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Through the Roof Thursday or Smashed into a Thousand Pieces?

GRANDPA JOE: But this roof is made of glass. It'll shatter into a thousand pieces. We'll be cut to ribbons!

WILLY WONKA: Probably

Is today going to be the day?  After pressing against our breakout levels all week, today we should finally have the gas to get over the top.  We didn't have a stick save yesterday and the Dow fell, but not very much and the Nasdaq made its 11th consecutive positive move in a row, something it hasn't done since 1996.  The conditions are right, the hits just keep on coming in earnings with another 200+ earnings beats logged this week against 32 misses (those we easy to count).  More importantly, 20 companies have been so bold as to raise guidance while only 12 have been worried enough to lower them

So we have optimists outweighing pessimists by almost 2:1 in the only poll that matters – the outlook that is filed with the SEC!  We also have the FACT that 85% of the companies reprorting this week have done as good or better than analysts expected and we have some signs that the economy may be improving.  I said earlier in the week that it was going to be 8,900 or bust for the Dow and we're toying with that line but it's really 6,232 on the broader NYSE that MUST be broken and held for this great glass elevator of a market to get through those upside resistance levels and prove these moves are for real.  That did not stop us from adding some QID covers into yesterday's close because, as Willy Wonka said to Grandpa Joe – it probably won't happen!

Willy Wonka had the physics right, there had to be enough power to get through that overhead resistance or it was going to be a very painful test of the top (like the one we had in June).  Since our last dip, we've come back for another try and the volume has been up 35% on the average day on this leg.  Is that going to give us enough "thrust" to break through this time?  As it was in June, all of our inexes are making their targets EXCEPT the NYSE so we do not really care what any of the indexes do this week EXCEPT the NYSE, which must break through it's magic number (40% off the highs).  We have 3 other global holdouts:  The Nikkei needs to take out 9,980 to make it back over 40% off, the SOX need just 28 points to hit 329 and the Dow Transports need 1,868, which is still almost 10% away.  The Nikkei added 69 points this morning and finished less than 100 points shy of their mark and we'll be playing IYT if the NYSE and SOX break up.

Today we have Jobless claims and existing home sales.  Less than 500,000 jobs lose and more than 5M homes sold are both numbers that can give us the push we need to break up and out.  China is through the roof and breaking the bounds of market gravity as the Hang Seng adds 3% on the day, jumping to 19,817 this morning – that's 85% over the October lows but STILL 38% off the October 2007 high of 32,000.  The Shanghai gained 2% today and is up 120% from the lows, not a bad run for 10 months!  At 378, the DJSH is still 35% off the highs and these levels give a lot of credence to our theory that the markets want to return to about 1/3 off the highs globally.  Indias BSE broke 15,000 today, closing at 15,231 and that is up 97% from the lows and is just 28% off the highs so small wonder that India, unlike the other Asian indexes, has been consolidating up here

Europe is taking a pause that hopefully refreshes this morning.  Good news from CS (profits up 29%), official word from the BOE that the recession is slowing and surprisingly strong UK Retail Sales for June were all bullish points that kept the markets up near their highs for the year.  Bill Miller of LEG is today's plate spinner, putting out a letter to investors saying: "the worst has passed” for the U.S stock market and that financial and technology companies will probably lead gains:

Bargains abound in the U.S. stock market,” Miller wrote. “Bull markets typically begin when the following four conditions are present: the economy is bottoming, profits are bottoming, the Fed is stimulating and valuations are low. That’s where we are now.”

Recent ISM reports on employment and production are consistent with an economy that has stabilized and should turn higher this quarter.  The very dramatic inventory liquidation of the past nine months could set the stage for a considerably stronger set of GDP numbers than currently forecast as inventories are rebuilt.”

So no excuses for not breaking out this week.  As I said, we added the QID (ultra-short Nasdaq) calls into the close on the assumption we would NOT be breaking out without a pullback.  It's good to take short plays at upper resistance levels because you get a nice quick signal to get out if things do go against you.  We have tons of bullish plays that we're not very worried about as we took many of those 2 weeks ago and our biggest headach in the $100K Virtual Portfolio is what to do with the FXP puts we sold as covers, as China's move up is making those look far less than safe!

It turns out 554,000 people lost jobs last week, that's up 30,000 from last week but continuing claims fell to 6.225M, the lowest level since April 11th but it remains to be seen whether this is because people are finding jobs or simply running out of benefits. It's all up to housing data now to give us the boost we need to get through the roof.  UPS had dismal earnings and outlook and that's keeping a lid on what is an otherwise decent morning of earnings.  We need those Transports to join our over 40 party and we also need to make some progress WITHOUT the energy sector, who once again have been a bit too much a part of this rally for comfort.  $70 oil killed us in June and it threatens to kill us again in July so, if we are going to break higher – let's to it with different leadership this time.


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  1. Hello  Good Morning.
     
    On drillers:  NE is just great. I have been looking into all OIH memberson dicember 2008, and you can find incredible things. Most companies move up or down in group because the heavy trading on  ETF. So  they are bought (or sold) in group.  Consider RIG, Total shareholder equity is 16+Bn BUT haf of them is just "goodwill".  So thir goodwill is valued in more than 8Bn, more than double of  coca-cola goodwill !!! c’mon, they just to be kidding. That way they reduce  P/B by half.  There are other dirty details in many OIH members. 
     
    The only OIH members with no intangible in their books (as dic/2008) are NE and DO. Others with little intangible are: ESV NBR and RDC.  Of course, that is not something indicating they are good companies are they are a buy. But at least they are not cheating.
     
    The problem with NE is they had many contracts so they didn’t suffer the oil price decline. But we have to see if they keep making new contracts and if the get less money  for the same job in future ones… OR if the oil keeps doping and they do not get any contracts at all. (its expensive to extract oil from ocean). Anyway, if they keep this pace they will earn $30 in 5 years.  And today its a $32 stock.  (Disclosure: i’m long from nonbrainers 20′s)  :-)


  2. I miss to post:  Im not in OIH because im fored to buy those cheaters. You can cherry pick and do your own OIH portfolio.


  3. Jobs: -554k
     
    Probably that will delay the takeoff countdown


  4. PLD misses big and cuts outlook for the year by 20%, revenue down 82%. maybe an idicator of how commercial real estate will do.


  5. Mornin – Sunco 1 please – Amazing spreadsheet – I had a pop up that said if i enable the automatic updates i may experience a security breach and i would be zapped with a taser (maybe)
    Should i enable or not? I havnt made a copy yet. thanks.
    I have been working on one for DD & roll situations but it’s nothing as pretty as yours.


  6. Phil – was not sure if you intended it this way, but I enjoyed how you mitigated the ‘hard sell’ message on the referral post last night with the woman in the t-shirt…smart..hope it helped…Actually, I finally got with the program a couple weeks ago.
     
    Anyway, re: your opinion on VZ – I believe a couple people here had been playing with it, including me (the thesis was trade the boredom)…Last month I bought the stock at about $30.95 and then sold 30 puts for $.95 and the 31 calls for .92…Looks as though IV is in fact shrinking, which is nice…
     
    I had planned to let them expire and take the $, but now with good ATT report and with how VZ has traded the last few days, would you consider a roll of these, one leg a time in order to stay long the stock or is there anyhting out there that would concern you about the Telecomms


  7. Pharmboy and others,
     
    Any ideas on VNDA or DNDN…..both have gone horizontal for weeks and have not been crushed and have products that may be of interest. Seems that they may tire and cave in or take off since they have enjoyed continued support. Any thoughts--not necessariy as a buy today but in the next few days……


  8.  Phil… 8 trading days of up and up… stochastics are the highest overbought indication since May 6
    The indexes are riding the top of the upper Bollinger band… some stocks have even popped ridiculously over the upper BB (like CAT and HOG did on Tuesday.. which I just had to buy naked puts on like crazy)
     
    Seems like the resistance pressure is on the upside and the most likely move is back down to the 200MA to relieve the steam building on the internal technical indicators.
     
    I vote for broken glass and bulls get cut to a thousand pieces… chuckle


  9. bcfla, my two cents are this.  The iPhone has been doing great.  That helps T and hurts VZ.  I switched a week ago.  Now, next quarter will reflect the success of the iPhone 3GS more so then the quarter they are reporting now.. but there could still be an impact.  They only question is, has VZ made up for any losses in wireless customers with increases in their FIOS service?  That, I don’t know.


  10. thks, Matt   I guess we’ll see about the FIOS and how VZ guides on 7/27 – appreciate your feedback


  11. Hey Phil,
    I have VLO at half at 16.10 and half 15.75, sold Aug 17 calls against the entire position for 1.00 a couple of weeks ago.  Should I just stick through it and get called away if it closes about 17.00 or look to make another move?  I when I initially bought it was with the goal of getting called away now I’m wondering if I can do something that would be more favorable?


  12. AMZN at 90.50 … now that is obscene !!


  13. The only things we really care about today is: Can we hold our levels and can the NYSE break 6,232.

    Our June highs were:  Dow 8,878, S&P 956, Nasdaq 1,909 (yesterday’s close was a new high), NYSE 6,231 and Russell 535.  And we need to see some determination to hold there by the 3 that were over while the NYSE and RUT take them back. 

    It looks like we’re getting selling early in but unless it has volume it is likely to reverse quickly so I’m not looking to hang onto the QIDs at this point as we had no disaster that should make them sell off.

    $5KP – On the WFC play, the callers are gone and getting anything over $1 for the Oct $27s is a $100 win on the trade and selling them for $1.15 is a $120 total profit and we should be happy to be out there.

    YUM took a nasty hit this morning but we’ll bear (oops, never say bear!) with them for now. 

    At the end of yesterday’s post there is an extensive comment on Mattress plays and also a trade I really like on a good dividend payer:

    SO (5.5% div) – I think they’re a great deal down here, earning about the same $2.40 as last year (total) but trading at 10% off with a solid-looking dividend.  I would think utilities should be doing well as their input costs probably fell faster than prices.  I like the stock at $31.78, selling 2011 $30 puts and calls for $7.05 for net $24.73/27.37.  That makes the $1.75 dividend more like 7% and you get a nice 20% bonus in 18 months if called away at $30.  Another nice way to play them is to go with the 2011 $25s at $6.85, which have virtually no premium and sell 1/2 the Aug $32s at .50.  If you can pick up .25 per month for 18 months, that’s $4.50 back on your $6.85 (65%), which is better than dividends and much less capital at risk


  14. Seems like they are truly out to get sidelined money back in the market.  I’m hearing chatter from friends who are casual observers like, "wow, the market is doing great.  I’ll think we’ll be out of the recession soon and the worst is behind us". 


