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Which Way Wednesday – Fed Edition

FOMC rate decision at 2:15, that’s all that matters.

Sure no one on the planet expects anything other than the Fed holding steady but it’s what they say when they do nothing that matters.  On April 28th there were a grand total of 17 different words from the March 16th statement but they were, apparently, the wrong words and the market fell over 10% in the next 30 days.  The big changes in April were the Fed seeing improving labor markets (data later refuted that) and they gave no indication that rates would rise this year UNLESS the data improved.  We’re still down 8% from 11,200 and our Omega 3 pattern tells us today will be an up day, which kept us from being too bearish yesterday even though most of our downside levels were broken

We were HOPING for a blow-off bottom this morning and then to be "rescued" by the Fed but the Hang Seng got one MoFo of a stick save that took them up 150 points into the close and left them up 35 points for the day and that saved the futures markets as well.   Copper made it all the way back to $2.995 from $2.92 yesterday as the Chinese dragon woke up and oil jumped from $77 back to $77.85 and the US futures gained 0.5% so the lipstick is on the pig and now we’ll have to see how many suckers line up to give it a kiss this morning.

We were already very short on oil yesterday and we lightened up into the close at our $77.50 target (see yesterday morning’s post).  In fact, I said to members in the morning Alert:  "Not too much pressure on the markets today, all they have to do is hold our bounce levels to confirm it wasn’t just a weak bounce but a probably recovery:  Dow 10,250, S&P 1,100, Nas 2,260, NYSE 7,000 and Russell 666.  So it’s all about the RUT and the NYSE, as usual and we’re watching copper ($3 good, $2.85 bad) and oil (below $77.50 too weak, above $77.50 too strong – $77.50, just right!) for signs of which way things are heading."  The Dow (10,293) and the Nasdaq (2,261) were our survivors but the S&P wasn’t so bad at 1,095 and oil was "just right" at the close so we remain watchful and more or less neutral into the morning, hoping for a blow-off bottom we can buy into.

Will the Fed be able to convince us that they are on the ball and….  Oh, sorry, I had to stop laughing before I could continue with that thought…  and give the markets a boost or will we be left to drift until the next meeting on August 10th?  Between last year’s June 24th announcement and the Aug 12th meeting the Dow went from 8,300 to 8,500 that week, then down to 8,100 after July 4th but THEN we rallied all the way back to 9,400 on Aug 10th so the best thing the Fed can probably do for us is to go away – something Ron Paul has been advocating for years

I advocated a very simple way to solve the housing crisis near it’s beginning, back in April, 2008 when I proposed "How to Solve the Housing Crisis Tomorrow."  My solution was, very simply to offer any homeowner who wanted it $100,000 to pay down the principal of their mortgage in exchange for a 125,000 first note on the home.  The money would go straight to the bank and reduce their exposure and the troubled homeowner would IMMEDIATELY save $600 a month in mortgage payments.  Bailing out $2Tn worth of these loans would reduce the mortgage payments on 20M homes, put $2Tn back into the banking system and would leave the government with $2.5Tn worth of notes securitiezed by at least $5Tn worth of homes. 

With my plan the $600 a month saved by 20M homeowners would have pumped $12Bn a month back into the economy or $144Bn a year of direct stimulus that would continue for many, many years.  The plan would keep people in their homes, allow them to catch up on other debts and would maintain house price stability by making homes more affordable for our 20M "partners" in housing.  Would some homes still ultimately be foreclosed?  Sure – even with the best of filters that’s going to happend but let’s look at what the Fed did instead with our money.


They just gave $2Tn of our money to the banks (note this sheet is a year old).  What did they get for it?  $2Tn worth of already toxic assets for which they paid FACE VALUE.  How many homeowners did this help?  NONE.  How many foreclosures were stopped?  None?  Did this stabilize housing prices?  NO.  Did it stimulate the economy?  NO.  Is anyone putting a stop to these bastards?  NO.  They need to be stopped – they MUST BE STOPPED! 

They are taking OUR money and GIVING it to banks and the banks are not lending it out, they are just filling the bottomless holes in their balance sheets that were caused by their reckless lending and excessive bonus payouts that removed what should have been a cash buffer from the banks and put TRILLIONS of dollars into the pockets of mortgage brokers, loan officers, bank executives and, of course, Investment Bankers who have done nothing but suck the life out of the rest of the economy.  WHEN WILL IT END?

All right, I’ve said my piece.  Please read "The Creature from Jekyll Island" before you vote for more of the same this November or, in the very least, take 45 minutes to hear what author Edward Griffin has to say.  The Federal Reserve is EXACTLY what Thomas Jefferson warned us about when he said:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

It was Lennon (John, not Vladimir) who subsequently warned:

A million workers working for nothing
You better give ‘em what they really own
We got to put you down
When we come into town

Singing power to the people
Power to the people
Power to the people
Power to the people, right on

We’ve been paying close attention to the people power that’s asserting itself in Asia as almost every day now there is another incidend of workers waking up and realizing how much they are being screwed.  I guess that’s the problem with the internet and today it’s Indian Garment Workers, who have been having violent protests and shut down factories this week until arriving at a better pay deal ($73 a month, up from $30).  Of course, every time one of these incidents works – it only encourages more workers to act up.  Where’s Senator Joe McCarthy when you need him?  

Nissan had to settle wage issues in China but it was quickly handled by Calos Ghosn, whose $9.8M salary alone is enough to pay a full year’s wages for over 5,000 Chinese factory workers.   Honda was forced to halt production in China as a strike hit an auto parts supplier.  Workers of the World are uniting in Europe as well as Greek strikers (and not the soccer kind) are disrupting the ports in defiance of a court order.  Private Sector growth is slowing in the Euro-zone and the UK published what they call an "unavoidable budget" today with very harsh austerity measures but, funny thing, it’s sending the Pound to month-long highs! 

There’s nothing to do but brush up on our ability to spot Communism as it creeps ever closer to the American shores (or is that just oil?) while we wait for the Fed.  Remember, it is the American way (post Jefferson) to let the bankers control our lives and to have unelected officials write checks to their friends that become debts that we are forced to pay off down the road while they spend Billions of dollars making sure that Financial Reform Bills are watered down until they are pointless and Billions more defeating any measures that mitigate the plight of the citizens because that would just be – unAmerican, wouldn’t it?

I still expect a sell-off ahead of the Fed and we’ll be more inclined to play the upside that way than if we have a silly run-up without a nice blow-off bottom.


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  1. Pharm / ALNY  – what do you think of this stock and the RNA therapeutic space?  Thx. 

  2. Cap,
      Thanks for the kind words, and even more, for the advice on HK.
      Money making strategies that actually make money, astute financial analysis, informative and interesting commentary, and stimulating discourse on subjects financial and non financial; I’m finding a great deal to thoroughly enjoy as a Member! 

  3. Suckers lining up to kiss the lipsticked pig?   Phil, I’ve seen you do interviews.  If you used some of this stuff during the next one you would have them rolling in the aisles laughing.    :)

  4. Hey, correct me if I’m wrong, but isn’t the usual one day pattern during the day the Fed speaks one of "Up  on expectation of talk, immediately down after talk?"    Could have implications for today’s moves by us. 

  5. Phil,
    Your morning post is nothing we already didn’t know about the banks but the way you string words together is almost without peer. You would have been a great speechwriter. Your articles are always a great read let alone the advice and perspective you give. My portfolio has improved alot since I joined and made me a more confident investor. Also hats off to the intelligent folks on the board answering questions and giving advice – nothing like it.

  6. jflan: lots of aapl calls are being bought.

  7. RMM….Noted.  Very bullish atmosphere out there on the company.  Have to be careful how we play it though.  If the market makes any kind of huge pullback, AAPL could come with it (although it didn’t yesterday).    I have some July 280 calls which I’ll probably unload fairly quickly today, then wait for an expected retracement. 

  8. NKTR – at this point, they have a few things in the pipe for cancer, but a ways out for releasing any data.  I think one can wait without missing the boat.  Most data is due out next winter or spring.  Interesting target, but there are many in the same space.
    ALNY – this is one of the hottest areas of Pharma/biotech research now.  ISIS, MRK and others have jumped on board.  These guys have a good platform, but IF they have any failure, BOOM.   Thanks for reminding me, because a future write up will focus on these type of companies and we will try to find one that is reasonably priced.

  9. Phil- I agree with your article completely. The article about the dcumentary Gasland, the movie Food Inc, GS’ manipulation of the market, JPM’ manipulation of silver, Gold & oil manipulatio , Cramer’ deciets… Everybody is corrupt. Where is the change though? Democrats and Republicans are both alike. Both of them do similar things. The people have not waken up. We choose the same politicians over and over again. History has shown us the world has always been like this. There is never peace. A few people have managed to control the population.

  10. Does anyone want to consider the "end of quarter window dressing" effect here.  From what I have seen over the past few years of investing, stocks are generally bid up in the week or so leading up to the end of a quarter.  I have not studied it, however.  It is just my impression.

  11.  Check out the action in the EURO

  12. Quick 35 cents on TNA in 30 seconds !  luv it.

  13.  sorry for an off topic question but does anyone here use iStockmanager for iPad? I’ve updated mine moments ago and its going crazy – am I the only one?

  14. Good Morning Phil,
    I’ve been hearing a lot about the Omega 3 pattern that you believe is a repetitive pattern that the TradeBots are following.  I’ve followed the links that you’ve posted related to Omega 3 but do not see any long term charts that better explain or identify the pattern.  Is this information available anywhere on this site?
    On a different note, I think this market may be ready to unravel.  It’s only my opinion, but from a strictly political point of view, Bama’s got a real mess on his hands.  I’ve been saying for months that a lot of this rally makes no sense other than market manipulation.  One of my theories has been that Bama has enjoyed an extended honeymoon due to the fact that the market has been advancing.  It’s seems obvious that the fed, large institutions (aka GS) and media have been trying their hardest to keep this market propped up in an effort to help Bama and the administration, and to avoid a bloodbath in this falls election.  It seems to me that the honeymoon has reached an abrupt conclusions.  Everyone is distancing themselves from Bama (even the Dems) despite their role in the disasters that are about to unfold.  Even the media has changed their tone as they smell blood in the water.  They love the agenda, but love destroying politicians even more.  The last shoe to drop and a final nail in the coffin of Bama’s agenda will be the market unraveling.  The Bama administration has made it clear that they are no friend of business.  I believe they are about to be taught the hard lesson that business is not the villain, rather the nucleus of the economy.

  15. TLT / TBT – Phil, any quick thoughts?  Thanks!

  16. That cornicopia of hamburgers, televisions and hotdogs is fantastic!!

  17. Good morning,
    IWM 63.56, 64.20, 64.59, 65.38, 65.93, 66.41, and 66.85

  18. Ahead of the FOMC info release at 2:15 thought that this would add some levity.  As Phil says, what they say or don’t will be of significance as surely there will be no changes today.

  19. Good morning!

    Wow, oil is trashing us this morning, down to $76.25 in a flash!  Congrats to all the USO holy rollers who stuck it out – we went from down 50% to up 100% in 2 days!

    Note that 10,250 is holding and 2,260 in Nas is close enough so this is NOT very weak yet – just the blow-off bottom we expected.  It’s going to be tricky through 10:30 as a big build in oil can send us down more (although a draw may save us) and, of course, we have the Fed later so much crazyness lies ahead. 

    I like those IWM July $68 calls for .50 (now .58) so let’s keep an eye out around that level.   The June 30th $68 calls can be sold for .30 so a nice spread if you want to be more conservative (maybe a 5:4, 5:3 ratio).

    Levels are still:   Dow 10,250, S&P 1,100, Nas 2,260, NYSE 7,000 and Russell 666Oil below $76.50 is bad and copper below $3 is bad (now $2.94) so we want to see at least copper turn up.  Oil going down is only a short-term rotation issue, not really a long-term problem for the market. 

    The Euro is dropping like a rock, down to $1.22 again and the Pound was rejected at $1.495 and is down a penny at the moment. 

    Gotta love the drop folks – this is why we are mainly in cash! 

    MBA Mortgage Applications: -5.9% vs. +17.7% last week. Thirty-year fixed mortgage rate decreased to 4.75% from 4.82%.  Sharply lower rates and no takers – Danger, Will Robinson, Danger, Danger!!!!

    More big words from Soros: "Right now the Germans are dragging their neighbours into deflation, which threatens a long phase of stagnation. And that leads to nationalism, social unrest and xenophobia. Democracy itself could be at risk." The comments have little impact on the euro; +0.1% vs. the dollar.

    Eurozone private sector growth expanded at the slowest pace in three months in June, but it still looks like economic growth in Q2 was stronger than Q1, possibly coming in at around 0.6-0.7%

    With the U.K.’s new bank tax, and pledges from France and Germany to introduce similar measures, banks including BofA (BAC), Deutsche (DB) and Goldman (GS) are checking to see how much of their balance sheets can be moved offshore to countries like Switzerland and Japan.

    Moody’s says the new U.K. budget is supportive of the country’s triple-A rating and stable outlook because "successful implementation would return the government’s finances to a more sustainable trend." Pound +0.7% vs. dollar.

    It always pays to find the right judge!  Drilling down: The most recently available financial disclosure report shows that Martin Feldman, the judge that yesterday overturned the deepwater drilling ban, owned stock in Transocean (RIG), Halliburton (HAL) and several other oil and gas firms. Feldman declined to clarify which positions, if any, he still holds.

  20. Cheers to David Ristau on JBL. Another big hit!

  21. JRW – some of my lines looking at the past 10 days 66.84, 66.36, 65.93, 64.21, 63.97.  Noticed Tuesday closed at 2 day 0% fib, 10 day 50%…

  22. Cap
    Good job on TNA, are you using my chart?

  23. David/LEN,
    Are you still holding?
    Did you say earning today?

  24. arbolito
    June 22nd, 2010 at 7:49 pm | Permalink  
    June 22nd, 2010 at 6:20 pm | Permalink  
    H Phil: Going over a past blog to Jimmy on SPWRA and noting the price shot up, what about the following strategy to own them long term. Buy 500 @ 14.30, selling 5 contracts Jan12 15 C for 3.25 = 1625, selling 5 contracts jan 12 12.50 P for 3.50 = 1750. If called profit 52.% if put own at 10.375 or 37.9 discount fo today’s price. Is this still ine of your favorite stocks? Is this a smart sratgy to own the stock long term? Thanks
    Another question where is the best place to opost questions pertaining to the portfolio and until what time? Thanks

  25. Earnings on LEN are tomorrow. As of last evening, David was still holding.

  26. JRW … not yet; have to check my email; haven;t been able to do that for the past few days.   Just been buying lows and selling back at 5 MA.  Kind of looks like S1 will be tested, so waiting to see that.  Thats about 42.30.
    Can’t wait to fire up your charts !
    65 cents so far on TNA; but not pushing my luck….

  27. Rumor of a France downgrade going around.  Big put buyers in Eurodollar front months.

  28. USA Soccer on ESPN now fyi…

  29. Volume not very exciting so hard to get confident so far.  Gold dropped $20 from the open and poor AAPL is looking mortal today, down 1.5% so we need to see them turn or there’s no way the Nas will recover.

    New Home sales in 10 mins is big deal but expectations are now super-low at 325K, which would seem insanely low normally (541 homes sold per month in each state) but who knows how screwed up things are now that the home stimulus is fading out.  The mortgage application number (above) is very disturbing

  30. Wow…..what was that

  31. New Home sales: 300k

  32.  TBT is now trading lower than at any point since Dec 09. How much of the weakness in this thing has to do with the rebalancing that affects all ultras?

  33. Wow, down 32.7% at 300,000 and the previous all-time low was 338,000!  April was also revised down to up 14.6% (446,000 homes).  What a mess! 

    Gotta take another 1/2 of the oil puts off now, $1.13 for the July $34 puts is good money – too much to risk on inventories so $1.05 stop in the least and .20 trail if we get past $1.25.

  34.  I don’t usually play crude oil except on a day trading basis and don’t usually play it on or around inventory reports.  I also didn’t follow Phil’s advice and rolled up(regretting it) I will take that 50% gain on 1/2 USO puts.  1/4 I will protect on any spike up by selling Aug. contracts (as close to delta neutral as possible ) and I will let the remaining 1/4 ride with stops on 25% gain.  

  35.  eric- you mentioned S&P 1088 as level…could explain importance?txs

  36. USO July $31 puts at .30 and if you really want to stick with it, that’s the way to go as can take .90 off the table (almost a double) and let those run with a .15 stop.

