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Friday – If Our Goods Are Not Durable, Our Markets Won’t Be Either

mhp,We have our Durable Goods report for August today at 10am.

There are many indications that Durable Goods may miss the high expectations of a 1.2% increase, especially the anticipated 0.7% mark ex-autos (Cash for Clunkers) and, no matter what, it will be a far cry from the 5.1% increase we posted in July, when the car-buying frenzy began.  We've been discussing shipping issues – unless they have found a way to have major appliances walk to your home on their own, there simply isn't enough shipping and trucking activity to support a big number.  Also, the GDP report, retail sales report, consumer surveys and BBY earnings all indicated that people were just not all hyped up about getting a new washing machine this year

It was a strong July Durable Goods report that launched this leg of the rally on September 2nd.  We at Philstockworld, who actually read the damn reports, noticed that virtually the ENTIRE gain for the month of July was due to a MASSIVE 107% increase in aircraft orders for the month but apparently none of the other analysts seemed to care and those same analysts will be shocked today when pretty much the exact same thing happens as happens after every other major spike in durable goods.  I don't have to tell you, we have a chart:


See – this stuff isn't hard…  How many times in the past two years have we had two big up months in a row?  Zero (0).  How many times have we had reversals that were as large or larger than the prior positive month?  Five (5).  If I were a betting man (and we are, since we play the markets),  I'd have to put my money on a miss, contrary to the 26 "expert" analysts polled by Bloomberg who forecast more growth.  I could be wrong – gosh, I hope I'm wrong because that would be great for our economy – but after a 10% move up in the markets since our last Durable Goods report, I think I'll error on the side of caution.  WHR makes a fun short here as you can buy the Jan $80 calls for $3.10 and sell the Nov $75 calls for $3 so it's net .10 on the spread and, if WHR doesn't gain almost 10% by November expirations, whatever value left in your Jan calls over .10 is your profit

Also bothering me this morning, is news from the Financial Times, which indicates the US financial sector’s losses on large loans exploded over the past year, EXCEEDING THE COMBINED LOSSES SINCE 2001, with hedge funds and other members of the “shadow banking system” hit the hardest, official figures revealed on Thursday. Regulators’ annual review of “shared national credits” – loans larger than $20m shared by three or more federally regulated institutions – highlighted the toll taken by the crisis on financial groups outside the traditional banking sector.

More than one in three dollars lent by non-bank institutions such as hedge funds, securitisation vehicles and pension funds, went sour, according to the figures, compared with 11.5 per cent for US banks.  The results will increase fears that, in spite of a recovery in the shares and balance sheets of many banks, the epicenter of the crisis has moved to the hedge funds and investors that gorged on cheap credit in the run-up to the turmoil.  The importance of these non-bank institutions was underlined by the review’s finding that they held 47 per cent of problem loans, in spite of accounting for only 21.2 per cent of the total loan pool.  

Overall, the US financial sector’s losses on loans in early 2009 reached a record of $53bn, almost triple the previous high in 2002.  The number of loans edging into the danger zone has also surged.  Some 15 per cent of the $2,900bn SNC virtual portfolio was classified as “substandard” – the second of the four categories used by regulators – and worse, up from 5.8 per cent in 2008.  The pace at which loans got into serious trouble accelerated significantly.  The dollar volume classed as “doubtful” or loss-making increased 14-fold over the past year to $110bn.  “Doubtful” loans are so weak that collection or liquidation is highly improbable.

Euro-Zone private lending to the private sector also cooled sharply, with the growth rate dropping to a tepid record low of 0.1% in August from 0.7% in July. Economists say the rate may turn negative in September, and warn insufficient access to funds could seriously hurt business and trade in the area, undermining a potential economic recovery.  "Nothing here to change our view that the euro-zone recovery looks set to be weak by historical standards," said Ben May, a European economist at Capital Economics in London.  The ECB data showed that the annual growth rate of loans to non-financial companies decreased sharply, to 0.7% in August from 1.6% in July.

So no help expected from Durable Goods (confirmed at 8:30) and no help at all from the G20 so far, who issued a communique which states:

"'The process of recovery and repair remains incomplete. In many countries unemployment remains unacceptably high. The conditions for a recovery of private demand are not yet fully in place. We cannot rest until the global economy is restored to full health and hard-working families the world over can find decent jobs…  In the short-term, we must continue to implement our stimulus programs to support economic activity until recovery clearly has taken hold…  A return to the excessive risk taking prevalent in some countries before the crisis is not an option." G-20 endorses FSB standards "aimed at aligning compensation with long-term value creation, not excessive risk taking…  to make sure our regulatory system for banks and other financial firms reins in the excesses that led to the crisis. Where reckless behaviour and a lack of responsibility led to crisis, we will not allow a return to banking as usual."


That all sounds great and it's nice to see that they are working on the problem but it does underscore the fact that THERE IS STILL A PROBLEM.  The markets have been acting this month like there isn't and if they were looking for an "All clear – back to business as usual" from the G20 – this isn't it.  Not only that, but the White House and other G8 leaders will announce today that the G20 will replace the G8 as the main forum for global economic coordination.  This is a huge shift in power to the emerging markets and will shape the global economy for many years to come.  The official G-20 roster (comprising 85% of the global economy) now includes: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.  Good luck boys – you're going to need it!

All is not dire of course.  Goldman Sachs decided today was a good day to raise their forcast for oil prices before all those contracts they are stuck with expire worthless.  Why is it that Congress is all gung-how to investigate Moodys and MHP for their independent ratings calls yet GS - who are up to their eyeballs in black goo that they've been buying with taxpayer bailout money and then doubling the prices the taxpayers pay for oil in order to make their bonuses this year – are allowed to walk around scott-free? 

Why, because MHP and MCO are scapegoats for the last scam GS and co. were running.  By pushing the spotlight on the rating agencies, Goldman and the other Gang of 12 members can pretend they were innocent victims as they bought trash loans and repackaged them with triple-A stamps and sold them widows and orphans (pension funds) for MASSIVE profits in a con so massive and so despicable that it makes Bernie Madoff look like Robin Hood to Goldman's Sheriff of Nottingham – THAT'S WHY!  

Anyway, get mad, write your Congressman, blah, blah…  I'm just tired of this crap so I'm just going to move along and play the markets.  Play it will be today as we have a hell of a score with our bearish positions this week.  Speaking of Evil Empires, Iran has amitted they have another uranium plant today, probably thinking that the G20, with Merkel on her way back to Germany for the elections, would give them a pass for the weekend but no such luck and we already have a move towards sanctions.

A U.S. intelligence official says the U.S. has known about the second Iranian site "for years," but it confronted Tehran only recently after becoming more confident it was being used for uranium enrichment. At the G-20 conference today, Obama, France's Sarkozy and U.K.'s Brown chastised Iran for operating the facility clandestinely.  

Similarly, we've know that the market has been overbought "for weeks" but we chose this week to confront this issue after becoming more confident that the media was being used to herd investors in for the slaughter.  We'll be holding a state of the market review this weekend where we will chastise Goldman Sachs and others so stay tuned and have a nice weekend.


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  1. Durable goods … miss
    KBH …. miss
    RIMM ….. miss on revs; guidance

  2. Morning all!
    RIMM lol I guess I am still learning how to manage these.
    Currently Short Oct 90/Long Nov 100 and Short Oct 75 put.
    Would you have any advice please?

  3. I didn’t see anything that noteworthy regarding the GS conviction list other than RIMM moved to Neutral from Buy and price target taken from $96 to $73. Isn’t this the kind of information that might be helpful BEFORE the shares collapse?

  4.  Margin question…
    In Ameritrade, if I sell 10 naked Jan 5 put contracts for 1.00 (stock at 5.00), does my buying power decrease by $5,000 (the amount I would have to spend if exercised)? 

