Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Thrill-Ride Thursday – Jobs or Bust!

What a friggin mess!

Should we worry about jobs, should we worry about Europe, should we worry about Isreal nuking Iran before Iran can nuke Israel, is there too much copper is there too little gold, is the entire Atlantic Ocean going to become uninhabitable?  I can go on and on but I hear it will all be solved if we vote Republican in November so that seems like a no-brainer (and some people will get that and some people won't).  Yes, that's right – Republicans are the answer!  But why wait for the voters to decide when so many right-thinking (another one) Congresspeople are able to exorcise (not a typo) majority rule by filibustering a jobs bill – a move that will take 1.2M people off extended unemployment benefits on Friday? 

"It looks like we're going to come up short," said a senior Democratic aide on Wednesday evening. "It looks like Republicans are prepared to kill aid to states, an extension of unemployment benefits, and ironically, the Republicans are prepared to kill efforts to close loopholes that allow companies to export jobs overseas."  The legislation, known as the "tax extenders" bill, would have reauthorized extended unemployment benefits for people out of work for six months or longer, would have protected doctors from a 21 percent pay cut for seeing Medicare patients, and would have provided billions in aid to state Medicaid programs.  Thanks to the wisdom of a minority of Congress, none of that will happen and the markets are crashing, as well they should with 1% of our nation's struggling families losing the last shred of money they had coming in. 

It's not just the 1.2M people that lose benefits on Friday though, it's the 250,000 additional people PER WEEK that will lose their benefits as well.  As today's numbers are likely to show and as I ranted about yesterday – we are doing NOTHING to create new jobs while we funnel Trillions of dollars of Corporate Welfare (which is charged back to the taxpayers) to Banks, Insurance Companies, Auto Makers, Oil Companies and thousands of other companies who lobbied their pet Congresspeople to stop this bill from making it less profitable to ship their job openings overseas.  Is the American voting public too stupid to live?  Film at 11… 

Fifty million Medicare claims from June are currently in process at the reduced rate, which the AARP says has already caused some of its members to have trouble finding a doctor. And the Center on Budget and Policy Priorities estimates that dropping the $24 billion in aid to states will cause 900,000 public and private-sector layoffs in 2011.  Both chambers of Congress had already passed the measure, deficit spending and all, but when it came time to combine the bills in May, conservative Democrats and moderate Republicans lost their previous will to help the economy and forced party leaders to begin the nickel-and-dime process of trimming the bill.  SEIU's Lori Lodes said:.

"Let Senator McConnell, let Senator Senator Collins, let Senator Brown and every other Republican explain why one of their own constituents doesn't deserve to keep their job, shouldn't be able to send their kid to college, can't put food on their table without maxing out their credit cards.  Rooting against America, Republicans are taking pride in keeping families out of work as their only strategy for winning elections." 

You can contact your favorite Senator here, the only Democrat against it is Nebraska's Ben Nelson who has said repeatedly he would not vote for the measure unless its cost was completely offset, which is nice in principal unless you are one of the millions who are being cut off during the worst employment climate since the Great Depression or unless you are a retired person on Medicare who needs medical assistance or one of the million State employees who will be losing your job or one of the millions of others who's job is being shipped to Bangladesh, where they pay $73 A MONTH to factory workers - then Ben Nelson is just another jackass Congressman who needs to get his hands out of the pockets of his corporate sponsors and do something to ACTUALLY HELP THE PEOPLE WHO VOTE FOR HIM! – JMHO.

State budget shortfallsWhile Congress plays "chicken" with the economy, all this other doom and gloom can be very distracting but we've got trouble my friends, trouble right here!  That's trouble with a "T" which is right before "U" and that stands for UNEMPLOYMENT.  We've discussed the mess the states are in and the Washington Post's Ezra Klien points out that it's UNEMPLOYMENT, not budget practices, that is to blame for current state deficits.  With the real unemployment number hovering around 16%, we are all in Greece and Spain''s situation (20% unemployment there), where governments that are no longer able to tax the rich (3% unemployment in the top 10%) are having their revenues gutted while the great majority of their tax base suffers

So, are we bearish?  Hell no!  This is ALL old news.  Republicans have been tools of corporations since they got rid of Honest Abe and Johnson and put up their first "movie star" President, Ulysses S. Grant who was against rebuilding the South (giving them back their guns) which drove the liberals nuts and made him a hero of radical Republicans and he won by a landslide but he was so far to the right that, during his tenure, state after state was lost to the Democrats as the people sought to balance the scales (sound familiar?) and it was Grant's policies that turned the South solidly Democratic for 100 years to follow.  From Wikipedia:

The Panic of 1873 was a world-wide depression that started when the stock market in Vienna crashed in June 1873. Unsettled markets soon spread to Berlin, and throughout Europe. Three months later the Panic spread to the United States when three major banks stopped making payments, the New York Warehouse & Security Company on September 8, Kenyon, Cox, & Co. on the 13th, and the largest bank Jay Cooke & Company on September 18. On September 20, the New York Stock Exchange shut down for ten days. All of these events created a depression that lasted 5 years in the United States, ruined thousands of businesses, depressed daily wages by 25% from 1873 to 1876, and brought the unemployment rate up to 14%. Some 89 out of 364 American railroads went bankrupt.[57][58]

The causes of the panic in the United States included over-expansion in the railroad industry after the Civil War, losses in the Chicago and Boston fires of 1871 and 1872, respectively, and insatiable speculation by Wall Street financiers. All of this growth was done on borrowed money by many banks in the United States having over-speculated in the Railroad industry by as much as $20,000,000 in loans. Grant, who knew little about finance, relied on bankers for advice on how to curb the panic. Secretary of Treasury William A. Richardson responded by liquidating a series of outstanding bonds. The banks, in turn, issued short-term clearing house certificates to be used as cash. By October 1, $50,000,000 had been released into an economy desperate for paper currency. This was done without undermining the value of the dollar. By January 10, 1874 Richardson continued to liquidate bonds that released a total of $26,000,000 of greenback reserves into the economy. Although this curbed the Panic on Wall Street it did nothing to stop the ensuing five year depression. Grant did nothing to prevent the panic and responded slowly after the banks crashed in September. The limited action of Secretary Richardson did nothing to increase confidence in the general economy.[59][60][61]

File:Grant Inflation Bill Veto.jpg

After the Panic of 1873, Congress debated an inflationary policy to stimulate the economy and passed the Inflation Bill on April 14, 1874. The bill would release an additional $100,000,000 into the nation's tight money supply. Many farmers and working men in the southwest anticipated that Grant would sign the bill. Those with outstanding loans needed greenbacks in order to continue business. Eastern bankers favored a veto because of their reliance on bonds and foreign investors. On April 22, 1874 Grant unexpectedly vetoed the bill on the fiscal grounds that it would destroy the credit of the nation. Initially Grant had favored the bill, but decided to veto after evaluating his own reasons for wanting to pass the bill.[62][63]

So why should we worry, this is just the typical economic playbook that we've seen being run on our country for most of it's history.  The rich seize power through a puppet President, write ridiculous regulations that allow them to get away with murder, commit murder and then ask for bail-outs while lobbying NOT to give bailouts to the actual citizens because it might be a slice of their pie and THEY WANT THE WHOLE PIE!  Grant presided over the very first "Black Friday" in 1869, when speculators cornered the gold markets and ruined the economy as they fed the press with rumors that the Government would be unable to continue issuing "greenbacks" and would have to begin circulating a currency that would be backed by gold.  Wow, people were stupid back then - can you believe the fell for something so ridiculous?  Thank goodness today's sophisticated investors could never be tricked into trading the product of their labor for shiny bits of metal, right?

Anyway, so everything old is new again and this is not going to stop us from bargain-hunting in the markets.  When something really scary happens, we'll start worrying but right now we're just testing the bottom of our range again (as expected on our Tuesday charts) and, as convicted stock felon Martha Stewart says, "That's a good thing"


We've blown a lot of our levels and if we don't get back over and hold them through tomorrow we may have a very different kind of trouble – the kind that starts with a "T" for "technical" as we bend those blue lines into a downtrend that reinforces the downtrending red lines rather than negating them.  Don't forget we have a G20 meeting coming up and although Merkel has already rejected pressure to SPENDSPENDSPEND from the comedy duo of Timmy G and Larry S, now it's time for the big show in Toronto.

Hopefully we'll have reason to be more bullish into the weekend but, for now, we're still running this race under a yellow caution flag. 


Tags: , , ,

Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!

Comments (reverse order)

    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!

  1.  TBT/Phil – I have the July $40 TBT puts for $2.08. What do you recommend I roll to? I read some comments on this yesterday, suggesting perhaps the $36 puts. When is the time to make a move like this, now (to another July expiration put), or closer or expiration (to a later expiration)? 

  2. VZ -
    Phil – any play on the dividend and spin-off – I know it is also a buy-write or is it basically already covered by the arbs?

  3. TOS/iphone
    the TOS app on the new iOS4 doesn’t work properly (I don’t use it for trading but it is handy to check on things when away from the monitor). TOS says a new app is awaiting approval by apple…..prob end of week.

  4. Don’t quite get your sympathy for the State workers (any government workers) who would lose their jobs (other than a purely fiscal standoint).  This can only be fantastically great  news.
    Confiscating taxpayers’ hard-won dollars,  from their own bank accounts via taxation, and reassembling the3m into the coffers of state government (federal, local, municipal, school, etc)  where it is paid out to the laziest, most connected politically, unproductive, and fraudulent millions in our population, is the worst possible use of money FROM an ECONOMIC viewpoint.
    Most, if not all, of the government workers I have encountered are the least capable, most inefficient imbeciles, and inarticulate and worthless humans on the planet, next to the robber banksters, theBamster and other ‘government’, minions. 
    Having a "Favorite" senator must be sarcasm, right?  Since among those State and Federal workers must be counted these absolutely corrupt, likely insane criminals who were born with larceny if not murder in their hearts (like the rest of us) but found a way to legally use their, ahem, talents to get a lot of money, health benefits and perks for life for doing nothing and indeed, voting themselves raises, bonuses and other pelf for epic failure.
    Please clarify if you have the time and inclination.   

  5. Wow!!!!…..who pissed in your Cheerio’s????
    Actually Phil, the Republicans are not the answer……they’ve had their chance and we all saw what that got us.  The fact of the matter is, they’re all cut from the same cloth.  It’s not about what’s best for the country, rather, what’s best to get themselves reelected and/or line their pockets from the special interest groups.  Let’s face it, you hear the same BS every election cycle and once their reelected, it’s business as usual.  I have a business in Ohio……you want to talk about a Fuc#’d up State, you couldn’t get a more anti-business environment if you tried…….I better stop before I blow a gasket..!!!!
    Anyway…….I believe the only way your going to fix this mess is to vote all the bums out.  Democrats….Republicans….and the remainder of the political parasites that are running around on our dime masquerading as Independents.  Once we start sending their asses home where they have to get a real job, maybe the new blood will understand who they work for.  As far as I’m concerned you can start by sending that idiot McCain home.
    Now…..what’s going on in the market today.

  6. Filibuster/Phil – I just wish the democrats would grow enough of a spine to call the republicans on their perennial filibuster threat. Let them be seen standing up there droning on reading the phone book or whatever. It ain’t Mr. Smith Goes to Washington anymore.

  7. "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…"
    I’d be happy to prepare a spreadsheet.  Ok….here’s what I need.  Let’s say we have 250K to invest long term.  Tell me how much of each item to buy and I’ll put it together.

  8. Republicans absolutely are not the answer.  Reagan was the original deficit spender, "the deficit is big enough to take care of itself."  Really Mr. President, don’t our kids have to pay that money back with interest, after you and I are dead and gone?   In other words our kids will be paying for programs that benefit us today.  Isn’t that theft from children?  If so, your statement is a disgrace.
    I am a fiscal conservative and I do not agree with the social policies of the conservative party which is influenced far too much by the extreme right, and by Christian fundamentalists. 
    Here is what I concluded a after watching politics for the last 25 years or so.  Democrats tax and spend, conservatives tax cut and spend.  Take your pick.  The only difference is where the money is spent.  At least with the democratic way there is the semblance of paying our own way- taxing people now for what they get.  Conservatives pass the bill for their programs to children.  Woe to children.  This will go down in history as ’the selfish generation.’   

  9. flipslice – Those are some harsh words for government workers.  You must be from a superior gene pool.  Too bad we just can’t weed them out and send those government workers to camps, leaches as they are.
    I have a number of relatives who are teachers and policmen – very dedicated and sincere public servants.   They care about their communities and have lived their values their whole lives, making a pittance compared to people with similar educations in the private sector.  My Dad worked in the California State Department of Health.  He dedicated himself to improving public health, and in the latter part of his career he worked on AIDS education, and his efforts (and those of his colleagues) had a big impact on disadvantaged communities, where AIDS rates have been the highest.
    Some people really speak from ignorance.  I include you among them.

  10. JRW,
    Do you have a strategy this morning?

  11. Hey all,

    New positions this morning in J. Crew and Direxion Daily Energy Bear ETF. Check him out here.

    We are exiting DFS out of the gates. LEN is still hold throughout the day until we make a little.


    Good Investing!

  12. @jcaesar this should probably take place in another forum.  If willing I will move there to debate you on this.
    Your anecdote about your relative doesn’t begin to counter my own experieince with MY very close  relatives who have and continue to work in government.  Maybe yoiu don’t know what is going on here in Western Pa., that’s just your own ignorance.  Mike Veon just got 6-14 years for megacorruption. There are may others including my own relatives who could easily be indicted.
    Save your defense the naive, and ‘ignorant’.   I  stand by it.  Most, IF NOT ALL, government workers could be reduced by half tomorrow and no one but their mortgage banker would know the difference.

  13.  Phil, thanks for the advice on the AAPL Oct 280 callers early yesterday morning. Very helpful…I try and anticipate your response but you always come up with something a bit more creative than I can!

  14. The way the republicans get things done is to stick together no matter what. the democrats are more diverse therefore it is hard for them to pass stuff if all the repubs ban together.
    Will Rodgers said when asked what political organization he belonged to said: "I’m not a menber of any organized party – I’m a democrat."
    Only solution I see is passing strict campaign finance reform so the corporations and the rich (mostly) can’t buy congress. Congress will never pass this as it gives them more $ for their campaigns to get relected and thats the only thing they care about – not doing the right thing for the country. Got to be the best job in the world.
    Off subjuct a little but I remember reading president Ford was collecting 5 pensions: house, speaker, VP, pres, and military. Don’t know if it is true but sounds about right. There has to be a means test in getting benefits if serious in cutting budgets. The biggest budget busters I think are military (90 +? bases around the world) and the failed "war on drugs." This war is costing us dearly – 50K+ yearly to house inmates and they are overflowing with non violent offenders that are no threat to society – not to mention billions spent trying to stop it. Make it legal and tax it just like proibition, the world didn’t end when it was repealed despite threats to the contrary. No more cartels, killings, etc. We are not serious about cutting any defisits if we don’t talk about these 2 things. Also, do we want the govt. to be snooping into our private lives this much.

  15. Lots of charts show the 50 day rolling over and heading for the 200, including indices, GOOG currently at 479 and 50 is 508…would love to get into this one for a possible test in the coming days

  16. And to think we started this decade with budget surpluses as far as anyone could see (or forecast).   

  17. Good morning!

    No politcs please, it’s going to be a busy trading day.  We can discuss the merits of your favorite party this evening. 

    Same old, same old – 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 $2.98, which is .04 better than yesterday!) so we are seeing stronger copper and the Dow hanging tough.  As I said yesterday, oil going down is only a short-term rotation issue, not really a long-term problem for the market. 

    All we have here is the same blow-off we had yesterday and if you wish you went long yesterday morning, then don’t just sit there – BUY SOMETHING.

    How about IWM $68 calls, back at .48 (we liked them yesterday at .50, they topped out at .60)?

    How about DIA July $105 calls for .98?  We can sell June 30th calls against them but not now.

    Out if the Dow can’t hold 10,200 but, until then, let’s have some fun out there!

  18. Phil,
    Still on track for 10,450 this week? 

  19. Flipspice - you make broadbrush statements, generalizing about a whole group of people, and then when someone challenges you, you suggest the discussion move to another forum.  I’d suggest you be more circumspect about statements of this type in the future – and back them up with something more than anecdotes and hunches if you choose to make them. 

  20. Rut traders – are people going long off of yesterdays lows

  21. Good morning
    IWM 63.56, 64.28, 64.64, 65.45, 65.91, and 66.70

  22. Sorry Phil – didn’t see your note about politics – I’m done.

  23.  Hi Phil,
    Since I’ve gotten around to adjusting my portfolio, I can now comment on some of the political commentary you have.  Just to disclose, I’m a registered Independent though lean slight right of center on social and economic issues.  Also lean realist vs. idealist.  
    On party composition--I am hoping for more Republicans in Congress not because I lean to the right of center in my views but want more balance.  I always fear when one party dominates (not just by a mere 50% plus 1) both chambers of gov’t.  I like the Clinton years because of how everyone had to do away with their extremities and learn how to get stuff done.  I didn’t like the fact the GW. Bush had Republican controlled Congress during the majority of his term.  Granted, GW Bush was never the fiscal conservative he said he would be.  So for me, it’s all about balance.
    On bailout and building more debt--While I never favored bailing out financial institutions, car companies and any other type of company who has the money to lobby for aid, it’s done.  So from that perspective I also favor halting the unemployment benefits after it has already been extended.  Is it unfair? You bet it is!!  But having done one wrong thing that benefits one sector of society should not be used as a justification to do it again for another sector.  I know some parents have it that way when it comes to their kids, but I’m not one of those.  That’s just my thinking on it and I will not debate this too much since I don’t have an answer to those unemployed who rely on unemployment benefits.  I thought that that tax credit for hiring would work and help but I guess it didn’t.  I don’t know the internals of it (meaning what the catch was for those who would like to participate in it and what business size requirements are) so I don’t know if can still be tweaked.  I would rather have those types of programs versus having to hand out to those who don’t work for it. HOWEVER, if everyone (including the gov’t who CAN print money) lives like those bailed out companies that over leveraged and not have anything for a rainy day, there’s nothing to stop us from becoming like those European nations that are in trouble. 
    While I’m in the camp of fiscal tightening, I am forced to go against it in this instance as there are so many people suffering.  Just dole out money to programs that would actually provide incentive for people to work for something vs. just giving it out for free.  My only concern about going against my usual thinking is that when growth does come back, they forget that they have to tighten up and pay for the debt.

  24. phil, usd/jpn is very week, money go to jen and its not good sign for todays market!

  25. Good read this morning Phil!  I like the history lesson-
    There’s a big difference between government workers at the state and federal level.  Typically, it’s the state workers who are tasked with carrying out the dictates of the federal workers.  They’re the ones who actually do the work.  And for a lot less.  Federal workers make almost twice as much as their state bretheren.  I know.  I’ve seen it happen.  I used to work for at the state level in environmental regulation.  I wound up switching careers to make more money in computers.  I took a big risk and worked hard to train myself to do it.  A coworker of mine who made less then me at the state agency simply left and went to work for the Feds doing the same thing.  He now makes more then me!   Federal workers now make more then the average private sector worker.  IT’S BLATENTLY OBVIOUS FEDERAL WORKERS MAKE TOO MUCH MONEY.    The Brits got it right.  They’re lopping off their govt worker salaries as part of their budget austerity measures.  We need to do the same.  Instead, Obama is lining the ranks with more over paid workers.  Aside from the SEC, CFTC, FDIC and perhaps Treasury, no gov’t agency should be hiring.

  26.  Oops..sorry about my politically focused post.  Set that aside for much later! =)

  27. JRW,
    Yesterday you explained that when you have multiple studies supporting a level, that it is more powerful.  Which of these levels is the strongest?

  28. All,
    It sure would help me of the political stuff was gone during the day and reserved for evening musings.
    Just a request.

