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Testy Tuesday – Apple Leads Earnings Boosters

Wheee, being bullish is fun!

We're still not great at it as we shorted a few toppy-looking calls yesterday (WFMI, QLD, SPY and POT) but that was a normal offset to bullish plays on SO, ERX, VZ, RIMM, BMY, EMC, AAPL, TXN and T.  Of course, we're also playing our bullish Watch List, which still has plenty of laggards that we're picking up.  SRS was irresistible as they fell below $9.50 again but clearly we tipped bullish and all those bullish plays from last week should start bearing some fruit as well.  The best thing about being a bull is – the markets went up for no reason on low volume and we were happy about it – Imagine that! 

Of course we are still skeptical because the economy still sucks but it is fun to get a little more bullish while it lasts.  Even our too bearish $100KP enjoyed yesterday's action, finishing the day $101,364.  That won't last if we keep going higher and I'll be looking for some bullish plays to officially add there if we hold our levels today (we didn't yesterday).   

AAPL is going to be a huge winner for us this morning.  We've been selling Jan $165 and $170 puts for weeks as our key way to play earnings (collecting between $5 and $7) and yesterday, in Member Chat, I suggested selling the $185 puts for $7  as well as the April $180/200 bull call spread, also at $7.  It was my position that you would be better off putting $2,000 into either of those plays than you would be spending $18,750 to buy 100 shares of the stock ahead of earnings.  It will be interesting to see which position fares better today. 

In other earnings fun, we are strategically taking well-hedged earnings plays.  ZION was a ratio backspread, buying 4 Apr $21 calls for $2.10 and selling 6 Dec $19 calls for $1.55 in a bearish play on their earnings.  Looking good so far.  BSX was also played for a miss, selling an even amount of Nov $10s against the Feb $11s, both at .65 and we went bullish on TXN, buying 6 Jan $25s for .82 and selling just 4 Nov $24s for .70 as we expected good but not great earnings there.  We'll see how those do today but they're all looking like winners in pre-market.  The nice thing about plays like this is the are fairly low-risk and not capital intensive and you can often close out your winners the next day and roll the capital along to the next opportunity

As we can see from David Fry's S&P Chart, we are slogging through resistance zones and the nice earnings beats this morning from Dow components CAT (10x beat!) DD, KO, PFE and UTX had better give us the fuel to get over the top or I will be back to thinking we are too toppy.  CAT earned .64 per share vs. .06 expected in the consensus of the 23 clueless analysts who follow them (highest estimate was .27).  That aready puts them .30 over the year's target earnings of $1.49 with a quarter still to go and you can see why CAT was a staple of our buy lists when they were down around $30!  

CAT is, of course, the poster child for the new measure of corporate success in America.  They dramatically cut production and laid off thousands of workers and then benefited from Global stimulus, which boosted demand from developing countries such as China and Brazil, while a weaker dollar makes the company's products less expensive in overseas markets and rising commodity prices boost that sector and keep their customers digging.  Falling steel prices were also a huge help to CAT this year as the company also beat March expectations by 875% and June expectations by 227%, proving the theory that some analysts never learn

Is this really and economic recovery?  Declining dollars allowing foreign stimulus programs to afford more digging equipment for make-work programs while CAT slashes costs at home and shuts down long-term production…  UTX had similar benefits while DD, KO and PFE all had huge benefits from the exchange rates so forgive me if I don't run around screaming BUYBUYBUY despite all this "good" news. 

Speaking of good news, the MSM was once again made fools of by the "Yes Men," who like to hold fake press conferences to announce silly things.  In this case, the silly thing was that the US Chamber of Commerce has finally gotten real and decided global warming may be a problem.  The funny thing is that several reporters actually believed the CoC was capable of looking at the big picture, even after a real CoC guy busted into the conference and declared it a fake.  That guy then refused to answer questions about the Chamber's stance on global warming as he was only authorized to call the first guy a liar and they would have to confer at next year's conference (hopefully not held in the Maldives, who are already holding underwater cabinet meetings to call attention to the fact that their nation is drowning). 

But we are not here to worry about global warming, we are here to celebrate the bull market and ignore bad news.  We did get good news this morning from the ICSC Retail Sales Report, which shows a 0.2% improvement from last week and a whopping 2.8% improvement from last year, when the market was crashing hard and nobody was in much of a shopping mood.  Still, this is the first year over year improvement since August of 2008 and retailers are indeed posting better-than-expected July-Sept numbers.  Of course, most of this stuff is getting bought on sale and the Sept PPI was down a shocking 0.6%, a major turn-down from last month's +1.7% or the -0.2% expected by the experts.  This drop was so stiff that it even dragged the core PPI down 0.1% from +0.2% last month. 

Asia was up about 1% last night and Europe is flatlining into our open, which is surprisingly weak on such good earnings.  The US pre-markets aren't as excited as you may think even though oil is barreling up to $80, gold is at $1,065 and copper is $2.98 as the dollar hits a new low against the pound ($1.65) and hovers around $1.50 to the Euro while fetching just 90.3 Yen.  Surely we haven't run out of exporters already to celebrate, have we?  This evening we'll hear from ISRG, SNDK, STX, STM and TUP, all should benefit from the low dollar and tomorrow is APD, BA, LLY, FCX, GENZ, MCD, NOC, SWK and even USG who should do well under similar conditions.  

So nothing too likely to end this party today, other than the sheer weight of the rally as we approach critical levels of Dow 10,200, S&P 1,100, Nasdaq 2,200, NYSE 7,250 and Russell 623.  We don't need those, we're happy to stay more bullish as long as 3 of our 5 indexes are over Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623 but it sure would be nice to see the SOX over 338 and the Transports over 1,989 so we can get a little more aggressive on the long side. 

Until then, let's be careful out there…

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  1. Phil- are you using a nom de guerre? This sounds like you. Maybe its time to start an inflation hedge portfolio?

  2. Normal.dotm
    Meiji University


    10 pt



    /* Style Definitions */
    mso-padding-alt:0mm 5.4pt 0mm 5.4pt;
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    Damage control,
    Dear Phil,
    I did very with my putters the Put writes that I did on Apple. However, I had far out of the money calls that I was selling that will be well underwater and I wanted to see if I could salvage the situation or break even or better. It may be better just to sell calls after a few hours when the euphoria of Apples diminished or if there is profit taking. However, with a few speed bumps I think it is going to continue to rise over the next several months. I don’t want to adjust just to adjust, only if you have a creative situation that can become a winning play and making lemonade over a lemon.
    I have the following naked calls: 2 Jan. 210 bought at 6.24 and one April 220 bought at 7.41. I feel I should sell all the successful puts 5 and one call of 175 close to market open, wait for a pull back and then???? I don’t want to tie up more than 5000.00 on these adjustments. Thanks for your and other members help and I love your service. Even with this overhedging or imbalanced hedging on my part, it was a great learning experience and I feel I am lucky enough to work, after years of searching, a real master.

  3. Good morning Phil,
    I wish to refer to you HOV recommendation a while back where I did a vertical call spread 2011 buy 2.5c and sell the the 5c
    paid 2.78 and received 1.63 this where for 130 options. At the time you told me to put it in the drawer and forget about them. Even that the 2.5 caller is slidly less  2.07, the short 5 caller which I sold for 1.63 is now trading for about 1.18.
    Question should I play the short leg in and out during the year or shall I just let it rest. Thanks for your ever valuable advice

  4. "The US pre-markets aren’t as excited as you may think"
    Yeah, I think we’re seeing some signs of exhaustion here. I’m continuing to scale back longs and will not be tempted to add them back unless we go straight up and close over 1120. More likely, I buy after a 5-10% correction, IMO.
    Gold could fall fast if we flip over. That PPI number was terrible for the inflation hawks.

