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Frightening Friday – Halloween Edition!

Wheee what a day! 

Who said we placed a spread bet on the Dow moving 200 points one way or another in yesterday's morning post?  Me, that's who.  And how much did the Dow move yesterday?  199.89 points.  OK, so I was wrong by .11 but our plays worked out just fine and we flipped bearish again as we flew up and we'll see if my streak continues this week.  We would have gone more aggressivley bearish but we were worried about end of the month (and end of the year for many hedge funds) window dressing that would keep things going for one more day.

Everything went according to plan and we got the bounces we were looking for but the RUT failed to retake 589, which was our canary in the coal mine's breakdown level from last week.  As I alerted members at 12:15, that and the Qs failing to hold 42 into the close, which failed to confirm the Nas move over our 2,088 watch level.  We have our DIA puts, we have our SRS longs, we have our DXD longs (which are half price as our DDMs paid off yesterday) and we shorted SPG into the close as Cap noted they had a ridiculous run-up ahead of today's earnings. 

As I said to members in the afternoon, my gut said to go more bearish but we allowed ourselves to be spooked by Mr Stick in the afternoon and ended up about 55% bearish with a 1/2 cover of our long DIA puts but we already made a quick 20% on the sale of short puts in the morning so it's a position we had a little slack in going into the close.  Our logic is, even if we have another up day today, we're still going to want some pretty serious coverage into the weekend unless the Russell and the Qs can confirm this move up today. 

Bulls should be spooked by the fact that a blow-out GDP report, showing an economy with a HUGE turnaround and the President crowing on TV about how great things are going could ONLY erase 1/2 the losses we suffered since last week.  Another market move I hit on the head yesterday was my prediction that, after 3 consecutive 1.8% down days in a row, the Hang Seng would jump 3.6% this morning and we topped out with a 3.3% move up before falling back below the 2.5% rule at 21,752.

Do we have any brilliant charting systems or inside information that lets us know what will happen in a market across the globe 24 hours in advance?  No, we simply start out with the assumption that the market is fixed and that the 3 consecutive 1.8% drops were falsely supported by the Government or GS or whoever – it doesn't matter – and then we look at our MMOs:  Motive, Means and Opportunities – something we discussed this weekend in Member Chat when we looked at some of the various players who have interest in manipulating the stock market, what tools they have to do it with and what are the limitations of those tools.

Speaking of Member Chat, there is a very detailed discussion on using the Buy/Write strategy to build a hedged virtual portfolio as well as a series of disaster protection plays, following up on our August 24th article on the subject that is a must-read for Members and I'll see about turning it into a Members Only Post over the weekend as we have 7 new buy/write positions and the 4 April cover plays that will be great to work into over the next week. 

So what does the move in the Hang Seng (and yesterday's US markets) tell us?  Both markets ran up sharply on little volume and then failed into heavy volume.  That tells us there are pumpers but those pumpers are beginning to get overwhelmed by sellers who are running screaming for the exits like that scene from "The Blob."  The Nikkei similarly gapped up on no volume to just over 10,000 and made a scant 34 points of progress all day long during the actual session but painted a 143 point gain for the day despite the dollar falling back below 91 Yen near their close.  Did something happen to stop Japanese traders from caring about the dollar or is it possible, like many government statistics, that you can't always trust the market to truly reflect what's going on. 

Like Pumpkin Jack in "The Nightmare Before Christmas," you can dress a skeleton up in a Santa suit but you are not going to fool THAT many people if there's no meat on those bones.  Overall, investors are a savvy bunch and they know when there is no Santa, especially if it's a Santa Clause rally that may be missing this year.  The September Personal Spending numbers are in this morning and consumers cut back 0.5% this month while drawing a flat Personal Income.  Both are better than expected but both are down from August and both are down sharply over the past two years with Personal Income averaging 11% less than it was in 2006.  That's 11% less AND they are getting paid in dollars!!! 

Fortunately for consumers, PCE Prices are also down 0.5% this month but commodities are keeping Core PCE up 0.1% as we continue to have the consumers die the death of 1,000 cutbacks in their lifestyle.  Last week we talked about how consumers are so deep into the bottom of the barrel that food sales are off 5% this year – when people stop eating, especially Americans, you know you have a problem… 

We get the Chicago PMI Report at 9:45 and that could be scary if they are still below 50 (contraction) while Michigan Consumer Sentiment is likely to miss the 70.3 expected by economists who obviously don't read the same Consumer Confidence reports we do.  We also get the Employment Cost Index at 10 and that one is a mixed bag as our corporate masters love it when they don't have to pay us a living wage but then they wonder why no one is buying their stuff.  Notice on the chart how benefits have been totally dismantled since 2004, that does not count as lower personal income, just 5% more costs that employees have to come up with out of pocket.  Ah capitalism, you never cease to amaze me

Speaking of capitalism, Q3 earnings have taken an ugly turn as we're seeing a lot of something we didn't see at all last quarter and that is downward guidance revisions.  Just yesterday and this morning we had guide downs from AET, HSC, ULBI, WBSN, ELY, CALD, SCOR, CRAY, ERES, IN, MHK, RRR, TSRA, VAR, ALE and LNT.  That's 16 in 2 days (and today isn't over) against 33 guide ups but last Quarter my BULLISH premise was "Show me the misses," when I pointed out that there were virtually no guide downs, indicating we had plenty of room to run at the time (April).  This is not a ratio you would expect in a vibrant economy that is growing at a rate of 3.5% a year is it? 

Also we still have misses, and plenty of them!  This is something else we noted in chat as more and more of those small-cap companies (who can't quite cut costs as easily as their big S&P brothers) start reporting and we begin to see tiny little cracks forming in the glass floor that's holding up this market.  Combine that with the 2:1 ratio of companies who are RAISING guidance for Q4 and, if we do have a bad Christmas, then we are heading for a disaster of near biblical proportions! 

The return to GDP growth is encouraging but the recovery is still fragile, Treasury's Geithner said at a Q&A last night. "It was broad and strong and it wasn't just cash-for-clunkers and it wasn't just economic stimulus… but it's important to remember that it's very early." Geithner stressed that a robust recovery would have to be led by the private sector, saying the U.S. can't borrow-and-spend its way to health. (thanks, Seeking Alpha)

White House data due out this afternoon will show the government's economic stimulus programs created or saved about 650,000 jobs through Sept. 30 – a figure officials are prepared to tout as a significant success. The reports cover only $150B of the $339B in stimulus spending that occurred through that date. Yesterday, the White House lashed out (I, II) at an AP report saying it overstated stimulus jobs, and at an Edmunds.com note that took cash-for-clunkers to task. (again).

So it's going to be another fun day in the markets but be afraid, be very afraid if we can't hold our bounce levels, which are: Dow 9,696, S&P 1,056, Nasdaq 2,088, NYSE 6,912 and RUT 600

There is pretty much no way we're not going to be at least 55% bearish into the weekend and the more of a pump we get today (if any) the closer to 60% bearish we are likely to get.  As we did yesterday, we'll be taking those quick-paying upside momentum plays that cover our bear sides as once we cash them out at the end of the day, we are right back to bearish without too much messing around. 

Have a happy Halloween,

- Phil

 


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  1. If we bounce off the 1050 area this morning, it’s going to look pretty bullish, IMO. If we break through it not, of course, so hopefully we get to see whether yesterday’s ‘oversold rally’ was real.
     
    SPG with a small beat but guides in line which likely won’t support this price. GNW with a very nice beat so I’m long some stock this morning against short straddles.


  2. EricL, glad you are here.  The GNW straddle we took yesterday is a bit underwater.  What is the salvage play?  I never expected them to move THAT MUCH.  Although, it is helping my GNW buy/write out quite a bit.


  3. ss, I bought stock pre-market to lower the delta. The straddle should work up to near 12, although it will be behind at the open today. After those numbers, it’s hard not to feel bullish on GNW, so I may kill the 11 straddle and re-sell at the 12 strike.


  4. Phil,
    I’m sorry, but I can’t seem to find the original SRS recommendation.  Is there an entry play at these levels — looking like it’s going to open at 10.13, up 0.18.


  5. I meant ‘bought stock to raise the delta’, of course: basically went flat.


  6. Phil – Do you think if the Chicago #’s arent good it will get pretty ugly today?


  7. OK, i bought the 10 straddle not the 11, so I am good till 11.80ish at expiration.  I could wait it out and hope for the best.  I will see how today goes before making an adjustment.


  8. Hi Eric.  You seem to be pretty good at this.  I mostly lurk because Im new.  Something that would be very helpful to me would be your "Setup"  I’ve heard abouty Phils 6 Screens.  I’m currently building a system but I need someone to show me how to display the pertinent information.  Its kind of like drinking water from a firehose.  I really like TOS, but I have no ideas what information feeds I should be wathcing the most.  Can you please advise as to how you actually setup your TOS, multiple screens and what information is the most important to you?  Im getting better, but I tend to rely on a systamatic approach to everything and this puzzle is still very much in pieces.  Thanks in advance


  9. Although it doesn’t look to good right now.. I would be very suprised if we don’t see follow through from yesterday.  There was alot of volume pushing and keeping us up yesterday (especially at the end of day).  I really doubt that effort would be in vain…


  10. KONG – no wonder why it gapped up, but I’m happy to sell some now (which I bought on Wed)..


  11. There it is !!  AMZN.
     
    Now getting into the public domain that AMZN cash flow is juiced by delayed payments to suppliers ….
     
    We know that; but the grounds for the selloff are being set. IMO


  12. KONG – meant to say I have no idea why it gapped up…


  13. YRCW missed by 25% of the total value of their company (.98)!  Revenues down 45.1% – Merry F*ing Christmas

    5% drop levels are: Dow 9,600 (from 10,100), S&P 1,045 (from 1,100), Nasdaq 2,066 (from 2,175), NYSE 6,840 (from 7,200) and Russell 589 (from 624).

    EXPECTED bounce areas (20% of the drop) are Dow 9,696, S&P 1,056, Nasdaq 2,088, NYSE 6,912 and RUT 600.  These are the ones that will either hold up or signal a significant breakdown. 

    Also, we need to watch for holding roughly half of yesterday’s gains through lunch, which would set us up for a stick save on what should be a very light volume day.  That means we’re pretty much just watching things play out this morning but we don’t need the DIA put covers as we can still buy back the $100 puts for $2.45 (up .40) and hold naked on the Jan $103 puts until we see something hold up

    Same breakdown levels of:  Dow 9,650, S&P 1,020, Nas 2,075, NYSE 6,900 and Russell 575.  NYSE is in most danger of failing this morning.


  14. WTF!!


  15.  Phil,
      Since lot of people have gone and bought new cars with the cash for clunkers deal, now they realize that they have a monthly payment which they didn’t have for the old car. Now won’t that take some money off from spending for other things? if so that would be negative for the economy – would it be? What are ur thoughts?
    Thanks.
     
     malai


  16. I guess someone paid for the Chicago PMI data early.  What a frickin joke all of this is.


  17. oncmed 
    I am still playing with your yesterday’s suggestion in respect to WMT
    According to Phil’s suggestion  my question is why burden yourself  with a debit (margin) to your account of  23650.00 on 10 Jan 2011 buy c40 and buy p 60 at a cost of 23,650.00 paying 3750 on premium why not only sell a Jan 2010 50 straddle for  3.75 credit on 10 options you only debited 10,080.00 on margin. What is the reason to take on the extra burden of the Jan 2011 option play. ??
    Your comments pls. Thanks
    1.      Phil
    October 29th, 2009 at 4:22 pm | Permalink  
    WMT/Oncmed – How about buying the 2011 $40 calls for $11.40 and the 2011 $60 pus for $12.10 so you can’t possibly get less than $20 back and you WILL lose $3.50 in premium.  Then you can sell the Jan $50 puts and calls for $3.75 and if you sell 3 more quarters you collect $10.50 AFTER paying off your premium against $20 tied up at zero risk (other than WMT totally blowing you out with a massive move out of your range). 