  29. sry, weak

  30. SO – pays a nice 5.3% dividend, utility in the south.  Buying here and selling the Aug 34/32 strangle for $1.  Starter position….one can go out further, for Feb 11 for $3 , which is 10%, but not quite our 20% discount, where 2012 gets one closer to that discount (Jan12s 35/30 C/P for abou 4.2……)

  31. TBT/DrC – We have 4 weeks left and, as I keep saying, TBT has not stayed below $40 for any 3 week period, even when the market collapsed and those puts are still 1/3 premium.  I would roll them down to 2x the $38 puts (even) but not give up time so early.   

    GS is holding $134 if you are adventruous:  I like selling the $135 puts for $4.60 but keep in mind this is a very dangerous stock to play.

    VZ/Samz – Yes, all arbed out and too complicated to deal with to me.  I still like owning them for sure.  

    Approval/Ocelli – That’s messed up, isn’t it.   Even big companies have to twiddle their thumbs in Apple’s waiting room.

    Lazy state workers/Flips – Yes, those evil teachers sitting in classrooms with no air conditioning babysitting 30 kids for $15 an hour (if you don’t count the time the volunteer and the time they do homeork checking tests  and preparing for class) are the real problem in society, aren’t they? 

    Yay, volume!!!  This could be it kids!  If we can put up a good fight on volume at 10,200 we may be able to get out of this funk.

  32. Houston, we have breakthrough!

  33. Buying back 1/2 ARNA sold yesterday here.  if they go below $3, then going all in and then some  Isn’t this fun?

  34. Back from Europe…  Trying to get back in the swing but I just found out my broken bone ain’t healing and need surgery on it next week… :( Damn just when I thought things were almost finished I’m 8 weeks out again. 
    IWM lines are not done…Thanks JRW for yours…

  35. Thanks to jdub, NFLX was a nice short yesterday. I’m taking 1/2 off.

  36. jomtien
    Military and drug wars, now thats a start, those mutidippers have to be limited, 1/2 government workers state, federal and local. But please give enemployed, doctors, and individuals in need help. No corporate tax breaks, they are not people. Put US spyes in jail, stop wars and maybe terror will go away, we started this and only we can end this. 9/11 was not the first act!

  37. REITs breaking down nicely too.

  38. Cheerios/Exec – I read the article on that bill and I was very pissed.  What the hell is wrong with this country that we can even consider cutting 1M people a month off unemployment when no one is hiring.  Are those people lazy too?  

    Don’t forget those TZAs are great to stop any IWM bleeding!  Now $7.35.

  39.  Hey Phil,
    Those mattress plays that are 1/2 covered.  Good idea to sell 1/2 (of remaining 1/2 so really 1/4) on weekly or quarterly DIA puts(close to delta neutral on farther month puts) if we hold 10,200?

  40. This IS it kids!  Someone crushed the bots yesterday.  They fought hard and pushed us up in fits and starts.. but today they are a broken heap of memory chips!  Well, a guy can wish can’t he?

  41. Phil,
    No politics….smile.
    They’re not expanding unemployment benefits because they’ve obviously done the math and have determined that they will lose more votes if they vote for it, than against it.
    Simple politics 101

  42. AAPL trying to push green. There’s a bid but I think it’s shallow.

  43. Sell, sell, sell!  We must break the back of this technical farce-

  44. Phil- Your political reasonings of why everything is screwed up and who is responsible could not be more whacked. They are equally wrong and corrupted. And when you mention a facade like AARP as though they have any credibility or real purpose other than thier own self interest as a rip off the old folks con group, you diminish your otherwise informing image. Your misplaced ideology is showing again. The democrats suck donkey at least as self serving as the republicans, perhaps worse. I could give a littany of reasoning on Barny and Dodds F- ups but I won’t. They ahve much responsibility in the housing debacle now don’t they? Let it go and grow up, please, you are better than that! Do you really think the banking reg bill is gonna do anything or is Barny a closet GS/Fed man? This entire administration is basicly criminals and incompetence, but they are dems so that makes it OK??? Come on! 

  45. Matt,
    Careful…..the Bots have acquired intelligence and now have the capability to instantly process your ever move.  Don’t underestimate there resolve.  Just like the Terminator…….they will stop at nothing to take your money.

  46. Hi Phil,
    Newbie question: when you talk about holding specific levels, e.g. Dow 10200, do you mean closing below that level or are you referring to intraday moves?

  47. Someone’s buying an $ load of FAS trying to force a bounce.. but it looks like someone else is selling just a little bit more!  As well they should.

  48. David,
    Did earnings come out on LEN?  There’s a nice pop into this weakness.  Actually green for the first time.

  49. Putting on a small AAPL short with some put verticals, it seems to be struggling at the 5 dma.

  50. Exec -

    LEN reported great earnings. 0.21 EPS vs. expected 0.00. They would be up 10% if it weren’t for May data that saw orders down 10%. Great quarter either way.

  51. In TNA at $41.60; I believe we hit our low !!

  52. Phil,
    Looking to get into your tech recommendations: INTC, AMAT, CSCO…for a long term position….go/nogo….

  53. yip
    worse news today I hope this next step takes, please find the best doctor, VERY BEST WISHES!

  54. Putting on a small AAPL short with some put verticals, it seems to be struggling at the 5 dma.

  55. @Phil
    WHY are state workers baby sitting other people’s children in the first place?  That means that I and other taxpayers are paying the freight for other people’s kids.  There are 19,000 children this morning eating breakfast and lunch on the public dime in a suburb of Pittsburgh.  Where is Mom? Dad?  Their relatives?  Where’s all the ‘free’ health care, the Sec 8 housing, the’free’ cell phones, the food stamps, all the other ‘free’ money going that they cannot feed and watch their own kids? And when does it stop?
    But don’t expect to convince me that half or of the State ‘workers’ should not be the first to go in Pennsylvania. This state is so corrupt it makes Louisiana and Jersey look like Shangri-la.
    As for Teachers you don’t really want to get started on the Public Indoctrination system and millionaires it makes of the senior level "Teachers’ .  As you wrote above. Later.

  56. Exec, I can just go into hiding.  They can’t leave the ‘grid’!
    RUT is getting upitty.  I think they’ll get yanked back down..  damn, this is exciting.  Unfortunately, I’ve got a meeting to go to now.  Terrible timing.  Stops for covering in place.  All systems go!!!!!!!!!!!!!!!!!!!!!!!!!! 

  57. Shadow, Amen

  58. Sorry for the double-post; uploading comments is taking a long time for me.

  59.  Phil:  Should I be treating the short puts and calls sold on long term buy positions differently than shorter term trades?  ie. since the intent is to lower cost basis in Jan ’11 should i take profit if sold option has already lost 50% or still leave until opex?

  60. EricL… AAPL  short?      Careful.

  61. Iflan,
    I am. If it could retake yesterday’s open I’m out. I’m speculating that it may come back down to the 50.

  62. Biggies buying on the way down

  63. Phil – nice call on 10,200. What criteria gave you that number, nice and round? support last fall? Something with the 5% rule (which I need to study more)? Looks like were getting nice volume with 43M 50min into the session and no signs of abatement.

  64. Nice.  Copper’s taking off.  Challenging 3.00.

  65. hello, Phill
    I am new here( from Eastern Europe :) )
    question, I bought  Jan 11  TZA 6/11 bull call spread ( TZA at 6+ at that time) , now TZA  7.3, but my spread is at still 1 USD , how I can profit from TZA move up?  Wait till expiration? I suppoze there is no way to profit from spreads only wait till expiration day.

  66. chyer,
    Do you think? I’m skeptical that there is much fund buying right now (mutual fund cash levels are supposedly very low, probably because unemployed people don’t buy much stock).
    My hunch is that it’s desks and traders making the rallies, which is why they are failing quickly so far. That’s really just based on looking at price patterns and volume — nothing fancy. I may be completely mistaken.

  67. Can anyone tell why WIT was dumped two days ago from 24 to 12?  Don’t know anything about them….except they are in India and are and IT company….

  68. Shadow…great advice and thank you I have done a lot of due diligence.. He is head of bone trauma of the lower leg at a major hospital here, written almost a dozen books on the subject and teacher medical school and he’s 32 years in the business to boot so HOPEFULLY I’ve got that covered…. 
    I think we hold this bottom as well (or we are close) and we go back into an uptrend..

  69. Pharm,
    Where can I find that list of FDA dates and companies you did? Do you remember which day you posted it? Thanks

  70. David,
    You out or holding and waiting for a pop?

  71. BTW Congratz on the VXX call by kustomz yesterday.

  72. Here ace.

  73. Hei, Laimonas, welcome Lithuania I think:P

  74.  WIT/Pharm – Wipro announced bonus shares (2 bonus shares for every 3 shares).

  75. Thx Rn!

  76. REITs pushing new lows right now. Likely funds pressured to sell, I think.

  77.  INTC-taking a hit today.  Going for Phil’s strategy on his buy list to finally have a tech name in my LT portfolio.

  78. Following up on yesterdays post to painman on gold, and where it is going….. a good summary –

  79. Nice move out of gold, but it needs to get back over 1250 to look impressive.
    Bottom test on the /ES here.

  80. Rats – got out of the APOL long put too soon. More bad news for them.

  81. And quickly failed!

  82. Phil… The unemployment numbers are weighing negatively on the economy, but also on the equity markets – Most economists agree the engine of new business growth (and new employment) is in small business (over 80%). Without just adding government workers to the payrolls, how would you, if you were in a position to do so, create the employment that is needed so badly? Just a brief answer, as we are focused on our portfolios at the moment. Thanks

  83. Eric--what is /ES please?  and did that mean the bottom didn’t hold on your indicator?

  84. Exec -

    Holding what? I am out of LEN and DFS per my comments on my own page. I am holding JCG and ERY currently.

  85. fizz,
    It’s just the S&P futures. I wanted to see if we could put in a double-bottom on the intra-day at 1075 but it cut right through. Now bouncing back over, but not looking good.

  86. David,

  87.  JRW- What an annoying IWM today. I finally have some (mostly) free time to trade, and we’re stuck in this narrow range. I figured you would have exited TNA at the stoch RSI cross of the 80% line (1 min chart) at around 10:25. 

  88. Thanks Pharm. Do you have a typical way of playing these announcements or does it all depend on the product and the price movement prior to release date? I imagine there is a spike in IV leading up to the date. 

  89. I agree Snow, they should make them do it more but they actually do do it – Bunning filibustered for 2 days solo!

    Spreadsheet/Exec – Start with $5K allocated to each of the Buy List positions and 2K on each of the 500% positions and then I’ll look at it and figure out what a good hedge would be.   Now would be a good time as we have a nice bottom.

    Selfish/Fjad – Yep, total lack of investing in the future and a shop till we drop mentality.  Amazing…

    Yes boys, please keep the debate civil.  We all know everyone on the other side is a clueless idiot (whatever side you are on) so we don’t need to mention it.  Thank you…

    AAPL/Ajay – Don’t worry, you’ll get there. 

    Rogers/Jomp – LOL, I never heard that before, that’s perfect!  Other good points too.

    Rollover/Kustomz – I’m pretty sure that’s the picture they are trying to paint to get all the TA people to dump before they leg us up. 

    Decade/Lv – If only we had the foresight to put that surplus into some sort of "lock box"….

    10,450/Nols – I think we may have to wait for the Monday pre-market stick when the G20 says "Oh yeah, we forgot we already approved $1Tn for the EU and we haven’t spent a dime of it yet….   

    Unemployment/Jdub – Cutting unemployment benefits is just a very important step towards cutting overall wages.  Unemployed people are forced to accept less and less for their efforts as choices dry up and corporations are putting the pressure on wages just as they get ready to begin a hiring cycle.  Don’t you think big corporations "speculate" on the labor market?  Just like any commodity, they WANT unemployment to run out so a flood of the labor commodity is forced on the market and the prices drop so they hold off on hiring while paying lobbyist to do what it takes to make the life of working people miserable.  THAT’s the system of checks and balances we’ve built and I’ve put up enough charts and graphs to show that the status quo you want to maintain has done nothing in the last 30 years but decrease wages for the bottom 90% and transfer 1/3 of their wealth to the top 10%.  American people (270M of them) CAN’T afford another decade of nothing and neither can the top 10%, who may want to rethink those loose gun laws if things don’t turn around soon for the huddled masses. 

    Yen/Pahur – It bounced off 90 so still being supported, which means this is as bad as it gets, most likely.  Euro up to $1.232 and Pound just under $1.50 so if they break that line, you EUO longs better RUN!

    Fed workers/Matt – Overpaid though they may be, there really aren’t that many of them to say that that is what’s wrong with this country: 

    Political/BPS – That is right, all please shelve politics during trading hours!   Thanks.

    SO/Pharm – I love those guys.

    Bones/Yip – Sorry to hear that, hope all goes well.

    We’re going to need some good news to push back up.   Tomorrow morning is revised GDP but no one is expecting a shift from 3% and I didn’t see much in the BBook or other indicators to make me think we’re up unless they sandbagged the preliminary, which is always possible.  Also, big sale on oil impacted trade balance so that’s a factor that may boost us.

    Nat Gas inventories up a little, no biggie there but they are all excited that there’s a storm in the Gulf!!!!

    REITs/Eric – Not good if BXP can’t hold $75.

    Mattress/Jdub – Boy am I glad on 1/2 cover!   Sure, now is a good time to sell the June 30 $102 puts for $1 as other 1/2 of cover (to July $104 puts, now $3).

    Math/Exec – The senate has a 6-year term because they are supposed to rise above petty day-to-day politics and do what’s right for this country in the long-term.  I know, ha ha, but that was the point of that body….  That’s where you need term limits the most.  Senator should be one ten-year term and that’s that. 

    Bots/Exec – Interesting you say that as I’ve been experimenting and it does seem like the really do chase into bids now.  In other words, if I offer to buy 1,000 DIA $105 calls for .98, they immediately jam it to $1 and make me chase but if I buy 100 at limit ($1.01), more often than not they try to shake me out at .96 and then I can jam my other order in.  I’m sure they’ll get smarter but it’s fun to play with.

    Holding/Dbara – My rule of thumb is I want to see two consecutive candle bodies form above of below my level on a 10 minute chart (for day trades, on daily charts for long-term positions) to consider it a break.  That doesn’t mean it’s been down for 20 mins, just that segment a closes below the line and THEN 10-minute segment B forms totally below the line.  Anything less than that is very often just a spike and not worth panicking over.  Of couse, sometimes the breach is so major that you KNOW you are breaking down, which is why its a "rule of thumb" and certainly not something you should be sticking to no matter what.

  90. WIT – 5:3 Split.
    On June 4, 2010 the board of directors at Wipro Limited (WIT:$12.6600,$-0.2400,-1.86%) approved a 5 for 3 stock split. New shares will be granted on June 22, 2010 to shareholders of record on June 16, 2010. Beginning on June 23, 2010, the security’s price will reflect the split adjusted price
    By the way, WIT is one of teh companies that will have to divest / issue more shares as per the Govt’s announcement that all ‘public’ companies must have a certain percentage in the ‘public’ hands – ie float. Sure, this may not actually be implemented (most of such companies are govt. owned ones and if would mean IPOs of us$1 bn) or watered down a lot but you may re-evaluate your WIT position in this light too…

  91. Phil, yesterday you said VNO 77.50 was a good pass fail line. Does that mean we are doomed today or hoping to retake?

  92. COF is still amazingly strong. It’s leading MA and V in that they are both well off their recent highs, while COF is not. I’m not sure what’s going on there, except that they posted good numbers recently.

  93. IWM has stopped at it’s 61.8 Fib retrace right on the DOT at 63.48…  pull fib from low on 6/8 to high on 6/21.

  94. gel1
    Take from big business, give to small!

  95. kinki, sold the rest this morning on the run up…yesterday’s high was 27.74…my sell signal…need to see real weakness i would get back in

  96. Phil/Spreadsheet,
    I assume your referring to the Q2 top 20 correct?
    I’m going out of town tomorrow, maybe Sunday night I can put it together.

  97. Nice TASR bounce today… Stock does better when the market is down, it’s like an inverse fund… LOL

  98. Phil,
    Looks like we broke all of your index levels to the downside, with Dow @ 10,200 the last holdout although it keeps breaking through, currently @ 10,181….. What’s your take at this point??  Going lower? or do you see a bottom here?

  99. Phil- I know the rules are 1-take the money 2- run…….but at what level. I have sold some covered calls that are up 30% and on the other hand  some sold puts (BTU) that are up 20 – 30%. Most still have time til Sep, Oct and Jan. Do I act on the rule and reload later on or  do I show more patience.

  100. drcarl,
    Not at 10.25, but did sell some at 10:40, and the rest just now just now average $4187; ready to reload

  101. JRW,
    You looking at TNA here?

  102. Perfect saw toothed down trend in both the DOW and IWM. Looks like HAL’s signature!

  103. Perfect saw toothed down trend in both the DOW and IWM. Looks like HAL’s signature!

  104. Phil Good morning,
    Looking a bit ahead of the mattress play what long puts are we looking for in Dec thks

  105. I am no TA, but it looks to me that VNO, our leading indicator, has a strong intra-day support at about 76.30 or so.  Bounced 3 or 4 times off that line today.

  106. Phil,
    Is selling TNA puts (july $30 at around .70) with extra cash lying around foolish here?

  107. The volume is good at 62M coming into 10am and down 106 points is not bad for good volume with all this negative news.

    TNA/JRW – I agree and am heavy on IWM $68s, now .40 for a DD.

    Techs/Jsurt – Did those on the weekend post.

    Wokers/Flips – Yes later, call me when you reach the 21st centruy as the static from Dikensian England is going to make it hard to hear you.  8-)

    Shorts/Red – Rule of thumb is if you are up 50% and confident of the bounce, the risk is worthwile to take them out BUT, make sure you have a target for what you will sell to cover if you are wrong. 

    10,200/Rain – That’s been a level we’ve been charting forever based on our 5% rules and it one of our very key resistance points along with S&P 1,070 and Nas 2,200

    Oil touching $75.40!  Copper rejected at $3 but gold still way up at $1,243.

    Welcome Laimonas!  Those spreads do not help you much until you get close to expiration.  If you want to make money on a shorter-term move, you need to bring the spread in closer.  The idea is supposed to be you are protecting other positions that mature for you in January – it is not meant to be a directional play nor is it meant to protect short-term positions. 

    WIT/Pharm – In addition to the split (or whatever it is), bad exchange rates and striking workers demanding more pay (not WIT specifically but spreading all around Asia).

    And what RN said!

    BXP and VNO said this should be about it for the selling (10,182, 1,076, 2,220, 6,743, 634) – we’ll see if they are right.

  108. AAPL
    This is the typical reaction when a company (or an individual) becomes highly successful. 

  109. exec,
    1/3 at $41.25, 1/3 at $41.42

  110.  JRW – I waited patiently until the retest of 63.56, and bought 30 IWM $66 calls for $0.92. Now I have a stop in place where I bought. Market’s looking weak today. Even fake good news will suffice today! Any good Sig rune Z’s today? The best I could find was at the turn upward just after 10:15am, but it didn’t start below the 20% line. 

  111. drcraig,  10:02

  112. Phil/news.  Well, after Congress announces its deal on finance legislation, you know the banks will spin it as a big victory — not as bad as it could have been, watered down all the provisions to make them meaningless, etc.  That could be news that gooses the market.

  113. Taking off a few more shorts (F, some more SPG, half the AAPL), but not going long.

  114. I just sold July 7 TZA Calls.  This is the third time I’ve played this strategy in the last month.  The first sale was the June 7′s, the last the July 7′s and now again the July 7′s.  I’ve done well.  I think/hope we hold 10,160..  that is my support area on the Dow….

  115. Looks like we bottomed

  116. WIT/Phil – Striking workers is an issue in India among the manufacturing – IT has decent wages – not as high as the US, but when you look at it on a standard of living issue, they make good money!
    But manufacturing – yes – in addition to wages, there are revolts and strifes when the government takes over lands where villagers have been farming for years in the name of ‘economic development and prosperity’ 

  117. TNA $41.33

  118. Will re-add SPG shorts if it can make it back to 86.50. Come on SPG!

  119.  JRW – I need to try Stoch RSI on some different software because all I’ve got at 10:02 is a sharp oblique line zipping up from 20 to 80% without a Z retracement. I’m using %K 14, %D 1, no smoothing factor allowed. I tried playing around with the %K periods and this doesn’t give me a Z. 

