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Turning Up Tuesday – Can We Hold It?

I WAS really excited about yesterday's rally.

Meredith Whitney gave us the catalyst for the bear squeeze we expected But THEN I saw Cramer last night.  Nothing scares me more than watching Cramer's bandwagon do a 180 degree turn and head my way as he's been wrong and wrong and wrong and then wrong for months now.  Still, I'm going to try to ignore that noise and keep a level head, dealing with facts rather than fads to figure out which way thing will be going.  We were happily buying last week while Cramer was herding his sheeple out of the market and we'll be enjoying the free ride as he stampedes the masses back in, especially during expiration week but we'd rather see some honest, uptrending consolidation based on earnings than going back to early May's roller coaster model that hurt so many investors on both sides

We are, of course, thrilled with the move so far, as you can see from the new buy list that I put up over the weekend.  We cashed in our FXPs right at the top and went long on the DIA $83 calls at .40 as our 2nd trade of the day (the first was a long on GOOG into earnings).  Those calls finished at $1 (up 150% and we are done, of course) and we also went long on GLD while it was still low in our 10:31 Alert and I put up a hedged play on TNK but that was it.  We did all our buying last week, when things were cheap and we just spent the rest of the day waiting to see if we would make our target levels. 

As I said in yesterday's morning post, we were looking for 1,750 to hold on the Nasdaq as our primary indicator that we were going to hold our 33% pullback levels on the broader index so it's not really rocket science to see where that DIA trade came from as we timed it for right when the Nasdaq crossed back over the line after the morning dip.  Having a trading premise is always helpful and, in the 9:32 level watch to Members I had said: "Without $60 oil the best we can really hope for today is to claw back to our middle set of figures.  Earnings can take us up over the higher numbers as the market rotates out of commodities (if they see that other stocks look "safe").  So that’s the outlook for the week (so far)."

The levels we were looking to hold and break over were

  • Dow 8,100, 8,300, 8,500 to break H&S pattern
  • S&P 870, 900 and 930 to break pattern.
  • Nas 1,750, 1,775 and 1,825
  • NYSE 5,600, 5,800 and 6,000
  • Russell 475, 490 and 510

As it turned out, the Dow finished right at 8,331, S&P 901, Nasdaq 1,793, NYSE 5,761 and Russell 493 so just the NYSE holding us back at the moment but the Dow was over by about what the NYSE missed so we can call it a wash for now.  I did amend my Dow target at 3:01, saying to members: "Speaking of volume, 142M just coming into 3pm, very stickable and we’re going to need it to prevent a sell-off here.  Another 100 points would be very nice though but I’m thinking we run into trouble at last Monday’s high of 8,325."  That prediction worked out just fine into the close and at 3:58 we decided we could expect a follow-through move of up to 1.25% today so a test of 8,400 will be today's hopeful target for the Dow.

As we expected, Asia gave us a good pop this morning with the Hang Seng up 3.66% (we expected 4% so a bit of a miss actually), quickly erasing last week's losses.  The Shanghai was up 2% but was never really down and the Nikkei was stopped dead by the 2.5% rule, also not an encouraging sign after comming off such an awful week.  India popped 3.75%, Australia gained 3.23% but the Baltic Dry Index flatlined at 2,975 and that's not a very good indicator that the rally is real.  Auto makers were higher in Tokyo after the Nikkei reported they were stepping up production capacity in China amid brisk local demand, with Nissan Motor surging 7.3% and Honda Motor up 2.7%, while Toyota Motor rose 3.6%. Brokerage stocks also jumped in the broad market rebound, with Nomura Holdings soaring 6.9%.  "I think it is quite clear the worst is over, but the recovery will be tenuous," said Selena Ling of OCBC

Europe is up about a point and they outperformed us yesterday and were boosted by gains in the financial sector but Germany's ZEW Business Sentiment Index fell to 39.5 in June from 44.8 vs. 47.4 expected.  Industrial Production in the Euro-Zone was also weak in June, up 0.5% vs 1.4% expected there.  Barry Knapp of BCS raised his S&P forecast significantly and outlook for earnings season has been raised in the EU but until the EU indexes get past the 5% rule and hold it, this is just a technical bounce off the 33% retrace that we expected.  “The key point is that the capital markets have normalized,” Knapp wrote in a note. “The broad improvement in capital markets implies that the recovery is very much alive.”  

8:30 UpdateOur June PPI report came in much hotter than "experts" had anticipated.  This time they were off by 100% as prices jumped 1.8% in June vs. 0.9% expected by people who obviously don't have cars.  Crude goods led the advance, of course, rising 4.6% and energy costs overall were up 6.6% for the month after climbing 2.9% in May.  Even the core PPI was up 0.5%, that's a 6% annual inflation rate so you'd better be doing better than that with your "cash" or you are falling behind my friend!  This is why we got back into gold yesterday as $910 did seem cheap ahead of PPI and tomorrow's CPI.  Overall, this is nothing to panic over as long as the commodity bubble continues to abate, halfway through July, that's looking good but don't count GS out just yet – they can still force their $85 oil target if they want to.

We also got Retail Sales this morning and those were up a better than expected 0.6% but, again, gas sales skew the numbers and without that increase, retail sales rose just 0.3%.  In fact, retail sales excluding autos and gas fell 0.2% in June!  Adding insult to injury, Chain Store Sales for the first week of July fell 1.7% from last month and 5.7% from the first week of July last year.  As I mentioned with last week's retail numbers, we are comping to numbers when everyone had stimulus checks so it's not a fair comparison but the weak holiday weekend numbers indicate people are not heading back to the malls just yet and that's a big worry with only 150 shopping days until Christmas.

Goldman Sachs did not disappoint with $3.44Bn in profits, which was really amazing as they paid out $6.66Bn (I'm not kidding, that's the number!) in compensation.  Still despite paying out 1/2 of net revenue in salary and bonuses, investors love the $5 per share net earnings but maybe not enough to break $150 as much of this is baked in.  We sold July puts, which will be wiped out, against August puts, which may come back if they can't break out here so it will be fun to watch.

JNJ also had good earnings, off just 5% from last year's stimulated totals at $1.15 per share vs. $1.11 per share expected.  The company reaffirmed the full-year forecast and consumer sales were strong so that's a good thing.   DELL warned on Q2 earnings last night so GS was wrong with that upgrade and we were wrong to play them in the $5KP and should be happy to salvage a dime on the $13 calls, we'll follow up on that later.  Also in our $5KP, we need to watch SGR closely, who came back nicely yesterday but didn't hit our $2.50 target yet on the $22.50 calls but I have hopes for this morning

So we need to see a 1.25% move in our indexes hold for the day or we may be back to making bearish bets.  We'll be watching the 5% lines in Europe as early indicators but, as I said to members yesterday – I'm very glad we picked up a lot of stocks last week but I am also very glad they are well-hedged entries as we should be happy to make small gains that keep us ahead of inflation.  It's still going to be a bumpy ride out there and we are still not committing too much until we see more data. 

 


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  1.  Ha… GS knocked the cover off the ball hitting a home run on earnings and the market’s reaction?…. yawwwwwn
     
    that 150 double top resistance is just too strong to break over I suppose


  2. Morning!
    Just wondering what you think of OXEN’s ERX this morning. Movved too far already?


  3. It is a very interesting reaction to be sure.. it could just be that they want a flush before going higher.  There is no way we go down today on those earnings.  And regarding my previous call that GS’s earnings report will mark the high water mark for July in the market.. I’m backpedaling some now.  The more I hear CNBC say, " THE MOST IMPORTANT EARNINGS SEASON IN DECADES!!!!!!!!!" the less I think ‘they’ will let her go down.  It can wait.  Probably August.  Or at least towards the end of the earnings season.
     
    It truly is disturbing that these guys can make this much money.  Keep in mind that the $3B in earnings is AFTER they take $6B or so off the top for bonuses this year.  Which puts them on track to have their biggest annual bonus payout ever.  Think about it… the US is in the crapper, we’ll be well over 10% in unemployment by year’s end and the average GS employee will be getting $600k in bonuses.  And before you call me a commie or socialist, it’s all of our money that they are taking.  They produce NOTHING!  They only take.  It’s sickening.  And I doubt very much the Obama admin will do anything about it.  Summers was one of the guys, Rubin being the other, who lobbied Congress to repeal Glass-Stiegel.  Is he REALLY going to now bind their hands?  Of course not.  And Obama, with his pie in the sky agenda, is beholden to the Street, namely GS, to keep the market up so he has at least a big snowball in hells chance of getting some stuff pushed through Congress.  Because if the market goes South, he can forget about much of what he wants.  Bottom line:  He’s in their pocket.


