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Foolish Thursday – Through the Looking Glass

"If you don’t know where you are going, any road will take you there." – The Cheshire Cat

I like to sit with my daughters (8 & 10) on the couch and look at news pictures on my laptop – it’s a good way of getting them involved with the day’s events, teaching them about my job and teaching them about the world (albeit from my twisted perspective).  The USA Today is exellent for this as is Reuters and the NY Times.  As CSNY said:

Teach your children well and feed them on your dreams…

Can’t you see, you must be free to teach your children what you believe in, to make a world – that we can live in? 

Since they are kids, I often simplify what’s happening so we have a general classification of "protesters" to explain why the army or police are attacking people with no guns.  Yesterday, my 8-year old had a "eureka" moment when she said to me "Why is everyone around the World protesting – it is because of the bad economy?"  Well, she pretty much nailed it, didn’t she?  As I’ve been warning for years, the poor (all of the bottom 90% at this point) have been pushed to the edge and they are now starting to push back – so much so that it’s obvious to an 8-year old that we are on the verge of a global revolution…

That led to a little photo project we did together, where I also got to teach my daughters one of my favorite songs: "We Won’t Get Fooled Again!"  As the great and powerful Bush the 2nd once said: "Fool me once, shame on, shame on you.  Fool me ya can’t get fooled again."  That pretty much sums up my attitude on the markets right now – we cashed out at the top and, until we see some pretty DEFINITIVE proof that it was not a top, we’ll be sticking to mainly cash, thank you very much!  While Alice’s Red Queen may have said "Sometimes I’ve believed as many as six impossible things before breakfast," we’re having a little trouble swallowing what’s being dished out by our government and the MSM.  Richard Davis’s article on the lagging GDP is one example, as are many of the fine articles in our Phil’s Favorites section.

In "Through the Looking Glass" (you can tell I have kids!) Alice said "It’s no use going back to yesterday, because I was a different person then" and the Red Queen observes "It’s a poor sort of memory that only works backward…    Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"  The Red Queen is very much like the MSM – they adjust their "facts" to fit what’s happening, no matter how ridiculous it sounds.  Don’t like the economic reports?  Just paint the white roses red!  Up is down and black is white, which is all well and good until, as Douglas Adams observes, "you get killed at the next zebra crossing."

While it’s tempting to try to bottom fish on the dips (and boy have the little maze rats been trained to buy on the dips this past year!) I keep having to point out to Members that we don’t actually KNOW where the bottom is.  I wrote up our major watch levels in our 5% Rule Post article (and there is more discussion in it in chat on that post).  To simplify a long discussion, our key watch levels on the S&P are going to be 1,176 to the upside and 1,155 to the downside.  If we can’t hold 1,155 then the markets are in for a World of hurt and we’ll be looking for a move all the way down to 1,100 at least.

Rather than rehash the reasons for this and blah, blah, blah the news, let’s contemplate what the major problem is at the moment – Europe!   And Japan and the US but, right now, it’s Europe.  I warned you last Thursday that "The Pain in Spain will Hardly be Contained" and you should know better than to bet against a clever title like that.  Of course I’ve been warning for a year that all this incestuous bailing out of each other by the G20 could only end in tears so Spain is simply the straw that breaks the camel’s back.  Greece could have been solved any time but Spain? 

Graphic: Web of Debt

You see how ugly this all gets as things start unraveling and look how totally screwed France is, with $912Bn on loan to JUST these 5 jokers.  France’s entire GDP is "just" $2.7Tn (5th in the World) and they are themselves $5Tn in debt (the same as Germany, who’s GDP is $3.3Tn) yet they have, as "assets," what could be almost $1Tn in bad loans.  Wait, scratch that, of course they lend money to other nations besides the PIIGS, so France has OVER $1Tn in VERY questionable loans outstanding and, if the downgrade police are knocking on the doors of the PIIGS – how far away is France from a ratings downgrade?

And, if we keep downgrading everybody’s ratings, then rates are likely to go up and, if rates go up, then (and I hope this is obvious) debt service costs go up and the likelihood of defaults rise which would cause an honest ratings agency (sorry, laughed so hard I fell off my chair) to further downgrade the nations in question, which would lead to rising debts and further downgrades etc., etc. 

As we expected, Japan came back from holiday and fell off a cliff, with the Nikkei diving 3.27% (361 points) all the way down to 10,695.  The Shanghai reversed what I told you yesterday was BS action and fell 4.1% (117 points) to finish way down at 2,739 and the Hang Seng finished down "only" 194 points thanks to a 250-point stick save into the close.  Oh yeah, like THIS is the kind of action you want to have your money on:


I would love to tell you there’s a great way to play this but there’s a reason we went to cash.  As the great tradebot, WHOPPER once said: "Sometimes the only winning move is not to play."  Hopefully we’ll get a little more clarity over the weekend but,until then, we will stay on the sidelines until things make more sense.  As Alice said: "It was much pleasanter at home, when one wasn’t always growing larger and smaller, and being ordered about by mice and rabbits."


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  1. "Fool me once, shame on me, shame on you.
    Phil, why are you so cynical???  You don’t think they are trying to fool us do you? 
    Listen, they say it’s fixed.  So it’s fixed.
    Got it……Good… go buy some long stock and hold it like a good solder!!!!

  2. how do you expect the labor report to be?

  3. PCS flying after their earnings +8%

  4. The Who  in pictures, great stuff Phil !
    Can’t we expect the Feb. lows (at least) to be re-visited ?

  5. The Who  in pictures, great stuff Phil !
    Can’t we expect the Feb. lows (at least) to be re-visited ?

  6. Trading AAPL… AAPL !!!!

  7. lfl: hyping us into AAPL ?

  8. Phil/5% rule.  Thanks for the clarification.  I had to read your post 2 or 3 times before I got it.  I have follow up questions, but you’d prefer to use the 5% rule post for discussion, right?

  9. Why so cynical/Exec – Well, you see my wife said….

    Of course, Trichet said: ECB’s Trichet: Current rates are appropriate. Growth will continue, possibly unevenly. Risks to outlook are ‘broadly balanced.’ Calls for ‘swift’ fiscal consolidation, and welcomes Greece’s austerity plan. Euro -0.7% vs. the dollar.  So maybe everything is "fixed" again.

    We need to get back over ALL of our downside 50 dma levels today:  Dow 10,800, S&P 1,170, Nas 2,400, NYSE 7,430 and Russell 690 – and our KEY indicator today is the S&P at 1,176, which is the bounce they need to be more than WEAK (which would indicate a likely follow-through lower if they fail). 

    All Members should make sure they read the 5% Rule Post, as we’ll be adding commentary to that all week as the market moves

    1,155 is a big breakdown for the S&P and super-ugly if we go below there.  Notice how now we sell off in the pre-market to flush out stops and then the buy bots are coming in early, hoping to spark a rally, which they then sell into.  NO THANK YOU!  We do NOT have to play every day and this is not a very playable market….

    Europe could be "solved" tomorrow or it can descend into total chaos, as pictured in the post above, it’s a total coin flip which way we go but, be aware, even if the "fix" things – they will only be doing so by printing more money and putting Germany and France deeper into debt (and US, throught the IMF) in order to, not fix, but push off the default of the PIIGS.  Somewhere down the line, someone is going to be caught holding the hot potato and right now it’s just the US, China, Japan, UK, Germany and France dancing around 5 chairs that are left and wondering when the music will stop.  UK or Japan are in the worst shape at the moment but that’s like having to pick your favorite 80s band – they all suck! 

    Where will you be when the music stops – we’ll discuss this in detail over the weekend.  Hopefully it won’t be too late…

    So, as I said yesterday, we’re still liking Disaster Hedges and we’re not ready to bottom fish yet.  We still can make some fun plays but make sure you keep them FUN as this is not an investible market at the moment. 

    Be very careful out there!

  10. Thanks Ekor, that was fun putting together.  I wish I knew how to do those things where you set the pictures to run against music and put it on YouTube but that’s way beyond my technical abilities…  I’m hoping to get Madeline interested in video editing as it’s a fun hobby these days and can also give her a good part-time income long-term. 

    5%/Judah – Yes, let’s keep the discussion over there as it makes for a better long-term educational post. 

  11. judah – sitting on my hands at the moment.  Things look a little dicey.

  12.  I think the german elections this weekend will decide the fate of the market. If Merkel loses, I think markets will definitely be hurt bad, maybe a big gap down on Monday

  13. NFLX earnings play
    Short -5 MayC95 basis 2.43 now 7.70
    long 5 June C115 basis 2.01 now 2.61
    Whats the plan if NFLX stays over 100?
    Premium about 2.00 out of 7.70, 25%

  14. RMM   …Just trying to share my feelings with you.  I’m feeling AAPL up.

  15. SS, I agree. JRW can play these kinds of jittery markets, but I know my limitations. I’ve been entering into more short strangles instead.  With 2 weeks left to expiration, I sold puts yesterday afternoon (no calls yet) that are over 10% OTM for $3.50 each.  I protected them with some put verticals ($5 spreads) that I bought cheap because of the occasional anomalies in the trading around popular strike prices like 1100.  If SPX doesn’t hold 1150 and doesn’t hold 1100 and doesn’t hold 1050 in the next two weeks, I can roll the putters to June all the way down to 900 even and collect on the verticals.  Otherwise, I just watch the race against time and buy them back when they get below $1 ($2.50 now).

  16. UA – Buying Jun $30 P for $1.25.  Out if UA moves over 32.50.  Looking for 50c.

  17. By the way, gas is now about $8 per gallon in Europe!

    There’s been plenty of talk about a European debt contagion, but some wary investors are watching for a cross-Atlantic jump. The crisis "has gone global," says economist Jeffrey Frankel. Left unchecked, it could potentially undermine the U.S. recovery.  Really?  So he has a theory that the US economy is actually somehow CONNECTED to the global economy?  Interesting

    Another crazy theory:  Moody’s warns a severe contagion threat to the banking systems of Europe could "become a common theme." The banking systems of Portugal, Spain, Ireland, Italy and the U.K. are "increasingly moving into the focus of the markets."

    As Greek contagion fears continue to rattle markets, investors are hoping for some reassurance from today’s ECB announcement (coming up in ten minutes) and from ECB president Trichet’s press conference later in the morning.

    Greece’s Parliament begins debate today on a €30B austerity package. PM Papandreou is trying to get the measures approved ahead of an EU summit in Brussels tomorrow.

    British citizens go to the polls in what’s expected to be the closest election in nearly two decades. Opinion polls suggest the most likely outcome is a hung parliament, which could prompt a sell-off of British assets. Pound -0.2% vs. the dollar.

    By the end of the Thursday morning session, the Nikkei is at its lowest since mid-March, down 3.2%.

    Even the magic men are failing to make it rain!  Swire Pacific pulls plans to raise up to $2.7B through a Hong Kong IPO because of deteriorating market conditions. Goldman Sachs (GS), Morgan Stanley (MS) and HSBC (HBC) were underwriting the deal.

    Yay for paying workers less money for more work - Gooooooo Capitalism!!!  Q1 Productivity and Costs: +3.6% vs. +2.6% expected and +6.9% prior. Unit labor costs -1.6% vs. -0.7% expected and -5.9% prior.

    Initial Jobless Claims: -7K to 444K vs. 440K consensus. Continuing claims -59K to 4,594,000.

    April Monster Employment Index: +8 to 133, with growth +11% Y/Y. "While most industries and occupations are showing increased demand for workers, public administration remains muted and below seasonal expectations as several state and local governments continue to face budgetary pressures."

    The SEC is reportedly looking into the timing of Berkshire Hathaway’s (BRK.A) disclosure of its Burlington Northern purchase, as Berkshire’s failure to amend its securities holdings until the same day the acquisition was announced may have violated securities law.   It’s possible the SEC inquiry into Berkshire Hathaway (BRK.A) will dead-end, but the fact that the matter is being examined at all signals renewed SEC focus on a section of securities law that has received only spotty attention from regulators in recent years.

