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Testy Tuesday – Back to our Bounce Levels?

Too tricky to call!

We're trying to be bullish now, so we don't complain about stick saves and we got a nice one into yesterday's close and another one in the futures, which were down about 50 at 3am – but it still looks like BS to me.

On Thursday morning I said: "Our 5% "must hold levels" remain:  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 with 3 of 5 below = BAD!"  We got the Dow, S&P and the NYSE back over the line yesterday and now we need the Nasdaq and the Russell to show us the money and catch up.  Of course, this is just our "averting disaster" levels – we haven't even broken our "weak bounce" targets of: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 that the 5% rule predicted in last Monday's post

Last Wednesday I asked the question, is it weakness or good old fashioned consolidation?  My premise was that commodities were overvalued and we were due for some rotational correction, which was GOOD and HEALTHY.  The market still has much to prove and we are still pursuing disastrous economic policies that will all end in tears but, in the meantime, we can still party like it's 1999 as long as we know where the nearest exit is – and that's what our Disaster Hedging is all about. 

We took positions on DXD and QID yesterday as the weak bounce we got was a good chance to establish new hedges and I'm hoping we get another push in commodities so we can short some of them.  EDZ is getting interesting again, back at $5.65, about 10% away from our sweet spot ($5) for taking up a position but we may hit them early if the US indexes can't provide some leadership this week.  As you can see from Trader Mike's charts – we have plenty of resistance to get through and we're still waiting to see a rise on anything but weak volume to give us more confidence.    

Germany gave our confidence a small boost this morning as Retail Sales, adjusted for inflation and seasonal swings, rose 0.8 percent from November, when they dropped a revised 1.7 percent.  Germany’s government this month raised its forecast for 2010 economic growth to 1.4 percent from 1.2 percent. While the economy is still grappling with the aftermath of its worst recession since World War II, the government has extended subsidies that encourage companies to hang on to workers, helping to limit an increase in unemployment.

Wow, what a concept – instead of letting them get laid off and lose skills and sit on the couch collecting government checks – the government pays to KEEP PEOPLE WORKING, which also helps the company by lowering their costs without sacrificing their ability to get sales moving again.  This news pulled German bonds back from crossing the 3.25% mark but the low rates' days are numbered (have I mentioned I like TBT lately?).  “As the economy recovers, there will be some normalization of rates in Europe towards the third quarter of this year, creating a jump in yields in the second quarter,” said Michael Rottman, head of fixed-income research at UniCredit Markets & Investment Banking in Munich.  

Of course it's Groundhog Day today.  The movie "Groundhog Day" is one of my all-time favorite films and our foreign readers would do well to remember that we live in a country where thousands of people actually do gather each February 2nd in a small town in Pennsylvania where a dozen men in tuxedos pull a rodent out of a box to see how much longer winter will last based on whether or not it sees it’s shadow.

Perhaps the little ritual itself isn’t that strange but how seriously people in this country take it is downright weird!

In the movie, Bill Murray is forced to live the same day over and over, much like the trading range the markets have been stuck in since October.  There’s nothing wrong with being in a trade channel if you learn to recognize the tops and bottoms – that’s why it’s so important we watch our breakout levels and don’t overcommit as we near the tops or bottoms of the range.  As I often say, "if there’s a real market rally, we have all the time in the world to participate" so we scale in slowly here, looking to see if we hold these levels but anticipating a very possible test of the 200 dmas – about 5% lower than we are now.

[spain0202]Every day is looking the same for 18.83% of Spain's working population, who have to line up at the unemployment offices for their checks.  Spanish jobless claims rose by 3.1% to 4 million in January from December, January jobless claims were up 22% from a year earlier.  We'll be getting our own Non-Farm Payroll Report on Friday and it's anticipated we "only" lost 40,000 jobs in January, with a 10.1% national unemployment rate so IN YOUR FACE SPAIN!!!  Of course, Spain counts all the people who can't find jobs as unemployed while we don't count people who time out of benefits or get tired of looking after 12 straigth months of rejections or accept menial jobs in order to put food on the table.

Best of all for US statistics, is the fact that we don't worry that the Average Workweek for the 138M people who still have jobs (yes, I've been using 140M and have had to adjust it down) is all the way down to 33.2 hours while hourly earnings remain flat (and losing ground to inflation).  So 138M people who work 1 hour a week less than last year for the same hourly pay is ANOTHER 4M jobs worth of phantom unemployment – or the entire unemployed population of Spain tucked under the rug of US labor statistics

Step one in a 12-step program is admitting you have a problem - OUR LEADERS HAVEN'T EVEN DONE THAT YET!  Other steps include making a decision to turn our lives around (not just rhetoric), making a list of the people we have harmed and making amends (Lloyd Blankfein will be busy with that one!) and, of course, taking positive action to correct the problem (not with this Congress).  I don't recall any of the steps involving holding filibusters or fudging data but maybe I missed that meeting…  

Speaking of data – we have Auto Sales today and tomorrow is the ADP Report along with Challenger Job Cuts and ISM services.  Thursday is the usual Unemployment Data plus Q4 Productivity, which should be up again as workers skipped Christmas rather than risk losing their jobs.  December factory orders are bound to be a disappointment as nobody actually bought anything to cause the need to restock.  All that leads us up to the mighty NFP Report on Friday and we may get an upside surprise as the Census has just 6 months (including this one) to hire 2M people – that's over 300,000 people a month that should be added for the first half of this year (and then let go into Christmas – FUN!). 

Asia was wishy-washy this morning and Europe is up half a point but led by bouncing commodity pushers (talk about a planet that needs a 12-step program!) but that doesn't matter very much as everyone is set to follow our lead this week.  Hopefully, we continue to have sensible consolidation in the range I outlined on Saturday and perhaps we can see enough data and earnings this week to convince us the World won't be ending this quarter and THAT would be a positive first step!

 


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  1. Morning all!
    Hi guys, I think I missed an entry the other day but thinking of entering CME here any thoughts please? Looking at selling Jun 290 calls buying Jun 250 calls and selling Jun 250 puts for ~$16 entry on $40 spread any comments please ?
     
    Thankyou thankyou thankyou  :)


  2. Morning Everyone. Read a number of posts last week regarding X. Thought you might find this piece of interest. Possible short idea.
    seekingalpha.com/article/185691-u-s-steel-heading-for-book-value


  3. Good morning! 

    Yawn!!!!!  Same watch levels, same range.  5% levels of  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 (3 of 5 below is bad) and we’re not very interested in long plays (even including the Buy List) until we start seeing some action above that level. 

    There’s no proper upside breakout until we hit our bounce levels at: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 - ANY negative moves this week are a very strong indication that we’ll be continuing on to a 10% correction (9,250 ish). 

    Yesterday’s action was LAME volume with a stick finish and we had another stick in the futures so it’s much more likely we head lower today.  Protective downside trade is DIA $100 puts at $1 with a stop at 10,200.


  4. Phil, Would you put on any short term protection for those of us long (but covered) in financials (BAC, GS, XLF)?  As hysterical as the banks/market have been about financial reform, I am concerned that the next couple days of testimony may rough them up a bit. Volcker inadvertantly burping into the mic will probably send FAZ zooming.


  5. CME/Steve – Not a good time to enter as we stil have commodity weakness but they may bounce off this 20% drop from $350 to $280 but the 20% retrace is just $14 to $294 and that’s pretty much the 200 DMA and if they get rejected from that then it may curve down to follow the declining 50 DMA and THEN it’s a great time to short them for a retest of $220.  So, rather than spend $48 on June $250s, I like spending $35 on Jan $290s and selling the March $300s for $10 and the June $250 puts, only if they go from $10 to $15.  That would leave you in the spread for net $10 and you can roll down to follow CME lower, selling more calls along the way and rolling the putter if you have to. 

    X/Jbur – It could happen but I don’t short X unless they are way high, they go too crazy to the upside.

    Financials/Bord – I’m still expecting them to hold up but you can buy the XLF 2012 $16 calls for $1.40 and sell the June $14 calls for $1.28.  If XLF heads higher, you can add to the Leaps or roll them down and turn it into a positve spread and if XLF flatlines or heads lower, you are in the spread for .12 and the 2011 $17.50s are .40 so we can assume that by June, unless XLF drops more than 30%, you should be good for a triple off the net and even with the $2 in margin, it’s still better than 20% in 6 months

    Wow, we held 10,200 nicely so no trade on the downside of course and now we’ll see if the RUT and the Nas can make their marks but it’s a long way up (1.5%) for each of them.


