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Friday – The Fed Finally Supports the Dollar

The dollar rose against the Yen for the first time in 5 days and the most in 2 months this morning.

Bernanke finally came out of his stupor and said the Fed is ready to tighten monetary policy once the economy improves.  Once the economy improves?   Hasn't Ben been telling us how great everything is for the past 3 months???  The Dollar Index, which tracks the currency against six U.S. trading partners, recovered from a 14-month low after Bernanke signaled interest rates may rise when the economy “has improved sufficiently.” The yen dropped against all but three of the 16 most-traded currencies after Japan’s machinery orders gained less than forecast

People took the comments as an opportunity to take some money off the table before the weekend,” said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. “They came at an opportune time and allowed some people to get some profit out from bets against the dollar.”  

White House economic adviser Lawrence Summers repeated the administration’s commitment to a strong dollar, citing recent comments by U.S. Treasury Secretary Timothy Geithner.  “He made it very clear that our commitment is to a strong dollar based on strong fundamentals,” Summers said at a Bloomberg forum in New York.  

We've been talking dollars all week at PSW because it has been my opinion that there has been nothing supporting this rally, especially on the commodity side, other than dollar weakness and fears of further dollar weakness.  It's been a case of so far, so wrong though as our short plays have gotten hammered this week and I was thinking of opening this morning's post by saying:  "Hi, my name is Phil and I'm a shortaholic" because, try as I might, I have been unable to stop taking short positions all week.  Even yesterday, as we tested (but did not break) our upside target levels, I found myself putting up 8 bearish trade ideas for Members (DIA puts, FSLR puts, GLD puts, USO puts, EDZ calls, TBT calls, TZA calls, SRS calls) and just one bullish play, which was a DIA vertical spread to cover, just in case we got burned by today's open.

Fortunately, it doesn't look like I'll have to do a mea culpa this morning as FINALLY the dollar is finding some support at pretty much the exact same place we found support on 9/23, which was the beginning of our last 5% downtrend in the market.  We're not going to get too excited though and we'll try to balance out a bit into the weekend but at least a small bit of sanity is creeping back into the markets as people begin to realize that they can't count on the dollar to support $1,050 gold or $70 oil.  Now traders will have to scramble for fundamental arguments to support paying 50% over last October's price for gold and 100% over last October's price for oil in an economy that has not really gotten any stronger at all since that time. 

Not getting much coverage in the US media is the move I predicted earlier this week – the Asian Central Banks are intervening in the currency markets to stem the appreciation of their currencies against the dollar.  The central banks identified by traders as substantial buyers of US dollars included Thailand, Malaysia and Taiwan. Hong Kong and Singapore, which both have managed currency regimes, were also buyers.  Traders said that the central bank interventions appeared to be aimed at controlling the pace at which the US dollar declines rather than solely to stop Asian currencies appreciating.  Simon Derrick, at Bank of New York Mellon in London, said: “Other Asian central banks outside China are naturally looking to aggressively defend their competitive edge against undesirable currency strength as the dollar weakens.”

The Nikkei was certainly pleased with this action and that index rose 1.9% this morning, back just over 10,000 (10,200 is recovery) despite a poor showing from August machine orders as exporters were greatly relieved to see the dollar back over 89 Yen.  Shanghai came back from their week off and popped right up to the 5% rule but that was to be expected after a week off.  The Hang Seng was not playing catch-up and flatlined while the BSE lost 1.2% and is now down 3.2% for the month.  The Baltic Dry Index is kicking back up strongly off the bottom but our Trade figures were not all that encouraging but are rebounding somewhat and our own Trade Deficit was $30.7Bn as our exports increased 0.2% and imports decreased 0.6% – yet another indicator of lack of US demand

[Trade photo and chart]

Despite the lack of actual demand in the inventory reports, the retail sales number or the import data, the IEA raised their forecast for oil by 200Kbd to 84.6Mbd, less than 7Mbd under global production capacity.  Interestingly, despite this "good news" for the oil industry, British fund manager Neil Woodford sold his stakes in BP (BP) and Shell (RDS.A); the positions totaled 8% of his $28.8Bn funds. It's "getting increasingly expensive to find new oil and gas reserves, and when you look at the cash-flow dynamics, you see that at the sort of oil prices we are now seeing, both Shell and BP fail to generate enough cash to cover both their capital expenditure and their dividends," he said.  I'm going to go with the guy managing $28Bn and stay short on OIH and the majors…

Europe is down slightly just ahead of our open, recovering from a half-point dip in early trading.  "After recovering strongly, markets might appear to be losing some of their momentum. Nevertheless, we expect equity markets to remain in a generally positive mood," said an equity note from Erste Group.  Among the European blue-chips, Telefonica was the biggest gainer, up 2.2% after the company raised its dividend for next year.

We're bearish but well-hedged but ready to get more bearish if we get a proper breakdown.   As always in this crazy market, we take our bear-side profits quickly off the table because they sure don't seem to last long.  Our upside breakout levels remain Dow 9,829, S&P 1,071, Nas 2,146,  NYSE 7,047 and RUT 620 and we tested but did not break them yesterday – which is why we ended up with so many bearish bets.  Our aim is to go neutral into the weekend, we're not expecting a cliff dive and Monday is a holiday and should have slow trading, which usually means an up day

Have a great weekend,

- Phil


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  1. I notice the dollar is back to where it was the other day; so if the market was tied tightly to the dollar; we should be about 75 points lower than this.   FWIW.
    Phil; thanks for the comment last night; I responded there.

  2. Obama wins Nobel Peace Prize !   As so aptly pointed out by SNL, with such vast accomplishes, how could anyone be surprised ?  LOL.

  3. Nobel/Cap – It’s been a questionable prize for a while but when Al Gore won it, it became a complete farce.

  4. Good morning! 

    Detailed discussion of strangles and rolling at the end of yesterday’s post if anyone is interested.

    Nobel – I think there weren’t too many good candidates this year and the prize is often used to make a political statement and this is more a slap in the face to Bush than a real prize for Obama.  What’s really silly about it is that the nominations for the prize were due about 2 weeks after Obama was sworn in.  I suppose the US President is always nominated but even I, who is very happy with Obama, think this award is a bit premature.  Ironically, the prize is being awarded on the same day we begin bombing the moon….

  5. Carl Icahn on CNBC:  short REITs
    should be good for SRS today ?

  6. Everyone knows Nobel devalued and politicized their award long ago.  Its not Obama’s fault he won; perhaps he will do something someday to deserve it.  The whole thing is silly.
    Baidu getting major pre market pump on price target upgrade … I think this will get sold into (and the PT upgrade was probably released to clients earlier in the week, as the thing already ran 50 points in 3 days.

  7. I think we are going to see some relentless upgrading into option expiration week as "They" try to break the market out higher.

  8. AA now back to pre-earning price

  9. ERY Nov $12s at $1.75.

  10. OK, we’re still watching the tops of Dow 9,829, S&P 1,071, Nas 2,146,  NYSE 7,047 and RUT 620 – bears should freak out if ANY of these get crossed today.

    There is no downside targeting at the moment, we’ll just be looking to get back to Wednesday’s levels (around Dow 9,700, S&P 1,055), which is down around a point from here and, below that, we’re looking at the 1.25% and then 2.5% rules.  I doubt we fall more than 2.5% on a Friday though but, if we do, then we’d look for downside follow-through on Monday as it will freak out the international markets, who are more overbought than we are. 

    My pick on the ERY Nov $12s at $1.75 was because we had a silly $1 spike in oil right into the open that was pure BS and, without it, ERY would have been up .50 at least and I expect that we will get there.  Also, David made DUG an Oxen pick this morning so I like the fact that we’re both seeing it

    No change in status on our covers yet, we still could go higher and retest the highs as the volume is very low this morning so far. 

  11. BIDU/Cap – The bagholders are assembling.  5% China bump today helps too.  Also, good GM China news:

    GM’s China sales surpassed expectations, hitting a monthly record of 181,148 units in September, helped by a government stimulus package.

    This is interesting too:

    Canada reports a surprising net job gains of 30,600 in Sept., compared with the consensus forecast of a 5,000 increase. The jobless rate fell to 8.4%, down for the first time since July 2008.

    How can they be off by 500% in their forecast?  Is it really possible to be that clueless?  Don’t forget Canada is like Australia, with a small number of people to support and plenty of commodities to export.  That is a really amazing number, it means about 1.5% of the populattion got a job last month.  Of course, you have to actually read the article to get to this part, which kind of changes the tone:

    However, Statscan said the net employment gains in September were all in the public sector while private sector employment actually lost 17,100 jobs, suggesting big private-sector losses outside manufacturing and construction.  

  12. Damn, RIMM is coming back strong.

  13. Bombing the Moon- I have been warning about this for years. If this goes forward I fear the Moonmen will undoubtedly organize clandestine terrorist groups which will flood the earth through out porous celestial borders seeking free health care and destruction of US infrastructure. Poets have long recongnized the powerfull effects of moonbeams have upon men’s souls. This is a catastophe in the making! On the plus side, this will give the UN something more productive to work on. :)

  14. This is a new trick – Dollar up AND stocks up.  I have been tracking total NYSE volume on TOS for about a month now, and today is the lowest thus far.

