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Friday Already?

Man what a fun week, I can't believe it's ending so soon!

We are already on vacation, having followed our plan to cash out at the bottom yesterday anticipating some short covering today that would take up the markets.  Actually, we took some bullish plays into yesterday's close as it was such an obvious set-up for a stick save and there was so much bad news out already that we weren't too worried about more.  My hot streak continued as I posted to members at 11:13, with the Dow on the rise at 8,267: "OIH now at the 5% rule (94) and XLE at -4% (47.50 is 5%) and Nas at 2.5% rule (1,685) along with RUT (477) while S&P needs 880, Dow needs 8,220, and NYSE 5,725.  Those are the points that should hold and bounce us at least back to -2% but, after the way they behaved at 1.5%, we need to see them retake -1.25 before we’re even slightly safe."

The Nas bottomed out at 1,678 at 2:45 but came back 20 points to -1.89%, the Russell hit 474 at the same time but finishe down 1.66%, the S&P hit 880 on the nose at 2:53 before recovering to -1.68%, the Dow hit 8,224 at 2:52 but rallied back to down 1.54% and the NYSE bottomed out at 5,728 at 2:58 before making it back to -1.53.  Now I know there are lots of stock services that can tell you exactly what the market will do for the day 3 days in a row and I'm certain that there's no way to profit from that kind of information anyway so, whatever you do – don't sign up for this service (see, we are cleverly experimenting with reverse psychology!).  We took quick profits on our DIA calls into the close but left our DDM (ultra-long Dow) calls on for fun and they should get a nice pop this morning.  We also couldn't resist some great buy opportunities during that sell-off and we picked up new, hedged positions in HMY, FIG, DRYS, RF, DAL and UYG in addition to our Dow plays.  As we also sold the Dow puts to cover our longer covers – we ended up pretty darned bullish after being 100% bearish at the open.  We are flexible if nothing else!

Our futures are looking pretty good this morning despite BKUNA being siezed by regulators in a move that will take a $4.9Bn bite out of the FDIC.  The FDIC sold the company's banking operations to a private-equity team headed by John Kanas, the former head of North Fork Bank. The bank's 85 branches will reopen Friday during normal business hours under the same name. The sale protected depositors. BankUnited had $12.8 billion of assets and $8.6 billion in deposits, and regulators said it was critically undercapitalized.  Mr. Kanas's team agreed to pump $900 million in new capital into the bank and to acquire $12.7 billion of the bank's assets and $8.3 billion of certain deposits that are considered less risky. The FDIC agreed to absorb most future losses on a $10.7 billion pool of assets that the investment team will manage.  BankUnited's collapse puts further strain on the FDIC's deposit-insurance fund, which guarantees most deposits against the risk of a bank failing. BankUnited is the 34th bank to fail this year, after 25 went under last year.

 

A BankUnited spokeswoman referred questions to the FDIC. The FDIC said the investment group's acquisition of BankUnited was the "least costly" resolution for the deposit insurance fund.  The FDIC's deposit insurance fund had just $19 billion at the end of 2008 to backstop trillions of dollars in deposits. To replenish the fund, the agency is scheduled to vote Friday on a controversial plan to assess a special one-time fee against more than 8,000 banks. President Barack Obama signed a bill into law Wednesday that allows the FDIC to borrow as much as $100 billion from the Treasury Department to shore up its fund, a measure the FDIC had sought for months.

So don't worry kids – $100Bn fixes everything and there's plenty more where that came from as surely Uncle Ben's face will be plastered across the new $1,000 Bills soon as there is no way we can print $100s fast enough to cover these little financial gaffes as they pop up.  Not surprisingly, the dollar fell to 6-month lows against the Euro and the Yen, which we don't mind but even the Pound is pushing $1.60 and their country is on probation!  As I said yesterday, if the UK is on probation over their balance sheet, then the US is on double secret probation for sure….

Not at all surprisingly, the Nikkei fell half a point this morning and the Shanghai composite and Hang Seng were down a bit more despite the BOJ holding rates steady at 0.1% and RAISING their asessment of the economy, saying the recession may have already hit bottom.  With the dollar at 94 Yen, Japan actually did hold up fairly well and the Baltic Dry Index continues to march upwards, now 2,707, challenging October highs.  Copper, on the other hand, continues to slide along that declining 200 dma into our test zone at $200 next week but I'm getting nervous as the weak dollar isn't helping copper at all so demand must really suck. 

