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G20 Thursday – Pittsburgh Ponders Our Planetary Predicament

Our global leaders all get together today with the Global Financial Crisis (yes, it's still a crisis) topping the list for the 2nd year in a row.

Fresh from the UN general assembly in New York, heads of government and a vast diplomatic entourage will descend on Pittsburgh today to kick off two days of talks on economic stability, financial regulation, climate change and bankers' bonuses. They will be greeted by boarded up shops and energetic protests.  On the eve of the summit, China indicated it was willing to countenance an initiative by President Barack Obama to smooth the flow of capital around the world in the hope of securing greater long-term economic stability.  The US proposal calls on rapidly expanding economies such as China, Brazil and India to boost domestic consumption in order to lower their trade surpluses, while the US and Europe would encourage more saving to reduce long-term budget deficits.  Gordon Brown yesterday (see UK protests in picture) backed the effort, saying he hoped "different continents can better work together to achieve the growth we need."

Yes, like any addict we NEED growth.  Stability just won't give us the fix we need as our entire global economy is based on borrowing to spend money we don't have today in anticipation of being able to pay it off in the future, when things are "better."  The fact that this has clearly not worked out at all for the past does not seem to deter our leaders.  In fact, in 2009, our pals in the G20 have borrowed an additional $5,365,000,000,0000 to see them over this little "rough patch" we're having:

[global_debt.jpg]

This doesn't take into account the $6Tn worth of debt OBLIGATIONS taken on by our own Fed and Treasury, not to mention whatever nonsense the rest of the world is into – this is just the checks they wrote in excess of the cash that came in – and the year isn't even over yet!    Now $5.3Tn may not seem like a lot to you but it is a 16% increase in total global debt in just 12 months.  In fact, according to the Global Debt Clock in the Economist, our friends in the G20 are on a path to increase our debt from a "mere" $30Tn last year all the way up to $45Tn in 2011.  That's a 50% increase in just 3 years!  At that pace, by the time my first daughter is going to college in 2020, the G20 will be $151,875,000,000,0000 in debt - so I guess that sort of puts her student loan into perspective! 

How, you may wonder, can the world go another $115Tn into debt when the entire current global GDP is less than $50Tn?  You would think that someone would look at our balance sheet and cut us off but that's the fun part – we're borrowing all this money from each other and as long as we all maintain the charade that we expect to get paid back one day, everything is fine.  Meanwhile, I'll be advising my daughter to major in basic survival skills – just in case this infinite debt plan doesn't work out….

I don't want to write a 5-page article on the G20 but, seriously, the gist of the plan by the US, Japan and Europe is to encourage China, Brazil and India to consume more so we can bring trade into balance and create a demand for American labor and goods.  Yes, really, that's their plan for global growth – massive global consumption.  I believe that was the solution that enabled the planet Remulak to prosper, which is why the Coneheads were always encouraging Earthlings to consume mass quantities – it wasn't a comedy sketch, it was an economic solution from the stars! 

I will discourage my daughter from taking math classes or she may become depressed if she realizes that China, Brazil and India (notice Russia is now considered hopeless) have a combined GDP of less than $7Tn and it would take a 30% increase in consumption by those three countries to make up for just a $2Tn pullback (5%) in consumption by the US, Europe and Japan ($37Tn).  That's a real shame too as global trade is off 30% this year – that's $15Tn, so the G20 "solution" to the problem is for Brazil, China and India to triple their consumption to make up for it.  Hey – Big Macs and IPhones for everybody…  

Meanwhile, even these horrific-looking trade numbers may be overstated as China's copper stockpiling is now lashing back and creating a global glut with 331,950 metric tons piled up in warehouses.  “The rise in inventories has gotten people worried,” said Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis. “There’s some fear about a slowdown in demand.”  “Rising exchange inventories and slower Chinese imports of refined metal have capped the market in the short term,” Robin Bhar, an analyst at Credit Agricole SA’s Calyon unit in London, said in a report dated yesterday. Record shipments into China in the first half of this year contributed to a doubling of futures prices by August.  “The dollar has gotten so oversold lately that people are worried we could get a strong bounce now,” Cohen said. He said that would push down commodity prices. 

Speaking of stockpiles, we had an 11.2 MILLION barrel build in energy stocks last week, with gasoline up 5.4Mb and crude up 2.8Mb and distillates up 3Mb – that is more oil than we import in a day going unused into storage in a single week.  It's also, like the unnecessary copper that piles up in warehouses, a very false indicator of the global economy as $800M worth of oil was shipped to America this week – even though there was no actual demand for it  So between copper and oil and gold and other metals being moved about the globe like speculative chess pieces, chasing fictional buyers that never materialize, the trade numbers are probably worse than we think.

We were thilled yesterday as our morning plays for Members ahead of the oil inventories were the USO $37 puts at $1.75 (now $2.60, up 54%) and  the OIH $115 puts for $2.55 (now $3.30, up 29%) – those are not bad for day trades but nothing compared to our DIA spread, which I discussed in the morning post.  We had been accumulating the Sept 30th DIA $98 puts at .90 and the Sept $99 calls at .60 and my quick read of the Fed statement for members led me to conclude that the rally would reverse so we sold the $99 calls for .90 and doubled down on the $98 puts at .55 and those calls finished the day at $1.18 (up 115% from the dip).  So that means taking $90 to buy the puts and $60 to buy the calls at first led to cashing in the calls for $90 and using $55 to buy more puts ($145 total), which then cashed out at $236 so $150 turns into $271 in 2 days (up 80%) – this is why we love those Dow strangles ahead of market moving events! 

We didn't press our luck as we still have our Dec puts as well as our Oct puts and that's bearish enough in case the G20 does some razzamatazz to make the markets jump.  We did press our EDZ bets rather than go against China directly but China did drop 544 points this morning despite a 200 point stick move right after lunch.  The Nikkei has been closed all week and they opened up 175 points and held it thanks to a 100-point stick save into their close.  The Shanghai finished up very slightly but it was the Baltic Dry Index (yes, back to trade again) that caught our attention as they plunged 71 points (3%) and fell below our 2,250 watch line

As you can see from David Fry's chart, the BDI is in serious danger of a massive breakdown yet the Transports (IYT) are UP 40% since early July.  One of these indexes is tremendously wrong and, since the shippers are probably charging as much as the REAL market will bear while the IYT is a manipulated tool of the Gang of 12 – I'll have to go with IYT being a bit ahead of itself.  Dec $75 puts are $6.20 and you can sell the Dec $71 puts for $4.20 to create a $2 spread that pays a 100% return if Transports go down 9 cents between now and December.  THAT's a nice hedge, just in case the G20 doesn't solve everything

Europe is flat and trading should be choppy today as the bulls are holding out hope that the G20 will save them, just like they thought the Fed would save them yesterday.  We'll stand ready to take advantage of the big moves but yesterday was so profitable we can afford to just kick back and relax today and watch the fun – no pressure at all…

 


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  1. I’m not sure if anybody else follows this information but I will try to regularly post it in the morning in the hopes that it may benefit us. Phil, maybe you could give some comments about their analysis and make some potential plays out of it for us, whatever you have time for. ——
    Goldman Sachs says:    Adding Meritage to Conviction Buy List
    We upgrade Meritage (MTH) to Conviction Buy (from Neutral) as the company’s early-2009 land purchases, strong SG&A control, and low levels of antiquated land make Meritage the most likely homebuilder to return to profitability. Our $28 six month target (from $22) implies about 39% upside consistent with our Street-high earnings forecasts.
    Reiterating Conviction Buy on DR Horton
    We reiterate our Conviction Buy on DR Horton (DHI) and raise our target to $17 (from $16). The 37% implied upside reflects DR Horton’s industry-low prices and 2,300 ready-for-sale homes which support strong sales and cash flow this quarter. ——
     
    We add Citrix to CL-Buy and expect shares to move to our $44 price target (22% upside) as Street estimates shift higher on top-line with improving enterprise demand. Operating margins should also show a continued snap-back to the 25%+ level as cost cuts through the downturn take effect. Where are we different from consensus? We are more positive on application networking, assuming a return to double digit growth next year, more in-line with its trajectory pre-2009 as Internet companies once again build out network capabilities. We also assume core XenApp growth in the mid-single digit range off a highly depressed 16% decline in CY2009.
    Catalyst
    Our upgrade of Citrix to the CL-Buy list continues our ongoing offensive tilt to more mid-cycle groups within TMT – hardware, software and entertainment. We view a more normal 4Q as the next important catalyst for software stocks, and Citrix in particular, given pent up demand in IT budgets and some thawing in Europe. Expectations remain muted, with the Street projecting 3% yoy top-line growth in 4Q (vs. our 5%). Longer-term, we view Citrix’s positioning in the shift to virtual desktops as unique, with Microsoft leaning on Citrix technologies. Citrix’s Xen virtualization assets also positions the company well to address the cloud opportunity and create an attractive strategic asset at a time when consolidation in the software space is heating up. Our already higher-than-Street estimates shift up modestly to $1.89 and $2.09 in FY’10 and FY’11, from $1.88 and $2.07; we are maintaining our FY’09 estimate of $1.66.


