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Testy Tuesday Morning

Ho-hum, another day another 250-point move in the Dow


Wouldn't it be nice to string two of these together without the seemingly obligatory 250-point dip in between?  We sort of had two consecutive up days now as we came off the floor at 12,100 on Friday and finished almost 500 points higher yesterday but I don't like anything that comes in 250-point chunks at this point as it seems to be the new UNIT of movement, as easily reversed as it is gained.

Stock and Options Trades points out that we have critical tests on the Dow at 12,600 and the S&P at 1,380 but I've already moved on to 12,750 or bust as my outlook for the week and I want to see us finish ABOVE 1,400 on the S&P this Friday or we'll be shorting into the weekend.  We have to get past today's PPI report, but we also have Consumer Confidence at 10 with Durable Goods acting as tomorrow's wild card.  Tomorrow we also get oil inventories as well as Ben's first day of testimony to Congress so don't expect too much today with all that up in the air for later in the week.

Tomorrow we also get the Preliminary GDP report for Q4 but expectations are so low (0.6%) that is would be shocking if we disappoint there.  Friday is the PCE Inflation and Chicago PMI and, again, there is so much doom and gloom anticipated that I see most of these numbers as a reason to rally.  Bernanke is the wild card this week, along with random statements we can expect from other Fed Governors.

8:30:  Holy Cow!  PPI up 1%, "core" PPI up 0.4% – that is HUGE!  That is the biggest one-month gain in 26 years!  Inflation, inflation, inflation, inflation…  how will the market react to this?  Answer:  Probably not well.  This is, in part, a snap-back from the 0.3% DROP in PPI in December, which we thought was nonsense at the time.  Analysts missed this one by a mile generally looking for 0.4% and I didn't expect a number this big but with energy up 5% for the month, it was hard to avoild some undeniable inflation.

On top of that, the Case-Shiller Home Price Index shows that housing prices fell 9.1% in December from the prior year, this is being spun as a huge negative but it is just about what we expected and nowhere near low enough as we have at least another 10% to go before home prices begin to get attractive again. “Home prices are headed lower,'' Michael Moran, chief economist at Daiwa Securities America Inc. in New York, said before the report. “With demand soft and inventories still high, there will be pressure on prices to keep declining.''

This should be good for our XLE puts but not much else this morning but it is going to be a great test of market resolve to see if we can hold our levels, generally the same ones we were at last Tuesday morning like Dow 12,400, Nasdaq 2,350 (we're still below that!) and S&P 1,360.  Google is down $14 pre-market so that's going to be ugly but it will give us a cheap roll if you can still stand the pain (and, with a month to go, I can).  If the market can recover from this, it may truly be over for our bear phase but I'm not going to count on it.  We went into the close 1/2 covered and I'm going to be keeping tight stops on those covers this morning.

Hong Kong was up 445 this morning and the Nikkei was off 89 but it's a new ballgame after the PPI report so, if anything, I'd be shorting the FXI if we drop more than half a point today.  Europe turned down sharply on news of our PPI although Trichet called it correctly over a month ago.  We'd like to see the FTSE and the CAC hold that 2% line and the DAX took a normal rejection off of the 7,000 mark but we don't want them falling below the zero line today. 

This is a perfect set-up for a Fed statement that would rally the dollar but they've squandered every other opportunity to strengthen our currency since pretty much Jan 2001 and we are sitting at a very embarrasing $1.49 to the Euro this morning – THE WORST LEVEL EVER! 

Oil is priced in dollars, not Euros so the 77% INCREASE in the value of the Euro against the George Bush Dollar means that Europeans are paying the Clinton Dollar $57 per Bush Dollar $100 of oil.  Don't let the talking heads tell you this is a global crisis, this is very much a US crisis as 43% of our dollar buying power has been taken away from us over the past 7 years in one of the worst managed economies in the history of our planet.

So how can I remain generally bullish at a time like this?  I'm bullish BECAUSE it's an international economy and BECAUSE America has never mattered less in the World and BECAUSE we still have many fine globalized corporations who may call America their home but operate around the World where things are pretty good in general.  The President can send $2Tn Petrodollars a year out of America and intot he hands of our enemies but that doesn't stop The Gap from putting Levis on the well-dressed insurgent and it certainly doesn't stop BA (who just scored a $77M missile contract) and other parts of the US war machine from making Billions of dollars selling the most expensive disposable items ever created as we spend Trillions of tax dollars to fight for whatever it is we're fighting for this week.

As screwed up as this economy is, we are still not in a recession and a recession is already priced into the mix.  While it is not our job to save the markets, there are certainly A LOT of very attractive deals out there and today will be a great day to take note of who's hot and who's not (regrettably, Google is decidedly NOT in pre-market).

It's going to be one of those mornings where we Stop (out our callers), Drop (our positions to lower strikes) and Roll (to longer positions where we can sell covers) if we get a big drop as there is nothing today that changes our longer-range outlook but it's going to be another painful day and possibly week until we get past Bernanke's testimony.


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  1. I figured out why GOOG has been acting like crap.

    Since google wasn’t around for the tech crash, they decided to create one of their own.

    Look at the charts. It’s almost funny.

  2. PPI

    While the number sucks hopefully it will keep the fed from slashing rates again. Now if we could only get them to take back that fiscal stimulus and redirect the monies to fixing bridges, roads and maybe build a couple nuclear plants.

  3. steveplace,

    Can’t see the labels on the chart. Is one the 2000 tech crash next to the current Google chart? I remember friends of mine trying to get me on board JDSU & CMGI. Is my chart right that JDSU went to over $1000 a share?

  4. GOOG is in freefall and BIDU is following it. If you believe in the charts GOOG has NO support from here on down. No idea what would turn this around. :-(

  5. GOOG will turn around when I buy puts.


  7. FWLT

    Now these guys miss. Is this still a Cramer pump stock?

  8. The charts small, I know. The one on the left is GOOG present, and the one on the right is COMP Weekly chart from 99-00… of course if you can’t really tell which is which, well, that was the point ;)

  9. GOOG – Look at the P&F chart. No support whatsoever.

  10. DB,

    Not a heavy duty technical trader but it looks to me like Google has strong support around $460 and $440.

  11. Fred – I use them to gauge stops etc. You could be right about the 460 area (big clump on left of the P+F) but I’m not sure how strong that is. Will be interesting to see because its not far off at the moment.

  12. Morning all
    Phil CAKE is coming back to former levels. Any play? Thanks Henk

  13. SIRI,

    If the consumer is so weak would Sirius have added 654,000 subscribers in Q4? Now over 8.3 million subscribers. Seems to me that this is one of those totally discretionary items that you would cut first. Of course it is only equal to about 4 gallons of gas per month.

  14. If you want to find support use fib lines and project S/R… Look for a 68 as a stronger support than the 32…. Personally I would love to buy Google at 300

  15. Phil – what is the plan for your GOOG roll?

  16. HD – will they sell off big on this miss?

  17. GOOG will be very interesting. Looking at a 3 year chart it looks to have had a “tight” range for a while, but it’s all relative. We saw it last year go from 480 in Aug to 750 in Nov… a 56% increase in 3 months!!!!! If it can go up that fast, it’s no wonder it can fall as fast / even faster. Should have held onto my 480 put! LOL

    Also noticed it went up from 300 10/05 to 475 01/06… a 58% iuncrease of which it fell back to 330 range… so is the right range for GOOG between 400 and 500 somewhere? If it touches 400 I think I’m all in…

  18. GOOG – let’s see how they open but I want to roll down to the $500s at least but it depends on the offers.

  19. Our best case for GOOG is all this pre-market selling is BS designed to flush stops but if buying doesn’t come in shortly after the bell, we may have to take a 50% loss and wait to see WTF…

  20. MrN – HD

    The fact that they are holding up so well in the pre-market is amazing. The forward guidance is the real story…it sucks. I think Lowe’s is the better of the two to own. I used to be an HD shareholder and customer and now I don’t even bother going into their stores.

  21. HD – I can’t believe the response to this earnings?

  22. Crox & Home Depot,

    Trading at virtually the same P/E. One beat earnings, one missed…one has growth, one has shrinkage (seinfeld reference), really amazing.

  23. Keep in mind that we are up 500 points off the bottom so a 100-point decline is no big deal today.

    I see weak energy stocks – don’t care but financials are only down half a point. Goog just got a “downgrade” to $590 for the year, this is way too stupid.

    AAPL doing OK, BIDU still up, AMZN finding buyers, LOW getting bought and they did suck yesterday, FSLR, POT making new highs, INTC getting bought, HD also sucked and is getting bought, GRMN, MRVL… Nope, I’m not believing this drop!

  24. EOG – refusing to break down a sign to bail on puts?

  25. HD,

    Well that’s a really good sign given their report.

  26. EOG – as usual, 5 seconds too early – but this time I didn’t trigger sell.

  27. U.S. Home Foreclosures Jump 90% as Mortgages Reset (Bloomberg)


  28. GOOG -

    WOW – we can roll our 510s down to the 480′s for just $8 ….

  29. Well $460 didnt hold

  30. GOOG-lots of negative comments. Support levels to watch as potential downside objectives are at $457.41, $446.21, $439.00, $431.24, $419.53, $411.71. Resistance is at $465.50, $475.11, $479.84.

  31. CROX showing some life!!

  32. 35% of typical 10 day average volume of GOOG in 10 minutes. Wow.

  33. Hey look. GS and GOOG broke their link. Good news?

  34. Oh great, I just realized Esignal is stuck on GOOG, I’m still seeing $461.

    On GOOG – you can arrest your losses and cap them at 50% by selling 2x the $490s and buying 1x the $470s, turning it into a 1:2:1 spread like we have on the Russell. Since we already own the $510s, the play nets us some cash back and has a break even from $470 to $506. Of course, being lower than that now doesn’t exactly give us the warm fuzzied. This is the way to go if you can afford to buy out all or part of your caller on the way up.

    If not, then waiting is probably best, I’m offering $5 to roll down to the $490s for now on mine and will establish the above play if we keep dropping by first selling the $470s and then buying the $450s to cover but that’s an expensive way to go.

  35. You’d never know it looking at the stock, but there were two positive
    comments on AAPL this morning.

  36. I am liking this action. Except for the Jan-09 480 call I bought yesterday. That ain’t happy.

  37. Phil,
    Just a heads up in the old 25KP, the short has given us over a 50% profit after this morning’s drop (not sure why, just logged on so I haven’t checked what could’ve caused the drop).

    So that’s a position to watch during the day to stop out our caller…

  38. AAPL released new MacBook and MacBook pro’s…

  39. HIlarious from MS on AAPL:

    the firm would point to a 34% YoY increase in R&D and 170% YoY increase in Steve Jobs’ airplane expense in the December quarter as signs Apple is preparing for meaningful product launches.

  40. Filled roll to $490s for $3.70, next roll will be to $470s at $3.70. The $490s are $7 and I’m in for $14 so I may DD on the way up but, on the whole, I just want my money back at this point!

  41. Everyone’s dumping calls…. I’m talking atleast 20k lots on the strike I’m looking at.

  42. CROX call seems stuck – it is not moving at all just stuck at $0 better than loosing but just wondering if it is a problem on TOS

  43. Actually, calls and puts pretty even in general. ISEE says so.

    I really haven’t seen a “reason” for GOOG’s action. Does anyone else?

  44. Oh, downgrade, nevermind

  45. Anyone seen a reason for SNDK’s plummet?

    Still watching it, waiting to buy out my caller (68% gain on the caller right now).

  46. AAPL –

    Too funny, from notable calls, Stevos frequent flyer miles racking up.

    “Beyond industry checks, the firm would point to a 34% YoY increase in R&D and 170% YoY increase in Steve Jobs’ airplane expense in the December quarter as signs Apple is preparing for meaningful product launches.”

  47. PHIL:

    when you talk about the GOOG rolls and do not mention a month: is it always the FRONT MONTH ?




  49. For perspective, yesterday morning the $490s were $27.50!

    X going through the roof on this “awful” economy.

    GOOG PEG now below 1.

    CAKE – they have a 200 dma to test at $24 so selling the $25s

    Consumer confidence is 75! Very very bad!

