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Toppy Tuesday – Happy Anniversary Bull Market!

It's hard to believe that just one year ago today investors thought the world was ending!

Well, not all investors – we were BUYBUYBUYing at the time, as I recapped back in September whan we did our "Market Crash – Year One Review."  Click on Cramer's picture for the Daily Show's March 4th, 2009 review of the magical moments that led us down to the bottom and here's another great video from the evening broadcast on March 9th and, of course, there is my own legendary appearance on LiveStock from March 6th, but that's summarized in the crash link, so save yourself 3 hours, although the first 10 minutes are worth it for people who want to learn about our buy/write strategy as I explained the logic of it as I recommended FAS at $2.41 using those hedges

And what a wild year it has been as we've made an epic recovery.  The only question is – have we come too far too fast?  Should we be up 75% from our March 9th lows?  We are still down 25% from our highs but let's keep in mind that we made those highs thinking AIG was MAKING money, that FNM and FRE were great stocks for your retirement virtual portfolio, that Kirk Kirkorean was going to rescue GM, that BZH wasn't some kind of scam, that BSC, LEH et al were "the smartest guys in the room."  I urge you to click on Cramer and listen to the idiocy of the analysts who would tell you everything is all right even as it was all falling apart around them – why does everyone suddenly trust them again?

How could we not love this market?  Markets do this sort of thing all the time don't they?  It's all part of the "efficient pricing model" that always lets you know what a stock is truly worth like when GE was "worth" $30 in 2008 and "worth" $6 in 2009 and is now "worth" $16.  This is not some biotech folks – this is GE, they've been around for 100 years and they have $170Bn in global sales.  Did they really drop 80% in value in 2009?  No.  That's why it was easy to pick a bottom – the valuations got ridiculous and, as fundamentalists, we siezed on the opportunity to BUYBUYBUY despite the negative sentiment. 

Now, we are in a very different situation.  Now we have the MSM telling us to BUYBUYBUY despite the 75% run-up, as if a return to Dow 14,000 and S&P 1,500 is inevitable.  My problem with this is that those levels were based on profits that never actually happened so how can we return to them?  Clearly the solution our government has chosen is to continue to allow companies to report profits that never actually happened so we can slip back into our fantasy world where 30M unemployed, discouraged and under-employed Americans are somebody else's problem as are the 4M families facing foreclosure this year and the 20M families that are behind on their mortgage payments, who may be joining them

I have not been a fan of the recent move up as we were led by commodity stocks, real estate and financials.  People, these are the SAME guys who led us to our doom last time!  Is it really that hard to remember??  I'm sorry but if I get into one more conversation where someone tells me "this time it's different" I will FREAK OUT!  I'm getting interviewed and my views are considered "radical" because I'm still a bit concerned about the soundness of the banks who have Trillions of dollars on loan to unemployed people and businesses who serve unemployed people and on houses and CRE that is not selling and even to countries that themselves have debts they can't possibly pay.  My views are radical because I'm CONCERNED?  

I would be a lot less worried if other people were worried but what really worries me is how NOT worried the MSM is (or at least how they edit and present the views of the people who they decide to allow access to).  And, if the average person didn't believe what they see on TV – I would not be worried but, sadly, they do!  It is possible for a group of people – for a whole society, in fact, to believe something that is totally untrue.  The people of Pompeii were proud that Vulcan had chosen to make his home in their mountain, for example… 

So the people of America have chosen to believe that spending $80 for a barrel of oil and importing 11 Million Barrels a day and sending $321Bn a year OUT of the country to some of the very same people we are spending another $600Bn a year fighting a war against is the sign of a healthy economy.  Keep in mind that $321Bn is only about 1/2 of our oil spending in total.  In addition to the stimulus last year we also had oil that averaged $50 a barrel for the first half of 2009.  With 19Mbd consumed in the US, that was putting $17Bn PER MONTH right back into consumer's pockets vs $80 oil or, to put it another way – we now have $17Bn less money per month to spend than we did in June.  Of course, refining mark-ups and other rising commodities make it more like $50Bn a month but, since that extra $50Bn is counted into our GDP – it's a GOOD thing, right?

That's my premise for being cautious, the same one I had back in 2007 and 2008 as oil went over $80 and I kept saying it was going to destroy the economy.  I was wrong for a very long time – keep that in mind – but then, I was very tragically right as we finally hit a wall and the economy fell off a cliff.  But the wall wasn't caused by the sudden spike to $140 – the wall was caused by people running out of credit cards and second mortgages they were using to pay for all the oil.  If we're shipping $321Bn out of the country at $80 - how much did we have to borrow to subsidize $140?  And that money is NEVER coming back! 

Since we originally had to borrow money to pay for $80 oil and now we, the people, are all tapped out – how can we be expected to do it again?   It's an unsustainable model BUT – it may take a while before we hit the wall so we will party on – but you can be damn sure we will ALWAYS have our eyes on the nearest exit!  That being said, let's take a look as the S&P chart and the key resistance points we'll be watching this week:

The critical channel for the week is going to be between 1,130 and 1,150 and the most important takeaway from the chart is that we are now 10% over the 200 dma – that doesn't happen too often.  I did the multi-chart in yesterday's post so we know where we generally stand.  I have been bearish since last week – I am still bearish until we break 1,150 and then I will be VERY reluctantly bullish because I'm fairly certain it will all end in tears but knowing that in 1999 didn't stop us from having a fabulous year – even more so for those who cashed out at Christmas! 

Can we party in 2010 like it's 2009, where a monkey with a dartboard could have picked a stock that was going to double?  Well CSCO has an "It"-type announcement at 1pm and hopefully Cisco's "it" isn't Segway's "it," which didn't actually change anything except the way really rich people play polo.  

Asia was flat as a board this morning and not much happened other than the Yen getting strong again as Japanese companies brought profits home before the fiscal year ends.  This is happening at the same time as the Pound is getting weaker on poor housing data so currency traders may want to reverse this bet now that things are calming down.  Moody's has also made some negative noises about British Banks (and their bonds) so not a good day for the UK, on the whole.  Also of note in Asia, China's head of Foreign Exchange said "gold is unlikely to be China's investment of choice" as they diversify their reserve holdings BECAUSE IT'S TOO RISKY!  Gee, imagine that…

Copper failed $3.40 but is still a far cry from rational (below $3.20) so we'll be watching them closely and gold fell all the way to $1,110 in pre market – which will be fantastic for our GLL play if it sticks.   Oil fell all the way to $80.16 overnight but is, of course, recovering now that the NYMEX crooks have punched in for the day.  $81.50 is the mark to make over there and once again we'll be looking to short oil at $82 the day before inventories if they are foolish enough to take it that high. 

Not much else today.  Greece and Dubai are still unresolved while Spain, Italy and Ukraine are getting harder to ignore.  As with yesterday, we'll be watching our levels to see what sticks but, so far, it's looking like a slippery slope


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  1. Phil, 2 questions for you:
    1. Post looking a little bearish so far this morning: if we open lower, would you uncover some puts planning for a little ride down?
    2. VZ and T both had good days yesterday, for the first time in a while. As did other carrier companies. You think this space may benifit from some rotation into it? (I’m thinking about very cheap T calls here, and i have a small VZ stock position ? add to it)

  2. Hanna5 – BCE was focused in Barrons and VZ and T were mentioned as comps.  that prob spurred some buying interest.  BCE pays 5.5% dividend and a good defensive play and nice currency hedge to boot.  Barrons also noted telecoms and utilities were 2 sectors with lowest P/E ratios. 

  3.  Phil,
    On the GOOG 520/540 call spread, take the money and run early this morning? 

  4. Phil, cisco’s website says the announcement is at 10 am EST (there’s a countdown clock and everything, which has 45 mins left at the time of this post)

  5. Link to countdown clock on their website

  6. Hello all,
    Once again, I am available all day long to answer any market questions you may have. I have pretty stellar knowledge of stocks, ETFs, the oil market, and bonds.
    I just posted recently my picks for the day, as well. We are looking to buy ERY and short sale TXT. You can read more on my positions and ask any questions here.
    Let me know.

  7. Good morning!

    TXN raised guidance and is selling off – that is NOT a good sign….

    Still, same as yesterday: Russell breaking over 666 and S&P over 1,140 are both very bullish signs.  That should line up with Dow 10,600, NYSE 7,300 and Nas 2,325.  

    If we are going to get upside resistance after that it will be back at Dow 10,700, S&P 1,050, Nas 2,350, NYSE 7,400 and Russell 750 so a long way to go to the upside before we can count on a pullback once they break away from this morning’s levels. 

    There is no downside, which is to say the downside is so far down I doubt we get there in a day so we just need to watch 1.5% for a single day drop and 2.5% for a multi-day downturn for possible support points. 

    Meanwhile, TXN makes a nice bullish play off this dip.  We can sell the Apr $24 puts for .70 and I like that entry (net $23.30) on them.

  8. Uncover/Hannah – As I’ve been saying, fundamentals are out the window so we have to stick with 10,550 as our technical stop but now for a little spike, like we just had but if we do fail to get back over then, yes, a good time to go back to 1/2 cover on the long DIA play.

    Telcos/Hanna – I like both of those stocks whether the sector is in favor or not and there is a strong possibility that, whatever CSCO is about to announce, it should be a plus for carriers. 

    GOOG/Balance – I don’t really see them failing $540 by next Friday but if they can’t hold $560 then taking the money and running is prudent. 

    10am/Kwan – Thanks, we’ll know soon then. 

  9. Dinging TBT:  China is still very much committed to U.S. Treasurys: "The U.S. Treasury market is the world’s largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us."

    The U.S. budget deficit is a concern, says White House economic adviser Christina Romer, but cutting back now would "nip the nascent economic recovery in the bud – just as fiscal and monetary contraction in 1936 and 1937 led to a second severe recession before the recovery from the Great Depression was complete."  So — MORE FREE MONEY!

    The U.K. is still within tolerance of a triple-A rating, says Fitch, but its credit profile has deteriorated and Fitch is "uncomfortable with the fiscal adjustment path set out by U.K. authorities." (ETF: EWU) Portugal’s gradual approach to fiscal consolidation is a "concern," and a downgrade of its double-A rating could be in the offing.