  4. Have a mortgage and become unemployed?  No problem!  Have we got a new program for you!!
     
    http://www.cnbc.com/id/31900806
     
    If they don’t clamp down on oil speculation before our country blows up we’ll be paying $500 for oil as people stampede into it to hedge against inflation.


  5. Matt, would you like to write an article for the Favorites? :-)


  6. lovin that dell! :(


  7. what do you mean morxlntway.  wasn’t it a call we were holding?


  8. goood job morx, Dell will be crushed by weak consumers, apple’s appeal and the disaster that Is Vista.
     
    ilene, do you really think there is interest out there for the rantings of an embittered trader?  Wait a minute…  that’s most of us!


  9. that was a sad face. (fine print)


  10. Yes, but I’m admittedly slightly biased.


  11. GS/Merk – I think the issue is that people remember that there is a high degree of risk to their model so earning $5 a share for PERHAPS a $20 payout on $150 is just not all that thrilling, especially when it’s possible that the games they played to make that $5 may be reigned in at some point. 

    ERX/Steve – I think David doesn’t realize how BS the moves he sees in overnight oil are.  I would be careful with those energy plays.  I called ERX last below the $25 line and that’s a take the money and run play at this point as a move back to $60 was all we were expecting anyway.

    Patience is good Matt!  I think the funny thing about GS is that they do take in $3.3Bn in profits AFTER paying $6.6Bn in salaries and such on $13Bn in revenues so all but $3Bn of their revenues goes to the bottom line (as it’s technically a partnership, salaries are profits).  If the M&A market makes a comeback, without competition these guys could put in quarters that will rival XOM…. 

    $5KP:  DELL – take the dime and run.  SGR – Don’t let $2.50 get away, that was out goal.

    Levels are the same as yesterday, if we don’t hold those middles we can play the downside

    • Dow 8,100, 8,300, 8,500 to break H&S pattern
    • S&P 870, 900 and 930 to break pattern.
    • Nas 1,750 (can’t afford to be red), 1,775 and 1,825
    • NYSE 5,600, 5,800 and 6,000
    • Russell 475, 490 and 510.

    I like the DIA $84 puts, now $1.29 if we break below 8,300 AND the S&P is below 900.  If either of those conditions change then take the small loss and protect 20% gains as you may be able to go in and out several times.


  12. HA!  Bob Pisani of CNBC is saying to sell the news!  That was my line!!


  13. Seems for such "good" news…. maybe a slight lack of reaction…. is this a calm before a storm?


  14. GS play:  The Aug $130 puts are $2 (down $3) and the July $135 puts are .13 (down $2) and I like selling the $150 puts for $3 and spending $4 to roll up to the Aug $145 puts in that play as it’s adding $1 but a nice spread with $3 in July premium that expires on Friday (and the Aug $135 puts are $3 so the roll down is a $10 spread).


  15. GS – Out of the 13Bn in revenue, haven’t heard where the 10Bn they paid back TARP came from.


  16. does the GS play have a place for new entries or is it an adjustment?


  17.  It appears the way to play OE week during earnings is to generally go for premium crush by selling July options against August or September longs 


  18. Wow, Dell is being sold HARD.  With upgrades like Goldman’s.. who needs downgrades?


  19.  S&P support at 898 is holding, DJIA support at 8320 is also holding… bulls are looking strong today


  20. OK you Flu Vax people, reading today’s biotech mailbag, one to watch and maybe get into is HEB.  Looks like their drug makes the flu vax 100X more potent (looking for scientific rational).  Overall, Japan is seriously considering the use, and HEBs drug is on track for FDA approval for cronic fatigue syndrome (CFS).  In any case, if the FDA does not approve, they will look foolish (have before, so what’s to stop them).  EU is also considering.  Lots of up side potential, a bit of downside, but at $2….things I don’t like – Playing with the FDA approval process, and they have done a few share offerings (who hasn’t)….I am picking up a few hundred shares to see where we go….order in at 2.04.


  21. GS/Morx – You can just take it as a new spread.

    GS/CDS – It’s just a loan in and out and the interest would have come out of net profits most likely. 

    Well no put play as we held the lines so far, now we have to break higher.  SOX are up 1% and transports up 0.6%.  OIH up 2% on $61 oil, XLE up 1.5% so that’s our whole market now.   Gold is holding $924 but that’s not thrilling.  Pound is back to $1.63, Euro right about $1.40 but can’t break it.  Back to 93 Yen to the dollar but all flat from last week so oil and gold are just doing their own thing.

    I am NOT liking bullish plays at the moment, huge overhead resistance and not very exciting morning volume (on pace for below 50M in 1st half hour) is not a recipe for big gains.  Our goal for today is simply to avoid a sell-off though so it would be nice to have a dull day as earnings come from AIR, ADTN, INTC and YUM tonight and ABT, SCHW, CBSH, GCI, NITE, TXI, WWW and GWW tomorrow morning.  AMR earns in the afternoon and, of course CPI is tomorrow and that will be just as bad as PPI but without the "helpful" Retail Sales numbers to soften the blow.  

    Business inventories were off 1% vs -0.8% expected, not much to that.  April was revised to down 1.3% from down 1.1% and retail inventories fell 1.6%, the biggest drop in 4 years but mostly autos as dealers prepared to shut down and car plants halted production.  On the whole, that’s usually a positive as people figure lower inventories lead to manufacturing later but we may just be "right-sizing."   Any optimism over inventories can be quickly reversed by tomorrow’s Empire Manufacturing Index if it shows that no one is ordering re-stocks.  We also get Industrial Production tomorrow at 9:15 so it’s going to be wild into the bell.


  22. Pharm, it treats CFS?  Shoot, I want some.  The drug that is!  But seriously, that would be a huge market.  Thanks.


  23. AIG Aug $14 puts are $3.20, enter as a mo play looking to cover with July $14 puts, now $1.25 at no less than $1.10 but hopefully they just sell off and cover not necessary or maybe get $1.25 for July $12.50 puts, now .70.


  24. Btw, shorted PRU at the open.  It’s had a silly runup.  But then, so have alot of others.


  25. Look at GOL airlines….whoa.  They service South America (esp. Brazil).  Looks like $8 or so is the next stop.


  26.  Phil,
    As a new entry, can you clarify the GS spread.  I want to make sure I understand your recommended play before pulling trigger.  Thanks!!!


  27. >>We sold July puts, which will be wiped out, against August puts, which may come back if they can’t break out here so it will be fun to watch.>>
    Yup.  I was one of the puppies on that trade.  Frankly, I closed both legs – with a net loss.  Thinking GS would beat and we’d see another bull bump, I made a cheap synthetic futures-style trade (not looking to recover all lost on losing spread, but some – quickly) – being a DITM call delta junkie, I bought   August 125 @ $26.35 and sold July 150 puts @ $3.20 (out at $2.50 quickly).  Again, though it may not cover first trade loss, I don’t mind building my stack back one pot at a time.  Now the question is whether the high-delt calls sky just a wee bit.  Does that make any sense Phil and my peeps?


  28. Matt, you are welcome to print a guest column on ObamaNation !


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    Phil:
    on Friday you wrote:

    That’s why we have guidelines for taking out calls and puts we sold when they are ahead by 50% with more than 2 weeks to expiration and 75% with one week to expiration and 85% during expiration week.  We also have a guideline to take out off 1/4 of our callers or putters when they gain 25%, not just from where you sold them but from whatever low they hit.  So, in other words, if a caller drops from $1 to .60 with more than 2 weeks left, you don’t wait for it to go to $1.25 before buying back 1/4 of them, you buy 1/4 back if they bounce to .75!  