  18. AMZN – show me what you’ve got!  I want to reload my short!


  19. Nice try by the bulls there.  You need nerves of steel to stay bearish on those things…

    SRS/Jcm – As a new play I’d go with the Apr $8s at $3.25 and sell 1/2 the Dec $11s for .85.  If we fall, you can spend .60 per long to roll to $7 before you need to sell again to get money for the next roll.

    Chicago/Jrom – PMI numbers are 54.2, much better than 51 expected and miles better than 46.1 last month.  So much better, in fact, that something seems wrong but at least that explains that little spike we just had (sort of). 

    Now we have Michigan Sentiment and if that is upside surprise too, maybe we need to go back to a cover on our DIA puts. but downside is looking good so far! 


  20. ZION heading lower, watch them!

    Chicago Employment Index fell, that hurt the report. 

    Michigan Sentiment beat at 70.6 – that’s a good reason to go back to a 1/2 cover on DIA puts with the Nov $100 puts sold for $2.50 (now $2.65) if they head back up ONLY!  Let’s call it a .25 trailing stop on the sale, so if they get to $3 and pull back to $2.75, we do want to do the 1/2 sale but once we can get $2.50 or better for the $99 puts, we flip to those…


  21. zuko, I have a really simple system and in fact am often trading from my office on one screen. I divide the ToS ‘charts’ screen into 4 squares to watch /DX, /CL, /HG, and /ES at all times on the daily (dollar, crude, copper, and SPX futures). I like keeping it simple to avoid information overload. I watch RSI on those too. Then just look at individual charts when I get a break during the day. I also look at the forex intraday charts, but /DX is easier.
     
    Sorry to be so boring :)


  22. Looks like 1050 area may hold.   I killed the GNW 10 straddles for a small profit (incredibly). Now looking to re-position at 11.


  23. It’s quiet in here today.


  24. AMZN/Cap – I can’t believe how UNcritical analysts have been of their earnings.

    We’re going to be back to watching that 9,920 level as critical for the Dow to get back over – sale triggered on 1/2 DIA $100 puts very quickly but still made a nickel on the flip and if we do that 20 times it’s a dollar! 

    Cash/Malai – I don’t think people are really that stupid.  All CforC really did is push people who had crappy cars who were thinking about buying a new car off the fence but when you have a population of 300M with 160M car owners and the life-cycle of a car is 10 years if you push it then in any given year there are going to be 16M people interested in getting a car.  Since less than 25M people have bought cars in the past 2 years, there’s already a backlog of 6M cars that NEED to be exchanged for something newer.   So you have 6M people sitting on the fence and you offer than $4,000 to do a deal now and PRESTO – you get 600,000 people to bite.   The home-buyer thing works the same way, you shove the fence-sitters over the edge but you’re not really creating any real demand.  Demand has to come from the bottom and that means people with jobs and money and we don’t have either of those right now. 

    Volume 30M at 10 is 100% typical Stick-Bot trading so be very carerful if you are bearish.

    LINE doing well!

    Keep in mind that now we have 2 strong (and surprising) data points so now there is NO excuse to fail our levels but the NYSE and RUT are still failing and the S&P and Nas are barely over

    October Chicago Purchasing Managers Index (.pdf): 54.2%, bouncing back from 46.1% in September to climb over the neutral 50% line that indicates expansion. New orders and production reached the highest rates in over a year. The employment index continued to decline at a steady rate.

    Oct. Reuters/UofM Consumer Sentiment: While their view of the economy improved, "consumers continued to voice very dismal assessments of their personal financial situation. These grim financial evaluations, coupled with intentions to increase savings and decrease their indebtedness, will limit any rebound in consumer spending."  Obviously this poll is flawed somehow as it’s 100% opposed to other polls we’ve had but they are getting the same personal finance story.  Don’t forget, in a survey, just the wording of a question can make a huge difference. 

    Screens/Zuko – On TOS I’m usually watching the "Futures Trader" screen where I keep the S&P, RUT, NAS, Dow, Oil and Gold – those are my "dashboard" charts and if I flip to Forex Trader (which I often do) I have Euro, Pound, Copper, Nikkei, Yen and $Trin. 

    Speaking of oil, what a joke, they jammed back up over $80 but trading has them flying back to 78.50.  Gold will hopefully fall next as it tests $1,040 again.   Dollar is at $1.478 Euros and $1.65 to the Pound so yesterday’s BS drop is reversing.  BOJ gets us back to 91 Yen but they can’t hold it when their own people are trading, which is bad. 

    Reacting to the Bank of Japan’s decision to scrap its corporate funding support, Japan PM Yukio Hatoyama remarks that it’s hard to be as optimistic as the BoJ.

    This is good consolidation at Monday/Tuesday’s lows for the bulls if we hold but I think we are in the same pattern at Tues where we may come off the bottom but then the next day (Monday) will be down and down and down


  25. I am putting LH on my list to watch.  As I noted a few days ago, should the healthcare bill get a good foothold, generic drug makers, distributors as well as labs should do well.  Margins may take a small hit, but economies of scale should kick in. 
    Generics:  TEVA, WPI and MYL
    Distributors: CHSI, MHS and DGX
    Testing: LH, GPRO, MDAS
    I will try to do a writeup on these companies in the coming week or so.


  26. AMZN / Phil … it is criminal how they get away with it …


  27.  Eric,
    Care to elaborate GNW 11 straddle? With earnings out I thought the Vol should be down. 
    Thanks. 


  28. Phil
    "SRS/Jcm – As a new play I’d go with the Apr $8s at $3.25 and sell 1/2 the Dec $11s for .85.  If we fall, you can spend .60 per long to roll to $7 before you need to sell again to get money for the next roll."
    go with Apr $8s meaning "buy the call’? what do u mean by "roll" to? do u mean to sell something and buy another?


  29. Eric, I think I am going to stick with my GNW 10 straddle for the moment.  It seems as though co.’s that report decent earnings get taken up and then bled down slowly.  This is just a hunch, but I am hoping time value will decay along with the stock.  And yes, I know, hope is not a strategy.


  30. phil,
    what the hell is appl iphone doing priced  @ $1k  in china


  31. Morning Phil:
     
    I have a fair percentage of my portfolio in a 2011 2.50-5 bull call spread that has paid 3k already. if C stays above 5 by 2011 i have another 6k comming my way. should i cash out or wait out the year as planed. the only reason i ask is that C seems less stable. we has the sharp drop off couple days ago, but they recovered yesturday so its a chance for me to get out with 100% gain, but if there is no danger of BK then I would stick out till 2011.
     
    what you think ?


  32.  ANF, what are thoughts on support levels and exit points. 


  33. Phil, For now I am planning on holding SPG bearish play to let the premium die at expiration. Any thoughts?


  34.  sorry that post was for my OPT trades.


  35. so if you think Monday we will be down down down, today is a good time to get back to TZA, FAZ etc because I sold them when you all was saying sell some wed?


  36. Volume’s increasing; this may not go as planned for the Bulls.


  37. Phil | Eric,  Thanks.  Very hepful.  Im glad your simple Eric.  For some reason I envisioned you sitting in a cockpit of monitiors. 


  38. nice basing action this….


  39. USO   Saudi’s going away from WTI as their benchmark….what’s the effect, just less trading volume and volatility?


  40. lynn / TZA
    You should have some exposure over the weekend, but you may be able to build a better position later today. Watch your levels and good luck!


  41. lynn / ps
    Monday may be up because most expect it to be down but that would be an opportunity to DD for Tue, Wed!


  42. Hmmm.  I did notice one other problen with TOS… Guys.  My paper trading acount has a reset button.  I cant seem to find that on my real account.  I wonder whats up with that. 


  43. TOS/Zuko – Let me know if you find that button…


  44. balance, you’re right but it’s still sky-high (78% on those). I’m feeling bullish on the stock but ss is probably right to play it safe.


  45. DIA JAN 90 strike – Straddle results from yesterday.
    Of the 3400 contracts that were traded on both strikes yesterday, only the open interest of the CALLers fell by 2000.  So what does that tell us?  Someone is going long on the DIA by purchasing their short contracts back? The PUT interest fell by 900; so the chunk of that trade simply change hands.
    What do you guys think?
    XLF’d


  46. thanks JRW III


  47. lynn / SRS
    You can just go with the April 9 / 14 spread, thats easier.


  48. any thoughts on RIMM as it approaches $60?


  49. jbird – rimm
    yeah – pissed I did not get out earlier – but I think phil has said he likes it around 60 dont know if that still holds


  50. Quiet/SS – Yeah, often on Fridays.  I guess it’s a sign that people are doing well if they don’t have to hang out on a Friday to watch the market! 

    I’m looking at CAT this morning and I’m thinking about how fake the morning move was and I guess it’s because I’m a 20-year computer trader that I feel so strongly about that.  Most people didn’t have charting software in the pre-dot com days and when I see BS like the way CAT moved this morning it’s like watching a penny stock – real stocks aren’t supposed to do that.  This is a $35Bn company that’s up 6% from yesterday’s open and now down 1.5% this morning on NO NEWS – that’s nuts… 

    As I said last weekend, when you fall down the rabbit hole and all the animals are talking then it doesn’t make sense to refuse to talk to the animals just because they shouldn’t talk so we play these very stupid moves but it’s still  a good idea to recognize them as such.  These stock moves have nothing to do with reality – not the economy, not the company’s outlook or performance or anything – the short-term stock moves are nothing more than dark-pool trading and sheep herding in a market that has virtually no rules at all.

    I’m not complaining – I kind of like it, but I am still sickened by what has become of our country and what used to be the most robust and democratic capital-building system in the history of the world.  I do kind of miss the good old days when you would own IBM at $50 and sell the 12-month out call for $1.50 to guarantee yourself an extra 3% and you were THRILLED because your dollar would still be worth a dollar 12 months from now so 3% was pretty good…  Also, the only time we had to check our stock was when there was big news or around earnings.  Trading used to be a gentleman’s game. 

    AMZN/Cap – I’m surprised they can hold it together this long but look how long they kept FSLR going on what was clearly NOTHING.  FSLR even sold off strong after July earnings from $176 to $112 but then they pumped it back up again all the way to the $160s until the next earnings "shocked" investors.  That’s why I love shorting them, you only have to wait for reality to hit them at some point.  AMZN is a much, much better company so I won’t be too surpised if they hold up for quite a while but, eventually, p/es of 80 tend to contract and unless they are going to inrease earnins by 50% fast (p/e 40) then that means the stock will come down. 

