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Testy Tuesday Morning

Wow – what a lot of work to get back to last Tuesday's high! 

As usual, the vast majority of gains came in pre-market trading and the rest came in light-volume, early morning trading while the rest of the day was dominated by every buyer finding a willing seller for 75% of the day's volume.  We saw what happened on Thursday when someone big wants to sell and there are no buyers so we'll see how long the bull's luck (manufactured or otherwise) will hold out as we begin to get economic data along with some early earnings reports.

The Ag sector popped 2% yesterday ahead of tonight's earings from MOS with MON checking in tomorrow morning so we'll see how wise those last-minute bets were in short order.  SONC also has earnings tonight and we like those guys long-term.  SONC makes a decent buy/write candidate as you can buy the stock for $10.29 and sell June $10 puts and calls for $2.25 for a net entry of $8.04 with a very nice 24% profit if called away at $10 and an average entry of $9.02 (a 12% discount) if more stock is put to you below $10 in June. 

FDO and WOR also report tomorrow morning.  FDO will be interesting but a weak dollar probably hurt them last quarter.  Tomorrow night we hear from BBBY, BLUD, OHB and Sonic competitor RT, who seem a bit pricey at $7.50.  Thursday we get our first real builder, LEN along with STZ and TXI.  After the bell on Thursday we hear from APOL, CRI and SCHN with GBX and PSMT on Friday.  AA officially kicks of earnings season next Monday with GAP, INFY, KBH, BGG, SCHW, SHFL, INTC and JPM highlighting the reporters. 

We have plenty of data this week including Factory Orders and Pending Home Sales at 10 am along with December Auto Sales throughout the day (did you get a new car for Christmas?).  Tomorrow is jobs day, with the ADP Report and Challenger Job Cuts ahead of the bell followed by ISM Services (yesterday's ISM was a nice beat) and, of course, Crude Inventories at 10:30 which are unlikely to sustain $82 oil (USO Jan $40 puts for .80 are a good way to play this)We talked about the other stuff yesterday so I won't repeat it – suffice to say we have plenty of data this week to see if we justify these lofty levels.

Could Apple sell 2 million units of the new tablet at $600 each to generate $1.2 billion in 2010? Piper Jaffray analyst Gene Munster thinks they will.Apple generated almost $35B in revenue during the last 12 months.  If Munster is correct, the tablet could have a nice 3%+ impact on revenue and improve year-over-year revenue growth.Expectations are that it will be similar to the iPod touch but larger and capable of running most of the iPhone Apps and include a 3G cellular modem.Huge discussion on TechMeme.Kara Swisher / BoomTown:   The Jesus Tablet Will Walk on Water and Turn Fishes Into Moneyinternetnews.com:   Apple Touchscreen ‘iPad’ Could Take on NetbooksEric Slivka / MacRumors:   New Analyst Mockup and Sales Estimates for Apple’s TabletThe Mac Observer:   Analyst: Apple Tablet Worth $1.2 BillionDerek Thompson / The Atlantic Business Channel:   Apple Tablet: Super E-Reader or Super Mini-Computer?Everyone is talking about AAPL's new "Slate" computer so I'm not going to.  We broke this story back in September and everyone else is playing catch-up but I still like my name (from my original speculation of Dec 30th, 2007) of the IPad better than the Slate.  The IPad was at the heart of our AAPL buying premise at $86 so the real question is – do we still like AAPL at $215 or is it finally time to take it off the table? 

My decision on that will very much depend on the actual size of the Slate.  I was looking for something about 8.5" x 5.5" – the size of a book or a standard 8.5" x 11" paper folded exactly in half.  Something that size would be a companion to and would not be likely to cannibalize MacBook sales.  At a $599 price point, my IPad design would wipe out the Kindle and all other EBook readers while also making a cool little portable music player and nice little web browser.  If they left the phone functions in, I'd be in heaven and would happily stick my IPhone in a drawer and run out for my new all-purpose device.  Sadly, it sounds (if you can believe recent rumors) like AAPL has gone more towards a tablet computer format and that would be a shame and would cause me to get out at $220 and wait for the pullback.  I'm still hopeful, though…

Of course today is the day GOOG announces their own smart phone and I hear the code-name is the ME 2.  I guess 18 months from now we'll be looking for the Google Pad but it baffles me that GOOG wants to get into the low-margin phone business (for everyone but AAPL) rather than concentrate on making sure that the Android operating system with Google search (and the Google Mobile App on the IPhone is great) dominates the platform. 

Now, rather than sitting in meetings with AAPL, MOT, NOK, PALM, SNE/ERIC and RIMM on how to make phones better and searching on phones more useful - Google has decided to turn the people who control 99% of the phone eyeball market into competitors.  If I were Steve Ballmer (and thank goodness I'm not!), I'd be throwing a ton of effort into making Bing the new go-to spot for mobile devices and start cozying up to Google's competitors (ie. everybody). 

Also making enemies today is Iceland President Ólafur Ragnar Grímsson, who vetoed legislation to compensate U.K. and Dutch depositors for $5.5B in losses from the collapse of internet bank Icesave.  This will make UK's Alistar Darling very unhappy as he warned President Grimsson just yesterday: "We have spent many, many months in very productive meetings with Icelandic authorities and the Icelandic government to enter an agreement to make sure that the money was reimbursed to us."    

I guess we'll have to find out what passes for "or else" in England these days as the President listened to 70% of his countrymen and decided NOT to spend 40% of the nation's GDP to make foreign investors whole (unlike our country where we spent Trillions to make sure all speculators got paid).  This story is not about little Iceland per se, but the new paradigm that this opens up in International Risk Instruments as we have a first world economy telling foreign creditors (very sensibly) to drop dead.

Speaking of countries that are totally screwed – Greece has been forced to sell $3Bn worth of FLOATING-RATE notes in a private placement in order to keep the lights on in December and it looks like they'll have to do it again in January.  Greece needs to sell $78Bn worth of debt this year to finance their deficit or about 2 weeks worth of what America needs but add up enough of these poor countries and you are talking real money that will be competing (by offering higher rates) with our US Treasury sales this year.  Have I mentioned I like TBT lately? 

Lenders who want to insure against Greece's default (Iceland just did it) by buying Credit Default Swaps must pay $260,500 per year to protect each $10M or 2.6% so for Greece to attract any interest at all, they need to well cover that additional 2.6% "cost of lending" in their payment promises.  This is why Iceland's official default is so dangerous – it may lead to a change in CDS assumptions that will begin to boost global rates and quickly drive up borrowing costs, first for nations, an then for everyone else who borrows from nations (ie. everyone).

Asia was up this morning because we were up yesterday and Europe is up this morning because Asia is up so it's up to the US to break the cycle this morning (we betted it would yesterday).   It's the same commodity led nonsense that took us up yesterday and we're just not buying it.  We also tested our levels (see yesterday's post) and failed to hold them, which is also a bad sign so we will remain skeptical until we see them held through a closing but more likely we test our lower set first and that's what we're playing for so far in 2010.

KFT's offer for CBY got too sweet for Warren Buffett and he voted no with his 9.4% block of KFT shares on the deal.  "Does the board now believe those purchases ($3.6Bn in stock buybacks at $33 in 2007) were a mistake and that Kraft's true value is only the current price of $27 per share — and that it is therefore fine to structure a major acquisition based upon that price?"  Buffett asks.  "Would the directors use stock as merger currency if the price were, say, $20 per share? Surely the true business value of what is given is as important as the true business value of what is received when an acquisition is being evaluated. We hope all shareholders will use this yardstick in deciding how to vote."

That's why Buffett is my hero!  It's good to see someone putting their foot down and standing up for value in this market…

 


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  1. Things getting interesting again in Iceland:
     
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aujWzg8.dcs4&pos=5
     
    Just imagine if taxpayers the world over followed Icelanders’ lead and started refusing to bail out private banks. It would be the end of capitalism as we know it!


  2. GS raising price targets on:

    AMT

    --

    B/A

    --

    $52.00

    $48.00

    American Tower Corp.

     
     
     
     
     
     
     

     

    CYH

    --

    B/N

    --

    $45.00

    $43.00

    Community Health Systems, Inc.

    CCI

    --

    B/A

    --

    $42.00

    $40.00

    Crown Castle International Corp.

    HMA

    --

    N/N

    --

    $8.00

    $7.00

    Health Management Associates

    LPNT

    --

    N/N

    --

    $32.00

    $30.00

    LifePoint Hospitals, Inc.

    RSH

    B/N

    N/N

    $25.00

    $21.00

    RadioShack Corp.

    SBAC

    --

    B/A

    --

    $40.00

    $34.00

    SBA Communications Corp.

    THC

    --

    B/N

    --

    $9.00

    $8.00

    Tenet Healthcare Corp.

    UHS

    --

    S/N

    --

    $25.00

    $22.50

    Universal Health Services, Inc.


  3. …Sorry, that table didn’t transfer well but you can still suss it out. The format is ticker above and full company name directly below old and new targets.


  4. Good morning Phil,
    Your recommendation on SONC trade it today or tommorrow after the anouncement?


  5. phil,
    cramer bought aapl yesterday for his charity portfolio (5 day silence rule was met). probably does not bode well for aapl’s $


  6. Woops, somebody’s selling this morning!

    Levels we need to see held today are: Dow 10,457, S&P 1,127, Nasdaq 2,242, NYSE 7,380 and Russell 630.  3 of 5 over os good, 3 of 5 under is bad.

