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Tempting Tuesday

Wow, talk about a round-trip.

All that work last week and here we are, right back at last Monday's close with Tuesday's open looking like last Tuesday's open – which was a gap up that led to a flatline of a day with a sell-off into the close.  In our first alert of the day last Tuesday, we were watching for breakouts at: Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420 – the same levels we blew yesterday.  We were also cautious of a possible retrace to the downside, our 10% (off the non-spike bottom) levels of Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402.  That sure does make today easy as we're right between the two again as our stock market roller coaster makes another loop around the tracks.

My additional commentary in that same Member Alert was: "As usual, the Russell is going to be our best indicator, so over 425 is good, 420 is dangerous and 402 is very bad.  Also, note in the morning post that if we adjust our breakout targets (which were set two weeks ago) to compensate for the 7.5% drop in the dollar we still have a ways to go before we can relax and go long:  That's going to be Dow 8,000, S&P 847, Nas 1,585, NYSE 5,321 and Russell 456."  Keeping an eye on those levels last week allowed us to get out right at the top and flip bearish, where we rode out the 7.5% pullback (so far).  We went into yesterday's close 55% bearish - after enjoying the ride down, we're ready for a change but not yet willing to throw caution into the wind.  The adjustment to bullish is easy, we simply sell more short puts against our long puts and we hope to have good reason to add to our 1/2 covers this morning but it will take more than the 1% bump I'm seeing in pre-markets (7am) to get us to saddle back up.

As usual, we made our bullish plays yesterday, while everyone else was selling.  We once again got our $5 FAS entry and selling the naked $5 puts for $1 means our worst-case scenario is FAS is put to us for net $4 – that's something we can live with long-term!  We were too early trying some SPY calls but we got a nice entry (we hope) selling X puts, a fun C spread and even a play on GM calls, where we played the $3s for .29 ahead of Obama's talk.  We were looking for .50 and we got .47 – A 62% gain is nothing to complain about for an hour's work!

We flipped bearish again at 1:08, when we couldn't hold our 788 target on the S&P and we drifted into the close from there with a quick dip and recovery that came out just .47 under the 788 target – not bad for levels we've been watching for a week!  As you can see from David Fry's chart, we really can't afford ANY downward follow-through with that 50 dma right at 788 NEEDING to act like serious support because it would look A LOT more natural for the S&P to double test the bottom (target box) before mounting a serious rally.  Since this 3-week leg just happens to correspond with earnings season – you can forgive us for hedging to the downside just a bit!

Speaking of earnings – here's a good one:  Zero Hedge claims to have "inside information" from a trader who claims essentially that the "good earnings" claimed by C, BAC et al that led to the rally of March 10th were nothing more than a gift from the Treasury, funneled through AIG in the form of ridiculously profitable counter-party trades that made Billions for the banks which AIG turned around and wrote off as their stupefying losses.  If true, it's a hell of a scandal and it's also a great reason to load up on FAZ, which fell from over $100 on March 9th to as low as $20, closing yesterday at $24.64.  No matter what you think of the financials, I bet you can sleep better through earnings season with the Oct $24s for $11 backstopping your bullish financial plays.

Asia was mixed this morning with the Nikkei falling 1.5% but the Hang Seng, Shanghai and Bombay all put up about a point – which is far less than exciting when put into perspective against the drop, as our 1.5% bounce will be this morning if that's all we get.  What's scary about the Nikkei is they jammed the Dollar all the way back to 98.5 Yen, which should have thrilled the exporters and they still dropped 1.5% on the session despite continued stimulus talk.  Perhaps Japanese traders have their eyes on the Baltic Dry Index, which fell yet another 2% on the day, now 28% off the 3/10 high.

Europe is off to a happy start this morning, up over 2% across the board as British Retailer, Marks and Spencer, beat expectation with "only" a 4.2% drop in sales.  Things in the UK are bad enough that that is considered something to celebrate…  We're going to be back to watching our EU levels from last week to see what sticks:   FTSE 3,880, DAX 4,200 and CAC 2,900 – only the FTSE is likely to test at the moment, up 3.3% for the day so far.  The S&P put Ireland on credit watch but – shhhhhh!

Oil got a nice boost from Moscow this morning as Russia's Energy Minister, Igor Sechin said Russia's resources "are a God-given good that should be used effectively," he said in his first major interview with a foreign media outlet. "Somebody is always wanting to take them away."  He supports "coordinating actions" with OPEC because of the shared interest in lifting prices. He said Moscow isn't in a position to mandate lower production, but Russian oil companies will curb output this year as falling prices cut into their ability to produce.  That was enough to send oil up 3% in pre-market trading, back to test $50 after touching our target $48.50 yesterday.

That should give a nice pop to the OIH and XLE and XLF ought to retest $8.50, which will be a major pass/fail for the morning rally.  The quarter ends today and we'll see how things end up but we're not going to get all excited about a bounce this morning until we start making some real progress.  In addition to Ireland, the S&P also issued a warning on Hungary that is no surprise but all that could put pressure on the Euro and another dollar surge this week could be a real rally killer for our markets.   Don't forget there's a huge G-20 protest scheduled for 1pm tomorrow at the Bank of England (just ahead of US market's open).

The Case-Shiller Home Price Index showed 19% declines for January with average home prices in the US back to where they were in 2003.  This is worse than the -18.6% expected  but not really a market mover as no one expected much from January.  Chicago PMI is out at 9:45 and Consumer Confidence will be at 10 – both are March readings and both are expected to be awful.  Tomorrow morning we also get the ADP Report and that's been a market mover and then we get Construction Spending, Pending Home Sales and ISM at 10 so a very exciting day tomorrow at least.

Speaking of Chicago, the Sun-Times Media Group filed for Chapter 11 this morning.  This is a very big deal as the Sun-Times publishes 400 papers worldwide…

 

 


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  1. morning ,  no posts?  where is everyone


  2. My first concern this morning is holding yesterday’s lows if we turn down.

    Below that are our 10% levels which MUST hold:  Dow 7,404, S&P 775, Nas 1,466, NYSE 4,839 and RUT 402. 

    On the upside, we’re hoping to get back to:  Dow 7,636, S&P 805, Nas 1,525, NYSE 5,075 and Russell 420.