    SRS/Lynn – Yes, I usually specify PUT but often just say $10s for $10 calls. Roll would be selling the $8 calls and buying the Apr $7 calls IF the stock trends down.  Since getting $1 of intinsic value for .60 is always a nice thing to do, it never hurts to offer .50 for a roll-down right away, just in case you get it…

    IPhone/High – They aren’t getting a subsidy like they do from T from the China phone companies so the Chinese are paying the full price of the phone (starts at $730 – 4,999 Yuan).  There are service contract deals for the Chinese at about $100 a month, which is not much different than what we pay here.  It’s still a real high-end sale and will be a good test of the validity of the Chinese middle class which, in theory, has 200M people.

    We’re holding those lows so far...

    C/Micro – The words "fair percentage" freaks me out and I’d say there is no time I’ve ever seen a more clear application of Rule #2 – "When in doubt, sell half!"  Taking 100% off the table means you have a free ride to another 1,000% gain.  With money on the side, if your remaing half falls 50% and you cash out, you are still up 50% overall or perhaps you decide to buy in again at .20 and you have your full position again but with 50% still on the side.   Doesn’t all that sound smarter than having a "fair percentage" in a position you were worried was going to fail just a week ago?  Also, keep in mind that the $7.50/10 spread is .15 so if C goes up $2.50 from here the $7.50/10 spread will still be about the .40 that the $5/7.50 spread is then but your $5/7.50 spread will be $1.70 in the money and then you can cash some of those and buy the next bullish vertical that pays 6 to 1, so these plays aren’t all of nothing one-time opportunities. 

    ANF/Ken – It’s all about the next 55 days of sales for them and they are kind of iffy as it’s on thing to maintain your yearly market if you are on the more expensive end as people will still splurge on themselves but around Xmas you are counting on the gift crowd and those people are buying for a dozen people and that’s where you’ll start seeing some scrimping on purchases.  I know a lot of women (Tina is Prez of the PTA) are asking for necessities for Christmas this year like an oven or a fridge or other things that normally would just get bought whenever the need came up.  That’s a big shift in attitude and if that plays up, a lot of specialty retailers will get creamed this year.  I’m going all gift cards this year because I think that people will be able to buy twice as much stuff for the same money on sale in Jan that they can in December….  The 50 dma on ANF is right here at $33.50, if they blow that, the 200 dma is $27 and I would like them down there for a buy/write. 

    SPG/Foss – You could cash the longs and just leave the open calls, we only wanted the longs for protection…

    Ultras/Lynn – I think we are down again Monday IF we get a stick save today.  If we drift like this Monday becomes iffy and I’ll tend to want to be closer to even but I do like that SRS spread from before.  FAZ is also good down here as I’m still puzzling over the drop in bank preferred shares yesterday.  ZION is down almost 5% today and they’ve been on of our best canaries.  So the FAZ Apr $19/25 spread for $2 that’s $2 in the money is a nice trade to me with a 300% return if the financials fail.

    Dow volume 50M at 11 – EXACTLY what we usually get on stick days

    WTI/Eph – That’s a total wildcard which scared me off shorting oil yesterday.  There’s no way to know how this will play out if it happens but it’s very disruptive if NYMEX WTIC contracts have to be unwound and traders have to pile into sour contracts. 

    LOL Zuko – Let us know when you find that button, it could help a lot of people!

    DIA/XLF – It’s hard to say becasue they may have been covering another trade entirely but, as I said, it’s very easy to call today’s action bullish so far and I imagine they made a quick profit  on the puts so why not risk it?

    RIMM/Jbird – If you have the patience to ride them out, I like $60 as an entry.  They will be volatile and may fall to $45 but always plenty of high-premium options to sell. 

    Oops, S&P blew 1,056!  XLF failed $14.50 – not good!


  51. SNDK – Can someone please suggest a good bullish option spread. Assume it to shoot up towards $24 or so like it had a few days ago on buyout rumors (one more time!). Of course, a buyout may actually occur but I doubt for much higher than around $24-$25 where it seems to shoot up on such rumors…
     http://stockcharts.com/h-sc/ui?s=SNDK&p=D&yr=0&mn=3&dy=0&id=p41779844624
    I was considering buying a Jan 20/25 call spread for a net of $2 or so.


  52. Here’s a great pair of stories highlighting how idiotic the markets are right now:

    Demand for junk bonds hit record highs last week, with investors pouring another $207M into junk bond funds, pushing YTD inflows to a record $27.8B. Junk bond indexes are up more than 50% YTD as investors become more comfortable with risk. The growing cash flow enables shaky companies to head off default – adding more fuel to the rally.  I guess they don’t know about this story:

    Loan defaults by small and medium-sized U.S. businesses rose in September to 0.85% from 0.81% in August, according to PayNet, but accounts in moderate (30 days plus) and severe (90 days plus) delinquency decreased to 4.22% (from 4.35%) and 1.4% (from 1.48%), the lowest since January. PayNet’s Small Business Lending Index, which measures financing availability, is down 22% from a year ago.

     


  53. Oh man, I had a great short on; COF at yesterday’s close at 38.97.
    I covered early this morning; look at that baby sell off !
    Made a nice profit; but left a lot behind.
     
    Story of my life !


  54. sorry, what is a "stick save"? up market for today?


  55. But I am still short $42 calls sold b4 earnings.   Remember how that pumped to like $42.50.
     
    Look at you now COF ! 
     
    I [crude monty python reference] in your general direction !


  56. Phil,
    I’m short TIE with a nice gain, I know you like them long term but with so many steel, coal and similar companies come out with misses, what’s your opinion in staying short over earnings?


  57. lynn / Mr Stick
    A BS pump into the close by GS and others to make it look like everything is great and suck more money into the market so they can make more in fees!


  58. There went 1050 on the /ES. Not good if they don’t recover soon, IMO.


  59. Sharp drop in DIA.


  60. JRW III, I guess you are explaining to me "stick save"=up market for today so GS can suck ppl into the market….


  61. Now wish I held those GNW 10 short straddles, lol.


  62. Toto reveals the fraud, as the wizard shrieks in vain:  "Pay no attention to the man behind the curtain.  I am the great and powerful Oz . . ."


  63. MA getting hit ahead of earnings.


  64. Casinos - if you chart them for the last 3 months, the gap between MGM and LVS has not been wider.  Either MGM rises or LVS falls from here, so you could straddle this with MGM call and LVS puts.  I’m legging into LVS puts today, especially if it rises.


  65. lynn
    Yes, and by the way the FED loans them the money to do it at 0% because there is a benefit to the government; if the People think everything is great, they are less likely to consider another REVOLUTION !!


  66. also, how to find real time russel index to track?
    I don’t see it in etrade, they only give dow, nasdaq and s&p


  67. I tell ya.. these market makers are full of tricks to squeeze you.  I don’t usually use market orders but sometimes have to if I"m trying to react quickly.  Anyway, I put one in to buy FAZ.  The bid was 21.65 at the time.  My order went right through with NO delay.  I got it at 21.73!  The bid THEN got driven upto 21.73 which is where it should have been WHEN my order got executed.. NOT AFTER!  On level II you can see all the intra market orders get stuck in ahead of mine being listed in the time/sales.  So, they go ahead and give me the shares instantaneously at  a price much higher then bid, run the market up and then register the sale.  That is f-ing wrong and got to be illegal.  This goes on all the time now with market orders. 


  68. ZION’s been crazier than any 3X ETF.  Not only has it given back all of yesterday’s gains, looks like it’s going to test yesterday’s intraday low of 14.03


  69. JRW III, thanks, it almost sounds like this is a buying opportunity to buy FAS instead now….


  70. amazing how srs cannot go up even if the market will go to zero
    what ‘s up wth that?


  71. RL also reports Monday. They’ve had a nice run. Looking for some light bear trades into earnings, maybe selling Nov 75 calls against Jan 85s.


  72. LVS/MrM – What month are you looking at for the puts?


  73. If my account is not set up to do spreads….can you recommend a way for me to do this:
    "So the FAZ Apr $19/25 spread for $2 that’s $2 in the money is a nice trade to me with a 300% return if the financials fail."


  74. I am trying to wrap my hands around the P/E of BMY, GSK, MRK, AZN and PFE.  The latter is 18, the rest are 9-12.  Something has gotta give.  PFEs earnings are not growing (-10%).  So either the other companies are vastly underpriced or PFE needs to come down some.  I vote for the latter.
    BMY – holding here, but a bit iffy should the market tank.  I know many here are looking for holding a few paying stocks.  Phil may come up with a better play, but I like the buy/write of 22 Jun10 for 3.9. 
    MRK’s P/E is 9, and SGP is being picked up in a little over a week.  Buying SGP here and writing the MRK 31 Apr10 is a nice buywrite as well.  One will have to calculate the shares needed of SGP (0.5767 MRK share for every SGP along with 10.5 in cash). 


  75. Russell/Lynn – The symbol is usually RUT.


  76. Phil, X is melting down to your buy level….any words of wisdom here?


  77. on that previous post please replace bid with ask!  I know there is a spread between the two but my point is the executrion was well above the ask at the time.


  78. Sorry, Tuesday premarket for RL.


  79. Phil / ERY
    YEEEHAA………………Thanks David Ristau!!!!!!!!!!!!


  80. SNDK/M2 – Not a lot of $5Bn buyouts this year…  I like WFR much better as they are near their lows and can get a huge pop if some sort of solar-stimulus comes in, which is much more likely than SNDK benefitting from some sort of Cahs for Chips program.  You can just sell SNDK Jan $19 puts for $1.20 as getting them for $17.80 won’t be a tragedy or you can sell the Dec $22s for $1.50 against the 2011 $22.50s at $4.75 and you’ll just have to buy more longs if they do well (although a buyout would kill you).   With WFR at $12.66 you can buy/write the Jan $12.50s for $2.50 and that’s $10.06/11.31 with a nice 25% call-away profit.  You can make that artificial by buying the 2012 $10s for $5.60 and you’re collecting 1/2 in your first 3 months.

    Stick Save/Lynn – Look in Chart School under David Fry’s charts  and you’ll often see him not a stick save.  It’s that hockey-stick looking move that zooms the market up into the close (or during the day) usually on low volume as "THEY" try to punch up the markets so it’s shorthand for a BS up-market move. 

    ZION past the 5% rule – Ouch!  Of course, we know how things are in Zion

    TIE/Maxt – I don’t think earnings will be good but guidance is order-based and you have to watch BA’s delivery cycle for that so it’s playing with fire. 

    Casinos/MrM – I like the MGM up play (if we don’t crash the markets) as they are not too exposed to Macau and if Vegas isn’t ready to bounce with homes down 40% then this country is going down the tubes anyway. 

    Russell/Lynn – $RUT for the chart.

    MM’s/Matt – And you are just noticing this now?  There is so much crap going on there it’s incredible.  That whole part of the industry does nothing more than rip off investors all day long. 


  81. Blair, I’m buying LVS NOV 17s so I don’t buy too much premium and have room to adjust.  It’s just a short-term trade in case Phil’s right about a downturn Monday. 


  82. lynn / Russell – IWM


  83. Wow, SRS is really unfazed by today’s action.  While the banks are getting slaughtered.  Looks like yesterday was just a viscious bounce.  They fooled me.


  84. I think we’re getting an answer as to whether yesteraday’s rally was real.


  85. Careful, we’re at some TA resistance on the DOW, SPX and NAZ all at the same time.. Could be a big bounce here…


  86. Make that TA support not resistance!


  87. lynn / FAS
    I wouldn’t go long just yet; and if we do turn, TNA might be a more diversified play, that’s what I planned to do but haven’t executed yet ( obviously )


  88. Bounce alert, bounce alert!


  89. I’m going to half cover on the DIA puts here for the stick, on the thought that 98 is a round number to bounce off of.


