10.5 C
New York
Sunday, January 29, 2023

Subscribe

Thursday Thump – Brother Can You Spare 20 Trillion Dimes?

I hope it's going to be a Thursday thump

At least when you hear the "thump" you know you've hit something!  The market encountered virtually no resistance on the way down back to our mid-points and we could not be more thrilled as we went bearish at the top and we've been lining up our buys all week, expecting to hold 8,650 here but frankly happy to see us go back to 8,200 since we are a little bearish and looking for bargains

We're selling our short plays like SKF and FXP (a cover if you are in yesterday's spread leg) into the initial excitement this morning as we've had great runs and we're either going to be shifting long if we hold Dow 8,650, S&P 888, Nas 1,550, NYSE 5,750 and Russell 490 (the latter 2 being well above the 50 dmas as I look for leadership there).  I called a drop back to our midpoints in yesterday's member chat, 7 minutes after the market opened and it does not look like we will be disappointed this morning with some poor retail results, even from WMT, who shocked people with a profit warning.  We already grabbed ISRG on the dip and I urge members to check out the plays laid out in last night's comments as this is a great opportunity to get in cheap!

This is going to be fun because the crappy American economy will send investors scurrying back to our crappy American currency so we can expect the dollar to pop and that will put more pressure on oil with already (ROFL) dropped 12.5% yesterday – something I mentioned may happen in the morning post.  We'll see how oil handles $40 but, as I keep saying, we're going to have a very hard time sustaining any sort of rally until we get real capitulation in the energy sector (off 5% yesterday) and investors stop putting money back into it and rotate into other things. 

We saw the same thing happen with the builders as it took an agonizing amount of time for the sheeple to stop trying to call a bottom and move on but those same sheeple are now into energy stocks and looking for the next bubble to blow their money on.  Sadly, we have had no clear leadership for them to jump on top of and we have a parade of pundits on CNBC telling people how the smart money is parking oil in tankers and other ridiculous things to keep people invested while the big money dumps out (see "The Roach Motel Theory for Oil").

I read an article yesterday where FRO alone has 70M barrels worth of tankers rented out for storage so who knows how much oil is parked out there in addition to the 4Bn barrels of global storage (SPRs plus commercial) that we're already counting.  Yesterday's 11.8M barrel BUILD in inventories and we sent 9.7M barrels of product OUT of the country last week.  Imports surged by 1.6Mb per day as at least some of those tankers full of oil took the money and ran as oil ran up from $35 to $50 in the past two weeks.  That inventory report only covered through 1/2 so who knows how many more barrels were dumped this week – we'll find out next Wednesday but another massive build in product will be catastrophic for those poor tanker speculators…

I said yesterday, at only half a joke, that we needed to keep up our 30% monthly gain from December's picks into the rest of 2009 to keep up with inflation but, looking at the Deficit figures for 2009, maybe that's right in line!  Between the stimulus, the tax cuts, the war and existing unfunded TARP money – we are crossing the $2Tn mark for 2009 projected debt and that DOES NOT take into account the fact that tax revenues may be down considerably.  That means the US needs to auction off $150Bn a month in notes and MUST find buyers.  The auctions work by adding interest to the notes until the sale is filled and $150Bn a month is 3 TIMES more than we normally auction off in a mere $600Bn average Bush deficit.  THIS COULD BE A PROBLEM PEOPLE!  Have I mentioned I like gold lately?

Still, stocks are commodities too – there are only a limited amount of shares of ownerships in these little money making machines (well, the few that do make money) to go around and that means inflation will inflate stocks too, as well as the meager earnings they do manage to scratch out.  We have our list of 38 key positions we like and we have our daily gambles but let's not be idiots and think that tucking our money away in 10-year notes at 2% is "safe."  A few years of 9% inflation can chop those notes in half on you and by the time you cash you $100,000 note you may be lucky to be able to get a Prius with it.  Money MUST be put to work in this market.  Germany and Japan are already having trouble raising cash so it is not just us with our hands out for whatever change the global market can spare. 

Asia is a mess with the Shanghai falling 2.3% and they were the stars of the day.  The Hang Seng dropped 3.8% and the Nikkei gave up 3.9% (Bombay, who fell 7.25% yesterday, wisely took a holiday today).  European markets are off another 1.5% this morning but the global Dow is still hanging tough at 1,555 and we can maintain hope as long as they can maintain 1,500 so we'll be watching that closely in our next Big Chart Review.  As expected, the BOE cut rates to 1.5%, the lowest level since the bank was founded in 1694 so when we say these are once in a lifetime rates – we are NOT kidding!  The ECB meets next week and has rates on the continent at 2.5%, already down from October's 4.25% but the markets still want MORE (or less as the case may be).