  120. PHil – from ages ago i have a july $6 SRS short put which if i undrstnd correctly would correspond to $30 which isn’t a level SRS has been seeing very often lately.  I don’t really want to keep messin with thme but also don’t want to give them any more of my $ than they have already gotten. Your thoughts plz, roll or chance getting put to and selling on a rise. Thanks
    (also thanks for your challenging and caring insights)

  121. Came close to blowing through 10160 from the 10th i would keep a close on that level through the day

  122. Phil  VIX is approaching the 30th again I am looking at my plays of WMT looking to roll the long jan12 WMT from 45c to 40c at a cost of 3.60 on a 5$ spread is this recommendable thks

  123. Phil / Fannie Freddie inclusion in bill   Should I worry about my long term hold on C JPM and BAC in view of the talk of counting FF as financials whose losses are to be funded by the industry?  (don’t get me wrong, it’s ethically reasonable, but might damage my investment in financials).  Any action recommended.

  124.  Phil… in YRCW for only 0.1717 :)  Plan to hold and sell those calls on an upswing like you suggest!

  125. Watching CNBS reminds me how I’d like to put a boot in the ass of anyone defending BP…….. :(

  126. USO:  Sold my $33 puts @ $0.69 for 39% gain over my $0.50 entry…getting on a plane to L.A. and can’t watch anymore today.    I’m down about $90 total on the $37 calls, but I think I’ll let those hang for a bit.

  127. JRW,
    You still using 64.28 as next limit

  128. Yes, Italy is out, 3-1 to Slovakia :D

  129. CHK and XOM look like they are at good entry points.

  130.  I’m in total agreement with your comments regarding BIG corporations and the inverted triangle social structure.  I’ve lived 2/3 of my life (I’m 33) in the Philippines where this set up is very much manifested so I UNDERSTAND and LIVED in that inequality, and not just studying economic development in college and grad school.  I detest that set up and all for taking some of that corporate power and giving it to those who are more fragmented (the workers).  I just hope that it’s done in an orderly manner.  As for the power structure favoring the big companies, I know it’s unfair.  As most of us who have ever been employed would say, "been there, done that".  But big companies aren’t born overnight.  They went through tough times to get to where they are and most likely stepped on the mainstreet folks (or the "little ones" as BP execs would say :P ) along the way.  I think companies deserve some of their power over the employees as they did the legwork of building the company from the ground up.  Employees can’t expect to walk in do a superb job for a couple of years then expect to be a co-owner of the company.  I was an employee and I hated how I feel that upper management wouldn’t give enough credit to the folks who did the leg work.  I’m sure some in upper mgmt. felt that way when they were at the bottom of the food chain.  So as an employee, it’s either you suck it up until you get to a point where your compensation makes up for the miseries, walk away to do your own thing, or suck it up until you’ve saved enough where you can afford to do your own thing.  Problem with some is that during the good times, it feels like it’s never going to end and when the good times have finally ended, they don’t know how to live and get by because they either forgot how to or squandered everything during the good times that they seemingly thought were endless.
    I also know that people have to work their butt off if they want to get somewhere or do something with their life.  While I will not go as far to say that had these unemployment benefits been extended that all or most of those will go to lazy folks, I cannot help but think (and know) that these will go only to those who were laid off for reasons that they couldn’t control.
    And as a final note to this lengthy post, I just want to add that while the laborers shout out loud now when the going gets tough for them yet they were also bashing big companies when the good times weren’t around.  That’s why I never joined labor unions.  You can’t have it both ways! 
    Phil, man this is more cost effective than going to a shrink!  LOL!
    Back to trading!!  

  131.  Market bottomed short term when XOM almost kissed 60

  132. USA next game Ghana   2:30   Saturday.

  133. Phil: I have a Jan.2011 INTC $21/$25 bull call spread at $1.75/ $1.34 for $.41 credit ,now $1.66/$$.47 for $1.19 credit paired with 2012 $17.50 put at $1.56 debit ,now $2.47 debit. Thinking I should close out callers and go naked on 2012 puts since $25 calls decreased 65%. Your opinion,please. thanks

  134. Euro short covering, will be interesting when that comes to an end….

  135. Phil,
    Gold has failed to cross $1250 now after several tries.  What do you think about increasing the short position here.  DD on GLL.

  136. Yesterday around 1 pm, my internet connection went out.  Thank you Time Warner.   Its still out, I am at a WiFi location now.
    So, in case anyone wondering, TNA gains yesterday were about 1.25;  today about 0.80 (despite the down market !).
    Not doing much else.  Energy still getting whacked.  Good buys in the space IMO.  BEXP HK etc.
    sold some puts on a few names as well for July.

  137. Phil:  TBT, I have lost the faith in it.  I think the fact that its never stayed down is becoming meaningless since we never had the pressure from the collapse of europe moving into dollars and sending T bills up every day.  I think we are fighting too many pressures keeping rates low, at some point (1-5 years?), reality will set in and US rates will zoom up and all will be well with TBT.  In the mean time, I feel like we’re not letting the trend be our friend.

  138.  PFE taking a hit on some clinical trial bad news.  Buying here selling Jan ’12 15 puts and calls look good here.

  139. Morning Phil i have a general question about account management.
    These days when i sell a put or buy a call i don’t care about the margin requirements, i just mentally subtract the amount i would have to cough up when i have to buy the stock from the amount of cash i have in the account and don’t touch that cash.
    i do this because years ago i got burnt by using margin to buy stocks when i was more green.
    not its options and can be rolled and protected like you have taught us.
    Am i being too conservative with the cash ?
    whats the proper amount of cash to set aside when selling puts or buying calls, in spreads and other forms.

  140. Got into some IWM 68 calls too, at .46   Phil, curious why you choose the 68′s not the 67 or 69; you you have a way of determining which is going to give the best leverage?

  141. APOL – I think that’s enough bad news for them.  You can sell the $45 puts for $2.75, which is a good price with a stop if they  can’t hold $44.50.

    Employment/Gel – I’ve said this before.  I would:

    1. Put solar panels on every viable rooftop in America – commercial and residential.  5-man teams per home doing 100,000 homes a day will convert 20% of the country to solar and employ 500,000 direct people plus at least another 500K down the supply chain.  At $40K per job that’s $20Bn plus another $20Bn in materials and we cut our imports by 1Mbd ($27Bn), cumulative for each year we run the program.
    2. Begin spending money we should have spent over the last 30 years fixing bridges and damns – another $20Bn for 500,000 out of work consrtuction workers and call it $20Bn for materials. 
    3. Rebuild New Orleans – $20Bn and we get a functioning city in the process.
    4. Clean up beaches and ocean and bill BP – $40Bn, $60Bn, whatever…  8-)
    5. Offer to pay medical care and Fed withholdings for 5 years on 1/2 of all payroll increases over the next 12 months.  Cost about $10,000 per job created per year so they pay taxes and the money comes back so it’s even except the people are working and contributing to economy.   

     That’s a good start, should get 5M people working within 12 months for less than $100Bn. 

    11:30 Dow volume is 77M, now we’ll see if we can get back to bot trading (20M per hour). 

    VNO/Morx – That was yesterday’s pass fail, today it’s $75 but their long-term line is way down at $70, which is why I’m not taking this dip too seriously yet.  What, the whole world is falling apart except for commercial real estate? 

    STT is getting taken to the woodshed.  XLF down 2% and that’s really hurting today.  Europe closing down about 2% with more Greek panic.  Hopefully we can shake that off and get to work over here now.

    Top 20/Exec – Yes.  Still about 13 I think…

    TASR/Yip – That’s nice, I wish YRCW would get bouncy like that!

    Bottom/Jpuma – I take it you read earlier comment that this should be it with EU closing and BXP/VNO bottoming.  Now we need to watch those levels and THEN panic.

    Taking money/DK – Well the general rule of thumb it 50% with more than 60% of time left to go you take the gain.  Other than that, you have to go with your gut.  If you have BTU and they drop to $40 and you can take out your caller at 30% less with a long time to go AND you are very sure you can sell another call and do better on a bounce  – take a chance but, as I said earlier, only AFTER you have a firm fallback plan in place (what you will sell when you are wrong and where you will admit you are wrong). 

    Dec/Yodi – It kind of depends where we end up.  At the end of July, if we toasted our puts for $1.50 then the market must be up and that means we want to spend that $1.50 to roll up to the highest Dec we can.  If the market is down and we owe out putters money, we probably roll them and roll ourselves for as little out of pocket as is prudent – especially if we still expect a bounce.   If we don’t expect a bounce, then we just roll the putters because the Sept puts will have a higher Delta than the Decembers so we stay there until the position resolves itself. 

    VNO/Cwan – They are almost dead tandem with BXP and $75 was good support for them.

    TNA/Bps – Dangerous of course but not foolish with TNA at $42 as you need a 10% drop in the RUT to get it put to you BUT – what is your plan for waking up to a global meltdown that shuts the market for 3 days and we open a week later with TNA at $18?  As long as you are comfortable with that (triple down, roll to Oct most likely) then sure, why not?

    Financial/Judah – Yes, that will be good news as will be the last-minute save of the unemployed.  Surely they can’t be that insane….

    India/Rn – Yes but if factory wages go up don’t IT expect raises too? 

    SRS/Morx – I think it’s keep or kill based on VNO and BXP holding the line here.  That’s the simplest way to look at it.  If you don’t want to pay it, you can roll them into just a bit more than 1/2 as many Oct $6 puts ($1.22) even so worth considering if you don’t need the margin release. 

    FRE/Tusca – Sounds like someone dropped a nuke as a negotiating tactic and that’s what freaked the financials today but it’s not likely Congress is suddenly going to tell the banks to suck up their own mess unless I’m getting a lot more political influence than I thought.

    YRCW/SrF – Good luck to you ’cause I’m in for the long haul at this rate!

    USO/Poind – Good plan.  there’s always something to kick oil up eventually. 

    And wheeeee to the upside for a change! 

    CHK and XOM/Rain – I agree. 

    LOL Jdub – And how does that make you feel?  I agree but I think the root cause of the problem is the lack of communication between management and workers.  That all starts with poor education in schools and lack of real world experience for the well educated and then you have 2 distinct classes that can’t relate to each other and both see each other as enemies, rather than partners of sorts.   I can go on about this for days so I’ll stop there…

    Ghans/Iflan – What kind of crazy sport allows Ghana to compete with us? 

    Woopie!  Money is coming out of bonds – first time in ages.  Go TBT and there’s a 7-year auction at 1pm that may not do so well (B+ instead of A) when the market is looking so exciting.

  142. I was going to say woo-hoo on APOL and I just realized I never published it until just then.  DO NOT take that trade, it’s over!!!

  143. Phil
    the TZA hedge July6/8 BCS -6P is up lots. Is it safe to get out or hold?

  144. Buying another round (up to 1/2 position) of SPPI.  Seems to bottom out here and move up.  Order in for 3.83 or better…..

  145. Cap… is this a good time to sell some August puts on HK?… I’m loaded up on BEXP

  146. Phil…..They call it    "The beautiful game"     I still have cherished tapes of my three older sons playing high school soccer.     Sigh…………

  147. Phil / RDS-B    6.4% Yield, 10x p/e   China and India are going to put as many cars on the road as US and Europe, so LT oil will become increasingly expensive.  Yes, a DDIP may take us to $55, but then tar sands and deep water unprofitable, so limited downside and big LT upside.  Is now the time to buy,or is it still too early? Same question re: the other big integrateds.

  148. DIA Mattress    I’ve currently got +Aug 104, + 4 Sep 107 / – 3 Jul 104.    When should I look to do a 2X roll to full covers and at what price?

  149. Phil:  I am on board with your employment plan; it would shake up the country and what we need now is a change of psychology.  We need a long term goal to get us out of the funk.  Part of the plan should also include letting California go BK; then we can reorganize our failed state.

  150. Phil - The interest on the national debt is will rise 4x in 5 years, and that is assuming interest rates do not skyrocket.  Much of the debt is short term financed and will need to be re-issued soon…2yr, 5yr, and 7yr bonds…as mostly "Ben’s Banks" purchase the 30yr debt.  How can this be resolved long term beyond increasing fed taxes 50%…and what will be the unintended consequences?  Having a math minor…I’m having difficulty "Fugettingaboutit" as I personally can not calculate a solution that will be politically viable and thus enacted.  
    Below is an article posted today that confirms what has been calculated, published, and confirmed for over a year…yet mostly avoided in the MSM:,UDN,TIP,TLT,TBT,GLD,FXE&sec=topStories&pos=9&asset=&ccode=
    U.S. debt will top $13.6 trillion this year and rise to 102% of GDP by 2015. Moreover, the publicly traded debt (debt excluding intra-governmental obligations) will rise to $14 trillion by 2015, up from "just" $7.5 trillion in 2009.
    At $14 trillion, the interest payments on the public debt will total about $1 trillion in 2015, he continues; even assuming solid growth and low inflation, that would equal about 30% of total government revenue

  151. Phil
    The trouble with solar is payback will be slow, they are subject to damage and failure in many parts of the country. I think we should go natural gas but oil won’t let that happen. Anything will help except giving banks more free money.

  152. Phil/Employment
    Your plan may very well create the jobs that are needed, however the plan politically has a slim to none chance of passing (and Slim passed away last year)  I would propose a politically acceptable plan – Set up a new agency that would loan money to anyone that could present a viable business plan, that would include an emphasis on employment intensive growth. Additionally… a drastic lowering of tax rates for the small businesses, and a tax holiday for the first five years of any new business. This form of employment is Permanent, wheras I believe your plan has a shorter term emphasiis, as once the projects are completed, the employees are re-entering the unemployment ranks.  Mine could be done with a mere signature on the legislation, and will immediately take effect. This would give the markets a boost that would be considered parabolic.

  153. Out of TNA at $41.98 for 65 cents

  154. Cap/Wifi trading.  I had to do that recently when I lost power for a few days — sat at local Starbuck’s for hours at a time.   Nice job on TNA.  What method have you been using to time your entries/exits?

  155. Goldman:  unfortunately the only politically viable way out is through inflation, which will come after they’ve pumped so much money in the system to avoid a deflationary depression, that’s when TBT will shine  imho

  156.  I’m in on the YRCW bandwagon!  But instead of buying the Jan 1 C, I did a call spread to reduce my cost by a penny.  Makes a lot of difference for 50 contracts.  So far only 19 of the spreads filled.  Oh and shameless plug for Optionshouse.  YRCW is a great way to take advantage of those 100 commission free trades!  I have until 6/26 to use it.   

  157. INTC/Dflam – I would take out the caller and leave your long calls and the shot puts.  Don’t forget we’ve heard many positives on SOX. 

    INTC is very attractive down here at $20.40.  You can sell 2012 $20 puts and calls for $7 for a net $13.40/16.70 entry and they pay a .63 dividend (4.7% on the net entry).

    Copper over $3!!!  Oil $76.20.  Gold can’t get over $1,250 but looks like it wants to.

    Euro $1.2375!!!  Pound rejected again at $1.50…

    Gold/Button – Inceasing shorts?  We killed the GLL putters yesterday at .75.  I do like selling the $38 puts here for $1.50 but out if gold breaks $1,250.

    TBT/Humvee – What goes up just keeps going up and up, right?

    Too conservative/Micro – If you can’t see a clear path to squeezing out 20% for the year, then you are probably too conservative but, other than that, it’s called being sensible.  I would have to say that I allocate (mentally) about 50% of the cash I would need to cover but then I am acutely aware of the fact that I have to juggle if one of my positions needs attention (or all of them in a flash crash) and that can cost you money so not good if you are not super confident you will be able to adjust and get it back. 

    IWM/Humvee – We were in them yesterday so I am very comfortable with their movement and I couldn’d see losing more than a dime on a sell-off, which would be a good DD point and, failing that, they could be rolled down to the $67s for .20 (if we went below 10,200) and then we could sell the $66 puts (partial) to brake the fall.   Think of it like chess, I pick a position based on what the next 3-5 likely moves will be after that move and I’ll look at a bunch of possibilities and then get to the best of the bunch (IMHO). 

    Speaking of the IWMs – I hope people realize that if we DD at .40 for a .45 avg and then we hit .45 (we did) that you get 1/2 back out at .45.  That leaves us back to 1x with a .45 basis and we can then DD at .35 for a .40 avg if we decide it’s worth sticking with.  Only when a positions EXPLODES through your DD point should you stick with it on 2x and always you should have a tight stop on 1/2! 

    TZA/Shadow – Oh that one you can kill.  Short-term hedges follow short-term trading strategy of taking money and running! 

    Soccer/Iflan – Yep, we are soccer parents.  I hear if the US wins the World Cup we get to make all the other countries call it "soccer" from now on!   8-)

    RDS/Tusca – They are a good one.  Of course, now there are far more risks than were previously disclosed and I still like XOM best.  They pay a 3% dividend but they buy back their stock constantly, which keeps them going in good and bad times and you know they can buy off an accident. 

    Mattress/Eph – The current position is Sept $108 puts, now $8, covered with 1/2 July $104 puts, now $2.83 and 1/2 June 30th $102 puts, now $1.22.

    Wow – Guy Adami telling people the S&P is on the verge of disaster and next guy backs him up so I guess we are DOOMED!  Dr. J says we are pegged here and may be DOOMED.  "Nothing is good but gold and bonds."  Now girl says nothing is good but JNJ and KFT and other guy says all technicals are leading market down and chart of the day says we are DOOMED!  Coincidentally, the markets are turning down right at lunch to freak out the retailers…  Oh wait, they are not done – Adami says earnings are no good and consumer is floundering and Najarian says MCK doing well means consumers are so poor they are eating their shoes in soup or some such nonsense….

  158. Goldman / Debt   Great article, but:  the reasons I still haven’t bought TBT are:
    Japan 10 year still falling, now at 1.13% inspite of much worse debt ratios.   It’s about alt/s, if the mkt tanks again or even stays flat, with deflation / low inflation, people will become disillusioned with the mkt and will buy bonds for safety, like japan.   With 20% plus real unemployment and rising, I wouldn’t be surprised to see 10 year at 2% again.  It’s smelling increasingly like a Great Recession and free or very cheap money will be the only way out.  Phil believes the Fed will hyperprint eventually to end/avoid Depression, but it may not be so easy.  This could be a long and winding road for the US, Japan and Europe with people greatful for any (miserable) return.  The only sector that I’m interested in is oil, since China and India auto demand will progressive head towards US levels and supply is increasingly difficult and expensive, even in a recession.  But, there may be a better panic entry if we DDip and we revisit $55 oil, I’ll take Phil’s guidance on entry timing.

  159.  Well, they’ve thrown the AAPL antenna story at AAPL.  Guess we can see what happens.  

  160. in TNA at $41.40

  161. Goldman… I’m afraid Humvee is entirely correct. On one hand you have the option of default, and on the other the quantitative easing which creates inflation, thus paying the debt with worthless dollars. There is nothing in between in the choice for solutions. Hiking taxes will kill the economy and would never pass the political test.  Hope for a robust economy that absorbs the debt is fantasy, as you say the math does not work – so we are back to the only two options.

  162.  Phil, would you be inclined to take a bullish flyer on BP at this level? How would you do it?

  163. humvee4me -I’m in doubt that Ben can defeat the deflation monster…inflation could be a difficult "solution" to pull off if consumer spending remains deflated for years due to future housing and jobs collapses…. while the banks continue to horde cash to ensure M3 expansion continues to be meaningless and Ben is left with a hollow play book…
    One the point of CA issues…the govt was willing to bailout GM, so I’m assuming they will bail out CA as the consequences of CA folding are exponentially greater than government motors.  Yet unfortunately for CA, without going through maximum pain, there will be few long term solutions.
     In the end, there will be no other choice so cheer up citizen, that is a governmental order! =D

  164. @Phil
    You don’t seem to want to hold this off till later.
    If you want to have everyone who doesn’t work on a guaranteed ‘livable wage’ income, which is the only possible conclusion one can draw from your political statements, then say so.
    We can then agree to drop this permanently because we will never agree.

