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Thrill-Ride Thursday, Finally Some Earnings!

Wheee, what a day yesterday!

Of course we hit it out of the ballpark with our ICE puts as that stock melted so fast it turned to vapors (or at least the calls did!).  Fortunately, we had the puts and the Aug $95 puts I mentioned in the morning post, that we had taken at $6.20 on Tuesday, opened at $8.50 and ran up to $14.35 (up 131%) at the day's end – all without a significant pullback to stop us out.  Since we LOVE to go back to a well that's paying off, we jumped on the Aug $90 puts for $3 as our first trade of the day at 9:39 and those finished the day at $7.35 (up 145%), not bad for our 3rd play on the same stock in 48 hours! 

The best thing about having 100%+ put side winners in a downturn is it gives us free reign to speculate on the upside.  Since we had a bottomish view of the downturn yesterday, we were able to use the cushion provided by the gains on ICE (as well as our longer-term DIA and USO short positions) to establish a bunch of speculative upside positions on stocks we thought were bottoming.  The key to this strategy is position sizing and virtual portfolio management.  If you invest, for example, $2,000 per position and are willing to take 20% losses as a stop-out, then having a 100% winner on ICE (and we had 3!) allows you to take 5 bullish position as the total risk on $10,000 is the $2,000 you gained on the bear side.  We don't just mindlessly flip-flop of course.  In fact, it's been more than a month since we picked up bullish positions for more than a quick trade and we're not SURE these are going to work but, since we had the winning put plays, it's a good place to make a stand – dipping our toes in the bullish waters once again.

I mentioned our brand-new $5,000 Virtual Portfolio yesterday and our first play was a net .71 spread on AA where we bought the $7.50 calls for $1.75 and sold the $9 calls for $1.04.  On yesterday's dip, we had the opportunity to take out the $9 calls for .70, which was a .35 profit and left us with the naked $7.50 calls at net $1.40, with a break-even at $8.90.  We tried to sell them for $2.10 at the close but didn't get our price so we are happily "stuck" with those calls as AA had a nice beat and should open the day close to $10, giving us an exit at $2.50 or better.  Our other $5KP play we had to work hard for but we went in and out of the DIA $84 calls and worked our basis on 10 down to .46 and decided to risk those overnight, on the same premise that AA would beat and lift the Dow.  So far (7am), the futures are looking good but not great so we'll see how that goes but that trade ends today regardless. 

In addition to our remaining DIA calls, we had bullish trade ideas for Members yesterday on RT, YRCW, ERX, VZ, X, COST, EXM, HOV, DIS, CBS and CME – not a bad day of bottom fishing.  Of course, most of them were hedged and we did cover our downside exposure with the usual DIA "mattress play" protection but we're hoping we don't need our stock market parachutes today, although we are still fighting a very tough chart.  As you can see from Trader Mike's notes on the right, we do look oversold on a bit better volume but we face some very tough overhead resistance that we have to fight through just to get back to our 50 dma.  That's why all the longs we took are stocks we don't mind scaling into over time, rather than short-term trades – just in case

We're still obeying the technicals in our trading but we went right to my 8,100 target on the Dow twice in yesterday's action and we got a nice 100-point "stick save" right on schedule at 2:30 which we took full advantage of as I sent out an Alert to Members at 2:32 to pick up the DIA $84 calls at .40 and they jumped all the way back to .55 into the close, allowing us to lower our basis on the remaining DIA's to .46 so it won't take too much to turn a nice profit on that play this morning.  The S&P finished just under our "must hold" line of 880 and that was disappointing but I don't get too upset when we finish within .46 of a target I set before the session opened.  The Nasdaq was 3 points under my 1,750 target while the NYSE was 24 points above 5,600 and the Russell was .32 under my 480 mark so 3 of 5 misses but a total of 3.78 points under my mark on the S&P, RUT and Nas just didn't seem like a reason to panic.  I know that there are many, many financial analysts who call the market moves this accurately so please DO NOT refer any friends to our FREE trial newsletter because that might cause them to win $500 and you would win $1,000 as the referrer if your referral is selected in the July contest and the only thing worse than amazingly accurate stock forecasting is free money, right?

Speaking of free money (and accurate forecasting), Japan is dragging Asia down for the exact reason I told members it would at 11:32 yesterday, when I said: "The Yen has risen to 93 to the dollar now, that is just devastating for Japan stocks tomorrow."  The Nikkei was today's worst performer in Asia with a 1.4% decline to 9,291, the lowest level in 7 weeks as exporters led the declines on concerns of a strong Yen.  The Shanghai Composite, on the other hand, rose 1.4% with a strong auto sales report (up 36% in June) that is helpful for GM (one of the biggest sellers in China) as well as oil prices (more cars, more gas sales).  Another good report out of China showed lending doubled from May to June as banks lent out $223.9Bn. "Since the data showed stronger loan growth, economic growth in China should be stronger. But on the other hand, investors in China as well as Hong Kong are concerned that the People's Bank of China may take measures to avoid bubbles in asset classes such as property and stock markets," said Castor Pang, strategist at SHK Financial.

The dollar is still below 93 Yen but has weakened considerably against the Euro ($1.40) and the Pound ($1.625) as the BOE held rates steady at 0.5%, double what the US is charging for money and they also left their bond-buying program unchanged so no increase in quantitative easing in the UK.  EU markets are trading up about a point (8:30), boosted by commodity pushers who are rebounding off lows on the dollar weakness and theoretical Chinese demand.  AA's conference call was also bullish on China's outlook and, after a week of declines, traders are looking for even the smallest of green shoots as an excuse to buy in.

That brings us back to the US, where our green shoot de jour is Jobless Claims falling to "just" 565,000, better than the 600,000 job losses expected.  This is our lowest number since January but continuing claims set yet another record at 6,883,000, up 159,000 for the week.  Unemployment hit 9.5%, the highest mark since 1983 although I will point out that in 1983 the Dow was up 50% from the prior, depressed year and that by 1986 was up another 50% and peaked out another 50% higher in 1987 so let's take these improvements in job losses at face value, a POSSIBLE bottom to our recession.  Obviously, only time will tell but  I am encouraged that Florida was the best performing state with a DECREASE in unemployment of 12,493 due to fewer layoffs in the construction, trade, service and manufacturing sectors. 

We're going to be enjoying the ride up this morning but we need to take back our June lows of Dow 8,250, S&P 888, Nasdaq 1,750, NYSE 5,700 and Russell 488 before we can even call it a bounce.  We are still miles under our "safe" zone, above the weekly head and shoulders formation which would be Dow 8,400, S&P 913, Nasdaq 1,826, NYSE 5,865 and Russell 507.  As I said yesterday, the NYSE will be the key as it decides whether to break below 5,600 or above 5,800 and we can pretty much ignore the rest.  Oil still needs to get back to $62 to cheer up the OIH and XLE and gold needs to take back $920, especially with the dollar weakening today or we have to get REALLY concerned about the fundamentals in the metals market.  Hopefully Japan will take some action today to shore up the dollar before they get whacked again.

Goldman Sachs Market ManipulationI wish I had the time to get into this GS story and I can't wait for the book to come out but the quote of the day came out of the NY prosecutor's office who demanded that program thief Sergey Aleynikov be held without bail because: "The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."  ROFL!!!  Talk about a statement that will come back to haunt Goldman Sachs!  So they claim that their trading program CAN manipulate the markets BUT, apparently, only in the hands of other, less holy institutions.  Of course it's hard to be less holy than GS, especially if the new allegations are true that Goldman was involved in a massive front-running scam,   allegedly using security access codes to build a system to acquire trading information PRIOR to transaction_commit time points at NYSE.  The profitability of this split-second information advantage would have been and could have been extraordinary. Observed yielding profits at $100,000,000 a day according to DailyKOS.   There is a less technical summary of these shenanigans here – don't forget to write your Congressperson – we ARE getting results! 

June Retail Sales were NOT very good but it was a rainy, miserable month in the Northeast so we have to take that into account.  Also, the comps to last year are ridiculous because last June was stimulus check month so we're going to be looking for the retailers that get beat up on June sales reports and doing a little bottom fishing where appropriate.  ANF is a good one, with a 32% drop but the stock is down more than 60% since last June.  David (Oxen Group) selected HOTT as this morning's trade and they are off 5.8% from last year, which is a small disappointment.  We also followed them with a Channel Checkers Trade earlier in the week where took a speculative upside play but now that we have this data, the safer play is picking up the stock at $6.86 and selling the August $7.50 puts and calls for $1.50 for a net entry of $5.36.  That would put you up 39% if called away at $7.50 on August 21st or you will have a 2nd round put to you at $7.50 for an average entry of $6.43, which is a spot we feel comfortable with as a long-term entry (especially if we can sell .50 a month in $7.50 calls!). 

Watch oil today, that sector can still drag us down if they fall below $60.  We'll see if Europe can keep up the currency pump of this morning as that's the only thing keeping oil over that line.  We're going to be quick to take our upside profits if we can't hold out levels and we'll certainly have some puts lined up – just in case.  Do be careful out there, it's going to be a bumpy ride! 

 


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  1.  Hey Phil… to me it looks like the "Green Shoots" rally is in severe jeopardy.
     
    In Art Cashin’s opinion on the NYSE floor, earnings mean nothing this season since the estimates are set so low, pretty much any report is going to be "better than expected"…. so what matters is conference call future outlooks… but good luck with that because he thinks few are going to offer much outlook with any confidence or specifics.
     
    Technically I’m looking at S&P 898 and DJIA 8320 as major resistance levels.
     
    The bulls absolutely must get back over those levels to rescue this rally. The more trading sessions pass that the indexes stay below those levels, the more grim it gets for the bulls to keep the rally technically intact…
     
    and the more likey the head n shoulders formation plays out to the downside targets (S&P 825 and DJIA 7700). 


  2. Phil     In todays summary, you say  "…  our longer-term DIA and USO short positions".  I get the longer term DIA shorts (mattress plays).  What is the longer term USO short position?  Perhaps I was too quick to stop out of the July USO Puts???


  3. Apart from Aeropostale all same store sales seem pretty grim.


  4. American Eagle -11%, Gap -10%, Abercrombie+Fitch -32% !!! , Macy’s -8.9%, BJs – 7.5%, Aeropostale +12% !!!


  5.  Hi phil, greetings from rainy barcelona.  hoping to catch lance as the tour rolls through barcelona today.  been periodically checking in usually after market has closed.  thoughts on yrcw and bk?  on msft here?


  6.  oh yeah congrats on the ice play!


  7. Reduction in umemployment claims should offset the employment number last week and stimulate the debate on whether things are getting better or worse.   Sounds to me like more ammunition for a trading range strategy…just like you have, phil!


  8. Oh yeah,  I think the bias is up in the market now.  Took a long position on Sep ES contract.


  9.  Hey Phil…. California !
     
    How do you think that plays out?  I’m seeing many news stories indicating that the big banks initially agreed to accept the IOU slips as money, but now they are balking. The CA government looks hopelessly gridlocked. I’m seeing a crisis there that is getting worse day by day with no budget resolution on the horizon. Comments back and forth between politicians are getting very juvenille in character.
     
