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Which Way Wednesday

Yesterday was a wild one.

We call it "Testy Tuesday" for a reason and our 5% rule was tested twice during the day but the market failed to break out despite what seemed to be a contrarian rally to Fed minutes that I summarized to members at 2:02 as "BAD!!!!"  Of course we expected them to sound bad, I said as much in the morning post and Forbes summed it up better than me with a headline stating "Fed Minutes Offer No Comfort." 

As the market was "rallying" I predicted we would not break our watch levels for the day and we ran right up to them and failed.  Sadly, we were looking at put plays on FCX and OIH and selling SKF puts (which pay off when the financials go down) in a reversal of our positions from last week.  We're hoping to hold the line on the sell-off and gear up for an Obama rally next week but that's 3 long days away at the moment.  We actually love days like this as we get to test the resolve of the bulls, who still have not shown up in force and now will have to defend 8,866 and 8,650 to show us that they do mean business. 

I remain bottomish and I'm going through the good exercise of re-analyzing the 38 stocks I had selected for members in various sectors on December 1st as my favorite bottom picks and, about halfway through, we still have no rejects although 2 (TIE and GLW) have fallen off our buy list for this month.  Since we had picked TIE at $7.28 (now $9.39) and GLW at $8.45 (now $11.55) it's really just a choice not to be greedy and possibly push our luck too far. 

I am proud to say that our list went 38-0 with better than 30% average gains since December 1st and the format is popular enough that we'll try do a list like it ahead of each cycle (currently we are selling Feb contracts so in early February we'll be looking at March).

We'll need to make 30% a month the way Obama is casually talking about the US running up "Trillions" in debt during his administration.  That was enough to halt the dollar's recent rally as we took a harsh rejection of the 50 dma at 84, finishing near the day's lows at 82.83.  81.50  is the line to watch on the dollar and we need to hold that in order to keep a positive trend on the 200 dma.  81.50 is our mid-point on the dollar and represents a 5% decline from our 12/11 breakdown as well as 5% up from the 12/18 bottom.  At 82.83 we are still down 5% from where we were on 12/1 and you can see from this chart that oil, priced in relative dollars, has not been as impressive as you may have thought on their "bounce."  $50 is indeed the magic number and, even priced against the falling euro, we can see oil has not yet broken over any technical long-term declines.  $50 is NOT the 50 dma of WTIC so failing there is a VERY poor showing by the NYMEX pump crew and Criminal Narrators Boosting Crude are working overtime this week trying to get people back into that busted bubble.

The energy pushers also need to beware of France and Egypt, who are teaming up to put together a cease-fire agreement between Israel and Hamas on this 12th day of bombing.  Russia is pushing the other way as they have accused the Ukrain of stealing gas (they are) and have now cut off shipments entirely but natural gas is a local matter and this is not enough to support a gain in US prices.  Today we have the crude inventory report and another big build can send oil quickly back to $45 and that will take the markets with it as the energy sector has been our rally leader for the past week so let's be very careful out there today.  As I said on Monday morning, this is not an economy that can support a run-up in oil when every $10 barrel gain costs US consumers $1.4Bn a week. 

We forgot to pick up the very cheap FXP's in yesterday's excitement, that is one of our favorite covers when we turn a little bearish and that's a shame as the Hang Seng dropped 3.4% on the Fed's prospects of a very weak 2009 for their largest customer.  AA's outlook was no help either but what really killed Asia today was a 7% drop in India as SAY turns out to be a scam with years of ficticious profits.  Satyam fell 78% and took the whole Indian tech sector with it. "Some people have been saying it's time to buy but I think it's not time yet. I wouldn't hold my breath and say the worst is over," said one analyst at a local brokerage in Singapore.

Europe is off about 1.5% ahead of our open, led down by the energy sector despite Russia's escalation with the Ukraine.  Banks were also hit hard asthe EU debates the fate of credit default swaps and profit taking hit the miners (mainly coal), who had led the recent rally.  UK retail giant Marks and Spencer announced the closing of 27 stores on a 7.1% decline in sales along with declining margins in December and German auto sales were off 6.6%.

Obama is holding a press conference this morning but we already got an ADP report that shows 700,000 jobs were lost in December and that does not bode well for Friday's Payroll Report.  We also had warnings from TWX and INTC which wil be no help this morning.  Tomorrow we get weekly jobless claims so the hits may just keep on coming this week – a wonderful environment to test our levels so let's keep our eye on our 38 favorites and see what discounts we are offered this week.


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  1. SANTA CLARA, Calif.--(BUSINESS WIRE)--Intel Corporation today announced preliminary fourth-quarter financial information with revenue of approximately $8.2 billion, down 20 percent sequentially and down 23 percent year over year. Revenue will be lower than the company’s previous expectation, provided on Nov. 12, 2008, as a result of further weakness in end demand and inventory reductions by its customers in the global PC supply chain.

    They gave guidance o Nov 12 for Petes sake heres what they said then down another 800 million

    Intel Corp.(INTC), the largest computer- chip maker, lowered its
    fourth-quarter sales forecast by about $1 billion amid “significantly
    weaker“ demand across its entire product line. The shares dropped 6.8
    percent in late trading.

    Revenue will be $9 billion, plus or minus $300 million, and profit
    margins will be short of projections, Intel said today in a statement.
    The Santa Clara, California-based company originally predicted sales of
    between $10.1 billion and $10.9 billion.

  2. Phil:AN EVENT,
    I have notice of assignment of DRYS call at 10, so they already jumped on this one.

  3. 8,800, 915 (905 worst case), 1,600, 5,850 on NYSE and 500 on the RUT need to hold if we are going to stay bullish.  If not, we will be looking for 2.5% drops at least and, failing that, back to our mid-points.

  4. DRYS/RMM – They forced you to sell them the stock at $10 and walked away from the $5.20 (yesterday’s close) contract?  That’s nuts!  Don’t take a chance, you got a nice dip to close it out on.

  5. Oil just below $47.50, we need to keep a close eye on that.  OIH off nicely at $83.50 but already bounced $1 so that should have stopped out a put play.  FCX also hit target if you stuck with that one and this is not a place to be greedy – we have these opportunities every day to make quick trades like this

  6. Phil: what do you mean by your comment? What can I do ? Plan was to roll the callside up in strike.

  7. phil,
    bought back my aapl 95 callers @ more than 50% profit sice i covered yesterday! was this the right play on the callers?

  8. RMM – I’m confused, if your caller forced an assignment then he’s forcing you to sell him the stock at $10 and cancelling his contract.  That means, if you want to stay in the stock, you need to buy another round and look how fast it’s bouncing back.

    The whole market is bouncing with the energy sector taking a run into inventory now so we’ll see if it sticks but that was a very good call to take the short money and run.  ALWAYS sell into the initial excitement.  The few times it doesn’t work are much more than made up for by all the times you wisely cash in!

  9. Phil: well, my Drys were called and assigned at 10$, they are gone, I am confused about your comment of buying another round,
    all hedged positions are subject to a call now when the stockprice is substantially higher than the call strike, if one wants to keep the stock, such as SPWRA, a roll up is needed from 35 to 40.;

  10. Phil: its to be expected that stocks get now called if the stockprice is substantially above the call strike, the only way to deal with that is either to accept it or roll the call strike up.
    SPWRA, VLO, UNH, SNDK, CHK, JPM, WFR, GE ALL FALL INTO THIS CATEGORY  and are potential assignment now.

  11. AAPL/High – Locking in 50% in one day?  Of course it’s the right play.  The most you can make is another 7% a day averaged out so your average daily profit will start to decline as soon as you don’t make another 50% tomorrow.  This is the point about taking 50% profits off the table, your performance is virtually guaranteed to go down if you ride it out – it’s just math.  Also, note that AAPL just gap filled to Friday’s close and bounced right back so not too bad for them if they hold it here ($91) and form a base.

    DRYS – Right, that leaves you with a naked put and nothing to sell more calls against so if you want to continue to play DRYS, there is a good opportunity to reenter at $1 off yesterdays high and, since your caller gave up at $5.20 you would have owed him, you come out nicely ahead on the exchange.

    Bad day for oil with Israel saying they are interested in cease-fire and Russia seems to be making progress with Ukraine.  If we get a big build now, it’s going to really sting them as, unlike last week’s build, there’s a lot of profits to be taken.  My plan is to look at selling USO Feb $33 puts for $3 or better (now $2) as $30 for USO makes for a nice buy/write in March so this is an excellent way to initiate a position.  The puts were as high as $7 when oil bottomed and I’m sorry I missed them then because, at $35 a barrel (WTIC price) I WILL store the damn things until October and pray for a hurricane! (Is that wrong?)