  90. Just saw the article on AMZN on the WSJ.  They are playing with their numbers and they will go down eventually, I have no doubt in my mind.  Shorties, stay strong!


  91. Phil: frightening Friday you said, too bad you are right,
    although its Friday, with this drop, what sectors or stock are a potential buy ???


  92. AMZN – let’s see if it can break $120 decisively this time.  It’s below 5MA.


  93. RIMM: I had sold Nov $70 Puts (for $5.95) and Mar $60 Puts (for $5.20).  Seeing red there.  Phil, would you make any adjustments, sit tight, or just roll them out in a couple of weeks?


  94. TZA — Wasn’t able to do what I wanted yesterday.  Still own the shares at 12.22 and sold the Nov 14 calls for 1.05.  If I’m called away at a net $15.05, I’m not unhappy but is there anything you’d do to maintain bearish position — assuming today’s breaks make you more bearish?


  95. Phil:
    Long C Jan 2011 $5 and short C Nov $5 puts in $100K Portfolio. You said you’re not trading the portfolio until AMZN comes around. But if you could, what would you do with this C long position?


  96. phil,
    well appl officially closed its gap (it had already done so a/h )!!


  97. No follow through from yest. (bogus GDP #) the savy traders trimmed their holdings back at 10100, then some less savy trimmed at 10000 then some even less savy at 9900 then some even less smart at 9800…those guys that sold at 10100 wont buy at 10000 those who sold at 10000 wont buy at 9900 those who sold at 9900 wont buy at 9800 and so it goes

    Im sitting here watching the screen and the markets stagnant at 1055, i thought to myself they either got to move this up to 1062 or sell it off and let the bottom fishers come in and support it around 1045…why waste the time energy and money when you’ve duped so many people into thinking they can go long on any pullback


  98. Matt / Bounce
    Russell 568, if they don’t do it here, it’s over!!


  99. what just happened to the .DXY?


  100. ZION says we’re going up.


  101. russell double bottom at 566?


  102. Anyone discover what was happening with the JPM and BAC prefereds, why did they tank ?


  103. SRS/Dman – SPG was not too bad today, that’s encouraging for the REITs and TOL was upgraded by C, helping to lift the sector. 

    RL/Eric – Yeah, we got out of them at $55 and I’ve been watching ever since.  Does seem a bit silly at $75. 

    No spreads/Lynn – Wow, you really do have to see about getting a new account!  If you just want to go for it on FAZ you are better off with shorter-tem positions like the Jan $25s, now $3.10 and target to get into them at lows, like $2.20, which was this week’s low so figure you target an entry at $2.40 with a DD at $1.80 (assuming nothing changes our outlook) and a strict stop at $1.60, which would be about a 25% loss off your $2.10 avg entry.  If that one doesn’t work out, you move to April and then June and you lose .50 maybe 3 times and then you either give up or increase your position size.  It’s a tough road if you can’t hedge the premiums you are spending as you have to keep repositioning for an opportunity. 

    70M at noon – this is a very low-volume sell-off.

    Covering OTHER 1/2 of the DIA Jan $103 puts with Nov $99 puts at $2.60.  The $100 puts (the other half cover) are now $3.15 and we’d love to get out even at $2.50 but we stop them out if S&P fails 1,045 (now 1,048).

    So looking for the afternoon stick here.  Keep stops on those short-side profits, we can always re-load if we break below yesterday’s floor but this is a good place to speculate a bounce. 


  104. I just got this email fr my realtor:
    Good news to all!!  The Senate has agreed to extend and expand the popular home buyer’s tax credit.  Looks like we will have time to find you a home.  Talk to you soon.


  105. I really have an urge to buy an HGSI call vertical before monday’s announcement. :(


  106. Phil / TNA
    I really want to take a position here but we have 3 of 5 below breakdown, thoughts ?


  107. Ha – my ZION rally party worked!

    PFE/Pharm -  They have a ton of cash and things are cheap so people are buying them as a proxy for buying at the bottom.  I agree they are too far ahed of the group but I don’t think I’d short them unless they terst $18.50 and fail again, at which point an agressive short for a $1+ fall would be nice.   On BMY, the buy/write is just fine. 

    X/Oncmed – Oh that was an example, I’d rather circle X like a vulture and hope they fall below $30. 

    Wow, S&P testing already.

    Wor, S&P blowing it already! 

    So much for that play but now 1/2 covered on DIA puts with JUST the Nov $99 puts so, effectively, it cost .60 to roll down the $100 putter to the $99 putter.  Now we can use that 1,045 line on the S&P to go full cover on the $99 puts, now $2.90.   Jan $103 puts over $7! 

    By the way, despite what you see in your charts, we were up 199.89 yesterday on the Dow so until we are down 200, we’re just testing yesterday’s low again!!! 


  108. I guess I should have figured that by the time I finally got trained to buy on a bounce the gig would be up!  Teaches me for going long..
     
    Phil, is there any support out there not touched yet or have we blown them all now..


  109. TNA in @ $36.62


  110. DIA: I am confused.
    I thought we were going full cover, 1/2 with Nov 100 and 1/2 with Nov 99.  Those are what I have now.
    Any thoughts?


  111. ERY/David – Kick ass pick today! 

    Sectors/RMM – I still like IHI and Biotech best but I am only hunting and pecking stocks right now as everything is pretty expensive. 

    RIMM/Jordan – It depends if you want RIMM or not.   Generally, if they are down with the market, I wouldn’t be worried.  It’s when they go down on their own or go down more than the market that you should be concerned. 

    VIX 27.75, up 12% today.  Gotta love that thing!   VIX 25 pust are $1.10 and were $3 last Friday so I like them as a play for a bounce with a stop at .60, looking for $1.70.


  112. Phil: as you said yesterday, I closed the Jan DIA 100 puts with 41 % green, now, of course, no Dia puts left, what protection, if any after this drop should I get ? Feb DIA puts ?/


  113. i think i’m going to just trade XOM puts for a living :)


  114. That makes sense.  I like RIMM, planing to roll them out when the time comes.  Eventually to take delivery of shares, but not yet.


  115. 1042 critical and we just blew it


  116. Yesterday wasn’t a bounce.  Yesterday was a complete setup for today and continuing the sell off.  What a dummy I was.


  117. JRW III :  Are you looking for a stick save today? or play it out Monday?   Now going south $36.00


  118. TZA/Jcmn – So you own the shares and they went from $14.15 yesterday and fell back to $13, costing you 10% in one day and you sold the $14s anyway so why not cash out, take your profits off the table and cover your caller with the Jan $15s at $2.20 (your profits, more or less), which you can always add to if TZA keeps going up and if you DD at (for example) $3 you will be 1/2 covered with the Nov $14 calls and those are currently $1.40 and can be rolled to 1.5x the Dec $18 calls, now $1.10 so that would be 3/4 covered with a $3 spread that you are playing with profits.   Since we are flying now, you can start buying some Jan calls first in preparation to pull the trigger and sell your stock when it reverses


  119. stockbern / TNA
    Only a day trade; I’ll be short ( TZA ) into the weekend.


  120. phil,
    just what is the phenomina of gap closing. is it just one more excuse/cover to drive a stock lower my the manipulators or is there something more fundimental at work?


  121. Well I was wrong about DIA holding 98, sorry, but I’m going to full cover on the puts here, we either stick or we stay sick.


  122. so much for window dressing by the hedgies! inless they were short of course!


  123. Phil: can you recommend a long call on IBB and selling dec cover ???


  124. phil,
    you should have saved that ‘deliverance’ video for today. squeal little piggy squeal!!! where in the hell is bert and his big bow?


  125. How did the business meeting go for the title rollup ?
    Will you leave us, when your business is started ? :( :( :( :( O PLEASE NO !!!!!!!!! (just some preemptive sadness and horror )


  126. Through all of this madness GILD behaving itself rather nicely.


  127. phil,
    note that mot is actually holding its own today is green !


  128. LMAO…what happened CIT, Icahn is the man


  129. Phil, is dow 9650 the middle of your fair value range or the bottom? I forget…


  130.  MOT, I keep watching it since it has some momentum and positive press on the DROID smartphone. maybe Phil can give us a good trade .


  131. C/Chaps – I would do nothing with C.  They are down on rumors so it’s not really worth panicking.  I like those 2011 $5s a lot at .65 and you can DD there and sell the 1/2 the Jan $4s for .46 if you are nervous and then you’ll just roll those Nov puts along when you have to until you end up in Jan with the short strangle and, frankly, it’s a lot of work so you can see why I’d rather wait.  Don’t forget that C is one of very few bullish positions that balance a faily bearish overall portfolio so, in the context of the $100KP, there is nothing to adjust as my goal isn’t to be net neutral on each position – it’s the whole porfolio that needs to be balanced (exluding AMZN at the moment of course). 

    Very ugly pattern if we finish at the lows of the day!

    DXY/Mbais – Crazy dollar speculation going on now but much ado about nothing as Yen got much stronger (very bad for the Nikkei on Monday) and we are back to just $1.47 on the Euro and $1.645 on the Pound so barely a move at all and CNBC is just trying to scapegoat the dollar to cover for a weak market. 

    Preferreds/JRW – My guess is my theory, that they are sandbagging bank siezures and saving them for a holiday weekend when no one will notice, is looking good.  Not JPM and BAC of course but that whole sector will tank if they sieze 20 banks over a weekend.  Looking at the commercial assets of a lot of these small banks, I think if they had to price them correctly about 1/3 of them would have to be siezed tomorrow.  My friend has a building in NJ and I went to a meeting with his bank and the bank guy actually opened the discussion with "We can only let you go interest only for 6 months."  I almost fell out of my chair – we used to have to negotiate for a week to get a concession like that!  These guys are desperate not to have non-perfoming loans on their books and they are doing whatever they can to keep people out of delinquency – that’s a game that con only be played so long…

    Happy house-hunting Lynn!  8-)

    HGSI/Blair – I like them.  I had a play on them last Edro filled as recently as Wednesday to buy the Apr $16 calls ($8) and sell the Nov $17 puts and $20 calls for $8 (even) as an artificial buy/write with the $4 upside and owning HGSI at $17 less the remaining value of the Apr calls should it go down.  

    TNA/JRW – I’d keep my finger on it for a mo play but not over the weekend if we’re finishing down here.  The dollar is down to 90 Yen, that’s going to drop the Nikkei 300 points at the open if it sticks and the dropping commodities will freak out China, who may have bought all the commodities on the planet at the year’s highs in Q2 and Q3.

    Sector ETF weakness: Gold Miners– GDX -5.8%. Steel– SLX -5%. Oil Services– OIH -4.6%. Coal– KOL -4.4%. Solar– TAN -4%. Regional Banks– KRE -3.9%. Agribusiness– MOO -3.9%.

    Sector ETF strength: NONE.

    See, markets are insane – yesterday it was the opposite with Steel and Miners leading up and no sectors red.  Idiocy! 


  132. VIX just broke 30…..


  133. Go AMZN go!


  134. Mr. FAZ and Ms. FAS are nearing a combined 90 handle.  That took a loooooong time.


  135. Could you have named your article for today any better?  It’s sucks I’ve not only missed out on this great drop but I’ve actually lost money.  But the humor that it’s happening on Halloween doesn’t escape me!