  165. Phil
    Love it paid me .05 to get in.75 to get out, what percent is that or is it only really free money?

  166.  thanks to bots that have balls of steel and trade the technicals,we are where we are :-)   Wonder where the markets would be if humans played a larger role in the decision making based on fundamentals…..hmmm

  167. shadofax/gas — XOM just bought XTO so they see the move to gas coming.
    Doom/Phil — if CNBC is forcasting doom, I’m buying more IWM calls!

  168. Wow, you guys aren’t too different from Phil’s TV synopsis. :)

  169. Has sufficient time elapsed for the problems in the gulf to start showing up in the unemployment numbers? I believe there are far too many people impacted for the answer to be no. It will also be interesting if census workers are filing claims as well. It could get ugly tomorrow.

  170.  Hey Phil  -- love your take on CNBC crew, that’s funny.  
    BTW, are we looking like Feb 25th yet?

  171. Gold miners getting traction.

  172. Phil:  IWM 68 calls; when we just took that dip down; I tried to roll to the 67 for .22 cents but i didn’t fill, although if I had set it up earlier it probably would have.  Do you put your roll order in when we buy your initial position and just cancel it later if it doesn’t fill, or do you put the order is as circumstances dictate?

  173. With CNBC very bearish….. Friday should be a good up day

  174.  Phil, 
    Thanks for your answer yesterday. Regarding the long term hedges with TZA and such, I am concerned about the fact that TZA decays over time (due to the daily settling) so when you say on yesterday’s example that the RUT would have to decline 17% for TZA to decline 50%, I am not so sure that is the case? Thank you for clarification. 

  175. Grabbed XOM Buy/Write with $60.35 entry selling Jan 2012 C/P for $7.50/$8.60 for Net Entry $44.20/$52.10.
    Feels like a good spot there….

  176. rainman
    You got a play on that?

  177. Out of TNA at $42.88 ( IWM 64.28 line )

  178. Phil, you have been using VNO and BSX as market indicator recently. Are they always a good indicator?

  179. shadofax – well, I just stepped into XOM at 60.37 selling Jan 2011 60 calls and puts for 4.64/4.93 – didn’t think it was worth going out to 2012 for another $5. I also have speculative plays in FSYS, CLNE and WPRT for CNG vehicals. Careful on FSYS though, it’s the target of massive shorting.

  180. When selling naked puts what level of delta do you recommend to select? 

  181. GG and several other gold miners are in a perfect flag pattern on the dailys since March and even the weeklys to a large extent.  Which way is the wind going to blow the end of the pennant?  GLD on the other hand is in a bull flag.  Eric, still long a bit of GLD here? I am thinking a bit of a pull back to 117-118 area and then VRRROOOMMMM…..

  182. Phil, what about the TZA hedge Jan $6/11 call spread and $5 puts. Should I take the profit and run too or wait? thanks

  183. JRW/trendline.  You undoubtedly have it, but the descending highs from Tuesday and Wednesday lined up nicely with today’s high just now.  Couldn’t break through that time.

  184. judah – buy low sell higher !   using PP and S1 today I guess, just trying to pick good entries; looking at 1080 on SPX as a key level; so buying at or below 1080 until market proves me wrong.
    gel … HK, I havent looked at the prices for puts today, but the 18 or 17 strike for july probably is good

  185. Phil
    Completely agree with reconstructing our country (e.g. solar pannels, cleaning up beaches, etc)…With all of the people unemployed and receiving long-term unemployment benefits, I don’t understand why these people are not forced to work to earn their unemployment benefits.  I know they need the time to find a new job, but would working 1 day a week, on projects like cleaning up the beaches or helping with the construction of green friendly energy services, really impede their job hunts? Forcing them to work in one of these tedious jobs would also give them another reason to hit the job searching harder.  Some people would hate the work, so they would search their asses off, while others might enjoy the work and the government could allow these people to work more days for higher benefits.

  186. MO, buy/write – Buying at 19.73 and selling the 2012 puts and calls for 5.34 and selling 2012 15 puts for 1.32. Seems safe and pays 7.10% dividend. If rates stay low why woulden’t folks go to dividends for a return?

  187. Phil
    Pls if you get a change to look at my this mornings question below thanks
    June 24th, 2010 at 11:31 am | Permalink  
    Phil  VIX is approaching the 30th again I am looking at my plays of WMT looking to roll the long jan12 WMT from 45c to 40c at a cost of 3.60 on a 5$ spread is this recommendable thks

  188. MO – thats selling the 2012 17.50 p + c.

  189. In TNA at $42.68

  190. jomp – if you sell the 2012 15 calls for that, U may get called away b’f dividend, as if the option price (sold for) is less than the difference of the divdend, they may call you away.  Happened to me with a few others….

  191. never mind.. that’s better….

  192. judah,
    Thanks, got it next stop 64.64 then 64.89

  193. Wow, speaking of MO, the 2012 20/17.5 strangle is a hot item today….

  194. DIA 5 min look like an inverse H&S pattern….

  195. Well, it looks like the banks are happy with what’s happening to FINREG.  They’re starting to take off. 

  196. Cali/Humvee – California is a "failed state" because they only get back .80 of every dollar they pay out to the Fed govmnt, about the lowest in the country.  A couple of weeks ago I put up a chart and it’s very clear that the blue states support the red states, most of whom get more than $1 back for every dollar they send to Washington.  If California simply got back the money, they would go from fail to pass and if California goes BK, then 20 other wellfare states in the middle of the country lose their revenue source.

    Solutions/Goldman – Either hyperinflation or default.  The hyperinflation has to come back quickly enough that the short-term note-holders can’t react and suddenly they are getting .70 on the dollar after 2 years of 15% inflation.  That kicks our GDP up to $18Tn and suddenly the interest payments look manageable.  After a decade of steep inflation (10-15%), we have a $40Tn GDP and "just" $20Tn in debt and everyone pats themselves on the back and drives their $100,000 cars back to their multi-million dollar homes that have $300,000 mortages remaining and then we all refinance and buy 3-D TVs and head off to the hospital to have AAPL’s newest device implanted directly into our brains….   8-)

    Solar/Shadow – This is not about "payback" this is about the government coming in and saying "hi, you have a roof with southern exposure, here’s your solar panels."  It works well enough to power homes and powering homes takes them off the grid and taking homes off the grid de-stresses the grid, which is less than a decade away from a $3Tn breakdown at current pace.  Also worth noting that, since there is 50% transmission waste, each home taken off the grid saves 150% of it’s energy consumption….

    Jobs/Gel – If you give a 5-year tax break to new businesses then I would just dissovle my company and open a new one.  The loan idea is fine but isn’t that what the SBA is supposed to do but doesn’t because the bankers turned it into a joke?  I like the idea and will be happy to use it in my administration as well but, yes, I’m a social engineer and I want to put people to work doing jobs that need to be done.  We have 2-3M unemployed construction workers – let’s give them tools and let them fix America now, not after some guy figures out how to open up a tax free business with a government loan.  My payback is lower oil consumption and the constant stimulus of about $50Bn worth of energy bills that don’t need to be paid and then $100Bn in year 2 and $150 Bn in year 3 and $200Bn in year 4 and all I’m doing is spending $40Bn a year to lower the impact of homes drawing from the utility grid and when we’re done – consumers will still be saving $250Bn a year on energy costs and we’ll still be importing 5M less barrels of oil per day ($136Bn improvement to trade balance) and those impacts will continue forever. 

    AAPL/Occam – "IPhone Problems?  It’s an Annual Tradition"

    BP/TP – We did already.  Not working!  Right now I just like betting they survive the next few weeks by selliing the July $29 puts for $2.26.  If you don’t want to risk assignment, then the 2012 $35/50 spread for $4 is not a bad deal with $11 upside but it’s very risky and you can’t go closer because it’s going to be a long time before all the lawsuits and Congressional hearings blow over. 

    Consumer spending/Goldman – You can boost consumer spending in 10 seconds through loan programs or tax breaks or my housing program.  Drop $200Bn on the consumers instead of giving it to the banks and they’ll buy stuff for sure. 

    Never agreeing/Flips – OK dropped then.

    Percent/Shadow – I guess it’s a .80 gain on .05 or 1,600% – not bad!

    Humans/Kustomz – They’d only screw it up somehow.  How about if we go back to the days where you buy a stock and find out how it’s doing the next day in the paper?  That takes the bite out of 90% of the panic-moves we get these days….

    Doom/Rain – Yes, you are getting in tune there!

    Gulf/Cafords – I think slower hiring of seasonals is an impact already but layoffs won’t hit until after July 4th if tourists don’t come.  Major impact is on small business people in big, big trouble if this season is a bust (most likely).

    2/25/Esco – Not at all, we have blown Omega 3 with a vengeance and need to get back to 10,450 by tomorrow’s close to even resemble the patten now.  Only up 200 but we need some news or some kind of excuse to do more than a gap fill off this morning’s drop. 

    IWM/Humvee – I didn’t roll, still in the $68s but, with a month left, I will roll if we fail 10,200 and it only gets cheaper on the way down so I can’t miss the opportunity and, if we go up, then I don’t need to roll at all becasuse I’m taking my 20%+ and running. 

    TZA/Amatta – Yes there are decay issues and 17% is approximate, but it’s disaster insurance not "didn’t go great" insurance.  When you have consecutive down days, then TZA makes massive gains and when you make consecutive up days, they have massive losses.   We don’t expect to have this chop forever but, if you are not comfortable with the spread, then as I said to someone else, paper trade it for 2 years and see how it goes.  You can hedge with the index ETFs so you won’t have to worry about decay (in theory).  That’s the only way you are going to learn, by practicing and experiencing the reality.  Otherwise, everyone has a theory…

    XOM/Hoss – It should be.  I like XOM because refining and chemical segments do well when oil is low and, of course, big daddy does well when oil is high. 

    VNO/Sean – They are usually good indicators and sometimes better than others.  I’d have a hard time saying exactly why I key on certian things at certain times because I look at so many things and, if I notice a very strong correlation over time, they tend to move to the top of my pile and sometimes I find things very useful like the REITs this week and copper for a while now but notice I lost interest in silver and nat gas because they stopped correlating.  I still look, but not worth mentioning.   VLO used to be a favorite too and then SU for a while but things change, Bots change, public interest changes, fund and index weighting change… so things work until they don’t.  Like for the Nas now – I don’t give a damn what the Nas thinks it’s doing, eventually they will do whatever AAPL + SOX does (average the two %s and see what you get)…

    Delta/Maxim – I like the one with the most sharp edges so anything with 1s or 3s or 7s in the numbers.    Just kidding, I don’t really look at Delta, I look at what level I think the stock will hold and I look at what I can roll to if I’m wrong and as long as I can feel comfortable with a DD, a roll, a DD a roll and buy, then I’m good.

    TZA/Jossie – I’m for taking all short-side profits here yes.

  197. GES formed a hammer on the double bottom (dailys).  Going to try for a bounce here and buy a bit of the Aug 35 Cs.  These are against the PHILosophy here (don’t usually buy premium), but a TA craps roll for that (1/4 entry).  Out at 32.5 though.

  198. JRW,  That same line has been acting as support. Also, from SS’s playbook, TBT has been going vertical, so I stuck with TNA.

  199.  Apple dragging NAZ up

  200. Phil, what price are you targeting for selling the DIA June 105′s?

  201. Out of the other half of my AAPL shorts at my entry price.

  202. XOM 57.50 puts — looks like a good sale here at 59 cents for July !

  203. jomptien/MO
    That is a good one… Check out PM… just as good, and the emerging markets are expanding better than we are, giving more income to those that  can afford the "cancer sticks’

  204. Looks like a large postion of the unemployed are waiting in line to get the iPhone 4.

  205. Its interesting to me that they keep mentioning voice recognition / transcription systems on CNBC today as a thing of the future……I spend all day every day dictating into "PowerScribe" or "TalkTech" which work very well for me with minimal edits per paragraph (2 words per 100, depending on the complexity of the punctuation). I keep waiting for them to go mainstream. The only holdback seems to be that 1) it takes a good while for it to learn your voice and 2) its still very dependent on the quality and the proximity of your voice to the mic. But, the recognition itself is nearly flawless.

  206. Dk, no kidding…don’t these people who camp out in front of the store have jobs to go to?

  207. Jobs/Rstu – I only need to be dictator for about 6 months and I could clean this mess up!  8-)

    Woops, CNBC with another "Stop Rallying" minute with Bob Pisani bringing up 10 negatives in 60 seconds at the top of the hour.   Someone didn’t buy a Monet and "that’s the biggest canary in the coal mine" Maria has heard yet.  Yeah 15M unemployed didn’t bother her but somebody balks at paying $100M for a painting of a flower and she’s worried about the economy….  Geeez! 

    MO/Jomp – Always a good one. 

    WMT/Yodi – I’m not clear what you are doing.  You wan to roll the caller down to collect more money or you have a bull call spread now and want to pay $3.60 to gain $5 in position? 

    Banks/Matt – Was there really any doubt?

    DIA/Jimmy – We can sell the June $104 calls for .45 and those expire next Weds but I’d rather get out with a .05 profit at this point as we’re just lucky to get even after this morning.

    XOM/Cap – Good idea!

  208.  Hi Phil,
    Your comment on the Nas.  As of now, AAPL + SOX average out -0.9% but Nas is only down 0.5%.  So are you saying that Nas has about .4% down to go?  I hope that’s now how you use it ‘coz that a heck of a moving target for me to use.  

  209. Out of TNA at $42.98

  210. DKGuy…. LOL – all the best tools are needed in today’s high tech environment… plus it has a camera built in so you can sue the bastard that does not hire you.

  211. Phil, last week you helped me adjust my TBT position to a Jan 36/40 bull call spread. We left the Sept 45 put in place, sold at 1.59. Would you take this pop in TBT to adjust, or just sit patiently. The only good roll I can see is to the Jan 12 40, or maybe 2x or some fraction of Jan 12 35. Am I looking at this the right way? Thanks

  212. DKGuy - LOL…So what the Lexus gets repoed…when you have the new I-Phone, Life Is GooD and everyone around you knows it, correct??? =D

  213. Hi, jdub, you are doing spreads on YRCW at OptionsHouse?
    Do they take GTC limit orders on spreads now.  A few months ago, I had an account with them.  As soon as I discovered that they did not do GTC orders on spreads, I quit.  However, they did allow GTC orders with one leg.  Maybe they changed their policies recently?

  214. Only 120M on Dow at 2pm after such a good start.  Haven’t had a good stick in ages and we could really use one today.  Watch 2:30 and 3pm action closely but we are at the top of the bounce here.

    Big storm, lost my satellite.  Hope the cable holds out as that’s my web service…  If you don’t hear from me, that will be why…

    Right now I’m guessing we finish at 10,250 (sans stick), gap up to 10,350 tomorrow but that might be it for the move unless we get a stick and hold it.

  215. Rolled by TBT July short puts from 38 to December 32 with a DD and some nice premium income.

  216. Hi Phil: I am doing a lot of reading, past articles, portfolio articles, blogs, etc. First of all I want to say that I really enjoy the reading/lessons, although too many doubts still. I want to thank you for your shared expertisse as well as that of so many nice people in the blogs. Thanks to all. Now to me, I am in the process of correcting my portfolio. I have lowerd my basis in FRO and still have 2000 . I also have 2000 PGH at 19.70. Ive read you like that one long term. How can I lower my basis to a realistic level? I also have 2000 SLV, which you dont like and I need to do something about it, just studying the strategy. What would a good hedge be for FRO, PGH, SLV? Thanks.

  217. Pharm/MO, I’m selling the 15 puts, not the calls along with selling 17.50 puts and calls.

  218. An economist/analyst hedge fund guy I know is projecting 11,900 on the Dow by December…. we shall see!

  219. Phil, by the way, looking at my trades over the past 6 months or so, my being too active and buying back short positions has cost me profits quite frequently. If I just sit on the position and let time do its wonders, I’m much better off. Mastering this means finding the right balance., which I guess just takes time and practice.

  220. Phil yes this is my intention   ]you have a bull call spread now and want to pay $3.60 to gain $5 in position? 

  221. Phil, Based on the last post, should we stand pat with the DIA and IWM plays for  either stick or gap tommorrow?

  222. In TNA 42.55

  223. Exec: Just read your offer of preparing a spread sheet, will you post it? It would be so good for us newbies. I am a into health, so if I can help with anything I will. Thanks. 

  224.  Hmmm..maybe you live near Englewood Cliffs? as CNBC was knocked out as well for a few mins.   I live closer to central NJ and it looks like rain is about to come down hard.

  225. Yipcarl: Sorry to hear the bad news. Hope everything goes well this time. Al the best

  226. 40% "Cyclone formation" chance in the next 48 hours…was 30% chance 12 hours ago:
    Anyone have a "cyclone" long shot options play for Monday…like selling UNG puts, etc??

  227. ^^^ The cyclone is moving West-Northwest @ 10mph…towards the gulf…could be some of the reason for the BP decay today…

  228. Phil- How much of this negative action is Russell rebalancing (ie selling)?

  229.  Pharmboy—I have JUL 13 short puts on DCTH and am looking to roll them to JAN 2012 7.5 puts for about overall even. I recall you talking about DCTH in the near past and am wondering what your current ideas are? To me it looks like they’re heading down to the low 5′s and I’m thinking it’s better to roll now rather than wait the next few weeks out. Thanks!

  230. Thank you. 
    Out TNA at 42.50…not liking this action!!!

  231. for long time investors PFE possible again 14,46 sell 2012 jan 15 call+puts for 4.76, net entry 9.7

  232. gel 20% drop in the dollar and its possible

  233. DCTH/for – yes, rolling for about even is fine.  I noted a few weeks ago that they were most likely going to the 6 area.  That PPT fall based upon the data shows how manipulated the stock is (reminds me of the DNDN moves).  There are black pools out there, and not being able to short the stock at 10.50 on the open market tells me that banks/funds are controlling the interests and will start accumulating at that line. 
    One other note, Schwab and JPM are teaming up their retail desks….hummm….now they will know where retail is buying…..absolutely sick.

  234. New Midterm Trade in MU posted on my page.

    Check it out!

  235.  Voice/Hanna – There’s a Dragon Dictate App on the IPhone that works great and even GOOGs mobile app has nice voice recognition – no training at all.  I think that’s because they ship your soundbyte to a mainframe, which can crunch better than your local PC. 

    Average/Jdub – It’s not exact at all but it’s usually in bettween them and then you can see which way it’s drifting and figure you should keep momentum until you get to the middle and then you can scalp some pennies playing the Qs.  Like right now (2:22) Nas is down 0.7% and AAPL is flat and SOX are Dow 1.88% so SOX are the drag to .9% AAPL and SOX are moving up so that would be "no bet" on the Qs moving down from $45.75 at the moment and what we’d want to see is the SOX tick up a bit to give us confidence to grab the Qs but I’d be willing to go in here as long as the SOX hold 356 (now 356.21). 

    TBT/Jbur – Unless you want to roll to 2x the Aug $41 puts ($3.75), I don’t think there is much point.

    PGH/Arbo – You are out of position to "win" that one.  They don’t even have 2012 contracts to sell so your chance of getting your money back over the next few years is slim to none.  Remind me of your question at close if you want me to look at 5 positions but it would really help to know how many and what basis you have. 

    No 2:30 stick – nail in coffin #1 for today.

    Balance/Jbur – A great part of it is picking things that you will pretty much be disappointed if you can’t DD at target price at the end and then force yourself to leave it alone until then.  If you don’t have the conviction to ride it out and the self-control not to get all excited on a little dip and turn it into a gamble – then you can deal with it.

    $3.60/Yodi – I’d offer $3.30 and then be happy if I got it and, otherise, you can make $1.50 with $3.50 in other, diversified ways. 

    DIA/IWM/Amatta – No, based on last post you should be out of them.  After having to DD on both we got out +.05, that has to be good enough for you (from down 20% to up 10%).  I am liking a re-entry on the $68s now at .45 (our prior avg) if we can bounce off 635 again, maybe for .40.

