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Testing Tuesday Morning – S&P 1,010 Edition

So far so good.

As I said in yesterday's post (and the weekend wrap-up), we were well-positioned for the drop – It's just a quesiton of finding a bottom now.  It didn't take very long as we found it at 9:46 when I sent out an Alert to Members saying: "Once again it’s a good time to sell the DIA $95 puts at $2 as the volume on this sell-off is not at all exciting so far.  As long as the Dow holds 9,450 (now 9,475) it’s a good play."  We had a couple of spikes below but, on the whole, 9,450 held like a champ and those puts hit our 20% target by the day's end (some of our quicker traders even had a chance to double dip).  That level and 1,010 on the S&P will be our critical tests today as well

As you can see from David Fry's SPY chart, that 1,010 line on the S&P represents the bottom of the range we broke out of on Aug 21st after failing it several times earlier in the month so it either holds this week or last week begins to look like noting more than a blow-off top at the tip of a downturn. 

We followed through with our DIS play but we're still hoping to do better on the call sale to complete our buy/write.  We took an early stab at shorting OIH but chickened out by the end of the day and we took advantage of a nice drops in ITMN, LZB (hedged) and CIM (hedged) while adding protective plays by going long in TZA (hedged) so it was a busier day than we planned.  We also picked up some more fills for our $100K Virtual Portfolio, as per our weekend plans and that virtual portfolio jumped $500 on the day, which is nice for a down day and indicates we are doing pretty well on that balance thing…

At 1:03 I sent out an Alert to Members saying: "Should be stick time after a blow out bottom - I still like those DIA $95 puts sold naked for $2+, looking for .25 to .50."  We got a false run at 2:30 then a drop down to a blow-out spike at 3:30 and then, of course, the daily stick, that took up right back to good old 9,500.  The movement is getting so aggregious that even conspiracy theory-hating Barry Ritholtz is now saying: "I’m not inclined toward conspiracy theories, but it’s difficult to imagine a scenario in which this is not a (frighteningly necessary) coordinated capital infusion, with taxpayer dollars ultimately at work in financial markets."  Welcome to the club Barry – One of us, one of us, one of us

We went into the closing knowing full well that the last half hour had been fake, fake, fake thanks to another amazing performance by Goldman Sachs (played in the video clip by Julia Louise Dreyfus) as they sucker retail investors (played by Jerry and Jason Alexander) into the market by making all the right noises with a few convincing moves, all to give the impression they are participating in the rally when, in reality, they are already looking for the exits, leaving the poor retail investors broke but none the wiser in case GS wants to come by and hit them up for another dinner at a later date…

China faked it this morning with another set of good data with the government "revealing" that manufacturing levels in August expanded at the fastest pace in 16 months.  This was according to the Deputy Minister of Don't You Dare Question Our Numbers so we're not going to wonder how this happened in a month when the Baltic Dry Index was dropping like a rock and global consumer demand was off across the board.  Particularly interesting is India releasing a report on the same day, covering the same month that shows exports DECLINED for the 10th straight month in July with merchandise shipments down 28.4% from last year – and last year wasn't that good!  India has been working very hard to stimulate trade, offering tax refunds to exporters and sigining trade accords with many countries aimed at getting their 1.2Bn person economy out of the slump. 

So, is India lying and making us think that their export numbers are still bad?  If that is the case then South Korea (down 20.6%) and Japan (down 36.5%) are in on it too.  Between that and the fact that the BDI is also down over 30% in August one might conclude that the Chinese are, in fact, lying or perhaps, innocently, the massive government stimulus has them gearing up for phantom sales that may never be realized in a simple misinterpretation of the laws of supply and demand.  Either way you wouldn't be thinking this if you read Uncle Rupert's Wall Street Journal, which has 3 headlines touting China's "great" numbers and not one mention of India's export decline in it's Asia section (8:30).

Asia was a tiny bit bouncy this morning but nothing, on the whole, compared to yesterday's drops so we'll call it a flatline as they wat to see what we will do.  I had to go to Bloomberg again to find out that Manufacturing Output fell in the UK to 49.7 in August from 50.2 in July and net consumer credit fell, indicating that consumer spending in England is declining at the fastest pace since 1993 since none of this was mentioned in the WSJ's Europe section as of 8:45.  Today’s figures are “a bit of a setback,” said James Knightley, an economist at ING Financial Markets in London. “There are worries about the sustainability of the recovery.” While repaying debt is “positive for household balance sheets in the medium to longer term,” it’s “not good news for near- term spending.”  

The U.K. economy shrank 0.7 percent in the second quarter, less than an initial estimate of minus 0.8 percent, the Office for National Statistics said Aug. 28. Investment plunged 4.5 percent as companies slashed budgets for new equipment, vehicles and buildings (apparently, these companies live on a different planet than China).  Record debt means “there is a pressing need for many consumers to improve their balance sheets,” said Howard Archer, an economist at IHS Global Insight in London. “Serious concerns over jobs, the economic outlook and pensions will also lead to people trying to save more.” 

Hmm, let's think about that – US consumers, on the other hand, are tragically UNconcerned about the economic outlook and their "pensions" because the media keeps telling them everything is great to the point where 60% of the people surveyed believe their home has gained value in the past 12 months (99% haven't).  The boosted market and insane projections that the markets will fully recover has led US consumers to possible spend far more than is prudent given the state of the economy, job outlook, retirement savings etc. in order to keep the US GDP looking good – literally at ALL costs and possibly at a terrible long-term expense to those very consumers.  As I said a couple of weeks ago – corporate greed is literally killing the goose that lays the golden eggs

Europe is down about 1.5% ahead of our open, something we expected yesterday as the UK comes back from a holdiday and is forced to play catch-up with the global markets (something we may have to be doing next Tuesday so be warned).  Also not found in the WSJ (or heard on CNBC) this morning is the ICSC report showing US Chain Store sales fell 0.5% last week – more bad news for malls!  The report also notes that: "ICSC Research expects same-store sales for August to fall by 3.5 to 4%."  I don't know about you but, to me, that's news I might want to know about…  We'll keep an eye on RTH around the $85 line for a possible shorting opportuntiy if we blow our levels today.

As with yesterday, we are going into this session with an open mind.  We WANT to see how the market holds up under less than excellent news.  Redbook Retail sales just came out too and those are showing August off 0.6% month to month and down 4.3% year over year so actually worse than ICSC's forecast, which is not surprising as ICSC's partner is GS and we already know they don't want you to hear any bad news almost as badly as Uncle Rupert, who is willing to say almost anything to get you to sit on his lap. 

We also have ISM at 10am along with Construction Spending and Pending Home Sales but the day's bright spot is sure to be Auto Sales for August as Cash for Clunkers pushed more than 500,000 consumers through the doors in August alone.  AIG got hit with a Bernstien downgrade this morning, which is great for our $100K Virtual Portfolio position and our futures, overall, are looking down but not out.  Keep in mind that September is an historically bad month for the markets with an average loss of 1% over the last 100 years (the only other month that averages negative is February at -0.15%).  July and August are typically 2 of the 4 best months of the year (April and December being the others) so let's not be too shocked if we pull back a bit.  

Like Uncle Rupert's journalistic standards, we're just searching for a bottom… 

 


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  1. Phil,

    $100k – I never got the CROX Sept $6 calls for $1.30 but I did get the Mar $4 calls  for $3.10 – they are now at $2.95 (down)

    I did get the Sept $7 puts for .80 (down – now at .85 ) and the Mar 5 puts for .95 (up – now at $1.00)

    The situation seems fluid bottom line I’m even on the puts but down on the March calls despite my excellent price


  2. Just bought back the AIG short call verticals sold on Friday for +64%. Looking to sell C Sept. 5 straddles this morning.


  3. " OPEC oil production rose for the fourth straight month in August, to 26.2M b/d from 26.11M in July. Supply was 1.36M b/d higher than OPEC’s implied target of 24.84M, meaning the cartel has managed to implement 2.84M b/d of its promised production curb of 4.2M."
    Yeah, oil at $70 makes perfect sense.


  4. Also I have a question about spreads in general – if the spread narrows should we get out or roll the "down" leg and then the other leg or what? I have mastered buy/write and even shorts and longs but I’m still at sea on the spreads and the fluidity of how they get away from me is serious business. Where is the write up I am missing?

