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Thursday – Greece is the Word

Greece is the word these days.



We are getting a sell-off every morning as Europe goes through the daily ritual of waking up and seeing the cost of default protection rise and rise.  This morning Greece is with STUPID (Spain, Turkey, UK, Portugal, Italy & Dubai – coined by Zero Hedge) as five-year sovereign credit default swap spreads were recently at 4.23 percentage points, compared with Wednesday's closing level of 3.97 percentage points. That means the annual cost of insuring €10 million of Greek government debt against default for five years had risen €26,000 to €423,000.  In a nutshell, that's 4.23% annually to insure Greek bonds from default so Greece needs to offer 4.23% more interest on their bonds than an Aaa nation to attract investors

Of course, my new "I'm with STUPID" T-shirt franchise is going like gangbusters as we are getting orders from all over the US, especially California, as our own triple-A credit rating may not last the year.  Japan is a strong customer (mostly small and extra-small) and sales are strong in France and, of course, Mexico and all of South America.   

Keeping up with the STUPIDs is no easy feat as Portugal's CDS spreads jumped 15% overnight to an all-time high 2.26 while Spain gained 10% to 1.68%.  (Have I mentioned I like TBT lately?)  The moves followed news Wednesday that the European Commission had put Greece under more pressure to cut its deficit; that the Portuguese government sold only €300 million of treasury bills at an auction, compared with an indicative offer of €500 Million; and that the Spanish government had raised its budget deficit forecasts for 2010 through 2012. 

As we expected in yesterday's post, Greek workers were none too pleased with the EU's budget plan for their country and is rejecting the idea of wage freezes on top of wage cuts.  Greece's biggest union is moving towards a mass strike and the public-employee union is planning a job action next week as well.  Tax collectors are striking, customs workers are striking, which is screwing up the airports and shipyards and delaying commerce all over Europe – shades of things to come perhaps?

Napoleon said: "A revolution is an idea which has found its bayonetes" and John Kennedy said: "Those who make peaceful revolution impossible will make violent revolution inevitable" and what we are seeing here is backlash as workers of the world have been pushed to the brink for many years and now, as the governments are asking them to take that one final step into the abyss – they are, not surprisingly, pushing back.  That's why my 2010 Outlook was titles "A Tale of Two Economies."

As we expected, Jobless Claims were a disappointment this week with another 480,000 people involuntarily joining the revolutionary masses (and we will get one whopper of an adjustment tomorrow to the unemployed totals!).  Also as we expected, productivity is up nicely – up a whopping 6.2% in Q4 as workers literally kill themselves to keep their jobs.  The 138M remaining workers were rewarded with a 4.4% reduction in unit labor costs, which is how US corporations managed to put up those astounding cost savings in Q4 as that's roughly $60Bn in additional profits wrung off the backs of workers in a single quarter.  Go capitalism!  

In Economic panics throughout history, the wiping out of the savings accounts of lower earners and the middle class has often led to social revolution, sometimes violent upheavals – Nick Clooney

Let the ruling classes tremble at the Communist revolution.  The proletarians have nothing to lose but their chains.  They have a World to win.  Workingmen of all countries unite!  – Karl Marx 

I began a revolution with 82 men.  If I had to do it again, I would do it with 10 or 15 and absolute faith.  It does not matter how small you are if you have faith and a plan of action. - Fidel Castro

In just the past 30 years we've seen governments fall in Peru, Iran, Poland, Afghanistan, Czechoslovakia, Romania, Yugoslavia, Philippines, Africa (several and constant) and even Russia yet somehow we run our governments as if "that would never happen here."  I'm telling you, my top 10% friends, that the people are as mad as hell and they are NOT going to take it any more.  We cannot keep going down this path – it is simply not sustainable.  

We went bearish yesterday and I'm feeling pretty good about that decision this morning but I am telling you (and then I'll get on with my market overview) that this is just the tip of the iceberg.  We can't afford to have this government at a standstill – this government needs to be in meeting with other World governments and we need to act in concert, the way we did to save the banks.   But the banks have been saved and now there are no puppet-masters willing to pull the strings to draw our leaders back together on behalf of the people.  This is why James MacGregor Burns said: "A revolution is an act of violence whereby one class shatters the authority of another."  Change is in the air but the separation between the upper and lower classes is so great that I don't think most of the top 10% can even see it coming…

As we expected, Asia quickly gave back all of yesterday's gains this morning, rejected at the same bounce levels we were.  This was despite "good" news from TM, who claim they will made a profit and project further profits despite the recalls but I'm still waiting to buy them at $65.  SNE did well with cost cutting and auto makers did well but that didn't stop the markets from falling this morning with the Hang Seng and India both dropping over 1.5% while the Nikkei and Shanghai gave up about half a point. 

Europe is down about 1.5% just ahead of the US open and our futures are off about half that much.  We tested, but failed, our projected upside levels yesterday of Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625 and today we test our downside target levels of Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620.  Gold and the S&P have both held 1,088 like champs so they will be the first sign of a fatal breakdown toward our 10% levels but copper seems to be leading the way as it looks to test $2.85, which would just be sad if they fail. 

Oil is already below $76 so everything is going according to plan – forgive me if that doesn't make me very happy though


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  1. CNBC starts out running the wrong jobless headline number and calls it better than expected.  Then they correct it 30 seconds later saying it’s 10K worse than expected.   They guys that come up with the headlines don’t seem very smart do they?

  2. MA was smashed down so fast there was no time to get in. The H&S formation would complete a couple of dollars below here, so the projected move there is pretty much over.
    Results were disappointing but hardly terrible, but the stock was way overextended.

  3. Phil…What’s your plan on closing your DIA 101 puts?  I have SPY 106 puts.   I assume you will hold until at least after tomorrow’s report.

  4. Phil – I know YCRW is a player for you here, but a good little trucker that I came across was Arkansas Best (ABFS).  They have little debt, plenty of cash (for now), and if YCRW goes belly up, they should benefit = if they have not already.  Put them on our radar, as these guys could be a good one for LT.

  5. Phil, not sure if you were able to catch Chanos this morning on CNBC repeating his prediction of the Chinese bubble. The numbers he presents are staggering – 30 billion sq.ft. of office space being build – enough for a 5×5 cubicle for every Chinese (man, woman and child). Bad bank assets, a 9 man politburo putting together 10 year plans. I bet a friend of mine that I could predict the Chinese GDP growth rate for 2020 today because it’s already been calculated. Chanos could be wrong on his prediction, but the guy got his facts straight… This cannot end well! 

  6. ALKS/ Pharmboy, what is your say on this biotech company?
    ALKS didn t follow AMLN recent move up from $14 to $18.

  7. CNBC/TM – The propoganda machine is running off the rails.  People are tuning out in droves as they are fed up with being told how great everything is while, very obviously, it isn’t. 

    Wow, MA was so disappointing they took V down and V had GOOD earnings!

    DIA/TM – depends on if we hold levels or not.  10,058 is our lower crash zone and that’s a long way.  We’re not even violting the 5% rule yet:  Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 so don’t get too bearishly excited until those go, especially S&P 1,088 and gold $1,088 (there now).   If we do well today then we have to take safer plays into tomorrow rather than risk profits.

    No much volume to this sell-off, maybe EU funds scrambling for cash, could quickly reverse.

    ABFS/Farm – Thanks, worth looking into as we could use an upside Transport bet.

    Chanos/Stj – Remind me on the weekend to find you some of the stuff we had on BS Chinese data.  I forget to repeat it sometimes but you can’t believe a thing you hear from them and we also did some posts on Chinese ghost cities and ghost factories that should make you think twice (even three times) before you put money to work over there.

    We expect to bounce off our lower levels of course.  10,200 on the Dow is a key inflection point as is 1,088 on the S&P and 605 on the RUT and 2,175 on the Nas and they should hang tough for a while so a good place to take some bear profits off the table if we start getting over them.  Once we see some of those levels actually breaking – we can look down to the 5% line and then another 1% down from there begins a real failure so about 2% down for the Dow on the day is a real breakdown.  NYSE already down 1.5%.

  8. Gold, silver, copper all below support levels right now.

  9. Hi, Peter,
    I saw your comment yesterday.  Are you suggesting that we can sell a Feb put -10% below market without buying a put vertical, because the OpEx day is only 2 weeks away?

  10. On the brighter side – Jan. same-store sales (actual vs. estimate):
    BJ +8.4% vs. 5.3%.
    BONT +5.3% vs. -4%.
    PLCE +12% vs. 1.7%.
    COST +8% vs. 7.6%.
    DDS -5% vs. -8%.
    FRED -2% vs. 1.6%.
    GPS +5% vs. 4.4%
    HOTT -13.1% vs. -12.2%.
    LTD +6% vs. 0.5%.
    M +3.4% vs. -0.1%.
    SMRT -2.5% vs. -3%.
    BKE -1.2% vs. 3.9%.
    WTSLA -3.7% vs. -4%.
    ZUMZ +1.8% vs. -2.4%.