Nonetheless, miners are leading the EU higher while banks and airlines are dragging on the markets this morning.  Overall, Europe is up about 1% ahead of our open (9am) and it's very possible that one new source of dollar weakness is Dutch cable company UPC Holdings (owned by LBTYA) issuing $206M in junk bonds, the first major junk offering in Europe in 18 months. "It is a very strong statement, I call it the opening of the European high-yield market," said Marisa Drew, managing director and co-head of the European Debt Advisory & Restructuring Group at Credit Suisse.  UPC's issues come less than a week after Finnish paper, packaging and forest products company Stora Enso tapped its existing 5.125%, 2014 bond for a further €232.45 million, paying a yield of 12.25%.  Prior to that, the only significant deal in the European market this year was an $860 million issue from German health-care company Fresenius AG in January. Some said that because Fresenius is such a well-regarded high-yield company, that deal wasn't a true test of demand.  The European market had effectively been closed since late 2007. The effects of the credit crunch caused investors to shun companies with poor credit ratings.

Restored confidence in global markets quickly becomes a double-edged sword as US T-Bills MUST be sold and now have to compete for global cash with very attractive interest rates offered by major corporations.  Let's call this step one on what is likely to be a VERY steep inflationary ladder.   Adding insult to Dollar injury, UPC ended up issuing the bonds in Euros as well as dollars because: "We had very strong demand [for the Euro-denominated bond] from the absolute who's who of the type of investors you would want in a transaction like this and it was very significantly oversubscribed."  There are just so many bad nuances to this story I can't even get into it now!  Have I mentioned I like gold lately?

We will be flipping back to at least 55% bearish into the close, more so if we get a nice run-up today but it's going to be a very low-volume session so not much can be read into the action, no matter which way it goes.  We're sill hoping for a proper bottom test next week – I'm sure they'll think of something to properly spook the markets over the weekend.  Oil was back to our $62 shorting target on the futures already this morning and we'll take the USO puts again if they try that nonsense during the session but the futures already look to be a big winner into the open (9:15) with oil back to $61.25 already. 

GM is a very tempting short at $2 but, as we discussed in member chat on Wednesday, we don't want to end up bitter, angry and confused – like Jeff Macke was on CNBC Wednesday night as GM demolished the shorts and put on a 4-day squeeze that doubled the stock of this train-wreck of a company for no rational reason whatsoever.  Yes they worked out a deal with the UAW but so what?  They are still a losing operation and there is no way they can survive with their current debt load.  So I would say stay away from GM but you can sell the July $2 puts for $1.34 and sell the July $1 calls for .90 and that puts $2.24 in your pocket so you make .24 even if GM goes BK and GM has to go higher than $3 before you would have to cover your position.  Even if that happens and you lose money – at least we'll have the fun of watching Jeff Macke hauled away in a straight jacket, babbling incoherently as he goes.

Have a great holiday weekend!


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  1. If you say leveraged EFTs are designed to go to $0; why not sell calls against them all day long until they get there including SKF and SRS?


  2. Good morning folks.  I hope to finish packing and hit the road to the Hamptons by 11 am.
     
    Anyone needing a hotel room out there should let me know, not just this weekend, but all summer.  I will try to procure  periodic discounts for PSW members.
     
    Merkhava, you are entitled to your opinion; but clearly we have strong disagreements over Bush/Cheney on national security.  That’s ok.
     
    Totay, what are we going to see…. looked like pump action early; now, maybe minor pump.
     
    I gotta finish packing; good luch and be safe all.


  3. HK outperform initiated by Bernstein…. one of my buys yesterday afternoon.


  4. ETFs going to 0…what about Zeno’s dichotomy paradox?


  5. Somehow I started receiving Lenny Dykstra’s picks by email….interesting.  His pick today is ALTR (chip maker).  12.5 Jan10s @ 3.5 or better.  Looking for a $1. FWIW.


  6. merk, I really liked what you wrote how it was the reaction to 911 not the actual attack that has most damaged the country.  I have long thought that, but you expressed it very eloquently.


  7. merk, I really liked what you wrote how it was the reaction to 911 not the actual attack that has most damaged the country.  I have long thought that, but you expressed it very eloquently.


