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Monday Market Adjustments

We had a clear signal to stay cautiously bearish on Friday.

Despite the jobs rally, I had said in the morning post: "We’ll be paying special attention to the Russell, which tested the 33% line (off the top) at 574 on Tuesday.  We would consider a breakout over that level to be an extremely bullish sign for our indexes.  Our tip-off to get bearish at yesterday’s open was the failure of the QQQQs to break 40 so that will be our bull/bear signal for the day."  Despite the bullish-looking performance by the Dow and especially the Transports, who flew up 4% to lead the markets – the failure of the Russell to make a major breakout and the failure of the Qs to make a critical breakout at 40 (Nas 2,000) left us a bit less than bullish over the weekend

It will remain all about 574 and 40 this week (see David Fry chart) as our other levels (Dow 9,297, S&P 1,000, NYSE 6,438, Russell 562 and SOX 308) all seem to be well and truly broken.  2,017 is the proper mark on the Nasdaq so failing 2,000 is extra bad with a side of worry.  Still, as I also said Friday: "Not breaking our levels on this tremendously good jobs news would be a huge disappointment but it’s holding them that’s key."  The dollar is gathering strength this morning, also on the jobs news, and that's been very bullish for Asia (who export to us) this morning so keep that in mind as it does put some downward pressure on the US markets, which would make a breakout today even more impressive. 

In general, we took the advice of Yukio Takahashi of Mizuho securities who said: "The smart move is to take profits now."  Our $100K Virtual Portfolio was up $12,291 in cash and $6,690 in unrealized gains so our changes were protective, looking to cap big gains made on C and LYG by selling protective calls.  Having cash on the side is good as it lets us speculate a little.  Not all our speculation is to the downside, although we did take short plays with SRS Sept $10 calls, DIA Dec $95 puts and QID Sept $24 calls into Friday's rally, we also ran another Long Shot list for Members over the weekend as well as 5 very detailed Biotech long plays and a Pharma cover thanks to Pharmboy's Phavorite Phings, which is a must read for Members who missed it. 

I was just interviewed by AOL and they asked me what my favorite sector was for long-term investing and I said absolutely Health Care.  Despite the short-term noise over coverage, you simply can't fight the demographics that are coming down the line.  Even if the us passes "Health Care reform," the idea is to provide more coverage, not less.  Over the next 10 years, 50M Americans will move into the 65-75 year old bracket and if those people are ALL covered for their projected 20M heart operations, 10M diabetes treatments, 15M cancer therapies, 30M arthritis prescriptions, etc… then you can expect an uptick in the business of health care

My favorite ETF in that sector at the moment is IHI (equipment).  Although it has outpaced the overall XLV by 20% this year, if you look at the performance of a discovered company like ISRG (4.2% of the index and up 80% this year), who were a Fall favorite of ours - you can see  the potential of this ETF.  MDT (11.8%), TMO (7.5%), BSX (7.3%), STJ (7%) and SYK (6.1%) are all companies we play from time to time (and SYK is a great buy in it's own right at $40.21), so this ETF is perfect for a long-term tracker and still 25% below the 2008 highs.  You can give yourself a nice, discounted entry at $42.50 by selling the Feb $45 puts naked for $2.50.  If your margin is 50% it's a $2.50 return on net $20 (12.5%) over 6 months – not a bad way to initiate a position!  If we do break over our levels, the Feb $45s have just $2 in premium at $4.65.  If the ETF does make it over $47.50, then it will likely fill the gap at $53, which would make a nice 50% or better profit on the bull side. 

Aside from the dollar advance, Asia also got good news as Japanese machinery orders rose for the first time in four months in June, up 9.7% from May and way more than the 2.6% expected by clueless economists, who get paid to forecast these things.  Japan's account surplus also doubled from last year to 1.15 Trillion Yen, which sounds very impressive but is just $11.8Bn but it's very significant as it's the first gain since Feb 2008.  That lifted the NIkkei 1.1% to start the week but it was a sloppy close after a huge gap up.  “We shouldn’t be too optimistic about capital spending yet,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Companies are still burdened with excess labor and capacity and the outlook for the economy is uncertain.”    

Machine orders, an indicator of capital investment in the next three to six months, will fall 8.6 percent in the current quarter, the government said. June’s gain was mostly due to a purchase of equipment used to generate nuclear power. Without that, orders would have risen about 2 percent or 3 percent, said Shigeru Sugihara, head of statistics at the Cabinet Office.  More than $2 trillion in spending by governments worldwide has stabilized global demand, helping Japanese manufacturers such as Kubota Corp., which is selling more farming equipment in China. Japan’s factory production rose 8.3 percent last quarter, rebounding from a record 22.1 percent plunge in the previous period

Not surprising to us (as I had picked the FXI calls in Friday morning's post) was a 554-point snap-back on the Hang Seng.  China played the stimulus card last Friday but we're very disappointed that they couldn't crack the 21,000 mark, despite the "great" jobs news in the US. Property stocks held the Shanghai back and this week we face a critical test along the 370 line, wifh a possible fall to the 50 dma at 350 ahead if the US turns down today.  So we won't be hanging on the the FXI calls unless we break our US levels – things are truly all connected!  Also worrying in Asia is the Baltic Dry Index, which is going to test 2,750, a level it hasn't seen since May and a 35% pullback off the June highs.   Before all the commodity madness, the BDI used to play between 4,000 and 5,000 back in '06-'07 so let's say 5,000 would be fair given 2 years of inflation and growth.  Below 2,750 is HALF!  This does not support a global market breakout above the 33% lines so let's watch this carefully. 

Europe is down about a point ahead of our open (9:15) and there is literally nothing going on over there this morning that I have read about other than RBS and LYG falling.  RBS fell because bad-debt charges were up significantly and management warned that they saw little sign of improvement before 2011.  LYG fell on almost good news that they want to withdraw from the government's asset-protection "scheme" but they will need to raise about $3Bn to do it so there are fears of a dilutive offering. 

We will watch and wait today to see what the markets will do.  There is no earth-shaking news in the US this morning.  MCD had a very nice 4.3% sales growth in July so they should help the Dow somewhat but oil can be a drag if they start selling off, especially if they fail $70 and gold is already back below $950 (where we sold calls) so it will be interesting to say the least this morning

Be careful out there!


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  1. cwan -  l like BMY.  I was going to write on them, but decided to to AZN instead.  BMY should be part of my next writeup, but I own the stock for the dividend and sold the Dec 21s and have been selling puts almost every month.  I think they are takeover material, but with their last tender offer for Medarex, it may be a bit longer than I planned.  They are fighting with OH resistance right now, so be prepared if you go in, to DD somewhere in the 18-20 range.  Low is about 16.

  2.  Phil
    I have sold Aug SRS 18 puts – what would you think about a DD  to Sept here? If so – to what level? Thanks,

  3. Phil: when big money moves in or out, it leads to ROTATION,
    could we get a rotation alert system established ?
    the sectors technology, energy/oil/oil services, consumer staples, consumer discretionary, healthcare, utilities, financials,
    and maybe others typically get affected by moneyflow in or out.
    I certainly like to move with the big moneyflow.
    I have been looking for info about this and have been unsuccessful in finding relevant info.
    Maybe someone else would know.
    This rotation matrix would show the sectors and whether there is moneyflow in or out, it does have to be up to date though.

  4. Maguire Properties Inc.’s (MPG) second-quarter loss widened on write-downs as the company’s revenue was flat from a year ago.
    Commercial real-estate investment trusts like Maguire have been slammed recently by rising foreclosures and delinquencies. Maguire has been struggling since its purchase of a portfolio of office buildings in Southern California’s Orange County in early 2007, just before the crash of the subprime-mortgage industry.
    It has been selling off properties, and late Sunday The Wall Street Journal reported the company is planning to hand over control of seven buildings with $1.06 billion in debt to creditors. In the latest quarter, Maguire recorded $384.7 million in write-downs related to the properties.
    Maguire Properties – one of the largest office landlords in Southern California – posted a loss of $375.7 million, or $7.95 a share, compared with a prior-year loss of $105.9 million, or $2.32 a share. The results included 76 cents a share this year and $1.21 a share last year in losses from discontinued operations.
    Funds from operations – an important profitability measure for REITs – widened to a loss of $7.10 a share from a loss of $1.18 a share a year earlier. Excluding items, FFO slipped to 8 cents a share from 9 cents a share.
    Revenue was flat at $134.8 million.
    The company’s new leases and renewals completed in the quarter totaled about 452,000 square feet.
    Shares were recently up 1 cent at 90 cents in premarket trading. Though the stock has risen 46% in the last month, it is off 92% in the last year.

    -By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;

  5. MOS puts- in for .80; out for 1.10- AH, finally a winner!
    Now for SRS.

  6. SRS/Deano – Ouch, those are high!   SRS could go back to $14 prettty easy so why not roll to 2x the Sept $15 puts, which are $4.20 with .60 in premium.  You may want to consider covering all or just the new 1/2 of your downside by buying the Oct $9 puts for .80.  Remember, you are not trying to win now, just get even and moving to 2x almost doubles your downside delta, which you don’t want.  If SRS doees go back to $14, even if your Oct puts are completely wiped out, I would imagine you’d still have to call that a win.

    Rotation/RMM – Sounds like a good idea.  Be sure to tell us when you find something that tells us that!   I suppose you could just track the major ETFs and assume gains are from money-flow. 

    Anemic volume yet again and the selling was quickly brought to a halt but not much buying either.  Levels will tell us more now as they are tested without a catalyst.  Lots of data coming up this week: Wholesale Inventories and Productivity tomrrow; Trade and Treasury Budget Wednesday along with a Rate Decision in the afternoon;  Thursday is Import/Export Prices, Weekly Jobs, RETAIL SALES and Business Inventories and Friday is CPI, Industrial Production and Cap Utilization along with Michigan Sentiment.  I’m expecting July data to be weaker than June other than autos (Cash for Clunkers) but the analysts are all pointing up so we’ll have to see. 

    Russell is at 569 and looks more likely to fail 562 than break 574 today.  Qs do not look motivated at all with the Nas back under 2,000 and Transports are leading the pullback today but down just 1.13% at the moment is not so bad after a good run. 