    ANF +8% vs. -7.9%.
    ARO +11% vs. 6.1%.
    AEO +10% vs. 5.5%.
    JCP -4.6% vs. -4.9%.
    JWN +14% vs. 5.4%.
    TGT +0.5% vs. 1.4%.
    TJX +12% vs. 7.8%.

    Pretty good overall.  Markets don’t seem to care at the moment. 

    Good time to add 1/2 DIA June $101 puts at $5 to Matttress play and set a .25 trailing stop on higher puts to take advantage of nice gain.  Also, sets up to roll 1/2 covers easily if we keep falling.

    Volume is still pretty low, I do not think much of this sell-off so far. 

  11. The PM guys must be getting killed; many were positioned long after last week looking for a dollar pullback.
    Silver just failed a huge support level.

  12. Volume may be low Phil, but the commodities moves are worrisome.

  13. Coming into my 22.5 target on KRE. Starting to take some puts off.

  14. WOW!!

  15. Jan. Monster Employment Index: -1 to 114, reflecting continued moderation in recruitment activity. Year-on-year, the index is down a relatively mild 3%. "We’ve seen subtle signs of firming in hiring trends, even for sectors like finance in recent months.”

    At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively.  The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today

    It’s the market, not the European Commission, that’s calling the shots on Greece’s debt crisis, writes WSJ’s Heard on the Street, and other highly-indebted countries would do well to take note.

    The Treasury expects to hit the government’s $12.4T debt ceiling by the end of the month, and is working with Congress to raise the limit to $14.3T. That’s the equivalent of around $45,000 for every American.

    Corporate bankruptcy filings rose 7% in January Y/Y, with an average of 342 businesses filing for bankruptcy every day last month. The data suggests 2010 will see more bankruptcies than 2009, even as the economy shows signs of improvement.

    Royal Dutch Shell (RDS.A): Q4 EPS of $0.32 misses by $0.79. Shares -2.59% premarket. (PR)  Q4 results were "impacted by the weak global economy," said CEO Peter Voser. "Gas prices and refining margins have declined sharply, because of weaker demand and high industry inventory levels. We are not assuming that there will be a quick recovery, and the outlook for 2010 is uncertain." (PR)

    Deutsche Bank (DB): Q4 net profit of €1.3B ($1.8B), vs. €660M consensus and a net loss of €4.8B the year before. Results were boosted by a tax break and strength in corporate and investment banking. Tier 1 ratio rose to 12.6% vs. 10.1% a year earlier. Core Tier 1 rose to 8.7% vs. 7%. (PR)

    Boeing (BA) and Airbus expect demand for new orders to remain depressed until 2012 as a record drop in air travel prompts companies to pare growth.

    More Jan. same-store sales (actual vs. estimate):
    CATO -4% vs. 4%.
    KSS +6.5% vs. 2.7%.
    ROST +8% vs. 7.4%.
    SKS +7% vs. 2.8%.
    SSI -11.3% vs. -1.3%.
    2 misses, 3 beats, for a total of 6 misses and 20 beats.

    Dow laggards: AA -2.6%. GE -2.2%. BA -2.1%. PFE -1.8%. CAT -1.7%.
    Dow leaders: CSCO +2.2%.

    Factory Orders Up 1% – that’s good at least.  Took $1.50 and ran for my DIA $101 puts! 

  16. Eric, thanks for your thoughts on MA yesterday, I went with a straight put for fun overnight and made a quick double!

  17. Good morning Phil,
    Do not get your advice below do you expect to gain on the further falling market?
    Good time to add 1/2 DIA June $101 puts at $5 to Matttress play and set a .25 trailing stop on higher puts to take advantage of nice gain.  Also, sets up to roll 1/2 covers easily if we keep falling.

  18. WFR getting clobbered. Dint i see the street pushing that a few days ago?

  19. Short Stranglers, the VIX is popping up.  Any suggestions to open?  Thanks in advance.

  20. Morning Phil; WFR good now ? :) or we hide in the basements ?

  21. MrM, cool. I wish I’d had the courage of my convictions there, lol.

  22. robert – I am wondering also and will start to look at strikes.  Hopefully Peter will chime in.

  23. Phil, I have the GOOG Mar 530/560 call spread @ $18 from a couple of weeks ago. Roll the 530 to the 510 or going further out to June?

  24. WFR – sell FEB 14 puts for $2.  What do you think?

  25. that death cross looking pretty prescient. next stop,  200d EMA?

  26. Stranglers – just rolled my RUT Mar 700 call to 670 for 0.75.

  27. oops   forget that comment.

  28. Oil testing $75 now, that’s critical.  Nat gas $5.37 with inventories coming up (it was pretty warm for us last week in Northeast).  Gold testing $1,080 now with silver dropping like a rock at $15.78 and copper testing $2.90. 

    I’m still leaning towards cash here.  We had a nice run and tomorrow is a total wild-card with NFP numbers but a lot of this can be fixed over the weekend once the ECB realizes they need to bail Greece (and everyone else) out for the good of the Union. 

    10:10 Dow volume is just 47M, which is better than usual (30M at 10:30 is usual prog trading day) but not accelerating, which is key.  I’m just watching to see if we hold 10,058 and then I’m happy to get more aggressive to the downside but I’m mainly looking for good upside plays as we test the 2.5% rule. 

    SOX are at 3.75% at 315, NYSE is at 2.5% at 6,865 and are leading us down, Dow 2.5% is just over 10,000, S&P would be 1,071 and RUT will be 595.  It would take a lot to push us lower than that today but oil just failed $75 and gold failed $1,070 and copper failed $2.90 so people sure are starting to panic.

    10:15 and we’re at 53M on the Dow so now we’re accelerating in volume!

  29. Stranglers – my Feb RUT 600/590 put vert is popping hard today.  7 more RUT points to go to get into the rich part of the curve.

  30. Good morning all.  DLB had great earnings yesterday and as a result I am taking a loss on my covered calls.  Here is what I have:
    DLB 187 shares @ 35ish now 52.40ish
    Sold 1 DLB Feb $45 @ 4.04 now 7.45ish
    Now I know that in the big picture I am way ahead on these but I would like to salvage the play so I can keep the stock as I do see them continuing higher in the future.  I also envision a drop (possibly back to 45) but not before Feb expiration. 
    I’m looking at a  number of options:
    1) Roll the Feb 45 to the March 45 – not optimal as I only gain 0.30 in premium
    2) I can purchase 13 more shares at 52.40 (681.2) then roll the feb 45 to 2x march 50s
    3) I can purchase a Sep 50 Call for 7 and then roll the Feb 45 to 2x the march 50s
    I don’t really like #1 much.  2 and 3 seem almost equivalent except that #2 is stock (and we hate stock).  Any suggestions or other solutions I may have overlooked?

  31. Per my post above I guess I could also sell all the stock and turn this into an options-only position.  That would free up a lot of cash for other uses (pay my taxes this year)

  32. DIA/Yodi – I wrote a whole, long, detailed comment on this strategy 2 Fridays ago and it’s now on that Salvage Post in the Strategy section.  As the market falls, you add more long puts at lower strikes (mattress layers) to take advantage of the drop.   Adding those layers automatically increases your downside net delta to whatever puts you sold.   As you add lower layers, you set trailing stops on the upper layers so that, when the market turns, you stop out on the higher-delta positions near maximum profit and automatically flip more bullish on the overall DIA hedge. 

    Don’t forget that off the 2.5% rule we EXPECT a bounce back to 2% so that is not impressive, nor is 1.5% and that’s going to be the recovery lines we look at today.  The Dow is closest and needs 10,120 to get back over -1.5%.

    WFR/Morx – CC did not go well and 4% SOX drop didn’t help either.   I think we need to let the market find a level before assuming this is it.  This drop is a strong indication we will continue on to the 10% line now and tomorrow’s NFP could be a big catalyst for that. 

    WFR/Micro – If you are in, I’d hang on.  If you are not in, stick to the BBB plays for now (Bullion, Beans and Bullets) as we’re going to be in survival mode for a while.

    GOOG/Doro – I think a strategic retreat to June is in order at this point! 