  8. CNBC   When this guy opened his mouth all I could think of was a sing-song  "always after me lucky charms"


  9. I’m looking at shorting the Euro pretty soon here. I was tempted Wednesday and now I’m glad I held off, so maybe it’s still too early. But I don’t buy either of the premises for the euro rally, which seem to be:
    1. Euro-region countries are relatively good shape. *Maybe* Germany is, but Spain, France, Austria? Sorry, no.
    2. There are going to be lots of inflationary dollars circulating. Fed minutes confirm that lending is still contracting, despite the improvement in bond spreads and libor.


  10. Since it’s Memorial Day weekend and things are kinda slow I think it’s appropriate for us to get into a knock down drag ‘em out political brawl today!  Whada ‘ya say?
     
    ?:  why is Animal House still so funny?  Answer:  it’s a classic.
    Phil, I agree.  I think seeing Macke babbling (even more) on his back going out the door IS worth the risk of shorting GM!


  11. EricL/Euro: I absolutely agree. I’ve been scaling into a short futures position of EUR vs. USD this week. The EUR is seen as ‘safe’ right now as they are not as likely be be using QE. But the market will evenutally realise that the inflexibility of the ECB and European labour forces actually means the EUR is in much worse shape than the USD or even the GBP. I think the upside risk is still around mid 1.41 where further resistance hits. My target is 1.25 and I have long Gold futures as a semi-hedge if the USD keeps selling off. 


  12. ETFs/Savannah – That’s fine if you can ride out the bullish moves.  They can go up, it’s just that, over the long haul, they almost certainly will implode.  Take a look at FAS and FAZ since their founding..  FAS jumped 50% early on and FAZ fell 50% but, in the end, they are both down significantly from their opens.  I suppose a perfect strategy is to short both when they are first issued (or whenever they cross at the same price) long-term and assume any gains by one will cancel out the losses in the other and, ultimately, you will win on both ends.

    Lenny/Pharm - He’s a funny guy, I’ve seen him in Atlantic City playing craps on occassion, his picking style is very similar.

    Let’s keep an eye on yesterday’s lows to hold but below that would be, as they say, BAD!


  13. Ags on a roll again today. Ripe for shorting?


  14. JNJ buying CGRB for ~ 42/share.  I think I mentioned them here a few weeks ago….VRTX is also on the blocks, although they are a bit more than 970M!!!


  15. EricL,
    Your plan to short the Euro, is that going to be a daytrade or will you hold it over the weekend?   Just curious about your gameplan?  thanks


  16. Phil is it all clear to get some putters for BAC, if so, which do you rec?


  17. hey – you AG players…is there an ETF to play this (buy/writes, etc)…I have heard of MOO and DBA – any comments or suggestions of others.


  18. Good chart to look at for today.
    ibankcoin.com/chart_addict/wp-content/uploads/2009/05/spx3dp1.png
    The red box is “today”. The green zone is your support level and the purple zone is your resistance level. The two blue lines in between are minor support and/or resistance levels. That’s it. Don’t make it any more complicated than this.


  19. Phil,
    What do you think about SHLD. Maybe buy 55 puts?


  20. Oil took a bounce off $60.50, that was our previous shorting point so good resistance there.  Stopped out of the futures shorts and hoping we run to $62 again so I can do the USO puts, perhaps the $33 puts at $1.05, now $1.25.

    Zeno/New – LOL, actually if you imagine that sequence of infinite fractional steps and apply a transaction fee to every one, you can see how these leveraged ETFs do nothing but destroy capital.  It’s Direxion that collects the fees so they don’t give a damn and anyone investing in these things long-term is a real sucker.  The same goes for tracking ETFs like USO that are fee heavy – over time, they will always underperform the thing they track so you could, if USO and Oil cross in price, apply the same logic to shorting USO against a long position on oil and I’m pretty sure you couldn’t lose.

    GM – Woo hoo, nice pay off already!

    Euro – I agree but more from the standpoint that they really can’t afford to have the dollar go much lower and neither can Japan.  At some point they need to step in and support the dollar, probably next week as they may have been unwilling to make a move ahead of a 3-day weekend.

    I’d go long on the Dow here but franly I’m just not in the mood today.  Still full covered on long DIA puts  and still in the DDMs but just hanging out and watching today since you can’t take the action seriously anyway

    Ags/Mampcs – Yes if they retest the highs but, as above, I’m not so excited about committing capital to anything today.

    BAC/Oncmed – I think $10.50 should hold and I’d sell the July $10 puts for $1 and just sell some $9s for $1 too (now .65) if it keeps going down.. 