    This was in the context of a GE buy-write as an example. Two questions:
    Is it correct to assume the 25% guideline to take out 1/4 callers or putters always applies, not just when there’s more than 2 weeks to expiration? These quidelines are new to me.
    I can understand taking out the putters on a buy-write on a price drop. The callers are somewhat more puzzling to me. We’ve sold both puts and calls, so being called away on a price increase is often quite profitable if you don’t buy out your callers. By buying out part of your callers, you’re deciding to go naked on the upside on that portion of the underlying. With the price increase, the delta on the calls you sold has increased. So I guess you’re saying you’d rather get rid of a portion of the calls you sold with the increased delta.


  30. I don’t see the strength you see Merk … I see a modestly weak day; financials and real estate weak.
    GS and energy holding up the market.


  31. DIA looks like it wants to test 82.70 pivot point at least.  
    TRIN flat; TICK very negative, VIX low.


  32. VNO and BXP heading down again – that’s never a good sign. 

    Watch XLF at 11.50 for weakness.  GS broke $150 but other financials don’t seem to thing what’s good for GS is good for them.  ZION back to "bad" today, such a funny stock to trade…

    Forbes running article projecting "conservative" 4% GDP GROWTH in 2nd half.  Isn’t it funny how suddenly the MSM is finding "green shoots" again?

    GOL/Pharm – Be really careful with airlines into earnings as they got clobbered by fuel AND low travel.  I think they will be a good buy to pick up the ones that sell off harshly after earnings.

    GS/Sgr- That would be the Aug $145 puts, now $5.80, covering with the July $150 puts, now $2.65 so net $4.15 on the entry and it would be prudent to stop out 1/4 of the July puts at $3.35 and 1/4 at $4, which would leave you 1/2 covered if GS dips down

    GS/Dstil – If you are asking if I think you should keep the Aug $125 calls I would say no.  You got a good gain but it doesn’t mean anything if you don’t take it off the table.


  33. Phil  – don’t buy airlines (usually), just came across my screen and thought I would put them on everyone’s radar FWIW.  Only one I would consider is the cattle hearder LUV.


  34. Roger that, Phil.  i’m going to see if I can get $26.75 out of the Aug $125 calls and then bye-bye.   Sorry for the poker references, I used to play a lot, I don’t any more and I’m not a gambler – nor do I mean to suggest we’re gambling here.  I just talk funny.  : )


  35. HEB filled at 2.04.  Now let the fun begin.  Game’on Matt and MrM….


  36. Oil fell back below $60 – that led the sell-off.  OIH went screaming back to 0.5% and XLE is about flat so the market is ruled by crude at the moment.  Gold doesn’t care, still $923 at the moment.

    Volume just now hitting 50M so very slow.

    Stops/Chaps – I hate the word always but generally, yes.  As long as you can day-trade the covers then think about the math.  If you have sold 4 calls at $2 that’s $8 in coverage.  If you take one out at $2.50 you still have 3 at $2.50 for $7.50 in coverage and if you take out another one at $3, you still have $6 in coverage so just 25% less coverage than you started with but now 1/2 covered so if you add just one more contract back, you will actually be better covered than you were when you started.  Obviously there is also the upside advantage of diminishing your covers and, on the way back down, you may decide to cover with a lower or higher strike depending on your outlook.  Don’t think of stops as the end of a play, think of them as calling attention to your need to take action as holes open up in your spreads.   Ideally, it’s almost a delta-neutral strategy and you can manage it more finely to be really delta-neutral but, as a rule of thumb, taking out 1/4 of the covers at 25% is good.  Also, note that it’s 25% off the lows, not off what you sell them for. 

    Airlines/Pharm – You and Buffett.

    Funny Talk/Dstill – Ah, no problem.  I love poker too.


  37. Phil your thoughts on CAT this wk?  ….made a little juice on some 31 putters, wondering if I should take it off the table …thx.


  38. Phil:

    re: Ideally, it’s almost a delta-neutral strategy and you can manage it more finely to be really delta-neutral
    So I take it the best buy-write theoretically would always be adjusted to be delta neutral and you’re looking to make $ on theta.


  39. Interesting.
    We have wage deflation, weekly hours worked declining, residential rents declining, unemployment increasing, unemployed persons no longer eligible to collect unemployment insurance skyrocketing, commercial office rents down 7.4%, commodities finally coming down to earth.
    Hmmm How high can we go? 


  40. Oh and I completely forgot the whole alt-A reset schedule in the coming months


  41. SGR making a nice move now.  $22.50s now $2.80 so .20 trailing stop if you are still in them in the $5KP.

    CAT/Oncmed – Earnings not until next week so set stops but hopefully you collect the whole thing (if the S&P holds 900 and Dow hold 8,300 – same safety zone as anything else).

    Buy/Write/Chaps – Oh no, I’m not suggesting doing that on a buy/write.  Those are meant to be left alone.  That’s for calendar spreads, where you can actually be hurt by the callers running away and it can be applied to the put side of a buy/write but not the calls unless you REALLY like to constantly adjust things.  In a buy/write, if the calls are doing well, the puts are suffering so you already have a balance, the rest is just greed if you are not satisfied with the gains you signed up for.

    GOOG holding up well after some negative notes on them (Bing is stealing market share…). 

    HOV moving up nicely from last week’s entry.

    X up to $32.50 already!

    RIMM still $66.6….

    Damn VIX at 26 taking all the fun out of new plays!

    How high/Cafords – I think you need to turn your chart upside down (seriously) and look at the peak on the Dow of 6,469 in March and look at the "low" of 14,198 in 2007 and ask yourself how likely we are to break higher and retake that top or is it more likely we "fall" back into a normal pattern between 9-12,000 after that ridiculous spike up in Sept of last year.   None of the things you are pointing out weren’t discussed for the past year now.  You need new bad news to drive the markets significantly lower, the same old stuff isn’t going to cut it. 

    That was a good job holding up by the indexes.  Watch that 5,800 on NYSE, very important we break that in order to get things moving.  Nas needs 1,800 too


  42. Ags having another off day.

    OIH and XLE came back to 1.5% as oil bounce off $60.  You can practically hedge the market with USO puts, which is ridiculous, especially the way that low oil costs are now hurting transports.  The problem is the economic fundamentals are out of whack with all the government meddling.  Usually, you have a recession, jobs are lost, wages go lower, prices come down, demand for cheap goods picks up and the manufacturers benefit from low input costs and low wages and begin a hiring cycle again, which continues until there is near full employment and inflationary pressure builds up.  It’s a very simple cycle that has world for 1,000 years until we screwed it all up.

    SOX (268.5) and Transports (3,185) at 1.25% lines.  They need to get through in order for the other indexes to move up.  NYSE not looking happy about 5,800, RUT not liking 500, Nas not liking 1,800.  That makes the DIA $83 puts at .65 a fun play here, stopping out if 2 of 3 of those indexes break up and looking for .80+.


  43. Phil – FXP now 12.67 for defensive plays, but the Jan 20 put is higher at 9.10 and Jan 11 40 call is lower at 1.30 when compared to couple days ago when you suggested this trade – now the net entry is 20.50?


  44. Phil:
    OK.  I got confused, because on Friday you mentioned buying back puts and calls in the general context of a GE buy-write. Like I said, I could see potentially buying back the puts on a buy-write (though not necessary, due to inherent balance of the buy-write), but the calls didn’t make much sense to me.
    Then are so saying delta neutral is ideal on calendar spreads? If you’re covering a LEAP on something that you’re fundamentally bullish on (say GLD in 2011), wouldn’t you want to be delta positive overall, while adjusting your covers to prevent getting buried by them? On calendars, what I try to do is determine a % change in the trade versus the % underlying (delta on a % instead of $ basis) that I’m comfortable with. So, let’s say it’s 1.5% on GLD. I’m saying I want 50% more leverage than owning GLD naked. I then adjust my covers to maintain the 1.5%.


  45. LOL Phil – I just had to get that off my chest so I switch over to the dark side (bull).


  46. Phil How do you see CAT thru earnings and dividend on July 20 I think?


  47. UNG starting to make a turnaround…..52wk low was 11.91….


  48. What the heck just happend at GS?   At just about the moment the CFO opens his mouth, the stock (and my dear DITM calls) drop off a cliff.  Is he speaking in code?  Or at a frequency only dogs can hear?


