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Tempting Tuesday Morning

We've had improvements in the pre-market but do not be easily led into temptation.

It is very normal to get a 20% bounce off a harsh drop, while that would give us 150 Dow points and 40 Nasdaq points and 20 on the S&P, that is nothing to get excited about.  Anything less than a 40% recovery is pretty much a continuing downtrend.  The last play we looked at yesterday, at 3:43 was a speculative bounce play on the QQQQ $38s at $1.69 but, as I said to members at 11:20 yesterday (with the Dow was still up over 10,800) when we were still looking for bearish plays: "Technicals on all the indexes say we are doomed and TA has been very good at predicting lately.  If this bailout doesn’t give us traction soon, we probably are doomed so don’t go too crazy on the long side, I’d have to say that calls are still the speculative plays as the preponderance of evidence is against them."

We had our clue to worry from watching the VIX early in the morning and at 10:48 I had noted: "Looks like the market is not done going down and the VIX is up high enough for us to get back to 10,600 or it may mean we are 200 points too far down already – tough call with all this negativity!"  The VIX is an excellent indicator of trouble brewing in the markets.  At the time I made that comment to members it was just touching 40, by the end of the day the VIX spiked all the way to 48, possibly an all-time high, which we then noted would make for some good puts on the index of course.

Our worry was that Congress would pass the bailout package but it would be perceived as not enough (the morning post was titled "Too Little, Too Late?" but it did not occur to us until the voting started that they would actually vote it down and, rather than "too little, too late" we got NOTHING AT ALL.  What did doing nothing cost us yesterday?  Well the markets lost $1.2Tn in market cap, something that has a pretty broad-reaching effect on America but nowhere near what it would be if we had gambled our Social Security Trust Fund on the markets.  Of course, now may be a good time to bottom fish with our $2.5Tn of inadequate coverage as things have not been cheaper since 2005 and if Congress does finally get it together and come up with a good plan, we may be able to roll a double with some savvy investments so let's bust open that lock box and do a little speculating!

Pre-markets are holding up very well as hope does spring eternal that both the bailout will pass AND it will work if we miss either one of those two points, those SKF calls continue to be your best friend.  There are a lot of tempting values out there but it will be a while before we can claim to be out of the recessionary woods, even if the plan does pass AND it works so we need to look at very long-term positions, like the ones in our Trade Ideas section

My favorite at the moment is MSFT 2011 $22.50s, which closed at $7.38 yesterday and we are back about the price the stock was at before they announced a $40bn (about 20%) buyback last week.  MSFT may not be recession proof but, like oil, it's a necessity that people consume every time they buy a computer (most anyway).  Earnings are on October 23rd and expectations are for a modest 5% increase over last year, far lower than prior trends.  With 27 months to sell calls against them, you only have to collect .20 per month in premiums to pay for the calls but back at $25, it pays to wait to sell the Nov $27s for $1 or better, now .40

These are the kinds of plays you can construct on any stock you feel is at a good bottom.  Of course, as I said, calls are the speculative plays in this market and need to be treated as such.  We are assuming a plan that works coming from our government to "fix" the markets – not exactly something you want to bet the farm on.  USUALLY, when the VIX is this high, it precedes a short-term market rally but it is no indication of a long-term turn.  The VIX tracks the implied volatilities of S&P index options and a high VIX means it's a terrible time to buy options and a good time to sell them in general.  30 or more is generally considered high on the VIX, over 40 and we get what happened yesterday…

What's happening today is Bush is speaking at 8:45 and the international markets are expecting good news as Asia was down far less than expected (from the FXI  action yesterday) with the Nikkei falling "just" 4.12% and the Hang Seng actually closing UP 135 points (0.76%) and the mainland markets were closed, possibly for the Jewish New Year…  The Hang Seng notably recovered from a 1,000-point gap down and went straight up all day ONLY on the hopes that Congress WILL pass a bailout package on Thursday. 

"Just as the casket began its descent, signs of life emerged in the Aussie market to claw its way back from 340 points down. Investors showed glimpses of optimism as sentiment was mirrored throughout Asia," said Martin Batur, deputy head of dealing at IG Markets in Australia. However, analysts weren't willing to call a near-term bottom, and volume in many markets was low.  Government and central bank officials around Asia rushed to reassure investors they had measures in place to cope with the large market volatility. Overnight, several Central Banks stepped up their coordinated liquidity provisions to try and keep credit markets pumped with cash and borrowing costs down.  Bear in mind this is how our global markets are performing with unprecedented amounts of Central Banks support – if we have a good couple of days, we should consider it an opportunity to take on some more put plays and gold is still a great hedge as the world is awash in new capital being created by CBs at a record pace.

Europe is also staging an afternoon comeback (8:30), also on rumors that yesterday's disaster in Congress was only a bump in the road that will be fixed on Thursday.  The EU is overhauling banking regulations in actions that will affect our own international banks including "changes that include creating groups of national regulators to supervise banks doing business across national borders."  Europe's 15 biggest listed banks by market value held 24% of their assets in European countries outside their own, up from 11% in 1997.

[Then and now chart]Bankers have decried the new proposals, saying they will increase the price of raising debt and kill off a market already hit by the credit crunch.  But critics of the current system say the weekend's rescues offer little comfort. "Nobody should draw too many reassurances for other cases," says Wim Fonteyne, a senior euro-zone economist at the International Monetary Fund.

Another factor driving the European markets this morning is huge speculation that the Fed will make an emergency rate cut.  Our Fed already dumped another $600Bn into the markets yesterday morning and the ECB has a rate decision coming on Thursday and is also expected to capitulate and cut rates.  Ireland stepped in and announced they would, for the next two years: "guarantee all deposits, covered bonds, senior debt and dated subordinated debt of the four main banks."   This, of course, was a huge relief to that sector and sent their market flying – something the US could have done at any time.  The finance minister said the market has been making "severe judgments" about Irish banks. "We are in the eye of the storm … It's time for swift and decisive action," he said, adding that Irish banks will be subject to tighter regulation.  The guarantee will be financed through a commercial charge for Irish Banks.

Bush at 8:45:  "I assure our citizens and citizens around the world that this is not the end of our legislative process…  It does not matter how we get a law, what matters is that we get a law… that allows our country to get moving again…  The reality is that we are in an urgent situation and the consequences will get worse each day that we do not act…  If our nation continues on this course, the economic damage will be painful and lasting.   The drop in the stock market yesterday represented more than $1Tn in losses and (the bailout) would ultimately cost far less than $700Bn…  Congress must act!"

