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Frothy Friday – Churn Baby Churn!

What a wild week we are having!

We dumped our shorts as planned yesterday morning, getting a very nice dip at the open and my 9:36 Alert to Members was even titled "Take Those Short Profits!" and our upside targets were set (as they were in the morning post) at: Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623.  Where did we finish?  Dow 1,081, S&P 1,092, Nasdaq 2,165, NYSE 7,182 and Russell 613 – so a bit short of all of our targets but not bad considering we were opening 167 points below that on the Dow so perhaps I can be forgiven for a 6-point miss

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Even our free PSW Report readers would have done great just following the trades we had in last week's Wrap-Up (Report subscribers get to read our articles without the 48-hour delay).  We had GS Nov $210s shorted at .87, now .35 (up 60%), CERN short $85 calls at $4.15, now $3.10 (up 25%), ISRG Apr puts and calls sold for $39.20, now $36 (up 8%), PARD at $6.87, now $7.35 (up 7%), NTRI at $18.60, now $19.15 (up 3%)… 

We had other trades that are still in progress.  ICE notably burned us so far, but we rolled them up and shorted them some more yesterday  (now $106.56).  We've had a wild mix of short and long trades this week as we TRY to get more bullish on the markets but yesterday's run-up had us reloading Thursday's successful short plays as that set made 20% or more across the board in less than a day.  Note on David Fry's chart, that we bounced off resistance but a test of the 50 dma on the S&P still seems likely

We have plenty of long plays we like if we cross our breakout levels but our goal is to keep the emotions out of the trade and just play our levels.  That's why we pretty much sat on our hands through most of yesterday's trading.  We took a long position on SRS as we feel the REITs are way overpriced and we added more bullish TBT plays as that is our second favorite long-term play.  We did go long on TASR and short on COF (bad idea!) and POT (good idea!) and a BMY hedged play caught our eye at 2:30 but at 3pm we realoaded short plays on the DIA, FSLR, MS, AAPL and longs on SRS, TZA and CAL as the run seemed way overdone. 

At 3:22 we looked at 8 earnings plays and we'll see how they work out in the Weekend Wrap-Up.  Thank goodness we hedged AMZN and it will be interesting to see how the 5 Jan $100s at $4.80 /4 Nov $95 at $4.55 spread will work out.  I very much regret not taking our short AMZN play off the table in the $100KP and that is going to require some serious adjusting but, if we don't break over our watch levels today – I don't think I'm going to be worried about the spike up with 4 weeks to go until option expiration day. 

AMZN did indeed have amazing numbers and this $100 stock is well on its way to earning $2 a share this year – Booya!  In fact, if all goes well next year, AMZN thinks they may make $2.50 per now $107 share.  Wow!  That's an ROI of 2.3%, almost as much as you can get from a 12-month CD in the bank!  As I ranted last Monday, the concept of Risk has gone completely out of this market – as evidenced by the VIX dropping to 20 this week despite the fact that this has been the most volatilie week in the market in quite some time as we went from 9,940 on the Dow Monday to 10,100 Tuesday, back to 10,000 Wednesday, down to 9,940 again on Wednesday and then opening at 9,920 on Thursday morning before running all the way back to 10,100.  And we used to make fun of the Chinese markets! 

We'll see if the combined forces of AMZN and MSFT can take us over our bullish breakout levels today.  We loaded up with bullish plays from our Watch List as well as during chat this week but, sadly, all our big winners have still been coming on the bear side as these little moves up turn out to be just that – little.  Our earnings plays for today were:

  • 4 AMZN $95 calls sold for $4.55, buying 5 Jan $100 calls at $4.80
  • DECK Dec $100 calls sold naked for $3.10
  • 6 NFLX $52.50 calls sold at $1.40 against 4 Jan $55 calls bought at $1.70
  • SPWRA Jan $30 puts sold short at $2.40
  • SPWRA 2011 $45s for $4.20, selling Dec $35s for $2.05.  This is a spread where more money will be put into the longs if they do well and otherwise we roll down to establish a long position.
  • WDC Dec $34 puts sold naked for $1.10 (STX did good). 
  • CACH at $4.90, selling June $5 puts and calls for $2.50 nets $2.40/3.70
  • MSFT 2011 $22.50s for $5.45, selling Jan $26 puts and calls for $2.60 nets $2.85 on the $3.50 spread

As with the Tuesday trades we looked at in Wednesday morning's post, the idea is to make a series of small bets where we cash out the winners and work the "losers" into longer-term spreads as none of these positions is something we don't want to stick with long-term (unless the earnins report changes our fundamental outlook).  So far, starting with $1,000 in each trade we have STX even but on track, SONC down $200, TUP up $350, APD even, CAL was already moved to 2x the Dec $13 puts but we'll call that down $800 and MS is up $875 so a net of up $325 (5.4%) on $6,000 at risk for 3 days.  Our biggerst loser, CAL is a stock we would be happy to own 160 shares of at net $11.80, which is our current risk on that play as we rolled the Dec $15 puts to 2x the Dec $13 puts

By diversifying your risk like this, you can cash out, for example, SONC, APD, and MS for $3,675 and leave STX and TUP to mature (as they are on track to do very well) and put $1,000 back into CAL (which we did) to end up in a position (the Dec $13 puts sold at $1.20) that can become a stock position we DO want to allocate capital towards.  The leaves us wit 3 spreads we REALLY like and $2,675 of our cash back to reload for the next set.  This is how you can build a virtual portfolio of good spreads – take small shots at these earnings plays, which pay us very good premiums, and then, AFTER we have the facts from the earnings  reports, keep the good ones and get rid of the bad ones. 

Asia had a very nice morning with the Hang Seng up 1.7% and the Shanghai up 1.9%.   The Nikkei was flat and the movement of all 3 was the usual afternoon stick-save nonsense but we're bullish now so we'll pretend that it's normal and not dwell on it.  There is no news in Asia – they are rallying because we are rallying and that's about it.  Europe is more interesting as they are up 1% (9am) DESPITE a HUGE miss in UK GDP (the World's 6th largest economy) as the economy there SHRANK 0.4% vs the +0.2% expected by economists.  Of course, a 300% miss is nothing unusual given the quality of the people they have forecasting the economy and, even as I write this, our Forecaster-In-Chief, Ben Bernanke is doing a song and dance on TV trying to tell US investors to not worry and be happy

"The third-quarter [gross domestic product] data are a real shocker and desperately disappointing," says Howard Archer, chief European economist at IHS Global Insight in London. Going forward, the U.K. economy faces significant hurdles to sustained growth. Unemployment is at 7.9% and in early-2010 the restoration of value-added tax to 17.5% from 15%, an increase in a social security tax and an increase of five percentage points to 50% in the income tax of the highest earners will couple with a program of spending cuts that will take money out of the British economy.  Underscoring how painful a reduction in government spending is likely to be, Friday's figures showed that the public sector had been the only area of the economy with any life, with growth flat for the quarter after a decrease of 0.2% in the previous three months.  "It is becoming increasingly clear that the recovery, when it does begin, will be slow and bumpy," said Hetal Mehta, an economist at the Ernst & Young ITEM Club of economic forecasters.

So, despite the urgings of Mr. Bernanke, I do remain a bit skeptical of the rally but, like a good little mindless bull – I will keep my promise and initiate some more bullish trades if it looks like we are going to hold our levels for the day.  MSFT reported an 18% drop in profits and are being treated like they invented the IPhone or something and AMZN, who did invent the Kindle at least, have gained $8Bn in market cap since yesterday's close – pretty good for a stick that was less than $35 on March 9th! 

Since we are already short the Nov $95 calls, our most likely play will be to sell the Dec $110 calls, prior to rolling the Nov $95 calls up to the same spot, creating a 2x short position at the Dec $110s.   We may also choose to sell puts if we get a good price so stay tuned in member chat for the adjustments. 

Let's not go crazy today, we need to hold our levels on strong volume and then it's the weekend anyway so we're probably going to try to be 50/50 into the close anyway as it's not possible for us to see a sustained hold of our levels until Monday.

Have a good weekend,

- Phil

 


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  1. Good morning Phil Trust you have a lot on your mind this morning.
    My question Have a LINE play on hand of which I am not to happy with the JAN 11 22.5 call short
    Here my positions April 20 put long at .99 April 25put short 3.49  Jan 22.5 call short  at 2.45 (5 options ) against 200 stk long at 19.22 now trading at 24.97 What are your thoughts? thanks


  2. GS raised AMZN target to $125


  3. aclend, no problem.  We should be there by noonish. ;-)


  4. Morning Phil.  With regards to the 100KP and AMZN.  I was interested in the 100KP because I thought it was designed to be targeted towards the retirees you described living on fixed income, and so less volatile then day-trading.  With that in mind, I’m finding the situation with the short calls on AMZN to be more then I ever intended to be in on a retirement account.  I’m really happy now that I elected not to sell the $95 callers but instead opted to sell the $100 callers.
     
    I know you said above "if we don’t break over our watch levels today – I don’t think I’m going to be worried about the spike up with 4 weeks to go until option expiration day", but for those of us that find we either want some insurance (such as  buying 10 $105 calls (since I’m short the $100 callers) as insurance to move it to a vertical, or to buy the $100 callers out.
     
    What are your thoughts?


