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Tempting Tuesday – Waiting on the Fed

The dollar is diving and the futures are flying this morning!

Word is that the Fed will remain doveish in their 2:15 statement today with no sign of tightening in the near future.  That has (as of 7:30) rallied gold 1.5% to $1,115 and oil is back over $80 and copper is $3.35 again while the Euro jumps back to $1.375 and even the British Pound squeezes the hell out of the shorts as it flies from $1.497 at 3:30 to $1.514 (1%) in 4 hours, which is a pretty big move for FOREX! 

The EU also helped themselves by laying out a groundwork for a financial lifeline to debt-stricken Greece, breaking a taboo against aid to cash-strapped governments in order to avert a crisis for the euro. Officials from the 16 countries using the currency worked out a strategy for emergency loans in case Greece’s plan for 4.8 billion euros ($6.6 billion) in tax increases and wage cuts fails to stave off fiscal disaster. “We clarified the technical arrangements that would enable us to take coordinated action which could be swiftly put into place in the event it is necessary,” Luxembourg Prime Minister Jean-Claude Juncker told reporters late yesterday after leading a meeting of Euro-area finance officials in Brussels. 

The EU is also meeting to discuss ways to reign in hedge funds and credit-default swaps but the revised bill from Chris Dodd is now so watered down by compromise that it no longer requires regulators to agree that excluding a swap from being cleared “is necessary and appropriate for the reduction of systemic risk.”  So what’s the point?   The problem is that there are $605 TRILLION Dollars of CDS’s written against a Global GDP of $50Tn.  Usually, it’s a red flag for the police when a person insures their home for 12 times what it’s worth, right? 

Hexagon Securities LLC and at least 19 other financial firms are pressing regulators to force swaps clearinghouses to lower entry barriers in order to improve competition in a $605 trillion derivatives market dominated by the world’s biggest banks.  They also seek tougher conflict-of-interest laws to ensure that a bank’s derivatives desk doesn’t influence clearinghouse decisions that could shut out new competitors.  ROFL – move to Russia, you Commies!  This is America, where big banks rule and "firms with less than $5Bn net worth" drool!  See, my daughters taught me that one – wins every argument! 

Speaking of people who rule our lives – Saudi Oil Minister, Ali Al-Naimi said at the OPEC meeting yesterday.  “The price (of oil)  has stayed very well in the range of $70 to $80. It is in a very happy situation…  There are no shortages, investment is going on, demand looking forward is going to continue to rise, so everyone is happy,” Al-Naimi told reporters as he arrived at his hotel in Vienna yesterday evening. He said he’s pleased with OPEC’s quota compliance and foresees no need to change production.  OPEC officially supplies 40% of the world’s oil but Bloomberg estimates that quota cheats are producing "the equivalent of a supertanker of crude a day."

Buoyed by high prices, the group’s members are paying less attention to quotas and achieving only about 53 percent of their promised 4.2 million-barrel-a-day output cutback, according to a March 10 report from the OPEC secretariat. The monthly report also estimated that OPEC’s current production is 1.5 million barrels a day more than the demand for its crude in the second quarter, after analyzing non-member production and global consumption.  Shokri Ghanem, chairman of Libya’s state-run National Oil Co., told reporters yesterday in the Austrian capital “there’s no need for any change” to quotas. The market is “oversupplied and Libya will press for greater compliance with official supply limits, he said. 

Keep in mind that none of this stuff is bad for us top 10% investors.  I’ve been guilty the past week of letting my bleeding-heart liberalism blind me to the glorious profits that can and will be made as the great Capitalist machine of the "free" markets grinds the last few Trillion dollars out of our great, unwashed proletariat masses but, hey - a Trillion is a Trillion and if we don’t grab it, someone else will so instead of worrying about the way these events are undermining the American way of life and crushing our middle class under a burden of debt their grandchildren can never hope to repay – LET’S GET OUR SHARE! 

So, my Capitalist comrades, I am happy to report that both Housing Starts (-5.9%) and Building Permits (-1.6%) are still dropping while the rising dollar in February dropped import prices by a glorious 0.3% which should force the Federal Reserve to keep the money spigot open full throttle as they can point to how cheap everything must be for the American consumer, which means inflation is "well contained" and there is no reason not to keep giving their banking pals free money (at the expense of the American consumer) so they can buy another $100 Trillion in Credit Default Swaps while raising lending requirements to the point where you have to be in the top 10% to even qualify for a loan – not that we’re building anything in the US anyway… 

Woops, this just in (9 am):  Palestinians and Israeli forces are clashing over construction projects in East Jerusalem.  This happens pretty much once a week and neither the Palestinians nor the Israelis have a single drop of oil but oil just jumped $1.50, back to $81 and gold zipped up to $1,125 despite OPEC saying there is a surplus of oil and despite all the fantastic economic news that is driving investors to fearlessly put money back into the stock markets and despite the underlying assumption that LOW INFLATION will keep the Fed in a loose monetary policy that will aid the markets.  If all this seems contradictory to you, you may be too sane to invest in the markets.  My suggestion is to drink heavily and come back when you see small animals taking to you

Meanwhile, we’ll be celebrating the marching boot of Capitalism as it stomps out competition as our boys at Goldman Sachs (GS) and JPMorgan (JPM) are using their dominance in the OTC derivatives market to force hedge funds to put up more cash collateral while Goldman and JPM put up less of their own. This is generating billions of dollars in cheap funding for the two firms.  Neither firm looks particularly cheap but we were picking up C on sale yesterday and we’ll be upping our investments in XLF once we confirm the Fed’s benign status this afternoon.  We already have XOM and we picked up some UNG while it’s been down as we’re sure there will be a rainshower in the Gulf this fall that doubles prices in the very least

Asia was mixed this morning ahead of the Fed report but Europe is jumping as word spreads that the Fed will continue to be on hold through most of 2010 – AT LEAST.  SNE just gave Michael Jackson $250M to make 10 albums over the next 7 years AND HE’S DEAD so there’s no excuse for you, with your fancy pulse, not to get out there and grab some of the cash that’s flying around!

Today is a glorious day to celebrate the complete lack of any improvement whatsover in our economy.  Retail sales are up 3.2% but there’s a lot of seasonality involved in that number with Easter much earlier this year but that won’t stop the MSM from treating it like the Consumer is going hog wild and buying everything in sight so who am I to argue?  Let’s just get out there and take advantage of the madness, following through on our plan to short into the open ahead of the Fed – just in case EVERYONE is wrong!


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  1. On the IWM day trade, I did a couple of experiments using TOS’s OnDemand to back test the comparision between TNA/TZA and IWM’s options. In 2 out of 3 cases (where the execution time is exactly the same), IWM front month ITM calls outperforms TNA by a wide margin (like 14% vs 3%!), even with commission factored in.
    The one that failed is in 2/8 (a down day) where the ATM calls (Feb 65) spread is too wide (0.6). 
     
    So a rough conclusion is you need to pick the strike with the highest delta AND a narrow spread (<0.3). 
    Always subtract 0.025 for a roundtrip commission cost (assuming it’s 1.25 per contract with no fee). 


  2. are we still expecting a 4-6% correction/pullback? my cash covered puts would have done quite well by now, with fcx--but we re-structured positions to profit from a downtrend--your article is good, when this does go off the cliff it will fall hard, don’t you think?


  3. Good Morning, Viet’er…..America!…..New TA Handbook Post….


  4. Pharm- txs for the good trade ideas, though i’ve been too chicken to invest last couple of weeks. What do you find attractive now? Also, re AMLN, does it still have legs?


  5. guess the savvy folks sold back the Friday TBT calls, yesterday. and then there is the rest of us.


  6. in TZA at $7.27; lines are same as yesterday


  7. Balance, Thanks for the information. I’m trying a small experiment today.  Bought IWM 68 puts at the open this morning, instead of TZA.  Not really playing with the same amount of money, just trying the different method.


  8. And out at $7.34 for 1%


  9. JRW,  fyi, the IWM puts were .65 at the open, now .83. 


  10. judah – nice!


  11. 67.15, 67.33, 67.52, 67.82,68.02 ( IWM )


  12. SS,  Well, I’m just running a live trial, so I only bought 10 contracts.  Not much better than paper trading, now .88, 50% gain. 


  13. Good morning! 

    This is exactly according to our plan yesterday, a nice gap up that we can go short into. 

    Same as yesterday: Over 10,650 we can play the DIA Apr $108 calls at .95 but my heart isn’t in it.  Nothing is impressive until we see 52-week highs on all our indexes and that would be Dow 10,767, S&P 1,153, Nasdaq 2,362, NYSE 7,471 and Russell 678

    Since the Dow has a LONG way to go to catch up (100 points), they make a good upside bet and keep in mind that below 10,650, we can sell March $105 calls (now $1.70) as momentum covers but strictly using that 10,650 line as an on/off switch so that’s our play of the moment!