  5. Paco/Pstas – That would be a cool pen name for me but it’s not…  8-)

    As to inflation hedge, I had the TBT spread in yesterday’s post, still my favorite:

    I still prefer TBT with the 2x the March $42/50 spread at $3.30 ($6.60), selling the Jan $47 calls at $2.25 and the Jan $44 puts at $1.95 ($4.20) for a net $2.10 entry on a spread that pays $18 at $50 and pays 2x $5 ($10) before the Jan caller is even in the money.  It’s still directional as there is not a lot of downside protection here.

    AAPL – As I said last night, take money and run if you’re in it for the short-run.  Long-term, I still love them. 

    Big Breakouts would be:  Dow 10,200, S&P 1,100, Nasdaq 2,200, NYSE 7,250 and Russell 623.

    Our must hold levels remain:  Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623 but it sure would be nice to see the SOX over 338 and the Transports over 1,989 so we can get a little more aggressive on the long side.

    OPEC talking down oil for some reason.  Prez says 6.7Mb of spare production capacity likely.  That means Iran and Nigeria could shut off their taps entirely and no one would care….

    DIA should be Jan $103 puts ($102 puts are OK) at $5.15 and, if the Dow goes green, we should take the opportunity to 1/2 cover with Nov $100 puts, now $1.80 but only if we are green on the Dow.   Otherwise, we’re going to continue to hope for a nice sell-off back to test 10,000.

  6. Short OIH.

  7. That’s just with two Nov puts: day trade only.

  8. Paco- yeah, I was thinking the same thing- a great name. But, you would need a jaunty hat to complete the image.

  9. Phil,  I like the TBT trade mentioned pre-market in Monday’s comments this morning.  With a 34% probablility of hitting the downside breakeven of 42.75 (+/-) coming out of the trade calculator at OX, would you suggest putting a stop on the whole trade if TBT hits that price?  Also, I assume that you meant $16 upside on TBT hitting 50…and that we’d roll the Jan 47 caller before risking an exercise…do I have that right?  Looks like a sweet trade if you believe TBT will stay range bound between 45 and 50, and still make money up to 60.

  10. the ZION trade- I am up 200 on the Decembers and down 200 on the Aprils. roll up to the Apr 22.5c for 1.2ish, or get out

  11. Pharmboy: MTXX at a lower than usual point. Any interest?

  12. Do you think the sell-off in BSX is overdone?

  13. Phil/AAPL….How would you cover the stock with calls.  Nov or Dec 200′s?

  14. Sorry, I should’ve just put this in the other one. I’m holding a Jan 11p naked and thinking of rolling to 2x Jan 9s to recoup. I know the rule about naked selling if one doesn’t want to hold but I don’t want it put to me at net $10 if it is down at $9. What do you think?

  15. phil,
    what would be a good aapl cover $ strike and month (nov/dec)?

  16. Hi Phil TBT spreads march call buy 42 sell 50 now 2.90 sell jan put 44 now 2.25 47 call 1.80 is this OK still?

  17. AAPL/Tokyo – Well I’ll try to live up to that introduction but I am a little unclear as to whether the Naked calls were sold or bought.  Either way, my take on AAPL is take the money and run up here unless the whole market gets green as there should be plenty of profit taking in AAPL at the $200 level.   If you sold the calls, give it time and let the excitement drain out of them, you can always roll calls up.  If you bought those Jan $210s and Apri $220s, you bought way too much premium and you are lucky to get out with a profit of any kind.   Feel free to clarify if you need a better answer. 

    HOV/Yodi – Ow, they got hammered lately!  It really is a 2011 play, the spread is now about .95 vs the $1.15 you entered with.  I’d hang on and sell 1/4 the Dec $5s for .25 (now .20) to knock down the premium.  You make $5.40 (4x $1.35) before you owe them a penny back and the Feb $7.5s are .10 so you can 2x roll to them and still be just 1/2 covered. 

    Once again morning profit taking brings on the bulls.  Volume in first 20 mins is a solid 30M.

    OIH/Eric – Thanks but I’m short enough on that one!

    TBT/LV – That’s a pretty aggressive trade so you may want to stop out the March vertical at $2 if it’s looking really bad but 42 has held very solid on TBT so there’d have to be a funamental reason to get out, not just a short-term move in rates.  I did mean $18 as that’s what it pays back at $50, what you net out is very dependent on a lot of things since we’re selling the straddle as well.  Keep in mind this is a bullish play based on the markets going up and rates getting upward pressure – not a good play if we crash again. 

    ZION/Drum – What?  If you did a 4:6 spread you should be way ahead.   The 6 Dec $19s fell to .90 (down .65) and the 4 Apr $21s are $1.50 (down .60).  If you don’t need the quick profits, there’s nothing to do, you paid $8.10 for 4 longs and sold 6 shorts for $9.30 so all you have to do is wait for them to expire worthless and you have $1.20 profit plus whatever value the Apr $21s retain.  That’s all that play is designed to do, it was a short play on earnings with a cover in case we got it wrong.

    BSX/Aclend – Yes a bit drastic but beware the downgrade police as they had 15 Buys 11 Neutrals and NO Sells yesterday so don’t try to be the hero guessing the bottom on this one.

  18. Good Morning. Phil, are you aware of the new gov. program announced yesterday to provide low interest loans to first time home buyers and rental incentives?  Might this new program be a replacement for the 8k incentive due to expire?
    Looks like XHB is breaking down. Whats your thoughts? Thank You

  19. CCJ sneaking up past $30.  I can’t believe they were half price in Q4 and Q1 – THAT was silly!

    AAPL covers/Iflan and High - As I said last night, I’d sell the Dec $195s, now $11.50 and be thrilled to lock in $206.50 for the moment.  That $11.50 pays for you to buy Jan $200 puts (not that you should but you could if you have to) so it’s a nice, comfortable position for the non-greedy.

    BSX/Aclend – You sold the Jan $11 puts?   Those are $2.40 and yes, you can roll them down to 2x the $9 puts at .85 but you should also sell 1x the Jan $9 calls at .65 and worry about rolling those along if you have to.  That extra .65 pays to roll your putter to the Jan $7.50 puts (now .25) and then you could sell 1/2 the Jan $7.50 calls (now $1.45 but .90 by then) and that would pay to roll the rest – worst comes to worst…

  20. MTXX/Morx – not until after earnings.  They will most likely be horrible due to the lawsuits.  Let’s C where they settle.

  21. Thanks, I’m pretty sure it was per your recommendation awhile back.  "BSX Jan 11p makes a good naked sell at $1." …but I could just be confabulating.   8-)

  22. phil,
    going against my ‘hog’ instincts to hold aapl naked, i have sold all the aapl positions in my trading accounts @$201 and i have fully covered all the aapl positions in my ira’s with the nov $200′s @ a tidy $6.15. thanks for maintaining sanity while we all celebrate aapl’s triumph!

  23.  Phil:  BA is down over 2 points.  Any plays before earnings?  Expectations are so low that we may have a positive surprise.  How about selling puts?  Thanks.

  24. Phil, what do you think of POWR? I meant to buy some at 8 and then it blew up, now Im a little hesitant….

  25. nasdaq slowing grinding downwards!

  26. Now this is something different, down on good volume (52M at 10:20).

    TBT/Yodi – Sure, it’s all about the net cost of the spread.  Also, you can drop the vertical down $1, that’s always nice.

    Housing/1020 – Passed?  Do you have a link?  They talked about a lot of things but I didn’t know anything actually went through.  Even so, we always have to read carefully to see who it really helps. 

    BSX/Aclend – Oh I wasn’t surprised you sold them as a play, just not clear from the way you said "I’m holding the Jan 11p naked" as it may have been that you held the naked puts yourself so I thought it would be an important point to clarify as it changes the advice considerably.  I still like BSX long-term but Jan is not that far away so better safe than sorry. 