    What’s your call on California default?


  10. Phil and others who might have pity on poor new members - I have read "mattress" article (as you advised to new members in yesterdays comments) to protect my existing stock portfolio and I have taken action by: selling STO DIA July PUTS at 81 (1.36 price) and buying BTO DIA SEPT PUTS at 82 (4.50 price). I have 3 questions: Ques:1: Regarding the short put position exposure: Is it true that if DIA closes below 81 between now and July EXP the July putter can immediately put shares to me at 81 BEFORE EXP - if so, this seems risky, so do I monitor price every day and close out the position before it happens -  what does one do when the short put position goes "in the money"? Question 2:  Since I want the short July puts to expire worthless so I can keep premium, what is the process here - so just to confirm – as long as price stays above 81 by EXP, I would wait until day after EXP and then roll into buying STO DIA AUG PUTS at 77 (approx at same premium as July puts). Then day after AUG EXP (assuming price stays above 77) I would roll to SEPT PUTS at price equivalent to the similar premium. Is this correct process? Question 3: You often compare spread in strike price to spread basis of option prices (eg in the DIA example you gave you said "not to worry on downside as that is $4 spread for net $3.) But a $1 diff. in strikes often has less than $1 in option prices when its ATM. Is this 4 to 3 ratio then just a rough rule of thumb or what? Thanks for taking time to address my questions, and apologize if this was something I should have picked up reading the new member materials.
    > Best,
    > concreata


  11. i knew i shouldn’t jump on the ICE wagon late in the day. but i did. True confessions.


  12. Phil… isn’t it Interesting how the CEO gathering in Sun Valley are so pessimistic…. feeling market is overvalued?
     
    Futures must be up in "lah-lah-land" this morning.  I’m staying in cash and watching for an intraday top out.
     
    (Still holding a small position of ICE puts that I own for free, so just letting them joyride just in case there is another big roller coaster drop after this morning’s jump up)


  13. Phil, what are your thoughts on Chevron’s earnings that are coming out?


  14.  chuckle…. on CNBC S&P Chief Investment Strategist calling for correction down around 810 to 825


  15. $5,000KP – AA $2.50 is goal for the calls, nice profit, don’t be greedy.  DIA we need to stop at .50 (now .55) as it’s a better gain than we thought we’d get, using a .10 trailing stop if we get to .65 or better.  That puts us back to cash and that’s fine as we’ll be looking for our next trade later.

    Today’s minimum levels to stay bullish are:  Dow 8,250, S&P 888, Nasdaq 1,750, NYSE 5,700 and Russell 488, we need to see 3 of these hold today to stay bullish and we do not want to see them rejected.

    Oil below $62 is a bad sign too.  At the moment, oil is $60.45 as the futures pump to $61.50 didn’t survive the NYMEX open.  Gold is at $911, same as yesterday morning and they need to hold $900 or the metals sector will break too.

    On the top of a run (not nec. one day) we’ll be looking for Dow 8,400, S&P 913, Nasdaq 1,826, NYSE 5,865 and Russell 507 as our breakout levels to get us back into June’s range.


  16. A lot of selling just came into the UK market. FTSE dropped about 20 very quickly.


  17. Concreata/DIA   I’ll take a shot at your 3 Questions:
    1) Theoretically they could exercise at anytime, but in the real world that will not happen as long as there is premium in the option and in that case you would be really buried.  I hate to say never, but on a liquid option like DIA, you will never get early exercise.
    2) If the price stays above 81 you don’t need to do anything.  Your option will expire and disappear.
    3) I don’t understand the last question, but $1 strikes are good things.   You will have lots of flexibility to roll the option.


  18. Damn, in the time it took me to write that post AA dropped .20 and the DIA busted down.  Someone hit the sell button on a program because the selling is indiscriminate…  They are not going to let this be a Free Money Day, that’s for sure.

    Cashin/Merk – Well he’s right, BTE is BS this Q.  We do need to break up quick, really by tomorrow or the weekly pattern will look like crap.

    Longer/Mirachael – Those are the USOs we’d been pressing since June, when I first made the call and warned we’d have to follow them up and DD and DD unitl it hurt.  Actually, it didn’t end up hurting that much but we got a big scare when GS called $85 oil and jacked us up near $75.  The DIA puts we’ve played constantly but the long Sept puts were $88 and $90 puts, those are huge winners and we can now roll them down to yesterday’s combo and take the profits off the table.

    Same store sales – see end of post, they are comping last year’s stimulus check month so this is silly.  I am amazed that investors don’t realize this but, then again, I’m often amazed at how poorly people read numbers and how poorly the media reports them. 

    Howdy Jo, hope you are having fun!  YRCW I like down here but it’s very speculative.  If you short sell the 2011 $2.50 puts you lower the risk of ownership slightly.  BK doesn’t look that healthy but just down with the sector.  I would wait for a sign one way or the other.  MSFT I wouldn’t touch, if they go to war with GOOG things could get very ugly. 

    Oh no!  Dollar coming back, not good for oil, gold or US equities!

    California/Merk – I think, in the end, that Obama can’t let them go BK so something will happen but, like GM, it’s going to be a last minute thing AFTER they put the maximum squeeze on all the creditors – which is the sensible thing to do.


  19. DIA   I was out yesterday Phil.  To where did you recommend the Sep 90 puts which are the long part of my mattress? 


  20. Yesterday, the index PUTs were priced for a total collapse at 1PM when VIX jumped to 33.02.  The market dropped below a break down level (SPX 880) that people started to worry and started to buy PUT.  Due to the Stick Save, those OTM PUTs have since lost 25% of their value.  Some of us were quick enough to sell additional short strangles that pay off well in a day.   Keep an eye on the VIX as it could indicate profitable trades.


  21.  A couple of months ago, someone suggested a "cash alternative" strategy, which I can’t seem to find now…anyone remember the post or have a link to it?  Thanks!


  22. DIA/Condreata – What Eph said (thanks Eph!).  On rolling, feel free to ask anytime, we do need to track those closely but the goal is to win the premium and then sell August puts as well.  Yes the ratios are a rule of thumb and your % of coverage should be a reflection of how bullish/bearish you are at any given time.   Don’t forget that this is your INSURANCE – you expect to lose a little on this trade but hopefully not too much.  The idea of keeping the long DIA spread is to protect yourself from major gap down events so generally I like to have more protection over a weekend, so maybe we only half cover with the front-month puts if we are worried there may be a gap down.  Sometimes we go naked, you just have to play it through for a month or two to get the hang of it really.

    ICE/Morx – This is why chasing is very, very bad.  I doubt they make $90 though and probably sell back off from there but I’m done with them (we went long on CME yesterday).

    May Wholesale inventories in-line down 0.8%.  They were down 1.3% last month but who knows what that really means?

    CVX/Roam – Very low expectations should be beatable but oil at $60 is going to make analysts question their outlook.  I wouldn’t play CVX but I would use them as an indicator of which way COP and XOM will go and place bets there after the fact.

    DIA/Eph – If you have the Sept $90 puts they are too far in the money now and it’s best to cash out and set up the Sept $82 puts at $3.85.  Since we have a huge gain on the $90s, this makes for essentially free insurance and we can sell the July $82 puts for $1.30, which pays for 2.5 rolls up on the long side.  By the time we hit July expiration though, we’ll be looking to roll back to Dec most likely. 

    Cash Alternative/SS – I don’t remember that one. 


  23. Phil,
    I sold AA Jul 10 straddle for 1.33 two days back and covered that with Aug 11C/9P Strangle. What is theest way to manage the trade? Thanks.
    Also, I would like your thoughts on doing an identical play on Monday on GS. They release earnings on Tuesday BMO.


  24. ICE is rebounding today it seems, any thoughts on how high it could go?


  25. DIA/Eph – If you have the Sept $90 puts they are too far in the money now and it’s best to cash out and set up the Sept $82 puts at $3.85.  Since we have a huge gain on the $90s, this makes for essentially free insurance and we can sell the July $82 puts for $1.30, which pays for 2.5 rolls up on the long side.  By the time we hit July expiration though, we’ll be looking to roll back to Dec most likely
    Unfortunately, I’m fully covered at various strikes starting with Jul 86s.   I guess I’ll roll my Sep 90s --> Sep 86 and earmark the proceeds to a couple of my buried putters into more premium.   Reasonable plan?


  26. Phil,
    Regarding the above AA straddle/strangle play, is it possible to ride the straddle out to July expiration. The earnings release stressed on the excellent cash management by AA and I think not on future growth. So, I expect the price to meander between 9 and 10. Point out the flaws in my thinking. Thanks.


  27. Does somebody out there know something that I dont?  Why are the premiums for AFL options so high, with the stock at 29, the august 29 puts and calls are going for about $5 ( not that I mind since I have been making at least 10% each month selling premium)


  28. ssdirk – I think I and Phil did give the cash aternative strategies.  Mine was selling way OTM Strangles to get 2-3% a month with manageable risks.  For example, if you sell SPX Sep 620 PUT naked today, you’d get $2.1 credit, and would only loose if the market drop 30% in 10 weeks (Aug month has 5 weeks).  The margin requirement calculation is quite complex, a quick calculation is to look at the ATM PUT value, i.e. SPX Sep 880 PUT is $43, so you can sell 20 SPX 620 PUT contracts for every $100k, getting $4,200 credit, which is about 4.2% for 10 weeks.   You can also sell 20 SPX Sep 1025 CALL for $1.9, bringing the return to about 8% for 10 weeks.  The risk is that your account balance varies widely as the market moves, but the expectancy of such spreads is positive – wait for my future article on PSW.  You’d need Portfolio Margin, but with the $150k you mentioned, you should be able to get PM.
     
    I recalled Phil methods are to sell covered calls on dividend paying stock, or buy a long ITM PUT that protect you to zero, then sell CALLs or PUTs for regular income (the Collar trade from Sage)


  29. I currently have ERX july 21 call which has a profit but my july 25 and oct. calls are down. Do I sell them here. What about my FAZ july call which is up.


  30. Let’s bring GS back.  The market is too wild without those sneaky programs.  hihihi


  31. Oil below $60


  32. AA/B1 – Well this is a good example of why Rule #1 is "ALWAYS sell into the initial excitement."  The idea on an earnings play like this is to take advantage of the pop and then wait for the drop to get out of the other side.  With a short straddle, $10 is probably a good target for next Friday but I think the strangle was a waste as you are just costing yourself premium.  You can’t make money betting against yourself when you are the sucker laying out the premiums….

    ICE/Hat – Well it looks like I nailed it on the last comment as we topped out just below $90 and then fell off.  They may get as low at $86 again but, if they hold that, they are probably going to hold up for now.  As I said to Morx, it’s a dead trade, we played it, it worked and we’re done.  There are 9,000 other stocks to play so why waste time on this one when they are no longer a sure thing?

    DIA/Eph – Don’t forget the possible 2x roll to the lower strike as long as you can roll your callers into almost all premiums.   The $86 puts, for example, can be rolled to 2x the $82 puts which are 75% premium so worth the $1 it would cost as you still have August to collect. 