    Higher breakout levels are: Dow 10,549, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638 and we REALLY want to watch how the Nas performs up there.

    Yep, it’s the exact same thing I said yesterday – Yawn!

    In the morning post I have a buy/write on SONC with the June $10 puts and calls and a put play on USO (the Jan $40 puts) but, otherwise, it should be mainly a watch and wait day like yesterday as we see what sticks.


  7. End of Capitalism/Eric – Yes, that would be interesting.  More like the return of Capitalism and the end of Corporate Socialism. 

    So, you guys see why you kind of have to make those short bets the day before?  Hard to play catch-up on a bad morning…

    Goldman/AC – MS chipped in with upgrades on PALM, RIMM and QCOM and they said nice things about AAPL but no upgrade (already a buy). 

    SONC/Yodi – I guess you can wait as the June premiums won’t change much but I kind of like them here and think earnings will go well.

    Cramer/High – Yep, the contrarian indicator is in.


  8. LOL – GS just announced that China’s economy grew at 13% in December – the universal cure-all for any bear movement!

    So it looks like they are trying to defend my 10,549 mark on the Dow and we’re at 1,131 on the S&P, 2,300 on the Nas, 7,325 on the NYSE and 637 on the RUT so we’ll see if these end up being significant. 

    Global investment-grade bond sales of $1.4T topped investment-grade lending ($1.2T) in 2009 for the first time on record. Meanwhile, total global syndicated loan volume of $1.8T was down 39% from a year earlier – and the lowest annual volume since 2002. While bankers aren’t lending, investors are.


  9. Phil,
    When you recommend plays like the DIA Jan $103 puts, I’m wondering why you don’t recommend ones farther out with a higher delta, like the Feb or Mar puts?  It seems like those would be safer and give you more time to be right in case the market moves the wrong direction than what you predicted for a while.  Just wondering what your thought process is.


  10. Phil, I’m interested in your answer to Ernest on the DIA Jan 103 puts (and other front month naked plays as well). What is the theory generally behind choosing front months options instead of a bit further out time wise? I would guess it has something to do with the very short term nature of the trade, or the bigger bang one gets using front months options. But I am not here to guess, I am hear to learn. Thx


  11. MA and V both taking a beating, any ideas why? Good bounce-off number for either for an entry point?


  12. Hi Phil
    GLW buy STK and sell may 10 straddle 20 c/p at 3.25 break even 16.75/23.25 your thoughts pls tks


  13. Good Morning!  Phil, is there anything that can be done with YRCW? A reverse split is coming soon….


  14. Hi, Peter D,
    When you get in, please read yesterday’s post.  There are several questions for you.
    Thanks!


  15. FWIW – Apple has sold 1 billion apps in the past 98 days. Stevie says they’re so far ahead of the competition it’s not even funny.

    Apple’s App Store Downloads Top Three Billion
    CUPERTINO, Calif., Jan. 5 /PRNewswire-FirstCall/ — Apple® today announced that more than three billion apps have been downloaded from its revolutionary App Store by iPhone® and iPod touch® users worldwide.
    "Three billion applications downloaded in less than 18 months-this is like nothing we’ve ever seen before," said Steve Jobs, Apple’s CEO. "The revolutionary App Store offers iPhone and iPod touch users an experience unlike anything else available on other mobile devices, and we see no signs of the competition catching up anytime soon."


  16. Factory Orders up 1.1% – much better than expected (0.1%) but not much over last month’s 0.8%.

    Pending Home Sales are a disaster – down 16%.  That’s SIXTEEN, not 1.6%!!!!  Up 2% was expected by the geniuses who follow this stuff for a living.  Last month was up 3.9% so right off a cliff in November. 

    V went flyijng down this morning but we took 20% and ran yesterday on those puts, now $3.80! 

    Still no volume, just 30M on the Dow at 10 so don’t assume this isn’t reversable. 

    Dollar being driven down, just 91.4 Yen, $1.605 to the Pound and $1.442 to the Euro.  Copper holding $3.40 (strike continues), silver $17.65, gold $1,124, oil $81.66 and nat gas $5.82.  They are going to be looking for a big draw in distillates tomorrow and nat gas on Thurs – more likely to be disappointed than not as people are conserving much more than previous cold snaps. 

    Time-frame/Ernest – I do pick a variety of time-frames but I’ve been looking for a shap short-term correction and the  Jans take better advantage of that.  Don’t forget we’re playing these for dimes, not dollars, and we’re just looking for short-term moves – we’re not looking to marry the positions at this point as we don’t have a clear handle on the year’s direction yet. 

    Short-term/Bord – Yes, these are just quick trades, not really "positions" for the long haul.  For that purpose, the front months tend to be more liquid and have smaller bid/ask spreads, very important factors when you are just trying to make a nickel or a dime!

    V/MA – The retailers are at war with the Debit Card suppliers over fees.  This could turn into a big deal this year and will impact earnings.  Also, retail sales post holidays not looking so great and some retailers are already scaling back outlook for 2010. 

    Amazing – they are focusing on the Factory Orders and ignoring the Home Sales…


  17. BUCY loving the upgrade, PCLN moving up again, JOYG strong, OIH up for another day, XLE holding ground.

    BA making new highs, NYT making highs of all things (GCI too), BTU back near $50, DECK at new highs, BC at new highs (boats of all things), Boeing Buddy BEAV is making a new high…

    This is a very strong move up.  If we break over our levels we need to take this seriously but this is still low-volume nonsense with just 12M Dow shares traded to take us up 60 points in 20 minutes – kind of ridiculous..  Keep in mind the pattern from last year – big first day of Jan, 2 churning days with more volume and then – BIG drop.

    A 1.5% rise on the first session of 2010 is certainly something to celebrate, but despite popular belief, it’s not much of a predictor of what the year holds in store. Mark Hulbert’s recommendation: Stop torturing the data into making it look as though January means anything more than any other time of the year.

    Poor investments and unrealistically high earnings assumptions mean the U.S. public pension fund could face a $2T shortfall, far surpassing previous estimates of $400-500B. "If you factor in the reality of these unfunded promises, their deficits will rise exponentially."

    November Factory Orders: +1.1% ($3.9B) vs. consensus of +0.4%, up seven of the last eight months. Factory orders had increased 0.8% (revised) in October. Ex-transport, +1.9%. Shipments +1% vs. +0.8% prior. Inventories +0.2%.

    Nov. Pending Home Sales: -16% to 96 month-on-month, vs. expected -5%, and against October’s +3.7% to 114.1. Year-over-year, 15.5% higher than Nov. 2008. “It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit,” says NAR chief economist Lawrence Yun.

     

     


  18. OK, MRK has a PE of 9.6, all other BIG Pharmas are 12 – 16.  Citi just raised MRK to 45, which puts them up in that range on the P/E.  Bull call spread 35/40 Jan11 for 2.30.  We can sell small lots of P to counter the spread, and is easily rollable down JIC the healthcare bill sucks, but I don’t see that hurting MRK that much.


  19. Phil: INTC and JPM are predicted to report good earings, what do you think about these ?


  20. Good Morning Phil
    2010 should be fun – anticipating a lot of change that will surely offer much opportunity. I’m trying to get a long term handle on the US $. In order to get leverage on the USD movement, could you suggest an ETF that has good options, Also, over this period of time, do you see the $ staying flat, depreciating or appreciating. Thanks!


  21. Phil – Regarding last years early Jan action, was the market reacting to the negative Dec jobs data and other concerns?  It appears that the jobs data may be improving if only slightly.  I am just wondering what could possibly take this market down.  Negative data appears to have no effect.


  22. For Cap: Capital One (COF) +2.5% on an upgrade from Stifel Nicolaus. "We are more confident that credit-card industry losses have already peaked and are poised to drop significantly… we no longer see material catalysts for a pullback."

    OIH $125 calls can be sold naked for $2.50 and those can be rolled to Feb $130s, now $3, if it doesn’t work out.

    FCX nice and crazy near $85, I’ll be wanting to short them if they fail to cross it.  BHP making new 52-week highs however..

    POT getting near $120, making another tempting short. 

    VLO having another great day, up to $18.37 now!  WFR up ANTOTHER 4% to $14.42 – that’s why I loved those guys when they were super-cheap. 

    S&P blowing past yesterday’s highs and into the 1,135 zone so critical action here.  Nas is at 2,311, RUT 640, Dow 10,572 and NYSE needs just 36 more points at 7,353.   So the Dow is dregging at the moment. 

    Oil and gold are weak or I’d be buying this rally more.

    INTC,JPM/RMM – I think I’d rather wait and see what they say as we have no clue at all what to expect from Q4 earnings yet.

    Dollar/Gel – I like UUP to play the dollar.  I think we head higher, at least to 80 but maybe better as the global economy is still  a mess.

    Data/SS – I don’t think it matters much what the catalyst is.  Any negative news can send this market down 5% in a day.  This is more likely the blow-off spike (also just like last year) than a massive breakout on mysteriously low volume (just 50M at 10:47).