    Our levels remain: Dow 9,297, S&P 1,000, Nasdq 2,017, NYSE 6,438, Russell 562 and SOX 308 and we have lost the Nas and the SOX already, there is nothing bullish to be played if we don’t get them back as they have no excuse not to cross as they’ve both done it already.  Another failure would be a good signal to press those bear bets and to say a correction is long overdue would be a hell of an understatement. 

  7. What has got into YRCW?

  8. David likes CMCSA today and I like them anyway as they pay a 1.7% dividend and have them on my short list (not list to short but list of final candidates) for the new $100KP as I consider them undervalued and steady.  As an income-producer, we don’t want to do this but as a nice way to play the game, you can do an artificial buy/write with the 2011 $10s at $5.80, selling the 2011 $15s for $2.90 and the 2011 $12.50 puts for $1.85 for net $1.05/11.57, which is a 23% discount if put to you and a very nice 400% profit on cash if called away.  Even if you have to margin $6.25 from the put side, it’s still a 49% profit on the $6.25 + $1.05 total tied up for 15 months.  

    I’m also confident enough to go with the Jan $12.50s at $4.10 and just forget about it for a while.  If they drop we roll down and buy more at a lower price and if they go up we sell some Sept calls but I expect them to hold the 50 dma at $14.50 as they gather strength for a move back up.

  9. MPG/GS – Well they dumped out this morning to .75, will be interesting to see what the final verdict is on their day.

    MOS/Pstas – FINALLY!!!  SRS up 4% so there’s some hope (just 30% more and I’ll be happy).

    YRCW/Red – The union agreed to more wage cuts so a valid move up.  This is why I so loved them at $1 but up here is a tough call until they prove they can hold $3 again. 

  10. FOE holding strong.   Broke through OH resistance Friday, so they also need to close above 7…..otherwise, I may cover at the close or tomorrow.

  11. pstas- You were able to trade MOS options after-hours?

  12. GSsucks/MOS- No after hours. Bought on Fri; sold on Mon- right after the open. It moved too fast and I missed another .20 if I had been quicker on the trigger.

  13. Phil: your 10:05 on CMCSA: when you pick the calls and puts you want to sell, WHAT make you pick the strikes way out and not closer ?

  14. morning
    Q for Pharm: i bought some of the NNVC (that came across thru someone else) and today it shot up on some news. Is there a typical pattern that this might follow? ie up all at once and then drifting back down; creeping up for a few days? Probably not an answerable question, but maybe you could offer your expert opinion.

  15. never mind – while i was asking the question it dropped 6 pts! Crazy

  16. Morx – typical pattern? Correct on the assumption that it is hard to answer.  NNVC is in a very crowded space.  If it were me, I would sell 1/2 at least or put a stop order in to protect yourself.  You can always go back in at a later date.

  17. Phil: next week its OPEX, I have no AUG longs but aug callers and putters,
    still early to act on ??
    callers: WMT aug 50, MDT aug35, DE aug 45, DHI aug 12.5,
    putter: SPWRA 29.

  18. Phil, have SRS Sep 10s at 2. Does it make sense to sell Aug 12s at .75?

  19. Also have WHR Sep 60 puts at 3.1. Should I sell Aug covers and if so which ones?

  20. Meanwhile, I thing GS must be subscribing to the Oxen Report as CMCSA got bought like crazy at $14.95, arresting the sell-off David predicted, went up to his target zone ($15.10-$15.20) and then sold like crazy all the way back to $14.95, where it found buyers again…  Nice job David!  On the short side though, shorting a penny stock is just not for me, if you want to make a nickel you can sell the naked $2.50 calls for .05 and then you don’t have to stare at the damn thing all day.

    Energy sector holding us up this morning along a sudden interest in small caps, which is pushing the RUT back to 572.  BAC and C continue to march forward and I’m thinking BAC sees the $20s at least by the year’s end.  ZION is STILL going up, just touching $18 before and getting a little silly but I don’t generally short stocks I like so just watching for fun now. 

    Somebody took my my IHI pick to heart as they jumped this morning to test $47.50 and a lot of the components are moving up.  MRK, who we discussed in-depth in Pharm’s post, are up a whopping 2.6% after giving us a great open so thanks Mr. Buffett for waiting until the market opened!

    CMSCA/RMM – Well for one thing a lack of greed.  The payoff is great as is, why mess around.  If you buy/write the Sept $15s you collect $1.50 for 6 weeks and you’re in for $13.50/14.75 and you’ve committed $13.50 cash plus the $7.50 margin while my play requires just $7.30 in cash and margin and you can only get 1x put to you at $11.57.  So I can buy 2x (cash and margin) and lock that play down for a potential upside of 1x while you would start this play with 1x plus .5x in margin and it will take you 6 perfect sales (and those are 6-week sales) to make a 50% return on what you tie up.  There is a value to taking a simple play and just setting it up and NOT touching it for months at a time, maybe never if all goes according to plan. 

    Aug/RMM – Actually Weds is clean-up day for Aug.  You only keep the things you fully intend to leave through expiration, everything else rolls unless, as with many calls this month, there’s no harm in waiting.  If we don’t get our sell-off this week, we very well may next week.  None of those calls have really gotten away from you but if we break our levels then you would do well to stop out 1/2 your covers – you can always re-cover if we head back down and this is a perfect place to use the on/off switch as we cross critical levels. 

    SRS/Mampcs – That was the idea of that play but if they break over $11.50, you don’t want to cover unless they fail it again so maybe give them a chance this morning.  $11.35 is the breakdown line for today. 

  21. WHR/Mampcs – They are cracking too, best to be patient unless we break up on the RUT and Nas, then all the bears need to find caves…

  22. Phil any updates on your long term AAPL play?  ….still holdin the Jan 170c – Aug150callr. thanks.

  23. Selling half of Friday’s SPG 55 calendars for 1.00, holding the remainder. Also selling half my FXE Sept. 141 puts from last week, but rolling the remainder out since I think Euro may have a fair bit of downside left longer term. Hope to sell half again at 140 and then gamble with the remainder on a bigger Euro collapse.
    By the way, these currency ETF options like FXB, FXE, FXJ have very low IV: they’re like bond ETF options in that you can get a lot of leverage for little outlay, as long as you can bridge the B-A spread successfully. I suspect straddles on these would work much of the time.

  24. ARRY is moving up.  I mentioned them awhile ago, and I believe MrM is in on them at ~ 3.1.  They have broken all OH resistance levels and Kopp Inv. just took a 5% stake in them.  They will need more $$, but I know that many Pharma’s are looking at their MEK compounds for cancer.  Their market cap is tiny and they have a lot of scientists/G&A, so acquistion is the only play I can see.

  25. Phil, have Aug 40 QQQQ Puts at 1.3 (now .8). Any suggested adjustments?

  26. Hey everybody.

    Let me know if you have any questions about playing DYN or CMCSA if you still want to get involved.

    Post on

    David Ristau

  27. Phil, Also have the MA play from a couple of weeks ago (2 Oct 210 calls at 4.5 (now 8.8), -3 Aug 200 calls at 3.9 (now 6.75)). It’s sort of even at the moment, but could get bad if MA goes up in the next 2 weeks. Your thoughts?
    Also, have the Sept 165 Puts from before that I got at 2.7 (now .5). Should I double down or roll?

  28. Just wondering whether RMM’s idea of a sector rotation chart could be satisfied by putting say a 10 day version of the sector performance chart we already have on the bottom of the post. I do find the 1 day view illuminating, but from a rotation perspective a 1 day view doesn’t reveal everything.
    As I don’t know where that data comes from I don’t know if other periods are easily available, just a suggestion.

  29. Hi Phil,  I am curious if you have an ideas about lower risk lower reward plays farther out that don’t take as much management as day trading but are nearer term than the 100k accounts.  Or, should I just follow optrader if I want more of this style of trading?

  30. Hypothesis: late-to-the-party dip-buyers prevent any big sell-offs until their buying-power is used up. I wish I know how long that takes, but probably at least a few days. I like being short a lot of expensive SPY Aug 101 calls, covering them with Dec 102 calls in a 5:4 ratio (slightly bullish).

  31. Sorry, that’s 5 Dec calls agaisnt each 4 August short calls.

  32. Phil
    HOV- I am in this fully covered with Aug 2.50′s which I sold at back in late June when HOV was selling for a paltry under 2.50 (who knew?). In any event, with the calls sold I am in for $1.64 and will net +50% when called away. I am quite happy to get called away but thought I would seek counsel on any way to take advantage of the run up in HOV?

  33. Wow!  Check the move up in the $.

  34. where, yeah. 10 minutes after I sold 20 FXE puts, lol.

  35. Pharm again: what are your thoughts re MTXX earnings tonight? Cover/uncover?

  36. Phil,
    On the buy/write’s you’ve posted since Friday, would wait till expiration or until we resolve our index targets one way or another, or would you execute them right now if you get your price?

  37. EricL – you need to have a chat with "them" about that. ;-)

  38. Good Morning,
    Phil, any plays on the FXI you mentioned friday?

  39. WIth the dollar gaining, USO still up, thoughts on playing for a drop.

  40. stevenparker: I agree that a 1  day period is no good for the rotation question, needs to be at least 1 week or more , the point is : is there really a rotation.
    when I look at "majot Us market performance data (wish I know how to copy this one and paste it in here), the NAS, NYS,R2000,DJ,SP,AMEX, they all moved up with the same slope since early July, so there the rotation was in all and UP, but there was a great difference in magnitude: Amex 25%,Nas 20%,NY 15%, R2000 10%,DJ 9 %, so, there was a RELATIVE rotation, some much stronger than others.
    I believe though not to use these market indices but sectors such as FINANCIALS, Technology etc.  I nstill need to find the right data.

  41. Phil
    Insteresting article on Seeking Alpha this morning re: UNG.
    What is your current view on UNG for possible new entry?

  42. Hey all,

    Just posted a new blog entry about my thoughts on EBAY and GM teaming up for partnership you may find interesting:

    David Ristau

  43. RMM
    Take a look at Dr. Brett’s site.  He does a weekly review of sectors that include rotation.  Not sure if this is what you’re looking for but it’s an interesting start.  Besides the sector stuff, Dr. Brett is always a great read.

