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Which Way Wednesday?

This is going to be a short post as I ran a $109,729 virtual portfolio update for members this morning.

Yesterday was "Testy Tuesday" and the market certainly failed that test, breaking below our "must hold" levels early in the day and then just getting weaker and weaker.  As we already had our USO puts and our long DIA puts, we took some pot-shots on long plays, none of which are working so far of course and we took a quick stop out on Russell calls but stuck with a GOOG vertical, ABX longs, our AA spread, and DIA $84s at an average of .60 overnight.  Our big winner of the day was ICE puts, which we jumped on at 10:15 with the Aug $120 puts at $16.65, which is a synthetic short on the stock as they have little premium, those jumped almost 50% and finished the day at $23.85 but we got out at $24 after flipping to the Aug $95 puts at $6.20, which we got 1/2 out of at $7.20 already.  So all in all, a mixed day but that's what bottom fishing is, we take the easy money as the big guys fall and try to pick the winners for the possible bounce.

Asia is not looking at all bouncy this morning with the Nikkei diving to the 2.5% rule at 9,420, now down 6% off last weeks failure to break 10,000, which we knew would be trouble.  The dollar fell to 94 Yen and exporters did not like that one bit.  India also fell 2.8% and the Baltic Dry Index fell 4.7%, testing the 3,200 line.  The Shanghai was relatively subdued at -0.28% while the Hang Seng dropped less than a point to 17,721, also down 6% from June 30th's high of 18,900.  "These are knee-jerk reactions to the moves last night in the U.S., probably not unfounded," said Andrew Sullivan, a sales trader at Main First Securities in Hong Kong. "I suspect that the general trend is lower, and the fact that the Hang Seng Index didn't manage to regain the 18000-point level yesterday is probably a crucial thing."

Oil and commodity stocks were hit very hard in Asia as the drop in commodity prices seems much worse priced in strong Asian currencies.  Crude prices were likely to keep falling, said Citi Futures Perspectives analyst Tim Evans. "We simply lack any physical tightness that would cushion a decline."  Japan also got a very poor report on Core Machinery Orders, that were down 3% in May, a bit better than the 5.4% decline in April but still disappointing as "experts" had forecast a 1.8% increase despite all the other bad data we've been reporting on out of Japan (I guess they are not subscribers!).  Chinese President Hu Jintao left the G8 meeting to go home and deal with the escalating violence as riots are getting more intense in Urumqi.  Instability in China makes everyone nervous but, strangely, is doing nothing at all for gold as it falls below the $920 mark as the dollar maintains relative strength to the EU currencies, even while continuing to fall against the Yen and other Asian baskets.  

We have stayed away from gold for quite a while, even though we do like it as a long-term inflation hedge, and we'll be watching it around this level ($920) with great interest – especially as it lines up with $90 on GLD.  All commodity pricing is in quesition this week as policy makers on both sides of the Atlantic are looking to crack down on the oil speculation/manipulation that we at PSW have been bringing to your attention for 2 years.  While you may get bored hearing about it, that is precicely why the ICE play was so obvious yesterday as that exchange was founded by Goldman Sachs, Morgan Stanley and the usual suspects specifically to get around US commodity trading regulations and is going to be rendered pointless if the International law catches up with them

[Oil Speculators Under Fire]In an opinion piece submitted to The Wall Street Journal, meanwhile, U.K. Prime Minister Gordon Brown and French President Nicolas Sarkozy (who obviously ARE PSW subscribers) wrote that governments need to act to curb a "dangerously volatile" oil price that defies "the accepted rules of economics" and "could undermine confidence just as we are pushing for recovery."  In Washington, the Commodity Futures Trading Commission, the main U.S. futures-market regulator, said it is considering tougher regulation of oil-futures markets. The proposed rules, which drew immediate criticism from traders, would seek to curb the influence of speculative investors such as hedge funds and investment banks by limiting how much money any single trader can bet on any one commodity at a time.  On Tuesday, Sen. Byron Dorgan (D., N.D.), a backer of an antispeculation bill last year, called the CFTC's action "a positive first step" to curbing "oil speculators looking for a quick buck at the expense of American consumers."

The U.K.'s Mr. Brown and France's Mr. Sarkozy called on the International Organization of Securities Commissions to look at improving transparency and supervision in oil-futures markets. An umbrella organization for global securities regulators, IOSCO helps to set global standards and advises national bodies on regulation. In March, it set out guidelines on how regulators can beef up supervision and enforcement of behavior in commodities markets.  This is sending oil plunging below the $62 mark, something I predicted last month when I wrote an article warning that oil speculation was reaching a frenzy and cautioning against investing in USO.  

Sadly, the energy and commodity sectors are dragging down the broader markets, including the Nasdaq and SOX, which were hit hard by the fall of solar and other alternate energy companies as the media bandwagon has reversed course from predicting $85 oil to predicting $50 or lower oil.  Failure of $62 to hold can lead to another leg down in the energy sector and it's happening too fast for rotation to save the broader indexes so the whole market is in danger of being dragged down by this much-needed correction in the commodity sector.  We consider this a good buying opportunity but we are going to be treading very lightly until things stabilize as you never know when a "black swan" event will come up.  Our strategy remains having plenty of cash on the side so we can take some opportunistic plays as they come along but not taking the markets too seriously in either direction.

Over in Europe, we have grave concerns as commodity pushers are tearing the markets down, even though the G8 statement shows "some signs of stabilization of our economies," something that would have given us a 2.5% UP move 2 weeks ago.  The G8 draft states that "the turning point in the economies will be strengthened when our measures will reach their full impact on economic activity and will contribute to improve confidence."  Hopefully it's not just wishful thinking but we think this (Dow 8,100, S&P 880) is a pretty good bottom.  What we need to see it the EU bottoming out and the FTSE has been worrying today as it fails to retake 4,200 – a level we really want to see held.  The DAX is also looking sad but at least holding 4,600, which is what we need while the CAC is also failing us below the 3,200 line.  Yesterday the EU markets gave us a good preview of the US finish, hopefully today they can inspire us to do a little better.

It is all about oil holding $62 today.  We don't care if oil goes to $20, as long as it does it slowly but we can't take this sudden panic out of the energy sector as it's pulling down technicals of sectors that actually BENEFIT from lower oil prices.  I am encouraged that pump-monkey Cramer has turned into dump-monkey Cramer as he suddenly gets religion and declares the oil markets to be a "total farce."  I spent much of last month warning people not to listen to Cramer as he herded his sheeple into the energy plays at what I was calling a ridiculous, manipulated top and seeing this joker jump on the opposite side after a more than 20% decline in the sector makes me think it may be time to flip bullish but first, let's let him stampede his followers out of the sector and push the bottom the same way he drove them in to push the top.  See, we can make money by watching Cramer – AND DOING THE OPPOSITE!

Today we have the simple goal of holding yesterday's lows.  There isn't much data other than crude inventories at 10:30, where we expect bad news to be baked in and a possible relief run back over $63 for oil (we are out of oil puts and waiting for a sign at $62).  Hopefully that will give OIH and XLE a small boost, which will allow the Dow to retake 8,250 and anything below 8,100 is going to be, in technical terms, BAD.  The S&P REALLY needs to hold that 880 line (see David Fry's chart above) and there is no or there, we flip bearish below that line.  The Nasdaq has been our leader and 1,750 is the critical line for them but no clear breakdown until they fail 1,700 so we will be shorting the Qs if the S&P breaks lower as they have a long way to fall.  NYSE is fine if they can hold 5,600 and the breakout of the range between there and 5,800 will probably set the market's direction for next week.  The Russell failed us yesterday as we gave them a bullish toss and we won't try them again unless they show us they can hold 480 but the longs there are still very attractive as the RUT can jump 20 points very quickly off that mark.

We continue to be mainly spectators but things are getting very exciting.  As I mentioned, we took the DIA $84 calls at an average of .70 in our $5,000 virtual portfolio so we are really pulling for a 100-point move up today.  We also have AA $7.50 calls with the $9 calls sold for a .71 net cost on the $1.50 spread and that too is a bullish play in our new virtual portfolio.  You don't get to make many mistakes with $5,000 and we'll see where we stand this evening after AA announces earnings but today, it's going to be $62 or BUST in the oil patch so let's be very careful out there!