    We’re going to keep an eye on our EU levels too.  FTSE 3,880, DAX 4,200 and CAC 2,900 need to be taken back or I doubt we’ll make much progress.

    No matter what happens, today is the end of the quarter so we can’t trust the moves.

    I LOVE the FAZ Oct  $24s for $11 as overall protection against a financial collapse.  They were $100 just 3 weeks ago and shouldn’t lose more than about $3 if FAZ falls to $15 so a lot of leeway to ride out earnings with.


  3. Good morning Irish!  When I write a post with a lot of reading links, it takes a while for everyone to get caught up sometimes…

    Wow, oil got SLAMMED back to $48.50 in the last 15 minutes – that’s very interesting and not very supportive of a rally in the energy sector. 


  4. I am looking at starting to build a position in a nice dividend paying stock.  Since everything has crashed their yields are starting to look really attractive to me.  My goal is to use this as a fairly stable foundation to start generating some stable cash flow by pocketing the dividend as well as selling calls and puts against the stock. 
    I wanted to get your guys opinion on the following play.  I am thinking about begining to build a large position in AFLAC.  It is currently trading at 17.6 with the 15 may puts going for 2.05 and the 20 may calls going for 2.15.  That would allow me to get in at (17.6-2.05-2.15) = 13.4 which would equate to a just over 9% dividend yeild.
    I am looking for any play that works out in a similiar manner.  Also theres no real rush as I just have the cash on the sidelines.


  5. Watch that $8.50 line on the XLF – there is nothing for them to celebrate really.  GS needs to take $105 to stay bullish but C is at $2.50 and BAC is back just over $6 so pathetic anyway.

    Qs need to hold $30 and need $31 to get back on track. 

    RUT is at 420 already, up 1%.  We have SOX leadership, up 1.5% but everyone else is at 1%, which is just a 5% rule bounce so far.  Still/, we are testing our upsides and we need to full cover DIA puts if we break 3 of 5, using that as an on/off switch for those covers.

    XLE and OIH are up 2% and that won’t hold if they can’t get oil back up so let’s keep an eye on them as well.

    I have zero confidence in this rally breaking our levels at the moment.


  6. Ford to cover car payments if buyer loses job
    Ford Motor says it will cover payments for up to a year if car buyers lose their jobs


  7. Phil: what is your bullish/bearish ratio now ?
    my june 80 Dia puts are fully covered with apr 77, closed yesterday 1/4 of DIA puts, so may open some more again.


  8. AFL/Craig – We loved them at $10, at $17.50 they’re a little iffy.   Heging in like that is the best way to go but do realize you are in for 2x at $14.20 if the stock is put to you at $15.  Still, a very nice entry as a first round assuming they don’t cut the dividend.  Scaling in is key, if you wanted $20K, do this for $5K and if AFL drops to $10 for some reason, you can buy another set for $5K and drop your avg entry to $12.10. 

    Bull/Bear/RMM – Stuck with 1/2 covers so about 55% bearish but we will probably drift up and down intot he close today – like an option expiration day.


  9. Brilliant move by Ford.  Because if they have to make the payments they realize it will eventually be the government.


  10. craigzooka/Dividend Payers.   PCL is my favorite stock for a hedged entry.   It’s a timber REIT yielding 6% that has been hammered because housing is bad.   Bad end markets are not as bad for it as other companies, because it cuts back harvesting in bad times and lets its trees grow.  Big trees are worth more, so when the market recovers they will be sitting pretty.   Option premiums are very rich as well.


  11. What a crappy open !


  12. Phil: my IBM apr caller has moved from 2.44$ to 4.1$: should I buy back 1/4 ? YES ?


  13. FAZ Oct 24 are you selling the puts or buying the calls lol?


  14. APOL getting pumped again pre earnings tonite.  This one is gonna be a great short !


  15. Damn, 3 profitable trades in FAS and SKF today and it’s just 10.  If this is going to be a topsy turvy day I may just take my gains and a break till 3.  Hmmm..  don’t want the dice to cool off on me.. but don’t want them to turn on me either. 8-)


  16. FAS now at it’s premarket high of 5.26.  Interesting to see what happens.  They are really painting this morning.


  17. Cap, i shorted Apol via puts after last earnings.  They are a third rate company that gives a fourth rate education.  I think the new administration will emphasize the public comunnity college system over the private system.


  18. Matt: am curious what trades in FAS and SKF did you do which made $$ ?


  19.  Great article from Zero Capital--boy those AIG folks are a bunch of angry nihilists!!  They’d shoot their own dog if someone paid them $10!!
     
    SRS is looking good today, IMHO.  Has to hold 58 and then move up.  


  20. Thanks jomama


  21.  well, it broke 58, but I still like the srs at this moment,  not moved into upturn yet


  22. F – Jo, I know, at this point the government should have to approve deals like that. 

    IBM/RMM – Had you bought out 1/4 at $3, it would have been a no brainer and another 1/4 at $3.50 and you’d be ready to roll to 2x a higher call but you let it go to a 50% gain and now you’re probably just buying the caller back at the top.  Since we don’t believe this move up yet and they have strong resistance at $100, now is not really the time.

    FAZ/Steve – Just buying the calls and sitting on them as financial protection.  They should easily double on bad financial news and shouldn’t lose too much if we head lower.   You can also buy the Oct $12.50s for $14.15 and sell May $31s for $5 as that’s in a $18.50 spread for $9.65 net.

    Interesting now we have run up to day highs on the Dow, the Nas and the S&P bit the RUT can’t retake 420, even though it was at 422 earlier.  Something there doesn’t add up…

    Dow getting close to a test, Nas hit 1,525 and RUT just jumped back to 420 so now we need Dow 7,636 and, once they hold, we can watch for the NYSE and S&P to catch up.  Transports are off a point and being a drag at the moment.

    Most fun way to play for a rejection here is the DIA 3/31 (today) $77 puts at .90, just looking for a quick rejection.


  23. we’re riders on the storm cap


  24. apol starting to get slapped down now


  25. cap opinion on bank stocks this week?


  26. Stealthy FMD ?    Conditions borderline favorable.  Window dressing in progress.
    I don’t think we’ll see FMD but market is trending upwards.


  27. corleone .. no opinion on bank stocks; just a crap shoot / news flow.  Outlook overall still negative.
     
