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Will We Hold It Wednesday – 10,500 or Bust!

11172009We like going short on oil today.

We like going short on the Dow here, as close to 10,500 as we can until "they" prove they can hold it and not just spike us over the line.  Copper is also a great short at $3.17 this morning as that is just ridiculous too.  We can use 10,500 as a stop on Dow shorts and $80 as a stop for oil shorts and $3.18 as a stop for copper so it's not like we have to bet the house but, COME ON, this is just getting stupid!  Oh, sorry – missed one, also short on the Euro at $1.4975 with a stop at $1.5025

I know I am trying to be more bullish, we have plenty of bullish plays this week and just yesterday I was warning people to avoid the ultra-shorts, which can still get crushed but, I am sorry, THESE levels are ridiculous given the current environment.  Oil may be up at $80 for now and we will get a draw in today's crude inventories but only because Tropical Storm Ida gave Gulf energy producers an excuse to shut down 43% of production last week and the port at Louisiana was closed for 3.5 days, stalling imports.  Gasoline consumption will be up with the holiday last week so they couldn't have timed this better and, if you look at NYMEX trading yesterday, you'll see a quick spike from $79.36 to $80.06 at about 2pm, painting a top for the day they are now struggling to match in the futures. 

oecd demand

Despite analysts official expectations of a 300,000 build in crude (which was never adjusted to take the above 2 major factors into account), the oil traders will be very disappointed with anything less than a 2.5Mb net draw so that's what we'll be looking for at 10:30.  If we do get a good spike over $80, we'll be shorting into next week's report instead.  Another report we're looking at is the latest from Cambridge Energy, which projects growth in oil production capacity through 2030 with "no peak evident," something I've been saying for years.  As you can see from the chart - it's not peak oil they should be worried about, it's peak demand

Keep in mind that we still think the dollar is about to wake up and rally off the 75 mark, although every possible effort is being made to push it lower.  At this point, pretty much everyone is betting the dollar down but I flipped bullish this month (we mentioned our UUP bets) and George Soros has joined me in warning that betting the dollar lower may soon become hazardous to your financial health.  Since it's the falling dollar, and not demand, that has been fueling the speculative bubbles in gold, oil and the dollar and since the energy and materials sector have led the markets up, a dollar rally is very likely to be short-term market poison but it's also the best way to put money back into people's hands ahead of the holidays as it's the quickest way to drive down food and fuel prices, which make up close to 1/3 of non-fixed household spending

We are just barely a week away from what used to be called "Black Friday," the day after Thanksgiving when retailers typically begin making money for the year .  Now most retailers will be lucky to be in the black on December 31st and that clock is tick, tick, ticking as the reality of the economy will soon hit the unreality of the stock valuations head on. 

Mortgage applications fell 2.5% last week despite the 30-year fixed rate falling to 4.83%.  As with last week, refinances held things up but even they fell 1.4% as bank lending requirements have tightened people out of qualifying and actual applications to buy homes fell 4.7%, after falling 11.7% last week - making 6 consecutive weeks of declines.  This is now a 9-year low for mortgage applications.  Not surprisingly, housing starts are dropping as well with builders cutting back 11% to just 529,000 homes or 882 homes per month, per state.  “It’s going to be a long road back to recovery,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “The labor market is a key factor. We really need to see job gains in order to become more optimistic about housing.”   

No jobs and a weak dollar is not going to jump-start the housing market but that didn't stop "expert economists" from expecting 600,000 housing starts this month.  Gee, if they can be 15% wrong about that, I wonder what other optimistic BS they've been telling us is going to fall apart.  Permits also fell to 552,000 from 575,000 last month, possibly because 10.9% of the US housing supply, or 14.2M homes, are currently vacant and more and more families are evicted through foreclosure every day (averaging over 300,000 a month).  When the number of people being thrown out of their homes exceeds the number of people moving into homes – generally there is a problem.

Once again this morning the Nikkei sold off (53 points to 9,676) and the Hang Seng pulled back (73 points to 22,840) and once again the Shanghai made a 1.5% gain.  I don't want to by cynical but does it really matter what the news is in Asia?  Skipping ahead to Europe, they have pulled back to near flat after a +0.5% open as they didn't like our housing data at all but we already got the dips we were looking for in the futures (9am) and are ready to wait and see now as we still expect a proper attempt at 10,500. 

We're not going to go short again unless we get back to the pre-market levels mentioned above.  Our upside 25% levels are still ow 10,500, S&P 1,162, Nas 2,100, NYSE 7,750 and Russell 637 but now we are getting a little more concerned with how our breakouts hold up and those are Dow 10,250, S&P 1,100, Nas 2,187, NYSE 7,000 and Russell 600 with the Russell and the Nasdaq having the greatest chance of failing.  If those two break down, we will short the Dow, using that as a stop line.  With just 3 days to expiration, the DIA $104 puts give you a lot of bang for your buck at .55 but hopefully we can get a good deal on the $105 puts on a silly pump. 

Be careful out there, volume is still low enough for all sorts of shenanigans.

 


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  1. phil — left you a question late yesterday about the uup.  The Nov 22′s are a bit hairy this close to expiration aren’t they?  Is that the best play here?  Does Dec or Jan. have too much premium to buy? 
    Can you outline again the best Dow bear bet you have right now? 


  2. Phil: I want to manage this BIDU call effectively to recoup some $$$,
    have now rolled to dec 450 caller, have not yet sold the dec400 put,
    market looks to go down this am, when is it the right time to sell the dec 400 put ?
    now:how do I manage any gains or losses in the caller and putter ?


  3. Phil, can u comment on LDK pop this morning? What does it mean for the near term stock price?


  4.  Phil,
    The thing has been bothering me is the recent strong inverse correlation between the dollar and the market. My understanding of the ‘carry trade’  (as in the past done to the Yen) is to borrow the dollar and get higher yield in say Euro, because of the need to buy Euro and sell the dollar, thus driving the Euro higher. 
    I also understand lower dollar drives up commodities thus drives up the stocks. But in reality, why’s driving who? 
    Take today’s case, once the CPI/Housing start (bad) is out, ES drops, and DX up. But at 9:10am, you can see the sudden rise of Euro, and Yen, thus the steep drop of DX. and then the ES grinds up. 
    Is this ‘stick’? Stick by whom, and did they stick the ES, or stick the Euro/Yen, driving down DX thus up the ES, or the other way around? 
    Thanks. 


  5.   Phil
    What do you think of BRCD at this level – both as an acquisition play as well as a longer term hold to sell premium?


  6. UUP/Jcm – No, it’s definitely not good to hold Nov $22s now!   The roll to the Dec $22s is just .15.

    Dow/Jcm – I like the $104 puts (as above) for .55 with a stop at .40 and my inention, if stopped out, it to buy $105 puts cheap.

    DIA stance – March $105 puts naked as Dec $104 puts can be taken out for $2.25, which is a .25 profit.

    25% (off the top) levels should provide some upside resistance but the Nas is already over so the key is if they can hold 2,100 (very far down) in the other direction.  We’re looking at Dow 10,500, S&P 1,162, Nas 2,100, NYSE 7,750 and Russell 637. 

    To the downside, we need to hold our 25% (up from July) levels of: Dow 10,250, S&P 1,100, Nas 2,187, NYSE 7,000 and Russell 600.  Breaking any two of these is bearish and S&P, RUT and Nas are right on the lines.

    4,000 needs to hold on the Dow Transports along with 300 on the SOX.