    What a crap day this is, volume just 45M in first hour but mostly down since the open.  Everyone back at support with S&P 880, RUT 480, Nas 1,750 with the DIA 71 points above 8,100 and the NYSE 50 points over 5,600 so they have a ways to fall to catch up but, hopefully, the others wake up and go the other way.  I’d say any break down on the S&P is worth a Dow short, The $81 puts are $1.02 and can be played with S&P 880 as an upside stop.  To be clear, this is a play ONLY if the S&P is below 880 and get right out if S&P goes back above.  You can also play the other side with the $82 calls at $1.12 but these are momentum plays, looking for .10 to .20 gains and taking very quick 2-3 cent losses the other way.  If we get lucky, we catch a big move….  On the whole, I prefer the upside play.


  33. FWIW, I think we will see an energy led rally today.  Energy stocks oversold; NG number decent; oil oversold.


  34. Ephmen85 and Phil – Thanks for the guidance!


  35. ERX $21s at $3.60 have just .40 in premium.  Risky of course but can stop if oil fails $60 again, looking for $4+.


  36. Phil and others,
    Speaking of GS and the stolen code…..many of you may have seen this quote by an assistant attorney general regarding the danger of having this code out in the financail ecosystem……….hard to believe they would state the obvious…….and of course all the readers of this web site already knew this, but to admit it in public is a scream….
     
    – reporting the arraignment in U.S. District Court in New York of a former Goldman Sachs employee accused of stealing the program. The prosecutor, Assistant U.S. Attorney Joseph Facciponti, was quoted as telling the court:
    "The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."


  37.  Thanks, PeterD!


  38. RIMM   My position is + 3 Sep 65 / -1 Jul 70, -1 Jul 75 and – 1 Jul 70 put/+1 Jul 65 put.  Should I see if RIMM gets back to 70 or sell the Aug 70 caller for $3 now?


  39. Hey Phil, here is what I’m thinking….
    ICE began to drop on Jun 29th from an intraday high of 118.37 down to 83.73 yesterday… about a 35pt drop
     
    20% bounce off the overall move is usual…. so 90 to 91 is "bounce resistance" territory  (83.72 + (35*20%)) = 90.7….
    so if it doesn’t breakover 91, then I think there could be some more downside
     
    I’m still holding my ICE puts because the CTFC news indicates there is no longer a fundamental reason for ICE to even exist.  The big quick profit is probably already made from that amazing two day avalanche down move, but there is an outside chance for another leg down. So I’m keeping an exposure to it.


  40.  WASHINGTON (MarketWatch) -Republicans on Thursday lashed out in opposition to legislation introduced by Democrats that would require $6.2 billion of funds in the bank bailout package to be used to go to help troubled homeowners and neighborhoods. "We need to restore fiscal discipline," said Rep. Spencer Bauchus, R-Ala., "Treasury needs flexibility and this won’t give it to the agency." The legislation would require that some remaining funds from the Troubled Asset Relief Fund be allocated to help expand housing opportunities and assist in mortgage modifications. A group of large financial institutions have paid back roughly $70 billion of TARP funds they recieved. GOP lawmakers said they expected the paybacks to go cut the federal deficit. However, Rep. Barney Frank, D-Mass., and Democrats argue these funds will help a bad situation for struggling homeowners from getting worse.
     
    Let’s see if I got this straight:  Dems want to stem additional foreclosures through providing assistance to homeowners through loan modification assistance from the government.  Republicans want to return the TARP money to reduce the deficit.   Do Republicans somehow think the housing problem is over??  I wish there was a credible economic analysis that would authoritatively establish that avoiding foreclosures saves EVERYONE money, stabilizes the economy and restores tax revenues to government!!!


  41. DIA  That’s a good idea about a potential 2X roll.   I have 7 Sep 90s.  I can roll them to 10 Sep 86s for a small credit and then at opex if DIA gets above 84 (killing my two lowest callers), I can 2X roll my remaining putters into premium.  Plus if we head down from here, my 3 additional puts provide extra protection.   Good plan, Stan? 


  42.  there goes oil…. below 60 !


  43. ack. I obviously meant killing my 2 lowest putters.


  44. On that DIA trade.   I would also probably do better on price and if just rolled 7 90s --> 7 86s and then buy 3 more 86s on run up, right?


  45. Hello, Morning All !
    Phil, You mentioned about playing earnings with SGR.  Any update on that one? Or was discarted?


  46. AA/B1 – You sold the $10 puts and calls for $1.33 and I think $10 is still a reasonable target for Friday’s close but why not take out the caller at .15 now?  Not a lot of risk as the putter is just .78 so consider that .93 and make sure you stop out if they hit .90 to preserve a .30 gain on the play at worst.  If it does head back up, you’ll be very happy. 

    AFL/Craig – Just some nice, healthy earnings premiums I think.  Thanks to the VIX back at 30, we’re getting some good numbers.

    Cash Alternative/SS – Oh yes, thanks Peter!  That was our article on dividend plays and we did do one on KMP in the $100KP by setting up a spread that, in theory, couldn’t lose but would collect a very nice dividend over time. If you go to the Portfolio link, that article links back to the original Dividend article. 

    ERX/Nat – Well I just called a bull play on them.  I think $60 oil will bring in some bargain hunters, regardless of the dollar situation so I’d stick with the longs for now but if we get a run back to $61.50 oil and get rejected, you may want to cash your Julys and then sell some July calls to cover your longs.   FAZ I favor taking the money and running on until we can see how FAZ and FAS behave now that they are reverse-split.  Generally, we do not like ultras unless they are at very low prices where we can generate huge premium-selling income. 

    GS/Peter – Now everyone has a home copy of GS’s trading program (I just downloaded mine from Apple’s App Store!) so it’s going to be chaos for a while. 

    LOL Ocelli – I knew you guys don’t read my posts! 

    RIMM/Eph – I think they are low enough where you may as well take out the callers and give them a chance to get back to $70.

    ICE/Merk – I agree but it’s the point of diminishing returns.  The initial reaction is an overreaction because the CTFC stuff is hot now but even Europe will take 6 months to do something as complex as regulating commodities.  Don’t forget the oil producers, which includes EU nations and Russia, are going to be very against it so ICE may melt up as the news fades off the front page.  If they get back to $100+, I’ll be very interested in shorting again. 

    Republicans/LV – I know, what can you do.  It’s still illegal to hunt them in most states so we’re stuck with them until the laws change…  8-)

    Good plan Eph!  By the way, setting those 25% stop limits on 1/4 of your putters at each level would have helped you tremendously.  Yes, I don’t do 7-10 rolls, they always seem to rip you off.


  47. yes  Phil I read the GS comments in so many places…..knew you were aware but forgot you had it in a post here as well……


  48.  I hear ya Phil… it seems to me you identified a great short story in ICE
     
    ICE seems to have lost it’s reason for being and the regulatory and policy environment has placed an existential threat on it. Now oil is looking weak with traders even calling for a return to $30 and even $20 a barrel…. and Cramer of all people is stabbing his Goldman Sachs buddies in the back calling their oil manipulations a farce of a sham.
     
    With the high IV on ICE options right now, it seems to me scaling into an AUG or SEP put position based on your 100 strike target could be a good move. As you say, you prefer not to be day trading, and now we have a compelling bearish story to play. And if ICE makes a move down to 80 support level and flatlines there, we could sell July put covers to burn up all that nice high IV premium.
     
    Why do you say ICE is a dead trade?


  49. FTSE working its way back to the flat line with 20 minutes trading left. Now (about) +0.22%


  50. SGR/Spider – Thanks!  Once the day starts, if no one puts something in front of me I forget all about it.  

    SGR is a great clean energy play (although it’s nuclear).  They had a huge miss last earnings as financing issues stalled projects and it may happen again but this is a company with a $2Bn market cap and $18Bn in backlogged orders (usual revenues are $6Bn a year) so I like the Oct $22.50s for $4.65 as a long-term play and, in the $5KP, I like the $22.50s at $3.30, selling the $25s for $1.45 for net $1.85 on the $2.50 spread.

    Damn, this is about the last time we can test 880 on the S&P without most likely failing it.  Oil is now crashing, down to $59 so everything may break if the OIH and XLE turns red.  DIA $81 puts, now $1.08 are the defensive play, get out if S&P gets back over 880.

    Oh, another thing I forgot.  ATTN ALL MEMBERS:  Seeking Alpha now has a Twitter-like chat box on the main page and they also have major servers that should survive most outages.  Please go to Seeking Alpha and click to follow me HERE so that, if PSW goes down, you will be able to get right on-line over there and you’ll see any comments I make right on the main page.


  51. Phil – Jul 14 Puts on UNG – should we roll now/when , and if so to what.  Thx.


  52. Interesting, someone did an interesting spread on SPWRA (at least it looks that way by the volume).  25 Jul09 C and the 23 Aug09 C & P – 1000 options moved at each strike.  Now, which direction are they playing..???


  53. AFL has a significant bank prfds in their investment portfolio. So recently ,you have the uncertainty of the banks increasing inside a quality insurance company. Lack of transparity and what are they and what is the probabilty of forced conversion to common= high prem.


  54. LOL Ocelli, just kidding! 

    ICE/Merk – The problem is that GS and MS are partners in it and if they want to jam it up to $120 on you tomorrow, they can.  That’s why I prefer to not poke the wounded bear with a stick.

    UNG/Partha – Sure, if you didn’t get it yesterday then lucky it came back down off the open. 

    SPWRA – Looks like a strangle and they are trying to offset the cost selling the July calls. 


  55. YRCW up 105% on tentative Teamster agreement

     


  56. DIA good idea about stops.   I don’t use stops often, but I’ll have to start.  Especially now since I’m working full-time and will only be able to check in periodically.  Today is a rare free morning for me now.


  57. Phil/Craig,
    LIke the AFL play for my IRA account with VIX moving up, but can’t sell callers, so am leaning towards waiting for a pullback before scaling in with selling some puts.  Any advice?


  58. Bit of a sell off on the FTSE at the close (no stick manipulation here !) finished about +0.15%


  59.  Phil, for the 5K SGR play, how many do you recommend buying??


  60. AFL/Spuhr – That’s a good thought!  I would think though that much of that fear should be washing out by now. 

    Volume at 70M after 2 hours so about "normal" today.  If we can string together 2 more hours of 2M per hour, we’ll be in good shape for a stick save this afternoon. 

    Yay YRCW!!!  I knew I liked them at $1!  Take that money and run at $1.70  if you came in yesterday at $1

    Stops/Eph – I think it’s in the strategy section or that scaling article I wrote but just at least have a 25% stop on the first 2 quarters of your cover (one at 25%, one at 50%).  That way, if they jump 100% on you, you only have 1/2 up 100% (easy to roll) and 1/2 that gained 37%. 

    AFL/Chuaeu – If you can’t sell covered calls then I would advise getting a different IRA!  I think maybe, under those conditions, wait for earnings and pick up shares if they head up, you have no way to mitigate the downside risk otherwise. 