  37. sns – SPX support from trend lines back in the end of May and 6/10 or so close up.

  38. JRW – 7.15…that is one very stretched sig rune @9.57…housing news leaked a few mintues early!

  39.  EWZ is still in the down channel from yesterday afternoon – besides a minor breach of the upper side right before those home #’s came out… I’m still using the channel – it is testing the low side now… 

  40. I n TZA at $7.11

  41. 10,250 on Dow is now a good indicator to take off the higher oil puts ($33 or $34 puts).

  42. Whew. Thank god I was at my station this morning. I quick flip from long to short makes a huge difference sometimes, lol.

  43.  Pharm- txs!

  44. JRW - out on my line…doesn’t match yours…might regret it but will take $0.10 in 4 mintues any day!

  45. Edward Griffin? The same guy who has been a member and officer of the John Birch Society for much of his life, and was speechwriter for Curtis LeMay when he was George Wallace’s running mate? The guy who sees "international conspiracies" everywhere? (I think some guy in Germany in the 1920s rode that theme pretty far.) Who promotes a product made of apricot seeds as a cure-all for cancer?
    Who sees the creation of the Fed as a giant conspiracy? I’m no fan of Bernanke and what the Fed has become since Greenspan, but the Fed was created for a reason – multiple panics, crashes, etc. I don’t think some self-serving writer pandering to certain all-to-familiar segments of American society has much credibility.

  46. Right now I’m regarding these little bounces as bear-flags until one proves itself.

  47. Goldman / Early release
    Happens all the time, allowed them to pull the reverse flush !!

  48. Ifan – AAPL down 2%.

  49.  Spirit Ailrines taking a stab at BP.
    HAHA good to see!

  50. Perhaps David can comment on LEN when he has a chance. It is holding up pretty well.  Perhaps this would be a good time to pick some up.  Earnings are reported after the close today.  Do we still expect very positive numbers from the company, even with this overall low level of new home sales reported today. thanks.

  51. Eric,
    Bear Flags?

  52. David
    big thanks on the JBL pick.
    I sold 20  july14 p right before the close for 1 and bought them back this am  @ .43
    This hit and run strategy seems the only way I can make any headway with very frustrating market. 

  53. I can’t believe I forgot to short OIH!

    Pigs/Iflan – I calls ‘em as I sees ‘em!  8-)

    Fed/Iflan – This is what we wanted but we wanted it with more volume than this.  We’ll take it if we have to but we may get whip-sawed if oil is a draw.  If it’s a build, that should give us a bottom as XOM and CVX drag the Dow back to 10,200. 

    IWM $68s came in at .49 but it was the 6/30 $67s that can be sold for .30, now .27, not the $68s so a little riskier but I still like it (5:3 is more sensible)

  54. Out of TZA at $7.21

  55. Yes, David, do tell on LEN!

  56. I brought this answer from yesterday’s page since kustomz had asked a question and I stupidly put the answer over there first. ;-)
    kustomz — QCOM still holds a substantial number of patents in CDMA which is still the basis of W-CDMA which is really what LTE is.  And QCOM bought Flarion largely for Flarion’s OFDM patents (which *may* hold establish a fundamental patent position in both LTE and WiMAX — however, that’ll be fought out in backrooms and courtrooms).  But, if nothing else, QCOM will continue to have patent licensing revenue from LTE.  In fact, as everyone seems to be moving to LTE, they might even have more; however, I’ve not looked at all to see what their per phone licensing fees might look like (but LTE combines lots of technologies that have a more diverse patent background — so one would expect QCOM to therefore get less per device/phone).  In terms of actual chip sales, I don’t expect QCOM parts to end up in an iPhone (or iPad).  Historically, QCOM just has never seemed all that interested in getting their power consumption down.  Something BRCM and Samsung (and now Apple with their A4 system-on-a-chip) spend a lot of time on.  All that having been said, QCOM still has a shot since they’ve deeper experience with the underlying CDMA technology.  But it’d somewhat surprise me (and several other people) to see QCOM parts in AAPL products.  AAPL likely picked their original silicon vendors because there was a roadmap to LTE that meant that they wouldn’t have to port their software several times as they moved from GSM/EDGE to GSM/3G and eventually to LTE.

    It’ll certainly be interesting.  QCOM was quite behind on their CDMA/LTE chipset.  And with CDMA’s 20% marketshare, chipsets which fallback to CDMA had been getting less attention in the labs than those that fall back to GSM.
    I’ll post this over on today’s stuff as well…in case everyone has already moved on…

  57. B-Berg says that home sale number is a record low.

  58.  Phil, should we kill the FXP overnight trade as it did in fact turn up sharply but from a weak open, so even now (in at 1.8)…

  59.  Hi Phil,
    Where could  we see /CL if inventories are bearish?

  60. Pharm / ARNA : ARNA is again moving today on unusually high volume. Still no news?

  61. JRW,
    Do you use hot keys for your buy/sell orders?

  62.  Jdub – I use…  they have all "Market Currents" on the left side of the page.  It’s a good site overall – that’s how I found Phil.

  63. Thanks Jomp!  I love this group – that was my intention from day one was to have a top notch chat forum for serious players to gather without being hassled by pumpers and dumpers and mindless trivialites (well, maybe a few mindless trivialities…). 

    Change/Nicha – Well first we have to wake people up and then we can have change but every single attempt to pass a school budget seems to fail despite all the lip service paid to education and, of course, what the children are then taught is to avoid thinking at all costs and conform.  I have to constantly deprogram my girls when they get home from school and it’s tricky because I don’t want them to be outcasts but I also don’t want them going around thinking that everything they read in their books is true. 

    EOQ/Fjd – We expect a rebound after this sell-off.  I’m dipping into the IWMs and will DD on a spike down from here but most likely we’re flat to down more through lunch into a big Fed save this afternoon (but run-up may start well ahead).  If we don’t get that save – then look out below! 

    BP holding up nicely.  TBT $38 puts can be sold for $1.52

  64. up to 95 cents on TNA today

  65. exec
    3 seeparate order entry screens set up to buy or sell portions of a possition or both if it could go either way !!

  66. EIA Petroleum Inventories: Crude +2.02M vs. consensus of -1M. Gasoline -0.76M vs. consensus of +300K. Distillate +0.29M vs. consensus of +1.2M. Futures -2.75% to $75.7.

    Not too bearish and a big relief so done with all oil puts, obviously.

  67. Cap, You seem to have got a great hit and run thing going on TNA.  Congrats.

  68. JRW,
    But do you have keys set up to allow you to buy or sell with one keystroke?

  69. Phil/WMT.  It has slid back down nearly to 50.  Do you think it is on sale at 50, or wait until it is done with its slide?

  70. exec, YES

  71. Cap,
    You playing TZA also?

  72.  dude, OPXS trading platform is ******* painful !!!  I HATE JAVA

  73. judah; some days it works.  today my thinking was early selloff to test lower levels … check …
    possible rally from there …. too early to tell
    so far on track; picking entries carefully and quick to take profits;  if market takes off up, may miss out on big run

  74. TZA; have not been; don’t like the way it moves; not comfortable w/ it.
    I can see IWM  testing 64.68 soon; TNA 43.77

  75. no guarantee; plus I am no JRW when it comes to this thing.

  76. yrcw @ $.1931

  77. In TNA at $42.70; watch out for 66.59, 66.71, target 65.37

  78. GLL $37 short puts up 50% at .75 so buying those back (up 50% with more than 2 weeks to go is a kill unless you are POSITIVE you can’t lose – not possible with gold!). 

    Istock/Russian – I don’t use it but I can’t even bring up the app to load so something’s wrong.

    Omega 3/Exec – It’s pretty much just a fun thing, it started a couple of weeks ago when I asked if we were seeing a similar pattern because it’s only machines trading the market and that morphed into the "Omega 3" pattern but it’s not like we have an Omega 1 or 2 or a Delta 5 or any other pattern at all.  Effectively, we are just moving similarly to what we did when we came out of the Feb bottom so just look at the Yahoo chart and you can roll the screen to those dates and we’re right about at Feb 24th today (blow off bottom and then recover to yesterday’s high).  If it does happen it will be just plain creepy… 

    Oh damn – of course FULL cover on DIA Mattress Plays!!! $103 puts can be sold for $1.40 and we have 1/2 cover with $104 puts at $2 now and if we break below 10,200 we can roll the $104 puts down to the $102 puts (now $1) and then we just ride it out

  79. Phil / S&P multiples   The 10 year at 3.09 seems to confirming rising probability of double dip (my conviction still), and housing, 10mm foreclosure overhang and Euro austerity have us boxed in.  In a flat economy many sound co’s will continue to make good profits, but can only grow at expense of competitors (like Apple).  Starting to look increasingly like Japan (where 10yr yield went even lower due to dearth of alternatives).  I respect your view that long term bonds look like a foolish investment and the yield on many equities look relatively attractive (if they can just maintain their current profitability).  My question is, will equities have to adjust to a lower p/e multiple to reflect a no growth scenario – or, are the current multiples fine in view of the lousy fixed income return alternatives  (especially given your view that the money printing machine will eventually kick into high gear to avoid depression).

  80.  Hey Phil…
    great call on rolling up those uso puts early yesterday…got a years worth of subscription out of that…
    also…with the housing data being a complete disaster (should we go bearish on the financials)…even though everyone is expecting some sort of rally into earnings do you not see that as a game changer (or is it just more decoupling of corporate profits and wall street from the real economy).  

  81. Hanna -VVUS is DOWN…ARNA is UP… premise (and Opts) is coming to fruition…..

  82.  Apologies to those from Florida.  A site that aggregates oil spill news.  Warning:  it’s almost all bad.  Some of it is questionable.  

  83.  Hi Phil,
    Love your explanation on TBT yesterday!  Made a lot of sense to me as I have a HELOC rate of Prime +.25%.  I’ve been toying with the idea of refinancing my remaining 150K but it would increase my current rate to at least 1.6%.  Your TBT explanation totally helped me out.  So I decided to go with the Jan 40/48 call spread and sold 32 P for net .25!  I know I could have been more aggressive with the P selling but it’s really more of an insurance than looking to make great money on it.  
    For my profitable TBT trade I bought Jan 42 C and sold July 40 C.  I plan to keep on selling upside calls each month until Jan hoping to knock off most of the premium I paid for.  If it spikes, delta is in my favor (for now) so I can roll it into a call spread.  
    Been to a lot of forums before (TA, Fundamentals, etc) but nothing comes close to the balance on this site.   Those Ellioticians that just count waves w/o regard for sentiment, internals and technical divergences drive me nuts!!  

  84. Cap, Well IWM sure turned on a dime at the trendline from yesterday’s lows.  Like you, I went in and out quickly on that one, so I may miss a longer run if there is one.  Some days, the quick in and out is all I want out of it.  Part of JRW’s genius is that he lets his winners run and cuts his losers quickly.  It is a great discipline.

  85. Thanks for your .02 on QCOM Reinharden…if your a QCOM bull you would certainly hope for the demise of WiMax and a tie up with AAPL

    Qualcomm holds about a quarter of the patents required to make the Long Term Evolution wireless standard happen on mobile devices and networks, according to an ABI Research report published earlier this week. Other big holders include Interdigital, with 18 percent; Huawei, with 10 percent; Nokia and LG, with 9 percent each; and Samsung, with 7 percent. Which basically means Qualcomm may not be the patent shark that it could be with the CDMA 3G standard, but it’s still going to make some serious money with LTE. In fact, Len Lauer, COO of Qualcomm, confirmed that the company’s royalty rate for LTE would be about 1 percent lower than the royalty it charges for 3G.
    So Qualcomm’s sitting pretty with regard to 4G (this includes WiMAX, thanks to its 2005 Flarion buy).


  86. here ya Judah; I am not so good at that either
    I was pretty close on those tests … IWM 64.64 and TNA 43.50.

  87.  pharmboy, is it worth paying the brokerage $49 to take the "Tender Offer" on EVVV or just pay nothing and ride it out. Not sure how this works…

  88. Phil/TBT
    I have stock as well as various short put positions with different strikes. With TBT down today, would this be a good day to roll down & out for a better overall position, or should one wait.

  89. Phil
    I take it the full cover is on 1/2 jul 104 BUT Jun 30 103p correct?? thks

  90. Phil, do you have any good bullish spreads for RIMM.  I know this is a bit of a contrarian play, but i think they have a nice subscription model and they are still easier to use if you do a crap load of email. 

  91. Phil/AAPL
    On the last upward pump, I closed out all of my long spreads, trying to lock in some profit. I would like to enter new spreads, and am wondering ( as many of us are ) what  would be good timing for this re-entry? Thanks!

  92.  Hi Phil,
    In one of your posts you mentioned that S was undervalued.  I don’t know if you used a Price to Book model to come up with that or if it was based on market price vs. sales potential.
    Wanted to get your thoughts on ETFCD as a speculative play. Thinking about but only to willing to risk 0.5-1% of portfolio.  I still have 70% in cash (19% blue chips, 7% mid caps, 1.5% speculative, 2% hedges).  

  93. Out of TNA at $42.96 failing 64.31

  94. PM doing well today, raised EPS projections increase from 10-13% to 14-17.

  95.  Hi Phil/ any plays on MON into earnings, stock looks have priced in a very poor earnings report

  96.  Phil:  please could you recap where the DIA mattress is now.  what with weeklies ,quarterlies and July not sure what you were selling.  thx

  97. education/Phil – This is a big topic for me but it’s trading time so later look at the Alternative Educational Resource Organization, an inclusive consortium of better alternative, at

  98.  Kustomz — And, just to overstate the obvious, a lower royalty rate times 100% of the overall market is probably better than a higher rate times 20% of the market (aka the previous CDMA market). ;-)
    I don’t think that QCOM is going to get as good of a rate in WiMAX because while Flarion had a nice selection of OFDM patents, so did a dozen other WiMAX players.  Flarion was actually well outside the 802.16 specification for quite a long time before having a late-in-life conversion to standards compliance.
    Then again, even Clearwire has, um, cleared their way to an LTE deployment.
    PS: Too bad is still private.  They’d be an interesting holding during the 3G -> 4G transitional period.

  99. filibuster 2009: Year of the FilibusterUnraveling/Exec – If you think Obama is on a "honeymoon" then you are unraveling.  You couldn’t even say a bad word about Bush from 9/11/01 through his re-election without being braned a terrorist – the man had a 4-year pass where there was barely a Congressperson who would vote against him, let alone filibuster, like 150 out or 185 bills have had done to them since Obama was sworn in.  Damn, where do you guys get your news????

    TBT/Fab – I buy it below $40 and I sell it (but not short) above $45.  It’s the same thought I’ve had for 6 months yet, strangely, I get asked almost every day….

    JBL/Mill – Yes, great call David!

    LVS fighting the tape as is VLO, CAL, VZ, RIMM, IBM.

    Volume still not sexy with 54M on Dow at 11:15.

    LEN July $14 puts can be solf for .75, not a bad way to play if you REALLY don’t mind owning them for $13.25.

    SPWRA/Arbolito – Well I did answer that yesterday (wait or use short put play I detailed).  I either get to late questions or I don’t.  Sometimes I have a life and sometimes I don’t – it’s a day to day thing.  If I don’t answer your question under the previous day’s post then feel free to repost once the market opens because I almost never go back once a new post starts but I do appreciate it if you check first (just CTRL-F your symbol). 

    Speaking of which, I’m way behind at the morment, hopefully will catch up in next comment but I thought it was more important to call the morning craziness than get to individual questions.  I’m feeling good about decision to get long here (10,250) so far but we could drift along through lunch or spike down before we head up so not a good day for getting lunch….

  100. I am long a bit of CBOE stock, and sending all my option orders there now.  Silly how the mind works :)

  101.  Phil, 
    My SDS and DXD disaster hedges are both in the black again. Should I kill them and exchange for the Jan TZA you recommended a few days ago?

  102.  I was hoping to enjoy the soccer game while doing some gardening.  But morning action plus crazy humid day keeping me indoors to flip between the game and CNBC while looking at charts.

