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Thursday – Are We Thawing Out or Melting Down?

Greece is resolved!

Well, sort of, maybe – who knows?  The EU made some nice noises and it does seem there is an agreement which I detailed in my previous post so let’s move on and see what that’s going to do for us today.  We’ve been playing for a resolution in Greece giving us a boost back to test 10,300 but yesterday’s market movement was, as they say at Wharton, LAME and we’re going to have a tough time punching through 10,058 and 10,165 on the way to 10,300 today (see yesterday’s Dow charts), even if the Dow were so inclined

10,300 is 2.6% higher than yesterday’s 10,038 close but a little far away considering commerce is still shut down in about 1/3 of the US today as we sit under a massive amount of snow.  This kind of weather is bad for most retail but good for HD and LOW, who sell salt and shovels and other fun snow stuff.  Business people are stranded all over the country, moms are suddenly found unexpectedly with kids at home and people can’t park anywhere – a big problem when you have this much snow as you run out of places to push it to. 

Another problem with snow is it’s an unavoidable cost, like disaster spending, that couldn’t be hitting cities at a worse time.  Washington DC had already blown through their $6.2M snow budget for the year before yesterday’s storm, which may double the costs, adding to the city’s debt woes.  230,000 Federal employees are off for the 4th day in a row today, costing the US government $100M a day in lost productivity.  Public transportation is down and over 6,000 flights were canceled with travelers being told "maybe Sunday" for flights they missed on Wednesday – Greece’s national strike is nothing compared to the economic impact of this storm!

Speaking of coming storms.  We’ve been leery of getting back into SRS but I’m back to liking them (and the short IYR plays) as a report by the Congressional Oversight Panel shows nearly 3,000 small banks may have to dramatically cut lending as losses on commercial real-estate loans, which could reach as high as $200B-300B. Banks "are about to get hit by a tidal wave of commercial-loan failures."  This should finally push an issue we’ve been discussing since last Fall onto the front pages, where we can make some money

We’ve learned to be very cautious with SRS but I do like the July $6/8 bull call spread at $1.25, selling one Jan $10 put for $3 for each 3 of the bull spreads so your net entry is .25 per $2 spread if SRS hits the July target and expires over $10 in Jan for a nice 700% profit with a break/even at about $7.50 in July (now $8.50) as that would return $4.50 against the Jan $10 puts and you can net out of the trade. 

A duller way to play is simply shorting IYR, now $42.48 or buying the June $40 puts for $2.40, which is nice as you can sell March $40 puts, now .90, while you wait.  I’m torn on this one because I am trying to stay bullish on the markets but the possible collapse of CRE is one of the reasons I was bearish as the market went higher at the end of last year.  Now, at least, we’ll get a chance to see how much of this is priced into our indexes but I do think it’s important to offset bearish bets like this with bullish bets on the financials, like our well-hedged XLF and UYG entries as no CRE collapse = stronger banks.

Speaking of strong banks – Our beloved Fed is now backstopping $25Tn in Credit Default Swaps with, of course, YOUR MONEY.  You were obligated this week as the Fed approved an application by the Depository Trust & Clearing Corporation to operate "the Trade Information Warehouse (Warehouse) for over the-counter (OTC) credit derivatives."  The new Fed-endorsed organization will settle CDS obligations in all currencies and process credit events. It will also include all OTC credit derivatives traded worldwide, and will be regulated by the Fed and the NY State Banking Department and will be overseen by other US and International regulators.

As Zero Hedge points out: "What all this implies is that basis spreads will likely compress very shortly, once counterparty risk becomes a thing of the past and all systemic risk in the biggest derivative market out there (ex IR swaps) is fully backstopped by the Federal Reserve. It will also guarantee the DTCC monopoly status when it comes to CDS trading as nobody will desire to transact and/or clear elsewhere. We shudder to think if the Fed grants DTCC with exclusive status for IR and FX swaps as well, and the associated $600 trillion notional outstanding."  Oh come on, what can go wrong?

By eliminating step 3 entirely, the Fed/DTCC entity becomes the Freddie Mac of the CDS world and hedge funds are free to run out and write all sorts of nonsense papers knowing they have a rich sucker who will buy it all – no questions asked (except by Congress about 12 months AFTER it all falls apart).  Yes, it’s your tax dollars at work or, rather, all the tax dollars you are likely to pay as a nation for the next decade now obligated to keep the CDS scam going rather than forcing it to scale back by simply NOT supporting it when it fails

Speaking of kicking an explosive can down the road – CitiMortgage (C) announced that they will let some delinquent borrowers remain in their homes without making mortgage payments for six months if they voluntarily transfer ownership to the bank.  "We are concerned that if there is a foreclosure glut at some point in the cycle it would have to have a negative impact on house prices, and Citi’s pilot program should help prevent a build-up in foreclosed homes," said Sanjiv Das, the chief executive of CitiMortgage.  

The CitiMortgage pilot program provides incentives for more borrowers to use a procedure known as a "deed in lieu of foreclosure," in which the borrower voluntarily transfers ownership of the home to the lender, which then cancels the mortgage debt. Aside from letting such people stay in the homes for six months, CitiMortgage says it will give them at least $1,000 to cover relocation costs, an incentive sometimes dubbed "cash for keys."

Laurie Goodman, a senior managing director at mortgage-bond trader Amherst Securities Group LP, estimates 7.1 million of the 7.9 million households behind on their mortgage payments will lose their homes to foreclosure if nothing is done to improve current loan-modification programs. She believes banks should put much more emphasis on loan modifications that reduce the principal for people who are deeply under water.  315,716 brand new foreclosure notices were sent out in January, up 15% from last January, according to RealtyTrac.  That’s a rate of 1 in 34 homes over the year.  In Nevada, it was on in 95 homes, but that was for January ALONE - divide that by 12 and it’s one in 8 for the year. 

So how about shorting that Real Estate market?!?  OK then…   Oops, out of time.  Well the EU does NOT seem to have a definitive statement on Greece and may not until the weekend and that dropped us half a percent from what was looking like a nice open.  Greek mythology will still drive the markets until this matter is resolved.  Asia was up nicely this morning and Europe is mixed but also took a hit just now so we’ll have to wait and see – again – like we’ve been doing all week

 


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  1. Gel -
    Aussie vs Euro just broke through multi-year support at 1.5450 – goes back to 07


  2. Aussie – will see if it can put in a new high today – hopefully we get a rally and a new high


  3. Sorry long post.
     
    Peter D,
     
    I would like to re-iterate the Short Strangle play you outline to make sure I understand it correctly. We start by identifying strikes that are +10 / -15 % away from the current price. We should also consider support or resistance levels of the market in the setting of the +10/-15% strikes. We are also wanting to key off of when the vix is higher as the higher vix inflates OTM options more than ATM/ITM options. Also, in your experience, there tends to be better success with the short strangle when opening both legs at the same time (not legging into the position). 
     
    Possible adjustments come when the strike price of either option is within 5% of the index price (when more than 1 month away until expiration).
     
    For example:   more than one month until expiration: current Level (SPX): 1,068 = +10% = 1,175   /   -15% = 908 
     
    So the strikes considered for this example would be 905 put and 1175 call. Adjustment action point levels would be +5% = 1,121 and -7% = 993. If the current price gets to one of those levels, you suggest rolling the closer option away from the current price by closing the closer option and opening 2 option legs further away (1x to 2x — is the addition of the new spread considered a DD?). The adjustment you would look to make is rolling the closer option another 5% away from the current price (helps in decreasing margin requirements). You would also open up the corresponding opposite leg of the “new” strangle spread which would help pay for the roll and you could also roll “in” (closer to the current price) the opposite leg of the problem spread thus tightening the spread of the first position (also helps in paying for the roll). You would combine the short strangle with a long vertical put spread (crazy play) to help pay for the roll if the option that needs to be rolled is the put side (meaning the market is moving down and the vertical put spread is making money). If the market moves up, vix should be decreasing which should translate into decreasing all option prices, more specifically lowering the cost of rolling the call side if necessary.
     
    Peter, is this an accurate description of the short strangle combined with the crazy play ? Where do you like positioning the vertical put spread, ITM, OTM or ATM? Also, other people have made reference to your rules for PM and the number of contracts you can handle but I haven’t been able to find those. Lastly, could you elaborate on “using up the negative delta of the position.” Sorry for the long post and all of the questions but I want to solidly understand this strategy. Thanks in advance.


  4. Good Morning!

    No change of levels from yesterday:

    We’re not seeing ANY of our upside (5%) levels at: Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 so there’s nothing at all to get excited about until we cross those.  10,058 on the Dow is at least an indicator we are on track, as is any positive movement today. 

    Otherwise, we are just looking to hold our 8% bounce levels at: Dow 9,850, S&P 1,055, Nasdaq 2,125, NYSE 6,793 and Russell 596.  The Russell has done an excellent job of keeping us out of trouble as it stayed red when everyone else got bullish so we already know we need that 596 level to break in order to make any progress back to our 5% levels. 

