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Monday Market Madness – Pandemic Edition!

It’s been a while since we had a flu scare.

We had avian flu a few years ago and the biotech stocks of companies that made vaccine went nuts for a while and then crashed when it turned out to be much ado about nothing.  Of course before that was mad cow and that one devastated the beef and restaurant industry, especially in Europe where steak houses went bankrupt as people refused to eat meat so don’t underestimate how fast panic can spread and habits can change when people start dying.  The pigs are getting a bad rap this time as this particular virus is a mix of swine, bird and human strains but logic doesn’t enter into these things and if the press is determined to label it "swine flu" then you bet that’s what the public will fixate on.

HRL is a big seller of pork products and could make a big breakdown if they can’t hold $30 but, rather than short them, I prefer to get in on a dip as these things do tend to pass.  GSK makes a vaccine and is an obvious upside choice and they’ve been trading well off their highs so make a nice play either way.  The June $30 puts can be sold naked for $2.17 and that’s a nice way to enter the stock (or get paid $2 NOT to buy it).  Also buying the stock at $29.34 (which pays a 5.6% dividend) and selling the June $30 calls for $1.10 and the June $27.50 puts for $1.05 drops the net entry to $27.19 and an average entry of $27.35 if put to you, a nice discount to the current price (see "How to Buy a Stock for a 15-20% Discount" for details on this strategy).  GSK 2011 $25 calls are also pretty cheap at $6.15 ($2 in premium) and we can sell calls against them on a nice run up, perhaps a 1/2 sale of June $30s at $2+ (now $1.10).

NVAX already got a huge pop on Friday when this story first spread and should continue to fly but that’s one of the ones we’re more likely to short as they get overextended.  I think my other favorite upside play is MMM, who don’t make a vaccine but do make those blue masks that governments love to give out to make people feel like they’re doing something.  It’s hard to get US citizens to go for them but in Asia they love the things and 3M is a great company anyway who held onto half their profits in the last earnings report and are quite the bargain at $57.  Jan $50 calls are $9.85 and a 1/2 sale of the June $55s for $4 or more puts you in a $5 spread at $7.85, fairly well covered (and you can always sell the other half) with plenty of time to adjust.

Chinese character ji1 -- in traditional form ?

In Chinese, the symbol for crisis is made up of two elements that signify danger and opportunity (more accurately, a time of change).  Preparation is a pre-requisite for taking advantage of an opportunity or all you have is a dangerous crisis.  Although the danger may be high, opportunities present themselves to those who are prepared – that’s what we try to do here at PSW, prepare ourselves for market contingencies and be ready to act, turning danger into opportunity whenever possible but never forgetting that the danger is there!  Remembering the danger that lies in the opportunities and hedging for both is the yin/yang of trading….

As is usual in any kind of global scare, gold is running up, going as high as $920 in overnight trading and this is good news for the IMF, who are the world’s third largest holder of gold and are looking to sell 12.9M ounces (12% of their reserves) for, they hope, close to $12Bn while they wait for $500Bn in checks to clear from the pledges made by G20 nations at the last conference.  We’ve been bullish on gold for quite some time but I urge caution here as a combination of IMF sales forcing the ETF GLD to begin selling their stash could cause a fairly sharp correction along the way.  We covered our hedging strategy on that in "Spinning Straw Trades Into Gold" back on March 22nd, when we hit a perfect bearish entry right at $925 and flipped bullish at $875 – this strategy may be setting up to work again so we’ll keep an eye on it!

China, with 1.4Bn people, hates epidemics of any kind and the Hang Seng fell 2.74% this morning (418 points) so congrats to all our FXP players as that cover pays off in spades today.  Tourism stocks led the declines but the market was due for a pullback anyway and this is just a good excuse to take a little off the table after a huge run although it is a little disturbing to see the 15,000 line fall so easily as we practically gapped below it at the open.  The Shanghai Composite took a similar fall but the Nikkei got a 75-point "stick save" into the close that kept them positive (up 18) and painted a nice technical picture above the 8,650 line despite the government’s forecast of a record 3.3% economic contraction, a severe revision from flat forecasts in December.  

The government on Monday also finalized a supplementary budget bill to fund the fourth stimulus package since last summer, which includes ¥15.4 trillion in fresh fiscal spending. It will submit the bill to parliament for approval. "It is very unusual to submit an extra budget as early as April, the first month of a fiscal year," a Finance Ministry official said. "We can’t imagine what lies ahead now; let’s just hope that the announced measures will save the economy."  One thing I often say to members is:  Hope is NOT a strategy, but it seems to be what Japan is counting on as they once again roll the stimulus dice.  Japan’s GDP contracted at an annualized pace of 12.1% during the October-December period, and the Cabinet Office said it may shrink by about 14% — the worst pace on record — during the January-March period. "We are also worried about a return of severe deflation," the Cabinet Office official said, because it will make the recession more severe by damping consumer spending.

Europe is down about a point ahead of our open and hoping they can pull our markets up rather than us dragging them down as the EU markets clearly outperformed us last week.  Airlines and other travel stocks led the downturn in Europe as well and that should finally get PCLN to break lower here (see Weekend Wrap-Up) although not for the reason we expected.  Iceland swung sharply to the left in this weekend’s elections (European nations have elections on Saturday’s because they actually WANT their citizens to vote) with the Social Democratic Alliance and their coalition partners in the Left-Green Movement taking majority control of Parliament.  Why does this matter?  Well Iceland was not in the EU and ran a very US-style economy dominated by banking and it destroyed the country.  The Social Democrats want to join the EU and the EU is controlled by votes and this will push the EU further down the path to regulate and reign in capitalism.  Doesn’t that sound like it matters?

Speaking of capitalism not working – GM is diluting down common shareholders roughly 100 to 1 by paying off everyone in stock, cutting deals with bondholders and the UAW in order to save the company.  For some amazing reason, this is not tanking the stock pre-market, which I find amazing as I didn’t want to own 1/300 Millionth of GM for $1.69 last week and I sure don’t want to own 1/30 Billionth of it for the same price today!

We are, to say the least, relieved that we took a bearish stance into the weekend but we will try not to over-think the market and stick to watching our key levels, which remain Dow 7,900, S&P 833, Nasdaq 1,580, NYSE 5,225 and Russell 444 below which we have at least a 2.5% air pocket that will provide little support.  On the upside, we need to take out last week’s highs of DIA 8,130, S&P 870, Nas 1,700, NYSE 5,500 and RUT 480, which should NOT be difficult as the dollar is off 2.5% from last week’s open (raising the relative value of equities).  The energy sector and perhaps the miners will pull us down early on and I don’t really see a horse to jump to other than biotech/pharma but that’s based on the flu event and not a reason to rally the markets so we’re going to strap ourselves in and ride this puppy down and see where the bottom is today – hopefully we find it early on but, fortunately, we are prepared for anything.

Be careful out there!


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  1. phil--i have been watching cde, paas ssri and hl—cde seems to be set to run a little —50 dma is rising and price is apporcahng 200 dma--any thoughts on cde?

  2.  Thanks Phil for your opinion on gold and the impact of the IMF sale as well as the power of the USD to influence and adjust support and resistance levels.
    Do you think the Chinese government’s policy to buy gold with their hefty stash of USD would have enough force on the gold market to create a floor and prevent gold’s spot price  from going down? When I say down, I mean way down like revisiting the $700-$750 spot price we saw a few months ago.
    What do you think of the GLD chart that we had a successful short term double bottom at 85? 