  12. phil, how do you calculate Delta ?

  13. RMM
    I think your extrinsic value went below 5 cents.  Now the drys 10 extrinsic is a penny.   When it gets down below 10 cents that is when you need to take action.  Remember they changed the spread to 5 cents for assignments vs a penny. 

  14. CNBC mentions Obama wont be on for another 15 min instead of 2 min that shown on the clock and  the QQQQ dropped real quick, after Obama this market takes a bath just my sense of whats happening here.

  15. Lindsay
    Delta is always calculated for you.  It should be on the option chains that you look at or customize it so it shows.   Now Phil will cheat on calculating Theta but it gets you close.

  16. At least I’m on the right side of the Semi shorts today – thanks to INTC I guess.

  17. How do companies like Satyam get away with hiding all that on their books ? What are auditors and regulators for ?

  18. Phil: which DIA putters to sell against march 93 puts ?  with this DRYS assignment, missed the drop this am.

  19. Damn Dish smartcard, expired right before inventory

  20. Singapore Steve: the DRYS jan puts 10 are now .15/.25 bid/ask. with the stock at 14, this will expire worthless.

  21. OIL LMAO

  22. Assigns/RMM – It is rare to get assigned on a caller but, then again, it’s rare that you have them so far in the money.  Still, very foolish of the caller to lock in their loss of premium this far ahead of expiration as they are giving up their gains on the call and paying top dollar for the stock.

    USG holding up today.  AMZN not too bad if they can hold $55.

    RUT is down near 2.5% but let’s call 500 the one to watch.  SOX with a huge give-back on 10% run-up since Friday’s open but holding 225 is nice if they can.  S&P right at 915, Dow leeks like it will test 8,800 but they all look like they are set up for failure.  Energy sector giving up 3.5% so far with oil right at the 2.5% mark, now clost to $47 even so a poor inventory report in 10 mins can really kick us lower

    Calculating Delta/Lindsay – Well delta is simply how much an option changes against the underlying stock.  There are calculators for it (I’m sure your broker offers one) and it’s included on some options charts but I simply look at the next bracket and let that be my anticipation of change if the stock move that much (in a short time, of course).  The problem with Delta is it changes as the price changes so I don’t fixate on it although I know that about 80% of the options sites fixate on it.  Don’t forget I’m really a fundamental trader using options for leverage.  If you pick the right stock and the right direction – the little things tend to handle themselves…

    Obama/Kustomz – Interesting that they pushed it back to after inventories.  Possible they just saw the market diving and decided on a quick re-write.

    Satyam/DB – This is why I hate to invest in ADRs.  I don’t trust anything I read in a BRIC country report.  It’s hard enough trusting US and European companies but there’s a lot of cowboy capitalism in the emerging markets and that’s not always a good thing.

    DIA puts/RMM – I’d wait until the energy report, we may crash lower but most likely the $87 puts will be the ones to sell


    OOOPS!  Huge build of 6.7M oil, 3.3M gas and and 1.8M distillates – BYE BYE energy sector, bye bye XOM.  Strap on kids!!!

  23. what is LMAO about oil?

  24. dilbert what Phil says huge build, they have nothing to stand on….

  25. How much was oil before inventory how much is it now & how much will it fall.
    Down to the last of my money bought couple of uso 36 puts for 1.65 – right now above 2
    what is a good price to sell?

  26. .
    I am confused. Did y9u have puts or calls that were assigned? 

  27. Phil, in the last few days I think more credence was givent to case for deflation, including in the Fed minutes.  Does that change your outlook on GLD?  I have no position yet, and I am actually just seeking to buy some in a 401(k) so pure GLD, no options allowed.

  28. Phil: DRYS again: if one believes in it,
    buy stock at 14$, sell calls and puts:
    caller jan 15 and putter jan 12.5 for 1.65$
    caller feb 15 and putter feb 12.5 for 4.1$.

  29. SingaSteve: the calls jan 10 were triggered with the stock at about 14.

  30.  phil, i have feb xom 75 puts bought at 2.9.  would you sell into excitement or create a spread?

  31. Satyam – Their books were audited by PriceWaterhouse ! I always thought of this as fraudelent company. Raju, the former chairman, carefully cultivated politicians from all parties. This move of his, just before the general elections reeks of calculation all over.
    In 2006, I did visit Maytas (the firm owned and operated by Raju’s sons and family) apartments/homes in Hyderabad. Within 45 mins I wanted to run from the place from what I heard.
    My guess is, Raju already has made the deal with ‘authorities’. Dont expect him to go to jail anytime soon. My bet is ever. :-)

  32. Phil: what NY time is the energy report, its every Wednesday ??

  33. O my, they just cut off Obama!! Someone at CNBC is getting axed!

  34. hmmm…. oil coming back strongly – My hart is virtually V shaped

  35. KO up on decent volume

  36. Obama…….revamping gov buildings to become more energy efficient, very interesting….

  37. Oops, that was strap in of course!  ;)

    Gold got shocked back this morning, not so much on the oil but on jobs news I think.  Another good chance on GLD at $82 if they hold around here.  Don’t forget, we’re not playing gold for a short-term play, it’s about the Fed overcompensating and sparking inflation, even briefly, that sends people back to metals as the currency gets unstable. 

    This oil thing is great for the market if we can keep our levels as we were losing our rotation with idiot Cramer sending all his sheep back into the energy sector and CNBC bringing out a parade of "analysts" telling everyone how great it looks down here.  Don’t get me wrong, $40 is cheap long-term but $50 is expensive in this evironment and $60 is probably unaffordable if we want to turn the economy around as that’s $150Bn a year directly out of US consumer pockets and another $600Bn from global citizens – that’s the kind of thing that makes a consumer feel poor and keeps them from spending. 

    USO/Dilbert – ALWAYS sell into the intial excitement.   If you are up 50%, see what I said in an earlier comment.  It could fall further and that’s why rule #2 is: "When in doubt – sell half."  If you take a 50% profit on half and stop the rest out even you still made 25% and if you think of how many times that logic would have saved you from turning winners into losers you’ll see why we only need two rules.

    Gold/Jordan – See above.  My gold premise is very simple:  The global governments have increased the money supply by 10% or more aimed mainly at banks who lever it 2:1 so it’s sort of like saying if you have a 50 gallon bathtub and you put 100 gallons of water in it are you likely at some point to get wet?  Gold is being used as a hedge against there being a huge mistake made and inflation soaring on us.  The nice thing about GLD is you can buy the 2010 $70s for $19.45 which have just $7 in premium and you can sell Feb $86s for $3, which takes you up to $900 gold next month without having to pay your caller more than $1 and your net entry is $16.45 on a $16 spread so no danger of it getting away from you to the upside.  If gold falls, as long as you can collect $2.50 a month for 12 months, you will make a 50% profit regardless of the value of your long position by Jan 2010 so I can’t imagine a better way to hedge against inflation than holding these.  $1,500 gold would put you $80 in the money so 10% of your portfolio in a gold hedge can turn to 40% on a big run (assuming it’s not so sudden that you get called away).

    DRYS/RMM – today is not the day to sell a put on them.  Your caller may have done you a big favor taking the stock, oil and metals are down (told you so on FCX) and that’s going to panic shipping again so let’s just wait and hope for $12 to get back in.  You can get fancy and sell the naked Feb $12.50s now and for $3.30 and set a buy on DRYS to cover at $14.50, hoping it goes lower where you can write the $12.50 puts for $3 or better and buy the stock under $13.

    Meanwhile, POT Feb $75 puts are $5 and bottomed out at $4.50 but were $9 on Friday so they could be good for $6.50 if we break lower.  I like them as a gamble and, rather than stop out, I’d sell the $80 puts for $2.25 (now $2.50) if it runs up and make it a spread since you can roll those down to the Feb $65 puts even making it a not too dangerous diagonal.

  38. kustomz/Gov revamp - Waste of money, he’s not thought that through properly , they’re full of hot air all ready, just need to open the windows on warm days.  :-)

  39. DB….The markets are filled with hot air at the moment, i just want to trade it….just open the windows :)

  40. Funny thing: on a 20%er for LVS, my call was just assigned, not my put.

  41. XOM/Jo – I’d sell the 80 puts for $3.25 based on the above POT logic.  If XOM goes to $75 you will owe them $1.75 more and certainly you would get that premium selling him Febs and rolling yourself back to March but those calls were $1.75 yesterday and you could make a quick $1 on a bounce today or just ride out the $1.50 premium next week.

    SAY/Ramana – Very interesting!

