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Wednesday Rally – 80% Gain For S&P!

S&P 1,200?

It could happen this morning.  We have good earnings from INTC and a beat by JPM so there's no reason not to take out our last major technical as we party just like it's 1999 with MASSIVE gains behind us and the MSM projecting MASSIVE gains for the rest of this year too.  As I said yesterday, we're not going to complain (much) – we're just going to go with the flow.  Yesterday I put up a DIA play that returns 566% in 37 days if the Dow simply holds 11,000.  Today we'll look at a similar play on S&P 1,200

After all, like the crazy guy on TV says, if the government is giving free money away – shouldn't we be getting ours too.  Only I'm not telling you you need to buy a book or do anything special – just join my Membership site AFTER you make your 566% – that's a pretty good deal!  Of course, keep in mind these are the bull plays and we are generally hedging for a possible correction so obey the sign on the left and play wisely!  Consider that you can make 5% a month by risking just 1% of your virtual portfolio on successful plays like this one – that's 60% a year if all 12 months are positive, and the last 12 months have been so why not 12 more?

As I mentioned above, the S&P is up 80% from the March lows and is still 31% off the Oct, 2007 high of 1,576.  As we switch off our brains and run with the bulls, we're not going to worry about the low volume and those silly fundamentals – we're just going to use 1,200 as a key support that lets us know when to get in and out of our bullish plays along with Dow 11,000, Nasdaq 2,500 (still waiting), NYSE 7,600 and Russell 700.  This makes being bullish nice and brainless and a couple of high-percentage disaster hedges let us sleep at night without being worried about a Black Friday even wiping out our gains.  The other key percentages are:

  • Dow 11,019, up 71% from 6,440 low.  80% is 11,592, still 30% off the Oct '07 high of 14,279
  • S&P 1,197, up 80% from 666 low.  80% is 1,200, still 31% off the Oct 07 high of 1,576
  • Nasdaq 2,465, up 95% from 1,265 low.  80% was 2,277, now just 10.5% off the Sept '07 high of 2,724

    • Note that the Nasdaq is still 52% off the March, 2000 high of 5,132 with 108% to go to get back!
  • NYSE 7,638, up 83% from 4,181 low.  80% was 7,525, still 35% off the Oct '07 high of 10,387
  • Russell 707, up 107% from 342 low.  80% was 615, still 21% off the July '07 high of 856

So, what do we see in the above levels?  First of all, 80% seems critical to confirm the rally and only the the Dow needs to prove it, which is why they were our upside pick yesterday as they still have almost 600 points to go just to catch up with the other indexes.  Also, it's worth noting that the Russell was the first index to top out in 2007 - LONG before the others so we'll be watching out for that action going forward.  Finally, the NYSE is our canary in the coal mine as they just barely got over 80% (7,525) and they haven't made it to 30% from the top yet (7,990) so we'll be watching this zone with a great deal of interest

Notice if we throw out the abberant panics of November and March on the NYSE, we have a pretty neat Fibonacci sequence that bottoms out at about 5,500.  That puts 8,000 just 45% off the bottom so no excuse for the NYSE not to make that very easy target.  I had noted long ago that most of the indexes were not that impressive if you throw out the panic drops from the data series but I'm the only person that does this so either I'm wrong or the whole field of Technical Analysis is a total joke.  I report, you decide…

Actually, we use TA all the time at PSW because more than half the funds use it as a  primary indicator and it probably dominates overall asset allocation strategies so you ignore TA at your own peril the same way you shouldn't ignore any omens that the tribe believes in or you may find yourself served for dinner.   

We've been patiently waiting in cash (with the occasional side bets to keep us occupied) for the magic numbers in our series to roll over, giving us very clear entry and, more importantly, exit points for the next round of our bullish adventure.  We still need to see that magic 1,200 on the S&P because we can't believe in the Dow as the components have changed too much to make it reliable so we need that S&P to confirm our 3 of 5 rule and THEN we're willing to give the Nasdaq a pass on 2,500 (for now). 

Did we jump the gun yesterday with our Dow play?  Maybe but we also placed our last disaster hedge so a more neutral stance for Members and we also had a huge win betting oil to go UP, of all things as it hit our $82.50 goal early, allowing us to gracefully exit our short plays and flip bullish in the futures, which obliged us by marching to $84 before stopping us out.  This morning we have a possible reload at $85 to the short side but it will be tricky with inventories, or the reactions to inventories – which have been completely irrational this month.  Expectations are for a 1.6Mb rise in oil, a 1Mb rise in distillates and a 1.2Mb draw in gasoline for net 1.4Mb build and the numbers I've seen on driving statistics indicate we will once again have a build in gasoline that should send oil down but we'll be using $85 as a strict on/off line for our short betting in the futures because logic has nothing to do with energy trading these days. 

I did promise an S&P play for over 1,200 and we can make a quick 500% by going with the following:

  • Buy SSO May $42 calls at $2.85
  • Sell SSO May $44 calls at $1.60 (net $1.25)
  • Sell SSO May $42 puts at .95 (net .30)

That's another 566% profit in 37 days and, like yesterday's DIA play, this spread is already 100% in the money so all the S&P has to do is NOT GO DOWN (or at least finish up here on May 19th) and we win.  Keep in mind your downside risk is that SSO, which is an ultra-long on the S&P, falls below $42 and you are forced to buy the ETF at net $42.30, no matter what the price is at the time.  As I said yesterday, $42.30 is $1.75 (4%) less than the current price so this is an ideal play for bulls who intend to buy on the dips anyway

Remember, if the S&P does NOT make 1,200 - especially on these positive reports from CSX, INTC and JPM – then it is a FAILURE and we should not be making these (or any) upside bets but I'm not going to pretend that, just because MS is losing $5.4Bn (2/3 the value) on sour real estate investments, which is the biggest dollar loss EVER in private equity real estate investing, that things like that are going to matter. 

I also won't trouble you by pointing out that mortgage modifications are moving too slowly to keep pace with the growing number of foreclosures, according to a government watchdog who says "The re-defaults signal the worst form of failure of the HAMP program: billions of taxpayer dollars will have been spent to delay rather than prevent foreclosures" and I certainly won't connect that to the the fact that housing costs are artificially tamping down inflation data and causing policy makers to keep rates low, possibly leading to inflation or asset bubbles because that's all fundamental nonsense and, obviously, this market has no time for that…

I will point out that things are indeed worth whatever the Gang of 12 says they are worth, as evidenced by the catastrophic fall of ABK yesterday when JPM decided to agree with me and pointed out to their clients the very obivous fact that, despite earning $1.92 a share this quarter, they are still TOTALLY INSOLVENT with virtually no possible way for equity holders to expect to get paid in a liquidation.  That led to a fun day of profit taking but, as with GM, there are still plenty of believers – right up to the bitter end.

Today the Gang of 12 turns their wrath on the Ag sector with our friends at Goldman Sachs downgrading POT and MOS, who are both down about 2% pre-market.  This is a sector I've been warning about for some time and POT is a favorite short of ours whenever they get too high.  John Shipman feels the market must be riding a massive momentum buzz, with buyers jumping from one ascending stock to the next – it's an interesting take

Consumer Comfort fell 10% to -47 yesterday, far below the 24-year average of -13 with just 8% of the population rating the economy positively and only 25% of the people feeling it's a good time to buy things and only 47% of the people rating their personal finances positively but hey – what do they know, right?  We don't need anyone but that happy top 8% to bring this economy right back to our 2007 highs, right?  Yeah, right…

Asia was pretty flat and Europe is up over half a point but who cares what they think?  It's rally time in the US and we are certainly partying like it's late 1999 but the Nasdaq still has 108% more to go to retake those highs and, if the Russell can gain 107% since March, why should it be ridiculous for the Nasdaq to do the same and get back to 5,132?  Please answer in essay format and do not refer to any fundamental reasons as this is a purely technical rally. 

Just be careful out there, we don't have 1,200 yet and this may be the week that oil finally realizes there is no actual demand.  We have the Beige Book at 2pm, that's going to be a market mover if nothing else


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  1. JPM big #’s.   Trading profits (what else; when you rig the markets) and not paying customers any interest.
    INTC … Phil covered yesterday.
    AAPL delays Int’l I-pad by 1 month – This is "good news"; of course since they spin it as "strong demand".
    Morgan Stanley looks set to lose at least $5.4 billion of a $8.8 billion real estate fund due to bad property investments, according to the Wall Street Journal. This loss would potentially be the biggest ever in private equity real estate investment.

    Read more:

  2. They are pulling out all the stops on this market … Chinese make believe growth leaks; Wed options expiration week upgrade parade; etc.

  3. They are pulling out all the stops on this market … Chinese make believe growth leaks; Wed options expiration week upgrade parade; etc.

  4.  Hi Phil what’s your take on the greek bonds tanking today again? Ignore or just another excuse to rally

  5. Iflan – are you making a run at something this morning?  Seems AAPL and GOOG could be good candidates again.  Crazy as it sounds I am giving ABK another shot.  I entered it yesterday before the close.

