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Monday Market Movement

Unfortunately, I am ill today.

Tina, Madeline and I are all sick with some kind of virus but Jackie (8) has been taking care of us this morning.  Sadly, she must go to school and we’re on our own for the rest of the day.  Anyway – don’t expect much from me this morning – fortunately I gave an extensive outlook over the weekend and not much has changed this morning other than SLB buying SII for $11Bn but we pretty much knew that was going to happen last week.

The new credit card legislation goes into affect today so we should keep an eye on the financials and see how they take the rules that are supposed to cost the industry about $12Bn in lost revenue.  Another rule change coming this week is the SEC decision on short-selling, that will be interesting too. 

The most actionable story I see today is rising coal prices spurred by a massive increase in demand from China, who are having their coldest winter in decades and our own groundhog predicted another month of winter to go, which makes ACI a good bet at $22.57 and you can hedge that buy selling the July $24 calls for $1.85 and the July $20 puts for $1.45 for a net entry of $19.27 with a 19% profit if called away at $24 or an average basis of $21.29 if ACI is below $20 and a second round is put to you in July.   We don’t want to get too excited with coal as natural gas prices fell below $5 this morning but ACI makes a nice long-term play regardless.

Our big concern over the weekend was that the Shanghai Composite would come back from their holiday and react badly to China’s rate increase but that did not happen and they held the 3,000 line, dropping just half a point for the day.  The Hang Seng and the Nikkei both hit the 2.5% rule to the upside driven by strong moves in export stocks thanks to a strong dollar but that didn’t stop commodities from holding their gains of last week.  Both Thailand and Taiwan released strong GDP numbers, which is also encouraging

Europe is flatlining ahead of the US open and I posted up our watch levels in the weekend post along with charts and stuff so please check there.  The Euro remains persistently weak with swap rates persistently high and I sure wouldn’t bet against the dollar right now. 

Not much data today – we had the Chicago Fed Report already this morning, looking better at 0.02 vs -0.61 last month with some employment indicators actually ticking up.  Dallas checks in at 10am with their Manufacturing Outlook and Janet Yellen is speaking at 11 on "The Outlook for Economy and Monetary Policy," which may drop some hints on policy direction although Yellen is often off the track from the rest of the Fed.

Big data the rest of the week including Case-Shiller and Consumer Confidence tomorrow, New Home Sales on Wednesday, Jobs, Durable Goods and FHFA Housing Prices on Thursday with Friday giving us the Big Kahuna – Q4 GDP Adjustments along with the Chicago PMI, Michigan Consumer Sentiment and Existing Home Sales.  We still have tons of earnings coming in as well so it’s going to be a great week to see if our bounce levels hold – as we discussed in the weekend post.

OK, back to bed for me!  Good luck with the markets today but flat would be good as we only need to hold these levels (but we do need the NYSE to catch up and take 7,100) to show a little strength. 


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  1. Just a warning on Thailand everyone. I would not go real long on any Thai stocks, ETF, etc. this week and maybe next week. I won’t go into details but the political situation here comes to a head with a big court decision this Friday. Here, the government is expecting rioting which could get quite violent and a military coup to restore order is not completely out the question. It’s a long story and is just political BS, but the SET (the Thai index) will tank if things get ugly (it also will rocket up if things blow over quickly…).   Thai stocks are a casino for the next few weeks, be forewarned.

  2. Good Morning Fellows, Phil I do hope you can put a PUT on the virus and kill it. Hope you will fill better soon.
    On the weekend Phil gave a very good explaination on AGNC well this looks good for a play I have with a strike price of 25 on the buy write . But on an other play I am left with the stk at a price of 30 now 24.97 and put option Jun 25 sold at 2.30 now 2.27 but looking at selling calls there is not much beef left even the 25 Jun call looks sick .90 and Sep 1.10 which does not give much advantage on the stk I am holding here at 30$ Any one having some suggestions thks

  3. JRW, judah – you guys on TZA this morning.  JRW, what do the lines look like today? Thanks.

  4. Good morning!

    I am barely functioning but I’ll try to check back in shortly.  Watch that NYSE, we need them to confirm the other moves from last week (7,100) and we’d feel better seeing 2,250 hold on the Nas along with 350 on the SOX but, otherwise, 10,400 is good for the Dow and 1,110 is good for the S&P and 630 is fine for the Russell if they can hold it. 

    Thanks Bord, worth watching! 

    AGNC/Yodi – You collected $2.30 against $30 so net $27.70 and down about $2.80 at the moment.  You can, of course, sell the June calls but the premium sucks now and you don’t NEED to own the stock since it will get put back to you at $25 anyway so why not just take the loss and buy the Sept $22.50s for $2.60 and sell the March $25s for .65.  You need 5 sales like that to make up your $2.80 and those calls cost 1/10th of what the stock does so you can buy 3x for $7.80 and sell 2x the March calls for $1.30 and you are almost halfway to even with as much upide on the 1x open March calls as you have now with the stock.  If it goes up fast, you have cash to buy more stock and if it heads lower you can cover deeper and, of course, average in or roll you longs down cheaply.

    Looking a little weak at the open but that’s been a pattern for our opens so it doesn’t mean much unless it persists.

  5. yodi to Phil……"Hope you will fill better soon."   Now there’s an option traders Freudian slip if there ever was one. :)

  6. take care Phil. Hope you and your family get well soon.

  7. Woops, losing our levels already.  Now we need to take them back. 

    LOL Yodi!

    Thanks guys – I assume it’s a virus since we all have it and we didn’t eat the same dinners so not likely food poisoning but that’s how sick we are…

  8. Phil, Across the US from you, there’s a really bad virus going around – something of the cold variety – my family and I have all caught it.  I’m trying C, Zicam (zinc), Echinachea (sp?) tea. Hope you all feel better! 

  9. Yes, it is a good one.  We have had it for a week… liquids, aspirin/ibuprofen for the aches and sore throat. 

  10. Phil, hope you feel better soon. Stay in bed.

  11. Feel better Phil!

  12. SS, Not on anything, and I have a lunch meeting so I may not just sell some strangles and then look this afternoon.  For IWM, looking at 62.84 and 63.60.

