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Freaked Out Friday – Has CNBC Gone Too Far?

CNBC has now gone way too far!

Using their first amendment shield to shout FIRE in a crowded theater, CNBC began stampeding investors out of the market at 3pm when they decided to have a temper tantrum as the Senate had the nerve to approve financial reform, which will hopefully stop CNBC's advertisers from screwing people over quite as hard as they have in the past.  Note on the video, the Dow was at 10,209 at 3pm and then just watch the market move while they speak – what power! 

They say with great power comes great responsibility but what do we do when it is wielded irresponsibly?  Bob Pisani reports from the floor (where he's "in" with the traders) and tells you "The Germans are going to vote tomorrow on whether or not they even want to support the Greek package."  This is total BS as Angela Merkel's coalition controls 332 of the 622 seats in the Bundestag, their lower House of Parliament and this is considered a done deal.  What the EU is worried about is the meeting of the EU finance chiefs AFTER the vote (CNBC doesn't even give you this news) where officials will discuss proposals to better coordinate national budgets and may address unilateral German limits on government bond trading. 

I will give Bob a 1 out of 10 on this one because he got the words "German" and "vote" correct but the vote is on a bill that bill allows loans of as much as $184 billion from Germany to backstop the Euro and has nothing to do with Greece, who already got their money on the 18th.  Note how the moment Bob talks about an upside, Maria (who has someone whispering in her ear) cuts him off and spins things into a downward spiral talking about risk coming off the table and Roubini predicting doom (what else is new?) with, she emphasizes, "a 20% correction in the next several months from THESE levels." 

Just to keep track of Dr. Doom for those of you who don't follow him:

Now I love and respect Dr. Roubini, this is not about him, this is about understanding that his consistently gloomy views on the economy make him a tool that is used by the MSM to create a panic when they need one.  The reason I make a bad television guest is you never know what I'm going to say.  How do you "slot" me if you don't know which side of the debate I'm on?  As my readers know – I'm on the side that makes money!  TV audiences don't want a flip-flopper – they want a guy they can label "DOCTOR DOOM" and have him come on TV and say "DOOM."  It's the same thing my kids expect when they see their superhero cartoons – where's the catch phrase that identifies their characters?

Next up (3:01:34 pm – this may take a while!) is Scott Wapner who says "It's de-risking across the board… and we can't do anything about it."  Sharon says June crude is below $65 a barrel but doesn't explain that this was expiration day for June and oil was being dumped by idiot amateur speculators in a panic as often happens when oil falls in prices and they realize they can't afford to roll the barrels to July nor are they in any position to accept delivery.  July crude touched $69 yesterday, we went long at $70 and got out at $70.85 so thanks Sharon, for being such a reliable corporate tool! 

Brain Shackman (3:03:19) says: "It's not about a flight to safety, it's about a flight to liquidity… what you see is people wanting to get to cash."  Gee, it's a little late now, we went to cash at the beginning of the month, thank goodness!  The funniest thing to me is Sharon pointing out how thinly traded Platinum and Palladium ETFs are and how retail investors poured into them this year and now they are trapped like roaches (see my classic "Roach Motel Theory").  What's funny is it was CNBC's constant cheerleading that drove those investors into these brand-new, untested and unwise ETFs.  I warned against betting against the dollar with commodities last November (and congrats to all the UUP players!) and got incredible amounts of hate mail from gold bugs and other commodity lovers.  Gold bugs are still winning as my $1,150 top for gold was shattered….

Speaking of tools, notice Rick Santelli (the guy who was outraged that the government would subsidize "the losers' mortgages" with his money and effectively kicked off the Tea Party movement) blames the regulation of Wall Street on the Dow's drop, not their ridiculous broadcast.  That becomes this GE-owned(a financial that was bailed out) network's theme for the rest of the hour.  I said to Members that Lloyd Blankfein was probably on the phone to Obama at the same moment saying "Watch what happens when I press this button – Muhahaha…"  This was perhaps, the most coordinated arm-twisting of our government I've ever witnessed.  The passage of the regulation bill was never in doubt, this "market disapproval" is simply the disapproval of the guys who make the market, not the poor schlubs who try to invest in it and would like to have a slightly more level playing field.

Of course CNBC isn't done there, right after that little warm-up, they release Doctor Doom himself, slotting him in for a 6-minute segment and if you watch this video, just note how Maria spins every statement that's made to hit her (GE's) talking points.  Anthony Scaramucci comes on at 3:37 to say that Hedge Fund managers are not happy about the government getting involved in the markets and Maria spins it down and down and down.  Scott Minero (1:46 on this segment) has great advice, saying "sell volatility," which is what we do at PSW - he was the best guest of the day!  Still, a very gloomy pair…

Where I think CNBC went right over the line, where they began shouting FIRE in the crowded theater, was 3:45 when they introduced the "Fast Money Final Call" saying: "FEAR taking over Wall Street with markets continuing to sell off, out next guest says the markets are in a wholesale de-risking stage.  So how can you PROTECT YOURSELF in these uncertain times?"  And what does Brian Kelly have to say to help CNBC viewers?

You get to cash, you sell what you can on any rallies – even sell it now today.  I mean were in a stage here where everything is selling off.  There's a global risk reduction going on and the one thing that tells me that today, that this is more than just Europe – look at the Euro rate today, it is up now, yet the equity markets are down.  Something's changed, everybody's taking risk off.  As an individual investor you should take risk off, you should get to cash and, as a more aggressive investor, you can be short this market. 

Brian goes on to talk about slowdowns in China and Brazil and lots of other terrible things that would scare anyone to death and he explains we are in a global sovereign de-leveraging.  The host then says (and I wish I was making this up) "The markets entering full correction mode… Plus, he's the top-ranked chartist over the past 30 YEARS and he says it's time to SELL, SELL, SELL."  That is the CNBC Fast Money Final Call – Cash out, get short – on a day when the market is completing a 10% correction

I can't believe this is the same station that couldn't find a single bear to put on the air three weeks ago!  That was when I got fed up and we went to cash as I warned at the time (with a picture of a roller coaster): "Attention ladies and gentlemen:  The stock market will soon be leaving the station, please secure all personal items, pull down the safety bar (our Disaster Hedges) and keep all body parts inside ride at all times…  Since our biggest weekend fear is financial panic in Europe, our cash US dollars will become more valuable in a crisis and if the market drops, all the better as we can ride back in and do some bargain hunting."  Well, in a way we should be thanking CNBC for giving us these great buying opportunities (we had upside, well-hedged trade ideas on over 25 blue-chip stocks for Members this week already) but that's kind of like thanking Osama Bin Laden for getting us a good deal on a Battery Park City apartment – it's just too creepy! 

Just like any good terrorist organization, CNBC preys on your fears and manipulates your emotions to achieve their political ends.   Unlike Bin Laden, unfortunately no one is trying to put a stop to CNBC!  

Spending the majority of the last hour of a stock market session presenting nothing but negative news and having the guest on "The Final Call" look right into the camera and urging "individual investors" to liquidate their holding, even at the lows of the day is NOT journalism, is it?

So we are now in full panic mode and there's not a bull to be found and this morning (8:30) the futures are off another 1% and the game has gone from roller coasters to limbo – how low can we go?  We'll discuss this over the weekend but I was, and still am, looking for key support at these levels but, as I said yesterday, we're hedged to a 40% drop so our actual "best case" is another big leg down from here to 8,650 on the Dow.  I don't hope it happens much the same way don't hope my home burns up so I can collect my fire insurance but, on the bright side, we do get lots of cash at the bottom and the ability to build a brand new virtual portfolio just the way we like it.  We did this back in the last crash (and boy was CNBC wrong then too!) and we're ready to do it again if we have to but, for now, it's good to have a little perspective:

What's this?  It's the QUARTERLY chart of the S&P 500 for the past 10 years.  If you are a LONG-TERM investor, then you should be looking at LONG-TERM charts - that just makes sense, doesn't it?  We felt, for many reasons, that the run up to 1,200 came too quickly and wasn't pricing in risk so we lost interest in buying stocks.  Now risks are being priced back into the market and we're getting, not so much a correction as a proper price adjustment to more rational levels.  What we're hoping for (and hedging for) is a period of HEALTHY consolidation down around these levels that give the global economy time to recover and, more importantly, adjust to the new paradigms.

We may drop all the way back to 800 (head and shoulders fans) and that will give us a HUGE buying opportunity, which is why it's critical to stay MAINLY in cash and scale into long-term positions, taking advantage of the fear premium we are able to sell the the CNBC crowd.  If you are worried about positions you currently have and you didn't partake in our "5 Plays that Make 500% if the Market Falls" on April 28th (which was a Members Only post at the time), then you can still set up protection for a fall all the way to 800 on the S&P like the following:

  • Buy SDS Sept $29 calls for $8.25     
  • Sell SDS Sept $36 calls for $5.25 (net $3)
  • Sell SDS Sept $30 puts for $2 (net $1)

That puts you in the $7 spread for a net cash outlay of $1 ($10 in margin, which can be cut to $5 by spending .35 on the $25 puts) and SDS (an ultra-short on the S&P) is CURRENTLY at $35.77 so your $1 outlay on the spread is CURRENTLY $6.77 in the money.  This isn't even a play on the S&P going down, it's a play that pays you if it doesn't go up!  This is how we are able to buy with confidence at PSW.  Commit $5,000 to this position and you get $35,000 back if the market doesn't go up.  Then we can buy 500 shares of BA at $62.40 and sell the Nov $62.50 calls for $8 and the Nov $55 puts for $5 and that puts us in BA for net $49.40 ($24,750) and, if BA ends up below $55 in Nov, another 500 shares will be put to us at $55 for an average entry of $52.25 ($55,250).  If BA is below $55, it's a good bet the S&P will be below where it is now and you will be $30,000 richer so you are covered owning BA all the way to $22.25 – THAT'S what I mean when I say we're buying stocks!

I will be laying out many of these hedges for our Members and, of course, doing some bottom fishing today, just in case everything is all better next week.  If it's not, we're ready to get a bit more bearish for the next leg down but please folks – don't panic! 

Have a nice weekend,

- Phil

 


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  1.  I’m scaling in as a new basic member this month, I’ve been in cash toooo long waiting for the card counters to leave the casino and am enjoying what I see so far @ PSW and in the mkt.  I only turn on cnbc at market peaks and troughs but  last night caught this twisted logic from Sue H, to para phrase she said the retail investor has lost confidence in the market because regulators in washington, "who don’t understand the market", are going to make new rules.  Okay if the market is so twisted that the regulators don’t understand it, how in the hell is a retail investor supposed to have any confidence that they can? 


