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Tuesday, November 29, 2022

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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

If knowing about massive market moves in advance would be helpful to you – please consider subscribing to our service.  If you are already a member and know someone who might like to try our newsletter, you can send them a free trial subscription using this link and you can earn yourselves discounts on membership renewals for each friend who opts into the free trial.  We have over 19,000 people on our Newsletter list now and I want to see if we can break 30,000 by the end of the year now that our new mail server is up and running (we've been on hold for a month as we filled up our old server!).  Your help in this matter would be greatly appreciated.  PSW Report Members can extend their subscriptions at no cost simply by referring others to a free trial report – my little experiment in viral marketing…

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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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

GS raised AMZN target to $125

aclend, no problem.  We should be there by noonish. 😉

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?

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!

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

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. 

Any thoughts on NTGR?

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

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?

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)

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

Ok; AMZN 113.84 short
 
The hell w/ this !

edro – welcome to the deep end of the pool.

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

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…..

That also helped with my margin.

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."

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!

Phil, what is your long position in SRS?

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

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

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

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!

"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."

 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.

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

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

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

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.

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

Let’s get that SRS moving now !

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.

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

 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?

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

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.

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

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

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.

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????

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.

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.

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 

This market feels Bipolar…lots of ambivalence.

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