  49. rofl this is the first one I haven’t understood in a while so at least I am learning!
    GS/Sgr- That would be the Aug $145 puts, now $5.80, covering with the July $150 puts, now $2.65 so net $4.15 on the entry and it would be prudent to stop out 1/4 of the July puts at $3.35 and 1/4 at $4, which would leave you 1/2 covered if GS dips down.
    We are selling the July 150′s and buying the Aug 145′s?
    So we are bearish on GS here and believe 150 will hold as a near term top?
    So we stop out of the July’s progressivley if GS breaks above 150 (ie we arew wrong)?
    Sorry for asking for the third explanation, I do try hard to work it out myself.
     


  50.  Phil:
    Considering selling my UYG shares and buying more RF.  RF seems to be better for call writing.  If you had to choose between the two for a portfolio which would you choose based on pro/cons of each?
    Thanks!


  51. Phil,
    What do you think of POT/AGU/MOS at these levels?? Are these buys??
    Also, can I get your opinion on FSLR??


  52. Here’s a good chart showing inventory to sales ratio – a better indicator than just inventories and you can see we’ve got a long way to go to get back to "healthy."

    [InventorySalesMay.jpg]

    FXP/Concreta – That’s not too bad but I’d rather enter the FXP cover now by selling the Aug $12 puts naked at $1, which is (assuming $5 in net margin used) a 20% retrun for the month.  Just keep doing that until they are put to you and you don’t have to mess around with the rest.  However, this does not give you catastrophe protection since the upside is just the $1 no matter how far China falls.

    Deltas/Chaps – I’m not saying delta neutral as an absolute.  It’s about maintianing the delta of the front-month callers as taking them out at  those two stages knocks down the net delta as it’s increasing.  While you may be delta-positive when you initiate a leap spread, you will likely lose that advantage as the front-month moves into the money.  Your system is fine, it’s not something you want to overthink.  It goes back to the landlord/tenant relationship.  If you have a long-term lease of $1,800 for 18 months (your premium) with an option to buy at $20,000 with the current value at $20,000, then your primary goal should be to collect $1,000 a month.  Each month, you need to determine the best way to get your $1,000.  Sometimes you may be bullish and want to go out of the money or partial covered but sometimes you may be more bearish and want to cover fully and at or below the money.  That’s why math rules aren’t always the way to go – it depends on your 30-day outlook every time. 

    Dark Side/Cafords - May not be the quick and easy path just yet but keep your options open!

    CAT/B1 – They kicked ass last Q and expectations are still low but it’s a real wildcard as they are subject to currency fluctuations, which did not favor exporters last Q, as well as financing issues for their customers.  I doubt the dividend is in danger as they have cash and cash flow.  In general, I stand by my $30 bottom call of last week but I would hate to pay the extra $2…

    UNG/Pharm – Russia is talking about cutting off Europe again but that would be crazy as we’d be happy to send them our excess. 

    GS/Dstill – Greed kills! 

    GS/Steve – You’ve got it.  We’re bearish on GS once the excitement wears out but we don’t want to get burned and, since the July $150 puts are an easy roll to Aug that’s below us, it’s a reasonable risk/reward play. 

    RF/Jofori – Well my objection would be the lack of diversification.  UYG is much less likely to get chopped in half suddenly than RF.  You say "better" but RF at $4.09 has a .78 sale on the Aug $4s for net $3.31/3.66 so 20% if called away and 10% discount if put to you.  UYG at $3.76 has a sell of the Aug $4s at .75 for net 3.01/3.51. which is 32% if called away and a 6.6% discount if put to you.  Assuming you are bullish (otherwise, why buy either) the dealbreaker has to be the 50% additional profit if called away at $4. 

    Nice on those DIA puts already!

    Ags/HP – No because it was a good crop season (tons of rain in June) and people are cutting back on food as well as fuel.  The big deal is people are eating out less and restaurants waste a lot of food so there’s a big impact on demand if people eat just 10% more meals at home.  FSLR is a totally crap joke of a company that should be shorted whenever they dare to pick their ugly head over $190 but, under there, it’s nothing more than a trading vehicle for Cramer and other criminals to push people in and out of.  That, of course, is JMHO!  8-)


  53. Oh I see, we want GS to stay close to 150 thru friday to burn off the premium in the short put to pay for the long put. Right?
     


  54. LOL!! I ride the DIA  $83 Puts, just in time.  In Out $.62 / $.71 in  $14% in just 15 minutes. Have to take profits. Great timing Phil. I will be looking for a reentry …or not :-)


  55. you think getting out of DIA puts while we are bout even makes sense? We obviously didn’t hold the levels but …
    And AIG, i didn’t cover when i shoulda but it’s having trouble with 14.90.


  56. I find it very interesting that while the Naz surpassed its premarket pump today (intraday), QLD and QID have not surpassed their premarket pumps.  QLD and QID are still within their high and low for the day, respectively.  So my question is, if they are both ultra etfs… shoudn’t they have both easily taken out their hi (QLD) and low (QID)?  What am I missing here?
     
    I just think it’s an illustration of one of the many ways they have to f with people and take their money.  In this case, technical traders.


  57. Phil – QID play form a while ago – Jan 34 Call, Sell Jull 33 Call.  What strike call in Aug is the best play to make our income for Aug.  Thx.


  58.  Phil/RF:
    Looks like UYG is the way to go.  Are dividends a factor in this at all?  Would now be a good time to sell the UYG $4 put/calls?  Thanks for helping me "walk-through" the decision process.


  59.  Phil
    Looking for an entry to scale in to AFL, would you go with buy writes at $31 with Aug puts and calls at $4.90, or just keep selling naked puts? thx


  60. My appologies!  The high and low I mentioned previously was NOT a premarket pump.  It was during the second 5 min interval after the market’s open.  My eyes played a trick on me.  But the point I’m trying to make is still valid.


  61. Yes.  Greed kills, PD.  But its Greedman Stacks, baby!  I hate ‘em (though the stock used to just print money for me), but they can’t give me a little somethin’ somethin’ on the day they rock estimates?  I guess I may hold the August 125 callsfor a couple weeks.  They can’t do $152 by then?  Call me crazy (please.)  Oh well – Onward.  Anyone got a GNK or BDI-related play in mind?  


  62. VIX : VXN ratio =   25.61:29.82 = 0.8588  Too low.
     
    Very probably we will see action soon.


  63. Are there any Options for the vix


  64. Phil,
    No move by 1:00 PM is a bearish signal?


  65. yes. But watchout, they do not follow same as stock options.
     
    http://finance.yahoo.com/q/op?s=^VIX


  66. GS/Steve – Yep, we’re betting our premium holds up better than theirs as well as GS pins $150 into earnings and then maybe sells off. 

    DIA/Spider – Good discipline, I got stopped out too but I had scaled in coser to .60 avg so easy decision for me.  As to reentry – we need to see if they break out this time but now we have the "feel" for the movement.  It’s like surfing the same beach over and over, it gets easier when you’ve gone a few times.

    Ultras/Matt – There’s a bit of a supply and demand issue on the intra-day pricing.  Also, the VIX is down 2.5%, which is cutting them both back. 

    RF/Jofori – Sure dividends are a factor and if the qualifying date is within your range you need to factor it into costs for each but mostly it’s a long-term play over time, not a one-month event. 

    AFL/Deano – I like them!  They just got a nice army deal with UNH but UNH is just lying there so I’m quesitoning the real value.  As a new entry, I generally prefer just selling naked puts unless I think the stock is really going to run away on me and I really want it long-term.    With AFL, you can get $1.30 for the Aug $28 puts, which is a great one-month return on the naked sell as it returns $1.30 on (assuming 50% margin) net $12.70 or 10% vs buying the stock for $31.31 and selling the Aug $30 puts and calls for $5.05 for net $26.26/28.13, which is a 9.6% discount if put to you and 14.2% if called away so not much advantage to making the larger commitment with a 10% higher put to price. 

    GS/Dstill – I will say crazy.  What better catalyst can you hope for than a 30% earnings beat?  If the market heads south, they will follow for sure and I’m not sure they are going anywhere even if the market goes up.  On GNK, we like TNK and DRYS better, especially TNK with the dividend.   The buy/write on GNK is prety attractive though with the stock at $20.61 and the Aug $19 calls at $3 and the Aug $18 puts at $1 for net $16.61/17.31, which is a nice 16% discount if put to you and 14% if called away, not bad for a month… 

    VIX/Spider – Actually I said on the weekend that the VIX may be correcting back to 20 and that means we could be in for a long consolidation period.