  6. Essay form(condensed so as not to take too much room):
    Thesis:  The NASDAQ can gain 108%, matching the RUT 107% run from March.
    Evidence A:  Mountains are steep, and jagged, stock charts are the same.  Everyone pile in.
    Evidence B:  Everything is going up, so NASDAQ must catch up.  Everyone pile in.
    Evidence C:  Warm air rises, and tech is HOT…so, everyone pile in.
    Counter-argument(to prove we are willing to at least look at the other side):  When warm air rises too fast, it forms thunderstorms, which cause driving rain, hail and tornados!  However, it’s nice and sunny today, so EVERYONE PILE IN!!!
    Conclusion:  NASDAQ 108% here we come!
    (and please note the lack of fundamental analysis)

  7. Good morning!

    It’s Dow 11,000, S&P 1,200, Nas 2,500, NYSE 7,700 (upgrade) and Russell 720 (upgrade) which will now be our bullish floors.

    Assuming the S&P actually holds 1,200, I’ll be making a new Buy List this weekend and those will be our new watch levels for breakdowns. 

    We now have two very aggressive upside plays from our morning posts, yesterday’s DIA spread and todays SSO – both designed to pay 566% if the indexes simply hold their current levels 37 days from now.  If you are a bull, putting 1% of your portfolio in each of these will grow your entire portfolio 11.32% in 37 days – that is not bad.  Put a stop on each at a 50% loss and you risk 1% of your portfolio against an 11.32% gain.  I may be skeptical but I’m not THAT skeptical! 

    You can back those plays up with a 0.1% portion of the portfolio on the BGZ hedge I alerted yesterday and your bases are well covered.

    Yesterday’s IYR short call is looking promising but not sure why the sudden pullback other than it was a blow-off top. 

    We got our spike to $85 oil and it’s already down to $84.62 so non-greedy stop at $84.75 (.15 trailing) that can move to a .20 trailing at $84.50.

    More data to come:

    10:00 Business Inventories
    10:00 Bernanke: Hearing on "The Economic Outlook"
    10:30 EIA Petroleum Inventories
    11:00 Fed’s Lacker: ‘Economics, Policy and Politics’
    1:00 PM Fed’s Fisher: ‘A New View on Financial Reform’
    2:00 PM Fed’s Beige Book 

    I’ll be doing the BBook thing later and if we sell off at all I’ll be liking the FXP May $7 calls, now .60 as China did not look enthusiastic today and I do like shorting the Dow with the DIA $110 puts at .26 as a day trade but that’s a craps roll as you are very likely to lose it as easily as it could double.  Using that logic, if you keep a 50% stop loss on it then it’s a 2 reward to 1 risk ratio and a "sensible" way to play for a pullback.

  8. Hi Phil,
    AAPL  STill holding the Jan play 180/200c and the 180p in good shap looking for a further play
    Jan 11 220/240c spread against a 200p for sale obviously if apple still going for sky is the limit your thoughts pls

  9. ISRG making a run to $400!

    MS/Cap – Yep, isn’t that crazy?  I guess the REIT run-up is based on expectations of getting all those properties cheap?

    Greece/Chyer – I have Greek fatigue at the moment and I can’t believe the bond market doesn’t.  Now there is a legal challenge in Germany to try to stop the government from bailing out Greece but that’s just nonsense – they just use it as a tool to push the bond and Forex market around while IBanks squeeze Billions out of speculators every day. 

    ABK/SS – That does sound pretty crazy!

    LOL Hoss – nicely done!

    AAPL/Yodi – Why not roll the Jan $180 puts to the the 2012 $180 puts for + $10?  That way you don’t have to add margin (or downside risk) and you can still add your new spread. 

  10. VZ is testing the 50dma. 

  11. Morning Phil,
    I still have the FAZ July 13/18 bull call spread at cost of  1.29, covered 1x by July 13 put sold for 1.63. With FAZ at 11.37 and banks looking strong, do you think it’s time to adjust?  Be nice to at least break even.

  12. Phil/ABK – kept it a trade and made 11% by selling at 2 bucks.

  13. MRK pulling back nicely (if you like to stocks to fall and try and buy for a play up).  I am going to sell 1/2 36 May P for $1, and next level for support is 31.60ish.  Should they move through, the 36 May can be rolled out to the 2X to 32 Juls for about even.  I am also in the 35/40 Jan bull call spread for 2.1, but it can be had for 1.9 now.  I will roll those if MRK moves through 35.

  14. Phil/VZ.  Not playing along with the rally.  Sell some puts, or wait a bit to see if it continues to slide ahead of earnings next week?

  15. SS – Looks like VZ will blow through the 50dma, probably going to 29.2 range. Getting ready to sell 28 Jul puts.

  16. tradansh/VZ – I like it at around 28.80 which has been strong support for much of last year.  I will also sell puts near this level.

  17. Pharm,
    I would like to get your thoughts on BMRN. I have a friend who is pretty into the company.

  18. FAZ/Jbur – July is a long way away but those $18 calls are toast at .38 and you can pick up .80 rolling them down to the $12 calls and then spend $1.15 to put yourself in the $10s (now $2.06).  The $13 puts you just need to wait out as they are only $1.60 of intrinsic at $2.55 and the Jan $9 puts are $1.20 so that’s going to be the target roll as the premium drains out. 

    ABK/SS – That is some competition-level surfing!

    MON getting hit hard by Ag downgrades – will be interesting to see what they finally hold. 

    VZ/Judah, Trad, SS - As a new entry I would stay out and just hope they miss or give flakey guidance and then buy on the dip.  The VIX is so low that you don’t get enough on the put sales to justify the risk ahead of earnings.

  19. ABK – i just noticed the Aug 2s are going for .50 and someone is willing to give you .40 for selling them the May 2s. Not a bad way to make 100% if you’re crazy enough to go for it.

  20. Peter D and the Short Strangler gang -- my buying power got adjusted down by 10% overnight.  I have portfolio marging and my account isn’t that large.  I have called TOS and they had no idea why it was adjusted down.  Currently, i have only 4 SS on the SPX that are 5% OOM.  Does anyone have an update on the portfolio margining situation?

  21. Thinking about selling some sept IMAX 17.5 puts.  They have had a big run, are little lower than 18.6 high and report earnings May 2 (i believe).  PE is high but their screen viewership is increasing both domestically and internationally

  22. China’s economy grew about 11.9% in Q1 from a year earlier, topping expectations and expanding at the fastest annual pace in nearly three years, sources say. The Chinese government is scheduled to publish official results on Thursday.

    OPEC maintains a cautious view of world oil demand and gives no indication it might pump more crude to quell the recent rise in oil prices. Despite rising prices, OPEC isn’t convinced these prices will persist for a variety of reasons, including excess quantities of unused crude globally, and it isn’t as optimistic about demand as others.  And oil is down to $84.25 – WOO HOO!!!  1/2 out ahead of inventories, still a stop at $84.50 on the rest.  

    The European Union says it’s ready to work with G-20 members on introducing a "stability levy on the financial sector." Meanwhile, the IMF, which will weigh in on the bank levy idea later this month, is pushing for higher customized capital requirements for "systemically important" banks.

    Greek thingA German economist plans to launch a legal challenge against the eurozone’s Greek rescue package, arguing the aid violates the EU’s Maastricht Treaty. Meanwhile, a German cabinet official says the €30B is just a first step and could end up being "at least double the amount."

    The Treasury moves on new rules to stop banks from draining millions of dollars in fees from the Social Security benefits of elderly clients.   I love the fact that we didn’t have rules against this before!

    Big banks make a last-minute bid to water down the financial reform bill’s "clearinghouses" for derivatives, arguing that they would reveal too much information to competitors and erode profits. But it looks like White House pushback has been successful and lawmakers will release much stricter rules.

    Yes, it’s technically true that 47% of U.S. households owe no income tax for 2009, writes NYT‘s David Leonhardt, but the number is misleading. Ahead of Tax Day tomorrow, it’s worth taking a closer look at what’s really going on.

    MBA Mortgage Applications: -9.6% vs. +0.2% last week. Thirty-year fixed mortgage ratedecreased to 5.17% from 5.31%.

    Mar. Consumer Price Index: +0.1% in-line with expected, 0% prior. Core CPI 0% vs. +0.1% expected, +0.1% prior.

    March Retail Sales: +1.6% vs. +1.3% expected, +0.3% prior. Ex-auto +0.6% in-line with consensus and vs. +0.8% prior.

    Feb. Business Inventories: +0.5% to $1,326.4B vs. +0.4% expected. Prior raised to +0.2% from flat. Sales +0.9% to $1,041.9B. Inventory/sales ratio steady at 1.27 (prior raised from 1.25), below year-ago 1.46.

    Goldman Sachs downgrades fertilizer companies Potash (POT) and Mosaic (MOS), citing price increases that are "losing steam" and "fewer catalysts to propel the stocks higher near term." POT -2.1%, MOS -2.2% premarket.

    Kulicke and Soffa Industries (KLIC) +19.6% premarket after the company gives an early revenue guidance of $205M for the June quarter.

    Progressive (PGR): FQ1 EPS of $0.44 beats by $0.05. Revenue of $3.8B (+7.2%) vs. $3.7B. (PR)

  23. BMRN/wil – C yesterday’s post at the end. I  have two different write-ups on them.  In a jiff – I like them and think they are a takeover target.

  24.  Phil/FAZ – I see the note to Jbur -are you saying that FAZ should be adjusted now?  I have the same as Jbur. thanks

  25. Pharm
    Thanks for the info. Appreciate it. That is quite a write up!

  26. Iflan – BIDU looks like it would have been the play of the day.

  27.  Apple just announced they’re delaying their international launch by a month, citing "surprisingly strong US demand"

  28. JPMorgan (JPM) mortgage exec David Lowman tells lawmakers yesterday that customers worried about foreclosure can speak directly to him. Minutes later, he gets mobbed by 50 angry borrowers.

