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Friday – Will We Finish the Week Over Our Target Levels?

Here is a great metaphor for the emptiness of the global recovery

An entire city in China, tens of billions of dollars in construction, sits empty.  They also built the World’s biggest shopping mall, also empty.  As they say in the video, people can’t move in because there is no economy.  Yet the building of the city of Ordos and the Utopia mall have allowed China to hit their 8% GDP growth target because it doesn’t matter whether you build something worthwhile – as long as you build SOMETHING, it’s going to count as part of your GDP.  It’s ironic that this country still hasn’t bothered rebuilding New Orleans, which was once a healthy, vibrant city and we are letting Detroit die a little more every day when it’s ideally situated to attract (comparatively) wealthy Canadian tourists but China is willing to build entire cities from scratch.

chinaexports_r31Ironically, Louisiana is one of 8 US states that export more than $2Bn worth of goods to China, who is, by far, our fastest growing trading partner.  We get trade data later today and hopefully, at least one benefit of the week dollar will be to help boost our balance of trade but we’re a very, very long way away from balance and, as I pointed out last month, almost all of our gains are coming from lowered US consumption, not a real increase in exports. 

Speaking of lowered US consumption, just as we predicted, crude oil fell to the lowest in a month yesterday as the inventory report showed inventories in the U.S., the world’s biggest energy consumer, climbed DESPITE a drop in processing runs. Oil extended Wednesday’s 3%decline after an Energy Department report showed crude stockpiles rose a more-than- expected 1.76 million barrels last week. Refinery operating rates fell to 79.9 percent of capacity, the lowest in more than a year. Gasoline inventories rose 2.56 million barrels to 210.8 million, much more than a forecast drop of 350,000 barrels.

 “The U.S. numbers were incredibly bearish, especially the gasoline build,” said Clarence Chu, an options trader at Hudson Capital Energy in Singapore. The decline in U.S. processing runs is in line with low rates in other developed countries. Japan’s refiners operated at 71 percent of capacity last week, an industry report said on Nov. 11. The two nations were responsible for about 29 percent of global demand last year, according to data from BP Plc. “Demand is just so anemic and the crack is so bad,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp in Tokyo. “It behooves refiners to keep runs low to try to support this market.” U.S. fuel consumption dropped 4.3 percent for the week to 18.3 million barrels a day, the lowest since June, according to the Energy Department report.  Here is a nice like to Seven Common Bullish Myths About Oil.

Of course oil and mining stocks put pressure on the Asian markets this morning, as they did on ours yesterday.  As I’ve been saying for weeks - the very obvious lack of true demand for commodities is nothing compared to the hell those markets will go through if the dollar stages a rally.  Since, unfortunately, we are riding at the top of a stimulated commodity bubble market, things are not likely to go well for the markets if that happens.  "Most sectors are down on profit-taking across the board, while defensives have held up better as investors question the U.S. economic outlook after the crude oil inventories data," said Macquarie Private Wealth Private Client Advisor, Marcus Droga in Sydney. "The U.S. economy is not generating the demand for oil that people expected." 

Even China is now planning new measures to close factories to curb overcapacity and pollution after this year rejecting requests to build industrial projects worth almost 200 billion yuan ($29 billion).  The government will target the steel, aluminum, coke, cement, paper and utility industries, Zhu Xingxiang, director of environment evaluation department at the Ministry of Environmental Protection, said today in Beijing.  “The steel industry is the focus of our supervision,” Zhu said. “There is too much capacity being built without government approval.”  The government’s 4 trillion yuan stimulus spending has spurred overproduction of steel and rising inventories has led to lower prices, the China Iron & Steel Association said this month. The U.S. this year imposed antidumping charges on some Chinese steel products, which U.S. Commerce Secretary Gary Locke said today weren’t protectionist measures. 

Flat-Earth-trade-deficit.jpg image by ElaineSupkisThe Hang Seng managed to pull up after lunch and made it back to the just under the September high of 22,600, which is close but no cigar on our tracking chart, so no green box for them.  Meanwhile, of more concern to global chart-watchers is the Nikkei falling another 34 points, heading back to test the Nov 5th lows which, like the Oct 5th lows, came at the bottom of Dow pullbacks.  If we rally from here and pull Japan back with us, that will be fine but if we fall from this level, then our 15% spread to the Nikkei over the past 60 days may come into question

As I’ve been saying for quite some time, we are reaching the point at which the falling dollar (which has been the main driver for our rally) has the opposite effect on Japan, as well as our other trading partners other than China, who peg their currency to ours.  “There are still skeptical investors out there who don’t think the global recovery will be sustained and this is tempering the advance in equities,” said Allan Yu, who helps manage $4.24 billion at Manila-based Metropolitan Bank & Trust Co. “The market is trying not to run ahead of itself.”  

Europe is flatlining ahead of our open.  I said in yesterday’s post that either the Dax breaks over 5,750 and the global markets head up or the FTSE fails 5,250 and the global markets go down and they BOTH spiked towards those levels yesterday and today both are drifting along in between, so no commitment into their afternoon trading and we’ll need to watch closely.  EU GDP came in at 0.4% vs 0.6% expected but CNBC is telling us that the EU GDP has gone back to expansion, somehow omiting the part where it is a generally disappointing number.  That was of great help to the futures markets, which were up over half a point early this morning but now that real traders have come in (9am) it looks like we’ll be lucky to break even at the open. 

As I pointed out to Members yesterday, our tracking chart has gotten redder this week and we’re just going to be happy to hold the LOWER of our September highs OR the 2.5% lines from Monday’s opening chart today on 3 of our 5 indices to keep us a little less bearish (we’re going to be bearish no matter what) into the weekend.  Those levels will be Dow 10,119, S&P 1,095, Nasdaq 2,164, NYSE 7,131 and Russell 594.  We’ve already blown them all except the Dow so let’s keep an eye on that as well as that 43.50 line on the Qs (Nas 2,125ish) that MUST hold. 

We had great fun playing the Dow yesterday in Member Chat as we opened the day with the $101 puts at .55 and we quit those at .82 (up 49%) at the day’s end.  We also had great timing on the Dec $102 puts we sold to cover our longer DIA puts and hopefully we’ll get the opportunity for a repeat performance today. Our ERY and GLL plays paid off and, other than rolling some existing postions, we did very little yesterday as the action was exactly what we expected.  Today we’d love to see the selling cycle complete so we can buy a few longs but I think that, like Europe, we may flatline again and have to wait for Monday. 

Have a great weekend,

- Phil

 


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  1. Phil,
    Good morning. 
    Need your advise on ANF, I sold call@34 for $2 a few days when the same store sale is down 15.1%. now $3.8.
    With the ’surprised’ earning, premarket is 39 now. How can they pull a scam like announcing the earning being 44c while the ‘adjusted (translate REAL) is 30c!! 


  2. With that condo that fell over in China, maybe they could slash prices and start a marketing campaign extolling the virtues of living horizontally.


  3. balancenv – It seems like the "powers to be" have a new policy to allow "pumping" of earnings statements.
    "We don’t care what you do, just make it look good".


  4. I wonder what the crooks of GS will do now.  Did you notice in the list of Warren Buffets latest filings of his top 15 investments, the lowest (15th) largest was less than $0.5bn and GS did not make the list.  The canny fox appears to have divested off his GS investment that I was under the impression was well over $5bn while the MSM ‘analysts’ were pumping the price up.  Unless he is holding the investment somewhere else I think that is another sign the GS price should dive.
    What is your take?


  5. Wow, the balls on these people with their silly pumps in the morning! 

    We don’t need the Dec put covers on our DIA, those were just overnight protects. Naked March $103 puts is the way to go unless we get a proper move higher (and then the Nov puts sold as momentum plays are more fun). 

    As I said above, we’re watching Dow 10,119, S&P 1,095, Nasdaq 2,164, NYSE 7,131 and Russell 594, which is the only way we’ll get more bullish.

    FTSE below 5,250 is bad, DAX above 5,750 is good.

    Oil below $76.50 is bad (now $76) as is gold below $1,100 (bad, of course, meaning for the market – not us), sliver $17 and copper now needs to hold $2.90.

    I would like the DIA $100 puts again if they get back to .50 (now .65) on a spike up but not very interesting otherwise.  SRS is still a good upside play, you can sell Dec $9 puts naked for .75 ($8.25 net entry if put to you) or buy the $9 calls for .42 with a DD at .28 (.35 avg), which can be held over the weekend but, of course, a risky play


  6. Hi Fellows can any one explain the meaning of being Delta neutral and what is the advantage or disadvantage thanks


  7. Phil -  UUP Jan23/25 call trade idea yesterday – now is a "net even trade order"  Never had that happen, can you explain the risk?


  8.  Anyone…where to find the Michigan Consumer Sentiment Index today, and what time?


  9. LMAO…chaps virtues of living horizontally

    our next question comes from a hot blond valley girl, whats your question Miss. Bubblicious
    So like all the money that China is spending on infrastructure, including like the stuff CSCO does is just BS..is that why like all the companies that rely on China for growth like cant give too much guidance and say things like can turn for the worst again on a dime like

     


  10. lflantheman,
    try 
    http://fidweek.econoday.com/


  11. ANF/Balance – Well you know that rule about ALWAYS selling into the initial excitement?  A little late now but the power move there is to sell the calls at the top that are all premium to cover your entire trade and then put a tight stop on the original.  The $39 calls topped out at $1 (now .70) and you could have sold 4 of those to roll the $35s (and even covered with the .10 $42.50s if you needed to cap margin).  Those are the kind of things you need to look for if you get jammed.  Of course, keep in mind that is how we got in trouble in AMZN – sometimes the damn things down’t drop back!  You know it’s scam so selling into excitement is a good trade.  Now that things are calming down, perhaps just sell the Dec $36 puts for $1.20 (you have little to lose) and roll the calls to the Dec $37s ($3). 

