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Monday Market Maelstrom

A maelstrom is a powerful whilpool, once described by Edgar Allen Poe:

"Here the vast bed of the waters, seamed and scarred into a thousand conflicting channels, burst suddenly into phrensied convulsion – heaving, boiling, hissing – gyrating in gigantic and innumerable vortices, and all whirling and plunging on to the eastward with a rapidity which water never elsewhere assumes except in precipitous descents…  These streaks, at length, spreading out to a great distance, and entering into combination, took unto themselves the gyratory motion of the subsided vortices, and seemed to form the germ of another more vast…  The ordinary accounts of this vortex had by no means prepared me for what I saw…   It appeared to me, in fact, a self-evident thing, that the largest ship of the line in existence, coming within the influence of that deadly attraction, could resist it as little as a feather the hurricane, and must disappear bodily and at once." 

All in all, that's a pretty good description of the market action, especially in the financial sector where even the biggest "ships" are being pulled down to their doom.  It's the same action we first noted back on December 1st, with the Dow still at 8,800, when I said: "In our roller coaster market model, the absence of stimulus (usually in the form of government money) can only lead to gravity taking it’s toll.  As the picture on the right illustrates – is there enough money in the world to push our ships of state free of the relentless downward market spiral?"  I noted that (and see the original post for the image) we were still in the very early stages of a REAL bear market and sadly we have since continued right on that track.

I'm not here to make a bull case or bear case – see my most recent article on media manipulation and the markets starring my "friend, buddy-pal"Jim Cramer for my views on that.  Suffice to say we are deep in the throes of the maelstrom and one side of the ship sees nothing but oblivion while the other side of the ship sees calm seas to the horizon but Poe summed up the current situation very well saying:  "It may appear strange, but now, when we were in the very jaws of the gulf, I felt more composed than when we were only approaching it. Having made up my mind to hope no more, I got rid of a great deal of that terror which unmanned me at first. I suppose it was despair that strung my nerves."

In short – Abandon all hope, ye who enter!  It's a heck of an investing premise for the financials and I mentioned that in Friday's webcast regarding our SKF shorts – yes, the financials can go lower but we also do see clear skies on the horizon and the bears are betting on the rough seas lasting forever.  Even a storm needs energy, while a hurricane may destroy your home, the very act of hitting your home weakens the storm – that is why you cannot have an endless bear market, there is a certain point, even in this nightmare, where value is created, whether is is the $100 home you buy at a foreclosure sale that will make you $10,000 or the highly skilled computer programmer your company is able to hire for $50,000, even a depression creates opportunity – for those who can force themselves to take action that is…

The bears were out in force in the media this weekend.  As I mentioned in my prior post, we had Cramer, the Wall Street Journal, Bloomberg, Dick Shelby and John McCain all telling us we are DOOMED.  The financials are DOOMED, the Dow is DOOMED, the economy is DOOMED.  Even I told you last Monday that if we failed to retake 4,425 on the NYSE, 373 on the Russell, 1,340 on the Nasdaq we were DOOMED.  Well, today we'll see if 6.500 can hold on the Dow along with 670 on the S&P and we can only HOPE (never a good strategy) to get back to our broken-down levels.

Asia was hit very hard this morning and the Hang Seng ran straight to the 5% rule, giving up 577 points to settle 65% off the 2007 highs at 11,344.  The Shanghai fared little better, dropping 7 to 212 and the Nikkei "only" gave up a point to settle at 7,086 at 39% of their top.  Japan recorded its first current account deficit in 13 years (-$1.8Bn) in January due to plunging exports and a big decrease in its overseas financial earnings. "The result was shocking. I'm afraid that Japan's current account will likely be in the red ink for months ahead," said Toshihiro Nagahama, a senior economist at Dai-ichi Life Research Institute. "Because we can't expect that the U.S. economy will hit a trough in the near term, Japan's exports will very likely remain very weak," he said.  See – depression!  His outlook for Japan is based on his poor outlook for the US and now we will lower our outlook based on the poor outlook for Japan and so on and so on…

As I mentioned in Friday's Big Chart Review, the FTSE was our last holdout at the 50% off line and today they slipped right near it (3,377) on the morning dip to 3,450, 100 points off what was, for a moment, a good open – much like our Friday was.  HBC is hitting both Asian and European markets with a 24% drop as that bank is being sold of in bear raids as the bears are hoping they suffer the same fate as LYG, who may rise to 77% government ownership on this latest bailout.  There are a lot of people hoping something positive will come from the G20 meeting but it's not until April 2nd and I don't know if they have that long!

 We will be happy to get to our Friday upside targets any time this week at this point.  We tested them first thing Friday morning and failed miserably.  They were 6,765 Dow, 700 S&P, 1,350 Nasdaq, 4,400 NYSE and 360 on the Russell and they look pretty far away at the moment with the Dow showing a 60-point drop at the open as of 9 am.  We did get what would normally be considered good news as MRK pulls the $41Bn trigger on a merger with SGP, a considerable premium to that company's $17.63 close on Friday.  While the banks are not willing to finance deals, the companies themselves are getting creative although JPM is committing $8.5Bn in financing into the mix

Piper Jaffray must have been watching my show on Friday as they came out with an upgrade on AMZN this morning with a Buy reccommendation and a $81 price target on the $62.26 stock.  AMZN was the only stock I picked on Friday morning's dip…   We'll be keeping our eye on the Nasdaq in general, we're done with our QID puts and waiting for confirmation that it's time to take the QLD longs.  We're certainly not going to be excited about anything if we can't take back our levels but, as SGP shareholders can tell you – it does get to a point where some stocks just get too low to leave alone!


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  1. Phil:
    Outlook is bad for my March SKF puts.  Still wait for this slide to play out before rolling my 150s?

  2. Phil:  Regarding "Market Maelstrom".  Where is all the money going?  Everyone can’t be losing.  If trading is a zero sum game, then somebody HAS to be on the other side of the trade and making a fortune (i.e. looting the US Treasury)   Your thoughts?

  3. Phil: Good Morning:
    if outlook is for more decline, need downside protection: what is best to achieve this ?

  4. SKF/Bvar – We will look at it this morning but they have to break $270 to impress.

    Zero sum/JW – Oh, I forgot we were going to discuss that on the weekend.  Zero sum is a myth.  If I buy IBM at $20 in 1989 along with enought shareholders to own 90% and, over the next 20 years another 10% of the company is bought all the way to $150, I may THINK I have shares that are worth $150 each but good luck when we go to sell them.  That’s what’s happening to XOM now as I’ve been warning people for years that the number one buyer of XOM stock was XOM and that created a false demand for shares that didn’t exist on the open market and would quickly evaporate if oil fell.  There are no "winners" when people who thought they had a $150 stock find out they have a $50 stock.  Sure there may be 10% shorts who do well but it does nothing to offset the losses by the majority of shareholders.  That’s what I was saying to Tim on Friday about naked shorting – it’s the myth of the zero sum game that is supposed to excuse these actions along with the myth of the efficient marketplace – all BS in this day and age of electronic trading and media hype.  I have to stop now or I’ll get cranky!

  5. You almost start to feel like Rocky here – getting punched in the face and beaten to a pulp and yelling "Is that all you’ve got?  Come on – I’m still standing…"

    China says their SPR has been filled.  That is so not bullish for oil…

    Not so awful so far…

  6. U heard it here first….Drugmaker Merck buying Schering-Plough for $41.1B in cash and stock
    Good morning all!!

  7. Looks like somebody is buying today :-)

  8. Phil: I am testing the rules for caller/putter which go ITM:
    Caller SRS apr 90 is 25$ with 13 $ timevalue, which means onlky 1/2 in timevalue,
    now this can/should be rolled to jul 115 about even and then be OTM and have all timevalue , is that the actio to do ??

  9. Downside/RMM – I cannot get very enthusiastic about picking up more downside here as I do not agree with Cramer, the WSJ, Bloomberg or the Republican Party (no surprise on that last one) and I do think we are very close to a bottom where many companies, like SGP are priced at insanely low levels (see my C example this weekend).  The only reason they are not being snapped up in waves of M&A deals is there is no money left to make those deals with!  Usually a bottom is put in because stocks in one sector or another get cheap enough for strategic acquistions, buyouts (even management buyouts) or at least LBOs but the current situation doesn’t allow for that so even if your company was as ridiculously undervalued as YRCW – there’s nothing you can do about it because no banker will give you a penny.

    Remember, we will not be impressed by any run that doesn’t take out AND hold our levels: 6,765 Dow, 700 S&P, 1,350 Nasdaq, 4,400 NYSE and 360 on the Russell – pretty much Friday’s highs.

  10. hmmmmmmmmmmm

  11. Beautiful morning here in VA.  Hello!
    Looking at the volume so far on UYG and FAS… it would appear that this could be the turn around day we’ve been looking for.  It’s still a little early to call it.. but it could very well be a FMD on those two.