  50. There goes GRMN…

  51. RMM, yes, always front-month if he doesn’t specify.

  52. Feb. 26 (Bloomberg) — Consumer confidence fell more than
    forecast in February to the lowest level in five years as the
    labor market cooled and the economy faltered.
    The Conference Board’s index of confidence decreased to
    75.0 from a revised 87.3 in January that was lower than
    previously reported, the New York-based group said today. The
    employment outlook weakened and expectations for the next six
    months dropped to the lowest level since January 1991, at the
    beginning of the Gulf War.
    Consumers are worrying more about the economy because the
    housing market is in its third year of a slump, employment has
    dropped and gasoline and food prices are elevated. That may
    threaten consumer spending, which already has slowed, and
    further push down &cls;economic growth.&cle;
    “With so few consumers expecting conditions to turn around
    in the months ahead, the outlook for the economy continues to
    worsen and the risk of a recession continues to increase,” said
    Lynn Franco, director of the Conference Board’s consumer
    research center, in a statement.
    Economists forecast the Conference Board’s measure would
    fall to 82 from a previously reported 87.9, according to the
    median of 66 forecasts in a Bloomberg News survey. Estimates
    ranged from 76.3 to 87.
    The Conference Board’s measure of present conditions
    dropped to 100.6 in February from 114.3 the prior month. The
    gauge of expectations for the next six months decreased to 57.9
    from 69.3, the report showed.

    Jobs Outlook

    The share of consumers who said jobs are plentiful declined
    to 20.6 percent, from 23.8 percent last month. Those saying jobs
    are hard to get increased to 23.8 percent from 20.6 percent a
    month ago.
    The proportion of people who expect their incomes to rise
    over the next six months decreased to 17.0 percent from 18.1
    percent. The share expecting more jobs dropped to 9 percent from
    10.5 percent.
    Separate reports today raised concerns about inflation and
    a weakening housing market.
    Prices paid to U.S. producers rose 1 percent in January,
    more than twice as much as forecast, the Labor Department said.
    Home prices in 20 U.S. metropolitan areas fell 9.1 percent in
    December, the most on record, the S&P/Case-Shiller home-price
    index showed.
    The U.S. lost jobs for the first time in four years last
    month. The Labor Department is scheduled to release February’s
    employment report on March 7.

    Housing, Manufacturing

    This month weekly initial jobless claims have remained
    elevated and the number of Americans continuing to stay on
    benefit rolls reached the highest level in more than two years,
    signaling that weakness in the labor market continues.
    Outside of the labor reports, other releases are showing
    weakness in the housing market is spreading to other parts of
    the economy. The Institute for Supply Management’s non-
    manufacturing index fell to 41.9 in January, the lowest level in
    more than six years, and the Federal Reserve Bank of
    Philadelphia’s general economic index contracted the most in
    seven years this month.
    Federal Reserve officials last month cut their forecast for
    U.S. growth this year to a range of 1.3 percent to 2 percent,
    from 1.8 percent to 2.5 percent predicted in October. Two
    members of the National Bureau of Economic Research’s business
    cycle dating committee, the panel charged with dating U.S.
    economic cycles said last week that it’s too early to decide
    whether the U.S. is in recession.

    Fed’s Response

    Fed policy makers last month lowered their benchmark rate
    by 1.25 percentage point to 3 percent, including a three-
    quarters-of-a-point cut in an emergency meeting on Jan. 22.
    Central bankers are scheduled to next vote on the direction of
    interest rates March 18.
    Higher energy and food bills also are hurting consumers’
    outlooks and their ability to spend on non-essential items. The
    amount of Americans must spend each month on debt service,
    housing, medical care, food and energy rose to 66.9 percent of
    their total spending in December, the highest since record-
    keeping began in 1980, according to Bloomberg figures.
    Consumers are scaling back spending. Retail sales excluding
    automobiles and gasoline were unchanged in January, the Commerce
    Department reported on Feb. 13.
    In December, consumer spending, which makes up about 70
    percent of gross domestic product, grew at the slowest pace in
    six months. The government is scheduled to release its January
    report on spending on Feb. 29.

  53. DM,

    Calls on what?

  54. GOOG …. c’mon ….I mean down 30+ ? It ain’t BIDU !!

  55. Hmin turning the trend .. ???

  56. It’s the consumer guys. These AAPL, GOOG retail stocks are being hit because of percieved consumer spending disruption.

  57. Sam Zell says housing is on the bottom and he expects some upturn
    this Spring. Don’t agree with him! But you can’t discount his
    opinion. He sold Equity Office Properties last year right at the top
    of the market.

  58. spx popped perfectly off the 200 min sma with the confidence numbers… not sure still how to read this…

    Initial Balance ain’t over yet, so market makers still in control…

  59. BBY,

    Strong move given they warned last week. Looking to close the $40 puts I sold last week for .15

  60. has the market discounted consumer confidence yet ?? that would be astonishing

  61. Fred – 139s on SPY. I see put buying across the board too.

  62. SNDK – what happened there?

  63. what do you think of the chart on EK – not looking good on a Mar turn around???

  64. AAPL at 110 might be interesting… Anyways, I’m trying out a new strategy.. Place the order, walk away for half the day. So Ta.

  65. aapl-116.99 latest quote. These high flyers are going down the slope like a tobaggon on a Wisc hill in winter. If everyone is selling out, where’s the $ going? Silly me! To fill their gas tanks! Just a side note-target missed big time. I was in WMT close to here, the only one for 70 miles, on a SAt PM & it was EMPTY. This is NOt a highly populated area, however that was shocking. A good short opportunity? COST (at least in Calif)is still going gangbusters, but has a big population to support it. The big squeeze is on.

  66. DM, hope that is a OSO.

    Again, other than GOOG, this sell-off is really tame with the PPI and CC being so negative. Time to climb!

  67. This is one resilient market.

  68. sandyb

    Target beat by a penny, they didn’t miss.

  69. DAX idex getting hammered. Now I’m beginig to worry about

  70. albo/zell- do u have a link to that comment?

  71. GOOG Jan 2010 $1100 are $4

    That’s not a bad lottery ticket once we get out of this mess!

  72. xian – It was on CNBC. Probably on their website.

    SNDK – JMP cut 08 estimate from $2.09 to $1.70.

  73. SNDK – I dont see any bad news –

    State of Washington’s Division of Child Support Selects SanDisk Secure Flash Drives and Management Software

    NEW YORK (AP) – SanDisk Corp. (nasdaq: SNDK – news – people ) holds an analyst meeting on Monday, and one analyst expects commentary on improving demand, following an oversupply of memory chips last year which hurt the chip maker.

  74. Foreclosures & Housing Bottom – Anecdotal data

    I live in Boston and Massachusetts is in the top 10 for foreclosures vs. last year. I went to two bank auctions this weekend and one back in December and based on my calculations the weighted average of homes sold is 91% of the original asking price, i.e. last price before the home was taken by the bank. The news is the market is finding it’s level and it’s not another 20% decline. That may happen in some markets but the people I know are holding wads of cash and just lowballing homeowners hoping to catch a deal. A good friend just bought a second house on Cape Cod.

    Also, a lot of the foreclosures here are brand new homes from small builders that got to the end of the construction loan period and had to give the houses to the bank. I’m actually thinking of buying the house next door and renting it out as the rents are going up big time here.

  75. CAKE – sorry lost track. Selling the $25s when they get close against the Apr $25s now .35 is a fun play. XXX

    RUT is holding up really well, too well for our play!

    EOG – I’m willing to hold through inventory with a DD at .90 for a $1.26 basis.

    ISRG picking up.

    Jake – which position was that in old $25KP?

    SHLD doing well for a recession. TGT doing well despite disappointing numbers this morning. I’m telling you, it’s all old news and GOOG is being used to keep people nervous. If I’m Goldman and I have $200Bn shorted across the Nasdaq, why would I hesitate to dump 1M or 2M shares of Goog to make it look like something was seriously wrong with them?

    Note the marketwatch headline: “Google losses lead early tech sector decline”

    They are blaming the comScore study that showed lower paid click rates but that was caused by Goog’s own crackdown on extraneous clicks, not a change in user habits. As I often say, this is exactly the kind of news hyenas jump on to twist what would be an innocuous thing into a “catastrophe” so they can take a stock down.

    GOOG rolls, yes front month, April is still too expensive. Of course on of our possible escapes is selling the $450s for $22 and rolling to the Apr $460s for $27.50, that’s a good exit if you have margin to support the spread and will be able to buy out the caller (1/4 out with each 20% they gain). XXX That way we are collecting $18 in premium against our $14 (so far) position and buying ourselves 30 days but, on the whole, the market simply isn’t down enough yet to panic.

    DRYS getting hit hard though.

    VNO and BXP still looking good.

  76. SNDK
    Putting in a OCO order to buy out if the Mar 25 callers hit .75, or if they bounce back to 1.40. Not letting all the profit on the caller get away on my drive home. And if the caller goes to .75, I’m willing to risk it.

  77. GOOG in Short or Long Term Portfolio:

    is GOOG at $460 Jan 09 for 67$ worth having ?


  78. Phil,
    Forgot about that, it was a proposed play for 25KP that never got filled except for some of us. It is in the old 10KP, though…

  79. Sales were dwn Yoy, yeh I know they supposedly hit their lowered target, but with M sales down over 50% & tgt down only 25%, it foretells a big cutback by consumers.

  80. albo/parch- thanks for the zell

    TASR- i heard last week that the city hosting the democratic convention ordered tasers for all it’s police force.

  81. Always wonder about CC – despite saying things are bad I usually have confidence that the American consumer (national pastime – not baseball) will continue to shop.

    Most business people I talk to are OK with order books after mid Jan. The only ones that are crying are directly related to home building – volumes are down and they are getting squeezed hard by raw material costs.

  82. Wow,
    CY just jumped off the cliff trying to catch up to SNDK…

  83. I am long GOOG and not fully buying this theory – however here is one “gloom doom” story on GOOG – this was published a few days back …

    The insider believes that 50% of Google’s US customer base could see severe drops in spending over the next couple of quarters.

  84. EK reminding us why we should be thrilled to get out even after chasing with DDs!

    SNDK – I like th Apr $25s at $1.90 XXX 5 in the $10kp and 10 in the $25KP XXX

  85. Sam Zell is as smart as they get on RE – if he is being forthright in the media. Seems early to me on housing. We talk to some of the material suppliers on housing and they had been saying just a couple months ago that their business was as bad as they had seen it in 20 years.

  86. Phil/Anyone,

    Any thought on APPL??? Positive news doesn’t seem to help with this company. Now trading below 116.

  87. Phil,
    I have SNDK in old $25KP.
    8 SNDK JUL 25 @$5.30, now $3.10 covered with 6 MAR 27.5 @$1.53 now $0.40

    Should I take out my caller and wait for upturn or should I sell Mar 25?

  88. Not sure about Zell guys but with those foreclosures finally having an impact on prices, I think what he’s getting at is that it’s okay to begin looking at housing again and a bottom is approaching. I’ve seen some minor building beginning again where I am and it seems builders are forecasting an increase in sales at some point in the next 6months.

  89. AAPL- this is (has been) a bear raid- they always go for the honey (c GOOG)

    i’m sticking it out in JAN09 130s

  90. MCD- solid as a rock

  91. Xian-Did you cover your MCD in that downturn last week?

  92. Phil,
    Nevermind on that question, took the caller out at 1.15 (basis was 3.02, so a nice profit from him).

    Now if we could just get EK to head back up so I can get out at .50 (.46 basis on EK from old 25KP).

  93. MCD/parch- i’ve been covered this whole time (since FEB 13) w/ short MAR 57.5s @ 1.36- i still am.

    r u divining anything from the charts?

  94. Xian,

    AAPL and honey! :) AAPL should stick with something tasty!

    Are your APPLs covered, and with what ratio?

  95. Newbie’s wife – I’m neutral on AAPL at this point; sold protection down to about 112, as mentioned last week.

  96. Lots of sellers back in GOOG AAPL and BIDU here

  97. XOM calls still okay (held them overnight)
    Will Buy POT calls again after consolidation – no hurry.

    confusing market today – sometimes it pays not to play.

  98. My even order on EK was not filled at even of .50 in the old 25K so now I am hurting again….

  99. xian – are you in that daytrading vehicle, BAC? LOL

  100. Target Call:

    1. Inventory levels are in good shape.
    2. Top line sales for 2007 including a 2% deflationary effect.
    3. They expect a net neutral impact from inflation in 2008, food and clothing will have inflation, deflation in hard lines and electronics (interesting).
    4. Labor productivity offset soft sales and kept SG&A flat. Greater improvement in productivity expected in 2008.
    5. Credit card portfolio; expect announcement by end of Q1 re: sale of credit card receivables.