    200 DMA/Jcm – Hoping it holds!

  33. ss,
    If you’re in TZA, resistance is now at IWM 60.32 to the upside

  34. JRW – can’t believe I missed it, but I did.  Where do you see support?

  35. JRW – must be 59.

  36. Phil, would like your opinion on BP here…TIA

  37. Thursday Thud  -  Phil, have you mentioned lately how much you like to be in cash?

  38. DLB/Daveo – I would not buy back callers into a spike like this.  Roll them out and up into more premium, yes but not buy them out.   Good idea buying 13 more shares but you are so far up I’d rather see you cash out $9,850 and buy 3 Sept $45s for $10 ($3,000) and roll the $7.45 $45 callers ($745) to 2x the March $50 callser at $4 ($800) so you take $6,900 off the table (not bad from a $6,400 start) and you are left with fairly well covered calls that are $2,100 in the money with a full 100 shares worth of uncovered calls that can get additional gains should they keep going up.  You can add another caller on the way down to cover ($52.50 makes a good on/off line) and you can add another Sept call if they break up and then you have another 2x roll ahead of you – all with none of your original cash at risk. 

    BP/Oncmed – I like them down here but they aren not going to overcome a bad market so better off waiting for next week.  Cash, cash, cash… and TBT, which is down today as everyone is running to the dollar. 

  39. ss
    59.07 but it’s not STRONG support

  40. Wow, euro below $1.38, Spanish and Portuguese markets down more than 5%. This could turn ugly quickly on the other side of the pond!

  41. Phil – Where are those Dow 10,000 hats.  Maybe we can where them backwards.

  42. Phil -
    Little help on gs puts -
    Sold 1 gs feb 160 put @ 5.75 -  / Sold 2 gs jan 145 puts @ 14.2
    To cover myself this am – sold 100 shares of gs short at 56.30
    Happy to hold the short jan gs puts – of course i started with too big a position – so not really excited about doubling down for march
    Any suggestions on handling the short stock short put – I guess i can hold it until close to exp. and just stop out of the short stock if gs breaks above 156 before exp.

  43. OK i gots the beans and bullets i’m waiting for the bullions to get cheaper :)

  44. edz – feb 6 puts are still 40 – 50 cents?

  45. Exiting a lot of my ESS short position (turns out earnings are tonight). Keeping a few on for earnings, but it’s now getting oversold.
    SPG will be the real interest. Remember that they beat earnings last Q on what they said was a combination of cost cutting and charging higher lease prices. I don’t know how far they can go with cost cutting, but does anyone here see how they can keep raising leases on mall retail slots?

  46. short stranglers,whoops, VIX jumps earlier than I thought.
    cwan/not having put vertical for Feb,
    Good question.  Looking at it now, there is no room for a vertical as it is expensive.  So make sure that you have the March vertical, then the Feb can be naked.
    robert/ss/starting new short strangles,
    Sure, we can scale in 1/4 today.  We need the reserve as it can get more attractive if the market drops another 2%.   Somehow, SPX is a more attractive sell than RUT today.  SPX Mar 925/1170 or 900/1180 looks good.   Mar 1010/1000 put vertical is $1.55, or 1030/1020 for $2.3.

  47. Thank God, no thank Phil, for the mattress.  DIA feb 100 puts coming in beautifully.   Portfolio UP, on this down day, as I’m mostly bearish.  Phil, should I cover the puts 1/2 , or do otherwise?    Also, when you talked earlier about adding  1/2 June 105  puts to mattress you mean buying them, right?

  48. LOL SS! 

    GS/Samz – Sure.  You know yesterday when those puts went to $5.75 and you were relived.  Get out then!!!!  When a trade goes against you more than 20% and you get back to even – that is just as good as a 20% win – don’t let those get away.  The shorts were a good move and the $160 puts can be rolled to the March $150 puts for $2.50 or less and that means you’d still have $3 of his money in your pocket with March $150 puts (and nice profit on the shorts if things go that way) so don’t panic yet.  The 2011s are fine as long as you RELLY intended to own GS at $130 but  don’t lie to yourself – will you be happy when GS hits $140 and those puts are $22 because it means you’re going to get your entry or will you be spending money to avoid having the stock put to you?  So far, GS is just retesting where we started selling puts last week – I’m thrilled as I’m about to start selling again, only not until next week because I’m not crazy enough to ride out naked positions over the next 3 days.

    EDZ/Samz – Doesn’t matter what they say, it matters if we are on track.  Great entry on that on yesterday!

    Sector ETF weakness: Gold Miners– GDX -4.3%. Steel– SLX -4.3%. Coal– KOL -4%. Silver– SLV -3.7%. Oil Services– OIH -3.2%.
    Sector ETF strength: none.

    Commodities hitting the 5% rule while the indexes hit the 2.5% rule.  Gee, the BS commodity rally reversed itself – who’d have thought?

    EIA Natural Gas Inventory: -115 bcf vs. consensus of -122 bcf. Nat-gas futures -0.7% to $5.381  That’s a yawner but no way they retake $5.50 on that.

    Greece is the eurozone’s first real test, says IMF chief Dominique Strauss-Kahn, and "[it] would seem [that the eurozone] can’t allow itself not to help Greece in one way or another, so I’m rather confident.” Even so, Strauss-Kahn says the IMF will step in if asked.

    The average 30-year fixed mortgage rate rose to 5.01% (with 0.7 points paid), just up from last week’s 4.98%, but below a year-ago 5.25%, according to Freddie Mac’s weekly survey. The company’s chief economist notes residential fixed investment rose for two straight quarters to end 2009.

  49. Fear seems to be lurking around the world. With the increasing probability of a soverign bankruptcy, coupled with the statements made in the recent Senate investigation of the events surrounding the "underwear bomber" – all agreed we would be the victum of a terrorist attack within the next six months (WOW), and this group includes Leon Panetta (CIA), it seems to me today would be a good time to accumulate some gold positions (GLD), given the price weakness at the moment.

  50. Phil – remember 1040 is supposed to be THE LINE to hold in Gold because that is where India bought.  It is a ways down, but let’s see if that holds.

  51. Hey guys,
    Toyota – Do you think it’s too early to enter LEAP/Short spread on them?
    Buy the ITM JAN11 60 for about 15.25
    Sell the OTM MAR 75 for about 2.75
    Any thoughts?
    - XLF’d

  52. Speaking of terrorist attacks, ASEI reports tonight (if Im not mistaken), any way you’d play their earnings Phil or are we totally BBB?

  53. XLF’d    I’m thinking the same .  TM is great company, not likely to stay down long term.    Looking for best long’term play. 

  54. Wouldnt go too gaga over retail sales, people usually end up shopping when making returns.

    Deja VU, last time V had earnings the rest of the market went on vacation V was the only green stock on my list

  55. SS/verticals. My RUTs aren’t yet close enough to the money, but SPX is getting close.  I think Peter recommends that if you can get $7, don’t let it get away.

  56. judah – didn’t know that.  Thanks.  I am only at 4.25 at the moment.

  57. Gel, How do you recommend playing GLD?

  58. Phil, What about ANF as a short play? I know a while back you said you liked them. they are up 5% today so far.

  59. DIA Mattresses:  Is this a good time to sell 1/2 Feb 101s as a cover?  Or should we roll down our existing 1/2 cover to the 101s?  My current delta is about -1.02 and the delta of the Feb 101s is .50.

  60. Or should I maybe wait until we stop dropping :)

  61. Phil,
    Whats the correct TBT play right now

  62. I has been  weeks of Phil"s nagging, I finally got my dose of TBT today.

  63. TmDecay/CNBC – well, you should have seen David Farber yesterday, he did not have the latest earnings on a couple of reporting companie because CNBC were OUT OF TONER!  he said it on the air! 

  64. Judah/GLD
    I like the liquidity of GLD, and am cruising the option chain for a new position today. I am thinking of selling puts with a strike date in June, I’ll post later this AM of my choice.

  65. This area on the SPX is last week’s low (1072) If we hold here again now then we’ll probably have a double-bottom on the intraday and a reasonable place to cover shorts and/or daytrade long for the brave.

  66. NAS keeps going lower though so we need that to stabilize.

  67. On a positive note, at least the CNBC guys dont have shots of their ‘analysts’ looking at porn in the background :)

  68. XLF under 14 today , 1st time since Halloween

  69. Phil – remember way back when we put on a double short of FAS/FAZ at 90 bucks?  Today it is finally below.

  70. Also adding to my TBT positions today., and oh, by the way, Inflan, Phil sometimes is a substitute hitter for God when it comes to these decisions.

  71. What is up with V today? Up in a down market.

  72. gel1…..I’ve been here 6 months, mostly watching and learning.  Lots of smart people on the site and I’ve learned a lot from Phil and many others. 