  5. Wow, the open wasn’t nearly as bad as I would have expected.

  6. Phil I have MHP Oct 25 Puts sold, do you think they should be rolled out to 22.5′s?

  7. newparadigmz:
    It shouldn’t if you have a margin account. You need to ask Ameritrade about how they handle margin on naked puts to get the details. In a retirement account, you do need $5,000 in cash to cover the sell.

  8. Phil,
    what’s our cover status please?

  9. Phil, would you go long RIMM at this price?

  10. Well oil got a boost from the GS upgrade.

    Nice opportuntity here to sell RIMM March $60 puts naked for $4.30, which puts you in at net $66.70 and, of course, that can be rolled lower (2011 $50 puts are $6).  So if you don’t think RIMM is going BK, it’ a pretty good play!

    Finishing the week without retaking S&P 1,056 and NYSE 6,959 would be bad for the weekly chart.  The Dow needs to hold 9,600, 2,075 on the Nas and 585 on the RUT.  All should be easy to hold so the pressure is on the S&P and NYSE to get back over their lines.  Big disaster if we fail of course but that’s not too likely to happen. 

    Yesteray’s other watch levels were:  $66 oil, $115 on OIH and $54 on XLE.  XLF needs to get back over $15 and the Qs need $42. 

    Watch our for galloping horsemen to lead us back up.  Yesterday’s worry lines were:  AAPL $184.15, AMZN $91.31, BIDU $379, GOOG 494.65, RIMM 84.25 – obviously RIMM isn’t coming back but the others are all doing well so far.

    Overall, I will be more bearish into the weekend if we get a big move up as I’d be hard pressed to find justification for it

  11. Phil,
    I sold DIS Jan 27 puts and up 20% – any ideas on a hedge?

  12. Sept. Reuters/University of Michigan Consumer Sentiment: 73.5, the highest in more than a year, vs. consensus of 70.3 and up from 65.7 in August. Current conditions 73.4 vs. 66.6 in Aug. 12-month outlook an astonishing 88, up from 69. "Pace of gains in confidence continued in late September as the economic news reaching consumers grew even more positive," researchers say.
    This is incredible if you consider the news over the past couple of days. Record credit card defaults, durable goods down, lending still incredibly slow.

  13. Just got a fill on 47/48 bear put vertical paid for by selling 54 calls.  Cost = 0 and pays 100 below 47 (TNA = 44 now)

  14. RIMM/Steve – The spread is good but now you’ll see why I prefer to go for longer months on the long side.  There’s nothing you can really do but hope they recover some by November and get out when you can.  This was a worse sell-off than we thought and I wouldn’t add money in Nov to a bounce play.  You can buy back the callers for .10 and sell Nov $80s for $1.62 against the March $85s at $3.90 as you have the upside protection of your $100s and that should put some of your money back.   As to the put side, there’s still premium and you still may get a bounce but no reason not to put in for an even roll to the Nov $70 puts, just in case you get a fill.

    RIMM/Aclend – That’s why that list is a joke.  They get to say they were negative on RIMM ahead of the drop as they only count the market move of the day – not too usefull other than to pump up their reps. 

    From the Sept. issue of Marc Faber’s The Gloom, Boom & Doom Report: "The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society."

    Wow, happy Friday to you too Marc!  8-)

    He might be onto something, but the consumers disagree:

    Sept. Reuters/University of Michigan Consumer Sentiment: 73.5, the highest in more than a year, vs. consensus of 70.3% and up from 65.7 in August. Current conditions 73.4 vs. 66.6 in Aug. 12-month outlook an astonishing 88, up from 69. "Pace of gains in confidence continued in late September as the economic news reaching consumers grew even more positive," researchers say.

    Meanwhile, median home prices fell 11.9% to $195,000 (were $264,000 at the peak) but the Aug sales number came in at 429,000, which was about in-line and up 0.7% from July but we have to get back to over 1M homes to get healthy and, at this rate, that will take us until the end of this century

  15. Re: RIMM,
    ..must have meant "…puts you in at 56.70."

  16. blair – not to mention that the front cover of Time this week is "Out of work America – why double-digit unemployment may be here to stay – and how to live with it"
    I don’t understand the disconnect personally.

  17. Yeah, I can see where the Doom and Gloom part of the report comes from!  He advocates at least 50% of investments in emerging markets.  Where does that leave the other 50%?  gold??

  18. Phil: the march60 puts premium in my system shows 2.24 ? what is the problem ?

  19. Phil: its RIMM.

  20. anyone ever read The Road?

  21. What should we try to pump the markets up with today ?   REITs — LOL   buy buy buy

  22. Cap – and casinos.

  23. INFY – Can someone please sugegst a decent options trade. Assume short-term bearish outlook as it is way overbought (as is Indian market in general). I expect 44-46 by Oct expiry and 43-45 by Nov.

  24. Margin/New – Well in TOS with a normal margin account, it says if I sell 10 C Jan $5 puts for .96 it will effect my net buying power by $910 so I guess that’s the $960 cash collected less $1,870 they somehow decide to charge for the margin.  Again, a very nice feature of TOS is they tell you the buying power effect of a trade as you confirm it.  Other brokers do whatever they do and you can always call and ask them but there’s no set answer other than to assume you’ll be charged (at 50% margin), $2,500 for selling a $5 put naked less the cash you collect. 

    MHP/Bgb – I think we said yesterday, the goal should be to scale into more at $1.75+, not to roll out of .80 in premium.  If you REALLY want the stock, then this wouldn’t bother you and, if you don’t, then you should never sell naked puts against a stock you aren’t willing to buy at the net.  MHP pays a 3.5% dividend and if it gets put to you at net $23.50(ish) then you can sell the Jan $22.50 calls for $3 (now $3.40) and the Jan $20 puts for $1.25 (now $1.25) for a net $19.25/19.63, which is 18.5% lower than we are now, which would make a sweet 2x entry on the company.  I’m more of the camp that I’ll be disappointed to be called away with just a $1.50 profit. 

    August New Home Sales (.pdf): 429K, up 0.7% from revised July sales of 426K, vs. consensus of 445K. The figure is -3.4% from a year ago. Median price was $195,200, down from July’s $210,100. Inventory dipped slightly to a 7.3-month supply from July’s 7.5 months

    Covers/Maxt – 1/2 covered with 9/30 $97 puts at $1.05 (now .80).  All our Sept and Oct positions are off the table other than the puts we sold.  The current optimum position is the Jan $99 puts at $5.95, which is .70 more than the Dec $98 puts and .10 more than the Dec $100 puts and should be the goal of your next roll as October is coming up fast.  We can sell 1/2 the Oct $97 puts for $1.80 and that pays for the roll so no worries there

    DIS/Jom – Well, we’re back to that thing where I say "were you really willing to buy DIS for net $25 or were you bluffing?"  If you were bluffing, then like any poker player with a weak hand, you need to be thrilled to win a small pot.  If you "have the nuts" and you are happy to buy DIS at net $25, then you can play your hand slowly and let your putter twist in the wind while his premium wears down day by day.  So which is it for you?

    Consumers/Blair – If you tell them everything’s OK they believe you.  It’s kind of sad really…  60% of the consumers think their home is increasing in value this year but the housing data shows it dropped 12% – these people are clueless and usually that’s just amusing but when those people are scraping along the bottom and charging up the last of their available credit because the government and the media tell them things are getting better when they are not – then it turns tragic pretty fast.  The government HAS to say things are getting better, if you tell consumers not to spend then the whole economy would grind to a halt so fast the inertia of the earth would probably toss us all into space but it’s the media’s job to put the brakes on and urge caution – that isn’t happening and it’s causing some very irrational behavior that is probably going to end very badly for all (see Faber’s outlook for the worst case). 