  6. PharmBoy, MNKD taking a hit today due to change in partnership talks. I’m in it and I believe I got the idea from you, if so are you staying in or getting out on this news? Thx.


  7. Phil, do you see anyway to play FAS, the financials or XLF?  last night you said you would look to buy EDZ soon, still looking?


  8. GS moving up, XOM going well, CME popping (ICE too), SUN up for some strange reason (all the majors had poor refining numbers and SUN is mainly a refiner). 

    Pretty mixed action but I don’t see what they can use for a catalyst today other than maybe good auto sales for Jan – but I doubt it with TM trouble, I doubt everyone ran right to another dealership to buy whatever – more likely it hurt the overall totals at the critical end of the month. 

    Transports working hard to stay green, good turn signal if they go red and then we can go back in the DIA $100 puts (now .98). 

    UPS is getting sold off after giving a report that couldn’t have been much better – that’s a problem.


  9.  Phil, 
    I have April 26 calls in T. i feel like T is finding support around this area and i like T longer term. should i sell calls against my calls in the near term and form a calendar? if so, which strike should i sell? 


  10. LOL, now big Pending Home Sales (up 10%) number is pushing us back up. 


  11. dmankoff,
    MA has a decent chart set-up for a long, although as Phil was saying, anything is risky right here.


  12. Phil – Hard to see how Burkle is going to goose BKS up any further.   What do you think of selling some 2012 calls?


  13. Hi Phil,
     
    Thanks for the advice on C yesterday.
     I do need some more strategy suggestions.  I did buy 110 contracts on the 5/7.50 Jan 11 spread way back at ..64.when I was reading your old articles.  BUT I decided to just sit and it and I wasn’t looking at them.  Now they are not worth much.  So do I just sit on it? OR Roll them to the Jan 12 5/7.50s?  I could roll down to the Jan 11 2.50/4 spread but that is expensive and in my mind a crap shoot.  I feel that it is throwing good money after a bad to play that one.   Is there any way to recover this mess?
    Thanks Donna


  14. Phil,
    Can I get your opinion on BP?  …lookin to sell some puts here.  TIA


  15. JRW, judah – a little too crazy for me today.


  16. EDZ/Dman – Since they always make good protection I like selling the March $6 puts for $1 but that’s because I REALLY want to own them for $5 and I will plan to DD at $4.50 or lower.  XLF, see above play.  FAS/FAZ a little too crazy right now but if the VIX get’s back to 25, remind me.

    T/D12 – I love T long-term but not enought to pay .65 for Apr $26 calls.  I’d sell the March $26 calls for .55 and use that money to roll to the July $25s at $1.60 and you can also sell 1/2 the July $27 calls for .70 to make it an almost free roll.  If T heads lower, then you can sell puts (the July $20 puts are .36 and should fetch .75 if T drops $2) and then you’d have a net entry at less than $20 and totally free upside

    BKS/LV – I forgot about them!  Damn, that was a good short last night.  They already traded a normal day’s volume and they are probably near Burgle’s avg entry.  Unless we see volume accumulation on the way down, then he’s full of crap most likely.  BKS options are way overpriced, ESPECIALLY the puts.  I think the best sale is the March $20 calls at $1.15 as they may fade fast and they will be rollable (and you can always sell puts if they head up.

    C/DD – OK, you are in for $7,040 and the spread is now a dreadful .13 or $1,430 so the real question is what can you do to get $5,500 back right?  With C on this position I like buying the 2012 $2.50 puts for .42 and selling the 2011 $4 puts for $1.02 which, if you do 110, puts net $6,600 back in your pocket (but costs $1.50 in margin) and you only need C to gain 10% to get back in decent shape.  Meanwhile, you can roll to the Sept $3/$4 bull call spread at net .42 (+.28) which are, at least, .35 in the money already and if C makes it to just $4 by Sept you are back to $11,100 and, of course, the putter shouldbe worth much less too!

    Wow, that housing number is really helping!

    BP/Oncmed – 200 dma at $52 should hold so selling March $55 puts for $2.30 into the excitement isn’t too crazy (but notice I’m not bolding the play!).


  17. /ES straight up 10 points in less than 30 minutes. Possible short covering?


  18. really really helping


  19. Wow, look at these futures fly!

    You have the EU open at 3am and then the 10am housing data.  Nas is still the laggard and AAPL is still cheap (check the weekend post for your favorite AAPL play).  If program buying kicks in on the Nasdaq, 15% of it goes to AAPL.  For a quck play, I like the March $220 calls naked at $1.85, which were over $5 last week.


  20. Oh, just realized it might be helpful for you to know those are (top row) S&P, Nas, Dow (bottom) RUT, Oil and Gold. 


  21. Phil – you still liking cash.


  22. Phil, what do you think of MED? It’s lost 50% the past month, good spot for a bounce?


  23. Llorens/S, You follow S, right?  I don’t see anything yet to justify its big move this morning.  Short covering, I presume. Did someone leak some information that they didn’t lose as many post-paid customers last quarter? 


  24. In TZA at 10.10 (IWM 61.39 ), looking for IWM 60.82


  25. Phil, I’m in a TBT calendar spread with June 55s covered by March 54s for net $1.10, now net $0.73. Would you buy back some of the March calls or roll them to June or just wait for now? I know we like to collect premium, but is it worth holding out for the extra $0.21 when any sudden sovereign default, comment from the Fed, etc. would kill the covers and they’ve already gained 2/3+? Just curious on how you look at the risk/reward profile there. Thanks.


  26. Phil, I cant find the AAPL trade idea in your weekend post.
    Do you mind posting it again?
    Thanks


  27. And out for $0.09


  28. We’re driving along the highway and our car is on fire and Obama wants to pull over to get gas. ;-o

    Big Paul V may say things this afternoon that traders do not want to hear


  29. Housing vacancy rates in Q4 were up to 10.7% for rentals (not good for REITs) and 2.7% for homeowner housing.  That’s up 0.6% from the prior year and down a little from 11.1% in Q3.  Homeowner vacancies were down from 2.9% last year but up from 2.6% in Q3.  Overall homeownership rate is still 67.2%, which is huge compared to other countries.  On the whole, this is a positive report showing at least we’re stable. 

    Durable goods issue: Whirlpool (WHR): Q4 EPS of $1.24 misses by $0.08. Revenue of $4.8B (+13%) vs. $4.4B. (PR)

    Wow!  Lexmark (LXK): Q4 EPS of $1.16 beats by $0.54. Revenue of $1.07B (-1%) vs. $0.99B. (PR)

    Very green shoot:  Cummins (CMI): Q4 EPS of $1.36 beats by $0.60. Revenue of $3.4B (+3.4%) vs. $2.8B. (PR)

    And another:  Automatic Data Processing (ADP): FQ2 EPS of $0.60 beats by $0.58. Revenue of $2.20B (+0%) vs. $2.17B. (PR)

    Look, we picked the only oil company that went up!  BofA/Merrill Lynch (BAC) upgrades Exxon (XOM +0.7%) to Buy from Neutral, noting the stock is at essentially the same level as when the market bottomed in March 2009 and progress with the XTO (XTO) acquisition should provide some relief for the stock.

    BofA (BAC) and JPMorgan (JPM) are among the investment banks that could see a 20% boost in their fees thanks to a rebound in leveraged buyouts. LBO firms may pay as much as $4B in fees in 2010.

    ICSC Retail Store Sales: +0.1% W/W, vs. -2.5% last week. +0.4% Y/Y, vs. +1.9% last week.

    Redbook Chain Store Sales: +0.8% Y/Y vs. +1% last week.

    Dec. Pending Home Sales: +1% to 96.6 month-on-month, vs. 0% expected, and against -16% to 96 prior. Sales +10.9% year-over-year.

    Australia holds its cash rate target steady at 3.75%, saying it needs time to evaluate the effect of rate rises in late 2009. Economists had widely expected a rate increase to 4%. The news sends the Aussie dollar strongly down. (ETFs: EWA, FXA)

    China further restricts lending, reportedly telling banks to raise interest rates on third mortgages and to require larger down payments for those loans. Sources say regulators are warning banks of the danger of "hot money" flooding the property market. (ETFs: PGJ, FXI)

    Justice at work: The U.K. Serious Fraud Office says it won’t bring charges against Madoff’s U.K. unit or its directors because there is "insufficient evidence" to “provide a realistic prospect of conviction.”  Wow, a confession is "insufficient evidence" in England?