    Got my tunes playing also …
     
    Why is BAC up 10 % ?   Why not … or Ken Lewis interview later on CNBC.  These ultras are nuts.


  28. How are OIH and XLE up 1% with oil down at $47.90?  This is a very broad-based market pump that’s not too concerned about what it’s buying…

    Dow just made 7,636, now we’ll see if they can actually hold it.  Nas holding on by a nail but we lost the RUT so can’t get 3 of 5 positive at the same time so far….


  29. Looks like mostly financials and a little bit tech to me …


  30. Phil: monitoring all my putters and callers is a full-time job:
    that IBM caller was under my radar,
    how about this one:
    CAT:
    have stock, and have 2x aug22.5 putters, base 1.9$, now 2.3$,
    what is the best thing to do ?


  31. UK just closed up 4.4% @3928. Odd day, just sort of "drifted" up. No rush or hurry, just slow.


  32. There’s a market – Boston’s Hancock tower sells at auction for $660M, about 1/2 of what the owner paid for it many years ago!  I don’t see how the financials can be happy about this unless they were already counting on 50% off or worse on commercial. 

    BXP is holding on well at $34 and VNO is $32.50 so let’s watch those to see if they start getting weaker.


  33. One more question on Financial’s.
    What will the Mark to Market Hearings and subsequent vote do them? 
    Scheduled for later this week.
    I heard in passing on cnbc that they were about to do piece on this and i missed it? 
    I am interested in everyone’s .02 ……………  Is it baked in already or will it shake things up?


  34. RMM raises an interesting point. Does anyone use stop orders with options? I know this forum isn’t a ‘how to execute’ class, but I have always been frightened of leaving stops on options and instead monitor manually.
    What do others do?
    RMM
    March 31st, 2009 at 11:24 am | Permalink  
    Phil: monitoring all my putters and callers is a full-time job:
    that IBM caller was under my radar,
    how about this one:
    CAT:
    have stock, and have 2x aug22.5 putters, base 1.9$, now 2.3$,
    what is the best thing to do ?


  35. CAT/RMM – They are $22.50 putters for August, you can’t go bailing on those every time the stock wiggles up or down.  Do you believe CAT will hold $22.50 through the summer?  Are you willing to own CAT for $20.50?  Those are what determine your action, not random moves in the stock – you can’t day trade long contracts, the bid/ask spread alone will wipe you out.

    Mark to Market/Chuck – If they relax the rules it will be very helpful for banks reporting strong balance sheets in Q1 so almost certainly they will.  Perhaps that’s why no one cares that  the Hancock tower sold so cheap…

    Stops/Steve - Hard stops are very dangerous as they often get triggered but it’s essential to  have "mental stops" points at which you MUST reevaluate the trade and make a new decision to kill it or roll it or DD or scale in.  When I talk about stops that’s generally what I mean.  The DIA $77 puts fell from .90 to .80 and my decision was to DD for a .85 average, at .75 I may consider another DD, looking to get back out even at .80 unless I feel we are really going to hold up through the close.  

    So far, this all looks like a lot of BS to me with a massive effort being made to hold up the markets but without enough firepower to make progress.


  36. Phil; do you have a link on the Hancock tower ?  How much psf ?
    1 distressed sale doesn’t make a market;   SRS flying lower at noon.


  37. They should have bid $666mln for the Hancock … along with the S&P low that might’ve really freaked out everybody.


  38. "1 distressed sale doesn’t make a market"
    Au contraire. 


  39. I am trying to sell commercial self storage facilities now at close to a 10% cap instead of the 6.5-7% cap rates 1-1.5 years ago.  That means the properties are worth 30% less than they were two years ago.  So all commercial properties are going to lose 30-40% of their values compared to two years ago


  40. Phil, was looking at FAZ, now at around $22.22.  October puts and calls can be sold for about $20, so buy stock sell puts and calls puts you in at $2.  If FAZ is above $20 then, this is a 10 times return.  Am I missing something?  Where is the risk?  FAZ goes down to below $10.  How likely is that?


  41. Hancock link.

    Distressed/Anton – I’m not sure how bad it really is, the Tower was bought at the top, 3 years ago so the 50% loss represents worst-case timing but no one wants to see a major sale go through this cheaply – very scary.

    Storage/Ronald – Same thing I think, we’re comparing rates to a ridiculous spike in real estate.  It’s like saying oil isn’t worth $40 just because it wasn’t worth $140 – the $140 was the mark that should be thrown out, and the current mark is probably a bit low. 

    It would be interesting to have the cash-flow numbers on the Hancock Tower and see what you get for $660.6M in downtown Boston….

    Meanwhile, we got our little Dow rejection but it wasn’t very exciting, I’m looking for 7,550 to be tested this afternoon on the Dow.  At the moment, RUT is holding 420 and Nas is right on the line at 1,525 but NYSE and S&P aren’t even in the neighborhood (2.5% for both of them to get there) so it will take a Mega Stick Save to pull this off later (not that I would discount the possibility).


  42. IR   I have Jan 12.5s 1/2 covered with the Apr 15s.   I put the trade on a few months ago when you first suggested them.   Do you still like the company long-term after the announced dividend cut?   I need to take some cash out of the market in the next few weeks and am looking around at what I should sell.


  43. IR  Sorry, those are Jan 11 12.5s


  44. If BOTH FAS and FAZ lose 80% of their value in 6 months, wouldn’t the best strategy, in hindsight, would be to always have puts on both, or to sell naked calls?
     
    Do you think buying what are essentially leaps for FAZ (i.e. Oct) is really safe, or is this just a 1 month play?


  45. biodieselchris, I thought FAS and FAZ are supposed to be inverse of each other by construction so how can they both lose 80%?  I always throught it’s one or the other.


  46. FAS+FAZ: can someone shed light on this chart?
    finance.yahoo.com/echarts
    FAS and FAZ over last 6 months, each lost 80%.  What is going on?


  47. Phil:
    well, we need your event-keeping and position tracking capability to always be ready to do the right action:
    you say" you cannot always bailing on those when the stock wiggles up and down ", yet when a putter or caller goes against you, you need to close 1/4 etc.
    So, its not fixed, its a mental stop, yet its a judgement when you act.
    When its further out in ntime, you have time, when its frontmonth, you want to act . TRUE ???????


