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Mega Earnings Monday – 1,000 Reports This Week!

What a crazy week this is going to be!

Pre-Market we're hearing from BLK, CAT (are we building stuff?), EXP, HTZ, HUM, LO, TUES and TZOO and later we will hear from BSX, CHH, OLN, RSH, RCII, TXN (major) and my "friendbuddypal" Cramer's TSCM (if they are not delayed).  Revenues at The Street have crept back up this year in a recovery that pretty much mirrors the market.  The company does pay a nice 2.6% dividend, which works out to a nice $200,000 bonus on Jimmy's 2.1M shares (6.7% of the company) so you know that bonus will be a priority for the company.  Cramer was BUYBUYBUYing his own stock at $2.41 in January but sadly they have no options to hedge…  They might make a nice pick-up after earnings if they disappoint and head back to $3 or less.

I'm full of useful information on hundreds of stocks right now because I've been researching our new Buy List but I'm not pleased with what I've been seeing so far and this week's tidal wave of earnings, with 1,000 companies reporting means we're in no hurry to dip our toes in the water.  I told Members this morning I should probably be working on a Sell List, as it's much easier to find companies I want to short than ones I want to buy.  Even in the Weekly Wrap-Up, we featured a 1,900% downside hedge on the Russell to offset the 566% plays and other bullish plays we've begun to reluctantly take, just so we don't feel too silly in this runaway market. 

If you have never watched Jim Cramer discussing the sleazy, manipulative ways he used to game the markets – you really must take 10 minutes and watch this video, where Jim explains how any immoral bastard with $10M can yank the entire futures market around at will.  He prefaces one of his favorite strategies with "this is blatantly illegal but.. I think it's really important… these are things you MUST do on a day like today and if you are not doing it, maybe you shouldn't be in the game."  Are you playing the game or are you being played? 

The biggest game ever played may be unwinding as we speak.  Bloomberg reports that foreign-exchange profits from carry trades are disappearing as differences in central bank interest rates fail to increase fast enough to compensate for swings in currency rates, threatening to crash (oops, don't say "crash") a 20-year run in money movement that has fueled dozens of global bubbles.  Royal Bank of Scotland Plc’s index tracking the strategy of tapping cash where borrowing costs are low and investing where rates are higher, rose 0.57 percent in the first quarter, the smallest amount in a year, and down from 9.8 percent in all of 2009.

There is no easy money left in the carry trade,” said Henrik Pedersen, the London-based chief investment officer at Pareto Investment Management Ltd., which oversees $45 billion in currency assets.  “Most of the high-yielding currencies are overvalued and the low-yielders are undervalued,” he said. “The gains you can make on the interest-rate differentials are not going to make you 20 percent a year, it’s probably only going to make you about 2 or 3 percent.”  

As you can see from this chart, cheap Fed funds are FREE MONEY which is used to pump up emerging market bubbles and then (and this would be so funny if not so mind-bogglingly dangerous) the pumped-up emerging market stock is used as collateral for the banks to get MORE FREE MONEY to buy more emerging market stocks at even higher prices.  And it's not just stocks that are bubblicious to carry traders – bonds and commodities get their love too.  No more free money could set off a chain of events that skyrockets global borrowing rates and initiates a mad cash scramble between governments that need to borrow a dwindling supply of cash (that would be pretty much all of them). 

We're already seeing the effect in the energy markets as oil futures have gone into deep "contango," where longer month contracts are getting much more expensive than front-month contracts, reflecting an increased storage cost as carry traders attempt to cash in their oil tankers and have pushed global storage to their upper limits.  This makes oil storage hellishly expensive for speculators and if a rising dollar forces them to cash in at front-month prices, they force the price even lower as the full storage means the oil MUST be pushed out into the consumer market and the only way to do that is to drop prices far enough to actually influence demand – and that has not been working lately.  It is also murder on ETFs that MUST keep buying oil futures every month: 

 

Refineries are already running at just 85.9% of capacity, well below the 10-year average at 88% and total U.S. fuel demand, averaged over four weeks, fell 1.1 percent to 18.9 million barrels, the biggest decline since the week ended Jan. 8th.  All the speculators' hopes are currently pinned on the summer driving season – I think if we organize a motorist strike on Memorial day weekend we can wipe these guys out!  Would that be wrong?  Let's ask Cramer…

Cramer's old firm, Goldman Sachs, is still in hot water as the Senate held hearings this weekend with key witnesses and more documents came to light, like an Email showing that, As the U.S. housing market began its epic fall nearly three years ago, top executives at GS cheered the large financial gains the firm stood to make on bets it had placed (allegedly!).  After making nice on Thursday last week, Obama went back to being the bad cop and sharply rebuked Wall Street in his radio address Saturday. "In the absence of common-sense rules, Wall Street . . . hurt just about every sector of our economy," he said.  After a weekend of testimony, Senator Carl Levin was able to sum things up nicely:

Investment banks such as Goldman Sachs . . . were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis.  They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities and sold them to investors, magnifying and spreading risk throughout the financial system and all too often betting against the instruments they sold and profiting at the expense of their clients.

See, not too complicated, is it?  Also going badly for GS this weekend is testimony by former Moody's analyst Ted Kolchinsky, who said he didn't know about hedge- fund titan John Paulson's involvement in engineering the deal.  "It just changes the whole dynamic of the structure," Kolchinsky told the Senate subcommittee about not knowing that Paulson helped put together the collateralized debt obligation in question. It was "something that I would have wanted to know."  In addition to Kolchinsky's testimony, the subcommittee released e-mails showing how analysts at both Moody's and Standard & Poor's had misgivings about the CDO involved in the SEC's case, but faced pressure by Goldman to put those reservations aside.

I know – Blah, blah, blah, Goldman is evil, blah, blah.  As I said in the wrap-up, I'm sick of it myself but I see a lot of Members trying to bottom-fish GS and I'm still more in favor of shorting them at least down to $140 and, of course, last week we highlighted some plays that will do very well if we break below that mark.  If this GS case does blow up, that affects the financials which then effects the entire market and we've all seen this movie before so, tedious as it is, we will be following the GS news in progress.  We are also long on GS and the Financials in case it turns out to be business as usual and they end up with a slap on the wrist or maybe even another bailout!

Asia rallied with the Hang Seng jumping 1.6% (mainly a gap up at the open) but we're not impressed with any move under 22,000 (now 21,587) and we expected a good reaction from China to our fabulous Friday rally.  What's surprising is that the Shanghai FELL half a point, dropping 25 of the 14 points it lost for the day right into the close.  The Nikkei flew up 2.3%, also pretty much all on a gap open and finished their day back at 11,165, still another 250-point day off the April 5th highs.  We're trying to get bullish this week so I will refrain from comment and pretend everything is real, like TM's 3.4% gain that led the Nikkei based on the dollar testing 95 Yen again and the Nikkei English News reported that the company the carmaker "probably" had a profit of $50Bn Yen, despite the company's Feb. 4 forecast for an operating loss of 20 billion Yen.  This is what Mr. Cramer calls fomenting a stock by playing the media, which is very effective (as Jim explained) when you do it with a key stock like TM that drives the indexes. 

Greece is still the word in Europe and Greek bonds are out of control this morning on speculation that Germany may refuse to guarantee an early release of bailout funds.  I can just picture Jim Cramer on the phone spreading this story to his media buddies while he shorts the 9.5% ten-year rate this morning.  Not Jim himself, of course, he's retired now and only "influences" 20 or 30 stocks a night now and I'm sure he's completely reformed and only has his viewers' best interests at heart and would never mislead them in order to do favors for his hedge fund buddies or his former masters at GS.

Europe, on the other hand, firmly believes Greece WILL be bailed out and the markets there are up about 1% led by miners as BHP raised it's metals prices in London.  “We remain bullish,” Gang of 12 Member JPM's head of European equity strategy Mislav Matejka wrote in a report to clients today. “The recovery will prove sustainable.” He maintained an “overweight” stance on European stocks relative to U.S. equities.  Per-share earnings at western European companies have topped analysts’ estimates by an average of 14 percent since the U.S. earnings season began on April 12, according to data compiled by Bloomberg.  

It's all earnings, earnings, earnings this week but we also have a Fed Meeting tomorrow and Wednesday with the rate decision at 2pm on Wednesday and that's our big data-point for the week.  Tomorrow morning we have Cash-Shiller (which is always painted positive no matter what the numbers are) and Consumer Confidence (which will probably come off all-time lows) and Thursday we get our first look at the Q1 GDP, which I think will miss the 3.2% expected by expert economists as I think we'll be more likely in at about 1/2 last Q's 5.6% pace on inventory changes. 

We shall see what's what and, meanwhile, we have our levels to watch and our upside plays to ride but I'll be looking for some shorts into the 10 am top.  The 1% move in Europe is simply a catch-up play to our own big move on Friday so it will take more than that to impress us.  Once the EU markets close, the excitement may fade for US equities as the S&P hits the 5% rule for the month (meaning we're looking for a 1% pullback). 

Be careful out there!

 


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  1. BIDU….I’m looking at this stock as a possible momentum play today and tomorrow.  They report on the 28th.  Morning news is that they are definately taking market share from GOOG now (duh!).  This coupled with earnings report in 2 days should drive the stock up and make a momentum play possible.  I’m eyeing May 620 calls. 