So, keep in mind that governments are doing everything they possibly can to prop up the markets.  As I said a couple of weeks ago, this is very much like the government throwing sandbags behind the totally inadequate levees in New Orleans ahead of hurricane Katrina – it may look like they are doing something but if the storm hits us, all these efforts will quickly wash away like sandcastles in the tide.  Paulson and Bernanke are right, the time to act is well before you are engulfed by the crisis but that time may have passed a long time ago as those same men were assuring us as recently as July that the markets were sound and the economy was strong.  Is this the right plan?  Probably not but, like throwing sandbags at the levee and hoping it will hold, it's the only plan we have with the waves coming straight for us.

TBoone's BP Capital fund got caught in the wave that washed out the energy market and he sounded downright depressed this morning on his CNBC interview and, like everyone else, he is pinning his hopes on the bailout package, mentioning Buffett said to him if Congress doesn't act, we may be looking at a 2,000-point drop in the Dow (presumably from 11,000). 

Meanwhile, home prices continue to head lower – dropping at a record pace in July and, now that Congress has failed to act, the threat of massive layoffs loom for corporate America.  Without Congressional approval on the bailout, the Fed will be forced to cut rates and oil is already moving up on that premise and rates are already down from 5.25% to 2% yet mortgages have only gone down from 7% to 6% so all this has been doing is saving the banks from collapse, it has done nothing for the taxpayers who subsidize these low rates through deficits and inflation, no wonder Ron Paul is so pissed…

The FDIC can bail out banks without Congressional approval but it would be seen as circumventing Congress.  "There's really expansive authority for the FDIC to prevent systemic risk," said Michael Bradfield, a partner at Jones Day and former Fed general counsel. Waiving the usual FDIC procedures could "make banks willing to lend to one another, if they knew that regardless of who they lent to they were going to get bailed out if that bank failed."  The Fed could broker more deal like they did with BSC, where they tossed in $30Bn to make the deal palatable for JPM and they can also undertake "emergency asset purchases," also side-stepping Congress.

The Treasury could take other incremental steps to help mitigate the crisis, including further expanding its program to buy mortgage-backed securities issued by Fannie Mae and Freddie Mac. The new program, created during the government's recent takeover of the companies, has already doubled to buy $10 billion of MBS backed by Fannie and Freddie.  The Treasury could also turn to a Depression-era fund to find money for loans or loan guarantees to financial institutions. The Exchange Stabilization Fund has about $50 billion in it, and the Treasury could use that money to backstop financial firms. However, it's a small amount, compared with the $700 billion the Treasury said it needs to stem the problem.

So we will see what happens but, although it is tempted to call a bottom, just remember we are almost 1,000 points below the 50 dma at 11,352, so it's not likely we'll miss too much be being a little cautious at this stage.

 


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  1. Gm all. 

    Kustomz, just read your 2AM comment from last nite--LOL.  Hope you got some sleep.


  2. Gs play from comments last night.  Can do the same w. JPM--long the stock w. a DITM call cover.  Still enough premium for approx 10% in 3 weeks.


  3. We need much better movement on the Qs to confirm a move up.  The dollar is flying though, that’s a good thing but not so much for gold calls.  Very important that we hold above 20% retraces from yesterday which would be up 20 on the S&P, 150 on the Dow and up 40 on the Nas, breaking below that could get ugly fast.


  4. Phil:
    I have DIA PUTS nov 107 up 76 %,
    and SKF jan120 calls with oct 120 cover.
    how do I manage these now ?


  5. Premiums are giving back their voilatilty component. GOOG up $16 and every Oct strike is showing as down.


  6. Scobe morning, i did but woke with a sore neck
    IBM weak
    AMZN finally made a 52 week low yest, huge percentage gainer today
    CAT weak
    SHLD held up pretty well yest with no bounce today


  7. G’day
    Edro – Thx for sharing your system last Fri. and additional clarification last night.


  8. DIA/RMM – You want to mattress them, that means adding 1/2 the number of $103 puts at $4.50 and then placing tight stops (15% of the profits) on the higher puts, that gets you out with most of your money and you can then roll up and DD the new puts according to the regular pattern.  When you are up 50% is the best time to do that and subsequent layers down are generally the same size but the more layers you have going down without stopping out higher layers, the tighter your stops should become.  Obviously, the last layer of the mattress is always a loser, so 25% stops on the bottom layer are good unless you are planning to roll it up from whatever bottom we get.

    SKF/RMM – assuming they are protection, let them run, there’s no rescue yet, when wee have one you can cover.

    Volatility – I said that yesterday, the only reason contracts were holding up was because of the insane VIX level, that’s why you need to look to sell options, not buy them in times like this.

    Things not looking so good already. 

    HOLY COW, Look at CY!!


  9. Phil
    Last night, Sing Steve and Peter discussed a trade involving buying GS stock @ 120.70, selling the Oct.,30 call for $95.60anf buying Oct. 30put for .40. Is a safe to assume this is a risk free trade ? Thanks.


  10. XLF   I’ve got a put spread with Jan 09 20s, currently naked.   I’m tempted to sell 18s as covers, but wonder if I should just keep the extra protection.


  11. GS/Ash – The VIX is no longer there for the trade of buying stock, and selling Oct 30 calls and buying Oct 30 put.  So this trade is off already, sorry.


  12. GS/Ash – Yes a great trade yesterday but those spreads seem to have washed out already, maybe another opportunity if we head back down so let’s keep our eyes open.  The money you make is the premium between the price of the Oct $30 call + $30 and GS’s actual price at the time you buy it.

    I wonder how that works with CY if you had puts as the stock is now just CY with SPWR distributed to the shareholders…

    Big banks with big bounces but the XLF on the whole is very weak so far.  There are buyers though and we are holding out 20% retrace levels so all is not lost yet.

    XLF – When in doubt sell half Eph!

    RMM – that’s good for you too, the premium on the SKF $120s at $10 is pretty high, you may want to partially cover in case we do go up and just put a stop on them at $12.50.


  13. CY was split off from SPWR.  No real idea of their worth all alone.


  14. Options are 100 shares CY 27 share of SPWR.  Hard to calculate values quickly.  But it equaes to about 21-22 in old CY terms.


  15. Gee, consumer confidence actually went up a little to 59.8 for September, up from 56.9 last month and way better than 55 expected.  These forecasters are just terrible!  The Chicago PMI was also miles higher than expected at 56.7, about the same as last month but expectations were 53.  This is in-line with my premise that the base economy is not that bad but this bank crisis is just trashing everything.  Driving oil prices higher with a rate cut would be a huge mistake, bailing out the banks somehow is not….   Unfortunately, if the market does well today and tomorrow Congress may decide that Paulson and Bernanke are idiots and will decide not to help them.