    Also, I like the USO Apr $38 puts at .83 and GLL Apr $9 calls at .75.

    All bearish plays are Dow 10,650 dependent!!!


  14. SS, I meant 30%, but my fingers aren’t cooperating with my typing this morning.


  15. Ciff/Iprosper – Bullish sentiment is extreme, the upward move is extreme and the base of volume it’s built on is low.  It’s a recipe for disaster but you can build a house of cards surprisingly high so we really can’t assume anything until we get a test of 10,700 or a failure back at 10,400.

    TBT/Morx – Scale, SCALE, SCALE!  Our goal is a $46.50 entry so if we buy at $47.50 at 1x then our goal is to buy 1x more at $45.50, which we can accomplish by selling 1x of Apr $47 puts for $1.50 (now .85), which, if they expire worthless, lower our $47.50 entry to $46. anyway.  That’s how you use scaling in to your advantage and it changes "oh no, we were too early" to "oh yes, we can sell puts for lots of money now."

    And wheeeeee!


  16. re TBT – good words. What abt selling a march 48 or 49 call?


  17. "There’s too much liquidity and optimism to be short and not enough fundamental, constructive traction to be long. "
     
    Word.
     
    http://www.cnbc.com/id/35889884


  18. JRW, SS,  Got out at .90, for a .35 gain.  Easy enough to do with 10 contracts, but what about 100 contracts, or 500?  I’m not as sure.


  19. JRW, SS.  And again, I meant .25.  I think I’ll stop typing for a while, sorry for all the posts.


  20. judah,
    did you just buy w/ market order at the open or wait for signal? …still trying to figure out entry/exit decisions with you guys


  21. judah – just what I was thinking.  890 contracts on volume with 17K open interest on the 68 puts.  JRW’s volume might be a problem.  To make $2500 from your 50% gain would be a $5K investment or 7700 contracts at .65.  Aside from that it sure sounds appealling.


  22. judah,
    Was that the March 68.00 strike ?


  23. Juda
    I guess to trade TZA you need at least 1000-2000 (better 5000) shares or commission will eat all your profit :)


  24. JRW, SS, Aclend. Yes.  When I saw that the open was going to be at yesterday’s resistance, I bought the March 68 strike. Since the spread was just .01, it looked like the best one. (For calls, I was looking at March 67.)  I got out when IWM was at 67.40 (missed the bounce at 67.33--great line, JRW).  Of course, my 10 contract buy/sale went through easily.  Would the same have been true had I been trying 100, 500 or 1000 contracts?  I don’t think it would have filled as easily, but I don’t suppose I would need to buy as many contracts to get the same dollar returns I get when buying and selling TNA/TZA. 


  25. aclend – the TZA entry was a failure for IWM to break above 67.82.


  26. Woops, we already have support at the top of yesterday’s trading range (10,620) so we’ll have to watch that line on the way down but it seems to be defended.  Volume was 25M on the Dow in that first 1/2 hour and 50M by 11 is a normal program trading day so we’ll see how quickly it tapers off. 

    SOX are leading the Nas higher but Transports not matching them today despite a big rise in oil that they usually follow (don’t ask me why, they just do). 

    Lot’s of upgrades this morning including our pals at SONC! 

    EU finance ministers meeting in Brussels delay a vote on new rules for hedge funds and private-equity firms. The U.K. wants investment funds based in countries outside the bloc to have access to investors throughout the EU, while France pushes for limits.

    Google (GOOG) appears to have dropped censorship from its China search site. Google denies any change in its policy, but searches on sensitive subjects like the Tiananmen Square protests are currently turning up full, uncensored results.

    "The housing market surely will double dip," Meredith Whitney warns, citing supply coming to the market after government housing support programs end. "The only buyers of agency MBS are the Fed and banks, so you see how precarious that market is. If the Fed pulls back, that’s a really big deal… because there’s no substitute buyer." But the market may need to get worse before it gets better.

    If you hate your local bank, you can always turn to Wal-Mart (WMT). The company’s planning to increase its "Money Centers" by 50%, so that a little less than half of Wal-Marts in the U.S. will offer bank-like services.

    Deutsche Bank (DB): Confirms 2009 net income of €5B ($6.9B). Forecasts the banking sector will slowly move toward "a new form of normality" this year and next. Total compensation for the exec board increases nearly nine-fold Y/Y to €39M for 2009. Shares +1.4%.

    Dell (DELL) files suit against five tech firms in Japan and Taiwan, including Toshiba (TOSBF.PK) and Hitachi (HIT), on claims the companies formed behaved as a cartel by price-fixing and overcharging.

    ICSC Retail Store Sales: -0.4% W/W, vs. +2.9% last week. +3.2% Y/Y, vs. +3.4% last week. An earlier Easter this year should help March sales.

    ICSC Retail Store Sales: -0.4% W/W, vs. +2.9% last week. +3.2% Y/Y, vs. +3.4% last week. An earlier Easter this year should help March sales.

    Selling USO $39 calls for .75 is selling .30 in premium through Friday and they can be rolled up to Apr $41 calls, which is $85 oil at least.


  27. IWM is being constrained below the 5 day resistance line and the 10 day support line; so that would be the bull target. They tried and failed at the open, but they are resilient !!


  28. FYI anybody,  I bought and sold 500 USO  shares last September and got a K-1 a few days ago which had another $162 of gains for which I received nothing.  I did not know it was a "partership"


  29.  Phil:
    I have finally finished reading the NEw Member guide.  What I am struggling with is jumping into your flow of thought midstream as it were.
    EG. This morning, you said USO apr 38 puts AND USO MAr 30 calls – but doing both wouldn’t that be a stranlge?  If so, why not do them at the same time?  Or is it an either or choice on those 2 trades?
    Thanks


  30. JRW
    could you share secret of your black magic? how you get your levels?


  31. tch,
    It’s just a gift for you every morning !!


  32. TASR in a nice spot at $6.93 and you can buy it and sell the Jan $7.50 puts and calls for $2.80 for a net $4.13/5.82 net entry for a nice 81% profit if called away or a 20% discount if put to you.

    BZH is flying back up – there’s a sign that things are very strange. 

    HOV is still cheap if you believe in builders.  2012 $2.50/5 bull call spread at $1.25, selling $5 puts for $1.85 is aggressive but a net entry credit of .60 and a break-even at about $3.45 (down 20%) and a fat $3.10 profit at $5 against about .50 in net margin (according to TOS). 

    Newness/Salvum – Well in the new member guide it does suggest reading the last 30 days of posts and comments so you are up to speed and also it suggests paper trading the first month to get the hang of things.  That being said, make very sure you distinguish between BUYING a put (the USO $38 puts) and SELLING a call (the USO $39 calls) because those are the same, directionally and that distinction is VERY important…  All trades are a "choice" – these are just ideas and ideally, you should only have 10-20 working trades at any given time (have you read the Strategy section) with a goal of attaining a fair balance to the overall portflio. 

    Upside "disaster" hedge for the too bearish:  FAS July $86/92 bull call spread at $3, selling July $52 puts for $1.95 so you are in the $6 spread for net $1.05 and the margin on the puts should be about net $525 per contract.  That’s 470% upside if FAS holds $86 and they have to drop $34 (40%) to even threaten your put sale and, of course – very rollable (the Jan $33 puts are $2).  This is not a "safe" play as FAS is a crazy-assed Ultra but the general bet is simply financials won’t go down and putting $1,000 into this trade plus about $5,000 in margin returns $6,000 if the financials move higher between now and July


  33. The old support line is at 67.65-6, the resistance line is at 67.78


  34. sns – I like MRK, GSK and SVNT for plays now.  Merck was outlied over the weekend (and last week -35/40 bull call spread in Jan for 2.5 or better).  GSK – I like the 35 Aug10 C selling 1/2 the 37.5 Apr10s.  On any pullback, sell the 35 or 37.5s Apr 10 P (depending upon how risk averse one is).  SVNT – has 6 mo to approval, so 12.5 Jan11s for 5.4 is good, and selling OTM P for small change to reduce the costs along the way.  VIAP and ARNA are my one hit wonders, VIAP is 16c and ARNA $3.  These are all or nothing. With ARNA. one could sell (as I have noted before) the $3 front month P (until Jul) for small change. I expect volatility to increase into summer.


  35. SS, I just re-read your post. No, my small test this morning gave me a gain of $220 (bought at .65 sold at .90, less the $30 in commissions) off of a $650 investment.  Had I played my normal levels of TZA, say 20,000 shares and got out at about the same time, I would have made .13 or .14, I think, or say $2,600.  To have replicated that with the IWM puts, I would have had to buy only 120 contracts, right?  That isn’t very much money to put at risk compared to the amounts we’re playing with TZA and TNA.  What’s wrong with my math?