    Dow leaders after an hour: KFT +3.1%. BAC +1.4%. BA +1.3%. CAT +1.1%. JPM +1.1%.
    Laggards: TRV -1.8%. IBM -1%. KO -0.9%. VZ -0.9%. PFE -0.9%.


  23. Pharmboy
    What do you think of this pick  ?
    Thanks
     
    Salix Pharmaceuticals (NASDAQ:SLXP) maintained Overweight, $58 target and Top Samll Cap Pick for 2010, at Piper Jaffray. The stock closed yesterday at $25.74 on volume of 813,484 shares, below average daily volume of 831,638.


  24. ss / last year
    Redempyions, last year people looked at their end-of-year 401 (k) statements and went to cash; not this year.


  25.  Phil your thoughts on SRS if we have a downturn ?


  26. SPX / ssdirk – I missed your question last night.
    RE the $200 margin reserves: According to Peter, $100 is about the max margin requirement for a SPX strangle, even if a short SPX position goes further into ITM.  This calculation is based on the way TOS computes margin requirements in a PM account.  So, to be conservative, we allocate 2x reserves just in case we need to DD.
    If you lower your reserves to $150, yes, you take on more risk.


  27. JRW – Does this mean you don’t expect a selloff?


  28.  AFL feels way too high here, they just bounced off 48.  Considering playing for a pullback over the next couple days.  Looking at the JAN 48 PUTS for $1.  What do you guys think.  Can you one of you chart wizards take a look and see if you see the same thing I do? 


  29. Phil/UUP
    I pretty much agree with you on dollar movement – not that everything in the US is huncky-dory, but other places (eurozone and UK) look far worse. The dollar will remain the reserve currency and will attract investment, if for nothing else, an escape to safety. UUP has a very dull chart with conservative movement potential. I guess you have to play it with a large amount of contracts.


  30. cwan – Thanks again.  Is this the same for a RUT strangle?


  31. judah/SPX,
    You got it correct that every 5% move, or 2 weeks has elapsed, is when we look at short strangles for possible actions.  If the market has moved up 5% from 1115 (start of Jan) to 1170, it means that the SPX Feb 970 short PUT would be then 18% OTM, the 1210 short CALL is 3.5% OTM, and there may be 4 weeks to expiration.  Given historical data and where the support are today, we can roll up the PUT to about 1030 (when SPX at 1170), and use that credit to roll up the short CALL.  How much we can roll the short CALL depends upon how far we are to expiration and VIX.  Rolling up 2% means the OTM callers would be 10% OTM versus the 1115 level (at the start of the month).  The 2% is significant statistically that the probability of expiring 10% higher in 6.5 weeks is a lot less than 8% higher in 6.5 weeks.  I wouldn’t sell an additional PUT just yet, until 2 weeks to expiration as we would increase our downside exposure with the additional putter.
     
    Keep in mind that we can get whipsawed by rolling the callers and/or putters.  So we should only do so, when we feel strongly about it (feel = art, not science).
     

    cwan/ssdirk/SPX,
    Thanks, cwan, for the excellent calculations!
    For the Jan 1040/1030 PUT vertical, I still have it, but have been looking to sell off the 1040 long PUT to recapture $0.5 to $1 from the original cost of the vertical, making it a cheap hedge.  The selling of the 1040, however, increases some downside risk with 1-2 weeks to expiration.  The Jan 1030 putters is effectively 9% OTM with 8 trading days to go, including today, so I’m comfortable with that.  In another 3-4 trading days, 9% OTM putters will get to about $0.3 if the market is flat.

    The $150 per contract is the reserve that we set out to give us plenty of room to move.  The Initial Margin on PM is about $15 for that spread.  The maintenance margin can increase to $150 if the market jumps 15% or drops 20% (as the putters is more OTM).


  32. Phil,
    Any scuttlebutt yet about mall tenants leaving post Christmas ? Wondering about my April SRS.


  33. How long do we hold onto our Jan bearish postitions?  I own the DIA 103 and 105 puts and QID 19 calls.  I get the "Hold! Hold!" thing and all, but if the market chooses to focus on Factory data and ignore housing data, aren’t we just standing in front of a train?  We’ll be right eventually, but are we too early?


  34. Phil,
    I’m up about 30% on LAZ naked Mar 40p. I’m tempted to close it out in case we get a pullback because it is at the strike right now and it’s good maoney for so far out. However, I just closed out a SU naked put and I’m wary of taking out too many bullish positions in case we keep going up. Whatdaya think?


  35. jcmcn5
    I learned a long time ago – timing the market is a fools game. I have found it safer to take a long term position and hedge it for a short trm correction. The hedge is merely a momentum day trade that if overdone can erode your long term potential gain. I do much better with stops, rather than guessing market short term movement  FWIW


  36. gel — they are short term hedges.  i have plenty of long term positions in IRA’s and a 401-k.  The problem is that if enough hedges blow up, then long term performance can be compromised.  this december rally has been particularly unkind to every hedge i’ve put up.


  37. ss / selloff
    Yes, I do, but only 5 to 10% sometime after this week; see my post from last Thurs or Fri. This week is about propaganda, First 5 Day Precursor, January Effect, and an easy short squeeze. With so much cost cutting ( firings ) and new accounting rules, earnings season shouldn’t disappoint that much; BUT we are do for a technical correction so that the Bears can feel better about getting on board.


  38. Salix (SLXP) – I think we have discussed them before, and they have risen 188% over the past year – which makes me a bit nervous.  They should get approval, and their target has been raised to 45, so another double from here.  I would enter in stages of course…as they will be volitile!  The $20 should hold, as the IBS market is a large one with no real good drugs to treat the disease.


  39. Sector ETF strength: Solar– KWT +3.8%. Coal– KOL +3.7%. Agribusiness– MOO +2%. Gold Miners– GDX +1.6%. Oil Services– OIH +1.5%. Clean Energy– PBW +1.4%. Steel– SLX +1.3%.
    Weakness: Regional Banks– KRE -0.8%. Pharma– PPH -0.6%.

    Fed watcher Irwin Kellner says the central bank is already signaling the impending demise of ultra-low interest rates, for those who listen closely. "This should be no surprise, since the Fed has always leaned against the wind, and right now that wind is blowing in the direction of renewed growth."

    401K/JRW – Very possible.  Also possible this year people are so relieved to have money back they go to cash (might keep rates down for a while if they do).

    Transports are crankin’ (not YRCW, they are .65).

    SRS/B1 – SRS has been such a toxic trade it’s hard to get behind any more.  I think if the builders give poor reports we can probably get back to shorting CRE but our winning play on SRS has been selling short puts and the low VIX has made that much less attractive.

    AFL/Craig – They may look short-term toppy but still way below their highs and looking like they’ll have a strong year – not a short play I’d go after.

    UUP/Gel – I think UUP contracts are very cheap compared to movement potential.  They flew up 5% on the dollar bounce so figure they go about point for point with the buck and they bottomed out about $22 in two major dips so I think the 2011 $21/23 bull call spread for $1.20 is a nice way to play.  You should be safely in the money before June or it would be time to get out.  If there’s a big drop in UUP, you can sell the $20 puts for .60 which puts you into the ETF at $20.60 or cuts your net in half on the spread

    Malls/JRW – "The prediction for next year is more re-sizing and relocating of retailers," said real estate broker Richard Rizika of CB Richard Ellis.  There are almost 100 empty big-box retail stores in Los Angeles County, according to a study by Rizika. They have a combined total of 4.5 million square feet, or about 78 football fields’ worth of vacant space for rent or sale…  As many as 8,000 stores will close nationwide in the first half of 2010, Wiener said, and more grief will follow for landlords who have bank loans coming due while facing declining occupancy and rents. "We think the industry will suffer well into 2011."

    Wheee – and down we go again.  I love this ride!

    Hold/JCM – I’m giving it until Thursday.  If we’re not down by then, then risking the Friday NFP numbers will start to look like a bad idea. 

    LAZ/AC – I would take that one because you were just underwater and now, BOOM, you are 40% up and we ARE concerned about the overall market.   If you don’t want to be too bearish – then cash out a bearish play along with it to balance but don’t risk good money just to act as ballast in your portfolio. 

    Stops/Gel – Good attitude.  We never know what the market will do and managing your positions over time is a more important skill than picking stocks.


  40. Peter, Thanks. Two more questions. First, did you enter Feb strangles on the RUT.  If I recall from a couple of weeks ago, you were looking at 480/680, and I assume that if you haven’t yet taken those positions, you are now looking a bit higher, say 500/700? 
    Second, what is your rule of thumb for the crazy plays--do you look for 5% down from the beginning levels and try to get the spread for $1 to $1.50, more or less?


  41. JRW – Do you have a TNA/TZA position today with watch levels?


  42. Phil, what to do with YRCW?  Reverse split coming soon….. Thanks


  43. phil,
    s&p just went red. head fake or no?


  44. Peter, To follow my own question, I see the Feb PUTs for RUT don’t pay much until about 520, 530, 540, so I take it you would sell one of those levels?


  45. Any thoughts about TYH i.e. wait or act. I am short JAN10 160/165 call for $0.90 and 170/175 call for $0.65 premiums? Also, any thoughts about EOG: I bought JAN10 95 puts @ $2?