  101. Looks toppy from a day standpoint but i’m liking the chart longer term. I’m still a bit leary about the levels we’re at but if we get a breakout of any kind on the market we could easily head to $60 with no trouble. I sold some $52.50′s last week but I was stopped out of them. I’m debating another cover (rent) but I want to see how the market shakes out this afternoon with those bad inflation and consumer numbers this morning.

  102. Phil – can you please comment on the SU position? June 95 / Mar 90 (bearish). What is the plan, just roll it up on Mar expiration?

    Thank you

  103. My reasoning on why PPC and goog is down is due to the new bans (price increases that basically kill this market) on domain tasting, withdrawl from domain arbitrage etc.

    Myspace deal is also killing them – it does not monetize at all.

  104. SNDK 15 min 5 ema flattening out. If you aren’t in the SNDK play yet, start looking for entries.

  105. sandyb

    Where do you get these numbers? Macy’s sales down 50%, not even close, revenue was down 6%. Please if you are going to put numbers out do us a favor and make them accurate unless it’s an opinion, i.e. I think home prices are going to fall 50%, that’s fine.

  106. Out of GRMN puts, +50%

    Thanks for the idea opt

  107. IBM raises guidance + 15 B buyback

    What’ll happen if GOOG announces buyback ?

  108. IBM what’s the news all of a suden shooting up $ 2.- in 15 seconds

  109. IBM,

    Announcing a bigger stock buyback.

  110. X on crack.

    After crappy earnings, no less.

    It was in 90′s 2 weeks ago.

  111. Fan:

    Domain arb is not near a market compared to the rest of PPC. Dropping that wouldn’t warrant such a drop stock price.

    Banning domain arb is a good idea. Clickthroughs through landing pages on unused domains result in a crappy click through rate.

    I work in some internet marketing stuff. And PPC definetly doesn’t work for MySpace. There are much better ways to sell ringtones to dumb kids.

  112. sakiko,

    Are your AAPLs naked now? I have both 125 April and Jul, have Mar against them with 2/3 covered. Not ready to take my callers out since there is still premium and don’t know if it holds at 120.

    Wow, market is going green while I was typing! Go market, GOOOO!

  113. EK – $18 to $19.30 is $1.20 is 6.6%, 5% rule is $18.90 so that’s the spot to watch, this is just a retrace we should have had yesterday but didn’t.

    Advance/Declines are even on the NYSE and positive on the Nasdaq but we look to be weakening.

    GOOG Jan $460s at $67 – too much premium for me but not a bad gamble. As to the Alleyinsider article, GOOG is the CHEAPEST advertising they have, it is very doubtful their customers would give it up (it’s also the most effective) and don’t forget the shifting of Billions of dollars of mainstream ad bucks to the far cheaper Google alternative. Ah well, what can I say, I like them!

  114. OK stock repurchase of 15B $

  115. Turns out my target of 115.45 did come into play. Would be very nice of AAPL to hold them, but I am again in cash as I am just buying at “bottoms” with tight stops. Don’t want to be in it if we get the 110 or 100 retest that everyone here is clammoring for.

    GOOG: We should be getting FCC spectrum auction winners announced soon. That will move them one way or another. I am pulling for GOOG winning nothing, forcing the price up on T and VZ, then buying them in 3 years after decimating their business with VOIP initiatives with AAPL.

  116. 1/2 in GOOG 480′s @ 8.50.

  117. Upps missed SNDK

    And the EK in the 10K was half out yesterday or all out?

  118. JMAC3300,
    You are not a day trader -so, relax, walk away from your computer, take a break – come back when you hear that the mkt has turned around or at end of day and evaluate again.

  119. Alex,

    We DD and got half out at basis. That should leave you with 10 EK, unless I missed something.

  120. So, I just signed up for ISEE Select. It tracks the put/call ratio of individual stocks. As I look at the data, I don’t see any indication that this is the bottom for AAPL. Sadly. Just one indicator, of course, but I was hoping it would support my thesis. Also, doesn’t look like the bottom for GOOG. Suck.

  121. Newbie’s wife – no, fully covered still. I might decide to do something later today, but I’m only giving it the occasional look while below 119.

  122. MCD
    Phil i intend to roll my JAN 09 leap MCD 50 to either 09 $ 55.- or 10 $ 60.- what is the better one. Thanks

  123. GOOG 448

  124. Yah, I am pretty shocked at the 2 day price decline in goog as well. That being said, cutting off domain tasting seems like a big thing for PPC traffic as 90%+ of domain names that are registered are ‘tested’ for traffic (via PPC) were spat back into the system afterwards.

    I think numbers/expectations had built in these estimates and now that goog is trying to seperate ‘good’ and ‘bad’ PPC traffic, its a big hit to their numbers.

  125. GOOG-OUCH
    OIL up $1 over $100
    RIG DO ATW all doing well

  126. EK didn’t reach the point of “half-out” yesterday (unfortunately)

  127. sakiko/BAC- haven’t been watching that name- i’m in the worst of the worse…C

    AAPL/newbieswife- i’m fully covered w/ MAR 125s

    MCD/parch- i c the chart as dying to break out for any reason as well- 60ish would b easy in a good/better market.

    GOOG- the last time GOOG acted like this was a superb time to buy- Q1 JAN06 on a drop from 475ish to 330ish (bottomed 2nd week of MAR and reached new high by the end of OCT)-
    that was about 30% drop, and so a similar decline would mean 520ish for the current move .

    the moral of the story: GOOG has done this b4 and proceeded to more than double- of course, things may b different b/c of the economic situation we now have.

  128. Film,
    What is your reasoning in not buying AAPL leaps here ?

  129. got BIG program, I’m out boys! 8.1mm shares…

  130. Fan:

    It’s not like GOOG had a choice in abandoning domain tasting PPC. ICANN doesn’t let you do it for free anymore because Network Solutions was being dumb.

    I agree with you though. These bad clicks should be discounted.

  131. Cman, I keep buying at lower levels and getting stopped out. It is just that I haven’t committed to trading my covers because of my spotty availability and other non-market circumstances. I would rather be in cash at this point because it is in this environment that something could happen and drop us off a cliff. I would rather just have the clarity of mind if AAPL drops 10-20 to go long again, but when I go long, I go big. And given my recent trading results, I don’t really want to be rolling 10 positions in 6 accounts in a panic selling day right now. And when I buy AAPL, that is what happens. So, I take 5% or so losses on those leaps. I won’t be sad buying higher, but market has me freaked out. Not emotionally, just that my trading has gotten terrible and until that changes I won’t be putting myself into huge positions that require me to trade them well to make money.

  132. mark/program- what do u mean?

  133. xian – check out Mark’s bio… he has to move a client’s assets around.

  134. Just checking in… I know market’s bullish, but can anyone tell me why… It feels like it’s manipulated up.

  135. Phil

    “As screwed up as this economy is, we are still not in a recession and a recession is already priced into the mix.”

    Don’t wish to be argumentative, but as I wrote back on Feb 7: “If one looks at the revised nominal GDP of 2.2% annual growth, and one looks at PCE of 2.7% (Personal Consumption Expenditure) as a measure of inflation (something the FED actually keys on), we are and have been in a recession for almost a year (when real inflation exceeds nominal growth) !!!!!

    Furthermore, as you point out, the US has been lying about its interest rates since the 1980s when it revised its methodology in order to keep SSI annual adjustments down. Real interest rates are far higher then the PCE by 3 or more percentage points.

  136. Mark, Sakiko,

    Saw the bio but is this a buy or a sell program and is it indexes or something else? tia

  137. Xian/Sakiko/Flimflam,

    Thanks for your help with AAPL, will evaluate my trade position and do the adjustment!

  138. SNDK – I would take out the callers and wait but it’s a gamble.

    SU – We have a month so I’m not looking to do anything with it just now as that’s a lot of time for something to happen. SU gain makes no sense with nat gas going up and oil at the same $100 it was at last week but the upside escape is to roll up to 2x the June $100s at $7.35 (cost $1.80 per current share) and roll the caller up to the Apr $100s at $7 (net $1 per current share). As this doesn’t really change things much and as the March $90s give me 100% downside protection, I’m in no hurry to make the roll.

    GOOG going catastrophic! There are just no real buyers stepping in, it’s turned toxic. They are going to need some positive news at some point I think. Not holding $450 on the day would be bad but I expect a retest of $460 this afternoon as they fell from that very hard so that’s the line I’ll be watching on the upside. Notice all the “bad” news on GOOG is predicated on the RECESSION yet the market is heading higher. What if there’s no recession?

    IBM – well I’m generally against buybacks but there probably isn’t anything better for IBM to do with part of their $44Bn in cash (and $20Bn in long investments, not counting bs items) than buy their own stock at these prices. While it would be fun for GOOG to do the same as a big FU to the shorts, GOOG “only” has $17Bn in cash and buying back 10% of their company with All of their money is NOT the same as IBM buying back 10% of their company with 25% of their money.

    Forget the wireless auction, did you guys know GOOG is getting involved in building undersea cables to increase bandwidth between the US and Asia? Very cheap, just $300M split with Bharti Airtel, Global Transit, Google, KDDI Corporation, Pacnet and SingTel so GOOG has control on the US side. The next bandwidth auction will be held BY Google in case any US companies need to communicate overseas…

    Perking up nicely now, Russell crapped out at $718 last time so let’s watch that line.

  139. It is DM! I haven’t found much of a reason for that rebound.

    Xian-Mark is implementing a new trading program at his office.

    I’m banking on the rest of the world staying strong and investing in those companies with tremendous international exposure and growth.

  140. EBAY – is it naked? Time to add?

  141. Sorryif it was relayed & not accurate-just quoting what I heard on CNBC.Guess I was shocked by what I heard, but I won’t relay anything anymore. It seems a negative slant isn’t welcome at this site even though its what’s happening in this economy. I have a friends who r relaying to me what’s happpening with their heating costs; in the thousands of dollars for this one winter & r still cold! And stretched to the max with trying to keep their heads above the drowning stage.But, with things so bad it has to get better, right?!!

  142. EK – mine didn’t get filled yesterday. basis @.49 and target @.5. Still in order.

    should be 1/2 out according to DD rules, but wonder if Phil wants all out today if it hits our target. Phil, would you please clarify… Thanks!

  143. Michigan foreclosure filings fall 7% in Jan compared to one year ago -Free Press
    falls from number 5 to 10 in foreclosures

  144. Sandy-Everything is welcome here! I just want everyone to say everything with an open mind and try to control their emotions so they can make rational decisions. Negativity is a very scary hopeless thing that I wish we wouldn’t consume ourselves with. That is the only reason I have advocated to try and avoid these conversations. That and I think the rest of the world is doing great aside from some inflation and that we’ll work through this gradually.

  145. fred – Mark can correct me later, but generally, that task of his is to move a client’s assets from one type of risk to another (rebalance, mood change, whatever). HNW SMA = High Net Worth Separately Managed Accounts.

    He might use a piece of software to help him, but he’s looking for a way to move those assets into the destination without causing/losing any more than the 17 basis points he mentioned yesterday.

    So both a sell and a buy. Of course, he can’t tell us what he’s doing.

  146. ATW- close to sell target.
    Mark-Buy program, But wouldn’t say what of course. LOL

  147. newbieswife- im happy to help, i don’t like offering advice w/ so many others available that know more than me- just letting u know how i’m positioned and riding this out- at least we’re not alone in this!

  148. I’m thinking of joining the airforce.

  149. euh wrong forum

  150. DM/airforce- me too. i got the idea after watching the transformers movie. what a commercial that was!!!

  151. sandyb:

    This site doesn’t tend to be a bucket of rainbows; it’s more contrarian. I remember reading the discussions during the big run up last fall and people were complaining about how Phil and friends were such permabulls.

  152. sandyb

    The intent was not to stifle your comments just to ask for accuracy. I think it’s vital to pass along both negative and positive comments and have healthy debate.

    I agree with you that there is a lot of pain on an individual basis and I’m really concerned about what we will pass along to my kids that’s why I think the rebates were a stupid solution. Why should they pay for the malfeasance of our generation? I think we need to endure some pain in order to fix these issues. We can’t simply spend our way out of the problem.

