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Monday Markets – Is Momentum Shifting?

We're still trying to get bullish, really we are

Yes we are reluctantly bullish and only technically bullish at that.  All we are asking of the markets is for them to take out our very simple levels and hold them for more than a day or two.    Those levels are (and have been since early September):  Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623.  These are, according to the 5% rule, the levels we need to hold in order to establish a floor in the markets that justifies setting higher upside targets.  If they cannot be crossed, then these REMAIN our upside range targets and we need to start seriously considering the possibility that we may still get a pullback to Dow 9,650, S&P 1,020, Nas 2,075, NYSE 6,900 and Russell 575.

As I mentioned last week (and noted on David Fry's IWM chart), the Russell was the first to fail our 623 mark and will be our canary in the coal mine as they test 595, which is the 50 dma.  A failure there and the markets have little support all the way down to our June highs, our original breakout levels of Dow 8,650 and other levels you don't even want to think about on a Monday. 

$2.66 is another level we don't want to think about.  That's the average price of regular gasoline this weekend.  Despite 10% lower demand than last year when December gasoline averaged $1.66 a gallon.  What's a dollar a gallon between friends right? 

Well, actually since US consumers use 63M barrels of gas each week, and a barrel happens to be 42 gallons, it happens to be about $10.5Bn a month taken our of consumer's pockets.  That's cash, after-tax money – gone!  Money they won't be able to give to all those nice Russell companies for Christmas this year.  Remember how much that $160Bn stimulus helped the economy last year?  How much do you think a $120Bn mugging hurts the economy this year? 

The timing couldn't be worse – last year, gas prices flew down and helped people make it to the mall for Christmas, this year already – as we can see from Amazon's great quarter, many people will be skipping the malls and buying on-line.  With 10% of the workforce unable to find jobs and 10.3% of the US retail space now vacant (up from 8.4% last fall) it's kind of hard to get into the Christmas spirit, let alone the mood for a Santa Clause rally, which is what the bulls are hoping for now that there are just 58 shopping days until Christmas. 

The Federal Reserve has tallied nearly 8,300 store closings announced by retailers so far this year, including more than 1,500 large anchor stores. Last year, the International Council of Shopping Centers, an industry trade association, counted 6,900 such announced closures. The next-highest annual total recorded by the trade association was 7,000 in 2001.

As demand for retail space plummeted, average retail lease rates continued to decline in the third quarter, down 3.7% to $16.89 per square foot for shopping centers and off 3.5% to $39.18 for malls. And the outlook for a recovery in the near future appears bleak. "We don't see rent levels in retail returning to 2008 levels until 2016," said Victor Calanog, Reis director of research.  "If sales are flat, plus or minus, that won't be so bad, especially since our tenants are carrying lower inventories," Centro's Glenn Rufrano said. "What we're hoping against are big negative sales over Christmas."

So, big negative sales over Christmas would be bad.  59 days to go…  Oil is $80 a barrel and, as I pointed out last week, this rally has been led by just 4 sectors – energy, financials, commodities and consumer discretionary.  The XLE and OIH are right back where it was when oil was last at $80 and univerally thought to be heading higher.  Is $100 oil ahead for us?  Businessweek says "Don't Bet on It" and I simply don't see how people can afford $3 gas right now.   


How about materials?  Same thing – can we really afford $1,050 gold and $17.60 silver and $3 copper or is this just a reflection of speculative global money moving out of US equities (we are underperforming the global recovery by 1/3) and out of US currency (the dollar is down 20% in 6 months) and into commodities to hedge against what looks like inevitable inflation?  You can see the logic for financials going up on inflation (more money!) and oil and commodities but Consumer Discretionary?  That's just strange….

Oddly enough, the "recovery's" biggest enemy right now is the US dollar.  Should the dollar stop dying, money will flow out of our new commodity bubbles and will cause a relative devaluation of US Equities.  Also, it will make the relative labor costs being paid by US corporations soar and drive up their relative health-care costs and the cost of everything else they have to trade international revenues for to keep the doors open.  So watch out for the dollar but, as long as it stays dead, this rally can continue.  How's that for a bullish premise?!?

This week we get 1/3 of the S&P 500 reporting.  This morning GLW beat, keeping the fire going for electronics sales.  RSH, who actually sell electronics, missed however but that was more due to their general incompetence than sales, which were off just 3.1%.  VZ also put in a solid report and this all ties back to the same sector doesn't it?  Kindles, IPods, IPhones, Laptops and new TVs - just what a depressed population needs to stay home for the weekend.  In the great depression, the film industry boomed as a downtrodden populace found a way to set aside a little money to pay for a brief escape from a depressing reality.  Is that what's happening now or is this time different?  59 more shopping days should clear things up.  

Big news from BIDU tonight along with earnings of interest from DTG, DRYS, MTH, OLN, RCII and WINN.  Tomorrow morning we get AKS, BEAV, BJS, BYD, BP, CP, FDP, LLL, PCX, SCHN, AMTD, TXT, X, UA, VLO and WAT.  In the evening we get BXP, BWLD, CEPH, NSC, NTRI, PNRA, PEET and, the biggie – V, who will give us the best read yet on what the consumers are really doing into the fall.

Tomorrow we get the Case-Shiller Home Price Index and Consumer Confidence for October.  Durable Goods and New Home Sales hit us on Wednesday and Thursday is a big day with the Q3 GDP and more Unemployment.  Friday we end the week with a bang (hopefully not a whimper) with Personal Income, Personal Spending, PCE, Chicago PMI, Michigan Sentiment and the Employment Cost Index.  It's really all about getting past that GDP number, which is projected to be up 2.5%, downgraded from up 3.2% originally projected so we've set the bar so low on that one, a miss would be tragic (last Q was -0.7%). 

Toyota INDUSTRIES (not TM) boosted the Nikkei this morning with a surprising profit, gaining 7.5% in trading.  Nonetheless, the Nikkei dropped 100 points into the close as investors became nervous about the US open and the mega-pump that jammed the dollar back to 92 Yen in early trading fizzled out.  “Companies’ desperate efforts to cut costs have resulted in a lower break-even point, and we’re about to see these positive effects in coming earnings reports,” said Hisakazu Amano, who helps oversee the equivalent of $19 billion at T&D Asset Management Co.  China was closed for the day.    