    Nearly 1,000 firms with a junk rating face significant refinancing needs, warns Moody’s, with around $700B of debt due from 2012-2014. "Longer term maturities are vulnerable if the economic recovery doesn’t continue to take hold," and "things could get tough pretty quick for some companies."

    In prepared testimony ahead of his appearance before Congress later today, Paul Volcker pushes for curbs on banks’ high-risk activities and says banks’ proprietary and speculative activities shouldn’t be protected by the government. So any reaction on Volker is BS as it’s all prepared statements.

    Live webcast: Tim Geithner’s budget testimony. In his prepared remarks, Geithner notes current deficit trends "are not sustainable," and says correcting them will require cutting the debt-to-GDP ratio to a manageable 3%.

    Told you so!  Amazon (AMZN -2.7%) opened the floodgates with its e-book pricing concession to Macmillan. The Authors Guild says at least five other major publishers will push for the same terms, forcing Amazon to raise its prices.

    Mixed news and big rejections on the Nas and the RUT so far so be careful.  Volume not too exciting at less than 60M at 11.  AAPL still weak, which is probably why Nas is running out of gas but I still have faith (because of the low volume) that we can keep going up.

    Cash/SS – Absolutely! 

    MED/Jrom – I think they are getting their asses kicked by NTRI and now there’s an advertising and price war so I don’t like the space until they all bottom out.

    TBT/Fein – Those are miles out now.  The March $55s are .20 and you can roll them to 1/2 the March $48s at $1.35 and net .45 per long.  The June $55s are .92 and .45 pays for most of a roll to the June $52s at $1.48, which is a good spot with the 1/2 cover as long as you can afford the extra spread margin (double what you have now).

    Be careful on TBT this afternoon – Volker may commit the ultimate sin of sounding rational and making FOREX traders think we may actually have a plan to get things under control around here

    AAPL/Lionel – There was a summary of a half dozen AAPL trades, what are you interested in doing (ie, timeframe, risk, direction)? 


  30. kustomz, if what you say is true, I hope the Republicans are bound, gagged and tossed in the trunk so they can’t escape…….;) jokes are good, jokes are healthy


  31. Dollar moving up, commodities fading.  Copper failed $3.10 (now $3.075), silver $16.64, gold $1,112.  Oil rejected at $76 (now $75.82) and Nat gas can’t get over $5.50 (now $5.45).  Copper is key, if they can’t take back $3.10, there’s not much of a recovery and oil failing $75 is a down sign too. 

    GLL got nicely squashed today and the $9s at $1.05 have little premium for a fun upside play on gold pulling back on Volker speach – very risky of course!


  32. LOL bord….. gagged!!! o please no,  i want to hear their screams

    Forex traders were calling for a bounce in the Euro, we may see some strength in the dollar this afternoon and hopefully oil stays below 76
     
     


  33. mocha:  MNKD.   I would not be long this.


  34. Phil / Anyone – what time is Volker’s speech?


  35. pretty boring day so far …


  36. Phil, I cannot imagine GS not taking some kind of survival action if Volcker and regulators come down hard on banks. Prop trading is their bread and butter and wouldn’t be surprised to see them either give up their bank status, or try to go private, perhaps with Buffett’s help. What are your thoughts?
    Also, have 45% gain on GS opening trade suggested last week, sold Mar 145p at 6.00. Happy to hold them or happy to buy GS if opportunity comes. Any further moves yet, or just be patient?


  37. emcginley, probably after his nap :)


  38. Paul V.. at 2:30

     


  39. Peter – I am all out of Feb strangles and have actually paired down some Mar strangles.  Is that how you are playing this?  Seems like we are in no man’s land waiting to break to either side.


  40. Tkx kustomz


  41. Phil – on covers – we looking to take nice 50 cents on 102s or stay put -


  42. Volker/Emc – 2:30 I think.  Not a speech, testimony for Senate Banking Committee.  Thursday morning they have another hearing scheduled on this matter with testimony from GS, C, JPM and some Ivy League B-School types (because I guess they are considered neutral even though they are funded by GS, C and JPM and need to place all their students there).

    Here’s something you won’t hear in front of Congress:  Bubbles will come and go, but how much damage can they do relative to actual losses? Infinite damage, says Robert Waldmann, pointing out that even as swaps evened out average losses, the size of players’ irrational bets is enough to take down the system.

    A sudden and pronounced shift away from adjustable-rate mortgages appears to be an unintended consequence of the Fed’s MBS purchase program, which excludes ARMs, and thus favors fixed-rate loans. The interest rate differential between FRMs and ARMs has fallen from 2.5 points in 2004, to just 0.5 points.

    While Big Oil scales back spending and gets more selective about projects, Exxon (XOM) is forging ahead with high-risk exploration and praying the bet pays off – soon. Exxon’s spending on unsuccessful wells rose 39% last year, leaving little to justify its increased spending.

    On the much greener side, the beats just keep on coming, 72% so far this Q.

    GS/Jbur – Oh they’ll dump banking in a second.  They only do it to get the Fed money but if that gets taken away, they’ll just start issuing their own paper.  I’d be patient with the puts as I don’t think GS is in any danger for the next few weeks but, of course, set stops as we don’t let 45% gains slip away. 

    This is not a very good bounce as we are working off some VERY oversold conditions.  I’m just not expecting Volker to be a catalyst but gold flew up to $1,119 all of a sudden but got a quck reject there.  Oil is $76.34 despite continued dollar strength. 

    Oh yeah, auto numbers – that’s the best chance to get the markets moving up.  Other companies may do well compared to TM but the total sales will likely be down. 


  43. AAPL/
    Phil, I have followed up on your AAPL short term plays (FEB PUT and MARCH CALL) and it is working nicely for me. Thanks!
    Now I am interested in a LT play on AAPL and I don t mind owning them at $180.
    So what do you think of buying 2011 CALL SPREAD 180/240 and financing it by selling 2011 PUT 180 for approx $3 with an upside of $60?
    If you have already posted a similar play, my apologies. But that would mean that I have learned a lot from you :)


  44. Phil/TBT – Sorry for the dumb question, but not sure how you get to "net .45 per long" as I’m short the March 54 calls and long the June 55 calls? Am I rushing to do anything now given that there’s lots of time? Thanks.


  45. phil, any thoughts on a FSLR earnings play would be appreciated. thanks.


  46. Mattress/Samz – With the fully covered DIA mattress play, it is time to set stops (.10 trailing) in 1/2 of the covers, whichever ones (if you have more than one strike) is higher, as they would have more downside delta.  Essentially, below 10,220, we want to be 1/2 covered only.


  47. SS/Feb strangles.  I read your note to Peter (I’m still giving mine some time since I don’t have any near term need for the margin.)  What did you do with your Feb put verticals, close them as well?


  48. Most of my portfolio in AMED now.
    See my posting today on the  Yahoo Finance Message Board for Amedisys ‘AMED’
    It’s a very detailed analysis, based on extensive interviews, of why I feel this stock will increase to $85.  One of the few solid oppportunities out there.  (Was $55.50 this morning).
    A massive short squeeze is coming with a short interest of 53%.


  49. judah – on second look I still have a 10 Feb RUT 550/650 with 5 590/600 put vert (I have accounts at TDA and TOS).  All other Feb strangles are closed.  I still have Mar SPX and RUT strangles.  I too am a little perplexed as to when to close the verticals.


  50. Phil:
    have KBR stock, base 20.77$,
    have 1x caller mar 21, base 1.44$.
    have 1x putter mar 20, base 0.89$.
    is KBR good to buy at 19$ or adjust the options???


  51. 10300 like a magnet


  52. SS.  Your RUT vertical is a lot closer to the money than mine (560/550).  I’m better off just selling my put than closing the vertical, which I may do next week if the RUT stays in the current range or higher.  But yours must be worth more than you paid for it.  The RUT could still fall to 590-600 in the next couple of weeks, which makes it a good hedge still. 


  53. Good afternoon all!  As a new member, i am doing the usual processs (k1, reading posts, ect).  The strategies that are used here are great and i look forward to becoming more educated and imploying a more sophisticated trading model.  I use verticals extensively in my trading but in a slightly different way. 
    Peter D, i am very interested in learning more about the short strangle trade, specifically historical examples including adustments.  Do you have any history i could learn from?  I have read the articles on PSW (part 1 and part 2) and are looking for real world examples.  The line of discussion concerning the VIX and when to deploy a SS is great.  (i missed the VIX spike :( ).  Any help or direction would be greatly appreciated.