  2. Morning…
     
    I still remember the GS added US Steel to "Conviction Buy List" when it was $190 and rised target to $230 from $210 LOL


  3. aclend….I don’t know how Phil feels about this but I’ll give my opinion.  I look at analyst and broker recommendations with great skepticism.  I believe their opinions and recommendations are influenced by their relationships to each other (these are often not known by the public) and their need to "pump and churn" in order to keep us masses constantly acitve in the markets doing what we do best…buying and selling the stocks they are pumping.  Even during severe stock market downturns like the one we had recently you could go to any site that gave analyst recommendations and most of the recs were ‘hold’ or ‘buy’.  Very few were listed as ‘sell’ , yet at that time we should have been selling (or shorting) most everything in the market.  So, the least I can observe about them is that they are often wrong, and I suspect that they are sometimes intentionally biased in a bullish direction.  So my advice is…..use their advice as light reading and to get possible ideas, but don’t take their advice at face value…….ever.    That’s my opinion.


  4. One further comment on analyst or broker recs:
    Relative value scale:   Analyst /broker rec usefulness to me……1 out of 10
    Phil rec usefulness to me……7 out of 10    (no one gets a 10 because no one is always right)


  5. aclend= Got to go so i posted that short LOL at GS conviction list. Now, those funny calls aren’t always wrong. Its just a call they do and probably with same accuracy than a flipping coing.  Those calls usually means nothing (for me) and you have to keep objective in your invetiment parameters.  Some similar to  GS-CBL was the Lehman 10 uncommon values and eurovalues. Those lists are build with criteria, but with a lot of undisclosed interests. Better we ask Phil :)


  6. FYI: The Citrix target is 12 months, the homebuilders are 6-month targets.


  7. jobs… same thing, but is less worst than expected! -> green green green
     
    Rare sentiments. Im reading Karl Deninnger  and i feel I musto short the planet, including myself ! my god!


  8. OIH  Oct 115 Puts  bought yesterday 2.74, sold today 3.60 for +30% .  Following Phil’s advice…"small profits frequently"


  9. Well, this is getting boring.  Pretty much every morning I have to say ignore the BS pre-market pump in the futures…

    We are still holding S&P 1,056 and NYSE 6,959 so all is well for the bulls at the moment but they are getting nervous (and they should be).  Let’s watch for critical breakdowns of oil at $67.50 (nat gas inventories at 10:30 could push them through), XLF at $15 and the QQQQ at 42.50 – those will be our early sell signals.

    The upside is like a cliche with 9,800 on the Dow and 7,000 on the NYSE being the BIG lines we need to cross back over for the bulls to regain the upper hand

    AMZN must have read my notes from last nighs (and there were a lot last night so check there) that they were overvalued and they are selling off and YRCW is pulling back so watch out if the Transports turn red (and my bearish IYT play is in the post above). 

    Jobs were not impressive, within the margin of error and it’s really sad to see the MSM act like losing 530,000 jobs is a good thing just because it wasn’t 550,000 – talk about ignoring the problem! 

    Some news I didn’t get around to writing about this morning:

    Sources say Citigroup (C) may sell or shutter some of its 1,001 North American branches in an effort to downsize and focus on areas with the highest branch concentrations, the latest attempt by Citi to "mend a business dogged by underinvestment, strategic miscues and management turnover."

    Great news for AAPL:  The FASB approved a tweak to accounting regulations that could benefit some high-tech companies. Previously, devices like smartphones that combine hardware and software, were governed by accounting rules that applied to software which requires the revenue to be recognized over a product’s expected life cycle, typically years.

    German business confidence struck a new 12-month high in September, with Ifo’s business climate index rising to 91.3 from 90.5 in August, short of the 92 economists predicted. Pessimists still far outnumber optimists, except with regard to the six-month outlook which was a draw. "In light of the catastrophic developments over the past twelve months, this is good news," Ifo says.

    U.K. almost had two Lehmans: One day in early October, 2008, two major British banks – Royal Bank of Scotland (RBS) and HBOS – were within hours of collapsing, Bank of England Governor Mervyn King tells the BBC, explaining the government’s emergency pledge of about £50B to stave off disaster.

    The next front in the U.S./China trade war: paper.


  10.  Where do I find last night’s notes?


  11. I’m liking the move in REITs here. I am however cutting a little of my SPG exposure by selling the last batch put calendars I bought (which are now profitable). I was very short this thing and it was making me nervous, lol.
     
    I want to leg into more RIMM short strangles today and right now I’m looking at selling the 80 puts and covering them with Nov. 75 puts on a bounce higher. Also, I have a few low-ball bids on the call and put strangles in case Oct IV soars higher this afternoon and I get more very cheap.


  12. Existing home sales at 10 am.  IF up,  URE may bounce.


  13. Any theories on this $$ coming back to the banks through the expiration of the Fed’s "cash management" notes?  Supposedly starting today for the next 5 thursdays 115B in cash will be given back to the banks.  ZeroHedge had an article on it.  If the banks do use it to leverage up thier equity exposure we could see a re-pump today.
     
    Any opinions?  Thoughts?


  14. Old Goat – go to PSW website, page down to find Which Way Wed, click on the heading then cntrl&end on your keyboard will take you to the end of the page. Page up a couple times and set aside an hour or two.


  15. Conviction/Aclend – That’s always a good idea to post, they almost always move the market.   That being said, there are a lot of trades like MTH that I won’t play because Goldman is insane telling you to buy a stock for $22 that’s losing $4 a share this year and is losing $200M a year with $400M in the bank, $725M in debt and payables and $700M in "inventory" of quesitonable value.  You can call something a buy or say they are possibly undervalued but CONVICTION BUY???  If they jump to $26, then I want to short them but I’m not brave enough to fight the sheeple and short them at $22.   DHI is just as bad.  So CTXS is the most exciting opportunity to short into this news as they are off base and $39 is a reasonable place to short them with a $44 target as that’s 12 months away.  Let’s see how high they go.

    I don’t always go against GS, if they pick a buy I agree with I’m happy to jump on board but we have to catch them early so I’ll try to remember to look for AC’s posts early on if I have time.  As Iflan observes, these picks are most useful as a way to play the crowd who follows them and should never be taken as serious analysis.  I also love to see GS kill something with a conviction sell and then start buying on the dip.  Either way there’s fun to be had.

    7 out of 10/Iflan – I will strive to earn an 8.

    Oops,  August home sales were down 2.7% – so much for today’s party

    Last night/Oldgoat – At the end of yesterday’s post comments.

    Dollar/Where – I think the dollar is oversold and any move out of commodities will create a dollar demand that will pressure more people out of commodiites which will cause people to scramble for more dollars which will hurt the commodities….


  16. Thank god for stops.   Home sales down, stopped out of URE (with a good profit).   On to the next trade…..SRS?


  17. August Existing Home Sales: Down 2.7% to 5.1M/year vs. consensus of 5.4M and 5.24M in July. Sales remain 3.4% higher than a year ago. NAR’s Lawrence Yun was upbeat despite the decline after four months of growth, but said the drop "demonstrates we can’t take a housing rebound for granted."

    In his speech this morning (.pdf), Obama advisor Paul Volcker wonders: "Will not the pattern of protection for the largest banks and their holding companies tend to encourage greater risk-taking, including active participation in volatile capital markets, especially when compensation practices so greatly reward short-term success?"

    Oil $66.90!  Gold fell from $1,020 (which I called) to $1,007 already.  S&P blew by 1,056 like it was paper and NYSE blew 6,959 and is already testing 6,900. 

    Still not much volume but look out if it increases.  Just 30M as of 10:10.


  18. Hello Phil…  I still hold some of my WAMU shares. I am just surprised by the sudden move in these stocks of bankrupt companies. Whats going on with WAMU?


  19. Good point about the contra-indicated plays. When I was looking at the chart, it struck me as very UN-coincidental that it dropped 20% over the previous 5 trading days, THEN it was added to the list. Like I said yesterday, they have a vested interest in certain issues and the power to back them up.


  20. Phil
    I’ll give you that 8, plus a 2 in addition for the educational tips that GS et al receive a zero.


  21. any news on bidu this am.  Saw that they were pumped premarket and are now down a bit?


  22. Beginner question: How do I figure out the delta of an option?


  23. Pharmboy – CLDX options getting killed today, are you doubling down? Also, when are the results from the cancer study supposed to be released in December?


  24. WAMUQ.PK/Desi – Well we have AIG shooting up and they are just as BK as Washington Mutual is but I really think this is about Lehmans BK shares shooting up on their anniversary with Wamu just around the corner.  Maybe speculation, maybe souveniers…

    The Fed may enter into reverse repos – normally the domain of the 18 primary dealers – with the $2.5T money-market mutual fund business as part of its plan to drain liquidity from the financial system. The Fed would pledge mortgage-backed securities and Treasurys it bought as collateral for short-term loans from money market funds. – Oh yeah, good luck finding buyers for mortgage-backed securities! 