    Thanks


  5. Phil, out of TZA at the open, for a while.


  6.  Looks like we are on our way to a new high today.  I have come to the conclusion that this market moves up whenever there is news.  It does not seem to matter if it is good news or bad (since most of the news is bad).  As long as GS has the HAL9000 set to green I am going to be going long, while making sure my DIA mattress is exceptionally fluffy.


  7. Phil,
    Thinking about buying HOG again.  Current news is that they will start selling bikes in India. A buy/write at this price selling Oct 24′s C 1.65 / P 1.85?


  8. such BS this morning !


  9. Dow up now almost 100 points from open …


  10. CROX./Red – Well, of course you have a small problem if you have the March puts and calls and just the puts, as you are postured more bullishly than intended.  I wouldn’t change now as they already sold off and are bouncing back but once you sell a put it becomes imperative that you sell a call to cover it.  Oddly enough you got the opposite of what I got as I filled the calls but not the puts.  Of course, that’s a much safer position to be in…

    AIG $100KP – If you did not fill the roll from the 2011 $30 puts (now $10.40) to the 2011 $55 puts for $16. Now is a good time to take a chance and sell the $30 puts for $10.40 with an offer to purchase the $55 puts for $26.50.  That effectively accomplishes the same thing and we can always change our mind and buy something else later but getting out with a small profit on the puts is a good plan while AIG is down

    Break-down levels are still: Dow 9,400, S&P 1,010, Nasdaq 2,000, NYSE 6,600 and Russell 575 and below that is another 2.5% drop, back to 9,100 on the Dow and 984 on the S&P.

    We are very closely watching 1,010 on the S&P and 9,450 on the Dow but we’ve already gotten a huge move up at the open on no particular news as the stick is completing the move to 9,520 we were expecting into yesterday’s close.  We’ll see how it goes here but the data at 10am will likely set the direction. 


  11. What news did I miss this mornign that has the market up 80 at the open?  Is it the oil news?


  12. Smasher – What’s the "oil news"?


  13. Good morning,
    Any ideas on the10 news -oer/under
    Thanks


  14. GLD  Any opinions?  I’ve got 3 Jan 85s covered by 2 Sep 94s which seems about right, but I I’d love to go to full covers if we’re going to stall here.


  15. what blair posted.  I thought it might be offered as some weird explanation for the pop.  My guess is someone got the ISM data earlier and wanted to front run everyone else.   Probably be another "surprising" number.


  16. Dollar getting yanked down like clockwork every morning to boost the markets. 

    DIA $95 puts can be taken all out at $1.50 and that’s the right move.  If they can really break us higher thant this we’d rather sell the $96 puts anyway but, for now, naked Dec $98 puts are good ahead of data.


  17. Does the SEC even think about investigating this?  Futures down all morning and then the market takes off right from the open and we get a good number?  Big volume bars on the SPY right before the number (the cheaters starting their sell off their pump).  Number comes out and lemmings rush in to push it up again as the cheaters steadily sell into it.


  18. August ISM Manufacturing Index: 52.9 vs. consensus of 50.5 and 48.9 in July. The move above 50 marks the first expansion since Jan. 2008; it’s also the seventh straight monthly increase.


  19. July Pending Home Sales: +3.2% from June to 97.6, the sixth straight monthly gain and better than the +1.5% consensus. NAR says the recovery is broad-based with housing affordability at record highs.


  20. The moves on the /ES futures continue to be wildly erratic. Look at what happened at 10:02; an instant spurt up 5 points. What investor would buy futures that way? Same with index ETFs: they’re paying way over VWAP again just to jam it up.


  21. ISM is 52.9, which is better than 51.6 expected and the first positive number (above 50 is positive) since last July (and, of course July is usually the high for the year).  As with all these wacky month/month numbers, 51.6 only means we are expanding for one month after 11 months of contraction – nothing really to party about. 

    July construction spending was down 0.2% vs. flat expected and was up 0.3% in June.  

    Pending home sales for July are  up 3.2% though, that is double what was expected but less than June, which was up 3.6%. 

    Still this should give us a big boost with volume still light at 30M at 10am.  Unless we break 9,600 with some authority, this should just be another shorting opportunity but – DON’T FORGET – the big news today is going to be improved auto numbers so that’s when we’ll be likely to hit the shorts (this afternoon).


  22. Phil – 100k? – can’t sell the same option i already bought. ie DEC 30 VAF MF. The roll didn’t work yesterday. Not sure i understand your latest post. thanks


  23. Oh, i see. you mean sell to close. sorry.


  24. Phil what u think about YRCW here?  ….want to sell more 2.5P here?  seem OK?


  25. UPRO - Hail Mary plays:
    - Buy  Sep 90/85 PUT vertical for $0.2 (Buy 90 sell 85).  This pays $5 (25 times return) if the whole market drop 9% from here.
    - Of course we don’t like spending the $0.2, so let’s also sell the Sep 145 CALL for $0.4 credit. That’s a 7.5% cushion on the upside before we loose on the short CALL, then we’d roll it to October.
    - The net credit is $0.2, max payout is $5.2 for UPRO under 85, profit of $0.2 betwen 85 and 145.  Break even is $145.2 (rough numbers).
    - Initial Margin is $3, increasing to $8 if UPRO reaches 145.  Initial Portfolio Margin is $1.4, increasing to $4.4 (approx).
     
    The market is moving fast, so you should enter 3 legs at the same time.  In TOS, choose a Buy Butterfly, then change it to Custom, then you can change the legs to the above.


  26. Nice trade Peter.
     
    REITs are weak this morning, which is interesting.


  27. The news was good this morning and the markets are not really moving, that’s bad right? A sign of exhaustion?


  28. Peter D. -  Nice play
     
    REITS are weak.  +30% on SRS from a last week.  Sold on the expectation well get some stick firepower to knock it back down for a reload.


  29. Spreads/Red – Unfortunately all that depends on the situation.  Why is it moving?  What is your goal for this expiration period?  What is your long-term goal on this play?  Have the fundamentals changed or is the stock just moving with the market/sector and, if so, what are your short and long-term market/sector targets?  Are you getting a "good" deal to take out your caller or putter?  If so, will you be getting a good price on the calls and puts you want to roll to?  Are you willing to risk going naked for period of time or can you only do a roll?  What is the relative cost of rolling vs. riding the play out to expiraiton and how much margin are you using now vs how much will be committed or freed up on the proposed change?  Once you can answer all those questions, then the decision on the roll should be obvious.  That would be the "rule" for spreads!  8-)

    TZA/JRW – Nice exit call but already back as a buy at $14.10.

    Fluff/Craig – I’d be careful there, you really do have a long way to fall.

    Cerberus says there’s "no truth" to market speculation of default at its hedge funds. Sometimes it’s better when they say nothing.

    HOG/Wes – I’m concerned that the India thing is desperation rather than marketing.  They will have a hard time making margins in that market (US, Europe and Japan are unique in their willingness to pay $20,000 for a bike) and those revenues are years away as they have no production facilities, no supply contracts and no dealerships.  Then there’s the marketing etc that has to be done and it seems to me that $25 is more of a shorting opportuntiy than a buying one at the moment.  HOG was on our Buy List in March when they were below $10 but they will be lucky to hit .60 this year (they missed last Q by 66%) for earnings and next year they have rosey projections of earning $1.30 so, at $25, they have an ROI of about .90 per year so an effective return of 3.6% on your money (p/e 28).  If you want to play them, I would sell the Oct $25 calls for $1.50 and buy Feb $27 calls for $2.10 (net .60) as their $1.50 pays for you to roll down to the Feb $24s (now $3.40) so you have virtually no danger of being blown out and a flat or down performance should leave you in with a cheap entry.  While you are at it you can sell the Feb $22.50 puts for $2.50 as a drop to $20 for HOG (20%) would put you in the stock for net $20.60 and THEN you can buy/write or, if HOG goes up, you have your $27 calls for net .60 + $2.50 cash on a $2 spread with 4 months to roll the callers. 

    Oil with the big comeback today with UGA (gas) up 2.2%, USO up 2% and UNH (heating oil) up 2% so 50% bounces from yesterday.  Actual oil was jammed up to $71.50 on our "great" ISM report and Gold is at $957 but the dollar is bouncing already so watch that $957.50 line but more likely we’re back to $950 by lunch. 