    Volume is way low.

    SPWR is going to be a nice pick up once all the new shareholders are done selling.

    Why are the Qs negative if the Nasdaq is up 45???


  16. Phil – Reports suggest they are revisiting the bailout again with likely vote tomorrow or thursday. If the plan is going to retain most of the items from the rejected plan, what makes them think it will pass this time around? I am wondering if the markets are not being setup for another huge down day. Your thoughts please.


  17. Dollar up 2%, that’s pretty intense for one day, gold only down .5% so far.

    2.5% rule on Dow is 10,650, NYSE is 7,400, S&P is past it at 1,135 so let’s keep and eye on those and the Qs to stay positive for good signals. 

    HOV back in the bargain basement at $7.50.


  18. Phil – I have BA Jan60 3/4 covered with Oct 60. Is it a good idea to roll the rest down to Jan 55 and 2/3 cover with Oct 55? No new money needed.


  19. Plan/Bball – I agree they may fail again but it would be such a political embarrassment that I will cling to the hope that our government is not that hopelessly incompetent.  This morning I noted a comment from MarketWatch that summed up the situation: "Even the notoriously splintered government of Belgium was able to engineer a rescue of banking and insurance giant Fortis over 48 hours this weekend. But our own representatives, faced with the gravest economic threat in 70 years, took more than 10 days to hash up this rescue plan, and then rejected it anyway."

    Now Kudlow is talking about what the Fed, FDIC and Treasury can do without Congress that I talked about above, this is going around and may give us some traction to the upside so watch out for those financial puts!

    BA/Marek – You know I am a BA addict but I would take out the covers and wait.


  20. Thanks Phil – Begs the question, why didn’t they help Home Builders or Auto makers…i think this lineup will get bigger once the bailout is approved.


  21. 10,630 was 2.5% on the Dow.   SOX catching up to 2.5% around 300, S&P over 3% now and it’s starting to look like something here.

    POT doing well, might be worth a toss with Nov $125s at $25.25 since Oct $140s can already be sold for $10.85 and if you get $15+ for them it’s a very nice spread.

    JRCC still cheap…


  22. GOOG is an amazing stock, no one has a clue what they are worth from day to day…

    Oil up $3.50, that sucks – testing $100.

    VIX testing 40 to the downside, that’s good, it means people aren’t layering in puts into this rally BUT this is AMAZINGLY low volume. 

    Airlines are plunging on oil + recession which is interesting as LVS is up 8% and you would think they depend on the same.  

    IBN had a big gap up and certainly qualifies for "Always sell into the initial excitement" as does any bank play that goes well because sentiment can reverse if a single congressman gets a hold of a microphone.


  23. Phil,
    Oct. 2nd. short list expires.  How will that affect the financials and the market?  I think the members should keep that in mind when trading XLF or other financials.  BTW,  Changewave has been recommending buying the ultra shorts on financials and semis.
    Thanks.


  24. C testing $20 again, I love those guys when they test $18!

    NYX breaking up, that’s bullish.  NDAQ interesting gamble down here but the options are crazy expensive so maybe the Dec $25s at $6.75 and selling the $30s, now $2.33, if they can’t hold $30,

    ANF coming off a massive fall.  If consumer confidence is better than they think, these guys could be a real bargain down here.  Jan $35s are $6.30 and about 1/2 premium but Nov $40s are already $2.75 but I doubt there will be a need to sell them unless the bailout bill fails again.


  25. I had full cover for SKF with oct 120 this am, now 1/3 cover only, made a little $ in buying back,
    have problem with mattress play, never done it,
    does it work like this:
    base right now is PUt nov 107,
    put stop on nov 107 puts at 85 % of profits(giving up 15 % of profits, is this called a tight stop ??),
    when do you buy 1/2 nov 103,
    higher PUT is at higher strike ?
    Please explain the sequence.


  26. Phil:
    is there still a reasonable action to pursue with my AAPL apr 135 ?


  27. Short list/Malai – It will be surprising if they don’t extend it.  If SKF comes back down to $100 I still love them as covers but I don’t agree with Changwave bying them up at $110 (I just told RMM it would be better to cover at $113) unless something fundamentally changes like hard news on the bailout or some bank having problems.

    RIMM coming back a bit, nice looking breakout at $66.

    BAC up 12% – crazyness!  C up 11%, AAPL at 5% rule ($110.50), V with a little comeback.   SNDK back at $18 gets interesting.  That’s not a bad one to own because of the offer that’s out there and you can buy them for $18.78 and sell the $17.50s for $3, which is $15.78, called away at $17.50 for an 11% profit.  They were at $14 before Samsung’s offer so not a terrible play

    Mattress play article.


  28. Premium.. I bought GOOG Nov $390s at $42 when the stock was $385 yesterday. I just sold em at $46 when the stock was at $410. So that’s $4 option rise for $25 rise in stock. Looks like I sold them too early again. But profit is profit.


  29. AAPL/RMM – are those naked $135s?   I would not put much more money in yet but you can roll to the Jan $120s for $1.50 and buying $15 in position for $1.50 is worth giving up some time if we feel bullish.  It also puts you in position to sell the $120 calls for $8+ if we have a good run or the $115s for $5 if we slip back down.  Should we slip back down, the Jan $120s can be rolled back to the Apr $110s for about $6 more so it’s a commitment to pay $7.50 to roll down to the Apr $110s from where you are IF things go wrong AND you want to stay with the trade but you’ll be financing it with a $5 sale at least. 

    INTC popping 5% at $18 hopefully. 

    ISRG got cheap but the chart looks awful.  Earnings are on the 16th and we’ll have to keep our eye on them.   The Nov/Oct $230 spread is already temping at $7.50 net and maybe a 4:3 ratio.

    Watch out, slipping below our 2.5% marks across the board!!


  30. Wow, 3 month TBill is 0.65% – there is no way you can say the economy is healthy with people willing to put money away at that rate (usually 2%).

    C Nov/Dec $20 puts spread at net 0.75 is a nice play.  Current $17.50 put is $1.05 $2.50 out of the money.  Need to see if they are rejected at $20 though…

    S&P holding onto 1,140ish and that’s keeping the faith, 5 points down for them and it may be time for some puts.  Qs need to hold 38, which is still pathetic.    Gold did get blasted down by the dollar now, probably a good pick-up here on GLD $83s at $5.65, which were $8.50 yesterday.


  31. Dollar having a great day against the UK pound.


  32. V moving nicely.  AXP at 5% rule but MA not looking as strong.

    TIE may have found a floor, now $10.80 and you can sell Nov $10s for $1.95 which is net $8.85 with a 12% gain if called away there

    Speaking of Boeing Buddies, BEAV is also coming off the floor as is AIR so maybe something is up with big daddy BA…

    DIA holding 10,600 is very important!