    Boston’s mayor threatens to use eminent domain and seize a stalled-out construction site if building doesn’t begin ASAP. Vornado Realty Trust (VNO) had promised it would replace a torn-down building with a $700M mixed-use development, but the project shows no signs of getting under way.  And VNO made 52-week highs yesterday.

    Eyeing a "moderate" recovery, Bernanke tells a congressional panel that "significant restraints on the pace of the recovery remain, including weakness in both residential and non-residential construction and the poor fiscal condition of many states and local governments." He made no direct reference to the outlook for benchmark interest rates or the vow to keep them low for an "extended period."

    No we rally over what Bernanke doesn’t say?  Oh man… 

    Oil stopped all out

    EIA Petroleum Inventories: Crude -2.2M vs. consensus of +1.1M. Gasoline -1.04M vs. consensus of -700K. Distillate +1.1M vs. consensus of +600K. Oil futures +0.45% to $84.43.  So net down 2.2Mb and way below 1.6Mb net build expected so not touching oil now until we get detailed report at 1pm.

    Transports up 1.32%, loving high oil prices as usual and SOX up a whopping 2.6% so that is all of the Nasdaq’s 0.6% gain for the day (just 117.4% more to our ATH!).

    ABK/Kwan – If you are going to play them, that’s the way to go. 

    IMAX/Jo – I like them long-term and lots of good stuff coming out this summer but I’d go June first as you can take advantage of a run-up on a hot summer movie or roll down to Sept $15 puts if earnings disappoint. 

    FAZ/Salvum – We have CBSH tomorrow morning and BAC, FHN and GE on Friday morning so I’d give it until Friday – can’t hurt much worse can it?

    Poor decision-making, not government-mandated housing goals, led Fannie Mae (FNM +5.1%) and Freddie Mac (FRE +3.4%) to loosen their lending standards that led to their collapse, HUD secretary Shaun Donovan says.  I love the +5.1% and +3.4% that accompanies this story.  Fundamentals are apparently a joke they used to tell at cocktail parties… "Sure, the management is incompetant and the company needed $200Bn in bailouts and is now a ward of the state – get me a Million shares!"

  29. Hi Phil
    I am still hanging in some TRMA play they not dead in the water they are under water shall I just write it off as a bad play or what ? 300stk for 5.03 now 2.28 more than 50% down jun p sold for 1.05 now 2.72 as well more than 50% under water and the 7.5c well got .20 cents now 0. Do you see any light in this underwater venture?? thks

  30. NNVC is rockin’. 
    BMRN – Phil could have a better play and I know he (and I) are looking for pullbacks, but JIC, a small position could be:  20 Jan11 for 5.80 sold against 1/2 sell of 22.5 C/P May for ~3.20.  Or 25/22.5 C/P for ~ 2 giving BMRN room to run a bit since they bounced off support on the daily chart.

  31. Dow is up just about 2.5% from last expiration day – that seems to be the pattern lately:  Jan 22 10,172 – Feb 19 10,402 (230) – March 19th 10,741 (339) and now 11,064 (323).  Just a coincidence, Im sure…

    Yodi, what is TRMA? 

  32. Phil- what symbol do you follow on oil on TOS. I am using /CL? (Not playing- just watching)

  33. Pharm – BMRN , what trade do you recommend? Targeting to enter 1/2 position here.

  34. yodi – I rode TRMA up to almost 9 and have watched them implode as well.  For now, just hold on.  Look at Kwan and BEAT.  The CEO owns a boatload of shares at $6, and if their debt load does not kill them then they should come out the other side just fine.  I bought more down here for a DD and will buy more if the start to move up again. 

  35.  Phil / Faz – now you’ve gone and done it – "can’t hurt much worse can it?" – now you have sealed it. lol

  36. Good morning,
    IWM next resistace 72.63, not all gaps get filled

  37. THks Pharmboy Phil TRMA Trico Marine Services looks well under water by me

  38. Anyone use their iPad for trading yet?

  39. Phil  POT down 2.86 today  109.41  looking to sell the Jun 100p for 3.10 or so. Risky business Your thoughts  thks

  40. VIVO starting to look alive again.  Up 2.5% today.  They have a gap to fill, but will take awhile.  July  20 P can be sold for 1.6 or so for a nice entry if P to you.
    I was at a cancer conference yesterday listening to a bunch of different docs (for possibilities of the company I work for and our program), but there were other things that came out in the conversation that I found interesting (target related).  Several companies have hedgehog inhibitors that the doc’s were very fond of (early development).  INFI has one.  I looked a bit deeper into INFI, and they are growing on me, but I need to dig a bit deeper into their later stage drugs.  One to watch or wiggle our toes in after OPEX.   SNY has a PARP inhibitor that they were also high on, but I am not real fond of SNYs pipeline (although they are getting aggressive on in licensing compounds/tech/mAbs.  If any of the docs on the board go to conferences in their area and see things coming down the road, put it up for me to look into on MOA.

  41. I’m closing out the GDX April short condors that I sold less than a month ago (the ones with me short the 48 line :) ). 120% profit after commissions.

  42. Hi Phil — need your help to when should I adjust May 230 short call, that is now showed $15 of intrinsic value, wait till next week or readjust this week. thx

  43. EricL:    Niceeeeeee!!

  44. LOL.  I was checking comments from yesterday’s post.. got distracted.. then posted a comment to it thinking it was today’s post!  Duh.  Anyway,
    It’s pretty amazing that the JPM can make so much money trading when all the market does is go up.  Seems like they would do better with more volatility.  I can’t wait to see what the charts look like once the big banks have to actually think about their trades before they make them.  Knowing what they know and ez access to money clearly got them long early on.  Maybe they bought an s-load early on and are now simply selling some back into the market each quarter for these profits..  but at some point it will have to end.  That’s what I want to see.  Not that we’ll go straight down.. but the ups and downs.  Because this straight up stuff is just hard to believe.  I’ll be getting short with FAZ towards the end of the day and then again tomorrow at this time.  I think we’ll have a pull back for oe like last month. 
    Lowering lending standards at FRE and FNM were ‘bad’ decisions not government policy?  You might say they were the WORST decisions made since the Great Depression.  How bout some clawbacks?  Nevermind.  Let’s just skin them alive.

  45. Wow, TZA approaching 6 bucks.  We’re going to need a reverse split on this one soon.

  46. TOS/Pstas – I use CL too.

    Wow, SOX up 3.15% now and Nas going for 2,500.  NYSE just off 7,700 so everything’s coming up roses into lunch.  Volume is a big 90M for a change- probably a lot of bots kicking in on S&P 1,200 as it’s been our sideline target too. 

    VIX back down to 15.76 and it’s a good day to take note of who ISN’T moving like BK (bucking the sector), CL, CVX, DE, GD, GOOG, JNJ, LMT, MRK, PEP, PFE (all health care), PM, POT, RIMM, SPWRA, STT (bucking the sector), TWX, UNH, VNO, VZ, XOM, YRCW (trains are doing great but not trucks?). 

    Also, all the utilities are still dragging.  How do you rally on increased energy use and production and leave the utilities behind?  Those are going to be on the Buy List on the assumption the rally is right and the fundamentals keeping the utilities down (10% of the homes empty, 10% of the occupied homes not paying) are wrong and the market rally is right. 

    BRMN/Pharm – They don’t have very sexy premiums but that makes for a nice play buying the Jan $22.50s at $4.40, selling the Jan $17.50s for $1.20 (net $3.20) and selling the July $25s for $1.65 for net $1.55 on the $2.50 spread with 6 months to roll.  Your artificial buy/write works too and just requires a bit more margin and a bit more attention.

    LOL Salvum – I believe it was Custer who said: "There are not enough Indians in the World to defeat the 7th Cavalry."

    POT/Yodi – I like that in an up market but if the market turns down, don’t ride it out.

    Inhibitors/Pharm – How far away is that?

    GDX/Eric – Excellent play!

    Mystery stock/Gucci – Oh I love this game!  I’m going to guess AAPL and say that earnings are on the 20th so you have little to lose by waiting this week and I’d be looking to roll to the May $240s, now $12 so if you plan to roll to 1.25x of those you may as well sell .25x now, while things are moving up.  If we keep going up this week, then you can leap past that and roll your callers up to July $250s, which will hopefully expire before earnings.  Once you HAVE to roll, then we should look at put sales too. 

    Banks/Matt – They are now in a catch-22 because if the Fed stops giving them free money, their earnings will collapse and we’ll be right back to another crisis.  There is almost no way they can ever make enough money banking to compensate for the end of trading revenues and the Fed sure knows this so when will the merry-go-round stop?  It’s insanity…

    Here’s a good chart Barry found outlining "the game":

  47.  Pharm, have you looked at EW (Edward LifeSciences) – I havn’t looked at the charts but cardiologists and cardiothoracic surgeons seem to be pretty bullish on their percutaneous heart valve replacement procedures which would replace costly cardiothoracic surgery that usually involves cardio-pulmonary bypass.  This would be similiar to ISRG – expensive, but less expensive to surgery when you consider the decreased hospital stay.  They wil also have to deal with device tax for the "health care reform act"

  48. Phil,
    Positions I need advice on:  (I have plenty of margin do pretty much anything that would be best)
    BAC Long Jan 10c/short Apr 17c
    XLF Long Jan 13c/short Apr 16c
    BIDU short May 630c
    CMG short Apr 115c
    USO short Apr 40c
    TNA short Apr 55c

  49. The SEC votes to propose a trader tracking system that would assign unique codes to participants who trade 2M shares or $20M a day (or 20M shares or $200M in a month), and require them to report next-day transaction data, to give a better window into high-frequency trading. The agency is also looking at capping option fees at $0.30 a contractThat would be nice of them!