    LOL Chaps – They don’t have to market in China, they can just tell people this is how new condos will be built…

    Buffett/CJ – It’s not a stock holding, it’s a loan with warrants so I imagine he classifies it differently.

    Delta Neutral for Yodi.

    Consumer sentiment 66 – Big miss after 70.6 last month and 73 expected.  A 10% miss shows you just how clueless the analysts and economists are who stand there on TV telling you how bright the future is for retail.  Idiots! 


  12. lflantheman ,
    try  http://fidweek.econoday.com/


  13. This is g-ds honest truth i just turned my head away for a minute and the market dropped 40 points!!! Is my streamer on the fritz


  14.  For a summary of economic data/calendar, I found fidweek.econoday.com/ is pretty good 


  15. Yodi:
    Delta is how much a derivative of a stock, like an option, moves for every $1 move in the stock. Through various tools/techniques, you can determine how much your overall portfolio, or part of it, moves – either on a $ basis or percentage basis – moves as a function of some index – like the Dow. That’s just another form of delta: how does this portfolio tend to move relative to an index.
    If you’re scared about a market pullback and are currently bullish, you could go delta neutral (or negative) by buying mattresses – without having to change your portfolio. Neutral would mean your portfolio is not correlated to the market, and should just sit there whatever the market does.
    We’ve been discussing a "delta neutral" conservative stock portfolio. In this case, we’d try to eliminate delta on the underlying stocks, and front-month straddles we’ve sold against those stocks, through mattresses so that we minimize getting hammered by a major market downturn – a risk when selling front-month straddles against owning the underlying stock. We’d focus on making money through the premiums on the straddles and the stock dividends. So we want to eliminate the upside and downside of the stock movement through delta neutrality.
    So there’s nothing inherently good or bad about being delta neutral. It’s just a tool you might employ to achieve a particular objective.


  16. By Paul Ziobro
    McDonald’s is operating from the top of the fast-food heap, Goldman Sachs notes, with a heavy dose of confidence that it can invest in its business at a time when peers are retrenching. “MCD has control over its own destiny and, in a disciplined way, is flexing its muscle to accelerate its leadership globally,” Goldman writes. Firm expects MCD to grow share and achieve better returns on its investments. Re-imaging stores could give each one up to a 7% boost in same-store sales. Firm also thinks MCD getting Dollar Menu at breakfast would be overall positive.

    The pimping of Dow stocks continues


  17. If things are soooo great…..why are all the December Futures on the major indicies…at a discount to cash????


  18. Are they crazy? With Consumer Sentiment so bad, and we still have $TICK to 600? 
    Talk about irrational exuberance!
    Economic calendar, this is pretty good fidweek.econoday.com


  19. This is crazy, with such poor sentiment data, DOW is still up??
    Talk about irrational exuberance!


  20. btw, http://fidweek.econoday.com is pretty good with economic data/calendar.


  21. BA more problems i have a bad feeling about that plane

    As Boeing raced to implement a remedy this summer, it discovered another issue with the composite material in the plane’s wings, according to internal company documents and a person familiar with the matter. Metal bolts inside the wings of one of the six test airplanes were found to have slightly damaged the surrounding material—causing so-called delamination, or cracking—the documents show.
    http://online.wsj.com/article/SB20001424052748704576204574531651711236212.html


  22. Yodi:
    simple explanation of delta nutral:
    it is two major forces which change price of option: Time force and Price force (moving of price of stock itself)
    if you are a premium seller (playing of Time force) you need to do something with Price force( try to zero price force)
    you can do it if you short the market somehow , this is the consept of delta nutral strategy


  23. Only 8 dow stocks red aa ge hp hd jpm pfe t vz


  24. Here’s the pump to sell into.


  25. UUP/Concreata – I don’t know what net even trade order is – did I say that?  My plan on UUP is to buy the Jan $23 calls (now .35) and sell the Jan $25 calls (now .05) for a net .45 spread on the hopes that UUP jumps up and pays us off.  Since the dollar is down we can now offer .30 for the Jan $23s and then offer to sell the Jan $35s at .20 to bring our risk down to .10 on the $2 spread (but we are thrilled to take .50 off the table)

    Nov. Reuters/UofM Consumer Sentiment: 66 vs. an expected 71, and sharply down from 70.6 two weeks ago. Expectations dropped as well, to 63.7 from the previous 68.6.  It’s beginning to look a lot like Christmas

    Oct. video game sales: -19% to $1.07B, vs. -11% expected. Hardware -23.3% to $381M. "The continued economic turmoil, and in particular the troubling unemployment rate, is undoubtedly impacting industry sales," NPD’s Anita Frazier said.

    Nov. Reuters/UofM Consumer Sentiment: Confidence took a tumble "due to the grim financial realities faced by consumers as well as weaker economic prospects for the year ahead – importantly, the decline in confidence was already in place before the announced increase in the unemployment rate to 10.2 percent on Nov. 6."

    Watch out, says Hong Kong leader Donald Tsang; the next crisis is coming from the Fed’s zero-interest-rate policies: "I’m scared and leaders should look out … America is doing exactly what Japan did last time." He thinks a dollar carry trade fueled by cheap currency is inflating an Asian asset bubble.

    Q3 euro area GDP: Quarterly: +0.4% vs. +0.6% expected and -0.2% in Q2. Yearly: -4.1% vs. -3.9% expected and -4.8% in Q2.  Germany and France – the region’s #1 and #2 economies – undershot this morning. Germany Q3 GDP was +0.7% vs. +0.8% expected and +0.3% in Q2. France Q3 GDP was +0.3% vs. +0.7% expected and +0.3% in Q2.

    Forbes’ powerful-people list has the usual government suspects at the top (Obama, Hu Jintao, Vladimir Putin), but the top financial exec may be a bit of a surprise: No. 16 Laurence Fink of BlackRock (BLK) – which after completing a merger with Barclays Global Investors (BCS) will control nearly $3T in assets.

    Fritz/Kustomz – Don’t worry, it’s all back now.  Just don’t turn away again!

    Pimping/Kustoms – GS also gave GT a huge upgrade this morning.  Notice how they are targeting segments that need boosting to give the market some gas. 

    Futures/Rap – Good catch!

    DIA $101 puts at goal.  If they head higher I DD at .40 or less and sell the $100 puts (now .33) for .25 or better to drop to a .25 or less spread into the weekend.

    BA/Kustomz – That kind of stuff always happens. 

    Volume at 10:20 is just 32M so very easy to stick. 


  26. Phil, the warrants have phenomenal value as he had negotiated a strike price that were deep in the money very quickly, wouldn’t they be classified as assets and declared in the SEC filing?


  27. chaps & tchayipov  thanks for the explaination
    Let us use a typical example using GS say holding 500 shares at a given price now 176.58 sell 5 Dec straddle 175 for 14.20  you covered 160.73/189.27 how do you set up your protection or so called mattress ?


  28. Sector ETF strength early on: Solar– TAN +1.1%. Clean Energy– PBW +1%. Healthcare Providers– IHF +0.8%. Cons. Discretionary– XLY +0.7%. Coal– KOL +0.6%. Gold Miners– GDX +0.4%.
    Sector ETF weakness: Oil– USO -1.3%. Heating Oil– UHN -1.2%. Gasoline– UGA -1.2%. Commodities– GSG -1.2%. Regional Banks– RKH -0.5%.

    Dow leaders early on: DIS +3.9%. MRK +1%. MCD +0.9%. DD +0.9%.
    Dow laggards: JPM -0.9%. AA -0.6%. HD -0.6%. GE -0.5%.

    Warrants/CJ – I don’t think they have to be as they are connected with an unpaid debt obligation.  It just means Buffett would book a huge gain if he exercises them which, of course, is probably his plan (can make up for  a bad BRK quarter any time he wants to).


  29. Phil: I thought you buy DIA$100, this is what I did @0.32, how you recomend to play it if market go higher?


  30. Game of hot potato anyone?
    This should be interesting, the potato is red hot. Whos going to get burned?

     BofA-ML ups 2010 U.S. crude forecast to $85 bbl vs $75
    * Expects oil demand in 2010 to be above 2008 levels
     
    * Oil price at risk of spike above $100 in 2011

    Everywhere you look nothing but bullish(SHIT)ness

    The weak US dollar has pushed crude oil prices $20-$ 25 a barrel higher over the past couple of years, Exxon Mobil’s Chief Executive


  31. Phil Must be still lagging behind on the Dia holding Jan 105 put for 5.15 now 4.95 and sold 1/2 dec 102 put for 2.51  where am I looking for?


  32. Yodi:
    you shouldn’t hedge just one play, you should do it with all of your long positions (portfolio)
    go to yest. discussion, it is explanation there how to do this


  33. Yodi: That position costs about $814 net and has a delta of about 436. That means your position changes about 54% (436/814) for every % change in GS stock. You want to convert this delta to a DIA basis, since mattresses are based on the DIA. You use beta to do this. GS beta is about 1.4 while DIA beta is about .97 (let’s say it is 1).
     
    So your position will change about .75% (.54% x 1.4) for every % change in the DIA. Yesterday we determined that Phil’s current mattress strategy changes about 6.7% in the opposite direction of every % change in the DIA. So you’ve got the two pieces to determine how you’d go delta neutral on your position.