  12.  Phil,
    Zero sum is a real concept that needs to be reconciled.  If people sold at the market high and held in cash then that cash has to be in reserve somewhere.  Is the collapse due to written off bad debt or is there a huge reserve sitting somewhere? So, where is the money?  Show me the money?  Was the market inflated with Madoff Monopoly dollars?  Is the cash in gold or in "matresses"?   Help, us to understand where the money is.

  13. SRS/RMM – You sold the Apr $90 call?  Well, like SKF, you need to determine whether you think that’s a reasonable high or if you made a mistake.  Those calls can roll up about even to the July $125s so, as long as that roll stays about even, you don’t really care if it’s $25, $45 or $15 but make sure you are comfortable with your topside premise on SRS.

    Gotta love those SKF puts – you just gotta!  8-)  Keep in mind $330 was Friday’s low so watch that, as we get closer to expiration you can less and less afford to mess around although this could be the big one if we take off back through those 2.5% levels…

    COF is way cheap at $9, V is as good as it usually gets below $50., MA just under our $145 buy point.

    IYT has the most room to improve.  I like the Sept $35s at $7.75 naked for now.

    I think I like the IWM Aug $38s for $3 better than I liked the $RUT as an upside play.  IWM was $75 last Aug...

    Just a couple of suggestions for the upside, on the Downside I regretted not being 60% bearish on Friday and I will not make that mistake again so I will be quick to remove DIA put covers (1/2 covered now).  May $68 puts, now $5.62 make good downside additions, especially if they slip about .50 on the run up.

    We need to watch the SOX and the SPX, whcih are still positive and need to stay that way along with the Qs, but it’s the SPX that is most critical.  GOOG holding $300 is good, GS $75 is not good but may hold us up today.  XLF must hold $6 of course and that would be C over $1 and BAC over $3.50 and JPM $16.50, which will probably break first if we’re heading down.

    We are doing very well considering the carnage in Financials in Europe and Asia and don’t forget Europe is trading until 12:30 today (savings time) so the rhythms of the market may be all screwed up.  Obviously, we’ll be watching the FTSE and CAC very closely. 

  14. Phil, your thoughts on a resistance point in the very near future for FAS? 

  15. GOOG still not green?

  16. never mind!  How bout the next one?

  17. We need some follow through on volume here… but so far looks great.

  18. Zero Sum/Ticker – Long topic but Madoff money is the best way to put it.  Look how many people thought they were rich, acted like they were rich and are now broke from what – nothing!   The same goes for any type of trading.  When GOOG jumps 20% on a big day only 10% of the stock is traded for + $60 but 90% of the people make $60 on paper.  Even worse, 1/2 the people involved in the transactions were selling so it’s only a net differential of about 1% that causes 90% of the shareholders to "gain" $20Bn.  Nobody "lost" $20Bn – the reality of the zero sum game is these sums are BS and there is no $20Bn.  That’s why gains "evaporate" and people scream bloody murder and where did our money go – it never went anywhere, most if it was an accounting fantasy that did not hold up when you finally went to convert it into US dollars (worthless though they may be). 

    When I buy a house for $400K in a 100 home neighborhood and, over the next 3 years 20 of those homes resell for escalating prices up to $1M then me and 80 other people who did not sell their homes have homes that are "worth" $1M.  No one "lost" money on the homes, we just make paper gains.  We go to the bank and the bank gives us an equity loan of $500K on our $1M value, bringing our mortgage up to $900K with 10% "equity."  Still no losers yet.  I spend the money I borrowed on stocks or more homes and those inflate and banks make loans against those accounts as well using 10:1 leverage of money that they don’t have which is based on the rising asset value of my home.   Well, you know how this story ends – it’s not a zero sum game, it’s a game of hot potato where the last person to lend the money is well and truly screwed and the rest of the paper "values" simply evaporate as there was never any REAL demand to back them up in the first place.

    FAS/Matt – FAS doesn’t have a resistance point but XLF should run into minor resistance at $6.50 (and Tim made a good point on Friday that fund managers don’t wait for $6.50 exactly, they start selling at $6.45) and major resistance at $7, where it had 3 days of support on the way down.  If we breeze through that, things could get interesting.  Obviously, the 20% rule kicks in at $7.20 so between $7 and $7.20 is a likely consolidation point.

  19. Thanks Phil, exactly the info I was looking for.  Covered with SKF to see where we shake out.. but I’m inclinded to believe this is the turn around day.

  20. Matt, what makes you believe that we’re turning?  Every mini-rally in the past few weeks has been a quick head-fake following by more grinding down.

  21. Oh.. that sucks!

  22. DIA  You don’t see this too often, all my positions, both puts and putters are up in price.

  23. Mr. M.  the volume.  It’s increased significantly.

  24. Looking at the hourly chart on SKF is encouraging…  They bounced right off $230 again but it’s a fall from $262 so $36 x 20% bounce = $7 = $237 is the expected bounce and they broke over that so not good prospects short-term if they don’t get under it pretty quickly. 

    On the other side, XLF came off $5.90 to $6.45 and was harshly rejected before a 10% gain and is now testing a 50% retrace at $6.18, which must hold or we are DOOMED!  I think we hold it though but we MUST hold it.

    The problem is the buyers are weak to say the least, mainly doing what we are doing which is taking a few bullish pokes from a mainly bearish position just in case the market rallies.  Markets don’t get a good rally going based on money coming in from the "just in case" crowd.

  25. Well that was disapointing.  I was looking for shock and awe.  Just got shock.  I still feel an option expiration related blitzkrieg type turnaround is in the making.  Maybe tomorrow if we can take out some of the resistance levels today.

  26. STEM, GERN, CYTX are flying today.  Stem cell research companies.

  27. This may be the problem with financial reporting.  The CNBC woman said (her take from Buffett’s comments) that derivatives are like machine guns and can be dangerous if not regulated.  NO!  They are like machine guns in that no one should be allowed to use them at all!  This is the same problem with many after the fact regulations – we enter the issue with the presumption that people should have the right to do whatever stupid things they want as long as we regulate it.  At some point, the government is supposed to act in loco parentis and "Just say no."

    Wow, we didn’t reverse and drop 1% negative (so far), that is so exciting!

    YRCW up 10%.  HOV at .61, USO backed off the 5% rule, BAC up 13%, JPM having trouble at $16.50…

    AAPL, GOOG, BIDU being held down – that’s often a good sign as it means bears fighting hard to stop a rally.  Gold miners getting hit as gold ticks down about $15 to $925.  Dollar still floating around 90 (high) so a lot of people betting on a pullback may be getting nervous.   Hard for the dollar to pull back when Japan’s account deficit turns negative and China is spending stimulus money and the EU looks poised to fall apart.  That leaves Russia (ha!) or the Arab nations with their dwindling oil money and exploding infrastructure costs – Hmm, South America anyone?  Aftica?  I think that leaves Austalia and they are already socialist (Rupert left over taxes) and have few people to lose jobs and lots of natrual resources – we should look into that currency!

    Stem’s/Steve – Isn’t it amazing that we discussed that a week ago and the masses don’t figure it out until Obama holds the actual signing ceremony on TV?

  28. Phil:   I noticed you refer to 5% rule on oil and other "percentage rules" regarding misc indexes & equities.  Please explain how you calculate (or estimate) these "percentage rules" and the logic behind them.  Thanks.

  29. Ticker – I was speaking with my financial advisor last week.  He mentioned that there is the equivilant of 40% of the entire market in cash on the sidelines waiting to get into the market.  That said – a slightly biased source….

  30. Phil,
    Am I crazy to want to roll my WFC Mar 12 Puts @ 2.90 to the WFC Apr 12 @ 9.86 ?

  31. Matt, are you back to buying SKF?  The rally is ebbing away…

  32. I don’t follow the shipping sector but I know many of you have exposure to DRYS.  i read an article over the weekend indicating that there is a huge number of new cargo & tanker ships that will be delivered shortly.  Obviously there is a large lag between an order & delivery – all were ordered during the commodity boom.  Once the ships are delivered it is expected to impact the sector.  Not sure if this is already priced in.  

  33. GO)OG below 300.   Bargain time on it.  Interesting ion the daily chart a slight head and shoulder pattern had developed and it broke below the neckline 4-5 days ago. 

  34. dalef13
    Most the shippers are at values of only 10-20% of their 52 week high, and some less than 5% of their 2 yr  high.    I would think that is priced in. Seems what is taking some down is breaking of loan requirements and customers breaking their contracts.  Baltic Index is up though.

  35. Phil,
    Something is wrong (unusual) with that WFC option. 

  36. GS did not hold $75, that by iteself is a bad sign. 

    SRS is at $100, we don’t want to see that break back over either. 

    Nice list of what David Einhorn is buying.