So the world banks will be lending money at 0% and borrowing money at 2%, then 3%, 4%, 6%, 8%, 10%, 14%, 18%… at which point I think we'll flip our position but, for now, we are firmly bullish on interest rates over the long term.  We'll hear from Obama at 11 and we're hoping his speech on the economy firms up a floor at our mid-point so we can at least move back to a 5% test of the upside.

Jobless claims for last week were way better than expected at 467,000 (540K expected) so that's good news and we get a report on Consumer Credit at 2pm, which almost certainly grew in November by about $2Bn vs a $3.5Bn decline in October as holiday shopping trumped recession.  Earnings are off to a rotten start with big misses by GAP, HELE and TXI this morning but BBBY, BLUD and RT were good last night so we have to give it some time before we draw conclusions.  Volume is still very low, hopefully today we'll have some decent action and, of course, next week earnings season starts in earnest so it's going to be a wild ride.

As long as every man, woman and child on earth can scrape together 3,333 dimes for the US collection plate – everything will be fine!

164 COMMENTS

Subscribe
Notify of
164 Comments
Inline Feedbacks
View all comments

 Phil/GLD-
You suggested the Jan2010 $80s on 12/5 😉
 
I took out my $79 callers yesterday for a profit. 
 
I’m readjusting the position now.
Thanks guys

Phil: with 8 days to OPEX, I am looking at callers/putters of the hedged positions, the ones which need to make more $ to get back into the GREEN,
the question is: is it time to roll to FEB calls and puts?, some shorts are ITM, some have some premium left,
1) GE, have jan 17.5 callers and putters, roll to feb 17.5 call and feb 16 put ? assignment potential
2) JPM, have jan 30 caller and putters, roll to feb 30 call and feb 27 put ?? assignment potential
3) BTU, have jan 25 caller and putter, roll to feb 25 call and feb 25 put ??

Eph & TX – Ref GLD tactics. Theta for Jan’10 and Jan’11 are similar, so rolling to Jan’11 gives you perception of additional time to collect premium. I mean perception b/c probably this roll will not disappear. Phil’s suggestion to roll down yourself provides you delta advantage, so in the event of dip you don’t have to sell on margin. I would roll myself down, but very frequently I am dead wrong.

RMM/ITM callers    For callers deep ITM you can look at the daily decay rates of your current position vs what you’d roll to.   I had to make two trades today.   I had 2 VLO Jan 20 callers.  With the stock at $24.15 and the callers at $4.30 they had .15 in premium or less than .02 day.   I spent $170 (.83 per contract) to move them to the Feb 22s at $3.73.  Those callers have .04/day in premium so I doubled their decay rate and still am protected by being ITM.   The other trade was WFMI.  I had had Jan 9 callers, since I was only 1/2 covered to begin with, I did a 2X roll to the Feb 11s for a slight credit.  More importantly their premium went from < .01/day to >.03/day.

Eph & TX – Ref GLD tactics. Theta for Jan’10 and Jan’11 are similar, so rolling to Jan’11 gives you perception of additional time to collect premium. I mean perception b/c probably this roll will not disappear.
 
Most excellent observation, Bronek!  
Assuming I want to keep the trade on, is there a general rule when I should roll out my LEAPs?   Should I roll it with 6 months to go so it still has some good premiums, or wait until expiration so I have a better idea of what the underlying will do.   Anyone?  Anyone?  Bueller?

ephmen85: good comment , txs, where do you see these decay rates or you just calculate by takiing the premium and divide by the days left ?

About AAPL:
xkcd.com/527/
🙂

RMM
The decay rate is the Theta value.

About AAPL:
xkcd.com/527/
 
🙂

That’s why we like index covers – you can cover and uncover many positions at once rather than having to quickly try to put in a dozen trades on a big market move.
DXD/DIA   I’ve had DXDs for protection for a while and have made good money with the spreads, but my current callers expire, I’m going to cash out my long call and move the proceeds into DIA puts.   With $1 spreads and much greater volume DIAs are much simpler to manage.  

Phl,
I know that you have been talking about gold alot lately? If I want to start a position to be positioned for a disaster, Which one would you go after as of now?

phil, any thoughts on BIDU?

 ephmen,  
Just curious, What trading level does one need to get those comission rates with TOS?  Who do you talk to at TOS?  Tnx.

Here comes GOOG 320 lets see if the S&P can take back 910

Phil: CHK hedged stock;
want to roll jan 15 caller/putter to feb 17.5, makes sense to you ??

Phil – Ref GLD. Eventually you might be right. Now, b/c of the low oil price and lousy economy some governments (Russia and others) are forced to dump Au to the market. For a time being I am selling naked puts and collecting cash for buying outright GLD later when oil price start rising. So far (3 mths) it seems to be working.

