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Thursday Thump – Depression Sets In

What a difference a title makes!

Yesterday, I titled my morning post "WTF Wednesday?" and I had, at 5:36 am, already sent out a major Alert (rare thing to do) in which we discussed Raoul Pal’s statement that a major crash is coming in 2 days to 2 weeks, to which I said: "I think it’s insane not to be mainly in cash right now and hedged for at least a 40% drop.  If the guy’s wrong – our buy/writes pay "just" 20% and if he’s right, then we get to DD at good prices with the profits from our Disaster Hedges!"  As I’m not one to ignore a great opportunity to profit from catastrophe, we added 3 more hedges that pay 1,000% if the market does tank in the next few weeks, or days (using DIA, FAZ and TZA).

I commented that the riots in Thailand may be the first of many around the world and that "Europe is in full panic mode and is hitting the 2.5% rule at 5am, about 11 am for them – very, very bearish if they can’t hold 2.5% in a day and not very good if they finish near that line anyway.  CAC must hold 3,500, DAX 6,000 and FTSE 5,175" and we all sang "Smoke on the Water" as we sat back and watched the world burning on the news at 6am.  SO – when the futures were UP soundly into the market open, my article title was "WTF Wednesday?" indicating our incredulous take on the move.   I noticed on Seeking Alpha, they decided to change the title to Wacky Wednesday – a very different tone and that’s a shame because I think it washed out my stern warning to revisit our disaster hedges, 16 of which I published for free this weekend to help protect the general public. 

Having our bearish plays set, we attempted 3 bullish plays in our next morning Alert at 9:46 but those got quickly blown out of the water as the S&P failed our 1,115 line at 10:13.  At 11:37, just before we bottomed out for the day, I said to Members: "Well, this is ugly but we couldn’t have a better set-up for a massive reversal on the Fed minutes at 2pm.  Not that there’s any real reason for a turnaround on the minutes of a 2-week old meeting but it’s a great excuse to run the Bots as they will have a few pages of text to point to and say "that’s why."  That helped us catch a 100 point move up that started 12 minutes later but by 2:24 we looked over the minutes and were disappointed as I said to our Members: "Well this is annoying as we had such a good run that we ran out of gas at the minutes. Since the meeting was before the EU blew up, no one is putting much stock int he Fed’s nice outlook."

We barely struggled to hold support on the S&P’s 200 dma and it was a sad little stick save that took us back to our 1,115 line at the close.  Pragmatic Capitalist has a great article in our "Favorites" section yesterday where he made the following key observations:

  • The dominoes appear to be lining up in an eerie fashion at this point in time – there are now dozens of negative catalysts in the coming 12 months (which I will detail in a soon to be released report).  Although the markets are once again oversold and at risk of a bounce the fundamentals are quickly deteriorating and my expectation of a weak second half appears to be right on cue.  I would continue to approach this market with a great deal of caution despite the current oversold conditions.
  • What do the Germans know? This short selling ban is very desperate looking.  I hate to speculate, but my gut tells me that they are beginning to realize how bad the situation is over there.  They now understand that the problems in the Euro cannot be solved through intra-country debt issuance and bailouts.  The short ban looks like one more act of desperation from a group of nations that have severely underestimated the problems they confront.
  • Will we scare ourselves into a double dip or even a second great depression? Everyone and their mother appears to be in the same camp regarding all the very scary “money printing”.  I’ve never in my life heard the drumbeat so loud for fiscal austerity.  In fact, this might be the absolute scariest thing about the current predicament.  Investors are now convinced that government spending has done nothing to help the economy (despite talk of a v-shaped recovery just a few weeks ago).  Now everyone is convinced that we’re all bankrupt and doomed.

Josh Brown also sums it up nicely saying: "Here a Swan, there a Swan, everywhere a Black Swan…  Newsletter writers, hedge fund managers, journalists, bloggers, technicians, fundamental analysts, economists and strategists are joining the crash camp left and right.  Not the bear camp…the crash camp."  Really!  There is no happy medium with these people – it’s either all bull or all bear – that manic-depressive market we’ve been talking about all year has swing right into the depressive stage.  Josh observes that on Wall Street: "Equity analysts are all pointing to year-over-year comps which will start getting harder now.  They may feel OK about the "E" but they’re shaky about the "P" – will the tax hikes and regulatory headwinds we now face really allow for a high-teens multiple on whatever the earnings turn out to be."   

The only thing that shocks me here is how it can be possible that analysts only now realize this.  When I tell people on radio or TV that I think the forward p/e’s are too high, I usually assume they are as smart as our Members and understand that it’s because, at some point in the future, we do have to balance our budget and that means taxes.   You can have all the Tea Party rallies you want and the Republicans can sprinkle their supply-side fairy dust all over the country but even Ronald Reagan knew that, at some point, you have to face reality and raise some freakin’ tax money to keep the lights on

Now while higher taxes might SUCK, they are NECESSARY in order to act like adults and balance a budget.  Yes we need spending cuts too but until the Tea Party starts holding rallies to stop spending close to $1Tn a year on the military (close to 1/2 of the entire planet’s military budget and up 500% since Reagan), then we’re not seriously looking at cutting back on government waste.  Not to get into a major debate here but in 2008, we spent $711Bn (not counting the off-budget wars) and Europe spent $289Bn.  The ENTIRE Middle East spent $82Bn, Russia spent $70Bn and China spent $122Bn.  Aside from the fact that NATO outspent all of our potential enemies 4:1 – don’t you think that they only spend what they do BECAUSE we spend what we do?  

Cramer points out that it’s "just" a 10% sell-off and we should be buying to which Karl Denninger asks: "Cramer, Are You Hitting the Pipe Dude?" but I have to agree with Cramer here – not about smoking crack (although that does explain a lot of what Cramer says!), but that this "sudden realization" that the Global economy may not be this unstoppable growth engine that will go up and up and up and make everybody richer and richer and richer is not a reason to abandon the whole thing.  What I’m seeing is the beginning of the new market – a market where the financials go back to making a very boring 15% profit on their banking and command p/e’s of 8-10 and commodity stocks go back to providing products to manufacturers instead of speculators and they too are lucky to scratch double-digit p/e’s and investors go back to investing in companies that produce the goods and services that people want in the most efficient possible manner and, hopefully, those companies will employ humans and capital will flow to the Capitalists, not their bankers, who once upon a time provided a peripheral service and knew their place. 

That’s right, a Capitalist is "An investor of capital in business, especially one having a major financial interest in an important enterprise" – not a Speculator, who is "One that speculates regarding the future turn of events."  Perhaps simply understanding the difference between these two activities would help Congress pass a better Financial Reform bill because Speculators do NOTHING to help the economy.  They skim profits from the economy but that doesn’t actually help anyone except, perhaps, Chris Dodd, who was paid $3.7M this cycle by speculator types into his election fund AND HE ISN’T EVEN RUNNING!

I’m not joking and this isn’t funny, if you are wondering why we can’t pass decent Financial Reform, just look at this list of Dodd’s masters:  Citigroup – $265,000, SAC $262,000, RBS $223,000, BSC – $190,000, Security and Investment Firms – $3.7M, Lawyers and Law Firms $1.6M, Insurance Companies (AIG) – $1.1M, Real Estate – $1M, Commercial Banks – $760,000…

Are you freakin’ kidding me?  This guy is the chairman of the Senate Banking Committee.  Don’t you think he should recuse himself from legislation involving people who give him this kind of money EVERY 6 YEARS?  I think that’s the best way to have IMMEDIATE reform in Washington – let’s make it illegal to vote on any issue that affects someone who gave you money.  Sure there would only be one or two guys eligible to vote on any issue but I’d rather have Financial Reform Bills written by and voted on by 3 guys who have no vested interest than 97 guys who are so deep in the pockets of the Banksters that they have lint in their hair…

Violence is worse in Thailand today and I made a mistake in my timing because, silly me, I forgot that Thais were Brown people.  That’s why Europe was able to rally and how we effectively ignored the situation yesterday, they were Brown people and White people don’t think things that happen to Brown people matter to them.  Asian people (Yellow) cared and their markets sold off another 1% today despite a strong move up in Japanese exports and Singapore’s economy grew 38.6% in Q1 – that’s pretty good!  So Yellow people care about Brown people and they also care about White people and this morning, the White people in Greece (the original White people, in fact!) are rioting too - and that’s something EVERYBODY seems to care about.   

It’s going to be a rough day for White people’s markets as European stocks have broken that 2.5% line we were watching yesterday and are down another 2% already, ahead of the US open.  We talked about strikes and riots in Greece over a month ago so again, this shouldn’t be such a shock to US speculators but it does seem to be freaking people out although, as pointed out in this video, White people are prone to freaking out.  Oh yeah, it also turns out they are prone to not paying their mortgage either (1 in 10 now not paying!).

I spend a lot of time teaching people of all creeds and colors NOT to freak out and this is going to be one of those days as we test those "fat finger" lows again.  We are testing the lower end of the range I’ve been pointing to since we went short in early May so yay!  We’ll be buying while others are panicking because we can hedge our entries and our very good timing has been a huge bonus, making us cash rich just as it all hits the fan and, as I said yesterday, we have a system for entering positions at a steep discount to the current prices so today is party time at PSW – let’s sit back and enjoy the ride. 

Try to have some fun out there but do be careful!


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  1. Yaaaawwwwwwnnnnnn!!!!  Good thing we have Bama and the boys to fix everything.  I’m just going to sit here in my favorite recliner with my loaded guns and fire extinguisher at my side and be amused as they march out Twiddle Dee and Twiddle Dumber to try and put out this fire.  What will it be today???  Low rates until the end of time……Rising GDP………Better than expected whatever…..Hope???

  2. No No No Phil.
    Higher taxes do SUCK, but they are NOT Necessary.
    It is the drunks and crooks in government (Fed, State and Local) that need to cut back, along with the bloated public sector unions.
    CUT SPENDING is what is necessary.   Not continuing along with the drunken spending sprees that Obama has put in place in DC, and are in place in other places like CA and NY.

  3. oh, and Good Morning !   :grin:

  4. Spain has a novel plan this morning … "Lets tax the "Rich" "

  5. Big jump in jobless numbers this morning – now 470,000

  6. This commentary from Self-Winding quotes Alexander Tyler, a Scottish history professor at the University of Edinburgh in 1787. He was speaking about the fall of the Athenian Republic some 2,000 years earlier:
    A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.
    The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
    1. From bondage to spiritual faith;
    2. From spiritual faith to great courage;
    3. From courage to liberty;
    4. From liberty to abundance;
    5. From abundance to complacency;
    6. From complacency to apathy;
    7. From apathy to dependence;
    8. From dependence back into bondage

  7. Maybe that explains why those Republicans were having their meetings at that bondage club – just doing research!

  8. LOL!!!  Heck ya…..there on the cutting edge!!!

  9. Phil: this will be ugly today and tomorrow, I will be out of town tomorrow,,
    have that may48 naked call from that 48/51 spread sitting there in big trouble, ( had cashed the caller the other day), what do you recommend ?

  10. CAP--well said! Ronald Reagan doubled the cashflow into the us treasuries by cutting taxes--it’s all right there in the history that the liberal socialists will not recognize and are trying to change--the obomunists have us now at a 14 Trillion deficit, and yet they were trying to yell at Reagan for a 300 billion deficet--incredible; mainly because the liberal congress went back on their word and would not control their spending—

  11. Phil – do you like TBT down here at $39.20?

  12. Phil- I own DXD , what is your view of selling DXD 29 calls?

  13. Excellent, good on ya!

  14. Phil / ZSL – any bull call spread ideas for ZSL?  6 to 12 month time frame.  Thx. 

  15. WFR  any thoughts there with the $10 puts sold

  16.  Hey all,

    I have two new short sales available for investing this morning. We are looking at positions in MF Global (MF) and Williams Sonoma (WSM). I think they both have strong possibilities of moving down from their opening. You can read my analysis, entry, and exit positions here. 