    5%/JW – Didn’t I just answer that on the weekend?  5% rule discussion was here last week:

    40%/Dalef – That’s the figure I’m hearing, about $11Tn on a $20Tn market - IF we ever do get going, it could be one mother of a rallly.

    WFC/Wes – If I could sell the $12 puts or calls for $9.86 I would, not sure what that is but Buffett just reiterated they are in solid shape and I doubt he’d lie, even though he’s a major owner.  In fact, Buffett said something very interesting – there are 4,700 banks in the US and all you ever hear about is the 12 big ones that are in trouble.  He exstimates 4,400 of these banks are fine, which is my logic on the RKH – although it’s not working out so far for me or Warren…

    Boy, it does take getting used to a 30-point move in the Dow moving the index half a point!

    DRYS/Dalef – It is pretty old news for the sector but that doesn’t mean it won’t happen.  If the economy doesn’t turn by the end of the year there is going to be a serious overcapacity issue.  Of course, now that China’s SPR is full they may have to start filling them all up with oil as there is literally no place left to put the spare production.

    FAZ (3x ultra short financials) has become all the day traders’ favorite stock lately.  If you think SKF trading is crazy you should look at FAZ, which already fell more than 20% from Friday’s close and is now about 1/2 recovered.  They are worth watching with bollinger bands if you are trading SKF as they can give you an early tell on breaks.

    GOOG may be looking for a test of $282 again.  I think I said last week that I think that’s one to keep at but the bottom bottom was way down at $250 in November so you have to have as strong a stomach to go long on GOOG as you do going short SKF!

    APOL coming off the floor. 

    CCJ very attractive at $14.35.  The world NEEDS uranium.  The reason uranium crashed in price is Russia has been decomissioning nukes and flooded the market with barely used fuel grades.  The Apr $12.50 puts and calls are $3.20 for a $11.15/11.83 entry or the $15s are more aggressive at $2.90 for a $11.45/13.23 entry.  In this case you are better off scaling in smaller on the more aggressive entry as the payoff is more than double if called away at $15 vs. $12.50.

    VLO up 5%.

    S&P still green.

  37. Mr. M.  I’m not buying SKF.  But that’s partly because I can’t babysit it today.  I’ve got work to do.  And, I’m biased to the upside to just let it ride.  Stops are of little use.  I have FAS at 2.7 with a stop at 2.61.

  38. Steve – that’s exactly what’s happening the shippers, breaching covenants doesn’t mean the company is worthless but it likely means the common equity is.

  39. Took my very first long position in god-knows-how-long, scaled in to KO on Friday selling calls/puts.
    You can’t beat the real thing :)

  40. Phil: can we tackle a few PUTTER positions: please comment,
    the rules I apply:

    keep stock if judged worth holding ? yes/no,
    if YES and if putter strike not too high, accept assignment
    if YES, roll out in time and lower strike if possible,

    Stocks and PUTTERS deep ITM:
    LDK mar 10, expensive to accept assignment, maybe better to roll out and down,
    JPM mar 26, expensive to accept assignment, maybe better to roll out and  down,
    SNDK mar 11, expensive to accept assignment, maybe better to roll out and down,
    CAT mar 30, maybe accept assignment, or roll out and down,
    JRCC mar 15, expensive to accept assignment, maybe better to roll out and down,
    and the only NAKED putter, FAS mar 7.5, expensive to accept assignment, maybe best just closing,
    appreciate your help. TXS

  41. This market still sucks.
    Looks like another pre obama mini rally.

  42. Cap, I’ve got some stuff on Obama from a recent op-ed piece in the Washington Post you should like.  They guy made some really good points.  I’ll share later when I get some time.

  43. My apologies Phil:  I overlooked your previous post on percentages.  As always, your comprehensive explainations are much appreciated.
    Best Regards,

  44. BA – Doing well today in spite of up-down market. I think last week’s 29s were a short-term bottom (when I added to what I had from 2008). I think it goes to mid-35s in the short term (when I plan to sell Calls against it)

  45. Phil,
    Bought the XOM Mar 65 Calls. XOM just hit strike. Better to hold a little longer or fold it?

  46. MCD had good comps today and no one cared….

    Ouch, $47 oil!  Same old stuff though, oil is up (mainly on production cuts), copper is back around $170 ($150 was the danger zone) and the overall CRB held that $200 mark and is now at $210 along with the BDI holding up – either things are just not as dire as advertised or there are a hell of a lot of idiots shipping and stockpiking commodities somewhere….

    AFL and whole insurance sector is way down but AFL is the one I would like to play (when they stop falling).  That is also dragging down the XLF and IYF as they have insurance components. 

    RMM list – LDK, you don’t need to DD the stock but you can roll the puts and calls to 2x the June $7.50s at $4 and buy stock to cover in small amounts (20%) for each .50 it gains until fully covered.  That’s like buying a full round at $6, which still lowers your basis overall but you would only be committing after you’ve made good progress on the putter.  JPM, I’d go with 1x the Apr $19 calls at $1.85 and 2x the Apr $18 puts at $3.62 and keep stops at $4.50 on 1/2.  SNDK, well they were $10 2 weeks ago and could be $10 again no reason not to go to 2x the July $8 puts at $2.05 and set a stop on 1/2 at $2.50 as worst case is you roll the caller down $3 for $1.80 out of pocket.  CAT, at 7% dividend, the assignment is attractive.  Next one pays in mid-April, .42 probably.  Weigh that against and almost even roll to Apr $23 – $27 puts and calls and you are still very flexible with CAT looking like it wants to run.  JRCC March $15 isn’t a problem as that rolls to the Apr $12.50 puts and calls for .70 if you want to be more bearish and you know how I feel about FAS – I’ll just keep buying it for whatever they’ll sell it for on the way down…  It’s an even roll to 2x July $4 puts at $2.50 and you can stop those out at $3 which means you sell for $4.80, collect $5 and stop $2.50 out with a .50 loss so net $2 out of pocket to roll callers down to the $4s from $7s worst case…  Actually worst case is FAS goes to 0 overnight…  8-)

    BA/M2 – One of my long-term favorites.

    XOM/Wes – Long way for them to go if we rally.  Remember, Rule #2 is "When in doubt, sell half." and that very much applies to taking profits off the table!

  47. Taking what’s given so far.  Sold FAS at 2.9.  Will wait and see what happens with the high for the day..

  48. Phil,
    Sold GCI 7.5 Putters. Stock is about at $2. Not much flexibilty is options going forward. While I don’t mind owning the stock I wondered if you had any suggestions for bettering the position by selling other options (similiar to AAV example last week)?

  49. See how JPM $16.50 was the critical flip!  Let’s keep an eye on them as well as GS.  GOOG will be a good signal the rally is building if they pop $300, RUT still needs to get green and, of course, AAPL $85…

    Keep an eye on SKFs second run at $230, if they don’t pop this floor and if XLF can’t break $6.50 we are probably looking at another fizzle and those of you who can day trade, may want to consider taking that SKF put money and running so we can repositiion on a bounce.  Especially on the $120 puts at this point, if you can get $2 (up almost 50%) then that’s just great so don’t let it slip away if this rally fizzles.

  50. Anton
    The shippers breaching covenants was a strong arm tactic they used to force the banks into restructuring.  the banks don’t want to go out and repo a tanker.  Maybe they could hire the Somali pirates to do that and turn it into a reality show.   And the customers defaulting on their contracts knowing that it would take 3-4 years or more in court to try to recover.

  51. Interesting little tid bit for after hours.  Enjoy!!  
    D.L. Hughley: Frank Schaeffer Author of Crazy for God on What’s Left of the GOP

  52. Phil,
    I have the same situation on 2 SLM Mar 10 Putters (which dropped like a rock on the new budget excluding subsidies to educational funding). I’m not sure they will bounce back since the government funding was critical to their operation. Suggestion are appreciated. I forgot to add above that I have 3 od the GCI putters.

  53. I’ll look for that Matt…

  54. Will your server spring forward tomorrow?  I keep thinking I’m an hour behind the discussion when I check in.

  55. Sold SKF, bought FAS at 2.79.  We’ll see what happens..

  56. GCI/Wes – Yeah, they got ugly!  Well, you owe $5.45 and you can buy stock for $2 and sell July $2.50 puts and calls for $1.50, which is net .50.  Since you are already in for $7.50 in margin if you use $1.50 to roll to 3x that position you would have a worst case of having the stock put to you at net $1.50 x 6x or a best case of owing the putter nothing and having $2.50 x 3 worth of stock.

    SLM/Wes – Well there’s one of those worst case scenarios when you sell puts. I’m not even sure that one is worth sticking with.  You could roll them to a broader put on the finaincials like 2x XLF June $8s at $2.36 or the RKH Aug $30 puts at $6.20, which haven’t dropped too far despite a 7% gain in RKH today.