  3. CDE/Corleone – I prefer ABX over the long haul.  Gold is simply an unstable investment so, to me, it’s more important that I love the core operation and I can sell calls on a regular basis to generate an income.  There is nothing wrong with CDE but they are just a gamble and very sensitive to a dip in gold prices.  HMY is my favorite gambling stock on gold, I think they are way underpriced and you can buy them for $9.75 and sell June $9 puts and calls for $2.05 for net $7.70/8.35.

    China/Merk – To whatever extent they want to support gold, they can but China is not like us and it’s a huge mistake to cast them in the role of hedge-fund manager, thinking they are going to manipulate things for quick profits.  This a 5,000 year-old nation and they plan things over decades, not quarters.  I predicted 2 years ago that the Chinese would let the US spend money in Macau, build casinos and then kick them out and keep the buildings.  Today we have news that LVS is on the verge of giving up their holdings for $1.3Bn – Shelly got taken to the cleaners!  The same thing happened with Hong Kong over a 100-year period.  The Chinese are masters of the long-game and that’s the game you have to think about.  Long-term, they want the Yuan to equal the dollar or the Euro as a reserve currency but they currently have $1.5Tn  in reserves. 

    They are not going to do anything to devalue that currency and, while they may be on a path to spending dollars for gold, they are not going to do it to the extent that they will devalue what they have.  Once they have $1Tn in gold and $500Bn in dollar reserves, then it will be worth it for them to dump dollars and shoot gold to the moon so you need to keep your eye on those ratios over time.  I don’t think they want to set a floor, they plan on buying $1Tn worth of gold at less than $900 but it’s probably a 5-10 year plan and, just as we talk about scaling in – they’d love to catch a sale as their goal is in ounces, not dollars.

    I did call $850 as a floor but I have become nervous of the rapid accumulation of gold by GLD.  That’s a wildcard in the system as we don’t know how fast they could be forced to unload or what kind of market there would be if gold starts breaking down (due to global recession/deflation worries most likely).  Once we break $925 and hold it for a test, then I’m ready to get more bullish for the next leg but, right now, caution is advised.

  4. how about uaua on 5 strike price for may buy sell spread

  5. Let’s see if we can hold the magic numbers: Dow 7,900, S&P 833, Nasdaq 1,580, NYSE 5,225 and Russell 444

    If the bears can’t take these out today, their case is going to look pretty sad. 

    It would be healthier to get a nice pullback to start the week but we cannot always get what we want and it will be impressive if this morning dip is all we get, especially with the dollar going up and oil going down (now $48.61 but heading back up).

    We are not going to be impressed until we take out 3 of the 5 upside levels from last week:  DIA 8,130, S&P 870, Nas 1,700, NYSE 5,500 and RUT 480, but then we’ll be very impressed.

  6. NVAX up 170% so far!!

  7. Phil
    Still like the TSO – sell June $15′s for $1.50- 1.55?

  8. UAUA/Ronald – The airlines are getting crushed but we’re in day one of a panic so beware it’s a very dangerous time to take a stand.  As a small scale-in, committing perhaps 25% of a full position, I love the idea but I’d feel better about the stock at $5.45, selling June $5 calls for $1.55 and June $4 puts for .60 for net $3.30/3.65 – a nice 40% discount off the current price with a 50% upside.

  9. I’m with you Phil.  I want a nice pullback too.  Sitting on 60% cash and lookng for some pullbacks etc to deploy.

  10. Phil, I don’t really think its a case of the bears having the ‘strength’ to take us down.  I think it’s more of a situation where the current bulls will become bears.  THEN, we will move down with the ease of a hot knife through warm butter.  The so called ‘bulls’ will tell us when we are going down.  I see perhaps a spurt to the upside this week, maybe not today unless it’s a stick save, and then towards the end of the week we could drop significantly.  Just my premise.  We’ll see.

  11. Phil: DIA puts se4p83 with 1/2 cover may 81: leave it.

  12. this is a riot, watching them trying to pump up market this morning.  makes perfect sense !
    Sold another SKF call; oct 270 for 3.20 !

  13.  Thanks Phil for your perspective on China and gold.
    I just cashed out my May 77 puts on that last little dip below 8000… I’m all long and naked with DIA May 81 calls for the push upwards.
    Just in case "they" want to plunge the market for some shakeout, I set some low-ball orders waiting for them. The orders  will auto trigger to buy their dip at the bottom of the trading channel around 7750.

  14. In case you have not noticed, swine flu is bullish for RIMM, 70.27 and pumping.

  15. Dow holding up really, really well considering transports off 3%.

    TSO/Pstas – Yes I still like that one for sure.

    HOV sneaking back up to $2.50 durin g all this.  Overall, there is a ton of buying going on.

    Premise/Matt – Good luck with that!  I’ll stick to level watching and the levels indicate that the bear hunt continues at the moment.

    DIA/RMM – Certainly we’ve been given no reason to get more bearish this morning.  If we cross 8,130 we need to cover fully with $81 puts.  The SOX are already positive and the RUT has come back strong this morning.  GS is doing very well and all this is WITH oil down 2.5% – objectively it’s a strong market but they still have to prove it by taking out levels, not just keeping things from falling.

    MMM popping.

  16. Phil, thoughts on GOOG today with BIDU earnings tonight (i think)?  Oh yeah, thanks for the 100k hedged and other weekend submissions.  Starting to feel like the old days.

  17. Phil,
    I sold a few UAUA May 5 puts naked a week ago. At what point would I consoder rolling to 4′s if I don’t want to be assigned. Thanks

  18. Ok, would you believe we’re headed to 1619 on the Naz?  Read my premise again, I didn’t say we weren’t going to go up.  Just not today.  And not by the end of the week.  8-)

  19. here’s a link to follow the ‘swine flu’ in realtime via google maps as the world health organization declares them. stop eating bacon in texas IMO.

  20. phil – sold some puts last Thursday on the ABX – May 27.50 for .60…glad to see you are on board the stock.
    Question hedging…        I forgot who asked about this on Sunday but was a good thread and made think of a question I have had for a while…When you have misc postions that you feel you want to hedge (either long or short) with an INDEX,, such as DIA, is there a simple mathematicla way of determinging QUANTITIES….It is one detail I have not quite understood from the ‘mattress" play.
    I guess I am having a hard time with why we need to cover the DIA puts with short puts if in fact we have long positions (which are positively correlated with equity markets).
    For  instance, say I have have some ACN and I have both puts and calls sold against it  – and therefore bullish, why would I not just buy puts and thats that.
    ALSo, if I did this, how do i decide  quantities of the DIA contracts to buy.
    thanks very much
    **Also, other note, have a compliment for you…I was short both the FAS 6 and 7.50 puts at great premiums last week…then I hedged with the FAZ 7.50 puts as well…It was a nnice feeling to not bee so stressed this am: I new was OK on both sides of this  – just mentioning it as I feel I have learned a valuable skill in how to properly hedge by SELLING premium on both sides of a sector.

  21. GOOG/Jo – I don’t think BIDU earnings affect GOOG.  I think GOOG already painted a best-case for BIDU and it’s their ball to drop and I do like the $200 puts at $6.20, happy to get out later if there’s a panic sell but a gut gamble otherwise.

    UAUA/Aclend – I wouldn’t roll those, only if the premium is 75% gone and we really don’t think the transports will recover but these things go away very quickly and we have 3 weeks to May expiration and the Dec $4 puts are $1.52 so worry when you can’t do an even roll to them.

  22. now that i think about it, i’m not sure what was going through my head last night when i bought two slabs of baby-back ribs from the grocery store…(damn you food network!)