    The U.K.’s trade deficit unexpectedly widened to its worst in 17 months, as exports saw their sharpest drop in more than three years despite a weak pound. (ETF: EWU)

    U.S. employers have toned down their hiring expectations mildly, according to Manpower’s Q2 Employment Outlook (.pdf). A net 5% of employers expect to hire in Q2, down from 6% last quarter, but an improvement from the net -2% reading a year ago.

    Redbook Chain Store Sales: +3.1% Y/Y vs. +1.5% last week. It’s the best sales rate since November, but Redbook describes the week as below plan.

    ICSC Retail Store Sales: +2.9% W/W, vs. -0.8% last week. +3.4% Y/Y, vs. +0.7% last week. Warm weather helped boost sales of spring goods and gave retailers a breakaway start in March.

    JPMorgan Securities cut its rating on First Solar (FSLR) and two other solar companies, saying oversupply likely would become a major issue in the second half of the year. Shares -3.1% premarket.

    Hank Greenberg, former CEO of AIG (AIG), testifies today about a sham transaction that took place between AIG and General Re (BRK.A) in 2000. Greenberg’s testimony is part of a civil fraud suit filed in 2005 and now being handled by NY AG Cuomo.

  10. In TNA, failing to break IWM 66.90 will switch to TZA.

  11. This is some strange bounce back - Declines are 16:11 to advancers and down volume is 60:43 up volume.

    I think reality is watching copper under $3.40 and oil is currently unable to get back over $81 – those will tell us if we’re really improving today but I think we just had an early stick although CSCO can possibly give us an upside punch if they really have something good.

  12. Phil, what do think about that PDLI play.  Stock at 7.08 and buy 7.5 put for .55 with ex-div date on 3/11 for .50 dividend.  If the stock goes up great, if not you exercise your puts and get taken out at $7.50.  It seems like a good way to make 4.8% for 1 week.  Am i missing something?

  13. CSCO $25 puts for .12 are a fun play.

  14. PDLI/Robert – We looked at this yesterday and it looks legit but it’s hard to imagine life is that simple.

  15. hi Phil my GOOG bear spread open last month Sept 510/570/550 how should I adjust, i have 10 contract and not looking good right now, shoul I roll ou to Jan 11 and convert to bull call spread and sell front month call to get back the loss. Thk

  16. Out of TNA at 52.03, for $0.55

  17. PDLI: how about put in a tiny position, like 1 contract, just for the fun?

  18. Phil: checking with you on low premiums left:
    KBR PUT mar20 , base 0.89, now 0.10, have stock and no caller,
    AMGN PUT Mar 55 base 1.06, now 0.13, this is naked,
    adjust to what ?

  19. So, what’s the big deal on CSCO announcement?  They invented a device to ensure the sky does not fall?

  20. HXU/EDZ
    Phil, I am trying to get out of my old EDZ option plays for the new EDZ ones.
    But I am facing a problem. My broker doesnt quote me the smae prices for the same option.
    For example APR 5 PUT is .55/.70
    And APR 50 PUT is 3.70/4.00
    Do you know why is it so?

  21. Sorry for the previous comment, my mistake

  22. PLDI – just watch then entry on them.  Yes you collect the 50c and the Put price, but typically the ex-date, the price drops.  Check out the charts.  I like the play from a while ago where you don’t have to manage the daily swings and just collect the dividends.

  23.  JRW
    Do you ever hold TNA and TZA at the same time waiting for the market to move so each can be taken out as they become profitable?

  24. Hi Phil, I realy like your kristal ball yesterday we discussed SONC and you said they coming out of the woods and to hold on to it today the stk is up 4.4% how do you do it ?????????????

  25. cwan:
    They invented a device to ensure the sky does not fall?
    Al Gore already did that.   :)

  26. I have been with you a while and I am learning as always (yes i am a slow learner ;) )
    i took these position when we had the dip as you said, now i want to lear how to extend playes like this.
    1. is the best this todo to let expiration roll by and sort things out ?
    2. roll to APRIL ? same strikes ?
    3. buy the puts back, maybe the calls to and wait for a fall and a higher VIX to sell again ?
    SPWRA MAR 19 put soold 1.60 is 50
    MBI bought stock 5.20 sold March call/put  .70/.50 is  stock 5.33  call/put .40/.10
    WFR bought stock 12.28 sold JAN11 put 2.48 is 1.96, was waiting for the stock togo up to sell calls

  27. GOOG/Gucci – You could do that or you can just offset with a bullish spread that will be covered by the one you already have.  I’m not a big fan of those kind of spreads as they are such a pain in the ass to adjust.  I don’t know how far behind you are but the 50 dma is $562.42 and GOOG is at $560 so it’s a tad early to throw in the towel

    PDLI/Cwan – Oh I’m all for it as a fun play.  If it works you can do it again in Sept! 

    KBR/RMM – It depends on if there’s any merit in freeing up the margin.  Doesn’t look like KBR is in danger BUT, let’s say they do drop, you’ll want to sell Apr puts for a good premium so if you won’t feel comfortable carrying both, THEN it’s best to take out the March puts now.  I"d sure sell the Apr $21s for $1.20 either way, that’s good money since KBR was at $20.75 on Friday.  On AMGN, same thing more or less but if you REALLY want to own it fro net $54, then why should you pay someone money NOT to?

    CSCO – What is it?  I was too annoyed to register…

    EDZ/Lionel – That is strange but they are all so thinly traded now you can’t trust anything.  TOS has the Apr $50 put at $6.40/$6.70 (and there were 2 sales) - you may need to get another broker if they are quoting that far off.   Oh, now I see next comment so good, I guess…

    AAPL making new highs.

    SONC/Yodi – Well it’s a lot easier when people ask me about ones I follow closely. 

    Chevron (CVX -0.3%) will eliminate 2,000 positions this year and make further staff reductions in 2011 as part of a previously announced restructuring in its refining and marketing operations. Despite "difficult" downstream market conditions, the company says it will increase its dividend and continue funding its projects.  Ah capitalism

    The National Federation of Independent Business’s Small Business Optimism Index (.pdf) dropped 1.3 points in February to 88. Some 34% of small business owners said ongoing weak sales are the main reason they’re not yet ready to pull the trigger on expansion.   That would be the Russell that’s doing so well

    Wow, it’s Talk About Free Money Day at the Fed!  The weak labor market will justify near-zero interest rates "for some time," says Chicago Fed president Charles Evans. High long-term unemployment suggests the labor market may be "unusually weak," and restrictive bank credit and business and household caution are making it tougher to get job growth back on track.

    The EU threatens to ban "purely speculative naked sales" on credit default swaps, in a swipe at speculators who made bets against the euro and the chances of Greece not repaying its debt.

  28. jcedens,
    I tried that about a year or so ago, and found it to be a distraction; you have your parameters and within those you choose a direction, if you’re wrong, you adjust but holding both tempts indecision is net neutral, and just costs you another $ 16.00

  29. Hi Phil
    I’m still in TZA March 9 call and down about 60%; suggest a roll into April or throwing in the towel since this market just doesn’t want to get real.  Although still holding my short copper futures and they are working well today.

  30. GOOG sold sept 510 at $34, I bought back today at $18.9, still have sept 570put bot at $68 now 41.15, sold 550call at$27.65 now 46.75, I bot back the putter and wait for pull back to sell again that is all

  31. PDLI / Phil – Looks like other people have figured out the same play. Almost 350 contracts of 7.5 March Puts traded today, compared to the usual <50.
    Robert – I mentioned the same play yesterday. 40-45c guranteed. 10% profit on margin, 5% on cash.

  32. cwan  – What’s the fun in 1 contract? ;)

  33. Pharm – Looks like ARNA posted earnings yesterday. What do you think about those?

    Despite all the talk of free money and support for buying Treasuries, TBT doesn’t seem too bothered by it so far. 

  35. Phil, Quite a while back you set up some long plays on C to recoup the great loss of the stock I do not know you still remember hold stk at 35.00 now 3.68 so we set up quite some combinations of calls and put. they starting to work out very well. The only question I now have take for instant my bull spread Sep 3/4 c bought for .57 now .85 but the short one is just slightly already ahead of the 4c I sold for .21 now trading for .29  I do like the short puts I sold they running in to credit now. My question is should one not kill the short calls in time Jan 11 and even Jan 12 before they get to fare in the money as it is my believe C will as well get out of the woods. your feeling on the matter pls.

  36. Phil do you think the market will have some pull back sometime this week or next week ? Vix is low and RSI is near 60

  37. Super run out of AAPL. GOOG is still hanging around the 50 ma; if it can catch some of the craziness around AAPL and BIDU it could take off.
    Frustrating to chase up here but there’s not much alternative except low-delta spreads and cash (both of which I have a lot of).

  38. Phil,
    Did you ever get that oil rig photo I sent ?

  39. ARNA/Trad – earnings….not a concern.  It is all about approval.  Look at MDVN, ITMN, etc.   When approval is coming, the stock trades UP, volitilty increases immensely and one ride that wave.  I have been accumulating and selling P on ARNA for a few months now.

  40. With the VIX so low, I plan to spend the day shopping for stocks I want long term. Strategy is to buy leaps, as the call pricing is attractive. Looking at BA, V, GOOG and some of Pharms picks.Will sell some front month calls on upticks.

  41. iShares MSCI Germany Index Fund (EWG) is -0.3% after ECB’s Axel Weber told Bloomberg Germany’s Q1 GDP could slip back into the red. Weber was more confident about subsequent quarters, but some wonder how Germany will regain its momentum with so many of its trade partners in crisis mode.

    CSCO’s "it" is out:

    No, just kidding but it doesn’t seem to be out yet, maybe 11…

    Positions/Micro – Well it depends what the goal is, doesn’t it?  There are two ways we enter a naked put sales – either we WANT to own something for the net cost or we are taking advantage of a dip (like TXN) and we wouldn’t mind owning them at the net cost.  With the Buy List, I’m finding stocks I WANT to own so (and SPWRA is one of them) if I don’t get it this month, I’ll try again next month.  So, in the case of SPWRA, we didn’t get it for $17.40 and now it’s $20.22.  What are we really willing to spend (because $17.40 was ridiculous and we knew it).  I think we can live with $18 so selling the Apr $19 puts for $1.05 is a very reasonable way to go there

    On MBI, that’s a Buy/Write way down at net $4/4.50 and you’re only going to have to roll one of them so, unless there is a particularly exciting roll to make, you just wait.  Maybe you get lucky and they pin $5, maybe not.  Either way the putter expires worthless and you roll the calls forward.  