Europe is pretty flat ahead of our earnings so it's up to YOU to keep the upside momentum going in the US markets.  Get out there and BUYBUYBUY stocks and knick-knacks – OR ELSE!


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  1. AMZN- Sold DEC $110 short for $9.10 on Friday.  Looks like the mother of all short squeezes on this one.  Any recommendation on how to play this one?

  2. Phil:
    A little confused about the AMZN discussion this weekend. I was originally thinking there was little reason to roll my short Nov 95s because there was a whole month left and I’d sold puts and bought a long vertical LEAP. You pointed out the Nov 95s had no premium left, which is true. That means I do worse on the Nov 95s if AMZN goes up (versus rolling to the Dec 110s) , but better with the Nov 95s if AMZN pulls back some in the next month.
    Then Pstas asked about his AMZN position which included short Dec 105 calls. Your response was "why do anything with a month left?" But the Dec 105s only have about $1 in premium left. So the premium argument would seem to apply there as well.
    I guess it’s just how you come down on a bunch of trade-offs.

  3. did you sell them naked?

  4. Phil, Would you talk about implied volatility, giving an example of an option and the i.v. number. I’ve been reading about it but would like to hear what you have to say.

  5. Phil,
    When you like a stock like BMY and say: sell June P + C for 3.95, do you sell the same amounts dollar wise of both puts and calls or sell more puts – if so what proportion?

  6. Cramer pumping AMZN at the open.
    That is the kiss of death.

  7. At to the veritcal.  I think I mentioned the 2011 $100/130 spread for $10.50, that spread can now be had closer to $9.50 now that the volatility has calmed down a bit (though I don’t see why it should with that crazy move).  The point of this trade is that, if AMZN never goes back down – you pocket $10 more on this spread to offset losses/pay for more rolls up.  If AMZN does go down, the delta differential on the spread is just .15 so you lose net .15 per $1, which means AMZN can crash $15 and you’ll lose about $2.25 on the spread but wipe out the $11.30 calls – a very fair trade.

    Phil, This vertical that you mentioned over the weekend now costs over $15 with a .22 delta. Not sure if that makes sense anymore. Any suggestions?

  8. how are discussions held over the weekend?  on this same site?

  9. Last week, Phil had talked about the Jan ’11 100/120 vertical spread to be had for 10.50

  10. AMZN/Jim – I know, I am everyone’s worst nightmare when I say hold but hold is the smart move.  A squeeze is a squeeze and the only smart play during one is to roll up to some silly premiums (like the $110 calls, which were .57 the day before earnings for $9).   They can squeeze some more, which is why I also advocated selling puts (late now) or buying call covers (late now) in case you were worried.  As to why not worry on the $105s – because the only way a roll benefits you is if you don’t overshoot the marke OR you are not moving up to an uncomfortable amount of contracs.  Since we don’t know how far AMZN can take this squeeze, another DD is not advisable unless they REALLY look like they can hold $120. 

    Better/Chaps – You are only better IF they pull back below the calls you roll to.  If you have 10 $95 calls at $24 and you roll those to 2x the Nov $110s at $11.75, then you need AMZN to drop to $110 and you owe the caller NOTHING.  If AMZN drops to $110 and you stick with the $95s, you still owe $15.  Of course the danger is if they go up to $135, then you owe 2x $25 vs 1x $45 but, as I said, if you offset a massive gain by selling puts and doing the vertical leap spread, it’s a risk worth taking. 

    IV/OldG – IV is just odds.  The odds that AAPL or GOOG will move 10% between now and expiration are much higher than the chance that MCD will move 10% during the same timeframe so the IV for those stocks will be greater than for MCD and that is factored into the options pricing.   This is another one of those things you shouldn’t worry about too much other than learning to spot "good" and "bad" deals.  If you get to know stocks very well, you learn when the IV is too high or too low and that can help you find good option deals.  Cap and I were discussing that re. AMZN leaps in the last post. 

    Speaking of the last post, make sure you read the comments there as we talked about many, many ways of covering AMZN if you are in that one.  In the $100KP, the official (and sucking) position is 40 sold Nov $110 calls at $9, now $13 and 20 sold Jan $105 puts at $5, now $3.75.  In general, we fully expect to have to roll this posiiton along to Jan calls before getting lucky and getting out and we can always roll the callers later.

    Big rally already, pretty good volume so we’re reversing much of Friday’s damage.  This is why I wanted to be 50/50 into the weekend, there’s no profit in being a bear!

    Key levels remain:  Dow 10,087, S&P 1,096, Nasdaq 2,173, NYSE 7,204 and Russell 623.  So far, we have the Nas (of course). 

  11. SRS …

  12. AMZN – wtf..

  13. AMZN/oncmed or Phil: Thanks. It was the 2011 100/120 spread, now a little over a 10.50 debit. Not sure this makes sense now. Would moving it up to a 105/125 make any sense in light of today’s action so far? I am short the Dec 110′s but I did not short the 105 puts on Friday (yet – waiting for a pullback if it comes).

  14. AAPL November 200 puts bought back at 30% profit.  Normally I would wait for 50%, but not in the present market environment. 

  15. Thought the Amzn Nov 125 calls would top at 5 and went short, but clearly there is more momentum coming today…

  16. dmankoff….yes, same site.

  17. BMY/Jomp – It depends on how bullish and what your target is as well as whether or not you are getting a good price (if the VIX is high, you probably are).  With BMY, we like them long-term and think they should hold $20 so we’re happy to own it in June at that price so we can buy it for $22.47 and sell the June $22 calls for $1.90 and $21 puts for $1.50 for a net entry of $19.07/20.35

    Cramer/Cap – I don’t know, that can really squeeze the stock even higher and what they are trying to do is force shorts who have tried to hold on to capitulate. 