  23. Phil: is there a ZION buy/write again ?

  24.  A military drill over NYC put a nice wiggles and spikes on DIA and gold.  OK… now back to pushing up the market !!

  25. The ridiculous thing is there are low flying planes over NYC all the time.
    After 9-11 they made planes stay away and go around manhattan; but over time, they relaxed those common sense rules and there have been low flying planes over our buildings all of the time ever since.

  26. Phil
    AXP- last week you suggested the Jan 09 30′s and selling May 25′s againt it for a "short" play alternative to my May vertical.
    Would you stay with that recommendation? What are the pros/cons of going with a higher/lower strike on the long / short calls? Trying to understand the process a bit more?

  27. Kwan – FWIW, CDC claims swine flu isn’t transmitted by pork food products, though I think that won’t impress most people.

  28. Ok, scratch that call on the Naz.  It’s being defended.

  29.  millerbisme – i was actually making fun of the ridiculousness of it. so is xkcd this morning.

  30. TSO- in for $1.55- thanks,
    When would you consider adding to this position? I.E., Say TSO pulls back further and the June 15′s go to $1.85?

  31. Phil:
    What’s with the premium on DNDN May $10 puts?  Despite the upward spike in the stock price, put premium is
    not eroding like I thought it would.

  32. funny, kwan
    BTW, am I the only one who doesn’t get "twitter"?
    If I could *short* social networking, twitter would be my full stochastic sell signal.

  33. Phil,
    I am stuck in AXP which I bought around $19.8 and sold Mat $17.50 calls for $3.40.  I could use some help / suggestions on this trade on how best to exit here. I doubt AXP goes much higher than the $25 it has reacehd in less than week from  $18!

  34. Hedging/BC – The MAIN purpose of a mattress play is NOT to guard against a piddly 100-pont drop like today, that’s just normal market movement.  Ideally, you want a position that has a clear path to a double if we have a "Black Friday" type event that is going to whack you for perhaps 20%.  The current covers of DIA Sept $83 puts at $8.23, selling 1/2 the May $81 puts at $2.75 is in for net $6.36 and we have a reasonable expectation of being able to roll the $81 puts to 2x the June $73 puts, which is a $10 spread and those can be rolled to the July $69 puts, which is a $14 spread and there’s our double.  That being the case, if we want to cover a 20% drop on $10,000 ($2K) then we need to have net $2,000 of the DIA spread that we expect to double in a 20% drop of the Dow (1,500 points or $15 DIA points) so at least 3 and preferably 4 contracts (erroring on the side of caution is good). 

    The real trick is getting a handle on how much you really have at risk on a sell-off since presumably you hedge both sides and the goal of the mattress plays is to cover what you will lose on a Dow disaster – something that happens too fast to adjust.  I’m very happy to hear the double sells are working for you – those are great trades to take advantage of when the opportunities present themselves and, with all these crazy ultra-ETFs on the market now, that seems to happen more and more often.

    LOL Kwan!  It’s like a time bomb ticking in the fridge… 

    ZION/RMM – At $10.50 there is, not here.

    Financials not participating so far.  If they do, then we have a rally for real.  Also watch OIH (down 3.3%) and XLE (down 2%) for early signs of more buyers but, so far, we’re narrowly traded on low volume so not too impressive after 1 hour.

    Speaking of attacks – my computer has decided to work like a C64 so I’m going to have to reboot – back in a few (I hope).

  35. So far just sitting on my hands and not doing any trades.  Sometimes that works out to be the best.  Was going to get back into AAPL at about 123 but fixed a piece of toast and when I got back it was too late.  

  36. Dow up 130 points from the open.
    Makes perfect sense doesn’t it ?!

  37. That’s funny !  Swine Flu offensive to Jews and Muslims.  Rename it the Mexican Flu !  So then its only offensive to Mexicans.
    way to go CNBC !

  38. Matt – I’m with you that we should see weakness eventually.
    What was it someone commented about a year ago here?
    "This rally will go on longer than anyone expects, and the following drop will be deeper than anyone expects…" – or something like that.
    Pretty prophetic for Spring 2008, and my guess is it’s probably still valid for 2009.

  39. The MSM are still pushing the political line of "Green Shoots" and "Better than expected". 4 Banks bankrupt over the weekend and conveniently forgotton. Phil and Ilene continue to post articles in the favourites section that really eloquently argue many different viewpoints that things are going to get worse. If it wasnt for the fact that someone or somepeople keep buying (indiscriminately) everything thats on offer I’d have doubled up my shorts every week for the last 4 weeks.

  40. The other thing that is keeping me net short at the moments is that I know the second I buy em back will be the second that the market sells off :-(

  41. LEN in what looks like  a short squueze

  42. DB, you shouldn’t have to wait anymore then till the end of the week.  I suspect next Monday will be a BIG down day if we don’t have it before then.

  43. USG- I am short the Aug 10′s @ $4.30 callers;  Looking to roll these up to the Aug $12.50′s for $3.50 or other? Suggestions?

  44.  Phil,
    You are not the only one… my computer went into super-slow motion. All my live charts went to black screen and my Chrome browser wouldn’t switch between tabs. I did a reboot, by my @#$%$# PC wouldn’t boot to Windows on a soft restart. I had to do a hard kill using the switch on my power strip before the damned thing would reboot all the way to Windows.
    Back to normal now with all charts running…. finally !

  45. A pump on bad news seems like a welcome opportunity for bears and/or shadowy unwinders…so good in fact that maybe they’re the pumpers.

  46. BIDU short strangle 240/195 for $12. Protected to 252/183.

  47. Phil: have 8 UNG oct 8 longs for 6.4$, down to 5.25$,
    UNG is at rock bottom, can hardly drop lower, no june calls below 12,
    To do: wait as I planned this for a recovery later in year,
    but, is there premium to be burnt ?

  48. AXP/Pstas – That was a bearish, pre-earnings play.  They beat by a mile and stayed flat so the play was a good one but now we have no further reason to be particularly bearish on them other than possibly some reaction to the flu thing cutting down on travel etc…    Once May expirations run their course, the idea is to convert the bearish entry buy taking the $3 from the caller and using it to roll the Jan $30s at $3.25 down to the $22.50s at $6.60 and then sell something like the June $27.50s, now $1.65 to knock another 20% off the leap while leaving a little room to run.  As to TSO, generally you need to make decisions when you lose 20% so about $1.85 is the right place to consider adding but always try to take a realistic look, not just add because you lost 20%.

    DNDN/Bvar – A lot of us have seen DNDN fall from $20 to $3 before so the $10 puts will hold premium to the bitter end but I do think it’s different this time for DNDN.

    Dow up 40 – that is just crazy!

    Twitter/Miller – I would short Facebook, that thing is getting more and more like a junk Email account.

    AXP/M2 – You are not "stuck" you are just getting called away with a 6.7% profit and you wish you could do better.  What you need to think about is the risk/reward of rolling and staying with the position.  Since the $17.50s are so deep in the money, you haven’t got very good options unless you want to take money out of pocket.   I would sure spend $1.20 to roll the caller to the July $20s at $6.30 as that adds $2.50 to your potential exit and still leaves you with 25% protection.  That’s only 7.5% for the quarter so the question is do you have better things to do with $17.50 than make $1.30 between now and July 17th?  If, however, you don’t have a full postion and you are willing to roll to another buy/write, then the June $22 puts and calls are $6.15 so costs $1.35 to push your call-away strike up $4.50, that’s pretty good for a month.