  44. Morx – MTXX – I am naked on the stock.  Earnings may be a bit down b’c of the volutary w/d of Zicam products, and the lawsuits are piling up (again).  Total crap, but one has to understand that these are killer to any company.  If you are up or even, I would sell and you can get back in on a dip.  If not, then just be prepared to DD.

  45. CMCSA.  Man, I have a hard enuf time keeping up with this "chat" during the day using Phil’s 19th-century "manual refresh system" (lol) – now I gotta pop back and forth between Oxen and here to get the latest thinking from the two Mac Daddies?  Can’t we get dave his own cool color and his posts cross-post here?  Cuz Phil always got an opinion (albeit a good one) on Dave’s plays – let’s unify, baby!   Okay.  That tirade largely based on it being Monday (WHAT’S THE BEST Monday song ever?) and I bought CMCSA straight-up pre-open at $15.  I like them too – and figure the first dividend rolls around in about 8 weeks (I think) – wrote some calls to bring down my price…BUT, I dig PD’s option play.  So … be a wuss and stop out early today and come back in with the options?  Or man-up and hold the stock long-enuf to see if we make $15.20 (today or tomorrow) or a tad more and roll thru div ex date?   Thx for letting me share. 

  46. MDAS.  Anyone ‘rpund here want to grab my December 20s for $2.00?  That’s my cash point – for about 11%.  But boy has that order lingered.  Last trade is still $2.00 – bid a bit lower.  Oop.  Breaking news – ask up to $2.30 with bid trailing slightly at $1.95 now.   Almost there.  Maybe I go $2.10? (Said Pavlov’s greedy dog.)

  47. GS Sucks:   Nice handle … I like it !
    Financials; still absurd.  COF almost 35 thanks to schlock firm upgrade.  WFC, AXP, all these guys will be great shorts (probably right now).
    REITs, same thing.  SPG, VNO down a bit.   SLG up again to $34 + thanks to the sale of a 50% interest in an office building; a structured deal terms not fully disclosed; deal may or may not close; buyer is obscure for real estate world.
    As much as I like SLG, it would be a great short but no borrow on shares.  Merrill price target is $26, mine 20-25 as a fair range.  Over 30 is stupid.

  48. Keyser; txs, have seen this traderfeed, I will watch it and see what it does, basically that is what I like to watch:
    As we can see above, Technical Strength for the eight S&P sectors that I follow weekly remains largely bullish, with Consumer Discretionary and Energy shares in neutral territory. Recall that Technical Strength is a proprietary measure of short-term trending; sector readings of +300 to +500 suggest significant uptrending; -300 to -500 indicates significant downtrending. Readings between -100 and +100 suggest that a sector is not trending in a meaningful way.

    Here’s how the sectors are looking as of Friday’s close:

    MATERIALS: 320
    ENERGY: -20
    HEALTH CARE: 280
    FINANCIAL: 180

    I would look for the highest and the lowest numbers only, in between means little.

  49. AAPL/Oncmed – That’s like what I was just saying to RMM, if something is hopelessly in the money, like AAPL, you have very little to lose by waiting in case we have a big sell-off.  The Aug $150s are $15.70 and the Jan $170s are $13.30 – what was the entry on that?  The easy move is to DD the Jans and roll the calls to 2x the Sept $165s at $6.60 but there’s no hurry on that move as you do much better against the Augs on a pullback and the 2x delta (.53 x 2) would hurt you more to the upside thant he current .94 so no rush.  Same as all current advice – watch the Qs and Nas for that breakout, AAPL isn’t going too far without the Nas and the Nas isn’t going too far without the SOX, which are at 296 at the moment.

    Currency/Eric – I agree, I think the dollar was way oversold when the Pound hit $1.70 last week.  Now we’re at $165.5 and I think we have a ways to go.  Also 94 Yen will always be unacceptable to Japan and we already know China doesn’t want the dollar too weak or they will have a lot of stimulated factories and no one to sell to. 

    QQQQ/Mampcs – Aug is too risky after tomorrow (was already risky over the weekend but too late now).  Keep an eye on the fact that you can slel the $39 puts for .40 and roll to the Sept $40 puts at $1.40 so that’s +.20 net to buy a month and a buck in position.  If that relationship starts getting away from you, then you may want to pull the trigger but, for now, you have that 40 line to hang your hat on. 

    MA/Mampcs – It’s pretty much on target and goes back to the same thing yet again – watch the breakout levels, if we break our breakout levels then kill the bearish plays.  Of course you could always just buy 2 more Oct $210 if they cross $204, which would up your delta to 1.76 vs 1.89 on the callers, who still have $3 in premium (40%) but I have heard nothing that makes me thing consumer CC spending is on the rebound.  Retail spending report will be a big deal for you this week.  As to the Sept $165 puts, that was a big bet in the same direction as the backspread.  It’s never good to compound your bets like that.  It doesn’t make sense that you are worried about your callers burying you on the backspread but considering spending more money on puts does it?  If you are going to put more money in, I’d roll to the Oct $185 puts at $4.60 (+$4.10) and sell the Sept $190 puts for $3.50).   So rather than a DD on pretty hopeless Aug puts you have 2.5 months for a sell-off to come and a $20 improvement in position for .60.  The Oct $180 puts are $3.50 and the least of your problems would be "having" to roll the putter into a $5 vertical.

    Sectors/Steve – It’s a good idea but I don’t own the data, it’s  You would think someone would track this somewhere – it’s certainly something I’d be interested in….

    Plays/Smasher – Optrader’s stuff is pretty short-term so I’m not sure that’s what you mean.  The new $100K portfolio will be aimed at generating a montly income of $2,000 with as little risk as possible so you might like that.  Otherwise, the buy/writes I post about 10 times a week would seem to fit the bill.  You buy a stock, sell puts and calls and wait for expiration unless something drastic happens – what’s wrong with that?

    SPY spread/Eric – Nice way to play it patiently.

    HOV/Pstas – Congrats on the gain and it was prudent to lock in those gains.  At $4.24 you can go with 2x the Feb $5s at .90 ($1.80) and roll your callers to 3x the Nov $5s at .65 (even).  Since that is the alternative to buying them back for $1.80 and getting called away at $2.50, it’s not a bad trade-off.  I am much more down on the REITs than I am on the builders.  I do think housing is near a bottom, even if home prices continue to fall, and new home inventories are winding down, especially in the Northeast, where HOV is concentrated.   The Feb Delta is almost identical to the Nov delta so it’s a pretty bullish play but you can still stop out the stock at $4 and be left with a bearish backspread as long as your broker’s margin requirement on the naked calls doesn’t exceed the price of the stock (it shouldn’t).

    $$$/Where – Mighty, mighty dollar all of a suddend…

    Buy/Writes/Maxt – I’m a waiter.  If we break our levels, then we can buy but if we don’t, then things will get cheaper and the VIX will head up – both are better for our buy/writes. 

    "THEM"/Where – I hope you guys read Tyler’s article on Flash Derivate Trading.  If you’ve ever had the feeling that the MM was messing around with you and pushing the option prices around as you tried to enter and exit a position and then reversing as soon as you capitulate and give them their deal.  YOU ARE NOT PARANOID – there are programs specifically designed to "get you."  This is why my mantra is DON’T CHASE – if you miss it, you miss it but paying up for a contract is just handing your money over to a machine (ie. GS). 

    Speaking of GS – Kudos to Keyser for his nice reprimand of GS clients

    Also from Tyler, $181Bn budget deficit for July.   Individual and Corporate tax receipts are falling 5%, outlays are up 25%:

    FXI/Joe – As I said in the above post and in comments somewhere – If you didn’t get out even on Friday you should have damned well taken the money and ran this morning.

    USO/Cds – I would love to play USO for a drop but it is so scary!  More fun to play ERY (3x Energy bear) bullish.  The Jan $12.50/$17.50 spread is $2.20 for a $5 payoff if they just stop going down and I think establishing the Oct $15s at $4.40 against a 1/2 sale of the Aug $17.50s at $1.35 is a nice way to dip your toe into the play.  You can use the net .67 to roll the Oct $15s down to the $14s so that’s not a bad entry whether up or down

  50. Phil, how about selling some TIE puts?  have they already had earnings?

  51. I have my latest portfolio results published here:



  52. IHI……I’m in the medical field.  A few general comments.  I agree with Phil.  This train ain’t slowing down.  I treat mainly elderly patients and they just keep coming.  It’s not like that new TV or refrigerator, which you can put off buying.  When you get sick ( and we all do, sooner or later) you have to seek health care.  And when you do, devices often have to be installed…pacemakers, total hips, femoral rods, etc.   The insurance companies and the government try not to pay the health care providers, but the equipment providers do not get paid by the insurance carriers or the gov.  They get paid by the hospitals.  And they have to pay their bills.  I’m long IHI.

  53.  A stop loss question for you pro traders, please: What is the market mechanism – if any – that prevents spurious bids from triggering stops?  Here’s my example: I owned shares in ARRY.  The shares have not dropped below $3.80 in weeks so I put a stop order at 3.70.  This morning someone placed an opening Bid at 9:30 for 3.51, so my stop triggered and they took my shares.  However, the Ask on that Bid was 4.25 and the trade was at 4.03.  There have been no trades today under 3.92, so that Bid of 3.51 did not reflect the market conditions and yet it triggered my stop (and surely others).  If a stop triggers on the Bid price with no regard to Last price, what prevents people from entering spurious bids well below market just to trigger stops maliciously?  In other words, the guy who bid $3.51 this morning for a mere 100 shares could have just as easily bid $2.51 for 100 shares and triggered even more stops, correct?  This seems like an illogical market mechanism.

  54. GNK.  I know (collectively) we like others here.   But given my history with GNK (including that tantalizing dividend way back when) I am resolute in my commitment to making Peter Georgiopoulos my personal call girl for as long as possible.   We don’t need to talk about the modest red hue to my GNK positions over the last 18 months (it is modest) – and now I’m in for options or not at all.  But I am going to bang (sell – sorry) those calls until I get some green – and PG starts losing some of the that full head of Greek hair.   (I’m only sharing cuz I’m cashing the first batch today.)  Viva BDI!  Death to anyone in shipping that has more than four syllables in their last name.