  15. AND oil up.

  16. Re. Canada: 30,000 jobs gained is about 0.09% of the population. BTW, loonie was at almost 96c yesterday.

  17. Thanks to Uncle Ben, our TBT short PUT are making money in anticipation of interest rate rise.

  18. Phil - FAS/FAZ
    Since they " fixed " the problem of corrolation, is there an advantage to short the short vs going long the long, no options, just shorting FAZ vs buying FAS ? ( Or visaversa )

  19. Good morning Phil shall we sell a Dec or Jan put on OIH?

  20. DUG at $13.36, selling Nov $13 puts and calls for $2 nets $11.36/12.18, 14.4% if called away is not a bad way to play.

    DB raised their Semi outlook for 2009, jumping SOX 1.5%, there’s our sudden rally.  Also oil jacked up to $72 again despite the dollar holding up at $1.59 to the Pound, 1.473 for the Europ and 89.45 Yen at the moment.  Copper is back down to $2.85 off $2.90 yesterday and silver is down to $17.25 from $17.85 yesterday.  Gold is still $1,050 but that silver number should have goldies spooked if it doesn’t pick up soon. 

    As usual, I’m short oil at $72 in the futures, the play is short at $72, DD at $72.50, out at $72.75, looking for $71.25 with a .15 trailing stop at $71.75 that grows to .25 trailing stop at $71.50

    Moon/Pstas – Absolutely, this is an outrage.  Even if we accomplish our mission, are we really prepared for nation-building on the moon.  I would think Obama would remember the "Potter Barn Rule" by now!

    Volume/SS – Really in vacation mode already.  A lot of people taking long weekends.

    JOLT Survey: Job openings were little changed at 2.4M in August, now down 50% from the July 2007 peak. Hires were also unchanged at a low 3.1%. There are now 6.3 unemployed people for each job opening.

    I guess we should all be emigrating to Canada…  8-)

    URE at $5.80 can be played up with a stop at $5.69 to protect against a real BS move higher.

  21. anything to do on SRS /  FAZ  /  EDZ  ?

  22.  Phil, Is it possible to select options based just on the deltas??

  23. VZ now at first level of support.  Watch carefully, but the 29 Nov P are 1.02.  I think they will break through on a pullback, so 28 Nov P for 80c or better and potential enter there, or buy outright and just sit and wait.  Low for the yr is 23.07, but that was a freakish dip, really it is ~ 25.5ish.

  24. Peter D
    Did your AAPL Nov Long 180put – and shorted the 175p and 155p. Couldn’t get $2 for the 220 call. Working out well as an aapl short. Any possible adjustments here?.

  25. pstas, balancenv & Phil – continuation of short strangle discussion from yesterday’s post:
    Phil, your explanation was deep!  Thanks for the tips, which I think reserves for the pros who have the nerves to hold on.
    pstas, Current SPX strikes are Nov 920, 930 and 940 short PUTs (not wanting to go 950 yet for fear of a big pull back).  The short CALLs are at 1140, 1150 and 1160.  SPX has support at around 1000 and I would imagine that 1100 would be some sort of resistance.  If SPX doesn’t break the Sep high of 1080, I’m ready to roll down the short CALLs, since by that time, there is less than 3-4 weeks for SPX to try for another breakout.
    balancenv, nice job on the Theta comparison.  That’s a faster way to answer it.  I think Phil answered the other question on the guideline for rolling.  The key is to realize there are emotions involved when the paper loss gets larger and larger, so for beginner I’d say roll when the short strike is breached and hold for a day.  This is especially true in the Expiration week, as the shorter term Callers would have very high Delta that kills us, rolling to next month can reduce the Delta and lower the damage caused by the move in the wrong direction.  Then you can roll the Callers up (in the same month) on a dip.  For example, if RUT is at 630 next week, and we have the Oct 620 Callers, then roll to Nov 620 Callers.  If and when RUT dip back to 610 in the future, quickly roll it to Nov 640 callers, which was the intended roll, but you’d get more credit with this move.  This is a high percentage play as our October Caller was has a big OTM cushion and rallies tends to have pull back.
    So find a scheme that can support your trading experience and emotion, and stick to it for a while until you are more comfortable with market moves.

  26. Canada/Raulsm – OK, I should have specified working age population.  Meanwhile, if you’re up there, a case of Brodeur’s would make an excellent holiday gift for me!  8-)

    TBT/Peter – ROFL, up 5% since yesterdy’s bottom already!  I love it when a plan comes together….

    FAZ/JRW – I prefer to play the FAZ long as a 10% gain in the financials will send FAZ down from $20 to $14, which is something you can recover from but if you short FAS and the financials gain 10%, you will get a $25 pop in your face.  Also, with the intense premiums on the ultra, you can hedge FAZ with the Nov $19 calls at $2.90 and $18 puts at $1.65 for a net $15.20/16.60 entry so our $14 drop (30%) won’t really kill us.  You can’t cover FAS like that. 

    OIH/Yodi – I’m not clear on that, why would I SELL an OIH put? 

    DMan plays – Nothing really.  We’re in the same position as yesterday – just seeing if they can actually get a break up on low volume, which I doubt.  I like the same entries today that I liked yesterday for the same reasons – we’re not very far from our breakouts where we can stop out or cover with fairly little damage (especially if you use our DIA hedge) so it’s worth risking some naked entries here until we are forced to capitulate on easily identified levels.

    Speaking of risk – if you don’t like an October positioin enough to roll it to November (one that you own, not sold) then get out of it.   Holding an October contract into expiration week is nuts unless it is specifically a momentum trade that you are very comfortable with

    Deltas/OldG – It depends on what strategy you’re employing.  There is something called delta-neutral trading where selecting by deltas is pretty much all you do…

    10:30 volume is 33M, LAME!

    VZ/Pharm – Sweet discount down here! 

  27. Cap: I agree with your BIDU comment 9:09. I have been covering my BIDU puts and reduced the pain, BIDU’s run up has been impressive, I still expect a retreat though.

  28. Analysis of Treasury Dept. data show new mortgage modifications fell in September. The agency Thursday said loan modifications rose to 487,081 by the end of September, but those are cumulative figures.

    U.K. Treasury wants to know why Royal Bank of Scotland (RBS) and Lloyds (LYG) aren’t lending to small companies, which seems reasonable considering the govt.’s £37B bailout of the pair. The banks claim clients, trying to reduce debt levels, aren’t borrowing.

    Sector ETF strength early on: Healthcare Providers– IHF +1.8%. Semis– IGW +1.8%. Semis– SMH +1.7%. Regional Banks– KRE +1.5% Heating Oil– UHN +1.4%. Homebuilders– XHB +1.3%. Weakness: Telecom– IYZ -0.7%. Silver– SLV -0.7%. Gold– GLD -0.7%.

    BIDU $430s can be sold naked for $7.20 or covered with $460s at $1.25 to cut margin.  This is not so much about counting BIDU out from hitting $436 next week as it is them not hiitting $490 by November as the Nov $490s are an even roll at $7.30 and THAT’s a risk I’m willing to take.

  29. Short strangles- here is an interesting tome on RUT option expiration issues. I don’t get how there can be that much movement in the final settlement price (sounds like a Chicago election- "let’s see how many votes we need then we can fill out the ballots")
    But the moral of the story seems to be that if close at expiration, get out or roll.

  30. Hey drum, that play works out well.  Looks like AAPL is higher now than when that play started, but the 220 CALL value is less.  My suggestion is to wait and not sell the Callers as AAPL may jump on earning.  If that is true, you may be able to sell a higher strike caller into the excitement for more credit.

  31.  Phil, What do you think of delta neutral trading? Should all buys have good deltas, for eg, .52 rather than .38?

  32. URE rejected at $5.90, done at $5.86 – a nickel is a nickel…

  33. sorry  Phil buy OIH

  34. How can Obama bomb the moon and still dither around his "good and necessary war" in Afghan ?!  LOL

  35. Let’s go to Canada !  I hear they got some of dem gubinment jobs there !

  36. Dang, I am pro-moon!  Stop bombing the moon !  Bring the troops home !  Did someone tell Biden that there is Al Qaeda on the moon ?

  37. RMM ..  stop the presses my man ! (for agreeing w/ me).
    Remember, what do I know ?  But yes its overdone big time.  SHOULD retrace.  The problem with this type of stock is the momo traders go wild chasing breakouts.  But once that ends; look out below.  Would have happened today I think if not for this "news".
    Meanwhile, the Oct 430 call I sold the other day — I am only down $1.50 on it, so I will wait out the decay (I hope).

  38. Phil:
    If you’ve got long positions to protect with mattresses, an issue is how many DIA longs to buy. Is "the generally accepted"method as follows? Assume you’re going long on the Jan 99s. You want to be able to cover a 5% drop in the Dow (say 500 points.) That means you want to be able to roll your putters even into Jan 94s (spread of 5). Look to the front month (Nov, Oct is passing) that allows you to roll even to the Jan 94s. That would be the Nov 98s. Assume you do full covers on the Nov 98s. Your net cost (longs minus cover premiums) is then about $2.77, meaning a profit of $2.23 ($223 per contract) in January on the Jan 99/94 bear spread. If you estimate that a 5% drop on the Dow costs you $30,000 that you’re trying to cover, the number of contracts required is $30,000/$223.
    I understand that in theory you could choose any method that makes you comfortable. But if we want to follow your mattress covers, we can’t be arbitrary in how we determine the number of longs; we have to have a method that’s consistent with what you’re doing.

