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2010 Tin Tiger Tuesday

The year of the Tiger begins!

Chinese New Year is a serious business with tens of millions of migrant workers in China, as well as many from overseas, traveling home to have reunion dinners with their families.  In addition to fireworks, celebrants like to wear new clothes from head to toe (preferably red as it drives away evil spirits) and they exchange  red envelopes and red packets called “Ang Pow”. These Ang Pows are usually are passed out during the Chinese New Year’s celebrations, almost always containing money (from a couple of dollars to several hundred). Per custom, the amount of money in the red packets should be of even numbers. The number 8 is considered lucky (for its homophone for “wealth”).  In addition to red envelopes, which are usually given from elders to the younger, small gifts (usually of food or sweets) are also exchanged between friends or relatives. Gifts are usually brought when visiting friends or relatives at their homes. Common gifts include fruits (typically oranges, and never pears), cakes, biscuits, chocolates, candies, or some other small gift

The Year of the Tiger is considered lucky and this year is the year of the Metal Tiger, which explains all the commodity hoarding and the tigier is also considered auspicious for risk-taking and bravery.  Traditionally, all debts are paid by New Year’s and there is much emphasis on looking forward and letting go of the past.  The Chinese markets will be closed all week but we can expect a lot of forward-looking behavior when they come back so I’m liking FXI March $40 calls for $1 as long as our markets hold positive as we could get a nice pop next week as China plays catch-up. 

BCS will be popping the financials this morning with some great LOOKING earnings but much of it came on the sale of their Global Investors unit to Black Rock for a $9.9Bn gain so nothing at all to get excited about.  Impairments were up 49% but slowed in the second half and guidance indicates the worst is over.  Also goosing the market this morning is SPG offering $10Bn for GGWPQ, the bankrupt version of what was GGP.  This works out to about $9 for shareholders who hung on – we had taken a flier on them in the spring under $1 but got the heck out at $5 as THAT seemed high but I guess not and I”m now very glad our IYR shorts got stopped out last week because IYR should be flying today. 

We were making more cautious choices this weekend with a review of dividend paying stocks we like as well as looking at several strategies to knock $100,000 off of home morgage payments.  The two go hand in hand as the idea is to take the money you save on your home morgage and invest in in strong dividend-paying stocks to start insuring your own retirement nest egg because goodness knows we sure can’t count on the one the government promised us!  In the comment section of both posts is a lot of strategic discussion as well, so make sure you read these two articles as they are going to be very relevant if we continue to have a choppy, consolidating kind of year.  

Back on Feb 8th, I resolved to be done with Greece as I decided (after much research) that it was a non-factor and that very correctly guided us to shift bullish last week while our fellow investors were selling.   While I’m not willing to say I’m not going to worry about Debt, I do agree with a new report from the Center for Economic and Policy Research (CEPR) that concluds that it’s the deficit hawks that are the real problem at this point as they threaten to derail efforts to turn around the economy and spur employment.

"There would be no short-term or long-term benefit from reducing the current deficit," said Dean Baker, co-director of CEPR and the author of the report. "If the budget deficit were smaller we would see higher levels of unemployment."  The report, "The Budget Deficit Scare Story and the Great Recession," shows that the most-cited claims of leading deficit hawks are driven by unfounded fears and misrepresentations of basic economic relationships.  One such example cited in the report is that the worsening of both the short- and long-term deficit picture was driven not by a spendthrift Congress, but almost entirely by the economic crisis brought on by the collapse of the housing bubble. The small portion of the budget deterioration driven by legislative actions was primarily the result of increased defense spending associated with the wars in Afghanistan and Iraq.

As well, the study demonstrates that the true long-term deficit problem is skyrocketing health care costs and any meaningful attempt to deal with deficits would start with reining in health care.  "The nation does not really have a long-term deficit problem," Baker writes. "What we have is a long-term health care problem."  The study also refutes the notion that the budget deficit is the source of concern over the threat of foreign government ownership of U.S. debt.  It’s not wrong to be concerned about the deficit – it’s the timing that stinks.  I was a deficit hawk from the days of Al Gore’s broken lock box all the way through the insane idea to eliminate the "death tax" but once the economy breaks (and we can finger point some other time) – you HAVE to fix it!   

If budget hawks were truly worried over the prospect of foreign ownership of debt, they would focus on the trade deficit, which is driven by ridiculous commodity prices, especially oil, which, at $75 per barrel, makes up 75% of our trade imbalance ($300Bn at 11Mbd imported).  According to the report: "In a time when cogent, effective policies are needed to address the suffering stemming from the economic downturn, the tactics of the deficit hawks distract the public and policy makers from the policies necessary to bring the economy back to full employment." 

So that was some fun weekend reading, along with Obama’s 451-page Economic Report of the President, which I found both encouraging and disturbing (my comments on the first 85 pages are under Saturday’s post so I won’t ge into it here).  Asia was, of course, pretty much closed this morning but the Nikkie was up a little and got back over 10,000 while the BSE had a nice up 1.2% day.  

Europe is up about half a point at 9am but led, unfortunately, by surging commodies as that kind of trading was the key to BCS’s success.  Also boosting the sector was another Gang of 12 member, JPM, consolidating their stranglehold on our neccessities by purchasing RBS’s Sempra Commodities unit for $1.7Bn in order to expand their energy and metals trading unit.  

News of a shameless commodity pimp like JPM making a move like this shot copper prices up .14 off of Friday’s lows to 3.18 (up 4.4%) with gold flying $42 to $1,120 (3.8%) and oil jumped a whopping $3.50 (5%) all the way to $76 at the NYMEX open so kudos to JPM – may your floating tankers full of oil never have to find a port!  

Still we are now on the bull side of the market so we should be thrilled that the Gang of 12 is ready, willing and able to put the screws to the bottom 90% and squeeze another quick 5% out of them in the form of forced commodity spending.  They may be able to turn down that new sweater or put off getting a sofa but they damn well have to eat and use electricity so we’ll pump up some consumer spending one way or another.  Pay up suckers, we already have ABX and we’ll add FCX if they can break over resistance at $77.50!  

$1,700,000,000 is, of course, absolute peanuts to JPM as they, along with other US lenders, are sitting on $1,290,000,000,000 in cash, a record 98 cents for every dollar of existing business loans.  The ratio of cash to corporate loans has more than quadrupled from 21 cents in June 2008, according to Jan 13th Federal Reserve data compiled by Bloomberg. Corporate loans shrank 14 percent to $1.32 trillion during that period as bankers tightened standards to curb record defaults and meet demands by regulators for more liquidity.   

Cash piled up even as Obama beseeched bankers to lend more and drive down the 9.7 percent jobless rate. Among the three biggest U.S. banks, the one with the highest ratio of cash to corporate loans is New York-based Citigroup Inc. — whose biggest investor is the U.S. government with a 27 percent stake.  Citigroup’s $193 billion in cash and deposits with other banks as of Dec. 31 stood at $1.15 for each dollar of existing corporate loans, which totaled $167 billion, according to data compiled by Bloomberg. That’s double the ratio in June 2008, when cash totaled $113 billion against $222 billion of corporate loans.

The unused cash is a drag on profit, reflecting a shift toward safety by lenders and less demand from borrowers because of the slow economy, said Frederick Cannon, associate director of research at New York-based KBW, which specializes in financial firms. When the economy and finance get back to normal, KBW predicts bank returns on equity will be 10 percent to 14 percent instead of the 18 percent to 20 percent that prevailed in the two decades before the bust.  “Banks have to invest some of their excess liquidity and they have to figure out ways to grow loans,” Cannon said.  Citigroup Treasurer Eric Aboaf told bond investors during an Oct. 18th  conference that stockpiling cash and reducing loans was creating “a deliberately liquid and flexible balance sheet here at the company.” Spokesman Stephen Cohen declined to elaborate.    