  46. ss / TNA
    Bought TNA at 10:00, 63.58 on IWM; sold at 64.08. I may buy it again if Mr Stick shows up again. Just look for the Bots being turned on.


  47. Phil, what do you think of China Agritech (CAGC)? Its up 25% the past 2 days and has rocketed from 15 to 35$ since the beginning of November…


  48. ss / watch level
    64.20, if you buy in ( TNA ) that’s where to watch for an exit.


  49. ss / watch level
    64.20, if you buy in ( TNA ) that’s where to watch for an exit.


  50. judah/RUT,  I’m still building the RUT positions.  The 680 callers are very tempting as RUT could be the most likely to pull back 3-5% due to its recent surge.  Then, I think we better off with adding the 690 callers and 530 putters for Feb.  I still keep my few 680 callers, and need to roll up the 480 putters to 520-530 range.
     
    For the long PUT vertical in the crazy play, I try to get them for $1 to $2, preferably at 5-7%.  The primary goal is to have a good chance that they gets into the money on a drop.  If the market is flat or move the other way, I’d sell off the longs as mentioned above.  If the vertical remains within 2-3% OTM, the vertical would keep their value really well, and the short strangles would be down to near zero, then we get out of the entire crazy play, including the vertical.  So most of the time, there are 3 ways to win, either down, up or flat!  The crazy play only works for Portfolio Margin in case other folks are reading this thread.


  51. JRW – You are good at this game.  What was significant about 63.58 that made you buy TNA?  I see it is where we gapped up on the opening yesterday.  Did that provide support?


  52. ss
    It hit a trend line from 11 / 30, I sold when it coundn’t get over the trend line from 11 / 16.


  53. Phil, Need help here please. I sold VLO Mar. P + C (2X on the P’s) should I roll as now I am getting killed on the C’s?
    Also WFR: sold April 11 P and 12 C getting away from me here.
    Thanks


  54. Phil, Need help here please. I sold VLO Mar. P + C (2X on the P’s) should I roll as now I am getting killed on the C’s?
    Also WFR: sold April 11 P and 12 C getting away from me here.
    Thanks


  55. JRW – Cool.  I see that.  Which is where the 64.20 comes in.  Nice.


  56. RUT strangle / ssdirk: Peter discussed this a few weeks ago.  RUT value is about 60% of SPX value.  The margin requirements are proportional.  So, RUT’s margin requirement is about 60% of SPX.


  57. Phil -
    I am long IYR Jan 48 Puts with cost basis 0f 2.38 -
    My inclination is to turn this into a bear spread (as you originally suggested the trade idea) and sell the Jan 45 puts for 75 cents -
    reducing my basis to 1.63 and making my break even point – $46.37 -
    If IYR just stays flat, gives me 50% profit with max of 80% – I think it might break down from here


  58. FRX was initiated with a sell today, and the P vertical 30/35 can be bought for 2.9, which is ITM now.  52wk High was yesterday….gonna watch them closely to see where the stock heads.


  59. phil,
    what is the huge spike in aapl volume @  12:13???


  60. YRCW/1020 – I haven’t liked them in a while but they should survive long-term if you are patient.  

    Red/High – They are having a lot of trouble holding our levels, does not bode well but the volume is still a joke so there’s little effort required to yank the indexes back up to keep things from looking like they are breaking down (chartwise).

    TYH/EMC – You shorted bull call spreads?  That’s too complicated for me.  I’m giving it until Thursday for a pullback so that would go for these too.  On EOG, I did offered a  DD on the $95 puts at .80 but didn’t fill, generally I’d do that to drop basis to $1.45 and get the hell out even if you can – it’s too cold to expect much of a pullback this month. 

    CAGC/Jrom – Well it has the words China AND Agritech so it must be good.  Other than that, I have no clue and I don’t trust those ADRs at all.  There was a great comment from a guy on Zero Hedge the other day who does business in China and he said that EVERY statistic you hear out of that country is simply made up.  The government makes a 5-year plan and the local beurocrats turn in reports that say they are on plan and no one ever asks any questions so, effectively, the statistics end up being whatever the government wants them to be.  That doesn’t make these ADRs bad investments automatically but there’s no fundamental basis for making a decision on them one way or the other.

    VLO/Jomp – I am never a big fan of selling naked calls.  If you sold the $17 calls, they still have .50 in premium so a little early to roll and the $17 puts are still .60, which would just be silly to buy back based on a 2-day run.   Same goes for WFR — are these naked sells or are you just not wanting to get called away?

    IYR/Samz – It’s a good plan but little protection for you if IYR heads up.  Make sure you are ready, willing and able to roll out to the Feb $48 puts to buy some time.

    BA good for 25 Dow points today. 

    Ford (F) December U.S. sales: +32.8% to 184,655 vehicles. 


  61. Phil, Need help here please. I sold VLO Mar. P + C (2X on the P’s) should I roll as now I am getting killed on the C’s?
    Also WFR: sold April 11 P and 12 C getting away from me here.
    Thanks


  62. Phil and Others
    I only get the daily newsletter and the first alert in my inbox. Does anyone else have this issue?


  63. Phil…..A topic for anytime, not necessarily trading hours, but would relish your insight.  What’s the best "vacation trade"?.   I had occasion to be away for the past 2 weeks.    I was actually skiing in a location with no internet access, barely cellphone access.  Great vacation.  But what I found myself doing  before I left was converting most of my investments into spreads for the time away, leaving no ‘naked’  long calls, long puts, short calls or short puts  behind.  That way I felt safe in being away for several days at a time.  Sure enough, upon my return my portfolio had done quite well in my absence.  Time decay on the covers was mostly responsible for the positive return.  ( It even occured to me that maybe I trade too much, and should just set things up and stay away from the computer on purpose. ) This was a short vacation, but what if one went away for a month or more.  What’s the best "vacation trade"?   Again, after hours or anytime. Thanks.


  64. Phil, VLO I sold the 16 P’s + C’s, sold more puts but little premium left on them and getting hurt on the sold calls.
    WFR ? Sorry about the repeat posts


  65. SBUX – A new 52-week high. In spite of a downgrade Dec 29th saying ‘shares frothy’ (which I agree with). Looking at the chart below, seems they are about to get even more frothy!
      http://finviz.com/publish/010510/SBUXc1dl1218.png
    With stock around $23.97, considering selling Feb?Apr $24 calls to protect downside…Opinions?


  66. hi Phil, is it good to sell ERY naked puts now? If yes, what month and strike?
    thanks


  67. Phil
    I’ve been waiting for BAC to roll back a bit before rolling my Jan 15′s. (Shouldn’t have waited I guess).  What’s your take on BAC – are they likely to pull back or am I just late.  FWIW I’m still up for the month, just not as much as I was a couple days ago.


  68. Looking for 20% on the USO puts or do you think we get a big breakdown in oil?


  69. Phil, Good call on S the other day (someone asked whether you liked them).  Rocking on no apparent news other than the pre-CES announcement about the Skiff--an e-reader that is larger and looks better than the Kindle or the Nook. 


  70. Just closed out my V put for 50% in 24 hours  thanks Phil!


  71. That was me, Judah, and of course I sold after a nominal gain. Watching the stock rocket up on the sidelines like an idle schoolboy (Hunt for Red October). Ah well – If only my crystal ball worked better. I’ll jump back in if there’s a substantial pullback this week.


  72. Phil
    Just finished a telephone conversation with one of the best currency analysts in the country FWIW. Their position is – they feel the dollar is oversold by 10% at todays price. Like so many markets that attract a lot of controversy, the result is more often than not, exagerated. They feel the real value today for the dollar is 85 – 87. Also… they feel the dollar will soar ( yes, they said it ) in 2010. I have followed these people for years, and know them personally, so I tend to believe they again will be on target.


  73. AAPL/High – I don’t know what’s up with them but check out IBM falling.  What’s up with that?

    Am I crazy or is Yahoo’s list of the components making up the Dow wrong?  This is clearly a sign that the world is just falling apart if you can’t even get something like this right…

    Daily/Chakra – That’s all that usually gets sent out of this post (plus the 6pm letter).  I rarely make alerts.  If you want comments by Email, Members can use the RSS link in each day’s post (it changes each day) but I only send out an Alert when I think it’s worth bothering people like a big change in direction or a uniquely good trade idea. 

    Vacation Trade/Iflan – Well you seem to have accidentally discovered it.  Just cover up your longs with shorts that pay you premium and yes, you do trade too much because that’s how we should be making money on the bulk of our portfolio.  You don’t have to outthink the market when you can balance your own positions and charge other people 10% a month in premiums to bet against you.  Here’s our post on "How to Vacation-Proof Your Portfolio" – feel free to ask for follow-ups on that.

    VLO/Jomp – So you sold the $16 puts and calls naked?  Well, that’s silly but no big deal as you can roll the $2.45 combo to the March $18 puts and clals at $2.25 and those are pretty much all premium.  There’s no need to rush into it as long as you see your way clear to a roll as a pullback is very much in your advantage.

    Chrysler December U.S. sales: -3.7% to 86,523 vehicles. Chrysler brand -7%; Jeep brand -10%; Dodge brand +24%; Ram brand -33%. Car sales +31%; truck sales -14%.