    Sorry if I offended you.

  153. sandyb – I have to agree that negative opinion is fine (look, we put up with Anton!). But a relay with sourcing – or a comment that can be reasonably observed that it is just an opinion, would serve everyone a little better, methinks.

  154. Phil, EXACTLY my point. GOOG using game theory to push up the prices on something they really don’t want when they have a plan that will undermine the telcos business model.

  155. RUT is taking off

  156. back in for qucik sec – buy and sells, always getting dollar and sector neutral, playing both sides simulaltaneiously.


  157. I pick the bottom price to a frickin’ penny. Then I capitulate. Did I mention that I am a crappy trader?

    Chasing over $120 as that is a break from the channel. Also, buying a dip to 118.50. I am so afraid of being out of the market tomorrow as I think GDP is going to light a fire to the upside. Probably a good reason to stay in cash as my track record doesn’t bode well for my trading predictions.

  158. GOOG – when i read the report this morning on undersea cables…it brought me a smile.

  159. and all institutional, was retail back int ehd ay, now only big boys (pensions, mutual funds, hedge funds, insurance companies, etc).

  160. The $RUT is up all the day.
    EK bottomed and markets are in a good chape, so DD or roll on that or what do we expecting, what is the plan?

    NDAQ, can anyone describe me why we covered with the 40´ and not with the 42,5´??


  161. on bears- we need more here- not the grisly kind, but the kass kind (short sellers by nature but extremely flexible)

  162. GOOG Pacific Fiber – 600 GigaBytes/sec to start, expanding to 960 GigaBytes/sec.. Damn. And that’s ONLY increasing the existing lit fibers by 20%, giving the current tran-pacific capacity in the 3TB/sec range.

  163. NDAQ

    at the time we covered market was tanking.

  164. Filmflam – It’s not your price levels. It’s execution. No offense intended.

  165. lol xian… Well I wanted to a bit before transformers hah.. But I guess that works lol

  166. MCD – I’d go with the ’09 $55s, you get better leverage on callers and less margin (you can always roll back).

    EK – true we did not escape but next time it heads up, offer .45 even as it’s moving, my point was look how quickly things reverse if you “give it just 5 more minutes” I’m still in the 1/2 out camp and, had I gotten 1/2 out yesterday at .45, I would have DD’d again today at .25 if I could.

    Option capitulation on GOOG was intense this morning, 2/3 of the calls are gone it looks like, it will be interesting to see if this was just a flush. Xian makes a good point, last time this happened was Q1 ’06 and it was click fraud then too (same concept, attack their core revenue stream as falling apart).

    Dan – you’re right, we are in a PCE recession but that’s been true on a wages paid basis for many years, that’s what drives consumers further and further into debt.

    EBAY – not adding but still a good entry.

    SandyB – nothing wrong with relaying data as long as we cite sources as it’s very important for us to know what people are trading on, whether it’s right or wrong. We had this discussion last week re. unsubstantiated rumors on C that turned out to have enough truth to them to take it down. We don’t discover the truth until we examine ALL the evidence, not just the stuff that conforms to our original views.

    APPL doing what we wish GOOG would do, quick 3% rebound.

    JOYG new ATH

    BKX looking to go green, HOV up 10%.

    Wow, we may hit that 12,750 today if this keeps going. I wonder how much GOOG down $10Bn hurts the Nas and the S&P? My big concern at the moment is that 44 has been a tough nut for the QQQQs to crack since 1/22. They’ve been above it but that’s the line they keep hugging and we need a big snap that gets them over 46 (Nas 2,450ish) in order for us to get back on track.

  167. Nasdaq at the top of the triangle. Another 15 points and we can call it a breakout, methinks.

  168. Alex
    On NDAQ Phil said he was short term bearish on this position

  169. Sakiko, no offense taken. I know it is the execution. Sometimes I am just out of rhythm. Like my golf game, front nine can’t keep my head down and topping everything. Then I start drinking and I shoot 3 over on the back. Guess, I need to start drinking at 9am. That should fix it. Techinically, it is after noon in market time…

  170. AAPL-everyone is a good trader when the stock doubles 3 years in a row. LOL

  171. Don’t start with me, Mad Jack. I am just streaky. You know, like the Cowboys!

  172. RUT:

    is it time to short this one ?


  173. Greenspan tells Gulf to Drop Dollar.

  174. BBD – LOL

  175. Mad Jack- LOL!

    Scared to know how Film sees me.

  176. RMM:

    If you’re following the 10kp, the RUT hedge provides negative delta against.

    If you want some downside protection, you can use IWM which is the same thing as RUT but cheaper.

  177. I was a seller, I would wait till maybe 140 on SPY. Until then, I guess we could go higher?

  178. gotta be kiddin, who knows a Waste Management company in Jersey, somebody gotta stop this guy…

  179. steveplace – I didn’t have to read the story to think, “there’s no way they’d do that!” However, I had no idea that the inflation there was at that level.

  180. Herb okay thanks, now I know.

    Hey but whats with BA ? TRIN and VIX moving down, DOW up but Boeing, mhhpff…
    Do Investors waiting for the Tanker deal? Or is it the High Oil price?

  181. Alex – I think BA is a good buy today, mabe 3 dollar stops.

  182. Big support on the vix at 20.5-21, keep an eye out

  183. Meanwhile, QQQQ $46s are .36 and make a fun gamble. XXX You can afford to wait and see if GOOG breaks $460 and Apple breaks $120 to be sure it’s worth hoping for or take them and get out if we don’t hit those tagets by the day’s end.

    IGT made new high but WYNN and LVS are doing poorly, something not right there.

    VIX way down at 22!

    GOOG Fiber project is 7.68Tbps, doubling the global capacity. They’re going to jam YouTube down Pakistan’s throats!

    Fed Gov Cohen says “Jan CPI disappointing, however I don’t expect it to persist. Lower rates will not stop but will cushion housing slide. US is F’d up but rest of world is just fine and will pull us through.”

    Greenspan dollar drop – he is officially out of control. He’s like an economic terrorist now, attempting to destroy our economy for personal gain.

    RUT pulling back to test 118, watch that line but if GOOG takes off it’s all over for the bears as the Nas can pop another 10-15 if properly motivated.

  184. K1, sort like this: But, with dark hair and not a dork.

  185. steveplace;

    I checked the 10k dated 2/24: there is no RUT ?

    Is this the old 10K ?
    where is the new 10k ?


  186. sakiko:

    Hungary just got rid of their forint band against the euro.

    Actually, a forint band might be a middle ground for the middle east

  187. DM – Oh yes Inflation Nation( Great for me in Germany, because the fuel is not so expensive like it is when the dollar were a strong money.) :-)

  188. now, rally :-)

  189. MBIA’s Brown to Dinallo, on Ackman Plan: Consider the Source
    Ackman’s not exactly rooting for policyholders, after all
    Tuesday, February 26, 2008
    Thomas K. Brown

    from short opinion article-
    That’s exactly right: MBIA’s ability to access the capital markets enhances its financial strength, as the company itself has recently demonstrated. Ackman’s proposal would cripple that ability. How that’s supposed to help the company, I don’t understand.

  190. Anyone else feeling nervous about this “rally”?

  191. Alex in Deutschland:

    you guys usually complain about the high price of gasoline.


  192. Out for a While and back in a Bull’s Party.. nice

  193. Wow, this GOOG hangover is pretty bad. I rolled into a better position… now it’s time to sleep a while. Damn, should have stayed in those DIA calls from last Friday. T_T

  194. DIA 127 puts are +DAWOW. lol

  195. You guys are probably tired of hearing this, but we should start flying upwards on this triangle reversal. Could be a double fakeout reversal, but we are set up for a monster short-covering rally if GDP comes in at .8 or higher. Would take -.4 or lower to really do damage. Would you concur, Phil?

  196. yes but that are a question of the gasoline and economy Tax beeing payed at the gas station for the fuel. There are so many Taxes in Germany.

  197. BTW INTC filled thursday open gap

  198. NDAQ popped

  199. DAX finished in a Rally @ 6,985.97

  200. Watching the market depth on EK is like watching a stand off in a Western. Lots of tension on both sides, but no one wants to make a move…

  201. Rutterfly – bought 700s/ waited for the rise and sold the 680 and 720 made 15% now working on getting back into butterfly at $2.30

  202. Phil,

    Are you covering any of the Dell ’10′s before earnings on Thursday?

  203. MTL-exploding higher

  204. JMAC3300

    what were the prices on theRutterfly ?


  205. Xian,

    Sure! I was trying to compare note with people who are on the same boat. Will be responsible for any personal adjustment. :) thanks for sharing and please do let me know when you/anyone take the appl caller out! just at another 1/3 cover @120. Definitely need a clear picture and help from you guys on this!


    Thanks for your feeback and thought on EK! Learning a lot from you all!

  206. Well, IBM managed to sunk my caller, again…

    I was fully covered (with 110s) and preparing to uncover if it starts moving up, but I really didn’t expect the 3-4 point jump in about 15 sec.

    So, should I role now (a bit early) to April 110s for credit, April 115s for debit, or wait on pullback, which surely will come (I hope).

    Any advice is wellcome.

  207. Dollar going to bounce @ 75 again, or tank? Selling some SSRI & SLW, mmmmaybe AUY.

  208. phil – Google fiber is [only] adding 20% to the pacific fiber capacity per that press release.. with an ability to expand the one cable from 5 pair (initially) to 8 pair.. each pair is 120 GB (or 960 giga bit) per sec.. Doubling the pacific capacity would need 5 of these cables.

    Also.. there’s roughly 10x this capacity in the Atlantic.. -Peter

  209. bought 700 for 31.00
    sold 720 for 18.60
    sold 680 for 49.20

  210. I forgot to mention that my calls are Apr 105s.

  211. GDP/technicals- that will either drop us or rally us- but it’s just the kind of info to break these triangles one way or another.


  213. mark: the rating was confirmed, and that was the major point

  214. K1, it is also like this:

    Or maybe if those two had a kid. One who always made fun of them for being gay. Or is that TOO much information? LOL

    Anyone else think that GS made a deal with the Chinese that if they can get GOOG down to 450 and AAPL to 115, that they will agree to move a huge chunk of their funds into our stock market. No other explanation for why these are down here so low. Tis a shame. I just found my perma-bull self. But, I am not buying anything. One more day to before Thursdays GDP. Let’s see where we close to figure out how high this thing is going. Anything over 124 means a retest of 136 with a quick trip to 150 to follow, I would say before earnings. I think we land at 150 at APR expiry, maybe 135 for March. Drop on earnings as we always do in April, then continue up for the final assault.

    Just have to step back for perspective. Doing that today. Stuck in all cash so I am walking away. Good luck everyone. Planning on getting 60% out of cash again for third day in a row tomorrow. Eventually, I will wait for my price and enter there, and won’t get stopped out again.

  215. TPX woke up on the right side of the bed today!!! :)

  216. Phil – Time for gold stocks?

  217. Is there a general guideline for rolling? Got caught in some GOOG 510s from yesterday. Personally, I think this drop is BS and fully expect it gets at least back to 480. After that, who knows? Anyway, I rolled my 510s to 480 for $5.80. Probably should’ve added more, but I didn’t want to make GOOG more than 5% of my small portfolio b/c it would just distract me from other stuff. I see Phil and others here rolled to 490 for $3.70. Probably an after hours question. Just want to see what factors you all consider when rolling a cliff dive.

  218. steveplace – not disputing, but look at volume spike on MBI… crazy man.

  219. Rolling Guideliones:

    have asked same question and:

    its written up in k1.


  220. NYX- even they have buyers today!

  221. Phil,
    Got a question on the AIG position from the old 25KP when you get a chance.

    In an effort to start doing the LTP type thing, I would like to roll the call out to a Jan ’10 50 (currently an Aug 45) and figure out something to do with the caller (a Mar 45, he’s taken 94% of my money, but we’ve still got a ways to go before expiration and the overall position has a positive delta since its 5 long/3 short).

    How would you approach doing that?

    My plan is to start closing out positions in the old 25KP as appropriate and putting that money into LTP plays or rolling them into LTP style plays if I’m comfortable with some of what I currently have (i.e. AIG).

  222. SPX is hitting right against the downtrend line, as I draw it, from 12/11. Kinda cool. If it breaks through here then I think next resistance is at 1400.