    Four regional Fed chiefs were in Washington yesterday trying to persuade lawmakers not to step on the Fed’s toes. The fact that lawmakers are considering proposals to limit the Fed’s authority and independence isn’t new, but momentum has grown in recent days and Fed officials are worried.

    And, another guy who works for the bankers while pretending to help us: Geithner will tell the financial crisis commission today that it would be a mistake to remove all risk-taking from banking. "We cannot make the economy safe by taking functions central to the business of banking, functions necessary to help raise capital for business and help businesses hedge risk, and move them outside banks."

    "When Tim Geithner says that he doesn’t want to see the Fed audited, what he’s really saying is he doesn’t want to see Tim Geithner audited," Rep. Alan Grayson says. "It’s one of the biggest conflicts of interest I’ve ever seen."

    Lloyd Blankfein would be doing a public service if he really would explain why people buy "crap," Caroline Baum says. If successful, lawmakers might understand the role prices play in a market economy and do a better job of foreseeing the "unintended consequences" of the regulations they put in place.

    Freddie Mac (FRE -6.3%) asked for an extra $10.6B from the government after new accounting rules gave the firm a net worth deficit of $10.5B. Q1 loss of $8B, including a $1.3B dividend payment to the Treasury. Freddie expects to need more aid in the future because the housing market is still fragile.  This is more money than FRE made since the 70s IN TOTAL!  When will the madness end?

    Rio Tinto (RTP -1.2%) hasn’t cancelled any investments yet, but "we’ve got our projects on hold while we try to understand the ramifications of a 40% increase in taxes." Other industry players likened the new Aussie tax to a "40% nationalization" of the mining industry by the Australian government.

    Notable earnings after Thursday’s close: BGC, CFN, CIM, CLNE, CNQ, CROX, DCT, ED, KFT, LBTYA, LEAP, LVS, MIL, NHP, PKI, PSA, ROVI, SAPE, SD, SGMS, SQNM, WRI

  18. lfl: I’m feeling AAPL and BIDU UPPPPPPP.

  19. judah – I am seeing higher highs and higher lows on all of my RUT charts today so far.  Seems like a grind up.

  20. judah – BTW, nice job on the strangles.  I need to look at these again.

  21.  Phil,
    Is there any chance that with all of the rioting in Greece and potentially spreading, that TASR get a sales pop?

  22. Phil: when the market changes as it did just now, what news and where do I find the news which causes this ?

  23. SPWRA just keeps on selling and selling each day.

  24. SS/strangles.  I’m managing the strangles more actively now than before, using charts, day trading sense and opportunism.  Before I was just rote selling 15%/10% down/up and waiting for expiration.  This is more fun and more profitable, and I assume more of the way Peter plays them, other than his "light touch" strangles.

  25. Germany/Chyer – I don’t kno if you know but it’s not Merkel who’s up for election but her coalition could lose the majority in the upper-house, which is kind of like Obama losing the Senate and being, effectively, a lame duck ashe can’t get anything passed.  What’s key here is who takes control and how they re-form their alliances (there are 6 major german parties who have seats) after the election.   There are now many in Germany who are saying (and logically so) "screw the EU and the Euro, we can’t afford to carry them any longer."  Of course, the reality of that is kind of messy but there seem to be plenty of people now who are willing to suffer the consequences in order to end this "experiment" in the EU.  Meanwhile, Germany is about $50Bn more in the hole than planned as tax receipts aren’t keeping up with projections (gee, what a shocker!).  

    That’s why I’m so hands off this week – this thing can go either way this weekend and there’s no way to say but I do think down is a lot easier than up

    NFLX/Edro – We’ll roll that bridge when we come to it, too early to look now, especially with a random weekend coming up. 

    UUUUUP/RMM – LOL, well the market does need dip buyers but be careful, please!

    Nat gas up 83Bcf, way too much!  Demand is still being destroyed day after day (those productivity numbers are bad for energy commodities that love inefficiency).

    EIA Natural Gas Inventory: +83 billion cubic feet vs. consensus of +79 bcf. A larger-than-expected build, and the expected build was higher than average; futures -2.9% to $3.877.

    TASR/JCEd – Urban unrest is one of my investing premises in TASR!  8-)

    News/RMM – Mostly rumors.  I don’t count a rumor until I hear it on CNBC or see it on SAlpha or Bloomberg, otherwise it’s not widely enough distributed to bother trading off.  The only reason I torture myself with CNBC all day is BECAUSE they do move the markets with their reporting – sadly, the single most indespensible thing for day trading…

    SPWRA/Trad – Their customers are going BK, that’s never a good thing…

    Danger Will Robinson, Danger!  Goldman (GS) is now paying more for cash on the open market than bailed-out Citigroup (C). “No one’s attacking Citigroup over anything anymore, and everyone’s attacking Goldman Sachs over everything,” Dick Bove says, so "it logically tells you that Citigroup should have a lower spread to Treasury than Goldman Sachs.”

    "Bank attitudes toward lending may be shifting" as troubled loans are reduced, although credit demand remains “tepid” and the economy is “still under stress,” Ben Bernanke says. Bad real estate loans may cause smaller banks to require more capital in coming years, he adds.

  26. Phil: my LDK and SPWRA are dark red: no covers except 0.x LDK callers jun6, something needs to be done.

  27. Phil, I bought FAZ May $13/$14  bull calls spread @0.23 now 0.32. should I take profit or wait?

  28. LDK/RMM – Well I don’t know about them, we walked away ages ago I thought but SPWRA is a patience game and I do like them for accumulating on the way down but, of course, we don’t know where it stops so no hurry.

    FAZ/Jossie – FAZ is in no way skyrocketing so I’d say yet to taking a profit coming into just 2 weeks to expiration and you can always reload in a June spread if XLF fails $15.50.

    Closing in on our S&P target.  1,155 is 3.75% below 1,200 so that’s our 2.5% move plus decelerating follow-through.  The act of punching through the 3.75% line makes it VERY likely that we’re on the way to a 5% drop (1,140) and then we need to watch the 20% retrace of that drop (from 1,200) at 1,152 for our next support/ceiling line.  The cool thing about this is we know we can bottom fish at 1,155 because, if we break below, we see some support at 1,152 where we clearly know to bail if we tick below.  So, expect some tentative buying at that level but more likely they will be losses we have to take as things move down to 1,140 and then we’ll need to see 1,152 without much of a break below 1,140 or our next deceleration moves from 1.25% to another 2.5% (1/2 of the 5% drop) and the fall can pick up speed, especially if we are going to be testing 1,100. 

  29. Has anyone noticed that we haven’t had 3 down days in a row since the January 20 sell off?  So what will it be today…….bounce or abyss?

  30. The euro failed $1.27 – off 1% a day for the last couple of days

  31. 1,054.98 – Oh dear!  RUT right on that 690 line too….

    Musical accompaniment for the day.

  32. KRE coming into my target of 26.60, where it has some support at the 50. Going to sell another 1/3 of my puts here, but keeping the last 1/3 in case of a bigger breakdown.

  33. GDX still hanging tough.

  34. Phil, I am in the B1S2 DXD Oct $23/$27 spread for net $0.15.  (bought DXD Oct 23 calls, sold Oct $27 calls and Oct $23 puts).
    For this insurance play, you’ve said that if I make double I should think of getting out.  In this case, does that mean I should get out, if I can for $0.30?  Because of the sold puts, this spread has quite a bit of margin tied here and $0.15 return on the margin does not seem the way to do the calculation.  Do you mean to get out on a double calculated using margin as basis, not the net cost of the spread?  And if original entry was for a negative amount, how would you do that calculation?

  35. i have a 20% loss on spwra now do i take my loss anf run ?
    i have jun 19 puts and the stock

  36. The dashboard below with sector performances looks wack.  Auto-Tires-Trucks sector up 2.73%, and half of all other sectors also up on a day when the overall market isd down 1%.  Really?  Seems wack.

  37. OK, so now we have to consider WHY we are breaking our 3.75% level.  Is it perhaps just those fraidy-cats in Europe dumping into their close at 11:30?   While I understand their desire to be in cash – certainly not in Euros!  Our economic news was pretty good and tomorrow we have NFP at 8:30, which should be UP 200K thanks to census hiring.  We also very much expect that bounce back from 1,140 to 1,152 so we can daytrade down to 1,140 but no hurry as, either way, we anticipate revisiting 1,152 after that drop. 

    So, the best move is to be patient and see if 1,152 holds up and we will take a bullish play IF we cross back over 1,155 as long as at least the Russell is back over 690 with us.  That being the case, the best upside play to look at is the crazy-assed Russell so either selling TZA $6 calls at .80, which were .50 yesterday or buying the $8 puts for $1.55 (.15 premium) are the VERY SPECULATIVE bullish plays of the moment and out if we fail to hold 1,152 on S&P.

  38. Is anyone encountering some really long (as in 15-20 second) delays in order processing with Think or Swim? I put in a bid a minute ago, and it was probably 20 seconds before my bid appeared, by which point the underlying had moved of course.
    I wouldn’t make much of it, except that it’s not the first time this has happened to me recently.

  39. FAS – why did it fall yesterday so much?

  40. That was a bid on options where I’m getting this delay (KRE).

  41. REITS finally showing some weakness.

  42. Wow, the Pound totally nose-dived into EU close.  Broke $1.50 with a vengeance and finished at $1.4945.  Euro is at $1.27 and the Yen is up at 93 to the dollar which probably means they can’t buy dollars fast enough (bad for TBT) to get them out of those Euros and Pounds so they are kamikaziing into the Yen – anything to get out of a currency that may be a collectors item on Monday (I don’t believe that but some do). 

    So I will put it to you that gold at $1,187 is NOT that impressive given the circumstances but it could go higher as things get worse so not my favorite short right now.  Copper is $3.13 despite Mr. FCX’s assurances yesterday that China was only "resting" and would be buying again soon. 

    IYR has taken a spectacular fall, along with our friends at VNO so don’t you dare come to me later and say you are stuck with those $80 calls we shorted! 

    DXD/Jordan – It depends what your plans are.  If you spent $1,500 on the play to buy $30,000 worth of insurance (don’t you just LOVE these plays) then you are clearly on target to collect and that means you can risk some longer-term upside plays.  Of course, if the margin is bothering you and you’re up 100%, why would you even ask what to do as doubling your money and taking away your pain at the same time usually beats a sharp stick in the eye or even the occasional fish slap…. 

    SPWRA/Micro – The June $19 puts can be rolled down to the Jan $15 puts for a .50 CREDIT so unless you REALLY DON’T want to own SPWRA I would stick with it.  As to the stock, you can sell the Jan $17.50s for $2 and be thrilled if that set is called away.

    Dashboard/Jordan – You’re right that does seem strange but it’s from Istockanalyst, all we do is report it.  Doesn’t look likely from a quick look at Finviz

    Isn’t it nice to see those 5% Rule levels holding up as points of contention?  See, it gives us more confidence in our directional bets as we see the lines being obeyed under stress.   Volume on Dow is a nice 92M at 11:40 so a reasonable reliable data set today….

    TOS/Eric – I always put in limits and I usually try to scalp a nickel or a dime so I expect delays.  Have noticed a little tougher fills lately so same thing, I guess…  I’m very concerned about them since hooking up with AMTD.

    FAS/Dilbert – Was a 3:1 split.

    Uh oh – Broke down.  So much for playing bullish!  Can’t blame Europe for this, premise blown, get out – that sort of thing… 

    The European speculative-grade default rate jumped to 7.8% in April from a year-ago 5.6%, Moody’s says. The global rate slipped to 9% from March’s 10%; Moody’s expects that rate to decline to 2.7% by year-end and 2% a year from now.  Oh well, thank gooness they EXPECT a 50% decline from base in the face of the 50% jump we ACTUALLY have.  WHY ARE WE NOT ARRESTING PEOPLE???