    S&P -0.15 and Nasdaq -3.4 slide back into the red, Dow -37 never reach unchanged (SPY) : Relative Sector Weakness vs. the S&P on the recent pullback has been noted in Casino, Airline, REITs IYR, Consumer Discretionary XLY, Housing XHB, Materials XLB, Gold Miners GDX, Steel SLX, Software.

    S&P report says U.S. corporate default rate falls to 10.9% in December : Standard & Poor’s Ratings Services announced that the U.S. speculative-grade default rate decreased to an estimated 10.9% in December. The report notes that this is the first monthly decline since October 2007, when the default rate hit a 25-year low of 0.99%. The highest U.S. default rate on record is 12.54%, set in July 1991. "Credit conditions in the U.S. remain challenging, but signs of improvement are beginning to emerge, such as improved lending conditions and a resurgence in new issuance," stated Diane Vazza, head of Standard & Poor’s Global Fixed Income Research Group.

    SBUX/M2 – I think they will have a good Q so be careful.

    ERY/Jlui – Very dangerous but I’d sell the Feb $10 puts for .85, as that’s a nice return and they can roll down to July $8 or $7 puts – which is a pretty good margin of error.

    Uh-oh!  Meredith Whitney attacks!  Downgrades GS….


  74. HK – the gift that just keeps on giving!  I think it has another dollar left in it before it cools off, but I’d love to hear from any of you that are more chart savvy than I…


  75. Phil -
    Sorry to keep harping on CRE but
    Do you think the home builders reporting earnings are going to have much of an impact on CRE ?


  76. BAC/Bassad – I’m targeting $22.50-$27.50 by year’s end on them and $15 has been our buy point for ages so I’m not going to tell you to hang in there with short calls.  On the whole though, it’s the same answer I’m giving to all the bears – wait until Thursday as none will be spared from a major pullback if we do get it.

    USO/Ac – We’re in a real take 20% and run market for bearish plays.  I think we may get lucky and get a break below $39 but I’m not going to count on it. 

    S/Judah – I think any excuse could have boosted them off the 50 dma.

    V/Humvee – Congrats!

    CRE/Samz – I don’t think the builders will impact CRE but they will give us clues as to whether we are off-base shorting CRE or not.

    Meanwhile, dominos anyone?  Fitch cuts its rating on Iceland to junk status, with a negative outlook, following the decision to hold a referendum on whether to compensate U.K. and Dutch depositors of collapsed bank Icesave – a "significant setback to Iceland’s efforts to restore normal financial relations with the rest of the world."  Junk with a negative outlook?!?  What the hell comes next?


  77. IBM failed to break above the 2001 high, which may be why it’s selling off.


  78. SPWRA feb calls has great premium, I think it is time to roll our short Jan ITM calls, what do you think Phill?
    By the way, do you think it is good idea to sell additional Feb $28 calls for $1?


  79. Llorens/S.  Thanks to you, then.  If I know S, it will pull back below $4 again before too long, and it will be sure to disappoint when it reports in Feb. 


  80. Cwan/Peter – Using my example $500K portfolio from last evening wanting to achieve 3% profit per month, would you allocate $250K for a RUT strangle and $250K for an SPX strangle?  It appears easier to achieve the goal with the RUT strangle given the margin requirements discussed above. 


  81. Hey guys,
    LDK has extremly HIGH option volume (21,000 contracts) on the 2.50 JAN11 PUTs…….I wonder what’s going on here; either they’re going BK or investors are booking their profits…..I sold a bunch of these around $1 in late NOV.
    The funny part is that there isn’t any unusual volume on the other PUT months; other than JUN $1 PUTs Open Interest of 20,000.
    - XLF’d


  82. Meredith’s probably wrong on GS just like she has been on a lot of financials over the last months. GS is the casino (eg- the house) and she’s just a cranky lady at the roulette wheel. 


  83. BAC/Bassad – I’m targeting $22.50-$27.50 by year’s end – mabe we should cash in our citibank Chips and put the money on BAC?


  84. CROX making a big comeback. I’m still in the trade from the 100K portfolio. Long Mar 4c and short Jan 6c and 7.5p. Any action to take on that one? It seems like they could be hit hard in a big correction.


  85. Once again selling the PRU 50 straddle. This has worked three times in a row recently.


  86. Phil
    Where is the RSS link for each day. Thanks.


  87. JRW – That is a very narrowing flag on IWM based on the trendlines from 11/30 and 11/16.  Would you buy TZA if it breaks below 63.50ish?


  88. Here is a great source for stuff needed to trade currencies – http://www.tradingeconomics.com


  89. Phil:
    pleaSE COMMENT ON PUTTERS/CALLERS WHICH i HAVE:
    LDK jan 8 caller: base .99, now 0.15, have stock
    FVW jan 8 putter : base 0.62, now 0.40, naked,
    SPWRA jan 24 putter: base 1.22, now 0.60. have stock.


  90. JRW and SS.  I’ve been following your dialog re IWM/TZA/TNA for weeks.  Really good stuff.  Thanks.


  91. XLF’d most likely someone booking profits…..on LDK.  They made money last Q, but their debt is huge….looks like they are selling more shares to pay down debt.


  92. judahbenhur – The thanks definately goes to JRW.  Thus far I have been admiring from afar, not taking any trades.  Just trying to get a feel for this.


  93. ss / TZA
    That would be a clear $0.15 anyway but I think we’ll see the 2.5% rule here soon.


  94. JRW – not sure what levels on the 2.5.% rule.  Can you elaborate?


  95. Apple buys Quattro wireless for 275 million.


  96. SRS.  I sold the Jan 7 calls against a stock position when the calls were $0.40 with some premium in them.  The calls are now $0.68 with about $0.11 of premiun remaining.  I don’t mind getting called away, but I’m wondering if you’d roll the calls into anything else


  97. ss
    61.40 to 62.82 on IWM


  98. HSP and GENZ team up to manufacture GENZ drugs.  Nice.  HSP had its own problems last year with manufacturing.  HSP continues its ascent, Genz, not so much.
     
    OPTR – have a covered call (12.5 Febs) with stock out @ 11.  C if it fills. will sell P on a pullback JIC.


  99. Bord/Whitney
    My theory is as follows – underneath that cloak of professionalism, she is really a trader and just likes to jack her own portfolio positions.


  100. SPX vs RUT / ssdirk – I’ll let Peter answer the question whether RUT is better than SPX, as I haven’t had enough experience on RUT.  Peter did mention something about RUT being more volatile and therefore you have to be extra careful.  You probably have to make your buffer zone larger than +10% / -15%.
    However, there is a 35% (or is it 30%?) concentration rule in PM: If you have more than 35% (or 30% whatever it is) of your positions in one underlying, TOS will increase your margin requirements.  I don’t know how much increase it will be.  That’s why you have to diversify into RUT.


  101. Would you trust your money with a woman married to a former World Wrestling Entertainment champion called "Death Mask?!"And no, I am not making that up.


  102. If she consitently made me money, I wouldn’t care if she was married to a donkey.


  103. SPWRA/Tcha – Don’t forget many of these "great" premiums are due to earnings, those won’t change that quickly so there is no hurry.

    Porsche (POAHF.PK) December U.S. sales: +1.7% to 2,118 vehicles, a fifth month of Y/Y increases. But for the calendar year, sales down 24% from 2008. Dec. Boxster/Cayman sales down 48%; Sales of new sedan Panamera Gran Turismo were 521. (PR)

    Daimler (DAI) December U.S. sales: +0.2% to 20,889 vehicles. Mercedes-Benz: +8.2% to 20,025. Smart: -63.1% to 864.(PR)

    Honda (HMC) December U.S. sales: up 15.6% to 107,143 vehicles (percentages based on daily selling rate; units up 24.5% in total). Honda Division +18.9% to 96,568; Acura Division -26.8% to 105,723. Total car sales +11.3% to 61,020. Truck sales +21.8% to 46,123. Accord up 17.3%; Civic up 19.8%. (PR)

    GM December U.S. Sales: -6.1% to 208,511 vehicles, vs. expectations of -10.6%. (MW)

    Nissan (NSANY.PK) December U.S. Sales: +18.2% to 73,404 vehicles. Car sales up 22.4%; truck sales up 11.3%. (MW)

    Speaking of CRE space opening up:  Macy’s (M -0.9%) will close five stores to "selectively prune" underperforming spots; the stores are in Idaho, Michigan, Missouri, Montana and New Jersey.

    LDK/XLF’d - Huge put activity for some reason.  Maybe somehow locking in profits but I doubt it.

    BAC/Steve – I think they are both fun to play. 

    CROX/AC – Those are fine, just on target at the moment. 

    RSS/Chakra – It’s right at the bottom of the post above the blue line that says "Comments"

    RMM list:

    LDK – On target

    FVW – What tthe heck is that?

    SPWRA – I’d put a stop at .80.

    SRS/JCM – You can roll them along to Feb $7s at $1 or $8s at .53 if you want to stay in it.  Depending on how the week goes, you can decide.  It’s a nice monthly income isn’t it?


  104. phil.   fvw is fcx.


  105. Acura outsells Honda?  That doesn’t seem right.


  106. Phil
    I BOT the JAN DIA PUTS 104/103 yesterday at the close for a quick trade. Should I take any profits before the close or is tomorrow and the day after worth holding onto?