  36.  Phil,
    Thanks – I have read the strategy section – there is alot of info! Thanks for the detailed info.  My confusion was that in the guide it talked about options being sales unless otherwise stated so I incorrectly assumed that the PUTs were sales.  My apologies for the confusion.


  37. Morning,
    TNA/TZA players especially JRW (since you are the main guru); what charting and software do you suggest; and what background reading is suggested to a novice is day trading. tnx


  38. judah – nothing wrong with your math.  I didn’t account for x100 for option contracts.  You are correct.


  39. Salvum, I think Phil’s terminology is that the puts/calls are always assumed to be Buys, unless he says Sell. 


  40. SS, So it looks more appealing then, eh?


  41. judah – yep!!


  42.  are we ready for IWM 67 calls? 


  43. FAS addendum:  I also like the 2-step process of buying 3 July $80/86 bull call spreads at $3.30 (easy fill for $990) and offering to sell a single $65 put for $5 (now $4) for a net $490 entry with just $560 in margin that pays $1,800 (267%) at $86 (FAS now $90) with just a risk of $490 down to $65 – good bang for the buck!  Keep in mind that if this play goes well and FAS flies up, the put sale will never trigger and you’ll have to be happy with the 80% gain and no margin requirement…

    USO/Stock – That’s why I stick to the options.  Same goes for GLD I think.

    Oil futures make a nice momentum short at $81 (now $81.15) very tight stops though, playing for nickles and dimes at first. 

    Confusion/Salvum – No problem, you can always ask but also try to keep the context of what we’re doing in mind as well.  If you understand our premise and our expectations, you’ll be able to pick the trades that match your own trading style and outlook (being comfortable with your positions is always important), which will help you better manage your trade. 

    Gridlock in Congress, where Republicans won’t raise taxes and Democrats won’t cut spending, does not bode well for fixing "runaway fiscal deficits," Nouriel Roubini says. "If we cannot raise taxes or cut spending, the path of least resistance is going to be running the printing presses."

    Get those vacations in early!  Flight attendants for American Airlines (AMR -1.7%) will try to get government clearance for calling an impasse in talks, moving closer to the first U.S. major-carrier strike in nearly five years. A 30-day "cooling-off" period would be next before a walkout.


  44. Anybody who uses IB,
    When the prices are purple and it won’t fill, even at bid/ask, what does that mean? I’m getting that w/ the TASR play. Thanks.
     
    JRW,
    Re’: tchaiypov’s question,so my initial working hypothesis of you being guarded was correct!  8-)


  45. Balance,
    I’m with you, I need it to be more straightforward to work with my setup!


  46. From Redoption:  From the get out of debt file comes news that the average consumer is NOT paying down their debt as much as once thought. While the announced amount of shrinking credit card debt in 2009 came in at just over $93 billion, the U.S. banks wrote off a record $83.3 billion of that as uncollected. "Huh" you might ask. Yes, although credit-card debt has indeed been falling, the bulk of the debt that has been relieved (about 90%) has actually been the consumers walking away from their credit cards and the banks writing them off. Even after the $93 billion that was written off and paid off, the remaining credit card debt number stands at about $875 billion! Yup, that’s right, combined credit card debt rings up $875 billion! Ouch! And all the while we thought you were all finally getting out from under your debt load the right way and paying it off, but noooooo. What ever happened to financial responsibility?


  47. Nice that last little push made my DIAs roll up to 108 Jun’s. 10,700 here we come.


  48. Salvum,  Welcome to the site, there are only true words of Phil, follow the commends at least for a month ask questions and paper trade. You will find it some times tough to follow the lingua I remember an nurse from California,  I believe, did she give up on you Phil? Special tough for foreigners to follow.
    This side is like diving for pearls, you have to clean the shell to find the pearl. Good luck!  Phil is worth every penny you pay for !!!!!!!!!!!


  49. Phil,
     
    I sold a bunch of TNK Aug 2010 7.50 Puts @ .54. in early Feb  Should I get out now?
    Thanks
    DD


  50. doubled – that about that and all you have learned here…..YES!!!!


  51. Nice Pharm -doubled -  think about that and all you have learned here….try again…


  52. JRW, SS,  Bought the IWM 68 Puts again, same line.  This time they were only .62.  (Still just using play money levels.)


  53. JRW, judah – a little nervous to jump on TZA this close to 10,700.  I think they will try to make it.


  54. sold USO 39s Call @0.75 already $1.0 – shoot, Phil when you plan to roll them to Apr?


  55. oil up 81.80


  56. tch, aclend
    Pivot analysis, DeMark analysis, and multiple time frame TA; that’s about all I can say during trading. BTW I hope you caught that leg up I mentioned in my last post.


  57. gold 1123.8


  58.  Phil, a quick housekeeping question.  In years past, renewals for PSW  have qualified for a discount?  Is this still the policy?  Thanks


  59. judah,
    We have to be careful in the options as to make your normal $ profit on your morning trade you have needed 120 contracts, and ss the same, and if I only took1000, we would have consumed the entire supply.    And then there is the rest of PSW as well !!


  60. JRW
    well it is too complicated for me :) better just to get levels from you :) thanx


  61.  Salvum, welcome – half of the challenge is learning the lingo – enter slowly or you will increase your tuition price.  But soon, you will see reoccurring patterns & you will start to understand phil’s logic.


  62. balancev – here’s to hoping you pulled the trigger on the 67′s :)


  63.  Salvum, welcome – half of the challenge is learning the lingo – enter slowly or you will increase your tuition price.  But soon, you will see reoccurring patterns & you will start to understand phil’s logic.


  64. BSX – NICE!


  65. JRW, Yes, you are right .  The options volumes don’t work if we are all playing.  Man, 67.82-67.84 has been tough resistance today.


  66.  SS, 100 contracts for IWM calls, market order shouldn’t be a problem. But JRW has a good point. 
    I need the $ to cover my BIDU!! 
    BTW?buying IWM calls will offset margin for RUT short strangle, under TOS PM. 


  67. 2 of 5 so far for new highs:  Dow 10,767, S&P 1,153, Nasdaq 2,362, NYSE 7,471 and Russell 678 so let’s watch that Russell very closely!

    Debt/Pharmboy – At the end of the weekend wrap-up I had a good debt chart and it was interesting that JPM/Chase, by themselves, have issued more cc debt ($180Bn) than the top issuers of debt in the entire rest of the World COMBINED!  Great catch on the write-offs but just another one of those pesky "facts" that the market does not want to hear at the moment. 

    DIA Mattress Plays – The June $107 puts can be rolled to the June $108 puts for .50 and it is VITAL to do that when you can, especially at these key reisistance points.

    Thanks Yodi!

    TNK/DD – Well they are tying up about $75 of margin per contract so the question is, do you need the margin more than you need $10.  If you offer .05 and that triggers, then you are only giving up 7% to free up $75 5 months early, which is reasonable but .10 is giving up 14% over 5 months so unless you REALLY have something better to do with the money that will do better than a 30% ROI, may as well let them wear down a bit more.

    USO/Tcha – That was a stop out if the Dow went over 10,650 but the Apr $40s are $1.22 and the Apr $41s are .82 and the calls at .97 still have .20 in premium so there is no hurry. 

    We didn’t get an entry below $81 on oil and now it’s testing $82, which is the next place we want to short, also with tight stops.   Gold is having trouble at $1,125 and copper at $3.38

    Renewals/Jo – Yes every year of your membership your discount increases. 

    Dow volume at 11:20 is 68M, up 43M in the last 90 minutes so still very low.  90M at noon is normal.  We should get volume on the Fed and then volume into the quad witching close on Friday and if the market holds up on stronger volume I will sure be waving my white flag and surrendering to the bulls! 

    BSX/Pharm – Very nice!

    Market booster:  S&P takes Greece off credit watch – for now. The company affirmed its rating but says the outlook is negative and that additional measures are needed, as it expects medium-term growth that’s weaker than Greece forecasts.  So the US is ON credit watch at Moodys and the market goes up yesterday and Greece if OFF credit watch at S&P and the market goes up – Oh, I get it now – ALL news is good news

    Old Buy List favorite:  Heavy volume in Harley-Davidson (HOG +5.3%) amid some unsubstantiated rumors around a possible leveraged buyout, with Frankfurt traders eyeing KKR.


  68. re:
    you will start to understand phil’s logic
     
    then you can really start worrying (just kidding)


  69. Phil,
    What is your vision as a potential endgame for this market?
    Thanks.


  70. Phil, what are your thoughts on selling some naked June 46 puts on TBT into today’s weakness or are the premium too low to justify the risk/reward?


  71. Good news from Spain:
    The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.


  72. Peter D, Next time you check in, I’d love to know what you’ve been doing lately. 


  73. Chaps
    LOL


  74. One quick addition to my question above.   It’s mostly prompted by the fact that I am mostly in cash as of late because I can’t bring myself to buy anything in this market and I am just trying to make the cash/margin in my account work at least a little bit while waiting for some clarity.   Selling TBT OTM puts seems like a safe bet, but if we have an overall correction in the market in the near term, I am afraid TBT would suffer because of the "flight to safety" into treasuries and on top the put would suffer the due to the jump in VIX.    Any other ideas on what do with cash while waiting for market direction?


