Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Black Friday?

[walmart+wacky+bfa.jpg]Black Friday for retailers is the day that sales traditionally put retailers in the black for the year (not going to happen this year of course).

It is often, but not always, the busiest shopping day of the year and, at 6am this morning, WMT's server crashed from the traffic so we're off to a good start as shoppers, no matter how depressed, start thinking about Christmas shopping – often spurred on by a list handed to them by a nephew or niece or grandchild at Thanksgiving dinner last night.  Giving the market a positive spin last week was key as it allowed the media to focus on the holiday sales, rather than the market meltdown they would have focused on had we finished Wednesday below 8,000 so let's hear is for the Plunge Protection Team!

We'll see how real this week's 20% rally was – but not today.  Today is a meaningless low-volume day where we hope to hold the 8,600 mark on the Dow and nothing more so let's say we are looking for pullbacks of less than 1.25% across the board to maintain our slightly better than neutral stance.  We took advantage of Wednesday's rally to press our short bets by rolling up our index puts and that is key to managing this market as tight downside protection, which allows us to hold off on covering the longs we are most fond of (or cover the bull side a little lighter than we would otherwise).

The market has had simply spectacular performance since last Friday with wild double-digit gains in all of the US indices and the entire MSCI World Index tacking on 13.7%, now down "only" 44.8% for the year:


I will remind you, as we discussed in yesterday's post, that the US alone has spent/committed $7.8Tn to keep the markets over that 50% off line while the rest of the world is in for about 5 or 6 Trillion Dollars as well (it's hard to quantify the real cost of bank guarantees until it's over) so how could we NOT get a small boost to the global economy.  The problem is, the boost is being applied on the famous trickle down theory as bailing out the banks is somehow supposed to eventually help the people they lend to.  What has not occurred to our mindless leaders is:  What happens if that cycle is broken?   What happens if the US consumer (including the corporate consumer) is no longer willing to borrow more to spend more?

Note that we are not forgiving any debts or creating any jobs, all the administration is doing is making sure the institutions that made poor lending decisions by pushing tens of millions of people far past their credit limits will not suffer the consequences as a percentage of those people, VERY NOT SURPRISINGLY, fail to make their payments.  We are guaranteeing there will be a bank that is able to process millions of foreclosure notices but America is still littered with ghost developments and abandoned construction projects as the housing value of the peopel who are making their payments drops 25% and, for most Americans – that represents the bulk of their life savings.

Why is nothing being done to address this very obvious crisis while the administration has an open checkbook to the lenders?  Well, aside from the fact that the banker who pretty much invented the sub-prime debacle now runs our Treasury, we've been sold a huge bill of goods by the media, who told us it was un-American to bail out home buyers who couldn't pay their mortgages.  I'm not going to debate the nuances of personal responsibility today but the fact of the matter is that the failure of 4M homeowners to fulfill their obligations on less than $1.5Tn worth of mortgages has led to $3Tn in write-downs (once called tax deductions) by the banks and the resulting collapse of the financial markets has cost global investors $40Tn in equity value and US homeowners $10Tn in property value so I guess we showed those deadbeats…

This is, perhaps, the worst allocation of government resources in history and I can only hope that we truly begin to address the actual problem in January when we finally do "throw the bums out" and, until then, the best we can hope for is to tread water around the 8,700 mark, which I noted back on November 17th was the mid-point of our expected range.  No matter what happens today, we will cover up a little more into the weekend.  If we survive that, we have heavy data next week including Retail Reports, ISM, ADP, Productivity, the Beige Book, Factory Orders, Non-Farm Payrolls and Consumer Credit.  How much are you willing to bet that everything is great now and all that data will be turning up?  All the reports except Factory Orders and Consumer Credit are for November, so this will be our first look at the second to last month of the year.  Like I said – a little more protection could go a long way!

Mega Kudos to the Asian Plunge Protection Team where the Hang Seng was taken to 13,888 for the second day in a row but this time they held it on the button.  8 is considered a lucky number in China so bringing the market to that finish over the weekend was the best they could do to send a strong signal to investors.  This is not like "lucky 7" in the US, the Chinese take this a bit more seriously than we do.  In Chendu, the telephone number 8888 8888 was sold for $270,000 and a man in Hangzhou wants $150,000 to part with his license plate A88888.  In mainland China, the Shanghai composite fell a very unlucky 4 points to 195.80 while the Nikkei rose 1.7% to just above the 8,500 mark.   India's market reopened and actually held up, despite the terrorist drama that closed them yesterday.

[Crude]Financials and commodity stocks led Asia higher, including oil companies who are encouraged by talks of further OPEC cut-backs – probably a good idea as the US alone is piling up 1Mb a day of unused oil as of Wednesday's inventory report.  OPEC has cut production twice in the past 60 days and they are hoping the third time is a charm and, at $50 a barrel, we almost hope so too or the next round of bailout money may be heading to the OPEC nations, who's break-even price on crude is about $52 a barrel. 

An Emergency meeting is set for Saturday in Cairo and rumor is they are going to try to cut another 1Mbd, bringing the ADDITIONAL CAPACITY SURPLUS up  another 3Mbd since September.  This is the problem OPEC faces – the only reason oil was high was because of the possibility of supply disruptions and strong demand making it a speculative vehicle.  If the demand is down and a supply disruption will no longer push us to capacity limits – there is still no point to paying more than $50 for a barrel of oil

Some analysts now predict that global demand could turn negative both this year and next, adding to a growing spare supply cushion that the world hasn't seen for years.  OPEC countries appear so far to have abided fairly well to pledges made since September to cut supply. With financial and social pressures rising, some OPEC nations are nearing an inflection point economically that could result in members such as Venezuela, Ecuador and Nigeria flatly ignoring additional production cuts. Ecuador, OPEC's smallest member by production, is flirting with default on hundreds of millions of dollars of debt.  PFC Energy analyst David Kirsch says no OPEC nation, not even the lowest cost producer Saudi Arabia, can maintain macroeconomic stability and all their current and planned budget expenditures if oil prices fall and stay under $50 a barrel.