    The ECB didn’t discuss hitting the "nuclear button" of buying eurozone government bonds, President Trichet said in what may be the most critical news conference for the euro since its 1999 launch. The currency rebounded slightly from a 14-month low against the dollar; now -0.94% to $1.2707. (earlier: I, II)

    The euro is worth saving but Europe’s leaders don’t seem to fully grasp that the forces aligned against them are betting on their failure, David Callaway says. "Like a mob fired up for action and unwilling to listen to any sort of protest or rational argument, global speculators are hitting Europe in every way they can."  Somebody will make many, many billions if the Euro collapses, including us with EUO! 

    While eurozone leaders now acknowledge the seriousness of their predicament, "the prevailing definition of the problem is still too narrow," former IMF chief economist Simon Johnson writes – with most believing this is still a Greek problem. "Even the most negative still think that Portugal and Spain can easily escape serious damage. This is a major misconception."

    A Goldman Sachs (GS) settlement with the SEC could run in the range of $1B-5B, say the lawyers and rival CEOs that Charlie Gasparino’s apparently been talking to. "There is no number, but people are ball parking … for all I know, the SEC can come in and say give us $100M if Lloyd Blankfein gets fired. That’s a possibility."

  43. When the dollar rises, it is usually bad for US exporters.  The Dollar /Euro situation is likely to persist.  So what plays come to mind to take advantage of this.  BA comes to mind as our largest exporter.  How are they likely to be affected as well as any others?

  44. Gold going parabolic.

  45. Phil, my ToS order was above the previous bid. So I was aggressive in my order but it took 20 seconds for it to appear. Lots of time for the MM to try to figure out if he wanted to sell it to me (he didn’t, as he learned in that 20 sec).

  46. SPWRA thanks for the replay. well it seems you have felt that they have a good future and solar should be good. should i do the roll of the puts and the sell of the calls now or just wait it out ? i don’t know if you were pointing out what i could do if i was worried or things i should do on a trade i want to keep.

  47. Phil- How’s volume looking?

  48. Hi Phil,
    Your remarks on VNO 
    IYR has taken a spectacular fall, along with our friends at VNO so don’t you dare come to me later and say you are stuck with those $80 calls we shorted! 
    I sold the JUN 80c for 2.33 is still up 4.40 how shall I take your warning and how shall I move ? thks

  49. Damn, back on the TZAs as Greece passes an austerity bill. 

    DIA $110 calls are good bang for the buck to at .82.

  50. Yeah the IYR puts were timed perfectly the other day. Looks like you wont have to be selling me those May $52′s.

  51. Judah, would you mind explaining how you are "being more active" with the SS.  I really like that trade and i am curious how others have modified since the change in margin rules.  Thanks in advance.

  52. Phil- Back over 1155…time to play for upside? My guess is selling pressure from Europeans closing mkts is gone.

  53. EricL:
    I’ve notice for some time that OptionsHouse works their book against my orders. I have a new account at TOS and was hoping that what their reps said was true, that they don’t work book against clients….what the heck!!##??

  54. Executed a nice AAPL Leap spread… 2012 bull vertical 350-400. Decent price for a $50 spread. Apple could easily be at $400 in 18 months, IMO

  55. I am planning to open a new account at IB. Does anybody have an opinion on their trading platform?

  56. I’m accumulating AAPL, but I have plenty of disaster hedges firmly in place so I’m comfortable with the accumulation.  Who can resist AAPL in the low 250s? 

  57. Phil, TZA, can you clarify your comment ‘back on’?

  58. gel1:
    When To Use Bull Call Spread?
    One should use a bull call spread when one is confident in a moderate rise in the underlying instrument.
    and I thought you a really bullish on AAPL.

  59. The riots in Greece, which are fomented by the austerity efforts to bring their budgets into reality, is a good lesson for our politicians here. You can’t get these government workers spoiled on these freebies ( pension, benefits, early retirement, unrealistic pay schedules etc ). These same employees share their benefits with the union thugs that become enforcers, when the exorbitant benefits are threatened by common sense.

  60. Phil, is it too late to get into shorting the Euro using EUO? If not, what do you recommend pls?

  61. RMM/AAPL
    This is just one of my plays on AAPL, and like you say there are many others that are far more bullish. example – I have short puts that I have sold.

  62. gel -
    any interest in the aud.usd at these levels?

  63. PharmboyQCOR suspended, you have a good feeling or a bad one for today’s outcome?

  64. LVS – anyone have thoughts about tonight’s earnings?  I have the stock fully covered but wondering if a few protective puts would make sense given the market mood…

  65. DCTH 20d MA is being vigorously defended.    They are in a Doji on the daily right now, and bottomed out at 12.56.  I am selling Jun 12.5 P for $1.65.

  66. mrmocha…..LVS……Since you asked.  I think it goes down after earnings.

  67. QCOR/MrM – advisory is due out by EOD.  I am very comfortable with them.  R they gonna make them do a trial?  Possibly, but if it is already being used, my Spidy sense tell me that the supplamental NDA should be good enough to move forward with it.

  68. AAPL consistently failing to hold the support line at 255.

  69. Robert/strangles.  I’ve been trading them a bit more like a day trade this week than a sell and hold.  Overall, I am trading SPX under the scenarios that we hold/fail 1150, hold/fail 1100 and hold/fail 1050 over the next two weeks.  Mostly, I’ve been doing two things.  I’ve been selling during the rapid moves down and sometimes buying back during the recoveries, sometimes holding to see what the next day brings.  Second, I’ve been fishing for cheap put verticals, .05 to .20 on $5 verticals that are above the levels of my short puts.  Because of all the market volatility, sometimes these fill, sometimes they don’t.   I figure they are cheap insurance and if the market moves back up or stays the same, I’ll sell some of the puts and make my money that way.  If the market moves down, I will have spent about .10 on average plus (commission) to make $5. 
    As for the new margin requirements, I hold a lot of cash, since I cashed out almost everything a couple of weeks ago.

  70. Phil – new here so catching up on some previous posts – interested in previous MON and TBT 2012 bull call spreads given he current turbulence. Are the MON  50/65 (plus sell $60 p) at a net entry cost of $1.81 and TBT 45/65 (plus sell $40p) at a premium of $1.96 still a go or more prudent to see where this settles out?

  71. Damn, we are not holding that 1,155 line are we?   Gotta wait for the RUT at 690 I think but still bullish based on Greece news unless it reverses again. 

    BA/Grant – They’re not a normal exporter.   Most buyers hedge against dollar moves and BA has good buying power too but, possibly, they could be acting as hedgers and selling in local currency but I don’t think they are that dumb.  Better to go after KO and PEP, who report earnings in dollars with tons of international sales….

    MM/Eric – What a great time to be sitting in that seat and scalping spreads!

    Solar/Micro – That’s one of those fundamental things I have in that I have done pretty extensive analysis of every possible outcome for energy and, short of us perfecting cold fusion in the next decade, solar is the inevitable answer.  More solar energy hits the Earth PER DAY than the planet uses in a whole so covering a very smalll percentage of the planet with solar cells would actually solve the problem.  All it takes is the global will to get it done (and a LOT of money, which is the current problem).  So, to me, it’s a retirement play that we accumulate on dips.

    Volume/SNS – Dow at 115M at 12:20 so not too much movement in last hour and certainly no great rush on the "good" news that Greece is ratifying austerity measures necessary to get the loan (that still needs to be approved by the EU).

    VNO/Yodi – Well, in those you have to wait.  I was looking at the May $80s, which are off very nicely now.   This is why we don’t like to roll until as late as possible.  Our orignal play was shorting the May $80s at $2.30, I’m not sure where you came in but the play before that was selling the Apr $75 calls AND puts for about $2.50 each and clearly, even if you rolled that up to the June $80s, it’s still at least even at $4.50.  

    1,155/SNS – Sure, now we want to play it as a floor that better hold.  We were very welll behaved between 1,152 and 1,155 so we can be pretty comfortable that we’re not likely to have a shocking drop past them both - at least intra-day….

    Option House/JBur – You do, in fact, get what you pay for…

    AAPL/Gel – I’m still not ready to break out the champagne and start buying just yet. 

    TZA/Tusca – Back on as in same trade as above that I said was off below 1,152.  It’s a tricky zone here…

    Greece/Gel – That’s right it’s all about freeloaders who want benefits…  Driven to rioting by the commies no doubt! 

    EUO/EMC – I have a hard time picking a new play here other than a gamble as they could bounce back harshly or, really, the Euro could begin a severe unwinding if they don’t fix Greece this weekend.  Fixing Greece won’t make Spain go away but not fixing Greece will begin a cascading failure that I very much doubt will end until we’re filing chapter 11 over here as well. At this point, I’d just favor a flyer on the Aug $25 calls at $1.15 and you have to flip it to a diagonal and sell the June $23s (now $1.25) if things are "fixed" and then just play with the ratios depending on what happens next. 

    LVS/Mr M – MGM missed so I’d be careful but WYNN was a beat on Macau so, if you have it, I’d just make sure those covers are adequate but not go betting against yourself by buying puts.  Of course, if they don’t find support at $22, then possible break to $17 (this is why I’m not in them!). 

  72. Your 1140 SPX target is looking likely now Phil.

  73.  TBT is SO tempting here….but then I look at a longterm chart and wonder what will keep it from moving all the way back to 35???

  74. Phil, the rating agencies are becoming targets (finally). MCO may offer good plays.

  75.  Looking at DIA 2-year here’s some pullback data:
    6/10 – 7/10/2009 — 8%, (88 to 81)
    1/15 – 2/8/2010 — 7.5% (107 to 99)
    There was a couple of other ‘mini pullback (e.g. Oct 2009). If this one is a 7-8%, 3-week pullback look for 103 and a bottom in the last week of May (so if you buy calls, buy June’s or later)

  76.  Followon to TBT…is now trading below its 52 week low. I really liked the look of that candle yesterday on big volume and thought that might mark the bottom…but now I don’t know.
    My guess is that TBT doesn’t trade on the chart or technicals but rather on big $$ seeking a safe haven? Have I got that right?
    If so, whats to keep TBT from making it back to the all-time low since Europe is in such chaos?

  77. Phil….Let’s say you had QID   June 16 calls and June 108 DIA puts for near-term downside protection.  At what point would you cover?    I’ve been waiting as I tend to think we’re down again today AND tomorrow, then everyone gets optimitstic on Monday. 

  78. pHIL;
    THIS is what people say in Greece,  its the same in the USA as in Greece.

    I’m feeling more and more angry every day, because those who got us into this mess are not held responsible

    Thrasyvo Paxinos
    Teacher in Athens

  79. Is it a good day to get add positions to TBT Jan2011 or 2012 calls, or is the volatility to high?

  80. EricL,  You follow SPX pretty closely, right?  What is your estimate of support, below which we return to 1100?  You agree with Phil that the real test is 1140?

  81. Phil,
    I have BAC May 15-18 bull spread. Looked great a few days ago now looking shaky. Any suggestions on adjustments or sit tight? Also, for those buying into TBT what price point do you suggest the next scale in? Seems like a falling knife these days.  

  82. Pharm – DCTH / There is a big gap here to 11. Do you think they will break that gap?

  83. Pharm- Glad i listened to you on not buying AMLN…thoughts now?

  84. Welcome Brooklyn!  Much more prudent to watch and wait at the moment.  VIX is up another 5% today and MON and TBT are still looking weak (as is everything else).  Nothing wrong with targeting entries if things recover but until we make our magic number on the S&P (1,176) we are still in a broad downtrend. 

    TBT/Gil – Nothing will stop it from going back to $35 in a currency panic, BUT, if you look at that as a 60-day event tops, then that’s your DD point and just make sure you give the spread until September…  TBT gets hit when people are willing to buy TBills at any rate and that happens when there are more Euros being dumped than TBills available for sale but, trust me, they will print more to fill demand! 