    Server – Thanks Eph, I didn’t notice.  Probably I can fix it.

  57. I think that fixes the time and we skip an hour in comments.

  58. Phil, I really think HOV is dying.  I’ve now lost 69% of my ‘great’ entry.  Can you provide a link or layout again quickly what I have to do to get that HOV trade you were talking about?  It sounded like you were able to get options way in the future to buy for little or no money down.  I’d like to sell my shares and do that!  Hmm… sounds a little too good to be true!!

  59. Phil
    where we you comments on COP 

  60. Matt, the HOV trade you’re probably thinking of is buy the HOV JAN 2010 2.50 calls and sell the 5.00 calls, net cost .05.  I got into this one last week but it took four days to fill the order.

  61. Phil: those figures for the FAS case under 11:12 are not clear to me:
    sure, one wants to roll out and down, you say 2x jul 4 puts for 2.5$, stop at 3$ if they gain on you,
    what  do you keep buying ?? FAS stock ?
    I have no callers, just the naked putters,
    please explain ?

  62. I’m long TBT, anyone have an opinion on it’s direction for today?

  63. Phil, I’ve been looking over your 2011 spread ideas from the weekend, some great ideas there.  If it feels like commodities are bottoming, what do you think of a UYM AUG 15/19 call spread for .10.  This has the same ROI as some of your 2011 spreads with a much shorter timeline and only a double to get to max ROI.

  64. MrMocha – could you point me to where those spreads are mate? Thanks. 

  65. HOV/Matt – I think you mean the 2011 $2.50s at .20, selling the 2011 $5s for .15, also it looks like it may be possible to get the Jan 2.50s for .08 and sell the Jan $7.50s for .05 which is interesting but I’d rather have the extra year than mess around.  If you are down .80 it’s best not to be greedy and just try to invest enough where a $1.60 payoff gets you even so just 0.025 for each .58 current position. 

    COP/QC – I have no idea where my comments on COP are but they are very levered to nat gas and OPEC has no effect on Nat gas prices.  They are, of course, much more fairly vlaued than XOM but that just means XOM is still expensive, not that they are cheap.

    FAS/RMM – I’m saying it’s an even roll to 2x the July $4 puts at $2.50.  If it keeps going down, you stop out 1/2 at $3 and leave the other half to avoid having 2x put to you at $3 or whatever price.  Then you can deal with the roll on those later.

    TBT/Maxt – For today?  That’s pretty random.  Long-term you can be pretty sure rates will go up as 0.25% is very likely a solid floor on Fed rates and it doesn’t look like the US will be askinf for LESS money at any future auctions this decade.

    UYM/Mr M – Good idea!

  66. Oh no, Roubini coming on CNBC!

  67. Phil: for those deep ITM mar putter situations: what about selling calls or leave top open ?

  68. This is pathetic;  TRIN at 0.38 and this is the best the market can do ?
    Volume seems low right now.

  69. Ah, a Roubini sell off; maybe we rally when he is done …

  70. Phil; one by one:
    have no caller but mar 11 putter,
    action: sell 1x jul 10 call for 1.05$
    and roll mar 11 to 1x jul 8 put for 2.05, set stop at 20 % gain,
    comment please,

  71. So for over 6 months they have been saying to get rid of the toxic assets.  No one has figure out how to yet so why would government take over of the banks solve that when they have not been able to do it so far. We have had lots of proposed plans but no action.

  72. Mr. M/Phil, so using Phil’s suggestion of the ’11s, my net cost (excluding commisions) is .05.  And my max gain if HOV is over 5 is 2.5?  If HOV is below 2.5 then (.05).  Anything else is in between .05 and 2.5.  Is that the right way to look at it?

  73. Phil:

    one by one:
    JPM, no caller but mar 26 putter,
    action: sell 1x apr 18 call for 2.2$
    and roll mar 26 putter to 2x apr17 for 3.2$, set stop at 20 % gain, comment please.

  74. Cap – Volume is low for all the volatility but TRIN and VIX have just given up it seems…

    Whole market is just sickening but at least we’re holding Friday’s floor (so far).  We expected the 1% bounce down and SKF did just what I thought they’d do so I’m not feeling like it’s a misread.  Next month’s (April) $145 puts are now my favorites at $13.30, looking to roll up for $1 per $5.

    Good time to at least half cover DIA puts too.  1/2 $68 puts for $3.50 (my favorite selling price) can be rolled way down so I like those

    Still time for a move up into the close but only BAC and GE are really giving me hope (not a strategy!).

  75. VLO   Would you be selling some 17.5 callers here since we’re less than two weeks until expiration, or see if the stock runs a bit so we can get a decent amount for the 20s?

  76.  Phil I have 3 mar 320 Goog C.  We’re now in the deadly 2 weeks zone.  I bought them expecting a rally and still do, but do you think I should roll those out to aprils?

  77. Maybe the SNL ridicule of Geithner is the tipping point …
    Buffet sez:   Focus on the financial system Obama, forget the other stuff for now.
    SNL:  Ridicules Geithner, and by extension, Obama.
    Even pro Obama columnists are catching on.
    As Rick Santelli said, "President Obama are you listening ? ".

  78. Why does Biden need a chief economist ?  That’s ridiculous.

  79. Phil:
    one by one:
    JRCC, no caller but mar 15 putter,
    action: sell 1x apr 12.5 call for 0.9$
    and roll mar 15 putter to 1x apr10 for 1.4$, set stop at 20 % gain, comment please.


  80. Sunday’s lead story in the Washington Post was on the impending FHA crisis.  They have turned into the lender of last resort and only lender in the subrime/Alt A area.  There volume is up big in the last 2 years.  Problem is, they haven’t changed their underwriting standards since this fiasco broke loose!  They are guaranteeing loass on loans by lenders that are highly fraudulent and/or highly risky.  There is an apartment in Palm Beach, Fl that turned condo 3 years ago.  85% of the loans to buy there that were FHA backed were defaulted on after 1 or NONE payments!  That’s right.  Unscrupulous loan originators have been selling off the building to the government one condo at a time.  The people who supposedly bought the units never intended to live there.  The developer just wanted them sold and their handy dandy mortgage subsidiary was all too happy to help them out with that.  Now the government owns a large chunk of it.  The piece pointed out that some lenders who recognize the problem that it is have begun to impose their own stiffer requirements.  Because they are often on the hook for upto a year or so while the units are foreclosed on.  But once foreclosed, the lenders get their money from the gov’t.  So really, they are just trying to prevent themselves being out of pocket for a year.  You can bet if they gov’t gave them the money upfront for units that were in the foreclosure process they wouldn’t be imposing stiffer requirements. 
    The enforcement staff at FHA for going after these crooks was about 300 5 years ago.  But today there is no one dedicated to it.   They were reassigned because during the boom FHA’s business dropped off considerably and they figured they didn’t need the resources anymore.  CAN YOU BELIEVE THIS CONTINUES TO THIS DAY???????

  81. Matt, your assessment is correct re HOV but you should compare the 2010 and 2011 spreads, not much difference in cost or gain so why wait the extra year?

  82. Phil   Your email alerts have me confused as to their purpose. 
    It seems that you send out a few each morning then none  later on
    I am talking as a west coaster.  are you still  experimenting? if so

    are you  eventuality  going to give all your buy and sell alerts

    by enail?  Thanks

  83. RMM – If you want to re-go over the set I just spend 15 mins on before "one by one" it will have to wait until after hours.

    Toxics/Steve – It’s really a question of how toxic is toxic.  As Mauldin said in the weekend post, mark to market is causing a lot of the problem.  Roubini and the bears would like nothing more than to force an event – ANY event that causes a market mark that is low enough to impair some of the banks so they can jump up and down and scream that they are insolvent.  If the banks were allowed to carry the homes on their books for 5 years without it impairing their ability to conduct new buisiness and the housing market recovered – there would be hundreds of Billions of bear money lost.  That’s all this is about right now – who wins the bookkeeping war but the longer they delay a solution of any kind, the worse the situation gets and the lower the potential market mark becomes.

    HOV/Matt – That’s right, you can only lose the nickel below $2.50, your call expires worthless as does your caller.  Above, you get every penny above $2.50 but, at $5+, you owe the caller all the excess over $2.50.

    VLO/Eph – I like selling the $17.50 puts and/or buying the stock naked.  VLO is the top US refiner, it’s almost silly to bet against them long-term.  Short-term, of course, anything can happen!

    GOOG/Bigs – The idea of those calls was to roll down to stay near the money.  It costs just $6 to roll down to the $300s but you can also go to Apr $310s at $17.35 and sell the $300s for $10.75.  Those can already be rolled up to the Apr $330s about even and, if you look at the $290s, which are $6.50 in the money, they can be rolled to the Apr $320s for $3 so you can figure on a $30 up roll for $3 even if GOOG jumps up on you – that’s a pretty good spread.