    GLD/Eph – Weren’t you in it for an inflation hedge?  Full cover will take that away as you are already 90% in the money.  I’d sell 3 Oct $95s for $3 and buy 2 March $ 98s for $5 as that’s net $1 + $6 margin for the trade and you are then well covered and, if Gold takes off, you can roll up your 3 Jans to 2x March $92s (now $7.50) and you’d still have 1/3 uncovered (3/8 actually) with plenty of time to roll the callers. On the downside, of course, you’ll be damn happy you sold the covers.

    SEC/Smasher – Shhhhh!  You don’t want the SEC shutting this game down just when we have it pretty well figured out…

    "I think it’s a ways away – maybe quite a ways away." - St. Louis Fed’s James Bullard on the prospect of a rate hike

    Futures/Eric – That’s why I stopped playing them – you literally can’t sleep if you have futures positions out as they go up and down 1% for no reason at all overnight.


  30. Phil / TZA  Got it back at 14.14


  31. SPX – setting up SPX November Short Strangles (yes November) that has a -28% downside cushion and +15% upside cushion.  15% up would get us around SPX 1,170, which is only 20% off the inflated top of 1,570+ in 2007.
     
    - Short Strangles: Sell Nov SPX 750 for $3.6 credit, sell Nov SPX 1160 for $4.4 credit
    - Buy PUT and CALL verticals (giving up gain in the middle, but boosting returns on the wings):  Buy SPX Nov 980/970 PUT vertical for $3.15 (Buy 980, sell 970); Buy SPX Nov 1075/1085 vertical for $3.2
    - Net credit is $1.65
    - Profit of 11.65 between 830 and 970, and between 1085 and 1160.  Profit of 1.65 between 980 and 1075.  Variable profit in between these range
    - Breakeven point is 738 & 1171 (-28% and +15%)
     
    Why buy verticals?  They will help to hold up the account balance (available cash) in sharp movements either way due to the Longs in the verticals.
     
    Possible Adjustments – down market
    a- stop loss on the 750 PUT, and resell at a higher price
    b- rolling the 1160 CALL lower for a credit
    c- sell the 1075 long CALL in the vertical, i.e. having 2 short CALLs (1085 and 1160), but margin increases
     
    Possible Adjustments – up market
    a- stop loss on the 1160 CALL, and resell at a higher price
    b- rolling the 750 PUT higher for a credit
    c- sell the 980 PUT, i.e. having 2 short PUTs (970 and 750), but margin increases
     
    Note that the exact quotes can be different.  The idea is to get the credit for the spreads.  I’ll post the October spread also later.
    Good luck!


  32. If oil is up why is OIH dropping? i stayed in yesterday. Little profit now, should i take it an be thankful?


  33. AIG/Morx – Well we didn’t get our roll for $16 but if we take advantage to sell at $10.40 (almost $11 now) and THEN, on a move up later, buy the $55 puts for $26.40 or less, then that would be the same thing as having rolled it for $16.  If you can just leave a $16 spread in, that’s fine too.  The point was it’s worth spending $16 to move to a $25 spread as it locks in some long-term value.

    YRCW/Oncmed – This is the same as last time, they secured a credit line (that would have BK’d them if they hadn’t) and are making progress with workers who won’t have jobs if they don’t.  Last time this happened was early Aug, when they jumped from $1.50 to $2.90 before going back to $1.70 a week later so just be careful with them. 

    UPRO – Nice spread Peter – that’s the way to play insurance!

    Exhaustion/Blair – That and a sort of a "sell on the news" thing that’s going on lately.

    BXP blew $60 finally.

    SPX/Peter – 1,170 is 25% off the top but, otherwise, I like this one too.

    OIH/Morx – That re-entry plan from yesterday is very fulfilling!  Don’t be greedy but OIH can be down despite oil because they know that oil is nonsense above $70 as much as we do. 

    Qs barely holding 40, Nas still over 2,000  but looks like it’s breaking.

    All coming down now, let’s see how our levels hold….


  34. Phil / TZA Taking profit again. @15.10


  35.  TOL/Jomomma  -  Sorry missed your post yesterday and thanks for your thoughts.  At this point I’m rolling out my verticle put spread and hoping for some reality to hit by December.


  36. Did we just break down?


  37. WTF i was just getting bullish on the markets :-)


  38. Hi guys, just back from vacation and my portfolio value is right where I left it Aug 21, I guess I missed a boring week?  Looks like I arrived just in time for the selloff!


  39. Danger Will Robinson… Danger… Call me pessimistic but I’ll believe it’s the beginning of a correction if this continues through tomorrow and no sooner. We’ll see how it plays out…


  40.  Phil, China has convicingly violated its 50 day MA for the first time since March.  If we can’t get over it again soon I might get me some FXP. What do you think?
     


  41. It makes sense, but I just can’t trust my instincts as much as I used to be able to with these drops.


  42. What happened here? Who pulled the rug from under the market? And where are the bears? Not one single red post today :D


  43. TZA/JRW – That is one fun ETF – thanks for pointing it out!   I’m using a .25 trail stop so still going.

    Break/Blair – It’s very hard to decide if you have broken down or spiked while it’s happening.  We do now have an across the board level failure so now we look at our 5% rule levels for guidance.   As it so happens, the 1.25% mark was about the breakdown marks and none of the indexes have crossed 1.5% yet so that’s where we will be looking for a bounce first.  I not there, then the -2.5% levels come into play. 

    Wow, even as I wrote that we blew through -1.5% so it does look like we’ll be watching those 2.5% lines today but, if no one leads us below 2% soon, then we’re more likely to consolidate around 1.5%, roughly:  Dow 9,350, S&P 1,005, Nas 1,975, NYSE 6,545 and RUT 563.

    XLF blew through the 2.5% mark (great for our SKFs).  SRS up 7% to $12.25! 

    We could be on our way down…


  44. As I seeing this correct? There is no almost difference between /ES and SPX now.


  45. This is LONG overdue!


  46. Phil,
    I have a January $45 / $50 call spread on FCN.  It’s been dropping and I could use input.  Should I be making an adjustment at this point, and if so, could you advise.
    Details;    Bought (2) Jan. $45 calls at 5.78
                     Sold (2) Jan $50 calls at $3.32
                     Net $2.46   


  47. $100KP my GTC buy back on the FAZ put (that I meant to ask about) filled for .2


  48.  Mother F*CKER, everything is green and rosy and I go to class and by the time I get back we fall off the cliff!!!!


  49. Selling BAC 17 puts here to play the stick.


  50. Phil, interesting, things halted at least temp at your levels……1005 eg


  51. Pay attention to whats happening and take note of the stocks that recover quickly and those that linger at the bottoms, very important to take note of levels

    When the markets red expect to see lots of bears come on CNBC to add fuel to the fire


  52. RUT right at -2% at 560 so a big deal there as they seem to be leading us lower.  Looks like a quick bounce off it so far.

    2.5% off Friday’s tops bears watching:  Dow 9,360, S&P 1,010, Nas 2,000, NYSE 6,571 and RUT 570.  Without getting OVER those now, we remain bearish.

    DIA – Full cover on $94 puts at $2.  Plan to stop out 1/2 at $2.25.


  53. Remember when we used to yawn at 300+ point down days since they happened every week? Now it seems like a big deal to drop 150.
     
    Copper fighting to hold green after a nasty sell-off this morning.


  54. Pharm,
    Do you have any opinion on JAZZ (Jazz Pharma)? Thanks.


  55. Welcome back Mr. M – we missed your mojo!

    FXP/Soul – Well you’re a little late for the party but if we stay this low then plenty of room to fall in China too.

    Rumors that Wells Fargo (WFC -3.4%) may be in trouble.

    As of today’s auction, $276.3B of the Fed’s $300B in Treasury repurchase allocation has been used up. What then? "All of a sudden the invisible bid under equities is looking very, very precarious."

    SPX/Trad – There’s not too much of a difference with them usually.  Nothing like the Dow futures and the actual Dow anyway. 

    FCN/Bass – I’d buy back the callers and wait.  You are almost up 50% (and were up 50% this morning) with 4 months to go so the most you could have made is .40 per month more, which you can make by selling just two Oct $45 calls.  You are down $2 but if you have to, you can sell the Jan $45s to some other sucker for $3.50 and use that money to roll to the March $40s so it isn’t a crisis unless that roll gets away from you. 

    FAZ/Steve – That was the old $100KP right? 