  103. lapper,
    I know where you’re coming from there.  I felt slightly conflicted about my thinkorswim accounts after I bought IBKR.  :)

  104. Phil,
    What’s lunch ??

  105. SPY trying to break over 109.05. Might get a little run higher if/when it finally does.

  106. JRW, it’s that thing on the weekend, happens same time you start drinking, around 1-2 pm.  I have heard that some do it every day.  Drinking that is :)

  107. crap, second time she comes to the line and does not touch.  Easy choice to get out of the trade, harder to get it one

  108.  JRW 
    Could you explain a bit your strategy with IWM and TNA. I have been trying to follow to enter some trades but can;t make sense of it…

  109.  Trading IWM options with you guys today, had a few cancelled patients. Was in IWM 61 puts at the last test of 64.52 for 1.05. out at the trendline 64.41, 1.07. Rats!

  110. EricL, When you have some free time, I’d love to hear your view on watching SPY v. /ES v. SPX.  Do you get different insights into the S&P’s movement by watching one compared to another, that is, are there times when one moves slightly earlier than another, or reverses or breaks at S/R lines more dependably?

  111. JRW
    Can’t figure out that 64.31 failure that got you out. I still see you right 99 to1!

  112. Phil, 
    "Damn, where do you guys get your news????"
    That’s funny.  I guess it depends on your political affiliation.
    The people I run with are always bitching and moaning about how pro-Bama the media is. 
    I personally laugh at some of the commentary I’ve heard.  The media is all about steering the idiots.

  113. Gooool

  114. judah,
    I don’t have any developed system there, although I know that there are people that do. I watch the /ES mostly, since the moves are more clearly defined and exaggerated. It arguably leads the the SPX/SPY, but by such a brief period that only a computer could likely get an advantage.

  115.  Amazing win!!!

  116. oops…spoke too soon!  4 more mins…

  117. USA 1-0!!!

  118. Phil, you should be OBAMA’s spokesman – you are tough and cogent (even if i don’t agree with you)  You would be kind of like Tony Snow for the dems (may he rest in peace)

  119. JRW,
    I think I’ve figured out your reverse move.  Did one occur today between 10:27 and 10:30 on the .25 level signaling the move up?

  120.  Amatta- I can summarize a bit, and maybe the others and JRW can critique. Set up a chart for IWM with 3 minute candles. Slap a Stochastic RSI on there with %K 14, %D 1, smoothing factor 1 (if you have this). Slap on a RSI, and momentum as well. Slap on Bollinger bands, and an 8 day EMA. Draw the resistance levels JRW posts daily- these are key. Draw daily trend lines if possible. You can add 40, and 200 SMA as well. Now you’re ready to follow. When you see an upward moving Sig ross style Nazi "Z" form on the Stoch RSI (when the RSI line crosses the 80% oversold line- I think) AND the momentum is headed up, AND the RSI is over 50- that is a buy signal for TNA. All the better if we are at a key support/resistance level. There is more to this than I indicate here, but this should get you started. 

  121. Trading against these computers is really unbelievable.  It’s as if they wait for my order in a complete lull before doing an about face and racing the other way.  It’s pretty ludicrous to even attempt it.

  122. USA wins, market crash would totally make my day ;-)

  123. JRW,
    Never mind.  I was looking at a TNA chart.  When I shift over to the IWM chart it’s not the same.

  124. Griffin/Chaps – Read the book, it’s very good but maybe not for you since you have already decided.  Sometime a guy who spends a lot of time chasing down conspiracies stumbles onto an actual conspiracy.  I think that was a Mel Brooks movie, actually…  8-)

    QCOM/Rein – Thanks!  We hit them as one of this weekend’s Top Tech Plays (which are all a good buy now) and they are cheaper now:

    QCOM is another candidate for stupid dividends tricks at $35.69 but the dividend is just .76 (2%) so I’d want to go aggressive and sell the 2012 $25s for $12.25 and the $25 puts for $2.05 (net $1.20 margin on the puts) so we’re laying out $23.44 for the stock and $1.20 margin on the puts, and collecting about $4.50 for our troulbes for a respectable 19% in exchange for our agreeing to own QCOM at $25.

    FXP/Amatta – I think so because I’m satisfied we have a good bottom here.

    /CL/Jdub – I think they bottom out at $75.17 and rebound to $76 at 11:38.  8-)

    WMT/Judah – I sure like them at $50 and you can buy them for $43 by selling 2012 $47.50 puts for $4.50 so why not start there and you can enter the stock at $51 if they swing back up and then sell a call to cover when the music stops.

    OXPS/BDC – Sign up for TOS and try their paper trading for a week and that should be that for OXPS. 

    Relativity/Tusca – Well E=MC2 where E is the price of equities and M is the money supply and C is cash on the sidelines so, if E is going down and M is going up or flat, then C must be VERY LOW and that means equities are probably fully valued around here so I wouldn’t pay ANYONE for growth, I’m looking for survivability and that means name branks and best of breeds like GE, AA, KO, PEP, PFE, MRK, VLO, XOM, INTC, WMT – you know, the Buy List….  If they pay dividends, then all the better but I wouldn’t buy $10,000 worth of any stock that I didn’t plan on owning 4x of for about $34,000 after 2 rounds of doubling down to about 40% off the current price.  If you can’t see yourself HAPPILY ponying up, for example, $6,400 for 200 shares of WMT at $32 and sitting on it for a LONG TIME – then DON’T buy 100 shares at $50.

    Housing/Bambi – I see it as the end of stimulus and evidence that we need more stimulus (maybe even fake data to convince the G20 – we’ll find out what LEN says later).  Don’t forget, we are the Keynesians and Europe is having none of it.  Japan is with us and China may be the swing vote. 

    The nice thing about buying IWM calls is you only need to buy a little TZA to protect them!  IWM $68 calls have a .22 delta and TZA is a 3x ultra to IWM so you need just 1 share of IWM ($7.13) to protect 15 of the $68 calls ($7.50) so we can used the $642.50 line (below it) as an on/off for protection and you only have to make a little to drastically reduce the basis of the calls – a fun stupid hedging trick for momentum players.

  125.  drcraig, 
    Thanks, I am uninitiated in charting so will have to sink my teeth on it and see if Shwab offers these capabilities…

  126. drcraig,
    Do you overlay your studies in 1 window or do you have multiple study windows.
    Also, what platform are you using.  I have SS-Pro and do not have settings for %K and %D on the Stoch RSI study, Rather Stoch period, RSI period and slowing factor. 

  127. Matt- I agree. Have had it happen many times, the bigger my order the more obvious. They try to make me bid up to get the stock, try to get me to chase (I don’t). When I have my order fill, bam!, down she goes.

  128. Matt/
    I totally agree, but it just that volume dried up about two hours ago.
    So it is just us against them. If algo trading represents 70% of daily volume at the moment it must be close to 99%.!

  129. not really feeling the need to trade this market right now … so I won’t.
    Great win USA !!

  130. Phil: I took your advice to fix my XOM trade: originally sold 10 June 67.5 puts; rolled into 2X July 62.5 puts and almost made back all of the losses Monday morning (up $5K);  Remembering your mantra "always sell into the initial excitement", I tried to sell half of it but didn’t get the executed at my asking price.  Now more than half of the profit is gone and the chart looks bad (I also followed Opt’s board).  Now, should I take the money and run (still have a gain of $2.2K; loss on original trade ~$6K); or should I wait till July expiration – hoping XOM will be above 62.5?

  131. BDC – either way, do you pay the $49?  I would ride it out and C what happens unless U need the $$$$.

  132. amatta
    Confluence occurs when you take fibonacci projections off of multiple trends and get the same number and strengthens when it corresponds with other technical advents such as gaps, swing high/lows, chart indicators crossovers (MACD, RSI, Stochastics, etc.), trading congestion, etc. The more confluence, the more significant the level. I really take notice when I get two or more fib #s (say a 38.2% and 61.8%) to correspond with a gap in the chart or a swing high. Confluence is very powerful as it combines multiple technical analysis techniques to arrive at the same conclusion, and should be relied on accordingly. I post the levels every morning.

  133. JRW,
    Do you use Bollinger on your 1 and 3 min?

  134. Phil
    Getting ready to leave for  two weeks, is TZA spread the best hedge?  Jan $4/10 spread

  135. TBT/Jdub – Good strategy!  I agree on EWaves, not my cup of tea – especially the way they tend to be so absolutely positive of what’s going to happend but then, when it doesnt’, they are immediately absolutely positive about the next wave…

    10,250 on the nose with 1,088 on S&P, SOX 260 and TRANQ 2,000 so be deal if we fail there.   We also have 6,800 on NYSE, 2,250 on the Nas and 640 on RUT so let’s call this a bottom test set.  Oil is just under $76, copper $2.94, gold $1,232, Pound $1.489, Euro $1.223, Yen 90.07 and below 90 is another big sell-off in Japan tomorrow

    Rolling Gel – Yes, for sure!  You have a lot of positions, as do I and I much prefer to have 1 short put and on long call and one short call max (or one more leg in a butterfly, which I’m not too wild about) so I can make one adjustment like I’ve been doing this morning buying back all my callers and rolling down my long calls etc.  So absolutely I think you should take advantage of a not too high VIX to roll to more premium.  I think the Jan $38 puts for $4.10 are a great short sell as you’re good to $34 and they can roll to 2012 $30 puts.

    DIA/Yodi – We had the Sept $108 puts, 1/2 covered with July $104 puts at $1.80 and now we are adding another 1/2 cover with the July $103 puts and, hopefully, we’ll be using that $2 a share to pay for us to roll to Dec $108s about even when those calls expire worthless as we don’t want to be in a Sept/Aug spread

    RIMM/Jo – I’m not bullish on RIMM because AAPL is just ripping everyone’s guts out but they are willing to pay you $2.60 for selling the July $57.50 puts and you can sell those and buy the Sept $52.20 puts for $2.70 and you are in for a dime and your worst possible case is you end up in the stock for net $57.60 covered with Sept $52.50 puts or, if they go up, you keep whatever’s left at expirations.   On the other side, you can sell 5 Aug $65 calls for $2.15 ($1,075) and buy 3 Sept $65s for $3.10 ($930) and you’ll be thrilled to buy more Sept calls and roll them into a vertical if RIMM goes up, especially if you pair it with the put spread.

    AAPL/Gel – See my weekend play (link in last comment).

  136. Phil/Griffin: I haven’t "decided" anything. I simply prefer real research from individuals, no matter what their conclusions, who are more sophisticated and who don’t spend their careers pandering to fringe interest groups with conspiracy theories. And I don’t think it helps your site giving credence to such.

  137. Exec
    Remember, the Sig rune is only on the 1 minute chart, and I use Bollinger on yhe 3 minute

  138.  Amatta – JRW does his charting in Schwab software, so you should be good to go. 
    Exec – I overlay most of these studies in one window, as sucky OX will only let me have one streaming chart at a time (I think). I try not to let it get too cluttered up. JRW uses a 1 minute chat as well, I’m not sure which studies he overlays on that one. 

  139. JRW, IWM walking slowly right up the trendline from this morning’s lows and meeting resistance at the trendline of the highs.  Could be interesting in the next 15 minutes.

  140. Phil/IWM calls protected with TZA stock,
    very nice hedging suggestion showing that one TZA can cover 15 IWM 68 calls. Worth pondering further.

  141. It truly is us against the machine(s).
    Phil, Europe is not buying Keynesian theory because the credit market is not buying it!  The US is lucky our creditors haven’t come knocking on our door yet.  We can thank being the reserve currency for that.  Other countries aren’t as lucky.  So, how can we tell Europe, especially Germany, what to do when we are in a unique situation that has bought us a little more time then the others?  It’s the height of arrogance.  Which is about all we got.

  142.  sorry – typo – $49, and no if I ride it out their is no fee and no need to take the cash now as opposed to later. Just unsure what the tender offer meant…

  143. Pharma/ ARNA
    Now I realize that I may have cashed off these $3 puts a bit too early :)
    Fortunately, I have a stock position to enjoy this mini-rally.

  144. judah,
    Well, this is why Phil calls it Which Way Wednesday !!  Any minute now ; probably a flush first.

  145. Phil / CHK  – do u still like the Jan 25/30 bull call spread at these levels?  which puts would you sell?  Thx.

  146. USO: (First week trading options & practicing with a couple thousand dollars to monitor my performance/emotions before I risk any of the nest egg).  Yesterday, according to Phil, I stumbled myself into an "option strangle" on USO: 5 $39 calls and 5 $33 puts. After posting my trade Phil recommended I grab a nickle profit on $39 calls, and just hold the puts…unfortunately I didn’t move fast enough; the nickle evaporated. 
    What to do?  In wanting to try out various techniques discussed here , I did the following:  On USO weakness into the final minutes of the day I rolled the calls down to $37.  (My $39′s were down 9% but the $37′s were down almost 20%.)  I was willing to keep the calls as backup since earlier in the day on USO strength I added what I think was a bear spread (??):  Bought 5 USO $34 puts and sold 5 $32 puts for a net cost of $0.43.  (On my charts $32 looked like a solid support zone.  But now realizing the issue is, "Do I have the courage to find out if $32 is support for USO?") 
    On Phil’s alert this morning I sold-to-cover my $34 USO puts for a quick 50% gain.  Now I’m watching  USO floating just above $34 and hoping for a push towards the gap just above @ $35 so I can buy-to-cover the $32 short-puts.  That will put me back in an option strangle with $37 calls and $33 puts.   I’m leaning towards dumping the whole thing since I haven’t lost any money overall.   

  147. JRW/flush.  I was about to say the same.  The two trendlines I had drawn crossed at 12:36.  Flush down, flush up…  Which way Wednesday indeed!

  148. Exec and FJD -

    I am still with LEN. I think right now you can still get the shares for a great value. It is holding up so well considering the results over the last two days, but I think the company will still get great movement off their earnings report tomorrow.

    Ban -

    No problem.

    If you had questions for me this morning on my post answers are up on that post and my new one.

  149. Hi Phil,
    I’m a new member, joined this week & have been watching the chat…ques… we have broken most of the levels you posted to watch this morning except for the Dow: Dow 10,250, S&P 1,100, Nas 2,260, NYSE 7,000 and Russell 666Right now looking at Dow 10,275; S&P 500 1089; Nas 2251; NYSE 6823; R2K 643… At what point do you consider those levels "broken" with more potential downside to go?  thx.

  150. IWM/TZA – there are also June 25th and Jun 30th options for IWM with the 68 deltas  at .04 and .10, which would be 75-1 and 30-1 respectively.  Interesting for short term trades!

  151. IWM/TZA – there are also June 25th and Jun 30th options for IWM with the 68 deltas  at .04 and .10, which would be 75-1 and 30-1 respectively.  Interesting for short term trades!

  152. JRW,
    I remember and that’s why I’m getting aggravated that I can’t see what you are seeing.  I feel like I’m wandering around in the dark without a gun in Harlem trading without these indicators set up correctly.
    I suspect that the problem has do do with the chart or Stoch that you are using for your 1 min.  I thought I read that you do not use the SS-Pro platform for your 1 minute primary chart.  What chart do you use?  SS-Pro also has 3 other Stoch studies.  Perhaps one of them is similar to what you are using.

  153. Pharm
    Am in ARNA. Was there any significant news on VVUS or is this just volatility finally coming in with the pending review?
    I am currently long the stock, half covered on both 3 puts & 4 calls, up nicely on both, and considering moving them to AUG. What do you think?

  154. I have gone long on DIA 104 calls for June 30.  I like the idea that we are near a short term bottom.  I don’t want to make to much about this, but again today I observe that the stock advance/ decline line, although negative, has been edging more positive as the day has gone on.  I also like the idea that there will be end of quarter ‘window dressing’ that will bring us higher through the end of the month.

  155. Hey all,
    I opened a new position in Discover Financial Services for an Overnight Trade. We are involved at 13.80, and I am expecting this one to also have a great day tomorrow. DFS has declined from gains it got this morning, and a lack of huge gains today will be nice.

  156. David,
    I was tempted to DD but it’s moving fast now so just let it ride.

  157. Exec -

    Yes. Sounds good.

  158. TBT- Phil- re: your comment to Gel above- I did roll / buy backs on Sept positions. I have Jan 11 45 and 46 calls w/ 53 and 55 callers. Suggest rolling these now or too early? Thx.

  159. Why are Auto Dealers and Auto Dealer Finance arm going to be exempt from the conumer protection clauses of the FinReg bill? What sense does that make?

  160. Deano – IF VVUS goes down, then ARNA will shoot up.  I would avoid Aug for now unless U want to get called, or do a 1/2 cover.  July 15 is the VVUS date, so right b’f OPEX.  How nicely that works out.  I will probably buy a few ARNA 4 Cs for a nickle on that date. 