    Also, I will be doing a posting later in the day of an updated portfolio that updates from March and April through May so far of my Buy Pick portfolio and Short Sale portfolio. 

    As always, I am available all day for questions and comments. Please don’t hesitate to ask me anything.

    Good Investing!

  17. phil . can i have a straight for ward non complicated disaster play .  i dont need to be concerned about margin ,i just want o catch the pump in vol if it tanks . thank you

  18. Phil- I take my hat off to you! Your levels are spot on! I am heavy on cash and debating whether to step in or not at this extreme level…any suggestions for new trades? Or are the Top 8 you referred to still valid? Would you mind referring me to a link(s) to the trades? Txs.

  19. Morning all!  Curis/pain (question from last night) – the hedgehog pathway is the hottest area going and the cancer docs I spoke with are very excited about their product.  It is licensed to Roche/Genentech, and getting in here is a great price.  Tons of support here, but make it a 1/4 or 1/3 entry, as if they pull back, one will have to buy in again.
    EMIS – I know Cap…I know.  I have so much exposure to biotech, that I am drinking Kool Aid right now.
    ARNA – for those interested, July $3 P can be sold (again) for 50c.  Stock can be bought here as well for $3.
    Other than that … thank god I am a country boy...

  20. What liberal drivel.
    How about instead we: introduce the Fair Tax; eliminate the govenment system of punishment/reward known as the Tax Code and with it the IRS (and its 300+ billion i compliance costs); eliminate the Depts of Energy and Education (can anyone name a single accompllishment for their $78 billion budget?); repurpose the staffs to Homeland Security, securing our borders and eliminating Medicare/Medicaid fraud ($100 billiion/year according to Cato Institiue);collapse the price of oil by converting truck transport to nat gas (about $300 each) and lighting to white LEDs (have you ever read the fine print warnings re CFLs?) and watch what happens in the MIddle East as the mullahs are overthrown by their own people, not to mention Mr  Putin and Mr. Chavez; stop paying $300 Billion+/year in costs for illegal immigrants and substitute a tiered National Service for illegals – less time for combat service, more tor non military service – after which no one can complain they didn’t earn their place here. Then we can go after the wast and inefficiency in the Military which, as far as I’m concerned, is the only thing that keeps us a free country.
    There, I feel better now.

  21. gee kevin, feel free to unburden yourself on us.
    Anyone here interested in the market besides me, Pharm, and David?

  22. sns – Tuesdays and Monday.

  23. Eric – I’m with ya.  Dow now testing 200dma.

  24.  We are going to 1073 today, 50 weekly ma, bad Natty report will just add more fuel to the fire

  25. ss,

    SPY is now below its 200 sma. I’m out of yesterday’s trades at a small loss, now just watching. Nothing to like here really.

  26. Eric – willing to take an upside stab at the 200? 

  27. SPY Chart - holding here.

  28. Good morning!

    Disaster/Trice – Straighforward was yesterday’s DIA June $96 puts at $1, now $1.85 and if people don’t take those off the table on this dip THEN THEY ARE FOOLS!!!

    Rule #1 is:  ALWAYS sell into the initial excitement.

    Rule #2 is:  When in doubt, SELL HALF.

    Rule #3 is:  If you didn’t listen to Rule #1 or Rule #2 then don’t ask me how to save your sorry position later! 

    Get out, Get Out, GET OUT of the short-term short-side plays if we get back over the 200 dmas.  Take the money and RUN.  CASH OUT THE SHORT SIDE.  Is that clear?

    We may not hold these lines but that’s why we have October Disaster Hedges, the shorter-term downside plays are huge winners and should be cahsed here – we’ll find something else to short if we fall off this support level

    200 dmas need to be held and those are: Dow 10,250 (8,650 is nex major support), S&P 1,100 (900), Nasdaq 2,225 (not there yet!  1,800), NYSE 7,100 (5,500) and Russell 630 (still above!  500). 

    Note that the RUT and the Nas are not dead yet.  If they can hold their lines then the others can come back.

  29.  Trin went from 15 high to 1.5 short covering or bargin hunters

  30. AMZN holding up well in this sell off.

  31. ss, I see the 200 sma on the SPY at about 110.44, so I’m going to watch that.
    Phil’s right that the Nas is not dead. In fact some stocks are still holding up pretty well.

  32. Good Morning!  Kevin – White LEDs and Nat Gas?!  Sounds a wee liberal to me…… ;)

  33. Good morning,
    IWM support at 65.33 and 64.77, resistance at 66.93

  34. ARIA Jan11 $2 C for $2.10.  That is 0,30 premium.  Selling Jun10 $3 for 0.25. Data is due at the conference next week and MRK bought the rights to the drug.  1/2 position.

  35. Phil – I put on the October DXD 23/27 disaster play the other day and have noticed the spreads have gotten huge but no trade volume. So my concern is that when it comes time to take this trade off the table will I be able to do so or do you feel that since this trade is out til October that the reason there is no activity is that it is still too far out. Thanks for your patience on this but still learing.

  36. Trying a small probe long here at SPY 109.30. See if they can hold 109.20 this morning.

  37. Let’s stop ALL the political BS or at least until we get our money back;   after all, all Congress members should be lim ited to two terms…….one in Congress and one in prison.      GABBY

  38. JRW- Feeling a little skittish here.  Which way do we break?  Isn’t this 65.77ish line one from yesterday?

  39. Okay Phil, I’m listening. 
    Sold out my long FXP calls at a great profit (had closed short FXP calls earlier in week when bouncing). 
    Sold out my long FXI puts at a good profit. 
    Had put in an order for Jun $96 DIA puts for $1.50, cancelled it.
    Waiting with my cash, ready to pounce!

  40. ok, phil, well now TBT is getting real cheap, any new plays to initiate here, since i only bought 10 contracts in Sept. at the 39 level and sold some 40 May calls against it. would like to add to my position, and load up with TBT hitting 39 now.
      how about selling some May 39 puts for 60 cents ?  or June 39 puts for $1.90 ?

  41.  I checked the weekly 50 weekly  SMA market has never stabbed under it ever since it poked above it, we consolidated under it for a month last year in june. the last 1000pt reversal pivoted from there

  42. I am feeling a fat finger moment coming on.

  43. Get out, Get Out, GET OUT of the short-term short-side plays if we get back over the 200 dmas.  Take the money and RUN.  CASH OUT THE SHORT SIDE.  Is that clear?
    So let me get this straight……you think we should get out if we bounce over the 200 dmas if we’re short………..????
    Hee hee

  44. Out DXD 20.14

  45. Morning Phil, I checked the bottom of wednesdays post and i dont see your morning alarts about the new disaster hedges, where are they ?

  46. I fail to see anything that looks like a sign of stability. If there is something, I’d like somebody to point it out. Otherwise, I capitulate.

  47. AUD/JPY
    AUD is getting crushed against all currencies.
    It s interesting to note that AUD/JPY has been moving the most during Europe and US time.
    My guess is that we are seeing some heavy deleveraging from Hedge Funds.
    In 2 days it went from 83 to 73 (-12%). So most Asian FX retail investors must have been wiped out by now.

  48. Spending/Cap – I agree but I’ve come to believe that until we halve the military budget, this country just will never get serious about spending cuts.  $50Bn a month is enough to pay every mortage in America – how’s that for a stimulus? 

    TNA?/RMM – We have to see how today goes but we’re not too worried about the $47 putter and that made it cheap spread so you can cash the $1.50 or so on the spread and just hope the put expires worthless. Or you can offer $1 for the caller and, if you get that, you can then sell your calls on a move up or stop out if you have to.

    MA back up today – crazy stock.

    Wow, problem banks grew 10% last Q! 

    Reagan/Iprosper – Do you really believe that?  I’ll be happy to go over this one the weekend but Reagan had to raise taxes later in his term because his plan DID NOT increase cash flow at all.  Bush’s cuts doubled our deficit and that’s not counting the last $3Tn from the 2009 and 2010 budgets they are blaming Obama for. 

    TBT/Exec – I love TBT down here but this has to be a very-long term hold.

    ZSL/Terra – I never look at them but gold found good support above my $1,150 target (bounced off $1,175) and I don’t think it’s a good time to chase a silver ultra-short.   They did bottom out at $30 so if you think that will hold up, you can sell the Aug $30 puts for $2.10 and use that to buy the Jue  $31/37 bull call spread at $3.50 so you’re int he $7 spread for net $1.50 with a June b/e at $33.50 which you can roll to October if you have to. 

    WFR/Turtle – If you sold the $10 puts my thoughts are they are still at $10.59 so nothing to worry about.  If you are thinking of selling $10 puts to get a $9 net entry, I like that too!

    If we flatline here it will be good consolidation but depressing.

    Stepping in/SNS – I am 100% for stepping in on 25% scales on buy/writes that have at least 20% downside protection.  We had a dozen of those from Monday and you can get even cheaper entries now. 

    You know what’s funn here – the total Dow volume at 10:23 is just 55M – that’s nothing!   That means we can either quickly reverse if someone hits the buy button or completely collapse if volume selling hits.

  49. closed TZA bought .165, sold at .55..taking Phils advice and running

  50. Phil / Cash, I’m 100% cash now. Just sit tight Phil? Or lay on some more short positions gambling we break the 1065 level?

  51. Thanks SNS – Very glad I did that 5% rule post a couple of weeks ago, kept everyone on track as we dropped off. 

    DIA MAY $100/102 bull call spread is $1.35, selling $100 puts for .80 is .55 on the $2 spread that expires tomorrow.  THIS WILL SUCK IF WE DIVE DOWN.

  52. OK…Something I need to get off my chest.  No one is shy here, so I will try not to be the exception.  This has to do with reporting your investing results.  Time and time again I see on the board how much money someone made.  "I made 50K today" , or similar posts.   Now you must realize that this is meaningless information.  Why?   Because you aren’t giving members all the data.  For example, if have 5M in your portfolio and you made 50K, then you earned 1% that day, not particularly anything to crow about.  But if you have 250K in your porfolio and you made 50K, then we want to know how you did it.  Not generally, but specifically how you did it.  We also want to know about your failures, what went wrong, and what you learned from it.  And finally, knowledge of your long-term results would be helpful, so that we know how intently to listen to your posts.  If you built your portfolio from 10K to 100K in 5 years I am very interested in how you accomplished that.  If you went from 4M to 5M in 5 years then I’m paying less attention.  Do you get my drift?  Personally, I think the best way to report successes and failures is by way of percentage of portfolio.   "My portfolio gained 52% since Jan 1" is a much more meaningful statement than "I made 200K last month".  And to digress, many of us have more than one portfolio, so it’ OK to report on an individual portfolio, or on overall portfolio.  So the weight is lifted now and I can get back to what I was doing, which was trying to figure out how to negotiate this tough market.  I hope this is taken in the positive way in which it was intended.   Thanks.

  53. SS, You may have to dig out your 10K hat again.

  54. judah – are your put verts smiling :)

  55. pretty hard to buy the market here, wouldn’t you say, Phil?

  56. SPWRA – from AW yesterday, someone is loading up on the shorts on them.  ~15K of Jan12 $5 P bought/sold.  Either solar is gonna be dead, or someone is just backed up the truck…..

  57. Phil:
    from 5/19, QLD June $61/66 bull spread, & selling $53 puts….are you saying to roll this lower…..5 contracts
    from 5/14, BP 45 MAY puts, you recommend rolling it to June 42.5… 10 contracts
    Please advise…thanks

  58. ss,
    WAIT for Mr Market to show you the way; let me know when you get your candle I’m thinking UP.

  59. JRW – you got it brother.

  60. SS, The put verts are smiling.  But you know the tough thing about them — you don’t get full value until settlement and that means tomorrow morning’s open.  So, I’m trying to get $8 or $9 for them.  I think we stay below 1100, but who knows.  I’d love it if we finish right here.

  61. Tough market to trade…I keep wanting to take a stab at getting long, but technicals stink.  Any opinionson oil/uso?

  62. We’re massively oversold here. It may be either up or crash.
    It’s nice that this is happening right before opex, because cheap ITM options (with no extrinsic) still give you huge leverage.