    Funny reading the market news sites today. Headlines should read: “Market rallies on massive wholesale inflation, consumer confidence at 5-year low”, but they won’t do it.

  223. bad AAPL-

    Apple’s iTunes now No. 2 music retailer in U.S., NPD survey says
    February 26, 2008: 12:05 PM EST

    BOSTON, Feb. 26, 2008 (Thomson Financial delivered by Newstex) — Apple Inc. Tuesday said iTunes is now the No. 2 music retailer in the U.S., behind Wal-Mart Stores (NYSE:WMT) , based on the latest data from market research firm NPD.

    Apple also said there are now more than 50 million iTunes store customers.

    NPD Group’s MusicWatch survey ‘captures consumer reported past week unit purchases and counts one CD representing 12 tracks, excluding wireless transactions.’ The data is based on 2007 sales in the U.S.

  224. GOOG – A bit off the wall but I bought 2X my GOOG in BIDU this morning instead. So far BIDU rise is just offsetting losses on GOOG. Fingers crossed.

  225. Eric,
    Too true, it’s an interesting day. Almost like investors went, “Well, can’t get much worse, might as well buy…”

  226. Rolling — I know the general $3.50 for $10, but if that was all, we could’ve rolled those 510s all the way down to 450 for less than 20 for those of us with the money for it. I was wondering how other stuff factors in — perceived target before expiration, weighting in portfolio, overall portfolio mix, etc.

  227. Out of GOOG 480′s @ 9.20, never filled other half of position.

    After QID 50′s now @2.20

  228. Potash-POT: See spot Potash prices trending higher, maintain Outperform@RBCM
    RBC sees Potash prices trending to $600/tonne and sees potential upside to their $195 target.

  229. GOOGLE search trends
    I think Phil got wind of this last week, but here is the link.

    Also, a discussion of CROX’s last q, specifically inventory problems.

  230. lol Alex, you’re hilarious…. Germany eh.. How’s the Autobahn?

  231. Film – just catching up — LOL on your timing comment! A good contrary indicator? ;-)

    Do remember though the daily gain/loss chart. If Wed action holds to form you might be buying into a runup ahead of Thur-Fri lower.

  232. CROX getting a pulse.

    BA – high oil should be good for them. Not even Emirates can afford to fly an A380 around at $100 a barrel. Fuel is 1/3 of the cost of running an airline and planes are leased so, assuming you can roll a lease from one plane to the next, saving 20% on fuel is going to add 6.5% to the bottom line. LUV, for example has $9.2Bn in expenses and $645M in profits. Saving 20% on 1/3 of their expenses is a 100% increase in net profit. How can airlines NOT switch?

    New $10K – I’ll send a note to Greg to check out. Meanwhile, try the download.

    GSP – If recession is baked in then anything not negative will look good. I like the idea of the double secret double fakeout reversal of the short-covering rally – that clearly indicates the future direction! 8-)

    DELL ’10s – Nah, it’s do or die for them, if they miss I’m going to take losses and close them I think. HPQ is still pretty cheap and pays better premiums.

    Rutterfly – I don’t advise it as a new entry at the moment, we’re probably going to have to spend $1 to roll it, increasing our risk to maybe $400, which I’m not happy about but if they hold $720 this week we have no choice.

    IBM/Ljupco – what are your actual positions and entry prices?

    Dollar – 75 dollar is 100 yen and $1.50 to the Euro, I can’t see that falling without a major reason as it’s globally phsychological and will lead to some serious international fallout if they let it happen. China has 1.5Tn of our dollars, the Arabs and Europeans each have a Trillion too so that’s $35Bn per point in dollar losses out of the CBs over there. It’s not in their interest to just let it slide, especially as oil is still dollar pegged and it gives the Fed a liscense to print money and dump it off on them. Imagine if China forced us to buy $150Bn worth of Yuan and deflated the value of our $1.5Tn Yuan reserves by 10%? We’d be at war!

    Peter – I’ll go by your numbers but my understanding was it’s a 7.5Tb project. That’s kind of the point (that there is 10x capacity in Atlantic) there are less than 600M Europeans and we have 10x the fiber more than we have for 2.5Bn Asians, seems to me if we build it they will come online.

    Gold – JOYG says yes but I want to see the dollar fail 75 so I can believe in gold $1,000. Don’t forget that the Fed minutes said they were concerned about infaltion and the phrase “rapid reversal” seems to have been forgotten in the commodity pits. If Ben reiterates that enough is enough with cuts he may disappoint a few bulls (housing especially) but it will really poke a hole in the metals bubble and don’t forget how much the carry trade plays a role in sustaining these prices. If you can’t count on buying cheap dollars with your low interest Yen, then making riskly arb futures bets starts to look a little risky.

    GOOG/Rolling – I was going for the $480s but I didn’t see $5.80 for the $30 roll so I paid for the $20 roll as who can turn down $20 in position for $3.70? The trick is to just make sure you are in a position where you feel you have a reasonable chance of recovery so I’m betting on $504, which is the $490s + my basis. With a month left I can sweat it out for a few days but there are many, many factors in rolling. Ideally, I’d love to get to the $470s for another $5, which would mean I need just under $490 to get even.

    You need to keep mindful of your options at all times and right now I am looking at selling the $450s for $22 and roling myself down to the $430s at $35, which would give me a basis of $20 and a $20 spread but I’m not too wild about that as I’m very screwed if GOOG doesn’t hold $450 so I’m probably better off investing $21 in the April $460s and selling the $450s for $22 which leaves me with a basis of $13 and an extra month to wait for the turn. Only if GOOG can’t break back up of course.

    Rebecca Darst is on CNBC (Andy Wilkinson’s partner).

  233. Bought some IBM apr 115 / ’09 120 spreads at 4.80 just for giggles. Will look to uncover some on a pullback.

  234. $VIX down over 5% at 200 MA.

  235. Rolled my GOOG 510′s down to 490′s and will work after a bounce, or will roll down and out from there. This sick puppy is too oversold. Remember this stock was trading at 535 on the 19th, just seven (calendar) days ago!

  236. AIG – that’s a big adjustment. I’d roll out to 1.5X the Jan $55s and sell 1.5X the Mar $50s, which will cost $2.50 per current position but they can be rolled to the Apr $55s next month and you’ll be in good shape. Of course spending $2.50 more to be in the Jan $50s is nicer but you don’t want to put too much money in AIG over hurricane season as we’re due for one this year. That’s why we picked Aug – I was going to shut the trade down by then anyway.

  237. DM

    Autobahn is okay, there is often no speed limit :-)
    But I like to drive on countryroads, I like the curves with high speed.

  238. Just Bought GOOG APR 480/510/540 butterflys for 3.80 This should be good for a quick 50% return on any reasonable bounce, and you don’t have to worry about time decay. If GOOG continues to tank, however, there will be no joy.

  239. Phil,
    I see what your plan was. I was basing my roll to the Jan ’10s based on the facts that 1) we currently have a position in there and 2) it was one of the recommended LTP trades you listed for me a while ago.

    I’ll have to evaluate it in more depth later on.

  240. NDAQ – any change to our short term outlook? Plan for the callers?

  241. Rmarble:

    Nice play.

  242. Crazy Market !

    Financials going crazy.

    FSLR rumor … lost a big contract in Phoenix … trading suggests otherwise however.

  243. I get the same feeling when I short a stock and when I am playing the don’t pass in craps… no one really likes you. At least when shorting, there are not the evil glares to contend with.

  244. Alex – I’m the exact same way. What do you drive?

  245. Wow, DBA just continues it’s upward path. When do we go short this parabolic rise?

    Phil, you’ve got your 460 on GOOG, way to call it!

  246. Zouk- one of the motley fool books uses the “Don’t Pass” line as a direct example of how people resent the shorts.

  247. K1,

    that’s funny… i will have to check it out

  248. spx looking to test 200 min sma…

  249. NDAQ – you should be 1/2 covered, the Mar $42.50 calers should have stopped out on you in which case the position is fine. Unless this rally goes past 13,000, the $40 target is pretty much on track for the month.

    Wow, everyone decided to take a big pause now.

    BX having a good day.

    $480s are fun to sell for $10 as GOOG tests $460, then buy back for $9, wash rinse repeate until they break through and you stop them out at $1 (against the $490s of course).

  250. Zouk- I have it on my shelf. “The Motley Fool Investment Guide” 1997 edition, pg 189:

    The odds for Don’t Pass are no worse than the Pass Line. But because you’re betting against the roller and most of the rest of the table, betting Don’t Pass is considered bad form…Many other bettors will actually dislike you for doing it, a feeling which will be reinforced whenever you smile at dice rolls that make them frown.
    It’s quite the same for those who habitually sell stock short.

  251. Less vig on Don’t Pass, though.

    Fortunately, one can short in the quiet of his living room…

  252. fnm bupgrade fwiw

  253. BX – Boy is my caller happy! Easy 5% though if it holds up (sold the $15s against the stock yesterday).

    EOG new ATH, this one is NOT good.

    Out of MRB at $5.40, 10% is plenty for a stock play. Will buy again at $4.80 XXX

  254. Phil,

    Re IBM, I think a bit of background would help.

    IBM is one of my first and oldest (still alive) positions (I’m playing with it since last September). And one of the few left from my “old” days, to play with and learn. Gradually I brought it from -90% to -50% (right now is -45%); not much but better than nothing…

    I was asking for opinion more to learn about that aspect (when a pop drowns your caller) than to safe profits (I was thinking about closing it next month). The cost basis for the Apr 105s is $12.36 and for the callers $2.04.

    While I’m at it I would like to ask your opinion on JCP.

    This is one favorite position of mine :-) Another quite old and learning position which I brought back from death, from -95% to, at the moment, about +25% :-D

    My dilemma is should I go for closure or roll it fw in time. The cost basis is $10.00 for May 40s, and $4.50 for Mar 47.5 caller (3:1 coverage).

    As I said I’m biased and don’t trust my objectivity on this one :-)

    The main diff in my approach for these two positions (once I learned a thing or two from this site :-) ) was that for the JCP I was ready to add more money to the position while for the IBM I was not, and I’m still not: I’m not adding any new funds to my first account until I restore my loses (I’m using that account for the 10KP plays and for the remaining few old “sins”, while I’m using the other account with more cash for the 25KP plays).

    Ljupco aka tlsvet (the admins are still looking into the nick problem)

  255. This may be a repeat: Time to get back into DRYS? Did I miss some reasor the downturn?

  256. Phil

    I have AIG 45 Jan’09. I was going to roll it to 50 but in view of what you said earlier, is it better to roll to august (AIG 50)

  257. Anyone got an idea why the CROX Jun 25′s are still at the same level as yesterday? No volume today, not even bids/asks and corresponding sizes. Just, nothing.

    Is it just a lack of interest today?

  258. Phil -

    The 10k portfolio shows a 1/1 ratio for NDAQ spread and the callers were the March 40′s not the 42.50′s…or am I reading it wrong?

  259. Phil,

    For 25K portfolio I a have NDAQ Fully covered by March 40.

    I see your post that we are half covered by march 42.5. I must have missed that so my question is

    How can I correct this?

  260. Jake, CROX changed the options name today, maybe you are looking at the old code in your watchlist..

  261. CROX symbol change now.czlfe…

  262. Andy,
    Wouldn’t ToS have updated that? I’m looking in the trade tab…

  263. Interesting reading on “Global Cooling” (biggest temperature change in recorded history…

  264. Primus- that’s hilarious.

  265. Jake,

    They changed the symbol for Crocs…

    CZLFE is the new symbol for June 25 call

  266. Andy,
    Just contacted ToS and passed along the notification from the OCC (after I found it). They’re passing it along to make the necessary changes…

  267. k1 – I love that comic strip. He has lots of good ones.

  268. Anyone want to pass along to EK that today is an UP day? ;)

  269. TOS has been duely notified – I called as well…

  270. IBM/LT – well first of all you should know I am not a big fan of close spreads. I use them for short-term bearish plays or to capture premiums but if you like a stock, it’s a terrible way to show it. You have the Apr $105s at $12.36, now $11.70 and you sold the Mar $110s for $2, now $6.15 – that’s not really good is it?