  39. I missed that 10:15 spike down in SRS … looking to get in long.

  40. Did you guys look at your 401k statement for the quarter ending 9/30.  That must be a worry for the bear as my account nearly recouping the loss since 2008, meaning people could feel compel to put more money into the market.  This balance catch up may not true for you, depending on when you started the 401k contribution.   On the other hand, the contrarians may find that the current run is close to the top if there is extraordinary exuberance!

  41. Names I would like to see start to drop:

  42. Ok, taking a shot at SRS long here.
    Carl Icahn said to short Real Estate …
    In at 9.68

  43. HAL 9000 is full bore on propping this market up on a low volume day.

  44. Morning Phil I am worried about the PARD spread we took a while back: buy PARD 7.75 sell Dec 5 calls and puts for 4.40/1.75  now the stock is 6.77 and the Dec calls and puts are 3.40/1.75. there is tones of activity on the put side with PARD, is the activity strange enough to scuttle the spread even and get out ? or the spread is safe enough to stick it out, which i think it is, but things are strange and i wanted to see what your feeling is.

  45. cap, how about sell SRS nov 9 puts for .75?  low for srs is 8.5 range.

  46. Cap,
    Hey , would you please add aapl to your ‘want to drop’ list as a favor to those guys who are lomg in it and want to see it break upwards from the 52 week highs.
    btw what did you think of that ‘conservitive’ 100 point uphrade to bidu??

  47. phil,
    cnbc pisano is right on possible trouble on a dow double top and someone seems to be trying to force it to happan!!

  48. Going to get an Obama bump here

  49. Delta neutral/OldG – Too tedious to me although I suppose I am delta-neutral anyway as I balance the portfolio.  I prefer to look to win every trade and some trades I want a high delta (like the ERYs this morning or URE mo play) and some trades I want a low delta (like the DIA covers) depending on what I think will happen during the contract period. 

    According to the Fed’s latest figures, bank loans to business are shrinking at a yearly pace of 28%. "The question is whether the decline in lending will be reversed soon.Remind me why we gave them $1.3Tn of taxpayer money again?

    The decline in bank lending mostly affects smaller businesses. Larger corporations have alternative sources of funding, including retained earnings, corporate bonds, securitized loans and new equity. Those other sources of capital have increased in recent months, but not enough to offset the decline in bank lending.

    In the first and second quarters, the U.S. private sector consumed more capital than it raised for the first time in more than 60 years. Negative net investment is "the hallmark of depression and difficult to reverse," said economist Leigh Skene of Lombard Street Research.

    The big drop in credit also shows up as slower money growth. In the past 13 weeks, the money supply has fallen 0.3%. Most new money is created by borrowing, as banks credit the borrower’s account with the proceeds of a loan. Conversely, the money supply is reduced when debts are paid off or written off. Deflation is not a threat — it’s already here.

    OIH/Yodi – OK, that’s better then!  I like the Jan $115 puts at $6.50, selling the Nov $120 puts, now $5.15, for no less than $4.75 (if OIH over $123.50 I think).  That puts you in a very reasonable spread or otherwise naked through earnings where any miss or poor outlook from the group can give you a very nice gain.  If at any point you can get $4 or more for the Nov $110 puts (now $2.30) then absolutely take that for a great spread

    Bombing the moon/Cap – I head that Obama had intel from a guy who knows a guy who used to work in an embassy near the moon that there were WMD’s up there so this first stike is fully justified..

    Mattress/Chaps – Wow, if a 5% drop in the Dow is going to cost you $30K, you are pretty bullish!  Ether that or you’ve got a high six-figure portfolio I hope.  In either case, don’t try to cover 100% of the drop.  How worried are you?  100%?  75%? 50%.  You don’t want to paint yourself into a no-win corner (except for when you are purposely putting on the breaks like over a weekend).  Generally, just like any insurance, you want to mitigate your damages, not spend so much that you win when you lose (only Goldman is allowed to get those deals).  Better to assume $20K of the spread is adequate and you’ve still got $10K on the side to roll the putters or add more long puts etc on the way down.

    11 am volume 42M – 50M is a normal Bot day’s trading.   Obama holding up the markets I think so watch when he’s done although, of course, he does tend to push us higher and we’re still within striking distance of a breakout. 

    Speaking of Bots:

    The Fed is reportedly setting its plans to drain record amounts of cash from the financial system by accessing funds through third-party clearing banks in order to enable reverse repurchase agreements. The central bank faces a challenge in conducting reverse repos without constraining the capital of the 18 primary dealers who would normally be sole counterparties to the transactions.

    Good dollar article and chart:

  50. SRS 2-day chart looking good for an up move; particularly if overall market pulls back some.

  51. jomama;  could be a good play …. but 5 weeks is a long way to wait and the darn thing will deteriorate with back and forth action.

  52. Out SRS … gotta take the quick profit; will re-enter if it drops.

  53. Oh no, now the CDC says all 50 states have swine flue and 39 states are in epidemic already!   How the hell did that sneak back up from no news at all since we last discussed it?   RAD at $1.57 is a fun way to play, looking for $1.90.

  54. Phil:
    The $30K was totally arbitrary….lol

  55. Canada jobs
    The deficit was the result of a 5.1 percent drop in exports to C$29.22 billion and a 2.8 percent decrease in imports to C$31.20 billion. Analysts had expected exports of C$31.03 billion and imports of C$32.16 billion.
    Exports fell in all sectors in August, dragged down by machinery and equipment sales and specifically by exports of aircraft and telecommunications equipment.

  56. Dear Phil
    Did a buy write on SPPI in August at $7. Have Oct 7.5 puts at .95. Where do you think is the best roll out ?

  57. Highlander; I don’t place much interest in analyst price target moves.  They were at 380; the stock was at 415.  So if they were bullish on it; it makes sense to up the price target.  Beyond that who knows.

  58. Oh Boy !…Carter won the prize, and he did WONDERFUL things for the economy while President - Does this mean Obama will also do the same wonderful things? This is what can happen when peanut farmers and community organizers become world class economists overnight, with no formal training. They also share a similar expertise – total confusion over what needs to be done in Iran. End of editorial.

  59. Peace prize just adds to Obama’s right to take any action necessary to keep the peace and I’m sure that includes bombing Iran for the greater good

  60. Phil – SKF – need to roll Long OCT $24 calls, now worth 90cent (down 3.00). I was thinking of getting into vertical for JAN to at least break even?

  61. I like Obama and all but this Nobel prize thing is just ridiculous. He should perform another historical first and decline the award…

  62. Short OIH 120 straddles and SPY 108/105 strangles this morning. Betting on further drift, but I will buy out the call side on a push over 1070, since that would probably lead to short covering.

  63. The truth is, that O got good intel from the CIA that there was an alien enemy base camp on the moon from the N-072-Omega galaxy, so this was a good and necessary pre-emptive strike.

  64. Kwan … good point.  Even Obama in his speech basically said "who, me ?".
    Nobel committee really jumped the shark on this one ….
    Hey, but it comes w/ a big check …

  65. Dollar: Phil, I read that article on the dollar last night. How would you play that? I noticed the March 20 or 21 calls for UUP have little extrinsic value in them so not much theta at all.

  66. Cap, the kool aid is everywhere….no back to trading.

  67. MOON- this could  spin out of control quickly. Why, the moonmen could embargo the next full moon and with Halloween just around the corner, then what? Terrible consequence. Halloween could be cancelled and then I would have no good excuse to stock up on Snickers bars ("It’s for the kids , honey").
    We need to appoint a Special Ambassador to The Moon post haste. I wonder if Jerry Brown is still around? (remember Gov.Moonbeam?) or maybe we could resurect Ralph Kramden ("to da moon, Alice"). Come to think of it , we could appoint Geitner or Bernake or any White House/Congressional staffer- they all can relate to things that stretch to the moon (deficits).

  68. Yes I am in Canada Phil. Just for the record, population aged between 20 and 64 is 21M. 30k of this is 0.14%.

  69.  Pharmboy – What is your take on SPPI with regards to Fusilev and the FDA?

  70. PARD/Micro – These biotechs are crazy-assed gambles at the best of times.  PARD is going to go up and down based on rumors of study results and if you are not willing and able to see PARD go down to $2 and up to $12 while you wait for Dec expirations, get out even if you can.   When we were long on DNDN (who WERE victorious in the end) in 2007, they were driven down to about $4 from $10 before they went up to $20 and then over the next 2 years they went down to $2 just days before heading up over $20 to stay.  There is no funamental factor you can cling to on these trades – Cramer’s hatchet men print good or bad articles whenever his fund buddies need a push one way or another and all it takes is a few thousand Cramerites to buy or sell $5,000 worth of PARD and that’s 3 days of normal trading ($1.2M is normal) jammed through in a day.  Picking biotech stocks is about sticking it out to the end game but, of course, when you do get a silly spike, like DNDN in 2007, you just take the money and run as it’s very likely you’ll get another chance before the final approvals.

    OK, my new plan for a market recovery is just to have Obama come on every morning around 11.  He could probably do shadow puppets and the market would jump…  Maybe we can get Bush to come back and say something whenever we need the markets to sell off again! 

    Double Top/High – Ah, but are they trying to force a double top or a breakout?

    URE back down to $5.80 again but failed it.  I’m back in if they cross up again but I doubt it

  71. Phil/Moon  I think that might have come from my sisters fathers brothers mothers sons daughters brother who worked at the post office next to the Moon Embassy.  Old  news…..