  15. Phil thoughts on the following:
    SNDK – 15putters on the downgrade?
    3M
    DHR
    MOS – still holding 45 puts?


  16. Phil, a little explanation on the second strategy of that SO play.  Buying the 25s with no premium makes sense, but I’m not understanding the thesis of selling calls that are nearly ITM right now.


  17. WFC Phil. sorry please clarify: you bought back the 3 $26 callers?


  18. Smasher SO – looking at the charts, they have double topped at 32, also you are selling only 1/2 JIC so a move up doesn’t blow you out of the water.  Note on the charts, SO’s 1 yr high is 40.  Premis is they still move up, but you can stay ahead of them with selling 1/2 calls.


  19. SO then do you buy back & roll the 1/2 calls each month or get called away & sell more?


  20. Yeah, I had a look at the chart, but doesn’t that conflict with "they’re a great deal down here"?  Seems to imply an expected move up. 


  21. MCD down $2.25 to $56.57!  Profit down due to strong USD.  Quite a surprise.


  22. SO doesn’t move quite as violently, so you will have time to adjust.  Also you have .88 delta on a .41 for the 32s.  If it moves up, you should outgain the caller 2 to 1, and you have only sold half so you can roll up or out.  Gives you options.  If SO falls, you lose the same pace, so you want that protection. 


  23. Phil, what is the NYSE doing????


  24. NE/Spider – Yes they seem great long-term. 

    Nat gas inventories at 10:30.  Not too meaningful but should decide if oil goes above or below $65 today.  Housing at 10 is more important

    PLD/Maxt – That’s the one thing I can’t get my head around.   Commercial RE sucks.  It really, really sucks.  Also, retailers may have cut cost and reduced inventories but they aren’t ordering much from manufacturers and if this XMas is a bust then retailers shut down stores and commercial RE falls off the cliff that’s below the cliff they already fell off.  I really don’t see the whole thing as supportable without job ADDITIONS – not just a slowing number of losses from Terrifying to just Horrifying…

    Marketing/Bc – Totally intentional.  I love marketing stuff, I just never have time for it.  VZ I love long-time.  I liked T’s report there, what really hurt them is giving AAPL all those fees for selling ten billion IPhones…  Over time, that’s a big winner for T!  I would roll either and keep it as a staple income producer until you are really forced to give them up.

    MOS had a beat, earning .33 per share vs. .10 expected.  They gave no guidance but the company said:

    "The significant decline in sales volumes, primarily potash, in the fourth quarter was related to continued cautious purchasing by customers due to, among other factors, volatile grain and oilseed prices, global economic conditions the recalibration of the phosphate market to reflect, in part, lower raw material input costs and the lack of normal contracting activity in the potash market."

    A mouthful. But in looking ahead, Mosaic had more of it, arguing that its prospects are all but guaranteed, since they hinge on the future rebound and growth of the world’s emerging economies. "From this growth, a new middle class is emerging that has the financial wherewithal to improve their diets. This long-term trend, along with steady global population increases, translates into continued wherewithal to improve their diets. This long-term trend, along with steady global population increases, translates into continued demand for crop nutrients," the company said.

    So they are back to $51 on no comment re. the takeover rumors as people are taking the comments as posturing that proves that someone will pay MORE than $25Bn for a company that made $147M this Q. 

    Resistance/Merk – Seems futile to me.   There’s nothing to do but wait and see as we did come right to 6,232 last run before being finally rejected and that was without "good" news fueling the rally. 

    VLO/Estimated – Greed kills.  Mostly it kills profits.  Certainly don’t start taking on risks now (at what may be a top) just to avoid taking a nice profit off the table. 

    Oh, home sales up 3.6% and inventories down 0.7%.  Was up 1.3% in May.  Annual pace about 4.89M homes, just under our rally target but pretty good news


  25. 3rd highest 5 min volume in last 10 days just happened for QLD.  The other two came at the end of the day.  This one is near the beginning.  Determined buggers!


  26. MRVL- anyone follow this? Has had a good run up probably on general Tech sentiment plus I believe they sell some chips for the IPHONE. Any other insights?


  27. AMZN now 92.90 …. completely insane.
     
    squueeeezinnng  ahead of earnings ….. 76-93 in 10 days w/ no earnings and buying a dot bomb for stock


  28. AMZN  93.50 … we are back in 1999 !


  29. Cap, yeah AMZN is pretty insane- but i’m watching from the sidelines on this one.  It is like watching your neighbors fight – fun to watch as long as it doesn’t spill into your yard.


  30. Ok, you can relax now.  We just topped.


  31. The Naz chartists would say breaking 1952 (1947 + 5) signals we’re definately going to 2000.  Yeah, right.  We just pierced 1952.  I know, it’s not much to hang your hat on.. but this is a squeeze and I’m looking for inflection. 


  32. Go MTXX, Pharmboy. (But they gotta go a ways to get me even.)


  33. morxlntway I don’t think it matters if you update or not. I tested the link and updated without a problem. You could just as well click "donot update" because I don’t think I have any updatable formulas. Everything is auto-update on data entry and it is not linked to any other SS.
     


  34. No way that was the top. We have to punch thru 9000 on the dow and prove it, perhaps 9050 :)
     


  35. Hard to believe SPY was $87 just 9 trading days ago.


  36. Damn.


  37. Spider – how are you handling BG? sell the put or hold it expecting it to back track?


  38. Minimum wage also increases this weekend…..we shall see what that does to the unemployment/bottom line for retain in a quarter.


  39. Up strong because…? ford news?


  40. NYSE at 6,213

    AMZN/Cap – Actually I heard the biggest hurdle in the Zappos deal was the Zappos guys insisted on getting all stock and the AMZN guys did not want to give them all stock (so both sides think the stock is way undervalued).  This is, of course, great for our vertical! 

    Not good volume at 30M for first half hour but, as we expected, there was little conviction to the selling at the bell.

    Chatter/Matt – That will be when it’s time to go to cash, when those guys start piling in and telling you how easy it is to make money in the market…

    SNDK/Oncmed – Well, that’s what we expected so yes, I would sell puts here as we love to own them long-term but don’t go crazy in case they fall again on multiple downgrades. Sept $15 puts sold naked for .75 is a nice entry on them.  MMM we picked ages ago when the flu resurfaced, this is really about the point to take profits but I wouldn’t short them.   DHR I don’t really follow, they’ve never been too exciting but this is probably a good entry point for a long-term play.  MOS $45s got back to $2.50 yesterday and that was a lucky break.  If you are still in those at around $2.50 (and down 50%) I’d roll up to the $50 puts at $3.20 (+$2) and sell the $45s for $1.30.  If there is no quick sell-off, then you have to next roll to the Sept $50 puts, now $4.40 so another $1.20 and hopefully pick that up selling the Sept $45 puts, now $2.25 once the Augs expire. 

    SO/Smasher – You are only 1/2 covering with calls that are $7 off the money to your leaps (so 100% in the money for you) so you are RISKING not making a huge profit on 1/2 of your calls if the stock goes higher but you are GUARANTEEING a 65% rate of return against the cash you laid out.  Stop looking to maximize your fantasy gains and start maximizing your realistic returns and you will find you will become a much better investor!

    WFC/Spider – Yes, that was the play from yesterday, buying them back at .50 and THEN (I used THEN) at the time, selling the 2 Oct $27s for no less than $1.  We haven’t dipped to $1 yet and the market is strong but, as I said, $100 profit is all we need on these trades. 

    Speaking of the $5KP, YUM is one crazy mofo stock! 

    NYSE broke over!!!!!  6,255!!!! 

    SO/Morx – It depends on where we finish.  Generally, you can certainly expect to be able to roll the callers to 2x the Sept $33 or $34 puts and we’re not expecing SO to go on a rampage and double up over night and, even if it does, we are 100% in the money on the bull side so you can’t have more delta than 100% and there is no way we lose to the upside. 


  41. Morx. The play yesterday was neutral, and only profiting if they sell off.. so you will not loose a penny there (maybe some in comissions)  But after earnings i turn positive. I sold the 65 puts.  And I keep the short 60 puts. I think is very safe because earnings where very good.  The 65 are sold for a loss, but is hedged by the 60 puts you are short. Ig BG keeps over 60 is all profit.  Anyway  watch them.
     
    Actually im long in BG, and bought at 65 open. And i dont ming to buy more at 60. 


  42. Is it just me, or anyone else has also noticed that the TRIN is up at very bearish levels, but the market still wants to go up.


  43. WFC … dam i missed that post!


  44. Now all I need is ACAS to go back to $30, and I would be set…..


  45. OIl jamming up to $66, that’s a big negative.  OIH up 2.3%, XLE up 2% but not too far ahead of the broader market.  SOX over 300, Transports at 3,450, RUT 538!, S&P 967!  Wow!!!    Dow testing 9,000 now, if that breaks all hell breaks loose!

    MRVL/Pstas – We loved them around $6 but $14 is tough to call.   Still, stocks are running and they could do well, just not easy money to me. 

    Minimum wage/Pharm – Think of how much discretionary income that dumps into August retail numbers. 

    All right kids, we have 6,323, now we need to hold it (and RUT 535). 


  46. 100KP dividend plays – FYI, I’m loving them…thanks, Phil!!!  Including the $0.848/share dividend, I am up 100% on my $2.38 net entry on LYG…that’s pretty cool!
    Just a question on the mechanics of the KMP trade (or other "lock down" strategy-trades) – as the stock rises, is it necessary to adjust the deep-ITM put?  Unfortunately, I can’t find the link to the old Sage article that described this strategy…if anyone has the link, can you post?  


  47. Phil, so its official? Happy days are here again?  What is the game plan beyond reaching and holding these levels?  Are we supposed to just keep going up?   I don’t get it. 