    Disconnect/Kwan – Oh I think I may have figured that one out.  Unemployed people and people who have trouble paying bills don’t answer their phones when stranges call (bill collectors).  That is possibly massively skewing survey results.

    RIMM – yes that was $56.70 net entry. 

    RIMM/RMM – If your system is showing you $2.24 for the March $60 puts you should immediately go to cash and leave that broker as they must be ripping you off for thousands of dollars every time you make a trade.  That’s an active contract, and I’m watching trades go by at $4.50 as we speak.  I am not joking, if your broker even has the nerve to suggest in any way, shape or form that that’s a $2.24 contract, then you cannot possibly trust anything they say to you about any of your positions. 

    REITs/Cap – Yes, I was just thinking to myself what a great time this is to buy commercial property…  8-)

    Casinos/SS – Well people are running to the lottery machines so maybe the casinos can do well as it’s the only way a lot of people think they are going to save Christmas this year. 

  25. With the nice pull back in visa do we put on our cowboy hats with srs?

  26. whats up with wmt today?

  27. SYNA – 6K lot on the 25 Nov09 P went through at 2.20.  Either they are covering their stock hard, or someone thinks this is the bottom for them….

  28. Market going nowhere; but REITs still grinding higher.
    keeping the market from falling …

  29. RIMM/RMM – by the way, $2.24 just so happens to be exactly Wednesday’s low on that contract, the worst price of the week that they could possibly pull and only a system that is intentionally ripping you off would be pulling a price like that as it is coincidentally a price where they could claim "computer error" if someone were sharp enough to take them to court. 

    INFY/M2 – How about the Nov $50/$45 put spread for $2.70?  Those are 100% in the money (b/e $47.30) now with an 85% upside if they fail $45.

    Volume not there at all with under 50M coming into 11am. Dollar is back down to $1.47 to the Euro and 89.95 YEN!!!  That calls for a much bigger font but I don’t have that here so I’ll say it again - 89.95 YEN!!!  That is NOT GOOD.  

    Even with this trashing of the dollar, oil is having trouble holding $66 and gold is at $992 so figure that things would be much worse if the dollar got stronger.  So far, the Fed has lost all credibility and talk of reigning in liquidity and a strong dollar are being laughed off by traders but I still think we’re more likely to establish 76 as a dollar floor and head back to 82ish, which will shoot commodities back down (and OIH can’t take back $115, even though oil was pumped to $67 this morning). 

    Speaking of evil bankers:  U.S. banks are on pace to book a record $43.6B in fees on customer deposit accounts, just ahead of expected legislation on such fees.

    House Financial Services Chairman Barney Frank – who favors a "council of regulators" over the Federal Reserve when it comes to watching systemic risk – is backing Ron Paul’s "Audit the Fed" bill, which is facing no significant opposition in the House.

    SRS/That – I still like them but they are so painful to play.

    WMT/Jo – Trade restrictions very, very bad for WMT. Also, they sell durable goods too. 

  30. Phil – I’m still actively looking for collar trades to park cash.  HTS – Buy the stock at $32.15, buy the Oct $25 put for $0.05, write the Oct $25 call for $7.05 (net entry $25.15).   $1.15 dividend has already been declared (ex-date 9/30).  Assuming I’m not called away & I do collect the dividend, I see a guaranteed 4% by Oct OE.  It may be easier to get filled on the $30 contracts, but the return is a little lower.  Am I missing something here??? 

  31. GAME – below print ($12.50) already

  32. So what the hell is the deal with RIMM?  I mean, how can it get crushed so much without the rest of the market coming with it?  If its revenues were really that worrisome, shouldn’t there be some prudence taken with the other gadget stocks out there and trim some of their gains?  Or, RIMM should be going up here.  Something is seriously out of whack.  Which one is it?  RIMM volume is now over 72 million in two days.

  33. Matt, RIMM often moves this much around earnings too – it’s repetitive funny business!!!!

  34. Phil – RIMM -  could you explain how selling $60 RIMM puts naked for 4.30 actually puts me in for 66.70 since I could be put the stock at $60 in March. I know this is elementary but don’t completely understand, thanks

  35. Con – correction is noted above by several…..56.7 is the correct price.

  36. INFY/Phil – Would you get that spread for Oct or Nov?

  37. Ive seen this type of action many times before, these wild swings and gyrations are like a dying patient. Im watching ISRG for a signal.

  38. Steve, interesting.  Looks like this is going to be one of those times it closes down for the day.  I think this portends to huge opportunities going short on other gadgets.  I wouldn’t mess with Apple.  But there should be plenty of others.  If it weren’t for window dressing next week I’d go for it.  But I just got my hand cut trying to catch the RIMM knife and I’m gonna take a break.

  39. Phil your thoughts on the durable goods number

  40. Alright, 60 – 4.30 = 55.70.

  41. The SRS March 2010 9 calls and puts can be sold for 4.85 is there a better option to consider?

  42. Phil,
    INFY – Thanks for your idea of ‘Nov $50/$45 put spread for $2.70′. That is sell the $45 Puts and buy the $50s for a net debit – correct?

    I expect more downside than $45. Perhaps do the Nov $42.50/47.50 PUT spread instead for about $2?

  43. Matt – RIMM is way down, PALM is up 2%+.

  44. So phil, you wouldn’t be a buyer of wmt at this level?

  45. Phil – another RIMM question.
    I thought I did good by getting RIMM at $74 in AH.  Now it’s $70.
    Would you suggest playing some options to recover the loss or just get out?  Or maybe, wait?

  46. Just Once Mr. Banker, Just Once  POW!!! TO THE MOON ALICE!!!!!

  47. ARNA:
    Phil, I had a calendar spread (I guess actually it’s a diagonal) on ARNA. Bought the April 6 calls for 1.64 (now about 1.00) and sold and closed Sept and Oct 6 calls for a total profit of .94. I’ve been trying to sell the Nov 5′s but can only get .45 – .50 for them. In managing this kind of trade, does that make the most sense right now?

  48. Now, if only I could find one of my kids stuffed toys that resembles a banker……

  49. Asking .13 for my RIMM bear call spreads, which I sold for between .15 and .45. Not as much as I hoped, but not I’m complaining either given the size of the move.

  50. 70 is decent support for RIMM but i got to tell ya if it lingers here much longer it goes to 68 i don’t see any real conviction from traders

  51. 70 is decent support for RIMM but i got to tell ya if it lingers here much longer it goes to 68 i don’t see any real conviction from traders

  52. I mentioned this last night, but remember that RIMM sliced a lot of knife catchers last Sept. People might remember that; for me it’s not worth the risk right now.

  53. Phil:  I misinterpreted your original RIMM post. You said "puts you in at net 66.70 instead of 55.70" and so the only way it seemed like it might make sense was to buy the stock and sell the puts since the $4-or-so credit would have created a net $66-or-so price on the stock purchase, presuming that the puts expired worthless.  I’m actually in the stock at $70.07 so I can get out now without an issue.  The question is, do you think the stock is worth holding for a short-term bounce?  By the way, your commentary is tremendously useful and insightful, but for options novices the process of interpretation sometimes feels like Cold War era Kremlinology.  Is there a section on the site that provides a guide to your shorthand way of describing options trades, to "Phil-Speak"?  Thanks!

  54. Phil – 89.95…they are killing me.  It’s costing me an extra $100 for my ski vacation in Hokkaido this year!

  55.  concreta, It would put you in at 55.30  Phil just goofed up the math unless there is more to this transaction

  56. Phil – could you explain a little more around your comments on the Yen please? I am not sure how to read this and you do note that it’s very important)
    Is a weakening dollar relatively bad for Japan (exports) but good for US Stocks (which are dollar priced commodities)?