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  1. That’s great news that the CFTC is looking into its way of regulating oil speculation.  I didn’t know it’s done differently then what they do for ag commodities.  That’s a simple start.  Change oil regs to be the same as ag regs.  From there, study whether it should be allowable to use oil futures as a hedge for the economy in general and not simply oil.  I say NO it shouldn’t.  That’s what gold is for!  Now go get ‘em!  As I’ve said before, it’s a matter of national security.
    So my question is, how did Phil know that PR was coming out yesterday from the CFTC?  His choice of shorting ICE was just too coincidental for him not to have known..  Phil, do you have a ‘guy’ on the inside? 8-)  Btw, I think ICE has got ALOT more room to fall.  Maybe not today.. but its trend is down, not up. imo.

  2.  the cftc info was posted yesterday as a story on bloomberg before market open

  3. Boy, the Naz is getting goosed right now.  They waiting till 8:45 to start buying.  QLD is up .20 with just 27k shares traded.  That’s alot of bang for the buck!  Would expect all that to be given back at the open.

  4. occam, shoot.  there goes my theory Phil ‘knows’ people!  Guess ICE was a real no brainer then.  I don’t remember anyone mentioning the article yesterday morning.. guess I missed it?

  5. Phil,  Is it possible that controls on oil futures are now being pushed, because of the possible explosion (pun font) in the Middle East, between Israel and Iraq.  They are trying to lessen the coming oil price disaster?

  6.  i was going to mention it but didn’t; my bad.  Bloomy posted a follow-up today, saying any CFTC regulations may hurt MS and GS especially because
    "Goldman Sachs and Morgan Stanley accounted for about half of the $15 billion in revenue that the world’s 10 largest investment banks generated from commodities in 2007, "

  7. Feeling some pain on the ERX calls from yesterday.  Thinking about hedges with ERY or selling front month calls on ERX?

  8. Phil
    I signed back up but only for a basic membership.  7 comments were posted but I only see one???   It is unclear what I get in the basic membership other than the payment.   I plan on moving too the philippines and figured I could only read the comments but it seems I cannot do that eithe.   Do we really have to wait 4 days to see them??   If it takes 4 days to see them then maybe I just want my money back.  That is not what I was expecting  and it was not clear what I was getting.

  9. Oil/Matt – Very easy to fix, we just need the will to fix it.  As to ICE, it was something we’ve been watching for ages and I often say it may seem like I ramble on about things and keep bringing up all these boring fundamentals and talking about what a scam oil is and how the ICE is the mechanism used to manipulate the market but it all pays off when we see a shift in sentiment that we KNOW is going to impact that game – it makes for the easiest kind of fundamental short of all. 

    Yes, ICE does have further to fall and we can pre-roll the Aug $95 puts, now $9.40 by adding the current $90 puts at $3, putting $1 trailing stops on the Aug $90 puts.

  10. this is Singapore Steve

  11. Wow what is with GE and this guy who thinks it’s worth $2?!?!?!

  12. Was hoping to get out of the DIA calls on the gap up but the price on the options didn’t move.  Are you still try to hold out for .60 (even) and then bail?

  13. Good volume, 15M in first 10 mins.  If we keep this up and hit 50M by 10 and hold our lows, we could be ready to move back up

    We’re looking to hold Dow 8,100 and retake 8,250, S&P needs to hold that 880 line, Nasdaq 1,750 and we are shorting the Qs if the S&P fails 880, NYSE must hold 5,600 and Russell 480 is key support. 

    In Europe we’re watching FTSE 4,200, DAX 4,600 and CAC 3,200.  

    Our DIA $84s are still .54 and we can watch the $33.50 line on USO for early signs of trouble as well as $90 on OIH and $45 on XLE (just below it now) but I expect we’ll see 8,250 and it’s what happens there that will drive our decision.  Going to be tough to gain traction before oil inventories though. 

  14. wow, what a pick on the DLTR, that would of been some easy money. It ran right up after the opening. still hovering up there too. Watching DIA come back to us also. Singapore Steve I see most of Phil’s comments and all the other basic members….i only have the basic membership too.

  15. Singapore Steve I have to refresh my page all throughout the day too

  16. Controls/Sky – I don’t think they put that much thought into it.  This was all coming to a head for a long time and the Dems taking control of the Senate was the straw that broke the camel’s back because now they know they can push regulations through and look like heros. 

    MS/GS/Occam – And who says there shouldn’t be excess profit taxes on that nonsense?

    ERX/Smasher – I wouldn’t bet both ways ahead of the inventories.  Give them a chance to work and be ready with your covers in case they don’t.

    Basic/Steve – You cannot see the comments of Premium members and you can only see the trade ideas and comments I release for Basic members – that’s what a basic membership is.  I’m sorry if you thought it was the exact same as Premium, only cheaper.  I know Basic members are used to the access restrictions but if you started as Premium, it’s a hell of a step down to move to Basic.  Contact Greg at if you want to change your status.

    DIA/Estimated – In the $5KP I’m willing to hold out for the oil inventory report as that can give us a boost (or kill us).  With 10 contracts at .60 ($600) even .45 is "just" a $150 loss so not in a hurry to take it off the table down $50. 

    Refresh/Hatorade – Just hit the F5 key to refresh. 

    Volume fell off quickly, just 27M at the moment so figure 30M for first half hour.  Still stronger than "usual" lately but it would have been better if we were at the low at higher volumes for a real test.

  17. I tell ya what… that ski slope on ICE is turning into a sheer cliff on the chart… how low can it go?

  18. ICE is having another bad day – Yipee!

    RT selling off despite a nice beat – that’s a very bad sentiment indicator.  Looks like an opportunity to me and I like selling the Aug $7.50s naked for $1.

  19. Some of the August SPY puts have a bid/ask spread of $0.15 , which is just silly.

  20. Yeah I figured out the F5 thing yesterday, thanks Phil.
    Merkhava-you are still in your ICE position I assume?

  21. ICE/Merk – They can fall to $80 if that oil inventory is bearish and crude fails $60 but $92 should at least be bouncable for them and sicne the Aug $95 puts are now $10 (up 62%) and the new $90 puts are already $3.50, I’d put a stop at $9.50 on the Augs to lock that down and look to maybe DD on a bounce on the $90 puts.

  22. Phil after yesterday, please add calls or puts to your trade comments…niether price added up so I couldn’t choose one..

  23. any call on YRCW?

  24.  Thaks for the heads up on the support level at 80 Phil
    Yup… still holding ICE… I’m enjoying the ride and keeping tight stops
    I’m hoping the 10:30 oil inventory goes my way… 20 mins to go and luvin the suspense of it… Yeeehaaaaawwww

  25. CME getting hit right along with ICE but. long-term, it will be good for CME if the ICE nonsense is put down.

    Comments/Colberg – Oh damn, I have a mental block this week!  On RT that was, of course, selling naked puts.  I don’t think that one is getting away

    YRCW/Morx – I think they are worth a gamble at $1 but I thought so yesterday at $1.40 too!  They are really too low to sell against but you can give yourself some cushion selling the 2011 $2.50 puts naked for $1.85 as your max loss is .65 and, if you have a 50% premium, it could be a free margin play.

    Dollar still strong.  I can’t believe Japan isn’t stepping in to support it against the Yen as their exporters are crying right now. 

    Yeehaw is right Merk!  What a total collapse on that one!

    Nice to see plenty of stocks being bought this morning – good rotation and will be great if oil doesn’t fall too far.

  26. RT- Phil, you mean selling the $7.50 calls on a unjustified down day?  And $1 is a long way away.  Not following the logic. 

  27. RT/Jordan – Sorry, it was selling the RT $7.50 PUTS naked for $1 to give us a net $6.50 entry

  28. ICE is just the prettiest bear chart, never even comes close to triggering a stop! 

    Be careful with CNBC because if the oil report is bearish they tend to downplay it. 

    So much fear in the energy sector right now, they are expecting a disaster.

  29.  uh-oh… the MM just triggered me out of my ICE 120 puts a few minutes ago…  dang
    looks like he really wanted to get those off his book against him, so I guess that might be a sign we could see ICE going lower

  30. Oil expected to be about a 1Mb net build.

    Actual figures are: 2.9Mb draw in crude, gasoline 1.9Mb build and build in distillates of 3.7Mb so net 2.7Mb build and that’s knocked oil down to $61.50.

