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Will We Hold It Wednesday?

Yesterday was way too easy.

It's what Cap calls a "Free Money Day" in the markets, where you have some obvious good news and everything goes straight up all day, rewarding all participants with a shower of cash.  It was certainly just what we needed after a relentlessly bad month.  We flipped more bullish with full covers on our long puts in our 10:07 alert, using the very aggressive DIA $70 put as a cover at $3.23.  Hopefully, these will expire worthless and offset the majority of the loss on the June puts, which are down about $2 on yesterday's action.  While we stayed fully covered into close (60% bullish), we also took advantage of cheap rolls to improve our long puts – this lets us be a little braver letting our upside ride, since they are well protected.

Note that we say 40% bearish but, if we hit those covers right on our long puts, we actually lose very little on the bear side of the virtual portfolio.  You can construct a bearish virtual portfolio and do the opposite, cover with DIA calls and sell calls against those and achieve the same effect but ours it laid out (as we discussed over the weekend) to take full advantage of days like this.  I couldn't be more pleased as every single play I discussed on Friday's Livestock show already paid off.  In the case of the SKF puts, it paid off very handsomely as that ETF fell from just over our upside goal of $250 on Friday all the way down to $180 yesterday and should follow-through lower this morning.  I know I went on and on about SKF puts and FAS and FAS calls like a broken record last week but this is why – it was a fantastic opportunity to catch a massive move on the rebound.

We liked FAS so much that I was still picking it as my favorite play in our 12:38 Member Alert at $3.60 with a hedged entry that bought our net down to $1.45/1.97, FAS tacked on another 10% from there and finished the day at $4.  We used the 5% rule to stay bullish all day and we have learned to ignore the pullbacks at 11 am – what we now call the "Kudlow Crash" as the storm of negative energy that erupts from CNBC every morning on the hour when Kudlow appears has been very tradeable.  While most of CNBC seemed beside themselves with confusion yesterday, weather vane Cramer turned ultra-bull last night and I just give up on this guy as it now scares me that he has flipped to my side of the fence, perhaps he finally got around to reading my weekend post as he even echoes my Dick Shelby reference from that article.

Despite Cramer now being on the same side, I'm going to stick with yesterday's premise that we expect a follow-throgh to 7.5% on the major indexes today, from there we expect a pullback to the 5% line and holding that will keep us bullish (but a nasty drop while we wait) and, of course, moving over 7.5% without the pullback would be very bullish and have us looking forward to a possible 20% bear market bounce in the very least.  Off our rough bottoms the 5% (we are past them) and 7.5% levels (today's goals) are:  Dow 6,825/6,987, S&P 706/721, Nasdaq 1,344/1,376, NYSE 4,410/4,515 and Russell 362/370

The Hang Seng jumped 500 points at the open but lost 40% of it by the close, resting right back on the 12,000 mark.  The Nikkei (David Fry's chart right) put on a better show, having their own Free Money Day, pulling just off the 5% line to finish up 4.5%.  Australia gained 2% but the Shanghai actually lost a point and India fell 2% so all is not well in Asia (but the Baltic Dry Index rose yet another 1.5%).  We can attribute the Shanghai loss to a sharp drop in exports as well as the end of China's Parliament session comming without a firm commitment of fresh stimulus.  Don't forget the Shanghai is up 25% this year and up 50% since November so we can forgive them for having trouble breaking the 200 dma at 250.

Europe is mixed ahead of our open with the FTSE bouncing right off it's 7.5% line from 3,500 lows, now drifting along the 3,700 line, which is a still healthy 5.7%.  Keep in mind that 3,733 was the November low and it would be nice to see them hold that so we can pretend the first 9 days of March never happened.  The CAC took a hell of a bounce off the 60% off line at 2,500 but is running the exact same pattern as the FTSE today except holding 2,700 would be an 8% gain so nicely bullish there.  The DAX is in lockstep with the other EU indexes as well and they too flew off the 60% line on Monday with 3,870 being their 7.5% line so looking good if they can hold 3,900 through the close.  Keep in mind a 20% retrace off a 60% drop is 12% but, since the index is down to 40% of it's original value, you need a 30% gain just to make that bounce!

[Cities and States Take Stabs at Reviving Local Economies]While our own Federal government mulls over the possibility of additional stimulus programs, local governments are now getting into the act launching home-grown economic-stimulus plans aimed at spurring local spending and keeping small businesses afloat during the recession.  Some are taking the traditional route of cutting corporate taxes. Others are trying all sorts of ideas: Paying residents to shop in local stores; giving real-estate brokers bonuses for bringing tenants to empty strip malls; reducing fees on new development, etc.    More than 16 states are preparing their own stimulus packages, which are expected to total about $10 billion in spending, according to the National Conference of State Legislatures.

New York City has a $15 million plan — a fraction of its $43 billion budget — to help laid-off investment bankers start new careers as entrepreneurs. This month, the city began offering office space, complete with computers and kitchens, at the low rate of $200 a month per person.  San Francisco is tapping a pot of federal funds to offer small businesses $23 million in no-interest loans. The mayor also is pushing to waive local payroll taxes on new hires and to give tax rebates to companies that buy new equipment, such as commercial dishwashers, from local vendors.  "It's a million flowers blooming," says Neil Kleiman, policy director for Living Cities, a community-development nonprofit.    

[firepower]Meanwhile, with a Fed meeting coming up next week, we can expect even more money to be pumped into the economy through lending and securities-purchase programs.  It already has ramped up lending and asset purchases, but the Fed could decide to push harder by, for instance, purchasing long-term Treasury securities or increasing its purchases of debt issued or guaranteed by Fannie Mae and Freddie Mac.  In some respects, the Fed's existing efforts are having success. For instance, interest rates on high-rated commercial paper have come down since the Fed introduced a program to backstop that market last year. But with broader market strains unrelenting and the recession not showing signs of reversing, the next steps are on the agenda.

The Fed's total assets grew from about $900 billion to $1.9 trillion as of March 4, an indication of the huge amounts of cash it is pumping into the financial system.  That amount has shrunk by more than $300 billion in recent weeks as some of its programs are tapped less aggressively. But it is likely to grow substantially in the months ahead. The TALF program, for instance, could grow to as much as $1 trillion.  "We've grown our balance sheet by a factor of about two," said Governor Plosser. "It's going to get bigger before it gets smaller."

This is inflationary and that makes commodity plays a good way to go as either inflation, a dollar drop or an economic recovery can lead us to victory.  DBA is a way to play agriculture into harvest season.  The ETF is close to 50% off its highs and the Jan $22s are just $3.95 and we can be perfectly happy picking up .50 per month, which is the current price of the Apr $25s but I'd hold naked for a while, hopefully getting .75 or better.   DBC is a broader commodity basket that includes oil and metals and it's hard to imagine going wrong with the 2011 $15 calls at $6.10 ($2 in premium) when you can sell Apr $20 calls for .60 but hopefully $1 on a good run.  Since we could have a big commodity rally, it is very important to always use stops on your covers or be ready to add more longs, one of several strategies we practice regularly.

We'll be watching our levels closely today, wary of a pullback like Europe had this morning but hopefully we can hold up and put in 7.5% total gains – still not too impressive in the big picture but anything less will force us to be much more cautious as the weekend draws near.  We also have Retail Sales tomorrow along with the usual 650,000 job losses for the week and Business Inventories will be out at 10 and better show some contraction. 

Not likely to be another Free Money Day – we'll have to work for it!



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  1. FMD yesterday indeed !  And SKF, SRS … wow !
    I actually would not mind seeing SKF go to about 195, before dropping some more.  would help my hedges.

  2. Phil: General questions about heding via DIA puts. In general, one would be hedging an "exogenous" portfolio (things you own outside the DIA puts) that is inherently already long or short by a certain ratio, and you’re using the DIA puts to alter your overall long-short ratio. Correct so far?

  3. Phil:
    Is the LTP what you find under the "Portfolio" section that we’re generally playing via your version of a buy-write strategy?

  4. 195/Cap – I was hoping so as I cashed out my March puts, not wanting to risk it after such a great day but I really want to have the opportunity to re-enter on a bounce.

    DIA/Chaps – Yes you are hedging against whatever risk you have to a market drop.  Generally, if you watch your positions over time, you’ll get the idea of what a 200-point gap down will do to you.  That’s the risk you want to cover.  Say you have $100K in play but a lot of it is covered and you expect a 200 point drop to hit you for about 10%.  Then you really only need to cover some % of $10,000, not $100,000.  Ideally, I want to cover a 5% drop so 300 points, maybe 15% so I’d look to have about $30,000 worth of DIA puts that I feel will gain 50% on a 300 point drop.  The June $72 puts are $7.03 and I can offset those with Apr $69 puts at $3.48 for a net $3.55 entry.  The June $75s are $9.12 so I would gain $2.09 on perhaps 100 puts (net $35,500) and the June $69 puts can be rolled almost even to the May $66 puts which are $6 below mine so I have a clear path to getting that gain (if the market stays down) without having to pay back my putter. 

    Keep in mind this is a bullish cover, those gains are lost if the market reverses but I generally don’t WANT to win that side of my bet.  The idea is just to have covers that mitigate my downside losses on the bullish side so I can reposiiton as needed.  Since I am repositioning my bullish positions at lower and lower prices, IF the market ever stages a proper recovery, they should do very well.

    As to LTP (Long-Term Portfolio), that’s a term we use for longer-term trades and yes, right now that’s the buy list as we’ve had little reson to do the leap spreads lately that used to be the bulk of the LTP plays although there are a few in there…

  5. Not a good open, let’s watch the lower ends of our 5%/7.5% levels for signs that we should be looking to move a little more bearish on.  Stopping out 1/2 DIA puts if we break 6,900 and no reason to add them back unless we go green again (there’s always Aprils to sell at this point).

    Off our rough bottoms the 5% (we are past them) and 7.5% levels (today’s goals) are:  Dow 6,825/6,987, S&P 706/721, Nasdaq 1,344/1,376, NYSE 4,410/4,515 and Russell 362/370

    Certainly Europe held those 5% levels no problem early on but they are open until 12:30 and won’t be liking our open either!

  6. Buyers are asserting themselves.  GS over $85 is good, $90 is needed.  C at $1.60, hard to ask for more than that but holding it would be nice.  BAC over $5 and that’s a must hold.  AAPL $90 must hold, GOOG needs $309, RIMM needs $40 and AMSN needs to hold $65.  27.50 is a good hold for the Qs (Nas 1,365). 

    All 7.5% levels will be very tough to beat without some positive news I think but not even testing them and losing the 5% levels would really ruin yesterday’s momentum (such as it is).