    Energy/RMM – 10:30 any Wednesday when there is no holiday.  Nat gas is Thursdays same time.

    There goes $45 on oil – yet another prediction comes to pass!

    LOL DB!

    LVS in a real sweet spot for selling at $7.50.  Feb $7.50 puts and calls are $2.70 so that’s $4.80/6.15.

  42. Lets see if we can make it back to 920 on the S&P, GOOG at 325 needs decent volume to push past that number if they dont get it look out below.

  43. PHIL: I have analysed my 2008 experience and like to give you summary conclusions.
    Not right now when the market is in action.
    WHEN can I send this to you for your view and comment ?

  44. Phil,
    MON soaring this morning on news about product pipeline. I own MON at 71 and sold Jan 70 calls. Do you think MON will drop after this sudden run up and this is a good time buy puts?

  45. Do States qualify for TARP

    Reporting from Sacramento — State officials on Tuesday braced for the possibility of delaying tax refunds to millions of Californians, along with student grants and payments to vendors, as the latest round of budget negotiations between Gov. Arnold Schwarzenegger and Democratic legislators collapsed.

    With little more than a month’s worth of cash left in the state treasury, the governor and lawmakers have been unable to agree on how to erase a budget gap projected to reach $41.6 billion by the middle of next year. Democrats announced Tuesday that two weeks of discussions had ended in an impasse and sent Schwarzenegger the $18-billion fiscal package they passed last month. The governor vetoed it, as he had promised to do.

  46. Phil: still have trouble that the DRYS caller sacrificed 5.4$ to gain 14 minus 10 equals 4$ ???

  47. Phil: what other important reports ( when do they occur ?) besides of energy and NG come out during the month which I should pay attention to ?

  48. Don’t forget that you should not have any Jan puts or calls of your own that are not momentum trades.  If you don’t like a posiiton today enough to roll it to February, you should cash it out!

    GOOG $330 calls at $7.55 and $320 puts at $8.60 are a fun way to play GOOG to move $20+ over the next 7 days.  Ideally, we take off whichever side doubles to make it a free trade and play for a bounce back to take the profits on the other side.  Since we HOPE to make 1/2 of the low side or $2, it is good to be aware that a $1+ net profit on the trade should be protected. 

    Holding our levels nicely but energy hasn’t capitulated yet so we keep on our toes.  It would be great to see the Medical sector turn up since they were the week’s underperformer but don’t forget we have 2 days of jobs ahead of us and that’s going to be dangerous.

    2008/RMM – You can post it if you’d like.  Best would be Friday after hours and I’ll try to give it a look over the weekend. 

    MON/JW – LOL, I just said yesterday they are the only way I would play Ags for just that reason.  I’d expect them to pull back to $80 but sometimes when a value proposition is pointed out (to very thick investors) the run-up sticks so I don’t see why you want to flip and bet against yourself.  You are already well covered and you can simply spend $1.60 to roll your caller to the Feb $75s.   That’s you spending $1.60 to definitely buy $5 in position vs gambling with puts and you are still very well covered.  MON pays a terrible dividend so you may want to also consider rolling to 2x the 2011 $40s at $47 (+2 from you) and rolling your caller to 1.5x the Feb $80s (+3.50 from him) to give you what is effectively a 1/2 uncovered position (of the amount you currently have) and the ability to sell twice as many calls per month with the same amount of capital at risk.

    Califonia can be the disaster that puts us over the edge if they don’t do something…

    DRYS/RMM – WHAT???  If you owed the guy $5.20 yesterday and this morning he paid you $10 for the stock then he paid you $15.20 by cancelling your debt and giving you cash.  It doesn’t matter what it opened at this morning, he made that decision last night.  Either way the fact is you got 100% of your callers premium + $10 so that’s what we call a win.  Now the question is do you want to re-up the trade?  As to reports, see:

  49. G’Day
    C is strong today.

  50. XLE run-up was from $44 7 sessions ago to $52 so about 20% top to bottom.  Retrace of 4% is expected and not bearish so if they hold 4% today don’t get too bearish but if they settle below 2.5%, then we can expect follow through to 4% tomorrow and that would be the big test.  Meanwhile we’ll see if USO/Oil can take back 5% from the downside…

    LOL – Charlie Gasparino just said "Where was (somebody in SEC) when this shit was happening" – He’s getting out of control!

    C/Bro – What chart are you watching?   XLF down 2%, C down 1%, not a banner outperformer. 

  51. California is like a country failing to pay its obligations.

    Someone likes RIMM today

  52. HOV   What level would you consider selling puts against a long position?   HOV was your idea and I’m in at 1.82.  Also, I’m thinking of setting up a spread to go along with my shares.  I normally wouldn’t consider it on a $2 stock, but I’m seeing .95 for the Jan 11 2.5s and .25 for the Feb 25s means you can be in for .70.    Even if you don’t sell calls every month it seems like cheap insurance to be able to do a 2X roll against my long stocks if I don’t want to lose the shares to exercise on a big move.    Waddayathink?

  53. Boy, there is a real battle going on in financials.  Rarely do you see SKF/UYG trade in such a tight range for an extended period of time.

  54. Phil: after this DRYS cexperience, lets look at the next position with the greatest delta between caller strike and stockprice:
    that is SPWRA:
    stock is 39.8, caller strike is jan 35 and costs 5.7$,
    39.8 minus 35 equals is 4.8 $, so no incentive for the caller, but the same could happen as for my DRYS position,
    if the caller called my stock, I would make 79 % RoR, not bad at all since 11/20/08.
    BUT: I can roll to feb 35/30 on call/put for more than 10$.
    Well: you would say: the jan 35 call still has 1.1 $ premium!!!!!!!!!!!

  55. SAY – I agree with Ramana commented – SAY always seemed ‘different’ and not in the same league as the 3 bigger rivals TCS, WIT & INFY.  The markets in India seemed to think the same too as these 3 stocks held their own or even went up a bit in India in spite of the 7% down for the market. Two of them that trade in US as ADRs are up here as well.
    I also think this is perhaps an opportunity to buy into India for a quick 5-10% up in a few weeks. I am buying more of the Indian Index via EPI now and looking to add to INFY stock I already own if it weakens closer to $25. EPI owned 1.17% of SAY as of yesterday and it trading at a discount to NAV of about the same having been down as muc has 10% today.

  56. Phil:  got Jan120 calls on SKF, should i keep these or dump them?

  57. So much for getting past 920 in the S&P

  58. Phil: what did the energy report say???
    we did not crash lower,
    wonder about covering my DIA puts now  with jan 87 putters ??

  59. Is there a way to short the dollar other than UDN ? Those options seem illiquid with quite large spreads.

  60. 30 min chart on the S&P very important to watch if they fail 920 again, this afternoon will be fun to watch

  61. Phil/LVS – why wouldn’t you try to sell Jan puts and calls for $1.45, instead of the Febs for 2.70?
    This is the issue I am struggling with now, when is it time to start looking for Feb 20%ers as opposed to Jan.

  62. YHOO getting bid up

  63.  phil, i saw your play on bac yesterday.  how about bac 10′s 2011 for 7 and selling  feb 14′s for 2$ ?

  64. HOV/Eph – I agree.  Home builders are priced as if every one has a 50/50 chance of BK – very profitable to pick the ones that aren’t. 

    SPWRA/RMM – I wouldn’t give him the buck wit oil falling again, they rose with oil and may fall with it so better off keeping the insurance and ces’t la vie if they cash this out as 79% is a nice return and I’m sure we’ll find something else to play next month.

    India/M2 – The BSE is up 15% in 2 weeks and up 25% from the Nov bottom so I wouldn’t rush right in on the first day of a pullback.

    SKF/RL – As I said earlier, if you don’t like them enough to roll them to Feb, say the $130s for $9.25 selling the $120s to some other sucker for $3.20, then you should get out because one bad day and you have only 5 or less to recover at this stage and you WILL lose 1/7th of your premium tomorrow either way.

    Energy/RMM – sector held 4% so far and gave the rest of the market a chance to do mild rotation.  We need to see industrials coming back to make progress.

    Volume is still very low today.

    Dollar/DB – They are all thinkly traded but shorting UUP with the June $28 puts at $4 has very little premium (under $1) and UUP was down at $22 at the lows.  When something is thinly traded, it’s best to go in the money as much as possible so the spread becomes a non-issue.  UDN June $22.50 calls aren’t bad at $4.05 either.

    S&P/Kustomz – I’d like to see them test 912 first and then move up, maybe they hold that as oil stocks break down to 5%…

    LVS/Jordan – My bad, you are right, at that premium it’s worth selling the Jans first.  I’ve just been doing so many Febs I didn’t even look but when you can collect a nice premium like that it’s worth the risk.