    ICE should get lower off that but, sadly, it will also drop the rest of the market lower now as OIH and XLE sell off along with it. 

    Now look at idiot Cramer coming on CNBC as if he’s ALWAYS said oil was manipulated – sickening! 

    Volume 50M at 10:30 so on par with yesterday.  We really need that rotation now!

  31. ICE is falling like a ROCK.  Damn that thing moves!

  32.  Look at ICE go down…. weeeeeeeeeeeeee… raise your hands!!  LOL

  33. ICE looks to be  turning.. be careful.

  34. ICE $89, this is amazing!  I think $61.50 is going to hold up on oil so keep an eye on the ICE puts here, you don’t want to give up $11 on the Aug $95 puts as that’s almost a double and $4.50 for the $90 puts is up 50% in an hour so how stupid would it be to blow that?

    RIMM is another rock at $65 but AAPL is holding it together.  GOOG is barely moving but MSFT is being punished on news that GOOG will be pushing Chrome as an operating system in new PCs next year.

    BIDU not looking too healthy.  LDK getting back to where I like them around $7.50 ($8.80 now), SOX 250 is an interesting line to watch, no reason they should be failing that.  Let’s keep an eye on X too, it would be nice if they hold $32.

  35. Phil what is your take on CVX earnings report on Thurs along with the Oil report today. Do you think some puts are in order or not worth the risk?

  36. Easy to move the market up once the volume dries up.

  37. Hi Phil, back to my ERX trade.  So, I hastily (often, I learn by doing, and making mistakes) sold July 26 calls for .80 as I was expecting a bad invetory number.  I’m not worried about ERX acheiving 26 by expiration and I could roll or just buy the stock and be exercised if I had to.  But I’m wondering what to do about the October calls?  I assume we wait and see if oil holds around these levels before making any real moves, and I still have August to keep lowering the basis if I need. 

  38. i think n korea took out phil.
    where did everybody go? i don’t like being alone.

  39. would you get out of the AA calls if we can still break even on them or you think they give us a pop to get out on?

  40. Phil,
    How about buying DIA $84 calls and puts $79 for $.50 each leg?

  41. Clearly there is no confidence in earnings this quarter!  Breaking down the walls!!

  42. hey phil – do you have any idea what is going on with VZ – getting crushed today and I am not seeing anyhting on it

  43. CVX/Hatrade – I’d use them to pay XOM and COP.   COP would be my favorite short as they are more sensitive to nat gas pricing but these guys are all down 20% or more already and not too far off the lows they hit when oil was $35 so it’s going to take a long-term sentiment that oil will be below $50 for them to really devalue much from here. 

    Volume/DB – for sure, same game every day.  Will be very disturbing if they can’t get a push before lunch though. 

    GE is dying!  Amazing how many companies count on $70 oil to sustain their business model.  CCJ getting hammered too.

    Oil barely holding $61.50, looks like they are in the mood to head lower.  Gold at $915 as dollar gaining strength (people just flying back to cash and demanding dollars).  This is the big unwind I was expecting, commodity prices collapse, causing a dollar demand which pushes commodity prices lower causing more flight to the dollar……  

    Here’s 880 on S&P, not looking very good.  Our DIA $84 calls are down to .44 and were .54 before so a DD here would make it 20 in the 5KP at .52 average and we can do that and get 1/2 back out at .40 as a stop.  If 8,160 holds I’ll be looking for another run to 8,200 – S&P must hold 880 of course!   Our goal is to get 1/2 back out (10) at .52 on a run up.

    Volume 65M at 11 so 15M in 3rd half hour.

  44.  CNBC seems full of oil speculation proponents resorting to tactics of ridicule…. in my experience, ridicule is the resort of scoundrels when they know hey got caught…
    time to hit the mute on "the call of the wild" again…. sheeeeesh

  45. PETERD…..?? your current parameters on the indexes in your portfolio……GABBY

  46. ERX/Smasher – Oct $25s are down to $3.80, not a bad fall considering.  The July $26 calls are .55 and should be taken out as it’s a nice one-day profit and we think oil will snap back soon.  In addition to still liking the Oct $25s at $3.80, I now like the ERX $21s at $2.60, with $1 in premium and a stop at $2 – speculative but fun.

    AA in $5KP – Taking out $9 caller for .70, up .34, might resell later or might just get out but basis down to $1.41 with $7.50 calls at $1.85 so $2.25 would be a good spot to cash out on a run up.

    DIA spread/Maxt – I like the idea as we’ll probably move 200 points one way or the other this week and you’ll still have a week of premium.

    VZ/BC – No and it’s been 2 days of this for them.  I know that cable companies are mounting a big ad campaign against FIOS but so what?  Probably it’s about the anti-trust saber rattling – not specifically aimed at VZ but certainly hitting them hard if it goes through.  If they hold $28.50 they should be fine and either way I like them here long-term so how about selling the naked Aug $29 puts for $1.25 for a net $27.75 entry if put to you.

  47.  "the call of the wild"  — I’m not against screaming whining drag queens, but I do think an hour show for Larry Kudlow is too much.  

  48. what about ERX Oct 22.5 & Aug22.5 call spread? Or is this falling knife scenario?

  49. whoops, missed your 11.23AM post

  50. Wow, OIH fell 2.5% since inventories, XLE too!  XOM and CVX fell $1, costing the Dow about 20 points right there.  Oil now at $61 and gold at $910 but this move is mainly about the dollar popping a point since 10:30 so it’s just money going out of commodities and back to cash – not a reason to panic sell everything.

    The Yen has risen to 93 to the dollar now, that is just devastating for Japan stocks tomorrow.  Money goes out of commodities to Yen too and it looks like no one wants the Pound or Euro at the moment. 

    X hitting the 5% rule at $30, they are getting really attractive down here.  CAT also at $30, which was our goal to buy out the long calls in the $100KP.

    POT right at $90 so interesting there.  VLO $15.41 – amazing deal but I liked them at $16.50 too. 

    Volume 82M at 11:30 so 17M in 4th half hour is picking up and much better than usual which means we could be putting in a firm bottom here

    Damn, oil $60.50 now and ICE at $86.86 – DO NOT BE GREEDY!!!

    ERX/Drum – I like the Octobers naked for now.

  51. thanks phil – you may be on to something – I just checked T and got beat up too…
    I am in since last week at about 30.9….I sold Aug 30 puts and 31 calls for a total of $1.90…Also, it got a .46 dividend
    glad to see you would hold -  
    if it holds here , perhaps I will add at about 29

  52. phil,
    What do you think of selling the AAPL Aug 135 puts naked here?

  53. Phil/bcfla: VZ went ex-div today. $0.46.

  54. Phil how do you see oil futures regulation impacting VLO ?

  55. thanks never

  56. Hello to all;
    do we buy PGH, VLO, GE down here ?
    Whne does FAS start looking interesting to you again ?
    do we wait for that 20% bounce off the bottom first ?

  57. Phil,
    I have 400 shares of PGH at an average price of 8.28 for a total of 3312. I sold July 7.5 Calls on them and recouped 420 dollars. I bought them back today for 5 cents.
    I had a dividend of about 160 dollars to date. Does it make sense to sell more calls Probably January 2010? I have this in a Roth account and so cannot sell Puts. Thanks.

  58.  S&P really looking weak

  59. Wow you guys have to read this.
    they are finaly stepping on GS’s toes.
    Is all this happening because of the rolling stone article ?
    Goldman, Morgan Stanley Threatened by CFTC Review

  60. VZ/BC – They are a solid long-termer.  Don’t be too quick to add though, they will get put to you anyway if below $29.  Better to roll the callers down to 2x a lower put than to just add unless you are really early in your scale. 

    AAPL/Chuaeu – It’s fine to sell the puts if you REALLY want to buy the stock.  AAPL has crashed hard on several occasions so it’s not one I would choose for put selling at this level (at $85 it’s always a BUYBUYBUY).  I think the problem is that, if it does fail $135 then you DON’T want it so better off limiting your risk with a call spread like selling the Aug $135s for $8.40 against the Oct $120s at $20.82 which is $12.42 for the $15 spread and you don’t have to give back the $8 unless you are $22 in the money.  It costs a lot less margin than selling naked $135s and, if you want to be more bullish, leave 1/4 or 1/2 naked.