  33. UK just closed. FTSE +2.6%


  34. RIMM still holding up.   C broke $20!  DRYS coming on strong…

    MRVL now looks attractive at $9.  Not worth selling calls though, just a play to look for a 10% gain.

    Wow on FTSE, nice recovery.


  35. RIMM still holding up.   C broke $20!  DRYS coming on strong…

    MRVL now looks attractive at $9.  Not worth selling calls though, just a play to look for a 10% gain.

    Wow on FTSE, nice recovery.


  36. SLB  What do you think about it down here?


  37. Phil:

    I have SNDK at 19.15$,
    could sell oct 17.5 at 3.10 or oct 19 at 2.3 $, Samsung offer is 26$.
    if I sell the oct shorts, at 17.5 they will be called and I make 17.5 +3.1 = 20.6 which is 7.5 % gain,
    at 19, they might be called and I make 19 + 2.3 = 21.3$ which is 11.2 % gain.

    MY AAPL apr 135 are indeed NAKED.


  38. Commodities except gold are up. Bonds (TLT, IEF, SHY) down. Anticipating a stronger dollar which surely must be overbought?

    Almost all the ETFs I follow like XLF,BKX, IYT, SMH are up. But RKH is down. Is there a belief that Congress will limit relief to the largest banks and leave out regionals?

    RTH and XHB are also down. Beyond help? What’s wrong with RTH long term puts?


  39. i love the color green,  i think we’ll see some profit taking as people still have no idea what this new plan will look like


  40. TBoone back for his second pump of the day on CNBC.

    GOOG back in gear, breaking $415.  NYX still jammin’, RIMM passing $68 (10%) – you’d think they were underpriced at $60 or something…

    JOSB came back a lot off that crazy run but they are a good stock at $31 and you can sell $30s for $3.70, very nice 3 week return if it holds $30.

    SLB – I’d like to see them down at the 2005 level of $50, $75 is still a lot but they are a great company.  I’m just worried in OIH’s that lower oil revenues lead to big oil guiding E&P spending down and that will put the hammer on the service companies – THAT would be the time to buy.

    SNDK/RMM – Don’t forget they don’t want the deal.  If you are sticking with them for the deal, go for the 11% as you intend to wait long-term.  If you are tired of the stock, take the 7.5% that is safer.

    We keep getting rejected at our break points, hopefully the buyers won’t get tired of it.  Fortunately, there are very few sellers today. 

    JRCC with a nice move now.  RIMM rejected at 10%, C holding $20.  Still need a catalyst to get going…


  41. phil, what do we think of Blackstone (BX) back at 15?


  42. Phil Ref C clndr (| Permalink). My quote for Nov 20P is 2.45 and Dec20P is 2.73. Nowhere close to $.75.difference. Did you mean Oct20P (1.67)?

  43. BX/Tesoro – With all the toxic crap going around it’s hard to be sure who’s got what in these funds.  I got burned on FIG and it only takes one bad investment by these guys to kill their stock.  Better off making your own bad investments on the whole than investing in ones they already made.   Don’t forget these guys live on LBO money and there’s little of that getting done this year.

    JPM with the usual nice recovery. 

    Ah, it turns out someone did reassure the media that a package will be passed on Thursday.  I don’t know why CNBC can’t report it until long after the fact…

    C/Bro - Sorry that was Nov/Oct!   Now that C is up you may want to take the Nov 1st and hope for a retest just below $20 to sell.  If they can’t break $20.50 soon they are likely to head back down to gather strength.

    ELN coming back off $10, super risky but I like them.  $11s are already .75, buying the stock for $10.50 and getting $1.25 for the $11s is a nice play.


  44. Now MA is moving!

    Dow having touble holding 10,630 and SOX can’t take out 300, that’s our big problem at the moment.  Broader NYSE and S&P are moving up so hopefully they’ll pull them over.  It shows you the power of index selling on smaller (in number of holdings) baskets.


  45. Phil;
    in these times, I went for the safer way, got 3.30 for the 17.5 oct shorts, if called at 17.5, that makes8.6 %.


  46. Phil:
    Mattress play on DIA PUTs:
    I read it and that is what I understand:
    ONLY if DOW falls, right now DOW goes up, so does not apply,
    if DOW falls, add a mattress by
    ading 1/2 the PUTS at a price  which is 1/2 what the original PUTS are worth, with my nov107 worth 5.80$, that makes it 2.9$ which leads to nov put 99 or 100,
    the nov 107 at 5.8$ need a trailing stop at 20 % which is 1.16$,

    is this the way to do it, not now as DOW is rising.??????????????????


  47. Phil would you really want the markets to take out those numbers on low volume, every stock hitting resistance caused by yest no vote break down.


  48. Phil - Assuming the my ea pos is multiple of $10K, then legging into the calendar is not an option, is it? Example C. Nov/Oct P Clndr is $.75 so I need ~130 contracts, if I leg to it then I need >$31K per $10K to begin with.  Am I right?


  49. Phil:
    how is situation with th C butterfly:
    calls: nov 20 calls a little ahead of oct 20 shorts,
    puts: oct 20 short puts a lttle ahead of nov 17.5 puts.


  50. CAT at an important level


  51. Phil:
    I have GE stock at 24.3$,
    they pay 5.3 % dividend,
    now: I want to sell covered calls, which ones ?


  52. Mattress/RMM – You initiate with a strike that we roll up at .40-.50 per $1 as the Dow heads up.  THEN you add on the way down once you get about 40% ahead on the primary put play.  You add 1/2 because you don’t want a quick reverse to hit the puts you just bought too hard and wipe out your gains.  Once you add a layer (usually $2-$3 lower than your originals) you put tight stops on the top layer to make sure you make 30% AT LEAST.  That way, you are 60% ahead on the value of the new set you bought and can take a 20% loss there no problem (as that would be 10% of your original bet).  If all goes well, you go up 40%, add a layer that goes up 40% and add another layer before you get stopped out of your first layer, which should be almost a double by then.  You want to add the plays when it’s going your way, it’s a pre-roll for your original position as you prepare to take your profits off the table.  Again, all this very much depends on the overall balance of the portfolio and what you are looking to protect.

    Market/Kustomz – I would be thrilled to see the market holding up without a bailout but I think we’re only holding up in anticipation of a bailout so it will be interesting to see how far we can get by Thursday morning, when it’s down to the wire again. 