    F still going up on the same union news!  Congrats to the $1.60 crowd!  We may even be able to sell options at some point…

    Up volume is still huge vs. down volume, that’s a very good sign and we shook off the sells nicely.

  7. Phil
    721 on the S&P is that the 7.5% top level

  8. Holy Cow, those SKF $210 calls dropped in half already!  Not bad for about 20 market minutes…

    721/Ronald – Yes off the floor at 670 so we are in good shape right now, possible 20% gains ahead!

  9. I mentioned it late last night but I’ll just throw it out there again; I know there’s some HOV fans around here – not least Phil – and I stumbled upon their bonds last night. Yields are huge. Even the 01/2010 is going for about 80c on the Dollar, so if HOV aren’t bankrupt within nine months you’ll get about a 30% return on your money. Obviously, the further out you go the better the pay day… January 2014′s are paying about 50% annualised!

  10. Well the S&P is strange leading us up but all indexes are right around that 7.5% mark – super bullish if we hold it.  I guess we have to look at 10% levels now so that’s:  Dow 7,150, S&P 737, Nas 1,408, NYSE 4,260 and RUT 380 and to the extent that that seems unbreakable to you is the extent you should be getting bearish as we get near them.

    My logic on a run like this is, as we get near 10%, there is a HUGE chance we’ll have a pullback to 7.5% anyway so selling/covering at 9% is very prudent.  If we break higher, we uncover and miss a point but if we fail, we’re in great shape to ride the pullbcack with easy levels to track.

    377 is the Russells 2.5% rule for the day so a tough area for them to get through to 380.  Transports are still flying, past 2.5% already but Financais were rejected at 5% so far but GS is testing $90 so we’ll see.

    I don’t like the way the Dow is having trouble at 7,000 and 730 is giving the S&P trouble so let’s watch that too.

    It’s a watching kind of day overall but I think a 1/2 cover on DIA is good at the moment (rolling longs up of course), as I said, there’s always April…

  11. HOV/Anton – That wasn’t just a pre-earnings thing?  I don’t see how they can be bankrupt in 9 months – they don’t have any loans due…  Very strange.

    GOOG finally getting it together.  Dow just being a laggard now.  This is going to be an upside issue so we have to stop watching them but it also makes them a good cover as the price-weighting means that AA ($6), C ($1.60), GM ($2), and GE ($9) – 15% of the Dow and even more by market cap – could double and it would only add 150 points.

    V and MA pulling back again.  COST selling off with WMT – fear of the retail sales report tomorrow. 

    XLE and OIH cautious into oil report and now I REALLY don’t like the rejection off the 7.5% rule so 1/2 covers on rolled up long DIA puts with stops on the other 1/2 putters at 6,950 on the Dow.

  12. FAZ Apr $95s are a fun cover at $8.60 as the $105s are $7.30 so that’s a stop ($10 down, 20% on FAZ).  Those callse were $40 on Friday and should be a quick double if we get a pullback to $7 on XLF so a good way to hedge bullish financials with a fairly low upside risk.  Would also make a nice weekend cover to a bullish set of financials – just in case.

  13. Well… I closed out my risky AH SKF pickup premarket this am for a loss.  I knew I was rolling the dice..
    If SKF makes a new low here in the next 20 mins I will be buying it.  I know.  Sounds crazy.

  14. Phil, nope – I have the bid/ask up now…. volume might be an issue, but I think if I bid it, I’ll get it. There is some huge value in the debt markets these days, it’s fallen much further than the equity markets. Spending half my days now on the debt.

  15. read the research notes on HOV I posted last nite…

  16. So how low can SKF go?

  17. Market dropping; SKF continues to drop as well (doesn’t usually work this way).  Financials strong.

  18. GS up $17 since monday.  AAPL up $10

  19. Goldman well over $90, FAZ dropping hard, $48.50 was previous bottom so I think I might want them there even if they are going down whatever costs around $8)

    Not crazy Matt, I’m doing it from the other side with FAZ

    Debt/Anton – Not my thing but very attractive at those returns.  I don’t think I’d play much HOV, especailly when you can get really good returns off GE and many solid banks as well.

    HOV/Cap – I did read those, didn’t make me want to sell.

    SKF/Dilbert – It can go to about $130 today pretty easy if XLF picks up some steam and breaks 10% again.

    Money seems to be coming out of other things and going into financials – now the best looking horse in the race!

  20. Phil,
    Didn’t get a chance to sell the SKF 210 callers yesterday. Would that still be your pick for today?

  21. Phil:
    The June $75s are $9.12 so I would gain $2.09 on perhaps 100 puts (net $35,500)
    Sorry, I don’t get it. What does this mean?

  22. Yep, GE 2015′s are yielding about 9%.
    Cap, think you like LEN … you’ll get about 14% yield on the 2015′s. Not bad.

  23. Bought SKF at 161.45.  If UYG breaks 2.12 I’ll dump it.  Otherwise I’ll hold till maybe 173..

  24. Anton – as I have said here, CYE and HYV are good LT buys for debt, as they are cheap closed end funds that pay a nice dividend every  month and do the work for you.  Having said that, F bonds are very attractive as well and I have been chewing on those for my Roth/IRA.

  25. Are we done with the pullback?

  26. Phil,
    RE: your FAZ cover suggestion above:  here is my situation, Bought a FAZ 65 call yesterday at close. Its in the red as you might imagine.  I looked at rolling to your Apr 95 and I can get a $5.00+ credit for rolling,  seems like the thing (probably a no-brainer, but I am still learning to walk here at PSW). Please give me an opinion

  27. What’s up with MCD?  Strong dollar?  Realestate issues?

  28. Phil
    On V regarding retail sales report.  If it is bad ( who are we kidding it will be)  isn’t it offset with more people using credit to make their cash last longer if they are layed off.

  29. skf threatening to break higher.
    HOV … I was just putting the note up; I don’t really follow it so have no opinion; but looked like the liquidity was ok
    LEN … I do like them; lots of juicy buys in bondland Anton.  LEN is a good trade to buy when in the 6′s.

  30. Oil inventories:  Oil up 700K, gasoline down 3Mb, distilates up 2.1Mb.  CNBC trying to spin this as positive but it’s net flat and that does not support $50 oil.    It is good for VLO.  Refinery utilization was down yet again so DUH, they don’t make gas and that causes a drawdown in gasoline – this isn’t analysis on CNBC, it’s propoganda!

    SKF/Wes – No way, they are 1/2 now.  Still low risk but nowhere near as much fun.  We like to sell the calls when things are way too high, not when they are just a bit too high.

    DIA/Chaps – The June $75 put strikes are $2.09 higher than the $72 puts we were looking to enter so we can assume a 300 point Dow drop, which would correlate to a $3 move in the DIA, would put us in approximately the value of the June $75 puts.  Since our goal was to cover with $30K and the spead entry was $3.55, I said about 100 contracts.

    Pullback/Dilbert – Not done at all.  7.5% is firm cieling twice so now it’s more likely than before we need to test 5% line on the downside to see if it holds, that’s down about 2% for most indexes today – could be a good buy opportunity if we hold it.   FTSE still holding their line so hope springs eternal.

    FAZ roll/Chuck – I’m assuming you have Apr calls since you say you can get a $5 credit for the roll but no, the idea isn’t to roll up if you want to stick with it, the idea is to roll LOWER while it’s cheap or scale into the position to lower your basis.  Meanwhile, for the same reason I took the entry, you should stick yours out for a bit to see if we get a bounce but if you were uncomfortable with the position, consider getting out or lightening up as soon as you get even. 

  31. Bought UYG at 2.

  32. Man is it quiet on this board…where’s RMM? : O

  33. MCD/Pharm – Just money coming out of slow moving safety stocks to go into fast moving financials and tech.  You can always put money back in MCD later for 5% more but if you miss the move on JPM, you could be 20% behind…

    V/Steve – We already got reports from individual retailers and it’s my bad for not repeating this every time (but I get so bored).  WMT was up and other stores were down but WMT is like 20 times the total volume of the other stores so their up 2% wipes out the down 10% of everybody else from a total spending standpoint.  Also, the consumer credit report showed a lot more than expected activity which is a couple of indicators that consumers are still out there.  The CC’s are down on Whitney’s newest mantra that credit card defaults will reach biblical proportions and will crush the financial sector to crusingly low levels below the crush they are currently crushed to.

    UYG/Matt – I think they are broken.  I’m sticking with FAS on the long side, much more fun!  Remember about a week ago we traded $2 UYG for $4 FASs, well FAS is $4.17 and UYG is $2.04 so double the .08 gain of 2 UYGs…

    FAZ/Chuck – You may want to consider covering with 1/2 the March $55s at $8.50 and using the $4.25 per long to roll yourself down to the $50s.  You can always roll that out to a vertical or many other strikes.

    Will 3rd time be a charm at 7,.5%?

  34. FAS PHIL!  I agree.  I traded FAS all day yesterday and did much better then I would have trading UYG.  On the other hand, I like SKF when I’m going short.  And covering SKF with FAS is a pain because it’s not 1:1.  So, I’m back and forth today I thought I’d try UYG again to make it easier on my head.  Believe it or not, this is not my full time job!  Must be nice…

  35. Well GOOG is liking Kudlow this morning or is it Obama/Geithner?

    Speaking of safety stocks, KO finally catching some buys.

    Transports have been solid at 2.5% all morning, SOX not too bad – up 2%, S&P needs that 730 line for the rest of the indexes to make progress and RUT must hold 370.

    Obama not sounding very gung-ho.  Tim is very excited about going on an airplane!

    Call for global action is nice but setting us up for a big disappointment as we can’t even get the EU to agree with each other.  Obama says it’s a done deal though so I guess I was just expecting something more immediate after he met with Brown and Aso.  More hurry up and wait I guess….

  36. Phil
    I forgot about the Whitney rant but she sounded more bullish than i have ever heard her. 

  37. Pharm, i do think people are getting worried about the strong dollar and MCD.  They are the last darling from last year that hasn’t really taken it on  the like wmt.  I think they will come down to 48 as this rotation happens.
    JPM is looking great for covered calls.  Can sell 22.5 leaps for 6$ against the 20′s for a great "set it and forget it" kind of portfolio especially if you can’t sell put’s in your IRA.  That’s a nice return with some good downside protection.

  38. Phil, KO goes ex divi today (41c) so that accounts for some of the nibbles.

  39. V  bought in after the bottoming hammer on a five minute chart at 50.85 about 15 minutes ago.    picked up some mar 52.5 calls for a day trade.

  40. phil, does amzn look toppy here?  april puts?

  41. SPWRA down $2.40 while FSLR up $3 : something going on with SPWR?

  42. SRS and SKF starting to heat up a little.  Charts turning up for them.

  43. jo
    AMZN looks to me to be bullish pattern.  A break out after consolidation.