    AAPL/High – Congrats!  Keep in mind that the $6 you collected for the $200s pays for the Apr 230s (now $6.80) if AAPL breaks higher and you want to get more upside so it’s never the end of the world to cover.  Actually, you can take that $6 and buy the 2011 $170/180 bull call spread and that’s good bang for your bonus bucks but, on the whole, it’s good to just learn to be satisfied with a good gain and take some nice, relaxing covers and leave it at that. 

    BA/John – Possible big beat (-$2.12 expected) but not acting like it today.   They don’t really pay enough to make attractive put sales so I would just as soon hope for a miss and buy on that dip. 

    POWR/Jrom – I have no idea if there is a demand for that stuff or not at the moment but there probably will be growth down the road.  Since you can buy them for $9.71 and sell June $10 puts and calls for $4.50 for net $5.21/7.60 I think it’s a worthwhile risk but I don’t know enough about the company to make it a general pick. 

  27. anybody elses etrade just quit? (is elses a word?)

  28. I can’t believe that C straddle cow is still providing milk this morning.  I’m actually now scaling back my short straddle position by about 1/3 because it’s reaching the ‘too good to be true’ threshold, but I’m staying short a lot of these. I will not hesistate to re-add on a big move, though, probably shorting January straddles. Meanwhile, I shall patiently wait for the [C]ow to fill back up with the sweet milk of implied volatility.

  29. Phil/Housing  I’m not sure how to send a "link" :(    it was on yahoo finance after yesterdays close….

  30. Selling SGP 29 Nov P naked.  Arb play as the MRK deal closes next month, and if you own them at 29, then you are sitting pretty.  That chart is nothing but a straight, steady line UP.

  31. Damn, GMCR STILL going up!  V hitting 52-week highs, FDX on the march…

    Sector ETF strength early on: Solar– KWT +1.6%. Healthcare Providers– IHF +1%. Semis– SMH +0.7%.
    Weakness: Gold Miners– GDX -2.2%. Homebuilders– XHB -1.9%. Regional Banks– KRE -1.6%. Oil Services– OIH -1.6%. Agribusiness– MOO +1.5%. Coal– KOL -1.5%. Steel– SLX -1.5%. Real Estate– IYR -1.4%. Biotech– BBH -1.4%. Basic Materials– XLB -1.3%.

    This is not a weak-looking market, this may just be some rotation so far back to Tech, Solar and Health Care.

    BA is knocking 32 points off the Dow, DD another 18, HD 16, KO 16, DIS 16, GE 16 – that’s 114 of the 30 poiints the Dow is down so DO NOT read too much into this drop as none of those are companies that are doing poorly. 

    So, we will cover the DIA Jan $103s with 1/2 the Nov $100s, now $1.88.  If you aren’t in the $103s, you can spend the .55 to roll up, you’re getting it from the putter anyway.

  32. Phil
    What would be the best way to play BA  earnings? I am looking for a small trade ($500). Thanks.

  33. Phil,  ERY question – I own the Nov $12 calls but paid too much (1.70) thoughts on selling half of th $11s for anything above .80?  I still want exposure to a drop in oil.

  34.  Hi Phil
    New here and still working my way thru the new member’s guide
    Is there a play on the mo in ISRG selling nov calls? Earnings release tonite.  I’m almost $4k down on a short I missed covering.
    great site – the most instrructive and best I’ve found and looking forward to recouping some of 2008 loses

  35. Is there a play on HGSI?  I thought I saw a recent mention but can’t seem to find it and options premium looks huge. 

  36. EWZ getting smoked on the Brazilian tax on foreign stock owners. That thing was waay over-extended.

  37. 11 am Dow volume, 68M.

    FDIC proposes ending its debt guarantee program with a six-month safety net.

    Felix Salmon says a secret Moscow rendezvous between Goldman Sachs (GS) and then Treasury Secretary Hank Paulson – revealed in Andrew Ross Sorkin’s new book – is sleazy in the extreme, "and will only serve to heighten suspicions that Paulson’s Treasury was rigging the game in favor of Goldman all along."

    Goldman says its checks indicate reports that the Belarusian Potash authority was in final-stage negotiations of its 2010 contract with China were taken out of context, and that talks aren’t as far along as thought. Firm now expects negotiations to lead to prices in the low $300/ton range, well below Street expectations. POT -1%. AGU -1.5%Nice for our POT short calls.

    Bank of Canada keeps its overnight rate target at 0.25%, and repeats its conditional commitment to keep it there until the end of Q2 2010. BoC said closing Canada’s output gap and reaching its inflation target of 2% won’t happen until Q3 2011, one quarter later than its previous forecast.

    I think it’s "else’s" Morx and no, mine’s working.

    C/Eric – Let us know when it’s reload time.  Hopefully they run back to $4.75 at least. 

    Housing/1020 – Well, if you see something, let me know, I’m not seeing it now. 

    BA/Chakra – As I said above, I wouldn’t.  They are not offering enough premium to cover the risk of a 10% move.  Will probably be good to play AFTER they make a move.  6 weeks of flatlining around $52.50 and a low VIX just make this a poor play right now. 

    ERY/Mbaisley – Those are way out now.  You are better off going for the Jan $10/12.50 spread at .80, which pays $2.50 so if you are in for $1,700 and down to $500, you can spend $300 to roll there and have a $2,500 upside on the net $2,000 investment and the $300 you spend puts you $600 in the money.   You can even sell some Nov $13s (now .35) against them if they get to .50 and ERY looks toppy. 

    Welcome Ban2!  Thanks.  We had a whole discussion about ISRG the other day.   I was advocating the sale of the Apr $210 puts for $17.80 (now $12.30) and the Apr $280 calls for $22.50, now $29 as that gave us a break/even of $169.70 and $320.30, both of which seem unrealistic.  ISRG went on a bit of a run but I still like the sale of the Apr $280s for $29 but, the arguement was put forth that we could accomplish much of the same selling the Nov $270s for $17.50 and the Nov $230 puts for $5.30, which is a $22.80 credit with a much more immediate pay-off if we hit it.  If not, then at $300, the $30 Nov $270 calls could still be rolled out to the Apr $320s (guessing) and Apr puts could be sold so it’s a nice way to play the volatility crush IF you can ride it out.

    Another way to play ISRG bullishly is to buy the Jan $310 calls for $9.20 and sell the Nov $300 calls for $8.25, which is net .95 and you have to plan on adding more calls or rolling them down if ISRG breaks over $300 but it’s a very good spread as long as you don’t mind turning it into a long-term play

    HGSI/Aclend – Artificial buy/write with the Apr $16s at $7.50 and sell the Nov $20 calls for $3.80 and the Nov $17 puts for $2.50 for a net $1.20/18.20 entry with a $2.80 upside (up 233% in a month). 

    Kindle Killer?  Pictures and details of Barnes and Noble’s (BKS -5.9%) new e-book reader have leaked, "and it is hot, both inside and out," Wired says. "If you just ordered a Kindle (AMZN +0.5%), stop reading now or you’re in for a giant dose of buyer’s remorse." The reader, due out in a week, will allow loaning ebooks to friends – which could destroy the Kindle walled-garden model.

    In the latest in a series of China-U.S. trade disputes, China’s Ministry of Commerce took preliminary measures to impose tariffs on certain nylon imports from the U.S. The ruling affects imports of Nylon 6, used to manufacture a variety of products, including toothbrushes and chiffon. Affected U.S. firms include BASF’s (BASFY.PK) U.S. arm and Honeywell (HON).

    MGM Mirage (MGM +2%) to take a nearly $1B charge to write-down the value of its massive Vegas CityCenter project, saying the carrying value of its residential inventory is not recoverable. Meanwhile, controlling shareholder Tracinda says it’s exploring "other alternatives" to its investment in the gambling and resort giant.