  2. Offering to sell TASR Jan 11 puts for $1.05   looking for net entry under $4.00


  3. Sanity at last!  .. at least for the banks.  Let’s see how 4 how long…


  4. Phil/GOOG.  I don’t have any GOOG positions, but couldn’t help noticing its swoon since earnings were reported and is now about down to its 200 dma.  What do you think — wait to see if it gets back to about 520 or so before an entry play?


  5. Good morning! 

    Greg says to remind new members that my current chat can be found in my morning post (which almost always has the day of the week in the title) and all that can be found by clicking on MY TAB.  Since he’s getting a lot of those questions, I think I should also mention that the New Member’s Guide can be found HERE

    Woo-hoo on oil already, nice dive from our $85.50 short entry to 84.67 so far.  Too low to be greedy now so stop at $85.75 and reload on momentum below $85 with tight stops.

    Our breakout levels are all green but the NYSE is still weakish and let’s watch the SOX 400 too and say 2 of 3 below the line is going to be a bit bearish: Dow 11,000, S&P 1,200, Nas 2,500, NYSE 7,700 and Russell 720.   The rest seem in little danger, which is why it would be so bad if they begin to fail now.  Oil below $84 could trigger a bigger sell-off.

    Below those levels, we have our 50% bounce lines from last week at:  Dow 11,065, S&P 1,200, Nas 2,493, NYSE 7,645 and RUT 718.  If we start losing those, it may be time to get much shorter. 

    10 am means it’s time to short so let’s look at TZA $5 calls for .53, with very little premium as a good play with a stop at Russell 752 (now 743), risking maybe .15.

    DIA $110 puts are cheap at .85 too.


  6. Juda,
    Bidu earning on Wed, it will have impacts on GOOG. I’ll wait till after Wed. 


  7. Balance,  Ah, good idea. Thanks.


  8.  Phil OIH,
    Sold the May 130 Calls @3.50
    Currently trading flat at 135 and SLB results are out. 
    Any adjustments or ride it out for now.
    TIA


  9.  Juda,
    are you playing IWM today? 


  10. judah – got the buy signal on IWM calls using the 15 min chart.  I am in the 74′s.  Worked like a champ on Friday.  I actually was able to get in the 73′s for 1.80 and had a sell order filled at 2.10 while golfing.


  11. I like selling OIH $135 calls for $3.90.

    CAT is holding up the Dow with a 5% pop and C is down 5% on the government selling stock, which is a nice buy opportunity once people calm down.

    BIDU/Iflan -No way would I play them up, they are fairly sure to disappoint.  Some idiot wants to pay $28 for the May $640s and you can sell 5 of them for $14,000 and buy 4 Sept $720s for $31.50 ($12,600) and pocket $1,400 (lots of margin though) since the caller isn’t even until BIDU is up $30 to $670 and then you can either roll the caller up or buy 3 more longs and roll the caller to 2x whatever.  If you are really bullish you can also sell some Sept $550 puts for $26 too!

    TASR/Stock – Excellent idea, I’m all for shorting the Jan $4 puts for $1 and I also like buying the $5/7.50 bull call spread for .60 as you still make .40 if TASR just finishes over $4!

    Sanity/Matt – Don’t bet on it!

    GOOG/Judah – Nice dip but I bet they bottom when BIDU says how much business they got in China already.   Once China is fully priced out of GOOG, I’ll be excited about buying. 


  12.  Phil – thoughts on ICE? Thanks


  13.  VNO – Phil what are your thoughts on the short may 80 calls?


  14. Phil: have MTW stock, base 14.27, now 16.2$, and 1x caller jun13 base 2.65 now 3.5$, and ).5putters sep12 base0.l7 now 0.5$.
    what to do /


  15. Phil, is now a good time to look at a VZ play?


  16. Morning phil, do you think its a good time to get into the 2012 C spread you talked about last week now, or you think C might head lower a bit more ?
     
    thanks


  17. Thanks Phil,
    How about giving me a bearish play on the DIA.
    Phil


  18. Balance/IWM.  Yes, but I somehow missed the entry this morning.  See SS’s post.  I’ll buy calls on the next drop if there is one.


  19. I have no TASR options at $4, and the Jan 5 puts are $1.


  20. SS, I didn’t see anything on my 15-min chart worth doing.  I did take a small position in the puts at 74.63.  How did you set up your trailing stop on Friday — .05?


  21. ATPG – I noted last night that the stock formed a cup with handle on the weekly, I have set an alert for 23, as I believe it needs to break that barrier to make it a good trade.
     
    MEE – the chart is now flipping with the bullish as of last Friday and another 4/19.  May 44/46 bull call spread for $1, and selling the May 41 P for .95 makes the trade 5c debit.  If one wants to be more aggressive, then the may 42 P are $1.20.


  22. As I was writing, one can probably do better on the BC spread and get it for 90c.


  23. I am way overloaded on market shorts. Does the SSO 43-45 call spread with the 43 puts make sense(have th 42-44s, but not enough). thanks


  24. judah – you are right the 15min was not a perfect setup.  I only bought a small lot and will avg. in with a bigger drop.  Today being Monday made me a little more confident in a float up.  On Friday I did not have a trailing stop only the limit sell order.  It was really a small position that I felt comfortable with while away.


  25. Good morning Phil Looking at HOV today 7.40 up .27  wish to set up an other play  Bull 5/7.5 Jan 11 1.33 against Jan 11 5put for .60 your thoughts pls thks


  26. P.S. Phil holding many HOV in Jan 11and 12  2.5/5 play also with puts to balance


  27. barfinger, ditto – checked IB and TOS, no $4, must be a typo…but twice and changes the appeal of the trade somewhat (at least for me but maybe Phil still thinks it’s a good idea?)


  28. NFLX to 110?


  29. hi phil -  how should I adjust these position I have 50 BGZ oct 14 put , and  50 TNA short 56 call ( flip this to more puts?) thx


  30. GMTA Balance!

    OIH/Oncmed – As above I still like selling those $135s, maybe a roll-up to 2x and you can cap margin with the June $150s (.94) if you need to.  SLB was great earnings but they are the best of the group, now bar is set high for others and RIG just took a huge hit on platform explosion (isn’t it funny that MEE got killed for a mine collapse but RIG shrugs off an explosion and environmental catastrophe of an oil spill?).

    ICE/Hunter – Hopefully they get regulated out of existence.  This is possibly a good spot to short them but they are crazy dangerous to short.  I think I’d play for a pullback some time ahead of May 5th earnings so selling the May $120s for $4 and covering with the Sept $135s ($4.35) IF AND ONLY IF they pop $120 (maybe a 4/5 cover or 3/5 to start). 

    VNO/BGB – $85 is usually the tippy top for them so a little early to roll with the $80s still in $1.30 of premium.  June $85 calls are $2.40 so good to keep en eye on and we can sell June $80s, now $2.75 if we have to (above $85 is having to for sure!).

    MTW/RMM – It’s not June yet but you could roll the Sept callers up to the $15 puts for $1 and use that $1 to roll the June $13 caller up to the Sept $16 callers (now $1.95) if you are that bullish and don’t feel you need the protection. 

    VZ/Jbur – Yes, I do like them down here but I’m hoping for a 19 VIX to start selling as I want to be in the stock for a dividend play (6.5%) I don’t think we’re in a hurry but I’m wrong if they get over $29.50 so let me know if that happens.

    C/Micro – I think it’s a good time to scale in, they already bounced back 2% off the news of the government selling the stock, which is the same news that’s been putting them on sale for 2 months.

    DIA/Phlit – I just like the puts this morning.  An interesting long-term play is dissing the pre-Santa rally period and short the Sept $120s at $1.14 and pair that with a $1.70 bear spread of the $122/120 puts.  That’s in for net .56 with about $230 of margin that says the Dow doesn’t beat 12,000 by Sept expiration, giving you a nice $1.44 payout.  Dangerous of course…

    HOV/Yodi – You "won" the $5/7 spread so now you can move up to the $7.50/10 spread at .85 and you can flip your current putters out to the 2012 $5s at $1.25 to pay for a lot of it without adding any margin.  I wouldn’t put too many eggs in HOV’s basket – any builder can screw up and I’m not that bullish on a housing recovery…

    Oh sorry Pharm, after all that I forgot to put your trades in the Wrap-Up.  Got all distracted yesterday…

    TASR?/Barf – What’s a good idea?


  31. Phil,
    LVS – good spot to short here?


  32. judah – obviously I am still working out how to best play this strategy.  The average true range (ATR) for IWM is between .5 and 2 daily.  So I am selecting the calls with a delta of around .5 and a cost of between 1 and 2 dollars.   If the average ATR is around 1.25 then on days the strategy works the calls will have a 50% profit from top to bottom. I would be happy with getting 1/2 or 25% of that on most trading days.  If I limit the losses to 10% this should be a winning strategy.  I think it will work for as long as we march higher and have a stick.  What do you think?


  33. Next week Phil, no worries.


  34.  For BIDU followers:    
    High volume selling this morning down $8.50, accompanied by a complete pullback to opening levels by 10.30am on very low volume trades


  35. NFLX/Dilbert – I hope not!

    BGZ/Gucci – Are those TNA’s October too?  Generally, you just want to roll both out in time and away from the strike but those are deep so I need to know what you paid for each too.