  44. CCJ crankin’ along.  BIDU comes back to life, RIMM over $40, POT smokin’, CSCO over $15 – very nice! 

    Monday’s IYTs doing much better than IWMs so far QLD was the winning index play, of course, up 50% already (and off the table for the pullback or reposition later).  COF up 15%, V up just 2%, MA almost flat – somebody is wrong… 

    Whitney/Steve – Yeah but bullish for her is like saying "The world is going to end — but we have time for a nice lunch first."

    JPM/Jo – I agree, they are a good long-term play although they were way better at $16.50.

    KO – Thanks Anton, great point!

    AMZN/Jo – I would short them at $67.50 for a pullback after a 10% run but generally I don’t short stocks I like other than GOOG, who are more like a roulette wheel than a stock.  There’s good support for AMZN at the 200 dma at 65 but a littls dip to there is expected.

    SPWRA/Ramama – Cowen cut a lot of solar estimates but kept "outperform" on them too.  Unfortunately, people only read headlines so money is flying out of STP, ESLR and SPWRA to whoever is left (but not LDK as they missed earnings today).

    Oh great, Obama says he is signing a bad bill with earmarks…

    Kudlow crash half over at least.

  45. Shoot.  Got out of UYG with small loss.  Tried to get fancy.
    Obama came out and said it was a bad bill with loads of earmarks and he was going to have to hold his nose when he signs it?  That’s too bad he has to sign it.  Good thing he covered his ass first!

  46. I thought the tone of O’s signing speech was reasoned and adult.  It’s a departure from most Washington rhetoric, but I think it’s something we’ll enjoy once we get used to it.  Even if you don’t agree with him, it’s nice to have someone who is more of a pragmatist than an ideologue.

  47. SKF now back to my purchase point AH yesterday.  What a ball buster this financial sector is!  WTF, buying UYG at 1.9.

  48. FAZ popping nicely as is SKF of course.   BAC fell below $5, bad sign, C needs to hold $1.40, GS $90 or big trouble in the financials.

  49. Obama went on his 1001 excuses speech.  Blah Blah Blah.
    Ephmen … that’s where folks get sucked in.  He talks/preaches like he’s a pragmatist — but he’s not.  The reality does not live up to the rhetoric.  Not buying what he’s sellin’.

  50. Obama may think he’s Lincoln.  But he ain’t no Truman.  Sounds like he’s more then happy to pass the buck.

  51. matt, it does feel like the Truman-Show with Jim Carrey.

  52. Phil & Anton,
    I had a question about bond market. I see wachovia 2016  bonds (AA2/AA)  being sold for yields of 11%. Would WFC have to honor the bonds sold by wachovia?? why would the yield be this high??  Is this due to the fear that wfc will go bust??

  53. Matt & others …. don’t know if y’all saw the blog I created in a burst of, well, something just last night … Obama Watch.
    come and visit & have some fun.  Ideas welcome.
    I can’t wait for Phil’s first comments over there !

  54. Looks like we are filling the gap on all of the indices.  VIX has not moved much after the first 15 minutes.  Up vol still 2:1 over down so there is still hope for this rally to continue.  Maybe when the big boys finish their lunch.

  55. Eph – I agree with you, O is presenting his decisions better than anybody in current Congress or in previous admin. The first time I heard him about a year ago making speech about rev Wright in Phil. That speech was also great and mature. His economical policies concerned me and it seems that are concerning the market participants. Last night I saw Geithner on the C. Rose show. I like what Geithner said. Again the best overview were the financial system is, and a plan, with some milestones, for improvement. Market is not impressed, however.  

  56. Looks like today is going to be the opposite of yesterday.  As in… ‘not’ easy.  Comparing SKF charts within the last 10 days Feb. 26 sticks out as being very similar.  But with oe around the corner I just don’t know.  Then again, I tend to place too much emphasis on oe and it has jaded my objectivity at times.  Jus thinkin out loud here!
    Cap, I saw the link but haven’t checked it out yet.  I will.  But in honesty, I’m not huge on politics.  I’ve lived just outside DC my whole life and I’m really sick of it.  But I can’t resist calling someone, of ANY PARTY, out when I feel it’s deserved.

  57. FAZ stopped out, was quick 20% gain and sold off, not that I’ve changed my mind, just you don’t turn down a 20% gain in an hour…  Will look to get back in around $8.50 on Apr $85s unless it looks like we’re breaking through.

    The gloom hour is over on CNBC but FTSE failed 3,700 so back below Nov lows.  CAC is holding 2,700, DAX is still above 3,900 but diving (3,870 is key).  If FTSE fails, may not be good sign for our afternoon (1/2 hour to close).

    YRCW at $2.50!

    Watch C at $1.50 and BAC at $5 for direction on financials but I’m not feeling it so far…  No catalyst and scary retail report tomorrow (even though we know it won’t be so bad).

  58. Bonds/HP – WFC does I THINK have to honor WBs bonds but it’s not WB selling the bonds for 11%, it’s an open market like stock certificates and someone who bought the bond for 3% (and to be simple, on a 3 year $100K bond that’s a 9% discount) are now turning around and selling those same bonds for a 33% discount (11% a year) becuase they either desperately need the money or they think WFC/WB ultimately may default.  It’s not that WFC has to honor 11% interest, they got the cash for 3% but now that instrument has a free-floating value, depending on the current market sentiment. 

    That’s why HOV bonds trading at 50% are kind of silly but people are willing to take a 50% haircut to cash out.  The bonds are, however, an indication of how hard it would be for HOV to borrow money if they did need it so when you see a company with a 50% coupon rate that NEEDS money – they are probably screwed.

  59. Phil,
    Bought 3 XOM Mar 65 Calls @ 6.08 currently at 2.85. XOM was moving higher but with OPEX in 8 days I don’t think these are going to be profitable. Any suggestions for making lemonade from these lemons?

  60. phil
    for long term plays, any sugestions /some way to take advantage on the  bubble in treasuries,and the upcoming inflation
    due to the massive stimulous ,( the $ trillions quoted in the media by buffet and such.)

  61. PharmBoy; missed me you nice guy, LOL,
    you guys chat A LOT without me, today you cannot blame me as I was not around.
    I actuallt have a BIOTECH question for you:
    my daughter works at DNA, she bought DNA stock at 71, now with thye takeover game going on, should she wait/sell ????

  62. Phil,
    I have  the dreaded FAS Apr 7.50 Calls  last I checked it was .50 to roll to 5′s.  I am assuming that I will need to wait for a big down day to roll these.   same lemon / lemonade dilemma as WesMc.  Thanks

  63. RMM – hummm, let me think abo…. SELL.  Roche as a research engine, yuck.

  64.  Hi Phil,
    I’m kind of wondering in hindsight if I should have done something differently.  Here’s my situation:
    Jan2010 10 USB calls – avg price 4.62
    Mar 10 USB callers – wrote 1/3rd for a buck
    On the recent runup from  8ish->10, I decided to play it "safe" and write the last 2/3rds of calls against my long position for a buck.  Now on the runup for these past two days, these callers are now a 150% loss.  I decided to roll to Apr 12.5 callers today for 0.90 debit so basically breakeven (paying back the 1 dollar I gained from selling the Mar’s).
    So there’s two strategies I believe that could have caused me to be better off in hindsight.  1) Always have just a partial instead of full cover if there is some chance of a near term runup so I can roll 2x or 3x to a higher strike without much cost.  2) Have a tight stop on a fraction of covers of I’m fully covered and concerned on a runup.  Am I missing any other general approaches?
    Also, it seems in this environment for now with these huge swings to be a bit conservative and have fractional covers to leave room for these huge 20% rips, what do think?  Am I thinking about this the wrong way?  
    Also on the above situation now, that I’m overall breakeven on callers if I get 100% of their premium sucked out, should my approach be to look how I can roll to May 15′s for minimal debit for a better position?  Or should I be prepared for another rip up and have a tight stop again.  I feel kind of schizo between keeping callers that are ITM for protection and also not letting it run away from me.

  65. Phil: is it time now to cover 1/2 of my AAPLapr 75 calls with mar 95 ?
    why did SPWRA drop (15%), I considered yesterday switching LDK into this one ?

  66. Matt; I hear ya … even though I bitch about it I hate poitics and politicians.  The site is a place for me to vent and call Obama out … Phil’s happy b/c it won’t be going on here !

  67. Phil, Cap
    I read the HOV from Cap’s post.  Does HOV have enough cash to survive the burn rate?  I have some shares and am looking at getting out whilre the getting is good cause not much is happening to the upside.

  68. chenboy/covers   I have the same problem sometimes of going to full covers as opex approaches.  I’m kind of like a fruit merchant who wants to sell his inventory before it spoils.  I think it all depends on risk/reward.  Recenly, I’ve been scared and wanting to protect to the downside, so I’ve been heavily coverd.  Even if the market rallies, it is not a complete disaster, after all, you’ll earn the premium and whatever cash you brought in selling the callers.  Obviously you are having seller’s remorse, but you wouldn’t have these regrets if the market was flat to down the past few days.  I also don’t think you should be too critical of your long-term strategies when they suffer on these extreme move days.  Even in these volatile times, 300+ days are not that common.  So you lost this bet, I’m guessing your portfolio was still up for the day.  

  69. XOM/Wes – Sure, you can roll the March $65s to the July $70s for +$1.70 and sell 1/2 the Apr $65s for $4.30 (as long as you can swing the margin) or fully cover with the Apr $70s at $1.90.  If you are bullish, it gives you a few months to be right.

    That reminds me to remind you all that today is the day when you REALLY do not want to be holding any March contracts you are long on (as opposed to ones you sold to someone else).

    Treasuries/Relax -  TLT is the way to go, just short them long-term.  You missed the spike where we did short in Dec as the rates were beyond insane but this is pretty unsustainable too.  I like the Jan $125 puts at $29.30 as the premium isn’t so bad, selling Apr $102s (each month, the most premium) to cover as short-term, we can expect the government to keep rates down but, long-term, it’s bound to get away from them.

    Jamie Dimon (JPM) is speaking at 1:15 – that’s an easy market mover!  Remember Cramer pretty much guaranteed that an I-Bank would follow-through with good statements after C and maybe he knows something on this one.   Certainly worth keeping our eye on SKF Apr $100 puts at $4.20, which I mainly like as they have a low spread and won’t hurt too much if we’re wrong.  Plan to roll up for $1 per $5 as SKF goes the wrong way and it’s a good trade if you are long-term bullish on financials.

    FAS/Chuck – You should roll down asap, I see .40 now, maybe .45, not bad for $2.50 in position.  On a good run you should consider getting .20 back selling the March $5s if you can.