    WFR is another one we REALLY want to own and your strategy is right there.  They are holding up well despite JPM downgrade of FSLR and others so, like SPWRA, a good sign.  Do keep in mind though that you are vulnerable to bad solar news, like some kind of cutback in EU subsidies that will hit everyone…

    TZA/Humvee – Not looking good are they?  At .05, there’s not much to save but you can sell the Apr $7.50 puts for .57 to play next month.  I like those as they can roll down $1 per month about even.  As to your nickel – you can sell the $8s for .15, which I guess is all your money back, your $9s act as an upside stop and if TZA goes up you’ll be happy with the puts you sold and you can cash out your $9s and roll the caller to the Apr $10s – still in very good shape because of the sold puts

    GOOG/Gucci – Why not sell the $560 put for $35 and use that money to  roll out to the Jan $600 puts at $72 (+$32) so you are in for net $35 on the $40 spead there with a 4-month advantage.   On the call side, you can always roll him up and he still has $38 in premium so a bit early to worry. 

    PDLI/Trad – I am very curious to know how it works out.   Great find though!  Hard to imagine people missed something so obvious. 

    The new CSCO is here and it’s – A ROUTER!  Wow, a router – from Cisco – who’d have thought?  ROFL – people are such suckers…..

  42. Shorted the Euro against AUD, CAD, USD yesterday, and it is paying off very nicely. Still in all of the positions, as the Euro has to weaken against the stronger currencies, with all of their problems.

  43. Here is something that might help. Only major economic piece today:

    10:56 AM The IBD/TIPP measure of consumer optimism fell for the second straight month, to 45.4 - a one-year low and 1.4 points below February (under 50 indicates pessimism). Six-month outlook slipped to 46.4 from 48.7, and personal financial outlook fell 2.8 to 50.7. Just three of 21 demographics were feeling the recovery (over 50 on the main index).

  44. CSCO – basically they have a new service with 12 times the network capacity and will store your data in the cloud using 60% less power while delivering content based on proximity and is all on a pay as you compute pricing plan.
    New silicon, new network, bigger scale (data transmission capacity). Tested some time ago by AT&T on their live network at some point.
    I still want T to give me a phone with video conferencing built into it *cough*iPhone*cough*

  45. But yes, as Phil said it’s basically a low(er) power router with attached network storage.

  46. PDLI/Phil – We will know soon enough :D (Apr 1 is when the dividend is paid). Maximum risk (R) is 10c due to the 7.5 put, so worst case scenario – a loss of $100 for 10 contracts. Not too shabby given 5 digit losses I have had last year. Still a long way to recover all the losses.

  47. Hi EricL, Put the question yesterday to you but trust you were out Re.: V still hold some condors slightly down do we still hold on or take a loss?? thks

  48. Hi yodi,
    I did respond yesterday — my suggestion is that the safe trade is to get out at a small loss. I’m not following my own advice and am keeping it hoping for a little pullback.

  49. TBT/JCM – Yes a very good sign (for TBT anyway – not so good for America).

    C/Yodi – Well your question boils down to "I totally lost my ass and we made a play that’s going to get me even but now that I may actually get even I am very greedy and want to risk it all again by spending money to buy out callers rather than just being thrilled if the play works out."   Does that about sum it up?  If you are very gung-ho bullish then perhaps add a few of your own calls – which have real value – rather than wasting money buying out callers for all premium.   You can alos sell a few puts like the Jan $4 puts for .75 (net $3.25) but DON’T BUY PREMIUM!  Thanks…

    Pullback/Gucci – I do/did think so but this madness seems unending.  There’s no major data this week other than Friday’s Retail Sales and those seem to be trending up for a beat (-0.2% expected).  Next week is a big data week and expiration week so that’s going to be crazy but I really thought today we’d get some profit taking off last week’s move, which began Thursday afternoon.   I am wondering if this "Bull Anniversary" talk is helping today and that’s going to have me extending to tomorrow (just sitting on my bad bearish positions) but then time goes too far against me to ignore. 

    Frustrating/Eric – Yes, it is.  Not too many bargains to be hunted at the moment. 

    Oil rig/JRW – I don’t think so..

    Cisco Systems (CSCO) introduces a new type of router that triples its predecessor’s capacity to 322 terabits/second, in a bid to speed the growth of video transmission. Telecom’s been lifting stocks (T +1.2%; VZ +0.9%), but CSCO on its way down quickly: -1.5% and falling.  The thing sells for $90,000.  It is great but it’s just a capacity upgrade – something we knew we needed and had faith would be coming at some point

    The creation of a European Monetary Fund doesn’t look like it’s going to happen anytime soon. Germany’s Merkel says an EMF would require a new treaty ratified by all EU members, France says it’s a long-term project and Sweden says anti-moral hazard rules must be put in place.

    The IBD/TIPP measure of consumer optimism fell for the second straight month, to 45.4 – a one-year low and 1.4 points below February (under 50 indicates pessimism). Six-month outlook slipped to 46.4 from 48.7, and personal financial outlook fell 2.8 to 50.7. Just three of 21 demographics were feeling the recovery (over 50 on the main index).  I am beyond the capacity to express how ridiculous this rally is with data like this coming in!

  50. Thanks Phil, great play!

  51. Thanks Phil, for kicking ass on C  You so right yes sell puts.
    On Mar DIA 105 at .70 now do we buy any back here I am 1/2 cover ? thks

  52. yodi,
    you can also lower the delta on V by selling some 90 strike March puts, which I just did.

  53. JRW,  You looking to see whether it breaks over 67.10 or under 66.90?  I can’t imagine it has much more room over 67.10, but RUT seems like a helium balloon cut free from its tether.

  54. Phil,
    Any thoughts on VXX (I know it’s a leech with the VIX contango)?  Thanks!

  55. Thanks EricL, Just put an order in but it is a very high margin!!!

  56. Phil:  Any thoughts on Amzn?  I normally don’t sell AMZN calls until it approaches the 140 area.  But, since I’ve been pessimistic on the market I sold naked Mar 130s way too early (for .60).  Would you suggest toughing it out till expiration, or rolling now?  By the way, I can’t do a ratio roll as it would use too much margin.  

  57. yodi,
    You can buy lower strike puts to offset the margin: e.g., the 85s at .20. I have an order in for them myself.

  58. PDLI/Trad – Yeah I like it.  I hope there’s no snags we’re missing.

    Whenever the DIA ($105.91) is ahead of the Dow (10,582) I get a little worried that people are too irrationally exuberant. 

    DIA/Yodi – No sense in buying them out if we are over our line (10,550).   They are an easy roll down so why pay the putters enough money to roll your longs up $1 – aren’t you better off rolling your longs up $1 and leaving the putters?

    VXX/Fab – They don’t have options so I don’t think about them at all.  If you want a fun VIX play you can sell the March $18 puts for .50 and buy the May $18 puts for .45 so a .05 credit on a horizontal spread with a 2-month advantage.  Of course the March puts have little to do with the May puts but at least it’s kind of cover and the March puts still have .35 in premium and I’m fairly sure the May puts will maintain more than .25 of theirs for a very nice win. 

    AMZN/John – I like shorting them at $140 and longing them at $115.  I think they are too dangerous in between to mess around with so patience would be a virtue. 

  59. Thanks EricL, Just closed 3p 90 for .96 see how it works out the market does look to good for me to be true!!!

  60. judah,
    I’ve got 67.15 and 66.90 an ascending wedge in a very over-bought market………so barring a miracle from Mr Stick, we should be heading South !!

  61. Phil,
    I send the photo again, you’ll love it and it’s NOT a fake

  62. Mr. JRW, do you care to share with the rest of the class?  :)

  63. Hi, Gel1,
    I read your analysis of currencies last night with great interest.
    So, what do you think of JPY?  Why is JPY so strong vs USD?  Do you think the trend will reverse and USDJPY go back to 100?

  64. 1020
    I would, but I can’t get it into this thread; I’m sure Phil will post it

  65. I’m tempted to sell AAPL mar 220 calls.  I believe it will be pinned at 220 this month.  Notice I’m tempted, but not likely I’ll do it.  

  66. tradansh / PDLI 1 contract: Just so that I have something to boast about in a party 8)
    BTW, the 350 extra contracts could all came from PSW members.  Don’t you know how BIG we are?  We can move the market!

  67. Hi Phil, i am so frustrated to see the naked call premium get eaten away while I am waiting for a good pull back, which may not hapen, and I guess I would keep rolling the naked call into another month for more pemium i guess

  68. Phil,  Oil is getting real close to $82, you planning on shorting?

  69. I sold the AAPL April 220  calls for $8.15 on Friday.  These are now $10.20.  Is it time to get out or do you think they will drop prior to expiration?

  70. cwan – I know. Now over 500 contracts. ROFL. Crazy stuff.

  71. The RUT is now where it was pre-Lehman collapse.  My how things have gotten better.

  72. Hi, Peter, Fellow Stranglers, & All,
    I just happened to see the following in Webster’s Dictionary:
    The word "rut" basically has two meanings:
    (1) a furrow or track in the ground, esp. one made by the passage of a vehicle.  Or, a fixed or established mode of procedure or course of life, usually dull or unpromising: to fall into a rut.
    (2) the periodically recurring sexual excitement of the deer, goat, sheep, etc.
    Holy cow!  That’s why RUT is so hard to tame!

  73. judah – they may be coming for your 710′s.

  74. ToS Users – From your experience, what is the best and fastest way to exercise options for ToS desktop users? Want to make sure that I dont run into any snags while trying to get out of my PDLI position.
    A. Use the exercise functionality from within the desktop application?
    B. Talk to an online service rep to exercise options?
    C. Call ToS on their 1-800 # and tell the rep to exercise them?
    Also, what is ToS’s fees for options exercise?

  75. FWIW, which may not be much, but on a 7 Day RS measure, the RUT has not been this overbought in more than 2 years


  76. That is a way cool picture JRW! 

    AAPL July $240s at $9.20, covered with Apr $230s at $5.45.  Should be rollable, of course and, worst upside case, the July $250s are already $6.30 so you can roll it up to a vertical.  With luck, the caller expires and you have a cheap agressive long call through earnings.