    BAC/Jo – Oh absolutely that’s a nice spread.  Still, very important NOT to take individual bank shares without a hedge for the downside like SKF or XLE puts as ANY bank can go under in this evironment.

  65. ISRG back to being cheap.  I like the Feb $110 puts as a naked sell at $10.

  66. One great books I like recently is A traders guide to econmoic indicators …. bloomberg press.   Based on past recessions which last say 1.3 years, you could justify the market going up …. however, I am not in that camp.  If the bric doesn’t save you, it will hit you.  

  67. Phil: you did not give me an answer to "what and when DIA PUT covers to sell"

  68. It cracks me up that Dan Yergin is CNBC’s "Global Energy Analyst" as he also Chairman of Cambridge Energy Research, who are a mouthpiece for Big Oil and his book is a manifesto for oil being more valuable than gold.  He’s starring in a very sickening Bull vs Super Bull "debate" on CNBC right now – I feel like heading over to Englewood and forcing my way onto the set to expose these jerks!

    Books/Thatway – Try Galbraith’s "The Great Crash of 1929 which he wrote about 20 years later with great retrospect and the guy is friggin’ brilliant.

    DIA/RMM – I could have sworn I said the $87 puts but no hurry as you may get $2+ for them and, if you don’t, then you can always sell the $88 puts which can roll down to the Feb $81 puts.

  69. C not a bad spread with the Feb $8 calls at .62 and the Feb $7 puts at .77 which is net $5.92/6.46.  $5.94 was their panic low.

  70. SNE still up nicely.  MON going strong, UAUA seem content at $12. 

    LVLT breaking $1 – I’ve been watching them for a while and they are starting to look serious about this.  They are a nice infrastrucure play but a little too scary to recommend due to massive debt (and negative income!).

    STT is a good looking IBank bucking the downturn.  We picked them during the big crash below $30 so it’s hard to love them at $45 but they are likely consolidating for a breakout.  The volatility keeps them attractive and you can sell Feb $40 puts and calls for $11.50 on the $44.50 entry so that’s $33/36.50 and I really don’t mind owing them around $35 with those kind of returns.  I really like them because their 50 dma is actually turning up, as opposed to most which we only hope will flatline.

  71. That may have been the bottom retest we were looking for.  S&P and Dow both didn’t get back to their lows and are looking to get back to our levels (915 and 8,866).  I’d much rather see buyers come in now than a stick save into the close, which would be very questionable.  On the whole, it’s more like the sellers went to lunch than genuine buying interest….

  72. Phil they would put you in the loony bin, what are you some kind of conspiracy nut? Dan Yergin drives a Prius no less. Just kidding, but if your serious im 30 min from the studio meet you there with a venti black with 2 sugars this way you can blame it on the SBUX coffee and my puts will no doubt double.

  73. Phil, interesting analysis on STT. I have no banks now so will put that on my radar.
    Managed to sell a LVS Jan 7.5 call for 0.75, now placed the put, at 0.75 as well.  When it executes, I will purchase the stock.  Wanted to automate that last part, i.e. was looking at how I can do a conditional order on InteractiveBrokers, and I can swear it can be done, but cannot find it yet, hence the manual approach.

  74. Lets see how those 3 years went off, very well no doubt considering how screwed we are

  75. SAY – I am thinking that, to some extent, this scandal shows that it is NOT possible to outsource as cheaply as we have been which means that part of our economic rally was based on unrealistically low labor costs as well.  I haven’t seen anyone notice this yet so it will be our secret but SAY had a lot of contracts and they were not making any money but their false records forced other companies to compete on price.  Overall this is long-term good for INFY and many other outsourcers but, short-term – it’s going to be hard to hit US clients up for a fee increase.

    Kustomz – Great idea, we’ll get a bunch of us together and storm the studio.  I doubt they have more than a couple of token security guards..  Seriously, look at the coverage PETA gets with their "Fur Is Murder" BS and all they need is a few housewives and some cardboard signs.  We could dress up in burlap sacks and pour oil on ourselves outside the studio and chant "Oil Scam" over and over.  8-)

    Actually, it’s close enough to NYC that I bet we could get national coverage!

    LVS/Jordan – Can you put in a spread on the stock and the put for $6.75?

  76. We could dress up in burlap sacks and pour oil on ourselves outside the studio and chant "Oil Scam" over and over

    LMAO i think i’ll pass

  77. Phil: for your comments:
    I send you my 2008 review in 2 pieces:
    1) my findings
    2) few problems still remain.
    THIS is the findings part:

    2008 trading review:
    This speaks for PHIL and I thank him for what he taught me, had I practiced what he taught me, I would not have lost as much as I did in 2008.
    I signed up with Phil in feb 2008.
    Here are my findings about why I had all these losses:
    Had long calls, market dropped, waited like a lamb to be slaughtered (buy and hold nonsense), calls expired worthless.
    REMEDY would have been in applying PHIL’s knowledge as market was dropping:
    Sell FM shorts and make money,
    Roll longs down any time using 50 cent rule,
    Roll longs out in time.
    Now I applied PHIL strategy and sold FM shortcovers,
    When stock moved UP, I was loosing money again as shorts moved ITM and I bought back at high cost.
    REMEDY would have been in applying PHIL’s strategy as stock was rising:
    Do not let caller/putter get away from you (meaning getting very expensive to buy back)for a 25 % gain the caller/putter makes, buyback 25% of callers/putters
    50 % gain the caller/putter makes, buyback another 25 %,
    then roll UP to full cover at a higher strike.
    These 2 items cost me the vast majority of losses, I believe I know better now though sometimes the market requires faster moves than I can implement.

  78. WOW: what is all that stuff besides my comment ??

  79. Sathyam (SAY) – I just realised something, Sathyam means truth ! LOL. :-)  
    I prefer INFY and TCS better. I do not trust WIT, it suffers the same problem as SAY (the sons and family problem).

  80. U.S. Crude Oil Stocks Graph.Oil is down about 10% bus USO down "just" 7.5%, we’ll see which way this resolves in the last hour of trading.   Keep in mind that a (ROFL) 11.8M barrel build in a week is more oil than Cushing can process in a month!  According to the EIA, US production is LOWER than last year but we have a 22.5 day supply now vs. an 18.4 day supply last year.  Imports spiked up and accounted for about 1/2 the build last week but check out this supply chart:

    Big break over the top of the average range and the worst time of year for it to happen as demand slows in the winter anyway.  So we are now more oversupplied than when oil was below $40 by quite a lot and it looks like they are seeing what I’m seeing and bailing as XLE and OIH break below 4% and, as expected, take the market with them.

    Now we are at 500 on the RUT and 8,000 on the Dow and 1,600 on the Nas and 911 on the S&P so this is make or break time!

  81. Phil, LVS sure I can put in a spread on the stock and the put.  I was sure I can do a conditional order, though.  Not a big deal, still waiting for execution on the put.

  82. Phil, typo, the Dow is at 8800 or thereabouts.

  83. Phil, was thinking (maybe pass on to Jared or whoever is taking care of this): wouldn’t it be so nice, every time you (Phil) hit the submit button to have the current levels of the indexes we follow (RUT, NYSE, S&P500, DOW, OIL, GOLD, VIX) print out on top of your post?  You can use shorthand so it takes only one line and is easy to read, and we all know where the indexes were when you made the call, for better context.

  84.  Hi Phil,
    With regards to your recent comment on the C Feb 7putter / 8caller spread, why wouldn’t we buy stock and sell straddle at Feb 7′s for more premium instead (is there a reason to prefer the callers at 8)?  Or even try selling the Jan 7.5 straddles as there’s still some premium left in those.

  85. Come on Kustomz – where’s the fanatacism?

    RMM – It’s the right general idea but no one could have reacted fast enough in this crazy market.  It was a very tough time to learn and, hopefully, the kind of moves we had will not be the new norm.  I ran a fix on the comments, hope nothing was lost.

    LVS/Jordan – I’m saying if you get a spread at $6.75, what do you care which was priced at what?

    I like this guy on SAY, not only is he cooking the books but he claimed profits were up 30% last Q.

    Well it’s resolved – USO now down 10%.  See, this is why I need traders working for me, I saw the 2.5% just hanging there waiting to be taken but it’s too tedious to trade a stock for a 2.5% gain!

    Dow/Jordan – Typo is right!  Hopefully not an accidental forecast…  As to the other, Matt and I are working on a mini sheet for our watch levels that will fit at the top of comments and update kind of live.