  57. allan – why not take the money made, roll down to the 5s on ARNA, and sell 1/2 the Novs at the same strike?

  58. it appears since the 16th that the over bought condition has fallen to now/yesterday -36.79

  59. While you are at it, sell the oct or nov 4 Ps (if you want to own them). to reduce the basis further.

  60. Let me reveal a bit more of my ignorance with the question: If SRS is a 2x bear real estate play, and it has been cut in half over the last 6 months, I should expect real estate to be booming, which it isnt.

  61. barfinger – Many ETF’s are long term losers, due to the way they are compounded and commissions.
    Look at a chart with both URE and SRS comparing percentage for 1 year.  They both lose most all of their value!  I used google charts.
    Very short term OK.  Long term, very bad!

  62. bar – SRS is only a DAILY 2x. It does not offer 2x over longer periods.
    The fund loses a fortune in trading costs (which is the cost of leverage).
    The fund is predictable, so people work out what it will have to trade on any given day and trade in front of it.
    The fund is deeply susceptible to compound erosion, in which multiple down days in a row lose so much value that it is virtually impossible for the fund to recover.
    I found this article to be excellent

  63. VZ – Phil I have Apr 28 calls naked, would you leave them naked or do a half cover since it broke below 30.

  64. HTS/SS – How about buying the stock for $32.50 and selling the May $22.50s for $9.60 and buy the May $22.50 puts for .60 for net $23.50 entry called away with a $1 loss (but of course you can roll) but with 2 more $1 dividends for a net $2 gain on $23.50 (8.5%) over 8 months.  I am not a big fan of these trades but the only way you can lose is if they cancel dividends and even then, just $1 which, as you pointed out, is already promised for Oct.  Your plan works too but it’s hardly parking cash if the whole trade expires in 3 weeks – more like pit-stopping.

    RIMM/Matt – The media and the downgrade police have chased away all the buyers, leaving the sellers hanging out to dry.  Even Cramer didn’t defend them, hanging his bag holding minions out to dry as well.  What’s scary is how fast they just erased ALL of the gains since mid-July, when we did our last big round of buying.  I would be THRILLED if the rest of the market would do this but we’ll just have to buy stocks one at a time as they dive for now.

    INFY/Blair – It’s a November spread.   Too much pressure trying to be be right in 3 weeks.

    FSLR daring to sneak back up today.

    Durables/Kustomz – I think it’s nothing terrible, just that we had an overreaction to last month which was nowhere near as good as they were painted.  The problem is we had a consumption bubble with the average American owning 1.2 homes (not really) and now they own 0.8 homes so they flat out do not and WILL NOT need 3 washing machines and 2 dryers and 2 dishwashers and 4 refrigerators (I have 4 in ONE house!).  Those kinds of thing can and do snap back in cycles and the fact that we hit a cycle that peaked and are now in a period of contraction is not a bad thing for the long-term economy.  What’s dangerous is trying to break the natural cycle with too much stimulus looking to return to overbought conditions long past when they should be in healthy correction.  Economies are living things, they must breathe in and out to be healthy, pumping them up more every time they try to catch their breath is not a good idea…

    $55.70/SS – All right that’s it, no more numbers for me this  week!

    SRS/Sarahd – I see April, not March but I would be less greedy with the stock at $9.85, selling the Apr $7 calls for $4 and the Apr $8 puts for $1.50 which is net $4.35/6.18.  It’s still a 60% upside but with a 15% lower entry vs the 80% upside on the $9 spread.  Also, you can make this play and NOT buy SRS UNLESS it breaks $10.50 (or when it gets much cheaper) and you are still in for $5/6.50.

    INFY/M2 – If you are so sure, why not just by 2x of the safer play?

    WMT/Jo – Not in a downtrending market.  $47.50 is my magic number with them so they’re not far off but if the economy is really getting better it’s not that great for them.  They were having trouble in ’07 and were trying to move more upscale but they went back to what they were good at this year, which is great but they’ll be caught with their pants down if the economy reallly does improve and people decide to treat themselves to TGT or whatever.  Also, the weak dollar is not a friend to WMT who can’t jack up prices here but must pay more to our Asian masters. 

    RIMM/Rich – I was in and out after hours but if you don’t mind owing them for the long haul, then why worry?  The V is still high and you can sell Nov $70s for $4.75, which knocks you down to $69.25 (check the math!) and if you don’t mind owning them longer, you can couple that with a sale of the Nov $70 puts at $4.60 which drops you to $64.65/67.33, which is still where you’d be if you doubled down at $60.66 but has a 10% upside if RIMM simply holds $70.

    Gang of 12 action – C upgrades GS! 

    After meeting yesterday with Goldman Sachs (GS -2.3%) CFO David Viniar, Citigroup analyst Keith Horowitz says proposed rules on derivatives, commodity position limits and higher capital requirements could very well benefit Goldman due to its "expertise in high volume electronic trading." Firm boosts Q3 forecast for GS to $4.20, from $4.

    Of course that SPECULATION totally ignores this FACT:

    Commercial banks’ trading revenue – from foreign exchange, interest-rate and other derivative instruments – fell to $5.2B in the second quarter, from $9.8B in Q1, though the OCC expected a seasonal decline. Net current credit exposure is down 20%, but is still considered very high at $555B.

    Amen 1020!

  65. I’d be very careful with RIMM – if the market corrects further, RIMM could easily break support around 67, then there’s a rather long drop to the next support around 46.  I think Phil nailed the play earlier with the Mar 60 puts (currently 4.55), with a roll down to 2011 50s if there’s a protracted decline.  If the early earnings disappointments from tech bellwethers like ORCL and RIMM are the beginnings of a trend, we may get a nasty drop as support levels break, with big gaps down among many stocks that have been going up on fumes.

  66. ISRG running up in the face of this sell off.

  67. INFY – I think it will indeed go below $45 by Oct OpEx. Especially, if rest of the markets decline (come off these crazy levels 5-10%).  Looking at the chart, all I see is a nice trend-line though…
    Will go buy the Nov $42.50 or even Jan $40s (pricy!) and then look at selling the short end later today or early next week if today’s declines do not reverse

  68. Phil – do you like DIA puts going into the weekend?

  69. PHIL,
    DIA Oct $95 PUT – bought yesterday for $1.15
    Do you think it’s worth hanging on to today?

  70. What are the watch levels for today?

  71. Hi Phil, Holding stk of STP wish to enter a strangle sell dec call 1.60 and put for .95 looking for 2.50 2.55 what is your opinion?

  72. Kustomz – ISRG - could you explain why do you consider this movement a signal?

  73. Phil
    My short position in Palm is starting to look worrysome. The stock should be diving. Some investors might be thinking a purchase of the company is coming, I believe.

  74. phil -ratio put spread on AIG –  I’m long OCT 50 (at 7.00), short OCT 42 (at 3.70) and short 2x OCT 35 (at 1.65). Would you adjust anthing or just stick with this? Trade is up about 1.60 now with AIG at 43.20.

  75. clarification on STP dec call 17 and dec put 13 sorry

  76. concreata if there’s going to be a real sell off then all money gets taken off the table, ISRG has run up a plenty any real sell off would send ISRG lower not higher. There could be rumors of a buyout but like i said a real sell off would send high flyer’s down first.