    Greece did well in its debt sale, but that doesn’t mean a default is out of the question. More likely, the country will need serial bailouts by eurozone members over the coming years.

    Also from Barry: The National Federation of Independent Business (NFIB) released its monthly Small Business Economic Trends (SBET) survey, and the outlook for small businesses is still not good.  The NFIB counts its membership at about 350,000 small businesses.  The overall Optimism Index declined in the month of March to 86.8, roughly the same level it was at the very tail end of 2008 (87.8 in November ‘08, when the world was on the brink of collapse):

    NFIB’s economist, William Dunkelberg, commented as follows:

    While news about the economy has been positive for two or three quarters, small business owners remain quite pessimistic about the future for the economy. The Optimism Index has been below 90 for 18 consecutive months and below 90 in all but four months since the recession started in January of 2008. [...]

    Since small firms produce half the private sector GDP, it is hard to envision a sustained recovery without their participation. Once the gains from inventory rebuilding are exhausted, it is hard to see what will fuel growth. Small firm capital spending is at 35 year low levels and plans for future expenditures are equally low. Plus, hiring plans remain “negative” as more firms still plan reductions than increases in their employment).

    Unfortunately for small businesses, their larger counterparts enjoy (at least) three distinct benefits that they don’t:

    1. International sales
    2. Stronger balance sheets
    3. Easier access to credit

    Small businesses overwhelmingly continue to cite “Poor Sales” as their number one problem:

    I agree with Dunkelberg:  Barring a turnaround for the nation’s small businesses, it’s hard to see how this “recovery” will have much sustainability or make a dent in the ~8.4 million jobs we’ve lost since the recession began.  The problem, I believe, is how to stoke final demand (hence the “Poor Sales” problem), without which not much progress can be made.

  50. SS,  Didn’t hear you call "Screen Play" this morning.  Of course, the QB didn’t fade back much.

  51. JO – 2 fer 1 on EW as of May 14.  That will be nice.  Not sure how to play until after the split as it makes options a pain to manage.  Will look into the pipe beyond that.  Thx.

  52. phil, I’ve sold SDS Apr $30 puts @$0.42. How should I roll? thanks

  53. Phil: how do I get back issues of your report?  I want to send the iPhad picture to a friend, but don’t know how to get that…

  54. Hi Phil Sorry I was in a hurry while running a clinic.  Once I decided to roll up the short call, you mention sell put with it which strike on AAPL putter, not much premium in may right now for 210 and 220 putter.  Also did I mention My BP is in negative right now so roll 0.25x may be a problem this week.  My account in the process for PM approval, they take so long for papper work with Penson, they mention another 2-3 buz day, hopefully ok to wait till next week to roll.  what do yo think

  55. Oil back at $86 – things must be great!  Gold $1,159 and copper $3.61.  The dollar is diving against the Yen (92.9) and overall with the Pound back to $1.55 and the Euro at $1.367.  On the bright side, nat gas is up to $4.24 and that’s good for our UNG finally. 


    BAC Long Jan 10c/short Apr 17c – Keep the protection, pay .70 to roll caller up $1 to May $18s.  If you spend .70 to make $1 for the next 12 months – is that a bad thing?
    XLF Long Jan 13c/short Apr 16c – Those I’d roll straight across to May $16 puts for +.15.   Keep in mind that 12x .15 is $1.80, which is a 33% ROI on your Jan $13s while you wait.
    BIDU short May 630c – I’d wait for reality to kick in. 
    CMG short Apr 115c – There is, unfortunately, a shortage of reality.  Wait for YUM earnings tonight and ask me tomorrow.
    USO short Apr 40c – I’d take the free roll to the May $41s.
    TNA short Apr 55c – Ouch!  I’d sell the May $60 puts for $3 and roll the caller to the May $62s about even on the set.  Until Friday though, I’d wait on that one as we still may get a pullback (but not looking good).

    SDS/Jossie – I’d just roll along to the May $29 puts (now .98).  If you can pick up $2 per month for free you’ll be in the $6 puts by next March!

    Back issues/Sean – Just click on the tab that says "Phil" on top of this page and you’ll see all the posts I’ve written in reverse date order. 

    "A storm is brewing" in the downtown Manhattan office market, CB Richard Ellis Group says, with 13.5% availability that it says is heading higher. Rents are down 10% from a year earlier and the broker expects 1.5M square feet of space to come on the market in the next 21 months.  I guess that explains VNO and BXP at $80.  8-)

  56. Phil, what do you think about pairing the BGZ 4900% play with a similar BGU play… maybe Oct 50.72/54.72s and sell Oct 36.72 puts. This puts you in for 0.8 with a 500% return if BGU just holds 54. If BGU holds 54, then it’s possible BGZ hasn’t risen to 17, but we still make 5x. If BGZ rises to 17, we make 4900% and lose our 0.8, but it shouldn’t matter too much. If BGU crashes and we get assigned at 36.72, that’s probably not a bad thing, or we can roll.
    Thoughts on this? Seems like a win-win scenario. But the last time we tried this w/ FAS/FAZ paired trade, we lost on both big time.

  57.  We must be near a top. Cramer just called for dow 12000.

  58. BIDU — is the run up possible from short squeeze during expiration week, — or what other news that I missed

  59. Phil, when you have a sec, could you give a quick overview on how you think about the short BIDU $630 calls? I.e. how much of an "ugly paper loss" you’ll allow while waiting for reality to kick in before you have to roll up/out, or how close to expiration you’ll let them get while in the hole, etc.? I just want to make sure I’m thinking about it correctly given the extreme volatility. Thanks very much.

  60. Phil :  I did the C  January spread of BUY the 4 caller and sell the 5 caller, that you recommended about a month or so ago  It is up pretty good in the last  few weeks.  Continue to hold or take profit?

  61. Phil, I originally sold naked POT 115 calls, which I adjusted to May 105 putters when POT kept rising….now POT’s back to 108…time to roll again to Sep 90s for even? Looks like fertilizer has been downgraded…causing the sector to drop.

  62. OK all, C U on the other side of today!  Over and out….

  63. Phil,  are you still keeping the June 70 RIMM puts?

  64. Phil, can you recommend a good natural gas play?  An ETF that follows the commodity itself?

  65. Phil- Two questions: (1) How are you feeling the financials like GS, BAC, C? (2) Howa re you feeling the market re a correction? Txs

  66.  RBS ups BIDU target to, get this, $730! 

  67. For all you chartists, thoughts on C? it’s parabolic

  68. Phil,
    Also on disaster hedges, I’m still in the Jun 108s w/o cover, down about 60%. What is the play and strategy there?

  69. ssdirk….sorry to get back with you so late.  I’m onto GOOG this morning with May 600′s at 16.   They haven’t moved much so still time to pile on.   I”m stuck at work away from computer until after 3. 

  70. Iflan – thanks.

  71. AAPL/Gucci – You can certainly wait until next week to sell the puts or the new callers – just be careful with PM beacause if you get your back to the wall with PM, they can force you to liquidate with big losses. 

    Research in Motion (RIMM) agrees to buy back 2M shares, mostly completing a $1.2B repurchase program it announced in November. Shares +0.4% to $72.88.

    Retail Sales:  Once again, we’re up $24Bn (out of $337Bn) from last March with easter coming a week earlier this year. 

    • Auto Parts:  Up $8Bn (13%)
    • Auto Dealers: Up $8Bn (15%)
    • Food:  Up $2Bn (5%)
    • Gas: Up $7Bn (25%)

    There’s your $24Bn so WOO-HOO Retail, I guess….

    BG(pair)/Ajay – It’s a valid strategy if both ends are currently in the money.  You’re pretty much just betting against a black swan in either direction.  On FAS/FAZ the only people who lost were the ones that quit.  Ultimately, they worked out and, for those who followed the strategy of selling lower puts against them, they worked out very, very well.  Make sure you take trades like this at a level you will be able to ride out for a long period of time.  That’s why I was pointing out that you only need to commit 2% of your portfolio to make 11%.  It’s very easy to roll the losing side for 3 or 4 months when you start out with 1 or 2% but very hard when you start out with 5-10% because you were greedy.  Better to make 11% 8 out of 12 months than try to make 50% once and then blowing it and being tied up all year trying to work it out…

    Cramer/JC – Yes, that did make me happy, must be time to short. 

    BIDU/Gucci – I know nothing

    BIDU/Fein – This goes back to the general principle of never selling a short call in a stock you aren’t willing to hold short at the net strike long-term.  The $630 calls are now $11.50 and they can be rolled up to the May $690 calls, which are $12.20 so I would have NO reason at all to do anything but wait for expiration day, when I have to roll but why would I give them even a penny of premium when all I’m going to do is push them $60 higher for free.   Will BIDU outpace me and gain 10% per month for the rest of the year?  Maybe but if you really believe that will happen then you should get out now.  If you think BIDU will stop before $1,000, then just keep rollin’, rollin’, rolling….

    C/Wilsons – That spread is at .55 out of $1 so .45 left to earn and it looks on track.  You just need to be patient with verticals like that.  If we fail our levels, then you want to get out but if we’re over 1,200 – just enjoy the ride.