  72. Time again for OpEx Hail Mary plays, I love these.  Got some TIBX OCT 10 calls for .15, the thing is parabolic, watch me stop it!

  73. cap,
    this whole moon shot thing was a gw plan carryover and it just fell through the o’bama administration and everone knows gw is not from this planet or texas even!! he was just pis*** at some other alian base up there!!

  74. Phil, question here , do you mean buying the Jan 115 puts and selling thhe NOv. 120 puts?  so in the trade for $6.50 – 5.00 or so for $1.50 debit and you are in the upside down sp read of 5 points 120-115 exposure, for $1.50, not clear on this…
    OIH/Yodi – OK, that’s better then!  I like the Jan $115 puts at $6.50, selling the Nov $120 puts, now $5.15, for no less than $4.75 (if OIH over $123.50 I think).  That puts you in a very reasonable spread or otherwise naked through earnings where any miss or poor outlook from the group can give you a very nice gain.  If at any point you can get $4 or more for the Nov $110 puts (now $2.30) then absolutely take that for a great spread.
    Also, how about on SRS, selling both the Nov. 10  calls and puts bringing in 2.25 credit, with SRS at 9.82.  does this make sense?  and then if the stock drops you can buy it cheaper, and if exercised on the puts, you own it even cheaper….

  75. Phil i like CAT but think the price around 55 is a good time to get bearish on the stock with earnings on the 20th, how would you play this?

    Cat continues to layoff employees and will raise prices on equipment for 2010

    “Many of our plants around the world are conducting what we call rolling layoffs and/or rolling shutdowns, which are the short, one or sometimes two week defined periods when a plant or portion of a plant is idled,” Dugan said. “We typically do this in order to reduce the need for permanent layoffs.”

    Also, he said, these decisions are made to “manage production levels in line with demand.”

    Caterpillar anticipates global economic growth of 2.2% growth in 2010, following a forecast decline of 2.2% in global gross domestic product in 2009. Demand for construction equipment has fallen sharply this year, prompting Caterpillar to lay off tens of thousands of workers and idle assembly plants to lower its fixed costs.
    But material costs, particularly for steel, have remained stubbornly high compared with previous global economic downturns. By raising prices on machinery Caterpillar will be able to offset rising material costs without eroding profit.

  76. HAL’s program T-12 minites and counting.

  77. they are trying to hold back the indexes by holding aapl, goog, etc  back. same spread developing as yesterday. lets see if it hold thru the close as it id yesterday?

  78. Moon – I know this is all in fun, but does anyone feel that G.S. is hard at work, looking for ways to profit from the "Attack"  ;)

  79. I have swine flu right now…not that bad though it makes you feel like a little league team broke out their Eastons on you. I guess I can skip my dose of the vaccine.

  80. SPPI/Dia – as with any FDA review, some see it one way, others another.   At this point it is too hard to tell.  The drug is already approved, so it shouldn’t hurt current revenues.  They were looking for line extension in colo-rectal cancer.  They have some support around here, but not sure what you have.  If you have the stock, I would cover a bit more and wait for things to settle down.  5 Nov can be used as a cover 3/4 .  If they start up, then you can sell the same 5 puts to help pay for the roll to 7.5 Jan.

  81. Phil/Cat   Do you feel that Cat raised their prices to take advantage of the weak dollar? Whats 2% ?

  82. CXT oink oink ;-) get well soon

  83. SPPI/Drum – If it were me, and I am not sure what else you have around them, I would roll out even to 7.5 Nov P and sell the 7.5 Nov C to help reduce the pain…..

  84. SPPI/Drum – Make that clearer, roll to same strike, take a credit on the 7.5 Nov P for 20c….

  85. Arbitrary/Chaps – That’s fine but same concept applies no matter what.  You just need to assess your risk and then decide what 100% coverage would be and then decide how worried you really are.

    Canada/Kustomz – That goes with that other data, jobs mainly due to government, not real business activity.

    SPPI/Drum – I don’t know how bad that news is for them but it seems to me there’s little ownership premise at the moment so you’ll be lucky to hold the 200 dma at $4.15.  I assume you’re in for about $5.50/6.50 so I’d sell the Feb $5s for $1.10 while you can and roll the $2.40 $7.50 puts to 2x the Feb $5 puts at .90 so you pick up net .70 and your basis drops to $4.80/5 (but 3x if put to you at $5).  You can put a $1.50 stop on 1/2 the calls or just buy another round of stock over $5.50 or you can buy the 2011 $5 calls, now $1.75 if they break back up on you. 

    SKF/Concreata – This is why 20% stops (or action at least) can save you money.  I agree with the veritical idea, no sense in spending much more when you can move to the Jan $21/25 spread for $2, which puts you $3 in the money on the $4 spread for an extra buck. 

    Rates are going up fast!

    Dollar/Allen - I’m really happy with the TBTs.  Dollars get more valuable and you have to pay up to borrow them too.   UUP is a fun play and you can go with the Dec $22/23 spread for .55.

    Brown/Pstas – That was a good one!  I wish you hadn’t explained it as I would have gotten it about an hour from now… Frank Zappas daughter should have a say in any lunar policies too…

    30K/Raulism – Oh, the decimal thing!  That’s totally different.  I did know that it was 20M, not 2M.  I blame Obama and his crazy energy policy for my poorly functioning solar calculator (right Cap?).

  86. Moon – why don’t we just hire Sir Roger Moore as the Special Ambassador? He’s been there before with that whole Moonraker experience he partook in back in the day. Surely he can provide us some tactical advantage.

  87. China the manufacturing engine of the world, is this a sign?  Americans becoming Atheists
    They even make the Christmas trees that are exported to America’s K-Marts, Wal-Marts and a dozen other retail chains.
    But this year the Christmas forecast is looking a bit bleak. Orders for American retail stores are down 50 percent. The Wong’s Christmas tree factory is churning at two-thirds instead of full speed.
    The entire Chinese town of Yi Wu is feeling the Christmas pinch. The mile-long town is home to the biggest small commodities trade market in the world, but the whole area is feeling a hampered Christmas spirit.
    "We’re not thinking about making profits this year just try ing to keep our business going," Wong said.
    The largest factories report sales slumping sales down 30 percent. And in a town known by many as the Wall Street of counterfeiting, even knock-off watches are on sale.,2933,563082,00.html

  88.  This market is really confusing..!!!
    Techs say way overbought,
    Rates going up,
    DXY at HOD,
    Oil down,
    AND the market still holding up!!

  89. Thanks and understood on PARD.

  90. where, to add drama to the confusion, some monthly charts are starting to coil up nicely for a big move (IYR, USO, e.g.).

  91. cap,
    if andrew hall doe not get his $100m bonas, it will be an outrage!! why should a man who owns a 1000 year old castle in Germany and collects nazi atrocity art be compromised by a blatant socialist like o’bama? where in the hell are the principles that made this country great?

  92. OIH/Dman – Yes buying the Jan $115 puts and selling the Nov $120 puts IF OIH went higher and triggered the sale but it looks like that’s not necessary as the Nov $120 puts are now $5.55.  On SRS, you keep asking about naked short strangles on 3x ultras and I keep telling you they are dangerous so what do you want me to say?  If you don’t mind owning them then man up and buy it so you have a buy/write.  You can do the naked strangle with, say, a half buy on the ETF and stop out at $9.50 and double up (to a full buy/write) at $10.50 – that’s not too risky.  

    CAT/Kustomz – I don’t think I’d short them with the dollar so low last Q.  They could have picked up a ton of contracts as other governments plowed money into infrastructure.  Those layoffs etc didn’t hurt them last Q, when they jumped from $30 to over $40 on earnings.  I’m not long but I think they are simply a "stay away" as they are still 60% below the highs.  That being said, earnings are on the 20th so after expiration and you can sell the $52.50s for $1.42 naked and those should roll to the Nov $60s if you have to (as they should hold value due to earnings) so a quick pickup of $1.42 for next week very possibly.  Because of low long premiums vs current price you can also backspread them by selling the Nov $55s for $2.30 and buying the May $65 for $2.64.  If they head higher, you would have to DD on the Mays and roll the Nov to 2x the Jan $60s and hope for the best. 

    Whitney Tilson’s chart calling housing stabilization "the mother of all head fakes" (.pdf) has Felix Salmon skeptical of claims from FHA’s David Stevens that the agency won’t need bailing out: "We’ve seen this movie before; we know how it ends. There’s going to be an FHA bailout, and it’s going to be big."

    Icahn on CNBC this morning: We’re at a precipice – it could go either way from here. (video, 6min.)

    Woo-hoo – Jackpot on oil!!!  $71 without stopping out!!!!

    Flu/CXT – Hey that sucks!  Please let us know how that goes (how long, how bad) as we need lab rats to try to guage the overall impact.  I’m going for the inhaled vaccine this weekend.

    CAT/1020 – CAT is a virtual cartel as they control a huge percentag of global equipment so if they stop making it, they create a shortage.  Last Q they made $371M on $8Bn in sales so a 2% rise in prices (which don’t incur new costs) drops $160M to the bottom line (less taxes).  That’s very significant and can take their EPS from .50 per Q to .75+ without even rebounding sales.  Also possibly bullish for CAT is more than 50% international sales may be paid in foreign currency which could give them a huge conversion bonus.

  93. I gotta say, I love the fact that you can have a week with some spectacularly crappy trades (like me selling FSLR calls earlier this week, then bailing out at the worst time), yet nonetheless have the slow, steady drip of premium collection put you well ahead by the end. I don’t think life is so easy for those poor stock trader dudes.