    Mother/Craig – I’m telling you the charts were painted by liars specifically to get you to make those bets.  They got Merk too. 

    BAC/Mr. M – I like that idea. 

    1.5%/Ocelli – Not enough of a bounce to get us out of it so far. 


  56. Phil, I sold AIG Sep 33 call naked for 8.95.  I also sold and covered the Sep 33 put.  Of course, the call swung largely negative, but I am now 20% positive.  Is it worth trying to still buy the 30 Leaps for $25 to sell more premium against in future months, or let the naked calls ride?


  57. No reason for RIMM to hold up if this is a short term correction


  58. FAZ – this one sold for 1.10 bought back for .2
    FAZ: Buying 5 Sept $18 calls for $6.20.  Selling 5 Sept $23 calls for $3 and 5 Sept $20 puts for $1


  59.  AIG broke thru 42.6 support and is heading down towards 35…
    should bounce there at 35 support


  60. I should have said new portfolio. No worries I think I’m ok with it, the put was just part funding the position and I guess it has done its job.


  61. IF I were going to bet positively on CRE surviving, I don’t see the need to make any play other than URE at $5, selling the 2011 $4 puts and calls for $3.30, which is net $1.70/2.85 so 40% room to fall which is about  -15% IYR which would be about $33, which is their 200 dma and the upside is 194%.  That’s a pretty good risk/reward if you want to offset some bearish real estate bets (or the purchase of a home or office building).

    Dollar really asserting itself now, back to $1.42 to the Euro and $1.615 to the pound (remember when I called the dead top at $1.70?).  Still at 93 Yen and Japan can’t be happy about that.  Gold back at $951.50, which seems to be their defalut spot lately and Oil fell all the way back to $68.75 so far.

    RUT broke below 2% and NYSE is next if they blow 6,500, then S&P below 1,000, which will really have the bulls on the run


  62. JAZZ/Allen – they are the old founders of Alza that JNJ bought for 12B in early Y2K and then recently closed (JNJ is so good at doing that)!   I think they have run up a bit far here, and the fall could be swift down to the 5 range.  They pulled a small profit last Q based on lower costs.  If you buy here, scale in 1/4 and be prepared to DD several times.  Options are lightly traded and moats are wide on them.  They have some interesting things in the pipeline, but several are neuroscience….look what happened to ACAD today.  Then you will get my drift.


  63. AIG/SS – I’d go with the naked call at the moment, you can always buy AFTER a clear bottom has been put in.   Also, keep a reasonable stop on the caller after all this nonsense but that would be easier if you had bought back the Sept puts when they were way cheaper.  I think this is a bottom for the moment for the indexes and AIG.  In the very least, the 2.5% rule should hold us through tomorrow so plenty of time to consider your options. 

    $100KP FAZ/Steve – My bad, I forgot they were in the new one!   If you got that put sale and bought them back, that’s great.  No need to worry about it now as it was just to give you some extra cash and mission accomplished there.  On that FAZ play, the spread is now $4.50 so, if you are an active trader, there is no reason not to take it off the table as max profit is $5

    $100KP AIG – Selling $35 puts for $4.15, stop on $33 calls at $8.


  64. Re HOG – I have a Harley.  I also work with Indians.  I’m telling you the plan to sell in India stinks – the Indians can’t sit on the Harley and touch the ground with their feet at stoplights……picture this – just a bunch of people tilting over and clocking out at stoplights.


  65. What is a good way to play WFC with the increasing premium?


  66. Where is the best place to check overall market volume?  I use TDA and TOS.


  67. Thanks Pharm!


  68.  ssdirk on TOS NASDAQ total volume is $TVOL/Q and NYSE total volume is $TVOL.


  69. Java/HOG sounds like a money maker to me

    AAPL letting go wont be long before RIMM follows


  70. LOL Java!  I imagine they will tailor them to the local market but I also think it’s a bad plan.  Next thing you know Winnebago will be telling us they expect to do well in China.

    Doug Kass says he’s betting on a 10% drop in the S&P 500 by year-end. "I am shorting this market because we are facing a period of disappointing economic and corporate growth."

    • Chrysler actually sold 15% LESS cars in August – how pathetic is that?  Mecedes was down 7.5% (what no clunkers for a Benz?) and, oddly, Smart cars were off 33% so that company had a massive marketing failure
    • VW is up 11.4%
    • F up 17%

    WFC/SS – I think a simple short straddle, selling Jan $22.50 puts for $2.20 and the Jan $30 calls for $2.20 gives you a b/e between $18.10 and $34.40, about 30% in either direction.  In TOS with basic margin that costs just $266 per contract in net buying power and you pocket $407 per contract if you hit your mark.  Also, you can stop out the non-working side at $3.30 (down 50%) and then you’d still have a 50% gain unless it whips completely back the other way.

    Volume/SS – TOS has a MarketWatch tab but I just watch the Dow volume on ETrade Pro.  Volume is meaningless until you get used to what is high and low for each point in the day.  I like the Dow because I can wrap my head around the number more easily than watching X Billions of shares go by and trying to determine where we are from there.

    Volume at 1pm is 120M by the way.  Not much more than usual for this time of day but I do get the impression Mr. Stick struck at the open and may have spent himself already.

    Sellers are still out there and RUT and SOX are below 2% with S&P right on the line with Nas and Dow looking weak so next stop likely to be -2.5%.


  71. NFLX, GNK and Me. I know I’m a rook w lots to learn – and I am – but two of my microview faves here. GNK still paying fat premiums – anything under $22 strike keeps paying off. At least once a week from Peter The Greek. And I’ve always loved Netflix long and might again, but a combo of things inc info here led me to long puts last week that cashed at 40% gain today. I leave it to Phil to identify best if any puts or plays. I’d like to run at ‘em again. And in the interest of full disclosure, I couldn’t or didn’t get out of the long TIF calls when one-day victory was clear. But I do like them past the holidays and am now, alas, writing calls.


  72. Now this is more like it !


  73. SIRI. Thx for comments earlier Phil. No more buying right now. But the calls were so cheap I decided to go lookin’ for something to make ‘em even cheaper. SIRI generally on your original premise that this was a buy and hold long anyway. Lo and behold I was able to write calls against that silly March $1. Little downside long cuz el cheapo. But if someone out there wants to buy these calls for a couple more months- viva!


  74. RE: AIG in 100K
    Phil, I did not leg into the original AIG spread but was filled on the entire trade last week as a spread at the original 15.70 debit – but the individual prices were very different from where you were filled. I still am long a 2011 30 call (bought at 24.30 – RADICALLY different from where you were filled)). I have closed the other 3 legs for a profit of 8.83. I have an order in to buy the 2011 55 put for 26.50.
    What would you recommend I do now to bring me in line with the 100K portfolio? I would rather not be a lone wolf here. LOL


  75. fwiw; starting to get back into HK here …


  76. Porsche up 9% but Cayenne down 34% (just 509 sold in US).

    2.5% held up very well but auto sales aren’t saving us and those were set to be the bright spot of the week.  Tomorrow morning is the ADP jobs and expectations may be too high with "just" 255K jobs lost vs -371K last week.  We also get Productivity pre- market and they are looking for up 6.1% there (Q2) but I think we may have already hit the wall where layoffs are not leading automatically to productivity as I’ve been talking to biz clients who can’t find the right mix and may have over-fired, which is really inefficient, especially if you can’t get the same guy back as it becomes a training issue. 

    We also get Factory Orders at 10 and tha’ts expected to be up 1.5% for July vs. up 0.4% in June and again, July just did not seem to be as strong as June BUT this stat should benefit from clunkers so it’s a wild card.  Oil at 10:30 of course and then, just when you think it’s safe to go back in the water – FED MINUTES at 2pm. 

    So this is actually a good time to establish the call side of our typical DIA spread on Fed day.  The $95s are .92 and we’d like to get the $91 puts for the same price or less (now $1.01) so let’s start with some $95s as a first entry and our goal is to buy more at .60 if it gets that low

    SIRI/Dstill – Nice play.

    AIG/Allen – I like the naked long at the moment.  When you do fill the put side, then you can look to sell the $40 puts and calls or whatever works.  Right this minute I like selling the $35 puts at $4.30 (we just did) as that’s a lot of money for something that doesn’t pay off until $31, which is almost 20% lower than here.  You can also get $4 for the $40 calls so something like that spread would be a nice fill as both can be rolled $5 further off the money in Oct if it goes against you so not too stressful at the moment. 