    Vertical/Allen – No it doesn’t!  I hate to stand here and say don’t chase or whatever as it’s such a painful thing to do, especially with Cramer and Pisani now tag-teaming and coming up with scenarios where AMZN can break $130 but this is such blatant, disgusting manipulation I don’t know what else to say.  Loook at the volume on this $4 move today compared to the $7 move Friday morning.  You can choose to be one of the few that are buying but it might be very lonely at the top.  I will keep my eye out for something reasonable.  The 2012 $110/$140 spread is just $12.80 for the $30 spread, that’s not a bad long cover.

    $10.50/Allen – Well that’s way different.  That one is fine at $10.50 IF YOU ARE WORRIED that AMZN will go to the moon.  I’m more looking for a nice pullback to sell more puts into or maybe we fail our levels today and the whole thing falls apart. 

    AAPL/Iflan – Smart!

  18. Good morning,
    I see that Mr. Bernanke has loaned the gang some more free money !

  19. AMZN…I think you’ve got to be very cautious shorting this stock right now.  It still has decent volume, and the entire market is moving upward.  Patience.

  20. Real estate is suddenly healthy this morning; even on the heels of Capmark BK.
    Fake, fake, fake fake.

  21. Phil:
    9:53 comment: Official AMZN in $100K is Dec 110s, not Nov 110s, right?

  22. AMZN/Phil: I’ll sit tight for now and wait for some type of a retracement — and take deep breaths. LOL
    Let us know if you see something that makes sense for a cover as the day goes on.

  23. Phil, verifying on the watch list update for PDS. It’s a buy/write with the March 5P, 7.5C for $1.40 correct?

  24.  I have not been on the AMZN ride …. but now at these heights, what’s the best opening position ?    I was looking at selling 110 calls and buying 120 calls in Nov for a bear call spread

  25. Phil …. I am short 1 BIDU Dec 440.  w/earnings tonight should I roll it now or wait and see (I can roll to well over 600 Jan 11 for credit).

  26. PCLN is also insanely high.  Not even a million shares a day traded and they have gone up and up and up since March from $45 to $182 now.  I think that may make William Shatner one of the richest people on Earth!   They are an excellent company and I wouldn’t short them but geez…

    LEG also at 52-week high.  That is one very green shoot as they make stuff that goes in stuff.  WHR (big stuff), DE (huge stuff),. SYY (food), SHO (hotels), RSH (stuff), RL (clothing stuff) all making highs today so someone is believing in Christmas today

    Lloyds (LYG) will announce within days a plan to raise £23B to escape the U.K.’s costly insurance scheme, which would give the government a 60% stake in the bank. Under the plan, Lloyds will sell £12B in shares, including £5B from gov’t, and raise another £11B from debt issues.

    Nationalized U.K. lender Royal Bank of Scotland (RBS) is looking to pare back the assets covered by the government’s pricey asset insurance scheme to £265-300B from an original £325B, sources say. Shares -1.5% premarket.

    Analysts now expect crude to average $74 in 2010, up from $73.50 last month and $66 as recently as April. "Fundamentals for the oil market look better and better with the IMF raising the forecast for global growth in 2010," one analyst says. Goldman thinks we’ll see $85 oil before year-end. Currently Dec. crude -0.5% to $80.13.

    Gas prices jumped $0.1782 over the past two weeks to $2.66/gallon, the first increase in Trilby Lundberg’s survey in two months. The jump was a factor of higher crude prices, while profit margins shrank for both refiners and retailers.

    In an unusually bold attack, ECB’s Christian Noyer warns banks are taking the same risks that led to the crisis, and tells them to preserve capital rather than pay it out to bankers and investors. "Most of the negative effects of the economic downturn on balance sheets are still to come," he says. (read Noyer’s full speech (.pdf))

    Chicago Fed’s National Activity Index (.pdf) declines to -0.81 from -0.65 in August. Three of four broad indicators made negative contributions, but production/income was positive for the third consecutive month. The index’s three-month moving average makes quite a strong case for a V-shaped recovery.

    U.S. firms expect to hire and invest more over the next six months, according to a survey released this morning by the National Association for Business Economics. For the first time in a year, more businesses reported a rise in capital spending over the previous quarter than a decline.

    China’s economic growth is likely to speed up this quarter, but the government will stay the course with its loose fiscal policy, senior officials said today. Still, analysts say an unmistakable optimistic shift in official statements signal Beijing is starting to think about how to unwind its pro-growth policies.

    SRS getting near $9 again for you crazy roller coaster fans!  $9.15 is usually the best we do so I lkie the short sale of the $9 puts at .60.

  27. What is the news on BAC today – why down?  Trouble paying TARP with threat of another secondary?

  28. Hi everyone, I’m new here, realy enjoying to read all posts and articles.
    Phil question about entering BMY (and other same kind of trades): Do you recomend to sell first straddle (make sure to get a premium) and after that buy stock, or
    first buy covered call and later sell put?

    Since I was not in the AMZN trade in the same way as the 100K portfolio, I think it has allowed me to stay somewhat objective. I only shorted it after the big pop though I am down 100% on my naked 110 calls at this point. I just wanted to give a little encouragement and say that since I’ve been following Phil on this site over the past 8 months, he seems to be correct in his assessments about 95% of the time (estimating), especially with regard to unwinding long term. I can remember at least 10 times that I pulled the plug on a trade that was worrying me (against Phil’s advice) only to watch it do exactly what he said by options expiration. Right now, I feel like if I could avoid watching, it would be the best thing. If we could fast forward 2-3 weeks, most likely all would look much better.

  30. Banks may be down today due to downgrades on regional banks which seem to be pulling the whole financial sector down today.  I find that interesting since CRE seems to be jumping at the same time.  Too bad I can’t seem to get a fill at .60 on the SRS trade.

  31.  ACLEND   ……IF any person does get scared ….so gripped by the gator we call amzn……please be sure and post that you covered…..then we know it is the top or near ….