    You want to roll yourself up to 2x the Jul $115s at $8, which will cost you $4.30 per contract and roll 1/2 of your March callers up to 2x the $115s (roughly even). This will transfer $4.72 of intrinsic value that you owe to pure premium and set you up to sell a lot more premium in April on the next roll (the Apr $115s are $4.90). It leave 1/4 of your new Jul $115s uncovered so you can benefit from a good run or sell more calls if it turns down on you, much more flexible than your current position.

    As to JCP – if you went from down 95% to up 25% and you don’t take it off the table then I really can’t help you. That is incredibly lucky and you should be very thankfuly you got out alive, rather than assuming it will never pull back. As with IBM – if you think they are going to go higher, go for the May/Mar $52.50 spread, which takes most of your money off the table.

    Wow, $10.10 on the turn on selling those Goog $480s! If they break $459 it’s no worries but if they hold that, we may be setting up for a positive run over $462 so keep an eye on that line. $457 is about the bounce line we’re looking for to buy back for $9 and we need to take 1/2 out at $11 at least (depending on your risk tolerance).

    DRYS – I like them on dips, they are great to sell against.

    AIG Jan/Aug – If you are ahead, no reason not to take 1/2 off the table and cover.

    CROX levels – the VIX is way down (5%) so all option V is getting crushed , lowering your long-term’s premiums. (assuming you are looking at the right symbols!)

    NDAQ – sorry, I was looking at $25KP. In $10KP it’s not worth buying them back for $2.50, that’s $1.20 in premium and then what is your protection? We have June calls and the April $42.50s are $2.28 so that will be our roll if it keeps going up, this is not something to worry about.

  271. surfah – I have the same in the 10K on NDAQ and that is still okay with no changes

    happy – The spread you have in the new 25K is also right with no changes

    DM – I have a Toyota Corolla. Not a big car, I life in a cheap way of life.
    Next year perhaps I am a real Trader I want to have a little luxury for me and buy a Nice fast Car. Perhaps If I do my Homework on K1 :-)

  272. fun headline:


  273. Jake – I believe that EK has a mind of its own – does not follow suit…

  274. Alex ,

    Read Phil’s comment. He said that he was looking at 25K. I am not sure what is position everybody else have NDAQ in 25k ??

  275. Alex – Hey man no worries, I have a little car too. Really good on gas and to kick around. I put a wah pipe on mine to annoy the neighbors. My life is awesome.

  276. Fellow CROXers,
    Morningstar does have the change ontheir page if you want to look it up. It won’t tell you much, though, since the Open Interest reported there for CZLFE is 0 ;)

  277. happy,
    There does seem to be some confusion on the NDAQ position in the new 25KP. I’ve got the Jun 42.50′s half covered with Mar 40′s, myself.

  278. Jake – so suppose they would give me back the 26.77% I am down on CROX since I don’t own them anyway….

  279. Wow, came very close to pulling the trigger on my Goog callers, just brushing $11, now I’ll be happy to take them out even.

  280. Anyone remember Thunderbirds ?

    – “Anything can happen in the next 1/2 hour”

  281. AIG – Phil from the old 25K I have 5 Aug 45′s covered by 3 mar 45′s. Should I roll to a full cover of the mar 50′s?

  282. Would love to end right here – good with a profit on the day…would be a nice change…

  283. SPX at 200 sma again…

  284. XOM calls – all out. nice two day run

  285. Good time to pick up DIA $127 puts and QID $50s for overnight protection. XXX


  287. Phil, are you still holding or recommending the XLE 75 puts from yesterday?

  288. Just got quoted on my dream car… Mitsubishi Evolution X.. 51k out the door Canadian :/

  289. VLO,

    Strong move above the 50 DMA.

  290. I’m so glad I started only 1/2 covering my positions. It makes days like today much easier to cope with.

  291. Right about now should be the release of approval of the bailout plan….

  292. Crox

    Man, they’re just killing this thing.

  293. Crude predicted down 2.5M tomorrow, that’s a big draw but offset with a 1.9Mb build in distilates. Not sure whenre they are getting this from but as far as I know utilization is still way down so we’ll have to take the numbers with a grain of salt.

    AIG/Bigs – I see no urgency to roll, it’s good protection and you’re going to roll to 5 April whatevers, there’s no hurry now. Rolling to a full cover only costs you flexibility. Had you caught it on the way up from $47, that would have been better but now it’s probably toppy.

    DM – mmaybe time to switch sides?

    I’m not happy if we don’t hold 12,700, that was not such an ambitious target. GOOG is really bumming people out I think.

    Why is DE going down?

    XLE $75 puts, yes, despite today I still like them. $100 oil is NOT good for refiners and any evidence of lower demand will put pressure on the crack spreads, which is death for their bottom line. Already gas prices have not gone up 10% to match oil this Q so there’s refining losses right there. The problem is the people who invest in energy stocks don’t even know what the business is for the most part so it takes some slap in the face numbers to get people’s attention.

    XOM – that was huge, they are a nice put for tomorrow at $90. The XOM $85 puts for .75 can pay of nicely on a good dip. XXX

  294. or the release that the bailout is crap.

  295. So, uh, do we DD on EK again at .20 or .15? LOL

    I’d actually be up today if it wasn’t for them. Should’ve taken .45, 1 cent below basis yesterday, but I was feeling pretty good about them hitting .50…

  296. Phil – lol, whatever makes monayyyy!

  297. Yep – should have closed at 3 – now gone negative that EK is just not good…

  298. BTU has a nice daily ascending triangle, topping around 60.55. Any of you technical guys have any thoughts?

  299. 10KP /25 KP followers:
    Can you please let me know the covers on the above – was away at the hospital for my daughter – trying to catch up for the day.

  300. I think the shorts would like to ring Charlie Gasparino’s neck! You got to laugh!!!

  301. GOOG – has been uptrend since the low- also, OBV as well

  302. Rfly – rolled MAR 680 long to MAR 690 for 10% gain. Yesterday I rolled the MAR 700 short leg to MAR 710

  303. DONE! phew!

    sakiko – scored a 16 :) That’s good…

  304. $463 is the 5% rule on GOOG, they are a bit below it and that’s not the best sign if they can’t pick it up. We’d really like to see better than $468 at the close to get on a bounce track. $490 is 30% off the top ($700) and $500 is 25% over the old 2006 base around $400 so let’s assume that’s a key point.

    $460 is 35% off $700, just about right for a Fibonacci retracement (38.2%) and is probably a level we don’t want to lose. It actually works out just right worked down from the $740 closing high where 61.8% = $457.32. It’s funny to think of $280 as a normal retracement but they could probably pop back to $550 very quickly if sentiment changes but we don’t want to see them forming a floor here or we may be down here for a long while.

    CROX – naked, NDAQ 1/2 covered with $40s would be best. AIG no change.

  305. MCD- is telling me the sellers real

  306. Nice job, Mark… so was it a sector move?

  307. EOG has been unstoppable today

  308. EOG – Phil did you give up?

  309. Phil

    just to let you know that the $25K slot in the portfolio page is blank, only that one for some reason

  310. Ha, I got out up 10% on Goog for the day. after a DD, a 520-500 roll, and a whole lot of babysitting..

  311. MrN/EOG – I got stopped out today, but am repositioning into the close…

  312. EOG $108 – wow, they will sure be surprised if there is a build in gas on Thursday. Big problem now that CVX is in the Dow if we have a bad oil day. XOM and CVX can both lose $2 in a day easily and the stupid Dow weighting will make any dip in oil seem like some global catastrophe. Today the two are up $1.60 and the sum of all the Dow components is $12.20 so they are 10% of the move.

    BAC is going to be a lump, they hardly move at all, MO used to be fun to watch…

    Meanwhile, IBM was 1/3 of the Dow’s gain take out that and the oil boys and not that exciting (hence the covers overnight).

    EOG – I didn’t give up but I wish I did!

    $25KP – I’ll check it out.

  313. Crox – Abysmal

  314. alright folks!

    very good day- i like the GOOG action, AAPL too

    MCD was acting weak, but it firmed up and i may have been expecting too much anyway.

    when is GDP released tomorrow?

  315. This is one of our bigger clients. They’ll send us programs 2 – 3 times / month. We charge 5 bps explicit costs, and scored a 16 (so implicit cost to them of 11 bps).

    Today it was 8.1mm shares (4mm sells and 4.1mm buys) Total value of $316mm traded on 315 names. So it was all the sectors, but we began with a dollar imbalance of $19mm to buy (ex: buy 167mm on 157 names, sell 158mm on 158 names).

    The theory goes taht you try to get dollar neutral (so buy 19mm as quickly as possible), then trade hand in hand (buy 1m, sell 1m)… then also as quickly as possible try to even out sector imbalances (Selling $17mm Non-Cyc, buying $40mm for a $23mm buy imbalance).

    Theory there is that you don’t want sector moves to negatively effect you, so if non-cyclical sctor goes down you’re scoring well prob (b/c theory again say stocks in sector move in tandem which obviously isn’t 100% true) if you have to buy more than you’re selling… but rather than make that call we’d rather buy that $17mm imbalance in the sector as quickly as possible… but if you can’t then you can work a sector against another sector that you have an opposite imbalance in (mabye need to sell $10mm in financials and $7mm in Materials)…

    Anyways long winded answer but we basically bought / sold stocks in all sectors… the client sent us the orders and we executed them as efficiently / quickly as possible. So like the paper you looked at yesterday I posted, if when they give us the program all the buys and sells together equal $316mm exactly, then when we were done at EOD total cost was 16bps on $316mm or roughly $505k (of which we keep $165k). ;)

  316. Not a bad afternoon for you guys, then!

  317. Mark – BTW, appreciated the details – that’s quite a racket! I was looking to see if there was a rotational bias that you had the discretion on disclosing.

  318. Phil

    What is the best indicator to watch for money flow in and out of the bond/Treasury markets?

  319. Mark – that’s a great biz!

    Bond money flow – I have friends who text me so that’s my best indicator! Obviously you can watch the rates and watch the dollar, if you see an ailgnment on a strong move, you can pretty much guess what’s going on.

  320. Strange move in the TNX today: down despite the weak dollar, the inflation numbers, and the rising market.

  321. Mark.. Back when I was at CSFB, they were teaching their algo engine to do exactly what you described. It was crazy to watch it work (and scary for the traders to watch, as it beat them more often than not..) The engine is doing something like 50 bil shares a year now (globally, across all strategies..) Pretty much taking over the PT and DMA businesses combined.. -Peter

  322. xian – actually, it looks like GDP is Thursday 0830:

  323. Sakiko – yeah it’s fun man! I sit here and write you guys when I have sh*t to do (since sales guys make the calls, the desk implements the trades). This is actually a Program Trading client, but the Transition Desk helps out on this big guy on the trading side since we want to keep them happy / execute well! The client rotates between us and 12 other brokers and monthly ranks us based off of our score on shares, affirmation of shares, etc. It’s a big quant fund… good times.

    Transitions trade the same way (dollar / sector neutral) but take much more time to implement – Consultant calls day one to ask for bid, we submit pre-trade analysis day 2, they “hopefullY” give us the trans, we fill out contract / contact custodian to set up settlement instructions, we get certified list of assets (Legacy) from custodian and contact new manager (Target) for current portfolio… maybe trade day 5 or so, settle day 8 in custodial account… end transition. The we create post trade detailing the executions vs. vwap, prev day close, open, high, low, etc… show sector shifts, discuss our trading style, and what we “scored”.

    Frankly it’s a TON of fun… and I would have been out the door 4 min ago!

    GN everyone.

  324. foto – no doubt man, we’re an extremely small shop (100 ee’s, agency only broker, no principal…) so we have to compete against the biggest shops for TM business (State Street, Merrill, Mellon, etc). BUT we do have a great algo / sell side system, completely open architecture, able to be customizable rather than black box, and we’re known in the industry… but will NEVER be that big LOL.

  325. Global Cooling … now don’t get Phil all worked up … lol.

  326. Mark – I remember CS starting into the TM biz.. not sure where it went, but it sounded exactly like you described.. they’d be happy to get a few trades a quarter, yet each trade could be 100mm – 20 bil. though very rarely the latter. have a good night -Peter

  327. Countrywide has some houses for sale (post foreclosure):

    was 5k at the beginning of ’07, now above 15k.. 3x increase in foreclosed inventory.. -Peter

  328. Cap- global cooling: we could start a real firestorm here by pointing out that a lot of the climate modeling work is based on the exact numerical methods Anton is so down on for risk management.