  48. Phil, thoughts on IR?  have original leaps covered with 15′s.  Time to get rid of the leap?  I think they are raising capital and reducing earnings.


  49. sorry didn’t see eph’s question – same as mine


  50. Long term FAZ/FAS/SKF/USO has me worried too especially naked call. We are paying theta on the option and significant churn costs in the underlying fund. I have gone long the FAZ call today mainly for a 1-2 month protection for GS and HBC positions. Hopefully the FAS short put will pay for it so it is free…..


  51. FAZ/Jordan – I’d say it’s 50/50 they are below $10.  It just takes a 20% recovery in the financials to send FAZ down 60% so, unless the economy is in BIG trouble, they SHOULD be under $10 by then.  I like the calls as they probably will hold their value well and, if the financials fall 20%, FAZ will leap 60% and you have a double.  I also liked selling the $20 puts naked for $5 as you could roll then to July $15 puts and Oct $10 puts and then you are in at $5, which is reasonable long-term protection you can sell calls against.

    IR/Eph – I like them for holding this level as an income producer, they’ll have a really tough time getting back over $15 though.  To me, the 2011 $12.50s are $4.15 and you can sell the May $15s for .70.  Do that 10 times over 20 months and you’ve got a $7 return on $4.15 plus whatever value remains in the leap – not a bad trade…

    FAZ/BDC – It’s a one-month play as we can expect the Oct calls NOT to lose a lot of value (the Oct $45 calls are $7) during earnings but, if the Financials drop 20% and FAZ gains 60% ($13) then the Oct $10s are $14.60 so a nice 45% gain on the covers just for that.  If the financials collapse and you are screwed on your longs and they drop 50%, FAZ should hit about $45 and you will be up about 150% on the covers.  So risking hopefully 30% against 45% and 100% gains, as long as your long financials will gain more than $3 on a 20% move up – things will be fine…  Of course you can always cover the FAZ too once we see a firm direction.

    80%/Jordan – Ultra ETFs decay very harshly.  Don’t forget they reset every day so ANY day the financials jump 10%, FAZ drops 30% so 3 10% days pretty much wipes out any progress they make up to that point.  Same for FAS the other way.  Ultras make for good disaster protection and contrary plays but are insane as a long-term hold.

    Acts/RMM – Yes.  When we talk about stops, we’re talking about front-month positions.  Long-term postiions should be based on targets that don’t change based on a day or two’s action.  Also, the more liquid a position the better it is to use stops.  If I set an on/off swtich on DIA $77 puts at 7,636 on the Dow and it crosses 3 times, I’m only going to lose about a dime on the spreads.  If I do that with GOOG $330 puts at $340, I’ll get raped for about $3 on the bid/ask so it would be insane to set stops on GOOG puts. 

    FAZ/Steve – Perfect attitude!


  52. this puppy is going to nosedive at the end


  53. LOL – Now the Russell is back to overachieving, holding the line with the Nas while they wait for the Dow to retest.  If either one of them give up then we should get our next downturn but if the Qs make 30.50 then the Nas will firm up around 1,530 and we may see another Dow run at 7,636 and, if we pop that – then we’re probably into a Mega-Pump for the afternoon as there’s no logical reason it should happen but it happened in England, France and Germany with about 90 minutes to go…


  54. why would FAS be a bad long term hold assuming banks will be around in 2 years ?


  55. "why would FAS be a bad long term hold assuming banks will be around in 2 years ?"
     
    Because it reflects DAILY PERCENTAGE CHANGES in the underlying index. 
    Chart it and it should make sense.
    If you want to make a levereaged medium/long term play on bank values then you’d be better off buying a large position of LEAP calls on a non-leveraged financial ETF (e.g XLF Jan11 $10 which are $2.40). I suspect that a prime way to fund such a position would be to sell (1/3 size) OTM and a few months out Calls on FAS because of it’s daily percentage design.


  56. why is GS up $7


  57. microflux, FAS is likely to be a bad long term holding because, as far as we can tell, it doesn’t go up long term.
    In ultra funds, what you receive in short term leverage you may more than pay back in long term expenses.
    No free lunch. Buyer beware.


  58. Cap
    I said yesterday GS looked good at 100. I got 0n the AAPL trade instead.


  59. First steps down a very slippery slope……..
     
    Wells Fargo & Co., one of the largest U.S. lenders, told employees this month that it’s considering cutting foreign workers, citing political pressure stemming from the government’s bailout of the banking industry, according to an internal email obtained by MarketWatch.


  60. GS reported last in Dec16th. Looks like they have quite a bit of leeway on reporting their next quarter. Almost looks like they are waiting for MTM rule issue to get resolved before reporting. The option premiums for April is also quite low.


  61. FAS/Micro – Nothing wrong with FAS as they are already dragged down to ridiculous lows but look at UYG, it’s been dead in the water for 2 months.  Once these things get to a certain level, they kind of die due to the math of the fund (30% of $1 isn’t a big move and gets erased the next day).  They are trading vehicles only but feel free to long-term hold and let us know how it goes…

    GS looks like it’s being used to pump the financials today.


  62. Ouch, Phil, I was looking at BGU and FAS for my 401(k) which allows ETFs.  So, what now?


  63. jordan all the literature and articles about fas--read that stuff—they are hedges and gambling short-term plays—fas has been in existence SINCE LAST YEAR—any decent financial stcok at these levels (or wait a little while--stocks will be real cheap) will be great long term-)


  64. NYSE TICKs over a 1000.  Up vol and advancers still look good.


  65. Micro, Phi’s right on the UYG example.  I bought UYG at 2 and sold puts and calls. It quickly went up 30% and then has just sat there for weeks.  I’ll keep it as an anchor for selling puts and calls against every month but it doesn’t move the way you’d think..


  66. Phil: how tacky, dumb, arrogant these CNBC loudmouthed chatters are: they call themselves ALLSTARS….
    Why do they need so many: to spread the useless stuff they put out .


  67. Who would’ve thought we’d have one FMD to the downside followed by one to the upside.  This market it tooooo funny!  Oh well, just makes it all the easier to milk money out of the system.  That is.. after you accept the fact it’s an FMD!  Looks like the funds DO want to hold stocks at the quarter’s end.  Should be good for another BS surge into the close and a great opportunity to reload SKF.