  61. SGR in $5KP – My apologies, that should be 4 spread for $580


  62. Phil,
    On my IRA, I just can’t sell naked calls


  63. chuaeu, no one can sell naked calls in an IRA….unlimited risk positions are not allowed.


  64.  Noted!  Just to be clear, for the 5K, you recommend buying 4 July 22.5 calls and selling 4 July 25 calls?  Cost of this spread is around $730.  


  65. burned by HOTT


  66. IRA/Chuaeu – Oh, well then with AFL you can either buy the stock at $28.94 or, better, the 2011 $20 calls for $12.05 and sell the Aug $28 calls for $3.05.  On the spread, it’s net $9 on a $8 spread with 18 months to roll and on the stock at net $25.89, you are called way with an 8% profit in 5 weeks or, of course, you can still roll. 

    GOOG and BIDU getting their groove on.   CME doing well.

    Oil flying up now, back to $60.50 so a nice flush there and OIH is already up 2.5% and XLE is up 2%. 

    FAS and FAZ very well behaved on Day 1 post-split.  FAZ is down 4.4% and FAS is up 4.4%, almost perfect which means we absolutely want to short them both if they cross (and play short straddles on both).  Peter should be able to come up with some great plays on those!

    SGR/Sgrund (what a coincidence) – The $22.50 calls are $3.40 and the $25 calls are $1.55 so that’s net $1.85 x 400 = $740.  I don’t know where the hell I got $580… 

    HOTT is hot Drum, what’s the problem?


  67.  These are the Oct, not July?  That would make sense then!


  68.  Got it, thanks Phil.  Disregard last comment!!


  69.  Indexes are extremely boring today eh?… the bulls can’t get anything going to the upside…. yaaawwwwn


  70. Pharmboy, nice move on ANPI today, maybe rebounding?  (I got in back at 1.50)


  71. Phil, 85% of the stocks I own are green today yet DIA is red, are Da’ Boyz keeping the Dow down until they can load up for a nice earnings run?


  72. HOTT bought the July 7.5calls at .15


  73. You cant sell calls naked,  but you could do a buy/write picking up the stock at $29 and selling the AUG 29 PUT for $2.70 and selling the AUG 29 CALL for $2.45 which would leave you with a 17% profit if called away, otherwise you would own 200 shares at about $26.50 per share.  Which I dont think is too bad since AFL still pays $1.09 per year in dividends.


  74. HOTT / Got great trades with it, Enter 6.75 at open, out at 7.18 (avg) at 10:13 
    Reentered at 7.00 and out all 7.11  few minutes ago-
    Was a small play but I collected enoght for next month PSW subscription :-)
     
    SGR I’m waiting if it goes a bit lower to poen positions. If not i will stay away.


  75. Phil/Craig,
    Appreciate the advice on AFL


  76. SGR has earnings after bell today. So be aware with the July vertical.


  77. GS with a mighty move off the bottom, maybe they are taking control again after being beaten up for a couple of days.

    I’ll be surprised if the Dow can take out 8,250 today and that’s not so great on the whole.  The 200 dma is falling fast so they will end up with major resistance at 8,250 next week and little help from the 50 dma, which is now topping out at 8,450 so if they can’t jam a hell of a stick save over 8,400 by tomorrow, we are not going to look very attractive. 

    If you look at the S&P priced in Euros, you can see how much worse we look to foreign buyers. 

    Oil got slapped down off $60.50 right back below $60 in 5 mins, that’s a big move for intra-day.  OIH losing confidence and XOM is red but CVX is holding up so far.  The Aug $60 puts are $1.80 on CVX and make a nice naked sell since they can be rolled to the Dec $50s, now $1.60 and $48.40 is a pretty good price to own CVX long-term

    DIA/Merk – Actually, as I mentioned before, they anjd the NYSE are the highest off the danger zones so they do need the other indexes to catch up before they can get going.  I think we need to see the S&P, RUT and NAS make a full point gain (double what they have so far) before they Dow can really start moving. 

    HOTT/Drum – Oh well those are not as good, you should just be happy if another spike gets you out even. 

    Buy/Write/Craig – If you can do those then that is best as long as you are willing to accept the assignments.

    Cool Spider!   Good patience on SGR.  So many plays to make, why take ones that don’t hit your targets?


  78. Drumkeerin :  To break even you need HOTT to climb up to $7.65, Thats about 10% in 6 trading days. Can happen, but is very risky. And those options moves in .05 steps. So, one step down is -33%. – Cant do a recomendation, probably Phil can give an idea. Much safer will be the Agu ones. – Spider


  79. Since I ragged on Oxen my first day, gotta give props for today (among other recent gems): HOTT – in at 6.95 (9:37am) – out at 7.23 (10:21am). Dude needs to stay away from energy related plays (leave that heavy lifting to Phil – lol) and keep digging (or drilling as it were) for these tangential puppies.  


  80.  I hear ya Phil…
    I just went into a new AUG SPY put position buying my first 1x a few minutes ago when the S&P went to 885 and started flatlining below it.
     
    After that wild ride ICE rollercoaster, I’m getting back to safe boring trades on the indexes… chuckle


  81. GE Capitals $12Bn Shelf Filing.  Doesn’t seem so bad, GE super cheap here at $10.80.

    $11Bn 30-year note auction at 1pm.  Should go well and HAS TO BE the catalyst to take us up this afternoon because I can’t think of what else will.  Volume was 80M at noon so right on track for a "normal" day so you have to imagine yesterday being a spike low on "high" volume that formed a turning candle and, if we can retake Tuesday’s open at 8,300, we will actually look much improved on the daily chart so that will be the goal of the day as I try out my new Goldman Sachs IPhone trading app

    Hold the fries!  MCD looking good at $56.44, earnings are on the 23rd, after expiration so I like buying the July $55s for $1.60 (.28 premium) with a DD at $1.20, looking for $2 stop at $1 (avg loss of .40).  Lets call that 5 in the $5KP.


  82. Phil, looks like zig zag until the Auction and Obama do their parts. should we be positioning a straddle today, or be prepared to move with the tape? Not much on earnings announcements today….


  83. NAK is big Canadian miner, nicely beat up at $6.24.  Nov $5s have very low premium at $1.80 and you can wait and sell Nov $7.50s for cover, now .80, maybe when they get to $1.40 for a very cheap spread


  84. My broker (Fidelity) nor does Yahoo show a SGR Aug09-22.50 Call? The Aug $23 is close to $3.30? I can find all the others. If I am interpreting your code correctly I have: Buy SGR Oct09-22.50 Calls at 4.65. For a spread, Buy Aug09-22.50 Calls at $3.30 and Sell Aug09-25.00 Puts at $1.45.


  85. Speaking of ultras, have those 3X on the SPY launched yet?


  86. Phil- the MCD play.  Buy the 55 calls, no spread play?


  87. phil-  ever hear of the birth death adjustment the BLS uses in it umenployment figures?  That the adjustment figures have hit record levels recently? Not that you trust their figures anyway, just curious if anyone notices this ‘adjustment’.


  88. Sunco, the 22.5 are OCTOBER calls


  89. HOTT was definitely a day-trade pick, as mentioned in the Oxen group article.  Nice spike there this morning.


  90. Ephemen85 : UPRO=+3x   SPXU=-3x  And they already have options.
    WOW .. SGR did not come down, is taking off. Probably i will miss the trade.


  91. Can someone help me get my head around how existing FAS/FAZ option contracts were adjusted? I now have these weird 10 and 20 share contracts (instead of 100 shares), but I think at the old strike? Phil, should I dump these?


  92. afl  the fear that is out there is the impact of commercial r/e and the ever increasing unemployment, with the shallow when the recovery comes being adopted adds to the uncertainty of banks ability to absorb the loses. look at the correlation between afl/xlf,  tec look bad, pt fg maybe 20.
    While the stress test should not have been handled the way they did, but wfc had a different idea on their ability to earn their way out, while mr. T and the boys had a different idea with a more challenging economy developing.  i am betting with wfc.
    maybe buy some wfc pr j w/ 9% yld and then add afl after some bank earnings are reported or afl @ 20.


  93. SGR/Sunco – Who said August?  This is a July play ahead of earnings.  I like the Oct $22.50s as a straight out buy OR you can sell the July $25s agains them and I also like the veritcal spread of the July $22.50, selling the July $25s for net $1.85, looking for SGR to hold $25 after earnings.

    SPY Ultras/Eph – UPRO (bull) and SPXU (bear), both optionable and like nuclear weapons in the market.  Options have no market yet but I’ve been watching. 

    OK, here comes Obama and then the Note auction – it’s now or never to break higher.  Transports up 1.25%, NYSE up 1.2%, SOX up 3.4%, RUT up 0.75%, Dow doing nothing and S&P and Nas up 0.6% so we need to see that Dow break up soon. 

    MCD, MRK and PFE are the big drags on the Dow.  JNJ down a  point but no one else off more than half with 12 of 30 components red.  JPM and BAC are biggest winners, up 3%, AXP, INTC and DD up 1.5% and even IBM is up a point so the Dow should be able to go higher without too much effort.  Even CAT is up a point…. 

    MCD/Hat – No, just a guess that they turn it up from here. 

    BLS/WS - Yes, Barry Rhitholtz writes well about that when the numbers come out.  They do screw up the numbers but it’s best to just ignore them since the broader investing public has no clue and treats the numbers as accurate. 

    HOTT/Jason – Yes, David is looking to play moves as pure day-trades.  It is never a good idea to be greedy as his pick of a stock that may move up has nothing to do with his opinion as to whether or not the move is valid.


  94. PHil,
    I’m newbie. you mentioned:
    buying the July $55s for $1.60 (.28 premium) with a DD at $1.20, looking for $2 stop at $1 (avg loss of .40). 
     
    what does ‘DD‘ mean?
    looking for $2 stop at $1 (avg loss of .40) … can you rephrase that?

    sorry for the dumb question :-)


  95. DD double down
    looking for $2 —- obvious
    if it falls to 1.20 then your average is 1.40
    stop is at 1.0 so your loss is .40 per contract to the downside


  96. CNBC says….. an "insitutional buyer" setting a July call position on S&P at 880
     
    Whatchya think of that Phil?   Who is the "institutional buyer" that that guy could be talking about?
    sounds kinda creepy to me announcing something like that on TV


  97. foss: thanks so much!


  98. FAZ/FAS/Ajay – This is why I advocated getting out.  Nothing but hassle now and the longer you hold them, the thinner the trading and the spreads will widen on you.  I would get out as the last thing you need in your portfolio is an option that you don’t understand the proper value of. 

    VLO heading back to magic $16.50 despite horrible fall in oil.  I’m super confident in that one as a long-termer.

    AFL/Spuhr – I like them long-term regardless, if they have good earnings they can fly back over $35. 