  5. Naked calls – took a shot at ISRG ($300), CS ($60), and AMZN ($100).  ISRG worked out (will let it expire worthless).  Covered CS yesterday.  But getting slaughtered by AMZN!


  6. AMZN – shorted some common at $112, can’t help it!


  7. Breakout levels remain: Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623 and it’s a joke that we’re not taking them out on super-human news from AMZN and MSFT and nice words from Bernanke.  Who is selling and what do they know?

    So I know you guys hate it when we get a blow out and I say do nothing but that’s my call for this morning.  We are bearish enough on yesterday’s close and the only adjustment I want to make right now is selling 20 AMZN Dec $110 calls for $8 in the $100KP, which is roughly 1/2 of what we owe on the Nov $95 calls.  We can take out the Nov $85 puts (now .10) and sell 20 Jan $105 puts for $4.75 as well.  We will eventually roll our $95 callers up to the same or maybe the Jan $115s if they keep going but, for now, this is a good sale and we wait for a pullback to move our original callers.


  8. I confess.  I’ve been ignorant.  I know, again!  But seriously, I don’t track the dollar.  I just haven’t paid attention to it.  But of course I’ve heard all the talk about if you want to know how the stock market is doing look at how the dollar is doing.  I also know from Phil the shenanigans that are played on a 24 hour basis so that the Asian markets can perform with the dollar going one way and then we can peform after they are closed with the dollar going the other way.  But what I have been ignorant about is how long this has been going on and when it started.  When I say it, I mean the dollars steady drop.
     
    I happened to look at David Fry’s post today and finally saw what the dollar has been up to.  I’m ignorant no more!  Many of you all probably know that I’ve been suggesting that the miraculous rebound of the stock market on March 10th was as a result of our government.  Given the environment at the time, no one would stand in front of that train and blast it off it’s tracks with such force other then our government and it’s agents (GS, JPM, etc.).  Ok, so is it coincidence that the dollars latest decline started exactly the same time as the market’s rebound?  To me, I say hell no.  It’s part and parcel of their plan.  My thinking is that a strong stock market helps the entire country’s psychology.  And a weak dollar doesn’t really hurt it.  I mean I barely care about the dollar and I’m pretty plugged in compared to the average joe.  He definately doesn’t care.
     
    So what is the end game?  With the dollar at this level, it helps our exporters.  It helps our commodities.  It helps the Chinese  because they are pegged to it and their crap gets cheaper to buy as well.  Not for us but the rest of the world.  For us, it’s the same cheap stuff.  So what’s the problem?  Some folks say it will be harder for us to sell our debt over seas.  I ask why?  They can now buy more of it for less!  What’s not to like about that?  Furthermore, they are buying (now) at such a low level that they could actually be buying our debt as a hedge against the dollar increasing down the road?  So still no problems in my book except for one.  And Phil has talked about it extensively.   People in the US who have to buy the infated commodities are going to hurt.  That’s you and me.  The US consumer.  Gasoline will begin to work against us anywhere over $3 a gallon.  And it’s damn close to that now.  Just how does an unemployed guy afford to pay that?  I guess it’s a good thing he isn’t working so he doesn’t have to fill up as much to go to work!  
     
    To me, the point at which the dollar rebounds and the stock market drops is the point where the consumer is crippled by energy prices. 


  9. Any thoughts on NTGR?


  10. Fabergas …. that AMZN short should work; but maybe not today.
    The patterhn has been big earnings moves and then down on days after.
     
    Plus AMZN is insanely manipulated.  You are outdueled by the computers.   Nobody in their right mind would buy AMZN at $113


  11. AMZN
    For those of us who are marginally challanged ……..
    You adjustments require >$45,000 in margin
    Do you have an alternative that is not so margin intensive?



  12. matt, companies that do  a great chunk of their revenue outside the U.S.  will see stellar earnings (as in beating the lowered expectations).
    The sad thing is that investors in the U.S think the market has gone up, but for investors outside the U.S it has not. For investors in Brazil, the SPY has dropped 10% this year. Similarly for gold, it has gone up in USD wooden nickels, but it has gone down elsewhere (http://nexalogic.com/gold.html --> gold in other currencies)


  13. phil,
    even the indian mkt (bsen) is being manipulated after/pre mkt, jacking it up in the opens only to close much lower. it actually fell a record today and yet shows green


  14. Ok; AMZN 113.84 short
     
    The hell w/ this !


  15. edro – welcome to the deep end of the pool.


  16. 100KP AMZN – I just bought some $110 calls.


  17. I don’t like it that Cramer was bullish on GILD, and the market takes no notice of it.  Usually you can get the Mad Money bounce to sell the calls…..


  18. That also helped with my margin.


  19. September Existing Home Sales: up 9.4% to 5.6M/year, vs. 5.1M in August. Sales are 9.2% higher than the year-ago pace and are at the highest level in more than two years. NAR chief economist Lawrence Yun says the first-time buyer tax credit is fueling momentum that "needs to continue for a few additional quarters until we reach a point of self-sustaining recovery."


  20. phil,
    exstng home sales up! why not when we are at a bottom and kids, maids, family pets and probably street people can buy homes where $8k can make a big difference. this can kick the extension of home credit in the teeth!


  21. Phil, what is your long position in SRS?


  22. WFR – Phil I have Apr 12′s covered by Nov 15′s.  Thoughts?


  23. AMZN – MSFT down steadily from open, I suppose AMZN will not be able to top $115 (at least not today!).


  24. Matt – the dollar - why not pair long and short $/Yen forex trades timed to Asia markets open/close – too obvious?


  25. matt,
    the key for the u.s. is to use less and get serious about high mileage cars, wear sweaters in winter, and cut our consumption from its current high multiple compared to rest of world (especially food which is killing more of our people than traffic accidents, alcohol and cigarettes combined. obama’s drive for more fuel efficient cars is critical if we are to live with a lower dollar!


  26. LINE/Yodi – That’s an interesting set of trades!  You have 200 long at $19.22 but then you have (is it one?) the Apr $25/20 bear put spread at net $2.50 AND you sold 5 Jan $22.50s short at $2.45.  I don’t know how you ended up paying $2.50 for a $2.50 bear spread (now $1.25) but at least the stock jumped from $19.22 to $25 to save you (as long as you don’t have too many..  You oversold the Jans of course and you’d better at least kill 3 of them before they kill you.  My thoughts are LINE pays a great dividend and you can just lock in your gains selling 2011 $22.50 puts and calls for $6.70 to drop your basis to $12.52 plus whatever you lost messing around with these other positions.  That turns the $2.52 dividend into a 20% return for you and, if you can’t be happy with that – I can’t help you.  8-)

    Fed’s Evans: "I think that the recovery is going to be very unsatisfactory in 2010." With weak labor markets and plenty of idle factory capacity, there is a sufficient slack in the economy to set aside inflation fears, he said. If anything, low levels of inflation are a concern.

    $100KP/Java – Yes, we should have gotten out yesterday when we could but the market ran up suddenly and it looked silly so I didn’t want to buy the AMZN back at $94 when it had just been at $92 so a huge mistake and it’s tanking the portfolio of course.  The pricing and targets for AMZN are insane and all we can do is roll the position forward as it unintendedly becomes a too big part of the portfolio. 

    AMZN – Best to cap margin buy buying 20 Jan $130 calls for $2.90 if you have margin issues otherwise the roll is prohibative

    AMZN/Fab – Do not panic.  This is a massive short squeeze and has nothing to do with reality. 

    Dollar/Matt – It’s one of those things that doesn’t matter until suddenly it matters a lot. 

    NTGR/Roast – Nice company but ask me on a day when things aren’t so crazy.

    AMZN Margin/Edro – Then you proably need to do the roll-up first so the Nov $95s, now $19.50 can be rolled to 2x the Jan $110s at $10.75 and 1x the Jan $105 puts can be sold for $4.70.  If that does not work, margin-wise, then rolling to 20 2011 $115 calls at $20 (evenish) is an option as it chops current margin almost in half and puts them into 100% premium but it may take a very long time for the play to resolve itself.


  27. "The national median existing-home price for all housing types was… $174,900 in September, which is 8.5% lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area."


  28.  AMZN, Phil I was not in original play but cant resist here. What would be new play now. As a start I sold some Nov 110 C for 9.10.


  29. COF – Phil any adjustments to the Jan 41 Covered by Nov 38 play from earlier this week?


  30. If you think AMZN is crazy, take a look at BIDU!!


  31. Made my 20% on ICE 110/105 puts and got out.
     
    Now how about an AMZN 115/110?


  32. AMZN doesn’t even have a large short interest anymore.   Any shorts could have covered last night at 107 or less. 
    IMO, this is simply HFT options related pump.
    You would think AMZN longs would be ringing the register here.


  33. AMZN – shorted more common at $114.50… no more until $119-120!


  34. Let’s get that SRS moving now !


  35. POT – the bearish spread (sell POT Nov 120 Call, buy Nov 90 PUT, sell Nov 80 PUT for net credit of 0.07) is showing 0.3 profit already.  It’d pay $10 if POT crashes.  This is a long shot to the downside play as I have other neutral plays that are profitable if the market stay within plus or minus 8%-10% in the next 4 weeks.
     