  63. Hulk – the opinion earlier this week (Mon or Tues) was to see if 72.50 would hold…not working out to well ATM.

  64. JRW- Curious on your TNA Res/Sup…went in at 45.63/out 47…not sure on re-entry…cash for now…

  65. With the VIX where it is now, I am starting to scale into an AFL position.  Selling 1 JAN 40 put for $6.50.

  66. SPY Iron Condor from Red Option 99/96 P and 116/119 C for 1.25 credit FWIW.

  67. In TNA at $46.20 (1/2 possition)

  68. SPPI DD on the stock (if one is in from a few weeks ago) or buy the Jan12  $2.5 C for 2.20.  When they bounce up, sell 1.2 the $5 front month calls for > = 0.30.

  69. Country Boy/Pharm – Yep!

    Glad you are feeling better Kevin…

    Good focus Eric – you hang onto that!

    We do NOT want to see those 200 dmas forming upside resistance on the first try over – that would be a bearish sign.   Last time we were this low, we were back at 10,850 the next morning.  I will be very satisfied with 10,650!

    BA getting very interesting near $63.  XOM becomming a retirement stock again at $60.  GE back at $16.40, CAT nice at $58.80.  BAC $15.50, AXP $39.65, NYX $27.85, AA $11.13, DIS $32, INTC $20.70, JPM $37.50, MRK $32, PFE $15.40, T $25, VZ $28, WMT $52….

    DXD/DK – You just have to pretty much ignore it until October.  Even today we are taking advantage of spreads on the DIA 2 days before expiration so what hope can you possibly have of an October spread on an ultra giving you a reliable reading?  The disaster hedge is there to pay you 5x on whatever you want to insure with IF the Dow fails to hold 10,500.  Your job is to have enough upside plays to make it worth while if the Dow is over 10,500.  It doesn’t matter what the spreads say, it’s FACT that if DXD is over $27, no matter how far over, that you will collect $4 for that spread at October expiration.  You don’t need any activity, it will cash out on expiration day. 

    LOL Gabby – Why wait the one term?  I say put them in jail as soon as they are elected…

    Good job Power! 

    Nas holding that 2,225 line – BARELY!  RUT doesn’t look too worried about 630. 

    TBT/DMan – Ah NOW we are at a crazy low price!  Good job patiently waiting…  Jan $35/41 bull call spread is $2.90 and the $34 puts can be sold for $2.60 which puts you in the $6 spread for .30 with a 1,900% upside at $41, which is usually our low-end buy point on TBT!

  70. thegoldenrule
    Based on the 6 month chart

  71. JRW -Green cross here, but not convinced enough for me.  Need more confirmation, seems too choppy.

  72. Iflan – well I can let you know about my failures.  Just this week I failed on the DIA Mattresses and the "can’t lose" TNA May 47/51 bull call spread.
    DIA Mattress – Remember a week ago when tho Dow was over 109?  I’m sure everyone here took that opportunity to buy back their short mattress covers.  Not me.  I was fully covered with 1/2 at 106 and the other 1/2 at 107.   I was worried about buying back too much premium so I just did nothing until today when I finally capitulated and rolled them to June 102s and 104s.  In retrospect I should have bought them back on the spike.  But, since I did not I realize there were other opportunities to get out sooner.  I seem to remember mention of rolling when you have lost 1/2 of the premium.  That would have been Tuesday or yesterday.  There was a point yesterday when I could have rolled the May 106s to the June 100s even and May 107s to the June 101s or 102s even.  I guess I thought that the market wouldn’t drop faster than the premium decay.  Well, obviously I was wrong. 
    I wish I could say this is the first time I’ve done this but it isn’t.  I am able to handle the DIA mattresses fine as long as the market is rising.  Sell 1/2 for cover and use the money to roll the Long puts up $1 for 0.50.  Simple.  I have much trouble when the market drops.  Especially when it drops so close to expiration as theta kicks in.
    Failure #2- Along the same lines.  I put on the TNA 47/51 bull call spread for 2.40 which seemed to be impossible to lose.  I mean, TNA was over 60 just one week ago.  Same problem.  Except this time I just got greedy.  At one point a week ago the spread was at 2.90.  I had made over 80% profit already but I was holding out for the other 0.10.  I sold the spread this morning for $1 for a 1.40 loss.
    So, there’s my failures for the day.  While this has proven quite cathartic, I would really rather have the money back ;(

  73. Pharm, what does fwiw stand for?

  74.  Phil, this is getting boring, you crank out that old buy list every 2 weeks now!

  75. Phil: Get out ?/ what about the jan 35/55 TNA spread where the jan 55 caller is 18% green ?

  76. JRW – RUT sitting right on lower bollinger band at 650.

  77. Oxen Alert – Position Updates
    (This is a preview of an Oxen Alert that you can receive that will help you stay up to the minute on all of our trades.)
    WSM – We reentered at 30.30, and we were looking for a cover on this one at 29.70 – 29.40. We were able to get back out of WSM for a 3% gain on the short sale at 29.40 as the stock moved all the way back down to 29.30 off its high of 31.00. It was great to get 3% off WSM after losing 3% very quickly this morning. 
    We are even now for the day.
    MF – We entered MF, per my morning alert, at 8.30. We are still looking to get out at 8.13 – 8.05 for a 2 – 3% gain. The stock moved within a penny of our range, but it has been stuck at 8.14 – 8.19 for the past hour. 
    We will continue to hold.
    Good Investing

  78. Gotta go bullish on crude futures if they pop $70 (tight stops of course).

    Getting straight/Exec – Yes, I think you’ve got it.  But, giving the bonus drop now, I’d say it’s a fine time to get more bullish.  The Dow is barely holding the 2.5% line at 10,182 and the S&P needs to take theirs back at 10,585 but that’s a good time to say maybe we’re turning up.  Need those silly Europeans to stop selling first (11:30).

    Morning Alerts/Micro – Those were the Email Alert that came at 5:40 am on the 19th from the end of the previous day’s post, search for "disaster" in my last or 2nd to last comment if you don’t have the Email.

    Capitulate/Barf – Well that is exactly what they want you to do as we test a double bottom. 

    Cash/Tusca – No, I strongly suggest moving 10-20% into buy/write positions like the dozen from Monday or any of the 15 stocks I just mentioned in the last comment.  Just sell the 2012 puts and calls at whatever strike is at the current price or a little lower – it’s not hard, I just don’t have time to look up 15 more positions but Monday’s list is specific and you get better entries today

  79. SS/RUT, If the RUT is going to make a stand somewhere today, I think 650 is the place.

  80. JRW – Strong green cross.  In TNA.

  81. I’m out. -1% on the trade.  Sidelines for me.

  82. Phil, What are you thoughts on ERX for an oil rebound?  Thanks

  83. On these dips, I’ve been buying May SPY 101 calls, which have about .15 extrinsic on them. The position is small, and if we get a big leg down from here the plan is to roll them down and out to June. Otherwise, the risk-reward just seems worth it to me here.

  84. Phil, I have 3x short May $260 Puts on Apple (sold for $4.5) and 1x short May $340 Put on Intuitive. (sold for $8.63). should I wait until tomorrow to roll down and further in time?
    Also, it looks like the TNA 48/51 bull call spread we discussed in the week is going to lose all the money, unless a miracle occurs tomorrow.. :(

  85. Phil,  what do you think of a SPY M 110/115/120 C fly…expectation is that vol softens on a rally or a C 1×2?

  86. An alternative is the 104s, which have only .35 extrinsic. However, they may be a near total loss if we slam down again.

  87. SS, Probably what Phil said.  Gotta wait until the Europeans stop selling at 11:30.

  88. Is the final passage of the German bailout bill tonight?

  89. What if the Germans say NEIN!?

  90. judah – this back and forth around 650 has me like a turtle hunched in his shell.

  91. VIX back at 43. It’s been a while hasn’t it? Oh wait, that was last March wasn’t it?

  92. Back in TNA.

  93. Sorry, should have mentioned – You WANT to take advantage of selling as much premium as possible when the VIX is over 40.  We pursue different strategies depending on conditions like this and this strategy is aimed at allowing you to spend 20% now and get a 20% discount on stocks.  If we go 40% lower, you can spend another 16% to DD at 20% less than that (-60%) and you’ll be in for an average of 40% and if we drop 40% lower again and the Dow is at 5,000, you can DD again for about 30% of your cash (66% total) and you end up long on these blue-chip stocks at about 1/2 or less than today’s prices.  If you don’t WANT to own A LOT of these stocks for 50% off the current price, stay in cash.

    Also, don’t forget that if you puts just 5% of your cash into a matching Disaster Hedge that pays 500% if the market falls further, then that will give you 25% cash towards the next round!

    Hard to buy/DMan – Hard not to buy actually.

    SPWRA/Pharm – That could be us selling and causing offsetting hedges by whoever is buying the puts from us. 

    Here comes that big EU dump into 11:30, hopefully we hold up…

    QLD/Jsurt – Rather than spend $1 to take out the caller, I favor using it to roll down to the $58 calls ($3.50).  On BP, I dont think they’ll break but if rolling, I’d go straight across to the June $45 puts. 

    Oil/Hulk – I think 70 is a bit low and I like the futures here if they can get over that line.  I think we can assume that USO $28 is about $65 on oil so you can play the July $28/31 bull call spread for $2.10 and sell the $29 puts for $1 for $1.10 on the $3 spread and that putter is very rollable down to $55 barrels eventually

    Damn, you know I’m calling a bottom when I’m liking bullish plays on oil!  8-)

    MT at $29.50, MEE at $30.72.

    AFL/Craig – Good call on selling Jan $40 puts for $6.50.  Nice net $33.50 entry.

    Nice entry JRW – good for a Mercedes at least!

  94. Phil: my 11:02 please

  95. SS/TNS
    Ssdirk, thanks for your TNA play.
    I have stayed a bit longer in your play and it did pay off (+13%)
    Out at 47.03
    EricL, Thanks as well, I followed you on the SPY 104 calls

  96. Out of TNA at $47.03 after hitting S2 ( IWM 65.43) and stalling

  97. Hello phil hate to bother you on an exciting day like this but for the life of me i cant find the disaster hedges in the bottom of yesturdays post (19th). the alarts should have showed up there, but ….

  98. Finally got rid of that European selling pressure!

    Mattress/Daveo – It’s a good time to take some money off the table by rolling your long mattress puts lower, preferably to the Sept $105 puts, now $8.15, which are the first puts that can’t be rolled up to a higher strike for less than .50.  You could flip more bullish and roll 1/2 down to $98 puts at $5.50 as well.   On that TNA spread I would have taken the $1.50 and moved to the June $44/47 spread instead.

    Getting out/RMM – Not on long-term hedged spreads but short-term directionals and even short-term hedges if they’re up nicely.  Read Daveo’s fine statement re. TNA.  Greed kills – when you get a nice move, take the money and run!

    ERX/1020 – It’s very risky because oil can go irrationally low as easily as it goes irrationally high.  There are 300Mb of oil floating around on tankers with $6Bn in losses right now and if oil heads lower and they start capitulating (and some may have to if margined out) then oil can fly down.  

    AAPL/Rav – Yes, I’d wait to tomorrow as we’re not likely to get much worse (but you never know) and there is a chance we can get better. 

    Hey, who spiked oil back to $70.50?   Limit orders guys!!

    SPY/Hulk – I think we have a good chance of a big move up so it’s not something I’d like to mess with.  If the Germans pass that bill (and they should as Merkel’s party still has the votes) then they may act like it’s time to party again and we gap up into the open where you have no chance to fix. 

    11:02/RMM – If you can see that the last question answered on my last comment was BEFORE the one you are waiting for, then that means I haven’t gotten to it yet.  If I answer questions that came after yours – THEN feel free to remind me. 