    Storm/Jdub – All sunny now but that was a very violent storm that blew through. 

    Cyclone/Goldman – I like selling UNG Jan $7 puts for .65, cyclone or no.

    Russell/SNS – possible but where is the buying?

    Copper up, Euro down, Pound down, Yen down, Oil flat for day at their close, gold up 1% but indexes tanking again.  Very strange and annoying.

  236. eric  why note go with QID instead of shorting AAPL directly?

    Pharm got a link SCHW JPM

  237. selling out meeting buying, maybe they are done, oversold russel, any thoughts?

  238. Trying to buy DIA July $105s again for .80, no luck…

    Oh a package bomb killed a government official in Greece.   The revolution begins and the bourgeois markets do not like it!

  239.  goldman – I mentioned it early in the week – JOE is a BP + cyclone play.  Although it’s off quite a bit here from Monday

  240. here sticky sticky

  241. kustomz,
    It was bouncing against the 5 from the underside this morning on light volume so I shorted it. Also, I liked the fact that everyone is so bullish on it after this huge run. I got a $3 move on the first half and b/e on the second, but of course now I’m wishing I held the second half.

  242. Kust – here.  This is for fixed income….but don’t tell me they are not swapping spit.

  243. Gel/PM, Yes I like PM too – I like the dividend players to rite against when vix is high.

  244.  SPX almost hit its LOD but VIX didn’t come close to hitting its HOD.  So stick save possibility is still very much alive.

  245. 100k tna to buy at the figure loud

  246. Is it a stick if we stay red? Less red as I see it?

  247. and hit

  248.  Thanks Phil for the explanation and starting to drizzle here.  
    My play into the close—sell RIMM July call (whichever is the closest strike) and buy Jan C against it (whichever give me a slightly positive delta) taking advantage of higher front month IV.  This is a hedge against my remaining profitable July 60 P which has been inflated due to increased IV.  Want to hedge against any surprise to the upside as expectations are really for this to tank.  

  249. We cut right through another layer of support every day.

  250.  Look at those utilities overperform the markets.  Phil, you like any of them for LT holds w/ great dividends?  Locally, we have PEG..AEP is also beaten down.

  251.  Ok, scratch what I said about the VIX

  252. lapper,
    You bought 100 K shares of TNA ?

  253. VZ painted a BIG red candle and is at S2 on the daily.  it has been bouncing around the 29 line for a week now.  Going to pick up a few shorts and cover my longs here….29 Aug P

  254.  Ok, scratch what I said about the VIX

  255. I have a gut feeling that BOTs are doing the opposite of what we expect.
    If they know that we expect a stick, what do you think they would do?!

  256. i hope we can get a big bounce off this…this is ugly.

  257. Trying a small SPY long here with some calls.

  258. In TNA at $41.33

  259. Cant play games like that Cwan. Pretty soon it will be reverse-reverse-reverse psychology and you’ll be doing what you originally intended to in the first place. JRW, your 63.56 has loosely held, you buying?

  260. Perma-bear Albert Edwards just got even more bearish, saying the economy is set to collapse "like a pack of cards as soon as the steroid-like stimulus is reduced… With core inflation rates now sub-1% in the eurozone and the U.S., we are only one recession away from Japanese-style deflation."

    The U.S. Monetary Policy Forum conditions index falls to its lowest reading since Q4 20 2008. The gloomy reading stems from the large weight given to measures of the amount and availability of credit, including asset-backed-securities issuance, which are deteriorating.

    Commercial paper grows for a third straight week, to $1.099T outstanding, at least hinting at inventory restocking and as yet not held down by falling house prices. Asset-backed commercial paper rose to $435.4B outstanding from $427.4B.

    Hotel occupancy is inching its way back (chart). Average daily rate rose for the third time in four weeks, and RevPAR is up 7%

    "It’s gotten insane," says Pimco’s Scott Simon of record-high prices for mortgage bonds, soaring on speculation that refinancing isn’t speeding up. "This is rarefied air." The average price of GSE-guaranteed bonds has climbed to 106.3 cents on the dollar

    Commercial real estate prices picked up 1.7% in April, Moody’s says, but beyond that, weak fundamentals give the perspective you’d expect: prices down 16.4% Y/Y and down 41% from the October 2007 peak, and nonperforming assets not going anywhere.

    Layoff activity continues to slow, with May mass layoff events (50 or more workers) coming to 1,412, resulting in 135,789 lost jobs, and the fewest mass layoffs from manufacturers on record. Now, eyes turn to when the hiring is going to start.

    Top U.S. coal producer Peabody Energy (BTU) thinks we’re in the early phase of a "30-year super cycle in global coal markets," and the company is targeting Asia Pacific growth – particularly China, which has increased imports 17% from a year ago.

    The cost of insuring Greek sovereign debt against default continued to rise to record highs today. Greek CDS surged to a record of 972 basis points, and the nation’s probability of default is now an implied 56.5% over the next five years.

    France is in the midst of a nationwide strike against Sarkozy’s proposed increase in the country’s retirement age to 62. Some 200 demonstrations are planned today across France.

    More action may be needed from China on currency before the U.S. puts possible legislation back in its holster, says House Ways and Means chairman Sander Levin. Vocal senators have pressed for new laws to pressure China for a stronger commitment to revaluation than "a step forward and a step back." (previously)

    The U.K.’s new annual bank levy will fall predominantly on the shoulders of domestic banks. More than half of 2011′s expected £2B draw will come from Barclays, RBS, HSBC, Lloyds and Standard Chartered. By 2013, that figure will rise to £2B out of an expected £2.5B draw. Premarket: BCS -1.3%, RBS -1.15%, HBC -0.4%, LYG -2%.

    As it has done with U.S. retail, a Wal-Mart (WMT) bank could be a disciplining force in holding down costs for customers and could act as an engine of credit creation for a significantly under-banked subset of the American populace. So of course the banks are trying to kill it off in the financial reform legislation.

    Freddie Mac’s latest mortgage survey pins the 30-year fixed rate at a record low 4.69% with an average 0.7 point, and all other rates except for 1-year ARMs at record lows as well – though lower rates may not spur housing demand much if buyers expect prices to keep falling.

    Senate negotiators working to finalize financial legislation reject a provision that could force big banks to pay for the wind-down of Fannie Mae (FNM) and Freddie Mac (FRE).

    As financial reform sprints (or flails) to the finish line, early chatter about the Senate accepting the House’s stance on derivatives (the last and seemingly most controversial issue) is fading, though slim margins mean the House holds a lot of cards. The Senate gets a win on capital levels. Big banks have led financials sharply lower today: JPM -2.6%, MS -2.6%, BAC -2.3%, C -2.3%, WFC -2.3%.

    More shrinking auctions as the Treasury sells $30B in seven-year notes at 2.575% (.pdf). Bid-to-cover ratio of 3.01, vs. a recent 2.82; indirect bidders take 51%, vs. a recent 48.2%. Direct bidders take 9.82%, vs. a recent 12.2%. Some strength, especially from foreign bidders who like this maturity, and Treasurys hold gains: 10-year yield -0.03 to 3.09%; 5-year -0.03 to 1.92%.

    It may be too little, too late to help BP’s (BP) public image, but it turns out that BP and other oil majors based their response plans to a potential Gulf spill on government data that was faulty; government models had put very low odds on oil hitting shore, even in a spill much bigger than the current one.  Do I even need to say "which" administration’s study?

    Venezuela will nationalize a fleet of 11 oil rigs belonging to Helmerich and Payne (HP -2.5%), in Hugo Chavez’s latest takeover. The rigs had already been idled for months following a payment dispute.

    Notable earnings after Thursday’s close: ACN, HRB, ORCL, RIMM, TIBX

    Those first two items came last, release one after the other to take the market down at 2:30-3pm.  Enjoy the flush

    Same 2 plays as this morning, good for a DD if you never got out and I’m playing for a gap up tomorrow or a very painful exit!

  261. no JRW, it was on lvl2.  Just saw the bid and posted about it.  It looked like a failed stick attempt, got sold in to.  Now looks like round 2.  looks failing too, but ‘they’ have the money, question is if there is will.

  262. That was IWM $68 calls, now .40 (we liked them yesterday at .50, they topped out at .60).

    And DIA July $105 calls for .78.

  263. Out at $41.52

  264. Phil, I do understand the concepts of value investing and the DD.  I was somewhat puzzled by your response: "If you don’t have the conviction to ride it out and the self-control not to get all excited on a little dip and turn it into a gamble – then you can deal with it.", until I realized I didn’t state it correctly. I have been to quick to take COVERS OFF.  For example buying back my sold calls on a covered call position on a dip, only to see the stock drop further. You don’t have to be curt with someone who rarely asks a question.

  265. AAPL….Note that they are not leading the NAS down.  The Nas is down 1.5%, AAPL down 1/2 that.   When we rebound, perhaps tomorrow, perhaps Monday, AAPL will push up into the mid 270s.  Get your calls.

  266.  Kinda nice to see TBT hanging in there despite the market weakness. I am guessing that it is related to the auction this afternoon?

  267. lflan:  what aapl calls are you buying today?

  268. I cant see RIMM having a good Q or a good year, competition is cut throat and Canada’s currency have put pressure on margins on top of tight supplies

  269. July 280

  270. Phil re gap up tomorrow.   Arn’t you concerned employment #s will push us further down?

  271. I wouldn’t buy any AAPL calls unless it’s in a spread….like Aug 270/290…currently at about 8.  Just too expensive otherwise.

  272. next employment report is first friday in July

  273. thanks lflan!

  274. SPX July Iron Condor: 1.85 Credit, risk is 1600.  Short OPEX.
    Sell 1135 and 1000 C and P
    Buy 1140 and 995

  275. /ES drowning in sell orders

  276. Out of the SPY calls at B/E. Flat overnight.

  277. Phil / rwm   I lifted my RWM position to buy back more cheaply tomorrow.   Still wise?

  278. Well,  done for the day,  ugly day AGAIN !!  Up better than 6% on another poorly played day.  See you all tomorrow.

  279. What a great lesson today in not getting carried away with TA.  ‘They’ totally played the TA crowd today.  Allowing the bounce off the big technicals, allowing a retrace of almost the entire day’s drop only to turn around and drop it once more all the way through the bounce levels. 
    TA-ers got played today!

  280. what a climax at the end!

  281. Good job JRW

  282. Well, JRW made money anyway matt. I did too.

  283. ..everyone that is but JRW.  His system appears to be fool proof.  Hmmmmm…..

  284. What words from you – named Kinki!!!!  Nice.

  285. ..and Eric.  Good job.

  286. JRW – You called three $10-$1.2 TNA runs, and one $0.50…nice calls!  Quick question, what is your main confluence line below 63.56 for today…I wanted to work on my levels tonight…thanks!

  287.  XOM super strong at 60!! This whole move down seems forced

  288. ^^^"$1.0…not $10…I wish!

  289. Still have the EDZ 45/70 2012 bull call disaster hedge.  What a joke, its so amazing how rigged the markets are.  The spread has been running between 3 and 4 for several months.  Today EDZ up $2.17, the 70 call goes up (Mark Price per TOS) $1.30, the 45 call goes up $0.10 (???); so the spread narrows to $2.20.  I know its a joke, so I put an order to buy more at spread price of $2.25, it sits there all day and  never fills.

  290. goldman,
    62.80, but that will likely change for tomorrow !!

  291. JRW – Thanks…now go have a scotch as we need you relaxed for Friday’s volatility! =)

  292. Utilities/Jdub – I like PEG, ED and SO best.

    Curt/Jbur – I wasn’t trying to be curt, sorry if you thought so.   Sometimes a person asks a question and I want to make a point to ALL, not just the person who asks it.  I was agreeing with your statement as you had said buying out callers early had hurt some trades and I said the most important thing is to pick things you absolutely want to own and then resist the temptation to mess around with it (like when there’s a dip and you can uncover for 50% off the caller but then you never get a bounce to re-cover and it costs you).  I assumed you understood that bit so I skipped to the conclusion, which you found objectionable so sorry…  Also, I don’t know why I wrote "don’t" I think I meant to say one thing and switched to another as the point is you do need the conviction to ride it out and the self control NOT to get all excited on a little dip and turn it into a gamble (buy buying back the caller).

    AAPL/Iflan – If AAPL was down 1.5% with the nas, then the Nas would be down

    TBT/Gil – Auction was good but not so good as to keep TBT that low. 

    Employment/Tusca – If there were jobs numbers tomorrow, I would be worried but just U of M sentiment at 9:55.  NFP report is only once a month on first Friday of Month.

    And what Rwv said!

    RWM/Tusca – Not sure what you mean.  I hope you took money and ran as I’m betting heavy against you with IWM calls.

    6%/JRW – Next time I’m sticking with you!

    Climax/Kinki – Too many jokes spring to mind but suffice to say climaxes at end is much better than climax at beginning…

    Forced/Chyer – Soooooo forced I think. 

    By the way kids, I don’t think I’m out of school on JRW’s secret sauce:  Get ThinkorSwim desktop and set up a Free Paper Trade account and you can see this:

    JRW is more sophisticated than just this one S/R study but I think the day traders who are following him would do well to have a chart in front of them so you don’t have to be surprised when he does decide to pull the trigger.  Notice the big difference between yesterday and today was the fatter volume in the middle but also  notice how the S/R zone squeezed and our index continued to remain between the lines.  To me, more money back and forth in a tighter range means we are at a very significant point – hopefully a bottom but the beauty of JRW’s system is he doesn’t care if it’s a top or a bottom because he’s back to cash now and whatever range we move into tomorrow, he can play it once it’s established. 

    EDZ/Humvee – Yes, the out of money spreads are ridiculous to track. 

    So, based on that anti-stick finish, where we ended with 244M on the Dow (30% over avg) I’m not expecting us to do better than 10,350 and, if we get there early, I’m not expecting us to hold it.  I have no idea what basis there would be for a gap up (maybe 1M Iphone sales), only that if we don’t gap up, we’re going to be in technical hell and I can’t imagine anyone wants that (except Matt).

    RIMM apparently did not suck. 

  293. "TA-ers got played today!"
    I tried to tell you…..them damn Bots have evolved into living, breathing, thinking creatures.  You need to start thinking like one and develop tactics to defeat them…..IMMEDIATELY!!! …otherwise……..they’ll first take your money……..then your wife. 

  294. Phil - Great call on TBT @ 12:10…1.3% gain from that point upward, I’m back to break even on my TBT long after DD to a $37.76 avg…what option play would you recommend at this basis?  Also, what is your opinion selling the Aug or Oct UNG $7 puts vs the Jan?

  295. Well somebody didn’t like it:

    Research In Motion (RIMM): Q1 EPS of $1.38 beats by $0.04. Revenue of $4.3B (+23.7%) vs. $4.4B. Shares -2.8% AH. (PR)

    Oracle (ORCL): Q4 EPS of $0.60 beats by $0.06. Revenue of $9.6B (+39.9%) vs. $9.5B. Shares +1.5% AH. (PR)

    H&R Block (HRB): Q4 EPS of $1.46 misses by $0.58. Revenue of $2.3B (-5.2%) in-line. Shares -1.1% AH. (PR)

    Accenture (ACN): Q3 EPS of $0.73 beats by $0.04. Revenue of $5.6B (+8.3%) vs. $5.5B. Shares +1.9% AH. (PR)

    TIBCO Software (TIBX): Q2 EPS of $0.15 beats by $0.02. Revenue of $173M (+21.5%) vs. $161M. Shares +0.1% AH. (PR)

    Where are CNBC’s parade of misses?  Where are the terrible reports (other than HRB)? 

    Market recap: Stocks finished near session lows after another afternoon swoon, as investors dealt with uncertainty over the final shape of the financial reform bill and the legal conflict surrounding the deepwater drilling moratorium. Metals higher, energy flat, the dollar mixed. NYSE decliners routed advancers three to one.

    At the close: Dow -1.4% to 10154. S&P -1.67% to 1074. Nasdaq -1.63% to 2217.
    Treasurys: 30-year -0.3%. 10-yr -0.05%. 5-yr +0.03%.
    Commodities: Crude -0.13% to $76.25. Gold +0.47% to $1240.60.
    Currencies: Euro +0.11% vs. dollar. Yen +0.37%. Pound -0.29%.

    Utility stocks are the top performers of the past month, finding new fans among income investors as the 10-year Treasury approaches 3%. The three biggest holdings in the utilities ETF – Southern (SO), Exelon (EXC) and Dominion Resources (D) – boast dividend yields near 5%, which means utilities are 35% undervalued relative to government bonds, a Barclays analyst says. (ETF: XLU)

    "At $14, $15, $16, Yahoo is too low," CEO Carol Bartz (YHOO -2.9%) tells shareholders while vowing to improve on current 6% operating margins. She likes the search-and-advertising partnership with Microsoft (MSFT -1.2%) because search has "frankly become almost a commodity," adding that Microsoft will now be in charge of maintaining the "plumbing" that will support their combined search effort.

    From the land of delusion:  Verizon Wireless (VOD +1.3%), Google (GOOG -1.5%) and Motorola (MOT -3.9%) unveil their latest iPhone (AAPL -0.5%) competitor, the Droid X, a day before the new iPhone hits stores. The smartphone will sell for $199.99 with a two-year contract when it launches July 15.

    Poultry-related shares take wing after Russia says it is lifting its ban on U.S. poultry. TSN +1.4%, SAFM +3.6%, PPC +5.2%, SFD +0.5%.

  296. JRW- great job…could you point me to some posts where you explain your system? txs very much in advance.

  297. Climax/Kinki – Too many jokes spring to mind but suffice to say climaxes at end is much better than climax at beginning…     FUNNY!!!!
    exec, thanks for the tip.  I’ll start trying to think like them right after I figure out how to think like GS, JPM, CS…

  298. Phil/pharm,

    Your discussion with Jbur regarding adjustment of long term position and Pharm’s advice yesterday: I.understand that we shounld’t mess around with long term positions too much; but if a stock is down 10 percent, short call is up 50 percent (where is the percent symbol on iPad??), shouldn’t I take advantage of it? I guess I could 1)buy back the call and leave the stock uncovered; 2) buy back the call and sell a lower strike call 3) do nothing. I guess which option is the best will depend on where I think the stock will be going but I could be wrong. So is there a rule of thumb about this?

  299. RIMM getting close to 5% rule at $56, which I’d say is a buy after hours.

    Bots/Exec – It’s scary, you are pretty much activating a "hunt and kill" program the moment you place an order.  The most effective way to avoid that is to order spreads as they can’t rally "beat" you in either direction. 

    UNG/Gold – Absolutely Oct because that’s hurricane season, Aug is cutting it too close and also the bottom of demand.  Oct you get some winter demand and likely a storm or two.  Good job on TBT at $37.76, They’re paying $8.75 for 2012 $35 calls and $8.10 for 2012 $40 puts, that’s the combo I’d take for a net $20.91/30.46

  300. RIMM close to $56? Dang I wish I’d held onto my July puts until today!

  301. Phil/JRW
    Yesterday JRW said he uses market orders when day trading.  I’ve yet to buy anything with markets because I can’t help but believe the Bots are going to screw me over.  I watch TNA jump all over the place so I’m imagining that they’ll scam you out of a dime if they move fast enough.
    Are you guys dealing with large orders?  I bought a relitively large quantity of TZA the other day and it took a few passes at my limit before all the shares went when I sold.  What is your expierience with market orders?  Are the execute prices all over the place?

  302. EXC- Phil- subject of utilities came up today – been meaning to ask your opinion on EXC.

  303. Tisk tisk Phil i remember you got burned about 2 years ago trading RIMM AH

    RIMM margins were actually flat.  My thinking is less competition last Q…their are 10 new viable smartphones to contend with in coming Q’s

  304. Hi Phil: As suggested I am back at closing, I have 2113 PGH shares @ 16.85, holding them since 2007-2008. I’ve been collecting dividends and paying taxes. what to do?
    "PGH/Arbo – You are out of position to "win" that one.  They don’t even have 2012 contracts to sell so your chance of getting your money back over the next few years is slim to none.  Remind me of your question at close if you want me to look at 5 positions but it would really help to know how many and what basis you have." 
    I am now in one of my portfolios: 152K cash, 148k  invested, counting FRO PGH and SLV and some minor other. Should I start another portfolio with the 152 cash from scratch and try to repair the 148K little by little? I dont need this money to live on.
    Lookng forward to your advice. Thanks.