    POT/AJ – I’d wait until you are forced.  You would be buying into the excitement if you pay that premium today.  That’s the problem with flipping your stance – you don’t have the conviction to stick with the play since you started out bearish on POT in the first place.  Just because GS doesn’t like them anymore, doesn’t mean they’ll fail $100.  As long as the force of S&P 1,200 is with us, we can use it to guide our bullish plays.

    Later Pharm!

    RIMM/Jrom – I only have short puts on RIMM, not long and yes, I like them to hold $70. 

    Nat gas/East – UNG is still very cheap and hurricane season usually hits the sector by October so I like selling the Oct $8 puts for $1.23 for a net $6.77 entry and you can add the $8/10 bull call spread at .50 for a nice 150% return to the upside there and your net put-to price on the set is $7.27, which is still .25 less than it’s at now

    Financials/SNS – I think after JPM it’s looking like the financials will report huge earnings again and no one is interested in looking under the hood so I sure won’t be making new bets against them.  Clearly the Fed is just going to keep giving the banks money until they are solvent and the ones who know how to play the game, like JPM, will make a fortune as they get to dip their hands into the fund flow and pull out a Billion pretty much any time they want to.  As to C – I’ve said for a year that they are good for $5+ by Jan at least.  Looks like I will get my mark 8 months early.

    Disaster/Ac – Well you are supposed to lose when the market goes up.  The trick is do you have the longs to offset it.  Clearly you can go with yesterday’s DIA bull spread to offset them as you’ll make money if that play fails and hopefully you’ve made some money with covers.  At this point, if you want to stick with it, you should be rolling up to the $112 puts at $3.45 (+1.60) and selling 1/2 the May $110 puts ($1.66) to offset 1/2 the cost.  If the Dow goes higher, you need to sell another $1.60 worth of short puts and bite the bullet and roll to the Sept $110 puts (now $4.85) so that’s the 3-month plan.

    Three lunchtime reads:
    1) Why the rally will end in two weeks
    2) Market should prepare for autumn rate “exit”
    3) What could derail recovery?

    A bankruptcy judge agrees with the examiner for Lehman Brothers (LEHMQ.PK) to unseal censored details of a $2B auction of Lehman collateral, over the objections of auctionholder CME Group (CME). Examiner Anton Valukas says the auction caused $1.2B in losses and that Lehman may have grounds to sue Goldman Sachs (GS) and Barclays (BCS).

  72. Hi Phil, what do you think of shoting fcx today with the oil report coming out at 2pm?

  73. Damn, I have to go for shorting oil futures at $86 – it worked too well yesterday to pass up.  Tight stops!

  74. FCX/Iprosp – I take it you mean the BBook?  I am not too keen on shorting anything with S&P 1,200 – that is a big and significant number and, if it holds, there will be a lot of funds having meetings who will decide they can’t risk mising nother leg up. 

    USO $42 puts at .48 are a fun way to play oil down.  They were $1.40 yesterday.

  75. Phil, I have a few more trades I need your opinions on how to roll:
    bought SDS Apr $31/33 @0.72
    sold ERY Apr $11 @1.00
    sold FXP Apr $9 @ 1.50
    sold SRS Apr $7 puts @0.4
    bought UYG Jan 11 $4 call @2.30 sold $6 calls @0.40

  76. Phil- with all this bullishness…what are your thoughts on employment reports tomorrow and other statistics

  77.  Here’s how cynical I’ve become…thinking this run up is so that people pay their taxes on time and not run from the tax man- the guv can’t take another hit like last years low collections with all this debt piled on. 

  78. Jo/EW
    I have been in this one for a long time… Sold some November 95 puts today for $5.70. My plays in the past have all been short puts.

  79. Entered a bull call spread today on AAPL Jan ’11 260/300. Cost 24,000 to make 80,000, if AAPL reaches my estimate.

  80. Following Phil’s suggestion of yesterday…. Sold GOOG 500 ’11 puts for a nice income play

  81. I think gold weakens if stock markets keep this up.

  82. Phil, is this run up in AMZN based on anything solid or is it just a symptom of the way the market is heading?  I think is way overpriced but some say its worth way more than where it is now.

  83. gel – with you on EW but I did a buy /write on 1,000 shares selling the May 105 cs and Ps.

  84. Sold 1/2 the April IWN 71 C’s that I bought this morning for $1.04 ; a $0.56 gain or 115%

  85. Hi Phil: Bought 30 BAC Jan. 2011 $10 at $8.40 ,now $ 9.50 and sold 30 August $16 C for $1.26 ,now $3.75. ( I previously closed the 30 short put position for a $2.12  profit when you were advocating "cash is good" ). BAC now at $19.25 . Suggestions? 

  86. DKGuy/EW
    Your play is far better than mine as a long term hold. I got into this stock (selling puts) on a recommendation from an analyst I know very well. He is still positive on it, and is also positive on ISRG (still), but I am waiting to re-enter this one.

  87. Re-entering EWZ today…. selling June puts.

  88. Ccj – Phil what do you think of an upside play with ccj?

  89. My MOS short puts are really "stinkin" today… rolled them down and out to September to get some fresh air.

  90. gel/ISRG
    I too have been waiting to sell puts on it as well. Have done it a few times over the last 6 months but it has had some big moves as of late and the premiums are a little lacking for my taste right now.

  91. OK, at the airport, not too busy here, although I will say Southwest yesterday was full on both flights.  We shall see what Denver is like.
    CLDX we picked up right before Xmas has done a double almost.  I still like them long term and they have file for a shelf registration.  Selling the May 7.5s is OK, but if they fall, the next support is 6.  CLDX has a vaccine to the same target as Ebtirux.  Data is being collected now, and final analysis is in November.  I expect them to move back up to the 9 area before data, and volatility will get larger as November gets closer.

  92. Quite a spike in the VIX.

  93.  Phil – I’m w/ ya on the USO 42 puts… good call I see it going down now.  Where would you sell?

  94. VIX – and back down

  95. Gel – I’ve played ISRG before and feel like this truly will be a long term winner with a great franchise.  Having said that, it’s diffucult to buy a stock at 300$ which was recently (1 year ago) about 90$. 
    Need to study the price action on EW – but they may have a game changing product.  A friend of mine does testing for their noninvasive equipment and is very optimistic about this company.  FWIW

  96. Beige Book:

    • Producers unable to pass on higher input costs is key to me.  That’s what we’ll be watching in earnings. 
    • Mixed service sector activity. 
    • Consumer shows signs of life.
    • Activity increased in 11 of 12 districts.
    • Retail sales (vehicle) looking up. 
    • Lending and credit quality are declining.

    I’ll have a full review shortly but V certainly seems to like it – they are making new highs now.

    We were making progress on oil but this reversed it and now back to $86.11 and not worth a reload as the NYMEX closes in 30 mins

  97. 566% Plays
    I didn’t get a fill at 0.30 on either play – Phil, bid/ask now about .60/.70

  98.  will you be holding the uso 42 puts, or are you out now?

  99.  will you be holding the uso 42 puts, or are you out now?

  100. Phil – TZA – I am short APR 12.50 put (cost 3.80, now 6.55) do you have longer term play or plan  to get back to even – I am in no hurry. thx

  101. Jo… I am not a physician, (just the physician’s anti-christ – former attorney and still embarassed to reveal this), but my investment appeal is the emphasis on cost cutting surgical procedures. Recovery time in the hospital is very expensive for insurers, therefore the technologies that evolve to mitigate the costs will be in vogue. IMO. ISRG and EW seen to be on the right track, with all the dynamic change coming with Obamacare. Boy !!!! did I ever make some serious dough last year on ISRG. Got to thank Phil for that guidance.

  102. DKGuyEW
    I followed your play and bought 1000 of the stock, and sold the May 105 calls, which turns my short plays into a nice strangle. I’ll keep track with my analyst buddy on this one, as he really is on top of what transpires day to day.

  103. List/Jossie:

    • SDS – Waited way too long.  Take action at -20% or at least -50%.  – 95% is just a loss.  You can reload With June $27/29 bull call at $1.05 and sell the May $29 puts for $1.05 to pay for it so, if you get past May without a drop, you have a nice chance at a clean $2 in June but make sure you have some offsetting bullish plays too!
    • ERY – Best top pay the .50 and roll them down to the May $10 puts, which puts you in at net .50 credit and $8.50 b/e
    • FXP – Another dead play.  I’d sell the June $7 puts for .60 and go for 2x the $7/9 bull call spread at .45 and if you are lucky you’ll get your $1.50 back on a China dip but maybe hold off on that play until after China announces their 11% GDP tomorrow.
    • SRS – That’s the widow-maker but at least you sold puts there so we have something to work with.  You are down $1.20 so the focus is on getting even and that means selling 1.3x the July $6 puts for .96, which only takes on a little more margin and drops the putter $1 over 3 months so figure 1.3x July 6 puts then 1.7x Sept $5 puts and 2.1x Jan $4 puts if things keep going South.  If you don’t mind owning 2.1x SRS for about $4 (and you can offset that with a high payout positive spread) then that’s the way to go – you only have to be lucky once. 
    • UYG – If you want to risk it you can add 1x the Jan $7s and roll the caller to 2x the June $7s so you spend $1.45 NOT to pay the caller $1.70 and, if you want to get fancy, you can also sell some $7 puts for .23 as you have little to lose on the downside but I’d wait for bank earnings to get more aggressive.