    Ags/BC – They are at a difficult in-between place right now.  MOO is based on the stocks and DBA is based on the actual commodities.  DBC is similar but includes oil which, if you are going long, is better than DBA but, if you are going short, DBA is better to short as oil is too much of an upside wildcard.


  21. Phil,
    Another put candidate, EXM? The 11 puts?


  22. You cant short this market for more than 20mins


  23. Very pretty Pharm!

    SHLD/Wes – I don’t bet against Eddie – He can make that stock do whatever he wants, whenever he wants.  I think it’s a very dangerous play shorting them at less than 1/3 of the highs.  We liked them in the $20s and $30s and got out too soon but if they go back to the low $40s I would go long on them again.

    EXM/Wes – They did have a nice run but why shorting them?  They pay a 15% dividend, had great earnings and have already sold 67% of the remaining charter days for this year and 55% for next year.  What is it that’s bad about them?

    If the dollar does bounce that will be initially bad for our equity prices and terrible for commoditiy prices so miners and refiners will tumble.  If the dollar continues to collapse that will worry the banks and many other sectors so that’s bad too so there’s not too many positive scenarios to spin into next week.  This is what happens when you don’t have a healthy sell-off during a run up – you end up at resistance in some sort of "damned if you do, damned if you don’t" situation like this one.


  24. Phil, what do you think abou a  TBT buy/write selling Dec $52 call/put  for $10.70 netting $41.01/ 46.50 in  view of downgrading from AAA status of UK…….Thanks.


  25. CNBC is quoting prices of credit default swaps on the debts of various sovereigns including the US.   Does a CDS on the US make any sense?   If the US Treasury defaults on its debt, doesn’t that mean that the whole financial world has blown up…how does a CDS holder expect to collect?


  26. Chuck, I would hold the euro short, probably for several days or weeks.


  27. Phil,
    I was trying to capitalize on the initial excitment from the good news that I thought would fade by the end of the day.


  28. EricL
    what is the symbol of the short euro  ?


  29. eril: FXE is euro short ETF.


  30. qcmike,
     
    The ‘clean’ way to do it is with forex trading (selling EUR/USD). The options way is to buy puts on the FXE. You can run an option spread like a diagonal with the FXE, which is nice in a way because you can make it a premium trade as well, but has a huge drawback in that liquidity on FXE options is very poor, and you get dinged getting in and out.
    A cheap, relatively safer way to do it would be to buy longer dated FXE puts and then sell front month puts a few strikes below you.


  31. EricL
     
    thanks

     


  32. Trying to short the S+P again. Hoping the UK close will drag it down.


  33. Now the gap to fill is Wednesday’s close – Dow 8,420, S&P 902, Nas 1,725, RUT 488 and NYSE 5,860.  I would think that will be our top for the day, I’ll certainly be taking out 1/2 the DIA $83 puts we sold there so looking for a .50+ profit to get out of the first 1/2.

    TBT/Magret – I think you are right, they have nowhere to go but up.  I really can’t even imagine a scenario in which rates can go lower from here but here being $50, not $52.50 as this little jump may be premature.  I would rather sell the July $50 calls for $4.50 naked as an entry.  In this play, you would look to buy the stock at $53 and then you could sell the $50 puts, now $1.80 for no less than $1.50 but the goal would be to buy the ETF at $51 or lower and get $2 or more for the puts as that would put you in  (at $51) for $44.50/47.25 with a worst case (at $53) of $47/48.50, which is only $2 worse on the entry that the Dec play but with 6 more months of premium to sell so, if put to you, you can flip right around and sell those same $10 Dec calls and drop your net to $38.50 without having to sell more puts.

    CDS/Eph – Good point, if we go down there is not enough money on planet Earth to put Humpty Dumpty together again.


  34. Now you guys can see why I was not up for shorting…

    Looks like another wrist-slitter for the bears this morning!

    CME is flying but ICE remains cool.  I kind of like ICE here as I think they are consolidating for a big move up.  You can buy the $90 calls for $13.40, sell the $100 calls for $7.15 and sell the $90 puts for $2.33 and that’s in for net $3.92 on a $10 spread.  Stop out the puts at $3 and your net goes to $4.59 and you should be able to kill the remaing spread by taking out $3 so risking $1.50 to make $6.08.