    At the moment, I’m hoping we hold Dow 10,020, S&P 1,065, Nas 2,150, NYSE 6,800 and RUT 590 and I’m going with the DIA $101 calls at .80 with a tight stop if we blow just 2 of those levels.

    This is EXACTLY what I said yesterday and we fell right below 10,020 and lost the DIA play so today let’s add the DIA $99 puts if we are BELOW 3 of theose 5 levels (we are!).   


  5. JRW – on TZA out of the gate down to 59 and possibly 58.47.  What do you see?


  6. Boy, we can almost count on these morning sell-offs lately.  EU funds I think so I still want that upside play


  7. JRW – dow fighting the 10K level and IWM fighting the 5dma at 59.27.


  8. ss,
    Still 59.07, 59.60


  9. Copper way up at $3.02, we’ll see if $3 holds.  Silver is $15.26, gold $1,079 (ahead of the S&P now) with oil at $74.66 and Nat gas at $5.38.  These commodities are sucking the life out of any positive moves lately. 

    Dollar at $1.366 to the Euro and $1.559 to the Pound as the Greece situation is back up in the air (only because people are impatient, I’m sure it’s all over but the paperwork).  We’re at 89.73 Yen and Japan won’t like anything under 90 tomorrow morning. 

    Dollar gathering strength, will make some commodity shorts fun.  FCX $70 puts at $1.55 and USO $36 puts at .60 are good momentum plays.


  10. JRW,SS, That 59.07 has been magic, especially since it matches up so well with Dow 10K.  Still don’t have time for day trading today, though I hope to rejoin you guys before long.  My blood pressure has gotten way too low this week without the excitement.  Hope you make a killing.


  11. One worry for bulls here has to be that the longer we trade sideways the more we work off the oversold conditions from last week.
     
    Even before the reversal this morning with the EU’s Greece ‘solution’, I was surprised at how tepid the reaction was in the futures markets to the EU announcement. Basically it was good for about 6 /ES points and about $8 in gold price. I would have expected a more explosive move after the announcement.


  12. .95 was plenty for the puts.  For me, that’s a .15 buffer to enter the longs, now .75 but I don’t want them unless they either get back to .70, (where I’ll risk 1x with 1x at .60 and 2x at .50) or back over 10,020 with a stop right there


  13. Has anyone here used the AbleSys charting software?  TIA.


  14. Looks like a little selling pressure starting for BIDU in the last few minutes. Still dangerous though and there is a buyer quite willing to jam it up.
     
    I’m scaling into a few put verticals.


  15. Eric – what strikes and month you going for on BIDU?


  16. BIDU/EricL
    Could you tell us more about your BIDU bearish trade?


  17. ss,
     
    I’m buying Feb 490/480 right now. I don’t want to go deeper ITM right here because the risk/reward ceases to be worth it. I don’t want to go further OTM since if it holds here the premium decay will hurt. So this is my current compromise.


  18. I got in at 4.70 btw. So it’s a nice double if it works.


  19. lionel,
     Just to be clear I’m buying the 490 put and selling the 480. Anyway right now buyers are back so might be good to sit tight if we rally.


  20. EricL/
    Thanks a lot.
    I will just watch for now.


  21. Damn, this market moves so fast it’s hard to communicate day trades.  Mostly just trying to let people know my though process as many have asked but this is a rough market for it…

    Tepid/Eric – I agree, we are not getting much action on "good" news lately.   That goes for most earnings reports too as 70% are beating.  On BIDU, I like that you can collect $6 for the $470 puts and you can use the June $460 puts at $37.50 and then sell March $470 puts for another $15 or so and you have a nice spread….

    FCX not going well but I’m DD at $1.20 and looking to get 1/2 out even if possible.  If they break over $72.50, time to give up.  That will teach me to be bearish!

    PEP missed but going up.

    EnCana (ECA): Q4 EPS of $0.50 beats by $0.08. Revenue of $2.7B (-44.2%) vs. $3B. (PR)  – Not so bad at $30!

    Source say the Fed is in talks with money-market mutual funds to help drain up to $1T from the financial system as officials prepare for the first interest-rate hike since June 2006

    Investment-grade debt sales tumbled 90% this week, and returns on junk bonds turned negative for the year even after gaining 1.52% in January. RBC Capital Markets’ Simon Ballard: "Sentiment has turned significantly amid concerns about sovereign deficits and problems surrounding Greece and other peripheral euro-zone economies."

    The world’s leading economies are close to agreeing on a global bank tax, says U.K. PM Brown, noting public opinion has shifted in favor of the tax since Obama announced his $90B bank fee last month.

    China’s lending jumped to 1.4T yuan ($203B) in January, more than in the three previous months combined, as banks extended credit ahead of an expected tightening in monetary policy. Property prices climbed the most in 21 months, rising 9.5% Y/Y. (ETFs: PGJ, FXI)

    China’s central bank says risks to price stability have risen, and warns it will strictly control loans to new investment projects. PBOC’s Q4 monetary policy report, released this morning, gave the clearest sign yet it is beginning to scale back some of its extraordinary stimulus policies.

    Initial Jobless Claims: -43K to 440K vs. 468K consensus. Continuing claims -79K to 4,538,000.

    The White House expects employment to grow an average of 95,000 jobs a month this year. In the annual Economic Report of the President, Obama sees "clear evidence" the job market is stabilizing but more needs to be done "to eliminate the large jobs deficit that has opened up over the course of the recession."  That’s a BS number with 2M census people being hired by June.

    Apple (AAPL) is said to be in talks with television networks to lower the price of downloaded TV shows. Apple has been testing a $0.99 price tag for certain shows, half the price of standard-def TV shows, and wants to finalize a deal to offer that price more broadly for its iPad.

    Boosting oil already:  Global oil demand will grow by more than expected in 2010, says the IEA, with all the growth coming from emerging markets and developed economies in an "oil-less" recovery. New 2010 estimates are higher by 120K barrels per day to 1.6M bpd.


  22. Phil! AYE is up 10% + today. Hold or sell on the news? Thanks


  23. Phil…You are a DIA option machine today!   Nice job on all these bets.   I just can’t keep up with you.  


  24. SS
    Made $1.02 on TNA; but I have to go for the day so $10 K is it. Good luck and have fun !!


  25. JRW – nice job.  See ya tomorrow.


  26. Phil -
    Nice call on the BNI – puts went to a nickle today! 5 contracts paid for a good part of my subscription -


  27. AYE/Hanna – It’s an all-stock deal and FE took a tumble, we should be 20% higher but the deal may not go through etc.  If you are not already covered you can sell the stock for the gain and take the $2 and buy the July $22.50/25 bull call spreads for .90, which gives you another $3.20 of upside if we hit $25, which is about what you’d get if you held the stock and we got full value (about $27). 

    DIA/TM – This market is just too crazy, there’s not much else to do but day trade the indexes but not with serious money as it’s just sort of like playing craps while waiting for a spot at a poker tournament – it’s fun if you sit down with a few extra dollars but no big deal if you leave it on the table…

    EIA offices in D.C. remain closed and the natural gas supplies report will be released tomorrow at 10:30 a.m. EST, with petroleum supplies to follow tomorrow at 11 a.m. EST.  Man, I have to get a job in a company where 100 people can just not show up for work because it snowed the day before!

    U.S. foreclosures fell 10% M/M in January, to 315,716, or one in every 409 houses. But the drop may be temporary, warns RealtyTrac: "If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans" where mortgage-mods and other alternatives have failed.


  28. JRW III
    February 11th, 2010 at 10:36 am | Permalink  
    I would be interested to know how many options did you trade thanks
     
    SS
    Made $1.02 on TNA; but I have to go for the day so $10 K is it. Good luck and have fun !!


  29. any thoughts on BSX? I have JAN 2011 7.5 calls, wondering if I should roll to JAN 2012 7.5 for .60 or so. 


  30. BNI/Samz – Aren’t those great?  The AYE play is a similar concept.  Hopefully we don’t have to wait until July to collect as the premiums squash. 

    Analysts at Credit Suisse say fears of a sovereign-credit crisis are overdone, but note the current consolidation is still a work in process: "We think the period of consolidation may last another month: Tactical indicators are neutral and typically markets consolidate by 9% for 3 months around the first phase of monetary tightening (which this time is brought about by the People’s Bank of China and the end of quantitative easing)."

    Biggest news of the Day (EU speaking) and CNBC goes to extended commercial break – they are such a joke!


  31. Phil / MOT : The advancing plans to breakup / spin off divisions of MOT have any effect on the 2012 $5 calls? [ I'm not sure what exactly happens to a LEAP like this if they spin off another company? The stockholders would get stock potentially, but what about the option holders?]


  32. Phil- PM just reported, good numbers, huge buyback….any thoughts on how to position for a long position either buy/write or bull call spread?


