Archive for 2008

Weekly Wrap-Up

Oh great, I lost the weekly wrap-up!

I was having trouble this weekend and it just isn’t there so I’m just going to say it wasn’t a great week but we called it early on so that was fine with us!  We lost the nice V that we were looking for in last week’s wrap-up but by Wednesday I decided we were just too darn bearish in light of what I consider to be decent earnings and guidance, especially by the multinationals.

That didn’t stop us from being cautious into the weekend but we opened a lot of new positions and we are pretty bullish in our virtual portfolios, not following our covers lower but, on the other hand, not removing them either.  Are we done going down?  We’ll find out next week but Cramer said not to buy tech so we are betting on a tech rally to lead us out of this mess – not just because Jim’s been way off his game since Thanksgiving but because the stars really are lined up for a SOX-led Nasdaq rally.

We still need oil to behave itself but the sub-prime issue is reaching it’s crescendo and we’ll see what kind of mood Asia is in next week, certainly they have some catching up to do to the downside.  Our S&P is down 9.3% for the year and we’ve already tested the 10% line and passed that one so I’m more looking forward to an upside test of 1,350, which is a real 10% line off the highs of 1,500 (throwing out the spikes).  If we can punch through that, we’re going to be in a buying mood but, as with last week, we’re going to let the market tell us what to do and not try to move the markets all by ourselves.

It was a very rough week for our portfolis as we did our best to hang on through the 500-point drop.  We moved to more than 1/2 cash across the board because, despite my persistent bullishness, we’re ready to bet negative if my levels don’t hold up:

Our Short-Term Virtual Portfolio was (as is usual in a downturn) our star, gaining 12% for the week as our DIA index puts made most excellent protection for the week.  We cut back to "just" 370 DIA puts over the weekend and hopefully we’ll have reason to cut back…
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The Year Of The Rat

According to the Chinese Zodiac, February 7th was the dawn of the Year of the Rat. The Rat is supposedly associated on the one hand with wealth, aggression and order and, on the other hand, with war, pestilence and atrocities. It is considered to be a year that yields rewards only after hard work and is associated with extremes and hence volatility. 
In the month preceding the dawn of the Chinese year, the stock market was especially volatile and, with its advent last week, the pattern remained.
Dow Jones Industrial Average:  >4% Decline [600+ point decline from week high to week low]
NASDAQ:  > 4% Decline [150+ point decline from week high to week low]
S&P 500:  > 4% Decline [75+ point decline from week high to week low]
Did it really feel like major market averages declined 4% this week? By the end of the week, the volatility index had climbed from 25 to 28, which frankly didn’t seem a lot given that on January 30th (when the SPX closed almost flat after an intra-day move up 30+ points followed by a reversal of similar proportions), the VIX moved intra-day from 28 to 25 and back to 28 again. Perhaps traders were relatively complacent during last week’s slide as indicated by a comparatively low number of put purchases. If this is the case then it bodes ominously for the future and leads to the likelihood of continued and even more pronounced market undulations. Indeed during the week, Phil predicted that, within a month, we would see a 1000 point intra-day move in the Dow. Impossible? Don’t bet against it! On Thursday alone the Dow had a 680 point intra-day move, having gained 100 points, lost 100 points, gained 180 points, lost 180 points and finally, in the last hour before the bell rang, gained another 100 points!

The upcoming week begins with the news that Yahoo has rejected Microsoft’s $44Bn bid and Google has risen to its down-trending resistance line.  On January 24th I mentioned “if Google remains above $582 tomorrow, the likelihood is it will follow Baidu’s action with a reversal bullish. However, a failure of that level could signal a continued and pronounced trend lower…..tomorrow will


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TGIF

I skipped the Thursday wrap-up as we got involved in a long discussion in yesterday's chat.

It was a nice flat day and fine for skipping anyway although, as I mentioned mid-day, we had 6 100-point reversals in just one day and I predicted that we will be seeing a 1,000-point day in the near future.  We've been messing around with the QIDs and they are an absolute blast when you get them right and an absolute nightmare when you get them wrong but it sure breaks up the tedium of a down market!