    IYT going well, cover is now a spread under $1! 

    XLF did break $15 so safe enough for bears as long as they stay below.

    8/Gel – Thanks but don’t make it so easy, I’m very goal-oriented – I need targets!

    BIDU/Jo – The CEO spoke at Stanford so a lot of valley people may have decided to buy but they’re wrong.

    Delta/Blair – You shouldn’t have to figure it out.  TOS has them on everything you look up – get a practice account.

    Nat gas up another 67Bcf, about in-line with expectations but not at all good for oil, which is hitting $66 now!


  25. Phil,
    I never got .50 on my CROX oct $7 caller in the $100 K , any adjustment now that we’re miles from it?


  26. CLDX/Jr -  don’t know the date, and no, not DD yet.  Only down $100 on my screen.  Not worried at all.  I will DD if they get to 30c.


  27. Phil,
    Like Apple long term.  I know you’ve stated $145 as a fairly safe entry point for them.  Would you bump that up with the proposed accounting change?


  28. Phil, Please update your play of the day when you get a chance.  (DIA).  I need a fresh entry.  Thanks


  29. /ES already nearing 1040. Lots of people with their eyes on that one as a first possible bounce level.


  30. Dollar now gaining quickly — lots of short covering, heh heh.


  31. Phil – GLD – the short OCT 99 calls – they are now 1.40 (vs 2.89 cost) – would you close out half or wait for expiration?


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    Phil,
     
    I know you said the other day but I can’t find it anywhere. What is the trading platform/broker account of your choice?  Fidelity has just upped their minimum account size requirements to $25k for option trading and then you can only use funds above that amount to actually trade in options and if you should slip a nickel below the $25k reserve they cash out your options positions almost immediately.
     
    Schwab only requires a $5k minimum account size to trade in options with no reserves but they are beginning to tighten up like crazy on day trading with after the fact penalties after advising that a particular action was allowed by them regarding Fed calls for instance. They are also now beginning to require that larger option trades, especially spreads be broken up into smaller trades and separate legs, each with full fees being charged .
     
    I have several smaller children’s trusts (which can’t be co-mingled) and several much larger IRA’s along with a modestly large personal investment account.
     
    I want maximum flexibility and minimum fees with no reserves for trading options, stocks, etc
     
    Are these restrictions on smaller investors being done as part of same grand scheme by the big guys who basically hate us? Or is it just Fidelity and Schwab trying to up their margins?

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  33. Phil,
    I have no idea where the pro-log and post-log came from on the last cut and past message from ms word into firefox browzer. It only showed after I hit the submitt button on your page,


  34. BXP off nicely, RIMM down 3%, BIDU down $16, USO testing $34… this is like shooting fish in a barrel!

    EDZ flying, SRS broke over $10 finally! 

    VIX broke 25, we like that but too early to start trading.  Downside volume seems to be accelerating.

    AAPL/Chuaeu – I won’t do anything on a proposed change.  Those may or may not come though.  I do like entereing AAPL by selling the Jan $165 puts naked for $7.40 as those can be rolled down to Apr $150 puts and then you are in for net $142.60 and we’re happy.

    DIA/Zuko – No play of the day there.  We held naked Dec and October puts yesterday and I would remind players that we should be thirlled to take small profits on the October puts as we almost lost a lot!

    GLD/Concreata – I think we’re lucky to make 50% so better off killing it than waiting a month to hopefully make 50% more

    Trading/High – Most of us like ThinkorSwim, our rep is Scott@thinkorswim.com there.  A nice feature on TOS is you can flip between accounts very easily on the same screen, which is great for your situation.  I don’t think the restrictions you’re seeing are anything more nefarious than the brokers trying to increase fees any way they can.


  35. Highlander, I can’t speak for Phil obviously, but a lot of us like Think or Swim. I manage several peoples’ IRAs with them. They let you do pretty much anything that the SEC allows in an IRA.


  36. O.k., well I guess I can speak for Phil. Long FLSR everybody! (j/k)


  37.  Pharmboy
    Is  SPPI  a buy at today price ?


  38. Mess/High – That does seem to happen when people cut and paste.  I always type straight in, as you can tell from the spelling mistakes! 

    Watching that RUT at 600 now, Dow having serious trouble at 9.700, which it shouldn’t just 30 mins after failing it UNLESS it’s the shade of tops to come…

    Gold just failed $1,000! 

    Action kind of mixed now, maybe just resting at 11am volume is still under 60M and the bears may be hoping for some stick action to sell into as I’m sure they don’t want to lose 2.5% off yesterday’s prices if they can avoid it and there’s no urgent sense of panic – yet…

    If I were a fund selling, I’d be looking for a bounce back to green to begin selling again or a break below 9,650, which would seem like things are going very bad so I better get out fast.  That means it should be very hard for S&P to take back 1,056 but the Qs just failed 42 and the Nas is testing 2,100 so it’s all up to the horsemen to pull it out for the market this afternoon

    AAPL $184.15, AMZN $91.31, BIDU $379, GOOG 494.65, RIMM 84.25 – they need to lead us back up and OIH needs to hold $115 (and that’s the end of that trade).


  39. Plil,
    Is this not the standard first hour sellers followed by a day of botting ?


  40. Highlander – also check out Interactive Brokers – they also seem to let you do just about anything. Trade futures, forex, etc. – they will also let me buy and sell options on margin – I guess due to how they calculate buying power -
    For schwab always had to have cash in the account.


  41. Conviction/Aclend — Appreciate the buy list information.  It’s good to know what GS is advising.  Thanks.


  42. Hi Phil. IYT put spread in at 2.20 market wants now 2.35 still worth chasing??


  43. Phil,
    On CROX in $100K, how about selling 3 oct. 6 caller for .75 and then I can roll it to $7 caller if we get a move up?


  44. Phil,
    Would you be willing to consider using the MyTrade features of the thinkorswim platform for us to follow up on your trades--this way they can automatically and Instantaneously be incorporated and followed by us.


  45. Phil:
    are there today 1 or 2 stocks to possibly get into by selling premium ?


  46. Typing…whenever you do a cut and paste, you can first paste it into notepad…it will kill all the imbedded html stuff…and then do cut and paste from what’s in notepad and paste that into psw…


  47. SPPI/qc – well, they just raised 50M for 7.55/share (9/22).  Those investors bought in and lost money right away.  I would move to selling the straddle 7.5/5 Nov C/P for 1.05 if you buy a 1/2 position here.  They are kind of in no man’s land, so a move either direction is possible.  That way you will have a DD at roughly 5.5 ave, or a call away at 7.5 for a nice 20% or so.  I still like them for a revenue generator as well as takeover target.  They just need to get the machine rolling.


  48.  Phil
     
    Cover or half on the DIA puts now?


  49. Standard/JRW – A little different today as we are following through on a down day, hitting the 2.5% rule today in what finally looks like a normal sell-off DESPITE the attempts to pump things up.  If we assume the pumping is still there, then the selling pressure may be pretty big. 

    IYT/Yodi – It’s not too bad at $2.35 but the best way to enter trades like that is to buy the puts first and then sell puts to cover as a momentum play – which was fabulous this morning but too risky now that they have already dropped $3.

    CROX/Maxt – What is your current position and basis?

    Mytrade/Bben – I tried that once and it didn’t work well, some went through and others didn’t.  Also, I trade the Hedge Fund in TOS so I can’t really publish those trades and I don’t even want the possibility of a mistake there.  Wall Street Survivor will soon have a follow feature and that’s where members will be able to follow a portfolio.  Since that portfolio is virtual, it doesn’t conflict with my Fund trading.

    Stocks/RMM – Not at the moment.  I’m just happy to be in a good position to watch and wait today.  We are halfway to my 5% correction and we’ll see what holds up. 

    Microsoft (MSFT -2.2%) pours cold water on speculation it’s courting Electronic Arts (ERTS -3.4%). "We have no plans to acquire EA," Microsoft’s Phil Spencer told Reuters. "They remain a very important partner to us. No acquisitions." Spencer wouldn’t comment, however, on whether MSFT had held talks with ERTS. Analysts are also lukewarm to the deal’s prospects.

    The Baltic Dry Index, often considered a leading indicator, continues its decline, dropping (-3.2%) for a tenth-straight day.

    Article on the dollar carry trade.

    A progress report on where the G-20 nations are on their pledges from April.

    Bankrupt Tribune Co. (TRBCQ.PK) will provide bondholders with documents related to its leveraged buyout by Sam Zell in 2007, heading off a court hearing. The bondholders have said the buyout may have been a fraudulent conveyance and that "unsustainable debt" sunk the media company.