  33. Dollar keeps going up, but now metals are going up with it and treasuries are falling. Strange.


  34. yodi – with JRW gone I will answer.  These are day trades using the ETF shares not options.  These move so fast that we actually use market orders to get in and out very quickly.  Also, the spreads on options would make it difficult to get in and out quickly with good profits.


  35. Euro selling off relentlessly too, although that makes a little sense, as does the drop in oil.


  36. robert,
    That’s an impressive summary and I think you nailed the basics of the play.  Answering your questions and plus adding comments:
    - 1x to 2x — is the addition of the new spread considered a DD?  Yes, it is considered a DD, since the margin would double if the market keeps moving towards the edge of the range.
    - Change "The adjustment you would look to make is rolling the closer option another 5% away from the current price" to "… rolling the closer option to a strike that doesn’t require a debit with a 2x addition.  Depending on how many days to expiration and the level of VIX, we can roll from approximately 2% to 6% further away from the money on the put side, and less on the call side."
    - We can modify the statement "Possible adjustments come when the strike price of either option is within 5% of the index" to "… when the strike price of the put option is within 5%, or call option is within 3%-4% of the index"
    - Where do you like positioning the vertical put spread, ITM, OTM or ATM?  It’s like an insurance, so definitely OTM.  The goal is to spend $1.5 to $2.5 in insurance to get a possible $7-$10 payoff (or lose the insurance premium).  Depending on VIX and when we start the spreads, it may means the put vertical is 5% or more OTM.  Note that we can sell off the long in the put vertical if they are still 6-10% OTM with 2 weeks to expiration.  If they are closer to the money, we’d close down both the vertical and short strangles as as the mission has been accomplished, where the vertical retains most of their value while we gain on the short strangles.
    - Portfolio margining:
    https://www.thinkorswim.com/tos/displayPage.tos?webpage=portfolioMargin
    This is a must have for this play.  For large cap broad based indices, the margin is tested with +6%/-8% price changes.  So we took the liberty to say that the margin is 8% for SPX when the short strike is ATM.  For simplification purpose, let’s take SPX at 1000 level, and the 8% margin is $8,000 per contract.  So we reserve $20,000 per contract to allow for a doubling down.  Since we started out with -15% on the put side and we’d roll if the market drops 10%, some of us have cut down the margin requirement to $15,000 per contract.
     
    The test is +10%/-10% for small cap indices (RUT), and +15%/-15% for individual stocks.  That’s why we don’t usually strangle the individual stock as it’s more risky and requires more margin.
     
    - Negative Delta: when we start with +10%/-15% the short call is closer to the money, so Delta is negative.  If the market drops 2.5%, the Delta is even as the spread becomes +12.5%/-12.5%.  With the put vertical, the delta is slightly more negative, meaning the market can drop more than 2.5% to use up our Delta. VIX goes up when the market goes down, so the negative Delta provides that cushion to counter some of the VIX effects (not all if VIX goes up quickly).  If we start a spread 2 months out, like the April’s, we’d like to have the -20%cushion on the downside.


  37. Yodi, JRW typically trades about $600K worth of TNA or TZA shares when he makes his day trades.  Not for the faint of heart.


  38. I thought yesterday’s rally in XLF might be the start of some sector rotation, but on the monthly chart it’s starting to look like a bear flag pattern.
     
    Some very big diverging bets being placed right now in commodities/metals and forex.


  39. Thanks Peter!


  40. Gel – you in today?


  41. Euro just getting taken out back – wow


  42. BSX/Roast – They just got downgraded by someone, DB I think and they are cutting about 5% of the jobs so yes to the roll if you want to wait out the downturn.  From there, if you sell just .20 a month you’ll be in pretty good shape. 

    Whoa – testing $1.36 line on the Euro and it’s not looking good!   EU says they will deal with Greece in March?  WTF??  What, did they go to the meeting and say: "How can we best make our currency and bonds the subject of wild speculator manipulation for an entire month?"

    MOT/Hanna – Very messy, I’d get out.  You may get cash or cash and stock or all stock in new ratios…..

    PM/SNS – I’d say $55 is a good target with 10% buyback and you can go for the Jan $50/55 bull call spread for just $1.60, which seems like a fun way to play.  You can also buy them (5% dividend and shrinking outstanding base) for $48.32 and sell the June $49 calls for $2.20 and the June $46 puts for $2.10 for net $44.02/45.01 plus some dividends

    At least USO is working out, over 10% already. 


  43. I’m getting a little more defensive again. Of course we could still explode higher, but there is some strange stuff going on. These dollar buyers/euro shorts may be mistaken, but i doubt they are complete idiots.
     
    I would consider buying again at SPX 1057 though.


  44. Oh, I didn’t hear the EU talking about a March resolution. That explains some of it.


  45. ssdirk
    Thanks for the  reply ssdirk at the one side he stated a profit of 1.02 and it looks to me as he made 10,000.00 this morning looks like a very large trade or do I have this wrong thanks


  46. Minutes after I sold Monday, we started shooting higher. Let’s see if I can trigger it a second time, hee hee.


  47. yodi – that’s right. 10K shares.  He has been dynamite with these trades and with big brass ones.


  48. Let’s watch that 10,058 line, we either get through it or it’s a good place to buy the DIA $99 puts again….

    Flag/Eric – I think we’re consolidating for the next month. 


  49. Phil, you have to understand Europeans.  It’s not like in America where people want things done FAST, NOW.  It’s more of a "let’s see tomorrow if we still have a problem and then we’ll begin forming an exploratory committee what will make a recommendation on how to go forward to try to form a plan to further explore a possible eventual solution." :)


  50. Phil…..          Would   YUM     be a good buy/write for this old geezer?????     GABBY


  51. HG/
    Copper is moving up fast.
    Just got out slightly burnt…


  52. Phil  DIA 99p are you talking about your day trade or jun mattress?


  53. Phil, speaking of PM…. my covered strangle is long stock at 48.61, sold 45/47 strangle for 2.30. There are worse things than getting taken out at .69/ share net, but I would prefer to keep the stock. What would you do at this point? Thanks.


  54. Wow this market moves fast! Up we go! (apparently)


  55. AYE – is selling the Jul 25′s for 2.50 a way to play the sale of the company ?


  56. Jeepers, because it was the Wednesday before expiration I followed the rules and dumped my LVS FEB calls at OED yesterday, perfect timing again, lookie that baby fly!


  57. Copper up to $3.05 despite rising dollar.  Pound came back a bit but not the Euro so far. 

    Wow, way too crazy to trade!  Every word on Greece sends us flying up and down. 

    Nicely triggered Eric!  We’re still not hitting yesterday’s high, which came about 12:15 at 10,140. 

    Dollar sold off suddenly and goosed the markets.  Copper $3.10!  Wow, Greece may be bailed out and global demand for copper jumps 3.5% in one day – I did not realize they were so connected…  8-)

    Europe/Jordan – Oh I get that, it’s traders here that are crazy impatient.

    YUM/Gabby - That’s a tough one as they depend so much on China for growth.  I like BKC better as a valure play at $17.95, selling Apr $17.50 puts and calls for $1.80 for net $16.15/16.83

    We’re moving now!!!  Too much, too fast I think but maybe we get to 10,165 on this run. 

    DIA/Yodi – Day trade but only if we broke below, which we didn’t so no trade here.


  58. I just took a stab at the Apr $26 T calls for 0.45. Seems like low IV/premium for a stock thats at 25.3 and was above 28 less then a month ago. We’ll see how it plays out…if the market rises, hopefully it’ll drag T with it. :)  


  59. PharmBoy – Note ABFS, you mentioned it last week, making a nice turn upwards…


  60. I just bot some longs, making this the high of the day!


  61. Dollar, Gold and TBT all up today….so much for rational markets…


  62.  pharm, thoughts on RNN – was reading about them in seekingalpha?


  63. PM/Jbur – You only owe the caller $1.65 right?  You can just roll them along to March $48s (even) and sell the March $47 puts for another .80 if you are still bullish and there’s no reason not to be. 

    AYE/DK – You mean selling the July $25 puts I take it.  That works but the deal is subject to iffy regulatory approval so I feel better about the $22.50/25 bull call spread at .90

    Copper $3.13 – ridiculous!  Silver should be back at $17.50, it’s $15.58, gold flew up to $1,094 though.  Oil jammed back from $73.50 back to $75 and stopped out the USO puts too

    Very annoying movement, not very playable like this as it can all crash back down again very fast.

    LVS/Mr. M – The rule is roll or dump but cash is king.  We could have gone the other way just as hard.  Check out MGM, they just broke resistance at $11.

    T/Hanna – Very slow moving but those are cheap calls.  You need them over $25.25 very soon though. 

    Thanks Mr. M because I’m all in on the FCX puts now so I could really use a 1% pullback!

    Bearish sentiment retreated after five weeks on the rise in the latest AAII investor sentiment survey, and neutral investors converted to bulls. Bearish sentiment dropped 1.2 points to 41.9%; neutral sentiment slipped 6.3 points to 21.4%; bullish sentiment jumped 7.5 points to 36.8%

    Goldman Sachs weighs in market activity: "good, but not great." The firm sees healthy backlogs and behind-the-scenes dialogue, but it remains to be seen how much business gets done.