  305. Not a bad plan…..who needs those pesky budgets anyway!

  306. Sean – a 2012 call is not a short call for buywrites, so down 10% on the stock would most likely only make the long call go down 15% or so (depends upon the delta).  If you are selling short calls (front month or 3 mo out) then a roll down is warranted, but maybe only a 1/2 cover, as 3 mo is a long time and depending upon the trend lines and flow of the stock, the full cover could bury you and not be a win.  The buy writes out 6 mo or more are meant to be called away if they move through the strikes so that one does not have to manage them.  If the stock goes way up, then open up another round since we went in on only 1/2 or 1/3 or 1/4 position. 
    Look at VZ today.  The stock is at 29.  They spiked in Apr at 31.66 then went into a free fall.  They are very range bound now b’w 29 and 26.50 (10%).  What I would do here if opening a new position is sell a 1/4 position of the the Aug 29 Ps on them tomorrow depending upon the movement of the stock.  To me, if they go down and the stock is P to you, you own them at 27.76 or so (plus comm).  (need to know the dividend date as well).  Then you can sell whatever 2012 straddle or strangle puts you into the stock at 20% discount.  We know VZ is not going BK, we know future earnings are OK, and they are not a violent mover on the market.
    GSK today, I bought the stock as they are making higher highs and higher lows on the monthy.  Soon, I will sell round 1 of my long P and another round of short P, waiting for the green candle for conformation on an uptrend.  Then when it looks like a top is forming, then I will start the C side.  This is my comfort zone.  Others should just do the straight up buy write and then walk away for a day or so.  JMHO.

  307. I noticed that IB calculates almost three times less margin for emini future options compared to 3X ETFs:

    One ES AUG20 1070 put yields $2212 and locks in $3315 margin. 
    One EDZ AUG20 44 put yields $640 and locks in $2678 margin

    So from a margin perspective the emini options are a lot more efficient than the 3X ETFs, unless I am looking at this in the wrong way. 
    Phil, you mentioned before that a key drawback of naked emini puts is how you can’t end up owning desirable equity. But why not just continue to roll them out if the trade goes the 20% against? 
    Out of the money emini bear put spreads might also be an efficient choice of disaster hedge against which to go long on the buy list. Any thoughts on this approach?  

  308. exec
    I use the TOS active trader plateform for instant execution of orders mark outosend and you do not have any delays.
    but warning play around with it first at paper trading !!!!!!!

  309. Cwan & others, anyone interested in building a 500k portfolio of short strangles?  It can be on a dangerous side, but with VIX at 29.74, it can be profitable.  I tried one with 40% large cap (SPX), 10% midcap (MDY), 20% smallcap (RUT), 10% gold/silver (XAU), 10% oil services (OIH), 5% bond (TBT) and 5% speculative (nothing at the moment).  The minimum requirement is to have Portfolio Margin.  More later.

  310. Phil/ RWM  Yes sold my big long position at days end for nice fat profit, hoping to buy again when mkt pops back up. Thanks! was just confirming you’re guiding bullish into tomorrow am.

  311. Peter D, i look forward to reading your post on the 500k portfolio of Short Strangles.

  312. Oh man!  We finally got our break.  Patience has paid off!  Let’s buy an island and run from our debts.. and angry neighbors!

  313. Just read this article, sorry not good at cutting pasting, read it in Yahoo, if anybody is interested.
    "CARACAS, Venezuela – Venezuela’s government has seized control of 11 oil rigs owned by U.S. driller Helmerich & Payne, which shut them down because the state oil company was behind on payments."

  314. Hi, Pharmboy,
    Great analysis on selling calls & puts (your comment at 4:57pm).  But I got lost on the following statement:
    "GSK today, I bought the stock as they are making higher highs and higher lows on the monthy.  Soon, I will sell round 1 of my long P and another round of short P…"
    Selling long P??  Perhaps there is a typo or two?

  315. Phil, I would be interested in a group discussion of some of your ideas – in a live chat environment. I can arrange something if you are up for it.
    I wince at some of your socialist presumptions, but I cant find much wrong with your "programs". I may not support unlimited forever unemployment benefits, but I also don’t support most of the bank bailouts either. I want our government to perform useful oversight services, but I want government to do it correctly – and that is the crux of the tea party movement. Big government is bad, not because it is big, but because it cant do anything right.
    Anyway, I would love to explore some of your programs in more detail. Obviously, entrenched special interests make implementation impossible, however useful

  316. Pharm: thanks a lot for your advice!  I have been following Opt’s board for a while and think his method for timing entry/exits makes a lot of sense.  But I just don’t have the time to manage swing trading.  So I came to Phil’s board hoping to learn a long-term strategy that can make decent returns.  I think your method of combining the two makes a ton of sense.  Questions:
    1. "The buy writes out 6 mo or more are meant to be called away if they move through the strikes so that one does not have to manage them. If the stock goes way up, then open up another round since we went in on only 1/2 or 1/3 or 1/4 position": but if we use opt’s method, if the stock is in an uptrend, why not buy back the call and let stock run?  Same with Ps: if we sold the put and then the stock starts to go down, why not buy it back and sell at a lower price? 
    2. "Soon, I will sell round 1 of my long P and another round of short P": are you going to sell long and short P at the same time?  1/4 each?  I bought some GSK today per your advice (stock very strong in a weak market).  Could you let me know when you sell the Ps and Cs?
    3. I want to do buy/writes as a long term strategy and forget about it; but then I also think it’s foolish to not take advantage of stock’s big movements in between.  I guess the trick is how to balance the two.  Any advice?

  317. Hi, Peter,
    As always, look forward to your $500K Strangers portfolio!
    But it is dangerous, as you said.  You might have missed my comment posted within a day or two from the "fat finger"day: During that crazy 5-10 minutes, I was watching my TOS platform, and guess what, my account balance went -200K!  That is, I owed TOS 200K!  I am still interested in the strangle strategy.  But I’ll go more cautiously…

  318. With no desire to anger anyone who loves the iphone please read The Street comments today. I said the same thing weeks ago and warned when someone more important than me says it. Most of these problems are going to effect the ipad G4 also. The only solution would be for Apple to buy a huge network with all that money.

  319. like the rest, i am interested in peter’s 500K strangle portfolio. Like cwan, I watched my margin balance go negative by an amount equal to my entire portfolio balance during the flash crash. I am grateful to be here typing.
    I am retired, and after that experience, I realize I no longer can be taking that sort of risk, so i settle for a simple strategy : sell puts and calls for each month worth $6. It will pay all my bills, and at this point, I take it. If it goes in the money the last week, I roll. That’s all. not much to it.

  320. Alright, the following a 500k portfolio of short strangle, and how it can survive a -10% fat finger day.  This is for illustration purpose only, not that I have the same positions.

    Type            Allocatn Amount     Reserve  Initial Pos    Symbol    Type
    Large Cap     40%     200,000     75%       50,000         SPX        Short Strangle
    Mid Cap        10%     50,000      75%       12,500         MDY        Short Strangle
    Small Cap     20%     100,000     75%       25,000         RUT        Short Strangle
    Gold/Silver     10%     50,000      75%       12,500         XAU        Short Strangle
    Oil/Oil Serv    10%     50,000      75%       12,500         OIH         Short Strangle
    Bond             5%      25,000      75%        6,250          TBT         Short Strangle
    Speculative    5%      25,000      90%        2,500          SPX    Protection Put vertical
    Total        100%        500,000                 121,250        

    Month       Putter    Caller  Current    Date   Downside Upside    Contract Credit    Margin at -10%
    SPX Aug    875     1175     1074    24-Jun    18.5%    9.4%        9           12          56
    MDY Aug   107     148       134     24-Jun    20.1%    10.4%       28          2          4.4
    RUT Aug    510     720       633     24-Jun    19.4%    13.7%       8           9.9        31
    XAU Aug    150     210      178      24-Jun    15.7%    18.0%       8           2.85      15
    OIH Aug      80     115       97       24-Jun    17.5%    18.6%       17         2.49       7.5
    TBT Aug      34     43        38        24-Jun    10.5%    13.2%       26         1.3        2.4

    Total credit received is $34,213 (not including commission).  Total initial margin with Portfolio Margin is $63,000.  We do have large cushion on the downside, around 18-20% for indices and less for bond (because we think interest rates will go up in the long run).

    Protection Put verticals are at 960/950, 19 contracts for 1.3 debit each.  The max profit payout is $8.7 (16,530 for 19 contracts)

    Total credit minus the protection is $31,743, which is 6.3% of the $500k for roughly 8 weeks, about 41% annually if we win every time. Even 30% annually is a large return, i.e. 1,378% in 10 years (yes, dream on).  This is the maximum profit potential with no rolling 2X or flipping, i.e. the market stays within a +/-5% range and we don’t need to make adjustments.  To be continued below …

  321. Taking advantage/SeanC – Yes, you should take advantage of early 50% gains.  Let’s say above TBT play goes like that and TBT drops to $34 and 2012 $35 calls drop to $4.10.  Then it would be a good idea to take them out if you have say, 12 months left because they can only pay you .35 a month anyway so you take them out but you’d better damn sure know what your plan is if TBT drops below, say $32.50 and maybe that’s selling the 2012 $30 call for $6.  What would that do to the play.  Well first you raise your basis by $4 buying back the caller and then you lower it by $6 selling another one so that leave you in at $18.81/29.41. 

    As long as you A) do the math and B) Accept the possible consequences and C) Stick to your plan then you go ahead and spend the $4.10.  What are you really risking?  You go from a max upside potential of $19.09 at $40 to a max upside of $16.19 at $35 but the other play only would have made $14.09 at $35 so it very much depends on what your new target is.  There is very little change to your put-to price so you very much have to consider the implications of the move but the obvious benefit is you may get lucky and get your bounce without having to cover and pick up yet another $8 for the $35s (although at $6+ you should not be greedy as $2 is 10% off your basis). 

    Market/Exec – I hate market orders and really try to avoid them with options but on liquid stocks you can usually execute within a penny or two of your execution and, if you are momentum trading, you just need to accept that as your cost of entry or exit.  What’s your alternative, offer to sell 50,000 shares of TNA at $42 and only 5K execute and then it’s at $41.90 and by the time you open your order and adjust to sell 45,000 at $41.88, you miss it and now it’s $41.85 and now you are worried so you offer to sell at $41.80 but you only sell 1/2 and now it’s $41.75 and you have to do it all again….  JRW likes trading TNA BECAUSE it’s easy to get in and out of (the same reason I like DIA). 

    EXC/Pstas – I do like them and their 5.1% dividend!  You can buy them for $38.65 and sell the 2012 $35 puts and calls for $10.10 for a net $28.55/31.78 entry and that bumps the dividend up to 7.3% of the basis

    RIMM/Kustomz – Did I?  Well I must have gotten over it. 

    PGH/Arbolito - Nothing to do, it’s a loss really.  Of course you got a boatload of dividends and, if you think about it, is still 5% of your $16.85.  Let’s go bottom line here, you are down  $15,000 and you have $20,500 worth of stock so how do we get $15,000 back using $20,500?  Not with PGH but if you sell that and buy 2 BPT Dec $80/90 bull call spreads for $6 ($1,200) and sell the $80 puts for $5 ($1,000), you stand to gain $1,800 if BPT holds up at $90 and your worst case is you own 200 at $81 ($16,200) and it’s another trust that gets you 9% but with much better puts and calls to sell.  Now $1,800 gained in 6 months isn’t quite getting your $15,000 back in one shot but you’re on the way at least.  If you want to push it, you can DD with 4 spreads at net $800 and that will pick you up $3,600 if BTP holds up but you have to be sure you’re willing to hold 4 shares long-term.  As long as they keep paying $9 per year, it’s not the worst thing in the world to be stuck with.  I think if I were doing it, I’d start with just the two and IF they have a big sell-off, THEN I’d consider selling 2 more puts and waiting to see if we can fill in the spread. 

    As to other positions:

    $148K in 3 positions is very dangerous already.  The problem is you are in no position to add to the positions as it would use up all the cash.  FRO is nice, PGH we discussed and SLV I do not like but it’s OK for a metals play.  Ideally, you want to cut back to no more than $100K in positions and then you can sell 2012 puts and calls like FRO Jan $30 puts and calls for $10.50 which drops the basis of the $32.50 stock to $22/26.  So let’s say you have 500 shares at $32.50 for $16,250.  You are collecting $5,250 (32% for 6 months) but you are committing to buy another 500 shares for $30 more ($15,000) so, effectively, you are willing to buy 500 more for net $9,750 but, if FRO remains over $30, then you make your $5,250 and your margin is released.  

    So it is better to make $5,250 500 shares of stock ($11,000 at risk) with $15,000 cash on the side to buy 500 more as that’s 20% in 6 months on all the stock and cash, than to sit there with $32,500 worth of stock and just sell, for example 10 Jan $32.50 calls for $4,500 because your break even is $28 vs $26 and, aside from collecting the extra $7.50, I’m sure you can appreciate the flexibility.   Notice the amount of money you are collecting blows away the dividends, even the 8.4% dividends FRO pays so it pays to worry more about finding stocks that pay good options premiums than good dividends but it is very nice when you find a combo of the two. 

    Margin/Maxim – Don’t forget the margin requirement is not fixed. if the S&P black swans on you, those requirements can still eat into your portfolio.  It’s very, very dangerous to shoot for margin efficiency because that indicates you are somehow looking to max out your margin but, in a major market move, you can end up in forced liquidation.  I don’t mind having 100 EDZ put me at $44 but I REALLY do not want to be locked into a short put on the S&P at 1,070 as we get a sudden 50-point drop like we did twice in the past 6 weeks because that’s $2,500 lost (50 per contract) wheras the ENTIRE commitment to buy EDZ is $4,400 and at least you own the stock as a consolation prize (and it’s ridiculous to suppose it will suddenly go to zero so your REAL loss is reasonably limited to $2,500 and even that would be extreme while it’s not at all unreasonable to imagine losing $5,000 on the ES contract.   The prices you are paid for selling a put are not generally a mistake – they are generally an accurate reflection of the amount of risk you are taking on.   In this case, you do have about 4x more risk on ES than EDZ.

    As to the why not roll them?   That’s fine if you stay on top of it and always have plenty of margin but, before you mess around with unlimited downside plays – go back to Sept of 2008 and follow the action as we fell from 1,300 to 839, which would cost $23,000 per contract and think about where you would have gotten out and taken your loss before you go the margin call. 

    Now a spread is a different issue because it’s a binary event, you either win or lose so let’s say you want to guard against a greater than 10% drop in the S&P, below 1,000.  The options are super thinly traded but let’s say you could buy the Oct. 1,000 puts for $40 and sell the $950s for $30.  Then you are in the $50 spread for $500 and you can make a max of $2,000 profit if S&P hits $950.  That’s reasonable! 

    Of course, I would consider the Oct $1,090/1,040 bear put spread for $1,000 which pays a $1,500 profit but I don’t lose $1,000 unless the S&P finishes higher.  So now I know for an absolute fact that I have $1,500 of downside protection and I can only lose if my long bets pay off.  Let’s say I take $15,000 worth of buy/writes with 20% downside protection ($3,000) that make $3,000, MOST LIKELY, if the S&P doesn’t go down.  So I have $3,000 worth of built-in protection plus $1,500 of addtional protection from the bear vertical so 30% downside protection and I have POTENTIALLY given up 1/3 of the upside but it is possible that we lose 1/2 or less if the S&P doesn’t go up too much and, in fact, if the S&P "only" drops 10% and my positions perform the same or better (because we try to pick positions that will outperform), then I still make $1,500 on my buy/writes (roughly) AND I make the $1,500 on the bear spread so now we’ve widened our chances of having a nice win considerably

    Greek Island/Matt – I’m there.  We can pirate passing cruise ships for fun too!

    Rigs/Arbo – So what does our government do if you don’t pay your taxes or whatever?  Same thing.

    Discussion/Barf – That might be fun.  I’m not advocating unlimited unemployment but if the government isn’t going to spend money to create jobs then we need extended unemployment until they come back naturally.  I am personally horrified that unemployed people don’t have to do anything but that wasn’t the topic we discussed.  In my regime, if you are unemployed you come on down to the EMPLOYMENT office and we hook you up with a job counselor, who meets with you once a week to go over your game plan and schedule your interviews and the other 4 days – I GOT THINGS FOR YOU TO DO!   We are paying 6M people benefits – surely there is a park to clean up or subways to scrub down or paperwork to be filed or soup kitchens and homeless shelters to help out in - whatever… 

    Anyway, the point is that the bank bailouts were a ridiculous MIS-allocation of funds because why did we have to pay the banks?  Because people weren’t paying their mortgages.  So the bank takes the property away from the person and then we pay the bank for taking a loss on the property maybe 40% of the value, say $100,000 on a $250,000 home.  Why would I do that?  The man had a $1,500 a month mortage so I could pay his entire mortgage for 5 year before getting to $10,000 and, if I guaranteed $25Tn worth of mortgages (all of them) with a Federal backstop, I could service them all for 5 years for $1.5Tn a year if I had to service 100%. 

    If we make the terms of that aid a bit onerous (first lien on property 125% payback plus 8% interest) then only people who really need assistance would ask for it and maybe the ENTIRE bailout could have been handed for $300Bn a year and that would have made 100% of residential mortgages whole and therefore the banks would have no bad assets and there would be nothing to write down since it would not be possible for a loan to default and people would stay in their homes and have extra money to spend on other things and communities wouldn’t be wiped out and tax bases wouldn’t be destroyed etc, etc……

    Why couldn’t we do that?  Because the people who bet on the destruction of the US housing market didn’t want it.  This was their big payday and they wanted a bloodbath so they lobbied for it and they got it.  What a country!

    Simple/Barfinger – Simple is great! 

  322. Of course, it won’t be all that easy as thing does move around.  Factors that can kill the accounts:

    - Increasing VIX would inflate the option values, decreasing the account balance.  Flipping from short puts to short calls is the best defense.
    - Incorrect position sizing – this is why we start with 25% allocation, and the initial margin of $63k is half of the 25% allocation.

    We do have defensive tactics for when the position moves against us.  They are:

    - Rolling 2X away from the money when the short is within 5%
    - Flipping when necessary, e.g. when the positions has moved +/-7.5%.  If we already roll 2X, this will reduce the short positions that are in danger of being overrun.
    - Move out to next month if necessary (then hopefully move them back when things are calmer)

    On the other hand, the factors that can increase the max potential are:

    - When rolling 2X, we sell additional short calls (when moving the putters 2X), adding to the credit received
    - Most of the decay occurs 8 weeks to 2 weeks prior to expiration.  We might be able to close out positions and open new ones earlier.
    - The higher the VIX, the more credit we receive for selling the same option.  The reverse is true – the lower the VIX, the lower the return potential.

    Note that there is no individual stocks.  They are all indices and ETF’s.  These positions would require some monitoring every week or every 2 weeks.  If you don’t have time, reduce the positions by half and don’t have to look at them often.

  323. ADDITIONAL CHECKS – Fat Finger day scenario of 10% drop:

    - 10% drop, VIX would be up 10-14 points, the short puts would quadruple, e.g from $18k or so to 80k, representing about a 70k paper loss (we’d gain 8k or so from the short calls), or a $70k decrease in the account value, to $430k.
    - Margin required would tripple, from $63k to $200k, a $148k net increase.  Adding the $70k paper loss, the net BP would be decreasing by $218k, from $437k to $219k.  Since there would be $219k in Buying Power remaining, this means the positions would survive a fat finger day handily!