  48. Financials could be doing better but that’s my only complaint about this rally. 

    Indexes running towards 2.5% rule already, led by RUT at 541.    Transports already there at 3,480 NYSE hits it just above 6,300, S&P needs 978, Nas needs 1,977, Dow 9,100 (and that’s our 5% rule off 8,650) and SOX are the laggards today, flat at 301 so they need 308

    I doubt we break 9,100 today as that’s a lot of resistance so if you want to take bear bets, that would be the spot if we get there.  There’s a lot of squeeze going on right now – the quesition is what happens next?

    $100KP/SS – That’s great!  LYG almost gave me a hear attack with that dip but they are zooming once again, giving back my faith in fundamentals.  On KMP, you never have to adjust, you just collect the dividend until you are called away or roll for another year of boring collections. 

    Happy days/Matt – It’s official that a lot of bears got nailed in a huge chart trap and they are now chewing off their legs to get out of it as we move to a totally opposite chart pattern that looks like we could go parabolic.  Until we break 9,100 I am as unimpressed with the move up as I was with the move down – it’s not my fault that the charts are wrong….


  49. Now might be the time to short HGSI.  Small position in 12.5 Aug P @ 1.


  50. phil,  do  you still like CAL here?  going to sell some sept 9 puts for 1.05.


  51. Phil,  I picked up some Aug 87 puts on the DIA for 1.01 when the DJX was up 1.20.  Now it’s at 1.33 and the puts are trading for 1.02.  Did I just get lucky somehow that the options were a little bit mispriced on the quick move up or something?


  52. SQNM – whilst I do not like the company, looks like a BO.  Momentum up play for  the time being.  BE very careful with this one.  They are accused of manufacturing data….but none the less, one can play them to the up side.


  53. Phil: what’s ur opinion on shorting FITB?


  54. Confused with Matt… This morning, the glass ceiling was 9,000 … but now the real mark is 9,100????  I’ve been skeptical all along and hurting from some short DIA positions, but confusion over the mark to turn bullish has kept me leaning toward a correction.  Is there a point to flip or is that the capitulation that creates a double loss????


  55. Pharmboy, you may have missed my 9:30 post about DNDN and VNDA…..what are your views….I nibbled anyway and the options are up 40-50% so far….they both broke out of bases on volume……..thanks.


  56. LYG- was just looking at this. I took out the caller on the dip but I am still long the stock; collected the nice cash dividend; and still am short the Jan 5 puts. They have all these wierd options that have some kind of conditions attached to them that I don’t care to research. How would you palay this. Just sell the Jan 5′s again or try Aug, Sept; Oct?


  57. MYGN – they have been hammered recently for missing earnings (2X).  Now that things have died down, their spin off is complete (which was some of their problem for research costs), I think this is a good little diagnostic co that has the potential for a buyout.  They bounced right off their 1 yr low, and slowly climbed up in the harsh environment.  Cannot figure out what the new health care plan will do to all these diagnostic companies, but I can see consolidation in the industry either way.


  58. Phil,
     
    SRS was over $23 two weeks ago….. what has changed so significantly in the world of real estate that has sent it as low as under $17 today?


  59. Unreal, the mini futures were bid from 168 to 182 without a pullback, it hickuped to 180 and powered right back to 188.  


  60. Oce – Missed it, sorry.  VNDA.  Flagship has tons of potential, it is just how they position it against PFE Geodon.  Few other drugs in the pipeline could be big ones, but with CNS, it is a very difficult road to plough.  DNDN, I have posted on them on several occasions, and I am not a fan.  I think other things will come out of the drug pipeline for prostate cancer.  I know LLY has a vested interest now, but the problem is that DNDN takes cells from the person, cultures them with a mix, and then re-injects back to the patients.  It is also VERY expensive.  All well and good for the short haul, but I believe something better will come along shortly.  Cougar (now JNJ which I mentioned here), OGXI (buyout candidate I also mentioned here) are two such that could hurt DNDN.


  61. Could THAT be the top for the day?  I know there is more pomp and circumstance to come tomorrow or Monday.. but maybe just maybe for today?  please?


  62. JOBS:  THis is a lagger indicator… but Phil, whats you opinion on this? number was higher than expected.


  63. That was a crazy up move. we are in range of 2.5% Phil told. I’m with Matt, selling ES. we’ll see if i can profit some on that.


  64. Spider – Jobs. I think this has become like all bubbles. The stock market is on the front of all the newspapers proclaiming the "longest run" for decades. Fund managers are telling anyone who’ll listen that "it’s time to get in" Job losses are ignored as a "lagging indicator", house prices are ignored and jumped on if positive. (All house prices go up in spring and summer) Earnings beat (lowered) expectations yet revenue for the most part is well down. Its just a matter of time before theres a big correction. October is a good time for stock market crashes.


  65. CAL/Jo – Yes I do like them as a long-term, painful hold!  8-)

    Luck/Smasher – Yes that was lucky.  Of course if you watch them regularly you can make your own luck by catching those "bargains" and taking advantage when they run a little hot. 

    SQNM/Phamr – "Whilst?"  Wherfore art thou?

    FITB/Sthom – I think shorting anything is not the best idea at the moment.  The financials have not really moved off the floor yet and if that index catches buys, we could fly much further from here.  Also, you are talking about shorting FITB at $8 when that is 80% off it’s highs in a market that is heading to 33% off it’s highs so the question is – what is it about FITB that gives you such a bearish outlook?  I agree the run off earnings may be overdone as ALL of the profits were due to an asset sale but your real premise has to be that you expect them to be so awful that, even if the XLF finally starts moving up, FITB will fight the current and go the other way.

    Confusion/Miracle – Well there are various levels.  9,000 was where we needed to break for the day, 9,100 has been our watch level since November.  Now that we made that level, 9,100 is the next goal but, above that, we don’t hit real resistance until about 9,500 (10% over our mid-point and exactly 33% off the top).  You can’t be bearish here other than speculating at each breakout point and quickly (as we did with the QIDs this morning) giving up as soon as your premise fails. 

    LYG/Pstas – We liked them as we expected them to return to paying dividends one day and BOOM, they did!  Now if they officially go back to paying dividends, this stock could double and we want to be in it so the play is simply buying in at $5.05 and selling the Jan $5 puts and calls for $1.85 for net $3.2/4.1, which is a nice 60% if called away and a 20% discount if put to you – not bad for 6 months "work"…

    SRS/Roamer – You’ve got me.  I have seen nothing to shout about in real estate but sentiment has shifted and the ultra-shorts are getting killed.  The cheaper they get, the better cover they make but BXP just surprised up with a $1.32 per $52 share earnings, up .16 from last year so they are leading a run.  What investors don’t see is that .10 was income from lease terminations as LEH and GM vacated 550,000 feet of NY office space that is not being re-filled.  Occupancy dropped from 95.6% to 92.5% over the year and they expect further declines and lowered full-year guidance to $4.60 (from $4.75).  These guys are the second best of the best (the best being VNO, who report on Aug 4) so I would play SRS here ($17) between today’s "great" report from BXP and VNO’s report, figuring someone not so nimble will put up some bad numbers.

    $5KP – 2 SRS $16 calls for $1.50 (now $1.70 so we offer and wait).  We will either DD at a lower price or sell $17 calls to cover on a move back up


  66. Phil – AMZN — nice rumor, but I’ll call BS on that one (zappos/stock).
    And yeah, real undervalued !


  67. By the way – did anyone read the Pfizer report – Viagra sales down 7% !!!!! Everyone getting their kicks from the stock market this Q :-)


  68. Matt – Top ?  Who knows.  I bought DIA puts a little too soon.
    Intraday stats = FMD
    volume = ??
    Intraday DIA chart …. just made lower high; and failed – may have topped out.
    AMZN finally rolling over a bit.  That one smells a lot in terms of manipulation pre-earnings.
    No selling pressure in market yet.


  69. LOL Phil – Just a habit I got into when working with the English chaps in Pharma…..


  70. Thx for the SO play.   I’ll use it instead of buying more stock.  May I ask a simpleton’s question re net debit and net credit trades?


  71. DB – who’s got time or any energy left? (you don’t all have to answer at once)


  72. Speaking of real estate, HOV is almost $3!!! 

    I don’t think we’re going to make 9,100, everyone is slowing down considerably at the 2.5% mark but maybe all waiting for the SOX to catch up. 

    Oops, SRS jumped up.  I certainly hope people aren’t buying them at $1.70, the point of the play is to get in for a .30 spread and that’s not going to happen if you overpay!

    Europe finished up 2% and only because they ran out of time.  Check out this DAX chart – a great example of the 2.5% rule (also 5% for the week)! 

    For the Dow to be up 5% from Friday, we’d be looking at right about 9,135.  NYSE and Nas are right at the 5% marks now (6,300 and 1,970) so it’s up to them to lead us higher but a 1% pullback is not unexpected or bearish at this point if they hold it.  The Dow, S&P and RUT all need to add 1% from here to make 5%.  Most bearish signal would be NYSE and Nas pulling back more than 1% while the other indexes fail to hold 4%, where they are now at 9,050, 975 and 543

    By the way – if there is any such thing as "THEY" then there is no way "they" don’t intend to take these numbers into the weekend so the market rally can dominate the magazine covers.  The whole goal of this execise is to get cash off the sidelines and back into the market.  If I were Obama, I’d make a comment this weekend that it’s a good time to take 50% profits off the table from the time he said that it was a good time to buy stocks!  

    AMZN/Cap – You know I don’t engage in idle gossip – it was from the WSJ.

    Viagra/DB – That’s due to people losing health benefits from work and Viagra is not something people are likely to buy on their own and, for people cutting back – some have pretty steep deductables for what I think are $10 pills at retail even if they are insured.

    Simpleton/Dstill – go right ahead!

    Do not mistake a pause at the 2.5% rule for a pullback!!!!  If we don’t violate 20% pullbacks then it’s just a pause and, since we really have a 5% week’s move, even pulling back past 2% up (for the day) won’t mean much until the indexes go below + 1.5%. 