  7. Phil
    what’s the best way to update comments on a I phone
    anyone have any tips to share?


  8. PARD another ~+11%


  9. Housing must be doing awesome… LEN, TOL, XHB, … ;-)


  10. phil — thanks.  can you explain this a bit more DIA stance – March $105 puts naked as Dec $104 puts can be taken out for $2.25, which is a .25 profit


  11. Phil,
    EDZ, I sold Jan 6 P and sold Jan 7 C for about equal dollar amounts. Not going too well, any suggestions?
    Thanks
    PS Thanks for the ERY play before selling 11 P + C


  12. allen060:
    re:
    "Chaps:
    I’m going to begin a paper trading account in TOS with some of the stocks in your buy/write list that you posted last Wednesday to try to learn how to manage the delta neutral strategy. I understand it theoretically (I think!) but I’d rather do this on paper for a little while, especially with so many of the stocks so high (some of the charts are intimidatingly high – even with a hedge)?
    But one question: you said you look for firms with "moats." I haven’t heard that terminology before – I can guess what you mean – but I wonder if you could explain so that I am sure. Thanks."
     
    allen: it’s a classic Warren Buffett concept. Think medieval castles with moats for protection. Buffett likes companies that either, through skill, luck, or both have some position that’s very hard to pry them away from. Think MSFT and PC operating systems, for instance. (Not recommending MSFT.)


  13. If i didnt know any better i’d have to say it looks like killing the dollar is an inside job
     
    Nov. 18 (Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard said policy makers may not start to raise rates until early 2012 while facing a “too low for two long” argument that may “weigh heavily” on the central bank.


  14. Never mind Santelli says reporters are trying to kill the dollar


  15. BIDU/RMM – You only need to roll it on Friday at 3pm.  As long as the spread you want to roll to holds it’s net value, there is no reason for you to roll out of the position unless you clearly feel BIDU is heading much higher (and even then, if the net roll is the same, who cares?). 

    LDK/Wii – They got a lot of money for a 15% stake in a Chinese plant, which is good as you want the local partnerships in China.  Earnings will still trump that next week but I keep telling you guys I like this company long-term.

    Cramer called buys on the Ag sector and DE is making 52-week highs and POT is up 3.5%.

    Dips are being erased already on no volume (15M at 9:45).

    Carry Trade/Balance – It’s not just dollars for Euros.  If you can borrow dollars for 0.25% and put them into high-yeild corp bonds or leverage commodities or whatever, that’s the trade people make.  The sensible trade is to play the interest game, like an Aussie bank pays 6% interest so you can take $100M here and pay $1M a year in interest and put it in an Aussie bank and get $6M.  As long as the US dollar doesn’t gain 5% against the Aussie dollar over the same time, that’s a win.  As to the stock correlation – stocks are a commodity.  11 shares of DIA = 1 ounce of gold and if the dollar falls they both go up.  In reality, the rise and fall of the dollar will effect corporate earning but, on a day-to-day basis, the stock is just another commodity that will rise or fall almost perfectly contrary to the dollar. 

    Oops, and back down we go!  Man the manipulation in this market is simply stunning!

    BRCD/Deano – We just discussed them the other day.  I think the buyout rumors put a nice floor under them which makes for a good buy/write but that was .25 ago.  At $8 I like them again selling the Jan $7.50 puts and calls for $1.70 for net $6.30/7.15.

    IPhone/QC – There is a special IPhone view that puts the last comments first so a simple refresh works well. 

    PARD – gotta love it!

    Another shot at SRS for the faithful.  Dec $9s can still be sold naked for .90 and the Dec $9 calls are not too bad at .62 with a roll down the the $8 calls (now $1.12) if it can be done for .40 or less.

    Dow/Jcm – We have the March $105 puts as a general hedge and yesterday we went into the close with a 1/2 cover of them at $2.50.  Any time we make .25 on our covers we like to take them off the table since, if we do that 10 times in 3 months, we drop the cost of our insurance by almost 50%.  It’s also a great way to instantly flip our portflio more bearish (now 60% bearish).  Google "Stock Market Parachute" for the article explaining the Mattress Play strategy. 

    EDZ/Jomp – Gosh is it January already?  I must have missed the holidays!  There’s not much to do unless you want to turn it into a buy/write and pick up the stock while it’s cheap.  Of course, if you get it put to you at $7, you’ll own it anyway for net $5ish.  Personally, I would roll the Jan $7 puts to 2x the Dec $6 puts for a little better than even because things can change pretty quickly if we start breaking down. 

    Meanwhile, EDZ is nice and cheap down here and the Apr $3/5 bull call spread is just $1.10, which is a nice way to play a sell-off in global markes or an upside Dollar play or a gold or oil sell-off play…


  16. $DIA $104 puts stopped out at .73.


  17. DIA $103 puts at .35 are ones I’m willing to DD (already up .20 from $104s).


  18. Phil, re. "Carry Trade… Aussie bank pays 6% interest so you can take $100M here and pay $1M a year in interest and put it in an Aussie bank and get $6M". 
    You can currently make 11-14%/y by buying the FXA instead and simply selling covered calls against it monthly, and maybe initial puts if you really want to do that. Also, FXA pays 2.2% yield. You only need $5k or so, and money is not locked. I think banks are making  a killing on these ‘deals".
    BTW, Trades, Guns, and Money explains big bank currency derivatives things nicely (fabulous book).


  19. Dollar/Kustomz – It’s like "Murder on the Orient Express" – they all have a motive and they all did it! 

    Solarfun Power Holdings (SOLF): Q3 EPS of $0.37 beats by $0.22. Revenue of $145M (-23%) in-line. "We expect to see a healthy demand environment in 2010. The preliminary shipment target for 2010 is 500 MW. We expect strong demand from Germany as project development is accelerated in response to expected feed-in-tariff reductions, from new markets like China and the United States, and as the general availability of funding for solar projects improves." (PR)

    The usual suspects: Sources say Trinity Funding, a unit of GE (GE), and a former subsidiary of Belgian bank Dexia were the two unnamed companies that allegedly conspired with a financial adviser charged by the U.S. with rigging muni bond auctions. Former bankers with JPMorgan (JPM), Bear Stearns and Goldman Sachs (GS) Group have been notified that they may face prosecution in the case.

    Goldman Sachs drops Target (TGT -0.7%) from its Conviction Buy list, cutting shares to Neutral over concerns Wal-Mart’s (WMT +0.2%) aggressive discounting will impact its competitors’ margins. "Wal-Mart has already turned up the heat with all stores open on Thanksgiving Day and Black Friday promotions launching one week earlier," firm says, which is "likely to pressure its competitors’ sales and margins as they are forced to respond."

    Q3 E-Commerce Retail Sales: +4.5% from Q2 to $34B. Total retail sales seen +1.9% to $922B. E-commerce sales +1.8% vs. Q3 2008. E-commerce sales accounted for 3.4% of all sales in the quarter.

    FXA/Raul – It depends on your risk tolerance.  Don’t forget for guys doing this with $1Bn at a time, 5% is perfectly good money.  Also, cross deposits don’t look like risk-taking and that matters on some people’s books. 

    Oil Inventories coming up and we’re hovering at $79.72 as they are anticipating a nice drawdown.  I’m hoping for a nice pop to get cheap Dec $10 ERYs, currently $1.50, maybe $1.25


  20. Oil Down 900Kb, and CNBC cutting away quickly so I’d say a disappointment.  I’ll update gas and distillates when I can find it. 

    Refinery utilization under 80%, what a joke! 


  21. news this morning of WDC downgrade for those that have the puts.


  22. magret/rolling, answering your question from yesterday post – rolling is more of an art than exact science, because it depends on the position sizing, how much time left to expiration, where the strikes are with respect to At The Money, what other positions we have in the portfolio, and where is the market going.  A few examples:
    - If we have a short CALL that is close to the money now, but we feel the market is due for a pull back, we would wait until expiration to roll horizontally to the same strike next month.  It’s a multi-month bet that we’d get our credit for the shorts back eventually.  If we fear that the market would be going up, then we roll diagonally, up a few strikes and out a month.
    - If we have a new position that is potentially overrun by the market a few days after we started it, then we are in a fire fighting mode to roll it vertically to get out of the way, and roll the other leg towards the money to recover some of the cost.  There is a risk of being whipsaw with this situation.  That is why I would start out with plenty of cushion for short strangles so that we don’t need to roll in a panic.
    - It’s common that we start the short strangles at various time of the month, so they have different strike positions.  Sometimes I let them be In The Money as a hedge for other positions that have the opposite bias (bearish or bullish).  I know that I can always roll the shorts to next month, so I check my margin and see how much market movement (in percentage term) that the portfolio can sustain. 
    - If the short strangle is a couple of months to expiration, and the market has moved 5% or more, and I believe it would continue to move in that direction, then I roll the shorts towards the market direction.  Depending on how much cushion I have for the other leg, I may or may not move them further Out of the Money, e.g. if I have 10-15% cushion left on the short PUT, the I’d leave it alone.
    - Position Delta is important: if the portfolio have a large positive Position Delta and the market keep dropping, we are in for a big paper loss, so be ready to roll out of the way, with the intention to roll back once the market stabilized.  The same is true for large negative Postion Delta and the market keeps going up, although this case is less damaging as the VIX would be dropping when the market goes up.
     