    Cap – So the 8 years of making fun of Bush didn’t sink in but one sketch on Geithner is a sign that things must change?

    HOV/Mr M – It’s not waiting an extra year, it’s having an extra year to be right.  He can sell the spread anytime it goes well in the money.

    Ah, here we go again!

  84. Phil:
    one by one:
    CAT, no caller but mar 30 putter,
    action: sell 1x apr 27 call for 1.24$
    and roll mar 30 putter to 1x apr23 for 2$, set stop at 20 % gain,
    comment please.


  85. Alerts/Billman – I send out things I think are really important.  I don’t know if there are many people who want every bold comment I make to be an alert.  Generally, if the things I say in the morning pan out – there’s not much point in later alerts but today, for example, I sent out my last 2 comments on direction changes (12:24 and 1:42) as I considered them kind of important things. 

    Maybe if people want, we can figure out a way to just send all of my comments every hour as a batch and people can sign up for that too/instead of the basic alerts.

  86. George W. Obama?  From an op-ed on Sunday by Jackson Diehl.
    He states Obama is heading down the path Bush took.  That’s right.  Bush at the top of his game just after 9/11.  He was hugely popular here and around the world.  There was much good will toward him and the US.  It was a national emergency that he seemed eager to rise to the occasion of.  But he blew it.
    1)  Instead of asking a willling nation to sacrifice for the good of the country, he slashed taxes.  Especially on the rich.
    2)  Instead of working in a bipartisan fashion he rammed through Congress his conservative agenda uprooting rights for citizens and workers and extending the reach of the executive branch much further then it was intended by the founding fathers (IMHO).
    3)  And finally, he chose to fight a war of choice.  Shredding his support around the world and at home.
    As for Obama, he’s also taking office at a time of national emergency and with hugely popular ratings.  He talks of sacrifice but instead
    1)  he proposed giving 98% of the US a tax cut.  Only the top 2% will sacrifice.
    2) instead of taking a bipartisan approach in crafting bills, he casts those that oppose him and his stimulus package as simply ‘wanting to do nothing to end this crisis’.  They’ve attacked Rush Limbaugh, a blow hard on the radio, as the head of the Republican party.
    3) and finally, Obama is choosing to go to war as well.  What war you ask?  Health care.  It is a problem.  But it can wait.  Now is not the time.  He’s using the economic crisis as an excuse to push it through.  To him, it was necessary before the crisis.  And now, it’s still necessary to him.  In fact he goes as far to say as we can’t fix this crisis until we fix healthcare!  It will be a war.  And it will be his undoing.
    Both President’s have or are taking their eye off the ball.  The ball is the economy, STUPID!!!!

  87. Is there a way I can guarantee that I get both .2 for the call and .15 for the caller before either goes through?  I’d hate to be stuck with half a straddle or one that was more then a nickel.  Mr. M., I agree with Phil.  We definately could use another year to get out of the housing mess!

  88. Phil:
    Are you playing or following FAZ as you do SKF?  Any thoughts on FAZ April 55 puts for $10.5? You
    mentioned the SKF April $145 put and thought the FAZ suggestion could be a similar position. . . maybe or not??

  89. Phil: "and the housing market recovered" 
    Get a grip mate. Show me a single housing bubble, anywhere on earth, anytime in history that has "recovered" in five years. House prices are a function of wages and employment, they will – when inventory eventually normalises – resume being so, at levels far below today’s. You’ve been way off on your bank analysis, they’ve been and remain insolvent and it needs to be dealt with not kicked down the road by pretending the ugly marks don’t exist.

  90. Matt, you place the two trades as a single trade for a net debit of .05, then they both hit simultaneously.  In OXPS this is on the XSpreads page.

  91. Is this Ford / UAW agreement "rallyable"?.  I don’t trust anything in this market right now.

  92. Matt – I’ll tell you the same thing I tell Cap – If we want to read an op ed piece we will follow a link with a brief description but this is not the place for dragging either party through the mud.  I asked last week if there were 5 members who wanted a political post and I would put one up and NONE said they wanted it – that’s a pretty good indication that people don’t want to hear this crap, especially in the middle of a market day. 

    HOV/Matt – All you can do is put in for the vertical spread for a net .05 and just be patient to see if it fills.

    FAZ/Bvar – I don’t like FAZ, it’s TOO crazy and too much premium (SKF is ridiculous enough) and, if possible, has even worst bid/ask spreads than SKF.  FAZ is at $100, SKF is at $245 and a 10% move up in IYF sends FAS down $30 and SKF down $50 so my Apr $145 puts on SKF would be $50 out of the money while the FAZ Apr $55s would be $20 out of the money.  FAZ Apr $80 puts are worth $23 and SKF Apr $190 puts are $29.10 so a slightly better return on SKF…

    Housing/Anton – Well that would be the bear argument.  If I have 10 homes I lent $1M each to at 6% and 2 go into default and are sold at $400K each and the other 8 make their payments of $72,000 a year for 30 years then I’m collecting $576,000 a year on my $10M investment, paying me back $1.728M on $9.2M I had borrowed (less the 2 forclosed homes for $800K).  Is $576,000 a year back on $9.2M invested a poor return?  If I borrowed the $9.2M at 3%, my payments are $465,000 a year so I’m making over $100,000 a year on the deal.  Are you saying that because 2 of my homes out of eight were foreclosed I must be forced to sell the other 8 for a $4.8M loss even though I’m clearly making $100,000 a year by keeping them?  That’s the fallacy of your arguement – you are forcing a worst-case scenario on the banks where none is necessary.  If you force them to sell then yes, they are insolvent and the governemnt (US) are forced to bail them out while the scavengers who get to buy the homes at your fire sale price collect the same $576,000 a year in mortgages (at a 20% failure rate) for $3.2M so you want me to pay my tax dollars to destroy a bank and make some vulture capital firm amazingly rich - no thank you…

    F/Cap – I can’t believe this is a surprise but these investors are surprised when the sun goes down at night so who knows….

    Oh now Cramer says he saw SGP coming…

  93. Geeze!  I didn’t drag ‘either’ party through the mud.  I dragged them both!!  But I get your point.  Nuff said.

  94. Go WFC!  Held $10 on that dip and doing well.

    GOOG at 5% level ($293), big thing to hold.

    We must break out of this downward channel on the S&P!

  95. Of the 30 plus stem cell companies only 2 of them have options to trade, GERN and ALXN.  They also have volume too.  Half of them are under a dollar.

  96.  "the fallacy of your arguement – you are forcing a worst-case scenario on the banks where none is necessary"
    The fallacy of your argument is that you blindly pretend securitisation didn’t happen. If it didn’t then your Banking-101 example would be just dandy and I would have no problem with it whatsoever. But it did and you can’t undo it. The banks took the securitization and levereaged off the tremendous promisies it offered in a housing boom, the subsequent collapse revealed the (’til then ignored) huge downsides to mass securitization and it’s cousin: cross-collateralisation. Your example is, too all intents, irrelevant because it’s a scenario that simply doesn’t apply to the mega-banks and their mega-securitised mega-dumb mega-leveraged balance sheets.

  97. apologies for mass of spelling errors above, time is tight!

  98. Stem cells/Steve – I’d go with AMGN or GENZ, not the cell cos.   Those guys will be the most likely beneficiaries of advances in stem cell research long-term.  Obviously DNA was my favorite but, sadly, my favorites do tend to get bought…

    SKF bulls should be somewhat concerned about losing ground on a down 2% day in the markets.  Bears are workin’ it though, JPM getting hammered into the close, GS down at 2.5% rule.

    Securitization/Anton – The securitization is meant to be based on the performance of the loans.  If the loans are NOT performing at a loss on a cash-flow model then why do you have to force a write-down of assets?  It should not be the banks problem that speculators have bet on the value of their portfolios, their goal should simply be to earn a return on investment for their shareholders, which they are still able to do if they DO NOT rush out and dump their assets at fire-sale prices.  If you want to rope off the non-performers and force a rule on that then that’s fine but to lump in performing assets just because their valuations are currently impaired is ridiculous and the people who want it to happen are the same people who are chomping at the bit to buy up those assets as soon as they can fool enough people into buying into this BS model.

    Well the SPY is now working on the lower end of that channel! 

    Man, sadly utilities are doing just what I thought they’d do – this market just sucks!

    For some reason the energy sector took a very sudden dive, that’s killing us at the moment.

  99. Thanks for showing the chart.  It is easy to see and follow

  100. I don’t know why Buffett gave CNBC 3 hours of film to chop up at will, now they have a machine that can make him make any point they want…

    It’s going to take a pretty big stick to save this close!