Sooner or later Governments will need to sell some of their gold reserves, that will put downward pressure on gold.

regarding inflation:  is TIP a good play if looking at something beside gold (GLD)?

Phil:
SNWRA hedged stock: great position, bought stock at 20.7$,
jan 35 caller is deep ITM but has 89 cents premium left to burn,
jan 30 putter has 30 cents premium left to expire,
now, i am exploring this now as the stock is way up to over 40$,
LOOKS to me, after burning more premium, plan to roll to feb 35 for over 11$, what do you think ?

Phil: standing pat on CHK means what: doing nothing, I have closed the put.

TOS/TC   I’m not sure what kind of trading levels they require, but they are very flexible.   Their basic policy is to match any other company (except IB I believe) and then they do better than that for active traders.  They can can also tailor your commission schedule to the kind of trading you do.   For example I do a lot of 1, 2 lot option trades so a low per contract fee if very important.   I think I went from 2.95 –> 1.50 –> 1.25 –>1.00.   If your normal option trade is 20 lots, you might not mind paying a ticket fee + commission.  So maybe you can to negotiate something like $10 + .80/contract or something like that.   Scott Sheridan makes all those decisions. Email him at  Scott@thinkorswim.com   Just don’t use my name because I’m trading less since my account is smaller and I don’t want to lose my commissions.  🙂

Good call by me on FSLR, no ?
 
Just an intraday chart read; shorting the Obama pump job w/ a few hundred shares.
 
Out now.

Phil – FSLR is a total joke.  Recognize it for what it is as a trading vehicle; definitely scalpable.

TOS/SWIM – Oh well, I have account with both and told TDAmeritrade to improve their trading platform and they didn’t.  Now it’s a smart move to buy TOS.  Well, less competition may not be good for us.  I hope TDA doesn’t buy OpXpress too.  If so, all my eggs would be in the TDA basket!

 cap, another great trading vehicle is uaua

Phil: PFE hedged stock, bought at 16.2$,
jan 16 callers and putters have very little premium left so tthey can be taken out and rolled to FEB 17.5, is tha ok ?

RMM – less risky; close your Feb 12.50 puts at a profit.  Sell the Jan … either 12.50 or 10’s that expire in 6 trading days.
Then, depending on what transpires, decide about Feb.  Too far away (5+ weeks) to carry those naked IMO.

DRYS could easily be $10 by end of next week.  Or 12.50.  Or 15.  or who knows ? 

ISRG; nice recovery.
 
Boy, I played this wrong.  Should have just bought shares sub 100 and held.
Instead, sold Jan 95 and 90 puts.  Will likely make a few bucks, but the stock trade would have been better.

Phil
You were dead right on your ISRG analysis.  Margins are slim on robots but make it up on supplies.  Much like the inkjet printer market.  What a come back to 112.

Cap & ISRG: Another unhappy winner!  🙂       I get that feeling all the time.

Any site similar to briefing that has european / asian / russian unemployment charts / national stats data

Phil;
VLO hedged stock, bought at 17.5$,
my jan 15 caller is very deep ITM, the putter is zero valus,
now, is a roll of the caller to jan still worth the 50 cents premium to burn or do a roll right away to feb 25 call and maybe feb 20 to 22 put ???

Phil,
USO keeps leaking. 🙂
Do you think we can get below $25 before expiration day?

With aks moving so well do you see a play with Obams stimus package

Market trying to break to upside

cap: your 1:48, what are you referring to ?

EMOtrader … USO …. I doubt it (and hope not).
 
I had sold Jan 25 and 23 puts on USO.  Just sold Feb 23’s also.  I’ll own USO down there baby !

Phil – ref rubble. There is a believe that Russia has highest Au reserves in the world, so rubble collapse can be controlled by their gov and may be allowed to provide them a way to a cheaper way to pay down their debts. They have less debt than we, oil price are projected to rise to >$70 before the end of ’09, so I am willing to take a chance that gold will not gap up anytime soon. But, you are right stating that you are limiting a risk of financial blow-up.

Phil: hedge stock WFT, bought at 17.49$ but now net a gain,
callers and putters could milk jan premium at strike 12.5 and then roll to feb 12.5 , ok ?

Phil: SNDK hedged stock bought at 18.18 but am only down by4 % now,
on caller side could milk jan 12.5 premium, but overall plan to roll to feb 12, OK ??

RMM – DRYS

DRYS definitely on Crack now.  Up something like 60% this week.

Stay Connected

159,327FansLike
407,366FollowersFollow
2,150SubscribersSubscribe

Latest Articles

164
0
Would love your thoughts, please comment.x
()
x