    How is the word swine offensive to Jews?  I know it was the Israeli health minister who said it but I have to think he’s just crazy.  It’s like saying they shouldn’t call it "pork barrel" legislation…

    Bitching/DB – Keep in mind that there is enough hard cash on the side to take the market up 50% from where we are now.  Well over $11Tn in cash is in mutual funds, hedge funds, pension funds etc that is undeployed at the moment.  That is enough to add 50% of real value to the markets across the board.   The fact of the matter is though, that you don’t need to put $11Tn into the market to raise it 50% as less than 5% of all securities are traded on the average day and it only takes a fairly small imbalance of buys over sells to raise the market 5%, perhaps 10% of a day’s transactions.  So if we have $1Tn a day being traded and 50% is buys and 50% is sells that’s just $500Bn in buys per day and if just $100Bn comes in from the side it can tip the market up 5% that day.  With $11Tn on the side, there are 100 days worth of 5% up moves that can stop you from doubling up on your shorts for 6 months if the market keeps looking like a good investment.  Do not underestimate the potential to rally the markets if sentiment really changes. 

    That being said, what I think we have here though is a total BS pump job that is aimed at changing sentiment by manipulating the charts and propping up the indexes to prevent a sell-off.  Can they keep it up long enough to affect some real change?  That’s what our upper levels are all about – notice we once again were rejected at 8,130, that’s because there is real volume at those levles that would love to take profits off the table and until they turn those sellers back into buyers, we’re going to have trouble moving up but, once they do get rid of those guys – we’ll get another short squeeze as there’s still plenty of non-believers who keep fueling the fire every time we go higher.

    LEN/Cap – HOV is flying too, up 15%.  Clearly they had a very different interpretation of the housing report than we did.

    USG/Pstas – I’m not sure what you are trying to accomplish.  You were very wrong on your short sale but, thanks to premium erosion, you can get out even but instead you want to press your bet and give your caller 4 more months to bury you.  If they break through the 200 dma at $15, they could gain $5 more real fast.  If you must keep selling them, why not sell 2x May $15s for .80, hoping that the 200 dma is tough to break.  If they do get through, at least  you can roll those to June $17.50s and then Aug $20s and, hopefully, one day the stock will miss the target you keep raising for it but selling them an Aug call with only $1.80 in premium (.45 per month) after they just gained $7 this month is dangerous to say the least.

    Reboot/Merk – Actually I didn’t end up rebooting.  I closed all my windows, did a CTRL-ALT-DEL and used the Processes tab on the task manager to figure out who was using up all my CPU time and then I just killed that task.  My Idle CPU time shot right back up to 97% and I just opened back up and was done.  If you accidentally delete an important process, all that happens is you have to reboot anyway so I like to try that first as it’s usually some background program that ran amock and can be easily dealt with.

    BIDU/Savannah – That’s a good one.  We’ll see how low they go on the pullback that’s bound to come ahead of earnings. 

    UNG/RMM – Right now it’s just like any stock that dropped $1 on us.  Have we lost faith enough to give up and cover or is it just a dip?  Nat gas went down to $3.20 over the  weekend but they jacked oil back to $50 already today and I can’t believe that Nat gas will plow through $3 without a bounce so not much to do but wait.  It’s a wild stock, already went from $12.70 at the open up to $13.10 and now back to $12.95 and they are starting to get attractive as a buy/write with the June $12s selling for $2.35, which is something you can sell against your longer calls if things look bad since we have a synthetic ownership of the stock at $13.25 (the $8 strike plus our $5.25 value) and selling the June $12s for $2.35 lowers us to $10.90/11.45.  Of course we didn’t really WANT to own the stock but it makes more sense to do that than to DD on the long calls and pay another $1 in premium so that is our exit if we can’t hold $12.50 with the assumption that there will be July $10 puts and calls to roll to (currently $3.50).

  49. Phil: is your UNG comment:
    wait as I also said for the oct long calls to recover, do nothing else,
    but can consider going into buying UNG stock as the basis and sell jun 12 calls, now 1.65 $,
    ok ?

  50. LEN apparently sold some very expensive junk bonds last week.  Why that is a positive for the stock is beyond me.
    Ya can’t borrow it to short it, which is why is squeezes so easily.

  51. Phil – STAR seems to be a prime candidate for a short ( i am seeing a quick correction to $19 maybe $18). What do you think? Thanks

  52. Pig Flu?  We don’t scare because of any stinkin Pig Flu!  We have a charade to display!!  So we go up.  Or sideways.  But not down.  No, no, not down.  Not until we say so!
    Look at the PATHETIC volume in FAS.  They are boring us all to the sidelines.

  53. UNG/RMM – The idea is to wait for a turnaround and, if that fails, just sell the puts and calls.  There is no need to buy stock as we have leaps with just $1 in premium and we’re collecting more than $1 from the caller so we can’t (theoretically) be harmed by anything to the upside and the downside is naked anyway.  This is technically the advanced, stage 2 method of using buy/writes which we haven’t gotten into yet but, as stocks head higher, there’s really no reason to buy the stock when a leap will do the same job.  You can even use a vertical for one leg but then you WILL get called away each month so it depends what you’re trying to accomplish.

    Oil over $50 (bastards), XLF still down a point but OIH cut 1/3 of their losses as did XLE already and XOM is already green (Dow component) so let’s watch CVX, who are still down 1% to see if the Dow is going to get a push from those two. 

    GM very interesting.  Option players are smarter than stock buyers I think as the stock is at $2.10 but the $2 calls are just .28 and the $2 puts are .57.

    Who is boosting the Dow?  BA up 2.2%, CAT up 1.25%, GE up 1.5%, GM up 26% (no real effect on Dow as it’s so small), IBM up 1%, JNJ up 1%, KFT up 1.75%, MCD up 1%, MMM up 1.7%, MRK up 1%, PFE up 2.73%, PG up 1.7%, WMT up 2%.  So Pharma and consumer staples along with 4 industrials – not very impressive with 12 components down.

    All the advance/decline numbers are very red, this is a highly selective rally and we just tested the top again and failed – I have to think it’s worth chancing going short here by taking off DIA $81 putters at $2.50, which seems to be the same price we go in and out over and over.

    That means I expect FAZ to head up and FAS to head down from here but we’ll see how much of a dip we get.

  54. Phil:
    My portfolio strategy is based on applying the following: please comment and add.
    Have good stocks and sell covered calls for premium harvest,
    Have good buy/writes, sell calls and puts, harvest premium, get called or get stock put to me, either good return or get more stock at low net cost,
    Good LEAPS and LONG calls:sell 1/2 covers, if runup, sell full covers,
    NAKED short puts: premium harvest
    DIA puts: protective puts for portfolio, sell 1/2 or full covers dependent on DOW move.

  55. STAR/Ranj – I don’t follow them so I couldn’t say.  I used to know more about that space but if you miss a season these days you are way out of the loop but, in general, you can’t stand in the way of a company with a hot product as order pile up fast and T, VZ et al have lots of cash and lots of pressure to expand their multimedia offerings and, of course, there are tons of people getting into the space on the home front as well so a niche player like STAR can grow very rapidly.  I’d advise you have more of a premise for shorting them other than the fact that they are up 50% for the year so far.

    Oops – that last post was FAS to head down although I do like that format as it gives me an excellent chance of being right!  8-)

    Portfolio/RMM – Sounds good to me.  Keep selling more premium than you’re buying and things should work out over time. 

    HCBK with a quick recovery off the morning dip.

    Sheila Bair about to speak, that’s a wild card as she’s not always friendly sounding – lots of Q&A scheduled, will be very interesting.