    LVS/Fab – Too much good news out of Maccau so I wouldn’t short them, tempting though it may be. 

    Volume a lame 44M on the Dow at 10 to 11.


  36. oncmed/BIDU – that summarizes the entire market.  High volume selling in the morning brings the market down, but only last 30 minutes tops.  Then a float higher on low volume.


  37. Phil, I didn’t follow your suggestion with VNO. I also have short May $80s. Are u suggesting some roll to Jun $80s and also buy Jun $85s? I’m not I followed this suggestion correctly. Can u please clarify? thx
    VNO/BGB – $85 is usually the tippy top for them so a little early to roll with the $80s still in $1.30 of premium.  June $85 calls are $2.40 so good to keep en eye on and we can sell June $80s, now $2.75 if we have to (above $85 is having to for sure!).


  38. sorry phil type in a hurry
    also have 50 TZA July short 8 put sold for 1.22, not much intrinsic left
    50 BGZ oct 14 putter sold at 2.33
    50 TNA oct 56 short call sold at 8.34 this was a roll since march thx


  39. For those who may have missed on the GILD entry from last week, pretty close here to our entry.


  40. also no more margin to play unless have a big pull back this week but I do not think it is going to happen


  41. SS, Very good. I have been thinking to combine the approach with JRW’s lines and/or the TOS pivot point lines, taking a 1/2 position off the 15-min chart and another half position at the lines, playing it in the direction of the trend so that we can flip the whole approach around to puts if we ever get a few days of selling.  I also like setting a trailing stop on 1/2 at .05 or maybe 5%.  I agree with your criteria for selection of calls, which usually leaves 2 possibilities.  Do you think that the higher of the two calls has a better return, so that today 75s would work better than the 74s?


  42. judah – so far today the 74′s have a delta of .57 with a gain of .28 or 18.5%.  The 75′s have a delta of .46 with a gain of .23 or 23%.  I selected the 74′s because this knife cuts both ways.  I guess since it is Monday I could have selected the 75′s.


  43. MKT wii crast on Apr 30th. Until then it is UP UP UP


  44. Wow, NFLX is crushing the shorts with an upgrade today..


  45. judah – also, I am looking at the RUT 1min, 5min, 10min and 15min charts simultaneously  to analyze which will give the best entry signal.  Today the 10min and 5min gave the best entry when looking at the first strong green engulfing candle after a strong red candle.


  46. QQQQ $50/51 bull call spread is .55 and .49 in the money, nice bullish offset if you think you are too bearish.

    ECB President Jean-Claude Trichet dismisses worries about a European contagion. While "all countries in Europe without any exception have a lot of work to do," there’s no question that "Spain is not Greece."

    German Chancellor Merkel says Greece needs to show that its budget is on a "sustainable" path before Germany can approve emergency aid. Meanwhile, the cost of insuring Greek debt against default jumps to a new record.

    It’s "better than 50-50" that Greece won’t be Europe’s last bailout, Ken Rogoff says. "It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three years… The budget cuts needed in Europe in many countries are profound."

    Voicing the concern shared by many, Canadian Finance Minister Jim Flaherty says Greece’s €45B rescue package may not be enough. "There is concern [among some G-20 members] about making sure that the package is enough so that it’s a one-time event."

    The IMF is accelerating its efforts to provide Greece with aid before €8.5B ($11.3B) of the country’s bonds mature on May 19. Among other qualifications, Greece has been asked to provide detailed plans of how it will meet its deficit reduction goals in 2011 and 2012.

    AIG (AIG) better brace itself. Sources say the insurer may be on the hook to cover the legal fees of Goldman Sachs (GS) executives after selling them so-called Side A directors and officers’ coverage.

    The Wall Street Journal blew it with its story on the ratings agencies, Ryan Chittum writes, arguing the piece skipped over smoking-gun documents showing S&P and Moody’s fudging CDO criteria in order to secure business.

    How many months, at current sales rates, would it take to clear housing inventory of all the foreclosed homes and those likely to be foreclosed in the next couple of years? 103.

    Failure Friday came to Illinois, with seven banks shuttered in the state to bring 2010′s tally to 57. Banks in Rockford, Peotone, and Naperville, and four in Chicago (I, II, III, IV) – including Broadway Bank, owned by the family of Democratic Senate candidate Alexi Giannoulias – go down. Total estimated hit to the Deposit Insurance Fund: $974M.

    Struggling homeowners who avoid foreclosure through short sales will soon be eligible for new Fannie-backed mortgages in two years instead of four. But Fannie Mae’s (FNM) policy change may have little impact, as it’s unlikely borrowers will be able to fix their credit quickly enough to take advantage of the reduced waiting period.

    China is considering new real estate taxes, including the possibility of a U.S.-style property tax, to rein in what is now widely seen as a property bubble. The move could ripple through the global economy, as construction is the main driver of China’s current recovery.

    Et tu, Buffett?  As Democrats move closer to a financial regulations overhaul, Warren Buffett (BRK.A) has been lobbying for changes to the legislation that would prevent a hit to his finances.  Democrats in the Senate working financial reform agree to strip out the derivatives provision that Berkshire Hathaway (BRK.A) sought. (WSJ)

    Gizmodo’s iPhone scoop could result in felony charges. (Bits)

    Visa Europe (V) will cut some fees it assesses for debit-card transactions in a bid to end a European Union antitrust probe. V +0.9% premarket.

    Caterpillar (CAT): Q1 EPS of $0.50 beats by $0.11. Revenue of $8.2B (-10.7%) vs. $8.8B. Shares +2.9% premarket. (PR)

    Smoke ‘em if you got ‘em:  Lorillard (LO): Q1 EPS of $1.50 beats by $0.28. Revenue of $923M (+20.3%) vs. $803M. Shares +1.1% premarket. (PR)

    Whirlpool (WHR): Q1 EPS of $2.13 beats by $0.80. Revenue of $4.3B (+19.4%) vs. $3.8B. Shares +5.2% premarket. (PR)

    Humana (HUM): Q1 EPS of $1.52 beats by $0.38. Revenue of $8.4B (+9.5%) vs. $8.3B. (PR)

    BlackRock (BLK): Q1 EPS of $2.40 misses by $0.05. Revenue of $2B (+102%) vs. $2.2B. Shares +0.3% premarket. (PR)

    The Treasury plans to sell up to 1.5B shares of Citigroup (C -2.3%), with additional share sales to follow. From its statement: "Treasury will begin selling its common shares in the market in an orderly fashion under a pre-arranged written trading plan."

    The FTC is reportedly looking into whether up to a dozen of the world’s largest oil firms (including BP, CVX, RDS.A, XOM) violated antitrust law by colluding to suppress employees’ wages. The previously undisclosed probe has apparently been going on for years.  Collusion?  Among oil companies?  No, this cannot be

    Finally, someone besides me says it!  Somali pirates’ revelation: "We are doing God’s work. We work for Lloyd Blankfein."

    Notable earnings after Monday’s close: AMP, ANH, AXS, BSX, ELX, HMA, JEC, MAS, PCL, PPDI, SANM, SLG, TXN, UHS, VECO, WMS

    Off to the races now.  S&P lagging a lot so let’s watch that 0.5% line on the Dow at about 11,260.  The Nas is also not moving yet so this may be a blow-off top using the easy to move Dow.  If AAPL turns green, then good for the Nas.


  47. another hedge that I need help in adjust -  I have DXD 50 July 24 call bot at 3.04,  I bot back the caller last week since not much premium left, has not got a chance to sell call again, still have 50 July 27 short put and was sold for $1, thx


  48. hey Phil any thoughts on JNPR, traded over 32 recently now under 30
    by the way Valley Fair Mall in SanJo packed over the weekend, but many shops are higher end


  49. UXI   Phil
        what do you think abt this as a hedge against bull positions on the DIA?
    Phil 


  50.  PHIL / QQQQ bill call spread
    Per 10, risking 560 to make 440?  Poor risk to reward, no?  Or am I missing something? thanks


  51. AMZN…….Just completed a momentum trade for the day.  In AMZN May 145  calls at 5.425……stopped out at 6.00 for a  10 % profit.   I used 100 contracts.   I would have shared this trade with you but these things happen so fast I’ve little time to get a post done.  This trade was over within about 1/2 hour.  I’m still looking at BIDU.


  52. FAZ – July spread has adjust down once should adjust more? currently have July 11 call and July 13 short call with July 13 short put ( this leg should i adjust at this point or too early have about $1 intrinsic left slight more than 50%) thx


  53. sorry I ment SIJ


  54. Phil  MIcor what was the C play  ? thanks


  55. PharmBoy, you recommended RGN last Fall at .85, they’re lower now, do you like this entry point?


  56. Man they cannot find an analyst that doesn’t call GS a buy!

    VNO/Ravalos – I wouldn’t do anything right now but if they keep going up then maybe a roll to 2x the June $85s (now $2.75).  Since the May $80 calls are $4.60 and still have $1 in premium, you can afford to wait as there is a better than even 2x roll ahead of you to a $5 higher strike.  If you need to cap margin, you can buy 1x or 2x the June $95 calls, now .40 since no one seems to think VNO can gain $10 by then. 