  161. Phil, I can’t imagine the Fed will do anything, say anything that will surprise today (maybe just 16 words different today).  Are you anticipating anything in particular this afternoon?

  162. JPM looking strong, i think RIMM margins will be a huge disappointment ….greenback holding onto 86.15
    and now we get the usual pump and dump ahead of  the Fed

  163. Hey Phil,
    R you keeping IWM calls through FOMC?
    Great call on USO (booked +100% on July 34 Puts first thing this am as wifey stole my pc and i had to execute via IPAD). I stopped out on short XLF July 14 Puts. But its net another fine dinner.

  164. David – re: JWM. I bought July options in those not paying attention to the fact that it was a LT play. I am down 50% since I bought it. Do you think it is a good time to roll to Jan 2011 calls? Thank you.

  165. David: sorry, that was JWN.

  166. I have sold 1/3 my ARNA at 3.35/3.40 area and will buy it back today or tomorrow after the initial excitement FWIW.  I think we did it a few weeks ago and bought again at 2.90/3.00 area.  This has reduced by basis considerably…..

  167.  Does anyone like MOS at these levels?  Thinking of going Jan 12 artificial buy write on this. 30/40 call spread & selling 35 P.  Hoping to get into it net 1.25 or so with breakeven about 30% from where it’s trading right now.  My thinking is that population is increasing, arable land decreasing.  One has to think that fertilizer demand will be much higher in the future.

  168. Pharm / ARNA : You’re not worried about it breaking out from this area?  I only have 1/2 of a total position on ARNA (other 1/2 was in sold PUTS for july at 3). Am nervous about selling some of what i do have and missing a move.

  169. Phil,
    I currently have a few WFR calendar spreads (short Oct 13 calls/long Jan 10 calls).  Any advise on what to do with these?  I am down about 10% since buying.
    much appreciated!

  170. RSO (Resource Capital Corp) will be paying a $.25 dividend on July 27th. Buy stock before June 25th to go on record. Yield is 16%. Set tight stops to protect stock. They invest in commercial mortgages ( no residential ) – not guaranteed by government.. Some risk here, but refer to Economics 101 ( Profit is the reward for risk-taking).

  171. jdub : sounds reasonable, and i like MOS. But, i also liked MON at $60. See where that got me….

  172. Phil/relativity – really?! :)

  173. Jo…. I know you have some serious issues in Arizona brewing in the war between the State government and the Feds over immigration policy. The latest word coming out of Washington, is if Obama is unable to get a 60 vote majority in the Senate to give citizenship to the illegals, he than has a plan to legalize 11 – 18 million through executive order, that will then be implemented by Janet Napolitano. How is this setting with the folks there?

  174. Dear Leader Chairman O axes Gen. Mcchrystal for diss.

  175. exec / stoch
    You’re with Schwab, try a second screen for their standard Street Smart; I think their fast stock is a 14,3,3.  My chart is proprietary but if you can get a 1 minute 14,3,3 you should be able to see it.

  176. hanna – 3.48 is OH resistance on them and where did they bounce off of??? 3.46.  Ps R fine.  Remember take money off the table and sell into the initial excitement.  If ARNA runs through 3.48, then I will have to buy them at that price, but I think we will get another opportunity under 3.30 again.

  177. Fed day; just an excuse for the robots to go haywire

  178. JRW
    Is there any of these crosses on todays 1 minute that you could point out?

  179. I am not a techie, but EMC is supposed to have some decent earnings.  Buying the Aug 19 C  and selling the Aug 18 P for a 50c debit.

  180. Sorry, earnings are Jul 21 for EMC.

  181.  GEL – arizonan’s are very much in favor of the immigration reform.  The state bears much of the cost for the social services.  I think immigration policy has been a joke and has not been addressed by either party.  When my dad, got married – my mom had to wait 18 months to come to the states from India.  So its a complicated issue – but i think we are either a nation of laws or we are not.  

  182. exec
     Yesterday at 9:42 and again at 1:36 were the best.

  183. what we have done today is to ‘grind higher’ from the lows.  I think it is bullish for the rest of the day, unless we get something unexpected from the Fed, which I don’t expect.

  184. With a 25% profit since morning should we lighten up on the !WM $68 calls.

  185. exec
    Another indicator that I watch is option Premium by the minute. Simple stuff like index is starting to retreat but options hold or premium increases index steady. I strongly favor looking at many things and changing rather than trying to cement a theory. I constantly find new signals and JRW’s confuence idea with his levels reported every morning and if Phil gives a solid day trade, I call that coordination confermation. Hope this helps and don’t forget JRW also uses that elusive feel. For the first time in 3 weeks I actually took a small position today.

  186. ETFCD/JDub – The problem with brokers (aside from the fact that ETrade sucks) is you don’t know where they are parking their money.  It’s kind of the same problem you have when buying insurance companies but insurance companies aren’t generally run by gamblers but brokers usually are.  Etrade blew a ton of money in bad investments and it nearly took them out a while ago and now they’ve recovered and we assume they’ve learned their lesson but you never know.   With a forward p/e of 20, they are NO bargain and it will be very surprising if they hit those numbers (due to their suckiness).  As to S – many factors but mainly, I want to know if I’m likely to get my money back over 10 years.  

    MON/Chyer – It’s going to be hard for them to miss very low expectations of .80 but the guidance will be key.   I love MON down here long-term so I’m good with the stock at $49.23, selling 2012 $50 puts and calls for $17.40 for a net $31.86/40.93 entry with a whopping 60% upside if called away that makes you forget about the 2% dividend (3.5% on the adjusted entry!).  You can also forego the dividend and go artificial with the Jan $45/55 bull call spread for $4.50 and you can do that straight up as it’s $4.40 in the money or you can sell the $45 puts for $3.50 and you’re in the $10 spread for $1 that’s $4.40 in the money already.

    DIA/Red – See 12:20 to Yodi.

    Edu/Tenger – Looks interesting.

    CBOE/Lapper – I’ll toss a few over for you too!

    SDS/Amatta – Yes, I got out of mine and I stripped the covers off my SSO upside play too so very bullish into the Fed but qick to slap on some DIA puts if it goes wrong.  Just to be clear, I took all short money and ran, even TZA on that dip  and I’m hoping to reset later at cheaper prices.  If I’m wrong, I am not likley to lose even 1/2 of what I gained this morning before I can cover with DIA puts (probably July $101 puts, now $1.50) so that becomes my hedge (the money made) rather than buying covers I don’t believe in.

    LOL JRW – the burden of the daytrader…

    Spokesmodel/Jo – It would be fun if I could do it from home.  Here’s an interesting article on Fox and MSNBC.  I could nickname them "Sleazy" and  "Spineless" and keep confusing their names.  8-)

    Ghosts in the Machine/Matt – That’s why I don’t really bother much.  I pick a spot to take a stand and take it and then I pretty much ignore what happens next.  The key is to manage your entries so if you are wrong, you can DD, roll and DD and roll again, which means you have to be super-duper wrong before you are beaten and, by then, hopefully you have a new hedge down to balance it out.  

    Wow, just 45 mint to the Fed and not much at all as far as movement.  

    Abstinence/Cap – Good strategy!

    XOM/Sean – They got whacked on the oil drop (and don’t say I didn’t tell you!) but I think that was it for now and it’s kind of silly to pay the $62.50 putter $1 (50%) premium but I would put a stop on 1/2 if XOM fails $61 and you can raise that every time they cross a .50 mark so you don’t get caught flat-footed again.

    2 Weeks/QC – How about selling TZA Jan $5 puts for .87 and buying the July $7/8 bull call spread for .29?  Why?  Because you are going away for 2 weeks so you agree to buy $10K of TZA and sell 20 contracts for $1,740 and you put $870 into 30 of the bull spreads and they either pay you $3,000 for nothing or TZA is lower and you can DD on the puts and set up longer Jan protection.  Of course the Jan spread still works as is but you can work into that later

    Griffin/Chaps – Even a crazy person can do some good work.  I have some Van Gogh’s and the guy was totally nuts.  Pythagoras started his own crazy religion, Howard Hughes was wacko, Tesla was totally paraniod (although it turned out he was right – they were all out to get him!)….

    Can we get our Obam 50-point move.  Probably not since he’s not talking about economy, just firing a General.

    TZA/Ocelli – And vice-versa is good to remember too!

    Arrogance/Matt – That’s why we were last in line on that great circle of defaults chart. 

    CHK/Terra – The premise is hurricanes drive up nat gas around Oct/Nov and that should get CHK to $30 so I do likel the Jan $22.50/27 bull call spread for $2, selling the $20 puts for $1.50 for net .50 on the $4.50 spread an a very nice $20.50 entry on CHK, worst case

    USO/Poindexter – It’s not usually a good thing to have 2 front-month positions that are opposites, it makes it hard to win as you are paying 2x premium and, of course, you can’t win both sides at once.  What you should have done with the calls on the dip was either roll them lower or double them down, then get 1/2 back out on the bounce so you are even at a lower basis.  Still, you have your profits and USO held $34 and you are probably good for a move back to $35 but my expected range on oil is $70-80 with maybe $5 on either side as spikes so generally I’ll go short at $80 (willing to roll and DD if oil goes higher) and I’ll go long around $70 but not so willing to roll (tight stops) as oil could collapse. 

    Welcome Jpuma!  If they all break, we are broken but not if it’s just a spike down.  For bullish and bearis leanings, we pretty much look for 3 of the 5 majors either green or red but, of course, coming of a sell-off we expected it’s a judgment call to go long.

  187. Pstas/TBT
    Presently, the PIIGS in the Eurozone are "stinking up" our positions. The economic weakness of these countries are bloating the demand for our treasuries, but judgement day, when we see the rates rise, is immenent, but delayed temporarily. My strategy is to keep rolling down and out, but not liquidating any positions. I am learning the real meaning of patience on this one.

  188. Look at the dollar, i wouldn’t want to be long ahead of the Fed either should find support around this level…we should get a nice buy signal if Bernanke says something that kills the dollar

  189. kustomz,
    Good point. If that doesn’t happen (dollar negative news), I think this market could easily be spooked back down.
    "I have some Van Gogh’s"
    Holy cow Phil, you are a good trader!

  190. Jo…. We are a nation of laws, and we are only as strong as our committment to obey and enforce the laws.. As a naturalized citizen of the US, I know on a personal basis the difficulty in attaining citizenship. It should not become just a "wave of the hand" in order to legalize 10 million new citizens, particularily if it is based upon political expediency and the resulting benefit to a political objective.

  191. Phil/patterns.  Not all that different today compared to the April 28 FOMC.  Sell-off in the morning, slow grind back up until 2:15 followed by choppiness until 3:00, another sell-off and a stick in the last 10 minutes right back where it started.  I’m not saying They have a program for FOMC days, just another coincidence maybe.

  192. Phil,
    I trust we are still in the SSO play  all  due in Jul I hold long 35 caller pd 3.78 now down to 2.53 sold 36 Jul caller for 3.16 now 1.91 and sold 35 jul putter for 2.76 now 1.29
    Well if the stk would stay between 36 and 35 my long caller would be possible worthless but would gain on the short c/p 5.92 giving a net gain of 2.14.  close it now would show only a gain of  +- 1.30 But I trust you will have a better suggestion. Thanks

  193. Phil / EUO Cliff Wachtel sees Spain CDS rate increases signalling the next Euro crisis coming and next leg down in Euro.  How do you feel about EUO Phil? 

  194. IWM/Rain – Be careful with the weeklys as they are very thinly traded and the MMs can rape you on the spreads.

    TBT/Pstas - At this point we have ratcheted down expectations to "they are going to hold $40" so I’d sell the $36 puts for $3 and roll the $45/46 calls down to the $36s for about $3 and buy back the callers and wait for a move up to sell something else for $1.50+ (right now the $46s, which is still $10 of upside). 

    Autos/Hanna – If an auto dealer can’t make money ripping you off on the financing then they may as well close up because they only make about $1,000 on a car.

    Ah, just the cushion I was hoping for into the Fed – Thanks Omega 3! 

    Fed/Judah – Oh no, if they do anything it will be a shocker but nothing is as good an excuse as any to crank up the BuyBots.  Bill Gross is saying Ben should say they will keep rates low for a "hyper-extended period of time" which, of course, would be a huge boost to Gross’ $1Tn Bond Portfolio but there is no disclosure of that at all – he is just put on TV as the world’s greatest expert to guide viewers through the Fed news…

    Margins/Kustomz – Good point, Loonie is kicking Dollar’s ass. 

    IWM/Rexx – Yes keeping but happy to either stop out even or slam DIA covers if we can’t hold 10,300 or 1,090 or 360 on RUT.

  195. Bill Gross looks ill

    gel thats 10 million more votes for the Democrats, the donkey brigades wet dream

    Markets usually spike after the Fed, going to buy back VXX if we get that spike….that housing number was baahaaahad

  196. Phil/Griffin: I agree that crazy people doing useful stuff sometimes. But I don’t think Griffin is crazy, any more than I think Sean Hannity or Glen Beck is "crazy." I listened to "enough" of Griffin’s speeches. He’s a smooth-talking, articulate media guy who, IMO, does "pseudo research" to support a cause. (BTW: In ancient Greek times, math was generally considered a way to divine the workings of the gods. There was no separation of science and religion. So Pythagerous was "mainstream" in that sense, not crazy.)
    Real researchers are usually boring, media-shy people – and probably not smooth-talking speech givers. But they know that real research doesn’t mean you start with an end-state conclusion that conveniently supports what you’re selling to your usual constituents and then back fill by using historical data points to construct a convincing story line. You know the drill. We’ve all seen or read "convincing documentaries" constructed by savvy media types over and over again. It sure looks good and sounds convincing – even though what they’re promoting can simply be wrong.
    I don’t like Bernanke, Geithner, or Summers. I think they’re Mandarins whose careers depend on promoting a system that no longer functions.

  197. Call me stupid if you want but I am sure that the BOTS can’t think but they sure can follow, don’t get bored, patient, and emotionless. If they can pick up trades you are making and resell them to you and make a profit in a milisec, why not spot all those repeat patterns, add some more code and your busted. One thing that I see Phil always doing is changing his ideas of what we should do now and it seems to work most of the time. I am quite sure we are watched and I am slowly seeing more proof. Trader beware!

  198. Phil/ Etrade – I’m actually having pretty good luck with Etrade…I had been away for about a year, and I must say their Pro version 5 is much faster at execution than what I remembered in the past.  I cut a deal to bring in "X" cash and they gave me 500 free trades (even though I have had 8 accounts there long term)…and their execution is much better now and seems to get better the more I have traded over the past 30 days…as if they are picking up on my trading methods.  500 shares always trades fast on almost any stock, 5,000 share block hits the limit, even for a 7 stock like TZA.  As long as you know their limits, it isn’t too bad.  I plan to try Schwab next as a second account, especially if I can get JRW to send me one of his charts! =D

  199. Guess that solves Which Way Wednesday…..or will the pattern be a W?

  200. Phil – real Van Goghs? Anyway, I couldn’t resist selling the TBT $38 puts. Oops, schwab put a 100% cash hold against the 38 strike price (they now have a 100% mr for lev. Etfs). I got rid of that by buying the $30 puts for pennies, but now it occurs to me that even though it would be a heck of a deal at 36.50, that would be way too big of a position for me. Do I just monitor it and worry about rolling it later? I got part of your maxim about not selling something you don’t want to own but I forgot to look at position size . Thx.

  201. Deflation deflation deflation if the dollar holds steady commodities and markets most likely head lower

  202. There is the Fed statement.  Nothing new.  The economy is slowing and we will have low rates for as far as the eye can see.  That means more of the same.  Dollar flat to down and stocks flat to up.

  203. Executing wife via IPad/Rexx – There’s an App for that?  8-)

    MOS/Jdub – I don’t like anyone in that space but MON, CAT, DD and DE.

    WFR/Knuck – Patience I think but maybe buy back the $13 caller if you are up on them and wait for bounce to re-sell. 

    No change on Fed - No surprise of course and we’re ticking down in possible head fake.  They are sticking with generally positive outlook with CRE the weakest point plus concerns re. foreign situations hitting our recovery

    Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

    Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

    The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

    The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

    Just a fake down probably so we take a quick dime or so on the put play, there is nothing here to worry over and there sure as hell is no volume at the moment.  Dow volume is 95M at 2:22 but let’s watch our levels here (10,250, 1,088 and 640 on RUT).  I meant 360 on SOX in last comment!