    Moving the market/Cwan – Hey before we started trading QID there was no marke for those options.  Now there are 10s of thousands.  I remember when we would go days without a fill on them…

    Rolling/Gucci – May as well.  I figure that we should get a pullback around 14,000.  8-)

    Oil/Palotay – Yes, I like selling the $40 calls for .65, you can cover 5 of those sold with 3 Apr $41s at .95 for net $25 so all you need to do is hold .10 on the Aprils and it’s easy to adjust (buy more longs) if USO breaks over.   I also still like the Apr $38 puts, now .82

    AAPL/Sara – The bottom line is you collected $8.15 so you "sold" AAPL for $228.15 and AAPL is now $223.98 so should you pay $10.20 to avoid keeping $4.17? 

    Getting out tests:  Dow 10,600, S&P well over 1,140, Nas just under 2,350, NYSE over 7,300 and RUT looking for 700, still has a ways to go but over 650 is impressive anyway. 

    TOS/Trad – I never exercise, will be news to me. 

    Overbought/JCM – Doesn’t matter I think.  We seem to be going up with or without a good reason…

  77. jcmcn5
    And it’s going higher; still on TNA but looking forward to the switch

  78. Stay away from "the most dangerous market there is" – national government debt – because the end of borrowing is far off, says Loomis Sayles vice chairman Dan Fuss. He discourages investing in any country’s debt and thinks the Fed won’t raise rates in 2010.

    In a behind-the-scenes look at Apple’s (AAPL) efforts to block handset makers from infringing on its patents, Oppenheimer’s Yair Reiner says Apple’s suit against HTC is one of several warning shots "meaningfully disrupting the development roadmaps for would-be iPhone killers."

    Isn’t this great?  This is what sent oil and the energy stocks flying back up:  The EIA’s short-term energy outlook figures oil will stay above $80/barrel this spring, average $82 by year-end and $85 by the end of 2011. The group predicts average gasoline will follow, going from $2.35/gallon last year to $2.84 this year and $2.96 in 2011. (ETF: USO)

  79. Phil:
    where is XOM going:
    I have stock, 66.5 to 66.8,
    1x caller april 70 0.6 to 0.38,
    2x putter march 65 1.74 to 0.21.
    what adjustments would you make ?

  80. sarahd……AAPL/   I think I would not want to hold April 220 calls naked.  I hold them but they are covers, and can be rolled as needed. 

  81. And out of TNA at $ 53.33 for $ 1.21

  82. JRW – AWESOME SHOT!  Did you take it? If not, how do you know it’s real? very cool…..

  83. Oh and nice job with TNA…..

  84. JRW, Got on TZA when the Dow didn’t hold above 10,600.  Hoping the RUT will follow and I can make a dime.

  85. This CANNOT go on for another 3 1/2 hours !!

  86. cwan/JPY
    I have never played the JPY, for the reason it is a strong currency and likes to follow the dollar when there is a flight to safety..As a trading principle, I try to pair the strongest with the weakest looking for the greatest disparity.  Looking forward, I can see the JPY strengthening, as I see the new government in Japan turning their economy around. The "elites" will be giving up a lot of their power and wealth to the benefit of the country’s masses, allowing consumption to flourish. This will result in an economic recovery, that additionally will be given a boost by the overall strength of the Asian economic situation,  that is very strong. and getting stronger. Looking forward, I am more bullish on the JPY vs the USD. This is a "round about "answer that really says I do not know a lot about this pairing. Do you have any sentiments between the two?

  87. JRW – I have been thinking that for 3 1/2 weeks.

  88. 1020,
    No, I didn’t take it, photography is one of my hobbies, and a fellow I met through Nikon took it and forwarded to me.

  89. Didn’t Dick Fuld day something like that?


  90.  We should just call this the "Toyota market". Unexplainable and uncontrollable acceleration! The damn thing won’t stop no matter what force is applied to the brakes.

  91. SS,  Amen, brother.  I can’t remember the last time Phil said, Wheeeee!  What’s the corollary to a relief rally, a salve sell-off?

  92. XOM/RMM – Sounds fine to me.  We expect them to drift along between $65 and $70 unless oil fails $75, which is not looking too likely right now… 

    Now I think we may be topping out finally.  We tested enough highs, Dow got a rejection, Nas got a rejection, watch NYSE at 7,300 to confirm and SOX 350 is another good indicator

    DIA $105 puts can be bought (or taken out if you covered with them) for .60 and I like that below 10,600.  So it’s a play to take the nickel loss if the Dow goes higher or, if you have the Mattress Play, then we flip to a 1/2 cover of the $106 puts (now $1) if we are over 10,600

  93. Re: JPY,
    Another factor to keep in mind is Japan (unlike all the other countries in the region) is experiencing deflation right now and it’s getting worse not better. It’s the big topic on the news now, and I go there quite often and have been shocked the last few months at how cheap some things have become. I don’t know how deflation impacts currency trading, but it’s something to be aware of.

  94. Phil
    Any new trades on BRK/A ?

  95. "Can California declare bankruptcy?" asks Christopher Beam. Well, no, but it could go into receivership, which has a lot in common with bankruptcy as we know it.

    VNO Apr $75/70 bear put spread is just $2.60 with stock at $71.78.

    BRK.A/QC – They are just too high now.   We played them 20% ago and they are a little toppy here but so is the whole market and that’s not stopping it. 

    Speaking of which – there goes 10,600!  Nas broke 2,350 too.  I suppose it’s the joyous news that now Cisco has a router that will let the government watch you through 1Bn cameras simultaneously (I’m pretty sure that’s what they said..).

    Aside from selling the DIA $106 puts (now .95) the upside play above 10,600 on the down is the Apr $107s at $1.37 and, if we keep going, hopefully the March $106s can be sold for the same to make a $0 spread.

  96. If we can break IWM 67.39 to the downside, TZA may play to 67.15 anyway

  97.  Newbie question again:
    In the latest email, Phil said this:
    DIA $105 puts can be bought (or taken out if you covered with them) for .60 and I like that below 10,600.  So it’s a play to take the nickel loss if the Dow goes higher or, if you have the Mattress Play, then we flip to a 1/2 cover of the $106 puts (now $1) if we are over 10,600
    1. Are the DIA 105 PUTS a new position?
    2.  What is a Mattress Play?
    3.  HOw is it a nickel loss?  
    Thankyou -just trying to learn how to read Phil’s posts, etc.

  98. Phil DIA mattress, I have June 106 put and full cover with March 105 putter, so you now recommended to buy back March 105 putter and sell 1/2 cover now with 106 putters.  Could you tell me the 1/2 106 puter cover is march or april month

  99. DIA/Sal – start here for Mattress plays….  then you can catch up on positions later. 

  100. The Treasury sells $40B in three-year notes at 1.437% (.pdf). Bid-to-cover ratio of 3.13; indirect bidders take 51.9%; direct bidders take 10.3%.  That’s high for 3-year.  TBT moving up again.

    See, this is where it all falls apart – the Fed can say "low rates forever" but it costs them 1.4% to borrow money and they are lending it at 0.5% and it’s A LOT OF MONEY.  How long can they keep it up if these rates go to 2% and 2.5% and 3% – you can WANT to keep rates low but the more you run a deficit, the higher the rates go and, at some point – they will have to buckel. 

    Also, the Fed doesn’t want to raise rates because then you might get more than 1% for putting money in the bank.  If putting money in the bank and SAVING it once again becomes a viable investment choice – this whole house of cards can come tumbling down…

    Treasury brings in the bloggers again, and the (vague) message Felix Salmon gets is that meaningful financial reform isn’t dead yet. Daniel Indiviglio hears a clear "yes" on the subject of whether principal reductions are coming for mortgages.

    With monetary authorities around the world preparing for their exit, there are fears in some circles that a new Armageddon is in sight. Volatility could shoot up, it is argued, as investors try to figure out the impact of a synchronous global tightening on their respective asset classes—let alone the difference between, say, the effective fed funds rate and the interest on excess reserves!

  101. Gucci – march

  102. I really can’t take much more of this BS market !!
    I really hope that the whole year isn’t like this.

  103. DIA/Salvum – You really need to read the new members guide.  That is a follow up to the Mattress plays that we constantly track in chat and, of course, you know all about that from reading the last 30 days of comments so you are all up to speed before you ask, right?  I’m sure you followed the links that were posted when you read last week’s comments on mattress plays so I assume you are asking for the original title of the article to Google which is "The Stock Market Parachute."  If you bought the DIA $105 puts for .60 and you stopped out as the Dow broke over 10,600, the expectation was that you would lose .05 (a nickel).   Actually, at 10,608 they are still .56 so not a bad gamble on the whole…

    DIA/Gucci – Yes, I would buy back all the $105 puts and see if this holds.  If not, you can wait and sell some more puts on the dip and, if we go higher, you can 1/2 cover with the March $106 puts, let’s say by .85 (now .95). 

    Thanks Pharm!

    Why should this year be different Cap?

  104. april 107 at $1.37, you mean to sell a nake call here when Dow could not hold 10600… little slow to follow you on th e mattress. 

  105. Man, I hope I was successful talking Biodeisel Chris out of his BIDU short, what an amazing 30 days.

  106. Cap / BS Market
    Don’t worry, everything should be going to Hell very soon !!

  107. mrmocha – I think if anyone was short anything in the last 30 days they would be toast.

  108.  I would be the toast.

  109. Interesting stats for those who like them for mutual funds:
    Dec Inflows -3.5B (domestic = -8.9B, Foreign +5.4B)
    Jan Inflows 16.3B (domestic= 6.2B, foreign 10.1B)
    Feb Inflows  -3.2B (domestic -8.9b, foreign 5.4B)

  110. Cap
    Things could be worse… a California resident and a market bear – a double hit financially !

  111. Yes, ssdirk, it’s been painful lately, just like early January for me with Phil and others ranting about how silly this market is and me agreeing and shorting.  This month I followed Cap into SPG short, bet on BIDU down with Eric, shorted FCX and NFLX on my own, and am getting my lunch eaten on all.  Luckily I have some longs that compensate so my account is sitting at breakeven still waiting for the drop.  But when I capitulated in January and went long, the market tanked the next day, so I’ll be sure to tell you guys when I"m "all in" on the long side so you can get some puts!