    Welcome Lafitu!  DD = Double down.  I’m not even sure if that’s mentioned in the New Members Guide but do try to read it when you have a chance.  On the MCD play, the idea is to buy 5 $55 calls for $1.60 ($800) with the intention of buying another 5 if it falls to $1.20 ($600).  That puts us in the calls with a $1.40 average entry and we stop out at $1 if it keeps falling, taking a $400 loss on the trade.  On the upside, we are hoping to get out at $2, which would be a $200 profit (500 x .40) on the 5 original calls.  If we do end up doubling down, then our goal is to sell 5 back at $1.40 (our average entry), leaving us back in 5 at a lower entry point.

    Note auction went off with a 2.36 bid to cover, about average and the rate was 4.303%, which is high so not a very good auction on the whole but it is inflationary, which is what oil and gold want to see today.  Still, it is nothing to rally over and any up move now would have to be a pretty BS stick save as there’s nothing exciting going on at all.

    Volume just getting to 100M.


  99. Thansk FOSS!  Didn’t see that ’till after I commented. 

    CNBC/Merk – I missed it.  What do they mean by "setting?"  Did they buy a large posiiton looking for higher?  I hate those announcements if they can’t point to something you can look at.

    ZION back at $11.50!


  100. Foss
    I am also pretty new at this and don’t even understand what he said after explaining it. I wish he would have a simple "buy xyz (call or put) option at $$$ and put a stop at $$$" I totally misunderstood him a few days ago with ICE and ended up buying calls instead of puts (lost over 2 grand). Maybe one of the guys could elaborate on some of his stuff to help us new guys.


  101. Phil, i got out of all my FAS/FAZ stock positions yesterday, as  you suggested. Since the market was closed, I was stuck holding the options (don’t worry, they weren’t directly related to my stock positions).  They’ve behaved nicely so far and i don’t think i’ve taken a hit or anything. Just have no idea where they go from here :) I think I will close them out.


  102.  Phil… ON CNBC they had a floor trader saying a "synthetic call" position was established at 880 on S&P… he also stressed it was a July position and he stressed that the buyer was expressing a belief that the market would move up in reaction to earnings season.
     
    I’ve never seen anyone make that kind of "revelation" before as if he was trying to get the public to jump on the bullish bandwagon


  103. What about the guy who said "mutual funds" are waiting until 825 or 850 to buy — what a load of crap; like he would know what "mutual funds" want to do … plus mutual funds don’t think that way.
     
    He also said something ridiculous like if we get "one earnings miss" the market will tank to 800, maybe even a 7 handle".  Yeah, one earnings miss will do that; sure.


  104. Phil – VLO – right now would you recommend buy stock with collar or bullish put spread trade?


  105. Phiiiillll – me again
    Any thoughts you could share on NAFC. I, of course, have puts i sold a while back. I could DD as earnings comes up on the 13th.  Or i could buy puts or sell calls…
    Feed me seymour


  106.  phil, i have some faz oct 4 puts that i have sold.  i cant find other faz puts for potentiarolls?  do i need to call my broker? how are preexisting puts and calls treated with the reverse split?l 


  107. Understanding/Nat – If you do not understand a trade, or even if you think you do – why not just retype what you interpret it out in your format and then just ask if that is what I meant?  That way, I get to put a trade out the way I am comfortable phrasing it and you are free to do the work reformatting it.  Perhaps it will be helpful to others, perhaps not but you are just as capable of writing buy xyz (call or put) option at $$$ and put a stop at $$$ as anyone else, and, if it’s your own format – hopefully it will help you learn to "translate."  I hope you were at least happy with my advice to hold the ERX $25s, which are back to $1.30 and the way oil is acting you should be happy to get out even. 

    Pretty lame attempt at a rally, no volume at all on that run (5M since 1pm).  Low volume is good for the stick but they’ve been pretty stingy with it for the past week (since Goldman had their program problem) but there has been an effort to prevent the H&S pattern from forming and that would be 895-900 on the S&P, I’d say 900 by tomorrow, which is about 1.5% up from here

    On the Dow it looks like 8,250 won’t cut it and we need 8,300 at least to break the pattern.  Weekly patterns carry a lot of weight so we’ll have to go much more bearish on Friday if we can’t break over that 200 dma, now at 8,383, which is a tall order. 

    Closing/Ajay – Lots of fun things to do with cash!

    Call/Merk – Well I expect them to pull out all the stops to push us up.  There’s a rationale to the PPT as it’s going to cost the Administration another $500Bn in stimulus if we do start legging back down 10% or more in the markets. 

    VLO/Concreata – I would buy them anytime under $16.50 as a long-term play.  If they fall to $12, I would DD and if they fall to $8, I would DD again and they could be 20% of my portfolio at that price.  Unless we are going all electric cars in 3 years, this is a good stock!  Meanwhile, you can buy at $15.94 and sell the Aug $15 puts and calls for $2.45, which nets out at $13.49/14.24, not a bad place to start

    NAFC/Morx – What puts did you sell.  They are nice and cheap down here and they pay what seems to be a reliable 2.7% dividend.  I don’t know what % of their costs are fuel but I imagine they are saving a lot over last Q2 and expectations are low so it’s probably a good strategy if you don’t mind owning them cheap long-term.

    FAZ/Jo – Sorry but that’s a broker thing and that’s the reason I dumped out.  Too much hassle!


  108.  phil, are they offering options for faz/fas?


  109. nafc – I sold the 35′s for $5.94;


  110. Phil,
    Please don’t mind my sour attitude. You are 100% correct. I am certainly learning the hard way. Since I began trading 4 months ago I lost approximately $12,000 and I borrowed all the money since my job went bad. I am trying to become more optimistic but it’ll take me awhile to get over it. Thanks in advance for all your good advice and I hope to become a better student.


  111. Hey Philld;
     
    With VLO can we also sell puts like we did befor ? if so what ?
     
    thanks


  112. Phil,
    I have USO OCT 33 puts at 2.95 (now 3.75). Should I cover them with July 30 putters and let them run?


  113. BWLD also has earnings later this month.  They have been kicking the crap out of other ‘diners’.  Although football is over….I wonder if they will beat due to baseball/basketball, etc.


  114.  Phil,
    on the way back up on XLF, is $11.50 or $12 (or neither) the major resistance?


  115.  called oxps –  new chain of options for both fas/faz – old contracts are now deliverable for 10 shares per contract.  will probably have to go through them to roll.  ( in case anyone is interested)


  116.  pharm, bwld has done a good job of capturing the ifc/fighting crowd.  they pay premium prices to see thse pay per view events.  plus input costs like chicken has come down.


  117. FAZ new options/Jo – Not yet that I see. 

    NAFC/Morx – Oh that’s not bad at all!  They are $8.10 now and you can roll them down to 2x the Aug $30 puts at $3.80 to pick up $1.50 in additional premium.  If you are lucky, eanings will be good and they will come back a bit as you only need them to go to $3 to get out even.  Worst case is they go lower and you have to roll to Jan $25 puts, which are now $2.83 so figure $1 more (x2) to drop them $5 more in strike.  As long as you can be patient and have long-term faith, it’s a good way to go.

    Sour/Nat – I don’t mind.  Why not stick to less risky trades until you build up some cash.  The buy/writes are generally good ways to make 10% a month and we rarely get burned on those. 

    VLO/Micro – The premiums are not too sexy right now but you can sell the naked Aug $16 puts at $1.25 for a $14.75 entry if put to you.  As it’s not even a 10% discount, it’s not all that great. 

    USO/B1 – Yes, actually I would sell the $32 puts for .70 as you can always use that 70 cents to roll up to the $34s and you can roll the putter all the way down to Aug $28 puts, now .70 so a very nice $6 spread at worst.  Realistically, $60 should hold and you can then sell the Aug $32s, which are now $2 and then you have most of your money off the table and 3 months left on the spread.

    BWLD/Pharm – The one by my house is always jammin’  I like them but we played them back in Feb before the big gap up so they seem expensive at $32, even though they’re not really with a forward p/e of 15.

    XLF/Maxt – Any .50 on them is pretty significant but $12 needs to be retaken for us to get our rally caps back on and even that is lame until we cross $12.50.  On the whole, that means that any trouble they have at $11.50 is a pretty bad sign.

    2:15 and we need an oil stick today in order to put some gas on the big stick for the markets.  Oil at $60.24 and they really need to get back to $61.50 by 2:35.

    Thanks Jo!


  118.  Sarkozy: "We must have debate on currencies in the next few months."
    Goooood for gold!


  119.  to me S&P intraday chart looks like a rising wedge off the 870 bounce since yesterday… usually a bearish pattern
     
    I’m going to add a 2x put buy to my position if S&P gets to the 888 resistance…. one point to go


  120.  Phil,
    how about using the DOW $8250 for covering or failing uncovering DIA puts?


  121. I have a bunch of dia july 84 calls which are now worth less than half. Do you think I should take the loss now or wait it out a bit longer.


  122. in $100KP rolled the long DBC Jan caller down this morning but still waiting for a fill on the August cover, probably a bit late to ask :P but is this ok?


  123. VIX dropped 1.95 (6.3%) and the affect is that the PUTs got killed while the CALLs hardly gain any value.  For example, RUT Aug 420 PUT lost $1.5 while the RUT Aug 530 CALLs gained $0.2.  Selling them yesterday means we would get a nice 15% profit.  So watching the VIX is very important and prepare to sell strangles when VIX goes up.  How far OTM you need to sell is not an exact science and is dependent on your risk tolerance, but can be learned.


  124.  Ha… there’s the answer to California!!!….
    make a market for the IOUs so the big banks can find another sucker to hold them… LOL


  125. I meant long call not caller – the Jan 20 to Jan 18


  126. Peter – what tool do you use to watch the VIX?


  127. Merkhava:  im doing the same, as a parachute, with the SPY Jul 88 puts. In at $1.12 – Just hedging my longs


  128. This is what I like to see, bearish sentiment is at highest level since March 15th.  Yes, we can go higher, but they will probably be wrong. 

    AAII Bearish 070909

    Oil just at $60.32 with 5 mins left to trade, they’re not going to make it…

    OK Merk, you are adding to that 54.65% figure….

    8,250/Maxt – Like yesterday, it’s 8,250 or BUST today.  This is our 4th time to that line in 2 days and another sell-off into the close (which may be the only alternative to breaking up to 8,300) will bring us into Friday with a scary chart and that would be bearish right there.

    DIA/Natohana – If we don’t make it over 8,250 and close above it then those calls will lose value fast. 

    NYMEX just closed at $60.30 so no rescue there and that took the steam out of OIH, who were up 3% expecting something to happen.  Gold barely holding $915 despite a bad day for the dollar BUT, this was stick time yesterday and we gained 100 points off 2:35 and we’re already up 25 since 2:10 so let’s give them a little credit and not throw in the towel just yet.

    If they are going to be serious, we should get back to 8,250 before 3pm, anything less than that is going to be worrying into the close.


  129. Nat, one opinion from a fellow student, the buywrites in Phil’s $100KP are the least risk for us, I personally think. This is partly because they are designed to allow infrequent modifications, and also Phil will explicitly come back to them and review them periodically.
     
    With the buy/writes mentioned here in daily chat, they require more work from us because if we are uncertain with them in the future we have to (a) recognize that and (b) come back to ask questions. They are not reviewed automatically (there would be far too many!) and so this requires our expertise to be a little higher.