  54. Phil -
    Thanks for your patience with the covers – I need to go re-read.
    On the good side, made over 3.5% yesterday on the move up – thank you! Instead of just worring about covers – actually got long last week – my portfolio had been neutral to bearish.
    I was so focused on the covers that I did not have enough long positions in the portfolio to benefit on the upside. Getting rid of spy and efa covers – just following your advice on dias
    Sam


  55. Where did all the sellers from last week go ?
     
    What a joke this market can be.
     
    Mini-FMD in progress.  Needs more oomph to become full blown FMD.


  56. Hi Phil on DIA’s Still holding my Jun 109 for 6.43 now dropping to 8.85 but the Feb shorts are still high sold Feb 106 for 2.29 now still 3.85 and the Feb 107 for 3.95 now still up 4.75 still full cover. 
     Long 107 Feb call .60 now only .10 your advice pls


  57. AAPL/Lionel – That is an excellent play, you are learning well!  The only change I would make is to point out that, while making 20x on $3 is VERY cool, it does require AAPL to gain 20% to make $57 by Jan while selling the July $180 puts for $12.25 and buying the July $155 calls for $46 and selling the July $185 calls for $24.75 puts you in the $30 spread for net $9 with $21 of upside in just 6 months with a break-even at $167.50 and you make that money as long as AAPL drops less than $10, rather than needing a 20% gain.  Also, if there is a dip in AAPL and you think it will bounce, you can uncover a few or roll down your $155s (I like to do $10 for $6 or less) AND, if the play does (unimaginable) go against you – you have tons of time to roll out and re-set.   

    TBT/Fein – You have X number of March $55s at .20 – lets say 10 at $200.  You take those out (-$200) and sell 1/2 (5) the March $48s for $1.35 (+$675), which is net +$475 divided by 10 contracts = .475 per contract that you can spend to roll your 10 June $55s.  There is lots of time but you are hopelessly out of the money and you have virtually no protection so effectively you have a way out of the money call that is bleeding premium with no covers and your only hope is TBT gains about 20% in 2 months to make a level it hasn’t seen since last August  - that’s when it’s time to roll!

    FSLR/Lunar - I will call you Lunartic if you try to guess what that stock will do!  Did they lose contracts in Germany & Spain due to the government subsidy cutbacks?  Are they losing market share or margins to competitors who have benefitted from declining semi pricing?  Have they benefitted from rising copper production and low industrial use of tellurium creating a plentiful supply?  They are a crazy company, crazier than POT and almost as crazy as AMZN or RIMM and just as shoved around by mo traders.  If you want a fun way to play it, you can take the June $125 calls at $10.60 and the June $105 puts for $9.20 and sell the March $115 puts and calls for $19 so you are in for pretty much zero and you play for the volatility crush and the assumption that you will be able to roll out of trouble if they fly one way or the other.

    Amed/Tusca – You can post up a link here or you can even post it in comments (use a previous day’s post and then link people to it if it’s long) or ask Ilene to take a look for a proper inclusion in Phil’s favorites.  I think there’s good merit to those guys. 

    Wheeeee – up we go! 

    KBR/RMM – As they are March I’d say wait and see.  No great tragedy if put to you at net $18 on 2nd round for about $19.50 avg. 

    RUT and Nas not confirming Dow move but Transports held strong and VIX is down another 5% so they are not worried.


  58. Welcome Robert!   Hey Peter, if you have a list of links, I can put them into the New Member’s guide as it comes up a lot.

    Cool Samz!  The whole trick is just stringing a series of small victories together while staying generally neutral.  It is very much like riding a wave (just avoid the rocks!).

    Sellers/Cap – The switch has been flipped and they are now buyers.  No doubt, as you said yesterday, in reaction to Obama’s policies.  8-)

    DIA/Yodi – Those Junes were absolutely supposed to have been swapped for (now) $104 puts at $5.70.  You have to take $3 off the table because if the Dow goes higher and you roll up $1 for .50 each time, that $3 pays for you to roll back to the $110 puts so, even if we are wrong and the Dow goes higher, you end up in a better position than you started with for the same money!  Those $107 calls are pretty dead – you must use stops on those naked plays (see strategy section).  As to the other set.  All you can do right now is see how high we go but that’s still no reason not to roll down your June $109 puts and figure if we do head lower you add 1/2 the June $104 puts for $3 (the $3 you saved by rolling) and then you can roll the Feb puts at about $4.50 avg to 1.5x the March $103 puts, now $2.88 and that would put you in a not terrible June $104/March $103 put spread. I put together a huge comment on how to roll those mattresses and I copied it into the comments on the scaling link on the strategy section – you really should look it over. 

    Speaking of DIA, I like the $101 puts at .98 just until we break 1,100 on the S&P (one of these days, one of these things will pay off!).


  59. Hi Phil,
    Thanks for the advice on C.  I transacted both recommendations and am totally pleased with it.
    I also bought 100 Feb 2010 calls on MHO from your revised Watch List.  UP UP UP!!!  Great Service – Thanks
    DD


  60. AAPL/
    I like your play better as it is a more conservative bet on AAPL future performance.
    Thanks again for your advice.


  61. JRW, judah – any thoughts today on market direction?


  62. Phil, No doubt its that Obama magic of tax and spend til you go broke !
     
    Taking a small short position in LNR …
     
    Homebuilders and REITs running wild today.


  63. About 9.1% of FHA borrowers had missed at least three payments as of December, up from 6.5% a year ago, foreshadowing a possible crush of foreclosures that could exhaust the agency’s cash reserves.

    Ford (F) January U.S. sales: +24% to 112,406 vehicles. Cars up 43%; crossovers up 20%; SUVs up 8%; trucks and vans up 14%. Ford brand up 26%; Lincoln up 16%; Mercury up 6%. Fusion +49%. Taurus +121%. (PR)

    Daimler (DAI) January U.S. sales: +26.4% to 15,436 vehicles. Mercedes-Benz: +45.3% to 15,158 vehicles. Smart: -84.3% to 278. (PR)

    20 triggers that could ignite the debt time bomb
     

    From the NYT: In a federal budget filled with mind-boggling statistics, two numbers stand out as particularly stunning, for the way they may change American politics and American power.  The first is the projected deficit in the coming year, nearly 11 percent of the country’s entire economic output. That is not unprecedented: During the Civil War, World War I and World War II, the United States ran soaring deficits, but usually with the expectation that they would come back down once peace was restored and war spending abated.  But the second number, buried deeper in the budget’s projections, is the one that really commands attention: By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years.

    Think twice before you fork over $200K to send your kids to college:  Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in a report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value.

    The market may like today’s report from UPS (UPS +0.8%), but it may not like what the numbers reveal about the underlying economic picture: Q4 avg. daily package volume, -0.2% year-over-year; Q3 -3.9%. Q4 U.S. avg. daily domestic package volume, -1.9% year-over-year; Q3 -5.1%.

    Damn, S&P over 1,100 already.  Just losing nickel after nickel on these cover plays – gotta learn to go bullish without worrying about the consequences!  


  64. What are these crazy headlines from Whirlpool ?
     
    -  see housing starts up 27% in 2010
    -  sees existing home sales up 7% in 2010
    - yet sees modestly higher appliance sales.
     
    2 comments:
    1.  WHR thinks they are a housing forecaster now ?
    2.  Modestly higher appliance sales and new homes up 27% and existing up 7% seem to me to be wildly inconsistent points of view !


  65. C/DD – Cool, I’m very pleased with a nickel today.  Heck, a nickel a week is $2.60 for the year and we’re good to go!  MHO was David’s pick – he has been nailing them lately!

    AAPL/Lionel – You totally have the right idea, now you just need to add a more conservative outlook to the set-ups as you can essentially not only make almost the same returns, but give yourself pretty good downside protection as well.  Over the long haul, a series of small wins will work better than a few big ones.  I have pointed out before that there are about 300 players in the Hall of Fame who hit for average and only about 50 "sluggers" and even the best of them hit for average too (Babe Ruth had a .342 lifetime avg, 10th all time, Ted Williams .344, Lou Gherig .340).

    WHR/Cap – Lots of positive comments from CEOs today.  The memo must have gone out.