    September KC Fed Mfg. Survey: Orders pick up slightly and expectations hold mostly steady. Price indexes inched higher but remained at low levels. Headline production is +16% of firms reporting increases, a bounce back from -7% in August and +2% in July

    DIA/Deano – It’s fine to do a 1/2 cover but I’m willing to risk it (Dec only) for now as we’re right at the 2.5% line for 2 days and if we don’t bounce back over Monday’s lows, then the trend remains down


  50. Pharmboy
     
    thanks


  51. Phil,
    CROX/Maxt – What is your current position and basis?
    This is the position from the $100K , Long 5 March4 calls/5 march 5 puts, short 5 oct 7 puts at .90 but my order to sell 5 oct. 7 callers for .50 didn’t fill.


  52. MEMC (WFR) back to our magical 17.5.  If they fail, back to 16.5ish.  With that, I am going to sell the 16 Oct09 P for 50c (see if it comes to me).  Phil I believe likes them at 15/16ish.


  53. Or you can buy them here and sell the Nov 17 strangle for 3.5!


  54. Phil: I always sort my portfolio by premium,
    then I see which ones are high and which ones are low,
    the low ones could be closed, the high ones need rolling,
    I see low premium (under 1$) for the following and wonder whether I should CLOSE them:
    LDK dec10 caller (1.4 to 0.85$)
    MDT oct 38 caller (1.02 to 0.4$)
    PGH jan 7.5 putter (1.19 to 0.3$)
     
    The following need consideration of rolling:
    AAV feb5 caller (1.12 to 2.2$)
    MCO oct 23 putter,(1.54 to 3.9$).


  55. Phil,
    What’s your thought on BUYING the Dec $99 PUT for $5.30.
     
    We have 2.5% down today, the trend should continue negative…


  56. Phil, I know you are sitting on your hands today, but with the rapid decline in MCO are you thinking of a possible way to play them moving forward?


  57. For the cash we have in our trading accounts (mine is TOS), what do you park your money in to earn some interest?  I’ve read that some recommend T-bills.  I don’t know anything about them – which do buy, etc.  I don’t think I’m earning anything on my cash in my TOS account.


  58. FYI, I went long MCO at 19.36.
    Other ways to play long are buy the Jan ’11 22.50s or 25′s.


  59. I was about to comment that volume seemed to suddenly dry back up;  selling just kicked back in …


  60. MCO dangerous, why buy something thats still heading lower? Do you see a technical bounce here Cap?

    Santelli says we hit a top in everything and he says its time to go down.

     


  61. We have a FMD to the downside !
     
    Can’t remember the last time we had one of those.
     
    Be on the lookout for market closing at or near lows of the day (meaning possibly an afternoon move lower).


  62. By the way this is just another typical day on the Jetsons, why just hold the market in limbo if you have no intentions for a stick save.


  63. MCO down from $26 in 4 days on hyena attack; bad press; hearings in Congress.
    It will go back up; doesn’t mean necessarily today or tomorrow; I just like the entry point here to scale in.
     
    I also need some long exposure; and buying something that has already been slapped down seems better than buying something that is 1-2% off its highs.
     
    A more conservative entry play would be to sell the $Oct 17.50 puts for 75 cents.


  64. CROX/Maxt – In the $100KP we have 5 March $4s at $3.70 and sold the Oct $7 puts and calls for $1.40.  With CROX at $6.43, that play is on target at the moment.  As you didn’t print your basis, I’d have to say that your March $4 calls and $5 puts are now $3.70 and you’ve sold the $7 puts for .90 (now .85) so if you don’t have the patience to wait to sell the Oct $7 calls for .50 (now .30) then you can sell 3/5 the Nov $6s at $1.15 if you are worried about the downside. 

    WFR/Pharm – Yes I do like them long-term, especially around $16 but the SOX are a bit extended and may correct, which will drag the good down with the bad so make sure you scale in.  The Nov $16 puts can be sold naked for $1, that’s alteady pretty good and at $1.50 it’s downright exciting.  They can roll to the Apr $14 puts, which are already $1.35 or maybe even the Apr $13 puts so you’re looking at a $12.50 or lower net entry in April, that’s down 35% from yesterday.

    RMM/List – I’m not clear on what you are protecting but clearly it’s more an issue of setting tight stops, not buying out callers on today’s dip.  Esprecilly something like LDK where YOU would be the sucker paying a 10% premium for 3 months, which is 40% a year on the stock.  I would have to say, as a rule of thumb, if you pay 40% premiums against your stocks JUST IN CASE you stock gains more than 20% in 3 months and deprives you of a possibly bigger win – then you are not likely to do well over the long haul.  MDT is different because it is October and you are up 50% with more than 2 weeks to go so you shouldn’t even have to ask on that one.  PGH is fine to buy out if you have something better to do as it’s .30 that you are virtually certain of collecting if you wait so explain to me what vital interest it will serve for you to pay your putter .30 for a dead position and I’ll be happy to bless that trade.  

    AAV is way out in Feb and I’m not a big fan of worrying about Feb in October as I’m pretty sure there is a month or two in between them.  Also AAV is a crap stock to play options on as the strikes are miles apart (33% of the stock price each) unless you hit it just right on a buy/right, which is what I hope you did.  If you sold this naked, that is bad.  If you own the stock, then you can roll them to the May $7.50 puts and calls for better than even but there’s no hurry and it would be silly to give up protection and take on risk just because the stock jumped 40% this month for who knows what reason.  MCO is a real train wreck but you can rol the $23 puts at $3.90 to 2x the Nov $19 puts at $2.15 or the Nov $17.50 puts at $1.55 if you are more worried but both Cap and I feel this sell-off is overdone.  Also, keep in mind you can stay where you are and sell Oct $20 calls for $1.25 as that’s all premium so it covers you for an additional $1.25 loss if you stick with the $23 puts and you don’t get a net loss on that total position ($5.25 in debt) until MCO crosses $25.25, anything less than that is an improvement to where you are now. 

    DIA/XLF – They are fine to buy here, you missed $4.35 yesterday though… At this point you may as well go Jan $99 puts for $6.10 as that’s where we need to roll anyway in a couple of weeks.

    MCO/SS – See what I told RMM.

    Cash/Java – They have nightly sweeps of cash, talk to the rep about it.  If you have $100,000 in cash, there is no reason to lock it up, even for 4% as that’s $4K a year but you lose buying power.  I can sell 20 AAPL Oct $150 puts for .23 and collect $460 for $30K in margin and if I do that 12 times a year that’s 5.5% "interest" on cash right there.  

    MCO/Cap – I like the stock at $19.35, selling the Jan $19s for $3.10 and the Jan $17.50 puts for $2.15 for net $14.10/15.80 with a nice 35% profit if MCO holds $19 and a b/e 18% lower than we are now


  65. Phil,
    can you comment on what’s going on with MHP. buy or sell at this point?


  66. Anybody noticed that LZB down a lot, now at 8.58 (-1.17, -12% from yesterday)?


  67. Gotcha Cap at least your in good company WB still largest shareholder.

    Missed Volcker anyone watch the hearing? Opinions?


  68. MHP 2011 $17.50s for $8.70, selling 4/5 Jan $25s for $2.50 for net $6.70 on the $7.50 spread with one open.

    Big losses are hidden on China’s bank balance sheets

    Volume still blah at 85M.

    MHP/Maxt – See above, I think they and MCO are both overdone and MHP is my favorite of the two.

    LZB/Cwan – Yeah, don’t see news but right on target for us so no complaints. 


  69. China big losses are hidden,  basically doing the same hokis pokis here in the States


  70. Things are getting better REALLY

    Japan’s U.S.-bound shipments declined 34.4 percent to 713.1 billion yen, marking the 24th straight month of year-on-year decline. Among exported goods to the U.S., metal products nose-dived 82.2 percent.

    If we havent rebound then please someone explain where is GS gathering its information from, Zimbabwe witch doctors?

    I think its safe to say everything is over priced here.


  71. Phil – MHP – just to clarify "with one open" below – you mean sell one more short Jan 25 call than the long 17.50 call leap, for short term buy back with expected stock rebound? Just clarifying, thanks 
    MHP 2011 $17.50s for $8.70, selling 4/5 Jan $25s for $2.50 for net $6.70 on the $7.50 spread with one open.


  72. MHP/conc – I believe for every 5 2011 17.50s you buy you sell 4 Jan 25s. That leaves you one long if you’re called away.


  73. If volume is this blah then isn’t it stickable?


  74. Phil,
    how do I hedge MHP oct 25 puts I sold today at $1.50, now 1.725?


  75. Look out MHP – yesterday i bought an MCO put and was up in the 80% range when Phil gave the order a few minutes ago. I lost 5% right away! :)
    guess it’s a gang of 13 now.


  76. Treasury sells a record $29B in seven-year notes at 3.005% (.pdf). Bid-to-cover ratio was 2.79 vs. a recent 2.73; indirect bidders took 61.7% vs. a recent 63.6%. Treasurys are holding earlier gains after today’s housing data: the 30-year yield -0.03 to 4.17%; 10-year -0.04 to 3.37%; 5-year flat at 2.37%; 2-year -0.02 to 0.94%.

    Not really that impressive and didn’t do all that much to move the market up, even though CNBC gave the auction an "A" grade. 