  112. DIA/Gucci – That is not a matterss play, just a spread where you buy the Apr $107 calls on upside momentum over 10,600 (this works to stop the bleeding on short plays) and then look to get as much as you can for the March $106s to cover but making sure you cover if we cross back below 10,600 for sure

    I think my top call was right, just a few minutes early…

  113. mrmocha – I hear you man.  My RUT strangles have me runnin scared.

  114. Citigroup (C) up 8.1% in the wake of the CreditSights report that called the bank "back from the brink and back in business," even if it’s still a work in progress: light on branches, with improved liquidity, and "just plain cheap."

    Yep, this is SO NORMAL:


    AIG going NUTZ!

  115. Mr M
    You know you could just go long now, start the correction, and get it over with !!

  116. while were cryin on our virtual shoulders, let me shed a few for SRS. And the $50 call i sold on JOYG cause i thought it was going nowhere.
    But thanks to the longs there is still some green

  117. do you buy the same amount of contract as the june 106 put, or half since I have 1/2 cover with march 106 putter

  118. JRW, SS, Either of you on TZA?  I’ve been on since 67.40 (on the way up as it turned out).   I may hold this one overnight just to be stubborn.

  119. Phil,
    Is there a put spread you can recommend to take advantage of the AIG run up? 

  120. judah – I am in at 7.43.  Not holding over night.  For some reason I think we can go even higher (as silly as that sounds).  We are too close to the top in the Dow and S&P  not to make a run for it.

  121. judah,
    I’m in at $ 7.42 ( 1/4 possition )

  122. DIA Mattress:  I had an order in to roll the June 106s to 107s for 0.45 and it just triggered

  123. Picking up a few TYP MAR 8 calls for .55 in case tech pulls back a little.

  124. Sold the AIG $35 calls naked.

  125. SS,  Good point.  They may yet make a run at it today for that matter.

  126. Phil, gotta like that TBT now….  would you buy more here and establish some new positions?  typically, when the stocks get weak, bonds go up again, so if stock sell off here, bonds may go up and TBT may go down…  i know overall direction is higher rates and lower bond prices, but what do you think?   also
    would you buy SRS,  EDZ,  ERY   TZA  and FAZ right here?  they are all getting cheap

  127. Phil, Is there a reason the VZ JAN 2011 $30 call is going for $1.65 while the $30 put is going for $ $3.20?  I dont know If I have ever seen such an imbalance with the stock trading at $30 today.

  128. Phil,
    I own DIA March 103 puts and 102 puts from last week — they are both 80% down — Any advice on what to do with them at this point?

  129. VIX 25s….May/June calendar spread just went through for 45c.  Someone is betting on a VIX explosion in June. 19K 18 May P also moved @ 40c, although it must have been yesterday…no volume today.

  130. Phil, I see there are a lot of questions on the DIA mattress play Pls just con firm the official position
    I am holding 1/2 106p Mar short against against Jun 108p long thks

  131. judah, JRW – I am out of TZA even.  I have to let them finish their ram job.

  132. Doubling TZA if they can’t break IWM 67.40

  133. craigzook, high dividend payers usually have higher put premiums than call premiums – e.g. kmp, mo, etc.

  134. Phil
    I have 10 TNK Aug 2010 7.50/10 BC spread  in at .91 and now 2.10 and sold 10 Aug 2010 7.50 TNK  Puts at .54 now .40.  Do you think I should just take the profit now or let it slide for a while.
    Still holding the 11 contracts on C 3/4 Sept B/C Spread you recommended in at ..45 now .59  If we are at a top should I take the profit on these?
    I like your recommendations!   Donna

  135. Hi Phil : I have a bull call spread on CTCT ,June $15 / June $17.50 for net $1.51 ,now $2.20 Although happy to hold the position  until June expiration,should I  do anything else to maximize profit since stock is now at $20.40. Thank you.

  136. PDLI – Looks like the big players have started to roll in. 1500 7.5 March puts traded, instead of the usual <50.

  137. JRW, Well, that felt like a nice cool breeze on a hot day.  You still looking at 67.15, then 66.90?

  138. Does anyone know why IBM has been looking weak today and yesterday.  Kind of crappy price action.  Looking to pull the trigger around 124.  May sell some Jan 120 IBM puts 10$ would be a great entry.

  139. judah

  140. Just a musing:

    Every time I think there is going to be a pullback on lack of information and lack of data is never a reason at all for a pullback. The wise investor realizes that it actually takes something to make something move. So many times, I have heard investors (including myself) say well its got to move up, look how far its gone down. The market is only going to move one way or the other for reasons that are fundamental. The technicals can show us when that fundamental can make what kind of impact, but they cannot move the market. To see this market move down, we need a fundamental "something." Tomorrow, we could see this with wholesale inventories, crude oil inventories, or federal budget balances. In conclusion, we have to readjust from being just a bear or a bull to being a reactive bear or bull. Right now, I am in the mind set of I see bearish indicators technically. I have not seen, however, bearish fundamentals. The market will take a breather or pull back when something truly bearish happens. If the market is in a bear market and not a bull market, it will take something very bullish to pull out. I think we tend (including myself) to overlook this point. And you can see how I have over the past two days in my last two articles I published.

    I don’t expect much in way of feedback.

  141. Doubling TZA again if they can’t get back IWM 67.18

  142. If Phil day traded the RUT more than those DIA options, we’d have heard a Wheeee by now. :)

  143. Out of TZA at $ 7.51 for $ 0.05

  144. Took half off at $7.52.

  145. Damn

  146. Hi Phil, sld a March 16 caller which is out of premium but a loss to me, but the stock , bot @ 17.85 so a net profit. And the roll to April is small premium.  What do you suggest I do? Thanks

  147. Phil -
    Really nice call on closing out the dia 105 puts -
    What are we looking to do into the close?

  148. judah,
    Nice work keeping 1/2

  149. Down, baby, down!

  150. As Phil says – WHEE!

  151. Damn, I lost 1/2 of my post – please bear with me while I reconstruct! 

    AIG/Bord – That’s playing with fire.  Selling the $35 calls is the best way to play but still dangerous.

    DIA/Daveo – That’s the way to play it!  There is no reason not to take advantage and roll to the June $107 puts!

    Ah TM – GMTA!

    TBT/DMan – Yes, I still like TBT, the same posiitons I’ve likes every other time you have asked for the past 2 weeks except now they are much more expensive.  I don’t understand – why do you ask all the time.  Do you ever actually establish a position?  I ALWAYS like TBT below $50 as I expect it to go to $60 at least but every day you ask the trade gets worse and worse as TBT goes up and up so – by comparison – there is no way I could recommend TBT today since I’ve already made a dozen better entry plays in the bast couple of weeks!  As to SRS, EDZ, ERY, TZA and FAZ – those I still like and those are all good for continuing to scale on on our previous positions or for naked put selling as the best way to enter new trades. 

    VZ/Craig – I imagine they are weighting for the anticipated $2 of dividends that will be paid out.

    DIA/Agourgy – Well those are a bit out of the money but rolling up and doubling down at the top is the answer if you want to take a chance and stick with them.  It’s risky but you get a lot more bang for your buck spending .35 to roll up to the $105s (same logic as mattress plays) than doubling down in the $103s. 

    DIA/Yodi – $107 puts naked below 10,600, 1/2 covered with $105 puts again into the close


  152. JRW, Thanks. Amazing what a little volume does. No buyers.

  153. ITMN – 7-5 vote y/n for recommended approval….well ain’t that crap.  That is as good as 50/50.  FDA could ask for more data.  Still not open for trading.

  154. I got approved for PM at IB. I didn’t have to do anything other than request it and agree to some disclosures…quite different than what I heard on hear about TOS.

  155. Back in TZA ( 1/2 at $ 7.59

  156. Now just watch "them" paint a whopping stick just to show off their power and might!

  157.  MRK 35/40 jan11 bull call spread for 2.15, selling 35 Apr P for 35c.  This should be doable for working down the premium.  the 30/35 Bull call spread is 3.45, and selling the 30 jan11 P puts one in at 2.5.

  158. OUT again at $ 7.62

  159. Phil:
    protective puts are now june 106 ? 1/2 cover with march 106 ?

  160. TNK/DD – The most you can get for the spread is $2.50 so you are risking $1.20 in profits to make .40 – hardly worth it unless you have nothing better to do with $2.10 that you can make .40 with (I’m sure we can think of something!).  You can leave the puts ride for your additional upside or even DD on them for the .40 you’ll be missing.

    CTCT/Dflam – Same as TNK for DD above, not enough left to stick with since I’m sure we can make .40 with $2.20 in other ways.  Just ask for $2.25 or something that makes you happy as there’s certainly no urgency on your part. 

    IBM/Jo – I think tech is just too far, too fast.  Nas 2,350 is nuts!

    Bearish Fundamentals/David – There are tons of bearish fundamentals but they are macro ones, not the kind that really hit people in the face.  A Trillion worth of risk here or there that can be lost, debts that can never be repaid, finite amounts of money being expected to buy the end product of infinite commodity speculation….  As I said earlier, I knew for a FACT that, outside of hyperinflation OF WAGES, that $100 oil was unsustainable by the Planet Earth. 

    I did not realize how deeply into debt people were willing to go to finance that debt – that they would take out second mortgages and max out their credit cards becuase, somehow, people insanely believe that whatever they are being charged for a tank of gas is "just part of life" and if the guy at the pump says $100 for 25 gallons – they just fork over a $100 bill and don’t complain and don’t change their habits – they just go a little deeper into debt as if none of that matters.    It’s insanity but, obviously, we get the same behavior from our government and all the world governments so why should we expect the people to be more rational?  

    And, of course, I say oil but it’s the proxy for all commodies that we pay for every day as if money isn’t real and the charges on the credit cards don’t have to be paid.   America is like a giant casino and we’ve made money surreal for the masses by changing it into plastic chips where you don’t "really" pay what things say, you just pay the monthly payment so what difference does it make if milk goes up 30% or eggs 25% or gas 50%?  It’s just a new number to write down and you don’t even write it down – you just sign your name over and over and over – so many times that you don’t even think and you don’t even look and you just reflexively sign whatever they put in front of you and then, to most people, the bill they get at the end of the month is a surprise. 

    That’s the game that’s being paid and that’s what makes it possible to pick the pockets of a Billion people dozens of times a day.  Look at V and look at MA – they are on fire because the people are broke yet the TV people celebrate how well the rest of the world is "adopting" credit cards – glorious! 