  13. Pharm – Any thoughts on ISIS? They have recently dropped to $8.5-9. There was an article on Barrons recently with a target of $18 on them. Wondering if it’s a good long term play to get in them now.

  14. lflantheman
    OK I got it. English is not my mother’s language !!!

  15. Get well soon Phil, you and your family.

  16. TASR on a run.  I bought  just a few Jan ll  $5 calls a month ago at 1.50, now 2.85.       Query. ….   Buy more?   Sell?   Convert to spread?    Anyone in this trade?    tx.

  17. Judahbenhur,
    What SS positions are you considering?

  18. Phil: BTU, have june putter 38 with good gain, how about rolling to june 45 putter ? or april 46  or what ?

  19. drink lots of h ot tea, phil, and vitamin C, and some Chinese herbs.
    TBT – wonder if we can make a new play here on it…..  if stock market sells off, bonds may go up, though, so TBT already has moved a lot, so not sure what to do with this TBT, but over time, seems like bonds will go down and TBT will go up,
    any new play, PHil?  if you have the energy to look at this

  20. Robert, I’m looking at April SPX 1180/920 and RUT 690/520.  I may go even wider on the calls, 1200 for SPX and 700 for RUT and tighten in the next couple of weeks depending on the market’s direction. 

  21. Phil: what DIA puts and putters are in play ? what cover ?

  22. ISIS/Trad – not a  fan of ISIS.  I would enter with play money at this point.  They have a few things in the pipe, but I think the antisense is overrated (for now).  iRNA is the way to go, and they do own a company that has the technology.   I had a write-up on them a awhile ago and I believe it still holds.

  23. Phil,
    Good morning,
    Hope you and your family feel better soon; sometimes the smart play is not to. TAKE THE DAY OFF !!

  24. do yu just sell calls above and puts below?
    Robert, I’m looking at April SPX 1180/920 and RUT 690/520.  I may go even wider on the calls, 1200 for SPX and 700 for RUT and tighten in the next couple of weeks depending on the market’s direction.

  25. ss
    63.02, 63.44, 64.59

  26. Dman, Yes, I follow the Peter D playbook, which can be found under "Confessions of a Strangler" and in the many posts by Peter answer questions from the board.  In essence, we sell SPX and RUT calls and puts 1-2 months ahead, well out of the money, and also buy put verticals with a $10 spread, and make adjustments along the way.

  27. FYI for anyone in on that AMED play. The March calls are up volatility wise now (I think tomorrow is earnings) and the 65 call is going for about $1.70 (stock is at $60.70 right now). 

  28. ss
    Phil thinks we’re at the top of a range so if they can’t get through 63.44 I’m going TZA

  29. Do I wanna short BIDU badly, but it just won’t let me…..thank goodness….for now.

  30. Phil – if it’s what is also going around NYC – assume it is – sure was not fun with a 2 year old – we found ibuprofin did not work as well as Tylenol for taking away the chills etc. 

  31. AAPL taking a slight dip this morning for no reason.  I’m selling Mar 200 calls for 5.90, all time value.

  32. bord
    I think Pharmboy recommended the play on AMED a while back I sold the Jun 50p for 5.90 now 3.05 I am not sure these stks normally drop after earnings I am running a stop on them. Possible Pharmboy could give some further input.

  33. GILD pulling back nicely (Pharma in general, actually).  GSK getting a spanking from Avandia and heart issues.  This data should help LLY’s Actos, so liking both, but with GSK, have to watch the headlines, as they can fall fast and hard (aka Merck/Vioxx).  I would cover GSK hard, or refrain from entering here.  LLY is good to go, but remember their dividend has already been spoken for.

  34. JRW,
    Nice call as usual. Don’t have time to join you before I gotta run. Good luck today.

  35. The Dow low on Friday was around 10,345 before the massive run-up into the weekend so we can still fall a bit.

  36. Pharm – Seems like LLY is coming against the 200dma at 34.5 for some overhead resistance. Need to see if it holds otherwise it will breakdown further?

  37. My aapl entry should have read PUTS, not calls.   I would never sell naked calls on aapl, but I would sell puts.

  38. PharmBoy, I’m with you on BIDU, I played the OpEx crazy short last week and failed but trying to get the 490/480 put spread today for 2.50, no luck yet…

  39. Looks like HK is setting up for another good entry point soon, getting in around 22 has been pretty reliable.

  40. MrM – HK releases earnings tomorrow. Thoughts on how it might go?

  41. Phil…. Get well soon. I had the bug a few weeks ago – it spares nobody. The very able co-pilots will take over until you feel better !

  42. tradansh – Sorry, I haven’t had time to check on HK, Cap may have some thoughts if he shows up today.  I’m out right now because of earnings but will get back in afterwards.

  43. SRZ – Look at that 10 day chart, the kind of stuff I dream about at night!

  44. Good Morning! I know this is something that has been posted several times, but would someone be kind enough to re-post the name and contact number of the person at TOS to discuss discounted commissions and account set up. I’ve been scoping the TOS software/tools and think I’m missing out by being exclusively with OH. Thanks in advance.

  45. thanks, how can I find out more about your strategies? where do I find Confessions of a Strangler ?
    for example, with your put verticals, would you buy  a SPX  1110 long and 1100 short put vertical for March?

    February 22nd, 2010 at 10:54 am | Permalink  
    Dman, Yes, I follow the Peter D playbook, which can be found under "Confessions of a Strangler" and in the many posts by Peter answer questions from the board.  In essence, we sell SPX and RUT calls and puts 1-2 months ahead, well out of the money, and also buy put verticals with a $10 spread, and make adjustments along the way.

  46. iglan/AAPP puts – I have to tell you, I read your post and didn’t even realize you said sell calls.  I read it as sell puts since that’s the only sensible thing there! :)

  47. meant lflan in previous post.