    Legging/Bro – Ah, yes, that is a problem although you could have done 40, then covered 40, then bought 40 more if they got cheaper etc…  Actually, C is back at $20.50 so you can do that.  I’m saying that the Nov $20s are now $2.40 and you can pick them up and target selling the Oct $20s on this round for $1.75, which is the best they were in the past hour.  If we get a big sell-off, you luck out and sell for more and, if we break $20.50, you take your lumps and sell for $1.60 or $1.50 but you still have 2/3 of your cash to roll or DD depending on which way it goes.

    C Butterfly/RMM – please post up the orignal entries but they are right at $20, which was our ideal target.  With the Nov $17.50 puts, it was a slightly bullish targeted play and the $2 premium on the Oct $20s is outrageous although they were $1.40 this morning and had you put a 20% of the profit stop on them, you could be sitting pretty.

    CAT getting very sexy down here.  I picked them this weekend at $64.13 in the Portfolio Tab so I love the 2010 $55s at $11.55

    GE/RMM – I like them enough to do the $25s at .93 rather than the $24s at a very attractive $1.46 because I would NOT want to be called away and I figure they are a good risk down here but if the caller drops to .45 this week, you need to consider rolling to the Nove $24s, now $2.18 as it means something is very wrong.


  53. VLO still cheap.  $30 puts are $2.25 which gives you VLO stock at $27.75, not a bad thing to own long-term.  Nov $29s are $3, also a great deal to sell

    GE – If you want to own them like RMM, they don’t pay another dividend until Dec so selling the $24 puts for $1.21 puts you in at $22.89 this month and if that doesn’t work, you can sell them again and save another $1.50 next month.


  54. Damn that VIX wont let go of 40


  55. Out of AAPL and RIMM

    CAT is close to losing it


  56. 3 tops on XOM today


  57. If MET gets back to 46 i want in


  58. UNH   In all the panic yesterday I didn’t even see that they hit $21.    I’ve got an LTP with them, but that price might be a DD.


  59. CAT on the edge of the precipice, congress better hurry


  60. Phil – Being uncovered on the Bailout vote didn’t work for me yesterday but buying back thse covers gave me some great premiums. I’m now fully covered again but my callers strike prices are on average 15% above the current stock prices so I have a fair bit of leeway if the market jumps as well as cover if it dips again. So I’m looking for a way to play any jump on the bill passing without having to buy back those callers again. Some combination of XLF, SKF puts and index calls ? Or do you think removing callers is best ? Thanks


  61. VIX under 40, this may send us much higher


  62. SPY – sell OCT 102 put naked
    QQQQ – buy OCT 40 calls

    These are hopefully daytrades for small gain although I might keep the Q’s overnight and hedge with DIA puts at a strike that has the same implied volatility as the Q calls. The SPY short is strictly making use of what may be a nice drop in volatility rather than a point move up in the underlying


  63. UNH/Eph – Yeah I saw that yesterday near the close I think, what a deal that was!

    Callers/DB – I like the XLF calls best as they don’t have a big premium, ideally you want to make enough to roll your callers up to a higher strike in the next month without taking money out of pocket.   XLF was $22 last week and now $19.60 so the Nov $20s at $1.83 could double up pretty well on a $2+ move.

    Now we’re getting some serious movement!


  64. Traders not sure what to do here, GS BA MSFT moving up we, need some leadership


  65. VIX, would be nice to see rejection at 40

    I have to believe with the move today, traders will buy on weakness if they get it….lots of traders missed the move today and thats got to hurt


  66. SPY – cover naked puts for small gain. VIX went back over 40 and volume dropped. Still holding Q long calls


  67. Indexes at the magic 50% retrace zone, would be nice finishing a bit higher than here, maybe 10,800 on Dow and 7.500 on NYSE along with holding 1,150 on S&P. 

    Oil $100 and gold heading down, very strange… 

    Tomorrow’s data is Auto Sales, ADP Employment, Construction Spending, ISM Index and, of course Oil so possible negative data points to be worried about but the bailout rumors trump all I think.

    Today of all days SHLD stays flat…


  68. Phil:
    my C butterfly was established as:

    bCALLnov20
    1.95$

    sCALLoct20
    1.43$

    sPUToct20
    1.87$

    bPUTnov17.5
    1.43$
     


  69. SHLD very interesting looking chart, SHLD had very low volume on that 777 point selloff


  70. SLB is heading up fast.  Whole OIH group up on oil retaking $100 and holding it.

    C/RMM – So you are already at net .59 and you entered for .08, that’s a 7x return!  Your callers still have a ton of premium, obviously but just try not to slip below net .40 and maybe bump that stop up .10 for every .15 you gain on your caller/putter as you should hold premium that much better than them every day. 

    MS up huge today.


  71. anyone know why cat goes down when all the others up so much?


  72. Phil:
    ok, help me on the C butterfly to set trailing stops: I have none at the moment.
    Callers and putters have lots of time value left.
    Stop for which one:
    nov 20 call
    oct 20 put


  73. Phil;
    is SKF far down so to do something ?


  74. Phil,
    Looks like the market and everyone is looking for the bailout plan to pass.  Does this mean that everyone thinks that once the bill is passed, things are hunk dorry and the stock market can roll along the merrily?  I still see credit lending to be tough (LIBOR is way too high, was high even after they announced the bail out plan).  So the juice that runs the economy is stuff, labor market has started to deteriorate at a faster clip.  So what is the catalyst that can move the market to the upside?
    Thanks.


  75. CAT relies on a strong global economy, i think people get nervous and believe downgrades are coming and CAT would be on that list….when credit dries up it leads to less lending less building less digging as the need for commodities wanes, and the chart looks ugly


  76. Phil,  echoing Malai’s comments, the credit markets and bailout is one thing, that may or may not get liquidity pumping, but the economy is in or heading to a recession.  What effect on the markets?  Was yesterday the bottom or is today just a dead cat bounce?  The ultimate question I know. . . And if we all knew the answer, then we’d have all retired long ago.


  77. Phil – Callers – Thnx


  78. Today is also quaterly option expiration day. Is market being manipulated for that? Maybe the reason for light volume.


  79. I have equal amount of following AAPL:
    QAAVD (Oct       120) Puts Sold      at cost of $5.40
    QAAMB (Jan09  110) Puts Bought at cost of $4.00
    Should I be adjusting anything? I don’t mind owning AAPL around $115 and will use that to sell calls against.


  80. CAT/Acton – they are moving.  It will take a bit to convince people that international heavy machinery is out of the woods.  CMI is another nice play in that space but CAT was more beaten down so I liked them better.