  204. Phi: thanks!  And yes you did warn me.  I bought back half since it is now awfully close to $61.

  205. Thanks Phil.  Will study your advice closely and go back over my trades versus your advice.   Sold my
    $34 puts for $1.10 and waited to cover the $32 short put for $0.36.  So on an initial outlay of $0.43 I had gross profit of $0.31 or 72% overnight.  Net profit cut in half due to e*Trade commissions!  But I’m just practicing with small $$ and high commissions.  Will open an account elsewhere with cheaper commissions and $100,000, but I’m clearly not ready for that yet.  For now:  "wax-on, wax-off" like the original Karate Kid.   For better or probably worse, I still have an option strangle
    July $37 calls and July $33 puts.  Since I rolled down the $32 calls to the $37′s, this cost me an extra $50.  Currently net down $95 on the strangle.  Much to learn!

  206. Don’t forget the important news. The white I-Phone will be available in the second half of July.  Wow!

  207. Good call FJD!

    Oh and we’re off!  I am SO HAPPY NOW!!!! 

  208. Question for Phil and everyone else,
    Does anyone have any replacement ideas for selling TZA or BGZ puts as part of the disaster hedges. TD Ameritrade requires outrageous margin for them. For example, I recently sold 5 BGZ Jan11 12 puts (way out of money), maximum payout on the five totals only $675, but they are holding over $5,800 in cash for the margin requirement. That’s crazy and makes it hard to sell a serious number of hedge puts. Are there replacement instruments to sell premium that don’t require such margin?
    Speaking of TD Ameritrade, they may be to blame for some of the TOS bandwidth issues I have been reading here. When TDA’s platform crashes (about weekly), they are now referring customers to use the TOS platform, which they can access from their TDA account. So it’s possible TOS is getting swamped with TDA customers accessing the TOS platform. 

  209. And FAS is green for the day.  I really need my head examined.   Omega 3 seems to be aliveand well.  What a joke!!!!!!!!!!!!!!!!!!

  210. Head fake all right. Wow!

  211. Wow, is that Mr. Sticky showing up early?

  212. Oh-oh: now XOM is back up!

  213. Dollar getting creamed no reason not to go up

  214. USO:  Thanks Phil.  Will study your advice closely and go back over my trades so I know what to do next time.   Sold my USO $34 puts for $1.10 and waited to cover the $32 short put for $0.36.  So on an initial outlay of $0.43 I had gross profit of $0.31 or 72% gain overnight.  Net profit cut in half due to e*Trade commissions!  But I’m just practicing with small $$ and high commissions.  Will open an account elsewhere with cheaper commissions and $100,000, but I’m clearly not ready for that yet.  For now:  "wax-on, wax-off" like the original Karate Kid.   For better or probably worse, I still have an option strangle USO July $37 calls and July $33 puts.  Since I rolled down the $39 calls to the $37′s yesterday, this cost me an extra $50.  Currently net down $95 on the strangle.  If post-FED is a fake down as you suggest, I might look for an opportunity to sell the $33 puts for a nice gain.  If I were stuck with a July calls at $37, it would be very little money and nothing to worry over.    Much to learn though!

  215. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.
    Gotta love those midwestern bankers….such spunk!  Oh, and building that bunker in KC not a bad idea!

  216. Phil and goldman
    Etrade has gotten better lately and bettered my last 3 limit orders. I would love to believe my constant sqeaky wheel is being greased but they have changed two of my complaints. They promised Monday a few more improvments and I promised I wll maybe transfer the 0% money out of Wells Fargo maybe! Don’t forget saying what you want changed sometimes helps along with mentioning few in our group use them.

  217. I’m wondering whether that was just a big traders rally/short squeeze with no follow-through buying by funds.

  218. Today could be the straw that breaks the camel’s back.  This market has become such a racket that I can’t in good faith trade it.  It is clearly sick.

  219. Yeesh, everything looks like a headfake today.

  220. Hey all,

    Small Daily Discourse addressing the jobs that are coming in the second half of 2010. Big announcement from the Roundtable of CEOs this morning…

    Check it out here.

    Good Investing!

  221. judah,
    Can you link a chart of the last FOMC day ?

  222. kustomz…. ha-ha-ha… oh yes…. that 10 million new voters would be a "thunderstorm strength" dream!

  223. Phil / double dip   Seems Fed is just reconfirming DD and need for more free money.  I don’t recall a real economy this bad since early 70′s.  My nephew with Mag Cum Laude in Maths is working in a bar.  The next leg down in housing will put consumer spending in the tank and business spending (and profits) will follow.  I recall you think more stimulus will keep the heart ticking, but I’m not sure there will be the political support for meaningful additional spending until we have another mkt collapse.  Still stuck with my 90% net cash position for the past month and can’t get motivated to do more than day trade.  If, as I believe, US and Europe are headed into deep recession, should I buy VXX?  I’ve learnt from your website that the mkt is totally manipulated so logic doesn’t (at least short term) prevail, so defer to you as to if and when to expand my short book.  Thanks for your ‘Relativity’ comment.

  224. Geithner and Summers are at the G-20 trying to convince the Eurozone to drop the austerity measures and crank up much more quantitative easing. They think these guys are totally NUTS! We now know how we got into this horrible mess. We are the next domino.

  225. FOMC/Judah – Yeah, that’s kind of the wild-card but the bigger pattern says back to 10,450, 1,120 on this run and anything less is a sign of underlying weakness that we can’t ignore.

    SSO/Yodi – I took out the caller and DD’d on the $37 calls ($1.81 avg) and left the $29 putter alone as I’m not too worried with SSO at $36.  I will kill the trade if we can’t hold 10,300 now and I will start moving back to cash (out of short-term trades).

    EUO/Tusca – Well we were short from $26 to $24.50 where they stopped us out so maybe best to see if they hold it again.  I don’t think you should run your trades based on daily moves in CDS rates – may as well shoot craps. 

    Gross/Kustomz – He sure sounds ill.  Got that Steve Jobs whispy voice thing going. 

    If you guys aren’t watching VNO and BXP then I have taught you nothing this week!  $77.50 on VNO is a good pass/fail line for closing expectations.

    Crazy/Chaps – You don’t think Hannity and Beck are crazy? Where on Earth do you draw the line???  As to Pythagoras, I’m pretty sure making new religions where you were the god was frowned upon then, much as it is now.  Anyway, the Fed is dangerous, no doubt and evil most likely and it was clearly set up by bankers to control government and not by government to control bankers so all fruit of a poisoned tree there anyway. 

    Beware/Shadow – I say don’t worry about it and just go with the flow.  It’s like saying the tides are against you when you are trying to catch a wave – just pick a wave and ride it while you can and get off before you crash into the rocks. 

    ETrade/Gold – I haven’t used them in ages (but I still use the Etrade Pro screen for charts). 

    Van Goghs/Rd – No, reproductions!  I never understand people who pay tons of money for paintings when you need an art expert to tell it apart from a good copy anyway.  On TBT – Just stop out at a place you are comfortable with.  It’s not generally a very fast mover and it’s not like they are going to go BK overnight (althought they may shoot up overnight one day). 

    3pm Dow volume is 118M (very low) at 10,309.  S&P 1,092, Nas 2,257, NYSE 6,854, RUT 646, SOX 364 and Transports 2,027 and we’d really like to see them take out 2,030.

    USO/Poindexter – That is BS comissions.  Better off paper trading than tossing money out the window like that. 

    Oh damn, well that’s it.  Too weak to hold.

  226. Half out of VXX long some QCOM

  227. JRW/FOMC chart.  I was just looking at the 1-min chart from 4/28.  I’m not sure how to put in a link to it, but 4/28 also had a fake move down at 2:15 followed by the high for the day, followed by a sell-off that accelerated at 3:00 and a small stick at 3:50 into the close.  So far, it is awfully similar to today’s moves on IWM.

  228. Get ready for the stick save.  Per fjd there’s a white iPhone coming out in July ferchrisstakes. 

  229. Great day for trade bots: in an out every few seconds should be working.

  230.  Those who were looking to short NFLX, you may get a chance to scale in or all in today.  Getting a nice bounce but anemic volume.

  231. True, but accurate. As well, housing numbers way down and the homebuilders are up today????  LEN UP+70. America has been bought and soldout! The banks own and run everything, markets what markets we don’t need no stinking markets. We got HAL!……………………………….Wake up America. If today wasn’t the perfect example , there is none and the markets are in fact just fine and functional. This is past depressing if you think more than a week ahead.

  232. Phil,
    Your take on the close ?   Stick ?
    No volume so no REDEMPTIONS, FOMC is done so why not ?

  233. Thanks jdub.

  234. Zzzzz…
    Yawn…  Ummm…
    VNO? BXP? Did I miss some lessons?  How do VNO and BXO do with closing expectation?
    Sorry, I’ve been out for a few days.

  235. Phil/Hannity/Beck: I have no idea what those guys really believe – anymore than I know what a fundamentalist preacher fleecing the masses "really" believes. I know they’re making a very good living telling a constituency what they want to hear. Sean Hannity is a fast-talking salesman. I think he could sell a number of things.

  236.  Waiting to short F if it breaks 11 w/ volume for a day trade into the close.  

  237. JRW,
    I looked at the times and see the Nazi cross pattern that you are referring too.  On my screen, the pattern occurs over 5 minute span (approximately) and starts above the .25 line, crosses below the .25 line  then back over.  On the first instance, the momentum is elevated above the .75 line and on the second, it’s below the .75 line.
    Is this what your pattern is doing?  I was looking for the pattern above the .75 line.

  238. judah,  thanks !!

  239. Just saw YRCW – down to 0.19.  I am thinking of going in selling some Jan 2012 $1 puts, for $0.85.

  240. Alt- universe Capt JT Kirk had that app. I was just trading on an Ipad.

  241. Sorry, that was Jan 2011 puts for $0.85, not 2012.  Risky.

  242. exec
    No, It rarely takes more than 20 or 30 seconds. It’s just an indicator of a Buy or Sell program being turned on !!

  243. Margin/Kurur – Remind me after hours and I’ll look for something interesting.

    Can’t beat the Bot Matt…

    On the whole, volume is too soft to take any of this seriously, could get a huge stick at 3:30 or even 3:45 (to piss off max amount of people).

    ETFC/Shadow – They lost me forever.  They were a total disaster for options trading, at that time I left and found OXPS 10x better but then I went to TOS and they are 3x better than OXPS so I can’t even imagine going back to ETrade now. 

    Woops Matt – I did a search for all the times you said this was the last straw and got a stack overflow on the database…  8-)

    Jobs/David – Well, I hope so.   We are not going anywhere with a plan of less jobs, less wages and more taxes.

    Working in a bar/Tusca – Cool!  Beat my first few jobs out of school (mid 80s).  I’m not into betting VIX goes up as a way to play short.  The spreads on the VIX are ridiculous, the movement is random and you can be in and out of an index put 5 times while staring at VXX and wondering why it isn’t paying you off.  If you want to gamble on the downside, do the 2-week TZA play above. 

    Geithner & Summers/Gel – What I worry about is these guys will sound like when one of your nephews comes to you with a really dumb business plan and all it does is remind you NEVER to lend them money again… 

    I just did not see anything so terrible in the Fed that we should be selling off from that point.   Hopefully stick takes us up 100 into the close but I’m still lightening up on each little bump

  244. JRW, I’d add that so far each day this week has been behaving very much like the week of 4/26, but let’s hope the similarity ends there because the following week was flash crash week.

  245.  Yet again – TOS chart streaming seems to be having a "glitch" at the end of the day… 

  246. This IS a painful day to trade, but I feel better about only being up 1% today !!

  247. I think I just became YRCW’s biggest shareholder at .19!  8-)

    VNO/Cwan – They have just been excellent leading indicators for market moves.   Keep an eye on them for a while, whatever programs are running, they are on the list and, since thinly traded, perhaps react with a little more of a lead.  Also, I still think CRE sucks so if they are going up, then there must be a general buy on somewhere….

    Belief/Chaps – Well I like to give benefit of doubt that they are honest and crazy rather than deceptive and simply evil I guess…

    No 3:30 stick, one more crack at it in 15 mins and then it’s way to risky not to be neutral into close.  DIA $103 puts off the table at $1.25 on mattress play, leaving 1/2 cover with $104 puts (now $1.72). 

  248. "They" are probably going to do it to us in the off market hours.  Does anyone have an Asian or European account that can actively trade US ETF’s ??

  249.  Hey Phil…
    I like playing X up and down as when it moves its usually a big move…was wondering wat ur thoughts were in the short term…do you see them moving up(44 now), as it seems the global bad news has hit a peak .

  250.  Hey Phil…
    I like playing X up and down as when it moves its usually a big move…was wondering wat ur thoughts were in the short term…do you see them moving up(44 now), as it seems the global bad news has hit a peak .

  251. USD/JPY just poked below 90

  252. HERO is back 2,72 Gambling, but possible sell jan21  2.5 calls and puts

  253. Phil,
    I might be 2nd biggest in YRCW after you.

  254. I can’t believe we’ve been essentially in a 50 cent range on IWM for the whole day !!  (64.36 – 64.86)

  255. I will wait until tomorrow to buy back those ARNA sold.

  256. I don’t know guys, I’m still feeling 10,450 for the finish to the week.  Can’t bring myself to close out the rest of the longs but cut back significantly

    Crash/Judah – Even worse news, Feb 25th, which we are heading into on Omega 3, was a very, very sharp down day that recovered most of the drop by the close (but the next week was very nice) so not out of the question we still have our blow-off bottom tomorrow.

  257. Phil, I was just thinking, maybe you should have called this "Which way Fedsday". :)

  258. JRW/ ETFs on foreign markets,
    Why not consider using futures instead (/TF). Your lines etc are easily translated to /TF. Most importantly they are very liquid, which is what you need. Futures are integrated into TOS, but on Schwab, they are separate, as you probably know. Just a thought……also you can play with the movements immediately after the close.

  259. ETFs/JRW – Just get a futures account. 

    Peak badness/Bambi – X has too many burdened long-term liablities (retirement, health care) and they are almost GMish in that respect except people still want their steel and nobody wanted the cars GM made out of that steel.  Other than that, they have the same problems.  I like MT better in that space but they may not be done going down.  Still you can buy them at $31.18 and sell the Jan $30 puts and calls for $9 for a net $22.18/26.06 entry AND they pay a 2% dividend, which is more like 3% with that entry.

    Yen/Kinki - That is going to knock the Nikkei back a bunch and then I become concerned that Dow and Nikkei shouldn’t be more than 500 points apart (Nikk now 9,923).  So if we don’t get a big Yen drop tomorrow, I’ll be worried about any Dow rally we see.

    YRWC/BPS – So I’ll tell you now, out with 20% loss on that one. 

    HERO/Pahurik – I like that one!

    Good title JBur! 

  260. YRCW: Why not buy Jan $1 Calls for $0.04?  By buying 100 contracts, I might control more shares than you folks with less money!  If it doesn’t work, I am only out a couple hundred dollars.
    The commissions is crazy, though.  A huge % of the total $.

  261. JRW - only opportunity I’ve found today was TZA when we hit the 200 (no-news-fed-headfake), and the upward trend starting at 3:06….but the trend just broke @ 3:50ish so down we go……….

  262. Glad this day is over. I couldn’t tear myself away, even though it was a complete waste of time to watch.

  263. tuskadog… your earlier question to Phil regarding the Euro direction. I am in a long term position (EUO spread) that I have anticipating the further weakness of the Euro. All of the countries in the eurozone sharing the Euro (16), with the exception of Germany, are very weak. Most investors are laboring under the belief France (big economy) is relatively stronger, and the stats prove the inverse. France will be revealing their GDP numbers in August, and expectations are dismal. France is soon to be downgraded as far as their debt is concerned, and this will spell big problems for the Euro going forward. Germany, the only stalwart in the group is very reluctant to be of any further assistance. More sparks to fly!

  264. Phil – Who do you use for futures account?  I set up Etrade’s partner company on a computer but the interface is difficult, and I’m just playing with it right now.  Also, I’m surprised you us EPro for charts as I just talked you can’t change the axis range, it defaults to the high and low for the stock.  I contacted them in the past, and they say many users have complained, and it "might" get upgraded.
    JRW – Does PSW get discount trading at Schwab?  Are their account discounts based on account size, number of trades, or both?