    It’s been fun riding the VIX down from 40 to 22 with short strangles on indices.  As these spreads have never been bullish since March, it shows that we can make money in volatile market being neutral.  3 of my accounts reached all time high balance today.  So I’m scaling back the positions, protecting the profits.


  36. Gene Munster on CNBC …. shameless pumper.  40X is the right multiple.  This price you should get in now !  Not yesterday, but NOW !


  37. SOX and Transports down 2.5% as they don’t make headlines so no point in goosing them.

    ZION $16.81 – we all know what that means…

    September Existing Home Sales: up 9.4% to 5.6M/year, vs. 5.1M in August. Sales are 9.2% higher than the year-ago pace and are at the highest level in more than two years. NAR chief economist Lawrence Yun says the first-time buyer tax credit is fueling momentum that "needs to continue for a few additional quarters until we reach a point of self-sustaining recovery."

    Art Cashin on bucking the trend: "There is nothing more painful – ideologically and psychologically – than being at a banquet thinking that the food is tainted and watching everybody else have a grand old time. It can be a little tough. But if you have strong suspicions about the food, you may feel better than they do in a day or so." Great interview. Zero Hedge has the excerpts.

    BSE/High – Good point, check out this action

    BIDU $430s can be sold for $23 with earnings scheduled on Monday so not for the feint of heart.  Safer to do a diagonal, buying March $470s for $33 but a very dicey play….

    Volume 95M at 10:30 – strong and down.


  38.  Phil:  I sold AMZN Nov 115 calls naked yesterday for .40.  Right now they are at $4.6.  So a big mistake.  I can roll to December 120s or the Jan 125s or just sit tight for now.  I can also sell some more November premium, for example the Nov 140s.  My concern, as crazy as the current price on AMZN is, GS raised the target to 125 and who knows who far the idiots will push it.   Right now margin is not an issue.  Any suggestions?


  39. POT was also had its price lowered from 88 to 83 by Soleil….go figure.


  40. Hi Fellows, I see a lot of shark feeding frensi on AMZN Phil got blamed for the 100K from Java. Please let it cool down over the weekend you buy on the rumor and sell on the news. So if you have a bad hand and you are a gambler sell some 115 or 120 calls same with MSFT But pls do not blame Phil as what I have learn from  many advisers they all loose money I must say Phil is the only one where I fell he is earning his PAN. (bread)  He give you a response in 5 minutes! and if you can not make up the fees you realy should not be dealing in OPtions. Even the 100K is not a life insurance! You gain some you will loose some. I see the Dow is dawn already. Starting to run for the gates already. So let see what comes and have a nice trading day.


  41. 500 children applied for the $8k home credit:  fox video


  42. Phil thoughts on AMZN 115 callers for 5.25?  I’m in a 100C calender…Jan-Nov


  43. This AMZN explosion upward is a good learning opportunity.  In my head I have a set of rules for options investing.  One of these is ……..No naked anything at earnings.  Reason?  You can just get creamed.  Most companies report after close, so you sell a naked put or a naked call before earnings tjen the next morning you may be  in the proverbial hole if the stock rushes up or tanks overnite.  I play earnings, yes, but I never play them with naked puts or calls. It’;s just too dangerous.


  44. Took my 24% profit on the Nov 99 puts from yesterday. Thank you very much.
    I feel like a piker compared to others re: AMZN. I had only one short Nov 105 call which could have taken out for $100 profit but did not follow the "rules" and got greedy. I rolled this one to Dec along with selling some 110′s and 120"s. Now I am in deeper. This will come back to reality, right? I say right? Anyone out there????


  45. It turns out that nifty "lending" feature on B&N’s nook that let you loan a book to another person wirelessly for 14 days is a one time loan that will only allow you to lend the text one time PERIOD. Not per person, and not repeatedly to the same person like people thought. Furthermore, publishers have the right to forbid lending on a per book basis if they choose.
    So much for the bonuses of digital media.


  46. AMZN/pstas….This WILL come back to reality.  The question is when and how.  It’s got to be shorted (or left alone),  but I’m not shorting it yet.  It could, unbelievably, move higher before it retraces.


  47. HI Phil AMZN again you might say
    I am holding short Nov 5 puts at 80 and 5 calls at 105 received a credit of 4.16 Stock at the moment 115.30 or so possible at it feeding top would like to roll for Jan call 120 short and and 95 put short being a debit of 3.39 so I am still with a net credit of 0.77 Your thoughts thanks 


  48. This market feels Bipolar…lots of ambivalence.


  49. AMZN/Java – I hope that was the Jans and not current!

    Home sales/High – That figure is so ridiculous it must be distorted.   Other home data this week was all negative. 

    SRS/Jrom – Lots!  Buy/write on stock, the current puts sold short, long calls and long bull verticals.  $9.40 is my buy point on them.  The most sensible way to play is either selling Dec $9 puts naked for .85 or the Apr $3/5 bull vertical for $1.20.

    AMZN $115! 

    WFR/BGB – I’d take out the callers.  If they don’t bounce back you’ll want to sell a lower call anyway. 

    Recovery? What recovery? The question: "Thinking about your own experience of economic conditions, would you say that from your point of view the recession is over, or not over?" Result: Not over, 82%.

    Median/Raul – That may explain the sudden surge in sales volume.  Lots of short-sale homes being scooped up by speculators who the market has convinced that they are buying at the bottom.

    AMZN/Ken – This squeeze is not ending soon.  There were 20M shares sold short before earnings so it will take about 60M shares traded for them to wriggle out (20M so far today).  From a clean start, I’d be looing to sell the Dec $120 calls naked, now $5 as those can be rolled to Jan $130s etc and if AMZN makes $150 by 2011 I would give up and pay the money!

    COF/Balance – Oh sure!  On a play like that you should sell the Jan caller and leave the naked Nov calls.  ALWAYS sell into the initial excitement.  Those calls were $4.20 this morning, now $3.70 and you just wait and deal with the Nov $38s, which still have $1 in premium, as you would any naked caller that you have to roll along.  Note you can also sell Dec $37 puts for $1.30 to offset

    ICE/Blair – Nice job.  THAT is the way to play them!  AMZN is just too damn crazy to play other than naked call selling as I just mentioned to Ken but notice from the $100KP that those plays can get away from you if you hit a streak of bad luck.

    AMZN/Cap – I think it’s more a case of shorts just stunned and waiting/hoping for reality to set in.

    Munster/Cap – 40x, what a tool! 

    AMZN/John – I wish that were my only AMZN problem!  I wouldn’t do anything right now as it’s all premium.  That roll will still be there no matter which way they head.   GS is just raising the price so they can sell to all the suckers today at $115 and then they’ll tell people that AMZN only missed their target by $10 and it’s not their fault that you didn’t get out when it was close.  They are always geniuses in retrospect!

    Thanks Yodi but it’s OK, it comes with the territory for me and it is important to look at our adjustments on a blow-out like this. 

    Children/Raul – If I had known kids could get it, I would have had mine apply too!   8-)

    The U.S. stock market is anything but cheap, analyst Andrew Smithers asserts. According to his calculations, U.S. stocks are overpriced by about 40%. "That doesn’t mean markets won’t keep rising given the tsunami of liquidity unleashed by the world’s central banks, but it should give investors some pause for thought, even if they keep backing the momentum trade."

    Earnings/Iflan – I’m so pissed I didn’t kill those yesterday when I was debating the idea.  They were up 36% at the time, now down 260%!

    AMZN/Yodi – I would have to say, with the market down and only AMZN and MSFT up, best to stand pat for now.  Those rolls don’t go away if you wait a few days. 


  50. Here’s a picture that tells 1,000 words:

     

    Shorter-term Treasurys are off a ways ahead of $123B in new auctions next week. The 30-year yield +0.02 to 4.26%; 10-year +0.04 to 3.46%; 5-year +0.06 to 2.42%; 2-year +0.06 to 1%. Dollar now +0.7% against yen; +0.2% against euro; +1.8% against pound.


  51. FXP Dec $7/8 bull call vertical is .50 and I also like selling the Dec $8 puts for .75.


  52. lflantheman – good observation on not having naked shorts on earnings.  I used to do calendar spreads for IV crush that gives a 15-20% cushion either way when VIX is much higher.  But now VIX is at 22 that we don’t get a big cushion any more.  So I didn’t play any earning this quarter.  Well, if VIX is lower, we might even consider buying premium for earning plays!


  53. 100KP AMZN – man am I ever glad I bought those $110 calls!  I’m actually a little positive on delta and gamma at this point!


  54. Phil,
    With last nights earnings and todays news I would have thought "they" would have gone for it from the open. Do you expect a stick sometime today to try to retake our levels or is the selling volume too much for "them" ? 


  55. phil,
    when compared to sears (the orig mail order catalog company) amzn has half the sales, twice the growth, and 6% of the employees while having comparable gross margins. from that standpoint it is not a bad stock.


  56. phil,
    now i suppose you are going to point out to me that amzn’s mkt cap is 6 times sears! and i would have to reply who gives a shit about such details, they will grow into it in a ‘few’ years!!


  57. Phil,
    VLO up 3.73% oil down .73% should we go long USO /OIH? (Valero rule) 


  58. magret,  VLO is up on an upgrade, but OIH might be entering a nice range for premium sales. I suspect that this pullback in the oil sector is part of a developing bull flag that will lead to much higher prices, unfortunately. The safe thing to do would be to wait for the pattern to fully form, but I’m long OIH calendars here.