Yesterday we got the action we expected, with the markets opening at the low of the day but, rather than stopping out of our index puts, we sold Feb puts as momentum play covers, which worked out to be an excellent strategy as the market went from 12,125 all the way back to 12,332 in the afternoon before falling back to 12,247, low enough for us to want our covers back!

You can always tell a flat day as the member chat tends to go off topic and yesterday we had a spirited (and educational) debate on trading styles (and Ilene found this great article on trading that's a must read) as we nudged our positions around, at this point hoping (against all odds) for a flatline into expiration so we can dump all our callers cheaply and set ourselves up for March.  With China still closed for the holdiday and Europe digging out of a deep hole, we are very likely to just dribble into the weekend, lucky to hold 12,200 for the day.

The biggest market moving news of the morning so far (7am) is ALU totally blowing their quarter and WY had had an earnings beat and a revenue miss so 50/50 there, we may be interested in picking them up if we get a good dip.  The only other biggie is FNM, which will be quite the market mover I think, especially if they come in BTE.  I haven't actually counted but as I continue to review the week's earnings, I see beat after beat after beat AND, if you look at the symbol on the right on the Briefing.com chart, you'll notice guidance is predominantly in-line with (albeit low) expectations.  SHOW ME THE MISSES!

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A fresh pickup in AIG puts…and traders take jaded view of Children’s Place

Today’s tickers: AIG, PRU, MYL, PLCE, HBC, CSCO, RIMM, MSFT, ANN, CREE, AKAM, NWA, AET

AIG – Is litigation fanning the flames of put action in American International Group? Shares in the property and casualty insurance giant are trading .60% lower this afternoon at $51.82, lagging behind the broader S&P 500. While the current share price action is relatively subdued, a look at the 55% implied volatility reading shows current option premiums pricing in about 11% more price risk for AIG shares over the next month than has already been documented over the past year. With more than 120,000 options trading this afternoon, AIG was one of the most heavily visited tickers on our platform, and the volume favored puts by a factor of 7 to 1. Prosecutors rested their case yesterday in accounting fraud proceedings against five former insurance company executives from General Re and AIG. The courtroom drama may be hardening investors’ inclination to seek put protection – AIG options saw a big spike in out-of-the-money put volume in the May and August contracts earlier this week on credit exposure worries. Today’s volume appears centered in the February contract at strikes 40, 45 and 50, where buyers went long on premiums up as much as 14% on the session.

PRU – Shares in the country’s second-biggest life insurer Prudential Financial are down 6.6% to $72.25, recouping some losses after having declined as much as 9% on back of its earnings miss and lowering of guidance. Traders were positioned long volatility heading into the earnings release, anticipating just this kind of violent move on earnings by buying into the then-at-the-money February 80 straddle. The position, which cost $6 heading into the close yesterday, has since mushroomed in value by some 42% to $8.55, yielding a tidy profit for traders looking to cash in on the big move now. Elsewhere traders sought fresh positions today in February calls at strikes 70 and 75, which traded at around $1 apiece – possibly looking for stabilization in Prudential shares at strikes well below the 52-week low.

MYL – Shares in generic drug maker Mylan Inc. sank 5.7% to $13.02 in afternoon trading. The move appears to have come after the company opted against providing guidance as part of its upcoming earnings report on February 27. Earlier today, Bloomberg reported that Mylan might be a pole position to realize $150 billion…
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A fresh pickup in AIG puts…and traders take jaded view of Children’s Place

Today’s tickers: AIG, PRU, MYL, PLCE, HBC, CSCO, RIMM, MSFT, ANN, CREE, AKAM, NWA, AET

AIG – Is litigation fanning the flames of put action in American International Group? Shares in the property and casualty insurance giant are trading .60% lower this afternoon at $51.82, lagging behind the broader S&P 500. While the current share price action is relatively subdued, a look at the 55% implied volatility reading shows current option premiums pricing in about 11% more price risk for AIG shares over the next month than has already been documented over the past year. With more than 120,000 options trading this afternoon, AIG was one of the most heavily visited tickers on our platform, and the volume favored puts by a factor of 7 to 1. Prosecutors rested their case yesterday in accounting fraud proceedings against five former insurance company executives from General Re and AIG. The courtroom drama may be hardening investors’ inclination to seek put protection – AIG options saw a big spike in out-of-the-money put volume in the May and August contracts earlier this week on credit exposure worries. Today’s volume appears centered in the February contract at strikes 40, 45 and 50, where buyers went long on premiums up as much as 14% on the session.