    Employment/SNS – We’ll lose another 450,000 jobs and no one will care.  Industrial production is expected to be up another 0.5% so that’s a possible disappointment and the Philly Fed often sucks.  We already had bad hosing data today that was blown off so Building Permits and Starts on Friday don’t mean much and Michigan Sentiment shouldn’t matter as the AWFUL Consumer Confidence numbers last night didn’t matter.  As I said this morning – your brain is your enemy in this market – stop looking for facts, they will only confuse you…  8-)

    Taxes/Phil – That’s not a bad theory!

    Yay, got that 2nd break in oil!

    AMZN/Jtiff – I think $140 is a fair top for them but they are a very dangerous short.

    BAC/Dflam – No need to mess around, just spend $1.70 to roll the Aug $16s to Nov $19s and sell the Nov $18 puts for $1.30 to pay for it and you’ve moved it $3 for net .40.  After that, you can always double up the longs by rolling to the $15s and then rolling the callers to 2x whatever in a vertical.  Also, if BAC does start to fall, keep in mind that rolling up to the $17.50s at $3.30 is a good way to take most off the table without having to pull the callers. 

    CCJ/BGB – They have been strangley slow movers and I do like them long term.  Please remind me as a comment on the last buy list and I’ll add them this weekend. 

    MON getting near my $65 target.

    USO/Srfrog – Those were an alternative to playing the futures but no big win and overnight is too risky.  You can always get back in tomorrow.  The nice thing about the futures is that .10 is a very nice win there, not so much with the USO puts.

    566%/Edro – .60 isn’t bad when it’s already gone so far our way (less risky) but perhaps keep a very small entry initially and try to work into the legs as they get cheaper.

    TZA/Concreata – How about flipping to the TNA July $68/62 puts spread at $3.  Those will get you back $3 and you can also sell May $50 puts for $1 against the spread as those can be rolled and if you can add $1 in May and June, you knock your basis down to $1 on the $6 spread. 

    ISRG/Gel – I agree, they are the future along with the other devices.  Just wait until remote surgery kicks into gear – then we can get some real efficiency. 

  104. With the AG downgrade today, and a positive outlook for this sector down the road, I sold some naked puts today on POT. My MOS play now has some company.

  105. Phil…. Your SRS play might very well be a "widow maker"…. I just hope my IYR is not a "ball breaker". They are inverse to each other, so I guess on this one, we both can’t win…. but is sure a lot of fun !!!!

  106. Hi gel1 What POT did you sell?

  107. Phil any reason I can not enter the account status above?

  108. Ya know that BSC LEH FNM FRE AIG Housing Market Implosion, 8 million lost job thingy ?
    Well, it didn’t happen and it doesn’t mean a damn thing !

  109. Yodi… You are not with the Fed’s. are you????. The POT  puts I sold were the June 110′s for $7.05

  110.  What day did the 1930 rally top out on the DJIA? April 16.

  111. Sold another 100 of the IWM April $71 C’s at $1.09 for $0.61 or 125%

  112.  Gel got me thinking about selling puts in the Ag space but when I look at those charts I get nervous, how about selling something like the BG JUL 60s rather than the MON/MOS/POT camp.  Thoughts anyone?

  113. gel1 Thanks, a bit risky  110 dont you think so? no I am with the German underground ha ha you find my photo in the post office!

  114. phil: after run up today, do u still think DIA 566 % May spread a good  idea?

  115. What is the current DIA mattress play?  Long June 111s and short May 110s?

  116. Here’s my own thinking on investing right now, FWIW. With only 20% of my cash in the market (a bit less today, actually), I’m still getting a very nice monthly return with just some bull call verticals, bullish short condors, diagonals, and similar spreads. Selling naked puts at these depressed prices is generally not worth it, IMO (unless part of short strangles/straddles).
    If (worst case) we open limit down on the futures one morning, my positions will of course take a big hit, but the sizes are small enough that it won’t be a disaster and I expect I’d recover pretty quickly. Also the VIX flying higher and my few remaining puts will help me in such a case. Maybe I’m too skeptical, but there is too much strangeness to do otherwise. So low-risk non-greedy bull trades is my preference. Since we go up every day that’s making plenty to keep me happy.

  117. Beige Book:

    Overall economic activity increased somewhat since the last report across all Federal Reserve Districts except St. Louis, which reported "softened" economic conditions. Districts generally reported increases in retail sales and vehicle sales. Tourism spending was up in a number of Districts. Reports on the services sector were generally mixed. Manufacturing activity increased in all Districts except St. Louis, and new orders were up. Many Districts reported increased activity in housing markets from low levels. Commercial real estate market activity remained very weak in most Districts. Activity in the banking and finance sector was mixed in a number of Districts, as loan volumes and credit quality decreased. Agricultural conditions were mixed as well, with positive conditions reported in Districts from the central and western parts of the country, while negative conditions were reported in the mid and southern Atlantic Districts. Mining and energy production and exploration increased for metals, oil and wind.

    While labor markets generally remained weak, some hiring activity was evident, particularly for temporary staff. Wage pressures were characterized as minimal or contained. Retail prices generally remained level, but some input prices increased.

    It’s a mixed up mess but better than last time!  I hate this "most" or "some" stuff.  There are only 12 districts – is it that hard to count them???  That’s why I don’t trust those statements.  They know how to say "all except St. Louis" so why can’t they say "hosing activity increased in 5 of 12 districts" instead of "many"?  I’m counting low wage pressures as a positive because it is for business and clearly it doesn’t matter if the employees starve to death as long as the top 8% (we lost 2% to middle class hell) can step over the bodies on the way to the Apple store

    Consumer Spending and Tourism
    District reports indicated that consumer spending increased during the reporting period. New York and Cleveland reported that recent sales strengthened, while sales rebounded in Richmond and Kansas City. Slight sales gains were reported in Philadelphia. Retail sales in San Francisco continued to improve, but remained somewhat sluggish on net. In St. Louis several new establishments opened, particularly in the food industry. Several Districts described consumers as somewhat more confident. Businesses were cautiously optimistic regarding future sales: Cleveland, Atlanta, Kansas City and Dallas noted that retailers expect sales to improve during the upcoming months. Sales of home furnishings and electronic goods increased in a number of Districts, while seasonal apparel sales were up in New York, Philadelphia and Kansas City. New York and Minneapolis noted that shopping by Canadians was strong at businesses near the border. Atlanta reported that retailers continued to keep inventory levels lower than normal, and retailers in New York reported that inventories are in very good shape.

    Vehicle sales improved in a number of Districts during March. New York, Philadelphia, Atlanta, Chicago, St. Louis, Minneapolis, Dallas and San Francisco noted that auto sales picked up in recent weeks. Cleveland described sales as decent, while sales were steady in Kansas City and mixed in Richmond. Several Districts noted that favorable pricing and credit terms helped lure buyers into showrooms. Dealers in Philadelphia indicated that they expect sales to increase during the next few months.

    Tourism conditions also improved during the reporting period. New York, Richmond, Chicago, Minneapolis, Kansas City, Dallas and San Francisco pointed to signs of increased tourism activity. Tourism was described as stable in most parts of the Atlanta District. Hotel occupancy rates were rising in New York, Chicago, Kansas City, and San Francisco. Reports on room rates were mixed: New York and Kansas City noted increases, while Chicago reported rate cuts, particularly at luxury hotels. Managers at mountain resorts in the Richmond District reported that this winter was one of their best ski seasons ever. However, Atlanta noted that corporate bookings remained at very low levels at some high-end resorts.

    Generally good stuff.  Seems like a lot of foreign buying is offsetting weak US consumers.  Come to think of it, in Disney there were a hell of a lot of foreigners…  This is actually better than the previous book by a wide margin so far

    Nonfinancial Services
    Business services were mixed, with some signs of economic recovery. Boston and Minneapolis reported increased activity. Richmond and Dallas were mixed, while San Francisco said demand remained lackluster. St. Louis reported that the sector continued to decline. Advertising and consulting firms in Boston said demand is up substantially from the first quarter of 2009, while an advertising contact in Richmond and professional media services firms in San Francisco characterized sales as flat at low levels. Dallas reported sluggish demand for nontax-related accounting and legal services. Law firms in Minneapolis specializing in debt collections and bankruptcy saw strong demand, while a Richmond property manager noted a large number of repossessions.

    Manufacturing activity increased since the last report across most of the country, with all Districts other than St. Louis reporting increases in orders, shipments, or production. Boston, Cleveland, Chicago, Dallas and San Francisco reported positive results in metals and fabrication. Cleveland, Richmond, Atlanta and Chicago reported increased auto or auto component production. Boston, Richmond, Dallas, and San Francisco saw increased production in electronic, computers or high-technology goods. Chicago and Minneapolis saw increased production of energy-related products. However, for construction-related goods, Chicago and Dallas reported mixed conditions, Boston reported flat activity and St. Louis reported decreases. Overall, St. Louis saw more plant closures than plant openings.

    Wow, does anyone live in St. Louis?  Sounds worse than Detroit.  Must be something to do with having a French city name (New Oreleans too!).

    Banking and Finance
    Bank lending activity was mixed by category in most Districts. Atlanta, St. Louis and Kansas City saw weaker loan demand across categories, while activity in San Francisco was flat at low levels and Dallas said that demand appears to be stabilizing. Demand for consumer credit decreased in New York and increased slightly in Philadelphia. Most banks in Cleveland reported weak consumer loan demand, although a few contacts saw a slight increase due to seasonal factors. Business and industrial loan volumes decreased in Philadelphia, Cleveland and Chicago and were flat in New York. San Francisco noted continued modest gains in venture capital funding.