  2. Phil- How much of this S&P futures action is related to expiration where big investors are getting physical delivery of shares in cash market and shorting the futures to hedge and lock in their price?


  3. Phil,
    I hear you about the news, or should I say media manipulating the masses.  I bought back into DXD around 2:10 yesterday at 29.14 and immediately found myself down a grand.  I was about to sell until I started watching CNBC and heard all the gloom they were promoting.  I kept my position and went out to play golf.  I didn’t look it again until 3:40 when it was down over 300 points.  Thank you CNBC…..I was long and straight off the tee the rest of the round.
    Speaking about media manipulation, during the health care debate, all you heard about was how you weren’t going to be forced into the government plan and how only the uninsured would be part of the government system.  Well here’s the dirty little secret they didn’t tell anyone about.   online.wsj.com/article/SB10001424052748703880304575236602943319816.html  We run a business with a lot of employees, the average cost per year for health care coverage per person is approximately $12,000.  They will soon be on the government plan.  The people are going to get what they deserve.  And I can guarantee two things.  The government health care plan will not be cheaper and it won’t be better that the current system.  Now help me down off my pedestal.


  4. Phil / Direction – should we increase our shorts today into the wkend?  Elliot wave guys are saying if U.S. markets are flat to down today, and don’t bounce, then market decline will accelerate and really get nasty.      


  5.  phil, 
    Is oil a buy after expiration? What is the best proxy for it? you mentioned you bought yesterday at 70 and got out at 70.85…
    I had the UCO and got rid of it a couple of days ago at 9.6…
    Aside from the DXD which I got into a couple days ago, what else can I buy for a bearish stand? (I would like to have a few bearish positions and a hedge against a run back up), As I have a nagging feeling the market will keep going down for a bit… The other disaster hedges went out of hand as the premium spread has doubled or more. 
    Thanks,


  6. Phil,
    I have a few different TZA positions that I’d like to lock in some profits on (and free up margin), while still maintaining downside protection.  Two in particular are June 5/8 and June 6/9 verticals; I also have a smaller July position.  I’m thinking of taking the 5/8 spread and rolling it up and out to an October 6/9 or 7/10 spread.  Is that a sound strategy, or is there a better way to achieve my objective?  Thanks!


  7. I had come to a conclusion such as this in fact a couple weeks ago… the question is how long can stocks stay overvalued above the 20x normalized earnings…?
    seekingalpha.com/article/206138-don-t-be-surprised-if-we-see-a-31-correction 


  8. Phil,
    Wow…..everyone and there brother is talking this market down now.  That should pretty much guarantee a reversal.  The DJI chart looks ugly.  What are you looking at as a potential bounce level?
    BTW….what happened to DOW 15,000?  Weren’t the say people predicting that level a couple of weeks ago?


  9.  There’re some discussions yesterday on short spx strangles and margins. Need to be really careful for the next few weeks. This is not a normal ‘dip and lots of dip buyers’ correction. If you look at the aud/jpy, the best money flow indicator for carry trade, it’s down to the July 09′s level. The alarming part is the speed of the drop! 
    If you look at EUR/USD, AUD/JPY, and /ES during the past few days, you’ll see that it’s the Euro at the beginning, but not anymore. even as I am typing now, EUR is shooting up, but AUD/JPY down, and so is /ES
    What AUD/JPY is telling is the process of ‘de-leveraging’, as evident on the recent drop of /CL and TBT!
    Most of the Elliott wave followers are saying we’re in the middle of the C wave (of the ABC correcting wave) and C is nasty. On the horizon I don’t see any confidence booster in the near term. Today we have a high chance to revisit the low of the ‘flash crash’! So Vix will continue to shoot up, and this puts a LOT of margin pressure on short strangles. 
    Cleaning out calls won’t help much since the margin is mainly calculated on the put side. 
    If you believe the market will continue to go down, for the next few weeks, then buying some JUN put spread (much like Peter’s crazy play) will relieve the margin pressure of your short strangles while at the same time provide some downside hedge. The tricky part is the value of the spread will shine ONLY when very close to the OpEx, AND close to the money at the same time.
    Buying put spread right now will also reduce your cost, compared to single put, since the VIX is outrageous high.


  10. Phil / War
    Obama starts massive US Air-Sea-Marine build-up opposite Iran
    http://www.debka.com/article/8794/
    Chances we provoke a war with Iran and maybe even N. Korea to detract everyone from crappy global economy? 


  11.  Phil your Erin image is wrong where is the middle finger!! ha ha
    China up today, Aussie only slightly down after down hard, copper up, oversold bounce or a hint


  12. Phil, I have TNA stock at 55.24 which I was stubborn, and dumb enough to keep after a day trade didn’t go my way. Kept thinking it would turn around. Classic mistake.  I need some help. Thanks


  13. CNBC seeking to induce shorts to go all in for massive squeeze?


  14. If the "herd" follows CNBC off the cliff , will "financial evolution" create more intelligent investors? 


  15.  Commods on fire


  16. Good morning,
     Same lines as yesterday, plus 6 month support at IWM 62.31 and 58.68
    Descending trend at 63.24


  17. Woohooo!  It’s a shoot out!  Whoever’s got the most money wins today. 


  18. Good morning!  Too bad the spreads are so outrageous as it’s a great time to go long on options…

    SPY $105 calls are realistic at $2.45, that’s my only play right now.  Levels same as yesterday – make sure you read the above post

    I hate to say BUYBUYBUY but I reiterate my attitude that it’s a good time to commit 25% to the upside ahead of the weekend (with an appropriate disaster hedge). 


  19. We need to see these huge index sell order stop before we can stay up. I’m basically watching sell-side volume on the /ES and SPX.


  20. Look at the friggin volume!  This is market manipulation at it’s worst.  This isn’t about value.  It’s about direction and instilling either fear or greed into the minions.  Who will win?  Looks like those trying to instill fear have got a lot to sell/short!


  21. Looks like it’s going to cost the option writers a lot of money today to protect their positions..


  22. They’re trying to crack the shorts


  23. Good Morning!  SPWRA – Sold for 6%. Tough to hold solar…..


  24. exec,
     
    I don’t think most of this is short selling at this point. You’d be insane to keep making big short bets when we’re this oversold.
     
    I think it’s been funds all week who want out and will take any price. I don’t know how else to explain the action. The rest of the market is clearly ready to go up. I you were a short, you’d let the market go up to build your position at a better price.


  25. Phil- So i just learned that index options settle at the open, so if the market is skewed to the downside, it is easier to push the futures mkt down pre market to ensure as low of an open as possible (vice versa if skewed to the upside)…this makes me a bit short term bullish here…am i missing something?


  26. Yesterday’s other descending trend (64.36) is now at 64.14


  27. Phil, I’m starting to miss the days when we could sit back on opex friday and play pin the number.  I like CROX at 9.00. 
     
    Commit 25% to the upside ahead of the weekend?  Really?  I’m thinking of a more conservative bullish route, like selling some June puts in VZ, WMT or KO.


  28. Whats the current feeling on MBIA (MBI). I sold the $8 puts some time back, and frankly, don’t even remember the logic of the trade. Trading below $7 now.


  29. Any input on the following play based on the high vix?
    Jun NFLX 130 C Sell June 125 call for net +.25 
    Jun 67.5 P Sell 72.5 P for net +.55


  30. I know this may sound like a joke at this point, but we still don’t have a lower low on the weekly or month time frames on the /ES or SPX.
     
    So technically, the rally off of the March ’09 lows is still intact by that measure. Desperately on life-support, but intact.


  31. Phil:
    I still have the SSO May 37/38 bull call spread for .78, and sold 37 puts for .58. I could sell my 37 C and roll the May 37 P to a June 32 or 33 P. Is this how you would handle this? Thanks much.


  32. IPad. I’ve been tracking my iPad as it wends its way from Shenzhen to Anchorage to Memphis to Dulles, so I may have a new toy this weekend.  Has anyone tried using it with TOS yet?


  33. EricL/SPX.  If you draw a trend line from the lows over the past 9 months, you get a bounce right about where it bounced this morning. 


  34. Welcome Redlog!   We had a ton of plays from the last few days, I’ll be consolidating them over the weekend but it’s important to understand the strategy, which is roughly outlined in the above post but also extensively discussed all week.  We don’t care how screwed up the market is if we can buy BA now and hedge it down to $22.25 a share do we?  Of course, that’s overkill and it’s a matter of how much of your $30,000 hedge (that costs $5,000) do you want to allocate to protecting that potential BA entry at net $52.50.  $52.50 is already down 20% so if you allocate just $5K to the dip, you are covered on 1,000 BA down to $47.50 and then you can take 6 more positions ($150,000, potential if put $300,000) that have 20% built in protection with another 10% protection from your hedges, all for $5,000 extra.  Spend $10,000 and get $60,000 in protection – it’s pretty simple!   SDS bottomed out at $28.37 last month so you have a very long way to go before you have to worry about losing more than the $5K

    Action/SNS – Hard to say now with so many moving parts but the short story is the Financials crashed the market to try to derail regulation as well as chase all the retailers out of positions so they could grab the stocks. 

    Direction/Terra – I’m not for increasing shorts as long as you are fairly balanced.  We may get news out of Europe and a gap up on Monday and, if not, plays like the SDS don’t go way and, in fact, there are more of them as the VIX gets high

    Oil/Amatta – Yes, we did USO yesterday and we have our standing buy on oil above the $70 line in the futures (with a stop at $69.95).   That’s goiong great today as we rocketed up over $70 to $70.75 already! 

    TZA/Wassel – Yes, as I said yesterday (and it goes double today) TAKE THOSE SHORT PROFITS OFF THE TABLE!

    Normalized/Amatta – Good point! 

    Reversal/Exec – We’ll see if we finish the month back over 1,100.  If that happens, this IS the reversal…

    Margins/Balance - Yes, for those of you with margin issues or Short Strangle issues, we discussed it at the end of yesterday’s chat.

    War/Terra - Man I hope not!

    China/Chyer – Speaking of which, the FXI June $39s are .98 and they were $1.70 a week ago

    TNA/JBur – They could come back next week but, if they don’t, you can cash out your $11 loss and buy whatever you need in the Jan $25/40 calls for $8.50 and sell the $25 puts for $6.25 for net $2.25 on the $15 spread and your worst case is you own them again at $27.50, skipping the next $17 of downside.

    Just a weak bounce so far, nothing to get too excited about but not bad for an opening move….