  136. VIX going higher…Is that blood we smell?????


  137. Biggest dow drop since March lows, I think.


  138. A close at 9666 would be fitting


  139. phil,
    well the 90 day dow still looks like mr. slinky going up the stairs but it had better get some traction now!!


  140. Supports/Matt – Just the Dow 9,650 but look how close we are getting!  Volume is still low at 113M at 1:30 but it’s a steady drip down and that has to stop for Mr. Stick to be able to set up. 

    Oh no, we just blew 90 Yen – How long before CNBC tells us the dollar is strong again?

    VIX 30 now!  Up 21% on the day. 

    DIA/Cwan – No, 1/2 cover, full if over S&P 1,045.  The idea was to take the full cover temporarily and stop out the $100 puts if the S&P broke 1,045 (which happened very fast), effectively creating a 2-stage roll.    Now that we are down here and you have the full cover, you are better off giving it a little time to see if something saves us.  Don’t forget you have the money and the $100 puts (now $4) can be rolled to the Dec $96 puts at $3 for $1.  Buying $4 for $1 is a good thing!  

    DIA – this is also a good time to add a mattress layer in Jan.  A mattress layer is 1/2 X of what you have in the Jan $103s (now $7.90) in the Jan $96 puts (now $4) and set a stop on 1/2 the $103 puts at $7.70 (trailing .30 stop).   That way, you capture the majority of your gains and automatically lower your delta when the Dow moves against you.  Once you stop out and have the 2 half covers, you concentrate your roll-ups on the lower half on the way back. 


  141. R they shaking the trees or what.  Reminds me of last year at this time!!
     
    Call options in ARNA are moving after year end.  $3/4 Apr10 bull call spread for 20c.  You are already 50c ITM.  If they fail, short OREX and VVUS….madness.


  142. Phil my account is moving down slightly with the market.  Do you think I should move neutral or negative based on this action?  Or just leave it as it is.

    Thanks.


  143. EricL, GNW sure did come down back to 10.  The straddle is working pretty nice.  Amazing.


  144. KONG – sold some at $14.50 during opening hour, just reloaded at $13.  Madness.


  145. ss,
     
    I know. In fact it will probably do much better once the IV drops — Obvoiusly I’m sorry I closed early and I’m now behind on that trade today. But all those XLF puts I panicked into buying yesterday are more than making up for it — so two bad trades makes a right sometimes, lol.


  146. Phil -
    I don’t understand how we manage not to lose money on the covers if we have to roll them down – if we get a move back up – we are now in covers that have a lower delta – right?


  147. If I have no position in TZA and TNA, with this market condition and the fact that I can only do L2 etrade options, that is, buy and sell options alone, any play to participate using TZA, TNA?


  148.  Since its a global economy here are some things to watch
    Monday UK October Hometrack Housing Survey, Manufacturing PMI’s for various European countries, Japan Vehicle Sales and September Labour Cash Earnings, US Construction Spending, Pending Home Sales and October ISM. Tuesday US September Factory Orders, October Vehicle Sales and UK Construction PMI. Wednesday EZ16 September PPI, Japan October Money Supply, UK Nationwide Consumer Confidence, Services PMI, BRC Shop Price Index, US Challenger Job Cuts, ADP Employment Change, Non-Manufacturing ISM and the FOMC decides on rates (unanimously expected unchanged at 0.25%). Thursday UK September Industrial Production, Eurozone Retail Sales, the Bank of England and ECB decide on rates (both expected unchanged at 0.50% and 1.00% respectively), then US Q3 Unit Labour Costs. Friday Japan September Leading and Coincident Indices, German Factory Orders, US Consumer Credit, Wholesale Inventories, UK October PPI, US Non-Farm Payrolls and Unemployment. Saturday the second round of Afghan presidential elections.


  149. Phil – DIA mattress – I have Jan 102 puts long and full cover with Nov 99 puts (misunderstood your earlier comment). What to do now – little confused.


  150. DIA/RMM – Well I also said you should look to repositiion in the Jan $103s as you asked me that first thing in the morning yesterday as we were heading up.  Now it’s a little late to chase and I don’t recommend it, you are better off using the disaster protection plays we talked about last night. 

    XOM/Jordan – Oh congrats!!  Yeah those are up huge. 

    Dumb/Matt – Don’t blame yourself, as I said the other day, they have been psychologically conditioning the bears to be afraid to be bearish.  That’s what lets them pull BS like this because, in a real market, we would have jumped all over yesterday’s move and gone 70% bearish but it just seems too damn dangerous – even when you are positive the fundamentals support you (see AMZN).

    If we’re going to get a move up, it needs to be here, otherwise volume will overwhelm the trade-bots (now 125M).


  151. DIA – New official position is now 1/2 Jan $103 puts, 1/2 Jan $96 puts with 1/2 sold Nov $99 puts, now $3.20.  That $3.20 is enough money to pay for 6 rolls up of the Jan $96 puts, which puts them right back to the $102 puts and we got $3.70 off the table (20% of our long total). 


  152. Sam – your delta compared to your short putters delta (on a move up) will cause them to lose money faster than you. Since you are 1/2 covered, then you can roll the putters (ones you sold) back under yours either out  and down a month (Nov to Dec) or full cover in Nov. You are just protecting some of your gains.  I do it in small lots so that things don’t get away from me.


  153. What position should we be taking for Monday? Are we anticipating a follow through to the down side?


  154. LH/Pharmboy ,  Like the buy-write for May 10 67.50 , puts you back to April 2009 lows


  155. Stock – LH does not pay a dividend, so I am not as interested owning the stock.  I am still a bit leary on a pull back here, so I would be very conservative.  The 65/70 May bull call spread, if you can get it, is $2.5.  Otherwise, I am waiting as the charts (3mo) say they may have further to fall ($68 is the 50d MA).  I would rather see if they hold it.


  156. Hi Phil hold the bull spread of BAC and C  1. jan11 17.5/20  paid  for the 17.5  4.21 received for the 20  3.22
    at C jan 2011 5/7.5 paid 1.34 received .74 May question is ,is it wise to by back the short possible 50% of the trade  BAC shorts 20 c at 1.76 and C short at .29 obviously the longs are down by about 50% your thoughts pls thanks


  157. Gap closing/High – That’s a complicated topic, remind me on the weekend, many factors involved.

    Hedge manipulation:  Don’t forget that a key metric in fund performance is "beating the S&P" so it doesn’t do you a lot of good to have a fund that’s up 10% in a Q if the S&P is up 10% too.  That’s why you had Cramer, GS et all herding the sheep in  at the top in early October so the funds could dump their profitable shares on them for cash before turning around and crashing the market (remember when GS flipped negative on REITS, then GS lowers the GDP target, then Cramer tells the sheeple to SELLSELLSELL 5% lower than where he was telling them to BUYBUYBUY?).  Yet no arrests will be made…

    JPM.PR.I – Making lows at 26.6! 

    IBB/RMM – Not today, let the market settle first!

    Deliverance/High – No, I was right yesterday – the dollar was literally getting raped for no reason at all other than to push down the markets.  I hate to say manipulation every other comments but it was flagrant yesterday…

    Roll-up/Micro – It went well, see yesterday’s late comments.  I’m not leaving, I’m just overseeing the roll-up.  I’ll be putting together a private placement and people here can play along at home, the VCs will match $15M and underwrite the IPO, possibly with my buddies at GS!   Hey, they are evil but we like to win….  8-)

    CIT with the mother of all head-fakes a few mins ago.

    DIA $99 puts sold at $3.10, stop at $3.40 a gamble on full cover on the longs or a solo mo play.  Looking for $2.50.


  158. Phil,
    Like AAPL long term, thinking about easing in by selling some puts to take advantage of elevated VIX, and think this pullback is a nice buying opp.  Got called away a few months ago, and didn’t want to chase.  Appreciate your thoughts.


  159. VIX coming back in….


  160.  Phil
     
    On the DIAs I have the Jan 102′s half covered by the Nov 98′s (never got the roll up) – to get at least somewhat in sync here – what’s my next step? Or should I just full cover & add a layer? Thx,


  161. I’m selling some bull put verticals on names like GS, AAPL, and OIH here. Selling the most premium-heavy put (170s for GS), and buying the one below. These trades are rather boring, and profits are modest, but so is risk and they will benefit from an IV drop early next week, if we get one.


  162. CIT will go BK you can count on it


  163. Hi Phil remember still the deal with CIT 1.5/2 put spread finally got out of the with o profit of 560.00 net possible should have held the long put until 0 but still got 1.30 for it


  164. Hey Phil – How come we didn’t have in the plan to sell calls on PSQ and would it make any sense now?
    Thanks for all your help


  165. Soulfly; AMZN; that’s what I’ve been saying !!


  166. WORLD’S RISKIEST DEBT Ukraine
    The IMF expects the economy to contract by up to 15 percent this year after industries ground to a virtual halt, steel exports plunged and the hryvnia currency lost over 60 percent last year, knocking the banking sector off balance.
    S&P said the uncertainty over the IMF would sap investor confidence in the banking system and would also pressure the hryvnia. The currency was little changed on Friday at 8.095-8.195 a dollar. Last May it hit a peak of 4.474/$.


  167. VIX up 25% !  Wow


  168. Phil
    Do you plan to make some kind of seminar for new guys through vidio conferencing or other way (I know how busy you are but I think once per month will be big help, because just reading about your strategies from different posts kind of confusing)


  169. Phil- Are you a naked buyer or seller of any stocks or options today? If so, which ones?


  170. Phil what trade do you suggest on the VIX ?


  171. Phil – are you just naked overall?  8)


  172.  Phil,
    SRS is beaten down for several obvious reasons. It’s one of the kings of the beaten down. Please name a few more that are in that category.


  173. DIA: Phil, is Jan 96 puts the way to go for a new entry?  if I want to add more DIA mattress?
    I think you picked that strike because it’s the one that you can roll up by < 0.50 per 1.00 strike.  Is that right?


  174. Eric – dumb question, i’m sure, but how do you determine "most premium heavy"?
    thanks


  175. Pharm – that’s why he cant do video training programs.


  176. I have no interest if Phils naked or not (clothes), but Pharm i had great timing with my question in reference to AMGN… u saved me from jumping into that AMGN trade for that i thank you…


  177. "I’m selling some bull put verticals on names like GS, AAPL, and OIH here. Selling the most premium-heavy put (170s for GS), and buying the one below. These trades are rather boring, and profits are modest, but so is risk and they will benefit from an IV drop early next week, if we get one."

    EricL..
    do you mind explaining what is a bull put verticals? and what is buying the one below? 165?


  178. morx, if it’s OTM, it’s all extrinsic premium. If it’s ITM, just factor out the intrinsic. So AAPL 190 puts have .10 intrinsic right now (stock at 189.90) and cost 6.05, so 5.95 extrinsic. You can set ToS up to show you extrinsic too.