    MCO/Raul – Good thought, we need to look at them again but they are already pretty beat up.  $19 was our entry on MCO last time it was going to be "all over" for them. 

    Ah here we go, silly terror rumor is now gone and maybe we can get a little buying action….

    QID/Iflan - A wise man once said to me "When in doubt, sell half."  If you have 10 June $16s and you sell 5 for $1.50 and QID breaks over $16 and you buy 5 $18s for .90 (now .80), what have you lost?  On the other hand, if you have 10 June $16s at $1.50 and QID drops to $16.50, then you lose 10x .20 instead.   I don’t know why people view taking profits as some form of defeat….

    Greece/RMM – I know, those are the people who are pissed, the ones who have to pay for prior excesses.  Ironically, they are the Gels of Greece but Gel calls them freeloaders so I wonder what the Greek think of him?   8-)

  85. Phil: its not Greece but the lousy US retail numbers which drag the market down.

  86.  gilmdjd -
    Looking back at the TBT 2-year keep in mind they blew through 5 (yes FIVE!) gap-downs as they went from 65 to 35. 
    Hopefully the whole .. "Europe thing" blows over so we can get back to business of TBT at 50….  :(

  87. judah,
    I think we’re in an area of decent support here from mid-March: roughly SPX 1145-55. But if we can’t get over 1160 today on a close it’s still going to look shaky and it could be that we touch 1140 this week. Also, if you look at the 4/21-4/30 period as forming an H&S topping pattern, it would project to around here (slightly lower, actually).

    A failure of 1136 (the close from the 3/5 gap-up) would probably set up a move down to 1120.

  88. Pharm – ARNA has dropped again. Time to continue accumulating. :d

  89. LINE – Having a really bad day. Anyone knows what’s going on? I was thinking of getting them in my IRA.

  90. what is causing this new drop ? CNBC again according to Phil ?

  91. Phil: under what scenarios do you just buy a call or enter a spread ?

  92. samz
    Playing the AUD against the USD is too scary for me at the moment. I have been playing the EUR short against the USD for the last three days. The Dollar is far too strong to short it. The AUD will continuue to stay strong ( just raised interest rates) and same for CAD as they will raise rates probably next month. The dropping EUR is dragging so many other currencies with it, so I am very cautious. After the elections in UK and the vote tommorrow in Deutchland re the loan to Greece, I then will be making some plays that I will share. For me today… I’m cautious.

  93. DCTH – I am comfortable with them long term (aka Gel’s closet, fuggedaboutit portfolio) as their technology is transferable to many different solid tumors.  Will they fill the gap, maybe.  TONS of support here, but gaps are ment to be filled.  That gap is covered by my P sale.
    ARNA – Waiting to see if they hit 3.  Sell the July $3 P for 50c if you can.
    AMLN – Maybe at $10.
    Otherwise, I am stealthy ….

  94. tradansh,
    No idea what’s up with LINE but I have lots of that stock (I agree it’s a good IRA stock). I have it all collared with short 2011 25 calls, long July 25 puts.
    Net result today: up .05 per 100 share lot :)   Collars are boring, but man am I glad for them sometimes.
    I like them collared for an IRA trade. If it were me entering I’d buy the stock today and for safety sell calls while the IV is high. Then wait for a bounce to buy the puts.

  95. UA – out at 1.40…big volume now moving in to support.

  96. As expected, the Greek parliament passes a tough package of austerity measures. Now eyes turn to Germany’s contentious debate over the bailout.

    Worried about a possible Iceland repeat, Swiss lawmakers are rushing to make UBS (UBS -3.4%) and Credit Suisse (CS -3.9%), their two biggest banks, cut risks and hold on to capital. Too-big-to-fail is an understatement; UBS and CS each have more than 1T Swiss francs ($900B) in assets, twice the size of the entire Swiss economy.

    Three lunchtime reads:
    1) Winners and losers in the European crisis
    2) Oil isn’t expensive – the dollar is cheap
    3) Pattern seen in governments’ currency policies

    TBT/BDC – Good day as any to sell puts but not buy calls, they are a rip-off at the moment.  I like Selling June $41 puts for $1.25 and I like selling Jan $38 puts for $2.50 and you can pair either with the Jan $38/42 spread for $2 and you have some serious upside if rates tick up.

    BAC/Kururi – Need to know the basis but you’re still $1.70 in the money so probably not so bad.  You can always flip to the Aug $13/15 bull call spread at $1.55, which lowers your upside but drops your payoff by $3 so a good trade, assuming you want to stick with the trade. 

    Retail/RMM – That’s nothing compared to the global financial meltdown.  If we weren’t on the verge of another major crisis, THEN those retail numbers would suck and we’d be selling off for that reason…

    LINE/Trad – Nas gas build is out of control.   We don’t need LNG and neither does anyone else.

    Scenarios/RMM – Depends on how sure I am or the overall risk/reward.  Also, spreads are tough to day-trade so if it’s something where I think a quick 20% can be made, I’ll go for the plain call over a spread. 

    It’s still early, but sales trends are starting to suggest that the iPad (AAPL) is making netbooks uncool. They have a lot of features the iPad lacks, Paul Boutin says, but there’s something about them that says "I’m broke." (previously)

  97. TBT – I cannot see a reason to initiate a new position – we might very well get a panic – if we don’t have one already. I would definitely wait for some stabilization or for the Euro to take back 1.30.
    The euro has been down about 1% a day for the past several days – huge currency move – seems on the edge of a panic -

  98. Lot’s of piggie backers on the XHB trade yesterday by Andrew. 

  99. In TNA at $54.72,
    Major trend line at IWM 68.35,
    Support at IWM 67.90, Resistance at 69.33, 70.40, and 71.65.
    Trading in the lodge using CNBC and a phone !!

  100. Good Jessie chart on S&P, note big drop if we fail next set of levels:

  101. This is turning into a rout. Thank god for gold and GDX.

  102. And out at $54.55

  103. Phil… Please!  I do not give a rats pitouy what anybody thinks of my comments regarding free-loaders. They are the ones that put their government in financial chaos, and the entire population will have a life of hell for the next ten years, trying to bring their economy back to normalcy. The free- loaders I’m referring to are those government workers, that in concert with their union thug enforcers, extorted unreasonable benefits that were disproportional to their value. As for example, they are excessively overpaid for their job description compared to similar jobs in the private sector, and extorted pension benefits that do not have any correlation to what is commonly offered in other countries in Euroland. Retire at full salary at age 55? It is stupid to offer this kind of retirement to a worker that takes no risk and is probably not even qualified to work in a "for profit" private corporation.

  104. gel,
    If you don’t care what we think about it, then you don’t need to share your thoughts with us. : )

  105. EVVV hanging tough too. I think something’s up with them.

  106. TBT/ Every time I want to do a TBT trade (either naked puts or naked put paired w/ vertical spread), I just can’t seem to get excited about the economics. For every 1 contract I sell (collecting about $100), I need to be prepared to take assignment of $4200 in TBT. If I pair with bull call spread (38/42), then my upside is capped to $400. i can up the number of contracts, but now I’m looking at a $4200 potential commitment for each contract. No matter how I look at it, it doesn’t seem too exciting. I’m not sure why I am only having this problem with TBT. Thoughts?

  107. Ajay,
    Although I don’t like TBT, you could consider selling a put vertical to significantly reduce your exposure and margin. Alternatively, a call vertical. If you sell ATM and buy ITM (for calls) or OTM (put vertical), you can still have all the time and volatility variables on your side, and nearly double your money if it works.

  108. VPHM seeing some buyers, might be time to jump back in, I did well on the bounce from 12 to 13.5.

  109. Hi Phil:  How to take profits?  I have a May 6/8 TZA call spread that’s up ~ 50% at the moment.  I don’t want to be greedy, but I also think this market is headed lower.  I’m a bit concerned about the approaching May expiration, as well, not to mention the NFP report and Europe insanity.  Any suggestions for how to scale OUT of a position?  I’m thinking of closing out 1/3 of the position, then closing out another 1/2 if the trade moves against me by 20%.  Sound reasonable?  Thanks!

  110. Phil- I went in on the TZA July 7/8 call spread.  Good time to cash in on the 7 calls and roll the 8s or just wait?

  111. David Rosenberg has repeatedly said in his articles that he does not see inflation short term.  With this flight to safety ($), I still see TBT being extremely volatile.  Again, it is an Ultra, so careful.  Long term (when?) remains to be seen.  If memory serves me correctly, Japan is still not there….

  112. Phil…..From your reply I think you may have misunderstood ( or I misstated) my question.  It was not should I take profits but rather, how to take profits.  So here’s an example ( real):     DIA June 108 puts, up 25%.  Need to take profits but also, need to maintain downside protection.    Are you saying that it’s best to sell 1/2  then use a portion of that profit to buy further OTM puts?   Wouldn’t selling further OTM puts lock in profits yet allow me to keeptthe DSP in the form of the long puts?   Thanks.    

  113. Ajay – Having the same issue with TBT. With the increased margin requirements for leveraged ETFs, selling TBT puts is no longer an attractive option. Like $1 return on $20 in margin (reg-T) for a couple of months, not too attractive.
    Phil – Do you have any other strategies to deal with this issue?

  114. Closed end Bond funds are getting haircuts today.  HYV and CYE are two Blackrock funds (no options) that have moved up extremely well in the past year (I loaded upon them).  Pulled back to the 200d MA.   I like them a lot for income producers.

  115. Phil; now diving again, what is the cause now ? The guys have come back from Lunch, its 2pm in NYC.

  116. Oh my this is sucking!   RUT blew the 2.5% line and so did SOX and Transports – very bad for a day move!  Dow has some catching up to do to the downside if they can’t get back up.    Volume not that big (166M at 2pm) but not a buyer in sight other than RMM…

    Freeloaders/Gel – Well I’m not going to pretend to know the workings of the Greek economy as intimately as you did.  I only know what I learned visiting the country and working with a Greek exporter but clearly you know a lot of things that haven’t been brought to my attention.  Gosh I would have thought a country that collects just 4.7% of it’s GDP in taxes would be your idea of heaven but even there I guess they have those damn freeloaders squandering the 4.7% that the upper class is willing to part with while the poor carry a massively disproportionate tax burden through the VAT. 

    TBT/Ajay – Everyone is having this problem with TBT right now but  your assumtion is that you are assigned $4,200 worth of stock that is worthless?  If you are not looking to be a long-term holder of TBT then it’s a stupid trade to be in but many of us want TBT as a long-term hedge against inflation.

    TZA/Wassel – Well you can assume today is a very nice move down and get out now.  Tomorrow, even if jobs are bad and we head lower, then you can still flip to a June spread.  Don’t foget that VIX keeps climbing as we head lower.   Also, don’t forget how nice it is to be in cash and not care what happens tomorrow! 

  117.  Phil / FAZ
    Any adjustments on my long oct 9 calls (3.52 cost), short oct 11 calls (2.56 credit), short oct 12 puts (2.82 credit) in FAZ?  Original entires in parantheses.  Remember that I working with a carryforward loss on the positon from previous rolls.  thanks

  118. Can someone please give me a WHEEEEE!!?


  119. This looks suspiciously like October 2008.

  120. Phil: this looks like it will run down to the 1122 level .

  121. The  panic is palpable, watch out below

  122. margin balance went from $550,000 this morning to -$42,000. No more rolling, I guess. Just buy em back and take my beating.

  123. Panic in currency markets as everyone goes to U.S. $
    AUS off by 2.5%

  124. 30 year T bond up 1.5% so TBT should be down 3%, obviously there is an over reaction.