  75. JRW – which way are you leaning?


  76. Leon, Great question.  Maybe a DBA buy/write.  It doesn’t move much and seldom gets much lower than has been the past week or two.


  77. The more things change:  --Deutsche Bank AG, Germany’s biggest bank, paid 2.2 billion euros ($3 billion) in bonuses last year to employees who can conduct “high-risk” business.  The lender’s “risk-taker population,” or “employees who can create high-risk positions,” received 921 million euros in cash bonuses, 961 million euros in deferred equity awards and 317 million euros in restricted incentive awards, according to the company’s compensation report published today. The bank, which declined to identify how many employees are defined as risk takers, gave the group 367 million euros in fixed pay.  See, the system is designed to promote the riskiest behavior – it will NEVER stop under the current rules.

    Boosting oil todayIndia may create a sovereign fund to help state companies compete for overseas energy assets with rivals from China, a government official said.  The oil ministry has formally asked the finance ministry to use a part of the nation’s $254 billion foreign-exchange reserves for the proposed fund, the official said, declining to be identified because a decision hasn’t been reached.  

    Wow, it must be All Problems Are Solved Day: Dubai World, the state holding company restructuring $26 billion in debt, will present creditors a “fair” plan to protect long-term relations with banks and contractors, Dubai’s fiscal committee head said.  The restructuring proposal will be announced “very soon,” Supreme Fiscal Committee Chairman Sheikh Ahmed Bin Saeed Al Maktoum said in an interview in his office in Dubai today. The plan will be drawn up considering the long-term interests of banks, contractors and Dubai itself, Sheikh Ahmed said.  You would think the markets would actually be doing better on All Problems Are Solved Day

    What problems?:  Risk appetite rebounded as concern eased that interest rates will have to rise later this year to cool inflation, prompting investors to cut cash holdings and buy equities, a BofA Merrill Lynch Global Research report showed. Seventy percent of survey respondents, who together manage about $589 billion, expect the Federal Reserve to keep interest rates at a record low until at least the fourth quarter of 2010, as concern that inflation will return dropped sharply. Fifty percent said they expect the European Central Bank to keep its benchmark interest rate unchanged until 2011.

    ALL Problems:  — Tiger Woods will return to professional golf on April 8 at the Masters Tournament, four months after stepping away from the sport and admitting marital infidelity.

    “For society, it’s less expensive to screen hundreds of people than to treat a single patient with cancer,” said Bert Vogelstein, co-director of the Johns Hopkins Ludwig Center in Baltimore

    This is somebody else’s problem:  Since 1990, cancer-related medical expenses have more than doubled to $90 billion, accounting for inflation while the death rate from all cancers fell by just 16 percent from 1991 to 2006 - much of that decline came from anti-smoking campaigns and early disease detection, not the drugs or treatments.  “For society, it’s less expensive to screen hundreds of people than to treat a single patient with cancer,” said Bert Vogelstein, co-director of the Johns Hopkins Ludwig Center in Baltimore. 

    Not our problem either: China’s Billionaires are forming their own "No new taxes" tea party within the Communist party.  Wang Jainlin, the World’s 16th richest man, sounded like Ronald Reagan when he told reporters on March 11th, “if you really want to provide a boost to employment, don’t raise taxes, cut them.”


  78. Juddah,
    I had the same thought as you and earlier I sold July 25 P’s for 1.25 figured it was a good entry but not too sure.


  79. Judda, That was DBA


  80. Hi EricL,
    Are you arround ? Is the DBA not a good contender for a condor? not to great but april  25/26/25/24  pays .72. How did you do with SCHW?


  81. ss
    I’m still in TNA ; I see no reason they should fail with this volume. But there may be a flush first.


  82. POT is going gun ho 3.04 up even CF is up today


  83. Jomptien, Phil has a different DBA play suggestion, but $23.75 would seem a pretty good entry to me. I last exited DBA at $27 and I’m thinking of selling puts this time as you did as a way to enter again.  Not a great premium, but usually pretty safe and steady, especially if you do a buy/write. 


  84. Checking out the RE stocks.  Crazy.  Seems to happen every expiration period.
     
    IYR is pushing 50 !
     
    MAC almost 41  (screaming short)
    SPG 83 (same)
    KIM 15.50 (same).
     
    Unreal !
     
    Joined the TZA train today for a scalp; don’t like the way it moves.  But JRW, etc. you guys rock it !


  85. Phil,  I have the long 3 FCX May 80 call, 5 short FCX March 75 call backspread. What should be the next move for that? thanks.  


  86. Judah/DBA – thanks for your suggestion. will look into it.  Seems like a good inflation hedge too.  
    Phil and others -  would appreciate your ideas on what to do with idle cash/margin, especially as it relates to placing some inflation-hedging bets since the biggest threat to cash itself is its devaluation and this article (http://bit.ly/d1PKjN) on the possibility of hyperinflation Phil shared with us last week makes a little paranoid about holding unprotected cash.


  87. Judah/DBA – thanks for your suggestion. will look into it.  Seems like a good inflation hedge too.  
    Phil and others -  would appreciate your ideas on what to do with idle cash/margin, especially as it relates to placing some inflation-hedging bets since the biggest threat to cash itself is its devaluation and this article (http://bit.ly/d1PKjN) on the possibility of hyperinflation Phil shared with us last week makes a little paranoid about holding unprotected cash.


  88. Hi, stockbern,
    I got K-1 for my holding USO shares for 3 months, as well.  Sigh…  I tried to avoid buying shares of partnerships, but didn’t check this one before I bought.
    My worst experience was K-1 from BX (Blackstone).  It was unbelievably complicated.  And I lost money on that trade.  Very bad experience.


  89. JRW, You think?  Man, I hate to be on the other side of a trade from you.  I’m out if it breaks 67.84. I believe you once said,  From here, it either goes up or it goes own.   :)


  90. Cap
    You can always short TNA or play TWM until your comfortable


  91. Nice, now we can set a stop on $81.85 on oil (.10 trailing)

    LOL Chaps!

    Endgame/Agour – Short-term, I think that any kind of shock will snap this rally like a twig.  It could be a nation defaulting or a big bank defaulting or rates heading up or worsening jobs numbers or consumer spending falling far enough that they can’t bury the stats – something like that…  Once we get more real, I’d be looking for some long-term (6 months) consolidation around 10,000 before we get a couple of improving earnings reports WITHOUT more stimulus and then we can make a run back to 11,500 but we need all commodities to calm down, even home prices, which are still too high as a 10% drop in home prices will offset a 1% rise in interest to more realistic and sustainable levels.

    TBT/Leon – The premiums are low, which is sad but I don’t consider them too risky because we’re pretty sure the Fed won’t be LOWERING rates so hopefully at least a flat-line for TBT, if not higher and, of course, you can always roll down but SCALE in, just in case we go lower.  As to what to do with cash.. I mentioned yesterday how Buffett made $11.5Bn (33%) last year by NOT doing anything with cash for 5 years and then grabbing the opportunity.  We have plenty of opportunities every day and you have already taken pretty much today’s best one.  Yesterday’s was C at $3.85 and tomorrow will be something else – just wait for the 10 you can’t resist. 

    Speaking of opportunities – VIX $17 calls are .70 and I think that’s a fun trade ahead of the Fed.

    LOL Jamie!

    DBA/Judah – Good one, always worth it at this level.

    I’ll be doing the $100KP tomorrow I think and the Buy List hopefully Thursday (since it’s so in the money it doesn’t matter).

    RE/Cap – $75 on VNO is certainly time to consdider shorting. 

    FCX/Bord - With a play like that you want to DD over $80 but a little late now.   I’d wait to see what the Fed does but eyes should be on rolling to 6 the May $85s (now $3.80) and selling 8 Apr $80s, which is pretty much an even roll of the 5 March $75s.  This time, though, if they pop $85 make sure you go to at least 8 May calls. 

    Cash/Leon – Don’t let fear of losing your money force you to make unwise decisions about what to do with your money.  You can go for a long TBT hedge to your cash or even gold but I prefer TBT as I think rates are going up long-term no matter what BS the government spouts.  The 2012 $40/55 bull call spread is $6.30 and you can sell Sept $44 puts for $2.40 to knock the net down to $3.90 on the $15 spread for a 284% potential upside if TBT rises less than 20% and a break-even way down at about $44.  So let’s say you put $3,900 into that play (10 contracts) and you can also sell 1/2 the June $50 calls for $1 to knock .50 off the spread basis.  Do that 7 more times in 20 months and you have a free spread and, for the June $50s to be in the money by a penny, you are ahead $11,600 if TBT holds $50 for 18 more months so you can just roll the 5 callers along and, if you have to, add some more long calls of your own.