  77. ARNA/Allen – So you have Apr $6 calls at net .70 and they are $1?  You’re up 42% so the question is how badly do you not want to take a proift?  How much of the 140% of what you originally played and won with are you now willing to risk on getting your way again?  If the risk/rewards of the new potential trades no longer look attractive we have our patented 2-step process for locking in profits.  Step 1, as you may recall from our 12-hour seminar on the subject, was called "Take the Money."  Once you have mastered this very important process you are ready to move on to Step 2, which requires a weekend spent in a cabin up in the rockies but the notebook from that seminar is just a single page with a single word on it: "Run."  I know this is a difficult concept to master as profits are just so icky and must be handled with the greatest of care but, if you learn to master these two vital steps – you may find that profits are your friend and you don’t have to turn around and risk them every time they rear their ugly head in your portfolio. 

    If you MUST play ARNA (which I got out of after their study didn’t sound too exciting but Pharm still likes) then why not buy the Apr $4 calls for $1.55 and sell the Apr $5 calls for $1.30.  That’s net .25 on a $1 spread that’s already .50 in the money.  THAT’s how nervous other people are about this stock, they are willing to spot you a quarter for you to hold it through April!  But you can be the brave one and take just the profits you made and put it into a spread that pays another .75, which is something you would only get if ARNA finished April at $7.39 in April and you can do that while pulling 2/3 of your cash off the table.

    RIMM/Eric – Now THAT is the proper attitude about taking profits! 

    RIMM/Kustomz – I find it amazing how no one on this board or on TV has even once mentioned what RIMM may be WORTH.  No one is forced to sell RIMM stock.  It’s the same company it was yesterday but is now projecting 0.08 less out of $4.15 worth of earnings and that has cost the stock $18.  That is a p/e of 225 on that marginal 0.08!  Wouldn’t it be funny if the CEO is walking along the sidewalk today and finds a dime to add to earnings – will RIMM then be worth 20% more tomorrow?  I don’t know but as a former CEO it kind of pisses me off to see how fickle investors are.  People switch stocks like TV channels – they hold your interest for a moment or two but then it’s on to the next thing that looks exciting… 

    RIMM/John – I wouldn’t take the double risk if you have the puts sold as well but I do like the buy/write selling the Nov $70s for $4.60 too but you have to want that extra batch of shares if RIMM drops another 10%.  As to Philspeak – Deano is working on something with me and I’m causing the delays as usual but I plan to catch up on the weekend. 

    Where – What?

    Yen/Steve – There are now 89.77 to the Dollar.  Toyota makes a Camry for 950,000 Yen (or whatever) with the Yen at $95 and they price it in the US for $11,000, looking to make a 10% profit.  That price is advertised and set 6 months in advance and there is nothing they can really do about it now.  Here we are in Q4 and suddenly selling a Camry for $11,000 and splitting the profit with the dealer, who gets $500, leaves $10,500 but that’s now only 942,585 Yen so it’s a loss before they even finance it! 

    That’s the gist of how a rapidly declining currency can kill the exporters who ship to that country and the dollar isn’t down just 5%, it’s down From 88 in Q1 to 76 now, that’s 13.6%.  That’s how it hurts manufacturers but it also hurts distributors on this end like WMT (althought I’m sure WMT hedges currency to some extent), who plan their fall pricing a year in advance and now find they owe their suppliers $11.14Bn for $1Tn Yen worth of product although when they ordered it, it was only going to cost them $10.3Bn – Someone is going to absorb that loss along the line. 

    So Japan is a VERY export-led economy and it is terrible for them to see the Yen less than 90 to the dollar.  Effectively, it’s like forcing them to raise their prices 10% during a bad economy just to stay even with last year and cover their costs.  If that leads to lower sales, they are screwed. 

  78. Look at the Put volume on AMZN for Oct 75 strike !

  79. Hi Phil : Is it too early to sell BBY  NOV. $38 puts naked for $2.25 ?

  80. RIMM you have to admit they lowered guidance and the future in reality is pretty grim so any guidance to the downside spells doom, We’ve been given a chance to make a shit load of money on RIMM so i welcome this pullback. This stock can fly and i know you like them around 66, i would be a buyer not all in but i would nibble. As soon as i see some support i will buy buy buy.

    Stop throwing all those numbers around, very confusing!!

  81. Thanks Phil and Pharm re: ARNA
    I put in an order to close the position. I was debating doing that, given my gains, and figured Phil might hit me over the head about that. Plus I have some other exposure to ARNA with a buy/write so why not take some off the table. Thanks.

  82. If we break 1040 and do not recover then this tells me one of the big boys doesn’t want to play anymore and there’s one less player and 1020 is the next leg down.

  83. MYGN – buying 25 or 22.5 C May (which ever fills first (20c less than ask)).  Waiting for them to bounce up and sell the front month 30s.  Moats are wide on the options, so be patient and prepared to scale in.  OOPs, guess i am in the 25s….

  84. I’m thinking that window dressing is having the opposite effect on RIMM right now.  No one wants this lemon on their pick lists.  Better to get out now then wait for a recovery that could happen well after 9/30.  The rats are scurrying from the sinking ship and jumping onto another like PALM.  In hindsight, RIMM’s miss makes perfect sense.  They’ve been losing retail customers to iPhone and Pre.  Their business custumers have been getting laid off.  They were at their high at 230pm on Wednesday.  How much further could they have gone up?  Should have seen this coming!   DOOOOOOOHHHHHHHHHH!

  85. SRS/Barf – IYT is booming, not the real estate itself.  I made this arguement for real estate back when HOV was .60 and I was pounding the table to buy it:  At some point in time, this company made between $150M and $450M a year for 5 years until the market crashed.  At the time, the stock was trading for $50M so the logic was if you buy some for $50M and they EVER, EVER again make $150M, even if it happens 20 year from now, then that stock would be a 10-bagger.  That’s the logic for investing in real estate companies but not real estate itself.   You buy some and put it away and forget it and (if you pick good, surviving companies) let them deal with the annoying market for a dozen years and then sell them on the next upswing.  Because it’s land (a commodity), it’s also a hedge against inflation so lots of good reasons to get in cheap and some of the well-run REITS, like VNO and BXP, seem poised to muddle through the downturn and should be able to expand as their weaker competitors go out of business. 

    VZ/Bgb – Value again.  If you WANT to own VZ for $27 or whatever then you should be rooting for it to come down to your price.  Take a look at the chart of the March dip.  You could have had the May $28 calls and you would have gone insane during the dip to $27 but then a month later they were at $33 (when I bet you wouldn’t have sold because it wasn’t up enough) before falling ack to $30.  I don’t like naked calls very much unless it’s an initial entry you plan to roll down and add to if VZ heads lower.  Apr $28s are $2.85 with $1 in premium and you can sell 1/2 the Nov $30s for .86 and use that .43 (per long) to roll down to the Apr $27s at $3.50 so you pay net .22 per long to roll down $1 and put yourself from $1.95 in the money to $2.95 in the money.   If you don’t have enough faith in VZ to roll down when it’s cheap – you shouldn’t be in a call.

    RIMM/Chauaeu – Yes, if you have a lot of those plays some PSQ, QID or other negative Nas plays may be in order. 

    ISRG/Kustomz – I love those guys!

    DIA/Jrom – Well it does look like the G20 is a bust as far as boosting the markets.  Iran seems to have distracted everyone but I think, overall, it’s just a ploy to support oil prices as none of this is actually news.   The energy sector is far from capitulating so far and the metal sector is also way too high so lots of room for the markets to drop.  We haven’t even hit our 5% line yet so hopefully a nice high-volume blow-off Monday or Tuesday and then we’ll see if there are real buyers outthere.

    DIA/Xlf’d – I woldn’t hold it now.  Those out of the money puts kill you on a reversal and are only good for momentum trading.

    Levels/Sthom – See first comment, same old S&P and NYSE levels (not looking good for either).

    STP/Yodi – I’d be more conservative.  You can sell the $15s for $2.40 and the $15 puts for $1.75 and that’s pretty good money on a $15.75 stock (26% in 90 days).  If you are more bullish then sell the puts naked first and have a stop sale price on the calls in case they do head down from here.