  59. Yesterday’s earnings plays:

    AMZN – At this point, if you did sale of 4 Nov $95s at $4.55 against 5 long Jan $100s at $4.80 (net $580), the 5 Jan $100s are not $18.60 ($9,300) and the 4 Nov $95s are $21 ($8,400) so it’s a good win to just kill it at net $900 but I like selling the Jans and hoping for a pullback of course.  The Nov $95s can be rolled to 8 Jan $115s at $9 ($7,200) and those can be rolled along too but what a massive victory if they expire worthless! 

    DECK holding up well but feeling safe with the short $100s, still $3.

    NFLX went crazy and we sold 6 $52.50 calls for $1.40 ($840) and bought 4 Jan $55s for $1.70 ($680) and now we have the $52.50s at $3.90 ($2,340) and the Jan $55s at $4.10 ($1,640) and we have the same kind of squeeze as AMZN but here we need to roll to 2x the March $60s at $3.60 ($2,160) and that allows us to roll the callers up to 10 Jan $60s (now $2, $2,000) if we have to but, right now, the $52.50 callers still have $1.50 in premium so no need to worry.

    SPWRA is right on target with Jan $30 puts at $4 and the stock at $29.  It’s down on paper but fine if you don’t mind owning them.  They can roll down to 2x the $27 puts at $2.80 and that’s a net $24.20 entry if you want 2x to start.  The 2011 $45s are $2.80 (down $1.40) and the Dec $35 calls are .55 (down $1.50) so fine on that spread too.  Kind of a shame not to take advantage of the roll down to the 2011 $40s for + $1.20. 

    WDC has been a roller coaster but the Dec $34 puts sold at $1.10 are $1.30 so all good with the stock holding $35 on that nasty drop.  Of course they were a bit cheaper this morning!

    CACH is right on target for the buy/write. 

    MSFT 2011 $22.50s bought for $5.45 are now 7.75 and the Jan $26 puts and calls sold for $2.85 are now $3.35 so a huge winner there and further reason to love the buy/writes.  No point in buying back the putters and the callers are an easy roll so take the money and run on the leaps and wait to reload with something cheaper I think.

    Meanwhile, crazy market going up again.  DDM $39s are $2.20 and were $2.70 yesterday and this morning so a good one to play on the Dow over 10,020. 

    DIA $100 puts can be sold for $2 and were $1.50 at lows, also a good cover against Dow over 10,020.


  60. phil,
    was that a ‘jam packed store’ clip on cnbc during the msft interview? i saw two people and one was obviously a store clerk!


  61. Phil on FXP buy the 7c and sell the 8c ?


  62. Phil, since i can’t write and can only buy…any one sided plays??  I’m tired of sitting on the sidelines and watching you guys make money :-)


  63. BIDU pulling another jam the shorts job.
     
    This probably means that they’ll sell off after earnings.


  64. Gotta go …. need to go check out the MSFT store !
     
    Nah, just kidding.


  65. Phil: looking for a trade, stock, options, as these companies are expected to report Monday improved earnings:
    LO, BIDU, EQIP, PCH.
    what do you recommend ?


  66. Sector ETF strength: Internet– HHH +6.4%. Retailers– RTH +0.9%. Agriculture– DBA +0.5%. Coal– KOL +0.2%.

    Sector ETF weakness: Solar– KWT -3.4%. Transports– IYT -2.8%. Insurance– KIE -2.7%. Semis– IGW -2.3%. Energy– IYE -2.1%.

    THEM/JRW – I’m not sure THEY are all on the same page anymore.  I think people are running for the exits so we have a lot of cross currents as one firm pumps and another firm dumps.  At a toppy point in a rally like this, they can’t get the whole market to go up any more so they create excitement in various stocks and sectors to bring the suckers in one stock at a time.  Think about how many QQQQs got dumped today because AMZN made .45 in a Q and MSFT was only off by 18% from last year’s crappy quarter which, when they reported it at the time, sent them flying down from $24 (where they are now) to $18 by mid-November.   Now 18% LOWER profits and they are "saving the market" – Give me a friggin’ break! 

    New Jersey is paying $1M a month to Goldman Sachs (GS) for protection against rising interest rates – on bonds that were redeemed over a year ago. The state’s transportation fund entered a swap agreement in 2003 that doesn’t expire until 2019, though it replaced the auction-rate bonds last year after that market froze. Says one rulemaker about swaps: "The world’s got to see what stupidity even the sophisticated investors like the transportation fund can get into."

    Allan Meltzer in today’s WSJ: "History gives many examples of countries with high actual and expected money growth, unsustainable budget deficits, and a currency expected to depreciate. Unless these countries made massive policy changes, they ended in crisis. We will escape only if we act forcefully and soon."

    AMZN/High – Yes but Sears is worth $8Bn and AMZN is selling for $45Bn…  LOL, now I read your next comment!  Very good!!!  OK, we’ll see who cares in a couple of years when either AMZN is selling $80Bn worth of crap a year to justify this valuation or they end up with a p/e of 15, just like any other retailer and are valued at $150 IF they increase profits 10x by then. 

    VLO/Magret – That’s because of and upgrade and a CVX refinery disaster so don’t take the move seriously.  I can’t go long on USO and look at SLB before you go long on OIH, which is doing just what I expected as earnings hit.   I can’t go long on oil at $80 because there is no evidence at all that people can afford it. 

    Store/High – That’s as good as it gets I think.  We went to the mall last weekend for Tina’s Bday present and it’s like having a personal shopper in every store you go to!  

    FXP/Yodi – Yes on the vertical play as long as it’s net .50.

    One side/Lolo – Well it’s bearish but FXP can be played with the March $6s at $2.70 (.70 premium).  This is a play on China following us down next week (assuming we stay down in the first place).  If you take that, you want to use one of the upside protections I just listed if we cross 10,020 to offset losses but if you make a quick .50 to offset a move down on the long FXPs, that would be great.  Meanwhile, what is the deal with your account restrictions?  You can’t sell a covered call?

    BIDU/Cap – Who knows these days.  Maybe they jam BIDU past GOOG to run everyone into China again.  They need a new story to sell because the old ones are running out of gas. 

    MSFT store/Cap – LOL! 

    Calculated Risk graphs the increasingly worrisome delinquency rate at Freddie Mac (FRE -2.2%), now up to 3.33% of its book from 3.13% in August, and from 1.22% in September 2008.


  67. Earnings/RMM – There is NO WAY I want to pick any Monday play ahead of this weekend.  Although I did just call a short play on BIDU calls, that’s only for crazy high-margin traders and I did not bold it and they are already losing money.  Let’s just see if we survive this weekend and then we can make trades.  If you really want to play something for earnings, I do like doing BIDU like we did ISRG, selling the March $470 calls for $34 and the March $390 puts for $30.50 so that’s roughly break-even from $330 to $530 and, of course, we just roll, roll roll if it doesn’t work.


  68. Here’s what just rallied the commodities:

    Commodity Futures Trading Commission chief Gary Gensler wants derivatives bills to be improved by pushing more transactions through clearinghousesnot regulating capital or business conduct. "If a large swap dealer gets into trouble, it’s not pulling and tugging at thousands of others in the system, that’s the benefit."


  69.  Currently holding onto TZA naked Nov 11 puts, SRS 9 puts, and unfortunately CAL naked 13 puts …. any adjustments to this into the weekend ?   I really have nothing on the long side to offset the TZA and SRS plays in the short term.


  70. Phil
    I sold 125 contracts of the TBT Mar 45 puts. Would you cover  or just set a stop order ?


  71. Cap, i can’t believe that people waited in line "all night" to go to the MSFT store.  Unemployment in AZ must be must higher than the advertised rate.


  72. Phil: how many days before earnings reporting will you have courage to suggest a trade ?


  73. CAL/CMC – Well it’s kind of an offset.  No adjustment there, they are down with the transports (down 3%) today.  You have to go with what you believe in and I don’t think TZA and SRS are a bad bet this month.  Unfortunately, you never do know what shenanigans may come.   You could do a buy/write on URE at $5.84 and sell the Jan $5 puts and calls for $1.70 for net $4.14/4.57 as that pays 21% if SRS DOESN’T gain at least 15% (in theory).

    In a substantial (if not the most surprising) move, Lazard (LAZ) changes the base currency of its World Trust Fund from dollars to pounds. Or, as a commenter says, "leaving the Titanic and jumping into Lusitania": Sterling now -1.8% against dollar, -1.9% against euro, -1.6% against Swiss franc, -1.1% against yen.

    TBT/Gel – I’d just roll them along but 125 is a lot so a stop mayb be a good idea (or buy short-term puts to cover if they cross a threshold).

    Days/RMM – I don’t get that question?   We’ve done earnings trades all week. it’s just doing them in conjuntioun with a weekend when we could get a 2.5% gap is just silly. 


  74. Phil: ok, its ov er weekend,
    what about Tuesday, Wednesday, Thursday, Friday, all next week:
    CEPH, FPL, FSLR, SEPR, COCO, LZ, DUK ?????? All up on earnings expectations.