    All these comes with experience.  One day I can develop a program for it, but it will never be fool proof.


  23. EIA Petroleum Inventories: Crude -0.9M vs. -0.6M consensus. Gasoline -1.7M vs. +0.1M. Distillate -0.3M vs. -0.5M.+ Dec. crude futures +0.9% to $79.80, in line with pre-inventory levels.

    So just a bit over the 2.5Mb draw we expected, still want those ERYs if they come down enough

    Dow leaders after one hour: BAC +3%. HD +0.4%. JPM +0.4%.
    Laggards: HPQ -1.7%. DIS -1.3%. INTC -1.1%. CSCO -1%. BA -0.8%.


  24. phil what about sell naked ERY put $11 @1.05? what do you think?


  25. Hi Phil try to understand your lingua
    I’m hoping for a nice pop to get cheap Dec $10 ERYs, currently $1.50, maybe $1.25.
    does that mean you want to buy ERY at 1.50 ?


  26. ERY/Tcha – Selling the Dec $11 put is a nice way to play but give it a chance to go higher, hopefully $1.20+.


  27. Any one Is the INEAX Fund still allive??


  28. With the negative Home market report HOV still up .04 Banks aswell C +.04 and look at BAC + .52 not bad


  29. Phil I set the DIA Dec 104 to sell for 2.50 but the market is not going anywhere ?


  30. Phil, as per your recommendation, I got into EDZ a while back.   My entry point was:  EDZ at $7.60 against selling Jan $7calls for $1.90 and Jan $6 puts for $.8, so net $4.90/$5.45.  Do you have any recommendations on this trade (rolling, etc.)?


  31. What is going on with RIMM falling below 60 ?


  32. Yodi, some may argue RIMM is pinned at 60 for expiration


  33. Yodi, others may argue it only went above 60 due to RIMM share buyback commencing…
    Lol who the heck knows, maybe Phil does!


  34. yodi – rimm is one crazy ass stock.  whenever possible i sell  leap  puts 2011 55′s for 10+ and then buy them back for a 20 to 30% profit.  i am very comfortable owning them for 45$.  i like  playing momentum stocks in this way.


  35. FCX – Phil I have Dec 85 Puts with Nov 80′s sold against.  Now that it broke and is holding over 85.  Any recommendations on adjusment?


  36. Phil: well, I observe my BIDU dec 450 callers dropped by about the same amount that the dec 400 putters went up,
    so the net holds, but when can I make some $$ ?????


  37. ERY/Yodi – No, it means they are currently $1.50 and I hope to get them for $1.25.  I’m hoping for a pop in oil, which makes the ERYs go down. 

    XLF at $14.97!

    Sector ETF strength: Solar– KWT +1.4%. Silver– SLV +1.4%. Commercial Banks– KBE +1.1%. Gasoline– UGA +1.1%. Commodities– DBC +1.1%. Agriculture– DBA +1.1%. Oil– USO +0.9%.
    Weakness: Internet– HHH -1%. Biotech– IBB -0.9%. Nasdaq– QQQQ -0.8%. Semis– IGW -0.8%. Tech– XLK -0.8%.

    They cannot seem to get anything going.  Very tempting to go back to the well on DIA puts ($104 puts back to .60).   Kind of greedy though… 

    Amzn.com

    Tuesday morning Trans Union, the big credit bureau, released its quarterly report on mortgage delinquencies, and it was not pretty. Nationwide, 6.25% of all residential mortgages were at least 60 days past due in the third quarter, up from 5.81% in the second quarter and 3.96% a year ago. This was the 11th straight quarter that delinquencies increased.

    There are huge regional disparities in the rate of mortgage delinquencies. The former bubble states continue to suffer mind-bogglingly high rates of delinquencies — 14.5% of all mortgages in Nevada and 13.3% of all homeowners in Florida are at least two months behind on their mortgages. That is almost one in seven in Nevada and about two in every fifteen in Florida.

    Roubini picking up my concept of shorter workweek equaling phantom layoffs: The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost.

    RUT still NOT at 600 – that’s pretty wacky with the Dow up over 10,400 now.  Nas not through 2,200 so watch them closely at the 2,187 line.  XLF at $14.99, another line to watch but it looks like they are still determined to get a headline print at 10,500 just to make sure they trigger every last possible buy program before selling off.

    After five days and an estimated $550M in sales, Activision (ATVI +0.6%) calls "Call of Duty: Modern Warfare 2" – "the largest entertainment launch in history and a pop culture phenomenon." Sales have outdone those of the previous videogame record ("Grand Theft Auto IV", $500M); the largest worldwide movie release ("Harry Potter and the Half-Blood Prince", $394M); and first-day book sales ("Harry Potter & The Deathly Hallows", $220M).


  38. Any power engineers on here lol? Southern China is flat out of natural gas. Wonder if this may lead them to buy more oil.


  39. jomama – interesting!


  40. Did "they" change SRS from a real estate bear fund into a bull fund?
    I have a losing SRS call that SHOULD be up today.  But isn’t.


  41.  steven – i just employed that strategy on spwra yesterday.  i sold jan 20 2011 leap puts for 4.9.    At 15$ CY will buy them back :)


  42. RIMM hit with a downgrade early this morning


  43. steven – this is also nice if you are not able to be glued to your monitor.  this worked nicely when phil suggested mhp?  just closed out mhp puts -for a nice 50% gain.  still have 1


  44. DIA/Yodi – If you made another quarter, make sure you take another quarter with stops!

    EDZ/Leon – EDZ is at $5.16 so you are really on target.  It’s the low end of the target but the purpose of the buy/write is to get a cheap entry for a long-term trade.  You can buy out the $7 callers for .40 and the Jan $6 putter is $1.40 and those can be rolled to the Dec $6 puts and calls at $1.50 which would put you in at $5.20/5.60 if you don’t want to stick it out or you can just buy the caller out for now and let that be your back-up plan. 

    RIMM/Yodi – Hmm, that’s surprising.  Maybe all this talk of the Google phone is making the space look crowded.  BMO downgraded them today but I’m surprised people care what they think.  Pinning is good – thanks Steve!

    RIMM Strategy/Jo – Very nice!

    California Attorney General Jerry Brown says he’s reached a billion-dollar settlement of securities fraud charges with an unnamed major bank, which would bring hundreds of millions for the state’s investors. A 1 p.m. EST news conference should provide the details.

    Fannie Mae (FNM) and Freddie Mac (FRE), which together have taken more than $110B in capital infusions from the Treasury, stepped up their lending for apartment buildings as the commercial real-estate market peaked, and are now facing rapidly rising loan losses.

    FCX/Bgb – Other than a roll-up for $3 to the $90 puts, no, I still like the $85 puts and you should watch the $80 puts – may as well pay the .15 to get rid of the – unlikely but how pissed would you be if FCX plunges?

    BIDU/RMM – You can’t make money on the Dec combo unless BIDU moves to the center, which is why I told you every single time you asked me that there was no point in rolling to them until you had to give up the $420s, which have gone down quite nicely.

    SRS/Rich – It’s such an insane ETF you can’t worry about intra-day moves.  Turnover is 33M shares daily, about 1/3 of the fund.

    Rejection on XLF, Russell and Nas on the button.  Watching NYSE 7,250 and Transports 4,000.  Obviously, blowing 1,100 on S&P would be very, very bad.   OIH also having trouble at $125. 