  56. Bitching/Phil – Its really difficult to argue when you start throwing trillions of dollars around. !!!!  All I can say is that if the market was such a big deal they’d be in. I read somewhere that Californian pension funds actually got out the market last week. So perhaps you should wonder what would happen if all the invested Pension Funds/Hedgies got out. I’m just not clever enough to throw all the figures back at you :-)

  57. Phil: among the following, which one is attracTIVE:
    PCLN, MA, FLS.

  58. USG- I am a bit confused- no surprise there – but some background on my position:
    I own 1500 shares USG- I started to buy in last year while still on the $30′s before the collapse. I added while down in single digits- my avg cost is $16 and change.
    I sold covered calls in April when I started with PSW- April $7.50′s- just prior to USG deciding to move up after being in the crapper for so long. I subsequently rolled these up to the May $7.50′s; then rolled to the Aug $10′s. I did not expect the move so soon but remained bullish long term. My intention was to just gain some premium/reduce my cost basis while I waited for a recovery. Well , it happened quickly. Here is the sequence of events. Perhaps you can help by pointing out what I may have done incorrectly plus what is the best course now?
    4/3- Sold 13 April 7.50′s for $1.15 (USG was in the 8′s- just ran up & I was assuming a pullback)
    4/13- Bought back 13  7.50′s for $2.65 (USG was in the $9/$10 range- again- looking for pull back)
    4/13- Sold 13 plus 2 add’l- total 15 May $7.50′s for $2.85
    4/22- Bought back 15 $7.50′s for $ 5.70. (USG had run up to $12+; Wanted additional protection)
    Now what?
    4/22 – Sold 15 Aug 10′s for $4.30

  59. DB I think it’s really easy to argue back you just reverse Phil’s figures and state how easy it is to move the market down again with exactly the same math. Then you point out how frightened people are and how we have gone from "oh my god the world is gonna end" to "the world isnt ending yay" and haven’t yet had the penny drop on  "maybe the world isn’t ending but how good is that when this is a recession like none in our lifetime" and hey presto the market goes down.
    I find Phil’s most telling comments to be the ones that encourage us all to STOP thinking and debating just watch what the market is DOING without trying to explain it.

  60.  Phil,

    YRCW @2.9 selling Jan 11 $5 calls for $1.20 – a good deal?

  61. SKF off the table, going long for the pump job.

  62. Phil,
    Thanks for the AXP roll analysis.
    As I think AXP is to go down a bit in the near future, I am going with trying to roll to the May $17.50 to Jul $20s. Being cheapstake and the fact that I am betting AXP keeps going lower (next few days) while digests the sudden post-earnings spike, I should be able to get the roll for $1 or so rather than the $1.20 as it was earlier today AM with AXP 0.50 higher.

  63. …long meaning FAS.  Pew, it stinks!   Wish me luck!!

  64. Sorry Matt, can’t wish you luck today, I’ve been short DIA and FAS for days expecting a big dump and still don’t trust today’s upwards action…

  65. Pharmaboy – you here today?  Wondering if you have any opinion on VIAP as an LT penny stock play.  Someone on this board was accumulating last year around 3 so I’ve had it on a watch list since then, seems to have bottomed.  Thanks!

  66.  CHBO must be involved with flu drugs, I dumped mine at .04 a few days ago, now up 250%, sorry I didn’t post this as an anti-trade for you guys!

  67. Wow, no posts but mine for 20 minutes, a bunch of strong, silent types on this board!

  68.  FAS is dropping

  69. Phil what do you think of  buying calls leaps on gsk with their annoucement today  and selling the short months?  thanks

  70. UA getting pumped ahead of earnings tomorrow morning. Still think thats a good short along with my favourite expensive jean people TRLG.

  71. hey phil – I bought back some FAS short puts to take profits this am and faz run…
    should we be 1/1 on this trade…also, at WHAt level would re-sell the FAS again (assuming the  May 6 puts)?
    Also, BTW, did you see that a pirate attacke was repelled by a private security force – thought you’d find that of interest

  72. Funds/DB – The problem (for the bears) is the marke just go so low that the average montly flow of funds from those few people who are able to save is enough to susstain us here.  We had a capitulation event, 2 in fact, already where people and funds liquidated and went to cash – what is your catalyst for the next one?   Without something truly dreadful happening that forces people to run screaming for the exits, then the tiny bits of money that pour into the market every day from IRAs and 401K etc are enough to keep a lot of positive pressure on these markets, which are only 1/2 the size they used to be so, if the money comming in every day is more than 1/2 of what it used to be – you can still get your bullish imbalance right there.

    List/RMM – What is with you and the pop quizzes?  I like GME best of that set.  PCLN and MA I’m short on, COH I love but they went up too much for now.

    USG/Pstas – Setting some simple stops on 1/4 of your calls for each 25% they gain would have kept you out of trouble.  At this point, you have a $13.68 stock  and you sold $10 calls for $4.60 and if you want to improve it I’d say go to 30 2011 $7.50 calls at $7.90 and convert the $4.60 callers to 15 Aug $12.50s at $3.10 and 15 June $15s at $1.25, if you get a pullback that drops the June $15s below .60, you’re going to want to roll them to something that gives you another $1 but worry about that when and if it comes.  Meanwhile you convert $3.65 in intrinsic value to $3.25 in premium by spending .25 (plus a little to roll to the 2x).

    Thanks Steve – as a funamentalist you don’t know how good it makes me feel to hear how irrelevant all those facts can be!  8-)

    GSK still going up.

    YRCW/Red – I wouldn’t go that long.  They could go BK so it’s just a coin flip giving them 2 years to do it.  I’d rather sell 2011 $3 puts and calls for $3.25 and put a buy on the stock at $3 with a stop out at $2.95 so you give up a few nickels until it resoves itself and that’s your real cost but, hopefully, it goes up on you and it’s a nice winner.

    GSK/Bill – I like the leaps, no hurry on selling I think.  The Jan $27.50s are not bad at $5.40 and you can cover with June $32.50s at no less than $1 (now $1.25) but no hurry at all if they stay above there.

  73. DB,
    I’m going in w/ you on TRLG. Did you ever watch Wall St. Warriors? Is this the $300-jeans company that they loved to short (scouted out B-tier discount stores and found a lot of excess inventory)?  Sound familiar?

  74. FAS/FAZ/BC – Neutral is safer but I find selling for $1 and buying back for .60 and waiting for the next cycle hasn’t let me down so far.  Worst case doing it that way is, of course, .60 worse than not staying balanced but once you get away with it 3 times you are ahead of your best case…  It just depends on what kind of risk taker you are.  Pirates I do find interesting.  As I said, $100K per ship and you won’t touch me. 

    TRLG does seem crazy back at 2007 mid-point but I’m not brave enough to short them!  Last Q was great with a 13% beat and they should grow for the year unless you guys have some amazing inside information that shows a weakness not picked up by the 7 analysts following them who all have a buy on the stock and see 11% sales growth vs. last year when the stock jumped from $18 to $31 on Q1 earnings.  Anyway, keep me posted, I’d love to see how this goes for you!

  75. aclend/TRLG – Cant say it does but they’ve gone from $7 on 9th March to $17ish today. I cant see any justification for that especially given how expensive their product is. I read that you pay $300 for the jeans and then have to have them tailored to fit !! They are trying to move down market into the $200 region which implies to me they are having trouble shifting gear. They opened a new store in LA which boosted the stock. Earnings are on 5th May so they still might get a pop into that but 150% in 7 weeks is asking for some sort of sell the news event.

