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Wednesday Worries – Greece Closed & Japan Close to the Edge

Lord Blankfein, the peasants are revolting!  Lloyd: "I know, they stink on ice."

Greek air-traffic controllers and teachers walked off their jobs and shopkeepers shuttered their stores to challenge Prime Minister George Papandreou’s latest decision to cut wages and pensions and raise taxes in return for a 110 billion-euro ($143 billion) rescue package.  Protesters trying to gain access to the parliament building clashed with helmeted and padded riot police and threw sticks and stones and chanted slogans when they were repulsed. Police, who said 18,000 people are participating in the marches, shot tear gas at other protesters who lobbed rocks and set trashcans on fire at the central bank building near the parliament.

Today’s general strike, the third this year, follows Papandreou’s announcement of a second set of wage cuts for public workers, a three-year freeze on pensions and a second increase this year in sales taxes and the price of fuel, alcohol and tobacco in return for a bailout from the European Union and the International Monetary Fund. Union groups have called the austerity measures “savage.” Demonstrators daubed “IMF OUT” in red paint on pillars around the centrally located Finance Ministry. Most stores in the main shopping street of Ermou were open for business, with some lowering shutters over display windows to protect against any violence.

  • Air traffic controllers shut down Greek airspace
  • Government workers shut schools and hospitals
  • Gas stations closed to protest the fuel-tax
  • Dock workers grounded the ferried
  • Power company employees are striking
  • Journalists are on strike so there is no local news covering any of it!

It's one thing to have these egg-headed discussions about austerity and cutbacks and for the EU and the IMF to get together and tell the Greek people it's time to pay their debts but it's quite another thing to actually get it past the people who's lives these measures will affect.  Imagine if the IMF told Americans that we needed to cut government spending by $1.5Tn (the equivalent) and that wages would be frozen and retirement will be raised from 65 to 70 effective immediately so hopefully you die at work and save us the Social Security payments….  We have Tea Party protests now! 


Fifty-one percent of Greeks say they won’t accept new austerity measures and would join protests against them, according to a poll of 1,000 people by ALCO for Proto Thema newspaper from Apr 27-29. That compares with 33 percent who would accept them.  Support for the government fell to 29.7 percent from 32.1 percent last month, according to the survey. “These measures are unjust and should be paid for by those politicians over the past 30 years who have led us here,” said Barbara Tzerbou, 37, a lawyer who traveled to central Athens with her brother to participate in her first-ever protest. Papandreou “had choices; we didn’t need to get as far as the IMF,” she said.

Make no mistake, Japan is next.  Their consumers have tightened their belts for 20 years to pay back for the collapse in the 80's but that belt is out of notches and Japan can no longer borrow money internally as their people are tapped out.  S&P indicated that a fiscal plan scheduled for next month by Prime Minister Yukio Hatoyama’s government may be key to whether it will cut the nation’s sovereign credit rating.

At stake for Japan is keeping the AA grade after S&P lowered its outlook for the rating in January, and shoring up confidence that it will avoid contagion from a Greek crisis threatening to engulf other sovereign borrowers. Finance Minister Naoto Kan said this week that Greece has shown the need for Japan to take a “very firm” stance toward reducing debt, which is approaching twice the size of Japan’s economy.  “There is a growing sense of urgency, even though it’s stated very quietly, that the situation isn’t sustainable,” said Hess, who was in the capital of Uzbekistan to attend an annual meeting of the Asian Development Bank.

Japan's government has an election in July but needs a budget next month that reduces the deficit from 9.4% of GDP to 3% of GDP but the whole thing is a joke as Japan is still borrowing money by selling 10-year notes at 1.29% because the Japanese people are offered 0% by their own banks and tend to be long-term savers.  Also, 20 years of DEflation has given the people a false sense of security so 1.29% seems pretty good when things get cheaper every year.  The rest of Asia is fighting INflation and if prices go up OR if rates go up OR if Japan is forced to sell 10-year notes "outside the family" – that 9.4% deficit could jump to a 20% deficit overnight if Japan is forced to pay the same 3.72% the US does.  Of course, if Japan has to compete on the open market for loans – EVERYONE's rates will be going up!

So party on Garth - the dollar is fetching 94.7 Yen this morning, that's up 10% since Thanksgiving while oil priced in Yen is now hurting the Japanese consumers as much as it hurts us (they had escaped some of the pain with a very strong Yen to Dollar in the last spike)Oil priced in Euros is even worse, now passing 2008 highs as the Euro falls below critical at $1.30 (now $1.289).  At the end of 2008, oil was priced at $100 American and that is the pain currently being felt in Europe as their currency declines while oil continues to be manipulated higher by investment banks who are stealing more money every single day than all of Goldman's sub-prime deals put together.  Now that bubble may be popping too as, once again, they have bankrupted the people who have to, ultimately, buy the oil.

Putting the global cherry on top of our EDZ and EUO hedges is State Street Global, who put an "underweight" position on the largest emerging markets including China and Brazil on concern shares are expensive relative to smaller developing nations as economic growth slows. “We’ve been a little cautious on the larger countries in emerging markets, China amongst them, that seem to have reasonably rich valuations,” Richard Lacaille, London-based global chief investment officer at State Street Global Advisors, which oversees $1.9 trillion, said in a Bloomberg Television interview in Hong Kong

The MSCI China Index trades at 14 times estimated profits and Brazil’s Bovespa gauge fetches 13 times, compared with the multiple of 12 for the MSCI Emerging Markets Index. Chinese manufacturing grew at a slower pace in April according to a survey of more than 400 companies released today.  BlackRock Inc. is among money managers reducing their holdings on Chinese stocks on expectations that economic growth has peaked. The BlackRock Emerging Markets Fund has widened its “underweight” position for China versus the MSCI Emerging Markets Index to about 7.5 percent from 4.6 percent at the end of March, the fund’s London-based co-manager Dan Tubbs said.

The Hang Seng dropped another 435 points (2.1%) this morning, down to 20,327 but the Shanghai bounced 0.8% but is still off 13% for the year so far and the rise in the Shanghai smacks of manipulation.  Taiwan fell 3% and India dropped another 0.5% so it was JUST the Shanghai that went up IN THE WHOLE WORLD.  Japan and Korea are still closed for holidays and, at the moment, they have a LOT of catching up to do when they come back. 

"It's a bit of a bloodbath today," said IG Markets institutional dealer Chris Weston in Sydney. "We are seeing aggressive short-selling of materials and other high beta names because there's still no clarity on the resources tax and the European debt crisis and Chinese manufacturing looks to be slowing down. It's a perfect storm, but we've got great value in certain stocks, which could trigger broker upgrades."

I love that attitude, which is the norm among investors:  "Hey, things are catastrophically bad but maybe GS will put a stock on their Conviction Buy list and everything will be all better…"  Europe actually opened up this morning and gave a brief pop to our futures but now they are back to roughly 1.5% drops with the DAX failing 6,000 for the first time since March and that would be about 1,157 on the S&P, right where I said we'd be at the conclusion of our 5% Rule Review!  I also said "not holding that is going to be nasty" so look sharp today as we exepect at least a 1% bounce off that line.  Anything less will be LAME!  

Of course we are in disaster hedge heaven because THIS IS A DISASTER!  We'll be looking at layers to go lower and also as a way to lighen up because, the same way we took 300% profits off the table on the way up, we need to do the same on the way down. 

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  1.  Phil / TBT
    Opened last week long sept 43 calls, short 48 sept calls – then you said if the sept 43 puts get to 2.5 then to sell them.  Think I should go to a lower strike on the puts?  thanks!

  2.  Phil, regarding Greece I was watching a show on TV5 (French TV) and a Greek journalist (no bleeding heart libraaaal) was making comments that the Greek population doesn’t understand that they have lived a charmed life for many years and that it cannot go on. She mentioned public employees retiring between 42 and 45 years old for example. A large percentage of people not paying their income taxes, building 2-story houses and not finishing the second story so not real estate taxes get paid because the house is not finished, rampant corruption and on and on… Obviously, something needs to be done! Not sure they have the right recipe now though. As we all know, the current bailout if not for Greece but for the foreign banks! The French politicians understand that as even the socialist party voted with Sarkozy to lend money to Greece (with interest). French bank exposure to Greece is one of the highest. It seems that German politicians have not gotten the memo yet! Some interesting days ahead!

  3. stjeanluc; the facts about Greece and its behavior in general was known for 50 years, Greece was always admired for their lust for life yet their irresponsible living was also known.
    The EU has behaved like a permissive parent towards a child.

  4. MYGN/ Pharm    I have May20p short for  .45, what should be next move?

  5. Phil,
    I sold XOM 3 July 67.50 puts and 4 July 70 calls after rolling making money on the puts.
    I had the short 65 puts but noticed you mentioned that 67.50 looked like a good floor.
    What would you suggest now? Thanks

  6. Down and out.  Downgrade police are out today.  This is their low for the past 2 years, no debt, and tons of cash. Aug 19s possibly for an even move..

  7. judah – are you here waiting for the setup?