    "Until jobs are being created to replace those we’ve lost… this recovery will not be finished," Obama says in his Economic Report to Congress. Don’t hold your breath, Mr. President. The latest Business Council survey of CEOs finds continued and widespread wariness of new hiring. And S&P companies show no signs of spending, as they increased Q4 cash holdings by a combined 78% to $1.2T from a year earlier.


  64. hi peter
    what is the range to start open for march short stangle is this range ok< I just started to look at the chart today please asvice before I open th eposition today --   March sell 520put and sell march 560 call is this ok
    thanks JC


  65. Phil, any thoughts on DPTR?  You can buy the stock for a buck and sell JAN puts and calls for a buck…


  66. hi peter sorry miss type sell 660 call which 10% above current 600 right now


  67. FMD in the making?


  68. gucci,
    Those March strikes on RUT looks fine.  Check your margin before clicking to confirm the order.


  69. SS, You around?  I ended up taking a stab at TNA, which has now kept me rooted in a Starbucks until I close it out.  I may do it now just so I can leave.  If you are in, what do you see as resistance now?


  70. judah – good job.  I am not in, but top resistance at around 60.37.


  71. Phil are we still rolling the Feb 103p short to Mar 101p now for a credit of .22 thanks


  72. Phil/PM-- I am short the Mar 45p (sold at 1.18) AND the Mar 47c (sold at 1.12), not just the caller. That changes the problem a bit. Thanks in advance.


  73. SS, very much obliged. Seems a little stuck here. I’m taking my $2 and going back to shoveling. If only I was swinging a bat JRW’s size on this one.  Some day.  Have a great afternoon.


  74. judah – that should more than pay for the coffee.  Stay warm my friend.


  75. Phil -
    Sorry – sure this has been asked but what’s a good – tbt spread that you like now -
    I am in the jan 45 – 55 spread – don’t know whether to add to it or not -
    for taxes I also like buying the jan 12 – bc I can get long term treatment if I hold them for a year – you like anything that far out? I am happy to do a calendar spread – buy leaps and sell front month – in fact I probably like it a little too much


  76. ABFS – yes MrM, moving.  If they can make it through here, they pop to 27ish.  Tried to buy the 25 C for 10c, but no avail.  RNN – for cancer, they are behind with their flagship which appears to be a iDNA technology, not a ‘drug’ per se, but looks like Teva has signed up. Several Big Pharmas are in Akt for cancer, so it will be a race but a long shot.  The HIF1alpha drug is to early to tell.  The SSRI in the pipe, a me too drug and they will have issues with generic overload (it will work, but at what cost to develop).  The ED drug looks interesting, but they are moving into PIII where the tires meet the road.  Side effects will be the biggest issue in this study, because if the arousal mechanism leads to ‘hallucinations’, the FDA will say no thanks.  Although maybe the men will not tell?   They also seem to raise money every 6 mo, something I don’t care for, so you have to be careful with the entry points.  The last one went for 82c.  Biomed reports thinks they are undervalued, so for a small entry to see where they go, why not.  Just be prepared to DD.


  77. Was it clear what a great day I am having -
    GO BNI!!! GO AUSSIE !! Nothing erasing a large loss to make you feel good


  78. SVNT – man do I hope they announce here soon.  Those 17.5 Mar C are gonna be SWEET.


  79. Phil, any thoughts on AMED?  We are getting a good run up back toward 60..


  80. Phil — I’ve been out all day til now so you may have discussed this already.  I read that you like SRS again.  I own the shares and have been short the Feb 8 calls at $0.40, now $0.62.  I was going to let the shares get called away, but now that we like it again, is there a better play?


  81. Hey Pharmboy- just got in and saw your SVNT remark whats up? Do you mind giving me a quick once over
    Thanks


  82. Pharm, what did you pay for the SVNT calls, the bid/ask is wide today?


  83. Rational Markets/Bord – You still believe in that?  In that case, I have bad news for you abou the tooth fairy…  8-)

    DIA/Yodi – Yes but no hurry as long as you are even or better.  Those $103 puts have .60 of premium in them (.10 per day through expiration). 

    PM/Jbur – Oh March $47s, I thoughs Feb so I was assuming the $45 puts would expire worthless.  They are more or less on track and have plenty of premium so why worry?  You’ll just roll out to June whatevers when the premium is gone.  It doesn’t matter what the prices say at any given time – only whether or not you are comforable with the target price. 

    TBT/Samz – How did you know I liked that stock?  I hate to get into these later-stage games because we’re getting to the point where they are more likely to pull back a bit after running up $3 since last week (when I may have mentioned liking them).    You can still do the Jan $41/47 bull call spread for $3.50, which is a great upside on a flatline and you can sell 1/2 March $52s to cover at .64.  10 net .30 sales and your b/e drops to $41.50, down 20% from here

    Speaking of TBT – Yet another failed note auction.  The Treasury sells $16B in 30-year bonds at 4.72% (.pdf). Bid-to-cover ratio of 2.36 vs. a recent 2.24; indirect bidders take 28.5% compared with a recent 39.8%; direct bidders take a record 24.1% vs. recent 10.4%. Longer-term Treasurys moved lower afterward: 30-year yield +0.07 to 4.71%; 10-year +0.05 to 3.76%.

    AMEX/Robert – We picked them last week, nicely on track.  See very good post by Tuscadog in Phil’s Favorites on AMED.   Nice call by the way Tusca! 

    SRS/JCM – Sure you can roll the caller to July $9s at $1.60, picking up $1 for 4 months (12%) is nothing to sneeze at and it’s pretty well protected.  If SRS flies up, the caller loses his premium while your stock goes up and maybe you end up selling at $11 and paying him $3.10 or something early.  If we have a pullback, you can match by selling July $7 puts for $1, now .55, and that’s another 12%.

    How bond vigilantes left Greece in ruins
     

    Why the federal budget is not like a household budget

    America is hurtling towards a fiscal trap that is forcing us into the only option we’ll have to restore budgetary sanity: The VAT.

    Insanity!  The news that Fannie (FNM -1.8%) and Freddie (FRE -1.6%) will buy nearly $200B in delinquent loans took bond markets by surprise, and agency MBS are getting slammed today. Fannie and Freddie are required to buy back loans delinquent for 24 months, but they now say they’ll buy more loans that are just 120 days in arrears.

    Behavioural psychology applies to central bankers, regulators and politicians as much as it does to investors. In promising to ‘fiscally retrench tomorrow’, finance ministers are exhibiting the behavioural phenomenon of overconfidence in their future self-control. The bitter fiscal medicine required to stabilise debt levels won’t become more palatable today relative to tomorrow until the bond market makes it so. It can only do this through higher yields. Thus,  Ireland and perhaps now Greece lead the way. For the Japanese it’s too late…. Nice Soc Gen research.


  84. Phil – do you think this rally has legs?  what’s the volume?  Thanks.


  85. Phil, FCX puts I bought starting to kill me.. any way to fix it


  86. Phiil, Thanks! I WILL catch on to this.


  87. Samz
    I hope you are killing them today… The Aussie is going great guns. The news that broke it out was their jobs report which reflected 3X as many new jobs as projected (WOW). – up 53,000 new jobs in Jan. Their economy is on a tear… this is the 5th consecutive month of job increases. The RBA will have their next meeting Mar 2, and I PREDICT they will raise their interest rates. This will really drive the AUD upwards. The EUR – it has been beat with an ugly stick. This pairing looks good to me for the next 30 days – buying the AUD


  88. Phil, thanks for the AYE comment


  89. SVNT play was last week, and I paid 11c.  On Friday I sold the 12P to pay for the trade.  This is an all or nothing trade as I am going for FDA approval announcement. 


  90. Phil/TBT
    I believe your projection of a possibe price of $60 is well within reason by year end. The Fed, however will be somewhat reluctant to help us by raising rates, as they have bought up tons of mortgage backed bonds, anticipating they can sell them back into the markets. The Fed will be hurt badly by a rate increase as the mortgage bonds will take a hit. They make have not much choice as they are boxed in.


  91. All right goal!! 10,165!  Now we see if we have the juice to take it to the next level. 

    S&P behind schedule at 1,079 (needs 1,088), Nas 2,178 (2,200), NYSE 6,896 (7,000) and RUT 602 (620). 

    The RUT has always been a laggard but from this group it seems like the Dow is simply way ahead of itself and that means rejection is very likely here with a 35 pullback off the run (20%) to 10,030 needing to hold to keep up a show of strength.  That will then make Dow our strong leader and we can hope to see the others catch up but keep in mind the Dow is the easiest to manipulate, followed by Nas, then S&P, NYSE and RUT last so these guys are off the mark pretty much in the order of who is hardest to fake a rally in.  That does make me a little nervous. 