  76. MrM – sorry, busy with IND stuff.  VIAP, I think Steve and I commented on them a while ago.  I got in a 80C, out at 1.1 and have been watching but not participating.  For a leap- why not.  The mechanism is unproven with zyleuton on the market (for asthma), but it is believed to be one that works.  MRK is in clinical trials with the same mechanism.  GSK should sweep both of them under the rug eventually if the mechanism works really well (they have a licensed compound in the same area -different target but same pathway), but for a double, triple, I am game.

  77. aclend/TRLG – And what Phil said. :-)

  78.  Phil

    There are noYRCW 2011 $3′s to sell

    There are 2.5′s or 5′s

    My idea was to sell the 5′s (puts and calls) and buy the stock for under $3 right now to cover

    But perhaps the 2011 2.5′s would be a better idea – because selling the 5′s would be too greedy?

    What happens incidentally if they do go bankrupt? Is my investment totally wiped out.

  79. Zileuton, sorry – which is on the market for asthma, but VIAP has a better drug for CardioVasc.  MRK has the same target (5LO) in clinic, but different indication in CV.

  80. Transports broke th 5% mark, RUT heading back to test 2.5% at 457.  XLE down past 2.5% at $45, OIH below $90, Dow is outperforming all but Nas, down just 1% so watch the Qs at $33.50 to break us down big.  SOX barely holding 250 and that would be bad if they blow it and, of course, losing 8,000 is bad but we’re not even past the opening lows yet.

    Now there’s an earthquake in Mexico ctiy – it’s like 10 plagues over there!

    YRCW/Red – Oh, the $2.50s then, $5s way too risky.  If they go BK you owe the putter $2.50.

  81. DB,
    I took a very small position since it is so spec but it just "looks toppy" chartwise dealing with the 200dma and we can expect an increase in options premium in advance of the earnings report. Also, if the market as a whole pulls back over the short-term that will add pressure. That’s all I got but it works for me.
    I’m naked May YRCW 2.5 puts. What are your thoughts?

  82. Phil: just cashed in 1/2 of my FAZ puts may 7.5 with good gain,
    now am thinking about sellin FAS jun put strike 6 for 1.15$: approve ???

  83. Phil- thoughts on PCLN? earnings could be good.

  84. aclend – been sort since last week so todays pullback is working for me at the moment. good luck

  85. I’d go short again at market close.  SPY tested 87 and failed, SPX 868 and failed.  Those people who bought after hours on Friday (at prices 0.5% higher than the closing price) are dumping theirs, aren’t they?

  86. YRCW/Aclend – I’m naked $5 puts so I’ll be naked 2x June $2.50 puts soon but I’m not going to panic over them selling off today along with the entire transportation sector.  Always differentiate between weakness in your particular stock and sector weakness. 

    FAS/RMM – That’s the way to play it but scale in, they may go to $1.50+ if we get another selling leg.  You don’t want to catch a knife, better to sell for $1 AFTER it turns back up than guess a bottom. 

    Watch VNO and BXP (still our market leader) at $45 – bad if they break down there.

  87. Pharma, thank much for the reply.  Any chance you can also weigh-in on VNDA?  I’ve had that one for awhile and there’s some rumor that it’s closing shop in the summer yet the recent price action remains positive.

  88. Now this is more like it …. more push down needed.

  89. MrM – sorry, don’t know them well enough, but CNS is VERY hard to hit .  If the target looks good, most big pharma will scoop them up or be in on the target.  ARNA is one that comes to mind.

  90. phil, what is your take on SBAC?  looks like a total piece of junk to me

  91. Phil: looks if DOW wants to go up, this might trigger 1`/2 cover on DIA puts,
    what should cover be oivernight ?

  92. PCLN/SNS – I was short but this dip was good enough for me to take the money and run as they had been annoyingly strong.  I think they will have a hell of a hard time justifying $100 and, with the Flu thing, the timing is not good for them.  Had they not dropped 10% this morning, I’d still be short into earnings but you don’t look a gift horse in the mouth. 

    Dumping/Peter – If you look at a 5-day, we’re just holding the gap up from Thursday’s close without a proper fill so it seems very unlikely that we don’t drop another 1% from here and tomorrow is Consumer Confidence for April and Case/Shiller for Feb, which was not a great month so hard to get all bullish into the close but that’s logic and logic has little to do with this market after 2pm…

    DIA – That was fun but we need to get 1/2 cover again so we’ll be looking to either 1/2 cover with $80 puts at $2.50+ (right there now) or RE-cover with the $81 puts, now $3 if they fall to $2.75 so, at worst, we’re .25 better off than when we bought them back earlier.

    We’re not looking strong here but there is no predicting the end of day shenanigans so we need to be prepared for a move back up – just in case.

  93. ok, I’m back.  what did I miss?  Holy $hit!  I was underwater with my FAS!!  No wonder it stunk so much when I bought it.  Good thing I wasn’t around to freak out while it was swimming with the fish.  8-)

  94. Phil,
    One more. I’m naked LVS 4 puts. Should I close those and roll up to 5′s or 6′s?
    …and are you thinking stick save today? …seems ripe for one!

  95. ALD- buy/write? Your thoughts?

  96. SBAC/City – I think there’s a point at which the advancement of technology kills the tower business which is, at the heart, a real estate rental play.  If they get WiMax or whatever that has 10x the range, then they need 1/10th the towers but, until then, you can’t really bet for or against these companies without knowing if they are winning new contracts or not.  SBAC is not at all impressive looking on the books but someone sure liked them under $15.

    DIA/RMM – Hey, your timing is getting better!

    DIA – notice we topped out just before the $81 puts hit $2.75 ($2.79 was the low bid) hopefully I was right with that target and we sell back off here to be able to sell the $80 puts for more than $2.50, if we’re going to head down, it will probably come AFTER 3pm, once the bears can begin to hope there may not be a stick save today (there wasn’t last Monday).  Also, don’t forget last Tuesday was a gap down following through Monday’s drop but then a huge up day so don’t get too cockey no matter which side you’re on.

    Volume very lame so far.

    LVS/Aclend – You sold the $4 puts naked?  What’s wrong with just letting them expire and enjoying the profits?  Why roll to more and more dangerous positions?  We sold LVS puts because $5 or less was too low but we’re not so sure $6.83 is still too low are we?

    ALD/Pstas – One of the rules of a buy/write is a stock you don’t mind owning long-term and one you strongly feel won’t go BK.  A $1.77 penny stock with a $300M market cap that lost $500M last Q does not qualify.

  97. 10 plagues in mexico city … lol

  98. ok; 3pm; are they gonna pump it AGAIN ???

  99. Very stealthy 2% drop in financials.  Dow not really affected because sum value of financials ($81) is less than IBM so IBM up 1% wipes out a 1.25% loss in the entire financial segment of the Dow – it’s a totally broken index!

    BA and PFE still strong but only WMT is  left over 1% otherwise (not counting GM, up 22%) so a lot of weakening in the Dow but just not breaking it yet.

    How irresponsible for the media to fixate on "exposing" the anonymous college donor.  Do they not get the concept of anonymous?  All this does is discourage this person and others from giving if they are going to be the subject of witch hunt.

  100. Phil,
    I agree and that was my inclination because I have a nice profit on those. However, I thought selling 5′s might still be fairly conservative as that would represent about 30% discount from recent highs…just trying to learn when to roll since I haven’t done that yet. Is that usually reserved for getting out of trouble then?

  101. UA really getting pumped now. Hope their earnings are worth it.

  102. 3:01  Treasury Official:  Economy Seen Contracting thru Mid-Year.