  8. Wheee doggies, what a move! 

    Those bottoms I mentioned yesterday are: Dow 10,800, S&P 1,170, Nas 2,400, NYSE 7,430 and Russell 690 – I’m really surprised we’re here in 24 hours and I sure hope the Dow and RUT hold it together or this will go beyond ugly!  3 of 5 below is a terrible signal already…

    Certainly this is not time for bottom fishing so we need to get over yesterday’s afternoon highs before we even think about buying something – no matter how cheap it looks! 

    Spain’s 10-year spread just hit a new all-time high compared to Germany so that’s a crisis that’s not going away today. 

    SDS is at $31.25 and you can buy the June $29/33 bull call spread for $1.60 and sell and sell the $29 puts for .80 for net .80 on the $3 spread and SDS bottomed out at $28.37 so you are really betting that the S&P won’t flip around and fly back over 1,200 so fast you can’t get out of the spread.  Meanwhile, if we keep going lower, it’s a nice 275% gain. 

    This is the kind of play you want to roll 1/2 of your profits into if your original Disaster Hedges are already way up.  Then you put a 50% stop on the new set and you lock in 75% of your current profits while keeping another 68% upside from your original position.

    Another big hedge is QID June $15/16 bull call spread at $1.05, selling the $15 puts (lower than QIDs lows) for .50+ (now .30) if QID ticks lower but otherwise, gaining .95 off $1.05 in a month is just fine! 

    Remember these are ROLLS so we can take out WINNING short plays OFF THE TABLE – I do not like these as new plays unless we fail to bounce

    My favorite upside play at the moment is ERX June $37/41 bull call spread at $2, selling May $30 puts for .60 for net $1.40 on the $4 spread (180% upside) and June puts can be sold to further reduce the basis.

  9. SS, Yes, though having trouble believing it could be an up day, though maybe it will be when the European markets close.  I might wait and find a good entry for TZA instead.  I’m undecided and futzing around with some strangles.

  10. SPX is sitting on the bottom of support from mid-March. There’s another layer of significant support around 1150, which it looks like we may at least touch.

  11. Yeah Judah, that’s what I am looking for.  I am waiting for the buying to end (early stick) and the selling to continue.  I am looking at the 3m10p chart for entry.  BTW, I am all out of strangles now.  TOS changing things has soured my mood on them.

  12. Hi, Peter, regarding your comment last night, you said we need a larger reserve.  Do you have some idea how much reserve might be sufficient?  We used to have the rule of $20K reserve per strangle.
    Also, you said "The margin calculation is continuous, but would stop at the -12% & +10%."  But I suspect that they slap on additional penalties if you have too many shorts.

  13. SS, Just looked at my chart, and guess I missed it if we are going up.  I’ll wait for the return trip.  And, yes, the continual change in margin requirements is making me question the strangles.  I have made steady money on them month after month and I will likely continue albeit with smaller numbers.  

  14. Long some EWZ May calls for a quick bounce.

  15. TBT/Salvum – Wow, we are slamming into that $42.50 line aren’t we?  Well, this is another CDS crisis and we either recover from it or the world ends so place your bets accordingly.  Rates are not going down (obviously) just money is flying into US treasuries at an alarming rate and depressing TBT.  As long as you are out in Sept, it’s always good to roll down if you can buy $1 of intrinsic for .40 or less (was .50, time to get greedy)

    Greece/Stjean – It’s all relative.  Whatever people are used to, they won’t want to cut back.  Greece has many problems but this is how revolutions begin, when someone pushes the proletariat too far…  I see you’ve heard enough of the MSM talking about Greek tax cheats and hidden swimming pools and early retirement etc but that’s nothing compared to the scams run in this country by multi-Billion dollar corporations who evade all taxes, bonus out 42-year olds more money (Goldman paid out $23Bn in 2008 – enough to solve Greece’s entire debt) than any normal person would need to retire and people like Warren Buffet pays less of his income in taxes than his own secretary.  What will they right about America when we’re rioting in the streets to protest tax hikes from the lowest level in the Western World? 

    XOM/Jomp – You are short on both ends?  Why change it then, they’re close enough to target and not too likely to fly up or fall much futher.

    Moody’s may downgrade Portugal 2 notches.

  16. Hi, Judah,
    Because my BP was hurt a little more by this morning’s dip, I rolled my May 1080 puts to June 1000.  I got a small credit for the roll, maybe because of the jump in VIX.
    Be careful, though.  I bid $0.20 better than TOS’s Mid, and the order was filled almost instantly.

  17. Phil – I remember, sometime back you used to post a table with different levels for the different indexes. Seemed pretty helpful to look at the key levels in one place. Any way you can bring it back?

  18. Good morning Phil — Bucy october 65 short put now have about $5 premium left — what level stock price should I look at possible adjust it.  I also have Oct 90 call — not much margin left for 2x roll – I am looking for even roll .  thx

  19.  PHIL / TBT – so, roll down my short calls to 47? AND sell the short 42 puts or still the short 43s?

  20. Volumes are still far from panic levels, just 45M on the Dow at 10am.

    OopsApril ISM Non-Manufacturing Index: 55.4 vs. 56.1 expected and 55.4 prior (>50 denotes expansion). Prices rose to 64.7 from 62.9. Employment fell to 49.5 from 49.8. New orders fell to 58.2 from 62.3.

    April ADP Jobs Report: +32K vs. +20K expected and +19K prior (revised from -23K). Employment has now shown modest gains for three months in a row.

    April Challenger Job-Cut Report: 38,326, down substantially from 67,611 prior and the lowest level in nearly four years. "It is certainly a promising trend that suggests most employers are increasingly confident about conditions going forward."

    MBA Mortgage Applications: +4% vs. -2.9% last week. Thirty-year fixed mortgage rate decreased to 5.02% from 5.08%.

    Greek protests have turned violent: Three people have died and at least four are still missing after a fire bomb hits a bank in Athens. Twenty people are still trapped on the floor above the bank.

    ECB council member Axel Weber tells German lawmakers that Greece’s fiscal crisis is threatening “grave contagion effects” in the euro area, foreseeing more turbulence in the weeks ahead if Germany doesn’t ratify the Greek aid plan rapidly.

    Nice timing!  The European Commission raises its growth forecast for the eurozone to +0.9% this year from +0.7%. But the upgrade needs to be tempered with caution: Officials say the outlook is surrounded by "high uncertainty" as seen by "recent tensions in sovereign-bond markets."

    Moody’s puts Portugal’s AA2 rating on review for possible downgrade

    "You can’t shrink your way into prosperity," says one business professor, explaining why companies have recently started to rethink major layoffs, opting instead for smaller, better targeted actions. Case-in-point: Honeywell (HON).

    GDP growth in H2 will likely slow, Calculated Risk says, notwithstanding bullish forecasts. Among the reasons: 1) Stimulus spending peaks in Q2. 2) The inventory correction has run its course. 3) Recent gains in consumption were a result of less saving, not income growth. 4) There is a slowdown in China, and Europe has some problems.

    Health Secretary Sebelius calls for a national inquiry into the data behind rising health insurance costs, pointing to WellPoint’s (WLP -1.5%) mathematical errors that prompted it to request, and then withdraw, price hikes of as much as 39% on individual plans.

    Memories: Former Bear Stearns execs plan to testify they did everything possible to save the firm but its collapse was unavoidable. "The market’s loss of confidence, even though it was unjustified and irrational, became a self-fulfilling prophecy," says former CEO James Cayne.

    Notable earnings after Wednesday’s close: BMC, CBS, CECO, CLWR, CXW, EXPD, JDSU, KIM, LVS, MCHP, MUR, ONNN, PRU, REG, RIG, SYMC, VALE

  21. Phil, why do you call this a CDS crisis?  Because of the increase in spreads and if Greece defaults it will cause a domino affect?

  22. Pssshhhh! Anybody who believes Wellpoint made "mathematical errors" raise your hand – I have a bridge to sell you – I hope Sebelius doesn’t believe that either. 

  23. DIA Mattress:  If I recall correctly (too lazy to search yesterday’s comments), the plan is to roll to Sep 111s?

  24. Cwan, By going down to 1000 on SPX, did the BP issue resolve itself?  I’m thinking of doing a half/half thing, rolling 1/2 down and 1/2 out to June.  I’m a model of indecision this morning.

  25. ITMN down 77% what is going on there???

  26. Phil, POT May 105 naked puts…roll to Sep 90 puts or 1.1x Sep 120 callers? Or something else?

  27. Pharm – GILD waking up this morning.  Any news?

  28. Morning phil;
    If i wanted to make a trade for a friend who has 3k. would selling outs on WFR or spwra be good to day ?
    is solar on shaky grounds with countries failing ? or these are solid companies anyway.
    if not what would you recommend if any. TASR perhaps ?

  29. ARIA just announced MRK is taking over all development costs for their lead compound.  I think it will be a slow grind from here (up and down) and might be wise to take some profits off the table.  I am also selling the May $3.5 P for 25c for a better entry should they pull back a bit.   People may view this as a negative, but it gives me conviction that MRK likes what it sees.  I am just being conservative on this end after yesterdays ITMN move.