  35. any n ew TBT trad right now, still did not buy it yet


  36. TBT/ Phil     Do you  still like the TBT Jan11  $38/45 bull call spread , selling the 36 puts?,   or would you make the spread a bit lower on both sides?


  37. Hi Phil could you show me an altrnative to buy write, ?artificial buy write how is that set up, instead of buy stock you buy a call instead right, I am already have buy write for IBM stock with selling put and call for jan 125 for 25.95.  what is the other way …. or is there one thx


  38. Trading AAPL…….Seems they are throwing the baby out with the bath water on this one.   Ipads can’t be stocked for more than 24 hours.  Stores are reporting delivery one day and they are sold out of them the next.  New iPhone due for release very soon.  New markets opening up.  I remain a buyer at this price.  Anyone know the Ryder number?  In fact, I reiterate what Phil says.  BUY<BUY>BUY.  When there is joy in the streets, sell.  When there is blood in the streets, buy.   I see only blood right now, and to me that’s a huge red flag to rent the Ryder truck, back it up and load it.  I am no longer mostly cash.  I am LONG!!!


  39. My current conspiracy theory is that the "fat finger" event last week was a TEST of what they planned to do if the Senate moved the reform bill forward.  That’s why we went right back to those lows yesterday, they were testing the stops and, as I said at the time, training investors to buy on the dips so they would be slower to sell when the real downturn came.  That allowed the big boys to dump and dump and dump since last Friday and yesterday, now that they are about done, CNBC hits the panic button so the big boys can NOW shake retailers out of their shares and buy back at the lows – giving them yet another fabulous quarter and plenty of cash as GS, JPM et al are likey to go back to being private (or at least spinning off private funds) to avoid regs. 

    Nice early volume today, 202M on the Dow at 10:25

    Futures/Sns – Nope, that’s often the play but we have to look for better than this weak little bounce as we fell 1,000 points since last Thursday afternoon so anything less than a 200-point bounce (about 10,150) is pathetic

    25%/Judah – Yes, but hedged.  There’s no reason not to buy here, just in case we do take off and then we have some nice base positions that will need little protection.  As I said yesterday, selling puts is a nice, mellow way to work into the positions if you don’t want to commit to a long-term spread. 

    MBI/Barf – Crazy stock.  Too dangerous to guess with the new financial regs still unclear in their effect. 

    NFLX/Amatta – It’s a good play but I don’t like the company.  When they have dividend-paying blue-chips on sale, why go for the flashy momentum companies? 

    SSO/Jbur – I’d just roll the $37 puts down to the June $33 puts and pick up .20 more on the play to get (hopefully, even).

    IPad/Judah – They have a TOS app?

    TBT/Dman, Stock - Your patience is starting to pay off though, they are at lows and the VIX is at 43.50.  I think the best play right now is the Jan $34/40 spread for $3, selling the $34 puts for $2.90 and that’s net .10 on the $6 spread (a bazillion percent upside!) and worst case is you own TBT net $34.10.


  40. Alternative lifestyle/Gucci - 

    DIA $102 calls at .13 are a fun bet for the day.  Take the SPY off the table with a tight stop (S&P 1,074) and roll .13 of the profits into these and you don’t miss much if we have a good run and you lock in the profits!


  41. IPad they have a launch app all someone would need is the launch code ;-)  

    Like the conspiracy theory


  42. Good morning Phil,
    I would like to structure a similar trade to the SDS you have posted today but on Google.
    What do you think about that one
    SEPTEMBER
    + Call spread 390/460
    - Put 410
    For a net cost of approx $26?


  43. Phil- Perhaps instead of a fat finger, the PPT (Regan formed "investor confidence mechanism) cut off the free money tap into futures and options?
    I would tend to believe the govt is pushing Wall Street around…


  44.  Hello Phil,
                         I have been reading through your hedged plays. I have a margin account that allows me to Buy Write but unfortunately I do not have the ability to Sell Puts or Calls. 


  45. Talking about fat finger…"Reagan"…not "Regan"…LOL


  46. JRW- You working TNA today?  Seen 20k move at 45ish…tell me that wasn’t you making 80k…=)


  47. Hi Phil TZA — I have 30 Oct 7 short put, should i flip this to October 10 short call for possible even money.  THX


  48. Phil: Thanks for help with SSO and TNA positions!


  49. Hi Phil,
    Does it pay to bough back short calls of long plays
    Example Bac Jan11 20c slod for 1.75 now trading at 1.05 I bought Jan 11 17.5c for 4.71 now down 3.12
    same applies to C and would be for other plays like sept WMT etc  thks


  50.  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 calls 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?


  51. thegoldmanrule,
    I’m in cash now; bought TNA about 5 min in as we broke through the lower trend, then sold when we couldn’t break resistance at IWM 64.76. I’m now waiting for them to finish building a floor here on the upper trend line (64.12)


  52. Momentum stocks like AAPL, BIDU, GS, X, MA are being consistently bought through the little dips this morning, which is encouraging. 
     
    FWIW, I’d like to see at least 1066 hold on the /ES, which was the pullback low from the morning rally. A close below there and I’ll probably just go neutral into the weekend. But otherwise I’m going to assume we are consolidating for a tradeable bounce and will keep some modest bull exposure into the weekend.
     
    Not sure what’s wrong with GOOG.


  53. JRW – jumped on TNA on the green cross.  In at 44.30.


  54. Phil your thoughts on F
    Thanks
    Phil


  55.  Since its OPEX friday, anyone want to start guessing pins?  I bet the pin SPY at 109, just to shake things up.


  56. NAK – anyone know why this miner is getting trounced more than any others this week, I can’t find any news.


  57. The eriee thing is the charts is starting to look alot like 2007 in compressed time, good news is a new high may be made, bad is that will be the end, need 1115 close to confirm


  58. JRW – I get IWM 64.56 R2 …what timeline are you using to get 64.75?


  59. Alternative lifestyle/Gucci - Now, where was I?  Oh yeah, artificial buy/writes are great as you take huge advantage of the premium buyer.  With IBM, you can take $113 off the table by swapping your stock for the $28.70 2012 $105s and sell the 2012 $125s for $17.50 for a net $11.20 on the $20 spread.  If you want to risk a bit more, you can sell the JAN $100 puts for $5.50 and your worst case is IBM is put back to you at net $111.20 and you skip $13 of downside (and, of course, the Jan $100 puts can be rolled to the 2012 $85 puts).  IBM is not an ideal stock to do this with as it has a low IV and even this crazy VIX doesn’t juice it too far.  Also, a big-ticket stock like IBM tends to get margin expensive on this strategy vs say INTC, where you can buy the 2012 $15/22.50 spread for $4 and sell the $15 puts for $2 and that’s net $2 on the $7.50 spread with about $3 in non-PM margin – not a bad upside for 18 months!

    Make sure you have hedges Iflan!  You never know…

    AAPL is good for an artificial too.  I like the 2012 $200/250 spread at $25, selling the $145 calls for $15.50 and that’s net $9.50 on the $50 spread so 10 contracts pay $50,000 and you lay out $9,500 in cash and about $30K in margin and your worst case is you own AAPL at net $154.50. 

    It is very important you understand this about these trades – as long as I REALLY WANT to own 1,000 shares of AAPL at $154.50, which will cost me $77,250 in margin if assigned, then I have NO PROBLEM committing $30K in margin and $9,500 in cash to this trade.  That still leaves me about $40,000 of spare margin to play with in shorter-term positions.  As tempting as it is, you need to always make sure you allocate enough cash and margin for the eventual allocation.  I see a lot of people over-committing and then a move down like this one becomes painful, when it should be joyful (as you are going to get your super discounts).

    GOOG/Lionel – Great but, as above, make sure you REALLY want to own GOOG at net $436.

    PPT/Thegold – I doubt it, the timing of this was based on the Fin Regs and the government would clearly rather have you think the markets are celebrating reforming Wall Street. 

    Margins/Desi – It depends what level of options trading you are approved for along with some other factors and there are other ways to make trades so remind me on the weekend. 

    I must tell RMM here how please I am that he has learned to roll well in advance of expiration day! 

    TZA/Gucci – I like that – it’s clever and daring! 

    You are welcome Jbur!

    Buying back shorts/Yodi – Not at these crazy premiums.  Won’t you just be happy if BAC gets to $21 without paying a buck to make sure you make more money if it goes over?  If the VIX were lower, I might say yes but those prices are a rip-off!

    BIDU/Sun – 600 calls?  6 contacts I hope otherwise you are the guy moving BIDU around!   Anyway, assuming it’s a reasonable 3 June 70s and not 300 and we want to try to get most of your $9.40 back, how about selling the $72 calls for $4 and rolling down to the $62 calls at $10.  That’s spending $1 to buy $7 of intrinsic value and, if BIDU turns lower, you can sell some puts, like maybe the $60 puts (now $1.50) for $3+. 

    Good plan JRW!

    F/Phlit – I wouldn’t touch them at this price.   We shorted them at $14, when there was a buying frenzy and that worked out well and I’d love them back at $5, which is the last time we bought them but I’m not too thrilled with the in-betweens.  Remind me if they hold $10 next week though, might be a fun play to make…

    Pins/Craig – I think we end up at 10,300 at least. 


  60.  Phil:
    I totally get your approach, it’s just too logical, I guess that’s the reason I haven’t bought this way before.  I’m already in some SDS spreads and will adjust as I start to buy,  assume BA (which I don’t follow) is just an example but any blue chip dividend payer is a candidate and I look forward to doing something constructive.. thx


  61. ss,
    11:02 ?


  62. Phil – What are your SP500 lines?  1044, 1065, 1071, 1080 is what I’m using right now…not sure above 1080 other than 1100…


  63. goldman,
    A line from my 6 month chart 64.76; I use a lot more discipline than just pivots, you can search past posts, I’m pretty specific.


  64. JRW – Funny, got filled at 11:01:59.


  65. chyer,
     
    I agree. It’s not impossible we still get a blow-off high in the months ahead, possibly late summer, although a huge amount of upside work needs to be done of course.


  66. correction yodi
    May 21st, 2010 at 10:51 am | Permalink  
    Hi Phil,
    Does it pay to buy back short calls of long plays
    Example Bac Jan11 20c sold for 1.75 now trading at 1.05 I bought Jan 11 17.5c for 4.71 now down 3.12
    same applies to C and would be for other plays like sept WMT etc  thks


  67. ss
    Me too, I’m either doubling here or bailing for a reload.


  68. Hello Phil,
     
    Went to cruise for over 2 weeks and missed the market, got few bad positions, please help… this is few of them:
    Sold RIMM May 70 put, GOOG May 540 Put and BIDU 67 Call, which month and strike should I roll to?
     