  55. Wow, look at COF option IV. Short the Aug 34/36 strangle for 2.3 credit. What could possibly go wrong?

  56. ENTRY $1.1

  57. Ugh.  Sorry for the typos.   A rant with typos is like stuttering.   I hate myself for it.  lol

  58. FRE – $1.25  + $0.51 +68.92%
    Is this a sign of recovery or just …. :-)

  59. Phil….DD Jans and roll to 2x Sept 165callers for $6.60?  ….no can do…

  60. FRE…Indeed….Phil, what’s pushed this stock up so rapidly???

  61. Virtual $1 to the first person who bitches about SRS today.  (Hey don’t be mad at me it’s burned my fingers too!)

  62. Time to sell the SRS options and buy them again later today when it’s at $9.50 or hold on?

  63. I love Paul Krugman: "All in all, then, the government has played a crucial stabilizing role in this economic crisis. Ronald Reagan was wrong: sometimes the private sector is the problem, and government is the solution."

    UNG/Pstas – I think there’s just too darned much of the stuff around at the moment.  There always has been, natural gas is cheap and plentiful and, if it weren’t for a combination of speculators, hurricanes and cartel-like control by CHK and others, nat gas would never go above $2.  Declines in prodcution do not cause increases in demand – until inventories stop going up, these guys are dreaming.  Of course these guys are unhedged, due to the above factors, we bought UNG when it hit $12 in April and stuck with it when it went back there in June.  $3 is a fair enough price that theres no reason for them to lock it in for a year but, again, it doesn’t mean things are looking up.

    Monday/Dstill – That would be "I don’t like Mondays" – don’t even mention the Mamas and the Papas in the same breath as Sir Bob Geldof…  As to David – his service is seperate, like Opts.  You are a Premium member so you get everything but we can’t combine it for you.  If you get the new IE browser it has nice tabs that you can flick back and forth in (speaking of people using 19th century tech).  You know CMCSA will drop on ex-date so waiting to reestablish is best.

    COF/Cap – Great short idea after bad news from RBS on defaults.  Some of these investors must be living on another planet where all the homes are filled with happy, working families that are never behind on their bills and none of the shopping centers they visit have empy stores – that’s all I can think of to excuse some of the buying I’m seeing…  COF is up so high they have run out of August option brackets as no one in their right mind considered they could hit $35 this month.  The Sept $40 puts are $6.15 and you can sell the Aug $35 puts for $1.75 but I’d wait and try to sell the $34 puts for $2+.  If they hold $34.50 and head back up, then sell the Aug $35 puts and use that as the line for on/off coverage

  64. Phil –
    I wish I could take credit for the GS reprimand but, alas, there’s more than one KeyserSoze on the internet.  While it’s not quite as ubiquitous as John Smith, it’s pretty close so you’ve really got to know your Keyser’s from site to site.  8-)

  65. AMZN.  Call me crazy (plz – b4 I pull the trigger again) but I love AMZN.   They have delivered for me (no pun) since long before the bubble – and my folio seems naked without them.  So I’ve been going with LEAPs.  I currently like the Jan 2010 80s and am going to buy more unless cooler heads prevail.  Monthly calls against them seem pretty easy/profitable so far.   Thoughts?

  66. Pharmboy,
    What do you think of mck? They seem to be going in the right direction although I don’t know much about them.

  67. Phil, a good company in the healthcare sector, although not heavily traded, is Amedysis (AMED).  They are one of the largest Home Health companies in the country and continues to buy smaller agencies.  Their stock has moved from the lows in March at 25 to 44.70 today.  What do you think about a buy/write on them.  Selling the call/put Dec 45′s for a net credit of 9.80 gets you net 34.90/39.95.  If called away it is a 29% profit and if put to it is net 10% below today’s price.

  68.  Okay, newbie traders, pay attention and learn from my mistakes.  I’ve done some reading on my stop trigger problem as described in my earlier post.  A standard stop is triggered by the Best Bid, which in my case was a rediculous price but the stock was thinly traded.  So it looks like you should not place standard stops on second-tier stocks because if there are no reasonable bids open then someone can place an unreasonable bid and it then becomes the Best Bid.  An improved approach appears to be to use contingent stops that trigger when the Last falls below your threshhold, this takes the Bid price out of the equation.  I know that Phil dislikes stops and I can see why because in this whipsaw market they can trigger on whimsical moves, so with them you get bit by the swings and without them you need to watch the market every minute.

  69. Hello.
    FRE: seems there is a strong bill demand.  Now we have only to look WHO are the ones creating the demand (just to figure if its real or fake).
    VNO : Phil, do you expect they hold at 60 or maybe they pullback?

  70. Phil
    RF- I am in this for net $1.78 fully covered with Aug 4′s. I am thinking about rolling the callers to the Sept 5′s and selling the Sept $5 puts. Comment?

  71. mrmocha
    could you explain a little better please. I place stop markets on some of my stuff, is that what you are referring to? what are second-tier stocks?

  72. Hey Pharm:
    I have a lot of HSP (Hospira) for long term hold. They have approx. 40 drugs in their pipeline and just reported a plus 25% increase in earnings for the second quarter. I’m considering adding to my position through naked puts. Do you like this one?

  73. "They" tried to shake us out of SRS with that quick drop to $11.20

  74. Sorry Gel, haven’t even followed them as they are a delivery system company, not what I would consider a ‘pure’ Pharma company (new new molecular entities like PFE, MRK, GSK, etc).  I will put them on a list to do some research into.

  75. GNW just flying….holy balls, Batman.

  76. Boomtown Rats!  That’s the only one that matters! [apologies to The Clash - "the only band that matters."]  (Black Uhuru’s "Mondays" is also very good – and "Manic Monday" if only for the MTV visuals.)  Oh my god, I’m having man-love for Phil now.  (Right up there with Viggo Mortenson and Val Kilmer.) (Clearly this is a different sort of love from that I extend to my wife and Kate Beckinsdale).

  77. CMCSA – Hi, Phil, in the town where I live, we now have 2 choices, Comcast Cable and Verizon Fios.  I love the competition.  It’s way better than when we had only one choice (Comcast).  Technology wise, I think Verizon Fios has an edge long-term.  For that reason, I chose Fios for my TV/land-phone/Internet.  Some of my neighbors went Fios as well.  So, I’m a bit surprised that you like CMCSA long-term.  Can you give us some short comments on your long-term outlook on CMCSA vs VZ?  Thanks.

  78. MrMocha…I always use a limit order set at last sale.    This means my order doesn’t trigger until a sale takes place at the limit price, which I have set, and that I will not take less than that price.  Example:  I own xyz which is now 1.00      I set a limit order for .90   This is set at last sale , not bid or ask.   When the stock gets bought by someone else and is bought by someone else at .90, my bid goes in at .90  If there is enough volume, my trade will trigger.  And note, that since this is a limit order, my stock cannot be sold at less than .90   It’s not ideal, but it protects me from losing my stock at a low price.  I too, dislike stops, but since I cannot sit in front of the computer all day, I have no choice.  I can either stay in cash, or set stops to protect my acct.  Anyone know better management techniques, I’m listening. 

  79. Phil
            When you draw up a scenario for an option play you often talk about margins.  Your results or gains are based on using margins.  But some or a lot
    of us are working out of a IRA accounts which does not allow margins so we are left in the dust.  Is this a valid concern or am I off base? 

  80. Sectors/RMM – The problem with that list is Materials 320, Industrial 280 and enery -20 makes no sense does it?  I always have problems when something is supposed to indicate something but the indications are nuts…

    TIE/Jo – I love TIE long-term.  A) those are materials and 2) (don’t you hate when people do that?) Nobody likes them.  I think it’s a long road to recovery though and they happen to also be just out of the sweet-16 in my new $100K eliminations but still in contention, possibly facing off against CCJ in the quarter-finals.  My issue with them at the moment is the low VIX makes the sales less than exciting but I’d rather buy the March $7.50s for $1.75 and sell 1/2 the Sept $7.50s for .95 as an entry than mess around with puts

    Rods/Iflan – Hey, another use for TIE!  Good summary of the set-up on IHI, thanks…

    Speaking of songs – the market is slip slidin’ away (just as it was near it’s destination too!). 

    Stops/Mr. M – First of all, I hate hard stops for exactly that reason but, if you are away or whatever, see if your broker can used last sale as a stop, not bid/ask.  TOS does and I imagine others can.  Also, you can set a stop on 1/2 or less and have that trigger serve as an alert to you to consider selling the rest, rather than doing a full dump on a spike. 

    GNK/Dstill – Wasn’t that the name of Coreleone’s company in the Godfather?

    COF/Eric – This is a crazy price for them.  They are on track to "only" lose $1.50 a share this year (after losing .76 last Q) and they HOPE to make .50 in 2010 so that’s a p/e of 70 for a friggin’ loan service!  V & MA are in the 30s and projecting 20s for next year…

    FRE/Ramana – I’m not at all clear on how any good news from FRE, FNM or AIG is of any help to common shareholders but, as long as there’s a "greater fool" willing to take the hot potato, the game continues until the music stops.

    No can do/Onc – Because of funds or what?  Need better info to give better ideas…

    FRE/Ifl – The float of FRE is just 650M shares and they are capable of earning $5Bn a year in a stable economy so that would be about $7.50 per share.  If we ignore the fact that they lost $50Bn (10 year’s earnings) by virtue of the fact that it’s been swept under the rug by the government.  Even if you think it would take them 10 years to pay Uncle same back you still paid $1 for a stock that will let you retire on $7.50 a year in earnings.  FRE is not going away, the common stock may end up being liquidated or whatever but, on the off chance it’s not – we were buying them in the spring at .60 on this same premise.  What the hell, you put down $1,000 bucks and maybe get $15,000 a year off it down the road – that’s worth a toss.  Less so at $1.30 but now options come into play again so a world of possibilities like buying it here and selling the Jan $1 puts and calls for .95 for net .45/.73.  You can also spread the Jan $1s with the Jan $2.50s for .34 with a $1.50 upside at $2.50 and in for the same $1.34 as it would cost to buy it now but with less downside delta.

    SRS/GS & Where – Have faith…

  81. SRS – if IYR can break below $40.80…

  82. ..thought you were DD and rolling for $6.60 TOTAL…but now i see that was the pricing for the sep. 165 callers….never mind will wait and see…thanks.