  73. Dstill – net debit – money out of UR pocket, net credit – money in UR pocket.


  74. Starting to accumulate QIDs here to cover my rocketing RIMM calls from yesterday…


  75.  Thanks, Pharm – I get what it means, but I’m a little off on how I enter a trade into ETrade.  A spread for example, it’s a "complex" option trade that I would typically enter with limits.  I’m not looking at order entry screen right now, but I’m pretty sure when I select net credit or net debit, they then want a single $ number entered as the credit or debit.  Is that number the difference in price between the two premiums?  Or?
     
    Follow up – not urgent:   I like to do bracketed trailing stops with regular stock trades – what’s the functional equivalent for an option?  (i love brackets cuz they take me out of having to think during the day – on those positions at least.)


  76. Phil, weekend, absolutely.  I think we’ll close at / near the high today, have an unchanged day more or less tomorrow and then Monday… well I don’t know.  Maybe another unchanged to slightly up day and then Tuesday… . KABLOWIE!


  77. IF there is a ‘they"?  Are you kidding me??  We don’t rocket up for nearly 2 straight hours and then just flatline by luck.  The market is a machine.


  78.  PHIL,

    I went "with the 2011 $25s at $6.85, which have virtually no premium and sell 1/2 the Aug $32s at .50. " and now the stock is above $32 what do I do now? I have the leap but how does that cover exactly?


  79. Sorry – its SO from earlier today.


  80. We are doing a programming update tonight.  In case the sytem has trouble tomorrow, please make sure you are following me over at Seeking Alpha’s "Stock Talk" and bookmark it as a backup.  If you don’t do it while we’re up, you won’t know where to go when we’re down, right?   http://seekingalpha.com/author/philip-davis/stocktalk

    Etrade/Dstill – They are not a great platform for options trading but if you use "complex" then you just put in what you are buying to open and what you are selling to open and the net debit or credit you are targeting for each.  I really hope you didn’t say that you generally order options without limits… 

    Now bonds are falling (rates going up) by about half a point so more money may be coming off the sidelines to give the bears even more pain ahead!

    Dollar is pushing 95 Yen and that could get the Nikkei over 10,000 and that would be even more follow-through fuel tomorrow.

    SO/Red – You don’t need to do anything.  The stock moved up .30 on the day.  This is a long-term play.  The idea is to sell a little premium every single month to be sure to collect $4+ over the life of the play and if, at the end, you also get your $6.85 back (stock finished $31.85 or higher) then that $4 is all profit.  The leap is almost the same as owning the stock – you have the right to buy SO for $25 through Jan of 2011 so whatever the price of the stock is less $25 is the mimimum value of your call (now $7.14 so congratulations on a great purchase). 

    CNBC just said MCD is only Dow component trading lower.  When did BA get kicked out of the Dow?

    RUT touching 3%, SOX still dragging (up 0.5%).


  81. Phil – its not the SO leap I don’t get its the Aug $32 at .50? I don’t understand how I am covered when I can get "called away" at $33 and I don’t own any stock only the Leap way out in 2011

    Thanks


  82. Crazy day… the vix when down, and market up. Then the vix start clambing and the market …up… :-)
    Actually the vix didn’t move in a violent way, and vix can go up in violent rally.
     
    Matt = Why you say next week KABLOWIE?
     
    BG, I get out at 68.70 … looking for reentry at or lower than $68


  83. I realise that Phil will have a good argument as to why this is b***** – but for its well written and should be read ! Depression


  84. dstill it is possible that the etrade price shown is the worst price possible for your trade, in other words buying on the ask and selling on the offer.
    If you are selling something that is 1.0 x 1.1 and buying something that is 1.50 x 1.6 it is possible they will show you 1.0 from the sale and 1.6 from the purchase giving you a net price of .6
    At a minimum I would think you should start by offering mid price which would be selling for 1.05 and buying for 1.55 giving you a net of .5 which is nearly 20% less! You might get better or worse, but you can negotiate and you should!
    It is also possible that when you enter your order the price will move away from you, especially with anything a little less liquid. This is sometimes the market maker trying to squeeze more money from you, so try to be patient!
    If you lost 20% in both directions in this example (put spread  on and take spread off) then that’s 40% on the round trip, so this stuff is worth paying attention to!
    Obviously % varies depending upon the price of the instrument and how wide the bid/ask spread.


  85. Thx all.  I def order options with limits.  Not getting the net entries, I’ve been entering them separately is all.


  86. Phil:
    I loaded up big time yesterday on your suggestion of the AMZN September 75 naked puts. They are up 43%… what would you do at this point?


  87. Phil,
    where do you see resistance for DBC?


  88. Well – t’is been fun all.  I am off to Vegas then KC.  Will let you know next week what the life was like in Vegas. One play I have been watching is ARNA.  Much like the OREX trade, one can play with the front months to reduce costs.  Butterfly would be 
    Calls:  Buy 1 Oct7.5 for 55c, Sell 1 Aug5 for 15c -20c
    Puts:  Buy 1 Oct 2.5 for 35c, Sell 1 Aug 4 for 10c. 
    Sept can be repeated if needed as I think that the data come out after OpEx, but they could announce any time.  I expect the calls to start gaining value, as these little biotechs heat up a month or two out ahead of announcements.  Note OH resistance would be 4.8 or so as ARNA has filled the gap up.  Cheers.


  89. Phil,
    also, I’m long Goog Aug $420 and Short Aug $440. because I sold the July $440 and rolled it to the Aug $440, I’m in for $10 for the trade. with that scenario would  you hold for expiration, which was my original thought, or something else?


  90. Next week Treasury auction schedule :  235 Bn
     
    http://market-ticker.denninger.net/archives/1256-HOLY-!!!-Treasury-Auction-Schedule.html


  91. UPS tells the story of this market.  Bad earnings, poor outlook and up over 5% from where they opened…

    SO/Red – The same way you can get called away at $32 (not $33 but you keep the .50 they gave you), you can exercise your own option to buy the stock for $25 so, if you had to, you would get called away at $32 and exercise at $25, netting $7 on that transaction plus the .50 you keep is net $7.50 off your $6.85 entry (up 9.5% in a month).  That is you WORST upside case if you don’t roll the caller and let the whole thing get away from you. 

    Looks like rest time is over, time for a serious 2.5% test now… 

    Depression/DB – I agree that there are still plenty of negative indicators out there and there are severe fundamental flaws in the economy but I don’t know that it’s enough to derail a $50Tn global economy.  Goverments can tax their way out of anything over time and, since this is a global slump, no one is going to be foreclosing on our economy in the near future.  Meanwhile, the p/e charts he sites says we are already at p/es of 13 when only twice in history have we gone below 10 and both of thse dips led to 100%+ runs higher so we are not heading into a depression, we are well into one more likely and to refuse to buy at 100% because we may fall to 70% before going back to 140% is kind of nuts isn’t it?   If I scale in here at 100% and DD at 80% and DD again at 60%, my average entry is 75% and if we survive that and just go back to 100% (which would be the weakest recovery ever recorded) and even if it took 10 years to get there (the slowest recovery ever recorded) then I still make 5% a year on my investment and I would have bought in within 15% of the bottom.  You can keep betting against the rally and refuse to buy anything and if we go from 100% (where we are now) to 120% you can short more and at 140% you can short more but, in the last 100 years, the S&P has spent 10x more time above 20 p/e than below 10….

    Here come the financials!  XLF $12.50 is the next major break.  Qs getting dangerously close to 40!

    AMZN/Gel – On the one hand I’m feeling good about those but on the other hand, you never know with earnings.  I think this falls into the category of "when in doubt sell half" if not "take the money and run."  Don’t forget you are up 43% of a possible 100% in just one day and you are risking all of that to hold it one more day and the most you can make over the next 60 days is the remaining 57%.  If you sell 1/2 now, the puts could gain 80% tomorrow and you could still get out even and, if they expire worthless, you would still be up 71% overall. 

    Damn, oil at $67, just got rejected at $67.50.  OIH up 3%, XLE up 2.6%…  They are a big part of our rally. 

    DBC/Maxt – I think the last run to $24 was fatal for the economy and we’re not far off.  Certainly $25 would be very tough too but, above that, we would be in another kooky commodity run (I just don’t see it with no job growth).

    Viva Las Vegas Pharm! 


  92. Hello Phil;
     
    Do we do the LYG play now ? are we not expecting a pull bacl with this ? are we going to see the other end of out range ? 8200 8300 ?
    How sound is LYG as a company ? UK not going to blowup ?
     
    thank
    David


  93. Lets say a 10yr for a 3.5 yield vs market (as GS predicts) climb ~10% to Yend?  wonderful, I go all bonds.


  94. Phil – Depression - I knew you’d say that :-)


  95. Phil speaking of OIH, I got out of the long puts this morning but stayed in the shorts. That’s helped but i am still deep in the hole. Plz look in your ball & see if you think they will drop back or should i just ignor them for a while.
    I am working on a similar plan for MOS; rolling higher & selling puts to cover. Any thoughts on MOS? I know it’s kind of "who knows?" at the moment but you will haev a better clue than I.


  96. I’ve owned AMZN (stock) on and off since 1997.  I’m out now and have most recently traded DITM calls.  It’s a company I know intimately on a number of levels for a number of reasons – I think they blow past expectations and I think they are profitable and dominant for years to come.  My immediate question, tho, is whether an earnings beat has already been factored into the run.  I’ll make a long term option play based on Phil’s recos, but I’d also like to make a quick stab at cash if they jump tonite/morn.  In this respect, my usual play is a healthy delta ITM call for current month or a bt further out. Thoughts?


  97. For you PharmBoy followers, his proposed ARNA butterfly doesn’t really excite me given that we’re playing for a classic biotech upsurge, so I’m in the trade a different way.  I’m in the Jan 5/10 call call spread, this is a dollar to make five.  I also picked up some Oct 7.5 calls cheap on the recent dip down.  Note that these are both Hail Mary plays so don’t use your food money.


  98. RF Aug 4 callers up 80% in a week. Would anyone take them out? They only have 10 cents left in em.
    Trying to balance not fiddling with taking profits and finding it difficult….


  99. SO/Phil,

    So I must not roll the caller and if I do the whole position can get away from me! Uh-hu – this is SO enlightening because I have tended to panic in these situations and indeed that explains how I end up losing money on perfectly good working positions.