  94. Kustomz I gotta mention the bullish side of the rolling plant closures for CAT. I think this means management is forecasting a pickup in demand over the course of 2+ quarters. Otherwise it would likely be cheaper to lay the workers off and rehire them later.

  95. Phil With reference to yesterday’s GLD advice reproduced below……
    GLD/Magret – Ah but you did not get out at $101 as recommended.  That’s OK, I didn’t either..   Like the FCX adjustment for Japar above, once you are behind you try to get even, not ahead.  Step 1 is we can get paid $1 for selling the Oct $93 puts and that pays for a roll from the Nov $101 puts to the Nov $103 puts right there.  Those Oct $103s can then be rolled down to the Nove $99 puts if things do turn our way and we’ll be thrilled with that..
    Do you think it’s time to roll the Oct 103 to the Nov 99…….

  96. EricL –  I love the smell of burning premium in the morning!!

  97. Moon – Hopefully there is no intelligent life in outer space because inevitably, we’d end up having very embarrassing conversations with them where they would ask us "How many moons you have?" and we’d say "One" and they’d say, so what do you call your moon and we’d say "the Moon."   I mean that is just sad…. 

    Atheism/Kustomz – Well for one thing there’s no collection plate…  I think it’s just another sign that XMas is going to be WAY toned down this year and I can’t believe all this optimistic BS I’m hearing from the retailers.  Back to school sales are not optional – kids need books and kids need clothes but XMas is a luxury item that used to be celebrated (very nicely if I remember) with a few small gifts under a tree as opposed to the room full of crap we’ve gotten used to this past decade. 

    Premium collection/Eric – Yep, gotta love it! 

    ZION under $17 – Danger Will Robinson!  Warning!  Warning!  XLF $15 is next domino to fall, then Qs at $42 would be next to watch…

    WHAT?????  Obama back on at 2pm???  Holy cow this market is nuts!

    GLD/Magret – Based on today’s info I would roll to less than a full cover, worth taking a chance on 2/3 cover I would think.

  98. omg look at Cramer moving RIMM.

  99. CAT thanks for the input but i think global spending (stimulus) has peaked and hasn’t done much to reverse the global slowdown. I believe in V recovery. GS can always buy a few billion from CAT and park the equipment in some of the empty gargantuan manufacturing buildings that are now empty in China, kind of like what Merrill Lynch did with barges back in 2000. "nobody was buying, so Enron contacted Merrill Lynch, which agreed to "purchase" the barges with the understanding that Enron would buy them back with interest within six months. Six months later"

    Daimler Trucks Sees ‘Slight’ Sales Improvement
    Globally, “we’ve seen sales decrease more than 50 percent on average,” he told reporters at an Oct. 8 press conference in Washington. In the U.S., Canada and Mexico, medium- and heavy-duty truck sales are down 45 percent year to date from the same period in 2008, itself a dismal year. Sales were down 43 percent last year from 2006.
    From the bottom of that down cycle, however, things are looking up. After two years of job and pay cuts and a reorganization, Daimler Trucks North America, which builds Freightliner and Western Star trucks as well as buses and diesel engines, hired about 600 people this summer. “We’ve seen a slight increase in our order intake,” said Martin Daum, president and CEO of DTNA. “We’re hoping that can be sustained.”
    The economy seems to have hit bottom, said Renschler, and for Daimler “it’s stabilizing and in some markets slightly improving.” But “slightly” is the key word.
    “We are not expecting that this will all be over in two years,” Renschler said.
    DTNA expects sales to improve 10 percent at most in next year over 2009 levels, “which is still a very bad market,” said Daum, worse, in fact, than 2008.

  100. RSX Nov $28 puts for $1.15.   There’s an example of a position where you don’t want a high delta in case you are wrong but we’ll be looing to make .50 or scale in with a roll up if it goes the wrong way.   This is also a short oil play more or less.

  101.  Hey Phil…
    Thought you might like to know…. I’m getting rehired by my former company. It’s one of the reasons I’ve not been around to chat and gripe about the stock market lately. I’ve got to relocate to upstate New York and will be working at a nanotechnology research facility in the Hudson Valley area…. near Poughkeepsie.
    Maybe things really are starting to get better? My company says business is definitely getting stronger in the semiconductor area. 

  102. MOON- Ok, I can agree the Moon Unit Zappa get appointed to the soon to be assembled United Nations Intergalactic Moon Relations & Global Warming Council. However, I demand that her brother , Dweezil , also be appointed since he is much more qualified because I think he has a better name. We could also appoint former Oakland A’s pitcher John "Blue Moon" Odom-who’s reputation for fisticuffs would send a signal that we won’t be pushed around. We can offset that beligerant image by appointing  former Houston Oilers Q-back Warren Moon. He played a number of years in the Canadian Football League- that would enhance our peacekeeping intentions. Besides, these two could dazzle the moon men with 90MPH fastballs and thread the needle spiral passes while GS gets busy cornering the Green Cheese futures market.

  103. Strategy for rolling buy/writes:
    Phil, I have a TASR buy/write: bought the stock at 4.75 and sold Oct puts for .69 and calls for .16; total credit = . 85. The calls will probably expire worthless and I could buy back the puts for .45 or .50 today. I might be able to roll to the Nov 5 puts and calls which would bring in a bit under .30 credit (assuming I let the Oct calls expire). That does not seem like a lot but, as you have written in the past, .30 x 12 months = 3.60 which is not bad for owning a 4.75 stock. Or i could just roll the put side to Nov now and try to get a bit more for selling the Nov calls next  week. I am less concerned about the specifics for this trade but more interested if I am evaluating how to manage this properly. Thanks.

  104. EricL – Right on…. The happiest day of the month is OPEX when I watch the sold positions go to zero. It’s great when you get paid for your calculated risk.

  105. AA now negative since their " blowout" earnings report.   DOW is 100 points higher anyway.

  106. Hi Phil: What’s your take on LINE.  We seem to have enough natural gas for the next 100 years ,but the stock just keeps going up. I’ve  got a large position  which is up 60 %. Is  just that they hedged their production fofr the nx 3 years which assures the 10% + dividend or is it something else I don’t see.

  107. Merkhava… Good Luck! – a friend of mine is a CEO of semiconductor mfg. co. and he says everything is starting to look very positive FWIW.

  108. Highlander – I could give a damn about Andrew Hall and his bonus; and if he collects Nazi "art" or whatever then he probably deserves some agida.
    That said, in general, companies should honor contractual deals w/ employees; if they made a bad, stupid or costly deal; too bad for them.   Its also none of the gov’ts business unless fraud is involved.

  109. Phil .. Moon … that was funny :grin:
    Where is MoonUnit Zappa these days ?  We need her.

  110. BIDU;  this is really range bound; and when it breaks; look out (either way).
    My guess would be down; looks like a lot of resistance.

  111. merk; Poughkeepsie;  ugh.
    IBM ?

  112. Ladies and Gentleman,
    Please make a decision on which way we are going….I am growing very tired….

  113. Pharmboy: wait to last hour, it will go down. Maybe I should say go up as it mostly goes the oppsite way as I think.
    I get tired and frustrated, for how many months did we have anticipation of drops (thats why I am underinvested) and the market went mostly up, now a few bearish bets are really hurting.
    What is so great about BIDU that it is up that much ?

  114. pharm – MTXX jumped to my sell at 5.75 level today. Still working. (until it doesn;t  then i’ll come crawling back to Phil & he’ll say "I told you so". So it goes.)

  115. Pharmboy,  what do you want, free money? 

  116. Im going to play it safe and say UP! I have lost a LOT shorting since May as well… I dont want to be a bear but how can one be a bull with so much bad news? Ive definitely lightened up on the shorts though, if I stayed the course Id be broke before this mythical crash happened!

  117. Cap, my BIDU short is really ticking me off, roll roll roll.  While GOOG just sits there.  I hope you’re right about a turn down.

  118. mrmocha: my Bidu short is in the form of PUT dec 390, where would you roll this ?
    what is your short position ?

  119. SOX up 2% holding everything up.

    In the "Duh" department:

    Economists surveyed by Bloomberg News say U.S. consumer spending will wane if unemployment surpasses 10%. Rising unemployment “could be enough to push the economy back into recession,” said Gus Faucher of Moody’s

    Cool, oil heading back for a possible reload, $71.67 already…

    Speaking of SOX – Congrats Merk!  They sure are getting lots of upgrades so maybe that is our greenest shoot. 

    Moon/Pstas – We have a joke rule in our house with the kids:  3 times is funny, after that it’s annoying…  8-)

    1pm volume 71M, about 20M light of a normal low-volume day. 

    TASR/Allen – They got bonked down from $4.90 last week so I wouldn’t rule out a move back up.  .40 was the best price for the Dec $5s so no reason not to take .30 for those and you should be able to roll the Oct $5 puts to the Dec $5 puts for a .25 credit so that’s another .55 off the basis.  On the roll, you’ll get it on a move up because of the delta differential.  You may want to treat yourself to a few 2011 $5/7.50 spreads for .50 when they fill.  Every time you have a good month, you can take 20% of the profits and add a few until you build up a nice long position that will let you roll callers to 2x on a run or let you cash out your longs without fearing a run-up. 