    DIA $100 puts at.62 are good protection with a stop if we break over 10,165 and that’s it for the $101 calls at $1.35 as that is PLENTY for one day


  92. gel1 – are you using XDA to play the Aussie or some other vehicle?


  93. Volume/Terra – Not  too impressive.  Just 98M at 1:42 so they could pop us from here but also a strong wind could knock us back to 10,058, which I think is more likely. 

    FCX/Foss – I’m in a 4x positon at avg $1.16, now .71 so not good but I think copper run was BS so I’m willing to stick it out but very happy just to get even now.  I think a big squeeze was put on commodity bears today with no energy reports to point out the demand destruction.   Copper up from $2.93 yesterday to $3.13 today after takng two weeks to fall that far on the way down – that is nonsense!   If I were not full I would roll up or DD but, as I said, I’ll just be happy to get back out and, if not by tomorrow, I’ll sell some other sucker my puts and roll to March. 

    Rates/Gel – The Fed can’t make rates stay low forever.  We subsidize those low rates and it adds to our debt and uses up working capital that they have – it can’t keep going forever – it’s only a question of when it breaks. 


  94. Party Time!  In case you didn’t have access to enough leverage, ProShares launches eight new triple-leveraged ETFs.

    Faced with declining ad sales and circulation, USA Today (GCI +2.1%) will give about 1,620 employees unpaid leave for a week between the end of February and July, and extend an expiring freeze on raises for another 90 days.

    And here’s why we shot up today:  Sens. Charles Grassley and Max Baucus come to a deal paving the way for the Senate’s $85B jobs stimulus, with a payroll tax break for some hiring, and an extension of unemployment benefits and COBRA health coverage.  Yes – more stimulus, we’re saved!

    See how 10,130 is holding up?  That’s a good sign for the bulls if we hold it.  Need RUT to hold 600 and Nas to hold 2,175.  NYSE and S&P not in significant spots so it’s those 3 that need to hang on. 


  95. Phil – I have the DIA June 101 puts from the mattress plays, fully covered with the Feb 100 puts.
    In the past you had suggested to wait for a rally in progress to peter out before rolling the long puts. Is it good to wait until the Dow is in the vicinity of 10300 before rolling them, or just do it now, to say the 104 puts?


  96. Mr. M
    All of my trades on the AUD are on the Forex. I have traded the ETFs but I really don’t like that venue. My strategy in trading currencies is to trade a pair. – usually the strongest against the weakest, but also cross trades that have unique situations.


  97. Hi Phil.  How does ELON look as a green spec play?  Thanks


  98. DIA/Pyern – If you can roll up for .45 or less, then for sure take that.  .50 is nothing special but I think you should at least be able to take the $102 puts and, of course, if the Dow goes up another 100, roll up another $1 to keep pace in the very least

    ELON/1020 – They are a tiny littl company that makes no money and don’t project to make any in the next few years.  Surely there are better things to buy?  We have no carbon agreements so who is going to spend money on green tech if they don’t have to?  That’s why all these companies tanked since we blew the conference in October – between lack of regs, lack of money and "conflicting" global warming science – I’d stick with the "drill baby, drill" premise for our energy future, those the are corporate "people" who will be supporting the future elections. 

    Miami hotels may have had a good week with the Super Bowl, but overall the industry’s occupancy rate was flat, while RevPAR slipped 5.6%. Occupancy may have bottomed, but the coming week will be a test for business travel – especially with the weather.

    Oil closed at $75.30, gold is at $1,097, silver got to $15.70 and copper still $3.13.  Nat gas is $5.38 and we may or may not get inventories tomorrow. 


  99. IWM/ SS      Just crossed over JWR"s upper at 60.42  Now what?


  100. stockbern – I see the 100dma at 60.67 and then further resistance at 60.82.  It stopped dead on the 15dma of 60.50.


  101. ssdirk, thanks , I’ve been following you, Judah and JWR for over a month. You guys are great traders.  I keep selling too soon only making .20 when you make .75 or $1.00      I’m working on it.


  102. Phil/ELON  I agree with that. Sometimes I’m tempted by a good idea.  :)


  103. Dear Phil,
    Elementary Question!
    I sold RTH 30 Feb 90 puts backed by 30 Apr 85 puts for .25.
    I am going to Florida next week, and I will be out of touch at times. My question is if  RTH suddenly plummets below 90, and I am unable to take action, do I have a $270, 000 margin problem or a $!5,000 obligation. I called OptionsXpress, and someone related that the latter scenario was appropriate. But I want to be sure, as my Aprils could be a great downside protection.


  104. stockbern – JRW is the master like Peter is on short strangles.  I seldom get the full run like he does.


  105. SS, Checking back in for the last hour.  Doesn’t seem like there was much going on while I was out, and I don’t think I’ll play the final hours stick/sell-off today.  I was just looking at rolling down some of my March SPX calls to 1160, but I think I’ll give it another couple of days to see if we get a big move up.  Where have you rolled your March calls to?


  106. Phil, I sold ABX FEB $38 puts @2.00. Should I just take a small profit before it heads back down next week?


  107. judah – for March I have Rut 540/650 with 590/580, SPX 950/1160 with 1050/1040.


  108. SS, Thanks. I have way too much cushion on the calls.  I’ll be looking for some excitement to sell into.  Catch up with you tomorrow.


  109. This is unbelievable. I use 2 computers to trade, on one of them the only place the Firefox browser will go to is Philstockworld.


  110. G12 Activity: Barclays (BCS) head of asset allocation Tim Bond sees "disastrous returns" for government bond markets over the next decade, with long-term yields doubling to 10% by 2020. The firm says demographics (including an expansion of retirees) will alter supply/demand dynamics in a "profoundly negative" manner.

    RTH/Drum – Well it’s the broker’s call but logically the latter.  I would make sure you do have a contact number for OXPS just in case.  If it is put to you, you pretty much want to just sell them back for the cash loss right away and then either keep or kill your long put.  Assignments are not really a big deal as long as you take care of them right away.  

    ABX/Jossie – Nice sale but yes, I wouldn’t risk it after that huge run with $1,100 resistance right here and no time to adjust. 

    Sector ETF strength: Coal– KOL +4.9%. Gold Miners– GDX +4.1%. Steel– SLX +3.7%. Silver– SLV +3%. Homebuilders– XHB +2.5%. Basic Materials– IYM +2.3%. Oil Services– OIH +2.3%.

    Sector ETF weakness: Regional Banks– KRE -0.5%. Livestock– COW -0.4%

    Yay, a commodity rally!  How original….
     

    Stocks have traded in a strong positive range with good breadth – but low volume – since reacting to the EU’s pledge of support for Greece. With an hour to go, the Dow +1.1% to 10,146; S&P 500 +0.9% to 1,078; Nasdaq +1.3% to 2,176. Crude +0.9%. Natural gas +1.7%. Copper +5%. Gold +1.9%.

    Treasurys have pared earlier losses, with 30-year futures -0.27% to 117-08; 10-year -0.12%. Euro -0.4% against the dollar; pound +0.6%; Swiss franc -0.3%; yen +0.3%; loonie +1.2%.


  111. judah – what calls do you have?


  112. Firefox/Stock – That is one good browser!  8-)

    Nice Bespoke charts.  Looks like Telco and Utilities will be good if we break up but the whole thing shows you how oversold we were so bouncing back to 10,165 and 1,088 NOT thrilling! 


  113. SS, I’m all over the map from having scaled in so slowly:SPX 1240 (I know), 1200, 1180 and 1160; RUT 710 and 680.  My putters are the same as yours, but I never got around to rolling the calls, as I kept waiting for a rally to sell into, leaving thousands of dollars on the table. 


  114. Oh man, I had to leave soon after my last post (about my selling causing a spike) and sure enough!  It looks like I sold AAPL right before a $4 move <sob>.
     
    Intraday charts show banks haven’t started moving much yet. Regionals still going down.  I think we need at least some big bank participation if we’re going to get follow-through, because there is quite a bit of chart congestion just above here.
     
    Had an order for more BIDU put verticals at 4.00, and it filled, which is good. It’s looking tired to me.


  115. PhiL Do u still like UYG  jan 45 puts & calls for $2.20?
    dflam


  116. judah – I have a Feb RUT 600/590 put vert that I am really po’d about it moving OTM.  I waited for it to get to $7, but it never quite made it there.  Hopefully next week as I would hate to be this close and miss it.  Maybe I’ll get the full $10.


  117. SS, I hear you. I have some 1060/1050 put verts that were looking great a few days ago, but never got over $5.  I also have some 1040/1030s, and I’m thinking of selling back the 1040s, leaving the 1030s exposed, but not yet.  The decay is rapid, though.


  118. Phil, on the mattress play.  If we buy 10 puts at slightly in-the-money June 103s (buying less premium – some intrinsic value) and sell 1/2x puts (partially covered) or x puts (fully covered) slightly out-of-the-money current month Feb 101 (selling more premium – no intrinsic value).  If the market moves up and against the long side we should take the profit from the short leg to use it to roll up the long put strike keeping pace with the market climbing maintaining that long put relationship of slightly in-the-money?  