  32. AMZN/Chaps – No, it’s 40 Nov $110 calls and 20 Jan $105 puts sold short.

    AMZN/Allen – As I said on the weekend, just imagine you are going to have to roll every single month all the way to Jan 2012 (26 months) and it NEVER goes down.  As long as you make sure you sell $4,000 (or whatever proportion) per month in puts against it, that’s $108,000 collected against the short calls.  The $100KP can accomplish that by selling 10 $120 puts, now $4.90 but we’re not that bullish yet are we?  Selling the Jan $105 puts for $5 gave us 2 month’s collections ($10K for 20) at a price we’d be thrilled to hit as it would certianly wipe out the callers and let us rolling the Jan puts down lower be the worst problem we have that month!  Given the earnings and guidance, I think that’s about a fair spot for AMZN to settle down at.

    PDS/Doro – No, the original play was JUST selling the Dec $7.50 puts for $1.15.  The other play I liked was the vertical, buying the $5 calls, now $2.70 and selling the $7.50 calls, now $1.10.  I liked it at $1.40, I like it much, much less at $1.60 as these plays are all about making pennies.  IF you can get $2.80 for selling the March $5s, NO LESS, THEN I like the buy/write at $7.58, selling the March $5 calls for $2.80 and selling the March $7.50 puts for $1.05, which is net $3.73/4.37, which is very nice on a stock that pays .39 in dividends (around 10% against that entry). 

    BAC/Jo – Arguement over how much reserves they have to have left to pay the TARP.

    Welcome Tchayipov!  We do a little of each, it depends what you think the near-term move is going to be.  My favorite entry is to sell the put on the way down, buy the stock when it begins to turn up and then cover as it loses momentum.  As I just said about PDS, this is a game of pennies and a nickel here and a dime there make a huge difference. 

    Thanks AC!  I just hope this isn’t one of the 5%!  8-)

    CRE/LV – BXP reports tomorrow, that may make or break the sector. 

  33. BAC- I took out my under water callers this AM on the pull back- sometimes sloth pays- or is it "patience" . Yeah , that sounds better.
    That’s the good news. Now , I am still long some Feb 17 calls (net $2.30) now $1.10.
    Looking at rolling the Feb 17′s to May 16′s; sell May 13 puts for financing and then sell Jan 11 20′s against the May 16′s.
    I am sure you have  a better plan?

  34. Sector ETF strength: Steel– SLX +2.2% Coal– KOL +2%. Gasoline– UGA +1.9%. Internet– HHH +1.8%. Energy– XLE +1.8%. Retailers– XRT +1.6%. Real Estate– IYR +1.5%. Heating Oil– UHN +1.5%.
    Weakness: Commercial Banks– KBE -2%. Regional Banks– RKH -1.9%. Livestock– COW -0.7%. Financials– XLF -0.6%.

    Dow leaders early on: MSFT +3%. AXP +2.8%. CVX +1.9%. CAT +1.9%. XOM +1.6%. DD +1.3%. PFE +1.4%. MRK +1.3%. KO +1.3%. IBM +1.3%.
    Laggards: BAC -3.8%. JPM -1.6%.

    I especially like AXP’s amazing recovery (upgraded) after their earnings beat-down on Friday.  That’s how you know IT JUST DOESN’T MATTER

    More commodity pushingAmbrose Evans-Pritchard says food prices – which have largely missed out on Bernanke’s reflation rally – will never be so cheap again: "For investors wishing to rotate out of overstretched rallies, this is a rare chance to buy cheap into a story that will dominate the rest of our lives."

    Ten names to drool over: Barron’s cover story highlights 10 mid-sized tech companies likely to be consumed by bigger names: Networking – Riverbed (RVBD), Brocade (BRCD), Juniper (JNPR), F5 (FFIV); server side – BMC Software (BMC), Red Hat (RHT), Citrix (CTXS); storage – CommVault (CVLT), 3Par (PAR), NetApp (NTAP).

    FDA OKs emergency use of BioCryst Pharmaceuticals’ (BCRX) experimental intravenous antiviral drug peramivir to treat severe cases of H1N1. "Based upon the totality of scientific evidence available, it is reasonable to believe that peramivir IV may be effective in certain patients," FDA says (.pdf).

    In a wide-ranging interview with Index Universe, Nouriel Roubini says he doesn’t believe in commodities ("rising commodity prices are not justified by the fundamentals"), oil ("I worry that oil is going to go up above $100 for reasons that have nothing to do with the fundamentals of supply and demand"), or gold ("without inflation, or without a depression, there’s nowhere for gold to go").

    According to Gretchen Morgenson, Washington’s hat trick of financial reforms last week (consumer protection agency; limiting risky derivatives trading; reining in runaway executive pay) were much ado about little, and do nothing to prevent another disaster like the one that unfolded a year ago.

    TRLG making 52-week highs now!  Someone is just buying the hell out of the consumer sector.  Again though, this is not one I’d short as they are a good company. 

  35. Nice reversal on the UUP….

  36. Commodity futures going red, financials mostly red. It’s looking like a BS rally right now.

  37. Not adding to my C position (from Friday) right now, btw. Lots of bad news surrounding them at the ‘mo.

  38. Aclend, I agree. The emotions involved in these trades can run high and it is important to remain objective and follow the plan. We can also do some things to help us deal with our own emotions and I have a couple of rules I have developed that help me follow Phils recommendations:
    - only enter Phils day trades at his DD point if he is still in it
    - only enter shorting of anything clearly rising on momentum at his third adjustment, if he is still in it
    - no naked short selling against volatile stocks around earnings
    These rules aren’t for everyone, and I’m not recommending them at all. But these rules help me only be in trades that I have the best chance of following the plan with. I do suggest everyone have their own set of rules. It is not as though we are short of ideas, and in order to make money one must first learn to not lose it.
    Since I was not in the AMZN trade in the same way as the 100K portfolio, I think it has allowed me to stay somewhat objective…..