  48. Virus/Ilene – Other than the Zinc, I’ve got the others.  Perhaps I could swallow a few pennies (97% zinc), which I’m sure is a damn site cheaper per mg than Zicam!  Our favorite family cure right now is Canada Dry Green Tea Ginger Ale, which doesn’t taste great but really calms your stomach and has 100% of vitamin C per can.  In fact, it works so good I’m back on my feet!  8-)

    TASR/Iflan – ANY time you are up 100% on a position you should be looking to cash, cover or stop out.  With your TASR position, the most you can make at $10 is $2.50 more and you can take $2.20 off the table right now by flipping to the $7.50/10 spread at .80 and, if you want to get more aggressive, you can do a 1/2 sale of the $7.50 puts for $1.50 (in which case you have all your money off the table) or a full sale of the $5 puts.  Even the straight flip to the $7.50/10 spread locks in a 50% gain for you and still gives you another 100% upside ($1.70) at $10 and keep in mind it’s not new money so your net at $10 is you put in $1.50, took out $2.20 and another $2.50 at $10, which is $4.70, which is only .30 less than your max possible gain if you risk all of your profits by letting the $5 calls ride.  

    TASR – Meanwhile, I like any play that involves selling the Jan $7.50s for $1.50 (20%) like the above $7.50/10 bull call spread, selling the $5 puts for .50, which is net .30 on the $2.50 spread and your worst case to the downside is you are in my stock of the decade for net $5.30.  You can also save a little margin by selling 1/2 the $7.50 puts for $1.50 instead against the spread.  Also, nothing wrong with the buy/write with TASR at $7.50, selling the Jan $7.50 puts and calls for $3 for a $4.50/6 entry or you can be more conservative and sell the $7.50 calls and $5 puts for $2 for a $5.50/5.25 net entry, which still has a 36% upside if TASR holds $7.50.

  49. MrM – tried to get the crazy short and did not fill at all.  Wasn’t gonna risk on Thurs/Fri.  I like that fill, but may have to ask for a quarter more. I am just gonna watch the charts.
    HK – charts say back to 21ish.  I am gonna wait on them.
    LLY – like them here from our initial entry (Phil had one as well into 2012).  I am only interested in holding until years end.  Low would be 32ish, and I think selling 1/2 35s is fine for protection.  You can even sell the 34 Ps as well.
    AMED – Phil had an entry on them, and I was more interested in selling the premium.  Mine was the Ps at 50 that was noted, as a more conservative entry.  They are at ATH, so enter cautiously here.  I am not into chasing, and if they continue up, then oh well, there is more to play.  If earnings are not great, then their fall will be swift.

  50. Good day to sell OTM Bidu calls.  Nice premiums !

  51. Trying to goose the markets with financials (again) i would watch the XLF at this level for possible breakdown. Since every funds been jumping on BAC and C it wouldn’t be very bullish if they fail here.

  52. Nice drop in gold, back to $1,114, silver at $16.22, copper back to $3.30 but still crazy. I can’t believe I missed shorting FCX this morning – maybe they’ll recover!  Oil is holding $80 and today is rollover day so looking strong but not nat gas at $4.90.  Dollar at $1.36 to the Euro and $1.547 to the Pound and 91.6 Yen so still pretty strong (high of the day to Euro, low of the day to Yen). 

    BTU/RMM – I think you are looking at a bird that is firmly in the hand and considering letting it go for 2 in the bush.  You WILL collect 100% of that $1.40 between now and June and if you roll it to the Jun $45 puts at $3.60 you MIGHT collect another $2.20 or, if BTU pulls back to the 200 dma at $40, you may owe $5 back, blowing your gains plus another $1.40 out of your pocket.  Probably, on the whole, you’d be better off doubling down on the sale you already have but I do like rolling them up to the Apr $44 puts at $1.55 too as you can always roll them back and you are putting more time pressure on the callers – getting the same money quicker is just as good as getting more money later…

    TBT/DMan – You can always make a new play until they get over $55, especially since we can play them simply not to go down.  The Sept $43/50 bull call spread is $4.40 with a $2.60 upside (59%) and, if TBT goes lower, we can sell the $44 puts for $2+ to lower our long basis to $2.40 or less with a 200% upside at $50 and worst-case is we’re in TBT for the long haul at net $46.40.

    DIA/RMM – June $105 puts, 1/2 covered with March $103 puts is current position.  If we get the roll-up for .50 (now .65) then it’s time to sell another cover

    Day off/JRW – Well, what am I gonna do – sit and watch cartoons?  So not me….

    Range/JRW – I do think this is a top but we have to respect the breakouts if they hold.  Holding the bounce levels and consolidating between 10,300 and 10,700 would be bullish for a break higher but they can’t affort to move lower so we have all these lovely lines to watch (Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625) to let us know if we’re holding up. 

    Damn, missed my chance to sell OIH into the SII excitement! 

    HK/MrM – I’d be a little concerned that they performed so poorly in a pretty big OIH group rally.  A little too gassy perhaps?

    TOS/Jbur – Scott at think or swim dot com – tell him you are a member. 

  53. Mr M, you’re shorting SRZ?

  54. Hey all,

    I have a great Overnight Trade opportunity for you in Sonic Automotive (SAH). I think it will be a nice surprise pop for tomorrow. Read more here and where to get in. We are looking to get in today in the 9.45 – 9.55 range, with an exit tomorrow morning after earnings report. If you have any questions about the trade or any other stock, ETF, crude, bonds, etc. questions…just ask me away on my post.

    Thanks and Good Investing!

  55. magret – No, I’m long SRZ at $2 and just marveling at the recent run up.  Will cover with calls if/when it approaches 5.

  56. LLY – Does anyone remember Phil’s play for 2012?

  57. JRW – just getting back in the saddle.  Every Feb I have a ton of work at my beachhouse before the rental season, almost done.  Anyway, doesn’t look like I’ve missed much.  Are you in TZA?

  58. George Soros not too long ago stated Gold was in a bubble, however he bought over $600 mil. of gold funds during the same period of time. I think that is called manipulation. I am slowly buying back into GLD on dips – starting today.