  77. PhiL :
    I have doing  buy/writes  on CAT  for dividend  for several months. Up 30% on the stock. Latest  call sold is Sept. $45 calls @ $ 2.50 with current. price of  $1.30  Should I roll out to OCT $45 for $2.45 premium or roll down to Sept $44 for premium of $1.75 to get more downside  protection. Also sold Jan $36 puts  for $1.98 now $2.20. I plan to hold.Thank you.
    dflam


  78. Phil – you selling the DIA $91 puts?


  79. Volume looks a little higher today? Any thoughts on stickability please?


  80. Wow, we have a winner!  Hyundai August sales up 47%, Elantras up 116%.  It’s a monthly record for the company (82,000 cars). 

    MOS holding it togethe at $49 today.  Could get wild if they start that takeover stuff again.  POT makes a better play as they are sitting on the 200 dma at $86 and I do like selling the Oct $90s for $4.70 against the March $95s at $9 (net $4.30).  The $4.70 pays for a roll all the way down to the $85s so no big deal if they fail the 200 dma and POT has to hit $95 before the caller gets their money back and you can already roll the Oct $90s to the Jan $105s (now $4.10)

    CAT/Dflam – Step one – take out the caller.  Step 2 count your 50% profits.  Step 3 – see what happens, you just made 50% so take a break.  If you don’t get a bounce – then the answer is obvious as you cover lower.  If you get your bounce, then maybe you sell the same puts again for the original price.


  81. Phil – please clarify the component  trades in the "typical DIA spread on FED day" – thanks


  82. DIA/Morx – I hope you mean buying.  That is the premise for our Fed spread tomorrow but there’s no hurry as long as the Dow keeps heading up into the close.  Maybe we can buy the $92 puts for .90 instead.

    Stickable/Steve – We are at 140M before 3pm so we are pushing what we consider stickable but not by too much.  They really need to get us back over 9,400 and then punch us up 50 more pre-market.  On the put side, as long as you can say to yourself "yes, I want to own CAT at $34 in Jan" then what do you care what the price of the put is?

    DIA/Concrata – It’s the DIA play I just noted at 1:41, buying the $95 calls (now $1.05) and some offsetting puts, looking for a move of 200 points to give us a double on one side or the other with a free ride on the remaining half.


  83. LZB. Did we adjust the $100K play? Or just sitting tight?


  84. Well Hello!!  How is everybody?  Doin great!  Thanks for asking :-)   But to be honest, I did try and catch the falling IYR knife this am after cashing out my overnight SRS position WAY TOO EARLY. 


  85. Crude futures really getting pasted now.


  86.  Anyone here with thoughts on the route in natural gas?


  87. Phil- Earlier you mentioned how “When China gets a cold we get the flu” and I just read a passage from a book about the French Revolution where the author quoted a German writer who said at the time “When those damned French sneezed we caught the plague!” Interesting how power shifts…


  88. GM came in down 20% from last year (last year they had $4,000 cash rebates).  Cadillac off 55%, Buick off 52% – such a sad state of affairs. 

    Back to URE – You can day trade them at $5.01 with a stop at $4.98 and pick up nickles.

    LZB/Dstill – Not a problem, sitll $1 over our zone.  We added a buy/write yesterday (not for the $100KP).

    Hi Matt!  Yes, we are all gunshy with short profits aren’t we?

    Oil testing $68 now.  $67.50 is a big problem for them and this is a dumping into the NYMEX close.   Don’t blame the dollar as gold is up now at $957 again.

    Speaking of the dollar:  An analysis of why the U.S. dollar is the worst choice for reserve currency – except for every other option. The dollar has weaknesses, but four forces maintain its importance.

    Nat gas/Ticker – Well I was BUYBUYBUY last week at $2.75 but only because I think $2.50 is a floor and there’s always the potential hurricane bonus through October.  There is no fundamental reason for nat gas to go too much higher.

    Honda up 14.2%, CRV up 58%, Civic up 50%

    Nissan down 3%, Infinity down 30% – people are just walking away from big cars!


  89. Picked up some more IYR at 39.03.  Playin for a close at 1005 on the S&P.  We’ll see…


  90. Phil, I think all 509 Cayennes must have been sold in Scottsdale – I see them everywhere…LOL….


  91. Webtech. Sorry to post here, Phil. Our Web Team digs your site – much of it. One of our firms getting ready to post a slew of gigs in web tech and related. Looking for referrals from
    various places we hang out. Low maintenance and mobile functionality will trump “art” for the most part. I’ll try to remember to email.


  92. Fully covered IYR with SRS. 


  93. Remember too that these collapsing auto sales are occuring in the context of an artificially low interest rate regime. What happens when Asia gets tired of our shenanigans and a 36 month car loan is suddenly 11%?
     
    Infinity vs. Hyundai story:  An acquaintance recently bought a new Infinity G37 at over $7K below sticker after he told the dealer that he would buy the new Hyundai Genesis coupe instead unless the dealer could come down to near the Hyundai price.


  94. Trading of bearish Wells Fargo & Co. options climbed to 162,000 contracts, triple the four-week average. More than four of the puts, which give the right to sell the stock, traded for each of the calls, which give the right to buy.
    The most-active contracts were October $24 puts, which rose 67 percent to $1.25 and accounted for a quarter of today’s put trading. The shares haven’t closed below $24, or 13 percent below yesterday’s closing price, since July 24.


  95. O boy first sign of economc recovery is here
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aMJ6yR9lHQQM


  96. Oil finished just over $68.

    Flu/Josiah – It’s always something right?

     U.S. ad spending fell 15.4% (.pdf) in H1 to $56.9B, according to Nielsen. Cable TV was the only major category to see increased spending, up 1.5%. Online ad spending fell 1%, radio spending dropped 9%, and national newspaper spending was off 23%.

    TM up 10%, Lexus down 19%, Hybrids up 28%.  Seems to me vehicle sales were entirely clunker driven. 

    Web/Dstill – Well if they want to do a little design work I have a lot of stuff backed up…

    WFC/Kustomz – Just seems like a lot of rumors looking to take down financials but that’s what we said last September so I wouldn’t take any chances!

    FSLR going lower and lower….

    Stuy Town/Kustomz – That is totally amazing, prime NYC real estates and they can’t make money…


  97. STUY town, MET should be rewarded for selling it at the height of the market.


  98. On the FSLR note, SPWRA has just filled the gap … Now selling the 23 Oct09 Ps are very attractive at 1.8 for an entry.  3mo low is 22.10, 52 wk is 18.5 (15%) from the the put entry price.


  99. FSLR i would get into them in the 90′s, i forget the guys name some Euro fund manager said they shouldn’t be trading over a 120 when they were at 200 not too long ago, his target was 90 peso’s i mean dollars…not too take anything away from your call and insight ;-)


  100. Let’s take note of a couple of things today.
     
    First, its a FMD to the downside.  While we should be on alert for the stick; I think a stick is highly unlikely today.  More likely we close at the lows IMO.
     
    Second, we are seeing so far this week a drastic change in character from the free money upward trending low volatility market.  I would not be surprised to see 200-250 point swing days become more common again.
     
    Third, while we are seeing some nice down moves today, they really are very minor.  Financials, Reits, Retail, other stuff are still very pumped up, even if off 5-10% today.  Same for tech at off 1-2%.
     
    Market laggards continue to be energy names and AMZN.  In some ways, AMZN has been the "tell" for the market, a leading indicator both up and down.
     
    Finally, we could see a bounce tomorrow or later this week, followed by more downside.  I am looking at 1010 for my first bounce level, which is where one might reload some shorts.
     
    Just watching right now …. wheeeee !


  101. URE at $4.98. Not sure i like day trading.


  102. Uncle Rupert says (page one on-line): "Factory Gains Signal Global Recovery."

    SPWRA:  Buying March $20s for $6.50, selling Oct $25 calls for $1.70 and Oct $22 puts for $1.35, nets $3.45 on the $5 spread.  Put to you at net $25.45 (if March calls are wiped out but doubful so figure $23 ish).  

    FSLR/Kustomz – I still don’t like them at $90 but, as a trade, they might work… 

    Well it does look like we’re zoning in on the levels we expected for consolidation at 11:37: Dow 9,350, S&P 1,005, Nas 1,975, NYSE 6,545 and RUT 563.  Below that would be pretty pathetic and, so far, there’s a lot of selling pressure rejecting all upside attempts.   Yesterday, they waited until last 15 mins to stick it.