    After a brutal earnings report, Greater Atlantic & Pacific Tea Co. (GAP -13.5%) – parent of the A&P supermarket chain, among many others – says its CEO Eric Claus has resigned. Chairman and former CEO Christian Haub will occupy the position on an interim basis.

    That’s why I shorted WFMI – the grocery business sucks this Q and they ARE a grocery store. 

    Meanwhile, nothing brings on a market collapse faster than us covering the DIA puts!  Only up .20 so far on the half cover so we’ll live but we can reduce to 1/4 if the Dow crosses 10,000 the bad way…

  38. Hi Phil,
    I have sun stock at 27.10 – sold Nov 32 calls for about .95 and Nov 22.50 puts for about .90
    Stock and puts good but calls not, how would you adjust?

  39. slice and dice your way through earnings, they must have magician accountant…I’m not going to be stubborn on this but i think its fooey that they are at a 52 week high….not cutting the div saved them

    Other Metrics Caterpillar’s total operating costs for the quarter were $7.02 billion, down from $11.81 billion in the previous-year quarter. The company noted that significant inventory reduction resulted in $120 million, or $0.16 per share, of pre-tax LIFO inventory decrement benefits.
    Operating profit for the third quarter was $277 million, down 77% from $1.17 billion in the year-ago quarter, primarily due to lower sales volume. Currency had a $90 million favorable impact on operating profit as the benefit to costs more than offset the negative impact on sales. Meanwhile, the consolidation of Cat Japan unfavorably impacted operating profit for the quarter by $79 million.
    Caterpillar said that due to the positive results for the third quarter and the improving outlook, its board of directors maintained the quarterly dividend of $0.42 per share at the October 14, 2009, meeting.
    As at the end of the third quarter, Caterpillar’s worldwide employment was 94,225. Employment declined by about 17,900 from the year-ago quarter.

  40.  thank you — will try one of the 2 sug.

  41. Will do on C Phil, but I’m watching IV more than price. 47% (current) is good but 60% would be much much better.
    BIDU with a huge reversal as the momentum longs panicked out.

  42. On this "Testy Tuesday" I am testing my intuition and buying TSRA (Tessera Technologies) stock, and selling a strangle – March 35 calls and March 30 puts. Earnings will be reported on Oct. 29. The company sells miniatization technology for the electronics industry and has strong growth and 50% operating margins.

  43. Phil,
    I haven’t sold the callers and putters against my BAC position from the $100K, is this a good time to sell the callers?

  44. YAAaaa!   My first link :)

  45. Phil, In the HGSI artificial buy/write how did you calculate the $18.20 entry…thanks

  46. CAT cut their workforce 19% yoy?!?!?  Wow! See this is my problem with looking at employment as though it won’t snap back up dramatically. There is no way that CAT or any other company can continue to do that at that rate without throwing in the towel and closing the doors. Admittedly perhaps the first 5% of people they  let go did absolutely nothing anyway. The next 10% were perhaps low productivity people who were also a drag on moral. But the next 5% were likely actually contributing to the development of the company and if they keep cutting they would start removing increasing quantities of really valuable people – for sure they will become ever more creative at finding ways to avoid further layoffs.
    I suggest it’s quite possible that CAT can be just as productive as it was before with 15% fewer people. Think what will happen to their margins when sales pick back up. Through the roof!

  47. Phil……A question you may know the answer to.  ….    When do institutional investors generally push funds into favorable stocks?    It occurred to me as I watch the markets pull back, except for AAPL, which may be under accumulation by these large investors today.  Do they usually jump right in after a company has a blow-out quarter, or are they more likely to try to wait for a pullback?  Just curious.

  48. Man, AAPL is the most innovative co. ever, while Dennis Kneale is the biggest goober ever.

  49. Dollar rally causing most of this sell-off.    Dollar is up about half a point from the open but that constitutes a rally for the buck these days (lack of failure). 

    FDIC head Sheila Bair warns community banks are struggling to compete against their too-big-to-fail rivals. "Too big to fail has become worse," she said, "it’s become explicit when it was implicit before." Bair contends government guarantees create competitive disparities between large and small banks, because "everybody knows small institutions can fail," making it more expensive for them to raise capital and secure funding.

    EWZ/Eric – I wonder if that will spread?  Makes EDZ a nice play at $6, selling Dec $6 puts and calls for $2 is net $4/5.

    SUN/Jomp – With 5 weeks left it’s way early to worry as the $32 calls are still 1/2 premium.  If oil breaks $80, then you can roll to Dec $33 calls at $2 and sell Dec $30 puts for $1, which keeps you good until $36, another 10% up from here.  If you are worried about a big move up (I’m not) you can alway buy some 2011 $30/40 verticals for $4,  That would give you an extra $6 of upside. 

    CAT/Kustomz – Hey, you’re not supposed to actually READ those reports – you’ll spoil the mood!  8-)

    IV/Eric – Yep, that’s what I mean of course.  A "good price," not just the price.

    BIDU – How many times will they get people to buy into that thing on a run up?

    TSRA/Gel – They seem like a nice little company.  You can get $2 more for selling the $30s and use that $2 to buy the 2011 $25/30 vertical  or spend another $1.30 for the $30/40 vertical, all give you better downside protection with plenty of upside.

    BAC/Maxt - I sold the puts for .96 and am waiting to sell the calls for about the same (now .65).  When you REALLY don’t mind owing something, it keeps you in the drivers seat. 

    Thanks 1020!  Now you can play with the little linking tool on the bar above this box.  What you do with that is highlight the text you want to have the link associated with, then hit the little button that looks like a globe and a paper clip and a box pops up and you just put the URL in there.  If you can do that, you can tell all your friends you know how to embed HTML code and they will be very impressed! 

    Housing/1020 – Not much detail there but it sounds like they are going to be trying to get cash moving back to state-level housing programs, which is a good idea as the big banks are just keeping every dollar they get and helping no one.  This will take a few months to run through the system but it’s a good idea as there’s nothing wrong with these loans (no more so than the average loan on the books already anyway) and lack of financing is choking off housing at the moment.

    Wow, just tested that 10K line on the button…

    $18.20/Magret – That’s a pessimistic number as you still have value on the long but it’s your net $1.20 in plus the $17 put to price.  In reality, it’s highly unlikely you don’t have $4 left on the Apr $16 so you’re way down to net $14.20.  That’s why I love those plays.

    CAT/Steve – You assume a pretty inefficient company at the outset and that is not typically true with well-run companies.  Of course it’s GOOD once in a while to force a 10% reduction as even the best of companies have people who skate by in good times but much of the productivity gained the past two Qs is coming from unpaid overtime as scared workers are coming in sick and early and staying late and skipping lunches to make up for the missing 10% (above the first 10%).  I very much doubt there can be growth without bringing people back and if they wait too long to bring people back, you run into a whole re-training cycle and THAT’s a big expense. 

    That’s why I felt that 9,650 was good and toppy for the Dow as, if you drill down and look at HOW these companies are making their numbers, they are mainly milking the momentum out of their sales and production and clearing inventory and stripping costs but all that stuff comes back to haunt them.  Even worse, if the Chinese or European companies at the same time choose to gamble on growth and catch our companies flat-footed, then they could fall behind for years or lose market position permanently.  Going over 1,100 on the S&P has an expectation of robust growth ahead, I just don’t see our companies really geared up for that, most are in a very defensive posture. 

    Intstitutions/Iflan – If you get a big surprise, there is a quick inflow by funds who think they are underweighted and missing the bus.  On regular beat like PFE, you get retargeting and plenty of exits if the stock has already run up.  A good fund (and most try to be) constantly revalues the stocks and earnings reports constitute serious information so they will run those numbers and make a new target and then decide if they have too much or too little.  That’s why I think the safest earnings play is shorting stocks that are already up in anticipation of a beat, it’s VERY hard to justify a big run into earnings (IBM is another good example) as a fund has to look at $120 and BELIEVE IBM will be at least up to $132 in 12 months, otherwise, they need to cut and run or risk underperforming. 