    Credit standards remained generally unchanged across the nation, while credit quality was mixed. New York, Cleveland and Kansas City reported tighter lending standards for commercial mortgages. In Atlanta several business contacts reported difficulty getting credit. Dallas and San Francisco said standards continued to be tight. New York saw increased delinquency rates for all categories except consumer loans, which were flat. Philadelphia and Richmond saw little change in credit quality, while Cleveland was mixed. Dallas reported that credit quality was either stabilizing or improving, and appeared to have turned a corner. Chicago noted an improvement in consumer and business loan quality, although credit quality for many small firms continued to decline.

    Believe it or not, this is still better than last time when there was no green at all.  NYC was the last to fall so maybe they are lagging the turnaround now or maybe it’s all just a last gasp before the next downturn but let’s assume that everyone buying into the market isn’t insane and there are actually signs of life in the market.  Now the question is – what level of life? 

    Real Estate and Construction
    Residential real estate activity increased, albeit from low levels, in most Districts, with the exceptions of St. Louis, where it was mixed, and San Francisco, where it was flat. Contacts in Philadelphia, Cleveland and Kansas City expressed concern about whether sales would continue to grow after the expiration of the first-time home buyer tax credit. New York, Kansas City, Dallas and San Francisco noted sluggish sales for high-end homes. Home prices were stable across most Districts, but decreased in parts of the New York and Atlanta Districts. Residential construction activity increased slightly in New York, Atlanta, St. Louis, Minneapolis and Dallas, but remained weak in Cleveland, Chicago and San Francisco.

    Commercial real estate activity was slow across the nation. Notable exceptions were Richmond, which saw an uptick in commercial leasing, and Dallas, where the sector was mixed and might be nearing bottom. In Boston, leasing activity consists largely of renewals, with many renewing tenants leasing less space. Manhattan Class A office rents were down 20 percent to 25 percent year over year. Contacts in Philadelphia, Richmond, Kansas City and Dallas expressed concern that lease concessions from landlords were putting downward pressure on rents. Commercial construction continued to be weak in most Districts. Cleveland saw some development in the energy and industrial segments.

    CRE is still our weakest segment but, as I said above, maybe NYC is just a laggard and the rest are actually bottoming.

    Agriculture and Natural Resources
    Districts reported mixed results in agriculture. Atlanta reported that cold weather negatively affected crop conditions. Richmond, Kansas City, and Dallas noted that wet conditions delayed planting, though Dallas also commented that current soil moisture levels will be beneficial for the growing season. Chicago expected a normal planting schedule. Minneapolis and San Francisco indicated favorable weather conditions. The calving season is doing well in the Minneapolis District, but Chicago and Minneapolis noted softening dairy output prices.

    Activity in the energy and mining sectors increased since the last report. Philadelphia, Atlanta, Minneapolis, Kansas City, Dallas and San Francisco saw increases in oil exploration. Coal production was mixed in the Philadelphia District and increased in the Kansas City District. In the Minneapolis District, more wind energy projects are planned, and mining activity increased.

    Employment, Wages, and Prices
    While overall labor markets remained weak, some hiring activity was evident, particularly for temporary staff. Employment in the manufacturing and services sectors in Boston remained relatively unchanged, while very little hiring occurred at major legal and financial firms in New York. In the Richmond District, job cuts subsided at retail businesses, and employment was stable at most other services firms. In Kansas City overall employment levels held steady, but more manufacturers and several energy-related firms planned to increase payrolls. Cleveland, Richmond, Atlanta, and Chicago reported strong demand for temporary workers. A pickup in employment was noted in the manufacturing sector by Cleveland, with little change in staffing for retail, energy, transportation and banking. Atlanta noted that many businesses continued to increase hours worked for existing staff. Minneapolis reported that while labor markets remained weak, some signs of hiring were noted.

    Wage pressures were characterized as minimal or contained. In Boston, most firms reported instituting or planning to institute modest wage increases of 2 percent to 3 percent in 2010, while performance bonuses in the services sector were generally down. Richmond reported that average wages edged higher in March in the services sector, but declined slightly in manufacturing. Most companies hiring new workers in the Kansas City District were not offering higher salaries to attract qualified applicants. Dallas reported that just a handful of firms were planning on partially reinstating employer matches to retirement plans or giving small pay increases. In Chicago wage pressures were minimal; however, an increase in health-care costs was noted. San Francisco also reported significant increases in the costs of employee benefits, such as health insurance and pensions.

    Retail prices generally remained level, but some input prices increased. Where producers faced cost pressures on inputs, they were largely unable to pass those prices downstream to selling prices, although in Kansas City some manufacturers were considering raising selling prices due to higher raw materials costs. In Boston retail vendor and selling prices were stable. Philadelphia reported that prices of most goods and services have been steady, although there were increased reports of rising prices for basic materials and construction-related products. Apart from rising prices for steel and petroleum-based products in Cleveland, raw materials and product pricing were generally stable. Richmond noted moderate price increases in the manufacturing and services sectors. Chicago reported upward pressure on prices for plywood, industrial metals and petroleum-based fuels. In the Dallas District prices of chemicals and related products rose sharply, primarily due to plant outages. Natural gas prices slipped during the reporting period because of continued high levels of production, low industrial demand and the end of the winter season. Richmond and San Francisco reported increased overseas shipping costs.

    This is, on the whole, the most positive report we’ve had in quite some time and, if we weren’t already 80% up from the bottom, I’d be very excited to buy but there is nothing in here that’s a rally killer and the last few awful reports didn’t hurt the rally anyway so why worry at all?  Up we go!

  118. Sold the last 100 IWM April $71 C’s at $1.25 for $0.77 or 166%

  119. Phil -
    I am AC’s boat with the long BAC Jan 2012 calls stike 10 and short the April 17 -
    I know the roll got away from me – but the premium was so bad on selling the calls that it never seemed like a good time to roll  that and the $1 distance between strikes with stock in teens - I just could never get enough money to cover the roll. Kind of sucks bc it was a good position.
    Anything to do different next time or are you just kind of stuck – besides selling the puts – thanks

  120. EricL / Market Strategy
    Ditto !!

  121. there is nothing in here that’s a rally killer
    Yeah, but we shouldn’t forget that the Nasdaq bull ended when earnings were good but not good enough to justify prices. When we roll over it probably won’t be on bad news (bad news only gets bought).

  122. Phil – Am I correct – to buy July 68 p, and to sell July 62 p?  The fill seems closer to 3.50DR than 3.00DR?I
    TZA/Concreata – How about flipping to the TNA July $68/62 puts spread at $3.  Those will get you back $3 and you can also sell May $50 puts for $1 against the spread as those can be rolled and if you can add $1 in May and June, you knock your basis down to $1 on the $6 spread.

  123. Ags/Gel – I like Mon the best in the group.  They should be solid around $65.  Selling Jan $65 puts for $6.10 is a nice entry on them as they didn’t go lower than $62 during either leg of the crash.   $3.60 of that money can be used for a Jan $65/75 bull call spread and that makes the net entry $62.60 on this $1.06 dividend payer (1.7%)

    IYR/Gel – I’m thinking of giving up already.  The markets are giddy with excitement.  I’m giving it another day or two but not happy right now. 

    Account status/Yodi – I got in but it was very slow in loading. 

    By Jove Cap, I think you’ve got it!

    DIA/Dflam – Well if you were in it yesterday then it’s a fantastic idea but I’m not sure I like chasing it.   Don’t worry, we have miles of upside to play if this sticks over the weekend.

    DIA/Daveo – Yes, long June $111 puts and short May $110 puts is the play at the moment but need to roll to Sept soon. 

    Good strategy Eric – Like I said earlier, you can play just 2% of your portfolio to make 11% so why risk a lot in a crazy market.  Unfortunately though, on days like today, the temptation is incredible! 

  124. Yesterday I invested $130,000 in TNA and made $2K; today I invested $20k in IWM C’s  and made $24K, I love this market !! ( But not enough not to be in cash over night !!

  125. Phil
    I sold April 36 EDZ puts, should I wait it out or roll?

  126. Phil,
    Seems like except for AA, they load the first week of earnings with the cheerleaders ( financials, including GE ) maybe next week or later we may be disappointed, but don’t you think we finish the week UP ?

  127. BAC/Samz – I don’t see it as a bad thing.  It’s not a loss, just not the win you expected. The Apr $17s can be rolled to the Aug $19s for .70 and, if you are more bullish, you can sell some Aug $17 puts for .70 to pay for it and, PRESTO, a free $2!  The Jan $10s are deep in the money and you can take $5 off the table by rolling to the 2012 $17.50s which gives you a whole extra 12 months to roll and $5 cash to adjust with or move on to a new play.

    Endings/Eric – Yes, we need to watch earnings very closely and get an idea of what investor tolerance is for less than great numbers.

    TNA/Concreats – I’m seeing the $68 puts at $10/10.30 and the $62 puts at $7/7.60 so not at all unreasonable to expect a net $3.  Broker systems will always quote you the Ask for what you buy and the Bid for what you sell – it’s your job to demand better pricing.  You’d be surprised at what prices get filled if you ask but I generally quote what I think should be gettable. 