So a commodity rally is my least favorite kind of rally and we will quickly take bullish profits if we can’t retake our levels.  It’s options expiration week so things will be crazy but we have had some encouraging economic data including this morning’s Empire State Manufacturing Survey, which jumped to 24.9 vs 15.9 in January with employment up to 5.6 vs 4 but, thanks to commodities, prices were up to 4.2 vs. 2.7 and, strangely, new orders dove to 8.8 from 20 so take it with a grain of salt overall.

It’s going to be a wild week but we will likely be shorting oil at $76 and gold at $1,120 unless we get a serious break-out.  A commodity rally is the last thing we need as our "recover" such as it is, is still way too fragile to withstand having our pockets picked to the tune of 5% increases on neccessities.

 


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  1. Phil -
    Dia covers – are we looking to pull the feb 101s on the initial move up this am?


  2. Also – IYR -
    Are you short term bullish now -
    I am short some feb 43 calls and trying to decide whether to roll or just take a small loss
    thanks


  3. quite day


  4. Good morning!

    Not looking all that strong and the volume is nothing at all (that includes all these commodity moves that can be reversed in seconds).  Keep in perspective that this is no gain at all – we’re just testing Thursday’s highs after Friday’s poor performance. 

    Our upside (5%) levels were: Dow 10,165, S&P 1,088, Nas 2,200, NYSE 7,000 and RUT 620 and there is nothing at all to get excited about until we cross those.  10,058 on the Dow remains a bullish sign. 

    Below that, our weak holding levels are:  Dow 10,020, S&P 1,065, Nas 2,150, NYSE 6,800 and RUT 590.

    But let’s hope we finally have a reason to look higher at our bounce goals of: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625

    I’m too scared to short gold but USO $37 puts are just .44 and you can put a stop at .40 or if oil beats $76 (now $75.88).  Our goal would be a quick win at $75.50 unless they break below, then that’s the stop (.10 trailing).


  5. public schools in nyc have off this week and other people might still be on vacation -


  6. DIA/Samz – Well you should stop out with gains for sure, this is a very strange morning so far and it looks like we’re still in selling mode. 

    As usual, it’s the NYSE and the RUT that are showing us not to trust the rally in the manipulated indices, let’s make sure we see some life there before getting too excited. 

    VIX is UP 2.5% by the way, very unusual on an up day and possible indication of massive put buying.

    IYR/Samz – I would not press my luck on short calls with the SPG news although I think CRE still has fundamental problems.  Just because SPG wants to buy GGP out of bankruptcy doesn’t mean there’s any real value in regular CRE where people are still burdened with crushing debt and declining revenues BUT, for the next 3 days – that doesn’t matter enough to keep you safe. 

    Dow stuck right at 10,165 – pretty amazing for levels we pegged months ago. 

    Day after holiday’s often very quite as many people here don’t have regular jobs and take full advantage of long weekends.


  7. Phil

    I bot SIRI Mar $1 Callsfor 0.17 cents way back. Should I exercise now or wait until March?

    Can’t figure it out.

    Good to be back.


  8. JRW, judah – are you in today?


  9. SIRI/Red – Well if you exercise now you are down .24 so I’m not sure I see the logic.  Since you are willing to buy the stock and you own the March $1s, I’d sell the June $1s for .15 to get most of your money back and then just put a buy on SIRI if they cross $1, allowing you to then sell your $1 calls for a net profit and leaving you with the covered SIRI stock.  If you are more bullish than that you can either buy more stock or go for the 2012 $1/2 bull call spread at .20 for another .80 of upside without over-committing. 

    Went for it on USO puts at .35 despite being over $76 – they look weak at $76.50. 


  10. Mygn/Pharm    Sell May 20 puts?  Nice entry


  11. Any opinion on SXE, who took a dive after earnings?


  12. MYGN/Stock – yes, nice entry.  I am a bit more aggressive, in the 22 Mar P.  I think the sell off is unwarranted.


  13. Pharmboy
    do yo think  Salix Pharmaceuticals Ltd SLXP  is going to get the label change or are they over priced  ?
    Think


  14. Question for the techies….anyone have an opinion on STEC?  They are in the same space as SNDK, but they are 1/10 the size and have a better growth and ROE chart.  Their stock is like a small rocket that rides the prevailing winds, but I don’t know enough about the technology to determine if they are any better than WDC or SNDK.  I know SSD memory is a commodity, but R they a takeout for someone bigger?  TIA.


  15. Kevin Connor wonders whether hedge-fund giant John Paulson is partnering with Goldman Sachs (GS) in building massive and profitable bets against Greece.

    EU officials are taking a closer look at Wall Street’s role in Greece’s debt crisis, requesting information from Athens about currency swaps from 2001 to 2008 that may have allowed Greece to conceal billions of euros of new debt. (see also)

    European finmins give Greece until March 16 to prepare deeper deficit cuts in case it fails to make sufficient progress on its budget goals by then. If Greek efforts fall short, the EU “will impose on Greece the acceptance of additional measures."

    The decision to give Greece one more month to work on its debt is being seen both a delay tactic on the part of other European countries, and a reflection of their newfound determination to bring wayward nations back in line.

    U.K. inflation jumps 3.5% in January, its fastest pace in 14 months, prompting BoE to issue an explanatory letter. Though the spike was influenced by short-term factors, including an increase in the sales tax, "underlying pressures are to the downside." (ETF: EWU)

    Dec. International Capital Flow: Net foreign purchases of long-term securities fell to $63.3B vs. $126.4B in Nov. Private foreign investors bought $62.6B, official institutions another $19.6B.

    This morning’s record drop in foreign demand for U.S. Treasurys was led by China, which trimmed its holdings by another $34.2B. The reduction drops China to No. 2 spot among foreign holders of U.S. government debt, with $755B to Japan’s $769B. U.K. is third at $303B.

    Speaking of JPM screwing us:  The Fed is holding heavy paper losses on the real estate portfolio it acquired when it helped JPMorgan (JPM) buy Bear Stearns, reports the FT. At the time, the assets had a face value of $8.4B with an estimated worth of $7.7B; as of September, they’d been marked down to $4B.

    With more than 75% of S&P 500 earnings now booked, U.S. firms continue to broadly outperform, Deutsche Bank notes, with a 76:22 beat-to-miss ratio, following an 83:16 ratio in Q3 and 76:23 in Q2. Some of that may be due to analyst lag, but European stocks continue to trail their U.S. brethren, with a beat/miss ratio of just 57:43 this quarter.

    More bad news for the housing industry: Low inventories and little slack in the supply chain have caused lumber prices to soar, which could raise construction costs or force builders to swallow the increase.  Damn, that was my prediction for commodity of the year but I never found a good lumber ETF! 

    Sector ETF strength: Base Metals– DBB +3.1%. Heating Oil– UHN +2.8%. Solar– TAN +2.8%. Oil– USO +2.7%. Steel– SLX +2.4%.
    Sector ETF weakness: Healthcare Providers– IHF -0.7%. Biotech– IBB -0.7%.

    Dow leaders: MRK +3.3%. CVX +2.4%. BAC +1.7%. GE +1.7%. HPQ +1.2%.
    Dow laggards: KFT -1.6%. PFE -0.5%.


  16. SS, I’m around, not in anything at the moment.  If we get a sell-off, I think I’ll add some strangles. If we move up, I’m going to buy some put verticals.  This area of the RUT feels like a no-man’s land to me.  Are you looking at April yet?