  103. No pump today … or until 3:45

  104. Just to add to the conversation about this potential epidemic: I just spoke to my friend who is an infectious disease specialist and he dismissed the whole thing as being no big deal, he said we had something similar to this in the 70′s that diodn;t do anyhting and that most likely the people who died in Mexico are vulnerable people (eg the elderly). On the other hand he tried to call in some tamiflu and all the drug stores are out and they said the manufacturer has no supply left.

  105. I’ve been out all day….did I miss anything

  106. Phil: what do you anticipate for tomorrow ?
    are there earnings reports ?

  107. They tried to pump too much into UA and it burst.

  108. Homebuilding: March New Home Sales Fall Slightly, Slightly Below Street’s Outlook for Flat; Levels Remain Depressed

    While March New Home Sales of 356K were above the Street’s 337K, we note that, given the Street consensus is primarily predicated on sequential change from the previous month, March’s 0.6% sequential decline from February (which was upwardly revised to 358K from 337K) was also, and perhaps more importantly, slightly below the Street’s flat sequential estimate. Moreover, we point out that this level remains highly depressed, down 31% YOY and still down 4% from 12/08. Accordingly, we believe the Spring selling season remains relatively weak, and that a trough in the housing market remains elusive. In addition, while absolute new home inventory continued to decline, down 5% seq., months supply remained elevated at 10.7 months. More importantly, however, we believe the core problem facing the housing market is still the highly elevated level of existing homes available for sale, which fell only 2% in March to 3.737 mil., and is now 12.0x the size of new home inventory. As a result, given our outlook for continued weak demand amid rising unemployment and low consumer confidence, tight credit conditions, and rising delinquency trends, we believe inventory should remain highly elevated over the next 12 mos., which should result in further home price declines and large impairments for the builders well into 2009.

    While absolute new home inventory continues to decline, months supply remains elevated; more importantly, however, existing home inventory remains the core problem. New home inventory fell 17K units to 311K, rep. a 5.2% decline and a 46% fall from its July ‘06 peak, while specs fell 6.0% seq. to 267K, down 44% from its Sept. ‘06 peak. Mos. supply fell 4.5%, but remains elevated at 10.7 months. Importantly, we believe these declines in absolute inventory remain relatively immaterial relative to existing home inventory, which fell only 1.6% in March and remained highly elevated 3.737 mil., or roughly 12.0x the size of new home supply.

    Prices fall, but we believe more declines are necessary. Median prices fell 3.5% seq. to $201K following Feb.’s 0.4% decline. On a 3-month moving average basis (to reduce volatility), prices fell 4.4% seq. and 12.3% YOY. We continue to believe further material declines in new home prices are necessary, given continued weak demand and our outlook for further deflation in existing home prices.

    Regionally, seq. decline led by the Northeast and Midwest. The Northeast fell 32% seq. following Feb.’s 7% sequential decline, and the Midwest fell 8% following Feb.’s flat month. The South was flat following Feb.’s 11% rise, while the West rose 15% following Feb.’s 12% rise. On a YOY basis, all regions fell 30%-33%.

    Maintain negative sector stance. We note that the larger-cap builders are currently trading at 0.84x P/B (ex-FAS 109, incl. MDC), above the 1990 trough of 0.7x. However, we believe today’s markedly more challenging housing and macro environment supports even lower trough valuations for the current cycle. Specifically, given our outlook for higher unemployment, still tight credit, rising foreclosures, and elevated inventory levels, our estimate for impairment charges to represent another 30% hit to builders’ book values could easily prove conservative. As a result, we believe large impairments should continue to prevent investors from gaining confidence in asset values, resulting in depressed price-to-book multiples, as well as drive further erosion of book values.

  109. Ha, 3:15; here they go ….

  110. LVS/Aclend – It’s a matter of risk aversion.  With the market looking weak you don’t increase exposure when you don’t have to. 

    Holy cow, what a massive buy-in just hit, right when we were going under 8,000!  The fix may be in boys…

    Missing/Eph – Nope, same as usual for a Monday.  The only question remaining is save or no save.

    Tomorrow/RMM – Millions of earnings but earnings have been generally good, it’s the data you need to worry about.

    $81 puts right at $2.75 now, have to cover!

  111. I hate this. Why doesn’t the market just open at 3.00pm and close at 4.00 and be done with it. We wouldn’t have to wait all day to see where they want it to finish !

  112. Hey Phil – Just noticed I havent had any email alerts all day ! Should I ?

  113. Reboot/Merk – Actually I didn’t end up rebooting.  I closed all my windows, did a CTRL-ALT-DEL and used the Processes tab on the task manager to figure out who was using up all my CPU time and then I just killed that task.  My Idle CPU time shot right back up to 97% and I just opened back up and was done.  If you accidentally delete an important process, all that happens is you have to reboot anyway so I like to try that first as it’s usually some background program that ran amock and can be easily dealt with.
    Are you sure that a reboot is the only problem that happens when yoiu turn off an important process?   I get "low virtual memory" warnings all the time on my laptop, but I could live with rebooting if I screw something up.   I always fear that I’m a walking example of "a little knowledge is dangerous" and worried that if I try to fix something I’ll lock myself out and send all my passwords to the Taliban.

  114. Phil: have to cover ????? fully ?

  115. The Hell With The Market!  Who’s The Donor!!!!

  116. I think they may be running out of suckers….

  117. Wow…head fake stick save.

  118. DB,
    TRLG wants to break through 17; I can feel it!  hahaha

  119. Ok…finally fixed my profile for my old handle 
    millerbisme --> stratdaddy

  120. Alerts/DB – They were 9:37, 9:48, 12:13 and 2:31.  Check your spam filter, maybe the new title system caused them to get caught.

    Reboot/Eph – I won’t say sure as my real knowledge of how computers work ended with DOS but DOS still runs PCs down at the core and all you do when you kiil those processes is turn off something that turned on since you last booted so, if it causes a catastrophic failure (like there is a process that runs the tabs on the new IE that sometimes hogs CPU time) then shutting the computer off and rebooting should set things back up again.  Just try running the process window and sort by CPU usage.  If system idle process isn’t top of the list then whatever is is probably causing the problem.  No process should be taking more than 1/3 of your CPU power for more than a few seconds.

    DIA/RMM – Not full cover, if you read the above comment (which was sent out as an alert at 2:31) you will see the possible actions and, very clearly, the event triggered.  Luckily you ddn’t miss much yet as we pulled back off my trigger yet again.

  121. 1020 … I’ll go w/ Meg whitman

  122. Phil/Alerts – Nothing in my spam filters. No need to cut me off because I’n bearish :-)

  123. 3:41; here we go again….

  124. Cap – Meg, huh… how about Elliot Spitzer…. :)

  125. Re: slow PC’s, I realized at one point that installing .net packages and service packs with windows updates opens up a big can of worms, including background compilation of libraries. I generally keep it out of my system if it can be avoided.
    There are some links on the web about which "services" are important, and which are just MSHAFT busy work (or worse). You may find windows startup and runtime generally snappier by going through and tweaking, but its a "tweak at your own risk" endeavor.

  126. This market sucks.  It’s all about cleaning the retails’ clock.

  127. SLAP SHOT!!!

  128. 1020; what kind of Donor are you referring to ?   LOL 

  129. hey phil – i have been following some of the comments on the FAZ/FAS trade – are you in favor of the JUNE or MAY and which strikes are the least risk (assuming we are selling the puts and we do not mind if assigned)..Is it 6 on both or 6 on the FAS and 7.50 on FAZ?
    I like the idea of trading in and out of these where worst case is being assigned at decent level.