    Since the paper loss are now built up in the short puts, we can decrease risks by flipping the putters to callers at the end of such fat finger days.  This would help the positions to survive another 5% drop.  We’d have less short puts at the end of the day, getting the delta back to a more neutral stance.  Note that with a 15% drop, the SPX positions are not in the money yet as we started out with a 18.5% downside cushion.  Since VIX is high at that time, we can easily roll them 2X from 875 to 800, while SPX is at 920 or so.  If SPX recovers, those 800 putters would get killed quickly and we would survive the drop.
    That’s it.  Potential rewards and risks are there for us to manage and hopefully winning most of the time.

  324. It seems as though most members use TOS which has caused many problems, margin, execution, and going down. I was ready to open an account there because etrade has problems also. Now I am not sure and etrad’s pro is quite powerful, ececutions have changed from they suck to WOW. The only issues remaining are no quarterlies, no more than a 2 leg spread, price, and pro load time. Please report if TOS solves the TDA transition problems. I really desire to follow the TOS patterns commented on that I am unable to duplicate with etrade.

  325. Hi, Pharmboy,
    I think I know what you meant by "selling long puts".  I think you meant "selling LEAP puts".  Is that right?  I got confused because I thought "long"=="buy".  But I think you meant "long"=="long term".  Now that makes sense.

  326. yes, selling LEAPs and I meant GSK weekly, as I was looking at a monthly when I wrote it. 

  327. Hi, Shadow,
    Why don’t you open a paper trade account at TOS and see what they have.  In addition to multi-leg orders, etc, you are asking for, they have analysis and other nice functions.  Give them a try.  A paper trade account won’t cost you a penny.
    If you like it, contact scott at thinkorswim dot com and tell him you are a PSW member.  He should be able to give you discounts on commissions.  You can fund your real account with some smallish cash to start with.
    ALL brokers have glitches.  TOS seems to be no worse than other brokers as far as glitches.  As an example, on the "fat finger" day, my TOS platform continued to function, although the response was slow.  My other broker, Scwab, on the other hand, was completely down.

  328. Peter, thank you so much for such a long explanation.
    I’ll have to read it 3x tonight.  I’m sure you’ll get lots of questions.  Please check back often.

  329. cwan120 and all
    I have called the talk newenglish, one word, but what too many don’t get is the communication between all suffers. I have no idea what an Iron Condor is and the long = buy = long term = I have no clue. I believe we and Phil need to come up with standard terms and a list of definitions that can be accessed esaly while reading or writing along, those who do not use the standard be forced to clarify or have there posts blocked after uncorrected BS. Lets give standardization a try and leave creativity to artists. This is a problem in America and why are most, over 50% divorced? Communication!

  330. Hi, barfinger,
    Regarding your selling $6 puts & calls, do you mean selling front month SPX puts & calls at the beginning of the month?  How many do you sell, for example, for a $500K portfolio?  You can’t sell too many, relative to the size of your account, can you?  Or else you are going back to the same experience on the next fat finger day.
    Another thing: If VIX goes down below 20, I don’t think you want to insist on selling $6 SPX puts/calls, because you’d have to sell strikes too close to the market.  And, pretty soon, the market makes a big move.  Then it’ll take months to clean up the mess.  That was what I did back in January.  Sold puts/calls too close.  I am still in the clean-up mode after 4-5 months.  What do you think?

  331. cwan120
    How do you open a paper trade account? I never got past open an account sales BS that couldn’t convince me the were worth trying. By the way what is the diffinition of a condor and iron condor?

  332. Phil,
    Please bear with me and explain what the exit strategy should have been on this particular trade that you had proposed:
    QLD: Selling June 53 PUT for 2.00 and June 61/66 Bull Call Spread for 2.10
    I exited these 3 positions individually at different times and lost money on the deal.
    What is the rule of thumb on these bull call spreads with an extra PUT. Do we need to exit the three positions simultaneously? OR do we treat them separately and apply the 20% profit rule to each leg?
    Also, your thoughts on UUP, CSJ, AGG acquired earlier with an advisor. Do you advise getting rid of these positions?

  333. Peter D:  Thanks so much for the amazingly detailed and thoughtful posts describing your strategy.  You have an amazing depth of knowledge.

  334. jsurti
    I have lost on not sure but I can say that one at atime doesn’t work. I use etrade and they limit you to a maximum of a 2 leg spread. Always do the Bull Call Spread at one time at a limit amount, debit or credit. The wild putter is do it before or after based on what has been happening, do it closely and all works out. Today I closed a short term TZA hedge spread, at the time I bought the putter first and then closed the  Bull Call Spread with limits of half way, waited 15 minutes, lowered the credit 2 cents and it filled in a milisec. Hope this helps.

  335. Sean, if the stock is in an uptrend, then the leaps or long C will be bought back for a loss.  I advocate just sitting back and doing 100 share increments in the stocks.  For VZ and GSK, I will try and let people know as an example of when I am moving them around.  So far, I only have the stock.  Yes, I would sell 1 Leap in here and potentially 1 short P for a credit, so that would be 3/4 of my position if I wanted 400 shares total.  Then I do not have to manage anything until I decided to sell the Leap call, or potentially the short call.  It depends upon my goal.  With VZ, I have been doing short calls against my long position.  With GSK, I am going to do LEAPS to see which one does better from a return prospective.  Kinda an experiment of sort.

  336. Shadowfax,
    Thanks for the reply;
    I am with TOS at TDAmeritrade. I have no problem entering the trade. I am a bit at odds on when and how I need to exit the three legs. Do I need to do all three legs at once, individually, or when I see profit targets achieved in each leg.

  337. Phil and Pharm: thank you both so much.  And yes Pharm it would be great if you would let us know when you sell Ps and Cs.  Currently I have GSK stock only; and VZ and short Jan 11 calls, which I sold probably a bit too early.
    By the way, per Phil’s advice: under the normal conditions, selling front month options consistently would be more profitable than leaps; however, when VIX is high (above 30, which we are now close again) we should take advantage of it and sell leaps.  Is that right?

  338. Back to reading all the posts, after much of the day away…… Phil, you are a very creative thinker with a extraordinarily high level of inteligence, but I am suprised why you have not thought of market forces to mitigate the unemployment malaise we are experiencing.  The principal reason we have so many looking for jobs, but few employers taking advantage of the imbalance is the spread between the cost of labor and the projected value of labor to an enterprise. GET RID OF THE MINIMUM WAGE !
    Sure, many think it is disgusting to ask someone to work for a wage less than the leglislated minimum wage, but the businessman who is struggling will be better off if he could hire someone that he can afford, than just keeping his business small and surviving the difficulty of a contracting economy.  Is a man better off earning a couple of bucks below the Kennedy inspired minimum wage law, or is he better off sitting on the corner with a sign "anything will help".? Receiving money from the government is demeaning and is costly to the government, – would it not be better to have the individual paid by the enterprise, instead of the taxpayer? It is all about balance between what a business can afford, and the alternative which is loss of dignity and the welfare that ensues, for the unemployed.  As the economy recovers, that man that was hired below today’s minimum wage, will be more valuable to the business, relative to his skills and contribution to the enterprise, and will accordingly be compensated to the level of his value bas3ed upon market forces. The labor unions and the pointy headed intellectuals that are control, do not understand the basic principals of economic balance, and therefore the pain prevails ad infinitum. One must remember, as in the forces of nature, you can not legislate laws that are not in sinq with the forces of economic common sense, as they will fail, and we are seeing the result today. I remember the day I worked for $2.50/hour, as that is what my employment was worth to my employer. Had I said "screw you", I would have subjected myself to the alternative, which was standing in a line with many collecting welfare, as they were, in their mind, worth much more. The market determines value - not the folks in Washington, who believe they are doing God’s work!  (end of today’s conservative commentary)

  339. Evening update:
    My internet connection problem continues.  2-Day Time Warner outage is pissing me off !  Makes it very hard to trade.
    So, today, off to the public library for free wifi.  Get there 9:15; doesn’t open til 10.  your tax $$ at work.
    While I am waiting, make my first TNA trade on the street using laptop and library’s connection.   Make 30 cents in a couple of minutes.  Lunchtime, I take a walk over to Cosi.  Hang there for a couple of hours.  Good lunch and free wifi.  Connection very spotty however, making it even more difficult to trade.
    To make matters worse, 12-2 lunch hour coincides with big $2 run in TNA.  Miss nice profit opportunity.
    TNA trades today.  9 roundtrips.  7200 shares each way.  $303,000 + of buys, $304,000 of sells.
    Net profit = $722.
    Broker has nice day in commissions !
    JRW I am NOT.
    Still, 2 nicely profitable days in TNA despite negative market dynamics.   Hope to get better at this.
    What a wild beast !
    I need my internet connection back.   Right now, I am getting a signal from someone’s unsecured router.

  340. jsurti
    If I could do 3 legs at a time, that is what I would do. It seem as though that is available at TOS, The other issue that Phil points out is sell the put at a higher price after if possable. The spread I mentioned I sold the put later, hours and beat phil’s call by a dime his was pay .05 net I collected .05 net but I was ready to hold the spread without nselling the put as it mostly only lowers the cost at profit lost maybe. Hope this helps but experiment on paper.

  341. Cap to funny that you complaining about free WIFI at the library. For your team isn’t a waste of public resources?

  342. jel1
     I remember working fo $1.40 per hour but like the trickle down theory you need players to play fair rather than maximize profit. The conservative way for over 10 years is screw the suckers/fools, I am smarter and deserve more because I know how to do it leagally. Workers beware, why are major companies not hireing now? They are waiting for lower wages to maximize their profits. Conservatism looks good on paper but the results are where we are now, failing everything while the rich get richer and the poor can go to hell. What they don’t want to believe is the resulting deflation has no cure and doesn’t stop until all are broke and unemployed including the rich. My mother remembers multimillion dollar mansions selling for a few thousand, a buying oppertunity if you have a buck. Will you have one?

  343. Right on doro105

  344. Gel- Minimum wage is the problem in America? That is a whopper of a statement.

  345. hi shadowfax:  if companies are not hiring how, owing to some grand conspiracy, are they turning away work; if so where is it going.  it seems more obvious that corps aren’t hiring, people aren’t spending because we don’t know what is next in the economy. 
    Of course corps want to maximize their profits, and hence their stock prices which is what we investors want?

  346. Cap should have gone to the local Starbucks or McDonalds for free wifi; but maybe he wanted to go to the library to browse supreme court sanctioned porno on the internet …

  347. humvee-4me
    WHAT YOU DON’T GET IS  THE JOBS ARE IN CHINA. People are not spending because they don’t have a job or any money, the government is broke because the taxs are down because if the bottom 90% aren’t making any money, they don’t owe any taxes. You can’t get blood out of a stone. That is why the constitution says taxes will be born by those that can most afford the burdon. You probable don’t understand separation of church and state state like your hero, destroy the world, I am the religious right right right and all you others are pond sucking morons a la  George W. Bush. The stupid SOB started with his father terrorism and you don’t get it. Maybe you remember when Bush 2 took over we had a surplus, now your great grand children won’t see the end of this and you want to continue the same, a perfect storm where everyone looses.

  348. A family I know is leaving NY to move to China; not sure why, will find out tomorrow.  For work obviously, but that’s a big move.
    Library … complaining about a taxpayer funded operation that doesn’t open until 10 am on some weekdays; and 11 am on others.  That is ridiculous.
    Maybe I’ll try McDonald’s tomorrow.  Negative on Starbucks as I don’t drink coffee.  Will report back on Mickey D wifi if I have to do that !
    I am a trading nomad ….

  349. I have had several business trips  to India and I do think our poor are pretty well off in comparison. Never have I seen such poverty. Anyone who thinks they have it bad here should spend a day walking the back streets of Delhi. 
    I agree with Phil that if your collecting unemployment you need to have a plan approved by a couselor who makes sure your looking for work. My mother had to do just that when I was growing up. She would have to go through the Sunday paper, list out all the companies running adds and the next day call the employers listing jobs for which she thought she was qualified, get the name of the person she spke to and report that info twice a month to the unemplyment office in order to continue receiving her check for the next month. If she didn’t provide the info, she was off the list and had to reapply starting the process all over again. Watching her go through that process made a lasting impression on me.
    That compares to the process today of getting a check in the mail for what now, 99 weeks ?
    For those able bodied and capabille of work It’s not unemployment, its’ welfare.
    If your disabled or physicailly unable to work there should be and are other programs availalbe which I would continue to support but what is going on today with a majority of the unemployed is shameful.

  350. Shadowfax:  well, let’s just start by you demonstrating where the constitution say:  "taxes will be borne by those most able to afford the burden"; if you can’t do that well I’ll just ignore the rest of your post.

  351. Geez, what a surprise, California welfare cards being used at Casino ATM’s to the tune of 1.8 billion over the last 8 years; who would have guessed that welfare mothers have to go to a casino to get a happy meal.  This is the sort of abuse, which of and by itself isn’t that significant, but it can cause a furious voter backlash.  I guess the poor are ready for revolution and so are the middle class, should be interesting.

  352. MY $.02
    Well said Shadow.
    Cap – library’s short hours due to limited budgets. Some people don’t like paying taxes.

  353. Free WiFi/Cap: if you are in Manhattan, the civil court down on 111 Centre St./75 Lafayette St. has free and fast WiFi.  If you go to the 3rd Fl into the Juror’s Lounge, theres network cables and electrical plugs in the side rooms so you can kick back, relax and trade away.  
    I was stuck in jury duty for 2.5 weeks and was following Phil’s posts during the courtroom breaks.    The only problem is the security checks at the entrances, but other than that, its not so bad.  Plus cheap Chinese food and groceries in Chinatown. Bonus!

  354.  India/Phil – The IT people already get significant raises (I believe it was 8-15% on an average this year) – the services industry in India makes all the money. So they will never rise in revolt – they would comprise the top 10% of the country (taking your analogy).
    India Poverty/DK – yes, the poor here are much better off than in India. All the talk about growth in India has only resulted in the creation of 2 Indias – one where the value of money is still the same as what it was 5 years back (90% of the population), and one where it isn’t (pretty worthless due to inflation – the remaining 10%). The two currently have an uneasy co-existence – but who knows for how long?

  355. Some people just don’t understand how to maximize their profit, they should have gone to Tiffany’s and asked $25K

  356. humvee4me
    I dont’ have a coppy handy but you are proving your lack of knowledge. In the 50s max tax rates were 90% and paid by the richest, the economy was working. I also remember wage and price controls, another conservative idea, stuck at $8,?? per hour and going from getting ahead to falling behind while inflation continued. I have paid maybe $2,000 in federal taxes since the accident in 2001. Not because I am rich but disabled and under the poverty income line. I have not been to a movie in at least 10 years, no cable or satellite TV, no out to eat, or vacations. I try to make enough to pay medical bills and property taxes. I actually joined this group because it might help. So far I have not actually made more than the monthly fee but blame that on the market and 75% cash. I feel sorry for you because your future is fixed in the not real. I believe in coservatism but it no longer exists, look it up and the constitution in older books not the fake internet. The taxes in this country are inverted and you are in fantsy world, the money is not going to the people, check it out, eventually you will be devistated by deflation and have no clue why.

  357. AAPL news updates:
    Steve Jobs Describes iPhone 4 Signal Strength as a ‘Non Issue’
    Other Mobile Phones also suffer from similar signal degradation while being held tightly
    iPhone 4 screen yellowing could be a temporary problem from assembly
    "New iPhone 4 devices plagued with a yellow discoloration of the screen could be the result of a temporary problem that will alleviate itself in a matter of days."
    iPad, iPhone 4 supply issues expected to continue for Apple
    "Demand for both the iPhone 4 and iPad has constrained the availability of supplies from Apple’s overseas partners, suggesting shortages could continue for some time."

  358. Doro… You might have misunderstood the direction of my thesis. I am saying that the minimum wage is an arbitrary number passed by the government and made into law for pseudo compassionate purposes.. Fine!. However by setting this benchmark, it does not dictate to business, who typically hire people to do the work they need done, that they have to fill the jobs… if the minimum wage is too high to for them to absorb, they reduce the size of the business and the economy shrinks. That is what is taking place. Case in point…. I have a relative that is worth only , at the very most, $5.00/hour. For the past three years he has been unable to get a job, as nobody he interviews believe he is worth the minimum wage that prevails.  Bottom line is, if there was no minimum wage he would be employed, as he has in the past been employed as a dog walker.  That is better than what he doing now – sitting at home,watching TV,  drinking beer in the morning and smoking cigarettes and dope in the afternoon, and is on every welfare program that California has ever implemented.  Which is worse? – My belief is he is better off working at $5.00/hr,  than making a jerk of himself because the minimum wage precudes him from otherwise being somewhat productive.( not much however)

  359. QLD/Jsur – I take it you really mean June and not July?  Well I’m dumbfounded because QLD finished Friday at $61.50 so you shoul dhave collected .50 for the $61/66 spread and the put should have expired worthless so a .40 profit overall. 

    Now, how do I explain this in general?  It’s out of context but we take the QLD bullish spread because we expect the Nas to go up in the $61/66 range and we sell an offsetting put to pay for it.  Thing one is that we cerainly don’t believe we will have to pay the putter.  There’s no point at all in paying them off because they are the thing that’s making the play free.  

    The logic of selling (using July now) the July $52 put for $1.25 is to make a free play out of the July $58/61 bull call spread ($1.20).  What are our expectations?  I’m betting that QLD will hold $52, where it held on the last few spikes down.  If QLD does not hold $52, then I assume I can roll it down to the Oct $33 puts, which are $1.25 now.  Am I comfortable sitting on the QLD Oct $33 puts for 4 months while I wait for the $1.25 to expire?  If so, then cool – free money selling July $52 puts! 

    Of course, it is possible that the Nasdaq goes up over 20% and QLD goes down 40% but if I can’t figure out how to offset my put loss during a 20% Nasdaq run then I’m a dumbass.  So what we have here is a totally free $1.25 spread that we hope will become a $3 spread.  If QLD breaks down, the smart move is to kill the bull spread for .75 or at least .50 and then follow through with my rolling plan on the puts so, when they expire (hopefully) we still have a .50 gain. 

    So that’s the answer, whether we are stopping out or whether we have a nice gain early and we’re taking it off the table, the variable in the spread is really the value of the bull call spread while the unchanging goal is the worthless expiraiton of the putter. 

    As to the others.  UUP was brilliant but it may be time to take it off the table.  You seem to have stopping issues as the dollar peaked out in early June after a huge run yet you are still in an ultra-long bet on it.  CSJ also had a great run this month but I don’t know enough about how it works to have an opinion other than it seems like kind of a dull place to put money.  AGG is another interesting one.  It would seem to me that’s a bit stretched but, then again, that’s why we bet the opposite with TBT but, so far, that advisor was smarter than me… 

    Leaps/Sean – Yes.  A) Because it’s less hassle and B) Because right now you can sell an INTC 2012 $20 call for $3.30 and, in a "normal" market, you would be very lucky to get .25 per month anyway.  Now, we haven’t been in a normal market since early 2007 but, if we ever get back to one, then we will be thrilled to make 10% on a buy/write (and, of course, we will do far less of them).  There’s also the issue of having more downside protection – also a big plus in an uncertain market…

    Minimum wage/Gel – Oh my, where can I start with that one?  When you worked for $2.50 an hour (mid 70s), gas was .60 a gallon, a brand new VW bug cost $1,999 and gold was $150 an ounce.  Now minimum wage is $7.25 (3x) but gas is 5x and gold and cars are 10x so that $7.25 you aren’t willing to pay represents a 50% or greater drop in the standard of living that you enjoyed with your fat $2.50 an hour job.  Did you think making double what people make now was a lot at the time?  You had to put in 60 hours to buy an ounce of gold, a kid today has to work 172 hours but no, the problem is that greedy kid who should put in a solid 300 hours for an ounce of gold, right?  When will you be satisfied?  I think we should do a show called "Survivor – Minimum Wage" and have people get dropped off in a strange city with no stuff and have to spend 3 months working minimum wage jobs and see how they do…   Day one would be fun – Find a job, get an apartment (with what deposit?), have clean clothes for work, feed yourself and, whatever you do – DON’T GET ILL! 