  100. Phil:
    Re AMZN… Thanks to you the round trip was very pleasant, naked and quick – a lot like streaking!. Will sell the entire position today.


  101. Will someone explain to me why Aug AIG $5 Puts are selling for $4.30 when the stock is over $12?


  102. red my screen shows em at 3 cents.


  103. Phil: tempted to sell, at least some of DBC, how can this run even higher,


  104. Oh – thanks Steven – my response from the ToS platform has been very poor today – but it has saved me from the bane of over-trading and given me an opportunity to think as opposed to do.


  105. GOOG/Maxt – I’d hold it for now.  Spread is up to about $13 out of possible $20 so still a bit to gain.  You may want to keep an eye on the roll to the Sept $410s, now $37 (+$12.50) and the Sept $430s, now $23.50 (+$11.50) as you may (if you have the cash) want to consider doing your end first and letting the Aug caller expire.  If all goes well, we finish around $440 and you keep that $10 and then get another $10 or so for a net $0 on the Sept spread. 

    $235Bn/Spider – Wow that’s a lot.  Oddly, China failed to sell $1.7Bn this week of their own notes…

    LYG/Micro – If you scale in and it pulls back to $4, you just buy some more.  It’s an 18-month play and the long puts and calls we’re selling won’t change much.  UK may blow up (as could we) but I think LYG is too big to fail and they’ve survived for over 400 years so I’m betting they make it until Jan 2011.

    Depression/DB – That’s good, if you are starting to think about what my side would be while you read this stuff you are on your first step to recovery…  8-)

    OIH/Morx – Well, we have "hurricane season" now so hope can spring eternal and it’s not looking like earnings are going to bum anyone out no matter what they are (see UPS) and oil is over $65, which wrecks that premise so I’d sell those $100 puts at $2.25 and look to roll to the Sept $100s, now $3.85 (+2.65) so it costs you .40 to buy a month.  If you keep leap-frogging there will hopefully come a point at which you do catch a top but it may not be until November when the storm season winds down and oil demand falls off completely.   On MOS, they are totally rumor driven at the moment.  MOS and POT just agreed to sell India potash at $460 a ton in big quantities, that’s WAY less than Junes $700 spot pricing.  This is price war with the Russians and I think they are all shooting themselves in the foot and would still short MOS here ($52.25). POT missed and reduced guidance (so they are only up 9% today) but at least they earned .62 per $97 share vs. MOS’s .30 per $52 share. 

    All these ag companies are slashing prices because there is no demand for what they are selling and the HOPE (not a strategy) is that by selling cheap they can reignite the market demand but all they will do is allow farmers to lower costs to spur demand for crops and that will make it harder for them to raise fertilizer prices later as the margins won’t be there.  That’s how deflation works when the commodity you’re trading isn’t manipulated.

    AMZN/Dstill – We took a bull call spread yesterday and that will be hard to lose now but I don’t know if I would want a lot of uncovered exposure after this $10 run in 5 days (almost 25% since July 7th) I’d be more inclined to do a backspread like selling 2x Sept $100s at $3.90 against the Jan $95s at $10.60.  That put you in a $5 spread for $2.80 and if AMZN runs up $10, you just buy another Jan at about $17 which puts you in 2 at net $10ish still $5 below the callers with 3 months to roll.   

    Gasparino still bitching about bloggers.  CNBC seems to have a new agenda to take out the competition.  They are going after Tyler because he uses and alias but to say "you don’t know if they have an agenda" when this moron gets his checks signed by GE is ridiculous! 

    ARNA/Mr M – Good play!

    RF/Steve – Very hard with such low-priced calls.  You HAVE to not care if you get called away and focus on your job of selling calls every month that you do have the stock UNTIL it’s called away, at which point you buy something else and go back to work. 

    SO/Red – You must not roll the caller 2 hours after you sell the call, that’s for sure!  You need to always work through the "worst case" numbers to the upside of these trades and get comfortable with being called away (like Steve with RF just above) and recognize that your job is to sell premium, not to maximize gains on the long positions.  It’s like buying an apartment building and NOT renting it out because you want to make sure you get a good price if the market appreciates – they are two very different games… 

    Streaking/Gel – LOL!

    AIG/Red – those are not standard.  They are based on AIG’s pre-split price, I would avoid.  AIG coming down nicely too.

    DBC/RMM – You would think not but look at the market for the past week.  Hard to bet against any bullish premise.


  106. Is it the slight tick up in home sales in the US that’s strengthening the dollar so much?  Dollar killing! Oil hanging tough for how long?


  107. This is what I’m studying now, stocks highest above 50 dma, looking for short opportunities (chart from yesterday):


  108. Phil:
    when I look at 50 and 200 MA, I see possible breakouts but I cannot believe it that this can just go higher: based on what, when earnings are over, the drearyness will set in.
    BUT: what about at least put a FULL OR PARTIAL cover on the following stock(covered call):
    BUCY,VLO, DBC, SAP, PGH.???????????????


  109. phil thoughts on getting into QID calls 28′s and hedging them with 30′s


  110. I cant recall a market that shows so much resistance to the downside. Every $0.01 on SPY is fought over on the way down whereas it jumps up $0.05 at a time.


  111. RF – ok thanks Phil fiddle-free it is!!!!


  112. Well. You call 11 positive on nas, today will make 12 days in a row. Maybe we will get 13 tomorrow. This all good news from earnings are triggering a panic buy. So maybe tomorrow we stay green. It will be a good setup for next week when 235Bn auction will be looking for buyers. They need money from some place, as stats Denninger. It would be a nice moment for a pullback.. or not?  
     
    Pick your short Phil, I follow :-)


  113. I can recommend Dec $95 puts on SPY


  114. Dollar/Maxt – I don’t think it was home sales, the dollar just jumped against the Pound and Euro at 11:30 (EU close).  We’re still down 2% against the Yen since yesterday so something negative in Europe I would guess. 

    Hey let’s hear it for my home state!  Fed charge 44 people, including the Mayors of Hoboken and Secaucus, the Deputy Mayor of Jersey city, a couple of Assemblymen and 40 other people with "public corruption and a high-volume, international money-laundering conspiracy."  Apparently there were rabbis involved too and some of these guys were selling human organs! 

    ISRG at $208!

    Covers/RMM – I’d lean more towards the index covers because who knows how far up we can go.  I do think we have a 5% rule pullback at 9,100 but that’s only 20% of the run from 8,650 so maybe a 100-point pullback if we are breaking out.  It would be healthier to rebase at 8,650 and build from there but that won’t happen unless earnings turn sour next week.

    QID/Sheen – I was just looking at them and I’d go for the naked $28s, now $1.15 and look to roll down to the $27s if they fall to $1.10 (probably a .30 roll) and THEN sell to cover but, overall, I’d rather take a chance here on a pullback actually happening – maybe — someday….  If the Qs break 40, then you have a big problem! 

    Next week we have New Home Sales on Monday, Consumer Confidence and Case Shiller Tuesday.  Wednesday is Durable Goods and the Beige Book.  Thursday we have Jobs and Friday is the Q2 GDP, which better be WAY better than -5.5% in Q1.  We also have PCE, the Chicago PMI and the Employment Cost Index on Friday.  Other than the GDP and the Beige Book, there’s not too much I’m worried about and the BBook is ahead of GDP so if they see improvement, it can cancel out a poor GDP. 

    We get lots of regional banks next week and that could show us problems in commercial RE that they are on the hook for.  Plenty of retailers and manufacturers too…

    ISRG $210!


  115. Oh come on, no one has an opinion about health care today?


  116. GCI up huge today.

    $5KP – AXP Backspread: Buying 2 Oct $32.50s for $1.50 ($300), selling 3 Aug $30s for $1.65 ($495)


  117. By the way, the best way to initiate a backspread is to put in for the 2/2 spread for a .15 credit first.  Once you get your price there, then you can relax about selling the extra call.  Also, if the stock takes off on you, it gives you a chance to change your mind (if it falls right after you buy, your delta is .38 and the caller’s delta is .52 so you have little to lose by being patient)

    Health Care/Maxt – I’m not worried about it.  Friend in Washington says it’s a done deal by the year’s end as the Dems will not risk even the possiblility of the Republicans winning a seat and the ability to block it. 

    Woooeeee, up 200!  9,100 here we come!!! 

    XLF snuck over $12.50….


  118. Phil: ok, I see what you say, leave the top open of those positions,
    index covers: I do have my dec 89 puts, is that enough ?/



  119. I like IGT as a straight short here, the options pricing sucks so no good for puts but $20 is silly for these guys.

    DIA/RMM – It’s enough if you are making good money on the way up and a little pissed about your covers getting hammered.  If your covers are killing you, then too much…  If you are making a killing and barely losing on the long puts – not enough…. 

    DB Challenge:  Come on, I can’t even take a guy seriously who should know it represents a whole month’s auctions but does the math x 52 weeks to try to make his point…..  This auction could be a good excuse for the markets to sell off but the weeklies are a non-issue and the 2-years are probably a non-issue and TIPs are a non-issue as there are tons of suckers buying those thinking they will actually protect them from inflation.  So what are they really selling that MIGHT be hard to sell?  "Just" $39Bn in 5-years and $28Bn in 7-years.  The stock market gained over $3Tn this week so we just need 6.7% of that newly printed money to go back to the sidelines and the whole auction is covered.  If you want this auction to go badly – you’d better hope the market gains another 10% next week because if it has the slightest hiccup, then money will fly back into TBills and these auctions will be a huge success, which will spark another market rally as EVEN $235Bn in notes can be sold by the US in a single week.  I think either way you are screwed….


  120. Phi and Pharml – Your thoughts on either doing a short straddle (Aug $20 calls and Aug $10 puts) or selling naked $17.5 calls on HGSI?  The stock has run up from $2.50 to the mid $14′s in a little more than a week based purely on their Phase 2 trials.  The FDA hasn’t approved their Lupus drug (and even if they do, it won’t happen until November) and the company will lose money both this year and next regardless of whether the drug gets approved…as the drug wouldn’t start making money until 2011.
     