[retail performance]Europe is down about a point ahead of the US open as business and consumer confidence in the Euro-Zone hits new lows.  UBS is moving forward with plans to beg for government assistance but investors are avoiding them and a bailout for UBS will put pressure on other EU majors to do what it takes to shore up their books.  Spain approved a $14.37Bn stimulus package, which is sort of a joke as Spain itself is in danger of over $100Bn in defaults and two major retailers,  Woolworths and MFI, filed for reorganization in the UK while DSG (electronics) and Kingfisher (home improvements/general merchandise) posted terrible retail numbers with 9% and 7% drops respectively. 

I'm going out on limb and expecting what passes for a tight range these days, between 1.25% up and down.  In a break down, we will get a little more bearish but a break up will not get us more than 60:40 bullish, no matter what number they print in a low-volume rally because, if retailers finish today far out of the black – Monday may be a very black day for the markets so be very careful out there!

Members:  Please try to fill in your shopping observations in the PSW Holiday Retail Survey.  Last year we got great insights into which retailers to back and back off from and Q4 earnings reports are just around the corner!


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!

Comments (reverse order)

    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1. Good moring to all the hard-core market watchers!

  2. Phil – Goog morning and hope Turkey day was relaxing!  Question for you:  basic TA says that we are in the midst of making higher lows (8700 on DJI).  Until that cycle is broken (if the next week fails to make it over 9600??) don’t we need to retest the low again (7500)?

  3. good morning

  4. Phil:
    Good Morning, the Mumbai event is almost like 9/11, so the world has another major shock, cannot see that this world will get out of this horrible mess.

    Market: you commented on those positions we took buying a stock and selling puts and calls,
    I saw that the stock rise and the put and call positions gave a net gain so closing the options makes sense, AGREE ?

  5. Phil: AAPL cover, I have 1/2, is it smart to go to 3/4 or full ?

  6. Cycle/Pharm – At the moment, I’m willing to look at the dips below 8,000 as spikes that can be thrown out but we need to get over 9,000 and hold it next week in order to ignore the downard pressure and you’re right, about 9,600 is what we need to stop the 200 dma from curving more sharply down on us and we REALLY don’t want that.  Unfortunately, my range forecast is 8,200 to 9,200 through the year end so we are going to have some pretty crappy technicals for December most likley.  There’s just not going to be a V-shaped recovery in this market.  I said 2 weeks ago that 8,500 is very likely the new 12,500, in that it’s the center of a range that we may stay in for a very long time because the market simply never should have gone past 12,500 in the first place and now we are making up for our excesses.

    Mumbai/RMM – I think, at the moment, it’s a little more like that shoorting at Virginia Tech, where 33 people died and we moved quickly past it.  I agree that it is different as this was clearly coordinated and could have been much, much worse but India seems willing to move past it so it doesn’t pay for us to fixate on it.

    Hedged entries/RMM – You can lighten up on some protection if you feel really good about your position but this is the last trading day of November and the weekend is scary so don’t go taking big chances for no particular reason.  Remember, if you are called away as is, you are looking at 20%+ gains in 30 days and you can always roll the hedges forward to pick up more premium so don’t be too quick to turn nice, conservative gains into risk-taking speculation.

    AAPL/RMM – If you are covered 1/2 with the $90s I would add 1/4 the $95s.  If you are covered 1/2 with $95s, I would roll 1/2 of the $95s to 2x the $90s.

  7. G’Day
    Wow I am stuffed, My eyeballs are bulging out.

  8. Did everyone have a good one? I’m testing the IB API today… light day.

  9. Phil:
    can we analyse the SPWRA;
    stock went from 20.7 34.6$,
    dec 20 call from 3.39 to 15$,
    dec20 put from 3.69 to 0.50$,
    if things stay like it is now,
    my stock will be called at 20$, I keep the $$$$$ from the  calls and puts,

  10. Phil: my DRYS position:
    stock went from 10.5 to 5.6 $,
    call dec 7.5 went from 2.03 to 0.60$,
    put dec 7.5 went from 2.2 to 2.8 $,
    in closing the options, return was now 15 %,
    now I can sell dec5 puts and calls for 2.5$ which will increase the return to 39 %, AGREE ??

  11. Phil – Ref your earlier post. Monday will be last trading day in Nov. Just a reminder.

  12. Well the terror thing was a dollar booster, or maybe it was just bouncing off 85 on the pullback…  Oil is hovering at the $52.50 mark and the 10-year is still under 3% and gold is hanging just under $820 – all sounds about right on track for our overall outlook. 

    SOX leading today’s pullback and it’s probably a good thing to see the VIX jump 2.5% on a small pullback but can’t make any conclusions on this volume.

    Not many shopping days until Chrismas this year with the 24th being a Wednesday so just 17 weekedays until then.  Late Thanksgivings are not good for retail at the best of times so I’m really concerned aboutt the numbers next week as there is little chance to recover from a slow start.

    At least GOOG is making a run to $300 and C is past $7.50 but not a lot of excitement overall.

    My Thanksgivinng was great thanks – hope all of you had a nice dinnner.