  179. oncmed  Hi I am repeating my question from this morning to you. In deed WMT is holding up very well only dropped .50 Pls let me have your comments Thanks
    I am still playing with your yesterday’s suggestion in respect to WMT
    According to Phil’s suggestion  my question is why burden yourself  with a debit (margin) to your account of  23650.00 on 10 Jan 2011 buy c40 and buy p 60 at a cost of 23,650.00 paying 3750 on premium why not only sell a Jan 2010 50 straddle for  3.75 credit on 10 options you only debited 10,080.00 on margin. What is the reason to take on the extra burden of the Jan 2011 option play. ??
    Your comments pls. Thanks
    1.      Phil
    October 29th, 2009 at 4:22 pm | Permalink  
    WMT/Oncmed – How about buying the 2011 $40 calls for $11.40 and the 2011 $60 pus for $12.10 so you can’t possibly get less than $20 back and you WILL lose $3.50 in premium.  Then you can sell the Jan $50 puts and calls for $3.75 and if you sell 3 more quarters you collect $10.50 AFTER paying off your premium against $20 tied up at zero risk (other than WMT totally blowing you out with a massive move out of your range). 


  180.  Strength in the GB has more to do with possible troubles in the EU


  181. Sorry, just had to get a bit of humour out there!!!  d’oh!


  182. Dow 9,650/Steve – It’s the top of our old range and possibly the bottom of a new one, which is what the market needs to prove in November. 

    MOT/Ken – I’m not so enthusiastic but the Jan $9 puts can be sold for $1 and $8 is sure a good entry for a buy/write going forward. 

    VIX $25 puts STILL $1.05 – that’s why I like that play, the movements have little to do with reality! 

    Thanks Matt – sorry you are not having fun but you should get your bounce into this close.

    Slinky/High – Not on this chart it doesn’tPlease note all, THIS is how we look to the rest of the world!!!

    Neutral/BGB – I’d try to get neutral at leaste over the weekend.  Like I said before, we’re looking at a massive Asian melt-down looming on Monday if they can’t hold 90 Yen (rock solid at the moment) with commodities closing this far down.  Europe closed Down 2% at lows of the day so we’ll be lucky to flatline next week but, of course, there’s always more stimulus and a Fed meeting coming so more wild moves ahead.

    Covers/Samz – You are not supposed to make money on covers, we try not to lose too much while trying to stay in a position where a 300-500 point gap down won’t kill us.  It’s insurance.  We initiated a spread of 2 Jan 99s at $5 and sold 1 Nov whatever for $2.  We spend $2 more rolling up to the Jan $103s, pretty much using money we collected from various puts we sold so let’s say we are in them for net $6.  When they hit $8 we stop out at $7.70 on 1/2 and then spend $4 to buy the $96 puts instead.  That takes $3.70 of real money off the table and it’s money we can now use to buy some long positions if we feel so inclined as we are still very well covered to the downside.  Making 20% on an insurance policy is fantastic - how would you like to have a $1M life insurance company and get a chance to take $200K off the table and still have the $1M insurance?

    Speaking of downside, bye bye AMZN!!!

    TZA/Lynn – With your restrictions playing the ultras is very dangerous.  Why not just work with IWM?  Also, level 2 trading should let you sell covered calls – are you sure they won’t let you?

    Data/Kustomz – Yeah lots of it next week. 

    DIA/Concreata – I’d keep the full cover and add the 1/2 $96 (or $95) puts as that puts you with 1.68 downside delta to 1.22 for the putters and you can keep the stop on 1/2 the $102 puts at $6.25, which would flip you to a slightly delta bullish positiion.

    Monday/Sthom – 55% bearish is still likely.  Ask again in 75 minutes…

    Buy backs/Yodi – I wouldn’t until we get some clarity next week.  You can alway buy more longs for yourself if you get bullish and lower you average while the possible additional covers rise in value so it’s not like you’ll miss much if you don’t try to catch a falling knife today.

    AAPL/Chuaeu – I still like selling the Jan $165 puts for $4.10 but you have to really want to own them.

    DIA/Deano – You’re fine really but you might want to keep a stop on 1/2 the $102s if we get a big bounce up and just re-enter with a lower put like the $96s to get something off the table at the bottom of a 5% move.

    Wow, relentless selling but lower volume after that failed breakdown attempt. 

    Verticals/Eric – Nice idea playing for the volatility.

    CIT/Yodi – Yes, we also should have gone short yesterday at $1.10 and made 30% today.  8-)

    PSW/Morx – There was a plan to sell calls but they never hit our price and now they are just waiting patiently for the Nas to come down (this isn’t it yet).

    Ukraine/Kustomz – The only thing I find surprising there is that they don’t think anyone is in worse shape then them…

    Seminar/Tchay – Well you can set one up and I’ll show up but if you think the posts are confusing, try sitting on a virtual conference call with 100 other people asking questions! 

    Stocks/SNS – Nope, mostly watching today.  We already have plenty of posiitons and my hope is to make some good bear side money, find a bottom next week and buy some longs but we may be in for a long slide first.

    VIX/Yodi – the only VIX play I like is betting the volatility comes down with the $25 puts at $1.  It’s a bullish bet on the market so a silly play unless you need some upside coverage. 

    VIX is up 22% and back over 30, the highest since July, and it’s been shaky this week, with a spike that some read as a buy signal.

    Naked/Pharm – I don’t want to think about you thinking about that, thanks!  8-)

    SRS/Oldgoat – Please save quizzes for the weekend.  Actually, we discussed this at the end of yesterday’s post in the possible upside buy/writes in the hedged spreads. 

    How big is the coming CRE crash? "Huge," says Wilbur Ross, who recommends "extreme caution" before putting money in. "All of the components of real estate value are going in the wrong direction simultaneously. Occupancy rates are going down. Rent rates are going down and the capitalization rate – the return that investors are demanding to buy a property – are going up."  The sad part is there are people who are only hearing this for the first time!

    DIA/Cwan – Yes the $96 puts, which follow our rule of thumb of buying the first strike you can’t roll up $1 for .50. 

    Amazon.com’s (AMZN) secret to its soaring cash-flow growth? Steadily lengthening the time it takes to pay suppliers – now 64.6 days, up from 59 days last year and 49 in 2003. Amazon’s working capital management is to be envied, but investors shouldn’t get too used to it: You can’t keep extending payment terms with your vendors forever.

     Five reasons the GDP jump isn’t all it seems
     

     


  183. lynn,
    I’m selling the Nov. 170 GS put and buying the 165. I’m asking 1.85 (hasn’t filled yet). The delta, if it fills, will be around +15 each, so pretty low. So it would not make a lot of money from GS going but, if GS starts going up, the IV will fall and I’ll make more from the volatility decline. This trade might be good for 10% or so on Monday or Tuesday, if GS stabilizes or goes up. Max loss would be 3.15, but I would be out long before that happened (unless we crash, of course).
     
    So these are little, cautious, baby-bullish trades that also try to take advantage of the high VIX. I sell these against plenty of bear positions that I have already, of course.


  184. Phil: what will happen to my puts which I sold if I keep them until Monday: will they be worse than now:
    have Dia nov 98 and 100
    plus Bidu nov 380.


  185. EricL, GNW heading your way. I guess a strangle would have been more appropriate.


  186. "Amazon.com’s (AMZN) secret to its soaring cash-flow growth? Steadily lengthening the time it takes to pay suppliers – now 64.6 days, up from 59 days last year and 49"
     
    I think they do that with their customers too. I swear it takes another day longer to receive the item each time I order a book…


  187. WMT/Yodi – Wasn’t this discussed in yesterday’s post?  Go there and see response on how to play (I believe I decided I liked the artificial buy/write best). That play was about safety and was an answer to what Oncmed asked me – What is it YOU are trying to accomplish in a WMT play?

    89.99 Yen to the dollar – Danger Will Robinson, danger, danger!!! 

    Puts/RMM – Well if the Dow drops, they will be worse.  If it goes up,. they will be better.  We are trying to be 55% bearish into the close as we didn’t get a stick and we do expect some follow-through but you never know.  Add some Jan $96 puts if you think you are too bullish.  At $8, if you want, you can sell 1/2x the $103 puts (delta 73) and buy x of the $96 puts at $3.90 (delta 45), which would increase your downside delta by 23% on that half at no cost. 

    Wow, this is now officially bad looking


  188. Hi Phil an off the record question where does one find my account status of our group?


  189. The 10 year yield is falling.  Are people running to cover the dollar short?  Wow what a day.


  190. if we close at 9666 the markets are truly controlled by Satan himself and i dont mean blankfein


  191. H Phil It looks like oncmed has thrown in the towel I would be pleased to know why he sets up a Jan 11 strangle to play Jan 2010 straddle options?
    yodi
    October 30th, 2009 at 2:48 pm | Permalink  
    oncmed  Hi I am repeating my question from this morning to you. In deed WMT is holding up very well only dropped .50 Pls let me have your comments Thanks
    I am still playing with your yesterday’s suggestion in respect to WMT
    According to Phil’s suggestion  my question is why burden yourself  with a debit (margin) to your account of  23650.00 on 10 Jan 2011 buy c40 and buy p 60 at a cost of 23,650.00 paying 3750 on premium why not only sell a Jan 2010 50 straddle for  3.75 credit on 10 options you only debited 10,080.00 on margin. What is the reason to take on the extra burden of the Jan 2011 option play. ??
    Your comments pls. Thanks
    1.      Phil
    October 29th, 2009 at 4:22 pm | Permalink  
    WMT/Oncmed – How about buying the 2011 $40 calls for $11.40 and the 2011 $60 pus for $12.10 so you can’t possibly get less than $20 back and you WILL lose $3.50 in premium.  Then you can sell the Jan $50 puts and calls for $3.75 and if you sell 3 more quarters you collect $10.50 AFTER paying off your premium against $20 tied up at zero risk (other than WMT totally blowing you out with a massive move out of your range). 


  192. how come non of the guests are screaming buy buy buy with the markets down so much….bunch of clueless buffoons


  193. i know i know maybe cause they only say buy when the want  to sell


  194. AMZN/Steve – That’s very interesting!  See, when you have $8Bn in sales and make $200M in profits, you can do lots of little things to make $20M here and there on paper for a quarter or two.  When a stock has a p/e of 80, every little dollar helps! 

    Account/Yodi – You mean your membership info?  That’s on the top right of this web page where it says "Yodi’s Account."

    Finishing down here is just down 3% for the week, not really the catastrophe you woud think it is.  It’s just the bulls are so used to every single play they make tuning green that they are truly shocked anything else can happen.  

    9,712 is where the Dow started the month.


  195. Something tells me they will close this down 200 on the Dow.


  196. Pharm:
    What do you think of adding long GILD LEAPs at this price?



  197. Im reading lots of stories on continued global deflation


  198. phil,
    you guys can talk and bitch about amzn all you want but i would trade them for my aapl shares at the start of this day.


  199. ARNA/Pharm: Other than the general market, is there any fundamental reason you have heard that would explain ARNA today? I am only reading positive developments.


  200. Now if we could close 200 points up on the DOW today that would truly be like this time last year :)


  201. Phil WMT yes I coppied your comments above I would only like to know why you buy a Jan 11 long put and call strangle to sell a Jan 10 50 straddle the Jan 11 long strangle cost only additional money do not see the reason?


  202. What time is it? Stick o’clock!


  203. Phil & friends: I have this BSX Jan $10 long call left over from a spread, i am thinking to roll to the Jan $7.50 to improve the delta then sell the $9 to cover a bit of the cost. Any better ideas? I cannot sell calls naked, must be covered. Thanks.