  59. ss
    Still waiting, seems like we might have an old fashioned 1:30 rally.

  60. LLY/Trad – here it is – Well you have to like that 5.6% dividend AND the p/e around 7.5 so yes to that one even if they do test the 200 DMA at $34.  You can buy the stock at $35 and sell the 2012 $30 puts and calls for $9.50, which puts you in for net $20.50 and still collecting that $2 dividend so almost 10% a year + 50% if called away at $30 makes for a nice long-term hold.

  61. JRW, SS, Just getting back now as well.  Looks like I didn’t miss much.  I always like playing an afternoon rally.

  62. Hi Phil Just seeing your recommendation on DIA I am trying to roll my JUN long p some off from 104 to 105 for .48 but I amhaving 1/2 cover Mar 103 p short at 1.92 now 1.36. should I not better look to sell one or two Mar 104 1.75 or do nothing thks. Good to see you in the run again. They call this here Montesuma revance

  63. With the Fed making noise about a slow change in policy, I am now starting to phase back into long plays on dividend stocks, using the buy/write strategy. The market has not experienced a 10% correction, but if we should get a further pullback, it will not be too significant, and the buy/write strategy should be able to absorb some of the downdrafts. I am phasing back into BMY (5.1 %), LLY (5.7%), MO (6.7%), PBI (6.4%), T ( 6.7%), FTR (13.1%).

  64. OMG…LOL yodi….

  65. Sold some USO puts today – Mar 41. This is a play looking for USO to reach 42.00 within a week or two., and then I’m out.

  66. HK – day trade only, playing for a stick here.

  67. Thanks Pharm. Good advice on ISIS.

  68. Pharmboy
    Nothing what you can not cure with a good Tequila

  69. Thanks David, looks like it hit your mark for the buy.  The $10 puts can be sold naked for .95 and that gives a little cushion to the play with a very nice upside

    LLY/Trad – That was a 2012 buy/write, very conservative, selling $30 puts and calls, now $9.50 against the stock, now $34.55, which would be $25.05/27.53.  The idea is to get the 5.7% dividend, at $1.96/$25.05 for 7.8% plus the 20% upsde.

    Gold/Gel – How about the GLD 2011 $100/130 bull call spread at $10.50, selling the $95 puts at $4.90 for a net $5.60 entry on the $30 spread and worst case is you own GLD at $100.60 (now $108.95)?  You can even hedge with some GLL Oct $9/10 bull call spreads at .45 which pay 100% if gold ticks down so figure you can do that hedge, which pays off $3.50 if gold holds steady and put that $3.50 into a hedge that pays $3.50 if gold ticks down so your new net on the bull play is $9.10 with $20.90 upside if gold takes off but you get $7 back if you are wrong.

    DIA/Yodi – Yeah and I didn’t even get to go to Acalpulco!  If you can’t roll up for .50, don’t.  I’m sure you’ve learned over time, it pretty much always happens eventually.  If you are NOT in the $105 puts then you DON’T want to be more than 1/2 covered.  If we cover more, we’ll sell the $104 puts, now $1.72  and put a $1.50 stop on the $103 puts (now $1.33). 

    Buy/writes/Gel – I agree, that’s why we did that last Buy List.  I think we drift along in a fairly tight (10%) range and that’s perfect for buy/writes as we really don’t care if they go up or down 10% as long as we can sell more puts and calls. 

  70. Yodi… Montezuma left behind a cure however – lots of good Tequila  Phil, try it – you might still not be totally cured, but you think you are.!

  71. Phil
    Thanks for the GLD play. I am not a "gold bug" per se, but if there is action in this stuff, then I want to be there. My "bunker" was long ago converted to a 1000 bottle wine cellar, which makes more sense for my needs.

  72. This is my first time hearing about the Bloom Box.  Pretty darn cool.

  73. Gel1 recommend 1800 the best

  74.  gel, any "turley" in that bunker?

  75. Jo – tons of Turley in mine!!!

  76. Jo… You bet – the 101 variety

  77. GTI   Anyone have any opinions?  Earnings are premarket tomorrow.   I have a small position (2 Jun 10 Calls), but am thinking of selling 12.5 P/C and making 10% of the underlying in extrinsic overnight….how bad can that be?

  78. DIA 5min dailys looks like it is gonna snap.    All MAs are converging, so which direction.  The wedge is rising, but there is no volume…..divergence…Oh, there is the break up.  Will it hold? 

  79. Greece isn’t exactly alone. Apparently, other European countries have an equally murky history of cooking their books to keep up with eurozone monetary restrictions.

    Though Goldman Sachs (GS) may have arranged the largest of the contracts, sources say Greece had swap agreements with as many as 15 securities firms.

    Greece isn’t looking for a bailout, says PM Papandreou, and its borrowing needs are covered through mid-March. What it really wants is political support and "help so we can borrow at the same rate as other countries." (full interview transcript)

    Heard On The Street: The reality is that Greece needs to raise cash in the next two weeks, and the relative calm in the markets makes this a good time to issue a bond on market terms. Then it needs to deliver on the budget measures it has promised.

    Futures traders are more bearish than ever on the euro, as the collapse in the euro/dollar spread indicates investors believe the European Central Bank will keep its target interest rate at a record low and sacrifice euro strength. The euro slide looks to continue even if EU leaders bail out Greece.

    Don’t forget the guy’s who started this mess:  Dubai’s government is no longer seeking preferred creditor status, suggesting that the on-again, off-again restructuring proposals are likely to be played out in the press.

    Merger approval from European regulators appears to be imminent for Deutsche Telekom’s (DT) T-Mobile U.K. and France Telecom’s (FTE) Orange. The tie-up will create the largest mobile operator in the U.K. with 30M customers and a 38% marketshare.

    As Toyota (TM) fights a recall nightmare, Honda (HMC) takes top brand market share in retail sales, according to a survey. Honda’s market share jumped to 13% while Toyota fell to 12.1% from 17.5% a month prior. Ford (F) isn’t too far behind at 11.7%.