    SPWRA/RMM – Well that one did a bit better than expected!  From an adjustment perspective we just look at the simple fact that your $20 puts and calls are $15 and you are in for $13.62 so a 50% profit if just called away at $20.  You can roll the caller and putter to the Jan $25 puts and calls at $14.70 so you are increasing your basis to about $14 with a $2 better profit if called away.  This now depends on your goal for this stock.  If you bought SPWR because you like them long-term, then making $2 per month on your $13.62 investment should make you very happy.  If you bought the stock to make a profit – You have a $6 profit right now vs a potential $9 profit 50 days from now – no way do you stick with that and tie up the $19.41 you could take off the table right now if you just cash everything out.

    DRYS/RMM – This is a good exercise as it’s the opposite case…  You are in for $6.27 and owe $2.86 if you don’t want to have another round put to you at $7.50.  There is still $1.15 of premium in the callers, as a percentage that’s way too much (about 20%) to take them out now.  If you roll them down to the $5s, for net .30 AND you don’t really want to own DRYS then sure, it’s worth doing as you are giving up very little to lower your potential net basis considerably ($1.25).  In this case, either Dec set will give up half their value at least in 3 weeks and you’ll likely pick up another $1.50 in Jan.

    Monday/Bro – Not on my calendar.  My Novembers only have 30 days…

  13. Transports, RUT and SOX all off 1.5% – if any of them go down below 2.5% it’s a good reason to be concerned.

    I hope you guys got those XOM puts at $80 – those people are out of control!

  14. Phil,
    TLT – any thoughts on the long bonds?

  15. Good Morning.  Thoughts on CHK with share dilution?

  16. BRO…..30 days has Sept, April, June and NOVEMBER…. like your CC plays…. any new recs???  GABBY

  17. Phil – Ref Nov, You are correct, today is the last trading day in Nov. Thanks for straightening me up.

  18. Good morning all.  

    AAPL traders, in can you missed it on Tuesday’s post (at the very end, actually Wed early AM) Phil posted a great explanation about calendar spreads, premium vs intrinsic value and risk/reward. 
    I was already in 2010 Jan 90′s.  Sold that position Wed, but wasn’t able to complete the other side of trade until this morning.  Picked up the 2010 Jan 70′s and covered with the Dec 90s.   Ended up paying 9.55 for 20 points in position, covered with Dec 90′s at 8.25.  I think that was reasonable pricing and worth it based on the reasons stated in the post.

    Mumbai terror - I was surprised this was basically ignored by the markets Wed and again today.

  19. Phil, I’m watching a stock and there was just a large purchase of puts.  1,200 open interest, and it looks like there was one transaction today at 1,500 contracts on an uptick in the put price.  How would you interpret that?

  20. TLT/Fab – I wouldn’t touch them.  Money is flying into treasuries as the markets look unsafe and America looks "safer" than most other countries but what the government is doing could spark off a massive devaluation of the dollar, which would drive them up or, if successful, at least a massive bear market rally, which will send money out and drive rates up so I guess if I were betting, I would be betting rates move back up but the world is very screwed up and, in the short-term, US notes may still be the way to go.

    CHK – They sell stock to get cash.  I think the point is people want the stock and they are down by the dillution and the suddenness of the move means you can still sell $15 puts and calls for $3.95 against a $16.15 entry for a net $12.20/13.60 entry, which I love.

    AAPL/3Way – Nice entry!

    Puts/Rookie – Depends on the stock and the news and the strike and the price paid and have you notices any large offsetting positions.  In other words, someone could buy 1,500 AAPL $85 puts because there is an article that Steve Jobs was seen buying Kleenex at the drug store and may be dying or someone could be selling 1,500 AAPL $85 puts and selling 1,500 AAPL $85 calls to make a hedged spread (it might have been 3Way).

    SOX down 2% now but RUT and Transports not following and transoports have no reason to with oil down 5%.

    AAPL would be nice if they can hold that $92 line today.


  22. Gabby – Thx. Sep., Apr., Jun., & NOVEMBER – I got it. I have more than six CC stocks. In the last 4 months all are losing money, but w/CC are losing less. Nothing to brag about, V, ABB, CELG, LINE, MLM, etc. Good luck

  23. Phil-
    The stock I am watching is SOLF.  Do you have any opinion on it or would you mind looking at the option activity today to give me your assessment of what people might be doing.  Also, how much can you gather from watching this level of activity?

  24. did anyone else notice that in the U.S. foreclosure image linked above by phil that the number of foreclosures has been growing exponentially since Q2 06 and not linearly as that line drawn in red may suggest? (you can tell a physical scientist didn’t analyze that data!)

  25. in fact, just start from Q1 05 – it’s still well correlated.

  26. I’m going to start watching the DBC commodity ETF as I think global stimulus is enough and real costs are enought that we may be putting in a floor at 22 so we can enter this one by buying the ETF at $22.60 and selling the Dec $22 puts and calls for $2.20 for a net $20.40/21.20.  It’s not the most exciting discount but it follows our rule of being something that, even if it goes down 50%, we can still expect to collect .50 per month in calls sold and that’s $6 a year on a $21.20 entry so a huge margin for error and do you really expect commodities to fall 50% more?   This too, is a great long-term inflation hedge and the 2011 $20s are just $5.65 on an ETF that was $46 in June so selling just .20 per month in premium, like the Dec $25s for .22, works out to a 50% annual return on investment and, at $25, you are $5 in the money and making penny for penny upside gains with your caller.

    SPWRA/RMM – I said it depends on what you went in it for.  It’s a great one-month profit so the question is, do you want to be in it long-term, in which case you will diminsh your quick returns in excahnge for a plan to make smaller, steady returns or do you want to move on and put cash to work elsewhere?  I like SPWRA as a 20-year hold.

    Well, we’ve had our first Black Friday fatality as a 34 year-old WMT employee was crushed to death as shoppers stormed into the store.  That is one thing I just don’t get at all, I wouldn’t go near a mall today!