  68. matt- i’m watching my FAZ for a reload



  69. ETFs/Jordan – What’s wrong with XLF?  If you can take BGU and FAS on and off then fine but you need to take profits off the table, not just leave them sitting long-term.

    Still looks fake to me but could be fake setting up for Mega-Pump this afternoon.  I wouldn’t be too surprised to see us up or down 200 this afternoon.  DIA $77 calls are .19 and DIA $76 puts are .16 for a fun spread against a possible big move one way or the other.

    Sudden interest in BIDU supporting the Nas.  Overall volume is anemic so far.


  70. Soros is scum of the highest level! imo


  71. From Yahoo Finance – GM CEO Henderson says bankruptcy ‘more probable,’ more plants could close in restructuring. 
     
    U know they are gonna do it!!!


  72. texasmotion: irrespective of person, I am always upset when someone calls someone names and expresses harsh judgements, in a sense calling names WITHOUT saying why one has such a strong view,
    its so easy to hide behind the IMO.
    IMO.


  73. Matt, please keep us posted on your SKF entries!  Are you considering SRS too?


  74.  RMM

    same here – thanks for speaking up


  75. Phil, The DIA’s 77 calls and $76 puts are $2.10 and $2.20??


  76. Soros is scum of the highest level! imo
    I agree.  I hate all those guys who spend their fortune trying to spread democracy and raise living standards among the poor.


  77. DIA/Jamie – I mean the 3/31s that expire at close.


  78. Jamie, look at the quarterly March option that expire today.


  79. Phil:
    one of my buywrite schemes for FAS is: stock, and apr 4 putters at 0.5$, now I am waiting to sell apr 6 calls: is it to early and too low to get 0.85$ ? I want to get called at 6$ which would give me 78% and naked apr 4 puts.


  80. RMM, earlier this week I bought FAS under 5 and sold the JUL 6 puts and calls for a free entry on a trade I don’t need to micro-manage….


  81. this could be the buy on the rumor sell on the news mark to market play


  82. Thanks


  83. CNBC – I got so tired watching them….I just flip to Bloomberg. Atleast they are not stars, they just report most of the time.


  84. phil,
     
    are we looking at a pullback at 2.5% or has that ship sailed already?


  85. MrMocha:
    yes, also have the same FAS buywrite,
    what do you mean by free entry on a trade ?/
    I am not that comfortable with the put strike 6, FAS yesterday fell below 5, so I might roll to 5 with put .


  86. Bloomberg can be so boring at times.  But much better than listening to Kudlow.


  87. Fabre, Well it’s a little after the fact now but I just closed my FAS position and opened one for SKF.  Want to see if the low holds.  If not, I’ll reload FAS for the closing push.  If I do pick up FAS I will DEFINATELY sell it at close and buy SKF.


  88. Lookking for a nice pullback till 3pm… I think FAS could drop to 5.5 without breaking the FMD pattern but it’s pretty relentless today so we’ll see.


  89. RMM I mean that I sold the puts and calls for $4.40 so out of pocket on FAS shares at 4.80 was very low.


  90. The pricing on the FAZ calls is weird. Way below my calculator. We expect vol to go down as the instrument falls (inverse instrument), but still, wow!


  91. RMM I don’t mind the JUL 6 puts becuase the average of .40 and 6 means that I’m in the stock for 3.20 average, plus I have several months to adjust.


  92. Well, got stopped out of SKF.  What sucks is that SKF is reaching new lows without UYG reaching new highs.  Shouldn’t be that way… but it is.
     
    Phil, do you still think there is a possibility of a sell off at 3?  What would the point be?


  93. Steven, what do you mean that FAZ doesn’t fit your calculator, it’s running about -3x the move of the XLF today?


  94. 2:30 on the dot.  Maybe target Friday’s close at 7,800ish.

    FAS/RMM – On a run like this I’d say take it, why be greedy?

    2.5%/Maxt – We’re through it on most, now we need to see if we hold it but this is all such orchestrated nonsense it’s hard to take it seriously…

    Sell-off/Matt – Not after this much effort to take us higher, it would be strange but one fund dumping to cash could make it happen.  I just don’t think it’s the plan and you can’t bet against the plan….


  95. Phil you had mentioned at some point that you like FAS because UYG is broken, and it was ok as a bet on eventual financial recovery. So have you changed your mind about FAS as an instrument to bet on financial recovery and sell call against ? if so were do I go from FAS ? I don’t want to prove anything on my own :) need your help :) I need a 5x to get back to even some day, i thought FAS might do it.


  96. new to site – a/o today
    in terms of following the real time action – are thes posts most efficient way?
    re: opt trader real time trades (why i signed up)- where exactly would I follow these live portfolio trades?
    thank you in advance


  97. LOL!  This is too funny!  They won’t let ANYTHING pull back today.  They are buying after every surge to keep from dropping.  A true FMD.  If you’re long.  Will be interesting to see what 3pm brings.  I"d have to say more of the same.


  98. Phil – what do you think of selling the Apr FAZ 17.50 puts for 2.50  or higher as a pump play into the close?   I’m thinking there is a chance of some letdown out of the G20 meeting, where I can cover before expiration, but taking the etf at 15 doesn’t  sound too bad either…


  99. Oh now they give us a pullback.  Guess they think they can afford 5 mins before we hit 3pm.  I can’t believe I had FAS yesterday at 4.85, predicted an up day today and still didn’t hold onto that $hit.  Don’t get me wrong, I’ve bought and sold FAS/SKF many times today.. but if I"d just held I"d be golden.  That’s the only hard part of an FMD.  Just trusting that they’ll take care of you and it will be alright. 


  100. Matt, I agree with the frustration of FMDs, I dumped my DIA calls about 100 points ago after a nice gain but now looking at shoulda woulda coulda held on, it’s painful…


  101. Cool, DIA $77 calls hit .43 that’s a nice profit on that spread already!

    FAS/Micro – No I haven’t changed my mind, FAS still works, UYG is broken but it works as a short-term trading vehicle when you think the financials are oversold and due for a pop.  Remind me later and I’ll look it over as a trade to stick with.