    Volume 166M now – in theory, they shouldn’t have enough to do a major stick from here so those 1.5% levels are proably as good as it’s going to get for the close.

    UK Shenanigans:  U.K. market regulator FSA warns about stock spoofing (.pdf), where traders stack the order book of a stock on one side, then quickly pull those orders after their true intention (an opposite trade) is executed. FSA says spoofing could trick algorithmic trading systems into thinking there was "a host of buying and selling interest that wasn’t really there."


  103. Phil:
    $94 put mattress shorts hovering near $2.25 1/2 stop (sold for $2.00.) 1/2 covers into close?


  104. Ops, forgot to remind people that we had a blow off spike down yesterday at 3:28 so don’t count your chickens until 3:35!


  105. DIA/Chaps – I wouldn’t take out the 1/2 just yet – like I said, they are blowing out stops so don’t be one if them if you don’t have to be


  106. Can someone please give me a link (or let me know which day it was covered) to the Fed DIA play?  Thanks


  107. Cap, fear of the stick is keeping me covered.  It’s a damn shame on an FMD.  Phils right.  I have gotten gun shy.  Last  year I’d ride a FMD into the close.  But you just can’t trust those bastards.


  108. 27,632,990

    17,172,276

    13,715,791

    21,121,210

    19,209,740

    12,411,747

    7,982,881

    10,187,667

    9,715,570

    9,270,791

    10,722,142

    12,722,177

    Here is Dow Volume by the Half hour todya so far


  109. Is there any automatic way to keep track of a NET stock price after having sold/bought several rounds of puts and calls, or does this have to be done manually?   Again, I am using TDA and TOS.


  110. matt, I hear ya; but the selling pressure today is very real, I don’t think a stick would work, unless based on some insane "news" released between now and the close.


  111. Phil,
    I figure that if anyone figures out how to bust the nuts of the algorithmic trading machines then the more power to them. Odd isn’t that the powers that be always go after the guys who might hurt the guys who are the ultimate manipulators?


  112. Phil – DIA Fed spread day – I am filled on the 95 DIA calls, if I can’t fill on 92 puts below $1, do I cancel trade or fill at best put price I can get.


  113. This is really weak, good call Cap.  This being the case, we are still going into the close 1/2 covered on our long DIA puts.

    Volume now 180M.

    URE – That’s why we have tight stops – when they blow it, they blow it but, on the other hand – go SRS! 

    The idea is you cover your SRS play with URE with tight stops when you fear a bounce and, while URE drops to your stop, SRS breaks overhead resistance and takes off.  Next inflection point, you do it again. 

    Really messy now, hitting 2.5% lines and that can lead to some serious ugliness in China tomorrow.


  114. Comparative half hour Vol on the Dow> I am just getting my Autologging spreadsheet working

    8/31/09 8:59 AM
    27,122,497
     
    9/1/09 9:00 AM
    27,632,990

    8/31/09 9:29 AM
    10,646,206
     
    9/1/09 9:30 AM
    17,172,276

    8/31/09 9:59 AM
    10,341,160
     
    9/1/09 10:00 AM
    13,715,791

    8/31/09 10:29 AM
    6,914,677
     
    9/1/09 10:30 AM
    21,121,210

    8/31/09 10:59 AM
    7,395,650
     
    9/1/09 11:00 AM
    19,209,740

    8/31/09 11:29 AM
    6,598,450
     
    9/1/09 11:30 AM
    12,411,747

    8/31/09 11:59 AM
    5,494,850
     
    9/1/09 12:00 PM
    7,982,881

    8/31/09 12:29 PM
    4,581,612
     
    9/1/09 12:30 PM
    10,187,667

    8/31/09 12:59 PM
    5,261,728
     
    9/1/09 1:00 PM
    9,715,570

    8/31/09 1:29 PM
    5,014,568
     
    9/1/09 1:30 PM
    9,270,791

    8/31/09 2:02 PM
    7,888,560
     
    9/1/09 2:00 PM
    10,722,142

    8/31/09 2:32 PM
    12,340,901
     
    9/1/09 2:30 PM
    12,722,177

    8/31/09 3:02 PM
    84,837,953
     
    1/0/00 12:00 AM
    -171,864,982

    8/31/09 3:32 PM
    7,165,657
     
    1/0/00 12:00 AM
    0


  115. Talk of Cerberus going bye bye, Cerberus says liar liar


  116. that didn’t paste corectly!  Sorry guys


  117. Fed DIA/GS – Just a simple spread of (today) the $95 calls and the $91 puts, both at .90ish, now $2.03.  We’re just playing for big moves on Fed volatlity. 

    Volume/Chuck – Thanks.  It’s pretty normal overall, last half hour will add a lot. 

    Net/SS – I just look at them but call TOS support, they have a widget for everything.

    DIA – looks like we’ll now be lucky to take out half for $2.25.

    Busted nuts/High – Oh I agree.

    DIA/Concreata – If you can get out even (and the $95s are .96 now), get out, it’s not worth overpaying for the $91 puts and who knows where we’ll be tomorrow. 


  118. Spreadsheet/Chuck – That’s one thing this system doesn’t do very well, which is a real shame.  Data is great though.  

    Oh wow, look at this last minute move!


  119. Wow, FAZ is doing better the SRS today.  Could it be that the banks aren’t being protected anymore?  I just can’t help thinking that we’re going to have a stong up day tomorrow…


  120. Phil, is IGT still a good short? In at 19.85.


  121. Web. Thx. We’re looking to hire. But I could send some other folks ur way. More later.


  122. 1/2 hour Dow Volume . The total won’t be correct until it posts again in 30 minutes, but close enought for Govt Work. SO they say, I never worked for the Govt?

    27,632,990

    17,172,276

    13,715,791

    21,121,210

    19,209,740

    12,411,747

    7,982,881

    10,187,667

    9,715,570

    9,270,791

    10,722,142

    12,722,177

    77,945,693

    -249,810,675

     
    Amazing that last 1/2 hour!


  123. Speaking of Cerberus, my thought to self on Friday afternoon (?) when that came out late in the day was "gee, in a normal market, Cerberus investors wanting out would be a huge sell the market event".
     
    Maybe it took a couple of days for that to get factored in ….


  124. Volume finished at 267M and near low of day.

    That was a major stick rejcection!   Haven’t seen that in ages and you can tell they were trying there at the end and someone just dumped into everything they tried to buy

    IGT/Ajay – Still a short if the market doesn’t turn that’s for sure.  50 dma is $18 so be careful there. 

    Web/Dstill – Oh you need guys?  I can hook you up. 

    Wells Fargo (WFC -5%) CEO John Stumpf says it will pay back TARP soon, and that it won’t need to raise equity to do so.

    Wow, this stuff is really getting interesting….


  125. Phil, I am short FAS and FAZ.  since my short, FAS has gone up.  Last week I sold SEP 67 puts on FAS.  I picked 67 as the strike because I calculated that they could be put to me at that price and my overall position would be approximately a breakeven.  I don’t want to buy FAS so as we get closer to expiration my plan was to either let the option expire worthless or buy it back and sell a cheaper strike OCT option for approximately the same cost.  My question is what should I do if say tomorrow or sometime soon FAS drops to say 62 or 63, do I roll the option then or do I wait until closer to expiration?  If the option is in the money I risk having it put to me at any time, correct?  Thanks in advance!


  126. 100KP – FAZ – I had mistakenly gone for the full buy 5 sep 09 18 call, sell 5 strangle 20/23 put/call.  Do you suggest any changes to this position tomorrow with respect to 100KP?


  127. Question for everyone – I using ameritrade and have a command center 2.0 screen set up with watchlists, level II, last sale.  What does the ToS platform provide that I am missing?  Or rather, should I use the ToS tool instead of the command center 2.0 and if so what are the advantages?  Thanks!!


  128. Bloomberg – Check out the "Editors’ Video Picks" on Bloomberg.com, "Expects GDP Growth of 3.5% this quarter… ISM Data clearest sign this recession is over… Ford on Upward Trajectory…" Those editors sure are hoping we like their picks!