  34. Thanks tchayipov will look in to this I take it you just cover your stks not your options ?


  35. typo: "54%" should be ".54%"


  36. Wow – 3.8Tn cubic feet of Nat gas in storage.  The US uses 2.1Tn feet all winter!  That’s getting close to an entire year’s worth of demand in storage with another year to build it up next year.  Nat gas is under $4.50 again ($4.39 now) and we’ll see if $4.25 holds for the day.

    This is not helping oil either and that is down to $75.66. 

    EU markets getting a big stick in their last hour.  FTSE hit 5,250 and then jumped up like the floor there was electrified.  I think that’s what this whole spike is about – keeping the FTSE from failing

    DIA/Tcha – Sorry, I meant the $101s that we bought yesterday with great success.  Not a big deal as they are still .31 so you can just offer .29 to roll up if you want to be in the same position.  You may even get the roll for .25 if we break 10,250 here. 

    DIA/Yodi – Well if you can buy back the Dec $102s for $2.25 or less (now $2.31) that’s the way to go and then we have to see where we’ll be for the weekend.  There’s no urgency to buy it back, most likely it’s the same coverage we’re going to go into the weekend with. 


  37. Chaps… Living horozontally… good laugh – Still beats living upside down.  BTW  What do you think of Peter D’s short strangle on the SPX. I like it, but still working with the strikes.


  38. President Barack Obama has come halfway around the world to personally deliver the message to East Asia that the global economy can no longer count on the U.S. consumer to keep it afloat.  In what White House aides call a "major address" here on Friday, and in planned comments in Singapore and China next week, Mr. Obama will press his push to "rebalance" the world’s economy, urging China to adjust its economic policy to spur domestic consumption as the U.S. encourages less consumption, more savings and more exports.

    The balance of trade, ex-OPEC and China, has actually improved – suggesting that the fixes are resolving the deficit with China and reducing the oil bill. With Obama and Geithner in Asia, oil is the issue not getting a lot of attention, but it will if crude prices rise once more.

    EIA Natural Gas Inventory: +25 billion cf vs. an expected +15 Bcf. Inventory’s at record levels, more than 10% above last year’s stores and 12% above the five-year average. Natural gas futures +0.7% to $4.402.


  39. What is the jam up on this one – 100 point swing on S&P?


  40. I’m back!
    Is Phil still calling for $2,000 Gold?  If so, is there a target date?


  41. Crazy …. bad data; overbought market; no volume; GS revises GDP down by 0.5%


  42. Short SPY here; let’s hope this is at or near top for today


  43. Phil,
    Sold DIA Dec 103 C, any suggestions to protect or just buy back.


  44. Level check (this is where we expected to be on a bull run):  Dow 10,119 (+162), S&P 1,095 (-1), Nasdaq 2,164 (-3), NYSE 7,131 (-12) and Russell 594 (-11).  Interesting how the S&P, Nas and NYSE are all together but our canary index is having the most trouble. 

    Hey Prof!  I’ve gone short-term bearish on gold as this run is very dollar-based and I think the dollar comes back soon.  If gold goes back to $850, I’ll be backing up the truck though. 


  45. yodi:
    I screwed up the math in your example (what else is new?). .54% is the change in your position for every $1 change in GS price. With GS priced at $177, GS’s price moves $1.77 on a 1% change. So your position changes about .95% (.54% x 1.77) for every 1% change in GS’s price.
    So use .95% instead of .54%, and hopefully the rest is right. (This is why I build spreadsheets.)


  46. Hey Phil!  Great community you’ve built here :)
    Are you familiar with the CAN SLIM stock strategy developed by IBD’s William O’Neill?
    If so, what is your opinion of this strategy?


  47. Hi Phil, I have sold CAL DEC 15 @ $1.20 any thoughts pls?


  48. gel: Haven’t looked yet, but I will. Did you see my early morning post on CFSG, referring to your CGA position?


  49. cap / SPY
    I really think they want 1105 today !!


  50.  AMZN appears to me to be set for a near-term correction.  Not participating  in this morning ‘rally’ of sorts.  


  51. iflan – i have been watching from the sidelines but AMZN looks like a real widow maker.  If it tries to correct one of the big 12 will give it a upgrade and you will be left with a lovely jailhouse hug.  AMZN is like ICE – i wanna short or buy puts but the competing interests seem to great.  IMHO of course.


  52. UUP jan 23 are .25 cent now, buy you think things will go lower ?


  53. SVA bad news, some of us are in it.


  54. Thanks chaps I copied all this and will have some reading over the week end


  55. Thoughts on SIRI hitting or approaching $1 before year-end? Better than expected earnings report (broke even) but have concerns about their balance sheet & increased competition. Didn’t expect much from the iPhone SkyDock.


  56. Sinovac Biotech Hearing weakness attributed to Chinese news report circulating about possible deaths related to H1N1 vaccination – Xinhuanet reports Health Ministry reported two Chinese people have been reported dead after they received vaccination against the A/H1N1 influenza, but said experts have


  57. steven, that is unfortunate – there are so many misconceptions about vaccines – this will only make things worse.


  58. Sold some iron condors on AAPL, ICE. They’ll work if we stay propped at these or slightly higher levels next week.


  59. Good Morning!  Phil, Any thoughts on IRDM?  Thanks and Happy Friday the 13th!


  60. Very interesting note from Dr. Charles Laser re my Goldman oil article:

    I have been engaged or around the oil business for fifty-five years and am one of America’s leading wildcatters as referenced by a person from one of the five largest oil firms in the world whether true or not. First of all peak oil is a reality, only meaning that at a given time in history we reach a point where EXISTING oil fields have reached their peak production. It does not mean we are running out of oil. In fact we probably have enough oil to last many thousands of years since we have drilled less than 1/10 of 1% of the earth and I agree with astrophysicist Thomas Gold and Astrophysicist Stephen Soter that oil and gas is not necessarily a fossil fuel.

    Hydrocarbons and in particular methane, the main component of natural gas--has been found on Jupiter and the moons of Saturn. We will never run out of oil, however it is economics (the cost to drill and find it) that creates shortages. When the prices are low we do not explore. When the prices are high we explore and we ALWAYS find just enough oil to meet demand at any time in history. When prices dropped in 1986 virtually all exploration in the U.S. stopped as companies went overseas. For example we have spent eighteen years and millions of dollars doing studies in Nevada USA (which has the two largest continuous oil producing wells at a high rate in fifty years), and we have found that we have the same exact conditions for giant oil production as the fields in Saudi Arabia, Iran or Kuwait. In several years you will see massive oil and gas fields (resource plays similar to the Bakken shales) larger than anything found to date in the United States due to multiple thrusts, horst and graben systems similar to Saudi fields. The organic content (TOC) in Nevada is similar to the giant fields in the Middle East. 

    Dr. Charles Laser Deerfield Beach, Florida

    See, I’ve been saying this for ages and I’m always getting shot down by oil "scientists" who freak out if you try to say oil is abiogenic.  If oil is a naturally REcurring geological process, then the whole concept of peak oil is a total joke.  I love it when actual wildcatters point out that they have wells that run for decades – long, long after the "experts" tell them that the oil will run out.  Outside of the theory that dinosaurs sneak into the well at night, die and dissolve into fuel the next morning, the simpler explanation is that more oil is being created somewhere beneath the field they discovered.

    DIA/Jom – Well I’m 100% short and added the Nov puts at this spot.

    CAN SLIM/Prof – Very valid way to trade fundamentals as an overview but you can’t take the numbers for granted anymore so I think it’s good for identifying a list but then you need to use your macro head as well. 

    CAL/EMC – We WANTED to own CAL at $13.80 and it’s now $13.65 so I”d say don’t worry, be happy at the moment.  Since it looks like you will have the stock put to you at $13.80, you can lower your basis to $12.80 by selling the Dec $14 calls for $1 but then you’d better buy the stock to cover if we actually do break over $13.80 or you may get burned by the caller.  Working into the buy/write like that would put you in (assuming you trigger in at $13.80) net $11.60/13.30.  If CAL finishes over $13 but under $15, you get called away with a $1.40 profit on half and have another round put to you at net $13.30, even better than planned and you can then sell Jan or March puts and calls to drive the basis lower. 

    AMZN/Jo – You are right, it is very similar to ICE.  Up and up at all costs. 

    UUP/Micro – Sure, that bet started because someone else took a $3M risk selling the Jan $29 puits naked for $6.30 yesterday.  We’re just speculating that they might know something.  Maybe they do, maybe they don’t but UUP is at $22.36 now and the Jan $23 is now .25 and UUP was $23.60 3 months ago in Aug so it’s not a huge stretch to imagine they can make it back to $24 and pay me $1.  You can’t take positions in ultra-ETFs and worry about it going the wrong way on you – they can swing back and forth 10% in a day and we’re going to own these for 3 months so it’s not much of a stretch to imagine they may go down severely.  In a bet like this, you pick a spot and stick with it and it works or it doesn’t. 

    Oil up to $76.50, Gold back to $1,115 – tempting to reload on GLL but not over the weekend, when anything can happen. 

    SIRI/Llorens – I like them very long-term but no idea where they will be in Jan.  That stock does whatever the traders need it to do.  Generally, we like to buy them on dips but we haven’t touched them since they were .40 and almost doubled.  They touched .50 in early October but came back so fast we missed that entry.  You can buy the Jan $1 call for .05 so let’s say you were going to buy $1,000 of SIRI hoping to make $300 by Jan and planning to stop at $900.  You can just take $100 and buy 20 Jan $1 calls for .05 and offer to sell 20 Jan $2.50 calls for .05 which, if it hits (doubtful), gives you a free ride.  You can also offer to sell 10 Jan $1 calls for .10 and if that hits, you have 10 free calls and if they make it to .30, you make $300 as it’s essentially the same 1,000 shares you wanted.  A good run to $1 by Dec 31st should get those calls to at least .15. 