PRU – Shares in the country’s second-biggest life insurer Prudential Financial are down 6.6% to $72.25, recouping some losses after having declined as much as 9% on back of its earnings miss and lowering of guidance. Traders were positioned long volatility heading into the earnings release, anticipating just this kind of violent move on earnings by buying into the then-at-the-money February 80 straddle. The position, which cost $6 heading into the close yesterday, has since mushroomed in value by some 42% to $8.55, yielding a tidy profit for traders looking to cash in on the big move now. Elsewhere traders sought fresh positions today in February calls at strikes 70 and 75, which traded at around $1 apiece – possibly looking for stabilization in Prudential shares at strikes well below the 52-week low.

MYL – Shares in generic drug maker Mylan Inc. sank 5.7% to $13.02 in afternoon trading. The move appears to have come after the company opted against providing guidance as part of its upcoming earnings report on February 27. Earlier today, Bloomberg reported that Mylan might be a pole position to realize $150 billion…
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Thursday Thump???

This is the end
My only friend, the end
Of our elaborate plans, the end
Of everything that stands, the end
– Jim Morrison

[10pt LG econ forecast]Oh boy, it looks like another bad day in the markets!

Retail reports have been coming in less than stellar and we’re down significantly in pre-market trading as the anticipated stimulus package was voted down in the Senate.  The jobs numbers weren’t so bad with unemployment still around 335K with 400K considered "recessionary."  I said in yesterday’s post "show me the misses" and we got a big one from INX that’s going to hurt the SOX today along with yesterday’s bad guidance from CSCO but, on the whole, beats are outnubering misses 4:1 – what kind of recession is this?

Over in Asia, China is closed for New Year’s but the Nikkei actually gained 1% despite India dropping 3% on the day.  The ECB continued to focus on inflation fighting by holding rates steady as at least one Central Banker (Trichet) is a man of his word.  The BOE dropped rates down to 5.25%, still miles ahead of us as well as the ECB, who are holding the line at 4%.

DB’s earnings were NOT a disaster and the bank had no more write-downs to give!  No one cares but I do as this seems kind of significant to me.  UN made less than last year but beat estimates and raised guidance – yet another multinational who’s not seeing a recession and this too is being ignored.  French Telecom posted a 52% increase in profits and no one cares about that either, sentiment is an amazing thing…

I spent the morning running virtual portfolio reviews so that’s all I have time for here but let’s look for the open to be the bottom and we’ll call this day a win.  We are very covered and hoping to have reason to buy back some callers but hope is not a strategy so let’s all be careful out there!

 





Bargain Basement Virtual Portfolio Review

Well, so far these stocks are turning out to be no bargains!

We are down almost $7,000 this week as pretty much everything we bought is losing money as a major downturn in long-term volatility has been crushing long contracts.  Bear (oops, don’t say bear!) in mind that these are longer plays and we are supposed to ride out a dip but it’s getting a little scary out there

I’m losing faith that Apple will come back by April so I’m going to move those back to the July $120s, a roll that will cost $10-$11.  The current $120s can be sold for $5.40 and I will sell them for $4.50 if they fall that low, otherwise my goal is to sell more $125s for $4.50 or better.

BUD is a buy and hold, not much fun selling callers if they are wedged between strikes.

I wish they would sell us more MCD for $3, I’m happy with these at $4.40 and we can sell the $52.50s if we get into trouble but I’d rather not.

MRVL is absolutely a double down at .65!

MSFT needs to be rolled to the Jul $27.50s at $2.99 and I like those as a new play for any virtual portfolio and we’ll help pay for it by selling 60 (of 80) Feb $29s for .50 but let’s hope to do better as long as MSFT holds $28.