  83. Krugman- let’s see, Reagan’s "government" tax cuts resulted in umpteen billions of INCREASED  Fed revenue; Krugman’s "government" SPENDS umpteen billions (perhaps trillions, sorry Ev) with more to come.
    Pretty difficult choice, I must say.

  84. COF – thanks Phil, I like your short play.

  85. Phil / COF — Yep … there are a lot of CRAZY prices out there right now !
    CRAZY …. Toys in the Attic they are CRAZY; truly gone fishing; they must have taken their marbles away !
    CRAZY …. Over the rainbow, they are CRAZY; bars in the window; there must have been a door there in the wall when they got in !

  86. DIA- I am 1/2 covered with Sept 93′s sold Friday @ 2.45 against long Dec 95′s.
    When/If to pull down the covers?

  87. GS/Keyser – Oh, I thought that was you as it said "a reader."

    AMZN/Dstill – I love them to but a bit nose-bleedy for me up here.  I’m hoping for the mid-$70s for re-entry but establishing an early scale here and selling covers is a fine way to work in. 

    AMED/SS – I’m just starting to get familiar with the smaller players in my new favorite sector.  I can understand why they went up recently but I don’t understand how they fell 50% in 3 weeks in the spring so they make me nervous.  Unless you have a compelling reason to jump in now (thinking you will miss something big) I’d wait to see if they either break $45 or go back to $35 for an entry.  Your play isn’t too much of a bargain if they tumble down.  I’d rather go for the Dec $35/45 spread for $6.20 (60% upside) as a bullish entry as you can roll them lower if you have to or roll your call out or whatever….  Don’t foget, if the stock falls hard, the VIX goes up and THEN you can sell the Dec $30 puts for $3 (example) and use that $3 and the $4.50 you collected from the caller to roll yourself out to 2011 $30s, which are now $17.50 and then you have yourself a long….

    VNO/Spider – I think $60 is way too optimistic and it won’t take much of a change in attitude on the economy for them to fall 20%.

    RF/Pstas – Yes, that’s what I would do (assuming you really don’t mind owing more and averaging $3.50ish).

    Love/Dstill – I’m very glad you clarified that!  8-)

    CMCSA/Cwan – I prefer VZ 100% but the reality of their system is they won’t displace Comcast for many years in 90% of the country so the sell-off in CMCSA is overdone, especially in a poor economy that will, if anything, slow VZ’s transition.  I’m not looking for a home run with them, just for them to get back a bit more than 1/2 their highs, which you would expect for a dividend payer.

  88. stevenparker: I have studied this also: in determining the rotation, one has to look at this RELATIVELY;
    if a sector goes up and the other down in terms of moneyflow, its obvious what is happening, BUT, ROTATION is still going on if all sectors move in same direction YET some sectors move at double speed. This means far more money might be flowing into some sectors than others, that is still a rotation in a one-directional market.
    Unfortunately these are performance data, so that is the outcome of some force. the force is moneyflow. Clearly if money is flowing in flowing out, the outcome is predictable.
    I have to find up-to-date moneyflows .

  89. RE: FRE
    Any reason not to do a buy/write but sell the September 1 puts and calls for .60. Granted, good chance you will get called away at 1.00 but that still gives you a .30 profit in 6 weeks versus .60-.65 profit that you have to wait on until January. Am I missing something?

  90. Phil: I think oil should be shorted, I have some ERY, what yout best way of doing it ?

  91. Phil,
    are you planning to sell 1/2 SRS aug $13 puts on a spike?

  92. Margins/Bill – Well you need to make plays that are appropriate for your account.  I don’t often discuss margins but lately I’ve been trying to point them out on naked put plays as people seem to not take them into consideration.  Don’t forget a lot of people have been here for more than a year so you have to expect to see a little advanced course work once in a while…  If you have a restriction but you like a play, best thing to do is let me know what you are and are not allowed to do and I’ll see if I can think of a plan on that basis.   Like, in your IRA, can you not sell naked puts against cash?  Can you hold options at all or is everyting a play against stock?

    Chart/Steve – That one is great!

    COF - That was nice, they tested $34.50 from the bottom and failed.

    ROFL Cap! 

    DIA/Pstas – Sept $93 puts are $2.70 now and they can be rolled to 2x the Aug $93 puts at $1.40 so no worries yet as their deltas (.49, .48) are virtually identical.  We don’t want that trade to get away though as that is where we want to be on Wednesday if we are still at this level.  If we are dropping, then we can roll down to 2x the Sept $89 puts and that’s fine too. 

    FRE/Allen – That works too and I suppose no worse off in a BK but just be very aware of that possible downside.  Remember BSC rallied before they gave up…

    ERY/RMM – see above.

    SRS/Maxt – I should but I’m not.  I’d rather just play for the stick as a day trade if we turn it up here than cover on a day when RE is finally weakening.

  93. Phil: I have sep10 SRS calls, is there a caller to be established ?

  94. Phil, any ideas on TBT?

  95. CMCSA.  Speaking of these cats and FIOS, where does Direct TV fit in the mix?  As in, given their massive competitive advantage with the NFL package this time of year (and the reality that it locks us in year-round simply based on inertia), where does this "show up" in the "attractiveness" of DTV alone or versus others?

  96. Re: shorting options in IRAs. You can sell puts naked, of course (full cash margin though). With call sales, the thing to remember is that you only have to have *some* kind of cover.
    E.g.: suppose you want to sell COF 35 strike August calls. You can cover this in an IRA by buying COF Aug 45 calls for 0.025 each. This uses a lot of margin ($1K – the credit from the sale of the spread), but it is possible to nearly naked short calls in and IRA by buying nearly worthless way OTM calls to limit the risk.
    All the SEC wants in and IRA is that every trade have ‘defined risk’, and all your broker (should) want is that you have the cash margin to cover the defined risk.

  97. Could someone send me the link for the explorer auto-refresh? Thanks.

  98. Incidentally, the naked sale of that same COF 35 Aug call in a margin account still uses over $600 margin (without portfolio margining, anyway). So the difference isn’t that huge between it and the IRA.
    Likewise, selling the 35/34 COF strangle in a margin account uses $650 margin. Selling that same strangle in an IRA by also buying the 45 call/25 put (for .05 total) uses $740 margin. So again, roughly comparable.

  99. Can anyone confirm that non-profit, 501(c)3 organizations have the full $100K of FDIC protection in a savings account? I’m treasurer for a non-profit that has a small account with CNB. Maybe time to move?

  100. Damn, GENZ was on my list too, now they are flying… 

    SRS/RMM and others – If Cap and I are right, SRS should be returning to $14-$15 in a couple of weeks.  Selling calls on day one of a recovery is sensible but hopefully not neccessary.  If you are willing to gamble, don’t cover.  If you are looking to catch up from a DD, you should be getting 1/2 out even and then considering a cover on the rest.  If you were in for the spread, then take the spread as we’re up 10% from Friday’s lows.

    TBT/Blair – You guys are always trying to suck me into these treasury plays!  Long-term, rates must rise.   Japan only got away with 20 years of low rates because they are a major exporter (money comes in and needs to go into banks even if the banks pay low rates for deposits) and people were happy to circulate Japanese currency in a carry trade.  The carry trade only works if other currencies look stronger than the Yen AND pay better interest.  The exporting only works with a relatively weak yen too.  As other countries ease rates, the Yen cannot stay weak and the relative merits of the carry trade fall apart so —- rates must go up.   That’s the long-term play.  Short-term, rates are whatever the Fed says they are short of sudden shocks, which are random so I don’t have fun playing these.

    DTV/Dstill – I think fiber kills satelite long-term.  You can deliver more on fiber than satellite with less wires.  Once TVs turn more into computers (5 years) satellite will die as there’s no good upload solution even if they could deliver web content to your TV.  Your phone is a computer, your TV is a computer and your computer is a computer.  Makes more sense to have fiber and a router for all 3 than a special line to space for your television right?

    IRA/Eric – Ah good.  Not as Draconian as I thought.

    Now you can clearly see from the sector list (below) that energy is holding up the market.  Wasn’t really being reflected here when I pointed it out this morning.

  101. DIA- Phil, please explain for me the reasons for (see earlier post) for moving to Aug from Sept ?
    Also, what specifically do you mean re: where we want to be on Wed? What’s significant about Wed.
    Just trying to get the process down.

  102. DTV.  Agreed, I guess, long term.  Tho, it’ll be a NFLX kind of evolution I would imagine – DTV will cut lucrative content and limited partner deals with fiber providers (Qwest may already be doing this) before they retreat – as NFLX is (I hope) continuing to position itself to be a major on-demand player.  But the more immediate and interesting issue (to me at least) is how the NFL deal makes an investing difference short-term.  Maybe their SEC filings or an analyst report estimate what the deal is worth to DTV – if that can be parsed.  They have the exclusive rights thru 2014 now at $1B per year – up from $700 million a year (this is the new deal.)   Having this property on an exclusive basis – where sports is more and more the dominant and most desired content around – seems tantamount to, say, American Idol only being available Comcast. 

  103. Really low volume today.

  104. Hi folks – UAUA buy/write AUG 4′s have no premium left – am considering rolling to Sep 5′s any thoughts pls?

  105. Here’s what’s worrying me shorting oil.  There are still 10 trading days to the expiration of the Sept NYMEX contacts but they’ve already gotten the front-month down to 262,000 open contracts (262Mb) with "only" 470,000 open in the front 3 months, about 15% less than typical.  Either oil is poised to fall off a clif (and those 262K contracts were traded 367,000 times on Friday) or some major shenanigans are in the works.  I year out contracts are $80+ and storage costs (the BDI) are coming down so it makes sense for MORE people to go long at $70, not less.  Seems like we’re in for a snap one way or the other and I still like the ELYs because logic dictates down would be right. 

    DIA – The proper move now is to roll the 1/2 cover of Sept 93 puts, now $2.77 to the SAME amount of Aug $93 puts at $1.47 and only sell more Aug $93 puts IF the Dow crosses back over 9,320 again.  The Aug puts have the same delta as the Sept puts so, although a smaller amount, you are not hurting your coverage on an intra-day basis

    Wed/Pstas – Always the Weds before expiration you want to get your rolling done to the next month (especially for contracts you own) as deterioration is very intense in the last 7 days. 