    LINE/Dflam – They seem like really good operators to me.  They have oil and gas and with both much improved this year, I wouldn’t bet against these guys.  Yes, Mike Linn owns 1.2M shares and he’s happy to lock in that $2.52 dividend so that dows make them a nice dividend play.  The stock is $23.67 and you can sell the 2011 $22.50 calls for $2.50 and the $20 puts for $2.80 for net $18.37/19.18 so a nice 20% cushin and $2.50 coming to you over 12 months is another 13.6% but you are going to want some sort of oil hedge along the way – just in case….

    Semis – Oh, that reminds me, I do think that the smart-phone wars and the new IPad are driving a lot of the turnaround in semis.  Growth is growth but it’s a pretty narrow catalyst.  Also, TV sales are strong because 18M people may be unemployed but that doesn’t stop them from buying a new 42′ flat screen at WMT for $700 for their extended couch time.

    Moon Unit/Cap – I think she’s an actress now, must be about 40.  I wouldn’t know her face but I’m sure I’d notice here name on something if credits rolled by.

    Rally caused byFed Vice Chairman Donald Kohn: Anchoring inflation expectations has been a difficult achievement decades in the making, and "we should not take this stability for granted." The Fed has stopped short of the academic view that it should encourage some above-normal inflation, due to the real-world chance of inflation fear spinning out of control.

    WTF?  This guy just undid all the strong dollar talk from everyone else!  Is he crazy or is this on purpose.  Maybe the plan was to have all the top-level guys go on record supporting the dollar and let Kohn undermine the whole thing by whipping up the inflation talk in the afternoon… 

    This seems like a good time for a level reminder:  Dow 9,829, S&P 1,071, Nas 2,146,  NYSE 7,047 and RUT 620

    That DIA Nov $98/99 spread is still .52! 

  120. Peter D
    ?Current SPX strikes are Nov 920, 930 and 940 short PUTs (not wanting to go 950 yet for
    fear of a big pull back).  The short CALLs are at 1140, 1150 and 1160.

    Could you clarify? Are you taking positions in all of these strikes? If so, what is the strategy?

  121. IBM responsible for 23 points in the dow

  122. mocha; I hear you on BIDU … taking a shot at 100 shares short myself.  Get some selling in the market today and this baby will roll over !

  123. Cap, I started with a BIDU vertical of OCT 400/390 puts, and after some rolls am at the 430 puts w/ 1/2 cover of 410s.  Luckily I paid for most of the rolls by having a GOOG call sitting out there. done with that.

  124. QID $22s have no premium at .90 (.19) so a fun way to play this as a top.

  125. Sorry all- was out very late last night on a job and not much sleep and I am just a bit punchy.

  126. Pstas/sorry  No need to apologize, the words "green cheese" always puts a smile on my face  ;)

  127. RMM,  mrmocha:    BIDU chart here w/hich explains what I am looking for …

  128. Cap, the funny thing is Phil and I were chatting about pair trades yesterday and it turns out the best pair trade would have been BIDU long and GOOG short, who would have thought that?

  129. Phil sorry messages coming through delayed your play on RSX do you buy the Nov put?

  130. There gonna keep the Dow at the tech level just to screw with the tech traders…..some will say double top, others BUY everything…wratch it up, then the rug gets pulled.

  131. Wow, too bad I sold full covers on SRZ, look at that baby go.

  132. "That DIA Nov $98/99 spread is still .52!"
    So, what do we do with it?  Hold it over the weekend?

  133. LINE/dflam- I also have a fair amount of LINE. Probably would not apply to the leaps but the fat dividend makes it vulnerable to early assignment on front month covered calls as happened to me the day before the record date. Perhaps you have had the same issue? Ticked me off as I had that check snatched right out of my hands.

  134. IBM  My spread is +1 Jan 100, +3 Jan 110 / -2 Oct 120.  Two questions:  when should I be looking to roll my long calls?  I can roll the Jan 100 --> Jan 11 105 for a credit, which seems pretty good to me.  Also, should I stay in half covers all the way through earnings?   I’m planning on it since the callers still have decent premium, but I wonder if I should roll them if they get too far ITM.

  135. Does anyone know the ex-div date for LINE? The divi is so good that puts and calls are really cheap. So a collar trade selling the Jan ’11 22.5 C and buying the Jan ’10 20 P gives a 2.05 credit. Stock at 23.65 – 2.05 = 21.60, or about 1.60 total risk (but of course you must buy another put after Jan). This is another possible ‘mom IRA account’ position, methinks (mom doesn’t like risk).

  136. pstas, i am learning that the hard way also. Just happened with T.  You think it’s a good rule to not sell CC in opx month?

  137. Just got in a couple of BIDU put calendars, long Jan 380, selling Nov 380. Nov. IV is a bit elevated relative to Jan. Very boring, but I like the fat theta and relatively low risk here.

  138. Phil.
    How do you feel about the close ?  I would doubt that they could push for new highs with no news and a stronger dollar, on a Friday. But maybe because that makes sense, the opposite could happen. Regardless, I have a rather large possition in TZA at $ 11.46 and am wondering about the weekend.
    Thanks,  J.R.

  139. ephmen85: when does IBM report earnings ?

  140. Those BIDUs filled at just 11.05, btw.

  141. HAL 9000 refuses to let the marrket drop below any trendline.    Very frustrating and annoying.
    Every attempt to push down gets hit w/ a quickie buy program in the indexes.

  142. morx-not sure but that sounds good to me. I got assigned on 3 occassions within about 45 days and I complained to my broker but they "assured me that is was random"  Right.  Phil?

  143. Hi Ericl Line last ex div was 5th Aug paying every three month so will be some where 5th Nov pays over 16%

  144. Thanks yodi.

  145. Eric,
    It looks like the May dividend on LINE was earlier than the 5th. 2nd or 3rd maybe.

  146. That’s OK Pstas – How about relaxing with some nice Pink Floyd music.  That or Neil Young

    WYNN not doing so good after their capital raising.

    BIDU/MrM – If BIDU is a $420 stock then GOOG is a $1,020 stock…  And I’m not joking, BIDU forward p/e is 50, GOOG is 20! 

    Speaking of conspiracies, this is why so many British think the moon landings were faked.   This is why I think they were….

    RSX/Yodi – Not for me, I decided to get more EDZ as it’s a similar play but I do like the RSX play (Nov $28 puts, now $1.15).

    Oil seems to be closing over $71.50, never got back to $72.  Gold down at $1,047, silver $17.68 so a good recovery for them and copper is at $2.83 so no good there. 

    DIA/Cwan – Yes, if we stay up here we STILL could go either way on Monday, especially with the low volume.  It depends what you are protecting of course.   I’m over 60% bearish so I’ll be a little pissed off if we do break over our levels and that cover takes the sting out and shouldn’t lose too much if we drop 100 (compared to the short gains).

    IBM/Eph – That was crazy today.  They get called out on anti-trust issues and the stock acts like they won the lottery.  You can roll the Jan $100s to 2x the Apr $120s about even and that puts you 5 longs with the 2 covers at $6.20 and those can be rolled to anything but I’d go for rolling them to 6 Oct $125s at $2.75, which hopefully expire worthless and leave you with 5 open longs.

    LINE/Eric – They just x’d on 8/5 so you have a wait.  You can go in for $23.79 and sell the 2011 $22.50s for $2.50 and buy the Apr $25 puts for $3.50.  That puts you in for net $24.79 with a guaranteed sale at $25 through April.  So you collect the dividend and if it heads way up on you the puts are worthless and you roll the calls and do it again (but with 3 dividends in pocket) or, if it heads down, you sell your stock for $25 in April and that should mean the callers are cheaper when you buy them back or roll them. 

    Paul Krugman says you need to read today’s WSJ editorial "The Dollar Adrift" with an eye to the paper’s long-term goldbugism: Focusing on currency stability over domestic recovery is a path to disaster.

    American Superconductor (AMSC) up 3.3% to $32.40 on rumors it might be a takeover target for Swiss utility construction company ABB at $47/share.

    U.S. IPOs hit a level not seen since Q1 2008, according to a report this morning by PricewaterhouseCoopers. "Q3 IPO activity is historically slow; however, we are encouraged by the deal flow and proceeds raised in 2009, clearly building upon improvements that began in late March," the firm says, noting we’ve seen 20 IPOs so far this quarter raising nearly $5.8B, nearly quadruple that raised a year ago.

    Close/JRW – I’m pretty surprised we have no selling into the close.  As above, we need to get as neutral as possible into the weekend

    Random/Pstas – Yeah it’s random, as in if you have the money and don’t complain too much, you go to the top of their random list.

    Oil Jammed up to $72 in the last minute, no shorting now (not the futures anyway). 

    America’s cumulative trade deficit for the first eight months of 2009 ($238 billion) is running 52 percent below its January-August 2008 level ($491 billion). That reduction is mostly attributable to the recession, which deepened significantly beginning in September 2008.
    Most economists expect the dollar’s declining value, which makes U.S. exports more competitive, will spur an increase in U.S. exports, especially after foreign economies begin to recover more robustly.

  148. Just brutal …. and no volume

  149. Hi Ericl LINE I am holding since Jul 09 stk has gone up 1.50 / month do you know where you are in 2011?

  150. cap: Bidu is running again.

  151. Ericl question how about a vertical on LINE April 10 25/20 credit 2.52 if assigned you get the stk for 22.48

  152. Phil, SP at 1070, is it worth shorting for next week?

  153. DIA- moldy oldies- Ah, much better now thank you very much.
    Long Jan 100 w/half cover Oct 98′s sold at $1.15. Tempted to take these out and play for a sell-off and reload into the close?
    Or am just getting greedy?