    PALM/Gel – Persistant buy-out rumors make this a poor short.

    AIG/Roaster – I think you should be thrilled to be ahead and should lighten up.  AIG can go up or down $20 overnight.  It’s just not a spread I could in any way get comfortable with as a single-day move can reverse your gains. 

    BBY/Dfalm – I have no faith in Santa this year so I wouldn’t be gambling on the retailers.

    REALLY GUYS – 200 points down for the week and suddenly everyting looks like the bargain of a lifetime???

    With new home sales data comes an updated "distressing gap" – the (recently large) difference in the ratio between new and existing home sales, showing distressed sales have a ways to go before moderating.

    1040/Kustomz – Good thought but I doubt we get there today.

    SBUX and GMCR going up at the same time – maybe coffee prices falling or sugar or milk or all 3?

  86. Next long-term support level on RIMM 45?  I’m not playing this puppy right now but it seems the selling pressure is so heavy it’s probably got further down to go.  

  87. Early stick?

  88. Selling GILD 46 calls and  buying them back is still working.  (against Leaps)   In XOM 70 Calls since they are less than a buck and not  within expiration week. 

  89. YAY!! All is well in the land of OZ nice recovery

  90. BAC $100KP - Selling 5 Oct $17 puts for $1.02

    Volume at 2pm 103M = very low and very stickable.  Yesterday they took us up 65 points from 2:20 to 3:20.  If we break over 9,680, which was kind of a support yesterday, then they have a clean shot back to 9,720 at least.  Those DIA Sept $96 calls are $1.30 and yesterday we took them with a .15 trailing stop and they make sense again today as protection if you are bearish

    I’m not seeing the kind of selling into the stick we saw yesterday. 

  91. Not sure about bargains, but this selloff has been about as easy as the bulls could have wanted (smart bulls wanted a controlled sell-off). Modest volume, support levels holding, and no sense of panic except for perhaps a few minutes Wed afternoon. My only hesitation is that it’s almost ‘too nice’ and the bulls deserve more of a shock. Maybe you’re right and we’ll get one next week Phil.

  92. stick save, stick save, stick save!  I know.  I’m disgusted with myself, too.

  93. Phil
    Morning cartoon with loan officer in unemployment line… Funny if were not true – am buying a forclosed home that was owned by a very successful sub prime loan executive – he believed in his own BS.

  94. Phil,
    If I’m not in the BAC trade at all, would now be the time? …same LT contracts?

  95. Oh look!  RIMM has value again!
    It’s just pathetic how ‘they’ create fear in ’us’ by sudden moves in the market, the media hammers away at those fears, people capitulate while they buy and then they whole cycle repeats itself.

  96. If we close green today it will prove once and for all that consumer sentiment trumps durable goods data.

  97. Phil,
    A general question: I’m going on vacation tomorrow for ten days, so I’ve tried to make my positions as neutral as possible. The ones that I can’t make neutral , I believe I have enough in FXP and SKF and SDS spreads to be okay. Since I won’t be around to  make adjustments to DIA puts and Putters, I’m getting out of those today. Do you have any further suggestions?

  98. Matt,  What’s ROFL ?

  99. Enjoy Maxt – I have gone on vacation twice in the past few months, and my portfolio has done quite well without me watching it……..

  100.  phil, there is no such thing as a DIA sept 96 call, Do you mean OCT 96′s?  On my screen they are $1.50

  101. Panic/Eric – As I say to my kids when they are having an "emergency" - there’s always time to panic later…

    BS/Gel – It is just amazing.  I know some mortgage guys who weren’t satified pulling in high six-figure incomes because they were lending to people who were making millions so they quit and started buying homes at the top – madness.

    BAC/Aclend – It’s a good time to fill the long end (selling the puts, buying the leaps) as we’re happy enough to own them at $16, although not even 1/5th as happy as we were to buy them at $3 in the spring!  I’m looking for BAC to make $25 by next year.

    Cycle/Matt – Well if it wasn’t for that cycle then most stocks would do nothing at all from quarter to quarter and even then unless there was a significant change in earnings.  Ah, those were the days!   I remember when you would buy a 2-year leap on a $20 stock for $1.50 and sell the $1 out of the money contracts for .10 per month and you’d only check the paper on Sundays to see how things were going! 

    Vacation/Maxt – Nah, just go have fun.  As long as you have 1/3 cash you can adjust out of almost anything.  Just make sure you have a number to call your broker and a single thing you would want to execute if the market goes more one way or another than you thought. 

  102. Phil:
    my internet service was down until now,
    is there a put to sell on RIMM ???
    also: the WMT oct 50 callers are down to 63 cents, will WMT fall more then of course I keep it, but could roll to nov ???

  103. Phil – IYT – is this trade from yesterday still viable – there is still $2+spread but put prices are higher
    . . .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

  104. Re – Internet down till now….I got in a real bind a year ago when some workers cut through my internet cable.  Now we’re going on a trip next month, and a couple of the locations we’re staying at in CA said they didn’t have internet at the places.  So I picked up a really cool little VZ broadband device that I also use here at work that gives me Internet.  It connects via USB to my personal laptop.  It can also broadcast WiFi, so when in CA both me and my wife can use it over our broadband connection.  AT&T and Sprint make them too.

  105. RMM – do you still live in phx?  My cox internet was doing this morning at home (working at hospital + i have vz mifi)

  106. RIMM – nice ass kicking
    MCO — also getting ass kicked again !  Was $26 last week; now 18.68. 
    Has anything changed there ?  No.  Hyena attack over same old short argument.  Amazing how they can pull it off.  Very LEH like.  I know a bunch of traders who piled in on the short side.  It’ll work til it doesn’t.   MCO seems to lack leadership at the top who ought to be able to swat this stuff away.  Same goes for MHP.  Corporate weenies.  Hedgies have staffers and lobbyists who get paid to feed them info on hearings, witnesses, and so on; helps them spread good rumors.

  107. Phil,
    I wasn’t tracking the price when you put the BAC reco up. Did you get filled at 1.02 or is your order waiting? Thanks.

  108. java, are you talking about the vz mifi – it is awesome.  We drove from phx to san diego last week and had coverage for 95% of trip.

  109. jomama: yes, my cox service was bad all day.

  110. I have the VZ mifi too.  Running TOS for a week all day while the market is open has used about 200 MB (or .2GB).  The digital plan gives you 5GB, so at the current rate I’ll only have used less then 1GB of the 5GB.  And I keep track of Phil’s RSS Feeds too for each day, at 1 min updates.

  111. I’ve "gone on vacation" a couple times this summer and had bad market experiences each time. Hopefully i am learning the importance of every equity being covered somehow cause the one i least suspect will be the one to take a hit. Just an encouragement to check closely cause it’s no fun to find that your vacation cost you 2 x’s.  I do hope you have a profitable and refreshing time.

  112. the i phone works good too but your family has to give you time. :)

  113. re BAC – is it time to cash in on OCT $17 short call?

  114. Stick it to me baby !
    (stick will fail again today)

  115. That GE commercial where they show the employees singing "i dont know much but i know i love you" makes me want to drop everything and go out and buy a jet engine, maybe 2. WTF is the sense of that commercial? What a waste of money, but then again it was free since they own CNBC.

  116. Here we go !!!

  117. it’s a very annoying commercial – they play it a lot since it is a filler and essentially free.

  118. FSLR becoming tempting for a naked put…..

  119. PHIL!!! can i get some volume numbers please on that last push?

  120. ISRG still rockin

  121. Looks like they peaked all the stocks they used to pump the market off the bottom with 50 min to go

  122. ROFL – roll on floor laughing
    Cap, that’s interesting about the hedgies and their paid informants.  That goes back to my comment yesterday about some people are willing to do anything for money.  I bet even honest broker Art Cashin has got a ton of tricks up his sleeve to hoodwink people out of their $.