  17.  Phil…Seems pretty quiet here today so I’ll enter something I’ve wanted to share with the group.  Have you ever heard the term ‘Portfolio Stabilization’?  I’m sure it’s been used.  Began thinking about it last week when I read someone’s post saying she had experienced a drop in her portfolio saying she had lost 20% in one week.  Opt, I believe, told her if that’s the case she’s not doing things right.  Then I looked at my own portfolio, which in the past few months has acheived a high degree of stabilization.  I’ve noticed that on up days, down days, even days, it doesn’t matter, my portfolio rarely varies more than 2%.  And over the long haul it just slowly increases in value.  I attribute this not to investment choices, but to style.  Thanks to you and others on this site I’m paying close attention to position size, delta neutrality, downside protection, and concentrating on selling premium rather than buying it.  I’ve developed increasing patience, not having to trade daily, or even weekly.  I’m concentrating on the finer points of trading, letting the profits come to me, rather than the other way around.  It’s a great topic for detailed discussion on a weekend….how to stabilize your portfolio……I appreciate the help everyone here has given in getting me focused on this principle.  I’m pumped!…in a calm sort of way.


  18. judah – no, still in March.  Will look soon.


  19. Hi Phil
    Is the AAPL Jul bull spread 185/190 still attractive debit 3.15 or can we add something ?


  20. SLXP/qc – the stock has shot up like a rocket, and I am leery of chasing them.  The company did a stock offering in Nov at $21, so that could be somewhat of a floor (loosely).  They have upgrades all over the place, and one has a high target of $58.  I think that is a bit crazy, but hey…I am a scientist!  As for the label change, not sure which drug you are referring to, as I don’t see an FDA alert on them.


  21. Infant/
    yes, it is very intersting topic,
    Let me share what I lern in 4 month with Phil:
    I found that buy stock and sell calls is little bit boring for me with low potential, Buying LEAPS is too volotile, the most comfortable strategy is buying long term in the money call spread with 50% potential and sell 1-2 mo calls and puts with 5-10% per month additional income and when they drop in premium let’s say from 0.6 to 0.2 it is not much left with high risk of bounce back so I buy them back and wait next oportunity.
    Will see, may be I will lern something new and comfortable in the future here


  22. I bot 1/4 of april SPX strangle on friday – already in green


  23. Phil
    Holding ERY Feb 11c and 10p sold c for ..45 now ..47 and sold p for .80 now .02 shall I close for profit or roll to March 12/10 c/p thanks


  24. SXE/Ac – I’m not hot on defense names because it’s the last part of the budget that can be cut and, one day, MAYBE, someone will break that sacred cow pinata.  We are currently spending $1Tn on defense – $663Bn on "official" DOD spending and $350Bn on the 2 wars.  That’s 60% of our deficit but, more importantly is 4x our other "discretionary" government spending so, at the risk if brigning down the rath of the neo-cons, it may occur to someone that we don’t have to cut ANY spending programs at all if we just knock 10-15% off Defense, which would still leave us at 10 times what China (2nd largest) spends on Defense. 

    When Ike was leaving office, he gave a great speech where he prophetically said:

    This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.  In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

    STEC/Pharm – I don’t know why they don’t get more live, they are a great grower.  Needham just downgraded them today too.  I don’t see them as a takeout, you can usually build a new fab for less money than some company paid for their old one and, of course, no one really wants old-line tech until it’s very cheap.  Still you can sell the March $14 puts for $1.45, which is a nice entry on them.

    Dollar down 1% since last night but back to 90 Yen, which will thrill Japan so I guess we have a bouncy Euro today ($1.37 now).  EWJ is a fun way to play that move in Japan with the $10s just .05 and .20 out of the money.


  25. Tchay, What levels are your April SPX strangles?


  26. Phil
    I am scoping the horizon for some bullish energy spreads, and need your opinion. GS has predicted oil to be trading at $85 in 90 days, $90 + in 2010, and $110 in 2011. I know GS has the ability to manipulate, but do you put any relevancy in these predictions. I like the oil and gas sector because the alternative energy efforts are still not cost effective. Your thoughts?


  27. hi SS and Juda
    I am new to strangle, do you know what is the range for NDX, RUT, and or SPX — and is it too late to open march and should look for april
    thanks JC


  28.  tchayipov/ 10:38 am      I use the same strategy a lot myself.   Only difference is I tend not to buy the call covers back until the day before expiration (if they are still worth anything).    I wait for an opportunity to sell the covers when the stock I’m playing has run up, then I sell them.    I then  let them ride until the last day before expiration, squeezing as much time value out of the covers as possible.    THis can be done quite safely, as you know, because you own the far out ITM calls which go up at the same time.   For instance, I’ve got $200 AAPL covers right now, still with 2.50 or so time value.  This will be lost rapidly within the next 3 days (a gain for me), so I’ll buy then back on Friday, not before.  I’ve tried it the other way, to buy and sell the covers, but then I have to watch the trade all the time, and I don’t always hit it right.  My method of just leaving them alone means I can vacation without checking my computer all the time.  I consider these spread trades great ‘portfolio stabilizers’.     


  29. Stabilization/Iflan – Sure, that’s what I call "balance" and I’ve written lots on the subject but perhaps, if you remind me on the weekend, I can dig up and refresh some of those articles.  I’m glad you found yours and achived the inner peace (and profit) that does come with balance! 

    I just picked up DIA $101 puts for .50, just for fun though.

    AAPL/Yodi – It’s fine at $3.15 and the time to add is if they pull back and you still have faith, THEN you sell puts into the initial excitement.  Since your b/e is $188, we can wait until AAPL fails $185 and then sell, perhaps the July $135 puts, now $1.50, for $3+ (the price of the current $150 puts).

    Good way to play Tcha!  That’s key too, people need to find strategies that "fit" them.  What works great for one person may not work great for you, that’s why football teams have quarterbacks, running backs, tackles and receivers – even a great athlete doesn’t just play every position but, if they find one that’s right for them, they can have a great career.  Remember when Michael Jordan went to play baseball – disater!  You can similarly be great at one kind of investing strategy and suck at another – the trick is finding out what works for you.

    ERY/Yodi – I’m pretty sure that put will expire worthless and the caller still hs .20 in premium but certainly stop it out if they head higher so you don’t lose.  Rolling is fine as I firmly do not believe the global economy can support $80 oil so rolling up to March $12s (.80) or March $13s (.55) is fine but, timing/wise, don’t you want to wait for them to bounce back a bit if you are going to short them?

    Obama not doing much for CCJ.

    GS/Gel – I think they are on drugs but they are evil drugs and they may pull it off, just like a crack-head might lift the front-end of a car (while snapping his ligaments in the process).  It’s never a bad move to bet gasoline will be higher by the May holiday driving season through about July 4th.  That’s where I’d go and VLO is one way to play or shorting Yodi’s ERY, which is way more dangerous but at least safer than going long on ERX.  Alternative energy is cost effective with oil over $70, the problem is that people who are serios forecasters (not GS) don’t see $70 being sustained until we have a real GLOBAL turnaround in jobs. 


  30. Hi lflantheman
     
    Your explaination on the call covers AAPL as well as in general, do I understand this correct you hold the stk and the caller is short against the stock. Thanks


  31. Phil/Defense  1Trillion?  I say we piss off the neo-cons. This is a huge burden for the U.S. taxpayer (and their children and grandchildren-sound familiar?) with much of the world benefiting from it as well……


  32.  yodi/  11;23       No.   I never (almost never) buy stocks.     I buy a deep in-the-money call, far out, then sell monthly covers on those calls.  Example, I might buy GOOG Jan 11 $500 calls, then sell monthly or so calls on those.  For instance, I might right now sell  March 550′s against the Jan  500′s……then repeat, repeat, repeat.   