    As its PR nightmare continues, an internal document from 2009 shows Toyota (TM) employees celebrated saving the company over $100M by convincing regulators to end a 2007 probe into acceleration complaints with a relatively cheap floormat recall for just 55,000 cars

    The U.S. International Trade Commission, already investigating a Nokia (NOK) claim against Apple (AAPL), will probe Apple’s patent-infringement complaint against Nokia. The fight over wireless techologies could involve hundreds of millions of dollars in annual royalties. (previously)

    Crooks:  Judge Jed Rakoff slams JPMorgan (JPM) for participating in a "down right sham" in the way it arranged a $225M loan for Mexican telecom Empresas Cablevision (TV). The loan structure would have allowed Carlos Slims’ Telmex (TII), a major Cablevision rival, to access confidential company information.

    More crooks:  A class-action lawsuit – alleging Pimco manipulated certain 10-year Treasury futures in an attempt to corner the market in 2005 – will go forward as the Supreme Court declines to hear Pimco’s challenge to the class.

    Crooks getting away with wrist-slaps:  Judge Jed Rakoff approves the $150M settlement between Bank of America (BAC) and the SEC, just ahead of a scheduled trial next week, after the two sides agree to make changes.

    How the crooks make their money:  How Lehman’s lifetime-ago bankruptcy generated $642M in dismantling fees.

    An angry shareholder files suit against General Growth Properties’ (GGWPQ.PK) board of directors for dismissing a $10B bid from Simon Property Group (SPG). The rejection "is substantially unfair to GGP and the company’s public shareholders."

    Get ready for a wild renminbi ride, says Gordon Chang. Everyone thinks Beijing has to act on currency revaluation to slow down a hot economy, but there’s already talk in China of a new stimulus to replace the existing one in December

    China finalizes its lending rules, calling on banks to be prudent, creating rules to ensure private and corporate loans are used properly and requiring banks to stay vigilant even after the loans are made.

    Chinese demand and the cold U.S. winter could send coal prices, already up 20%+ from last year’s lows, substantially higher, says a Bloomberg survey. “If you look at the pricing increases we’re seeing now in regard to future sales, they have not only floored or held their bottom, they are starting to spike up."

    FDI in China rose to $8.13B in January, up around 7.8% from the year before as investment picked up strongly in the services sector, but the total came in below December’s $12.1B. (ETFs: PGJ, FXI)

    The Chinese boomtown of Huaxi is seen as a symbol of the country’s overheated growth. Jim Chanos, who says China is "Dubai times a thousand," is one of a growing number of investors who are sounding the alarm.

    California plans to sell $6B in bonds in its first sale in three months – and the first since S&P cut the state’s credit rating in January.  As California gears up for a $4B bond sale in March, and bets that changes in how the state manages its cash will keep its credit rating from sinking even lower, local lawmakers start to throw around the b-word.

    Weekend bank failures:  : Marco Community Bank in Florida and La Coste National Bank in Texas become the 17th and 18th bank failures of 2010, at a combined estimated cost to the Deposit Insurance Fund of $41.8M.   No. 19 in Illinois, at an estimated resolution cost of $141.4M; and No. 20, California’s La Jolla Bank, taken over by OneWest (itself created from failed IndyMac) at an estimated cost to the DIF of $882.3M.

    Five former Treasury secretaries line up behind the Volcker rule. "The principle can be simply stated. Banks benefiting from public support by means of access to the Federal Reserve and FDIC insurance should not engage in essentially speculative activity unrelated to essential bank services."

    Just a month of declining core CPI isn’t a definitive sign, but it is the first time since 1982 that it went negative – which means there may still be a whiff of deflation in the air.

    States are facing a budget shortfall of $134B over the next three years, and most see job creation as the key to recovery.  The worst is yet to come, say the nation’s governors, as they must cope with a cumulative $18.8B shortfall in balancing their books for the rest of the current fiscal year and an estimated $53.6B next year.

    Introducing the new poor – middle-classers who have suddenly found themselves relying on government assistance for the first time ever, and could potentially be dependent for years to come.

    The recovery will soon lose its "jobless" label, according to a survey released this morning by NABE. GDP will grow 3.1% this year and next, and problematic financial headwinds will begin to abate.

    On the other hand: San Francisco Fed President Janet Yellen: "Not at all convinced" that a V-shaped recovery is coming; economy will operate well below potential for years. She expects unemployment of about 9.25% by year’s end, and about 8% by end of 2011. There’s more worry about economic slack than inflation; it’s not the time to remove monetary stimulus.

    The Treasury sells $8B in 30-year TIPS at 2.229% (.pdf) – the first sale of TIPS of that maturity in nine years. Bid-to-cover ratio of 2.45; indirect bidders take 42.4%.

    Distressed loans in commercial mortgage-backed securities could double by year’s end – to over $60B, Credit Suisse analysts say, pointing to a rapid acceleration in troubled loans.

    I slept through this earlier but bad:   Feb. Dallas Fed Manufacturing Outlook: Business Activity Index -0.1 vs. 8.3 the month before. Mfg. Production Index 2.3 vs. 7.4 prior. Several indicators turned negative, reversing recent months’ improvements.

    Using jobs to blackmail governments into lowering taxes:  Utilities say electric-grid projects may be canceled or downsized if taxes on at least $2.5B in government grants aren’t eliminated. Among the largest grant recipients: Duke Energy (DUK), FPL Group (FPL), Exelon (EXC) and Constellation Energy Group (CEG).

    John Burns Real Estate Consulting, which last week predicted new waves of foreclosures as "shadow home" owners lose their properties, doesn’t believe we’ll see lower prices. Mortgage mods may not save many homeowners from foreclosure, but they will delay the process enough to spread out the carnage and keep prices stable.

    AIG (AIG) "has pulled out of what could have been a death spiral," showing stable revenue for its insurance units and improving its ability to repay taxpayers after the bailout. Property-casualty posted sales increases in three straight quarters last year, and sales of life insurance and retirement products rose for the first time since the bailout.