    Not that I’m looking for trouble or anything. :-)

  329. k1,
    You, trouble? Never… :D

  330. foto – they’re in, all major banks are now. And it’s exactly like you said… we might have a few small piddly things, but then get 2 $1b clients in a month… great bonus those times, average the rest of the year. Hard for us to compete on their scale (b/c they have relationships with most ever huge pension / insurance company etc out there), but we do well considering our size (me and one other guy pushing $5b avg / year). :D

  331. Boeing Air Tanker

    Decision maybe on Wednesday after market close.

  332. k1,

    Is there anything in your education section about how to manage butterflys as the underlying starts moving around. I’m trying to think through the rutterfly and when I looked back at the AAPL/GOOG position last fall, they look more like condors (same with XMSR and LDK in December).

    I’m not worried about it yet at 717 since there’s still a lot of time for it to find 700 by opex but reading Phil’s “fail to plan, plan to fail, yada yada yada…” thing reminded me I really need to get a better handle on this one (i.e. a plan) before I need to make any moves.


  333. k1 – lol !

  334. Euro – Is printing above 1.5 now. I don’t know when it did this, but there goes that level eh? Huge move in the Swiss Franc today too. I’m basically dollar neutral so I don’t care that much. I have offsetting currency positions for my trading account which holds mostly dollar equities, but this whole dollar weakness thing is hard to get a handle on.

  335. KeyserSoze- There’s nothing specific about butterflys in the k1 project, but I would definitely suggest going back to study Adieu Baidu which at least talks about how to manage a condor in the same circumstances.

    I believe Phil once discussed viewing butterflies and condors as two separate spreads, each going against each other. So I believe the adjustments have more to do with continuing to press your advantage, and using the proceeds to adjust your losing side into better position.

    Caveat- I don’t trade these currently, and so haven’t studied them in detail. I understand the goal of the trade, but am not applying the tactics to my own portfolio. The closest I come to doing that is selling volatility in earnings situations or opX week.

  336. k1,
    Thanks. I’ll take a look at it. The two sides thing makes sense.

  337. KeyserSoze,
    LOVE the name. One of the best movies ever, and one of Kevin Spacey’s best performances. Hell, the whole damn movie was outstanding!!

    One of my favorites, and one of the few movies/shows that I can watch over and over.

  338. To recognize the urgency, if we go up 2-3% in the next 2 days, on the various indexes, we run into a vacuum. This thing is going to get sucked back up the money vacuum with no overhead supply for another 5%. That means a quick 8% move. I typed this at 1:15pm EST and only wanted to put it out now as there is no reason to stoke the markets when you are in cash. Better to save the cheerleading until after market close. I am really liking this setup.

    I suggest everyone take a look at a 1yr/daily chart on the indexes and look at how sweet we are setup for a power move from here. I think it goes up if an inflation scare and GOOG dropping 5% cannot slow down the markets.

    Very excited over here.

  339. as you can imagine today has been a big day on the Forex markets so I’ve only had half an eye on your wacky equity markets. Nice “Consumer Sentiment” number by the way… I know, I know – it’s all priced in ;)
    Sorry I can’t stick around for the conversion, it’s already late in Dublin, but I do have my daily *reality check* post, spotted on another Blog but well worth a look and just about destroys any shred of credibility the rating agencies had left… plus, the Bulls can’t even blame Ackman for this:

    Hope you all had a good day though, it looks like most did excepting the GOOGbash. The break of 1.50 against the Euro is a big event, going to be very interesting to watch it all unfold. My own biggest holding is long Yen against the Dollar and that has been disappointingly flat but I have a wad of Aussies against the greenback too and that has had a tremendous few days – yields 7% too – not to be sniffed at.
    Watch out for FNM & FRE results, I think they could hurt, might break your rally.
    Later chicos.

  340. Mark – from what I remember (this was a few years ago) the bigger firms were having issues due to the secrecy involved in TS.. I can imagine having somewhat better luck in winning deals not being attached to a major firm.. -Peter

  341. k1 – you are indeed inviting trouble – BTW in Pittsburgh it is the coldest Feb since early 70′s.

  342. Jake,

    Thanks. I agree this was Spacey’s best performance although Se7en is pretty close. The Usual Suspects is a classic and there were so many good parts but I think my favorite is Spacey’s line at the end…

    “The greatest trick the devil ever pulled was convincing the world he did not exist”.

  343. Speaking of trouble, does anyone else see the irony in Film and Anton posting diametrically opposed comments at essentially the same time? I find the irony involved to be delicious.

    Off for a jog, hope everyone has a great evening. No arguing numerical methods until I return.

  344. K1 – Now that’s comedy.

    Anton – The funny thing about your statements is that you provide evidence, and people have a hard time arguing against you. (Other than saying it’s priced in). You have a very interesting character, and obviously very intelligent. It is even more amazing in how confident you are.

    I’m not trying to kiss your ass, but you’re perspective is valued, atleast by me. I insist that you keep writing, for I will be an avid reader.

  345. YOUR

  346. Not intending to ruin the mood here today / this week, but today happens to be the 15th anniversary of the 1st WTC bombing.

    Should you be so interested, more here:

    And be on the lookout for another scintillating (sarcasm added) debate tonite.
    Will it be Hillary “I’m honored to be here with you Barack” Clinton, or Hillary “shame on you Barack Obama” Clinton ?

    And will Russert & Co. continue to lob softballs their way; or will he ask about things like the House Democrat’s playing political games with terrorist surveillance legislation (that passed the Senate… Hillary and Obama didn’t show up to vote and has the votes to pass the House).

    Will Tim Russert ask ?

    And will Hillary and/or Obama answer, or bob and weave ?

    Let me know; cuz I ain’t watching !

  347. Anton – keep writing for sure; we need to consider all of the evidence … but so do you.

  348. Interesting Wash Post story on Clinton campaign advisors disarray:

  349. Phil; don’t know much about EOG (yet) but I do know they have an analyst day scheduled for Thurs 28th. Shorting after that might be the right timing given this move.

  350. For anyone still awake -

    I’m messing around with trying to figure out the ideal trailing stop, for me. Got a spreadsheet going, running numbers to see how close I can get to the ideal (for me) using one percentage. Of course, the more gain you get from your caller (for example) the less breathing room you’re going to have. Say you’re using a 6.25% trailing stop, if you’re sitting on a 50% gain then the trailing stop is going to trigger when it heads up to 47%. That same 6.25% will trigger after a 20% gain when it heads back up to a 15% gain. So as you gain more on your caller, using the same percentage, the more of the gain you’re going to keep, but the quicker it will trigger. Those of you that like math will be reading this going “duh”, of course ;)

    The other option is using a fixed dollar change in the last, which will guarantee that you always trigger the stop after, for an example, a 5% bounce back. So using an example of a call that you sold at $2, setting a fixed trailing stop of .10 will mean if you gain 20% and then the caller starts gaining on you, the stop will trigger after a .10 rise (5%) getting you out with a 15% gain on the caller.

    Anyone have any thoughts on the subject of “hard” trailing stops (I say hard in the sense that you put in the order and forget about it, so to speak, as opposed to setting a mental stop and then watching it closely)?

    I’m still doing all the math to figure out what I would be comfortable with, if anything.

  351. Jake – you’re going to be looped into the paralysis of analysis. I thought we covered this in the last few days…

    Use price after it triggers over your precomputed percentage.

  352. Trailing stops work better on stocks than options because you don’t experience a 5 or more % slippage between bid/ask.

  353. TNX – I suppose you have to expect this is a bounce point for the dollar, just because it’s the all-time low. I think it’s amazing how people white-wash over the fact that our currency is becoming a joke on the level of the Lira or whatever that Turkish currency was called. The only people that don’t see it is Americans because we hardly ever leave the country and we think the World revolves around the US so the fact that everything we own is now made in China at the lowest possible cost, replacing all the good stuff we used to have, just goes right over everyone’s head…

    Rutterfly – be conscious of the cost of rolling the whole set up $20 to reposition. Is it going to be worth $1 to move our target? Once, probably, twice – maybe but by the third time we start taking on too much risk so it’s the kind of thing we do when we really have to.

    Power move – let’s see if we can turn in a positive week first…

    EOG – all the gassies went crazy, not much you can do about that sort of thing in the end. CHK got an upgrade last week but it was our pals at GS who pumped the markets on Monday with this note: “We see U.S. natural gas fundamentals as among the most attractive in the energy landscape, and believe a higher expected commodity price increases visibility into our North American drilling forecasts.” Probably the easiest Billion they ever made. Don’t forget they hired all the Amaranth traders and all they have to do is run the same set-ups but use GS’s clout to stampede the market into their positions and Ka-ching!

    Isn’t capitalism wonderful?

  354. Stops – I try not to use hard stops when they can be avoided as everything is a judgement call in the end. Like the GOOG $480s I sold for $10 with a $1 “stop”, when they actually got to $11 I decided that $465 looked toppy so I held on a bit and managed to buy them back for $9.50, not great but better than nothing. If I can do that 8 more times in the next 20 days I’ll make up my whole loss on the trade!

    Hard stops get triggered all the time and then what is your sell order – certainly not a market order I hope! A lot of what you are looking at needs to take into account the bid/ask spreads and the overall liquidity of the position. If you want to put a stop on XOM, you can say “If last sale hits $1.05 then sell all for $1″ and you can be virtually certain it will go off but if you are trading EOGs, they can skip right over your trade before it triggers. Also, you can see them spiking GOOG all the time, just trolling for suckers who set stops that they can trigger – you don’t want that to be you…

    To protect profits, I will use Tstops because if I’m up 50%, I can say sell 1/2 if my caller gains 20% from the bottom as I don’t mind making the buyout 40% ahead. What I don’t like to do is be forced to buy out a caller at a profit because it hit some arbitrary point, those I prefer to make myself but just last week, when we thought the market might turn, I did place a bunch of stops as there were just too many to execute manually. You need to think of these things ahead of an event.

  355. DM – The spread isn’t an issue. My platforms let me trigger from either side of the NBBO regardless of the position.

  356. Regarding trailing stops… if selling a long option position, should i use the TS limit order on the bid or the ask?


  357. Zouk – “It depends” Most of the time I’d use the ask (“ask is over”), but the best way to know for sure is to watch the market depth for a while and see how the participants in your neighborhood act around a turn. However, if the spreads are wide and you trigger off the ask, you *never* seem to get executed. I try to avoid those, but in such a situation, triggering from the bid is indicated.

  358. sakiko,
    I appreciate what you’re saying, I just like messing with numbers ;) Its fun for me, kind of a way for me to relax (I’m the guy that likes doing Calc problems for fun) ;)

    IF I were to set up trailing stops, it would be only after I’ve made 20-25% on the caller (have no intention of doing it on the long side) to protect profits, as you said. And only if I’m comfortable doing so, since as you said, a hypervolatile stock such as GOOG would be a bad choice for hard stops, even trailing stops. The first question to ask would, of course, be “Is using a trailing stop on this caller a good decision?” I liked your idea the other day about setting those stops as a reminder using just 1 contract.

    I’m probably going to mess around paper trading and see how various things work out. I’m happy with what we’ve got going on right now in the old and new 25KPs, this is just something I like thinking about.

  359. the Zouk (and sakiko),

    That’s part of the “fun” in this for me. What’s going to be the best for each postion, since each is different? Go with a fixed $ change in the option? Or go with a % change? Do you trigger off the change in the last trade? Change in the market price? Bid? Ask? Do you execute at the market price (we all know the answer to this ;) ) or the bid/ask (depends on if its a buy or sell)?

    Lots of options on a trailing stop, for sure. And I’m trying to figure it all out to see if it is something that will work for ME or not, hence the paper trading different systems.

  360. Jake – BTW, I usually look at the underlying to get the triggering level; setting the trigger for the contract ask price is difficult unless it’s done on the same day… premium variance over a week’s time isn’t straight line in this market.

    You have the right idea in investigating, as I have been both successful and unhappy with the TS execution (due mostly to my choices) at different times.

  361. sakiko – What platform are you on?