    SOLF/Rookie – Very much a trading vehicle.  I prefer LDK but SOLF is certainly nice and cheap down here.  I see that block of $5 puts flying past but, at .90-.95, it could just as easily be someone selling them as a bullish play on a cheap entry as that is a great deal on a $5.50 stock.  You can enter this one by buying the stock for $5.80 and selling the Jan $5 puts and calls for $2.95, which is a very nice net $2.85/3.93 for an entry.

    Fundamentally, I like LDK better and you can pick them up for $14.90 and sell the Jan $15 puts and calls for $6.80 which is net $8.10/11.55 and LDKs spike low was $9.45 for just one day and they have been below $12.50 just 3 days since their IPO at $30 in mid-2007.

  27. RMM, i’m trying to understand (learn) how you got the calculated returns? Can you elaborate?

  28. 1500 AAPLs….not me, only dreaming of having that kind of capital ;-)     good to see that 92 line holding!

    I think I’m done for the day.  Enjoy the rest of the long weekend folks!

  29. CHK — When does the love stop @ $10.00; $5.00 or zero?

  30. Exponents/Kwan – You are right and also realize these are quarterlies and if you look at annual changes it’s really shocking, especially the fact that there is no end in site.  I remember last Q Cap was siting some stuff about how foreclosure rates were going way down that he got from his conservative sites and many of us posted mountains of evidence that that was pure BS, and it turned out to be but that’s what’s wrong with this government’s policy – they have lied about and covered up this problem and continue to sweep it under the rug.  It is my old analogy that the basement is flooding and the government keeps showing up with another truckload of paper towels to soak up the water but never even bothers to look at the pipes.  So far, we’ve spend $7.7Tn on paper towels and less than $50Bn has gone towards programs that do anything at all for homeowners.

    Damn SOX at 2.5% rule at 196.  I guess we could give them to 195 since others are holding but, below that, I would recommend upping the short side for sure!  DXD Jan $71s are good at $10.95 as DXD was $85 last week, they can be covered with $79s at $5 to make a spread but I think naked with a stop at $10 today, looking for a sell-off into the close to cover into or just take a $2+ profit.  DIA Feb $88 puts at $8.38 are the current proper entry for a long cover and hopefully you can sell the $82 puts for $3+, now $2.45 as that covers us to 7,900 into the weekend and that would be quite a dip!

  31. Thanks, Phil.

  32. Phil, when you say  
    "I like LDK better and you can pick them up for $14.90 and sell the Jan $15 puts and calls for $6.80 which is net $8.10/11.55"
    what does the $11.55 represent? (sorry if this is too elementary a question)

  33. Yay C at $8.22!   XLFs are up 1%, bucking all market trends. 

    CAT having a nice day, so are GS, GM, LVS, MCD, TASR, YRCW, BA, AXP, GE, MET, PRU, HIG, ALL (yes, insurance on my radar) and almost all the utility companies.  TEVA always strong,

    SOX holding 2.5% line but need to get them back above -2% for it to be more than a bounce.  (197). 

    EBS making new highs, turned a nice profit on Fridah and up 35% since then and very strong.  Maybe Pharm knows about them…

    LDK/Rookie – I started using that shorthand on hedged entries for the net price you will pay if the stock is put to you at the price you sold the put for on expiration day so the first number is your net entry on the first round and the basis you will be called away from if things go well and the second price is your average entry if you are forced to buy more.

  34. C $8.50!!!  That we can be thankful for…

    SOX clawed back so all is relatively well and the NYSE and SPX are green, which I care about more than the Dow.

  35. GOOG and BIDU going the wrong way!

  36. C… wow!  Bought the common @ 6.20. Partial roll from the 5 to 7 puts and DDed on the 5s… Sold some $5. calls for 2.23 a couple days ago…  We’ll see what happens.

    C finishes below 8 today imo …..

  37. LOL, the WMT police took down the lead picture already.  I hope I didn’t get that guy in trouble – I thought it was funny…

    Oil off 6% now ($51.50), possibly NYMEX traders just giving OPEC an incentive to cut this weekend.  Gold is up so it’s not the dollar.

    Unless something bad happens in the next 30 mins, this is our best week’s gain since 1933.  Right now it looks like someone is taking down the horsemen to keep the Nas down as it’s dragging the other indexes and the SOX just blew 2.5% again so good time to grab those DIA puts and DXD calls a little cheaper than where we looked at them.

  38. IBN (Indian Bank) was a great buy Wed around low $13s. Still a decent buy around $14.7 now.
    You can sell calls such as Dec 15, Jan 17.5 or Mar 20s for around $2.
    RBI is expected to reduce interest rates soon and that will give it a further boost too.
    Terrorist strikes in Mumbai much ‘over-reported’ in the US media compared to prior such incidents in India – probably due to how long this even lasted and involvement of westerners

  39. Balance should be 50/50 here as we wait and see what happens next week.  The big difference is we are now favoring Dow coverage over financial coverage as there is good evidence that the financials have bottomed but, until our tech plays start paying off – we’re not building anything that is likely to be sustained over the long haul.

  40. IBN/M2 – I always like them and especially down around $12 so an entry at $14.70 and selling the Jan $12.50 puts and calls for $5.70 puts you in at net $9/10.75, which is lower than their spike low of $11.01.

  41. Very good summary of the credit crisis data.

    8,800 – very impressive-looking if we close up here.   Also a nice number for China…

    Wow, death toll up to 160 now in India.  You really consider this "over-reported" M2?  What scares me is how easy this would be to do in the US as well and if something like this happened in a shopping mall or something – people would just bolt their doors and stay home until after new years…

  42. 3wayhard7: I’m still trying to understand this trade. What’s your move if AAPL goes to 100 at expiration (or is anywhere above the Dec 90 strike)?