  265. Hmmmmmmmmmmmmm, 64.59 !! 

  266. Phil
    General Q: Why do you recommend the Jan2012 expiration options on most of your stock plays?
    Why not jan 2011? Or earlier ?
    I know the time premium is a factor, but so much can happen between now and Jan 2012. And if you sell premium, it is a long time to wait to collect the 20% or so.
    What am I missing?

  267. Thanks Phil for looking into this put hedge question…. Anytime you can get to it after hours today or tomorrow or whenever is fine.  Here it is the post again below.
    "Question for Phil and everyone else,
    Does anyone have any replacement ideas for selling TZA or BGZ puts as part of the disaster hedges. TD Ameritrade requires outrageous margin for them. For example, I recently sold 5 BGZ Jan11 12 puts (way out of money), maximum payout on the five totals only $675, but they are holding over $5,800 in cash for the margin requirement. That’s crazy and makes it hard to sell a serious number of hedge puts. Are there replacement instruments to sell premium that don’t require such margin?
    Speaking of TD Ameritrade, they may be to blame for some of the TOS bandwidth issues I have been reading here. When TDA’s platform crashes (about weekly), they are now referring customers to use the TOS platform, which they can access from their TDA account. So it’s possible TOS is getting swamped with TDA customers accessing the TOS platform. "

  268. Maya- see TBT- sometimes it takes longer to be right.

  269. JRW – My lines had 64.21, 64.73….how did you get 64.59, do tell as that one stuck like glue!  Also, I had a line at 63.97 that I listed at open today…looking at it now, I should have listed 64.89 (triple decending bottom June11/23

  270. Questionable Jefferson Quote:  Taking nothing away from the excellent Which Way Weds blog article, I think we have to question  the authenticity of the Jefferson quote on banking.    The consensus of historians is that there is no reliable source for that quote and Jefferson would not have used terms like inflation (first appeared 1864) and deflation (first appeared ~1920).  So probably quote was "invented" in the ’20s.  Take a look at the book,  RESPECTFULLY QUOTED:  A DICTIONARY OF QUOTATIONS.  I’ve been a big fan of Phil’s blog articles on …that’s what drew me to become a subscriber:  the fantastic quality of the writing.  Not just good content, but funny, wise, controversial, interesting, valuable…on & on.  Just wanted to point out how easy it is for quotes to take on a life of their own on the Internet.  Google this quote and see how often it’s been used and where.

  271. gel / EUO    Yes, and Spain’s real estate surplus is considered to be 3x ours (in proportion to population) yet already 20% unemployment.  How do you get unemployment down when you can’t build anything for 7 years and they don’t manufacture and export anything.  Will come off the rails before France and Italy, hence my interest in EUO.

  272. JRW, i have tried to google Sig Rune without any success.  It would be great to see exactly to what you are referring to.  If you have time could you post a link, chart or a picture.  TIA.

  273. tuscadog and gel, I think you dont know nothing about Europe. Irw@spain dont manufacture and export anything. LOL

  274. YRCW/Cwan – On a play like that, you just have to consider the comission part of the cost.  Also, if you do those a lot, it may be worthwhile to have a side account with OptionHouse or someone else who give a flat rate on a trade ($10 there).  As to why not buy Jan $1 calls for .04 - by the time you get your .04 back we have a 400% gain, that’s why.   

    Volume finished at 185M on Dow so 1/3 traded in last 1/2 hour and that’s a little encouraging that we didn’t lose ground but no stick and no 10,300 and 6,850 on the nose on the NYSE not all too encouraging.

    I’m thinking though that the reason we bailed in later April was the BBook (among other things) and the Fed statement is just a reflection of that book so all old news and not the kind of thing that should move a market much.  Quarter does end next Thursday so they could ram us up next week and still take us back down by options expiration, which would be a good plan when you consider selling covers on everything ahead of earnings, then wiping out the covers and selling puts and then going back up into expiration and wiping out the puts – BRILLIANT! 

    Tearing away/Eric – Yes, like watching very, very expensive paint dry…  8-)

    Futures/Goldman – TOS, very easy.   I use EtradePro on one of my 8 screens because I like the watch list with the ugly colors and the high/low ticker and I almost never flip that chart off the DIA.  My main charter is Esignal.

    2012/Maya – As a Mayan, you should know the world will end in 2012 so we can either take our gains early or let our losers run to the end of the year and hope the world ends before we get the stock put to us!  Seriously, it’s a matter of what’s paying best.  I just picked the Jan puts and calls on MT because the 2012s don’t pay enough additional money to merit the longer commitment.  I look at Jan and 2012 almost every time and, usually, the 2012s are worth it but the lower the VIX gets, the less true that becomes.  Keep in mind the point is to BE SAFE!  We don’t know that the markets won’t crash again, maybe as bad or worse than March 2009 and we want to be very well covered with as little expenditure as possible.  This is not a market for trying to make huge gains by taking huge risks.  If we are deflating, then just keeping the amount you have will make you a winner so our goal is to do better than bonds (10%) and better than inflation (5% despite what they tell you) and try not to lose anything.

  275. Hi Phil BiDU Sept 77 short call was roll previous mos now 7.7, should I solit this into august  70 short put and august 85 short call for 7.6 almost even price or this is not recommended, thx

  276. goldman / 64.59
    Confluence,  I do all the calculations, and they are what they are. Your other lines are all good also; I had 64.21, 64.71, and 63.96

  277. I’m goin’ to have me some fresh homemade cherry pie (with ice cream on top) after that day!  Too bad you all don’t live in Missouri!! you could come on over!

  278. If only our present day politicians could same the same as Tom :
    I have the consolation of having added nothing to my private fortune during my public service, and of retiring with hands clean as they are empty.

    Thomas Jefferson, letter to Count Diodati, 1807

  279. roberthjrfl,

    Sig rune of the Armanen Futharkh, identical in shape to Sigel.

    While the rune itself has no direct connection to National-Socialism, the Sig rune used by Karl Maria Wiligut (Himmler‘s official occultist) in his own runic row (Wiligut runes) was used in the context of Nazi mysticism and is most commonly used to refer to the insignia of the Schutzstaffel (SS) of the Third Reich.
    Guido von List in his "Armanen runes" called the rune "Sig", apparently based on Sigel, thus changing the concept associated with it from "Sun" to "victory" (German Sieg), arriving at a sequence "Sig", "Tyr" in his row, yielding Sigtyr (God of victory), a name of Odin. Under this name of "Sig rune", the s-rune played a certain role in Fascist symbolism, most notably in the badge of the Schutzstaffel (SS), but this is credited to the Wiligut runic row of Karl Maria Wiligut as opposed to Guido von List.

    Two white oblique Sig Runes on black: The symbol of the Nazi SS

    The SS Sig Runes design was created in 1931 when Walter Heck, a Sturmführer in the SS, drew two reversed and inverted Sig Runes side by side and noticed the similarity to the initials of the SS. Heck sold the rights of the Sig Runes to the SS for 2.5 Reichsmarks, and the runes were quickly adopted as the insignia of the Schutzstaffel and became one of the most commonly used forms of SS unit insignia. [1]
    The Hitler Youth also used a single Sig Rune, but not as the emblem of its organization. The similarity to the SS insignia was an indication that the Hitler Youth was considered by many to be a central recruiting area for membership in the SS.

  280. I guess a hypothetical question, but still… if I buy 1 million shares YRCW at 0.19, do the flat rate brokers still charge $10?  InteractiveBrokers says the commission for that "trade" is about $1,000 (they have a formula based on number of shares and value of shares). :)

  281. Politico
    I cought a comment that made me take two. The liberals are complaining that Obama hasn’t sent a new stimulus package. Evidently nobody knows anything about anyone on either side or any history as Bush started simuloss  it didn’t work but we must try again. The logic is if you hit your hand with a hammer enough times it won’t hurt as much as the first blow. Econ for dummies and congresspeople!

  282. Pahurik / Spain  Simply pointing out that Spain (like Greece) is not a competitive exporter (has boomed for ten years on construction, European second home mkt a la Florida, services and tourism.  With the massive excess RE supply there’s no way to reduce massive unemployment.  Spain  was a bubble like Miami condos and Vegas real estate, just there it’s the whole country.

  283. robert,
    Sorry, the PSW evidently won’t let it post. Just go here :

  284. Yes, I know they report tomorrow, but the fact is all the homebuilders are BK if not for the tax breaks they recieved, special accounting issues and homebuyer credits. Now if that isn’t changing the rules for special interest, what is? I have a 3 dollar bill as well.

  285. Thanks JRW.

  286. Yes, Spain is in trouble, but we have in home maybe bigger real estate  bubble, economy fall 15% last year and unemployment +15%. But we cut spendings, we are only state in Europe with deficit 2% and export flying. All is possible if goverment do right things and 1. jan we are 17. eurozone member. If you are small country you cant print money like US and we can spent only money, that we have.

  287. phil
    Thank you for that explanation.
    Maya stands for duality of life, and the fact that ultimately, money and all the ‘stuff ‘ does not matter at all as its all MAYA!
    I find I do well in life when I keep that perspective. Still, nicer to make ‘money’ than not to!

  288. Anyone here buying the stock of YRCW? You guys have sparked my interest…this is a quick in and out deal as they are in a world of trouble.

  289. I think if euro falls to 1-1 to dollar, it is problem only for US and China, not for Europe. I remeber time then euro was 0.85 $ and euro fall is very good for Eurozone export and if higher oil prices give inflation, its help to avoid deflation like 20 years in Japan.

  290. kustomz, I am thinking of YRCW, but not a quick in and out.  Rather, planning to have a stop-loss.

  291. If we only had a few of these guys on both sides running for national office- what a treat that would be.

  292. Phil – Earlier in the day you suggested selling TBT JUL 38p’s for $1.5 (or thereabouts) – they were up $.28 on the day. What about selling SEPT 36′s instead for $1.60 or DEC $35′s for $2.20 to get a get a better price if they get put to you? On the DEC35′s there is less leverage but seems about the same for the SEPT 36′s. What is the downside of selling a later month for more premium at the same or lower strike?

  293. pahurik…. oh no…. I hope you are not the one that bought the puts I sold on EUO… we need to work as a team!

  294. pahurik… the weakening of the Euro is the best news for the Eurozone, as it will boost their economy in spades, and will help them with the re-payment of their masssive debt. It is the best chance for a re-birth. – not so good though for those that are competitors who are producing goods and services in areas where they are active commercially. Great time to book a long overdue vacation in Europe!

  295.  Phil, 
    I signed up with the expectation to set up a long term portfolio and hedge the positions, making adjustments sporadically. And do a little side trading with options as per recommendations on the site.
    However I have been doing very poorly (down already $20K now in my $120K that is not in cash) because I can’t follow all the trades…even the long term hedges are constantly being entered and exited (and it is not easy to follow, plus when I realize that you have made some adjustments it is too late (as with my  June SDS/TZA on which I lost $6,000+) --I obviously understand you can’t possibly post every move you make and nobody could follow them exactly). I am not sure even if the long buy-writes and artificials are there for that long or you are actively trading them… 
    So I can’t see how one can actually do well without dedicating the majority of the day to trading…contrary to what you explained to me a few weeks ago when I joined.
    Or do you see I can manage to do well by entering the 20 or so long buy-write positions, hedge them and do adjustments every week or couple of weeks?

  296. amatta – why not use the buy list as your starter positions and the DIAs as a tool (paper trade) to get a feeling of Phil’s techniques.  There is no way one can do every trade done here, and many are redos (see SPWRA for an example).  Many of the dividend players that are noted are good for 2012 buy writes, selling the puts IF we go down, or selling 1/2 the puts.  Also, as Phil and I have noted many times (Opt also does this), scale in.  Jumping in whole is a big mistake.  The $6K loss is large, but can be recouped. 
    My advice for all newbies is when Phil posts a trade, look at the charts, daily for 3mo to 1 yr, and the weekly and monthly for several years.  That gives you a breadth of where the stock has been and could go.   Use the charts, sector and overall market determine the entry.  Don’t jump in with one foot, dangle your toes.  If you miss the entry, move on to another….there are plenty to go by.  Then, if your account is 100K, scale in with a 100 share buy write or sell a put (if you can)
    I also use Opts strategy when entering.  If the 5d MA is down, I may wait a day or two to see where the stock goes.  Take my GSK trade for an example.  GSK is at $35, 5d MA is down, but the trend line on the 1d chart from the bottom on 5/25 is up.  I will enter my stock buy here and most likely my P on the first green turn, but may wait for the C side for the cover.  It is a matter of preference for me, but for the writeups it is too difficult to say that.  Overall, the trade does not change that much.  I am trying to be a portfolio manager and trend trade a few things for extra $$. 
    As for the hedges, I would paper trade those until you get a feeling for the movement of them and the stochs.  I am down on the hedges a bit, but since the beginning (2008), only about 2K which is the purpose of the hedge. 

  297. Pharm – so over what period of time does it take you to fully enter a buy write position? On balance this works out better than doing the puts and calls at the same time as the long (I presume sometimes you end with a different entry point on a leg than you were targeting?)?

  298. Pharmboy: your advice to amatta is really good.  I have the similar experience with Amatta.  I think this site provides enoumous amount of valuable information, education and great trading ideas.  However, for someone who can’t spend  a great deal amount of time trading, it is difficult to pick and choose profitable trades, make appropriate adjustments and time entry/exits.  I also have lost quite a bit of money; but they were mostly because I didn’t have appropriate position size, or didn’t respect stops, didn’t take profit at the right time, etc.  I agree with you the best strategy for people like me and Amatta is to do buy/write. 
    Just curious: you said you only lost $2K on disaster hedges since 2008.  Is that because those hedges paid off huge in 2008 but overall you still lost $2K?  For a buy/write with inherent 20% cushion, is it really necessary to have disaster hedges?

  299. SeanC: As I understand it, the good thing about a disaster hedge is that it’ll pay enough on your first 20% drop to average yourself down (i.e., another buy/write at the 20% cheaper price with 20% more of a cushion).
    Others: Do I have that right?

  300. Boobearsdad: I once saw Phil responding to a "Boob" and thought he meant "Bob".  That must be you!
    You may be right; but I don’t think the disaster hedge will be enough to pay for 2nd round…

  301. SeanC: Yeah, he calls me "Boob" sometimes, "Boobs" other times, "BooBear" others.  Whatever works.  (In truth, Boo Bear is my "son", a 4-1/2-year-old Pekingese.)
    The disaster hedge is enough to pay for the second round if it’s big enough.  If you’re 25% long with a 5% disaster hedge that pays 500% when the disaster comes, your disaster hedge will pay 25% of your original portfolio size.  Right now, he’s not suggesting disaster hedges as big as 5%, but I suspect that will change if we break down below 1040 or if the "mood" changes.

  302. Hedges/Kururi – First of all, why do I like the TZA hedge?  I like it because it’s currently $7 so if I sell the $5 puts I can’t possibly lose more than $5 but I still get paid $1.85 for selling a 2012 $5 puts (almost 40%).  BGZ is $15 and I can’t sell the 2012 puts, I can sell the Jan $13 puts for $1.70 but that’s nothing like 40% off if put to me.  Also, my logic with having something like TZA put to me at net 50% off the current price is that if TZA is down 50% then the RUT is up 17% and that means I really don’t mind owning TZA at $3 as long-term portfolio protection.  I’m fairly confident that, even if TZA is $2 per share, that I can sell $3 calls for .10 and if I do that 10 times a year I have a 33% ROI so there’s little downside to the position.  That’s why I flipped to it for my main hedge.    

    So the key to the strategy is thinking through the downside to the bitter end and, if you don’t mind the bitter end so much – then what’s not to love?  When they reverse split TZA, it won’t take away the fact that we collected 40% of the long put--to price so if they go 1 for 10, then we collected $20 on the $50 puts, not a big difference but I’ll bet the $50 puts are no longer $20 so maybe a quick victory for us there! 

    So – what are we protecting?  TZA is a nice general hedge as is BGZ but so are the 2x funds like QID, SDS and DXD.  None are particularly low at the moment because, of course, we went down recently and they all got a boost and I don’t want to bet against tech because that goes against our "Tale of Two Economies" premise so I think that keeps us in TZA for now as a long-term general hedge until they take it away. 

    After all that then, it’s still going to be TZA, selling 2012 $5 puts for $1.80 (and TOS says that’s a net margin of $2,137 for 10, which does indicate they are marining about 80% of this thing).  But, again – I DON’T MIND OWNING IT so I will NEVER panic if TZA goes low and the price of the putter goes up because I DON’T MIND OWNING IT as long-term protection to my bullish positions and if I sell 20 of those to generate $3,600 and commit to owning $10,000 worth or TZA at $5 and my bullish positons aren’t going to make much more than $10,000 if the Russell goes up 50% – then I MUST BE AN IDIOT for overinsuring myself.