    C/RMM – You don’t really want to change it or expose yourself.  Perhaps add a couple of extra calls or pick up the Jan $22.50s as a pre-roll for your Nov $20s, that gives you 2x to roll the Oct $20 calls to if they get away from you but it’s a butterfly, you’re not supposed to mess around with it unless it goes way out of range.  You can also roll you Nov $20 calls to the Dec $17.50 calls for $2, which buys you a month and $2.50 in prosition but your callers still have plenty of premium and C is up 18% for the day, the same logic that says they probably would retrace some of yesterdays drop (they’ve taken back all of it here) is the logic that says they may still give some back tomorrow.

    SKF – If you mean the butterfly, no, they are well in range.  As to your callers – if you are well ahead then a stop at 20% of the profits or simply lighten up a little in case we get bad news tomorrow (again, assuming you are protecting something with these).

    Market/Malai – All we’re doing is clawing back to a 20% drop from our highs of last fall, this is nothing like a rally, just an upside test of our 20% levels (Big Chart later).  So we are already trading on awful outlook including frozen credit, mass unemployment and economic stagnation, the proverbial wall of worry.  To a very large extent, the SPX should probably be around 1,250, not 1,150 and perhaps we trade between there and 1,350 for a while as we sort through the next two quarters which makes the market perhaps 10% oversold and says that we should be down about 15% off our highs but down 25% is just too much UNLESS we are actually letting the financials fail and businesses will NOT be able to work their way out of this jam.

    By the way, check out the S&P priced in Euros – if we did have shorts, they’d be really worried by this chart.  The key will be follow-through tomorrow and we need to add another 3% pronto to turn this around. 

    AAPL/M2 – Well you are ahead and your caller still has a lot of premium.  It is a bit bullish on AAPL of course but, since you can roll them to Nov $110 puts even at the moment, you have little to worry about.


  81. Commodity plays and ags selling off sharply.  Oil in it’s own special world but that’s normal on TBoone days on CNBC.

    VIX down near 39 now, that’s very good.  We’re a bit shy of 50%, not so good but we’ll be thrilled if it leads to an up open tomorrow.  If we do get a sell-off into the close, then we worry.    XLF still under $20 is bad too. 

    SKF Nov $115s at $13 were $22 yesterday, not a bad cover because you can cover with $105s, now $11.30 if it heads the wrong way but this is a cover if you are trying to stay bullish for tomorrow.   QQQQ $40 puts at $2.15 were $3.25 yesterday, not a bad way to protect long tech names but this is a really good move and if we finish up here, it’s more likely we get follow-through tomorrow so perhaps some half covers on existing positions are a better way to go than buying puts that may lose money on a gap up.


  82. Phil: Thanks, I rolled my cat position.  SHould we cover half?


  83. CAT/Acton – Yes, I think all of today’s gains should be protected.  This was a huge run but the volume was low so there’s no saying it will be sustained.  Also, the premiums you can get for seling are still very high.  I’m still worried about hedge fund redemptions forcing another round of selling.


  84. Ah, here’s a late market booster, SEC to change some rules today, very likely in favor of banks on mark to market accounting – so much for needing covers!


  85. Phil:
    my C butterfly
    and
    my C LEAP 2010 jan 15,
    after this big runup needs protection ?  oct 20 shorts ???


  86. Phil;
    also: does AAPL need cover?  oct 115 ???


  87. Phil:

    there seems to be a notion that NG is the energy play from now on ????


  88. C/RMM – You can sell 1/2 $20s for $2.31 and those can be rolled to Nov $22.50s, now $1.70 in almost any circumstance, that’s good cover.

    AAPL is tough to cover, did you roll down or still $135s.  If still $135s then still taking a chance is probably better, if you rolled down, then you had a good day and should 3/4 cover.

    Nat gas – I still think it’s too high over $7 but so is oil so who knows.  We talked about CHK being a good one the other day but now they had a huge run and less attractive.


  89. Phil,
    What’s your opinion on POT, with the market rallying, yet it is selling off.
    Thanks


  90. Phil:

    AAPL still naked apr135.


  91. TM 2010 $75s are $18.75 and 1/2 the premium is wiped out with the sale of the Oct $85s at $4 or the Nov $90s at $3.70 so it’s a good speculative buy on a recovery with no major urgency to cover as the Nov $85s are $5.85 and covering with them at $4 is the fallback plan.

    POT – I made a cover play on them at 10:22 but the are already a big disappointment.  Dollar strength is bad for them but I do think they hold $130, at least for a while but I wouldn’t risk them outside a spread.

    Hitting my 10,800 target, very nice if we hold it!


  92. Phil:
    what is meaning when you have a comment in BOLD ?


  93. Phil: would you have a cover on BA ? probably not.


  94. QQQQ – close OCT 40 for nice daytrade

    GLD – buy OCT 80 puts


  95. Phil
    My AAPL is killing me.  Got stuck with 30 Jan 150 covered with Oct150.  Was going to let this ride oput until exp or close it down in 5-7 days before it starts to decay..  I figure I need to sell the Jan 150 while I can becuase not much hope it will be back up there soon.  Spent my cash on rolling down postions.


  96. Phil – rolling down covers. I have Oct22C 1/2 cvr that I am thinking to roll down to Oct 20C, but I will get less than $.50/$1. So, should I roll for lower price or I should open another ½ cvrs at the lower price and be fully covered. Thanks


  97. WOW, they are opptimistic about change in rulkes and passage of the rescue package.


  98. Phil XLF is undelying in the above post.


  99. GLD – nevermind, decided against holding anything overnight


  100. Phil
    1/2 covered with my C with Oct20.  Would it be good to think about rolling these to Nov 20 to keep the delta down when we head into exp in 17 days. And then I can deal with eiter a a 2x roll up or buy back on a dip if there is one.


  101. WTF, anyone watching MET this is nuts


  102. C up 19% now, GOOG heading for 10%, RIMM broke 10% up, AAPL more than 9%, XLF testing $20…

    Bold – It means I really like it!

    BA/RMM – no cover.  The strike will end one day and they will shoot back to $70, you don’t want a caller for that but if they run up to $60 and get rejected, then a 1/2 cover might be a good idea.

    AAPL/Steve – You can sell Nov $120s for $11 and the roll down to the Jan $120s is $9, seems better than where you are now. 

    C/Bro – If they are changing the regs we may have a big bank rally, you can roll to 1/2 covers on Nov $20s at $3 and those can be rolled to 2x the Nov $22.50s for better than even but you want to be careful as they can really pop.