  43. AAPL/Ajay – When you take a long calendar like the AAPL 2010 $70s for $39.12 (I assume 3Way got them earlier for less) and you offset by selling the Dec $90s for $8.12 the key is that you are in for $31  with a $20 spread.  If AAPL goes to $100, you will owe the caller $10 back but your 2010s are now $30 in the money.  The assumption is that you will be able to roll the Dec $90 caller nearly even to the Jan $100s, at which point your caller won’t even be in the money until you have a nice profit.  Once you are well in the money, you can always roll yourself up to a higher strike to raise cash to move your caller up as well.  This strategy is not ideal in a very choppy market but is great in markets that are flat with low volatility as you are mainly collecting the front-month premium against a leveraged low-cost long position.  If Texas can sell just $5 per month in premium for 12 months, he will collect 200% of his original $30 investment and whatever value is left in Jan 2010 is a bonus. 

    Well that was an exciting finish, up about a point across the board, up 2.75% on financials.  Hopefully it will hold up…

    Have a great weekend!

  44. India Terrorist Attach – When I say Over-reported, it is in comparison with other recent terrorist attacks in India where similar or more people died (but were mostly all locals in smaller cities). The other events were reported just in passing by CBS/NBC and  couple of minutes by the CNNs etc. This time it was simply hours-and-hours of coverage…

  45. Looking through hundreds of charts .  Many of them all look the same.  The commodities look different with more of a flatening for the last 2 months.   But almost all charts are showing a lower swing high.  After this past week we may be due for a slight correction.  The charts seem to indicate that.   On the weekly charts, the major indices look like a bear flag.   Maybe we have one more shot at going lower and this turkey rally was just what it is , a turkey.

  46. The3 only key index chart that looks different is the DJ utilities. But it still looks like a bear flag pennant on the weekly.

  47. After scanning thru the DOW and SP 100 I see stocks rising on decreasing volume over the week in the majority of the stocks.  This usually never holds so I would expect a downturn when volume comes back.  Maybe the bears were out for Thanksgiving because they made too much money and had to spend it.   I think puts would be inorder.

  48. Fab/TLT: I came across a great set of articles on shorting bonds and other ideas for an inflationary environment. They recommend going slowly into things like TBT. Check it out. (See list of related articles.)

  49. Mumbai.  Here’s why we need to fixate on it.
    Global terrorism is a huge problem.  This is the first major post US election terror incident.
    Obama will be tested, and what happens abroad is part of that test.
    Say what you will about Pres. Bush, but there has been no terror attacks on US soil in the last 7+ years since 9-11.
    Bush has kept America safe, or at least safer.
    The terrorists rooted for Obama (not because he supports them, but because he is perceived as softer on security issues, and inexperienced), and now they have him.
    We will soon see how serious Obama will be about confronting and fighting terrorism.  These scum, like those in Mumbai, don’t give a s--t about kumbaya or how nice or not nice the US plays with the Europeans or the UN.

    Mumbai matters, expect more of this stuff around the world.  And watch how Obama handles that along with issues like Patriot Act, Iraq, Afghanistan, FISA, Guantanamo and so forth. 
    The time for fun and games and election rhetoric is over. 
    Its reality time.

  50. And this ain’t no Virginia Tech.  Va Tech was one loser nut with a gun.
    Mumbai was a well planned invasion of a major city by 20 well armed and well trained terrorists.

  51. CHK … poor timing by CHK.  Not dilution as yet.  Just a shelf offering.  Nothing to see there, stock need not have been smacked like it was.  Like I said poor timing and judgement by Aubrey.

  52. Not a fan of the wall to wall Mumbai coverage however.

  53. Cap
    I can see Pelosi and the democrates repealling the Patriot Act and other things that help get information that6is concieved to be spying on americans.  If you don’t do anything wrong then what’s the problem.  After they turn back the clock and give the terrorist time to regroup we will have a attack like a subway bombing or such.  After that in the next election they will all be thrown out.  So you just need to sit tight.   So far I have liked his picks for cabinet.

  54. My Black Friday purchases:

    1 pair of shoes (Cole Haan) – used gift card
    1 memory card for my cell phone.

    Was tempted by a PC for folks and large flat screen TV.  I can see how its easy to get addicted into Black Friday spending.  Decided to pass, plenty of sales to come.  Horrible hearing about people being trampled to death.  What’s wrong with these people ?

    Then again, I am not your typical consumer.

  55. ajaytoo,

    AAPL calendar spread – - what Phil said!  I’m glad Phil fielded that one, his answer is probably 10x better that whatever I post.  I’m going to save that one to remind me about the goal of collecting $5 a month.

    If you’re new to calendar spreads and rolling positions, one of the things you have to get comfortable with is holding a position that’s moving against you; you’ve got to look at the big picture, both parts of the trade – - the long calls/leaps you own and the front month calls you sell.  Its fine if the stock goes up by expiration and the calls you sold have to be covered for more than you sold them for because you pay for those calls by selling the next months calls, hopefully for about even, but at a higher strike price.  It may be a bit disconcerting to see a big negative value in your portfolio, but believe me the next time AAPL plummets 10-15 points, you’ll be glad you have the insurance to cushion yourlong position against the drop. 

    And you can still lose money if there’s a precipitous drop in the stock because the calls you sold can only go to zero, leaving you holding the bag if the stock keeps dropping.  There seem to be many nuances (that I’m still learning…) about when to cover a position and when to roll the position up or down.  Hopefully the downside in AAPL is limited at this point, but you never know and you have to be prepared to adjust.  (Phil is always thinking several steps ahead.)