  123. HOLY MOTHER OF G-D did you guys just see that on CNBC? Shameful what a pump on GE in the face of a weak market.

  124. Yeah, that GE pump was pathetic.  I immediately hit the mute button.

  125. DIA/Craig – Yes there are Sep 30th calls but you can use the Oct instead but the Oct $96s are $2.35, not $1.50.

    RIMM/RMM – Yes, I like selling the naked March $60 puts, now $4.90.  As to WMT, $50 is a perfectly good price for them and Oct expiration is 3 weeks away.

    IYT/Concreata – Doesn’t matter what the prices are as long as the spread is $2.

    Wow, talk about a guy who just doesn’t get it:  Thomas Kostigen says France PM Sarkozy’s plan to monetize happiness by including it (.pdf) as one of the GDP indicators will just make us sad; money makes up "too much of how we value ourselves to begin with."  As I said when Cramer was attacking this new way to measure GDP, there will be more effort made to stop this from being adopted than there is about health care by the power elite of this country.

    MCO/Cap – Ridiculous run-ups bother me more than ridiculous sell-offs because I’m happy to buy at a bottom.  I’m not a big fan of shorting by comparison. 

    BAC/Aclend – Filled at .97 because I always wait until I publish to put in my order and it was a little late by then.  Was close enough in that case as we sold the calls already anyway.

    BAC/Morx – I’m not playing it that aggressively, it was just time to sell the puts, hopefully we’ll make $1 of $2 sold.

    GE/Kustomz – Remember the dancing jungle animals, that was on every single break for a year and was an early warning sign of a bad economy as GE ran their "filler" spots with no real customers in site.  Talk about a scam too, they pump ad cash from GE into CNBC, which raises the book value of the network which they book as an asset under GE and then they consolidate the earnings (no sales commission) back onto their balance sheets wiping out the expense – BRILLIANT!

    FSLR/Magret – They are up on possible G20 statement supporting renewable energy initiatevs.  I would go short on the next frenzy. 

    Volume is now just 122M aso nothing to speak of for the past hour.

    With 89 Yen to the dollar you have to be very brave going bullish into the weekend.  Nikkei finished at 10,265 and 10,200 is breakdown zone we’ve been watching.  BDI broke down and Shanghai and Hang Seng look iffy.  Also, don’t forget the German elections this weekend that could take Europe down.

    Today’s pump looks just like yesterdays, rejected after 60-point run at reisistance, not a good treand!

    GE/Kustomz – Don’t forget they report 10/16! 

  126. This is what that meathead on CNBC was talking about, how about doing another report but this one will only take one page on how fooked they are on their commercial loans HMMMM!!

    Bankrupt power trader Enron Corp. announced last month it would sell its California-based wind-turbine unit to General Electric Co.’s Power Systems division for an undisclosed amount. Enron Wind is the largest U.S. manufacturer of wind turbines, and was one of Enron’s largest remaining assets that could be used to pay creditors. Founded in 1981 as Zond Corp., it was acquired by Enron in 1997

  127. Phil : About 10 days ago,I bought YRCW for $4.10 ,(now $4.84) & sold Jan $5 calls for $1.06 (now $1.30 ) and sold Jan $2.50 puts for $.70 (now $.55 ) Since the stock is pledged against the calls, I can’t place a stop loss order.Is there a way that u know that I could place some form of synthetic stop loss so I can let the profits  ride  a while,but get out if it turns against me ? Thanks you.

  128. Just found the 23 page GE report on their website. 
    It’s Titled "How to Sitck your Nose so Far up some Corporations ASS and then Tell everybody about it on TV"
    There’s a Link with a graphic you click on. You can’t miss it has a Wall Streeter performing the Brown Nose Boogie on a GE Executive. 
    Wait is that Immelt?

  129.  Phil your right (of course).  I forgot about the quarterly’s.

  130. YRCW/Dflam – I’m assuming you simply can’t have a naked caller so it’s not an option.   Let’s say you have the stock at $4.10, now $4.80 and you sold the Jan $5 for $1.06, now $1.35 and you want to lock in your .70 gain.  You can buy the 2011 $10 calls for $1.10 and then put a stop on your stock at $4.75 (.10 trailing otherwise).  That would leave you covered with $2 leap with a delta of .7 against your Jan at $1.30 with a delta of .62 but a much worse theta.  That’s a bout it for a stock like that which is too small and too volatile with contract spreads that are too wide to make for good rolling. 

    Something good going on with C I think, their preferred are taking off as are other banks.   2011 $5/7.50 spreads are .52 and Jan $4/5 spread is .42.

  131. LOL chuckb

    Theres too big of a discrepancy here with the NAZ and the DOW….the NAZ either builds from here or the DOW ends the day down 50 at least.

  132. hello phil
    would you reconemd a spread for BAC, some thing like the C ones above ?

  133. Phil, Isn’t the SSO supposed to mirror the S&P and not the other way around?  That last plunge occurred in SSO a good 5 seconds BEFORE it registered in the index.  This is probably a dumb question but is it any easier to move the index by buying/selling SSO then it is using a basketfull of stocks?

  134. C wonder if that has anything to do with Singapore converting and selling their stake.

  135. Phil – Should we be net long or short over the weekend?  I assume short.

  136. Phil: is there a put on POT you  like to sell ?

  137. With Yen up 2% and at multi-month highs v/s us$, bought Oct $65 Puts (July lows). Plan to sell $80 Puts early next week as I do not mind owning TM for $68 or so – especially with a protective Put under it.

  138. BAC/Micro – With that one I think I’d do the 2011 $10/22.50s for $4 as its got a decent downside b/e at $14 and a nice possible $12.50 return on the spread (a 212% return).  You can play it safer and do 2 $10/15 spreads for $3 and that would pay 66% to the upsdide but a full win at $15, where you only make 25% on the other spread and a b/e $1 lower at $13

    SSO/Matt – I HOPE that SSO can’t move the S&P with their lousy 32M shares a day traded at $30 – that would be way too scary.  More to the point, the guy who made that trade needs to be taken in for questioning…

    Weekend/Grant – 55% short, very wimpy even though we may get a 200 point drop at the open. 

    POT/RMM – Plenty of time for that if the dollar ever turns around (it could happen).

  139. matt, I was reading a story yesterday about how lobbyists and congressional aides and congress were "exempt" from insider trading rules.  You can bet, for example, that guys like David Einhorn have all sorts of folks in DC on the payroll.  Its disgusting; part of our FUBAR system.

  140. MCO trying to rally a wee bit into the close; lets see if they can scramble some shorts.

  141. Phil – That is about as much conviction as I have, and am going to spend the weekend with 90% cash.  Randomly looking at daily bars today, I see too many read ones now into the close to long anything.  I also am not daring ehough to go short either (wimp).

  142. Everyone have a wonderful and safe weekend.

  143. Wheeee – what a great ride this week!

    I see 9,666 – I love numbers like that…   S&P blew it, NYSE blew it, Nas failed to hold 2,100, RUT failed to hold 600.  Tsk, tsk, tsk.

    Oil finishign right at $66, gold at $990 but the big deal is the dollar below 90 Yen and Japan won’t like that one bit on Monday as they test our 10,200 mark. 

    Have a very nice weekend everyone,

    - Phil

  144. Phil – Thanks.  Have a nice weekend.

  145. Copper futures have been hanging by a thread: they pulled back from the brink (brink = 270) today.
    Good week for me, hopefully for others too. HANWE.