  154. ALL IN!!!

  155. Wow the moon landing was fake? I feel like I just found out there isn’t a Santa Claus.

  156. BIDU $430s just $8.10 so far (up $1 from the sale) but the Nov $490s are $8 so no problem so far

    Gold trying for $1,050 again now that trading is closed and oil pushed up over $72 so we’re painting a very pretty picture for Asia and Europe on Monday. 

    SOX are now up 3% for the day but Transports are flat.   Advance/Decline is about 16:13 and Dow volume just hittin 100M at 3 (140M is our stick zone) so 30% below normal, or low-normal.  

    The rise in short-term focus in equity markets has meant a resurgence in hiring for the technical researchers that saw some of the sharpest axes at the beginning of the decade, when clients lost interest.

    It seems silly to look at day after day after day of up moves and keep saying they are meaningless but they are! 

    S&P/Ocelli – No, we can’t short them, these are our breakout levels and, silly or not, we do have to obey the technicals.

    DIA/Pstas – As above, these are our technicals being broken, you can’t fight them, we just have to go with the flow here.

  157. Thanks Phil and jomptien. Yodi, yeah: I’m rolling up the long call if it keeps up, but I’m fine with that. As long as there is a decent amount of extrinsic on the long call, you can’t lose to the upside because if you are assigned ahead of the dividend, then you keep the fat call extrinsic.
    BIDU is going to punch out a new all-time high today. Wow.

  158. I’m turning my brain off. For real this time.

  159. We can’t break the up 100 every day trend, can we?

  160. Yodi: I just saw your other comment. I agree that would work but you have to factor in the $500 margin. But not a bad trade either IMO.

  161. phil,
    for the method claimed (small hole restricting most of earth’s surface) the remaining sphere’s weather patterns would by mathematical necessity appear enormously enlarged. the weather pattern’s scaling seemed normal to me.

  162. Is this a failed break out? 1 more try before the close maybe.

  163. Interestingly, there is no data until Wednesday next week so nothing to stop this crazy train until then other than a major earnings miss.  Starting Weds though, we have huge data including Retail Sales, Biz Inventories, Fed Minutes, CPI, Philly Fed, TIC Flows, and Industrial Production.   A week later, on 10/21, we get the Beige Book and that’s always a mover. 

    Nothing with earnings Monday.  Next week looks like:

    Tues – DPZ, JNJ / ALTR, CSX, INTC




    So we’ll have a damn good picture of the economy by Friday and Weds, with all that data and earnings can move us 300 points up or down.  It’s going to be fun.

    Meanwhile, I’m rolling up my short plays (better strikes, more shares) and keeping well covered.  Monday will be another low volume day but if they don’t break us over on Monday, that should be of major concern to the bears.

    DIA cover stance is still Jan $100 puts, which are holding up well at $5.15 and there is no point to keeping the covers on now so buying out the October puts we sold (up 50%+) and selling 1/2 Nov $97 puts for $2.05.

    That’s about 55% bearish into the weekend overall.

  164. I think INTC is gonna kick ass on tuesday….
    I just accidentally bought some USO 37 puts for .75, would you keep em? lol

  165. SAN FRANCISCO (Dow Jones)--The developer and the owner of a 101-megawatt wind farm in northern California said Thursday they’re starting construction on the project after lining up financing from six lenders.
    The Hatchet Ridge wind farm, owned by a unit of private-equity firm Riverstone Holdings LLC, will be built on a mountain ridge in Shasta County, Calif., using 44 wind turbines made by Siemens AG (SI). The project is estimated to be completed by the end of 2010, said RES Americas, which is developing the project. PG&E Corp. (PCG) unit Pacific Gas & Electric Co. has signed a 15-year contract to purchase the output from the facility.
    Debt financing for the project is being provided by French banks Natixis (NTXFY, KN.FR), Credit Agricole SA’s (CRARY, ACA.FR) Calyon investment-banking unit and Societe Generale SA (SCGLY); German banks Landesbank Baden-Wurttemberg and WestLB AG, and U.S. bank Union Bank

    Mostly European financing and no GE

  166. MORX, did you take advantage of the XOM bump yesterday to get even or get out?

  167. Phil,
    Follow through on Monday ?

  168. kust,
    that’s because ge’s bank is broke!

  169. Phil
    Whenever you get a chance can you explain the below para for us. I need some clarity on how we can attempt to get a discount on premium. Are you referring to waiting till the premium gets to 1/2 or is there something else to it? .Thanks.
    Rolling – Also a good rule of thumb if you are rolling is to attempt to get a discount of 1/2 your callers remaining premium (assuming we are in the last week) to rolll to the bid price or less of the caller you are aiming for.  So if I have the RUT $620 caller at $4.40 (not that I would roll him based on my targeting) and I wanted to roll up to the Nov $660 with a bid of $4.40 and ask of $4.50, my calculation would be that I have $4.40 of pure premium so I would offer to roll for a credit of $2.20 (1/2 my caller’s premium gone subtracted from the current bid). 

  170. No Santa Clause/Steve – WHAT??? 

    Were back to 90 Yen for a buck, that should make Japan very happy on Monday. 

    Still fighting the urge to short everything in site….  Kwan is right, your brain is you worst enemy in this market.

    Sphere scaling/High – LOL, sounds good to me!  I just find it funny.  Here’s how Buzz Alrdin responds to people who thinkk the landing was faked.  

    USO/Steve – Yeah I have those again into the $72 close but too nervous to play futures again. 

    A whopping 113M volume with 20 minutes to go.  On a good day you do that by 10am.

  171. Get this REIT pumper jackass from Citi off my TV screen !

  172. Rolling/Chakra – How about tell me specifically what you have as it’s easier than doing abstracts?  In that case I’m talking about offering the roll (assuming your broker lets you and, if not, get another broker) at the net price you wish for.  When a stock spikes up and down all sorts of crazy things get filled but not if you don’t have an offer out there.  The same goes for selling things at good prices – if you don’t ask, you certainly won’t get it. 

    A "handful of firms" have urged the Depository Trust & Clearing Corp. – clearinghouse for virtually all U.S. stock trading – to act as a marketwide watchdog guarding against computer-driven chaos. Both authorities and high-frequency traders have apparently called for limits that would prevent a malfunctioning algorithm from acquiring a massive position.

    115M at 3:45. 

  173. Phil, are you still holding the ERY calls?

  174. stomping the shit out of aapl trying to turn this thing downwards!!

  175. Cwan,
    I think he probably got rid of them when he mentioned oil spiking in earlier post

  176. Will the Dow fail 9,829 or will the S&P make 1,071? 

    I’ll feel better about my stance if the Dow fails…

  177. Cwan – it is his post at 2:46 at bottom.

  178. it’s not gonna happen….i’ve got my finger on the 99 Oct P for 1.1…

  179. Somewhere I hear about a three day week end is this just for OBama ? Some of you guys can help a foreigner thanks

  180. yodi – it for the Italian that DISCOVERED America!  Columbus! Yeah for us.

  181. FAIL!!! no such thing 10000 on target and 1100 s&p
    Great weekend people

  182. ERY/Cwan – Sure, they are Nov and they didn’t do much all day.  Jomp is right, I should have gotten out but I didn’t as it was an early scale I’m willing to stick with. 

    Follow through/JRW – Well we have to look at the 5% rule and this would be a finish on the week that suggests follow-through to the upside on Monday.  Those levels are obviously tough to break but what are you gonna do?  You have to just go with it once we get over the levels and use the levels for stops.

    Wow, 1,071 on the S&P!  These guys are magic… 

    Have a good weekend everyone!   I’ll be busy looking for stuff to add to the Watch List, which becomes the Buy List once we go 3 of 5 indexes over.

  183. Shoulda known better, had 500 shares of DRV forgot to put my stop in, Hal 9000 being the mutha that he is ran it down 80 cents the last 90 minutes….

  184. yodi,
    Thanksgiving in Canada, light day in U.S. ( Columbus Day )

  185. Lief Ericson discovered America in 1,002, learn your history guys!

  186. Phil,
    Earlier when you were explaining a hedge to somebody you said that you are not suppoed to make money on a drop (in context, meaning net total gain on your portfolio) but then, if you are 55 or 60% bearish, wouldn’t you make a net gain or is this just 55 or 60% on your mattress play hedge which is structured to defend a certain predetermined percentage of one’s portfolio? Am I understanding that correctly?

  187. Today proves without a shadow of a doubt  this market is manipulated (LMAO)and to talk about the moves with a straight face is a strain on facial your financial advisor and pour (poor) all your savings into the markets…

  188. Phil,
    I bought 8000 TNA to more than  neutralize my TZA position over the week end, and you have a good one ! J.R.

  189. I have a headache !  Have a good weekend; this was silly … again !

  190. Hi fellows thanks for the info on holiday all have a nice weekend bye

  191. phil,
    yeh, but Lief did not carry Sid’s to the natives so he only gets honorable mention. go Columbus. you da man!

  192. phil,
    make that STD’s sorry Columbus!

  193. That BIDU didn’t work as planned … today.  Main reason is the market kept ramping; just no selling pressure.
    Hope someone comes out and downgrades that POS over the weekend.

  194. cap,
    why don’t you just do a hedge of bidu against goog? the spread cant hold up but bidu might.