  33. Phil – as an AD AF Officer(getting paid to get my Master’s degree right now, that’s why I can converse with you all :) ) I totally agree. Besides the expensive wars, another huge cost is the standard 3%+ cost of living increase per year that military and (if Im not mistaken) all Government employees get. Im definitely not going to complain about getting a fat raise, but at the same time I can recognize that in today’s environment it is wrong. A recent GAO report on miltary pay found that we are actually overpaid when compared with civilian counterparts and have been since 2002ish. When comparing military and civillian salaries they do not add in our BAH (Housing allowance) or BAS (food) which usually ranges from $700-2000+ a month in benefits! And don’t even get me started on end of the fiscal year purchases (Im a Finance Officer)… Basically most bases (at least AF bases) get their $$$ for the year and spend very conservatively until the last few months of the year. That is when they realize ‘oh shit we need to spend our $$$ or we might get our budgets cut next year !’(Something I hate about the system, ending the year with a surplus is considered VERY BAD). So you get these crazy end of the fiscal year purchases like 50 inch flatscreens for waiting rooms that *might* see 4 people a day and $700 ergonomic chairs for an an entire office (which just had purchased new office chairs 18 months ago).  Again, not going to complain about getting raises but the right thing to do in today’s economy would be to slash pay of military members/civilian employees along with the DOD budget. I know it will never happen, but it would also help the budget. Sorry for my tangent on government waste, but it’s pretty frustrating seeing all the waste and not being able to do anything about it!


  34. Phil, you mentioned VLO as a play… is there a recommended spread? Also, is SLB a possible play as well?


  35. lflantheman
    Thanks for your reply  I buy stks if they pay a good interest other wise I do the same just interesting you hold the caller until the last minute I find if they in the money you just might called away. Obviously sometimes you loose or gain when selling the stk the next day or so.



  36.  
    Pharmboy

    Salix upgraded ahead of FDA’s Xifaxan decision
    This is the approval I was writing about
     
    thanks
    Analyst expects FDA to approve Salix drug to treat neurological damage from liver failure
    On Tuesday January 26, 2010, 1:51 pm EST
    NEW YORK (AP) — An Oppenheimer analyst said Tuesday that Salix Pharmaceuticals Ltd. will win new marketing approval for its drug Xifaxan, driving up sales and boosting the company’s profit and sales for the year.
    John Newman said he thinks the Food and Drug Administration will clear Xifaxan as a treatment for hepatic encephalopathy, or neurological damage caused by liver failure. Newman upgraded the stock to "Outperform" from "Perform," and said he now expects Salix to earn 46 cents per share this year — almost double his prior estimate of 24 cents per share.


  37. All TOS users- my "buying power" was cut in half this morning. I contacted TOS and have been informed as follows:
     
    Our clearing firm has doubled the requirement for index options in PM accounts to compensate for increased requirements they are being charged by the OCC. This change is being reflected as a buying power adjustment. We do not know if this will be a permanent requirement change and are working with the clearing firm to explore other alternatives.
    The bottom line is that the clearing firm has doubled the margin requirement on ALL index options, apparently across the board. I just got off the phone with TOS and they basicallty say that no margin call requirements will be enforced if the margin call results only from this adjustment. In essence, they are saying "trust me". TOS also says they are working with the clearing firm to work this out but the prognosis is unclear. It may just go away or it may be made permanent.
    I expressed my very strong objection to such a change without warning as it places me in a much more tenuous margin situation vs what existed last week. Completely unacceptable. I urge all TOS user to contact them and express your concerns. This will put the short strangle plays in a different situation entirely.


  38.  yodi        I watch the time value carefully on the last day .   Below 25 cents or so, then i’m out and done.   I wont risk getting called away for a quarter.   


  39. Energy/Gel – I have given the matter additional thought and I would be VERY careful about following what has been effectively GS and JPM both putting top-spin on a bounce in oil that was driven by a very easy to anticipate pullback in the dollar off the 80.50 line, all of which is incredibly easy to manipulate on a very thinly traded week.  What possible fundamental should have driven oil up $3 this morning?  Nothing, just JPM’s buy and GS’s hot air plus some very timely trading on a day when volumes are the lowest of the year.  If someone was looking to fool you into taking your cash long on energy so they could put a knife in you tomorrow – today would be a good day for it. 

    Defense/1020 – It’s funny because you can’t talk about cutting defense as it’s unpatriotic and anyone with the talking points can immediately shut down any questions with the line: "So you want the next terrorist attack to be on your head?"  Sadly, it’s exactly what Orwell predicted in 1984 – keep the population in a constant state of fear of war and terrorism and they will put up with practically anything to ensure their safety, even giving up their own rights and freedoms in the name of "peace"  Check out this diagram from the book – does that look familiar?  

    The primary aim of modern warfare (in accordance with the principles of doublethink, this aim is simultaneously recognized and not recognized by the directing brains of the Inner Party) is to use up the products of the machine without raising the general standard of living. Ever since the end of the nineteenth century, the problem of what to do with the surplus of consumption goods has been latent in industrial society. At present, when few human beings even have enough to eat, this problem is obviously not urgent, and it might not have become so, even if no artificial processes of destruction had been at work.

    The Ministry of Penty rations and controls food, goods, and domestic production; every fiscal quarter, the Miniplenty publishes false claims of having raised the standard of living, when it has, in fact, reduced rations, availability, and production. The Minitrue substantiates the Minplenty claims by revising historical records to report numbers supporting the current, "increased rations".

    The Ministry of Truth controls information: news, entertainment, education, and the arts. Winston Smith works in the Minitrue RecDep (Records Department), "rectifying" historical records to concord with Big Brother’s current pronouncements, thus everything the Party says is true.

    Thanks Jrom – Nothing we don’t suspect but an insider’s view like that adds so much to our understanding.  It is a shame that after all these years, we still have tremendous amounts of military waste.  I think people who risk their lives to defend this country in a volunteer army should be well paid and should get perks but that doesn’t mean we can’t still watch the bottom line and create a system, like any decent corporation, that whittles down inefficiencies for the greater good.

    VLO/Bord – They are super volatile so a buy/write at $17.89, selling July $17 puts and calls for $3 hits $14.89/15.95 gives us our target $16.50 entry with a not bad 14% return in 5 months.  You can play for additional upside by adding (or playing alone) the very reasonable 2012 $15s at $5, selling the $15 puts for $2.20 and you can cover that with the 2012 $22.50s for $2 for a net $1 or less entry on the $7.50 spread or you can just work down the net $2.80 by selling June $20s at .67 – 4 sales like that and you have a pretty free ride and you can stop 1/4 out at .75 and 1/4 at $1 and that just raises your long basis by .37.

    TOS/Pstas – They did kind of warn us about this ages ago, mid February just seemed very far away at the time…


  40. Gucci, I haven’t entered any April strangles yet, and with more than 8 weeks out, I’d be looking to at least 10% higher on the calls and 15% lower on the puts.  Maybe 1200/920 for SPX and 700/520 for RUT.  I don’t play any others.  My March strangles are 1160/950 and 680/540.  Others on this board have tighter strangles for March than mine.  I think it is best to wait for a surge in the VIX, which gives you a better price.  On the put verticals, we usually look for the highest level we can get for $2 or less on a $10 spread.  The March strangles don’t look like they would pay enough today, but if we get a big down day with a big move in the VIX, I would still enter March.  That is one reason Peter stresses only doing this with PM, so that you have plenty of dry powder to use on the most advantageous days, which tend to be down days.
     
    I think Peter is looking this week at April levels and he usually lets his acolytes know when he has started a new month or adding to existing positions.


  41. TOS- Unless I am mistaken,this is something new. The earlier notice was for 2X and 3X options.


  42. Bord/VLO
    I am moving into VLO today with a Buy/Write. I believe they are a well managed company with a bright future. They are aggressively adding more retail outlets, and are the largest refinery operation in the US. Sounds like a CONTROL advantage to me.


  43. We’re making small victories with the S&P now over 1,088 so we’re waiting on the RUT, Dow and NYSE to confirm the 5% lines. 