  39. Yeah, it works 100% of the time, 95% of the time!  :-O

  40. PGH  You still like them for a buy/write?  Dec 10 P&Cs?

  41. PGH – FYI, the latest dividend will be closer to $0.0648/mo., not the $0.09/mo. it used to be…I believe this is mostly due to the CAD/USD exchange rate?  Still a 7% yield though…

  42. Hi Phil Note the remarks above on BAC I wonder what is the right thing to do in respect to intermidia play
    bought BAC jan 11 17.5 call for 4.13  now 2.56 against sold 20 call at 3.22 now 1.82 question should one buy the short call and take the profit on it even that the long call is down wait for the up turn of BAC and sell the 20 call again.
    This situation I have in many other option positions wonder what your thoughts are Thanks

  43. BAC/Pstas – Too much work!  You started with $2.30, hopefully covered.  The 2011 $12.50/15 spread is $1.40 and you’ll get back the $1.20 you lost for another .30 invested if they hold $15.  If they don’t hold $15, THEN you can sell some puts for good premium.  Let’s say you can sell the 2011 $10 puts (now .98) for $1.50 on a move that gets you worried about your spread – then BAC just has to hold $10 for you to get out with $1.50 of the $2.30 and you can flip around and go long for 2012 if you want. 

    Nas has been frozen at 2,175 (43.50 on the Qs) but the Dow is weak in the knees for sure and, of course, the RUT is not impressing us.

    Oops, there it goes.   Nice BS spike in AMZN right before failing – just confirms what manipulated BS it all is!

  44. FXP at $8.09, $8 calls are .60 or Dec $8 puts can be sold for .75 – I like them all!

  45. Song to the tune of Wheels on the Bus..
    The wheels on the bus are falling off.  Falling off.  Falling off.  The wheels on the bus are falling off.  All through the day.

  46. I made a few bucks on DDM 40 calls this morning, since we’ve gone red should I pick a couple up again as a bullish hedge? My positions are bit bearish as it stands right now.

  47. Closed SPY strangles from Friday for a small profit. I think there’s some risk of a bigger fall here.

  48. As soon as I typed that we went down 5 points.

  49. shorted amzn @ 123.13

  50. COF closed their gap..

  51. Wow what’s up with oil?

  52. re: AMZN Better/Chaps: OK. We weren’t on the same page. I thought we were rolling to Dec 110s. (We were at some point.) I was comparing the Dec 110s to the Nov 95s during the month of November (using TOS.) Somehow, I missed the transition from Dec 110s to Nov 110s.

  53. Vix spikes 6% – looks like people are actually getting worried

  54. Anybody follow WMS ?  Hearing some chatter on good earnings when they report, fwiw.

  55. What happened ?

  56. $123B note auction. If I buy #1B, would you guys buy another $1B? All funny money anyway.

  57. Phil,
    I’m new here so don’t always understand your shorthand.  When you say "FXP at $8.09, $8 calls are .60 or Dec $8 puts can be sold for .75 – I like them all!"

    Are saying to buy then all, or some combination?  Sorry if that’s a stupid newbie question.

  58. Ohhhh PPT……  where art tho?  You might want to get on the ball here.. and make it soon!  Don’t let the RUT slip past 598…

  59. Good calls by Rap and Eric at 11:20.  Great things to note about the market when we’re looking for a turn. 

    Rules/Steve – Those are great rules!  I have often said that the best possible porfolio would be to only buy stocks AFTER we have to roll or DD on them as it indicates they moved against us (got cheaper) AND we re-evaluated and still decided to stay in.  There are so many trade ideas, it makes sense if you are limited in your trading to wait for the real bargains and they come in any market – like RIMM, which is cheap now despite everything else in it’s space going like gangbusters or WFR, which also well off the sector. 

    By the way, as I said on the weekend.  If AMZN is freaking you out, keep in mind you can roll it to 20 2012 $170 calls at $15 and 20 2012 $80 puts at $10 and that’s $50K sold for a net margin (according to TOS) of $24,500 and then it’s just a matter of forgetting about it and hoping AMZN stays in a 40% trading range.  The nice thing is it won’t jump up and down $5,000 an hour on you but the bad thing is you don’t collect until 2012, even if you nail it

    PGH/Eph – Premium sucks but they are solid.  I’d just say the hell with it and sell teh Apr $10s for $1.90 so you have a $8.10/9.05 basis.  200 dma is $8 but what takes down these trusts usually is rumors that the tax status will change as that’s the whole reason most people own them.  Make sure you are prepared to buy into one of those dips (although one day it may be true!).  

    BAC/Yodi –  I’d wait (them of the day it seems).  You bought a $1.09 spread and that spread is now .74 so you are down 32% with a year left to go.  If anything, I would offer $1 to roll to the 2011 $15s.  You can always get .75 of that back rolling your caller lower and, if we turn back up, you are $2.50 better off. 

  60.  WTF happened?

  61. Dollar fell below $1.50 to the Euro and look how fast things collapse!  Break came at 11:10 and that and this news is the biggest reason we’re selling off. Watching copper at $3 now, that would be tragic to lose for the bulls.   Oil down below $79, Gold back to $1,048. 

    Dallas Fed Manufacturing Outlook: Texas factory activity declines as the production index moves into negative ground after leveling the month before. New orders and shipments turned back to negative as well; employment stayed negative and price pressures remain "tame."

    This is a terrible report that CNBC is pretending doesn’t exist.

    Not bothering AMZN too much so far….

    Keep in mind those must hold levels are: Dow 9,650, S&P 1,020, Nas 2,075, NYSE 6,900 and Russell 575, NYSE is closest to a test and that’s bad when a broad index breaks down on you

  62. AMZN will crack … countdown is on …

  63. Phil, a 102-103 GLD strangle requires 3.98% move in GLD to be profitable, with 25 days to expiration. Have you ever looked at GLD and do you have any thoughts on this?

    Current price:

    Call Strike:
    Call Premium:

    Put Strike:
    Put Premium:

    Number of calls:
    Number of puts:

    Call$ invested:
    Put$ invested:

    Straddle Cost:
    Dollar Cost:


    Max move req. to upside:
    Max move req. to downside:

  64. Phil, what do you think of a BAC buy write selling May 18 C / 14 P for a net 12.47/13.23 entry….

  65. Phil: when I closed PGH on 10/13, i made 26 %, had sold jan 7.5 puts and calls,
    with the drop, maybe go back in: buying the stock and selling premium with puts and calls, why is apr best ???