  195. Ahhhh.. what a nice day…  Not being in the market!  For a change, alot of you are feeling my pain… and I’m not!

  196. Phil – BIDU – clarification, with today’s run up - when next week do you roll short OCT 430/s to short NOV 490/s (assuming even roll)?

  197. Balance/Aclend – It’s all a matter of personal taste.  If you are bullish and hedging (which was the question at the time) then you don’t want to negate your position with covers, just soften the blow if your are wrong.  If you are more neutral, like I am, then it’s just a question of an adjustment here or there that puts you from 50/50 to 55/45 or 60/40 one way or the other.  The nice thing about playing for balance (with a mix of bullish and bearish positions) is that it is very easy to adjust. 

    If, for example, you have $30K bullish and $30K bearish (presumably with about the same overall "delta") with $40K of cash on the side, then you don’t have to touch the existing spreads to get more bullish.  I can just add $3,000 worth of the DIA $98/99 spread and, Presto!, I’m now 55% bullish overall.  If I am in that 55% bullish stance and I want to get more bearish, I just add $3K of QID calls that should doulbe if my DIA calls get wiped out and I’m back to even or maybe a bit bearish. 

    Then I add and SRS buy/write with 1,000 at $9.60, selling Nov $9 puts and calls for $2.10 for a $7.50/8.25 entry and I’m only a little tiny bit more bearish – perhaps I consider that I have a risk of getting assigned at $7 so that’s $1.25 x $1,000 at risk or $1,250 pushing me to a little more bearish but not much and so on.  Generally I look at my risk (what I think the risk is) on each play to decide how bullish/bearish I am overall.  Take a look at the original set-up of the first $100KP where I go into the logic on each play.  THAT was a nicely balanced portfolio.  I’m still waiting for WSS to get it together and come out with the spread order system so I can start the new portflio there.

    By the way, you don’t need to knock yourself out with crazy calculations to see your balance.  Just keep notes of what happens to your portfolio when the Dow is up 100 or down 100 etc and you’ll know how unbalanced you are.  Since we go up and down 100 pretty much every day, you won’t have to wait long!

    All your savings in the market/Kustomz – No need to call your broker, your government has already put all your savings into the market.  And your childern’s savings, and your grandchildren’s savings and their grandchildren’s savings…

    Balance/JRW – Good job!  The UREs neutralized the real estate shorts as they busted $5.80 again.

    Columbus/Highlander – Aside from the fact that it wasn’t actually America (he discovered the Bahamas) and Columbus didn’t even know it was America or that he had discovered anything at all as he thought he was in India – there is the nitpicky little point that you can’t really say you discovered a place when people are there waving at you from the shore.  By that logic, I have "discovered" most of this planet so hurry up and get me a statue and a national holiday!

    Here’s a great quote from a Columbus’ first voyage journal:

     "Many of the men I have seen have scars on their bodies, and when I made signs to them to find out how this happened, they indicated that people from other nearby islands come to San Salvador to capture them; they defend themselves the best they can. I believe that people from the mainland come here to take them as slaves. They ought to make good and skilled servants, for they repeat very quickly whatever we say to them. I think they can very easily be made Christians, for they seem to have no religion. If it pleases our Lord, I will take six of them to Your Highnesses when I depart, in order that they may learn our language." Lacking modern weaponry and even metal-forged swords or pikes, he remarked upon their tactical vulnerability, writing, "I could conquer the whole of them with 50 men, and govern them as I pleased."

    So here’s to Columbus – the first Republican in America!

  198. Is anyone setting up to play GOOG earnings next week? It should be a definate move one way or the other.

  199. BIDU/Concreata – Either when they lose 1/2 their premium (are 50% in the money) or I capitulate.  Look how many things you can do with the BIDU $430s, now $8.70:

    • First of all, they are still $3 out of the money so BIDU has to rise $10 more just to owe them back the $7 we collected. 
    • 2nd of all, keep in mind that BIDU’s all-time high was $429.19 back in Nov ’07, which they held for about an hour. 
    • They can be rolled to the Nov $490s, now $8.20. 
    • They can also be rolled to the Nov $520s at $4 and the Nov $350 puts for $5.70.  
    •     Those can be rolled even to the Jan $300 puts and the Jan $580 calls, which are more than 20% away from here. 

    GOOG/CaFords – I looked this week and the premiums were too stupid but I’ll look again over the weekend. 

  200. Phil,
    As you point out, Columbus did not discover America, he discovered a banana republic and thought of setting himself up as the first Danny Ortaga !!

  201. phil,
    to close on Columbus, he did have the insight that the world was round and the balls to back up his thesis by sailing due  west, and aside from his math error (50%) which made him think he was in India, the earth was indeed round.
    the republicans on the other hand, still think it is flat and that everyone on it has all the medical care they could ever need.

  202. Come on we can’t end the week on healthcare.
    Columbus didn’t discover america. Neither did Leif. If either of them did, WHERE IS THEIR BRIDGE? Giovanni Di Verrazano was the true discoverer, and stayed here so long he was able to build an absolutely enormous bridge (
    Verrazano’s claim to being the true father of America is further reinforced by his shared passion with George Washington, who built an even bigger bridge  ( and subsequently went on to become the first president!

  203. Well let’s see, we have Columbia (country), all sorts of Columbus towns cities, etc (Columbus Ohio) , Columbia County NY for example.  Columbus Circle.  Columbus Avenue.  Columbia University, etc.  He also gets a holiday, Columbus Day, with his own parade.
    How come nobody here seems to know Amerigo Vespucci, who after all has 2 Contients and the USA named after him.
    Vespucci got all the major naming rights; Columbus got the holiday, a parade, a country and some other stuff.  And he may even have won the Nobel Prize in 2003.  Poor Columbus.
    Vespucci is said to have made a guess at the world’s circumference that was accurate within 50 miles. His real achievement seems to be that he concluded America had to be a new continent and not the eastern part of Asia, as Columbus believed. An honored citizen in Spain, Vespucci spent the years after his voyages as a maritime official for King Ferdinand.
    Lief who ?  What’s he got named for him ?  LOL.

    Seems ol’ Lief just wasn’t entrepreneurial enough; found Newfoundland; stayed awhile; left; never came back; no good record of it except in Norse lore.

  204. Bridge ?  Who needs a bridge when you got 2 continents ?

  205. Roundness:  In 200 BC, Eratosthenes beat everyone on the round thing.  He picked 2 places in Egypt and somehow computed high noon at each city and used the error to deduce the circumference of the Earth.  That’s pretty darn clever for the times! 

  206. Obama Wins Booker Prize

    The Mann Booker Prize, Britain’s most prestigious literary award, has been conferred for 2009 on President Obama, it was announced yesterday. Not only is this the first time the Booker Prize has gone to an American. It is the first time the prize has gone to someone who has never published a work of fiction. By the terms of the Mann Booker Trust, the prize is awarded annually to “the author of what is judged to be the best novel published each year in the United Kingdom.” Obama has written two highly regarded memoirs, but neither was published in 2009 in the United Kingdom, and neither is a novel. At the press conference where the award to Obama was announced, the chairman of the judges said, “He’s bound to have a short story or two shoved into a drawer somewhere. That’s good enough for us.” And besides, the chairman noted, it was the unanimous conclusion of the judges that the president’s “whole life is a great novel.”
    Although as recently as 24 hours ago, the president’s name was entirely absent from the traditional frenzy of speculation about the Booker Prize, he is now considered the leading candidate for the Prix Goncourt, which is the French equivalent of the Booker and possibly even more prestigious. Among past winners are Marcel Proust and Simone de Beauvoir. Traditionally, as a prize for novel writing, it has gone to someone who has written a novel. Obama got the award, according to the judges, for “smoking cigarettes and wearing those Euro-cut suits and skinny ties, and generally looking like a French intellectual.”
    The president is considered a shoo-in for an Oscar in the category of best cinematography at next spring’s Academy Awards. “We had to give him something,” a spokesman said, “and nobody knows what the heck cinematography is anyway.”
    Obama is also expected to win this year’s Nobel Prize for Physics, for an experiment he conducted two decades ago in a science course at the high school he attended in Hawaii. By dropping two coconuts from the top of a tower, he determined that gravity works in Hawaii just like it does in England, where Newton had conducted a similar experiment several centuries earlier, using apples, even though Hawaii is much closer to the equator. “Whether distance from the equator might make some difference in the way gravity works is a question that nobody had thought to ask,” the Nobel citation declares. “Now, thanks to Mr. Obama’s research, we have the answer.” Obama will be the first person to win two Nobel prizes in the same year. “Next year, he’s going for three,” said presidential adviser David Axelrod yesterday.
    Among other prizes Obama has won or is expected to win in 2009 are Scariest Costume at the annual Halloween Ball of the National Press Club (he came dressed as Elizabeth McCaughey), Parent of the Year at the Sidwell Friends School (“So what if he missed all the PTA meetings?” the citation read), and Most Hot Dogs Consumed in Five Minutes (14) at this year’s White House staff July 4 picnic. A controversy broke out when the Post reported that they were actually veggie-dogs, but House Speaker Nancy Pelosi ruled that the new-age sauages should count. “Next year he’s going for 16,” said Axelrod. “Eyes on the prize.”

  207. Phil – Bidu – Thanks for explaining all the possible rolls. Would you consider DD on the first roll i.e. gets 50% ITM?