  75. Hi Phil, do I have to wait till I finish reading/digesting the options trading book in order to understand what you are saying here?
    eg SRS/Jrom – Lots!  Buy/write on stock, the current puts sold short, long calls and long bull verticals.  $9.40 is my buy point on them.  The most sensible way to play is either selling Dec $9 puts naked for .85 or the Apr $3/5 bull vertical for $1.20.
    out sold short=buy long call, right? can i just buy dec $9 call?
     
    eg #2, fr the email:
    "NFLX went crazy and we sold 6 $52.50 calls for $1.40 ($840) and bought 4 Jan $55s for $1.70 ($680) and now we have the $52.50s at $3.90 ($2,340) and the Jan $55s at $4.10 ($1,640) and we have the same kind of squeeze as AMZN but here we need to roll to 2x the March $60s at $3.60 ($2,160) and that allows us to roll the callers up to 10 Jan $60s (now $2, $2,000) if we have to but, right now, the $52.50 callers still have $1.50 in premium so no need to worry.
    if you sold $52.5 calls, why u have $52.5 at $3.9 since you got a debit from selling the call already.
    I am only set up for level 2 option trades in etrade. I don’t think I can follow these recommendations
    anyway to play along if I only have level 2, meaning I only could buy or sell options


  76.  Phil,
    The BIDU Mar Strangle is not BOLD, too risky? I thought the range is pretty wide.


  77.  Phil
     
    I’m in the DIA Jan 102′s and up on them – no/half/full for the weekend? How’s that for being undecided?


  78.  Hey Phil,
    Got killed on the NOV 16 puts in WFR this morning. Rolled to 2x Dec14 for a small credit. I cannot tell why their acquisition news was so terrible. Should I stay as I am? Get out?


  79.  Phil
     
    BTW – did you get my email?


  80. TBT/Phil…. Thanks!…. Eventually they will get to 60, but hell may freezing first. I’lll just roll & wait.


  81. gambling on ebay dec 29 calls.


  82. Freddie Mac said on Friday its mortgage investment portfolio grew by an annualized 7.3 percent rate in September, while delinquencies on loans it guarantees accelerated.  The portfolio increased to $784.2 billion, for an annualized 3.4 percent decrease year to date, the McLean, Virginia-based company [FRE  1.35    -0.02  (-1.46%)   ] said in its monthly volume summary.

    The portfolio size increased on a year-over-year basis. In September 2008, the portfolio was $736.9 billion. Delinquencies, which increase stress on the company’s capital, jumped to 3.33 percent of its book of business in September from 3.13 percent in August and 1.22 percent in September 2008.

    The multifamily delinquency rate accelerated slightly in September to 0.11 percent from 0.10 percent in August. A year earlier it was 0.01 percent.


  83. Agrium warns its profits will decline 95% in Q3. They are taking a page from APPL, setting expectations low for 2010.


  84. DIA Cover – Phil I sold a half cover of the DIA NOV 100 P, should I buy back, add another layer.  Thoughts into this weakness?


  85. Earnings/RMM – Well we’re already long on CEPH, already short on FSLR and I’ll be happy to look at the others on Monday but the market may be down 300 points by then and any trade I look at now would be meaningless.   I posted a dozen short plays yesterday when the market was 150 points higher than it is now so no, I do not feel as strongly now about shorting whatever random stocks you happen to name into their earnings at the moment – sorry. 

    Digesting/Lynn – Well not every play is going to be for your skill level.  Buying the Dec $9 call on SRS and PAYING .80 in premium is not at all the same thing as selling a Dec $9 call that is already .70 out of the money for (now) .75.  In my case, the putter is spotting me a $1.45 move (almost 20%) before he is even and in your case, you are spotting the guy who sold you the call (that would be me!) .75 (almost 10%) before you get even.  So it is about 30% more to my advantage to sell the puts than to buy the calls – that’s a pretty massive difference.  If you figure we are right a little better than half the time then spotting 30% means we would have to up our winning percentage to about 70% correct just to be even.  That’s not a very attractive way to play is it?

    NFLX/Lynn – I can dissect this for you over the weekend but I don’t mean have as "own" I mean have as these are now the prices.  we are net negative $700 on the spread and there is nothing special about it other than the fact that we sold 2 naked calls, which you may not be allowed to do at L2 on Etrade.   You should check to make sure but the simple answer is just don’t do ratio spreads and stick to fully covered ones – we have plenty of those too. 

    BIDU/Balance – Too much margin and too risky for most.   After getting burned on AMZN I want to differentiate those plays a little more. 

    DIA/Dean – We have the Jan $103 puts 1/4 covered with the Nov $99s, now $1.77 and we haven’t had a good reason to shift despite this crazy roller-coaster action.  Thanks so much for the book, by the way – I’ll get back to you this weekend on the project! 

    WFR/Roth – I liked the aquisition.  $200M is 20% of their cash and a great buy for them but people don’t understand how solar is sold in this country.  It’s the installers that go out and sell solar, not the chip companies.  By setting up sales centers that feature their products, they take control of the supply chain at the top.

    EBAY/BDC – Really?  Why?

    FRE./Pharm – The worst thing about those numbers is you and I just bought that company!

    DIA/BGB – I like the 1/2 cover of the $99 puts better as they are all out of the money for .55 less and we’re pretty bearish here.  If however, we get a nice 100-point drop from here to around 9,850, then I’ll want to move to a full cover on $98 puts as those should be about $2 and that takes us all the way back to 9,650, which we think will hold and which would make our Jan $103 puts about $8 anyway.


  86. That Alan Meltzer article in the WSJ was excellent.  One can only fantasize at this point that someone will actually step up and lead in this country for the people.. not their banks.
     
    Took my 3.5% profit on shorting COF this am and called it a day.


  87. David Singers oil notes:

    Annotated Crude Oil - 10-23-09

    Even more importantly – I KNEW something was very wrong with those housing numbers:

    Existing Home Sales fell 5.4% last month, despite the nonsense you have read elsewhere.  NAR continues to bullshit America with their garbage data and spin, month after month, with few people calling them on it. Well, I’ve had it up to here with their garbage:.

    No, home sales did not rebound — that was purely the result of SEASONAL ADJUSTMENTS.   As you can see on the NON SEASONALLY adjusted chart below, from August to September (Red Bar) Sales actually dropped. In prior years — 2005, 2006, 2007, and 2008 — there was always a big fall from August to September.

    This year, the fall was more modest.

    Why was this year so different? We have ZIRP (which will eventually go up) and a large 1st time buyers tax credit that is scheduled to expire.  Hence, the unusual September activity that dos not reflect the traditional drop off.  Mark Hanson notes that on a NSA basis, Existing Home Sales actually dropped 5.2% — this was the second straight monthly drop on an NSA basis.

    EHSSeptNSA

    NSA home sales


  88. C option IV is finally on the rise after falling for weeks. I think it may yet go higher, but I’m starting to re-build my position by selling Jan 4 and 5 strike straddles in a 1:2 ratio, which is a fairly delta neutral position at this price.
     
    Since you’re playing for pennies on these, you have to do them in scale. I think of them in terms of 10 groups of 3 (i.e., 30 short straddles total, 20 5s and 10 4s). A 10 group of 3 uses about $2300 in margin in a non-PM account, but of course you should have some extra cash reserves in case the stock makes a large move, so say at least $3K margin per 10 group of 3. You don’t want to hop in and out of these either because commissions will quickly eat into profits, but you can easily adjust the delta later if necessary by either buying back a few 4 calls or 5 puts as needed.
     
    I was short 90 of these straddles into earnings, and they were losing (= me winning) between .02 and .11 each every day for like 9 days. That was the closest I’ve come to having to a Citi ATM machine of my very own. Since earnings are far away, any gains will likely come more slowly, but it’s still a nice trade IMO. However, make sure you know the risks. Again, I’m starting small today, looking for even better prices later.


  89. Hi, Phil, RE MSFT:
    Just a few weeks ago, when MSFT was $25 or so, you weren’t quite interested in MSFT.  Earlier yesterday, there were discussions about what a lamb idea it was for MSFT to open retail stores, and nobody seemed to like Steve Ballmer.
    What made you changed your view about MSFT, and turned bullish?  What’s your price target?
    Thanks!


  90. UK
    This is the problem with zero or near zero interest rates, economists are scratching their heads going over all their little equations trying to figure out where the flaws are in their formulas. Art said it today, (velocity) there isn’t any and money is being horded by the banks, growth requires spending (credit). Banks are using the money to bolster balance sheets and take risky bets on the markets.

     


  91. Phil,
    I have a BAC November short strangle with 19C & 16P sold at $1.25
    I’m considering taking out the strangle (at about .72) and selling the Nov. $15Putters for about .28.
    Would appreciate your comments. (& yes, I know I passed on 80% up on Wed.)


  92. Roubini:  "A Big Crash is Coming, but I don’t Believe in Gold."

    Fed Vice Chairman Donald Kohn calls for a deliberate pace to regulatory reform, in a panel discussion after a speech on international perspectives delivered to a Boston Fed gathering. "I hope we build a regulatory structure that’s good for a couple of decades and it’s worth taking our time to get it right." He added he doesn’t want a mandate for financial stability added to the Fed’s mission for price stability and maximum growth.

    C/Eric - Nice discipline!