  101. Phil, how can the utilities get any traction when the airways  are bombarded  with dirty coal commercials ?                                                                                                                      

  102. banks: securitization does makes the situation opaque. with bad assets and a one-world financial system, it’s the equivalent of the crap hitting the fan and ending up everywhere on the planet.
    there are two risks: (1) there is large-scale insolvency and the banks are incorrectly zombified through being propped up.
    (2) there isn’t large-scale insolvency, the banks are shot, and either the tax payer or the creditors have to pay for it. if the creditors are put on the hook, that can cause another large-scale panic in the bond market, and stress the solvency of insurance companies, etc.
    and it’s a chicken-and egg problem, because the longer the problem goes on, the worse the economy becomes, the more jobs are lost, the more mortgages go into foreclosure, the more good loans become bad loans
    in the 90s, we were telling the japanese to shoot the banks. some people say risk 1 is worse, because it’s long-term corrosive effects on the economy are more severe. you can wander in the wilderness forever. and least shooting the banks provides clarity, although painfully .
    i’m not personally arguing for either case. if there was an easy answer, it would’ve been done by now.

  103. Here is my 2c on the pharma industry:  I said it back in Sept or so, MRK would buy SGP FWIW.  Just took a bit longer than I thought – MRK and SGP have too many things co-branded.  BMY will be picked up here, and soon.  Not sure if it will be NVS or JNJ or SNY doing the buying.  Someone will pick them up.  AMGN will be bought by someone as well. JNJ is my bet here, which puts them out of the loop for BMY. JNJ and AMGN share rights for the anemia franchise (from what I remember), and Roche has the other half, which is tied up with DNA.  GILD/CELG/BMRN will aslo be bait.  AMLN most likely will be bought by LLY (Ichan is banking on it and did it last year with Imclone and LLY).   There it is.
    ARNA, AMAG, ARRY and others are smaller players that have attractive portfolios, but not sure where they will end up.  The Japanese Pharmas are sniffing around, but they usually do smaller companies (ie, ARRY).

  104.  You guys with great charting software can hopefully take a look and provide a more granular rule of thumb, but from my quick glance at the charts it looks like if you had bought DIA puts at 10am and sold them at the close you would have made money EVERY DAY out of the last 8.  The pessimists like Matt that observe such things must be making good cash in this market…

  105. Utilities/Potter – Actually my reason for shorting them was a combination of higher borrowing costs, bottomed input costs this Q, rising foreclosures (lost customers) and slower collections from remaining customers.  Regulation issues would be a bonus!   XLU already off 10% from our short.  ‘

    Banks/Chaps – I’m still in favor of bailing out the homeowners which eliminates the bad assets and only costs the governenment whatever it takes to support the payments (through either principal reduction or interest reduction).  If you can lower the payments on troubled mortages by 40% or so, you can eliminate 2/3 of the problem payers and then focus attention on the more hopeless cases.   The way we’re doing it now, we wait until each bank is bad enough that they need to be bailed out, then transfer the bad assets to another bank that comes under attack – kind of silly.

    Cool Pharm!  I’ll have to draw up an investment cycle for that!

    Speaking of charts – here’s SPY right on that bottom line…

    Oh great, doom and gloom is a hit – CNBC’s ratings are up.

    Sadly, I’m at a loss to figure out what good news will turn us around tomorrow but here comes a few last minute buyer (very last minute).

  106. Mr. M, what you’ve stumbled upon is the trend we’re in.  And it’s down.  Going with the trend is always a good thing!  My hesitation for doing so today was that I thought, based on fairly heavy and consistant volume early in the day that we might be reversing in the finance sector.  The volume fizzled and it’s been back and forth ever since.  But since banks are up on a down day.. it could still be the start of a reversal for the sector.  I’ll definately be looking for it the closer we get to oe.
    That being said, volume has been a great indicator today and I’ve done well with FAS and SKF.

  107.  Steve, and the rest of you guys that follow shippers, are any of you following FREE?  Have any opinion long term?  If they don’t cut their dividend (a giant IF), my Fidelty research screen shows the current dividend at .625 for a yield of 100%!

  108. QLD Apr $14s at $6.10

  109. Pharm – Thx. Your comments and suggestions, like always, they are valuable and appreciated. BTW thx for the confirmation of the DNA play. It worked for me.

  110. Interesting that you could have made money shorting the DOW at 10 today but you could have also done so shorting SRS at 10, and these two are not usually positively correlated.  Means what?

  111. Phil – Chart looks great.  Easy to open in new tab too, so I can blow it up!  Feel free to do more charts as needed. 
    As to your video Friday, I find it too distracting (even before Daleela-wow).  Hope you don’t do it regularly.  Now if you want to do a series of video lessons to access under "trading education", that would be useful.  Maybe do a weekend video explaining a trade of the week. 

  112.  Can anyone here explain the significance of the $TRIN and $TRIN/Q ?

  113. QLD – I like those because the $20s can still be sold for $1.10 so $1 from them or $1.50 from the $19s tomorrow if it heads down.  They have just .50 in premium so good upside and this is right where QLD bottomed in Nov ($19.72) so worth a shot I think…

  114. There’s one positive from today, we’re getting closer to the bottom….

  115. kustomz – I ‘ll remember that the next time my parachute fails.  Is the day over already?

  116. Bro – U R welcome.  T’is a trying time in the field, and whilst I cannot keep up with all companies, I do see and have seen my fair share of failed drugs.  Biotech will become thet spokes that feed into the Pharma engine.  There is no way the big boys can keep up their own research engines.  Biotech is eating their lunch, the question remains, how long?? 
    ESRX and MDH are still taking a beating on the prescription front.  I think a nice leverage into them would be worthwhile.  Phil, since neither company pays a dividend, maybe a calendar spread?  I know the market sucks, but these two are the big players here, as Rite Aide sucks, Walgreens is trying hard, Costco is working it little heart out to break in, and WMT wants this area BAD. 

  117. SRS/Mr. M – At a certain point those Ultras get very hard to push up.  It’s what I was saying about absolute value this morning, they’ve pushed a lot of these guys down below takeover levels and even the bears get a little nervous shorting things that could get taken out for +30% overnight.  

    LOL Grant!  I wouldn’t do that at all if it wasn’t for the fact I just show up and leave at the end.  There’s a lot of production people involved there and tons of lights and a green room – certainly not for a hobbyist and no thanks to doing a hack job….   I’m talking to someone about doing a weekend show, that I have time for…

    Trin explained well.

  118. Phil; SNL; as always with you, its all Bush’s fault !

  119. Phil:
    You said earlier, we can review my planned actions after the market closes:

    You prefer getting one at a time or in groups of 5  ?
    CAT, have stock, have no caller but mar 30 putter,

    action: sell 1x apr 27 call for 1.24$
    and roll mar 30 putter to 1x apr23 for 2$, set stop at 20 % gain,

    comment please.

  120. Phil, in Matt’s defense, Obama’s handling of this crisis to date is completely relevant to our participation and success (or lack thereof) in the market.  I was about to make some comments about that post; but Phil, since I don’t want to tick you off, I won’t.

  121. Chart — good chart; I assume you mean break out to the upside !

  122. Mocha, you are so right about the 10 am selloff; but that can’t continue forever (can it ?).

  123. Matt; what volume were you talking about as a great indicator.
    Best I can tell, the volume in the SKF was on the downside.

  124. SKF down about $5 after hours (meaningless I know..) any reason ?

  125.  Way to go on the political "crap" Phil. But I enjoy your political comments having said that.
    It’s the anger of the right I don’t like. If they were funny or fun or even just fair it would be fine 
    but its the false logic and lack of human kindness that makes it hard to read – but we can skip over 
    it mostly.


  126. LOL RMM – Groups of 5!   CAT – I think I was looking at May.  I meant an even roll to any combo between $23 and $27, in other words, there are numerous sets of puts and calls at many, many strikes you can roll to, depending on what happens this week and, since I like the way CAT looks at the moment, you may be better off waiting to see if it comes up a bit.  If CAT gets back to about $25.50, you should have an even roll to any April put/call combo you want.

    Cap – I’m trying to be clear about this, it is one thing to discuss a program and it’s merits and whether it works but general political discussions are unwelcome.  If you and Matt can round up 3 more interested people, I’ll be happy to give you a weekly post and you guys can post to your heart’s content.  We did try that during election season and it died due to lack of interest so there is no reason to force 498 people to listen to this nonsense because 2 people want to talk politics. 

    Breakout/Cap – Well, at the time I was hoping for an upside breakout but it sure did make a quick run the other way fast.

    SKF volume – Actually, the 10 am hour and the 3pm hour had the most volume and both were up but they formed almost reversal patterns and did not follow through which indicates possible forced support.  The quesiton is, can they keep it up through expiration?  It seems to me that attacking the insurers is a last-ditch effort to jam the financials lower but XLF still finished up 2.75% (just a .17 gain these days).  I don’t know why but the IYF gapped up after hours and that kicked the SKF lower.  Interestingly, IYF was up just 1% today and SKF fell 4.43%, correlated more closely to XLF.