  130. SGR; From what I have deciphered from the "spread trade" portion we are talking about Buying the Jul$22.50 Calls and Selling the Jul$25.00 Calls. That would mean we want the stock to be trading at $24.99 on 16Jul09 so that we don’t have to give back any premium?


  131. VIX watching/morxlntway – it’s right there in my ThinkOrSwim screen under Indices.  If it’s not there, type VIX over some other symbol


  132. LOL, the MCD call hit $2 but they never filled the $1.6 :-(


  133. phil – MCD -  at the risk of sounding trite by ripping off Staples
     
    ‘that was easy’


  134. Merk/Spider, can you tell me why you’re buying the SPY 88 puts versus the DIA 82 puts which are the same price?  The SPY puts are further OTM.


  135.  new nonadjusted options for fas/faz will be issued tomorrow according to a email i received from oxps


  136.  chuckle… OK Phil… glad my bearishness  helps boost your bottom fishing thesis… LOL  ;)
     
    MM didn’t fill 2x put buy because S&P couldn’t hit 888 to fire my trigger… I’ll keep the order open just in case Mr. Stick tries to do his sssssshhhhhhtick


  137. Okay folks – here are my un-scientific prediction: SPX has spike down more than 7.5% since June open, looking at historical data in the past 15 years, there is little chance that SPX would close higher than 950-970 in the next 4 weeks.  If we slip another 2.5% (i.e. down 10%), then it would certainly close below 950-970 area.  Remember those days where 10% drop was a big deal?  What this means is that I’ll be happy to roll my short CALLs to the 950-970.
     
    The RUT (which we believe has less manipulation) has dropped 11% from the peak.  It may bounce, but would unlikely to close above the 535-545 area.


  138. TEVA Sept $47.50s for $2.70, selling Aug $50s for $1 is net $1.70 on $2.50 spread

    DBC/Steve – Sure, you can wait to get a better price, we seem to have called the right bottom yesterday so hopefully we get more of an upswing than this.

    VIX/Peter – This drop is crazy on almost no move in the market today.  Someone is playing games…

    IOU Swaps – Great idea Merk!  Quick, apply for permission before Goldman beats us to it…

    SGR/Sunco – Anything over $25 is fine, we just collect the net spread of $2.50 on anything over $25 while $24.35 is our break-even point.  As we did with AA, if, for some reason, SGR sold off hard and we had an opportunity to take out the caller and uncover the trade, we might go that way but I was very sure about AA and willing to take the risk, not so much with SGR so probably we stay covered. 

    Volume 126M so maybe 130M at 3pm, still stickable but we’re not making progress like yesterday and if we’re not at 8,250 in 5 mins I would hedge with the DIA $82 puts, now $1.20 with a stop if the S&P breaks 888, which was our morning watch level that we just got rejected off.


  139. Merk, then we can securitize the IOUs and sell them.    Then we can make CDO’s out of them.  And sell CDS on them !
    Whoopee!


  140. thanks phil,
    got out MCD call at 2 while cost is 1.65.
    I can call my day now.


  141. Wow, that was fast, 10% in few minutes.  sold em $1.25
    MrMocha: I dont know if Merk is in SPY puts. Me yes.
    SPY is a little more volatile than DIA, thats one difference.
    I just trade more the SPY (look into my name) ;-)


  142. Cap don’t forget to sell OTC options on the CDS’s on the CDO’s on the IOU’s :P


  143. MCD = 8-)

    New FAS/FAS – Let the games begin!

    Cool Lafitu!  That’s the way to play, just look for one good play a day, take the money and run. 

    DIA $82 puts barely budged on that sell-off, that indicates the premiums are a rip-off so be careful!  Better to stop out even and reload if we turn back down than try to ride those out.


  144.  Spider… yup… I’m in SPY puts… I got some AUG 88 for 3.2… tried to average down a 2x at 888,
    but the S&P just didn’t make it there to trigger my order


  145. Sunco if the thing expires at any price above 25 then you will be required to sell at 25. You have the right to buy at 22.5.
     
    Buying at 22.5 and selling at 25 gives you 2.5. Then subtract the net price you paid and you have your profit.


  146. Phil
    I have faz july 7.5 puts. With this reverse split I am a little confused as to how I should handle them.  Whether i should
    roll them down to 7 or roll them up or just what  sorry if you have address this already    thanks


  147. ICE – been chasing its tail all day long. We might be testing $80 before we go anywhere. 


  148. Thanks stevenparker
    Thanks for your help. Maybe you could just tell me where to find these buy/writes.


  149. FAZ/Bill – I don’t know how they are converting, you have to check with your broker and they will have to help with the roll when the new options are issued but the good news is you should get a good premium on the roll to a lower Aug strike.  The advantage of the reverse split is there are now 5 stops between $7.50 and $6.50 for you to roll to (in theory).

    Very sloppy action so far after 3pm.  Just 10M shares in 20 mins so no effort being made to prop this up so far.  Vol 136M now so about 30% of the day or more will trade in the next 40 mins and it could go either way but, if it goes down, we are going to be looking very bad to Europe and Asia, who are both barely hanging onto their own levels.

    Summary is:  Make damn sure you are well covered!


  150. WFR options are active today – calendar spread @ 20s Aug09/Oct09.  About 360 or so moved.  Lots of action in the 17-19 range for the Aug Calls.  Also a spread opened in the 16-17 Aug09 P – 400 or so.  Someone thinks they are moving UP.


  151. Phil, Still have the DIA 84′s for 40c average wondering what to do about them. Am inclined to take a small loss and getting out. Any thoughts?


  152. Did anyone notice that AIG is at 9.4x now, after opening at almost 24-25 a few days back. Are they going back to 1? :D


  153. Buy/writes/Natohana – Under the Portfolio tab there is a Buy List, we haven’t used it in a while as stocks got expensive and the VIX got low but going over that will give you a good idea of the strategy and how it plays out over time.  The buy/write trades are simply the ones where we buy the stock and sell both puts and calls against them to lower the basis.  The key to this strategy is scaling in, pretty much you should only be committing 1/4 of your position buying power in the first round of the trade so you can handle the assignments and DD your putters when necessary. 

    140M on the button at 2:30, this will be a 1-day 50% drop in volume unless it picks substantially up soon and, since all volume has been down volume today, maybe we’d just as soon let it drift into the close. 


  154.  Hey Phil… looks like you made a great call on ICE range 90 to 86….
    you got one of those secret  "Looking Glass" devices to see the future?    LOL


  155. WFR/Pharm – This is a great price for them anyway.  March bottom was $13 and that was a gift, with a buy/write at $16.18, selling the Aug $15 puts and calls for $3.35, you’re in for net $12.83/13.91

    DIA/Foss – Very painful to sell at .33 but after today’s close if we drop back to 8,100 tomorrow they will be .20 so not worth the risk.  I will say though that with a week of earnings to go, I like those calls at .20 coming in fresh. 

    AIG/Trad – I read a sensible article arguing that there is no value whatsoever to that stock. 

    ICE/Merk – I don’t know, looked pretty obvious to me…  8-)


  156. PPT throwing all GS SPARCS at the dip. $88.2 is their line in the sand and they seem to be winning :-(


  157. I just don’t get this half-assed defense of MINIMAL support levels.  Right at 480 on RUT and 880 on S&P and 1,750 on Nas.  Arguable the Dow and NYSE have made progress but if this is all they can do then this is very scary.  Maybe they are saving up for a ridiculous rally tomorrow or maybe they simply can’t do it, even on this pathetic low volume and that means we are one snippet of bad news away from a black Friday-type event. 

    My logic is that clearly the markets are being supported but then I have to say, to what end?  Why support them at all if you can’t close the deal?  I expect better out of my evil market manipulators, that’s all….


  158. AIG- I saw an article on that this morning too…shoulda paid more attention to it I suppose….


  159.  chuckle… Phil… you duh man !!


  160. Merk: I reentered position into SPY  Aug $88  puts , following Phil cover recommendation.
    Avg cost $3 (thanks previous trade).


  161. SGR spread.: Phil and stevenparker comments helped with understanding the SGR spread. Thanks.


  162.  14M shares since 3:30… now 150M for the day… flat line dead stalemate… yuuuuck


  163.  man I wish I had been watching AIG… that stock was totally off my radar… dropped it off my watch list after it became a penny stock


  164. Gold slammed back to $911, now oil hits $60.50 but dollar still dead to the Yen, below 93 and also weak to the Euro so very pathetic performance today all around. 

    VNO close to failing $40 for rirst time since 4/21 and last time they failed $40 before that was on a massive gap down into the February market collapse

    I see 175M at close for Dow so 35M in last 1/2 hour (20%). 

    The spin is that Retail Sales sucked and they really didn’t and not a single analyst questioned mentions that last June was artificially stimulated – craziness!

    Oh well, from the 1,000-foot viewpoint, it was a flat day in the markets and nothing much happened…


  165. Woops, now volume snuck up to 192 – how do they stuff the trades in like that without massively moving the market?


  166. Phil:  What’s you feel about selling covered calls on the VIX.  It’s fairly low now and things do look shakey, so I’m thinking it has a big upside and low downside.
    My thought was to sell the July 32.5′s, let them expire, then sell the Aug. 35"s at a "hopefully" higher premium than today.


  167. VIX/Sky – What are you covering with?  It’s important to note that the VIX is cash settlement and each month is calculated individually so it’s possible for the front-month you sell to spike while your longer position just lays there.  I’m not saying that’s bad but you need to have the right expectations. 

    SGR missed by .03!  Down to $23.50 after hours.  Might be an over-reaction, depends on the CC.  A lot of their losses were currency-based, that’s going to hit a lot of people.  Order backlog is up to $22.9Bn from $18Bn last Q so, one of these days, they will do well.  For our purposes, we’ll be looking to possibly take out the $25 caller if it’s less than .45 as that would knock $1 off our basis and break-even on the $22.50s would be $24.80, which is a good target on these earnings.  They missed by 64% on April 8th and dropped to $27.03 a week later (down $2) but recovered to $34 at the end of April so hopefully this is an overreaction at $24.

    Our fallback strategy is to roll our calls to Aug and sell Aug calls against those but we’ll make that decision tomorrow or next week. 

    This was 4 $22.50s in the $5KP at $3.30, selling 4 $25s for $1.45 so we are in for net $1.85 with a break-even at $24.35 if we do nothing.  We can expect our calls to retain about $2 in value and we should be able to roll them to the Aug $23s for very little and if we can then sell the Aug $25 calls for $1, we would be in a $2 spread for less than $1 so that is going to be our fallback plan if the CC doesn’t look too good. 

    I mentioned earlier that we will be using Seeking Alpha as a backup to PSW (all these denial of service attacks got me thinking about a fallback strategy) and I will be posting all $5KP Alerts there so any level subscriber will be able to track them.  Please go to Seeking Alpha and click to follow me HERE.  Please do this today, while you have it in front of you, as I won’t be able to post this for you if our site does go down.