    Thanks.


  69.  Phil, for your bull call spreads paired with a put, why do you calculate returns on the initial cash outlay and not the margin requirements? I always like to make sure I am not overextending myself and calculate the amount of reserve cash I need to take assignment of the put leg. I think it’s unfair to set up a spread that costs 0.10 that pays 5 if all goes well and call that a 4900% gain. For each of these contracts, you need significantly more cash on hand to deal with it going the wrong way on you.


  70. Phil, is VLO a buy down here? I kno u like them in this area. Thanks
    Phil


  71.  VIX poised for an outside down day if it closes under 40


  72. Phil how would play FCX here? Thanks.
    Phil


  73. BA/Red – Yes, you can apply that strategy to any blue chip (which tends to move with the Dow or S&P so easy to protect) and just pick strikes you are comfortable with.  I have 25 of those plays from this week but the idea is to pick your favorite stocks.   Think of companies that, even if the world is burning next week and we’re back in March 2009 mode, you will be happy to take money out of your pocket to double down on.  Preference should be given to dividend payers for sure.

    Nice Double on the DIA calls.  Set a stop on 1/2 at the double so its a free ride on the rest! 

    S&P/The gold – See chart above.

    Yodi correction (???) – same as I said above, VIX is too high and stocks are too low to make buy backs worthwhile. 

    Welcome back Bobhu!  I wouldn’t take the drop too seriously here so the RIMMs can be rolled across to the June $70 puts unless you want to go 2x the $62.50 puts.  GOOG is nasty and tricky and you may want to go to 1.5x the Jan 450 puts and that lets you sell some calls if GOOG drops further and that would keep you safe to under $400.  On BIDU, I’d just roll em up to the June $73s about even, they aren’t that great and you can sell some offsetting puts (the $67 puts are $3.20).

    Oh such sport! 


  74. Phil,
    ..still got the SSO 36-37c spr….think i should leg of the 36c here?  TIA


  75. IWM just hit the 200 SMA at 65.19, then there is the 65.31 resistance line, and then R1 at 65.46. "They" have a lot of work to do !!


  76. Bought T at 24.65 and sold 2012 p/c for 7.66


  77. VLO/Ajay – As I said above, you should have tons of margin available in your account and you aren’t spending the margin are you.  The requirement goes to zero when the play expires so should we count that as a gain?  No, that would be silly too..  Also, everyone has different margin requirements and I’m not going to sit here and work out margin every time I have a trade idea.  If you don’t have TOS, I suggest setting up a paper trading account as they give you margin requirements before you buy anything – very nice!   If you have ANY margin concerns at all or you are not comfortable managing margin you should not be making ANY trades that require margins – is that clear?

    VLO/Phlit – I love them down here and you can buy the stock for $18.20 and sell the 2012 $17.50 calls for $4.10 and the $15 puts for $2.60 (but BEWARE THE NET $150 MARGIN!) and that nets out to $11.50/13.25.

    FCX/Phlit – I had said I would like them at $65 and they sure rocketed off that mark so I think I’d go for the Jan $55/75 bull call spread at $10 and sell the $2012 $55s for $10.70 so a .70 credit (AND $1,500 IN MARGIN!) and your worst case is your margin is released and you own FCX for net $54.30 with the upside at $20.70 if they get back to $75



  78. "My current conspiracy theory is that the "fat finger" event last week was a TEST of what they planned to do if the Senate moved the reform bill forward.  That’s why we went right back to those lows yesterday, they were testing the stops and, as I said at the time, training investors to buy on the dips so they would be slower to sell when the real downturn came.  That allowed the big boys to dump and dump and dump since last Friday and yesterday, now that they are about done, CNBC hits the panic button so the big boys can NOW shake retailers out of their shares and buy back at the lows – giving them yet another fabulous quarter and plenty of cash as GS, JPM et al are likey to go back to being private (or at least spinning off private funds) to avoid regs. "

    Interesting theory.  We think alike.  If you believe that the big investment Banks with their willing accomplices (the government) are controlling the markets, then this makes perfect sense. 

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    Ok I’ve had enough today.  I set my sell order for DXD a little to high and let a 2k gain for the day get away, of course I couldn’t just pull the trigger and be happy with a $1500 gain, instead I became hypnotized by the rapid moves on the screen while my gains evaporated.  Thankfully, Eric gave me some good advice which snapped me out of my stupor and I managed to get out in the green.  100% cash for now baby.
    Have a good weekend all.


  79. Something to think about over the weekend.
    broadcast.ino.com/education/deja_vu/


  80. SSO/Onc – That’s a tough one because they may go up another buck but it’s foolish not to be happy to just get out alive on the last trading day.  I’d take out the caller for .07 and then just keep a very tight stop (1,085) on the bottom and keep raising it .05 for each dime you gain. 

    T/Jbur – Nice one with a nice dividend. 

    Exec – Hey, any double that you walk away with is a good one, right?

    Did I mention, Wheeeeeeeeeeeeeeeeeeeeeeeeee!


  81. Phil
    Yesterday I rolled the mattress Sep 112p down to 100p can I start rolling up again say to 102 for .75 ? thks


  82. Someone dumped 78K of GooG…470 to 467.50 in a "flash"…wow


  83. SS, Just back from my kid’s school.  Checked the charts and saw your post on your entry. Very nice. 


  84.  No Phil it is 300 June 70′s on Bidu @ 9.40. Does that change your idea?


  85. ss,
    Are you still in, I sold when they couldn’t break 65.61 on the 10 min chart.


  86. JRW – out  at 11:55.


  87. CNBC reports on GooG FCC ruling AFTER GooG moved 10 points in 6 minutes…yeah, CNBC is useful…LOL


  88. LOL, CNBC guy was reading a script on how awful the EU markets were today but then saw the chart that showed they closed flat and he starts hemming and hawing and had to go off script – priceless! 

    Mattress/Yodi – Don’t be too quick to roll but .75 for a $2 roll up is a great price so I say yes to that!

    Got a note from former CNBC guy:

    Even as an ex-NBC and GE employee, I found myself smirking through your engaging piece…such an entertaining and timely way to explain and expose bias.

    I’m somewhat new to SA, so I’m not sure what really goes on here, but I will add that CNBC is certainly as guilty of rah-rahing on the other side. (I think cheerleading the rallies actually bothers me more, but that’s not important.)

    Finally, as one of the few managers who is pure technical analysis, I still can’t for the life of me understand why good TA managers don’t really get a seat at the CNBC table. Only when things head south fast do they trot out a bear-oriented TA schub that noone knows, or – my fave! – ask a poor analyst like Cramer to explain "charts." Appalling, considering how most of us outperform the perma-bull crowd!

    GOOG/TheGold – Didn’t hurt them much, that’s a posive sign for GOOG.

    FREE MONEY!  Germany’s lower house of parliament okays the country’s participation in the €750B aid package to protect the euro. The upper house of parliament is expected to approve the law later today, paving the way for Germany to contribute up to €148B in guarantees. Euro +0.3% vs. the dollar.

    Germany’s upper house of parliament also backs the €750B euro aid package, as expected. Having lost the battle over the bailout, some think Germany’s recent move to ban short selling is an attempt to stage a comeback.

    Spain approves public wage cuts and reduces its economic growth forecast for next year, as the government tries to tame the euro region’s third-largest budget deficit. “The measures are so unpopular, it’s the last thing you want to do, so it shows you really are serious,” head of research at Barclays’ head of research says.

    Apr. Mass Layoffs: 1,856 mass layoff events (at least 50 workers), resulting in 200K job losses – up 228 layoff events from revised March total of 1,628. Total mass layoff events since Dec. 2007 beginning of the recession: 58,793, resulting in 5.9M job losses.

    Just inches away from deflation: With all eyes on the recent euro-related turbulence, markets are ignoring the rapidly vanishing core inflation in the U.S. and eurozone, Socgen’s Albert Edwards warns. "With both moving below 1%, we are now only one cyclical mishap from joining Japan in outright deflation."

    Libor rises to a 10-month high as lingering concern over counterparty risk in the wake of Greece’s fiscal crisis increased institutions’ reluctance to lend. Meanwhile, in Europe, the corporate bond market has gone paper thin.

    Geithner heads over to Europe next week to meet with his British and German counterparts. Officials plan to discuss the region’s debt crisis and steps that can be taken to "restore global confidence and financial stability."

    Treasurys broadly higher, with yields now the lowest since last November. "The market continues to be highly correlated with risk assets movement," RBS’s Jim Lee notes. Benchmark June 10-year +0.63% to 121-23. 30-year +1.01% to 125-10. 5-year +0.36%. Update at 8:30: Now the lowest since last October.

    Fed’s ready to mop up excess liquidity from the banking system if needed, Vice Chairman Donald Kohn said this morning in Frankfurt, noting that "stable, anchored inflation expectations become more critical [when interest rates are at zero] than they are in normal times." Kohn conceded many of the Fed’s moves during the crisis were "uncomfortable" but "necessary."

    The Fed gets most of what it wanted in the bill that passed the Senate last night. In addition to preserving their bank-supervisory powers, the bill maintains a ban on congressional audits of interest-rate decisions. Under serious threat for a time, the Fed "now appears to be emerging with at least as much authority and likely more." Losers: big banks, credit rating agencies.

    "I regret that we participated in transactions that brought too much leverage into the world," a penitent Lloyd Blankfein (GS) tells The Economic Times. "It led to people taking too much leverage. But those were the standards of the moment." Blankfein said he’s on board with Congress’ push to curtail risk, adding, "But the most risky activity is lending."

    Analysts expect Goldman Sachs (GS) will pay $1B or more to settle with the SEC, but that’s far higher than was extracted from Bank of America (BAC) earlier this year. The SEC will need "a good explanation and justification for the number," a former SEC attorney says. but $1B may have become the minimum "goalpost" that the public expects the SEC to reach.

    MORE FREE MONEY!  As expected, BoJ holds its key interest rate steady at 0.1%. The bank also rolls out a new loan scheme to support growth industries, and upgrades its assessment of the economy, pointing to a moderate recovery "induced by improvement in overseas conditions."

    The eurozone crisis underscores China’s need to rebalance its economy, U.S. Secretary of Commerce Gary Locke tells investors in Beijing this morning, pressing again for a more flexible yuan. "You need to export less to other countries. And now that you’re affected by the EU, it is all the more urgent to not be so reliant on exports to build your economy and instead to increase your domestic consumption."