  119. Gel -
    Thanks – nice to turn a 5% loss around into a gain – my inclination was to double down on the aussie / euro pair – it never broke out of that down trend channel – but not dd allowed me to sleep at night with the position -
    I am still a little worried about the China growth story so it’s just a small position for me – but have a stop with a gain locked in sure feels good. That and Phil’s BNI pick have made my week.
    Gel – what time zone are you in ? Tried to check in earlier with you but seems like you did not log on until later -
    I am on EST – have a young kid – so I am up working at 5am


  120. Portfolio margin with Fidelity -
    Just called them to see if they offer the Portfolio Margin, and the representative said they don’t, at least not yet.  Someone mentioned Fidelity here before, what was your experience with them?


  121. BRK/Bs are a monster!  This stock is getting way ahead of itself but we’re long so enjoy the ride I guess…

    Pharm – What’s up with MYGN?   They had a very nice Q, spiked up and now even worse than before…  I’m tempted but I figure I must be missing something.

    UYG/Dflam – Love that play!   In for net $3/4 with 66% upside if the financails don’t go down this year.  One of my favorites

    I’m still generally suspicios that we’ve had such a strong day on very low volume (136M at 3:40) when there was a storm.  An amazing coincidence if nothing else….  The fact that it was led by BS commodity sector making a radical move up on NO news at all (in fact, when data was postponed) makes the coincidence even more amazingly amazing to the point of being kind of impossible to believe… 

    Dow leaders: CAT +5.4%. AA +3.4%. INTC +2.1%. MRK +1.8%. MMM +1.7%.

    Dow laggards: BAC -0.4%. UTX -0.2%. WMT -0.1%.


  122. judah – How good are JRW’s lines.  59.07 major pivot point and 60.42 holding like a stone wall.  Pretty damn good if you ask me.


  123. rumors on AET downgrade on YAHOO.


  124. Mattress/Robert – Extensive discussion on that in Salvage article in the strategy section or you can just Google "Mattress Plays" for the original article.  After you read that, then ask questions as there are rules for these things.

    Despite this chart, I’m still not buying it until we make our levels!


  125. It is surprising that we are up ~1% when DAX and CAC are down 0.5%.   I guess the thinking might be that they will be guaranteeing Greek debt but whose guaranteeing UK and US?   It will be interesting to see what Asia and Europe does tomorrow.


  126. Peter/Fidelity:
    I was with them for years. When I began trading options seriously (for me), I left after about six months for TOS. No decent options software. No in-house knowledge of options. No comparison to TOS.
     
    Great customer service and decent for trading stocks. Not good for options.


  127. Peter, I have Fidelity and TOS, as does Gel.  I like Fidelity.  If you keep enough money with them, they are very responsive and though the trading platform is not as slick as TOS, it has worked well for me.  I’ve been asking them for many moons about PM and it doesn’t look like it is coming, so I keep transferring money from Fidelity to TOS as I increase my number of strangles.


  128. phil
    Any play here yet on DF which is down quite a bit today also?


  129. Peter D -
    With your strategy why would you go to Fidelity?
    Seems to me that IB is by far your best bet – considering their rock bottom margin rates -
    Their platform is not great – but you cannot get lower margin or trading rates – unless you can negotiate something based on high volume
    BM rate = .13% (current fed funds) + 1.13% for balances over 100K = 1.26% Margin interest – it’s even lower with a balance over a million -
    TOS might have a better platform – but cannot beat these rates


  130. Samz
    Glad to hear you captured a gain on the trade. I am in PST (California), and since I am trying to live up to our reputation here (laid back), I sometimes log on later. I will be changing my schedule however, as I am going to do a lot more currency trading looking forward, as I believe there will be some great opportunities. To do this, as I have in the past, I usually log on for trading purposes at 6.00 AM onto my GFT account. (early here but 9.00 EST). I’ll post my "drop dead convictions" when they become obvious.


  131. HY bond market is correcting.  perhaps foreshadowing more trouble ahead for equity markets? 

    The average bid of high-yield flow-name bonds dropped 183 bps over the past two trading sessions, to 88.81% of par, with an average yield-to-worst of 11.56%, according to Standard & Poor’s LCD.  with Tuesday’s reading, the net 396 bps fall in one week is largest one-week drop since the week ended May 14, 2009.  The combined 461 bps decrease over two weeks is the largest two-week drop since the depths of the most recent market trough, during the four weeks ended Mar. 5, 2009, according to LCD. The average is down 5.09 points in the year to date, but looking back four weeks, which excludes the New Year rally, the average is down 7.25 points. That reading is the largest four-week drop on record since the four-week period ending Dec. 11, 2008.


  132. They must have Lorin Maazel leading this orchestra….closing above 10138


  133. SS/JRW’s lines.  Agree completely.  They are money lines. 


  134. Sorry.  I haven’t been able to check in until now.  Too busy on other stuff.
    What are you folks’ outlooks on the market?  Bullish? Bearish?
    I had a chance to talk to a friend who plays forex.  He is really worried about Euro.  He thinks Greece is just the beginning, and  the market hasn’t priced in the other 3 in PIGS.  Do you think they could be the catalyst for another downturn?


  135. Good chance they pump banks tomorrow and we close above 1085. Will watch GS, BAC for a possible day trade.


  136. Samz
    Re:  China growth… Their last quarter had growth of 10.7%. This growth story has been going on for at least 8 years, and is not about to stop. I believe they are buyers of commodities for a long time to come. I am not suprised by the hike in FCX today, as the Soverign Government has a very large position in this stock and I assume they know China is their largest customer. 75% of all copper is used for electrical usage, and they are building lots of homes. Australia is a big winner in this growth story, and their economy reflects this.


  137. DF/Drum – I don’t like them.  They sell to the bottom 90% and I didn’t see any positive jobs numbers yet.

    Well, another crazy day bites the dust!  I don’t know what to think of this as it’s the bullish move I wanted but it came in such a totally fake way that I’m now not happy with it…

    Pigs/Cwan - I think IF Greece goes, then we have dominos but Greece won’t go because we’ll have dominos.

    Banks/Eric – I’m with you but sticking to XLF, UYG rather than picking horses.


  138. Take a look at stochastic on the 5 day 30 min chart of the DOW….virtual carbon copy since the 8th..HAL is alive and well


  139. Phil, I am in the GS APR 180 calls, would you move this out to Jul or roll it down to say the 165/170 strike?


  140. Hi, Peter,
    I just saw your question about Fidelity & PM.
    I don’t know about Fidelity, never tried them.  As far as PM, you might want to call optionshouse.  Several months ago, I asked, and they said they have PM but the minimum is $1M.
    Optionshouse used to charge one flat fee for ANY number of contracts.  Not any more.  They now charge $8.50 per ticket + $0.15 per contract.  But my biggest complaint with optionshouse is that they don’t have GTC orders on spreads.


  141. Cwan
    My feeling is we will see further downward movement in the Euro. I personally do not think they will allow any of the currencies to fail, and bailouts will be the solution. These countries all trade between themselves, and their debt is spread across each others balance sheets, so a BK would hurt them all. Going forward, I see an effort to impliment a stricter enforcement agreement between the countries as regards their debt/GDP ratio. Deleveraging, however will be painful and will hurt future growth prospects for the Eurozone.


  142. samz,I will be interested in checking out your (DROP DEAD CONVICTIONS)could help me with my fx trading.not succesfull at it Yet!!


  143. CAKE just reported and is not taken well in after hours.


  144. hi Peter
    Is TNA a good EFT for short strangle — it seems that this etf is very illiquid despite margin required is much less than RUT
    JC


  145. Does anyone know what happened with OIH? Ticker on my feb options changed to OAU and now I can’t see the options in yahoo.


  146. Jash -
    Those are Gel’s DROP DEAD CONVICTIONS not mine -
    I wish I had some convictions but, like you, will be interested in reading Gel’s -
    I am not a big forex trader – just trying to think of ways to hedge the dollar (long term – mult-year )


  147. OAU prefex is for option adjustment where by cash-in lieu is $20.63 per contract plus 100 shares.


  148. Hi, Gel1,
    Thank you for your comment on EUR.
    Do you think the problems in Eurozone will cause US stock market to go down?  My guess is yes.  Just like Dubai.  Even though Dubai crisis was a small potato, we got a knee jerk reaction.  Eurozone is much bigger, and we’ll get a much bigger reaction.  But of course, the question is when.


  149. Hi, gucci,
    I think Peter answered similar questions a few weeks ago.
    The answer is no.  TNA is a 2x or 3x ETF, and therefore, it moves much further up and down.  For SPX, we have a +10%/-15% buffer zone for our strangles.  That is, we sell calls with strikes +10% from market, and puts with strikes -15% from market.  For TNA, you’d have to have a buffer zone +20%/-30% (2x) or +30%/-45% (3x).  At those strikes, you probably won’t get much premiums.