    Also, do any stocks or ETF’s stand out to you guys as "easy money" in terms of doing a short straddle for August?
     
    Thanks in advance.


  121. Sorry….meant short STRANGLE, not straddle for both my questions.


  122. Hasn’t Karl D been calling for a market/political implosion for over 6 months now?  It seems like once every other week or so he is pointing out that we’re on the precipice of some event that is about to happen because of something the Fed is about to or is going to do.


  123. PHIL….I have fond memories of Hoboken as my ship was there for repairs after the invasions of Sicily and Salerno.  We then went to the Pacicic and invaded Saipan, Guam and the Phillipines.  While at Hoboken some shipmates and I went to Union City to see a burlesque show.  When we tried to get hotel rooms there were none available so we went to the police station and they put us up for the nite in  the jail cells.  Only time I’ve been in jail.    GABBY


  124. Phil – Auctions I knew you’d say that :-)


  125. PHil
    DIA- OK- I am long Dec 89 . I am 1/2 covered with Aug 88′s ; sold at $1.75; now about 1.10.
    Any adjustment needed?


  126. Neat story Gabby!  Did you see Sinatra when you were there… wait a minute, he still would have been a lil punk then.
     
    Treasury Auctions next week:  I can’t understand why they sell so many short term notes.  I know the rates the gov’t has to pay are less but isn’t it REALLY short sighted for them to do this?  It’s not like we’ll be paying off any of it soon.  We’ll just have to refinance again.  And again.  And again.  At some point even short term rates will go up.  So wouldn’t it be better to lock in the debt now for the longer haul while those rates are still reasonable?  Oh wait, I get it.  This country is run by people who are like the average American.  Spending beyond their means and financing everything at the lowest rate possible.  Never mind it’s an interest only mortgage!  Why tie up your money with paying down the principal when you can go out and buy something else with it!!  DUMBASSES.


  127. STJ with a solid recovery.

    HGSI/Confiz – I think Pharm is heading to Vegas and I have no opinion on HGSI but I’d say selling the Sept $17.50s for .80 and the Sept $12.50 puts for $1.30 gives you a nice amount of leeway.  What I don’t like about playing small biotechs is it IS possible that they do double up if they get bought or drop 50% if the FDA sends them a bad Email, which is why I generally stay away from the sector – fundamentals are useless when the entire business model can change overnight. 

    As to good ETFs to straddle, there is always UYG, they barely move.  DBA and DBC have good premiums vs. the actual movement and IYT is going nowhere fast.  As to straddle or strangle, whatever gives you a wider zone of protection is what works. 

    CAT on a tear! 

    ISRG $215!  Remember when we were arguing the merits of it down at $90? 

    Karl/Smasher – That’s why I like to read a lot of the same people every week.  You get to know where they’re coming from and that makes it easier to know how to take what they’re saying. 

    LOL Gabby – Only that once?  You must be a tough one to catch!  8-)

    Auctions/DB – You can talk about manipulation all you want but no one is jamming this kind of money into the market if they are worried about auctions next week. 

    AXP giving us a nice pullback already! 

    DIA/Pstas – Japan is very likely to break 10,000 tomorrow and the HSI should move up too.  Europe ran out of time or they would have gone higher so it’s not likely we go down first thing tomorrow.  That means you DO NOT want to roll up (puts you in a higher delta) and you may as well kill the $88 puts and lock in the .60 and sell the $90 puts into the close (still a 1/2 cover) for $2 if possible (now $1.83) but no less than $1.75 if the Dow heads higher.  By pocketing the .60 and getting another $1.75 it would be no big deal if the market drops 100 points (you lose .50 and are right back where you started the day) and, if we go up, you effectively sold $2.35 as a 1/2 cover


  128. Phil/AXP: Is this a correct interpretation of your reco? http://www.filebox.com/li5jbycrxs7l


  129. Phil with the LYG deal there are 2 diffirent sets of 20010 contracls, one more expensive then the othere, which one do we use and whats the diffirence ?
     
    thanks


  130. Hmm. DB’s earlier article has one troubling spot for me. Usually I can pick holes in articles that set out biased form the start to prove a point and true to form this one contains a lot of silly observations.
     
    However they argue that the P/E of the S&P 500 hasn’t yet fallen below it’s "inflation adjusted average since 1900". While I am curious why a p/e needs inflation adjusting (both the P and the E are already subject to inflation aren’t they?), can anybody pick an obvious hole in this point.
     
    It is bottom of page 4 and chart on top of page 5 Depression
     


  131. Your answer at 3:17: in my trading account, today, losses are slightly greater than covers+index puts, same in IRA account,
    what does this tell you ?
    PS: I believe I have not enough long positions at present.


  132. Hey, guess what?  I’m going short at the close!


  133. AXP/Sunco – I am NOT going to be downloading spreadsheets to check trades during hours.  Just paste the trade into the comments please.   

    LYG/Micro – The $5s that are .80-.90 are the "normal" ones, the others somehow include a dividend obligation you don’t want to mess with. 

    Looks like we’re going to hold +2% across the board (Dow most in doubt at 9,055) and the SOX made progress to 0.8% so we are set up for a follow-through but I still can’t buy that we blow through 9.100 with only this pullback so I still like the QID $28s, still $1.20 and still very speculative


  134. Buy LEAPS & Sell Calls/Phil:

    Hi, Phil,
    You used buying an apartment building as an example to illustrate the strategy of buying Leaps & selling calls.  But I began to think the following might be a better example:

    I am a "flipper" buying a house in a bad shape but in a good neighborhood.  I fix it up with minimal costs.  My goal is to get it sold when the market goes up.  I don’t mind having it sold!  But if the market goes down, let me rent it out, with a short-term lease, while waiting for the market to go up.

    So, "buy a house in a bad shape but in a good neightborhood" = buy a Leap of a beaten-down stock but with good upward potential.

    "Rent it out with a short-term lease" = sell a short-term call

    The "flipper" strategy in real estate is very different from the buy-and-hold-and-rent strategy.  There is nothing wrong with either strategy.  It’s just different mind-set, and different strategies are good for different market conditions.
     
    What do you think?


  135. Phil, shoot, hadn’t read your last post before coming to the shocking decision to short the market.  Maybe I"ll just dip my toes in a little.  I can’t watch the market tomorrow so it’ll be not only naked but blind, too.  I’m feeling plucky!


  136. Phil,
    What do you think can be done with ISRG. Buy puts?
    Thanks


  137. I just finished loading up with QID calls and DIA puts expecting a nice pullback soon, please forgive me bears if that causes us to open at 9200 tomorrow!


  138. Phil, thoughts on MCD here?  thinking about MCD 55 2011 Leaps for 6 or would you suggest a straight up buy/write?


  139. Inflation/Steve – I agree, it doesn’t seem like it would matter.  Also, why should I care what the p/e ratio of the S&P is?  I don’t need to buy the whole S&P, just the stocks I like.  The E in p/e includes stunning losses booked by AIG, GM and others, if I don’t buy them and buy the other 498 companies, then the p/e of the S&P 498 goes from 13 to 9. 

    Covers/RMM – Well either not enough longs or too many shorts.  On a day like today you should be making money unless you were purposely bearish. At this point, I wouldn’t change but you are going to want to be a buyer if we do break over 9,100 for sure. 

    Nice pop in the Dow at the last second to make sure we beat 2% for the close. 

    What a day, what a week, what a 12-day streak!  Let’s see if MSFT et al can pop the Nas over 2,000 tomorrow….

    CRAZY!


  140. LYG/Phil – Ruh roh…I don’t think those "normal" options were available when we entered the trade in the $100KP.  Do I need to swich the "normal" ones?  Is there somewhere you can direct me to get more information on oddities like this?  Thank you!


  141. If the NAS gets popped over 2000 it won’t be because of MSFT !


  142. Phil, re: AXP backspread:
    Shortly after you posted the trade, AXP went down and by the time I saw your post, the Aug 30′s were at about 1.50-1.45 and headed down. The credit on the spread was about .125. I could have put in an order for .15 credit but didn’t because I was concerned the credit on the short calls had gone down too much and these are supposed to be short-term trades. In these cases, is it the credit for the overall spread that is most important or is the credit received for the short calls paramount?
    Also not sure what you meant when you wrote, "Also, if the stock takes off on you, it gives you a chance to change your mind." If that ‘s after the initial 2/2 spread is filled, why would you change your mind if that would increase the premium you would bring in from the extra short call? Unless you mean it would negate the thesis behind the trade if it broke above the high of the day….  Trying to figure this out for the future.


  143. New Jersey- It gives me a warm, fuzzy feeling to learn some politicos will be getting some time in the slammer. Here in Chicago/Illinois, corruption is a spectator sport with indictments so common it sometimes doesn’t even make the front page. For all you Obama fans out there-  keep in mind that this is where he earned his chops and always pay attention to "behind the scenes" as it’s the guys behind the guys that are really important.


  144.  
     
     
    Sprd/strike:
    $30
    Margin:
    50%
    $3,000
     
     
    1-Aug-09
    9
    2616.49%
     
     
     
     

    AXP
    American Express
     
    $29.99
    $28.00
    -3.00%
    $29.09
     
     
     
    $310.00
    $510.00
    65%
    $200.00
     
     
     

    Date
    Description
     
    Price
    Shares
    Cost
    Bkr
    Total
    B
    S
    Expense
    Income
    Balance
     
     
     
     

    23-Jul-09
    Buy Oct$32.50 Calls
    $1.55
    200
    $310.00
     
    $310.00
    1
     
    $310.00
     
    -$310.00
     
     
     
     

     
    STO Aug$30 Calls
    $1.70
    200
    $340.00
     
    $340.00
     
    1
     
    $340.00
    $30.00
     
     
     
     

     
    STO Aug$30 Calls
    $1.70
    100
    $170.00
     
    $170.00
     
    1
     
    $170.00
    $200.00
     
     
     
     

     
     
     
     
     
     
     
     
     
    1
     
     
    $200.00
     
     
     
     

     
     
     
     
     
     
     
     
     
    1
     
     
    $200.00
     
     
     
     

     
     
     
     
     
     
     
     
     
    1
     
     
    $200.00
     
     
     
     

     
    Quote to BTC Aug Calls
     
     
     
     
     
    1
     
     
     
    $200.00
     
     
     
     

     
    Quote sell Oct Calls
     
     
     
     
     
     
    1
     
     
    $200.00
     
     
     
     

    Do Not "sell" the 3rd Aug $30′s until you see the price start to retreat.
     