    I’m smelling a reason to rally with Diamon speaking and then some sort of announcement on the heels – good timing for a snap up so back to 1/2 cover on the DIA puts, Apr $70 puts at $3.75 are my new favorite covers.

  70. SKF — next upside resistance levels are 180-181;  then 194.

  71. Phil, do you still like LDK even after this earnings miss?  Has your premise on them changed? 

  72. DIA Put covers
    Why don’t you cover with March 70Ps rather than Aprils as recommended in your previous post
    If the market rallies on Diamon you get payoff in 7 days and theta is working for you??

  73. ISRG  I’ve wanted to take an LTP position for a while, but didn’t have the money last time ISRG was in the 90s.  Think this is a good level to buy my long call or might it dip a bit more…I haven’t seen any company specific bad news to account for its weakness.

  74. Steve – I don’t really know; not really following HOV.
    I put the research there b/c I know you and others are interested in the name.

  75.  Thanks eph.  Yeah, portfolio was stil up, but could have been up more :) .  It feels like writing these calls and puts against long positions is somekind of "art".  It feels that sometimes selling these calls is like putting the emergency break on a car about to take off, but if you’re on a downwards slope, it helps prevent the car from rolling down too much either.  To continue the analogy, it’d be nice if I could time it so that once the car has a huge runup the hill, I can slap on the emergency break right there and sit nice and tight.  Is that ever a strategy?  I mean, I suck at timing these things, but is it sustainable to wait for things to rip and then write into the rip for better position?

  76. ephmen, i am hearing more general surgeons using the robot.  But there are some real headwinds as hospitals are not making money and may decrease cap ex.  May be a better stock to sell puts than the LTP strategy.   But long term, ISRG is for real.

  77. Phil: DIA put covers: why use a putter strike 70 which is ITM already ?

  78. chenboy83:
    interesting description of buy/write: keep in mind, its not an art its a lot of paying attention and a lot of work,
    depending whether it moves up or down (sideways is ok), you need to roll up or down, or just remove the cover,
    if you have a few, ok, but if you have many, its real work.
    I am going to reduce my many positions, and focus on less.

  79. DIA puts
    Just trying to understand your thought processes…..
    Yesterday you were recommending that everyone roll from April covers to March covers to capture premium expiration.
    Today you are recommending we use April covers.
    What has changed???
    I rolled my Aprils to March yesterday.

  80. There are cheaper h/c plays than ISRG with same fundamental exposures.
    Check out SYK balance sheet.

  81. anton, i would be careful with joint companies like stryker.  their future earnings could be very different.  They are going to be low lying fruit for medicare/healthcare reform.  stryker reps are looking very bored and well rested.

  82. chenboy:  "write into the rip"   is an excellent goal for covering

  83.  RMM – Yeah, I’ve downsized to only a few so it’s much easier to manage.  The issue is that I don’t have time to keep track of it during the day.  I usually just check things in the morning before heading into work and randomly drop in if I have some downtime.  I’m also trying to make this as much work-less as possible, and try to remove as much as the guesswork from a "timing" perspective as I can’t rely on my timing judgements that well.
    It feels like there’s no exact free lunch here.  Writing things, we’re betting things stay sideways.  If we roll up, we’re betting things continue up, and vice versa with rolling down.  Sure, we get lots of premium these days, but this whipsaw action feels like it’s priced in with these premiums we’re selling.  At some point in time it feels a bit like we’re still going in/out of positions like a daytrader on these short term moves by stopping out the caller or taking money off the table.  Ideally I’d like a strategy to just write once a month and forget about it.

  84.  eph – yeah, I’ve started to pick that up after half a year of following Phil’s LTP strategy.  That’s why I’m calling this an "art".  There’s some sort of feel you start developing on when’s a "good idea" to write, and when you’re writing too close and can get burned without much to show for.  Also, before all this, I was from the school of thought that writing calls is kind of like saying, "OK, I’m ready to sell my long position at X price, but give me Y change in premium while you’re at it".

  85. Anton/SYK  I’ve looked at them as an LTP candidate as well, they’ve got a decent set of options and I like the demographics of their industry, although anything health-care related has some political risk attached to it.

  86.  eph – another thing I’m wondering.  The "write into rip", seems like also opposite of seller’s remorse (I’m learning new phrases!), if it never rips, you’re out of luck if you keep waiting for one.  Then you write since you’re like, yeah, need to unload inventory before it spoils.  But then it rips and you’re like AHHHH.  So I guess I’m wondering, if it’s sustainable to wait for a magic rip once a month ;) .  Obviously if everyone knew such a thing with a certain certainty, we’d have a real easy time.  Also, I hear somtimes about market manipulation.  Is there a way to know ahead of time if people are propping the market up to write calls into and jump on the bandwagon?  And vice versa, tanking the market into opex so we can buy back our callers?  Or is all that a myth/illusion?

  87. chenboy83:
    important is NOT to let callers and putters get away from you too much, if they rise in premium(remember we want to get premium to go down), close them out or roll,
    callers: if no close or no roll up, stock might get called, this is not too bad if you end up with gains,
    putters: if no close or no roll down, stock might be put to you, this is only ok if you want more stock but you MUST roll down otherwise you get stuck with a high stockprice for the assignment.
    Unfortunately I have some of these situation as I could not pay attention enough.

  88. S&P blew 720 by the way and FTSE finished just below 3,700 and CAC finished right at 2,705 and DAX held up so generally bullish signals. 

    If Diamon is a snoozer, back to bearish but I’m using that hope strategy for now!

    USB/Chen – Both partials and tight stops are good appraoaches but, just as important, don’t panic out of a position – which means, don’t let yourself get deep enough in a position which will force you to panic out.  As you can see today, they dropped a quick 15% off the high and they could be back at $10 tomorrow.  You have a very long time and there were many adjustments you could make.  Another big issue, when you full cover a horizontal spread (same strikes) – you are BEARISH on the stock for that period – You need to be very aware of this and set tight stops on your bearish position, either buying back callers or adding more long calls.  Ideally, your attitude on 10 $10s covering 10 Jan $10s should be – if the callers run up more than $2.50, I’ll add 10 Jan $12.50s and look to roll the callers to 2x or LESS the Apr $12.50s, currently $1.67.  That way, as long as the roll remains 2x or less you do not have pressure to act and, if you do have to roll them all up, then it’s fine because you are well protected and your long $10s have $2.50 position advantage (25%) to the April calls, which would still be mainly premium. 

    AAPL/RMM – Well, they are holding up really well on a blah day.  I’d rather cover with 40-50% of the $90s, which keeps you more flexible although you do know I do not like the Apr $75s as they are too dangerous and could be rolled to the July $80s even or, even better – cashed out if you have a nice gain.  SPWRA we discussed, Cowen lowered guidance on several solars.  LDK did get cheaper but will remain so for a while going by this earnings report.

    HOV/Steve – They once again hit our target before pulling back.  I don’t advocate a real buy and hold.  Our play was and entry on momentum at .63 or less looking for a .10 gain then 1/2 off the table dropping the remaining basis to .53 (or less) with a stop at .58 and then just letting it run.  That’s a no risk trade as long as it doesn’t gap down on you.  As to survivability – if you assume that housing prices will drop 10% a quarter forcing write-downs then no, they can’t go more than 2 years but home prices would be down 80% and you can trade $20,000 worth of HOV stock for a chalet in Aspen!

    LDK/Jo – Yes I still like them but I still liked CROX at $5 so be careful!  There is nothing wrong with the company, there is something wrong with their customers, who can’t get the credit they need to place orders.  Government programs are in flux and orders are halted and this has forced them to eat a lot of inventory.  With Obama’s energy plan and Germany’s energy plan and Japan’s energy plan, IF we ever get out of this mess, then we could have a shortage of solar panels very quickly.

    DIA/Edro – I’d rather take more money for the 1/2 cover and stay flexible.  I can roll the Apr $70 puts to 2x the March whatevers depending on direction but I don’t WANT to bop in and out of covers every 5 minutes if I can avoid it and the Apr $70 puts provide adequate coverage down and up.

    ISRG – Also down on financing fears out of their control.  It’s all about whether or not you believe commerce will resume this decade or not.

    Brakes/Chen – Actually you do have the idea but don’t think of it as an emergency brake and think of it more like a regular brake, which takes practice but you also need to use it to slow down when you are going too fast, that’s where experience comes in.  Safety around the curves…

    $70s/RMM – That’s a bullish cover (slightly), which I usually do with a 1/2 cover as I can always break it up into 2x at a lower srike.  You need to run all the "what ifs" before you buy something and have a plan for up 100, down 100, flat, up 200, down 200…  That’s how you decide which strike suits you best.

    DIA/Edro – Yesterday there was better premium in March, we got $3.26 for one.  Today it’s $2.20, that’s a big, big difference and I’m not comfortable that $2.20 is enough coverage and ALSO, if I get buried on the putter there are not enough days for me to recover.  1/2 April covers are a more flexible choice (and we made a buck yesterday so already in very good shape).

  89.  Phil what do you like best right now for a new upside play?

  90. chenboy, Phil will probably elaborate more, but the whole idea of the LTP was that it could be a one-sell-a-month strategy.   You might not do quite as well as if you were able remove and add covers based on market movements, but at least you’d earn all your premium every month.   Basically, it getting a monthly premium kick vs. just buying and holding the stock.  You’re giving up the potential dividends, and you’ll occasionally have to pay out cash to roll up to a higher strike caller or roll your long call down/out, but over time earning that 3-5% of premium every month means that you’ll win the race vs. buying and holding the stock.   The last year’s relentlessly declining market was horrible for LTP, but over time I think it is a good strategy if you only have a limited time to pay attention to the market.

  91. What happened at 1:30 to spike market.

  92. Ughhh, a Jamie Dimon love-in …. just sad - really, really sad.

  93. anyone’s thoughts on aa?