    You can also get burned on the up side if the stock rises sharply and you don’t have enough position advantage over your caller, the calls you sold could outgain the calls you bought/own.  I think a 20pt position advantage in AAPL (2010 Jan 70 vs Dec 90s) should be sufficient to avoid this.

  56. More black friday absurdities – two people were shot dead at a toys r’ us in california.  AP, CNN, LATimes.
    I’ve hated the holiday since I was a teenager and refuse to get caught up in it just because of the sheer number of people, and this year just reaffirms my general disgust for it.  I’m at the point where I don’t want to buy anything anymore, in real life or online.

  57. Thanks 3way and Phil for the very insightful posts! Everyone here is so helpful and I’m proud to be part of the community. I’m getting more comfortable with rolliing options and the like and making my way through all the information on this site. I’m in on the AAPL calendar spread now and figure this is the best way to learn. Good point about getting burned on the upside, as I hadn’t thought much about that.

  58. 3wayhard
    You need to look at this in a different fashion.  You need to maintain delta advantage over your callers.  You can do this by never going more than 80% covered, or by having a 1 or preferrably 2 strike difference over your caller.  You should test these conditions out in some of the option screeners that are available to see what happens if your stock gaps up 20 points, or how many strike difference you need, or what % you need to cover.    A couple of key things is that your longs should be 6 mo or more because they will loose premium at a fast rate the closer they are too your covers.   Your 2010 longs are perfect but may take money off the table that you could invest.   The more you are ITM the higher the delta and the more your longs can suffer.  It is a real risk and balance art in this.   Good luck

  59. Where are the PSW stock portfolios? I only see a few long term ideas from September. Am I missing something? Thanks!

  60. In the typical hedged entry we’ve been using lately (stock / short call / short put), are there any rolls we can do if the stock jumps up quickly. I’m in DIG at 23 and short the Dec 23 calls (4.53) and puts (4.13). While I’m happy with the 8.66 profit, I’m wondering if there are any other exits available, other than having the stock called away at expiration.

  61. Singapore Steve,

    I’ve been reading your posts for a long time. Thanks for chiming in on the AAPL trade, I appreciate it.  The "greeks" are kinda intimidating, I’ve done some reading, but I still need to get more familiar so I can discuss them intelligently.  Are there any specific option screeners you’d recommend for testing different scenarios?

    For a few months I’ve been in OTM APPL leaps because I was worried about losing more intrinisic value in the longs that I could cover as the stock kept dropping. I’ve been able to stay even by rolling down my leaps to stay in position for a turn and paying for those rolls with front month calls I’ve sold.  I think I only stayed even because I did not have a position advantage while it was dropping, only time and the timing was fortuitous on some of the trades.

    Now I’m ready to change strategy as I’m more worried about the premium collapsing than I am about the stock falling much further, so I guess I’m making a call that AAPL is near a bottom.  But I’m still not quite convinced that we’re out of the woods enough to go with less than a full cover right now. 

    We’ll see…I guess that’s why they call it gambling, uh, I mean trading or investing – - sometimes I’m not sure there’s a difference :)

  62. Mumbai:   This ain’t no Va Tech.  God forbid that something like this happens here.
    The terrorist attack in Mumbai is finally over.

    Indian commandos killed the last remaining gunmen holed up at a luxury Mumbai hotel Saturday, ending a 60-hour rampage that killed 195 people in India’s financial capital, as authorities shifted their focus to who was behind the attacks.
    A previously unknown Muslim group claimed responsibility for the attack, which killed 18 foreigners including six Americans. Indian officials said the sole surviving gunman was from Pakistan and pointed a finger of blame at their neighbor. Islamabad denied involvement and promised to help in the investigation. A team of FBI agents was on its way to India to lend assistance.
    Some 295 people also were wounded in the violence that started when at least a dozen heavily armed assailants attacked 10 sites across Mumbai on Wednesday night. At least 20 soldiers and police were among the dead.
    Orange flames and black smoke engulfed the landmark 565-room Taj Mahal hotel after dawn Saturday as Indian forces ended the siege there in a hail of gunfire, just hours after elite commandos stormed a Jewish center and found nine hostages dead.

    With the high level of training, preparation, and coordination these terrorists showed, it’s pretty clear that this was more than just a local battle. It was a strike at the heart of India’s financial sector, it was targeted primarily against Westerners and Jews, and it was a message to the incoming Obama administration that the global jihad is alive and well.
    The murderers who staged the Mumbai attacks were ruthless: Scene of Unimaginable Carnage Inside Taj Majal Hotel.

    The scene Saturday night inside the Taj Majal hotel was one of unimaginable carnage in the immediate aftermath of the terrorist onslaught across Mumbai.
    Two Indian commandos told FOX News that 150 bodies still were inside the hotel, and dead victims were found all over the hotel, on all five floors.
    The terrorists used incendiary bombs, or grenades thrown on gas or fuel canisters, indicating they had access to the Taj hotel in advance, though the Taj Majal hotel denies any staffers were involved. …
    The siege was particularly troubling because “they didn’t spare women or children.”

    And there was slaughter at the Chabad House.

  63. it occured to me that if the goal of the AAPL trade is to collect $5 premium every month, then I should be fully covered most of the time, only uncovering if the stock if falling and I can buy back the calls to capture the $5 – - then I have the choice of staying uncovered for a while, going with a 1/2 cover at a lower strike or a full cover at a lower strike depending on my outlook, support levels, etc.   If the stock is rising, I stay covered until expiration and then roll to the next month; hopefully gaining a bracket in position.
    i’m sure there are nuances to consider, for example,  we’re still 3 weeks from expiration, so if AAPL tanks next week and  I have the chance to book a 50%+ gain on the short call, I might want to take that even if its a bit less than $5.  Then its decision time again – - stay uncovered for a while, go with a 1/2 cover at a lower strike or go with a full cover at a lower strike.
    phil,  am I getting this yet?