     
     
     
     
     
     
     
     
     

    The strategy here is ? a quick short play because we think the stock will pull back in a day or 3.
     
     
     
     
     
     
     

    We want the price to remain below $30 (if stock is above $30 we will have to buy at market and resell at $30)
     
     
     
     
     
     

    After we sell Aug $30′s (or they expire) we then sell the Oct $32.50′s for what ever we can get
     
     
     
     
     
     
     
     


  145. MSFT will be used as the excuse to pull the market back tomorrow.  Now I wish I hadn’t lightened up on my qid purchase at close.  hindsight.


  146. LYG – FWIW, a quick search looks like if you’re called away on the "funny" options, you owe the caller your shares PLUS the $0.85 dividend.  OUCH!  I was out a few days ago when Phil recommended buying out the call so I still own it, but it looks like it would cost about $0.50 to buy it out & sell the "normal" instead.  Recommendations?


  147. Not a good night for earnings so you are ok MrMocha


  148. Flipper/Cwan – I agree but the added dimension means I will not be changing my explanation because people get confused enough with the basics.  Also, one problem all flippers have is they don’t REALLY plan to be long-term holders.  I prefer to look for opportunities where the "not-so-good" case long-term hold makes sense (you can sell enough premium to pay off the leaps) and anything that happens to the upside is a welcome bonus.  By planning to be a long-term investor and taking gains off the table when offered, it’s a little easier to work with a long-term portflio than considering all your positions transient.   As I often say:  "I am not a day trader but I am not adverse to taking profits off the table the same day."

    SPWRA with great numbers!

    AMZN made .32 per $94 share!  Woo-hoo!!!!   Not enough to justify today’s run but fine for our spread.

    ISRG/John – This is ISRG ——————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————————-- This is you at the station…   Just stand and wave my friend…. 

    Oh no Mr. M!  I bought those QIDs!!!!   Now I won’t be able to sleep!

    MSFT seems to have missed.  Oh man – when will they get rid of Ballmer?  How can that company lose money when 99% of us are using their damn products right now?   

    OK Mr. M – you are forgiven…. 

    MCD/Jo – I think I said I would love them at $50.  I’m a little wishy washy at $56.  I agree the 2011 $55s are attractive 10% of their earnings were erased by currency fluctuations so it’s worth a chance and just keep an eye on the Sept $55s, now $2.30 or $57.50s, now $1.10, for cover if they head south.

    LYG/SS – You have to call your broker on that but I imagine you are obligated to give that premium you collected to the caller if he’s in the money.

    AXP now dropping hard but I don’t see the earnings.  Hmm, they are a beat, not a miss so there must be something else here. 

    AXP/Allen – That play was bearish on AXP at $30.  As long your net collection is $195 more than you pay, then you have accomplished the goal of the spread (which is we make $190 if AXP isn’t at $30 by expiration and any value retained in the Oct calls is a bonus.  Changing mind is because, often, it can take an hour or more to fill your spread (since we tend to ask for more, not less than the middle) and things can change in that time.  In this case, if AXP filled me because it popped right over $30 and the front-month calls were outgaining the Octobers by a wide margin, I may have decided not to add more risk into earnings by selling another caller or I may have said "wow, now I have 2 calls that are up 50% on me so I can buy another Oct call that is up 30% for a net 10% average more than the first 2 I bought and I am now in a well protected, more bullish spread. 

    Corruption/Pstas – Hey, this is the Sopranos state – Corruption?  Fuggedaboutit!

    Caller/SS – Do nothing, roll him a year out when appropriate…  We like LYG long-term so you’re always going to have a caller. 


  149. Phil – AXP missed on revenues $6.09b v $6.29b


  150. Phil, As I was about to exit my SDS position ($59.41) with a small gain, Ms Whitney came to the rescue. Now I’m in deep and don’t want to own more if I don’t have to (thought about DD more than a couple times, but so far glad I didn’t). As I’m a newbie, any ideas you could offer would be appreciated (I’ve been doing quite a bit of damage chewing on my right leg and don’t want to start on the left). Thanks


  151. Looks like a big reversal after hours, DIA down .58


  152. Gotta run to my softball game; but just wanted to note I am ringing the register big time on AXP AMZN and tomorrow on DIA puts.  And Bidu.


  153. phil: well, Phil, I also rolled the long Dia puts for 1$ by 2 strikes, I bought some long calls, and I took some gains, but like I said, I often take gains early.


  154. The E in p/e includes stunning losses booked by AIG, GM and others, if I don’t buy them and buy the other 498 companies, then the p/e of the S&P 498 goes from 13 to 9.

     
    Bingo that’s what’s wrong with it.  Record corporate losses have gone up over tenfold in the last decade and a half (IBM was shocking at $5 billion in 1993, AIG was what $61 billion) so the historical comparison of the index p/e is invalid.
     
    Now why couldn’t the author do the sensible thing and remove  the outlying losses instead of including some silly inflation adjustment.  Relieved!


  155. Looking forward to the earnings summary tomorrow Phil. Futures aren’t too keen.


  156. Can MSFT drag the market down tomorrow, now that we know it disappoints?
    MSFT has been steadily going up lately, probably meaning that people were having high expectation.  It could be the biggest disappointment of this earning season.


  157. Well solars are flying up cant see why


  158. AXP/DB – Well that is just a stupid reason for them to sell off!

    SDS/CDS – LOL, that does suck….  If you have enough to sell calls against, at $48.43 (down $11) you can just sell Jan $50s for $6.30, effectively taking $56.30 for them but that won’t protect you from a further sell off.  For the Sept $46 puts to pay off, SDS has to fall to $44, which is 10% lower.  Do we think the S&P goes over 1,025 by then?  That makes selling the naked Sept $46 puts attractive against the $48 calls at $3.60 so you collect $5.60 in September and either wipe out 1/2 your losses (and, of course, you can then roll for more premium) or DD at net $44, which averages you to $51.70 down "just" $7.70 a share so still progress from where you are now.  If you want to maintain a bearish stance long-term, you trade in your $48.43 calls for 2x the March $35s at $14.80 ($29.60).  You can then sell 1/2 the Aug $50s for $1.90, collecting $2 of the $11 you lost in month one and taking about 1/2 your money off the table.  If the S&P goes up, there are tons of 2x rolls you can make and if the S&P keeps going up, you can "leap-frog" your sells by just selling whatever is $2 and buying back whatever is $1.  Even if the S&P goes up and up and up you would sell the $48s for $2 and pocket $1 from the $50s and then sell the $46s for $2 and pocket $1 from the $48s and then the $44s, pocketing $1 for the $46s… If you had to do that all the way to $35, you would pocket $8 plus the last $4 you sold for $12 back against your $14.80 leaps and the S&P would be at 1,100 and you could then stay naked for the pullback.  This would have been way better than buying expensive ultras in the first place. 

    Nas down .75% in futures.  Don’t blame SPWRA, almost at $30 and proving why they are my favorite solar co.  My least favorite, FSLR is also doing well though but SPWRA had real earnings and FSLR just had an announcement that they are building a plant in France… 

    Great job on AMZN Cap!  Convictions do work sometimes…

    Gains/RMM – Nothing wrong with that…

    Relieved/Steve – Good that you can have something "bother’ you in the first place.  Many people take these things at face value way too easily (cough DB, cough, cough!) 8-)


  159. I posted this view here some weeks ago, worth a repeat: Absent actual tragically bad news, this market will be rising, possibly for many months or even years. The problems we face will not derail the market unless we see economic reversal. We will either get better, or die. We would be wise to bet on getting better, cuz if we die, there are no more consequences.


  160. We have a buy on dip market. Or, in my case, sell tight puts on dips.


  161. Phil/APX: Posting the spd sht didn’t work very well so I will try the link again. This is a revision to the original after I read your latter explaination of APX.  http://www.filebox.com/f6vdtip6l1tv


  162. AMZN … thanks Phil; boy did they run a squeeze on everyone there …. made me sweat …. scaling helped.
    I think AMZN has an 85 handle tomorrow …. maybe lower.  10% off the close for the options boys.


  163. AXP/Sun – Actually, you were supposed to sell the third today, ahead of earnings.  I was only saying that, during the time you fill you first 2:2 spread, things may change and you may want to make a new decision but nothing changed and we did want to sell the 3 (as we topped out right at $30 as expected).  Again, this goes back to the idea that you should really paper trade new types of trades until you completely understand how they work rather than risking money on positions if you are not 100% clear on the goals.  Chaper 11 in the book covers backspreads and note that it is under "Advanced Strategies" and is the second to last chapter, with the assumption you have practiced and mastered the first 10. 

    Here’s a whole article on Ratio Backspreads and here’s a whole post on ways to save trades by rolling options (useful for the bears this week!)

    Rising/Barf – I think we rise as a simple function of inevitable global inflation, which is the only way we’re ever going to get out of debt.  Sure it will screw China to pay them $2Tn back when the global economy is $150Tn (3x) but their economy will have grown from $9Tn to $37Tn so the "adjusted" $1.4Tn loss won’t be worse than if they take a $500M haircut now trying to cash in their T-Bills.  The US collects $2Tn in taxes on a $13Tn economy now (soon to be $3Tn!) and spends
    $3Tn (23%) but if they can cut keep spending down to $8Tn on a $39Tn economy (20%) then we have a $1Tn surplus to pay back debts. 

    AXP/Sun – Testing to see if I am able to paste it.   It seems confusing becasue you break up each single contract. 

    • I would just say BTO, AXP, Oct,  $32.50, 200, $1.50, $300, x (stop loss) then Balance – I don’t see why you need the rest as subseqent entries will act on the balance.
    • Next would be STO, AXP, Aug, $30, 200, $1.65, $330, X, Balance = -$30
    • Then STO, AXP, Aug, $30, 200, $1.70, $330, X, Balance = -$200

    This play takes up $500 in margin on the $2.50 spread on the two matched contracts and TOS charges another $529 on the naked call (all brokers differ and accounts within brokers differ).  You collected $200 so your net margin is $829.  That means, if we get up $160 at any time, that’s 20% and we should be thrilled.   