    LZB heading up fast!


  45. How is SPG doing this?


  46.  RIMM 55 2011 puts getting close to my 10.5 trigger.  


  47. SPG/Roam – They are buying (maybe) GGPs stuff dirt cheap.

    Volume about a lame as yesterday, which is why I’m shy about shorting the Dow.  If we hold 10,400 here, they can still pull things together for another run at the top.

    DAX could not hold 5,800 but closed just under it, flat for the day.  FTSE also flat and dull, well above the danger zone and CAC was about the same. 

    Copper bottoming out at $3.12, that was a huge win in the futures! 


  48. roamer, All the REITs are up big on, at best, bearish news and on light volume. So I *think* it’s a BS move, possibly intended to prop up the  market. I’m taking the opportunity to roll my SPG, SLG, VNO, etc. puts to better strikes since we’re nearing the top of the recent range for many of these.
     
    Meanwhile commodity and energy names are struggling despite the ‘bullish’ moves for them in the dollar and the glorious inventory numbers.

    So it’s a bit confusing right now, IMO. One possibility: commodity longs are taking the chance to get out  while somone props the broader market up with RE and banking shares. Alternatively, commodity stocks are basing for another push higher.


  49. Phil: if Bidu stays about in middle between 450 and 400, then towards OPEX, premium erodes, fine,
    my question is: how to manage the caller or putter when it moves into a 60% gain or loss ?


  50. Phil Re EWJ bought Dec 9 call.   It is down 33% any ideas how to limit damages…..


  51. Thanks Jomama!


  52. Basing/Eric – Man I hope not!

    BIDU/RMM – If it happens, we can look it but this is a little different as you are pushing for a total wipeout so really only if we think the expiration day target is wrong is it an issue, otherwise, everything rolls again. 

    Still hoping the Dow retests yesterday’s high, about 10,430, to re-buy puts (assuming they don’t pop over).  ERY Dec $10s not cooperating nor are $11 puts and that looks like it’s dure to someone jumping the gun on them as there’s no reason for them to hold these prices.  This is definitely the kind of trade you wait out though as .20 is 20% right there so if you don’t get your entry price, there’s not much point in doing the trade

    The continual rally on declining volume speaks to a "frightened" mood that is bullish for stocks, says Potomac Research’s John Mendelson. He’s among analysts that see low volume as pessimistic and a contrarian indicator.

    EWJ/Magret – That is a defensive bullish position, still valid if we break up and also a play on a stronger dollar.  It’s meant to offset a generally bearish portfolio so the loss is expected.  At about $9.20, probably .45 on the $9s, I’d want to DD. 


  53. if we do get a pop, are there Dec Dow puts you’d buy?  Buying the Nov’s with two days to go means I have to stay glued to the screen (not sure the boss’d like that).  Or, is it just a mistake in general to buy out month?


  54. Can LDK or LZB maintain or is a little put worth trying?


  55. Phil: Bidu: and with each roll you hope to make some bucks,
    yet, Phil, I still look for the answer to: if either the caller or putter moves weeks before OPEX into a 60% gain or loss situation, do you take an action or leave it untouched ?


  56. Phil,   UNG   Got any ideas on that one?


  57. Phil
    I agree with your opinion re leap strategy deployed by Jomama. I have executed some similar trades that have worked out very well. My question is: Would an inverse strategy work sucessfully, selling leap calls on stocks that you feel are weak fundamentally or overpriced, and you feel have a bearish bias? Among others, I am thinking of HOG. Thanks!


  58. SPG, I’m moving to the dark side by buying premium, entering long PUT vertical, SPG Jan 70/65 PUT for $1.38.  The 65/60 PUT vertical is $0.80, but I like to spend 0.55 more for a higher breakeven point.  The intention is to later sell Jan 50 or 55 PUT for $0.8 to $1, and/or selling Jan 90 CALL for $1 to recover the cost.  This pays $3.65 if the stock drops.


  59. Peter Are you planning any new short strangles for Dec /Jan expiration?


  60. Dow puts/JCM – Well we already have the March $105 puts naked so that’s pretty bearish.  I was just taking advantage of the pop this morning to get the cheap puts for a quick profit.   You get pretty good bang for your buck from the Dec $101 puts at $1.20 if you want to play it straight down as you lose about .20 if the Dow goes up 100 and, of course, that would be the point at which we would give up if they break over 10,500.  I’m still wiaitng for a nice, pointless move up to short into…

    LDK&LZB/Morx – I like both of them so I wouldn’t short.  

    BIDU/RIMM - And the answer remains, it depends.  It’s different when you sell a naked spread as it’s all about the target and the net profit on the trade.   Then it depends on WHY you are up or down 50% on one side and WHEN the move happens and WHAT you think is going to happen next so there is no "answer" as to what to do but if you must insist on an answer then the rule of thumb remains we set tight stops on winners with more than 2 weeks to go on 50% gains, 70% gains with 2 weeks to expiration and 85% gains during expiration week.  We also take quick 20% gains off the table (also using tight stops) and we use all that winning cash to work out our losers.  

    UNG/Stock – I don’t like playing them.  I loved them last time they were at $9 because nat gas was under $3 but they went to $12 and we were done.  Now they are back at $9 with nat gas at $4.25 so it shows you what a crap ETF this is to hold long-term.   This is just a stay-away to me.

    Leaps/Gel – The thing about selling puts is that you WANT the stock so it’s low stress.  Also, the thing that kills a sold leap put is bankruptcy but the thing that kills a sold leap call is a buyout and those are much more likely to take you by surprise.  There is nothing wrong with it in theory but it’s the same question as for owning the stock – If, for some reason, HOG flies up to $35, are you willing to be forced short on the stock long-term?  If that stock was PFE and you asked me if I would own them at $14, then it’s an easy answer for me.  If it’s not an easy answer for you then that will cloud all your decision making along the way. 

    Speaking of PFE, MRK hitting 52-week highs.

    Great article by Todd Harrison:  Albert Einstein once said that the definition of insanity was doing the same thing over and over again and expecting different results. Through that lens, the current course of fiscal and monetary policy is absolutely insane.

    Here’s a guy betting against EDZ - Buy BRICs on dips: the advice from Templeton’s Mark Mobius, who’s increasing emerging-market holdings and expects stocks in Brazil, Russia, India and China to gain 30-40% within three to four years.

    The debate continues over whether Goldman Sachs (GS) benefited from the AIG bailout: Goldman’s claim that it was hedged against losses if AIG collapsed is rebutted by the TARP inspector general’s report, which says it was "far from certain" that underlying CDOs could be liquidated, and that it would be difficult for Goldman to collect on credit protection in the event of AIG’s failure.


  61. srs — I own the stock and sold the dec. 9 calls for .60 a day or two ago.  does selling the dec 9 puts short for .90 make any sense, or am i running myself in a circle?


  62. Peter D
    Next to choosing the right stocks or etf’s, I think the most important skill needed for successful option trading is the "art" of making adjustments as the market gyrates. It is definitely a "seat of your pants" skill that is not finite. Do you (or others on the board) have a suggestion for a good book (books) on this subject ? Thanks!


  63.  gel – the best way is to watch phil manage a trade/recommendation that has gone the opposite way.  invariably, there will be 4 to 5 people who panic and want constant advice on adjustments.  just watch it unfold from the sidelines – i have learned quite a bit over the years by following those threads.  


  64. Wow, is this Peter Navarro’s column or mine?

    Last week, I called a market top; and the Dow Jones industrial average proceeded to reel off a 3.2% gain. There are a couple of important observations to make about this market action.

    First, the tape never lies so it’s important to be flexible when the market moves in the direction that you do not expect. While I entered last week slightly net short, I had a trailing stop loss on my major short position TWM and as the market rallied, I was able to close that short position and still preserve some of my profits from the previous week.

    Second, the fact that the market rallied does not mean that I’m ready to give up on my call that a market top has been reached. As we enter this week, the Dow will open at 10,023. This is still slightly below the actual market top, which was registered at 10,092 on October 15. It will take a sustained push through this level for me to give up on my market top call.