Our one open SPWR call is hurting at $9.50 but we picked up a lot on the caller and we can afford to hold for now as the March $60s can be sold for $7.25 and pay for a roll all the way down to the June $55s with money to spare.

XLE puts should do nicely, we’ll consider selling Feb $65 puts if they hit $1.50 or better.

Our cover plays are, thank goodness, pretty much on target:

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$25KP Update

We took a bigger hit in this virtual portfolio, down $3K since Friday!

As with the $10KP, we scrambled the covers at noon but the meltdown was nuclear and our umbrellas just weren’t enough to stop the fallout from giving our positions some serious radiation sickness.

We can still sell the CY $20s for $1 so we should against 5, even though it breaks my heart.  I will be loading up on these June $19s if I can get them for $3.50 in the STP as these guys are just way undervalued. 

We should have waited longer to DD on EK but we’ll get another chance at .40 or .45 with the bad retail numbers and I’m going to go for it since we couldn’t get them for .80 in the prior three days of trying.

ERTS is the same roll as the $10KP (spend $2 to go back to the June $45s)  and we’ll sell more Feb $45s for $1.

We are in good shape with NDAQ and a DD at $1.80 is affordable here.

I’m happy enough with the covered plays except AXP where we need to take out the $47.50 callers and sell 5 $45 calls if we fall below the $45 mark and we’re going to want to cover at $2 regardless if we get that price of for whatever we can at the day’s end.

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“);

  CYFT Jun 19 CALL [CY @ $20.17 $-0.96] 10 1/30/2008 (135) $4,660.00 $4.65 $-0.95 $3.70 $-0.90 $-960.00 -20.6% $3,700.00


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$10KP Update

Well we did what we could to salvage our gains in the $10KP around noon.

Lucky for us my timing was pretty good as the market was just off its high as we ran for covers.  We’re down about $1,300 from Friday, not too terrible for such an awful week but more money  than you like to lose when $10,000 was our original bet!

I strongly regret not covering ERTS in this virtual portfolio (we half covered in the $25KP), more so now that WMT gave us some poor retail numbers – I doubt any retailer wil be spared and we’ll be very lucky to hold $45.  It’s very dangerous to do a close calendar spread in a small virtual portfolio but let’s take the $1 for the Feb $45s and use it to roll ourselves back to the June $45s with the addition of another $1 ($2 total on the roll).  That puts us in position to sell the Febs, now $2.25, if we don’t get some improvement next week.

NDAQ I would like to buy 5 more of, they are down with CME but have none of CME’s issues.  Let’s not forget that just last week they posted excellent earnings and jumped from $42 to $46.  Another round at $1.80 would be nice to have! 

The only other move I would make is possibly taking out the SNDK Feb $27.50s for .50 and IF they fall below $27.50 (I say they hold it) THEN buy 4 more Apr $25s for around $3 and sell 5 $25s for around $1.50.

I’m trying to leave us in a position we can sleep on over the weekend, with these covers, we kind of want a flatline:

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“);

 


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WTF Wednesday Wrap-Up

Well that was no fairy tale ending to our Disney day!

What a total mess…  I have little to say about today's action as the selling was relentless and made me question my premise but David Tsao's excellent post on the ISM reminded me of why I refuse to turn into one of the three bears just yet

Fed President Plosser was the villain of the day, with comments that: "It is certainly true that the chances of the economy slipping into a recession have risen."  Well Duh!   Still, that's all it took to send the market racing back to the Jan 22nd opening levels, let us hope and pray that we don't get another day like that tomorrow!

Plosser actually also said he agrees with me and "the U.S. will skirt any recession with growth rates of around 1 percent in the first half of the year, before slowly returning toward trend growth rates in the second half" but no one was in the mood to hear that as the word recession was in it and CNBC can only use one big word per segment so they ran with recession all afternoon as traders ran away from their stocks.

Energy stocks led the slide with a 1.6% loss on the day so this is all actually going according to my plan in general, but the ulcer is an unexpected bonus as we never came near 12,450, which I said in the morning post would be our "cover and cash" point if we failed to make it on the morning rally.