    Disaster/Micro it’s too late to chase them now but they WERE:

    Bang for buck/Power – I like the simple play of the DIA June $96 puts for $1 if you really want to play for a short, sharp shock.  If we crash 20%, they are $10 in the money.  Also, I like TZA July $7 calls for $1, selling July $5 puts for .40 and JUNE $10 calls for .30, which is net .30 on the $3 spread and the nice thing about this is you can be wrong in June and still be right in July.  TZA is a 3x bear so a 20% move down in small caps = a 60% move up to about $10 and if the RUT goes up 10% to 750, that’s a 30% drop in TZA to $4.60 so not terribly damaging on the rollable put.  Because it’s an ultra, you do get hit for $1.50 per contract in margin so you need to have about $3K available to take a 10 contract spread just to be safe but the upside is at least $3K on $300 in cash! 

    Another nice disaster hedge is FAZ.  You can go for the July $17/25 bull call spread for $1.10 and sell the Oct $9 puts for $1.10 so about $3K in margin and NO CASH for 10 contracts and you have a $8,000 upside if the financials collapse and the financials have to gain 15% by October for you to owe a penny of that dollar (and by then we could offset with a UYG bull spread).

    Wow, finally caught up, now maybe I can make some trades and read some news!

  99. Initiated buy/write on INTC based on your instructions.  Since this is my first one of these, what do you think?
    Wanted exposure to Intel, so
    Bought 100 INTC @ $21.06
    Sold Jan 2011 21 C for $2.66
    Sold Jan 2011 21 P for $2.78
    Net entry :  $15.62.  If above $21, called away for 12% gain.
    If below, another 100 put to me @ $21 giving me net entry of $18.31, 12.8% below current.

  100. Kevinb63v …. i like it !  Run for President; you got my vote.

  101. Spending / Phil.  Surely there is waste in the military budget.  But we NEED the military.   The waste everywhere else; that we don’t need; including all the other bloated and worthless Federal bureacracies.  And we need to rein in, not expand, the bankrupt entitlement programs.
    Kevin … that’s change we can believe in !

  102. TNA/
    Ss, JRW, is it a signal for TNA?

  103.  yeah let’s watch Putin get overthrown. Russia only have 5,000 active nuclear warheads.

  104. DCTH ITM puts and calls have very little premium, having fun play it today on the swings.

  105. lionel, JRW – my 3min chart is not in sync with the market today.  I am seeing waves from 64.90 up to 65.30 and as high as S2 65.43.

  106. 1,087.25 is the exact 2.5% line on the S&P for the day.   That’s a key hold now.

    By the way, if you don’t want to commit to a full buy/write position - You can just sell the puts for stage one and see what happens… 

    Is $1.10 the new normal for the euro?

    Initial Jobless Claims: +25K to 471K vs. 440K consensus. Continuing claims -40K to 4,625,000.

    Apr. Leading Indicators: Leading Index -0.1% vs. +0.2% expected, +1.4% prior. Coincident Index +0.3% vs. +0.1% prior. Lagging Index +0.1% vs. +0.2% prior.

    May Philly Fed Business Outlook: 21.4 vs. 20.7 expected and 20.2 in April. New orders index -8, shipments +10, current inventory -10. "The survey’s broad indicators of future activity continue to suggest that the region’s manufacturing executives expect growth in business over the next six months."

    EIA Natural Gas Inventory: +76 bcf vs. consensus of +78 bcf. Futures -1.92% to $4.078.

    Japan’s economy grew less than expected in Q1, as GDP rose 4.9% on an annualized basis vs. consensus of 5.5%. The data puts pressure on BoJ to do more to fight deflation.

    It’s not just the hedge funds going negative on the euro. Longer-term investors and central banks are growing skeptical too, putting more pressure on the floundering currency. Euro -0.6% to $1.2349.

    Chancellor Merkel forgot one thing in launching Germany’s unilateral ban of some short selling: She didn’t get the French on board. Finance Minister Christine Lagarde was irate about not being warned in advance, much less consulted. "I absolutely don’t think that the euro is in danger," Lagarde maintains. The dispute adds to doubts about Europe’s credibility in handling the crisis.

    Financial markets are acting irrationally, and immediate action to boost the euro is not needed, says Jean-Claude Juncker, chair of the Eurogroup forum of eurozone finance ministers. "I’m concerned because the rapidness of the fall in the euro is impressive. I’m not concerned as far as the current exchange rate." Euro -0.56% vs. dollar.

    "I’m convinced the markets are really out of control," says German FinMin Wolfgang Schauble. In an interview with the FT, Schauble makes the case for transparency, tighter regulation and stronger European leadership.

    Eurozone governments are doing everything they can to ensure the region slides into "depression," Charles Dumas at Lombard Street Research says. But the euro’s fall is actually "very good news" because European exporters would benefit from the expansion in the rest of the world, counters economist Charles Wyplosz.

    Something that would usually boost the markets:  Dubai World reached an agreement in principle with its main creditors to restructure $23.5B of debt. The news lifted Dubai’s general index, and pushed down the CDS spread slightly.

    Also should be a positive:  Spain passed a crucial test by raising more cash than expected from a sale of 10-year government bonds. As Europe’s fourth biggest economy, any funding troubles for Spain would signal a massively bigger problem for Europe and banks holding Spanish debt.

    Germany, Spain, Italy and the Czech Republic launch separate probes into Google’s (GOOG -0.7%) accidental collection of private data via unsecured wireless networks. EU officials weigh in too: "It is not acceptable that a company operating in the EU does not respect EU rules." (see also)

    HSBC (HBC -3.2%) is accused of aiding an international fraud orchestrated by late California financier Danny Pang. A lawsuit filed against the bank earlier this month seeks to reclaim $1.9M in fees paid to HSBC and an unspecified amount in damages.

    Beef prices have shot up earlier than usual this year, and fast-food chains are wary of driving away customers with price hikes. Instead, McDonald’s (MCD -1.5%), Burger King (BKC), Wendy’s/Arby’s (WEN) et al. are absorbing the loss and trying to push more profitable fare.   This is from all those times we looked at the PPI going up and the CPI holding flat and I kept saying – how can retailers possibly making the money people think they are under those conditions?

    Many developed nations are experiencing the lowest inflation in decades, or even flirting with deflation, while some developing economies fight rising price pressures. It’s just one more sign that the global recovery is less than balanced.

    Boeing (BA -2.8%) CEO Jim McNerney says the company is "effectively sold out" of new commercial aircraft through 2012, with customers for some models facing a longer wait. The company this week announced plans to boost production of its best-selling 737 later this year, and assembly snags in the delayed 787 program are "improving."

    Two Democrats joined with all but one Republican yesterday to block the Senate’s bid to end debate on the financial overhaul bill. But Republicans may end up wishing they had moved forward, because the final bill could become stronger, not weaker. Another cloture vote is likely today.

    Banks and thrifts insured by the FDIC earned $18B in the first quarter, the best results since Q1 2008. Bigger earnings growth came from bigger banks, but 52% of FDIC members grew net income. The so-called problem bank list, however, grew to 775 institutions from 702.

    The Treasury will auction $113B in nearer-term notes next week – $42 in two-year notes on Tuesday, $40B in five-year notes on Wednesday and $31B in seven-year notes on Thursday. Treasury futures sharply higher with today’s stock slump: 30-year Tsy +1.16%; 10-year +0.76%.

    And while Treasury yields are at 2010 lows, deflation worries are hurting the returns on inflation-protected securities, with the spread between 10-year TIPS and 10-year Treasurys slipping to 1.92%.

    Stocks are starting to ratchet up off intraday lows, but depending on whether the uptrend holds, the correction you’ve been looking for might be here.

  107. biochris … yeah, so ?  unless its a bunch of radical islamists or commies; getting rid of Putin would be a good thing imo.  Russia has regressed much since Putin replaced Yeltsin (not that Yeltsin was such a great leader, just that Russia was heading towards a free and open society; and under Putin has regressed back into an autocracy and increased hostility towards US).

  108. Sorry, the iron condors were the June Quarterlys.

  109. I think for today we can watch how AAPL trades from here.  Right at S2.  Up, and market will rally.  Flat; we go nowhere; and down, market will follow.

  110. Phil/Mattress – So you say I could roll 1/2 the Sep 100s to Sep 98s.  I assume this is to take cash off the table.  Then if DIA goes up, it will be cheaper to roll the 98s back up.  Is this the correct thinking.  It almost seems counter intuitive to roll puts down to 98 if you are bullish.  I guess the 98 lose less on the way up than the 110s or 105s.

  111.  Double dip on TBT’s 3 month. Nobody seems to give a **** about all this money printing (sorry … "Quantitative Easing"). I have a 10,000,000,000 bill from Zimbabwe taped to my computer. Every day Obama doesn’t raise taxes we get closer to the cliff event for inflation. When it goes, it’ll be ugly. But you can’t make any money being right at the wrong time though.
    Remember those GS/MS put play from Oct 2007 Phil? Right play, wrong year. Would’ve been $100k+ my way. Right play, wrong year!

  112. Here is my Daily Musing for today. Would love to get some comments from you and reactions. ITS ABOUT OIL REGULATIONS THAT ARE COMING!!! Exciting stuff.


    The Daily Musing: Oil Spill Aftermath – Pros and Cons of Offshore Regulation Increases

    In the aftermath of the deadly and devastating offshore oil rig explosion and spill in the Gulf of Mexico, the government is scrambling to point fingers and comment on how they will make necessary changes to regulations to better oversee offshore drilling. The idea is that if the government was more involved with the offshore drilling they would be more able to act as a watchdog for the profit-driven corporations doing the drilling. 

    Currently, the USA has a performance-based regulation, which means that standards are set by the government of safety that must be met; however, the corporations are given the ability to oversee what type of mechanisms they would like to use for oil drilling. It is a typical industry regulating approach that is used by many industries throughout the USA. President Obama has commented, however, that he would like to reform the federal Minerals Management Services (MMS) to help provide more regulation that would introduce more safety to offshore oil drilling.

    At first glance, this attitude of more regulation and overseeing safety standards would appear to be the right thing to do. Some higher performance standards or penalties for breaking regulations, SUCH AS AN OIL SPILL, would definitely be appropriate. The conundrum of politics is that the government wants to introduce more severe regulations; yet, at the same time, they are not penalizing BP PLC with any severity. The latter decision is an economical approach to the situation. Too high of penalties would cause offshore drilling to become a much more expensive task, and therefore, companies would charge higher premiums that drive up the price of oil. The prior, the introduction of more regulations, is not economical at all. So, what is it going to be?

    Well, from the economical approach, which is best for the market, the government should most likely not introduce any more regulations than they do right now. They can reform their governmental bodies as much as they want because it was governments constantly do, and it has no affect on the economy. In fact, just yesterday, the first step in new offshore regulations was announced by Interior Secretary Ken Salazar. The MMS will be split into three branches that will separate the body into one for leasing lands, one for enforcing regulations, and one for collecting royalties. Mmm…more bureaucracy. Salazar commented that this was not the only move that will be made, so more policing measures are expected.

    Yet, this is a problem. Command and control regulation versus a market driven regulation just does not work. What was it that made car companies finally move towards higher gas mileage in cars? It was not some government regulation. It was pressure from the consumer. Companies are driven by making profits. They exist to make goods and sell services to make profits. Command and control regulations threaten this capability. Why? There is definitely room for measures that oversee the way companies inspect themselves and how often, but typically, when the government talks about new regulations they mean new standards needed for technology or emission limits or some baseline that must be met.

    For one, governments do not know the technology of offshore drilling cement casing and other protective measures as well as corporations. Further, since corporations are in the business of making money, they want to provide the most innovative features that do provide safety. Most of the best safety measures that are developed come right out of the corporation, not the company. Further regulations of command and control that force specific technologies are strict regulations do not allow for this necessary innovation. 

    Additionally, governments take much longer to produce new technology that should be implemented, new regulations that match changes in the industry, and provide a burden to corporations ability to produce. No oil company wants an oil spill or wants any kind of black eye. I am sure that BP is seeing a loss of consumer support for their gasoline right now. Consumers respond to corporations that are unsafe and have unsafe practices. KFC has been working for years to clean up their reputation after years of being stigmatized with unsafe chicken and unsanitary food. 