    Loving it!/JRW – Yep, it sure is fun, isn’t it?  SOX up 4.3% today, helping the RUT pick up 2% - amazing stuff.

    EDZ/Jtiff – You sold them and they are down to .20 and $1.86 out of the money, I wouldn’t give them the .20 with 2 days left.  It would be very surprising if we fully reverse today’s gain (famous last words).

    Wheee, what a day! 

  128. Death to the rally monkey:
    My strangle callers are getting killed and my BP along with it.
    Enough already.

  129. Up JRW – Is there any other direction?   If we do reverse now, then I will be certain that this market is the biggest scam since Ponzi invented the thing 100 years ago.  We are past anything that can be fundamentally justified and maybe this is the blow-off top or maybe it is just like 1999 when the Nas went from 2K to 5K and the big push came in October when we were just over 2,500 and then it was 3,000, 3,500, 4,000 in December, 4,500 in Jan and 5,000 in March and every step of the way past 3,000 we all knew it was ridiculous but that didn’t stop the market from going 60% higher than any logical stretch of the imagination could take it.  When we first went over 3,000, we all waited for the world to explode every day but by 3,500, we were in for the next 500 and then when 4,000 popped (after Y2K didn’t happen) we were in for the next 1,000.  I think right now we’re at that 3,000 stage, it’s now getting silly but if people want to keep buying, then who are we to argue?  Just be first in line to buy the sock puppet and early in line to sell the sock puppet….

    The banks that were too big to fail are now bigger, the unemployment is greater, the debt is much greater, the budget is more out of balance, commodities are higher than in any year except the year the global economy collapsed and Cramer says there has never beeen a better time to invest so BUYBUYBUY until they start arresting people I guess…

    Market recap: Better-than-expected earnings from bellwether companies helped push market averages sharply higher. Traders welcomed strong results from JPMorgan Chase (JPM +4.0%) as a sign that the financial system is strong, Intel (INTC +3.2%) that businesses are buying equipment again, and CSX (CSX +4.1%) that strong demand exists for moving goods to market. Advancers led decliners on the NYSE by more than three to one.

    At the close: Dow +0.94% to 11123. S&P +1.11% to 1210. Nasdaq +1.58% to 2504.
    Treasurys: 30-year -0.64%. 10-yr -0.28%. 5-yr -0.12%.
    Commodities: Crude +2.27% to $85.96. Gold +0.12% to $1154.80.
    Currencies: Euro +0.28% vs. dollar. Yen -0.03%. Pound +0.56%.

    With exports rising 55% to $737M in Q1, China surpassed the U.S. as the top market for polished diamonds from Europe’s diamond capital. Tom Lydon says that sums up why we’ve only seen "just the tip of the iceberg" for commodities demand.

    While many consumers say they care about the environment, few put their money where their mouth is. "When you ask them to pay more for a green product, you’re also asking them to cut something else out of their life," Wal-Mart (WMT) Chairman Lee Scott says.

    Eurozone combined debt may top 100% of GDP in the next few years, and high public-sector borrowing could have "severe consequences" for growth and stability, ECB’s Juergen Stark warns. "These fiscal developments are all the more worrying in view of projected ageing-related spending increases."

    Maybe the euro is saved for now, but a Greek default remains likely without severe austerity. It has been done in the past, Megan McArdle says, but with one key difference: "The countries involved were able to devalue their currencies. This lowered the burden of paying debt denominated in the local currency, and it also made exports more competitive, giving a boost to employment. Greece doesn’t have this option."

    Without net income of $2.5B in its investment bank division, JPMorgan Chase’s (JPM +4.2%) results would have been woeful. So it stands to reason that Jamie Dimon doesn’t want the government to clamp down on derivatives trading. He says the biggest hit would come if over-the-counter derivatives trades were forced to go through a public exchange.

    The largest financial institutions are too big to supervise and too big to manage, Dallas Fed President Richard Fisher says. "The risk posed by coddling [too-big-to-fail] banks is simply too great… A truly effective restructuring of our regulatory system will have to neutralize… the greatest threat to our financial system’s stability," i.e. the big banks.

    George Soros warns that the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust. “Unless we learn the lessons, that markets are inherently unstable and that stability needs to the objective of public policy, we are facing a yet larger bubble.”

    Ken Fisher says pessimists fail to take into account the big spread between short- and long-term interest rates, a classic indicator of an economy on the verge of recovery, and ignore the amount of junk bonds sold in Q1.

    When talking about a recovery, don’t underestimate America’s work ethos, Daniel Gross says. "This sense that people are going to sit on their rear ends for a decade and not do anything is not only unhistorical, it’s un-American," he says. "We don’t have the safety net that let’s people not work for three, four, five years."

    Japan redux: If Richard Koo is right, the U.S. economy is in the midst of a balance sheet recession and about to embark on 10 more years of deleveraging.

    Insiders may be taking profits, as they pick up the pace of their selling and cut back on buying, Mark Hulbert says. Except for a brief period last October, the eight-week average of the ratio of insider selling-to-buying is the highest since July 2007.

    J.B. Hunt Transport (JBHT): Q1 EPS of $0.29 beats by $0.02. Revenue of $845M (+16.9%) vs. $793M. Shares +1.2% AH. (PR)

    Yum! Brands (YUM): Q1 EPS of $0.59 beats by $0.06. Revenue of $2.35B (+5.8%) vs. $2.26B. Reaffirms FY10 EPS growth outlook. Shares +2.4% AH. (PR)

    Goldman Sachs (GS) weighs in on the implications of the iPad – the bank is neutral on Apple (AAPL) stock – and how it’s treating affected companies: a conviction buy on GOOG; buy ADBE, AMZN, MSFT; bail out of RIMM.

  130. Fundamentally, I don’t think you can compare today to 1999-2000. Back then, there was a hypothetical reason for at least the beginnings of the rally – through Dec 99, for example. Today, it is absolutely impossible to find something new and exciting to bid up. We are excited that the world didn’t end? (yet) And, today, we don’t have the volume we had back then (relatively)
    I remember selling my first covered call after 20 years on the sidelines – the CSCO Oct 60s in 99. And of course, it doubled after I lost the stock. In fact, by Dec 99 almost all my stock had been called away, and still the market soared, and stupid was me. So, I started selling puts in Jan 00. My, were the premiums astonishing. Then I started strangling the QQQQ.
    The rest is history. I held almost no stock in march 2000, and by April expiration, I had a shitload. Cheap, I thought.
    When the market is stupid, no strategy is smart.

  131. Phil : on UYG , I own the stock at  $5.23 ,now $7.79 and sold Jan  $5 puts & calls at net $ .65 ,now $ 2.70. I’m not sure whether to just close it all out since I don’t want to go out to 2012. Any suggestions? Thank you

  132. JRW. EricL/Market strategy. I agree completely with you guys.  Spent the day cleaning up most of the cats and dogs in my portfolio.  Tomorrow I’ll clean up the rest, as all my remaining short strangles will all expire (assuming SPX doesn’t gain over 20 points and force me to roll to May).  After that, I’ll be 100% cash and I’m just day trading until I can get a decent premium selling puts and calls again.  I just don’t see anything worth buying at the moment.  I’ll participate in the bull run day by day by buying calls in the mornings. 

  133. Yodi…. Guten Abend…. Oh I feel better now ! Selling POT puts is different than selling POT. I really feel the 110′s are safe, as I picked up $7,000 on a stock I like long term. If I am wrong in my assessment in mid June, then I can roll for an eventual win, or get assigned and still pocket the premium. I really like the AG sector, as the population is growing, and the emerging markets are consumers of better food in larger numbers, and God is not making any more agricultural ground so the fertilizers have lots of room to grow, to meet the growing demand.

  134. Phil/SRS
    Conceding ???? .. I gave up on this one a long time ago. I agree with you, the fundamentals point to a sure thing in the opposite direction, but there is a strange pattern of movement in this stock that makes no sense. Rather than fight it, I entered IYR long, and I must admit I will still be dumbfounded if it goes in my direction  How is that for the ultimate contrarian play?

  135. ERY- Bought the May 9/10 call spread for net $.45; now $.275; Sold May 9 Put @ $.45; now $.675.
    Suggestion for adjustment. I am severely margin challenged after today’s runup.

  136. GEL, how many open postions do you have?  Those apple plays are doing well.  Thinking about taking out puts after runup into earnings.  AAPL should also get a boost after 3G Ipad release.  I think people are underestimating the 3G version.  I have a order pending as well as many colleagues.  Another friend, just bought 7 ipads to send to korea.  The international market will go apeshit.

  137. JO….. At the moment I have 154 open positions, which is about half of what I had the first week of January, after which I pared everything down to about 50 positions. I regret the move now, as the market has not seen a significant correction and I have a massive tax problem for this year. A better plan would have been to go all out on a hedging strategy. I was pissed at the time for all of the bashing the administration was throwing at the banks and Wall Street in general. Next time I get into one of these fits, I’ll be more careful. – I am real "gung-ho" on AAPL, and I am confidant they will see $300 before this year is out. They have marketing momentum that is textbook, and the envy of all their competition. I have a total of 7,000 shares, mostly in options. Holding the shares  makes sense only for capital gains treatment, however the options really allow far better flexability and thus safety. They have delayed their launch internationally on iPads, and I believe they now realize the explosive demand for the product, and do not want to get in over their heads with backorders. When they finally do the launch of the 3G, apeshit it will be for sure – I am waiting for that one myself.