  106. Let’s see if we can end this day w/out the Stick !
    Time to sucker in the dip buyers !

  107. slg now RED after being up almost $3 earlier…

  108. UNG/Pstas: Please read a bearish case on natural gas (also on seeking alpha, but written by a different author Trader Mark:
    I almost wanted to short CHK after reading this article.
    Perhaps Phil can comment on CHK?

  109. Goooooooooooooooooo SRS! :/

  110. DTV/Dstill – You have to rethink the whole concept on the premise that bandwidth will be solved and you can watch whatever you want.  Sienfeld had 40M viewers a night and they sold about $3M worth of ads per episode.  GOOG can deliver an episode of Sienfeld on demand to 40M people for .25 ($10M) and split that with NBC (or whover produces it) for $5M each.  If your family watches 8 hours a day of TV and pay .10 to .25 per half hour, say .20 on the average – you pay $48 a month for total TV on demand.

    I’m not just talking about on demand like the 20 movies they show you now but typing into GOOG "I want to see that episode of Seinfeld where they were stuck in the parking garage" or "Show me all the Borg episodes of Star Trek in date order" or "Play the next 3 episodes of Burn Notice."  That’s what TV will be.  You don’t need the networks after a while, GOOG will just make deals with the production companies to distribute their new shows.  That’s the future of TV and if you think it can’t happen that fast – ask my kids what a phone book is or an encyclopedia…  Heck if I didn’t have all this legacy crap I doubt I’d be buying CDs now or DVDs – how many DVDs do you watch enough times to justify not paying AMZN (through Tivo) $1.99 per 3 viewings?

    The NFL deal is great for DTV but 2014 is only 5 years away and DTV must come up with that $1Bn a year.  If their audience falls off too far, they may give it up themselves. 

    Low volume/DB – Yeah, really, really stickable! 

    UAUA/Steve – That’s the correct move but no real hurry if they don’t break $6.

    CHK/Cwan – Don’t short the best.  That’s a good rule of thumb.  EOG is a more attractive short and you can do a nice backspread on them with 3 Oct $85s at $1.80 ($540, delta .78), selling 4 Sept $80s for $2.15 ($860, delta 1.44) as you can always add 2 long calls to balance things out if things go wrong

  111. Kindle bashing on CNBC!

  112. That slg could be an inverse hammer and in which case time for a short

  113. DTV.  dude – they are "too big to fail…"  lol

  114. Now we know why MRK is up…GS — Rubin removed her previous “Not Rated” designation on Merck (MRK), and added the stock to the firm’s Conviction Buy list. She contends the stock’s low valuation – a 30% discount to the market, and a free cash flow yield of more than 20% – “sets the shares up for substantial out-performance over the next 12 months on the back of the potential for cost-driven earnings acceleration. Rubin writes that what sets Merck apart is the pipeline provided by its acquisition of Schering-Plough, which together with its own pipeline provides the potential for $5 billion to $6 billion in incremental annual revenues by 2015. She set a price target of $38 on the stock, which closed Friday at $30.10.

  115. DIA – Long Dec $95 puts should be full covered with Aug $93 puts, now $1.33.  Stop on 1/2 at $1.50.

  116. dstill - not sure how valid the comparison but two companies in recent years have gone bust trying to make money out of English Premier League, Setanta most recently and ITV Digital before that. And this is the second richest league in the world after NFL…..

  117. ACAS on the move again. Just noticed that I received my ‘dividend’ stock.  33.2 shares/100.  So now those are a free ride since I sold last week at 3.51.

  118. Phil – On average when do you move Jan10 out to 2011thanks

  119. Pharm, be careful with ACAS, I’m in at 3.40 from many months ago and it’s just a useless bouncing ball stock since then.

  120. MrM – I bought them eons ago at (cough) 30.  Sold at 5.  Bought a month or so ago b’f the dividend for 3.15, kept until ex-div and sold at 3.51 last week.  These ACAS shares are now the dividend and to hold until they reach 100 or so… :)

  121. Hey everyone,

    Check out my new Oxen Gamble of the Day.

    The play is on Parexel International Corp. (PRXL)



  122. UNG premiums are very good, especially given the relatively flat ETF action over recent months. I mentioned this before, but selling strangles is a nice way to bet that it’s not going to make a huge move. You can cover with comparatively inexpensive 2011 options. E.g, buy the Jan 11 15/11 strangle, sell the Sept 14/12 strangle for 3.40. I did something similar last week one strike higher, and then shorted Aug 13 calls on the way down to keep the delta balanced.
    Selling front-month options on this should be a good long-term income stream provided, of course, that UNG makes no explosive moves.

  123. DTV.  Thx, Steven.  Yeah – I’m not looking for an excuse to jump in with them – curiousity just arose out of CMCSA play today.  Tho it would be foolish, I suspect, to ever bet against John Malone on much of anything, eh? 

  124. Phil;
    on SRS I expect a rise, so no spread.
    on ERY: I also expect a rise, yet less preictable, so I have order in for jan spread for 2.2$, no takers ,
    for MRK jan 2011 25 with writes  sep30, have no order in, the long is now 7.25$, is this still ok to do /

  125. MRK/Pharm – Oh, I thought it was your pick this weekend (maybe it still was, you know those GS bastards are watching us!)  8-)

    Moving leaps/CaFords – Excellent question.  Now would be a good time.  Especially into the top of a rally with a low VIX as you’ll get your cheapest rolls to 2011 here.  Generally, you have a bigger delta than the longs so you get killed if you wait until things sell off

    Now David is like the guy on airplane who keeps sticking his head into the cockpit! 

    Explosives/Eric – That’s pretty much the only kind of moves they make.  Don’t forget it’s hurricane season and no one is expecting one so make sure you have an out. 

    PCLN off to the races for some reason…

  126. David – with Pharma trimming OH in R&D, I can see the contract labs actually having a pick up in business over the long haul as well.   Things have been slow in the contract lab space, b;c they, much like telcon in the late 90′s, overbuild their capacity.  Their bids for services are very competitive with the little guys who are trolling for business.  Things will catch up.  Just my thoughts.

  127. Ouch, PRXL AUG 15 options are too expensive to make David’s play interesting from the option side; compared to the BAC 17s that I’m playing, for example, they’re twice as pricey.

  128. Phil, PCLN had a good report this morning, profits up 20% over last year…

  129. OH it was, and the SGP comment on the pipeline was right out of the post (minus my Organon mention), but my paltry 300 shares sending MRK up….maybe so on this low volume…So, if GS is part of this website, do they pay a corporate rate of 20K and do I get the 1% cut?

  130. SRS heading down quickly…..

  131. Phil,
    If we get the stick into the close- any change on full cover of Aug 93′s?

  132. EOG  Backspread – 3 Oct $85s at $1.80 ($540, delta .78), selling 4 Sept $80s for $2.15
    I understand how the position works.  But what price do I put into my order?  I’ve done lots of even spreads (eg, Buy 4/Sell 4).  This is my first time doing a backspread/ratio.

  133. UNG, well, you can try to protect against natural gas explosions by supplementing the strangles going long something like Jan ’11/Sept calendars at the 18 strike for 2.00, which gives a fair bit of upside as well as having a plausible shot at break-even over the next year selling 18 strike options for at least .10/month against the long option if UNG continues to flatline.

  134. David.   Um.  Do we want his head in and out of the cockpit?  Or no? 

  135. cwan,  if it’s ToS click on the Oct option, click the quantity arrows to get three, then hold down Ctrl and select the Sept option, and then click on the arrows to sell four.

  136. MRK/RMM – .30 more is a lot and you will get paid no more for the Sept sales so it may be better to be patient and see what happens tomorrow.  Of course, it never hurts to offer $6.90 and see what happens.

    PCLN/Mr M – Ah, thanks.  I didn’t know this was their day.  That Shatner is amazing! 

    GS/Pharm – You and me both.   No one on the site has a address nor do I know who the CNBC jerk is who feeds Cramer my stuff but what can you do?  The day’s of privacy are truly over…

    Stick/Pstas – If it’s enough to make us .30 then yes, we should take it but I kind of doubt that.  See how nicely that works though – roll over to the Augs and THEN see which way we go.  Even after it went the wrong way we still did the cover for more then 2x the price of the Septs and we got a free look.

    Backspread/Cwan – I usually do the 3:3 diagonal and then sell the extra.

    Supplements/Eric – Too much cross betting for my taste.  I prefer to just buy low and sell high on UNG.  Like now ($13) is a good low and you are very likely to get a sale at $13.50 or better into inventories. 

  137. Any one have the link to the past post on "vacation proofing"?

  138. Phil – TASR is rather low again. You still fond of them?

  139. THMRQ - there’s your stick for the day!

  140. UNG/EricL: When you said "buy the Jan 11 15/11 strangle, sell the Sept 14/12 strangle", do you mean buy Jan 11 15 CALLs & 11 PUTs, and sell 14 CALLs & 12 PUTs.
    I am still newbit on such stuff…  Thanks!

  141. GS/Pharm – You and me both.   No one on the site has a address nor do I know who the CNBC jerk is who feeds Cramer my stuff but what can you do?  The day’s of privacy are truly over…
    *cough* *cough* it’s not
    and no, I am not a mole

  142. Backspread/EricL: Yes, I’m on TOS.  My question is what price do I bid on?  For example, say, I buy 3 (now @ $1.00) & sell 4 (now @ $.80).  What price do I put in?
    Phil’s diagonal + sell one more seems simpler.  But for argument’s sake, can you help?

  143. MrM – was that your 55K lot that just went through on THMRQ???

  144. cwan, yes, exactly. If you buy several (or a lot of them), you can hedge a little bit by leaving a few of the 2011s uncovered, or looking for little OTM calendar trades like I mention above, etc. I’m sure Phil’s right that it only takes one lit match near a Nat gas refinery, or one hurricane in the Atlantic, etc. to set this thing off, so it’s not a trade I’d go crazy with. But, I like it for now.