  362. C- someone asked my opinion on C last night after i posted a timeline of sorts on the stock and news flow- i do that to think about info that is priced into a stock (GOOG finance is excellent for this, but not a very long timeframe)

    i think C is the worst run american company that gets as much press. the damage of prince and negligence of rubin will take at least 24months to correct- but this doesn’t mean it’s still not hugely undervalued on the long term time frame- so yes, there is real downside here.

    yet, i think this name has become such a joke that all it’s finer points r being ignored- brandname, smithbarney, huge footprint, and china.

    so i think of this position (JAN10 25s and shorting front months) as a “hold the nose” and buy position. it’s just too good a deal.

    i’ve mentioned that abu dhabi & alwaleed have bought in (31ish)- for better terms than mine(10% special divi for 2 yrs), but i think it’ll b worth it in 2+ yrs. also, despite rubin’s poor performance, he’s an asset that any bank would like to decorate the board with.

    also- i dig d kass’s view (offered by phil as well) that the banks r over correcting for the writedowns and will have surprise writeups in the next 12-24months.

    i’ve also collected 20% of the total cost of my longs so far- which have lost about as much, but i have the cash in-hand and still have the postions- net/net, i’m nice in C- looking to get bigger, too

    bear food-

    Roubini Says U.S. Recession May Last Up to Six Quarters: Video

    February 26 (Bloomberg) — Nouriel Roubini, chairman of Roubini Global Economics LLC, talks with Bloomberg’s Michael McKee and Deirdre Bolton from Washington about Federal Reserve Vice Chairman Donald Kohn’s comments today, the outlook for a U.S. recession and the housing market. Turmoil in credit markets and the possibility of even slower economic growth pose a “greater threat” than inflation, Kohn said in a speech to the University of North Carolina, Wilmington.

    Morriss Sees More Dollar Weakness After Record Low: Video

    February 26 (Bloomberg) — Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd., talks with Bloomberg’s Catherine Yang from Sydney about the dollar’s drop to below $1.50 per euro for the first time since the European single currency was introduced in 1999 and the outlook for Federal Reserve chairman Ben S. Bernanke’s testimony before Congress. (Source: Bloomberg)

    AAPL fans- not customers- in the younglings-

    Texas university giving freshmen iPhones and iPod touches
    By Justin Berka | Published: February 26, 2008 – 04:57PM CT

  363. sakiko,
    Personally, I’d go with the option itself, not the underlying, but only because I’d be doing exactly what you said, putting in new orders every morning (or whenever). Not a set it and forget it for a long time ;)

  364. I will remind y’all once again, we have a “strong dollar policy” dammit !


  365. NYX- i read on GOOG finance board (from a post) that institutional ownership has increased from 53% to 71% in the last couple months

    anyone verify or know where to find historical institutional ownership data?

  366. Xian -
    type in symbol (goog)
    go to institutional ownership ….
    it will only be current to 12/31/07, as institutions don’t have to disclose holdings until 45 days after end of Q (feb 15).

  367. dude!!!

    Railway Builder Draws $420 Billion in Shanghai IPO, People Say

    By Bei Hu

    Feb. 27 (Bloomberg) — China Railway Construction Corp., builder of more than half of the country’s rail links since 1949, drew about 3 trillion yuan ($420 billion) for a Shanghai initial public offering, two people with direct knowledge said.

    Demand for the sale was 135 times the offering, which may raise as much as 22.25 billion yuan, said the people, who declined to be identified before an announcement tonight. The amount of money the IPO locked in is believed to be the fourth largest for first-time domestic stock offerings in history, they said.

    Institutions, whose bids helped set the price range for the sale, demanded more than 340 billion yuan of stock, said the people, citing preliminary numbers. Investors, including individuals and institutions, ordered about 2.67 trillion yuan of shares through the portion of the offering open to all buyers, they added.

  368. thanks cap- good site i’ve forgotten about- cool

  369. IBM … interesting comment from Notable Calls … did they really warn on EPS if you ignore the affect of the announced stock buyback ?

    “Benefits of a market savvy management team
    Man, the management at IBM (NYSE:IBM) sure is market savvy.

    Why do I say this?

    Well, they picked the best day for a profit warning.

    Huh? Didn’t they just up their 2008 EPS guidance?

    Yeah, but given they now have $15 billion earmarked for buybacks, this alone should benefit EPS by $0.65.

    Yet, IBM upped their 2008 EPS by $0.05.

    So there you have it. IBM is looking like a hero for saving the day (indexes ticking green). Benefits of a market savvy management team. “

  370. DM – I use both OptionsXpress and Interactive Brokers TWS (Traders Workstation), which is a Windows application. IB has a web interface, which very much sucks.

    From what I’ve seen of ThinkOrSwim, that platform is very slick (when they have the current symbols available…)

    Jake – I suppose if it was KFT, I could get away with triggering from option price estimation a week out. But you’re right, I do set levels “every morning” when I think I’m going to exit (remember that I have a good idea of what my profit object is before entering). But this is the short period trade mentality, not the LTP strategy where we’re trying to erode callers into sadness. In that application, I change my exit strategy depending on if we’re in X week or not.

  371. Asia Markets : Wednesday, February 27, 2008

    (The following is from WSJ; please cross check with other sources to confirm.)



    Hong Kong*


    DJ Shanghai*






    Baltic Dry Index (BDI)
    16 7312

    * at close
    Sources: Dow Jones, Reuters

  372. Asian Markets Rally, Japan Closes at Six-Week High
    Asian markets advanced in the afternoon session Wednesday, for a third straight session of gains. Japan closed over 1 percent higher and Australian posting a 1.78 percent gain.

    Japan’s Nikkei rose more than 1 percent to post a six-week closing high, with blue-chip shares such as Sony driving gains IBM’s share buyback plan boosted investor confidence. South Korea’s KOSPI rose 0.7 percent to a five-week closing high, as shipbuilders rallied after a fresh order for sector leader Hyundai Heavy renewed hopes over earnings, while techs tracked Wall Street peers firmer. Australian shares added 1.78 percent to a three-week high, rising for a third straight day as financials gained on easing credit worries, while record peaks for oil and gold lifted resource firms.

    In markets still trading, Hong Kong stocks leapt more than 3 percent, as advancing global equities and Asia-focused bank Standard Chartered’s forecast-beating earnings fueled investor confidence. Resource plays also drew strength from a commodity rally and record gold prices. Hong Kong’s financial secretary unveiled the city’s 2008-09 budget, which included corporate and salary tax concessions, helping to brighten the market’s mood.

    Chinese stocks rose over 2 percent, led by financial stocks such as Merchants Bank and Ping An Insurance as Tuesday’s rebound from technical support continued. The Shanghai Composite Index bounced from around chart support at 4,165 points, the 38.2 percent retracement of its bull run from June 2005 — the second time this month that it has rebounded from that level. This convinced some investors that another rally was starting.

    Euro Markets Open Mixed on Host of Earnings
    European markets opened higher for the third day in a row on Wednesday, on positive earnings from HBOS, Gaz de France, Holcim, PPR and Bouygues, but later slipped on worries about a gloomy business outlook.

    HBOS reported a 3 percent rise in full-year underlying profit, but its shares opened almost 4 percent lower after the UK’s largest mortgage lender missed market forecasts. UK cement maker Holcim’s earnings topped forecasts with an 84 percent rise in full-year net profit. The company also reiterated its long-term growth targets.

    Full-year profit at Gaz de France came in ahead of expectations, sending shares higher by 1 percent. The firm said performance in the second half bodes well for 2008.

    In financial news, UBS shareholders are set to approve a $12 billion capital injection from Singapore and the Middle East at their extraordinary meeting, where the management is also like to face fierce criticism over the bank’s vast amount of subprime losses.

    FTSE : -1.0 %
    CAC : -0.74%
    DAX : -0.67%

  373. Oil Jumps to New Record over $102 as Dollar Slumps
    Oil powered to a new record above $102 a barrel on Wednesday, closing in on its inflation-adjusted peak, as a slumping dollar on lackluster U.S. economic data triggered a surge across commodities markets.

    U.S. light, sweet crude [ 101.29 0.41 (+0.41%)] for April delivery stood higher, off its latest highs of $102.08 but still edging closer to the inflation-adjusted peak of $102.53 seen in 1980. London Brent crude [ 99.75 0.28 (+0.28%)] climbed, after earlier hitting a record of $100.30.

    Oil has also lately been supported by growing winter fuel demand in the United States and Europe amid falling temperatures, and indications from OPEC that the exporter group will not increase production at its meeting next week. “(OPEC) appears reluctant to heed requests from Western leaders to add more barrels to the market in order to soften prices and appears to be heading for an unchanged scenario when it meets next Wednesday,” said Robert Laughlin at MF Global. On Tuesday, OPEC’s president said members would agree not to raise production, in part because of fears of a demand slowdown.

    In the United States, crude oil supplies are forecast to have risen last week by 2.5 million barrels, the seventh increase in a row, as refineries undergoing maintenance have built up stockpiles. A Reuters poll of industry analysts predicted U.S. distillates stockpiles, including heating oil and diesel, would maintain their seasonal decline, down 2.1 million barrels, due to cold temperatures and a dip in production and imports.

    The U.S. government data is due at 10:30 am New York time on Wednesday.

    Dollar Sinks to Record Low $1.50 Against Euro
    The dollar slid to an all-time low versus a basket of currencies after weak data underscored the gloomy outlook for the U.S. economy and comments from a top Federal Reserve official cemented views for more U.S. rate cuts. The euro pushed further into uncharted territory above $1.50, while rallying commodity prices helped drive units like the Australian dollar, which was within a whisker of its 24-year peak reached last November.

    The euro [ 1.5056 0.0085 (+0.57%) ] had risen against the dollar, just off a record high of $1.5071 set earlier.
    The dollar [ 106.32 -0.94 (-0.88%) ] traded lower versus the Japanese currency.
    Versus a basket of major currencies, the dollar fell 0.6 percent to 74.317, after earlier plumbing a record low of 74.264.
    The dollar [1.0687 -0.006 (-0.56%)] also carved out a new trough of around 1.0680 Swiss francs, while sterling
    UK Pound Sterling [ 1.9896 0.0028 (+0.14%)] climbed to a two-month high of $1.9971.

    Dollar weakness came on the back of downbeat comments from Fed Vice Chairman Donald Kohn, who said on Tuesday a weakened U.S. economy was a bigger worry than higher inflation, suggesting a willingness for more interest rates cuts. Also in favor were commodity currencies like the Australian and New Zealand dollars, underpinned by their attractively high yields as well as stronger commodity prices.

    “This is a big boost for the terms of trades for these countries and as far as I’m concerned that’s largely what determines their currencies,” Barrow at Bear Stearns added. “The Aussie stands out for me as the best of the commodity-type bunch.”

    The Aussie [0.9385 0.0049 (+0.52%) ] climbed against the U.S. dollar and was within striking distance of its 24-year peak of about $0.9401 set last November. The New Zealand dollar[ 0.819 0.002 (+0.24%) ] jumped to a 23-year post-float peak of $0.8213 and was last trading up against the greenback.

    In contrast to the gloomy U.S. data, recent economic reports on the euro zone were better than expected. On Tuesday, a strong reading of German corporate sentiment cooled expectations the European Central Bank could cut interest rates in the near term from 4 percent, helping lift the euro.

    Gold scales fresh highs as dollar plunges to new depths
    Gold hit a fresh record high, buoyed by the dollar’s slump to its lowest ever against the euro amid fears of a recession in the US, which boosted the precious metal’s appeal as an alternative asset. Gold rose past 950 usd overnight to set a series of record highs. At 9.01 am, the precious metal was trading at 961.08 usd per ounce, off its peak of 964.73 usd, against 946.20 in late New York trade yesterday.

    Gold was supported by a surge in oil prices — which also set new highs on both sides of the Atlantic — as players continued to hedge against inflation.

    Analysts say the metal may be able to scale even greater heights if the dollar plunges to new lows. Other metals — silver, palladium and platinum — are also expected to find strong bids. On the other hand, if Bernanke were a bit more hawkish and were emphasising inflation risks, gold might rise as a hedge against inflation, analysts suggested.

    Elsewhere, platinum rose to 2,163 usd this morning from 2,145 usd yesterday, while its sister metal palladium reached a 6 1/2-year high of 560 usd an ounce, before easing to trade at 546 usd against 529 usd.

    Among other precious metals, silver reached a new 27-year peak of 19.44 usd an ounce before easing back to trade at 19.29 usd, against 18.70 usd in late trade yesterday. In the case of palladium, in particular, this market has benefited from expectations that automakers will shift heavily substitute platinum for palladium in auto catalysts.

  374. I screwed up both my egg yokes… I’m freaking pissed.