  130. Cap – :)

  131. Phil
    When your 50% up on your covers with 18 days you take them out right?

  132. aclend – good break below $17. :-)

  133. Phil: closed FAZ puts, 50 % gain, sold FAS puts jun 6 for 1.2$.
    1/2 cover on DIA puts,
    talk to you tomorrow.

  134. Definitely. It went back up and tested it a couple times on the 1min chart too. Let’s see if we get a nice gap down tomorrow at the open…    Off for some exercise. Take care.

  135. Alerts/DB – Go to your account and make sure you are checked off to get alerts and, if you are and not getting them, I’ll have Matt check it out.

    Tweaking/Strat – They have made windows (and cars) so complicated it’s just annoying to own now.  Hardly anyone is a computer "enthusiast" anymore as there’s no fun in it.  It used to be great to find cool things and install them and try a new program that could improve performance, now it’s a black box with a "void if seal is broken" sign – how do you have pride of ownership in something like that.  That is why the whole industry went to hell, it’s not even fun to pimp your PC anymore.

    BIDU at highs of day, those better be some fantastic earnings!

    FAZ/FAS/BC – There is no "least risk" but the idea is if you sell both $7.50 puts for $1, the chances are only one could possibly be put to you at net $5.50, which we don’t mind and can be rolled.   If you collect $5 for selling the June $9 puts on each, it’s the same logic net $4 but, obviously, a bit more chance of having both put to you so you can go for the June $7.50 puts for $3 or whatever.  The point is we don’t mind owning either one long-term for $4 as a hedge because you can sell the damn June $10 calls of FAZ for $2.25 so if my net is $4 and I can sell the $5 calls for $2, I REALLY don’t mind owning the stock.  That’s what this play, and all buy/writes, is about – you must WANT to own the thing you are selling puts against – then you can’t lose.  If you buy things you don’t want, you are very likely to get disappointed and that leads to panic and bad decisions.

    50% Steve – In the very least you want to set tght stops (at 40% profit) or take 1/2 at 50% and set a stop at 25% on the other 1/2 so net 37.5% if stopped out and 75% net profit if the other half returns 100%.

    Good job RMM!

    I wonder what time BIDU reports as they are in China and it’s like 3 am there….

  136. Phil – I ticked the alerts. Odd because I had ticked previously and I had been getting them . But ticked now so that should be ok. Thanks

  137. Phil the fun is still there for Linux computer and Macs. they are all unix based more or less, very stable no bs, no virus, not as bad as windows atleast ;)
    Ill help you setup a Mac system if your ever interested.

  138. Alerts/DB – well I always do one around the open so let me know tomorrow.

    Mac/Micro – I have an IMac.  My main computer is a Dell but that has a Mac screen for the main.  I’d probably have all Macs at this point but Tina doesn’t like them because she can’t tweak them and she’s really into that stuff.  Once upon a time (mid 80s) I was a cetified Sun network technician but I don’t even remember the basics anymore…

    WHO is raising Swine flu from 3/6 "Few Human Infections" to 4/6 "Sustained human to human transmission."  Phase 5 and 6 are the same "Widespread human infection".  After phase 6 they have "post peak," which is essentially where they burn the bodies….

    If you want to see something depressing,check out our disease-ridden country.  We’re worse than Aftica but Canada, with Nationalized health care and Mexico are relatively trouble free.

  139. Phil, BIDU reports at 8pm Eastern.

  140. BIDU/Mr. M – Thanks, that makes sense, gives them a chance to wake up before it all hits the fan…

    Declinefrompeak0427Tomorrow is Case/Shiller Median home prices, thought to be down about 18% from last year but check out this chart of declines from peaks!  That is some hurting numbers… 

    As a New Yorker (and I think Cap can back me up as he lives right in NYC) it seems to me that things are getting worse this Q, not better.  The Wall Street jobs are gone and people are starting to capitulate on their condos because NYC is not a good place to be if you can’t afford the lifestyle. 

    I hear that the bottom 5 do seem to be bottoming but the value of the average home in NY, Boston, Denver, and Chicago could devatate the economy if those markets move even halfway to the worst performers and since those include big cities like SF, LA and Miami – there’s no real reason to think they won’t share the same fate.

    We don’t get the data until 10.  Consumer confidence is at the same time but who really cares if it’s 29.5 (estimated) or 26 (March record low) as it still means 70% of the consumers are NOT confident.  Of course Wed at 8:30 is our -4.9% (projected) GDP!  We may beat that based on inventories and trade balance so be careful there bears.  Most likely we’ll be 55% bearish into that one as a good report will give us a long boost so we won’t miss too much by getting beat in the morning and then there’s a Fed decision in the afternoon anyway so you figure people won’t go too nuts in the morning.

    For the gold bugs:  "….Given that foreign investors own about $2.5 trillion more of US assets than Americans own of foreign assets, what price of gold is necessary for the US to no longer be a debtor? Answer: More than $8,500 an ounce."


    CCL should be a nice pick-up once this flu nonsense (hopefully) blows over.

    Barron’s latest Big Money poll finds 59% of the money managers it polled are bullish on the market through year end. But, as Barron’s notes, it’s unclear how much of that bullishness is only in theory. To wit, 58% concede we’ve yet to see the bottom, and only 26% of them expect to be net buyers of equities over the next six months.

    BIDU out now!  Not bad looking.  Revenues up 41%, Net income up 23.5% – what recession?  Last year Q1 they were at $382 so plenty of room to run on good earnings.  Not helping Qs or FXI though…

  141.  For the gold bugs:  "….Given that foreign investors own about $2.5 trillion more of US assets than Americans own of foreign assets, what price of gold is necessary for the US to no longer be a debtor? Answer: More than $8,500 an ounce."
    I am a teetotaler when it comes to drinking alcoholic beverages… never touch the stuff. But if I can sell my gold for $8500/oz, then I would say….    "I can drink to that" !!  I could even afford to upgrade from McDonalds and take the wife out to Red Lobster !!  
    Of course, if things get so bad in the the world that gold would be selling at so high a spot price, then there might be plenty of other reasons for a lot of people to take up drinking.
    Damned either way eh?

  142. Phil,
    I can say I’m suprised to see DC hit a 31% decline.  In my neighborhood 10 mins South we’ve only have a 15% drop. 
    Interesting survey of the money managers.  To take your statistics at face value they appear to be be bearish.  Not overwhelmingly bearish but bearish.  Or at least one can hope!

  143.  Phil
    X Jun $27 puts and calls have $7 in premium. Is X, in your opinion too high here for an entry? What about leaps for a spread? thx

  144. Hi all.  Up hitting the whiskey after getting a 400K tax bill frm the IRS.  I do mark to market accounting on my trades but they , the IRS, don’t have me listed yet for that.  I filed all of the elections for M2M but it is a slow process to get them to recognize it.  
    Cheers and bottoms up.

  145. What about a pairs trade using FAS/FAZ?

  146. Steve, sorry about that.  I researched the trader status and decided against it as there was only 1 person successfully persuaded IRS to gain the trader status.  So I didn’t do M2M.  On the other hand, if you had huge profit, then it’s not a problem. hihihi.  Otherwise, it’s a hard slog to clear your tax bill.

  147. Matt any ideas on how to play the financials today?

  148. [...] we called the action pretty much on the nose yesterday. In the morning post I said that we would: "see where the bottom is today – hopefully we find it early on" and [...]

  149. [...] It only took until 9:42 for me to send out an alert to members listing the levels that we held and saying: “If the bears can’t take these out today, their case is going to look pretty [...]