    A week later, he’s frustrated and writes this one.  I feel his pain but it bothers me that I seem to be in bed with the academics while CNBC seems to find an endless supply of traders who are buying, even though most of them say something like "I’m holding my nose and buying."

    Speaking of idiots on CNBC.  This guy is pointing to an uptrend in the lumber FUTURES and says an uptick in the futures is a reason to start buying lumber companies and builders.  This is very funny to me as I just had a whole conversation with the ICE people (they called me, not big fans) who claimed that the futures don’t drive the markets…  This does sum up the market logic at the moment – people are buying oil futures (not the product, just the futures) so we should buy oil companies who produce real oil and need buyers.  Even if the buyers don’t show up, at least we can charge the current buyers, who are trying to cut back to save money, a lot more so we can make nice profits.  This is so unhealthy for society…

    SRS/Jcm – Well if you want to DD at net $8.10 then it makes great sense and, of course, you still have the $9 callers, which have .60 left to lose. 

    DIA – Back on the $103 puts at .28.  That makes .33 even (as I lost .05 before) and I won’t have much tolerance for a pullback.


  65. President Barack Obama told Fox News on Wednesday that he is worried that spending too much to help boost the economy could invite a second recession because rising deficits could sap confidence

    What,  no second stimulus


  66. sp,
    who says china is running out of nat gas?


  67. What was that ??


  68. ICE people (they called me, not big fans)

    Phil did you invite them to call?


  69.  phil, i love the mantra from all the cnbc parrots – "fundies don’t matter – the market will go up until it doesn’t"    Very useful advice (Insert huge SARCASM font)


  70. Hi Phil still sitting on my MSFT Jan 26 straddle call sold for 1.49 now 4.17 put sold for 1.14 now .18 how do I get out the caller ?


  71. Jobs, Leading Indicators and the Philly Fed tomorrow.

    Next week is Existing Home Sales Mon.  Tues is GDP, Case-Schiller and Consumer Confidence.  Wednesday is Personal Income and Spending, PCE Prices, Jobs (early), Durable Goods, Michigan Sentiment and New Home Sales.

    I’ll be out of here Weds afternoon and out Thurs and Friday although I’ll likely be on-line for Friday’s chat and I’ll put up at least a small post.  As I said Monday, I think this is toppy and there is no reason to risk bullish positions that are unhedged as a catastrophic fall is more likely than a castastrophic rise

    Oil down to $78.80 – woo hoo!  Gold at $1,141, copper $3.11. 

    Volume today still really low (85M at 1pm) so anything can happen but that doesn’t mean we have to believe it!


  72. magret, yes, I’m always scheming for the next month, but SPX and RUT are not that enticing now with a lower VIX.  So my strategy is to wait out the time with minimal positions.  I did have a SPX Dec 1150 short CALL and 975 short PUT as posted a few days ago.  Since then I added a few more 1150 short CALLs and SPX Dec 1170/950 short strangles.  These are minimal positions to wait for VIX to shoot up.
     
    gel1, Optrader has some good recommendations.  I have a few such as MacMillian, Nison (candlesticks), but my best book is PSW and my own trading.  The book can cover the basics, but nothing would cover all situations that we may encounter, so experience counts, especially experience with big crashes and big spikes.  Options trading seems confusing and hard at first (due to the Bid/Ask and delayed action), and needs patience, but once we understand it, we get to understand how the market moves with resistance and support.


  73. High/Gas – sorry this is the best I can do apologies if not that helpful http://74.208.72.72/wjepaperlogin/showpaper.aspx?20091118


  74. The guy on CNBC was saying buy lumber because Cramer has a position in WY and it has been one of his laggards.


  75. Phil: Re GEL Leaps You can get PFE for $13 selling 2012 $15 puts  for $2.05…. what do you think…


  76. MA now down for eight consecutive sessions (yay!). Sure seems like COF, AXP should be vulnerable too up here (COF especially).


  77. Hey, we keep boxing with the HAL and other high frequency trading computers.  Look at them dumping shares at a higher volume for Red candles in SPY 5 minute chart.  Today looks doomed to the downside, and other computer may follow to create a day’s low.  VIX didn’t quite budge yet, until after they have time to buy more PUTs, before VIX rockets up!


  78. I am absolutely LOVING all the negative press for GS!!


  79. Phil – i am considering an entry in SHOO. Like buy the stock here, 39.5 ish, sell Mar $45 CC for $2.10 and Mar $35 puts for $2.0. The target i read for SHOO in 2010 is $48 to $52. OK here’s your 1st chance to make fun of me this week. Take it or leave it. 


  80. In response to errors on recovery.gov (the White House’s effort of unprecedented transparency):
    "We know what the problem is and we are trying to fix it,” said Pound. Asked why recipients would pluck random numbers – 26, 45, 14 – to fill in for their congressional district, Pound replied, "who knows, man, who really knows. There are 130,000 reports out there.”

    It’s kinda breathtaking – the contempt they have for our money. Debauched.


  81. SPG doesn’t have enough money to pay its dividend in cash; highly unlikely they do anything with GGP.


  82. will SRS NEVER go down, even if the market goes down 20% from here?  i don’t get why commercial real estate is so great, unless the stocks have been oversold from 2007 till March 2009.  Phi. your thoughts?  and TZA, still not playing it?


  83. dmankoff/ SRS jumped yesterday at the end of day, this is probably why it is not cooperation today


  84. Adjustments/Gel – Read the Ebook on our site, there’s a lot there on adjusting trades.  Also, Sage’s site at MarketTamer is big on how to adjust trades and the link above this page gives our members a good deal there too.  Jomama has a good point as well.  There’s a great military quote: "No plan survives contact with the enemy" – adjusting trades isn’t about rules, it’s about giving yourself a flexible toolkit that helps you identify opportunities when they present themselves.  Look at BIDU and go back over me and RMM discussing it for 2 days – you can have all of the right instructions but it’s a matter of what you are prepared to do when push comes to shove.   Learn to use the tools, learn to recognize the situations, stand by your convictions – all those things take time and patience to learn.  If there was a quick book on the supbject then eveyone would do it and no one would make any money so be glad we’re a niche profession! 

    Obama/Kustomz – What, Obama spoke to Fox news? 

    China/High – They are having a very cold month and a 50% increase in nat gas deman last week.  It’s a combination of the cold and the sudden populatrity of gas-powered heaters but it’s probably just a temporary allocation issue, not a long-term shortage of gas in China. 

    ICE/Kustomz – No, they invited themselves.  They sent a letter asking if they could clear up some "misconceptions" about their systems but then they said I couldn’t quote them so kind of pointless.  I will say though that I do feel they do what they can to keep a lid on shenanigans but I asked them what is done to stop someone from buying on the NYMMX or CME and selling on ICE or vs. vs. and their answer is pretty much that that would be the CTFC’s problem, not theirs so without regulatory coordination by the CTFC that ties in and monitors ALL trading from ALL exchanges in real time and hunts for patterns and tracks them back to the participants and generates immediate calls from compliance people (yeah, right), then the whole concept of regulating a single exchange is pointless.  Again, that was my overriding point, ICE was founded so there would be ways around the regulations.  The fact that they themselves internally regulate does nothing to erase the fact that there are now 3 cups to hide the ball under. 

    Parrots/Jo – I know, it is so sickening.  The country is full of people who were wiped out in the last crash and they are doing everything in their power to herd them back into this market.  If it crashes again, then what?  Oh, I know, we’ll bail out all the financials again and forclose on another 10M homes and then Cramer can tell us how great that is and call another housing bottom…

    MSFT/Yodi – Any you never bought the stock?  Oh well, you can always buy the 1x the 2011 $30s for $3.35 and roll the $26 callers up to 2x the Apr $31 calls at $1.45 and 2x the Apr $28 puts at $1.25 so that’s $3.40 collected.  That puts you in the leaps for net $0 and you can also buy Jan $22.50 puts for $1.35 if you need to cap margin to the downside and, of course, be ready to buy another 1x the leaps if MSFT breaks over $30. 