    VIX/Miracle – Yes there are VIX options, try $VIX as a symbol if VIX doesn’t work.

    No move/Maxt – no, flatline is good if we can hold it.  We’re working off the urge to "correct" yesterday’s move and that can set us up for a leg up if we get some good news.  Also, the spin tomorrow would be that we shook off weak retail sales and an inflationary PPI so flat would be fine and, of course, we are still very stickable with volume just now approaching 100M at 1:30.


  67. Europe managed to finish the day up about a point but off the highs.  Keep in mind that, on all indexes, if they were down about 1/3 off the top then we expect a 20% bounce just to be weak and that’s 6.6% up from our bottoms.  Any failure along those lines is "dead cat" territory. 

    Still flat with a chance of stick this afternnon but even better if they let it drift into the close and stick it in the morning on whatever news they can find an excuse for. 

    $59.60 oil at the moment and gold is frozen at $923.90. 


  68. Phil do we change expectations on DIA’s looking for less than .80?


  69. Phil
    On my dividends in July, I have a LYG NON-QUALIFIED DIVIDEND for $423.on my 500 shares! Is this right?


  70. Ok, crazy then.  I’m gonna end up bonin’ myself here.  But it’s a small-ish stake.  I’m selling the July 155 calls just to gain some green on the August 125.  I’ll dump ‘em soon.   Thx re dry bulk.  Man, I pine for the days of the $1 per share GNK paid for a good long while.  I $-cost-averaged and sold calls on several thousand shares so many times to bring my costs down that it felt like the only thing I ever traded – finally just closed it all out in pieces.  I’ll use the buy-write on the dividend payer TNK, I think.  For now, good riddance Peter Geogiopolous: too rich, too good lookin’ and too Greek to me.  


  71. Sorry — which NYSE index are we especially watching? 

    $DECN
    NYSE (Declines)

    $DVOL
    NYSE (Down Volume)

    $NHIN
    NYSE (New Highs)

    $NLON
    NYSE (New Lows)

    $TICK
    NYSE (TICK Indicator)

    $TVOL
    NYSE (Total Volume)

    $TRIN
    NYSE (TRIN Indicator)

    $UNCN
    NYSE (Unchanged)

    $UVOL
    NYSE (Up Volume)

    $ADV
    NYSE Advances

    $NHB
    NYSE BETA INDEX

    $NYB
    NYSE Bond Advances

    $NYA
    NYSE COMP INDEX OPT EUROPEAN ..NYG

    $NYX
    NYSE COMPOSITE INDEX SETTLEMENT

    $DEC
    NYSE Declines

    $NF
    NYSE Finance Index

    $NNH
    NYSE New Highs

    $NNL
    NYSE New Lows

    $TRD
    NYSE Total Volume

    $NV
    NYSE TRANSPORTATION

    $NUN
    NYSE Unchanged

    $NNA
    NYSE UTILITY INDEX

     
    I’m not having any luck with symbols NYSE or $NYSE.


  72. As a fairly new investor, Its wacky in this market. Up and then down and there it goes again. A day or two in between theres solid stuff but by that time everything I had is gone. But then again its back to these games. After losing quite a bundle (too embarassed to tell you) I fee like throwing in the towel pretty soon.Phil, I see your plays are winners but I can’t seem to follow them and so I end up doing my own cr-p. I am a slow learner and maybe once I feel comfortable understanding  your tactics (or the market starts behaving-long shot) I’ll come back.


  73. Okay, NYA (or $NYA), I take it.


  74. Miracleniss = You have to take it easy, no be impatient, look for several reasonable gains, even small ones and always have a stop loss defined before you enter a position. Stay away from gambles, like CIT, AIG, ex-GM and so. I should also include this "less-than-one-week-into-expire plays" close to gamble.  You enter after looking some technical indicators and you go out very fast if you are wrong, or you ride and take profits fast.
     
    I’m very sorry by reading you taking loses. What i can say, its also part of the learning. Sad the amount is not small. I have been there back in the bubble tech. I was young and inexperienced. Lost 1/3 of my porfolio.  I was so upset.  But i take the lesson, start learning and always with one thing in my ming: I can lose some times, but i will never, ever take a hit like that. And I proposed myself to be in the other side of the trade for the next bubble.!!!  So far, so good.
     
    The above only come after a big hit. So, in some way, I have to consider that loss the price of learning and the cost of changing my attitude.  – Spider.


  75. Pelosi to tank the markets ?


  76. Does anyone know did GM or GMGMQ stop trading?


  77. got me a little HEB too. we like a family.


  78. Will we take out 1800 on the Naz today???


  79. Obama speech later – that will be interesting!

    DIA/Colberg – Oh yes, looking for .80 and not getting it means taking .70 after a while!  If you enter the spread with a nickel stop and make a nickel and get out, it means you can afford to take another chance later for free.  Always keep in mind that when we’re only looking to make .15 on a trade, making .05 is not too bad.

    LYG/Drum – I have no idea what those guys ended up doing.  There was a question as to whether the ADRs would get paid so please let me know what your broker says on those.  We sure got punished on price as if the dividend got paid but you are the first person I know who saw it show up in an account.

    LOL Dstill!

    NYSE/Swell – I don’t watch those during the day as it’s too much data.  What I do like to watch is new highs and lows and I use Dow volume.  After hours, I’m very interested in up and down volume and Cap keeps us up to day on TICK and TRIN, which he likes to watch and is very important when over to extremes.

    Trades/Miracleniss – If you are faily new to trading, jumping in on short-term trades without cover is nuts.  You should stick to hedged plays like in the $100K Portflio or things like the buy/writes, which I summarized over the weekend.  There is a strong allure to going for the high-risk trades but if you don’t have a trading discipline (which comes from experience) you can pick the wrong entries and exits way too often.  As we say in the new members guide, it is best to paper trade until you get the feel for how options act, which are very different from stocks.  First and foremost, you have to identify the kinds of trades you are comfortable with.  We make all kinds of trades here, but not every trade is for everyone.  You need to know what trades fit your risk profile as well as what fits in your overall portflio and, if you are not sure, ask – that’s how you’ll learn.

    Oil finishing down at $59.38 for the day.  OIH up 1%, XLE up 1%.  Gold still at $924.10.

    INTC Jan $17.50s for $1.28, speculative naked call with earnings tonight.

    GM/B1 – They do look halted.

    Now we’re back at that sweet spot for shorting the DIA $83 puts at .63.  A little more dangerous now with Obama coming on TV but I’ll offer .60 and figure out at .55ish if S&P breaks 905 and Nas breaks 1,800 and NYSE pops 5,800 (2 of 3)


  80. Thanks for the support spider. I will tell you some of my stupid mistakes. Ask and bid! That could sometimes put you in the red too much right away. How can they make it where you buy the option at .15 and its actually only worth .05 after buying it. Another stupid mistake was instead of buying an option for .05 for example, I forgot the zero (.5 obviously fifty cents). I am also too optimistic. I almost always buy call options. Another big booboo is that I didn’t put a stop market on my options and so I would watch them decrease by the minute. All in all I have been doing this for only about 4 months tops and lost about 5 grand a month. I feel ashamed but thought the mistakes I made could be beneficial for another new guy in making sure he doesn’t do the same.


  81. In again with the $83 DIA puts.  I will use as stop my previous profit. Too risky. Special if we have a stick today.


  82. PD – Ur buyin’ or shortin’ INTC?  Should I know that "naked" means ur selling?  Thx, DS  (I ask ‘cuz I’m not Level 4 at ETrade yet – a mere Level 3, so no naked sells for Daddy yet.)


  83. nice prediction matt!!!!!!
     


  84. I really liked it when Obama was travelling; we did not have to endure his daily preening before the cameras with his teleprompter.


  85. Oh boy Nancy first…Then the Boss the prez.


  86. Come on.  Gimme a little bump on the ERX Oct 25 calls – no greed.  I swear I’ll get out even – ok, maybe a little green – if you get me to $4.80 today.  Or should I ride for a while?  


  87. Pharmboy, Ilene posted an article from some trader named Allan over the weekend. His sight was really pumping a penny stock called Nanoviricides (NNVC), which makes me very leary…    As a biotech/pharma company, do you have any opinion on this company???