    C/Chen – Yes, that is buying the stock too, we don’t do those plays naked.  The stock is at $7.35 and I’m bullish enough to go with the $8 calls rather than the $7s on that play. 

    Across the board index failures.  We need to lean bearish if they can’t take back those minimums.

  86. Ahhhh….. nothing like seeing a good ol’ fashioned drubbing of the market.  It gives me hope.  That they can’t keep up the charade forever.  Very interesting day for the SKF.  It’s been slow and steady as she goes.  Not the normal +/- gyrations we’ve come to expect.  Least not yet.

  87. Should have thought of shorting Goldman!

    YRCW still up!  VIX up 10%, 10 more days like this and we’re back in the 80s, maybe just in time for expirations…

    ATVI, which we picked yesterday, is coming nicely off the bottom.

    GOOG already looking good on the put side. 

    SKF lagging XLF in movement, may pop if XLF fails $12.

    FXP not really moving much off the gap open.  That’s a little strange as they could drop another 5% tomorrow.  I like the Feb $30s at $7.60 selling the Jan $35s for $2.50 (but wait until close as it should go up) as a nice spread.  Roll can go to Feb $35s, now $5.55, so a free trade if things go well or you can roll back to March $25s, now $11.45 with the Feb caller’s money.

  88. Phil, what do you think of another round of FXP calls.  Now at $33.95, the Jan $35 calls are $2.35.  Is that how you’d play it, and what do you think fo the play itself?

  89. Oil collapsing into the close!  $42.50!

  90. Hey GMTA Jordan!

  91. ah, you just answered my question before I posted!  makes me think I am on the right track, at least identifying tickers ;)

  92. OK, those 2 FXP Feb $30 at $7.70 were mine. :)

  93. RMM – ref ’08 losses. I had the similar understanding of Phil’s rules. Today my attitude is different. Basic rule is not to “defend” a trade if market characteristic changed i.e. close calls if market became bearish. I have rolled so many times down and out some of my trades that it will take years for me to BE. The callers do not generate enough income when the volatility is low. After few rolls Phil’s calculations of premium becomes somewhat convoluted. Phil has so many of good ideas that I would need 8 digits account to trade them, because he doesn’t have open portfolios any more, I will need two employees just to monitor open trades with reasonable frequency. I have not understood and I still do not understand how Phil is making money. But I learn few tactics of  option adjustments.

  94. matt at what level would you be a buyer?

  95. Why are IPI an BIIB not participating … IPI is correlated to oil in price movement in general.  It seems like they are holding up AAPL, RIM to hammer it down later on.

  96. GS, I tried shorting them this am but Scottrade told me there were no shares available.  Couldn’t get COF either.  My brother on e-Trade never runs into that problem.  Wonder if e-Trade is getting them naked or does Scottrade just suck.  Or both!

  97. Kustomz:  I buy pretty much everyday.  I short more though.  If you’re asking me when I’ll load my iras and 201k back up… somewhere in the 7000s.

  98. Bronek,your results and mine have unfortunately been similar …defending leaps vice selling them and   continously rolling them down  to ATM positions in light of this 30% market decline is a blueprint for  disaster.

  99. Oh, please delete the one above Not sure what happened.
    I want to share an observation with you re: my order on FXP’s Feb $30 calls.

    When I wanted to place the order, the bid/ask were 7.50/7.80 with last execution at 7.70.  The moment I placed my order for 3 options at 7.60, there were about 100 more options placed at that price, so my "avant-garde" status as the highest bidder was no longer there.  Apparently, algorithms lurk in the background, ready to buy at 7.60 but not actually saying so until someone else (me) does at which point they come out and the "high" bid of 7.60 is no longer really higher than anyone else.

    So, I place that order for 3 options and the others rush in at the same price, so, I decide to up by 0.10 to bid at 7.70.  I change and resubmit the order, and then I am the only one at 7.70.  After several seconds, I decide that if I am willing to overpay by 10 cents, at least I shouldn’t go in all the way, so I change the order quantity and resubmit at 7.70 but with an order size at 2.  At that very moment, my bid for 2 options at 7.70 gets hit, and when the display shows my order is fulfilled, I can see a residual offer to sell 1 option at 7.70 just sitting there!  There were absolutely no offers to sell at 7.70 ever before.

    So I figure again there must have been some program (or person) lurking and willing to sell at 7.70 and the moment they saw my offer to buy 3 options they jumped on it, but by then I had changed my quantity to 2, so only 2 of theirs executed against 2 of mine, and their orphan offer to sell sat there.  The offer to sell at 7.70 disappeared after a few seconds and ask returned to 7.80 as before.

    So, beware of lurkers.

    I have come across this many times, but this time it was especially interesting to watch.

  100. Just bought some GOOG with some hope of making a little bit of money on some type of small recovery.
    matt def i wouldnt look at anything here for long term investment

  101. Oh boy, here comes Cramer who just told everyone to get back into energy this week.   I wonder how he’ll spin this to make himself seem right?

    Rolling/Bro – Rolling down does not (did not) work when the market dropped more than 20%.  You do have to stop out at some point.  Better to walk away with a 50% loss than pursue dimininshing returns.  That’s why we shifted away from the leap spread strategy to the buy/writes in this market.  We simply can’t cover the premiums safely as there is too much danger of getting burned to the upside. 

    IPI/Thatway – They actually have very good growth prospects and are trading very cheap relative to their April IPO at $50.  If you must play that group, they are probably safer than POT but with less track record, I don’t like them either.  BIIB has also managed to turn up their 50 dma and are very fairly priced at $46.  Clearly someone has been buying on the dips since early December.

    Naked/Matt – Why not just buy in the money puts?  They are fairly liquid on both of those stocks and use up far less margin.  I know ETrade sucks so Scott Trade must REALLY suck if you think ETrade is better!

  102. matt/shorting GS: you can check how many shares are available to short at InteractiveBrokers by going here:
    Search for your stock and then click on check availability.  For GS shows over 6 million available shares.
    Have to warn you though, transition from Scottrade to IB is not easy, steep learning curve, not much support, and no tax software to keep track of your profits and wash sales.  I did that, commissions are worth it if you trade a lot, but there is a LOT to learn.

  103. Jordan
    Market orders go to the front of the line and can cut in front of you even if you think yiou are first.

  104. SingaporeSteve, thanks but I don’t think these were market orders, as I was looking at them for several seconds, and saw no executions besides mine.

  105. Holy cow – now Cramer is saying oil has peaked!  I’m dizzy trying to figure out his position on things…

    Shenanigans/Jordan – I think the MM gets to play those games with you.  Their whole gig is stealing dimes millions of times a day.

    SPWRA – See what I mean by not reacting to short-term moves!

    SOX held 5% on the button at 222.  RUT down 4% and others past 2.5% so we should see 4% down across the board (total) tomorrow before things turn back up.  Unless, of course we get one of those famous 200-point rallies into the close today…

    Obama speaking on the economy tomorrow at 11am – this will be interesting.   Maybe we open down at -4% from today’s open, hold that and rally up if he can deliver the goods.

    SKF testing $110, would not bode well if they pop it.

  106. Phil:
    still waiting to sell jan puts87,
    also, is closing XLF caller jan 12 still too early ?

  107. Am trying to think about what’s bugging me about the FXP example I gave, and here it is:
    What bugs me is that even though I am the first to openly state my desire to buy at a given price, some shmuck, who always wanted to buy there, but was never "brave" enough to stick his neck out and say so, can come in and overwhelm me with their 100 orders, copying my price and doing a limit order, and then based on the fact that for limit orders execution is not based on arrival priority, I have a much smaller chance of getting filled than they do, even though I was the one who helped "uncover" that price.
    Seems unfair to me, if that matters.

  108. Phil: look where DRYS is now:13.2 $.

  109. INTC  Jan 11 10s are 5.70 with 1.30 in premium….too good to pass up?

  110. Phil/Obama/Economy – The ECB is expected to cut rates tomorrow, that’ll be about 2 hours before the market opens. Any thoughts on how that might play out in the US ? thnx

  111. bronek: no doubt, we should have abandoned LEAPS much sooner last year and switched to hedged positions sooner.

  112. Canadian iPhone Activations Down 50% In Q4 (AAPL)

    Dan Frommer | January 7, 2009 2:05 PM

  113. Phil, what do you think about covering the FXP Febs with $35 Jans tomorrow morning?
    Ahh, the order for LVS Jan $7.50 executed at 0.75.  Until Jan 16, I am in for a straddle, sold put and call for $1.50.