  64. terror is just that – terror. Only p@ssies run around being scared. Sorry, but I am so damn sick of this (no I’m not sorry) 160 people, are you kidding? 200,000 americans die every year from lung cancer. 90% of that number is attributed to smoking. That means 543 die of just lung cancer just because of smoking every single day. I f fox noise plastered the inside of a lung from each of the 543 people that died every day for no reason except they are morons, would people be scared?
    <p> Are there actually people here so anti-american they would advocate giving up civil liberties as basic and fundamental as habeas corpus, due process and presumed innocence just because their scared little girls? You deserve tho live in a Soviet country where the government tells you to shut up because "you don’t have anything to be scared of if your innocent" bullsh1t routine.
    <p> 9/11 happened during Bush! Obama inherits a world that, unfortunately for conservatives who hate america and can’t see anything except idiocy, has greatly EXPANDED under Bush and his illogical regimes maniacal unilateral military action against ghosts. Of course, conservatives think this was about Terror (and what the hell is that, exactly?). Nope. Money. It’s ALWAYS ABOUT MONEY. If you don’t believe me just OPEN YOUR FREAKING EYES. Going on and on on and ON AND ON AND ON about some seige is some other country ?????????? The economic meltdown — financial armageddon — second great depression — whatever you want to call it, started right here in the US – a direct result of our actions, policies, short-sightedness — all under Bush. And economic disparity breeds global violence. This snot-nosed "here comes Obama and its reality time" is so infantile but it’s so simple. You’re saying it without even realizing it, which is sooo frickin hilarious – HE INHERITS BUSH’S FAILURES. He inherits a greatly expanded terror network (that could’ve been marginalized into irrelevancy instead of being put on the main stage to inject fear into people like you). He inherits the closest thing to financial doom we’ll ever see in our lifetimes. How many people is this economic downturn going to kill JUST IN THE UNITED STATES? A quarter million a year? Half a million? Through deteriorating diet, poverty, suicide (suicide alone will be 10x terrorism), access to health care, security for our nations oldest and most vulnerable. No number matters to you. All that matters is TERROR TERROR TERROR. How many people will die globally, per day? 10,000X than that due to "terror," maybe 100,000X ?
    <p> As long as I’m going, I also love the illiogical (old granny voice) "they’ll take your guns" nonsense. Too bad I use logic and reason, unlike conservatives. I live in the most liberal distrcit of the most liberal city in a fairly liberal state and I can carry a concealed weapon around for a permit that cost me $60 and a thumb print. Screw you.
    <p> What happened to this Country?

  65. 3wayhard
    if you think that we have reached a bottom then it would be foolish to be fully covered because you will loose out on the upward movement of the stocks.   If the stock goes up at a steady rate odds are you will only breakeven unless you are less than fully covered.    The last time AAPl was down around 120′s I rode it up into the 180"s and hardly made any money after the rolls.  And then when it crashed it really hurt and I lost.

  66. Good Morning Phil & all

  67. Asia Markets :    Monday, December 01, 2008
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                   8397.22    -115.05    -1.35%
    Hang Seng*                       14108.84     220.60      1.59%
    China: DJ Shanghai*            200.16          4.36      2.23%
    Seoul Composite*               1058.62      -17.45    -1.62%
    Bombay Sensex*                 8839.87    -252.85    -2.78%
    Baltic Dry Index                       715.00      -18.00    -2.58%

    *at Close

  68. Asian Markets Trade Mixed, Central Bank Meetings Eyed

    It was a mixed start to the trading month as some Asian markets bounced into positive territory, but Japan remained in-the-red as investors locked in profits from the previous week’s rally.

    The Nikkei closed 1.4 percent lower after falling as much as 2 percent earlier in the session while the broader Topix Index lost 0.9 percent.

    In South Korea, the KOSPI ended 1.6 percent lower in choppy trading as financials such as Korea Exchange Bank advanced but steelmakers fell on worries about weakening demand hitting steel pricing.

    The markets in Greater China outperformed the rest of the region, led by a 1.8 percent jump in the Hang Seng Index and a 1.3 percent rise in the Taiwan Weighted Index. Properties and banks gained on prospects that interest rates would continue to ease in the coming months. The Shanghai Composite Index bounced up 1.3 percent led by buying in properties.

    Australian stocks continued their decline to close 1.6 percent lower, dragged lower by BHP Billiton as investors booked profit in the world’s biggest miner after last week’s strong gains.

    In South-ease Asia, Thailand’s benchmark SET Index inched up 0.8 percent on hopes that a court ruling expected this week could help relieve political tension. Analysts expect the court to order the disbanding of the ruling People Power Party and two other coalition partners for electoral fraud, meaning the prime minister and many other cabinet members would have to step down.

    Singapore’s Straits Times Index was off its early lows to trade 1 percent down.

    Malaysia’s KLCI also lost nearly 2 percent on Monday.

    Bombay Stock Exchange’s Sensex was at 8833.57, down 259.15 points or 2.85 per cent. The index touched intra-day low of 8,803.34 and an intra-day high of 9326.68. Equities fell to hold on to intra-day gains and fell to close sharply lower following decline in interest rate sensitive majors. Benchmarks closed below psychological levels.

  69. European Shares Fall in Early Trade; Banks, Miners Drop

    European shares opened lower on Monday, after a strong rally last week, with banks and miners falling.