    Leadership is coming from SOX and Transports despite rising oil prices, which is one of the reasons I think it’s BS as how can the transports rally on a 5% single-day jump in fuel.  Hold flat maybe on improved outlook but for airlines, for example, it’s a 5% jump in 30% of their costs – really? 

    2x/Pstas – Hmm, now that you mention it, you may be right.  I do remember a lot about the ultras and I didn’t pay attention because it seemed sensible (we knew we were getting away with murder on those).  This will have a wider effect and I wonder how much of today’s action is being driven by margin adjustments at that rule could force a lot of short covering.

    The Federal Home Loan Bank of Seattle has launched 11 lawsuits aimed at forcing Wall Street banks to buy back souring mortgage-backed securities. The bank says it was misled by underwriters about the quality of $4B of securities it purchased during the housing boom.

    Bank of America (BAC) says credit-card delinquencies fell to 7.35%, its lowest rate in a year, from December’s 7.44%. The bank’s write-offs and delinquencies of 30-59 days also fell. But delinquency rates increased for Capital One (COF) and Discover (DFS).

    Companies are pulling out of debt sales at the fastest pace since credit markets seized up in 2007. Analyst Jonathan Moore: "Investors are concerned about Greece and the broader economy much more than they were a couple of months back. They understandably want to charge more, and most companies aren’t willing to pay that price."

    Investors retreated into cash and bonds and positioned themselves for halts in both Europe and China’s recovery, according to BofA/Merrill Lynch’s latest fund manager survey. Equity holdings dropped sharply as 12% of asset allocators went Overweight cash in February, vs. an 8% Underweight reading last month.

    The "wall of worry" that bull markets like to climb remains alive and well, says Mark Hulbert after his newsletter sentiment index drops 45 points in one month – actually a good sign: "By no means are we seeing the kind of stubbornly held bullishness that is a hallmark of major market tops."

    The number of U.S. companies raising their earnings forecasts this quarter hits 10%, while only 4.1% lower them. At the same time, analysts are cutting their projections, a divergence that may force Wall Street to raise estimates later this year. "It tells us the stock market is cheap," says one strategist. "The chances of companies beating estimates are extremely high."

    Huge win for GOOG (as we expected, thank you)!  The FCC will propose a minimum broadband access speed for Americans, hoping to bring 100 mbps to 100M households – more than 20 times typical speeds – as pressure builds on telecoms (including CMCSA, TWX, T, VZ) to loosen control of Web access in the wake of a Google (GOOG) gigabit fiber project announcement.

    In a jab at rivals such as Apple (AAPL +1.5%), Research in Motion  (RIMM -1.3%) CEO Mike Lazaridis warns that bandwidth-guzzling phones will choke already congested airwaves: "Manufacturers had better start building more efficient applications and more efficient services… If we don’t start conserving that bandwidth, in the next few years we are going to run into a capacity crunch."

    Yay SO!  Obama announces the loan guarantee for Southern Co. (SO +1.3%) to build two nuclear facilities, part of the first new nuclear power plant in three decades. The administration hopes to triple authority for guarantees to more than $54B.


  44. This is unbelievable stuff, One West/Indymac deal details that will make you sick (video).  Also explains why banks are so oddly unwilling to modify loans. 

    Also, on the same subject, here’s a site of one of those legal groups that is working to VOID mortgages entirely on behalf of the homeowners.  Fun stuff – and they claim 1.8M visits. 

    Oops, looks like we’re rolling over at 12:30 – I’m still in the DIA and USO puts (scaled in).


  45. Buying a large long position today in CHK and CNX. My belief is NG will have a much larger position in the energy future, as it is clean and cheap. Electrical generation will be the big catalyst downstream as carbon restrictions are with us permanently. I like CHK as they have the largest reserves, and might be a takeover target. CNX has both coal and NG for electrical generation.


  46. juda/
    my position is:880/1185 with 960/970 spread


  47. juda
    on my March strangle I start slowly buy back my calls ( not much left and too much to loose (margin if market will go up))


  48. Phil, I sold INTC FEB $21 puts @0.76, sold AMAT puts @0.65, sold WFR puts @0.8, should I roll or wait since there’s only 3 days left before expiration?
    thanks


  49. I have sold AMAT FEB 14 puts @0.65 and WFR FEb $14 puts @0.8, should I roll or wait?


  50. Energy/Gel – Sensible long-term holds.  I’m pressing for decentralized generation of solar but no one will back my program so we’re going to be stuck with coal, nukes and NG down the road.  We lose 50% of our energy through tranmission and you can take a home off the grid for about $15,000 per BR – seems smarter to me than "drill baby, drill" but it’s going to take strong government leadership to….  oh excuse me, I just laughed myself off the chair….  OK, it’s going to take strong gover….  Oh forget it!  8-)

    Waiting/Jossie – INTC is looking good, they may wipe out those puts but 50% in the hand is worth 50% in the bush so I think I’d have an itchy trigger finger there.   Since you can roll them even to the March $20 puts, I wouldn’t worry too much and they do still have .15 premium.  AMAT – well, assuming you sold $13s, then same deal as long as we hold our 5% levels.  On WFR I’lll guess it was the $13 puts and, again – same deal – as long as you intend to roll and the ratio of the spread you want to roll to remains – it’s no big deal.

    Oh darn, it was the $14 puts!  I’d roll the $1.22 AMAT $14 puts to 1.5X the March $13 puts and the WFR $14 puts also down to 1,5x the Mach $13 puts. 


  51. AMAT/
    I closed today my short put position with 25% gain


  52. Phil
    My GLD positions are way up today.. Is this a good time to blow out of them?


  53. Phil/Energy
    I, like you, are not counting on government direction… You may be laughing, but it almost makes me cry!


  54. no volume…why is FAS running like a race horse?


  55. "….seems smarter to me than "drill baby, drill" but it’s going to take strong government leadership to….  oh excuse me, I just laughed myself off the chair….  OK, it’s going to take strong gover….  Oh forget it!  "
     
    Thanks Phil….that’s the hardest I’ve laughed in a while…that’s worth half the price of admission.


  56. Bomb at jpm’s Athens office, does gs have an Athens office?


  57. JPM bomb, they better tighten up security in Spain… those guys know how to blow stuff

    UUP tempting me


  58. BIDU – anyone adjusting their put spreads today?  Tempting to close the putters here, up 60%, and leave the long puts naked, but that’s dangerous…


  59. Phil:
    Can you elaborate on the DIA trade? Thks


  60. Opening a new position on EW (Edwards Lifesciences) I sold the March 90 puts. This company makes money like ISRG, and is recession resistant (heart valves)


  61. Alsos
    Phil is a master at keeping you laughing, as well as making you money. – It is like " laughing all the way to the bank"


  62. GLD/Gel – Huge gift today.  Depends how weak the dollar gets but one bounce and those gains earase so at least cover or take some profits.  

    Gov/Gel – Hey, what can you do?  If they are going to screw things up, we may as well bet on them screwing things up. 

    FAS/Jim – Yeah, crazy.  XLF up 1.5% so they gotta move I guess. 

    LOL Alsos, as Gel says, so funny but then sad…

    JPM bomb/Jrom – Someone must have a Gang of 12 tour book!  Leave it to the Greeks to start a vendetta.  Not bothering JPM, they are up 2.3% today. 

    Also not bothering anyone today:   Failure to reduce the swelling U.S. debt could be catastrophic, Fed inflation hawk Thomas Hoenig warns: "If pre-emptive corrective action is not taken regarding the fiscal outlook, then the United States risks precipitating its own next crisis."

    The Fed’s Kocherlakota says the U.S. jobless rate is not likely to fall below 9% this year or 8% next year. He sees 3% growth over the next two years, slower than many economists forecast. "To get a true expansion… the hiring rate has to pick up, and we have yet to see evidence that it will do so."