  88. Phil please- on the INTC, b 4 i do something stpd. It sounds to me like you are selling a call naked. Is that the play?


  89. GS Put spread…  I got into the Aug $145/July 150 spread this morning.  Interesting how the spread has held at $3.00 for much of the day, but over the past hour as GS drifted DOWN, the July 150′s actually increased in value and took the spread to about $3.20 before dropping back to about $2.90 and it is now drifting back at the $3.00 range.  Guessing this is due to a fluctuation in the VIX… is it indicative of any underlying buy-sell pressures on the stock or am I looking for something that is not there???


  90. mirachael – i bought some of the NNVC. Not as much as he recommended. Up a couple cents today.


  91. Get Blinky and her band of crooks off my TV screen !!
     
    Yeeeaaaagggghhhh !


  92. NAK kicking ass since entry last week.

    $5KP YUM ratio backspread:  Buying 4 Aug $35 call at $2.20 and selling 6 Aug $37 calls for $1.15 for net .48 on the $2 spread.  Since you make 2x $1.52 before having to pay back the 3rd caller, you have $3 of leeway before taking a loss so YUM has to hit $40, just off the all-time high, in order for this trade to take an upside loss (and you can adjust).  On the downside, you need to retain just .48 in value ($35.48) to break even.  


  93. miracleniss  = The bid and ask. Well market is computer trader paradise today. The provide liquidity, but a sort of bad one.  They are playing games with us. Just stick to your planed buy/sell targets. Never place a market order.
     
    Sure your comments will help a lot of people, IF they read it Before jumping into the market.  And my point is that YOUR post will help YOURSELF.  Take a break, stop trading, read some books, and even read PWS site. Search for the K1 strategy in the education section. Print it !! Simulate trades, find what is working for you. And come back sronger than before.  In mean time, you maybe want to leave some invest like the ones in 100k portfolio, (just a bit) and remaining in cash for opportunities.  – Spider


  94. Cap, LOL!


  95. Mistakes/Miracle – You can make the same mistakes with one contract as you do with 10 and you will learn just as much.  Just don’t try to "win it back," learn to make 10% a month first and the rest will come.  Once you realize that 10% a month is just 0.5% a day, you will get a lot better at both taking profits off the table and stopping your losses as you gain perspective. 

    Did you get .60 Spider?  No fill for me yet…

    INTC/Dstill – Buying, that was naked as in not covering.  Usually we say naked in relation to selling an uncovered put but it’s also very rare we take a leap with no cover so I wanted to specify.

    ERX/DStill – Don’t forget we have inventories tomorrow and API inventories tonight so we could drop oil to $48 before the bell tomorrow if we have a big build.  I wouldn’t risk it but that’s just me….

    GS/Mirachael – Don’t forget the front-month is more actively traded so it will jump up and down more.  


  96. Be careful on DIA puts, Dow looks like it wants a stick save.  If you want to ride out a move up you can sell 1/2 the $84 puts at $1.06, which have a .56 delta vs .38 for the $83 puts so it mitigates about 75% of the damage on a move up but you’ve gotta be good with your timing!  Still, Nas is below 1,800, RUT 496 and NYSE 5,799.  We expect to be close to get our fill but we hope for no cigar.  Of course, fear of the stick takes hold here


  97. DIA spread of $83 puts for .60 and DIA $84 calls for .60 can be fun as a 200-point move in either direction over 3 days pays off but very possible a sharp move in either direction will let you take one off the table and have a free ride on the other side


  98. Re- LYG – called optionsxpress. said $423.87 put into my account on July 2 (I’m not too sure it was there at that time).
    anyone else in LYG brokered by OX have this entry.


  99. DIA $83 PUTS: I got them.. but i worried to miss them and jumped in  at $.62 :-(     Sice i have 8 cents matress….
    Im looking if the stick save comes, or the anti-stick comes… probably i kill the trade. This thing will lose $.13 a day. out of the money.


  100. DELL is just sucking today! 

    JPM earns Thursday, lookign at GS I like the Aug $38 puts for $4.05, selling the Aug $35 puts for $2.22 for net $1.83 on the $3 spread.

    3:30 and no stick.

    LYG/Drum – Thanks, I knew there should be something coming!

    DIA/Spider – I look at it as, if I overpay by .02 6 times, I lost 20% already so that wipes out one of my 4 or 5 anticipated wins and takes me from 5-1 to 4-2 or from 4-2 to 3-3 so what’s the point of paying the extra .02 – better off skipping the trade than not getting your price


  101. mirachael – i noted yesterday:  Morx – never heard of them.  Another company in the nano pathway for treating influenza and other viruses.  Mjr holder has been selling small lots since March. Worth a flier if you like to meddle in the penny stocks…..
    I have entered into a  few of these penny stocks, but only when I understand the technology or target they are after.  Not playing these guys.  I like CRIS better, and they are 1.39 or so.


  102. Hello Phil;
     
    About INTC, are we talking about pure speculative here ? your not a gambling man, niether am I, so what are you basing this on ? I need a floor to stand on :)
     
    thanks
    David


  103. Okay this may sound like a dumb question but how can I put a stop market on any options or stocks without having an account value of $25000? Since the price may drop and trigger a sell, they tell me that I need an account value of at least $25000 since I would be called a day trader.


  104. Alright – dropped ERX Oct 25 calls at 4.60, PD.  You win, greed loses.  ;  )  No rush here as we go into final 15 minutes, but since I’m going to be a stubborn SOB on my GS August 125s (and at least let them run thru this week’s expiration – since they cover my new GS July 155 short calls – which will surely expire worthless), any thoughts on a longer-term buy-write with GS that pays enuf in divs (mere 1% yield?) to make a long play attractive?  I thought I was done with GS 18 months ago and am being sucked back in on the option plays.  Save me!  I’d prefer not to type GS ever again if I can avoid it.


  105. NFLX 45 Jul09 options are flying…..look like someone did a ‘lil calendar call spread at the 45s.  New speculation on AMZN and MSFT are heating up for a BO.


  106. Pharm, thanks… I am leary of penny stocks and not venturing near these based on Allan’s recommendation and the pump-job that they will net you $1M over the coming years.  I would have looked deeper if someone here in the Phil’s World had confidence in the pick… but seems that is not the case…


  107. It will be interesting to see if DELL losses are HPQ gains.    Dell has been going down on increasing volume but HPQ has had decreasing volume on their decline.   HPQ does not report until Aug 18.  Might be a good speculative play against DELL.


  108. INTC/Micro – At $1.28, even if Intel has a poor report, I’m comfortable rolling down (cheaply) and selling front month calls to catch up.  I’m fairly certain they’ll hold $15 (200 dma) regardless and the roll to the $15s is now $1.30 but should drop to about .75 for a net $2.05 entry on a $1.30 $15 option with Aug – Dec to sell (5 months) and get my .15 per month back.  It’s a worst case I can live with so I like the play. 

    Stops/Miracleniss – I don’t like hard stops anyway.  Stops should be mental, you should know when a position is at a decision point and take a hard look at it, leaning towards selling but always make a decision.  Like just now the DIA spiked up and down, could have triggered stops on both sides but it was so fast I ignored them.  If you set those in the computer, they’ll trigger on you every time.

    GS/Dstill – Well you are sending mixed signals asking for a play…  I think they are lucky and their luck will run out one day but the premiums are good so I’d go for picking up $15.25 for selling the Aug $150 puts and calls against the Jan $150 puts and calls at $35.97 and just roll myself to better positions on whichever side goes against me (cheaper) to widen the long spread over time.  If you spend $7.50 on each side right now you can move to the Jan $135 calls and the Jan $160 puts so that’s a $25 spread for net $20.72 in the first month.  If you can widen the spread by about $10 per month that’s a $50 spread at expiration and hopefully you can roll the sold puts and calls to keep them in between. 

    NFLX/Pharm – AMZN can’t buy them as the tax issue would blow NFLX’s model.  I’m not sure if MSFT really would fare better and what the hell does MSFT want to get into that business for? 

    HPQ/Steve – I’m not sure there is a winner in that space.  Let’s see what some of the other guys say. 