    Toyota (TM) will take a $50M stake in Tesla Motors and the two companies will cooperate on the development of electric vehicles. Toyota is likely hoping the deal will help repair its tarnished public image, while the tie-up gives Tesla global exposure.

    BP (BP) says it’s now capturing 5,000 bpd, but oil continues to surge from the Gulf leak, forcing BP and government officials to admit they markedly underestimated the size of the spill. The White House says it’s ‘imperative’ for BP to share the results of its internal investigations. New from BP (BP -1.5%): Live webcam of oil gushing into the Gulf of Mexico.

    Wow, the SOX are up 3.6% already, Transports up 2.3%, RUT up 2%, Dow "only" up 1% with a lot of catching up to do…  Now DIA $101 calls at $.95 are interesting with just .28 premium and a possible big move ahead – dangerous play of course as the .28 premium can go away in a second.

    FTC approves GOOGs purchase of Admob – Not good for AAPL and other people trying to make money off phone ads.


  89. @ sunilram – Holy %&*t ! What an interesting group of traders we have here.


  90. DCTH – Pharmboy I sold the 14 puts this morning, I either make money or I own it, hopefully you still like this one?


  91. JRW – 200sma now providing support.


  92. I hate to say it, but yesterday I was having EXACTLY the same feeling about CNBC.  No better than some other media which just tries to AMP the drama in order to capture viewers.  This is NOT just journalism, it becomes more like THEATRE which is not what I am looking for in a news source.  I monitor mostly only news and forums, and try to get a BIT of real time DATA from the TV news media, but is there anyone better?


  93. ss,
    Great minds think alike; very nice day !!


  94. Phil
    Some place I saw you making recommendations on LINE. Can not find it .
    Surely this stk has gone down bought the stk for 19.22 now 23.38 sold the Jan11 calls for .90 now .52 but sold Jul 30p for 3.82 now up to 6.90 and sold jan11 30p for 7.50 now 8.80 . Any good sugestions thks


  95. ss
    Draw a line from the 3.15 low on 5/11 to the low on 5/19


  96. I have a new post up about long term investing in Big Lots Inc. It takes a look at financial statements, management, trends in the market, competition, etc. 

    I have given fair value estimates of where I think the stock will be in 5 years. I have entry and exit points etc.

    Check it out!


  97. Phil- I was waiting for the FCC Goog ruling, but only got half of the 10 pt jump by watching the chart.  Rally started at 12:16…CNBC reported at 12.25, and MSM reported at 12.26.  Any recommendations for quicker news feeds?


  98. BIDU/Sunilram – That’s a LOT of contracts!  Fortunatley BIDU is heavily traded but you have to realize when you move blocks like that, MMs and others will target your position to see if you have a breaking point.  Also, maybe it’s just me, but for $165,000 in the position with a $120K loss, I’d be going longer and safer(ish) with something like $120K of the Sept $56/66 bull call spread at $6 and that gets $80K back if they just hold $66 and you can pick the rest by selling the $50 puts for $2.60 but I would not be greedy and only sell if BIDU plunges and then sell something for $4 or $5 (assuming we thing the sell-off is overdone).  If you have the margin, of course.

    Better/Tivo – Bloomberg is "better" but CNBC moves the markets so I watch them from 6am to 4pm every day. It’s like a bad Satre play….

    LINE/Yodi – That was yesterday but it wasn’t a recommendation:

    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…

    Three lunchtime reads:
    1) What’s big, risky, and losing billions? Fannie and Freddie
    2) Freaked-out Friday: Has CNBC gone too far?  Hey, this one sounds familiar! 
    3) Three stocks for weathering currency swings

    The Treasury lowers its cost estimate for TARP to $105.4B, from $116.9B, pointing to gains in its Citigroup (C) investment, lower costs for aid to AIG and improvements in the auto-industry outlook. "Not only have we averted an economic catastrophe, we’re in a stronger position sooner than anyone predicted," says Assitant Secretary Herb Allison.


  99. Eric- what are the SPY charts telling you now? txs


  100. Phil, I don’t know what to do with my APPL May $260 PUTS short. I initially had 3, but yesterday I roll down one to Jan 2011 $200 for zero net cost.. I still have two contracts left, but (lesson learned) I don’t want to own that many shares since it will be a big chunk of my portfolio.. Should I take temporary assignment of the 200 shares so in a sudden run up I can close them? Having seen how wild this market is, I’m now unsure to roll them to June. Bottom line, I don’t want to own that many shares so I’m trying to get out of the mess.. advice?


  101. Phil- invoking Sartre! I love it!


  102.  Phil, what do you think would be the best way to play the upside on oil from a retirement IRA acct?


  103. JRW/lines.  5/11 to 5/19.  That’s a nice one.  You think if it can break through it’ll run a bit?  Or, that may be the top for the day…


  104.  at the moment – I simply have UCO stock (uncovered)… would like to get some downside protection


  105. Why does it seem that Rand Paul’s 15 minutes of political fame is about to run out…… and I like his dad!


  106. Got lucky
    Any idea of GOOG closing price?


  107. For those trading TNA, are all of you just trading the stock no options?


  108. judah
    That line is now at R1, so a break up and I’ll be back in TNA !!


  109. Hulk, Mostly TNA or TZA stock, occasionally IWM options. 


  110. JRW, I’ll be with you, and back with you day trading as of now.  Done with strangles for a while.  Though I made more money with strangles and put verticals than any other trades I made these past few weeks, they took too great a toll on my sleep.  I’d rather just be in cash at the beginnings and ends of the days.


  111. dilbert – I went in at 470 (should have bought at 465 but the 78k sell scared me), out at 482  (Thurs R2,4 84 was R1)…out for today as the big money can move it 3-5pts in a few seconds…no need to get greedy…
     
    CNBC reporting now that hedge funds getting margin calls, but I think mutual funds could be getting redemtions as they are very low on cash right now, and retail redemptions are most likely occuring due to the votility and flash crash, etc…JMO…


  112. JRW, SS, Judah, etc - Are you guys waiting for a specific TNA entry?  IWM heading toward 200SMA @ 64.60???


  113. judah
    one last question: what is the advantage to trading the stock vs trading the futs?  is it just the 3x multiplier?


  114. SS, Thanks for pointing out the 200sma.  It may not hold, but so far…


  115. Hulk/TNA/TZA.  Liquidity mostly.  Sometimes it is hard to get filled quickly and at your desired price on the options.  JRW is the best at this and he mainly trades TNA/TZA, which is a good enough reason for me.


  116. Hulk -
    JRW and others clearly like TNA / TZA
    I am not as skilled and find iwm easier for exits and entries -


  117. goldman,
    It’s between lines right now so we wait for Mr. Market to show us the way; I’m up 10% on the day now, so I can be very patient !!


  118. goldman,
    On the come back through IWM 64.76


  119. JRW, judah – sorry, have guests over so I am in and out all day.  You know how it is living on the beach.  Nice line JRW.  Also, check out the line starting on 5/19 connecting the lows thru today.  It is exactly where IWM started today and headed up.


  120. JRW – good advice…if 64.67 doesn’t hold, and SP500 1080 doesn’t hold…watch out below…that said I went in "a little" at 45.14 as I got bored…but just got out at 45.54…about half or less of what you make each trade…your indicators are much, much better than mine!
    Any input you can give me on TNA/TZA is greatly appreciated…I don’t have much experience with TNA/TZA.


  121. SS, Well, you just got a buy signal.  ;)


  122. Thanks Phil,
    There are few more… :-(
    MEE May 45 Put, SPWRA May 18 Put, WMT May 52.50 Put and XOM May 65 Put.
     
    Thanks again….


  123. judah – I think I might have to be an infrequent spectator today as opposed to an active trader.  Too many distractions.  Our 3m8p is back in sync today.


  124. TIVOBOY    ….I like Bloomberg (TV or Radio) much bettter…..LOL     GABBY


  125. SS/3m8p.  It has been.  It is very similar to the MACD set at 1-min.  I’m still looking for Mr. Market to give me direction.  I’m thinking down, but agnostic.


  126. GOOG/Gold – I don’t think it’s such a big deal.  Their TV idea yesterday was interesting but I think they are really reaching here into anything that might give them growth.  Good if they pull it off but expensive short-term.  For me, the quickest news source is often right here but CNBC is usually pretty good (lots going on today, can’t blame them for not dropping everything for GOOG) and sometimes so good that the rumors they jump on are just BS, but that’s all part of the game. 

    SOX holding 2.5% and RUT right on 1.5% line but losing it.  Real loss of momentum here, which is a shame…

    AAPL/Rav – There is no real difference to rolling them out to the June $250 puts but you gain $10 in position.  They are pretty far in the money so you benefit from a run up almost as much as the stock.  What would you think of rolling 2 $260 puts at $18 to 6 $230 puts at $8.50 and buying 6 $200 puts for $2.90 so you net $3,360 on the roll of the $3,600 puts but you only need $230 to expire worthless and the margin is going to be $18,000 vs about $13,000 on the current short puts. 

    Satre/SNS – Love it, hate it – what does it matter?

    Oil/SrFrog – I think XOM as they pay a 2.8% dividend and buy back their own stock all the time and they are very liquid and fairly volatile, which makes for good call selling long-term.  You can buy the stock for $60.27 and sell the 2012 $57.50s for $10 and that’s net $50.27 with a 20% profit in 18 months if called away right there (of course, some would say that since you only need 50% margin to buy it that the profit is 40%…).  So you can stop right there and the dividend is just a bonus.  If you are willing to buy a 2nd round, then you can also sell the 2012 $55 puts for $7.60 and that drops your net to $42.67/48.84, with the $48.84 being the net you buy one round for averaged with the second round that is put to you at $55.   XOM bottomed out at $54 in the last crisis and oil was $35 a barrel then so buying it now for net $48.84 is the kind of thing you want to back up the truck on!

    That was a nice shakeout move we just had or at least it will be if we pop 10,200 on this next move…

    Rand/1020 – Unfortunately, he has foot in mouth disease. 

    GOOG/Dilbert – If they are going to be healthy they should get over $500 but maybe dogging it to get rid of all the May callers. 

    TNA/Hulk – The options are not very good for a day trade as the spreads are so wide although, if you want to go bullish then you can take advantage of that by selling the $46 puts for $1.10 and that gives you .80 cushion to the downside (not that that lasts long with an ultra..).  

    Bobhu/List – MEE (ouch!).  I have to say 2x the Jan $32 puts on that one.  Gotta cover with 1x calls if they break below $30.  SPWRA to 2x the Sept $14 puts at $3.50, happy to roll to Jan $12.50 puts later (now $3.25).   WMT I’d just roll to same strike June.  XOM – one good driving report and they’re up $5 so give them until July at the same strike I think.