    The FTSEurofirst 300 index of top European shares was down 0.8 percent at 855.03 points. It gained 13.3 percent last week, but has lost more than 42 percent this year, hurt by a credit crisis and several major economies going into recession

    BNP Paribas, Barclays and UBS were down between 2.7 and 5 percent.

    UK consumer credit figures are among the data due later in the session.

    "There’s a lot of data, but it’s not going to be much better," said Bernard McAlinden, investment strategist NCB Stockbrokers.

    "We think the market will go higher but it won’t be because of anything in the data. It’s a question of when the markets can start ignoring the bad economic news and take the view that things will get better. Our view is that the stimulus packages will work."

  70. Good morning and welcome back Ramana!

  71. Oil Falls After OPEC Delays Supply Cut

    Oil fell more than $2 to below $52 a barrel on Monday after OPEC decided to wait until mid-December to make another cut in output to try to defend sagging prices.

    U.S. light crude [ 52.1    -2.33  (-4.28%)] for January delivery was down. Oil had settled at $54.43 on Friday after a shortened post-Thanksgiving holiday session. On Nov. 21, it touched a three and half year low of $48.25.

    London Brent crude [ 51.44    -2.05  (-3.83%)] was was also lower.

    "The markets are discounting OPEC’s decision to stand put by selling off," said Edward Meir, analyst at broker MF Global. "When it comes to calibrating supply and demand to fit the new post-September economic realities, OPEC seems to be in a state of denial," he said in a research note.

    A global economic slowdown that has tipped a growing number of countries into recession has caused sharp falls in demand for oil.

    But OPEC’s Gulf producers want to see strict compliance with the producer group’s existing output curbs of 2 million barrels per day (bpd) before agreeing to any more. The Organization of the Petroleum Exporting Countries (OPEC) meets next in Algeria on Dec. 17.

    Saudi Arabia on Saturday pointed to $75 a barrel as a "fair price" for oil, the first time in years that the world’s biggest exporter has identified a target for crude prices. Saudi Oil Minister Ali al-Naimi in Cairo cited this price as necessary to keep more expensive new projects at the margins of world supply on track. "I believe $75 is the price for the marginal producer," he told reporters in Cairo.

    Analysts said OPEC’s delay could prove costly.

    "The longer OPEC waits to cut supplies, the higher stocks rise and the longer we think it’ll take for fundamentals to tighten once the tide does turn," Jan Stuart, an economist with UBS in New York, said in a weekly U.S. oil data report.

    Yen Benefits as Other Central Banks Prepare Cuts

    The Japanese yen strengthened on Monday and currencies of countries where central banks are expected to slash interest rates later this week, such as the euro, sterling and Australian dollar, all weakened.

    The Bank of England, the European Central Bank, the Reserve Bank of Australia and the Reserve Bank of New Zealand are all expected to cut rates by at least half a percentage point, diminishing the yield advantage of their currencies over the ultra-low yielding yen.

    Analysts expect these four major central banks will cut rates aggressively to counter the threat of deflation and prevent the global financial market crisis from spilling over into further economic weakness. The yen also garnered some support from broad weakness in world stock markets on the first trading day of the month, while crude oil’s slide of 4 percent after OPEC deferred a supply cut helped support the Japanese unit and U.S. dollar, analysts said.

    The Bank of Japan, meanwhile, whose key interest rates are a mere 0.3 percent, said it will hold an emergency meeting on Tuesday to discuss changes in the use of corporate debt for collateral banks put up to access central bank funds.

    The dollar [ 93.87    -1.64  (-1.72%)   ] was down against the yen and the euro [  118.9    -2.38  (-1.96%)   ] was down against the Japanese unit as well.

    The euro [  1.2666    -0.0029  (-0.23%)   ] was also down against the dollar, and sterling [  1.5048    -0.032  (-2.08%)   ] was off against the dollar. 

    The Aussie [ 0.6427    -0.0124  (-1.89%)    ] slid  and the "kiwi" [ 0.5363    -0.0125  (-2.28%)    ] was off as well.

    Investors will be keeping an eye on the November jobs report on Friday. Later on Monday the Institute for Supply Management releases its November manufacturing index.

    Market players are also keen to see whether struggling U.S. automakers win government financial support. U.S. lawmakers are soon scheduled to reconvene to review restructuring plans submitted by the U.S. automakers and consider their request for a $25 billion rescue plan.

  72. Thanks…Phil

  73. Platinum slides 7 pct, Japan auto data hurts

    Platinum tumbled 7 percent in Europe on Monday as weak Japanese auto sales data further emphasised poor demand from carmakers, while gold came under pressure from a firmer dollar and falling oil prices.

    Platinum slipped to a session low of $808.50 an ounce, a one-week low, and was trading at $809.50/829.50 at 1033 GMT, against $871.50 an ounce late on Friday. Its sister metal palladium fell nearly 5 percent to $178/188 from $186.50.

    old prices also slipped, pressured by a marginally firmer dollar against the euro and a $2 slide in oil prices, which can dent interest in commodities as an asset class.

    The dollar strengthened 0.4 percent against the euro. The European Central Bank is widely expected to cut its interest rates later this week.

    Gold was trading at $796.70/798.30 an ounce, down from $813.00 an ounce late on Friday, while spot silver was at $9.85/9.93 an ounce from $10.26 an ounce.

    "The event risk is really high this week, starting with the US ISM Manufacturing index which is likely to slip further to a fresh 16-year low of 37.5 from 38.9," said Pradeep Unni, a senior analyst at Richcomm Global Services.

    "However the prime focus would be on the U.S. non-farm payrolls on Friday which is likely fall negative for the 11th straight month and by the most since September 2001."

  74. Went to cash at end of Friday expecting a pull back today.  Anyone have any ideas for stocks to short?