    Welcome Bcfla!  Posts are where we are all day.  Optrader has his own tab and a portfolio on his last post (comments at bottom like here). 

    Interesting, they ran out of gas it seems just when they were breaking up.

    FAZ/Lvm – If you sell the puts and there’s any positives in financials, you can get buried fast so make sure you really want them.


  102. Looks liek we had our 3pm sell off.  Maybe things are back to normal.


  103. Phil:
    MrMocha and I have FAS buywrites of various kinds:
    what is your view about selling puts and calls july rather than april ?


  104. Thanks a lot :)


  105. Ok….. let’s see what 3:15 brings.  Could just be a headfake… but not looking that way!  Have SKF.. till we turn up.


  106. One things for sure – given the silly headlines already about positioning/posturing at the G20 – they’ll be plenty of ups and downs on the back of the press reports.


  107. For anyone holding FAS, I would say if 5.5 breaks abandon ship!


  108. LOL Matt, you’re getting to be a time check!

    Looks to me like there’s enough funds looking to go to cash that they are washing out the pumpers for now.  Volume still low for the day so anything could happen when the real action begins but I could imagine some pretty serious moves to cash ahead of the close.

    Good time to go 60% bearish, buying out front month putters but no roll-up on the long puts.  We can re-cover if we make new highs on Dow and S&P but, otherwise, easier to sleep with downside protection after a 2% up day that made little sense.


  109. Phil/60% Bearish - Are you bearish ahead of the jobs report before open tomorrow ?


  110. Phil,
    What’s your opinion on BIDU they seem to be bumping up against resist @ 180, time to short.
    Thanks


  111. Phil 60% bearish ::::my 1/3 cover of DIA puts with apr77: buy back for no cover???


  112. Sold my FAS in case it can’t breach the high, will pick up if it does and hold till 3:45 at least.


  113. Oh yeah baby!!!


  114. I have no fear holding SKF in the 90′s… neither should you.


  115. That being said…. I sold my SKF until FAS breaks 5.5.  Will buy again if it does!


  116. matt: is SKF and FAS making you dizzy ?/


  117. TIME CHECK!!!!!!!!!!!!!!!!


  118. Jobs/DB – Yes, lots of potential bad news tomorrow and we hit our putters pretty hard to no point in pushing it.

    BIDU/John – I like them as a short at $190ish.

    60% bearish/RMM – That’s just naked on long put side (assuming you are balanced otherwise).  Would just be silly to take a big chance on giving up all of today’s gains on a gap down in the morning.  We can always cover back up with April puts.  Anyway, it’s up to you, that’s just my stance after seeing all the indexes fail the 2.5% rule for the day.


  119. RMM, a little bit.  But they are also making me $.


  120. What the heck was that at 3.3.  i am eating my lunch and dropped my sandwich when it went green to RED.  That drop happend in less than 20s. 


  121. ON the DIA 5 min chart.


  122. Phil, those Long FAZ Oct calls didn’t do so well today… :(


  123. Bought back my Mar DIA 77 putters too early today :(


  124. C’mon, give us that totally bogus 3:45 pump job!


  125. SRS – buying some here


  126. Now they are selling the quarter close….this is gonna be fugly.  Volume spikes on the 5 in ticker are huge.


  127. Seriously annoying market.


  128. FAZ/Ajay – they aren’t meant to do well, they are meant to be a hedge against financial longs, which are up huge.

    What craziness!


  129. Phil, looks like they are trying to retake your upside levels.  How do you feel about tomorrow now?


  130. Well, they didn’t make it on the Dow.  Just the RUT and the Naz.  How about the NYSE?  Judging by the last half hour, I’d have to say down for tomorrow.  But they may put up a brave front in the first part of the day tomorrow to keep folks guessing.   Holding SKF at 98.89.


  131. Phil,
    As a recent new member I read your GLD screed the other day and I am looking for a something "low maintenance" for and IRA where I have some cash. Any thoughts?


  132. Tomorrow/Matt – I’m very glad I made that bearish call! 


  133. Anyone watching LVS in afterhours?  It did the same thing Friday, last week.


  134. matt u still there


  135. i’m pissed i didn’t toll over my faz profits into fas yesterday—what a graet f’n call by you—-what do you read by AH movement? or do u use ut as an indicator


  136. faz is getting a workout in ah


  137. Scaling:

    FAZ – It occurs to me I need to mention more often the idea of scaling into positions.  FAZ is a good example as the Oct $24s opened at $11 and quickly fell to $10.50 and finished at $8.50.  Even if you do a very basic scale where you allocate $4,400 for 4 contracts and buy one at $11 right at the bell, by the close those calls were $8.50 for round 2 but, even better – is the $2.50 roll down to the Oct $15s, now $10.95, which were $15 yesterday. 

    So scaling into the position you spend $11 for the Oct $24s, then roll down for to the $15s for $2.50 so net $13.50 to be in the $11 calls and you DD at $11 to lower the basis to $12.25 for 2 contracts.  That took up $2,450 out of the $4,400 allocated and we’re down about 10% so not at a new decision point (20%). 

    That shouldn’t stop you from planning ahead though so what do we do if FAZ drops another 20% tomorrow?  That would bring us to $16ish and maybe we roll down to the $5s for $2.50 (now $15.95) if we can and that would leave us with enough to buy 1 more $5 call.  If we consider 3 $5 calls for $4,400 ($14.50 each) to be a good position, then we can stick with this plan.  More likely I’d rather cover with 2 May whatevers cost $5 (currently the $25s) and use that money to have a 4th long contract with the whole set half covered.

    So scaling in is VERY important with these violent ETFs but the nice thing is there are so many ways to move and cover but – ultimately – you end up with what you get (in this case 3 or 4 Oct $5 calls for $4,400) and, if you don’t WANT that when you start, you shouldn’t initiate the position.


  138. Damn, looks like I missed all the fun this afternoon; had to leave at 2 for a meeting.  I hate when that happens on a day like this, but could not be avoided.  That must have been some last half hour ! 
    Wanted to get long SRS but missed it for now by being out.
    Bummer of a day for SKF SRS.
    Matt, its just not well correlated to UYG.  they change the composition, it now has a good number of insurance companies in it.
    Looks like my APOL play will work out nicely.