  127. XLF …. I would like to see a run to $7 or higher sometime this week to blast SKF lower.

  128. In defense of ME, it’s not like the op-ed was completely unrelated to the stock market.  I think it’s very related.  And I’m not a Republican.  I’m an independent.  How can ANYONE be a member of either of these two terrible self-interested, self-preserving parties??
    SKF volume, I wasn’t using it to make my call earlier.  I was using FAS.  I looked at FAS/UYG/SKF and FAS volume was up significantly over the previous open.  Taking that with the huge stick save on Friday I thought we might be having follow through today.  I do believe something is afoot though.  Banks are never up in a down day.  And after hours it would appear that they’re putting a lid on FAS rising any higher then 2.75.  If FAS isn’t up again tomorrow by end of day then I’ll chalk up my observations as abberations and a knee jerk reaction.

  129. Phil – for the insurers – I noted hear last year that the insurers would fall soon after the banks.  Insurers were selling annuities with guarenteed returns, but they now face huge losses.  Those people that bought these for the returns will seek their money sooner rather than later, and it will not be there, wiping out another round of wealth.  AIG is the first one to have fallen, but others will crumble as well. 

  130. Politics/Matt – Don’t worry about it, just letting you know what I’m trying to keep off the site.

    Annuties/Pharm – Excellent point but do you think AFL is in that game?

  131. Matt, I am with you bro !  A pox on all of them (Phil thinks I am a Republican; not that there’s anything wrong with it !)
    Banks … not all were up.  GS down again.  I look at "financials" vs. banks.

  132. SNDK,
    have stock, have no caller but have mar 11 putter,
    action: sell 1x jul 10 call for 1.05$
    and roll mar 11 to 1x jul 8 put for 2.05, set stop at 20 % gain,

    have stock, have no caller but have mar 26 putter,
    action: sell 1x apr 18 call for 2.2$
    and roll mar 26 putter to 2x apr17 for 3.2$, set stop at 20 % gain,
    have stock, have no caller but have mar 15 putter,
    action: sell 1x apr 12.5 call for 0.9$
    and roll mar 15 putter to 1x apr10 for 1.4$
    have stock, have no caller but have mar10 putter,
    action: sell jun call 7.5 2x for 0.5$ and roll to jun7.5 put 2x for 3.5$,
    have stock, no caller but mar 28 putter,
    action: sell jan call 20 and jan 17.5 put,
    comments please,
    if callers and putters gain and move ITM, close 25%/25% gain, another 25%/50% gain, if bullish, roll to higher strike,
    if callers/putters move OTM, close when 70 % of timevalue is gone, if bearish, roll to lower strike.

  133. GS earnings is next week (I couldn’t get the exact day yet).  For IV crush plays, we can do calendar spread, Jul 75/Apr 75 for $6.2.  Profit range in ToS Analyzer is $60 to $100 given the current volatility.  You can get fancy and add a calendar spread to each side Jul 55/Apr 55 PUT, and 1/2 Jul 95/Apr 95 CALL to widen the profit range, but lower the peak (but it maybe fine as GS would unlikely to stay at this price in 6 weeks).
    For more extensive margin, we can try short strangle of Sell GS Apr 45 PUT/GS Apr 100 CALL for $3.4.  Profit range is $42 to 103 at Apr expiration. 
    Lastly, we can do a Back Ratio PUT, which is less margin intensive.  Sell 20 GS Apr 50 PUT, Buy 10 GS Apr 55 PUT for $1.64 credit.  Breakeven point is $43.  Max profit of $6.5 if GS expired exactly at $50 in April.  Profit of $1.64 from $56 to infinity.   If you are bearish, you can do the reverse with Back Ratio CALL.

  134. RMM list 2:

     SNDK, sounds good but stops are at losses, not gains!  As long as the putter is losing money, you are in good shape.  My play was to roll to 2x the July $8 puts as, of course, they lose money twice as fast on the way up and to put a $2.50 stop (20% higher) on 1/2 so you don’t get burned if it turns down.  If it doesn’t go lower, then you sold $3.50 in premium, plenty to cover the $11 putter.  I wasn’t keen on an upside cover with SNDK this low but it’s not such a bad idea to be safe looking at the sell-off we had since then

    JPM, also 20% loss not gain but maybe you’re saying gain of the putter?

    JRCC, my intention was to go to the $12.50 puts as you would do well on a bounce and you pick up $1 in premium anyway, your way is safer.   LDK, yes but stop at $4 on 1x of the putters so you don’t get buried (the remainder can be rolled to 2x lower puts easily). 

    UNH – If you are content with the wait, that’s fine.  Usually that’s something you’d do with a dividend payer.  You could go to 2x the June $18 calls at $2.88 and 2x June $18 puts at $3.05 with a stop at $3.50 on 1x the calls and $4 on 1x the puts.  Do you see how that works, whichever way it goes, you are taking out 1/2 the winning side for less than a $1 loss out of the $11.76 you are collecting.  Once you do have to take one out, then it gets tricky but feel free to ask then. 

    As to rules:  Really just do things in 1/2s or 1/3rds and worry less.  As a rule of thumb, 20% is too easy to stop you out on a caller or putter, especially if they are offset by the oposite end.  Generally, it’s the 50% rule we apply to any caller or putter.  The reason I’m a little tighter on the 2x rolls is because you have an offset and we’d rather take a small hit than overcommit.

    With any option, you generally don’t want to buy them out when they have more than 1/2 premium.

    Nice on GS Peter!

  135. S&P to bottom at 600 points in October: Merrill
    Sounds to me like a rather bullish call for a bottom, although they did revise it one time already.  We can easily deal with a bottom that is "only" 13% lower with the buy/write and other strategies.

  136. Phil: txs for you help indeed,
    when a stock drops and a putter gains in value, that is what I think is a loss, so I have to stop this by closing/rolling, your figures for selling puts and the stops you quote(example: UNH jun18 put at 3.05$ with stop at 4$ means 4/3.05 is 31 % higher value for the putter), looks as if I am dividing the wrong numbers ?? is this NOT correct ?
    When callers or Putters move ITM and their value/price goes up, at a certain level it is necessary to close or roll otherwise its gets away too far to recover (has been my problem), I thought at a 50 % change UP its time to act, (previously it was the 25%/then another 25%/then roll), time to OPEX is, I think of lesser concern, I have been burnt too often to wait for a reversal, closing/rolling is safer but it must be in time. Rolling Up a caller or down a putter does of course bdepend whether one is bullish or bearish, just closing and waiting might be safer though.
    If there is a false notion in here, let me know, I must come to grips withy this.
    Here are 5 more PUTTER situations:
    for all 5 I have the stock and NO callers but march putters:
    DBC putter march20, sell july20 call and roll putter to july 18,
    PFE putter mar17.5, sell jun15 call and roll putter to jun 12.5,
    BTU, putter mar22.5, sell mar/apr 25 call and roll putter to apr 20,
    PEP, putter march 50, sell apr 50 call, roll putter to apr 47.5,
    X, putter mar 30, sell 1x call jan 22.5, and roll putter to 2x jan 17.5.
    TXS Phil.

  137. Stops/RMM – It’s a judgement call based on what we’re willing to lose.  On UNH you have 2x puts and 2x calls and you aren’t buying 2x the stock so you’d rather remove the cover quickly if it goes against you than get burned and $4 was a nice round number – no special science to that.  Don’t forget you are doing 1/2 measures so if it runs to $4 and you stop it out and then it goes back to $3 and you put it back on – you’re only out $1 on half a position – these are not life and death decisions…  50% gain or loss is always time to act.  25% is if you have enough contracts to be doing 1/4s and especially on a UNIDIRECTIONAL bet.  In these plays, when one side is winning, the other side is losing so less pressure on you when it runs away. 

    Also, very important.  If you have 2x calls at $5 and 2x puts at $5 and set a stop for 1x at $7 (either way, doesn’t matter) – Let’s say that it goes higer and you buy 1x your caller out at $7 and your putters fall to $3.50.  At that point, you need to either set a very tight stop on 1x the putters or plan to re-cover with more calls if it goes against you.  Always think of it as a fluid situation – nothing you do is irreversable and, as you can see from all the ones you let run away, better to lose a buck on bad timing than get buried later.

    Others I’ll try to get in the morning – going out.

  138. AAPL Apple: Sources confirm Apple laid off salespeople last week – CNET (83.11 -2.19) -Update-

    CNET reports despite public statements to the contrary, Apple did lay off around 50 enterprise salespeople last week, CNET News has learned. Sources who wished to remain anonymous for fear of reprisal confirmed reports by Valleywag and that roughly 50 salespeople were let go by the company for "business and economic reasons," according to one source. An entire sales group based in Austin, Texas was let go as well as workers in Cupertino, California, where Apple is headquartered. Those affected were given severance packages and the opportunity to apply for other jobs inside Apple… The layoffs in the sales group did happen, according to several sources that were brought into conference rooms in Austin and Cupertino last Tuesday and given white manila envelopes informing them that they had been laid off, amid plainclothes security officers. It’s still not clear whether or not the Mac Hardware layoffs occurred on Friday.