    I was once in conversation with an executive at ExxonMobil. The man was heading up XOM’s oil sands project in Alberta. Exxon is working to extract oil from sandy tars and then restore the land back to the way it was before – exactly the same way. Why? It is not that the Canadian government requires them to do this. Exxon, themselves, introduced the measure and got the Canadian government on board with it because of reputation. If the company goes into Canada and destroys a pristine part of the nation and does a less than perfect job of restoring it, they will lose business with Canada and possibly other nations as a result. If BP does not work hard to regulate their offshore oil, they will lose business in America.

    It is not that some rigid command and control regulation must be implemented with more government interference. Companies know that they have to provide the best product, but it has to be safe. I guarantee the company is setting in motion research and development, if they were not already, new safety features that can allow for them to continue to develop a safer way to do something as dangerous as offshore oil drilling because it is good for their wallets. Cutting corners and costs will bite any company in the butt, and large corporations just do not tolerate that sort of behavior – or they are gone.

    I’ll leave my final comment to Robert Wine from BP PLC. He discusses goal-setting, which is basically performance standards that allow the company to regulate itself within its industry.

    "Generally, goal-setting allows you to make improvements as technology develops without having to change the legislation. So it makes it a more flexible way of improving standards, improving performance."

  113. Sorry that was roll the Sep 110s to 98s

  114.  Cap – I moved this conversation to your blog. Maybe that’s a good place to rant and rave so PSW can stick the stock stuff.

  115. Let’s see if we can put in a double-bottom at /ES 1074.

  116. ok bdchris, that’s cool

  117. Phil noted "Many developed nations are experiencing the lowest inflation in decades, or even flirting with deflation, while some developing economies fight rising price pressures. It’s just one more sign that the global recovery is less than balanced."
    A problem I see, as someone with one foot in Korea, is that Confucian countries look at economy very differently from western countries (and Korea is about as Confucian as you get). The result is that western perception of how those economies are doing often get it very wrong, in part because different denominators are used for basic measures, but more because the underlying goals are so very different.

  118. Phil  Looking at your DIA mattress play I am in the 112 sept long shall I roll this down 111 or 110 to take profit ?
    3/4 covered with still some may 105 rest 103 and 104 june thks

  119. Phil/DIA Mattress – Another quick question.  At what point do we take profits on the longs like you suggested I do?  Do you wait for a big drop like today?  When would you consider rolling down to take profits over purchasing 1/2 the 105s and setting a trailing stop on 1/2 of the 110s?

  120. I need a market bounce! I’ve sold out of almost all hedges including DIA puts, EDZ and SKF calls. I think BIDU and GMCR are the only ones left.
    A couple weeks ago I called ‘Late May, 10,200,’ shoulda stuck to it!
    DD on TBT June calls in progress

  121. Good stuff, David. I just took a position in DVR on this same premise…could be a huge winner! Look into them and tell me what you think.
    Thanks for the reminder Phil. I’ve been selling puts all morning. AAPL Oct 220s still look very nice at 19.75. In AAPL at 200ish…I’ll take it any day!

  122. Kevin
    You really make sense, and you have posted the numbers that gives proof to your plan.

  123. Aclend -

    Yeah definitely a nice speculation play. Cheap and undervalued it appears. It could definitely have some nice bounce in the next couple quarters from strictly companies upping their safety measures. It would be even more beneficial if the government would introduce new measures. Only problem with that is if the government got their own contractor that companies have to use for some new technology or something like that.

  124. Going to have to disagree with you Kevin… Im sure I know less about stock than most of you on here but being active duty Air Force who is a Finance/Acquisitions Officer, I feel I probably know a little more than most on military waste.. The military (and probably Air Force most of all), has huge amounts of waste in it. We definitely should start with the military (although I am not opposed to Dept of Education cuts as well). Any new acquisition of a weapons platform usually runs over budget by 50-100%.  Things wrong with the acquisition process are too numerous to list.  I The F-22, F-35…. And what are we buying these next generation aircraft for? To fight China? yeah right…. Oh and in case any of you were wondering why I am frequently posting on here during work hours – right now I am in a Master’s program for Cost Analysis where the Air Force is paying me a Captain’s Salary to go to school, it’s a pretty sweet gig :)

  125. Lots of "double down" plays for me today…. will also go long on some TBT, as well as TBF plays.

  126. INTC/Hoss – Good deal.  I usually go to 2012 where the $22.50s are $3.15 and the $20 puts are $3.80 for a net $14.03/17.01 because it’s the same current margin requirement but less cash in the play and more upside.  You could do that play more conservative and sell the $20s for another $1.10 to drop to net $12.93/16.51 and getting to $20 off of a $12.93 entry is still pretty sweet for 18 months.  On the whole, always look at the two Jans and then play with your net entries around your stike until you find something that’s really attractive to you.  You totally have the right idea already….

    Military/Cap – Not to get into it now but if the US and Europe were to cut 50% of their military spending, we’d still be outspending the rest of the world 2:1.  It’s an arms RACE in militaries – if we ALL scale back then we can still outspend 2:1 but at 1/2 the spending.  Maybe a side effect would be 1/2 the killing – who knows?  I saw a gun drive in Africa where this little wooden village collected a dumpster full of AK47s and such – why are there so many guns in the world?  A side effect of buying tens of millions of guns for ourselves is that hundreds of thousands of guns fall through the cracks and get into the hands of terrorists and rebels.

    Wow, so much for turning around after the EU closed.  Maybe they were doing all the buying..

    Mattress/Daveo - Yes but I assumed you were in the much higher Sept puts, hardly worth rolling the $100s to the $98 puts.  Even yesterday the $111s were the logical trade (based on rolling .50 per $1).  Oh – just saw your other commend – that’s much better then! 

    Caring/BDC – You are right it’s insane but, as I was saying to Gel yesterday, this money is not being put into the economy, this money is filliing in MASSIVE hidden losses for the Banksters and that creates no jobs at all but it may save some because if the truth was out and the banks had to mark their assets to reality and pay off the derivative bets they sold to speculators who said their assets were BS – then this whole ball of wax would come undone so quickly that you’d be better of moving to Zimbabwe.  

    Moving discussion/BDC – Thanks, great idea!

    Cofucian/Snow – Hey, great point!   That’s the same with Europe too, they want to change the way GDP is measured to reflect the quality of life for the masses and, of course, the US Banksters think that’s a terrible idea..

    DIA/Yodi – No, I’m saying you should roll down to the $100 puts and tale proft!  You can keep that cash on the side and double down if we head lower or spend .45 per $1 to roll back up if we head higer. Don’t forget your June putters can roll to July, then Aug and then Sept so you are still in good shape with the Sept $100 puts.  Keep 1.3x if you are worried. 

    Mattress/Daveo – Yes, if you are lucky enough to have uncovered longs, this is a very good time to cash them in.  We can always buy other Sept strikes but all we ever look for is a double and we got that.

    Wow, we are weak and sucking fumes at the moment.  As I have said over and over – MAINLY cash and well hedged for any bullish positions with disaster plays as we could be seeing 8,650 at this rate and THEN we would back up the truck and hunker down for the long-haul!

  127. PGH being taken out to the shed and beaten…..I have held these guys for a long time.  10% Div Canadian, and little tax, so say 7%ish after tax. 

  128. Three lunchtime reads:
    1) What Dr. Copper says about the economy
    2) Germany: Right and wrong on naked shorts
    3) Inflation manipulation – why should China be any different?

    The SEC’s top priority in the next two weeks is getting exchanges to clarify rules about how trades are canceled in events like the "Flash Crash," Mary Schapiro tells Congress. Nearly 21,000 trades were broken, mostly in ETFs; transactions in 326 invididual stocks were canceled.

  129. Selling is bad but /ES selling volume is less than this morning and seems to be tapering off. I think it’s just a waiting game for longs.

  130.  did OK on JRW’s TNA entry yesterday. Looking for another play there?

  131. I added a little there. My last buy for the day, and a failure of /ES1074 would make me cover everything with ATM calls.

  132. Hi Phil. Been a subscriber for a couple of weeks and just been watching mostly so far. I have 1 position that is bothering me a bit. A few weeks back I bought RIG August $60 put and sold the August $65 put for a credit of $1.66. Your thoughts?

  133. I have several SPX short puts for june, all rolled there from before. I am almost out of rolling room, and they are exploding in value against me. If we go directly to 8650, I will be broke.
    I am steadily adjusting, and I cashed in most of my regular long positions to generate more margin credit, but as we sink, the handwriting is on my wall. I am close to simply buying back short puts that are all premium. Of course they are A LOT of premium, so this is effectively locking in a major loss to protect myself from bankruptcy. It would help a lot if we had a small rally.

  134. No fat finger today, looks like someone with a big a** just sat on the whole keyboard !

  135.  "8,650" ? C’mon Phil, we’re right in the middle of the MARKET RECOVERY (R)(TM)(c) !!!!! Don’t you listen to Cramer?  :)

  136. Thnx Phil.  Another play, if you don’t mind.  Hedge using FAZ:
    Buy Oct 11 C for $7.40
    Sell Oct 15 C for $5.35
    Sell Oct 11 Put for $1.94
    Net entry $0.10 on $4.00 spread with worst case being put FAZ @ $11 which is $0.22 above lowest on record.
    Not chasing it, just seeing if I have the Bull Call structure right finally.  thanks for your patience, I feel I am starting to get the hang of this.

  137.  for those so inclined today is a good day to buy Pt or Pd (1,509 and 418 per oz, respectively). Way oversold.

  138. Phi; I’m confused . You say BA, GE, WMT etc look good  then you just said  we may go to DOW 8650. Is it a good time to do buy writes only ? thaks

  139. IWM trend lines descending at 64.36 and 63.76

  140. Too much uncertainty holding the US bank stocks, until after the Senate is finished with the regulation fiasco. The bank balance sheets are problematic – on the left nothing is right – on the right, nothing is left..

  141. Whoops, I made USO go down, turned the moment I picked some up.  Sorry guys.

  142. Disaster Hedge,
    Hi Phil, I bought some more buy/write play this morning
    Just trying to adjust my disaster hedge accordingly.
    What are you thought on SDS SEP +call 33/43 -put 31 hedge?
    Would you change anything

  143. The lower trend line intersects with the primary ascending market support line from last July at 63.76

  144. Phil – etf – index question
    Let’s say I am long spy (VTI in my case).
    I like the idea of dumping the stock spy at 108 and selling the Dec. 100 puts for 8 bucks -
    If we go to 1,000 on the S&P – I saved myself  $16 – good down to 920 and I don’t see us rebounding to 1200 all that quickly – am I missing something – of course more down side than cash

  145. This is no time to be doing anything bullish. Dow may not hold 10,000 today.

  146. Reluctantly covering some, but this is getting silly and I’m happy to buy the S&P in this region.

  147. Opening Wallet slowly……

  148. Going to roll my SPY calls down to the 100 line.

  149. TNA: S3 was breached, really bad.

  150.  Barf – hope you’re wrong – I got TNA at 44.00 and will come back EOD to check on things. Back to work now.

  151. Eric – UR in the front month (June) SPY right or still playing May?

  152. Hey all,

    I just posted a new article that is an update on how all my portfolios are doing currently. My Buy Pick Portfolio is currently up 133% in 14 months from $3000 to $7004. My Short Sale Portfolio is up 14% in 7 months (but only made 90 picks) from $3000 to $3400+.

    Check out the article to see how I report my portfolio and to see for yourself the success of the Oxen Report.

    Thanks and Good Investing!

  153. I am looking for MACD and RSI to reverse on the daily DIAs….then jumping in.

  154. Pharm,

    All May: basically want to keep myself out of premium ownership. I’ll roll out tomorrow if necessary.