  146. Phil / SSO : well, that answers my bigger question.  This system is so rigged for certain people it’s just not funny.  But I’m the fool who keeps trying to sneak a nut out of their greedy hands.  One of these days…
    Cap / Insider Trading Exemption:  See comment above.
    I had an absolutely lousy week.  I’m teetering on the edge.  Glad to hear some folks did better.  But I’d really be happy to hear if someone did worse!  Just kidding.  Have a good one.

  147. Phil – GLD – Sold short OCT 99 call yesterday for 50% profit, but did not close the long GLD JAN 105 call. Should I short NOV or DEC call or do something else. thanks

  148.  Phil,
    I need to park a lot of cash safely. And it would be nice if I could make a little something on it. Can you suggest something?

  149. Hang in there Matt; I’ve had weeks like that too … keep your head and you’ll bounce back.
    Have a good weekend.

  150. oldgoat, can I try?  You can buy SPY stock and buy SPY Dec’11 145 PUT for $148.85.  That is you are guaranteed to sell SPY (S&P 500) at $145 in 2 years and 3 months.  The insurance costs is $3.85 for 27 months.  However, SPY pays a $2.03 dividend per year, totaling $4.5 for the period, resulting in the cost basis of $144. 35, so you’d never loose on this spread.
    Now, we need to sell some shorter term PUTs and CALLs to earn more than CDs.   Selling Nov 90 PUT and 114 CALL gives us $1.25, which is 0.8% profit of the cost basis for every 2 months.  With the short strangles, we have a 14% downside cushion and 9% upside cushion.  There is no additional margin requirement as the short CALL are covered by the stock and short PUT are covered by the long stock.  There are adjustment that can be made if the market moves beyond the short strikes.  The max profit is 4.8% per year.  Well, not much more than CDs, but the money is protected by the long PUT, not by FDIC.
    To increase the profit, we just sell the short strangles without the stock and long PUT combination.  The margin requirement is 20% of the stock.  So the same Nov 90 short PUT and 114 short CALL only requires $23 in initial margin (20% of 114), which is only 16% of the $144.35 cost basis for the stock/long PUT.  So you can afford to sell 6x the number of contracts, but let’s be cautious and selling 3x contracts only.  That would give us 14.4% (3x 4.8%) profit per year, with only half of the money committed for most of the time.  The risk is to watch for big market crashes that we should stop out in the short PUT.
    Now, we can get fancy and sell 1x more contracts in short strangles and use them to buy long CALL or PUT verticals in the Jan’11 contracts in individual stocks that return 10x to 20x.  If 1/3 of these Hail Mary plays work out, then the 4.8% can becomes another 15%, increasing the potential profit to 29%.  With a bit of luck, 29% would usually beat many mutual funds most of the time.

  151.  Thanks Peter D, I’ll study it.

  152. Phil
    INFY- Can you share your assumptions on this trade. You wrote
    "INFY/M2 – How about the Nov $50/$45 put spread for $2.70?  Those are 100% in the money (b/e $47.30) now with an 85% upside if they fail $45"
    We will get $5 for the 50′s but what will we be paying to buy back the 45′s ?

  153. Hope everyone’s having a great weekend
    George Carlin RIP…warning explicit language…well it is George Carlin

    To give you guys an idea on why real estate is doing better than expected, Deutsche bank holds a note on a home i want to buy, 1.2 million they are asking 480 i wont pay that much and expect i will buy the home in the 300′s. The woman i work with says that FHA tax credit is used mainly as a down payment and most sales are at or below 250k
    and you need a fico of 620 which isn’t all that great but better than the 580 level they required a few months ago.

  154. chakra/INFY
    The spread you paid 2.70 for (buy Nov50P/sell Nov45P) will be worth $5 if INFY is below $45 – a $2.30 profit.

  155. Phil
    I dont know if I missed it, if not can you post some earnings plays that we could plan for this season. Thanks.

  156. I left something out the majority aren’t foreclosure sales but short sales, in other words these homes never went to foreclosure but the bank still takes a HUGE hit  :-)

  157. Kustomz
    The one I am buying is a foreclosure, ie already owned by the bank. You have to buy if "as is", so look out for tax liens and all kinds of other encumbrances. I’m offering half of what the bank has in it, and it looks like it will fly. The banks were real dumb when these loans were made, and even dunber when it comes to selling them. I can’t believe their incompetence!

  158. Edro
    Thanks! I wasnt even thinking.

  159. Peter D. – You wrote "There is no additional margin requirement as the short CALL are covered by the stock and short PUT are covered by the long stock."
    Should that read "There is no additional margin requirement as the short CALL are covered by the stock and short PUT are covered by the long PUT."
    Or am I missing something here?  Anyway, thanks for posting this – giving me some food for thought for the weekend!

  160. gel1, don’t be afraid to low ball em. I mean give them a ridiculous offer, you want to hear their response. I’m gathering information on a 110 apartment and 56 condo development that is bank owned. These guys hate owning real estate and are desperate to get properties off their books.

  161. Kustomz…. The next wave of non-performing loans will soon be the next headache for the banks, and they know it. The purchase opportunities will exist for some time, and the buyers for a lot of this stuff are very few as financing is still difficult. A great opportunity for those that have done their homework!

  162. gel1, this place (Florida) is a disaster the title lady I’m working with (shes owns the company) and the realtor are both behind on their mortgages for over 12 months (former million dollar homes)!!! I know funny isn’t it. I bought the house that i occupy at the moment for pennies on the dollar. I’m now looking at a new place with over 4 acres and 7k sq of living space. Its hard to find this type of property in Palm Beach county. Its a got to have kind of thing for me.

    You need to drown out the noise with Wall St. when it comes to realty, all this bull about the economy recovering is just another way to stabilize things and make you believe there is going to be a fast correction in the housing market which is total nonsense, i know of a few buyers that (over payed) are sitting on properties recently acquired thinking they will make a 30% return in 6 months, HOG WASH!!! They actually got bullish because of the stock market its sad to see there’s still dumb dumbs out there after all that’s happened.

    I’m on my way to NY to look at a property that caught my interest last year, the price dropped 60% in 11 months!

    Back to my Hookah!

  163. java, you are correct on  "There is no additional margin requirement as the short CALL are covered by the stock and short PUT are covered by the long PUT."  That’s what I was thinking.  I don’t know why the typing came out wrong!
    I also forgot to mention that with the long stock and long PUT and no short strangles, we’d be profitable if SPY is above $145 in 27 months.  This is a remote possibility, but worth mentioning as when we apply this scheme to individual stocks, some may be doubled in 2 years, meaning we’d have plenty of profit above the long PUT strike, while the downside is fully covered with zero loss.

  164. Kustomz… Great weekend laughter. It is hard to believe that the people who were so involved in making this monster of a bubble were blind to the compelling evidence that signaled an imminent bust. Oh well, stupidity by some creates opportunity for others. The properties I am targeting are all in California (Bay Area) and all are multi-million $ single family homes, as they took the biggest hit,  (the bigger they are, the further they fall) and have fewer buyers. I hate competition when chasing a property, as it sometimes clouds your better judgement. I follow a very strict formula and keep all emotion on the sidelines. The following criteria will determine my offer. 1. I first establish my financing options as my return on personal cash invested is the most important issue. 2. I calculate what I determine will be the selling price in 60 months. 3. I estimate the rental return currently applicable as this will mitigate the carrying costs. 4. I have to have a ROI (my cash) of 200% in the five year period. I then take this calculation and work backward to determine my maximum purchase price. And as always – location is EVERYTHING. I consider only areas that are sure to appreciate, and I spend a lot of time in this assessment. I’ve always been a real estate junkie, but have only dabbled and my activities in this area have just been a fun, profitable hobby. Off to the beach.