    NAHB Housing Market Index: +2 to 17, rebounding from a seven-month low. Current sales conditions +2 to 17 and sales expectations for the next six months rose 1 to 27, though prospective buyer traffic stayed flat at 12. Chief Economist David Crowe: Builders are just starting to see effects of the tax credit but "several limiting factors" still weigh on expectations.

    Australia’s resilient economy could soon face a housing bubble of its own, caused by high debt levels and misguided government policies designed to pump up asset prices, according to an outspoken skeptic of the nation’s housing boom.

    Dow leaders: BAC +4.4%. GE +3.1%. AA +2.6%. BA +2.5%. CVX +2.4%.
    Dow laggards: KFT -1.9%. PFE -0.3%.


  63. BIDU/Mr. M – They are bound to have trouble at $500 ish, which is what I think is fair for them anyway.  Of course, very essy for them now to drift 10% up and down of that line.

    DIA/Fprat – In DIA $101 puts at .50, DD at .40 (now 2x at .45 avg), 1/2 out at .45 is current goal and, if successful, then DD at .35 for agv 2x at .40.  At any point there is a .10 overall profit though, more likely to just happily cash out as we play this game for nickels.

    EW/Gel – Sounds interesting.  They had a nice pullback off $95 but held $85 well so watch that line. 

    Thanks Gel!  I like that.  It’s that whole "Fun and Profits" mission statemement…


  64. hi Iflantheman
    Just curious on AAPL feb short 200 call is now up 4.2 from this morning, do I understand it right, you are holding a deep ITM call like in July or Jan mos for example, you are selling feb 200 call, if by friday it drop to 0.25  you buy it back, but what if aapl stay above 200, do you roll up th estrike to the next mos and wait till then …. Just want to lear your stragety  thanks ahead JC


  65. Re: EW… I’ll post my research later today… Have a meeting scheduled in a couple of minutes.


  66. Phil any thoughts on clf    thanks 


  67. Phil, It’s been a pretty quiet afternoon. Your thoughts into the close?


  68.  Phil, I am new to the board, and since it seems to be slow today, was wondering if  you can comment on a CIM Buy/Write strategy. (NLY spinoff) Seems like buying the stock for 3.70 a share, and selling the Sept. $2.50 calls for 1.20 each, gives you a nice cover to collect a dividend of .17 a share in March and June, for a total of .34 a share. The obvious issues would be limited chances to roll and a dividend reduction.  Just seems to me that if it holds $2.50 by Sept, you have not risked much, and if it does not hold $2.50, your net entry is aprox. $2.16 a share. Thoughts?


  69. Phil, re: AMED
    Message posting below, copied from Amed Yahoo Finance site may underpin an explosive short squeeze in AMED.  If analysis is correct, then the real daily trading volume in AMED is only about 15% of that reported.  So, it would take the 53% (15million shares) short interest almost 100 days to cover!
    Naked shorts are thought, per the article, to be hiding their failure to deliver stock with 1 million share back to back option/stock trades with (fraudulent?) Institutional help.  Not my area of technical expertise, so I defer to your opinion Phil? A Block trade of 1mm shares seems to show up late morning on many days.  The reporting of short interest each 15 days never shows a decrease in the (over 50%) short interest.
    When AMED issues 09 results (about $4-95) and 2010 guidance (at about $5-60 to $5-70 eps) on Feb 23rd, the 16 analysts will be compelled to issue new guidance (they are currently averaging $5-14 for 2010).  Even putting a 13x p/e on Amed, the stock should jump to $73 and 15x = $85 (justified by impressive history of earnings growth).
    Do you buy the technical explanation below Phil?  If so, isn’t AMED going to explode to the upside? for both fundamental reasons and inevitable short squeeze??
    I’ve been long 15k shares of Amed for ages and thinking of buying more if you feel this story of  naked short manipulation (and huge exposure) is credible.  I’m more of a strategic long/short old guy, but I’m learning a lot since recently joining your site.  My next detailed analysis article will be on CIEN – building a long position but still researching in detail using my ex Nortel background.
    Info on large block trades     15-Feb-10 12:58 pm    

    To any who are thinking about these daily trades of options and stocks, here’s a link to look at:

    http://www.sec.gov/news/press/2009/2009-

    From this page, download and read the two pdf files ("additional materials") which detail the complaints. Here’s an excerpt to get you interested:

    The second type of transaction – referred to herein as a “reset” – is a transaction in which a market participant who has a “fail-to-deliver” position in a threshold security buys shares of that security while simultaneously selling short-term, deep in-the-money4 call options to – or buying short-term, deep in-the-money put options from – the counterparty to the share purchase. The purchase of shares creates the illusion that the market participant has satisfied the close out obligation of Reg SHO. However, the shares that are apparently purchased in the reset transactions are never actually delivered to the purchaser because on the day after executing the reset, the option is either exercised (if a call) or assigned (if a put), transferring the shares back to the party that apparently sold them the previous day. This paired transaction allows the market participant with the fail-to-deliver position to effectively borrow the stock for a day, in order to appear to have satisfied the close out requirement of Rule 203(b)(3).

    Sound familiar? I think some of the guessing these past weeks might have been pretty accurate.


  70. "Next month, nine Verizon smartphones with accompanying 3G plans will be able to make unlimited Skype-to-Skype calls, as well as call out to regular phones internationally at a reduced rate. That’s worth both a "whoa" and an "about damn time."
    http://phones.verizonwireless.com/skypemobile/ (via Gizmodo)


  71. FTSE got right to our 5,250 breakout line (from Oct) and stopped there.  All of Europe had an insane day, up 1.5%, back to zero and then up 1.5% into the close.  So far, we’ve just had the up part…

    Notice the Dow is about way ahead of the FTSE but usually the FTSE is a truer indicator, with the Dow lagging.  This chart (I’m using the 3 month view) stops yesterday so you have the FTSE punching through that -4% line and the Dow exactly following.  I’d say any rejcection in Europe tomorrow may be mirrored by our indexes and that 5,250 line was a big deal, along with DAX 5,750.  I don’t see the Dow breaking up without international confirmation tomorrow. 

    CLF/Kelly – Well that’s a major bet on US Manufacturing despite their name chanbe (was Cleveland Cliffs in ’08).  I would have liked them better $10 ago when they fell but they held a double tap at $39 and you have to respect that.  The company has plenty of fans so I’d take advantage of the high premiums and go artificial with the 2012 $40s at $16.50, selling the March $50s for $2.50 and the March $46 puts for $2.30 for a nice net $11.70 on the $10 spread with 2 years to roll.  If they settle down into a range between $45 and $55, you can look forward to pulling down $2-4 of monthly premiums on your net $11.70 for a nice 20% MONTHLY ROI.  This is one you have to want to DD on bad economic news as they could see $30 again but keep an eye on X for early warning signs.

    Thoughts/Juda – I’m not liking the move yet.  Commodity rallies have all been reversed lately and, if they are not reversed, then I’ll be back to thinking we are rallying on the wrong sectors and I’ll end up flipping short again so, either way, this will cause me to go short so I’m getting a small jump in it by betting against it today and I’ll roll to March puts if I’m wrong and we keep going up because oil and gold are hot again.  Rotation makes me happy, not commodity spending. 

    Welcome Tim.0!   As long as you are comfortable with the fact that Chimera translates as "Hard to believe" or "Difficult to understand’ and realize that these guys thought that would be a good name for an investment company – that’s fine…  I agree with your premise but realize that the low premium (and this is typical with dividend payers) of the Sept $2.50 calls (net $3.70 for the call buyer) means there is no reason for them not to exercise you out of your stock right before ex-dividend day, steal your dividend of .17, and then re-sell low premium calls to some other sucker the next day.  I think if you want to play a stock like this you simply SELL the naked Sept $5 puts for $1.70 for a net $3.30 entry, saving yourself .39 and leaving a full $1.70 upside if called away.  If the stock is put to you, you are in for 10% lower than the current price and on the dividend train but CIM would NOT be a choice of mine as I just did a whole post this weekend on way better dividend plays (also, see our Buy List under the Portflio tab). 