    VZ/Never – Thanks, that’s good to know but only accounts for 25% of the 2-day drop.

    VLO/B1 – I don’t think low oil is that bad for VLO as it’s an input cost for them.  They are, by far, the best refiner and they will figure out how to make money with gas back at $2 but you have to have long-term faith and just patiently sell calls for income.

    Buys/Micro – Not unless we see some real support.  Even a 100-point rally in the Dow will be just a weak bounce at this point.  If we stay down here we are deep in head and shoulders territory and that can take us quite a bit lower.  FAS was $4 at some point so not very sexy at $7.40.  UYG is more interesting to me at $3.38 as you have a nice call selling income on them. 

    PGH/B1 – So $8.28 less $1 is $7.28 (forget the dividend) and they are at $6.51.  Our play in the $100KP this morning was to buy 400 more and that would average you in at $6.89, which is a very good price if they keep paying that dividend.  You can then 1/2 cover with the Jan $5s at $1.70, which drops your basis to $6.04 with a 1/2 cover at $5.  The idea would be to roll the Jan $5s to 2x the 2011 $7.50s hopefully when the time comes. 

    Volume 95M at 12, best in a while.

    Goldman/Micro – I will believe it when I see it.  Their stock is getting hammered though…

  61. OK – thanks phil

  62. Hey Europe had a sucky close, down about 1.25%, which is good (sequential slowdown along 5% rule) but also a clear break of our levels, putting them into a bad pattern overall.  That does not bode well for our finish so we can’t afford to pray for a stick today so we’ll be covering any open long positions with DIA puts, Sept $82 puts are $4.45 and July $81 puts can be sold against them for $1.40 and that pays for 3 rolls up so a good entry on new coverage.

    The July $81 puts can be rolled better than even to the Aug $77 puts, now $1.65 so no worries to the downside as that’s a $4 spread for net $3.

  63.  damn, gave up on my goldman puts too early.  Sigh.

  64. Phil,
    What is your opinion on selling fas aug 6 puts at 0.65??

  65. 1727 on the Naz is an important support level marked on my chart…. bulls have to hold it… so far they got the bounce right on it

  66.  hey phil and crew – newbie here.  loving site.  but perhaps a dumb clarification request:
    "That does not bode well for our finish so we can’t afford to pray for a stick today so we’ll be covering any open long positions with DIA puts, Sept $82 puts are $4.45 and July $81 puts can be sold against them for $1.40 and that pays for 3 rolls up so a good entry on new coverage."
    So covering ANY open long positions in my far flung portfolios (not literally or all of course)?   Or puts that hedge my recent DIA July call plays?  
    Thx, DS

  67. Whats going on with USB? 

  68. Nas still up 10% for the year vs flat to down on other indexes

    Forgot to short the Qs when the S&P broke 880, which is too bad as it was a nice drop and we really need to see support here on the Nas if the markets are going to survive this sell-off.  We’ve got 8,100 on the Dow to hang onto but everyone is looking pathetic now and that level can break any moment.

    Ags still falling, horesemen still falling, financials down 4% today so a new group failing us = BADBADBAD

    Oil $60.33, total disaster there and gold $905.  Hard to imagine oil fails $60 and gold fails $900 without a fight but dollar just failed 92 Yen but is still kicking the crap out of the Euro and Pound (the Yen/Euro move must be huge!). 

    I still like this for bottom fishing but it’s very hard with the index technicals failing us so cash remains king at the moment.

    FAS/HP – I like it if you don’t mind holding long-term as an income producer. 

    We just about touched .40 on the DIA $84s and that’s a $300 loss in the $5KP.  AA is also sucking at $9 so not a good first two trades so far and the only thing keeping me bullish is the relatively large volume (110M at 12:30) that indicates this is a "real" sell-off and maybe we have a "real" bottom being made. 

    Tomorrow we do have data with Jobs and Wholesale Inventories, both of which matter.  Import/Export data comes Friday along with Michigan Sentiment.  Next week is huge with data too so this is our last data-free day and obviously expectations are fairly low.  Only one of 6 reporting companies missed this week (VIMC) and no one lowered guidance but people are clearly panicking out of stuff ahead of earnings.

    VNO just broke below $40, BXP testing $42.50.  Even JPM down 2%…  Ugly….

    Nas/Merk – I agree, very important to hold and not looking promising at the moment.

    Welcome Dstillwe!  The DIA puts are meant to take the sting out of what you anticipate losing if the Dow gaps 300 points lower tomorrow (about as much as we fear outside of a 9/11 attack).  The strategy is called a Mattress Play and you can read the original article here

    USB/Smasher – Just down with the financials.

  69. Does moving from a DIA 84/86 to 82/84 vertical call spread make any sense?

  70. I like selling COST Aug $45 puts at $1.65 as a net $43.35 entry if put to us.

    X at $30, selling Aug $30 puts and calls for $6.70 nets $23.30/26.65

    EXM at $5.67, selling Aug $5 puts and calls for $1.65 nets $4.02/4.51 so 20% off if put to you, 20% profit if called away.

    Chicago Fed chair making nice economic noises. 

    10 year auction went very well with 3.365% yield and huge 3.28 bid to cover.   As good as it could be but is it good enough to rally us here?

  71. Nice T auction maybe a bounce back up

  72. DIA/Swell – Why not just take out the caller and roll yourself down? 

    Speaking of DIAs – in $5KP, don’t forget our goal was to sell 10 back at .52, which is right here.  Doesn’t pay to get greedy so get back to 10 with .52 basis and then we can see how it goes.

  73. Phil, how about AIG at $13?  Falling and falling even after the reverse split.  $12.50 puts and calls are $6.10!

  74. Phil
    What is your opinion on RIMM,   up/down

  75. what are your thoughts on this rally? 

  76. Volume at 1pm was 125M so 75M from 10:30 to 1 is 15M per 1/2 hour, about 50% more than we’ve been getting.

    AIG/Jordan – Total speculation.  No one knows how much damage they still have on the books and who knows what kind of dillution they’ll need to square up.  Also, be careful with AIG options as there are two kinds and I’m not sure what the obligations are of the odd ones (ZEU/UZL) so check with your broker before buying any. 

    RIMM/QC – I’d like them at $55 if they hold it, $45 would be better as the expensive options make them worth owning down there.  I think $65 is a fair price for them long-term, not a bargain.

  77. This so called ‘rally’ started at 12:30 and has been a very pretty stair step up.  I can’t believe we are going to reverse like this.  But it’s a hell of a pullback for sure..  If we’re going to turn back down it would be now. 

  78. Back from vacation and see a couple of nice drops.  VIX already up to 31.93.  Nice to sell more short strangles.
    Gabby, what are your current positions?  It’s a lot better to deal with what you have to see if adjustment is needed.

  79. TLT in a good spot to start buying puts

  80. Rally/Roamer – Nothing to it, weak bounce on pretty low volume and we had 2 catalysts so not at all impressive so far. 

    Good call Matt but volume at 140M now so we’re still low enough to be swayed by bargain huntersif we can hold most of the progress off the bottom. 

    I still like HOV as my little builder that could at $1.82, selling 2011 $2.50 puts and calls for $2.12 for net -0.30/1.1 although it would be advisable to stop out the putter at $1.60 (now $1.32) and probably kill the trade.  So we expect HOV to hold $1.50 but, if not, we’re willing to pay .30 to get out of the puts and maybe DD at a lower price and ride it out or just take the loss.

    Hola Peter! 

  81. Phil – Old trade – Jan 2.5 Calls in HMY at 3.50 – Now at 2.05.  Good point to DD or wait for better point ?

  82. Phil – Sorry – That was Jan 10 7.5 Calls … Not 2.5 Calls

  83. Big Booboo,
    Yesterday when you said buy ICE, I thought you meant buy ICE Aug. 110 call. I did. In fact i bought 8 of them. Its currently down 70% which is over a $2500 dollar loss. I bought the ERX Jul. 25th call which is down almost 50%. Do I eat my losses now or should I wait them out.