  30. S&P fell from 1,208 to 1,160 and that’s a bounce to 1,170, which is the 50 dma so that’s what it’s all about today – holding or not holding that line.

    Copper testing 3.10 from below (ROFL), gold at $1.166 and needs to get back over $1,170 but needs to test $1,150 more I think. 

    By the way, I know I missed questions last night as I was working on my 5% article so feel free to paste ‘em up here as I almost never remember to go back once I start a new post!

    EWZ/Eric – Not with STT telling people to get out, too scary. 

    C hit $4.05, that’s panic in the US! 

    FAS split 3:1 today.  Holy cow you need a scorecard to keep up with these guys…  This is a great break for us as we can be much more comfortable spreading them down here when we get bullish again. 

    Levels/Trad – Sure if I can find it.  I usually call it a "Big Chart" and it’s a lot of work doing the plots so remind me on the weekend. 

    BUCY/Gucci- Unless you have some pressure on you, there’s no hurry. 

    Oil up 2.8M, Gas up 1.2M, Distillates up 600Kb so not good for poor oil at the moment.   I still like the ERX spread though as $80 is a bit too low, too soon.   I am for buying oil futures over the $80 line with tight stops

  31. Phil, what do you think happened to WHX?

  32. Yodi – ITMN, I posted yesterday that the FDA cut them off at the head.  Not approved.
    GILD and overall sector rotation – I think hedge funds are moving their money overseas (AUS) b’c of the rate hike, and the stocks that are flights to safety are getting a haircut.  I am sticking to my convictions with GILD.  Just have to hold my breath a few times, sit back and relax.  Very frustrating.

  33. judah – taking a stab on puts with the 3m8p cross.

  34.  ssdisk, 
    what’s 3m8p? Sorry I missed the discussions.

  35.  Good morning, been a member for a few months but haven’t posted yet.  Phil, I have learned a lot about more complex options strategies by following this blog.  My day job is in commercial real estate market, primarily in hotels, so that’s been a disaster for the past few years.
    I am long the MON Jul 60/65 call spread for $2.64.  Not sure where the bottom is to MON, do you think that position needs any adjustments as it’s still $1.24 in the money.

  36.  PHIL / TBT
    DOnt know if you missed this:  - so, roll down my short calls to 47? AND sell the short 42 puts or still the short 43s?


  37. Hi Phil ,
    SSO holding May vertical 42/44 pd 3.18 now 1.39 and the short sold for 1.79 now .54 sold the 42 May putter for .82 now 1.65 your advice pls Thks

  38. Phil
    is BP incident should be bullish for SPWRA?

  39. Hi Phil
    I have a C 2012 bull call spread (5/7.5) and naked 2012 put (5).
    I’m thinking of adjusting the put downards taking advantage of the move down in C as follows.  Am I doing the right thing do you think?
    +10 2012 5C / -10 2012 7.5C
    -10 2012 5P
    Thinking of rolling the 5P (currently $1.00) to 3x 2012 2.5P (currently $0.37).  Not doing anything with the calls at the moment unless you advise something.
    Many thanks.

  40. I am in the TBT Jan11 40/50 spread at $3.52 worth $3.73 now.  Can you suggest a roll for this or should I let it ride?

  41. Volume appears to really be dropping off.  Looks like the program could easily take control and grind us higher again..

  42. SS, This is a real pivot area, bounced all around here yesterday afternoon (I have the whipsaw marks to prove it).  I’m rolling down some strangles.  You’d think 12% away with 2 weeks left would be enough.  Rolling, rolling, rolling.

  43. Pharm – Do you believe ITMN can recover from this setback? It’s bouncing above 10 now, so people do believe there is some value in the company.

  44. balancenv – sorry, 3 minute 8 period moving avg. chart.  Judah and I have been experimenting with different timing of charts to try to get a good signal for entry/exit on IWM puts and calls.  I am now out ot the puts BTW.

  45. Phil/Levels – I was actually not refering to the big chart/plots. You used to have an excel like table with each morning post with the key levels for each index (2.5% down, 5% down, 20% bounce etc etc).

  46.  ssdisk, be careful since 1. the europe is closed now and 2. i think the bull will try to retake the 1180, at least for now.
    speaking of iwm trading, I remembered edro recommended woddiescci with iwm and I have been experimenting with it. Looks good but only paper trade right now. 

  47. jusa — are you rolling your may spx to june or just roll down still in may, what strike are u looking at …. does your BP change in any way.  My BP hurt bad this morning and I have may spx 1080 and 1090 with 1255 short call, do you think lower the caller side to 1230 would be wise ? thx

  48. ITMN/Trad – FDA wants a new trial.  That will take a year or more.  Setting up the trial will take at least 6 mo.  Data 6 mo.  Resubmit 6 mo.  Easily 3 yrs out.  Not interested.  Overall, I think their drug is crap, but IPF patients have no other hope.  A few things in the pipelines of other companies, but that is years out as well.  So in short, I am not interested in them any more.

  49. Phil, how much lower do you see SPWRA going? Also, I had a small position in ES and was doing alright until that jack@ss Cramer told his minions to sell, was curious your thoughts on thoughts on the stock…

  50. Phil, I was just in EWZ for the bounce; it was very oversold. Got about 1.10 worth of move with 20 contracts; that made up most of my opening losses. :)

  51. Let’s see if 1163 can act as support now on the /ES.

  52. Phil – remind me to write a script for you that checks for new comments in the previous post and emails them to you once you begin writing a new one

  53. Gucci, I’m rolling about half down to May 1040, and sitting tight with the other half for now.  I think 1040 will be fine with just over two weeks left (famous last words).  If SPX doesn’t hold 1150 this week, I’ll roll the other half out to June.  My personal preference (not necessarily Peter’s rules) is to finish the strangles in the month I started them, rather than roll them out a month, so I usually start by rolling down 2x rather than out.  I don’t know what is safe on the call side, 1240 or 1250 is probably fine.  We were at 1220 not too long ago, so I am reluctant to roll the callers down to 1230.

  54. Phil well here is your master puzzle ITMN  Pharmboy correctly commends no more interested but what to do if you in the play? sold 35p Jul for 6.80 now 24.47 sold 50c Jul for 7.77 zero (good) 44p July sold for 6.80 now wopping 33.25
    fortunatelly hold only 2 options of each. First thought let the dust settle. By the way TOS Margin 13,700.00 against settlement of a present cost of 7,300.00 your happy thoughts pls thks

  55. Lots of stocks still showing very little weakness, like REITs. SLG just at its two-year high.

  56. Eric- everyone hiding in REITs due to perceived stability of income and yield vs treasuries. it’s a higher yielding play on US dollar for Europeans.

  57. sns,
    Yeah, I’m one of them with AGNC in IRA accounts. I have every last share collared, however.

  58. BUCY/Gucci – Sorry, oil report came out.  I was also going to say you can selll the Oct $60s for $7.25 and buy roll to the $55s for $9.65 and you should be THRILLED to win those.  I’m pretty sure you will be able to roll the $65 puts to 2x the Jan $45 puts for about the same margin but, like I said, no hurry at all.   I am not, by the way, bullish on BUCY or that whole sector…

    TBT/Salvum – I think this is a trilling opportunity to buy TBT.  The longest they stayed below $45 in either major turndown was 45 days and both times they went back to $50 within 3 months.  I wouldn’t roll the short calls unless you REALLY need the money.  At this point, you can sell May $43 puts for $1.10 so I like selling those as they are rollable and, as I just said, 45 days is the record below $45.

    CDS/Matt – Yes, that’s what this is about.  No one would care if Greece was busting but they could still float notes at 3.5% but a default calls into question the other loans (and I had a great chart for that yesterday) and France has $1Tn lent out and Germany not too far behind and all those threads can start unwinding fast.  It’s the overnight swaps that are panicking people, not the debt itself but the sentiment on the debt because, every single day, the G20 needs to borrow another $50Bn from someone…

    DIA/Daveo – Right now I’d rather go for the Sept $112 puts for $1 if the roll fills (need a move back down).  Otherwise, yes to the Sept $111 puts as the main hedge.

    Holy cow – Oil almost $81 already!

    ITMN/Yodi – They got their thing rejected (not one I follow closely…)

    POT/Ajay – You shorted $105 puts?  Well, I’m bearish on POT but they’re only at $103.50 in a terrible market, hardly a reason to buy back a $105 putter 2 weeks early. 

    $3K Plays/Micro – Why does everyone ask me these things a day late?  If you don’t mind using your margin for your freind’s gain then I’d go for the Oct $11/13 bull call spread at $1 and sell the $10 puts for .72 for net .28 on the $2 spread.  If you go for 20 of those for net $580 it pays back $4,000 in Oct if WFR holds $13.  Margin would be about $3,500 on your end.  C is also fun and you can sell Sept $4 puts for .38 and buy the Sept $4/5 bull call spreads for .38 and you can do 20 of those for about $2K in margin and it makes $2K profit if C holds $4.