    DIA – Well mission accomplished on the $103 puts and now we see what Mr. Stick can accomplish for the day.  Without the RUT over 600 I have no desire to cover the March puts

    PFE/Magret – It’s a little far out for my taste but a very solid trade and they pay .64 dividend, which is 5% to your basis.

    COF/Eric – I agree, silly pricing.  AXP is still where it was when we sold the $41 calls the other day but that play is working.

    VIX/Peter – Note the VIX Dec $22.50 calls are $3.20 and the VIX $22.50 puts are .90 with the VIX at $22.26 – how’s that for sentiment!

    Sector ETF strength: Agribusiness– MOO +1%. Commercial Banks– KBE +0.9%. Solar– KWT +0.7%. Regional Banks– RKH +0.5%. Agriculture– DBA +0.4%. Pharma– PPH +0.3%.

    Sector ETF weakness: Internet– HHH -1.4%. Oil Services– OIH -1.4%. Biotech– IBB -1.4%. Gold MinersGDX -1.4%. Semis– IGW -1.3%.


  85. Phil: you said "we also take quick 20% gains", well, the BIDU dec 450 caller is up 24 % green, is this to take ??


  86. Phil: which option will change faster: BIDU dec 400 or 450, it should be the 400 with the higher delta ? True ?


  87. Where is MrMocha ?   — HK,  HK,, HK


  88. Phil: i have the Jan DIA naked puts 103: should they be moved out in time ?


  89. SHOO/Morx – They are solid but also at ATH – surely there are better bargains in the sector?  I think if you are going to play them that way, maybe consider NOT buying the stock below $40 so you don’t suffer double from a pullback. 

    SRS/DMan – I think CRE is the most likely thing to topple us into round 2 of the recession.  I think a lot of what we are seeing now – manipuluated markets, dollar dropping, commodity pumping and BS statistics along with government and corporate happy talk is nothing more than a very desperate attempt to get the consumers off to the mall in the next 35 days.  Consumer spending is 70% of the GDP, they can’t "fix" that if it breaks and the only reason it isn’t down 10% is because they are reaching into people’s wallets and ripping out 100% more for fuel than last year and 25% more on general commodities (CRB).  So if you force people to spend that much more on things they have no choice about, you can pump up your BS economy numbers even though the reality still sucks.  As to TZA – still no, you can’t fight the Fed, you SHOULN’T fight the Fed and with TZA you are bringing a gun to a knife-fight, which sounds good except you are pointing the gun at your own head. 

    BIDU/RMM – Does it get you even?  If not, you can ride it out.  Yes, the higher delta one will change and if you take off the $450 then you are left with all the pain of the $400 puts as they sell down. 

    DIA/RMM – Yes because you don’t want to sell Dec puts against Jan puts do you?  It costs you $2 to roll across and about $3 to hit the March $105s so just make sure you earn that selling the front-months over the next 3 months.  You need to make .25 on a half sale 24 times! 


  90. Phil – mattress play for next week – I will be out next 7 days and can only check my emails/account once a day (end of day). What strategy would you recommend for mattress covers. I was thinking just leaving it 1/2 cover Dec 104′s or suggest something else?


  91. Here comes the pump


  92. Phil/Jo/Peter D…. Terrific thoughts re trading skills…. I guess you are not a REAL soldier until you have a few wars under your belt.


  93. STX – Phil we did an earnings play of Nov 16′s Sold against Jan 17.5.  Would you close that or roll to Dec?


  94. Thanks Phil – Are you saying (re SHOO) don’t buy the stock til its over $40 or just wait to get it put to me? Im not comprehending. Also, i cant sell calls unless i own the stock.
    i read recently that stocks that are at their highs tend to go higher and stocks that are trading near their lows tend to go lower. What’s you take on that? I expect overall market sentiment is something to think abt.


  95. Phil: example for learning how to manage buy/writes:
    have MO stock, 18.7, now 19.2, gain 3%
    have jan 17.5 calls, 1.41. now 1.83, gain 30%
    full cover
    caller dec18, 0.74, now 1.37, loss 84%
    putter dec 18, .23, now 0.07. gain 70%.
    what is there to do if anything ?


  96. VLO couldn’t hold spike from inventory numbers this morning


  97. Anyone getting the feeling that AMZN likes the number 130 this week? Tempting to short a few calls there, maybe against Dec. 135s for 1.50.


  98. Phil if you’re going to be out the rest of the week I have a few rolls I’d love some help on.
    COF – Jan 41 C short Nov 38 C
    AKAM – Jan 22.5 C short Nov 21 C
    SNDK – Jan 22.5 short Nov 22
    STX – Jan 17.5 short Nov 16
    VZ – Apr 28 short 1/2 Nov 28

    Thanks for all your help.


  99. DIA Mattress overnight: nude? bikinis? full dress?


  100. Phil, will there be a price where you like UNG?  It is trading at its ATL for the second time.


  101. Cap - HK has been dropping for some time now. How far do you think it will go before boucing? 20?


  102. Just back from vacation and can’t find any 100K adjustments listed in the portfolio.
    What are the rolls on BAC Nov 17.5 p, C Nov 5p, CROX Nov 8 p?


  103. Phil, 
    When you have a bit of time, please respond to my essay question. :-) What would be some good stocks to hold LEAPs on and write short calls against for monthly income?  I am also thinking that I will hedge with a long put a few strike prices below but I’m unsure if I should halve the LEAP or hedge for the entire duration. So, it would be a like a diagonal calendar/collar strategy that produces monthly income but also protects to the downside, such that if the stock dropped significantly over the next few months, I would cash out the long put (short call also worthless) and re-evaluate. I know that you would probably recommend the LEAP being ITM but does it matter as long as my deltas work out and I am not planning to hold until the end? This is probably my plan for at least some of the picks in the new portfolio as I would rather sacrifice some potential profit for the sake of greater immediate protection and for the sake of not having to wait longer for a long recovery in stock price after a double down (which I rarely like to do because of my portfolio size).  For example:  VZ Jan ’11 30c long, April 28p long, and Dec 32c short (except I’m not thinking VZ becasue the premiums seem too weak). To put this in context, I only get paid every month for reaching a new highwater mark so I have little tolerance for large trades that take a long time to unwind. Since this is my first year trading full time, I have been doing a lot of experimenting with what works for me and learning how to balance that with the trading ideas I have plus all the excellent ones I get here plus all the other issues: discipline, effective use of margin, risk tolerance, etc.  So, if you had a small account (100K) and you just needed to make a "guaranteed" 2-3% a month, would there be a better strategy than what I just outlined? 


  104. DORO = i think he posted that in the conversation on Nov 12. I would paste it but it will go all confluie.


  105. had no idea that lazy boy could have so much get up & go.


  106. Mattress/Concreata – It depends what you are covering of course.  The 1/2 cover with Dec $104 puts at $2.50 (hopefully) will pay for about 3 rolls up so 10,800 and you start getting real damage on you March puts.  If the rest of your portfolio is going to make you very happy at 10,800, then that is fine. To the downside, a drop back to 10,000 will run those puts up to $4 and will raise the March $105s to about $8 (up 40%).  Since it’s a 1/2 cover, you can roll down to 2x something else that has more premium so the question is really whether the 40% is enough offset on the downside and if your long gains will make you happy once the March puts start going red on you.

    Just getting past 100M at 2:20, a little more volume than yesterday and it’s down. 

    STX/Bgb – Yeah, that went perfect!  I was worried yesterday too…  The $16s still have .20 premium, which is a lot so maybe see if we flatline to $16 and wipe out the caller as the Jan calls aren’t going anywhere. 