    Stocks are extending gains at midday on better-than-expected pending home sales and strong earnings from D.R. Horton (DHI +11.1%) and Emerson Electric (EMR +8.0%). Dow leaders: GE +3.6%, AA +3.0%. At 1:00, Dow +0.8% to 10,265, S&P +0.9% to 1099, Nasdaq +0.5% to 2182. Crude +3.2%. Natural gas +0.9%. Gold +1.2%. Silver +0.4%.


  66. ss / direction
    Today is a new DeMark day, and " they " spent a lot of ammo on the morning Stick (s ) getting over the 5 day MA and the 2 trend lines, so I think they’ll fight any selling pressure. With that said, resistance at IWM 60.39 and 61.97


  67. Boy even the NYT is dumping on Obama’s budget … you know it is bad !


  68. JRW – I saw where you mentioned DeMark before.  What is it?


  69. Phil, made your reccommended play on ACOR. Doing great (up 60%)!! Take profits? Hold? It seems to go up every day. [its the Apr 30 call]. thanks!



  70. lionel fyi the AAPL plays were in the friday post


  71. oh well, I got stopped out of my short Feb 103 Puts.  I should have moved to a 0.15 trailing stop before my meeting.


  72. ACOR/Hannah – I think a .25 (on the stock) trailing stop is a good idea here.  There are a couple of ways to play a run like this. One is to take 1/2 off the table up 60% and set a stop on the other half at 30% (30% trail) which is very generous and you still make an average of at least 45% if you stop out.    The other is to layer up, like taking the $1 profits on the $30s and buying something like the 2011 $30/35 bull call spread for $2 and stopping those out at $1, leaving you with $3 more in upside and plenty of time.  Ideally, until you stop out the original play, you have both going at the same time.. 

    Dow volume 109M at 1:35, normal for program trading day and very stickable but we’re not seeing Dow 10,300, S&P 1,105, Nasdaq 2,225 (or 2,200 for that matter!), NYSE 7,100 and Russell 625 (or even 615 we’ll take). 

    The lower the volume gets, the higher we go though so it’s back to the usual shenanigans to take us higher and higher.  AAPL is finally waking up and the QQQQ $45s are STILL .20!

    Contentious Davos discussions involving Obama’s plan to restrict prop trading slowly gave way to the beginnings of a potential compromise: no outright ban, but a cap on the percentage of a bank’s business. No word yet from Paul Volcker.

    Copper prices are up today and more than doubled last year but are on the verge of "catastrophe," metals trader David Threlkeld tells Bloomberg, as speculators unwind positions and inventories expand. Prices may slump below $1 per pound, he says, about 67% below today’s levels. (ETF: JJC)

    Sector ETF strength: Homebuilders– XHB +4.4%. Gasoline– UGA +3.6%. Heating Oil– UHN +3.2%. Commodities– GSG +2.7%. Oil– USO +2.6%. Solar– KWT +2.1%.
    Sector ETF weakness: Internet– HHH -0.5%. Regional Banks– KRE -0.4%.

    Commodities rally us once again – oh joy!


  73. Phil, re: AMED in depth article explaining $85 target, link is:
    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_A/threadview?m=tm&bn=22993&tid=6203&mid=6203&tof=1&frt=2
    March calls look interesting since new Co. guidance will emerge Feb 23rd and the share price should take off.


  74. Lots of people here liking AMED, did anyone call a spread on this yet? Thanks.


  75. Nissan (NSANY.PK) January U.S. Sales: +16.1% to 62,572 vehicles. Car sales up 31.5%; truck sales down 8.5%. Nissan division: up 19.4%; Infiniti division: down 5.7%. (PR)

    Wow, oil $77!  That is one resiliant mofo commodity!  Gold at $1,118, silver $16.73 and copper back to $3.10.  FCX is back to $72 and I’m hoing they hit $80 again for a nice short. 

    Short puts/Daveo – Nothing says you can’t sell them again.  It’s just missing a nickel or dime, not a tragedy. 


  76. Phil,
    Delta- I own FEB $28 DXD PUTS which have a delta of $0.10. However there seems to be no change whatsoever for moves.For instance today’s move has brought in no change. Can  you comment on this. Are the ultras best BOT at the money or can we still depend on delta?


  77. Wow – watch that vol. collapse -
    Goog down a buck and 520 puts down $1.45 -


  78. Amed/Tusca – Very nice!  I moved it here in one comment:  http://tinyurl.com/AMEDTusca
     

    Since there is a lot of interest already im AMED, the premius are very high and we love to take advantage of that!  Feb 23rd is after expiration so we can play for the crush on the $60 calls, now $1.75 and sell those against the June $65s at $3.  Those can be rolled even up to the March $65s but hopefully they expire worthless and THEN we sell the March $65s (now $1.40) and, if we beat the $1.75 caller entirely, we can do a 3/5 sell and have a nice upside potential but, for now, not much harm in playing conservative

    DXD/Chakra – You get screwed by the drop in the VIX as the Dow goes up and buying way out of the money puts like that is never a good idea unless you are expecting some serious momentum.  The delta on the $28 puts is just .13 so you need a full dollar move in DXD just to see a .13 gain and even then you have to overcome the ridiculous bid/ask spread.  This is why it’s so great to SELL premium and so silly to buy it…


  79. Thanks Phil on the DIA neglected the matter taken your advice and set stops now. Still came out ahead overall


  80. Phil,
    Your 80/85 calendar spread play on WHR few months ago was excellent.
    Pls comment on my current idea to take advaantage of teh runup on WHR stock.
    Sell Mar 85 Calls for $2.65
    Buy Mar 90 calls for $3.65.
    Close position in Mar if WHR trading < 85.


  81. O no Obama is talking on TV hope the market can stand it


  82. Correction…
    Pls comment on my current idea to take advaantage of teh runup on WHR stock.
    Sell Mar 85 Calls for $2.65
    Buy Jun 90 calls for $3.65.
    Close position in Mar if WHR trading < 85.


  83. JRW, SS, Got anything going?  Maybe play for a stick into the close to push the RUT back to 615 (the Dow over 10300)?


  84. judah – I am a little caught in the cross currents at the moment.  Sitting on my hands.  Volker could unwind this in a hurry.


  85. judah,
    Still waiting, made $ 4K this morning but have been out since 11:00


  86. Argentina January New Car Sales Up 6% On Year – Association
    Last update: 2/2/2010 2:41:17 PM

    Now thats a green shoot


  87. hi Phil : I’m in BSX $8.94 ,now $8.30 & sold FEB. $9 calls for $.45 ,now $.10. Closed the putters  a week ago at $.19 profit. With the large Billion dollar plus they need to paay JNJ per settlement yesterday,I’m torn between selling & holding on and selling May $9 calls for $.50. any suggestions?
    dflam


  88. Obama – Town halls work well for him…..


  89. blah blah blah bush did it blah blah empty words blah blah campaign mode blah blah teleprompter.


  90. Cap, HK still treating me well. In at 22.90, out at 24, not bad for two days, you staying in?


  91. Hi Phil, the rut has improved and my Feb put spread is better but under water bot 620 sld 650 12.2 credit ,down abt 12k.  Can you suggest a complimentary Rut spread for say March or not? Thanks, phil


  92. Phil
    What would convince you to turn bullish on the DOW now that its testing the 10300 mark? I do not see any catalyst until the FEB expiry. Is there anything that can act as an upside catalyst?


  93. Cap – Tell everyone how you reeealy feel….:)


  94. If the dollar starts to gain some ground here we can sell off, but holding 10250 seems to be the goal


  95. Obama is one very troubled dude… he has gone into full campaign mode, trashing the republicans and once again blaming Bush for everything he inherited. This rhetoric is not about solving problems and engendering cooperation, but trying to justify his failed actions of the past year, in an attempt to energize politically the proletariat, for the coming November elections. I am almost totally in cash and will be cherry picking profound opportunities that always surface, and to follow Phils great picks that are short term for near term profits. ( end of editorial ).


  96. AAPL just refuses to budge


  97. SPPI just licensed in another cancer program for quite a bit of money (30M upfront, > 300M total deal w/ double digit royalties). The compound is promising in Peripheral T-Cell Lymphoma. The drug has been granted orphan drug and fast track designation by the FDA. I am already in them for the Jan11s for 2.5, and they can still be bought roughly there. 


  98. Looks like the stick is back … sticking it to Volcker.


  99. BSX/dflam – whilst they are a risk, i think the reward for them is much greater than MDT.  Their current book value is 8.8, so you are buying at a discount.  They generate tons of cash, so stay pat and wait for a bounce.  I would sell a few puts here and see how they go.  you can always roll those down or DD on them.  Long term, they could be bought by JNJ!