  150. chaps, judah, samz & cwan,
    Thank you for the answers on Fidelity.  Looks like the answer is a no-go.  I’m looking to diversify to multiple brokerages for the insurance and unforeseen brokerage bankruptcy risks.  Yes, I have an account with IB, but haven’t managed to navigate their software to place a single trade yet (while TOS already executed my 5,000+ contracts this year!).  For Optionshouse, thank you for the information, but not having a GTC order is a killer, and I also heard that getting trades out of them for tax filing is a nightmare also.  Thanks, again.


  151. gucci & cwan,
    Yup, cwan’s answer is correct.  The margin on the ultras increased by 2x or 3x in December 2009, resulting in a lower return for short strangles on the ultras than in the 1x indices, so we stopped playing them.  Those 3x ultras gets into trouble when the indices drops or gains 20%, which is 60% on the 3x, getting them to zero quickly and killing the short strangles.
     
    Hey folks, I recently found out that TOS allows us to sell naked puts in IRA retirement accounts!  Not naked calls, just puts.  So if we see a good bottom, we can sell the puts on the ultras instead of on the regular indices, since the margin in IRAs is 100% anyway.


  152. Hi, Cwan:
    Just my gut feeling… I do not see any direct correlation between the problems in the Eurozone and our market valuations, certainly not long term. ( Dubai was just a short term glitch in the markets) My feeling is they, (Eurozone) a family of economic structures that have in common a common  currency they share, will as, in most families, solve their family problems. If they do not, then they ALL will suffer. In the short term, they, as an entity sharing the same currency, will look at this risk and will swallow the immediate negativity, and will feel they dodged a fatal shot to the heart. Overall the entire currency will have to absorb the loss, but this loss is better than a domino effect that could be catestrophic for them all. The wayward countries who have debt problems are the smaller of the consortium, and this disparity in their debt ratios are able to be absorbed into the family. Geez, Greece was only 450 Bil upside down. All that is needed, is to have France sell a bunch of expensive wines to the buyers of Mercedes Benz automobiles in wealthier countries,in order to capture the revenue to bring the disparity into balance.


  153. Thanks, Gel1.


  154. Hi, Peter,
    TOS allows you to sell puts in IRA, but you have to put up the full value of the puts as margin.  That is, if you sell one contract of a put with strike $10, your buying power goes down $10 x 100 = $1000.  Imagine if you want to sell puts on GOOG!
    I believe that is the case.  Correct me if I am wrong.


  155. Hi, Peter, re IB: Months ago I was looking at various brokers.  I think IB has a web based platform with much reduced functionality.  You might want to give it a try.
    I haven’t really tried IB yet.  Do they have PM?  What’s their minimum account balance for PM?


  156. Cwan -
    IB has PM – I think the minimum for PM is 100K -
    The platform was designed for institutional trading – its trader workstation – it’s not bad to use – but – it’s really designed to be customized for institutional use -
    i might move my retirement stuff to TOS for the tools that you get and I know everyone loves it -
    but on a price alone basis IB cannot be beat – I did not negotiate any special deal and am paying $1 per contract -
    For Emini options – I paid $3.62 for 2 contracts
    5 TBT contracts – $3.57 (total or just 71 cents per contract)
    DIA roll today on 5 contracts $7.14 – (ten contracts in total – buy five / sell five)
    Unless you are trading huge volume – I really don’t think TOS can beat that


  157. cwan & sam,
    sam is correct on the 100k PM minimum for IB.  Note that their fine prints said they will automatically liquidate the positions if the balance gets below 100k.  This is rather dangerous.  TOS has a person looks at it to see whether the reason is due to a software error in calculating the balance before giving us 1 day to meet the PM margin deficiency.  With IB, imagine that we can find our short strangles got liquidated if we are unlucky to suffer a spike in the market.  I could be wrong in my interpretation, and will call them some time to get clarification.
     
    As with the rates, TOS gives me a great deal, and IB doesn’t beat it by much.  With all the services and the nice trading platform, I have no complain, but I do need to put some eggs in other baskets.


  158. cwan,
    Almost missed the naked put discussion.  I’m just looking at the maximum percent return.  For example, selling SPY Mar 108 put (ATM) nets us $3.07, which is about 2.8%, while selling TNA Mar 38 for $3.4 is 8.7%.  These are maximum gain if we are correct.   If we get it wrong, the loss is 3x as large in percentage term for the ultra as they move 3x as much.  If we sell 10% OTM, i.e. SPY Mar 97 put and TNA 27 put, we get 0.6% and 1.5% maximum profit respectively.  The loss is zero for approximately 10% move down in SPY.  1.5% for 6 weeks is not bad.
     
    We can do iron condors to increase the profit percentage, but those are all or nothing play that we can loose it all if the market goes past the outter strikes.  With naked puts, we keep rolling until the market comes back up.


  159. Mocha – I missed 21.50 buys on HK this morning TWICE !   Arrggggh.
     
    The 1st time I was screwed by an algo or MM that front ran my order that I placed at the ask.  The instant I placed it they moved the stock up a nickel.
     
    Crooks.


  160. Mocha – I missed 21.50 buys on HK this morning TWICE !   Arrggggh.
     
    The 1st time I was screwed by an algo or MM that front ran my order that I placed at the ask.  The instant I placed it they moved the stock up a nickel.
     
    Crooks.



  161. Fidelity – 1 of my accounts is there.  The other day a rep told me they have a downloadable options platform that would be useful for an active option trader like me.  I have not tried it; but perhaps their platform has improved since some of you left.  I don’t know.


  162. Peter -  naked puts in IRA’s must be cash covered.  You need to have enough cash to cover an assignment.
     
    E-Trade also allows naked cash covered put selling.  I just moved some IRA money there.  Tired of earning $1 per month on a 0.08% money market fund.


  163. IB – I never used them.  But over the past couple of years we have had several folks here tell horror stories about IB blowing out their accounts on no notice whatsover.
     
    There is no way in hell I would recommend IB to anyone on that issue alone.


  164. Peter – I have negotiated pretty decent deals at Schwab,Etrade and Fidelity.  The bigger and more active you are, the more they will play ball.  With all the firms now in a price war; I am planning to go back to the well and renegotiate even lower.


  165. Hi, Peter, Samz & Cap,
    I have accounts at TOS and I love them.  But, like Peter, I am also looking for a 2nd broker.  Not very many brokers have PM.  I also asked TradeStation.  They don’t have PM either.  As far as IB, I also heard some not so good stories.  But we may not have a whole lot of choices.
    If IB’s platform is not easy to use, I hope that their web-based platform is good enough to place trades.  All we care about are GTC, spreads and maybe several other trades.  We can use TOS to get qoutes, do analysis, etc.


  166. Hi, Peter,
    Your idea of selling SPY puts in IRA is interesting!
    I tried SPY iron condor in my IRA once.  The strikes had to be fairly close to market in order to get decent premiums.  Scared the hell out of me!  And as you said, no chance to roll.
    I’ll give your SPY puts idea a try!


  167. Hi, Cap,
    What kind of deal do you get at Schwab and how many contracts do you trade there in order to get that kind of deal?


  168. China/Gel – I’m not saying anything but check out this video, Vitaliy is a very smart guy and just got back from China.  The logic that China will inflate copper to make money on their investment in FCX is as if the US owned $40Bn (10%) of XOM and wanted to make $4Bn by driving up the price of oil $10.  It sounds great in a bubble but US citizens consume 20M barrels of oil a day so it costs them $6Bn a month in extra oil costs for the government to make $4Bn on their investment (and that only works if they sell, otherwise it just costs the people money so the government can have a pretty portfolio to stare at).  Over the year, it pushes the trade imbalance up by about $30Bn which impacts the country’s ability to borrow money as well.  In short, it’s pretty far fetched to think that a government is going to drive up commodity prices so they can make money on stocks they bought but that is the story that they are pushing this week on all the commodity bull  sites and it is working.

    GS/Trad – I don’t like GS enough to buy calls.  I like them enough to sell puts and let some other guy sweat out the expirations but I don’t see any great upside for them here, especially since that’s probably the last time they’ll take such "little" bonuses and drop that much of the GP to the bottom line. 

    CAKE/Jordan – They were actually pretty good earnings, just had a huge impairment charge and will be a nice put sale into any kind of panic dumping. 

    OIH/Roast – I see the OAU’s. It looks like they have an obligation of $20.63 per contract (100 shares), maybe there was some kind of dividend?  Either way, I’d be inclined to exit and avoid the hassle.  Oh and what TM said!

    Eurozone/Cwan – Problems like that anywhere cause us to go down in sympathy.  Look at what Brazil and Agentina did to global markets – and you would think they wouldn’t matter in the grand shceme of things.  We’re all one globally interconnected mess now, kind of like a ball of rubber bands being batted around by a cat and the cat is Goldman Sachs.  Pull one out and everyone feels it and the whole thing could fall apart if you pull the right string.  The problem is most of us went to school when the world was a very different place and that goes for the economists too.  You can’t "win" in global economics anymore because everyone is so damned interconnected it’s like trying to win a battle for food in your own house – you may get more but someone else will get less and your victory may last until you go to sleep at best. 