  73. Hi, Peter & Fellow Stranglers,
    I am still busy in a project at work, and can’t do much trading.
    Thanks, Peter, for your reply.
    BTW, I still have quite a few individual stocks in my portfolio. I discovered that SPX/RUT short calls are good hedges (in addition to other hedges I already have).  So, I am selling a little more calls than puts, nothing big, something like 10:9 to 10:8 ratio, while still being mindful of the $20K reserve rule.  Also, I am rolling down short calls that are low in premiums.  Eg., I am rolling Mar SPX 1210 calls down to Mar 1170.  This is an experiment I started 2 weeks ago when the market dipped.  It’s been doing well.

  74. lflantheman, TM, how about selling the Jan 2010 60s for $4.20? or the 55s for $2.80.

  75. I mean 2011 of course.

  76.   Phil….I’ve got a bull call spread with AAPL long July 200/Feb 200 covers.  The Feb 200′s today are 40% profitable.  I would presume you’d tell me to buy back the Feb 200′s, or should I just hold them for further profit on this spread?  I’m also tempted to turn this into a ratio spread by buying a few more July 200s today while the price on them is down.  Eh?

  77. raulsm/ TM   I think that’s a good trade.

  78. Phil, what are your thoughts on the AAPL Feb $200 Calls?

  79. Phil, MHP trading at 34.50 down today 1.04 sold the jan11 30p for 5.88 now 2.82 would you take 1/2 off the table or roll to 35p for 5.15 ? thks

  80. Mattress/Iflan – Yes, we add long layers to the mattress on the way down but we’re also looking to take profits on the upper layers that are already ahead.  Once you remove the upper layer, you simply roll up the lower layer .50 per $1 and, since our upper layer always has a delta greater than .50, it means we save money even if we end up rolling our new puts all the way back up.  Math protects us! 

    DIA status.   At this spot I like cashing out the higher June puts in favor of the June $101 puts, now 5.35 so very tight stops on higher calls.  Presuming you have 1/2 cover of the Feb $103 puts, now $3, we’re not worried at all as they can be rolled to 2x March $97 puts, which are now $1.60 so as long as that roll doesn’t get away, there’s no worries.  It’s also tempting to roll them to 2x the Feb $101 puts at $1.80 if we think things will hold but that’s not clear right now.  If we do fail 10,058, then it’s time to consider adding June $97 puts before they pass $4 as they are very cheap to roll up and will be able to cover the March $97 puts (always be planning 2 moves ahead at least). 

    Yen heading up faster than the dollar. 

    Gold/Gel – I think global weakness trumps fear but if you must play, consider the UGL July $39/44 bull call spread for $2.70 with a nice 85% upside (and UGL was $55 in Dec and $49 in Jan) and, if they fall below your b/e point, you can offset your $2.70 by selling July $36 puts for $2.70 and that would put you bullish on gold back where UGL was in September, when gold was $1,000.  Personally, I’m holding out for $950 and even then I’m not sure I’ll jump in but it does get attractive there with all you gold bugs overpaying for premium.  8-)

    TM/Xlf’d – I’m looking for $65.  They are way downplaying the problem still. 

    ASEI/Jrom – It’s more a question of whether their earnings/outlook can justify this price. I like them long-term but not into this weekend when cash is just so damn useful.  Of course the $75s are being sold for a whopping $4 so you can take the mellow ratio backspread, selling 5 of those for $2,000 and buying 4 July $80s for $5.75 ($2,300) and that’s a pretty cheap way to enter the spread.  You have to be ready to add 6 more longs and roll them to 2x the Apr $85s but that would put you in the $5K spread for not much more than $5K with 3 more months to roll the callers so a good bullish position if it pans out and a cheap speculative position if they disappoint.

    TM/Iflan, Xlf’d – You can look at it as accumulation to sell the July $65 puts for $4, which is a net entry at $61 and the basis for a buy/write on the way up where you can buy in over $73 and sell the July $75s for $6 (now $5) for a net $63/64 entry so not bad if they head up and, if they head down, you’ll be really glad you just sold the puts! 

    Wow, dollar $1.375 to the Euro, $1.575 to the pound and 89.65 Yen (which is going to bum out the Nikkei tonight). 

    We are flattening out in 2.5% territory but at the lower end of our tolerance levels for 5% rule.

    Retail/Kustomz – Still it’s better than expected and better  than I expected. 

    ANF/Bord – Yes, I like looking at them with CASH in my pocket.  This is a TERRIBLE time to be buying and they aren’t even cheap, up 20% from mid-Jan.

    Mattress/Daveo – Way too early to roll the $101 puts – they are all premium, why would you buy that?

    TBT/Bassdad – I like the Jan $35/45 bull call spread for $6.30 as that has a nice 58% upside and free downside protection to a ridiculous low (41.30).  You can do 2x that and sell 1x the March $50s at .65 and knock off half your basis or more over the course of the year

    Oops, down we go again!  Big test here.

  81. Yep, new swing low on SPX. Pretty much make or break here.

  82. Buying a few SPY call verticals. Small position.

  83. Phil, no, proposing ANF as a short play, not long play.

  84. Good time to add 1/2 DIA June $101 puts at $5 to Matttress play and set a .25 trailing stop on higher puts to take advantage of nice gain.  Also, sets up to roll 1/2 covers easily if we keep falling.
    Hey Phil, I’m at work and just got on.  Would I missed the 101s at $5….should I shoot for 101s at 5.50 or 100s at 5?

  85. Buying "toe in water" PNC and BBT long positions too (still holding some KRE puts in case these keep going down).

  86. MA looks like an interesting bounce play; assuming the market will allow for a bounce.  225-226 looks like good support.
    Volume has dried up   on this ..

  87. Sold 40 TZA, buying 10 TNA

  88. Inflan
    I have to trump your sentiments regarding the wisdom of the board. I have to thank Phil and the many contruibutors for a 80% profit for 2009. I have learned a lot and am still learning ( even occasionally about political issues – ha! )

  89. gel – that cash must feel good about now.  I know I am liking mine.

  90. Phil,
    I’m a bit confused by the TBT suggestion above.  The 2011 Jan. $35/$45 bull call is currently $7.80, not $6.30.  Are you suggesting that I offer $6.30 & hope for a fill or was that available and I missed it.

  91. Phil, or anyone:   AAPL bull call spread.    Long July 200s/short Feb 200s.  The Feb 200s are now 2.51 and 50% profitable for me.  Does it make more sense to 1.  buy these back now   2.   ride them out.   3.  buy them back and sell the 195′s, which now have a value of about 4.30, all time value of course, with AAPL at about 193.   Which is most prudent?

  92. Phil, or anyone:   AAPL bull call spread.    Long July 200s/short Feb 200s.  The Feb 200s are now 2.51 and 50% profitable for me.  Does it make more sense to 1.  buy these back now   2.   ride them out.   3.  buy them back and sell the 195′s, which now have a value of about 4.30, all time value of course, with AAPL at about 193.   Which is most prudent?

  93. Phil — I’m in and out of my office and am a little confused about where I should be re my DIA puts.  I bought the March 99 yesterday at $1.44 and am not inclined to sell them.  Is there a better play in terms of premium and or delta that I should roll to?

  94. GLD/gel – careful here for the next month or so with them.  if they break 103.75, they fall to 98ish.  I am short gold barring a terrorist attack.

  95. Iflantheman,
    I may not be experienced enough to answer your question, but my advice to you is to sell half and take the profits.
    You will always have opportunities further down the track to sell other 200 calls against your Julys.
    Hope it helps…

  96. I am wary of doing anything bullish until the NYSE retakes 2.5%.  S&P is next to pop at 1,068 and that would be, as they say at Harvard Business School, BAD!

    CNBC/Jrom – Oh I get it – analysts!!! At CNBC?!?  LOL, what a riot….  8-)

    XLF/Stock – Now that one may be a good entry.  There’s nothing wrong with the banks and banks aren’t stupid enough to lend to countries for the most part…

    FAZFAS/SS – Yeah, wasn’t as easy as I thought but the math is inevitable over time. 

    V/Gel – Very good earnings.

    AAPL/Iflan – I wouldn’t pay them $2 for those ahead of the weekend.  You can set a stop but they can roll all the way to March $220s so, unless you are THAT bullish, let them expire.  As to July, why pay $16.20 in premium to buy 50% more calls when you can spend $8 and roll all your calls down to the $185s and REMOVE $7 in premium from your callers and ADD $15 in gains to any upside move AAPL makes through July?

    AAPL/Jimmy – I like them as speculation here but only as a craps roll (the amount you’d be willing to lose on a single roll on a craps table). 

    MHP/Yodi – They’ve been great.  I’d leave them because I’d be happy to own MHP at net $25.  Don’t take a win and roll it into risk, that’s not usually a good idea.   You stand to make another $2.82 if MHP doesn’t drop 20% – that should be good enough. 