    Oil having trouble getting off that $66 line and OIH couldn’t hold $115.  XLF down to 14.76 and Qs are below 42 so nothing to get bullish about here.  Looks like we will leg lower this afternoon if volume kicks in (just 95M at 1:20 so far).

    Japan/Kustomz – A little skewed by autos but totally sucking overall. 

    MHP/Concreata – Yes that’s buy 5 leaps and sell 4 Jan $25s at $2.50.  I don’t really care if it rebounds or not as I’m happy to roll down and stay naked if they are going to go lower than this.  I figure within 6 months this will blow over.  Let’s say you buy 5 for net $6.70, that’s $3,350 to own 500 MHP at $17.50.   If MHP falls to $10, we can buy 500 more for $5,000 and then we own 500 with an option to buy 500 more at $17.50 for a total of $8,350.  We could then sell June $12.50 calls for $2 on 500 to collect $1,000 and if we are called away we’d be left with the $17.50s at net $2,350 – probably not a terrible position even if the stock drops over 50% from here…

    Stickable/Sthom – Yes this is very stickable as I see no evidence that any stick firepower has been used for support so far.  Watch oil closely, if they can’t pull it together and retake $67.50 by 2:30, then the whole market may sell off.  Of course resting here, right at the 2.5% line, would be a bearish close on the day and we’d expect 1.25% follow-through at least.  Mr stick is not going to make the same mistake they made in Europe, where they pumped the markets back up into 3pm and then got SLAMMED to close at the lows in the last hour.  That is the way you cause Mr. Stick massive pain!


  77. If they just tried to prove they could get the S&P past 1050 then they failed, if they tried to keep us within striking distance then mission accomplished.

    Phil i know you like to keep with shopping trends in local area malls
     
    From the ultra-cheap to the outrageously expensive, there weren’t too many buyers Wednesday afternoon at The Pier Shops at Caesars. Most people exiting the 3-year-old shopping mall were empty-handed, and the few who carried bags definitely bought on the lower end of the spectrum.
    The high-end second level of the mall was like a ghost town, with few pedestrians. The vast majority of the stores had no customers, only employees waiting around for someone to come in and ask about the fancy shoes, dresses, watches and handbags that were offered for sale.
    Taubman Centers, of Bloomfield, Mich., on Tuesday wrote off more than $100 million of debt and started negotiating with its lender. The 83 stores are making a profit, but not enough to cover the gigantic mortgage, Taubman said.
    http://www.pressofatlanticcity.com/news/press/atlantic_city/article_fdc6820c-a8bf-11de-8cac-001cc4c03286.html


  78. Phil, I am currently long on a substantial number of your buy/write reccommendations. How best to set up a mattress strategy in case of a breakdown……


  79. Hi, All,
    On plays like MHP (buying LEAP calls & selling front-months calls), if I do get called away, do I have to exercise the longs myself? Or does TOS automatically exercise the longs for me?
    I guess I have to pay assignment fees twice, correct?  One for being called away, and another for exercising my longs?
    This is not a complaint about fees or anything.  Just want to understand what will happen.  Sorry about the dumb question, I haven’t been called away in such a situation yet.  Only got called away with long stocks.


  80. Phil – MHP and MCO – thank you for explaining, but can you say why you prefer MHP over MCO – Moodys seems to me to have a better long term story?


  81. Good Afternoon,
    Phil, is there a  play on Rimm today?
    thanks,


  82. cwan, if you’re called away on the short calls, you’ll just be short 100 shares of stock per call option you were called away on . In return you’ll get the face value of the call X $100 (or $2500 for a 25 strike call). You can then buy back the stock and reload by selling another call. It’s no biggie, but there are irritating fees involved (ToS = $15 assignment fee plus $5 to sell the stock). You probably don’t want to request assignment on your longs in such a case because then you get dinged for another $15 assignment fee plus another $5 stock sale fee.


  83. MHP/Maxt – If you just sold them what the hell are you doing?  Having no conviction is a very expensive habit.  Scale, scale, SCALE when you buy.  The correct answer is you sold 1x at $1.25 so you are targeting another 1x sale at 30%-40% higher at $1.75 which puts you in for avg $1.50, which can be rolled even to the Nov $22.50 puts so no worried at all unless the 2x position goes 50% in the money.  If you took this position and you are not happy with the prospect of owning MHP at net $23.50 then why did you do it in the first place?

    MHP/Morx – Sorry about that but I have a hard time pitying you not being satified enough with an 80% gain to risk 180% of what you started with AFTER the stock has already dropped 10% in a day. 

    Notice the ZION index is still working.  If they go down, the market goes down and vs vs…

    Shopping/Kustomz – Yeah, I have this weird little theory that if actual people don’t buy things it doesn’t really matter what they make or ship…  I love the Mall at Caesars, that’s where we stay when we’re in Vegas (not for the mall but the pool).  Anyway, that’s very scary as it’s usually a vibrant, busy place and you had to use the concierge to get a table at most of the restaurants around dinner, even during the week.  To think that mall, with a wealthy international client base, is doing as badly as our local malls is really scary.

    DIA Mattress/Magret – Well we still like those DIA puts, now the Jan $99 puts at $6.15 and you can 1/2 cover with Sept $97 puts at $1.05, which can be used to offer to roll yourself up to the Jan $100 puts for .50 more.

    DIA/Cwan – It’s a virtual call away.  In reality you’d roll the caller or just buy out the caller and sell the leaps to kill the trade – you don’t let the caller exercise you but, from a risk discussion perspective, it’s good to treat it like a call-away.

    MHP/Concreata – Because S&P is only a part of the business and the rest of MHP is very solid and a good bargain but the whole company is being treated as toxic as it’s being lumped with MCO, who themselves are being sold in an overdone panic. 

    RIMM/Joe – We did them yesterday.  I’m not so wild about them now that they’ve dropped $2.50 as yesterday’s short play was obvious and now it’s a little riskier. 


  84. Mr. STICK – I want to see you broken again into the close today!!!


  85. people forget that mhp has other buisinesses besides the investment arm.  i think they r publishers for dan brown’s 2 million book.


  86. joe, I don’t think Phil has an official trade yet, but I’m legging into the short Oct. 80/90 strangle and buying the Nov. 75/95 strangle, which should have some profit if the move is under about 15% tomorrow.


  87.  Phil, I have dec 104 spy puts that are up 26%. Should I roll them or hold them?


  88. Phil,
    I was okay with MHP position, based on your recommendation to sell puts sometime in the past week or two, but then I saw your post about the hedged position and I thought maybe you were changing your mind about where it might go.


  89. WOW they just kicked the DOW higher by 10 points in a flash


  90. Gang of 12 Alert!

    Bullish Barclays Capital (BCS) thinks stocks are underestimating the strength of the recovery and raised its estimate on U.S. GDP near a robust 5% growth for the next six months: "We believe that a combination of surprisingly strong economic news and policy settings still at ‘crisis’ levels is a potent brew that will keep driving risky asset prices higher."

    Credit Suisse (CS) is reportedly trying to sell a $1B claim it has against Lehman Brothers, and the market for Lehman claims has been steadily building over the past six months. More than 16,000 claims have been filed against the bankrupt firm, and Morgan Stanley (MS) reportedly sold a $1.3B claim last week for 38 cents on the dollar.

    So BCS says things are getting better but CS is scrambling to get 38 cents on the dollar.   Hmmmmmm…..

    Sen. Bob Corker warns that banks may be banking too much on backstops – like the Public-Private Investment Program – that may not materialize, and thus miss a valuable window to prepare for a commercial real estate decline by selling shares.

    SPY/Oldgoat – When in doubt, sell half!  Generally I think making 20% on an index put is good money and I’ll tend to take it off the table.  You can always take something like the DIA hedged play I put up in the last comment but if you were 60/40 bearish and you made 24% on the bearish side then you now have 74.4% on one side and that is WAY too much so the correct thing to do is take 14.4% and use it to improve your long positions even if you do want to stay generally bearish. 


  91. RIMM October IV starting to lift off now. The Oct/Nov 90/95 bear call calendar can now be sold for .15, which is the same price as this morning when the stock was $4 higher. I’m adding a few more but not going crazy. They may get even cheaper before the close.


  92. Phil – DIA mattress – still hold DEC 99 puts (never got the roll to 100) should I roll to JAN 98 (for about even) or just hold and wait til tomorrow?


  93. CLDX – just a little note on them….GS owns 1M shares out of a possible 15M (they are the largest holder of stock).  If I was a betting man, they will be sold.


  94. BIG reading on TRIN  3.22


  95. Phil, lookin to get my BAC 16 putters now for around .50……its OK, or u still lookin for financial pullback…? TIA


  96. BULLISH BARCLAYS …. I guess that would include the "Surprisingly Strong"  Existing Home Sales, Jobs, Post-Clunker Car Sales, and so on … LOL.