    Right on both counts SS!  8-)

    Damn, there goes 10,000….

  50. Is X ready for buy entry?

  51. No sooner did John Lounsbury assert that those claiming the housing crisis is over are oblivious that we’re just in the eye of the hurricane than today’s housing starts data provided more evidence.

    With rapidly rising vacancy rates and rents declining (both rent and owners-equivalent rent used to calculate the CPI fell for the first time in 17 years in September, and regional and anecdotal evidence suggests that the declines are much larger than the CPI data has captured so far), it is probably a good thing over the long term that we are putting up fewer of them. Single family starts rose 3.9% on the month to an annual rate of 501,000, and are down just 8.7% from a year ago.

    The weakness in starts will help clear up some of the inventory overhang going forward, but also means we will be getting less of a boost from Residential Investment in growing GDP. Weak starts are not exactly a good thing for construction employment, or employment of firms producing building materials. Also not good for the profits of homebuilders.

    X/Concreata – I’m still short the steel index.  It’s way oversupplied and the auto sales numbers this month may push them over the edge if China does’t save us.  Of course, the average Chinese car uses 1/3 the steel of a US car so it’s not apples to apples but that’s how investors play it so who’s going to argue?

    California sues State Street (STT -8.2%) for $200M, claiming "massive fraud" in overcharging pension funds by some $56M for executing currency trades.

  52. Phil:
    the AAPL put sold yesterday worked out great: 72 % gain when sold this am,
    what about SNDK which seems to report after hours some good numbers ?

  53. Phil: FCX might be ok also with good numbers before the open tomorrow ? any comment ?

  54. Phil,
    What’s the bounce level here, and do you think it’s a bounce or should I sell my TZA ?

  55.  Phil,
    I have sold November covered calls on YRCW with a basis of $3.39 and was thinking about selling the Nov $3 puts for $0.6. What is your opinion of YRCW with earnings coming up and the recent debt restructure?

  56. Of course, the average Chinese car uses 1/3 the steel of a US car so it’s not apples to apples but that’s how investors play it so who’s going to argue?

    What about gas (OIL)
    China’s Oil Consumption to Hit 600m Tons by 2020: Expert
    Published: September 24, 2009 03:58 PM
    China will guzzle 490-520 million tons of oil by 2015 and 560-600 million tons by 2020, a senior official with the National Development and Reform Commission said Wednesday at an international oil and

    this is from sep
    Platts says that China is the world’s second biggest oil consumer but the nation is down on imports and crude through-put rates at domestic refiners, bringing total demand to roughly 33 million metric tons, from nearly 35 million in July – consumption was still just over 2 percent higher than last August.
    "August seems to have brought a reality check for refiners in China," said Vandana Hari, the Asia news director at Platts. "Domestic fuel demand has clearly been lagging their high processing rates, and storage space is finite. However, the correction could be short-lived because the government’s new domestic oil pricing policy implemented since the start of this year incentivizes high refining volumes. As long as inventories can be managed by boosting product exports and reducing imports, refinery throughput might remain high."
    In July, China boosted crude imports and refining rates to an all-time high, leaving state-owned refiners Sinopec and PetroChina with swollen inventories in the face of low demand.  
    Refined product stockpiles were 30 percent higher than the same period last year.

  57. OGXI bounced off the 30 support level.  I will be watching closely for an entry, most likely a few 35 Nov P to sell.  I don’t see them breaking through here (yet).  Data are to be released in Dec.

  58. Phil
    You wrote:
    Another way to play ISRG bullishly is to buy the Jan $310 calls for $9.20 and sell the Nov $300 calls for $8.25, which is net .95 and you have to plan on adding more calls or rolling them down if ISRG breaks over $300 but it’s a very good spread as long as you don’t mind turning it into a long-term play.
    The one above is at 1.60 now. But pardon my ignorance, how is this a bullish play? 

  59. ISRG/Chakra – it’s really quite bullish. You want the Nov 300 call to expire worthless and you are giving ISRG room to increase from 267 to 300 and still earn premium. That’s an anticipation of 12% increase in share price in a month. Further the breakeven on the sale is 308.25 and that’s 15% in 1 month.
    The sold call pays for most of the Jan 310 calls which are also bullish as they benefit from further appreciation in the stock between November and January.

  60. Sector ETF weakness: Steel– SLX -2.8%. Homebuilders– XHB -2.6%. Gold Miners– GDX -2.6%. Oil Services– OIH -2.5%. Clean Energy– PBW -2.2%. Real Estate– IYR -2.2%. Agribusiness– MOO -2.1%.

    Sector ETF strength: Healthcare Providers– IHF +0.2%.

    The government says it’ll be a few weeks before it has the data to decide whether to extend the $8,000 first-time homebuyer tax credit. The IRS’ internal watchdog is about to warn the agency for the fourth time about fraud related to the credit – up to $489M possibly granted to unqualified applicants. And Rex Nutting says to kill this ineffective, wasteful subsidy.

    Volume dying down at 115M at 1pm.  Market heading back up on low volume.  Now we see when/if sellers step back in. 

    SNDK/RMM – That one’s a little wild. Best to take advantage of Nov $22 calls at $1.33, selling them against the same number of Jan $22.50s at $1.95 for a net .62 position on the .50 spread.  Unless SNKD has TERRIBLE numbers, the Jans should hold about $1, even if they are around $20 after earnings.   We can then roll it into a free vertical hopefully.

    FCX/RMM – I’m inclined to be short on them but there’s no good plays I see.  Too dicey with gold prices so crazy. 

    Bounce/JRW – Clearly it’s a weak day and we’re waiting on data tomorrow, especially the Beige Book at 2pm.  BBook is generally based on what’s seen through about 10 days before the book so Retail was looking good, housing still iffy, jobs still iffy, lending still tight – I don’t think it’s going to be a big market booster…

    YRCW/Calch – I wouldn’t.  Noboday is shipping anything anywhere (other than IPhones) and that does not make for a good outlook for YRCW.  Also, gas is skyrocketing so it’s going to be another rough quarter I think.  If they get through it, just be happy about it. 

    China/Kustomz – Oooh, scary numbers!  A ton of oil is just 7 barrels (oil is heavy!) so they are talking about (at 600MTons), 11.5Mbd, about 1/2 of US consumption projected at the high end of the range in 2020.  They currently consume net 450MT and that’s 8.6Mbd so we’re talking about 3Mbd more over 11 years.  If the US saves 15% of it’s own consumption over that time (raise milage from 20 avg mpg to 25), we will offset all of China’s increased use.  If China makes an effort, they can conserve too as can Europe and India.  Also, if some alternative fuel replaces just 10% of the world’s oil in 10 years, that’s 8.5Mbd free’d up – What would the article sound like if they said China’s current consumption will be reduced to zero over the next 10 years?   That’s what a 10% replacement OR a 10% reduction in current usage would be…. 

    ISRG/Chakra – You have the $310 calls and pay net $1.60 for them so you are "in" for $311.60.  You sell the Nov $300s so you will owe $11.60 to the caller by the time you are in the money BUT, the in the money ISRG Jan $270s are $22.70, not zero.  You have to look ahead to the roll(s) you will make if ISRG goes up, not just the net of the 2 positions as one will maintain its time premium and one won’t.  Also, as I pointed out, you may need to add more calls for the roll but the gist of the play is you expect ISRG to go up, but not too much. 