    TZA/Gucci – The TZA short puts are bearish on small caps and now $2.90.  They can be rolled even to 2x the Oct $6 puts so they don’t bother me at all as long as you don’t mind owning 10,000 shares of TZA at net $5.39 in October (of course there is more rolling ahead).  BGZ short puts are bearish on large caps and now $3.40.  There is no October roll but you can always drop these to 2x the TZA Oct $6 puts because the margin is the less and what’s the difference if you are bearish on large caps or small caps really, the way this market all trades in lockstep?  TNA short calls are ANOTHER bearish small-cap bet and holy cow are you buried there at $20, which puts you $100K short on small caps on that side alone.  This is all fine if you have about $2M in upside bets to protect but a little extreme otherwise.  I’d start working out of these by selling the Oct $57 puts for $7 and using that $7 to push the $56 callers up to the $68s (now $13) so then they have $10 in premium and the putters have $7 in premium and you will win one or the other and maybe both. 

    DXD/Gucci – Another 50 block to the downside?  Your longs must be doing great!  If you want to stay bearish I’d roll the $27 puts to 1.5x the Oct $25 puts ($2) and roll the calls to the Oct $22 calls for $1.20 and pay for that by selling the July $25s as you should be happy enough for DXD to finish over $25 and wipe out your putter that it doesn’t matter if you over-hedged the call side.  Whenever you get behind, your goal needs to shift to getting even.  If you had a great call side, then you want to lighten up there (taking profits off the table) and work on recovering your bear money.  Once you re-position, then you know how aggressive you want to be on the bull side to compensate for additional gains. 

    JNPR/B1 - I like them but after a pullback.  There was a lot of 2-year pent-up demand in last year’s Q4 orders that bled into Q1 – I really want to see what’s sustainable.   On the malls – we had a stat this weekend that only 3% of $150,000+ workers are unemployed so watching the top 10% shop till they drop isn’t that indicative. 

    UXI/Phlit – Isn’t that a bull fund? 

    QQQQ/Salvum – It’s only poor when you are used to crazy profits.  Most people think 78% in 4 weeks is pretty good, you know…  I like it because it’s very liquid and that makes them a nice stop if you think we are breakiing over here and find yourself too bearish.  It’s good to have "safety" plays lined up like that so you have a way to stop losses as the market breaks higher (or lower) than you think.

    60M on the Dow at a quarter to 12 and the BuyBot looks tired but maybe just waiting for further instructions.  Oil hovering at $84.50 and gold at $1,155 with copper at $3.54.

    Sharing/Iflan – It’s tough isn’t it?  That’s why I get too far ahead of things sometimes – I’m trying to keep ahead of the curve but then get too far ahead….

    FAZ/Gucci – I think that it’s not worth it as we’ll snap back if XLF turns down and if they keep grinding up the adjustments will be cheaper.

    SIJ/Phlit – Too thinly traded.  BGZ more fun.


  57. Sharing trades vs. sharing trade ideas.  These are two different things.  It’s easy to trade the ideas but sharing the actual trades is very difficult.   Usually I’m sitting in front of the computer watching a potential setup for one of my large momentum trades and …BANG!>……I see the opportunity, make the trade and do the immediate followup of setting stops, etc.  Today I had the added problem of TOS screen not showing me the trades in progress.  That was very frustrating.  Anyway, it is hard Phil.  That’s why when I’m here on site I don’t often look to mirror trades suggested by you and other memebers.  .  I’m looking for ideas, strategies and tactics,  then I set up my own trades. 


  58.  Phil / QQQQ:
    Can you explain further please? "78% in 4 weeks is pretty good, you know… " <-- What are you referencing here?


  59. DCTH – thank you very much for that pop…..
     
    RGN – nice memory MRM!  No they are putting out an offering, and if it is priced lower, I expect them to fill it back down.  Wait and see on them.


  60. BIDU….I’ve abandoned my idea to use bidu as a momentum trade today.  It’s not cooperating.  I’ve not abandoned my idea to short it with 1% of my portfolio into earnings. 


  61. phil : I’m curious. On TZA Oct spread, the bid/ask spread is about a 6 cents higher than the bid/ask spread on my quote screen.In otherwords, they are offering less than the quote bid and asking more than the ask bid.Any explanation?  


  62. Phil……The thought has occurred to me that on the 28th when BIDU reports, that GOOG may move in the opposite direction.   GOOG is getting low low low.   What about a married trade on the two, say GOOG long, BIDU short, before Wednesday? 


  63. lflantheman, thanks for asking the pair trade question, I was having a similar thought.  I shorted BIDU the last time it hit 650 and did well, I regret not doing that again today but would like to balance it with something.


  64. Closed my USO puts from Friday up 20%, that was easy. 


  65. Phil, how are you feeling about the IYR 52 puts we picked up a while back? Mine are down about 40% and I’m trying to decide whether to kill it or not because it is beginning to feel a lot like SRS did many moons ago…


  66. HK might be a nice candidate for a pop if we do a stick, I’m putting the USO winnings to work there for the rest of the day.


  67. do you think gold and copper can hold their levels this week?


  68.  I pondered Phil’s comment "Tomorrow morning we have Case-Shiller (which is always painted positive no matter what the numbers are)…" and I compared my HOV to BZH on the ten day chart. HOV is way ahead so I bought some BZH for a quick fun trade on the housing data on the thought that BZH catches up.


  69. MRM – HK having a tough time with their 200d MA on the daily.  Since the OPEX in March, they are in a wedge, and I can see them falling to ~21.75ish then moving up.  Today will be telling.


  70. Phil: have ACI stock, base 22.6, now 28.3$,
    no putters but 1x  july24 callers.
    what changes would you make /


  71.  Pharmboy – thanks. This HK trade is just for the day with tight stops, they are prone to violent swings and thus fun to play – I did pretty well with Friday’s day trade on it, just check out that stick!


  72. judah – DD at 1.65.  Waiting for Mr. Stick.


  73. Phil -I’m still short the May 260 long Jun 270.  Should I roll the May 260s. Thanks


  74. phil,
    I’m in an aapl spread; long the jan ’11 $240′s @ $30.60 and short the oct ’10 $260′s @ $14.92. is there a better way to re-position this? aapl . no mattter which way aapl moves this spread seems to loose!!


  75. Phil: VLO check:
    have VLO stock base 17.5, now 20.1$
    have 1x june20 callers, base 1.67, now 1.23$
    have jan2011 17.5 putters, base2.24, now 1.46$.
    What update is needed ?
    AT WHAT PRICE IS vlo STOCK ATTRACTIVE ?


  76. I just realized that, instead of closing my June DIA 108s last Wednesday when rolling to 114s, I doubled down and then deleted them from my trading screen so that they have been working against me since last week!  :-/   Any suggestions for what to do now? On a positive note, the fold-up chair that received the power-slam is not permanently damaged and this is the first trading-related outburst I have had in almost a year, which is amazing because it used to be 2-3/month. I seriously considered putting a punching bag in my living room for these little crises but then realized that learning trading discipline and psychological/emotional control would be the more mature and profitable route.


  77. Oh I know well MrM…. I have moved out of all shorts until I see something better on the charts. 
     
    From FiercePharma: 
    There’s one Big Pharma that’s not losing much to health care reform, relatively speaking. Merck (NYSE: MRK) says higher Medicaid rebates will cost it $170 million this year, and next year’s tab will run $300 million to $350 million as Medicare discounts kick in. That’s less than 1 percent of the company’s global sales, Reuters points out, and about 1.5 percent of U.S. sales of some $21 billion.

    And it’s far less than than the estimates we’ve heard from other drug makers. Eli Lilly (NYSE: LLY) projects up to $700 million in reform-related costs for 2011, or about 3 percent of global sales. For 2010, Abbott Laboratories (NYSE: ABT) is expecting a $230 million revenue hit, while Johnson & Johnson (NYSE: JNJ) predicted $400 million to $500 million.

    Sanford Bernstein analyst Tim Anderson says in a note to investors that Merck’s expected costs from healthcare reform are comparatively small, and that the overhaul law might have been expected to cut into earnings as much as 4 percent this year and 6 percent next, rather than the the 1 percent and 2 percent he now calculates. The impact is "less than what we might have otherwise guessed," Anderson writes (as quoted by the Wall Street Journal). Merck’s shares rose on the news.


  78. with C down 4% and BAC down almost 1%, let’s see how powerful is the stick.


  79. Poor ‘ol Buffet.  Guess what’s good for the gander isn’t good for the goose.  His special request provision would really put a damper on these regs preventing the next crisis.  There could very well be, and probably is, another crisis around the corner that will get vetted out if the companies who sold derivatives have to put up some more collateral.  I love these analysts saying Berkshire is good for the money and they shouldn’t be required.  After all, they stepped in and bought GS when everyone else was heading for the hills.  True.  So putting up more collateral shouldn’t be a problem for ‘em!   


  80. C/Yodi – Right now I like the 2012 $4/7.50 bull call spread at $1.05, selling the $2.50 puts for .25, which is net .80 on the $3.50 spread (337% upside) and a put-to price of $2.75 (down 41%) and what looks like $70 per contract in margin

    Good system Iflan!