  204. Huge REIT pump, as usual.


  205. yes, phil, i can do covered calls. what would u advice to do with tza or tna then


  206. Look at SPG up $3 since 3 pm …. ridiculous !!


  207. zion climbing like a rocket!


  208. I am very leery of buying anything right now except dividend payers that will hold up fairly well….
    GILD – has solid support around here, but there is always the ??… I would enter slowly at the $40 May for 5.5 (no more).  Sell the 45 Dec for 1 or better, full cover.  If the chart starts to turn around, buy 2X (the second lot of the 40s) and wait for direction. 
    ARNA  – it is called drop the stock, shake out the weak.  I am just holding on, and patiently waiting for payday (or May day) when I am buried. 


  209. Last attempt to bread 9760 on the Dow….



  210. "Trading used to be a gentleman’s game."

    Interesting comment. FWIW, perhaps you recall the days before 1975 when the game was "rigged’ in other ways – before discount brokers.  There were fixed commissions rates that cost a couple of hundred dollars per trade and the "big boys" then had a complete lock on the system. Trading options may have well been something from Mars and was very limited until the CBOE came on the scene in the mid 70′s. If not for this "deregulation" , PSW and all of this would not exist and what fun would that be? Enough of the history lesson.
    Your thoughts on ELY- thinking it may be a good longer term play on general economic recovery and a weak dollar play (domestic production and 50% foreign sales. Sales down now and although I am not a golfer  (I already have enough expensive bad habits); from what I can tell, the pastime is addicting and demand should return with better times. 4th Q is traditional slow time for ELY and they just took a good whack on earnings/downgrade. Comment?


  211. Well butter my bread b’c they didn’t break it.


  212. Out of TNA @ $36.89. so .3% on TNA +9% on ERY; 9.3% not a bad day


  213. Phil, % Bull / Bear over the weekend ?


  214. PharmBoy - I can’t get the ARNA MAR spread for .20, did you target that or actually get that?


  215. Sorry, MrM – April target, has not filled.


  216. An observation, just in case it might be of use to someone: I am short a lot of puts and calls – I suppose I’m 60% bullish net – but these last two down days have trashed me good – almost 1 for 1. This is because the VIX is nearly 50% higher than it was last week – inflating everything that I’m short. My calls have not devalued much, and my puts are well higher (against me). If I calculate how much of my short option positions are premium, I feel much better.


  217. David Darst the biggest pumper that told people to buy GE hand over fist at 16, says we may get a 8% correction from here…what a guy looking out for the retail investor

    No many want the market at 1040…bad bad bad


  218. Happy Halloween All! 


  219. whens the last time you heard the word curbs?


  220. barfinger,
    I’m feeling the pain as well. I already was not positioned very well for this drop and had quite a few naked puts on stocks I thought I would like to own down here but if we drop another 10% or something, it doesn’t feel like such a good deal.


  221. WMT/Yodi – Save it for the weekend please, happy to discuss when we have the time.   To answer your second Q, the 2011 $40/60 had $3.50 in premium and CAN NOT, under any circumstances, not return at least $20.  By having the long put and call you limit the margin requirement of the short straddles you sell and, of course, you are fairly well covered against any sudden moves (not that we think WMT is making any major moves, which is why I prefer the artificial buy/write to the double diagonal).

    Volume 195M at 3:40.

    Deflation/Kustomz – Well deflation makes sense.  No jobs, no money = deflation.  This insane concept that they must stop deflation at all costs is killing us (it killed Japan for 20 years).  Sometimes things get too expensive (like oil or housing) and then they deflate until they find the right price.   Trying to prop up everything that inflates to it’s max gain in order to prevent speculators from losing money is the very definition of insanity. 

    AMZN/High – How many shares do you have?  I’ll buy an equal amount of AMZN and swap you the whole thing!  8-)

    Stick men can’t get anything going.

    BSX/Morx – The Jan is .15.  I guess you can roll but what’s really the point?  Essentially, you are entering a brand new play on BSX and the question is – should you?  I would sell the Dec $8 cals for .55 and buy the 2011 $10s for $1.  If BSX pops up, you have the upside buffer of the Jan $10s and you can roll the callers to 2x the Jan $9s and add some more longs if you have to.  If they are down or flatline, you collect net .40 for the Jan $10s and you are left with cheap leaps for a comeback. 

    Covered calls/Lynn -  Then go to yesterday’s post (last few comments) where we have 4 vertical spreads laid out.  My favorite one is the TZA. 

    SPG/Cap – VERY!

    ZION/High – Remind me never to be a passenger in a rocket you are flying!   8-)

    History/Pstas – You are right, I missed the old, old days and was lucky enough to get active in the 80s.  Speaking of gentleman’s games, ELY I liked a lot on Father’s day when they were down around $5 and I suggested that the stock would be a good gift but they guided down and you don’t want to be in them with a bad market.   I think wait for the downgrade police to slap them and see where they settle but down around $5.75 I would like a buy/write as a starter entry of maybe get $1 for some $5 puts as an entry. 

    Nice JRW! 

    The dollar is up 0.75% today against the EU and down 1.5% against the Yen this is LESS than it was down yesterday by a wide margin and CNBC did not say a peep about the dollar yesterday and today they are blaming it for everything every 5 minutes – this is one sickening, biased, hack network – no wonder their ratings are cut in half! 

    Oh sorry, just annoyed there…  

    Have a great weekend everyone! 


  222. Yea MCC i know where my money is, its in a risky money market account all cash baby

    Have fun with your kids over the weekend and don’t drink the koolaid, it may be spiked ;-)


  223. Barfinger/ Thanks – I Do feel better now…..but gloomy.


  224. Barfinger – you are right – for those of us in covered call positions – this vix spike sucked because the calls did not degrade compared to the stock -
    The Vix futures are look very interesting – but not a pro – more than a little leary.


  225. The race is over  all of you have a nice HALLOWEEN see you Monday


  226. Phil,
    I sold 1 RIMM march $60 Put @ $4.55 and I think I’m about ready to roll that 2X March $55. What do you think?


  227. %/JRW – Still 55% bearish.  Too risky to do more even though I wish I had gone with my feelings yesterday when I wanted to be more bearish at the close. 

    9,712 EXACTLY – Amazing how the "random" trading of millions of people can finish the entire month of October at the EXACT same place it began. 

    Premium/Barf – Yes, that very much sucks if you sell a lot of contracts and the VIX runs up.   Especially when it runs up 24% in a single day. 

    Curbs/Kustomz – If the dollar runs up next week you’ll be hearing limit down on the commodity pits I bet. 

    Check out gold, jumped from $1,036 back to $1,045 at the close.   Oil didn’t, they flatlined at $77.  OIH still too high at $117. 

    Keep in mind this was just a 3% down move for the week so what matters is next week’s moves

    Have a fun Haloween!


  228. Look how they jammed all the REITs up, IYR up, SLG , SPG etc. at 3pm.
     
    Y’know why ?  because at 3 pm the outlook for real estate suddenly improved dramatically.
     
    talk about window dressing !!


  229. Seminar: I got your point,
    But I’m talking about training seminar and if you make them expensive))) only people who realy need it will show up


  230. The e/mini dow future for dec are at 9666!!!


  231. Has anyone looked at the daily chart on /GC, and specifically the contract volume over the last few months? Seems a bit odd to me, I am not sure what to make of it.


  232. RIMM/Maxt – I think it’s a bad practice to react to single day moves and I think the March $60 put still has $6.30 in premium out of $7.70 (82%) so your real question is – "Should I buy 82% of RIMM premium and then turn around and sell 100% of RIMM premium which has almost double the downside delta so I’m gaining 18% premium and doubling my downside risk?"  What do you think the answer is? 

    Try this question – Phil, I have the RIMM March $60 puts sold at $4.55, now $7.70.  What can we do to take advantage of the VIX at 30?"  To which my answer is I’d sell 2x the Dec $55 puts for $3 and 1x the Dec $65 calls for $2.25 and that’s $8.25 collected in a hedged position with a downside delta of net 35 (vs .72 for 2 March $55 puts or .47 for the single March $60) and you don’t owe the caller the $4.55 + .55 = $5.05 you collected unless RIMM gets back over $70 and the best part is you can be done with the whole thing in 8 weeks!  

    Seminar/Tcha – Well, like I said, you organize it and I’ll show up. 

    9,666/Kustomz – Cool!   Good prediction by someone earlier.


  233. Quick question about what you said to Samz on the cover play.

     let’s say we are in them for net $6.  When they hit $8 we stop out at $7.70 on 1/2 and then spend $4 to buy the $96 puts instead. 

    Are you trying to take a 20% gain off the table to buy cheaper puts? Also where is the stop at 7.70 come from?

    Also, in one of the mattress play comments you talk about rolling up in .50 cent increments. Why did you sell $2 worth of puts to roll up 2 puts by $1 each?
    Thanks!
    P.S. You should make a video explaining this stuff and post it for members. I learned a ton watching you on LiveStock with Timothy Sykes back in March.


  234. Betsy Rafael, vice president, controller and principal accounting officer at Apple, sold 7,065 shares for $1.4 million, or $202.80 each, on Oct. 26. After the sale, Rafael held 12,172 shares directly and through restricted-stock awards, down from 19,237 shares.


  235. Hey kustomz, that $1.4M for a VP sounds low, so I went to Yahoo Finance see who is selling more AAPL shares, and yes, the Robert Mansfield sold $11.6+M worth of AAPL on 10/22, so as Jerome York (90,000 shares!).  Back in July Ronal Johnson sold a neat 500,000 shares.


  236. Roth -
    You try to roll up your puts by $1 for .50 cents – as soon as you buy the puts – you put in an order for the roll at a limit price of .50 cents.




  237. Peter D,
    Your crazy SPX play now is right on the mark, in the center of the sweet spot! Sure wish tomorrow is 11/23 :-)
    A general question on straddle/strangle adjustment. Let’s assume I have RUT 550/640 strangle. What’s the best way to do adjustment due to large market moves. Today’s drop for example,  I had to fight the fears and of course the sudden surge of margin requirements to roll 550 down to 530, paid by rolling 640 to 590. But then I thought this should be done on a bounce, rather than during a sharp drop. But if Monday is a strong up day (I think unlikely), then one would think, no need to adjust…
    Thanks. 
     
    PS. For those of you interested in really know what’s going on in China, this book is highly recommended.
    http://www.amazon.com/China-Road-Journey-Future-Rising/dp/0812975243/ref=sr_1_1


  238. JPM – picked up some before close, it’s near the low end of its trading range in the past 3 months..


  239. And the academy award goes to
    http://www.fdic.gov/

    Did i hear that right? She’s pretty sure they wont need the line of credit for 500 billion from the fed but its there just in case, and banks will pay up 40 billion by year end (2 months) and that should be more than ample enough

    Hey Pete that Robert Mansfield guy sold at the top!! What timing!! 

    Fab i would be careful lots of traders spooked (fitting it being Halloween and all) wont be easy to get them back in, should make for some nice volatility….


  240. "Keep in mind this was just a 3% down move for the week so what matters is next week’s moves."