  61. Phil – Pls, how did you calculate "pays $18 at 50" and "2x $5 before caller is in the money at 47"?
    "I still prefer TBT with the 2x the March $42/50 spread at $3.30 ($6.60), selling the Jan $47 calls at $2.25 and the Jan $44 puts at $1.95 ($4.20) for a net $2.10 entry on a spread that pays $18 at $50 and pays 2x $5 ($10) before the Jan caller is even in the money.  "

  62. Steve
    Thanks for the explanation. This is a little counter intuitive but I have learnt something today. However, the spread seems to be priced at $1.60.

  63. A red day ?  Yay !
    Man I had some good shorts early today that I just did not stick w/ … CAT premarket a 61+, COF at 37.85; others.
    Phil; surely you will enjoy this:

  64. TBBK upgraded to buy.  No options, but I bought them a while back rode them up, and am now back in.  CEO bought a boatload of shares in Sept for $6.

  65. What is the symbol for the steel index.

  66. NJ’s gonna get crushed on income tax…..PFE laying off a ton from WYE, and MRKs gonna slam one site or the other in RY or Kenilworth.  JNJ is already trimming scientific staff in NJ.  (MRKs PA site will also take a haircut on the merger as well.)  NJ also has the highest property tax!  WHOA Nelly!

  67. Phil — you gonna be in my neighborhood today ?   Only 30k for you and the wife to flush some money to just another politician.

  68. SLX Cap

  69. Pharmboy … same for NY State….

  70. Phil,
    Any thoughts on TS? They were added to the GS CL today with a $50 6-month price target. They’ve had a huge run already over the past 2 months.

  71. Hey Cap, you still in those ICE puts from last week (Fri I think)

  72. OIL….. you forgot to figure in the explosion of auto sales in China ;-)

    Man that MCC has some temper, too bad politicians cant do their job without a hidden agenda.

    *This is an interesting article on AAPL, this guy follows AAPL religiously*

  73. Chakra, agreed it’s 1.60 on my screen as well, the premium in the front month option has collapsed.
    The real lesson (for me at least) is that, even if you are bullish, you STILL want to pay as little option premium as possible.

  74. PharmBoyOREX has drifted up and then back downwards, now below my buy price, get out or DD?

  75. Pharm,,are you buying TBBK again at $5.42….are there no options on this? …..IB do not offer any.

  76. MrM – all in on ARNA. cheaper and better on the P side for selling.   WHEN they sign a deal, I think they perk up to OREX and VVUS levels.  ARNA is not hiring a sales team, so they will command a partner with favorable terms.  (VNDA only bigger)

  77. Margret – I bought in at 5.29 the other day (TBBK).  I noted above that there are no options.

  78. kwan; been in and out of ICE ….  currently short some shares and some calls; small size.

  79. Ah, the some spreads – i.e. SNDK – almost feels like the old days :)  
    Also like PFE for some spreads.  June 17′s are 2 and can sell NOV or DEC 18′s against them and know down 1/4th of the price just this month.

  80. Phil -
    JNJ – What do you think of selling the Jan. 11 puts – looks like there is good support around 55.
    and selling jan. 11 bull call spread – buy 55 for $7.50 sell 60 for 4.6 -
    stock can move sideways all year and you make 70% 

  81. Phil/Pharma RAD down 5%….is it a good time to DD…

  82. Phil: NTRS reporting good earnings, so is MO.
    any comments ?

  83. OIL/Kustomz – yeah Im struggling to see conservation of Oil in China as well. Most people don’t have cars and most cars are small and most homes, schools etc. don’t have air conditioning (or heating either maybe that’s just my experience) and most people won’t get on an aircraft all year.
    Having said that, the chinese may eventually start doing maintenance on things. I swear they would rather tear a building down and rebuild it from scratch than replace a single lightbulb. That could lead to some effiencies…

  84. PharmBoy - what’s your horizon on ARNA?  I have JAN 4 calls, should I roll out to a later date while it’s cheap? 

  85. Bought some HK, LAZ, and SYNA calls yesterday, am adding a little bit to these positions today, they are all holding up well enough.

  86. Phil: AMZN looks good with projected earnings on 10/22: make a trade ?

  87.  Cap – thanks. Good to know I’m not completely insane (yet)

  88.  B&N’s new nook ereader now live on their website (a week before it’s "release"?)

  89. ARNA / Pharm – What trade do you recommend for ARNA?

  90. Kwan; I stepped out for 10 minutes and the damn POS is up $1.
    Just another manipulated stock !

  91. I don’t get that thing, you can only lend "most" books for up to 14 days at a time and the full color touchscreen looks like it’s only good for browsing through the books on the device…and conceivably books that are available at the store front.
    So it’s basically the same price as the Kindle but with a color touchscreen that in itself doesn’t give you much bang for your buck. Big woop?

  92. AMZN will probably be a killer short after earnings w/ all the competition coming from WMT Sony B&N etc.

  93. RAD/Marg – not playing now.  Up from 35c…I think LONG term they may be ok, but I will wait a bit longer to see how the market shakes out. I am moving to a larger cash position with a few pokers in the fire.
    ARNA/MrM – no idea.  Might be tomorrow, might be next year. I have been selling the front month 4 P for nice steady reduction in my holding of the stock.
    SNYA earnings are tomorrow. If they rock, they will move back to OH resistance, if they fail, look out below.  I just bought back the last of my P plays from Oct that I had to roll to Nov.  I am also in the 20 Jan11 Ps (sold).

  94. Pharm, I’m thinking of a small position of either long 500 stock (cost $2125), or short 10 Jan 5 puts for 1.25 each ($1250 credit, and ties up just $850 margin). Would you choose one over the other? Unless the stock really, really takes off, it seems like the put sale is the better risk/reward. But if the move could be 30%+, the stock might be worth buying. Thanks!

  95. Cap, I am praying AMZN runs up after earnings so that i can mortgage my house and short amzn :)

  96. That was for ARNA Pharm.

  97. PharmBoy – when you sell puts on ARNA do you cover the downside because it’s pharma?  For example sell DEC 5s, buy DEC 3s, net credit $1…

  98. Pharm, just saw your answer to MrM, I’ll go with put sales then. Thanks.

  99. Who’s making mortgages jomama ?!   LOL

  100. LNN went down a lot lately, but bounced back after hitting 31.20 today.
    This seems to be a solid company, making irrigation equip for farming.  Earnings on Oct 22, I believe.
    I am scaling in by selling Nov 30 puts.

  101. Cramer’s viewers are "desperate to play Iraq".
    This guy is out of his mind ….

  102. No, I don’t cover the P side with anything.  Currently in the 4 or 5 Nov different accounts.

  103. TBT/Concreata – Oops, my bad!  I was looking at the $41/50 spread (as TBT went down I immediately started looking at the lower srtikes.  So it pays 2x the spread ($8 x 2 = $16) at $50 and you are in for net $2.10 so a possible profit of $14.80 at best. 

    Stealing elections/Cap – What,.did you guys think you had a patent on that?  Just wait until the gerrymandering begins!  Sorry, wasn’t planning on attending a fundraiser today…   8-)

    Steel/Cap – SLX, we sold the $60s.  

    TS/Aclend – Crazy low expectations and they are probably underpriced but I don’t like the sector (OIH) but they’d be a nice pick-up if they do miss and drop back to the 50 dma at $35. 

    Getting sticky after 2pm.  Volume at 2:20 was 135M, very stickable which shows you how much we slowed down after a big open. 

    Oil/Kustomz – That’s what the usage projections are based on.  It’s not like they were going to start bathing in it… 

    PFE/Jo – Good plan on that one!

    JNJ/Samz – I think you tie up a lot for not too much gain.  I’d rather be less complicated and go for the 2011 $55/60 spread for $2.90, which has a 72% upside at $60 (flat) and makes enough so that you can have 3 of those verticals and sell 1 Dec $60 put and call combo for $2.90 which knocks off 1/3 of your long cost each time you hit your mark

    RAD/Magret – I’d rather let them work through this debt restructure first as I’m not too sure about them and 5% isn’t that much to DD on unless you were very gung-ho to own a lot. 