    WHX/Stock – Looks like their reserve requirements are going up and people are worried they’ll halt the dividend.

    Welcome Raj!   We went for MON last week, I think $65 is a fair price.  You can spend $1.90 to roll out to Oct $60s if you get worried.  That gives you 2 more months to sell calls and still a $5 spread.  If you have margin and REALLY want to own MON, you can sell the $55 puts for $1.45, which knocks your basis down to $1 and you can stop the spread out if it gets that low and then you "only" have to worry about rolling the putter (Jan $45s are $1.65 so you have to REALLY want to own MON for $45 plus the $1 you would have lost along the way).

    SSO/Yodi – Just wait and see if we hold 1,170 for the day. If we do, you are probably OK and, if not, you are probably screwed.  I’d buy back the callers for .50 (now .55) as they aren’t doing you much good anyway and, if we keep going down, you can do something like selling the June $42 calls (now $2.28) and rolling to the June $40 calls (now $3.55) for about even and the $42 putter can be rolled down to the June $39s about even too.  Keep doing that every month and hopefully, one day, you’ll see a recovery…

    BP/Tcha – I think in the long run the BP thing reminds our fearless leaders why we do need to invest in clean energy, which is good for all our solar pals and SPWRA is a long-term favorite of mine but that’s LONG-term.  Don’t forget I kept buying CROX on the way down too so I’m either lucky or smart – hard to tell but I don’t really let the stock price change my opinion of a company. 

    C/Jason – I dont’ see that you gain much on the roll.  If C goes BK you lose 50% more and if C doesn’t go BK, we’re both confident they’ll beat that $5 mark.  Now if you wanted to roll to 2x the Jan 2011 $4 puts at .60 so they expire quicker and you have another chance to sell in 7 months – that I can get behind.  Also, it costs .40 to roll your longs down $1 and .20 of the .40 you spend will be on intrinsic value – that’s a good deal.

    TBT/Sarah – I still think we get to $60 by Jan so I wouldn’t change it.  You can offer .35 for rolls down and take ‘em if you get ‘em. 

    Dow volume 85M at 11:21, much more than yesterday so far, when I think we went into the close at 140M.  If we can get over 200M without dropping further, then maybe we are going to hold the 5% lines.

    Levels/Trad – Oh that thing.  That was useful but it broke the system somehow and the programmers ditched it.  I’ll put that on my list of summer changes to make as I liked that too. 

  59.  PHIL / TBT- general ?
    When selling short puts against a call vertical, do you choose shorter durations (MAys vs the Sept call vertical) because you expect them to expire and then then you can resell? thanks so much!

  60.  TBT – Phil what do you think of a new Jan 41/45 bull call at 2.03?

  61. SS, Just spent the last hour breaking a trade that had executed, though not the trade I had entered.  I rolled some puts down 2x for a small credit, the trade filled for a debit.  It still says credit on my computer screen under Orders, and the only explanation I got from TOS is that by entering a custom order, it confused the computer.  TOS was good enough to break the trade, but I’ve wasted the morning.
    Now, if you take go by the Fry maxim that the first move of the day is wrong, and you enter on the first sign of reversal using the 3 min candles and forgetting about the DMA, you would have had a nice day today.  I’m sure JRW would have told us that 69.40 was a major support line.   Me, I’ve just done a whole lot of nothing.

  62. judah – yep, that certainly would have been the trade.  I just thought we would have follow through from yesterday.  Not quite sure what was fixed since the market opened.  I need to stop thinking and trade the system.

  63. Phil- would you take a punt on SPY May 120 calls for a day trade?

  64. Gartman is talking about the collapse of the Euro
    That seems like a sh*t storm of massive proportion – hard for my small brain to puzzle through that one – but shure not that happy with any holdings denominated in Euros

  65. Phil: when market opened and dropped, I went on the couch to sleep, now I woke up and it has totally turned around, that is one way to COVER.
    Now my BIDU jun650 puts naked are GREEN and my AAPL july 250 calls too.

  66.  Hey Phil, check out the 39/40 call vertical in EDZ.  Right now TOS tells me it is going for $1.25.  Now if only I could sell eleventy-billion of those I would be all set.

  67. hi phil my BP is in negative now, I will wait and adjust BUCY next week if premium going lower to your rec 255. 
    for DXD july 22/25 bull call spread and short put  july 27 — any adjustment this week or wait till next week  thx

  68. Hi, Judah,
    The rolling of May 1080 to June 1000 seemed to help BP a little bit.  But I have some other strangles fairly close to, or at the edge of, the +10%/-12% band.  So, my BP is still affected by those positions.
    Frankly, I panicked at the open this morning.  Had I waited until now, I would’ve gotten a much better deal for the same roll.
    So, if you still have enough BP, I think you can wait.  1080 is quite far from the market.

  69. Phil- I agree with you that this is the start to a major correction.  I looked over your disaster play for EDZ when it was at $44.  I was interested in what adjustments you might make to that now.

  70. Pharm/ Phil, MYGN is down 24% on missed earnings ($1.30-$1.35  vs $1.50…… quite an overreaction. What do you think? 

  71. SPWRA/Jrom – I think they are already too low but unitl Spain is resolved and the new German government states support for solar subsidies, they’ll be up in the air and subject to rumors that can take them down. 

    EWZ/Eric – That’s the way to play it!

    Comments/Kwan – It’s more a function of time plus mood.  Once I think of something I want to say for the day’s post, I start writing and once I make a new post, I don’t generally go back to the old one.  Mostly I just read the news and do research until something hits me that seems very important to talk about so it’s kind of a random event.  Also, Emailing me doesn’t work as I ignore those too until the weekend, when I try to catch up… 

    ITMN/Yodi – I thought you got out of those in March?   See I like playing them when they are down under $20 (hedged to under $10, I think it was) but once they pop they become ridiculously dangerous, as you see.  The premiums got really crushed on those.  So you collected $1,450 and owe $3,35 for about $1.9K x 2 down down.  You can just sell a dozen Oct $12.50 puts on the assumption that they are once again worth about the $15 they were trading at and at least they are 1/2 premium and realistically rollable.   Should be less margin too.

    TBT/Salvum – When you have a spike down and a high VIX and a good opportunity, yes. 

    TBT/BG – I do like that as my targe is unchanged ($60) for Jan.  Look, the markets are recovering already so everything must be fine….  8-)

    SPY/SNS – Sure, why not with Mr. Stick on the prowl but just set tight stops as we are still just weak bouncing.  Oil’s past $81.40 now, that was a good punt earlier (done of course at $81.25 – .25 trailing).

    See, now that we got rid of those depressing EU traders we can get back to BUYBUYBUYing as if none of that stuff matters…

    Gotta go with the flow, though, copper jammed up to $3.17 after FCX CEO got his fluff piece on CNBC.  He says China will save them and any pullback is only temporary.  Ah China – Your $5Tn economy amazingly accounts for $20Tn of projected global expansion

    The Dow touches positive ground for the first time today as basic materials takes the ball from financials to drag the market higher; heavy dollar volume in Alcoa (AA +1.4%) and Freeport-McMoRan Copper (FCX +2.4%) as well as Cliffs Natural Resources (CLF +8.3%) and U.S. Steel (X +4.4%).

    More cheerleading for commodities: Former LTCM-er James Rickards says to look at paper money supply and do the "eighth grade math": Gold is going to $5,000 an ounce. (ETF: GLD)

    Outages that started popping up randomly this morning have resulted in one-third of floor traders unable to get trade confirmations through their handhelds at NYSE (NYX), though volume so far is at an above-average pace.

    Quarterly refunding: The Treasury will sell $78B in debt next week – $38B in three-year notes on Tuesday, $24B in 10-year notes Wednesday and $16B in 30-year bonds on Thursday – less than bond dealers expected, as the government cut long-term borrowing for the first time since 2007.

    Fitch revises its outlook on Goldman Sachs (GS) to negative, from stable, on "recent legal developments and ongoing regulatory challenges." The agency affirmed Goldman’s A+ rating on its other strengths, however.

    Banks face "tough" comparisons when they report Q2 results, and higher dividends aren’t likely because of increasing capital requirements, Meredith Whitney says. "I’ve been amazed to see the demand come back time and time again for financial institutions that are still not paying a dividend and still may not be able to for a while," she says.

    Interest rates on Spanish bonds are widening to new highs vs. comparable German bonds, an unmistakable sign of market skepticism towards Spain and big trouble for those trying to stamp out the eurozone contagion.

    Few people have a more apocalyptic view of the BP oil spill than 41-year industry vet Matt Simmons. "It really is a catastrophe – I don’t think they’re going to be able to put the leak out until the reservoir depletes. It’s just too technically challenging." Simmons says BP’s (BP) cleanup costs could ruin the company. "They’re going to have to clean up the Gulf of Mexico."

  72.  TZA – Heres a good hedge I think.  Buy Jul 6 call, Sell Jun 7 call.  It costs .48 but based on the way the calls are priced it will have to drop to atleast 5 before you hit break even on it.  You have 100% upside plus a month to roll the june call.