    AMED/Tusca – That fail to deliver BS is the rule, not the exception, which is why it’s a total joke to pretend short selling is legitimately practiced (it is but only by retailers who don’t know how to cheat).  Meanwhile, I don’t put too much credence in those reports, you never know who is gathering the "facts" or what their intention is.  I like your value ideas on AMED because they are a good stock but, frankly, seeing nonsense like that associated with them makes me think it’s more of a "stay away" deal because obviously, one way or another, manipulators are on top of it and that means it could go violently either way without warning or reason.  They had a great run since you posted on them (thanks, by the way) but if they can’t handle $60 it’s time to lighen up or cover.

    Skype/Kwan – Are they still under Ebay or did Ebay spin them out?


  72. Skype – partially sold (ebay has roughly a 1/3 stake left) from my understanding


  73. phil – any suggestions for overnight covers or you going naked.


  74. SLXP/qc – ok, so I expect them to get the approval for this barring an unforseen circumstance.  For a one trick pony (they have a few other small market items), they are priced way high, with PJ the only firm with a 58 target on them.  I would scale in wisely, and hedge for a drop JIC.  I think they get approval for the IBS data as well in May.


  75. Covers/Samz – We’re kind of on track sofar, no major pullbacks to chase us out of our full DIA covers and, if you sold the $103 puts, There’s still tons of premium to work off. 

    As to my short DIAs, still have them but covered with the $102 calls but I’ll be getting out into the close most likely, happy to get out even on the overall trade. 


  76. Phil are you keeping the USO puts that you bought this morning?


  77. Buying some GLD 106 Feb P for 15c. This gold run up is crap, and they are gonna squeeze every thing out.  There you go MrM!


  78. USO/EMC – Yes, I am, I’m going to give it until inventories.   I haven’t even DD’d yet at .36 (now .24) – I want to see what happpens tomorrow. 

    I did stop out those DIA $102 calls with a .17 gain that offset the majority of my loss on the $101 puts. 


  79. GLL is a fun way to play gold down, Pharm.  The March $10s are must .45 and GLL was $10.50 on Friday and $11 the week before.


  80. AMED – Phil excuse my naivety, but trying to understand why such a huge naked short interest for so long.  The mkt manipulation is above my experience, but don’t fundamentals ultimately rule?  It must be becoming painful for the 53% short interest as the share price increases.  The only conceiveable reason I can fathom for maintaining such a huge short interest is that they know something about revival of healthcare legistlation not yet public (though it looks unlikely to me/and others).  I’ve interviewed management on the business story and outlook, which seems solid.  And, industry mgt don’t expect any pricing impact from revived healthcare legislation this year and are therefore planning to issue guidance accordingly.  Arn’t the manipulators just p…ing into the wind of positive news, results and guidance?
    I’ve no experience of a short squeeze, but isn’t it going to be difficult for the manipulators to buy back these shares?
    Amed is one of my core long term holdings rather than a trading stock.  Am I being sensible?


  81. XLF — I own the buy write we spoke of a few months ago.  I own the stock at $14.99, am short the the March 15 puts at 71.75, and the march 15 calls at .65.  The position is mildly negative for me now.  Any adjustments that I missed?


  82. XLF.  Sorry, that’s the mar 15 puts at .70


  83. Oil action was very strange today.  Oil shot up to $77.28 by 11 and then flatlined along the $77 line all day. 

    Shorts/Tusca – You have no way of knowing what shorts represent.  People can be short on AMED to protect much more complex positions.  You should read Andrew Wilkinson’s posts every day as he gets into the nitty gritty of all the strange plays people make to set up complex spreads.  Short interest is not all that accurate anyway – if it were, the sites that identify short squeezes would be famous but they are not.  Overall, I consider high degree of short interest a factor with about as much weight as a 50 dma – it’s nice if it’s in your favor and something to be cautious about if it goes against you but, otherwise, you should stick to the fundamentals.

    Just because you love a stock long-term doesn’t mean you have to put blinders on it as it hits overhead resistance.  Nothing goes up forever and I think you brought AMED to our attention around $53 and it has since gained 15% to $60, which is about where it topped out after its last great run in Jan.  Even if you don’t want to get out of it at this point, we have a rule "ALWAYS sell into the initial excitement" and you could get $1.10 for the Feb $60 calls that expire on Friday.  That’s $1 for 1 week or a $52 premium for a year on a $60 stock or 86%.  Since your target is $85, there is no logic at all in not taking that play, as you can clearly roll them up to 1/2 the March $65s, which are already $1.75. 

    Small-cap executives are buying their own shares at the fastest pace in a year, according to Insiderscore.com’s tracking of the Russell 2000.  Fastest pace in a year is misleading as last year it was over 90% selling but still a good sign.

    Starbucks (SBUX) up 1% with news its Seattle’s Best brand coffee is being added to all Burger King (BKC) restaurants.

    Opportunities still exist in gold investing, says USAA Precious Metals and Minerals manager Mark Johnson: "Think of gold as homeowners insurance … The question when you own a home isn’t whether you carry insurance. It’s how much you have." (ETFs: GLD, GDX)

    XLF/JCM – Looks on target to me.  If not, you can just roll to June whatevers.  Meanwhile, you went in for $13.64/14.32 and now you are at net $13.17 so down about .50 so far.  Keep in mind that our early entries are meant to give us discounts to the current price and a straight purchase of the stock would have had you down .76, which is 2% worse, nothing to sneeze at. The real quesion is, what is your intention.  If this is 1x of a scale then not a big deal if put to you.  Had you sold the Feb $15 puts and calls, you’d owe net .76 to them and then you could either take the assignment and be in 2x for a .08 loss or  roll to the June $14 puts and calls for $1.86, which would drop your net basis $1.10 to $12.54/13.27 and still at 1x.  A $1.46 profit call away at $14 in June would still be over 10% so no tragedy there so it’s really a question of how confident you are in XLF here as you can either roll to that spot or take your assignment and be in 2x at $14.32 and THEN sell the June $14 puts and calls for $1.86 and then you are in for net $12.46/13.23 on 2x with over 10% profit if called away at $14. 


  84. Re: Amed,
    I did a bit of research too because I have some chips in on this AMED spread. Could not finds much new, although it does seem like they have been making acquisitions lately. A key thing to remember with these kinds of companies is that they live and die by government Medicaid/Medicare reimbursement rates. And I have noticed in the past, if there is ANY whiff of rumor that rates might be cut, or held steady, these stocks drop hard and fast. Anyone else can chime in on this with new information?


  85. Interactive Brokers was quoting 1.65/1.95 on the GLW Mar 20 straddle but wouldn’t fill, even at the bid. You guys ever had this happen?


  86. pstas (11:48 comment)/short stranglers/margin on index options,
    Yeah, I got a reduced buying power too, but luckily I do follow our margin rule of thumb, so none of my account margin got below zero today.  Actually, doubling the margin would be likely to be conflicting with the portfolio margin rules.
     
    Nevertheless, taking the worse case if the margin is doubled, it would only be doubled At The Money, to 15% for broadbased indices (instead of a rough 8% that we’ve been assuming).  Applying the equidistant tests for PM accounts would still be beneficial to us, and the margin would not usually be doubled for OTM strikes.  We just need to roll them sooner.  So, I’m not sure what was the change, or specifically what factors in the PM calculation have changed.  We’ll know more tomorrow hopefully.