    NTRS/RMM – Banks are too much like crap shoots this Q – some hitting some missing.  If you really like them you can sell the Dec $55 puts naked for $1.70 but, otherwise, not a very exciting play.  MO’s options are too cheap considering how volatile the stock is.  They do pay a 7% premium though so they make a nice long-term hold and you can buy them for $18.70 and sell the 2011 $17.50 puts and calls for $3.90 for net $14.80/16.15, which is very good collecting a $1.36 dividend on top of it. 

    AMZN/RMM – We are very short on them at $95.

    BKS/Kwan – So many leaks I think they gave up and put it up.

  104. Interesting charts from Bespoke.  Only four (Consumer Discretionary, Energy, Materials, and Technology) of the eleven sectors shown have outperformed the S&P 500 over the last year.  While Financials have been one of the leading sectors off the March lows, they are still underperforming the S&P 500 by a wide margin since 10/08.  Not surprisingly, given all the debate in Washington over Health Care, that sector is near its lowest levels in the last year in terms of relative performance.  Finally, with the consumer supposedly tapped out, it’s ironic that the Consumer Discretionary sector is near its best levels of the last year:

    Relative strength 102009

    Relative strength 102009a

    Relative strength 102009b

  105. Iraq/Cap – Yeah, what a growth opportunity!  Didn’t Cramer shove his sheeple into Russia and China at the dead top?   I’m surprised they have anything left to invest…

    Speaking of China – Actual stocks on the Shanghai Composite are up 69.4% for the year but idiot Americans are paying up 101% for American versions of the same stocks

    Chinese ADRs


    The SEC is reportedly considering much sharper limits – by 95% – on anonymous "dark pool" trading. The agency will propose lowering the amount of daily volume that can be privately traded to 0.25%, from 5%, but exempt block trades, which account for 8% of dark-pool trading.

    Looking at the gap between the real federal funds rate and market rates, Zubin Jelveh wonders if Fed rate cuts still have any juice, and sees it as another sign our strategy is nowhere near the exits.

  106. Is that ADR vs. Shanghai saying that the actual ADRs are overbought by that amount? Or only that the average U.S. Chinese ADR is way above the Shanghai composite average, which is what it seems to say? The latter could happen without the ADRs themselves being overbought.
    If the former, though, we should find out which Chinese ADRs are the most overbought. That would be crazy (I bet BIDU would be on the list).

  107. Buying SPPI 2.5 Jan11 C for 2.45.  Nice way to play the up move with them.  P/C ratio is 0.17.  Will 1/2 sell front months on next little green candle (3 mo).

  108. Earnings plays:

    STX has flown so I like the Jan $17.50s for .65, sselling the Nov $16s for .60 (net .05).  My expectation is they disappoint but then hopefully recover on a Santa Clause run after earnings.

    SONC June $10/12.50 bull call spread for net $1.20 (SONC is at $11).  Just a bullish bet

    TUP is interesting as they are at ATH and probably worth it.  Apr $40/45 bull call spread is net $2.30.  3x of those and selling a Dec $45 for $2.30 gives you one for free!

    APD likely to look like DD – will show good numbers but so what.  Dec $85/80 bear put spread is $2.20, might be a good chance to take out $80 putter on a spike up.

    CAL is one I do like at net $13.80 so selling naked Dec $15 puts for $1.20.

    MS Jan $31/32 bull call spread is at .40 is just fun.

  109. SONC should be interesting with RT doing ok…although GS put them on the conviction sell in late Sept.

  110. ARNA / Pharm - What’s your specific reasoning for Jan 11 calls? Why not spend 30c more and get the Jan 12 calls for 2.75?

  111. ADRs/Eric – Those ADRs are mainly part of the Shanghai so it looks to me like they are running way ahead of the actual stocks.  Not surprising since we have an endless supply of rich idiots in this country…

    Sector ETF strength: Solar– KWT +0.6%.  Healthcare Providers– IHF +0.4%. Transports– IYT +0.2%.

    Sector ETF weakness: Homebuilders– XHB -2.5%. Gold Miners– GDX -2.5%. Regional Banks– KRE -2.2%. Biotech– IBB -2.2%. Oil Services– OIH -2%.  Insurance– KIE -1.9%. Real Estate– IYR -1.9%.

    SONC/Pharm – I have seen several in NJ that have lines that literally disrupt traffic.  It’s good, cheap fast food and the kids like it and their p/e is 20% below the sector norm with good growth.  If they get cheaper, I’d want to establish a long position anyway. 

  112. Looking at the JNJ options, someone is expecting a big move.  A 100 position calendar 80 Nov/Dec P spread (for 5c) countered with 160 55 Nov P for 20c.  I am going to take a stab at a few 60 Dec09 P for 1.3.

  113. PharmBoy - SYNA reports Thursday after close, not tomorrow.

  114. Trad – SPPI, not ARNA.  I am expecting a buyout next year.  Jan12s delta is the same as the Jan11s, so why pay more?

  115. Yeah, I saw that after I posted, but TOS says SYNA after market close tomorrow, with the conf call on Thurs.  Not sure why they would do it separately, but hey, I just go by the little calendar in TOS!

  116. Phil: "CAL is one I do like at net $13.80 so selling naked Dec $15 puts for $1.20."
    ??? I see CAL at 15.90.

  117. Phil
    MS Jan $31/32 bull call spread is at .40 is just fun.
    Its now 0.68. Would you pay that much?

  118. Whoever bought the DIAs at 105.9 @ 7:15 am PST is a moron.  Totally messed up my 1d chart on them.

  119. Phil, did you see  the 120,000 Mar SPY 100 puts and 240k Mar 85s?

  120. phil,
    how can amzn be ahead of its 14 mo high and yet aapl was not allowed to exceed it even with blow out numbers?

  121. Stick at it again since 3 pm …

  122. phil,
    re amzn, it is not above its all time high of $100 which occured in oct ’07. its like some computer is just looking at ath’s without regard to a calandar!!

  123. Pharm – Thanks for the clarification. I meant SPPI :D

  124. Raul – those look like the two resistance levels.  Someone is using the lower strike to minimize the cost of the higher one (expecting a move down to below 96….).

  125. stick has no power today. the higher dollar is driving everything!

  126. CAL/Cwan – If you sell a naked $15 put for $1.20, your net entry is $13.80.  So I am saying I WOULD like to buy them for $13.80, which makes this a good trade. 

    Boy I forgot how much fun it is being bullish, just sitting here and waiting for the stick to fix everything!  8-)

    Old-fashioned cash has become the benchmark of value around the world, says J.P. Morgan’s Jan Loeys, and as long as the returns on it are near zero and uncertainty keeps falling, money will flow from cash to positive-yield assets.

    MS/Chakra – NO WAY!  You guys need to be more mellow in your bidding, that thing was rock steady at .40 until I posted it, then it went nuts…  Just walk away if you don’t get your price.  Even at .50, you go from 150% upside to 100% upside, losing 1/3 of your upside on a 50/50 bet is not a good thing…

    DIA/Pharm – They were just trying to flush the stops, didn’t look like they hit too many. 

    VIX is down on a down day – that’s interesting…  Even more interesting is that, with the VIX at 21.08, the damn 22.50 puts we got yesterday are only .75 – up a dime but it would be nice if we got more of a move.  You have to get closer to settlement date to get proper value from these things… 

    AMZN/High – Because AMZN is easy to manipulate and AAPL is too heavily traded on a day like today to fake.  When you see the movement off AAPL and GOOG rest on resistance after earnings, THAT gives you a pretty good idea of what will happen to the mo-mo guys once the numbers come out.  You are right about the computers, it’s totally faked trading on most of these, just programs that runs the stocks up and down to make the sheeple panic in and out. 