  73. Phil, Wht are your thoughts on entering a bullish spread on FCX? 

  74.  OUCH, looking at the new options for FAS is hurting my brain!  $0.33 stikes is making the mental arithmetic hurt.

  75. Margret.  I am DD on them in anticipation of this.  As I noted above, no debt, they are buying back shares (not a big deal) and plenty of cash.  With all the genetic testing companies, we are going to have to watch the litigation closely, as many own patents to particular genes.  If we can make some back on the upswing, then I would lighten up a little.

  76. SS, Back to a screen play day.  You are right. Trade your system and ignore the news. I think that’s what Nassim Taleb suggests. 

  77. Phil Mattress holding still the Jul 114p and I am trying to roll to Sep 112p market still asking .60/.55 have set my buy at .52. What is in your view an aceptable price to pay thks

  78. Euro/Samz – We now have two rival camps of "no problem" and "total disaster" – interesting there is no middle ground.

    Couch/RMM – I find that’s an excellent way to ride out a market move…  Don’t be greedy though, if you were worried about a play and now you are even – get at least 1/2 out and be happy about it!

    EDZ/Craig – Hey, I put in my order!  The spreads are insane on those, who knows what will fill…

    DXD/Gucci – If you need cash and you got a nice pop on DXD, why not take is off the table?  When you get a quick 5% drop like we just did, you shouldn’t EXPECT more.  More is a huge bonus past 5%. As I said this morning, you can always layer in another play and still make good money but you need to recognize a spike low for what it is and lighten up in the very least. 

    EDZ/Jtiff – I would not chase it here, it’s too volatile.  If we end the day red, then I would chase it. 

    MYGN/Magret – I haven’t had a chance to look at earnings but not really the environment for knife catching. 

    TZA/BGB – Very nice one but keep in mind it is out of the money and TZA is VERY volatile.

    FCX/Trad – No thanks!  Maybe at $65.

  79. Phil: I did not sell 1/2, I need to get back on the couch.

  80. FAST – buying Jun $50 P for $1.20.  Chart looks week and no mjr support until 48ish (little at $51).

  81.  Phil/ The last I checked the last few qtrs the market tends to top after INTC earnings and bottoms around CSCO’s. Whats your take on this?

  82. BP Oil Spill.. it all depends on what their liability is..  are they required to make everyone affected whole?  If there is no proven negligence.. will they be required to compensate the fishing industry?  It’s not like that guy who was drunk while the Valdez got busted up by the junior officer.  Or at least we don’t know that yet..  so, without that, just how much is BP on the hook for?  I think it might fall into those gray area’s where it’s just a cost of living in the world we live in today.  $hit happens.  Even if it wipes out entire ecosystems for a generation and spoils a billion dollar tourist industry..

  83. Phil and gang, as many of you know I live on the Gulf coast in Destin, FL Walton County.  All of the counties up and down the Gulf coast have resorted to taking matters into their own hands instead of waiting on BP to allow us to do what they think is right to protect our beaches.  Walton County will be dispersing hay into the gulf along the shore based on this video attached.  Pretty amazing what people can come up with when faced with such an adverse situation.

  84. BTW – I just got off of the phone with BP claims hotline in order to make a claim due to losing renters in my beachhouse.  I received a claim # and was assured that all lost income will be reimbursed.  If true, that could be a huge # for them to pay.

  85. Matt/BP.  I could look it up, but I’m fairly certain that BP’s liability is limited by federal statute to $75 million, in addition to the cost of clean-up.   That’s a limitation that was enacted by Congress after the Exxon Valdez disaster.  Go figure.

  86. Phill/ BP
    I can tell you that BP can solve this problem only to drill another well close to existing one and explode or pump high density fluid and it is probably 3 mo work which gonna cost them around half of bln plus clean up cost. We did same kind of blown well in Russia 2 years ago ( by the way for BP (poor guys)). I think BP is gonna use HAL service for it because they have the best tehnology for this and they is gonna make probably additional couple of hundred milions revenue

  87. Phil.  I see commends on DXD to me this play is like the hole in the gas tank  I have been putting money in to this play all the time and never seem to come even. Here is my present position long Jul 25call pd 3.15 now down to 2.37 even the market is down sold 24p JUl for .60 now .97 aswell sold the Jul 32c for 1.02 now showing a bit of a green light .75
    your thoughts Please

  88. Here is a fairly gloomy article on oil spill:
    The worst scenario is that they can’t stop the leak for days/weeks/months, and the hurricane season comes, then the East Coast and BEYOND is in danger.  I hope it doesn’t go that far.  But you never know…  If it indeed gets THAT bad, your BP/RIG shares are but a tiny problem, compared to what would happen to the entire earth.
    The difference between Valdez and this oil spill is that Valdez was just one ship.  The spill was limited to whatever it had in its containers.  But this one…

  89. SS/Hay – great video- I wonder if there are hay futures we can get into.

  90. Phil, do you think it’s a good idea for UYG buy/write at this point?

  91. Wash Sale question… My understanding of a "wash sale" within which you sell a stock at a loss, then this loss is not allowed as a tax loss if you buy back the same stock within 30 days. What would be the result if you bought the same stock back within the 30 day period, HOWEVER in a different brokerage?

  92.  Phil / Followup    
    I am not grasping something here.  Initially, you had said to sell the SEPT 43 puts for 2.50 if TBT dropped enough – now that it has, why sell the May 43s for 1.10?  Is it because I only gain 1.40 more by going out 4 more months so time value is less?  What if I went for sept 40s for 1.49? is that a good tradeoff to get less premium for a lower strike for more time?  Or is it wiser to get shorter tiemframes when possible?

  93. Hi Phil,  TASR filled a gap from Jan. 6 today and looks oversold, what are your thoughts?  Thanks.

  94.  gel – same result, it’s still a wash sale.

  95. Greek Bond Trade idea/
    I have just read an article about France and Germany both pressuring their banks to keep lending to Greece via their Greek subsidiaries for the next 3 years. A major French bank’s officer reported that the French Treasurer has asked her/his bank to keep their loan assets constant throughout the bailout period by contracting new loans or replacing maturing Greek treasuries. (in French, if asked I will try to find a corresponding article in English)
    Greece won’t need to issue new treasuries until 2012 under the planned bailout plan.
    My bet is that French and German banks, in order to comply with their "national shareholders" orders, will rather buy Greek Treasuries and reduce their loan books.
    I will try to buy some GGBs at Europe’s opening tomorrow. 
    GGB 4.10% expiring Aug/2012 have been trading below 82c today and are yielding slightly more than 13.5%.

  96. Phil – TNA – I am short May 62 Put (16.70, now 6.40) and long June 68 Put (5.70, now 3.20). Any adjustments or hold? Thx

  97. My position in AIS (Anteres Pharma, Inc) is moving nicely. They have a product that is in late stage clinical trials that if approved will do for women what Viagra does for men. The product name is Libigel  This drug is a testosterone -based gel that ramps up a woman’s libidos, thus safely inproving sexual desire and the frequency of sexual events, The drug is in Phase 3 trials, and Phase 2 revealed no safety concerns. If approved "spanish fly" is out, and Libigel is in for some nice profits, as it is without competition.

  98. gel1/wash sales: It doesn’t matter which broker.  You have to reconcile ALL positions from ALL brokers at the end of the year.  If you trade a lot, I’d recommend that you look into TradeLog, a software to help you compute your gains/losses/wash sales, etc.  Google TradeLog and you’ll find their web site.
    BTW, a trick: Don’t worry about wash sale during the year.  But on or before Nov 30, close out positions that are affected by the wash sale rule.  Go for a one-month vacation.  Then you are clean!

  99. cwan…. thanks! – your strategy will work.

  100. hi Phil what haapen to FAS today , Iuse to have may 90 short put and may 130 short call …is there a reverse split or something ??

  101. Phil/POT – I don’t remember exactly, but I ended up in the POT May $105 putters after some adjustments from a different position. I think the original may have been 120 or 125 callers. Anyway, I now have these May $105 putters. You say it’s too early to roll, but I’d like to know what the exit strategy becomes if POT drops another $3-$5. I’ll have missed the roll, correct?

  102. Gucci – there was a 3:1 split on FAS, so stock trades at 1/3 the previous value. For the options, the strike price was reduced to 1/3, but you have (or are short) 3x the number of contracts you were before (1 90 put = 3 30 puts now). My account finally reflected the new number of contracts mid day today (IB)

  103. I entered a new position today in a Chinese biotech that looks interesting. ( Sinovac Biotech ) Nasdaq symbol is SVA. This company dominates the the market for Chinese hepatitis vaccines. These diseases do not yet have a cure, but they are controlled through preventitive vaccination. The company has a lot of products in the pipeline and is #1 in China for hepatitis A vaccines in China. Sales are 85 mil/yr, and profitability is climbing. I jumped in primarily for one reason – their chart reflects a spike up in stock price each September. to about double what the stock is trading for now. I’m in now, and will be out in October, hopefully for a double

  104.  Pharm
    Looks like libigel is actually under development by BPX ie BioSante Pharmaceuticals??

  105. gel you’ve got some interesting plays…thanks for sharing! :-)

  106. gucci/FAS    3:1 split today. 