    Speaking of evil companies worth buying:  MO at $20.95, selling 2012 $20 puts and calls for $6 is net $14.95/17.48 on this 6.6% dividend payer.


  127. JRW, judah – just for grins.  Put up a S&P 2 year daily chart.  Draw a line from the Nov 08 low connecting to the July 09 low and extrapolate thru today.  Where did the S&P stop on a dime today?  Spot on that line.


  128. SS/SPX.  Draw a line from the Oct. 09, Nov. 09, Feb 10 lows.  Pretty close to the same thing.  Intersects with today’s open.


  129. EU governments are backing efforts to coordinate fiscal policy more closely, President Herman Van Rompuy says, including stronger punishments for nations that flout rules like the deficit limit of 3% of GDP and debt limits of 60% of GDP. An EC task force will reportedly meet two more times and a progress report is expected June 17.

    Goldman Sachs (GS) shares have climbed 4.4% today amid chatter that it reached a settlement with the SEC on its civil fraud charges, but Reuters says there’s no deal.

    From SA commentIts not like cnbc usa has ever been what one would call rational. I started watching it when I moved to the states 10 odd years ago assuming it would be just like cnbc europe which I practically grew up watching. To my horror I found that the United States of America has no news channels – every last one of them is an opinion channel that people like to treat as news. While nobody that matters in the United States takes them seriously anymore, do remember that these people are actually broadcast in other countries where people still trust their local cnbc network and they do influence opnions abroad. Larry Kudlow and Jim Cramer are horrifyingly, what other people take to be their primary sources of news on the american economy.


  130. judah – I guess that would be a confluence of trend lines.  Thes HFT programs have to have figured out all of these lines for resistance and support and target them. 


  131. Phil,
    rec on AAPL……lookin for  a call spr….TIA.


  132. JRW, I’ve got a line drawn at 64.77.  Must be one of yours.  Up or down from here.


  133. judah – still playing with using TBT to foreshadow a move.  Check it out on a 1min chart.


  134. SS/TBT.  That is great. Gives you about a 1-2 minute head start.


  135. anyone think we end red today?


  136. Phil, re AAPL.. after further thoughts, I have to be wise on this one.. I KNOW I can’t have such a big chunk of my portfolio tied to just one egg in the basket.. so even if AAPL experiences a sharp run up in the following weeks, it might as well go down SIGNIFICANTLY if Europe continues to incite panic on investors.. so I can’t really take this big risk of experiencing a significant decline due to a missallocation on sizing. So, I stuck with just one contract Jan $200 Put that I REALLY CAN & WANT to own for the long-term and bough-back the other 2 paying no premium at all. So my loss incurred on those 2 contracts was about $1,400 dlls, which is more manageable than risking an equivalent $7 decline sometime next week if this continues. Bottom line, this is all going back to the right sizes on things, so I don’t take a big hit if something goes very nasty again. What bothers me a bit at this moment is that this year my losses keep piling up, reaching now almost 20k which is significant for my portfolio (of couse, you have to attribute 75% of that to that disaster play I made on ISRG a while ago which shove 10% of my portfolio in one day)..
    On a different trade, the bull call $48 / $51 spread I took last week following your offering for the subscription won’t work. :( It looks like I will lose the entire $500, but the thing that makes me REALLY happy is your kind offer to give me the next Q for free as premium. I gotta say when it comes to the markets year-to-date, THAT is the only thing that makes me quite happy. Should I contact Greg for this? Thanks again for your advice.


  137. judah / 64.77
    That’s now the floor they will use to get over65.45


  138. ss / judah -
    How big a stop loss do you guys use %. I keep buying on the cross of the 8 period 3 min and then essentially getting stopped out – too much vol. today for me I guess


  139. I meant the TNA $48 / $51 bull call spread..


  140. sam – I try to limit to 1%.


  141. Samz.  Mental stops when it breaks the other way clearly through one of the lines.  I try not to lose more than .5-1% on a trade.  As usual, JRW knows best.  I have stopped out of trades that he stuck with and they turned around. 


  142. AAPL/Onc – What are you texting these comments?    I tnk A is exp at the mo….  Stl is gr8 stk tho, maB use spr frm 11:15 cmnt…  8-)

    Red/Nols – Nope.

    TNA/Rav – I suppose you missed my call to cash out at $1.50 yesterday?  That play totally sucked.  I forgot you didn’t have the naked put either.  We need a 10% move in TNA so about a full 5% move up in the RUT by the close so I still have a couple of hours but not looking at all good. 

    Interbank lending rates aren’t the only short-term indicators that are flashing warning signs – commercial paper investors are moving to shorter terms, and the TED spread (an indicator of money-manager credit stress) has moved to 34 basis points.

    The FCC’s latest report on wireless has a key change: It doesn’t conclude the industry is "competitive," which could mean restrictions for Verizon Wireless (VZ, VOD) and AT&T (T), and a boost for Sprint-Nextel (S) and T-Mobile (DT). Smartphone penetration and texting are big, and growing data revenue isn’t making up for declining voice revenue yet.


  143. Wow the bond guys are worried about the long-term economy – what a shocker! 


  144. 64.77 – trying to learn a little; that is the pivot point from averaging yesterdays high, low & close. (you probably knew that but it was revealing to me)


  145. If IWM 64.76 fails, it’s 64.09, and then……………


  146. morxintway,
    It’s a pivot BECAUSE of it’s value in the 6 month chart; strong lines attract conversion


  147.  Did PIMCO pay for that 30 minute infomercial on CNBC?


  148. And it’s 2:30 !!


  149. Phil, re TNA, yes I missed that call to cash out yesterday unfortunately..  but fortunately (?) I didn’t sell any puts (I didn’t have the margin anymore).. I’m not sure which direction the market will take one hour prior to the closing, but since it’s options expiration week, I think they usually bid up the prices during the day and then a sell-off comes at the end (is this a valid assumption?) so I guess there’s not much hope. :(


  150. 2 questions: 1) I have several TBT positions from before with Sept expiration all of which are now down 50-70% since I have not had time to manage them. I want to take advantage of the high VIX to improve my positions. Any suugestions? 2) How do I adjust spreads? I have a bull call spread on EDZ and BGZ with a sold put on each. With the rapid decline I’m more down on the short call than up on the long call and the short put still is at a loss since expiration is Jan and Oct respectively.


  151. JRW/2:30. Lloyd is still sulking and won’t let them turn on the buy bot.  Why don’t you give him a call.


  152. Phil – what is up with crude or I guess down – seemed like it was going to hold 70 for a while


  153. Phil, earlier you said you would not be impressed with less than a 200 point rally.  Thoughts into weekend?


  154. JRW, judah – RUT traveling in a nice downward channel on the 3min. 


  155. Oil closing spot on $70 on the NYMEX but we got our $1 run for the day so no reason to be greedy into the weekend

    PIMCO/Stj – Is it only 1/2 hour?  She’s there all day…  I love how TARP boy, who was at GS is now at PIMPCO – such a little boy’s club…

    This should help platinum:  The administration will begin the process of setting environmental regulations for cars and light trucks, plus the first-ever mileage and emissions standards for big rig and work trucks, in the start of what could prove a long battle with auto companies.

    Chrysler guy just said they will "blow the doors" off estimates.  That seems a little bullish to me..

    Hope/Rav – Slim to none is generous…

    Positions/Japar – What are your strikes and entries?

    Crude/Samz – There are still way to many contracts out there for comfort.  Hard to get people long until they burn off about 100Mb somewhere. 

    Weekend/Nols – This is not good, very disappointing.  A 1,000-point drop and a 100-point bounce is not even physics for a weak market – it’s just sad….  I think neutral is about the only rational stand for the weekend.  It’s OK to have a couple of bull gambles but nothing significant that isn’t hedged.    There seems to be a total lack of buying interest as the volume has ground to a halt and there’s not even enough bargain hunting to get GOOG green – that’s bad….


  156. SS, JRW.  Bought a little TNA at 2:59, just to show faith in the 3:00 Stick.


  157. Phil, at 11:15 you wrote: "AAPL is good for an artificial too.  I like the 2012 $200/250 spread at $25, selling the $145 calls for $15.50 and that’s net $9.50 on the $50 spread so 10 contracts pay $50,000 and you lay out $9,500 in cash and about $30K in margin and your worst case is you own AAPL at net $154.50."
    I can’t understand about selling the $145 calls for $15.50. The premium for a 2012 $145 call is in the $70s not in the 10s, then I thihk there is a mistake and you are proposing sell $145 puts.
    If this is the case and AAPL is between 145 and 200 at the expiration date you will lose the 9.50 you paid. ¿Am I right or there is something I’m not getting?


  158. Phil          Looking for that 100-point bounce and can’t find it.


  159. judah – damn, I hate betting against you, JRW and the stick.  I am riding the TZA train at the moment in the downward  RUT channel. 


  160. judah / Lloyd
     
    Got voicemail, something about meeting with an interior designer, so I left a message !!


  161. Hi Phil I have SRS stock put to me price was 35, should I sell Jan12 30 put and call to lwer basis to about 11, or should I lower the strike even more….I really hate to keep this one, but wnat to even money if I can . Thx


  162. ss or Judah      First time I"v seen you guys on different teams!


  163. SRS or other alternative is sell call against the stock and roll it until expired worthless…TIA


  164. JRW – Nice!!  I can imagine him having a trophy room with the heads of all the "little people" he has trounced over the years.


  165. SS, Good job.  I should have been in this channel since noon.  I’m out since it couldn’t break through the channel.


  166. ss
     
    You are not betting against me my friend, I’ve been in cash since 11:54 !!    ( No conviction )


  167. stockbern – and I don’t like it one bit.  Feels like going against family.  I should have posted my entry, but was distracted by guests.


  168. DIA $101 calls at .10 for a gamble.


  169.  Phil, do you see a scenario where BP could basically blow up? There seem to be no end to the bad news with these guys! 


  170. IWM   there was a big green flash then down through JRW’s line of 64.09


  171. Yeah, pathetic.
     
    If Wall Street wants to make sure that a generation of investors will have no interest in the stock market, they are doing a great job, lol.


  172. SS, You’ve got nothing to feel bad about.  I got out where I got in.  Forgot they changed that train schedule from 3 to 3:20.  Back in when it broke back through 64.09, but I’m may get out again.  Feels like too much work and the FedEx guy just delivered my iPad.