    Condors/Eric – That’s a dangeous thing to count on (staying up here next week).

    Outspoken Ryanair (RYAAY) CEO Michael O’Leary reacts to the British Airways/Iberia merger: “It reminds me of two drunks leaning on each other. If you put one high-fare, loss-making airline together with another high-fare, loss-making airline, you will get an airline with higher fares making much bigger losses." Ryanair is Europe’s #1 discount carrier.

    Get used to bubbles: "There’s something about the current stock market environment that brings to mind words sung by the Who: ‘Meet the new boss, same as the old boss.’ "

    The good news for Cadbury (CBY) is the number of hedge funds suddenly snapping up its shares. The bad news is the number of hedge funds snapping up its shares: "Obviously the less long-term holders on the shareholder list, the more difficult it is for Cadbury’s management to persuade people to hold on for the five-year view."

    Noon volume looking like a very low 65M, maybe 70M if we have a good 15mins.  Seems like another AM stick day that is likely to trail off inot the close. 

    FTSE finished at HOD of 5,292 (up 0.3%), DAX at 5,687 (up 0.4%) and both were rescued from the day’s low in afternoon stick saves at the same time as we had ours.  So I have to think this is still just a bunch of nonsense but they can keep the nonsense up for quite a while, can’t they?


  61. JRW /// 1095 seems to be the top on SPY  (109.80).
     
    Scalped SPY twice for pocket change (.15 cents each time).
    I do think we get a selloff; I just don’t want to wait around for it.
    May get short again if they jam it up again; but chart is looking like I may not get the chance.


  62. I can’t believe I have never heard of the abiogenic theory of oil before. thankyou for mentioning this. I am beginning to finally believe in conspiracy theories!


  63. "If oil is a naturally REcurring geological process, then the whole concept of peak oil is a total joke"
     
    Phil, I think there is an ambiguity or misunderstanding in the term ‘peak oil’. In many common uses it refers to the possibility that oil extraction rates may eventually fail to keep up with demand, which is quite different from saying known reserves may or will run out. In this sense of the term, if oil demand over a given time period is d, then even if ‘proven reserves’ are many multiples of d, you could still have a peak oil situation if the extraction rate couldn’t match d. This could happen because one can’t extract oil at an arbitrary rate — there are real limits as to how fast oil can be extracted from a field. If you try to extract it too fast, you can permanently damage the oil field (e.g., by over-pressurizing it and spoiling the oil).
     
    I have no position on the peak oil debate, and frankly can’t see how anyone (with the possible exception of some Saudi-Aramco engineers) can claim any certainty about it. But it’s worth clarifying that ‘peak oil’ does not, in many common uses, mean ‘running out of oil’.


  64. Agree on the condors Phil, but I have pleny of bear cover.


  65. Phil,
    did you see my 11am post?
    Thanks


  66. Phil,
    Sorry I see it now


  67. Short $SPY again 109.72.
     
    Looks like energy pump is the latest rolling squeeze to pump things a bit.


  68. Chaps… Just retrieved your early morning post re CFSG/CGA – I will check out CFSG. A few weeks ago I started to liquidate some of my slow moving positions that have me bored, and I will be entering a lot of new positions that have much of their business or are located in Asia. I have some associates that concentrate on investments in this high growth geographical area, and they pass along some of their better pics to me. They are very careful in deployment of capital, and before making a move on a stock they visit the facilities, and enter into a very close personal relationship with the management. This is a lot of careful due dilligance, time consuming for sure, but considering their investment level, is prudent. I personally believe in Asian equities, and have over the past few years done very well. I will pass along some of these "hot opportunities" as they surface. Also… I believe the USD will be weak for a loooooong time vs the asian currencies, which along with growth rates of the asian economies, adds to the appeal.


  69. Volume only 65M at noon.

    IRDM/1020 – I didn’t even know they were still solvent!   I have no opinion on them, they are just a very expensive penny stock with a float of just 1.6M shares that are half owned (officially) by insiders so the stock is worth whatever they want it to be worth for the most part.  Damn, I forgot it was Friday the 13th, could have had a whole theme post on that one…

    Peak oil/Eric – Well it depends who’s arguing it but that’s my theory as to why the Saudis are so secretive about their oil reserves.  Peak oil people like to say it’s because they are being depleted/at peak capacity but it’s also possible that the damn stuff is just pouring out of the ground and they don’t want people to know how much they really have.  Any commodity can be over-extracted, I would think that’s a given but it would be nice to be able to treat oil like a global resource so the G20 (as if they could accomplish anything real) could actually sit down and plan growth according to what’s realistically achievable.  Lacking that, expect price spikes and falls on a regular basis which, in a rational world, employ natural brakes and gas on how fast we can grow but speculation and the black-box treatment of the supplies throw the whole thing out of whack and cause us to have a very poorly organized global economy.

    So close and yet still no cigar on our watch levels!


  70. I think that production of oil from chip fields (less than $10) is declinenig, oil companies, to keep production level must go to offshore and up north where production cost 40-60$, so I think that oil shouldn’t drop below this level in long term


  71. Wow, nailed all 3 at the same second:  S&P 1,095, Nas 2,164 and NYSE 7.131 – how’s that for targeting?


  72. If you sold the DIA Nov $103 puts as a mo play (now $1.05) failing 2 of those 3 levels is now the stopping out point.  You can also sell the DIA Nov $104 puts now for $1.65 and use 2 of the 3 breaks as a stop and go for another .25 or so profit.


  73. Phil, what are your thoughts on WIN for a buy write?  options only go out to May – but it has a 10% dividend.  Also, what are your thoughts on BA here?  They should go ape when the dreamliner flies.  Sounds like they are determined for end of the year.    Thinking about selling BA Jan 2011 45 puts for about 8 if  BA does drop – which it probably will due to a gazillion reasons.


  74. I’m confused.  A few posts ago I thought I read that you are 100% short in DIA.  Is that still the case or has this latest spike changed your short term view.  Sorry – still getting used to the shorthand.


  75. Dollar getting killed … explains a lot !


  76. Phil: did you DD of DIA $101 @0.40? when you recomend to sell $100s at .25 or better? now or at the end of day?


  77. This has been a very confusing DIA day.
    Shall i hold on to the Nov $101 long put which i already rolled up from the $100? Then also enter the Nov $104 short put?
    Sorry i misunderstood.


  78. HI Phil I entered in to the MSFT jan straddle a short while ago sold Jan 26call for 1.49 and put for 1.14 regret Msft is climbing  close to 30 any good suggestions ?


  79. Phil
    I am looking at a private placement investment that involves oil drilling in the Bakkan. This area is huge – large parts of N & S Dakota, Montana, Saskatchewan. The proven reserves are 500 Billion BBL, and at today’s price of oil is very profitable to recover. Other than the current administration’s dislike for oil usage, there should be little worry about shortages anytime in forseeable future.



  80. Man, I am so tired of this low volume bullshit manipulation.


  81. UUP down more than 2.1% .. insane … Obama and Timmy doing a wonderful job w/ the dollar.


  82. i guess this m arket will never go down for more than a day or two,,, where is all the buying coming from?
    after a 70% up move in the Russell smalll caps and 60% in the SPX, don’t you think we need to consolidate more than a few days, and actually drop a little to digest that kind of a move, or is the seasonality of buying so strong now, that we will march on higher and higher?  don’t know, but would love to get some kind of perspective on this….thanks
    and SRS is never going up ever …


  83. Small-company valuations have risen to a 13-year high, giving some investors a reason to look for value in bigger firms. The S&P SmallCap 600 trades at a P/E of 34 – 56% more than in the S&P 500.

    WIN/Jo – They look strong long-term.  Not very thrilling premiums to sell but as long as you are scaling in, why not?  BA doesn’t thrill me at $50 as a new entry but hitting the 200 dma at around $44 is a great entry.  I agree with the put selling idea and your logic – they’ll find some reason to drop, they always do.

    DIA/JCM – Yes, I went short too early but now we have our levels so we can re-short with the higher puts and set stops back at the breakouts.  These are very day-trady positions (the front-month DIAs) so we pop in and out of them all the time scalping dimes.  The March $103 puts are the only ones we really care about and they are STILL $5.55 and can now be rolled all the way to March $105 puts so offering $1 for that is worthwhile and then we could even keep the Nov $103 covers (or at least half) if we hold these levels.

    Poor Dollar – $1.49 to the Euro, $1.67 to  the pound and 89.5 Yen

    DIA/Tcha, Morx - Now a spread of $101 puts at .50 and $100 puts at .25.  No DD yet as they keep getting cheaper but basis is net .25 so I really don’t want to buy more for more than .25 now and, for .25 I can roll to $102 puts, which is better than a DD so that’s the move I’m looking at.

    Keep in mind, you only get these cheap prices when the market is going against you!

    MSFT/Yodi – You collected $2.63 on the pair and the Jan $26 calls are now $3.85.  I would take out the putter at .25 (he’s useless now) and see how MSFT handles $30.  If they get through and look to go higher, you can split the caller (probably $4.30 by then) into the $29 calls and $30 puts for about $3.50. 


  84. WIN/Jomama… I have been in WIN for a long time, and consider it to be terrific as a Buy/Write – good dividends and they have a very stable safe position in their niche market that will continue to grow. My short November straddle expires next week worthless. I will be writing a short strangle today on my shares for more premium income.


  85. Man, this is crazy volatility!


  86. is it time to buy the bearish etf’s again with the stick save?