  107. RMM – you need a garden. i go pull weeds.

  108. EC President Herman Van Rompuy decries "totally irrational" market movement related to Spain and Portugal. "I would like to make it very clear… the situation in these countries has nothing to do with that of Greece, the latter being unique" because of unreliable statistics, a competitiveness problem and high public debt.

    Roubini - US Faces Inflation or Default:  Today there is a lot of talk about "de-leveraging", yet the data shows that de-leveraging has barely begun. Debt ratios in the corporate sector as well as households in the US have essentially stabilised at high levels.  At the same time, we are seeing a massive "re-leveraging" of the public sector with budget deficits on the order of 10 per cent of GDP. The IMF and OECD are projecting that the stock of public debt in advanced economies is going to double and reach an average level of 100 per cent of GDP in the coming years. 

    This is all actually quite typical of what happens in a financial crisis. What explains this re-leveraging? First, "automatic stabilisers" (such as unemployment compensation) came into play during the recession. Second, countercyclical fiscal policies (such as tax cuts and spending increases) have been implemented by government to avoid depression because private demand is collapsing. Third, we have decided to socialise some of the private losses in the financial, corporate and housing sectors and put them on the balance sheet of the government. 

    Bill Gross comes not to bury the ratings agencies, but to dismiss them. At the giant party, they were the ones handing out the fake IDs, but you don’t have to accept them: Firms with their own credit staffs like Pimco can "bypass, anticipate and front-run all three, benefiting from their timidity and lack of common sense."

    Spain’s market down past 20% YTD

    Spanish bonds remind me of a Clash song:

    The Irish tomb was drenched in blood.
    Spanish bombs shatter the hotels.
    My señorita’s rose was nipped in the bud.

    Spanish bombs; yo te quiero infinito.
    Yo te quiero, oh mi corazón.
    Spanish bombs; yo te quiero infinito.
    Yo te quiero, oh mi corazón.


    DIA/Yodi – I think giving up $2 and paying more than .50 is plenty for 2 more months.   There’s no urgency, you’ll get a good price if we head lower and, if not, you can always roll to a cheaper strike and offer .50 to roll up, saving money that way instead. 

    Couch/RMM – Don’t get too comfortable, if Mr. Stick isn’t showing up by 3, could be a disappointing finish. 

    Hey, CNBC discovered EUO – Now it’s really time to ditch it! 

    INTC, CSCO/Chyer – I haven’t noticed that cycle but very possible as INTC gets the semis all excited and CSCO calms them down.  A lot of Intel’s growth the last two years has come from Mac sales and dual-core processors, CSCO is more dependent on unit growth that isn’t happening. 

    BP/Matt – The law hasn’t been tested since XOM.   Not too many people gave a damn that 20,000 people in Alask lost their homes and livelihood but I don’t think BP is going to get away with what XOM did and even they were forced to spend about $2Bn 1989 dollars on the cleanup so it’s going to be MUCH more than that for BP, even if they do get a quick lid on it.   Of course TM is on the hook for $5Bn+ and their reputation was shot because their cars killed people and they covered it up and their stock is still staying up there. 

    Hay, that’s a good idea, SS!  That is the great thing about America, this guy is sitting in his barn in the middle of nowhere and comes up with a good idea and thanks to the internet and, yes, even the 24-hour news cycle, within 48 hours he’s meeting with the heads of the clean-up operation.  I hope it works as advertised, that would be a good break…

    Claims/SS – I will be very curious to see how that plays out over time and what you ultimately have to go through to get paid. 

    HAL/Tcha – I think they put that well in in the first place BUT I do like the investing premise that they may pass a rule that all the safeties on these rigs need to be upgraded and that can be YEARS of extra work for HAL and other deep-water service cos.

    DXD/Yodi – You paid net $1.53 for a $7 spread and you are currently .96 in the money so your insurance (which I hope it was) cost you .56 so far.  It doesn’t matter what the putter and caller think they are worth – YOU are the one that is in control and you don’t have to give them anything.  These are going to be TERRIBLE plays if you don’t plan on riding them out to expiration becasue you will always have much less premium than your putter or caller.  Also, this is a TERRIBLE play to take to try to make money but a GREAT play to protect your portfolio.   Here we are with a 5% drop and you are already $1 in the money.  Another 5% will put you up to about $29 and another 5% will give you a home run on this play.  This play is DISASTER protection, not DIP protection!  The time to improve the trade was 300 points ago, when the rolls were cheap, not now.

    Spill/Cwan – I believe that this well is putting out about 6M gallons a month at the moment, that’s a lot of oil to spill but it’s not quite as bad as people are making out.  To put it into perspective, Exxon was 11Mb all at once and there was a tanker off the coast of Italy that sank in 1991 with 45M gallons and leaked oil there for 10 years.   The worst spill ever was on purpose as our pal Saddam Heussain dumped 500M gallons of Kuwaiti oil into the sea to slow down the American troops, creating a 4,000 mile oil slick….

    UYG/Jossie – I like SCALING into the stock at $69.44 and selling the Jan $65 puts and calls for $26 for net $43.44/54.22 with a nice 60% upside or you own the stock for 22% less.  Figure they are a 2x so XLF falls 10% and you are stuck with it.   If you are scaling in, you give yourself another 20% discount next year so you are good for a 20% drop to be in for the long haul

    Wash/Gel – It’s YOUR tax form that’s in question, not your brokerages.  Of course you can always wash yourself by selling a wasy DITM call and buy the caller back if you think you may change your mind, good trick for getting past earnings if you are nervous.

    TBT/Salvum – That’s exactly why.  I’d rather have $1.10 in the May hand than $2.50 in the Sept bush.  Those $43 puts are already .75 (up .35) and that’s good enough for me for a day trade.  What you’re not seeing is you can sell the MAY $44 puts for $1.25 and those can be rolled to June $43 puts (now $1.30) and those to the Sept $40s ($1.45) IF things don’t work out but, if they do, you make $1.25 in two weeks, rather than 4 months.

    TASR/1020 – I’d start a small position by selling the Jan $5 puts for $1.10 and then waiting patiently.  At $5 you can buy the stock and sell the calls, which are already .85, so you are in for something like net $2.50/3.75.  Obviously, if they head lower, you can take the assignment on the put sale and be in for net $3.90 anyway. 

    GGB/Lionel – Still a risk until the EU ratifies (may need all 15 votes) and then Greek people run out of steam and put up with it.

  109. Correct Gilm on BioSante.  I have them on my watch list and an alert if they fall through 2.20. 

  110. Phil / EDZ – I tried to take profits on half of my June 38/44 spread in for net $2.30 at market prices for the spread per TOS yesterday (around $3.75) — which, correct me if I’m wrong, usually you can do BETTER than those spread quotes, but given the craziness of EDZ you may do better or worse or who knows. That said, I’ve gotten no fills, and now my long $38 EDZ call is up $1.20 on the day while my short EDZ $44 call is up $1.65 on the day. Would you recommend just leaving that alone and waiting for rationality to play out or what, and how much is not greedy to leave on the table given that the spread is 100% ITM by $5+? Thanks.

  111.  PHIL / TBT:
    Ok, I get why a closer in expiry is smarter now .Thanks.  But now I have a question on rolling.  "What you’re not seeing is you can sell the MAY $44 puts for $1.25 and those can be rolled to June $43 puts (now $1.30) and those to the Sept $40s ($1.45) IF things don’t work out"  
    If i sell the may 44 puts for 1.25 and then have to roll them to jun 43s, it would cost me more more to buy them back so i would be increasing my overall capital at risk, correct?  I think you look at it as I would be buying $1 in intrinsic and 30 days of time by rolling so as long as the net cost to close the mays is not over say .50 (so being able to buy the mays back at 1.75 or better) I am in like flynn, so to speak?

  112. Looking at the clinical trials, we have a long way to go on the info.  2014 for LibiGel.  I can wait a bit longer b’f getting in.

  113. Gel/
    just got SVA Oct 5/7.5 spread + sell Oct 5s put for fun just for 0.1 with huge profit potential if you are right, if not will get stocks for $5.1 and start sell calls & puts against them,
    Thanx for sharing

  114. Don’t know all on SVA.  Chart looks horrible, and most of their recent run up was due to fear on the flu vaccine (and we know what a pandemic that turned out to be).  As for the hepA, etc. too much competition and not enough ‘guts’ for me.  If China’s market goes over a cliff, I think they could go right along with them.  JMHO.

  115. Phil/ HAL
    I don’t know for sure if HAL was on that project, but I can garantee that service company is not responsible for blowout, it is responsibility of drilling contractor (RIG) and oil company itself. what I’m just saying is to drill new well they need other technology which around 3 times more expensive ( to pay to service company) than to drill regular one

  116. Options sure can be difficult creatures:  I have 2012 EDZ  45/70 bull call spread.  EDZ currently trading about 50.25 the 45 call trading at 23.25 (already $5.25 intrinsic value and $18.00 premium)  the 75 trade at $19.50  all premium.
    Sold half my EOU Nov 21 calls for 50% in a few days, of course i wish i had bought more, but i hate buying premium.