    What the hell is GOOG doeing all of a sudden?  Totally insand trading just went off and they went from $480 to $390 – looks like they are flushing all the stops in both directions…


  103. BUDfly – if you’re playing the BUDfly you know that InBev voted to go ahead with the buyout at $70 leaving it up to BUD shareholders to approve (and of course the Trade folks on both sides of the ocean) which looks like a done deal.  I entered it only because I though the Euro drop would drive the cost up to high for InBev to want the trade.  With the recent DOW drop I was able to buy back some BUD Jan60′s callers for $7.80 yesterday and today I bought back the Jan 60 putters for 2.05 and sold my Jan 50 puts for .90 for a total trade of $8.95 (and I still have my JAN 70 calls!).  Since the original trade was for $9.70 credit you can make some money that way rather than taking a loss when the trade goes through.  Trading is real light in the calls though so it will take some time and waiting.


  104. Bold is the new XXX


  105. cant be right the trades going through cant be right


  106. GOOG – Must have been a typo. My screen is showing last trade at $295.57


  107. phil,  can you further explain GOOG and flushing the stops in both directions, thanks


  108. GOOG was simply amazing, I was watching $100 swings real-time. You’re right Phil, my stops got triggered on puts and calls within one minute of each other, just insane!


  109. GOOG – not sure if the TD Ameritrade trend chart is correct, but it shows trades down to the 200′s. That would be some illegal manipulation if its correct, no?


  110. There was a hiccup in the system i seen some nutty trades go through in the last minute of trading


  111. There was a hiccup in the system i seen some nutty trades go through in the last minute of trading


  112. GOOG – could it be that some hedge fund or some institution was exercising various calls & puts to even out a trade?


  113. Anyone know if you can do complex spreads like a 4 leg trade in OXPS. This is in a IRA account.   I want to roll my AAPL Jan150 to Jan120 and at the same time roll my oct150 to oct120.  This should net me about $1.10 credit.    Thanks Phil for finding that.


  114. GOOG – they need to investigate that action, someone just yanked that stock around in the most ridiculous way I’ve seen in ages.

    C/Steve – same as comment to Bro in last block.

    MET – another crazy move at the close.   AAPL got flushed too. 

    BUDfly – thanks James, good point. 

    CNBC can’t figure out what’s going on with GOOG either.

    GOOG – in thin trading someone can dump shares at ridiculous prices up and down which then triggers stop-loss orders for legitimate transactions.   By spiking GOOG up first to $489 at 3:37 they trigger some buy programs, which they start selling into and then they sold the stock down to – well, it says $0.01, triggerig people to sell at stops and then they  start buying under $350 from all the suckers who got triggered.  It happens all the time but that was amazingly blatant and drastic.  Probably a hedge fund that was desperate to show some sort of profit before the quarter closed so they are risking an investigation on the trade although smart ones do it with several partners who all claim it was just a big coincidence that they all decided to trade like maniacs at the bell.

    OXPS/Steve – Go to Toolbox/Trade Calculator and you can enter anything there and when you hit "Calculate" they give you the option to initiate the trade.


  115. Phil - How should I handle ½ cvrs of XLF. This is process question, how to handle ½ covers when underlying dips, cover loses .50% of value, but I would like to still maintain some cover. Sorry for not being clear at the original post.

  116. T – Surprised that on a day like today, AT&T is up only 1.5% and within $1 of it’s 52-week low set yesterday.
    Any explanations? It currently yeilds almost 6%


  117. EDRO – Please wish me luck. I have opened IWM ’10 LEAP and sold  Oct$66/67 strangle. Tomorrow I am going to roll up cvr to $69. Thanks, BTW I repeated your results up to last Fri. If my time permit will see how this trade behaves on blow to the bottom. Thx.

  118. Official GOOG last trade is $341, down 10% – that’s what’s going to read out to foreign markets tomorrow!   That move was strong enough to dip the Qs too. 

    Covers/Bro – It’s like a mattress play.  If $20 cover loses 50% you cover other 1/2 (assuming you are bearish) with lower strike and put a tight stop on the NEW covers as the higher ones won’t burn you as badly on the way up. 

    T – totally great dividend stock, we should add that to the Long-Term trades.  VZ is more exciting because of FIOS though.  VOD is still way down.


  119. I’ve seen this thing GOOG thing before.  I think someone makes a trade "in-house" at really low or high prices just to trigger stops which is why I don’t use them anymore.  I still use limt stops, just not market stops.


  120. I count at least 30 prints for google under $1..


  121. Any one trading CY calls, you can find quotes for the old calls at SPWRV.  Not much activity yet.  Still waiting to see what the OCC does to make it all work.  Looks like .27 shares SPWRB for each share of CY but how that works out for each option of CY I don’t know.  Any input is appreciated.


  122. Under $1?  Wow!  I cannot believe that a person sold GOOG for under $1, that is simply amazing.  I don’t see how just a few buys will help a fund (won’t hurt though) so I guess the trick would be to figure out which option contracts got snapped up during that time.  It just goes to show you – it never hurts to offer a ridiculously low price for something – sometimes you might get it…


  123. Reading some chatter about changing the mark-to-market rule to infuse liquidity. This could be huge for markets!
    Some excerpts from http://www.foxnews.com/story/0,2933,430429,00.html 
    "One reason is that there’s a step they could take tomorrow morning that would dramatically improve things with no congressional action, and that is to change the accounting rules that the Sarbanes-Oxley bill imposed on the system called "mark to market." It’s a complicated issue, but I think it’s so central to our future, Greta, that every American needs to understand. We adopted an artificial rule which drives down the price of everything in a period when prices are declining. So we artificially make it much worse for companies."

    "So my challenge to the administration is simple. Suspend tomorrow morning the mark-to-market requirement. Replace it temporarily with a three-year rolling average. You will overnight explode the amount of liquidity on the street. Companies will immediately have relief all across America. It will be a stunning effect. And you will have bought plenty of time to now think through in a better way what was so badly designed by Secretary Paulson and that, frankly, could not be salvaged."


  124. Watching what happened to GOOG today it very disheartening - the playing field is slanted for the benefit of the big players.  The more I see this activity the more I wonder why I bother to participate in the market.  GOOG over $400 in after-hours…


  125. Goog options spreads and IV jumped huge when the price moved.  I doubt much was traded options wise.. 
    looking at the T&S..  looks like it was driven up about 70..  from 411 to the 480s..  Then back to 411 range..
    about 3:58:28, the market is locked, bid 318.11, ask 318.01..  that’s when the 39$, 10$, and 0.02 prints flooded in..  size in the thousands..  totaling over 100k shares.. 
    Going to be fun seeing who did this one..   -Peter


  126. They’ll just bust the trades, won’t they?


  127. some kind of rolling average for MTM pricing is probably not a bad feature permantently.