  125. Wow, dumping everything now.  Impressive.

  126. Hi, Judah,
    $0.10 for a $5 SPX put spread???  Can you give us some examples?  Thanks.

  127. Phil, so I have this crazy FAZ Jul 10/12 bull call spread, which I rolled from the Jul 13/18 bull call spread at a loss. Also sold the Oct 12 put. These puts have a listed delta of -.26, but the options have barely budged today!! The puts were supposed to be the money makers. What the heck? Any comments or suggestions? TIA

  128. SVNT/ Pharm         Down today 10%.   Was reading their press release saying that they will put the co. for sale upon approval of KRYSTEXXA in Sept.  I find that interesting.  Also the wording of that statement  sounds very positive, like they firmly believe in approval. 

  129. Across the board dump going on right now, some stocks getting hit harder than others. Oil down is also not helping.

  130. VIX upto 32. Gosh. Thought would never see this day after the last run-up.

  131. SVNT/stock – they were held up by manufacturing, so approval of the drug is in the bag IMHO.  Many funds (hedge/otherwise) were loading up on them in the 12.5 range, and even 14.  We road that pony last year, and the pharma industry is in a buying mood, but I think they will beat them down a bit more.  They have 100M in cash, little debt, but there is a ton of competition on the horizon.  Again, not playing for now.  If they move through 11, then maybe.

  132. Pharm – Looks like there are no sellers of ARNA. Trying to sell July 3 puts, and buy Jan 4 calls. but no fill.

  133. Phil,
    I have significant amount of July $49 QQQQ puts (long).  How do I max protect profits from here?

  134. Cwan, I have some .10 bids that haven’t filled, but I did get May 1100/1095 put spreads and 1075/1070 put spreads filled earlier today for .20.  Yesterday, I got some 1110/1100 spreads filled for .40.  I’m just fishing. If we keep dropping, they’ll work out nicely.

  135.  TBT…sheesh…I thought it would get to 35 eventually…but not TODAY

  136. nol – Um. sell……

  137. Cwan, Oh, I just got some 1080/1075 put spreads filled for .10.  It is just random.  My short puts are completely covered by verticals.  Down will be nice.  Up will be nice.  Right here will be nice.

  138. Phil,
    Newer member just reading the messages and learning the jargon. I have tripled my small account in two months just buying simple calls and puts! FAZ is one mover when it looks the world is coming to an end!

  139. Phil -
    Any reason to sell dia covers – hard to see us holding a bounce going into the weekend.

  140. Wow, UA….that baby had legs.  Made money, but….

  141. Judah, what ratio of verticals to short puts do you use?

  142. TZA/Jtiff – You sure don’t want to be with a naked caller ver this weekend!  Maybe take some $7s off and turn it into a ratio spread if you feel very bullish. 

    Japan/Pharm – But Japan was the ONLY country runing a QE machine to fight deflation and their people were funding almost 100% of it (ever hear of a Yen auction?).  That is not even close to the case for the rest of the World. 

    DIA/Iflan – Ah, OK..  If you need them for protection then just lighten up.  You can sell some or you can cover by selling SOME May $104 puts for $2.90 (not full) and your worst case is you roll them down to June whatevers and you have a vertical.  June is really uncomfortably close for spreading though and you may want to conside rolling to July with the money you collect from the putter and the extra month is also some protection for you. 

    TBT/Trad – Well you can roll to longer months at lower strikes or you can simply buy 2012 $35 puts ($4.50) to cap margin.

    Diving/RMM – Same stuff as this morning.  Greece is rioting (just the lazy freeloaders, of course) and the rest of Europe isn’t happy either and they are already stiking in India for higher wages and Australia is taxing miners 40% and the EU nations are going to sue the IBanks no matter what the US decides to do with them and we haven’t even looked at Japan yet, who were down almost 4% this morning along with the rest of Asia and there sure isn’t anything to cheer them up is there?

    Holy cow!


  144. Holy $%^%$^%$!!! Looks like someone forgot to turn off the sell button for the HALs. Market just keeps on dropping.

  145.  Now THIS is all out panic….

  146. COWABUNGA!!!  :)

  147. got a notification on ToS. Intraday margin requirements have been raised to 50% due to market volatility. Scary.

  148. Phil, Do we take profits in our disaster hedges!!  They are going crazy! 

  149. ES halt at 1053 no?

  150. I have $80M in my account now!!!!!selll sell selll…..

  151. I’d say wheeee but this is just scary now!  We broke below 10,000? 

    Wow, things are just going insane now and we still have an hour to go.  Spreads are jumping .25 at a time on the DIA and I"m not even bothering to look at other stuff….  

    I just sold DIA $110 calls for .80 and the second my order filled they went down to .47 – that’s what I call an untradable market!

  152.  Did AAPL really touch 200?

  153.  the spreads on ToS right now are ridiculous – I can’t tell if the system isn’t keeping up or if the people setting the asking price are in denial

  154. TOS is going crazy on my screen….

  155. What the heck just happened? Did a HAL program just go on crazy selling spree? And now starting to come back up?

  156. WTF was that???

  157.  What Happen!!, my etrade account jammed hard

  158. FAZ/Salvum – You’re playing for a meltdown and this is a meltdown so not much to do about it. 

    This is such total BS it’s incredible!  Good time to do some bottom fishing at these crazy lows. 

    Volume is pretty good now, 273M on Dow at 2:50 but 5% lines held and now we’re bouncing to -4% so watch those lines.  What a crazy day!

  159. You know how there are always those crazy bids @ 0.01 and asks at 200000?  Well, what if some of those were getting hit?

  160. Astonishing.

  161. GO FISHING !!!

  162. I was seeing really effed up lows for several stocks in ToS. Is it really true?

  163. Plunge Protection: YOUR TAX DOLLARS AT WORK !!

  164. Vix up over 50% today

  165. Anyone check out the insane bid asks on the dia?

  166. did anyone notice google finance FROZE during that drop? I couldn’t pull up a chart for a solid three minutes – and ToS is still lagging…

  167. TLT hit 100.31

  168.  This is so 2008 all over again, tmr circuit breakers better work!!

  169. IWM 66.87 and 66.20; buy the direction above or below !!

  170. THAT was Walmart the Friday morning after Thanksgiving!!!

  171. For a few seconds my IRA was down 20% for the day and it’s fully hedged, the price swings on that dip must have been epic!

  172. JRW/PPT – not doubt!!!  Who would have stepped in front of that train to buy?

  173. I believe I saw the Dow down over 700 points.
    The balances in my account had astronomical figures and frozen. This is the stuff to get heart problems.

  174. Robert/ratio.  I have used one-to-one in the past.  What I’m doing now is just fishing.  But I just got a mess load of put verticals filled for .10 during that madness, so that even if I don’t roll any of the short puts out to June, my BE is SPX 1,000, which before this afternoon I would have thought safe enough with 2 weeks to go.  I’ve never seen anything like that. 

  175. Phil- When you get a chance, I unloaded my July 7 TZA calls, but I still have the July 8 TZA calls naked.  What is the best way to adjust them?  Roll to a later month or roll up or both?  Thanks

  176. Margin Barf – Don’t start capitulating unless you have to, this was a forced move that can’t be real but, of course. 

    Money coming out of bonds now, rates ticking up a bit.  People back to bargain-hunting stocks.

    FAZ/Jbur – If you go for October, you have to wait for October – that’s all there is to it…

    Profits/Nolsrul – Protect them by taking them!  Dow 10,200/S&P 1,100 was our goal for this whole sell-off and we got here in a day – that’s NUTS!  If we fall below this, we’ll find shorts all the way back to 8,650 so don’t worry about missing anything (unless we get there in an hour tomorrow).

    Welcome Tophytooth!  You picked a hell of a week to start! 

    DIA/Samz – I think we just had a fantastic example of how good cash is right now, don’t you?

    TOS/Trad – That is just BS!   They are blowing people out of their accounts all over the place – could lead to more selling…


  177. Phil – how does that move fit into the 5% rule?  (Don’t answer that).

  178. Well, that will clear out a lot of stops !!!!!

  179. TOS balance is like a random number generator! 

  180. I just went to ER to check my heart.  The doc tighten a few screws and told me to stop watching the markets!
    Holy Cow!!

  181. Trad – ARNA shoulda been filled on that spike!!!!

  182. so is this the PPT buying or real buyers here?  At this rate we will end the day in positive territory and people will wonder why all of their stops got hit. 

  183. How come no one is debating global warming right now?    :)

  184. I  can’t believe it .  I was buying AAPL calls on the CHEAP as it got down to $200 for a couple of minutes.  Got a few contracts then the computer froze.    WOW.

  185. Phil- I’ve been wishing for these levels and now i cant bring myself to buy…it was just too disorderly…do you think there is follow through or are we done? What data points are/will you be looking at to determine your stance at this point?

  186. Selling some T puts.    I will own T at 21,22, 23  this summer.  Fine with me.

  187. If you didn’t have a limit order in place, there was no way to enter a trade during that brief moment.
    Besides, BOTH my BP and Net. Liq went negative BIG TIME for a few minutes!  Did anybody have the same experience?  Or, perhaps you didn’t/couldn’t pay attention to those numbers.  That was an amazing sight!  Once in 20 years, I’d say.

  188. ss
    I see not all of my posts are getting through. I’m out of TNA off the top trend line from this morning,
    after a short ride on TZA, after a loss on TNA. The internet where I am is NOT secure! So I’m using the phone to make trades!
    Back in TZA

  189. Looks like all the trade bots flickered a "sell" at the same time.

  190. Nice double on DIA P bought this morning.  Now if I could have sold on the swing, I would be retired.

  191. Pharm – ARNA filled on the puts. Still no fill on the calls. I can live with that, if I can survive this drop.

  192. Phil
    Had SDS Jun 29 longs & 33 shorts – sell the 29′s and naked on the 33′s?
    Also BGZ Oct 12 long & 17 shorts – same thing?

  193. Phil – Can you recommend some more disaster hedges for days like this? Had been selling puts during the drops in the last couple of days and got killed today.

  194. Phil & All,
    Do you guys think it’ll go up big time tomorrow?  Isn’t it quite possible a BIG UP after a big down?

  195. Out of TZA at $7.24 for another $0.44

  196. "Intraday futures reqs have just been raised 50% due to market volatility" says ToS

  197. Sounds ominous, doesn’t it?

  198.  Phil – A couple of days like this one and we can go back to your buy list from last year!

  199. Phil, I partly capitulated – just enough to bring margin close to 0. But I couldnt resist it when I had the chance to sell Sept 950 puts for $33.50.

  200. "THEY" are trying to get IWM over 68.34 !

  201. Hey Phil….Does this move back to 10,500 DOW qualify as a stick?   :)

  202. I think there will be no rally till EU does QE like the US. 

  203. Did anyone notice how calm Cramer was while his last two months of bullishness went down in flames…..

  204. What a calm group during a 500-point sell off…  I am so proud of you guys! 

    TZA/Jtiff – Ahead of the weekend and jobs?  Just re-cover them cheaper.  If you want to be bearish, then take something like the Oct $10s to cover ($1.20) but don’t leave any naked shorts out there in a market that’s moving 500 points a day.

    5% Pharm – Still working!   Passing the 4% bounce zone now….

    Gold hasn’t "fixed" itself the way the market has.  Makes for an interesting short but way too scary. 

    Positive/Terra – Man those glasses must be rosey! 

    Global warming/Bass – We settled that – it’s real and we’re all screwed. 

    Levels/SNS – I just rolled and DD’d what I already had into this mess.  No time to buy new things.  If anything goes wrong tomorrow or over the weekend, we could be right back at those lows anyway so, sadly, must wait until next week.  SPWRA and WFR are still very cheap.  MON is nice,  C is $4, CAT is cheap, GS close enough to our $140 target to take a shot

    LVS down 9% is a gift ahead of earnings.  June $19 puts can be sold for $1.47 as long as you REALLY want to own them at net $17.53.

  205. stjeanluc – LOL on using  last year’s buy list!