    ETFs missed their marks by a wider margin last year, with index-tracking errors of an average of 1.25 percentage points, more than twice 2008′s 0.52-point average miss – partly due to a spate of new funds targeting more exotic or less-frequently traded areas.

    According to its latest 13-F filing, nine of the Harvard Endowment Fund’s 10 top publicly-traded positions are in ETFs – mostly those run by iShares (BLK). The tenth, for the record, is Spider-Man producer Marvel Entertainment (MVL).

    Obama unveils a new healthcare overhaul plan today, including a proposal to give regulators the ability to limit rate hikes by health insurers and to demand customer rebates. Could spell bad news for insurers like WellPoint (WLP), UnitedHealth (UNH) and Humana (HUM).

    Green shoot:  U.S. commercial real estate prices rose 4.1% in December following a 1% gain in November, according to Moody’s: "Although we are unable to conclude that the bottom to the commercial real estate market is here, we do believe that the period of large price declines is over."

    And anotherWe may not need more increases to the discount rate – as part of seeking a more historical 100 basis-point spread between emergency borrowing rates and overnight lending – said SF Fed President Janet Yellen after a San Diego speech: "It’s perfectly possible that 50 will be adequate to accomplish everything."

  80. Phil, gotta hate viruses. Our GS short position (short GS Mar 145p) is up 80%. Yeah. Anyway to play GS moving forward? Will probably expire worthless, but I thought I would ask.

  81. One of the top hedge fund managers in the country, Donald Smith ( last year performance was 65%), I’m sure Phil knows of him, is a big believer in F. With Toyota’s (TM) big problems that are growing daily, I feel his bullish projections will play out.

  82. SD- any opinion?

  83. gel – bought a bunch of F bonds last year for 40c on the dollar.  Yield was 55% at the time, and they are now > par and collecting a nice 9.5% APR.  There have to be more like these in the bond market, but I have not gone back to screen them recently.

  84. SS/bloombox.  Very cool. Thanks for sharing. I want one of those in my backyard.

  85.  Gel, we must think alike.  i did a ghetto F buy-write earlier today.  F 10/15  2012 call spread financed by sell 2012 10 puts for 2.12 for a credit of .12 total.

  86. Hey Phil;
    Don’t take zinc, I ran across an article in a while back about a research where a small percentage of people using it loose thier sense of small for good. a couple groups are looking into it. why risk it, its just a cold.

  87. Tequila!/Gel – It’s a strange kind of thing that makes us dizzy so tequila may not be the best solution.

    Bunker/Gel – Yeah, I’d go for the wine celler too – may as well go out in style!

    Bloom/SS – I didn’t realize they were moving along that fast.  Does seem like a workable system but one of many that will be out over the next few years.  Here’s a good article on Hydro systems for people with access to running water. 

    Turkey/Jo – Not only is it good drinking but it also makes a fine general anesthesia and antiseptic – what more could a survivalist ask for? 

    Dow volume at 2:30 a veryu pathetic 95M – just kind of drifiting along today. 

    GS/Jbur – Rules are we take them off as you can only make 20% more over a month (especially the $150s, for people who have that play).  When in doubt, buy back 1/2 but I’m for killing it as we’re still not making all our levels. When we went in, GS was pushing down and we felt there was a good risk/reward to selling the puts but now we RISK our 80% gain for a 20% reward so no longer as attractive unless you are 80% certain you’ll make that 20%.  At $1.18, you can put a stop at $1.40 but then look at how easily they can hit $1.30 and what’s the point of waiting?

    Smith/Gel – What fund is that?   As far as F goes – keep in mind that they still have the same legacy issues they had last year with pensions and health care etc and oil prices are still sky high which means people still won’t want to be buying big, high-margin trucks and suvs so, other than a recovery play off the floor, I find the whole sector generally unappealing.

    Zinc/Micro – I think that’s just if you sniff the inhalers – I’m sure eating pennies is much safer!  8-)

  88.  Phil,
    I know you like CCJ for the uranium play, but have you looked at UEC as a more speculative play for uranium? They expect to become a producer soon. They are at about 3.60 and doing a conservative Aug buy write at 5 and 2.5 brings in about .50 with a nice upside on the short call and good cushion on the short put. Its a little illiquid but what do you think about it?

  89. Phil… LOL. I can tell you have recovered – your sense of humor is alive and well !

  90. Hard to believe the move in the IYR the last few days. Any thoughts on a play at these levels ?

  91. Pharm/Jo
    I added to my Jan 11 position today – selling the 12.5′s puts for 2.66. Not concerned by assignment, and can roll anyway. If good management and a good sign of economic recovery in its infancy is so clear, then I feel very safe with this play. Phil is right – the underlying sector problems are still brewing but, I feel this company is a strong player as we recover.

  92. Pennies might be safer :P
    As for Ford the current CEO is Alan Mulally, this guy was in charge of the Boeing 777 from start to finish. I watched an 8 hours documentary of what happened, he is a very hands on and very competent CEO. The only reason I have a lot of faith in Ford is because he is there and he wouldn’t be there if he didn’t think he could pull it off. your thoughts ?

  93. gel, i have been daytrading GS  calls (sell’em and then buy’em back) against 165 2011 Leaps.  The leaps are left over from a broken vertical.  This has been a nice little money maker since GS always has very juicy premiums.

  94. microflux – I know someone who worked directly with Mulally while at Boeing, had massive respect for him, he gets the whole ‘firm but fair’ model and people tend to become loyal to him.  Caused me to buy some F last year, made money but got out way too soon.

  95. Phil, I bot the aapl 200call this am @ 5.95 now its 6.4 and I want to sell the 210,,,,,,,, yes, no ? thoughts

  96. Hi Phil : I bought BAC at $14.46 and sold March $15 calls for .$44 . Bac now $16.38 and calls are $1.53 Thinking  I roll to Aug $16 for $1.80 for $.27 credit and also sell $15 puts for $1.05. Your opinion?