  139. how does srs look tomorrow caps


  140. Matt – are u trading shares or options of SKF FAZ FAS ?   And in what size … just curious.


  141. Soros/ Eph & RMM- 
    Sorry for the delay getting back to defend my point (Soros is scum).
     
    RMM,
    I am of the opinion that Mr. Soros is a wolf in sheep’s clothing. Throughout his life, he has misrepresented himself and his intentions for personal gain. He has proven time and time again that “George Soros is a do as I say, not as I do” Type-A individual (a perfect example of a classic narcissist). You have to look no further that the evidence provided by his recorded actions and words.  He is in fact, DESTRUCTIVE. Period. I’ve spent years studying people like Soros, who have severe personality and psychiatric disorders. Just because he has a lot of money and gives to “charities” (I use the term “charities” very loosely here), does not mean that his intentions are for good. He is out for himself. I have no problem with that. However, Soros covers his destructive, selfish motives with Do-gooder lies. Given his psychological profile, public statements, and behavior, he is probably not self-aware enough to realize what he is doing. If he is cognitive and conscious of his behavior and continues behaving in this manner, he is evil. That said, he is either a narcissistic lunatic or he is just plain bad. He is a parasite.
     
    I don’t care how much money or education one has. It does not exclude them from being fools or dangerous to the world around them.   If I was a friend or associate, I would firmly rebuke his behavior and offer to get him psychological help. 
     
     
    Ephmen,
    LOL… good joke! (I hope).
     
     
    I welcome any debate on the subject. I call them like I see them.


  142. corleone, beats me.  low 50′s seems to be a good entry point.


  143. texas …. you are pretty spot on ….


  144. I would like to thank Phil and PSW crew for the insight and assistance (even the liberals).
     
    In December I initiated long stock positions buying stock, writing calls and puts in AAPL, WFR and CHK (scaling in and out).  Over the last week I have been trimming back my positions selling stock and taking out my callers and putters. I am now back to my initial 25% position that I started with in December. However this time, my cost basis on shares AAPL, WFR, and CHK is $0! With money to spare from those positions. 
     
    If I could only get GE, C, and X in the same shape, I would be very happy!!!! Works in progress I guess.
     
    I’ll be back for more advice tomorrow
     
    Cheers!


  145. Cap, I trade the etf, not options.  My positions are generally between 20k and 90k and usually at the lower end.  If averaging is necessary to salvage a position I’ll wind up at the high end.  But recently, I’ve been getting more bold with my positions.  Tired of missing out on the easy ones.


  146. Good for you Matt; if its bringing you success, even better.
    Me, I trade a few different accounts.  SRS and SKF I usually limit to 100 shares of each per account.   FAS, usually 1000 shares.  And I sell OTM calls and puts, and trade around positions.   My timing with the etf shares has not been as effective as I would like.  The call selling has worked out really well.
    Would like to improve my execution on the ETF itself; hopefully SKF and SRS stay above 90 and 50 for quite some time so I can sell enough calls to own them for free as portfolio insurance.



  147. Good Morning everyone. The UK has halved it’s opening losses and is now down 1.1% @3882. Not a good start. G20 people squabling and posturing isn’t helping. US Futures down about 80 points at the moment.


  148. Good Morning Phil, DB & all


  149. Asia Markets :    Wednesday, April 01, 2009
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                         8351.91    242.38     2.99%
    Hang Seng*                             13519.54     -56.48    -0.42%
    China: DJ Shanghai*                 280.19         3.94      1.43%
    Seoul Composite*                    1233.36      27.10      2.25%
    Bombay Sensex                        9901.99    193.49      1.99%
    Baltic Dry Index                          1615.00     -31.00     -1.96%

    *at Close


  150. Asian Markets Extend Rally But Caution Sets In

    Asian markets started the new quarter with more gains after an impressive performance in March on expectations the frail global economy is about to bottom out and hopes the financial system was on the mend. However, the safe-haven yen also rose on concerns about the fate of General Motors and Chrysler, in a possible sign that more bad news could spur investors to ditch riskier assets just as quickly as they piled in on March. Evidence of economic weakness abound. Data on Wednesday showed Japanese business confidence tumbled to a record low, while reports on Tuesday showed plunging U.S. home prices and consumer confidence holding at just above record lows.

    Japan’s Nikkei closed 3 percent higher, with carmakers such as Honda Motor climbing on relief that a solution for struggling U.S. automakers could be near, prompting bargain hunting.

    South Korea’s KOSPI was finished 2.3 percent higher led by banking and auto issues including KB Financial Group and Hyundai Motor, with news of a record high trade surplus in March lending further help.

    Australian stocks eased 0.1 percent, down for a third straight day and pressured by drops in Macquarie Group and Rio Tinto, but banks gained on hopes of an interest rate cut next week. The market oscillated between positive and negative territory during the day, reflecting a lack of confidence, and ignored Wall Street’s gains on Tuesday.

    Hong Kong shares dropped 0.4 percent after starting on a firm note. Bank of China, the country’s largest foreign exchange lender, said it would raise its stake, currently at 65.77 percent, in its unit by market purchases over the next 12 months.

    Singapore’s Straits Times Index closed 2.3 percent higher, led by financials.

    China’s Shanghai Composite Index climbed nearly 1.5 percent to test major chart resistance in heavy trade, buoyed by hopes for an economic recovery and an ample supply of funds for short-term speculation in shares.

    The BSE Sensex closed at provisional 9,914 higher by 206.30 points or 2.12 per cent from the previous close.  After an extremely choppy session, Indian stock market ended Wednesday’s trade in a positive terrain. Unexpectedly, traders were seen taking long positions in the frontline stocks despite demonstration of mix cues from global markets.


  151. Euro Stocks Dragged Down Ahead of G20

    European shares were lower in early trade on Wednesday, weighed by banks and commodities, with investors cautious ahead of a summit of G20 leaders in London.

    The pan-European FTSEurofirst 300 index of top shares was down 1.1 percent at 725.46 points, following a 3.5 percent rise in the previous session.

    "Investors are looking at the G20 for any commitment… like government expenditure, or more importantly, getting the banking system working properly so that there is more lending. Everyone is on egg shells waiting to see what happens with G20. Everything … is now predicated on what comes out of G20," said Justin Urquhart Stewart, director at Seven Investment Management.