    RUT/Judah – There was a Wheee in the original comment, but the damn computer ate it, now I’m just catching up….

    $17.85/Phlit – I suggest you tell me what stock.

    DIA/Samz – It looks like we’re getting as stick and I don’t see the point in reselling the $105s for 70 – I’d rather take a chance overnight and be naked

  161. DIA $105 puts – Just to be clear – I do like selling them for .80 – just not .70!  So a 1/2 sale at .80 is good if it can ve done.

  162. Sorry Phil   VLO is the stock
    Hi Phil, sld a March 16 caller which is out of premium but a loss to me, but the stock , bot @ 17.85 so a net profit. And the roll to April is small premium.  What do you suggest I do? Thank

  163. Hi, Gel & bord,
    Thanks for the comments on JPY.
    I am betting that JPY will weaken long-term.  Japan is an exporting country.  They need weak JPY to make money in exports.  In those good ol’ days, BoJ routinely do jawboning to lower JPY.  Maybe it doesn’t do that any more under the new gov’t.  I have positions betting USDJPY to go to 93.  But it’s been sitting around 90-ish for quite a while.
    Bord – It’s interesting to hear your first-hand observation that they have a deflation problem.  I don’t know what it means to the currency, either.  I’ll dig around…

  164.  JRW,
    Are you going to take a quick run at TNA before the close

  165. Phil, Any SPWRA put selling play that you like? I think earnings are next week.

  166. ITMN’s first vote was for efficacy.  Safety was fine (9-3 y/n).  for lung function ( 9-3 y/n).  They are gonna get approval….wow.

  167. DIA/RMM – The $107 puts if you can get them.  I had wanted to risk naked at 10,600 but if you are 1/2 covered here ($1.20) there is no urgency to change it as they are 1/2 premium and can be rolled down to the Apr $103 puts so it’s not a big deal.  If we open up down tomorrow, you can probaly roll to 2x the $104 puts nearly even.  Just take advantage of the roll to the $107 puts while you have their $1.20!

    VLO/Phlit – Damn, I was going to guess that but they are way up at $19.50 and I didn’t think you would have let it go that long without adjusting….  You didn’t sell puts, just calls?  Oh well.  The March $16s are $3.50 and they can be rolled to the June $18 calls at $2.18 and the June $19 puts at $1.10 – almost even and another $2 for you to the upside but you MUST be willing to buy more VLO at $19.  Of course, you can roll the putters along but if you don’t REALLY want them, then you’ll freak out if they turn back down while the proper move would be to wait patiently for summer driving to kick in. 

    Goldman releases the Abby!  Stock prices have room to rise further, and the likelihood of a double-dip has diminished, Abby Joseph Cohen tells CNBC. "The stock market is almost always a discounting mechanism that… moves in advance of the economy, but we don’t think it has moved too far at this point," she says, expecting the S&P to hit 1250-1300 this year.

    For Fedspeak, this suggestion of higher rates by year’s end from New York Fed Markets Group chief Brian Sack is more straightforward than usual: “The current configuration of yields and asset prices incorporates expectations that short-term interest rates will begin to rise around the end of this year… The markets seem prepared for the risks toward tighter policy."

    Uncertainty about the market’s outlook fuels a debate between economists Robert Shiller, pessimist, and Jeremy Siegel, optimist. But on Main Street USA, the prevailing mood is mostly doom and gloom. (Best and worst stock performers from year-ago market low.)

    JPMorgan Chase (JPM) analysts say that bank-owned sales as a share of total home sales will remain at current or even higher levels three years from now in more than half of the nation’s 10 largest housing markets.

    There’s "chatter on more asset sales coming," sparking another surge in AIG (C +12.4%) after deals to sell Alico to MetLife (MET) and AIA Group to Prudential UK (PUK) garnered $51B. AIG shares now trade above their 200-day moving average.  This is insane – they are selling off all the things that actually make money and leaving themselves with all the crap.

    Airline stocks soar as United Airlines’ (C +6.8%) CFO and Continental (CAL +5.2%) CEO say corporate travelers were starting to return and unit revenue growth jumped in February. (ETF: IYT)

  168. jcedens.
    It fell through my support line, so no. Poorly played day on my part; 2.5% on the day, but should have been 4%

  169. $81.28 for oil – that’s a wheeee!  8-)

    JPY – Don’t underestimate the trust the BOJ has and the comparitive lack of trust of EVERY other Asian currency.  In that region, money will always run to the Yen, which makes it hard to bet on them to go down very far.  On the other hand, we’ve seen the Japanese government step in and support 90 Yen to the dollar to preserve their exporters – so there’s a nice floor under the bullish dollar/yen trade. 

    SPWRA/Foss – I think I said earlier I like selling the Apr $19 puts for $1.05. 

    Well yet another fun day where it looks like they are going to break out but we end up going nowhere.  Bottom line is we are still down for the week and this is a hell of a lot of top churning, albeit on low volume

  170. In discussions with Obama today, Greek Prime Minister Papandreou says he did not ask for U.S. financial help and discussed a European proposal to crack down on financial-market speculation. The White House says Greece’s problems "can and should" be resolved by the EU.

    Why did this guy waste his time coming here?   The country is in turmoil and he desperately needs money.  Surely he knew he wasn’t going to get it from us so what the hell is he doing getting on a plane and taking 3 days of his time away from Europe?   It certainly doesn’t make him look good, coming home empty-handed, does it? 

  171. Actuall I did sell April puts @ .95 currently .27…. are you saying close out all 3positions and put on a new spread?

  172. VLO/Phlit – No, I’d let the .27 expire, then sell (maybe you get lucky and we sell off a bit).  I feel better about the trade knowing you had a put sale too – as I’m sure you do!

  173. Currency- Phil
    Late yesterday, there was some discussion on currency trading and Gel stated his premise and expected position for later in the year. Given that a world crisis could upset the entire apple cart with a rush to the dollar for safety- what is your take and suggested play either / both re: Forex or options.
    Later in the year, I am anticipating a dollar weakness, as the traders around the world come to realize the level of debt we have and the deficit projections, both currently and long term. Both projections are "mind blowing", and historically is the " kiss of deaath "when it comes to currency valuations. Case in point is the current problem in the Eurozone – the EUR is suffering and it will get worse as the chickens come home to roost, as regards the debt of not only Greece but also Spain, Ireland, Italy and Portugal, which will have to be back stopped by the other Eurozone members. United States is in an equally precarious position, and will follow the Eurozone eventually, reflecting a weaker currency. On the other hand, Canada has a very small deficit in comparison ($54 Bil), and is taking steps to liquidate it. Compare that to the US which is 1.5 Tril., and no plan to liquidate anything, but instead attempting to double it. The handwriting is clearly on the wall, and I believe the USD will drop like a rock, and commodities will fly upward as a result.  Canada’s currency will appreciate precipitously when this event takes place, as commodities drive their currency. When this plays out, my currency play will be the USD short against the CAD, AUD and NOK. I feel as strong about this scenario as I feel about the end game we have structured for TBT. TBT, of course has different drivers – rising bond yields. I’m curious what Phil might think of this, and of course his take on the time line. I will continue to pass along any relevant research data that comes my way, that provides clarity to this position.

  174. Absolutely no love for Abby Cohen or GS in the comments section of that article!
    Bank Owned Sales 3 Years From Now / Phil:  I’m pretty sure that the banks will be managing the outflow of foreclosed properties to the market as carefully as they do the movement of the stock market.  They will take great pains so as to not put pressure on prices.  My question is.. how can they afford to do this?  I’m so confused as to what the real state of affairs is with the banks that I can’t even make informed decisions.  Why does NO ONE talk about toxic assets anymore?  Are the big banks rid of their T.A.s?  Does the Fed now have them?  Or do the banks still have them but the Fed has lent them $ for them at face value?  Do the big banks still have T.A. but on a much smaller scale now?  Where are those mortgage backed securities!
    When all this mess started there was a great concern about who would wind up with the toxic assets and that it wasn’t fair for the banks to get bailed out for their poor decisions.  Is this still a concern?  Or have we completely absolved them of their responsibility.  I know it’s a completely different situation at the regional bank level.. so I want to keep this just about the big banks.

  175. Thanks Phil, but what adjustments SHOULD I have made and and at what point?

  176. Phil :In the past,you advocated bull calls spread/sell put in lieu of buying actual stock & selling calls/puts.I thought this was risky,but I’m learning it may be the best approach.I’ve waited until after market close to ask you to verify my example below is correct since I’m concerned that I not miss something.It’s not important that you verify that the prices are correct,just that my overall analysis is correct.
    Buy 20 GLW  May $18 calls for $1.26, sell 20 May $19 calls for $.77 (net debit of +$.49) and sell 20 May 18 puts for $.88 for overall net credit to me of + $.39 each spread .  At expiration, the following can occur:
    (1.) GLW  price at  $18 = $.39 profit which =  31% ROI  (2.) Max. profit of $$1.39 occurs if GLW at $19 or higher which = 84 % ROI. (3.) Breakeven is at $17.61   ($18 put price less net premium received of $.39 ).
    Thak you for your guidance.

  177. Cwan120, Long term I do have confidence in the Japanese economy and the Prime Minister is a very smart guy, but the ruling party is currently being hounded over some campaign finance scandal as well. They have the lowest approval rating now since taking power. Another factor to keep in mind.
    I live half time in the East Asia (in USA now for a visit), so I get sometimes get useful tibits of on the ground info..

  178. Hi, bord,
    Thanks for the info.  But isn’t the Japanese population the oldest in the world, and they have very little immigration into the country?  How can they keep up with the productivity long term?
    BTW, I’m just curious: When you are in East Asia, do you trade actively the US stock/options market?  How do you manage the time difference?

  179. ITMN just opened trading at 36-37. What the heck!!!

  180. ITMN … Cha-Ching!!! ;-)

  181. International travel- Since the subject has come up, I have a question for our nomad members- I am going to the Bahamas next week and looking into phone/internet connectivity. I have Verizon/Blackberry phone service plus Verizon Mobile Broadband (MI-FI 2200). According to Verizon, my Blackberry Storm phone will work OK but I have to purchase what they call "global data plan" for email, etc. This is fairly cheap @ about $65/mo and they prorate it so for the 7 days I will be using it, it will cost about $15. Air time on the phone, however is based on roaming rates which is $1.99/min- steep. The Mobile Broadband connection is ridiculously priced at 120 MB/month for $129 with overages @ $.02/K or about $20 MB which means some nasty bills if one is not very quick to get on/off.
    The hotel has WIFI (although they charge for it which is aggravating enough given the room cost). Any of you world travelers have insight on this?