  107. FCX/RMM – Really?  What kind of typo is that?  We’ll I’m totally short on FCX so I’d get the hell out of that one!

     Hyundai (HYMLF.PK) December U.S. sales: +40.6% to 33,797 vehicles. Sonata up 59% to 10,485; Santa Fe up 47% to 9,264; Elantra up 119% to 5,763; Accent up 126% to 4,149. (PR)

    GM sales: While things aren’t going so well at home, GM is positively booming in China, increasing sales 67% to a record 1,826,424 vehicles in 2009, and is hungry for more this year as market penetration is still low. The unlikely cornerstone: Buick, a very popular luxury marque in China.

    Have I mentioned "wheeeeee" lately?  8-)

    Be careful – coming back to support from the morning dip here (10,520).


  108. That can’t be right (More Acuras than Hondas sold).  It has to be a typo.


  109. DIA/Chakra – We only have 2 rules and Rule #2 is "When in doubt, sell half."  There has been a fortune in bear profits the past couple of months but only for those who took 20% off the table regularly – the rest got slaughtered. 


  110. Also, if we are in a ‘recovery’…ACAS should rocket out of the gates….I have been buying them on the dips and selling when they get to $3 or so…


  111. Phil: have VLO stock and 2x ma 16 putters, base 1.30, now 0.32,
    any adjustments,
    what about selling calls ?


  112. Accuras – I just past ‘em in but it does seem odd although Accura did have a big ad campaign recently.

    Oil jammed way back to $82 into the close from $81 at 1:30.  Gold still down at $1,117 (was $1,130 at open).  Silver at $17.71, nat gas at $5.64 (EOG off nicely) and copper still magic at $3.42 even though there are no home sales and no commercial construction. 

    VLO/RMM – If you already did so well on the putters, why not cash them and go for a more conservative cover on the stock with Feb $18 puts and calls at $1.80?


  113. Phil:
    what about the 2x situation. Better to go 1x cover ?


  114. Still not a proper volume day – just 118M at 2:30.

    We have had a sell-off into the close 3 of the last 4 days (not last Wed) so we’ll see if that trend holds up but a sell-off here should take us back to 10,500 and, if we fail that, the next support is 10,470 but Thursdays drop had us all the way to 10,420 so anything better than that won’t look too terrible to the bulls.

    Discovery, Sony and IMAX confirm plan to launch first 3D television network in the U.S. (DISCA) 31.80 +0.80 : Discovery Communications, Sony Corporation (SNE) and IMAX (IMAX) confirm a joint venture to be established to develop the first 3D television network in the U.S. Discovery.   All flying on this news already!

    Mazda North American Operations reported December sales increased 1.6% y/y to 18,255 :  

     Commodity/Energy under pressure as Dollar Index breaks out to new session high — XLE, OIH, SLX, GDX, KOL, USO, UGA (XLE) :  

    2x/RMM – Yes, I meant take the 2x profits and just go with a normal 1x buy/write. 


  115. Hi Phil :What do u think of buying PAA May $55 puts at $1.60 &  selling PAA May  $60 puts  for $3.60 for net $2.00?
    dflam


  116. Phil:
    my old NG situation is:
    FCG stock, base 14.05, now 18.7$
    FCG caller mar 17, base 1.44, now 2.25,
    UNG LEAPS jan 2011, base 3.91, now 2.04$.
    So: need to create cash to work myself out of the overall loss.
    what is your view ?


  117.  Any news on BIDU, down 1.7% with China (FXI) up 1.7%?
    Worth a shot on the long side?


  118. dflam/PAA… looks good to me


  119. Hey Phil, I grabbed some USO Jan 40 puts.  What’s your take so far?


  120. NexusOne.  Mossberg out with a very positive view of the NexusOne.  I have my doubts about GOOG getting into the handset space, but if I were PALM I’d be worried.  RIMM has that strong corporate customer base, AAPL is APPL, where does PALM go but down.  


  121. Volkswagen (VLKAY.PK) December U.S. sales: +16% to 20,387 vehicles. Jetta +26.9% to 10,233. New Beetle -58.5% to 677; Passat -68.4% to 800; CC +374.2% to 3,149. (PR)

    Toyota (TM) December U.S. sales: +32% to 187,860 vehicles; for the full year, -20% to 1.77M vehicles. (MW)

    BIDU not looking too healthy.  FXP Jan $8s at .15 (not .20) are a fun way to play a possibly pullback in China – FXP was $8.60 last week.  If you pay .15, you can figure you can salvage dime by Thursday if we keep going up.

    Volume so low it’s an easy stick at the moment, the only hope for the bears is someone big is looking for the exit ahead of the Jobs data tomorrow. 

    PAA/Dflam – It’s a nice hedged way to short them so that’s good.  I don’t have any particular reason to be bearish on them but, chartwise, they do look a little stretched and nat gas prices should calm down by May.

    FCG/RMM – No big deal on that, you get called away at $17 with a nice profit or you roll them (June $18s are $2) if you decide to stick with.  I think taking the money and run on this gas move is the way to go.     On UNG, I’m guessing you have the $10s and I have zero faith in those outside of some disaster that runs the price up but, if you want to wait and pray for the suffering of others to possibly enrich you, you can do so by selling 1/2 the Feb $10s or the $11s if you are more bullish.  Even the $11s pay you .49 against $2 leaps, a 25% return in 2 months – that’s pretty good!

    BIDU/Pyern – Very, very risky.

    USO/Jtiff – It’s a wait and see play on inventories tomorrow.  Logically, it’s not possible for us to have a drawdown that will be supportive of $82 oil but logic and oil trading aren’t really on speaking terms so anything can happen. 

    PALM/Judah – Are they still in business?  8-)

    The dollar has rebounded from earlier and Treasurys remained higher: the 30-year yield -0.05 to 4.59%; 10-year -0.06 to 3.75%; 5-year -0.07 to 2.55%; 2-year -0.06 to 1.01%. Dollar +0.3% against euro, +0.3% against Swiss franc, +0.6% against pound, -0.8% against yen.


  122. Phil: I meant May $50 & $55
    dflam


  123. Wow. Do those vehicle sales do anything to dent our opinion that the consumer is strapped? I find those numbers amazingly positive,  which probably means I’m missing something.


  124. dflam/PAA – I am a little confused on this play.  I see the 60 puts at 7.80 and the 55 puts at 3.90.  It seems this vertical would be bullish on PAA – selling the 60 and buying the 55 puts.


  125. Even with an upgrade – RIMM is just getting abused -
    I love the iphone and all – but if you have to do a lot of email – cannot be beat – guess all the kids will know how to type on the iphone


  126. ss
    If you’re in TNA, I think they’ll try to get IWM close to 64.00; I’m NOT holding over night.


  127. ssdirk,
     
    cwan, thanks again for the good explanation on the 35% position concentration rule.  ss, for the post on RUT versus SPX, see it here:
    http://www.philstockworld.com/2009/12/14/manic-monday-dubai-citigroup-and-gs-move-markets/#comment-274869


  128. dflam – I see your repost.


  129. Steven Parker
    No more middle class; Hyudai or Bentley


  130. Phil/PALM.  LOL. Morgan Stanley came out today with an overweight rating on PALM and a price target of $14.  That alone is probably reason enough to buy puts.


  131. Phil, with XLF looking to move above 15, what would be your choice: SKF or UYG?  :)


  132. Nexus/Judah – It looks like it has a nice, fast processor (QCOM) which, now that the novelty of smart-phones is wearing off, will start to matter.  What will also matter (and this is what I’m waiting to see with non-Apple phones) is will they be able to download 1Bn apps without crashing 1M phones and without spreading 1M viruses?  That’s something that perhaps AAPL may do better than others.

    PAA/Dflam – That’s what I thought you meant anyway.  The other would have been too easy right?

    Cars/Steve – They certainly aren’t terrible numbers, especially post-incentives.

    IPhone/Samz – Between Dragon and Google I just talk into mine to send mail and search.  Beats the crap out of sitting there with a BBerry and typing on those little keys.

    XLF/1020 – Those are not at all the same are they?  I like UYG long-term.   They have been rock steady for buy/writes since the crash.


  133.  Hey everyone, new here! love the comments so far…
    some stocks I’ve been trading that no one mentions…thoughts?
    MGM / MPEL / LVS : casinos. worth a gamble? MGM seems to have a nice chart for bounce (which its doing as we speak)….also macao gambling revenue was good. these are risky, but worth a play? 
    BKE : has bounced strong recently. thoughts? was gonna sell some calls against a long position. or maybe i should just dump the position? (+11% now)
    thanks


  134. I’m sorry Phil, I should have just asked if the move in financials the past two days is justified?  While recognizing the XLF has been a laggard since October….


  135. UNREAL….bears….


  136. Welcome Hanna! 

    I like MGM the most out of the casinos as I consider Macau a risky proposition but LVS and WYNN just turned in some very good numbers there too.  This is in line with my 2010 outlook that the rich get richer and casinos should do well overall.  MPEL I don’t trust so much as I have a general issue with ADRs but, on the whole, no one can play with the books more than Shelly of LVS so maybe not such a bad idea!  MGM is my favorite of the 3 and you can buy the stock for $10.43 and sell the March $10 puts and calls for $2.55 for net $7.88/8.94 (if put to you), not a bad entry on them.  BKE is going to be all about earnings and you can sell the June $25s for $6.50 and the June $25 puts for $1.55 to get you through earnings.  That would cover you down to $26 and if you end up getting called away you collect another 10% by June.  Of course, 11% in the hand is worth 20% in the bush right?