    We have to have rules now that you can’t say made in America unless 55% of the parts are from America – what does that tell you?  I have a project running now with an Australian programmer who is coordinating teams in China and India to process data that was collected in New York and New Jersey that will be sold nationally over the web with telephone support from Israel.  I’m doing this from a desk in New Jersey – what do you think the big boys are doing?  People still think in terms of nations but they are fairly arbitrary distinctions, which is very sad, but true.  If the US does some tax thing that messes me up in China, I’d be on the phone to India, Israel or wherever it may be favorable to switch to and my business would be moved in 24 hours.  Maybe my work would be pulled from 100 Chinese employees and given to 100 people in the Philippines – what do I care as long as it’s done on schedule?  

    While people may have felt bad in the old day’s about laying people off and our direct investment in training and developing talent encouraged us to support our workforce during rough times, these days everyone and every thing is pretty much disposable and companies that don’t play that way are considered "inefficient."  When I sold my old company the guys that bought me were drooling over the way they could "cut the fat" by switching to a lower-cost health care plan and cutting my 100% matching 401(k) contributions and not paying stock options plus bonuses each year and not letting people get any damn company car they want and limiting expense accounts etc… 

    Those were all cuts I would have had to make myself had I stuck it out through the market downturn, which is why I sold at the time – obviously, that’s not something I would have enjoyed but that’s global competition these days.  Once the real estate bubble was popping we wouldn’t have the luxury of being generous with our employees and our competitors were already outsourcing everything to cut costs.  You can compete by offering quality in a good market but not so much in a bad one so we got out rather than firing half our workforce and replacing them with Indians.  Since our employees were all stockholders, they did very well but I’m sure that’s true about half the tens of millions of jobs we’ve shipped overseas – a nice severance and no future for America because the people at the top think they’re going to "win" somthing for themselves by screwing over American workers. 

    Sadly, this is the same thing that is happening everywhere else too as it all comes down to making a buck at the expense of everything else and everyone has gotten so short sighted that they are "shocked" when things start to fall apart.  Gee, how could 30 years of slashing benefits and freezing wages have harmed the middle class?  Who’d have thought?  In 1960, 1/3 of American Workers worked in manufacturing and drew salaries with union benefits, pensions, health care etc that put them in the to 10% of global wage earners.  Now it’s 10%.  That’s about 40M high quality jobs lost over 50 years (not to mention none gained as the population grew) and, of course, it’s been accellerating the past 20.  Then you think of the data jobs we sent out as well and you can see how we went from being thw world’s #1 exporter to a service economy with a permanent trade deficit.

    I think it’s funny when they say the government shouldn’t interfere in business.  50 years of idiotic government policies are what got us into this mess.  At any point it could have been stopped by simply making it less profitable (through taxation) to send jobs overseas.  Now it seems "drastic" to try to change things because we’ve fallen 75% of the way off the cliff already, so why not just go splat then, is the logic I guess…   I don’t want to get politcal but when a guy comes up and says "let’s spend our money building US infrastructure and developing US industry" and that can’t find bi-partisan support – then you know it’s over for this country.  That’s why I’m island-shopping now – the major corporations have already moved out, all that’s left is their name on the door of some downtown office just for show but 75% of their workforce is already overseas and, like HAL, they are ready to cut and run any time.

    Naked puts/Peter – Since you can sell naked puts in an IRA, perhaps we could design some market neutral plays short-selling puts in long and short ETFs simulataneously?


  169. Jobs-overseas- I have often heard the lament over evil corporations having "shipped jobs overseas" which I find very amusing. It reminds me of the occasioinal confrontations with union thugs on job sights where their complaint was "Hey, that is OUR work". My response was always, "Well, last I looked, my name is on the contract for this job. I bid it and won it." The response was blank stares initially as I challenged  their sense of entitlement so they resorted to threats and intimidation. Having been born and raised on the south side of Chicago I am well schooled in such measures so let’s just say that those tactics failed.
    The point is the sense of entitlement. Neither the union nor the contractor for whom they worked "shipped" the job to me. I came and took it!. While this may be a micro-anecdote compared to the macro-issue the logic holds. To paraphrase George Washington Plunkett, "they seen the opportunities and tookem".
    By what standard are we entitled to those so-called well paid manufacturing jobs? By what standard do we deny the rights of others to improve their lot in life?
    In my business career, I have lost customers to competitors for a host of reasons. In all cases, it comes down to the other guy being able to better meet the customer’s needs. No different on a global scale.
    Should government step in to protect the union’s entitlement vs. me? Should government step in to protect American’s entitlement vs. the Chinese or Malaysions or Vietnamese?  By your logic, a tax on me would be justified to protect the union’s workers interests while denying my rights. By your logic , a tax on GE is justified while denying the rights of some Indonesian peasant?
    Who is in charge of picking the winners and losers?
    In my view, the government policies which are out of whack are those which promote entitlement which in turn promotes dependence. Rather than wallowing in victimhood and soothing our pain by longing  for the good old days we would be far better served by a healthy dose of personal responsibility and more vigourous pursuit of self reliance.
     


  170. Hmm, Pstas, I wonder if there is any way I can put this that you will not automatically naysay?

    Let’s say you are a father and you have a wife and two children a son and a daughter.  You married your wife because you found here fun or attractive and you had your children because you hoped they would learn to take over your business in the future.

    You put them into school but it turns out your daughter isn’t quite the student your son is.  You tell him to get a degree in engineering because that would be a perfect fit for your company and he joins your company as an engineer and your daughter ends up being a receptionist.  Your wife, meanwhile, got old and needy and, frankly, a little annoying so obviously you cut her loose immediately – hiring the best attorney to make sure she never saw a dime.  You taught your children well so they don’t waster their time visiting her in that crap-hole she lives in now.  

    With the invention of the internet you are able to cut you son loose and save $100,000 a year on his engineering salary, which more than makes up for the $250,000 you blew educating him.  He’s not very good at management so you offer him his sister’s admin job at 1/4 his original pay and cut you daughter loose (she was dead weight anyway) but, sadly, she’s too old to work the pole and she ends up living with her pathetic, jobless Mom. 

    After a while you get a call from a company in India who can replace you son with a 24-hour a day concierge service for half the price so that’s a no-brainer.  Your son does manage to go out and find work managing a fast food franchise and you are proud of yourself for pushing him out of the nest.  He’s ashamed to tell you that he visits his Mom and Sister with leftover food sometimes and it causes a rift between you. 

    You make tons of money but die alone leaving nothing behind in this nation except a desk that connects to a chain of foreign outsourcers, who don’t even come to your funeral but eventually end up taking over the land of this nation, and your life’s work means as little to the next generation of Americans as the Hopii Indians do to you.

    Slash and burn is a very profitable policy and you embrace the spirit of Ghengis Kahn well.  You come and you take it until the next guy comes and takes it from you (if he can) and you owe nothing to no one which is why you have no need to take care of anyone else as they are all just leeches trying to get what’s yours and there’s no benefit to you in charity.  After all, we didn’t sign up to build this country, if we can’t compete with those Chinese and their free education then let them come – I’m sure you’ll figure out how to make a Yuan or two off of them. 

    In the long run, what do any of them need us for?  Sure you may be one of those exceptional individuals who will thrive no matter what the world throws at you but, for the vast majority of us, the next thing to be outsourced will be executives because they don’t need your fat ass sitting at a desk collecting 60% of the money while they do all the work.  Don’t worry, they’ll find tons of people just like you to front for them, to be the American face of the foreign company, which is fine too as fooling the pathetic suckers in this country just means  "they seen the opportunities and tookem".

    The only arguement I could make for you is genetic as your genes will probably be wiped from the face of Earth or relegated to the same fate that happens to all conquered people who sit on land that a more powerful race wants.  If that doesn’t bother you, I’ve got nothing but idealistic liberal crap and I’m not even going to bother to try with you. 

    So good luck with that vigourous pursuit of self-reliance, I guess I’ll be seeing you at the the top of the pyramid but choose your positon well for that final push because I plan to have the people below me acting as support, not just be some guy who’s face I just put my boot into as I climbed over him. 


  171.  cwan120:
     
    at present, I am paying $8.95 + 0.25 per contract; not bad; not great.  Now w/ their lowered rates, the 8.95 seems too high; I will try to get that lowered.  I think their standard per contract rate is 0.75 ?   Makes a difference if you trade a lot of contracts.  I trade a lot overall, but usually 1-10 at a time; although sometimes 40 or 50 at a time if w/ the indexes.


  172. Naysay/Slash & Burn- Pretty good rant this morning. Sounds like you were channeling Ayn Rand. Too bad it is completely off point. Seems like, by your own admission, you left the slashing and burning of your sold firm to others? Still looking for the answer to who picks the winners and losers? You?