  114. Phil, today remember to click submit before 4 pm LOL ;)

  115. Jordan, no tax software?  That would be a deal killer for me.  I rely on Gainskeeper.  Otherwise, I’d prolly have to spend an hour a day entering trades into a spreadsheet to calculate all the wash sales.  Never did really understand that calc, either!

  116. matt1966, yep, IB has no tax software and no OCX interface, so there is a lot of manual work getting the transactions into Gainskeeper, for example.  I ended up subscribing to Gainskeeper on the GK website, and timed it in such a way that processed two years’ worth of transactions with my one year subscription, so the cost was bearable.  I also tried a bunch of other software.  In the process I discovered quite a bit about the way these software work, and how they match transactions, including the many grey area decisions they make.  So overall from the point of view of learning, it was great.  It did take me time though.

  117. matt
    Why don’t you just get trader status and do mark to market. You cannot for this year because you have to file for it the previous year.  I had out of Chicago do my taxes and it saved me days.  And they filed all of the forms.

  118. XLF/RMM – I don’t even understand why you would want to buy back a caller that is .50 of pure premium.  DIA is right on the money (how was that for a bottom call?) at $87 and we’re at target (see 10:31 and 1::05 comments) for the puts at $2 so what is the question?

    MON and ATVI are still pretty much the only stocks getting bought.  I think we’re getting too widely read again…

    LOL Jordan – Life is certainly unfair isn’t it?   That’s just the way it is with thinly trades contracts, a lot of bigger trader won’t trade until they see a new bid come in as it gives them at least the impression that they are not the only idiot who is interested in shelling out the premium.  Then you have alert programs like John’s Thermal Imaging that does nothing but hunt for unusual activity.  If I’m bottom fishing on contracts, I may wait but then get worried even if a few orders on my intended contract start trickling in.

    DRYS – As expected, NOW is a good time to sell the Feb $12.50 puts naked for a whopping $3.  The $12.50 calls are $3 so you really have little pressure to do anything unless they break below $12.

    INTC/Eph – I love those!

    ECB/DB – I think that plus Obama should keep us from breaking our midpoints (8,650, 900, 1,550) but we’ll have to see how lousy this finish is.  If we’re going to rally back, I think it would be on a big promise by Obama, not just the EU cuts, which are expected.

    IPhone/Kustomz – When was it rolled out?  If it was rolled out in Q3 (which I think it was) then those are pretty tough comps aren’t they?  Does Rogers have an exclusive or were they burned by another vendor?

    FXP/Jordan – If we don’t recover to -2.5% on the majors then it’s worth the risk naked but you are being greedy as you could be throwing away a nice spread if China does something stimulative to coincide with Europe.  On LVS – keep in mind that they moved .95 today so don’t get too complacent.  Thanks for the 4pm reminder!

  119. Phil: where do you get 2$ for jan 87 puts??

  120. Thanks for the greed reminder Phil.  My worst enemy in trading.

  121. Rogers is exclusive

  122. Phil: Drys: the only ones I have is puts feb 12.5,
    should I sell calls feb 15, and aLSO BUY THE STOCK ?

  123. Phil/DRYS you are looking at Febs?  Can’t see the $12.50 naked put at 3, shows as 2.30 on my screen.  Marches $12.50 are at 3, but is that what you meant?

  124. Option/reading – Phil mentioned delta earlier and I recently purchased a book by Jeff Augen that has 100s of worked example on all the pricing and trading dynamics of options. Its quite detailed and personally . since I trade to collect premium, its more than I’ll ever need. But its great to know what you are dealing with and I’m going to test Phil with some of the questions one day :-)

  125. Phil, aren’t you referring to the Mar DRY 12.5 puts as the the Febs’ are 2.40

  126. Phil – where can i find your list that was reference in today’s posting?

  127. rlogan, the list was a Monday post (I think either before or after hours) about 3 or 4 mondays ago.

  128. DIA/RMM – I’m seeing $2 even right now with a $1.99 bid and $2 ask and I see a ton of fills well over $2 around 3:15 to 3:30.  As I do keep telling you, if you always wait for a better price you will give up the momentum and get screwed.  The rule is ALWAYS sell into the intial excitement. That means when you get your price, you can watch keep going until the first tick against you, then sell AT LEAST 1/2 with a very tight sell-stop on the next 1/2.

    IPhone – If I remmeber correctly, AAPL sold about 2M IPhones in month one in the US and then projected about 500K a month for the next 12.  That means "only" dropping 50% from the intro quarter in Canada is not at all bad but this is why I love AAPL – there’s always an article that lets you take out your callers!

    DRYS/RMM – I’d stay naked on those puts.  You have $6.25 in margin and $2.40 in cash from the putter and you end up owning DRYS for $10.10 at worst.  If you buy the stock here at $12.80 and sell another $2.40 on the calls you are in for net $8.40/10.45 with twice as much cash at risk.  That being the case, you are just as well off leaving it alone and doubling down or rolling the puts if they keep going down.  Ideally, as I said earlier, we want to see them hold $12 tomorrow and you can buy on the way up and sell calls at the top for a really good spead but, for now, you have little to lose chancing it naked.

    DRYS/Potter – Oops, that is $2.40 for the Feb puts.  It was March I was looking at.  For .50 I sure wouldn’t sell the March’s and $2.40 is still a good price.

  129. Test/DB – No thanks, there’s a reason I didn’t go to grad school!

    List/RL – Didn’t I have a link?  Well it was the early Tuesday post I think,  The original post was 12/1 for sure but I’m running through an update that’s about 1/2 done that I started posting up yesterday.  The timing could not be better as we’re going to be well armed to pick things up in this market dump.

  130. Phil: ok, I got 1.96$ for the puts, my system never showed 2plus.
    Anyway, its done. I also have the DRYS feb 12. 5 puts NAKED as I was already NAKED with the jan.
    I will send now the PART 2 of my 2008 review :

    A few problems still remain for me:
    Deciding to go FULL or less than full cover/shorts:
    this will of course depend whether there is a bullish or bearish outlook,
    For protective DIA PUTS, full cover seems to work, but deciding what OTM strike is a problem for me,(how far away from ATM?, PHIL seems to pick a certain premium level )
    For LONG positions, to cover/short, the INITIAL EXCITEMENT rule is good for timing, pick an OTM strike, but about 50 to 75 % cover seems to be best,
    Which INDEX is best to use and why ?
    For hedging/protecting
    For trading trends
    Best use of ULTRA Longs and Shorts
    ROLL UP of LONGS: is there such a need or opportunity ?
    The BEST timing to CLOSE Front Month CALLS and PUTS
    According to PHIL: close 1 week before OPEX.
    The BEST timing to close Front Month CALLERS and PUTTERS:
    According to PHIL:
    if 50%plus drop in value and with less than 2 weeks to OPEX and
    being BULLISH on stock: CLOSE/buyback,
    f 70%plus drop in value, CLOSE or ROLL to lower strike.

  131. What’s the best tax software to use with TOS?   I’d like something that could track trades automatically so I don’t have to track all my buys and sells on a spreadsheet.   Do Gainskeeper and other packages work live, or off the year-end 1099?

  132. Nice try for a stick into the close but not enough of a hook to get us back over our minimums.  I’m very pleased, the week is going just as planned because we didn’t want to rally too far ahead of inauguration week, which is still 2 weeks away so next week is really when we want to see some excitement build. 

    Volume is still less than 1/2 normal and a 5% decline in oil is a full point off our indexes and commodities probably pulled us down another .3% so not really that terrible if we can recover a bit and just get back to our low levels (8,866, 911, 1,600) into the week’s end.

    DIA/RMM – If your system never showed $2+ then your system may be ripping you off!  There were hundreds of contracts that went off above $2 for a long period of time, no reason you shouldn’t have filled.  $1.95 no big deal but if you are getting ripped off by your broker, it can cost you amazing amounts of money over the course of the year.

  133. Fully covered and ready for whatever tomorrow premarket might be trying to tell us but we should ignore.  Good evening all.

  134. ISRG announced "only" a 22% increase in revenue from last year and fell off a cliff!  They expect all of 2008 to be up 46% with a 60% increase in procedures this year.    They are only projecting 15% increase in 2009, that’s what’s killing them.  That sucks on the Feb $110 puts but they can be rolled to much lower March puts and boy would we love to own this company at $80.

    When they bottom out we can go back to the leaps now as we’re going to get some great pricing there.  2008 income estimates were for $5.31 and 2009 estimates were $6.45, a 21% gain so the company adjustsing to 15% in this economy is NO reason to take them down 20% after hours.    They are at $96 now and I wouldn’t mind pulling the trigger around $95 or wherever the music stops here.