    Yes, that’s what’s wrong with America, WMT has to pay 2M people that damn minimum wage so they can sell goods that are made in China by people earning $2 a day to underpaid Americans while all the local stores go out of business because they can’t compete and all the US factories close down because they can’t compete with WMT’s slave-owning suppliers so now the people who used to have nice factory jobs in America and the people who used to own stores that bought those US made goods are all forced to get minimum wage jobs and shop at WMT so the Walton Family can be 5 of the 20 richest people in the World.  Yeah Gel, it’s great to watch those "market forces" at work, isn’t it?

    Here’s a nice video of Gel showing he really does care8-)

    Conspiracy/Humvee – You don’t need a grand conspiracy.   All it takes is to set up the rules and regulations a certain way and let "market forces" do their work.   If I want a "conspiracy" to keep oil prices high then I would do crazy stuff like promote the purchase of gas guzzlers by giving tax incentives based on the weight of the vehicle and I’d start a war or two (our troops go through 1Mb of oil per day) and I’d pass rules that say I can stick as much oil in the ground that I like while at the same time passing rules that make it virtually impossible for anyone to ever use that oil and I’d take away regulations aimed at controlling commodity speculation - things like that and then, Presto!  "Market forces" go to work and, surprisingly, oil goes up in price.

    Here’s a fun statistic:  XOM sold $477Bn worth of oil in 2008 and made a profit of $47Bn and spent $40Bn buing back their own stock and spend over $30M on lobbying and campaign donations but spent just $10M on investments in renewable energy.  Once again, "market forces" are at work….

  360. Phil
    These guys aren’t ever going to get it because it is not in their own self interest or their plan, The brainwashed are controled but will never catch on because they are brainwashed. Like organized religion is run by god not humans with an agenda.

  361. Thanks Phil.  I continue to be impressed by the tremendous amount of energy, effort and time you, Pharmboy and everyone else (with or without a color) spend on educating, re-educating and re-re-educating new members.  I truely appreciate the help!

  362. One more question: we seem to have broken all of the levels you have been watching.  Now what?  Are we in "technical hell"? Going straight back to 9,000, then 8,000… David Rosenberg says 5,000.

  363. Phil…. This morning started with the commentary you made addressing the problem we have with the high number of unemployed. Our economic system, as it esists today, allows a business to operate profitably, based upon the laws of supply and demand. By dictating to a business what they are to pay people, it is no longer a business operating under the free enterprise system – it is an arm of the government, and is controlled by the government. Example… if the government dictates that workers have to earn more than the business can pay and maintain profitability, then the business has choices to make, as lack of profits will soon end the enterprise.Because of government mandates, many have chosen to close their doors, some have moved their operations to foreign countries, and others have mechanized their operations wherin employees are dismissed. All of these options increase unemployment – not just the weakness in the economy. The recent increase in the minimum wage put multitudes ( mostly young entry level employees) out of work. Sadly, these are the ones that need to keep working as they will advance as they gain knowledge and experience. By raising the minimum wage, it innovates automation and encourages business to substitute the increased cost of labor for alternatives.. Phil, you are an economist and a historian….this pattern has  existed since the industrial revolution, and is known by all who have studied economics. Unfortunately, compassion does not trump the economic reason for free market common sense business decisions. Artificially establishing wage rates may be a great idea, but will not ever be followed, as profitability is the bottom line. Otherwise, the alternative is to have the government operate all the business activity, which as proven, most models fail eventually.

  364. Conspiracy: Phil:  Just yesterday Oil speculation was the biggest scam on the earth; now its control of speculation that keeps oil high. 

  365. Copper under $3.00 again, not good

  366. I just don’t get some of you guys.  You bemoan that XOM makes 10% profit on revenue, then during market hours recommend the stock. 

  367. Gel- I understand your theory of the jungle. I just don’t agree with it. The people working for the minimum wage
    aren’t ruining this country its the people that make the rules to benefit themselves. They are the pox on society.

  368. Hey, Cap, Congrats on making $722 in a day.  If you keep doing that, and assume you trade 150 days per year, you’ll make $722 x 150 = $108,300.  Hey, that’s not a bad salary!  And you can do it while enjoying cappuccino.  What the hell are you complaining?

  369. The labor econ debate could go on forever.  We don’t live and operate in a vacuum.  In theory, minimum wage laws can have a negative impact on markets; but there are also markets where the net impact of a minimum wage law is beneficial.  Under the current economic system we operate under, the minimum wage laws could do far more good than bad.   We live in a global community and removing the minimum wage laws would further expose ourselves to global wage rate competitive pressures and that would be catastrophic to the middle and working class of this country (e.g. we have an excess supply of labor & domestic companies cannot compete with foreign firms who are able to pay significantly less in wages due to lower standards and costs of living ==> significant depression of domestic wages w/o a min. wage  ==> welfare to cover the difference of the cost of living & strikes & an increased incentive to accept welfare instead of working b/c wages are so low & less income per family to consume goods & less income per family to pay taxes ,etc…etc….).  No minimum wage laws might work in a utopian world, where all players in the market are operating in the best interest of one another, but we don’t live in this perfect world.  We live in the times of a great race-to-the-bottom (look up the term if you are unfamiliar).  Eliminating the U.S.’s minimum wage would only drastically increase our country’s, and the world’s, velocity towards this bottom.  Read Upton Sinclair’s "The Jungle" if you want a glimpse at what the relationship between worker-employer looks like without minimum wage laws. [Everything I've discussed is only a sliver of what needs to be considered when discussing minimum wage laws...nothing in economics is as simple as "it is bad" or "it is good"...the markets are always changing, and thus, whether a variable has a positive or negative impact is also always changing!!!]      
    Now to the important stuff—- After hours NASDAQ and S&P have gone negative in the past hour…if no GAP up before the day begins, then is it a down swing until we test 1050 on the S&P? I held overnight positions in FAZ & TZA thinking they will see a spike up during early trading.  Thoughts?

  370. Phil, “if we ever get back to one, then we will be thrilled to make 10% on a buy/write (and, of course, we will do far less of them)”. So when VIX is low, we will do less buy/write; what would we do then?

  371. Sean,
    If volatility is low, you would want to buy more options.  Low volatility = relatively low options prices.  High volatility = relatively high options prices.  You write options at high volatility because you are selling them at historically high prices.  What goes up, must come down…right?  If the prices drop, after you write the contracts, the options will become worthless and they won’t be called. 
    The converse is true for buying options at low volatility.  You are betting that volatility may increase, thus increasing prices, and therefore your options contracts will appreciate.  However, if you are writing contracts when volatility is low, you run the risk of volatility increasing and the prices exploding on you => you writing out options that are getting called up => your in a world of hurt.
    You can google "option writing when volatility is low," or something similar, and I’m sure you’ll find a bunch of additional information on the topic.  

  372. Peter D / Strangles:  Peter, thank you as well for the detailed posts. I am running a similar style portfolio and know that your detailed thinking of contingencies shows that you are a strangle survivor and will continue to be! My thinking around this subject has been also impacted by the ‘flash crash’ and rather than target a potential 40% annual return (at VIX of 30, and without factoring in trading upside), I add more hedges around my portfolio, and target 30% (2.5% a month) returns. So, in addition to some ‘cheap’ put verticals, I like to pay a bit of premium for either naked SPX puts or SDS calls. Obviously, these hedges can be traded a bit to take advantage of market moves and the likelihood of mean reversion in the market after sustained moves in one direction. With open naked SPX puts or SDS calls, I still ensure a theta advantage on other positions, and although giving back some of the premium I’m writing every month, it is well worth it for the better sleep!

  373. Hi, Peter, a quick question:
    Why bother with Large/Mid/Small Caps?  Why not go with just one, like SPX?  I can see why you want to strangle gold, TBT, etc, as they don’t necessarily track SPX.  But SPX, MDY, and RUT move in tandem almost all the time.  So far TOS does not have rules on concentration.  So, isn’t it kind of making things more complicated than necessary?
    BTW, be extra, super, extremely, absolutely, careful if you play this strategy with an account at Interactive Broker.  They have software-based liquidation rules.  It’s written in the contract when you sign up with IB.  Some PSW members reported that IB automatically liquidated parts of their portfolios during the fat finger day.  Go back to the posts within a few days after the fat finger day and you’ll find comments on that issue.

  374. Peter D / Strangles:   Sorry, one other thought. I know that the VIX is notoriously a very difficult animal to trade, and only during very particular situations will you get any return on VIX calls. But for short strangle players, with the great positive expectation of the strategy, the black swan is the only risk. And that black swan is a spike in VIX (given the strategy is SHORT volatility) driven by a plunge in markets. In Peter’s portfolio, for example, he is already writing over $30k of premium per 6-8 weeks, so mid to long term OTM VIX call options could be an extra way of insuring the portfolio.  For example, with 2.5 months to go, Sept $65 VIX calls trade at around $0.70. In a flash crash, the VIX will spike to 50 and the Sept $65 calls might go to $3 or $4, a good return which will help you recover some of your paper losses. But, if we had an Oct ’87 or Sep ’08 event, VIX could go to 90. That’s where the VIX calls save you, as they would then jump to maybe $40, an over 50x return. So, paying $1,000 every 3 months to have a potential 50x return ($50,000) in a true blackswan moment, I think is worth it, and I calculate it as a cost of about 1.5% against Peter’s expected 40% annual return.

  375. Cwan / IB:  I am using IB and have not had an auto-liquidation. I discussed this with John Cracraft (the IB sales rep Phil found). The IB view is that investors that are flirting with low buying power, or are close to margin calls, are taking on too much risk anyways and need to be more conservative. Hence, design your portfolio with all of the conservatism that Peter D preaches, particularly with this strategy. In some ways, being worried about auto-liquidation is good as it keeps you alert and makes sure you keep your risk under control. The other point John made, is that their modeling over the years has shown that most investors that move into negative margin do NOT recover on their positions. In other words, investors go into negative margin, and like a drunken gambler, hope for the market to turn. It often doesn’t on those type of positions. Now I’m not sure I entirely agree with him on that when it comes to short strangles as often the loss of buying power is paper losses given a VIX spike. But, the onus is on the investor to be thinking ahead, rather than just hoping they have enough margin. As well, you can specify on IB which positions to liquidate first in a disaster scenario. Obviously choosing the most liquid positions to be liquidated first makes sense.
    The other thing which is a bit ironic about IB, is despite their auto-liquidation algorithms which force you to run a conservative portfolio, they brag about ‘the best margin rates on the Street’. I find that pretty funny, as obviously, using those great rates means you are setting yourself up to be auto-liquidated. In any case, I’m pretty happy with IB. 

  376. Thank you all for the nice feedback on the portfolio.  Yes, Neverworkagain, I agree that additional hedging is nice to have and can help us sleep well for sure.  To reduce the profit target, we just need to buy more put verticals, naked puts, or calls on the ultrashorts, just like you said.
    Cwan, it’s a matter of personal preference to diversify into several indices.  I found that having positions in MDY and RUT means I can just adjust the SPX with a decent size market move, but leaving MDY and RUT alone to reduce the number of adjustments.  So SPX may have negative Delta while the others may have neutral or even positive Delta.  The idea is to have them move differently.  Sometimes, we are kicking ourselves for making the adjustments too early, so having separate symbols and not touching them is a neat idea.

  377. Never,
    Buying VIX calls for hedging is a fabulous idea!  No need to apologize, keep them coming.  I’ll look to add them seriously in my portfolios. 

  378. Peter / VIX calls:   Two other things which I think are interesting with VIX calls, purely as an insurance play against a high returning strangle portfolio… First, the VIX calls actually hold their value pretty well, despite being way out of the money. Obviously, there are always some guys like us who are worried about a black swan and willing to pay some premium to hedge against it. By always rolling to 2 or 3 months out, you can avoid having the insurance go to zero on you, while maintaining the protective nature of the calls.  And Secondly, you have to have the discipline to actually sell the VIX calls on CRASH day. VIX calls surge higher and then collapse, especially if you have the 2 or 3 month forward ones, as the market knows the likelihood of the VIX staying that high until expiry is not that high.  I’ve only added in VIX calls for a few months now, but my current strategy is to use calls 2 or 3 months out at a cost of about 1.5%, and I would sell half if VIX surges into the 40-50 range, and wait with the other half if we get a mother of black swans that takes us above that.
    But, I also have some naked SPX puts, so feel less need for a full VIX call position right now. But in lieu of having naked SPX puts (which keep my delta quite negative right now), a bigger VIX call position could be the answer.

  379. neverworkagain,
    Any sense in buying 2x the farther-out VIX calls and then selling 1x one-month calls against them?  Or does that not lower the cost enough to make it worthwhile?

  380. Peter/Never- interesting concept on the VIX calls insurance. Can you state this as a "rule"? I.E., we now have a "rule" for one put vertical for each strangle. Comment?

  381. Boo / VIX:  I have thought about ways of lowering the cost of the insurance, but the ‘flash crash’ showed me that spreads are a complete disaster on Crash day as bid / asks go crazy. So being short front month VIX calls is NOT what you want. I was thinking more of a possible risk reversal, where you sell some VIX puts to lower the cost of your long VIX calls. The skew (more demand for VIX calls than VIX puts) means that selling puts is not that attractive, but you can always just keep rolling them, and VIX doesn’t have the same downside risk as on the upside.
    Pstas / rules: I have just started adding VIX insurance to my strangles and have not formalised rules. As in my previous example though, a single contract (say the Sept $65 VIX calls) at $0.70 (or $70) can hit something like $4 ($400) if VIX spikes to 50. That will only help protect a little bit of your short SPX puts which as Peter says, may quadruple. I did a rough calculation; a Aug 950 SPX put which today is at $14.65, with IV of 35 would jump to $50 (just less than 4x) if SPX plunged to 1000 and VIX spiked to 50. That would be a $3,500 loss per put and the VIX call would only cover around $400 / $3,500 or about 10% of your paper loss.
    But, if VIX goes up to 90, then your VIX call goes to $40 ($4,000) and a bigger chunk of your paper losses will be covered. I calculate that if the SPX continued down to 950 in a crash and VIX spiked to 90, your short Aug 950 put would jump to $130, a loss of $11,500 of which your VIX call would cover 35%. These are all just rough calculations, just for illustrative purposes.
    So, depending on your overall portfolio delta and risk tolerance, this is the way I would think about how many OTM VIX calls to buy relative to how many short puts I had.
    By the way, I’m pretty convinced that in a ‘normal’ market (meaning that within any rolling 2 month period, the market moves less than +/- 10%), Peter’s verticals are enough protection. However, with the system being as broken as it is, as well as the warning Phil always gives about waking up to some bad global news, it seems this is the time to be extra careful. Also, because the VIX is now high (>30), it gives us extra room as strangle-writers, to pay a bit for insurance. Just my opinion.

  382. Interesting after hour posts.  They say the country has never been so devided over politics and idiology.  Shadow and Humvee’s post clearly demonstrate the passion people feel towards their views.

  383. Never-thanks- can you give  a couple of examples of specific position (say SPX  XXX/YYY strangle and the put vertical plus VIX insurance you would take under your theory?

  384. Phil:
    Thanks for the reply and a swift kick in the butt was well delivered and deserved. This "dumbass" gets it now. I guess I was in a freaky panic mode when I saw QLD tumble a few points in the middle of the month of June. As for the advisor positions, I’ll blow them out and put your long term 2012 bets into play. Thank you.

  385. Good morning! 

    Wow – Financial Reglulation!  Imagine the arm twisting that took…  Maybe we will get our markets back now but, sadly, I remember when they passed education reform and made it much, much worse so it’s all in the execution.

    I hope everyone has a chance to read Peter D’s excellent overview here and here.   Note the advanced contingency planning and hedging strategies that goes into setting up a portfolio.  Keep in mind the old chestnut: "If you fail to plan, you plan to fail."  Great job Peter!

    Technical Hell/Sean – Thanks!  Not there until we close today below our levels and I’m just not feeling it in my gut yet.  I’ve wanted money to get out of financials and out of commodities and to rotate to more productive sectors and I was THRILLED to see people mention on the Senate floor yesterday that Financials earn 40% of all the money of the S&P 500 ($2.5Tn out of $6Tn), which is something I used to harp on as a reason they need to be reigned in in the first place.  To put it in context, you have to compare it to the 10% the made pre-Bush.   That money is sucked away from other businesses and, EVEN WORSE, that money is net of bonuses and dividends so it’s really $5Tn out of $8.5Tn (and there is no other sector on the planet that bonuses like the financials), which is getting close to 60% of all dollars made in America are made by Bankers.   That is simply not healthy and, if nothing else, at least we are finally spraying a little disinfectant on this disease. 

    Minimum wage/Gel – You are right, what we need is a global minimum wage.  That will make it impossible for corporations to treat labor as a global low-bid commodity.  I have to think this over but if we can develop a system that creates a global minimum wage, I will be sure to call it the Gel plan! 

    Speculation/Humvee – "take away regulations aimed at controlling commodity speculation."  I’m sorry, I thought you were aware of the fact that it was the ELIMINATION of regulations that allowed first Enron and then GS et al to begin treating the commodity markets like a global shell game.  Didn’t mean to confuse you… 

    XOM/Humvee – There’s a difference between being an investor and being a good global citizen but what’s really interesting is you not "getting" how people can be conflicted in their views.  We don’t like XOM but, instead of letting that fix our views and make us treat everything about XOM as unholy and evil and anti-American or whatever, we maintain an open and objective mind when viewing it as a potential investment vehicle.  Amazingly, there are two sides to a coin and our ability to accept that allows us to make investments with our heads, rather than our hearts.  Personally, to this day I will not buy gas from XOM if there is any other choice but I’m almost always a stockholder. 

    Thoughs/Rstu – I liked your thoughts on unemployment.  Futures took a hell of a dive on FinReg as well as very poor showing in Asia and Europe’s cliff dive this morning but I still thing we turn up today.  Whatever the bill is, it’s now over and the Financials led us down yesterday and that’s likely a "sell on the rumor, buy on the news" situation. 

    Low Vix/Sean – Depends on what the overall picture looks like but we used to do well buying leaps and selling front-month calls against them as that leverages your stock positions but you have to be REALLY sure the market is heading up because it doesn’t offer that much downside protection.  Then there are butterflies and condors and double diagonals and ratio backspreads – lots of work for me teaching all new ways to play that we don’t need (or want) in this nice and volatile market but they are mainly in Sage’s book if you want to cheat and read ahead!

    And what Rstuart said!

    Division/Exec – I blame the Internet.  The problem today is the concept of "balanced" reporting is a joke.  Even on TV news, you listen to the news station who’s viewpoint you "agree" with.  Alternate viewpoints are either not presented or scoffed at and everything is broken into soundbites so the whole world is presented as black or white – there is no time for gray.  Whatever crackpot viewpoint you decide to have, there’s a site (and probably an App) for that and that site links you to other sites that agree with you and those sites lead you to other sites that agree with you and you end up chatting with "like-minded" individuals and, without even realizing it, your world-view gets narrower and narrower over time.

    I go out of my way to spend at least 25% of my time reading things I totally disagree with.  I watch Fox news, I listen to Rush and Ann, read the WSJ, Druge, Hopeychange, the Post, Washington Times, National Review, Weekly Standard,  Heritage Foundation reports …  Thank goodness for Gel, Humvee and some others here because sometimes Cap is busy and he fulfills my quota for rampant conservatism quite nicely during the day too!  8-)

  386. Peter,
    what do you think about use cash reserve from longs for strangles ( as Phil suggest, alocate first 25% for LTP longs and use 75% reserves for your strangles strategy) just a question, how dangerous it is if Black Swan event will come?

  387. Division/Exec/Phil  "I blame the Internet. " To some degree – but don’t forget AM talk radio, a huge factor here in the West.
    "Minimum wage/Gel – You are right, what we need is a global minimum wage" Well, yeah, but that’s reflective of cost of living – even between here in Altadena and where I moved here from, Omaha, big differences in cost of living and therefore salaries. Even bigger when I retire & move to my cousin-in-laws’ farm in Yeoju, Korea.

  388.  Divison/Exec/Phil/snow – Unfortunately the MSM is a business that (barely) masquerades as a public service. Everything and everyone can be bought and sold now.