  87.  
    Hi Chaps
     
    I am still grooving over the Deltas below you take a delta of +500 and refer to a portfolio value I take it on shares only of 100,000 My question is how do you find your delta on 100,000 ??

    chaps
    November 12th, 2009 at 11:17 am | Permalink  

    cwan:
    tchayipov is right. Here’s how I think of it using our mattresses as covers using tchaypiov’s +500 delta when measured against the DIA. Let’s say that your portfolio’s net value is currently 100,000. That means your portfolio moves approx .5% (500/100,000) for every 1% movement in the DIA.
    Now take whatever Phil’s current mattress strategy is (say, it’s March 103 DIA puts half covered with Dec 100 puts). If I buy 10 March 103s and sell 5 Dec 100s, that costs about 4,950 and has a delta of approx -331. That means Phil’s current mattress strategy moves about 6.7% (331/4,950) in the opposite direction for every 1% change in the DIA.
    So to balance things out, for every $1 you invest in your portfolio, you’d invest about $.075 ($1 x .5/6.7) in mattresses.


  88. Phil, are you still holding RAD?


  89. Bakkan/Gel – There’s really no drilling, it’s more a question of is the government going to let them strip-mine those states.   Those Canada shale projects make a huge mess and require a lot of up-fron infrastructure.  At some point, extraction will become more viable but don’t hold your breath.   Even Canadian sands remain an iffy investment (see SU) but are a better way to play shale than chasing private placements.  

    Consolidate/DMan – One would think but, like I said on Monday, it’s like 1999.  No matter how silly you think the values are getting they find a whole new batch of idiots next week to sell to.  On SRS, as long as you own the underlying and SELL contracts, you are fine.  Even if it goes to $2 and you sell .10 per month in contracts, it’s still a $1.20 a year return on your $9 investment. 

    Bearish/Lynn – Not if we are over our levels, too dangerous.  If the RUT makes it the rest of them can use that as a signal to zoom higher.  I do feel we go back to 10,000 but when is a mystery.


  90. Hi
    Phil the move on MSFT you suggested I set up and it remains with the same net loss as if I close the position
    MSFT/Yodi – You collected $2.63 on the pair and the Jan $26 calls are now $3.85.  I would take out the putter at .25 (he’s useless now) and see how MSFT handles $30.  If they get through and look to go higher, you can split the caller (probably $4.30 by then) into the $29 calls and $30 puts for about $3.50. 


  91. phil,
    I have a phd in mathematics and physics as well as one in electrical engineering and i own and operate oil wells here in texas and am licensed to drill wells at will.
    the independent drillers here would drill anywhere and anytime that they believe a reasonable probability exists that they will strike a productive pool.
    Each and every year we must drill deeper and with diminishing probability of success here in texas.
    believe me that we would move in droves to nv if it were another virgin saudi arabia and no force short of their national guard would stop us.
    The statement by this dr laser that since methane exists on saturn’s moons (which it does) then it logically or scientifically follows that we will never run out of oil here on earth is  just pure bunk and not worthy of this site.


  92. Phil Again MSFT if I roll the jan 26/26 to april 30/30 I lend up with +- 0.00 With the risk obviously MSFT goes up again


  93. Phil – I have ISRG Jan 280 at $7.70 (now $13.40) covered with Nov 260 at $8.30 (now $15.10). The delta for the Nov 260s is now twice that of the Jan 280s and is starting to hurt. Seems like it has broken out.
     
    Should I wait it out until next week or make adjustments now? Does rolling out the Nov 260s to 2x Nov 280s (now $9.80 for a total of $19.60) sound right? or, is it better to split it to Nov 280 puts and calls for a total $18.30?


  94.  ISRG – Sorry, I meant to roll out to Dec’s.


  95. Highlander, isn’t it curious though? If there’s methane on Saturn’s moon, how did it get there? Dead dinosaurs sounds unlikely….and if dead dinosaurs didn’t put it there then why is this our explanation on earth? I find this really curious…


  96. Phil, do you recomend to put 1/2 DIA cover back now?


  97. Stunningly low volume …. turn off the computers and the market just sits there !


  98. Highlander,gel1 Looking at a private placement for E-T Energy. Need opinion
    TheEnergyNews


  99. Its so low that HAL 9000 can just fire off SPY purchases every few minutes to prop things up.  Like it just did.


  100.  Bummer, I’m still short ANF (two months running) and still getting pummeled, who’s buying their stuff?  It’s a recession for Pete’s sake and I this year my kids buy their clothes at Target …


  101. sp,
    methane is one of the simplest and least complex hydrocarbons in existence. they existed on earth prior to and actually contributed to the evolution of life. such pre-mordal soups can be recreated in any jr college chemistry lab.in essence  just add water, carbon dioxide and energy and shake well.
    oil is not methane, it is extremely complex (as complex as other life matter) and does not naturally occur in any simple bonding of hydrogen and carbon.
    oil is not methane and methane is not oil. methane occurs mostly here on earth from the breakdown of organic material. ask any farmer who has been killed by it when working in a green corn silo. or the college clown who has lit his own flatulence.


  102. I am watching a bunch of stocks and they are simply not trading …. amazing and shows how bogus this whole market really is.


  103. Phil,
    Do you close out the HGSI artificial buy/write or does it "expire?"


  104. They are jamming these higher prices down the throat of traders, sooner or later all those shares will be regurgitated. If GS doesn’t participate this afternoon expect a sell off


  105. Hi Phil I think you might hate AMZN by now but still my question sitting with them Apr 115p short sold for 10.23 now 7.85 and Apr call 135 short sold for 10.17 now 13.40 do you think I need to roll the call up as the climbing on fresh air?


  106. thx high


  107. Highlander, I agree, I’m petrolium engineer, and this is what I got from school


  108. Selling some ANF iron condors too, shorting the 40 straddle and buying the 37.5 and 42.5 for 1.50 credit against 1.00 risk. This is against another bearish position there. Again, since there appear to be no sellers it might sit here for awhile, even though the price is silly.
     
    Very tough week to trade but at least the condors and other short theta trades are working.


  109.  Phil, Is SRS at a great buy point for several day trade?


  110. Wow – narrow range  – SPY is like watching paint dry.


  111. stockburn,
    even if it is an efficient process(and it seems not to be), how can it be more efficient than just strip mining the sand and then just  using its own energy to boil more sand to produce product to sell. it is a low btu product that stinks and literally plugs the arties of all known refinery process in existence .
    sweet texas crude btw literally smells good, has a very low density with a high btu and is highly aromatic, the sands product is as thick as sewer sludge and reeks of sulphur.
    alberta is a lot like west virginia. who continues to hang onto the belief that some miracle technology will suddenly occur and allow their high sulphur coal to compete with wyoming’s much superior (higher btu)  and cleaner ultra sulphur coal.


  112. stockburn,
    even if it is an efficient process(and it seems not to be), how can it be more efficient than just strip mining the sand and then just  using its own energy to boil more sand to produce product to sell. it is a low btu product that stinks and literally plugs the arties of all known refinery process in existence .
    sweet texas crude btw literally smells good, has a very low density with a high btu and is highly aromatic, the sands product is as thick as sewer sludge and reeks of sulphur.
    alberta is a lot like west virginia. who continues to hang onto the belief that some miracle technology will suddenly occur and allow their high sulphur coal to compete with wyoming’s much superior (higher btu)  and cleaner ultra sulphur coal.


  113. stockburn,
    even if it is an efficient process(and it seems not to be), how can it be more efficient than just strip mining the sand and then just  using its own energy to boil more sand to produce product to sell. it is a low btu product that stinks and literally plugs the arties of all known refinery process in existence .
    sweet texas crude btw literally smells good, has a very low density with a high btu and is highly aromatic, the sands product is as thick as sewer sludge and reeks of sulphur.
    alberta is a lot like west virginia. who continues to hang onto the belief that some miracle technology will suddenly occur and allow their high sulphur coal to compete with wyoming’s much superior (higher btu)  and cleaner ultra sulphur coal.


  114. Phil
    I have Nov  GLD 103 callers at 2.65 as half cover for Mar 98s. What roll do you recommend?
    Thanks


  115. Phil:
    Re Bakkan… The big boys are already drilling in the area, with the blessings of the local government (Hess, Encore, Conoco, etc.) There is no stripping as in the SU methodology, but they drill straight down from the surface, and once they hit the oil reserve, the drilling is horizontal and they keep going. The technology is proven and environmentally safe, regardless of Al Gore’s opinion (didn’t he invent the color green?) The government must feel there is still benefit to this kind of investment, as the IRS still allows lenient write-off tax treatment, and I do not believe Americans will accept the idea of driving around in unsafe battery powered fart-carts any time soon, so the demand for oil derivitives will prevail.


  116. sorry about that triple post, the target server seems to be booged down


  117. All the oil arguments are dependant on theory,  thing that’s factual is the oil markets are driven by loose money and speculation.


  118. All the oil arguments are dependant on theory,  thing that’s factual is the oil markets are driven by loose money and speculation.


  119. Cap: HK is touching its 200 day MA and the RSI is pitifully low, are you ready to back up the truck on this one again?  I’m closing the covers and thinking about getting more longs…


  120.  Anyone…..We’ve talked about this before, but just to revisit it very briefly……..tdameritrade does not allow me to do spreads in my IRA account, even though no margin required for most.  Does anyone allow this level of trading in such an account?  Sorry to post this during the day, but my frustration with this matter is such that I’m prepared to transfer this account this moment  if I can find an appropriate broker.   