  94. JPMorgan …. daddy of the CDS …… we LOOOOOOOOOVE you.
    You are sooooooooo smart and sensitive. 

  95. Strategy/Chen – Ideally the buy/writes are supposed to be once a month trades but when the market drops 20% in a month, it’s kind of silly not to make adjustments.  Similarly, you could set and forget the cover spreads but the way this market jerks up and down, you leave a lot on the table so it’s a preference.  I often point out to people "if you look back at all the moves you made and instead just left it alone for a month, you may have been better off."  Too much cooking spoils the broth in many cases but, when the pot’s boiling over it’s kind of silly not to adjust the flame…

    Yay Jaime!  Makin us money!!!  Let’s see if it lasts…

    Upside/Bigs – the commodity plays in the above post are my favorites at the moment because there are many ways to win and you can sell calls if you don’t.  Will commodity prices drop another 50%?  Well, if they do I can still sell $2 worth of calls a year on my $20 entry…

    Big energy sell-off dragging the markets (we knew that when the report came out) no reason to be bearsh really.  GS failing $90 would be a reason to be bearish

  96. Thanks Phil.  Yeah, I’m kind of at a point where I’m long all I can on the USB position from accumulating on the way down.  I’ll keep the delta of the position in mind next time I come to a similar position and either unload callers or set good stops.  Yeah, before I knew it, my delta on the USB position was negative and I was like, oops!
    eph – Yeah, I also kind of get a bit greedy in this market which keeps hurting me too.  It’s something I else I also need to control.  Also, I want to kind of backtest the braindead write once a month strategy.  Any idea how to do that?  I tried using thinkorswim’s thinkback thing but it’s really manual, looking for something more automated.  I know how to code so all I need is programmatic access to historical options data (preferably free).

  97. PCL  I’m short May 30 and Aug 25 puts, but I just couldn’t wait anymore and bought the stock again with an Apr 25 buy/write for $23.02 net.    This is my absolute favorite stock for one of Phil’s hedged entries.   I’m already short puts so I didn’t sell more, but you get about $4.50 for selling the Apr straddle.   As for holding the stock, it yields 6.5% and has favorable tax treatment of its dividends, has monster premium to sell covered calls against, and it’s assets grow over time (literally) no matter what is happening in the market.

  98. AA/Greed – I love those guys long-term and you can buy them for $5.85 and sell Apr $5 puts and calls for $2.15 which is net $3.70/4.35.

  99. Chenboy
    I try not to be over 80% covered. If the stock gaps up big you can still get a profit.  So on 10 contracts i might scale in with 4 covers and then add 4 more within 2 weeks.  If I own the stock then I just go 100%.  Plus I try to keep 2 strike differences between so that my delta is better.

  100. Palms new thingy.

    Oh, that reminds me, there was something about AAPL buying up all the 10′ LCDs in existence for some kind of IPad!  Finally…

    LOL!  Check out GOE, the thing Tim and I were talking about on Friday that made no sense.  Still makes no sense but back to $45 from $115 on Friday – totally insane – Whatever it is!

  101. Phil: your comments about AAPL longs and covers and DIA covers: really usefull, TXS.
    BTW: I used the word GAIN on callers and putters because you said: let them not gain on you. Of course, the gain is a higher premium which leads to a greater LOSS, thats why closing or rolling is important. I am still puzzled how you pick the STOP for that action ?

  102. Perfect timing:   CNBC shows how you can join in on the bear market!  Amazingly they pick SKF as one of their top choices…

    DPO pays a .167 monthly dividend at $6.62!  That’s about 30%!   No options but it’s a super crashed Dow fund

  103. If you want to try a once a month strategy, SPY is a good vehicle.  Buy a LEAP calls, sell a covers and wait until expiration to see how you do.   Right now you can sell the Apr 75s for 2.30.  With SPY trading for 72.50 you are getting almost $5 in premium, almost 7%, for six weeks.   Roll or resell at expiration.  Even if SPY takes off and you get buried on your callers, with $1 strikes you will always be able to roll up for a credit as you sell more premium.  Even if you are still ITM with your new callers, you will gradually catch up.  If you don’t catch up after few months, your long call will be ITM enough that you’ll be able to do a 2X roll for free to put your caller into premium.   No fuss no muss.  Or as Phil just referenced Ron Popiell: "set it and forget it!"

  104. Phil:
    my NAKED FAS situation is better as I have reduced the difference in putter strike by rolling down, and FAS is up too,
    I do have now, of course 2x apr 5 and 2x july 4,
    with FAS up at 4, is there a usefull potential action ?

  105. SKF testing short term 50 MA resistance …

  106. Gain/RMM – It’s not the premiums you should worry about it’s the intrinsic value, the amount they are in the money – that’s not something that’s going to wear out.  The VIX can go up 20% and a caller you sold for $10 can go to $12 without the stock moving – that’s not a loss!   Keep that in mind…  As to stops, it depends on the time of month and how much you buy into the move – as you well know, half the time you adjust you regret it later so, on the whole, there’s not much point in doing it until you are REALLY sure it’s not bouncing back (and even then we can be wrong half the time!).

    SPY – Good call Eph!

    Well here’s a fine afternoon for ya!   Not very encouraging but no danger of failing 5% levels so far.  As is often the case, the most disturbing thing about the drop is the lack of VIX movement.

    Still an energy sell-off but followed by some medical sector now and miners pulling back off a good run.

  107. Eph- As you know in the up market all bullish strategies work. The cover calls are not good protections in the down market. So if one bought SPY LEAPS in January (SPY @ ~90), there is a good chance that 2009 will not be a profitable year for this trader ( now SPY is ~72). But, the CC do provide some protection.

  108. Palm Pre (bankruptcy), i think its a fitting name for their new phone!!

  109. You guys have to check this out !

    Click to refresh each picture and go the next.

  110. Phil: what was the suggested AAPL 1/2 cover ?
    Premium being Intrinsic + time value, do you ever look at the ratio timevalue/premium to make decisions ?You say at times, its all premium, I assume that means its all timevalue, also, closer to OPEX, time value erosion accelerates, therforte the ratio timevalue/premium goes towards ZERO.
    Is that all so ?

  111.   Phil,

    I am a new member. I joined because I’ve admired the insightfulness of your political and economic commentary on Seeking Alpha for a long time.  It is way above the norm.  The bad news is that I am new to options trading and am pretty much lost.  For now anyway, I am the dumb kid in the class.
    I have a NYX long stock position (cost $20.90) and am short some March 20 puts at $1.76.  It would have been better to roll the puts last week but the long market decline had me in a margin call last week.  I am lightening up my positions today, and, in general, have to be careful about using up too much buying power, especially since it is unclear whether this rally has legs and I want to avoid forced selling.
    Would you wait for a decline to roll the puts, or just close out the long stock and the short put position entirely, take the loss and be done with it?
    I have long positions in JPM (cost $30.68) and UNP (cost $44.37).  Any suggestions?  

  112. This market is like a pinball machine on crack !

  113. Cap, so right, anything I buy with a tight stop goes against me, I get stopped out, and then turns back the other way again, it’s just a tease game all day. 

  114. JohnC1 – Phil will formally welcome you. But, don’t worry you will get over your good impressions as your options IQ will go up (this is a sarcastic remark). I want to make sure that you didn’t make a common error of “covering” a long position in NYX by shorting the put. This trade doubles your down risk.

  115. Bronek, I agree.  The SPY strategy would have worked great last year as a put spread rather than a call spread.   The best of both worlds is a long-term double diagonal where you are basically market neutral and keep siphoning off rich front month premium.   I’ve set up one of those on USO.  I had a put spread for a long time and added a call spread a couple of months ago.   Again, $1 strikes make it easy to manage.   I think that is what I’ll aim to do in my small IRA where I set up the SPY spread.  I’ll try to save up the premiums over the the next few months.  Hopefully we’ll get a run up and I can set up a put spread and  then I can really put it on autopilot.

  116. FAS/RMM – Not unless you get well ahead of the callers (and maybe you are) then stopping out some would be good.

    LOL Kustomz!

    Obama/Cap – Yeah, the price of fame, a million bad pictures of you…

    Premium/RMM – I always look at premium, to me anything intrinsic (in the money) is lost unless I am making a very bullish/bearish bet.  The premium (the part sold for cash, not the position) is the only thing you can count on and that we know for a fact will lose x per day into expiration, which is why I like to sell "all premium" whenever reasonable.

    John list – Hey, there’s no better way to learn than doing it.  NYX, I hope you realize you have a double bet as the stock and just the puts makes you buy more stock as it goes lower.  Generally you are better off JUST selling the puts to establish a position, then you would be looking at having one round of NYX put to you at net $18.24 and not too upsetting.  Meanwhile, the March $20 puts are $2.89 and you can roll them to the Apr $17.50 puts at $1.85 and sell the Apr $17.50 calls for $1.65 which lowers your net entry to $18.50 without forcing you to double up yet.  Hopefully they will improve or at least stay flat and you’ll get a move to the May $17.50s or even the May $20 puts and calls.  JPM is a bad loss but you can start working it off by taking the $20.35 stock and buying 2 Jan $12.50 calls for $10.30 and selling 1/2 the Apr $22s for $2.  Since those can roll to 2x the June $29s and that would put you 2x $16.50 in the money, we’re not too worried about the upside.   UNP is the same, at $36.39 you can switch to 2 Jan $25s at $13.85 and fully cover those with Apr $40s at 1.65 so that’s $13+ off the table and leaving you in a position that has a $30 spread (2 x $15) if UNH gets back to just $40 and presto – you’re even in 36 days!  (if all goes well).

    Meanwhile, the markets are going well as our little sell-off had little effect. 

  117. TIE  I’ve got 4 Jan 11 7.5 calls that I’m trying to roll to 2 Jan 2.5s.  I’ve had a GTC order in at .60 for a few days and it won’t fill even though the mid is now .325.   Any suggestions?  Should I move my order or make some other kind of adjustment to this incredibly frustrating position (I’ve lost track about how many times I’ve rolled it down).

  118. DRYS at $4.10, selling Apr $5 puts and calls for $2.32 nets $1.78/3.39 - a bullish play but I still love them.

  119.  Bronek
    Your sarcastic remark gave me a laugh and these days I really need one.  Thanks also for your point about the short puts. I do understand that this is a commitment to buy the stock at a set price, in this case $20, which I don’t want to do.  So either I roll to another expiration date or I close the position and take my lumps.  I appreciate the friendly advice.

  120. DRYS earnings tonite or tomorrow morning.
    How can you love Drys ?

  121. TIE/Eph – I agree with the roll but another .20 per current contract buys you a year.  The problem  is the very think trade on the Jan $2.50s.  You should sell 2 at $1.35 and once you get that, offer to buy at $2.70.  The ask is $2.85 so it’s not likely to fly away from you.  If you don’t need to conserve cash you can reverse it of course and buy first and sell on a move up.

    DRYS/Cap – Because I think they may have troubles but now 99% off the highs troubles.  The highs were stupid but so are these lows…

    YRCW still rollin’!

  122. SKF clearly failed the test of the 50 MA…..  now falling back; could be headed for 165.
    I’ll go out on a limb and say we close either 165-166 or 174.

  123. DRYS/ Phil – maybe, maybe not.  Lots of debt.  Lots of self dealing w/ CEO at company’s expense.  Debt covenant problems.  Lots of dilution due to stock sales at low prices.  Not worth it in my opinion (even though I have small position).

  124. Market is threatening to Blast Off into the close ….

  125. phil, thoughts on yrcw?