  66. *Pharmboy* any thoughts on AMGN?
    Amgen Inc. announced higher third-quarter earnings late Wednesday, but added that U.S. regulators will not approve a drug key to its financial future until the company furnishes additional supporting information

  67. Matt – All through the town!

    DDM/Blair – Don’t catch the knife but sure, they make a great hedge.  So does selling DIA puts like the $95 puts for $1 as the Dow has to drop 400 more points before you owe them anything and that’s bound to make your bear trades happy.  Those are the nice hedges, even when you lose, you win…

    AMZN/Shane – If I didn’t have it already I’d be right there with you!

    VIX/Samz – Yeah, this move seemed to catch people by surpise.  That’s great for our VIX spread as we cashed the short side on Friday and now just have the vertical play left. 

    WMS/Cap – Good growth usually but I’m a little concerned that orders may have been held up this year as the casinos scrambled to refinance first.  Could go either way and certainly one to buy if they have bad earnings and get knocked down. 

    Notes/Raul – Lock into low-interest US Dollars for long periods?  No thanks…

    FXP/Jcm – That was hurried.   I like the stock at $8.09 (now $8.20).  I also like buying the $8 calls for .60 (now .65) and I like selling the Dec $8 puts naked for .75 (now .70).  Any of them would do and, of course, you can turn the stock into a buy/write once things settle down.   China was closed yesterday and if we put in another negative day, they have a lot of catching up to do.

    CNBC celebrating that 81% of the companies have beaten estimates but shouldn’t we be scared to invest in a market where 81% of the analsts have no idea what earnings are going to be from quartert to quarter.  And those analysts listen to guidance from the firms, who also seemed to have no idea what the business environment would be like last Q so Woo-Hoo for cluelessness – it’s the American dream…

    SNDK getting bought anyway. 

    FSLR hopefully breaking finally.  Another one with a huge run-up just before failing. 

    GLD/Raul – That’s still $40 so you need $1,010 or $1,090, those are not for me as you are buying premium on both ends.  If you want to play volatility in gold, why not buy the $103/104 bull call spread for .40 and the $103/102 bear put spread for .50 so a $1.50 move in either direction gets you at least even and a big move soon pays you a double on one side and whatever is left on the other is profit.  You are risking $2,100 on 6 and you need $107 or $98 to get back $3,000.  With this spread you can buy 20 on each side for $1,800 and you get back $2,000 if gold finished higher than $104 or lower than $102 but, like I said, a big move would let you take one side off at .80 and then hopefully the other would still be .25 and that’s a very quick $300 profit (about 20%).  You can make that trade at any strike over and over again just needing any good $3 move in gold to win. 

    BAC/Magret – I think that’s a great play but make sure you are scaling in.  They are floating rumors now that BAC or C may be allowed to fail. I don’t believe it at all but rumors don’t have to be true or even plausible to work.

    PGH/RMM – If you want to trade around on it, Jans are fine but as a set and forget dividend play, there’s no sense in incurring rolling costs.  I have the impression (possibly wrong) that Eph is a more conservative player than you are so for him I like the April sale. 

  68. Let the labor games begin: Ford (F) workers in Missouri vote 92% to reject labor concessions matching those that the United Auto Workers made with rival (but bailed-out) automakers. The accord called for a six-year ban on strikes over wages and benefits, and a new-hire pay freeze.

    I’m out of here at 2 today.  A little more bearish but still 50/50 ish as we’re pretty much in the same place as we were on Friday now

  69. Well, tip top o’ the morn’ to you all!  Nice day, 68F here in sunny San Diego….Now, who pulled the plug on this thing?  It was up b’f I left for my stroll down the coast for work. 
    AMGN – kust, not a big fan of AMGN.  yes, their drug is 1/yr, but with Fosemaxx off patent, 1/wk Fosemaxx and other competitors priced in the hundreds of dollars/year (ok may be a few thousand), why would anyone pay 10/20K for this?  I think they are going to have a tough time on that one IMO for profitability.

  70. Phil Still watching AMZN go up and down possible moving to 124 hold still the 80 short a 105 short NOV thin king of rolling to April 105 /130 debit 1.39 your thoughts pls

  71. Just worried a bit about the 105 put

  72. Possible stick save, as usual that 9,920 mark is critical.  I may not be here but two upside plays if we break over it are:

    FAS off good support at $80, nice upside play on $84 calls at $5.20, were $14 two weeks ago and $8 on Friday – Stop if they break below $79.

    DIA Jan $103 puts now $6.15, can be full covered with Nov $99 puts at $2.10, stopping out 1/2 at $2.50, which is where they just beaked or any break back below 9,900

  73. Detroit real estate "market" is chaos. Poor bastards.

  74. Pharm, but isnt the new drug targeted towards cancer patients….do they use Foso for this purpose?

    denosumab’s usefulness in preventing complications from cancer’s spread to bone

  75. Kust -
    Denosumab is a fully human monoclonal antibody that specifically targets a ligand known as RANKL (that binds to a receptor known as RANK) which is a key mediator of osteoclast formation, function, and survival. Denosumab is being studied across a range of conditions including osteoporosis, treatment-induced bone loss, bone metastases, multiple myeloma and rheumatoid arthritis.  Last ones are still up for debate.

  76. AAPL….In my opinion, good time to scale in if you aren’t there already.

  77. AMZN ….is a feel good stock …..every stock sold is at a profit……no body is out of the money except the bears…..just be patient …..

  78. And from my knowledge, they are looking at broad spectrum, not necessarily cancer patients.  The trials were HUGE #s for this mAb.

  79. Thanks Pharm going to approach AMGN with some caution

  80. Thx Phil.

  81. AMZN/Yodi – Sure if you can make that progress at little cost it’s worthwhile.  They are still buying AMZN like hotcakes so who knows where it will end?  I’m dying to sell the $125 calls for $6 but nothing seems safe with these guys! 

    Big failure to recover there on the indexes and down we go again.

    BIDU getting hit hard. 

  82. Instead of FU stick, I should be saying FU AMZN !
    This is ridiculous.

  83. bidu is reporting tonight. so should be fun either way

  84. WMS / not that I have any clue, but what I am hearing is strong Q, beat and raise.

  85. Phil……How do you feel about a long staddle on BIDU, for minimum $, for recreation.?

  86. OIH getting whacked

  87. Phil……I know it’s generally more profitable to sell atm calls naked on a stock we think is going down, but in AMZN case, would a further otm call be safer, perhaps Nov 135s at 2.50? 