  168.   Phil,
                I’m thinking of selling OLN puts, Aug. 12.50 with B & A of 1.65/1.80 but it doesn’t lok like enough premium for me.
    I don’t mind owning the stock long term due to the great divd.  I wish I could judge better as to when I am getting a good price when selling puts.


  169. Phil – Doesn’t the VIX trade like an ETF or stock?  I was thinking of buying the VIX and selling the July 32.50 call.  When that expires next Friday, I’d sell an Aug. call
    You deal with trades that are quite complex, but this is a very basic covered call idea.
    I might be missing a major point about the VIX and this "cash settlement" and "each month calculated".  Sorry for being dumb about this, but it seemed to be a good ROI.


  170. Phil, FYI I clicked on your link to SA from the email alert and it just took me to a 3 year old "Wednesday wrap up" page. The link does work however from your post above. 


  171. You cant buy VIX or sell it. Nor do the options move like stock options its a  crazy world of VIX as I am learning with the 2-4 contracts that I am trading.


  172. Ha, CVX did not actually have earnings.  It was a interim update on earnings to be released 7/31:

    SAN FRANCISCO (MarketWatch) — Chevron Corp. [cvx: s], in its interim quarterly update, said late Thursday it faces "significantly lower" results from its refining and marketing operations in the second-quarter compared with the first quarter. Without providing specific estimates, it also said that while higher oil prices boosted earnings in its exploration and production activities, the gains were "largely offset by substantial unfavorable currency effects." Chevron, part of the Dow Jones Industrial Average, is slated to report its second-quarter results on July 31. Chevron shares closed Thursday with a 30-cent gain at $63.08.

    OLN/Silent – It is a crappy premium for such a volatile stock.  I think if you want to sell puts it should be the naked Aug $10 puts at .40 or the Nov $10 puts at $1.05 because that’s a good price to own them for.  The dividend is 7% and even if you have to margin all $10 between now and November you are getting $1.05 on $8.95 net committed and that’s 11.7% over 4 months so better than 35% annualized and you only risk having the stock put to you at a 15-year low.  It’s all about picking your spots with options.

    VIX/Sky – I don’t even think you can "buy" the VIX outright.  Effectively the options plays are like parimutuel betting at the horse track – there’s a race and you are betting on the results and all bets are settled in cash once the race is run.  You and other gamblers are GUESSING where the VIX will finish on expiration day (which is  not the same as option expiration day!) and the price of those bets is a function of supply and demand, which is why you tend to get pretty wide spreads in the less active strikes.  There is virtually no reality to the pricing, this is less obvious now than it was when the VIX was extremely high but notice that the October $42.50 puts, for example, are $12.60 with the VIX at $29.78 – that’s no premium at all!  Even stranger, the July $42.50 puts are $13.05.  That’s because they really don’t have anything to do with each other, each month (like each horse race) has it’s own pricing although, obviously, they are sort of in line.  

    The problem with "covering" the VIX is that there is no underlying "value" to hang your hat on.  So, if the August VIX were to spike like crazy to 60 because a plane flies into a building somewhere, that doesn’t mean that the October $40s would go to $20.  People may feel the VIX will "calm down" by then and you may find that you owe a caller a lot of money while your long calls barely budged.  I’m not even sure most brokers would even consider a long VIX to be a cover for a short one but maybe their compliance guys don’t think that through….  Either way, if you think the VIX is too low, simply sell naked Aug $27.50 puts for $1.15, you will still be able to roll and roll if it drops and the VIX hasn’t been lower than $20 since mid-2007 and I don’t think it’s ever been below $10 so a roll and a roll and a roll and you should get there one day!

    Keep in mind that 20 IS "normal" for the VIX, the markets aren’t supposed to go up and down 100 points a day.  Will we ever return to calm markets in these days of global electronic trading is the question.  I think the easy money was made shorting the VIX at 60 and higher, something we did do back in March and April as THAT simply can’t last but the VIX was 10 just 2 years ago and it could happen again…. maybe….

    Thanks Sunco!  That sucks as I sent it out to lots of people…  It should take you to:  http://seekingalpha.com/author/philip-davis/articles , where there is a button by my picture that says "Follow" but maybe it doesn’t work if you are not already registered on Seeking Alpha?


  173. Phil: Thanks much for the VIX explanation!


  174.  Dang… CVX down 1.05 in afterhours at   62.03… I should have played those August puts at the open like I had planned


  175. Peter
    I found your information yesterday very interesting. I tried to get the SPX  715-975 late yesterday for 7.3,, then 7.1 Put the 7.1 in early today, but the VIX factor today plunged the premiums.Nice profit for a day!


  176. For our friends  playing AMLN: http://www.biospace.com/news_story.aspx?NewsEntityId=149390
    The good news is there, there is still promise in the stock, and maybe more news soon. In this space, the future of Anti-sense with Isis, may finally prove out, in an under the radar indication…possible Oct news…These both face lots of risk, but if you follow this sector you know it is either boom or bust and sometimes both!


  177. Guys, on VIX matters, I have a couple of documents.
     
    First one is a study on Hedging with the VIX (futures and/or options) and compares to the classic SPY puts hedge. The document was from defunct Lehman.  The second document is a reference, I got from CBOE website.  I haven’t checked CBOE web for long time. Still I remember they had a lot of information about VIX and for sure, they should have much more new info! 
     
    (uploaded to megashare. Both are PDF files)
     
    Hedging with the VIX  (PDF): http://www.MegaShare.com/1212521
    VIX OPTIONS – Quick Reference Guide : http://www.MegaShare.com/1212524
     
    Regards – Spider.


  178. Guys, on VIX matters, I have a couple of documents.
     
    First one is a study on Hedging with the VIX (futures and/or options) and compares to the classic SPY puts hedge. The document was from defunct Lehman.  The second document is a reference, I got from CBOE website.  I haven’t checked CBOE web for long time. Still I remember they had a lot of information about VIX and for sure, they should have much more new info! 
     
    (uploaded to megashare. Both are PDF files)
     
    Regards – Spider.


  179. Well, seems that for some reason (maybe security) i cant post the links to the files.
    Trying again .. now using plain text for the links…
     
    Hedging with the VIX  (PDF): http://www.MegaShare.com/1212521

    VIX OPTIONS – Quick Reference Guide :  http://www.MegaShare.com/1212524


  180. Well, seems that for some reason (maybe security) i cant post the links to the files.
    go to megashare site and add the slash and the number after .com
    Hedging with the VIX  (PDF):    /1212521
    VIX OPTIONS – Quick Reference Guide :  /1212524


  181. Phil since you are running a promotion for new subscribers I thought you might like a little feed back from new eyes. I am a beginer; I have been trading options for about a year and have been following this letter for a couple of weeks. I can tell from what I have read that you have the knack to spot the correct move to make in an instant but it is hard to pull the info out of all this "chatter". I believe that this chatter is benificial because it gives your followers confidence in the recommendation and constant backup if the trade goes south. I know that if I stick with it long enough I will be able to decipher your recommendations just as easily as your old members are doing now. As an example I didn’t recogonize your MCD recommendation this morning as a "do it now" day-trade. Perhaps something like "KwikTrade! Buy MCD Jul55C at 1.60 (1.55-1.65) C trgt=$2; C stop=$1; $5KP=5cntr" would elimate all the mistakes I see us new members are making as well as all the questions coming back to you for clearification. I don’t know what ".28 premium" means so I don’t know if it should be included in the Kwik Trade (KT) info. The double down (DD) info could be included in a followup if it became necessary. Today it wasn’t needed and at least one member didn’t know what it meant (new member confusion). In the new members guide you can define Kwik Trade, C=Call, P=Put, S=Stock etc. I think something like this would save you a lot of time rather than saying yay and nay to each members reply as to weither they got the trade perameters correct or not.
    For my own part I am just looking for the "trade perameters" so I will continue to try and learn your "short speak" so that I can put the trades in correctly and quickly.  Once I figure them out  I think your picks are fantasic and I hope that I can learn to interpet your "short speak" in a more timely manner so as not to miss trades like ICE, SGR or MCD.  I am not going to second guess your picks so I don’t really need the why’s of a trade. As a secondary value the why’s are good as a learning vehicle.
    Anyway just food for thought


  182. Drum/SPX – Glad that the spread worked out well.  I’m on the other side of the fence where I sell option premium, rather than buying premium.  The risk profile is very different, but can be very profitable as premium decays with time.  It’s almost in reverse of what Phil does, but he believes it can work, hence I got a color.  Hihihi.


  183. Peter,
       Do you sell futures options? otherwise how would they be cash settled? Curious and Confused.
    -Krishna


  184. foss – I don’t think it’s called futures options.  What we sell is Index options (SPX, RUT, NDX, OSX, etc.), ETF’s options (SPY, DIA, QQQQ, IWM, etc.), and the options on the Ultras (TNA, TZA, SDS, QLD, QID, etc.).  Futures doesn’t have options.  Buying futures (/ES, /TF, /NQ, /QM) is like buying stock, but with more margin leverage.  The index options (SPX, RUT, NDX, etc.) are cash settled as we cannot buy the underlying index itself, i.e. we can’t buy SPX share by spending $882 each.  Since there is no assignment, the value of the option are paid in cash.  For example, if SPX opening price on Friday 17th, 2009 is 880 and we have SPX July 870 CALL, it would be generally worth $10 and we’d get paid $10 per share ($1,000 per contract) for the CALL.  The shenanigan is that the settlement price of index options are calculated as of Friday’s open in the expiration week, it can gap up or gap down, making our option goes into the money (or out of the money), loosing the value overnight.  So it’s a good idea to get rid of all cash settled option on Thursday in the Expiration week. 
     
    For the ETFs such as SPY, we’d get assigned (or called away) SPY share if the CALL or PUT sold is in the money.  Getting assigned is no big deal, just a hassle with margin requirement and getting rid of the shares.  Some brokerages don’t let you see the assigned shares until 2 days later, while requiring you to meet margin requirement in a day.


  185. Links/Spider – I don’t know what happened there, first you got caught in spam filter and now the links seem stripped.  Maybe there is a security issue…  Try embedding them if you don’t mind.   You just highlight a word and then click on the thing on the icon bar that looks like a globe and a paper clip, that pops up a link window and all you have to do is paste the URL into it and it makes the word you highlight a link. 


  186. Sunco1:  I think it takes some time and practice to keep on PWS chat. I’m also new and and I have to get used to the refresh and the reading, and at same time keep an eye on the trading and the world around (phones, people, emails, etc). I do bet its easy for the new ones (us) to learn PWS stile instead to change current system.
     
    I do agree that sometimes I get confused. For example, 2 days ago, I missed the ICE trade, and was a great one. I realized about the ICE trade only when many where so happy about ICE going down. Blamed myself because of that, and after market went back to review chat about ICE:
     
    The trade originated when drumkeerin asked for some advice on ICE. Later Phil replied with a conclusion about how much ICE was affected by upcoming regulations and how that will spook investors. And he issued the trade idea. I didn’t followed because I understood it was a play for him. – my bad, lesson learned.
     