  135.  phil, whe the music stops i am loading the frigging truck up with isrg.  they are becoming the standard of care.  i saw it advertised when i was visiting my folks in lexington, ky.  so they are starting to penetrate middle america.

  136. Phil, does "pulling the trigger" mean buying them after hours or?

  137. Jordan, yes, by open tomorrow they could retrace 10% or more of what they drop initially.  Goes most after market over reactions.

  138. TO: ephmen85  RE: Tax Reporting
    TOS already does this for you. Go to accounts tab, then click on "Tax Tools" on the top right.  It is a bit unintuitive to use at first, but it does a great job listing all your trades and can be downloaded to excel.

  139. TOS and tax:  I found that when something expires worthless, TOS somehow drop the Closing Trade (either cost basis or sold amount) on these trades.  You’ll have to then manually check them and enter a zero value to it.  Worse, it doesn’t remember after you manually enter the numbers, so the next time you download the manual entries got wiped out.  TOS has not reconcile the trades to December 31st yet, only to 9/30.  So wait to do the whole year in one go.
    On the plus side, you can save as TXF that Turbotax can easily consume. 

  140. ISRG  —- the only thing that would worry me is "Fourth quarter 2008 da Vinci Surgical Systems revenue increased approximately 5% to $114 million from $108 million during the fourth quarter of 2007."
    that’s downright anaemic growth for their key product.

  141. Indeed, ISRG now back at $101.

  142. Can you believe that theiving son of a bitch Cramer is now recommending Galbraith’s "The Great Crash of 1929" that I mentioned at 1:05?  I am so sick of his show trolling this site for material – at least once it would be nice to get credited…  And, no, it’s not a coincidence, he does this kind of stuff all the time on things I talk about!

  143. ISRG – Well $101 is a 7% gain so fine by me but even if it opens at $95, you can buy/write it down to $80 so I’m pretty happy with that entry.  Don’t forget credit was tight for the quarter so hospitals could have put off reorders or supplies to shove them into Q1.  The FACT is that procedures are up 60% and the machine count went from 792  to 1,127 and that means that that 335 of the machines (30%) only had 6 months worth of use on average so there’s an immediate 15% bump next year in total procedures – other things being equal. 
    But other things will not be equal – all this bad economy stuff has moved health care to the back burner as it’s "only" going to cost $100Bn a year and will create jobs as we put another 42M people on health care.  That’s a better than 10% bump in the population that will be able to get da Vinci procedures and there will be more pressure on crowded hospitals to buy machines which shorten surgical stays and free up space more quickly.  These are not things that the company can project because they are speculative and it’s our job to spot trends like this ahead of the curve.
    Cramer is patting himself on the back for figuring out the trend that Dollar stores will do well in a recession.  I’ll give Cramer a freebie for next week and tell him that check cashing services will also do well – Duh!
    Anyway, so ISRG has consistantly had good growth and the machines that are being used show increased utilization over time but the guidance is conservative because it is just as hard for a hospital to buy a $1.5M robot (plus training, insurance, etc) as it is for a consumer to finance a new car so it’s not surprising a big ticket item like this is going to hit a bump in the road.  Break-even for a hospital is about 80 cases a year taking into account the cost of the machine, the $120,000 service contract and supplies so, to be profitable, the machine has to be in use more than once a week and that keeps them out of small hospitals but 30 systems out of 85 were sold internationally this Q and that is a huge improvement and there are roughly 1,000 US hospitals big enough to have 3 machines each at 100 procedures per machine or more so they are nowhere near saturation, even in the US.
    If you only buy stocks after they report strong quarters – you will never get a discount…

  144. Phil, I don’t have ISRG.  So, the way to play it at the open for an $80 entry is try to sell naked a Feb $95 put for $15?  Do you recommend another way?

  145. Phil, its kind of interesting..their story really hasn’t changed (ISRG).  Investors loved them at 300$, 200$ and now…..unitl they get competition (a competing robotic system), these guys will print money.   These guys have established themselves with hospitals, nurses, and most of all physicians.  Even if you make a superior machine, the barriers to entry are enormous especially the implicit ones.  I’m sure it will happen, but not now.  Two sourcees of growth that are grossly underestimated:  1. the international growth story  2. new procedures such as hysterectomies.  People also understimate the delayed effect of new surgical residents.  All of these newbies are being trained on these machines and will push hospitals to get the machines.  In addition, new physician groups will hire these docs for marketing purposes.   So every year, a new group of users will get released every july.  I will be establishing a new postion this week. 

  146. C – $5.92 was not panic low.  C traded in the $3′s.

  147. Oil & Burlap sacks ?  Now if you light them on fire for the cameras, now that would be some scene !

  148. Phil, the antidote to your Cramer problem is to reference a non-existent or otherwise idiotic book in a prominent fashion; and when he steals it and uses it, you have completely busted him.

  149. Phil,
    I need some advice on rolling a vertical position. I have 7-Jan 17.5 puts ($4.74 basis) against 7-Jan 12.5 puts ($1.13 basis). I am willing to put more (Margin) money into this position to roll down and out in time to try and salvage this loss.

  150.  Yeah Cap.  Phil should use some sort of super slick watermarking on his comments.  Like maybe reference the correct title, but use the author’s name spelled backwards, or stick in a non-existant middle initial.

  151. i wonder why you all watch CNBC, it has become another format such as entertainment tonight.. When are we going to rain in these commentaries and say bullshit.  Is this news or entertainment tonight.  I am tiried of their personal commentary, again i will turn to bloomberg.

  152. Good morning!

    FRO alone says 70M barrels are stored in tankers!

    ISRG:  "The company’s preliminary figure for full-year sales, $875 million, marked a 46 percent increase over 2007 but again fell short of analysts’ forecast of $898.1 million.  Intuitive said revenue would grow about 15 percent this year, which would be about $1.01 billion.  Chairman and CEO Lonnie Smith said systems sales reflected the global recession and tight financial markets. He said it was difficult to forecasting sales of systems into 2009.  Analysts were looking for $1.11 billion in 2009. The company expects higher sales of instruments, accessories and services this year but flat sales of systems."  So they are guiding down 10% but this is firm, conservative guidance, not speculation and ISRG is already down 50% from last Q, when earnings were expected to be $7.14 for 2009, now $6.45 so $120 is 14.7 times current earnings at $95 and if we assume the same crappy 15% growth for 2010, we’re looking at a 12.8 forward p/e.

    Of course, keep in mind that ISRG has a shaver model, where they make little money on the machines but massive margins on the disposables so they could have flat sales numbers but if $300M of sales next year (total sales this year were $875M) are disposables and not machines, the company could make much MORE money than those estimates, which analysts are arriving at by simply adjusting down with the company’s statement on revenues (they haven’t guided profits).

    Our man Cramer gave this a SELLSELLSELL yesterday so there should be a good chance to buy in today but best to scale as it could go ridiculously lower if people panic out on the headline numbers.  This company has a PEG of 0.71, no debt and $400M in cash and makes about $50M a quarter on $200M in sales.  They are only carrying $32M in inventory as clients have to wait for machines and parts and accessories go out at a predcitable pace.  This stock is exactly the kind of stock you do want to own in a rough economy!

    Jordan – Absolutely selling puts into the dip is the best way to enter (or not enter as it will be very surprising if it’s put to you in 6 weeks).  I’d say whatever put gets you $10 is the way to go but it also will probably be fun to sell the Jan whatever we stop ats, since they can be rolled to much lower Febs as well.  As for long-term, ISRG does not pay a dividend and doesn’t have long strikes below $110 so it will be interesting to see what the 2011 $110s come down to (were $44 yesterday).  July calls go to $25 so possibly getting the $80s for $30 will be the way to go, basically, whatever strike has $7 or less in premium as we can sell Feb $100s for more than $10 against them most likely.

    C/Cap – Oh yeah, I forgot about those 2 days.

    Cramer/Cap – Well clearly he or one of his minions is a subscriber as the stuff he uses comes right out of comments so I don’t think it’s going to work if we hatch a plot in comments to expose him.  It’s not a big deal but it ticks me off that he goes around telling people I’m not in his league (haven’t seen him go 38-0 on a show lately) but then steals my stuff without credit.  I’ve tried being nice to him recently as I’ve been working with Najarian, who’s a CNBC guy and I didn’t want to make things awkward but he’s really starting to piss me off again.

    Calch – I give up, what stock?

    Middle initial/Chen – That might work but he’s on TV, not print and I’m sure he has fact checkers to keep him from compounding his bad calls with bad facts.  He actually had the book in his hands on the show - GET ME INTERNS!