  97. BCS call borders on criminal, i agree markets can be manipulated higher but wheres he getting his information from?
    50% rise in H1N1 could cause a 5.5% drop in GDP Bloomberg reporting


  98. TASR – Getting just below $4.50 level. In the past, it has bounced from $4.40 or so and typically liked by Phil in the past. Technically, chart looks at resistance. http://finviz.com/publish/092409/TASRc1dl1417.png


  99. Phil Re Mattress: you mean buy 2 DIA puts,Jan $99 puts at $6.15 and sell1 Sept $97 put at $1.05,  PEMI (please excuse my ignorance)…thanks


  100. IYR getting deservedly crushed …. where is that Jackass Cramer now w/ all his sheeple !!


  101. MHP/Maxt – What?  I’m still bullish long-term…

    RIMM/Eric – That’s a good way to play it!

    DIA/Concreata – I’d 1/2 cover with the 9/30 $97 puts at $1.05 and then see what happens.

    TRIN/Cap – That is big!

    BAC/Oncmed – Are we happy to own them for $15.50?  Yes.

    BCS/Kustomz – That’s what they do.  They go around upgrading this and that and dropping statements in interview (Blankfien had a doozy yesterday but I forgot to find it) as if they know something other than how to game the system to make money.  Cramer has a great video explaining how he, a Goldman trader, would manipulate the markets at will day in and day out.  It has nothing to do with bullish or bearish or value – it only had to do with setting yourself up in front of an event you orchestrate and then taking a quick profit and getting out until the next scam is set up.  GS, as you can see from the bonuses, has thousands of guys like Cramer who sold their souls long ago in exchange for nice suits and 2 full bathrooms in an NYC apartment.  Their job all day long is to line up suckers, trick them into positions they have already gotten in front of and then pulling the trigger.  This is as far away from investing as loansharking is from banking – it’s a similar concept but with no morals or governing laws.  Watch this Cramer thing and realize what a cold, sick bastard you have to be to do that kind of crap and, as he says, you have to do those things if you want to play the game with the big boys – it’s endemic in the culture and if you aren’t willing to cheat, you won’t last at those firms. 

    My favorite line by Cramer here (5 mins in):  "What’s important when you’re in that hedge fund mode is not do anything remotely truthful.  Because the truth is so against your view that it’s important to create a new truth, to develop a fiction.  The fiction is developed by anyone that is down 2% to up 6% for the year because you can’t allow that…."  Sadly, his m/o hasn’t changed at all except now he is allowed to manipulate the masses directly instead of just orchestrating the scam from above.

    TASR/M2 – I’d like to start a position by selling the Jan $5 puts naked for $1 (now .90).

    DIA/Magret – Yes, the idea is to 1/2 cover your long put position which would give you enough money to roll up the Jan puts for .50 each to the next strike (so it’s a 100-point upside cushion).

    Here’s Cramer to act like his mooing performance yesterday when we were spiking up never happened…


  102. Witness the power of the stick you peasant, 1050 mucho importante here people…. i doubt we get the kiss goooobye today


  103. SPX – with VIX up, are you pondering how to initiate new short strangles?  The jump in VIX means the call value is likely to be inflated, and the put value may also be inflated, because the put buyers assume that the market can keep going lower.  The put buyers may be correct, until the momentum to the downside slows down.  So we need to sell a bearish strangle, such as Nov SPX 1150 CALL and 900 PUT that gives a 10% upside cushion and 15% downside cushion. 
     
    This spread is good for another 2.5% downswing, then it becomes bullish.  If the market is 2.5% lower, the next step in the chess game is to see if we can roll down the CALL to 1130, while keeping the short PUT at 900, because we are feeling as confident as other experts that SPX won’t be at 900 in 8 weeks.  We can keep rolling down the short CALL until the market stops sliding, then assess whether the market is going to bounce pass the short CALL strike or not.  Keep in mind that VIX would go up as the market goes lower, so is the short PUT value.  Once the market bounce, VIX can decrease, which would kill the PUT value quickly, that’s when most of the profit is made.  Make sure that both the short PUT and CALL are out of the money, then you are good to pocket all the premium sold.
     
    You might ask, why can’t we wait and just sell the short PUT at the bottom.  Well, it’s hard to predict such a bottom, so we use the short CALL as the hedge in the short strangle scheme.


  104. Cramer….O yea thats an old vid i watched it on a few occasions…"This is as far away from investing as loansharking is from banking" couldnt agree more


  105. Pharmboy
    Is there a trade on CLDX  ?


  106.  Phil , is there any point in selling my dec 104 spy puts and buying the 100′s?
    Obviously I’m a beginner.


  107. Called Away / EricL & Phil -
    Eric: Thanks for the explanation of the mechanics of being called away in such a situation.  It’s nice to know how to save $15 assignment fee.
    Phil: Got it.  Gotta watch those callers.


  108.  Phil, They are dec 104 spy puts.


  109. Pharm
    I have been in and out many times with MDVN over the past year. I think I will now take a stand and create a B/W as they are close to (Phase 3) approval on their Altzimers drug – Dimebon (if my memory serves me on this) which should be a blockbuster if testing goes well. They are well along with a prostate cancer drug, as well, that could also be a driver. Are you playing this one?


  110. DIA is stickable into final hour …. intraday chart sez so; watch for push above 97.  My guess is we get an attempt; and it fails into the close.
     
    Alternatively we get a total BS recovery of all of the losses !


  111. Either the NAZ gains 10 points here or the DOW ends up down 100 by the end of the day


  112. Phil: where are the sep97 puts at 1.05$ to cover 1/2 the DIA puts ?


  113. Phil – any play possible on BIDU ?


  114. SPY/Oldgoat – Well if you are a beginner then it might be smart to stick with the DIA puts which we track and discuss all the time instead of messing around with the SPYs.  So that would be selling the Dec $104s and buying the spread we discussed in two of the last three posts.

    I just want to point out what a total bunch of wimps we have all become thanks to getting hit on the head with a stick save over and over and over again.  Who says you can’t modify people’s behavior – a year ago, we never would have covered with a 2.5% down day after a 20% market move up.  That would be mission accomplished for the stick men as now they can SELLSELLSELL without too many people trying to get in front of the trend as we’re all too worried it will reverse but they KNOW it won’t reverse because they are the ones with their hands on the swtich. 

    So I’m watching more fundamental things like oil closed at $65.86, which is down about $7 in a week.  Gold is $995 and the Pound has fallen to $1.60.7 and the Euro is back down to $1.465.  There are now 91.28 Yen to the dollar and that’s still very low so no bounce yet. 

    Volume is a pathetic 122M coming up on 3pm with 140M being stick territory.  If they pop 9,720 they are good to go for a run back to green and they probably will so we can mo play the DIA 9/30 96 calls as a cover for $1.60 but just looking for $2 and out at $1.45.


  115. Phil, you are so right; they have made it dangerous to hold your shorts or press your short bets … which is when they probably pull the rug out as we sit in stunned silence !


  116. Phil: I figured the sep97 puts, its your 9/30, first time I see you doing it that way.


  117.  Phil,
     
    Ok I am chastened.
    Will there be a stick save today?


  118. DIA/RMM – What???  Er, yes, we are covering the DIA long puts (Jan/Dec) with 1/2 the Sept $97 puts at $1.05 (now .90 so a winner already). 

    BIDU/Partha – Nothing that excites me at the moment.  It was more fun to short them at $400 as it was a neat barrier. 

    Time starts taking a long look at Detroit – where a rapid disaster like a hurricane or flood would get more notice than its ongoing slow-motion unraveling – and where the unemployment rate is a painful 28.9%.

    Silence/Cap:

    Suffering in silence, they’ve all been betrayed.
    They hurt them and they beat them, in a terrible way,
    Praying for survival at the end of the day.
    There is no compassion for those who stay
    .

    Lots of sellers into the move up so far but no major buying effort has been launched yet. 


  119. Mission accomplished on the NASDAQ


  120. Kustomz
    Mucho Gracias… no sticko pour favor


  121. No me gusta senior Stick


  122. Don’t let the stick fake you out !


  123. What great sound on this ELP clip but it’s the wrong section of the song….

    Here’s a whole ELP concert with nice sound….  I was at this show, I can’t believe it was 18 years ago! 

    Stick/OldG – Well, we’re playing for it with the long DIAs but hopefully not as I am getting sick of all this manipulation BS. 

    BEWARE THE STICK!  The pattern has been that if they hit a lot of resistance they just push back the timefame.  We only have volume 135M so very little effort has been made so far, you are not able to call a stick failure until you are past 200M – they may wait until the last 5 mins.  All they care about is giving Japan and China a pretty number to look at when they open.  Notice FXP traders are getting worried at the end of a 10% day but it’s Japan they really can’t afford to lose tomorrow. 


  124. Cap are you holding MCO?

    If they dont solidify the move and RIMM disappoints tom is going to be mucho feo


  125. Cap,
    Do you see a fall into the close and no jam-up in the premarket tomorrow ?


  126. One year ago this month, a -40 point DOW loss would have counted as an ‘up’ day. Now it feels like this is some big event, lol.