  206. Phil,  could not close out all July $49 QQQQ puts but sold 1/2—--thoughts for bounce?

  207. Imagine if this was a ‘test of the system’ …don’t even want to go there!

  208. Phil- Not sure if its calm or shell shock!

  209. T/Stock – Good plan!

    RIG Jan $60/75 bull call spread at $7.20, selling $50 puts for $3.30 is net $3.90 on $15 spread and worst case is you own RIG at net $53.30.  I think their liablility is not that great on spill and much work is ahead for them.

  210. Phil: have BIDU naked puts jun650: too risky to keep or what ?

  211. Phil, one reason the the PSW group was so calm is that perhaps they weren’t  so loaded up due to your recent, constant reminders that cash might be good in this environment. I have a little bit of oil still, but no real damage. Thanks for the constant, insightful reminders.

  212.  CNBC is starting a Larry Kudlow suicide watch!

  213.  Holy mother of Crap!!  I was gone for 2 hours and it looked like the market just exploded.  Was there some kind of trigger for this?  Did everything just decide to explode for no reason?

  214.  WTF happened today. Good thing I had an EDZ call

  215. A human trading error at a major firm could have caused the market sell-off, CNBC reports, citing multiple sources.

  216.  Phil/TBT — No, not assuming it’s worthless…but I don’t want any more than $8400 of TBT, limiting me to two contracts upside, with the potential for TBT to go to 35…i see what you’re saying though.

  217. Fat fingered error?!!??!!?  If one person can do that then this market is truly a casino!!!  Who will reimburse the people who were on the wrong end of those monsterous trades.  What a joke. 

  218. what do we do with the mattress puts?

  219. OK…….which one of you guys hit the "B" instead of an "M" ???? Time to fess up. Gel was that you ?????

  220.  This is the best example of why to maintain only mental stops that you could possibly get.

  221. Geez- who’d a thunk short strangle could be sooooooooooo exciting!

  222. My A$$, human trading error.  I had $50M in my account, now back to normal!

  223.  This is the best example of why to maintain only mental stops that you could possibly get.

  224. If you listen closely when Bob Pisani is on from the floor, it really does sound like a casino!  ;)

  225. Bank of America Online Investing- unable to log on this afternoon. B of A- "experiencing technical difficulties"  Thankgoodness for TD ameritrade/TOS.

  226. Out of TNA at $53.67 for $2.12
    I think this is my first 6 figure day since the spring of 2009 !!

  227. Thanks Phil.  Took the TZA 8s off the board cheaper.  Learned quite a bit this week.  Perhaps its best to wait and pick up the pieces later.  I did leave some EDZ out there for fun, though.  Thanks for your patience.

  228. Hey any body get the number on that truck?

  229. JRW – I guess that would qualify as a "whole car"  :)

  230. SPX Weekly last trade day today, 1025 can be sold for 0.30!

  231. What Crap!  CNBS will be talking up the "700 point rebound" the rest of the day…..

  232. 1020
    I can’t believe what Schwab says my account change is; and I missed the first 4 hours !!

  233. CNBC claims trader "at major firm" hit sell on BILLIONS of shares vs Millions intended.  They say that trade can be unwound but what about everyone else who got screwed?  What a joke! 

    SDS/Deano – Sure I’d do that and just keep stops on the caller.   BGZ same thing.  Hard to imagine we go lower than we just did. 

    Disasters/Trad – Sure, remind me laster and we can go over but lousy entries now compared to even this morning.

    Big up/Cwan – I think we’re correcting now back to 10,700 but tomorrow is back to depending on Europe and Jobs.  Even if we recover a lot, it’s still a terrifying amount of damage to investor psychology.

    Buy List/Stjean – LOL, wouldn’t that be great?  Cash is so king!

    Good sell Barf!  So great when you can take advantage of the panic of others. 

    Cramer/1020 – I think he was shell-shocked.  I can’t wait to watch tonight to hear how he predicted this…

    QQQQ/Nols – I’m sorry, what’s the position?  A little hectic on my end at the moment…

    BIDU/RMM – If you don’t mind rolling them, not too risky.  They should hit resistance at $650, which is just about a 5% drop for them. 

    Thanks Ocelli.  I was starting to feel like a bit of a nag (and losing a few members who said I was too bearish in a great market) but I just have to go with what I see, even if it hurts my "ratings."

    Do we even believe what CNBC is saying?  Pretty much they are telling everyone to BUYBUYBUY because all that selling was in ILLUSION and that the markets are fine.  Obviously they are not fine at all if today can happen!

    Kudlow watch/Stjean – Did they say how he wants to do it?  I’m not sure if I should send him a new tie or buy him a gun or maybe send him one of my perscriptions…  JK – more or less..  8-)

    Mattress/Morx – What position? 

    Mental stops/Jced – Great point.  This was certainly a day where hard stops would have trashed you (which I think was the point). 

    $50M/Pharm – ALWAYS sell into the initial excitement!  8-)

    Way to go JRW!

    Any win is a win Jtiff.  Good going.

    Rebound/1020 – Yep, strong rebounds and fat fingers.  GE was down a good 10% earlier. 

    What a day!  I need beer…..

  234. JRW – It just dawned on me that you won that Porsche over a phone!  Mega Props!!!!

  235. I don’t know about the rest of you, but that was a tough trade even though it ended well for me. I got absolutely creamed trying to exit bear put spreads on the B-A spread; sometimes having to give up 60-70% of the paper profits to get out. So that was frustrating, but also a learning experience.
    I’m starting to think that naked long-dated puts are the better way to go for downside protection. I was able to sell them at much better prices.

  236. Phil and others …..Here’s a point to ponder for the evening.  I have to go offline so I can’t get involved in the discussion for the next 2 or 3 hours.  It’s this…..This type of whipsaw in the markets in a 1/2 hr. period could only have been done by computer programs.  Individual traders could not have made that happen so quickly.  Am I right Phil?  

  237. QCOR – Overwhelming YES on the safety and efficacy data.  Side-effects split.   Now we shall see if the market likes it. 

  238. So based on this supposed Billion order trade instead of Million we should all go long in the morning?

  239. "CNBC claims trader "at major firm" hit sell on BILLIONS of shares vs Millions intended.  They say that trade can be unwound but what about everyone else who got screwed?  What a joke! "
    Yeah, sounds like BS on its face. Scary that they are trying to explain things away like that, but we’ll hopefully find out what happened.

  240. PG only traded 28M.  Where is the billion shares supposedly causing this?  Something doesn’t smell right at all.  Funny how no one is talking about Greece all of a sudden.

  241. Anybody who could handle today’s pressure should be good for any trading day.  I got some orders filled during that madness, but for about 10 seconds, my account said I had negative 99,999,999.99 in value and BP.  Sort of gave me pause, then it switched back to normal, and I ended up the day right about where I started.  What a way to spend an afternoon.

  242. Trader error today?

  243. I assumed this PG talk was all BS as well but Denninger’s got evidence to show that maybe it was PG, and we all know he’s no bull

  244. Where is the RIG deal my net seems to be $7.63 nowhere near $3.90!

  245. Even assuming the sharp dip was an error, its timing at around 2:45 pm really must have screwed up any stick-save bot.

  246. Rumor that some trader at C triggered a trade for a Billion shares of PG instead of Million, which caused this crash. What a joke. Looks like several stocks hit a penny .. e.g. ACN.

  247.  With all of the talk of Blankfein needing to be fired, maybe this is his revenge? One last poke in the eye to show who’s really in control.

  248. I just did a quick statistical analysis.
    Today’s high=1167 & low=1065.  So, (high-low)/low = 8.74%.  According to the following statistics, it would have ranked one of the top 10 intraday swings.
    Statistics based on SPX daily data (from 2000 to last week) downloaded from, using the formula (high-low)/low.
    avg=1.521% stddev=1.105%

    largest[1]=10.331% date=2008-11-13
    largest[2]=10.312% date=2008-10-10
    largest[3]=10.126% date=2008-10-28
    largest[4]=9.489% date=2008-10-09
    largest[5]=9.353% date=2008-10-13
    largest[6]=9.110% date=2008-10-15
    largest[7]=8.912% date=2010-01-11
    largest[8]=8.865% date=2008-11-20
    largest[9]=8.640% date=2008-10-16
    largest[10]=8.490% date=2008-09-29

  249. How can something like this even happen with all the sophisticated techology, circuit breakers etc etc. Stocks like ACN crashing to a penny? Will anyone truly figure out what happened really?

  250. 1020
    Not a Porsche, Aston Martin, but since I made the family late for lunch, I guess it will be a new Bentley for Mom !!

  251. Phil- today was one for the books. My heart is just now slowing down. Your tutelage was put to good use today. I had to do some things which I was not happy about but I had a plan and worked it right down to the last items on the list just trying to stay liquid and not get blown out. I need a few hours to get away from this but I think the damage was minimal and I should be able to recover with a profit but it just will take more time than I anticipated.  A year or so ago it would have quite a different story.
    Your politics needs some work but your trading regimen is the best. Thanks.

  252. The problem with there bogus fat fingered story as that someone has to be blamed.  They first try C, but C says "It wasn’t us."  Someone might have to come in to convince C it was them.

  253. That Denninger article is the most plausible hypothesis so far.
    There was clearly a artificial no bid situation for something like ACN to go to .01. Something was broken.

  254. Note: When calculating the above statistics, I did NOT know if it was an up day or down day, because the data only had open, high, low, close for each day.  So, take it for whatever its worth.

  255. Hi, pstas,
    Just read your comment.  Not sure if I understand.  You had some damage due to today’s violence?  How much damage did you get in your account?  And what happened?  I hope it’s not much.  Very concerned.

  256. Somebody was asking about IB. I think it was Gel. Their user interface is rudimentary but the only one I have ever used so I don’t mind. It is simple to use but I don’t use their charting, analytics, etc. so I can’t comment much on that. I have not received any weird deviations regarding margin as I’ve heard reported with TOS. Lastly, I went for a jog and to get my girls from school and missed the whole huge drop today! I don’t know how much my margin was affected but when I came back it was as is nothing happened, which surprises me because I have a LOT of naked puts written…way more than I have cash on hand. Their customer service isn’t great but I think they have a lot of professional users so they take execution very seriously…and the pricing can’t be beat anywhere as far as I know… basically $1 per option per contract, sometimes cheaper depending on number of contracts and which exchange.

  257. Re. the PG fat button excuse:  IWM was selling off well before that. and PG is not part of the RUT.

  258. Looks like someone took out Zerohedge as well. Can’t open their site, bu the RSS feed is working.

  259. Hi, aclend,
    Thanks for your comment on IB.  I’m interested as well.
    Do you have Portfolio Margin for your IB account?

  260. WOWZERS!  / Short strangles:  What a day.  I’m using IB with a portfolio margin account and have about a third to half of my portfolio running short index strangles. As it turned out, this was my best trading day ever. But it easily could have been a disaster. Obviously, as the market began to crash, the bid/ask spreads on the SPX options went completely haywire and my May short puts at 1050 and 1100 exploded as I basically had an exponential increase in gamma. As a few of you have mentioned, quotes went completely nuts so I didn’t know where I stood, other than at S&P 1070 or so, I knew that my May 1050 puts had massive exposure.  I was saved by the simple fact that I have been getting more and more bearish in my market view and had uncovered my June SPX 1150/1160 put crazy play, basically just running a long put position which had a high delta given the declines of recent days. I was also short ES mini futures and copper and a few other futures. Futures pricing remained tight, so I sold off the futures to make sure my margin was OK. Despite the craziness, IB seemed to make all the right margin calculations, as on paper and according to their risk analytics, my long puts should have just about balanced out my short puts down to 1050 or so. Once ‘the stick’ started, I bought back some of the short puts as spreads moderated. Now I have shorted more ES mini futures, and still think 1050 should be a floor, so am keeping some of my naked short puts. I think Eric L made the comment that ultimately in this sort of situation, you need to have naked long put positions. I completely agree. If I only had ‘crazy play’ put verticals, I would’ve been in big trouble I think…

  261. Phil, the disaster hedges actuall got closed in all that madness.  That said, I am not sure this down draft is over, what do you suggest for continuing to play the market down?  thanks for responding to a question with a pretty obvious answer!  BTW, the lessons you teach us actually made a day like this fun!!  Thanks!