    MSFT/Cwan – I hate them but they are a cash machine so I made a bullish earnings play as everything we knew indicated they should have a nice beat but, as you can see from my earlier call, it’s take the money and run at $29 (and a good thing we did too!).  The ONLY reason I got interested in them was because of the earnings premiums yesterday giving us a high-percentage spread, nothing more.  I think they are fine for a long-term hold (buying on dips) but they are more volatile than their premiums give them credit for so usually an annoying one for our strategies. 

    AMZN busting up to new highs AGAIN!!!  $117.67 now.   2011 $100/120 bull call spread is about net $10.50 with a 90% upside if AMZN makes $120 by then and that’s a good offset to the Dec $110s sold as it’s another $10 as we roll ‘em, roll ‘em, roll ‘em….


  93. There’s some amazing symmetry to those UK GDP numbers. We are at 100.7 of GDP level in 2005 and the FTSE 100 is at almost exactly the same price it was in Oct 05. Proof that fundamentals ultimately win out?


  94. Rates/Kustomz – Cost of money = zero but no one can have it except the Gang of 12 and they use it to churn the markets and squeeze every dollar they can out of retail investors and funds that invest for 401Ks and they will drive coportations to merge at outrageous prices and whatever else it takes to make their next round of bonuses.   Sadly, I’m seeing person after peson fold in govenment as THEY get to them and suddenly it’s all about wrist slaps and "stability" and "not too much regulation"  – sickening! 

    I think one by one all the would-be regulators get the Ned Beatty treatment from GS or whoever their local G12 representative is…

    BAC/Bas – I’d go Dec at this point as the money for the Nov $15s (.57) is barely worth selling.  Just make sure you get at least a buck for the $16 calls (now $1.12) if they head south.


  95. Phil,
     Had sold RIMM Jan-2010 $80 puts at 7.5 and $70 puts at 3.8 .. Both are now ITM.  Advice on how to roll ?
    I do have the RIMM bull spread for Mar ($55-$65 calls) as you had recommended a while ago


  96. Phil
    How do you like the CYOU Bull PUT spread SELL NOV $34 and BUY DEC $32? They are reporting on Monday AM.


  97. AMZN…..Continuing up, as expected.  Very high volume. I won’t short it until it surpasses 120, which I expect will be Monday or Tuesday.     


  98. Would you believe I’m the G12 rep on my block?
     
     
    BWHAHHAHAHAHAHHAHAHAHHAHA!


  99. Hi Phil your latest on AMZN buy 2011 100c sell 120c aswell sell the dec 110 call I still short 5 Nov 105 calls what to do with these are now  14.17 minus 2.23 (I received) against me thanks for the advice


  100. Phil:
    I always look at earnings projections, I prefer to set up a trade 1 to 2 weeks before earnings reporting, sometimes only a few days before reporting,
    for bullish plays: buy stock or sell puts ??
    for bearisk plays: short stock or sell calls ?
    What is your macro-view about this strategy ?


  101. Hi, Peter D & All,
    Following Peter’s discussion on Portfolio Margining earlier this week, I contacted TOS about applying for PM.  They sent me a test that I have to pass at least 16/18 (>= 16 correct answers to 18 questions).  Whoa, that’s a pretty high mark!  I don’t recall doing that well since kindergarden 8)
    I google searched and found the identical test questions at:
    http://speedtrader.com/forms/PortfolioMarginTest.pdf
     
    I studied REALLY hard and filled out the answers.  Before I send it to TOS, can Peter or someone help me?  You can post the correct answers here, like (1) A; (2) B…  Or, if you insist on private communication, my email is cwancalo at gmail dot com.
    Thanks!


  102. AMZN; what is interesting to me is that the 90, 95 & 100 puts for November have held value and even increased in value as the day has progressed.
     
    So either they were mispriced earlier; or at some point this bitch will start to drop.
     
    Or I am delusional.


  103. Phil
    Do we have any VZ plays towards earnings?  I may have missed your earlier recs?


  104. Good oppty to sell some puts if you are so inclined.


  105. Phil,

    I am long Jan 11 FXP $5 calls – what do you advise selling against them if anything? Thanks


  106. Ultimately/Steve – Yes, but when is that?  I am just blown away every time a new round of buyers jams AMZN up another notch…

    AXP off 5% now.  C surprisingly up 1%. 

    VIX back to 22 (up 6%). 

    Dow volume 210M at 2:38 – when’s the last time we’ve been able to say that?

    Harvard business professor Bill George pens a detailed response to the numerous responses to his provocative Tuesday piece, "Let’s Stop Vilifying the Bankers."

    RIMM/Mampcs – I would wait as a rally in AMZN and AAPL, if they continue, should lift RIMM and you have a long time.  Keep an eye on the roll to the March $70 puts at $9.30 and think how many you need to get even.  Meanwhile, selling the Jan $75 calls for $2.35 won’t hurt you and will offset some of the losses.  

    CYOU/Chakra - I’m not a big fan of the ADRs but I know that space is really hot.  You’re still buying a lot of Premium and you can sell the 3 Nov $35s for $2 against 5 Jan $37s at $2.90 which drops your net on the Jans to $1.70 and you should get a decent roll if they do well and not too much damage if they don’t. 

    AMZN up 27% now.  How is that real?  They beat .33 expected earnings with .45!  Sorry but I am a fundamentalist and this just goes against everything I believe in…   Does no one find it at all suspicious that AMZN earned $81M more (69%) on 28% more sales?  The answer is not better margin effiency or cost cutting – the answer is $300M worth of Kindles with a 33% profit margin = $100M in bottom line profits that have NOTHING to do with their operation as a retailer.  Those sales are NOT scalable long-term.  Kindle had a huge first mover advantage in a segment that is going to be massively crowded next year.  They already cut their price by 1/3 and it will go lower than that soon.  This is not sour grapes, there is no logical way they could make that much money in their normal business model.  


  107. Nice all!  I go to meetings, come back and my whole screen is red (didn’t sniff any GLUU…I mean glue today, but my eyes are bloodshot!)  ITMN 12.5 Dec09 P – trying to sell a few for 1.30. 


  108. Please can some one explain to my what is it with TOS normally stands for Terms of Service here we speak often about it.  Does not make sence to me Thanks


  109. ITMN – Also trying to get the 10/12.5 Apr10 spread for 0.9.  For 5 contracts $450 risk, $800 payout.


  110. Great timing on this sell off in the dollar


  111. CAP/AMZN puts – does put/call parity mean that huge demand for calls will also drive up the price of the puts?


  112.  OIH is at the bottom of its range over the past few days. I know how bearish you are right now, Phil, but do you have a good, conservative, bullish options play for this?


  113. Come’on Phil…there is a little gold there in that Kindle.


  114. Yodi – TOS is a broker, they are called ThinkOrSwim


  115. Cap… How are you playing AMZN over the weekend ? Thanks


  116. Thanks stevenparker


  117. phil,
    you are right on re the profit bump amzn realized on the kndle but you have to realize that  ’it just doesn’t matter" !!



  118. AMZN/Yodi – What???  The 2011 vertical (buy the $100s, sell the $120s for no more than $10.50 spread) is to protect the upside of a play like the calls we sold in the $100KP.  Since our short call sales will be done in Dec, we should retain most of the value in the long vertical, even if AMZN does sell off and give us a win on the short calls.  The Nov $105 calls you are short, since you have the leap vertical, can be hung on to – just in case things get normal next week or next month.  The Nov $105s are now $14.30 and can be rolled to Dec $120 calls and $115 puts whenever you want for about even.  If you do that and widen the gap by about $10 each month, chances are eventually you’ll find a spread so wide that AMZN doesn’t hit it (maybe!). 

    Earning/RMM – Happy to look at some things on less hectic days but setting up on a Friday for Monday is NOT a good idea.   In this particular market, I’m favoring selling things that are toppy and hoping we don’t have too many AMZN-type moves up.  It’s very, very hard to take bullish plays AFTER stocks have risen 100% off their lows for the year, especially when you know they are going to turn in numbers that are 20% below last year. 

    LOL Cwan – Cheating on your PM test!   I love it!!!  8-)

    Delusions/Cap – I feel that way watching that stock.  Every 5 mins or so I have to stop myself from shorting them again.  Imagine if AAPL gets into on-line retailing with their $1.4Bn quarterly profits – they’ll be worth $1Tn in no time.  In fact, AAPL should just buy AMZN for $50Bn, the extra $19Bn in sales that make $200M would be added to AAPL’s $8Bn in sales that make $1.4Bn and you apply AMZN’s p/e, which is now 77 and PRESTO – $1.25Tn Market cap or about $1,400 a share for AppleZon.  IT JUST MIGHT WORK!!!

    Working: Internet– HHH +7%. Retailers– RTH +1%. Silver– SLV +0.2%.

    NOT Working: Solar– KWT -3.5%. Transports– IYT -3.4%. Insurance– KIE -3.1%. Oil Services– OIH -2.9%. Semis– IGW -2.6%. Regional Banks– KRE -2.5%. Financials– IYF -2.4%.

    VZ/Chakra – We just like VZ long.  Their volatility died so the 2012 $30s are cheap at $3 and I’d just go with that.

    FXP/Red – I like them over the weekend if we’re finishing red (looks like).  In general though, you are a little far in the money and if you can get $4.20 for them, you are better off in the June $7s for $2.20 and you can sell Dec $9s for .55. 