  109. Mixed signals?  I’m an addict, baby!  And, boy, was this a fun day.   I have no idea how playing in the markets with you guys will mesh with running a business – we’ll just see what else I can delegate.  Managment theory of value all the way.   Thanks re GS and all.  DS


  110. Was that the bell already?

    OK, that was actually perfect, held up all day, not too fake looking.  Volume 188M so low-average and Financials made 1.25% along with SOX and Transports so not bad technicals yet still below our goals.  Tomorrow is going to be a real Which-Way Wednesday! 


  111. Housing Bail-out…   We’d be so far ahead if Govt used Phil’s housing bail-out plan, but it looks like they are coming around to a castrated version that will only prolong the agony…
    NEW YORK, July 14 (Reuters) – U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration’s thinking said on Tuesday.
    Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.
    Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.
    As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said. (Reporting by Patrick Rucker; Editing by Diane Craft)


  112. miracleniss  – Any time you make more that 3 day trades (buying and selling same security in a day) within 5 business days duration, you will be called as a pattern day trader (look up SEC rule 2520) and you would be required to maintain atleast 25K in your trading account.
    You can look at swing or other short term trades if you dont want to get classified as a PDT.


  113. Leaps/Covered Calls:
    Hi, Phil & All: We’ve had some interesting discussions on Leaps/Covered Calls last Friday & weekend.  I understand most of it.  The only thing I don’t understand is why waiting until the price drops before selling the calls.  E.g., "XYZ $20 calls now $1.65, sell 1/2 if it drops to $1.25".  Why not sell now at $1.65?  Using Phil’s analogy to rental property, why don’t I rent out at $1650/m?  Why do I want to wait until it’s down to $1250/m?


  114. DIA Puts: Killed.  Even is a small position, I have to stay like a watchdog on the screen. Was .63 in .63 out. 
     
    Im late for YUM. I will keep in radar.
     
    GOL airlines. That ones git an accident in 2006. A mid air collision with a small plane. The big one (GOL) come down in amazonas, and the small one landed safe with a wing tip damage. Impossible to forget that.  Besides that, I understand they are a good company. Impossible for me to give a fair value. Airlines where hit big: Oil, recession, now you have to add the A-H1N1… Probably airlines  will come up from ashes.


  115. Looking for some possible crazy action on INTC AH when it starts to trade.   Seeing BS bids of $22 and $24 flashed.
    I can’t imagine we see anything like that ;  nope, just started at $18


  116.  INTC beats estimates by almost 2-1.   Already up a buck after hours.   What’s that look like in the morn?  


  117.  dstllwe, there is no telling what the am will look like for intc.  afterhours (post earnings exhuberance – up or down) is quite unreliable.  


  118. Sorry for the delta fixation.  With regard to INTC, tho, what’s the thinking for or against looking at Jan 10 DITM calls with .85+ delta versus the play we made today? Just curious.  


  119.  thx, jo


  120. Intel Earnings
    Breaking News – WSJ : Intel reports loss of $398 million after recording $1.45 billion charge for an EU fine. Revenue fell 15%.
    Breaking News – CNBC : Intel Reports Profit of 18 Cents a Share, Excluding One-Time Items; Stock Leaps in Late Trading (Click for Story)
     
    Why the different interpretations ? LOL


  121. INTC – that’s going to be a nice winner – Congrats to the leap players! 

    Housing/Mirachael – I guess I should update my housing bail-out article before they waste $50Bn…

    Waiting/Cwan – Think of it as a stop.  We don’t WANT to cover at all but, if it turns out we’re wrong and the stock goes the wrong way, there’s no need to go down with the ship and we cover all or half.  On the rental front, let’s say I”ve got a $12,000 annnual lease and I usually get $1,000 a month for rents but in June, I decide to hold out renting because I think by June 15th I’ll get the summer rate of $2,000 that I usually get in July and August (kind of like earnings premiums).  So I wait and wait 2 weeks with no nibbles at $2,000 and then I see things renting out for July at just $1,500.  Rather than just sit there, if I can get a tenant in at $1,500 now, I should take the money before things get worse… 

    DIA/Spider – That’s the way to play it, you win or you don’t but the idea was not to marry the position.  I agree on airlines – man will continue to fly…

    YUM got killed on their outlook (they beat earnings), down to $34.75 so ka-ching on the sold calls!  This should go well too.

    INTC/Dstill – With in the money calls the downside risk is far greater.  As I said above, I’m happy to DD and roll from the $17.50s down to the $15s if I have to but we’ll get an excellent gain off the $17.50s as is and we didn’t risk too much to get it. The magic of delta is that it changes and actually improves while the stock is going your way and decreases while it’s going against you.  If you manage your entries you can still capture most of the gains while avoiding the crippling losses. 

    Different/Ramana – I agree with CNBC, the fine is a one-time charge not relevant to their ongoing business. 


  122. Phil, Thanks for the INTC leaps, average entry of 1.277 Sell into the initial excitement, Thanks Jamie


  123. That’s a question


  124. Hi Phil,  I sold July 26 ERX calls last week as a small hedge and due to traveling I missed the chance to take them off at 75% gain.  Now, ERX seems to be back on a tear again and I’m wondering if I should grab the stock  just below 26 and hold it until expiration or just avoid tieing up the capital and by option back tomorrow for a small loss.


  125. Oops.  Forgot I had those DELL July 13s buried in a custodial account portfolio – so didn’t get out at $.10 – sitting on them at a couple pennies now – not even worth the txn costs to dump — esp if there’s any chance INTC bumps the calls into dbl-figures again between now and Friday.   I’d be happy for 10 cents now.  What say ye?  


  126. INTC/Jamie – Well it depends if we have a whole big market move up or if it’s just INTC.  Also, keep in mind that selling into the excitement includes the idea of selling covers on leaps so just remind me in the morning and we’ll formulate a plan but, when in doubt, taking a 50%+ profit off the table after owning something for about 2 trading hours is never a bad idea is it?

    ERX/Smasher – I don’t know what they are so excited about today.  I haven’t seen it yet but the API report must not have been too bad as oil went up about .50 after hours but that’s not much to rally on.  I’d say yes to using $26 as your on/off switch for covering the calls by buying the stock, not much to lose that way unless you have something better to do with the money and just want to be out.

    DELL/Dstill – I agree there’s hardly any point in taking .02 at the off chance you get a dime but do take that dime if it’s offered. 

    $100K Portfolio Update is up!


  127. Phil / INTC : does the 1 time fine really not impact their business model in Europe?  Just thinking out loud here.. the fine, which I know little about, was probably because of some unfair business practice which INTC was able to profit by.  Assuming the fine works, and they cease and desist, whatever profit they were realizing from the practice is now out the window.  Seems like a headwind for future earnings to me..
     
    Phil / Reminder:  Can you please repeat this occasionally for those of us with very short term memories! 
     
    Mistakes/Miracle – You can make the same mistakes with one contract as you do with 10 and you will learn just as much.  Just don’t try to "win it back," learn to make 10% a month first and the rest will come.  Once you realize that 10% a month is just 0.5% a day, you will get a lot better at both taking profits off the table and stopping your losses as you gain perspective


  128. The more things change.. the more they stay the same.  QLD is 37.79 in AH trading right now.  A whole 10 cents above where it was at close on opt. ex. last month. 


  129. ES_F popped to 910. Why are the futures up after the close? On Intel news?


  130. Good Morning Phil & all


  131. Asia/Pacific Markets    Wednesday, July 15, 2009
    (The following is from Yahoo, please confirm with other sources)   

    Australia All Ordinaries*         3,917.50        58.70       1.52%
    Nikkei Average*                     9,269.25          7.44       0.08%
    Shanghai Composite*             3,188.55        43.39       1.38%
    Hang Seng*                         18,258.66       372.93       2.09%
    Seoul Composite*                  1,420.86         35.30       2.55%
    Singapore Straits Times*        2,389.42         78.87        3.41%
    Bombay Sensex                  14,286.94        433.24        3.13%
    Baltic Dry Index                     3,097.00        122.00        4.10%

    * at Close


  132. Asian Markets Cheered by Intel, Yen Takes a Breather

    Asian markets extended gains Wednesday as blockbuster results from tech bellwether Intel seemed to augur well for the U.S. earnings season and for consumer demand globally. Hong Kong’s Hang Seng Index also managed to breach the 18,000 level. The results from Goldman Sachs and Intel, offset a report showing U.S. retail sales remained sluggish, with the headline figure supported by a jump in car and petrol sales while core sales were lower for a fourth consecutive month.