  139. Here are next 5 situations: (Phil: I got so many as you put them up for consideration, maybe I have too many positions, fewer would be easier to manage)

    for all 5 I have the stock:

    MDT putter march32.5, sell april27.5 call and roll putter to april27.5,
    MCD putter mar57.5, sell jun57.5 call and roll putter to jun 52.5,
    SAP, no caller and no putter, sell apr35 call and sell april27.5 put,
    WFT, no caller and no putter, sell apr 15 call, sell apr 10 put,
    USO, no caller and no putter, sell apr 53 call, sell april25 put.

    TXS Phil.

  140. Good Morning Phil & all

  141. Asia Markets :    Tuesday, March 10, 2009
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                     7054.98     -31.05    -0.44%
    Hang Seng*                         11697.25    352.67     3.11%
    China: DJ Shanghai*              246.56        4.86     2.01%
    Seoul Composite*                1092.20      20.47     1.91%
    Bombay Sensex*                  8160.40   -165.42    -1.99%
    Baltic Dry Index                      2262.00      37.00      1.61%

    *at Close

  142. Asian Markets Gain, But Rise Seen as Fragile

    (Indian Markets are closed for holidays Tuesday and Wednesday. Markets will reopen on Thursday).

    Asian markets mostly rebounded Tuesday from a three-session losing streak, while the safe-haven bid on the dollar retreated in moves seen as a momentary reprieve from concerns about the weak outlook for the global economy.Asian share gains were led by banks, however, Japan dipped lower to trade close to a 26-year intraday low, led by worries about the global competitiveness of the country’s drugs sector following a $41 billion merger in the United States.

    Japan’s Nikkei finished 0.4 percent lower, with drugmakers such as Astellas Pharma sliding amid worries about their global competitiveness after Merck proposed to take over Schering-Plough.

    Seoul shares ended 1.9 percent higher led by banks and energy issues helped by a stronger won, but tech and auto exporters underperformed. Foreign investors were buyers of 176.8 billion won worth of shares, their biggest net purchase since February 5.

    Australian shares closed 1 percent higher, recovering from earlier losses as the top banks and property groups staged a revival on hopes for more interest rate cuts. Analysts said the market was also starting to see some value in the battered financial sector, which has been caught up in a global sell-off.  The big four banks climbed.

    Hong Kong shares rose 3.1 percent, bouncing off a four-and-half-month low.

    Singapore’s Straits Times Index extend gains, up over 1 percent.

    China’s Shanghai Composite Index rose as strong loan data outweighed news that China had slipped into deflation for the first time in over six years. Consumer prices fell 1.6 percent in the year to February, the government said on Tuesday; producer prices tumbled 4.5 percent. But the consumer price drop was in line with the market’s expectations and was to a large degree due to volatile food prices and seasonal factors.

  143. Euro Stocks Rally, Citi Soothes Bank Fears

    European stocks rose on Tuesday morning, gaining ground for the first time in four sessions, as a memo from Citigroup’s chief helped calm fears over the health of the embattled financial sector.

    According to the memo from Citigroup’s Chief Executive Vikram Pandit obtained by Reuters, the bank was profitable in the first two months of 2009 and is confident about its capital strength after tough internal stress tests.The memo said the bank was having its best quarter-to-date performance since the third quarter of 2007. Citigroup declined to comment on the memo.

    Banking and insurance stocks — which have been Europe’s biggest losers so far in 2009 — were in a rallying mood, with UniCredit gaining 6 percent, ING Groep adding 12 percent, Deutsche Bank up 6.2 percent, Barclays up 5.5 percent and AXA up 3.8 percent.

    The DJ Stoxx European banking index is down 37 percent so far in 2009, while the DJ Stoxx European insurance index is down 42 percent.

    The FTSEurofirst 300 index of top European shares was up 0.6 percent at 661.66 points. The index, which hit an all-time low on Monday, has tumbled nearly 60 percent since reaching a multi-year peak in mid-2007.

    On the downside, Germany’s E.ON dropped 8.3 percent after lowering its 2010 profit expectations some 10 percent due to the financial crisis, regulation and negative currency effects. Other utility stocks were on the downside, with EDF down 1.1 percent and GDF Suez down 0.7 percent.

    Mining stocks gained ground, with BHP Billiton up 3.3 percent and Rio Tinto up 6.3 percent, helped by steady metal prices.

    Around Europe, UK’s FTSE 100 index was up 0.2 percent, Germany’s DAX index up 1.1 percent, and France’s CAC 40 up 0.6 percent.

  144. Oil Slips Below $47 after Saudi Supply Report

    Oil slipped below $47 a barrel on Tuesday after reports Saudi Arabia was keeping supply allocations to customers steady for April, suggesting OPEC may maintain existing production output quotas on Sunday. OPEC’s largest member, Saudi Arabia, notified customers of largely steady supplies for April from March, traders said on Tuesday, a day after a Saudi-owned newspaper said the world’s top exporter wanted stricter compliance with existing curbs before considering more cuts. Oil traders and analysts said Saudi Arabia appeared to be hinting that there would be no change in production quotas at the Vienna OPEC meeting.

    U.S. light crude [ 46.91    -0.16  (-0.34%)] for April delivery fell, having gained more than 3 percent on Monday, on OPEC’s hints of further cuts and after a naval incident between the United States and China. London Brent crude [ 45.81    0.46  (+1.01%)] was up after settling 72 cents lower on Monday at $44.13.

    Dealers were also looking ahead to weekly U.S. oil stockpiles data expected to show another fall in inventories. The U.S. Energy Information Administration will release later on Tuesday its monthly short-term energy outlook, which will likely contain a cut in its demand forecast. The EIA’s forecast is the first of three widely watched reports on world petroleum use to be released this week. The EIA has lowered its estimate for 2009 global oil demand in 10 out of its last 13 monthly forecasts.

    Analysts polled also expected an 800,000 barrel fall in gasoline inventories and a 200,000 barrel rise in distillates stockpiles.

    Dollar Falters, Sterling Stays on Defensive vs Euro

    The dollar fell against a basket of currencies on Tuesday, retracing much of the previous day’s sharp gains as investors focused on U.S. stock market futures that pointed to a stronger start for Wall Street. A tentative easing of wariness towards risk allowed the euro a technical bounce against the dollar, while sterling lengthened losses versus the common currency on continued worries about Britain’s banking sector. The yen erased losses and rose versus the dollar, though doubts about its status as a safe port in the global economic storm ensured it kept an overall defensive tone, traders said.

    The dollar index,a gauge of its performance against six major currencies,fell 0.9 percent to 88.492,off last week’s high of 89.624.
    The euro [ 1.2711   0.0102  (+0.81%) ] rose against the dollar, rebounding from a three-month low of $1.2457 hit last week.
    The euro [ 1.0902    -0.0016  (-0.15%)   ] was also firmer against sterling, off a 5-1/2 week high of 92.18 pence.
    The pound [ 1.3862    0.0092  (+0.67%)    ] managed to recover from a six-week low against the dollar, rising on the day.
    The yen [ 98.29    -0.53  (-0.54%)    ] reversed earlier losses against the dollar to rise,
    but the Japanese currency stayed weaker versus a broadly stronger euro [124.95    0.31  (+0.25%)]

    Market participants say foreign investors have been reducing long positions in the yen, with expectations fading that it can surpass a 13-year peak of 87.10 yen per dollar hit in January. Recessions in many of Japan’s export markets have dried up overseas demand for its goods, meaning exporters also have fewer dollars to sell in exchange for yen, traders say.

    Gold dips, ETF holdings unchanged

    Gold dipped on Tuesday, falling below $920 after sinking more than 2 percent in the previous session, as investors reassessed current market levels relative to other assets.

    Gold was at $915.50 an ounce as of 0635 GMT, down 0.6 percent from New York’s notional close on Monday. Prices are now down about 9 percent from the 11-month high above $1,000 marked on February 20. It hit a record of $1,030.80 in March 2008.

    The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings stood at 1,028.99 tonnes as of March 9, unchanged from March 8 when they dipped for the first time since January. That decline was 0.3 tonnes or 0.03 percent from the record 1,029.29 tonnes first hit on February 26.

  145. Good morning all!

    RMM – sorry I’m way behind as it was a late night but we should be improving a bit today.  Just repost your list today and we’lll go over it and yes, maybe too many positions, especially since you need help adjusting them as it needs to be something you do yourself as the situation comes up – then you could handle twice as many.