    ANF/Bord – Ah, that’s different but they had a nice upside surprise in sales and I don’t think they are so particularly awful that I’d short them.  You can take advantage of the move up and sell the 5 Feb $35s at .85 against 4 March $36s at $1.13 for net evensh as the current $36s are .55 so figure they’ll hold some value after expiration and not a tragic roll if you are wrong.

    Mattress/Eph – The idea is to trade off your 1/2 of your June $104 or $106 or whateves for the lower puts on a bounce.   Right now, I think we are firming up a bottom and I’d go with the June $100 puts but keep in mind we are stopping out the higher puts, taking that profit off the table and we’ll start a new roll cycle with the lower puts if we start heading higher again

    TNA/JRW – I sold the TNA Feb $35s for $1.35 as an upside play

    LOL – Thanks Gel!  I’ll keep working with you on that politics thing – we’ll have you pulling the right levers before you know it!  8-)

    TBT/Bassdad – Never accept the price they give you on those.  Sure, make the offer.  TOS is quoting me $6.43 on that one and you really don’t want to go over $6.50. 

    DIA/JCM – Absolutely take money and run on the March $99 puts!  That’s a very nice win at $2.35.  Stop should be a trailing .20 (20% of the profit).

  97. Judah
    I sold the June 100 puts at 4.00. This is really an income play that takes advantage of  today’s price weakness. I also like Phil’s UGL play. I concur with Phil on the drivers that will pump the price of gold. The prime mover, IMO, is a geo-political catastrophe ( such as a suprise attack on Iran ) or a successful attack by terrorists on US soil. We now know what our security leaders assume the probability level is, so therefore this is a portfolio defensive hedge. 911 killed the markets and gold jumped.

  98. cwan – I also have more sold calls than puts in my strangles.  Just seems safer at the moment.

  99. Phil,
    I am in the EDZ July 2010 4/6 BC spread for today.  Should I get out before the end of the day?

  100. ssdirk/Cash
    Yep… I have never slept so well. When this market bottoms out, I will still have my sanity, and will be able to scale back in not lamenting about losses I might have otherwise experienced. As some say "cash is king’ – So true!

  101. ok, i sold the march 99s.  I guess I’m wondering if there isn’t some way to remain bearish — other than cash, which i have, and tbt, which i also have.  i just think things are starting to look really crappy, and we could at least start testing the 200 d EMA which hasn’t been tested in ages.  If it can’t be tested in THIS environment, when can it?

  102. Usually bearish Doug Kass has just gone heavily long. and covered all his short positions.  Thinks we’re at bottom of trading range.  Buying GLD, Financials, China Life, LNC, kkr, and claims Meredith Whitney has a buy now on Goldman.
    Any thoughts on this ‘’ move Phil?

  103. Phil
    CME is a bigest looser today in my portfolio, i have June 270/290 spread and short June 270 put
    any suggestions?
    also SPWRA below 20 today, is it good buy now?

  104. Phil
    CME is a bigest looser today in my portfolio, i have June 270/290 spread and short June 270 put
    any suggestions?
    also SPWRA below 20 today, is it good buy now?

  105. Phil
    CME is a bigest looser today in my portfolio, i have June 270/290 spread and short June 270 put
    any suggestions?
    also SPWRA below 20 today, is it good buy now?

  106. AAPL/  thanks Phil.  I am NOT that bullish in the short term.  I’ll let the feb 200 covers expire then roll my longs to 185 or so, as you suggest.  I would not have thought of the latter part, by the way. 

  107. oops sorry, triple post

  108. This is what they call a MAJOR test:

    I’m fairly sure we hold the 2.5% line today but now we MUST get back over -2% or it’s more likely we follow through tomorrow but tomorrow is the craziest NFP report of the year so there is no way to predict this action and CASH is very, VERY flexible – especially with the dollar going up so you actually gain by holding it!

    Good chart of Sovereign Debt – GRE is way more screwed than the others but you can see how the STUPIDs are not unfairly categorized.  Our debt is 100% of our GDP (BELG) and our Defict is 10% of GDP (between FRA and IRE) so USA would be right between GRE and FRA/POR on that chart!

    New York AG Cuomo files securities fraud charges against BofA (BAC), and former CEO Kenneth Lewis and former CFO Joe Price. Separately, the bank agrees to pay $150M to settle SEC charges related to Merrill Lynch. (DJ)

    Keeping the wheels spinning:  The Fed buys $1.099B of agency debt maturing 2012-2014, of $3.664B submitted by dealers. The purchase brings cumulative buys to $165.86B of a planned $175B in purchases from Fannie Mae (FNM), Freddie Mac (FRE) and the Federal Home Loan Bank system.

    Another TBT convert!  It’s a "no-brainer" to short U.S. Treasuries, says Nassim Taleb, author of The Black Swan. "Every single human being should have that trade."

    Berkshire Hathaway (BRK.A -2.3%) will sell $8 billion in debt to help finance its purchase of Burlington Northern Santa Fe (BNI). The offering, expected to be priced later today, would be more than double the size of Berkshire’s largest investment-grade bond.  And they are dropping Berkshire’s rating too!

    Sources say Amazon (AMZN) has bought Touchco, a start-up that specializes in touchscreen technology. It’s a sign that Amazon wants to upgrade its Kindle to compete with the Apple (AAPL) iPad. But some analysts believe Amazon is fighting a battle it can’t winI just want to meet the analysts who DON’T think AMZN is bringing a knife to a gun fight.

    This is good: "Don’t call me Dr. Doom but…"  Roubini: The ticking fiscal U.S. bomb

    Today, it’s Greece and Portugal. Tomorrow, is it Spain and Italy? The real problem is if the sovereign debt contagion spreads past one of the small players in the eurozone economy to the bigger players. The cost of insuring government debt is climbing daily all across Europe, not just for Greece and Portugal.  This is just what happened when the financials started failing too, a domio effect and if the EU doesn’t step in to stop it NOW, this can get out of control  Make sure you do have those disaster hedges no matter what.

  109. jcmcn5,
    You can buy TZA, or sell the Feb puts

  110. Cap, that MA bounce not looking so good.  I got out of that short $10 too soon, bummer, but I’m trying to be a good Phil-ite and take profits when I can…

  111. Phil -
    Dia covers – if we don’t get stopped out on the higher junes – what should we plan on doing overnight – selling more covers ? closing out at end of day?

  112. JR — I used to play TZA a lot and got smoked nearly every time.  How are you playing it? 
    Do you mean Buy the Feb puts?  I’m bearish — at least in so far as I expect a test of the 200 DMA on the spx.

  113. Gel / anyone
    Why would the euro be gaining against the aussie – is this people in europe having to end their carry trade?
    Unless it is a fear of china growth thing – it seems odd to me.

  114. I do not overlook the support of TBT by Nassim Talib. He knows a black swan is and we have one in the making. When you factor in all of the US debt, including the unfunded accounts of Social Security, Medicare and Medicaid, we have a debt of 100 Trillion. At best we are able to collect 2.5 Trillion in taxes annually. The way I see it, there is NO WAY our debt can EVER be liquidated, other than by debasing the currency (inflation). As more and more investors, foreign or otherwise bond buyers realize the inbalance, then bond yields will DEFINITELY rise to attract the requisite buyers. The term "junk bonds" may apply to these instruments, and the yield will reflect it.

  115. jcmcn5,
    Sorry, Sell the CALLS, or buy the puts; I just buy the stock as a day trade, but I switched to TNA ( long ) at noon

  116. Phil, what do like like to get more Bearish for tomorrow’s report?  TIA

  117. Wow, oil touching $72.50!  Gold at $1,062, silver $15.40, and copper bounced off $2.86 but looks like they’ll hit my target too.  FCX is a train wreck but should hold $65 I think.

    EDZ/DD – Not really.  The idea is to just be on track.  Ideally, that play should gain .20 per month so if you get .20 ahead of schedule, then you may want to cash in as the max never changes so if, for expample, you get to $1.50 by Feb, you still can only gain .50 more through July and it’s no longer worth waiting for (or risking the gains). 

    Cash/Gel – I myself am relieved for you, you were making me nervous last month!

    Bearish/Jcm – We were just down here on the Dow and the S&P last Friday (a little lower now) and the world did not end, or at least put off ending until this morning.  As the great WHOPPER tells us: "Sometimes, the only winning move is not to play."  This is one of those times. 

    Kass/Tusca – I’d like to see a link on that one please.  Sounds like the kind of silly rumor they float in order to sucker other people into bottom fishing before the next leg down. 

    CME/Tcha – It’s June, I wouldn’t touch it other than spending $4 to roll down $10 on the $270s.  SPWRA is not CASH so no, I don’t like it today. 