  35. ok, phil – following the TBT post…I like this play an already in it…
    I currently have the following position: 100 shares CB of $49.50; covered with 2 (1 naked) of june 51 callers for which received $2.20 each …also, I have 1 June 50 putter which I sold for $2.10
    Should I go ahead and sell the Jul 50′s callers and Jul 50 putters naked?
    Also, should I buy more of the stock now..my avg price will be lower than 52


  36. CDS on US    I thought about it some more and a "default" under the CDS is probably defined as a downgrade.  That’s what sunk AIG.  They did not have to put up collateral unless they were downgraded, but once the downgrade hit they couldn’t meet their collateral obligations.   One of the problems with CDSs, similar to mark-to-market rules, is that defaults can be triggered even if the bonds are current.   That sets up perverse incentives and hinders restructuring.  I believe that is what’s happening at GM.  I think GM is current on all of it’s bonds, but they obviously are at risk of default.  Some of the bondholders also own CDSs.   They figure in bankruptcy they will get paid off on the CDS even if they don’t get much for the actual bonds.   Hedge funds have actual incentives to force viable companies into bankruptcy, and even liquidate them, rather than restructure the debts.   


  37. Looking toppy now, not going to make the gap fill at this rate so keep tight stops on all upside position that you don’t intend to ride out through the weekend.

    If oil blows $61, that will hit the energy sector and Europe is closing and many US stocks look cheap to them.  The shorts may be done covering and then the longs will have to decide if they want to be invested  over the weekend.


  38. DIA Mattress.   I’m fully covered, but I probably should take off half into the long weekend, right?  


  39. DIA.   My lowest strike short Junes are the 82s and 83s.   If I wanted to go to half covers, the best way to do it would be to put trailing stops on these, right?


  40. No US stock looks cheap to me :-) (And i’m in Europe !)


  41. Call me Nervous Nellie (’cause I am), but I think the Treasury short trade may be getting crowded. After this sell-off, it won’t take too much to pop them: a stronger dollar, a good auction result, a return of deflation talk. I’m taking some of my own TLT short off.


  42. Hello phil;
     
    the ICE play you mentioned above. can we have that in low IQ language :) ?
    also is the DRYS buy/write still good ? how much do you like DRYS at this level


  43. TBT/EricL – I agree with you.  I have a feeling that there may be some "corrections" ahead of the auction next week.  I’ll look at the trade again when the ETF hits 51 or 50.


  44. Dollat at 4 month low today.


  45. re ICE, any way to accomplish this type of entry if you aren’t approved for selling calls? I’m still a lowly level 3.


  46. Phil in the last line….how do you kill the spread for 3?


  47. Phil, is the plan still half cover on the DIA puts for today?


  48. UDN options seem pretty illiquid an have quite big spreads – is there a better way to play the falling dollar ?


  49. EUR above $1.40


  50.  wow, check out MSFT vs APPL in wolfram alpha – there’s a plethora of info there and you can give it other queries as well (yum ko, for example tells you that yum makes 36k per employee and ko is 10x that at ~360k, but yum has 336k employees versus ko’s 92k).
    i hadn’t used this ‘computational knowledge engine’ yet but clearly i need to play with it more…


  51. Its not taking much volume to buy up the dips.


  52. New post up at Insider-Zone:  http://www.philstockworld.com/2009/05/22/seagate-stx-insider-buy/

    It’s an educational post on why I didn’t buy STX, which had an officer buy over $1 million earlier.  Is my pink color back?


  53. TBT/BC – You can take out the $50 putter at .90 and look ahead to rolling up to the July $53 callers, now $3.20 even at some point.  Meanwhile you have nothing to lose by selling 1 $54 put for $2.65 as they can only gain 1/2 of what your callers lose and they will cut 1/2 of any additional upside gains for your callers up to $56.  You can buy in more stock anytime you feel nervous about the upside and just keep a tight stop to the downside as there’s no point in taking an additional loss.

    DIA/Eph – Yes all naked now on Sept $86 puts.  Of course take out the $83s first as they have the higher delta.

    LOL DB!

    TLT/Eric – Short-term there could always be a "flight to safety" but, long-term. the US has to compete for money just like everyone else.  Heck, if the Fed wasn’t buying Treasuries now there’s no way the 10-year would be under 3.5.