  173. stjeanluc / BP : i though about taking a deep out of the money July put option on these guys in case the leak actually cant be contained until they drill the parallel well; by then the liability and the endless press coverage should be terrible, maybe enough to drive the stock to 25? Perhaps congress will even pass a "BP law" to make them compensate everyone…..


  174. AAPL/Zen – I meant selling the $145 PUTS – sorry!  Yes, you lose the $9.50 under $200 ($209.50 is break-even).  You can get more aggressive and sell the $200 puts but, personally, I’d rather lose $9.50 than pay $200 for AAPL after it drops 20% but, at $145, THEN I’m willing to buy. 

    Here it is stock (I hope).

    Quick double on the DIA calls means 1/2 out and it’s a free ride to the close.

    SRS/Gucci – Oh we hate that ETF!  I think, if you want to be patient, then selling the Jan $25 calls for $10 makes sense to drop your basis to $25 and get even (hopefully).  Selling puts is, of course, risky with them so make sure you REALLY want more of this thing.  Don’t forget, if it starts going really well you can THEN roll the caller to a put/call combo for some upside. 

    BP/Stj – Yes I do.  They could get saddled with a $100Bn clean-up bill and fight lawsuits until the end of time.  Of course, that was the rap on XOM once..


  175. EricL – Great point:  "If Wall Street wants to make sure that a generation of investors will have no interest in the stock market, they are doing a great job, lol."  I’m going to steer my kids away from the market and teach them how to buy rental property for their retirement!


  176. Phil- stick or no stick?


  177. Volume picked up a bit on that dip. 

    DIA $101 calls back at .10 but more of a gamble now…

    Stick/SNS – I am going be both surprised and disappointed if we can close at 10,200.  It will put a lot of pressure on a big move up on Monday or we enter technical hell.


  178. Phil are we entering "technical hell" at the moment?


  179. Buying TNA here


  180. JRW, I believe you observed that the Stick has been coming at 3:20 lately.  True enough today.


  181.  Inverse H+S need to close over 1093 


  182. Now THIS is nice!


  183. Good afternoon and good night.  Big pharma is on the prowl and sniffing for good deals!  CLDX getting battered around like a….well, anyway.  As Phil says, Biotechs are going to get slapped around a bit.  I will be around this weekend all, hope it is a good one and that Monday fairs better on the Biotech front.  Heatlhcare in general is in the dumps, but there are some good buys in here.
    Later.


  184. SS, That channel line from before has become support.


  185. JRW, Lloyd must have checked his voicemail. Nice work. ;)


  186. Owwww!  I think I just kicked myself for not buying Phil’s DIA calls!


  187. And OUT !!


  188. I did the dia $102 for a double. I didn’t think that it would happen again on the $101. Congrats.


  189. JRW, Out as well.  Heckuva way to end the week!


  190. Good call on the SPY 109 pin this morning craigzooka!
     
    Selling scores of those for 1.50 yesterday was the best trade I made all week.


  191. Phil,
     
    Thanks again.  Have a nice weekend.


  192.  VIX outside down day
    I see alot of bullish signals, monday will be the real  test


  193. Phil- so please explain technical hell as it seems we’re in it per your comment


  194. To me, that close felt like a mirror image of yesterdays close….. Have a great weekend!


  195. 13.3% on the day !!


  196.  Thanks for the help Phil. My son coming home today, for the summer (from SFSU).
    We’re gonna surf our brain this weekend.


  197. Wheeee!  What a finish!! 

    Didn’t quite get 10,200 but close enough to get a nice 900% return on those calls! 

    Another great call by JRW at 3:44!

    Funny how we don’t complain about a total BS close when we’re long…

    Technical hell/SNS – See my 5% Rules article.  10,200 is a "must hold" zone but we don’t quibble over 7 points.  Monday should be fun.

    Have a great weekend everyone!

    - Phil


  198. Let me know if you liked today’s posting format better; rather than entry / exit #’s just posting lines and then reporting results at the end of the day on % terms rather than gains. This was a suggestion from someone on the board.


  199. Phil- so are you saying monday is up?


  200. JRW – havent followed your trades yet but was planning on starting. I like it when you include the entry/exit #s better. However, I did like the 13% better than reporting like a a dollar amount… Mainly I feel like a chump b/c I am only trading with a 20-25K account. I appreciate your posts though!  


  201. JRW I follow your postings and they have been a great help. I prefer the entry / exit #’s because they are distinct signals. The % gains are a great score to keep track.


  202. Surfing/Sunil – Cool beans!   Enjoy that, and by that I mean the whole thing of sun, sand, being athletic and having a son to share a day with – that’s what life is all about, not this insanity!  8-)

    Format/JRW – Most important is to do something you are comfortable with.  It’s tricky to trade and post but congrats on a very nice week – I’ll be looking forward to a ride in the Maybach…

    Monday/SNS – I am more enthusiastic now than I was 20 mins before the closing (note I did not bold the re-entry on the $101s because I thought it was getting too risky…).   Still, I thought this was an overdone panic sell-off and Europe is closed Mon so they can’t drag us down and our FXIs are up already so if we get a nice pop in Asia (easy to get) there’s nothing but net between their close and our open and – as a bonus to "THEM," if they jam us up to 10,500 on Monday then Europe comes in on Tuesday having to play catch-up and we can steal all their money selling into the squeeze.  See, it’s fun to be on THEIR side…


  203. jromeha
    It’s NOT about the size of the account when you start; it’s about the size of the account at days end.
    Here’s hoping the latter will always be greater than the former !! Good hunting.


  204. Phil / week
    Thank you.


  205. I’m long and that move was B.S. It cost me a dollar bet with the wife…. ;)


  206. Good Hunting JRW!


  207. 1020
    Thanks !!


  208. Phil- do we need to re-test S&P 1060 or was today enough?


  209. Ditto JRW! Look forward to making some good %s with your trades next week.


  210.  JRW lll
    I also think defining enrty/exit numbers are more helpful along with the pivot lines/pts
    I’ve been following your posts experimenting with small lots to try to get the hang of it.
    Also like absolute number results at the end of the day  -- more motivating to learn
    thanks for the effort doing this
    Also wondering if there is not another set of ETF’s (1x & 3x) to follow so IWM/TNA/TZA doesn’t get corrupted by all of us jumping in/out following you.
    Maybe David can suggest something here.
    have a great w/e
    off to Cape Cod for strippers!


  211.  opps – that’s striper’s 


  212. JRW – i kind of like the lines better. But i am just a watch&learner at the moment so go with the group opinion. It helps me to see it on the charts.
    One question, when you mentioned the descending trend line this morning, where were you getting that? ADX  or MACD  or what?


  213. Hi everyone,
    Sorry that I’ve been out in the past three weeks.  The $160M software project that I’m helping with has been live for 2 weeks and needs baby sitting.  In the meantime, the market decided to drop while I’m busy with the implementation. Yuk!  Anyhow, I’m back for an hour or two on PSW each day.
     
    First of all, if your accounts are intact with short strangles (or short puts), then congrats as you have passed the big test, and that you have mastered the Position Sizing, and the "flipping" tactics very well.  Today is such a gift for the short stranglers and I know would already save Barf from being broke!  VIX at 40+ is where the short strangle is one of the most profitable strategy in options.  Remember Phil’s plan for scaling in with the Buy/Write (with a short put) on your favorite stock?  It’s the same for short strangles that we need the fire power to sustain the rise in VIX.
     
    Do you also remember the simulation that balancenv did?  It showed that the potential loss in that one VIX spike is large, but the overall profit expectancy is positive, i.e. it’s profitable over the long run.  With that said, we need to live through the VIX spike to know how much emotion is involved.  The two tricks that have worked very well in the past 2 weeks are the flipping from short puts to short calls, and rolling putters down by 2X.
     
    If we flip early in the crash, it can save the margin a great deal.  I usually find the strike that I can flip to for even, i.e. the paper loss in the putters are now hiding in the callers, but the callers value won’t jump as much when VIX increases.  Then we buy back the original callers in the short strangles as they are close to zero already, reducing the number of short strangles (until we need to roll the putters 2X).  When the market goes up, VIX goes down and the callers doesn’t appreciate in value as fast.  This stopped my margin from going through the roof, then the vertical in the crazy play kicked in to slow down the paper loss.
     
    If we can roll 2X twice in a month, we can survive a drop of about 25% – 30%.  It’s because we start out with 15% downside cushion, and with the high VIX, each 2X rolling gets us around 6-8%.  This 2 weeks market drop is about 15% already, so we have a 10%-15% cushion left.  With the flipping, we can survive a larger drop to about 40%.  That’s good as a stockholder would have lost 40% and we are even with the trade.  All comes down to position sizing in the first place. 

    I was actually worried when barf said his putters are usually 5% OTM.  So barf, you have done well to survive this far too.  Looking at the SPX chart, the 50 days MA is at 1170 and is curving down, while the 200 days MA is roughly 1100.  With the way we are going, the dead-cross is coming up around the corner.  We should look to play in the range from 900 to 1100.


  214. re other ETF’s, i noticed FAS had a much higher percent gain today than TNA. I don’t know how one might have a hunch about that in the morning.


  215. Well, I was off-balance to start with, having ridden my Reg-T margin to zero on the call side earlier on. There was a point in the May option period where I had to actually buy back ITM calls for a loss, because I couldn’t roll any more because of margin. When my PM was implemented, I then completed a "roll" although by that time, the market had fallen back, and my roll was not even, so I sold puts (May 1125) to make up the difference. Perhaps the biggest mistake of my life. I already held May 1160 puts, and may 1150 puts, easily rollable. Now, using PM, you dont go for 5% OTM when you set them up. I was caught square in the middle of a transition to a system Peter would find more appropriate – more contracts, less money per unit.
     
    The morning of the flash crash, I was still hanging in there, with margin only 55% of my available balance, but during the crash, it went to 150% – not because margin went up so much, more because my account crashed, and the margin credit evaporated. I closed and rolled, and closed some more, and finished the day with a positive margin balance. But, I sealed up some substantial losses. Friday, it was just more of the same.
     
    Although I used the early part of the week to move things around and sell some calls, when we plunged the 100 points (from 1171 to 1071) I realized that it was actually possible to go broke – the margin squeeze could be contained, but I began to worry when I saw a front-month contract 50 points out of the money be worth $32. I wouldnt take much more and a 50-point OTM contract could be worth $40 or $45. Sort of like the fall of 2008. Only now, I had relatively more contracts, enough to wipe out my account, I thought.
    Long story shortened. Phil pointed out, and I was resisting this, that you can roll WAY into the future and the margin is low and the delta is low. You just have to wait a long time to get healthy. Today, I sold some Dec 2010 and Mar 2011 puts when I got the chance. You cant order a roll from June at the money to Dec way out of the money and expect execution, so I did it separately.
    I had a moment where I was scared. The thing that beats me (and maybe all of us) is a repeat of early March 2009. With PM, you are vastly more vulnerable than I was with Reg-T.