    Woo-hoo, oil hit $81.50 and that’s OUT!  Looking to reload if they cross back under


  92. judah,
    I’m in TNA at $53.87 from about 10:45 ; if you got on TZA at IWM 67.80 or better you’re fine. It’s just that one of us is going to have to do some quick trading !!


  93. JRW,  I’m playing with the options today.  Bought the IWM puts for .62 when IWM crossed 67.80 just after 11:00.  I’m fine and ready to sell them back if it breaks up.  I think SS and others bought the calls when you got on TNA.   


  94. Senate Banking Committee Chairman Chris Dodd urges Congress not to adjourn for the two-week Easter recess without addressing financial reform. "We think we’re on the right track, and the public really wants us to address these issues and they deserve an answer." Dodd yesterday unveiled his long-awaited reform bill.

    Even with the Volcker rule’s proprietary-trading limits gathering steam in legislation, Citigroup (C +2.8%) is looking to add employees to its own prop desk after a third of them defected. The unit brings $100M annually to Citi.

    Bad cop: An apocalyptic article in today’s NY Times worries about the impact $700B in junk bonds maturing between 2012 and 2015 will have on credit markets and the economy. "An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this," Moody’s Kevin Cassidy warns.

    Good cop: “The market is not overbought,” says Sam "Grave Dancer" Zell, who says stocks may actually be undervalued, REITs will have enough cash to boost dividends in the future, and more M&A activity is coming for real estate.

    Three lunchtime reads:
    1) At Lehman, watchdogs saw it all
    2) Progressive values, financial reform and sunlight
    3) Dear Moody’s: It’s Accounting 101, not economics

    Holy cow, we did it – $81.37 now on oil, so stop at $81.55 (.20 trailing)

    And wheeeee!


  95. judah – I am waiting for direction.  Not clear at the moment with no volume, but I can’t believe they are this close to 10.700 and not making a run for it.


  96. I was trying to buy some VIX options on Scottrade and got the following message, " Unable to enter the order because options for the underlying symbol are currently not allowed." Anyone else have this problem?


  97. Out of TNA at $ 54.23 for 40 cents; waiting with ss for direction


  98. Barry Ritholtz’s answer to what the end game is:

    I have a few good quotes about secular bear markets in The Bear: Dead or Just Sleeping?:

    “And, in fact, many in the bear camp believe the market is destined to meet its maker as soon as the Fed starts to raise interest rates – which could happen late this year.

    “When rates go up, it becomes more expensive to borrow, corporate profits slide – all the negative things that take place that make the market less appealing as an investment opportunity,” Mr. Ritholtz says.

    In fact, Mr. Ritholtz is one of several commentators who believe this rally has merely been a temporary cyclical swing in the midst of a longer-term bear market – one that began roughly a decade ago and is far from over. These long-term, or “secular,” market trends tend to last 15 to 20 years.

    “This does not have the characteristics of a secular bull market,” Mr. Ritholtz says. Not only would it be starting ahead of schedule, he argues, but even at the market lows of a year ago the stock valuations were never as low as they typically get at turning points in secular market trends.

    “In the past, at the start of these big secular bull markets, you have really cheap stocks … I’m not sure we ever got to that point,” he says. “Stocks became reasonable in March [2009] for a month. Now, there are plenty of stocks that are expensive and there are plenty of indexes that are pricey.”

    There is a lot more in the article . . .

    >


  99. Phil  On the VNO short ply what ply do you suggest ? JUN 75 straddle or 80/75 strangle or do you expect a pull back?


  100. INTC is creasy today, Phil do you recommend to sell something into it?


  101. Put/call ratio of CCL is 183 vs. normal of 0.71 – something is up there…

    AMR Apr $9 puts not a bad sale at .45 for a net $8.55 entry (now $9.66).

    Blue (JBLU) says February passenger traffic rose 2.7%, to 1.91B revenue passenger miles, on capacity that also rose 2.7%. Load factor (percentage of seats filled) held at 74.5%.

    VIX/Jrom – Not on TOS.

    Fun spread:  ETFC July $1.50 calls at .30, selling Jan $2.50 calls for .17 is net .13 on the $1 spread but a little tricky to manage – most likely it needs to be shut down in July but it’s .19 in the money now and a flatline shouldn’t increase the value of the long caller at all and we have 2x the delta of the longs if things go up

    Oil stopped out, hopefully another shot at shorting at $81.75 or even $82 (whichever one it crosses and then turns below with a .05 stop on entry and then a trailing .05 stop at .10 and .10 at .20 etc.).

    VNO/Yodi – No short yet, we need to see what happens with the Fed but feel free to remind me right after.
     

    INTC/Tcha – We’re already long on it, I wouldn’t chase as their premiums are pathetic to sell so no insurance. 


  102. Phil ,
    I am all in the mattress jun 108 is it good to start rolling some to 109p at .50 thks


  103. Juddah/DBA
    I do plan on a buy/write if put to me.


  104. Jomp/DBA, It’s a nice, safe and profitable play.  And you can always roll it first if you don’t want to do the buy/write. I’ve been looking at Phil’s "20 stocks I’d bequeath to my kids" list for stocks to sell puts against, and then do a buy/write.  DBA is the only one on that list that really fits the bill right now.  Maybe KO. 


  105.  Is anyone playing for a directional move after the FED announcement?


  106. Phil/TBT – Charles Nenner believes in your TBT thesis (link below).  What are your thoughts about using bond futures in addition to your TBT bull call spread plays? Also, do you normally play out bull call spreads to maturity?  I was wondering if it’s wise to buy back the sold call once the trend has clearly been established and then let the long call ride on for bigger gain?  this may not work as well for the 2011s but for 2012s i think we could go unhedged on TBT in early 2011 as rates hopefully will have started to rise meaningfully.  Thx. 
    http://www.zerohedge.com/article/technical-analyst-charles-nenner-predicts-market-may-crash-april

     


  107. Phil
    Cash/Leon Sept TBT $44 puts for $2.40
    It trades at 1.42 with TOS  possible a typing error or TOS is giving a bade deal ?


  108. Phil, thank you for the recommendation on  what to do with cash.  I totally agree with your premise that rates will rise in the future regardless of where the US government may want them to be.  My only reservation on going more aggressive with TBT is due my  lack of understanding of how volatility decay would impact the price of this 2x ETF in the long-run.  I think you already addressed that for me a couple of weeks back, but at that time I walked away with the impression that while the treasury market isn’t as volatile and hence the decay shouldn’t be a big issue, you could still view TBT as more of a momentum play on the changing fundamentals.   Do you still feel comfortable with the target range high 50s on TBT even 2 years out?   Do you have any unleveraged ETF plays on rising rates?


  109. leon
    you can play TLT inversely to TBT, its unleveraged.  Just do bear put spreads, sell calls, etc.


  110.  Phil
    On the FAS trade, or any trade for that matter that this occurs: it has moved well beyond your entry, could I increase my put strike to capture more premium to offset the higher price for the call spread or do you typically have a "Range" that is ok to enter in the event of movement or slippage?


  111. I know that there is an arbitrage play between TBT/TLT making money on the decay; but each scenario I come up with doesn’t seem to make it worth while. 


  112. Phil: wonder whether to take some profits on some positions – VLO,ACI,KBR,MRK – as you predict a drop in market, my PPuts (protective puts) are june 107 and 108..


  113. Phil  :buy USO april puts at .65 ?


  114. SS, Now today was a first 90 minute/last 90 minute day.  I could’ve gotten 9 holes of golf in between 11:00 and the Fed statement.


  115. judah – LOL!  You are in FL right?  I am in Destin.


  116. SS, I’m in Maryland, a suburb of DC, but it’s a nice day today.


  117. Looks like Dow will reset to 0 before the fed.


  118. Hi, Peter, Judah, SS, chaps, and Fellow Stranglers:
    How you folks doing on SPX/RUT strangles?
     
    March is a tough month.  I rolled out all the callers, except one SPX March 1155, fighting to the last inch!
    I have not really begun selling Apr or May puts in earnest yet, with VIX so low.  What do you folks think?


  119. Mattress/Yodi – Absolutely, we always want to gain $1 for .50, especially when it’s intrinsic value.  Your position in June then affects how aggressively you can sell front-month puts and that, too gives you an advantage as you can sell more premium with less worry. 

    Fed/Jced – I would say play down but I’m already playhing down (see the above under 10,650 plays)

    Bond futures/Terra – It’s not something I play so I couldn’t tell you.  I find TBT to be nice, simple and understandable in it’s movement so, like my beloved DIA’s, I don’t feel the need to stray.  I think logically, TBT should be at 60 by the year’s end, which is just over 5% on long notes – not looking for catastrophe, just reality. 