  117. TNA/Concreata – Well I was short the calls and playing TZA up so my adjustment would be you are super lucky to get out alive.  I’m not understanding how you sold the May $62 puts for $16.70 though…  They haven’t been this low in ages.  You don’t have much to lose as you puts are $6 more in the money than the putter so unless we have a pretty good recovery, you have that coming to you but something has to be wrong with the numbers you gave me.

    AIS/Gel – Sounds interestring.  Could be danerous if introduced in colleges…

    FAS/Gucci – 3:1 split today.  Those ultras are really using those splits – a little too much for my taste as it’s very annoying.

    POT/Ajay – Sure, if they drop you just roll them along.  POT should hold $100 or, if not, then $80 and the $105 puts can roll down to Dec $80 puts so a long way to go before there’s a real problem.

    EDZ/Fein – If you can’t get a price that makes you happy, we have no reason to exit the trade yet.  Time is on your side as you are the one with intrinsic value and the high VIX is giving your caller and putter way too much credit (or debit, as the case may be). 

    Rolling/Salvum – It’s hard to explain without having you do one so at least paper trade it through so you can see what happens.  If the front-month putter gains value then the value of the putter you roll to goes up as well.  The trick to rolling is not to let the target roll get away from you and, if you don’t have a target roll lined up when you enter the trade – then you’re doing it wrong.  When I sell a TBT May $44 put for $1.25 it’s because I don’t mind having TBT put to me in Jan for about net $39 because I’ve already mapped out the trade and I know what I’m going to do if TBT does any of at least 3 different things (up 10%, down 10%, flat) and, since it’s an ultra, I know what I’ll do if they go up or down 20% as well.  You are right about looking at it from the perspective of risking up to .50 per roll since I anticpated 2 rolls and I collected $1.25 up front then I can afford to put back .50 on the roll so my target of rolling to the June $43 puts is valid as long as it isn’t going to cost me more than .50 (currently -.05).  Notice if my plan had been to roll the May $48 puts ($3.70) to the May $47 puts ($3.30) I STILL wouldn’t be worried because it’s not going to cost me more than .50 and, even though I’m down $2.50 on the put (assuming I sold for $1.20), unless I think TBT isn’t coming back to $44 by Jan (because my Jan target would have been the $44 puts, now $4.95) then I have no reason to change anything other than the fact that I can now anticipate rolling to the Jan $41 puts (now $3.50) because my patience paid off and the rolls became more favorable to me down the curve. 

    Lots of grave concerns, the bears have finally come out of hibernation:

    Don’t buy the dip, Societe Generale’s Albert Edwards says. "Is this correction a buying opportunity like the one in January? One key difference is that the leading indicators have now topped out quite decisively. Investors therefore should be far more wary of buying on the dip this time."

    The chaos in Europe is enough for Dennis Gartman to advise investors to get out of the stock market. Seeing little chance of a peaceful resolution, Gartman also foresees a stronger dollar and weak commodity prices.

    Ed Altman finds it odd that credit spreads on U.S. high-yield bonds are below historical averages. "We’re seeing the real dregs getting refinanced, triple-C-rated companies, just like in 2006," Altman says. "Are things really that much better today?" If default rates trend higher, owners of these asset classes at current spreads will suffer.

    Desperate times do indeed call for desperate measures, writes FT’s Martin Wolf, but the story doesn’t end with Greece’s bailout. Much larger efforts will be needed, including a reform of the eurozone itself.

    The Obama administration is supporting a "significantly" higher limit on damages that BP (BP +3.1%) would face for Gulf cleanup, over an existing $75M cap. Senate Majority leader Reid supports a $10B cap; any new limit would be applied retroactively. (earlier: I, II

  118. Lots of selling pressure on the s&p mini…looks like its going to get ugly

  119. DIA Matress:
    I am long Sep 111s (cb 7.18) now 7.35
    and fully covered with May 107s (cb 1.28) now 1.55
    I am full covered because my 1/2 cover of the May 110s lost half of its premium so I rolled to 2x the May 107s.  Since we are still going down should I buy back 1/2 of the putters?  Or not worry about it until they have also lost 1/2 if their premium?

  120. Daveo – May 107s can be rolled down to the June 103s even.  Should be fine for now, but be prepared to buy back some when you make a little $$ to lighten up JIC.  Should have just sat with your 110s, as those protect you a bit better and could be rolled 2X to June.

  121. "Lots of grave concerns, the bears have finally come out of hibernation:"
    Yeah, except there were people saying things like this at every single one of the last six pullbacks since the March ’09 rally began. Richard Russell was apparently telling people not to buy the dips all the way up, even when his own indicators said to buy.
    All that said, it’s pretty clear this isn’t going to be over today.

  122. gilmdjd/Pharm/ Libigel
    Antares is the dominent partner of BioSante (BPAX). The wait for approval requires patience, but considering the massive profits that are possible, I believe the stock will appreciate as the news comes to the surface. Hormone replacement therapy is a $2.1 bil market and growing nicely. Anteres is already in this niche business with iElestrin, marked by its partner Azur Pharma ( hot flash therapy ), and a needleless injection product (Tjet) which was designed to deliver Teva’s HGH. No needle, as it delivers medication using high pressure to the skin surface. AIS has some other injectors that are in development with TEVA  I have 5000 shares that have been placed into my "parking lot" portfolio.

  123. Oil sold right off into the NYMEX close, back to $79.67 now and not playable.  Gold is back to $1,172 and still shortable for the brave. 

    Great "deck of cards" rundown on all the idiots who helped produce this financial crisis.

    Nice attempt at a stick move at 3 on the button but volume is 157M on the dow and that’s a little heavy already and I think, like yesterday, there are people waiting for the stick to sell into as this market is very hard to sell things into.

    DIA/Daveo – You bought the time so you wouldn’t have to worry about the putters.  The May $107 puts are ALL premium and won’t be in the money for another 150 Dow points, where you gain about .90 on your longs.  Then they can be rolled to June $103 puts and that’s ANTOTHER 400 Dow points, which would put you $8 in the money to the putters with July and Aug still to roll to if the market keeps falling… 

    Bears/Eric – As I noted last week though, the bears had pretty much all shut up as the market drove relentlessly higher.  Now they are feeling brave again.

  124. pharm – hindsight is … or so they say. 
    I should have sold 1/2 after they dropped to .98 this morning but I thought we would keep going up and haven’t been able to watch the market much today.
    thanks for your suggestions.  i’m not worrying yet as we have 16 more days and its still pretty far to 107 (i hope)

  125. Phil/AIS… The college students need the antidote… Too bad for the poor guy that leaves work at the end of the day, only to find his work is just beginning as he returns home!

  126.  GILD, finally waking up.  It’s been a huge drag in my portfolio – but i’m still very bullish on them.   AIDS has become a chronic disease because of these drugs similiar to diabetes as a result, they tend to live longer and inadvertently infect a few more people (unfortunately).

  127. Wow, ARIA decided to take off….bit early on the partial exit, but the P sold should be nice.

  128.  gel, love "the parking lot portfolio"    My biggest positon in the PL portfolio is Citigroup.

  129. Phil – you are right my TNA May 62 put short was 1.67 not 16.70, so here are corrected numbers: I am short May 62 Put (1.67, now 6.40) and long June 68 Put (5.70, now 3.20). Any adjustments or hold? Thx
    TNA/Concreata – Well I was short the calls and playing TZA up so my adjustment would be you are super lucky to get out alive.  I’m not understanding how you sold the May $62 puts for $16.70 though…  They haven’t been this low in ages.  You don’t have much to lose as you puts are $6 more in the money than the putter so unless we have a pretty good recovery, you have that coming to you but something has to be wrong with the numbers you gave me.

  130. tchay/SVA
    That is a nice spread… I am holding a position, having sold the October 10 puts – sold for 5.44. The charts from 2004 – 2009 show this spike up in September ( except during the 2008 market downturn ) I believe the stock will peak between $9 – $10 this September. It must have something to do with summer sales of their Flu vaccines, mostly by the government, which buys the stuff every year. This company has grown from $3 mil in 2003 to over $84 mil last year, and they have a lot of new products in the pipeline, including vaccines for EV71 virus, pneumonia and related derivitives, menaingitis and various influenzas. Don’t forget to bail in late September, as the charts are quite definitive.

  131. TNA/Concreata – Ah better (or worse, actually).  You have the TNA May $62/68 bear put spread at $4.03, now $3.20 and I assume you want to stay bullish on TNA and not just get out with a .80 loss even though TNA is now more 10% below your break-even point with 2 weeks left until the trade is worthless?    OK then…  Well you can widen the spread by $1 (+$1 in premium) and spend about .20 to roll to the June $54/61 bear put spread at $3.   That moves your net to $4.30 but drops your b/e point to below your current wipe-out.  I suppose if you feel TNA will recover, this is the way to go and, of course, if you can keep rolling down $8 for .20, it’s bound to work out one day!