    XLF/1020 – Oh we’ve been waiting for them to pop for ages.  It’s one of my few bullish positions.

    Yet another low volume day comes to a close…  178M this time but 13M came while the bell was ringing so we can hardly count that.  Oops, now 185M as the futures pop back down on the last minute selling. 

    Video/Pharm – Theres a minute of my life I won’t get back…  8-)

    Oh well, this was what we expected, a flat day after the big pump day.  Tomorrow likely to be another flat day and then it’s crunch time.


  137. DNDN
    The May volatility is so high you can do a buy/write at 28 and make $15 if called away or wind up owning 2x the stock for about $20 if it’s put to you.


  138. There’s at least one guy who gets it.
    MattTaibbi:
    "It has to be looked at as an important part of a diabolical whole, a symbiotic scheme in which the banks and the state were irreversibly intertwined in an enterprise that on both sides was never about market economics, but crime. Because otherwise… the diversionary notion that one side or the other is wholly to blame is part of what makes the whole scam possible."
    http://trueslant.com/matttaibbi/2010/01/04/fannie-freddie-and-the-new-red-and-blue/


  139. Casinos-- I have a relative who is a tour guide for Asian tour groups going to Macau and their trips are jam packed…… regional international demand is huge.


  140. IRA account at TOS: Does anyone have an IRA account at TOS?  What’s your margin requirement on naked puts?  Is it 100%?
    I transferred an IRA account to TOS.  Today I was going to do a buy/write on SONC as Phil recommended.  But then I noticed that I had to pay $10/share for the stock AND needed margin $10/share for the puts.
    Do you have the same experience?  This is not a complaint.  Just to know if I am right.


  141. cwan – you may have lucked out.  SONC is down a bunch after hours.  Your buy/write may have gotten a little more attractive.


  142.  Phil  What do you think about YZC…got a lot of Jan calls.


  143. alsos -
    Great Taibbi read – thanks


  144.  Also, bot some MGM Jan 12.5s for a nickle…could resist.


  145. HYG with a fresh high on the year. Volume was light but still a pretty bullish indicator overall.


  146.  I meant couldnt resist.


  147. SONC / ssdirk – Whoa! Almost 8% drop after hours!


  148. DNDN/Edro – Gosh but if it’s put to you at $20 do you want it? 

    Taibbi/Alsos – That’s a great article!  Matt is on fire lately…

    Macau/Bord – Hey that’s good info!  What income level are the tours?

    IRA/Cwan – I don’t know for sure but I have heard something about IRAs needing full margins for some silly reason.  You can offset it by buying the June $7.50 puts for .25 (net .70 on the put spread turns it into $1.85 on the $10s so $8.40/9.20 vs $8.04/9.02 so not much worse at all if put to you but cuts your gain down to 19% although it can be argued that you are making $1.60 on $10.94 (net $8.40 + $2.50 in margin) or 14.6% vs $1.96 on $18.04 or 10.8% the other way so you tie up less margin and make a better return by wasting money on the lower puts.

    D’oh – SONC with a big miss.  Their own same store sales were in-line, down 6.5% but the franchisees dropped 9.1%.  That’s going to cut them way down but the whole thing is wacky because of the way they booked 205 franchises this year (first time they did this).  "The company now receives franchise royalties from these refranchised drive-ins instead of partner drive-in sales."  I still like them long-term.  

    Very good advice:  David Weidner, not one to freely dispense investment advice, breaks the mold for some timeless tips: The markets are a dangerous place, driven by greed and fear; technical analysis does not work; stay liquid and diversify

    YCZ/Big – Don’t be greedy, you are getting a big run on energy this month.  Be very careful of oil inventories tomorrow.  Nat gas already pulling back.


  149. Mosaic Company (MOS): FQ2 EPS of $0.24 misses by $0.11. Revenue of $1.7B (-43%) in-line. "Although potash orders remained soft, sales activity picked up toward the end of the quarter and we see this trend continuing into calendar 2010." Shares -1.3% AH. (PR)


  150.  Should I put in a market order for the open??


  151. cwan 120   you are right.


  152. cwan,
     
    ToS IRAs do need full margin for put sales. So it’s tough in that sense, but remember if you can buy a lower-strike put for a few pennies, you can considerably reduce the margin requirement (and buy a small bit of safety too).


  153. RE IRA account margin requirement: I just checked with TOS.  Yes, you do need full margins on naked puts.  It’s the rule.  No if, but, whatever.
     
    Phil: Thanks for the alternative play to reduce margins.


  154. Oops, late to the punch and I didn’t see Phil made the same suggestion. Anyway I do this (short put verticals) all the time in IRAs.


  155. IRA / lflan & Eric: Thanks!


  156. Why does Weidner say TA doesn’t work? Anyone who has used it lately (buying technical breakouts, e.g.) has likely made a killing.
     
    Trading on fundamentals, otoh…..


  157. Eric – How do you enter a buy/write + buy another puts in IRA?  I mean do you do 3 separate orders? (1) buy the stock first, and then (2) sell calls and (3) do a put vertical?


  158. cwan, yes. You can enter the option trade as a ‘custom spread’ order if you want to though. But I usually leg in like that.


  159. I meant the whole option trade as a single order (put vertical plus call sale). But you have to have the stock first.


  160. USO / Phil – Oil dropped after hours. We might have a winner tomorrow on the $40 puts.


  161. Eric, Thanks!


  162. Big Pinot: Put in a market order for the open and expect to get robbed… people please correct me if I am wrong. Even Cramer says you should never use market orders!


  163. For some reason oil travels with these fertilizer stocks. So I think it’s something with mosaic. But what I don’t get is how to get oil down. Only thing that would do it is dollar appericating and every shoe shiner knows that’s not going to happen. Especially with bendecit arnold who can’t put some viagra in the us interest rates.


  164. Might as well go long here with tight stops as it’s hard to bet against the govt.  up, up and away!  at least until June anyway. 
     
    http://www.marketwatch.com/story/time-for-fed-to-disprove-ppt-conspiracy-theory-2010-01-05


  165. New member and excited to get rolling — underway with k1′s suggestions, so thanks for those k1! Relatively new to options trading and working through the education section, but curious if there are any articles that focus on rolling strategies in different scenarios (I know Sage’s guide touches on the basics of time decay)? For instance, I picked up some of the DXD / FAZ insurance from Phil’s 12/31 post — I understand that these are disaster prevention and that we expect them to go down, but still curious how they should be maintained between now and July (I realize it depends…).
    Same question for some LEAPs on stocks I like long-term but perhaps longer-term than Jan ’12 if necessary. Do you roll those when they get within a year typically or what? They are a "three legged" trade as in tonight’s letter — short put spread used to finance a long call. I don’t mind some fluctuation as I’m in for the long haul, but wondering if/when it still makes sense to adjust and/or roll these assuming my conviction on the call holds. Thanks for any advice.


  166. TA doesn’t work – HA!  I started using it this year and have done quite well…..fundies don’t hurt, but TA is what drives my decisions. 
     
    Minute Phil – better than watching the market all day to end up where we began……..go back down AH, only to shoot up pre-market tomorrow. 


  167. Hi, Pharmboy,
    Are you going to write an intro to TA?  That’ll be very interesting!


  168. Fein – UR right on it depends, so if you have particular stocks you like or are mentioned here, then ask away.  With the low VIX, I would start looking at Jan11s for longer term holds and sell front month calls against.  PSW has a basket of stocks that are favorites including WFR, VZ, MRK, GILD, XLF, SPWRA, VLO, HK, AAPL (although pricey now), etc.  BA, BAC, C are all on the long hold list.  Oil and Ags are usually a short.  I would recommend you paper trade for a few months to get a handle on the positions.  Many of us had our a$$es handed to us in the past for jumping in and trying to trade right away. 
     
    When you do dive in, ease into positions 1/4 to 1/2 starters.  This will lessen the pain if something moves against you.  Cash is king for now, so have at least 30-50 allocated to it for rolling, double down, etc.
     
    For an example for a long trade that I am currently in is GILD – 40 and 45 Jan11, sold the front month 45s a few weeks ago and am up on those.  Just rolled to the 42 Feb P (Sold them).  I am 3/4 covered b’c I expect GILD to hold this area and move up, so IF I were to start a new one, I would buy the 40 Jan11s (1/2 position) and sell a few Ps ATM (currently 42 Feb P).  Waiting to sell 1/2 the 45 Febs for 1.50 or better.
     
    I also just wrote a MRK 35/40 Jan11 bull call spread for 2.3.  And will sell P against it to offset the 2.3 debit.
     
    JMO, and good investing.  The site has been great for me.


  169. Cwan – it is in the works, yes.  Should be out in the coming weeks.


  170. …just got this notice from IB: Link would be to my email so I will paste…
     
    In February 2010 the US options industry will be changing the manner in which option symbols are represented, transitioning from a 5-character symbol format (i.e., the OPRA code) to a more descriptive 21-character format under an effort referred to as the Options Symbology Initiative (OSI).   While the initial industry scheduled implementation phase of OSI is set for 2010-02-12, IB has been and will continue to implement changes in advance of this date with the goal of minimizing any last-minute disruptions.
     