    SHOO/Morx – Yes.  As long as you don’t think the stock is getting bought and you think they are near significant resistance (the kind they are not likely to punch through before you can cover) then there’s no actual need to buy the stock per se – just the fact that you are ready, willing and able to buy is your cover.  Of course, rules are rules though if you can’t sell naked.  As to the other – a stock can’t make a new high unless it hits the old high and it can’t make a new low unless it hits the old low so there is a 100% correlation when you look at a new high and see it came after testing the old high.  If you factor that in with a 50% rejection rate otherwise then that theory sounds great – but only in the same way that your keys are ALWAYS in the last place you look (because after that, you stop looking!).

    California’s top fiscal analyst now thinks the state’s gaping budget deficit will expand to nearly $21B next fiscal year, now that several provisions in this summer’s plan are falling short on revenue projections.

    A tax on financial transactions – like the one proposed by U.K. prime minister Gordon Brown – faces an uphill battle in the U.S., with lackluster support unlikely to overcome powerful opposition. A 0.25% tax has been floated in the House but doesn’t seem to have the administration’s support.

    Best way to cap off a ridiculous commodity rally: After making big moves into gold earlier in the year, John Paulson is launching a fund to buy shares of miners and other related investments and derivatives, with an eye to outperforming gold prices. Paulson reportedly has up to 10% of his $30B under management in gold-related investments and will invest up to $250M of his own in the new fund.

    MO/RMM – You don’t have MO stock with a 3% gain.  You have an MO Jan buy/write at net $17.73/17.87, which I can’t even understand the point of as you get called away with a .25 gain and then you have some calls that are up 30%.  You have to have a goal for your trade, not just a bunch of things you hope will do something or other at some point.  I don’t like the whole trade because the premiums are low but at least they have a 7% dividend so you can just move the Jan caller and putter up to the June $18 puts and calls at $2.75, which puts another $1.30 in your pocket and drops the basis down to $16.43/16.97 and you just go to sleep and collect your dividend and get a bonus buck if you are called away.  As to the naked calls – what are you supposed to do when you are up 30%?

    VLO/Stock – Going though a very sad phase. 

    AMZN/Eric – they can move $5 really fast….

    Sorry, it’s not the rest of THIS week I’ll be gone, that is very early warning for Thanskgiving week.  Chance are, none of you will be here either but last year we had fun on Friday with the hard-core traders.

    List/Bgb:

    • COF – Is that a bear call spread?  I agree, they are overdone here.  Just keep an eye on consumer/shopping data.
    • AKAM – Another bear spread?  That one I’d ditch as on-line should shine this year. 
    • SNDK – That’s pretty much on target.  That’s a wild stock, as I’m sure you noticed so you may want to consider getting out rather than going to a 1-month spread.  I do like them and you could spend .63 to roll down to the $21s and sell the Dec $22s for .82 so you take .20 off the table and you are in for $1 (based on where you are now) on a $1 spread with a 1-month advantage but again, you are depending on the consumer to buy IPhones and TVs for Xmas.
    • STX – As above, I think ride it to see if we get an expiration at $16.
    • VX – Me love them long time.  I’d roll to 2x the Dec $30s (.98) and eat the .60 to gain the $2 spread.

    DIA/Cwan – I’m so cared to be 60% bearish!!!  RUT is below 600, Nas is below 2,187 and XLF below $15 so all three and I’m willing to cross my fingers and stay naked on the DIA March $105 puts.

    UNG/SS – No way.  Nat gas is UP 50% and they are back to $9 – what’s to like?  When nat gas is $2 then I like UNG, or maybe we can find an ETF that behaves better…. 

    $100K/Doro – We made final adjustments on that last week (Wednesday I think) and we move to new $100KP on Monday.  BAC is fine for rolling forward to Dec $17.50 puts and calls, C can roll right along to Dec $5 puts and CROX Nov $8 puts at $2.30 can roll to Jan $7.50 puts at $2.05 but I wouldn’t sell calls until you can get at least .50 for the $7.50s (now .25).

    Rep. Paul Kanjorski’s measure empowering a council of regulators to dismantle systemic-risk firms makes it out of committee. "Financial firms that want to play in a casino need to have their own resources to cover their bets and not assume that tax dollars are available in reserve if their bets fail," he says.

    Cool article on who’s really behind deceptive Internet scams:

    The scandal is involves a small cabal of firms using quite outrageous — though seemingly legal — tactics to trick people into joining “membership clubs,” which then extract monthly payments from the victim’s credit card.

    We’d always assumed that such shabby online antics — much like penis extension spam or those promises of prize draw winnings if you call a special number for ten minutes — were the domain of shady off-shore operators and/or the offspring of jailed mobsters.

    But no! Turns out some of the best biggest names in private equity stand accused here, along with a large number of rather reputable well-known online retailers.  Let’s try a little exercise. Let’s reprint the findings of the committee staff’s investigation, while inserting the various parent company names (in bold):

    Using aggressive sales tactics to enroll consumers in unwanted membership clubs is a billion-dollar business. Affinion (Apollo Management) , Vertrue (a group of private equity investors led by One Equity Partners, the private equity arm of JP Morgan), Webloyalty (General Atlantic LLC) and their e-commerce partners (US Airways, Travelocity, Priceline, Expedia, Classmates.com, , 1-800-Flowers.com, etc) have earned over $1.4 billion in revenue by using aggressive tactics to charge Internet shoppers for club membership programs. Since 1999, Internet consumers have been enrolled more than 35 million times Apollo’s, One Equity/JPM’s, and General Atlantic’s membership clubs. In June 2009, there were 4 million Internet consumers currently enrolled in these three companies’ membership programs. 


  107. I don’t know how you bears do it. Everytime I try to switch my brain on and go even slightly bearish (I’m not talking about any of this hedging nonsense) I get smoked. Good thing I’ve learned to honor stops over the years.


  108.  Hi Cap, I’m buried at work so just checking in here occasionally.  Stopped out of my HK shares higher up, kept the Dec 21 calls fully covered with NOV 22s.  At this rate the covers will pay in full and I’ll use that coin to roll the DEC calls down; I just can’t get excited about shorting HK until the market turns down badly.


  109. Kwan, I’m with you, I find it hard to be bearish, but last week I decided this level was lunacy and I turned the corner and picked up quite a few negative positions; needless to say it’s not working very well thus far.


  110. Essay/Ac – Unfortunately, that strategy, which I used to love, does not work well in such a volatile market.   The tolerance for those trades is generally about 10% moves on the stock in a month and now we have stocks that move 10% a week, sometimes twice.  I still like the more neutral double diagonals, buying long puts and calls and just selling premium every month but, even there, you have moves like AMZN that blow them out.  Better to take a look at what we do with the new $100KP as we’ll take em if they make sense (like on dividend paying stocks, and VZ is a good one) but mainly we will stick to buy/writes that give us plenty of downside protection within each play and a clearly defined exit point.

    Ben Bernanke saying there are no obvious asset bubbles seems "weird, and not in a good way," Roger Nusbaum writes, warning that bold and unfounded confidence may come back to bite Bernanke. "The notion of anyone with influence saying ‘Keep on buying folks, it’s all good in the hood’ seems outrageous," he says.

    Let’s keep in mind why you should NOT listen to the government:

    Damn, getting stuck after all!  We’ll see what they can push out but jobs in the morning keeps me brave (not that anyone seems to care that we lose 500,000 jobs a week but it’s something we can count on anyway).  

    Actually, a quick cover is the DIA $104s, now .65 with a stop at 10,400, which I like better than selling puts.  If they pop us back to 10,430, we should make .20 at least and that’s our quarter for the day


  111. Out of my last ICE short condors which gained 1.025 against 1.70 net margin in six days. Cool.


  112. You mean someone actually had the balls to call Bernanke out on that ridiculous statement
     
    Ben Bernanke saying there are no obvious asset bubbles seems "weird, and not in a good way," Roger Nusbaum writes, warning that bold and unfounded confidence may come back to bite Bernanke. "The notion of anyone with influence saying ‘Keep on buying folks, it’s all good in the hood’ seems outrageous," he says.


  113. ICE/Eric – That was a very well-constructed play, nice job!

    Good Bespoke list:

    Simost

    Sileast

    Bernanke/Kustomz – When will people wise up and realize that the Fed is NOT our friend.  All you guys should read "The Creature from Jekyll Island" or at least watch the video if you are reading-challenged! 