  121. RAD/Morx – Unless they fail the 200 dma at $1.13, yes.

    MSFT/Yodi – ???  You take in $2.63, now you spend .25 to take out the putter so net $2.38 collected against the Jan $26 caller that is $3.85 so we are starting with a $1.22 loss.  if you roll the caller at $4.30 to the $29 calls and $30 puts at $3.50 you will have to pay another .80 so you have net $1.58 in cash collected and then you have to hope MSFT expires between $29 and $30.  If you aren’t intending to stick with the play long-term and roll from there, then there’s no point but there’s no magic fix that’s going to make it all better in one roll, especially in the same month.  The idea is just to re-target and try to break even, which you do on that play between $28.50 and $30.50 rather than taking $1.22 out of pocket now and giving up.   That’s your call to make.

    Methane/High – I just think he’s saying that since methane is a naturally occuring gas that does not require the breakdown of biological matter then there is a strong probablility that there are far more hydrocarbons to be found in the earth than is currently thought.  Some places may naturally produce more oil all the time and some may be pools from long dead deposits that formed however they did.  Like active and inactive volcanos, some deposits may replenish themselves and some do not – we are pretty sure the ones in this country do not as we’ve pretty much drained them dry over the past 100 years but that doesn’t mean none of them do.  I think regardless of whether oil is limited or not, we need to stop using it for geopolitical and environmental reasons. 

    It is possible to get 1/2 of our energy from the sun, maybe more.  Then we should – end of story.  It doesn’t matter what it costs or how long it takes, we are using 20Mbd of oil and that number will probably go up over time and oil will get more expensive over time so replacing 10Mbd of consumption saves (at $75 a barrel) $273Bn a year.  So what if we spend $1Tn to get there?  If oil goes to $150 a barrel we’ll be saving $500Bn a year.  Also, of course, the act of saving 10Mbd will keep the remaining oil cheaper and if we perfect and export that technology, we can have a nice chunk of the worlds $2.5Tn (current) annual energy spending going to US solar companies.  How is that not worth a $1Tn investment?  It sure beats throwing it down a sinkhole for the financials…

    We don’t even have to borrow the $1Tn, we can charge .50 per gallon of gas used and that’s $76Bn a year.  We’ve already proven we can pay $4 a gallon for gas so, while it’s $2.50, slap a .50 tax on it for solar development.  They only put up $10M and 20 different teams are building person orbital spacecraft – imagine what we could get done dangling a $10Bn annual prize for the best solar solution in America…

    ISRG/Pyern – You had a .60 credit spread that is now $1.70 and your caller has just $1 in premium.  That’s the bottom line.  Are you bullish or bearish into next week and what is your exit strategy since you already gave up a ton of position to your caller?  Realistically you could just roll the caller up to the Nov $280 calls at $2.50, which are all premium and $6 out of the money and, if they expire worthless and you hold $13.20 in value, you win!  Also, you can just sell the $270 puts for $3 because you have nothing to lose unless we drop below $260.  

    DIA/Tcha – Current position is full cover with Nov $104 puts as long as we are over our breakout levels.  I think, when push comes to shove at the close, I’d be more comfortable rolling them to a 1/2 cover of the Dec $102 puts. 

    ANF/MrM – You can’t stop girls from buying that stuff.  I think they’d rather sell their cars…  They also have done a great job of repricing their stuff without really going downscale so people feel like they are getting more for less there.

    HGSI/Ac – I think take the money and run.  It’s almost tempting here to cash out the entire bullside and just take 20% of the portfolio and go 100% bearish with a 10% stop.  There are so many stocks that are not at all justified in their valuations and there are only 40 shopping days until Christmas and I have yet to see a positive consumer report. 

    AMZN/Yodi – I don’t hate them.  I actually like the company but I’d like them a lot more if they would make more than $1Bn (projected next year) in exchange for the $77Bn they are asking people to buy them for.  April is a long way away and if TBills go up to 4.5%, are people really still going to buy AMZN for it’s 1.3% return?  I think it’s a good target and it’s the downside that worries me, not the up.  If they report weaker-than-expected Christmas sales, they will be lucky to hold $85. 

    SRS/OldG – No, they are a terrible trade for several days as the premiums are ridiculous and it swings unpredictably.  I love SRS at $8.94 but the way I’d play it is to buy the $8 calls for $1 and sell the $9 puts and calls for .70 so you are in for net .30 if called away at $9 and stuck with the stock at net $9.30 if it heads lower.   This is a good trade if you intend to DD at $8.50 or lower and then you’d be in for net $8.90 or less and you sell the Jan $8 puts and calls for $2 and your net is $6.90/7.45.

    S&P back to 1,095, NYSE broke 7,131 so back to naked on DIA March $105 puts, now $6.70.


  122. WASHINGTON — Boeing said Friday its new 787 Dreamliner aircraft remains on track for its first test flight by the end of the year and that a problem noted in a news report had been "resolved."
    The aerospace giant commented after the Wall Street Journal reported it discovered a new issue with the composite material in the plane’s wings as it reinforced an area of the fuselage of the aircraft.
    The Journal said metal bolts inside the wings of one of the six test airplanes were found to have slightly damaged the surrounding material.
    "The issue raised in the article has been resolved," a Boeing spokesman told AFP. "We are progressing well toward first flight and are on track to fly by the end of the year."


  123. Why is this BS from the Realtor’s trade association treated as credible news.
    They are always optimistic.


  124.  Retailers are raping China manufacturing, what cost (Clothing)6 dollars a dozen last year now costs 3 dollars.


  125. PharmBoy, GPRO looks like it’s turning up, I’m in the FEB 45 calls and thinking of a DD here if it holds, thoughts?


  126. Cap, I agree – It’s like asking a lawyer "How much should I sue for?"


  127. CHICAGO (Dow Jones)--Moody’s Investors Service on Thursday cut the financial strength rating on Assured Guaranty Ltd.’s (AGO) bond insurance unit to Aa3 from Aa2 and said another downgrade is possible, while the bond insurer responded by pledging to keep its ratings from dropping more.
    Shares of Assured Guaranty surged 15.5% to $20.91 in recent trading, more than making up for a share-price drop earlier in the week when Assured said it would report a third-quarter loss.
    Through the mortgage crisis, Assured Guaranty is the only legacy bond insurer that has maintained a high enough financial strength rating to sell insurance on public finance debt. The latest downgrade could further test customer willingness to continue buying so-called insurance wraps that guarantee debt principal and interest payments.
    Analysts reacted positively to the fact that even after the downgrades, Assured Guaranty still managed to hang onto a rating in the double-A level.


  128. GLD/Drum – Wow, is that our trade from way back?   I’d just roll em along to 2x the Dec $108s ($3.45), which puts a little back in your pocket and you can roll up 1/2 of your calls to the 2x (of the 1/2) the March $109s at $6, so another $1 back in your pocket there and then set a stop at $12 ($1 trailing) on your remaining $98s.  That means you can take more than half off the table, ride out a downturn and get back in when you want. 

    Bakkan/Gel – What’s the extraction cost per barrel there?   As to fart-cars.  Almost every family has 2 cars and they just need to give people a reason to make one of them electric.  I’d have to guess that 90% of all 2nd cars do nothing but local driving and would be ideally suited to being electric.   Aside from a $1 per gallon gas tax (another $150Bn a year in revenues), I’d say mandate that 50% of the spots at all shopping centers and stadiums (the closest 50%) are for electric cars and watch how fast people switch.  NYC and other cities could drop $5 of the parking fees for electric cars at lots too and the government could subsidize insurance by $1,000 a year (50M cars = $50Bn of the $150Bn of fuel tax collected) and in a few years we’d be selling 10M electric cars a year. 

    IRA/Iflan – Contact scott@thinkorswim.com, I’m fairly certain they allow it.

    Retailers/Kustomz – That’s where all the magical profits are coming from!

    Doug Kass says in the current environment, market ignorance is bliss: "In bull markets, there is often no clear demarcation between fantasy and progress."

     Chicago Fed President Charles Evans: Agrees "the severity of the recent crisis argues against simply waiting and mopping up after the fact if and when the prices of some assets do collapse." But doesn’t agree that Fed should be "leaning against a bubble" with proactive efforts to lower asset prices. Regulatory policy and structural prescriptions are most promising.

    Sector ETF strength: Solar– TAN +3.4%. Gold Miners– GDX +3%. Clean Energy– PBW +2.7%. Steel– SLX +2.2%.
    Sector ETF weakness: Regional Banks– RKH -0.6%. Commodities– GSG -0.5%. Heating Oil– UHN -0.5%. Gasoline– UGA -0.2%.

    XLF still way under $15 othewise I’d be more bullish


  129. Iflan, you can do any defined risk trade in a ToS IRA account. Example: sell short a BIDU Nov 210 call, buy a Nov BIDU 610 call. Congratuations, you are short 100 shares of BIDU in your IRA :)


  130. Speaking of solar (and since we’re not moving), a friend works for Earthship and gave us a tour of their new off-grid homes this summer near Taos.
     
    http://www.earthship.net/
     
    The old designs are kind of hippy-funky, but the new ones are very modern inside and really beautiful. Totally off-grid for power and water, except for a small propane tank for the range. All modern amenities: home theater, high-speed internet, you name it. Excellent climate control. Really no meaningful compromise living off-grid anymore.
     
    I feel like a chump now living on-grid.


  131. SPX $1,100 puts at $43.50, selling $1,075 puts for $33.50, that’s a bear put $1,100/1,075 spread for $10, pays $25 if S&P finishes below 1,075

    Realtor’s/Cap – I wonder if CNBC will still be such a joke when they are no longer run by GE?