  155.  50 SMA  weekly tested SPX cash

  156. In TNA at $44.29 (1/2)

  157.  On that last drop MACD and RSI did not dip lower than the first drop, could be a tell

  158. Pharm / ARNA – where do you think this bottoms out?  any near term catalysts coming up?  I’m down 12% from entry.  Thx. 

  159. Phil / TBT  Looks cheap now, yet Japan borrowed for years at less than 2% with much bigger defecits, since stock mkt alternatives had no appeal to Jap investors.  Won’t we be facing same scenario here when this mkt meltdown has run it’s course? ie Depression, deflation and total distrust of mkts?  Germany is now below 3% on 10 year.  Maybe 3% here will start to look attractive within a few months?

  160.  Out of MF for 2% gain!

  161. Hi Phil I still have 30 Jan 11 Bidu 70 short call, was sold at 5 now 12.5, what do you recommended how to adjust this into a spread and watch it and roll it along a market change.  THX

  162. phil,
    euro moving up fast!@

  163. Doubling TNA at $45.12

  164. EURO breakout!! 

  165.  1087 needed to be crossed for  a real charge!!

  166. chyer: what chart for the EURO ?

  167. phil,
    out of the short leg of my aapl spread. shorted aapl may 240 calls @ $11.20 and just bought back @ $3.45. have aapl jan $240 calls naked. what do i do now? sell and them sell near puts?

  168. ARNA/Terr – $3 has held well.  Sell the July $3 P for 50C for a DD.

  169. rmm,
    use $xdn for the euro chart.

  170. euro actuallt went above $1.25 for a moment!

  171. USO/Mr. M – More like margin calls into the close at the moment. 

    Ah, fun time begins!

    Disaster/Lionel – I really don’t like adding more hedges (as long as you have some) unless we fail RUT 630.   If all the indexes aren’t below their 200 dmas, there is still hope.  650 on Russell is very hopeful despite the others lagging and the Nas is holding 2,225.

    Volume on Dow at 1:30 is 170M

    SPY/Samz – Nope, very well thought out. 

    At its developer conference, Google (GOOG) introduces Google TV, with an integrated search function for finding content on the broadcast system as well as online. (previously)

    Stocks hit the skids with major indexes all off more than 3%. Every sector is deep in the red, with capital goods down 4.8%; heavy selling in Cummins (CMI -9%), Boeing (BA -4.5%), Caterpillar (CAT -4.9%) and Deere (DE -3.8%) among many others.

    Bets pile up on a "massive unwinding" in carry trade, as yen calls surge to a 15-month high vs. puts. Investors who borrowed yen to buy Australian dollars and other currencies lost 12% this month as growth-related currencies suffered.

    Markets are experiencing a "mini-relapse of a flight to liquidity," Pimco’s Bill Gross says, as leveraged positions are liquidated to preserve capital. He notes that momentum is building for fiscal tightening not just in the eurozone, but in Japan and the U.S.

  172. 1/2 out of TNA at $46.08;

  173. Dow 11,200 is acting as a RESISTANCE now!  After 3 atempts.. I think this is the begining of a sharp and massive downtrend..

  174. Bought back TNA at $45.22

  175. GoogleTV – already requested to be notified with more info as they release it to the public…

  176. Looking at that above article concerning the FDIC’s quarterly report, it states:
    "The FDIC said new accounting rules also helped bank earnings.
    ‘The sharp increase in net interest income caused by adoption of the new accounting rules significantly boosted the industry’s net interest margin,’ the FDIC said."
    Accounting changes?  Maybe something to be further looked into?  Also, the FDIC reserves to insured deposit ratio is STILL negative and the number of failed and or assisted banks jumped back up to 775 and seems to be rising at a fairly brisk pace.  
    Feeling very uneasy.

  177. MACD/Chyer – Good signal (I hope).

    ARNA/Terra – Just to be clear, with a biotech, my attitude is it’s like a roulette wheel and we bet on black and just hope we hit a streak and are smart enough to cash out.  Even when there is real news, rumors still trump reality on these things 4 out of 5 times.  They are patience plays and you should expect to lose 5 before hitting a 10-bagger.  If you happen to hit 2 10-baggers in a row – then you would be smart to retire and not press your luck.

    So – Did they pull in enough bears to stick it to? 

    Japan/Tusca – Yes but Japan did it alone.  Now it’s a global thing, much harder to sustain (as you can see from the way things seem to now be falling apart).   The Yen jammed up to just 89 to the dollar this morning – that is death for Japanese exporters and the Nikkei futures fell 4% on that.  Also, Japanese people are massive savers and fairly Xenophobic so they buy their government 10-year notes at 1.25% all the time – you’ll never get US investors to do that. 

    BIDU/Gucci – I’d roll it to the short Sept $77 calls for $6 and the short Sept $61 puts at $6.50 so you pick up a little time, add 10% to the long strike and you’re still 10% over the puts.

    Euro/RDR – All sorts of talk about Swiss intervention and imminent action from the ECB and Germany passing their Bill….

    Just as rumors of a European Central Bank currency intervention begin to fade, CNBC reports fresh chatter about an ECB conference call between members and a "massive short squeeze." Euro spikes, now +0.6% against dollar, and stocks have pared most losses from the past hour; S&P 500 -2.7% to 1,085.

    "In the worst case, such turmoil [in Europe] could lead to a replay of the freezing up of financial markets that we witnessed in 2008," the Fed’s Daniel Tarullo says. There are good reasons to think that U.S. banks can withstand some fallout from Europe, he says, but the bigger the crisis, the more exposure they will face

    AAPL/RDR – I’d wait.  IPad sales are through the roof so I’d give it until Monday.  You can always sell June $250s for $9 and roll the Jans down to the $220s for $10.50 so it’s not like it’s a big worry yet. 

    OIH June $95 puts are a good sale for $3.60.

    10,200 rejection not a good sign although I do find it very interesting that gold is performing very poorly given the same uncertainty that took it to $1,250 on last week’s dip.

  178. rdr: $xdn is yen/dollar

  179. DIA BULL put spread:  Buying $100 puts for .52, sellig $102 puts for $1.20 (net .68 credit) and buying $102 calls for .82 is net .14 and the most you can lose is $2.14 but anything over 10,214 is a winner on the Dow with no upside limit so if we gap up tomorrow, you get it all

  180. SPWRA rising from the dead!  WFR holding $11!  Even FSLR looks happy!  V up 2% today, MA up 3% – Wheeeee!

    This guy never met a bank he didn’t like:  Dick Bove says U.S. banks’ stocks may fall another 10%-12% to reflect market fears about European debt and new regulations which he says will lower the earnings capacity of the industry by 25%. However, he believes bank stocks are still "very attractive" investments and would "grow in multiples, not percentages."

  181.  Nothing better to stick it to them today since almost everyone on MSM is uber bearish

  182. A little higher and we have a nice inverted head-and-shoulders on the daily /ES.

  183. TNA 2012 – 20 puts are $8. What would that position translate into on the DOW

  184. Eric- what does inverted head and shoulders mean? txs

  185. Out of TNA at $46.55; reloading !!

  186. sns1
    It means we could go UP from here !!

  187. the euro shorts are starting to panic!!

  188. JRW,
    You are on fire!
    Thanks for sharing your entry/exit levels.
    I am trying to follow your trades and it is pretty successful so far

  189. sns,
    Yeah, up. It would project up about 19 SPX points, but we need to get over 1090 and then 1093, which have acted as resistance. Bears are not surrendering any ground without a huge fight.

  190. In TNA ( 1/2 ) at $45.78

  191. Doubling at $45.72

  192. Economists polled by MacroMarkets predict housing prices will rise by 12% over the next five years, but’s Stan Humphries says that’s "probably a little high… We’re predicting a bottom in the third quarter of 2010, [followed by] three to five years of modest-to-negligible appreciation, and perhaps flat-to-down in real terms."

    Inverted/Eric – That’s cool, a lot of people jump on that signal.

    TNA/Drum – about 60% off on TNA is 20% off the market.  Of course you can roll it so if you have the margin and the patience, selling the 2012 $20 puts for $8 is a great play.

    Woo-hoo on oil by the way, just stopped us out at $70.85 bouncing back off $71.  Reload over $71 but, now NYMEX is closing so scary for an overnight hold…

    Oh those poor bears! 

    I call dibs on JRW’s Mayback from today’s trade!  Keep  this up and we can hold a demolition derby to clear out his garage…   8-)

    And here comes Cramer to ice the cake…

  193. Sold 1/2 at $46.75

  194. Of course, in Japan, getting 1.25% on 10 year notes is better than everything else that has been "growing" at -2% a year like real estate and stocks! 

  195. Wow, Cramer is amazing.  He tells people not to short puts when it’s clearly the best way to buy stocks and he says buying out of the money calls is "the best" way to lower your risk.   He is so dangerous to investors! 

    LOL, now he is calling calls that are "one strike down" deep in the money.  Can’t someone arrest this guy?  His voice is shot, he must have been freaking out on the phone today. 

    I’m surprised how slowly they are taking this up, practically inviting retail investors back on board – that makes me a little nervous actually…

    Japan/Stejean – You are right, it can be argued that it’s still a relative 3%.

  196. Phil,
    How do you feel about CPLP down in the low $7′s.  They dropped their dividend to .90c, but the Dec 7.50′s can be sold for $2.20, so about 4.90/6.20 range on buy / write.  Any feel for whether they can maintain their div. at present level.

  197. Phil/Nervous  I would be…..

  198. Phil – I’m in the same boat as Daveo on the mattress and per your 11:49 comment, rolled the long puts to Sept 105. So, I’m bullish on the mattress. How would you change it by the close today, based on the outlook for tomorrow?

  199. ….last hour could be ugly….

  200. Hello kitty…SPWRA on the prowl.  Gotta be a sure sign of a recovery, eh?

  201. Sorry, phone call
    Bought back the 1/2 at $46.77 when we broke over IWM 65.33

  202. Senate gets the vote (the vote to get to vote that is, but it’s all over now) on Fin Regs and XLF is at $14.62 so let’s see how they feel about that.  We’re right at 10,250 too but I have to think this is a nice bullish push. 

    Retaking 1,100 on the S&P would be cool…

  203. Phil/ SPWRA
    is it your hedge fund start buying them???????

  204. 1093 is acting as resistance so far. Bears just fearlessly stepped in and pounded it down. I covered my SPY longs with the 109s to help lock in profit, but almost wish I had sold them. Let’s see if we get another attempt.

  205.  out of TNA at 47.  +6.8%!!!
    Tomorrow if TBT bounces into the low 40′s — a perfect gift for the weekend.  :)
    Oh and GOOG, jesus, break out of it man.

  206. CPLP/Bass – You never know how much trouble these tanker cos are in with loans but I do like the fact that you can spread them that way.

    Damn, financials stopping the rally now!  I think we can pull it back together but we have to have Nas leadership now. 

    Mattress/Pyern – Same boar is same anwser.  Just roll down to take about 1/3 off the table. 

    SPWRA/Tcha – Where were you, they were a BUYBUYBUY all week…

  207.  JRW lll
    do you ever hold overnight or are you always out by EOD.
    Thanks for these inputs.
    $50k one day gains are a BIG deal to me no matter what % of portfolio it is
    Only tried 100′s of shares so far

  208. 1/2 out of TNA at $46.71

  209. Man CNBC is trying to lobby that passing the bill will doom the markets really hard. 

  210. Phil – Not sure I’m clear on your mattress response. Are you suggesting rolling 1/3 of the long Sept 105 puts down further to the Sept 98s, making it even more bullish?

  211. Phil- How did you get USO @28 is like Oil @65?

  212. This is interesting, they are trying to prove to Congress that investors don’t want financial regulation, that’s pretty much what this seems to be about.  They are even bringing Roubini on now to help drive a stake into the rally but there seem to be a fair amount of people buying anyway, which makes sens as we’re buying and we can’t be the only people in the world who like buying blue-chips on sale.  

    When Roubini’s done, if he doesn’t have a "zinger" for them, I think we get going up again.