  87. Back from a long lunch meeting…. Re earlier post I made on EW (Edwards Lifesciences). I have been in it before, and still like it. The company makes and sells replacement valves for advanced heart disease, with more than 200,000 applications in the US. This company sells its stuff in over 100 countries and their foreign income is over 50%. The company has a very strong balance sheet with 18% profit margins and 23% ROI. The kicker I like with this company is their product does not require open heart surgery, as all that is needed to replace the original valve with the EW valve (breakthrough product called Sapien) is to insert it as if it were a stent – snaked through the artery in a minimally invasive proceedure. Recovery is 1 to 2 days.Traditional surgery requires a weeklong hospital stay and up to a month for recuperation. This is a dream for insurance companies. Fourth quarter earnings jumped 25% on a 12 % increase in sales, and I think this time saving and money saving product has a great future. Because of the worldwide penetration, this company is positioned well for the growth anticipated in their aggressive projections, IMO


  88. Peter- glad to hear, sort of , that I was not the only one affected by this. Have you talked to TOS? All I got was what I reported earlier. The think that I find most offensive is the change was implemented w/o warning. Fortunately, I have been keeping margin on strangles conservative so no big problem for now but it does interfere with my plans going forward. I was going to start some April strangles today, but will be holding off til the smoke clears. How about you?


  89. Gel1
    I reviewed the minimally invasive aortic valve replacement study you referenced and discovered that this is an experimental study done on patients who can’t tolerate the usual open heart procedure.  This would make me think that any wide spread application is many years away, perhaps a decade away.  I think its a great company and one worth owning, but thought i’d point that out.


  90. Humvee
    This valve replacement proceedure is targeted toward patients that have, I would assume, advanced disease., like severe aortic stenosis, restricting blood flow from the heart. The replacement valve (Sapien) is made from bovine material and works for up to 20 years, exceeding most patient’s life expectancy, There is an analyst with Credit Suisse that said " I can’t see anything  in medical devices with this potential". My feeling is this company is looking at lots of growth, as the alternative to this type of surgery is so expensive, and the targeted patient is not always excited about the alternative open heart surgery. This company can, as well, help the California fiscal demise as they are headquartered in Irvine, CA. What’s not to like? Ha!


  91.  Phil
    What do you think of URI at this price? Bottoming?


  92. pstas,
    Yup, I got on the chat with TOS in the morning and they told me the same thing.  The guy who helped me also pissed off at the clearing house as he didn’t know also.  Their margin department got into a frenzied for an hour, and they made quick decisions on not issuing any margin calls (not that I would have got one).  We need to wait and see if and how the change would affect TOS PM algorithm, then we can revise our game plan.


  93. Phil… I believe you have mentioned you like TBT ( Terrific Bull Temptation) I now have over 750 contracts, so am watching this closely. Thomas Hoenig, the President of the Fed Reserve Bank in KC, today, is very fearful of the deficits the government is launching, and has stated this is very inflationary. He is also encouraging the Fed to liquidate these holdings, as he is fearful of the current status and has suggested that " without pre-emptive action, the US risks its next crisiis. He is just one voice, but this is the beginning of the transformation of thought and eventual action to be taken by the Fed to build a defense against the inflation threat. Also on topic: http://finance.yahoo.com/news/Foreign-demand-for-Teasury-apf-1402391707.html/?x=o&.V=6


  94. Phil…. Re previous post – Hoenig is suggesting the liquidation of the huge mortgage backed securities the Fed has been acquiring. Japan has just passed China as the largest holders of US Treasuries as China is liquidating in order to avoid the coming depreciation of value of their holdings, as the yields escalate on new issues.. In one of my previous posts on this subjec,t relating to signals to watch for…. this is the beginning, but it is JUST the beginning.


  95. Good morning!

    This is just a chart.  I have no political opinion about it so don’t start that crap! 

    EW/Gel – They sound excellent and now I remember where I heard of them from, they are the guys suing my precious MDT for patent issues on the valve.  I’m not up on the patent specifics – one of the reasons I love MDT is they have so many cool new things that this is just one of them and they are always in court over some patent or other.  I know Germany decided in MDT’s favor and there are other EU nations on deck over this issue – that is bound to affect EW’s stock price so be prepared for a bumpy ride but a win against MDT will bring them to the table with an open checkbook because they certainly want to license this if nothing else. 

    URI/Deano – Construction equipment bottoming?  That’s a tough one isn’t it?  I think URI’s problem is there is so much idle equipment that they’ve lost their niche, which is temporarily increasing capacity on jobs that are falling behind or allowing firms to take on extra jobs while accepting the huge ding to their profits that renting from URI entails.  Meanwhile, they have to service their $3Bn debt on equipment whether people use it or not and there’s no way they make a profit this year so you have to be very patient to get into this one.   On the whole, I think I’d wait for EPS to REALLY go up in a Q.  The last 4 were -17, -.18, -,18 and -.20 with -.59 projected for Q1. 

    TBT/Gel – See Vitaliy’s post on main page, yet another reason to like TBT.  I don’t see that unwinding MBS is an option for the Fed unless they just don’t give a damn about tanking the US economy.  They might not, they certainly don’t work for us, they work for the banks and if it’s to the banks’ advantage to blow out the housing market, then they will.

    Well, Hang Seng open and up 1.12% but fell 100 off the highs into the close.  Nikkei flew up 2.72% and only stopped because they ran out of time, which worked out to exactly 272 points as well – gotta love that 10,000 line! 

    Dollar holding ground at $1.376 to the Euro, $1.578 to the pound and 90.19 Yen (told you Japan would be happy!).  Our FXIs are looking good too.  We’ll see if copper can hold $3.20 today and $1,120 for gold.  Silver is at $16.15 and needs to take $16.50 back to show any kind of real trend, otherwise shorting copper and gold may be a good idea. 

    Oil is at $77.32, which is totaly ridiculous, especially as nat gas is still $5.33 – still weak under $5.50.  Let’s see if gasoline can retake $2 (now $1.9998) as that’s going to be a good indicator as to whether or not this commodity move will have legs. 

    BP, COP and CAT quit the "Climate Coaliton."   That may be a good thing because the last thing they actually wanted was a climate bill.  BP and CAT were founding members but there was a whole scandal a while ago that they were attending these meetings, getting the talking points, and then feeding them to their real lobbyists who would run out and crush them while they ran interference inside the USCAP – very clever but very evil…


  96. pstas/Peter TOS PM:
     
    The same thing happened to me. I have a lot of business with TOS and a lot of index trades.
     
    I’m in the process of telling TOS I’m not happy. I’ll get more info today, but what I’ve been told so far, strictly through email from TOS margin people last night (the first time they answered my day-long inquiries), is that Penson made this decision "over the weekend" and it’s just a pass through to TOS, over which TOS  "has no control."
     
    If that’s true, IMO, TOS needs to start using the leverage they obtained through selling themselves out to Ameritrade to either put a leash on Penson or find a clearing firm that treats customers decently.
     
    I don’t have a problem with people changing how they calculate risk for PM, but to have a whopping change in margin come at you due to some decision made "over the weekend" without warning can create serious damage and makes me worried TOS’s management processes are not sophisticated. I’m worried that TOS neither intended, nor has a management process in place, to communicate critical events like this to clients. So far, their process for communicating critical events seems to be to wait for the switchboard to light up with calls from irate customers.
     
    There’s no information available on what instruments are affected. Having the change show up as a generic BP Adjustment in the software leaves you doubly clueless as to what instruments are causing the adjustment, since the BP effect is not assigned to specific instruments.
     
    I was told via email that "the increase imposed today of two times the TIMS requirement for index options will be lowered to 1.3 times the requirement for index options going forward." I don’t know what the TIMS requirement means. Can anybody enlighten me?