  132. Humvee… Thanks! – Good confirmation of stats.


  133. Phil, how I understand, electric cars now much more expencive than regular one, so if you don’t drive a lot (cab driver) you wont safe anything


  134. Phil / fart cars & government mandates
    I think China already has a program like that in Ordos !!


  135. Hey MrM – been real busy here at work…..GPRO was upgraded 11 Nov to a buy by Natixis (who ever that is).  I still like them a lot, and why not roll down to the 40s, sell the 35 or 40 Feb P and then sell the 50 Feb calls.  That will put you in a 10 spread.
    I still have a concern about the health care bill and what it will do with all these companies (Genprobe, Lab Corp, etc).  Do we do the right thing and test, or do we cut corners.  Will it be like the Pharma, where more tests are done for a lower rate (big pharma gets more people in for meds at a lower rate of reimbursement — economies of scale).  That remains my biggest fear/question.


  136. Todays jam up proves they haven’t sold all their long positions just yet and if they let it fall and hold positive it proves again they aren’t all out yet, so Monday could be another jam up.


  137. My thinking too kustomz. This looks a lot like last Friday.


  138. tcha – agreed you have to do a full calculation. You also have to factor in the cost of the electricity required to charge the car, which in New York City (we would have to provide apartment dwellers somewhere to charge up) was about $2/gallon equivalent when I looked at the Volt.
    Of course if we all had a nice new solar installation that should make the electricity cheaper :)


  139. Earthship/Eric – Way cool.  That’s exactly what I’m talking about.  Why aren’t these guys all driving Teslas on government grant money?  There should not be a bigger priority for our government as this effects our economy, jobs, national security, the environment… 

    More about where the jobs aren’t: pretty much everywhere except education.

    Electric/Tcha – More expensive to who?   That’s the problem, the government should be subsidizing them to get them going.  If you drive 15,000 miles and get 25 mpg you use 600 gals of gas and that’s $1,500 a year so, over 4 years it’s just $6,000 a car.  But if having 1/2 the cars be electic saves the rest of the driving population $1,000 a year in saved fuel costs (due to lower demand) then you are saving $10,000 over the life of the car.  Mass production will bring electric engines in-line with regular and, I will point out again, if we pour $1Tn into perfecting an electric car engine that is as good as an internal combustion engine, we can once again have an auto industry that exports to the world and even GE will be happy because they’ll still need nuclear, solar and hydroelectric plants to make it all go. 

    Ordos/JRW – That’s what those reporters don’t get.  Ordos is filled with invisible cars zooming all over the place and the streets are only empty because people teleport from place to place….   8-)

    Volume 107M at 2:45 – Is it still Veteran’s day?


  140. kus, Erik / Monday
    I worry about that as well; I wonder why Goldman sent Timmy and the Pres over to China this weekend !?!


  141. Phil/Bakkan
    The extraction cost of this ‘light sweet crude" is very attractive given today’s oil price, which is manipulated as you have confirmed. In making this investment, I am assuming the price of today’s crude will not take a dive south, as the USD is sure to drop vs other currencies, and thus oil will rise in price as the $ weakens –  oil is priced in $’s. Phil, as to the issue of "fart-carts", I cannot see wifey taking an unsafe cart, with children inside, to school for the day, just because they save a few $ to please the environmentalists. Safety and luxury comes with a price, and the American dream is still focused on these benefits, and the sacrifice will not soon be accepted. You have made excellent points, in order to facillitate a changeover to more efficiency, but changing the consumers mind is the real challenge, IMO.


  142. Phil, do you plan to keep over weekend DIA spread nov 101/100?
    about electric cars I agree 100%, they should be down in price and/or be sibsidized


  143. SPWRA, it is driving me creasy, stock up .45 but my long LEAP drop .25


  144. Market levels…its like showing up late on a camping trip, all the fresh fish has been eaten already and now your stuck with rotting stinky fish…you have to pinch your nose and swallow if you want to eat, and here we are with markets at dizzying levels cause some traders are simply starving for performance…


  145. Wells Fargo research asks whether the nation overdosed on debt: "While the budget gap will narrow in the near-term, the long-term trend does not show a return to fiscal discipline, rather the destruction of it."

    Want to see a nice correlation?  The Dow to UUP, The real breakdown came on the 6-month view in July, when a 5% drop in the dollar sent the Dow up 25% (but it had been drifting down with the dollar for 2.5% so it snapped up sharply and then they normalized again.  I think overall, UUP (which is an ultra) can drop the Dow 2x on a move up.  They bottomed out at 22 twice in 07 and 08 and are now at $22.35 so figure we move 10% and hit the 200 dma at 24,  That’s a 20% drop in the Dow, back to 8,150, which just so happens to be the bottom of our 5% rule range cenetered at 8,650, which is still probably the "right’ price for the market given the overall economy.

    Where’s the evidence of the inventory rebuilding story? The more you talk to CEOs, the more you get the sense that they’re waiting to see how demand is before ramping up hiring.

    DIA/Tcha – Oh yes on that spread, it’s do or die over the weekend though.

    Leap/Tcha – That’s because the VIX fell 2% today, back to 23.77.


  146.  Phil, As far as premium is concerned, if you sell it for more than you buy it for what difference does it make if it was a high premium?


  147. Phil,
    Stick ??


  148. Phil, what is your price for Dec $102 1/2 cover? 2.5 or better?


  149. Another one of my concerns…. what happens when losses do come in and people have to cover margin calls?
     
    At the end of September, margin debt was up 6.8% from August to $220.79 billion, according to Big Board data for customers of NYSE-member securities firms. The figure got as low as $173.3 billion at the end of February, the smallest level since the end of 2003.
    Market analysts track margin-debt activity as an indication of investors’ appetite for speculative trading.
    A potential pitfall for those trading "on margin" is a sharp decline in stock prices, which can expose investors to margin calls, requiring them to post additional collateral lest their brokers sell their securities to cover the debt. A wave of margin calls can worsen selling pressure on stocks and was seen as partly to blame for the market’s woes last fall and winter.


  150. David Darst used to be a car salesman, hes one shady character


  151. SPWRA/ looks like I need to start checking IV first before enering this kind of spreads


  152. You know whats really scary, how many are underweight cash right now. Just got goose bumps all over my body


  153. DIA Mattress: nude beach for the weekend? or bikini (1/2 cover)? or fully dressed?


  154. Chaps, Tcha, & Company,
    I’ve been following the conversation on beta weighting deltas for 2 days, saving the running dialog in a separate file so I can review later.  Great stuff!
    I am having trouble coming to grips with the TOS weighted deltas though.  I’ll use an example from a position.
    I have 1000 shares of EXM.  The beta listed for EXM is 3.0.  The beta listed currently for DIA is .89.  Therefore, the math, as I understand it, would be     ((1000share X 1.0 delta) / 3.0 ) X .89 = 296.67 total DIA beta weighted delta
    The problem is when I go to TOS and beta weight this position to DIA, it’s giving me a delta of 36.02
    I don’t get it.  This seems to be the case with all the TOS beta weighted positions I have to examine.  Can someone explain.


  155. Which Monday in October was Black Monday?  I think it was the 19th and the 26th.  I’m just saying… 

    Blackest Monday scenario would be China picking this weekend to float the Yuan (as a sign of friendship on Obama’s visit) to puncture their own bubble a bit and lift the dollar (which they have 2.5 Trillion of).  That can jump the buck 10% and drop both our markets 10% but they sure could take the correction at the moment so maybe it is the kind of thing you want to do when things are strong…. 

    Keeping that in mind, I am going to go with the 1/2 cover of DIA Nov $103 puts, now $1.27 into the weekend.   That’s against the March $105 puts now.  I like the Nov because they have $1 in premium that goes away in 5 days, so that’s .20 a day in profit and the $1 pays for 1/2 of the roll-up we just did and they can be rolled even to the Dec $99 puts and that’s a 1/2 covered $6 spread I can live with 400 points below here


  156. cwan, I’m trying to get dec $102 for 2.5 but afraid not gonna happened (1/2)


  157. swan, plan to follow Phils recomendation (Nov103)


  158. Phil: are you telling me to roll my naked DIA puts jan 103 to  ?????


  159. okay, half nude we go for the weekend


  160. Good read on the pillaging going on by our GS JPM in China just to name a few

    http://www.financeasia.com/article.aspx?CIaNID=116704


  161. Premium/OldG – Well I will sell you my condo in Taho for a $100,000 premium and you tell me what the difference is.

    Stick/JRW – We had our stick already I think this morning.  There may be a closing pop but that would just be insulting our intelligence with just 120M volume at 3:30. 

    Cover/Tcha – See previous comment.  I decided that a 200 point move up would cost the Dec $102 puts $1 but would wipe out the Nov $103 puts but a 200 point drip would gain the Dec $103 puts $1 yet I could roll the Nov $103 puts down to the Dec $99 puts even so the smarter play, due to how close we are to expiration, is the Nov puts. 

    Margin/Kustomz – Yes, but what were we at last year?  I would think $500Bn, which means $220Bn is nothing and $50Bn of margin calls shouldn’t be much vs. sideline cash.

     

    Avgpctch

     

    Sector ETF strength: Solar– KWT +2.7%. Gold Miners– GDX +2.3%. Clean Energy– PBW +1.6%. Steel– SLX +1.5%. Cons. Discretionary– XLY +1.3%.
    Sector ETF weakness: Regional Banks– RKH -1.8%. Gasoline– UGA -1%. Heating Oil– UHN -0.8%. Commodities– GSG -0.8%. Broker/Dealers– IAI -0.8%. Commercial Banks– KBE -0.8%

    XLF not just not making $15, it’s at $14.60!

    Dow leaders: DIS +4.1%. MCD +1.9%. AXP +1.4%. UTX +1.3%.
    Dow laggards: JPM -1.9%. BAC -1.2%. GE -1%. AA -0.8%.


  162. TOS users – The free money on selling the leverage ETF options with TOS is ending soon.  I got a message from TOS that "these leveraged ETFs are not correctly accounted for on TOS platform currently.  All leveraged ETF should have 2X or 3X the margin requirement that is shown; this will be included in the programming soon."