    78%/Salvum – Well if you buy the spread for .55 and you make .45, then you divide your profit of .45 into the .55 that you laid out on the trade and that’s 78% profit.  Then if you look at the expiration date of 5/21 and look at today’s date of 4/26 and get one of those calendar doo-hickeys, there are 4 sets of 5 business day periods (weeks) between today and the day you collect your winnning.  8-)

    Seriously, when looking at risk/reward you can’t consider that your entire .55 is at risk.  Obviously, if the Nas does break down (as we think it will) we would pull this trade under 2,500 and take maybe a .10 loss – the trade is to stop the Nas from getting away to the upside and pounding our shorts so if we have, for example, $20K in short positions that are down 25% and we don’t want to lose another 25%, we can grab $5K of the QQQQ spread and expect to almost double it if the Nas keeps going.  If it goes the other way, the vertical should be pretty forgiving as we recoup our losses to the downside. 

    TZA/Dflam – You get all kinds of crazy numbers depending on how your broker runs the trades though.  I prefer to offer something in the low end of the range and it either fills or it doesn’t but there’s no reason to chase.  If something gets away we can just move the strikes or move on. 

    Pair trade/Iflan – That’s like taking making a bottle out of plastic explosives to store your nitroglycerine in!  I don’t see that BIDU can do much to boost GOOG when they report so I don’t think there’s a reason to go long on GOOG ahead of BIDU’s CC.  BIDU just seems to have priced in all the best possible news already and I’m fairly comfortable shorting them (but it’s still very, very dangerous). 

    USO/Mr. M – Very nice!  There were so many positive stories on oil this weekend I had a feeling they’d be going down.  Too many juniour Cramers out there trying to "foment" their way out of positions…

    IYR/Ynubi – I am miserable about them.  I’m in my 3rd round of them with an average at $1.08 and they are at .63 and my next move will have to be a roll.  The delta is still .27, which means I’m $2 away from even and they’re up $4 in a week so I don’t think it’s an unrealistic expectaion so I’m just waiting and seeing what sticks this week.

    Gold/Iprosper – Gold ripped up $20 off Friday’s lows ($1,135) and has hovered around there since.  Copper keeps going high when nobody is trading and then testing lows all day.  I think that the carry trade issues are about to catch up with commodities but it’s hard to say when it will break.  The Euro is coming pretty damn close to a breakdown that could cost them 20% to the dollar and Japan is a mess and the UK isn’t that much better off than Greece.  If commodities crash and take the markets down then people run to the dollar and it goes up and pushes commodities lower, etc and it’s all driven by the ETFs that HAVE to chase the indexs down as much as they have up.  So, other than my little oil futures plays, I’m not too excited to play those guys. 

    BZH/Mr. M – Be careful with them, they are not a very good company.

    ACI/RMM – We like coal!  I’d just sell the July $25 puts for $1.10 and pay .70 to roll the callers up $1.  Do that every month and you can pull an extra $12 a year out of the position if it keeps going higher and still well protected if not. 

    Mystery Stock Game/Magret – I’m going to go with AAPL on that one and I’d say take the $11.90 and run on the June $270s and you can wait for a pullback (if you can hold naked) or roll the caller to the June $270s (net $1.80) and you can pick up the July $300 calls to cover at $5.40 and you can just add a couple extra $300s (or $590s) to increase your delta if AAPL gets back over $270. You can also sell the June $250 puts at $4.50 as you can’t lose both so it doesn’t hurt unless AAPL really falls hard (but then rollable).

    AAPL/RDR -  Keep in mind your losses are illusional as the FACT is you have a net $16 entry on a $20 spread that is $10 in the money.  It doesn’t matter what the option chain TELLS you the value of the position is worth, the FACT is that position is worth $20 + 3 months.  If you are satisfied with a 25% gain, then patience is your friend here.  Your $240 calls are $49 (up $18) and the $260 callers are $30 (up $15) so it’s a question of – What did you expect from a spread?  Rule of thumb with a spread is that 20% is GREAT!  You can spend $10 to roll your caller up $20, to the $280 calls but don’t you want the protection.  Of course you can consider rolling 1/2…

    Recovering the markets:  The Treasury auctions $11B in 5-year TIPS at 0.550% (.pdf). Bid-to-cover ratio of 3.15; indirect bidders take 23.1%. Treasurys held modest gains for the most part; the 10-year yield -0.01 to 3.81%; 5-year -0.01 to 2.57%.

    Also: Dallas Fed Manufacturing Outlook: Business Activity Index +21.1 vs. +7.2 the month before, a sixth straight month of expansion in the index. Mfg. Production Index 18.2, hitting a new two-year high, vs. prior 8.7. Labor index builds on its swing to positive, going to +9.8 from +2.8.

    Verizon Wireless (VZ, VOD) backed off its plans to offer service for the Nexus One handset from Google (GOOG -2%) – which may be signaling Verizon views Google as more of a competitor than a partner. Up until this morning, the Nexus One site said the phone was coming to Verizon.


  81. If you spent the money of an original ipod in 2001 on apple stock ($499), you would have 14,513.78 today.


  82. Well you guys can blame me for C decrease today; I doubled by 2012 spread on it on Friday, geez am i blessed with timing.  Phil how much lower for C to go from here until we back up the truck and load up on some more?


  83. This market is acting like a down late afternoon. 


  84. Phil, ynubi/IYR – that was me. For some strange reason my display name changed on its own…


  85. PHIL/ QQQQ
    Thanks – so if the max return is .45m and the max est loss is .10, then the real return could be 450%!


  86. soccer-f1 – it’s kind of more fun to do both – that way you make money and enjoy their superb products.


  87. My BPI ( Bridgeport Education )is moving nicely today. May 3rd earnings are expected to be good, maybe real good. Bought the May 25 calls for an earnings play.


  88. Leveraged ETF margins – TOS doesn’t calculate these correctly
     
    Please be aware that the margin requirements for uncovered Leveraged ETF options will change on April 23, 2010. The new margin requirements will be as follows:

    2X ETF options

    Short calls
    40% of the underlying stock minus out of the money amount, or 20% of the underlying stock, whichever is greater

    Short puts
    40% of the underlying stock minus out of the money amount, or 20% of the strike price, whichever is greater

    3X ETF options

    Short calls
    60% of the underlying stock minus out of the money amount, or 30% of the underlying stock, whichever is greater

    Short puts
    60% of the underlying stock minus out of the money amount, or 30% of the strike price, whichever is greater


  89. I’ve purchased more DIA puts.


  90. AAPL: A friend of mine bought 1 share, with a framed stock certificate, of AAPL, for each of his mother’s grandchildren a few years ago as Christmas gifts.  After stock splits, each share’s cost basis is $12-ish.  Today, AAPL is $270.
    Sadly, those kids, now ranging from 7 to 17, tossed those framed stock certificates around like all the other toys, and many can’t find them any more.  Ten years from now, when their uncle asked them "Where is your AAPL stock certificate?  It’s now worth $270,000 now!"  Imagine what they’ll do!!
    8)


  91. Ran across an interesting article in FT this past weekend – Nomura currency experts have stated China is surely to adjust the Yuan sooner than later, for sure with in the next few months. Nomura insists the yuan will move at least 5% upward over the next 6- 12 months, and the Asian currencies will be immediately move up simultaneously. Singapore has already adjusted their currency upward last week, and the others ( S Korean Won, Malaysian Ringgit, Indian Rupee, Taiwan $, and Indonesian Rupiah ) will soon follow. This will make for some terrific currency cross trades.


  92. APPY is at OH resistance.  Profit taking is kicking in, but the stock still looks as if it is accumulating.  I am still inclined to pick up the Sept 2.5/5 bull call spread for .95.


  93. Hi, gel1 on currencies,
    How do you suggest we play the Asian currencies?
     
    BTW, remember the EURNOK play you suggested a while back?  I closed the position with a nice gain.  But, I closed a bit too early, as It’s still moving quite nicely.  Thanks for the reco!


  94. Marketwatch headline:  Jumbo mortgages making a comeback


  95. FWIW – I just received Ken Fischer’s current outlook update for 2010 market projections… they are bullish, and believe the correction has a way to go in what they call a "V" shaped recovery. They acknowlege the possibility of another correction (minor) during the year, but see the direction to be bullish as the year unfolds. These folks have a very successful track record, and are very diligent in their research.


  96. Phil:
    Regarding VZ, I can understand why you want to wait for an increase in the VIX. The option premiums suck. Selling Oct 28 puts yield only about 5%. Annualized 10%


  97. SS, I’ve been out most of the day.  Looks like you’ve got a nice, quietly successful trade going.


  98. judah – hoping the stick comes to boost it a bit more.  Why should today be different.


  99. cwan/Currencies
    I played the SGD ( Singapore $ ) againt the USD this past week and made some gains. In july of 2005 when the Chinese revalued the Yuan, the S Korean Won rose about 5 times as much as the Yuan in the 12 months that followed, and the Singapore $ rose about 3 times as much. The Indonesian Rupiah jumped 5 times as much and Malaysia currency (Ringgit) rose 2 times as much. With the Chinese economy jumping like a firecracker factory, I think this time around the surraouning Asian currencies will have even a more profound effect of the re-valuation. Economists are predicting the other asian currencies to apprreciate at least 10% in the following 12 months after the adjustment. I am still researching the best cross currency to trade these against…. not yet sure of the yen, but I believe later in the year the USD might be th best if we see the inevitabe weakness start to show some cracks developing. I will have some plays next week that I will share. On thing for sure is to not play the Yuan, as these others will be the best, as proven historically. If you have any thoughts – please let me know.