    As a new member in PWS I understand we have to learn from the Education Section, and invest time on reading back PSW articles and the day chat of that day. For example, i selected a couple of key time frames:  September/2008 when LEH went BK and March/2009 when markets were all red. Go read them.. at least for curiosity :-) And when I read old articles I look at that time market charts.  Good exercise.
     
    If you read several articles and chats  (Is recommended to read 1 month PWS articles) you will understand and learn a lot. And you will find several times "confusing trades" that are soon corrected or have more details explained in next posts. As usual, you should never do a trade if you don’t understand it.  Ask in you dont get it.
     
    And I do think you also have to evaluate yourself if you like the trading idea proposed.  I will not follow all trades proposed here, sometimes because I’m late, sometimes because I judge to risky for my taste.  The only responsible of your trades is you and only you. If you look bad you will find Phil is a great adviser, but as all humans, he sometimes is wrong so there is where you have to use the stops, the parachutes, mattress, etc..


  187. Links / Phil  :  I done in both ways, plain text and embebed. The site is megashare
    I will try links with a space in middle. (you have to copy and paste into browser and then delete the space)
    http://www.mega  share.com/1212521
    http://www.mega share.com/1212524


  188. Trades/Sunco – Every once in a while I need to tell members that asking me to change the way I call trades is very much like being the new nurse in an operating room and demanding that the surgeon use the terms they taught you at your college rather than what the team is used to, not the best idea.  While I’m flattered that you would rather blindly follow whatever trade I make with no explanation – I would much prefer it if you did learn the how’s and why’s of the trades as, inevitably, some will be right for your portfolio and some won’t.

    With MCD, my 12:27 comment was:

    Hold the fries!  MCD looking good at $56.44, earnings are on the 23rd, after expiration so I like buying the July $55s for $1.60 (.28 premium) with a DD at $1.20, looking for $2 stop at $1 (avg loss of .40).  Lets call that 5 in the $5KP

    If you look at the 1 min chart, you will see that I was making that comment just ahead of the final downsweep of that session so I was in a hurry to get that out and I laid out the parameters as best I could.  I said I like buying the July $55s for $1.60.  I believe in the context at least it was clear they were calls.  Rather than write the word call or, as you suggest "C" (which confuses me) roughly 1,000 times a month, we have a convention here that if I say $25s, I mean $55 calls and if I say $55 puts, I mean $55 puts.  Again, I would find it very disturbing to think that a person is trading based on my say-so who cannot differentiate from the above statement whether I meant a call or a put.

    The .28 premium may be superfluous information to you and I apologize for cluttering my trade idea with it but for more advanced traders, it explains why I like the call (low premium, high delta) and, at the same time, is an indication that the trade will have substantial downside risk so it is a very bullish bottom call.  I think conveying all that by saying "(.28 premium)" is a reasonable use of space.  If you do not understand something in a trade, ask.  If you miss the trade, I can guarantee you that we will find another trade idea within a couple of days. 

    Also, there is a reason that the new members guide says it is very important to read a month’s worth of posts and comments to get up to speed.  Questions like "do you mean puts or calls" and "what does DD mean" are asked and answered almost weekly and you’d be amazed at all the other cool things we discuss over the course of a month…  

    As to your format.  I’m not sure why this would be a Kwik Trade ™ as opposed to other trades which we (I suppose) don’t actually want to execute?  I suppose what I could have said is Buy MCD Jul $55 calls at $1.60 (do I really have to write out the bid/ask every time or can we assume some very basic knowledge on the part of the reader?).  I don’t know if I like C trgt=$2 better than looking for $2 and saying C stop = $1 would just be totally wrong without first introducing the idea of doubling down at $1.20.  What if we were actually trading C, the stock?  That would be a total mess!  The next part you need to explain to me as I don’t get $5KP=5cntr.  Is that 5 contracts in the $5K Portfolio?  Again, you are assuming people are hip to your code but I think saying "Let’s call that 5 in the $5KP" is just as descriptive and I don’t have to sit there and worry about my formatting.

    There has to be some assumption that the person I am speaking to has a working knowledge of options trading.  There is a reason the New Members Guide encourages a month or so of paper trading.  Practice first, ask questions, join the team…   I will make an effort to be as clear as possible and you feel free to ask for clarifications any time.  As I said earlier, if you want to rewrite what I say in your format to verify for you, you’ll find I’m pretty flexible and can probable figure out what you’re saying and then I can just say "yes, that’s what I meant" or, worst case, I’ll just have to ask you to clarify what you wrote.


  189. VIX articles/Spider – It jsut takes me to the Mega Share site.  Very strange.  Maybe you have to be registerd with Mega Share..


  190. spider – Thanks for the VIX info links.


  191. Well, not working. I will try to post again via tinyurl. When you get to the megashar, select "free download" button.
    tinyurl.com/mvqpwp   (vix hedge)
    tinyurl.com/lq7tc2   (vix guide)
    Hope now works.


  192.  spider / megashare
    figured it out…your first try worked…select the FREE button on the bottom right of the screen…wait a few seconds…select download or direct link…here are he direct links….
     
    http://www.MegaShare.com/dnd/1212521/d28d743ace47f4de791cfe8359f865f9/1212521/070914/FTSOR/vix_hedge.pdf
     
    http://www.MegaShare.com/dnd/1212524/d28d743ace47f4de791cfe8359f865f9/1212524/070963/WSMUX/VIXoptionsQRG.pdf
     
    if those don’t work (maybe they are different for each person) then just select download…
     
    thanks for the info….


  193. VIX links – The links worked for me.  Even the links in the first post worked.  At the MegaSite page, I clicked on "Free" and the download appeared after their 20 second wait.
    The "Hedging with VIX" article is a, very deep, 44 pages.
    Thanks again.


  194. Hi Phil-
    I am getting the hang of the call and put talk in your website.  I actually had a bunch of USO puts when oil was in the 70′s, but chickened out and ended up bailing out with a small loss.  If I had been patient, I would have had a huge gain.  I found that I am more of a "bullish" person and would rather bet on things improving.  Do you have any trades for me?  I don’t mind holding a bit of stock and selling calls in the short term.  I think you mentioned XLF is ok.  Can you suggest something for my speed that I can make a small profit on and not risk anything?
    celeste


  195. I am sorry that you misunderstood my comments; I am not saying that my code is any better than your code. I am saying in my opinion for new users it would help considerably to have the code described in the new members guide what ever it is. Some where in your lititure I read that you leave the month out if it is the front month and you never use the current month within 2 weeks of expiration date for any reason. Now with SGR you use the current month within 2 weeks of expiration. I know that this rule change is probably listed somewhere in the 3,000 words of each days posts but I did miss it. From your earlier comment I presume that all $5KP trades are current month UNO even if within 2 weeks of expiration. My food for thought is that I am not sure how many new member will stick with it long enought to memorize all the idioscracies from each days posts. In a years time I have reviewed 38 different newsletters This is the only one that leaves out perameters of a trade recommendation. I hope that means that you are better than al the others.
    Anyway just food for thought. I will remain a while longer to determine if I can decipher the missing perameters in a timely fashion.


  196. Wow. What a difficult day to trade yesterday.  At least for me.  Headfakes galore.   Ugg.
     
    My hunch is today we’ll close near the week’s low.  Next week, up.  Then down from there.  FWIW.  Which, btw, I’ll be the first to admit is not much!  But in fairness to me, my macro calls aren’t that bad.  I just have huge trouble with execution.  I’m very easily affected by all the noise in the market.  Guess that comes from havnig so many losers!
     
    Phil, I think sunco1 has a valid point.  I don’t really like his suggested ‘code’, but if your point is to get new members to join and STAY, and I think it is, then maybe a less steep learning curve of a months posts would encourage them to do so.  Personally, I gave up trying to understand all your calls a long time ago.  But I chalk it up to me not being an options guy.  For options guys to have the same trouble as me then there could be some merit to it.  I like your nurse analogy though.  That’s your biggest talent…  analogies!


  197. Good morning!

    Thanks for straighening that out Spider, those are worthwhile links too! 

    Glad you are getting into the swing of things Celeste.  It’s a very good thing to recognize your comfort zone is with bullish trades but, that being the case, you also have to exercise patience because the technicals are way against you at the moment.  It’s fine to be a bull or a bear (as opposed to not really caring and trading either way) as long as you are patient and don’t try to force entries.  This is a bearish turn in the market so not the time to make a bullish play except for quickie plays like MCD yesterday.

    Today the dollar is up 2% and oil is back below $60 and gold is below $910 and we are lucky the futures are only off half a point so far. 

    Format/Sunco – That is a good point, I will try to summarize/define my trade talk in the New Members Guide.

    CVX is going to cost 15 Dow points by itself, XOM may follow and not much bullish news to offset so far.  We have Trade Data at 8:30, not sure how that can help us.  At 9:55 we get Michigan Consumer confidence and that seems like an oxymoron at the best of times.

    Next Week is Data Central with PPI, Retail Sales, CPI, Industrial Production, Fed Minutes, Housing Starts and the NY and Philly Fed Reports plus tons of earnings.’

     

    Date ET Release For Actual Briefing.com Consensus Prior Revised From
    Jul 13 14:00 Treasury Budget Jun   NA -$77.5B $33.5B  
    Jul 14 08:30 Core PPI Jun   NA 0.1% -0.1%  
    Jul 14 08:30 PPI Jun   NA 0.8% 0.2%  
    Jul 14 08:30 Retail Sales Jun   NA 0.5% 0.5%  
    Jul 14 08:30 Retail Sales ex-auto Jun   NA 0.5% 0.5%  
    Jul 14 10:00 Business Inventories May   NA -1.0% -1.1%  
    Jul 15 08:30 Core CPI Jun   NA 0.1% 0.1%  
    Jul 15 08:30 CPI Jun   NA 0.6% 0.1%  
    Jul 15 08:30 Empire Manufacturing Jul   NA -5.00 -9.41  
    Jul 15 09:15 Capacity Utilization Jun   NA 67.9% 68.3%  
    Jul 15 09:15 Industrial Production Jun   NA -0.6% -1.1%  
    Jul 15 10:30 Crude Inventories 07/10   NA NA -2.90M  
    Jul 15 14:00 Minutes of FOMC Meeting June 24          
    Jul 16 08:30 Initial Claims 07/11   NA NA 565K  
    Jul 16 09:00 Net Long-Term TIC Flows May   NA NA $11.2B  
    Jul 16 10:00 Philadelphia Fed Jul   NA -5.0 -2.2  
    Jul 17 08:30 Building Permits Jun   NA 523K 518K  
    Jul 17 08:30 Housing Starts Jun   NA 530K 532K

  198.  Gooood morning Phil and all,
     
    Is CNBC reading your blog Phil… chuckle… they picking up the California crisis story today.  SEC is going to regulate the IOU’s as a muni debt…. i guess there really is gonna be a market created to trade them…. chuckle


  199. Morning from Scotland!
     
    I should issue some IOU’s and create a market!
     
    Anybody here use finviz.com to search stocks?  Found some interesting charts there with nice fundamentals to back them up.
     
    IIVI – Long
    PTI – Short