  129. By Erik Larson and Thom Weidlich
    Sept. 1 (Bloomberg) — Extended Stay Hotels Inc. should have an independent examiner probe the company’s pre-Chapter 11 deals with lenders to reveal if its bankruptcy filing was a scheme to push out junior debt holders, two investors said.
    Mezzanine lenders Deuce Properties Ltd. and Line Trust Corp. say an examiner, requested by the U.S. government, should have subpoena power over witnesses, according to papers filed yesterday in U.S. Bankruptcy Court in New York.
    “An independent examiner will clearly benefit all creditors, in light of the very real questions that exist concerning what occurred in the weeks and months leading up to the petition date,” they said in the filing.
    Deuce and Line Trust sued in June over claims that Cerberus Capital Management LP and Centerbridge Partners LP, with senior lenders, are trying to take over the chain’s 680 properties. The suit also named David Lichtenstein, the leader of a group that acquired Extended Stay from Blackstone Group in 2007, using $7.4 billion in debt financing.
    U.S. Trustee Diana Adams requested an examiner in July, citing “serious questions and concerns” about the deals Extended Stay used to acquire most of the assets now in bankruptcy. A hearing on the request is scheduled for Sept. 22.
    Extended Stay’s lawyer, Jacqueline Marcus of the firm Weil, Gotshal & Manges LLP in New York, said the company is in talks with the U.S. Trustee and creditors to “try to resolve the motion in a manner that’s acceptable to those parties.”
    Indemnification of Investor
    Extended Stay listed debt of $7.6 billion in a June 15 Chapter 11 petition it blamed on decreased business spending on travel. Deuce and Line Trust claim Cerberus and Centerbridge, New York-based private-equity firms, agreed to a plan to indemnify Lichtenstein against $100 million in liabilities that he faced if the hotel went into bankruptcy.
    The plan also called for him to be given equity in the restructured entities and a $5 million “litigation defense war chest” for him and his Lightstone Group LLC to fight claims by the junior lenders, Line Trust and Deuce said in the complaint.
    The U.S. government is among Extended Stay’s biggest creditors, thanks to investments in the company made by defunct Bear Stearns Cos. A government trust for the collapsed bank claims $796 million in mezzanine debt and $274 million in mortgage debt, court records show.
    Other top holders of secured debt are Wells Fargo & Co.’s Wachovia unit, which claims $984 million in mezzanine debt and $515 million in mortgage debt, and Bank of America Corp., which claims $958 million in mezzanine debt and $400 million in mortgage debt.


  130. Eben
    Without answereing the question the TOS platform is available on Td Ameritrade, just call or email Cust Service and they will enable it.   To answer it quickly … it handles options purchases very quickly and the analytics are very in depth.  never used command center, so maybe CC is just as good? 


  131. WFC – Over at Zero Hedge (http://www.zerohedge.com/article/357-pm-stick-save-wells-fargo-bank-promises-repay-tarp-soon) they’ve got a conversation going over whether or not Wells could be the "Large Potential Bank Failure" that was rumored earlier. With the put buying being so huge (1/4 of all put buying done today was done on WFC!) What does everyone think about that? I know they’re sick but they wouldn’t be my first guess for going belly-up. I think that the fact that the CEO came on last minute shows that they are in the confidence game now and that’s never a good sign. 


  132. Phil – Could you suggest 6 month (March exp) bearish plays for the 2x short ETFs: SDS, SRS, TWM, and REW. I was planning to scale into these positions and looking for the best buy/writes, verticals or other bearish plays in your judgement.  Chose March because I do not expect market recovery before then.Thx


  133. PHIL – Re: DXO - May I please have your take on this.     I own many shares of DXO.
    Did you see what they announced after hours???
    As of Sept. 9th, Deutsche Bank has decided (or forced) to buy back all shares of DXO.  No new shares will be issued, starting now.  They will determine the redemption value on Sept. 9th.  I’m not sure if they mean market value at that time, probably not.
    What will that mean to the value of my shares?
        Will it go way up, because there are no new shares?
        Will it go down, because Deutsche Bank doesn’t want to pay us much?
        Go up a little, because Deutsche Bank needs to support their other ETFs values and reputation?
        Or is it a "Wild Card"?  It droppped 7% after hours, with the announcement.  Oh Boy!
    http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20090901006479&newsLang=en
    Thanks – Rich


  134. Good morning!

    Cerberus/Cap – I know, on Friday it seemed like yet another major negative that was being ignored by the market but you need a lot of straws to finally break the camel’s back in an irraitional market.

    FAS/Eben – Wow, that’s a lot of worrying over a trade that is totally going your way!  I imagine you noticed already how silly FAZ puts and calls are as an almost 20% drop in the stock in one day ($13) to right at $67 from $80 has only moved the $67 puts from $2.25 last week to $5.75 now.  Had you also sold calls, you would be in pretty good shape despite the huge move.  Of course, here’s where it gets dangerous because another 20% drop will take FAS down to $55 and clearly the puts will be worth at least $12 then.  Of course $12 can be rolled to 2x the October (appx) $55 puts (now $4.60) so that’s fine as long as you want to stick with your 3x bullish position on financials. Of course, you could offset some of the downside risk by selling FAS calls or doing a buy/write on FAZ or something.  Don’t worrry about an assignment just because your putter is in the money, as long as he has a good bit of premium (25% or more) there is virtually no chance the contract will be assigned.  I am, of course, still concerned the financials go lower (we were bearish on financials for a while now) and I suppose the easiest adjustment would be to roll the $67 puts down to the $60 puts for $3 and sell the $76 calls for $3 on the theory that a $10 drop to $57 will give you another $2 on the call side which you can then use to roll down another $10 (maybe kicking in another $1) down to $50 puts and that’s a total drop of 37% off $80, which seems like it should be enough of a correction and you can still roll to October after that.

    FAZ $100KP/Java – That wasn’t actually our play but it seems fine.  As I said earlier today, the vertical is just about $4.50 which, with 3 weeks to expiration, is about the point to take it out as you can only make .50 more if everything goes perfectly into expiration (and when does that happen?).  On the sold put, that’s also a big winner and you need to set a trailing stop at 25% of the profits.

    Bloomberg/Josiah – They have really sold out lately.  Maybe Mayor Mike has decided the only way to save NYC is to save Wall Street and he decided to join the pump crew as I really don’t think he’s hanging with Rupert and the gang of 12 but that’s the thing about powerful conspiracies – you don’t need to include everyone and some will still end up working for your cause for their own reasons…

    Extended/Kustomz – That kind of nonsense happens all the time but the sloppiness of it inicates possible desperation on the part of Cerberus et al to try to salvage what they can on these deals.  Also – Gee, this doesn’t exactly seem like a green shoot for CRE does it?

    WFC/Josiah – One thing I learned last year is that it doesn’t matter whether or not a bank is/was healthy once the jackals start circling as they can tear anyone apart bit by bit and it starts with the rumors (which force a denial that sparks more rumors), then a few high-profile withdrawls, then the negative ananlysis from "trusted" sources, more rumors, stock prices tumbling, meetings with regulators which force management to go silent leading to worse rumors then more withdrawls, lower stock prices and, possibly death.   There was NOTHING worse about BSC and LEH than there was about GS when they were attacked (by GS) but taking them down eliminated competition for GS (and Paulson allowed it) and also made it much more compelling for the government to step in and save GS and JPM as they became too important to fail.  So nothing surprises me now and I no longer bargain hunt a financial that’s under attack (I still have som WM stock if anyone would like some!). 

    6 months/Concreata – Well see last Monday’s post where I set up 3 plays.  Now you are chasing a bit which makes it a tougher call but it’s still the financials that have the farthest to fall and you can buy Apr $20s for $11.20 and sell Apr $28s for $7.20 which is $4 for an $8 spread (+100% profit potential) that’s $9 in the money right now.  If you want to get more bearish you can buy the April $25s for $8.50 and sell the $34s for $5.20 and that’s $3.30 for a $9 spread (+172% profit potential) that’s $4 in the money – still not bad…   You can apply that logic to verticals on the others but that’s my favorite. 

    DXO/Rich – As of Sept 1, DXO has $426M in assets but I have no idea how many shares there are so it’s kind of hard to tell.  This is why I don’t play those things very much, especially ones that don’t even have options as they are so hard to value properly.  I’m sorry but there is no way to tell what’s going to happen with these guys and they are near enough their highs that I would just take the money and run, rather than mess around hoping for a series of events to fall in your favor.