  100. VLO/RMM – VLO is a crazy stock, you are right on target and about $17.50 is our favorite entry.  If you want to own more stock, sell more puts, like the Sept $18 puts at $1.10 and, in 6 months, you either get more VLO at $17 or you get a free $1.10 and that means next time you can sell the $20s for $1.10 (assuming it’s still going up) and no real harm done if put to you as you would have sold $2.20 in a year, which is a 12.5% return on $17.80 (your net put to off a $20 put) which is a nice dividend on top of your stock. 

    LOL AC! I think it’s a lump-taking thing right now on the DIA puts.  I would give it until the Fed on Wednesday but if we’re not going down by then, then you have to move along.  July $114 puts are our current target for the long put (now $4.25) and if they get back over $5 we want to do a 1/2 cover OR, if we get a roll up for .50 we want to pay for it with a 1/2 cover. 

    MRK/Pharm – Do you like them or PFE at these prices.  I’d like to put one of them in the Buy List but both seem like they could drop more.  PFE has the more attractive chart with a possible life cross by next week. 

    Oil hit $84, which is where we flip to play them up (/CL futures contract)

    Buffett/Matt – Well, just like us it’s margin money they’re asking for.  Obviously Buffett has better things to do with his money than cover a spread he doesn’t think is all that risky (just like us) but that is kind of what the problem is – the lines need to be re-drawn for the big boys and they will like it as little as we like it when TOS messes around with us…

    AAPL/Soccer – That’s the investing premise I teach my kids:  If you think McDonald’s has great food and you go there a lot – then buy some MCD stock.  If you love going to Disney and you go broke every time you go there – buy some DIS!  It’s funny because I happened to see my own very old MySpace blog from about 4 years ago and I was explaining to people that high oil prices ($50 a barrel) aren’t a problem if you just buy stock in XOM and COP (enough to have the dividends fund your fuel) because they will increase with the price of oil.  Funny how much I hate those guys now…

    C/Humvee – It’s a long game, just ignore, ignore as they’ll probably test the 200 dma around $4.  Some smarty-pants will run numbers that shows that the selling by the government will drive C to zero etc. so we wait for a headline that says "C Failure Imminent" and then we buy more.   If that doesn’t happen and they go up and up, then we can always layer up the bull call spreads. 

    Ynubi/Kwan – ???  That’s strange. 

    450%/Salvum – I just look at the return against money spent, not margin as I’m not spending margin.  It’s kind of like when they put a $50 hold on your credit card when you rent a DVD for $2 – the DVD doesn’t cost you $52 UNLESS you lose it.  Margin becomes an ordinary loss if the stock goes against you and you show debit losses but not before.  Margin is, of course, important because it is a measure of maneuverability but even PM doesn’t take into account your offsetting hedges that mitigate your "black swan" damages.  That’s why the rule of thumb is "Never short any call where you are not REALLY willing to be short the stock at that net and never short any put for a stock that you don’t REALLY want to own at that net."

    Margins/Edro – Man they’d better change that soon. Right now, if I put in to short 10 TZA $5 puts at .15 it gives me net margin (buying power effect) of $735.  That doesn’t jibe with the new rules at all.

    Stocks/Cwan – My kids know better I hope…  That is a totally cool thing, there’s a company that makes very nicely framed certificates for gifts – Oneshare. 

    Yuan/Gel – Yes but only a very small change at first.  5% not too much of a move considering how long they’ve held it.  As to Fisher – that is certainly the "official" word on the markets.  Who are we to argue?

    VZ/JBur – Now you see why I’m willing to wait months for a sell-off if I have to…

    Volume 102M at 3pm – Are we open?


  101. Phil/Fischer
    I hear you.. He and his buddies can move the market in what ever direction they want.  By the way, your comments regarding investing in products you like.. makes a lot of sense, as your purchases help their profit stats. That is why I have large positions in not only AAPL, but also DEO and SAM


  102. NYSE not holding 7,700.  Watch those SOX at 400.

    Mortgage fraud continues to rise, according to a new LexisNexis survey – up 7% last year. Florida easily led the nation in fraud incidents, with New York, California, Arizona and Michigan rounding out the top five.

    Saving the Financials today:  Sen. Shelby predicts Republicans will block Democrats’ efforts to begin debate on the financial reform bill in a test vote today, saying the move would give them more leverage while continuing talks with Senate Banking Committee Chairman Dodd. Debate is set for 5 p.m. in Washington.

    Fixed-income investors should take advantage of opportunities in emerging markets, Pimco’s Mohamed El-Erian says. "An emerging market like Brazil can be one-third as risky as an investment-grade country like Greece. That is a fundamental change, and it’s a very exciting time for investors."  Wow, that is some very dangerous advice!  Pretty much he’s saying, invest in whatever country is having the Olympics and spending themselves into a hole and get out of whoever already had it (watch out China).

    Boy, these analysts are so on top of things:  Transocean (RIG -1.6%) shares tumble after a downgrade from S&P Equity Research, based in part on the sinking of the company’s rig in the Gulf of Mexico. BP (BP -2.8%), who was leasing the rig and is responsible for cleaning up the mess, says it could take "several months" to stop the resulting oil spill.

    What is the primary force behind the market’s rally: technical factors or attractive valuations? Barry Ritholtz says it doesn’t really matter as long as you understand that "as we go higher, the risk levels increase."

    ZION $28 puts at $1.15 – overnight trade


  103. MRK or PFE….hum…..All have drawbacks, but bang for buck would be PFE.


  104. PFE failure in liver trial helps several companies….Morgan Joseph says ONXX.   They popped after the PFE data, but are pulling back hard.


  105.  Perhaps GS is having a temper tantrum this week and programmed the stick out of the bots just to get their pound of flesh from the bulls?


  106. It’d sure be nice to see some selling through tomorrow to get the VIX back to 20.  A fellow can dream, can’t he?


  107. PFE/Pharm – Thanks, I was leaning that way.  Not too many guys left with safe-looking dividends who haven’t already run up.  Of course Gel’s theory is dividend players won’t be as sexy soon but I think a bonus 4.5% is a bonus 4.5% either way. 

    GS/Mr. M – Wouldn’t it be funny if Blankfein went over the edge and started acting like a cartoon villain and unleashed his machines to destroy the markets?  I wonder if THAT would lead to financial reform or if they’d brush him off as a "Rogue CEO"?

    It was a question of when, not if, but the shareholder lawsuits against Goldman Sachs (GS) have begun.

    Air samples did not show high levels of explosive gases before the deadly coal mine explosion, Massey Energy (MEE -1.8%) says. One of Massey’s directors proclaims support for embattled CEO Don Blankenship and blasts unions for spreading a "big lie" that the company traded safety for profit.

    116M at 3:25 – still nothing. 


  108. ZION $28 puts at $1.15 – overnight trade.  Are we buying, or selling?


  109. Pounding the drug stocks today.  GILD, MRK, PFE,  BMY, NVS, SNY all down …..now comes the stick.


  110. Phil  how about our mattress play I am still naked the Jul 10 113 puts thanks


  111. I think the Dem’s will let the dividends off the hook personally …


  112. Atlas….I would think we’re buying the ZION puts.  Looks like the logical trade.


  113. Someone seems to be defending GS at 152, so I’m selling a small number of May 150/130 put verticals. Out on a failure of 148.7 which was the closing low from January.


  114. VIX/Judah – If we break higher here those days may be long behind us and we’ll have to go back to working for a living and picking stocks based mainly on fundamentals.  Nah, that’s never going to happen…

    ZION/Atlas – Welcome!  Sorry, that’s why they say make sure you read a month’s worth of posts and comments to get used to those things.  If I don’t say sell, I’m buying.  There was no context there so my bad – always feel free to ask.

    Mattress/Yodi – I would have been happier if you had rolled up to $114 puts but, as I said above, we’re holding out for about $5 on the $114 puts before we do a 1/2 cover. 

    Deutsche Bank (DB +1.7%) sold Paulson-selected CDOs to IKB similar to those that have landed Goldman Sachs (GS -3.2%) in hot water, reports The Atlantic. "Deutsche’s view was, you’re all big boys, you do your own research. Here is what’s in the security – you choose if you want it or not. IKB knew exactly what they were buying," said a Deutsche Bank trader who sold CDOs. 

    RIMM looking quite perky today.

    133M at 3:51.


  115. judah,
     
    One thing about the low VIX is that if you sell short condors it doesn’t matter as much that it’s low, since the OTM wings that you are buying are really, really cheap. So instead of shorting X strangles (say), you short some multiple of X number of condors using the same margin.
     
    I’m not saying it works out perfectly, but it’s something to keep in mind.


  116. Phil & Pharm
    GILD- either of you expect the downgrade police to beat them up more here or is this about the level for a good entry?
    If so, looking for a spread entry for a Roth IRA or possibly a cash secured put sell?


  117. I am one that is not fond of PAYING for options, however with the low VIX, the cost of buying some are very cheap… will look tomorrow for some that are cheap enough to take the risk. Selling options is less than attractive for the same reason, so will switch hats and become a buyer for a change.


  118. judah – stopped out.  Not a good day for the buy-em-and-forget-em strategy.


  119. pstas – look at my above post or the weekly wrap up.  In short, yes.  I am sitting nice on this pullback, as I covered my longs on Fridays run up.  They could bust through $40, but at that point the world will be coming to an end….