  88. Interesting divergence between the financials and the indices right now.  Who is leading who…

  89. AMZN – taking another shot at $125.  Hope it breaks before I do.

  90. Wow, AMZN and SNDK both murdering the shorts! 

    BIDU backspread of 2 Jan $460 calls at $24.25, selling 3 Nov $450 calls for $15.  If it hits big you’d have to buy more longs to adjust.

    Well, I have to go – try not to let AMZN hit $130 without me!  

    AMZN/Iflan – I wouldn’t touch it right now unless you are already stuck in it.  This movement is completely insane against a down 1% market.  SNDK and AMZN are holding up the Nasdaq and the runaway VIX is making everything more expensive.  You can sell a call but you’d better be prepared to roll it a lot, especially if the market bounces back.

    AMZN note to all:  You can always sell Nov $120 puts to stop bleeding, just keep tight stops on them in case this move is BS.

  91. Phil,
    What is your opinion about MON??

  92. Big note auction this week, dollar is pushed up. We have seen this movie before.

  93. I know this goes against the PSW philosophy in certain ways, but AMZN’s recent volatility actually makes it a candidate for a long gamma position if anyone wants to try. E.g., go short stock and long OTM calls for a neutral or low-delta entry position. This may look crazy since the calls are expensive, but if the stock keeps going up you wind up long delta (bullish) as the calls move ITM, and if it goes down you wind up short delta as they move futher OTM. The idea in this trade is that the expected move near-term is faster and bigger than the IV on the long options. You don’t want to stay in a position like this for more than a few days, obviously. Basically you’re just looking for a move later this week large enough to take some profit. IV will probably stay elevated for the week, so you’re unlikely to get suddenly burned by an IV collapse there.
    A long straddle is a similar play but even more expensive from a premium decay standpoint.

  94. SNDK – Wow. I own some stock but afraid to write calls against what seems to be obviously an irrational surge higher today as it may go up even more and I will loose the upside!
    Anyone have suggestions?

  95. any thoughts on NAT GAS….(….The implied net injection of 18 Bcf was 53 Bcf, or 75 percent, below last year’s net injection of 71 Bcf and 70 percent below the 5-year average (2004-2008) injection of 60 Bcf for the same report week…..of course there is the all time high storage to consider

  96. mSquare
    When if doubt sell half -
    Sell 1/2 Nov24C, if stock goes up you can roll to 2x the Nov26C for about even then to the Jan 30s for about even.
    Something like that is a plan

  97. Eric or others -
    If you have DIA covers – at what point do you decide to roll them?
    I actually bought SPY March 111 & 112 puts and sold 1/2 cover on  Nov. 98 puts -
    Thanks Sam

  98. sorry correction 1/2 cover at 108 on spy

  99. Now Cramer wants to short everything …
    WMT can’t compete w/ AMZN according to Jimmy … uh, yeah, sure.

  100. lots of volume in the dollar trade

  101. Cramers playing with fire, i foresee a postal type incident happening here

  102. samz, Phil has the cover thing down to a science and will have a better answer than me, but I will just say that the cover side of your trade is still delta negative (and the uncovered is too, obviously), so if it were me I wouldn’t be in a hurry to do anything right now since we could easily reverse back up this week. Once the cover is deeper ITM (= not much premium) and a lower delta than the option it covers (= outgaining it on the way down), I start thinking about rolling the whole thing down.

  103. If the markets begin to believe the dollar heads back to 78/80 we could get a deeper sell off

  104. Monsanto (MON 72.20, -3.03) has been under considerable pressure and, in turn, is undercutting the broader materials sector. Monsanto’s weakness comes amid chatter that a Wall Street analyst issued cautious commentary regarding the company’s seed pricing practices. Shares of MON are being hit with their worst single-session percentage drop in more than one month

  105. Guys,
    where can I see your 100k portfolio just to understand all adjustments you discuss here

  106. MBIA: I think a while ago there was some discussion about a buy/write for MBIA (ticker MBI). Does anyone remember the details? Thanks.

  107. So Erik, CAP, kustomz, ANYBODY,
    Anyone have a " market feel "  for the close today or open tomorrow ?  It looks like they’re trying to camp it here, but The Stick is always out there. And if they don’t get back to at least 602 on the Russell, the chart looks pretty bad.

    Oh no, the Undertaker !   (harry reid)

  109. No feel; I am not the great and all powerful Oz !

  110. Whew…in FAS 84s at $5.10 and out at $4.80. Glad I was paying attention today! FAS broke through 79 and 84s now down to 4.00.

  111. JRW – volume looks a bit heavy for a serious stick to me

  112. JRW, since the markets rise and fall with strength/weakness in the dollar i would focus on the currency and any sentiment that would boost the dollar. Look at MA, GS etc lower lows and lower highs…not a good sign. Theres been  slow steady selling with spurts of buying but no follow through. A pull back to 9600 would suit me just fine.

    Dow is at a 5 day low today, they can easily take it back up to 9940

  113. AMZN RSI7D is 90.75 now.

  114. From earlier. Keep in mind those must hold levels are: Dow 9,650, S&P 1,020, Nas 2,075, NYSE 6,900 and Russell 575, NYSE is closest to a test and that’s bad when a broad index breaks down on you.
    For now, just wait for direction.  Remember, higher lows on down day(s) only confirm the trend (using 1 d charts).  My graph for the 1 yr DJIAs show that ~9450 and SPX @ 1025, RUT @ 580.  Until those fail, we are still moving up.  On the flip side, lower highs will confirm a turn down (still waiting for that).  At least that is what I am following.

  115. Hey everyone.

    I just made a recommendation on Aetna as a long term trade. The full alert is here.

    I am recommending AET as a multiple day trade moving into the company’s earnings report on Thursday. I think the stock is primed for some market movement in the next couple days, and we should definitely be able to make some money getting in on these cheap prices today. I am positive on this after some solid United Health numbers and outlook, as well as, the technicals.