  84. Let’s put some cash back to work.  The PUT values are inflated today due to the jump in VIX.  You can see it by looking at the PUT and CALL that are equally Out of The Money.  The PUT increases is a lot more than the CALL drops. 
    SPX short strangle – Sell Aug 975 CALL (+11% upside cushion) and 725 PUT (-17% downside cushion) for $7.6.  The PUT went up 60c today and the CALL dropped 28c, so we’d get more money today for this spread than yesterday.
    RUT (my favorite index with its high premium to sell) – Sell Aug 530 CALL (12% upside cushion) and 400 PUT (-16% downside cushion) for $8.2
    Be prepare to scale in more, or make adjustment by rolling them up or down.

  85. Peter, are your index plays cash-settled options, i.e. there’s no assignment risk?

  86. Mr M, yes you’re correct on no assignment risks as those are cash settled options.  However, I’ve been trying to avoid the settlement by rolling a day prior to the Thursday deadline (settlement is on Friday opening price, which could gap up or down on us).

  87. Phil,
    Do you see ICE down to the 70s?

  88. Phil,
    Yesterday when you said buy ICE, I thought you meant buy ICE Aug. 110 call. I did. In fact i bought 8 of them. Its currently down 70% which is over a $2500 dollar loss. I bought the ERX Jul. 25th call which is down almost 50%. Do I eat my losses now or should I wait them out

  89. Merk- U still in ICE or get bounced out on the stop? I can’t beleive it is still dropping like this

  90. Great quote:  Illinois is 101 business days late on $2.4 billion in bills but hasn’t considered IOUs. "It’s not that we’ve run out of cash," says Carol Knowles, spokeswoman for the Illinois comptroller. "We’re always out of cash."

    Even worse from Cumberland Advisors: "We demonstrate that if the Fed were a bank it would be capital constrained. In the second and more technical part, we use McCauley duration to measure the risk building in the Fed’s new balance sheet construction. We estimate that a 1% upward parallel shift in the yield curve could render the Fed technically insolvent."

    Nice chart from Bespoke:

    We need to watch for the "oversold" sectors to move up and the "overbought" sectors to stop falling or bounce off neutral to get a proper turn.  If we have a panic, they can all go to OS before anyone turns (market remains irrational longer than you can remain solvent). 

    Oil not holding $61 into NYMEX close, what a catastrophe for that sector!

    HMY/Partha – Never hurts to offer $1.65 for the $2.50 roll down to the $5s.   Then you can sell Aug $9s for .55 to get 1/3 back right away with a $4 spread. 

    ICE/Natohana – Damn, that is bad!  ICE is sure not going back to $110 and I’m surprised you are only down 70% at $1.43 (so you bought for about $4.50?).  I would sell 1/2 the $85 calls for $4.80 and spend $3.20 to roll down to the Aug $95s but you need $10 in margin per covered contract to do that.  Ideally, the $95s should retain most of their value while you pick up the $2 per share in premium, putting you close to even.  If no margin for that, we don’t like ICE long at all so best to kill it.  ERX is a wait and see on the July $25 calls (I don’t rembember picking those), which are now .65 and if oil holds $60 tomorrow, maybe worth a DD into the weekend so ask me then. 

    ICE/Emo – I think they hold $80 unless the newsflow goes much against them but these regulations will take ages to go through so it’s kind of an early reaction.  If they really crack down on the regs for ICE there may be no point at all to them staying open.  It’s like a front operation that has little merit as a business if they can’t process their illegal (in the US) transactions – kind of like investing in a money laundering operation after the Feds bust it… 

  91. C down 5% now. 

    DIA in $5KP.  If you stopped out 1/2 at .52 you should have 10 left at net .52 and now we’re back at .40 so we buy 10 more at .40 to drop the average of 20 down to .46, where we will again sell 10 back on the next bounce

    Volume 160M at 2:30, maybe too strong for a stick save today.  Oil hitting $60 into the NYMEX close (5 mins) so a catastrophe there.  The ICE $90 puts are $7, up 133% so don’t even talk to me if you blow those.  The Aug $95 puts should be gone but are now $14.20 – amazing. 

  92.  still holding some ICE… what I already cashed out lets me own what I still got for free, so I’m letting it the rest of it ride… making some dizzy "profit"…. I’ll probably sell the last of my puts tomorrow

  93. DIS at $22.07, selling Aug $22 calls and Aug $21 puts for $2.07 nets $20/$20.50

  94. Phil,
    Wanted to get your thoughts on GOOG plays with earnings coming up a week from tomorrow, and as usual, the day before OE.  Interesting that they released the news about the Chrome OS today, which is probably the only reason it’s flirting with 400.

  95. Phil or any others, does anyone try and play the overnight gaps?

  96. Phil,
    ICE – based on what you said, should I start a put position in it or that would be chasing?

  97.  chuckle… I hear ya Phil…. I’m still making some damn stupid profit on my remaining ICE puts…. I just wanna laugh like a rodeo clown
    yeeeeehhhaaawwww     bwah-hhahahahahahhahahahhaa

  98. GOOG/Chuaeu – Remind me after hours, we can look for something.  I’m not sure they will be able to monetize Chrome much until 2011 and Ballmer is such a tool he’ll either lock people up or slash prices and wreck the OS market by then and I’d hate to see GOOG get into a marketing war with MSFT. 

    Overnights/Hat – I’d speculate a gap up, not down but only because it’s more fun.  We broke mad technicals here and still haven’t had a good volume flush.   We need a 2x volume day, maybe 400M on the Dow and roughly 4Bn for the NYSE, probably testing 8,000. 

    ICE friggin $84.61! 

    ICE/Emo – Well someone thinks they are going much lower from this action.  I just can’t see chasing something we started shorting at $110 yesterday when it’s below $85 (down 23%) but the $75 puts are $1.30 and could double if ICE drops $5 more while you can get out on a turn with maybe $1 salvaged so that may be the way to speculate lower.

  99. Phil,
    I still have shares in FAZ but closed all my options. Given their 10 for 1 reverse split after the close today, do you think i should sell the shares? My experience in penny stocks is that reverse splits are always shorting opportunities but I do want to remain short financials right now. Any suggestions?

  100. could oil cause a sell off today?

  101. Yay!  Goal on DIA $84 calls – it’s OK to wait a bit here but if we go back to .45 must sell 10 of 20.  Otherwise, .05 trailing stop.

  102. I have some FAS puts….. would that be a good or bad alternative? I can take profits if you think its a good idea….

  103. FAZ/Allen – We got out of ours, those reverse splits can really suck so better to risk naked and get back in later than mess around hoping you retain value.   There are lots of ways to short financials and FAZ may look good tomorrow but too risky to let 10 of your shares get plowed into one. 

    Oil/Roam – Oil did cause a sell-off today.  That’s why I’m buying into it.  Why should I care if commodities go down, how does that hurt DIS? 

    FAS/Roam – Same thing as FAZ, they are going to reverse split so take the money and run. 

  104. Come on Mr Stick – 8,250 or BUST!

  105.  I wanna see if ICE can actually make it down to 80 before today’s close… LOL
    that would be just tooo freakonomically awesome

  106. 178M at 3pm. 

    ICE $84!!!

    Under no circumstances should a $5KP player go into the close with 20 DIA $84 calls!

    WFMI on a tear today.

    Consumer Credit down 3.23Bn but April numbers were worse with a record $16.5Bn decline.  Overall this is BTE but nothing exciting.  It means people kept borrowing, more or less in May but Retail numbers show they weren’t spending so the assumption is there was a lot of rollover. 

  107. PeterD…Ihave sold  SPX AUG. 09 725 AND 850 PUTS AND 1000 CALL………………..also SPY AUG. 09 77 AND 78 PUTS AND 100 CALLS. tKS. FOR YOUR HELP AND i HOPE YOU HAD A WONDERFUL VACATION…………..gabby

  108. Phil, I"m holding both FAS and FAZ shares right now.  Are you saying because of the reverse split that both could potentially lose some ground?  Or are you speaking stictly in terms of buying or selling options?