  100. I love playing for the 3:00 stick.  The stick is Love, right Phil?  BTW, did you see S today, up over 10% on nothing.


  101. gel1
    If you can’t keep your mind focused on trading, then please STFU…I happen to be a card-carrying proletariat and I find your political commentaries annoying.


  102. Pharm: Thank you
    dflam


  103. BRK- valuation analysis on Berkshire if interested.
    http://www.tilsonfunds.com/BRK.pdf


  104. AMZN weak even with this bounce. How about AMZN feb 115 puts as a hedge with a tight stop?


  105. DIA/Yodi – If you can’t watch them, default to 1/2 cover selling as much premium as possible in front month.  If your goal is protection, that makes your net delta about .50 so a 200-point move against you is only going to cost you $1 net (about 20% of your protection) while a move down is easily rolled.  If you have 20% of your portflio in this cover and 50% in stocks and the Dow moves up 200 points then you lose 4% on the covers (20% of 20%) and, as long as you make 8% on the upside move or better, you are even (8% of 50% = 4%).  Since we set up buy/write plays to make 15-20% if the Dow simply stays about even – this should not be a problem. 

    WHR/Oncmed – I do feel they are too high here and certainly not deserving of $85.  However, I’d go for the June $90s at $3.60 and sell the Feb $85s frirst for $1.30 and then sell the March $85s for another $2 (hopefully) or 1/2 the $80s, now $5 so either way you get $1.30 + at least $2 but with less decay on your long play.

    Argentina/Kustoms – Is that 6,000 more cars?

    BSX/Dflam – Well they are paying out about 1 year’s revenues on stents in order to be able to keep selling them so it pays back in 5 years (at 20%) and this is a baked-in suite that is only freaking out the uninformed at the moment.  They are not likely to spring back and $10 is probably a fair price this year but still a nice long-term holding.  I’d sell the Jan $7.50s for .85 (so you plan on owning 2x at net $7.70 (including the .20 you made on Feb calls).  Knowing that’s where you’ll be, you can target selling the May $9s for $1 (now .50) on a move up  or getting at least .50 for the Aug $9s (now .70) if they break down more.  That drops your basis (if the Augs are triggered) to net $7.45 as a long-term holding.

    Teleprompter/Cap – Man are you juvenile with that.  Bush couldn’t read a teleprompter so they had a wire up his back to his ear so someone could feed him his lines (here’s the great bush delivering a speech with the "ear prompter" track captured.  Every great American speech in history has a written archived copy somewhere because only idiots get up in front of millions of people and "wing it."   Please save the unproductive, uninformative jabs at people for your own site Cap.  When Bush was President, Democrats may have made some fun about his speeches but it wasn’t in the form of vicious attacks by serious people.  I know you don’t want to listen to anything he says (you being such an "independent" and all) but Obama is asking to RAISE the level of political discourse in this country so how about giving it a shot?

    Anyway, clearly the markets are simply loving Obama and Volker Cap so I’m still waiting for you to apply the criteria you said you were applying yesterday that a market sell-off would be a repudiation of his policies.  What then is a market rally? 

    RUT/Phlit – didn’t we have some fix for that?  We’re zooming up so maybe you’ll get paid but you should take out the $650 callers as you are going to have to under any adjustment anyway.  You can sell the $610 calls, now $13.80 on the way back down (as a momentum play) and use that money to roll out to March $610s, which gives you more time (and you can roll the caller back up as the premium expires).    Also, the Apr $630/610 spread is about $9 and doubles if the RUT goes down 5 and makes good protection for those upside adjustments as they shouldn’t lose much on a move back to 625 where we get a proper upside test. 

    Dow/Chakra – They have to break 10,300 and have that move confirmed by 2 of the 4 other indices taking getting over their bounce levels.  Don’t forget 10,300 is the EXPECTED bounce on the way DOWN on the 5% rule.  We don’t need an upside catalyst if the market is ready to rally, just more low-volume buy-bots and happy talk from the media – that sustained us through all of Q4 last year.

    Cash/Gel – Don’t let your dislike of Obama get in the way of your investing.  That’s how all those hippie Clintonites got rich in the $90s while the Repulblicans sat in cash and waited for that whole "internet fad" to blow over.  While I certainly think there have been many missteps taken in the past year – I would hardly call the fact that we avoided a complete meltdown in the global markets "failed actions"  and I know you are a smart enough businessman to imagine how you would handle things one year into your job if every move you made was being obstructed by a minority of the board.

    See, it’s working: Against Senate Banking Chairman Chris Dodd’s strong support, ranking Republican member Richard Shelby is saying he’s willing to consider the rule named after Paul Volcker, testifying now (live stream).

    Treasurys are just above flat, with the 30-year yield -0.01 to 4.55%; 10-year -0.02 to 3.64%; 5-year -0.02 to 2.36%. The dollar’s down against most partners: -0.2% against euro, -0.1% against pound, -0.1% against Swiss franc, -0.4% against yen.

    Another indicator of China’s explosive growth: Cnooc, the country’s largest offshore oil exploration company, plans to increase production 28% – a "staggering" production forecast, says one analyst.

    Toyota (TM) January U.S. sales: -8.7% to 98,796 vehicles. Toyota brand -12% to 83,279; Lexus +14.2% to 15,517. (percentages reported on daily selling rate basis; total vehicles -16% on unadjusted basis. PRNot so bad.

    Honda (HMC) January U.S. sales: -5% to 67,479 vehicles. Total car sales +2.7% to 41,638. Truck sales -15.3% to 25,841. (MW)

    GM January U.S. Sales: +14% to 146,825 vehicles, vs. expectations of +16%. Expecting a sustained recovery this year, boosts 2010 sales outlook to 12M vehicles, from 11.5M. (MW)

    Chrysler (FIATY.PK) January U.S. sales: -8% to 57,143 vehicles.Chrysler brand -2% to 10,443; Jeep brand -7% to 15,715; Dodge brand +1% to 19,953. (MW)

    Hyundai (HYMLF.PK) January U.S. sales: +24% to 30,503 vehicles. Accent up 61% to 5,747; Elantra up 133% to 7,690; Sonata down 38% to 5,306; Santa Fe up 43% to 7,204. (PR)

    AstraZeneca (AZN) and GlaxoSmithKline (GSK) are laying off again – just symptoms of what is a vile start to 2010 for big pharma, says Derek Lowe. And not only aren’t industry problems going away, but it looks like new ideas for business models aren’t anywhere close, either. (ETFs: IXJ, IYH)

    With BRICs, and PIIGS, and other acronyms trying to index countries with growth potential, Zero Hedge goes the bearish direction and gathers countries waiting for the (inevitable?) sovereign debt implosion: the STUPIDs (Spain, Turkey, U.K., Portugal, Italy, Dubai).

    Sector ETF strength: Homebuilders– XHB +5%. Gasoline– UGA +3.8%. Heating Oil– UHN +3.7%. Oil– USO +3.1%. Commodities– GSG +3%. Pharma– PPH +2.2%.
    Sector ETF weakness: Regional Banks– KRE -0.6%.

    Dow leaders: GE +4.2%. MRK +3.5%. AA +3.1%. PFE +2.6%. AXP +2.4%. HD +2.2%. JPM +2.1%.


  106. Boys Boys……Can we all act like Independents and just discuss the facts and leave the B.S. to the pundits. :)


  107. And like Phil Said. Good Job Phil! ;)


  108. SVNT options from last week at 11c are starting to pay off.  Now, 17.5 would be just about right b’f Mar 1 please!


  109. alsos
    Sorry for the interpretation you have made about my post .If one thinks political activity is without consequences that impact financial markets or investor sentiment,, then you are flying blind. My post was made with the purpose of helping one interpret the direction of the market, and certainly not to influence political direction in the future, as I for one think very little, of the aptitude of politicos in generaland could care less, however I do care what they might do to my portfolio. I have been a very active investor for many years, and have come to realize that the most important information to watch closely, as it relatets to investment strategy, is actual or potential decisons coming out of Washington DC. Again, please accept my appologies, if you have interpreted my comments as pure political.


  110. They jam the markets for no other reason than they could do it. They jam it up 30 points and then it just falls upon itself as they fill all the bids on the way down. Volcker, nothing comes from this and GS goes back to 200


  111. I think that big pharm is laying off to buy smaller, more productive companies and allowing them to run.  This is much like the JNJ model, but unfortunately, when big companies get involved, the innovation dies.  JM2c


  112. Mocha; HK; sold some; holding some that I am long w/ covered calls sold against.  Good stuff.
     
    1020; just having fun ….