    TBT/Yodi – Ah, that was the Jan $44 puts sold for $2.40 (still are).  I have no idea why the Sept puts are a whole $1 cheaper

    TBT/Leoon – I don’t think decay is a big enough issue with them to offset the rising rates.  We had this discussion when FAS was $5 and it turns out I was right about that…  I don’t have any unleveraged plays as the premiums are crap so not comparatively worth the effort.

    FAS/Salvum – Generally if a trade gets away I don’t bother.  If it comes back to our price then we probably don’t want it anymore (as the momentum is clearly gone) and if it doesn’t, chances are we’ll find something to trade tomorrow that is in a better position. 

    Arb/Humvee – The real problem with those trades is you need to take notes on what the hell you were thinking when you entered the trade because by the end of the first month they can be like looking at a scrambled Rubik’s cube trying to figure out how you meant to make a profit. 

    Profits/RMM – I have said for weeks that 10,700 was the place to take money and run and we just came close enough for me.

    USO/Dfalm – Yes, I do like the Apr $38 puts at .65 for a DD.

    Rainman says:  15 Minutes to Bernanke…


  120. cwan:
     
    March was good for me, but had to adjust RUT frequently.
     
    I’ve been into April for several weeks, but less heavily than I would prefer. Have done pretty well on premium decay for the positions I have taken. Keeping more reserve than normal in case of downturn.
     
    I have some May RUT, not much. Tried to sell a few May SPX, but no takers. The premiums on VIX options makes it look like most people are expecting a pullback. I’ll sell some more May no matter what after March expiration. But will continue to sell less heavily than normal if no pullback.


  121. Well it seems to me that since the FX markets already sold off the dollar (and hence commodities up) and that there is no possibility that the fed will say anything but rates will stay low "for an extended period"; that the dollar should strengthen after the announcement.  In the unlikely event that they open to door to a quicker rate increase, that will force the dollar even higher.  So I’ve doubled down on my GBP short.  


  122. Last Fed Statement was Jan 27th

    Information received since the Federal Open Market Committee met in December suggests that economic activity has continued to strengthen and that the deterioration in the labor market is abating. Household spending is expanding at a moderate rate but remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls. Firms have brought inventory stocks into better alignment with sales. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

    With substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter. The Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

    In light of improved functioning of financial markets, the Federal Reserve will be closing the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility on February 1, as previously announced. In addition, the temporary liquidity swap arrangements between the Federal Reserve and other central banks will expire on February 1. The Federal Reserve is in the process of winding down its Term Auction Facility: $50 billion in 28-day credit will be offered on February 8 and $25 billion in 28-day credit will be offered at the final auction on March 8. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30 for loans backed by new-issue commercial mortgage-backed securities and March 31 for loans backed by all other types of collateral. The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.

    We’ll see what the changes are.


  123. Cwan, My story is very similar to Chaps’.  March was good, but I have barely anything going in April and I plan next week to start selling May.  I’m pretty patient and the day trading keeps me from getting too antsy.  I’ll just keep waiting for the pullback.  I will be very interested to hear what Peter is doing.


  124. Phil,  here the question after the FED
    VNO/Yodi – No short yet, we need to see what happens with the Fed but feel free to remind me right after.
     


  125. GE still going up!  Say they will raise dividends next year. 

    New Fed statement!  Changes highlighted good or bad:

    Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

    With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

    In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.

    Last time they said about the closing of loan programs: " The Federal Reserve is prepared to modify these plans if necessary to support financial stability and economic growth."  That was at the end of the 2nd to last paragraph and removing that is a way of saying – "That’s it, you are on your own now." 

    I’m surprised that’s not giving us a sell-off but maybe this is a headfake but let’s not take any chances and stay bullish over 10,650 but maybe taking a poke at the short side at 10,700 with the sale of the March $105 calls at $2.10 with a stop at $2.30.


  126. VNO/Yodi – I like selling the Apr $75 calls for $2.20 and I also like the Apr $75 puts at $2.50

    Still no volume (120M on Dow at 2:30).


  127. Phil,
    I sold OIH March 125 calls for $3.05 few days ago, it’s 2.65 now(OIH is about 126.85), should I take the little forfit and run or wait.  Thanks.


  128. This level seems a bit dangerous for either direction.  We either fail 67.82 or they punch it up.  Flip a coin.


  129.  Stick or no Stick….. that is THE question.


  130. Hi, chaps and Judah,
    Glad to hear that you folks are doing well.
    I, on the other hand, have had too many callers too close to the market, and I waited too long and rolled too late.  Another lesson I learned was that I should’ve first tried to roll 2x to higher strike in the SAME month, and as Chaps pointed out several days ago, sell puts to finance the rolls.  Instead, I almost always rolled to next month.  So, for me, on a per month basis, I have some losses in March.


  131. SS, I followed Phil’s impulse and voted fail with puts again.


  132. Its the anti-stick


  133. PHIL: CLOSE OR REDUCE TO 1/2 ?
    in the light of possible downturn, each stock affected differently of course,
    Please look at the following,
     
    Refining: VLO stock: 17.3 to 20.58$, 1x june20 caller, 4.01 to 5.85$, 1x jan17.5 putter,2.24 tp1.35$
    Coal: ACI stock: 22.7 to 25.7, 1x july24 caller, 1.84 to 3.6, 1x july20 putter, 1.39 to 0.7$.
    Engineering: KBR stock: 20.17 to 21.42$, 0.6x april21 callers, 0.84, 1.05$, no putters.


  134. Cwan- I am still in March. Rolled up some SPX and RUT up/2x and 3x; reluctantly. I am using the Quarterlies where it makes sense as I still think the air will come out of the balloon sooner rather than later. Nothing for April yet.


  135. OIH/Bobhu – I think $82 is obscene for oil and, with OPEC meeting tomorrow and not likely to cut production, an inventory build tomorrow will be taken worse than usual.  As long as you are willing to ride out the consequences of a move the other way (rolling up and out to Apr calls) than I’d stick with it but it is very risky.

    Stick or no/Jced – I say no but this will make about the 7th consecutive day I’m wrong about that…  8-(

    News of Fed minutes is seeping across the wires and I just cannot read bullisness into that statement.  "Things are NOT improving and we’re not giving you any more money other than low rates" is how I see it…


  136. In TZA at $ 7.27, watch IWM 67.66, 67.53 and 67.33


  137. more free money and down goes tbt – wtf -
    you would have to pay me to own a 20 year treasury – but then again – i am not a central banker


  138. TZA also.


  139. tbt – wait – they do pay you – just a measly 5%


  140. To stick or not to stick, that is the question.
    Whether tis’ nobler in the mind to suffer
    The slings and arrows of outrageous fortune,
    Or to take arms against a sea of troubles,
    By opposing, end them.
     
    Hey, is Shakespeare telling us something? 8)


  141. Out of TZA at $ 7.36 ; ready to reload


  142. Hi, pstas,
    What’s your experience with SPX Quarterly?  Peter said that the volumes are pathetic.  Do you find your orders easy to get filled?


  143. List/RMM – VLO I like forever so why worry about it?  ACI I’d let them get called away and KBR is also high enough that you can let them get called away.  Since you have no putters on KBR and they are at $21.59, why not plan a re-entry at $18.60 AFTER you are called away by selling the Sept $20 puts for $1.40?  If KBR heads down, you have a DD at a good price and if KBR goes up and you never get it put to you – it’s another $1.40 in profit added to your play. 

    TBT/Samz – At the moment, the Fed has the credibility to make rates low by simply saying they will keep them low.  The removal of the q/e provisions does strengthen their stand somewhat and then we have Greece and Dubai "solved" today so all good things to take TBT lower. 

    LOL Cwan – the Bard lives!  Jude Law did a great 2 minute version of Hamlet from the actor’s perspective on SNL this weekend. 

    C still going up.

    JPM June $40 puts are a good sell at $1.40 with low rates until then.


  144. Oil jammed back to $81.85 despite the NYMEX being closed – that’s a good trick, gotta take a chance on that one for another short (very dangerous)!   Gold at $1,125 still, copper $3.365, silver $17.38 and nat gas $4.35.  

    Google’s (GOOG) partners in China send an impassioned plea to keep the company’s Chinese search engine open, saying their businesses would be jeopardized and demanding to know how they would be compensated. If Google decides to close in China, it might open a door for Microsoft (MSFT), whose Bing service hasn’t even hit 1% market share in the country.


  145. phil,sold faz 18 puts march any suggestions


  146. Hi Phil : I bought CTCT June $15 calls at $3.49,now $7.50 and sold June $22.50 puts for $1.10 ,now $1.61 Share price of CTCT has doubled from Dec low of $11.00 to current price of $22.00. Leave as is since $$22c are all time premium of $1.66 ? thank you. 