  109. What about >5k plyr……are we holding??

  110. Hey Phil – I am  in FAS from long ago at 12.30. been buying when it is low to lower the CB. with the talk of getting out – what do you think? I was going to keep banging away til it gets even at least.
    wish i hadnt been on the road yesterday with all the ICE fun. Can you get that Merk guy to close his trap? :)

  111.  chill morx….. we’re here to all have fun making profits…
    I’d be happy to read your celebrations when you have a great success…
    and if you don’t like mine… then just skip over it dude

  112. CBS at $5.76, selling Aug $5 puts and calls for $1.45 nets $4.31/4.65

    FAZ/FAS/Matt – Look what happened to AIG after reverse split.  They could both lose ground on you, not worth the risk to me.  Don’t forget that you will get a 10x move on the split so if you have 10 FAS at $7.28, you’ll have 1 at $72,80 and a 2% move down in IYF will knock you down $4.36, that’s like having 1/10 of your shares wiped out!  You can say its the same but when you take the overall deterioration of a high-priced ultra ETF into account, I just don’t see it being very attractive. 

    $5KP/Oncmed – Well it’s meant to be a high-risk portfolio so kind of wimpy to kill the DIAs even and also wimpy to kill AA but we are at $2.04 and that’s up .60 so we will take it off the table at $2.25 as it would be silly to turn that gain down

  113. LOL Morx – I think Merk has a right to be happy, he went all in on that ICE play!  As to FAS, if you are close to even I would get out as the combination of a reverse split tomorrow and another 4% down day for financials would be a big disaster for you.  Don’t forget you can only sell one call against them now and we don’t know if you’ll be able to get anywhere near the premiums they offer now.

    Oh Mr. Stick, why have you foresaken us?

    AAPL turning up, FSLR at 2.5% line, WFR with nice comeback. 

    CME still on the road to hell. 

  114. Boy, Which Way Wednesday is extremely appropriate for today.  Cept for ICE!

  115. merk, my bro – you didnt see my smilly face? I spent weeks learning how to make it.
    No i’m totally happy for you! just a little playful jab. no harm intended.

  116.  OK morx !!….   Yeeehhhaaawwwwww… chuckle

  117. Here comes the stick !

  118. This market is crazy!

  119. CME’s CEO coming on CNBC.  Since you can sell the $260 calls for $11.30 I like that play with buying the $240 calls for $24.85 and that’s net $13.55 on the $20 spread.


  120. Buuuueeeeennnnno!!

  121. Did I hear Cramer admit that his show is a travesty of a mockery of a sham?

    Volume 210M with 15 mins left!

  122. Phil … DIA 84 calls…  A bit confused on the various comments…  Seems we should be keeping 10 into the close for a possible gap up tomorrow or do we go fully back to cash. 

  123. Phil – are you making any adjustments to the GE $12 puts we sold?

  124. DIA/Mirachael – With a .46 basis we can keep 10 into the close.  If they hit .60 we should get out and be happy though

    GE/Mllange – Too early to worry about them. 

  125. G’day everyone, been in meetings all day….what’s goin’ on….??  Oh….  :)  

  126. AA in $5KP – As basis is $1.40 we should take $2.10 and get out.  Up 50% ahead of earnings is not worth risking

  127. Just a dull old flat day Pharm – no worries….

    Damn, my AA did not fill so now risking into earnings.  Should have taken $2.08 when offered…

  128. holy moly, a big block of AA just went through.  51K bought, 100K sold, down they go…..

  129. Gabby,  there is a typo and you meant SPX 750 PUT (not 850 PUT), right?  There is no need to adjust  the PUT side.  For the SPX 1000 CALL, it has droped to $1.4.  You can either make no change (bullish bet), or roll it down to SPX 975 for $1.75 credit.  975 is a full 10% jump from the current level, so it’s relatively safe bet for the short CALL.  The vacation was great as always! Thanks.

  130. Nicey nicey on ICE.  Which I had bigger cahunas to go in on that one….

  131. AA trading halted pending news….humm.  Glad I did a put/call strangle on ‘em.

  132. how do you do the math on quadrupling or more down? If i have say 100 shares of xyz and buy 1000 more.
    like i said, i’m an art major.

  133. Morx – average them up.  100 @ $1 and 1000 @ .50 = $100 + $500 = $600/1100 shares = 0.545/share

  134. AA better than 1Q, but down 50% from 2Q last year.  T’will be interesting to see how they play out.  Big blocks moving through again 20K and 7K buys.

  135. Hello Me.  Must be heavy drinking goin’ on after that market day, or everyone is a the beach on the left coast.  Surf has been less than stellar here, but hey, there is always Sea World! 

  136. Looks like AA is still halted.
    I’m not so sure the report is good.  Less worse. maybe?

  137. Pharmboy
    what do you think of MRK  ?

  138. AA – BTE I think but not by much.  No movement in the stock that I can see….

    Quad down/Morx (Lol on art major by the way!) – If you have 100 at $2 and buy 1,000 at $1.50 then it’s $1,500 + $200 / 1,100 or $1.545.   If you have 100 at $2 and buy 200 at $1.50 then it’s pretty much ($1.50 + $1.50 + $2)/3 = $1.67.

    Or what Pharm said!  8-)

    AA – Ah, now they are moving.  $10!  If that holds it will be very nice for $5KP, tough luck to MM for not paying our ask….

  139. Wonder what happens to my FAZ calls and puts?

  140. Wow,  AA up over 7% after hours!

  141. Phil,
    I know in the past you’ve made some pre-earnings plays on GOOG, so would be interested in your thoughts this time around. 
    My own 2 cents:  On GOOG’s Chrome OS, don’t think it’s really meant to be a real revenue generator, but more of a strategic response to MSFT to stick to their core Windows/apps business.  Unfortunately, it seems like the boys in Redmond may actually have come up with a serious search app in Bing – don’t think it will seriously threaten Google, but a few points of market share means a great deal when Google hasn’t been able to demonstrate an ability to monetize any of their other offerings, especially troubling when their growth rates are continuing to decelerate as we would expect of a maturing company (gasp – GOOG not a growth stock?!!).
    I agree with you wholeheartedly that the last thing GOOG wants is a marketing war with MSFT – unlike their older ads, MSFT’s latest campaign is very effective in differentiating their performance bang for the buck vis-a-vis AAPL.  As for global expansion, I think GOOG missed a golden opportunity when BIDU was hit with their scandals last winter, but it doesn’t appear that they’ve been able to make an appreciable dent in BIDU’s market share in China.
    So I’m looking for opportunities when GOOG gets ahead of itself.  It’s certainly not as bad as RIMM’s pre-earnings run-up, but I think there’s still a higher probability to disappoint expectations this time around.  Welcome your thoughts Phil.

  142. AA’s earning is better than expected, I believe.  That’s why AA’s big move after hours.
    Do you think this might set the tone for this earning season, i.e., market generally going up?

  143. Can’t help chiming in I think chrome OS is very interesting for the consumer. Windows products are currently "very expensive" for netbook users and this gap will get worse as hardware further commoditizes. Goog aiming at netbooks is a strong first play.  Many People who spent $300 on a netbook may be very reluctant to pay another  $100  for a windows 7 upgrade. This is a clear opening for a competitor and the gap will only widen.
    I would argue though few people actually care or need a new operating system. This is one of the reasons so few people upgraded to Vista. They just didn’t need to. If it’s shinier and works perfectly or is just much cheaper, maybe  GOOG will gain traction. In my opinion it will be hard to make something much shinier than windows 7 though, it really is brilliant. To me that only leaves cheaper.
    Producing a "universal" operating system for netbooks (and larger computers) is dramatically harder than anything GOOG has done in cellphones. You have to deal with random devices being plugged in, and software that was never tested on your specific computer. You don’t do that with cellphones, you do that with netbooks. This stuff is REALLY REALLY REALLY hard to get right. And that’s expensive.
    If GOOG can successfully overcome this very very expensive challenge, then then I think this leaves GOOG competing on price.
    Now let’s remind ourselves that the incremental unit cost of a producing new windows 7 license to microsft is zero dollars. Ignoring antitrust legislation, MSFT has spectacular room to compete on price.
    Maybe the new OS has some killer capability in it that MSFT won’t be able to replicate, if so what is it? Or are GOOG only competing on price with something that costs zero incremental dollars to produce?
    Perhaps the only outcome from all this will be the cost of a windows 7 license coming down so far that MSFT have less money to compete with GOOG in search and other areas….

