US financials. The British did this to China for 200 years, after starting out as friendly buyers of exports they became the de facto rulers of the country through banks – unlike us, China learns from history and there is nothing in history that gives you an in better than a country that’s desperate because they can’t pay their war debts."  I was going to make a list of China investments in financials this week but it would be easier to list who they're not buying a peice of — yet!

I'm going to try not to be grinchy today as the global markets seem determined to believe in Santa Clause but I'm still glad I went to cash and I will be covering into this rally, just being glad I'm getting so much money from my January callers.  If this rally continues next week and into the new year, there's plenty of good things to buy, like poor LDK, who got murdered yesterday…
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Thursday Wrap-Up

I don't think the day matters much now that we got good numbers from RIMM.

Q3 earnings were .65 vs. .62 expected and the report was strong across the board and capped with an upbeat guidance, raised to .70 from .65.  By itself this would probably not have been such a big deal but coming on the heels of ORCL's great earnings, we should be able to get back over 2,650 on the Nasdaq – the point at which we fell off the table last week, leading to Monday's terrible drop

The Dow will have a tougher job impressing us as it has to get back over 13,500 to turn bullish but clearly we are reaping the rewards of the EU's $500Bn cash injection on Tuesday when I said: "While this may goose the World’s financial markets into the holidays – we are heading for on mother of a hangover in 2008!"  We saw money pouring into the bond market on Wednesday and misinterpreted that as a sign of panic and we discussed how the markets held up well despite all the money that was going into treasuries etc. but we failed to consider that this was NEW money, coming in from Europe and getting ready to be deployed. 

At 2:29 I noted: "This is the reverse of yesterday, money is stampeding out of bonds back into stocks" and we had to uncover some of our new covers which I called for at 12:01 when the Philly Fed report had TERRIBLE numbers but luckily, 10 minutes earlier, when I was calmer and not caught up in the moment, I had said: "Action into the Philly Fed suggests they don’t expect a good report so we may get relief even on bad numbers."  By 12:28 I was already having doubts about my cover call saying: "Any new covers should have 20% stops if you weren’t planning on covering and that would be the cost of insurance as that Fed report was absorbed rather well. I’d say AAPL and GOOG are the key to the universe today – if they stay green, we should hold up."

And that was pretty much how the rest of the day went. 
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“Springtime for Volatility” in Swedish wireless giant Ericsson…?

Today’s tickers: SLM, ERIC, , CAKE, APOL, TTWO, KMX, AIG, COH, TRB, MS

SLM – For much of the afternoon, our market scanners seized upon an unusual level of activity in SLM, the student loan administrator known ubiquitously as Sallie Mae. For those not on the receiving end of its monthly statements, Sallie Mae is preceded mostly by its reputation as a casualty of those summertime credit skids that provoked a J.C. Flowers-led consortium to abandon a $25 billion bid to buy out the firm. Barbed words were exchanged between the two parties to the jilted jointure, but today Sallie Mae’s CEO confirmed that the company may have to resort to a divided cut to shore up finances amid rising defaults and higher borrowing costs. While we’ll refrain from wondering aloud whether the J.C. Flowers party is thanking its lucky stars for having dodged that bullet, we’re obliged to report that the news appears to be the culprit behind a 48% hike in implied volatility to 101%. Options in Sallie Mae traded on a volume of nearly 125,000 contracts – making it one of the day’s most active tickers – following a 20% drop in the value of its share price to $23.09. Fresh liquidity was drawn to the December 25 calls, which were bought and sold freshly despite the imminent expiration date. In the January contract, we noted heavy traffic in the January 45 calls, which traded to the middle of the market at a measly 7 cents apiece. Heading into today, the largest option contract in terms of sheer open interest was the January 50 call, so we wonder if the option market is on the verge of a reconfiguration of its view on the company’s share price heading into 2008. Interest in calls continued into the April contract, however, where we observed fresh volume at the 25 strike.

ERIC – Options on American depository receipts of Swedish wireless tech giant Ericsson attracted more than 22 times the normal level of trading activity, according to our scanners. ADR’s in Ericsson closed 1% lower this afternoon at $22.53, floating on a mixed raft of news out of the company. Earlier today Ericsson announced a new executive appointment in its global services business unit and this week has brought news of lucrative orders won from the likes of Mobilkom Austria and a division of the America Movil Group. Traders…
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Thursday Morning

Wow, I always forget how long those LTP reviews take me.

I think I know what I want to do but then once I get around to analyzing each position I end up looking at layer after layer and chasing things around, pobably about a half hour for each position and all you end up seeing is "I think I'll go naked on this one!"  Anyway, so I'm miles behind but please put the comments here while I write a short morning post.

So, on the whole, I think I see more risk to the upside (as far as us selling callers) than the downside but that is a statement coming from an 85% cash position anxious to buy more if we get another nice dip.  ORCL gave us a big boost last night with fantastic numbers (and congrats to all who played the $20s yesterday!) but Oracle is unique, not a typical software company.  ATVI raising outlook is more significant but someone said last night that perhaps games are popular over the lingering fear of accidentally giving lead poisoning for Xmas with a Chinese toy.

China (the Shanghai Composite) was up 2% today but that was quite the suckers rally as the government raised the lending rates for the 6th time this year after the close.  Gee, booming economy and raising rates?  We'd better send Greenspan over there to teach those commies how to properly screw up an economy!  The PBOC raised rates to 7.47% as they are attempting to curb a 6.9% CPI in order "to prevent the economy from overheating and the structural price rises from evolving into evident inflation."  The Central Bank is also raising the DEPOSIT rate to 4.14% to ENCOURAGE savings.  Why, those godless fiends – when will the madness end?!?

From the WSJ: "Just months ago, the one-year U.S.-dollar London Interbank Offered Rate was as much as 3.0 percentage points above the one-year deposit rate in China. Now, the one-year Chinese deposit rate is nearly even with the one-year Libor, which means it almost costs nothing to borrow U.S. dollars and bet them in China. While China's strict capital controls mean that getting money in and out of the country isn't always easy, the incentive is
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$25KP Update

We are more covered here than the $10KP and more diversified.

Same call with XMSR – let’s just try to get a good price to take out the putter.  GOOG we will play by ear but I’d really like to collect that $680 premium if it’s $5 at the open so we roll our $670 calls up to them for $7 if possible and cover the 5th March $670 too.

Other than that, same general outlook as I posted mid-day yesterday:

Description Qty Trans
Age Net
Issue Price/
Total Change
Curr. Price/
Change Today
Gain/Loss Market
7 Long Calls


  CFQDX Apr 2008 22.5 CALL [CAKE @ $24.54 $2.37] 10 11/19/2007 (121) $2,360.00 $2.35 $0.95 $3.30 $1.60 $940.00 39.8% $3,300.00


  GEAS Jan 2008 37.5 CALL [GE @ $36.57 $-0.23] 10 12/11/2007 (30) $1,310.00 $1.30 $-0.68 $0.62 $-0.11 $-690.00 -52.7% $620.00


  GOOCN Mar 2008 670 CALL [GOOG @ $677.37 $4.02] 1 12/18/2007 (93) $5,420.00 $54.10 $0.30 $54.40 $0.10 $20.00 0.4% $5,440.00

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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 >>