    Volume is now low enough (147M at 1pm) that we can play for a bounce.  The DIA $102 calls at .92 are fun and out if we fail DIA 10,040 or S&P 1,069.

  118. Samz
    At the moment there is a lot of FX downward pressure on the Aussie. I think the forward players see a weakening of  economic fundamentals. I would be shorting the AUD at this point, but would not pair it with the Euro, both are weak. For the next short period I like the Euro short and the USD long as a pairing. Regarding the AUD and EU strength, Phil would say they both suck, but one is not as "sucky" as the other. I think the China economic fear is also hurting the Aussie, in spite of their high interest rates, which has strengthened the AUD in the past.

  119. VZ just broke support.

  120. Not 2-3 weeks ago Kass called for a 10% correction and we were at around 10,650 at the time, so he is about 400 points early if he did turn. And the Whitney long on GS sounds fishy too, she’s been saying short all financials for a long time now, and about a month ago I read somewhere (sorry to be fuzzy) that she was for shorting GS down to around $135.

  121. wHAT A MESS TODAY !

  122. JRW – it just seems a test of Dow 10K is in the works today.

  123. ss
    You could be right, but volume is decelerating and we are on support ( weak ) so I’m still long, for now.

  124. EDZ had a monster day so far, sold some 6 calls to play a pullback.

  125. Samz/Gel/ AUD
    Just to follow up on your comments on the Aussie dollar, AUD/JPY has lost a bit more than 3 Yen today and has been touching SEP lows. This is a very popular FX trade in Japan. And a 3% overnight move will wipe out 50 time leveraged retail investors.
    It will be interesting to see how the cross moves in 5 hours. Below SEP lows it is all the way down to 72 Yen (JULY lows)…

  126. Toys R Us BBY and GME just told Tina they don’t have enough foot traffic to bother restocking Tony Hawk game Jackie wants for her birthday.   Deli down the block from me says they don’t know how long they can stay open -  THAT’s reality! 

    DIA/SamZ – That’s a good question.  The system was designed for a time when we didn’t move 200 points overnight.  I’d say DD on the lower puts and still take 1/2 the higher puts off the table and add some front-month cover so you have 3 June puts (1x $105 puts, 2x $101 puts and 1x the short Feb $103 puts and 1x the short Feb $101 puts).

    Aussie/Samz – They had poor retail sales today so took a general hit.  Also, it’s a commodity economy and commodities are down 5% today.  Canada probably hurting too. 

    Junk/Gel – Ah but the connundrum is the more rates rise the less likely it is that the bonds can be paid…  Hyperinflation or Default are the only answers and hyperinflation is the easier way to go. 

    More bearish/Rob – Tomorrow’s report is not assumed bad.  The adjustments will roll back and will most likely shock in the form of raising the overall unemployment rate but it’s backward looking at best.  So, I’m not wanting to go too risky on Downside betting but normal Disaster Plays are fine like:

    • DXD July $27/33 bull call spread at $2.50.  If we go up, the $27 puts (now $1) can be sold for $2 to offset.
    • SDS 2011 $36/40 bull call spread at $1.30, selling $27 puts for $1.50 and S&P has to gain 14% to cost you money.
    • TBT (have I mentioned them lately?) Jan $42/51 bull call spread at $4, selling $42 puts (now $3) for $4+ if they head lower.

    I would much rather pick these up on a bounce or next week.  They won’t change all that much as long as we don’t break the next 2.5% set and I’ll have those levels later.

    Anyway, copper held $2.85 and oil held $72.50 so I’ll take a pop at the bull side first…

    EDZ/MrM – Be careful with naked shorting them, today is nothing compared to what will happen if on of the STUPID’s collapse. 

  127. FYI to readers, my EDZ sold calls is just a stick play day trade, Phil is correct that this kind of trade should not be held overnight.

  128. You could see the nervousness in the markets in yesterdays trading, does it end here? Stoch is heading up on the DOW chart as we linger, not good. PPT will have its hands full this afternoon.

  129. Cap, now comes your MA bounce!

  130. Disaster hedge:  Add EDZ July $3/8 bull call spread at $2.10, no offset but, on a good run, maybe we can sell March $9s for .50.

    Nice flush – I HOPE!!!

  131. AMED-- those short Feb 60 calls are down to .30 Phil (spread was short Feb 60 call, long June 65 call. Any adjustments or sit tight til the smoke clears?

  132. judah – you staying safe today?  What’s shakin?  I did some call rolling down today that is working out well.

  133. SS, I was occupied this morning and didn’t get on the TZA express.  I had been waiting for a drop to 59 or so to try TNA for an afternoon stick.  Just got on, but not a big position and not with a lot of enthusiasm.

  134. absolutely no bounce so far.  still sticking with the 102 calls?

  135. AMED/Bord – Those are meant to let the entire front-month run dry.  We were playing for the initial drop and some recovery between now and June. 

    Here’s a glimmer of light on a gloomy day: Cisco (CSCO) chief John Chambers says the U.S. economy is on the rebound and the sharp increase in capital spending is a precursor to job growth.  Much the way that a sharp increase in demand for carriage wheels meant the 1900s would see a rise in horse employment…  CSCO is nice but they are part of the problem, the web has globalized labor and we are the most expensive labor force on the planet – why should companies hire us? 

    Here’s one for Gel’s team: "Sometimes the best investment strategy requires a little sitting and waiting," says resources expert Curtis Hesler. "For now, stay short term and park your liquidity as safely as possible… the best capital gain bet this year will be in gold," where he likes Goldcorp (GG) and Royal Gold (RGLD).

    S&P downgraded Berkshire Hathaway (BRK.A -3.1%) from AAA to AA+, saying its acquisition of Burlington Northern Santa Fe (BNI) will hurt liquidity. The downgrade came on the same day the company announced an $8 billion bond sale to help finance the acquisition.’s (AMZN) unpredictable revenues, and a substantial short interest, have made it a favorite among day traders, who can make a fair amount of money – or lose a huge chunk of it – in a 15-minute period.

    S&P below the 2.5% line, which is exactly 1,069.50.  NYSE down 3.1%, Nas down 2.45%, Dow 2.2% and RUT off 2.7%.  Transports down 2.7% and SOX down 4.5% – UGLY!  We’re not even holding 10,040 but we also haven’t put 5 minutes together below it so I’m still int he DIA longs at the moment

  136. I am rolling my TBT positions to lower strikes and a little further out with DD and picking up some more premium on my short puts.

  137. Gel – just curious what months and strikes you going to on sold puts.

  138. Sorry to keep on you on AMED, Phil. Just want to understand how to run these spreads properly. I am sitting tight on the 65 long June calls for sure. Since we’re neutral and want a bit of downside protection, could I close the Feb 60 short calls out, and then 1/2 cover the 65 June longs by selling the March 65 calls? My intent is provide a bit more downside protection if we get roughed up more in the next few days. Is that a stupid move to make or no?

  139. ssdirk/TBT
    My DD rolls today are all short puts – Mar 48 rolled to June 45, and June 46 rolled to Jan 45. I have a LOAD of contracts so am trying to stay ahead of the strikes. On each roll I look for premium income opportunity. It worked out well for me today. Oh, by the way, did you see where Moodys is chattering about the possibility of dropping the rating on the Treasuries because of the deficit prospects. This would, if it materializes, pump the yields and for sure pump the value of TBT positions.

  140. DIA calls/Jcm – Keep in mind this is the same concept as the futures.  We risk nickels at resistance points hoping to make .25 or .50.  They may not work 2 out of 3 times but that would be great with a 5:1 (gain:loss) payout.  Just like the futures, the key is to be serious about your stops and to learn to be happy with small wins.

    AMED/Bord – We had the June $65s at $3 (now $1.90) and sold the $60s for $1.75 (now .40) so the play is up a bit.  Yesterday I said the way to stick with it (as opposed to taking a 20% profit and running) is to roll down to the June $60s for $1.20 and then be patient.  June is 120 days from now – you don’t need to make 120 daily adjustments on the way.  If you do not believe in the play long-term.  Take the money and run.  We were playing this for a 2/23 event but we took advantage of the run-up to short the front-month.  You can do a 1/2 cover on March but that wasn’t our trading plan, which is currently right on track.

    The top 10 shorts in the U.S. (.pdf), according to Dataexplorers. Tops on the list: Laboratory Corp. of America (LH). Top squeeze: Sears Holdings (SHLD).


  141. Phil, oil touched 72.42 (72.5) 10 minutes ago and took off for a short run to 73.2 (that’s $800 per /CL contract). That was about the same time the SP hit 1069 and bounced…….they are edgy and have their finger on the trigger…….your DIA calls may do well.