  144. I heard that the Windows 7 upgrade is going to be very pricey – well over $100.  Thus, Google might do well to undercut them.

  145. The news is all messed up for AA – CNBC reported a 26 cent loss – better than expected, excluding something or other, while others are reporting a 47 cent loss, more than expected.  So the after hours trading is going skewed, trying to figure out what’s up.

  146. I figured it out… the smaller cents loss was on a non-GAAP basis.  The estimated loss expected was probably NOT on a non-GAAP basis.

  147. From Alcoa’s own materials
    Loss from continuing operations of $312 million, or $0.32 per share
    –Excluding restructuring, loss of $256 million or $0.26 per share

  148. Jason I think you are right. It’s on page 39 of their presentation at
    I am new to this, but while I can find presentations and opinions left and right I still haven’t been able to find the actual filing with all the GAAP numbers on it :(

  149. To understand NKorea, go here:
    "You imperialist gangster !"
    "You reckless political dwarf! "

  150. QCm – I like MRK, but a bit expensive up here.  I would scale in or buy SGP for a better return, as MRK is purchasing for 0.57 shares and 10.5 or so in cash.  A premium of 5-8% now.  I would also buy OTM puts in the 19 Nov09 strike JIC the deal falls apart……

  151. Pharmboy
    thanks for the information

  152. thank you pharm. that’s like duh, but never hurts to ask.
    so no waves at solana bch today?

  153. Don’t know about Moonlight Beach in Solana Beach.  I live in Carlsbad along the 101 and Ponto/Carlsbad State Beach, and the waves were small.  I am not a surfer, but I do try to get out on my ocean kyack….eons ago, b’f I was a father of 2 boys.  Good evening to all, now time for wine and a little R&R.

  154. Would it make sense to shadow a trade like the PCS option play (in Andrew’s column from yesterday)  at a 10 contract pace. You invest $13,000 and collect $17,500 in 8 months for a annualized 50% return. It appears this investor has enough clout to manipulate the stock and guarntee a $17.50 price in Feb2010. I also noticed the volume was almost double the daily average. I can’t figure out why he didn’t just buy the stock for $11.80 before he manipulated the price up in order to lower the option cost. The only conclusion I can come up with is that he used OP money to manipulate the stock and his own money for the option play. Oh well if you have $4.6m to spend on an option play a few wasted $ here and there is nothing.

  155. On another note – JAVA – still a premium of 30c on the Oracle deal price.  Should close this summer, and is an all cash deal.  That is 3% premium, 12% or so yearly yield……….tain’t bad.

  156. Good Morning everyone
    UK up about 0.5%, S+P futures a little more than that. Missed the afternoon session yesterday but a good job I had trailing stops on my shorts all of which stopped out during another end of day pump job. As Phil said "it would have been another DB fit" Enjoying all the GS conspracies in the press toda and will be short again once the AA hype wears off. (About 11.0am !)

  157. Good Monring Phil, DB  & all

  158. Speaking of GS conspiracies, there is a great discussion (more like tongue in cheek) on Slashdot on the missing source code.

  159.  Gooooood morning Phil & all,
    I’m ready for earnings season !!
    Chevron reports 5PM today. It has been channel trading between 64 to 71 since April, but this week it broke down thru the bottom of the range and bounced off 62 yesterday.
    I’m thinking of setting up an earnings play on it during today’s session. Since it broke the bottom of the it’s trading range, I’m thinking puts for further downside move drivin by bad earnings from lower oil prices last quarter.
    Phil… what do you think about Chevron?

  160. Asia/Pacific Markets    Thursday, July 09, 2009
    (The following is from Yahoo, please confirm with other sources)   

    Australia All Ordinaries*             3761.40         -4.60        -0.12%
    Nikkei Average*                            9291.06    -129.69        -1.38%
    Shanghai Composite*                3123.03        42.26         1.37%
    Hang Seng*                                17790.59        69.52         0.39%
    Seoul Composite*                       1430.89         -0.13        -0.01%
    Singapore Straits Times*           2307.61        47.84         2.12%
    Bombay Sensex                         13757.46       -11.69        -0.08%
    Baltic Dry Index                             3107.00     -109.00        -3.39%

    * at Close

  161. Asian Markets Struggle After the Yen’s Surge

    Asian markets were mostly lower Thursday with Japanese stocks tumbling after the yen spiked to a five-month high against the dollar, with investors seeking to trim riskier bets amid growing concerns about the health of the global economy. Doubts about the prospects for a swift and strong recovery also weighed on oil prices, which tumbled more than 4 percent on Wednesday, but other Asian stock markets steadied after a late rally on Wall Street.

    The latest forecast from the International Monetary Fund predicted the global contraction would be worse in 2009, but growth would be higher in 2010.

    Japan’s Nikkei hit its lowest close in seven weeks, down 1.3 percent, weighed by exporters as the yen stays near five-month highs against the dollar amid growing doubts about a speedy recovery in the global economy.

    Seoul shares ended flat with a central bank decision to hold rates steady having a limited impact on markets, but gains by financials lent support to the index. 

    ustralian shares closed down 0.1 percent, off earlier lows, with investors seen reluctant to commit cash before the upcoming corporate earnings season.

    Hong Kong shares gained 0.4 percent.

    Singapore’s Straits Times Index climbed 2.1 percent.

    Chinese stocks rose 1.4 percent as surprisingly high mainland new lending data for June stoked further worries of a likely clampdown on China’s monetary easing policies. China’s central bank on Wednesday said it would resume auctions of one-year bills in its weekly regular open market operations, in what traders said was another sign that monetary policy was being tightened slightly.

    Bombay Stock Exchange’s Sensex ended at 13,765.65, down 3.50 points or 0.03 per cent. Indian markets ended the volatile session flat as traders lacked confidence to take positions ahead of earnings season and uncertain global markets.

  162. Euro Stocks Gain; Oil Boosts Energy

    European stocks extended their early gains on Thursday, up 1 percent, as a rebound in oil prices boosted shares of energy companies such as Total. The FTSEurofirst 300 index of top European shares was up 1 percent at 825.12 points, snapping a five-session losing streak.

    Total was up 1 percent, Repsol gained 0.8 percent and Royal Dutch Shell rose 0.8 percent.

    But Europe’s biggest gainers were mining and steel shares, rising after Alcoa’s reassuring results late on Wednesday. Xstrata was up 3.1 percent and BHP Billiton was up 3.3 percent.

    "There has been nothing reassuring in macro data lately, so people are really hoping for good surprises on the earnings front," said David Thebault, head of quantitative sales trading, at Global Equities, in Paris.

    "We’re still in a downward trend, with a lot of ‘puts’ from institutional investors, so if we don’t get better-than-expected results and positive comments from companies, stocks are heading for another 10 percent drop."

    Around Europe:

    FTSE    4,171.96     31.73         0.77%
    DAX    4,637.66     65.01         1.42%
    CAC     3,034.08     24.37         0.81%
    SMI    5,331.85     42.46         0.80%

  163. Good morning!

    It’s a beautiful day to be "stuck" with those AA calls!  DIAs should do pretty well too as long as retail sales don’t screw us.

    The "official" AA earnings is -.26 as that’s the number excluding restructuring charges so a nice beat (but down 41% from last year in revenues).  They do seem to be on track retooling the operation and the CC was pretty optimistic. 

    PBG had a good beat too, FDO was as expected (and great call by David playing DLTR off that news) and we also had beats from the other 2 reporters: NUHC and WDFC so just one miss so far this week and VIMC raised guidance so that doesn’t even count! 

    COMS, PKX and HELE this morning.  Also CHTT and FCSX.  Tonight we get INFY, LWSN, SGK, SGR and NCTY.  I think we might play SGR in the $5KP, I’ll have to see what the options look like.  Tommorrow is CREL, PSMT and PGR and I think I like PGR too (tons of advertising hopefully worked).

    Oil is bouncing back to $61.50 as G8 pretty much says stimulus still neccessary for quite some time. 