  145. Vacation-Proof/Pstas – Ah, the 2007 classic!   Most of these things come up in Google as we’re pretty high ranked…

    TASR/Morx – My fondness in them is the same fondness I had for F at $1 – just buy it and put it away for 10 years (although F may have tempted you to cash in by now). 

    Holy cow, how annouing it is to be bearish in this market.   Every friggin’ day they jam it up into the close.  I’m looking back to 2/28  and there is just the Aug 7th (Fri) and last Friday where we didn’t get a substantial up move into the close.  Hmm, nervousness on consecutive Fridays…. maybe a clue there…   Holiday weeekend coming up too..

    Ah ha!  C raised their S&P earnings outlook to $60 a share from $56!  That’s this afternoon’s smoking gun.

  146. Pharm, unfortunately not. The only reason I noticed the uptick is because I’ve had a standing buy on it at .005 for months, it never filled (looks like it got down to .0052 at some point so just missed it).

  147. cwan, if you set up the ‘custom’ order using the Ctrl key you get the mid-point of the current spread, which my machine shows as 3.52 credit. If it were me, I’d ask for 3.55 or 3.60 (except the market is about to close).

  148. that sounds greedy :)

  149. There are some big lots going through on that one…..wonder what’s up with it??

  150. yep; another bogus stick ….

  151. Pharm
    what is your opinion on MYGN?

  152. Phil: DIA covers close for 1.15$ ???

  153. Annoyed.  "Holy cow, how annoying it is to be bearish in this market. -PD"  Hey, Big Daddy, it’s my job (along with others here) to annoy you.   Your feelings re the market, bears, etc. should be altogether zen-like. 

  154. Drum – I own them and have DD once.  I will do it again if necessary.  They have had some baggage, and managment needs to shape up.  They spun out the pharma group as well.  Wilkinson had a writeup in the beginning of July on them for bearish movement, but I still like them for a longer term adn you can sell the Sept 25s, knowin that you can roll to Nov 22.5 even.  The spreads are a bit wide for me on the options, so I just bought it outright and am considering selling the above mentioned.

    Phil, my callers got called, should I stay short VLO for the next few days in view of some bad news above? Thanks! Still long Jan 15 calls.

  156. PRXL.  Here come the extended hour bidders – finally.  Maybe we’re gonna see a beat here.   Let’s close that gap, baby! 

  157. GS/Steve - What I really need is one of those things that identifies servers…

    Bidding/Cwan – That’s why I prefer the 3/3 + 1 entry.  My attitude is it either fills at my price or I don’t want it anyway so getting the bulk at your offer is a good start. 

    LOL Pharm!  Why worry about GS when we have Mr. M dropping 55K lots?  8-)

    That was a lot of work for SRS to make 4.4% today!

    DIA/RMM – Avg entry was $1.40 so $1.15 just .25, not really worth it as we’re not expecting 100-point gap down and we still need protection.  They can still be rolled to 1/2 the Sept $93 puts and if you were going to make any change, that would be it as you pick up .15 on the roll and you’re back where you started. 

    Annoying/Dstill – I didn’t mean the bears are annoying I meant it was annoying TO BE a bear.  I was sympathizing…

    Well, another crazy day in the bag.  Inventories and Productivity tomorrow.  I imagine we are reaching the point of diminishing returns on productivity but we’ll see…

  158. Annoyed.  I know what you meant.  You’re supposed to be the iceman.  Which means: (1) no feelings and (2) no feelings.  lol

  159. Phil, if I ever buy a 55K lot of anything I’ll be sure to let you guys know, that’ll surely turn out to be your best short ever!

  160. dstillwe - I think you meant he should have (1) no feelings and (2) no feelings about having no feelings!

  161. Moles:  PD – You should be sure none of ur advertisers have inappropriate access.  Not sure how or why they would.    But OptionMonster pimps for CNBC/Cramer big time. 

    "No one on the site has a address nor do I know who the CNBC jerk is who feeds Cramer my stuff but what can you do?  The day’s of privacy are truly over…"

  162. Phil: TXS, you gave me good answers today,
    DIA putters did not close, so fully covered for tomorrow.

  163. TOS order/EricL: Thanks for the tips.  I haven’t tried all the tricks on the TOS platform.  It’s kinda overwhelming.
    Now the market is closed, I can try things out without worrying about sending an unintended order to the market.  I can just cancel the order.

  164. Phil,
    I’m looking at KBH..RSI chart seems like a bearish divergence.
    what do you think?

  165. looks like MTXX had a pretty negative report.

  166. lol, Mr.M – Tho the recent healthcare debate here gives me pause…

  167. Morx – as I noted above…I was kinda expecting it based upon the lawsuits and the w’d of the oral treatments from the market….4.39 was the low from 6/23.

  168. Sorry, that is the nasal products…for the loss of smell when one has a cold…I can’t smell when I have a cold either, ’cause  I have too much mucas blocking my smell receptors in my nose.  Sheash.  Again, total crap, but who knows.

  169. VLO/Cris – I don’t know, sounds like a management team that watches the bottom line to me!  Don’t mess around too much as that wasn’t the point of the trade but it’s doubtful they break $19 if you are willing to gamle they revisit $17.50 after inventories or perhaps on this lawsuit but the suite was out this afternoon and they went up into the close so your best bet is panic selling by the uninformed into the open tomorrow.  I love this quote:

    "To keep its gas pumps flowing, Valero virtually pumps the lifeblood out of its workers who are expected to be on call 24-7, but are only paid for a fraction of the time they spend working.  This class action aims to turn off this oil Goliath’s unfair pay practices…  When it comes to its employees," adds Mr. Wittels, "the only thing Valero has refined is how best to fleece its employees out of their wages."

    Remind me to get this lawyer for my GS case – he’s a sound-byte machine! 

    Moles/DB - Then you have to turn it into a police state and that violtaes my constitutional sensibilities (even with the generous addition of the Patriot Act). 

    KBHLafit – All builders are pretty overbought.  KBH is a late reporter and with fairly low expectations (.60 loss per share) but a relatively good bet to finish $17.50 or lower at expiration but the option prices are awful but I’d take a beaish backspread of 5 Sept $17.50s at $1.45 ($725) against 4 Jan $20s at $1.85 ($740).  After earnings, especially if it’s a miss, the volatility should die on the Sept calls and, if not, you can just add 3 more longs and roll the calls to 8 Oct $20s, now .95 ($760 for 8) and you still have Nov and Dec to collect premiums.  To the downside, the expectation is, of course, that you hold more value than the callers at expiration

    Speaking of things that smell – Gold flatlined all day long…

  170. RE: Krugman – cannot resist- here is an old Reagan quote that fits the current bill:
    "The intellectual establishment [is] so busy demanding more power for government, more bureaucracy, regulation, spending and — oh, yes — more and more taxes, they forgot all about the secret of America’s success — opportunity for people, for all the people. … Will we heed the pessimists’ agenda of higher taxes, more bureaucracy, and a bigger welfare state leading us right back to runaway inflation and economic decay, or will we [take the] road toward a true opportunity society of economic growth, more jobs, lower tax rates, and rising take-home pay?" --Ronald Reagan

  171.  Yes, the lawyer is a class-action superstar!

  172. Hi all!  New member, really love the site!  I’m almost afraid to sound stupid and ask my question but here goes.
    Regarding Phil’s "buy/write" strategy.  Why not just sell 2 puts instead of buying the stock and selling 1 put and 1 call?

  173. Phil
    I am a new member and want to know your strategy for playing a possible pull back. I am still trying to find my way around the site. I will appreciate any pointers on using DIA puts or anything else. I understand this may have been posted by you earlier but as I get my arms around the site, it would save some time as this market looks ready for a drop. I am looking to get into some action by the AM. Thanks.

  174. Krugman/Pstas – Don’t make me pull out my Marx on you!  (Groucho, of course)

    Whittels/Cris – Well he sounds like fun but I think we need Dstill’s boys to take on GS. 

    Welcome/Ebon!  First day on and you already question the strategy?!?   LOL, just kidding.  Actually we often enter our first leg selling just puts but it depends on a lot of things.  When the VIX is low I’m not as keen to sell puts as we limit the upside. 

    Take MRK, for example at $30.60 now.  You can do a buy/write of 100 shares of stock for $3,060 and sell the Sept $30s for $1.50 and the Sept $28 puts for .50 so you are in the stock for a net of $28.60/28.30 (if put to you).  Also, the stock goes ex dividend on 9/2 and pays you .38, which drops your net net to $28.22/28.11.  The total outlay on this trade with a 50% margin requirement is $2,730 and, if called away at $30 it profits $216 (8%) in 6 weeks.  

    If you sell instead 2 Sept $29 puts for .80, you collect $160 against a $2,900 magin requirement and the most you can make is $160 (5.5%).  Also, if MRK drops very suddenly to $20, you are obligated to pay net $5,640 for stock that is worth $4,000 (down $1,640).  If you do the buy/write, You have 100 shares at net $2,784 (unless they cancelled the dividend and trashed the stock) and an obligation to buy 100 more at $2,800 for $5,584 total, losing $56 less than the puts. 

    We don’t sell puts at all in stocks we don’t REALLY want to own at that price and, of course, selling puts and calls allows for easier retargeting than just selling puts.  For example, if you sold 2 Aug $32 puts for .80 and they are now $1.55, you would have to DD to roll them out of the money to the Sept $29 puts at .80.  Now you have a declining stock and an obligation to buy 400 shares of the stock for $29 (net $28.60).  If you had sold 1 Aug $32 call at .80 and one Aug $32 put at .80 however, you can choose any Sept put and call strike you wish to transfer your $1.80 obligation to and you will get AT LEAST an ADDITIONAL .90 in premium from the new combo.  So, month after month, it’s $1 smarter to work the puts and calls and also much more flexible. 

    Of course there are examples that can go the other way and, when it’s worth just selling puts, we are happy to do so.  Go to the Portfolio Tab and find some of the old Buy List Portfolios and you’ll see we entered about half of those trades with naked put selling – it all depends on our 30-60 day outlook for the stock and how safe we feel in either situation.  In general, if you are going to buy a stock and don’t want it to get away from you, the buy/write increases your chances of getting in at a good price and gives you a little more flexibility. 