    If you ever have any stock questions, I am always available on my stories to help out with your questions if you want a 2nd, 3rd, 4th, whatever opinion.


    David Ristau

  116. JRW, I think we’ll close at low of day.  Tomorrow…. that’s a tuff one but I’d say there will be follow through… at the open.

  117. AMZN also flirting with its first lower high on the 10 min since earnings; not definite yet though.
    JRW, I’d just add to what the others said that there is some support just below here on the SPX (1060-ish). If it fails that then pretty bearish, but otherwise I’d look for some consolidation tomorrow.

  118. Going to try again with some short SPY strangles this time selling the Dec 104s and 109s. Looking for a flatline or recovery tomorrow.

  119.  dollar got weaker and the markets move up
    China Unicom Aims for Rival’s Gray-market IPhone Users

  120. Phil, how can best play SRS  or FAZ or TZA ?  there is such hiigh premiums for these things, must be something interesting to do
    ideas please?  thanks DAviid

  121. To borrow a line from Cap….. F U Stick! 

  122. Pharmboy,
    I am in the original PARD in Aug with buying the stock at 8.15 and the the Dec 5s at 5.2. The premiums are even
    higher 2 months later. Any suggestions here.

  123. David Ristau/SKF….Good call this morning on SKF.  I played it with Dec 25 calls.  Already up 27%.

  124. Amzn/  No sign of weakness.   Volume 4 times normal.   Not shorting yet!

  125. Amzn/  No sign of weakness.   Volume 4 times normal.   Not shorting yet!

  126. Thanks all,
    Just wanted some confirmation, uncovering TZA , EDZ.

  127. Eric, that’s probably a good call.

  128. Allen / MBIA: Try the "Search" function at the top of this web page.  Sorry, I can’t help much here, as I don’t follow MBIA.

  129. S&P closing under 1070 scary

    I think tom you get some selling in AMZN

  130. Drum – I would just wait it out, or if you are up on the Ps, I personally would scale back a bit, and you should make a little if they do hit on the up side.  Downside should be .  Again, biotech is a crapshoot.  I am not in this one, but  someone put a ton of $$ in them, so if they fail….you will be small potatoes….

  131. Phil, thoughts on BA here?

  132. "Well, I have to go – try not to let AMZN hit $130 without me!"
    Captain Phil, AMZN 124.58 at 16:00!  Mission accomplished!!
    Now what?

  133. Drum I am in the same pard play pharm with the stock basically flat we are down on both puts and calls sold. I think we have to wait this out theta will catch up with rising IV eventually. If you are worried you could watch the price of rolling forward to nov although I think the time for that has probably passed.

  134. Hi, Pharmboy & All,
    I am in both PARD and ONTY.  ONTY is down even more, closed today at 3.99.  Any new development?

  135. AGNC just launched a 4M shares public offering. Stock down to 26.5 AH.

  136. Holy cow!!!! Fast money just said MCD closing shop in Iceland due to currency collapse, that means this county is in danger of losing a few hundred thousand jobs!!!!

  137. cwan – ONTY – again, they are in the cancer space….put on your boot straps and get ready for a ride!  PII data were mixed by some, others thought it was rosy.  In the end it comes down to body bags, and IF they prevent them, they WILL fly initially.  Look at OGXI…..

  138. bidu down 12% to 377 in after hours after disappointing outlook

  139. BIDU … that’s a shame ….   :grin:
    WMS … hope nobody followed me on that one ….   :<(

  140. AGNC / Phil – Any thoughts on this news – good / bad? Good opportunity to buy at your price target?
    <AGNC prices public offering of 5 million common shares at $26.60 per share>

  141. Interesting on the iphone kustomz.
    I don’t know where they get their prices though. Last time I was in Shenzhen you could buy a "superior replica" iphone (basically an iphone that never made it as far as the front door of the factory) for $100.

  142. Trad – articles make us here look like geniuses, but the technical chart looks ugly…too bad that we (I) am gonna ride this one to the bottom (along with ARNA). 

  143. Good morning! 

    Well, looks like I didn’t miss anything exciting in the afternoon.  

    If I missed a question please re-ask in the morning post and I’ll try to catch up. 

    So far so flat in the futures.

    Mon/Harip – They had to cut prices in effort to keep market share, that’s the kind of thing you want  to step back and watch it play out.

    SNDK/M2 – You can sell the Apr $24 calls for $3.50 to lock in some gains and buy the 2011 $25 calls for $5.  If SNDK goes down, you take your cash off the table and you have the spread.  If SNDK goes up, you get called away +15% and you have the spread.

    Nat gas/Shane – I think it’s going to collapse at some point.  Storage is too high and if they don’t get drawdowns soon they will have to shut production but you are best waiting for an actual disappointing number and then play for the long decline back to $2.50 or maybe $2.  If the market stays up, they can just keep nat gas going regardless, especially with oil over $70.   Also, watch coal, which substitutes for nat gas in electricity production depending on price.

    Cramer – Sorry I missed that! 

    SRS etc/DMan – Remind me in the morning (of course the proper way to play is the way we’ve been playing them for the last two weeks, when the S&P is touching 1,100, not 4% lower already).

    BA/Jo – Remind me on them, probably a weekend project.  I lost interest in them as they ran up and we got out and I haven’t really considered the next move yet.  I’ver been hoping they crash with the market and waiting is probably best but it is worth some research as analyzing BA leads to a lot of interesting broad-market research.

    AGNC/Trad – Yes, I love buying stocks that are down because they are able to sell their shares for cash.  Investors are very dumb, it’s not dillutive to your posiiton if the company gets cash for stock although it is slightly dillutive to forward EPS so you have to look at where you are and what the company will do with the cash.  In AGNC’s case, this is a big dillution (30%) so you have to decide if you trust them to use this money wisely.  I think management sees an opportunity to buy things cheap and they don’t want to (or can’t) borrow in this environment.  I’d tread lightly until the offer is filled, then buy a bit more as a long-term play. 

  144.  Phil?
    Good morning.
    With BIDU premarket at 372, the 430 calls work out great! 
    What actions you recommend on the March 470/390 Strangle?