  262. I do, also approved without any "test" other than normal questions answered in the beginning regarding trading experience and account goals. For example, if one says "preservation of capital" as a goal, then "risky" strategies like naked selling is not allowed, so I put "hedging, speculation, trading"etc.

  263. Phil,
    QQQQ/July 2010 puts—where from here?

  264. QQQQ/July 2010 puts (long)--where from here?

  265. Hi, aclend and neverworkagain,
    Thanks for the comments on IB.  I am going to open an account at IB, and transfer some, but not all, of my portfolio to IB.
    Even though we’ve had some bad experience with TOS lately, today TOS behaved as well as it could, I think.  When SPX hit 1065 for a brief moment, my BP and Net. Liq. both went negative big time.  But it was probably because the explosion in the values of all short positions.  No one at TOS called me or email me.  They continued to run during the whole episode, whereas my other account at Schwab was completed locked up for quite a while.  Schwab probably didn’t recover until after market close.

  266. Cwan- thanks for the concern. I was very heavy on short put legs of strangles as a result of flipping during the grind upward, I have been working to get things back in balance but then today hit. My TOS account was going literally crazy. The account was locked up for a short time and my buying power moved from +50 M to -50M during the course of the day. I had to roll strangles out to July to get some relief. Now that I hear of the exchange nonsense I now wonder how much of what was forced today was a result of that. Also sold some other positions taking profits which I did not want to take now just to try to recoup some buying power. I traded 34 orders today which would be what I normally would do in a month. Nuts.
    I am sure I have some loose ends but I don’t want to dig in now- best done after a cleared head.

  267. Still waiting for an answer to the RIG play, my math using Etrade is double your numbers. The problem today was computer programs by the SOB’s. What bothers me is I trided at least 3 times to buy during the 950 point rout but all failed including raising buy limits. Any ideas how to beat the systems? Please don’t reply I’m sending comments to quickly I have to tomorrow AM.

  268. Programs/Iflan – Oh right, no way was that natural.   This is everything that is wrong with program trading in a nutshell and I am telling you that this was a multi-billion dollar crime.  Someone "fat-fingered" Billions of shares instead of millions and that’s all it takes to send the markets down 10% in one day and the only reason trading didn’t shut down was because Mr. Fat Finger just so happened to make his mistake minutes after the usual trading brakes come off at 2:30.  What a friggin coincidence, right?  Well, bad luck to all who got wiped out and what a funny stroke of luck for those with multi-billion dollar shorts (including us fortunately so we shouldn’t complain too loudly).  It’s amazing what "THEY" get away with right in front of us, in broad daylight….

    RIG/824..  – The numbers were moving so fast it’s pretty impossible to say now.  That is what they were when I wrote them but RIG bounced $2 already and the VIX pulled back from 40 to 32.80.  Man, we didn’t think we’d see that number again for a while!

    Blankfein/Jced – Crashing the Dow 1,000 points and then bringing them back 700 is EXACTLY the kind of thing a James Bond villain would do just prior to making his ransom demand after the "demonstration."  It would be funny but, even if it really was a "human error" at C – they just proved that a single person can walk in, press a button and destroy $3Tn worth of US wealth in an hour.  If it were a James Bond plot you wouldn’t believe it could happen – no system would be that unsecure, would it?

    Thanks Pstas, I think…


    Zero Hedge/Pharm – NOW I’m sensing a conspiracy! 

  269. With TBT at 40 it’s practically criminal how easy it will be to make money on this thing over the next 3 weeks.

  270. Phil – I think that "B" button on that keyboard should be treated just like the "Red" button for firing nukes.  It should have a clear box over it with a double key lock.  It obviously has the potential to do tremendous damage.  Insane!!

  271. I know Phil’s got a million questions zooming his way now, so maybe some other can help me understand in addition to Phil. My disaster hedges really failed me today. For example, BGZ I acquired the Oct 12-17 call bull spread during April 20-23 (Dow hovering 11,100 then) for debit around $1.30. Also sold Oct. 11 puts for 1.10 credit. Today the respective buy/sell bid spreads are 12c = 3.7/6.5; 17c=1.5/4.7, 11p=.75/3.5. We are at Dow 10,500 and I actually show a paper LOSS for this position due to the huge spreads. The last fill of the 11put today was 1.10, so even if I got that it would just be break even on the put cover, which sold for 1.10 at Dow 11,000. I have a similar issue with a TZA Oct6/10 bull spread.  My understanding was that you take profits from these during big pullbacks, but how can you realistically cash them out with such huge bid spreads and inflated callers due to the high VIX? I tried to get decent fills today but no dice, and i can’t sell the long calls and leave the short calls because these are significant positions that would throw me into margin trouble quickly. I have read over and over and over all the disaster hedge stuff here, and acted in order to prepare for a day like today. But it went horribly wrong.  What can I do to pick up the pieces at this point?

  272.  LOL Phil …  here is the PSW post trading day party wrap-up:

  273.  P&G ==> Plunge & Gamble

  274. kururi
    That was basically my experience with some vertical spreads like yours on ultra inverses. The B-A spread was so screwed up that they were showing a loss even though they should have had huge gains. Also, my longs were generally ITM while the short legs were OTM, so the short legs exploded higher with the volatility. I simply couldn’t sell some of them.
    I’m going to reassess using these plays. I’m very disappointed in how they worked out. Connected with this, I think the pricing system for options broke down in many cases, which is also a disappointment.
    One thing I think we should all try to figure out is which options remained tradeable during the plunge. XLF did o.k.; spreads went wide but manageable. SPY was o.k. too, most of the time.

  275. Fun/Trad – Well mission accomplished for me then!  I am actually hoping that this is it (consoldation around 10,200 to 10,700) and we can finally get bullish again.  I couldn’t believe 10,000 fell without a wave of buybots – that has to give us serious pause that we could break through that level in a straight shot.  Hopefully everyone (including you!) cashed in the short side today and now we only have to worry if 10,200 and 1,100 fail again. 

    We really won’t know until Monday the earliest with the EU meeting over the weekend but step 1, Greece agreed to take the money, step 2 UK elections seem inconclusive so no major changes there, step 3 Germans should now be sufficiently scared enough to vote the status quo and step 4 will have to be ratification by terrified EU members that if they don’t bail out Greece then they are all going down in flames together.

    QQQQ/Nolsurul – I’m sorry, I don’t have track of all this at the moment.  What strike do you have and what is your basis and what do you want to do with them?

    TOS/Cwan – I agree.  They were up, they worked and trades were executed reasonably (as I mentioned I was able to sell DIA $110 calls for .80 and they dove 2 seconds after I sold them, a great fill, now back to over $1 on extreme optimism…  Being able to attack positions like that while the market is crashing is worth putting up with many other hassles (not that there are any other than this margin idiocy). 

    TBT/BDC – I agree.  I hate to keep saying it since we were selling $47 puts at first in this series but – what a deal!

    B button/SS – I never believe these stories.  Even C gets a margin call when they try to execute a Billion shares on a stock.  It’s not very likley they have a single account with $50Bn worth of PG in it (1/3 of the company’s value) and some guy accidentally sold 1BN when he meant to sell just 1M (obviously if it was 2 or 3 Bn it would be more shares than exist for PG) and then we are meant to believe that there were 1Bn buyers lined up to buy PG on the dip.  This is a fairy tale to mask whatever really happened

  276. Phil….Thanks for what you’ve taught us.  That is,  how to protect ourselves from wide swings in the market, and today I was very well protected from the downdraft.  I watched my computer screen in disbelief as downside protection plays became rapidly profitable.  I cashed them out one by one as the DOW hit about 700 down, worried that the trading program would freeze.  I cashed out everything to the downside then noted that AAPL was selling for less than 210!   I couldn[t  beleive my eyes.  I put orders in for calls, and got a few, but before I could get all I wanted the program DID freeze, and I was done.  It came back on later and I finished the day with a profit. 
    So as another member above said Phil, where do we go from here?   I’m left at opening tomorrow with NO DSP, having cashed it all out today, and lots of ITM AAPL calls, plus cash  .  I’m wishing I’d had time to load up again on some protective plays, as I’m not sure this is over, but the market whipsawed so rapidly I didn’t get it accomplished. 
    And one final observation.  Remember several days ago I was on line talking about the concept of putting buy triggers into your portfolio management system to take advantage of unexpected rapid swings in the market and in specific stocks?  That would have paid off hansomely today.  But then again, computer programs are probably what got us into this mess today.  I’m betting there are many inexperienced traders out there who panicked today, made unwise trades under a state of anxiety, and blew their portfolio. 
    What a day.

  277. Just got back from a meeting ….
    Did I miss anything today ?

  278. Cap LOL I feel same way, I came back and everyone was talking about the dip… :)

  279. Pharm – QCOR up 15% now AH after trading is resumed. Let’s see what happens tomorrow.

  280. I was a bit dissapointed today because I couldn’t take any action due to the Apple shorts I have. I initially had shorted May $260s but as the stock shot up past $270 I had sold $250 puts.. now I’m stuck with those two plays because they take up most of my margin and I can’t retire them now due to the increased VIX which made them extremely expensive to retire.. So, I don’t know what to do at this point. I couldn’t even close the short calls because they were still more expensive than when I bought them..  I’d rather buy the stock at $250 but then again, this madness could continue and drive the shares further deep down..

  281. Phil – When you get a chance, can you please post some more disaster hedges or update the previous ones?

  282. ravalos,
    I’m sure others would have more comprehensive strategies but if you are bullish on AAPL long term, then you could at least buy an OTM long call several months out (or JAN ’11) and that would free up some margin and give you a chance to profit on a resumed uptrend. Of course, it’s still risky since you are buying premium but if there is a stock I would take a bet on being up $30-50 dollars a few months from now, it would be AAPL.

  283. Thanks Ilfan – that’s great to know.  I don’t know where we go from here (see coin flip above) it all depends on the EU this weekend but even that doesn’t do more than put a band-aid on Greece.  Sadly I think the only solution is for universal defaults (sorry China) and a 10-year depression through which we can rebuild.  That or hyperinflation so we can all pay off our debts with worthless dollars.  Hmmmm, I wonder what they’ll choose?

    Meeting/Cap – Same old, same old…

    AAPL/Rav – Not worth doing those kinds of plays if they leave you inflexible.  As I often say, short strangles are only for stocks (better ETFs) that DO NOT, as a rule, move 10% in a month.  As you can see today, even that is up for grabs…

    Disaster hedges/Trad – Well our last batch of hedges is actually still playable because of the ridiculous VIX.  The question is, will the market stay low for that long but, on the other hand, if we use them to hedge buy/writes they will make ideal downside protection as they are all already in the money so they just tick along to profits and, if we flatline here, we can collect on both ends now! 

    I’ll come up with new plays next week but tomorrow is random and so is Monday.  Cash is my disaster hedge (have I mentioned that lately?)

  284. Phil, Can you check out my question posted 5:44pm. Thanks.

  285. QCOR/Trad – they are gonna be nicey nicey.
    DCTH is going to be too.  With the high VIX one can even go down further OTM and sell P.  Phenom day for selling P on companies you want to own. 
    Bought more ONTY at 3.12, and they bounced nicely
    KERX is looking more appealing now, and selling a few P might be better.  ARIA P can also be sold for good $$$.