  216. Thanks, barf, for the notes.  In fact, I forgot about selling leap puts and just did today, SPY Jan’12 70, 75 strikes for a big credit and margin is small as it’s way OTM.  The idea is to ride the VIX down from 44 to 30 or so, then out for a reload.  I recalled that I wasn’t worry as much in March 2009 with the short strangles as we expected huge moves then.  Yes, I agree that the past 2 weeks are scary as VIX jumped faster than last year I think.  Too many folks buying puts at the same time.


  217. Peter D, If you are checking back in this weekend, I have a question about flipping.  First of all, I did better than fine these past couple of weeks, though it wasn’t always comfortable.  During the flash crash, I had placed a lot of .10 and .20 bids for $5 spreads on put verticals between 1095 and 1110 and 100 contracts filled at those prices, so yesterday was a real gift to me.  And, as for my putters, I had rolled my 1090 putters 2x down to 1030s, which were never seriously threatened and I bought them back for less than a buck earlier in the week just to be safe. 
     
    The part that I don’t have the hang of, however, is flipping.  I never see a price that would let me flip that is close to even, even at a 2x or 3x ratio of callers to putters, at strikes that I’m comfortable with.  Just to take an example, let’s use a June 975 putter, still 10% out of the money, but maybe too close for comfort.  I just checked TOS and the midpoint price is around 14, so you’d have to sell 2x 1160 callers or 3x 1175 callers just to make it an even flip.  At 1160, I think one would be at risk of being whipsawed and even 1175 doesn’t seem all that safe to me — I remember what happened between the Feb drop and the Feb and March opex dates.  But is that what you would do in such a circumstance — flip 2x to 1160 or 3x  to 1175 — and if the market moves up steadily and threatens the callers, since up moves are not typically as dramatic, you have time to flip back again?


  218. Peter D- glad to see you are back. I think we missed messages a while back- the email I entered was a typo- please try again if you have time- philstas1011@gmail.com
    Thanks,


  219. judah, buying $5 spreads for 0.1 and 0.2 was a very smart move!  I have to keep that in mind.  My crazy play orders at that time didn’t execute, may be verticals are much easier to fill.  I think I was able to flip as I’m more out of the money.  You are right, with the current pricing, you’d need to flip 3X to 1175 callers.   1175 is the lowest callers that I have.
     
    It does help to flip early.  SPX Jun 975 putter was $6.35 on 5/18, $10 on 5/19, increasing to $22 by 5/20, down to $13.85 by today’s close.  On the caller side, SPX Jun 1200 was $4.4 on 5/18, dropping to $3.4 on 5/19, $2.2 and $1.6 today.  As soon as SPX failed the 50 days MA, I started the flipping and got great pricing on 5/18, then I quickly looked at the lower 1190 callers at $5 on 5/19, which I can flip 1X putter to 2X 1190 caller.    Those 1190 callers are $2.3 today.  On the big drop on Thursday, I’m looking at the 1180 and 1175 callers, while rolling the putters 2X down to 875. 
     
    I also learned to buy back those callers that are less than $1.  Those don’t do much for hedging, except going up on a bounce.   The trick is that I don’t have to double my putters all the time.  For example:  if I started with 10 putters and 10 callers, then I roll 7 putters 2X to 14 putters, and flip 3 to 3-9 callers.  By that time the 10 original callers are less than $2, so I’m looking to cut the ones that are less than $1, ending up with 14 putters and 10 to 16 callers.  The margin stay pretty much the same if we are sufficiently OTM, with the 875 to 950 putters.  With all these moves, my Delta is slightly negative now (ready for another drop), and my second set of crazy play put verticals are from 1030 to 1060.   If the market drops 5% or more, the portfolios would hit their sweet spots with the max payout.  Not bad when SPX dropped 1,000 points in 7 trading days.
     
    The flipping is also equivalent to rolling the putters and callers down.  Flipping is also good as the trades would be executed on a bounce (when we set a higher price), so we are riding down with the market and take advantage of any bounce for improving the positions.  If the market rallies, I can flip back to 975 putters and close out the 875 putters as their value would be down significantly because VIX would be lower, and more time would have elapsed for June options.  I felt that the first priority is to get out of the way of the VIX rocket, then flipping back to putters when the market stabilized feels a lot safer then.  We don’t know how low the market can go, but we know there are now lots of resistance to the upside.  The key is to get a no out-of-pocket cost flip to be flexible with the market.


  220. We now have the Index settlement numbers:

    http://www.cboe.com/data/settlement.aspx
    S&P 100 (OEX):
        494.31
    S&P 500 (SET):
        1050.15
    VIX Options (VRO):
        34.53
    Dow Jones (DJS):
        98.83
    Russell 2000 (RLS):
        629.95
    NASDAQ 100 (NDS):
        1766.42

    Let’s compare the settlement values to the index futures (5 minutes chart on futures at 9:30-9:35AM):

    S&P 500:
    /ES: 9:30AM open at 1054, Low 1051.25.  Settlement is 1050.15 (3 points lower than /ES at 9:30)!
    SPX: Open at 9:30 at 1067!

    Russell 2000:
    /TF: 9:30AM open at 629.1, Low 626, Settlement 629.95 (0.9 point higher than /TF at 9:30)

    S&P 100:
    OEX: Open at 485.77, settlement at 494.31 (8.5 points higher than OEX open – So there was no panic in the 100 stocks in S&P 100 this morning.)

    NASDAQ 100:
    /NQ: Open at 1772, settlement at 1766 (6 points lower than /NQ at 9:30 – some panic in Nasdaq stocks)


  221. Peter D / judah / barf / short strangles:  Guys, thanks for the discussion here. Lots of good wisdom and tips. Yes, those settlement numbers on the SPX are criminal. On Thursday afternoon, i still had some short May 1050 puts and despite us being around 1070/1075 near Thursday’s close, I closed out the position with still around $1.50 of premium just to be safe from this sort of open. I remember two months ago, the opposite move happened with an insane up open just to take everyone out at the 1170 (I think) strike. As attractive as the premiums on SPX options are to sell the day before monthly Friday settlement, it is just too risky anywhere within around +/- 20 points.
    Peter D: I like your description of "passing the test". I have had a great 3 weeks or so, but it has not been easy. And the notoriously wide spreads are now even wider with the VIX high, which always makes for frustrating rolls. Patience required. The best trade I made in the last 3 weeks was uncovering my 1150/1160 June put vertical (i bought back the short 1150′s) just before the mayhem started. I had that in place as my ‘crazy play’. It would have been a lot tougher over the last week if I didn’t have those naked June 1160 puts to dominate all of my short 1000, 1050, 1075, and 1100 puts. In addition, during the flash crash, covered spreads didn’t help much as the spreads became almost untradeable. If (and it’s a big IF) the flash crash would have become a 20% crash (same as 1987), any strategy that didn’t have naked puts would’ve been in big trouble. I am keeping that in the back of my mind as I go forward. Some time in the next months or years, we will get another ‘big one’ and you have to make sure it doesn’t break your account. I wouldn’t consider the last three weeks as anywhere near how bad things could get in a melt-down.
    The short strangle strategy is a great tool and one of the most profitable ‘market neutral’ strategies out there, but can be very dangerous and must be treated with the upmost caution and respect…


  222. I forget exactly when this was, but one final friday morning the SET was 18 points different from the "open" on the SP500. The difference was that six stocks did not open until later due to huge order imbalance. The SET is the sum of the opens of each of the SP500 stocks.
    Margin itself tends not to be the issue, since you can always reduce it by moving farther away from the money. My problem was the insane valuations that undermined the margin CREDIT my account provided, and that continues to be the major risk. when you roll for equal money, by definition you do not help your account value.
     
    I sold off all my conventional long positions because when my puts exploded and tanked my account, my longs dropped like stones and made it worse. I will move all my buy/writes to my IRAs, and leave only option spreads and the strangles in my taxable account.


  223. never & barf, yes, totally agree that shorts strangles and short puts should be treated with plenty of respect.
     
    Do you guys remember TOS increased the margin on short strangles 4 weeks before the crash?  That forced us to close some shorts, which was a good thing.  Then the margin in SPX increased by 2.5X on PM accounts (by moving from the -8%/+6% equidistant test to -12%/+8% test, which also helped to reduce further positions, right before the crash.  Somebody apparently knew about the fat finger Thursday 5/6 a week before it happened.  The pros got plenty of warnings is a possible theory.
     
    The PM margin on SPY is still unchanged, so if you are squeezed by SPX, change them to SPY and you’d get an immediate 2.5X margin cushion, i.e. if your BP is at 50% with SPX shorts, it would be at 80% with SPY short at equivalent strikes.  This is significant of course as a 0% BP would become 60%!   You’d pay 10x more in commission of course, but it may be a good trade-off at this time.


  224. Peter- when employing the short strangle strategy, what would you recommend as the appropriate size on this position given a 100,000 portfolio?


  225. Hulk,
    Actually, short strangles are only recommended for Portfolio Margin accounts that are over $125,000.  With Reg-T accounts, the margin is 20%, reducing to 10% when the shorts are 10% or more out of the money.  One SPX contract would require $20,000 in margin ATM, so we’d need to reserve $40,000 per SPX contract in Reg-T accounts so that we can roll 2X away from the money if needed.
     
    With $100k, we can play 2.5 SPX contracts or 25 SPY contracts.   Since VIX is relatively high at 40, selling Jun 900 puts and 1180 calls would net $1,100 per contract, resulting in a 2.75% return for June if SPX expires within 900 and 1,180 (-17% and +8.5%).  If SPX does drop to around 950, we’d roll the Jun 900 puts to 2X Jun 825-850 puts, adding more cushions.   When VIX is at 20 or less, the return is much less and have led some of us in loading up with too many positions.  If we stick to the position sizing, we would be able to get a 10-20% return on short strangles.  As a warning though, that as VIX goes up, the put value would be inflated and you’d start seeing paper loss on the accounts that may cause you to lose some sleep.
     
    With Portfolio Margin, it’s a different ball game as the margin ATM is "roughly" 12%, and once the short puts are more than 12% out of the money, the margin is less, making it easier to roll 2X away from the money.