  126. Very Low Volume on SKF today

  127. Eph – Some time ago Edro suggested similar idea of LEAP vs short straddle. I have opened $ 45 IWM ’10 LEAP in October when IWM was >$50. Now IWM is <35 and I would have to make a double in 7 months just to break even. Currently I prefer to buy stock and sell strangles, or sell puts to initialize a position. Maintaining LEAPS when they are falling and loosing time value,  and paying for rolling down putters is not attractive. Let’s hope that market turns up and all will be as it supposed to be.

  128. I’m liking FAZ April 85 puts at 8.30.  Phil, still like this play?

  129. JLL   Anyone folllow the stock?   I’m short Mar 20 puts and trying to figure out whether I want to take stock.  It’s got so many parts that it is kind of a hairball to analyze, but  it would be a good vehicle to sell calls against.  In the medium term it is deleveraging after a recent big acquisition, but in the long-term I think it is a great worldwide play.

  130. AMZN going nuts….

  131. Here is something first. I have place with Fidelity order to roll few DHT April 7.5C to Jul7.5C. I got conformation of partial fill, followed by conformation of full fill. Few hours’ later Fidelity rep is calling me and tells me OOPS there is no full fill, the MM made a mistake. So, just to be obnoxious I said to the rep that when I screw – up Fidelity feels very bad but it always charges me for my error, why if MM screws up they cannot fill the nickel and dime order from the cabinet holdings? I was informed that that how it is, but to show the Fidelity’s good heart they will waive my <$20 trade commission. FWIW

    FAZ April 85 calls.  Anyone like these as much as i do?

  133. TIE  I’m already in the 2011s, but the idea of breaking up the trade because the options are so thinly traded is probably a good idea.

  134. SKF did drop to 165+; now where does it settle ?

  135. Phil –Ref SNE. I am pretty much tired of losing money on SNE. I have small calendar of short Mar17.5C over long April17.5C. I am ready to close this 7-8 month trade at loss. Any brilliant suggestion?

  136. Blast off/Cap – I don’t think so – well not in a real move, but we shook off the slide and buyers are pleased.

    YRCW/Jo – Too risky at the moment if you aren’t already in from those crazy lows but I do like them long-term.  Wow, now $3! 

    SKF has not captulated yet.

    Man Futures trading is strange – I ordered 10 Rut calls and the last one  filled AFTER the other 9 were up $150 each and so was an immediate $150 profit at the fill…  (all sold now as I figure the guy who filled me knew something…)

    FAZ/Bvar – If you can get that price I love it as FAZ is at $69 now!  I do think they can drop further but I’m pretty neutral into this close and just waiting to see what happens tomorrow.  Ah calls, no, I’m not that into them watching this close.

    JLL/Eph – no clue, sorry.

    LOL – TBoone is going to come on TV to tell us oil prices are heading higher.  At what point does he lose credibility.  It’s really not much different than them having Bernie Madoff come on to put you in his newest fund…

  137. Phil: your 2:52 comment,
    fine, that is what you call premium, as long as I know that. It declines as the option gets closer to OPEX.
    (in option books and in my trading platform, option price is called premium with premium minus intrinsic value equals time value, so with their jargon, timevalue declines to OPEX).
    with the market as it is right now, I have 8  stock positions left (others have been rolled out in time and down in strikes) which have NO callers but march putters ITM with 9 days to OPEX and the premium is 5 to 15 cents typically,
    They are:
    X mar30, MCD mar 57.5, PFE mar 17.5, UNH mar28, MDT mar 32.5, JPM mar26, PEP mar 50,
    all good names, as I have no callers, callers to be sold OTM, putters to be rolled close to or below stockprice.
    We could not finish this recently, hope you can help me today after the market closed ?
    TXS Phil.

  138. SLG:  looking good.  I think it can run to 15+ by expiration.
    Market …. mild FMD conditions now.  Too late to play.

  139. Possible "W" bottom pattern setting up for SKf for tomorrow based on multi-day chart pattern.

  140. Did T-Boone say something like "150 before 30"  or some such foolishness ?

  141. Cap, please expand on the W bottom, are you referring to bouncing upwards off the 160 range in late Feb or something else?

  142. Matt, are you buying SKF here for overnight?

  143. Phil, what’s the bullish/bearish stance into this close? 50/50?

  144. Phil: SRS jul 11o caller is always getting stuck around 12$ even though SRS has dropped again today: why is that, is it just too far out ?

  145. 500% Plays
    UYG JAN 2011 6 CALL / JAN 2011 7 CALL
    Filled at 0.10

  146. Bears are pushing…

  147. edro: low cost play for financials: what is the 500% ?

  148. SNE/Bro – well not much to do with a tight calendar like that.  Best you can hope for is an even roll to a vertical or just see where SNE settles (still .30 premium) and get out.

    SOX making new highs.  Transports rolling, looking good if we hold this close but I’m still neutral – much more relaxing this way…

    RMM list – Yes after the close I promise.

    SKF/Cap – I agree, scary for an overnight hold but I have faith in the long-term doom of the ETF.

    Bull/Bear/Jordan – Yes 50/50, there was nothing excting about todays action but happy to hold what we did.

    SRS/RMM – Yes, long contracts tend to get stuck like that.

    Cool Edro!

  149. Phil thx.

  150. phil,do you still feel we are at the bottom .

  151. Good night everyone!

  152. Mocha …. W bottom …. a chart pattern …. basically a double bottom.  You see this pattern often in different time frames … intraday, daily, and so on.  Something that can be traded on with decent odds at times if you recognize it ….
    The chart basically looks like a W … pull up a 2 day chart of SKF and you can see how that is possibly set up now for tomorrow.

  153. That was not a bad close.

    Bottom/Rick – Yes, I do think it’s going to be very difficult to take this market much lower but, as we’ve seen, you can panic people into anything so I remain watchful.

    Good night Jordan!

  154. Edro, thanks! 

  155. Thanks Cap. I bought a call at 165 to hold overnight, this seemed to work well for Matt last night, so far so good…

  156.  Phil/USO?
    The Jan10 $50 Calls are selling for .90 (down .36 today). For a CHEAP speculative spread on summer oil. It got me thinking…
    -Pick up 10X the 50s at .90 ($900)
    -Sell the 5X the Apr 30s at .95 ($475)
    Puts you in at $.43 ($430)

  157. Cap – jeepers, talk about the letter W, look at today’s chart of SRS, did some major developer go BK at 3:40?

  158. texas/USO  For almost the same amount ($450), you can buy + Jan 10 25/-Apr 28 spread.  You’ll make money on any increase in oil prices, and if oil goes to $50 you’ll make $2500 on the long +/- whatever you do on the rolls.  With the flyer you proposed your caller could give you trouble on a quick move up and your longs might never got ITM.   If you feel like gambling in the oil patch, I think there are better ways to do it.

  159. phil,i pulled up a 10year chart on all the indexes and the dow and the s&p500 broke through the 2002 lows,but the nas.and the russel have yet got down to the 2002 lows. i wonder if we bottom out when those two index’s come down to the 2002 lows?

  160. Eph,
    Thanks for that… just toying with some ideas. 

  161. RMM list:  I thought you had more…

    X mar30, 2x the Jan $17.50s and you should be happy to own X for that price but you can hedge with the 2011 $11s at $3.60 and put a stop on them at $3 so pretty cheap insurance until X gets above $20.  As to the stock, I’d do 1/2 cover with Apr $20s and see how it goes.

    MCD mar 57.5, why would you not want to own MCD for $55?  I think just roll them out to $55s but I would wait to see if there’s a bounce on them, they were $54 yesterday morning.

    PFE mar 17.5,  another great stock at a crazy low.  I’d take the stock to 3x the 2011 $10s at $3.88 and sell 1/3 Apr $13s to start but not too keen on selling unless they can’t hold $12.50.  As to the puts, I’d go to 2x June $14 puts at $2 covered with 2011 $10 puts at $1.65.

    UNH mar28, 2x the Sept $20 puts at $4.25.  You can split the stock to 2x the 2011 $12.50s at $9.90 and sell 1/2 Apr $19s for $2.12 and see how it goes. 

    MDT mar 32.5, 2x May $27.50 puts for $3.40.  Change stock for 2011 $20s at $7.25 and, frankly, I wouldn’t even cover at this ridiculous price. 

    JPM mar26,  I would certainly wait until expiration day on these, putters could go worthless.  They are not even far off track as you can roll them nearly even to any Apr strike set.

    PEP mar 50, also on track, nothing to do but wait and see.

  162. Phil: what is FMD ?

  163. USO/Texas – What Eph said!

    SRS/Mr. M – Stick save off the rising 50 dma at $66.84.

    FMD/RMM = Free money day (read above post).

  164. Oh no Mr. Bill!  I mean M.!
    If you review my comments, my SKF hold over last night did NOT work out too well for me.  It was only at some point during today (12?) that it would have broken even (if I had held onto it).  But don’t worry too much.  I think tomorrow’s open will be much different then today’s.  On the other hand, everyone will be glued to the Congressional testimony tomorrow on Mart TM and the uptick rule.  So hope will probably be held out all day only for it to be dashed at the close.  Or at least that’s my hunch.  Sorry I couldn’t answer your question earlier but I’ve been tied up with work (!) all afternoon.  Good luck. 

  165. RMM
    The 500% plays were a list of 2010 and 2011 spreads that were very cheap with very good risk/rewards.
    Such as UYG JAN 2011 6 CALL / JAN 2011 7 CALL for only 0.10.
    Phil suggested them last weekend.  They take a long time to fill.

  166. Phil: Yes I have more but I have rolled them:
    LDK, jun7.5, DBC apr 19, USO apr25, CAT aug 25, VLO apr 16, AAV aug 5, RKH apr 35, SNDK jul 9,
    any comment ?
    in a comment on 2/27 you said: need to roll when 1/2 the putter’s premium is gone, that means 1/2 of the timevalue, capito amigo.

  167. Rolls/RMM – Well there you go, I have no comments on those because there is plenty of time and decent position – no worries!

  168. Phil:
    couldn’t resist and bought FAZ April 85 call for 8.30 to hedge this rally.  Now feeling remorseful.  Cover suggestions?

  169. Phil: are you suggesting switching some of these stocks to CALLS 2011 like X, PFE, UNH ? what is better with this move ?
    I actually would want to reduce positions and focuas on less as this is too much paying attention to too many,
    kind of roll a few into something good or better

  170. Ephmen, what are your thoughts on oil? 
    My uneducated guess is we should be in $70 range by fall.
    BTW, that is the formula for USO vs 1 barrel of oil?

  171. Phil:you seem to say: switch to far out calls and wait, protect the downside with OTM puts, leave upside uncovered.
    Is this how you see the future ?