  97. Phil – glad you are on the mend. I wasn’t going to bug you with this today but since you are here…
    SRS (Gr-r-r-r) have the Mar $9 long call, have been selling puts & calls so i am down about $1 per share over all. After reading your weekend article, I came up with lots of scenarios which i wont bore you with.  One was to roll to the Oct $8 calls for $1.30 (down $2.30) sell front month calls to hopefully make $1.40 (down .90) then sell the $7 put for $1.70.
    I am sure you can improve on that but it is a good exercise.

  98. Wow, VIX is moving ever lower, bouncing off the 5d MA over the past 12 days. 

  99. Jo/GS
    That is a strategy that I have not tried. It sounds very interesting and will give it a test drive. Thanks!

  100. Sector ETF strength: Regional Banks– RKH +2.3%. Commercial Banks– KBE +2.3%. Financials– XLF +1.5%. Coal– KOL +1%. Transports– IYT +1%.

    Sector ETF weakness: Solar– KWT -1.6%. Biotech– BBH -1.2%. Energy– XLE -1.1%. Agriculture– DBA -0.9%.

    Dow leaders: BAC +2.9%. JPM +2.5%. BA +1%. GE +0.8%. HD +0.8%.

    Dow laggards: CVX -1.2%. MRK -0.9%. MMM -0.7%. JNJ -0.5%.

    UEC/JC – If CCJ wasn’t trading at 40% off it’s highs then I might like UEC more but UEC used to be a gold company, that went bust so now they are a uranium company.  Maybe I’ll like them more when they move on to palladium… 

    Humor/Gel – It’s hard to be funny when the room is spinning!  I just re-read my post and I can’t believe I wrote that new CC "rules that are supposed to cost the industry about $12Bn in lost revenue" without adding (that they can no longer rip consumers off for) – WAY off my game this morning!

    IYR/DK – How about the SRS July $7/8 bull call spread for .35?  If SRS heads lower, you can offset it with the sale of the $5 puts for .35 or you can collect .38 now for selling July $6 puts if you are impatient.  

    F/Micro – I think F is good at $11 but I wouldn’t be in it expecting them to get to $15.  Just a nice vehicle to sell premiums against long-term.

    AAPL/Phlit – I don’t like getting locked into a vertical like that as you won’t know whether you win or lose unitl about a week before expiration unless AAPL goes way up or down.  You still in for net $3.50 on the $10 spread.  I’d rather be in the Apr $180/185 bull spread for $4 and sell the $180 puts for $2.75 for a net $1.25 entry on the $5 (300% upside) spread that’s already $15 in the money.  I think if I take that play 12 months in a row and you take your play 12 months in a row – there’s a real good chance I’ll do better.  Since I’m in the play for $2.25 less than you, I can set a stop on my putter at $4 and my risk is just $5.25 and I get $5 back at $185

    Down we go.  I grabbed some DIA $102 puts for $1 as a fun play, now $1.07 but happy with a dime….

  101. Phil, any moves on GLW or are we still in a wait and watch phase? Thanks, and hope you feel better!

  102. What are mattress covers?

  103. Out of HK even on the day, not holding overnight.

  104. Got it. Thanks Phil. Hope your feeling better.

  105. I bought DXD VXX SKF when the XLF was stagnant at 14.68…i was thisss close to throwing my laptop into the pool

  106. BAC/Dflam – I still like them for $20+ at the end of the year so, sure.

    SRS/Morx – They are always "grrr" aren’t they?  I like the play above (for DK) but you also have to love the 2012 $4/8 bull call spread for $1.70, which puts you $3.50 in the money with 22 months to sell to get your $1.70 (or, in your case $2.50) back so you just need to sell .20 a month like the Apr $8s at .42.  You make $2 over $8 so SRS would have to hit $9.50 before it really hurt you and you can always add some $10 calls if it heads higher. 

    GLW/Hanna  – They seem to be holding $17.50 so you can sure enter by selling the Apr $17 puts for .57 to get started.  If you sell puts for .57 every other month you make $3 for the year and that’s 20% on the stock price and more than 40% on your margin requirement so a perfectly good way to poke around at a stock

    Mattress/Eph – Same June $105 puts, 1/2 covered with March $103 puts and this close should show you why. 

    Laptop/Kustomz – Off a roof is way more satiflying – don’t forget to back up first!

    Whee, that was fun – back to bed for me.  Nothing like a good consolidation day is there?

  107. Forget the Darwin Awards – the Dynamite Awards honor the individuals most responsible for blowing up the global economy. Your winner? Alan Greenspan. (via)

    Pin prick this afternoon: The MBA delinquency survey had some positive signs, but of course it’s not all silver lining: The seasonal adjustment model may not be adequate to handle today’s out-of-range numbers of troubled mortgage loans, and 30-days-late loans "may still seem like on time these days."

    My pick for market of the year is coming back into fashion!  Emerging markets have been in vogue in rising-equity environments, but lately the U.S. is back in style.

    Far from a record-breaking day in the markets, it was repeating like a broken record – lightly rising on low volume – until a sell-off into the close, with energy and utilities lagging. The Dow closes -0.2% (-19.04) to 10,383.31; S&P 500 -0.1% (-1.16) to 1,108.01; Nasdaq -0.1% (-1.84) to 2,242.03. Crude +0.5% to $80.20. Gold -0.6% to $1,115.40.

  108. mrmocha / Ford :
    thats pne of the things that got me about him, he rallies up a real loyal support from the workers. I wused to work for a CEO like that and it makes a diffirence. It also helps that he knows excactly what is needed and where he needs to be ;)
    what do you mrmocha if i may ask. im a software architect

  109. Roof, saving that for myself

    Con..solidation, on no volume. Im thinking this is more of pass the hot potato to the next smart guy. I also believe Bernanke adds to the volatility this week.

  110. Short stranglers,
    A consolidation Monday and our short strangles gained 15% of whatever premium left.  Very nice!

  111. Peter- current premiums for April not attractive compared to what we were getting a couple of weeks ago – easily spoiled , I guess. I placed some orders for April on SPX and RUT at approx. $1+ over the market figuring on a pop in the VIX if we get a move down. How do you play this situation after such a wild and successful ride on Feb/Mar strangles?