  142. OK thanks for the explanation, it really does help prevent me from doing silly things. PLAN THE TRADE, TRADE THE PLAN. I am with you on this one. Still believe in it and sitting tight.

  143. Lionel/AUD/JPY
    This move in the JPY is interesting, because as you say, this cross trade is very popular with the traders in Japan. They are some of the best and most experienced. I think most of the housewives in Japan are "carry traders" and follow the fundamentals very closely, and I would never doubt their sentiment.

  144. MA — went down to 220.92 wow.  Still, getting a nice bounce finally, have made a little bit scalping this one.  Now long a little bit w/ covered call and short put.
    HK … also bouncing a little bit.
    Will we get short covering into tomorrow; or will we close at the lows.  I don’t see the market getting any legs here, unless Mr Stick shows up to play,
    Also started a position in IMAX during this selloff.

  145. Gel1/AUD
    I totally agree with you.
    Let s watch "Mrs Watanabes" ‘s reaction when they wake up…
    The move may have been also amplified by Japanese online brokers liquidating positions overnight…

  146. Strange volume on AMED 30 FEB Callers….who in the world would BUY 7845 contract Deep ITM money on these guys if you were so bullish?  The 50 callers don’t have much prem left, so why you buy the 30′s? Please explain?

  147. Phil — any other EDZ play in mind.  I’ve got a bid in for the July 3/8 as outlined above, but I have the feeling I’m pretty far away from the market here/.  Is it up too much to play today? 

  148. Anybody see this interview?
    Good to know we had a steady hand on the rudder, lol.

  149. Lionel/JPY
    So true… When so many throughout the world are sleeping the FX market is very much alive in Asia. I love to watch this move up lately in the USD, particularily against the CAD, as I believe we will see a complete reversal later in the year, with possible parity between the two. This pairing is my favorite, and is regional which makes it more predictable.

  150. XLf’s, re. AMED, that would give the buyer very close to 2X leverage on AMED. But, could be other things too.

  151. LMAO Paulson was scared and called his wife!! What a crock!!

    Feb. 4 (Bloomberg) — Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night.

  152. Eric
    One interesting caveat to the whole Paulson saga is he new of the magnitude of the problem. He wanted to save Lehman, as he new a failure might be the domino that could rattle everything. He felt, with help from the Brits, Lehman’s survival could be a reality. The British gave him the "bird" and the rest is history as we know it.

  153. Phil,
    Strategy for overnight if we close with 1) a big stick, 2) a weak stick, 3) here, 4) on the lows ?

  154. Stick stuck?

  155. That’s it for the DIA longs – things looking pretty grim if we’re just going to lay here into the close

    AMED/Xlf’s – Possibly just a way to buy at 1/2 price, doubling up for an expected big move.  If you felt comfortable that they’ll hold $54.50 and you pair that with the sale of the $55s at $1.70 then you’re in for net $23.30 with a call away at $25, which is 7.3% in two weeks – nothing wrong with that.  We are all so into make 20% here and 50% here we tend to forget that the vast bulk of options trading is done by funds looking to make just a few % on very high-probability trades. 

    EDZ/Jcm – They are just messing with you as there’s no reason for that spread on the $8s.  I’m going to try to buy some for .95 and see what happens..  I’ll chase up to $1.05, maybe you fill..

    Paulson/Eric – He’s making a great effort to "humanize" himself.

    Stocks hit 2010 lows about 45 minutes ago, and have come off them a bit, though still only 15% of the NYSE is trading positively. Losses are spread evenly though basic materials and energy continue to pace declines; for the moment, the Dow has stopped a free-fall toward 10K. With an hour to go, DJIA -2.1% to 10,051. S&P 500 -2.5% to 1,070. Nasdaq -2.4% to 2,138. Crude now -5.1%. Gold -4.4%. Silver -5.7%. Platinum -4.8%.

    On Toyota’s (TM) FQ3 earnings call, analysts badgered executives over Toyota’s overly conservative estimate that its recall woes would impact global car sales by just 100,000 units. Noting the precipitious sales drop at the end of last month, Moon Capital’s James Irwin wonders: "Maybe I am missing something. Can you share with me what happened in the last 10 days of January?"

    Commerce Secretary Gary Locke started to outline the government’s plan to double exports in five years, through trade advocacy, law enforcement and expanded credit. Exports have been "an economic blind spot," he says, and exports are now "front and center."

    It’s ironic, writes Max Schulz, that the "drill, baby, drill" calls for new oil during the gas price spike were being made largely irrelevant by a quieter revolution – over in natural gas development. Technologies and discoveries are paving the way for regional markets to become interconnected. (ETF: UNG)

    Sector ETF strength: Livestock– COW +0.04%.
    Sector ETF weakness: Silver– SLV -6.3%. Steel– SLX -6.1%. Solar– TAN -5.8%. Coal– KOL -5.8%. Clean Energy– PBW -5.2%. Oil– USO -5%. Gold Miners– GDX -4.9%. Heating Oil– UHN -4.5%.

    Dow leader: CSCO +0.8%.
    Dow laggards: BAC -4.5%. MRK -4.5%. AA -4.1%. JPM -4.1%.

    Bill Gross on CNBC to twist the knife.

  156. BTW, out of TNA at a 3 grand loss;  good thing I managed an $18K gain on the morning TZA play on 1/2 the drop.

  157. JRW III: good, my weakest point is taking gains and cutting losses… always wondering of what it can be, the sort of perfectionist attitude that is really working against me when investing.

  158. Whos waiting for the last 15 min the stick or the seller

  159. PS, I’ll be buying at IWM 59.07 on the way back up, IF that happens.

  160. Jordan,
    Better to be Rich than Right !!

  161. Pharm
    This is one crazy day – my two "hail mary" biotech plays VIA and NWBO are up today. With all the market losses today, I guess the players are putting their money on risk with hope to get even.

  162. Everyone turn your hat backwards.

  163. (YM) DOW mini 9968

  164. Well we have one honest CEO so far: MasterCard’s (MA -9.2%) tepid outlook on the U.S. consumer remains unchanged, despite recent strength in retail sales and a strong holiday season. "We continue to be cautious about the health of the consumer as reflected in recent spending trends, as well as the slow pace of real improvement for people’s financial security," CEO Bob Selander said on this morning’s call.

    Overnight/JRW – We should have a 3:2 or 2:1 stance on the DIA mattress play regardless of any shenanigans that may be pulled into the close. 

    Perfectionist/Jordan – That is a killer fault in trading.  I forget to mention this more often but Dr. Brett has an excellent series of articles on Trading Psychology that are well worth going through

    Well at this point I’d have to say a light entry into additional disaster plays may be warranted.  We may get blown out to the upside if the EU does something constructive but I don’t think they move that fast and, if we are covered to the downside, we can jump on some upside trades with less worries.

    Asia and Europe can easily push us towards the 10% correction (9,650 on Dow, 988 on S&P) and the media is in no mood to spin payroll adjustments positively tomorrow.  

  165. Seems like opportunities will be abound when things settle.

  166. Sorry, on S&P the 10% number is 1,035 and the Dow correction is 9,630, those were some other levels I was looking at… 

    Nas 10% is 2,088 (close), NYSE is 6,660 (very close) and RUT is 585 (very close).  DAX is close to 5,445 too at 5,533. 

  167. Phil,
    S&P support is at 1,025, not 1,035, IMO.

  168. Trading Psychology/Phil – Thanks for the link!

  169.  "The S&P 500 is now down more than 7% from its Jan. 19 high of 1,150.23. For those awaiting a 10% correction, keep an eye on 1,035. A 20% pullback – which would signal a new "bear" market – would take the index back to 920."

  170. What is keeping the Dow up half a point above the others today?

  171. Holy molly, are we closing below 10K?

  172. Support/JRW – Well a 10% correction is not automatically support of course.

    Look Ma – I’m spinnin’:  The U.S. economy could grow more rapidly in 2010 than current forecasts suggest, says Chicago Fed president Charles Evans. Expected 3.5% GDP growth would be "an unbelievably modest growth rate on the heels of the contraction we just had," and 4% is "not outside the realm of possibility." Also: "I cannot fathom that inflation is going to take off, short of some deficit catastrophe."

    Wow, they had to puch it below 10K at the close – that was painful!

    NFP Report at 8:30 tomorrow – total insanity to follow. 

  173. Phil
    Regarding consumer sentiment: –  Was at the Stanford Mall in Palo Alto last weekend. After many ears of visiting this mall. I have never seen anything so quiet since shopping a few years ago on Super Bowl Sunday. This mall is always a beehive, and it was DEAD on a weekend. The consumers have lost all interest in buying, and the numbers will reflect this next earnings season. Definitely a bearish opportunity!