    ICE/Micro – Frankly, if you need it translated you should not be in the trade as it’s too complex to manage. DRYS is a yes as long as they stay in this channel.  On the ICE trade, it’s really just a bull call spread which creates an artificial buy/write (but with limited downside) and a fairly normal sale of a put on the side.  Because we don’t want to own ICE at $95.51, we would stop the putter out before it casues too much damage and stop out of the trade with a small loss as the premise would be blown if they can’t hold $100 anyway.  Really you should have a plan like this for every trade you enter, I don’t usually go into it because it would take up my whole day discussing a couple of trades but, on a nice boring day like this, it’s worth taking time to delve into the nuances…

    ICE/Morx – I would skip this one as the way I structured the trade reflects my distrust of holding the stock.  The problem with ICE (and CME) is that they trade very dangerous derivative that may get suddenly regulated and knock the stocks down 20% in overnight trading so I don’t see the risk of laying out $100 a share to make $7 worthwhile.

    ICE/Onc – Oh, that was bad math, if you take the spread for $6.25 and sell the puts for $2.33, that’s net $3.92 but if you buy back for $3 you are in for $6.92 so, still keeping with the concept of trying to keep your whole loss at $1.50, you should be looking to get out if the call spread falls below $5.42.

    DIA/Mampcs – I took them all off on that top call and I will cover back up if we break new highs on this run but I doubt it.  If we hold yesterday’s floor I’ll probably want to 1/2 cover with $82 puts but that’s 3 hours away and a lot can happen….

    UDN/DB – I wouldn’t touch thouse spreads.  Gold is the best way to play a falling dollar I think but a little chasey now.  I suppose with the VIX here I would sell the July $95s naked for $3.60 and, if gold goes higher, look to get in the Jan $84 calls, now $14.50, at $15.50, which still puts you in a $11 spread for $11.90.

    Wolfram/Kwan – That’s good stuff!   You can see how poorly MSFT is run compared to AAPL or GOOG.

    Ilene – Still no pink.  8-(


  54. I regretted not shorting DIA before, now I’m looking at the $80 puts at $1.15 (now $1.17) with a stop at $1.10 to see if I can catch this top.


  55.  phil, thoughts on ba for a new entry?


  56. TBT… I tried legging in by selling the July 50 Calls naked for $4.70.  TBT has moved up, and the calls are now about $5.30.  Since my premise was that I would be able to by the TBT etf at a lower price, and then sell the puts, I am wondering what would be the best way to salvage this as the spread is not moving in my direction.  Thanks…


  57. The problem with ICE (and CME) is that they trade very dangerous derivative that may get suddenly regulated and knock the stocks down 20% in overnight trading so I don’t see the risk of laying out $100 a share to make $7 worthwhile.
    Not sure if I understand this Phil Are you referring to futures? Aren’t Futures already heavily regulated? Haven’t heard much complaint about the CFTC.  Most people have never even heard of it…
    Or is there some other part of their businesses that you are referring to that may attract new regulation?


  58. Phil: oyu say for 1/2 cover you might select 83 $ puts, what is rationale for this rather than 83 puts,??


  59.  phil, exm actually looks like a good buy/write candidate for july?


  60. BA/Jo – Not up here, let them come down first.

    TBT/Ether – First of all, scaling in is always key.  If you had sold some at $4.70 and some at $5.30, there would be no issue).  You don’t want to sell puts in a panic because you’re getting a bad price.  I take it you missed the buy at $53 but the $50 puts can still be sold for $1.50 so not so terrible.  You can make up the .50 on the stock by selling the $51 puts instead at $2 but a bit worse if it backtracks on you.  Keep in mind that scaling is YOUR BEST FRIEND if you are trying to time entries into a buy/write as it makes your position much more forgiving of missed entries.  I think there’s still a lot of panic in this price and it will come down but I know it’s hard to ride out a naked position when you didn’t intend to.  Keep in mind that it will only cost you $1 to roll the caller up to the $52s so, worst case, you sold those for net $3.50 and you are good to $55.50.

    Never got filled on DIA puts and now they are $1.29 8-(

    ICE/Steve – No, the big excitement on them is they are now trading Credit Default Swaps and, in the case of ICE, they still trade commodities outside of US regs and I am hoping they get slapped down on those too. 

    Puts/RMM – I’m a little more bearish on Monday so I’d rather sell lower puts to get another 100-points on my putter.

    EXM/Jo – Yes I do like the stock at $10.49, selling the July $9 puts and calls for $3.37 for net $7.12/8.06.


  61. do we close early today?