  120. EricL, Thanks. I do need to add something to my repetoire if we stay in a lower VIX world.


  121. Part of the beauty of options is that if things look unfavorable from one perspective, you can always take the other side of the trade.


  122. SS, The pivot point lines from TOS were awfully good today.  Have you looked at those? Had I set and forgot the put I bought at 74.63, I would have made out better. I still think the 5- or 15-min candles have to be combined with some lines, and unless JRW is around in the mornings, I may start using the TOS pivot point lines.  RUT down on a Monday, maybe we’ll have a day or two of selling.


  123. Well… that was a nice day to be in FAZ.  But boy are they few and far between.  Plus, no technical damage was done.  Looks like we could be poised for tomorrow to be just the opposite.  That’s what I’ll be looking for..


  124. CNBC Breaking News:  Blankfein will tell Congress GS did NOT bet against clients! 
     
    ..but if they sell both sides of a trade.. and take a position themselves, don’t they HAVE to be betting against someone?  It’s amazing how far off topic this discussion has gotten.  This is a matter of disclosure.  Plain and simple.  They withheld information.  End of story.  They, along with many other creators of CDOs, wouldn’t even give the ratings agencies all the information they would have needed to make a proper assessment.. assuming they wanted to.  That is plain and simply wrong.


  125. judah – I think you are right with respect to the lines. 


  126. Nice gain on those morning shorts!  TZA $5s ended at .78, DIA $110 puts hit $1.80 – a great start to the week!  Oh yeah, and the oil shorts…

    GS/Eric – 200 and 50 dma at $167.75(ish) so 10% drop is $151 and I think that’s what the support is coming from.  10% over was $184.50 which is close to the top-out point so this would maybe become a channel if this thing blows over but I doubt it will and that means $151 may be the middle of a new channel that tops out at $167.75 and a lower end around $135. 

    Condors – Good idea, Eric.  We used to do them before the crash and they should come back in vogue but they suck when there’s a violent move unfortunately…

    GILD/Pstas – Usually a few days is plenty to let it wash over people but only a 10% drop means they might be resting.  Aug $39 puts sold at $1.75 are not a bad way to poke at an entry.  If they break $42 you can sell June $42s for about $1.50 and the stock and then your’e in for net $38.75/40.38 but with time to roll the caller built in so no worse than a straight entry at today’s price.

    Buying/Gel – Sure, if they are so cheap it makes you sick to sell them – then it’s time to buy!

    And what Eric said!

    Off topic/Matt – You are right, they are clouding the issue big-time!  Of course they are guilty of fraud but they lost money so they are, therefore, dumb and should be let go or something like that…

    No TXN earnings yet?


  127. DIA May 2010 110.000 put
    (OPR: DIA100522P00110000)

    Last Trade:
    0.92

    Trade Time:
    4:02PM EDT

    Change:
    0.06 (6.12%)

    Prev Close:
    0.98

    Open:
    1.22

    Bid:
    0.92

    Ask:
    0.97

    Day’s Range:
    0.79 – 0.93

    Contract Range:
    0.93 – 7.50

    Volume:
    447

    Open Interest:
    8,856

    Strike:
    110.00

    Expire Date:
    21-May-10

    Where are you getting DIA’s hit $1.80??


  128. Phil,
    Waited til after hours to get clarification on this mornings question on ERY.
    My position:
    In either event, here is my position: I am in the May 9/10 spread for net .45 (now .125); also sold the May 9 puts for .45; (now 1.025).
    You replied:
    Your $9/10 spread is not looking good but they were free, your real problem is how to not pay back your putter.  Keep in mind the $9 puts are only "worth" .85 at the moment so it’s a little early to give up .17 in premium but I would take the exit of rolling to the Oct $11s at .95 (+.70) while you wait for the caller to expire (probably get a new caller next month) and roll the puts to July $8 puts  at .85 (maybe a little more than 1x) and you can also hedge the whole bet by selling some USO $39 puts (now .45) for .75 if we get a dip as you can’t lose both and USO is easy to roll along.
     
    No problem on rolling the putter and letting the caller expire, I get that. I don’t understand rolling the May $9 long call to Oct $11 call? Perhaps I am not looking at it from the same perspective? If my view is that oil will go up  from here, then this seems backward. Is this suggested adjustment based on an assumption of further decline in oil? 
    Maybe its just Monday-itis but would appreciate your elaborating on this a bit more if you have time.
    Thanks


  129. Pharm… I receive a lot of stuff every day that is nothing more than "copywriting hype", but one caught my eye. This relates to a biotech company that is in Phase 11 trials and will soon be releasing data that supposedly will be very positive. The company (small) has a market cap of only 250 million, and is working on a product that will treat nerve damage in diabetics.( 2.5 billion market) In the Phase 1 trials the drug was effective in 75% of the recipients, and no safety issues. The drug, evidently, can turn genes off in any organism. Might you have a wild guess which company might fit this scenario?


  130. Phil, 
     
    Last Wen. at 10:44am you had this trade on:
    OIH insists on proving they can hold $130 so I like selling the $131 calls for $3.45.
     
    At weekend Wrap-up you had this on the Wed.’s trade
    OIH $131 calls sold for $3.45 – out at $3.80 – down 10%
     
    I didn’t see the out at $3.80 trade Last Wed, Thu and Fri.  Do you have a 10% stop lost on short term trade?  If it’s true, can you put on the websit so we can follow?
     
    Thanks.
     
    But I didn’t see the out at $3.80


  131. Sorry, last line was extra…


  132. gel – Sangamo Biosciences


  133.  PHIL/ PHARM
    What do you think about writing ITM 17.50 DNDN calls?  If provenge is approved, you make 4%ish in 25 days. If it is delayed or denied, as long as the stock stays above 16.50ish, we can buy back those calls.  Now I am going to wait for you to tell me how not to tie up all that cash long the stock and be synthetic long the stock through short puts at 17.50?  Am I catching on?


  134. The ‘drug’ applicable to many diseases gel, but I don’t buy the hype.  They are developing engineered zinc finger DNA-binding protein transcription factors (ZFP TFs) for therapeutic gene regulation. We couple the ZFP DNA binding domain to a functional domain, creating a ZFP TF™ capable of controlling or regulating a target gene. For instance, an activation domain causes a target gene to be “turned on.” Alternatively, a repression domain causes the gene to be “turned off.”  
     
    In other words, they are developing a protein from what I can tell that interacts with ZFP to do what they want it to do.  In my mind, siRNA is the way to go. 


  135. DNDN/salv – that is a question for Phil, as I am no expert in moving options around.  As for DNDN, if it is not approved, then they have some serious problems….


  136.  Pharm:
    Thankyou for your comment.  I agree, if Provenge gets denied, then DNDN has going concern issues.  IF it is delayed, maybe i get a chance to buy back the short calls.  Just trying to figure out id buying a atm call and shorting an atm put would get the job done


  137.  Phil,
    TZA did you mean the June $5 call on close? I have May $5 call closed at .62
    On the entry you mentioned .53 I assumed it meant May $5 call since the LOD on June contract is  .59


  138. Salv -

    Look at the short strangle on August DNDN, say the 31P and 45C- a credit of $11.80 with  BE about 19 and 56 with the stock at 40 – what do you think??


  139. Salv -
    DNDN – If you combine the short strange with 1/2 May 44P/May 33Pbear put spread at 4.00 then BE runs from 0 to 51


  140. (Olin )  OLN    1Q earnings .18 vs .60 1Q 2009 (not comparable?)        Sales 1Q 362.0 M vs 400.6M in 1Q 2009
    might sell off  tuesday


  141.  edro/ DNDN
    I like that short strangle but my only concern is if the stock moves beyond 56.90, the topside breakeven.
     
    What do you think of :
    short May 17.5 calls
    Long May 41 calls
    Short May 41 puts
    Net credit of $24.40
    If stock moves above the 41 strike than net profit is .90 per 16.40 so +5% in 25 days.
    Downside is 16.40ish.  ANything in between is preferable so the short calls can be bought back.
    What do you think?


  142.  edro / DNDN:
    Adding that bear put spread though increases risk topside in case of an explosive break.  I guess I am coming from it from a different angle than you: I am more concerned if Provenge gets flat out denied.  If it gets delayed, that is great as I can buy back the short calls on a dip for a profit.  If it gets approved, I have no idea if it breaks 50 but with all the excitement surrounding it, I wouldn’t be surprised. Either way, impossible to know so I think I am being more conservative than you.  
     
    I look forward to Phil’s comments on DNDN.


  143. DIA/Lolo – You’re right, that was the Junes, not May, the May $110 puts are just .94 – slight difference!

    ERY/Pstas – The Oct $11 has the same upside delta as the May $9s and, if oil goes the wrong way, will be much cheaper to roll down.  I wanted to get to a safe(ish) place in case oil still runs up into summer driving season (end of May – July 4th weekend) and spending more now just to keep the strike the same didn’t seem worthwhile, especially with the nasty spreads on the long calls.  Ideally, you can go to Oct $11s at .95 and offer $1 to roll down to the $7s.  From the Oct $11s, you can still sell the June $11s for .20 with plenty of room to roll so a clear path to zeroing out the basis on the long leg.