  213. Bought back the 2nd 1/2 at $45.81

  214.  C breaking out from range 3.60-3.70

  215. Mattress/Pyern – No, I’m suggesting rolling to whatever strike gets 1/3 of your cash off the table.  You roll to a LOWER strike put which costs less money and pocket the difference. 

    Mattress plays – Oh, I would think it goes without saying that I think selling the 1/2 the June $102 puts for $3.75 is a very good way to cover your long puts.

    USO/Hulk – Based on today’s move and oil’s move.

  216. Could be an interesting last 10 minutes…….

  217. 1020   You said it right the 1st time   ,  interesting last hour

  218. Phil poor Cramer some one needs to buy calls when we are selling them never the less buying a call will asure you a stk at a certain price. The reason why he does not sell puts as he is  worried the market will go further down and you actually land up with the stk. Really counter productive the way the man thinks.  Possible he is a option buyer.

  219. Phil/Congress.  Not a comment on the merits of any particular piece of legislation, but it does seem that whenever Congress is about to address issues that affect Wall Street, the market sells off.  Must just be a coincidence, or one of those "market hates uncertainty" things.  I’ll have to remember it the next time and buy some puts the day before.

  220. A few months ago, you recommended the TZA 5-12 call spread at 1.2 or so, selling the 5 puts for a buck. The swollen value of the 12 caller enables one to do essentially the same trade at 1.4, but the 5 put is now around 1.9

  221. 2012 that is

  222. ss, judah,
    How good are today’s lines ?

  223.  Pharm/Phil,
    What do you think of GSK and LLY down here near their yearly lows?

  224. Phil do you think it is still time to sell some 102 or 101 may puts to fill up the mattress still have some space on the mattress? thks

  225. Man, it has been hard to sell my 1110/1100 SPX put verticals at a decent price.  Fully in the money, but I can’t even get $8.  Sold half for $7.  Maybe I’ll just hold the other half overnight and see if SPX opens at 1100 or below.

  226. Oh dear, I hope I wasn’t selling all those 109 "one strike down" SPY calls to the Cramerites a while ago.  Those things are in trouble.

  227.  Phil, re: Cramer, I explained to my best friend the other day that you advocate selling premium (shorting puts or calls) to get into stocks you like and he got it in 2 minutes! But for the heck of me, every single guy on CNBC, Bloomberg or all these places always, always mention the unlimited risk to shorting puts! For Cramer, there is no risk being long Amazon at $145 (3 months and $25 ago) but unlimited risk shorting the $150 call when by all means you can see that they are overextended. Or shorting puts when the VIX is at 45 and you can buy stocks at a 30% discount! If I weren’t paranoid, I would think that they want you to BUYBUYBUY so that they can short options themselves!

  228. stjeanluc,
    I don’t think you’re being paranoid there, lol.

  229. GSK/jced -  Trend line is down though, so until that is broken, I am not really recommending anything that is not well, well hedged.  They have some support @ $30, and already paid the dividend, so I would wait until after the weekend.  I know Phil has an opinion….

  230. JRW/lines.  I sure wish I had joined you, but I’ve spent all day disposing of May SPX puts — mostly $10 spread put verticals that I picked up for less than .50 a couple of weeks ago during the plunge.  Just got 10 left of the 50 now, and I’ll be back on the train with you tomorrow. 

  231. Nothing is lifting this market today..

  232. EricL,  You’re the SPX go to guy.  What do you think the chances are that we gap up tomorrow morning above 1100?

  233. Uncertainty/Judah – Well that’s what’s interesting, they know this bill will pass now and they know what’s in it – that’s certainty.  This is all about trying to psych out Congressmen so the lobbyists can say "see, look what happens to the market when you regulate…"

    TZA Drum – Then I like it better now!  Gotta love these high VIX’s….

    Mattress/Yodi – See above, I like selling 1/2 the June $102s while they are so high.  That pays for 4 rolls up on the longs!

    Paranoid/Stj – You are not at all.  Why do you think so many of these guys on TV (Cramer included) worked at GS et al.  If they were any good, they’d still be collecting their multi-million dollar bonuses over there but GS encourages their people to work in politics and the media so they can steer the markets. 

    If we finish this weak then Asia will probably bottom hard tomorrow and maybe Europe too as they are closed Monday.

  234. 1/2 out of TNA at $46.40

  235. Sold the other 1/2 at $45.80

  236. judah,
    Not enough to make it worth a big gamble here, IMO. Unless we do something in the final minutes here, it’s a big mess.
    All the May SPY puts above 114 have no extrinsic, and I basically flattened by position delta with some 115s. Now hoping to skim off the extrinsic on the 109s tomorrow.

  237. JRW – just getting back.  Lines were brilliant.

  238. ssdirk: what do you use the lines for: entry and exit ?

  239. Back in TNA at $44.91 (1/2)

  240. Looks to me like two hours of CB intervention — from 1300 to 1500 ET on the dot — to minimize the hit from final hour forced liquidations.  Pretty smart, actually, if you’re going to spit into the ocean like that, may as well get a little bit out of it. I wonder how many millions per minute it ended up costing them though.

  241. And out at $45.05; that’s it for today, too much work !!

  242. On the pullback to Dow down 200, added new short term short….
    Bought EDZ  Jun 55/58 bull call vert for $2.80
    Sold EDZ Jun 52 Put for $5.00 (net credit of $2.20)
    If EDZ stays above 58 then net $5.20, if EDZ goes below 52 I’m in for 49.80…although I could roll the position out or down if needed.  Between 52 and 55 I keep the $2.20.

  243. TRMA is up 14% today…. :)

  244.  judah,
    I hope you keep some of your SPX spread hedge. 
    I am keeping my 1080/1090!

  245. Balance. Ah well, I should have kept them, but I got $9 and figured that was good enough.  It’ll be $10 in the morning, but I got em cheap so I’m certainly not complaining.

  246. This market sucks.  They squeaze the shorts for the vast majority of the day only to end down big.  This is opportunistic selling/shorting.  CNBC with a total hit job just before the close.  They are despicable.

  247. and finishing on the lows of the day, month, and year.

  248. NFLX -
    Finally – out even

  249. Phil, tough to guess what will happen tomorrow in Europe as it could go either way in the Bundestag with the Greece bailout! If they decide to poke Merkel in the eye, it could get ugly for the markets and the euro! Hopefully they are scared now. Should be fun to get up at 4:00 and check them futures!

  250. Wow, brutality!

    Craps roll on DIA $104 calls for .18 – just for fun.

  251. Huge volume in the end: all selling.

  252. What a NASTY finish.. but SUPER NASTY..

  253. sold some SPX calls and RUT calls today, but nonetheless, Im one day from being wiped out.
    my hedges were inadequate.

  254. Phil – Any option ideas on some TBT I picked up at $38.83 at the close…I stuck it into a IRA account…couldn’t resist
            -Also, is there any way to turn off the linked graphics on your forum web page (from the article)…or have a page without graphics, along with the normal graphical page?  I turn them off via Internet explorer (so I can auto refresh much, much quicker)…but it removes the posting window in the process, so I can’t post during the day…perhaps a good thing…LOL

  255. barfinger, why would you be wiped out? if I understand correctly, you hold short June SPY puts.. wouldn’t you be able to roll to lower strikes further out in time for a net cost of zero or even credit? Did you let those guys go away? You have all the way to Dec 2012 to roll.. what’s the matter?

  256.  Initial Reports for Aeropostale:

    EPS – 0.48 vs. the expected 0.46

    Profits – Rose 55% year-over-year

    Income – Rose 43% year-over-year

    Net Sales – Rose 14% year-over-year

    Second Quarter Guidance – EPS 0.45 – 0.48 vs. expected 0.47

    Things are looking pretty great, but the market is crazzzy.

    We will just have to see. 

  257. Well, a 10% day with a bull ETF in a down market, there must be an easier way !!

  258. Nice volume today, over 330M on the Dow, too bad it was all down but that last part seemed very fake.

    EDZ/Hoss – I like that because the global economy still has a long way to fall if w’re going down. 

    Oil futures back below $70 and worth a stab if they get back over.

    CNBC/Matt – Could they possibly be more obvious about it.  First 6 of them in a box saying how bad the banking bill was for the market, then Roubini being Roubini and then some guy comes on and looks into the camera and says "SELL EVERYTHING RIGHT NOW"  – could you possibly do more to freak out the viewers?

    By the way, you can sell the DIA $105 calls for .10 and make it .08 on the $1 spread.

    Europe/Stj – That is the big what if.  If Bundestag does what our Congress did in ’08 when they hung that first TARP vote – then all hell will break loose. 

    I should have gone with my suspicious gut earlier when I thought they were taking the market up too slowly for it to be a real move – that will serve me right for thinking the markets aren’t rigged for a moment!  8-)

    TBT/TheGold – You may get a cheaper entry tomorrow if Germany flubs the vote but, if you are willing to DD down the road you can sell the Jan $37 puts for $3.75 and sell the Jan $40 calls for $4.50 and that’s a nice 20% discount off the current price for a net $30.58/33.79 entry so you pick up 33% if TBT holds $40 through Jan and, of course, you can roll out to 2012 pretty easily unless TBT is below $25, which would be insane…

    The premiums on the index options a day before expiration are insane! 

    Easier/JRW – I don’t see how there could be…. 

  259. JRW, that’s some fancing dancing you did.  There is definately a down agenda though.  They brutalized Mr Stick today!

  260. Castration is a painful experience…. Closed out of over 100 positions today, and will play the currencies exclusively for a while. I have never seen a day when stocks as well as covered calls on the stocks decline.

  261.  Phil, TBT never went below $35 when everybody was predicting the end of the world in March 2009! Of course, I didn’t panic because the Maya calendar didn’t mention anything about March 2009. Not sure about the Inca calendar though!
    But with TBT at $25, where would the Dow be, and the dollar?

  262. Is Kay Bailey Hutchison a box of rocks or what……

  263. This can perhaps serve as a cautionary tale for those of you who believe in shorting puts with the plan of rolling. Rolling doesnt work in a strong one way market. I can easily control my margin requirements, but I cant stop the huge VIX from pumping up the short value and destroying my margin credit. If I roll more and the market moves tomorrow like it did today, I will be margin squeezed into eating (not rolling) short puts, even though they are all premium. My entire account is down 38% in the past two days, even though I have a bunch of Phil’s hedges in place.
    Portfolio margin is a great thing, except when the market does this.

  264. Declines/Gel – That’s from the sharp sell-off and up 30% VIX unfortunately.  Still a very good time to begin working into a small, manageable amount of blue-chips.  One day the global economy will recover.  Maybe not this week, maybe not next year but one day and, on that day, IBM will sell someone a computer and AA will sell a tin can and BA will sell a jet to someone and that person will do business using INTC processors and CSCO routers… 

    You know all those stories about people who’s grandparents had original shares of T or sormething and they didn’t realize their $10 share had split 2,000 times and is now $50K?  Those guys didn’t get out when T was up and they didn’t get out when T was down, they bought a share of a stock that they thought would be around their whole lives and they forgot all about it. 

    Of course, had they sold calls against those shares for 40 years they’d be multi-millionaires and instead of a $15 check for your 10th birthday you might have gotten a pony – but that’s a different story….   8-)

    TBT/Stj – Oh I dont’ think it will happen and, if it does, it will be more important to know where your gun is than what TBT is doing that day! 

  265. Phil,
    I need your advice.
    I am short 1000 WMT stock sold at $54.
    I am short 10 May 52.50 puts sold at $.50
    and short  10 Jun 55 puts sold at $1.80
    In case WMT finishes below 52.50 tomorrow, would you recommend rolling out the May 52.50′s or simply letting them cover  the short stock position.
    If WMT finshes above 52.50 tomorrow, what would you recommend?
    I beleive WMT to be a long term buy at this price.

  266. PM/Barf – That’s a dangerous thing in a time like this.  It’s very important never to sell anything short that you don’t fully intend to buy at the put-to price.  If you sell too many puts for your actual cash and we have an event like this (which we now seem to have AT LEAST once a year) then it does become a huge problem.  Scaling in applies to short puts as well as actual stock purchases because the sale of a short put is, for all intents and purposes – an actual purchase of the stock at the put-to price.