  172. Phil:  Thanks for  taking the time to respond to my post earlier today. 
    I am embarrassed to say that for now I am having a hard time following you.  You wrote: "JPM is a bad loss but you can start working it off by taking the $20.35 stock and buying 2 Jan $12.50 calls for $10.30 and selling 1/2 the Apr $22s for $2.  Since those can roll to 2x the June $29s and that would put you 2x $16.50 in the money, we’re not too worried about the upside."   
    So are you saying:  "sell the stock at $20.35. Then buy 2 Jan $12.5 calls for each hundred shares of stock sold, and then sell half as many April 22 calls for $2.  Then when those expire, sell 2 times as many June 29 calls for whatever they are worth at the time??"
    This seems to mean that the above would give me a net $1.7 ($20.35 – $20.60= -.30 + $2 = $1.7) + whatever I get for selling the June 29 calls.
    But I am not clear what the implications are if the market moves up or down sharply.  I believe that I have $1.7 to cushion my losses if the market moves down and the April 22 calls expire worthless, but I limit any gains on the upside to $22 plus the premium I received.
    What you are suggesting for UNP sounds great but I don’t quite get it either. ("UNP is the same, at $36.39 you can switch to 2 Jan $25s at $13.85 and fully cover those with Apr $40s at 1.65 so that’s $13+ off the table and leaving you in a position that has a $30 spread (2 x $15) if UNH gets back to just $40 and presto – you’re even in 36 days!  (if all goes well)."
    If you have the patience to explain what you are suggesting in greater detail, and what the implications are, I’d greatly appreciate it.  Sorry for being such a novice.  Thanks.

  173. SRS … looked like a similar W bottom pattern that I saw w/ SKF…

  174. Cap" what does this mean for SRS, hope it drops more as I have some shorts>

  175. texas/USO  I go back and forth on what future oil prices will be, but I doubt we’ll see $70 this fall.  There was a good article today in the NY Times show that even experts are unsure.
    While the near term is unclear, I think that if prices stay down for a while and exploration slows there could be a big increase in a few years when the global economy recovers if people cut  back on exploration.
    As for the relationship between USO and the price of a barrel of oil, it’s pretty close to 1.236*USO = price of oil

  176. RMM, I have no idea.  I would think after the huge drop -40 points in a day and a half, it might retrace a bit to the upside; all depends on what the crooks want to do w/ it.

  177. USO/Oil   I just looked and the relationship between USO and the price of oil seems to have changed again.  Probably due to the fees from the ETF.  Also the price relationship between Texas and Brent Sea has changed again.  I’m no oil expert so I’m sure there are others on this board who can give a better explanation. 

  178. Phil / All
    What do you think of this for a Memorial day trade, it seems to be a reasonable risk considering the options for adjustment.
    Buy June VLO 16 calls and sell the Apr 19′s for $2.20.

  179. More on HOV …. Steve & others, you should really listen to the conference calls and analyst/mgmt Q&A on companies that you are really interested in.
    Hovnanian Enterprises: Post-Call Notes: Feb. Pickup Only Seasonal, as Demand Remains Depressed, in Our View

    Following its 1Q (Jan-end) call, we provide the following key takeaways (pre-call bullets in body):

    Seasonal improvement in February, but demand remains depressed; accordingly, we continue to see further home price declines and large impairment charges. Specifically, while February’s 2.2 orders per community was modestly above last year’s 1.8, we believe this level remains highly depressed; we also note that, on an absolute basis, orders fell 37% YOY for the month. As a result of this still-depressed level of demand, which we believe should be increasingly challenged this year due to rising unemployment and very soft consumer confidence, we believe home prices will continue to decline, particularly as builders (HOV in particular) remain focused on generating positive cash flow in 2009. As a result, we believe this will drive further material impairment charges for both HOV and the industry and continue to weigh on the stocks, in our view.

    Some limited land opportunities seen, but not material, in our view. Similar to TOL’s comments last week, HOV noted it has begun to see land opportunities that “make sense,” as it recently bid on a few parcels from banks priced at roughly 15 cents on the dollar. While ultimately outbid, HOV was “optimistic” it was “going to see an increase in good opportunities.” While we believe some sporadic land opportunities may emerge over the next few quarters, we continue to believe they will likely be small in size and limited, given the banks’ reluctance to mark its assets to market, thereby incurring material losses. Overall, we believe the bid-ask spread on available properties will remain wide well into 2009.

    Similar to last quarter, no cash flow guidance given; we continue to believe cash flow generation will remain challenging in 2009. Similar to other builders, HOV did not provide any guidance in terms of cash flow generation in FY09. While it noted it will continue to sacrifice margins for cash flow, we continue to believe cash flow generation will be difficult in 2009 for HOV and the industry and view 1Q09’s roughly $120 million cash burn (ex-tax refund), well above 1Q08’s $55 million, as a material concern regarding HOV’s potential for the overall year. While HOV’s land development spend should be less in FY09 as 47% of its 23K owned lots are 80%+ developed, we note that its backlog value at 1Q-end was down 61% YOY, and given the sharp YOY drop in 1Q, believe cash flow generation in FY09 will be materially less than FY08’s $368 million, and could be negative.

  180. USO… Ephman … is that multiple to WTIC or Brent ?

  181. Cap/USO  That used to be the multiple of USO to NYMEX crude price, is that WTIC? Probably.  Someone gave me that number on this board a while ago at the time it was good.  The relationship does not seem to be holding now.  Phil says that it used to be 1:1, but the churning of the futures in USO means that fees have eaten up the ETF so it is losing value in it’s relation to crude.  Now it seems to be closer to 1.5.  Maybe Phil or someone else can enlighten all of us.

  182. test

  183.  Thanks everyone for the bit of discussion about writing calls midday today.  Seems like everyone kind of has a slightly different flavor on how they approach it, it was good info.  Yeah, Phil’s analogy is better than mine, callers are more like breaks and consistent daily rips aren’t just sustainable.
    eph – I agree with your double diagonal end goal.  I’d like to eventually work myself into something like that where I’m selling callers and putters against call/put leaps and basically fine no matter what happens for the most part.  I’ll look into starting an SPY spread.  ETFs like Phil says are attractive due to their 1 dollar increments on strikes which makes rolling a bit more convenient.

  184. ephmen85 the price of USO is only partly related to the "price of oil". There is no fixed ratio.
    USO purchases the "current" oil future, and rolls once per month. Its performance is driven by the price of the nearest oil future, the "roll yield", and the yield on US Treasuries.
    The price of the nearest oil future is the price you "want". The yield on US treasuries is close to zero.
    The roll yield is based on the oil futures Curve, as a snapshot:
    April $42.97
    May $44.5
    June $45.60
    What this means is that USO would lose about 3% in the next month, as it rolls from April to May, assuming the price of oil is unchanged. Looking carefully you will see over the last roughly 3 months, that as the price of oil has ranged from roughly 35 to 45, the price of USO has gone from roughly 30 to 27.
    Buyer beware!

  185. Phil, what to do with XOM Mar 75 puts covered with XOM Mar 70 and 80 putters? Should I close out the 75/80 spread and keep the naked XOM Mar 70 putter and then roll that next week? I know I’m a day late with these… thanks!

  186. Good Morning Phil & All

  187. Asia Markets :    Thursday, March 12, 2009
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                      7198.25    -177.87    -2.41%
    Hang Seng*                          12001.53       70.87      0.59%
    China: DJ Shanghai*               244.40        -0.31     -0.13%
    Seoul Composite*                 1128.39         0.88       0.08%
    Bombay Sensex                     8318.02    157.62       1.93%
    Baltic Dry Index                       2271.00     -27.00      -1.20%

    *at Close

  188. Asian Markets Turn Lower After Global Rally

    Asian markets were on the defensive Thursday as investors viewed rare gains this week as overdone in light of a shaky global economy and financial system. Trading reflected a trend this year of steep declines followed by bursts of small gains that quickly fizzle as investors focus on the bleak global economy and uncertainty about how to cleanse the banking system of toxic debt.

    Japan’s Nikkei fell 1.6 percent after a nearly 5 percent rally the previous day, with investors taking profits in banking shares, while insurers fell after a merger report that reminded investors of the sector’s severe business environment.The Nikkei gained 4.6 percent Wednesday, its biggest percentage rise in six weeks, a day after posting a 26-year closing low.

    Seoul shares extended losses, down 1.3 percent after the South Korean central bank’s decision to keep the base rate unchanged.

    Australian stocks were flat though National Australia Bank surged following a well-received strategy update, but energy stocks limiting gains as they followed oil prices lower.  NAB climbed 4.5 percent. The nation’s top lender announced a 25 percent dividend cut, but analysts said the market was happy the update did not contain any more bad news.

    Hong Kong shares slipped into negative territory with Chinese stocks underperforming in the absence of fresh announcement on China’s stimulus spending. HSBC dropped over over 7 percent as its shares begin trading without rights.

    Singapore’s Straits Times Index was down 1.3  percent with blue chips mostly lower.

    China’s Shanghai Composite Index fell 1.85 percent and turnover shrank as mixed data, which kept alive hopes for an economic recovery but cast doubt on its strength and sustainability, continued to encourage profit-taking. Following very weak February export figures on Wednesday, the government announced Thursday that annual industrial output growth slowed to 3.8 percent in January and February from 5.7 percent in December, coming in well below analysts’ median forecast of 6.4 percent.

    Bombay Stock Exchange’s Sensex was at 8367.12, up 206.72 points or 2.53 per cent. The index touched an intra-day high of 8439.71 and low of 8274.78. Benchmarks witnessed some profit booking at higher levels Thursday but continued to remain firm led by gains in oil & gas and banking.

  189. Euro Shares Fall, Led by ArcelorMittal, Banks , Liechtenstein Eases Bank Secrecy

    European shares extended their losses in morning trade on Thursday, led by steelmaker ArcelorMittal and banks. The FTSEurofirst 300 index of top European shares was down 1.4 percent at 683.32 points, having risen almost 5.5 percent over the past two sessions.

    ArcelorMittal fell 5.8 percent. In financials, Banco Santander was down 4.5 percent, Royal Bank of Scotland fell 4.3 percent and BNP Paribas lost 3.8 percent.

    World Bank President Robert Zoellick told the Daily Mail newspaper that the global economy is on track for its worst recession since the 1930s with output likely to shrink by 1-2 percent this year.

    Britain’s Home Retail posted further falls in underlying sales and profit margins at its Argos high street catalogue and Homebase do-it-yourself chains but said it would meet full-year profit forecasts. But the group said on Thursday the trading environment in the year to end-February 2010 would be "extremely challenging".