  119. PSQ – Phil I have the Jan PSQ 50′s from the 100KP and actually we added in member chat so I have 1.5x for net 3.25 now $1
    I am tempted to roll them down to Jan 45′s and sell the Jan 50′s for net  debit of about .60 – is it worth it?


  120. There maybe some gold in them that kindle.. but not like ye olde iPod.  There really isn’t a substitute for an iPod.  Where there is for the kindle.. a real book.  I will NEVER buy one.  And it’s not because I don’t read.  I don’t.  Unless it’s in a newspaper or on a computer screen.  But because I would never curl up with a kindle.  Ick!  For alot of folks, there is no substitute for a real book.. just like there is no substitute for some for a real newspaper.  Add to that the fact that most folks don’t buy books and you have another pet rock in the making. IMO.
     
    I will take a shot at shorting AMZN at the close.


  121. Thanks Phil that explains it very well I think I have not ever seen a stock like this going up by 24.45 in one day something is crasy.


  122. Let’s all short it together Matt, maybe we can become market movers….offer ‘em a nickle!


  123. BOY ! This day really stinks… That bear that came out of the woods left something nasty behind.


  124. newparadigmz – Now I’m going to be depressed all weekend. :(


  125. phil,
    the mkt would like to break down but afraid of the possible stick! wounder what would happen it was a no show?


  126. OIH/Roth – Sure but look at SLB.  If the others report like they do, OIH may not do very well (and I am short with $125 target).  You can do an artificial buy/write with the Jan $115s at $15.30 and sell the Dec $120 puts and calls for $14.80 so that’s net .50 on the $5 spread and your downside is you get OIH put to you at net $120.50 (but, of course you can roll it). 

    Kindle/Pharm – Sure it’s a great product and if AMZN set up Kindle corp and made $500M a year selling Kindles and we pretend they will never get competition and will grow 20% a year we could give them a p/e of 20 and value them at $10Bn.  So let’s say we add that to AMZN with their non-Kindle buisness and $500M a year that’s showing negative growth without the Kindle so we’ll even let them keep their 77 p/e and say that part of the buisness is worth $38Bn.  THEY ARE STILL PRICED TOO FRIGGIN’ HIGH!!! 

    Hey I shorted WFMI on the same sort of logic and that worked…

    PSQ/Steve – Yes to the roll, no to the sale over the weekend as this  is a very, very bad day we are having you know…  It’s a smart positioning move and if you don’t want to overexpose just wait.  PSQ can come back very fast if the Nas breaks down.  

    Stick/High – Way too mucyh volume for anything but a last few minutes stick.


  127. Looking to sell a small number of SPY 105/110 Dec strangles into the close for the weekend decay. Not getting too aggressive yet though, and happy to be in a lot of cash. I’ll sell the puts first and then sell the calls AH in the expectation that the SPY will catch a bid after hours.


  128. Phil,
    So 50/50 over the weekend ?


  129. DIA  What mattress covers are advocating…sell more on this dip? 


  130. EricL, you can sell calls (trade options) AH? I thought you can only trade stocks
     
    anyone looking at UNG?


  131. If we keep plummeting I’ll go with 105/109s.


  132. All I’ve got to say is if we get another day like yesterday on Monday I’m gonna go nuts.  I mean how could the top not be in with today’s action?  A total sell into the news event.  It’s been like that all of earnings so far.  The up days have come on nothing.  Yesterday it was 3M and Travelers?  C’mon!  We’ve sold off on all the days with marquee names reporting.  I’d say be the farm but these mother f-ers f so much with investors who try to use logic that they don’t know if they’re cumin or goin.  Seriously, how do you explain that BIG FAT RED CANDLE IN THE RUT on today’s news other then to say the top is in for now?
     
    Someone tryin splain it to me…


  133. lynn, you can on indexes like SPY, but only until 4:15.


  134. Tell me how your REALLY feel Phil!  LOL!  I don’t play AMZN, GOOG, AAPL…too much for my nerves.  Biotech is much more fun!


  135. newp, thats the price we pay for progress (they) we are actually paying less due to China taking the lead in manufacturing all that garbage we buy from them…sad… would like to know if China has had a rise in Autistic children which is becoming prevalent in this country, some say due to pollution


  136. They def dont want a close below 1077 on the S&P


  137. hi phil,thoughts on IDCC possible put write?


  138. KINDLE/Phil
    The price of ebooks for the Kindle is almost the the same cost as buying the real thing.
    SuperFreakonomics
    Kindle version:  $12.95
    Hardback Book:  $16.47
    For a difference of $3.50, I would rather have the paper version.  I can then loan it to a friend or sell it used.  I only now purchase books on Kindle when: 1) I need it RIGHT away (rare), or 2) I am traveling and don’t want to carry the extra weight.
    For Kindle to be a huge success for Amazon they will need to sell content, not Kindles.
    Either Amazon is getting too greedy on the kindle book pricing, or else the publishers are squeezing them too tightly.(unlike Apple who negotiated a terrifically  low price for music content with the record labels, which really made online music purchasing a volume business)


  139. AMZN: Phil, are you suggesting the 2011 vertical (100/120 calls) as part of the 100KP? If so, how many do you suggest? Right now I am short the Dec 110 calls as you suggested and I am trying to learn patience….  :)


  140.  MATT – Look at the 20 EMA on the daily charts for the NYSE, DIA, SPY and QQQQ. We are still in a short term uptrend. I have sufficiently shut off my brain to the fundies and cannot get too bearish until the technicals REALLY tell me so. This still could be a short term retrace.


  141. Kindle lets be serious people you can take 1000 books with you when travelling


  142. Here comes the stick.


  143. 50/50/JRW – I think so, DIA 1/2 cover with $99 puts at $1.80 and well-balanced as possible otherwise.   I still think down on Monday but how often has that worked out? 


  144. Phil
    Do you have a write-up on Implied Vol or Vol before earnings that I can read? Even any online source is good if you have one. I just want to learn a bit on premium and the collapse of such.


  145. TOS PM Test / Phil: Oh, no, no, no.  It’s not cheating.  I just want to know what the correct answers are.  I’ll send in the test the way I filled out. I swear 8)


  146. I think the action today on AMZN for shorts was almost a perfect form of torture.  Water slowly dripping up hill… all.. day.. long.
     
    Couldn’t short it.  Scottrade didn’t have any shares.   I had tried earlier too.  Can you believe that over the course of the day people weren’t closing their shorts and thereby making them available for other daredevil folks?  I think this was a serious squeeze placed on the shorts today.  I think it will all be better on Monday.


  147. Kustomz lol we’d have to be travelling a long time to need 1000 books. i don’t get kindle. I take a netbook with me when I travel. If I *need* a book I can download it there. My netbook also makes phone calls, plays movies, charges my phone, provides internet access, contains all my contact details, and let’s me play games.
    Maybe I am a luddite (happens a lot) but I don’t see the purpose in a $259 device that can only read books. If they gave me the reader for free I would consider buying more content from them though…..


  148. Well Steve Bozoz or is it Bazoz i can never get it right,  thanks you for being in the minority


  149. new …to Phil’ stock world…..I am short AMZN……from 90 ….and shorted today…..Reminds me of X steel and the coal stocks last year


  150. I don’t know about Monday Matt, but I agree that AMZN was a nasty short squeeze. I’m almost certain big trading desks were pushing it up hard all day knowing they would force short covering — we’ve seen this all year. It will probably fall just after the shorts finally give up.


  151. ok Phil, market closed now. I just don’t understand why I can’t just buy SRS, FAZ, TZA calls if I expect market selloff. I know your way of doing spreads and straddle is more conservative and safer as its not just directional. However, with my status at Etrade L2 temporarily, I still hope to be able to use options to profit…
    so if you can help me out to explain those 2 examples I asked, it’d surely enlighten me greatly


  152. matt,
    call gs on shorting amzn. they will do them naked! all you have to do is promise to bring in your shares in about a week or so (wink wink) and have  $1B or so in the account.


  153. Selling the SPY calls here on this little run. Phew, finally done for the week. Wild.


  154. What we saw today w/ AMZN was ridiculous.
     
    You would think they cured cancer or something, instead of selling a few more low margin electronics and books.


  155. Man, what a week!  It was great other than that damn AMZN trade….  Oh well, maybe sanity next week?

    IDCC/Jash – I’d go for the stock at $19.13 and sell the Dec $17.50 puts and calls for $3, which is net $16.13/16.82.

    KIndle/Ether – The publishers are not helping at all as they keep pricing totally unrealistic.  We’ll see if Jobs can twist their arms but Bezos has done nothing for the consumer in the Kindle deal but it’s still very popular so imagine the market if the books are cheap and easy to trade.  Down the road, Ebooks will be the only books except for people who like antiques but that doesn’t mean they’ll be kindles….

    AMZN/Allen – I think it’s appropriate for the $100KP, especially if you are concerned about another move up.  How many would depend on your margin issues.  To some extent, spending $40K on this spread should knock about $40K off the reqpirement for the naked calls so it’s a good trade but it depends on what your broker allows.  Depending on next week’s action, I will put more thought into this balancing out this trade for the long haul. 

    Vol/Chakra:  The Crushing Effect of Implied Volatility & How to Profit From It

    OK, Cwan, that sound legit… 

    Welcome Shane!   And welcome to the AMZN pain club too!  Don’t worry, they can’t go up forever (can they?).