  174.  JRW  what are you looking at tomorrow?

  175. Nothing like being on the right side of the market, Deeeeee leverage!!!!

  176. Phil, as you prepare to sum up today, is it your gut that today’s action increased or decreased the chance for a big drop tomorrow if the jobs report goes badly?

  177. "gut feeling" that is

  178. Besides being 10%, there is other support in the 1030 area; we bounced there twice late last year.
    MA today showed us what 10% off looks like.

  179. Now that was a good day!  Bought WFR 2012 Jan 10s (actually rolled), and sold HK 21 Mar P.   I think I noted MS to 25ish, yeah!  And yes Gel, go VIAP….!!!! and GNBT…..and SVNT….and ITMN….OH MY!

  180. Big,
    The open. All depends on the news and the spin, a great deal of damage has been done technically; if we open up, I think we move up, if we open flat to down, and don’t move up in the first 30 minutes, we could lose another 2.5 %.

  181. phil
    I bought the RTH 85 puts at 1.29 and sold the Feb 90s at 1.04. I know that i am early here, but which march or april short put  should I be beginning to looki at here.

  182. Peter – I am curious how to play my only remaining Feb RUT strangles.  I have 650/550 with 600/590 wild play which is now ITM. 

  183. This is feeling like a replay of the 1st quarter last year. If so, then the Ides of March will be the timing for a turnaround.

  184. OK, Cramer is now pumping gold…..gonna short some more.

  185. Copper finished right at $2.85.  Gold $1,064, silver $15.20!  Oil held $72.50 and finished at $73.10 and Nat gas is $5.43.

    Our 10% levels from Jan 25th were:

    Dow 9,630, S&P 1,035, Nasdaq 2,088, NYSE 6,660 and Russell 585

    Today we finished at:

    Dow 10,002, S&P 1,063, Nasdaq 2,125, NYSE 6,787 and Russell 589

    So we’re off by Dow 372 (3.7%), S&P 28 (2.6%), Nasdaq 63 (2.9%), NYSE 127 (1.8%) and Russell 4 (0.7%)

    At the 10% line, we expect a bounce back up 2% so let’s watch these levels as intermediate breakdowns:

    Dow 9,850, S&P 1,055, Nasdaq 2,125 (a ha!), NYSE 6,793 and Russell 596

    Those are going to be our new bounce zones if we hit the 10% lines but, for now, they are watch lines as we move between 7.5% to 10%.  ANY break of the 10% line is going to be a very nasty sign. 

    That brings us to today’s new Disaster Hedges (adjusted to the close):

    • DXD July $27/33 bull call spread at $2.75.  If we go up, the $27 puts (now $1.90) can be sold for $2.50 to offset.
    • SDS 2011 $36/40 bull call spread at $1.30, selling $27 puts for $1.50 and S&P has to gain 14% to cost you money.
    • TBT (have I mentioned them lately?) Jan $42/51 bull call spread at $4.10, selling $42 puts (now $2.45) for $4+ if they head lower.
    • EDZ July $3/8 bull call spread at $2.30, no offset but, on a good run, maybe we can sell March $9s for .50

    These are nice long-term spreads that protect us in the event of a major market collapse.  Very good to have some in your portfolio.  DXD and SDS are direct protects on the market while EDZ protects against a downturn in the emerging markets and TBT protects against rising interest rates.

    Tomorrow at 8:30 am we get the Non-Farm Payroll Report and it’s very hard to say which way we go from there but what’s going on in Europe is currently more important than what’s going on in America.  I’ll have an update in the morning but at least we have some plays that can protect us if those levels start falling. 

    Dylan Ratigan is justifiably angry at what’s going on in Europe and I’ll link his MSNBC clip in the morning.

  186. Mall/Gel – Not sure what kind of opportunities any of this is if we have another global slide.  They spent $15Tn Globally just to keep us this "healthy" – unfortunately, we need actual UNIVERSAL health care for the Global economy because we don’t have enough money just on this planet to fix things…

    Jobs/Bord – Ah, but the question is "What constitutes badly?"  If we have gains, then the Fed may tighten and no free money is bad.  If we don’t have gains, then the Fed can go no lower and the government needs to borrow more money against a still-shrinking tax base and we are screwed long term anyway.  Clearly we are only rearranging deck chairs on the Titanic.

    So my gut is that the massive birth/death model adjustment I was worried about but that I was worried that I would be the only one who was actually worried about it on Friday, is now likely to be worried about by everybody since it fits into the MSM’s new doom and gloom bandwagon.  All we can sensibly do is sit on our cash and wait for the stiuation to resolve.  Think of last Feb – maybe you would have known to go short from Dow 8,000 to Dow 6,600 but would you have flipped on March 9th and caught the much more profitable move back up?  If we’re going to fall big, we have a long way to go.  The next 3 sessions are a total crap shoot so the winning move is not to play… 

    RTH/Drum – You have a bull put spread and now you are worried?  I’d ride it out and just think of it as a putter you have to roll.  You got the money, in fact, if you cash out at .30 then you got your $1.29 back and you simply have a naked Feb $90 putter and those can be rolled to 1/2 the March $90 puts (now $2.45) which will set you up later for a 2x roll to July $75 puts (now $1.15) and that covers you for about a 20% drop in RTH. 

    Deutsche Telekom (DT) has been talking with banks to prepare an IPO or spinoff for T-Mobile USA, sources say. DT has struggled with its U.S. arm since acquiring it for $35B in 2001.  I would like DT much better if they got rid of T-Mobile.

    House Speaker Nancy Pelosi says she’s got the support for a bill revoking the 65-year-old antitrust exemption for the insurance industry. A trade group says the move will hurt small insurers who don’t have the resources to build large databases.

  187. Phil – birth/death model adjustment – I heard it mentioned this morning on MSNBC with a guest appearance by Erin Burnett from CNBC, and it was brushed off by Erin as something that is backward looking, not important.  Let’s see the spin tomorrow…

  188.  Nothing like a good old snow storm to push Nat Gas back to $5.50…

  189. Well that was, uh, fun.

  190. ssdirk/RUT,
    Your 650/550 with 600/590 wild play is picture perfect, isn’t it?  In these cases, we just wish that expiration was today.  You have plenty of options to consider:
    - Do nothing and let the market decide what the profit would be in 2 weeks (imagine that you are on vacation and have no internet access).  You could get $10 for the 600/590 vertical or lose the current $4.95 value.
    - What action to take for not letting that $4.95 from the wild play getting away from you.  I’d say sell at least half if the market turns up, or sell all if you get $7-8.
    - Roll the 650 callers to 630 for $0.75 credit.  Like cwan would have said "gasp", RUT was 650 not so long ago.
    - Follow other escape routes if RUT continues to go lower, e.g. roll 2X from 550 putter to 530 for about even, and/or roll to March at a lower strike if the 550 putter strike is threatened.

  191. Peter – your awesome!!  I am afraid I am an addict.  If I had no internet access I better have no positions, otherwise, I am a basket case.

  192. Phil, you must know where this guy is ….   :wink:
    News from the art world:
    An Argentine artist called Caesar Saëz applied to the Canada Arts Council and le Conseil des Arts et des Lettres du Québec and was given, between the two bodies, a grant of $130,000 to create a 300-metre long flying banana that would float over Texas protesting the policies of George W. Bush
    Why Canadian taxpayers are subsidizing Argentine artists to violate U.S. airspace is a topic best left to the next Summit of the Americas.
    The good news is that Señor Saëz cashed the check and skipped the country. So the banana’s whereabouts are unknown. French-speaking readers will enjoy this radio interview: "Une subvention de 128 000$ pour faire voler une banane géante au-dessus du Texas." I particularly like the arts bureaucrats’ insistence that there’s nothing to see here (literally): The granting of public monies for the purpose of producing a particular work of art imposes no obligation upon the artist to produce the work of art. Although the artist was quite specific about the construction of the giant anti-Bush banana (a bamboo structure covered in Tyvek), he never specifically promised to make it. Therefore, its non-existence is not an issue: In taking the dough and scramming town, the artist is in full compliance with the terms of his grant.
    And, as I’m sure most contemporary art scholars would assure us, the non-existing work of art becomes paradoxically a work of "performance art" (or non-performance non-art) in its own right. Failing that, he could always claim it floated off over New Mexico with a five-year-old boy inside it.

  193. Peter – sorry, you’re (not your) awesome.  Must be my Cajun accent.

  194. Goldman very very very very bearish on the Euro zone, via Bloomberg….says GDP could be effected by 30 to 40% due to all the trouble(s) brewing

    Cant find an article but im sure it will online soon enough

  195. Phil -
    IYR on the Long Jan 37 put short feb. 43 – what would you be looking to roll your short febs to?