    Brilliant!! im putting that one in my memoir ;-)


  241. RIMM phones practically being given away…Storm 1 for 50 bucks!!
    http://www.verizonwireless.com/b2c/promo/splash/ewp?v=7&cid=BAC-prorsch


  242. Well also get the Employment Cost Index at 10 and that one is a mixed bag as our corporate masters love it when they don’t have to pay us a living wage but then they wonder why no one is buying their stuff.  Notice on the chart how benefits have been totally dismantled since 2004, that does not count as lower personal income, just 5% more costs that employees have to come up with out of pocket.  Ah capitalism.
    *****************
    Marq Thompson
    <a href="http://auctions.fastrealestate.net&quot; rel="dofollow">foreclosed home auction</a>
    *** High quality comments only please ****


  243. Phil,
    I have the RIMM Mar 55/65 bull call spread bought for $620.(I think it was reccom last month) ..It is down approx. 28%. I was thinking of selling the Nov  55 puts for $1.14 and/or the Nov 60 or 65 calls ( 1.96 /.63 respectively) in order to try to recover part of the loss.  Probably selling the call is a better idea as this reduces delta. What do you think…
    Phil, in general, what is your fall back strategy with several  months out vertical spreads when the market start going agaist you? I am certain that sitting back and crossing your fingers hoping that the market reverses is not what you reccommend….( I must say contrary to most investment services ……)


  244.  Phil,
    I see this in the WSJ re commercial property:
    http://online.wsj.com/article/SB125694507086819833.html#mod=todays_us_money_and_investing
    I would like your read on this as it relates to SRS.
    Thanks…hope you’re having a good weekend.


  245. TOS | Phil,
    Still looking for that reset button.  I’ll let you know when I find it.  Could you please elaborate on your TOS setup.  I’ve found  the gadgets on the left hand side that allow to you to use a tabular | drop down format  to select predetermined symbols under the future tab.  Are you talking about this or are you actually using a divided chart screen to track the S&P, RUT, etc..  If your using the chart what symbols are the?.  Eric actaully clued me in on the "/" thingy to run down futures.  (Sigh… I know.  Its hard to believe Im a rookie, huh?) Im getting better though.  Eric if you reading this, I setup a chart called "Erics Chart" . Super cool.  Thanks.  Im assuming with multiple monitors I can detach and have multiple, viewable,  data streams.  Feel free to elaborate as much as possible about your "system". (i.e first thing your read in the AM, emphasis on most important data, etc..)  Thanks.  


  246. Kustomz, possibly an inventory clear down for the storm2 release. Note that ASP’s for RIMM have not fallen that much, so presumably it is VZ who is taking any hit?
    As seen by RIMM from the most recent conf calls:
    Q1 Average selling price was $357
    Q2 Average selling price was $345
    Q3 projected selling price is $320
    "Gross margin for the second quarter was 44.1%, in line with the guidance we provided in April and higher than the 43.6% in the first quarter [due to reductions in raw material costs] as well as the shifts in the product mix, as we discussed in the last earnings call."


  247. Magret, I would watch RIMM carefully hopefully it will hold 58 where I see significant support, but you may want to decide it has held this level before adjusting in a bullish way (eg selling puts)
    Obviously we all read the tea leaves our own way :)


  248. Old G | SRS
    Im in the mortgage industry.  I could go into detail, but trust me when I say Commerical RE has crazy, crazy problems.  I’ve just bought SRS long and I’ll hold until spring with a stop out at 8.50.  I could be wrong, but I suspect it may go to the moon.  All it will take is the failure of one the REITS.  I’ve been playing it for a while.  If you want a shorter term trade, I buy in the 9′s and sell in the 10′s.  It appears to be trending up.  It moves fast so pay attention.  Also read up on Nicholas Darvas (http://en.wikipedia.org/wiki/Nicolas_Darvas)  This technique has worked pretty well for me on SRS.  The other day when it busted through the ceiling I bought and made a tidy profit.  Pretty simple, but It works. WARNING…  I’m new.  Please clear any advice I give through others on the site who actually understand  the markets better.  Im usually reluctant to give any advice but I’ve done well with SRS over the last few months.  Plus Im concerned that Phil may end up on the evening news if he has answer any more SRS questions. I kind of need him.  Good Luck.      


  249. Steve really depends on how many they have left but i think that potential buyers that aren’t tech savvy will fall for buying the Storm1 (cannibalize), which is a pretty nice phone but not so smart smartphone. VZ doesn’t care due to the fact of the data plan you are forced to pay for. Looks like desperation on RIMM’s part. I’m just saying…lol

    In my opinion they would sell tons at that price, there isn’t much of a difference in looks (feel) and people will question why the 150 price difference compared to the Storm2, WiFi ..memory …better keyboard feel/…little faster proc.

    I’m thinking they don’t have many of the Storm1…and people will wonder if the Storm2 will have a big price drop of 150 dollars in coming months..I’m just saying ;-)   …..

    I had tee many martooni’s last night sorry if i sound like I’m rambling…O and 58 on RIMM… i dont know i think people will look at this and say there is lots of pricing pressure and the sandbox is starting to get crowded with some pretty decent smart phones…im just saying


  250. Forgot to mention its buy one get one free at VZ for the blackberry’s…would that make you bullish on the stock or any other of the smart phone makers besides the almighty AAPL stock.. which has gotten cheaper he past weak.


  251.  Zuko775…….SRS…….I too have made significant $ with this industry, but not with SRS, rather with URE.  They, of course, move in opposite directions.  I’ve wondered how one might use this fact to trade them both advantageously.  Anyone may present such a method.   Thanks.


  252.  IF  | SRS
     
    I’ve often wondered the same thing. Anyone?   


  253. Zuko775… probably you are better of shorting URE rather than going long SRS if you are perrimistic on the REIToutlook. Chances are that ultras decay with time, in other words even if the RE index falls by say 5% SRS will increase by less than 10% but chances are URE will fall by at least 10%, eg from 01/01/09 to 09/30/09 DJ REIT index rose 16%, SRS fell 80% URE rose 45%. Also from 01/01/08 to 12/31/08   DJ REIT fell 41% so one would expect URE to fall and SRS to increase  URE did in fact fall 81% BUT ,unless the Yahoo historical figures are incorrect, believe it or not , SRS fell 50% instead of rising 80%……..I would appreciate if someone coould confirm these fi gures from the following link:
    http://www.djindexes.com/mdsidx/index.cfm?event=showreitIndexData&perf=Historical%20Values
    http://finance.yahoo.com/q/hp?s=SRS&a=00&b=1&c=2008&d=11&e=31&f=2008&g=d&z=66&y=198
    Bottom line is that you are always better off shorting these Ultra ETFs rather than holding them long term. FAS/FAZ seem to be an exception. As noted in PSW more than once , some months ago the two etf’s were worth $45 each , ie $90….today the 2 ETFs together are worth $95….


  254. Unless I am mistaken ……….If some one had shorting both URE & SRS from 01/01/08 (prices then were $31.82 / $102.11) to the 30 September 2009 ($5.98/ $9.69) he would have earned 88% Too good to be true…….but what happened for FAS/FAZ could happen for SRS/URE…….
    PS Above prices are adjusted for splits / dividends as per Yahoo site……


  255.  Magret  |  SRS/URE
    Wow.  Thats great info.  Thanks. I definately want to be on the short side of the impending CE disaster.  I’ll probably start to work that into my positions.  Thanks again.  


  256.  Zuko,
    I’m not new to playing SRS. I’ve made considerable $ with it. Now  I have more than I should have in various Jan calls. I’m up a bundle on SKWAH, SKWAI and SKWAJ and want to buy more anytime SRS is circa 10. I think if the f….in govt would let the market percolate naturally SRS will go way (!!!) up. It was 290 something and now it’s under 11. Did you see the article in Bloomberg re Wilbur Ross’s read on CRE? He’s predicting a crash. But then today in the WSJ there’s the article that I’m asking Phil about that states that the gov is going to take the pressure off CRE. I’m concerned that this could f up my plan for SRS (or URE). The gov thinks they have to rescue everything because they are extremely afraid that if they don’t the whole bleeding house of cards will collapse. If they had kept their hands off we could have been OK by now. Just my take.
    I will read about N. Darvas.
    I will look into shorting URE. 
    Also, know of any other etfs with SRS potential?


  257. Zuko, please check out my figures before taking any action….also maybe Phil could give us a piece of his mind on the subject. You could , say, short the Ure and sell front month puts at a lower strike price than the cost against the short stock position.


  258. Kustomz I don’t know. Provided VZ can make enough money off the data plan to pay RIMM a decent price for the phone, I don’t think I care what price the end consumer thinks they paid for it, I just want them to sign up. Surely this is a financing issue for the network operator rather than a margin issue for the manufacturer?
    That said I agree, all the new competition is a threat although both companies have built franchises which will be very difficult to break into although for quite different reasons.


  259. Magret
    I will do the home work…. Thanks again.
    Old G | SRS
    I would agree that its a valid concern with regard to Government Intervention.  Unfortunatley, it may be necessary to some extent…  The CE has the potential to dwarf the "Sub-Prime" fiasco.  (Disclaimer … I’m slightly Liberal).  Im not aware of  too many other ETF’s that have such an obvious external influence.  The problem is that it is obvious, which means every other trader with a brain sees it too. I think that may compromise its potential.  Once again, Im relativley new to sophicated trading so what do I know?  One thing I do know is that the fundamentals will ALWAYS collect whats due.  We obviously have a irrrational exuberance in conjuction with artificial influnces (i.e.  The Goverment, Goldman Sucks, etc…  ) driving the market..  I read Pharmboy say the other day he was moving to 95% cash soon. I think hes on to something. Earnings season is over, and I do not see a lot of positive news on the horizon. Traders are going to want to protect thier profits and I’ll bet stops are set pretty tight right now.   The house may come tumbling down and I would like to be in a position to go short very quickly.  Tell me you  what you think about Darvas.  At the very least its very interesting story about a 25 year old Ball Room Dancer who found a way to beat the market. 


  260.  Zuko,
    Good points. I don’t care about the many other traders. When SRS goes up toward 11 my SRS jan calls swell in value. This is just in the range of 10 to 11!! It hasn’t been to 11 in some time. I hope it goes bellow 9, I’ll buy more. April next. My advice, do the same.
    I will read about Darvas. Thanks.


  261. Phil,
     
    I still don’t see what stick save is….i cant find David Fry chart and his hockey stick. by the way, did we get a stick save friday?
    "Stick Save/Lynn – Look in Chart School under David Fry’s charts  and you’ll often see him not a stick save.  It’s that hockey-stick looking move that zooms the market up into the close (or during the day) usually on low volume as "THEY" try to punch up the markets so it’s shorthand for a BS up-market move. "
     
    thanks


  262. RUT/balancenv, with the RUT Nov 550/640 strangle, rolling down to 530/600 is the correct move.  Like I mentioned on Thursday, that rebound was a gift to the premium sellers, so as soon as we weren’t holding the levels on Friday, I quickly roll down the PUT, then roll down the CALL also.  Once the indices have dropped more than 7.5% in a month, it’s unlikely to recover to the top (unless we have those crazy stick saves), so we can roll down the short CALLs.  Note that VIX jumped over 20% on Friday, so both the PUT and CALL value are super inflated.  If the market holds this week, VIX would drop and the options value would evaporate quickly. 


  263.  Peter D,
    Thanks for the note. Originally I was asking for advise of, when market drops and we need to roll down but the put and calls, it’s actually not the best time since put value increases while calls drops, i.e., need to roll more on the calls to cover the puts. But then that’s life.. It’s good to know VIX is high so there’re still premiums even for those far away calls.