    OIH/Bob – We flipped long on oil on Thursday morning, OIH had fallen to $128 but then popped back up and broke stops.  Do me a favor and read the Strategy Section and let’s figure out what’s not clear about setting stops so we can do a better job laying it out for people.  A quick rule of thumb is, if you are still in a trade that’s down 20% – get out.  If you don’t want to get out, then ask about adjustments but don’t expect to have every single exit posted, when the market makes a big move like it did last Thursday – I’m a little busy too but I can’t assume that placing long plays on oil and UNG would lead someone to expect that short OIH calls should come off. 

    DNDN/Salvum – I wouldn’t.  That’s an insane stock and can blow right through.  I know it’s tempting but they don’t just make up these options prices – they are somewhat of a reflection of the actual risk.  I see your logic (as I assume you mean buying the stock and selling the call) as it does seem very unlikely they flop below $17.50 so you are catching on for sure but still it’s not enough payoff for the risk (ie. I can think of better ways to make 4% in 25 days and certainly safer ones).  How about buying the June $30 calls for $14.70 and the June $50 puts for $12.35 ($27.05) and selling the $40 puts for $6.75 and the $40 calls for $8 for net $12.30 and if DNDN finishes between $35 and $45 you get $15 back (up 22%) with a break-even between $32.30 and $47.50 and if there’s a blow out in either direction you get $10 on on side and hopefully you can cash out near $2.30 on the bad leg and leave the very out of the money naked put or call.  Just a fun way to play them….  Actually, for $5 more you can get the Nov longs and risk rolling the putter and caller along to get more premium every month.  If you did that you could start with May and just hope they delay the results and keep the premiums flying. 

    Keeping in mind that DNDN is pretty much a one trick pony and that the approval is mainly priced in and that they could go to zero, I think the prudent trade is the 2012 $20s at $25, selling the Jan $45s for $10 and buying the Jan $20 puts for $3.  That puts you in the $25 spread for net $18.  To the upside, you can roll the Jan $45s to the 2012 $55s (now $9) so $35 possible upside.  Flat you wipe out the Jan callers and you are still $15 in the money with a year to sell calls.  Dowside you have puts that will give you a profit if DNDN goes bust or if (even better) if there is panic selling on a delay

    Here’s another interesting DNDN play.  It’s only $6.15 for the Jan $25/35 spread and you can buy 2 of those and sell 1 $55 call for $6 and that puts you in for net $3 on two $10 spreads so $14 of upside between $35 and $50 before you owe the caller a dime.  $64 is where you would start to lose money to the upside so break even is $28-$64

    TZA/Minijoe – It seems I was looking at June in both cases. 


  144. Great post by Fibozachi:

    In an effort to dredge a moat around market share for Amex & Arca, the NYSE has implemented a new Penny Pilot "Premium Tier" pricing schedule for the options of 15 specific issues.  Liquidity providers transacting serious size across these anointed sticker symbols … AAPL, BAC, C, DIA, EEM, FAZ, GDX, GE, GLD, IWM, QQQQ, SPY, UNG, USO & XLF … will (yet again) enjoy additional rebates as the NYSE attempts to [1] stave off competition from other options exchanges and [2] further buoy an anemic equity market, which continues to plow forward on phantom volume at 3 am on Sunday night (like the accelerator of a Toyota Camry beneath a sleep-driving Ambien junkie approaching a raised drawbridge with both eyes closed shut, one hand on the wheel and the other on his sixth bear claw).


  145. Thomas Montag, the former head of sales and trading in the Americas at Goldman Sachs Group Inc., called a set of mortgage-linked investments sold by his firm “one shi**y deal,” according to an excerpt from internal e-mails released today by Senate lawmakers.

    Mark Zandi of Moody’s says the recent strength in housing data is almost entirely due to seasonal factors and government intervention.  Zandi says housing data is likely to dip again after the April data is released.

    103: The number of months it would take to sell off all the foreclosed homes in banks’ possession, plus all the homes likely to end up there over the next couple years, at the current rate of sales.

    Does this REALLY not matter?  How can we know it doesn’t matter – no one has ever been this in debt before in the history of the World!  Of course the people setting the record debt will tell you it doesn’t matter, right?

    This is the best – from Barry’s Blog.  First, a chart of the major improvements in consumer lending the markets are celebrating:

    Then the FASB rule change that led to the change in data (we talked about this looking like BS a while back but we didn’t know what had happened):

    As of the week ending March 31, 2010, domestically chartered banks and foreign-related institutions had consolidated onto their balance sheets the following assets and liabilities of off-balance-sheet vehicles owing to the adoption of FASB’s Financial Accounting Statements No. 166 (FAS 166), Accounting for Transfers of Financial Assets, and No. 167 (FAS 167), Amendments to FASB Interpretation No. 46(R). Domestically chartered commercial banks consolidated $377.8 billion in assets and liabilities.[...]

    Then we have the chart sticking with the original way of measuring Consumer Lending:


  146. Phil,
     
    Got it, thanks.


  147. Pharm-/-Phil -  thanks for the info on GILD.
    BTW, do you know of any index which corresponds to the biotech sector in any meaningful way?


  148. ERY- Phil- appreciate your patience in explaining in more detail.
    That makes more sense as long as oil stays near its current price- a big if.
    As an alternate consideration , given an objective of getting out near/at even – sell the May 9 call for .25; leave the $10 caller to expire and roll the putter along to eventually collect net $.30? Is that premise valid?
    Don’t mean to get so detailed but I don’t have a lot of experience working out of these more complex multileg plays so I am trying to hone some skills here.
    Thanks,


  149. Phil, new subscriber.  Can u give me some framework on how u identify good candidates for calendar spreads on these earnings plays you’ve laid out (IBM, AMZN, etc.) 


  150. Debt- right now, it does not matter.
    Like a most everyone here, I have been reading all I can to get a handle on where we go from here. There are compelling bull and bear scenarios. I liken it to a tug of war between a cyclical recovery and secular storm clouds on the horizon. Over the long haul, betting against the powerful freight train that is the US economy has been a losing proposition. Also over the long haul, betting against fundamentals has likewise been a loser. A classic dilemma. (Ironically, the origin of dilemma derives from choosing which horn to grapple on a charging bull- impaled regardless).
    Logic, however dictates a third option- getting out of the way. Perhaps the wisest choice for the near term.


  151. It took sitting on both hands to keep from loading up on FAZ last night AH.  Everything points to another down day in the financials… which is precisely why they will likely go up.  We should find out quickly whether human logic or programming logic rules the day.


  152.  Well it seems GS is on trail all day today in the senate, so should be a catalyst one way or the other
    http://www.bloomberg.com/apps/news


  153. Good morning!

    Biotech/Pstas – IBB and BBH

    ERY/Pstas – My concern on the the sold call side is that we are, in fact heading into a correction and 10% down in Energy is 30% up in ERY.  My concern on the sold puts side is that Memorial Day is the big gas weekend and from 2 weeks before it until a week after July 4th they can make the most insane claims about consumption that they want to and spike the markets – taking advantage of the refiners’ normal switch to summer driving blends.  So it’s just a wild swinging thing to try to short strangle.   Fundamentally, I still don’t see how the global economy can afford $85 oil without crashing so at least there’s probably a top but we couldn’t afford $100 oil either and we had it for 10 months in 2008.  This time is a bit different becuause we had the stimulus checks paying for the fuel plus the consumers simply ran up record debts paying for it (and 6% more of them were employed) - now they are tapped out and maxed out so they more literally cannot afford it. 

    Welcome Kickstand!  How do I identify good candidates?  Well the first thing you need to understand about me is that I’m not an options technician and I don’t play delta differentials or anything like that.  Basically, I’m an old-school fundamentalist who uses options for leverage and to take advantage of the greed and foolishness of others.  So when I’m looking at earnings plays, I look for a lot of things.  Since I’m overall market bearish at the moment, I prefer to find earnings plays that are bearish as they have less resistance.  Then I look for companies that look toppy, companies with unrealistic expectations or companies with all the possible "good news" baked in.   I didn’t bet against IBM because I don’t like them, they are one of my favorite stocks but, because they are one of my favorite stocks, I was pretty damn sure they wern’t going to hold $132 on the announcement.  Had they not had the run-up that inflated the May call prices, however, I wouldn’t have shorted them anyway.  AMZN was a different case as they were just silly although they’ve held up very well considering their guidance.  Also, here’s what I said to pretty much the same question on the weekend post:

    Relaxing/Gel – What’s that?  I did have a good weekend though with plenty of kid time, which is my favorite kind of time.  I don’t like to "pick" earnings in advance – it’s kind of like picking a wave in advance, you have to let things wash over you and then one will eventually present itself.  It depends on the day, the sector, who else is reporting, the economic news that will accompany the report – whether it’s an AM or PM announcement (how much time the market has to digest) and, most importantly, what the pre-earnings run looks like.  That’s why I usually wait until the afternoon to decide what to play the next day but it is very helpful to get suggestions from you guys as I sometimes get distracted doing too much research on a company or sector (you’d be surprised how many things I reject before I make one pick). 

    Dilemma/Pstas – Sounds like cash is still king?  That’s why I still can’t get a buy list up – I just can’t do it when I think it’s wrong timing.  It would be annoying if we begin to grind down the way we ground up – then I really will have to make a Sell List, and THAT I have plenty of candidates for! 

    GS trial/Micro - Yay, I can’t wait:


  154. This has feel of bad, bad day—-unless you are short….Funny, I cannot point to anything thing other than fundamentals.