  114. Will do but just to argue/question a bit. The double diagonals are dangerous because they are not really hedged as the long calls and puts effectively cancel each other out and you are left with a naked straddle/strangle which can still run away in either direction. Whereas, the other strategy if done properly either: 1) provides a small income on flat/small range, 2) hits the upside call for a "call away"/cash out for a profit,  3) provides a pretty nice BE down below, or 4) goes way low and never recovers for a small loss after accounting for the wasted call and the slightly-lower delta protection of the long put. Even if the stock dropped 20%, it seems like you could sell another call as your 3rd protective/recovery measure and probably get back or close to even on that write, not to mention if it stayed flat down there and you could do it multiple times. What am I missing?


  115. Look at chart for CL


  116. Kwan — it’s easy.  All you need is an insatiable appetite for losing money and feeling foolish. 


  117. Watch this video and tell me how in the world Bernanke has any credibility left

    Bernanke: No Obvious Asset Bubbles In US Now
    http://www.youtube.com/watch?v=9QpD64GUoXw

     


  118. Phil:
    We established a number of verticals in short ETFs (e.g. TZA, TWM) awhile back, generally in the April time frame. Seems they’re worth holding and rolling down for better positions.


  119. SRS just got crushed!


  120. By the way, if the SPG move is justified because the (possible) GGP acquisition goes through and gives them some fabulous advantage, why is every other commercial REIT soaring too?


  121. Phil,

    Short here ?


  122. RUT 600


  123. Stategies/Ac – There is no call away on a leap strategy unless your leaps are DITM and, if your leaps are DITM, then you probably don’t have enough downside protection.  As I said, I’m not adverse to them but the strategy is most effective for picking slow-moving bargains in a steady market and does not protect you well from violent market sell-offs or sharp rises where your front-month callers can outgain your leaps.  All I can say is paper trade it for a month or two and compare it to what we do in the new $100KP because you can argue merits all day long and it will prove nothing. 

    CL/Stock – I love how companies can now gain $1.5Bn in market cap for no particular reason these days.

    Damn, those DIA calls are flying, up to .75 already.

    Verticals/Chaps – Well, they were disaster protection designed to give a fixed return if our longs didn’t pay off.  Hopefully the longs paid off and you don’t need them anymore.  Rolling makes sense if you are pushing the long side but not if you are in profit taking mode ahead of the holidays. 

    SRS/Bgb – URE usualy tops out around $6.40, that’s usually a good spot to take SRS.

    Selling 1/2 Nov $104 puts for .50 – that’s good money.  Obviously stopping out the $104 calls with a .25 gain.


  124. DIA $104 calls – Sorry, that was .20 gain!!!!  Either way, taking off the table.


  125. if you bought dia Dec 101 puts for 1.15, what’s the stop?  I could have marked this reversal almost to the minute my bid got hit.


  126. Can it get anymore ridiculous?


  127. CL
    BRIEFING.COM] Stocks in the broader market continue to trade with modest losses, but shares of outfit Colgate Palmolive (CL 86.52, +3.68) are suddenly ripping higher amid news from Daily Telegraph that Reckitt Benckiser is close to announcing a multibillion pound cross-border transaction that many suspect will involve a consumer staples play. Consumer staples stocks, as a group, are currently down just 0.1%.


  128. Strange volume action on SRS and URE in the final minutes.


  129. That may have been late-day levereged ETF rebalancing (SRS/URG)


  130. Volume 166M at close, just a bit more than yesterday.  Check out 15 min chart of Monday off the afternoon high through today’s close – it’s like seeing double!  I’d love to know, statistically, what the odds are of 2 days of "random" trading yielding patterns that match that closely.  I wonder if they pull a triple tomorrow by selling off in the morning again. 

    DIA/Jcm – Maybe .95, really we’re looking for a clear break over 10,500.

    More ridiculous/SS – No, I’m pretty sure this is it but, then again, we all know it CAN get even more ridiculous than this…


  131. Tradansh – HK – beats me how low it can go.  I like the price here though.  I am told still on a P&F buy signal.


  132.  Cap – You’ll appreciate this


  133. Mocha – long, not short HK.


  134. SS Dirk .. that was a riot !  Thanks.   Well done ridicule.
     
    It will make it on to hopeychange.blogspot.com tonite


  135. Cap – What do you mean by "I am told still on a P&F buy signal"? What’s P&F?


  136. phil/ VIX
    what do you think about call batterfly 22.5/25/27.5 @ 0.4 ?


  137. P&F – Point & Figure … a different type of charting … I dont know how to do it but a lot of people follow it for buy and sell signals.


  138. Thanks Phil. I realize there is no call away on that kind of play; I was just using it as shorthand to refer to it going ITM on the short call where one would want to cash out much beyond that point. I wasn’t thinking about the near-term calls outpacing the LEAPs though. I think that is where the logic in the trade breaks down. I’m looking forward to the new portfolio.


  139. P&F/Trad – Go to stockcharts.com, they have a nice instructional on P&F charts. 
    VIXerfly/Tcha – It’s a nice risk/reward as long as you realize you have as much chance of hitting a target on the VIX as you do of hiting a number on a craps table (and that’s assuming it stays between 20 & 30) so of course they payout is good.  I play the mega-millions lottery when it’s over $200M for the same reason (the odds are 170M:1) but that doesn’t mean I think I’ll win….

    Spreads/Ac – Any violent movement screws up that strategy, especially if the market whips up and down.  If you sell an IBM $120 call for $5 and IBM runs up to $130 and you roll up to the $130 calls the next month taking a $5 loss, then IBM drops back to $115 you are out $5 you put in for the roll-up and then another $5 on the loss to your leap that wasn’t fully covered.  This was my favorite strategy since 2004, when the markets pretty much flattened out and was even great as we ramped up in 2006 & 7 but then the market started violently dropping and popping and the strategy no longer worked.  It would take a good 6 months to a year of fairly flat trading before that becomes a "safe" strategy again.  Meanwhile, with a high VIX (and over 15 is historically high), there are better ways to make money.

    Busy day today:
    Thursday’s economic calendar:
    8:30 Initial Jobless Claims
    9:00 Conference: Restoring Global Financial Stability
    10:00 Leading Indicators
    10:00 Philly Fed Business Outlook
    10:00 CRE Leading Indicator
    10:00 Hearing: Financial Regulatory Reform
    10:00 Markup: Restoring American Financial Stability Act
    10:30 EIA Natural Gas Inventory
    4:30 PM Money Supply

    Another take on the volume-free rally: Just how many blocks are trading through those dark pools these days, anyway?

    The Congressional Budget Office’s word on the Senate’s healthcare reform bill: $849B cost and a $127B reduction in the deficit over 10 years. Majority Leader Harry Reid will need 60 votes (including three or four Senators who are bristling) to prevent a filibuster of the legislation.

    Didn’t I just say this?  A spike in lumber prices despite weak housing data likely means that in a weak-dollar era, it’s all about investors trying to get any commodity they can get their hands on.

    The gold rush has resulted in a lot of buying into (and cashing out of) gold ETF shares by owners who might get a rude awakening come tax time: The IRS treats gold and silver (even in ETFs) as collectibles, like baseball cards, and so they don’t qualify for the 15% maximum long-term tax rate, but instead 28%.

    All of the job growth from 2000-2007 in the top U.S. metro areas was erased in the recession, according to a New York City comptroller’s report: 2.29M jobs lost in total, with the biggest brunt taken by Chicago (-257,700 jobs) and Detroit (-467,400 jobs).

    This year’s oil run is no 2008, but an energy-price squeeze is still becoming a big threat for consumers, writes Colin Barr. Forget $100; crude at $80 is enough to risk a fragile recovery.  Duh!

    SHLD has a big beat this morning.  Like I said, don’t bet against Eddie! 
    TSL with a big beat too.  Should help our LDK and SPWRA stay alive in the downturn.


  140. Futures down nicely pre-market. Let’s see if this holds during the open.