  62. OGXI having a nice day!  Should have trusted that move I noticed on Tues…

    T has a 7% dividend and I’m watching them for an entry but I’m not convinced yet.  However, the 2011 $25s are just $2.84 and July $24s can be sold for $1 so I like that spread and buying into the stock at $24 with that being the line to get back out.  If you figure it costs you .05 every time it crosses $24, you have 20 crosses before you lose that $1 you sold and if we get a good sell-off, we can sell puts instead, like the July $22 puts for $1 (now .60).  Yes, this is complicated so please don’t play it if you need to ask!

    Close/Eph – Nope, on time I’m pretty sure.

    OIH heading down with oil, could be a breakdown this time if they can’t hold $97 and that could take the broader markets with it.


  63. testing for pinkness


  64. Thank you Matt!!


  65. Yay, very pink!  Also, cleary not the same color as Matt’s, which was meant to be a bearish red but did come out a little pink… 


  66. Phil/Ilene – reminds me of the one of the all time classic movie lines:
    Reservoir Dogs:
    Mr. Pink (Steve Buscemi) says "why am I Mr Pink?’
    Joe: "Because you’re a faggot, alright"
    I am NOT making any points other than it reminded of a funny scene!


  67. We could make Matt’s text blood-red to really convey bearishness, since the pink doesn’t quite rise to the level of fear.


  68. Thanks for that sensitive disclaimer BC!  8-)

    Well, maybe I will get filled on my DIA puts – not sure if I want them now with just an hour left and dangerously in stick territory…


  69.  VNDA has become a pretty fun little side gamble, I buy the 10 calls below 11 and sell them above 12.  Three hits on this strategy in the last few days.  Your two risks are that it quickly goes to 5, or that you sell at 12 and it quickly goes to 20!


  70. Phil-
    Why do you think there will be a sell off next week?  I thought you have been saying that the last few days were good consolidation days, and that the trend is still up?  If we sell off hard next week, won’t that indicate a longer term down trend?


  71. Red/Ilene – It was an artistic decision as all the reds were too annoying to read through and made the comment section look like a barbershop pole…

    OK, now the DIA $79 puts give you more downside bang for your literal buck as the delta is .24 vs .28 for the $80 puts at $1.20 so 20% more cost for 10% more downside delta is not worth it.  Oil was jammed up to $61.75 into the close and I do like the USO $32 puts at .80 for a weekend play too.


  72. phil – mentioned that just in case ur sensitive :)
    I have been wathcing those too..still hanging at about 1.23…I assume, as yesterday, these are a day trade for 10-12 cents play…
    You said on stuff like this you do 100 contracts?
    I am naked now on the SEP 86


  73. TBT – Thank you Phil.  Yes, I must say that to myself again (and again) "scaling in is your best friend"


  74. Phil: as expected, it is calm and uneventfull,
    still waiting for my AAPL calls jul 125 to go green,
     
    what about next Tuesday: bearish or bullish,
    at least 1/2 cover for sept DIA puts with june 82 or 83 ??? am NAKED at the moment .


  75. Its amazing how you cant get short this market. They look for the short sales and hunt you down.


  76.  Hmmmm… is Mr. Stick gonna show up today for his 3pm final hour session?


  77. VNDA/Mr M – They do look like fun – seems better to short them off a good open though.

    Sell-off/Rookie – I think we still haven’t put in a good bottom and I assume "THEY" would hate to end the month negative and we are just about flat for the month now.  So what is more likely?  That we head up and break through the levels we couldn’t take out for the past 3 weeks or we get one more downside test before mounting a new attack on 8,650?  Between that and the fact that this "rally" is probably just short covering into the weekend and the fact that newslow is bad and data is bad and earnigns are over (no catalysts) and the dollar may rise, tanking the commodities and pulling down the markets in addition to the dollar itself driving down the relative price of equities – means I’d rather be on the short side over the weekend.

    BC – that’s me, Mr. Sensitivity!  On the DIA’s – I’ll generally open with 50-100 and usually willing to scale in to 400 if I feel strongly about the position on the cheaper front-months.  That’s why I’m very happy to take those .10 profits but so should anyone as it’s all about relative portflio size. 

    Scaling/Eph – Try a post-it on the monitor, near where you press the execute button.