    So we are on the hook for up to $10,000 and we have $3,600 cash to blow on an insurance play.  The Jan $4/11 spread is less than $2 but do we think we’ll ever get to $11?  TZA is at $7 and $4 more is 57% so the RUT would have to fall about 20% for us to get to $11.  It’s very possible but not likely by Jan (we hope).  The Jan $4/7 bull spread is $1.25 and has the very nice advantage of starting out 100% in the money.  That means that UNLESS the RUT goes up, you make $1.75 (140%).  Don’t forget – you don’t need to sell long puts, you can just go for, perhaps $5,000 that pays $7,000 if the RUT refuses to go up and that will augment $100,000 worth of buy/writes that have a built-in 20% hedge that will make 20% if the RUT doesn’t go down.  So you make $20K on the bull calls if we flatline and you make $7K on the bear play if we flatline and somewhere between $27,000 profit on $105K invested and wherever the RUT ends is your destiny.

    BUT, we’re more adventurous and we have $3,800 of free money (don’t forget your $10K commitment) from the put sale and we’re happy to use that to buy 30 $4/7 contracts that pay us back $9,000 IF THE RUSSELL SIMPLY DOES NOT GO UP and, of course, if the RUSSELL either doesn’t go up or goes down then TZA will go up and the 20 2012 puts (remember that) that we sold will get cheaper too, so it’s $9,000 of essentially free money on the TZA winning side and that $9,000 then pays for a 100% loss on the 2012 puts less just $1,000 so very cool there

    With $9,000 in our pocket, what would we end up doing?  Let’s say we hedged $125K in positions that had a 20% buffer (our discount so we used $100K in cash) but the market dropped 30% and now those positions are worth just $87,500 and we are forced to buy another round for $100,000.  That means we need to take $91,000 out of our cash and the $9,000 from the TZA spread (and this is assuming we sat there like idiots while the market went 30% against us) and now we are $178,000 out of pocket on positions that are down 30% and worth $175,000 and we have 20 TZA $5 puts with TZA up 90% to $13.30 so maybe they are worth $1 but probably not.

    What do we do next?  Well we should still have at least $222,000 on the sidelines because we had to have $400,000 to take $100,000 worth of positions at round one, right?  So now the market is down 30% (Dow 7,210,  S&P 765, RUT 450) and we have a total loss of $3,000 on $178,000 in positions and $222,000 in cash and we decide if we want to once again commit to a full DD by giving ourselves another 20% discount or do we want to maybe sell 1/2 of our positions and start the cycle at 1x again.  Frankly, if we go back to 1x and knock 20% off a market that’s down 30% already, especially with the high VIX we could expect down there – I’d be chomping at the bit to DD at 20% off the $178K because the sale of another 20% puts and calls puts $35K back in you pocket so now it’s $257K in cash and $143K in positions and if the market falls yet another 20% then were in IBM and KO and INTC and BA and PG and MCD and KFT and XOM and WMT at 50% off the current prices for $286,000 and we’d STILL have $114K on the side!

    This is not complicated folks but it takes 3 YEARS to play out and for 3 YEARS you stop touching your damn positions and get a hobby or something.  Only when there are MAJOR moves in the market do you have any reason to make adjustments.  Meanwhile, it doesn’t matter if the VIX makes it look like your positions are up, down or sideways – WE KNOW FOR A FACT what our net cost is and what our net put-to price is and we KNOW we have the cash to cover it so the ONLY POSSIBLE CONCERN we would have is if the market is dropping MORE THAN 20% and we think we may want to use ANOTHER 2% of our CASH to cover another 10% loss BELOW 30%.

    NOT COMPLICATED but you MUST get your heads out of the 1 minute charts!!!

  303. YRCW: I’m assuming that is a fun gamble that it will recover or do you have a target of where the stock can go? I see that is was $20 in 2008, $40 in 2007, and $60 in 2005. Quite a drop for a company with over a billion shares.

  304. Boobs: that’s funny!  Yes I agree; if the hedge is big enough it will pay for the second round.
    Phil: thanks for the re-explanation (you must have explained this a million times!) I understand this part very well now (the disastrous scenario).  But what about the other scenario (the bullish case): if the market is up 30% in the next 18 months.  We are now only 25% invested, with 20% maximum profit; the rest 75% is in cash.  So our gain on the whole portfolio would only be 5%.  So my question is: if the market goes straight up from here (possible but not likely), at which point do we invest the remaining 75%?

  305. amatta
    I used Phil’s buy-write strategy extensively just before the market drop last year. I ignored his advice to scale in, ignored position sizing, and didn’t understand hedging at all. When the crash came, not understanding how to roll, I panicked out of several positions that I should have stuck with. I had not done my homework.
    I took a step back, reduced my investments greatly, and mainly just hung out and read the posts for a few months. When I started to really understand Phil’s approach, I started to invest again, and am generally much more successful now.
    I suggest starting out with very few positions, very small positions, and reading the site religiously. Read the educational section 3x. When you’ve done that for at least 90 days, you’ll have a much better idea of the approach, and you’ll experience much greater success. Good investing!

  306. Jefferson/Pondexter -  It’s interesting because I find bits of what Jefferson said in his actual letters, like this one and the link I used above so, in the very least, it’s assembled from various quotes of his.  But most of them have been redacted, possibly someone is attempting to make sure no one can attribute a founding father with anti-banking sentiment…   The full quote appears in The Modern History Project attributed to him and I’m sure they are better equipped verify it than I am.  That dictionary of quotations is kick-ass, thanks for that.    On the whole, reading Jefferson’s actual letters, I can’t see that he would disagree with that statement at all.  Here’s a nice article on the origin of the word inflation and they cite older references than 1864 and it’s not too likley that, in all the history of the world no one thought of it before then anyway as banking, trade, currencies and bubbles had been around since the first coins were minted 5,000 years ago.   David Hume wrote extensively about pricing and the money supply (the quantity theory of money) in the 1700s and this Jefferson letter is from the 1800s and, of course, Adam Smith wrote "The Wealth of Nations in 1776" – it wasn’t the stone age, you know…

    What really bothers me about this whole thing is the multiple redactions of Jefferson’s writings I come across as I search the Web.  It’s very much like history is being edited so that our founding father doesn’t sound like he’s worried about bankers taking over the country.  Very 1984….

    BIDU/Gucci – I don’t know what you are worried about but if you want to accellerate the expiration then sure, you can split the $7.70 caller to the Aug $85s at $3.45 and the Aug $70 puts at $4.20 but if they have a big fall, you’ll be splitting the putter, of course.

    Good quote Hai – too bad he was probably the last guy who could say that…

    YRCW/Jordan – I’ve never hit a limit but I use it to buy 1,000 lots of option contracts, not 1M shares of stock as I generally wouldn’t touch a penny stock with a 10-foot pole. 

    YRCW/Kustomz – I think a lot of us are in between .19 and .21.    Good words from Zollers.

    Meanwhile Euro is flying and will continue to fly when Timmy is Keynes to Trichet’s Hayek.

    Now there’s a Repbublican I like Pstas! 

    TBT/Brook – I may be wrong but I figure we can always roll the July puts down and out but, meanwhile, they haven’t stayed below $40 for more than 3 weeks – EVER so I’d rather collect a very quick $1.50 than a slow one. 

    Trading/Amatta – Hopefully the above note on hedging and managing long positions helped a bit.  Clearly you didn’t follow the advice of the new member guide, which is to paper trade for at least a month to get used to the strategies and how to manage them and I’m SUPER disturbed that you are day-trading when a $20,000 out of $120,000 loss bother you.  Day trading is for money you don’t mind losing – AT ALL.  Not like you say you don’t mind losing it but when you do you can’t sleep at night – it needs to be like went to Vegas with your friends and $1,000 and came home with memories kind of fun! 

    Under the portfolio tab there are 3 articles on "Smart Portfolio Management" discussing position sizing, hedging and diversification.  The strategy section has articles on scaling and 75% or more of the picks I have made in the past two months including EVERY SINGLE TRADE on the Buy List are trades that are taken once and then not even touched again until at least October, which is perfect for people who don’t want to watch the markets every day (and you should go back a year or so and read our old buy lists and follow them month by month as we adjusted them).  So – what exactly are you doing?  What does your portfolio look like?  How much cash, what are the positions, what are your goals?  The answer to the last part is yes – here is the concept:

    If you have $500,000 we are 75% cash so that means $125,000 should be in about $120,000 worth of positions that have a 20% discount (buy/writes) and $5,000 should be in insurance protection to those positions.  There would be virtually no reason to touch either the positions or the hedge for months at a time and in a flat to up market you should make $25,000 on the $120,000 worth of positions and maybe lose 1/2 or so of the hedge for a net gain of $22,000 out of $500K which is 4.4% on the whole portfolio. 

    If you are COMFORTABLE gambling with the $375,000 that’s sitting on the side (and $120,000 is committed to a DD if the market drops.  Then you can go for short-term trades and then you have to determing your risk tolerance and what you are willing to lose within the cycle that you expect to make $22,000 in.  If that number is $7,000, then fine, you can risk $7,000 but $20,000 is HUGE, you are risking 100% of your possible upside gains for all your long positiions.

    Since you have TREMENDOUS amounts of margin available, you can do very simple things to make money like the XLF trade I mentioned this morning.  You just sell 40 XLF $14 puts for $1,000 (.25 each) and that takes about $10K in margin and you must buy $56,000 worth of XLF if they drop like a rock so, even with $375,000 in cash, you don’t want to have more than maybe 5 of these plays out at a time (in case you get stuck with a couple) but 5 plays like this generate $5,000 a month, which is another $60,000 a year while you PATIENTLY wait to see how your long plays work out.  

    If you diversify your margin plays like maybe adding 15 SDS $31 puts at .42 ($630), whcih is VERY unlikely to go in the money at the same time as you lose XLF and vs. vs so what you hope for is a move of less than 10% either way and you make $1,630 by July 17th.

    Another thing to play is slightly riskier stocks that it wouldn’t kill you to own like 20 AA $11 puts for .33 ($660) and your worst case is you end up with $22,000 worth of AA to play with.  WFR $11 puts are .53 so 10 of those sold for $530 risks owning $11,000 worth of WFR at worst.  Look, already we have $2,820 sold for the month, a run rate of $33,840 a year.  Add that to the $22,000 you expect from the longs and you’re already at 10% a year. 

    Notice there’s not a single play here that I don’t want to have put to me so I can go on vacation, catch up on my Emails, walk the dog, have a life – and all I need to do is keep an eye out for Dow moves that are over 200 points down in a day where I may have some rolling or adjusting to do.  As long as about 1/2 our cash remains free and as long as we have a good disaster hedge - we should be ready for anything. 

    And what Pharm said!

    What period/Brook – As I said above 3 – 5 years!   That may suck when you first start building a portfolio but think about what this does.  The only stocks that are ever put to you are ones that you get to buy for at lest 20% off.  The rest pay you 120% back in cash.  That means that, over time, you are building a large portfolio of very cheap entries.  Who else do we know with a large porfolio of very cheap entries he amassed over a long period of time????  Oh yes, it’s the richest man in the world (or maybe Gates is this year).   

    Patience is the hardest thing to teach people, especially people who like options because they tend to be wreckless gamblers who are attracted to options because of the high-risk, fast action.   Build this portfolio up for 5 years, making 20% a year while only buying stocks that are at least 20% off the price you throught was a good deal in the first place and you end up with 100% in cash and 100% in very cheap positions that will be 120% to 200% of the intended number of contracts  when you took the first round

    Now you are making 40% of your original stake per year and increasing your cash every year even while building more and more positions which continue to pay you dividends and premiums.  5 years later, you have 4 times what you started with 10 years earlier and most of your long-term positions have already paid for themselves in full through premium sales so you may have 75% cash (300% of original) again but 200% more posiitions with a 50% lowered basis and now you are generating 80% of your original balance every year following the SAME fairly conservative options strategy.

    I cannot understand why this is not good enough for people….  Teachers and cops work 20 years to retire on 80% pay.  If you put one year’s salary into this strategy you will have 80% pay in 10 years barring any major market disasters, of course. 

    Disaster/Boobs – Yes, they offset the cost of your 2x at 20% off or they at least keep you about even down to 30% off.  There are no magic bullets though, if you sit there like a dummy and watch the Dow drop from 10,200 to 6,000 without making any adjustments – you will still lose money…

    And yes Boob, I would adjust size of disaster hedge up (or, more appropriately, add a layer) if we break our levels to the downside.  As I said, you need to know when things are going bad, like a 10% drop from your entries and now wait until we’re down 30% and then say "Dear Phil, I don’t understand why this position is underwater as I bought TBT at $70 in 2008 and had 2011 $70 puts and calls for $20 and now TBT is at $37.50 and I owe my putter $22.50 – I don’t understand why this trade isn’t working…" or something to that effect.  8-)

    YRCW/Aug – Those are from our gambles that pay 500% by January and was actually the most speculative of the bunch but I do think they are unfairly down and should come back to at least .40 if we’re patient. 

    Bullish/Sena – See what I said to Booby (now I’m going to just have fun with that name) 3 lines above this one.  If you do not have the mental capactity at 10%, 15%, 20% or 25% up from here to say "Gee, maybe I should buy some more stock" then not only can’t I help you but I’m not sure how you could have formed the question without adult supervision!   If we KNEW the market was going up 30% in 18 months we’d be 100% investing in 500% upside plays right?  We’re not sure so we’re in cash but we are sure enough that the market isn’t going back to Dow 7,000 that we may as well buy some upside long-term plays (25%) because, even if the market does crash – we’re still comfortable with the entries.  At what point do we invest the remaining 75%?  Never.  But we will invest another 25% once we are secure that the first 20% is in the bag (maybe up about 10%) since that 20% then becomes our downside hedge to the next 25%.  In other words, the market would have to, at that point, fall 20% for us not to make 10% on our original round – get it?

    And very, very much what Deano said!

  307. brook & Sean- sometimes I don’t enter both sides, but more often than not a week or so is the max.  It all depends upon the charts and how much I want to play with the position.  Remember, we can have several entry points for the same stock, which is why we do 1/3, 1/2 or 1/4 entries (or at least I do).  Again, let’s use GSK as an example since it is my most recent. 
    Three weeks ago (or so) I pushed it for an entry at  ~$33 selling the 30 Jan 2012 P @4.40 and 35 C @ 2.90.  So, the differential on stock price is a bit higher (8%), but the options are now 3.20 and 3.60 – not really much different on a total $$ perspective.  It all depends upon your tolerance for the hedge, where you think the market is going, etc etc.  These are ideas, not set in stone (I did not get my fill on that one BTW)..  If GSK has moved the $2 one way or another, would you readjust?  No.  10%, probably not.  20%, maybe…..  I think we need to be realistic on this site and not play the game of the second to second, minute to minute moves of the market.  Heck, even the day to to day moves are erratic.  (and what Phil said above…).  IF YOU WANT TO HAVE A PORTFOLIO, then hedge accordingly and don’t look at it every day.  If selling P is too much, then pay the premium, sell a call and buy the put a few strikes down for a small credit (this is a collar).  Then you can sleep at night if it moves down hard, and you can collect the dividend.  Sometimes I do just that with the P sold.
    XOM for example:  I have the 60 Jan 2012 and have been rolling the C around, selling P against the position and sometimes buying the front month P that are ITM or just OTM using Opts strategy.  Making 20% is not unrealistic.  Making 80% YOY is….

  308.  Phil,
    As a hunch, if I thought that Israel would take out the Iranian nuclear reactors next week, what would your positions be to protect/benefit a portfolio the most?