  147. FAZ/Jash – I’d go to 2x the Apr $15 puts or the July $13 puts, both about $1.45.  Better the April if you have the margin because you can always roll those to July.  If FAZ breaks below $14, you can always sell the Apr $10s (now $4.40) as a mo play to the downside as they will lose pretty much penny for penny on the way down.

    PALM making new lows.

    Volume 142M on Dow – about 20M in last half hour, right on the edge of being stickable at this level. 


  148. Phil: txs, so no closing and taking profits on VLO, ACI, KBR.
     
    How about these:
    MRK stock: 36.7 to 37.8,
    0.6x  apr 37 callers,  1.07 to 1.51$,
    0.6x apr 35 putters, 0.76 to 0.24.
     
    PGH stock: 9.99 to 11.3$,
    1x july callers, 1.12 to 1.5 $,
    0.3x july putters, 0.7 to 0.4$.


  149. I think we were destined for 10,700 no matter what was in the FOMC language.


  150. IYR looks like they want to tag 50


  151. Decaying options have a distinct odor ….. smells like smoke


  152. SS/10,700.  That’s the only thing that is keeping me from buying puts again here.  But if the Dow touches 10,700, I’m back in.


  153. There ya go …  what a joke !


  154. judah – I  had the same idea.


  155. MRK,PGH/RMM – When you are pretty much on target (and being over is no problem, only being under is) and you have this long to go – all you can do is wait for the premium to come to you.  It’s very dull and very profitable if you are patient. 

    Check out the WSJ – they can’t (or don’t want to) get the facts straight:

    March meeting:
    Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.
    January meeting:
    Business spending on equipment and software appears to be picking up, but investment in structures is still contracting and employers remain reluctant to add to payrolls.

    The risks to household spending were unchanged from January, but the outlook for business spending was brighter. The March statement noted weak housing construction.

    Surely the WSJ knows that nonresidential is not housing.  This is a very significant change.

    re upside surprises lie ahead for the "new normal" crowd, Brian Wesbury and Robert Stein say. The consensus still underestimates the resilience and robustness of the U.S. economy, but productivity is strong, monetary policy is (and will continue to be) easy, inventories are razor-thin and corporate profits are growing rapidly.

    IYR rings the bell!  For some reason the $50 calls are only .40 so I like the $50 puts for .44.


  156. Pharm- Txs very much!


  157. DIA stance - If you have rolled up to the June $108 or $109 puts (the $109 puts are better), then having 1/2 cover of the $106 puts into the close is a good idea as they are .70 and they are all premium, which is a lot to collect for 3 days


  158. SS, I think 10,700 will coincide with JRW’s upper line at 68.02.  Finger on the trigger.  This is such a tease.


  159. judah – will they leave us any time for the pullback?  They are devilishly sneaky.


  160. Phil,
    Any thoughts on tomorrows open, and any plays for over night ?


  161. Phil / DIA- did you mean the 107p for .70?


  162. dia – phil – the 107s are .70 not the 106s


  163. Phil:  Any thoughts on Zion?  I’ve been pessimistic on it because of its large CRE exposure. But, as you’ve noticed, for the moment, pessimism isn’t working in this market.  I sold Mar 19 calls for .80; should I roll or just be happy to let it go?  Thanks.


  164. /DX is now back below 80. If it breaks down from here then back to the 78 area. That in turn should provide the impetus for the blow off top we need to finish this rally. Everything is set up nicely for it right now. Exciting!


  165. Tomorrow am they expect core PPI to hold 0.1%, down from 0.3% in Jan.  PPI is expected to be down 0.3% vs up 1.4% in Jan and that could be a disappointment in the morning.  They are looking for a draw in distillates but I think we had a lot of air travel canceled last week didn’t we?  Thurs is CPI with 0% expected in the core and 0.2% regular plus the usual 450,000 lost jobs.  Then we get Leading Economic Indicators at 10 (flat expected) and the Philly Fed (also flat at 17.8) so not too much data expectations for the rest of the week. 

    Apr $108 calls are $1.15 already, up .20 and that’s good enough for a day’s work.  I know I keep taking bullish profits too early but I have zero faith in this stuff and I just can’t see playing the overnights up.

    Tomorrow/JRW – No, I’m just watching this in amazement.  Only the still-low volume gives me hope that not everyone is crazy….

    DIA/Jbur – Sorry that was a 1/2 cover of the DIA $107 puts at .70 – wishful thinking on the $106 puts


  166. SS/Time.  No, they won’t leave us any time.  They could still jam it here right at the end, and I don’t want to hold those Mar puts overnight.  Maybe the April puts though…


  167. IYR over 50. RTH over 100. That’s at some pretty long term resistance for the IYR, as I recall.


  168. ZION/John – Think of it like you own the stock and the auditor just missed an entire book of losses – don’t press your luck by inviting him back for poker in the file room! 

    RTH over $100 and the $100 calls are .65 – there is not a lot of betting on follow-through.

    VIX holding 17.50 – someone is buying puts…  Oh wait, that’s me! 

     


  169. judah/April’s – Man, we are on the same train of thought.  Exactly what I was thinking.


  170. In-frickin-credible!


  171. VNO and BXP having a party.  Poor SRS at $6 and it would be just crazy to sell the July $6 puts for .70 as this damn thing never works but very tempting. 

    It looks like Mr. Stick is hell-bent to tag 10,700 at the close so magic time…


  172. If this bull market continues and the US continues to gain share, it will represent a very big trend change that will make a huge impact on portfolio performance depending on an investor’s domestic versus international equity allocation.

    click to enlarge

    While the US is gaining share, China is losing share. Aside from an uptick in the summer months of 2009, China’s stock market cap as a % of world market cap has been trending downward throughout the entire rebound.


  173. A little meat left on the bone for tomorrow.


  174. SS, Yep. I stayed away from the overnight trade.  I’m going to play the IWM options again tomorrow instead of TZA/TNA. 


  175. Finishing up a 190M on the Dow, about normal – 50M in last hour.

    Crazy day.  I’m off to a meeting but not much expected to change this trend tomorrow other than hitting our tops but it’s always the ones you don’t see coming, especially on expiration weeks….

    Dylan is calling C’s books fraudulent! 


  176. Phil just like to know RMM question
    How about these:
    MRK stock: 36.7 to 37.8,
    0.6x  apr 37 callers,  1.07 to 1.51$,
    0.6x apr 35 putters, 0.76 to 0.24.
     
    PGH stock: 9.99 to 11.3$,
    1x july callers, 1.12 to 1.5 $,
    0.3x july putters, 0.7 to 0.4$.
    .6 and .3  does he hold 60 and 30 options they only come in 100???


  177. Well 3 1/2% today and badly played at that. This close is above all resistance levels and triggers buy signals in several TA disciplines ; tomorrow could easily be a gap up and not close, but if they’re smart, and they are, we open lower and everyone should go long. Good luck !!


  178. Hi EricL
    looks like you showing up when the market is closing ??
    Just put a question to you this morning  interested to know what you are thinking about it thks
    yodi
    March 16th, 2010 at 11:58 am | Permalink  
    Hi EricL,
    Are you arround ? Is the DBA not a good contender for a condor? not to great but april  25/26/25/24  pays .72. How did you do with SCHW?

    t


  179. yodi,
     
    I never got in SCHW. I think the DBA could work; I’m somewhat bullish on commodities near-term on the expectation of a dollar pull-back. I’d be a little more confident about precious metals, metal miners, and energy near-term (again, assuming the dollar continues to fall). Perhaps GDX condors selling the 47 or 48 line (currently showing .92 credit for GDX selling the 47 and buying the surround strikes; not bad at all at .08 cost risk!). I myself am in April call verticals on this, GLD, and some other miners like ABX, RGLD, PAAS, and SLW. However they are fairly small positions; I’m mostly in cash until SPX 1200 or a clear break of the trend.


  180. By the way yodi, I have to work during the day and so often miss a lot, FYI.


  181. Thanks EricL have a nice day


  182. EricL- you post so frequently that I assumed you were in front of the screen full time. By the way, I never found out why you left Fort Collins, and where you are now…


  183. jburgess,
     
    I sometimes wish I was in front of the screen watching some of you guys kill it with the Russell ultras. But, I’m in Alabama now where I work at the U. of South Al. I have a pretty good job frankly; in the end I’d take it over watching the screen all day.


  184. EricL,
    doesn’t matter where you are or what you do as long as you feel fulfilled doing it. No sense having long life if it’s hell…


  185. Eric, what do you do at the U. of South Al ? 


  186. Phil:
     
    RE:
    INTC/Tcha – We’re already long on it, I wouldn’t chase as their premiums are pathetic to sell so no insurance.
     
    Do you think they’re not a good candidate for a double diagonal? Front-month premiums too low?