    SRS/FAZ/TZA/Lynn – Of course you can do that but just realize that you are taking on a tremendous handicap by only buying naked calls, which is why we don’t do it that often.   I though I did explain the other two above…

    OK guys, have a great weekend!  I think we finished almost exactly where we started on the Dow – what a coincidence..


  156. Oops, was worse than I thought – Dow was outperforming index:

     choppy few days sends stocks to their first weekly loss in three. For the week: The Dow down 0.2%; S&P 500 down 0.7%; Nasdaq down 0.1%.

    GoGo TBT!

    Treasurys moved still lower – and 2-year yields jumped the most since August – amid chatter about how the Fed will nuance rate hikes, and news of $123B in Treasury auctions next week. The 30-year yield +0.05 to 4.29%; 10-year +0.07 to 3.49%; 5-year +0.09 to 2.44%; 2-year +0.07 to 1.01%. The dollar +1.9% against a plummeting pound; +0.9% against yen; +0.3% against euro; +0.5% against Swiss franc.

    Options trading shows there aren’t signs of a further big euro move against the dollar, and there’s "no hint of a crisis" in the greenback, Royal Bank of Scotland says. The bank’s North American currency strategist says at least with the euro-dollar pair, volatility and risk reversals show "quite the opposite."

    Is the stimulus helping? asks Justin Fox. Maybe, but we won’t really know the effect of the stimulus bill until much bigger "stimulus" efforts – like the trillions the Fed put into asset purchases – wind down.


  157. shorted AMZN earlier today as it hit 113/114 as did many. Good report but it wasn’t THAT good. Returned to office a few hours later and WTF……who is buying it up here? Even on a bad tape it rises…….nice.


  158. OMG!  What an AMZNing day!
    I was out this morning.  By the time I logged in, AMZN was 118.  I just couldn’t resist on shorting it.  But instead of selling naked calls, I went for selling Dec 125/130 (selling 125C & buying 130C) for 1.50 credit.  My profit is limited to 1.50, but my downside is also limited to 3.50.
    I’d rather sleep like a baby than sweating like an adult !


  159. roth87, thanks.  I’ll check it out.  With AMZN up 26.8% today NOTHING would suprise me.


  160. 100KP on WSS
    Originally WSS showed open positions, completed trades and  open orders.  Recently it is only showing open positions and trades.  Is there a way to display open orders??
     
    Thanks


  161.  Phil:  I sold a substantial number of naked AMZN calls today since the price action seems insane.  I sold Nov 130s at $1.42, Nov 135s at $.675, and Nov 140s at $.4. I need to establish spreads both to protect myself and to use up less margin.  Since there are no Nov or Dec strikes above 140 how do you suggest I do this?  (Regrettably, I also sold some Nov 115s yesterday before earnings at .4 (these are now $7.6.  You suggested  earlier that I sit on these until expiration and then roll once the premium has been eaten up).  Any thoughts would be appreciated.  Thanks.


  162. Phil
    Thanks for the Vol article. That will make my weekend reading. A second request, do you have anything on when to use a trail stop or trail stop limit when we are racing to the sky with an entry. I am finding it difficult when spreads are involved. Thanks.


  163. AMZN….For all of you guys under 30, just to put this AMZN thing in perspective.  It ain’t the first time this stock has done what they did today.  Pull out your MAX chart and note that AMZN was about $1 in 1997, and by mid 1999 it was $100.!!  Some of us rode this phenomenal ride on this stock.  I bought it myself at $13 and rode it to $100.  As I’ve said before on this site, I took a small portfolio from about 50K up to about 400K in 18 months, largely on the back of AMZN.  So am I surprised by today’s action?  Yes?  Am I shocked?  Uh, no.  I’ve seen it before.


  164. Iflan, those were the days!  But the Kindle is not a game changer as AMZN was when it first opened it’s virtual doors with the anticipation that it would close many doors in the brick and mortar world.  Not sure that it has lived up to that hype even today.
     
    Whoever makes hand sanitizer is going to have a blow out quarter next time.  Our office is about out and the manager said Staples has a backlog on it for a week due to demand.  Who makes Purell?  Btw, in  a pinch it’s also good for a snort!  Pharm, you should try it!  8-)


  165. matt….those certainly WERE the days.  Back then my wife told everyone she saw that I was a very very smart investor.  Truth was almost anyone could buy a dot com stock and make bundles of cash.  There were very few naysayers at that time.  98% of those I saw on TV discussing the markets thought it would last forever.  Only a few knew better, and said so, some putting their careers at risk by ‘talking negative’.  But eventually it all imploded, as you know, and many of those ‘smart investors’ just became what they were before….average people trying to learn how to make money in the markets.  But it’s because of that experience, and more recent experience in the markets, that we know it can all turn around very abruptly.  No, AMZN is not worth what they were willing to pay for it today.  Some of us know that,  and we will profit from the retraction of the stock in the coming weeks.


  166. Amazon’s price went up all day despite the fact they cut the price of the international version of the kindle by $20 to combat the the Nook. I don’t know what people are smoking but I think I might want some. Especially since my brain is now officially off.


  167. I hate these F-ing computers !
     
    Its all about the options; the prop desks at GS etc made a killing on AMZN today.


  168. Pharmboy,
      Any comments on Elan? Is Tysabri dead?


  169. cwan/PM test – I sent you an email


  170. Japar – good question, and I am not at liberty to guess on the FDA decisions, nor do I agree with some of them.  You die with MS, you die with the drug, maybe a little faster with drug as there is not cure for MS  -  take your pick.  Mine would be drug, but that is me. 


  171. 106 less banks this morning.


  172. With the 100th bank failure in the rearview mirror, a Georgia bank and two more in Florida (in Naples and Bradenton) go down as 101-103, at a combined estimated cost to the Deposit Insurance Fund of $148M. Updated 7:15 p.m.: Banks in Wisconsin and Minnesota make 105 failures total, another $120M from the DIF. 8:36 p.m.: No. 106, in Illinois.

    Keyreports1023

    Even after its huge day – trading at 56 times its estimated forward earnings – is Amazon.com (AMZN +26.8%) still cheap at $118.49? The median price target for Wall Street analysts is $125, and FBR and Benchmark say $130 and $143 respectively.


  173.  Phil,
    For a naked intra day trade which gives the most bang for the buck, otm, itm or atm? If otm or itm how many strikes away from atm?
     
    Thanks 


  174. Capmark Financial Group (one of largest CRE lenders) is getting ready to file for bankruptcy
    http://online.wsj.com/article/SB125640081248705947.html?mod=djemalertNEWS
    Has the house of cards started to fall?


  175. Day Trading/OldG – Sadly, it depends.  It depends how sure you are, how big the move is going to be and what you consider bang for the buck. 

    For example.  AAPL is at $203.94 and let’s say we thought it would go up and retest $206 on a stick save. 

    To me, if I am SURE AAPL is going up or I’m willing to deal with the trade if it doesn’t (turn it into some sort of spread), the most bang for my buck is the $195 calls at $11.50, which should make about $1.50 at my goal.  If you have cash sitting on the side and it’s a day trade, then the bucks you are not using because you are too cheap to buy in the money (high delta) are getting no bang at all.   People don’t like getting no bang – that’s why Viagra is so popular…

    The delta on the $200 calls at $8.10 is .62 vs .74 on the $195s.  To me this is silly as you are either going to go for it or you’re not.  In reality, the MOST "bang" per dollar in this situation is the $220 calls at $1.32.  They have a delta of .17 so they gain a penny per 7.7 invested while the $195s gain a penny per 18 invested.

    The problem is that the $220s may be less liquid or have a wider spread and, of course, you have to buy 5x more to make the same money as you would with the $195s so it depends on your broker costs too.  All things being equal, you probably are better off buying 5x the $220s since you spend only $6.60 to get 85 delta points but, keep in mind that you increase the downside risk substantially too. 

    On the whole, with AAPL, in that situation, I would rather SELL the $210 puts naked for $9.60.  Those have a .64 delta so I can make $1.30 on a $2 move up and, if I’m wrong, I don’t owe my putter more than he paid me until AAPL falls below $200.40.  Since your premise is you are short-term bullish on AAPL, if you are also long-term bullish on AAPL this trade is pretty good overall.  Of course, if you are not a greedy bastard and you want to make $1.50 trading AAPL and you are bullish, selling the $190 puts for $1.60 is also a way to go BUT, with 4 weeks left on a stock that iis up $30 in the past 4 weeks – that’s a pretty risky trade unless you intend to stick with it. 

    Capmark/Trad – As far as I know, it’s just formalities at this point and Buffett is already planning to scoop up the assets so the FACT of Capmark dying shouldn’t surprise anyone but the REASON they died is what’s wrong with CRE in the first place and this is very much like when Northern Rock finally went under in the UK after a year of dying and everyone said "tsk, tsk" and pretended they could go about their business.   That was Feb 2008 after they had gotten emergency support in Sept 2007 – look what the market did during that time:  We PEAKED in Oct 2007 and had a sell-off into early ’08 with all the bank issues but then we rallied back from 11,500 in Jan back to over 13,000 in May so don’t underestimate how long it takes something so obvious to actually affect the markets.