  163. If they float the yuan (or allow the yuan to appreciate against the dollar) would that strengthen the dollar or weaken it? Wouldn’t funds flow into the yuan? *confused* (again)


  164. AMZN at 131.61  is criminal.  Up from $78 in august.  $30 earlier this year.
    Reminds me of RIMMs big run to 140; which of course ended in a collapse.
    Still its criminal.


  165. Bassdad,
    I geuss that in TOS database Beta for stock is 3.6 ( against DIA)(beta is historical number, and diff. sources can use dif.timeframe) and calculated for 100 shares, so if you have 1000 shares 3.6 x 10 = 36,
    but may be I’m wrong


  166. Since we seem to be talking green, Phil what do you think of the Chinese battery maker CMTP? They are at 7.26 right now but if they get listed on Nasdaq they should explode… Your thoughts? Too dangerous?


  167. Phil your 2.18pm re GLD. clarification. Your recommend selling 1/2 my 98 longs up to a march 109s or selling my remaining eligible callers up to the mar 109 callers?


  168. tch I think he wants his EXM position expressed in DIA deltas. I am surprised it’s not .89/3 = .29


  169. China float, that would be very bad for commodities, very very shocking if that happens

    Phil the high was 381b in 2007 and dropped in 2008 to 230b so the numbers are high we are back to oct 2008 numbers

    Jan 08
    The amount of margin debt, which is how brokers define this kind of borrowing, hit a record $285.6 billion in January on the New York Stock Exchange. Such a robust appetite, amid a backdrop of complacent market conditions, could leave investors badly exposed if major indexes are snagged by a market decline. Some could find themselves forced to sell stock or other assets


  170. so, ok… got the nov 103 short put. What should i do with the Nov $101 long put?


  171. Bassdad,
    I think if you compair stock to DIA and stock has beta 3 and DIA has beta 0.89 you need 3/0.89 = 3.37 , pretty close what TOS shows


  172. Pharm
    My naked puts on GENZ took a bad hit today. I am out for good on the next pop up. With GMP’s that allow this kind of negligence, the next shoe to drop is a recall, IMO


  173. Bassdad,
    I think that beta 3 is against SPX, but because Dow little bit less volotile than SPX (0.89) it is mean that your stock should have higher beta against DOW, so 3/0.89 = 3.37 should be correct


  174. Gel – that is a big problem in manufacturing these types of ‘drugs’.  Very interesting….I will have to look into it further, and a BIG disappointment as this is the 2nd time in 6 mo.


  175.  Phil, But we arn’t talking condos. If you buy something at 6.50 premium and sell it for 7 what dif is it that it was an expensive premium? I am not as mathematically talented as you are so please keep to my example.


  176. Crazy BS nonsense on pathetic volume.


  177.  Phil, Your condo example went right over my head.


  178. Bassdad,
    I found, that you can not so easy convert beta to delta, because beta calculated in % change, but Delta in$ change.
    look to your example with EXM: stock trading just for $6 so it can not be 3 times more volatile than DIA by $


  179. Cap / BS nonsense
    I’d watch out for a short squeeze Monday !!


  180. Bassdad,
    so I think right formula should be: 3/0.89 x 6 / 103 = 0.19 x 1000 shares = 190
    how much TOS shows now?
    we have lots of PHDs in the room, they should help us


  181. Cap your right, but our opinions don’t matter now do they

    Im looking at the amount of margin out there and its at 2003 levels when we just started to get the ball rolling on the economy but unemployment was on 5.6% and the economy will not have a housing bubble to help it along

    China fixed asset investment 2003  US$403.3 billion …..today 1.34 trillion U.S. dollars…..jeez can this last much longer


  182. Cash/Kustomz – That’s cause your cash ain’t nothin’ but trash.  This is something I first bought up as my prediction for rally fuel way back in the March 12th weekly wrap-up.  Man I’m looking at the prices of those bullish calls and I could just cry at what things cost now!

    Roll/RMM – Those Jans are not going to be much good to you for long and the March puts are pretty cheap with the low VIX and high dow.  If the Dow drops, the VIX will go up and the March puts will fly and your roll will suck so if you do plan to roll, you’re going to need to put up or shut up at some point. 

    Leverage/Peter – Oh that sucks!  That’s going to force a lot of people to dump positions.

    Yuan/Steve – China maintains an artificial peg to the dollar by weakening their own currency.  The weak Yuan strengthens the Asian basket against the dollar – in other words, China’s action to deflate their own currency by buying up other currencies (but not the dollar) pushes us even further down and China keeps deflating and we fall more and China pushes more etc…

    CMTP/Jrom – I’m not big on the ADRs but remind me over the weekend and I’ll take a look.

    GLD/Drum – I’m saying that just if you have 10 March $98s, 5 of them can be rolled to 10 March $109s and you can keep 5 $98s for now.  Then the callers can go from 10 Nov $103 callers to 20 Dec $109 callers and, if gold falls, you stop out the 5 March $98s that are left and that leaves you in a bearish backspread on the way down.

    Margin/Kustomz – I’m very surprised we were that low in Oct last year but I guess the sqeeze really began in Sept.  I have not doubt that we are primed once again for disaster, but when? 

    DIA/Morx – The idea was to roll up and get into a vertical.  I don’t understand, you were worried about it at lunch when they fell to .35 and they went back to .50 at 3 and now they are back to .40.  If you don’t want to get out even by 3pm on a Friday then you’d better be wanting to hold them over the weekend.

    Premiums/OldG – You are paying almost a 10% premium.  If you do that 10 times you have lost 100% before you start.  That means every 10 times you do it you are wiping out a double or 5 20% gains.  Even if you are a phenominal directional trader and nail it every time and you make 10% 3 times and 20% 5 times and 30% once and 100% once, your 10% overpayment 10 times means you could have made 360% instead of 260% and isn’t that extra 100% worth it, even if you are the world’s best picker?

    Well that was loads of fun.  Very insane for a 167M volume day but what can you do?

    On level watch it was:  Dow 10,119, S&P 1,095, Nasdaq 2,164, NYSE 7,131 and Russell 594

    The Dax and the FTSE gave us no clear signal, XLF is $14.71, Qs are right at 44.  Gold is back at $1,119 and oil is right at $76.40, silver and copper both held their levels. 

    So we have a 1/2 cover of March $105 puts with the Nov $103 puts at $1.27 (now $1.10) into the weekend as we had to wimp out on our bearishness (55% bearish) with all this pumping today. 

    Have a great weekend,

    - Phil


  183. Phil when, when risky assets become riskier than holding dollars…..can you hear me Ben???


  184. Yodi:
    re: I am still grooving over the Deltas below you take a delta of +500 and refer to a portfolio value I take it on shares only of 100,000 My question is how do you find your delta on 100,000 ??
    Just to be clear, the 100,000 and 500 delta was strictly hypothetical. As discussed over the last few days, I’m trading/tracking my portfolio in a "symbol group" I set up in TOS. You can customize the columns displayed in groups. As long as you’ve got delta as a column, TOS will sum the deltas of all your positions in the group.
     
    But that number is meaningless unless you convert all deltas to a common basis, which TOS supports through beta weighting. If you weren’t using TOS or something similar, you’d have to go through the exercise we were discussing earlier (your GS example) on all your positions in the group. So if that group is beta weighted to the DIA, that delta summary for the group is what you want.


  185. Phil,
    Could you chime in on my question from 3:21 ref. DIA weighting of deltas on TOS


  186. Hi chaps thanks for all the help and advise I do work with TOS and will look in to this over the week end to get a better understanding
    Have a nice week end to all of you


  187. Hi, Peter D, re TOS Margin requirements on leveraged ETFs, What does that mean exactly?
    If I buy FAS stock outright, no changes there, right?
    If I buy FAS calls or puts, no changes here, either, right?
    If I SELL calls or puts, then the margin requirments will be 2x or 3x of what it is now?
    Just want to understand what it means…  Thanks!


  188. Highlander,  could you  e-mail me at Hoberns@yahoo.com


  189. Bass et. al. / EXM beta weighting
    Was out this afternoon. TOS shows current beta of EXM as .55 (3.00 is the number next to it, the 52-week low.) And beta of DIA is listed as .97. Using prices of 6.60 and 102.91 for EXM and DIA respectively.
    Beta is % change / % change in SPX.  The DIA-beta weighted delta you’re calculating is $change in EXM / $ change in DIA.
    You’d go through the following chain:
    ($ EXM / % EXM)* (%EXM / %SPX) * (%SPX / %DIA) * (%DIA / $ DIA) = (6.60/100) * .55 * (1/.97) * (100 / 102.91) = .03636. So 1,000 shares would be 36.36.


  190. cwan/margin – I don’t know for sure.  We can ask TOS or just wait.  My understanding from an article from the Web a few weeks ago is that the margin requirement for leveraged stock also change 2X or 3X to a maximum of 100%.  So FAS stock would need 100% margin instead of the normal 35% or 50%.  No change to long CALL or PUT as they are already 100%.  The margin on naked shorts would increased 2x or 3x as you said.


  191. champs,
    you r rite, if beta is 0.55 (I calculated if it will be 3 )
    mach simpler formula:  0.55 / 0.87  x 6 / 103 = 0.0368 x 1000 shares = 36.8
    beta of stock / beta of DIA   x   price of stock / price of DIA = delta for 1 share


  192. Hi, Peter D, Some brokers, such as Schwab, already requests 100% margin for leveraged ETF stocks.
    TOS has probably one of the most lenient margin requirements among brokers.


  193. tchayipov:
    right. take out the 100/100 in my formula to get yours.