  127. Phil / wimps – A year ago GS could’nt finance Mr. Stick by borrowing $ from us at 0% !


  128. Phil,
    Assuming we close here (602 on the Russell), where do we open ?


  129. Cutting it close but clearly an attempt at 3:45 that is hitting resistance around the 9,720 line.  Look for a totally BS last minute shot now – the kind that has Matt complaining for hours afterwords…  8-)


  130. domo arigato mr roboto


  131.  Phil at what point is VLO a buy?


  132. JRW III heres goldman sachs email you should really ask them GS@wecontrolthe world.com


  133. ELP … what a Lucky Man, Phil !


  134. CLDX – I am in the 5 Dec C.  MDVN – there are a ton of companies in the prostate cancer area.  I will have to look at them more closely. 
     
    FWIW – Prostate cancer and diabetes are the two diseases that have more clinical trials ongoing  than any other diseases from my last check.  I will have to look where they are now on the clinical trials board.


  135. kus,
    Thank you very much.


  136. kustomz, I should hold it, but I sold the stock and sold the 17.50 puts for 80 cents. 


  137. Open/JRW – Well Japan overdid the optimism thing if we can’t get green so if we are red again today then the fall back to 10,400 (down 1.5%) and that should give the Hang Seng reason to test 20,000 and failing that would make a big mess – SO – I don’t think it’s going to happen.  I think we close up from here and the Hang Seng recovers a bit and the Nikkei holds and Europe makes up 1/2 their losses and if ANYONE has an encouraging word at the G20 tomorrow then EVERYONE will be scared to be short into the weekend.


  138. JRW … I have no idea; we are at the whims of HAL 9000


  139. Stick Fails !


  140. I said it in my last post, we are getting to the end of the biotech pump.  Fall and winter are usually downs for the sector.


  141. VLO/Soul – We generally like them around $16.50. 

    Wow, lots of selling into the close – not going to get green from here….  That means the negative scenario could be in play but too tough to call with the G20 on the loose. 

    Volume still low at 157M but seems to late to save now, they seem to be just trying to hold 1,050 and 9,700 and 600 on the RUT and that can’t be a good thing….


  142. now we root for a RIMM miss !   (they won’t miss; but where will the stock go ?)


  143. Cap good move

    I wouldn’t say the stick fails unless 1050 doesn’t hold


  144. Hi Phil  I bought ORCL at $22.15 (now $21.20)  and  also bought Dec $23 calls for $1.15 (now $.55). NOt sure what do do w/this .I think once ORCL get EU approval of Sun buy,stock wil bounce  up.Any suggestions? Thank you.
    Dflam 


  145. Man, they couldn’t save it on low volume (200M now) – that is not too promising.  It’s all up to RIMM to save the market now.  If I remember correctly, they take forever to report so don’t hold your breath… 

    RIMM looking for $1 per share (up from .86 last year) and Revs of $3.62Bn up (40% from last year) – seems a little optimistic to me but they did make .98 last Q so a miss would be a huge disappointment. 

    ORCL/Dfalm – Why would you buy the stock and the calls?  Makes it hard to be happy on any level…  I’d sell the Jan $21s for $1.55 – if ORCL takes off, you have your Dec calls and, if they don’t, at least you paid for your Dec calls.

    Looks like RIMM earned $1.03 but missed slightly on revs with $3.53Bn and is taking a beating (unfairly it would seem).


  146. RIMM down $11 + AH.
     
    Rev. Guidance looks crappy (flat to down from here.
     
    Don’t worry, the analysts will try to defend them.
     
    I want to see them go sub $70 (sorry if you are long).


  147. Phil,
     RIMM just missed by .02


  148. JAVA – another way to play JAVA is buying the Jan 7.5s for 1.7 and selling the 9 Oct p for 0.06.  That is less risk than the stock and is a nice 5% gain in a quarter for doing NOTHING……


  149. Phil, 83 cents and 3.53 B looks like a big, big miss from what you posted they were looking for.


  150. The stick didn’t fail. It stemmed the selloff and levels are now at that point where you think they could go up or down.  A headfake tomorrow am and we’ll be off to the races again by midday.  Let’s not forget there are only 3 days next week till end of quarter.  They’re gonna make it look real pretty before finally selling off in October.  Much like last year.  IMWO.
     
    I’d never seen that video of Cramer.  Very illuminating.  And just goes to confirm what I’ve long suspected and that is that some people will stop at nothing to make money.  Every trick in the book is deployed on a daily basis.  I would love to know how the administration got Wall Street in their corner to manufacture the March rebound.  This has been the biggest show ever.  Fundamentals only matter when they want them to matter.  


  151. Jim Goldman:  Rimm = "UGLY"


  152. http://www.businessinsider.com/live-rim-earnings-analysis-2009-9

    Looks like a major miss here… shares down 12% after hours.
    Key Stats:

    Q2 Revenue: $3.62 billion consensus, $3.7 billion (RBC)
    Q2 EPS: $1.00 consensus, $1.03 (RBC)
    Q2 Subscribers: 4.1 million net additions (RBC)
    Q3 Revenue: $3.92 billion consensus, $4.0-4.1 billion (RBC)
    Q3 EPS: $1.05 consensus, $1.06-1.08 (RBC)
    Q3 Subscribers: 4.3 million net additions (RBC)

    Preview: RIM’s August quarter should be an easy one to beat: Verizon has been offering a buy-one, get-one-free deal on BlackBerries, pushing out its inventory with cheap prices ahead of new product launches, and the new Tour has been a solid hit.
    But the Street has already-high expectations for RIM’s guidance for the November quarter, including 65% year-over-year subscriber net additions growth, and that’s where trading will likely focus. (This is always a tricky one. This time last year, RIM gave weak November quarter guidance and shares flopped 20%.)
    In the long run, RIM is fine if its Christmas gadgets are ready to go by Thanksgiving. But how early they ship in the November quarter, and how much promotional muscle its carriers put behind them that far ahead of Christmas, could make a significant difference in how the quarter shapes up. (Delays and soft promotion would be bad, as would a weak gross margin forecast.)


  153. Matt / Wall Street – They offered them $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ !!!!!!!!!!!!!!!!!!!!!!!!!!!!


  154. Did anyone get to sell that 1/2 cover DIA Sep/30 97 puts at 1.05?
    I was way behind in reading the comments.  By the time I refreshed the page, and saw Phil’s reco, it was 30 minutes late.  And the putters already went down to < $0.90.  I decided to put in a limit order to sell at $1.00.  Of course, it never got filled.
    Should I try again with a limit order at $1.00 or something tomorrow?


  155. Ah, low end of forecast is $1 vs. $1.05 expected.   See, this Q is going to be very different as everyone now has high expectations and any company that isn’t hitting their marks will get trounced as wins are already priced in.  They are down at $75 now so I’m worried about the damn March $100s at net $2.30 now…

    Too bad for the poor guy who paid $4.30 for the Oct $90s yesterday – that’s really goinig to leave a mark!

    .83/Cap – Wow, what?!?  I was going by CNBC – serves me right to believe them….  No, wait, I have that here too:

    Q2 EPS of $1.03 beats by $0.03. Revenue of $3.5B (+37%) vs. $3.6B. Sees Q3 revenue of $3.6B-3.85B vs. $3.92B. Shipped about 8.3M devices and added 3.8M net new BlackBerry accounts, to total of 32M.Shares -10.3% AH. (PR)

    That’s pretty strange. 

    RIMM being taken so badly it’s hurting AAPL! 


  156. phil : Just a screw up on my part to buy both ORCL stock & calls.Meant to do a buy/write,but  got distracted. It’s so ez now to trade. Push a button & away you go.
    dflam


  157. I’m guessing the RIMM Oct 90 calls open around .40 at these prices (74), while the Nov 95s hold around .60, so it won’t be a huge winner but not bad for one day either. I’ll be looking to get out early in the morning because RIMM has a history of trending down (see 9/26/08, which is looking similar to today).


  158. Headlines:  DJ RIMM 2Q EPS = 83c
    DJ RIMM 2nd Q Non-GGAP EPS = 1.03


  159. Discrepency in RIMM is due to a one-time patent settlement of .20 so $1.03 is the right figure – BUY at $76, looking for $80+ in after hours.


  160. Results for the recent period include a charge of $112.8 million related to the settlement of a patent dispute with Visto Corp. Excluding the charge, RIM said it would have earned $588.4 million, or $1.03 per


  161. Pharm…. ARNA down 10.60% in two days…. maybe time to scale in, using Phil’s favourite buy/write strategy  for a net $1.84 selling Jan 5 Call Put for  $ 2.80 and buying stock at $4.63….This will give a return of over 170% if stocks called at $5 in January  . Worst case scenario you would  own 200 shares at the average price of $3.41 if stock put to you. (i.e. downside protection of 26.6% on current price ….)
    What do you think following last week’s report


  162. The French Finance Minister is on CNBC saying she is slapping the hands of their banking execs for being distracted from their primary charge of loaning money because they are finding equities trading soooooo profitable !!!!!


  163. Nice $75.25 entry – let’s see what happens but very happy to make 5% ($79).  Will set stop at 2.5% ($77ish) as that’s a nice non-greedy exit.