    GOOG/Chuaeu – I love making GOOG plays.  We took that vertical the other day but I am concerned about GOOG in that I wonder how much of their Adwords revenue comes from small businesspeople, who are really hurting in this economy and may have cut back on that expense.   As much as I like GOOG, they are still a one-trick pony and we won’t really know until this report whether or not their revenue stream is recession-proof.  I don’t think market-share matters as neither Bing or Yahoo compete effectively for the ad dollars but it is all about eyeballs and another factor we’ve been seeing with GOOG is click fatigue – people just aren’t clicking on ads that often and that’s a revenue-killer for them.  So, if we’re going to bet GOOG, it will probably be some outside fun bets coupled with a premium-killing bet to pay for the fun bets but I don’t think I want to do anything until next week unless they make a big move one way or the other, in which case I’ll want to grap the opposite puts or calls.

    Chrome/Steve – Oh I think GOOG can be a huge threat to MSFT’s revenues but that doesn’t mean they will make a dime themselves.  If I were GOOG, I would NOT try to make the OS universally compatible.  This is the problem with MSFT, it’s ridiculously bloated trying to be all things to all people.  I would strip down the system and make is a lean, mean OS that has an instant on feature and only works with "certified" plug-ins, since the main reason people boot up a notebook is to get on the web anyway.  If GOOG really wants to kill MSFT what they should do is come up with an office suiite that runs as an ASP (so you work anywhere and store and share docs on the web) but also downloads docs and runs off the notebook when you can’t get on-line.  If they couple that with an OS for $50 in a notebook, they will kick the crap out of MSFT and there will be no shortage of vendors lining up for certification.

    Shadow/Sunco – There are tons of good plays to track in Andrew’s posts but don’t make the mistake of assuming people with $5M to make an option spread "know" what they are doing.  The super-rich are just as stupid as you and me and they get burned just as often but, if you see a trade that makes good sense and agree with the strategy – the fact that someone else REALLY likes the trade is a good reason to follow.  Just beware that when that person exits, they will distort the prices on you so you don’t want to get caught flat-footed when they change their mind.  Also, you need to look up and down the chain for offsetting bets because sometimes the entire play that Andrew (same for Najarian) picks up is just a cover for something else so really they are betting the opposite of what you see.  It’s very hard for a person who is used to trading 10 contracts to think in terms of the the people who trade thousands at a time.  They are playing a very different ballgame than the one you are watching and, while $4.6M seems like a huge amount of money, it’s probably less than 1% of what that person is playing with so you are NOT getting the big picture on their strategy by looking at a single trade.

    JAVA/Pharm – Nice, safeish play.

    UK/DB – Let us know if they turn over there please!

    Goldman/Ramana – I really hope one day someone writes a book about what really is happening inside GS right now, it would be so fascinating! 

    CVX/Merk – Hey, that’s interesting. does not say anything about them reporting today but Yahoo does.  I’d say yes to puts if oil can’t get back over $62 because their outlook is bound to be based on over $60 oil and analysts will bash them no matter what they say in the CC.  Don’t go crazy though as they are already down $10 from $72 last month and they bottomed out at $54 when oil was $35 so they may not have far to fall.

  164. Oil Rises Above $61, Snaps 6-day Losing Streak

    Oil rose by more than $1 on Thursday to edge back above $61 a barrel, halting a six-session losing streak which has seen prices decline by 15 percent on concerns about the timing of any economic recovery.

    Prices hit a seven-week low just above $60 a barrel the previous day on bearish U.S. oil data which highlighted how weak demand is in the world’s largest energy consumer. U.S. diesel and heating oil stockpiles have swelled to their highest level in almost 25 years after jumping by 3.7 million barrels last week, data from the Energy Information Administration (EIA) showed.

    U.S. light, sweet crude [61.4    1.26  (+2.1%)] for August delivery rose, having lost more than 4 percent on Wednesday.
    London Brent crude [ 61.71    1.28  (+2.12%)] gained.

    "It’s no more than a mild correction from the earlier decline that reflected the EIA report. There are still concerns about the outlook for demand, particularly in the U.S. But much of the possible decline in oil prices has already happened. If we did dip below $60, you would probably see some people who might see it as a buying opportunity," said David Moore, commodity analyst with the Commonwealth Bank of Australia

    OPEC’s 2009 World Oil Outlook added to the gloom as it said world demand for oil may take years to recover from the slump in 2009 because of economic weakness and demand destruction. OPEC said consumption of its crude will not return to 31 million barrels per day (bpd), the level it averaged in 2008, until 2013. OPEC Secretary-General Abdullah al-Badri said on Wednesday oil prices — trading just above $60 per barrel — were "comfortable," but were still below the $75 a barrel the producer group said at its May meeting could be achieved this year.

    Yen Falls, Euro Gains as Stocks Rise Ahead of BoE

    The yen and the dollar fell on Thursday, correcting some of the previous session’s gains, with a recovery in European stocks helping buoy the euro and perceived higher risk currencies.

    The dollar rose versus the yen [ 92.84    -0.03  (-0.03%)    ] from late U.S. trade, having hit a five-month trough of 91.80 on EBS trading systems the previous day.

    The euro climbed against the yen [ 129.68    0.75  (+0.58%)   ] after falling as low as 127.00 yen on Wednesday, its lowest since mid-May.

    Against the dollar, the euro [ 1.3965    0.0083  (+0.6%)   ] was up after falling as low as $1.3830 on Wednesday, while the dollar index fell 0.7 percent to 80.171.

    Among currencies seen as higher risk, sterling [ 1.618    0.0109  (+0.68%)    ] rose against the dollar.

    Meanwhile, the Australian dollar recovered 0.9 percent to $0.7855, though analysts said the currency is highly sensitive to concerns about Australia’s ties with its top trading partner China.

    Gold lifts from 2-month low; ETF holdings dip

    Gold traded at $911.80 an ounce at 0337 GMT, up 0.4 percent from New York’s notional close of $908.45.

    Reflecting receding demand for bullion, the holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, fell 0.9 percent on Wednesday.

    The holdings stood at 1,109.81 tonnes as of July 8, down 10.38 tonnes from the previous business day and down 24.22 tonnes from a record hit on June 1.

  165. AA – An in depth (not so optimistic) look at their earnings. You pays your money ….

  166. If I were GOOG, I would NOT try to make the OS universally compatible.  This is the problem with MSFT, it’s ridiculously bloated trying to be all things to all people.

    But therein lies the rub, Phil. Netbooks have USB ports. Consumers *expect* to be able to plug anything in to them. They also expect to be able to run hundreds of thousands of software titles. The *premise* of a netbook is it does just about anything a notebook can but is more portable. The premise of a notebook is that is does everything a desktop can, but is portable.
    The $50 price target does seem meaningful, but I see little to prevent MSFT from offering windows 7 at that price point.  By the time this GOOG OS is ready new machines will be all solid state storage, and instant on will be near universal anyway. Windows 7 already boots surprisingly quickly. I agree the business market may leap at the microsoft office competitor, I am surprised GOOG didn’t just build this product first. They don’t need a new operating system for that.
    Sorry I just can’t see the market for this product. However this is GOOG (and you are Phil) so maybe I am just waiting for the lightbulb moment, but I still haven’t found the killer thing this new OS is gonna do.

  167. I apologize for resending this message but the link was broken.

    Very simply, I need you to go to: and click on the word "Follow" where you see my picture.  You will be asked to register for SeekingAlpha – they are nice people and don’t bother you, so go ahead.

    Once you do that, on the right side of the main page you will see something called "Stock Talk," it is like Twitter and it is where I will be posting trades for the $5KP (in addition, of course, to the main Members site) as I had promised to make them available to all readers.

    It will also be where we go if, for some reason, our PSW site goes down so be sure to bookmark it. 

    Also, don’t forget there is a July contest in progress.  If you have any friends, all you need to do is sign them up for a FREE trial of the PSW Report using your account link: and each confirmed (opt-in) registration makes you eligible for one chance to win $1,000 for you AND $500 for your friend from a randomly selected pair.  You can enter as often as you like (ie register people) and we will make a random winner selection on August 1st. 

    This is in addition to the usual discounts you get for referring people to our service.  Referring just 2 people this quarter still gives you a 20% bonus discount on your membership renewals PLUS the 1% for the 2 referrals – not a bad deal!