  113. alsos re gel1  I am sorry but the truth hurts


  114. Phil,
     
    What happened with oil…..big move without the dollar  doing much? Can it stay up short term?


  115. gel; I share those same thoughts about 0 – 100%;  except for the true believers and friendly crowds they pick; people are sick of his act already. Even on the left.


  116. Can they stick 10,300 on the button.


  117. Phil,
    Overnight ? It looks to me like we gap up tomorrow.


  118. Gonna pick up a few GSK 35 Sept C for 5.  that is 50c premium, and sell the 37.5 P for 30c.  GSK bounced and they should move back up with the rest of Pharma.


  119. "What then is a market rally" – A dead cat bounce.


  120. Obama is asking to RAISE the level of political discourse in this country so how about giving it a shot.   Really!!!   I must have missed that along the way.

     


  121. ss
    "They" can obviously do whatever they want !!


  122. JRW, You thinking of playing overnight? Say it isn’t so. I’m out with my .50.


  123. LMAO Bush ear prompter video, im skeptical with that said i think Bush has 2 brain cells one to breath and the other to blink


  124. judah,
    Nice job, better than me; I basically sat out the whole day !


  125. S/Judah – Yeah, well we did like them down there just as a value play. 

    Proletariat/Alsos – How did you get past the guards?  8-)

    AMZN/Hanna – As a hedge to what?  I like AMZN at $115, I just didn’t like them at $130-140. 

    Dow volume has once again been low, seems like whole market having a low day but that’s what we expect now – low volume = good, strong volume = bad. 

    GS/Kustomz – Well they certainly seem happy about something today. 

    Oil/Ocelli – Big move without the buck is partly Nigeria and partly all the positive comments from CEOs who are looking forward to a stronger 2010.  We’ll see if it holds but that’s why 72.50 was the downside target.  Down form $85, $77.50 is a 40% Fibonacci retrace (38% actually is the right number) so we look at that as a real break back up for oil but I would expect no less from even a weak bounce as the manipulators certainly won’t give up until it’s aboslutely hopeless.

    Nat gas is still $5.46, under $5.50 means you can’t trust an oil move up.  Gold is $1,114, silver $16.69 and copper right at $3.10. 

    Here’s a nice way to use AAPL to put topspin on the market:  ABI Research says the media tablet market could explode to 57 million units by 2015, up from four million today. The report takes pains to note that the Apple (AAPL) iPad is hardly the only tablet device in the market, but its arrival raises awareness of the entire sector. "A tablet will not replace a laptop, notebook or mobile phone but will remain an additional premium or luxury product" for many years.

    Tomorrow/JRW – We’ll still be looking to make the bounces, just like last week we have to have a "show me" attitude but, after a week of consolidation, they probably have a better chance. 

    Wow, another fun day in the markets!  Big test day tomorrow but it’s all about Jobs on Friday.


  126. JRW – right there with you. 


  127. That qualifies as a FMD in my book; a mild one; but one nonetheless.
     
    Hope everyone made $$


  128. Phil,  Any idea what the political climate is like in New Zealand?  ;)


  129. JRW, You know there are a lot of people who would like to have sat out after making $4K in the morning.  Tomorrow is another opportunity.  Though there wasn’t much movement today, it felt like a very comfortable trading range to me. Enjoy your afternoon on the Pacific. 


  130. AMZN / phil, was using them as part of a hedging strategy for my portfolio which is heavy in tech…i know, i know its risky and a little odd. But i’m long a lot of tech, and partially hedged with QID. Thought i’d pick up some AMZN puts just to track the short term weakness as a mo play, specially if the market reverses and continues lower. Took a small posotion, so i guess i’ll see (although they do seem to hold that 115 line well). Have a tight stop..unless it gaps up, then oops!
    ACOR/phil : thanks for the advice. the whole thing is working out perfectly.


  131. Politics annoying? It’s the greatest spectator sport on earth!
    It’s primary election day here in Illinois. Too late to vote early, but plenty of time to vote often. Gotta go- still time to cruise the cemetery for some last minute "registrations". :)


  132. yodi
    GD right it hurts…or did you not notice that the opposition party destroyed pretty much everything….that real estate values are down 30%, 401Ks down 25-40%, 7 million unemployed, 5000 dead in foreign wars fighting people who never attacked us. etc, etc, etc
    "The truth hurts"…..yea I would hope so. 


  133. Phil, A bit embarrassed to ask this…. but…. due to an oversight while moving out of an old AAPL spread into a new one (one from your playbook), a few calls did not get closed. Bottom line, I am long a few AAPL Feb. 200 calls naked, which I know is not the place to be at all, but with AAPL the way it is now, I just feel like the moment I sell it at around 195-196, next day it  will get legs and move quickly towards, or above, 200. Stubborn thinking…am I foolish for not shutting them down ASAP? If I am, tell me nicely because the President that I voted for and still support took a lot of heat on this website today ;)


  134. Hey Phil;
     
    hope your doing great. there is a mistake in the buy list for WFR. WFR is 13.50 now not 15. can’t wait to see what the adjustment looks like.
     
    thanks
    david


  135. For ekor (in response to a comment on a favorites post a day or two back) - i think the chart is in blue but not to signify a surplus, just a blue deficit. – ilene


  136.  Anybody see a reason for Baidu to be up $3 after hours?


  137. Ear/Kustomz – Good article on it here.   This girl did a whole study on the subject but Bush is so yesterday, like this bad dream we had that doesn not need to be revisited.

    Good article re. AMZN’s business model with Kindle and effect of weekend’s published dust-up.

    New Zealand/1020 – They run a typical British system and, like Canada, are technically part of the empire.    They don’t have a constitution, just a few bits of paper with rules written on them that are stapled together and kept in the PM’s desk apparently…  A few year’s ago, I think they had a 100% female government at the upper levels but the boys are back now.  There’s also whole local contingent of Maori, who are the native NZ’ers (and serious warriors you do NOT want to piss off) and they actually have a minority voice in government there. 

    ACOR/Hannah – I hope you took advantage of that spike to lighten up.  AMZN is fine but they do have the danger of jumping 5% on an upgrade, which could be annoying. 

    AAPL/Bord – How about selling 1/2 $195 calls for $5.60 and using the net $2.80 + $1.10 out of pocket to roll over to the March $200s so you buy some more time to be right for $1 and sell some premium.  The $195 calls have a .54 delta and are all premium while the March $200 calls are also all premium and have a .45 delts so 2x = .90 which means you gain about .36 per $1 on the way up vs your caller vs .39 if you stay in the March $200s.  This play is mainly a way to buy you time to be right, it doesn’t particulary "fix" your position but I don’t disagree with giving AAPL time to realize some value.  When these guys expire, just make sure you follow-up so we can see if another roll or sale is in order (we may at least want to get that $1.10 back in your pocket by selling the March $220 calls, now $1.80). 

    Buy list/Micro – Do you see the big "IN PROGRESS" written in the middle?  That indicates I have not gotten to those yet.

    BIDU/Bgb – More noise about GOOG pulling out of China.  Same old, same old..

    Another Toyota (TM -2.8%) driver who says he’s having trouble getting authorities to listen to his stories about unintended acceleration: Apple (AAPL) co-founder Steve Wozniak. (Toyota January sales)

    Fresh off news of its plan to sell a unit to Bank of New York Mellon (BK), PNC Financial (PNC) says it will repay $7.6B in TARP funds by buying back preferred shares. PNC -1.2% after hours.

    The hemorrhaging at boutique research firm Pali Capital continues. Today there are rumors its entire distressed-debt team has left en masse. Pali, which snapped up orphaned analysts and traders fleeing troubled Wall Street titans, is finding itself unable to hold on to talent as it desparately seeks cash or a buyer.


  138. alsos, you need to read my blog; we’ll straighten you out.
    you must lap it up when O bashes Bush for all of O’s empty words and incompetence.
     
    :wink:


  139. alsos, you need to read my blog; we’ll straighten you out.
    you must lap it up when O bashes Bush for all of O’s empty words and incompetence.
     