    Japan’s Nikkei closed flat, giving up earlier gains made on upbeat results from Goldman Sachs and Intel after investors grew cautious ahead of more earnings in the United States and Japan. The Bank of Japan voted unanimously to extend its corporate funding support measures beyond their planned expiry in September, and it kept interest rates on hold. The impact was limited as the moves were within expectations.

    South Korea’s KOSPI finished 2.6 percent higher, powered by a rally in chipmakers on Intel’s strong results and sharp gains in financial and transportation stocks.

    Australian stocks ended up 1.5 percent, hitting a two-week closing high as strong  earnings from Goldman Sachs revived investor appetite for risk and boosted shares.

    Hong Kong shares gained 1.6 percent, to move above the 18,000 level.

    Singapore’s Straits Times Index was up 1.6 percent with banks leading the advance.

    China’s Shanghai Composite Index added 1 percent, held up by on hopes for a solid economic recovery, backed by China’s fine-tuning of monetary policy. Annual growth in China’s broad M2 measure of money supply surged in June on the back of breakneck bank lending ordered by Beijing to pump up the world’s third-largest economy.

    Bombay Stock Exchange’s Sensex closed at 14287.98, up 434.28 points or 3.13 per cent. Markets surged for second straight day taking cues from positive global markets and encouraging comments from the Finance Minister. Revival of monsoon in some parts of India also helped sentiments. The rally was led by realty, metals and power stocks.


  133. Techs Propel Euro Stocks to 2-Week High

    European stocks rose to a two-week high on Wednesday, as forecast-beating earnings from Intel, Johnson & Johnson and Goldman Sachs reassured investors on the outlook for corporate profits. The FTSEurofirst 300 index of top European shares was up 1 percent at 848.36 points, gaining ground for the third consecutive day.

    Tech stocks were among the biggest gainers, with the DJ STOXX European technology index up 2.6 percent. Nokia climbed 4.1 percent, Infineon advanced 4.1 percent and STMicroelectronics put on 4.5 percent.

    Alcatel-Lucent, upgraded to "buy" by Banc of America Merrill Lynch, surged 7.2 percent.

    Banking stocks were in positive territory, with Deutsche Bank, HSBC, BBVA and Societe Generale up 1.2-2.7 percent.

    Mining and steel stocks also gained ground, bolstered by rising metal prices. Xstrata gained 3.3 percent, Rio Tinto added 2.7 percent and ArcelorMittal climbed 2.8 percent.

    Around Europe:
    FTSE     4,305.64     67.96         1.60%
    DAX    4,873.07     91.38         1.91%
    CAC     3,135.77     53.90         1.75%
    SMI    5,450.18     85.13         1.59%


  134. Oil Rises Above $60, Confidence Up for Now

    Oil rose above $60 a barrel on Wednesday, supported by data showing a fall in gasoline stockpiles and after strong company earnings lifted expectations for economic recovery.

    U.S. crude [ 60.49    0.97  (+1.63%)] for August delivery rose. The U.S. contract settled at $59.52 a barrel on Tuesday, adding to a decline that shaved 11 percent from the price last week in the steepest weekly fall since January.

    London Brent crude [ 61.85    1.00  (+1.64%)] was also higher on the day.

    The oil market got a boost from a report by industry body the American Petroleum Institute late on Tuesday, which showed a drop in gasoline stockpiles, as well as in crude inventories. But traders will be waiting to see whether U.S. government data for release at 10:30 am New York time will provide confirmation. A Reuters survey of analysts predicted the figures would show rises in distillate and gasoline stockpiles and a fall in unrefined crude.

    News Nigeria’s main militant group had agreed a 60-day ceasefire was theoretically bearish for the oil markets, but traders had yet to be convinced it would translate into a more stable environment for oil production.


    Dollar Down, Risk Demand Rises on Earnings View

    The dollar fell on Wednesday, hitting its weakest against a basket of currencies in nearly two weeks as currencies seen as higher risk benefited from upbeat earnings Goldman Sachs and Intel. The yen also struggled while the euro gained, boosted by higher European shares. The euro brushed off a 0.1 percent annual fall in euro zone inflation, which confirmed that price risks in the region are nil at the moment. Analysts said risk appetite was rising on speculation other U.S. firms may post solid second-quarter performance after reports from the two U.S. powerhouse firms exceeded forecasts.

    The euro [1.4053    0.0088  (+0.63%)    ] traded higher against the dollar, near the day’s high around $1.4070.

    This helped to push the dollar index down more than 0.6 percent to 79.559, its lowest since the start of the month.

    Euro/dollar implied volatility fell, with one-month vol decreasing to around 11.0 percent according to Reuters data, its lowest since Lehman Brothers collapsed last autumn.

    Lower volatility was partly seen as a reflection of the pair’s inability to significantly break out of the $1.38-$1.42 range in which it has been stuck since mid-May. Analysts say this may help to limit demand for carry trades, which tend to pick up in low-volatility conditions.

    The Australian currency [0.7986    0.0058  (+0.73%)   ] rose against the greenback, while the New Zealand dollar [0.6418    0.0031  (+0.49%)   ] also rose versus the U.S. dollar.

    The euro rose against the yen [ 131.52    0.89  (+0.68%)   ] as the yen slipped across the board, continuing to relinquish gains seen last week.

    Sterling [  153.26    0.80  (+0.52%)   ] and the Australian dollar [  74.72    0.59  (+0.8%)   ] each rose roughly half percent against the yen.

    Focus was also on China’s currency reserves, which ballooned to a higher-than-expected $2.13 trillion last month. Some analysts said China’s massive reserves pile — by far the biggest in the world — may raise pressure on China to allow the yuan to appreciate against the dollar, while also keeping the issue of reserves diversification on the front burner.


  135. Gold holds above $925, ETF slips

    Gold was at $925.80 ounce at 0301 GMT, up 0.1 percent compared to New York’s notional close of $924.60.

    The world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, said holdings fell to 1,094.54 tonnes as of July 14, declining for the first time in about a week. Holdings were down 15.27 tonnes, or 1.4 percent.

    n contrast, the world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, said its silver holdings rose 0.5 percent to hit a record.The New York-based trust said it added 42.07 tonnes, to reach an all-time high of 8,766.93 tonnes as of July 14.


  136. Good morning folks!

    Looks like a fun one, Don’t forget we still have to get past CPI, Industrial Production and Empire Manufacturing but, if those come out good, we could be on rocket power today.

    Futures look good at the moment, up about 1.5%, oil up 1.5% at $60.50 and gold touching $930 so we nailed the bottom there!  Dollar back to $1.405 to the Euro, $1.638 to the Pound and 93.5 Yen.


  137.  Goooooood morning Phil & all,
     
    Looks to be exciting eh?  T minus 10 and counting…. we have main engine ignition….. chuckle
    Now if those CPI and other number clouds don’t bring rain and scrub the mission again…. we might liftoff for a change


  138. wow… judging by S&P futures movement, it looks like a gap and trap day against the bears… could be a painful squeeze


  139. Good Morning Phil et al,
    Phil thanks for the INTC response. J


  140. Good Morning @ all
    All looks greeeeeeen.
     
    My parachute will take another hit. Witch makes me think this question: What ratio you expect on profit / loss ration from a green day on longs/parachute? For example, On monday (big bull day) I got nice profits from my longs positions (ex-chute). Now, the loss in the hedge side was 20% of those profits.  Some like a 4-1 win/loss in 5 trades.  Does this sounds reasonable?  Or was too much hit?

    INTC :  There is a nice (or not so nice) review on earning release by Karl Denninger on market ticket blog.  I deserves a reading. 
     
    DIA puts :  (yesterday)  yes you are right. I paid .03 more than my target.  Yesterday DIA puts, up that time, never broke the $.60 and we where reaching 15:30.  So my play was more a time-play, a kind of stick-save  or dive. At that time was ok for me to take the risk.  I was expecting a roll over OR closing close to that level.
     
    But you are dead right on doing a bad trade will reduce you win/loss ratio.  – Spider


  141. :-P