    So, that being said.  What do you have and maybe I can think of some ways to at least stop the bleeding. 

  267. Phil/Fake  Could the last hour have included a forced liquidation for some accounts?

  268. Is this move down a reduction in leverage by the banks due to the Financial bill?

  269. I had been balancing the delta in my account. Naturally, the short calls are nearly worthless, and represent a huge profit, but the short puts have quadrupled in value, even though not a nickel in the money. I hold june 1075, 1050, 1040, and a substantial number of 1025s. And the september 950s and 925s, which still havent budged much.
    On thursday morning a week ago, my margin requirement was less than half of the margin credit I had generated. By 2pm that day, my margin requirement was 50% MORE than the margin credit generated. the account collapsed, and the margin exploded. I did not properly understand that when the market collapses, not only do the puts get closer to the money (which I expected) but the high VIX explodes their premium.
    The safest of those positions, the June 1025, closed at $32. still nearly 50 points out of the money. It is a disaster.
    Margin is not currently an issue, because I liquidated all the conventional longs in that account. I am actually fine, unless the market does the same thing tomorrow, and the VIX goes to 60.

  270. WMT/Oncmed – So you shorted 1,000 WMT at $54 sold the $52.50 puts for .50 (which is like shorting at net $54.50 with a max gain of $2) and you ALSO shorted June $55 puts and now, just $2.70 lower (5%) you are bullish?  OK…  Well, just let yourself get exercised on the short stock and the May puts ($2 profit) and roll the June putter to the Jan $50 puts about even and then you are in WMT for net $48.20 if it’s put to you and another $1.80 profit if it isn’t. 

    Liquidation/1020 – Very possible on this relentless drop.  Last week, we bounced back to fast for margin calls.

    Leverage/Hulk – Wouldn’t really make sense for them to act so rashly.  Certainly the bill will give them huge amounts of time to comply.   I think this was an anti-stick, running sell-bots and spinning the MSM employees to hit the talking points that "the markets do not like financial regulation – voting for financial regulation will doom America – leave the poor banks alone"  – that sort of thing.   Of course, it doesn’t have to be that subtle.  Lloyd could have been on the Phone to Obama right at that time saying "Watch what happens when I press this button – Muhahaha…"

    Of course Bush used to have a counter for that move

    To which Blankfien replied.  Which was because his first idea hit a snag

  271. I had not realized, but the 1075s are now in the money. worth $48.40.

  272. Phil, i have the TNA 48/51 BCS with the 47 short put.  The spread looks to be worthless, where would you roll the 47 put to?  Thanks for the guidance.

  273. phil,
     I did the bull put spread on 100/102 DIA and bought the 102 call as you suggested.  How should I play the expiration day tomorrow.  Should I buy back my 102 puts and sell the call for whatever I can get at the open (both for a big loss) if we think the market is going down tomorrow?  Or should I hold on and see how the day goes but risk losing more money?  My cost basis for the spread and the call is 2.66 (I couldn’t get in on the prices you suggested)

  274. hI pHIL: what a day .Too much stress for a retired guy that just finished prostate surgery. What do you think of buying the high yield MLP’s that got clobbered due to low energy prices. ,particualry LINE that now pays 11 % dividend. Thank you.
    even though I’m 70 % cash/bonds,sure wish I bought your simple Dow hedge yesterday.

  275. SPX/Barf – Oh I see.  Not my specialty on those but now you are feeling Buffett’s pain.  The reason I don’t like the index puts is becasue I don’t REALLY want to own the S&P as I’d much rather pick the best 20 stocks out of the basket at any given time. 

    I take it that you say I hold that you are ALL short on puts at those strikes?   Assuming that, I’d say the real problem is the crazy margins on the June puts, more so than the Septembers. 

    • TOS shows me that 10 (my default is 10) short June $1075 puts are $46,300 and have a net margin requirement of $216K. 
    • TOS shows me that 10 short Sept $950 puts are $45,000 and have a net margin req of $97K.

    So that answer seems fairly straightforward, just roll the Junes down and you’ll knock out 1/2 the margin req.  Also, you should note that you can send some out to the Dec 2011 $850 puts at $92 ($92,000) and those have a net margin of $85K and can still be rolled to the Dec 2012 $750 puts even (net margin $78K). 

    That’s without resorting to selling any calls, which would lower your margin further, of course.  So you can sweep up a few of your Sept putters into a smaller number of the Dec 2011 puts and get a very substantial drop in margin but I do think, for sanity’s sake, you should take advantage of the fact that you can still sell Dec 2011 $1,200 calls for $93 and those would bring the net margin up to $107K on $184,0000 collected but you can unload a hell of a lot of current puts into that $186 position and you don’t owe more than 1/2 of it back unless the S&P is below 750 or above 1,300 by Dec (and then there’s always the 2012 roll!).

    So, I guess I’m relieved that it’s fixable.  If you have to roll through margin, you should probably get friendly with your account manager TONIGHT as they may need to talk to a margin specialist to OK the rolls but if you explain what you are doing, they usually come around.  

    This folks, is why I am not a short strangler.  It’s a great, great strategy EXCEPT when it isn’t and then you have a huge mess to clean up for a long, long time and you can’t have fun with the other stuff.   There is nothing wrong with doing it with 10% of your portfolio, knowing, as Barf found out, that it may suddenly take up 20% of your portfolio on a 9/11 event or, going by recent activity, Thursdays….

    Holy cow!  Thank goodness the market was closed – I just accidentally hit the order button on 10 of those spreads! 

  276. Phil / accident w/ the order button
    ROFL, I’ve actually done that !!

  277. Phil,
    I am also short the 45 BP put.  Should roll it down to next month if we don’t think the stock goes above 45 tomorrow?

  278. BGZ over 17 now, so that  2000% (Oct 12/17 BCS, – 11Ps) hedge is nearly in the bank. Thanks

  279. TNA/Robert – I cannot believe those spreads died!  Unfortunately, it would have been much better to cash the bull call part for $1.50 per my 10:25 comment.   As to the $47 puts, now $2.70, they just roll along to the June $35 puts even and, if you have the $1.50, you can still pick up the June $32/35 bull call spread to go with it

    DIA/Kyw – Well if we are over $102, you just keep the call money and if we are heading down, you’ll want to look for a June spread to roll to but roll is the wrong word unless we get a chance to do it for less than $2.   Otherwise, best to take the loss and THEN we can set up a new June or July spread to get the $2 back.  Sometimes, if the market is moving fast, you can get a wacky exit. 

    Simple/Dflam – Yeah those June $96 puts finished at $2.55!   I wouldn’t buy LINE because they spiked down to $12.60 last week and the fact that they can do that AND they were around $11 for about 6 months 18 months ago makes me think that $22.71 is a lot of money to pay for them.  The puts and calls simply don’t pay you enough to take the risk IMHO BUT I suppose you can buy the stock and sell the Jan $20s for $4 and the Jan $22.50 puts for $3.20 AND buy the $15 puts for .70 and you’re in for net $16.21/19.36 with a stop at $15 so you risk $4.36 to make a $2.50 dividend and hopefully get called away with a $3.71 profit.  Too messy for my liking though…

    BP/Kyw – Right now it’s just .50 – isn’t that fine to just cash out and be happy?   I do still like selling the June $42.50 puts as a separate issue but if you sell a put for $1.50 and it’s done at .50, that’s a win! 

  280. Cool Ekor but keep track of your net and don’t let the whole thing get away from you just because you wish it will be 2,000%.   In fact, keep in mind that if you take 1/2 off the table at 500% or whatever it is now that you lock in a gain that cannot be taken away and your worst regret, if BGZ does finish over $17, is that you "only" make 1,250% and not 2,000%.

  281. Thanks for your thoughts, Phil. I have learned that rolling does not successfully combat relentless.
    I will survive, unless tomorrow is like today.

  282.  Phil, whats your opinion of RIG at these levels? Value at 58? It trades at a very low multiple, unless you think that the gulf spill will someone result in so much liability or decrease in future earnings that it could damage the company permanently. 
    Also, whats your opinion of GS at these levels? It has been outperforming other financials in the last couple days. Perhaps a bottom at 135?

  283. Well, it’s begun.  The MSM is trying to blame the last half hour crash on the impending financial regulations.  It’s nothing but a scare tactic.  That sell off was as intentional as it could possibly be.  And it wasn’t because of Roubini.  He is a tool.  The banks giveth (via the Fed) and the banks taketh away.  They are trying to take their toys and go home because they aren’t getting there way.  At least not completely.

    The absolute BEST quote from the German finance minister!
     “If you want to drain a swamp, you don’t ask the frogs for an objective assessment of the situation"

  284. Phil,
    How exactly does selling calls reduce margin, simply as a function of adding cash or because it reduces overall risk vis-a-vis market direction? Is that specific to PM?

  285. selling calls does reduce put-dominant margin under PM, but it turns out, not much.

  286.  Phil,
    not sure if u remember but I was short 600 calls bidu (May 77s and 82s). Suffice to say I did okay on that, but as part of the margin call and hedge I now own 300 June 70s @ 9.40. Obviously there’s 4 weeks til expiration and I’m crossing my fingers etc. BUT any ideas how I can offset some of my risk?

  287. LoL Matt – I say F#CK the frogs!  :)

  288. PSW members - any Chem Engineers and/or environmental specialists here?  BP is being forced to look for a "safer" oil dispersant, therefore the company that has a replacement product……could very well see a huge stock price jump on Friday.  With 70,000 barrels of oils spilling, and only 5,000 barrels of recovery per day…there is sure to be a huge demand for a "safer" dispersant for a very long time…
    The EPA Thursday directed BP to begin using this safer dispersant within 72 hours. If BP can not identify an available alternative dispersant, the company must provide EPA and the Coast Guard with the reasons they believe no other dispersant meets required standards.
    The use of dispersants, including those manufactured by Nalco Holding Co., at such high rates and at such deep levels has set off alarm bells with some environmentalists, who worry the chemicals may have a lasting negative impact

  289. Pharm / CBPO - what do u think of CBPO?  Chinese biopharma listed on Nasdaq last Nov.  Thx.

  290. CNBC has a list of the companies in the fight to get the BP dispersant business…

  291.  Today is PROOF that economy is not getting better!
    22-years of loyal service, my benefits and pension package were too rich for a company, and they turned their back on me!

  292.  THIS ECONOMY IS NOT IMPROVING… I’m betting on the second Crash!

  293. Rats leaving a sinking ship?
    Mystery rodent scurries by as Obama lauds Wall Street vote

  294. Looking to cash all my long positions tomorrow as I have the nagging feeling this is going to get uglier. Does anybody have a set of short term bearish plays and how could they be hedged in case the market turns positive in the next few days?

  295. CBPO/terr – I can’t see anything that really excites me from a pipeline perspective.  They appear to be a generic equivalent of TEVA/ABT.  There is no way to protect your position (options) and there is no dividend.  So, at this point I cannot recommend them in the current environment.

  296. Amatta – as Phil noted earlier, it is a bit late to jump in with the VIX so high, but the DXD Oct 23/27 spread is about $2.2 and sell the 23 P for ~$1.  IF/when the VIX erodes, it will not lose its value as much and the P can be moved around.
    Should we head back up, read the DIA section here, as these have saved my portfolio to some extent. 

  297. 1020 – "last hour could be ugly"; man, that was spot on.
    Hope you profited from that.

  298. Pharm — GS … what year ?
    What could possibly be a catalyst to take us 25% higher in a month or two ?

  299. BTW,that GS comment is a little dated, and it called for 1300 by mid year; but 1250 by year end.
    wrong and wrong anyway.

  300. BTW,that GS comment is a little dated, and it called for 1300 by mid year; but 1250 by year end.
    wrong and wrong anyway.  But hey, GS undoubtedly made money again today anyway. 

  301. Maybe Obama is trying to get a crash out of the way now, instead of October, right before elections.