  309. Phil, I appreciate the effort put into the long response about hedges. I am 100% on board, committed to them and DON"T fiddle with my positions every moment. But I think you were responding to another person’s question as that was not my question. See my question again above in the comments.  To summarize again, TD Ameritrade (TDA) charges so much margin on TZA, BGZ short puts it’s impossible to sell puts as part of the disaster hedges. Let me illustrate. Say I have for example sake a 100K portfolio and I buy only 5% worth of protection in hedges. So I buy 5k worth of, just for example only, BGZ Jan11 12-17 bull spread, selling the Jan 12 put (about 30 contracts).  Just 2 days ago I sold 5 Jan 12 puts which TDA is holding 5,865 in margin (roughly $1,173 per contract). So to sell 30 contracts worth of the BGZ Jan 12 put, they will likely restrict over $35,190 ($1,173 x 30). So a 100k portfolio – 5K (locked in a BGZ 12/17 spread) – 32K ($35,190 locked up in margin minus the proceeds of selling 30 BGZ Jan 12 puts) – 50k (50% of portfolio set aside for buy-writes, etc.)  leaves only 13K cash, most of which would get tied up in long margin requirements if the market tanked between now and January.  Keep in mind a market tanking will turn up the value of that BGZ 17 caller a lot, so cashing the disaster spread out won’t really work until fairly close to expiration.  Also there won’t be much free cash at all to scale in or DD on the longs (most will be locked up in margin). And remember this example has only 5% of the portfolio in hedge protection, which is likely not enough to protect 50K worth of long buy-writes in a major downturn. So I can’t see how this would be a workable portfolio configuration. Assuming I don’t want to change brokers, what I am trying to find out is if there is an alternative to selling BGZ puts that has lower margin requirements to finance a BGZ style hedge. Or do I just do run disaster hedges without selling puts? That’s not a great alternative but maybe it’s the only one.   

  310. Economics theories/Phil
    Sometime we should have a talk about the ruling economic theories and the varying disastrous effects. You mention Keynes regularly, but I’ve always the the Chicago gang – Friedman and Lucas in particular – have been an influence for evil and generally generators of stupidity leading to disasters.

    AAPL has problems with the Iphone 4.  Issue, reception while holding the phone, in non-speaker phone mode.
    MacRumors, whose members are the most devoted perhaps in the world, discuss
    This is in response to a gizmodo (the Iphone theft people) report on the issue.
    They of course stole the thing, and had AAPL not disabled it, they probably could have pointed this out earlier.  
    There are also reports of bad screens, yellow dots, this is typical in any release.   But the antenna issue is a big deal.  It may take the shine off of AAPL.  Beware of this news AAPL longs!!! 

  312. McChrystal – There will be a lot of dust over the replacement of McChrystal and the following attitude of a Turkish ex-foreign minister will be heard more common: "The way things are going, your Congress will have made Afghanistan secure for China to make a deal with a new Taliban regime to exploit the $3 trillion worth of minerals verified by U.S. intelligence."
    The issue of guns for oil has become a leit motif in the Middle East, and continues to influence on the price of oil and the whole energy market. Should the theme of ‘guns for minerals’ become common, then it might form a new link between politics and metals. If that happens, then I suspect equity prices for exploration and producers will become more volatile. Any thoughts or investment theories?

    one poster on gizmodo, an asshole, but nevertheless makes a good point:  this is a hardware issue and AAPL probably didn’t notice it since its testers, like the one the the gizmodo guys stole from, had their Iphone in disguised cases.  So, there was never any hand touching the critical antenna link point.  therefore, no one could know that there was  this problem in the Q&A process in the field.  This make sense.
    It may be resolved, but as for now, I think 20% of Nasdaq is unhappy with going up, because a possiblity of a recall looms.  Or slowing sales, etc.  But this is an early story, only a few hours old.  I would say that it is really bad though, in the short term for AAPL, because this is a hardware issue.  And AAPL has been declared as the one who can do no wrong.  

  314. occam – I liked you better when you were trying to freak people out about the BP oil issue …
    OK, now take a deep breath and let it out slowly. Next, try some decaf.
    Regarding the iPhone antenna issue … perhaps that is what the Apple iPhone 4 Bumpers are for.

  315. occam – I liked you better when you were trying to freak people out about the BP oil issue …
    OK, now take a deep breath and let it out slowly. Next, try some decaf.
    Regarding the iPhone antenna issue … perhaps that is what the Apple iPhone 4 Bumpers are for.

  316. Phil…. Your portfolio management strategy comments this evening should be well understood by all who trade. One must recognize our activity is investing and not gambling. I could add one more point to your comments : all should read "the man who planted trees" found in the educational section. I have one recommendation – when planting your trees, do not plant too many, as you soon will not be able to see the forest for the trees, and at that point your portfolio is too large to manage. One is better off to have fewer positions and manage them well. I learned this from personal experience.

  317. painman… Phil has opinions of his own regarding the best play for an attack on the Iranian nuke sites, but I will offer my personal strateg. Mine is to be very long gold ( miners , and GLD etf ) and as well some long oil positions, as well as silver positions as it will follow gold. I have these in my portfolio now, as when it takes place ( better than a 50% probability IMO), you will not have time to position yourself, as there will be no advance notice of the strike. It could become very ugly.

  318. GEL, i know that you have a lot of tbt plays but look at tbt sept 37/34 bull put spread for a credit of 1.10. I like the risk/reward on this mofo.

  319. Jonny Evans
    Apple Holic
    June 23, 2010 
    Revealed: Why Android beats iPhone for organized crime

  320. JO: I like that spread, and like you say – not much risk. Was doing some reading tonight, and ran across some opinionated research from Fidelity, relating to the drivers that are moving the fixed bond rates. It helps to put into perspective the anticipated time line for a TBT payoff.

  321. NOT COMPLICATED but you MUST get your heads out of the 1 minute charts!!!
    I couldn’t agree more with this comment.  It’s impossible to run a business effiecently while day trading.  With that said, I read this post twice and both times found myself confused about half way through. 
    I just recieved the hard copy of Sage’s book which should be easier to study than online reading, so hopefully the entire "selling of 2012 $5 puts, the Jan $4/7 bull spread, the selling of long puts, buy/writes, 20% hedges" terminology starts to register rather than sounding like some forein language.  This might be easier to follow if it was presented in a spreadsheet form, where the people like myself who are not yet profiecent in the lingo could set up a paper trade of the complete system and follow it for a while.
    Thanks for your help.

  322. Ingrid Lee, Taipei; Jessie Shen, DIGITIMES [Thursday 24 June 2010]

    Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) have seen some major clients, including Qualcomm, Integrated Memory Logic (iML), Microsoft and Silicon Image, increase their orders for the third quarter of 2010, according to industry sources.
    Judging from the orders from these major clients, high-definition multimedia interface (HDMI) chips, TV-use buffer amplifiers, controllers and handset baseband chips are expected to show strong demand during the second half of 2010, the sources observed. Wafer starts at the foundries for these segments are expected to grow over 30% compared to the second quarter, said the sources.
    Wafer starts placed by other IC design houses at TSMC and UMC in the third quarter will also grow as much as 20% from the second-quarter volumes, the sources indicated.
    TSMC will likely see full utilization rates at its 12-inch fabs, and overall utilization rate of 93% in the third quarter, the sources said. Rival UMC will also run production at almost 100% utilization in the upcoming quarter, the sources added.
    TSMC chairman and CEO Morris Chang was quoted in previous reports saying the company’s sequential revenue growth for the third quarter of 2010 will be modest due to a particularly strong second quarter.
    UMC said during its recent shareholders meeting that the foundry will see capacity remain short of demand through the third quarter of 2010.
    Taiwan-based telecom carriers have been controlling inventory for previous-generation iPhones in anticipation for diminishing demand as consumers delay purchase and await the introduction of the iPhone 4, according to industry sources.
    Current iPhone sales in Taiwan are estimated to have decreased 30-50% since the unveiling of the iPhone 4 in early June, said the sources.
    Sources from the carriers pointed out that there is still no finalized schedule thus far for the iPhone 4 in Taiwan. Telecom service providers have not received confirmation from Apple regarding launch time-frames, said the sources, adding that all they know is that Apple plans to launch the new device in 18 countries initially in June-July, another 24 in August and 88 more in September.
    Despite the decline in sales, carriers in Taiwan said that they have no plans to reduce prices for the iPhone 3GS since inventory levels remain healthy.

  323. Sonders has been pretty much right on over the last 2 years.  This snapshot is worth taking the time to watch.

  324. Israel/Pain – Well gold and oil are the classic plays, nothing too wrong with going long on oil here at $75 if you fear a war but be aware it’s the same war they’ve been predicting would start any day now for a decade for the same reason (Iran’s nuclear threat) and that there’s always a new round of suckers who read the article de jour and think they are going to make a killing due to their sudden inside knowledge of the impending Isreali strike on the Iran nuclear facility because we know those Isrealis are crazy and that’s how the US does their serreptious attacks even though Israel has never, in the 60-year history of their nation initiated any war certainly tomorrow they will strike because jets are in the air and some guy said something and BUYBUYBUY commodities because this may be your last chance etc. etc…..

    Hedges/Kururi – I was resonding to you, as I said, since the margin on TZA to get $3,800 on the sale of 20 2012 $5 puts is "just" $10,000, that’s why I like them best.  If you wish to avoid margin, you can simply invest $5,000 in the 140% upside play that’s 100% in the money and if you insist on paying large premiums to take large risks for a better reward in a real disaster, then you would need to pursue the opposite strategy, which is to pick the most expensive ultra, like TNA, and then just do the math, like how far will TNA fall on a 20% RUT drop, which is 60%, down to $17.50,  Therefore, the Oct $34/27 bear put spread for $2 pays $7 on a serious Russell drop (up 250%) and there is no margin at all.  Pretty much, when the play drops to $1, you take the loss and then set up with another bear put spread in Jan or March for $2 so your insurance cost is $1,000 per quarter per $5,000 of protection.  Your example of buying $5,000 worth of insuarance on a $100K portfolio is a big problem as you are missing the point.  If your whole portfolio is $100K then you shouldn’t have more than $25K committed and your $25K should be hedged for a 20% drop ($5,000) so just $2,000 would insure you against another 20% drop and you can EASILY affford the margin because you have $75,000 cash. 

    Of course this strategy breaks down if you irrationally overcommit – it’s not designed for that!  This is a strategy for a very uncertain time in the market where we feel we need disaster hedges so we can sleep at night…  Also, again you miss the point of the disaster hedge by saying it "won’t really work until fairly close to expiration" – the trade pays off if you are below the strike that is very likely to pay you 20% on your long trades.  If you are not below 20% on the long trades at expiration then your insurance will, of course, expire worthless.  If the market drops 5,000 points but then recovers 5,000 points by expiration – you insurance will expire worthless but you will make 20% on your long plays.  It’s insurance – it doesn’t pay off until you actually die, not when you THINK you are going to die. 

    So, in short, you are thinking about this the wrong way.   You can’t not follow the allocation and not follow the hedging percentatges and then insist that the strategy deosn’t work because you are following 25% of it.  Here’s a very simple example for $100,000:

    Buy $23,000 worth of XLF at $14.51, selling the Jan $14 puts and calls for $2.90 for net $11.61/12.80 so 20 contracts for $23,220.  This pays $28,000 if XLF is over $14 at Jan expiration and, if below, you will own 4,000 shares for $51,200.  So you are NOT concerned about protection until XLF falls below $12.80, which is 12% below the current price. 

    Obviously, the best hedge here is FAZ and a 12% drop in XLF will send FAZ up 36% from $15.05 to $20.45 so we can simply take the $10/15 bull call spread for $2,000 at $2.15 so let’s go crazy and buy 10 shares for $2,150.  FAZ is at $15.05 now and my XLF spread pays me $4,780 if XLF simply doesn’t go down while my FAZ spread pays me a $2,850 profit if FAZ doesn’t go down (so if XLF falls at all). 

    On a flatline, we stand to collect BOTH legs of this spread and my b/e on FAZ is $12, which is down 20% so XLF has to rise 7%, to $15.50 to begin costing us money.  So lets say that, as intelligent market participants, we watch the $15 line on XLF and consider withdrawing our insurance at that point – either taking a small loss or rolling out to longer protection (since the rise to $15 makes us feel there is no immediate threat to our portfolio). 

    That’s the no margin way to do it and that extra $2,850 gives your $51,200 worth of XLF (4,000 at $12.80 average) an additional 5% of downside protection so XLF can fall all the way to $10.87 before you are taking a loss.  As I keep saying to members over and over again – if you think XLF is going to fall below $12.09 by Jan expiration – then why the hell are you buying it for $14.50 today?  The idea is to buy stocks you feel VERY confident are near a floor and, if not near a floor, then you are THRILLED TO DD at you net price.  If you cannot honestly see yourself happy to DD at the net – DON’T initiate the trade becasue you don’t REALLY want the stock.

    Since I am beginning this trade with $75,000 cash on the side and since I would be THRILLED if XLF went up 20% and locked in my $4,780 gains, I’m going to offset my spread by selling the FAZ 2012 $7 puts for $1.60.  That puts $1,600 in my pocket for 10 contracts and I’m pledged to buy $7,000 worth of FAZ if it falls over 50% by 2012 out of my $75,000 cash. 

    Now if my FAZ Jan spread drops $500, I can just kill the spread because I have my longer protection and I’m still up $1,100 if FAZ doesn’t fall about 60%.  Even if XLF does go up 20% to put me down 20%, knowing that I will have the protection will allow me to add more long XLFs on the way up and maybe it will make sense for me to add 50% more XLF stock or a bull call spread and DD on my protection – I’ll worry about it when it happens because I know that these initial entries are the first of a long series of moves I am likely to make over 18 months. 

    This is a long-term INVESTING strategy, not a TRADING strategy and if you are the kind of person who only believes your stock is worth whatever it says on your trading screen at whatever moment you happen to look, then you are going to have a miserable time being a long-term investor.  Most of us are sitting in homes that we bought for say, $400,000 that may have gone up to $800,000 at one point and are now $600,000 – Did you buy and sell your home every day based on the price you saw in the paper?  Did you pay a realtor a commission over and over again constantly trying to optimize your price?  Did you spend ridiculous amounts of your time moving in and moving out of homes, making sure you were always in "the best one" maybe the one Barbara Corcoran hit the BUYBUYBUY button on during her "Mad Real Estate".  Did you freak out when she called your neighborhood a SELLSELLSELL?   No, that would be stupid wouldn’t it?  The real estate market goes up and down over time but if you intend to stay in your home and get many years of use out of it then it is not even worth paying attention to short-term fluctuations in its value.

    Why are stocks different?

  325. Economic theories/Snow - Keynes wrote: “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.”  Ironically, it is Keynes who may be the most famound defunct economist…

    AAPL/Occam – Oh no!  If they are defective then AAPL will only sell 400,000 a day instead of 500,000.  Come on Occam, what nonsense.  It’s always something – every time AAPL launches a product the hyenas drop rumors that this or that is the final proof that AAPL has taken their eye off the ball or have gotten too big or are crashing T’s netwrorks or whatever.  I like the cleverly constructed logic that the units were protected and therefore it never occured to anyone at AAPL to touch the antenna because I’m sure in the testing labs they slap jackets on them right away – even before the scratch and drop tests because AAPL is so stupid that they just don’t get the physics of antennas to the point where they built millions of defective phones like they are GM or something all of a sudden.  While it is certainly possible that AAPL has made a series of massive blunders that have led to them putting out a defective product – Occam’s Razor would suggest we look for the simpler explanation, that this is more likley a rumor and should not be taken seriously until we get good confirmation.  Beware AAPL shorts is more like it!

    Less trees/Gel – Good lesson, I’m glad you learned it! 

    NKE with a reasonable report – they are a pretty reliable economic indicator.  They are having trouble passing through inflation and margins are under pressure (and the strong dollar hurts them), all things we expect from bottom 90% businesses.

    Spreadsheets/Exec – I am not a spreadsheet person but feel free to make spreadsheets and post them and track them and adjust them every day and I will be happy to look at it for you…

    Semis/Kustomz – I keep hearing good things but the Nas does not respond.

    Sonders/Exec – That’s a nice review, I really like that you can get the slides too. 

  326. Phil, the TZA 2012 spread is 100% in the money for now, but won’t the volatility decay bite you in the end? since it’s a leveraged ETF.

  327. Yes it will decay IF the XLF goes up but it’s INSURANCE – you ARE going to lose the money unless there is a DISASTER.  I can’t write a doctoral disertation on the underlying mathematical assumptions on long-strike options as they relate to leveraged ETFs but I can suggest you paper trade it and we’ll compare notes in 2012.  The 3x ultras weren’t around in the last crisis but let’s say, for giggles, you were in SKF back in 2007, when things were still going pretty well and you hedged with Jan 2008 spreads.  Do you think you could have found a good exit point somewhere? 

  328. OK thanks. In short, it sounds like you’re saying the 3x ultra allows you to accept some volatility decay in exchange for the right to buy the same amount of disaster insurance for 1/3 the cash.