  187. Barrons.com – Online Brokers Survey (Monday, March 15, 2010):
    http://online.barrons.com/article/SB126844973242861545.html#articleTabs_panel_article%3D1
     
    "Thinkorswim (www.thinkorswim.com) once again dazzled, earning 4½ stars. Last year, we worried about the pace of innovation following the firm’s takeover by TD Ameritrade, but thinkorswim’s president, Tom Sosnoff, put those fears to rest. Sosnoff says that thinkorswim still operates as a separate broker-dealer from TD Ameritrade, mainly because the two brokers have different clearing operations.
     
    Though the platform has a wide variety of tools, there are no added fees beyond commissions, which fall in the middle of the pack. 
     
    Thinkorswim added free access to Gainskeeper, a cost-basis and tax-accounting tool, last November; it handles not only stock and options transactions but futures and foreign exchange. You’ll find live broadcasts from the S&P 500 pit as well as Shadow Trader, and a live feed from CNBC.
     
    One interesting new feature, rolled out in mid-January, is thinkOnDemand, which uses online retailing giant Amazon.com’s cloud technology. It’s analogous to Nasdaq’s Market Replay feature but takes it several steps further. ThinkOnDemand saves every price tick in every options contract available as well as every listed equity and allows you to stream historical data as though it’s happening in real time. This permits customers to practice their trading strategies against real data. Loading and buffering the data can take 1-2 minutes; Sosnoff says most of the traders using this feature launch it after the market closes to practice trading or to check on how an order was filled. Charting functionality was added at the end of February.
     
    Another new thinkorswim feature is Prodigio, which offers drag-and-drop trading-model tools with back-testing capabilities. Prodigio can run either inside the thinkorswim platform, or it can be launched independently. A menu on the left side of the screen allows access to tools such as trade actions, type of data, logical operators, technical analysis studies, candlestick patterns, and mathematical equations. Using the Java-based system, you connect the selected tools to create your trading model. Once you’ve developed a model that you want to use, you can connect it to your thinkorswim account and generate orders. It’s an amazing piece of technology, but not for an amateur or the timid.
     
    Thinkorswim offers great customer service and a wide array of educational offerings. You can access the tools via its downloadable-software platform, and most are also available on the Web. Many of these powers have been pushed through to the thinkorswim platform for TD Ameritrade customers, which we’ll discuss later…"
     


  188. Barron’s – How the Brokers Stack Up
    http://online.barrons.com/article/SB126844977199261489.html
     


  189. How Barron’s Ranks 22 Leading Online Brokers
    http://s.wsj.net/public/resources/documents/BA_OnlineBrokers100315.pdf
     


  190. Barrons.com regarding clearing firms (from comment section):
     
    01:23 pm ET March 13, 2010
    Eben Smith wrote:
    A number of years ago my broker failed and I had to collect from SIPC. Contrary to what most investors think, SIPC is not like FDIC and it took me 6 months to get out whole, a period of time where most of my trading capital was unavailable. Particularly in light of what happened with Lehman, I consider the name of the clearing firm to be very important. I would consider it a good service to your readers if you made this information part of your article. The best platform in the world will be pretty useless if the clearing agent goes under. If this is something your readers haven’t focused on, I urge them to do so.
     
    ———--
     
    03:16 pm ET March 13, 2010
    Doug Neese replied:
    Eben your point is excellent! It is a foolish risk reward to save a few basis points on commissions in exchange for a less sound institution. My trading capital is all I have, if I loose it due to the failure of my broker, I will be standing on a street corner holding out a paper cup.
     
    ———--
     
    10:06 pm ET March 13, 2010
    Theresa Carey replied:
    I’ve written quite a few columns about this problem. Most recent was when North American Clearing went down in June 2008. 
     
    http://online.barrons.com/article/SB121279339012053405.html
     
    Though that column focuses on Just2Trade, the failure affected quite a few other brokers as well. 
     
    I ask all the broker about their clearing firms and their capitalization. I’ll post a list of the clearing firms tomorrow. It looked to me as though the 22 I reviewed were OK this year.
     
    ———--
     
    02:44 pm ET March 15, 2010
    Theresa Carey BARRON’S Contributing Editor replied:
    Regarding clearing firms, here is what the brokers reported to me.
     
    These brokers clear through Penson, which appears to be financially very sound. ChoiceTrade, Cobra Trading, Lightspeed Trading, MB Trading, OptionsHouse, thinkorswim, tradeMONSTER, Zecco. 
     
    TradeKing currently clears through Legent but is moving to Penson. 
     
    Just2Trade clears through Legent.
     
    Firstrade clears through Ridge. 
     
    Muriel Siebert clears through National Financial, which is the clearing firm owned by Fidelity. 
     
    All the others — E*Trade, Interactive Brokers, optionsXpress, Schwab, Scottrade, SogoTrade and TD Ameritrade — are self-clearing. With the exception of Scottrade and SogoTrade, those are publicly traded companies and their finances can be found online. Terra Nova also self-clears; frankly they are the only ones on the list that I have concerns about financially.
     


  191. MRK/Yodi – On both of those I had said they are on target and not worth messing with.

    INTC/Chaps – I’m a value buyer so it takes a while for me to come around to chasing something up like that, especially when there’s not a lot of protection (due to low VIX).  The best thing to do in an uptrend like this is to SCALE into leaps like the 2012 $17.50s for $5.55 ($1 premium) and then sell July $22 calls for $1.20 and $20 puts for .60 and that’s net $3.75 on the $5 spread so if it goes up you make at least 33% and if it goes down you can roll the July $20 putter to Jan $15s (now .38) and roll the 2012 $17.50s to the $15s for about $1.30 (now $1.90) and run the cycle again for the next 6 months.

    TOS/Diamond – Damn, those features sound great – one of these days I have to find them….

    Just had a nice meeting with Seeking Alpha people, they are working on some cool stuff this year.

    This is scaryABC Consumer Comfort Index: An out-of-the-ordinary +6 to -43. But 90% of Americans rate the economy negatively, 54% are negative on their personal finances and 71% say it’s a bad time to spend moneyOf course when I say "scary" I men to rational people in a real world – which has nothing to do with the current market so BUYBUYBUY, I guess….

    More "shocking" news:  Blockbuster (BBI) files a 10-K that says it might have to file for bankruptcy as part of a debt exchange, but CEO James Keyes thinks that’s not likely and says he’s been discussing new deals with studios to increase studio revenue share while cutting Blockbuster’s DVD costs.

    From the frontlines of the Trade War – Opening SalvoIn a statement posted on its Web site, the Zhejiang Administration of Industry and Commerce said that "International designer clothes, blindly worshipped by Chinese consumers and enjoying ‘super national treatment’ in the country, have once again proven unsuitable for China."  Hewlett-Packard Co. came under scrutiny from Beijing for problems in some of its laptops sold in China.  According to the Zhejiang notice, 48 out of 85 samples of imported clothing from 30 international brands failed to meet Chinese product quality standards.  The brands also included Versace, Dolce & Gabbana and Zara.  The authorities say that they have impounded all of the clothes with the same model numbers as the samples that failed to meet the standards, but the rest of the companies’ products aren’t affected. It was unclear if any fines would be levied.

    Hewlett-Packard apologized to Chinese consumers for faulty laptops and offered extended warranties and compensation for those affected.

    China’s relationship with foreign companies is starting to sour, as tougher government policies and intensifying domestic competition combine to make one of the world’s most important markets less friendly to multinationals.  Interviews with executives, lawyers, and consultants with long experience in China point to developments they say are making it much harder for many foreign companies to succeed. They say the changes suggest Beijing is reassessing China’s long-standing emphasis on opening its economy to foreign business—epitomized by the changes it made to join the World Trade Organization in 2001—and tilting toward promoting dominant state companies.

    Asian Stocks Advance to Eight-Week High on Fed’s Rate Pledge

    China Is in Midst of `Greatest Bubble in History,’ ex-LTCM’s Rickards Says China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP.

    Feldstein Sees Greece Euro-Exit Pressure as Government Deficit Plan Fails  Harvard University Professor Martin Feldstein, who warned almost two decades ago that the euro would prove an “economic liability,” said Greece’s austerity plan will fail and the country may quit the single currency to fix its fiscal crisis.

    German Defense Cuts Loom as Merkel Fights Record Budget Deficit This Year Chancellor Angela Merkel’s coalition is reducing funds for European defense projects as the government faces a record budget deficit this year and pressure for deeper cuts in 2011.

    More FREE MONEY:  Like the FOMC, the Bank of Japan keeps its benchmark interest rate unchanged – but BoJ adds stimulus by doubling the size of a ¥10T ($111B) program providing low-interest loans to the money market.

    Oil Is Poised to Break Resistance, Test $90 a Barrel: Technical Analysis Crude oil may head toward $90 a barrel if it breaks a resistance level at $82, according to a technical analysis by Auerbach Grayson, a brokerage in New York.

    Wednesday’s economic calendar:

    7:00 MBA Mortgage Applications

    8:30 Producer Price Index

    10:30 EIA Petroleum Inventories