  128. busting..  well, it depends on what the investigation finds..   but they don’t look too kindly on maniuplation, especially when it effects a quarter end closing price that all the mutual funds owning GOOG will have to base their quarterly report on.. 
    but there’s also the guy out there that might have had a legit, albeit crazy, order to buy 200 shares of goog limit $1, GTC..  that’s been there for 5 years..  and well, that guy might get to keep his shares, depending on who/how/where they came from.. 
    then again, the locked market situation looks bad for the market makers.. and typical recourse is to find against the favor of market makers.. 
    though these aren’t typical times..   -Peter


  129. Gain in the DOW 3rd best in history – or something like that !!! What a crazy crazy market.


  130. Learned a load about voilatility and stuff today. UNH +20% Jan10 $25s up $0.1   !!  JPM +14% Jan10 $50s down $0.6 (and both the $25s and the $50s were in the money Friday !!!)


  131. Pursuant to Rule 11890(b) NASDAQ, on its own motion, has determined to cancel all trades in security Google Inc Cl – A "GOOG" at or above $425.29 and at or below $400.52 that were executed in NASDAQ between 15:57:00 and 16:02:00 ET. In addition, NASDAQ will be adjusting the NASDAQ Official Closing Cross (NOCP)and all trades executed in the cross to $400.52. This decision cannot be appealed. MarketWatch has coordinated this decision to break trades with other UTP Exchanges. NASDAQ will be canceling trades on the participant’s behalf.


  132. SEC issued guidelines about fair value accounting
    http://www.cnbc.com/id/26959254 
    So now all the paper losses on bank’s balance sheets could be adjusted. This could very well provide the much needed financial rally!!!

    "The U.S. stock market added to its gains on the news, on hopes that regulators’ new interpretation could slow or reverse the heavy flow of mortgage-related losses on banks’ balance sheets."


  133. Phil – Ref GOOG @ $1. How someone can sell for a $1? It is my understanding that all orders are at a asked price or better (or better is implied). That “or better” clause is specifically used that someone cannot easily trigger the stop losses orders. So to sell for a $1, I would have to first fill all standing unpublished orders to buy below asked price and $1. I am suspecting this will require a lot of monies. I am suspecting that something got mixed up in NASDQ system.


  134. Bronke..  First off, there’s no central order book..  so each broker/dealer/order holder only shows there best order to the market.  And given google is so expensive, those orders don’t equal a lot of shares.

    There’s no way to fill "all standing unpublished orders" as they are unpublished and you’d have no way to know they exist.


  135. What is going on with GOOG ah


  136. Have no idea what’s happening, i put orders to buy at 320.50


  137. kustomz..  Nasdaq is canceling any orders trading under 400..  so don’t bother.. :)


  138. Mark to market – Let’s hope they do that.  Of course you are wallpapering over some very real losses and allowing a lot of very bad lenders to go back to levered up gambling…  Perhaps in conjunction with a serious audit of all lenders, maybe conditional on accepting the accounting change. 

    GOOG/Foto - What pisses me off is they say it was an electronic glitch, which is what they always say because they don’t want people to know how rigged the market is….


  139. Foto; Isn’t NASDQ computerised, so unpublish price is not visible – but it is in the computer que. It is an hones question – not a chalange.


  140. So Nasdaq unwinds the bad trades, but I bet they don’t unwind the trades that were cascaded, I was stopped out when I didn’t want to be and I’m pretty pissed.


  141. I knew it was too good to be true, but im leaving my orders, just in case


  142. This is wild, voting has already started in several states and they say 1/3 of the voters will vote before election day.  I guess they’re not exactly the undecided types but you should be required to at least watch or read about 2 debates before voting!


  143. Phil..  nothing I’ve read has said "electronic glitch"..  at best it was a disorderly market (crossed bid/ask spread)..  at worst there was some manipulation afoot..  Either way, they’ve quickly wiped out the worst of the trades, and I’d assume an investigation is still underway.

    Bronek – yes and no.. nasdaq is computerized (of course) but they’re a quote listing system, not an order management system.  So brokers list quotes with them which the brokers are responsible for filling.  brokers have to represent their best orders in their quotes, but not all the orders, as a single quote couldn’t possible represent multiple orders at different prices.

    There has been talk (for years) of having a central order book for nasdaq.. but the technical bits behind that would be tricky at best.. 

    also.. there’s no such thing as an "unpublished price"..  There are quotes, they have sizes and names next to them.. go look up "nasdaq level 2" and you’ll see what everyone else sees (who pays for it).  nothing secret in these markets (except all the OTC options trades!)   -Peter


  144. GOOG – Cool, I have $2k extra as my broker shows GOOG quote at $301 in the end of day balance.  It should be in the $400s.


  145. DB/Volatility stuff – Yes, I saw the same thing where the call value doesn’t gain much today, and they didn’t also loose much value yesterday.  With a 400 point drop in 2 minutes yesterday, the VIX shot up and we have the whole day to sell covers.  On the other hand, buying leaps yesterday wasn’t good as they don’t gain much today.  Next time, I’ll be buying the stock on a quick dip, rather than options.

    Back in July when we have the slow grind, it was impossible to sell cover as calls keep loosing value as they stock drops steadily.


  146. Jim Goldman on one the analysts who downgraded AAPL yesterday:

    Morgan Stanley’s Katie Huberty is a bit more of a quandary: She cut Apple’s target just a week ago from $192 to $179. And now just five trading days later, she goes from $179 to $115. She was woefully short in her estimates last quarter across Macs, iPods and iPhone. And yet her call this morning is contributing to a 14 percent shelling of Apple shares. Regular reader Robert O’Neil tells me her report seems "random at best and doesn’t seem rational on her part."


  147. How nutty are the mega rich? Here ya go.. This bastard knocked down a bill to help pay medical to the people that were there after the 9/11 tragedy…burn in Paulson Hell Bloomberg!!
    AP source: Bloomberg wants 3rd term as NYC mayor
    http://ap.google.com/article/ALeqM5jpzbVnsi4wA6i41pQJcS334ACndQD93HAKD03


  148. Foto – Thanks for taking time to explain. I used term “unpublished price” b/c it was used by the rep used at two occasions. At both times there was no implication of any hanky-panky. Once I “shaved” price and order was filled instantaneously – I was still on line with broker. When I expressed concern that I screwed-up something, he told me that a MM either had to publish price or fill it. The other time I have quizzed a broker how they fill multi-leg order and why two spreads are more advantageous to place instead on one four-legged ticket. As part of this explanation broker said that MM keeps ask/bid “unpublished” tickets which he/she tries to line up as orders come, so the price is unknown until filled, therefore cannot be published. Again there is no implication of any machinations.