  286. I have a problem with the theory of the "fat finger".
    I do my own trading for fun on a small account with Fidelity but my larger accounts are with Smith Barney and if I call the broker and want to trade 100 contracts he has to enter that trade as 2 separate orders (90 / 10) since any trade of 100 contracts or more has to be approved. So the lilehood that he would hit the wrong key is very remote.
    I find it hard to believe any  "professional" trading house would not have the edits and approvals process in place to make sure trades like these are handled correctly. A trade of huge magnitude could work against them as well as for them so there has to be something more going on here but I am sure we will never know the exact cause of the problem. I can’t imagine any internal or external auditor worth his salt would approve any process that colud allow for this to happen. And that doesn’t even speak to the audits of workflow processes done by their liability insurance carriers.
    I could be dead wrong but I just don’t buy it.

  287. I think today shows hows vulnerable we are to cyberattacks; either hacking into servers or getting real people into positions where an orchestrated attack can bring down the whole financial system.   You just need five people with "fat fingers" to simulataneously enter bogus orders and we collapse.  We need a failsafe system that we can all believe in.
    Have I mentioned that I like guns and ammo lately?

  288. Unlikely "fat finger" accident  – I agree.  More likely the banksters reseting positions in chaos – because they can.

  289. Pharm,
    Which of the biotechs has the potential to be a ten-bagger in 3 years?

  290. Missed most of the action today, as I was trading curencies, or on the golf course….. Geez – what did you guys do to the market?  I was stopped out of some stocks that I had forgotten had stops on them. ( not good ). I believe this parabolic drop was caused by the same thing…. guys at work and not watching the market and the protective stops were like a domino effect as they rolled down, and the computers activated the sell orders ( and no buyers ). I am so fortunate to have been protected by stops, hedges and GOLD positions! Shorting the Euro was also a blessing!  Congrats to JRW …You have a brilliant strategy!

  291. Aceland… Thanks for the very helpful assistance re IB. I have more confidence now that this is the right move for me.

  292.  I’m surprised NFLX of all stocks didn’t track the Nasdaq today

  293. No problem, guys.

  294. ACN went down to 0.01 and then back up to 40?  Did anybody get that trade?  You only need to enter that one for 100,000 shares (only $1,000), and you can retire!
    How do I catch that next time?  How about enter limit orders of $0.01 for every stock on the planet?

  295. I heard second hand that there was a possibility that some of the trades during that crazy period be reversed.  Imagine the guy who sold ACN for 0.01!  Don’t you think that he’ll cry foul?

  296. Hi, pstas,
    I hope that you are okay now.
    It’s interesting that I had exactly the same experience.  I have tons of SPX short puts as well.  This afternoon, my buying power & Net Liq. went from + to -.  I then tried to roll the puts down and out.  But the bid/ask spread was so wide that I had no idea what price to bid.  TOS’s Mid was jumping from $1 to $10 and back to $1 within seconds for rolling May 1050 to June 950.
    I ended up doing nothing.  I was completely frozen for minutes.  I finally managed to cash out some downside hedges.  But by then the markets already calmed down.
    We’ll see what happens tomorrow.  I still have those 1050 puts to worry about.

  297. It just occured to me the amount of taxes generated by all of the stop losses being hit.  Hmmmm.

  298. ssdirk, but on the other hand, the guy who retires because he bought ACN at $0.01 has to pay taxes at the top tax bracket.

  299. Phil/Univ. Default   Let’s see, Generations with Kazzilions in Debt or Red China?    Hmmmm……. 

  300.  Last night (for me from Asia time) was fun. To share my TOS experiences, similar to pstat, my MP went from +M to -M a few times during the panic time. ON TOP OF THAT, I bought 200 IWM 69 put right around 11am and was enjoying the ride. 
    During the panic time I can’t execute any order until 3:07pm and I sold it for 2:65, about half of the gain right before the ‘crash’. I probably lost 20K on this! 
    Anyone IB user to share your experience?

  301. Fat finger/DK – I agree 100%.  Obviously, it’s not like no one ever hit the wrong button before.  In fact, in the last spike down we got the same BS before the relentless sell-off began and back then the SEC was going to investigate yadda, yadda – anything to keep the sheeple buying while the funds are dumping…

    Guns & Ammo/Humvee – I’m just glad I live on top of a mountain (good,defensible position)!   8-)

    Samsung/Kustomz – Interesting, I don’t think I would have even thought of them.

    Day off/Gel – Glad you had gold and EUO, although I still think it’s ridiculous at this price. 

    Default/1020 – China has got to be nervous about that but maybe it’s being used as G7 leverage to get them to pony up…

    Craziness/Balance – That’s why I went to cash.  We expected this as there was no proper base established to support the market.  That’s why all the thin-volume rallies freak me out, this kind of thing is pretty much inevitable and then it’s a mess but hanging out with cash allows you to swoop in after the crash and pick up the pieces – pretty much like Buffett did last year

    ACN/Cwan – Unfortunately, the offers use up buying power but, otherwise, great plan and I’m sure some fund has 1,000 stocks with 100,000 shares bid at .01 for just such an emergency (which maybe they then cause..).  That happened so fast, there wasn’t much we could do about it, unfortunately. 

    BGZ/Kururi – Your spreads are victims of a high VIX at the moment.  It’s not possible to profit in October from a sharp move in May, the idea is we would have protection for 5 months, not 2 weeks!  The bottom line on BGZ is you have the Oct $12/17 spread and the short $11 puts for net .20 and BGZ is currently at $15.11 so you are $3.11 in the money on your .20 spread.  If BGZ expires at this level, you make 1,455%.  What you actualy have at the moment though is the Oct $12 calls with a $3.80/5.70 bid/ask spread (last sold for $4.50) and the Oct $17 calls with a $2/4.20 bid/ask spread and a last sale of $2.85 so let’s call that a net $1.65 based on the last sales while the Oct $11 puts are .75/1.65 with a last sale at $1.10.  So you should be able to liquidate this trade at roughly .55, up 175% but that would be a shame as you have $3.11 coming to you at the moment. 

    The idea of laying out these disaster hedges was orignially to protect long-term positions.  As we pretty much cashed out everything, not their use is to establish long-term positions.  Since you have $3.11 coming to you if large cap bears stay low, it makes sense to take something like CAT at $63.50 (one of the buys I mentioned this afternoon, when we were lower) and sell the Jan $65 puts and calls for $18.50.  That drops your net on CAT to $45 and you make $20, or 44% if CAT simply makes it back to $65 and your worst case is cat is put to you at a $55 average.  Since CAT is a major large-cap and we don’t see a reason it will ignore the group or the group will ignore it, we have a resonable expectaion that any fall in CAT will coincide with a rise in BGZ and that will lock in your 1,400% gain or maybe even improve it

    If you had spent $200 on the BGZ spread for 10 contracts, your upside on the spread is $5,000 and your risk is having 1,000 shares of BGZ assigned to you at net $10,800.   If you buy 400 shares of CAT for net $18,000, you have an upside of $8,000 if CAT holds $65 and that would pay for you to be assigned 1,000 shares of BGZ as low as $2.80 (assuming you didn’t roll it out to a lower strike).  Meanwhile, if CAT falls, you have $5,000 of additional protection that will cover your 400 shares down $12.50 lower, all the way to $42.50 on CAT.  Of course, if we more or less flatline, you can make money on both ends – which is what we really hope for!   Anything that doesn’t drop BGZ 20% at this point is a winner for you and, of course, we could always now set up a 1,900% upside play that costs .20 and pays $5,000 if a 3x ultra long goes up 20% if you want to really balance things out…

    So you can take profits by either offering the spread or using your future profits as insurance against a play that would lose money if you end up collecting those future profits but pays off if you don’t.  If your broker doesn’t let you offer net spread prices, look for another broker!  You can also offer the best end for each leg, figuring if you can buy back the puts for .75 or buy back the caller for $2 or sell your calls for $5.70 that the rest will work itself out when the VIX calms down. 

    You can also attempt to imprrove your position, offering .50 to roll down $1 on your $12 calls and asking .85 to roll the $11 putter up $1.  I’d roll the Oct $11 puts to 2x the June $13 puts even to wipe them out sooner since I can always roll them back down to the Oct $11s or maybe lower but that’s based on the fact that I never thought the Dow would break 12,000 by October and I still don’t.  If you have conviction, these plays are fun and easy to hold but if you are going to ignore the FACT that you are $3.11 in the money on a .20 spread and panic out of a posiiton because of some ridiculous spread pricing – then these trades are not going to be for you. 

    The reason "THEY" do these ridiculous spikes, both up and down is to, as they say in THE GAME "flush out the weak hands" – in other words, force as many stops as possible to see where the buys and sells were set up (almost like peaking at other people’s cards) and to see what kind of retail panic they can force (not to mention the margin calls they cause).  When it’s a downside move, the inflated options prices are perfect because the guys who made the market drop know that they made it drop so they can buy with confidence and sell puts and calls (like the CAT trade) at insane prices to more retail suckers who think 40 is a normal level of volatility

    TZA is in a similar position, you have an Oct $6/10 spread and TZA is at $7.15 so $1.15 in the money but the last sales are $2.24/1.20 so just $1.24 to collect and, if you sold the $6 puts, they were $1.06 so probably not even a profit in those if you cash out now. 

    The problem is that the Russell has only fallen from 745 to 670 and that’s just a 10% correction and these disaster hedges are meant to cover a 20% correciton so we’re not there yet.  As I said, IN BOLD LETTERS, in EVERY disaster hedge post I’ve written, including the last one:

    Keep in mind these are INSURANCE plays – you expect to LOSE, not win but, if you need to ride out a lot of bullish positions through an uncertain period, this is a pretty good way to go…  Also, be aware that these are thinly traded contracts with wide bid/ask spreads and you need to use caution establishing and exiting positions.

    If you have been following our main moves, which were cashing out on March 18th and rolling up the disaster hedges while having fun with our cashy short-term trading, then you should be THRILLED just to cash out the existing disaster hedges with a small profit.  This is like having car insurance and, at the end of the year when you don’t have an accident, you get to sell your insurance policy back for a profit!  Cash is still king and we haven’t found things to buy yet so there’s not much to protect…  So don’t take these plays out of context – they are there to protect our bottom fishing, which we haven’t started yet and they are there to roll out of our successful plays as we take some bearish cash off the table

    When you are entering a trade like this, assume you will have FAZ put to you at $10.75 and allocate how much you are willing to own.

    Of course keep in mind that this is insurance, not betting.  Betting is the call/put combo on SDS, which is a bearish bet on the S&P that has an immeditae payoff on any downward move with an unlimited upside.  These are hedges that are meant to perform for you if your upside bets don’t work out and will hopefully not cost you too much money when your upside plays go well.  If your upside plays are sensibly hedged, like our buy/writes that pay at least 10% a quarter in a flat to up market, then this kind of sensible insurance is all you should need to offset reasonable dips in the market.  It doesn’t mean you don’t need stops.

    I cannot remind you enough though that these are insurance plays and they are not ideal for rolling or adjusting and you should EXPECT to lose money if the market heads higher – much the same as you expect to have "wasted" your life insurance premium for the prior year every time you celebrate another birthday….

    As with life insurance, it may make you feel good to walk around with $50M worth of protection in case you get hit by a bus but – is it realistic?  Look at your portfolio and think about what kind of protection you REALLY need.  If you have $100,000 worth of May buy/writes that are good for a roughly 15% dip in the market, then you don’t really need ANY protection against a 15% drop.  If the market drops 25%, then you will lose 10% on what you have now.  If the market drops 40%, then you lose 25%.  We all learned how valuable it can be to simply stay even in a major market drop as opportunities abound then so simply putting 5% away on hedges that will pay 25% back when the market drops 40% will let you cash out with 100% of what you have now and go shopping – that’s all insurance needs to do.

    Perhaps you can tell me what I should say to make this clearer….

  302.  Phil, Good morning. Need advise on BIDU (yes, I am still trapped in it…) 
    What;s your advise for some downside protection to my short position of Sep 650 Put. I want to go to cash but the premium right now is just too ridiculous. I was thinking buying some 600/580 put spread, or just simply roll the Sep put to Jan11 600 put?