    What we know for sure is if AXP does not make $30 by Aug 21st, then we keep the $500 we sold (up $200) and any remaining balance in the long calls is more profit.  Once earnings happen, we need to judge the best course of action going forward and there are a lot of possiblities there.  You need to follow these plays over time to see how they play out, not try to deal with all the what-ifs in advance as if they will all neatly fit in some boxes ahead of time.  It’s good to have a spreadsheet and make plans but those plans are more like diagramming plays and putting them on a chalkboard ahead of a football game – you can have a really amazing plan but reality will mess with it every time. 

    Sprd/stke: $30 Margin: 50% $3,000 Expiration Duration Annualized
    Symbol Name   Current Target Stop % stop-loss   21-Aug-09 29 1218.02%  
    AXP American Express   $29.99 $28.00 -3.00% $29.09   $310.00 $610.00 97% $300.00
    Date Description   Price Shares Cost Bkr Total B S Expense Income Balance
    23-Jul-09 Buy Oct$32.50 Calls $1.55 200 $310.00   $310.00 1   $310.00   -$310.00
      STO Aug$30 Calls $1.70 200 $340.00   $340.00   1   $340.00 $30.00
      STO Aug$30 Calls $1.70 100 $170.00   $170.00   1   $170.00 $200.00
      Quote to BTC Aug Calls           1       $200.00
    22-Aug-09 Quote sell Oct Calls $0.50 200 $100.00   $100.00   1   $100.00 $300.00
    Do Not "sell" the 3rd Aug $30′s until you see which way the price is going.
    The Oct Calls are a "throw-a-way" as protection on the Aug Calls.
    The strategy here is ? a quick short play because we think the stock will pull back in a day or 3.
    We want the price to remain below $30 (if stock is above $30 we will have to buy at market and resell at $30)
    Our loss is limited to $2.50 with the Oct Calls
    After we sell Aug $30′s (or they expire) we then sell the Oct $32.50′s for what ever we can get 
    (or maybe sell when the Aug $30′s are in safe territory)

  164. And what a bullish parade they had going on CNBC today …. everyone wanted to buy this breakout …
     
    I can’t believe the crap they were claiming about "real buyers" in the market.  I don’t know any of them ….


  165. By the way, those are Sun’s notes below the sheet, not mine! 


  166. Phil Thank you very much, I appreciate your help and wisdom.


  167. One last thought on AMZN.  The CNBC comments that b/c EBAY did well, AMZN would do well are, well, absurd.
    Of course EBAY should do well in a recession / depression.  a) they lowered fees.  b) a lot of sellers need to sell their stuff to pay their bills !
     
    AMZN, on the other hand, is a retailer pure and simple.  Very little auction business there (if any).
     
    There are some similarities, but given the flea market nature of Ebay, the differences should have been obvious.


  168.  What in the heck got into CAT and HOG today !?!?!?  Are the MM’s pissed off at me?
     
    First I jump on thier back and they try to buck and shake me off. Then I sink my claws into them and they go crazy today. Tomorrow I’m gonna sink my teeth into them until I draw blood and make a meal out of those beasts… 
     
    Grrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr


  169. Cap and others,
     
    Re: cNBC; I laughed yesterday when Terranova said he continued to buy MSFT into earnings because of all the wonderful products, etc they made. They did have a good run recently but there is no substance to what they make or do….they can’t even date Yahoo properly, Vista is being taken off so many machines, BING is good but irrelevant, and he expects us to buy into the idea that they will show super earnings…….and of course all the people that follow his opinion got burned…….if he offered two views and chose between them that would be acceptable but he states it like it is a fact and not an opinion…..if cNBC would analyze things rather than preach, it might be useful……….sorry, enough said. (PS I shorted AMZN and MSFT)


  170. well done, CAP!!


  171. Phil – FXP free play idea - FXP is now below 10 - I am showing it closing at ~ 9.80 and the Jan $20 put is ~11.20, so you can own both the ETF and 20 Put for $20 without need to sell the  Jan 11 $40 call (and associated problems dealing with the 40 naked caller after Jan). Unless I am missing something, next Jan, if FXP is below 20, you execute put and you are scratch. If above $20 you sell ETF with no call limit and you are up – possibly substantially. It couldn’t be this easy, other than tying up capital what are downsides, what did I miss. Thx.


  172. Phil/AXP: As an expert and the creator of the trades you can visualize these trades instantly in your mind. I am the same way in the const business. But as a newbie in either business a written plan is a necessity whether the final product follows the plan or not depends on a lot of variables. "A picture is worth a 1,000 words."  I have found that I can enter the data and let the formulas do all the math and from the results I can see the concept and visualize the "expected" out come. I will review the documents you indicated. Tks for the review, I think you said everything I had on the SS except for the timing on the 3rd Aug $30′s. I did have the margin wrong I forgot to change the calc from the strike to the spread (I know better). Thanks again.


  173. Here’s why global economies are holding up and companies are reporting better than expected results. Our Gov is propping up the global economy…..
    http://www.youtube.com/watch?v=2_VCy0lMU1g&feature=related


  174. Good Morning Everyone
     
    UK GDP much worse than expected -0.8% v -0.3% yet FTSE continues to storm upwards. The US has also erased its overnight losses. Nasdaq run of panic buying now reminds me of the Dotcom boom. I haven’t been in the market for a couple of weeks now – waiting to go short again. I thought today would be the day – it seems not.


  175. Good morning Phil and all,
     
    Well yesterday the glass shatterred. Today we get to see if glass shards levitate in defiance of gravity.
     
    Hey… maybe gravity has been quietly repealed as Government Sachs decides that taking over the free market isn’t enough, but now "they" will take over the universe too and remake the laws of nature to their own liking.


  176. It doesnt look like today will be my hoped for profit taking day so here is another bearish article that Phil will no doubt shred !


  177.  Morning all; and all hail the leader :)
     
    One question about the LYG play yesterday. i like it and %30 is great but such a company why not just out right buy the stock and maybe sell the put too, so we can own the stock long term, enjoy the upside of the stock recovering and getting the dividens until we grow old, why sell the calls too so we loose the stock when every thing recovers?


  178. Good morning!

    No problem CDS!

    AMZN/Cap – I thought earnings were actually good.  They just couldn’t live up to those crazy expectaions of the run-up.  Sales were up 15% – who the hell has that these days other than AAPL?   Even North America was up 13%.  Also, $142M earnings (.32/share) were after being knocked down $51M on ToysRUs settlement.  So I wouldn’t get too bearish on them.  If they sell back down to $80, I’d be inclined to get in.

    CAT/Merk – I would not bet against them.  Massive stimulus is playing right into their sweet spot.  HOG may be toppy here.

    Good job wading through the BS Ocelli!

    FXP/Concreata – You are right, it is a riskless trade.  In fact, if you sell the Jan $20 calls for .75, it’s a guaranteed .75!  

    Review/Sun – No problem.  You are learning a lot already, by this time next year you’ll be teaching others I’m sure…

    Loans/Kustomz – I think the question is how far outside the norm is this?  I imagine we are always lending money and I’m sure this is more than usual but is it triple, double, 30%?

    UK/DB – Oh DB, you and you "facts!"  This market has no interest in your statistics.  The Germans are confident so why aren’t you?  8-)

    Gravity/Merk – Oh no, first DB with hard data and now you with physics?  Really guys, you are simply on the wrong side of the looking glass.  Just drink the little bottle, slide through the keyhole and eat a mushroom and this will all start to make more sense….

    Kim/DB – Too long for me to go through now so I’ll just say "too many words" and be done with it! 

    LYG/Micro – There is nothing wrong with going more bullish but first read the article DB just posted – I would still rather have my hedges and be sad to make "only" 30%.  If life is so great when positions close out – I’m sure we’ll find something else to trade.  Don’t forget if you buy 500 LYG at $5 and sell the Jan $5 puts and calls for $1.80 (net $1,600) and the stock flies up to $10 in Jan.  You can simply buy 500 more for $10 and roll the $5 caller to 2011 $10s for maybe $2.50, which would put you in for ($3.20 + $2.50 + $10)/2 or $7.85 with a call away at $10 in 2011.  So, if things are so great, just buy a few more shares on the way up.  If you are willing to DD and roll up at $10 with 500 more, then buy 100 more at $6,$7,$8…  and your net on the new set would be $7.50 for an average entry on 1,000 of $5.35 with 1/2 the stock covered by the Jan $5s (some would say well-protected).  A big problem people have trading is they don’t think of the trade in terms of something that is worked on over time.  There is no need to rush into things – you may miss some huge winners but you will more often miss taking huge losses.


  179.  Point taken, that how i have managed to screw myself over everytime, by rushing in and not thinking about the time line. i used to think that there was this one chance and i had to hurry up or there would never be anything else, and that the mistake, there is ALWAYS something else when you play correctly. 
     
    thanks
    david


  180. What’s w/ the RIDICULOUS futures …. green again !   How can this be ?
    MSFT  -6%
    AMZN   -6%
    AXP   -4%
    INTC  -1.5%
    AAPL -1%


  181. Morning @ all !
     
    Cap: the red paint was all used in march. Only green paint remaining!
     
    AMZN: Good point Phil. I will be looking also for a $80 (or under)  to trade up.


  182. Phil, I agree with your analysis. AMZN did ok and my short idea was that it moved into the stratasphere too quickly and could pull back, but I wouldn’t stay short too long. But MSFT actually had bad numbers, which is a different situation for shorting. I am flying blind a bit here, but this time it worked out. BTW excellent links to ratio backspreads yesterday……hope that is part of your book.


  183. AMZN may have done "ok", but its valuation is absurd.
    It is a low margin retailer w/ a ridiculous P/E and misleads its true cash flow generating capacity.


  184. Phil – GLD came down a bit yesterday. If I am bullish at this 93+ level, what’s the best way to enter – Buy/Write?


  185. FXP Jan calls – thanks for finding an insurance policy that actually pays one to hold the insurance!