    :wink:


  140. ABC Consumer Comfort Index: -49, down from -48 last week, and still a bit above its all-time low of -54. Positive ratings for the national economy actually bumped up, to 9% from 8%. But those rating personal finances positively slipped to 45% from 47%, and only 22% say it’s a good time to buy things. (.pdf)


  141. GOOG is one sick dog lately.   AAPL also.  
    Bord; what price are your 200 calls ?  AAPL could easily make a run over 200; but probably not past 210 best case.
     
    Or they may stay weak and not even make 200.


  142. That ABC confidence # has been relentlessly bad.


  143. Bush beer at one time was actually considering changing its brand name all thanks to one that shall not be named

    New Zealand…i love that country and the All Black haka

    Picked up some DXD and nibbled on TM…GOOG bouncing off 530 for 4 days possible bounce coming


  144. Cap, they are priced at about  3.35 now … they were part of a spread that was closed out for about even money, but these lingering calls are in the red a decent amount since AAPL has sucked the last few days. Phil’s suggestion above seems like a very smart exit strategy. Thoughts?


  145. This is Must-See TV  http://tinyurl.com/ydy9h44
     
    Its a riot !


  146. Bord; Phil usually gives good strategies; however, sometimes you just need to cut the losing trade.  You do have options (as Phis says, there’s always an option !).  Sell.  Hold.  Adjust.   You could sell 2x the Feb 210′s which are about 95 cents; take $1.80 off the table; doubtful you lose by getting blown out to the upside; but this way you reduce your wipeout risk to 1.50 and you can still get out even or profitable.  Depends on your margin.


  147. AAPL/ Thanks Steven
    I didnt go that far back.


  148. Sure hope the wired girl has found a more productive and useful occupation. Some people just have too much time on their hands.


  149.  Phil….Questions about hedging…..
    1.   Do you always put stops on your downside protection, like this morning with DIA.
    2.   How and when do you sell covers on your DSP (if you do)
    Thanks.


  150. More Amazon problems:
    "During media megaconglomorate News Corp’s earnings call—which owns publisher HarperCollins—the Dark Lord Rupert Murdoch reveals, ‘We don’t like the Amazon model of $9.99….we think it really devalues books and hurts all the retailers of hardcover books.’
    And here’s the deathblow: Murdoch says News Corp’s deal with Apple ‘does allow some flexibility and higher prices’ and now Amazon’s willing to renegotiate."
    Who wants to bet every major publisher will be playing this game in the near future?


  151. Gee, wonder what’s wrong with his country’s health care system ?  http://www.nationalpost.com/news/story.html?id=2510700


  152. ss/judah/short strangles,
    Yes, I’ve scaled way down on short strangles this week, both protecting the profits and hibernating in a waiting mode.
     
    Phil/robert/short strangle links,
    I’ve compiled the list as in the next post.  Phil, feel free to post them into the New Member’s Guide.


  153. The following is a collection of posts on Short Strangles and the Crazy plays on the indices (SPX, RUT, NDX, etc.)
     
    1- The Crazy play consists of a Short Strangle and a protective long put vertical. These plays are mainly for Portfolio Margin accounts, with balance greater than $125,000, preferably over $200k as the margin can swing wildly.
     
    http://www.philstockworld.com/2009/12/03/thrilling-thursday-japan-jump-juices-futures/#comment-272396

     
     
    2- Very rough comparison among Short Strangle, Iron Condor, Buy/Write and straight stock purchase. Note the rolling tips in the second to last paragraph:
     
    http://www.philstockworld.com/2009/11/20/friday-dell-misses-is-goldman-sachs-stupid-or-evil/#comment-270495
     
     
    3- VIX, the effects of:
     
    http://www.philstockworld.com/2009/12/02/which-way-wednesday-47/#comment-272331
     
     
    4- Possible adjustments of the Crazy Play:
     
    http://www.philstockworld.com/2009/12/19/wild-weekly-wrap-up-17/#comment-276237
     
    Additional discussion on the doubling down:
     
    http://www.philstockworld.com/2010/01/07/thrill-ride-thursday-retail-sales-and-maybe-some-jobs/#comment-278802
     
     
    5- Figuring out the margin requirement for short strangle using Thinkorswim Analyze Tab:
     
    http://www.philstockworld.com/2009/12/19/wild-weekly-wrap-up-17/#comment-276242
     
     
    6- Setting up February 2010 spreads on Jan 4th:
     
    http://www.philstockworld.com/2010/01/04/monday-market-movement-my-2010-technical-outlook/#comment-278096
     
     
    7- Thoughts on Delta movement with respect to the underlying:
    http://www.philstockworld.com/2010/01/20/whig-party-wednesday-republicans-take-kennedys-seat-at-the-table/#comment-281552
     
     
    8- Selling into a VIX excitement, play-by-play examples, including the discussion on escape routes:
     
    http://www.philstockworld.com/2010/01/26/tightening-tuesday-global-edition/#comment-283221

    http://www.philstockworld.com/2010/01/26/tightening-tuesday-global-edition/#comment-283222

    http://www.philstockworld.com/2010/01/26/tightening-tuesday-global-edition/#comment-283223


  154. The following is a collection of posts on Short Strangles and the Crazy play on the indices (SPX, RUT, NDX, etc.)

    1- The Crazy play consists of a Short Strangle and a protective long put vertical.  These plays are mainly for Portfolio Margin accounts, with balance greater than $125,000, preferably over $200k as the margin can swing wildly.

    http://www.philstockworld.com/2009/12/03/thrilling-thursday-japan-jump-juices-futures/#comment-272396

    2- Very rough comparison among Short Strangle, Iron Condor, Buy/Write and straight stock purchase.  Note the rolling tips in the second to last paragraph:

    http://www.philstockworld.com/2009/11/20/friday-dell-misses-is-goldman-sachs-stupid-or-evil/#comment-270495

    3- VIX, the effects of:

    http://www.philstockworld.com/2009/12/02/which-way-wednesday-47/#comment-272331

    4- Possible adjustments of the Crazy Play:

    http://www.philstockworld.com/2009/12/19/wild-weekly-wrap-up-17/#comment-276237

    Additional discussion on the doubling down:

    http://www.philstockworld.com/2010/01/07/thrill-ride-thursday-retail-sales-and-maybe-some-jobs/#comment-278802

    5- Figuring out the margin requirement for short strangle using Thinkorswim Analyze Tab:

    http://www.philstockworld.com/2009/12/19/wild-weekly-wrap-up-17/#comment-276242

    6- Setting up February 2010 spreads on Jan 4th:

    http://www.philstockworld.com/2010/01/04/monday-market-movement-my-2010-technical-outlook/#comment-278096

    7- Thoughts on Delta movement with respect to the underlying:
    http://www.philstockworld.com/2010/01/20/whig-party-wednesday-republicans-take-kennedys-seat-at-the-table/#comment-281552

    8- Selling into a VIX excitement, play-by-play examples, including the discussion on escape routes:

    http://www.philstockworld.com/2010/01/26/tightening-tuesday-global-edition/#comment-283221

    http://www.philstockworld.com/2010/01/26/tightening-tuesday-global-edition/#comment-283222

    http://www.philstockworld.com/2010/01/26/tightening-tuesday-global-edition/#comment-283223


  155. Test post


  156.  CAP – Your 9:10 – Nobody knows what he is doing except that he is going to the US for heart surgery – I don’t believe this event means our health care system is screwed – wait and see what he has to say. At the risk of wading into a debate with you, I am glad that I am in a country where people don’t die every day because they can’t afford health insurance. I personally just discovered a few months ago that I have seriously high blood pressure – and that’s after a perfect physical a few months earlier – I guess I’m lucky my doc decided to check my BP again – he even gave me a bunch of free drugs. Best Italian accent – a noa charga.I remember the last time you tried to debate me a long time ago – about tribunals – I didn’t bite – LOL.
     
    Phil – Your 5:12 – Yup, NZ is part of the "Commonwealth", just like Canader. But, we got ourselves a constitution. Oh yeah, and before I die, I want to see the All Blacks play a game – http://www.allblacks.com - absolutely amazing sport – football (N. American) is for girls.


  157. Peter- thanks for the summary. Great work.
    A question- have you pulled back on Feb and Mar spreads? If so, under what circumstances would you re-enter these months?


  158.  Peter D – Yes, thanks for all those links. I was going to ask you about Iron Condors but luckily you answered that question back in November as per your link above! I had forgotten that post.


  159. Peter/Phil – The new post "Confessions of a PSW Strangler" is awesome.  Thanks!!!


  160. Peter D thanks for all these links!  Very helpful indeed to have them all in one place!