    One great flaw in naked put selling is, if the market tanks, the VIX goes up and your margin requirement remains so you have a big loss on the puts that starts eating into your buying power.  That can trap you in the puts and if the market falls further – all you can do is buy out the puts, using up your cash and giving you no asset at all to fall back on.  Many people lost their asses in the big sell-off with naked puts, the people who had stocks and didn’t panic out of them (selling calls helps) got about half their losses back already.

  175. PS – Actually, even if you go to the April 10th start of the $100K Portfolio, you’ll see that in that very conservative group we did some naked put selling – that’s a good example of judicious use of the strategy mixed in with buy/writes and others.  We’re about to start a brand new one after this expirations, will be a good time to go over a lot of these fine points!

  176. LOL – Cramer talking up the health care sector.  Gee, I wonder what spurred this on?  8-)

  177. You go pstas !  Great Reagan quote and so true today !
    Phil … I am gonna go all Randy Newman on you :
    When Karl Marx was a boy
    he took a hard look around
    He saw people were starving all over the place
    while others were painting the town
    The public spirited boy
    became a public spirited man
    So he worked very hard and he read everything
    until he came up with a plan
    There’ll be no exploitation
    of the worker or his kin
    No discrimination ‘cause of the color of your skin
    No more private property
    It would not be allowed
    No one could rise too high
    No one could sink too low
    or go under completely like some we all know
    If Marx were living today
    he’d be rolling around in his grave
    And if I had him here in my mansion on the hill
    I’d tell him a story t’would give his old heart a chill
    It’s something that happened to me
    I’d say, Karl I recently stumbled
    into a new family
    with two little children in school
    where all little children should be
    I went to the orientation
    All the young mommies were there
    Karl, you never have seen such a glorious sight
    as these beautiful women arrayed for the night
    just like countesses, empresses, movie stars and queens
    And they’d come there with men much like me
    Froggish men, unpleasant to see
    Were you to kiss one, Karl
    Nary a prince would there be
    Oh Karl the world isn’t fair
    It isn’t and never will be
    They tried out your plan
    It brought misery instead
    If you’d seen how they worked it
    you’d be glad you were dead
    just like I’m glad I’m living in the land of the free
    where the rich just get richer
    and the poor you don’t ever have to see
    It would depress us, Karl
    Because we care
    that the world still isn’t fair

  178. ME!?

  179. Phil thanks for the GREAT reply!  I wasn’t questioning the system, I just KNEW I was missing something but couldn’t quite figure out what it was.  I’m really happy someone didn’t post a link to where you had already answered this.  I  read a lot on the site over the weekend and didnt see the answer.
    Also, I am not the GS secret agent you are looking for.

  180. Phil:
    Question on the CMCSA artificial buy-write: How do you come up with the $11.57 put-to-you price? Here’s how I understand the trade: You’re out $1.05. If the stock finishes below 10, you get 1x put to you at $12.5+1.05 = $13.55. Between $10 and 12.50, you’re buying 2x at $(10+12.5+1.05)/2 = $11.78. Between $12.50 and 15, 1x at $10+1.05 = $11.05. Profit of $3.95 and no stock put to you above $15.

  181. PRXL.  Christ.  Getting hammered after hours now.  Was it a fricking undiscoverable secret they were going to report accounting errors that diluted EPS for the qtr by 16 cents?  I guess the question (Phil or Dave or team) is whether this makes the stock cheap for a longer play.   I covered the buy with 1/2 August 15 calls (mainly to bring down my entry price to around $14.25 if they expire – which they apparently will – and can probably cover the other half to reduce cost further) – maybe overreacting to report and after hours bid/ask.  But if things run like they’re running now, I’m down prob $1 at open.   So … chill until morn?  And, then, worst case, ride stock thru August at least?  I think the analysis by David is right – and the sector looks good.  

  182. PRXL :  dstillwe, I read the press release and is a mess. Can’t understand well and all times they are mixing the gaap and non-gaap results. Besides what numbers says, the seems to show in a disorganized way and I read between lines "please don’t hammer us, things will be better"   Conference is sheduled for tomorrow. As I see its more a $8 stock instead a $15 one…  but i will wait till tomorrow at least.

  183. dstil – low is 6.11 in Nov, and bottom support is now about 11.2.  I would wait out the flush and maybe sell some 10P depending upon your position.  Just wait until tomorrow to let things settle.  MTXX is in the same boat.

  184. Phil-  Is the current outlook on SRS the same as your earliers post (could go to 14-15 in the next two weeks)? 
    Also, I’ve got 10 $90 and 10 $91 DIA puts that are currently worth about a third of what I paid for them.  Kept holding them expecting the correction last week and then today.  Thoughts on what to do with them?  If I get lucky tomorrow, they could go up 50% from where they are now….just as they did today….before the stick came in.  Would you suggest selling them at that type of opportunity or holding on in anticipation of a 2-5% correction this week?

  185. PRXL
    Does not sound so bad.  Seems like a honest mistake from the acquistion in how start up cost and revenue streams get accounted for because different rules apply.   Does not appear to be book cooking.   Maybe a good time to buy in on the dip.

  186. PRXL.  Thx for talking me in off the ledge.  Their press release is a disaster.  U cats are excellent.

  187. GsSucks
    What was the original strategy(Strategy, expiry etc) with the DIA 90 and 91 PUTS. I am a newbie trying to play catch up with some Index put strategies.Thanks.

  188. PRXL : Yes, looks like they get trouble reporting earnings because recent acquisition.  Using non-gaap numbers seems earnings yoy are $0.82  ans using a 15x mult = $12.30  Well see tomorrow how this come out.  Sadly I loaded more than a speculative buy deserves.

  189. PRXL
    The bid/ask was way to big for me. Volitility over 100%.  Any calls will get crushed tomorrow.  If a stock doesn’t have 5 to 10 cent spread on it’s options, I typically will not play it.   Look at AAPL , the spread is only a dime, the volitility is low, and the ATR is high enough to generate a nice return.

  190. Phil — check this out ….

  191. Will we heed the pessimists’ agenda of higher taxes, more bureaucracy, and a bigger welfare state leading us right back to runaway inflation and economic decay, or will we [take the] road toward a true opportunity society of economic growth, more jobs, lower tax rates, and rising take-home pay?" –Ronald Reagan
    Pstas, The only problem with the Reagan quote is that it didn’t quite work out that way. Those policies resulted in one of the greatest transfers of wealth in this country’s history from the lower and middle classes to the very wealthy. The middle class experienced fewer jobs, ongoing wage pressure, and lower take-home pay – plus an enormous increase in economic insecurity (before the current crisis) that required the vast majority of households to have 2 wage earners to maintain the same standard of living. Add to this 50 million citizens without health insurance and untold additional millions under-insured – real people (our neighbors, friends, and relatives) who are literally dying all around us because they cannot get basic health care (an ongoing but hidden scandal of epic proportions) – or they go bankrupt as soon as serious illness strikes.
    Reagan’s quote is part of an ideologically-driven propaganda campaign that obfuscates what has really happened to the American middle class – all in the name of opposing the supposedly evil big government to be replaced by a wonderful corporate culture that promises to deliver huge economic and social benefits. This has been a massive and ongoing PR campaign that is backed by huge amounts of money dedicated to reinforcing an ideology that benefits only a tiny few. It is a testament to the partnership of money and Madison Avenue that it continues to work so well even in today’s economic climate.

  192. Good morning!

    Welcome Sudhar!  Playing a pullback starts with having a Stock Market Parachute.  That would be the famous DIA mattress play we always talk about (currently the Dec $95 put, fully covered with Aug $93 puts).  You can enter new with just the Dec DIA puts as cover and I’ll be happy to take a little time to discuss sizing and covering strategy during the day, when I’ll have a bit more time than this morning, unless someone happens to have a good link to an older discussion (I’m hoping). 

    Marx/Cap – You officially have way too much time on your hands…

    Thanks Eben, I’ll keep hunting then.  8-)

    CMCSA/Chaps – I was assuming it was put to you at over $11 and averaging the $11.05 net entry with the $12.50 that would be put to you or $11.78, I think I made a math error on the $11.57.  If you don’t excercise your calls (which you wouldn’t below $11), you have no original batch so the net $1.05 would be ADDED to the $12.50 that’s put to you.  That would be then $13.55 on 1x or $11.78 on 2x

    PRXL/Dstill – A great example of how these things are always a crap shoot.  That’s why I’m never too keen on buying them UNTIL they crash (and 80% do at some point).  Buying boitechs is a swinging for the fences kind of business.  Scaling in is also critical.  If you had a 25% entry then a $3 drop would be nothing more than a great time to DD (assuming the earnings don’t look fatal).  One suggestion I would make for the open is you may want to consider selling the Sept $12.50 calls if you can still get $2+ for them at the open, that will take the sting out and you can then roll them up to the Dec $15s if things improve.  Again, this is if you are committed to the position as they may get downgrades and head even lower. 

    SRS/GS – Yes but, as of Wednesday, it would be foolish to stay in Aug positions and we’d have to roll to Sept, possibly making a spread.  Of course Wednesday is Fed day so it could be a wild 48-hour ride ahead.  If you are behind then getting out even is the way to go as this position just does not want to pay off. 

    Thanks Cap, I wanted a working copy of that! 

    Reagan/Allen – Never confuse conservatives with facts, it only annoys them…  8-)

    Good John Stewart on Health Care.

    Daily Show Panel on proposed Democratic "Death Panels."

  193.  Phil
    I own BAC at net 13.25, fully covered by Aug 13 calls – deeply buried now, any suggestion on how to roll? I can increase position here, but should I at this point? Thanks

  194. PRXL.   I bitch.  But I take responsibility.   I withdraw my suggestion that these picks not be called gambles, I guess.  Since they apparently are – and it allows me to use poker "analysis."   This is not a "bad beat" – I hate table whiners.   This is me, head-up, thinking I’m going to get the other guy all-in cuz I know on the turn I have the best pair.  This is me losing the hand because I was careless – for lack of attention – to missing the cursed two-pair (little cards.)   Online, I’d eat that play a lot.  Live – not so much.   Off to AC for better odds, man.  lol  PS – Any PRXL puts worth grabbing?  DS

  195. REAGAN- I stand corrected. I must have missed the memo about the grand utopia that has been created by the New Deal; Great Society; and now Obama Nation.