    Maybe they should buy some BRK/Bs: Goldman’s Dominic Wilson says his firm’s buying this dip: "We may be a little early, and we are conscious that contagion is hard to predict, but we think risk-reward is better now than for several weeks." Wilson notes consumer growth stocks, which are removed from "the epicenter of market worries," look attractive.

  132. Jo/Parking Lot Portfolio
    Just like the guy that collects antique cars… time passes you get appreciation!

  133. With the home tax credit ending and the home builders at highs, there has to be some good down plays on them. 

  134. Pharm! yooo-hooo! i got some really fine SRS over here. make you a great deal.

  135. Thx, morx.  SRS ain’t my style.  Played them many eons ago and I am after a long term…the ultras and SRS ain’t that!  TBT is hard enough.

  136. Absolute Returns on "The Commodities Con"

    Oakland, CA Bankrupt, Administrator WON’T LET staff prepare a report on the issue as they go ahead with a budget that ignores the crisis and can’t possibly work….  " You guys are crazy and irresponsible," Councilwoman Pat Kernighan says to the rest of the council..  Madness!

    On Friday, JP Morgan recommended that the flight-to-quality bid we have seen in the Treasury markets will eventually fade and rates will sell off. Their Fixed Income Markets Weekly, dated April 30, 2010 stated:

    “Thus, this week’s flight-to quality bid likely reflects fears around the potential for Greece’s fiscal issues to snowball into a European banking crisis, something we believe policymakers will almost certainly seek to avoid. Indeed, the late-week rally in Greek spreads as well as the Athens Stock Exchange index suggests that markets are beginning to price in this expectation as well. Thus, flight-to-quality pressures are unlikely to sustain low Treasury yields. In sum, given these factors, we now turn underweight duration”

    Lagging GDP Confirms Consumer Slowdown:



  137. As many would say for Mr. Stick.

  138. They’d better get that libigel going soon.  Ms. Stick needs some excitement.

  139. ROFL Morx!

    LESS volume than yesterday by 20% (204M on Dow) and still no buyers (other than Mr. Stick at the end). 

  140. Someone was thinking like me on the homebuilders!  8)

  141. Phil/5% rule.  Just got around to reading your morning’s 5% rule post.  As the recent top of SPX was 1219 and 5% down from 1219 is 1158, where did the ball bounce off this morning?  1158, of course.  Scary accurate.  It sure makes a believer out of me that the bots are programmed to buy at 5% down from a recent top.   Wish I had read the post before the day’s trading instead of after.  To me, the chart is looking a lot like the chart from late Jan-early Feb, a 5% drop, a pause, another 5% drop and a rapid rebound.  So, we’ve got the first 5% drop, maybe now a pause and down to 1097, perhaps by the end of next week.  Great stuff.

  142. Disaster plays- these are new to me so looking for some guidance:
    SDS- June 29/33 @1.80; now 1.46; plus putter-May 29 @ .84; now .36.
    EDZ -June 38/44 @ 2.08; now 3.60; plus putter June 35 @ 1.25; now .75
    EDZ Jan12 long calls 50′s -  ( 8 @ 14.74; now 22.25; short calls 75′s ( 2 @ 14.74; now 19.00) plus putters Jan 12 35′s ( 2 @ 11.80; now 11.75)
    BGZ – Oct 12/17 spread (net 1.15; now 1.40) plus putter Oct 11′s @ 1.05; now 1.08.
    From your 5%  post, looks like a critical juncture about here. Was not around today to watch, but in reading the days comments, I get the impression you are advocating taking some or all off the table now; then reloading if we break below say 1160 on SPX or thereabouts?

  143. BRK- notes on Buffet/Munger Q&A at annual meeting – down-loadable PDF file:

  144. Lawyers/Doro – Why does no one listen to Shakespeare

    5%/Judah – Here’s where we’ll have to refine my rules over time as I figure out how to explain it.  There are big and small 5% moves.  The big one we’re tracking, is off the consolidation at 1,200 and we expect a 2.5% drop to 1,170 and from there (as with any 2.5% move) we expect a 20% retrace back to 1,176.  Anything less than that is a very weak bounce and anything less than a 50% recovery (1,185) will leave us very skeptical of any move up. 

    Yesterday was very telling as we topped out right at 1,176, so our "weak bounce" was a strong top.  We also got that indication on Monday as we bounced along the zone between 1,170 and 1,176 and finishing in the bottom 20% of the 2.5% Rule is a strong indication of follow-through the next day. 

    Now let’s look at follow-through.  I look for accelerating or decelerating (where does that other "c" go?) behavior in our follow-through days.  If there is a 5% move – that’s tragic and often means there is much more to come.  Less than 5%, especially less than 2.5% indicates that there are plenty of dippy programs coming in at that spot and we expect less of a follow-through than we do at 5%.  In either case we’re looking for a drop to fall off 50% per day until the next test bounce is passed. 

    Normal deceleration from a 2.5% drop is 1.25% the next day, that would have been another 15 points, down to 1,155, which we didn’t quite make in the morning. 

    Now, here’s where you can get a headach as we have to consider more converging lines…  In addition to the 2.5% line at 1,170 and the bounce line at 1,176, we now have the 3.75% line at 1,155 AND the mini bounce line off that day’s move (-15) at 1,158 (which we did bounce off) AND the 20% bounce off the 3.75% move from 1,200 to 1,155 (45 points) to 1,164. 

    Since the weak bounce of the 1.25% follow-through held as a bottom and we broke the weak bounce off the anticipated 3.75% drop then we now have 2 reasons to think that the 3.75% line is not going to be in play.  Of course, I don’t go crazy with predictions at the end of each day on those things because a single day’s move never means anything but it’s the pattern we want to watch today. 

    So this morning, when I say that we need to clear 1,176 as a key move up on the S&P and we will get more bearish if we blow 1,158, watching 1,155 to confirm a breakdown - you’ll know how I pulled those numbers out of my ass!  If those lower numbers hold and I toss in a bullish play – you’ll also know why.  Of course, keep in mind I don’t fixate on these numbers, in fact, I don’t even write them down or do the calculations usually but I know what I expect to see – as I said in the 5% rule post, the system works for me because it fits the way my brain thinks and I have an easy time "seeing" the fractional relationships so this "system" is not a distraction from what I really like to do, which is research the fundamentals.  If I had to sit here with a calculator or worrying over a spreadsheet all the time, I probably wouldn’t bother because I still firmly believe fundamentals triumph over all (eventually) but, in the short run, it’s good to know what the TA guys are doing and this is a big help for that!

    As you know, I tend to personify market actions as it helps me clarify my thinking (and writing).  To a large extent I think of the whole thing as a huge chess match with all the various players in whatever positions and this particular item, to me, is like a little tug of war between the bullbots and the bearbots and WHEN we see our resistance points being obeyed on decent volume, THEN we have a pretty good idea we have reached a critical point of contention and then it becomes more interesting to look for signs of a winner or a loser in that competition and that’s where our levels do the most good.  That’s why the 5% rule is most effective after a period of consolidation – when the bullbots and bearbots have both played their hands and we have a clear indication of where the battle lines have been drawn. 

    Disasters/Pstas – As I said yesterday (and as Obi Wan Kenobi said a long time ago in a galaxy far, far away) "This is not the disaster you’ve been looking for." – Yet!   As our disaster plays were hurting and finally somewhat ahead, this is a very good time to lighten back up, especially if you’ve been scaling in and rolling (you apparently haven’t) as we got a 5% drop and we do not like to be greedy as greedy bears are dead bears pretty much every single time since March 2009. 

    Most especially, if you cashed out with us at the top last week and now those disaster plays are unnecessary, then what a fan-friggin’ tastic break this is to be able to cash out both sides with nice profits.  Yes, I still like the disaster plays as a general bearish bet and they do make a nice hedge to my early-stage bottom fishing but that’s from a 90% cash perspective so I’m happy to roll back into deeper hedges if we head up or just make a little extra on the way down while scaling into long positions at what I hope will be a 10,200 bottom (where I would quickly deploy 25% of cash to buy/writes, willing to DD at 8,160 (down 20%)).  

    If we break up over S&P 1,200 et al without a good pullback, I will reluctantly take on bullish plays but I will also allocate more for protection than I would if I had an entry at 10,200 (where my buy/writes are already good for a 20% drop). 

    So I would say watch that 1,176 line carefully and be ready to take your winners off the table.  If you can, you can leave naked callers and just keep tight stops on them as long as we keep notching back over the levels we just failed.  Keep in mind that these plays are available to use at every single $1 incriment along the way and in pretty much every month so all you miss by cashing out a winner is a few dimes until we break the next level and reload.  These were not terribly aggressive disaster plays as we took them when we though we might break over 1,240.  If I take these off and do a reload, I’ll be more aggressive on the next batch because our reload will be based on new information as the market turns uglier. 

    Thanks for BRK link!