    CNBC/Lindsay – We watch because it moves the markets.  One of the reasons you should never give your money to a Wall Street firm is because, when you walk in there, every single TV they own is on CNBC – they are sheep.  The floor of the exchange has a huge CNBC TV on with closed captions.   Every dumb-ass local broker watches CNBC too and we could have news for a week but it doesn’t move the stock until these bozos decide how to spin it.  So, if you want to know what’s actually going on – watch Bloomberg in read IBD and FT but if you want to make money on the news, watch CNBC and read the WSJ.  Sad but true.  I read serious stuff on the weekend but during the week I’m immersed in this fluff.  On Saturday morning I read the NYTimes cover to cover to detox (when you subscribe you get most of Sunday’s paper a day early).

  153. Good Morning Phil and all

  154. Asia Markets :    Thursday, January 08, 2009
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                         8876.42    -362.82    -3.93%
    Hang Seng*                             14415.91    -571.55    -3.81%
    China: DJ Shanghai*                 206.50         -4.87    -2.30%
    Seoul Composite*                   1205.70       -22.47    -1.83%
    Bombay Sensex **                   9586.88    -749.05    -7.25%
    Baltic Dry Index                           789.00        14.00      1.74%

    ** Market Closed for holiday, data from yesterday’s close
    *at Close

  155. Asian Stocks Drop as Economic Fears Return

    (Indian markets are closed for a holiday, will resume trading Friday)

    Asian stocks dropped sharply Thursday, with a recent rebound in investor willingness to take risks jeopardized by dire U.S. private employment data and fears about corporate earnings.

    Japan’s Nikkei slid 3.9 percent, snapping a seven-day rally, after grim U.S. jobs data and that Intel revenue warning fanned fears the recession was deepening, hitting chip stocks and other exporters.

    Seoul shares closed 1.8 percent lower, ending five consecutive sessions of gains as technology issues retreated on earnings worries, but shipbuilders rose on expectations for large overseas orders.

    Australian shares fell 2.3 percent as renewed worries over the outlook for commodities amid a global downturn sparked a sell-off in resource stocks.

    Hong Kong shares tumbled 3.8 percent with Chinese banks tanking for a second day in a row after equity selldowns in two major banks in the first week of 2009 put nervous investors on the backfoot.

    Singapore’s Straits Times Index was down 2.8 percent with DBS Group leading the declines with a 5 percent fall.

    Chinese stocks fell, led by banks after two high-profile sales of Chinese bank shares in Hong Kong sparked fears of more such selling.

  156. Miners Lead Euro Shares Down

    European shares were down in early trade on Thursday, with heavyweight mining stocks taking most points off the index, after a record drop in German exports and weak U.S. jobless data rekindled economic worries.

    The FTSEurofirst 300 index of top European shares was down 0.6 percent at 872.27 points, having ended a six-day winning streak on Wednesday by dropping 1.3 percent. The index lost 45 percent in 2008.

    The DJ Stoxx basic resources index was the top sectoral loser, down just over 2 percent.

    The bleak economic outlook hit shares in raw material producers such as steelmaker ArcelorMittal and mining groups Rio Tinto and Anglo American, all of which fell around 3 percent.

    German exports posted a record fall in November as demand for cars and others mainstays of the manufacturing economy plummeted, deepening worries about the country’s already bleak 2009 outlook.

    Shares in J. Sainsbury, Britain’s third-biggest supermarket group, were down 1.5 percent, after the company posted third-quarter underlying sales at the top end of forecasts but said economic conditions were set to remain "particularly challenging" in 2009.

    The market’s focus later on Thursday will be on the Bank of England (BoE), which is expected to cut interest rates by 50 basis points to 1.50 percent. Its decision is due at 12 pm London time.

    Royal Bank of Scotland gained 3.5 percent after a newspaper report saying the bank is mulling a sale of its 4.3 percent stake in Bank of China as part of a widespread review of its international assets.

    German chipmaker Infineon dropped 5 percent after iSuppli said global sales of dynamic random access memory (DRAM) chips are expected to fall 4 percent in 2009, extending their decline for the third straight year amid a prolonged industry downturn and chronic oversupply.

    Across Europe, the FTSE 100 index, Germany’s DAX and France’s CAC 40 were down between 0.2 and 0.8 percent.

  157. Oil Rises Toward $43 after Record Overnight Fall

    Oil traded higher on Thursday, reaching $43 after diving 12 percent overnight, partly due to higher than expected U.S. crude stockpiles data that hardened evidence of weakening demand.

    U.S. crude [ 43.06    0.43  (+1.01%)] for February delivery was up, after sinking 12.3 percent to $42.63 overnight, its biggest one-day percentage loss since Sept. 24, 2001.

    London Brent crude [49.58    0.91  (+1.87%)] rose.

    U.S. Energy Information Administration (EIA) data showed crude stockpiles up 6.7 million barrels, more than seven times the 900,000-barrel increase analysts expected.

    Prices had gained some support from violence in Gaza, widening natural gas supply disruptions due to a row between Russia and Ukraine, and mounting evidence of OPEC’s compliance with production cuts.

    Three rockets fired from Lebanon struck northern Israel on Thursday, slightly wounding two people and prompting the Jewish state to respond with artillery fire, officials said. It was not immediately clear who fired the rockets.

    Russia and Ukraine will argue their case to Europe on Thursday in a gas price dispute that is choking off gas flows to European countries.

    The dispute has cut heating to tens of thousands of households in Bulgaria and hit supplies as far west as France and Germany as Europe faces freezing temperatures.

  158. Dollar, Yen Rise as Stocks, High-Yielders Slip

    The dollar and yen rose broadly on Thursday as falling share prices sapped demand for risky investments, while the euro fell as dismal German economic data kept concerns intact about the deteriorating euro zone economy.
    The dollar gained versus higher-yielding currencies as ongoing worries about the global economy stung oil prices and pushed commodity currencies like the Australian and New Zealand dollars lower.
    This helped the U.S. currency recover some losses suffered in the previous session due to a disastrous reading of U.S. employment, but the dollar fell against the yen, which benefited from risk aversion as European shares fell 0.8 percent in early trade.

    Sterling slipped against the dollar ahead of a rate announcement by the Bank of England due at 12 pm London time.

    The euro [ 1.3573    -0.007  (-0.51%)    ] had fallen to a session low against the dollar of $1.3536 according to Reuters data, edging towards a three-week low around $1.33 hit earlier in the week.

    Selling in the euro picked up following figures showing an unprecedented 10.6 percent month-on-month fall in German exports in November as global demand for cars and other manufactured products have plummeted due to a global recession.

    The data comes ahead of a raft of regional figures due later in the day, including economic growth, unemployment and business and consumer sentiment, as well as German industrial orders.

    The dollar rose half a percent against a currency basket to 82.550, and rallied roughly 2 percent against the Australian dollar [ 0.7019    -0.0106  (-1.49%)   ] .

    The Aussie sold off after a hefty fall in Australian building and trade data reinforced the case for more rate cuts in the country.

    Commodity currencies have also come under selling pressure due to falling oil prices, which have taken a hit on the view that a slowing global economy will decrease demand for oil.

    This helped to push the New Zealand dollar [  0.5869    -0.0044  (-0.74%)    ] down 1 percent against the greenback.

    Despite its gains against most currencies, the dollar [  91.61    -1.03  (-1.11%)   ] fell nearly 1 percent against the yen to a session low of 91.57 yen, according to Reuters data.

    ADP jobs report has decreased demand for risky investments, prompting investors to continue unwinding risky yen carry trades, which involved using the low-yielding yen to pick up assets in higher-yielding ones.

    High risk aversion was also reflected the bond market, which rallied despite damp demand for new issuance around the world, and pushed the two-year euro zone government bond yield to its lowest since the early 1970s, according to market participants.

  159. Gold steadies as oil stabilises; U.S. data eyed

    Gold steadied above $840 an ounce in Europe on Wednesday as oil prices stabilised after a 12 percent slide, and traders awaited key U.S. non-farm payrolls data due on Friday for fresh impetus.

    Gold was quoted at $841.45/843.45 at 1020 GMT, against $842.20 an ounce in New York late on Wednesday. U.S. gold futures for February delivery GCG9 on the COMEX division of the New York Mercantile Exchange were up 80 cents at $842.50.

    Platinum edged up to $985/990 an ounce from $972.50 in New York late on Wednesday. The metal has held firm this week despite gold’s fall and a spate of bad news from carmakers, the main buyers of platinum.

    Among other precious metals, silver was at $10.98/11.06 against $11.01, while palladium eased to $193.50/198.50 an ounce from $195.