    This whole commodity ETF game may be winding down and EVERYONE needs to seriously consider getting out of these positions until this regulatory game runs its course.  The ultra-ETFs may be next so we need to keep our ears open on those too but there is no question that the CTFC is determined to put an end to this ridiculous speculation that is bankrupting the planet

    For that reason, I like the USO Jan $34 put for $3.30, which is risky but could do very well.  You can also sell the Jan $38 calls for $2.75 to pay for it (doubling the risk of course) as it takes $75 oil to put them in the money and, outside of a dollar collapse, I just don’t see that being sustainable through Jan.


  135. Busy day – 12:00 AM Wednesday’s economic calendar:

    7:00 MBA Mortgage Applications

    7:30 Challenger Job-Cut Report

    8:15 ADP Jobs Report

    8:30 Productivity and Costs

    10:00 Factory Orders

    10:30 EIA Petroleum Status

    11:30 Fed’s Lockhart speaks on lessons of the financial crisis

    2:00 PM FOMC minute

    Paul Tudor Jones and macro funds are placing their economic bets, and they’re against Goldman Sachs (GS) and its predictions that the recovery is under way. Clarium’s Kevin Harrington: "This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later."

    This would be a great one for weekend discussion on the very ugly side of the Pharmecutical Industry:  FRX is now under investigation by DOJ for: "improperly marketing antidepressant drugs Celexa and Lexapro for use in children, and gave kickbacks to doctors to encourage these prescriptions."  The Senate blew the whistle on them, releasing the company’s internal  Lexapro Fiscal 2004 Marketing Plan which outlines how one of the principal means by which Forest hoped to persuade psychiatrists, primary care doctors and other medical specialists to prescribe Lexapro was by finding many ways to put money into doctors’ pockets and food into their mouths.

    It is illegal to pay doctors to prescribe certain medicines to their patients. It is not illegal to pay doctors to educate their colleagues about a medicine. In recent years, federal prosecutors have accused many drug makers of deliberately crossing that line.  Lexapro had $2.3 billion in sales in 2008 even though generic versions of Celexa and every other drug in the class sell for a fraction of Lexapro’s price. For example, a month’s supply of 5-milligram tablets of Lexapro costs $87.99 at drugstore.com, compared to $14.99 for a month’s supply of a generic version of Prozac. 

    See, this is how you can save 33% of health care costs – simply put an end to nonsense like this.  Prozac costs 1/6th what Leapro costs so PRESTO!  Proper oversight gives you close to $2Bn in savings on one drug alone.  This is the kind of crap that is pulled on US consumers every day and this is nothing compared to what goes on with cancer drugs and other "must have" medications. 

    Forest’s 2004 plan for marketing Lexapro offers detailed information about how the company planned to direct this money to doctors.  Under “Rep Promotional Programs,” the document said the company planned to spend $34.7 million to pay 2,000 psychiatrists and primary care doctors to deliver 15,000 marketing lectures to their peers in one year.  “These meetings may be large-scale dinner programs with a slide presentation, small roundtable discussions or one-on-one advocate lunches,” the document states (in other words, they pay you to take your friend out to lunch).  Under “Lunch and Learns,” the company intended to spend $36 million providing lunch to doctors in their offices. “Providing lunch for a physician creates an extended amount of selling time for representatives,” the document states.

    It’s not so much the fact that people can be bribed that bothers me but the fact that they can be bribed for so little!


  136. TTWO earnings weren’t so bad, make a nice buy/write if they open at $10 and we can still sell Oct $10s for $2.

    HOV has earnings tonight, that should be interesting.

    By the way, I forgot to do the math but $34.7M for 2,000 doctors is $17,350 per doctor to push their crap and that small payoff allowed them to charge $2Bn more than Prozac for a medication that is altered by a single molecule and has absolutely no proven differences (but the molecule let’s them patent it as "different").  And yes, I am friggin’ infuriated by this! 

    Spain’s unemployment is up 2.4% in August!  That puts them at 18.5% unemployed.  Of course you can’t find this in the WSJ (this is getting ridiculous), who are running with the Europe Section headline of "Euro-Zone Outlook Improves." 

    Also interesting (as I was giving Murdoch every possible opportunity to show me the facts somewhere) is the front page of the EU version of the WSJ, which leads with "Global Economy Gains Steam," an interesting choice on a day the Nikkei and Hang Seng both dropped 350 points and Europe opens down and our futures are down (but being played with as we speak).  This is what I was talking about the other day – in Asia they tell you things are picking up in Europe and America, in America they tell us things are improving in Asia and Europe and in Europe they tell them things are getting better in America and Asia.  They don’t have the balls to try to tell you things are great in your own economy but they figure they can say whatever they want about things that are 5,000 miles away from their readers.

    I’m still looking for some official confirmation that UK Manufacturing PMI dropped to 49.7 from 50.2 in July – there is nothing in the US press about this so far.  Net borrowings by UK consumers in July fell about $400Bn, that’s like US consumers borrowing $2.4Tn less in a month – a pretty radical pullback!  


  137.  Good morning Phil & all,
     
    Hey Phil…. I put up my trades, charts and how I’m thinking to trade today’s action….
     
    Is this the beginning of the HARD and FAST drop?… Is this the start of the Big W selloff?
     
    http://timelineonev83.blogspot.com/


  138.  CNN’s Money headline for me this morning… Is the rally over?
     
    http://money.cnn.com/2009/09/02/markets/world_markets.reut/index.htm


  139. Phil – I’m not looking to get into a debate with you; the kickbacks infuriate me as they do you.  But I have trouble understanding how you blast the government for their lack of supervision and regulation of the fraud in the markets today, yet feel so passionately that they are capable of efficiently running healthcare.  
    Also FWIW, not all patients react the same to Prozac as they do Lexapro (or other anti-depressants); not that it justifies the need for such a discrepancy in price, but it can be argued there is a need for different medications.


  140. Drop/Merk – I’m actually hopng 9,100 does hold up and we have a new floor at that level, otherwise I’m fairly confident in 8,650 but a panic fall can take us back to 8,200 if people decide to freak out again.  WFC failure, CRE collapse, Spanish Defaults, Eastern Europe collapse, Russia collapse (more likely if oil hits $50 again) are the main concerns, each good for at least a 5% drop if they hit but it is possible we skate by without any.

    CNN/Merk – It’s good that the media are turning negative so fast.  If we run low into the weekend, hopefully we get some volume capitulation next week and we can see where things really stand.

    Lexapro/SS – I don’t know enough about the effects etc to make a judgement,  I have read many statements in the articles about it stating there was virtually no difference but as a gourmet cook I appreciate that one man’s no difference is another man’s life and death preference but that in no way, shape or form excuses the type of marketing and cost gouging engaged in by these bastards and the fact that this kind of systemic abuse can occur under the current system simply indicates that "stay the course" is not a solution.  You can’t wave the government bogey-man flag every time a program is proposed. 

    Yes, over the last decade, lack of government supervision has let the makets run rampant and destroyed the nation but now there is a new administration that is trying to do something but the CTFC and the FDIC and the SEC run into the same wall of knee-jerk statements pressed by the people who want to maintain the status quo who say "the governenment shouldn’t get involved, look how they messed (fill in a program) up."  There are always a million good reason to do nothing, doing nothing is easy and natural and requires virtually no effort and you can’t posibly by wrong by supporting no solution as "those other solutions would have only made things worse" and if that’s the way you like things I understand, my Grandpa was that way, even after he went senile, he hated when anything changed at all….


  141. Phil thanks!  Did I sound worried?  Sorry about that.  Not worried at all.  essentially just wanted to know the risk of having the options put to me and whether i should roll them now or wait a bit.  thanks again!


  142.  More swine flu fear mongering…. today’s headlines are insane trying to get me to believe the world is coming to an end
     
    Swine flu is all hype…. I think it is BS… and I don’t want their vaccine since I prefer not to become one of their lab rats !!
     
    http://news.yahoo.com/s/ap/20090902/ap_on_go_ca_st_pe/us_us_swine_flu


  143. Phil – a gourmet cook?  What are some of your specialties?  I like to cook too, but would never call myself gourmet.  I’m a comfort food type of guy.  Unfortunately, I live in a house with a vegetarian wife a baby and 2 little children who only eat mac ‘n cheese.  Kinda hard for me to cook a roast without having to invite the neighbor over.