    Calm/RMM – Funny how we call an up 60 day "calm."  I feel like I must have been imagining the days where a triple-digit move in the Dow would have us scrambling to find out what major news event rocked the markets.  Now it’s just a typical morning or afternoon trading…  Tuesday is bearish but very light play so just a speculative downide bet overall.  I’ve decided to stay naked on Sept DIA puts and I’m going to hold some $79 puts into the close too just so I won’t feel like I missed out if we gap down to 8,100.   If we go up, then maybe I roll and DD or maybe I flip long as I’m already protected – we’ll have to see if it seems real or not.

    Obama speaks – good time to fill those puts as he’s usually good for a nice boost!


  78. Phil: ok, I go 1/2 cover with 82,
     
    this flatlining is too exhausting,
     
    have a good holiday weekend.


  79. Wow – look at the harsh rejection off the SPY = 90 line.  It touched it for a brief moment, then dropped 0.5% in 10 minutes.  Anyway, it’s been a relaxing day for me, sitting back and watch the callers and putters loosing their values.  Have a great weekend!


  80. What a weird day, almost every stock in my portfolio is down – BAC, DRYS, FITB, LVS, MGM, UAUA, but so are my DIA SEP 85 puts, FAZ, etc.  So basically red on the longs and red on the shorts; Twilight Zone.


  81. That was a quick elevator ride down.  Maybe we hit bottom for a bounce now.


  82. There should be a law against stick save. Very depressing for a bear !


  83. if you’re selling premium, you have to love days like this…now, you get another 3 days of decay…drip, drip, drip…
    i do wish for the scary down days though – easy to make money being short in 8/08 – 3/09


  84. Good way to play Peter – have a good weekend!

    That sounds very annoying Mr. M…  Well you have the two transports, which can go down when oil and the Dow go up and you have the banks, which no longer have enough weighting to move the indexes too much by themselves and then the casinos are like random number generators and have nothing to do with anything else.  I think you are diversified enogh though that we can assume that this "rally" is very narrowly based and thus proably BS and you’ll be needing those index puts very soon.

    Bottom/Steve – I’m not feeling it, I had my finger on the sell button at $1.10 on the DIA puts but I just feel there should be more there so I let it ride…  Maybe the opposite of yesterday and we sell down to 8,250 into the close in the last 15 mins…

    EZ Money/BC – Be careful what you wish for, I don’t think the economy could stand another major dip.


  85. Had to take 20% off the table on the DIA puts, 1/2 cover with DIA $82 puts agains the Sept $86 puts.


  86. Thanks, Phil, I listed my ‘play’ portfolio which clearly needs more diversification based on today’s performance.  I just checked my wife’s IRA, she’s got 12 stocks green and 8 red for the day, so that’s a closer match with the overall market and clearly she’s smarter than I!


  87. Wow, the premarket pump, the late day head fake pump and then the end of day dump.  These market makers just love to come up with ways to take people’s money.


  88. phi – got ya…hey did you finally get those 80 puts – looks like they clsed at 1.44!
    great job this week – have a good holiday
    how old are your girls btw – mine 7 and 5


  89. On another note, I’ll be at Rehobeth Beach, DE this weekend fighting the crowds.  Have a great holiday everyone!


  90. Glad I didnt let them "stick" me out my shorts !!!!!!!!!


  91. Have a great holiday guys….


  92. LOL, looks live everyone else left already anyway. 

    $80 puts/BC – No I switched to the $79 puts which made a quick 20% and I would have felt really stupid losing that so I cashed them out.  Still have the long puts and those are pretty bearish at 1/2 covered with not much to protect.  My girls are 7 & 9…

    Have a great holiday weekend everyone!


  93. good work !! -
    ok, maybe I’ll get some balls next week and piggy onto one of these day trades…have a good one


  94. Have a great weekend Phil. don’t foget the pool passes !!!!


  95. About shorting Uso against a long oil position… This works particularly well when oil futures are in contango , as Uso follows front month futures rolling them them a month forward 14 days approx before expiration. Everytime futures are rolled in contango barrels ‘owned’ by uso are literally depleted overnight. I paper traded short uso long oil futures ……return was not something to write home about… However over a month position was always profitable.


  96. Happy holiday weekend to all… And Phil my sincere congrats for your site and a thank you for sharing your expertise of the world of options.


  97. Can someone validate my Buy/Write calculation on YRCW.  Stock at $2.57, Looking at July $2.50 calls @0.70, puts @0.60 for 1.30 credit.  So, in for 1.27/1.89 and if called away in July, profit of 97%. 


  98. That looks right to me. There is some risk in YRCW that it will go bankrupt.  .