  112. Phil- perhaps you missed it earlier — any opinion on SD?

  113. thanks Phil – hope there is consolidation in your lower track, too.

  114. Phil,
    Coal- its not the Chinese, its your gumba buddies across the river :)
    MMMM- pizza.

  115. microflux – I’m a software architect as well, owner of a software development company writing custom applications for enterprise IT and tech companies.

  116. Pstas, Good question and I’m keenly interested as well in Peter’s thoughts.  I guess we can take just what the market will give us and enter a very small number of positions while waiting for a move in the VIX.  At least the verticals are relatively cheap.

  117. pstas,
    I know what you mean.  It’s hard to bring ourselves to sell April strangles for less than what we got for Feb and Mar.  Waiting and taking a break or having fewer shorts is a good idea, just like other folks got off their longs after a successful trade.  This answer is not sufficient I know.  So, for starting new strangles, we need to be wary that VIX can go up on us, meaning the short PUT can jump in value.  A new spread would need to be more skewed to the short call side, i.e. the short call is much closer to the money than the short put.  Since the market can’t go up forever, we can sell SPX Apr 1180 or 1190 calls.  These are just 7% or 8% OTM, but if the market drops 3%, they would be 10-11% OTM, which is where we want to be.
    On the put side, we want a 15% cushion after a 3% drop, so the Apr 915 or 925 put would fit the bill.  This is a nice spread that would unlikely to blow us out on the upside and give a nice downside cushion.  Of course, if the market drops 5%-10%, VIX would be back to 27-30 range, and this spread would lose money and we’d double down with an appropriate spread.  If the market doesn’t go anywhere, we’d pocket the original spread and move on.  If the market creeps up, the 925 put would appear to be in neverland in 3.5 weeks, then we can buy it back and sell the 1000 or even 1030 puts with 4 weeks to April expiration (SPX would be at 1150 or higher in this what-if scenario).

  118. Micro/F
    A great summary of the Boeing experience as it relates to Alan Mulally. I do believe he will prevail, as history has a tendency to repeat, and I just have a "gut feeling". I have had about 10 positions in F since Phill made the recommendation last year to jump in at 1.38. I started with selling Leap puts (200), and had no doubt this was a safe bet. (thanks again, Phil). I have since been doing the same for the following trades I made. Today was no different. I sell the puts for premium, as I believe the news from F will keep getting better than it is today, therefore mitigating any downside risk, as I have already collected the premium. The sad but true catastrophy TM is experiencing, is larger than most people realize, and will benefit F.

  119. I must confess I mostly took today off. It has been a wild ride for the past three or four months… I took another look at GS after my rolling stone escape, and OMG the premiums have died! Mar155s only 3.75! That’s just a bit over half by percentage of what I got for the Nov180s way back when, and the stock was further out of the money then.
    I only wrote a few covered calls today. (renewing the WFR, which you can sell month after month and keep your basis equal to the price -which keeps going down) Phil? do you hear that? That stock looks pretty sick to me, and you still appear to love it.
    Speaking of sick, hope you and the crew recover immediately :)

  120. Phil
    Re your 2:57 post today asking the hedge fund associated with Donald Smith. I received this from Mark Skousen, and have sent him an e-mail. I am curious as well as I BEAT his record, and will let you know when I hear back from Mark. I do know he is located in NYC and specializes in undervalued stocks.

  121.  On TOS PM margin increase,
    (just came back from a chinese new year and saw lots of complaints on TOS margin increase on PM accounts). 
    I was also on yahoo’s TOS forum and saw this following msg (repost without author’s permission so no name involved):

    the guy threatens to pull 14(!) accounts out of TOS if there’s no response on this margin issue and here is the response: 

    Within 24 hours, Scott worked with Penson and implemented what he believes is a solution for me.

    Penson is applying a 1.3x multiplier on the margin requirements of option positions.  The way Scott said it, this may apply only to index option positions and may apply only to portfolio margin accounts.  The latter doesn’t make sense to me because the inaccurate margin calls I’ve been getting have been in non-portfolio-margin accounts.  I do trade only index options so the former may be true.  Regardless, because Scott and Penson know my trading style well, they agreed to remove the 1.3x multiplier for my accounts.  I agreed to wait and see whether I get any more inaccurate margin calls before changing clearing firms.
    Scott didn’t know whether Penson double counts the non-overlapping put and call short verticals on the same underlying."

    For my own account it’s not just index option so I can’t verify if indeed Pensen is increasing the index option margin by 1.3x. 

    I’d suggest we verify if this is indeed the case, then fire a shot to TOS as a group to request the same ‘treatment’ of rolling back to the original margin level. I have three accounts with TOS but only one (but sizable) under PM, the other two are IRAs, which I didn’t see margin requirement increased. 
    I am sure together as a group the shot will be more effective.
    PS. There’re also discussions of the real possibility of TOS using TD AMERITRADE as the clearing house once the integration is done roughly toward of the year. Do we have any clue of the TD AMERITRADE margin level and PM requirements? 

  122. Five former Treasury secretaries line up behind the Volcker rule. "The principle can be simply stated. Banks benefiting from public support by means of access to the Federal Reserve and FDIC insurance should not engage in essentially speculative activity unrelated to essential bank services."
    Not lining up — the architects of disaster …. Bob Rubin, Larry Summers, Hank Paulson

  123. Peter, not to nitpick, but aren’t your plays consider straddles, not strangles ?

  124. balance,
    That’s a good idea.  Just email scott and will see what he says.
    Straddles means the strike on the short put and short call is the same and both expire at the same time.  Otherwise, it is a strangle.  You must be having a ton of good beer, in which case I want some too.

  125. Good morning!

    Still in catch-up mode so please re-ask questions in the new post, which should be up on time (8:30).

  126. Yesterday’s volume in FAZ had the highest volume in the closing 30 minutes then any other within at least the last 10 days.  I’m thinking it’s hit the bottom of its range and will turn the corner today.. It’s monsterously overdue.