    Lots of sellers here (Thursday’s highs) and we gapped lower on Friday so be careful...

    3:52 PM While Microsoft (MSFT) has begun emulating Apple (AAPL) in some notable ways – such as its planned retail stores ( for which Apple was once mocked) – Apple has spent the past five years doing something positively Microsoftian: building a hoard of $20B in cash and marketable securities (see comparison chart).

  127. Phil, any put play for AMZN??  Haven’t been in here awhile, good to be back.

  128. Hi Lolo!  We sold the $95 calls but that position is nothing but heartache so far.  On the whole, I think they come back down to $85-90 after earnings but I like selling the $95 calls best as they are $5 and we can roll them to Jan $100s and Apr $110s etc so it’s not like we ever intend to pay them. 

    Gotta go guys, good luck on earnings plays. 

  129.    FWIW     GOOG "partnering" with BKS on the "kindle-like" book  might be worth watching.  Hope the populace gives a lot of books at  x-mas.

  130. What or where is the best site for following earnings?

  131. Wow, YHOO earned .13 per $17.50 share!  Only .07 was expected.  That means if you give Yahoo $17.50 it "only" takes them 134 quarters to make the money back, that’s like getting almost 2% a year interest on your money!  Watch people buy it now…

    ISRG great but is great good enough to justify $280?    Obviously we bet it wouldn’t be…  Still, a totally great, great company that I am so proud I badgered people into at $85…. 

    OK now I’m gone….

  132. STX beat but barely moving. That’s looking like another nice earnings trade.

  133. Pharm, Phil,  GILD had great earnings, but the stock is moving down.  Any reason?

  134. ssdirk,
    is good site since earnings in them selves are many times secondary to what the mkt is expecting. i.e. the whisper numbers.

  135. SS – GILD – give them a chance, they are trying to shake people out.  Lots of support at 45, and if they move down, i will be inclined to back up the truck (Cramer’s phrase).

  136. phil,
    you have to admit that cramer has his effect. he has got to be pissing off the appl short guys tonight. they are pumping very large amounts of stock (by after hours standards) and still cant get to come down. they will probably ultimately prevail but they have got to be pissed right now!

  137. ssdirk, is another one.
    I was going to post this photo if CAT missed this morning. Maybe we can use it next time:

  138. So far, I think everyone except for AAPL and GOOG have been sold off after earnings or any earnings pop.

  139.  Cap/AAPL and GOOG.    Are these two top-notch companies, or WHAT!   Anyone who doesn’t own these two should reexamine their portfolio.   

  140. Phil,
     "VIX is down on a down day – that’s interesting… ” do you think it’s because of we’re seeing some complacency, or underestimating the downside risk? With such poor fundamentals to support the bull runs, one has to wonder…
    You 10/19 comments of "So anyway and FWIW, I’m actually buying some of my SPY strangles back because I’m willing to bet that I’ll get a little better price soon (we are in earnings season in the biggest global economic crisis in 70 years, after all). If I’m wrong, I can’t see the VIX going down so much that I miss out on more than a few dollars.“ is very interesting (to me as a newbie at least). 

    I’ve seen straddle/strangle adjustment mostly via rolling but not based on volatility. I tried on TOS thinkBack to get a sense of the gain (on those strangles) due to VIX increase but then offset by time delay without much lucks..

  141. It seems we are finally hitting the point of diminishing returns for earnings.  Expectations have finally gotten so high that even big beats aren’t enough to keep the momentum going. 

    Last earninings Q, we were down from 8,900 in June to 8,100 on July 9th as companies began reporting and we had a nice, 1,000-point relief rally over the first two weeks of earnings.  This time, we went up an additional 500 points in the past two weeks, over our 9,600 line and that has been in anticipation of a repeat of last earnings but the circumstances are very different this time and it takes a lot to justify a 20% run off the July lows. 

    Keep in mind that in the above sector charts, Energy, Materials and Tech are leading us.  Since semiconductors are simply another form of commodity – this is almost entirely a commodity rally in the midst of a recession with Consumer Staples, Financials, Health Care, Industrials, Telcom, Utilities and Transports all underperforming the rest of the S&P.  As I keep saying – if no one is shipping anything, how the hell can we be having a proper recovery?

    David Weidner’s not surprised an America sucked in by an improbable boy in the balloon continues to be bamboozled by Wall Street’s slight-of-hand. "The ‘dumb money’ never fail to live up to our reputation as suckers, chumps and easy marks. We keep putting our money in the market, diversifying and looking at the fundamentals of the underlying investments….  We do so even though the overwhelming evidence is that the safest and surest way to riches is through what Wall Street calls superior "intelligence." You and I have another name for it: cheating."

    GILD/SS – Some nonsense about their Aids drugs not doing as well as expected but, as Pharm says, a super-solid report and they look great long-term. 

    AAPL/High – Cramer’s main function is to herd the sheeple into a stock right at the top so his hedge fund buddies can cash out.  John Stewart already pointed out specifically how Cramer is a known AAPL manipulator so I have nothing to add.  Just watch that $200 line as all Cramer is doing is pumping in suckers to hand over their $200 to his pals who are getting out ahead of the next hyeana attact that will take the stock down so they can jump back in again.  Of course, Cramer was leading the hyenas last Thanksgiving, when I was telling everyone to buy on the dip at $85:

    Last year, the Street continued badgering Apple, brushing aside the global launch of the iPhone 3G to try to focus coverage on Steve Jobs’ health in a video segment titled "Without Steve Jobs, There is No Apple."

    "This is a company that thrives on innovation, and the innovation is all being driven by one man.” Cramer said of Apple. “That’s okay, the one man is not a stock. I mean, you can’t. The multiple of one person is zero. Well, one. But I would warn people that this company… I don’t want to call it nothing without him, but it is not investible without him, because he is the driver of ideas. Now behind anybody there’ll be other ideas, but I remember the original Apple, and it was all him, too."

    CAT/Eric – They do make some wild machines! 

    Consumers not at all "comfortable":


                   NATIONAL   PERSONAL    BUYING
    10/18    -50       11         41         23
    10/11    -48       11         42         25
    10/4     -45       11         44         27
    9/27     -46       10         45         26
    9/20     -46       10         45         26
    9/13     -49        9         44         24
    9/6      -48        8         45         25
    8/30     -45        8         48         27
    8/23     -45        8         49         25
    8/16     -46        7         48         26
    8/9      -47        8         47         25
    8/2      -49        9         44         24

    VIX/Balance – I have a different theory about the VIX that has held up pretty well for 2 years.  My theory is that the VIX is not a "fear" indicator.  It’s really a volatility indicator (duh) and it’s just that we’ve generally gone up and up and up for 20 years so people think a high VIX means fear but what a high VIX really means is that the direction is wrong.  Think of the VIX as a stretch indicator for the rubber band of market normalcy.  When the market is stretched unrealistically, then option players bet more heavily on big moves back and that spikes the VIX.  When the market is heading along the "correct" path of least resistance – option players tend to bet on the money, with a lower assumption of a snap back.  So, when I see a lower VIX on a down move, it means to me that the VIX agrees with the down move.

    Last year, we talked about setting up a VIXdex, an index that tracks the VIX move relative to the market move.  I think something like that would be pretty revealing…

  142. The "Audit the Fed" movement gains some momentum as two senators introduce a bill calling for the Government Accountability Office to look over emergency lending programs.

    Don’t be fooled by the sudden recovery, Paul Farrell says – American capitalism has lost its soul and the consequences will be dire: "Use your gut. You know something’s very wrong: A year ago ‘too-greedy-to-fail’ banks were insolvent … Now, magically they’re back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising … "

    Venture capital investments in tech are picking up, but the wealth isn’t being spread around. Most of the money isn’t going to new startups, but to mature ones trying to stay alive.


  143.  EricL – thanks for the links!  Great CAT pic, BTW…