There was, as I predicted, a MASSIVE build in crude – 7 MILLION barrels of crude piled up in storage and 3.6 MILLION barrels of gasoline and even distilates had a very slight build (vs. an expected 2Mb draw) EVEN THOUGH refinery utilization dropped 0.7% which works out to producing 1Mb less of refined product than last week.  So, to summarize, they are not making it and nobody wants it!

13.6 Million barrels is an entire day of US imports built up in just a week, that's 14%!   Let's not get too excited until we see a clear trend as it's easy to fudge this data and bury all the bad news into one week (like when the market is collapsing and nobody notices)…
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Zero Hedge

Americans' Economic Hope Has Collapsed

Courtesy of ZeroHedge. View original post here.

Which came first, the confidence or the stock market rally?

One thing is for sure, the crash in stocks in December has crushed the hope of Americans that their economic future is going to be better under President Trump.

Overall confidence dipped to 58.1 - a 4-month low, but, U.S. consumers this month were the most downbeat on the economy since November 2016, a third straight drop after expectations reached a 16-year high just three months earlier, as the partial government shutdown wears on toward a fourth week.

...



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Kimble Charting Solutions

Triple Breakout Test In Play For S&P 500!

Courtesy of Chris Kimble.

Is the rally of late about to run out of steam or is a major breakout about to take place in the S&P 500? What happens at current prices should go a long way in determining this question.

This chart looks at the equal weight S&P 500 ETF (RSP) on a daily basis over the past 15-months.

The rally from the lows on Christmas Eve has RSP testing the top of a newly formed falling channel while testing the underneath side of the 2018 trading range and its falling 50-day moving average at (1).

At this time RPS is facing a triple resistance test. Wil...



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Phil's Favorites

Brexit deal flops, Theresa May survives -- so what happens now?

 

Brexit deal flops, Theresa May survives -- so what happens now?

Courtesy of Victoria Honeyman, University of Leeds

As the clock ticks down to March 29 2019, all of the political manoeuvring, negotiating, arguing and fighting is coming to a peak. In the two and a half years since the 2016 EU referendum, views on both sides have hardened and agreement still seems as far away as it was the day after the referendum.

With Theresa May’s withdrawal agreement disliked by all sides, and voted down by an unprecedented majority in the House of Commons, everyone is wondering what can and should be done next?

...



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Digital Currencies

Crypto-Bubble: Will Bitcoin Bottom In February Or Has It Already?

Courtesy of Michelle Jones via ValueWalk.com

The new year has been relatively good for the price of bitcoin after a spectacular collapse of the cryptocurrency bubble in 2018. It’s up notably since the middle of December and traded around the psychological level of $4,000... so is this a sign that the crypto market is about to recover?

Of course, it depends on who you ask, but one analyst discovered a pattern which might point to a bottom next month.

A year after the cryptocurrency bubble popped

CCN...



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ValueWalk

D.E. Shaw Investment Calls For Leadership Change At EQT

By ActivistInsight. Originally published at ValueWalk.

Elliott Management has offered to acquire QEP Resources for approximately $2.1 billion, contending the oil and gas explorer’s turnaround efforts have done little to lift the company’s share price. The company responded and said that a thorough review of the proposition is imperative in order to properly act in the best interests of shareholders, “taking into account the company’s other alternatives and current market conditions.” The news came only a month after Travelport Worldwide agreed to sell itself to Siris Capital Group and Elliott’s private equity arm Evergreen Coast Capital for $4.4 billion in cash and two months after Athenahealth was bought by Veritas and Evergreen for $5.7 bi...



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Insider Scoop

UBS Says Disney's Streaming Ambition Gives It A 'New Hope'

Courtesy of Benzinga.

Related DIS Despite Some Risks, Analysts Still Expecting Double Digit Growth From Communications Services In Q4 ...

http://www.insidercow.com/ more from Insider

Chart School

Weekly Market Recap Jan 13, 2019

Courtesy of Blain.

In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Biotech

Opening Pandora's Box: Gene editing and its consequences

Reminder: We are available to chat with Members, comments are found below each post.

 

Opening Pandora's Box: Gene editing and its consequences

Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

Courtesy of John Bergeron, McGill University

Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

...

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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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