    Liechtenstein has agreed to ease its strict bank secrecy law by committing to OECD standards on tax transparency and data exchange, a fresh sign that a global crackdown on tax evasion is forcing offshore centers to open up. The tiny principality, a financial center wedged between Switzerland and Austria, is seeking to be removed from a black list of tax havens and will now offer bilateral tax deals for cooperating in cases of tax fraud and tax evasion.

    Baugur Group HF, the high-flying Icelandic retail group that crashed along with its nation’s banks, said Wednesday it would file for bankruptcy after a court called time on its efforts to reorganize. The announcement followed a ruling earlier in the day by the District Court in Reykjavik against extending the moratorium process, which protected Baugur from its creditors. BG Holding EHF, Baugur’s vehicle for its British holdings, is already in administration.

    The European Union has imposed antidumping and anti-subsidy duties on imports of biodiesel from the United States, the bloc said on Thursday. From Friday, U.S. firms exporting biodiesel into the EU will have to pay additional antidumping tariffs of up to 29 percent, and anti-subsidy duties of between 29 and 41 percent for an initial six months, the EU said in its Official Journal.

    London’s FTSE 100 index, France’s CAC 40 index and Germany’s Xetra DAX index were all down between 0.9 and 1.7 percent.

  190. Oil Rebounds Towards $43 After Bearish Oil Data

    Oil prices rebounded towards $43 a barrel on Thursday after a 10 percent fall in the past two sessions on bearish data for the U.S. and China, the world’s two largest oil consumers, and ahead of OPEC’s meeting this weekend.

    U.S. light crude [ 42.53    0.20  (+0.47%)] for April delivery rose 59 cents to $42.92 a barrel in the Asian session, having settled more than 7 percent lower on Wednesday at $42.33. London Brent crude [ 42.9    0.35  (+0.82%)] gained 43 cents to $41.83.

    Weekly stocks data released by the U.S. Energy Information Administration (EIA) showed a larger-than-expected 700,000 barrel build in crude inventories together with a large 2.1 million barrel rise in distillates stocks.

    China crude imports have dropped 13 percent in January-February, the biggest two-month decline in four years.

    OPEC  meets on Sunday, with some members calling for another output cut and others insisting greater compliance with current agreements is needed. Saudi Arabia, the biggest and most influential of the 12-member producer group, is among those which believe it is too soon to agree new output targets, sources have said.

    Yen Rallies, Rises 1.5% vs Dollar; SNB Eyed

    The yen rallied broadly on Thursday, rising more than one percent against the dollar and euro, as Japanese investors repatriated funds and short-term speculators bought yen. Japanese investors typically bring home funds to window dress their books ahead of the end of the business year in March. Data on Thursday also showed Japan’s economy shrank 3.2 percent in the final three months of last year, revised from an initial drop of 3.3 percent but still the sharpest contraction since the oil crisis in 1974.

    Swiss franc was pressured against the dollar as the market awaited whether the Swiss National Bank would announce any so-called quantitative easing measures along with a widely expected rate cut later on Thursday.

    The dollar [ 96.17    -1.11  (-1.14%)    ] fell as low as 95.79 yen, its weakest in two weeks. It was last down against the Japanese currency. Others said short-term speculators saw the dollar had faced strong resistance in the 99.50-100 yen area and were now selling it short-term. The dollar’s rally from a 13-year low in January lost steam as it approached 100 yen last week.

    The euro, sterling and the Australian dollar also weakened against the Japanese currency.

    The euro [ 122.93    -1.93  (-1.55%)    ] fell versus the yen.
    Elsewhere, the dollar recovered as a recent run in risk appetite lost steam, with the euro and sterling both down against the dollar.
    The euro [ 1.2777    -0.0057  (-0.44%)   ] and sterling [ 1.3762    -0.0107  (-0.77%)   ] were down against the dollar.
    The dollar [CHF-TN  1.1561    0.0031  (+0.27%)   ] was up against the Swiss franc.
    The euro [0.6765    0.001  (+0.15%)   ] was down versus the Swiss franc.

    The New Zealand dollar briefly touched a two-week high of $0.5145 after the central bank limited its interest rate cut to 50 basis points. It later fell back to $0.5076, down 0.7 percent on the day.

    Gold resilient above $900, ETF hits record

    Gold stood at $912.40 an ounce at 0542 GMT (1:42 a.m. EDT), up 0.6 percent from New York’s notional close. It earlier rose as high as $914.05. Traders called gold’s recovery a minor one, however, led by investors and traders who had sold it recently.

    SPDR Gold Trust said holdings hit a record 1,038.17 tonnes by March 11, up 9.18 tonnes or nearly 0.9 percent from the previous day. The holdings had logged a fall of 0.3 tonne this month from the previous record of 1,029.29 tonnes first marked on February 26.

    The global economic crisis continues to support demand for bullion, as investors flee other asset classes such as stocks and also because major governments’ measures to address it tend to increase inflationary pressure.

  191. Good morning!

    FAZ remorse/Bvar – Actually you are not in bad shape this morning, it’s really too dangerous to cover, you need to be in or out.  You can cover a 2x but RMM can tell you how crazy that gets -covering  a 3x is suicide…

    X/RMM – Yes.  Because you can do an even swap to 2x the leaps that are well in the money (low premium) and sell 1/2 covers that bring in the same revenue as full covers would on the stock, it’s a good switch – PROVIDING you want to be in it for the long run.  You can reduce the positons by rolling to 1x, you have almost the same upside and 1/2 the total downside exposure (although of course, with low premium you lose most of the same $5 on a $5 drop!).

    Oil/Texas – This economy simply cannot afford $70 so unless you think we are totally out of the recession by then, I’d steer clear of that bet. 

    Future/RMM – Well if this is a bottom and we can get leaps that cheap then there is no reason to hold stocks that don’t pay a significant dividend.

    Following/JonhC – Don’t sweat it, if you go back a year or so and see the questions we got from some of the same people who are answering now, you’d be very surprised!  This is kind of like jumping into grad school without taking the college classes but if you follow the new member’s guide you’ll find a ton of stuff that covers the basics and we do tell people who are new to options that it’s best to read a month’s worth of posts and comments, Sage’s Book and the K1 Project and then paper trade for a month before jumping in.  This is not something to be taken lightly, it’s a profession and you can get very good at it if you put in the time it takes to learn it properly. 

    On JPM – Yes but not nec sell 2x the June $29s, it’s just looking ahead to the next possible move.  Like chess, if you don’t plan 2-3 moves ahead you are very likely to lose the game before you start!  In the very least, for every position you have you should know what you will do next if the stock goes 10% up or 10% down.  Also, you need to think of the positions as fluid, not fixed.  What are we doing, we are taking $2,035 in stock and trading it $2,060 in calls and collecting $200 by covering 1/2.  The calls have virtually no premium so this is an aggressive play but you will gain almost $2 for every dollar JPM goes up from here vs what you would have gained with the stock.  Since you are deep in the money you have a very realistic expectation of collecting at least $2 for the next 8 months and that’s $1,600 back so you are covering JPM from a fairly devastating loss. 

    If the market goes down sharply, you cover more and lose whatever you lose on your leaps.  If the market goes up sharply, you are only 1/2 covered and have a very superior position to your caller so your leap will have more than $10 of intrinsic value before you have to give him back his $2 and your uncovered 1/2 will gain every penny of the upside with no cover.    Hopefully that clears up the UNP plan as well, let me know if it doesn’t.

    Gold is flying pre-market.

    Oil – Those of you who want a reasonable correlation to oil should buy USL, not USO.  USL rolls the entire 12-month strip rather than one month at a time so it doesn’t get slammed the way USO does.  Options are very thinly trades so I don’t play it.  Also, consider oil futures, they are quarterly contracts that are very liquid and have low premiums.  As long as you learn to set stops properly they are not too dangerous and they can be rolled like options.  An oil futures contract for June is at today’s price ($42.50) and you gain or lose $50 for each $1 move in the price of oil.  We bottomed at about $36 so if you plan on an entry at $42.50, $38.50 and $34.50 for 3, you would be in 3 contracts at $38.50 with a $600 loss at $34.50.  If you set a stop out at $900, you are entering the trade at $42.50 with a stop out at $32.50 and, obviously, at almost any point oil goes up $2+ before hitting $34.50, you start making money.  Futures are very dangerous so discuss your margin issues with your broker before considering it but if you buy just one contract and oil takes right off to $47.50, that’s a $250 win right there.

    That USO/Oil relationship changes every time USO rolls but on a day-to-day basis you can generally track it that way.  It is very important with oil expectaitions that you realize oil was a bubble, just like housing or copper so if you seriously believe oil will run back to $70+ on "fundamentals" then you are probably better off buying home builders as there are always more people who need to live somewhere.  Just like we can now say the cardboard McMansion was never worth $1M in the first place, a barrel of oil was never worth $100, $50 to $60 is a more than fair long-term price on oil, the rest is speculation and that is not likely to come back so soon.

    VLO/CaFords – You are burning .70 a month in premium and selling a .81 call so you’d better be right!  I love VLO long-term so why not buy 1/2 as many Jan $12.50s for $6.50 ($2 premium over 9 months) and sell 1/4 the Apr $18s just to cover this month’s premium and then see how it goes.  That keeps you very flexible as you can sell another 1/4 or fully cover or roll the caller to 2x twice….  Of course, this is based on my premise that VLO retakes $20 in the near future.

    HOV/Cap – to me, the most significant thing is the end: "and given the sharp YOY drop in 1Q, believe cash flow generation in FY09 will be materially less than FY08’s $368 million, and could be negative."  So given the presumed continuation of the second worst economy in recored history, cash flow COULD be negative.  Will it be $800M negative?  If not, they still have cash left.  Could be negative to me is $100M, maybe $200M – which is what I expect.  Double that and keep them down for 2 years and they could still scrape by but meanwhile Ara is looking to BUY properties at .15 on the dollar becasue he expects to be building on them down the road.

    Good USO explanation Steve!

    XOM/Ajay – You can roll the set over to Apr if you don’t want to pay it out but you know you were supposed to have stops on some of those putters right?  Do you have 2x and sold 1x of each strike?  If so they are pretty close to even and there’s not much issue to just closing it down.  Notice you can always move the bottom (if your goal is to wipe out highest putter) like rolling to the Jan $55/$65/75 combo, which widens your strike zone but that’s a little drastic for now unless we really start tanking.  Just rolling across to Apr gives you another $1.50 in premium.

  192.  Phil
    I have long 10 GE Mar 12.5′s puts and short 20 Mar 5 puts. I like them long term, but would like to adjust eventual basis down. Target ownership is 1k shares. Any suggestions?

  193.  Phil
    Sorry that’s short the 12.5′s and long the 5′s – sorry.