  164. Sorry Arna put/calls are Apr not Jan and prices are approx being of an hour ago…


  165. Zuko775 – you still out there?


  166. TIBX looks good software kicking ass this year


  167. ARNA/mag – my premise is that they bounce back. Quick money has exited stage left.   So, I have my position on the stock and sold both Oct & Nov puts for my net entry.  I am looking for someone to come in and either buy the company (prob 25%), or help them in the sale of the drug (prob 75%).  ARNA has NO sale force, and they are going to be looking for favorable terms.
    What I have been reading, and Opt said it a while ago, is that the data is less than stellar against the competition.  BUT the addition of phentermine (‘speed’) should bring them down in line with VVUS and OREX data – with a better safety margin.  That being said, I am long on the stock.   Buy writes are great for them, but I am gonna risk it naked and swing for the fences on this one.


  168. HPQ just guided lower


  169. HPQ just guided lower


  170. Businessweek just reported a joint eBook reader between IRex and VZW – "Kindle for the Enterprise".  AMZN impact?


  171. Aaaarg, this RIMM is a nightmare….  This is why I hate stocks!  8-)

    Took the loss on them, very annoying….

    HPQ sounded like the middle of their forecast but what do I know, I thought that RIMM would turn up when that number got clarified. 


  172. RE RIMM:
     
    Their primary source of revenue is enterprise spending. How can we believe that RIMM will continue gain market share when company layoffs have been so drastic. It also seems obvious that AAPL is retail smart phone of choice. So additional headwinds for RIMM.


  173. What’s so bad in the report from RIMM?
    I’m missing something big.
    I’m lookiong to buy after hours, but it keeps going down.


  174. You have got to buy AAPL on a pullback if we get. RIMM can get back down to 68 area


  175. Jeez!!!


  176. I read the report and it looks to me like they are holding up great considering 10% of the people who use Blackberrys lost their jobs this year.  Their sales are doing fine in a tough economy and that charge was a one-time thing but I’m already long with the March $100s (from the spread) so I’m not going to sit there and blow $1 on the stock but I do think this is just that .83 number making the rounds and people are bailing based on that. 

    People should be REALLY worried if RIMM is going to dive 15% on those earnings – what’s going to happen when there’s a real miss in tech?  The Nas is up 66% off the bottom and we are not China – it won’t take much to push us back sharply. 


  177. CC RIMM….CEO says lots of efforts put into promoting RIMM phones around the globe yet they didnt have a blowout Q. What else can they do to get brand recognition, there he goes again talking about all kinds of promotions and incentives.

    There’s decent support around 70 but we all know traders over do it. What scares me is that RIMM has peaked just about every measure in the charts


  178. APPL
    Previously, accounting regulations required Apple to recognize revenue from the iPhone and Apple TV over the length of their two-year product lifetimes, since the company had promised to roll out new features via software updates. The new rules allow Apple to adjust the percentage realized at sale to a more accurate level. The change could also mean an end to charges for iPod touch software updates, though Apple hasn’t spoken specifically on that yet.
    http://www.macworld.com/article/142968/2009/09/accounting_change.html


  179. Terra Industries Inc. (TRA) said it will pay a total of $750 million to shareholders through a special cash dividend and plans to raise up to $600 million through a debt financing as the fertilizer company looks to improve its balance sheet.


  180. Phil, my theory on stocks like RIMM is that they are usually priced for a big options move.
     
    On a RIMM, that move is usually at least 15%, which is about where the stock is trading off right now.
     
    Plus, you can’t trust after hours …. could be better or worse in the morning.  And you can bet all the RIMM pumpers will be out in force defending.


  181.  question for tech guys…
     
    what’s the best way to record a bunch of shortish youtube clips into an itouch?


  182.  newpara try this
    go to cydia and search for mxtube…

    this video may help
    http://www.youtube.com/watch?v=iFcjdp50Cs4


  183. AAPL, alternate play (too late for today), but can be done tomorrow, probably different strikes.  Buy Nov PUT vertical, Buy 180, sell 175 PUT for $2.08, sell Nov 155 PUT for $2.23 credit, netting $0.15 credit. 
     
    If AAPL is more than 180 at Nov expiration, we’d be breaking even ($0.15 profit minus commission).  If it’s less than 175 and above 155, we’d pocket $2.92 from the PUT vertical plus $2.23 credit from the short PUT (totaling $5.15).  If it’s less than 155, it’s get put to us and the cost basis is $149.85.  This play is for folks who wants to own AAPL long term, and is neutral on AAPL in the next 8 weeks. 
    We should save money for a double down, etc., for another 15% discounted entry in the second round of the stock.  While we are at it, the Nov 220 CALL can be sold for $1.78 (maybe less tomorrow), with a stop in case AAPL jumps.



  184. Last Friday morning prior to market open, I was assigned on the 100KP -10 XLF $14 calls. I had assumed, incorrectly, that assignment in TOS would pay me the $14 per stock, then purchase the stock via my account, and turn those shares over to the call owner, and I would be out of the trade.
     
    I just noticed today that instead, I am short the XLF stock – TOS did pay me the $14 for the stock, but it didn’t make a counter purchase, so I am not out of it – I’m short the 1,000 XLF stock now, and it’s risen from the $14 buy to close to $14.73 buy to close. I don’t know if this is normal or not.
     
    On Thursday the day prior to expiration, I had attempted to roll it to the Oct $14, but only the short Oct sell leg executed, so I’m short -10 Oct $14.
     
    So now I’m short the XLF stock 1000 shares, with -1000 deltas (that’s actually what tipped me off that I wasn’t where I thought I was with the trade), as well as being short the -10 Oct $14 calls.
     
    I don’t want to sit here being short the stock and short the calls, which is twice the short position size I thought I had. So what’s the best way to close this out – just cover the stock, or is there another approach that would be better?


  185. Hey java, you are the lucky one being assigned the XLF stocks that went down from $15.20 on Friday morning  to $14.75 now, so being double short helped you in the past 2 days.  You can just buy to cover the stock position, i.e. taking some "profit" off the table, and be the same position as the short Sep 14 call. 
     
    There is only $0.235 extrinsic value left in the XLF Oct 14 call, so you should look to get out or roll to Nov 15 if XLF drop another few %, as a rally can hurt the short Oct 14 position (not sure if you had a long CALL or not – I’m too lazy to check the 100KP portfolio at this time of the night).


  186. Good morning!

    TRA/Kustomz – That makes no sense.  They are handing out $750M in cash and then dilluting to raise $600M?  That just sounds like a roundabout way for the CEO to give himself a $7M bonus (he has 1% of the stock), which is about 5 years salary and bonus for him.   For a company with $1Bn in cash and $500K in debt with decent cash flow, this is a totally BS move and anyone in it should get out now as they have no interest in the future of this company (unless they are getting bought and this is a pre-move to milk extra money). 

    RIMM – I really didn’t think the report was that bad and, at $4 in earnings per $73 share, that’s a p/e of 18.25 vs 32 for AAPL, 40s for PALM, 30s for MOT…   I don’t like RIMM that much but I will set up a position on them down here.  RIMM usually lags AAPL but look what happens when they values get too far apart – big snap up for RIMM.

    XLF/Java – I can’t believe your broker never called you.  You let the calls expire in the money and you had 3 days (usually) to settle or the force the assignment.  You sold Sept calls so you promised to sell XLF for $14.  Since you took no action this week (good move it turns out!) the guy took 1,000 shares of XLF from you fro $14,000.  Since you didn’t really have any XLF, that left you short 1,000 shares of XLF.  Of course, you also keep the money you sold those calls for.  Then your "roll" is still open as you never really rolled I guess so you are short the shares you were assigned from your Sept short calls AND you are short the new short calls as well.  Just covering the stock is the answer.  You didn’t intend to be short 1,000 shares and you have the $14,000 (plus $720) to buy them back with so why leave it to chance when the ETF was at $15.20 yesterday (another $300)?   On the bright side, the $14 calls were .97 yesterday so the guy gave you a $240 gift by giving up his premium and saved you money on that leg of the roll.

    Friday’s Economic Calendar:

    8:00 G-20 Pittsburgh Summit, Day Two
    8:30 Durable Goods
    9:00 Fed General Counsel Scott Alvarez Testifies on The Federal Reserve Transparency Act of 2009
    9:55 Reuters/University of Michigan Consumer Sentiment
    10:00 New Home Sales
    10:30 Chicago Fed: Have the Rules of Finance Changed?, Day Two

    Durable goods is a huge worry, I think we disappoint there.  New home sales iffy and KBH reports ahead of the bell so we’ll get their spin ahead of the data.


  187. RIMM … I see no fewer than 6 different downgrades and price target cuts.  The price target cuts are generally shaving $4-$6 off the target.
     
    My view is that for the next couple of months RIMM is a trade to the short side; not looking for big downside, maybe to $60 at most, but rallies to $75 and higher should be shorted.  I will be looking for that today; not sure it will get that high.