    Banking stocks weighed heavily on the index, although stocks within the sector were mixed. Societe Generale lost 4.3 percent after the French bank said on Tuesday it expects additional writedowns of risky assets in the first quarter "at (a) manageable level." Lloyds Banking Group, HSBC, Banco Santander were down 1.7-6.5 percent. Swiss bank giant UBS gained 0.7 percent after the group said it had appointed former Credit Suisse executive Ulrich Koerner as its new chief operating officer.

    Energy stocks fell as crude lost 2.8 percent. BG Group, BP, Royal Dutch Shell and Total were down 2.4-3.1 percent. Goldman Sachs cut BP to "sell" from "neutral."

    Miners were in the doldrums as copper slipped 2.2 percent.Anglo American lost 6.8 percent after the group said on Tuesday it had sent out a request for proposals to banks for a loan of about $2 billion, three banking sources close to the deal said. Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, and Rio Tinto were 3.5-5.5 percent lower. Lafarge was down 4.4 percent after the world’s biggest cement maker launched a 1.5 billion euro rights issue at a subscription price of 16.65 euros, compared with Tuesday’s closing price of 33.89 euros.

    Across Europe, the FTSE 100 index was down 1.8 percent, Germany’s DAX was 1.7 percent lower and France’s CAC 40 slipped 1.9 percent.


  152. Oil Falls Toward $48 on Prospect of Rising Inventories

    Oil fell more than 2 percent to below $49 on Wednesday, pressured by weak economic data and the prospect of a further rise in U.S. crude inventories, which are already at their highest since 1993.

    U.S crude [ 48.27    -1.39  (-2.8%)] were down, eroding Tuesday’s 2.6 percent gain.
    London Brent crude [  48.28    -0.95  (-1.93%)] fell.

    Crude futures on Tuesday rose in tandem with Wall Street, which was headed for its best month in six years, despite bleak data showing U.S. house prices had plunged at a record pace of 19 percent in January and consumer confidence held just above record lows in March.

    Business confidence in Japan, the world’s second largest economy and the third largest oil consumer, tumbled at its fastest pace ever in the first quarter to the worst on record, the Bank of Japan’s tankan corporate survey showed.

    Oil prices could reach $75 per barrel in 2009 despite a the economic crisis, OPEC president Angola said on Monday, adding that compliance by the 12-member group with the agreed cuts remained at around 80 percent.

    Dollar Underpinned on US Carmakers’ Fate

    The dollar was supported on Wednesday as uncertainty over the fate of U.S. carmakers and falling share prices prompted investors to seek perceived safer assets and shun high yielders. The euro backtracked from sharp gains the previous day, but was off lows as European share prices pared some losses after falling 1.0 percent in early trade.

    The euro [1.3237    -0.0012  (-0.09%)   ] was flat versus the dollar. Against the yen, the euro [ 131.15    0.04  (+0.03%)   ] was lower.

    The dollar index, a gauge of the greenback’s performance against six major currencies, rose 0.3 percent to 85.771.

    Separate data showed the pace of decline in euro zone factory activity eased slightly in March. The Markit Eurozone Manufacturing purchasing managers’ index rose to 33.9 for March from 33.5 in February. That was revised down from a flash reading of 34.0 and forecasts for an unchanged figure.

    The dollar had earlier risen to 99.48 yen, the highest since March 5, after the Bank of Japan’s tankan survey showed confidence among Japan’s big manufacturers fell to a record low of minus 58, down 34 points from the previous survey and the largest drop on record.

    The dollar [ 99.04    0.13  (+0.13%)   ] was slightly higher against the yen.

    Reduced investor risk appetite sent higher-yielding currencies such as the Australian dollar lower, which was also dented by data showing Australian retail sales fell by the most in nine years, adding to the case for a cut in interest rates next week.

    The New Zealand dollar extended a big slide after New Zealand’s central bank warned on Wednesday that a recent rise in market interest rates was unwarranted and out of sync with its view of the economy.


    Gold steady as traders eye G20 for direction

    Gold was steady in Europe on Wednesday as traders awaited direction from this week’s G20 summit in London, with the firmer dollar versus the euro curbing interest in the precious metal. Bullion ended the first quarter of the year up 4 percent, boosted by fears measures to stimulate the global economy would lead to a rise in inflation.

    Gold was little changed at $919.30/921.40 an ounce at 1007 GMT from $917.15 late in New York on Tuesday. Trading is expected to be muted ahead of Thursday’s meeting of G20 leaders.

    Traders said gold’s failure to build on the gains it posted last quarter on fears over the inflation outlook and strong inflows into exchange-traded funds such as New York’s SPDR Gold Trust is also weighing on prices.

    The European Central Bank said it completed the sale of 35.5 tons of gold on Tuesday. However, the news had little impact on price.

    The other precious metals were little changed. Platinum was at $1,123/1,131 an ounce from $1,123.50, while palladium was at $215/218 an ounce, against $213.50.

    Silver was steady at $12.93/13.00 an ounce against $12.93 late in New York on Tuesday, awaiting direction from gold. Silver prices rose 14 percent in the first quarter.


  153. Good morning!

    As we expected, we’re back down to test that 7,550 line (my 12:16 comment/alert above).  We’re fine down here, hoping it holds DESPITE the thousands of G20 protesters but we’ll see how well we do with the 8:15 ADP report…

    Obama and Brown made some nice noises this morning that took us off the bottom but a strong dollar will keep pressure on our market (Japan was thrilled).  Oil is hovering around $48.50 and we have inventories at 10:30, if we break down from here, OIH and XLE still have further to fall and XLE below $42 could lead to a broader market sell-off led by energy.

    I’m very glad we went 60% bearish at the top yesterday (3:15 comment/alert).  With luck, we’ll have reason to cover the long puts back up at the open but there will be the heightened concern of a terrorist attack until the G20 is over tomorrow so we need to make sure we have some emergency coverage regardless so likely a 1/2 cover at best. 


  154. phil what are the oil etf’s-thank you


  155. dig dug? think i found them


  156.  phil
    if you were to want to be bearish overnight, but did not want to do an option (maybe because you wanted to jump out right after a bad ADP, like today) are you using the BGZ or another leveraged play?