  182. Very nice article recapping all the DNDN manipulation.  They neglect to mention Cramer’s little hit-men who write for TCSM and would assasinate DNDN on a regular basis (even though they were in no way qualified to analyze it).  Amazingly, no arrests were made but DNDN is a great example of how we can hate the players (Cramer, Lazard) but love the game as we got multiple opportunities to buy in when they panicked the sheeple out of positions.  This is why Pharmboy’s posts are so valuable – if you UNDERSTAND a company, you are better able to take advantage of them when other people don’t. 

    AIG today is another example – we UNDERSTAND that selling off profitable units of a company that is hundreds of Billions of dollars in debt does NOTHING for the future value of the company.   Because we KNOW that’s true, we can take advantage of others as they rush in to buy up a company that hasn’t made a dime in 3 years and is selling off the only units that turned a profit even then…. 

    Currency/Pstas – I’m not much of a currency guy.  Those markets are a little too crazy for me and very frustrating to play.  I like things like TBT because I can see the underlying pressure that is sure to drive interest rates higher over time because it may have been possible for Japan to keep rates at 0% but that was fueled by the carry trade where there was a demand for cheap Yen which could be borrowed and then converted into currencies that paid higher rates.  If EVERYONE has low rates, then there is no demand for their silly currency. 

    As we know, deflation causes savings – even if the bank pays zero intersest, it’s still in people’s interest to save now and spend later – when things are cheaper.   So, globally, you can’t have 0% interest AND inflation because all that happens is the banks take advantage of the spread and get rich but no money goes into the system and real prices deflate.   All we have going on now is the kind of temporary imbalances that you can get away with for a year or two as available global dollars slosh around to fill in the various holes but – once they settle in and find a place – you can get some very serious, very detrimental stagnation – the kind that can only be shaken loose by offering an incentive (interest) for the money to move. 

    Meanwhile, the concept of which currency is stronger is a total abstraction.  They are all generally a disaster.  The best currencies are clearly the AUD and CAD because they are small, low-debt countries that have a base of commodities.  If you have to put money away over time, that’s the way to go and Austrailia is probably safer than Canada because the US is like a horrible contageous disease that can infect them at any moment.  Yes, we are the world’s reserve currency and the dollar will be fairly resiliant but GET REAL – would you lend America money? 

    That’s what you’re doing every time you accept a Treasury note (dollar bills) in exchange for goods or services.  You are taking Timmy’s word for the fact that, at any time you choose, you can change your dollar back for "something" else.  On the whole though – shouldn’t you have an expectation that no one is cheating?  It’s kind of like playing Monopoly when the person who is the banker feels free to just use the bank money to buy things with.  What happens to the money you have?  Inevitably, you will go bankrupt as the "banker" grinds you down because bad luck always hits you and you need to work to recover while they just, effectively, print more money whenever they need to buy something.  

    That’s all US currency is, Monopoly Money but, fortunately, that’s true of all global currency to a large extent so we all accept the charade.  That’s fine until people start abusing it.  When you are given $1,000, it is in theory, $1,000 out of (for example) $20Tn so you have 0.000000005% of all the dollars in circulation.  You should be able to stack your 0.000000005% against someone else’s pile and make fair comparisons, right?  But what happens if tomorrow, the US government prints $2Tn more?   Then your pile drops to 0.0000000045% or the total.  Even worse, since the government spends that money, the price of goods stays steady even as your purchasing power drops 10%.  Next year, they do it again and you are down to 0.000000004%. 

    How long will people keep being suckered by this game before they begin demanding 10% interest on their money to compensate or before they begin to refuse to accept dollars that drop in value by 10% per year.   Even if we are "no worse" than the rest of the world in doing this – that’s still not going to stop global workers from demanding more wages and global senior citizens from demanding COLA adjustments.  

    So investing in dollars?  No thanks.   I’ll invest in low interest, expecting it to go higher and, if I had to, I’d invest in AUD but thankfully I don’t because it’s a hassle and who knows what’s really going on down there, even though I did pick them as best global economy last year (India was 2008, US is this year).   I was loving the dollar at 74 – that was too low compared to the mess of other countries and we were driven down (like DNDN) by hype about the dollar being abandoned as a reserve currency etc.  but that doesn’t mean (like the markets) that we should be barreling up to 90 again. 

    We are $15Tn in debt and another $1.5Tn by the end of the year and we’re ignoring our long-term obligations and we’re pretending the war is a one-time expense that also doesn’t hit our books.   The US is planning on running deficits pretty much forever and discretionary spending is less than 1/3 of our $3.5Tn budget so there is nothing to cut and we’re not even sure we won’t need more massive bailouts to keep from going down a hole. 

    So every time you accept a Dollar – you are lending the US money, even though you know they are printing 10% more each year on the back end in order to keep the lighs on and borrowing 10% more on the front end for the same reason and no one here has any plan at all for getting off this treadmill.   So I think I’m in deep enough allowning people to pay me in dollars – I don’t need to compound my foolishness by investing in them, thank you.

    If you like dollars, invest in companies that get paid in them.  It all goes back to fundamentals though, I like companies with a good international mix of revenues that cater to the top 10% and have good management that I can trust to deal with the day to day BS of managing currency conversions etc.   Playing currencies if fun but I’d rather put $10,000 into 500 shares of VLO and sell the June $20 calls and $19 puts for $1,000 and just make my 20-30% per year on that because I know VLO will rise with inflation anyway so I could care less how much this country debases the currency because the adjustments will be made automatically.  

  183. Howdy Cwan,  thanks for the interesting bit of info on RUT at 12:15.  Made me laugh!  The RUT now makes me want to short it aggressively.  From many places that I read, people started to take the short positions and the thing just keep moving up, until the later half of today.  We either get another short squeeze or a quick drop as the sellers either give up or adding the short positions.  How’s that for a dull prediction.
    aclend, once you have open a position with IB, let us know the level of margin that you get with IB portfolio margin.  PM with OptionXpress is just a little better than Reg-T with TOS, i.e. OptionXpress requires 5-10 times more margin with OTM options when comparing with TOS.  In other words, don’t get PM with OptionXpress.

  184. Phil,
    I sent a message to Greg ( to upgrade me to Premium on my next renewal, which is in the next couple of days and asked for a confirmation but didn’t hear back. Did I use the right address?

  185. Peter,
    So far, I’ve only received an email about approval. I think they will activate it overnight. However, they have a "Try Portfolio Margin" function that shows I will have an approximately 45% improvement in margin requirements. Normally, it’s about 20% of a position. For example, if I sell a naked 100p on IBM, I put up $2K in margin (probably minus value of option). They show my Reg T currently as $77K but Initial and Maintenance are both $68K which is the number they reference when making the comparison to PM. My current $68K requirement will drop to $38K with PM and my excess liquidity will go from $126K to $160K.

  186. ITMN…..holy shmoly.  Those bull call spread never filled in my books.  That is gonna be nice tomorrow.  WOO HOO.

  187.  RE: TOS 35% concentration rule:
    Here’s the msg I got from Aaron @ TOS Trade Desk: 
    "The BP effect calculation is passed through by our clearing firm. Currently, they are added a 1.3 multiplier to the total index requirement for PM accounts. In cases where all positions are hedged, thinkorswim has the authority to remove this additional requirement. Additionally, we are only allowing naked short 1000 contracts per million dollars of equity on the indexes. There is not a 35% concentration rule at this time."

  188. Cwan120,
    You hit on one of Japan’s biggest challenges, low birth rate and a very long lifespan. Like us, funding their social security and senior programs is one of their biggest policy problems right now. However, their health care system is not filled with the high costs, waste and abuse that ours has so they have a better chance of dealing with that I think. Their debt picture is much better than ours, they are the world’s second largest economy, located in the fastest growing region of the world, and have a highly educated and very hard working labor force. I am not a raging Japan bull, but I feel they conduct their economy much more wisely and responsibly than we do.
    I am a consultant, so I can carve time to trade during the day. When I am in Asia it’s a twelve hour difference, so that’s a bear sometimes. I try to do my prep work for the market in the early evening Asia time, execute required trades and bother Phil say between 10am-1pm (eg 10pm-1am), and if I am not tired I may research/trade sometimes until market close (4am). The only time it’s a real hassle is approaching options expiration when I need to do all the rolling, etc.    

  189. Aclend, thanks for the info.  I tried the same function in IB before, but my computer crashed because of it, and have not tried again.  With TOS, the same IBM 100 put (IBM at 125) would give a 85% improvement in margin.  I just tried this 100 puttter in TOS, but this number can change dependent on other positions that I have.  Usually the saving is in the 80-90% range with TOS when more than 10% OTM.  Would you be able to tell us the initial margin when selling 1 SPX May 900 put in IB, and selling 1 SPX May 1250 call?  There is no hurry, whenever you get to it. 
    Balance, thanks for the concentration rule info.  Shoot, then some other rules trip us up on the margin when we have reached a certain number of contracts then.  We certainly don’t have 1,000 contracts per million of dollars in the indices.

  190. gel1
    You might find this interesting:

  191. Peter,
    It is $9205 on the 900p, so 10% + sold put value (2.05) and $28888 on the 1250c, which has a value of 1.95. What are your thoughts on that? I’ve never sold on an actual index before only SPY, DIA, QQQQ, etc. That seems like a lot of margin for such a small payoff.

  192.  Phil, 
    I sold TBT march 52 covered calls, now 90% + profit. I can let them expire! But, should i buy back (for 4 cents) and sell the March 49 calls for 42 cents? Maybe i can squeeze some more profit out of this position?

  193. Hi everyone! I thought you might this of interest. The latest by Niall Ferguson, the man who wrote "The Ascent of Money", which I found educational and entertaining.

  194.  pharm, so do you have ITMN uncovered?