    To date, these changes have been limited to the advance conversion of two largely inactive PHLX listed products, providing the limited group of clients most likely to be impacted by OSI an opportunity to test their preparedness.  Effective as of the 2010-01-06 open, the remaining option contracts listed solely on the PHLX are to be converted and on the 2010-01-11 open, contracts listed solely on the AMEX, BOX, CBOE or ARCA exchanges will be converted.


  171. Market Order/Big – for what?

    Oil/Trad – We’ll have to see what the inventory report says.  Imports can’t get any lower (I don’t think) so they are bound to be disappointed, especially with storm grounding flights (which causes a build in distillates).

    MOS barely went down on a 30% miss – go figure…

    PPT/Terrapin – I think they miss the point.  The Fed does openly give money to GS et al at 0,25% interest for 90 days at a clip.  They then put money into the market and jack it up, then cash out at a proift and give the principal back to the Fed – that’s not very complicated to follow and auditing the Fed won’t help.

    Welcome Fein!  There have been articles on rolling but I’ll be damned if I know where they are.  In general, we roll when it’s advantageous to do so so it very much depends.  With DXD and FAZ, we are way too early in the cycle to consider a roll but, if we get through this week without a pullback - then we need to rethink our protection stance.  Leaps, on the other hand, do have a rule of thumb and we like to roll them by July (within 6 months of expiration) if we are going to keep the play going through the next year.  Sometimes it takes until Aug for them to print the next year’s contracts so we end up waiting.  The best thing to do is give us specifics as they come up and we’ll discuss the pros and cons of adjusting each trade.  

    And what Pharm said!

    TA/Pharm – Well it does work great when all the charts say up and that’s all the market ever does…

    New format/Ac – They already are on it on WSS, it’s a real pain in the ass but at least it’s a format we can get used to except for the silliness where I need to know the expiration day of each period – that I can do without.

    Financial markets that are pricing in three 2010 rate hikes by the Fed are getting a bit ahead of reality, says Pimco’s Richard Clarida, who expects no movement until late 2010 or 2011. “The Fed has never hiked until they have seen a sustained decline in unemployment … By the Fed’s own forecast, that is at least one year away.”

    A positive holiday revenue report from Continental Airlines (CAL +13.7%) pushes the stock to lead an air carrier rally that made transportation the best-performing sector today. Also marking big gains: LCC +11.3%; UAUA +8.7%; AMR +8.3%; DAL +7.8%.

    ABC Consumer Comfort Index: -41, a 16-month high, kicking off 2010 on a less-awful note. A full 51% now rate their personal finances positively; 28% think it’s a good time to buy things and only 9% rate the national economy positivelyAnd that is our BEST report in 16 months?

    All the gloom you never wanted: Paul Farrell collects the thoughts of the 12 most prominent "Dr. Dooms."

    Despite the year-end incentives blitz, automakers actually spent less on incentives in December than they did a year ago – or even in November. Average incentive of $2,542 was down $167 (6.2%) from November and $320 (11.2%) from last year. Still, 2009 model incentives were a much higher $4,317, led by $7,000 dealer payments on soon-to-be-orphaned Saturns and Pontiacs.

    David Fry says: "Program trading is still the dominant force in markets and computers are just pushing each other around."  Note his chart of SPY program trading on pg 3.


  172. "DNDN/Edro – Gosh but if it’s put to you at $20 do you want it? "
     
    Maybe…..  Depends on what happened …
    How would you protect yourself?


  173. For Cap: Capital One (COF) +2.5% on an upgrade from Stifel Nicolaus. "We are more confident that credit-card industry losses have already peaked and are poised to drop significantly… we no longer see material catalysts for a pullback."
    Phil/COF
    Yeah, I saw that upgrade.also, thx for mentioning.
    I did short some COF towards the end of the day.
    Stifel has a bridge to sell you too …  :grin:


  174. DNDN/Edro – I think the play is fine, just pointing out the need for caution because it’s NOT one of those stocks that you are going to be happy to hold if they have a catastrophic set-back (like BA or AAPL..).  As always with naked put sales, you should REALLY want to own the stock at the put-to price if you are going to make a commitment.

    COF/Cap – Yes, I thought you would find that amusing.

    Huge move up in futures beginning at 5:15.  We were down about 40 on the Dow, now almost flat again. 

    China’s Ministry of Housing says it plans to tighten credit policy to curb speculation in the real estate market. Housing Minister Jiang Weixin: "Housing prices in certain areas and cities have risen too fast and that has attracted the central government’s attention." Will China succeed in curbing the very greed that destroyed America? (ETFs: FXI, PGJ)

    A Chinese government economist urges Beijing to allow the yuan to rise by 10% in a one-off revaluation against the dollar. Chinese Academy of Social Sciences economist Zhang Bin would also like China to widen the yuan’s daily trading band to 3% around parity from a current 1.5%. (ETF: CYB)

    With China poised to overtake Japan to become the world’s No. 2 economy in 2010, North American companies that understand what Chinese consumers want stand to earn hefty profits. Shaun Rein fingers four he says have the right idea: AAPL, WMT, ADY, DD.

    China, China, China – whenever you need a reason to believe in the US economy, nothing sells it to speculators like China!

    Wednesday’s economic calendar:
    7:00 MBA Mortgage Applications
    7:30 Challenger Job-Cut Report
    8:15 ADP Jobs Report
    10:00 ISM Non-Manufacturing Survey
    10:30 EIA Petroleum Status
    2:00 PM FOMC minutes


  175. Here’s a nice set of charts highlighting one of the main reasons I have trouble being bullish:

    negative equity deutsche bank units five estimates

    property house-value-debt-equity jpeg

     



  176. Gang of 12ers pump it up:

    Worries about unsustainable debt levels in the U.S. and the U.K. have dominated the headlines recently, but at least one influential economist thinks the concerns are exaggerated and that Japan faces greater risks to its economy. Concerns over sovereign credit ratings and fiscal problems in the U.S. and the U.K. are "overdone," Goldman Sachs’s Chief Economist Jim O’Neill told Dow Jones Newswires in a telephone interview Tuesday. He doesn’t expect a "disaster" in the Treasury or the U.K. government bond market this year, nor does he buy into the hype about the dollar’s demise. Even sterling — the market’s favorite punching bag — should be a big winner this year, according to Mr. O’Neill. Instead, he said, it’s Japan and the yen that investors should keep an eye on. Japan’s problems are "much, much worse" than those of the U.K and the U.S. That’s why he expects the yen to be the "big loser" among major currencies in 2010. No surprise, then, that one of his favorite personal trades this year is to buy the pound against the yen.

    In the U.S., he noted that "the risk of [a] double dip [recession] in the economy this year has declined significantly. The bigger risk is the economy is stronger than we and others think and therefore the Fed may have to change its mind." As for the dollar, Mr. O’Neill made it clear that he doesn’t buy into the doomsday scenario painted by some for the U.S. currency. In fact, according to Goldman’s models, the dollar remains undervalued, despite its recent recovery. "My experience tells me that sometime over the next two years or longer the dollar would go to $1.20 against the euro," said Mr. O’Neill, a level it last traded at in March 2006. Tuesday, the dollar was trading at $1.4356 against the euro. "The dollar’s long-term problem has in the past been the current account deficit and that is now improving. It is very hard to be so bearish on the dollar," he said. Mr. O’Neill expects stock markets to outperform other asset classes this year, followed by commodities, while credit markets, including government debt, are likely to be the laggards. "It is a fantastic environment for global equities because you’ve got very strong earnings recovery and very strong liquidity from the central banks," he said.
    U.S. economic growth as measured by real GDP will top 5 percent in 2010, and the unemployment rate will fall below 9 percent, said Byron Wien, vice president of Blackstone Advisory Services, who shared his annual top 10 surprises with CNBC Tuesday:

    Warren Buffett famously described complex financial instruments such as credit-default swaps as “weapons of mass destruction.” YRC Worldwide, a trucking company best known for its Yellow and Roadway-branded big rigs, would agree with that assessment. CDSs nearly proved to be the company’s undoing. And the fact that YRC almost went bust because of CDSs shows how little has changed on Wall Street. WSJ’s Dennis Berman sits down with Evan Newmark to discuss YRC’s struggle for survival
     The cost of filling up the car is rising in the wake of soaring crude and by this weekend, pump prices may race past the highs for all of 2009. Tracing the ascension of crude, up 14% since mid-December, energy prices across the board are catching up. Falling supplies in recent weeks have contributed to prices driven higher by the falling dollar. "Some back of the envelope arithmetic puts the current U.S. fuel bill at about $1.066 billion each day," Kloza wrote. "A year ago, that daily outlay was about $625 million." Already, gas costs $1 more a gallon than a year ago, and that’s costing a typical motorist about $50 more a month.


  177. Phil – are you out of those dia 103 jan puts / I did not roll – bail or hold? Getting ready to cut my losses – thanks.
    Sam


  178. Taking a COF short here at 40.82


  179. cof; a bit early; should have waited for R1, it should be good


  180. SPG and SLG have been nice dogs this week