  195. Aclend, that 10% margin is the normal Reg-T margin when the index option is 10% OTM:
    We are hoping to get much better margin with portfolio margin.  TOS PM would only require $200-$1000 for one SPX May 900 short put, depending on what else we have in the portfolio.  The strategy of selling options is a different way to play all together:

  196. Alsos
    The article covering the many financial problems here in California is accurate in my opinion. Having residency in the state for 35 years, I have watched the evolution from what used to be one of the most desirous places to live of any place in the world, to a quagmire of endless problems, not only financial but also social. It has been very clear to me for many years as to the cause and anticipated results which are evident today. My take is as follows: The state became overpopulated with free-thinkers, many from other states, and they were seeking freedom from conventional conservative lifestyles. They did not want discipline or or restraint, and brought to the state a liberalism which accepted mind altering drugs, behavior that endorses weird sexual practices and a general unacceptance of common responsible behavior. This liberal approach to laise faire lifestyles, and the acceptance of it has led to the same mind set in the state and local governments, which has brought the state to its knees with a financial catastrophy. I can tell you this – there is no way the state will ever be able to pay its debt on its own. The financial base is gone forever, and the solution the politicians have taken is to raise taxes and do almost nothing to cut spending. This is Stupidity 101.
    Corporations are moving out of the state, as well as many of the successful entrepreneurs. My second home is in Nevada, and I am contemplating, in a very serious way, moving there for most of the year, as I would save $200,000 in just state income tax, not to mention the miriad of so many other taxes that are shoved at you. Last year my license fee on my car was $500. The state doubled it to $1000. this year – 100% increase. The state employee labor unions will not negotiate a revised contract and the legislature keeps increasing spending. The end is near. I would love to see a default in all state payments, forcing a bankruptcy, as this would give the state a new beginning and would end the strange hold the unions have on the state as their contracts would be null and void. There would be total chaos, but there will be anyway, sooner or later, so why wait. Meg Whitman (Ebay) is running for Governoer, and she could get this done, as it will take a Harvard MBA to sort through the mess, which was far too big for a body-builder Hollywood actor.

  197. Jo – my ITMN was a bull call spread for 1.7 12.5/17.5 Jul.  Tried to sell them yesterday for 3.5, but no takers….luckily.

  198. Gel- I just read your post to Alsos. The article I have linked about is called "Collapse and Complexity: Empires on the edge of Chaos". I think you’ll enjoy reading it. Sounds a lot like what is going on in California, and likely the rest of the country. Yes, California was probably the most desirable place in the U.S. to live 35 years ago. Perfect weather, rich in natural resourses. Now, SoCal looks and acts like some post-apocalyptic nightmare.

  199. Cwan/JPY
    I have started to track the Yen as a currency to trade. At the moment, I do not have the same sentiments as you regarding the prospects of weakness against the Dollar. Down the road, after we see how the economy is doing, I will become more confident. It is definitely an interesting study.I have closed out all of my short Euro positions except the EUR/AUD, and I have doubled down my position, as it just keeps chugging along in my favor. Bord has some very good insight to the strengths in Asia, not only relating to currencies, but also the impact on equities.

  200. jburgess
    Now that is some terrific reading… most interestingly is the revelation of how quickly these empires failed. Ferguson stated that " most imperial falls are associated with fiscal crises, caused by the imbalance between revenues and expenditures" .History is truly the window to the future. In almost all cases, the demise of a government is caused by ineptitude or personality disorders of individual leaders, and not external forces. California has suffered from very poor government for decades, brought on by selfish non qualified elected officials that are perpetually re-elected through handouts to potential voters. This  totally flawed system now has destroyed a great state, that had so much promise for so many. Until the government has a complete make-over, the future looks grim. This problem, is replicated at the federal level, and the solution will have to be the same.

  201. California, Illinois, New Jersey- 3 major states all in the news lately are the canaries. All afflicted with the same problems of profligate spending with 80% of the problem emanating from public employee pay and benefits. Taxes will go up. The lunch tab must be paid. Look to Greece. That is our future.

  202. Good morning!

    Bank sales/Matt – They can try to manage them but, on the whole, they will keep home prices depressed and hamper the recovery of the building market.  I was an advocate of removing mark to market for PERFORMING loans but they went nuts and removed it for everything.  It’s all going to hit the fan one day, probably in some major bank failure where a lawsuit uncovers all the crap on their books that gave a false impression of the bank’s health but, meanwhile, the free money papers over everything.  What do you care if you are carrying $100Bn worth of dead assets if you can borrow $100Bn at 0.25% so you are risking 1.25% ($1.5Bn) to hope the market bounces back in 5 years?

    Of course, the downturn was inevitable anyway and I don’t understand why Obama or someone can’t just get on TV and say to America "Hey, we overbuilt for 5 years – that means we will have to underbuild for 5 years to get back in balance.  Meanwhile, those 3M construction jobs WON’T be coming back so let’s stop fooling ourselves and do something to utilize the skillsets of those unemployed people like, instead of giving them welfare and unemployment – how about we pay them to repair bridges and highways and build high-speed rail lines that will have a lasting benefit for our country?"  Maybe we can even get some massive hyrdroelectric or wind projects going… 

    It always seemed to me that we have this Grand Canyon thing that’s very tall with a river running down the middle so why can’t we put a couple of walls in that allow the water to build up in one section until it gets very high and then drop it into some turbines?  That’s how we power the most of the Northeast United States…. 

    Adjustments/Phlit – Once a caller gets to less than 25% premium, it’s time to consider a roll as you are probably going to do as well or better by rolling him to a longer call.

    Bull calls/Dflam – That was a function of the very high VIX making naked Leaps and other long-term calls unattractive.  The bull call always has it’s uses but the key is always the long-term target.  You have the math and the concept totally right but keep in mind that you are selling the May $18 put so, as long as you REALLY want to own GLW at $17.61 – it’s a great play but just keep your bearings on how you will feel if GLW misses in April and falls back to $14 – where they were most of last year.  Do you still want them – are you willing to DD and have a $15.80 net basis on 2x?  What’s the plan going forward?  Those are the considerations you need to make when establishing what is, on the whole a fairly inflexible position.  Perhaps that would lead you to conclude that you’d rather go for the May $17/18 spread at .65 and sell the $17 puts for .50 for .15 on the $1 spread with a put-to price of $17.15 but your break-even is actually $17.08 because you’d still have something from the calls! 

    So, on the whole, I like to use the bear-call spreads to either give me tremendous leverage on a hedge (like our disaster hedges) or to take a position that is already in the money that I have a great deal of comfort in.  With GLW, I think it can go back to $14 simply because it did go back to $14 and sat there for a very long time so it’s not much of a stretch for me to imagine investors panicking back to that level.  So my long-term plan for them has to include what I will do if the stock is between $12 and $14 for a year or two.  Obviously, your put side can be rolled so all is not lost if they drop (as long as it’s not sudden) but I would prefer to go for the GLW Aug $16/18 bull call spread at $1.30 and sell the $16 puts for .70 for net .60 and a put-to price of $16.60 but with the Jan $12.50s at .43, that’s my roll target for the put side

    I’d be more comfortable doing 20 of those unless you REALLY, REALLY want to own 2,000 shares of GLW at $17.61 AFTER something bad must have happened.  My plan makes the same $1.40 yours does but my commitment is effectively to buy 2,000 shares of GLW in January for about net $13.25 – a price I REALLY would want to own them at – a price I’d be EXCITED to own them at!

    We’re still in the kind of market where you may wake up one day and find your stocks are cut down 20% and they could be 1/2 in a jiffy.  It is not a good idea to make big commitments on stocks you don’t mind puttting under your pillow for a year or so while another wave of crisis sorts itself out.

    Japanes/Cwan – Vitaliy had a great PowerPoint on Japan’s aging population and the economic impact on the main site about 2 weeks ago.  Not a pretty picture…

    Bahama’s/Pstas – If you are an Amex Platinum or Centurion member you can call them and they can set you up with a local phone or maybe a sim card that will work while you are there, might be cheaper.  I can’t stand that hotels charge for WiFi – it’s infuriating, especially in nice hotels where they are supposedly catering to business people.  Of course, there’s always Starbucks and I’m pretty sure when I was in Atlantis the Wi-Fi was free as I remember using it all around the resort. 

    Upgrade/Ac – I believe he took care of it.

    Banks/JRW – That is total nonsense isn’t it?  It’s all part of the stealth bailout that’s still going on that is keeping the banks "healthy" by showering money on them as fast as we can print it. 

    ITMN – Congrats to all who played that one!  It’s funny that our original buy/write just a month ago gave us a $3.40/6.70 with a $10 call away…  That’s the nice thing about hedging biotechs that way – when they pop, you get to close out early with 95% of your full profits anyway. 

    Wow Bord, that’s some schedule!  I miss those consulting days – hanging out in different cities, staying at nice hotels all the time…

    Cali/Alsos – Yeah, it’s funny how people worry about Greece and Dubai when California could swallow them both for breakfast.

    TBT/Hanna – Keep in mind it’s a very violent ETF and could very easily bury a $49 call.  Why not just sell the Apr $49s for $1 and leave the March calls with a .15 stop?  It’s always very tempting but just because expiration day is close and the premiums are low, doesn’t mean the risk to you of TBT moving $2 against you in a single day is diminished – you are simply getting paid far less to take the same risk.

    Here’s an interesting thing you can do.  The Apr $50/48 bear put spread is $1.20 with TBT at $48.50 so you are effectively capping your gain (until $50) at $48.80 but you get an additional .80 protection if TBT slips to $48 or lower.  Since the caller already caps your gain – you really have nothing to lose.

    California/Gel – I don’t know if Whitman can save it but if she thinks she can I say let her take a whack at it.  Perhaps someone can convince Arnold to terminate the legislature, who seem to be a major impediment to progress. 

  203. Speaking of California

    In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands.

    I always wanted to buy a vineyard when I retire, maybe now’s the time.  Except I was going to buy one in France around Burgundy.  I sprent a month in Lyon once and I really got to love that region and the bullet train makes it a very easy trip to anywhere you want to be while still living a real country life-style.  Nappa is very nice too but. over the long haul – I think France has a better chance of surviving….

  204. Phil, current position in DIA March calls
    bot 70 105 calls @ 1.04
    sld 70 106 calls @ .50
    bot 30 107 calls @ .42
    sld 30 108 calls @ .12
    Hoping for DIA close @ 106.5  (or higher) at the end of March, what adjs would you  make now. Thanks, and thanks for VLO clarity.